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 19, 1999 --------------------------------- (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 - -------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (703) 205-1000 Page 1 of ___ Pages
Item 5. Other Events. ------------ (a) See attached press release. (b) Cautionary Factors The attached press release contains forward-looking statements which involve a number of risks and uncertainties. The Company cautions readers that any forward-looking information is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking information as a result of various factors including, but not limited to, the following: continued intense competition from numerous providers of products and services which compete with the Company's businesses; with respect to financial products, changes in the Company's aggregate accounts or consumer loan balances and the growth rate thereof, including changes resulting from factors such as shifting product mix, amount of actual marketing expenses made by the Company and attrition of accounts and loan balances; an increase in credit losses (including increases due to a worsening of general economic conditions); the ability of the Company to continue to securitize its credit cards and consumer loans and to otherwise access the capital markets at attractive rates and terms to fund its operations and future growth; difficulties or delays in the development, production, testing and marketing of new products or services; losses associated with new products or services; financial, legal, regulatory or other difficulties that may affect investment in, or the overall performance of, a product or business, including changes in existing laws to regulate further the credit card and consumer loan industry and the financial services industry, in general; the amount of, and rate of growth in, the Company's expenses (including salaries and associate benefits and marketing expenses) as the Company's business develops or changes or as it expands into new market areas; the availability of capital necessary to fund the Company's new businesses; the ability of the Company to build the operational and organizational infrastructure necessary to engage in new businesses or to expand internationally; the ability of the Company to recruit experienced personnel to assist in the management and operations of new products and services; the ability of the Company and its suppliers to successfully address Year 2000 compliance issues; and other factors listed from time to time in the Company's SEC reports, including, but not limited to, the Annual Report on Form 10-K for the year ended December 31, 1997 (Part I, Item 1, Cautionary Statements). Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. ------------------------------------------------------------------ 99.1. Press Release of the Company dated January 19, 1999. Page 2 of ___ Pages
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 19, 1999 By: /s/ John G. Finneran, Jr. ------------------------------------ John G. Finneran, Jr. Senior Vice President, General Counsel and Corporate Secretary Page 3 of ___ Pages
EXHIBIT INDEX 99.1 Press Release of the Company dated January 19, 1999. Page 4 of ___ Pages
Exhibit 99.1 Page 5 of ___ Pages
[LOGO OF CAPITAL ONE APPEARS HERE] NEWS RELEASE For Immediate Release: Contact: Paul Paquin Sam Wang - --------------------- V.P., Investor Relations Dir., Media Relations January 19, 1999 (703) 205-1039 (703) 205-1180 Capital One Reports Record Earnings Earnings Per Share Increased 41 Percent in 1998 FALLS CHURCH, Va. (January 19, 1999) -- Capital One Financial Corporation (NYSE: COF) today announced record earnings for 1998. Earnings were $275.2 million, or $3.96 per share, in 1998 compared with earnings of $189.4 million, or $2.80 per share, in 1997. For the fourth quarter of 1998, earnings were $72.7 million, or $1.04 per share, versus earnings of $70.0 million, or $1.00 per share, for the third quarter of 1998 and $58.2 million, or $.86 per share, for the comparable period in the prior year. Earnings per share amounts are reported on a diluted basis. "We are pleased to report we have achieved our earnings growth targets for the fourth consecutive year and increased earnings in excess of 40 percent in 1998 while making record investments in our business," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "And, we are