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Capital One Reports Record Third Quarter Earnings

October 14, 1999 at 6:28 AM EDT

FALLS CHURCH, Va., Oct. 14 /PRNewswire/ -- Capital One Financial Corporation (NYSE: COF) today announced record third quarter 1999 earnings of $95.4 million, or $.45 per share, versus earnings of $70.0 million, or $.33 per share, for the comparable period in the prior year, a 36 percent increase. All earnings per share amounts reflect the Company's three-for-one stock split distributed on June 1, 1999.

"We're extremely proud of another record quarter that demonstrates the outstanding earnings power of our Information-Based Strategy," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "This is the second-largest quarter of account growth in our history and it puts us over the 20 million customer mark."

During the third quarter of 1999, the Company added 1.6 million net new accounts, bringing total accounts to 20.8 million. Third quarter revenue, defined as managed net interest income and non-interest income, increased to $999 million versus $927 million in the second quarter of 1999, and $705 million for the comparable period in the prior year. For the quarter, Capital One's managed consumer loan balances increased by $657 million to $18.5 billion.

The managed net interest margin was 11.18 percent in the third quarter of 1999, an increase from 10.89 percent in the second quarter of 1999, and 10.15 percent in the comparable period of the prior year. The increased margin and higher non-interest income contributed to the increase in risk adjusted margin to 16.09 percent, compared to 15.50 percent for the second quarter of 1999 and 11.68 percent for the comparable period of the prior year.

The managed delinquency rate (30+ days) increased to 5.06 percent as of September 30, 1999, compared with 4.72 percent as of June 30, 1999. The managed net charge-off rate increased to 3.88 percent for the third quarter of 1999 compared with 3.73 percent in the second quarter of 1999.

"Our extraordinary growth is fueled by our robust investment in marketing," said Nigel W. Morris, Capital One's President and Chief Operating Officer. "Thanks to our surgically targeted marketing approach and our conservative approach to lending, we continue to reap the benefits of the best charge-off rate in the industry."

Marketing investment decreased slightly in the third quarter of 1999 to $175 million versus $178 million in the second quarter of 1999, and $126 million in the comparable period of the prior year. Other non-interest expenses (excluding marketing) for the third quarter of 1999 were $456 million versus $430 million for the second quarter of 1999, and $257 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.

The allowance for loan losses increased $40 million during the third quarter of 1999 to $306 million or 3.69 percent of on-balance sheet receivables as of September 30, 1999, compared to 3.58 percent as of June 30, 1999. Capital ratios remained strong as of September 30, 1999 at 13.50 percent of reported assets and 7.12 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 20.8 million customers and $18.5 billion in managed loans outstanding as of September 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.

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

                      CAPITAL ONE FINANCIAL CORPORATION (COF)
                          FINANCIAL & STATISTICAL SUMMARY

                                                        1999        1999
     (in millions, except per share data and as noted)   Q3          Q2

     Earnings (Managed Basis)
     Net Interest Income                            $   560.7  $    528.8
     Non-Interest Income                                438.6       398.5
     Total Revenue                                      999.3       927.3
     Provision for Loan Losses                          214.3       178.3
     Marketing Expenses                                 175.2       178.2
     Operating Expenses                                 456.1       429.6
     Income Before Taxes                                153.8       141.1
     Tax Rate                                            38.0%       38.0%
     Net Income                                     $    95.4  $     87.5

     Common Share Statistics
     Basic EPS                                      $    0.48  $     0.44
     Diluted EPS                                    $    0.45  $     0.41
     Dividends Per Share                            $    0.03  $     0.03
     Book Value Per Share (period end)              $    7.29  $     7.11
     Stock Price Per Share (period end)             $   39.00  $    55.69
     Total Market Capitalization (period end)       $ 7,686.9  $ 10,991.3
     Shares Outstanding (period end)                    197.1       197.4
     Shares Used to Compute Basic EPS                   197.4       197.6
     Shares Used to Compute Diluted EPS                 210.1       211.5

     Managed Loan Statistics (period avg.)
     Average Loans                                  $  18,162  $   17,598
     Average Earning Assets                         $  20,060  $   19,428
     Average Assets                                 $  21,563  $   20,714
     Average Equity                                 $   1,461  $    1,374
     Net Interest Margin                                11.18%      10.89%
     Risk Adjusted Margin(1)                            16.09%      15.50%
     Return on Average Assets (ROA)                      1.77%       1.69%
     Return on Average Equity (ROE)                     26.12%      25.47%
     Net Charge-Off Rate                                 3.88%       3.73%
     Net Charge-Offs                                $   176.0  $    164.0

