<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
July 16, 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 associate 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; and other
factors listed from time to time in the Company's SEC reports, including 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.
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99.1. Press Release of the Company dated July 16, 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: July 16, 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 July 16, 1998.
<PAGE>
Exhibit 99.1
<PAGE>
[Capital One Financial Corporation Letterhead]
FOR IMMEDIATE RELEASE: Contact: Paul Paquin
- ---------------------
July 16, 1998 V.P., Investor Relations
(703) 205-1039
Sam Wang
Manager, Media Relations
(703) 205-1180
Capital One Reports Record Second Quarter Earnings
Falls Church, Va. (July 16, 1998) - Capital One Financial Corporation
(NYSE: COF) today announced record second quarter 1998 earnings of $66.9
million, or $.96 per share, versus earnings of $65.7 million, or $.96 per share,
for the first quarter of 1998 and $39.4 million, or $.58 per share, for the
comparable period in the prior year. Earnings per share amounts are reported on
a diluted basis.
"We are pleased that our information-based strategy continues to allow
us to identify new opportunities in our domestic and international businesses,"
said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer.
"These opportunities and an improving credit risk picture are enabling us to
invest in record levels of marketing."
Revenue, defined as managed net interest income and non-interest
income, increased to $653 million in the second quarter of 1998 versus $637
million in the first quarter of 1998 and increased 40 percent over $466
million for the comparable period in the prior year. For the quarter, Capital
One's managed consumer loan balances increased by $967 million to $15.0 billion.
The Company also added 914,000 net new accounts, bringing total accounts to 13.6
million.
<PAGE>
The managed net interest margin was 9.84 percent in the second quarter
of 1998, an expected decrease from 10.40 percent in the first quarter of 1998
and an increase from 8.30 percent in the comparable period of the prior year.
The lower margin from the previous quarter primarily reflects decreases in late
fees as the Company's delinquency levels declined. Non-interest income increased
$33 million compared to the first quarter of 1998 and $84 million for the
comparable period in the prior year. This growth reflects increased fees
(including annual membership, interchange, and overlimit) on our customized
products and strategic cross-sell initiatives.
The managed delinquency rate (30+ days) decreased to 5.14 percent as of
June 30, 1998, compared with 5.75 percent as of March 31, 1998, exceeding
typical seasonal patterns. The managed net charge-off rate decreased to 5.91
percent for the second quarter of 1998 compared with 6.04 percent in the first
quarter of 1998. These decreases demonstrate the combination of high-quality
growth and improving consumer credit.
"We continue to see favorable risk trends as both the delinquency and
charge-off rates improved modestly in the quarter," said Nigel W. Morris,
Capital One's President and Chief Operating Officer. "These improvements
exceeded seasonal expectations but we remain cautious in our outlook."
Marketing investment increased in the second quarter of 1998 to a
record $86 million versus $75 million in the first quarter of 1998 and $45
million in the comparable period of the prior year. Other non-interest expenses
(excluding marketing and performance-based stock options) for the second quarter
of 1998 were $222 million versus $182 million for the first quarter of 1998 and
$157 million in the comparable period of the prior year. Operating expenses
reflect increased investments in staff levels and infrastructure development to
position the Company for continued growth.
<PAGE>
The allowance for loan losses was maintained at $213 million, and
decreased to 4.14 percent of on-balance sheet receivables as of June 30, 1998,
from 4.49 percent as of March 31, 1998. Capital ratios were strong as of June
30, 1998 at 15.25 percent of reported assets and 6.68 percent of managed assets.
Separately, earlier this week Capital One signed an agreement to
acquire Summit Acceptance Corporation. Based in Dallas, Texas, Summit is a
proven performer in the subprime automobile finance industry with approximately
180 employees and serviced loans of approximately $260 million as of June 30,
1998. The acquisition price for Summit will be approximately $55 million which
will be paid through the issuance of Capital One stock. The acquisition will
be accounted for as a purchase and goodwill of approximately $70 million will
be amortized over 15 years. The acquisition is expected to be completed by
the end of the third quarter and its impact is expected to be neutral to
earnings per share in 1998 and accretive to earnings per share in 1999.
