SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(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, 2000.
[_] 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
(State or Other Jurisdiction
of Incorporation or Organization)
2980 Fairview Park Drive, Suite 1300
Falls Church, Virginia
(Address of Principal Executive Offices)
54-1719854
(I.R.S. Employer
Identification No.)
22042-4525
(Zip Code)
Registrant's telephone number, including area code: (703) 205-1000
Securities registered pursuant to section 12(b) of the act:
Title of Each Class
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Common Stock, $.01 Par Value
Preferred Stock Purchase Rights*
Name of Each Exchange on
Which Registered
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New York Stock Exchange
New York Stock Exchange
* 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 28, 2001.
Common Stock, $.01 Par Value: $11,511,485,965*
. 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 28, 2001.
Common Stock, $.01 Par Value: 207,214,626 shares
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Annual Report to stockholders for the year ended December 31,
2000 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 26, 2001 are incorporated by reference into Part III.
CAPITAL ONE FINANCIAL CORPORATION
2000 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
Item 1. Business......................................................................................... 1
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Business Description......................................................................... 2
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Operations................................................................................... 3
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Funding...................................................................................... 5
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Competition.................................................................................. 5
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Employees.................................................................................... 6
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Supervision and Regulation................................................................... 6
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Risk Factors................................................................................. 12
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Item 2. Properties........................................................................................ 17
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Item 3. Legal Proceedings................................................................................. 17
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Item 4. Submission of Matters To a Vote of Security Holders............................................... 17
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Item 5. Market For Company's Common Stock And Related Stockholder Matters................................. 18
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Item 6. Selected Financial Data........................................................................... 18
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Item 7. Management's Discussion And Analysis Of Financial Condition And Results Of Operations............. 18
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Item 7A. Quantitative And Qualitative Disclosures About Market Risk....................................... 18
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Item. 8 Financial Statements And Supplementary Data....................................................... 18
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Item 9. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure.............. 18
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Item 10. Directors And Executive Officers Of The Company.................................................. 19
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Item 11. Executive Compensation........................................................................... 19
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Item 12. Security Ownership Of Certain Beneficial Owners And Management................................... 19
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Item 13. Certain Relationships And Related Transactions................................................... 19
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Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.................................. 20
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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, 2000, we had 33.8 million customers and $29.5 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, 2000. 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 and installment loan
products. 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 Capital
One Bank (Europe) plc, an indirect subsidiary of the Bank organized and located
in the United Kingdom (the "UK Bank"), through a branch of the Bank in Canada,
and through our involvement in a joint venture with a South African financial
institution. We currently have foreign operations primarily in the United
Kingdom and Canada, with additional operations in South Africa and France. 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, including automobile financing and installment loan
products, 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.
______________________
/1/ Signet Bank and Signet Banking Corporation were 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 Description
Our business consists of both lending and non-lending activities. Our
lending activities consist primarily of credit card products but also include
other consumer lending activities, such as unsecured installment lending and
automobile financing. Our non-lending business activities consist primarily of
our retail deposit-taking business and various non-lending new business
initiatives.
Lending Activities
We offer a wide variety of credit card products throughout the United
States, and internationally primarily in 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. Our automobile finance subsidiary, Capital One
Auto Finance, Inc./2/, a Texas corporation which we acquired in 1998 ("Capital
One Auto Finance"), offers loans, secured by automobiles, through dealer
networks throughout the United States/2/. Capital One Auto Finance is our
platform to apply IBS to the automobile loan market, and as of December 31,
2000, loans outstanding at Capital One Auto Finance have tripled since its
acquisition in 1998.
We have also expanded our existing operations outside of the United States,
and are currently operating primarily in the United Kingdom and Canada, with
additional operations in South Africa and France. We have experienced continuing
growth in the number of accounts and loan balances in our international lending
business, with most of our growth coming from our business in the United
Kingdom. In 2000, to support the continued growth of our United Kingdom business
and any future business in Europe, we established the UK Bank, which has
authority to conduct full-service operations.