     Managed Loan Statistics (period end)
     Reported Loans                                 $   8,286  $    7,427
     Securitized Loans                                 10,231      10,433
     Total Loans                                    $  18,517  $   17,860
     Delinquency Rate (30+ days)                         5.06%       4.72%
     Number of Accounts (000's)                        20,845      19,213
     Total Assets                                   $  21,577  $   20,985
     Capital, Including Preferred Interests         $ 1,535.3  $  1,501.0
     Capital to Managed Assets Ratio                     7.12%       7.15%


     (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

                                                        1999        1998
     (in millions, except per share data and as noted)   Q1         Q4

     Earnings (Managed Basis)
     Net Interest Income                             $  515.7    $  443.4
     Non-Interest Income                                357.6       327.9
     Total Revenue                                      873.3       771.3
     Provision for Loan Losses                          190.5       186.3
     Marketing Expenses                                 176.1       159.0
     Operating Expenses                                 373.9       308.9
     Income Before Taxes                                132.9       117.2
     Tax Rate                                            38.0%       38.0%
     Net Income                                      $   82.4    $   72.7

     Common Share Statistics
     Basic EPS                                       $   0.42    $   0.37
     Diluted EPS                                     $   0.39    $   0.35
     Dividends Per Share                             $   0.03    $   0.03
     Book Value Per Share (period end)               $   6.69    $   6.45
     Stock Price Per Share (period end)              $  50.33    $  38.33
     Total Market Capitalization (period end)        $9,929.1    $7,551.1
     Shares Outstanding (period end)                    197.3       197.0
     Shares Used to Compute Basic EPS                   197.2       197.0
     Shares Used to Compute Diluted EPS                 210.0       209.1

     Managed Loan Statistics (period avg.)
     Average Loans                                   $ 17,436    $ 16,547
     Average Earning Assets                          $ 19,482    $ 18,702
     Average Assets                                  $ 20,722    $ 19,944
     Average Equity                                  $  1,302    $  1,212
     Net Interest Margin                                10.59%       9.48%
     Risk Adjusted Margin(1)                            14.42%      12.21%
     Return on Average Assets (ROA)                      1.59%       1.46%
     Return on Average Equity (ROE)                     25.32%      23.99%
     Net Charge-Off Rate                                 3.93%       4.51%
     Net Charge-Offs                                 $  171.1    $  186.5

     Managed Loan Statistics (period end)
     Reported Loans                                  $  7,246    $  6,157
     Securitized Loans                                 10,198      11,238
     Total Loans                                     $ 17,444    $ 17,395
     Delinquency Rate (30+ days)                         4.56%       4.70%
     Number of Accounts (000's)                        18,022      16,706
     Total Assets                                    $ 20,318    $ 20,619
     Capital, Including Preferred Interests          $1,417.2    $1,368.3
     Capital to Managed Assets Ratio                     6.98%       6.64%


     (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

                                                        1998
     (in millions, except per share data and as noted)   Q3

     Earnings (Managed Basis)
     Net Interest Income                             $  440.8
     Non-Interest Income                                264.6
     Total Revenue                                      705.4
     Provision for Loan Losses                          208.9
     Marketing Expenses                                 126.5
     Operating Expenses                                 257.0
     Income Before Taxes                                112.9
     Tax Rate                                            38.0%
     Net Income                                      $   70.0

     Common Share Statistics
     Basic EPS                                       $   0.36
     Diluted EPS                                     $   0.33
     Dividends Per Share                             $   0.03
     Book Value Per Share (period end)               $   5.94
     Stock Price Per Share (period end)              $  34.35
     Total Market Capitalization (period end)        $6,758.0
     Shares Outstanding (period end)                    196.7
     Shares Used to Compute Basic EPS                   197.2
     Shares Used to Compute Diluted EPS                 210.0

     Managed Loan Statistics (period avg.)
     Average Loans                                   $ 15,746
     Average Earning Assets                          $ 17,372
     Average Assets                                  $ 18,597
     Average Equity                                  $  1,149
     Net Interest Margin                                10.15%
     Risk Adjusted Margin(1)                            11.68%
     Return on Average Assets (ROA)                      1.51%
     Return on Average Equity (ROE)                     24.36%
     Net Charge-Off Rate                                 5.03%
     Net Charge-Offs                                 $  198.1

     Managed Loan Statistics (period end)
     Reported Loans                                  $  5,667
     Securitized Loans                                 10,671
     Total Loans                                     $ 16,338
     Delinquency Rate (30+ days)                         4.90%
     Number of Accounts (000's)                        14,907
     Total Assets                                    $ 19,211
     Capital, Including Preferred Interests          $1,267.0
     Capital to Managed Assets Ratio                     6.60%


     (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)