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 consumer lending products. Capital
One's subsidiaries collectively had 13.6 million customers and $15.0 billion in
managed loans outstanding as of June 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 97 97 97
Q2 Q1 Q4 Q3 Q2
(in millions, except per share data and as noted)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earnings (Managed Basis)
Net Interest Income $ 399.5 $ 416.7 $ 361.6 $ 330.7 $ 296.3
Non-Interest Income 253.2 220.7 230.4 218.5 169.3
-----------------------------------------------------------------------
Total Revenue 652.7 637.4 592.0 (1) 549.2 465.6
Provision for Loan Losses 213.1 242.5 255.7 243.6 200.1
Marketing Expenses 85.8 75.0 65.0 60.8 45.0
Operating Expenses 246.0 (2) 213.9 (2) 177.4 165.2 157.1
-----------------------------------------------------------------------
Income Before Taxes 107.8 106.0 93.9 79.6 63.5
Tax Rate 38.0% 38.0% 38.0% 38.0% 38.0%
Net Income $ 66.9 $ 65.7 $ 58.2 $ 49.3 $ 39.4
- ------------------------------------------------------------------------------------------------------------
Common Share Statistics
Basic EPS $ 1.02 $ 1.00 $ 0.89 $ 0.75 $ 0.59
Diluted EPS $ 0.96 $ 0.96 $ 0.86 $ 0.73 $ 0.58
Dividends Per Share $ 0.08 $ 0.08 $ 0.08 $ 0.08 $ 0.08
Book Value Per Share (period end) $ 16.31 $ 15.08 $ 13.66 $ 12.84 $ 12.35
Stock Price Per Share (period end) $ 124.19 $ 78.88 $ 54.19 $ 45.75 $ 37.75
Total Market Capitalization (period end) $8,139.0 $5,163.7 $ 3,542.2 $ 3,001.0 $ 2,509.8
Shares Outstanding (period end) 65.5 65.5 65.4 65.6 66.5
Shares Used to Compute Basic EPS 65.5 65.4 65.5 66.2 66.4
Shares Used to Compute Diluted EPS 69.5 68.4 67.5 67.6 67.6
- ------------------------------------------------------------------------------------------------------------
Managed Loan Statistics (period avg.)
Average Loans $ 14,417 $ 14,097 $ 13,824 $ 12,918 $ 12,715
Average Earning Assets $ 16,242 $ 16,020 $ 15,655 $ 14,608 $ 14,278
Average Assets $ 17,296 $ 16,834 $ 16,367 $ 15,618 $ 15,272
Average Equity $ 1,037 $ 950 $ 892 $ 841 $ 798
Net Interest Margin 9.84% 10.40% 9.24%(3) 9.05% 8.30%
Return on Average Assets (ROA) 1.55% 1.56% 1.42% 1.26% 1.03%
Return on Average Equity (ROE) 25.78% 27.66% 26.12% 23.47% 19.72%
Net Charge-Off Rate 5.91% 6.04% 6.37%(4) 6.66% 6.38%
Net Charge-Offs $ 213.0 $ 212.7 $ 255.6 (4) $ 215.1 $ 202.8
- ------------------------------------------------------------------------------------------------------------
Managed Loan Statistics (period end)
Reported Loans $ 5,140 $ 4,748 $ 4,862 $ 4,330 $ 3,624
Securitized Loans 9,829 9,254 9,369 9,143 9,113
-----------------------------------------------------------------------
Total Loans $ 14,969 $ 14,002 $ 14,231 $ 13,473 $ 12,737
Delinquency Rate (30+ days) 5.14%(5) 5.75%(5) 6.20%(5) 6.36% 6.33%
Number of Accounts (000's) 13,588 12,674 11,747 10,664 9,796
Total Assets $ 17,462 $ 16,464 $ 16,433 $ 15,440 $ 15,270
Capital, Including Preferred Interests $1,167.0 $1,085.2 $ 990.9 $ 939.7 $ 918.5
Capital to Managed Assets Ratio 6.68% 6.59% 6.03% 6.09% 6.01%
Percent Introductory Rate Loans 20% 22% 27% 26% 25%
- ------------------------------------------------------------------------------------------------------------
</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 $24.0 million and $32.4 million in compensation
expense in Q298 and Q198, 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.
