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Capital One Reports Record Third Quarter Earnings

October 13, 1998 at 12:00 AM EDT

FALLS CHURCH, Va., Oct. 13 /PRNewswire/ -- Capital One Financial Corporation (NYSE: COF) today announced record third quarter 1998 earnings of $70.0 million, or $1.00 per share, versus earnings of $66.9 million, or $.96 per share, for the second quarter of 1998 and $49.3 million, or $.73 per share, for the comparable period in the prior year. Earnings per share amounts are reported on a diluted basis.

"This is the strongest quarter in our history: record earnings, record growth in accounts and outstandings, record improvement in credit quality, and record investment in marketing to build our future," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "We are on track for 40 percent earnings growth in 1998."

Revenue, defined as managed net interest income and non-interest income,

increased to $705 million in the third quarter of 1998 versus $653 million in
the second quarter of 1998, and $549 million for the comparable period in the
prior year.  For the quarter, Capital One's managed consumer loan balances
increased by a record $1.4 billion to $16.3 billion.  The Company also added a
record 1.3 million net new accounts, bringing total accounts to 14.9 million.

The managed net interest margin was 10.15 percent in the third quarter of 1998, an increase from 9.84 percent in the second quarter of 1998, and 9.05 percent in the comparable period of the prior year. The higher margin from the previous quarter primarily reflects further growth in our customized lending products. Non-interest income increased to $265 million compared to $253 million in the second quarter of 1998, and $219 million over the comparable period in the prior year. This growth continues to reflect increased fees, including annual membership, interchange, overlimit and other fees.

The managed delinquency rate (30+ days) decreased to 4.90 percent as of September 30, 1998, compared with 5.14 percent as of June 30, 1998. The managed net charge-off rate decreased to 5.03 percent for the third quarter of 1998 compared with 5.91 percent in the second quarter of 1998.

"Our credit performance has been outstanding: flat or falling delinquency rates for six consecutive quarters," said Nigel W. Morris, Capital One's President and Chief Operating Officer. "Our successful Information-Based Strategy has led to innovative new products, expanding margins, and new opportunities. At the same time, we continue to maintain our long-time conservative approach to credit."

Marketing investment increased in the third quarter of 1998 to a record $126 million versus $86 million in the second quarter of 1998, and $61 million in the comparable period of the prior year. Other non-interest expenses (excluding marketing and performance-based stock options) for the third quarter of 1998 were $251 million versus $222 million for the second quarter of 1998, and $157 million in the comparable period of the prior year. Operating expenses continue to reflect increased investment in staff levels associated with our growing account base and the impact of expansion into new markets and businesses.

The allowance for loan losses was increased to $231 million or 4.08 percent of on-balance sheet receivables as of September 30, 1998, compared to 4.14 percent as of June 30, 1998. Capital ratios remained strong as of September 30, 1998 at 14.77 percent of reported assets and 6.60 percent of managed assets.

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 14.9 million customers and $16.3 billion in managed loans outstanding as of September 30, 1998, 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.

Note: This release and financial information are available on the Internet on Capital One's home page (address http://www.capitalone.com). Click on "Financial Information" to view/download the release and financial information.

                      CAPITAL ONE FINANCIAL CORPORATION (COF)
                          FINANCIAL & STATISTICAL SUMMARY

                                                          98          98
     (in millions, except per share data and as noted)    Q3          Q2
     Earnings (Managed Basis)
      Net Interest Income                          $    440.8   $   399.5
      Non-Interest Income                               264.6       253.2
      Total Revenue                                     705.4       652.7
      Provision for Loan Losses                         208.9       213.1
      Marketing Expenses                                126.5        85.8
      Operating Expenses                                257.0(2)    246.0(2)
      Income Before Taxes                               112.9       107.8
      Tax Rate                                           38.0%       38.0%
      Net Income                                   $     70.0   $    66.9
     Common Share Statistics
      Basic EPS                                    $     1.07   $    1.02
      Diluted EPS                                  $     1.00   $    0.96
      Dividends Per Share                          $     0.08   $    0.08
      Book Value Per Share (period end)            $    17.83   $   16.31
      Stock Price Per Share (period end)           $   103.06   $  124.19
      Total Market Capitalization (period end)     $  6,758.0   $ 8,139.0
      Shares Outstanding (period end)                    65.6        65.5
      Shares Used to Compute Basic EPS                   65.7        65.5
      Shares Used to Compute Diluted EPS                 70.0        69.5
     Managed Loan Statistics (period avg.)
      Average Loans                                $   15,746   $  14,417
      Average Earning Assets                       $   17,372   $  16,242
      Average Assets                               $   18,597   $  17,296
      Average Equity                               $    1,149   $   1,037
      Net Interest Margin                               10.15%       9.84%
      Return on Average Assets (ROA)                     1.51%       1.55%
      Return on Average Equity (ROE)                    24.36%      25.78%
      Net Charge-Off Rate                                5.03%       5.91%
      Net Charge-Offs                              $    198.1    $  213.0
     Managed Loan Statistics (period end)
      Reported Loans                               $    5,667   $   5,140
      Securitized Loans                                10,671       9,829
      Total Loans                                  $   16,338   $  14,969
      Delinquency Rate (30+ days)                        4.90%       5.14%
      Number of Accounts (000's)                       14,907      13,588
      Total Assets                                 $   19,211   $  17,462
      Capital, Including Preferred Interests       $  1,267.0   $ 1,167.0
      Capital to Managed Assets Ratio                    6.60%       6.68%


