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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the fiscal year ended December 31, 1999.
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED).
For the transition period from to
Commission File No. 1-13300
CAPITAL ONE FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 54-1719854
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
2980 Fairview Park Drive, Suite 1300
Falls Church, Virginia 22042-4525
(Address of Principal Executive (Zip Code)
Offices)
Registrant's telephone number, including area code: (703) 205-1000
Securities registered pursuant to section 12(b) of the act:
Name of Each Exchange on
Title of Each Class Which Registered
Common Stock, $.01 Par Value New York Stock Exchange
Preferred Stock Purchase Rights* New York Stock Exchange
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* Attached to each share of Common Stock is a Right to acquire 1/100th of a
share of the Registrant's Cumulative Participating Preferred Stock, par
value $.01 per share, which Rights are not presently exercisable.
Securities Registered Pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of the close of business on February 29, 2000.
Common Stock, $.01 Par Value: $7,263,238,371*
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* In determining this figure, the registrant assumed that the executive
officers of the registrant and the registrant's directors are affiliates of
the registrant. Such assumption shall not be deemed to be conclusive for any
other purpose.
The number of shares outstanding of the registrant's common stock as of the
close of business on February 29, 2000:
Common Stock, $.01 Par Value: 196,988,353 shares
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Annual Report to stockholders for the year ended December
31, 1999 are incorporated by reference into Parts I, II and IV.
2. Portions of the Proxy Statement for the annual meeting of stockholders to
be held on April 27, 2000 are incorporated by reference into Part III.
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CAPITAL ONE FINANCIAL CORPORATION
1999 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
Item 1. Business............................................................................... 1
Overview............................................................................... 1
Business Segments...................................................................... 2
Operations............................................................................. 3
Funding................................................................................ 5
Competition............................................................................ 5
Employees.............................................................................. 5
Supervision and Regulation............................................................. 5
Risk Factors........................................................................... 11
Item 2. Properties............................................................................. 15
Item 3. Legal Proceedings...................................................................... 15
Item 4. Submission of Matters to a Vote of Security Holders.................................... 15
Item 5. Market for Company's Common Stock and Related Stockholder Matters...................... 16
Item 6. Selected Financial Data................................................................ 16
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.. 16
Item 7A. Quantitative and Qualitative Disclosures about Market Risk............................. 16
Item 8. Financial Statements and Supplementary Data............................................ 16
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure... 16
Item 10. Directors and Executive Officers of the Company........................................ 17
Item 11. Executive Compensation................................................................. 17
Item 12. Security Ownership of Certain Beneficial Owners and Management......................... 17
Item 13. Certain Relationships and Related Transactions......................................... 17
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-k........................ 18
i
PART I
Item 1. Business.
Overview
Capital One Financial Corporation (the "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 ("IBS"). The Corporation's principal subsidiary,
Capital One Bank (the "Bank"), a limited-purpose Virginia state chartered
credit card bank, offers credit card products. The Bank originally conducted
its operations as a division of Signet Bank, a wholly-owned subsidiary of
Signet Banking Corporation ("Signet")(/1/). Capital One, F.S.B. (the "Savings
Bank"), a federally chartered savings bank, offers consumer lending and
deposit products. Capital One Services, Inc., another subsidiary of the
Corporation, provides various operating, administrative and other services to
the Corporation and its subsidiaries. Unless indicated otherwise, the terms
"Company", "we", "us", and "our" refer to the Corporation and its consolidated
subsidiaries and for periods prior to our separation from Signet Bank, Signet
Bank's credit card division.
We began operations in 1953 as part of Signet Bank, the same year as the
formation of what is now MasterCard International, and we are one of the
oldest continually operating bank card issuers in the United States. The Bank
separated from Signet on November 24, 1994 and became a subsidiary of the
Corporation. As of December 31, 1999, we had 23.7 million customers and $20.2
billion in managed consumer loans outstanding. We are among the ten largest
issuers of Visa and MasterCard credit cards in the United States based on
managed credit card loans outstanding as of December 31, 1999. The success of
our IBS, which we initiated in 1988, in addition to credit card industry
dynamics, has led to our growth in managed credit card loans and accounts.
In June 1996, we established the Savings Bank to expand our product
offerings and our relationship with our cardholders. The Savings Bank
currently takes deposits and offers a variety of credit card products and
installment loans. Through the Savings Bank, we expect to offer multiple
financial products and services to existing cardholders and other households
applying IBS and existing information technology systems.
We offer credit card products outside of the United States through a branch
of the Bank in the United Kingdom and several non-bank subsidiaries. We
currently have foreign operations primarily in the United Kingdom and Canada.
We may also, from time to time, consider establishing our business in
additional foreign jurisdictions as opportunities arise. We also offer various
non-card consumer lending products, automobile financing and
telecommunications services through our subsidiaries both in the United States
and elsewhere.
We use IBS to differentiate among customers based on credit risk, usage and
other characteristics and to match customer characteristics with appropriate
product offerings. IBS involves developing sophisticated models, information
systems, well-trained personnel and a flexible culture to create credit card
or other products and services that address the demands of changing consumer
and competitive markets. By actively testing a wide variety of product and
service features, marketing channels and other aspects of offerings, we design
customized solicitations that are targeted at various credit customer
segments, thereby enhancing customer response levels and maximizing returns on
investment within given underwriting parameters.
We build on information derived from our initial sources with continued
integrated testing and model development to improve the quality, performance
and profitability of our solicitation and account management initiatives. We
apply IBS to all areas of our business, including solicitations, account
management, credit line management, pricing strategies, usage stimulation,
collections, recoveries and account and balance retention.
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(1) Signet Bank and Signet Banking Corporation have since been acquired by
First Union National Bank and First Union Corporation, respectively, as of
November 30, 1997.
1
Our common stock is listed on the New York Stock Exchange under the symbol
COF. Our principal executive office is located at 2980 Fairview Park Drive,
Suite 1300, Falls Church, Virginia 22042-4525 (telephone number (703) 205-
1000).
Business Segments
We maintain three distinct business segments: lending, telecommunications
and "other." The lending segment is comprised primarily of credit card lending
activities. The telecommunications segment consists primarily of direct
marketing wireless service. The "other" segment consists of various, non-
lending new business initiatives.
Lending
We offer a wide variety of credit card products throughout the United
States and internationally, including the United Kingdom and Canada. Applying
IBS, we customize our products to appeal to different consumer preferences and
needs by combining different product features, including annual percentage
rates, fees and credit limits, rewards programs and other special features. We
constantly test new products to develop packages that appeal to different and
changing consumer preferences. Our customized products include both products
targeted at a range of consumer credit risk profiles, such as low rate cards
and secured cards, as well as products aimed at special consumer interests,
such as affinity, co-brand and student cards. Our pricing strategies are risk-
based; lower risk customers may likely be offered products with more favorable
pricing and we expect these products to yield lower delinquencies and credit
losses. On products offered to many higher risk customers, however, we may
experience higher delinquencies and losses, and we price these products
accordingly. In general, however, IBS allows us to provide appropriate
products to individual consumers with a wide range of credit histories.
Additionally, we have been applying our IBS to other financial and non-
financial products and services. In 1998, we acquired Summit Acceptance
Corporation ("Summit"), an automobile finance lender located and incorporated
in Dallas, Texas. Summit offers loans, secured by automobiles, through dealer
networks throughout the United States. Summit is our platform to test and
apply IBS to the automobile loan market.
We have also expanded our existing operations outside of the United States,
and are currently operating primarily in the United Kingdom and Canada. We
have experienced continuing growth in the number of accounts and loan balances
in our international business with most of our growth coming from our business
in the United Kingdom. To support the continued growth of our United Kingdom
business and any future business in Europe, we opened a new operations center
in Nottingham, England in July 1998 and expanded it in early 1999.
Telecommunications
Through our subsidiary, America One Communications, Inc. ("America One"),
we resell analog and digital wireless services through direct marketing
channels. In 1999, we announced that we would change the focus of our efforts
to market telecommunications services. In the first half of 1999, America
One's primary business, the reselling of analog and digital wireless services
through direct marketing channels, began experiencing significant competitive
pressures in its markets. In response to these changing market conditions, we
have decreased our marketing investment in our core wireless markets and have
been testing wireless products and services in other market segments that are
not being adequately served by the major wireless telecommunications
competitors.
Geographic Diversity
Loan portfolio concentration within a specific geographic region or
demographic portion of the population may be regarded as positive or negative
based upon the current and expected credit characteristics and performance of
the portfolio. Our consumer loan portfolio is geographically diverse. See Note
O to Consolidated Financial Statements on page 68 of the Company's Annual
Report to its stockholders for the year ended December 31, 1999 (the "Annual
Report"), which is incorporated herein by reference.
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Operations
Marketing
IBS is the cornerstone of our marketing strategy, and since its
introduction in 1988 we have steadily increased our marketing efforts. We
generate accounts primarily through direct mail and telemarketing
solicitations, although we also solicit accounts through the internet,
newspaper, magazine, radio and television advertising and location and event
marketing. Many of our solicitations are targeted at potential customers that
have been prescreened for creditworthiness. We track and periodically review
the results of our various solicitation campaigns. In developing our targeting
strategies, we use customer information only in accordance with our privacy
policies and respect for the privacy of our customers and potential customers.
Risk Management
We employ a comprehensive risk management process that integrates all
aspects of an account's life cycle, from origination to closure. We have a
credit policy group that makes marketing and credit policy decisions. This
credit policy group consists of senior management representatives from the
credit operations, risk management, marketing and analysis, and legal units.
This group originates credit policy from the viewpoints of both profitability
and credit risk, based on prescreening criteria, proprietary model development
and usage, as well as reviews of test programs and test results. We review
significant test results before the widespread introduction of a tested policy
or product.
