SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
JANUARY 15, 1998
---------------------------------
(Date of earliest event reported)
Capital One Financial Corporation
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(Exact name of registrant as specified in its charter)
Delaware 1-13300 54-1719854
- ------------------------ ---------------- ------------------
(State of incorporation (Commission File (IRS Employer
or organization) Number) Identification No.)
2980 Fairview Park Drive
Suite 1300
Falls Church, Virginia 22042-4525
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 205-1000
Item 5. Other Events.
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See attached press release.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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99.1. Press Release of the Company dated January 15, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereto duly authorized.
CAPITAL ONE FINANCIAL CORPORATION
Dated: January 15, 1998 By: /s/ John G. Finneran, Jr.
-------------------------
John G. Finneran, Jr.
Senior Vice President, General Counsel
and Corporate Secretary
EXHIBIT INDEX
99.1 Press Release of the Company dated January 15, 1998.
EXHIBIT 99.1
For Immediate Release: Contact: Paul Paquin
- ---------------------- V.P., Investor Relations
January 15, 1998 (703) 205-1039
Sam Wang
Media Relations
(703) 205-1180
CAPITAL ONE REPORTS RECORD EARNINGS
EARNINGS PER SHARE INCREASED 21 PERCENT IN 1997
FALLS CHURCH, Va. (January 15, 1998) -- Capital One Financial
Corporation (NYSE: COF) today announced record earnings for 1997. Earnings were
$189.4 million, or $2.80 per share, in 1997 compared with earnings of $155.3
million, or $2.32 per share, in 1996. For the fourth quarter of 1997, earnings
were $58.2 million, or $.86 per share, versus earnings of $49.3 million, or $.73
per share, for the third quarter of 1997 and $40.3 million, or $.60 per share,
for the comparable period in the prior year. The above earnings per share
computations are presented on a diluted basis in accordance with a recently
revised accounting standard.
"We are extremely pleased with our success in delivering both earnings
growth and return on equity in excess of 20 percent for the third consecutive
year," said Richard D. Fairbank, Capital One's Chairman and Chief Executive
Officer. "Our information-based strategy has consistently delivered superior
results despite a challenging consumer credit environment."
For the year, the Company increased managed receivables by $1.4
billion, or 11 percent, and added 3.2 million net new accounts, a 37 percent
increase over 1996. During the fourth quarter, Capital One increased its managed
portfolio by $758 million to $14.2 billion in outstanding receivables and added
1.1 million net new accounts, bringing the total number of accounts to 11.7
million. Revenue for the year, defined as managed net interest income and non-
interest income, exceeded $2 billion, a 41 percent increase from revenues of
$1.5 billion in 1996. For the fourth quarter, total revenue rose to $592 million
versus $549 million in the third quarter and $437 million for the comparable
period in the prior year. Fourth quarter 1997 revenues were reduced by $50
million, as the Company now recognizes in the current period the estimated
uncollectible portion of finance charge and fee income receivables.
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CAPITAL ONE REPORTS RECORD EARNINGS
Page 2
"We continue to grow at a rapid rate adding over a million accounts this
quarter, the second largest quarterly account growth ever. We look forward to
continued growth next year as we expand product offerings both in domestic and
international markets," said Nigel W. Morris, Capital One's President and Chief
Operating Officer.
Managed net interest income for 1997 increased by 28 percent to $1.3
billion in 1997 from $1.0 billion in 1996. Managed net interest income increased
to $362 million in the fourth quarter of 1997 from $331 million in the third
quarter and $283 million in the fourth quarter of 1996. Managed net interest
margin for 1997 increased by 70 basis points to 8.86 percent from 8.16 percent
in 1996. The managed net interest margin increased to 9.24 percent in the fourth
quarter of 1997 from 9.05 percent in the third quarter and 8.29 percent for the
comparable period of 1996.
Managed non-interest income for 1997 increased by 68 percent to $776
million from $460 million in 1996. Managed non-interest income increased to $230
million in the fourth quarter of 1997 from $218 million in the third quarter and
$154 million for the comparable quarter of 1996.
During the fourth quarter of 1997 the Company modified its methodology
as to the timing of charge-offs of credit card loans. The Company now charges
off credit card loans at 180 days past-due versus the prior practice of charging
off loans during the next billing cycle after becoming 180 days past-due. The
managed net charge-off rate for 1997 was 6.59 percent (6.22 percent excluding
the effect of the modification in charge-off policy) compared with 4.24 percent
for 1996. The managed net charge-off rate of 6.37 percent in the fourth quarter
would have been 6.02 percent without this modification in charge-off policy,
which compares favorably with a net charge-off rate of 6.66 percent in the third
quarter of 1997. The year-end managed delinquency rate decreased to 6.20 percent
(6.97 percent without the modifications in charge-off policy and finance charge
and fee income recognition discussed above) versus 6.36 percent as of September
30, 1997 and 6.24 percent as of December 31, 1996. Higher delinquencies reflect
fourth quarter billing policy changes and seasonal increases.
