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Capital One Reports Record Second Quarter Earnings

July 17, 2001 at 4:38 PM EDT

FALLS CHURCH, Va., July 17 /PRNewswire/ -- Capital One Financial Corporation (NYSE: COF) today announced its 16th consecutive quarter of record earnings, driven by a 39 percent year-over-year increase in total revenues, and another quarter of the best credit performance of any of the major credit card institutions in the country.

Earnings for the second quarter of 2001 were $155.3 million, or $0.70 per share, versus earnings of $112.5 million, or $0.54 per share, for the comparable period in the prior year. Earnings in the first quarter of 2001 were $143.6 million, or $0.66 per share.

"Capital One achieved its 16th consecutive quarter of record-breaking earnings driven by a 39 percent increase in total revenues," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "Our focus on the superprime sector resulted in robust loan growth -- a 47 percent annualized increase in managed loans. We remain firmly on track to deliver this year's target of 30 percent earnings per share growth."

Second quarter 2001 revenue, defined as managed net interest income and non-interest income, rose to $1.6 billion versus $1.5 billion in the first quarter of 2001 and $1.2 billion for the comparable period in the prior year. For the quarter, Capital One added 1.7 million net new accounts, bringing total accounts to 38.1 million. The company's managed consumer loan balances increased by $3.7 billion in the second quarter to $35.3 billion.

"This quarter's outstanding performance once again proves the strength of our unique information-based strategy and our ability to consistently deliver value to our more than 38 million customers," said Nigel W. Morris, Capital One's President and Chief Operating Officer. "Our stringent risk management practices again resulted in the best credit performance of any of the major credit card institutions -- 3.98 percent."

The managed net charge-off rate increased to 3.98 percent for the second quarter of 2001 compared with 3.75 percent for the first quarter of 2001. The managed delinquency rate (30+ days) increased slightly to 4.92 percent as of June 30, 2001, compared with 4.72 percent as of March 31, 2001.

The company's managed net interest margin was 9.11 percent in the second quarter of 2001 versus 9.21 percent in the first quarter of 2001 and 10.88 percent in the comparable period of 2000, reflecting strong growth in the superprime portfolio and the success of the company's 0% purchase teaser offer.

Marketing expense for the second quarter of 2001 increased $37.5 million to $268.7 million from $231.2 million in the first quarter of 2001, and increased $57.1 million over the $211.6 million spent in the comparable period of the prior year. Other non-interest expenses (excluding marketing) for the second quarter of 2001 were $721.6 million versus $687 million for the first quarter of 2001 and $530.7 million in the comparable period of the prior year. Annualized operating expenses per account decreased to $77.38 for the second quarter of 2001 from $78.26 for the first quarter of 2001 and $80.97 from the comparable period in the prior year.

The company cautioned that its current expectations for 2001 earnings and future growth are forward-looking statements and actual results could differ materially from current expectations due to a number of factors, including: competition in the credit card industry; the actual account and balance growth achieved by the company; the company's ability to access the capital markets at attractive rates and terms to fund its operations and future growth; and general economic conditions affecting consumer income and spending, which may affect consumer bankruptcies, defaults and charge-offs. A discussion of these and other factors can be found in Capital One's annual and other reports filed with the Securities and Exchange Commission, including, but not limited to, Capital One's report on Form 10-K for the year ended December 31, 2000.

Headquartered in Falls Church, Virginia, Capital One Financial Corporation (http://www.CapitalOne.com ) is a holding company whose principal subsidiaries, Capital One Bank and Capital One, F.S.B., offer consumer lending products. Capital One's subsidiaries collectively had 38.1 million customers and $35.3 billion in managed loans outstanding as of June 30, 2001. Capital One, a Fortune 500 company, is one of the largest providers of MasterCard and Visa credit cards in the world. Capital One trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 500 index.

