<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
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
<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); 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
<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: 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
<PAGE>
EXHIBIT INDEX
99.1 Press Release of the Company dated January 19, 1999.
Page 4 of ___ Pages
<PAGE>
Exhibit 99.1
Page 5 of ___ Pages
<PAGE>
[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-
<PAGE>
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-
<PAGE>
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.]
<PAGE>
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY
<TABLE>
<CAPTION>
98 98 98 98 97
(in millions, except per share data and as noted) Q4 Q3 Q2 Q1 Q4
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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%
- ----------------------------------------------------------------------------------------------------------------------------------
</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) 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-
<PAGE>
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Balance Sheets
(in thousands)(unaudited)
<TABLE>
<CAPTION>
December 31 September 30 December 31
1998 1998 1997
------------------- ------------------- -------------------
<S> <C> <C> <C>
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
=================== =================== ===================
</TABLE>
- 5 -
<PAGE>
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Statements of Income
(in thousands, except per share data)(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Year Ended
December 31 September 30 December 31 December 31 December 31
1998 1998 1997 1998 1997
---------------------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C>
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
============================================== =============================
</TABLE>
-6-
<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 12/31/98 Quarter Ended 9/30/98
---------------------------------------- ----------------------------------------
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------- ------- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Earning assets:
Consumer loans $ 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%
========== ===========
</TABLE>
<TABLE>
<CAPTION>
Managed (1) Quarter Ended 12/31/97
----------------------------------------
Average Income/ Yield/
Balance Expense Rate
------- ------- ----
<S> <C> <C> <C>
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%
==========
</TABLE>
(1) The information in this table reflects the adjustment to add back the effect
of securitized loans.
-7-
