Prospectus Supplement
(To Prospectus dated August 13, 1999)
6,500,000 Shares
CAPITAL ONE FINANCIAL CORPORATION
Common Stock
(par value $0.01 per share)
We are offering all of the 6,500,000 shares of common stock offered by this
prospectus supplement and will receive all of the proceeds of this offering.
Our common stock is traded on the New York Stock Exchange under the symbol
"COF". On January 18, 2001, the last sale price of the common stock, as
reported on the New York Stock Exchange, was $63.50 per share.
Investing in our common stock involves risks. See "Risk Factors" on page S-6
for a discussion of certain factors that should be considered.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
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Price to Underwriting Proceeds to
Public Discount (1) Capital One (2)
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Per Share $ 62.00 $ 0.85 $ 61.15
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Total (3) $403,000,000 $5,525,000 $397,475,000
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(1) We have agreed to indemnify the underwriter against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting expenses payable by Capital One, estimated to be $200,000.
(3) We have granted the underwriter an option, exercisable within 30 days after
the date of this prospectus supplement, to purchase up to an additional
975,000 shares of common stock, on the same terms as set forth above,
solely to cover over-allotments, if any. If such option is exercised in
full, the total Price to Public, Underwriting Discount and Proceeds to
Capital One will be $ 463,450,000, $6,353,750 and $457,096,250,
respectively. See "Underwriting."
The securities offered by this prospectus supplement are not savings accounts,
deposits or other obligations of any bank and are not insured by the Federal
Deposit Insurance Corporation.
The shares of common stock offered by this prospectus supplement are offered by
the underwriter, subject to prior sale, when, as and if received and accepted
by the underwriter and subject to approval of certain legal matters by Simpson
Thacher & Bartlett, counsel for the underwriter. It is expected that delivery
of the shares of common stock offered hereby will be made against payment
therefor on or about January 23, 2001 at the offices of J.P. Morgan Securities
Inc., 60 Wall Street, New York, New York.
JP Morgan
January 18, 2001
Important Notice about Information Presented in this
Prospectus Supplement and the Accompanying Prospectus
We provide information to you about the common stock in two separate documents:
(a) the accompanying prospectus, which provides general information, some of
which may not apply to the common stock and (b) this prospectus supplement,
which describes the specific details regarding this offering. If information in
this prospectus supplement is inconsistent with the prospectus, you should rely
on this prospectus supplement.
You should also read and consider the information in the documents we have
referred you to in "Where You Can Find More Information" on page S-10.
We include cross-references in this prospectus supplement and the accompanying
prospectus to captions in these materials where you can find additional related
discussions. The table of contents in this prospectus supplement provides the
pages on which these captions are located.
In this prospectus supplement, the terms "Capital One", "we", "us" and "our"
refer to Capital One Financial Corporation.
Except as otherwise indicated, the information in this prospectus supplement
assumes no exercise of the underwriter's over-allotment option to purchase
additional shares of common stock.
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You should rely only on the information incorporated by reference or provided
in this prospectus supplement and the accompanying prospectus. We have not, and
the underwriter has not, authorized anyone to provide you with different
information. If anyone provides you with different or inconsistent information,
you should not rely on it. We are not, and the underwriter is not, making an
offer of these securities in any state where the offer is not permitted. You
should not assume that the information in this prospectus supplement and the
accompanying prospectus is accurate as of any date other than the date on the
front of those documents.