Note: This release, financial information and a live webcast of today's
5:00 p.m. (EDT) analyst conference call is accessible on the Internet on
Capital One's home page (http://www.CapitalOne.com ). Click on "Investor
Center" to view/download the earnings press release and other financial
information.
                      CAPITAL ONE FINANCIAL CORPORATION (COF)
                          FINANCIAL & STATISTICAL SUMMARY

                                                        2001        2001
     (in millions, except per share data and as noted)   Q2          Q1

     Earnings (Managed Basis)
     Net Interest Income                           $    823.7  $    759.3
     Non-Interest Income                                796.3       747.1
     Total Revenue                                    1,620.0     1,506.4
     Provision for Loan Losses                          379.1       356.5
     Marketing Expenses                                 268.7       231.2
     Operating Expenses                                 721.6       687.0
     Income Before Taxes                                250.5       231.6
     Tax Rate                                            38.0%       38.0%
     Net Income                                    $    155.3  $    143.6

     Common Share Statistics
     Basic EPS                                     $     0.74  $     0.70
     Diluted EPS                                   $     0.70  $     0.66
     Dividends Per Share                           $     0.03  $     0.03
     Book Value Per Share (period end)             $    13.02  $    11.81
     Stock Price Per Share (period end)            $    60.15  $    55.50
     Total Market Capitalization (period end)      $ 12,666.5  $ 11,509.1
     Shares Outstanding (period end)                    210.6       207.4
     Shares Used to Compute Basic EPS                   209.1       204.8
     Shares Used to Compute Diluted EPS                 221.2       217.8

     Managed Loan Statistics (period avg.)
     Average Loans                                 $   33,440  $   30,505
     Average Earning Assets                        $   36,180  $   32,983
     Average Assets                                $   38,820  $   35,303
     Average Equity                                $    2,608  $    2,347
     Net Interest Margin                                 9.11%       9.21%
     Risk Adjusted Margin(1)                            14.23%      14.80%
     Return on Average Assets (ROA)                      1.60%       1.63%
     Return on Average Equity (ROE)                     23.83%      24.47%
     Net Charge-Off Rate                                 3.98%       3.75%
     Net Charge-Offs                               $    332.8  $    285.9
     Cost Per Account (in dollars)                 $    77.38  $    78.26

     Managed Loan Statistics (period end)
     Reported Loans                                $   16,327  $   15,572
     Securitized Loans                                 18,956      15,979
     Total Loans                                   $   35,283  $   31,551
     Delinquency Rate (30+ days)                         4.92%       4.72%
     Number of Accounts (000's)                        38,146      36,462
     Total Assets                                  $   40,587  $   36,749
     Capital, Including Preferred Interests        $  2,840.1  $  2,547.7
     Capital to Managed Assets Ratio                     7.00%       6.93%

(1) Risk adjusted margin is total revenue less net charge-offs as a

         percentage of average earning assets.


                      CAPITAL ONE FINANCIAL CORPORATION (COF)
                          FINANCIAL & STATISTICAL SUMMARY

                                                        2000        2000
     (in millions, except per share data and as noted)   Q4          Q3

     Earnings (Managed Basis)
     Net Interest Income                            $   716.1   $   665.1
     Non-Interest Income                                696.5       619.9
     Total Revenue                                    1,412.5     1,285.0
     Provision for Loan Losses                          329.1       269.0
     Marketing Expenses                                 259.5       233.2
     Operating Expenses                                 617.1       585.8
     Income Before Taxes                                206.9       197.0
     Tax Rate                                            38.0%       38.0%
     Net Income                                     $   128.3   $   122.1

     Common Share Statistics
     Basic EPS                                      $    0.65   $    0.62
     Diluted EPS                                    $    0.61   $    0.58
     Dividends Per Share                            $    0.03   $    0.03
     Book Value Per Share (period end)              $    9.94   $    9.02
     Stock Price Per Share (period end)             $   65.81   $   70.06
     Total Market Capitalization (period end)       $12,989.3   $13,783.1
     Shares Outstanding (period end)                    197.4       196.7
     Shares Used to Compute Basic EPS                   197.0       196.3
     Shares Used to Compute Diluted EPS                 210.4       210.1

