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Capital One Reports Record Second Quarter Earnings

July 15, 1999 at 12:00 AM EDT
Falls Church, VA (July 15, 1999) - Capital One Financial Corporation (NYSE: COF) today announced record second quarter 1999 earnings of $87.5 million, or $.41 per share, versus earnings of $82.4 million, or $.39 per share, for the first quarter of 1999 and $66.9 million, or $.32 per share, for the comparable period in the prior year. All earnings per share amounts reflect the Company's three-for-one stock split distributed on June 1, 1999.

“Capital One is extremely pleased to report record quarterly earnings once again. And we've added more than one million customers for the fourth consecutive quarter,” said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. “This robust growth enables us to continue delivering strong returns while investing in the future.”

The managed net charge-off rate decreased significantly to 3.73 percent for the second quarter of 1999 versus 3.93 percent for the first quarter of 1999 and 5.91 percent for the comparable period in the prior year. The managed delinquency rate (30+ days) increased to 4.72 percent as of June 30, 1999, compared with 4.56 percent as of March 31, 1999.

“For the seventh consecutive quarter, our charge-off rate has declined and continues to be the lowest among industry leaders,” said Nigel W. Morris, Capital One's President and Chief Operating Officer. “We continue to be pleased by our strong credit performance and revenue growth, which have increased our margins to record levels.”

The managed net interest margin increased to 10.89 percent in the second quarter of 1999 versus 10.59 percent in the first quarter of 1999 and 9.84 percent for the comparable period in the prior year. The increased margin, higher non-interest income and the aforementioned decrease in net charge-offs each contributed to the increase in risk adjusted margin to 15.50 percent, compared to 14.42 percent for the first quarter of 1999 and 10.83 percent for the comparable period of the prior year.

During the second quarter of 1999, the Company added 1.2 million net new accounts, bringing total accounts to 19.2 million. Second quarter 1999 revenue, defined as managed net interest income and non-interest income, rose to $927 million versus $873 million in the first quarter of 1999 and $653 million for the comparable period in the prior year. For the quarter, Capital One's managed consumer loan balances increased by $416 million to $17.9 billion.

Marketing expense for the second quarter of 1999 was a record $178 million compared to $176 million in the first quarter of 1999 and $86 million in the comparable period of the prior year. Other non-interest expenses (excluding marketing) for the second quarter of 1999 were $430 million versus $374 million for the first quarter of 1999 and $246 million in the comparable period of the prior year. Operating expenses continue to reflect increased investment in staff levels associated with the Company's growing account base and investment in the Internet.

The allowance for loan losses increased by $15 million during the second quarter of 1999 to $266 million or 3.58 percent of on-balance sheet receivables as of June 30, 1999, compared to 3.46 percent as of March 31, 1999. Capital ratios remained strong as of June 30, 1999 at 14.19 percent of reported assets and 7.15 percent of managed assets.

The Company also announced that it will begin reporting on America One as a separate business segment. For the first six months of 1999, the telecommunications business produced an operating loss (net revenue less marketing and direct expenses) of $57 million on gross revenues of $67 million. “These results are consistent with expectations and reflect our upfront marketing investment in this rapidly growing business,” said Mr. Fairbank. “In response to aggressive competitive pricing, America One is significantly slowing its investment in certain core wireless market segments and, over time will increase its investment in market segments that are generally not being served by major wireless competitors.”

Headquartered in Falls Church, Virginia, Capital One Financial Corporation (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 19.2 million customers and $17.9 billion in managed loans outstanding as of June 30, 1999, and are among 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. Earlier this year, Capital One ranked #41 in Fortune's list of “Best Places to Work” and #15 best performer in Business Week's rating of the S&P 500.