<PAGE>
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
October 13, 1998
(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>
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); 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 October 13, 1998.
<PAGE>
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: October 13, 1998 By: /s/ James M. Zinn
---------------------------------------------
James M. Zinn
Senior Vice President and Chief Financial Officer
<PAGE>
EXHIBIT INDEX
99.1 Press Release of the Company dated October 13, 1998.
<PAGE>
Exhibit 99.1
<PAGE>
[Capital One Letterhead]
EMBARGOED UNTIL 6:00 AM: Contact:Paul Paquin Sam Wang
October 13, 1998 V.P., Investor Relations Dir., Media Relations
703/205-1039 703/205-1180
Capital One Reports Record Third Quarter Earnings
Falls Church, Va. (October 13, 1998) -- Capital One Financial Corporation (NYSE:
COF) today announced record third quarter 1998 earnings of $70.0 million, or
$1.00 per share, versus earnings of $66.9 million, or $.96 per share, for the
second quarter of 1998 and $49.3 million, or $.73 per share, for the comparable
period in the prior year. Earnings per share amounts are reported on a diluted
basis.
"This is the strongest quarter in our history: record earnings, record
growth in accounts and outstandings, record improvement in credit quality, and
record investment in marketing to build our future," said Richard D. Fairbank,
Capital One's Chairman and Chief Executive Officer. "We are on track for 40
percent earnings growth in 1998."
Revenue, defined as managed net interest income and non-interest income,
increased to $705 million in the third quarter of 1998 versus $653 million in
the second quarter of 1998, and $549 million for the comparable period in the
prior year. For the quarter, Capital One's managed consumer loan balances
increased by a record $1.4 billion to $16.3 billion. The Company also added a
record 1.3 million net new accounts, bringing total accounts to 14.9 million.
The managed net interest margin was 10.15 percent in the third quarter of
1998, an increase from 9.84 percent in the second quarter of 1998, and 9.05
percent in the comparable period of the prior year. The higher margin from the
previous quarter primarily reflects further growth in our customized lending
products. Non-interest income increased to $265 million compared to $253 million
in the second quarter of 1998, and $219 million over the comparable period in
the prior year. This growth continues to reflect increased fees, including
annual membership, interchange, overlimit and other fees.
The managed delinquency rate (30+ days) decreased to 4.90 percent as of
September 30, 1998, compared with 5.14 percent as of June 30, 1998. The managed
net charge-off rate decreased to 5.03 percent for the third quarter of 1998
compared with 5.91 percent in the second quarter of 1998.
<PAGE>
"Our credit performance has been outstanding: flat or falling delinquency
rates for six consecutive quarters," said Nigel W. Morris, Capital One's
President and Chief Operating Officer. "Our successful Information-Based
Strategy has led to innovative new products, expanding margins, and new
opportunities. At the same time, we continue to maintain our long-time
conservative approach to credit."
Marketing investment increased in the third quarter of 1998 to a record
$126 million versus $86 million in the second quarter of 1998, and $61 million
in the comparable period of the prior year. Other non-interest expenses
(excluding marketing and performance-based stock options) for the third quarter
of 1998 were $251 million versus $222 million for the second quarter of 1998,
and $157 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 into new markets and
businesses.
The allowance for loan losses was increased to $231 million or 4.08 percent
of on-balance sheet receivables as of September 30, 1998, compared to 4.14
percent as of June 30, 1998. Capital ratios remained strong as of September 30,
1998 at 14.77 percent of reported assets and 6.60 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 14.9 million customers and $16.3 billion in
managed loans outstanding as of September 30, 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
"Financial Information" to view/download the release and financial information.]
