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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, 1996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required).
For the transition period from ____________ to ____________.
Commission File No. 1-13300
CAPITAL ONE FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 54-1719854
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2980 Fairview Park Drive, Suite 1300
Falls Church, Virginia 22042-4525
(Address of principal executive offices) (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 Name of each exchange on
which registered
Common Stock, $.01 Par Value New York Stock Exchange
Preferred Stock New York Stock Exchange
Purchase Rights*
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* Attached to each share of Common Stock is a Right to acquire 1/100th of a
share of the Registrant's Cumulative Participating Preferred Stock, par
value $.01 per share, which Rights are not presently exercisable.
Securities registered pursuant to Section 12(g) of the Act:
None
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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
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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, 1997:
Common Stock, $.01 Par Value -- $2,515,356,548*
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* In determining this figure, the registrant assumed that the executive
officers of the registrant and the registrant's directors are affiliates of
the registrant. Such assumption shall not be deemed to be conclusive for
any other purpose.
The number of shares outstanding of the registrant's common stock as of the
close of business on February 28, 1997:
Common Stock, $.01 Par Value - 66,348,820
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Annual Report to stockholders for the year ended December
31, 1996 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 24, 1997 are incorporated by reference into Part III.
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PART I
ITEM 1. BUSINESS.
GENERAL
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. The Corporation's principal
subsidiary, Capital One Bank (the "Bank"), a limited purpose Virginia state
chartered credit card bank, offers credit card products. Capital One, F.S.B.
(the "Savings Bank"), a federally chartered savings bank, provides certain
consumer lending and deposit services. 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 term "Company" refers to the Corporation and its consolidated
subsidiaries and for periods prior to the Separation (as defined herein),
Signet Bank's credit card division. The Company's common stock is listed on
the New York Stock Exchange under the symbol COF. The Company's principal
executive office is located at 2980 Fairview Park Drive, Suite 1300, Falls
Church, Virginia 22042-4525 (telephone number (703) 205-1000).
The Company is one of the oldest continually operating bank card
issuers in the U.S. having commenced operations in 1953, the same year as the
formation of what is now MasterCard International. The Company is 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, 1996. The
growth in the Company's managed credit card loans and accounts was due largely
to credit card industry dynamics and the success of the Company's proprietary
information-based strategy ("IBS") initiated in 1988.
The Bank offers two brands of credit cards, Visa and MasterCard, and
within each brand, premium ("gold") cards and unsecured and secured standard
credit card products. Prior to November 22, 1994, the Bank conducted its
operations as a division of Signet Bank, a wholly-owned subsidiary of Signet
Banking Corporation ("Signet"). Pursuant to the terms of an agreement among
Signet, Signet Bank and the Corporation (the "Separation Agreement"), Signet
Bank contributed designated assets and liabilities of its credit card division
into the Bank, initially established as a subsidiary of Signet Bank (the
"Separation"). Signet Bank immediately distributed the capital stock of the
Bank to Signet, which then contributed such stock to the Corporation.
Concurrently with the Separation, the Corporation issued 7,125,000 shares of
the Corporation's common stock, par value $.01 ("Common Stock") in an initial
public offering. On February 28, 1995, Signet distributed all of the remaining
shares of the Common Stock held by it to Signet shareholders of record as of
February 10, 1995 (the "Distribution").
In June 1996, the Company established the Savings Bank to expand the
Company's product offerings and its relationship with its cardmembers. The
Savings Bank currently offers Visa and MasterCard credit cards and installment
loans, in each case, both unsecured and secured. The Savings Bank expects to
offer multiple financial products to existing cardmembers and other households
using the Company's IBS and existing information technology systems.
Information-Based Strategy
The Company's IBS is designed to allow the Company 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 using sophisticated statistical modeling techniques, the Company is able to
segment its potential customer lists based upon the integrated use of credit
scores, demographics, customer behavioral characteristics and other criteria.
By actively testing a wide variety of product and service features, marketing
channels and other aspects of its offerings, the Company can design and target
customized solicitations at various customer segments, thereby enhancing
customer response levels and maximizing returns on investment within given
underwriting parameters. Continued integrated testing and model development
builds on information gained from earlier phases and is intended to improve the
quality, performance and profitability of the Company's solicitation and
account management initiatives. The Company applies IBS to all areas of its
business, including solicitations, account
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management, credit line management, pricing strategies, usage stimulation,
collections, recoveries and account and balance retention.
Products
The Company offers an array of Visa and MasterCard credit card
products to customers throughout the United States and in the United Kingdom.
Products consist of varying annual percentage rates ("APRs"), finance charges
and fee combinations (annual membership fees, past-due, overlimit, returned
check, cash advance and other fees), credit limits and other special features
or services, depending on the risk profile and other characteristics of the
targeted customer segment. The Company offers gold cards, which generally have
higher lines of credit and additional ancillary benefits, and unsecured and
secured standard card products. The Company uses information derived from
proprietary statistical models and targets customers with carefully matched
combinations of pricing, credit analysis and packaging. The Company's pricing
philosophy reflects a risk-based approach where customers with better credit
qualifications generally merit more favorable pricing. The Company continually
tests new product offerings and pricing combinations targeted to different
customer segments.
The Company's credit card offerings include products referred to by
the Company as "First Generation Products" and "Second Generation Products."
The Company initially targeted its offerings to experienced users of general
purpose credit card products offering low introductory rate products with
accounts repricing to higher rates after six to 16 months from the date of
origination, "First Generation Products". Accounts also may be repriced
upwards or downwards based on individual customer performance. These First
Generation Products permit cardholders to use Company issued credit line checks
for cash or purchases or, under balance transfer programs, to pay down other
card balances. The Company manages the repricing of these First Generation
Products to maximize return on investment at the customer level, taking into
consideration the risk and expected performance of these products.
Faced with increased competition for these First Generation Products,
the Company began to test a number of other markets and product offerings,
resulting in the development of so-called "Second Generation Products". The
Company's Second Generation Products consist of secured card products and other
customized credit card products including joint, affinity and co-branded,
college student and other accounts. Many of the Company's Second Generation
Products are offered to moderate income consumers or consumers with a
blemished, little or no credit history, consumers which historically have not
been solicited by lenders to the same extent as more experienced, affluent
credit users. The Company provides credit to these underserved markets by
utilizing its IBS to better evaluate the credit risk of these consumers and to
apply a risk-based pricing strategy to optimize profitability within the
context of acceptable risks. As a result, Second Generation Products are
generally designed to have lower credit lines and higher APRs and fees,
including annual membership fees. Second Generation Products also tend to have
balances that build over time, less attrition, higher operational costs, and,
in most cases, higher delinquencies and credit losses than First Generation
Products. Although the target market for Second Generation Products is
composed of individuals with relatively high risk profiles, the Company's
management believes that, utilizing its IBS, the Company can effectively
evaluate, price and monitor these risks. See "Cautionary Factors" herein.
The significant growth to date of the Company's consumer accounts and
managed loan balances initially was due largely to credit card industry
dynamics and the success of the Company's IBS in generating the First
Generation Products. Second Generation Products contribute to the growth in
number of the Company's consumer accounts but do not have an immediate impact
on managed loan balances, as these products have lower balances that build over
time. The Company's product mix at any time may vary as the Company intends to
remain flexible in allocation of marketing investment spent on specific
products to take advantage of market opportunities as they arise.
