Capital One Reports Record Third Quarter Earnings
Capital One Reports Record Third Quarter Earnings
FALLS CHURCH, Va., Oct. 13 /PRNewswire/ -- 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.
"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.
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY
98 98
(in millions, except per share data and as noted) Q3 Q2
Earnings (Managed Basis)
Net Interest Income $ 440.8 $ 399.5
Non-Interest Income 264.6 253.2
Total Revenue 705.4 652.7
Provision for Loan Losses 208.9 213.1
Marketing Expenses 126.5 85.8
Operating Expenses 257.0(2) 246.0(2)
Income Before Taxes 112.9 107.8
Tax Rate 38.0% 38.0%
Net Income $ 70.0 $ 66.9
Common Share Statistics
Basic EPS $ 1.07 $ 1.02
Diluted EPS $ 1.00 $ 0.96
Dividends Per Share $ 0.08 $ 0.08
Book Value Per Share (period end) $ 17.83 $ 16.31
Stock Price Per Share (period end) $ 103.06 $ 124.19
Total Market Capitalization (period end) $ 6,758.0 $ 8,139.0
Shares Outstanding (period end) 65.6 65.5
Shares Used to Compute Basic EPS 65.7 65.5
Shares Used to Compute Diluted EPS 70.0 69.5
Managed Loan Statistics (period avg.)
Average Loans $ 15,746 $ 14,417
Average Earning Assets $ 17,372 $ 16,242
Average Assets $ 18,597 $ 17,296
Average Equity $ 1,149 $ 1,037
Net Interest Margin 10.15% 9.84%
Return on Average Assets (ROA) 1.51% 1.55%
Return on Average Equity (ROE) 24.36% 25.78%
Net Charge-Off Rate 5.03% 5.91%
Net Charge-Offs $ 198.1 $ 213.0
Managed Loan Statistics (period end)
Reported Loans $ 5,667 $ 5,140
Securitized Loans 10,671 9,829
Total Loans $ 16,338 $ 14,969
Delinquency Rate (30+ days) 4.90% 5.14%
Number of Accounts (000's) 14,907 13,588
Total Assets $ 19,211 $ 17,462
Capital, Including Preferred Interests $ 1,267.0 $ 1,167.0
Capital to Managed Assets Ratio 6.60% 6.68%
(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 Q3
98, Q2 98, Q1 98, Q4 97 and Q3 97, 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.
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY
98 97
(in millions, except per share data and as noted) Q1 Q4
Earnings (Managed Basis)
Net Interest Income $ 416.7 $ 361.6
Non-Interest Income 220.7 230.4
Total Revenue 637.4 592.0(1)
Provision for Loan Losses 242.5 255.7
Marketing Expenses 75.0 65.0
Operating Expenses 213.9(2) 177.4(2)
Income Before Taxes 106.0 93.9
Tax Rate 38.0% 38.0%
Net Income $ 65.7 $ 58.2
Common Share Statistics
Basic EPS $ 1.00 $ 0.89
Diluted EPS $ 0.96 $ 0.86
Dividends Per Share $ 0.08 $ 0.08
Book Value Per Share (period end) $ 15.08 $ 13.66
Stock Price Per Share (period end) $ 78.88 $ 54.19
Total Market Capitalization (period end) $ 5,163.7 $ 3,542.2
Shares Outstanding (period end) 65.5 65.4
Shares Used to Compute Basic EPS 65.4 65.5
Shares Used to Compute Diluted EPS 68.4 67.5
Managed Loan Statistics (period avg.)