     (1) Net of a $73.3 million reduction to more conservatively report
         uncollectible finance charge and fee income receivables and the
         charge-off of credit card loans at 180 days past-due.
     (2) Operating expenses include $6.5 million, $24.0 million, $32.4
         million, $9.7 million and $8.6 million in compensation expense in Q3
         98, Q2 98, Q1 98, Q4 97 and Q3 97, respectively, for performance-
         based stock options.
     (3) The net interest margin, without the modifications in charge-off
         policy and finance charge and fee income recognition, was 10.13%.
     (4) The net charge-off rate and net charge-offs, without the modification
         in charge-off policy, were 6.02% and $208.2 million, respectively.


                      CAPITAL ONE FINANCIAL CORPORATION (COF)
                          FINANCIAL & STATISTICAL SUMMARY

                                                          98          97
     (in millions, except per share data and as noted)    Q1          Q4
     Earnings (Managed Basis)

      Net Interest Income                           $   416.7   $   361.6
      Non-Interest Income                               220.7       230.4
      Total Revenue                                     637.4       592.0(1)
      Provision for Loan Losses                         242.5       255.7
      Marketing Expenses                                 75.0        65.0
      Operating Expenses                                213.9(2)    177.4(2)
      Income Before Taxes                               106.0        93.9
      Tax Rate                                           38.0%       38.0%
      Net Income                                    $    65.7   $    58.2
     Common Share Statistics
      Basic EPS                                     $    1.00   $    0.89
      Diluted EPS                                   $    0.96   $    0.86
      Dividends Per Share                           $    0.08   $    0.08
      Book Value Per Share (period end)             $   15.08   $   13.66
      Stock Price Per Share (period end)            $   78.88   $   54.19
      Total Market Capitalization (period end)      $ 5,163.7   $ 3,542.2
      Shares Outstanding (period end)                    65.5        65.4
      Shares Used to Compute Basic EPS                   65.4        65.5
      Shares Used to Compute Diluted EPS                 68.4        67.5
     Managed Loan Statistics (period avg.)
      Average Loans                                 $  14,097   $  13,824
      Average Earning Assets                        $  16,020   $  15,655
      Average Assets                                $  16,834   $  16,367
      Average Equity                                $     950   $     892
      Net Interest Margin                               10.40%       9.24%(3)
      Return on Average Assets (ROA)                     1.56%       1.42%
      Return on Average Equity (ROE)                    27.66%      26.12%
      Net Charge-Off Rate                                6.04%       6.37%(4)
      Net Charge-Offs                               $   212.7   $   255.6 (4)
     Managed Loan Statistics (period end)
      Reported Loans                                $   4,748   $   4,862
      Securitized Loans                                 9,254       9,369
      Total Loans                                   $  14,002   $  14,231
      Delinquency Rate (30+ days)                        5.75%       6.20%
      Number of Accounts (000's)                       12,674      11,747
      Total Assets                                  $  16,464   $  16,433
      Capital, Including Preferred Interests        $ 1,085.2   $   990.9
      Capital to Managed Assets Ratio                    6.59%       6.03%


     (1) Net of a $73.3 million reduction to more conservatively report
         uncollectible finance charge and fee income receivables and the
         charge-off of credit card loans at 180 days past-due.
     (2) Operating expenses include $6.5 million, $24.0 million, $32.4
         million, $9.7 million and $8.6 million in compensation expense in Q3
         98, Q2 98, Q1 98, Q4 97 and Q3 97, respectively, for performance-
         based stock options.
     (3) The net interest margin, without the modifications in charge-off
         policy and finance charge and fee income recognition, was 10.13%.
     (4) The net charge-off rate and net charge-offs, without the modification
         in charge-off policy, were 6.02% and $208.2 million, respectively.