                                                            Sept 30
                                                             1999

     Assets:
     Cash and due from banks                              $     59,934
     Federal funds sold and resale agreements
     Interest-bearing deposits at other banks                   53,493
       Cash and cash equivalents                               113,427
     Securities available for sale                           1,708,609
     Consumer loans                                          8,286,210
       Less:  Allowance for loan losses                       (306,000)
     Net loans                                               7,980,210
     Premises and equipment, net                               429,504
     Interest receivable                                        65,350
     Accounts receivable from securitizations                  614,962
     Other                                                     460,847
        Total assets                                      $ 11,372,909


     Liabilities:
     Interest-bearing deposits                            $  3,576,400
     Other borrowings                                        1,016,868
     Senior notes                                            4,328,237
     Interest payable                                           87,688
     Other                                                     828,422
        Total liabilities                                    9,837,615

     Capital Securities                                         98,113

     Stockholders' Equity:
     Common stock(1)                                             1,997
     Paid-in capital, net(1)                                   625,771
     Retained earnings                                         897,353
        Less:  Treasury stock, at cost                         (87,940)
        Total stockholders' equity                           1,437,181
        Total liabilities and stockholders' equity        $ 11,372,909

     (1) All periods have been restated to reflect the Company's three-for-one
        stock split effective June 1, 1999.


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


                                                             June 30
                                                               1999

     Assets:
     Cash and due from banks                              $     25,582
     Federal funds sold and resale agreements
     Interest-bearing deposits at other banks                   72,616
       Cash and cash equivalents                                98,198
     Securities available for sale                           1,615,422
     Consumer loans                                          7,426,974
       Less:  Allowance for loan losses                       (266,000)
     Net loans                                               7,160,974
     Premises and equipment, net                               347,168
     Interest receivable                                        60,858
     Accounts receivable from securitizations                  886,680
     Other                                                     411,324
        Total assets                                      $ 10,580,624


     Liabilities:
     Interest-bearing deposits                            $  2,414,933
     Other borrowings                                        1,356,374
     Senior notes                                            4,539,776
     Interest payable                                          101,150
     Other                                                     667,407
        Total liabilities                                    9,079,640

     Capital Securities                                         98,048

     Stockholders' Equity:
     Common stock(1)                                             1,997
     Paid-in capital, net(1)                                   626,796
     Retained earnings                                         852,105
        Less:  Treasury stock, at cost                         (77,962)
        Total stockholders' equity                           1,402,936
        Total liabilities and stockholders' equity        $ 10,580,624

     (1) All periods have been restated to reflect the Company's three-for-one
        stock split effective June 1, 1999.


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


                                                             Sept 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
     Interest payable                                           80,373
     Other                                                     466,160
        Total liabilities                                    7,313,792

     Capital Securities                                         97,856

     Stockholders' Equity:
     Common stock(1)                                             1,997
     Paid-in capital, net(1)                                   598,205
     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

     (1) All periods have been restated to reflect the Company's three-for-one
        stock split effective June 1, 1999.

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


                                                        Three Months Ended
                                                       Sept 30      June 30
                                                         1999        1999


     Interest Income:
     Consumer loans, including fees                    $386,727    $353,193
     Federal funds sold and resale agreements               638         764
     Other                                               24,671      23,816
       Total interest income                            412,036     377,773

     Interest Expense:
     Deposits                                            38,003      26,438
     Other borrowings                                    19,030      19,484
     Senior and deposit notes                            76,980      80,654
       Total interest expense                           134,013     126,576
     Net interest income                                278,023     251,197
     Provision for loan losses                          114,061      74,301
     Net interest income after provision
      for loan losses                                   163,962     176,896

     Non-Interest Income:
     Servicing and securitizations                      311,217     293,606
     Service charges and other fees                     275,900     244,874
     Interchange                                         33,946      33,567
       Total non-interest income                        621,063     572,047

     Non-Interest Expense:
     Salaries and associate benefits                    199,048     194,461
     Marketing                                          175,163     178,242
     Communications and data processing                  68,755      62,478
     Supplies and equipment                              48,076      42,303
     Occupancy                                           19,117      16,381
     Other                                              121,056     113,984
       Total non-interest expense                       631,215     607,849
     Income before income taxes                         153,810     141,094
     Income taxes                                        58,448      53,616
     Net income                                        $ 95,362    $ 87,478

     Basic earnings per share(1)                       $   0.48    $   0.44
     Diluted earnings per share(1)                     $   0.45    $   0.41
     Dividends paid per share(1)                       $   0.03    $   0.03


     (1) All periods have been restated to reflect the Company's three-for-one
        stock split effective June 1, 1999.