Our internet services provide significant support for our lending business
and include account decisioning, real-time account numbering and account
servicing. In the fourth quarter of 2000, we surpassed our previously stated
goal of originating one million accounts and servicing two million accounts
online by the end of 2000.
Non-Lending Activities
Our non-lending business consists primarily of our retail deposit-taking
business, which is also supported in part by our internet services. In 2000, we
launched CapitalOnePlace.com where we offer consumers a variety of products
________________
/2/ Capital One Auto Finance, Inc. was formerly known as Summit Acceptance
Corporation. We changed its name to Capital One Auto Finance, Inc. on
November 7, 2000.
2
available for purchase online, some of which are offered in partnership with
other companies. We also engage in various other non-lending new business
initiatives, which we currently believe are not material to our operations or
financial condition.
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 62 of the Company's Annual Report
to its stockholders for the year ended December 31, 2000 (the "Annual
Report"), which is incorporated herein by reference.
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 are increasing our efforts to solicit accounts through the internet,
newspaper, magazine, partnership arrangements, radio and television advertising
and location and event marketing. In 2000 we originated more than 1 million
accounts and serviced more than 2 million accounts online. 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 respect the
privacy of our customers (and potential customers) by using customer information
only in accordance with our privacy policies and applicable laws.
We are also developing a brand marketing, or "brand awareness", strategy
with the intent of differentiating ourselves from other credit card issuers and
building a branded franchise to support our IBS and mass customization
strategies.
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, taking into consideration a multitude of factors, including
prescreening criteria, proprietary model development and usage, as well as
reviews of test programs and test results.
An important element of our risk management process is our use of IBS to
identify and target potential consumers. We attempt to continuously monitor and
improve the effectiveness of our information systems and processes such that
senior management possesses the tools to manage portfolio risk and respond to
changing market conditions and challenges.
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.
3
We validate, monitor and maintain these models as part of IBS. Our modeling
also provides us with a tool to objectively measure our application stage credit
policy decisions and account policies relating to credit lines, pricing and
collections.
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 a
credit report from one or more credit reporting agencies.
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 calculate new credit scores for 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, product upgrades 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 is also used 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 introductory 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 delinquencies
and charge-offs. 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 attains delinquent status. We may also, at our discretion,
enter into arrangements with delinquent accountholders to extend or otherwise
change payment schedules.
4
We charge-off as uncollectible an account (net of collateral, if any) at
180 days past-due, except with respect to certain installment loans and auto
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. In connection with auto loans, for which we retain
a security interest in the automobile which is the subject of the loan, we
charge-off up to 40% of the value of the loan on the charge-off date, with
additional amounts potentially charged off at a later date following our sale of
the collateral and recovery of the proceeds from such sale. 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, and no
other responsible party is available. Transactions suspected of being fraudulent
are charged off to non-interest expense after a 60-day investigation period. 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 computer and operational 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 information 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, 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 25 and 34 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
5
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, 2000, we employed 19,247 employees, to whom we refer 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 is covered under a collective bargaining agreement.
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"). In
addition to regulatory requirements imposed as a result of the Bank's
international operations (discussed below), 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 and the FDIC. 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 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.
6
Under the Gramm-Leach-Bliley Financial Services Modernization Act of 1999
(the "Act"), 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 "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. 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.
While the Act 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
Dividends to the Corporation from its direct and indirect subsidiaries
represent a major source of funds for the Corporation to pay dividends on its
stock, make payments on its debt securities and meet its other obligations.
There are various federal and Virginia law limitations on the extent to which
the Bank and the Savings Bank can finance or 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 36 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 pages 58-59, which are incorporated herein
by reference.