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Table of Contents
Page
----
Prospectus Supplement
Forward-Looking Statements........................................................... S-4
The Company.......................................................................... S-4
Recent Developments.................................................................. S-5
Risk Factors......................................................................... S-6
Use of Proceeds...................................................................... S-6
Capitalization....................................................................... S-7
Market Price of Common Stock......................................................... S-8
Dividend Limitations................................................................. S-8
Underwriting......................................................................... S-9
Where You Can Find More Information.................................................. S-10
Legal Matters........................................................................ S-11
Prospectus
About This Prospectus................................................................ 2
Where To Find More Information....................................................... 2
Incorporation of Certain Information by Reference.................................... 2
Capital One.......................................................................... 3
Use of Proceeds...................................................................... 5
Financial Ratios..................................................................... 5
Supervision, Regulation And Other Matters............................................ 5
Description of Debt Securities....................................................... 11
Description of Preferred Stock....................................................... 21
Description of Common Stock.......................................................... 24
Plan of Distribution................................................................. 29
Validity of Securities............................................................... 30
Experts.............................................................................. 30
S-3
Forward-Looking Statements
This prospectus supplement and the accompanying prospectus contain (or
incorporate by reference) forward-looking statements. Forward-looking
statements include information relating to growth in earnings per share, return
on equity, growth in managed loans outstanding and customer accounts, net
interest margins, funding costs, operations costs and employment growth,
marketing expense, delinquencies and charge-offs. Forward-looking statements
also include statements using words such as "expect", "anticipate", "intent",
"plan", "believe", "estimate" or similar expressions. We have based these
forward-looking statements on our current plans, estimates and projections, and
you should not unduly rely on them.
Numerous factors could cause our actual results to differ materially from those
described in forward-looking statements, including, among other things:
. continued intense competition from numerous providers of products and
services which compete with our businesses;
. an increase in credit losses (including increases due to worsening of
economic conditions);
. our ability to continue to securitize our credit cards and consumer
loans and to otherwise access the capital markets at attractive rates
and terms to fund our operations and future growth;
. losses associated with new products or services or expansion
internationally;
. our ability 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 reports we file with the
Securities and Exchange Commission, including, but not limited to,
factors set forth under the caption "Risk Factors" in our Annual Report
on Form 10-K for the year ended December 31, 1999, as amended by Forms
10-K/A-1 and 10-K/A-2.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
You should carefully consider the factors discussed above in evaluating these
forward-looking statements.
The Company
Capital One Financial Corporation is a holding company, incorporated in
Delaware on July 21, 1994, whose subsidiaries provide a variety of products and
services to consumers using its proprietary information-based strategy. Our
principal subsidiary, Capital One Bank (the "Bank"), a limited purpose Virginia
state chartered credit card bank, offers credit card products. Capital One,
F.S.B. (the "Savings Bank"), a federally chartered savings bank, offers
consumer lending and deposit products. Our principal executive office is
located at 2980 Fairview Park Drive, Suite 1300, Falls Church, Virginia 22042-
4525 (telephone number: (703) 205-1000).
S-4
Our predecessor commenced operations in 1953, the same year as the formation of
what is now MasterCard International, and is one of the oldest continually
operating bank card issuers in the United States. We are one of the largest
issuers of MasterCard(R)* and Visa(R)* credit cards in the world. The success
of our information-based strategy, which we initiated in 1988, in addition to
credit card industry dynamics, has led to our growth in managed credit card
loans and accounts. As of December 31, 2000, we had total assets of $18.9
billion, total liabilities of $16.9 billion and total stockholders equity of
$2.0 billion.
Recent Developments
On January 16, 2001, Capital One announced that it experienced 30% earnings per
share growth for the year 2000. Earnings were $469.6 million, or $2.24 per
share, in 2000 compared with earnings of $363.1 million, or $1.72 per share, in
1999. For the fourth quarter of 2000, earnings were $128.3 million, or $.61 per
share, versus earnings of $97.9 million, or $.47 per share, for the comparable
period in the prior year.