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


                                                   Three Months Ended
                                                        Sept 30
                                                          1998


     Interest Income:
     Consumer loans, including fees                    $259,339
     Federal funds sold and resale agreements               957
     Other                                               22,813
       Total interest income                            283,109

     Interest Expense:
     Deposits                                            15,805
     Other borrowings                                    24,752
     Senior and deposit notes                            65,498
       Total interest expense                           106,055
     Net interest income                                177,054
     Provision for loan losses                           67,569
     Net interest income after provision
      for loan losses                                   109,485

     Non-Interest Income:
     Servicing and securitizations                      217,094
     Service charges and other fees                     146,648
     Interchange                                         23,213
       Total non-interest income                        386,955

     Non-Interest Expense:
     Salaries and associate benefits                    116,107
     Marketing                                          126,481
     Communications and data processing                  38,415
     Supplies and equipment                              27,416
     Occupancy                                           11,115
     Other                                               63,993
       Total non-interest expense                       383,527
     Income before income taxes                         112,913
     Income taxes                                        42,907
     Net income                                        $ 70,006

     Basic earnings per share(1)                       $   0.36
     Diluted earnings per share(1)                     $   0.33
     Dividends paid per share(1)                       $   0.03

     (1) All periods have been restated to reflect the Company's three-for-one
        stock split effective June 1, 1999.


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


                                                         Nine Months Ended
                                                       Sept 30      Sept 30
                                                         1999        1998


     Interest Income:
     Consumer loans, including fees                  $1,064,987    $734,106
     Federal funds sold and resale agreements             2,889       8,175
     Other                                               75,004      70,308
       Total interest income                          1,142,880     812,589

     Interest Expense:
     Deposits                                            88,383      43,578
     Other borrowings                                    62,351      61,180
     Senior and deposit notes                           230,129     196,231
       Total interest expense                           380,863     300,989
     Net interest income                                762,017     511,600
     Provision for loan losses                          262,948     212,448
     Net interest income after provision
      for loan losses                                   499,069     299,152

     Non-Interest Income:
     Servicing and securitizations                      876,777     541,161
     Service charges and other fees                     743,227     432,263
     Interchange                                         97,732      58,383
       Total non-interest income                      1,717,736   1,031,807

     Non-Interest Expense:
     Salaries and associate benefits                    572,703     337,488
     Marketing                                          529,493     287,292
     Communications and data processing                 189,305     102,618
     Supplies and equipment                             127,083      82,399
     Occupancy                                           49,412      32,849
     Other                                              321,036     161,600
       Total non-interest expense                     1,789,032   1,004,246
     Income before income taxes                         427,773     326,713
     Income taxes                                       162,554     124,151
     Net income                                      $  265,219    $202,562

     Basic earnings per share(1)                     $     1.34    $   1.03
     Diluted earnings per share(1)                   $     1.26    $   0.97
     Dividends paid per share(1)                     $     0.08    $   0.08


     (1) All periods have been restated to reflect the Company's three-for-one
        stock split effective June 1, 1999.



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

     Managed(1)                                   Quarter Ended 9/30/99

                                                Average     Income/   Yield/
                                                Balance     Expense   Rate
     Earning assets:
       Consumer loans                       $18,161,975   $813,643   17.92%
       Federal funds sold and
          resale agreements                      54,375        638    4.69
       Other                                  1,843,248     24,463    5.31
     Total earning assets                   $20,059,598   $838,744   16.72%

     Interest-bearing liabilities:
       Deposits                             $ 3,001,711   $ 38,003    5.06%
       Other borrowings                       1,235,352     19,030    6.16
       Senior and deposit notes               4,494,440     76,980    6.85
       Securitization liability              10,343,724    144,048    5.57
     Total interest-bearing liabilities     $19,075,227   $278,061    5.83%

     Net interest spread                                             10.89%

     Interest income to average earning assets                       16.72%
     Interest expense to average earning assets                       5.54
     Net interest margin                                             11.18%


     (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 6/30/99

                                                Average     Income/   Yield/
                                                Balance     Expense   Rate
     Earning assets:
       Consumer loans                       $17,597,571   $766,595   17.43%
       Federal funds sold and
          resale agreements                      63,578        764    4.81
       Other                                  1,767,280     23,816    5.39
     Total earning assets                   $19,428,429   $791,175   16.29%

     Interest-bearing liabilities:
       Deposits                             $ 2,270,769   $ 26,438    4.66%
       Other borrowings                       1,501,960     19,484    5.19
       Senior and deposit notes               4,620,921     80,654    6.98
       Securitization liability              10,161,421    135,788    5.35
     Total interest-bearing liabilities     $18,555,071   $262,364    5.66%

     Net interest spread                                             10.63%

     Interest income to average earning assets                       16.29%
     Interest expense to average earning assets                       5.40
     Net interest margin                                             10.89%


     (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 9/30/98

                                                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                                  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.


SOURCE  Capital One Financial Corporation