The Company has also been applying its IBS to develop other financial
and non-financial products and services. The Company has established the
Savings Bank and several non-bank operating subsidiaries to explore these new
product and service opportunities. The Company is in various stages of
developing and test marketing a number of new products and services, including,
but not limited to, selected non-card consumer lending products and the
reselling of telecommunications services. To date, only a relatively small
dollar volume of assets and a relatively small number of accounts have been
generated as a result of such marketing efforts.
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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. The Company's consumer loan portfolio is geographically
diverse. See Note M to the Consolidated Financial Statements on page 53 of the
Company's Annual Report to its stockholders for the year ended December 31,
1996, which is incorporated herein by reference.
Origination and Risk Management
The Company's primary method of account acquisition is direct mail
solicitation. Since the introduction of IBS in 1988, the Company has steadily
increased its solicitation efforts and has developed a sophisticated screening
process to target potential customers. The Company tracks and periodically
reviews the results of each solicitation. Management information systems and
processes enable management to monitor the effectiveness of prescreening and
underwriting criteria, and such criteria are modified based on the results
obtained from this process.
The Company employs a comprehensive risk management process that
integrates all aspects of an account's life cycle, from origination to closure.
Marketing and credit policy decisions are made by a credit policy group
consisting of senior management representatives from the credit operations,
risk management and marketing and analysis units. This group originates credit
policy from the viewpoints of both profitability and credit risk, based on
prescreening criteria, proprietary model development and usage, as well as
reviews of test programs and test results. Significant test results are
reviewed before the widespread introduction of a tested policy or product.
The Company uses various credit risk scores, generated by both third
party providers of scoring models and by proprietary models. These scores are
used, together with other criteria, in multiple screening reviews at both the
prescreening stage and the credit application stage. Score usage continues
after the account has been established and throughout its life cycle to adjust
credit lines, pricing and collection policies.
Account Management
Management has found that active account management is necessary in
order to respond to the changing economic environment and cardholder risk,
usage and payment patterns. The Company applies new credit scores to each
account several times a year and new behavioral scores for open accounts each
month. This information is used in account management strategies relating to
credit lines, pricing, usage stimulation, retention and collection. For
creditworthy and profitable accounts, such periodic review may result in more
favorable pricing, higher credit lines or other enhancements which, based on
testing, are likely to increase account usage or the overall profitability of
an account. Conversely, for delinquent or other accounts with significant
credit risk, periodic review may result in an account being reassigned to a
higher risk category and hence not being eligible for credit line increases or,
in certain circumstances, having pricing adjusted upward or the credit line
reduced.
The IBS approach has allowed the Company to develop customized
collections and pricing strategies based on cardholder behavior. Similarly, IBS
has been used in developing the Company's retention strategies. The Company has
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.
Certain of the Company's products, including the introductory rate program and
balance transfer program, have a repricing feature after an initial period. The
Company has developed methodologies for retaining these accounts and the
balances in these accounts after the expiration of the initial period.
Credit Operations
The Company's credit extension process is actively managed by senior
management and is designed to bring consistency in credit practices and
operating efficiencies. The Company's scoring technology and verification
procedures are highly automated with limited judgmental review. The credit
evaluation process is based on proprietary models using, among other things,
scores developed by nationally recognized scoring firms and tailored to
individual programs. These scores are validated, monitored and maintained by
the Company as part of IBS. The scores provide a statistically measurable way
to make decisions about applications, to evaluate risk and to modify credit
extension policies.
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For pre-approved account solicitations, which constitutes one of the
primary methods of solicitation, the Company's current process generally begins
with a prescreening review which identifies consumers who are likely to be
approved for a credit card account. In the prescreening process, the Company
provides a set of credit history and other criteria to credit reporting
agencies, which generate lists with desired attributes. The Company further
refines this list by applying additional sets of underwriting criteria
resulting in a new list which represents the consumers who receive direct mail
solicitations. The Company also employs additional underwriting criteria that
are based upon proprietary models designed to predict the relative credit risk
of potential account holders. Those persons who receive solicitation packages
generally must fill out acceptance certificates which are used to initiate a
back-end verification process in which an applicant's credit information is
reviewed a second time, updated and verified against criteria established by
lending guidelines. Once the acceptance certificates are returned and sorted
and current credit reporting agency reports are obtained, the acceptance
certificates are processed through the Company's underwriting criteria. Each
approved applicant is offered a line of credit commensurate with the results of
the back-end credit verification.
The Company manually reviews applications that are rejected by the
Company's credit scoring system because of inconsistencies in application
information, inquiry from a rejected applicant or for other reasons. 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-approved solicitations, the Company acquires names of
prospective customers from a variety of sources and then edits the list
utilizing internal and external sources. The prospective customers on the
final list are mailed solicitations. Prospective customers who respond to a
solicitation are approved or declined based on both the characteristics drawn
from the application submitted and a credit reporting agency.
Collection Procedures
The Company generally considers an account delinquent if a minimum
payment due thereunder is not received by the Company by the cardholder's
payment date. Delinquent accounts are first directed to the pre-collection
system, where appropriate early collection actions are taken. Early contact
with delinquent cardholders may include payment reminders by telephone, by
billing statement and by mail. In most cases, an account is restricted and
privileges are suspended depending on the riskiness of the account between four
and 105 days after the account enters the Company's collections department.
The Company may also, at its discretion, enter into arrangements with
delinquent account holders to extend or otherwise change payment schedules.
Efforts to collect delinquent credit card accounts are generally made by the
Company's regular collections group, but may also be made by third-party
collection agents.
The focus of the Company's response to an early stage delinquency is
rehabilitation and identification of the causes for delinquency. The Company's
policies and procedures are designed to encourage cardholders 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. An account can be re-aged once in a 12-month period.
The current policy of the Company is to charge-off as uncollectible an
account (net of collateral) in the next billing cycle after becoming 180 days
past-due. In connection with a secured card account, except as set forth
below, funds deposited as collateral will generally be applied to payment on
the account shortly before the account is charged-off as uncollectible. If the
Company receives notice that a cardholder has filed for bankruptcy, or has had
a bankruptcy petition filed against the cardholder, the Company charges off
such account as soon as practicable but generally no later than 30 days after
the Company receives such notice and, with respect to secured credit card
accounts, funds deposited as collateral will be applied in satisfaction of the
account only after the bankruptcy automatic stay is lifted. The Company
charges off accounts of deceased accountholders within 60 days of receiving
proper notice if no estate exists against which a proof of claim can be filed,
no other party remits payments or no other responsible party is available. The
Company's credit evaluation, servicing and charge-off policies and collection
practices may change over time in accordance with the business judgment of the
Company, applicable law and guidelines established by applicable regulatory
authorities.
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Technology/Systems
A key part of the Company's strategic focus is the development of
flexible, high-volume systems capable of handling the Company's growth and
changes in solicitation and account management strategies. Management believes
that the continued development and integration of these systems is important to
its efforts to reduce its operating costs and maintain a competitive advantage.
The Company has developed proprietary integrated systems which allow
employees to manage the large volumes of data collected through the IBS process
and to utilize such data in the Company's account solicitations, application
processing, account management and retention strategies. These systems allow
the Company's customer service representatives to access account specific
information when responding to customer inquiries.
