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Capital One Reports Record Third Quarter Earnings; Earnings Per Share Rise 29% Over Year Ago Period

October 16, 2001 at 4:23 PM EDT

FALLS CHURCH, Va., Oct. 16 /PRNewswire/ -- Capital One Financial Corporation (NYSE: COF) today announced its 17th consecutive quarter of record earnings, driven by a 38 percent 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 third quarter of 2001 were $165.3 million, or $0.75 per share, versus earnings of $122.1 million, or $0.58 per share, for the comparable period in the prior year. Earnings in the second quarter of 2001 were $155.3 million, or $0.70 per share.

"Capital One's 17th consecutive quarter of record-breaking earnings was driven by a 38 percent increase in total revenues over last year," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "Our stringent risk management practices again place us in the lead with the best credit performance of any of the major credit card institutions -- with a charge-off rate of 3.92 percent. We remain firmly on track to deliver this year's target of 30 percent earnings per share growth."

Third quarter 2001 revenue, defined as managed net interest income and non-interest income, rose to $1.8 billion versus $1.6 billion in the second quarter of 2001 and $1.3 billion for the comparable period in the prior year. For the quarter, Capital One added 2.0 million net new accounts, bringing total accounts to 40.1 million. The company's managed consumer loan balances increased by $3.2 billion in the third quarter to $38.5 billion.

"This quarter's strong performance continues to illustrate the power of our unique Information-Based Strategy and our ability to consistently deliver value to our more than 40 million customers," said Nigel W. Morris, Capital One's President and Chief Operating Officer. "Capital One's complete integration of marketing and technology continues to fuel our robust loan growth -- a 36 percent annualized increase in managed loans this quarter."

The managed net charge-off rate decreased to 3.92 percent for the third quarter of 2001 compared with 3.98 percent for the second quarter of 2001. The managed delinquency rate (30+ days) increased to 5.20 percent as of September 30, 2001, compared with 4.92 percent as of June 30, 2001.

The company's managed net interest margin was 9.27 percent in the third quarter of 2001 versus 9.11 percent in the second quarter of 2001 and 10.75 percent in the comparable period of 2000.

Marketing expense for the third quarter of 2001 increased $13.2 million to $281.9 million from $268.7 million in the second quarter of 2001, and increased $48.7 million over the $233.2 million spent in the comparable period of the prior year. Other non-interest expenses (excluding marketing) for the third quarter of 2001 were $793.0 million versus $721.6 million for the second quarter of 2001 and $585.8 million in the comparable period of the prior year. Annualized operating expenses per account, which included one-time expenses of $38.8 million, increased to $81.03 for the third quarter of 2001. Excluding the one-time expenses, annualized operating expenses per account would have been $77.06, down from $77.38 for the second quarter of 2001 and $82.84 for 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 40.1 million customers and $38.5 billion in managed loans outstanding as of September 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 pm (EDT) analyst conference call is accessible on the Internet on Capital
One's home page (http://www.capitalone.com ). Choose "About Capital One" to
access the Investor Center to view and 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)    Q3             Q2

    Earnings (Managed Basis)
    Net Interest Income                             $   926.7      $   823.7
    Non-Interest Income                                 852.5          796.3
    Total Revenue                                     1,779.2        1,620.0
    Provision for Loan Losses                           437.6          379.1
    Marketing Expenses                                  281.9          268.7
    Operating Expenses                                  793.0(2)       721.6
    Income Before Taxes                                 266.7          250.5
    Tax Rate                                             38.0%          38.0%
    Net Income                                      $   165.3      $   155.3

    Common Share Statistics
    Basic EPS                                       $    0.78      $    0.74
    Diluted EPS                                     $    0.75      $    0.70
    Dividends Per Share                             $    0.03      $    0.03
    Book Value Per Share (period end)               $   14.14      $   13.02
    Stock Price Per Share (period end)              $   46.03      $   60.15
    Total Market Capitalization (period end)        $ 9,710.1      $12,666.5
    Shares Outstanding (period end)                     211.0          210.6
    Shares Used to Compute Basic EPS                    210.8          209.1
    Shares Used to Compute Diluted EPS                  219.9          221.2