     Managed Loan Statistics (period avg.)
     Average Loans                                  $  26,377   $  23,020
     Average Earning Assets                         $  28,188   $  24,749
     Average Assets                                 $  30,234   $  27,015
     Average Equity                                 $   1,865   $   1,743
     Net Interest Margin                                10.16%      10.75%
     Risk Adjusted Margin(1)                            16.32%      17.24%
     Return on Average Assets (ROA)                      1.70%       1.81%
     Return on Average Equity (ROE)                     27.51%      28.02%
     Net Charge-Off Rate                                 3.98%       3.80%
     Net Charge-Offs                                $   262.3   $   218.4
     Cost Per Account (in dollars)                  $   78.09   $   82.84

     Managed Loan Statistics (period end)
     Reported Loans                                 $  15,113   $  12,331
     Securitized Loans                                 14,411      11,821
     Total Loans                                    $  29,524   $  24,152
     Delinquency Rate (30+ days)                         5.23%       5.32%
     Number of Accounts (000's)                        33,774      29,437
     Total Assets                                   $  33,286   $  28,185
     Capital, Including Preferred Interests         $ 2,061.0   $ 1,873.8
     Capital to Managed Assets Ratio                     6.19%       6.65%

(1) Risk adjusted margin is total revenue less net charge-offs as a

         percentage of average earning assets.


                      CAPITAL ONE FINANCIAL CORPORATION (COF)
                          FINANCIAL & STATISTICAL SUMMARY

                                                        2000
     (in millions, except per share data and as noted)   Q2

     Earnings (Managed Basis)
     Net Interest Income                            $   614.4
     Non-Interest Income                                554.4
     Total Revenue                                    1,168.8
     Provision for Loan Losses                          245.0
     Marketing Expenses                                 211.6
     Operating Expenses                                 530.7
     Income Before Taxes                                181.5
     Tax Rate                                            38.0%
     Net Income                                     $   112.5

     Common Share Statistics
     Basic EPS                                      $    0.57
     Diluted EPS                                    $    0.54
     Dividends Per Share                            $    0.03
     Book Value Per Share (period end)              $    8.39
     Stock Price Per Share (period end)             $   44.63
     Total Market Capitalization (period end)       $ 8,747.4
     Shares Outstanding (period end)                    196.0
     Shares Used to Compute Basic EPS                   196.0
     Shares Used to Compute Diluted EPS                 208.6

     Managed Loan Statistics (period avg.)
     Average Loans                                  $  20,915
     Average Earning Assets                         $  22,581
     Average Assets                                 $  24,567
     Average Equity                                 $   1,626
     Net Interest Margin                                10.88%
     Risk Adjusted Margin(1)                            17.03%
     Return on Average Assets (ROA)                      1.83%
     Return on Average Equity (ROE)                     27.68%
     Net Charge-Off Rate                                 3.97%
     Net Charge-Offs                                $   207.6
     Cost Per Account (in dollars)                  $   80.97

     Managed Loan Statistics (period end)
     Reported Loans                                 $  11,383
     Securitized Loans                                 10,500
     Total Loans                                    $  21,883
     Delinquency Rate (30+ days)                         5.35%
     Number of Accounts (000's)                        27,133
     Total Assets                                   $  25,610
     Capital, Including Preferred Interests         $ 1,743.9
     Capital to Managed Assets Ratio                     6.81%

(1) Risk adjusted margin is total revenue less net charge-offs as a

         percentage of average earning assets.