reaffirming our $5.10 earnings per share target for 1999, as our Information-Based Strategy continues to deliver extraordinary results." For the year, the Company increased managed receivables by $3.2 billion, or 22 percent, and added 5.0 million net new accounts, a 42 percent increase over 1997. During the fourth quarter, Capital One increased its managed portfolio by $1.1 billion to $17.4 billion in outstanding receivables and added 1.8 million net new accounts, bringing the total number of accounts to 16.7 million. Revenue for the year, defined as managed net interest income and non-interest income, approximated $2.8 billion, a 33 percent increase from revenues of $2.1 billion in 1997. For the fourth quarter, total revenue rose to $771 million versus $705 million in the third quarter and $592 million for the comparable period in the prior year. "The power of our Information-Based Strategy and positive trends in credit quality - coupled with the expertise and dedication of our associates - enabled us to grow at a record rate in 1998," said Nigel W. Morris, Capital One's President and Chief Operating Officer. "We look forward to continued growth as we expand product offerings in both domestic and international markets." -more-
Capital One Reports Record Earnings Page 2 Managed net interest income for 1998 increased by 31 percent to $1.7 billion from $1.3 billion in 1997. In the fourth quarter, managed net interest income increased to $443 million from $441 million in the third quarter and $362 million in the fourth quarter of 1997. The managed net interest margin for 1998 increased by 109 basis points to 9.95 percent from 8.86 percent in 1997. In the fourth quarter, the managed net interest margin decreased to 9.48 percent from 10.15 percent in the third quarter and increased from 9.24 percent for the comparable period of 1997. The fourth quarter decline in margin reflects the impact of lower yielding "superprime" lending and management's desire to maintain higher levels of liquidity. Managed non-interest income for 1998 increased by 38 percent to $1.1 billion from $776 million in 1997. In the fourth quarter, managed non-interest income increased to $328 million from $265 million in the third quarter and $230 million for the comparable quarter of 1997. This growth continues to reflect increased fees, including annual membership, interchange, overlimit and other fees. The managed delinquency rate as of December 31, 1998 decreased to 4.70 percent versus 4.90 percent as of September 30, 1998 and 6.20 percent as of December 31, 1997. In the fourth quarter, the managed net charge-off rate was 4.51 percent, a decrease of 52 basis points from 5.03 percent in the third quarter of 1998. Marketing investment for 1998 increased to a record $446 million, up 98 percent from $225 million in 1997. Fourth quarter marketing expense of $159 million represents the largest quarterly marketing level to date. This amount compares to $126 million in the third quarter of 1998 and $65 million in the comparable period of the prior year. Other non-interest expenses (excluding marketing) were $1.0 billion in 1998, up 56 percent from $659 million in 1997. Other non-interest expenses for the fourth quarter of 1998 were $309 million versus $257 million in the third quarter and $177 million in the comparable period of the prior year. Operating expenses continue to reflect increased investment in staff levels associated with our growing account base and the impact of expansion and diversification into new businesses and markets. -more-
Capital One Reports Record Earnings Page 3 The allowance for loan losses was unchanged at $231 million or 3.75 percent of on-balance sheet receivables as of December 31, 1998, compared with 4.08 percent as of September 30, 1998. Capital ratios were strong as of December 31, 1998 at 14.53 percent of reported assets and 6.64 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 16.7 million customers and $17.4 billion in managed loans outstanding as of December 31, 1998, and are among the largest providers of MasterCard and Visa credit cards in the world. Capital One trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 500 Index. ### [Note: This release and financial information are available on the Internet on Capital One's home page (address: http://www.capitalone.com). Click on "Investor Center" to view/download the release and financial information.]