<PAGE>
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY
<TABLE>
<CAPTION>
98 98 98 97 97
(in millions, except per share data and as noted) Q3 Q2 Q1 Q4 Q3
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earnings (Managed Basis)
Net Interest Income $ 440.8 $ 399.5 $ 416.7 $ 361.6 $ 330.7
Non-Interest Income 264.6 253.2 220.7 230.4 218.5
-----------------------------------------------------------------------------
Total Revenue 705.4 652.7 637.4 592.0 (1) 549.2
Provision for Loan Losses 208.9 213.1 242.5 255.7 243.6
Marketing Expenses 126.5 85.8 75.0 65.0 60.8
Operating Expenses 257.0 (2) 246.0 (2) 213.9 (2) 177.4 (2) 165.2 (2)
-----------------------------------------------------------------------------
Income Before Taxes 112.9 107.8 106.0 93.9 79.6
Tax Rate 38.0% 38.0% 38.0% 38.0% 38.0%
Net Income $ 70.0 $ 66.9 $ 65.7 $ 58.2 $ 49.3
- -----------------------------------------------------------------------------------------------------------------------
Common Share Statistics
Basic EPS $ 1.07 $ 1.02 $ 1.00 $ 0.89 $ 0.75
Diluted EPS $ 1.00 $ 0.96 $ 0.96 $ 0.86 $ 0.73
Dividends Per Share $ 0.08 $ 0.08 $ 0.08 $ 0.08 $ 0.08
Book Value Per Share (period end) $ 17.83 $ 16.31 $ 15.08 $ 13.66 $ 12.84
Stock Price Per Share (period end) $ 103.06 $ 124.19 $ 78.88 $ 54.19 $ 45.75
Total Market Capitalization (period end) $6,758.0 $ 8,139.0 $5,163.7 $3,542.2 $ 3,001.0
Shares Outstanding (period end) 65.6 65.5 65.5 65.4 65.6
Shares Used to Compute Basic EPS 65.7 65.5 65.4 65.5 66.2
Shares Used to Compute Diluted EPS 70.0 69.5 68.4 67.5 67.6
- -----------------------------------------------------------------------------------------------------------------------
Managed Loan Statistics (period avg.)
Average Loans $ 15,746 $ 14,417 $ 14,097 $ 13,824 $ 12,918
Average Earning Assets $ 17,372 $ 16,242 $ 16,020 $ 15,655 $ 14,608
Average Assets $ 18,597 $ 17,296 $ 16,834 $ 16,367 $ 15,618
Average Equity $ 1,149 $ 1,037 $ 950 $ 892 $ 841
Net Interest Margin 10.15% 9.84% 10.40% 9.24% (3) 9.05%
Return on Average Assets (ROA) 1.51% 1.55% 1.56% 1.42% 1.26%
Return on Average Equity (ROE) 24.36% 25.78% 27.66% 26.12% 23.47%
Net Charge-Off Rate 5.03% 5.91% 6.04% 6.37% (4) 6.66%
Net Charge-Offs $ 198.1 $ 213.0 $ 212.7 $ 255.6 (4) $ 215.1
- -------------------------------------------------------------------------------------------------------------------
Managed Loan Statistics (period end)
Reported Loans $ 5,667 $ 5,140 $ 4,748 $ 4,862 $ 4,330
Securitized Loans 10,671 9,829 9,254 9,369 9,143
-----------------------------------------------------------------------
Total Loans $ 16,338 $ 14,969 $ 14,002 $ 14,231 $ 13,473
Delinquency Rate (30+ days) 4.90% 5.14% 5.75% 6.20% 6.36%
Number of Accounts (000's) 14,907 13,588 12,674 11,747 10,664
Total Assets $ 19,211 $ 17,462 $ 16,464 $ 16,433 $ 15,440
Capital, Including Preferred Interests $1,267.0 $ 1,167.0 $1,085.2 $ 990.9 $ 939.7
Capital to Managed Assets Ratio 6.60% 6.68% 6.59% 6.03% 6.09%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(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) Operating expenses include $6.5 million, $24.0 million, $32.4 million, $9.7
million and $8.6 million in compensation expense in Q398, Q298, Q198, Q497
and Q397, respectively, for performance-based stock options.
(3) The net interest margin, without the modifications in charge-off policy and
finance charge and fee income recognition, was 10.13%.
(4) The net charge-off rate and net charge-offs, without the modification in
charge-off policy, were 6.02% and $208.2 million, respectively.