Funding
The Company's primary methods of funding include loan securitizations,
issuing certificates of deposit in amounts of $100,000 or greater, senior
notes, deposit notes and other borrowings and fed funds purchased from
financial institutions. For a discussion of the Company's funding program, see
pages 19-21 and pages 30-32 of the Company's Annual Report to its stockholders
for the year ended December 31, 1996 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, the Company faces intense and
increasing competition in all aspects of its business from numerous bank and
non-bank providers of financial services. Many of these companies are
substantially larger and have more resources than the Company. The Company
competes with 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 or debit cards, represent additional
competition in the general purpose credit card market. Although the Company
believes that it is generally competitive, there can be no assurance that its
ability to market its services successfully or to obtain adequate yield on its
loans will not be impacted by the nature of the competition that now exists or
may develop.
In addition, the Company faces competition in seeking public funding
from banks, savings banks, money market funds and a wide variety of other
entities that take deposits and/or sell debt securities, some of which are
publicly traded. Many of these companies are substantially larger, have more
capital and other resources and have better financial ratings than the Company.
Accordingly, there can be no assurance that competition from these other
borrowers will not increase the Company's cost of funds.
EMPLOYEES
As of December 31, 1996, the Company employed 5,552 full-time and 355
part-time employees. A central part of the Company's philosophy is to attract
and maintain a highly capable staff. The Company views current employee
relations to be satisfactory. None of the Company's employees are covered
under collective bargaining agreements.
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 (the "BIF") of the Federal Deposit Insurance Corporation
(the "FDIC"). The Bank is subject to comprehensive regulation and periodic
examination by the Bureau of Financial Institutions of the Virginia State
Corporation Commission (the "Bureau of Financial Institutions"), the Federal
Reserve Board 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 deposit of less
than $100,000, other than as permitted as
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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, any
non-credit card operations which may be conducted by the Company must be
conducted in other operating subsidiaries of the Company.
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
("SAIF") of the FDIC; however, by virtue of an initial deposit assumption
transaction engaged in by the Savings Bank in June 1996 when it was
established, virtually all of its deposits will be assessed at rates applicable
to BIF members. Pursuant to recent legislation recapitalizing the SAIF,
insurance premiums currently paid by SAIF-insured institutions are equivalent
to the rates paid by BIF-insured institutions. 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 the Corporation's 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, the Bank's 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 or as a result of the failure of the Savings
Bank to meet the QTL Test, 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.
The Corporation is also registered as a financial institution holding
company under Virginia law and as such is subject to periodic examination by
the Bureau of Financial Institutions.
Dividends and Transfers of Funds
The principal source of funds for the Corporation to pay dividends on
stock, make payments on debt securities and meet other obligations is dividends
from its direct and indirect subsidiaries. There are various federal and
Virginia law limitations on the extent to which the Bank and the Savings Bank
can finance or otherwise supply funds to the Corporation through dividends,
loans or otherwise. These limitations include minimum regulatory capital
requirements, Federal Reserve Board, 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.
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Capital Adequacy
The Bank and the Savings Bank are currently subject to capital
adequacy guidelines adopted by the Federal Reserve Board and the OTS,
respectively. In the case of the Bank these include a minimum ratio of Tier 1
capital to risk-weighted assets of 4.00%, a minimum ratio of Tier 1 capital
plus Tier 2 capital to risk-weighted assets of 8.00% and a minimum "leverage
ratio" of Tier 1 capital to average total tangible assets of 3.00%. Bank
regulators, however, have broad discretion in applying higher capital
requirements. Bank regulators consider a range of factors when determining
capital adequacy, such as the organization's size, quality and stability of
earnings, interest rate risk exposure, risk diversification, management
expertise, asset quality, liquidity and internal controls. As of December 31,
1996, the Bank's risk-based Tier 1 capital ratio was 11.61%, its risk-based
total capital ratio was 12.87% and its Tier 1 leverage ratio was 9.04%.
The Savings Bank is currently subject to capital adequacy guidelines
adopted by the OTS, including a minimum ratio of "leverage or core" capital to
adjusted total assets of 3.00 , a minimum ratio of "tangible" capital (core
capital less certain intangible assets) to adjusted total assets of 1.50% and a
minimum ratio of "total" capital to risk-weighted assets of 8.00%. In
addition, the Savings Bank is subject for the first three years of its
operations to additional capital requirements, including the requirement to
maintain a minimum core capital ratio of 8.00% and a risk-based capital ratio
of at least 12.00%. As described above, the OTS has broad discretion to apply
higher capital requirements. As of December 31, 1996, the Savings Bank's
tangible capital ratio was 9.18%, its total capital ratio was 16.29% and its
core capital ratio was 9.18%.
Failure to meet applicable capital guidelines could subject the Bank
and the Savings Bank to a variety of enforcement remedies available to federal
regulatory authorities.
In addition, in connection with the Bank's establishment of a branch
office in the United Kingdom, the Company committed to the Federal Reserve
Board that, for so long as the Bank maintains such branch in the United
Kingdom, the Company will maintain a minimum Tier 1 leverage ratio of 3.00%.
As of December 31 1996, the Company's Tier 1 leverage ratio was 11.13%.
FDICIA
Among other things, the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") requires federal bank regulatory authorities
to take "prompt corrective action" 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. Under applicable regulations, an insured depository
institution is considered to be well capitalized if it maintains a Tier 1
risk-based capital ratio (or core capital to risk-adjusted assets in the case
of the Savings Bank) of at least 6.00%, a total risk-based capital ratio of at
least 10.00% and a Tier 1 leverage capital ratio (or core capital ratio in the
case of the Savings Bank) of at least 5.00%, and is not otherwise in a
"troubled condition" as specified by its appropriate federal regulatory agency.
An insured depository institution is considered to be adequately capitalized if
it maintains a Tier 1 risk-based capital ratio (or core capital to
risk-adjusted assets in the case of the Savings Bank) of at least 4.00%, total
risk-based capital ratio of at least 8.00%, and a Tier 1 leverage capital ratio
(or core capital ratio in the case of the Savings Bank) of at least 4.00%
(3.00% for certain highly rated institutions), and does not otherwise meet the
well capitalized definition. The three undercapitalized categories are based
upon the amount by which the insured depository institution falls below the
ratios applicable to adequately capitalized institutions. The capital
categories are determined solely for the purposes of applying FDICIA's prompt
corrective action ("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, 1996, 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
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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 requires the federal banking agencies to review the risk-based
capital standards to ensure that they adequately address interest-rate risk,
concentration of credit risk and risks from non-traditional activities. The
OTS amended its risk-based capital rules to incorporate interest-rate risk
requirements under which a savings bank must hold additional capital if it
projects an excessive decline in "net portfolio value" in the event interest
rates increase or decrease by two percentage points. These standards are not
yet in effect.
FDICIA also requires the FDIC to implement a system of risk-based
premiums for deposit insurance pursuant to which the premiums paid by a
depository institution will be based on the probability that the FDIC will
incur a loss in respect of such institution. The FDIC has since adopted a
system that imposes insurance premiums based upon a matrix that takes into
account an institution's capital level and supervisory rating.