An important element of our risk management process is our sophisticated
screening process to target potential consumers which we have developed since
the introduction of IBS. We intend for our prescreening and underwriting
criteria to identify and avoid potential losses, however, we cannot identify
all potential losses. Management information systems and processes enable
management to monitor the effectiveness of prescreening and underwriting
criteria. We modify our criteria based on the results obtained from this
process.
Credit Operations
Senior management actively manages our credit extension process which is
designed to bring consistency in credit practices and operating efficiencies.
Our scoring technology and verification procedures are highly automated with
limited judgmental review. Our credit evaluation process is based on
proprietary models using, among other things, credit scores developed by
nationally recognized scoring firms which may be tailored to individual
programs. We validate, monitor and maintain these scores as part of IBS. The
scores provide us with a statistically measurable way to make decisions about
applications and to monitor an account throughout its life cycle to adjust
credit lines, pricing and collection policies.
Our prescreened account solicitation process uses information from credit
reporting agencies to identify consumers who are likely to be approved for a
credit card account. We vary the underwriting criteria used to prescreen
potential applicants from time to time in accordance with our established
policies and procedures relating to the operation of our consumer revolving
lending business. We may change such policies from time to time. In order to
establish the amount of the customer's credit line, we analyze, and in some
cases verify, the information on returned applications. We usually offer each
customer whose credit request meets all of the applicable underwriting
criteria a line of credit equal to or in excess of a minimum level we have
established for each product offering. We also may review manually
applications that are rejected by our credit scoring system because of
inconsistencies in application information, inquiries from rejected applicants
or for other reasons. Our credit analysts then have the ability to override
decisions made by the system upon the receipt of additional information from
an applicant or otherwise.
For non-pre-screened solicitations, we generate names of prospective
customers from a variety of sources, including third party list vendors and
our internal sources, and then edit the list using internal and external
sources to ensure quality and accuracy. We approve or decline prospective
customers who respond to a solicitation based on information from both their
application and one or more credit reporting agencies.
3
Account Management
We have found that active account management is necessary in order to
respond to the changing economic environment and cardholder risk, usage and
payment patterns. We apply new credit scores to each account multiple times
each year and new behavioral scores for open accounts each month. We use this
information in account management strategies relating to credit lines,
pricing, usage stimulation, retention and collection. For creditworthy and
profitable accounts, such periodic review may result in more favorable
pricing, higher credit lines or other enhancements which, based on testing,
are likely to increase account usage or the overall profitability of an
account. Conversely, for delinquent or other accounts with significant credit
risk, periodic review may result in an account being reassigned to a higher
risk category and hence not being eligible for credit line increases or, in
certain circumstances, having pricing adjusted upward or the credit line
reduced.
The IBS approach has helped us to develop our retention strategies. We have
developed integrated systems which evaluate account profitability and risk,
test various strategies for cost and effectiveness in retaining cardholders
and assist service representatives in negotiating potential pricing
alternatives. Some of our products, including the introductory interest rate
product and the balance transfer product, have a repricing feature after an
initial period. We have developed methodologies for retaining these accounts
and the balances in these accounts after the expiration of the initial period.
Collection Procedures
We have used IBS to customize our collections strategies and determine the
timing of collection activity based on models designed to predict charge-off
behavior. We generally consider an account delinquent if we have not received
a minimum payment by the accountholder's payment due date. We currently refer
delinquent accounts for contact by phone between seven and 60 days after
contractual delinquency, depending on the accountholder's risk profile. We
design our policies and procedures to encourage accountholders to pay
delinquent amounts; for example, once a delinquent account has re-established
a payment pattern with three consecutive minimum monthly payments, it can be
re-aged as current. Federal guidelines restrict how frequently an account can
be re-aged, renewed or extended. We reserve the right to suspend charging
privileges at any time after an account enters the collections process. We may
also, at our discretion, enter into arrangements with delinquent
accountholders to extend or otherwise change payment schedules.
We charge-off as uncollectible an account (net of collateral) at 180 days
past-due, except with respect to certain installment loans, which we charge-
off as uncollectible at 120 days past-due. In connection with a secured credit
card account, except as set forth below, we apply funds deposited as
collateral to payment on the account shortly before the account is charged off
as uncollectible. With respect to bankrupt customers, we charge-off the
account within 30 days after we receive the bankruptcy petition and, with
respect to secured credit card accounts, we apply funds deposited as
collateral in satisfaction of the account only after the bankruptcy automatic
stay is lifted. We charge-off accounts of deceased customers within 60 days of
receiving proper notice if no estate exists against which a proof of claim can
be filed, no other party remits payments or no other responsible party is
available. We may change our credit evaluation, servicing and charge-off
policies and collection practices over time in accordance with our business
judgment, applicable law and guidelines established by applicable regulatory
authorities.
Technology/Systems
A key part of our strategic focus is the development of flexible, high-
volume systems capable of handling our growth and changes in marketing and
account management strategies. Management believes that the continued
development and integration of these systems is important to our efforts to
reduce our operating costs and maintain a competitive advantage.
We have developed proprietary integrated systems which allow our employees
to manage the large volumes of data collected through the IBS process and to
use such data in our account solicitations, application processing,
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account management and retention strategies. We use this information to
predict consumer behavior and then match prospects to lending products with
various terms and fees. These systems also allow our customer service
representatives to access account specific information when responding to
customer inquiries.
Funding
Our primary methods of funding include loan securitizations, issuing
certificates of deposit, senior notes and other borrowings, and fed funds
purchased from financial institutions. For a discussion of our funding
program, see pages 29-30 and pages 38-39 of the Annual Report under the
respective headings "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Managed Consumer Loan Portfolio" and "--
Funding," which are incorporated herein by reference.
Competition
As a marketer of credit card products, we face intense competition in all
aspects of our business from numerous bank and non-bank providers of financial
services. Many of these companies are substantially larger and have more
resources than we do. We compete with international, national, regional and
local issuers of Visa and MasterCard credit cards. In addition, American
Express, Discover Card, Diner's Club and, to a certain extent, smart cards and
debit cards, represent additional competition in the general purpose credit
card market. In general, customers are attracted to credit card issuers
largely on the basis of price, credit limit and other product features and
customer loyalty is often limited. We believe that IBS allows us to more
effectively compete in both our current and new markets. There can be no
assurance, however, that our ability to market services successfully or to
obtain adequate yield on our loans will not be impacted by the nature of the
competition that now exists or may later develop.
In addition, we face competition in seeking public funding from banks,
savings banks, money market funds and a wide variety of other entities that
take deposits and/or sell debt securities, some of which are publicly traded.
Many of these companies are substantially larger, have more capital and other
resources and have better financial ratings than we do. Accordingly, there can
be no assurance that competition from these other borrowers will not increase
our cost of funds.
Employees
As of December 31, 1999, we employed 14,104 full-time and 239 part-time
employees, which we refer to as "associates." A central part of our philosophy
is to attract and maintain a highly capable staff. We view current associate
relations to be satisfactory. None of our associates are covered under
collective bargaining agreements.
Supervision and Regulation
General
The Bank is a banking corporation chartered under Virginia law and a member
of the Federal Reserve System, the deposits of which are insured by the Bank
Insurance Fund of the Federal Deposit Insurance Corporation (the "FDIC"). The
Bank is subject to comprehensive regulation and periodic examination by the
Bureau of Financial Institutions of the Virginia State Corporation Commission
(the "Bureau of Financial Institutions"), the Federal Reserve Board (the
"Federal Reserve"), the Federal Reserve Bank of Richmond, the FDIC and in the
case of the United Kingdom branch of the Bank, the Financial Services
Authority. The Bank is not a "bank" under the Bank Holding Company Act of
1956, as amended (the "BHCA"), because it (i) engages only in credit card
operations, (ii) does not accept demand deposits or deposits that the
depositor may withdraw by check or similar means for payment to third parties
or others, (iii) does not accept any savings or time deposits of less than
$100,000, other than as permitted as collateral for extensions of credit, (iv)
maintains only one office that accepts deposits and (v) does not engage in the
business of making commercial loans. Due to the Bank's
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status as a limited purpose credit card bank, our non-credit card operations
must be conducted in our other operating subsidiaries.
The Savings Bank is a federal savings bank chartered by the Office of
Thrift Supervision (the "OTS") and is a member of the Federal Home Loan Bank
System. Its deposits are insured by the Savings Association Insurance Fund of
the FDIC. The Savings Bank is subject to comprehensive regulation and periodic
examination by the OTS and the FDIC.
The Corporation is not a bank holding company under the BHCA as a result of
its ownership of the Bank because the Bank is not a "bank" as defined under
the BHCA. If the Bank failed to meet the credit card bank exemption criteria
described above, its status as an insured depository institution would make
the Corporation subject to the provisions of the BHCA, including certain
restrictions as to the types of business activities in which a bank holding
company and its affiliates may engage. Becoming a bank holding company under
the BHCA would affect the Corporation's ability to engage in certain non-
banking businesses. In addition, for purposes of the BHCA, if the Bank failed
to qualify for the credit card bank exemption, any entity that acquired direct
or indirect control of the Bank and also engaged in activities not permitted
for bank holding companies could be required either to discontinue the
impermissible activities or to divest itself of control of the Bank.
As a result of the Corporation's ownership of the Savings Bank, the
Corporation is a unitary savings and loan holding company subject to
regulation by the OTS and the provisions of the Savings and Loan Holding
Company Act. As a unitary savings and loan holding company, the Corporation
generally is not restricted under existing laws as to the types of business
activities in which it may engage so long as the Savings Bank continues to
meet the qualified thrift lender test (the "QTL Test"). If the Corporation
ceased to be a unitary savings and loan holding company as a result of its
acquisition of an additional savings institution, as a result of the failure
of the Savings Bank to meet the QTL Test, or as a result of a change in
control of the Savings Bank, the types of activities that the Corporation and
its non-savings association subsidiaries would be able to engage in would
generally be limited to those eligible for bank holding companies.