CAPITAL ONE FINANCIAL CORPORATION (COF) FINANCIAL & STATISTICAL SUMMARY 98 98 98 98 97 (in millions, except per share data and as noted) Q4 Q3 Q2 Q1 Q4 - ---------------------------------------------------------------------------------------------------------------------------------- Earnings (Managed Basis) Net Interest Income $ 443.4 $ 440.8 $ 399.5 $ 416.7 $ 361.6 Non-Interest Income 327.9 264.6 253.2 220.7 230.4 ------------------------------------------------------------------------------------ Total Revenue 771.3 705.4 652.7 637.4 592.0(1) Provision for Loan Losses 186.3 208.9 213.1 242.5 255.7 Marketing Expenses 159.0 126.5 85.8 75.0 65.0 Operating Expenses 308.9 257.0 246.0 213.9 177.4 ------------------------------------------------------------------------------------ Income Before Taxes 117.2 112.9 107.8 106.0 93.9 Tax Rate 38.0% 38.0% 38.0% 38.0% 38.0% Net Income $ 72.7 $ 70.0 $ 66.9 $ 65.7 $ 58.2 - ---------------------------------------------------------------------------------------------------------------------------------- Common Share Statistics Basic EPS $ 1.11 $ 1.07 $ 1.02 $ 1.00 $ 0.89 Diluted EPS $ 1.04 $ 1.00 $ 0.96 $ 0.96 $ 0.86 Dividends Per Share $ 0.08 $ 0.08 $ 0.08 $ 0.08 $ 0.08 Book Value Per Share (period end) $ 19.35 $ 17.83 $ 16.31 $ 15.08 $ 13.66 Stock Price Per Share (period end) $ 115.00 $ 103.06 $ 124.19 $ 78.88 $ 54.19 Total Market Capitalization (period end) $ 7,551.1 $ 6,758.0 $ 8,139.0 $ 5,163.7 $ 3,542.2 Shares Outstanding (period end) 65.7 65.6 65.5 65.5 65.4 Shares Used to Compute Basic EPS 65.7 65.7 65.5 65.4 65.5 Shares Used to Compute Diluted EPS 69.7 70.0 69.5 68.4 67.5 - ---------------------------------------------------------------------------------------------------------------------------------- Managed Loan Statistics (period avg.) Average Loans $ 16,547 $ 15,746 $ 14,417 $ 14,097 $ 13,824 Average Earning Assets $ 18,702 $ 17,372 $ 16,242 $ 16,020 $ 15,655 Average Assets $ 19,944 $ 18,597 $ 17,296 $ 16,834 $ 16,367 Average Equity $ 1,212 $ 1,149 $ 1,037 $ 950 $ 892 Net Interest Margin 9.48% 10.15% 9.84% 10.40% 9.24%(2) Return on Average Assets (ROA) 1.46% 1.51% 1.55% 1.56% 1.42% Return on Average Equity (ROE) 23.99% 24.36% 25.78% 27.66% 26.12% Net Charge-Off Rate 4.51% 5.03% 5.91% 6.04% 6.37%(3) Net Charge-Offs $ 186.5 $ 198.1 $ 213.0 $ 212.7 $ 255.6(3) - ---------------------------------------------------------------------------------------------------------------------------------- Managed Loan Statistics (period end) Reported Loans $ 6,157 $ 5,667 $ 5,140 $ 4,748 $ 4,862 Securitized Loans 11,238 10,671 9,829 9,254 9,369 ------------------------------------------------------------------------------------ Total Loans $ 17,395 $ 16,338 $ 14,969 $ 14,002 $ 14,231 Delinquency Rate (30+ days) 4.70% 4.90% 5.14% 5.75% 6.20% Number of Accounts (000's) 16,706 14,907 13,588 12,674 11,747 Total Assets $ 20,619 $ 19,211 $ 17,462 $ 16,464 $ 16,433 Capital, Including Preferred Interests $ 1,368.3 $ 1,267.0 $ 1,167.0 $ 1,085.2 $ 990.9 Capital to Managed Assets Ratio 6.64% 6.60% 6.68% 6.59% 6.03% - ---------------------------------------------------------------------------------------------------------------------------------- (1) Net of a $73.3 million reduction to more conservatively report uncollectible finance charge and fee income receivables and the charge-off of credit card loans at 180 days past-due. (2) The net interest margin, without the modifications in charge-off policy and finance charge and fee income recognition, was 10.13%. (3) The net charge-off rate and net charge-offs, without the modification in charge-off policy, were 6.02% and $208.2 million, respectively. -4-