Marketing investment for 1997 increased to a record $225 million, up 9
percent from $207 million in 1996. Fourth quarter solicitation expense of $65
million represents the largest quarterly marketing level to date. This amount
compares to $61 million in the third quarter of 1997 and $52 million in the
comparable period of the prior year. Other non-interest expenses (excluding
marketing) were $659 million in 1997, up 30 percent from $507 million in 1996.
Other non-interest expenses for the fourth quarter of 1997 were $177 million
versus $165 million
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CAPITAL ONE REPORTS RECORD EARNINGS
Page 3
in the third quarter and $148 million in the comparable period of the prior
year. On a per account basis, other non-interest expenses continued to decline.
The allowance for loan losses increased by $36 million during the fourth
quarter to $183 million or 3.76 percent of on-balance sheet receivables as of
December 31, 1997, compared with 3.40 percent as of September 30, 1997. Capital
ratios were strong at quarter-end at 14.00 percent of reported assets and 6.03
percent of managed assets.
Headquartered in Falls Church, Virginia, Capital One Financial
Corporation is a financial services company whose principal subsidiaries,
Capital One Bank, and Capital One, F.S.B., offer consumer lending products.
Capital One's subsidiaries collectively had 11.7 million customers and $14.2
billion in managed loans outstanding at December 31, 1997, and are among the
largest providers of MasterCard and Visa credit cards in the world.
###
[NOTE: This release and financial statements 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
97 97 97 97 96
(in million, except per share data and as noted) Q4 Q3 Q2 Q1 Q4
--------- --------- ---------- -------- -----------
EARNINGS (MANAGED BASIS)
Net Interest Income $ 361.6 $ 330.7 $ 296.3 $ 310.7 $ 282.6
Non-Interest Income 230.4 218.5 169.3 157.3 154.3
--------- --------- ---------- --------- -----------
Total Revenue 592.0/1/ 549.2 465.6 468.0 436.9
Provision for Loan Losses 255.7 243.6 200.1 185.9 171.5
Marketing Expenses 65.0 60.8 45.0 54.1 52.2
Operating Expenses 177.4 165.2 157.1 159.5 148.4
--------- --------- ---------- --------- -----------
Income Before Taxes 93.9 79.6 63.5 68.5 64.9
Tax Rate 38.0% 38.0% 38.0% 38.0% 38.0%
Net Income $ 58.2 $ 49.3 $ 39.4 $ 42.5 $ 40.3
--------- --------- ---------- --------- -----------
COMMON SHARE STATISTICS
Basic EPS $ 0.89 $ 0.75 $ 0.59 $ 0.64 $ 0.61
Diluted EPS $ 0.86 $ 0.73 $ 0.58 $ 0.63 $ 0.60
Dividends Per Share $ 0.08 $ 0.08 $ 0.08 $ 0.08 $ 0.08
Book Value Per Share (period end) $ 13.66 $ 12.84 $ 12.35 $ 11.72 $ 11.16
Stock Price Per Share (period end) $ 54.19 $ 45.75 $ 37.75 $ 37.25 $ 36.00
Total Market Capitalization (period end) $ 3,542.2 $ 3,001.0 $ 2,509.8 $ 2,472.5 $ 2,387.7
Shares Outstanding (period end) 65.4 65.6 66.5 66.4 66.3
Shares Used to Compute Basic EPS 65.5 66.2 66.4 66.3 66.3
Shares Used to Compute Diluted EPS 67.5 67.6 67.6 67.7 67.3
--------- --------- ---------- --------- -----------
MANAGED LOAN STATISTICS (PERIOD AVG.)
