1
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
JULY 15, 1997
--------------------------------
(Date of earliest event reported)
Capital One Financial Corporation
---------------------------------------------------
(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
Page 1 of 4 Pages
2
Item 5. Other Events.
See attached press release.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
99.1. Press Release of the Company dated July 15, 1997.
Page 2 of 4 Pages
3
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: July 18, 1997 By: /s/ John G. Finneran, Jr.
----------------------------------------
John G. Finneran, Jr.
Senior Vice President, General Counsel
and Corporate Secretary
Page 3 of 4 Pages
4
EXHIBIT INDEX
99.1 Press Release of the Company dated July 15, 1997.
Page 4 of 4 Pages
1
[CAPITAL ONE LOGO]
CAPITAL ONE FINANCIAL CORPORATION
2980 Fairview Park Drive
Suite 1400
Falls Church, VA 22042-4525
For Immediate Release: Contact: Paul Paquin
July 15, 1997 V.P., Investor Relations
(703) 205-1039
Diana Sun
Director, Media Relations
(703) 205-1184
CAPITAL ONE REPORTS SECOND QUARTER EARNINGS
FALLS CHURCH, Va. (July 15, 1997) --- Capital One Financial
Corporation (NYSE: COF) today announced second quarter 1997 earnings of $39.4
million, or $.58 per share, versus earnings of $42.5 million, or $.63 per
share, for the first quarter of 1997 and $38.2 million, or $.57 per share, for
the comparable period in the prior year. The level of earnings in the second
quarter was consistent with management's lowered expectations as described in
its first quarter 1997 Form 10-Q.
Revenue, defined as managed net interest income and non-interest
income, declined slightly to $466 million in the second quarter of 1997 versus
$468 million in the first quarter of 1997, but increased 42 percent over the
$328 million for the comparable period in the prior year. Revenues were lower
than expected due to lower rates of delinquency, providing less fee income, and
to higher balance attrition. For the quarter, Capital One's managed consumer
loan balances increased by $130 million to $12.7 billion. This modest increase
reflected greater emphasis on second generation credit card products and the
impact of increased balance attrition as a result of increasing industry mail
volumes. During the second quarter of 1997, the Company added 673,000 net new
accounts, bringing total accounts to 9.8 million. This was the second
largest-ever quarterly growth in accounts and represented a 30 percent
annualized growth rate.
"Despite a very difficult industry backdrop, we continue to add
accounts at a rapid pace," said Richard D. Fairbank, Capital One's Chairman and
Chief Executive Officer. "While improved delinquencies are always a positive
sign, they do create short-term earnings pressure."
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CAPITAL ONE REPORTS SECOND QUARTER EARNINGS
PAGE 2
The managed net interest margin was 8.30 percent in the second quarter
of 1997, a decrease from 8.83 percent in the first quarter of 1997 and an
increase from 7.94 percent in the comparable period of the prior year. The
lower margin from the previous quarter reflects decreased late fees and
attrition from loans at non-introductory rates.
The managed delinquency rate (30+ days) decreased to 6.33 percent as
of June 30, 1997, compared with 6.41 percent as of March 31, 1997. This
decline represents improvements in the first half of the year that slightly
exceed seasonal effects and is the first time that delinquencies have fallen in
eight quarters. The managed net charge-off rate increased to 6.38 percent for
the second quarter of 1997 compared with 5.84 percent in the first quarter of
1997. This increase was within expectations and is due to the continued aging
of the portfolio and the effect of increases in industry losses.
Marketing investment of $45.0 million declined from $54.1 million in
the first quarter 1997 and increased compared to $42.7 million in the
comparable period of the prior year. Other non-interest expenses (excluding
solicitation expense) for the second quarter of 1997 were $157.0 million versus
$159.5 million for the first quarter of 1997 and $116.6 million in the
comparable period of the prior year. For the period, total associate headcount
remained flat.