During the fourth quarter of 2000, Capital One added 4.3 million net new
accounts, bringing total accounts to 33.8 million. Managed consumer loan
balances increased by $5.4 billion during the fourth quarter of 2000 to $29.5
billion. Total managed revenue increased during the quarter at a 40% annualized
rate, compared with 40% in the third quarter of 2000 and 20% in the fourth
quarter of 1999. The managed net charge-off ratio was 3.98% for the three
months ended December 31, 2000, as compared to 3.80% for the three months ended
September 30, 2000 and 3.86% for the three months ended December 31, 1999. In
addition, Capital One's allowance for loan losses increased by $70 million
during the fourth quarter to $527 million, or 3.49% of reported consumer loans
as of December 31, 2000. The allowance for loan losses was $457 million at
September 30, 2000, or 3.71% of reported consumer loans, and $342 million at
December 31, 1999, or 3.45% of reported consumer loans.
Cost per account declined in the fourth quarter of 2000 to $78 from $83 in the
third quarter of 2000 and $86 in the fourth quarter of 1999. Contributing to
the growth in accounts and managed loans during the quarter was an increase in
marketing expense to $259 million compared to $233 million in the third quarter
of 2000 and $202 million in the fourth quarter of 1999. Online account
originations and online account servicing for the full year surpassed Capital
One's previously stated goals of one million originations and two million
accounts serviced online.
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*MasterCard and Visa are registered trademarks of MasterCard International
Incorporated and Visa USA, Inc., respectively.
S-5
Risk Factors
Investing in our common stock involves risks, including risks relating to
competition in our markets, fluctuations of our accounts and loan balances, our
ability to sustain and manage our growth, our access to capital on terms
acceptable to us, credit losses, economic downturns, interest rate fluctuations
and regulatory and legislative changes. In order to better understand the risks
involved in an investment in our common stock, please carefully read the risks
described in the documents incorporated by reference into this prospectus
supplement and the accompanying prospectus, including those set forth under the
caption "Risk Factors" in our Annual Report on Form 10-K for the year ended
December 31, 1999, as amended by Forms 10-K/A-1 and 10-K/A-2, before deciding
whether to purchase any of the common stock.
Use of Proceeds
We estimate that the net proceeds from the sale of common stock offered by this
prospectus supplement will be approximately $397,475,000, or approximately
$457,096,250 if the underwriter's over-allotment option is exercised in full,
before deducting estimated offering expenses.
We intend to use the net proceeds from this offering for general corporate
purposes, which may include the reduction of short-term debt, capitalization of
anticipated asset growth, possible acquisitions, investments in, or extensions
of credit to, our subsidiaries and investments in securities.
S-6
Capitalization
The following table sets forth our consolidated capitalization at December 31,
2000 on an actual basis and as adjusted to give effect to the issuance and sale
of 6,500,000 shares of common stock offered by this prospectus supplement. The
table should be read in conjunction with Capital One's consolidated financial
statements and the accompanying notes incorporated by reference in this
prospectus supplement.
December 31, 2000
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Actual As Adjusted
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(unaudited, in
thousands)
Debt
Interest-bearing deposits................................ $ 8,379,025 $ 8,379,025
Other borrowings......................................... 2,925,938 2,925,938
Senior notes............................................. 4,050,597 4,050,597
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Total Debt........................................... 15,355,560 15,355,560
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Stockholders' Equity
Preferred stock, par value $.01 per share; authorized
50,000 shares, none issued or outstanding
Common stock, par value $.01 per share; authorized
1,000,000,000 shares, and 199,670,421 shares issued..... 1,997 2,062
Paid-in-capital, net..................................... 575,179 972,589
Retained earnings and cumulative other comprehensive
income.................................................. 1,474,024 1,474,024
Less: Treasury stock, at cost; 2,301,476 shares........ (88,686) (88,686)
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Total Stockholders' Equity........................... 1,962,514 2,359,989
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Total Capitalization................................. $17,318,074 $17,715,549
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S-7
Market Price of Common Stock
Our common stock is listed on the New York Stock Exchange under the symbol
"COF" and is included in the Standard & Poor's 500 Index. As of December 31,
2000, there were 197,368,945 shares of common stock outstanding. The following
table sets forth the high and low sales price per share of the common stock for
the quarters indicated. The prices in the table below have been adjusted to
reflect the three-for-one split of Capital One's common stock effected on June
1, 1999.