CAPITAL ONE FINANCIAL CORPORATION Consolidated Balance Sheets (in thousands)(unaudited) December 31 September 30 December 31 1998 1998 1997 ------------------- ------------------- ------------------- Assets: Cash and due from banks $ 15,974 $ 14,974 $ 5,039 Federal funds sold and resale agreements 261,800 365,000 173,500 Interest-bearing deposits at other banks 22,393 32,993 59,184 ------------------- ------------------- ------------------- Cash and cash equivalents 300,167 412,967 237,723 Securities available for sale 1,796,787 1,296,959 1,242,670 Consumer loans 6,157,111 5,666,998 4,861,687 Less: Allowance for loan losses (231,000) (231,000) (183,000) ------------------- ------------------- ------------------- Net loans 5,926,111 5,435,998 4,678,687 Premises and equipment, net 242,147 228,550 162,726 Interest receivable 52,917 49,934 51,883 Accounts receivable from securitizations 833,143 921,602 588,781 Other 268,131 234,766 115,809 ------------------- ------------------- ------------------- Total assets $ 9,419,403 $ 8,580,776 $ 7,078,279 =================== =================== =================== Liabilities: Interest-bearing deposits $ 1,999,979 $ 1,598,335 $ 1,313,654 Other borrowings 1,644,279 1,439,690 796,112 Senior notes 3,739,393 3,729,234 3,332,778 Deposit notes 299,996 Interest payable 91,637 80,373 68,448 Other 575,788 466,160 276,368 ------------------- ------------------- ------------------- Total liabilities 8,051,076 7,313,792 6,087,356 Guaranteed Preferred Beneficial Interests In Capital One Bank's Floating Rate Junior Subordinated Capital Income Securities: 97,921 97,856 97,664 Stockholders' Equity: Common stock 666 666 666 Paid-in capital, net 599,498 599,536 513,561 Retained earnings and other comprehensive income 740,493 643,855 427,679 Less: Treasury stock, at cost (70,251) (74,929) (48,647) ------------------- ------------------- ------------------- Total stockholders' equity 1,270,406 1,169,128 893,259 ------------------- ------------------- ------------------- Total liabilities and stockholders' equity $ 9,419,403 $ 8,580,776 $ 7,078,279 =================== =================== =================== - 5 -
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 December 31 1998 1998 1997 1998 1997 ---------------------------------------------- ----------------------------- Interest Income: Consumer loans, including fees $ 269,016 $ 259,339 $ 176,411 $ 1,003,122 $ 619,785 Federal funds sold and resale agreements 4,389 957 4,393 12,564 16,423 Other 25,542 22,813 22,747 95,850 81,777 ---------------------------------------------- ----------------------------- Total interest income 298,947 283,109 203,551 1,111,536 717,985 Interest Expense: Deposits 23,901 15,805 13,808 67,479 41,932 Other borrowings 27,420 24,752 12,921 88,600 39,066 Senior and deposit notes 64,444 65,498 62,294 260,675 253,849 ---------------------------------------------- ----------------------------- Total interest expense 115,765 106,055 89,023 416,754 334,847 ---------------------------------------------- ----------------------------- Net interest income 183,182 177,054 114,528 694,782 383,138 Provision for loan losses 54,580 67,569 94,356 267,028 262,837 ---------------------------------------------- ----------------------------- Net interest income after provision for loan losses 128,602 109,485 20,172 427,754 120,301 Non-Interest Income: Servicing and securitizations 248,683 217,094 183,402 789,844 682,345 Service charges and other fees 179,695 146,648 116,992 611,958 337,755 Interchange 28,098 23,213 15,704 86,481 49,030 ------------------------------------------------------------------------------ Total non-interest income 456,476 386,955 316,098 1,488,283 1,069,130 Non-Interest Expense: Salaries and associate benefits 138,901 116,107 76,185 476,389 289,322 Marketing 158,972 126,481 64,992 446,264 224,819 Communications and data processing 47,602 38,415 26,090 