EX-99.1 3 dex991.htm EXHIBIT 99.1 Prepared by R.R. Donnelley Financial -- Exhibit 99.1
Exhibit 99.1
 
[LOGO OF CAPITAL ONE]
2980 Fairview Park Drive, Suite 1400, Falls Church, VA 22042-4525
 
FOR IMMEDIATE RELEASE: July 16, 2002
Contact(s):   Paul Paquin
  
Tatiana Stead
                        V.P., Investor Relations    
  
Director, Corporate Media
                        703-205-1039
  
703-205-1070
 
Capital One Reports Record Second Quarter Results
Raises 2002 Earnings per Share Growth Target to 30%
 
Falls Church, Va. (July 16, 2002) - Capital One Financial Corporation (NYSE: COF) today announced its 20th consecutive quarter of record earnings, driven by a 42 percent year-over-year increase in total revenues. The company also announced that it was raising its target for earnings per share growth for 2002 to 30 percent, up from the previous guidance of 20 percent. The company now expects to report earnings per share of approximately $3.79 for the year ending December 31, 2002. Consistent with its historical financial performance since 1995, the company expects to report earnings per share growth in 2003 of 20 percent or more. The company expects to release specific guidance on its 2003 earnings in October 2002.
 
Earnings for the second quarter of 2002 were $213.1 million, or $0.92 per share, versus earnings of $155.3 million, or $0.70 per share, for the comparable period in the prior year. Earnings in the first quarter of 2002 were $188.0 million, or $0.83 per share.
 
Capital One also announced that following a routine regulatory review in connection with a pending application and the normal examination cycle, the company and its subsidiaries, Capital One Bank and Capital One, F.S.B., expect to enter into an informal memorandum of understanding with bank regulators addressing certain regulatory matters as described below. The company's new earnings targets take into account the expected understandings with the regulatory authorities.
 
"Capital One's earnings power allowed us to increase our 2002 earnings per share growth target to 30 percent," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "The actions we have taken have strengthened our balance sheet with additional capital and loss allowances at our bank subsidiaries and will make us a stronger company as we position ourselves for future growth."

- more -

Capital One Reports Record Second Quarter Results
Page 2
 
The managed net charge-off rate increased to 4.36 percent for the second quarter of 2002 compared with 4.00 percent for the first quarter of 2002, consistent with the company’s expectations for increasing charge-offs for Capital One and the industry in 2002. The managed delinquency rate (30+ days) decreased to 4.54 percent as of June 30, 2002, compared with 4.80 percent as of March 31, 2002. The company further strengthened its balance sheet in the second quarter by increasing its allowance for loan losses by $247.0 million.
 
"Revenue grew at a 42 percent annualized rate in the second quarter, a testament to the power of our information based strategy to identify and meet customer needs," said Nigel W. Morris, Capital One's President and Chief Operating Officer. "I'm equally pleased that once again our credit risk management practices enabled us to achieve strong credit performance for the quarter."
 
Second quarter 2002 revenue, defined as managed net interest income and non-interest income, rose to $2.3 billion versus $2.1 billion in the first quarter of 2002. The company's managed consumer loan balances increased by $4.6 billion in the second quarter to $53.2 billion. In the second quarter, Capital One added 2.0 million net new accounts, bringing total accounts to 48.6 million. The company's managed revenue margin increased to 16.55 percent in the second quarter of 2002 from 16.47 percent in the first quarter of 2002.
 
The company also announced that, during the second quarter, it sold $1.0 billion of auto loans, with servicing retained by Capital One, and recorded a $17.3 million gain. The sale completely removes these loans from Capital One's managed consumer loan portfolio. Capital One plans to sell auto loans on an ongoing basis.
 
Marketing expense for the second quarter of 2002 was $320.4 million, down from $353.5 million in the first quarter of 2002. Other non-interest expenses (excluding marketing) for the second quarter of 2002 were $833.2 million versus $806.4 million for the first quarter of 2002. Annualized operating expenses per account decreased to $70 for the second quarter of 2002 from $71 in the prior quarter and from $77 in the second quarter of last year.
 
Bank regulatory authorities have recently completed a routine review of Capital One Bank and Capital One, F.S.B. in connection with a pending application and the normal examination cycle. Regulators have informed the company that they intend to request the company, Capital One Bank and Capital One, F.S.B., to enter into an informal memorandum of understanding with respect to capital, allowance for loan losses and other regulatory requirements. Further details regarding the expected memorandum of understanding and the company's business outlook can be found in Capital One's

Capital One Reports Record Second Quarter Results
Page 3
 
report on Form 8-K filed today with the Securities and Exchange Commission and available on the company's website (http://www.capitalone.com).
 