The Bank and the Savings Bank may accept brokered deposits as part of
their funding. Under FDICIA, only "well capitalized" and "adequately
capitalized" institutions may accept brokered deposits. "Adequately
capitalized" institutions, however, must first obtain a waiver from the FDIC
before accepting brokered deposits and such deposits may not pay rates that
significantly exceed the rates paid on deposits of similar maturity from the
institution's normal market area or the national rate on deposits of comparable
maturity, as determined by the FDIC, for deposits from outside the
institution's normal market area.
Liability for Commonly-Controlled Institutions
Under the "cross-guarantee" provision of the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), insured depository
institutions such as the Bank and the Savings Bank may be liable to the FDIC in
respect of any loss or reasonably anticipated loss incurred by the FDIC
resulting from the default of, or FDIC assistance to, any commonly controlled
insured depository institution. The Bank and the Savings Bank are commonly
controlled within the meaning of the FIRREA cross guarantee provision.
Investment Limitation and Qualified Thrift Lender Test
Federally-chartered savings banks such as the Savings Bank are subject
to certain investment limitations. For example, federal savings banks are not
permitted to make consumer loans (i.e., certain open-end or closed-end loans
for personal, family or household purposes, excluding credit card loans) in
excess of 35.00% 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 65.00% "portfolio assets" (total assets less (i) specified
liquid assets up to 20.00% 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 and to certain other penalties, and
could subject the Company to the provisions of the BHCA, including the activity
restrictions that apply generally to bank
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holding companies and their affiliates. The Savings Bank has been granted a
two-year exception from the QTL Test, but must be in full compliance with the
test by June 30, 1998. As of December 31, 1996, approximately 80.00% of the
Savings Bank's portfolio assets were held in qualified thrift investments and,
as a result, the Savings Bank was in compliance with the QTL Test.
Lending Activities
The activities of the Bank and the Savings Bank as consumer lenders
are also subject to regulation under various federal laws including the
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit
Reporting Act, the Community Reinvestment Act and the Soldiers' and Sailors'
Civil Relief Act, as well as to various state laws. Regulators are authorized
to impose penalties for violations of these statutes and, in certain 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.
Legislation
From time to time legislation has been proposed in Congress to limit
interest rates and fees that could be charged on credit card accounts. Various
bills have also been introduced that eliminate a separate savings bank charter
possibly requiring that existing savings banks become banks and repeal in some
respects the provisions of the Glass-Steagall Act prohibiting certain banking
organizations from engaging in certain securities activities and the provisions
of the BHCA prohibiting affiliations between banking organizations and
nonbanking organizations. 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 Company would be. Congress may in the future
consider other legislation that would affect the banking or credit card
industries.
Investment in the Corporation, the Bank and the Savings Bank
Certain acquisitions of capital stock may be subject to regulatory
approval or notice under federal or Virginia law. Investors are responsible
for insuring that they do not, directly or indirectly, acquire shares of
capital stock of the Company 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 Board or the OTS, as applicable. Control is
conclusively presumed if, among other things, a person or company acquires more
than 25.00% of any class of voting stock of the Corporation. A rebuttable
presumption of control arises if a person or company acquires more than 10.00%
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
the prior approval of the Bureau of Financial Institutions.
Interstate Banking and Branching
On September 29, 1994, the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 (the "Riegle Act") became law. Under the
Riegle Act, the Federal Reserve Board may approve bank holding company
acquisitions of banks in other states, subject to certain aging and deposit
concentration limits. Commencing June 1, 1997 (or earlier if a particular
state chooses), banks in one state may merge with banks in another state,
unless the other state has chosen not to implement this section of the Riegle
Act. These mergers are also subject to similar aging and deposit concentration
limits.
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Virginia has "opted-in" early to the provisions of the Riegle Act.
Since July 1, 1995, an out-of-state bank that does not already maintain a
branch in Virginia may establish and maintain a de novo branch in Virginia, or
through the acquisition of a branch, if the laws of the home state of the
out-of-state bank permit Virginia banks to engage in the same activities in
that state under substantially the same terms as permitted by Virginia. Also,
Virginia banks may merge with out-of-state banks, and an out-of-state bank
resulting from such an interstate merger transaction may maintain and operate
the branches in Virginia of a merged Virginia bank, if the laws of the home
state of the out-of-state bank involved in the interstate merger transaction
permit interstate merger. An out-of-state bank desiring to engage in such
activities must file an application with the State Corporation Commission. It
is unclear at this time whether other states will enact the requisite
legislation to permit such activities in Virginia and, if adopted, how the
legislation would impact the Bank or the Company.
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, the
Company currently believes that this development will not materially affect the
financial condition of the Bank, the Savings Bank or the Company.
CAUTIONARY STATEMENTS
Information or statements provided by the Company from time to time
may contain certain "forward-looking information" including information
relating to growth in earnings per share, returns on equity, growth in managed
loans outstanding and consumer accounts, net interest margins, funding costs,
operations costs and employment growth, marketing expense, delinquencies and
charge-offs. Such forward-looking statements may be identified by the use of
terminology such as "may," "will," "expect," "anticipate," "goal," "target,"
"forecast," "project," "continue" or comparable terminology and may involve
certain risks or uncertainties and are qualified in their entirety by the
cautionary statements provided below. The cautionary statements are being made
pursuant to the provisions of the Private Securities Litigation Reform Act of
1995 (the "Act") and with the intention of obtaining the benefits of the "safe
harbor" provisions of the Act for any such forward-looking information. Many
of the following important factors discussed below as well as other factors
have also been discussed in the Company's prior public filings.
The Company cautions readers that any forward-looking information
provided by the Company is not a guarantee of future performance and that
actual results could differ materially from those in the forward-looking
information as a result of various factors, including but not limited to the
following:
Competition
The Company faces intense and increasing competition from numerous
providers of credit cards and other financial products and services who may
employ various competitive strategies. The Company faces competition from
national, regional and local issuers of bank cards in each of its markets.
Additionally, the Company competes with other general purpose credit card
providers and to a certain extent smart cards or debit card providers. Many of
these companies are substantially larger and have more capital and other
resources than the Company. Additionally, many of the Company's competitors
are pricing credit card products at attractive interest rates at or below those
currently charged by the Company.
In addition, the Company faces competition in seeking public funding
from banks, savings banks, money market funds and a wide variety of other
entities that take deposits and/or sell debt securities, some of which are
publicly traded. Many of these companies are substantially larger, have more
capital and other resources and have better financial ratings than the Company.
Accordingly, there can be no assurance that competition from these other
borrowers will not increase the Company's cost of funds.
Accounts and Loan Balances
The Company's aggregate accounts or loan balances and the growth rate
thereof are affected by a number of internal and external factors. Because
the Company's product mix significantly influences account and loan balance
growth, the allocation of Company marketing investment among different products
will cause fluctuations
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in the aggregate number of accounts and in outstanding loan balances.
Moreover, as IBS is designed to take advantage of market opportunities,
difficulties exist in forecasting the allocation of marketing investment and
projections of account and loan balance growth and accompanying Company results
will vary from time to time. In addition, external factors such as attrition
of accounts and loan balances to competing card issuers and general economic
conditions and other factors beyond the control of the Company could vary
results. Customers are attracted to credit card issuers largely on the basis
of price, credit limit and other product features and, once an account is
originated, customer loyalty may be limited.