In January 2001, the Basle Committee on Banking Supervision issued for
public comment a proposal to revise significantly the current international
7
capital adequacy accord. The purpose of the revisions is to ensure that banking
organizations maintain prudent levels of capital, to make regulatory capital
standards more reflective of banking risks, and to provide incentives for
organizations to enhance their risk management capabilities. While many of these
changes address the activities of internationally active banks, some elements of
the proposal, including a revised basic or standardized risk-based capital
framework, could affect all U.S. banking organizations. The proposal embodies a
"three-pillars" approach for assessing a banking organization's capital
adequacy. These pillars are: a more risk-sensitive minimum regulatory capital
requirement; effective supervisory oversight; and strengthened market discipline
through enhanced public disclosure. 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, 2000, 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 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
8
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 Act. As of December 31, 2000, 78.22% of the Savings Bank's
portfolio assets were held in qualified thrift investments, and the Savings Bank
was in compliance with the QTL Test.
Subprime Lending Guidelines
On January 31, 2001, the federal banking agencies, including the Federal
Reserve and the OTS, issued "Expanded Guidance for Subprime Lending Programs"
(the "Guidelines"). The Guidelines, while not constituting a formal regulation,
provide guidance to the federal bank examiners regarding the adequacy of capital
and loan loss reserves held by insured depository institutions engaged in
subprime lending. The Guidelines adopt a broad definition of "subprime" loans
which likely covers more than one-third of all consumers in the United States.
Because our business strategy is to provide credit card products and other
consumer loans to a wide range of consumers, a portion of our loan assets may be
viewed by the examiners as "subprime". Thus, under the Guidelines, bank
examiners could require the Bank or the Savings Bank to hold additional capital
(up to one and one-half to three times the minimally required level of capital,
as set forth in the Guidelines), or additional loan loss reserves, against such
assets. As described above, at December 31, 2000 the Bank and the Savings Bank
each met the requirements for a "well-capitalized" institution, and management
believes that each institution is holding an appropriate amount of capital or
loan loss reserves against higher risk assets. Management also believes we have
general risk management practices in place that are appropriate in light of our
business strategy. Significantly increased capital or loan loss reserve
requirements, if imposed, however, could have a material impact on the
Corporation's consolidated financial statements.
Regulation of Lending Activities
The activities of the Bank and the Savings Bank as consumer lenders also
are subject to regulation under various federal laws, including the Truth-in-
Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act,
9
the Community Reinvestment Act and the Soldiers' and Sailors' Civil Relief Act,
as well as under various state laws. Regulators are authorized to impose
penalties for violations of these statutes and, in certain 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.
OTS Holding Company Proposal
On October 27, 2000, the OTS issued a notice of proposed rulemaking which
would require savings and loan holding companies to provide the agency with
prior notice of any significant transactions or activities proposed to be
conducted by the holding company or any of its non-thrift subsidiaries.
Significant transactions or activities include mergers, acquisitions or
significant debt issuances. Because the proposed rule contains a prior notice
requirement, the OTS theoretically could exercise the ability to approve or
disapprove of any proposed transaction, thus potentially delaying or preventing
the Corporation from entering into or consummating a significant transaction in
the future. In response to public comments the OTS received with respect to the
proposed rule, the OTS recently stated its intention to significantly revise the
proposal to address substantial concerns raised. As such, the proposed rule has
not been formally adopted. The nature of any potential impact of this proposed
rule, however, is uncertain and cannot be predicted.
Legislation
Legislation has been introduced requiring additional credit card
disclosures and that could place additional restrictions on the practices of
credit card issuers. Additional proposals have sought to change existing federal
bankruptcy 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 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 have a written privacy
policy posted on our web site, which we will deliver to all of our customers by
June 1, 2001, in compliance with the Act. Pursuant to that policy, we protect
the security of information about our customers, 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 require
business partners with whom we share such information to abide by the
redisclosure and reuse provisions of the Act. We have developed and are in the
process of implementing programs to fulfill on the expressed requests of
customers and consumers to opt out of information sharing subject to the Act. As
our regulators establish further guidelines for addressing customer privacy
issues, we may need to amend our privacy policy 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
10
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.