The company cautioned that its current expectations for 2002 earnings and future growth are forward looking statements and actual results could differ materially from current expectations due to a number of factors, including: competition in the credit card industry; the actual account and balance growth achieved by the company; the company's ability to access the capital markets at attractive rates and terms to fund its operations and future growth; and general economic conditions affecting consumer income and spending, which may affect consumer bankruptcies, defaults and charge-offs. A discussion of these and other factors can be found in Capital One's annual and other reports filed with the Securities and Exchange Commission, including, but not limited to, Capital One's report on Form 10-K for the year ended December 31, 2001.
 
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 48.6 million accounts and $53.2 billion in managed loans outstanding as of June 30, 2002. Capital One, a Fortune 500 company, is one of 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, financial information and a live Webcast of today's 5:00pm (EDT) analyst conference call is accessible on the Internet on Capital One's home page (http://www.capitalone.com). Choose "Investors" to access the Investor Center to view and download the earnings press release and other financial information.

 
CAPITAL ONE FINANCIAL CORPORATION (COF)
 
FINANCIAL & STATISTICAL SUMMARY
 
    
2002
Q2
     
2002
Q1
     
2001
Q4
     
2001
Q3
     
2001
Q2
  
    
(in millions, except per share data and as noted)
  
Earnings (Managed Basis)
                                             
Net Interest Income
   
$
1,185.2
 
   
$
1,120.9
 
   
$
982.9
 
   
$
926.7
 
   
$
823.7
 
Non-Interest Income
   
 
1,113.9
 
   
 
959.9
 
   
 
941.5
 
   
 
852.5
 
   
 
796.3
 
    
  
  
  
  
Total Revenue
   
 
2,299.0
 
   
 
2,080.7
 
   
 
1,924.5
 
   
 
1,779.2
 
   
 
1,620.0
 
Provision for Loan Losses
   
 
801.6
 
   
 
617.6
 
   
 
563.3
 
   
 
437.6
 
   
 
379.1
 
Marketing Expenses
   
 
320.4
 
   
 
353.5
 
   
 
301.2
 
   
 
281.9
 
   
 
268.7
 
Operating Expenses
   
 
833.2
 
   
 
806.4
 
   
 
773.4
 
   
 
793.0
(2)
   
 
721.6
 
    
  
  
  
  
Income Before Taxes
   
 
343.7
 
   
 
303.3
 
   
 
286.6
 
   
 
266.7
 
   
 
250.5
 
Tax Rate
   
 
38.0
%
   
 
38.0
%
   
 
38.0
%
   
 
38.0
%
   
 
38.0
%
Net Income
   
$
213.1
 
   
$
188.0
 
   
$
177.7
 
   
$
165.3
 
   
$
155.3
 
    
  
  
  
  
Common Share Statistics
                                             
Basic EPS
   
$
0.97
 
   
$
0.86
 
   
$
0.83
 
   
$
0.78
 
   
$
0.74
 
Diluted EPS
   
$
0.92
 
   
$
0.83
 
   
$
0.80
 
   
$
0.75
 
   
$
0.70
 
Dividends Per Share
   
$
0.03
 
   
$
0.03
 
   
$
0.03
 
   
$
0.03
 
   
$
0.03
 
Book Value Per Share (period end)
   
$
18.13
 
   
$
16.69
 
   
$
15.33
 
   
$
14.14
 
   
$
13.02
 
Stock Price Per Share (period end)
   
$
61.05
 
   
$
63.85
 
   
$
53.95
 
   
$
46.03
 
   
$
60.15
 
Total Market Capitalization (period end)
   
$
13,512.9
 
   
$
14,079.3
 
   
$
11,695.2
 
   
$
9,710.1
 
   
$
12,666.5
 
Shares Outstanding (period end)
   
 
221.3
 
   
 
220.5
 
   
 
216.8
 
   
 
211.0
 
   
 
210.6
 
Shares Used to Compute Basic EPS
   
 
220.0
 
   
 
217.5
 
   
 
214.7
 
   
 
210.8
 
   
 
209.1
 
Shares Used to Compute Diluted EPS
   
 
231.7
 
   
 
226.6
 
   
 
223.4
 
   
 
219.9
 
   
 
221.2
 
    
  
  
  
  
Managed Loan Statistics (period avg.)
                                             