(5) The delinquency rate reflects the modifications in charge-off policy and
finance charge and fee income recognition.
<PAGE>
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Balance Sheets
(in thousands)(unaudited)
<TABLE>
<CAPTION>
June 30 March 31 June 30
1998 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Assets:
Cash and due from banks $ 8,463 $ 2,983 $ 136,112
Federal funds sold and resale agreements 105,000 295,507
Interest-bearing deposits at other banks 30,926 34,077 21,441
------------- ------------- -------------
Cash and cash equivalents 39,389 142,060 453,060
Securities available for sale 1,431,091 1,513,398 1,142,328
Consumer loans 5,140,340 4,748,186 3,623,952
Less: Allowance for loan losses (213,000) (213,000) (118,500)
------------- ------------- -------------
Net loans 4,927,340 4,535,186 3,505,452
Premises and equipment, net 188,727 163,757 181,078
Interest receivable 45,866 44,213 48,135
Accounts receivable from securitizations 836,274 696,599 729,238
Other 182,751 128,689 100,144
------------- ------------- -------------
Total assets $ 7,651,438 $ 7,223,902 $ 6,159,435
============= ============= =============
Liabilities:
Interest-bearing deposits $ 1,287,402 $ 1,160,850 $ 869,801
Other borrowings 959,480 723,614 293,734
Senior notes 3,709,404 3,464,176 3,468,801
Deposit notes 99,996 299,996 299,996
Interest payable 83,167 67,544 72,261
Other 345,037 422,480 236,343
------------- ------------- -------------
Total liabilities 6,484,486 6,138,660 5,240,936
Guaranteed Preferred Beneficial Interests
In Capital One Bank's Floating Rate Junior
Subordinated Capital Income Securities: 97,791 97,727 97,534
Stockholders' Equity:
Common stock 666 666 665
Paid-in capital, net 561,518 543,179 491,953
Retained earnings 547,485 485,750 327,896
Cumulative other comprehensive income 3,421 2,325 451
Less: Treasury stock, at cost (43,929) (44,405)
------------- ------------- -------------
Total stockholders' equity 1,069,161 987,515 820,965
------------- ------------- -------------
Total liabilities and stockholders' equity $ 7,651,438 $ 7,223,902 $ 6,159,435
============= ============= =============
</TABLE>
<PAGE>
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Statements of Income
(in thousands, except per share data)(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 March 31 June 30 June 30 June 30
1998 1998 1997 1998 1997
----------------------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C>
Interest Income:
Consumer loans, including fees $ 245,129 $ 229,638 $ 143,485 $ 474,767 $ 289,997
Federal funds sold and resale agreements 2,140 5,078 2,613 7,218 8,277
Other 24,169 23,326 20,772 47,495 37,190
---------------------------------------------------------------------------------
Total interest income 271,438 258,042 166,870 529,480 335,464
Interest Expense:
Deposits 13,635 14,138 8,635 27,773 19,072
Other borrowings 20,375 16,053 10,453 36,428 16,977
Senior and deposit notes 67,704 63,029 64,523 130,733 127,959
---------------------------------------------------------------------------------
Total interest expense 101,714 93,220 83,611 194,934 164,008
---------------------------------------------------------------------------------
Net interest income 169,724 164,822 83,259 334,546 171,456
Provision for loan losses 59,013 85,866 46,776 144,879 95,963
---------------------------------------------------------------------------------
Net interest income after provision for loan losses 110,711 78,956 36,483 189,667 75,493
Non-Interest Income:
Servicing and securitizations 155,412 168,655 148,562 324,067 318,595
Service charges 128,191 113,324 57,278 241,515 110,926