International Regulation
We also face regulation in certain 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 operate through the UK Bank, which was
established in 2000. The UK Bank is regulated by the Financial Services
Authority and the Office of Fair Trading (the "OFT"). The UK Bank is an
"authorized deposit taker" under the Banking Act-1987 and thus is able to take
consumer deposits in the UK. The UK Bank has also been granted full license by
the OFT to issue consumer credit under the Consumer Credit Act-1974. The FSA
requires the UK Bank to maintain certain capital ratios at all times. In
addition, the UK Bank is limited by the UK Companies Act-1985 in its
distribution of dividends to the Bank in that such dividends may only be paid
out of the UK Bank's "distributable profits."
In Canada, we operate principally through a recently established branch of
the Bank (the "Canadian Branch"). Under U.S. law, a foreign branch of the Bank
may engage only in activities permissible for the Bank in the United States.
Thus, the Canadian Branch is engaged solely in the issuance of credit cards. Our
installment loan business in Canada is conducted through a separately
incorporated finance company subsidiary of the Corporation.
The Canadian Branch is considered a federally regulated financial
institution ("FRFI") under the Canadian Bank Act. FRFIs are authorized and
supervised on an ongoing basis by the Canadian Office of the Superintendent of
Financial Institutions ("OSFI"). The supervisory framework has been developed to
allow OSFI to focus its efforts on evaluating an institution's material risks
and the quality of its risk management practices. These goals are achieved
through OSFI's evaluation of a FRFI's risk profile, financial condition, risk
management processes and compliance with applicable laws and regulations. Areas
of review and evaluation include capital adequacy, large exposure limits,
liquidity, loan loss provisioning, management and outsourcing.
11
In France, we operate through a branch of the UK Bank which was established
under the European Union's passport authority. This branch issues credit cards
and installment loans.
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, with other
general purpose credit or charge card issuers, and to a certain extent, issuers
of smart cards and debit cards. In addition, the Act, 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
offered internationally.
12
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 much we will spend for marketing, how we will spend such
funds, or 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 can 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;
. our 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, including
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;
13
. operational difficulties or delays;
. losses arising from the testing of new products or services; and
. legal and other difficulties.
In addition, any new products and services we offer 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
One of our major sources 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,
securitization transactions 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. For example, securitizations that
meet the criteria for sale treatment under generally accepted accounting
principles 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 will become
uncollectible because accountholders may 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
14
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. 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, as well as rules to which we are subject
in foreign jurisdictions in which we conduct business, 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, in the U.S. or in foreign
jurisdictions in which we conduct business, also could change, making it more
15
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, banking regulators possess broad discretion to issue or revise
regulations, or to issue guidance, which may significantly impact the
Corporation, the Bank or the Savings Bank. As noted above, the OTS is currently
considering a proposal to impose prior notice requirements on savings and loan
holding companies. The banking agencies have also recently issued examiner
guidelines governing subprime lending activities which may require financial
institutions engaged in such lending to carry higher levels of capital and/or
loan loss reserves. The Corporation cannot predict whether a proposed rule will
ultimately be adopted, or if adopted, what form the final rule will take.
Furthermore, the Corporation cannot predict whether and how any guidelines
issued by the agencies will be applied to the Bank or the Savings Bank. As such,
the Corporation cannot predict how any rule or guideline may affect the
Corporation, the Bank or the Savings Bank.
In addition, the existing laws and rules, both in the U.S and in the
foreign jurisdictions in which we conduct operations, 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.
