Capital One Reports Record Second Quarter Earnings
FALLS CHURCH, Va., July 16 /PRNewswire/ -- 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.
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.
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.
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY
(in millions, except per share data 98 98
and as noted) Q2 Q1
Earnings (Managed Basis)
Net Interest Income $ 399.5 $ 416.7
Non-Interest Income 253.2 220.7
Total Revenue 652.7 637.4
Provision for Loan Losses 213.1 242.5
Marketing Expenses 85.8 75.0
Operating Expenses 246.0(2) 213.9(2)
Income Before Taxes 107.8 106.0
Tax Rate 38.0% 38.0%
Net Income $ 66.9 $ 65.7
Common Share Statistics
Basic EPS $ 1.02 $ 1.00
Diluted EPS $ 0.96 $ 0.96
Dividends Per Share $ 0.08 $ 0.08
Book Value Per Share (period end) $ 16.31 $ 15.08
Stock Price Per Share (period end) $ 124.19 $ 78.88
Total Market Capitalization (period end) $ 8,139.0 $ 5,163.7
Shares Outstanding (period end) 65.5 65.5
Shares Used to Compute Basic EPS 65.5 65.4
Shares Used to Compute Diluted EPS 69.5 68.4
Managed Loan Statistics (period avg.)
Average Loans $ 14,417 $ 14,097
Average Earning Assets $ 16,242 $ 16,020
Average Assets $ 17,296 $ 16,834
Average Equity $ 1,037 $ 950
Net Interest Margin 9.84% 10.40%
Return on Average Assets (ROA) 1.55% 1.56%
Return on Average Equity (ROE) 25.78% 27.66%
Net Charge-Off Rate 5.91% 6.04%
Net Charge-Offs $ 213.0 $ 212.7
Managed Loan Statistics (period end)
Reported Loans $ 5,140 $ 4,748
Securitized Loans 9,829 9,254
Total Loans $ 14,969 $ 14,002
Delinquency Rate (30+ days) 5.14%(5) 5.75%(5)
Number of Accounts (000's) 13,588 12,674
Total Assets $ 17,462 $ 16,464
Capital, Including Preferred Interests $ 1,167.0 $ 1,085.2
Capital to Managed Assets Ratio 6.68% 6.59%
Percent Introductory Rate Loans 20% 22%
(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 Q2 98 and Q1 98, 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.
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY
(in millions, except per share data 97 97
and as noted) Q4 Q3
Earnings (Managed Basis)
Net Interest Income $ 361.6 $ 330.7
Non-Interest Income 230.4 218.5
Total Revenue 592.0(1) 549.2
Provision for Loan Losses 255.7 243.6
Marketing Expenses 65.0 60.8
Operating Expenses 177.4 165.2
Income Before Taxes 93.9 79.6
Tax Rate 38.0% 38.0%
Net Income $ 58.2 $ 49.3
Common Share Statistics
Basic EPS $ 0.89 $ 0.75
Diluted EPS $ 0.86 $ 0.73
Dividends Per Share $ 0.08 $ 0.08
Book Value Per Share (period end) $ 13.66 $ 12.84
Stock Price Per Share (period end) $ 54.19 $ 45.75
Total Market Capitalization (period
end) $ 3,542.2 $ 3,001.0
Shares Outstanding (period end) 65.4 65.6
Shares Used to Compute Basic EPS 65.5 66.2
Shares Used to Compute Diluted EPS 67.5 67.6
Managed Loan Statistics (period avg.)
Average Loans $ 13,824 $ 12,918
Average Earning Assets $ 15,655 $ 14,608
Average Assets $ 16,367 $ 15,618
Average Equity $ 892 $ 841
Net Interest Margin 9.24%(3) 9.05%
Return on Average Assets (ROA) 1.42% 1.26%
Return on Average Equity (ROE) 26.12% 23.47%
Net Charge-Off Rate 6.37%(4) 6.66%
Net Charge-Offs $ 255.6(4) $ 215.1
Managed Loan Statistics (period end)
Reported Loans $ 4,862 $ 4,330
Securitized Loans 9,369 9,143
Total Loans $ 14,231 $ 13,473
Delinquency Rate (30+ days) 6.20%(5) 6.36%
Number of Accounts (000's) 11,747 10,664
Total Assets $ 16,433 $ 15,440
Capital, Including Preferred
Interests $ 990.9 $ 939.7
Capital to Managed Assets Ratio 6.03% 6.09%
Percent Introductory Rate Loans 27% 26
(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 Q2 98 and Q1 98, 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.