Average Loans $ 13,824 $ 12,918 $ 12,715 $ 12,559 $ 12,471
Average Earning Assets $ 15,655 $ 14,608 $ 14,278 $ 14,080 $ 13,635
Average Assets $ 16,367 $ 15,618 $ 15,272 $ 14,900 $ 14,459
Average Equity $ 892 $ 841 $ 798 $ 764 $ 733
Net Interest Margin 9.24% 9.05% 8.30% 8.83% 8.29%
Return on Average Assets (ROA) 1.42% 1.26% 1.03% 1.14% 1.11%
Return on Average Equity (ROE) 26.12% 23.47% 19.72% 22.24% 21.95%
Net Charge-Off Rate 6.37%/2/ 6.66% 6.38% 5.84% 5.11%
Net Charge-Offs $ 255.6/2/ $ 215.1 $ 202.8 $ 183.3 $ 159.2
--------- --------- ---------- --------- -----------
MANAGED LOAN STATISTICS (PERIOD END)
Reported Loans $ 4,862 $ 4,330 $ 3,624 $ 3,817 $ 4,344
Securitized Loans 9,369 9,143 9,113 8,790 8,460
--------- --------- ---------- --------- -----------
Total Loans $ 14,231 $ 13,473 $ 12,737 $ 12,607 $ 12,804
Delinquency Rate (30+ days) 6.20%/3/ 6.36% 6.33% 6.41% 6.24%
Number of Accounts (000's) 11,747 10,664 9.796 9,123 8,586
Total Assets $ 16,433 $ 15,440 $ 15,270 $ 14,945 $ 14,928
Capital Including Preferred Interests $ 990.9 $ 939.7 $ 918.5 $ 875.2 $ 740.4
Capital to Managed Assets Ratio 6.03% 6.09% 6.01% 5.86% 4.96%
Percent Introductory Rate Loans 27% 26% 25% 25% 27%
--------- --------- ---------- --------- -----------
/1/Net of a $50.2 million reduction for recognizing currently the estimated
uncollectible portion of finance charge and fee income receivables.
/2/The net charge-off rate and net charge-offs, without the modification in
charge-off policy, are 6.02% and $208.2, respectively.
/3/The delinquency rate, without the modifications in charge-off policy and
finance charge and fee income recognition, is 6.97%.
-4-
CAPITAL ONE FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)(unaudited)
December 31 September 30 December 31
1997 1997 1996
------------ ------------ ------------
ASSETS:
Cash and due from banks $ 5,039 $ 57,772 $ 48,724
Federal funds sold and resale agreements 173,500 152,575 450,000
Interest-bearing deposits at other banks 59,184 22,267 30,252
------------ ------------ ------------
Cash and cash equivalents 237,723 232,614 528,976
Securities available for sale 1,242,670 1,033,946 877,851
Consumer loans 4,861,687 4,329,799 4,343,902
Less: Allowance for loan losses (183,000) (147,000) (118,500)
------------ ------------ ------------
Net loans 4,678,687 4,182,799 4,225,402
Premises and equipment, net 162,726 180,740 174,661
Interest receivable 51,883 35,539 78,590
Accounts receivable from securitizations 588,781 539,925 502,520
Other assets 115,809 106,208 79,445
------------ ------------ ------------
Total assets $ 7,078,279 $ 6,311,771 $ 6,467,445
============ ============ ============
LIABILITIES:
Interest-bearing deposits $ 1,313,654 $ 1,050,014 $ 943,022
Other borrowings 796,112 321,463 530,983
Senior notes 3,332,778 3,307,801 3,694,237
Deposit notes 299,996 299,996 299,996
Interest payable 68,448 65,798 80,362
Other liabilities 276,368 327,036 178,454
------------ ------------ ------------
Total liabilities 6,087,356 5,372,108 5,727,054
GUARANTEED PREFERRED BENEFICIAL INTERESTS
IN CAPITAL ONE BANK'S FLOATING RATE JUNIOR
SUBORDINATED DEBENTURES: 97,664 97,599
STOCKHOLDERS' EQUITY:
Common stock 666 666 663
Paid-in capital, net 513,561 504,139 481,383
Retained earnings 427,679 373,921 258,345
Less: Treasury stock, at cost (48,647) (36,662)
------------ ------------ ------------
Total stockholders' equity 893,259 842,064 740,391
------------ ------------ ------------
Total liabilities and stockholders' equity $ 7,078,279 $ 6,311,771 $ 6,467,445
============ ============ ============
CAPITAL ONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)(unaudited)
Three Months Ended Year Ended
December 31 September 30 December 31 December 31
1997 1997 1996 1997 1996
------------ ------------ ------------ ------------ ------------
INTEREST INCOME:
Consumer loans, including fees $ 176,411 $ 153,377 $ 183,981 $ 619,785 $ 592,088
Federal funds sold and resale agreements 4,393 3,753 4,944 16,423 21,293
Other 22,747 21,840 12,428 81,777 47,102
------------ ------------ ------------ ------------ ------------
Total interest income 203,551 178,970 201,353 717,985 660,483
INTEREST EXPENSE:
Deposits 13,808 9,052 16,129 41,932 56,272