Under recently-enacted financial services modernization legislation
(discussed in detail below), bank holding companies may engage in an expanded
range of activities, including the securities and insurance businesses. To do
so, a bank holding company may voluntarily elect to become a new type of
company called a "financial holding company." While these changes are
significant in their impact upon the traditional banking, securities and
insurance industries, the impact upon us is less significant in light of the
fact that we are regulated as a unitary thrift holding company and not as a
bank holding company or a financial holding company. As a result, we may
engage in both the full range of activities authorized for bank or financial
holding companies, as well as additional non-banking activities typically
impermissible for such entities.
While the new financial modernization legislation does not impact the
permissible range of our activities, it does impose some limitations on the
future activities of unitary thrift holding companies. Existing unitary thrift
holding companies such as the Corporation are "grandfathered" with full powers
to continue and expand their current activities. Grandfathered unitary thrift
holding companies, however, may not be acquired by nonfinancial companies and
maintain their grandfathered powers. In addition, if a grandfathered unitary
thrift holding company is acquired by a financial company without such
grandfather rights, it may lose its ability to engage in certain non-banking
activities otherwise ineligible for bank holding companies or financial
holding companies.
The Corporation is also registered as a financial institution holding
company under Virginia law and as such is subject to periodic examination by
Virginia's Bureau of Financial Institutions.
Dividends and Transfers of Funds
The principal source of funds for the Corporation to pay dividends on
stock, make payments on debt securities and meet other obligations is
dividends from its direct and indirect subsidiaries. There are various federal
and Virginia law limitations on the extent to which the Bank and the Savings
Bank can finance or
6
otherwise supply funds to the Corporation through dividends, loans or
otherwise. These limitations include minimum regulatory capital requirements,
Federal Reserve, OTS and Virginia law requirements concerning the payment of
dividends out of net profits or surplus, Sections 23A and 23B of the Federal
Reserve Act governing transactions between an insured depository institution
and its affiliates and general federal and Virginia regulatory oversight to
prevent unsafe or unsound practices. In general, federal banking laws prohibit
an insured depository institution, such as the Bank and the Savings Bank, from
making dividend distributions if such distributions are not paid out of
available earnings or would cause the institution to fail to meet applicable
capital adequacy standards. In addition, the Savings Bank is required to give
the OTS at least 30 days' advance notice of any proposed dividend. Under OTS
regulations, other limitations apply to the Savings Bank's ability to pay
dividends, the magnitude of which depends upon the extent to which the Savings
Bank meets its regulatory capital requirements. In addition, under Virginia
law, the Bureau of Financial Institutions may limit the payment of dividends
by the Bank if the Bureau of Financial Institutions determines that such a
limitation would be in the public interest and necessary for the Bank's safety
and soundness.
Capital Adequacy
The Bank and the Savings Bank are currently subject to capital adequacy
guidelines adopted by the Federal Reserve and the OTS, respectively. For a
further discussion of the capital adequacy guidelines, see page 40 of the
Annual Report under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Capital Adequacy" and Note J to
Consolidated Financial Statements on page 51, which are incorporated herein by
reference.
In June 1999, the Basle Committee on Banking Supervision issued for public
comment through March 31, 2000 a proposal to revise significantly the current
international capital adequacy accord. This proposal seeks to address more
precisely various underlying bank risks, to refine the risk weighting
currently given to various bank credit exposures and to recognize interest
rate and operational risk from a capital perspective. If ultimately adopted,
this proposal may require some banks to increase their current capital levels.
FDICIA
Among other things, the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA") requires federal bank regulatory authorities to take
"prompt corrective action" ("PCA") in respect of insured depository
institutions that do not meet minimum capital requirements. FDICIA establishes
five capital ratio levels: well-capitalized, adequately-capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized. The capital categories are determined solely for the
purposes of applying FDICIA's PCA provisions, as discussed below, and such
capital categories may not constitute an accurate representation of the
overall financial condition or prospects of the Bank or the Savings Bank. As
of December 31, 1999, each of the Bank and the Savings Bank met the
requirements for a "well-capitalized" institution. A "well-capitalized"
classification should not necessarily be viewed as describing the condition or
future prospects of a depository institution, including the Bank and the
Savings Bank.
Under FDICIA's PCA system, an insured depository institution in the
"undercapitalized category" must submit a capital restoration plan guaranteed
by its parent company. The liability of the parent company under any such
guarantee is limited to the lesser of 5.00% of the insured depository
institution's assets at the time it became undercapitalized, or the amount
needed to comply with the plan. An insured depository institution in the
undercapitalized category also is subject to limitations in numerous areas
including, but not limited to, asset growth, acquisitions, branching, new
business lines, acceptance of brokered deposits and borrowings from the
Federal Reserve. Progressively more burdensome restrictions are applied to
insured depository institutions in the undercapitalized category that fail to
submit or implement a capital plan and to insured depository institutions that
are in the significantly undercapitalized or critically undercapitalized
categories. In addition, an insured depository institution's primary federal
banking agency is authorized to downgrade the institution's capital category
to the next lower category upon a determination that the institution is in an
unsafe or unsound condition or is engaged in an unsafe or unsound practice. An
unsafe or unsound practice can include receipt by the
7
institution of a less than satisfactory rating on its most recent examination
with respect to its capital, asset quality, management, earnings or liquidity.
"Critically undercapitalized" insured depository institutions (which are
defined to include institutions that still have a positive net worth) may not,
beginning 60 days after becoming critically undercapitalized, make any payment
of principal or interest on their subordinated debt (subject to certain
limited exceptions). Thus, in the event an institution became critically
undercapitalized, it would generally be prohibited from making payments on its
subordinated debt securities. In addition, critically undercapitalized
institutions are subject to appointment of a receiver or conservator.
FDICIA also requires the FDIC to implement a system of risk-based premiums
for deposit insurance pursuant to which the premiums paid by a depository
institution will be based on the probability that the FDIC will incur a loss
in respect of such institution. The FDIC has since adopted a system that
imposes insurance premiums based upon a matrix that takes into account an
institution's capital level and supervisory rating.
The Bank and the Savings Bank may accept brokered deposits as part of their
funding. Under FDICIA, only "well-capitalized" and "adequately-capitalized"
institutions may accept brokered deposits. Adequately-capitalized
institutions, however, must first obtain a waiver from the FDIC before
accepting brokered deposits, and such deposits may not pay rates that
significantly exceed the rates paid on deposits of similar maturity from the
institution's normal market area or the national rate on deposits of
comparable maturity, as determined by the FDIC, for deposits from outside the
institution's normal market area.
Liability for Commonly-Controlled Institutions
Under the "cross-guarantee" provision of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 ("FIRREA"), insured depository
institutions such as the Bank and the Savings Bank may be liable to the FDIC
in respect of any loss or reasonably anticipated loss incurred by the FDIC
resulting from the default of, or FDIC assistance to, any commonly controlled
insured depository institution. The Bank and the Savings Bank are commonly
controlled within the meaning of the FIRREA cross-guarantee provision.
Investment Limitation and Qualified Thrift Lender Test
Federally-chartered savings banks such as the Savings Bank are subject to
certain investment limitations. For example, federal savings banks are not
permitted to make consumer loans (i.e., certain open-end or closed-end loans
for personal, family or household purposes, excluding credit card loans) in
excess of 35% of the savings bank's assets. Federal savings banks are also
required to meet the QTL Test, which generally requires a savings bank to
maintain at least 65% "portfolio assets" (total assets less (i) specified
liquid assets up to 20% of total assets, (ii) intangibles, including goodwill
and (iii) property used to conduct business) in certain "qualified thrift
investments" (residential mortgages and related investments, including certain
mortgage backed and mortgage related investments, small business related
securities, certain state and federal housing investments, education loans and
credit card loans) on a monthly basis in nine out of every 12 months. Failure
to qualify under the QTL Test could subject the Savings Bank to substantial
restrictions on its activities, including the activity restrictions that apply
generally to bank holding companies and their affiliates and potential loss of
grandfathered rights under the Gramm-Leach-Bliley Act. As of December 31,
1999, 81.44 % of the Savings Bank's portfolio assets were held in qualified
thrift investments, and the Savings Bank was in compliance with the QTL Test.
Regulation of Lending Activities
The activities of the Bank and the Savings Bank as consumer lenders also
are subject to extensive regulation under various federal laws including the
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit
Reporting Act, the Community Reinvestment Act and the Soldiers' and Sailors'
Civil Relief Act, as well as to various state laws. Regulators are authorized
to impose penalties for violations of these statutes and, in certain
8
cases, to order the Bank and the Savings Bank to pay restitution to injured
borrowers. Borrowers may also bring actions for certain violations. Federal
bankruptcy and state debtor relief and collection laws also affect the ability
of the Bank and the Savings Bank to collect outstanding balances owed by
borrowers who seek relief under these statutes.
Year 2000
On October 15, 1998, the Office of the Comptroller of the Currency--
Department of Treasury, the Federal Reserve, the FDIC and the OTS--Department
of Treasury, together published Interagency Guidelines establishing Year 2000
Standards for Safety and Soundness. These were made effective November 2,
1998, by the Federal Reserve (Amendments to Regulation H Membership of State
Banking Institutions in the Federal Reserve System, Appendix D-2--Interagency
Guidelines Establishing Year 2000 Standards for Safety and Soundness) (the
"Standards"). Among other things, the Standards required components and
timetables for the review of mission critical systems for year 2000 readiness,
renovation of internal and external mission critical systems, testing of
mission critical systems, business resumption contingency planning,
remediation contingency planning, customer risk assessment and involvement of
the board of directors and management. Our year 2000 plan is subject to and in
compliance with the Standards. For a further discussion of our preparation for
the year 2000 and the continuing impact of those preparations since January 1,
2000, see page 44 of the Annual Report under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Business Outlook--The Year 2000 Issue."