Interchange 20,371 14,799 11,405 35,170 20,720
Other 24,979 19,121 11,797 44,100 21,858
---------------------------------------------------------------------------------
Total non-interest income 328,953 315,899 229,042 644,852 472,099
Non-Interest Expense:
Salaries and associate benefits 113,428 107,953 69,287 221,381 139,923
Marketing 85,811 75,000 44,995 160,811 99,046
Communications and data processing 34,840 29,363 24,320 64,203 46,110
Supplies and equipment 32,368 22,615 18,406 54,983 36,479
Occupancy 11,090 10,644 7,388 21,734 15,189
Other 54,299 43,308 37,659 97,607 78,855
---------------------------------------------------------------------------------
Total non-interest expense 331,836 288,883 202,055 620,719 415,602
---------------------------------------------------------------------------------
Income before income taxes 107,828 105,972 63,470 213,800 131,990
Income taxes 40,975 40,269 24,118 81,244 50,156
---------------------------------------------------------------------------------
Net income $ 66,853 $ 65,703 $ 39,352 $ 132,556 $ 81,834
=================================================================================
Basic earnings per share $ 1.02 $ 1.00 $ 0.59 $ 2.02 $ 1.23
================================================================================
Diluted earnings per share $ 0.96 $ 0.96 $ 0.58 $ 1.92 $ 1.21
================================================================================
Dividends paid per share $ 0.08 $ 0.08 $ 0.08 $ 0.16 $ 0.16
================================================================================
</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 6/30/98 Quarter Ended 3/31/98
---------------------------------- -----------------------------------
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Earning assets:
Consumer loans $ 14,416,722 $ 607,247 16.85% $ 14,097,475 $ 615,053 17.45%
Federal funds sold and resale agreements 151,275 2,140 5.66 362,680 5,078 5.60
Other securities 1,674,381 24,169 5.77 1,559,732 23,326 5.98
---------------------------------- -----------------------------------
Total earning assets $ 16,242,378 $ 633,556 15.60% $ 16,019,887 $ 643,457 16.06%
======================== =========================
Interest-bearing liabilities:
Deposits $ 1,193,508 $ 13,635 4.57% $ 1,266,064 $ 14,138 4.47%
Other borrowings 1,318,889 20,375 6.18 1,077,082 16,053 5.96
Senior and deposit notes 3,905,684 67,704 6.93 3,683,113 63,029 6.85
Securitization liability 9,190,007 132,337 5.76 9,297,590 133,526 5.74
---------------------------------- ----------------------------------
Total interest-bearing liabilities $ 15,608,088 $ 234,051 6.00% $ 15,323,849 $ 226,746 5.92%
========================= =========================
========= =========
Net interest spread 9.60% 10.14%
========= =========
Interest income to average earning assets 15.60% 16.06%
Interest expense to average earning assets 5.76 5.66
--------- ---------
Net interest margin 9.84% 10.40%
========= =========
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended 6/30/97
- -----------------------------------
Average Income/ Yield/
Balance Expense Rate
------- ------- -------
<S> <C> <C>
$ 12,714,870 $ 482,088 15.17%
187,650 2,613 5.57
1,375,364 20,772 6.04
- -----------------------------------
$ 14,277,884 $ 505,473 14.16%
=========================
$ 817,936 $ 8,635 4.22%
694,814 10,453 6.02
3,768,797 64,523 6.85
8,713,517 125,531 5.76
- -----------------------------------
$ 13,995,064 $ 209,142 5.98%
=========================
---------
8.18%
=========
14.16%
5.86
---------
8.30%
=========
</TABLE>
(1) The information in this table reflects the adjustment to add back the effect
of securitized loans.