High Low
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2000
Fourth quarter.................................................. $73.250 $45.875
Third quarter................................................... 71.750 44.625
Second quarter.................................................. 53.750 39.375
First quarter................................................... 48.813 32.063
1999
Fourth quarter.................................................. $54.875 $35.875
Third quarter................................................... 57.813 35.813
Second quarter.................................................. 60.250 46.063
First quarter................................................... 51.484 36.375
1998
Fourth quarter.................................................. $41.812 $17.250
Third quarter................................................... 43.312 27.672
Second quarter.................................................. 41.797 27.437
First quarter................................................... 27.293 16.855
Dividend Limitations
We have paid dividends on our common stock of 2.6667 cents per share, as
adjusted for our three-for-one common stock split on June 1, 1999, each quarter
since we became an independent company on February 28, 1995. The payment of
dividends in the future, and the amount of such dividends, if any, will be at
the discretion of our Board of Directors. The principal source of funds for
dividends on our common stock is dividends from our direct and indirect
subsidiaries. There are various federal and Virginia law requirements that
affect the extent to which some of our subsidiaries, including the Bank and the
Savings Bank, can finance or otherwise supply funds to us through dividends,
loans or otherwise. These federal and Virginia law requirements are described
in the prospectus under the caption "Supervision, Regulation and Other
Matters--Dividends and Transfers of Funds". The payment of dividends on our
common stock may be limited in the future by the terms of any preferred stock
we issue.
S-8
Underwriting
J.P. Morgan Securities Inc. has agreed, subject to the terms and conditions set
forth in the underwriting agreement between us and J.P. Morgan Securities Inc.,
as underwriter, to purchase from us, and we have agreed to sell to the
underwriter, 6,500,000 shares of our common stock.
The nature of the underwriter's obligation under the underwriting agreement is
such that all of the common stock being offered, excluding shares covered by
the over-allotment option granted to the underwriter, must be purchased if any
are purchased. All shares of common stock offered by this prospectus supplement
will include the attached rights to purchase our junior preferred stock that
are described in the accompanying prospectus.
The underwriter proposes initially to offer the common stock directly to the
public at the public offering price set forth on the cover page of this
prospectus supplement and to certain dealers at such price less a concession
not in excess of $0.51 per share. The underwriter may allow, and such dealers
may reallow, a concession not in excess of $0.10 per share to certain other
dealers. After the shares are released for sale to the public, the offering
price and such concessions may be changed.
We have granted the underwriter an option, exercisable for 30 days after the
date of this prospectus supplement, to purchase up to 975,000 additional shares
of common stock at the same price per share to be paid by the underwriter for
the other shares offered by this prospectus supplement. The underwriter may
exercise its option only to cover over-allotments, if any, made in connection
with the distribution of the common stock offered by this prospectus
supplement. If the option is exercised in full, we will receive aggregate
proceeds of $457,096,250, before expenses.
We estimate the expenses we will pay in connection with this offering are
approximately $200,000.
We have agreed to indemnify the underwriter against certain liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments the underwriter may be required to make for those liabilities.
In connection with this offering, the underwriter may engage in transactions
that stabilize, maintain or otherwise affect the price of the common stock.
Specifically, the underwriter may over-allot in connection with the offering,
creating a short position. In addition, the underwriter may bid for, and
purchase, shares of the common stock in the open market to cover short
positions or to stabilize the price of the common stock. Finally, the
underwriter may reclaim selling concessions allowed for distributing the common
stock in the offering, if the underwriter repurchases previously distributed
common stock in transactions to cover short positions, in stabilization
transactions or otherwise. Any of these activities may
S-9
stabilize or maintain the market price of the common stock above independent
market levels. The underwriter is not required to engage in these activities,
and may end any of these activities at any time.