Average Loans
   
$
51,343
 
   
$
46,688
 
   
$
41,352
 
   
$
37,017
 
   
$
33,440
 
Average Earning Assets
   
$
55,559
 
   
$
50,538
 
   
$
45,295
 
   
$
39,994
 
   
$
36,180
 
Average Assets
   
$
59,989
 
   
$
54,258
 
   
$
48,906
 
   
$
43,363
 
   
$
38,820
 
Average Equity
   
$
4,021
 
   
$
3,572
 
   
$
3,223
 
   
$
2,935
 
   
$
2,608
 
Net Interest Margin
   
 
8.53
%
   
 
8.87
%
   
 
8.68
%
   
 
9.27
%
   
 
9.11
%
Revenue Margin
   
 
16.55
%
   
 
16.47
%
   
 
17.00
%
   
 
17.79
%
   
 
17.91
%
Risk Adjusted Margin(1)
   
 
12.53
%
   
 
12.78
%
   
 
12.96
%
   
 
14.17
%
   
 
14.23
%
Return on Average Assets (ROA)
   
 
1.42
%
   
 
1.39
%
   
 
1.45
%
   
 
1.53
%
   
 
1.60
%
Return on Average Equity (ROE)
   
 
21.20
%
   
 
21.06
%
   
 
22.05
%
   
 
22.53
%
   
 
23.83
%
Net Charge-Off Rate
   
 
4.36
%
   
 
4.00
%
   
 
4.42
%
   
 
3.92
%
   
 
3.98
%
Net Charge-Offs
   
$
559.1
 
   
$
466.7
 
   
$
456.9
 
   
$
362.7
 
   
$
332.8
 
Cost Per Account (in dollars)
   
$
69.99
 
   
$
71.33
 
   
$
73.69
 
   
$
81.03
 
   
$
77.38
 
    
  
  
  
  
Managed Loan Statistics (period end)
                                             
Reported Loans
   
$
24,965
 
   
$
24,428
 
   
$
20,921
 
   
$
17,480
 
   
$
16,327
 
Off-Balance Sheet Loans
   
 
28,243
 
   
 
24,136
 
   
 
24,343
 
   
 
21,009
 
   
 
18,956
 
    
  
  
  
  
Managed Loans
   
$
53,208
 
   
$
48,564
 
   
$
45,264
 
   
$
38,489
 
   
$
35,283
 
Delinquency Rate (30+ days)
   
 
4.54
%
   
 
4.80
%
   
 
4.95
%
   
 
5.20
%
   
 
4.92
%
Number of Accounts (000’s)
   
 
48,612
 
   
 
46,623
 
   
 
43,815
 
   
 
40,145
 
   
 
38,146
 
Total Assets
   
$
62,022
 
   
$
55,381
 
   
$
52,506
 
   
$
44,497
 
   
$
40,587
 
Capital(3)
   
$
4,823.6
 
   
$
3,778.4
 
   
$
3,422.2
 
   
$
3,081.9
 
   
$
2,840.1
 
Capital to Managed Assets Ratio
   
 
7.78
%
   
 
6.82
%
   
 
6.52
%
   
 
6.93
%
   
 
7.00
%
    
  
  
  
  
(1)
 
Risk adjusted margin is total revenue less net charge-offs as a percentage of average earning assets.
(2)
 
Includes $38.8 million of one-time charges.
(3)
 
Includes preferred interests and mandatory convertible securities.

 
CAPITAL ONE FINANCIAL CORPORATION
 
CONSOLIDATED BALANCE SHEETS
(in thousands)(unaudited)
 
    
June 30
2002
     
Mar 31
2002
     
June 30
2001
  
Assets:
                           
Cash and due from banks
   
$
244,857
 
   
$
350,738
 
   
$
134,918
 
Federal funds sold and resale agreements
   
 
432,124
 
   
 
13,260
 
   
 
39,770
 
Interest-bearing deposits at other banks
   
 
448,363
 
   
 
105,063
 
   
 
62,050
 
    
  
  
Cash and cash equivalents
   
 
1,125,344
 
   
 
469,061
 
   
 
236,738
 
Securities available for sale
   
 
4,538,223
 
   
 
3,175,366
 
   
 
2,554,967
 
Consumer loans
   
 
24,965,210
 
   
 
24,427,642
 
   
 
16,326,617
 
Less: Allowance for loan losses
   
 
(1,237,000
)
   
 
(990,000
)
   
 
(647,000
)
    
  
  
Net loans
   
 
23,728,210
 
   
 
23,437,642
 
   
 
15,679,617
 
Accounts receivable from securitizations
   
 
2,417,775
 
   
 
2,218,472
 
   
 
1,708,055
 
Premises and equipment, net
   
 
808,972
 
   
 