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, 2000
------------------------------------------------------------ --------------------------------
I. Distribution of Assets, Liabilities and Stockholders' Equity;
Interest Rates and Interest Differential........................... 26-31
II. Investment Portfolio............................................... 51
III. Loan Portfolio..................................................... 25-26; 31-34; 37; 48; 52; 62-63
IV. Summary of Loan Loss Experience.................................... 33-34
V. Deposits........................................................... 29; 34-36
VI. Return on Equity and Assets........................................ 23
VII. Other Borrowings................................................... 34-36
16
Item 2. Properties
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 3,946,000
square feet (excluding the principal executive office) from which credit,
collections, customer service and other operations are conducted, in Virginia,
Florida, Texas, Idaho, Washington, Massachusetts, the United Kingdom, France and
Canada. 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, Florida, Washington and the United Kingdom
consisting of an aggregate of approximately 617,500 square feet in 2001. We
purchased approximately 29.2 acres of land in McLean, Virginia on December 5,
2000 and plan to consolidate our Northern Virginia operations into a single
campus. We recently commenced construction of the first phase of the Northern
Virginia campus. We also recently purchased approximately 316 acres of land in
Goochland County, Virginia for the construction of an office campus to
consolidate certain of our operations in the Richmond area.
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, 2000, no
matters were submitted to a vote of our stockholders.
17
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 34-37 under the headings "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Funding" and "--Capital
Adequacy," on page 41 under the heading "Selected Quarterly Financial Data" and
on pages 58-59 in Note J 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
23 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 24-40 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
pages 37-38 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
43 under the heading "Report of Independent Auditors," on pages 44-64 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 41 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.
18
PART III
Item 10. Directors And Executive Officers Of The Company.
The information required by Item 10 is included in the Corporation's 2001
Proxy Statement (the "Proxy Statement") on pages 6-8 under the heading
"Information About Our Directors and Executive Officers and is incorporated
herein by reference. The Proxy Statement was filed with the Securities and
Exchange Commission pursuant to Regulation 14A within 120 days of the end of the
Corporation's 2000 fiscal year.
Item 11. Executive Compensation.
The information required by Item 11 is included in the Proxy Statement on
pages 9-10 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 18-21 under the heading
"Report of the Compensation Committee on Executive Compensation," 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," and on page 12 in Footnote (11) to the
Summary Compensation Table, and is incorporated herein by reference.
19
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, 2000 and 1999
Consolidated Statements of Income--Years ended December 31, 2000, 1999 and
1998
Consolidated Statements of Changes in Stockholders' Equity--Years ended
December 31, 2000, 1999 and 1998
Consolidated Statements of Cash Flows--Years ended December 31, 2000, 1999
and 1998
Notes to Consolidated Financial Statements
Selected Quarterly Financial Data--As of and for the years ended December
31, 2000 and 1999
(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:
A list of the exhibits to this Form 10-K is set forth on the Exhibit Index
immediately preceding such exhibits and is incorporated herein by reference.
(b) Reports on Form 8-K
The Company filed on October 12, 2000 a Current Report on Form 8-K dated
October 11, 2000, Commission File No. 1-13300, enclosing its press release dated
October 11, 2000.
The Company filed on October 24, 2000 a Current Report on Form 8-K dated
October 23, 2000, Commission File No. 1-13300, enclosing its press release dated
October 23, 2000.
20
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
Executive Vice President and Chief
Financial Officer
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 ____ day of March, 2001.
Signature Title Date
--------- -------------------- --------------------
Director, Chairman and March 27, 2001
/s/ Richard D. Fairbank Chief Executive Officer
(Principal Executive
Richard D. Fairbank Officer)
/s/ Nigel W. Morris Director, President and Chief March 27, 2001
Operating Officer
Nigel W. Morris
/s/ David M. Willey Executive Vice President and Chief March 27, 2001
Financial Officer
David M. Willey (Principal Accounting and
Financial Officer)
/s/ W. Ronald Dietz Director March 27, 2001
W. Ronald Dietz
/s/ James A. Flick, Jr. Director March 27, 2001
James A. Flick, Jr.
/s/ Patrick W. Gross Director March 27, 2001
Patrick W. Gross
/s/ James V. Kimsey Director March 27, 2001
21
James V. Kimsey
/s/ Stanley I. Westreich Director March 27, 2001
Stanley I. Westreich
22
EXHIBIT INDEX
CAPITAL ONE FINANCIAL CORPORATION
ANNUAL REPORT ON FORM 10-K
DATED DECEMBER 31, 2000
Commission File No. 1-13300
The following exhibits are incorporated by reference or filed herewith.