Legislation
On November 12, 1999, President Clinton signed into law the Gramm-Leach-
Bliley Financial Services Modernization Act of 1999 (the "Act"). The principal
purpose of the Act is to permit greater affiliations within the financial
services industry, primarily banking, securities and insurance. The Act
repeals the Glass-Steagall Act, which separated commercial banking from
investment banking, and substantially amends the BHCA, which limited the
ability of bank holding companies to engage in the securities and insurance
businesses. To achieve this purpose, the Act creates a new type of company,
the "financial holding company." While these laws go into effect on March 11,
2000, the Federal Reserve Board is accepting public comment on proposed
implementing regulations until March 27, 2000. While this aspect of the Act is
significant in its impact upon the traditional banking, securities and
insurance industries, the impact of these provisions on us is less significant
in light of our current corporate structure. Because the Corporation is a
unitary thrift holding company and owns a limited-purpose credit card bank, it
is not regulated as a bank holding company. Therefore, we were already able to
engage in the full range of activities authorized by the Act, as well as non-
banking activities not available to financial holding companies. The Act does
impose certain limitations on the transferability of unitary thrift holding
companies. See, "Supervision and Regulation--General".
The Act also contains certain consumer privacy provisions relating to the
use of customer information. These provisions will be implemented by final
regulations that are due on May 12, 2000. Under those regulations, financial
institutions will be required to establish privacy policies regarding the
kinds of customer information they collect and the way they use that
information and provide such information to customers on a regular basis. In
addition, financial institutions will be required to give customers the right
to block the sharing of this information with unaffiliated companies, subject
to certain exceptions. Lastly, financial institutions will be prohibited from
sharing account numbers or access codes with unaffiliated companies for
marketing purposes.
In addition, the Act permits a limited-purpose credit card bank such as the
Bank to establish one or more foreign banking subsidiaries that are not
subject to the business-line limitations credit card banks face domestically.
Therefore, such foreign banking subsidiaries could engage in non-credit-card
lending and could accept retail deposits overseas.
Legislation has also been introduced requiring additional credit card
disclosures and that could otherwise restrict practices of credit card
issuers. Additional proposals have sought to change existing federal
bankruptcy
9
laws and to expand the privacy protections afforded to customers of financial
institutions. It is unclear at this time whether and in what form any such
legislation will be adopted or, if adopted, what its impact on the Bank, the
Savings Bank or the Corporation would be. Congress may in the future consider
other legislation that would materially affect the banking or credit card
industries.
Privacy
The Act also requires a financial institution to disclose its privacy
policy to customers and consumers, and requires that such customers and
consumers be given a choice (through an opt-out notice) to forbid the sharing
of their nonpublic personal information with nonaffiliated third persons. We
currently do this. We have a written Privacy Statement posted on our web site,
which we make available to all of our customers. Pursuant to that policy, we
protect the security of our customers' information, educate our employees
about the importance of protecting customer privacy and allow our customers to
remove their names from the solicitation lists we use and share with others.
We ask business partners with whom we share such information to abide by our
privacy policy. As our regulators establish further guidelines for addressing
customer privacy issues, we may need to amend our Privacy Statement and adapt
our internal procedures.
In addition to adopting federal requirements regarding privacy, the Act
also permits individual states to enact stricter laws relating to the use of
customer information. Many states are expected to consider such proposals
which may impose additional requirements or restrictions on us.
Investment in the Corporation, the Bank and the Savings Bank
Certain acquisitions of capital stock may be subject to regulatory approval
or notice under federal or Virginia law. Investors are responsible for
insuring that they do not, directly or indirectly, acquire shares of capital
stock of the Corporation in excess of the amount which can be acquired without
regulatory approval.
The Bank and the Savings Bank are each "insured depository institutions"
within the meaning of the Change in Bank Control Act. Consequently, federal
law and regulations prohibit any person or company from acquiring control of
the Company without, in most cases, prior written approval of the Federal
Reserve or the OTS, as applicable. Control is conclusively presumed if, among
other things, a person or company acquires more than 25% of any class of
voting stock of the Corporation. A rebuttable presumption of control arises if
a person or company acquires more than 10% of any class of voting stock and is
subject to any of a number of specified "control factors" as set forth in the
applicable regulations.
Although the Bank is not a "bank" within the meaning of Virginia's
reciprocal interstate banking legislation (Chapter 15 of Title 6.1 of the Code
of Virginia), it is a "bank" within the meaning of Chapter 13 of Title 6.1 of
the Code of Virginia governing the acquisition of interests in Virginia
financial institutions (the "Financial Institution Holding Company Act"). The
Financial Institution Holding Company Act prohibits any person or entity from
acquiring, or making any public offer to acquire, control of a Virginia
financial institution or its holding company without making application to,
and receiving prior approval from, the Bureau of Financial Institutions.
Interstate Taxation
Several states have passed legislation which attempts to tax the income
from interstate financial activities, including credit cards, derived from
accounts held by local state residents. Based on the volume of its business in
these states and the nature of the legislation passed to date, we currently
believe that this development will not materially affect our financial
condition. The states may also consider legislation to tax income derived from
transactions conducted through the Internet. We currently solicit accounts and
take account information via the Internet. It is unclear at this time,
however, whether and in what form any such legislation will be adopted or, if
adopted, what its impact on us would be.
10
International Regulation
We also face regulation in the foreign jurisdictions where we currently,
and may in the future, operate. Those regulations may be similar to or
substantially different from the regulatory requirements we face in the United
States. In the United Kingdom, we are regulated by the Financial Services
Administration.
In the United Kingdom, we operate through a branch of the Bank (the "UK
Branch"). The UK Branch is regulated by the Financial Services Authority and
the Office of Fair Trading (the "OFT"). The UK Branch is an "authorized
deposit taker" under the Banking Act of 1987 and thus is able to take consumer
deposits in the UK. The UK Branch has also been granted full license by the
OFT to issue consumer credit under the Consumer Credit Act of 1974. Because
the UK Branch is part of the Bank, it is also regulated by the US regulatory
authorities and is subject to all of the regulations and operational
restrictions discussed above.
Risk Factors
This Annual Report on Form 10-K contains forward-looking statements. We
also may make written or oral forward-looking statements in our periodic
reports to the Securities and Exchange Commission on Forms 10-Q and 8-K, in
our annual report to shareholders, in our proxy statements, in our offering
circulars and prospectuses, in press releases and other written materials and
in oral statements made by our officers, directors or employees to third
parties. Statements that are not historical facts, including statements about
our beliefs and expectations, are 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," "intend,"
"plan," "believe," "estimate" or similar expressions. These statements are
based on current plans, estimates and projections, and therefore you should
not place undue reliance on them.
Although we have tried to discuss key factors, please be aware that other
risks may prove to be important in the future. New risks may emerge at any
time and we cannot predict such risks or estimate the extent to which they may
affect our financial performance.
Forward-looking statements are not guarantees of future performance. They
involve risks, uncertainties and assumptions, including the risks discussed
below. Our future performance and actual results may differ materially from
those expressed in these forward-looking statements. Many of the factors that
will determine these results and values are beyond our ability to control or
predict. This section highlights specific risks that could affect us and our
business.
We Face Intense Competition in all of our Markets
We face intense competition from many other providers of credit cards and
other financial products and services. In particular, we compete with
international, national, regional and local bank card issuers, and with other
general purpose credit or charge card issuers. In addition, the recently
enacted Gramm-Leach-Bliley Financial Services Modernization Act of 1999, which
permits greater affiliations between banks, securities firms and insurance
companies may increase competition in the financial services industry,
including in the credit card business. Increased competition has resulted in,
and may continue to cause, a decrease in credit card response rates and
reduced productivity of marketing dollars invested in certain lines of
business. Other credit card companies may compete with us for customers by
offering lower interest rates and fees. Because customers generally choose
credit card issuers based on price (mostly interest rates and fees), credit
limit and other product features, customer loyalty is limited. We may lose
entire accounts, or may lose account balances, to competing card issuers.
In the past, we have faced intense competition primarily in the market for
our low introductory rate credit cards. Recently, however, the competition
with our other credit card products, such as our low fixed-rate cards, secured
cards and other customized cards, has also become more intense. The cost to
acquire new accounts varies along business lines and is expected to rise as we
move beyond the domestic card market. We expect that competition will continue
to grow more intense with respect to all of our products, including our
products in the United Kingdom and Canada.
11
Our Accounts and Loan Balances Will Fluctuate
Our accounts and loan balances and the rate at which they grow are affected
by a number of factors, including how we allocate our marketing investment
among different products and the rate at which customers transfer their
accounts and loan balances to competing card issuers. Accounts and loan
balances are also affected by general economic conditions, which may increase
or decrease the amount of spending by customers, their ability to repay their
loans, and other factors beyond our control.
Because we designed our IBS to take advantage of market opportunities, we
cannot forecast how we will spend our marketing funds and on which products.
Likewise, our account and loan balance growth is affected by many factors,
including the ones mentioned above. Our results, therefore, will vary as
marketing investments, accounts and loan balances fluctuate.
It is Difficult to Sustain and Manage Growth
Our growth strategy is threefold. First, we seek to continue to grow our
domestic credit card business. Second, we desire to grow our lending business
internationally, in the United Kingdom, Canada and beyond. Third, we hope to
identify and pursue new business opportunities, both financial and non-
financial. Our management believes that, through IBS, we achieve these
objectives. However, there are a number of factors that can affect our ability
to do so including:
. our ability to retain existing customers and to attract new customers;
. the growth of existing and new account balances;
. the delinquency and charge-off levels of accounts;
. the availability of funding on favorable terms;
. the amount of funds available for marketing to solicit new customers;
. general economic and other factors;
. the legal and regulatory environment;
. a favorable interest rate environment;
. our ability to build or acquire the necessary operational and
organizational infrastructure;
. the ability to manage expenses as we expand; and
. our ability to recruit experienced management and operations personnel.
