<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
April 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
1
<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.
------------------------------------------------------------------
99.1. Press Release of the Company dated April 16, 1998.
2
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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: April 16, 1998 By: /s/ James M. Zinn
James M. Zinn
Senior Vice President and
Chief Financial Officer
3
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EXHIBIT INDEX
99.1 Press Release of the Company dated April 16, 1998.
4
<PAGE>
EXHIBIT 99.1
<PAGE>
[LETTERHEAD OF CAPITAL ONE APPEARS HERE]
For Immediate Release: Contact: Paul Paquin
- --------------------- V.P., Investor Relations
April 16, 1998 (703) 205-1039
Sam Wang
Media Relations
(703) 205-1180
CAPITAL ONE REPORTS RECORD EARNINGS: RAISES 1998 TARGET
FALLS CHURCH, Va. (April 16, 1998) --- Capital One Financial Corporation
(NYSE: COF) today announced record first quarter 1998 earnings of $65.7 million,
or $.96 per share (diluted), versus earnings of $58.2 million, or $.86 per share
(diluted), for the fourth quarter of 1997 and $42.5 million, or $.63 per share
(diluted), for the comparable period in the prior year.
"This quarter's record results continue to demonstrate the power of our
information-based strategy," said Richard D. Fairbank, Capital One's Chairman
and Chief Executive Officer. "We now are targeting our 1998 earnings at $3.90
per share (diluted)."
During the first quarter of 1998, the Company added 927,000 net new
accounts, bringing total accounts to 12.7 million. First quarter 1998 revenue,
defined as managed net interest income and non-interest income, rose to $637
million versus $592 million in the fourth quarter of 1997 and $468 million for
the comparable period in the prior year. For the quarter, Capital One's managed
consumer loan balances declined, as expected, by $229 million to $14.0 billion.
This modest decline was consistent with previous years and primarily reflected
seasonal paydown.
The managed net interest margin increased to 10.40 percent in the first
quarter of 1998 versus 10.13 percent in the fourth quarter of 1997 prior to
adjustments (9.24% as adjusted). This increase principally reflected a
continued shift to higher yielding products. Fourth quarter 1997 adjustments
recognize currently the uncollectible finance charge and fee income and the
charge-off of credit card loans at 180 days past-due. First quarter 1998
managed net interest margin of 10.40 percent compares to 8.83 percent in the
same period of 1997.
The managed net charge-off rate increased only slightly to 6.04 percent for
the first quarter of 1998 versus 6.02 percent prior to the adjustment in charge-
off policy in the fourth quarter of 1997 (6.37% as adjusted) and 5.84 percent
for the comparable period in the prior year. The managed delinquency rate (30+
days) significantly decreased to 5.75 percent as of March 31, 1998, compared
with 6.20 percent as of December 31, 1997.
<PAGE>
"We continue to be very pleased with the credit quality performance of our
portfolio," said Nigel W. Morris, Capital One's President and Chief Operating
Officer. "Because of this stable credit picture and the success of our new
product innovations, we are bullish on our ability to continue to deliver
superior results."
Marketing expense increased in the first quarter of 1998 to a record $75
million versus $65 million in the fourth quarter of 1997 and $54 million in the
comparable period of the prior year. Other non-interest expenses (excluding
marketing) for the first quarter of 1998 were $214 million versus $177 million
for the fourth quarter of 1997 and $160 million in the comparable period of the
prior year. These non-interest expenses for the first quarter of 1998 include
approximately $32 million for the performance-based stock options granted in
December 1997. This expense reflected the 46% stock price increase during the
quarter. Excluding this expense, the Company's cost per account has remained
stable.
The allowance for loan losses increased by $30 million during the first
quarter to $213 million or 4.49 percent of on-balance sheet receivables as of
March 31, 1998 from 3.76 percent as of December 31, 1997. Capital ratios were
strong as of March 31, 1998 at 15.02 percent of reported assets and 6.59 percent
of managed assets.
The Company cautions that its current expectations for earnings are
forward-looking statements and actual results could differ materially from
current expectations due to a number of factors, including the number of
delinquent accounts and the dollar amount of charge-offs actually experienced by
the Company's credit card portfolio.
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 12.7 million customers
<PAGE>
and $14.0 billion in managed loans outstanding as of March 31, 1998, and are
among the largest providers of MasterCard and Visa credit cards in the world.