150,220 98,135 Supplies and equipment 29,702 27,416 24,674 112,101 82,874 Occupancy 12,488 11,115 14,161 45,337 37,548 Other 80,205 63,993 36,271 241,805 151,280 ---------------------------------------------- ----------------------------- Total non-interest expense 467,870 383,527 242,373 1,472,116 883,978 ---------------------------------------------- ----------------------------- Income before income taxes 117,208 112,913 93,897 443,921 305,453 Income taxes 44,539 42,907 35,680 168,690 116,072 ---------------------------------------------- ----------------------------- Net income $ 72,669 $ 70,006 $ 58,217 $ 275,231 $ 189,381 ============================================== ============================= Basic earnings per share $ 1.11 $ 1.07 $ 0.89 $ 4.20 $ 2.87 ============================================== ============================= Diluted earnings per share $ 1.04 $ 1.00 $ 0.86 $ 3.96 $ 2.80 ============================================== ============================= Dividends paid per share $ 0.08 $ 0.08 $ 0.08 $ 0.32 $ 0.32 ============================================== ============================= -6-
CAPITAL ONE FINANCIAL CORPORATION Statements of Average Balances, Income and Expense, Yields and Rates (dollars in thousands)(unaudited) Managed (1) Quarter Ended 12/31/98 Quarter Ended 9/30/98 ---------------------------------------- ---------------------------------------- Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate ------- ------- ----- ------- ------- ----- Earning assets: Consumer loans $ 16,546,962 $ 689,907 16.68% $ 15,746,091 $ 671,665 17.06% Federal funds sold and resale agreements 343,987 4,389 5.10 69,293 957 5.52 Other securities 1,810,761 25,542 5.64 1,556,874 22,813 5.86 ---------------------------------------- ---------------------------------------- Total earning assets $ 18,701,710 $ 719,838 15.40% $ 17,372,258 $ 695,435 16.01% ============================ =========================== Interest-bearing liabilities: Deposits $ 1,885,960 $ 23,901 5.07% $ 1,368,833 $ 15,805 4.62% Other borrowings 1,605,798 27,420 6.83 1,495,731 24,752 6.62 Senior and deposit notes 3,741,707 64,444 6.89 3,819,061 65,498 6.86 Securitization liability 10,751,360 160,625 5.98 10,090,262 148,620 5.89 ---------------------------------------- ---------------------------------------- Total interest-bearing liabilities $ 17,984,825 $ 276,390 6.15% $ 16,773,887 $ 254,675 6.07% ============================ =========================== ---------- ----------- Net interest spread 9.25% 9.94% ========== =========== Interest income to average earning assets 15.40% 16.01% Interest expense to average earning assets 5.92 5.86 ---------- ----------- Net interest margin 9.48% 10.15% ========== =========== Managed (1) Quarter Ended 12/31/97 ---------------------------------------- Average Income/ Yield/ Balance Expense Rate ------- ------- ---- Earning assets: Consumer loans $ 13,824,094 $ 559,800 16.20% Federal funds sold and resale agreements 304,266 4,393 5.78 Other securities 1,526,801 22,747 5.96 ---------------------------------------- Total earning assets $ 15,655,161 $ 586,940 15.00% ============================== Interest-bearing liabilities: Deposits $ 1,172,141 $ 13,808 4.71% Other borrowings 823,129 12,921 6.28 Senior and deposit notes 3,614,310 62,294 6.89 Securitization liability 9,302,846 136,291 5.86 ---------------------------------------- Total interest-bearing liabilities $ 14,912,426 $ 225,314 6.04% ============================== ---------- Net interest spread 8.96% ========== Interest income to average earning assets 15.00% Interest expense to average earning assets 5.76 ---------- Net interest margin 9.24% ========== (1) The information in this table reflects the adjustment to add back the effect of securitized loans. -7-