                      CAPITAL ONE FINANCIAL CORPORATION (COF)
                          FINANCIAL & STATISTICAL SUMMARY

                                                         97
     (in millions, except per share data and as noted)   Q3
     Earnings (Managed Basis)
      Net Interest Income                           $   330.7
      Non-Interest Income                               218.5
      Total Revenue                                     549.2
      Provision for Loan Losses                         243.6
      Marketing Expenses                                 60.8
      Operating Expenses                                165.2(2)
      Income Before Taxes                                79.6
      Tax Rate                                           38.0%
      Net Income                                    $    49.3
     Common Share Statistics
      Basic EPS                                     $    0.75
      Diluted EPS                                   $    0.73
      Dividends Per Share                           $    0.08
      Book Value Per Share (period end)             $   12.84
      Stock Price Per Share (period end)            $   45.75
      Total Market Capitalization (period end)      $ 3,001.0
      Shares Outstanding (period end)                    65.6
      Shares Used to Compute Basic EPS                   66.2
      Shares Used to Compute Diluted EPS                 67.6
     Managed Loan Statistics (period avg.)
      Average Loans                                 $  12,918
      Average Earning Assets                        $  14,608
      Average Assets                                $  15,618
      Average Equity                                $     841
      Net Interest Margin                                9.05%
      Return on Average Assets (ROA)                     1.26%
      Return on Average Equity (ROE)                    23.47%
      Net Charge-Off Rate                                6.66%
      Net Charge-Offs                               $   215.1
     Managed Loan Statistics (period end)
      Reported Loans                                $   4,330
      Securitized Loans                                 9,143
      Total Loans                                   $  13,473
      Delinquency Rate (30+ days)                        6.36%
      Number of Accounts (000's)                       10,664
      Total Assets                                  $  15,440
      Capital, Including Preferred Interests        $   939.7
      Capital to Managed Assets Ratio                    6.09%


     (1) Net of a $73.3 million reduction to more conservatively report
         uncollectible finance charge and fee income receivables and the
         charge-off of credit card loans at 180 days past-due.
     (2) Operating expenses include $6.5 million, $24.0 million, $32.4
         million, $9.7 million and $8.6 million in compensation expense in Q3
         98, Q2 98, Q1 98, Q4 97 and Q3 97, respectively, for performance-
         based stock options.
     (3) The net interest margin, without the modifications in charge-off
         policy and finance charge and fee income recognition, was 10.13%.
     (4) The net charge-off rate and net charge-offs, without the modification
         in charge-off policy, were 6.02% and $208.2 million, respectively.
                         CAPITAL ONE FINANCIAL CORPORATION
                            Consolidated Balance Sheets
                             (in thousands)(unaudited)


                                                         September 30
                                                             1998

     Assets:
     Cash and due from banks                            $       14,974
     Federal funds sold and resale agreements                  365,000
     Interest-bearing deposits at other banks                   32,993
       Cash and cash equivalents                               412,967
     Securities available for sale                           1,296,959
     Consumer loans                                          5,666,998
       Less:  Allowance for loan losses                       (231,000)
     Net loans                                               5,435,998
     Premises and equipment, net                               228,550
     Interest receivable                                        49,934
     Accounts receivable from securitizations                  921,602
     Other                                                     234,766
        Total assets                                    $    8,580,776


     Liabilities:
     Interest-bearing deposits                          $    1,598,335
     Other borrowings                                        1,439,690
     Senior notes                                            3,729,234
     Deposit notes
     Interest payable                                           80,373
     Other                                                     466,160
        Total liabilities                                    7,313,792

     Guaranteed Preferred Beneficial Interests
       In Capital One Bank's Floating Rate Junior
       Subordinated Capital Income Securities:                  97,856

     Stockholders' Equity:
     Common stock                                                  666
     Paid-in capital, net                                      599,536
     Retained earnings                                         643,855
        Less:Treasury stock, at cost                           (74,929)
        Total stockholders' equity                           1,169,128
        Total liabilities and stockholders' equity      $    8,580,776


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


                                                              June 30
                                                                1998

     Assets:
     Cash and due from banks                            $        8,463
     Federal funds sold and resale agreements
     Interest-bearing deposits at other banks                   30,926
       Cash and cash equivalents                                39,389
     Securities available for sale                           1,431,091
     Consumer loans                                          5,140,340
       Less:  Allowance for loan losses                       (213,000)
     Net loans                                               4,927,340
     Premises and equipment, net                               188,727
     Interest receivable                                        45,866
     Accounts receivable from securitizations                  836,274
     Other                                                     182,751
        Total assets                                    $    7,651,438