New Products and Services
Management of the Company believes that, through continued application
of its IBS, the Company can develop new product and service offerings necessary
to sustain growth. However, as the Company attempts to diversify and expand
its offerings beyond credit cards, and more particularly beyond financial
services, there can be no assurance that historical application of IBS to
credit cards will necessarily be reflective of its application to other
products and services.
The Company's development of new products and services will be
affected by the ability of the Company to build the operational and
organizational infrastructure necessary to engage in new businesses and to
recruit experienced personnel to assist in the management and operations of
these businesses and the availability of capital necessary to fund these new
businesses. Additionally, difficulties or delays in the development,
production, testing and marketing of products or services, including, but not
limited to, a failure to implement new product or service programs when
anticipated, the failure of customers to accept these products or services when
planned, losses associated with the testing of new products or services or
financial, legal or other difficulties as may arise in the course of such
implementation, will affect the success of any new product or business. In
addition, the Company is likely to face competition with respect to any new
products or services, which may affect the success of such products or
services.
Availability of Financing and Funding Costs
The amount, type and cost of financing available to the Company to
fund its operations, and any changes to that financing, including changes
resulting from within the Company's organization or in its compensation and
benefit plans or the activities of parties with which the Company has
agreements or understandings, including any activities affecting any
investment, impacts Company results. The Company's primary source of funding is
the securitization of consumer loans and any difficulties or delays in the
securitization of the Company's receivables impacts the cost and availability
of funding. Such difficulties and delays may result from adverse changes in
the availability of credit enhancement for securitizations or in the
performance of the securitized assets and changes in the current legal,
regulatory, accounting and tax environment governing securitizations.
Delinquencies and Credit Losses
The costs of an increase in delinquencies and credit losses could
materially and adversely effect the Company's financial performance and the
performance of the Company's securitized loan trusts. Delinquencies and credit
losses are influenced by a number of external and internal factors. First, a
national or regional economic slowdown or recession increases the risk of
defaults and credit losses. Costs associated with an increase in the number of
customers seeking protection under the bankruptcy laws, resulting in accounts
being charged-off as uncollectible, and the effects of fraud by third parties
or customers are additional factors. "Seasoning" of accounts (the average age
of a credit card issuer's portfolio) affects the Company's level of
delinquencies and losses which may require higher loan loss provisions (and
reserves). A decrease in account originations or balances and the attrition of
such accounts or balances could significantly impact the seasoning of the
overall portfolio, resulting in increases in the overall percentage of
delinquencies and losses.
In addition, the Company markets its Second Generation Products to
consumers with blemished, little or no credit histories. As a result, in
addition to the higher delinquency and credit loss rates associated with this
market, there is little historical experience with respect to credit risk and
performance of these underserved markets. Accordingly, although the Company
believes that by utilizing its IBS it can effectively price these products in
relation to their relative risk, there can be no assurance that the Company's
risk-based pricing system will offset the negative impact of the expected
higher delinquency and loss rates.
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Interest Rate Risks
Interest rate fluctuations affect the Company's net interest margin
and the value of its assets and liabilities. The continued legal or commercial
availability of techniques (including interest rate swaps and similar financial
instruments, loan repricing, hedging and other techniques) used by the Company
to manage the risk of such fluctuations and the continuing operational
viability of those techniques will influence Company results.
The impact of repricing accounts and the overall product mix of
accounts, including the actual amount of accounts (and related loan balances)
repriced and the level and type of account originations at that time and the
ability of the Company to use account management techniques to retain repriced
accounts and the related loan balances, affects the Company's net interest
margin.
Regulation and Legislation
The effects of, and changes in, monetary and fiscal policies, laws and
regulations (financial, consumer regulatory or otherwise), other activities of
governments, agencies and similar organizations and social and economic
conditions, such as inflation and changes in taxation of the Company's earnings
influence Company goals and projections.
Expenses and Other Costs
The amount and rate of growth in the Company's expenses (including
employee and marketing expenses) as the Company's business develops or changes
and expands into new market areas; the acquisition of assets (variable, fixed
or other); and the impact of unusual items resulting from the Company's ongoing
evaluation of its business strategies, asset valuations and organizational
structures will all impact Company results. Additionally, other factors
include the costs and other effects of legal and administrative cases and
proceedings, settlements and investigations, claims and changes in those items,
developments or assertions by or against the Company; adoptions of new, or
changes in existing, accounting policies and practices and the application of
such policies and practices.
Technology
System delays, malfunctions and errors in the proprietary and third
party systems and networks used by the Company for payment processing,
collections and other services and operations, which may lead to delays,
additional costs to the Company, and, if not corrected in a timely fashion,
customer dissatisfaction which could ultimately affect the Company's customer
base and the level of service it is able to provide to its customers.
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STATISTICAL INFORMATION
The statistical information required by Item 1 is in the Company's
Annual Report to its stockholders for the year ended December 31, 1996, 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, 1996
------------------ --------------------------------
I. Distribution of Assets, Liabilities and
Stockholders' Equity; Interest Rates and
Interest Differential
A. Average Balance Sheet 24
B. Net Interest Earnings Analysis 24
C. Rate/Volume Analysis 25
II. Investment Portfolio
A. Book Value of Investment Securities 46
B. Maturities of Investment Securities 46
C. Investment Securities Concentrations 46
III. Loan Portfolio
A. Types of Loans 19-21
B. Maturities and Sensitivities of
Loans to Changes in Interest Rates 32-33
C. Risk Elements
1. Nonaccrual, Past-Due and Restructured Loans 26-29
2. Potential Problem Loans Not Applicable
3. Foreign Outstandings Not Applicable
4. Loan Concentrations 53
D. Other Interest Bearing Assets Not Applicable
IV. Summary of Loan Loss Experience
A. Analysis of Allowance for Loan Losses 29
B. Allocation of the Allowance for Loan Losses Not Applicable
V. Deposits
A. Average Balances 24
B. Maturities of Large Denomination Certificates 30
C. Foreign Deposit Liability Disclosure Not Applicable
VI. Return on Equity and Assets
A. Return on Assets 17
B. Return on Equity 17
C. Dividend Payout Ratio 17
D. Equity to Assets Ratio 17
VII. Short-Term Borrowings 30
ITEM 2. PROPERTIES.
The Company leases its 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 expires February
29, 2000. The Company has the right to extend the lease until February 28,
2005.
The Company owns administrative offices and credit card facilities in
Richmond, Virginia, consisting of approximately 450,000 square feet from which
it conducts its credit, collections, customer service and other
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operations. The Company also leases additional facilities consisting of an
aggregate of approximately 1,222,500 square feet (excluding the principal
executive office) from which credit, collections, customer service and other
operations are conducted in Virginia, Florida and Texas.
ITEM 3. LEGAL PROCEEDINGS.
During 1995, the Company and the Bank became involved in three
purported class action suits relating to certain collection practices engaged
in by Signet Bank and, subsequently, by the Bank. The complaints in these
three cases allege that Signet Bank, the Company and/or the Bank violated a
variety of federal and state statutes and constitutional and common law duties
by filing collection lawsuits, obtaining judgements and pursuing garnishment
proceedings in the Virginia state courts against defaulted credit card
customers who were not residents of Virginia. These cases have been filed in
the Superior Court of California in the County of Alameda, Southern Division,
on behalf of a class of California residents, in the United States District
Court for the District of Connecticut on behalf of a nationwide class, and in
the United States District Court for the Middle District of Florida on behalf
of a nationwide class (except for California). The complaints in these three
cases seek unspecified statutory damages, compensatory damages, punitive
damages, restitution, attorneys' fees and costs, a permanent injunction and
other equitable relief.