    Managed Loan Statistics (period avg.)
    Average Loans                                   $  37,017      $  33,440
    Average Earning Assets                          $  39,994      $  36,180
    Average Assets                                  $  43,363      $  38,820
    Average Equity                                  $   2,935      $   2,608
    Net Interest Margin                                  9.27%          9.11%
    Risk Adjusted Margin (1)                            14.17%         14.23%
    Return on Average Assets (ROA)                       1.53%          1.60%
    Return on Average Equity (ROE)                      22.53%         23.83%
    Net Charge-Off Rate                                  3.92%          3.98%
    Net Charge-Offs                                 $   362.7      $   332.8
    Cost Per Account (in dollars)                   $   81.03      $   77.38

    Managed Loan Statistics (period end)
    Reported Loans                                  $  17,480      $  16,327
    Securitized Loans                                  21,009         18,956
    Total Loans                                     $  38,489      $  35,283
    Delinquency Rate (30+ days)                          5.20%          4.92%
    Number of Accounts (000's)                         40,145         38,146
    Total Assets                                    $  44,497      $  40,587
    Capital, Including Preferred Interests          $ 3,081.9      $ 2,840.1
    Capital to Managed Assets Ratio                      6.93%          7.00%

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

percentage of average earning assets.

(2) Includes one-time charges of $38.8 million.

                     CAPITAL ONE FINANCIAL CORPORATION (COF)
                         FINANCIAL & STATISTICAL SUMMARY

                                                       2001            2000
    (in millions, except per share data and as noted)   Q1              Q4

    Earnings (Managed Basis)
    Net Interest Income                            $   759.3       $   716.1
    Non-Interest Income                                747.1           696.5
    Total Revenue                                    1,506.4         1,412.5
    Provision for Loan Losses                          356.5           329.1
    Marketing Expenses                                 231.2           259.5
    Operating Expenses                                 687.0           617.1
    Income Before Taxes                                231.6           206.9
    Tax Rate                                            38.0%           38.0%
    Net Income                                     $   143.6       $   128.3

    Common Share Statistics
    Basic EPS                                      $    0.70       $    0.65
    Diluted EPS                                    $    0.66       $    0.61
    Dividends Per Share                            $    0.03       $    0.03
    Book Value Per Share (period end)              $   11.81       $    9.94
    Stock Price Per Share (period end)             $   55.50       $   65.81
    Total Market Capitalization (period end)       $11,509.1       $12,989.3
    Shares Outstanding (period end)                    207.4           197.4
    Shares Used to Compute Basic EPS                   204.8           197.0
    Shares Used to Compute Diluted EPS                 217.8           210.4

    Managed Loan Statistics (period avg.)
    Average Loans                                  $  30,505       $  26,377
    Average Earning Assets                         $  32,983       $  28,188
    Average Assets                                 $  35,303       $  30,234
    Average Equity                                 $   2,347       $   1,865
    Net Interest Margin                                 9.21%          10.16%
    Risk Adjusted Margin (1)                           14.80%          16.32%
    Return on Average Assets (ROA)                      1.63%           1.70%
    Return on Average Equity (ROE)                     24.47%          27.51%
    Net Charge-Off Rate                                 3.75%           3.98%
    Net Charge-Offs                                $   285.9       $   262.3
    Cost Per Account (in dollars)                  $   78.26       $   78.09

    Managed Loan Statistics (period end)
    Reported Loans                                 $  15,572       $  15,113
    Securitized Loans                                 15,979          14,411
    Total Loans                                    $  31,551       $  29,524
    Delinquency Rate (30+ days)                         4.72%           5.23%
    Number of Accounts (000's)                        36,462          33,774
    Total Assets                                   $  36,749       $  33,286
    Capital, Including Preferred Interests         $ 2,547.7       $ 2,061.0
    Capital to Managed Assets Ratio                     6.93%           6.19%

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

percentage of average earning assets.

(2) Includes one-time charges of $38.8 million.

                     CAPITAL ONE FINANCIAL CORPORATION (COF)
                         FINANCIAL & STATISTICAL SUMMARY

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

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

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

    Managed Loan Statistics (period avg.)
    Average Loans                                             $  23,020
    Average Earning Assets                                    $  24,749
    Average Assets                                            $  27,015
    Average Equity                                            $   1,743
    Net Interest Margin                                           10.75%
    Risk Adjusted Margin (1)                                      17.24%
    Return on Average Assets (ROA)                                 1.81%
    Return on Average Equity (ROE)                                28.02%
    Net Charge-Off Rate                                            3.80%
    Net Charge-Offs                                           $   218.4
    Cost Per Account (in dollars)                             $   82.84

    Managed Loan Statistics (period end)
    Reported Loans                                            $  12,331
    Securitized Loans                                            11,821
    Total Loans                                               $  24,152
    Delinquency Rate (30+ days)                                    5.32%
    Number of Accounts (000's)                                   29,437
    Total Assets                                              $  28,185
    Capital, Including Preferred Interests                    $ 1,873.8
    Capital to Managed Assets Ratio                                6.65%

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

percentage of average earning assets.