Average Loans $ 14,097 $ 13,824
Average Earning Assets $ 16,020 $ 15,655
Average Assets $ 16,834 $ 16,367
Average Equity $ 950 $ 892
Net Interest Margin 10.40% 9.24%(3)
Return on Average Assets (ROA) 1.56% 1.42%
Return on Average Equity (ROE) 27.66% 26.12%
Net Charge-Off Rate 6.04% 6.37%(4)
Net Charge-Offs $ 212.7 $ 255.6 (4)
Managed Loan Statistics (period end)
Reported Loans $ 4,748 $ 4,862
Securitized Loans 9,254 9,369
Total Loans $ 14,002 $ 14,231
Delinquency Rate (30+ days) 5.75% 6.20%
Number of Accounts (000's) 12,674 11,747
Total Assets $ 16,464 $ 16,433
Capital, Including Preferred Interests $ 1,085.2 $ 990.9
Capital to Managed Assets Ratio 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) Operating expenses include $6.5 million, $24.0 million, $32.4
million, $9.7 million and $8.6 million in compensation expense in Q3
98, Q2 98, Q1 98, Q4 97 and Q3 97, 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.
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY
97
(in millions, except per share data and as noted) Q3
Earnings (Managed Basis)
Net Interest Income $ 330.7
Non-Interest Income 218.5
Total Revenue 549.2
Provision for Loan Losses 243.6
Marketing Expenses 60.8
Operating Expenses 165.2(2)
Income Before Taxes 79.6
Tax Rate 38.0%
Net Income $ 49.3
Common Share Statistics
Basic EPS $ 0.75
Diluted EPS $ 0.73
Dividends Per Share $ 0.08
Book Value Per Share (period end) $ 12.84
Stock Price Per Share (period end) $ 45.75
Total Market Capitalization (period end) $ 3,001.0
Shares Outstanding (period end) 65.6
Shares Used to Compute Basic EPS 66.2
Shares Used to Compute Diluted EPS 67.6
Managed Loan Statistics (period avg.)
Average Loans $ 12,918
Average Earning Assets $ 14,608
Average Assets $ 15,618
Average Equity $ 841
Net Interest Margin 9.05%
Return on Average Assets (ROA) 1.26%
Return on Average Equity (ROE) 23.47%
Net Charge-Off Rate 6.66%
Net Charge-Offs $ 215.1
Managed Loan Statistics (period end)
Reported Loans $ 4,330
Securitized Loans 9,143
Total Loans $ 13,473
Delinquency Rate (30+ days) 6.36%
Number of Accounts (000's) 10,664
Total Assets $ 15,440
Capital, Including Preferred Interests $ 939.7
Capital to Managed Assets Ratio 6.09%
(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 Q3
98, Q2 98, Q1 98, Q4 97 and Q3 97, 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.
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Balance Sheets
(in thousands)(unaudited)
September 30
1998
Assets:
Cash and due from banks $ 14,974
Federal funds sold and resale agreements 365,000
Interest-bearing deposits at other banks 32,993
Cash and cash equivalents 412,967
Securities available for sale 1,296,959
Consumer loans 5,666,998
Less: Allowance for loan losses (231,000)
Net loans 5,435,998
Premises and equipment, net 228,550
Interest receivable 49,934
Accounts receivable from securitizations 921,602
Other 234,766
Total assets $ 8,580,776
Liabilities:
Interest-bearing deposits $ 1,598,335
Other borrowings 1,439,690
Senior notes 3,729,234
Deposit notes
Interest payable 80,373
Other 466,160
Total liabilities 7,313,792
Guaranteed Preferred Beneficial Interests
In Capital One Bank's Floating Rate Junior
Subordinated Capital Income Securities: 97,856
Stockholders' Equity:
Common stock 666
Paid-in capital, net 599,536
Retained earnings 643,855
Less:Treasury stock, at cost (74,929)
Total stockholders' equity 1,169,128
Total liabilities and stockholders' equity $ 8,580,776
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Balance Sheets
(in thousands)(unaudited)
June 30
1998
Assets:
Cash and due from banks $ 8,463
Federal funds sold and resale agreements
Interest-bearing deposits at other banks 30,926
Cash and cash equivalents 39,389
Securities available for sale 1,431,091
Consumer loans 5,140,340
Less: Allowance for loan losses (213,000)
Net loans 4,927,340
Premises and equipment, net 188,727