789,572
 
   
 
729,525
 
Interest receivable
   
 
151,828
 
   
 
148,547
 
   
 
79,089
 
Other
   
 
1,064,127
 
   
 
1,026,051
 
   
 
672,338
 
    
  
  
Total assets
   
$
33,834,479
 
   
$
31,264,711
 
   
$
21,660,329
 
    
  
  
Liabilities:
                           
Interest-bearing deposits
   
$
16,014,392
 
   
$
14,633,871
 
   
$
10,029,736
 
Senior notes
   
 
6,069,719
 
   
 
5,422,896
 
   
 
4,757,481
 
Other borrowings
   
 
4,590,716
 
   
 
4,879,427
 
   
 
2,320,734
 
Interest payable
   
 
235,108
 
   
 
173,659
 
   
 
151,429
 
Other
   
 
2,910,638
 
   
 
2,475,226
 
   
 
1,659,412
 
    
  
  
Total liabilities
   
 
29,820,573
 
   
 
27,585,079
 
   
 
18,918,792
 
Stockholders’ Equity:
                           
Common stock
   
 
2,222
 
   
 
2,214
 
   
 
2,118
 
Paid-in capital, net
   
 
1,600,489
 
   
 
1,532,034
 
   
 
1,089,582
 
Retained earnings and cumulative other comprehensive income
   
 
2,446,147
 
   
 
2,180,336
 
   
 
1,695,468
 
Less: Treasury stock, at cost
   
 
(34,952
)
   
 
(34,952
)
   
 
(45,631
)
    
  
  
Total stockholders’ equity
   
 
4,013,906
 
   
 
3,679,632
 
   
 
2,741,537
 
    
  
  
Total liabilities and stockholders’ equity
   
$
33,834,479
 
   
$
31,264,711
 
   
$
21,660,329
 
    
  
  

 
CAPITAL ONE FINANCIAL CORPORATION
 
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)(unaudited)
 
    
Three Months Ended
   
Six Months Ended
    
June 30
2002
   
Mar 31
2002
   
June 30
2001
   
June 30
2002
   
June 30
2001
Interest Income:
                                   
Consumer loans, including fees
   
$
925,257
   
$
836,955
   
$
620,866
   
$
1,762,212
   
$
1,238,755
Securities available for sale
   
 
45,815
   
 
42,344
   
 
33,942
   
 
88,159
   
 
62,176
Other
   
 
28,754
   
 
27,931
   
 
2,408
   
 
56,685
   
 
6,158
    
  
  
  
  
Total interest income
   
 
999,826
   
 
907,230
   
 
657,216
   
 
1,907,056
   
 
1,307,089
Interest Expense:
                                   
Deposits
   
 
203,112
   
 
178,163
   
 
155,479
   
 
381,275
   
 
302,440
Senior notes
   
 
109,687
   
 
93,904
   
 
87,842
   
 
203,591
   
 
171,135
Other Borrowings
   
 
57,450
   
 
51,056
   
 
43,825
   
 
108,506
   
 
87,725
    
  
  
  
  
Total interest expense
   
 
370,249
   
 
323,123
   
 
287,146
   
 
693,372
   
 
561,300
    
  
  
  
  
Net interest income
   
 
629,577
   
 
584,107
   
 
370,070
   
 
1,213,684
   
 
745,789
Provision for loan losses
   
 
501,780
   
 
347,212
   
 
202,900
   
 
848,992
   
 
453,514
    
  
  
  
  
Net interest income after provision for loan losses
   
 
127,797
   
 
236,895
   
 
167,170
   
 
364,692
   
 
292,275
Non-Interest Income:
                                   
Servicing and securitizations
   
 
718,347
   
 
626,147
   
 
594,584
   
 
1,344,494
   
 
1,148,121
Service charges and other customer-related fees
   
 
513,886
   
 
502,007
   
 
385,419
   
 
1,015,893
   
 
781,807
Interchange
   
 
137,353
   
 
98,096
   
 
93,673
   
 
235,449
   
 
168,524
    
  
  
  
  
Total non-interest income
   
 
1,369,586
   
 
1,226,250
   
 
1,073,676
   
 
2,595,836
   
 
2,098,452
Non-Interest Expense:
                                   
Salaries and associate benefits
   
 
379,363
   
 
380,735
   
 
342,076
   
 
760,098
   
 
667,792
Marketing
   
 
320,446
   
 
353,536
   
 
268,709
   
 
673,982
   
 
499,909
Communications and data processing
   
 
101,601
   
 
92,193
   
 
72,906
   
 
193,794
   
 
148,198
Supplies and equipment
   
 
88,844
   
 
84,507
   
 
74,780
   
 
173,351
   
 
148,383
Occupancy
   
 
38,275
   
 
33,381
   
 
31,349
   
 
71,656
   
 
62,651
Other
   
 
225,117
   
 
215,543
   
 
200,496
   
 
440,660
   
 
381,630
    
  
  