Our expansion internationally is affected by additional factors such as
limited access to information, differences in cultural attitudes toward
credit, new regulatory and legislative environments and differences from the
historical experience of portfolio performance in the United States and other
countries.
Difficulties or delays in the development, production, testing and
marketing of new products or services will affect the success of such products
or services and can cause losses associated with the costs to develop
unsuccessful products and services. Such difficulties could include:
. failure to implement new product or service programs on time;
. failure of customers to accept these products or services;
. operational difficulties or delays;
. losses arising from the testing of new products or services; and
. legal and other difficulties.
12
In addition, our new products and services may not achieve the same
financial results as we have achieved in the past from our credit card
business.
We May Experience Limited Availability of Financing and Variation in our
Funding Costs
Like most credit card companies, our primary source of funding is the
securitization of consumer loans. Securitization transactions involve the sale
of beneficial interests in consumer loan balances. Our ability to use
securitization funding depends on how difficult and expensive such funding is.
Until now, we have completed securitization transactions on terms that we
believe are acceptable. However, securitizations can be affected by many
factors. Economic, legal, regulatory, accounting and tax changes can make
securitization funding more difficult, more expensive or unavailable on any
terms both domestically and internationally, where the securitization of
consumer loans may be on terms more or less favorable than in the United
States. Securitizations may not always be an attractive source of funding for
us, and we may have to seek other more expensive funding sources in the
future.
In general, the amount, type and cost of our financing, including financing
from other financial institutions, the capital markets and deposits, affects
our financial results. A number of factors could make such financing more
difficult, more expensive or unavailable including, but not limited to,
changes within our organization, changes in the activities of our business
partners, changes affecting our investments, interest rate fluctuations and
regulatory changes. In addition, we compete for funding with other banks,
savings banks and similar companies. Some of these institutions are publicly
traded. Many of these institutions are substantially larger, have more capital
and other resources and have better financial ratings than we do. Competition
from these other borrowers may increase our cost of funds. Events that disrupt
capital markets and other factors beyond our control could also make our
funding sources more expensive or unavailable.
We May Experience Increased Delinquencies and Credit Losses
Like other consumer lenders, we face the risk that accounts become
uncollectible because accountholders will not repay their loans. Consumers who
miss payments on their loans often fail to repay them, and consumers who file
for protection under the bankruptcy laws generally do not repay their loans.
Therefore, the rate of missed payments, or "delinquencies," on our portfolio
of loans, and the rate at which consumers may be expected to file for
bankruptcy, can be used to predict the future rate at which we charge-off our
consumer loans. A high charge-off rate would hurt our financial performance,
the performance of our securitizations and our cost of funds.
Widespread increases in past-due payments and nonpayment are most likely to
occur if the country or a regional area encounters an economic downturn, such
as a recession, but they could also occur for other reasons. For example,
fraud can cause losses. In addition, the age and rate of growth, or
"seasoning," of a consumer loan portfolio also increases the rate of
nonpayment and past-due payments. If we make fewer loans than we have in the
past, the proportion of new loans in our portfolio will decrease and the
delinquency rate and charge-off rate may increase. Therefore, the seasoning of
accounts may require higher loan loss provisions and reserves. This would
reduce our earnings unless offset by other changes.
In addition, we market many of our products to underserved markets, which
may have less experience with credit risk and performance. These markets, in
some cases, also have higher delinquency and charge-off rates. Although we
believe that IBS can help us effectively price these products in relation to
their risk, we may not set high enough fees and rates for these accounts to
offset the higher delinquency and loss rates we may experience.
We Face Risk From Economic Downturns and Social Factors
Delinquencies and credit losses in the credit card industry generally
increase during periods of an economic downturn or recession. Likewise,
consumer demand may decline during an economic downturn or recession.
13
Accordingly, an economic downturn or recession (either local or national) can
hurt our financial performance as accountholders default on their loans or
carry lower balances. As we increasingly market our cards internationally, an
economic downturn or recession outside the United States also could hurt our
financial performance. A variety of social factors also may cause changes in
credit card use, payment patterns and the rate of defaults by accountholders.
Social factors include changes in consumer confidence levels, the public's
perception of the use of credit cards and changing attitudes about incurring
debt and the stigma of personal bankruptcy. We believe that we can manage
these risks through our underwriting criteria and product design.
Nevertheless, underwriting criteria and design may not be enough to protect
our growth and profitability during a sustained period of economic downturn or
recession or a material shift in social attitudes.
We Face Risk of Interest Rate Fluctuations
Like other financial institutions, we borrow money from institutions and
depositors in order to lend money to customers. We earn interest on the
consumer loans we make, and pay interest on the deposits and borrowings we use
to fund those loans. The difference between these two interest rates affects
the value of our assets and liabilities. If the rate of interest we pay on our
borrowings increases more than the rate of interest we earn on our loans, our
earnings could fall. Our earnings could also be hurt if the rates on our
consumer loans fall more quickly than those on our borrowings.
We manage the risk of interest rate fluctuations through various financial
instruments and techniques, such as asset/liability matching, interest rate
swaps and similar financial instruments, hedging and other techniques. The
goal is to maintain an interest rate neutral or "matched" position, where
interest rates on loans and borrowings go up or down by the same amount and at
the same time. We cannot, however, always achieve this position at a
reasonable cost. Furthermore, if these techniques become unavailable or
impractical, our earnings could be hurt.
We also manage these risks partly by changing the interest rates we charge
on our customer accounts. The success of repricing accounts to match an
increase or decrease in our borrowing rates depends on the overall product mix
of such accounts, the actual amount of accounts repriced, the rate at which we
are originating new accounts and our ability to retain accounts (and the
related loan balances) after repricing. For example, if we increase the
interest rate we charge on our consumer loan accounts and the accountholders
close their accounts as a result, we won't be able to match our increased
borrowing costs as quickly if at all.
Regulation and Legislation Can Change
Federal and state laws and rules significantly limit the types of
activities in which we engage. For example, federal and state consumer
protection laws and rules limit the manner in which we may offer and extend
credit. From time to time, the United States Congress and the states consider
changing these laws and may enact new laws or amend existing laws to regulate
further the consumer lending industry. Such new laws or rules could limit the
amount of interest or fees we can charge, restrict our ability to collect on
account balances, or materially affect us or the banking or credit card
industries in some other manner. Additional federal and state consumer
protection legislation also could seek to expand the privacy protections
afforded to customers of financial institutions and restrict our ability to
share customer information.
The laws governing bankruptcy and debtor relief also could change, making
it more expensive or more difficult for us to collect from our customers.
Congress currently is considering legislation that would change the existing
federal bankruptcy laws. One intended purpose of this legislation is to
increase the collectibility of unsecured debt, however it is not clear whether
or in what form Congress may adopt this legislation and we cannot predict how
this legislation may affect us.
In addition, the existing laws and rules are complex. If we fail to comply
with them we might not be able to collect our loans in full, or we might be
required to pay damages or penalties to our customers. For these reasons, new
or changes in existing laws or rules could hurt our profits.
14
Our Expenses and Other Costs Will Fluctuate
Our expenses and other costs, such as human resources and marketing
expenses, directly affect our earnings results. Many factors can influence the
amount of our expenses, as well has how quickly they grow. As our business
develops, changes or expands, additional expenses can arise from asset
purchases, structural reorganization or a reevaluation of business strategies.
Other factors that can affect expenses include legal and administrative cases
and proceedings, which can be expensive to pursue or defend. In addition,
accounting policies that change can significantly affect how we calculate
expenses and earnings.
Statistical Information
The statistical information required by Item 1 can be found in our Annual
Report, and is incorporated herein by reference, as follows:
Page In The Company's Annual
Report To Its Stockholders For
Guide 3 Disclosure The Year Ended December 31, 1999
------------------ --------------------------------
I. Distribution of Assets, Liabilities
and Stockholders' Equity;
Interest Rates and Interest
Differential.......................... 30-35
II. Investment Portfolio.................. 55
III. Loan Portfolio........................ 29-30, 35-38, 41, 66
IV. Summary of Loan Loss Experience....... 36-38, 56
V. Deposits.............................. 33, 38-39
VI. Return on Equity and Assets........... 27
VII. Other Borrowings...................... 38-40
Item 2. Properties
We lease our principal executive office at 2980 Fairview Park Drive, Suite
1300, Falls Church, Virginia. We lease our principal executive office at 2980
Fairview Park Drive, Suite 1300, Falls Church, Virginia, consisting of
approximately 43,400 square feet. The lease commenced January 1, 1995 and we
have exercised an option to extend the lease until February 28, 2005.
We own administrative offices and credit card facilities in Richmond,
Virginia, consisting of approximately 470,000 square feet, from which we
conduct our credit, collections, customer service and other operations. We
also lease additional facilities consisting of an aggregate of approximately
3,311,601 square feet (excluding the principal executive office) from which
credit, collections, customer service and other operations are conducted,
primarily in Virginia, Florida, Texas, Idaho, Washington and the United
Kingdom. We also own a facility in Tampa, Florida, consisting of approximately
118,624 square feet and another facility in Nottingham, Great Britain,
consisting of approximately 267,000 square feet. We expect to lease or
purchase additional facilities in Virginia, Washington and the United Kingdom
consisting of an aggregate of approximately 650,000 square feet in 2000.