Interest receivable 45,866
Accounts receivable from securitizations 836,274
Other 182,751
Total assets $ 7,651,438
Liabilities:
Interest-bearing deposits $ 1,287,402
Other borrowings 959,480
Senior notes 3,709,404
Deposit notes 99,996
Interest payable 83,167
Other 345,037
Total liabilities 6,484,486
Guaranteed Preferred Beneficial Interests
In Capital One Bank's Floating Rate Junior
Subordinated Capital Income Securities: 97,791
Stockholders' Equity:
Common stock 666
Paid-in capital, net 561,518
Retained earnings 550,906
Less:Treasury stock, at cost (43,929)
Total stockholders' equity 1,069,161
Total liabilities and stockholders' equity $ 7,651,438
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Balance Sheets
(in thousands)(unaudited)
September 30
1997
Assets:
Cash and due from banks $ 57,772
Federal funds sold and resale agreements 152,575
Interest-bearing deposits at other banks 22,267
Cash and cash equivalents 232,614
Securities available for sale 1,033,946
Consumer loans 4,329,799
Less: Allowance for loan losses (147,000)
Net loans 4,182,799
Premises and equipment, net 180,740
Interest receivable 35,539
Accounts receivable from securitizations 539,925
Other 106,208
Total assets $ 6,311,771
Liabilities:
Interest-bearing deposits $ 1,050,014
Other borrowings 321,463
Senior notes 3,307,801
Deposit notes 299,996
Interest payable 65,798
Other 327,036
Total liabilities 5,372,108
Guaranteed Preferred Beneficial Interests
In Capital One Bank's Floating Rate Junior
Subordinated Capital Income Securities: 97,599
Stockholders' Equity:
Common stock 666
Paid-in capital, net 504,139
Retained earnings 373,921
Less: Treasury stock, at cost (36,662)
Total stockholders' equity 842,064
Total liabilities and stockholders' equity $ 6,311,771
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Statements of Income
(in thousands, except per share data)(unaudited)
Three Months Ended
September 30 June 30
1998 1998
Interest Income:
Consumer loans, including fees $ 259,339 $ 245,129
Federal funds sold and resale agreements 957 2,140
Other 22,813 24,169
Total interest income 283,109 271,438
Interest Expense:
Deposits 15,805 13,635
Other borrowings 24,752 20,375
Senior and deposit notes 65,498 67,704
Total interest expense 106,055 101,714
Net interest income 177,054 169,724
Provision for loan losses 67,569 59,013
Net interest income after
provision for loan losses 109,485 110,711
Non-Interest Income:
Servicing and securitizations 217,094 155,412
Service charges and other fees 146,648 153,170
Interchange 23,213 20,371
Total non-interest income 386,955 328,953
Non-Interest Expense:
Salaries and associate benefits 116,107 113,428
Marketing 126,481 85,811
Communications and data processing 38,415 34,840
Supplies and equipment 27,416 32,368
Occupancy 11,115 11,090
Other 63,993 54,299
Total non-interest expense 383,527 331,836
Income before income taxes 112,913 107,828
Income taxes 42,907 40,975
Net income $ 70,006 $ 66,853
Basic earnings per share $ 1.07 $ 1.02
Diluted earnings per share $ 1.00 $ 0.96
Dividends paid per share $ 0.08 $ 0.08
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Statements of Income
(in thousands, except per share data)(unaudited)
Three Months Ended
September 30
1997
Interest Income:
Consumer loans, including fees $ 153,377
Federal funds sold and resale agreements 3,753
Other 21,840
Total interest income 178,970
Interest Expense:
Deposits 9,052
Other borrowings 9,168
Senior and deposit notes 63,596
Total interest expense 81,816
Net interest income 97,154
Provision for loan losses 72,518
Net interest income after
provision for loan losses 24,636
Non-Interest Income:
Servicing and securitizations 180,348
Service charges and other fees 87,979
Interchange 12,606
Total non-interest income 280,933
Non-Interest Expense:
Salaries and associate benefits 73,214
Marketing 60,781