References to (i) the "1994 Form 10-K" are to the Corporation's Annual Report
on Form 10-K for the year ended December 31, 1994; (ii) the "1995 Form 10-K"
are to the Corporation's Annual Report on Form 10-K for the year ended December
31, 1995; (iii) the "1996 Form 10-K" are to the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1996; (iv) the "1997 Form 10-K" are
to the Corporation's Annual Report on Form 10-K for the year ended December 31,
1997; (v) the "1998 Form 10-K" are to the Corporation's Annual Report on Form
10-K for the year ended December 31, 1998; and (vi) the "1999 Form 10-K/A" are
to the Corporation's Annual Report on Form 10-K, as amended, for the year ended
December 31, 1999.
Exhibit
- -------
Number Description
- ------ ------------------------------------------------------
3.1.1 Restated Certificate of Incorporation of Capital One Financial
Corporation (incorporated by reference to Exhibit 3.1 of the 1994
Form 10-K).
3.1.2 Certificate of Amendment to Restated Certificate of Incorporation of
Capital One Financial Corporation (incorporated by reference to
Exhibit 3.1.2 of the Corporation's Report on Form 8-K, filed January
16, 2001).
3.2 Amended and Restated Bylaws of Capital One Financial Corporation (as
amended November 18, 1999) (incorporated by reference to Exhibit 3.2
of the 1999 10-K/A).
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 Corporation'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. (incorporated by
reference to Exhibit 4.2.2 of the 1999 10-K/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 Corporation's quarterly report on Form 10-Q for
the period ending June 30, 1996).
4.4.1 Distribution Agreement dated June 6, 2000 among Capital One Bank,
J.P. Morgan Securities, Inc. and the agents named therein
(incorporated by reference to the Corporation's quarterly report on
Form 10-Q for the period ending June 30, 2000).
4.4.2 Copy of 6.875% Notes, due 2006, of Capital One Bank.
4.4.3 Copy of Floating Rate Notes, due 2003, of Capital One Bank.
4.4.4 Copy of 8 1/4% Fixed Rate Notes, due 2003, of Capital One Bank.
Exhibit
- -------
Number Description
- ------ ------------------------------------------------------
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 Corporation's Report
on Form 8-K, filed November 13, 1996).
4.5.2 Copy of 7.25% Notes, Due 2003, of Capital One Financial Corporation
(incorporated by reference to Exhibit 4.5.2 of the 1996 Form 10-K, of
Capital One Financial Corporation).
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, of Capital One Financial Corporation
(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 (incorporated by reference to Exhibit 4.10
of the 1999 Form 10-K/A).
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 Corporation'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
(incorporated by reference to Exhibit 10.1.3 of the 1999 10-K/A).
Exhibit
- -------
Number Description
- ------ ------------------------------------------------------
10.2.1 Lease Agreement, dated as of December 5, 2000, among First Union
Development Corporation, as Lessor, and Capital One F.S.B. and Capital
One Bank, jointly and severally, as Lessees.
10.2.2 Participation Agreement, dated as of December 5, 2000, among Capital
One F.S.B. and Capital One Bank as construction agents and lessees,
Capital One Financial Corporation as guarantor, First Union
Development Corporation as Lessor, the various financing parties named
therein, and First Union National Bank as Agent.
10.2.3 Guaranty, dated as of December 5, 2000, from Capital One Financial
Corporation in favor of First Union Development Corporation and the
various other parties to the Participation Agreement, dated as of
December 5, 2000.
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. (incorporated by
reference to Exhibit 10.3 of the 1999 10-K/A).
10.4* Capital One Financial Corporation 1999 Non-Employee Directors Stock
Incentive Plan (incorporated by reference to Exhibit 4 of the
Corporation's Registration Statement on Form S-8, Commission File No.
333-78635, filed May 17, 1999).