(2) Includes one-time charges of $38.8 million.

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

                                         Sept 30       June 30       Sept 30
                                           2001          2001          2000

    Assets:
    Cash and due from banks           $    64,884   $   134,918   $    81,403
    Federal funds sold and resale
     agreements                           365,652        39,770        12,688
    Interest-bearing deposits at
     other banks                          102,094        62,050       128,377
      Cash and cash equivalents           532,630       236,738       222,468
    Securities available for sale       2,707,564     2,554,967     1,652,330
    Consumer loans                     17,479,715    16,326,617    12,331,088
      Less:  Allowance for loan
       losses                            (727,000)     (647,000)     (457,000)
    Net loans                          16,752,715    15,679,617    11,874,088
    Premises and equipment, net           740,144       729,525       560,974
    Interest receivable                   108,868        79,089        93,817
    Accounts receivable from
     securitizations                    1,949,361     1,708,055     1,403,377
    Other                                 722,155       672,338       571,771
      Total assets                    $23,513,437   $21,660,329   $16,378,825


    Liabilities:
    Interest-bearing deposits         $11,075,499   $10,029,736   $ 6,323,924
    Other borrowings                    1,810,208     2,320,734     2,820,533
    Senior notes                        5,462,025     4,757,481     4,119,101
    Interest payable                      148,931       151,429       109,842
    Other                               2,033,481     1,659,412     1,230,037
      Total liabilities                20,530,144    18,918,792    14,603,437

    Stockholders' Equity:
    Common stock                            2,121         2,118         1,997
    Paid-in capital, net                1,154,211     1,089,582       559,595
    Retained earnings and cumulative
     other comprehensive income         1,872,520     1,695,468     1,322,744
      Less:  Treasury stock, at cost      (45,559)      (45,631)     (108,948)
      Total stockholders' equity        2,983,293     2,741,537     1,775,388
      Total liabilities and
       stockholders' equity           $23,513,437   $21,660,329   $16,378,825


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

                                                        Three Months Ended
                                                       Sept 30      June 30
                                                         2001         2001


    Interest Income:
    Consumer loans, including fees                     $ 667,335   $ 620,866
    Securities available for sale                         37,032      33,942
    Other                                                 18,323       2,408
       Total interest income                             722,690     657,216

    Interest Expense:
    Deposits                                             161,411     155,479
    Other borrowings                                      43,233      43,825
    Senior notes                                          90,225      87,842
       Total interest expense                            294,869     287,146
    Net interest income                                  427,821     370,070
    Provision for loan losses                            230,433     202,900
    Net interest income after provision for loan losses  197,388     167,170

    Non-Interest Income:
    Servicing and securitizations                        618,633     572,591
    Service charges and other customer-related fees      428,855     407,412
    Interchange                                           96,702      93,673
       Total non-interest income                       1,144,190   1,073,676

    Non-Interest Expense:
    Salaries and associate benefits                      349,487     342,076
    Marketing                                            281,910     268,709
    Communications and data processing                    92,735      72,906
    Supplies and equipment                                77,497      74,780
    Occupancy                                             32,151      31,349
    Other                                                241,117     200,496
       Total non-interest expense                      1,074,897     990,316
    Income before income taxes                           266,681     250,530
    Income taxes                                         101,337      95,203
    Net income                                         $ 165,344   $ 155,327

    Basic earnings per share                           $    0.78   $    0.74
    Diluted earnings per share                         $    0.75   $    0.70
    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
                                                                Sept 30
                                                                  2000

    Interest Income:
    Consumer loans, including fees                              $ 606,872
    Securities available for sale                                  23,367
    Other                                                           1,474
        Total interest income                                     631,713