Communications and data processing 25,935
Supplies and equipment 21,721
Occupancy 8,198
Other 36,154
Total non-interest expense 226,003
Income before income taxes 79,566
Income taxes 30,236
Net income $ 49,330
Basic earnings per share $ 0.75
Diluted earnings per share $ 0.73
Dividends paid per share $ 0.08
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Statements of Income
(in thousands, except per share data)(unaudited)
Nine Months Ended
September 30
1998 1997
Interest Income:
Consumer loans, including fees $ 734,106 $ 443,374
Federal funds sold and resale agreements 8,175 12,030
Other 70,308 59,030
Total interest income 812,589 514,434
Interest Expense:
Deposits 43,578 28,124
Other borrowings 61,180 26,145
Senior and deposit notes 196,231 191,555
Total interest expense 300,989 245,824
Net interest income 511,600 268,610
Provision for loan losses 212,448 168,481
Net interest income after
provision for loan losses 299,152 100,129
Non-Interest Income:
Servicing and securitizations 541,161 498,943
Service charges and other fees 432,263 220,763
Interchange 58,383 33,326
Total non-interest income 1,031,807 753,032
Non-Interest Expense:
Salaries and associate benefits 337,488 213,137
Marketing 287,292 159,827
Communications and data processing 102,618 72,045
Supplies and equipment 82,399 58,200
Occupancy 32,849 23,387
Other 161,600 115,009
Total non-interest expense 1,004,246 641,605
Income before income taxes 326,713 211,556
Income taxes 124,151 80,392
Net income $ 202,562 $ 131,164
Basic earnings per share $ 3.09 $ 1.98
Diluted earnings per share $ 2.92 $ 1.94
Dividends paid per share $ 0.24 $ 0.24
CAPITAL ONE FINANCIAL CORPORATION
Statements of Average Balances, Income and Expense, Yields and Rates
(dollars in thousands)(unaudited)
Managed(1) Quarter Ended 9/30/98
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Consumer loans $ 15,746,091 $671,665 17.06%
Federal funds sold and
resale agreements 69,293 957 5.52
Other securities 1,556,874 22,813 5.86
Total earning assets $ 17,372,258 $695,435 16.01%
Interest-bearing liabilities:
Deposits $ 1,368,833 $ 15,805 4.62%
Other borrowings 1,495,731 24,752 6.62
Senior and deposit notes 3,819,061 65,498 6.86
Securitization liability 10,090,262 148,620 5.89
Total interest-bearing liabilities $ 16,773,887 $254,675 6.07%
Net interest spread 9.94%
Interest income to average earning assets 16.01%
Interest expense to average earning assets 5.86
Net interest margin 10.15%
(1) The information in this table reflects the adjustment to add back the
effect of securitized loans.
CAPITAL ONE FINANCIAL CORPORATION
Statements of Average Balances, Income and Expense, Yields and Rates
(dollars in thousands)(unaudited)
Managed(1) Quarter Ended 6/30/98
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Consumer loans $ 14,416,722 $607,247 16.85%
Federal funds sold and
resale agreements 151,275 2,140 5.66
Other securities 1,674,381 24,169 5.77
Total earning assets $ 16,242,378 $633,556 15.60%
Interest-bearing liabilities:
Deposits $ 1,193,508 $ 13,635 4.57%
Other borrowings 1,318,889 20,375 6.18
Senior and deposit notes 3,905,684 67,704 6.93
Securitization liability 9,190,007 132,337 5.76
Total interest-bearing liabilities $ 15,608,088 $234,051 6.00%
Net interest spread 9.60%
Interest income to average earning assets 15.60%
Interest expense to average earning assets 5.76
Net interest margin 9.84%
(1) The information in this table reflects the adjustment to add back the
effect of securitized loans.
CAPITAL ONE FINANCIAL CORPORATION
Statements of Average Balances, Income and Expense, Yields and Rates
(dollars in thousands)(unaudited)
Managed(1) Quarter Ended 9/30/97
Average Income/ Yield/
Balance Expense Rate
Earning assets:
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%
(1) The information in this table reflects the adjustment to add back the
effect of securitized loans.