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY
97
(in millions, except per share data and as noted) Q2
Earnings (Managed Basis)
Net Interest Income $ 296.3
Non-Interest Income 169.3
Total Revenue 465.6
Provision for Loan Losses 200.1
Marketing Expenses 45.0
Operating Expenses 157.1
Income Before Taxes 63.5
Tax Rate 38.0%
Net Income $ 39.4
Common Share Statistics
Basic EPS $ 0.59
Diluted EPS $ 0.58
Dividends Per Share $ 0.08
Book Value Per Share (period end) $ 12.35
Stock Price Per Share (period end) $ 37.75
Total Market Capitalization (period end) $ 2,509.8
Shares Outstanding (period end) 66.5
Shares Used to Compute Basic EPS 66.4
Shares Used to Compute Diluted EPS 67.6
Managed Loan Statistics (period avg.)
Average Loans $ 12,715
Average Earning Assets $ 14,278
Average Assets $ 15,272
Average Equity $ 798
Net Interest Margin 8.30%
Return on Average Assets (ROA) 1.03%
Return on Average Equity (ROE) 19.72%
Net Charge-Off Rate 6.38%
Net Charge-Offs $ 202.8
Managed Loan Statistics (period end)
Reported Loans $ 3,624
Securitized Loans 9,113
Total Loans $ 12,737
Delinquency Rate (30+ days) 6.33%
Number of Accounts (000's) 9,796
Total Assets $ 15,270
Capital, Including Preferred Interests $ 918.5
Capital to Managed Assets Ratio 6.01%
Percent Introductory Rate Loans 25%
(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 Q2 98 and Q1 98, 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.
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 547,485
Cumulative other comprehensive income 3,421
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)
March 31
1998
Assets:
Cash and due from banks $ 2,983
Federal funds sold and resale agreements 105,000
Interest-bearing deposits at other banks 34,077
Cash and cash equivalents 142,060
Securities available for sale 1,513,398
Consumer loans 4,748,186
Less: Allowance for loan losses (213,000)
Net loans 4,535,186
Premises and equipment, net 163,757
Interest receivable 44,213
Accounts receivable from securitizations 696,599
Other 128,689
Total assets $ 7,223,902
Liabilities:
Interest-bearing deposits $ 1,160,850
Other borrowings 723,614
Senior notes 3,464,176
Deposit notes 299,996
Interest payable 67,544
Other 422,480
Total liabilities 6,138,660
Guaranteed Preferred Beneficial Interests
In Capital One Bank's Floating Rate Junior
Subordinated Capital Income Securities: 97,727
Stockholders' Equity:
Common stock 666
Paid-in capital, net 543,179
Retained earnings 485,750
Cumulative other comprehensive income 2,325
Less: Treasury stock, at cost (44,405)
Total stockholders' equity 987,515
Total liabilities and stockholders'
equity $ 7,223,902
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Balance Sheets
(in thousands)(unaudited)
June 30
1997
Assets:
Cash and due from banks $ 136,112
Federal funds sold and resale agreements 295,507
Interest-bearing deposits at other banks 21,441
Cash and cash equivalents 453,060
Securities available for sale 1,142,328
Consumer loans 3,623,952
Less: Allowance for loan losses (118,500)
Net loans 3,505,452
Premises and equipment, net 181,078
Interest receivable 48,135
Accounts receivable from securitizations 729,238
Other 100,144
Total assets $ 6,159,435
Liabilities:
Interest-bearing deposits $ 869,801
Other borrowings 293,734
Senior notes 3,468,801
Deposit notes 299,996
Interest payable 72,261
Other 236,343
Total liabilities 5,240,936
Guaranteed Preferred Beneficial Interests
In Capital One Bank's Floating Rate Junior
Subordinated Capital Income Securities: 97,534
Stockholders' Equity:
Common stock 665
Paid-in capital, net 491,953
Retained earnings 327,896
Cumulative other comprehensive income 451
Less: Treasury stock, at cost
Total stockholders' equity 820,965
Total liabilities and stockholders'
equity $ 6,159,435
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Statements of Income
(in thousands, except per share data)(unaudited)
Three Months Ended
June 30 March 31
1998 1998
Interest Income:
Consumer loans, including fees $ 245,129 $ 229,638
Federal funds sold and resale agreements 2,140 5,078
Other 24,169 23,326
Total interest income 271,438 258,042
Interest Expense:
Deposits 13,635 14,138
Other borrowings 20,375 16,053
Senior and deposit notes 67,704 63,029
Total interest expense 101,714 93,220
Net interest income 169,724 164,822
Provision for loan losses 59,013 85,866
Net interest income after provision
for loan losses 110,711 78,956
Non-Interest Income:
Servicing and securitizations 155,412 168,655
Service charges 128,191 113,324
Interchange 20,371 14,799
Other 24,979 19,121
Total non-interest income 328,953 315,899
Non-Interest Expense:
Salaries and associate benefits 113,428 107,953
Marketing 85,811 75,000
Communications and data processing 34,840 29,363
Supplies and equipment 32,368 22,615
Occupancy 11,090 10,644
Other 54,299 43,308
Total non-interest expense 331,836 288,883
Income before income taxes 107,828 105,972
Income taxes 40,975 40,269
Net income $ 66,853 $ 65,703
Basic earnings per share $ 1.02 $ 1.00
Diluted earnings per share $ 0.96 $ 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
June 30
1997
Interest Income:
Consumer loans, including fees $ 143,485
Federal funds sold and resale agreements 2,613
Other 20,772
Total interest income 166,870
Interest Expense:
Deposits 8,635
Other borrowings 10,453
Senior and deposit notes 64,523
Total interest expense 83,611
Net interest income 83,259
Provision for loan losses 46,776
Net interest income after provision for loan losses 36,483
Non-Interest Income:
Servicing and securitizations 148,562
Service charges 57,278
Interchange 11,405
Other 11,797
Total non-interest income 229,042
Non-Interest Expense:
Salaries and associate benefits 69,287
Marketing 44,995
Communications and data processing 24,320
Supplies and equipment 18,406
Occupancy 7,388
Other 37,659
Total non-interest expense 202,055
Income before income taxes 63,470
Income taxes 24,118
Net income $ 39,352
Basic earnings per share $ 0.59
Diluted earnings per share $ 0.58
Dividends paid per share $ 0.08
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Statements of Income
(in thousands, except per share data)(unaudited)
Six Months Ended
June 30 June 30
1998 1997
Interest Income:
Consumer loans, including fees $ 474,767 $ 289,997
Federal funds sold and resale agreements 7,218 8,277
Other 47,495 37,190
Total interest income 529,480 335,464
Interest Expense:
Deposits 27,773 19,072
Other borrowings 36,428 16,977
Senior and deposit notes 130,733 127,959
Total interest expense 194,934 164,008
Net interest income 334,546 171,456
Provision for loan losses 144,879 95,963
Net interest income after provision
for loan losses 189,667 75,493
Non-Interest Income:
Servicing and securitizations 324,067 318,595
Service charges 241,515 110,926
Interchange 35,170 20,720
Other 44,100 21,858
Total non-interest income 644,852 472,099
Non-Interest Expense:
Salaries and associate benefits 221,381 139,923
Marketing 160,811 99,046
Communications and data processing 64,203 46,110
Supplies and equipment 54,983 36,479
Occupancy 21,734 15,189
Other 97,607 78,855
Total non-interest expense 620,719 415,602
Income before income taxes 213,800 131,990
Income taxes 81,244 50,156
Net income $ 132,556 $ 81,834
Basic earnings per share $ 2.02 $ 1.23
Diluted earnings per share $ 1.92 $ 1.21
Dividends paid per share $ 0.16 $ 0.16
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 3/31/98
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Consumer loans $ 14,097,475 $ 615,053 17.45%
Federal funds sold and
resale agreements 362,680 5,078 5.60
Other securities 1,559,732 23,326 5.98
Total earning assets $ 16,019,887 $ 643,457 16.06%
Interest-bearing liabilities:
Deposits $ 1,266,064 $ 14,138 4.47%
Other borrowings 1,077,082 16,053 5.96
Senior and deposit notes 3,683,113 63,029 6.85
Securitization liability 9,297,590 133,526 5.74
Total interest-bearing
liabilities $ 15,323,849 $ 226,746 5.92%
Net interest spread 10.14%
Interest income to average earning assets 16.06%
Interest expense to average earning assets 5.66
Net interest margin 10.40%
(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 6/30/97
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Consumer loans $ 12,714,870 $ 482,088 15.17%
Federal funds sold and
resale agreements 187,650 2,613 5.57
Other securities 1,375,364 20,772 6.04
Total earning assets $ 14,277,884 $ 505,473 14.16%
Interest-bearing liabilities:
Deposits $ 817,936 $ 8,635 4.22%
Other borrowings 694,814 10,453 6.02
Senior and deposit notes 3,768,797 64,523 6.85
Securitization liability 8,713,517 125,531 5.76
Total interest-bearing
liabilities $ 13,995,064 $ 209,142 5.98%
Net interest spread 8.18%
Interest income to average earning assets 14.16%
Interest expense to average earning assets 5.86
Net interest margin 8.30%
(1) The information in this table reflects the adjustment to add back the
effect of securitized loans.