Item 3. Legal Proceedings
The information required by Item 3 is included in the Annual Report on
pages 64-65 under the heading "Notes to Consolidated Financial Statements--
Note K--Commitments and Contingencies."
Item 4. Submission of Matters To a Vote of Security Holders
During the fourth quarter of our fiscal year ending December 31, 1999, no
matters were submitted to a vote of our stockholders.
15
PART II
Item 5. Market For Company's Common Stock And Related Stockholder Matters.
The information required by Item 5 is included under "Supervision and
Regulation--Dividends and Transfers of Funds" herein and in the Annual Report
on pages 38-40 under the headings "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Funding" and "--Capital
Adequacy," on page 45 under the heading "Selected Quarterly Financial Data"
and on pages 64-65 in Note K to Consolidated Financial Statements, and is
incorporated herein by reference and filed as part of Exhibit 13.
Item 6. Selected Financial Data.
The information required by Item 6 is included in the Annual Report on page
27 under the heading "Selected Financial and Operating Data," and is
incorporated herein by reference and filed as part of Exhibit 13.
Item 7. Management's Discussion And Analysis Of Financial Condition And
Results Of Operations.
The information required by Item 7 is included in the Annual Report on
pages 28-44 under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and is incorporated herein by
reference and filed as part of Exhibit 13.
Item 7A. Quantitative And Qualitative Disclosures About Market Risk.
The information required by Item 7A is included in the Annual Report on
page 41 under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Interest Rate Sensitivity," and is
incorporated herein by reference and filed as part of Exhibit 13.
Item 8. Financial Statements And Supplementary Data.
The information required by Item 8 is included in the Annual Report on page
47 under the heading "Report of Independent Auditors," on pages 48-68 under
the headings "Consolidated Balance Sheets," "Consolidated Statements of
Income," "Consolidated Statements of Changes in Stockholders' Equity,"
"Consolidated Statements of Cash Flows" and "Notes to Consolidated Financial
Statements" and on page 45 under the heading "Selected Quarterly Financial
Data," and is incorporated herein by reference and filed as part of
Exhibit 13.
Item 9. Changes In And Disagreements With Accountants On Accounting And
Financial Disclosure.
Not applicable.
16
PART III
Item 10. Directors And Executive Officers Of The Company.
The information required by Item 10 is included in the Company's 1999 Proxy
Statement (the "Proxy Statement") on pages 6-8 under the heading "Information
About Our Directors and Executive Officers" and on page 5 under the heading
"Information About Capital One's Common Stock Ownership--Section 16(a)
Beneficial Ownership Reporting Compliance," and is incorporated herein by
reference. The Proxy Statement will be filed with the Securities and Exchange
Commission pursuant to Regulation 14A within 120 days of the end of the
Corporation's 1999 fiscal year.
Item 11. Executive Compensation.
The information required by Item 11 is included in the Proxy Statement on
page 9 under the heading "Information About Our Directors and Executive
Officers--Compensation of the Board," on pages 11-16 under the heading
"Compensation of Executive Officers" and on pages 18-22 under the heading
"Report on Executive Compensation of the Compensation Committee," and is
incorporated herein by reference.
Item 12. Security Ownership Of Certain Beneficial Owners And Management.
The information required by Item 12 is included in the Proxy Statement on
page 4 under the heading "Information About Capital One's Common Stock
Ownership," and is incorporated herein by reference.
Item 13. Certain Relationships And Related Transactions
The information required by Item 13 is included in the Proxy Statement on
page 10 under the heading "Information About Our Directors and Executive
Officers--Related Party Transactions with Directors," and is incorporated
herein by reference.
17
PART IV
Item 14. Exhibits, Financial Statement Schedules And Reports On Form 8-K
(a) (1) The following consolidated financial statements of Capital One
Financial Corporation, included in the Annual Report, are incorporated herein
by reference in Item 8:
Report of Independent Auditors, Ernst & Young LLP
Consolidated Balance Sheets--As of December 31, 1999 and 1998
Consolidated Statements of Income--Years ended December 31, 1999, 1998 and
1997
Consolidated Statements of Changes in Stockholders' Equity--Years ended
December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows--Years ended December 31, 1999, 1998
and 1997
Notes to Consolidated Financial Statements
Selected Quarterly Financial Data--As of and for the years ended
December 31, 1999 and 1998
(2) All schedules are omitted since the required information is either not
applicable, not deemed material, or is shown in the respective financial
statements or in notes thereto.
(3) Exhibits:
18
The following exhibits are incorporated by reference or filed herewith.
References to (i) the "1994 Form 10-K" are to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994; (ii) the "1995 Form 10-K" are
to the Company's Annual Report on Form 10-K for the year ended December 31,
1995; (iii) the "1996 Form 10-K" are to the Company's Annual Report on Form
10-K for the year ended December 31, 1996; (iv) the "1997 Form 10-K" are to
the Company's Annual Report on Form 10-K for the year ended December 31, 1997;
and (v) the "1998 Form 10-K" are to the Company's Annual Report on Form 10-K
for the year ended December 31, 1998.
Exhibit
Number Description
- ------- -----------
3.1 Restated Certificate of Incorporation of Capital One Financial Corporation
(incorporated by reference to Exhibit 3.1 of the 1994 Form 10-K).
3.2 Amended and Restated Bylaws of Capital One Financial Corporation (as amended
November 18, 1999).
4.1 Specimen certificate representing the Common Stock (incorporated by reference to
Exhibit 4.1 of the 1997 Form 10-K).
4.2.1 Rights Agreement dated as of November 16, 1995 between Capital One Financial
Corporation and Mellon Bank, N.A. (incorporated by reference to Exhibit 4.1 of
the Company's Report on Form 8-K, filed November 16, 1995).
4.2.2 Amendment to Rights Agreement dated as of April 29, 1999 between Capital One
Financial Corporation and First Chicago Trust Company of New York, as successor
to Mellon Bank, N.A.
4.3 Amended and Restated Issuing and Paying Agency Agreement dated as of April 30,
1996 between Capital One Bank and Chemical Bank (including exhibits A-1, A-2, A-
3 and A-4 thereto) (incorporated by reference to Exhibit 4.1 of the Company's
quarterly report on Form 10-Q for the period ending June 30, 1996).
4.4 Issuing and Paying Agency Agreement dated as of April 30, 1996 between Capital
One Bank and Chemical Bank (including exhibits A-1 and A-2 thereto)
(incorporated by reference to Exhibit 4.2 of the Company's quarterly report on
Form 10-Q for the period ending June 30, 1996).
4.5.1 Senior Indenture and Form T-1 dated as of November 1, 1996 among Capital One
Financial Corporation and Harris Trust and Savings Bank (incorporated by
reference to Exhibit 4.1 of the Company's Report on Form 8-K, filed November 13,
1996).
4.5.2 Copy of 7.25% Notes Due 2003 (incorporated by reference to Exhibit 4.5.2 of the
1996 Form 10-K).
4.6.1 Declaration of Trust, dated as of January 28, 1997, between Capital One Bank and
The First National Bank of Chicago, as trustee (including the Certificate of
Trust executed by First Chicago Delaware Inc., as Delaware trustee)
(incorporated by reference to Exhibit 4.6.1 of the 1996 Form 10-K).
4.6.2 Copies of Certificates Evidencing Capital Securities (incorporated by reference
to Exhibit 4.6.2 of the 1996 Form 10-K).
4.6.3 Amended and Restated Declaration of Trust, dated as of January 31, 1997, by and
among Capital One Bank, The First National Bank of Chicago and First Chicago
Delaware Inc. (incorporated by reference To Exhibit 4.6.3 of the 1996 Form 10-
K).
4.7 Indenture, dated as of January 31, 1997, between Capital One Bank and The First
National Bank of Chicago (incorporated by reference to Exhibit 4.7 of the 1996
Form 10-K).
4.8 Copy of 7 1/8% Notes due 2008 (incorporated by reference to Exhibit 4.8 of the
1998 Form 10-K).
4.9 Issue and Paying Agency Agreement dated as of October 24, 1997 between Capital
One Bank, Morgan Guaranty Trust Company of New York, London Office, and the
Paying Agents named therein (incorporated by reference to Exhibit 4.9 of the
1998 Form 10-K).
4.10 Copy of 7% Notes due 2006.
19
Exhibit
Number Description
- ------- -----------
10.1.1 Amended and Restated Distribution Agreement dated April 30, 1996 among Capital
One Bank and the agents named therein (incorporated by reference to Exhibit 10.1
of the Company's quarterly Report on Form 10-Q for period ending June 30, 1996).
10.1.2 Amendment to Amended and Restated Distribution Agreement dated April 21, 1998
among Capital One Bank and the agents named therein (incorporated by reference
to Exhibit 10.1.1 of the 1998 Form 10-K).
10.1.3 Second Amendment to Amended and Restated Distribution Agreement dated April 30,
1999 among Capital One Bank and the agents named therein.
10.2.1 Distribution Agreement dated April 30, 1996, among Capital One Bank and the
agents named therein (incorporated by reference to Exhibit 10.2 of the Company's
quarterly report on Form 10-Q for period ending June 30, 1996).
10.2.2 Amendment to Distribution Agreement dated April 30, 1998, among Capital One Bank
and the Agents named therein (incorporated by reference to Exhibit 10.2.1 of the
1998 Form 10-K).
10.3* Form of Employment Agreement dated as of January 25, 2000 between Capital One
Financial Corporation and each of Richard D. Fairbank, Nigel W. Morris and John
G. Finneran Jr.
10.4* Capital One Financial Corporation 1999 Non-Employee Directors Stock Incentive
Plan (incorporated by reference to Registrant's Registration Statement on Form
S-8, Commission File No. 333-78635, filed May 17, 1999).