"We are now beginning to reap the benefits of our investments in
technology and process improvements and our more aggressive management of
costs," said Nigel W. Morris, Capital One's President and Chief Operating
Officer. "Investments in the last few years are now paying off. In the
quarter, we added more than 670,000 accounts and actively reduced our total
expenses - achieving a nine percent decrease in cost per account."
The allowance for loan losses was maintained at $118.5 million, and
decreased slightly to 3.27 percent of on-balance sheet receivables as of June
30, 1997 from 3.37 percent as of March 31, 1997. Capital ratios were strong as
of June 30, 1997 at 14.91 percent of reported assets and 6.01 percent of
managed assets, compared to 14.22 percent and 5.86 percent, respectively, for
the previous quarter.
As a result of current conditions, management has revised its target
for earnings growth for 1997. Management now expects that the Company will
report earnings for the year ending
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3
CAPITAL ONE REPORTS SECOND QUARTER EARNINGS
PAGE 3
December 31, 1997 in the range of 5-10 percent higher than the $2.30 per share
reported for 1996. Management cautions that actual results could differ from
current expectations due to a number of factors, including the level of loans
outstanding, delinquencies and charge-offs experienced in the second half of
1997.
The Company also announced that it expects to repurchase up to two
million shares of the Company's common stock over the next two years in order
to mitigate the impact of shares issuable through dividend reinvestment,
employee stock purchase and option programs.
Headquartered in Falls Church, Virginia, Capital One Financial
Corporation is a holding company whose principal subsidiaries, Capital One Bank
and Capital One, F.S.B., offer financial products and services to consumers.
Capital One's subsidiaries collectively had 9.8 million customers and $12.7
billion in managed loans outstanding as of June 30, 1997, and are among the
largest providers of MasterCard and Visa credit cards in the United States.
# # #
[NOTE: This release and financial information are available on the Internet on
Capital One's home page (www.capitalone.com). Click on "Financial Information"
to view/download the release and financial information.]
4
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY
97 97 96 96 96
(in millions, except per share data and as noted) Q2 Q1 Q4 Q3 Q2
================================================================================================================================
EARNINGS (MANAGED BASIS)
Net Interest Income $ 296.3 $ 310.7 $ 282.6 $ 267.2 $ 231.6
Non-Interest Income 169.3 157.3 154.3 133.4 96.1
--------------------------------------------------------------------------
Total Revenue 465.6 468.0 436.9 400.6 327.7
Provision for Loan Losses 200.1 185.9 171.5 141.2 107.7
Marketing Expenses 45.0 54.1 52.2 60.2 42.7
Operating Expenses 157.1 159.5 148.4 136.6 116.6
--------------------------------------------------------------------------
Income Before Taxes 63.5 68.5 64.9 62.6 60.6
Tax Rate 38.0 % 38.0 % 38.0 % 38.0 % 37.0 %
Net Income $ 39.4 $ 42.5 $ 40.3 $ 38.8 $ 38.2
- --------------------------------------------------------------------------------------------------------------------------------
COMMON SHARE STATISTICS
EPS $ 0.58 $ 0.63 $ 0.60 $ 0.58 $ 0.57
Dividends Per Share $ 0.08 $ 0.08 $ 0.08 $ 0.08 $ 0.08
Book Value Per Share (period end) $ 12.35 $ 11.72 $ 11.16 $ 10.58 $ 10.03
Stock Price Per Share (period end) $ 37.75 $ 37.25 $ 36.00 $ 29.88 $ 28.50
Total Market Capitalization (period end) $2,509.8 $2,472.5 $2,387.7 $1,980.3 $1,888.1
Shares Outstanding (period end) 66.5 66.4 66.3 66.3 66.2
Shares Used to Compute EPS 67.9 67.9 67.6 67.0 66.9
- --------------------------------------------------------------------------------------------------------------------------------
MANAGED LOAN STATISTICS (PERIOD AVG.)