On July 31, 1996, the Florida case was dismissed without prejudice,
which permits further proceedings. The plaintiff has since noticed her appeal
to the United States Court of Appeals for the Eleventh Circuit and refiled
certain claims arising out of state law in Florida state court.
On September 30, 1996, the Connecticut court entered judgement in
favor of the Bank on plaintiff's federal claims and dismissed without prejudice
plaintiff's state law claims. The plaintiff has refiled, on behalf of a class
of Connecticut residents, her claims arising out of state law in a Connecticut
state court.
Subsequent to year-end 1996, the California court entered judgment in
favor of the Bank on all of the plaintiff's claims. The time period in which
plaintiffs may file an appeal of the court's decision has not yet expired.
In connection with the transfer of substantially all of Signet Bank's
credit card business to the Bank in November 1994, the Company and the Bank
agreed to indemnify Signet Bank for certain liabilities incurred in litigation
arising from that business, which may include liabilities, if any, incurred in
the three purported class action cases described above. Because no specific
measure of damages is demanded in any of the complaints and each of these cases
is in early stages of litigation, an informed assessment of the ultimate
outcome of these cases cannot be made at this time. Management believes,
however, that there are meritorious defenses to these lawsuits and intends to
defend them vigorously.
The Company is commonly subject to various other pending and
threatened legal actions arising from the conduct of its normal business
activities. In the opinion of management of the Company, the ultimate
aggregate liability, if any, arising out of any pending or threatened action
will not have a material adverse effect on the consolidated financial condition
of the Company. At the present time, however, management is not in a position
to determine whether the resolution of any pending or threatened litigation
will have a material adverse effect on the Company's results of operations in
any future reporting period.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the fourth quarter of the Company's fiscal year ending December
31, 1996, no matters were submitted to a vote of the stockholders of the
Company.
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS.
The information required by Item 5 is included under "Regulation --
Dividends and Transfer of Funds" herein and in the Company's Annual Report to
its stockholders for the year ended December 31, 1996 on pages 31-
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32 under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Funding," page 37 under the heading
"Selected Quarterly Financial Data" and on pages 50-51 in Note H to the
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 Company's Annual
Report to its stockholders for the year ended December 31, 1996 on page 17
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 Company's Annual
Report to its stockholders for the year ended December 31, 1996 on pages 18-37
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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by Item 8 is included in the Company's Annual
Report to its stockholders for the year ended December 31, 1996 on pages 39-54
under the headings "Report of Independent Auditors" and "Consolidated Financial
Statements" and on page 37 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.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
The information required by Item 10 as to the directors of the Company
is included in the Company's 1997 Proxy Statement on pages 4-7 under the
heading "Directors and Executive Officers", and is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by Item 11 is included in the Company's 1997
Proxy Statement on pages 6-7 under the subheading "Directors and Executive
Officers -- Compensation of the Board" and on pages 8-17 under the heading
"Compensation of Executive Officers", 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 Company's 1997
Proxy Statement on pages 2-3 under the heading "Security Ownership of Certain
Beneficial Owners and Management", and is incorporated herein by reference.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by Item 13 is included in the Company's 1997
Proxy Statement on pages 7-8 under the subheading "Directors and Executive
Officers--Certain Relationships and Related Transactions", and is incorporated
herein by reference.
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
Company's Annual Report to its stockholders for the
year ended December 31, 1996, are incorporated herein
by reference in Item 8:
Report of Independent Auditors, Ernst & Young LLP
Consolidated Balance Sheets - December 31, 1996 and
1995
Consolidated Statements of Income - Years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Changes in Stockholders'
Equity - Years ended December 31, 1996, 1995 and
1994
Consolidated Statements of Cash Flows - Years ended
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
(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:
The following exhibits are incorporated by reference or filed
herewith. References to the "1994 Form 10-K" are to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994. References to the
"1995 Form 10-K" are to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
3.1 Restated Certificate of Incorporation of Capital One
Financial Corporation (incorporated by reference
to Exhibit 3.1 of the 1994 Form 10-K).
3.2 Restated Bylaws of Capital One Financial Corporation
(as amended January 24, 1995) (incorporated by
reference to Exhibit 3.2 of the 1994 Form 10-K).
4.1 Specimen certificate representing the Common Stock
(incorporated by reference to Exhibit 4 of the 1994
Form 10-K).
4.2 Rights Agreement dated as of November 16, 1995
between Capital One Financial Corporation and Mellon
Bank, N.A. (incorporated by reference to Exhibit 4.1
of the Company's Report on Form 8-K, filed November
16, 1995).
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4.3 Amended and Restated Issuing and Paying Agency
Agreement dated as of April 30, 1996 between Capital
One Bank and Chemical Bank (including exhibits A-1,
A-2, A-3, and A-4 thereto) (incorporated by reference
to Exhibit 4.1 of the Company's quarterly report on
Form 10-Q for the period ending June 30, 1996).
4.4 Issuing and Paying Agency Agreement dated as of April
30, 1996 between Capital One Bank and Chemical Bank
(including exhibits A-1 and A-2 thereto)
(incorporated by reference to Exhibit 4.2 of the
Company's quarterly report on Form 10-Q for the
period ending June 30, 1996).
4.5.1 Senior Indenture and Form T-1 dated as of November 1,
1996 among the Company and Harris Trust and Savings
Bank (incorporated by reference to Exhibit 4.1 of the
Company's Report on Form 8-K, filed November 13,
1996).
4.5.2 Copy of 7.25% Notes Due 2003.
4.6.1 Declaration of Trust, dated as of January 28, 1997,
between the Bank and The First National Bank of
Chicago, as trustee (including the Certificate of
Trust executed by First Chicago Delaware Inc., as
Delaware trustee).
4.6.2 Copies of Certificates Evidencing Capital Securities.
4.6.3 Amended and Restated Declaration of Trust, dated as
of January 31, 1997, by and among the Bank, The First
National Bank of Chicago and First Chicago Delaware
Inc.
4.7 Indenture, dated as of January 31, 1997, between the
Bank and The First National Bank of Chicago.
10.1 Amended and Restated Distribution Agreement dated
April 30, 1996 among Capital One Bank and the agents
named therein (incorporated by reference to Exhibit
10.1 of the Company's quarterly report on Form 10-Q
for period ending June 30, 1996).
10.2 Distribution Agreement dated April 30, 1996, among
Capital One Bank and the Agents named therein
(incorporated by reference to Exhibit 10.2 of the
Company's quarterly report on Form 10-Q for period
ending June 30, 1996).
10.3.1 Employment Agreement dated as of November 1, 1994
between Capital One Financial Corporation and Richard
D. Fairbank (incorporated by reference to Exhibit
10.10 of the 1994 Form 10-K).
10.3.2 Amendment to the Employment Agreement between Capital
One Financial Corporation and Richard D. Fairbank
dated as of September 15, 1995 (incorporated by
reference to Exhibit 10.10.1 of the 1995 Form 10-K).
10.4.1 Employment Agreement dated as of November 1, 1994
between Capital One Financial Corporation and Nigel
W.