                         CAPITAL ONE FINANCIAL CORPORATION
                            Consolidated Balance Sheets
                             (in thousands)(unaudited)

                                                           June 30
                                                             2001

     Assets:
     Cash and due from banks                              $    134,918
     Federal funds sold and resale agreements                   39,770
     Interest-bearing deposits at other banks                   62,050
       Cash and cash equivalents                               236,738
     Securities available for sale                           2,554,967
     Consumer loans                                         16,326,617
       Less:  Allowance for loan losses                       (647,000)
     Net loans                                              15,679,617
     Premises and equipment, net                               729,525
     Interest receivable                                        79,089
     Accounts receivable from securitizations                1,708,055
     Other                                                     672,338
        Total assets                                      $ 21,660,329

     Liabilities:
     Interest-bearing deposits                            $ 10,029,736
     Other borrowings                                        2,320,734
     Senior notes                                            4,757,481
     Interest payable                                          151,429
     Other                                                   1,659,412
        Total liabilities                                   18,918,792

     Stockholders' Equity:
     Common stock                                                2,118
     Paid-in capital, net                                    1,089,582
     Retained earnings and cumulative
       other comprehensive income                            1,695,468
        Less: Treasury stock, at cost                          (45,631)
        Total stockholders' equity                           2,741,537
        Total liabilities and stockholders' equity        $ 21,660,329


                         CAPITAL ONE FINANCIAL CORPORATION
                            Consolidated Balance Sheets
                             (in thousands)(unaudited)

                                                            March 31
                                                               2001

     Assets:
     Cash and due from banks                              $     49,842
     Federal funds sold and resale agreements                  247,676
     Interest-bearing deposits at other banks                  492,390
       Cash and cash equivalents                               789,908
     Securities available for sale                           2,112,180
     Consumer loans                                         15,571,754
       Less:  Allowance for loan losses                       (597,000)
     Net loans                                              14,974,754
     Premises and equipment, net                               709,207
     Interest receivable                                       108,944
     Accounts receivable from securitizations                1,492,818
     Other                                                     614,194
        Total assets                                      $ 20,802,005

     Liabilities:
     Interest-bearing deposits                            $  9,390,524
     Other borrowings                                        1,845,509
     Senior notes                                            5,040,761
     Interest payable                                          135,863
     Other                                                   1,940,103
        Total liabilities                                   18,352,760

     Stockholders' Equity:
     Common stock                                                2,086
     Paid-in capital, net                                      974,503
     Retained earnings and cumulative
       other comprehensive income                            1,519,855
        Less: Treasury stock, at cost                          (47,199)
        Total stockholders' equity                           2,449,245
        Total liabilities and stockholders' equity        $ 20,802,005


                         CAPITAL ONE FINANCIAL CORPORATION
                            Consolidated Balance Sheets
                             (in thousands)(unaudited)

                                                             June 30
                                                               2000

     Assets:
     Cash and due from banks                              $    100,999
     Federal funds sold and resale agreements                   10,000
     Interest-bearing deposits at other banks                   78,226
       Cash and cash equivalents                               189,225
     Securities available for sale                           1,507,770
     Consumer loans                                         11,382,780
       Less:  Allowance for loan losses                       (407,000)
     Net loans                                              10,975,780
     Premises and equipment, net                               545,262
     Interest receivable                                        51,799
     Accounts receivable from securitizations                1,302,424
     Other                                                     554,631
        Total assets                                      $ 15,126,891

     Liabilities:
     Interest-bearing deposits                            $  5,288,927
     Other borrowings                                        2,773,050
     Senior notes                                            4,176,394
     Interest payable                                           96,493
     Other                                                   1,146,451
        Total liabilities                                   13,481,315

     Stockholders' Equity:
     Common stock                                                1,997
     Paid-in capital, net                                      578,915
     Retained earnings and cumulative
       other comprehensive income                            1,197,370
        Less: Treasury stock, at cost                         (132,706)
        Total stockholders' equity                           1,645,576
        Total liabilities and stockholders' equity        $ 15,126,891


                         CAPITAL ONE FINANCIAL CORPORATION
                         Consolidated Statements of Income
                 (in thousands, except per share data)(unaudited)

                                                        Three Months Ended
                                                       June 30     March 31
                                                         2001        2001

     Interest Income:
     Consumer loans, including fees                   $ 620,866    $617,889
     Securities available for sale                       33,942      28,234
     Other                                                2,408       3,750
       Total interest income                            657,216     649,873