Average Loans $ 12,715 $ 12,559 $ 12,471 $ 11,581 $ 10,740
Average Earning Assets $ 14,278 $ 14,080 $ 13,635 $ 12,809 $ 11,673
Average Assets $ 15,272 $ 14,900 $ 14,459 $ 13,718 $ 12,392
Average Equity $ 798 $ 764 $ 733 $698 $ 644
Net Interest Margin 8.30 % 8.83 % 8.29 % 8.35 % 7.94 %
Return on Average Assets (ROA) 1.03 % 1.14 % 1.11 % 1.13 % 1.23 %
Return on Average Equity (ROE) 19.72 % 22.24 % 21.95 % 22.24 % 23.73 %
Charge-Off Rate 6.38 % 5.84 % 5.11 % 4.19 % 3.97 %
Net Charge-Offs $ 202.8 $ 183.3 $ 159.2 $ 121.4 $ 106.6
- --------------------------------------------------------------------------------------------------------------------------------
MANAGED LOAN STATISTICS (PERIOD END)
Reported Loans $ 3,624 $ 3,817 $ 4,344 $ 4,462 $ 3,570
Securitized Loans 9,113 8,790 8,460 7,679 7,609
--------------------------------------------------------------------------
Total Loans $ 12,737 $ 12,607 $ 12,804 $ 12,141 $ 11,179
Delinquency Rate (30+ days) 6.33 % 6.41 % 6.24 % 5.25 % 4.58 %
Number of Accounts (000's) 9,796 9,123 8,586 8,232 7,758
Total Assets $ 15,270 $ 14,945 $ 14,928 $ 14,272 $ 13,285
Capital* $ 918.5 $ 875.2 $ 740.4 $ 701.3 $ 664.3
Capital to Managed Assets Ratio 6.01 % 5.86 % 4.96 % 4.91 % 5.00 %
Percent Introductory Rate Loans 25 % 25 % 27 % 27 % 28 %
Employees (FTE) 6,129 6,176 5,740 5,232 4,760
- --------------------------------------------------------------------------------------------------------------------------------
* Capital includes stockholders' equity and preferred beneficial interests.
- 4 -
5
CAPITAL ONE FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)(unaudited)
June 30 March 31 June 30
1997 1997 1996
-------------- ---------------- ------------------
ASSETS:
Cash and due from banks $ 136,112 $ 127,721 $ 8,426
Federal funds sold and resale agreements 295,507 339,950 600,000
Interest-bearing deposits at other banks 21,441 209,280 233,700
-------------- --------------- ------------------
Cash and cash equivalents 453,060 676,951 842,126
Securities available for sale 1,142,328 1,026,373 652,988
Consumer loans held for securitization 300,000 1,000,000
Consumer loans 3,623,952 3,516,951 2,569,740
Less: Allowance for loan losses (118,500) (118,500) (74,000)
-------------- --------------- ------------------
Net loans 3,505,452 3,398,451 2,495,740
Premises and equipment, net 181,078 180,927 155,569
Interest receivable 48,135 32,883 57,252
Accounts receivable from securitizations 729,238 459,169 409,983
Other assets 100,144 80,225 62,463
-------------- --------------- ------------------
Total assets $ 6,159,435 $ 6,154,979 $ 5,676,121
============== =============== ==================
LIABILITIES:
Interest-bearing deposits $ 869,801 $ 741,719 $ 1,215,499
Other borrowings 293,734 355,188 259,500
Senior notes 3,468,801 3,468,801 3,134,217
Deposit notes 299,996 299,996 200,000
Interest payable 72,261 61,162 70,724
Other liabilities 236,343 352,882 131,918
-------------- --------------- ------------------
Total liabilities 5,240,936 5,279,748 5,011,858
GUARANTEED PREFERRED BENEFICIAL INTERESTS
IN CAPITAL ONE BANK'S FLOATING RATE JUNIOR
SUBORDINATED DEBENTURES: 97,534 97,470
STOCKHOLDERS' EQUITY:
Common stock 665 664 662
Paid-in capital, net 491,953 486,127 473,502
Retained earnings 328,347 290,970 190,099
-------------- --------------- ------------------
Total stockholders' equity 820,965 777,761 664,263
-------------- --------------- ------------------
Total liabilities and stockholders' equity $ 6,159,435 $ 6,154,979 $ 5,676,121
============== =============== ==================