# # #
[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 97 97 97 97
(in millions, except per share data and as noted) Q1 Q4 Q3 Q2 Q1
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EARNINGS (MANAGED BASIS)
Net Interest Income $ 416.7 $ 361.6 $ 330.7 $ 296.3 $ 310.7
Non-Interest Income 220.7 230.4 218.5 169.3 157.3
------------------------------------------------------------------------------
Total Revenue 637.4 592.0 (1) 549.2 465.6 468.0
Provision for Loan Losses 242.5 255.7 243.6 200.1 185.9
Marketing Expenses 75.0 65.0 60.8 45.0 54.1
Operating Expenses 213.9 (2) 177.4 165.2 157.1 159.5
------------------------------------------------------------------------------
Income Before Taxes 106.0 93.9 79.6 63.5 68.5
Tax Rate 38.0 % 38.0 % 38.0 % 38.0 % 38.0 %
Net Income $ 65.7 $ 58.2 $ 49.3 $ 39.4 $ 42.5
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON SHARE STATISTICS
Basic EPS $ 1.00 $ 0.89 $ 0.75 $ 0.59 $ 0.64
Diluted EPS $ 0.96 $ 0.86 $ 0.73 $ 0.58 $ 0.63
Dividends Per Share $ 0.08 $ 0.08 $ 0.08 $ 0.08 $ 0.08
Book Value Per Share (period end) $ 15.08 $ 13.66 $ 12.84 $ 12.35 $ 11.72
Stock Price Per Share (period end) $ 78.88 $ 54.19 $ 45.75 $ 37.75 $ 37.25
Total Market Capitalization (period end) $5,163.7 $3,542.2 $3,001.0 $2,509.8 $2,472.5
Shares Outstanding (period end) 65.5 65.4 65.6 66.5 66.4
Shares Used to Compute Basic EPS 65.4 65.5 66.2 66.4 66.3
Shares Used to Compute Diluted EPS 68.4 67.5 67.6 67.6 67.7
- ---------------------------------------------------------------------------------------------------------------------------------
MANAGED LOAN STATISTICS (PERIOD AVG.)
Average Loans $ 14,097 $ 13,824 $ 12,918 $ 12,715 $ 12,559
Average Earning Assets $ 16,020 $ 15,655 $ 14,608 $ 14,278 $ 14,080
Average Assets $ 16,834 $ 16,367 $ 15,618 $ 15,272 $ 14,900
Average Equity $ 950 $ 892 $ 841 $ 798 $ 764
Net Interest Margin 10.40 % 9.24 %(3) 9.05 % 8.30 % 8.83 %
Return on Average Assets (ROA) 1.56 % 1.42 % 1.26 % 1.03 % 1.14 %
Return on Average Equity (ROE) 27.66 % 26.12 % 23.47 % 19.72 % 22.24 %
Net Charge-Off Rate 6.04 % 6.37 %(4) 6.66 % 6.38 % 5.84 %
Net Charge-Offs $ 212.7 $ 255.6 (4) $ 215.1 $ 202.8 $ 183.3
- ---------------------------------------------------------------------------------------------------------------------------------
MANAGED LOAN STATISTICS (PERIOD END)
Reported Loans $ 4,748 $ 4,862 $ 4,330 $ 3,624 $ 3,817
Securitized Loans 9,254 9,369 9,143 9,113 8,790
------------------------------------------------------------------------------
Total Loans $ 14,002 $ 14,231 $ 13,473 $ 12,737 $ 12,607
Delinquency Rate (30+ days) 5.75 %(5) 6.20 %(5) 6.36 % 6.33 % 6.41 %
Number of Accounts (000's) 12,674 11,747 10,664 9,796 9,123
Total Assets $ 16,464 $ 16,433 $ 15,440 $ 15,270 $ 14,945
Capital, Including Preferred Interests $1,085.2 $ 990.9 $ 939.7 $ 918.5 $ 875.2
Capital to Managed Assets Ratio 6.59 % 6.03 % 6.09 % 6.01 % 5.86 %
Percent Introductory Rate Loans 22 % 27 % 26 % 25 % 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 $32.4 million compensation expense ($9.7 million
in Q497) 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 modification in charge-off policy and
finance charge and fee income recognition.
<PAGE>
CAPITAL ONE FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)(unaudited)
<TABLE>
<CAPTION>
March 31 December 31 March 31
1998 1997 1997
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Cash and due from banks $ 2,983 $ 5,039 $ 127,721
Federal funds sold and resale agreements 105,000 173,500 365,660
Interest-bearing deposits at other banks 34,077 59,184 183,570
-------------- -------------- --------------
Cash and cash equivalents 142,060 237,723 676,951
Securities available for sale 1,513,398 1,242,670 1,026,373
Consumer loans held for securitization 300,000
Consumer loans 4,748,186 4,861,687 3,516,951
Less: Allowance for loan losses (213,000) (183,000) (118,500)
-------------- -------------- --------------
Net loans 4,535,186 4,678,687 3,398,451
Premises and equipment, net 163,757 162,726 180,927
Interest receivable 44,213 51,883 32,883
Accounts receivable from securitizations 696,599 588,781 459,169
Other assets 128,689 115,809 80,225
-------------- -------------- --------------
Total assets $ 7,223,902 $ 7,078,279 $ 6,154,979
============== ============== ==============
LIABILITIES:
Interest-bearing deposits $ 1,160,850 $ 1,313,654 $ 741,719
Other borrowings 723,614 796,112 355,188
Senior notes 3,464,176 3,332,778 3,468,801
Deposit notes 299,996 299,996 299,996
Interest payable 67,544 68,448 61,162
Other liabilities 422,480 276,368 352,882
-------------- -------------- --------------
Total liabilities 6,138,660 6,087,356 5,279,748
GUARANTEED PREFERRED BENEFICIAL INTERESTS
IN CAPITAL ONE BANK'S FLOATING RATE JUNIOR
SUBORDINATED CAPITAL INCOME SECURITIES: 97,727 97,664 97,470
STOCKHOLDERS' EQUITY:
Common stock 666 666 664
Paid-in capital, net 543,179 513,561 486,127
Retained earnings 488,075 427,679 290,970
Less: Treasury stock, at cost (44,405) (48,647)
-------------- -------------- --------------
Total stockholders' equity 987,515 893,259 777,761
-------------- -------------- --------------
Total liabilities and stockholders' equity $ 7,223,902 $ 7,078,279 $ 6,154,979
============== ============== ==============
</TABLE>
<PAGE>
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Statements of Income
(in thousands, except per share data)(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31 December 31
1998 1997 1997
------------------------------- -----------
<S> <C> <C> <C>
INTEREST INCOME:
Consumer loans, including fees $ 229,638 $ 146,512 $ 176,411
Federal funds sold and resale agreements 5,078 5,664 4,393
Other 23,326 16,418 22,747
------------------------------- -----------
Total interest income 258,042 168,594 203,551
INTEREST EXPENSE:
Deposits 14,138 10,437 13,808
Other borrowings 16,053 6,524 12,921
Senior and deposit notes 63,029 63,436 62,294
------------------------------- -----------
Total interest income 93,220 80,397 89,023
------------------------------- -----------
Net interest income 164,822 88,197 114,528
Provision for loan losses 85,866 49,187 94,356
------------------------------- -----------
Net interest income after provision for loan losses 78,956 39,010 20,172
NON-INTEREST INCOME:
Servicing and securitizations 168,655 170,033 183,402
Service charges 113,324 53,648 97,529
Interchange 14,799 9,315 15,704
Other 19,121 10,061 19,463
------------------------------- -----------
Total non-interest income 315,899 243,057 316,098
NON-INTEREST EXPENSE:
Salaries and associate benefits 107,953 70,636 76,185
Marketing 75,000 54,051 64,992
Communications and data processing 29,363 21,790 26,090
Supplies and equipment 22,615 18,073 24,674
Occupancy 10,644 7,801 14,161
Other 43,308 41,196 36,271
------------------------------- -----------
Total non-interest expense 288,883 213,547 242,373
------------------------------- -----------
Income before income taxes 105,972 68,520 93,897
Income taxes 40,269 26,038 35,680
------------------------------- -----------
Net income $ 65,703 $ 42,482 $ 58,217
=============================== ===========
Basic earnings per share $ 1.00 $ 0.64 $ 0.89
=============================== ===========
Diluted earnings per share $ 0.96 $ 0.63 $ 0.86
=============================== ===========
Dividends paid per share $ 0.08 $ 0.08 $ 0.08
=============================== ===========
</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 3/31/98 Quarter Ended 12/31/97
---------------------------------------- ----------------------------------------
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------------ ----------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS:
Consumer loans $ 14,097,475 $ 615,053 17.45 % $ 13,824,094 $ 559,800 16.20 %
Federal funds sold and resale agreements 362,680 5,078 5.60 304,266 4,393 5.78
Other securities 1,559,732 23,326 5.98 1,526,801 22,747 5.96
---------------------------------------- ----------------------------------------
Total earning assets $ 16,019,887 $ 643,457 16.06 % $ 15,655,161 $ 586,940 15.00 %
========================== ==========================
INTEREST-BEARING LIABILITIES:
Deposits $ 1,266,064 $ 14,138 4.47 % $ 1,172,141 $ 13,808 4.71 %
Other borrowings 1,077,082 16,053 5.96 823,129 12,921 6.28
Senior and deposit notes 3,683,113 63,029 6.85 3,614,310 62,294 6.89
Securitization liability 9,297,590 133,526 5.74 9,302,846 136,291 5.86
---------------------------------------- ----------------------------------------
Total interest-bearing liabilities $ 15,323,849 $ 226,746 5.92 % $ 14,912,426 $ 225,314 6.04 %
========================== ==========================
------------ ------------
Net interest spread 10.14 % 8.96 %
============ ============
Interest income to average earning assets 16.06 % 15.00 %
Interest expense to average earning assets 5.66 5.76
------------ ------------
Net interest margin 10.40 % 9.24 %
============ ============
<CAPTION>
MANAGED (1) Quarter Ended 3/31/97
----------------------------------------
Average Income/ Yield/
Balance Expense Rate
------------ ----------- ------------
<S> <C> <C> <C>
EARNING ASSETS:
Consumer loans $ 12,558,878 $ 485,515 15.46 %
Federal funds sold and resale agreements 428,853 5,664 5.28
Other securities 1,091,857 16,418 6.01
----------------------------------------
Total earning assets $ 14,079,588 $ 507,597 14.42 %
==========================
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 %
==========================
------------
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 %
============
</TABLE>
(1) The information in this table reflects the adjustment to add back the
effect of securitized loans.