From time to time in the ordinary course of business, J.P. Morgan Securities
Inc. has provided, and may continue to provide, investment banking and other
financial services to us.
We have agreed not to offer or sell any common stock or options to purchase
common stock (other than the shares of common stock offered by this prospectus
supplement and issuances in connection with employee benefit, stock purchase or
dividend reinvestment plans) for a period of 90 days without the underwriter's
prior written consent.
Where You Can Find More Information
This prospectus supplement and the accompanying prospectus are part of a
registration statement we have filed with the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933 with respect to the
common stock being offered by this prospectus supplement. The registration
statement, including the attached exhibits and schedules, contains additional
relevant information about us and the securities described in the accompanying
prospectus and this prospectus supplement. The SEC's rules and regulations
allow us to omit certain information included in the registration statement
from the accompanying prospectus and this prospectus supplement. The
registration statement may be inspected by anyone without charge at the SEC's
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549.
In addition, we file reports, proxy statements and other information with the
SEC under the Securities Exchange Act of 1934. You may read and copy this
information at the following SEC locations:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Chicago, IL 60661-2551
You may also obtain copies of this information by mail from the SEC's Public
Reference Room, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at
rates determined by the SEC. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-732-0330. You can also
inspect reports, proxy statements and other information that we have filed
electronically with the SEC at the SEC's web site at http://www.sec.gov. These
documents can also be inspected at the offices of the New York Stock Exchange,
20 Broad Street, New York, New York 10005.
The SEC allows us to "incorporate by reference" information into the
accompanying prospectus and this prospectus supplement. This means that we can
disclose important information to you by referring you to another document
filed separately with the SEC. The information incorporated by reference is
considered to be a part of the accompanying prospectus and this prospectus
supplement. Information that we file later with the SEC and
S-10
that is incorporated by reference in this prospectus supplement will
automatically update and supercede information contained in this prospectus
supplement and the accompanying prospectus.
The following documents contain important information about us and our
financial condition. We have previously filed these documents with the SEC and
incorporate them by reference into this prospectus:
1.Our annual report on Form 10-K, as amended by Forms 10-K/A-1 and 10-K/A-2 for
the year ended December 31, 1999;
2.Our quarterly reports on Form 10-Q for the quarters ended March 31, 2000,
June 30, 2000 and September 30, 2000;
3.Our current reports on Form 8-K filed on January 18, 2000, February 23, 2000,
April 13, 2000, July 12, 2000, October 12, 2000, October 24, 2000 and
January 17, 2001; and
4.Our definitive proxy statement* filed on March 21, 2000.
We also incorporate by reference additional documents that we may file with the
SEC after the date of this prospectus supplement. These documents include
periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K.
Documents incorporated by reference are available from us without charge,
excluding any exhibits to those documents unless the exhibit is specifically
incorporated by reference as an exhibit in this prospectus supplement. You can
obtain documents incorporated by reference in this prospectus supplement by
requesting them in writing or by telephone from us at Capital One Financial
Corporation, Investor Relations Department, 2980 Fairview Park Drive, Falls
Church, Virginia 22042, telephone (703) 205-1000.
Legal Matters
John G. Finneran, Jr., Capital One's Executive Vice President, General Counsel
and Corporate Secretary, will pass upon the validity of the common stock
offered by this prospectus supplement for Capital One. As of December 31, 2000,
Mr. Finneran owned approximately 27,052 shares of common stock and held 397,452
vested options and 184,308 unvested options to purchase additional shares of
common stock issued under Capital One's 1994 Stock Incentive Plan. Simpson
Thacher & Bartlett, New York, New York will pass upon the validity of the
common stock offered by this prospectus supplement for J.P. Morgan Securities
Inc.
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* The information referred to in Item 402(a)(8) of Regulation S-K promulgated
by the SEC shall not be deemed to be specifically incorporated by reference
into the accompanying prospectus and this prospectus supplement.
S-11
[LOGO OF CAPITAL ONE]