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6
CAPITAL ONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)(unaudited)
Three Months Ended Six Months Ended
June 30 March 31 June 30 June 30 June 30
1997 1997 1996 1997 1996
------------------------------------------- -----------------------------
INTEREST INCOME:
Consumer loans, including fees $ 143,485 $ 146,512 $ 123,403 $ 289,997 $ 237,514
Federal funds sold and resale agreements 2,613 5,664 4,487 8,277 12,464
Other 20,772 16,418 9,863 37,190 20,917
------------------------------------------- -----------------------------
Total interest income 166,870 168,594 137,753 335,464 270,895
INTEREST EXPENSE:
Deposits 8,635 10,437 11,031 19,072 23,574
Other borrowings 10,453 6,524 5,567 16,977 13,915
Senior and deposit notes 64,523 63,436 46,702 127,959 88,145
------------------------------------------- -----------------------------
Total interest expense 83,611 80,397 63,300 164,008 125,634
------------------------------------------- -----------------------------
Net interest income 83,259 88,197 74,453 171,456 145,261
Provision for loan losses 46,776 49,187 25,110 95,963 50,278
------------------------------------------- -----------------------------
Net interest income after provision for loan losses 36,483 39,010 49,343 75,493 94,983
NON-INTEREST INCOME:
Servicing 148,562 170,033 109,115 318,595 237,301
Service charges 57,278 53,648 42,034 110,926 68,658
Interchange 11,405 9,315 14,119 20,720 22,417
Other 11,797 10,061 5,331 21,858 13,371
------------------------------------------- -----------------------------
Total non-interest income 229,042 243,057 170,599 472,099 341,747
NON-INTEREST EXPENSE:
Salaries and associate benefits 69,287 70,636 49,655 139,923 93,931
Solicitation 44,995 54,051 42,733 99,046 94,257
Communications and data processing 24,320 21,790 19,879 46,110 34,819
Supplies and equipment 18,406 18,073 14,399 36,479 26,783
Occupancy 7,388 7,801 4,924 15,189 9,019
Other 37,659 41,196 27,744 78,855 56,975
------------------------------------------- -----------------------------
Total non-interest expense 202,055 213,547 159,334 415,602 315,784
------------------------------------------- -----------------------------
Income before income taxes 63,470 68,520 60,608 131,990 120,946
Income taxes 24,118 26,038 22,425 50,156 44,750
------------------------------------------- -----------------------------
Net income $ 39,352 $ 42,482 $ 38,183 $ 81,834 $ 76,196
============================================ =============================
Earnings per share $ 0.58 $ 0.63 $ 0.57 $ 1.21 $ 1.14
============================================ =============================
Dividends paid per share $ 0.08 $ 0.08 $ 0.08 $ 0.16 $ 0.16
============================================ =============================
- 6 -
7
CAPITAL ONE FINANCIAL CORPORATION
STATEMENTS OF AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES
(dollars in thousands)(unaudited)
MANAGED (1) Quarter Ended 6/30/97
---------------------------------------------------
Average Income/ Yield/
Balance Expense Rate
------- ------- ----
ASSETS:
Earning assets
Consumer loans $ 12,714,870 $ 482,088 15.17 %
Federal funds sold and resale agreements 187,650 2,613 5.57
Other securities 1,375,364 20,772 6.04
---------------------------------------------------
Total earning assets 14,277,884 $ 505,473 14.16 %
=============
Cash and due from banks 111,670
Allowance for loan losses (118,833)
Premises and equipment, net 182,227
Other assets 818,622
------------------
Total assets $ 15,271,570
==================
LIABILITIES AND EQUITY:
Interest-bearing liabilities
Deposits $ 817,936 $ 8,635 4.22 %
Other borrowings 694,814 10,453 6.02
Senior and deposit notes 3,768,797 64,523 6.85
Securitization liability 8,713,517 125,531 5.76
---------------------------------------------------
Total interest-bearing liabilities 13,995,064 $ 209,142 5.98 %
=============
Other liabilities 380,807
------------------
Total liabilities 14,375,871
Preferred beneficial interests 97,503
Equity 798,196
------------------
Total liabilities and equity $ 15,271,570
==================
---------
Net interest spread 8.18 %
=========
Interest income to average earning assets 14.16 %
Interest expense to average earning assets 5.86
---------
Net interest margin 8.30 %
=========
MANAGED (1) Quarter Ended 3/31/97
---------------------------------------------------------
Average Income/ Yield/
Balance Expense Rate
------- ------- ----
ASSETS:
Earning assets
Consumer loans $ 12,558,878 $ 485,515 15.46 %
Federal funds sold and resale agreements 426,726 5,664 5.31
Other securities 1,093,984 16,418 6.00
---------------------------------------------------------
Total earning assets 14,079,588 $ 507,597 14.42 %
==============
Cash and due from banks 91,047
Allowance for loan losses (119,835)
Premises and equipment, net 180,256
Other assets 668,501
-------------------
Total assets $ 14,899,557
===================
LIABILITIES AND EQUITY:
Interest-bearing liabilities
Deposits $ 992,751 $ 10,437 4.21 %
Other borrowings 410,924 6,524 6.35
Senior and deposit notes 3,808,926 63,436 6.66
Securitization liability 8,500,177 116,510 5.48
---------------------------------------------------------
Total interest-bearing liabilities 13,712,778 $ 196,907 5.74 %
==============
Other liabilities 357,833
-------------------
Total liabilities 14,070,611
Preferred beneficial interests 64,966
Equity 763,980
-------------------
Total liabilities and equity $ 14,899,557
===================
----------
Net interest spread 8.68 %
==========
Interest income to average earning assets 14.42 %
Interest expense to average earning assets 5.59
----------
Net interest margin 8.83 %
==========
MANAGED (1) Quarter Ended 6/30/96
----------------------------------------------------
Average Income/ Yield/
Balance Expense Rate
------- ------- ----
ASSETS:
Earning assets
Consumer loans $ 10,739,650 $ 381,552 14.21 %
Federal funds sold and resale agreements 336,951 4,487 5.33
Other securities 596,073 9,863 6.62
----------------------------------------------------
Total earning assets 11,672,674 $ 395,902 13.57 %
=============
Cash and due from banks 25,073
Allowance for loan losses (74,004)
Premises and equipment, net 152,285
Other assets 615,548
-----------------
Total assets $ 12,391,576
=================
LIABILITIES AND EQUITY:
Interest-bearing liabilities
Deposits $ 788,788 $ 11,031 5.59 %
Other borrowings 348,627 5,567 6.39
Senior and deposit notes 2,875,119 46,702 6.50
Securitization liability 7,490,724 101,032 5.40
----------------------------------------------------
Total interest-bearing liabilities 11,503,258 $ 164,332 5.71 %
=============
Other liabilities 244,641
-----------------
Total liabilities 11,747,899
Preferred beneficial interests
Equity 643,677
-----------------
Total liabilities and equity $ 12,391,576
=================
----------
Net interest spread 7.86 %
==========
Interest income to average earning assets 13.57 %
Interest expense to average earning assets 5.63
----------
Net interest margin 7.94 %
==========
(1) The information in this table reflects the adjustment to add back the
effect of securitized loans.