     Interest Expense:
     Deposits                                           155,479     146,961
     Other borrowings                                    43,825      43,900
     Senior notes                                        87,842      83,293
       Total interest expense                           287,146     274,154
     Net interest income                                370,070     375,719
     Provision for loan losses                          202,900     250,614
     Net interest income after provision
      for loan losses                                   167,170     125,105

     Non-Interest Income:
     Servicing and securitizations                      572,591     543,791
     Service charges and other customer-related fees    407,412     406,134
     Interchange                                         93,673      74,851
       Total non-interest income                      1,073,676   1,024,776

     Non-Interest Expense:
     Salaries and associate benefits                    342,076     325,716
     Marketing                                          268,709     231,200
     Communications and data processing                  72,906      75,292
     Supplies and equipment                              74,780      73,603
     Occupancy                                           31,349      31,302
     Other                                              200,496     181,134
       Total non-interest expense                       990,316     918,247
     Income before income taxes                         250,530     231,634
     Income taxes                                        95,203      88,021
     Net Income                                       $ 155,327   $ 143,613

     Basic earnings per share                         $    0.74   $    0.70
     Diluted earnings per share                       $    0.70   $    0.66
     Dividends paid per share                         $    0.03   $    0.03


                         CAPITAL ONE FINANCIAL CORPORATION
                         Consolidated Statements of Income
                 (in thousands, except per share data)(unaudited)

                                                   Three Months Ended
                                                        June 30
                                                          2000

     Interest Income:
     Consumer loans, including fees                   $ 511,886
     Securities available for sale                       22,845
     Other                                                1,776
       Total interest income                            536,507

     Interest Expense:
     Deposits                                            63,619
     Other borrowings                                    46,914
     Senior notes                                        62,016
       Total interest expense                           172,549
     Net interest income                                363,958
     Provision for loan losses                          151,010
     Net interest income after provision
      for loan losses                                   212,948

     Non-Interest Income:
     Servicing and securitizations                      282,640
     Service charges and other customer-related fees    374,706
     Interchange                                         53,461
       Total non-interest income                        710,807

     Non-Interest Expense:
     Salaries and associate benefits                    236,618
     Marketing                                          211,560
     Communications and data processing                  72,933
     Supplies and equipment                              58,167
     Occupancy                                           27,250
     Other                                              135,736
       Total non-interest expense                       742,264
     Income before income taxes                         181,491
     Income taxes                                        68,966
     Net income                                       $ 112,525

     Basic earnings per share                         $    0.57
     Diluted earnings per share                       $    0.54
     Dividends paid per share                         $    0.03


                         CAPITAL ONE FINANCIAL CORPORATION
                         Consolidated Statements of Income
                 (in thousands, except per share data)(unaudited)

                                                          Six Months Ended
                                                       June 30      June 30
                                                         2001        2000

     Interest Income:
     Consumer loans, including fees                 $ 1,238,755 $ 1,000,823
     Securities available for sale                       62,176      47,579
     Other                                                6,158       3,552
       Total interest income                          1,307,089   1,051,954

     Interest Expense:
     Deposits                                           302,440     115,739
     Other borrowings                                    87,725      88,368
     Senior notes                                       171,135     130,392
       Total interest expense                           561,300     334,499
     Net interest income                                745,789     717,455
     Provision for loan losses                          453,514     277,535
     Net interest income after provision
      for loan losses                                   292,275     439,920

     Non-Interest Income:
     Servicing and securitizations                    1,116,382     553,398
     Service charges and other customer-related fees    813,546     715,938
     Interchange                                        168,524      96,531
       Total non-interest income                      2,098,452   1,365,867

     Non-Interest Expense:
     Salaries and associate benefits                    667,792     471,454
     Marketing                                          499,909     413,498
     Communications and data processing                 148,198     143,755
     Supplies and equipment                             148,383     110,441
     Occupancy                                           62,651      52,542
     Other                                              381,630     260,494
       Total non-interest expense                     1,908,563   1,452,184
     Income before income taxes                         482,164     353,603
     Income taxes                                       183,224     134,369
     Net Income                                      $  298,940  $  219,234