<PAGE>
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Balance Sheets
(in thousands)(unaudited)
<TABLE>
<CAPTION>
September 30 June 30 September 30
1998 1998 1997
-------------- --------------- --------------
<S> <C> <C> <C>
Assets:
Cash and due from banks $ 14,974 $ 8,463 $ 57,772
Federal funds sold and resale agreements 365,000 152,575
Interest-bearing deposits at other banks 32,993 30,926 22,267
-------------- --------------- --------------
Cash and cash equivalents 412,967 39,389 232,614
Securities available for sale 1,296,959 1,431,091 1,033,946
Consumer loans 5,666,998 5,140,340 4,329,799
Less: Allowance for loan losses (231,000) (213,000) (147,000)
-------------- --------------- --------------
Net loans 5,435,998 4,927,340 4,182,799
Premises and equipment, net 228,550 188,727 180,740
Interest receivable 49,934 45,866 35,539
Accounts receivable from securitizations 921,602 836,274 539,925
Other 234,766 182,751 106,208
-------------- --------------- --------------
Total assets $ 8,580,776 $ 7,651,438 $ 6,311,771
============== =============== ==============
Liabilities:
Interest-bearing deposits $ 1,598,335 $ 1,287,402 $ 1,050,014
Other borrowings 1,439,690 959,480 321,463
Senior notes 3,729,234 3,709,404 3,307,801
Deposit notes 99,996 299,996
Interest payable 80,373 83,167 65,798
Other 466,160 345,037 327,036
-------------- --------------- --------------
Total liabilities 7,313,792 6,484,486 5,372,108
Guaranteed Preferred Beneficial Interests
In Capital One Bank's Floating Rate Junior
Subordinated Capital Income Securities: 97,856 97,791 97,599
Stockholders' Equity:
Common stock 666 666 666
Paid-in capital, net 599,536 561,518 504,139
Retained earnings and other comprehensive income 643,855 550,906 373,921
Less: Treasury stock, at cost (74,929) (43,929) (36,662)
-------------- --------------- --------------
Total stockholders' equity 1,169,128 1,069,161 842,064
-------------- --------------- --------------
Total liabilities and stockholders' equity $ 8,580,776 $ 7,651,438 $ 6,311,771
============== =============== ==============
</TABLE>
<PAGE>
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Statements of Income
(in thousands, except per share data)(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 June 30 September 30 September 30 September 30
1998 1998 1997 1998 1997
----------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
Interest Income:
Consumer loans, including fees $ 259,339 $ 245,129 $ 153,377 $ 734,106 $ 443,374
Federal funds sold and resale agreements 957 2,140 3,753 8,175 12,030
Other 22,813 24,169 21,840 70,308 59,030
----------------------------------------------------- ----------------------------
Total interest income 283,109 271,438 178,970 812,589 514,434
Interest Expense:
Deposits 15,805 13,635 9,052 43,578 28,124
Other borrowings 24,752 20,375 9,168 61,180 26,145
Senior and deposit notes 65,498 67,704 63,596 196,231 191,555
----------------------------------------------------- ----------------------------
Total interest expense 106,055 101,714 81,816 300,989 245,824
----------------------------------------------------- ----------------------------
Net interest income 177,054 169,724 97,154 511,600 268,610
Provision for loan losses 67,569 59,013 72,518 212,448 168,481
----------------------------------------------------- ----------------------------
Net interest income after provision for loan losses 109,485 110,711 24,636 299,152 100,129
Non-Interest Income:
Servicing and securitizations 217,094 155,412 180,348 541,161 498,943
Service charges and other fees 146,648 153,170 87,979 432,263 220,763
Interchange 23,213 20,371 12,606 58,383 33,326
-------------------------------------------------------------------------------------
Total non-interest income 386,955 328,953 280,933 1,031,807 753,032
Non-Interest Expense:
Salaries and associate benefits 116,107 113,428 73,214 337,488 213,137
Marketing 126,481 85,811 60,781 287,292 159,827