    Interest Expense:
    Deposits                                                       90,197
    Other borrowings                                               55,967
    Senior notes                                                   72,679
        Total interest expense                                    218,843
    Net interest income                                           412,870
    Provision for loan losses                                     193,409
    Net interest income after provision for loan losses           219,461

    Non-Interest Income:
    Servicing and securitizations                                 307,343
    Service charges and other customer-related fees               424,087
    Interchange                                                    65,039
        Total non-interest income                                 796,469

    Non-Interest Expense:
    Salaries and associate benefits                               264,171
    Marketing                                                     233,188
    Communications and data processing                             78,064
    Supplies and equipment                                         66,325
    Occupancy                                                      30,721
    Other                                                         146,488
        Total non-interest expense                                818,957
    Income before income taxes                                    196,973
    Income taxes                                                   74,850
    Net income                                                  $ 122,123

    Basic earnings per share                                    $    0.62
    Diluted earnings per share                                  $    0.58
    Dividends paid per share                                    $    0.03


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

                                                          Nine Months Ended
                                                         Sept 30     Sept 30
                                                          2001         2000


    Interest Income:
    Consumer loans, including fees                     $1,906,090  $1,607,695
    Securities available for sale                          99,208      70,946
    Other                                                  24,481       5,026
       Total interest income                            2,029,779   1,683,667

    Interest Expense:
    Deposits                                              463,851     205,936
    Other borrowings                                      130,958     144,335
    Senior notes                                          261,360     203,071
       Total interest expense                             856,169     553,342
    Net interest income                                 1,173,610   1,130,325
    Provision for loan losses                             683,947     470,944
    Net interest income after provision for loan losses   489,663     659,381

    Non-Interest Income:
    Servicing and securitizations                       1,735,015     860,741
    Service charges and other customer-related fees     1,242,401   1,140,025
    Interchange                                           265,226     161,570
       Total non-interest income                        3,242,642   2,162,336

    Non-Interest Expense:
    Salaries and associate benefits                     1,017,279     735,625
    Marketing                                             781,819     646,686
    Communications and data processing                    240,933     221,819
    Supplies and equipment                                225,880     176,766
    Occupancy                                              94,802      83,263
    Other                                                 622,747     406,982
       Total non-interest expense                       2,983,460   2,271,141
    Income before income taxes                            748,845     550,576
    Income taxes                                          284,561     209,219
    Net income                                         $  464,284  $  341,357

    Basic earnings per share                           $     2.23  $     1.73
    Diluted earnings per share                         $     2.11  $     1.63
    Dividends paid per share                           $     0.08  $     0.08


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

    Managed (1)                                     Quarter Ended 9/30/01
                                                  Average     Income/  Yield/
                                                  Balance     Expense  Rate
    Earning assets:
      Consumer loans                          $37,017,405 $1,437,367  15.53%
      Securities available for sale             2,645,982     37,032   5.60
      Other                                       330,863      2,646   3.20
    Total earning assets                      $39,994,250 $1,477,045  14.77%

    Interest-bearing liabilities:
      Deposits                                $10,537,193 $  161,411   6.13%
      Other borrowings                          3,103,263     43,233   5.57
      Senior notes                              5,280,860     90,225   6.83
      Securitization liability                 19,472,058    255,508   5.25
    Total interest-bearing liabilities        $38,393,374 $  550,377   5.73%

    Net interest spread                                                9.04%

    Interest income to average earning assets                         14.77%
    Interest expense to average earning assets                         5.50
    Net interest margin                                                9.27%

(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 6/30/01
                                                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 9/30/00
                                              Average      Income/   Yield/
                                              Balance      Expense    Rate
    Earning assets:
     Consumer loans                          $23,020,158 $1,039,473   18.06%
     Securities available for sale             1,557,088     23,367    6.00
     Other                                       171,881      1,474    3.43
    Total earning assets                     $24,749,127 $1,064,314   17.20%

    Interest-bearing liabilities:
     Deposits                                $ 5,787,748 $   90,197    6.23%
     Other borrowings                          3,084,407     55,967    7.26
     Senior notes                              4,139,665     72,679    7.02
     Securitization liability                 10,908,397    180,412    6.62
    Total interest-bearing liabilities       $23,920,217 $  399,255    6.68%

    Net interest spread                                               10.52%

    Interest income to average earning assets                         17.20%
    Interest expense to average earning assets                         6.45
    Net interest margin                                               10.75%

(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/