     Basic earnings per share                        $     1.44  $     1.11
     Diluted earnings per share                      $     1.36  $     1.05
     Dividends paid per share                        $     0.05  $     0.05


                         CAPITAL ONE FINANCIAL CORPORATION
       Statements of Average Balances, Income and Expense, Yields and Rates
                         (dollars in thousands)(unaudited)

     Managed (1)                                  Quarter Ended 06/30/01

                                                Average     Income/   Yield/
                                                Balance     Expense   Rate
     Earning assets:
       Consumer loans                       $33,439,690  $1,307,819   15.64%
       Securities available for sale          2,344,047      33,942    5.79
       Other                                    396,659       2,408    2.43
     Total earning assets                   $36,180,396  $1,344,169   14.86%

     Interest-bearing liabilities:
       Deposits                             $ 9,685,882  $  155,479    6.42%
       Other borrowings                       2,915,245      43,825    6.01
       Senior notes                           4,899,045      87,842    7.17
       Securitization liability              16,741,276     233,322    5.57
     Total interest-bearing liabilities     $34,241,448  $  520,468    6.08%

     Net interest spread                                               8.78%

     Interest income to average earning assets                        14.86%
     Interest expense to average earning assets                        5.75
     Net interest margin                                               9.11%

(1) The information in this table reflects the adjustment to add back the

effect of securitized loans.

                         CAPITAL ONE FINANCIAL CORPORATION
       Statements of Average Balances, Income and Expense, Yields and Rates
                         (dollars in thousands)(unaudited)

     Managed (1)                                  Quarter Ended 03/31/01

                                                Average     Income/   Yield/
                                                Balance     Expense   Rate
     Earning assets:
       Consumer loans                       $30,505,450  $1,235,002  16.19%
       Securities available for sale          1,913,357      28,234   5.90
       Other                                    564,592       3,750   2.66
     Total earning assets                   $32,983,399  $1,266,986  15.37%

     Interest-bearing liabilities:
       Deposits                             $ 8,996,414  $  146,961   6.53%
       Other borrowings                       2,442,200      43,900   7.19
       Senior notes                           4,678,452      83,293   7.12
       Securitization liability              14,948,262     233,524   6.25
     Total interest-bearing liabilities     $31,065,328  $  507,678   6.54%

     Net interest spread                                              8.83%

     Interest income to average earning assets                       15.37%
     Interest expense to average earning assets                       6.16
     Net interest margin                                              9.21%

(1) The information in this table reflects the adjustment to add back the

effect of securitized loans.

                         CAPITAL ONE FINANCIAL CORPORATION
       Statements of Average Balances, Income and Expense, Yields and Rates
                         (dollars in thousands)(unaudited)

     Managed (1)                                  Quarter Ended 06/30/00
                                                  Average   Income/   Yield/
                                                Balance     Expense   Rate
     Earning assets:
       Consumer loans                        $20,915,125  $ 937,935  17.94%
       Securities available for sale           1,519,369     22,845   6.01
       Other                                     146,760      1,776   4.84
     Total earning assets                    $22,581,254  $ 962,556  17.05%

     Interest-bearing liabilities:
       Deposits                              $ 4,495,242  $ 63,619    5.66%
       Other borrowings                        2,687,569     46,914   6.98
       Senior notes                            3,659,603     62,016   6.78
       Securitization liability               10,870,733    175,655   6.46
     Total interest-bearing liabilities      $21,713,147  $ 348,204   6.41%

     Net interest spread                                             10.64%

     Interest income to average earning assets                       17.05%
     Interest expense to average earning assets                       6.17
     Net interest margin                                             10.88%

(1) The information in this table reflects the adjustment to add back the

         effect of securitized loans.

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SOURCE Capital One Financial Corporation

CONTACT: Paul Paquin, V.P., Investor Relations, +1-703-205-1039, or Tatiana Stead, Corporate Media, +1-703-205-1070, both of Capital One Financial Corporation/