     Liabilities:
     Interest-bearing deposits                          $    1,287,402
     Other borrowings                                          959,480
     Senior notes                                            3,709,404
     Deposit notes                                              99,996
     Interest payable                                           83,167
     Other                                                     345,037
        Total liabilities                                    6,484,486

     Guaranteed Preferred Beneficial Interests
       In Capital One Bank's Floating Rate Junior
       Subordinated Capital Income Securities:                  97,791

     Stockholders' Equity:
     Common stock                                                  666
     Paid-in capital, net                                      561,518
     Retained earnings                                         550,906
        Less:Treasury stock, at cost                           (43,929)
        Total stockholders' equity                           1,069,161
        Total liabilities and stockholders' equity      $    7,651,438


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


                                                           September 30
                                                               1997

     Assets:
     Cash and due from banks                            $       57,772
     Federal funds sold and resale agreements                  152,575
     Interest-bearing deposits at other banks                   22,267
       Cash and cash equivalents                               232,614
     Securities available for sale                           1,033,946
     Consumer loans                                          4,329,799
       Less:  Allowance for loan losses                       (147,000)
     Net loans                                               4,182,799
     Premises and equipment, net                               180,740
     Interest receivable                                        35,539
     Accounts receivable from securitizations                  539,925
     Other                                                     106,208
        Total assets                                    $    6,311,771


     Liabilities:
     Interest-bearing deposits                          $    1,050,014
     Other borrowings                                          321,463
     Senior notes                                            3,307,801
     Deposit notes                                             299,996
     Interest payable                                           65,798
     Other                                                     327,036
        Total liabilities                                    5,372,108

     Guaranteed Preferred Beneficial Interests
       In Capital One Bank's Floating Rate Junior
       Subordinated Capital Income Securities:                  97,599
     Stockholders' Equity:
     Common stock                                                  666
     Paid-in capital, net                                      504,139
     Retained earnings                                         373,921
        Less: Treasury stock, at cost                          (36,662)
        Total stockholders' equity                             842,064
        Total liabilities and stockholders' equity      $    6,311,771


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


                                                        Three Months Ended
                                                    September 30    June 30
                                                        1998         1998


     Interest Income:
     Consumer loans, including fees                  $  259,339  $  245,129
     Federal funds sold and resale agreements               957       2,140
     Other                                               22,813      24,169
       Total interest income                            283,109     271,438

     Interest Expense:
     Deposits                                            15,805      13,635
     Other borrowings                                    24,752      20,375
     Senior and deposit notes                            65,498      67,704
       Total interest expense                           106,055     101,714
     Net interest income                                177,054     169,724
     Provision for loan losses                           67,569      59,013
     Net interest income after
       provision for loan losses                        109,485     110,711

     Non-Interest Income:
     Servicing and securitizations                      217,094     155,412
     Service charges and other fees                     146,648     153,170
     Interchange                                         23,213      20,371
       Total non-interest income                        386,955     328,953

     Non-Interest Expense:
     Salaries and associate benefits                    116,107     113,428
     Marketing                                          126,481      85,811
     Communications and data processing                  38,415      34,840
     Supplies and equipment                              27,416      32,368
     Occupancy                                           11,115      11,090
     Other                                               63,993      54,299
       Total non-interest expense                       383,527     331,836
     Income before income taxes                         112,913     107,828
     Income taxes                                        42,907      40,975
     Net income                                      $   70,006  $   66,853

     Basic earnings per share                        $     1.07  $     1.02
     Diluted earnings per share                      $     1.00  $     0.96
     Dividends paid per share                        $     0.08  $     0.08


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


                                                   Three Months Ended
                                                     September 30
                                                          1997


     Interest Income:
     Consumer loans, including fees                  $  153,377
     Federal funds sold and resale agreements             3,753
     Other                                               21,840
      Total interest income                             178,970

     Interest Expense:
     Deposits                                             9,052
     Other borrowings                                     9,168
     Senior and deposit notes                            63,596
      Total interest expense                             81,816
     Net interest income                                 97,154
     Provision for loan losses                           72,518
     Net interest income after
      provision for loan losses                          24,636

     Non-Interest Income:
     Servicing and securitizations                      180,348
     Service charges and other fees                      87,979
     Interchange                                         12,606
      Total non-interest income                         280,933

     Non-Interest Expense:
     Salaries and associate benefits                     73,214
     Marketing                                           60,781
     Communications and data processing                  25,935
     Supplies and equipment                              21,721
     Occupancy                                            8,198
     Other                                               36,154
      Total non-interest expense                        226,003
     Income before income taxes                          79,566
     Income taxes                                        30,236
     Net income                                      $   49,330