  
  
Total non-interest expense
   
 
1,153,646
   
 
1,159,895
   
 
990,316
   
 
2,313,541
   
 
1,908,563
    
  
  
  
  
Income before income taxes
   
 
343,737
   
 
303,250
   
 
250,530
   
 
646,987
   
 
482,164
Income taxes
   
 
130,620
   
 
115,235
   
 
95,203
   
 
245,855
   
 
183,224
    
  
  
  
  
Net income
   
$
213,117
   
$
188,015
   
$
155,327
   
$
401,132
   
$
298,940
    
  
  
  
  
Basic earnings per share
   
$
0.97
   
$
0.86
   
$
0.74
   
$
1.83
   
$
1.44
    
  
  
  
  
Diluted earnings per share
   
$
0.92
   
$
0.83
   
$
0.70
   
$
1.75
   
$
1.36
    
  
  
  
  
Dividends paid per share
   
$
0.03
   
$
0.03
   
$
0.03
   
$
0.05
   
$
0.05
    
  
  
  
  

CAPITAL ONE FINANCIAL CORPORATION
 
STATEMENTS OF AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES
(dollars in thousands)(unaudited)
 
Managed(1)
                     
    
Quarter Ended 6/30/02
     
Quarter Ended 3/31/02
     
Quarter Ended 6/30//01
  
    
Average Balance
   
Income/
Expense
   
Yield/
Rate
     
Average Balance
   
Income/
Expense
   
Yield/
Rate
     
Average Balance
   
Income/
Expense
   
Yield/
Rate
  
Earning assets:
                                                               
Consumer loans
   
$
51,342,764
   
$
1,789,516
   
13.94
%
   
$
46,687,578
   
$
1,672,655
   
14.33
%
   
$
33,439,690
   
$
1,307,819
   
15.64
%
Securities available for sale
   
 
3,662,832
   
 
45,815
   
5.00
 
   
 
3,367,786
   
 
42,344
   
5.03
 
   
 
2,344,047
   
 
33,942
   
5.79
 
Other
   
 
553,595
   
 
2,110
   
1.52
 
   
 
482,290
   
 
2,358
   
1.96
 
   
 
396,659
   
 
2,408
   
2.43
 
    
  
  
  
  
  
  
  
  
Total earning assets
   
$
55,559,191
   
$
1,837,441
   
13.23
%
   
$
50,537,654
   
$
1,717,357
   
13.59
%
   
$
36,180,396
   
$
1,344,169
   
14.86
%
    
  
         
  
         
  
      
Interest-bearing liabilities:
                                                               
Deposits
   
$
15,276,514
   
$
203,112
   
5.32
%
   
$
13,505,586
   
$
178,163
   
5.28
%
   
$
9,685,882
   
$
155,479
   
6.42
%
Senior notes
   
 
5,959,240
   
 
109,687
   
7.36
 
   
 
5,429,992
   
 
93,904
   
6.92
 
   
 
4,899,045
   
 
87,842
   
7.17
 
Other borrowings
   
 
5,946,983
   
 
57,450
   
3.86
 
   
 
4,925,669
   
 
51,056
   
4.15
 
   
 
2,915,245
   
 
43,825
   
6.01
 
Securitization liability
   
 
25,965,894
   
 
282,041
   
4.34
 
   
 
24,262,546
   
 
273,366
   
4.51
 
   
 
16,741,276
   
 
233,322
   
5.57
 
    
  
  
  
  
  
  
  
  
Total interest-bearing liabilities
   
$
53,148,631
   
$
652,290
   
4.91
%
   
$
48,123,793
   
$
596,489
   
4.96
%
   
$
34,241,448
   
$
520,468
   
6.08
%
    
  
         
  
         
  
      
                  
                
                
Net interest spread
                 
8.32
%
                 
8.63
%
                 
8.78
%
                  
                
                
Interest income to average earning assets
                 
13.23
%
                 
13.59
%
                 
14.86
%
Interest expense to average earning assets
                 
4.70
 
                 
4.72
 
                 
5.75
 
                  
                
                
Net interest margin
                 
8.53
%
                 
8.87
%
                 
9.11
%
                  
                
                
(1)
 
The information in this table reflects the adjustment to add back the effect of securitized loans.