10.5 Intentionally left blank.
10.6* Capital One Financial Corporation 1999 Stock Incentive Plan (incorporated by
reference to Registrant's Registration Statement on Form S-8, Commission File
No. 333-78609, filed May 17, 1999).
10.7* Capital One Financial Corporation 1994 Stock Incentive Plan, as amended.
10.8 Intentionally left blank.
10.9* Form of Change of Control Agreement between Capital One Financial Corporation and
certain of its senior executives (incorporated by reference to Exhibit 10.9 of
the 1998 Form 10-K).
10.10.1* Form of Amendment to Change of Control Agreement between Capital One Financial
Corporation and certain of its senior executives (incorporated by reference to
Exhibit 10.10 of the 1998 Form 10-K).
10.10.2* Amended and Restated Employment Agreement dated as of January 25, 2000 between
Capital One Financial Corporation and certain of its senior executives.
10.11* Capital One Financial Corporation Excess Savings Plan, as amended (incorporated
by reference to Exhibit 10.20 of the 1995 Form 10-K).
10.12* Capital One Financial Corporation Excess Benefit Cash Balance Plan, as amended
(incorporated by Reference to Exhibit 10.21 of the 1995 Form 10-K).
10.13* Capital One Financial Corporation 1994 Deferred Compensation Plan, as amended
(incorporated by Reference to Exhibit 10.22 of the 1995 Form 10-K).
10.14* 1995 Non-Employee Directors Stock Incentive Plan (incorporated by reference to
Registrant's Registration Statement on Form S-8, Commission File No. 33-91790,
filed May 1, 1995).
10.15 Services Agreement dated as of April 1, 1999 by and between D'Arcy Masius Benton
& Bowles USA, Inc. and Capital One Financial Corporation.
10.16 Consulting Agreement dated as of April 5, 1995, by and between Capital One
Financial Corporation and American Management Systems, Inc. (incorporated by
reference to Exhibit 10.33 of the 1995 Form 10-K).
20
Exhibit
Number Description
- ------- -----------
10.17.1 Amended and Restated Lease Agreement dated as of October 14, 1998 between First
Security Bank of Utah, N.A., as owner trustee for the COB Real Estate Trust
1995-1, as lessor and Capital One Realty, Inc., as lessee (incorporated by
reference to Exhibit 10.17.1 of the 1998 Form 10-K).
10.17.2 Guaranty dated as of October 14, 1998 from Capital One Bank in favor of First
Security Bank, N.A., as owner trustee for the COB Real Estate Trust 1995-1,
First Union National Bank, as indenture trustee, Lawyers Title Realty Services,
Inc., as deed of trust trustee, and the Note Purchasers, Registered Owners and
LC Issuer referred to therein (incorporated by reference to Exhibit 10.17.2 of
the 1998 Form 10-K).
10.17.3 Amendment to Lease Documents dated as of October 1, 1999 between First Security
Bank of Utah, N.A., as owner trustee for COB Real Estate Trust 1995-1, as lessor
and Capital One Realty, Inc., as lessee.
10.17.4 Amendment to Guaranty dated as of April 1, 1999 between Capital One Bank and
First Security Bank, N.A., as owner trustee for the COB Real Estate Trust 1995-
1, First Union National Bank, as indenture trustee, Lawyers Title Realty
Services, Inc., as deed of trust trustee, and the Note Purchasers, Registered
Owners and LC Issuer referred to therein.
10.18.1 Second Amended and Restated Credit Agreement dated as of May 25, 1999 by and
among Capital One Financial Corporation, Capital One Bank and Capital One,
F.S.B, as original borrowers, and The Chase Manhattan Bank, as administrative
agent and lender and the other lenders named therein.
10.18.2 Amendment to Second Amended and Restated Credit Agreement dated as of December
21, 1999 among Capital One Financial Corporation, Capital One Bank and Capital
One, F.S.B., as original borrowers, and The Chase Manhattan Bank, as
administrative agent.
10.19.1 Revolving Credit Facility Agreement dated as of August 29, 1997 by and among
Capital One Finance Company and Capital One Inc., as original borrowers, Capital
One Financial Corporation, as original guarantor, and the agents and lenders
named therein (incorporated by reference to Exhibit 10.19 of the 1997 Form 10-
K).
10.19.2 Amendment to Revolving Credit Facility agreement dated as of December 21, 1999
between Capital One Finance Company and Capital One Inc., as original borrowers,
Capital One Financial Corporation, as original guarantor, and the agents and
lenders named therein.
10.20 Form of Intellectual Property Protection Agreement dated as of April 29,1999 by
and among Capital One Financial Corporation and certain of its senior
executives.
10.21 Credit Agreement (Capital One Realty, Inc.) dated as of September 3, 1999 between
First Security Bank, N.A. as owner trustee for Capital One Realty Trust 1998-1,
as borrower, and Bank of America, N.A., as administrative agent.
10.22 Lease Agreement (Capital One Realty, Inc.) dated as of September 3, 1999 between
First Security Bank, N.A. as owner trustee for Capital One Realty Trust 1998-1,
as lessor, and Capital One Realty, Inc. as lessee.
10.23 Participation Agreement (Capital One Realty, Inc.) dated as of September 3, 1999
among Capital One Realty, Inc., as construction agent and lessee, Capital One
Bank, as guarantor, First Security Bank, N.A. as owner trustee under the Capital
One Realty Trust 1998-1, and the holders and lenders named therein.
10.24 Credit Agreement (Capital One Services, Inc.) dated as of September 3, 1999
between First Security Bank, N.A. as owner trustee for Capital One Realty Trust
1998-1 as borrower and Bank of America N.A. as administrative agent.
10.25 Lease Agreement (Capital One Services, Inc.) dated as of September 3, 1999
between First Security Bank, N. A. as owner trustee for Capital One Realty Trust
1998-1 as lessor and Capital One Realty, Inc. as lessee.
21
Exhibit
Number Description
- ------- -----------
10.26 Participation Agreement (Capital One Services, Inc.) dated as of September 3,
1999 among Capital One Services, Inc. as construction agent as lessee, Capital
One Financial Corporation as guarantor, First Security Bank, N.A. as owner
trustee under the Capital One Realty Trust 1998-1 and the holders and lenders
named therein.
13 The portions of Capital One Financial Corporation's 1999 Annual Report to
Stockholders that are incorporated by reference herein.
21 Subsidiaries of the Company.
23 Consent of Ernst & Young LLP.
27 Financial Data Schedule.
- --------
* Indicates a management contract or compensation plan or arrangement
required to be filed as an exhibit to this Annual Report on Form 10-K.
(b) Reports on Form 8-K
The Company filed on October 14, 1999 a Current Report on Form 8-K dated
October 14, 1999, Commission File No. 1-13300, enclosing its press release
dated October 14, 1999.
The Company filed on October 29, 1999 a Current Report on Form 8-K dated
October 27, 1999, Commission File No. 1-13300, enclosing its press release
dated October 27, 1999.
22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Capital One Financial Corporation
/s/ David M. Willey
By: _________________________________
David M. Willey
Senior Vice President, Corporate
Financial Management
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the Company
and in the capacities indicated on the 21st day of March, 2000
Signature Title Date
--------- ----- ----
Director, Chairman and March 21, 2000
/s/ Richard D. Fairbank Chief Executive Officer
___________________________________ (Principal Executive
Richard D. Fairbank Officer)
/s/ Nigel W. Morris Director, President and March 21, 2000
___________________________________ Chief Operating Officer
Nigel W. Morris
/s/ David M. Willey Senior Vice President, March 21, 2000
___________________________________ Corporate Financial
David M. Willey Management
(Principal Accounting
and Financial Officer)
/s/ W. Ronald Dietz Director March 21, 2000
___________________________________
W. Ronald Dietz
/s/ James A. Flick, Jr. Director March 21, 2000
___________________________________
James A. Flick, Jr.
/s/ Patrick W. Gross Director March 21, 2000
___________________________________
Patrick W. Gross
/s/ James V. Kimsey Director March 21, 2000
___________________________________
James V. Kimsey
/s/ Stanley I. Westreich Director March 21, 2000
___________________________________
Stanley I. Westreich
23
EXHIBITS TO CAPITAL ONE FINANCIAL CORPORATION
ANNUAL REPORT ON FORM 10-K
DATED DECEMBER 31, 1999
Commission File No. 1-13300
Exhibit
Number Description
------- -----------
3.1 Restated Certificate of Incorporation of Capital One Financial Corporation
(incorporated by reference To Exhibit 3.1 of the 1994 Form 10-K).
3.2 Amended and Restated Bylaws of Capital One Financial Corporation (as amended
November 18, 1999).
4.1 Specimen certificate representing the Common Stock (incorporated by reference to
Exhibit 4.1 of the 1997 Form 10-K).
4.2.1 Rights Agreement dated as of November 16, 1995 between Capital One Financial
Corporation and Mellon Bank, N.A. (incorporated by reference to Exhibit 4.1 of
the Company's Report on Form 8-K, filed November 16, 1995).
4.2.2 Amendment to Rights Agreement dated as of April 29, 1999 between Capital One
Financial Corporation and First Chicago Trust Company of New York, as successor
to Mellon Bank, N.A.
4.3 Amended and Restated Issuing and Paying Agency Agreement dated as of April 30,
1996 between Capital One Bank and Chemical Bank (including exhibits A-1, A-2, A-
3 and A-4 thereto) (incorporated by reference to Exhibit 4.1 of the Company's
quarterly report on Form 10-Q for the period ending June 30, 1996).
4.4 Issuing and Paying Agency Agreement dated as of April 30, 1996 between Capital
One Bank and Chemical Bank (including exhibits A-1 and A-2 thereto)
(incorporated by reference to Exhibit 4.2 of the Company's quarterly report on
Form 10-Q for the period ending June 30, 1996).