     Basic earnings per share                        $     0.75
     Diluted earnings per share                      $     0.73
     Dividends paid per share                        $     0.08


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


                                                        Nine Months Ended
                                                           September 30
                                                        1998         1997


     Interest Income:
     Consumer loans, including fees                  $  734,106  $  443,374
     Federal funds sold and resale agreements             8,175      12,030
     Other                                               70,308      59,030
       Total interest income                            812,589     514,434

     Interest Expense:
     Deposits                                            43,578      28,124
     Other borrowings                                    61,180      26,145
     Senior and deposit notes                           196,231     191,555
       Total interest expense                           300,989     245,824
     Net interest income                                511,600     268,610
     Provision for loan losses                          212,448     168,481
     Net interest income after
      provision for loan losses                         299,152     100,129

     Non-Interest Income:
     Servicing and securitizations                      541,161     498,943
     Service charges and other fees                     432,263     220,763
     Interchange                                         58,383      33,326
       Total non-interest income                      1,031,807     753,032

     Non-Interest Expense:
     Salaries and associate benefits                    337,488     213,137
     Marketing                                          287,292     159,827
     Communications and data processing                 102,618      72,045
     Supplies and equipment                              82,399      58,200
     Occupancy                                           32,849      23,387
     Other                                              161,600     115,009
       Total non-interest expense                     1,004,246     641,605
     Income before income taxes                         326,713     211,556
     Income taxes                                       124,151      80,392
     Net income                                      $  202,562  $  131,164

     Basic earnings per share                        $     3.09  $     1.98
     Diluted earnings per share                      $     2.92  $     1.94
     Dividends paid per share                        $     0.24  $     0.24


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

     Managed(1)                                   Quarter Ended 9/30/98

                                                Average     Income/   Yield/
                                                Balance     Expense   Rate
     Earning assets:
       Consumer loans                      $ 15,746,091   $671,665   17.06%
       Federal funds sold and
          resale agreements                      69,293        957    5.52
       Other securities                       1,556,874     22,813    5.86
     Total earning assets                  $ 17,372,258   $695,435   16.01%

     Interest-bearing liabilities:
       Deposits                            $  1,368,833   $ 15,805    4.62%
       Other borrowings                       1,495,731     24,752    6.62
       Senior and deposit notes               3,819,061     65,498    6.86
       Securitization liability              10,090,262    148,620    5.89
     Total interest-bearing liabilities    $ 16,773,887   $254,675    6.07%

     Net interest spread                                              9.94%

     Interest income to average earning assets                       16.01%
     Interest expense to average earning assets                       5.86
     Net interest margin                                             10.15%


     (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 6/30/98
                                                Average     Income/   Yield/
                                                Balance     Expense   Rate
     Earning assets:
       Consumer loans                      $ 14,416,722   $607,247   16.85%
       Federal funds sold and
          resale agreements                     151,275      2,140    5.66
       Other securities                       1,674,381     24,169    5.77
     Total earning assets                  $ 16,242,378   $633,556   15.60%

     Interest-bearing liabilities:
       Deposits                            $  1,193,508   $ 13,635    4.57%
       Other borrowings                       1,318,889     20,375    6.18
       Senior and deposit notes               3,905,684     67,704    6.93
       Securitization liability               9,190,007    132,337    5.76
     Total interest-bearing liabilities    $ 15,608,088   $234,051    6.00%

     Net interest spread                                              9.60%

     Interest income to average earning assets                       15.60%
     Interest expense to average earning assets                       5.76
     Net interest margin                                              9.84%


     (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 9/30/97

                                                Average     Income/   Yield/
                                                Balance     Expense   Rate
     Earning assets:
       Consumer loans                      $ 12,917,967   $518,563   16.06%
       Federal funds sold and
          resale agreements                     255,594      3,753    5.87
       Other securities                       1,434,536     21,840    6.09
     Total earning assets                  $ 14,608,097   $544,156   14.90%

     Interest-bearing liabilities:
       Deposits                            $    851,916   $  9,052    4.25%
       Other borrowings                         594,519      9,168    6.17
       Senior and deposit notes               3,686,416     63,596    6.90
       Securitization liability               9,061,882    131,670    5.81
     Total interest-bearing liabilities    $ 14,194,733   $213,486    6.02%

     Net interest spread                                              8.88%

     Interest income to average earning assets                       14.90%
     Interest expense to average earning assets                       5.85
     Net interest margin                                              9.05%


     (1) The information in this table reflects the adjustment to add back the
     effect of securitized loans.