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Morris (incorporated by reference to Exhibit 10.11 of
the 1994 Form 10-K).
10.4.2 Amendment to the Employment Agreement between Capital
One Financial Corporation and Nigel W. Morris dated
as of September 15, 1995 (incorporated by reference
to Exhibit 10.11.1 of the 1995 Form 10-K).
10.5.1 Change of Control Employment Agreement dated as of
November 1, 1994 between Capital One Financial
Corporation and Richard D. Fairbank (incorporated by
reference to Exhibit 10.12 of the 1994 Form 10-K).
10.5.2 Amendment to the Change of Control Agreement between
Capital One Financial Corporation and Richard D.
Fairbank dated as of September 15, 1995 (incorporated
by reference to Exhibit 10.12.1 of the 1995 Form
10-K).
10.6.1 Change of Control Employment Agreement dated as of
November 1, 1994 between Capital One Financial
Corporation and Nigel W. Morris (incorporated by
reference to Exhibit 10.13 of the 1994 Form 10-K).
10.6.2 Amendment to the Change of Control Agreement between
Capital One Financial Corporation and Nigel W. Morris
dated as of September 15, 1995 (incorporated by
reference to Exhibit 10.13.1 of the 1995 Form 10-K).
10.7 Change of Control Employment Agreement dated as of
November 1, 1994 between Capital One Financial
Corporation and James M. Zinn (incorporated by
reference to Exhibit 10.14 of the 1994 Form 10-K).
10.8 Change of Control Employment Agreement dated as of
November 1, 1994, between Capital One Financial
Corporation and John G. Finneran, Jr. (incorporated
by reference to Exhibit 10.15 of the 1994 Form 10-K).
10.9 Capital One Financial Corporation 1994 Stock
Incentive Plan, as amended.
10.10 Capital One Financial Corporation Senior Executive
Short-Term Cash Incentive Plan (terminated effective
November 16, 1995) (incorporated by reference to
Exhibit 10.17 of the 1994 Form 10-K).
10.11 Capital One Financial Corporation Senior Executive
Long-Term Cash Incentive Plan (terminated effective
November 16, 1995) (incorporated by reference to
Exhibit 10.18 of the 1994 Form 10-K).
10.12 Capital One Financial Corporation Executive Employee
Supplemental Retirement Plan (terminated effective
November 16, 1995) (incorporated by reference to
Exhibit 10.19 of the 1994 Form 10-K).
20
21
10.13 Capital One Financial Corporation Excess Savings
Plan, as amended (incorporated by reference to
Exhibit 10.20 of the 1995 Form 10-K).
10.14 Capital One Financial Corporation Excess Benefit Cash
Balance Plan, as amended (incorporated by reference
to Exhibit 10.21 of the 1995 Form 10-K).
10.15 Capital One Financial Corporation 1994 Deferred
Compensation Plan, as amended (incorporated by
reference to Exhibit 10.22 of the 1995 Form 10-K).
10.16 1995 Non-Employee Directors Stock Incentive Plan,
(incorporated by reference to Registrant's
Registration Statement on Form S-8 Commission File
No. 33-91790, filed May 1995).
10.17 Capital One Financial Corporation Severance Pay Plan
(incorporated by reference to Exhibit 10.26 of the
1994 Form 10-K).
10.18 Credit Agreement, dated as of November 17, 1995,
among Capital One Financial Corporation and Capital
One Bank, as borrowers, The Chase Manhattan Bank, as
administrative agent, and the lenders named therein
(terminated effective November 25, 1996)
(incorporated by reference to Exhibit 10.32 of the
1995 Form 10-K).
10.19 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).
10.20.1 Participation Agreement dated as of January 5, 1996,
among Capital One Bank, as construction agent and as
lessee, First Security Bank of Utah, N.A., as
owner/trustee for the COB Real Estate Trust 1995-1,
NationsBank of Texas, N.A., as administrative agent
and the holders and lenders named therein
(incorporated by reference to Exhibit 10.34.1 of the
1995 Form 10-K).
10.20.2 First Amendment to Operative Documents dated as of
June 5, 1996, among Capital One Bank, as construction
agent and as lessee, First Security Bank of Utah,
N.A., as owner/trustee for the COB Real Estate Trust
1995-1, NationsBank of Texas, N.A., as administrative
agent, initial lender and initial holder named
therein (incorporated by reference to Exhibit 10.3 of
the Company's quarterly report on Form 10-Q for
period ending June 30, 1996).
10.20.3 Second Amendment to Operative Agreements dated as of
October 11, 1996, among Capital One Bank, as
construction agent and as lessee, First Security Bank
of Utah, N.A., as owner/trustee for the COB Real
Estate Trust 1995-1, NationsBank of Texas, N.A., as
administrative agent, initial lender and initial
holder named therein.
21
22
10.20.4 Assignment, Consent and Third Amendment to Operative
Agreement dated November 8, 1996, by and among
Capital One Bank, Capital One Realty, Inc., First
Security Bank of Utah, N.A., as owner/trustee for the
COB Real Estate Trust 1995-1, and NationsBank of
Texas, N.A., as administrative agent.
10.20.5 Lease Agreement dated as of January 5, 1996, between
First Security Bank of Utah, N.A., as owner/trustee
for the COB Real Estate Trust 1995-1, as lessor and
Capital One Bank, as lessee (incorporated by
reference to Exhibit 10.34.2 of the 1995 Form 10-K).
10.20.6 Credit Agreement dated as of January 5, 1996, among
First Security Bank of Utah, N.A., as owner/trustee
for the COB Real Estate Trust 1995-1, as borrower,
the lenders named therein and NationsBank of Texas,
N.A., as administrative agent (incorporated by
reference to Exhibit 10.34.3 of the 1995 Form 10-K).
10.21 Amended and Restated Credit Agreement, dated as of
November 25, 1996, among Capital One Financial
Corporation, Capital One Bank, Capital One F.S.B. and
The Chase Manhattan Bank, as Administrative Agent.
11 Computation of Per Share Earnings.
13 The portions of the Company's 1996 Annual Report to
Stockholders which are incorporated by reference
herein.
21 Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP.
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated November
13, 1996, Commission File No. 1-13300, to incorporate a
Senior Indenture and Form T-1 dated as of November 1, 1996,
Statement of Eligibility to the Capital One Financial
Corporation Registration Statement No. 333-3850.
The Company filed a Current Report on Form 8-K dated December
4, 1996, Commission File No. 1-13300, to incorporate a
replacement page into Exhibit 13 to Amendment No. 1 to the
Capital One Financial Corporation Registration Statement
333-3850.
The Company filed a Current Report on Form 8-K dated January
27, 1997, Commission File No. 1-13300, enclosing its Press
Release dated January 22, 1997.
The Company filed a Current Report on Form 8-K dated February
14, 1997 announcing the issuance by Capital One Capital I, a
subsidiary of the Bank, of Capital Securities.
22
23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CAPITAL ONE FINANCIAL CORPORATION
Date: March 26, 1997 By /s/ James M. Zinn
-----------------------------
James M. Zinn
Senior 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
Registrant and in the capacities indicated on the 26th day of March, 1997.