4.5.1 Senior Indenture and Form T-1 dated as of November 1, 1996 among Capital One
Financial Corporation and Harris Trust and Savings Bank (incorporated by
reference to Exhibit 4.1 of the Company's Report on Form 8-K, filed November 13,
1996).
4.5.2 Copy of 7.25% Notes Due 2003 (incorporated by reference to Exhibit 4.5.2 of the
1996 Form 10-K).
4.6.1 Declaration of Trust, dated as of January 28, 1997, between Capital One Bank and
The First National Bank of Chicago, as trustee (including the Certificate of
Trust executed by First Chicago Delaware Inc., as Delaware trustee)
(incorporated by reference to Exhibit 4.6.1 of the 1996 Form 10-K).
4.6.2 Copies of Certificates Evidencing Capital Securities (incorporated by reference
to Exhibit 4.6.2 of the 1996 Form 10-K).
4.6.3 Amended and Restated Declaration of Trust, dated as of January 31, 1997, by and
among Capital One Bank, The First National Bank of Chicago and First Chicago
Delaware Inc. (incorporated by reference To Exhibit 4.6.3 of the 1996 Form 10-
K).
4.7 Indenture, dated as of January 31, 1997, between Capital One Bank and The First
National Bank of Chicago (incorporated by reference to Exhibit 4.7 of the 1996
Form 10-K).
4.8 Copy of 7 1/8% Notes due 2008 (incorporated by reference to Exhibit 4.8.2 of the
1998 Form 10-K).
4.9 Issue and Paying Agency Agreement dated as of October 24, 1997 between Capital
One Bank, Morgan Guaranty Trust Company of New York, London Office, and the
Paying Agents named Therein (incorporated by reference to Exhibit 4.9 of the
1998 Form 10-K).
4.10 Copy of 7% Notes due 2006.
24
Exhibit
Number Description
- ------- -----------
10.1.1 Amended and Restated Distribution Agreement dated April 30, 1996 among Capital
One Bank and the agents named therein (incorporated by reference to Exhibit 10.1
of the Company's quarterly Report on Form 10-Q for period ending June 30, 1996).
10.1.2 Amendment to Amended and Restated Distribution Agreement dated April 21, 1998
among Capital One Bank and the agents named therein (incorporated by reference
to Exhibit 10.1.1 of the 1998 Form 10-K).
10.1.3 Second Amendment to Amended and Restated Distribution Agreement dated April 30,
1999 among Capital One Bank and the agents named therein.
10.2.1 Distribution Agreement dated April 30, 1996, among Capital One Bank and the
agents named therein (incorporated by reference to Exhibit 10.2 of the Company's
quarterly report on Form 10-Q for period ending June 30, 1996).
10.2.2 Amendment to Distribution Agreement dated April 30, 1998, among Capital One Bank
and the Agents named therein (incorporated by reference to Exhibit 10.2.1 of the
1998 Form 10-K).
10.3* Form of Change of Control Employment Agreement dated as of January 25, 2000
between Capital One Financial Corporation and each of Richard D. Fairbank, Nigel
W. Morris and John G. Finneran Jr.
10.4* Capital One Financial Corporation 1999 Non-Employee Directors Stock Incentive
Plan (incorporated by reference to Registrant's Registration Statement on Form
S-8, Commission File No. 333-78635, filed May 17, 1999).
10.5 Intentionally left blank.
10.6* Capital One Financial Corporation 1999 Stock Incentive Plan (incorporated by
reference to Registrant's Registration Statement on Form S-8, Commission File
No. 333-78609, filed May 17, 1999).
10.7* Capital One Financial Corporation 1994 Stock Incentive Plan, as amended.
10.8 Intentionally left blank.
10.9* Form of Change of Control Employment Agreement between Capital One Financial
Corporation and certain of its senior executives (incorporated by reference to
Exhibit 10.9 of the 1998 Form 10-K).
10.10.1* Form of Amendment to Change of Control Employment Agreement between Capital One
Financial Corporation and certain of its senior executives (incorporated by
reference to Exhibit 10.10 of the 1998 Form 10-K).
10.10.2* Amended and Restated Change of Control Employment Agreement dated as of January
25, 2000 between Capital One Financial Corporation and certain of its senior
executives.
10.11* Capital One Financial Corporation Excess Savings Plan, as amended (incorporated
by reference to Exhibit 10.20 of the 1995 Form 10-K).
10.12* Capital One Financial Corporation Excess Benefit Cash Balance Plan, as amended
(incorporated by Reference to Exhibit 10.21 of the 1995 Form 10-K).
10.13* Capital One Financial Corporation 1994 Deferred Compensation Plan, as amended
(incorporated by Reference to Exhibit 10.22 of the 1995 Form 10-K).
10.14* 1995 Non-Employee Directors Stock Incentive Plan (incorporated by reference to
Registrant's Registration Statement on Form S-8, Commission File No. 33-91790,
filed May 1, 1995).
10.15 Services Agreement dated as of April 1, 1999 by and between D'Arcy Masius Benton
& Bowles USA, Inc. and Capital One Financial Corporation.
10.16 Consulting Agreement dated as of April 5, 1995, by and between Capital One
Financial Corporation
and American Management Systems, Inc. (incorporated by reference to Exhibit
10.33 of the 1995
Form 10-K).
25
Exhibit
Number Description
- ------- -----------
10.17.1 Amended and Restated Lease Agreement dated as of October 14, 1998 between First
Security Bank of Utah, N.A., as owner trustee for the COB Real Estate Trust
1995-1, as lessor and Capital One Realty, Inc., as lessee (incorporated by
reference to Exhibit 10.17.1 of the 1998 Form 10-K).
10.17.2 Guaranty dated as of October 14, 1998 from Capital One Bank in favor of First
Security Bank, N.A., as owner trustee for the COB Real Estate Trust 1995-1,
First Union National Bank, as indenture trustee, Lawyers Title Realty Services,
Inc., as deed of trust trustee, and the Note Purchasers, Registered Owners and
LC Issuer referred to therein (incorporated by reference to Exhibit 10.17.2 of
the 1998 Form 10-K).
10.17.3 Amendment to Lease Documents dated as of October 1, 1999 between First Security
Bank, N.A., and Val T. Orton, as owner trustees for COB Real Estate Trust 1995-
1, Capital One Bank, Capital One Realty, Inc.and Lawyers Title Realty Services,
Inc.
10.17.4 Amendment to Guaranty dated as of April 1, 1999 between Capital One Bank and
First Security Bank, N.A., and Val T. Orton, as owner trustees for the COB Real
Estate Trust 1995-1.
10.18.1 Second Amended and Restated Credit Agreement dated as of May 25, 1999 by and
among Capital One Financial Corporation, Capital One Bank and Capital One,
F.S.B, as original borrowers, and The Chase Manhattan Bank, as administrative
agent and lender and the other lenders named therein.
10.18.2 Amendment to Second Amended and Restated Credit Agreement dated as of December
21, 1999 among Capital One Financial Corporation, Capital One Bank and Capital
One, F.S.B., as original borrowers, and The Chase Manhattan Bank, as
administrative agent.
10.19.1 Revolving Credit Facility Agreement dated as of August 29, 1997 by and among
Capital One Finance Company and Capital One Inc., as original borrowers, Capital
One Financial Corporation, as Original guarantor, and the agents and lenders
named therein (incorporated by reference to Exhibit 10.19 of the 1997 Form 10-
K).
10.19.2 Amendment to Revolving Credit Facility agreement dated as of December 21, 1999
between Capital One Finance Company. Capital One Inc., Capital One Financial
Corporation, and the agents and lenders named therein.
10.20 Form of Intellectual Property Protection Agreement dated as of April 29,1999 by
and among Capital One Financial Corporation and certain of its senior
executives.
10.21 Credit Agreement (Capital One Realty, Inc.) dated as of September 3, 1999 between
First Security Bank, N.A. as owner trustee for Capital One Realty Trust 1998-1,
as borrower, the lenders party thereto and Bank of America, N.A., as
administrative agent.
10.22 Lease Agreement (Capital One Realty, Inc.) dated as of September 3, 1999 between
First Security Bank, N.A. as owner trustee for Capital One Realty Trust 1998-1,
as lessor, and Capital One Realty, Inc. as lessee.
10.23 Participation Agreement (Capital One Realty, Inc.) dated as of September 3, 1999
among Capital One Realty, Inc., as construction agent and lessee, Capital One
Bank, as guarantor, First Security Bank, N.A. as owner trustee under the Capital
One Realty Trust 1998-1, the holders and lenders named therein, and Bank of
America, N.A. as agent.
10.24 Credit Agreement (Capital One Services, Inc.) dated as of September 3, 1999
between First Security Bank, N.A., as owner trustee for Capital One Realty Trust
1998-1, as borrower, the lenders party thereto and Bank of America N.A. as
administrative agent.
10.25 Lease Agreement (Capital One Services, Inc.) dated as of September 3, 1999
between First Security Bank, N. A., as owner trustee for Capital One Realty
Trust 1998-1, as lessor, and Capital One Services, Inc. as lessee.
26
Exhibit
Number Description
- ------- -----------
10.26 Participation Agreement (Capital One Services, Inc.) dated as of September 3,
1999 among Capital One Services, Inc. as construction agent and lessee, Capital
One Financial Corporation, as guarantor, First Security Bank, N.A., as owner
trustee under the Capital One Realty Trust 1998-1, the holders and lenders named
therein, and Bank of America, N.A., as agent.
13 The portions of Capital One Financial Corporation's 1999 Annual Report to
Stockholders that are incorporated by reference herein.
21 Subsidiaries of the Company.
23 Consent of Ernst & Young LLP.
27 Financial Data Schedule.
- --------
* Indicates a management contract or compensation plan or arrangement
required to be filed as an exhibit to this Annual Report on Form 10-K.
27