10.5.1 Revolving Credit Facility Agreement dated as of August 10, 2000 by and
between Capital One Inc., as borrower, Capital One Financial
Corporation, as guarantor, and Bank of Montreal, as lender (terminated
as of February 1, 2001) (incorporated by reference to Exhibit 10.1 of
the Corporation's quarterly report on Form 10-Q for the period ending
September 30, 2000).
10.5.2 Revolving Credit Facility Agreement dated as of August 10, 2000 by and
between Capital One Inc., as borrower, Capital One Financial
Corporation, as guarantor, and Bank One Canada, as lender (terminated
as of February 1, 2001) (incorporated by reference to Exhibit 10.2 of
the Corporation's quarterly report on Form 10-Q for the period ending
September 30, 2000).
10.5.3 Revolving Credit Facility Agreement dated as of August 10, 2000 by and
between Capital One Financial Corporation, as borrower, and
Citibank, N.A., as lender (terminated as of March 15, 2001)
(incorporated by reference to Exhibit 10.3 of the Corporation's
quarterly report on Form 10-Q for the period ending September 30,
2000).
10.5.4 Revolving Credit Facility Agreement dated as of August 10, 2000 by and
between Capital One Financial Corporation, as borrower, and First
Union National Bank, as lender (terminated as of March 15, 2001)
(incorporated by reference to Exhibit 10.4 of the Corporation's
quarterly report on Form 10-Q for the period ending September 30,
2000).
10.6* Capital One Financial Corporation 1999 Stock Incentive Plan
(incorporated by reference to the Corporation'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 Multicurrency Revolving Credit Facility Agreement dated as of
August 11, 2000 by and between Capital One Bank, as borrower, Capital
One Financial Corporation, as guarantor, and Chase Manhattan PLC, as
lender (incorporated by reference to Exhibit 10.5 of the Corporation's
quarterly report on Form 10-Q for the period ending September 30,
2000).
10.9 Intentionally left blank.
10.10 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 (incorporated by reference to Exhibit
10.10.2 of the 1999 Form 10-K/A).
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).
Exhibit
- -------
Number Description
- ------ ------------------------------------------------------
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 the Corporation'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
(incorporated by reference to Exhibit 10.15 of the 1999 Form 10-K/A).
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).
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., and Val T. Orton, as owner trustees for
COB Real Estate Trust 1995-1, as lessor and Capital One Bank and
Capital One Realty, Inc., as lessees (incorporated by reference to
Exhibit 10.17.3 of the 1999 Form 10-K/A).
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
(incorporated by reference to Exhibit 10.17.4 of the 1999 Form 10-
K/A).
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 (incorporated by reference to Exhibit 10.18.1 of the 1999 Form
10-K/A).
Exhibit
- -------
Number Description
- ------ ------------------------------------------------------
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 (incorporated by reference to
Exhibit 10.18.2 of the 1999 Form 10-K/A).
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 (incorporated by
reference to Exhibit 10.19.2 of the 1999 Form 10-K/A).
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 (incorporated by reference to Exhibit 10.20 of
the 1999 Form 10-K/A).
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 (incorporated by
reference to Exhibit 10.21 of the 1999 Form 10-K/A).
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 (incorporated by reference to Exhibit 10.22 of the 1999 Form
10-K/A).
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, and Bank of America, N.A., as
Agent (incorporated by reference to Exhibit 10.23 of the 1999 Form 10-
K/A).
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 (incorporated by
reference to Exhibit 10.24 of the 1999 Form 10-K/A).
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 (incorporated by reference to Exhibit 10.25 of the 1999 Form
10-K/A).
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, the holders and lenders named therein, and Bank
of America, N.A., as agent (incorporated by reference to Exhibit 10.26
of the 1999 Form 10-K/A)...
13 The portions of Capital One Financial Corporation's 2000 Annual Report
to Stockholders that are incorporated by reference herein.
21 Subsidiaries of the Company.
23 Consent of Ernst & Young LLP.
* Indicates a management contract or compensation plan or arrangement required
to be filed as an exhibit to this Annual Report on Form 10-K.