Other borrowings 12,921 9,168 7,059 39,066 28,509
Senior and deposit notes 62,294 63,596 64,596 253,849 210,218
------------ ------------ ------------ ------------ ------------
Total interest expense 89,023 81,816 87,784 334,847 294,999
------------ ------------ ------------ ------------ ------------
Net interest income 114,528 97,154 113,569 383,138 365,484
Provision for loan losses 94,356 72,518 63,035 262,837 167,246
------------ ------------ ------------ ------------ ------------
Net interest income after provision for loan losses 20,172 24,636 50,534 120,301 198,238
NON-INTEREST INCOME:
Servicing and securitizations 183,402 180,348 112,983 682,345 459,833
Service charges 97,529 75,801 77,347 284,256 218,988
Interchange 15,704 12,606 14,135 49,030 51,399
Other 19,463 12,178 10,496 53,499 33,204
------------ ------------ ------------ ------------ ------------
Total non-interest income 316,098 280,933 214,961 1,069,130 763,424
NON-INTEREST EXPENSE:
Salaries and associate benefits 76,185 73,214 63,662 289,322 216,155
Marketing 64,992 60,781 52,186 224,819 206,620
Communications and data procesing 26,090 25,935 21,771 98,135 76,841
Supplies and equipment 24,674 21,721 17,784 82,874 60,053
Occupancy 14,161 8,198 7,619 37,548 22,330
Other 36,271 36,154 37,553 151,280 132,183
------------ ------------ ------------ ------------ ------------
Total non-interest expense 242,373 226,003 200,575 883,978 713,182
------------ ------------ ------------ ------------ ------------
Income before income taxes 93,897 79,566 64,920 305,453 248,480
Income taxes 35,680 30,236 24,670 116,072 93,213
------------ ------------ ------------ ------------ ------------
Net income $ 58,217 $ 49,330 $ 40,250 $ 189,381 $ 155,267
------------ ------------ ------------ ------------ ------------
Basic earnings per share $ 0.89 $ 0.75 $ 0.61 $ 2.87 $ 2.34
------------ ------------ ------------ ------------ ------------
Diluted earnings per share $ 0.86 $ 0.73 $ 0.60 $ 2.80 $ 2.32
------------ ------------ ------------ ------------ ------------
Dividends paid per share $ 0.08 $ 0.08 $ 0.08 $ 0.32 $ 0.32
------------ ------------ ------------ ------------ ------------
CAPITAL ONE FINANCIAL CORPORATION
STATEMENTS OF AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES
(dollars in thousands)(unaudited)
MANAGED(1) Quarter Ended 12/31/97 Quarter Ended 9/30/97 Quarter Ended 12/31/96
------------------------------- ----------------------------- ------------------------------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
----------- -------- ------ ----------- -------- ------ ----------- -------- ------
EARNING ASSETS:
Consumer loans $13,824,094 $559,800 16.20% $12,917,967 $518,563 16.06% $12,471,141 $464,469 14.90%
Federal funds sold and
resale agreements 304,266 4,393 5.78 255,594 3,753 5.87 365,112 4,944 5.42
Other securities 1,526,801 22,747 5.96 1,434,536 21,840 6.09 799,039 12,428 6.22
----------- -------- ------ ----------- -------- ------ ----------- -------- ------
Total earning assets $15,655,161 $586,940 15.00% $14,608,097 $544,156 14.90% $13,635,292 $481,841 14.14%
=========== ======== =========== ======== =========== ========
INTEREST-BEARING LIABILITIES:
Deposits $ 1,172,141 $ 13,808 4.71% $ 851,916 $ 9,052 4.25% $ 1,298,103 $ 16,129 4.97%
Other borrowings 823,129 12,921 6.28 594,519 9,168 6.17 471,708 7,059 5.99
Senior and deposit notes 3,614,310 62,294 6.89 3,686,416 63,596 6.90 3,842,830 64,596 6.72
Securitization liability 9,302,846 136,291 5.86 9,061,882 131,670 5.81 7,823,379 111,421 5.70
----------- -------- ------ ----------- -------- ------ ----------- -------- ------
Total interest-bearing
liabilities $14,912,426 $225,314 6.04% $14,194,733 $213,486 6.02% $13,436,020 $199,205 5.93%
=========== ======== ------ =========== ======== ------ =========== ======== ------
Net interest spread 8.96% 8.88% 8.21%
====== ====== ======
Interest income to average
earning assets 15.00% 14.90% 14.14%
Interest expense to average
earning assets 5.76 5.85 5.85
------ ------ ------
Net interest margin 9.24% 9.05% 8.29%
====== ====== ======
(1) The information in this table reflects the adjustment to add back the effect
of securitized loans.