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8
CAPITAL ONE FINANCIAL CORPORATION
STATEMENTS OF AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES
(dollars in thousands)(unaudited)
REPORTED Quarter Ended 6/30/97
------------------------------------------------
Average Income/ Yield/
Balance Expense Rate
------- ------- ----
ASSETS:
Earning assets
Consumer loans $ 3,996,560 $ 143,485 14.36 %
Federal funds sold and resale agreements 187,650 2,613 5.57
Other securities 1,375,364 20,772 6.04
------------------------------------------------
Total earning assets 5,559,574 $ 166,870 12.01 %
=============
Cash and due from banks 111,670
Allowance for loan losses (118,833)
Premises and equipment, net 182,227
Other assets 823,415
-----------------
Total assets $ 6,558,053
=================
LIABILITIES AND EQUITY:
Interest-bearing liabilities
Deposits $ 817,936 $ 8,635 4.22 %
Other borrowings 694,814 10,453 6.02
Senior and deposit notes 3,768,797 64,523 6.85
------------------------------------------------
Total interest-bearing liabilities 5,281,547 $ 83,611 6.33 %
=============
Other liabilities 380,807
-----------------
Total liabilities 5,662,354
Preferred beneficial interests 97,503
Equity 798,196
-----------------
Total liabilities and equity $ 6,558,053
=================
----------
Net interest spread 5.68 %
==========
Interest income to average earning assets 12.01 %
Interest expense to average earning assets 6.02
----------
Net interest margin 5.99 %
==========
REPORTED Quarter Ended 3/31/97
-----------------------------------------------
Average Income/ Yield/
Balance Expense Rate
------- ------- ----
ASSETS:
Earning assets
Consumer loans $ 4,058,701 $ 146,512 14.44 %
Federal funds sold and resale agreements 426,726 5,664 5.31
Other securities 1,093,984 16,418 6.00
-----------------------------------------------
Total earning assets 5,579,411 $ 168,594 12.09 %
=============
Cash and due from banks 91,047
Allowance for loan losses (119,835)
Premises and equipment, net 180,256
Other assets 668,501
-----------------
Total assets $ 6,399,380
=================
LIABILITIES AND EQUITY:
Interest-bearing liabilities
Deposits $ 992,751 $ 10,437 4.21 %
Other borrowings 410,924 6,524 6.35
Senior and deposit notes 3,808,926 63,436 6.66
-----------------------------------------------
Total interest-bearing liabilities 5,212,601 $ 80,397 6.17 %
=============
Other liabilities 357,833
-----------------
Total liabilities 5,570,434
Preferred beneficial interests 64,966
Equity 763,980
-----------------
Total liabilities and equity $ 6,399,380
=================
----------
Net interest spread 5.92 %
==========
Interest income to average earning assets 12.09 %
Interest expense to average earning assets 5.77
----------
Net interest margin 6.32 %
==========
REPORTED Quarter Ended 6/30/96
-------------------------------------------------
Average Income/ Yield/
Balance Expense Rate
------- ------- ----
ASSETS:
Earning assets
Consumer loans $ 3,248,926 $ 123,403 15.19 %
Federal funds sold and resale agreements 336,951 4,487 5.33
Other securities 596,073 9,863 6.62
-------------------------------------------------
Total earning assets 4,181,950 $ 137,753 13.18 %
=============
Cash and due from banks 25,073
Allowance for loan losses (74,004)
Premises and equipment, net 152,285
Other assets 615,548
---------------
Total assets $ 4,900,852
===============
LIABILITIES AND EQUITY:
Interest-bearing liabilities
Deposits $ 788,788 $ 11,031 5.59 %
Other borrowings 348,627 5,567 6.39
Senior and deposit notes 2,875,119 46,702 6.50
-------------------------------------------------
Total interest-bearing liabilities 4,012,534 $ 63,300 6.31 %
=============
Other liabilities 244,641
---------------
Total liabilities 4,257,175
Preferred beneficial interests
Equity 643,677
---------------
Total liabilities and equity $ 4,900,852
===============
----------
Net interest spread 6.87 %
==========
Interest income to average earning assets 13.18 %
Interest expense to average earning assets 6.06
----------
Net interest margin 7.12 %
==========
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