Communications and data processing 38,415 34,840 25,935 102,618 72,045
Supplies and equipment 27,416 32,368 21,721 82,399 58,200
Occupancy 11,115 11,090 8,198 32,849 23,387
Other 63,993 54,299 36,154 161,600 115,009
----------------------------------------------------- ----------------------------
Total non-interest expense 383,527 331,836 226,003 1,004,246 641,605
----------------------------------------------------- ----------------------------
Income before income taxes 112,913 107,828 79,566 326,713 211,556
Income taxes 42,907 40,975 30,236 124,151 80,392
----------------------------------------------------- ----------------------------
Net income $ 70,006 $ 66,853 $ 49,330 $ 202,562 $ 131,164
===================================================== ============================
Basic earnings per share $ 1.07 $ 1.02 $ 0.75 $ 3.09 $ 1.98
===================================================== ============================
Diluted earnings per share $ 1.00 $ 0.96 $ 0.73 $ 2.92 $ 1.94
===================================================== ============================
Dividends paid per share $ 0.08 $ 0.08 $ 0.08 $ 0.24 $ 0.24
===================================================== ============================
</TABLE>
<PAGE>
CAPITAL ONE FINANCIAL CORPORATION
Statements of Average Balances, Income and Expense, Yields and Rates
(dollars in thousands)(unaudited)
<TABLE>
<CAPTION>
Managed (1) Quarter Ended 9/30/98 Quarter Ended 6/30/98
---------------------------------------- -------------------------------------
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Earning assets:
Consumer loans $ 15,746,091 $ 671,665 17.06% $ 14,416,722 $ 607,247 16.85%
Federal funds sold and resale agreements 69,293 957 5.52 151,275 2,140 5.66
Other securities 1,556,874 22,813 5.86 1,674,381 24,169 5.77
---------------------------------------- --------------------------------------
Total earning assets $ 17,372,258 $ 695,435 16.01% $ 16,242,378 $ 633,556 15.60%
============================= =============================
Interest-bearing liabilities:
Deposits $ 1,368,833 $ 15,805 4.62% $ 1,193,508 $ 13,635 4.57%
Other borrowings 1,495,731 24,752 6.62 1,318,889 20,375 6.18
Senior and deposit notes 3,819,061 65,498 6.86 3,905,684 67,704 6.93
Securitization liability 10,090,262 148,620 5.89 9,190,007 132,337 5.76
---------------------------------------- --------------------------------------
Total interest-bearing liabilities $ 16,773,887 $ 254,675 6.07% $ 15,608,088 $ 234,051 6.00%
============================= =============================
=========== =========
Net interest spread 9.94% 9.60%
=========== =========
Interest income to average earning assets 16.01% 15.60%
Interest expense to average earning assets 5.86 5.76
----------- ---------
Net interest margin 10.15% 9.84%
=========== =========
</TABLE>
(1) The information in this table reflects the adjustment to add back the effect
of securitized loans.
Managed (1)
<TABLE>
<CAPTION>
Quarter Ended 9/30/97
--------------------------------------
Average Income/ Yield/
Balance Expense Rate
<S> ------- ------- -------
Earning assets: <C> <C> <C>
Consumer loans $ 12,917,967 $ 518,563 16.06%
Federal funds sold and resale agreements 255,594 3,753 5.87
Other securities 1,434,536 21,840 6.09
-------------------------------------
Total earning assets $ 14,608,097 $ 544,156 14.90%
============================
Interest-bearing liabilities:
Deposits $ 851,916 $ 9,052 4.25%
Other borrowings 594,519 9,168 6.17
Senior and deposit notes 3,686,416 63,596 6.90
Securitization liability 9,061,882 131,670 5.81
-------------------------------------
Total interest-bearing liabilities $ 14,194,733 $ 213,486 6.02%
============================
=========
Net interest spread 8.88%
=========
Interest income to average earning assets 14.90%
Interest expense to average earning assets 5.85
---------
Net interest margin 9.05%
=========
</TABLE>
(1) The information in this table reflects the adjustment to add back the effect
of securitized loans.