SIGNATURES TITLE
---------- -----
/s/ Richard D. Fairbank Director, Chairman and Chief Executive
-------------------------------------------------- Officer
Richard D. Fairbank (Principal Executive Officer)
/s/ Nigel W. Morris Director, President and Chief Operating
-------------------------------------------------- Officer
Nigel W. Morris
/s/ James M. Zinn Senior Vice President and
- --------------------------------------------------- Chief Financial Officer
James M. Zinn (Principal Accounting and Financial
Officer)
/s/ W. Ronald Dietz Director
- ---------------------------------------------------
W. Ronald Dietz
/s/ James A. Flick, Jr. Director
- ---------------------------------------------------
James A. Flick, Jr.
/s/ Patrick W. Gross Director
- ---------------------------------------------------
Patrick W. Gross
23
24
/s/ James V. Kimsey Director
- ---------------------------------------------------
James V. Kimsey
/s/ Stanley I. Westreich Director
- ---------------------------------------------------
Stanley I. Westreich
24
25
EXHIBITS TO CAPITAL ONE FINANCIAL CORPORATION
ANNUAL REPORT ON FORM 10-K
DATED DECEMBER 31, 1996
COMMISSION FILE NO. 1-13300
26
EXHIBIT INDEX
SEQUENTIAL
EXHIBIT NUMBER DESCRIPTION PAGE NUMBER
- -------------- ----------- -----------
3.1 Restated Certificate of Incorporation of Capital One
Financial Corporation (incorporated by reference to
Exhibit 3.1 of the 1994 Form 10-K).
3.2 Restated Bylaws of Capital One Financial Corporation
(as amended January 24, 1995) (incorporated by
reference to Exhibit 3.2 of the 1994 Form 10-K).
4.1 Specimen certificate representing the Common Stock
(incorporated by reference to Exhibit 4 of the 1994
Form 10-K).
4.2 Rights Agreement dated as of November 16, 1995
between Capital One Financial Corporation and Mellon
Bank, N.A. (incorporated by reference to Exhibit 4.1
of the Company's Report on Form 8-K, filed November
16, 1995).
4.3 Amended and Restated Issuing and Paying Agency
Agreement dated as of April 30, 1996 between Capital
One Bank and Chemical Bank (including exhibits A-1,
A-2, A-3, and A-4 thereto) (incorporated by reference
to Exhibit 4.1 of the Company's quarterly report on
Form 10-Q for the period ending June 30, 1996).
4.4 Issuing and Paying Agency Agreement dated as of April
30, 1996 between Capital One Bank and Chemical Bank
(including exhibits A-1 and A-2 thereto)
(incorporated by reference to Exhibit 4.2 of the
Company's quarterly report on Form 10-Q for the
period ending June 30, 1996).
4.5.1 Senior Indenture and Form T-1 dated as of November 1,
1996 among the Company and Harris Trust and Savings
Bank (incorporated by reference to Exhibit 4.1 of the
Company's Report on Form 8-K, filed November 13,
1996).
4.5.2 Copy of 7.25% Notes Due 2003.
4.6.1 Declaration of Trust, dated as of January 28, 1997,
between the Bank and The First National Bank of
Chicago, as trustee (including the Certificate of
Trust executed by First Chicago Delaware Inc., as
Delaware trustee).
4.6.2 Copies of Certificates Evidencing Capital Securities.
4.6.3 Amended and Restated Declaration of Trust, dated as
of January 31, 1997, by and among the Bank, The First
National Bank of Chicago and First Chicago Delaware
Inc.
27
SEQUENTIAL
EXHIBIT NUMBER DESCRIPTION PAGE NUMBER
-------------- ----------- -----------
4.7 Indenture, dated as of January 31, 1997, between the
Bank and The First National Bank of Chicago.
10.1 Amended and Restated Distribution Agreement dated
April 30, 1996 among Capital One Bank and the agents
named therein (incorporated by reference to Exhibit
10.1 of the Company's quarterly report on Form 10-Q
for period ending June 30, 1996).
10.2 Distribution Agreement dated April 30, 1996, among
Capital One Bank and the Agents named therein
(incorporated by reference to Exhibit 10.2 of the
Company's quarterly report on Form 10-Q for period
ending June 30, 1996).
10.3.1 Employment Agreement dated as of November 1, 1994
between Capital One Financial Corporation and Richard
D. Fairbank (incorporated by reference to Exhibit
10.10 of the 1994 Form 10-K).
10.3.2 Amendment to the Employment Agreement between Capital
One Financial Corporation and Richard D. Fairbank
dated as of September 15, 1995 (incorporated by
reference to Exhibit 10.10.1 of the 1995 Form 10-K).
10.4.1 Employment Agreement dated as of November 1, 1994
between Capital One Financial Corporation and Nigel
W. Morris (incorporated by reference to Exhibit 10.11
of the 1994 Form 10-K).
10.4.2 Amendment to the Employment Agreement between Capital
One Financial Corporation and Nigel W. Morris dated
as of September 15, 1995 (incorporated by reference
to Exhibit 10.11.1 of the 1995 Form 10-K).
10.5.1 Change of Control Employment Agreement dated as of
November 1, 1994 between Capital One Financial
Corporation and Richard D. Fairbank (incorporated by
reference to Exhibit 10.12 of the 1994 Form 10-K).
10.5.2 Amendment to the Change of Control Agreement between
Capital One Financial Corporation and Richard D.
Fairbank dated as of September 15, 1995 (incorporated
by reference to Exhibit 10.12.1 of the 1995 Form
10-K).
10.6.1 Change of Control Employment Agreement dated as of
November 1, 1994 between Capital One Financial
Corporation and Nigel W. Morris (incorporated by
reference to Exhibit 10.13 of the 1994 Form 10-K).
10.6.2 Amendment to the Change of Control Agreement between
Capital One Financial Corporation and Nigel W.
Morris dated as of September 15, 1995 (incorporated
by reference to Exhibit 10.13.1 of the 1995 Form
10-K).
28
SEQUENTIAL
EXHIBIT NUMBER DESCRIPTION PAGE NUMBER
-------------- ----------- -----------
10.7 Change of Control Employment Agreement dated as of
November 1, 1994 between Capital One Financial
Corporation and James M. Zinn (incorporated by
reference to Exhibit 10.14 of the 1994 Form 10-K).
10.8 Change of Control Employment Agreement dated as of
November 1, 1994, between Capital One Financial
Corporation and John G. Finneran, Jr. (incorporated
by reference to Exhibit 10.15 of the 1994 Form 10-K).
10.9 Capital One Financial Corporation 1994 Stock
Incentive Plan, as amended.
10.10 Capital One Financial Corporation Senior Executive
Short-Term Cash Incentive Plan (terminated effective
November 16, 1995) (incorporated by reference to
Exhibit 10.17 of the 1994 Form 10-K).
10.11 Capital One Financial Corporation Senior Executive
Long-Term Cash Incentive Plan (terminated effective
November 16, 1995) (incorporated by reference to
Exhibit 10.18 of the 1994 Form 10-K).
10.12 Capital One Financial Corporation Executive Employee
Supplemental Retirement Plan (terminated effective
November 16, 1995) (incorporated by reference to
Exhibit 10.19 of the 1994 Form 10-K).
10.13 Capital One Financial Corporation Excess Savings
Plan, as amended (incorporated by reference to
Exhibit 10.20 of the 1995 Form 10-K).
10.14 Capital One Financial Corporation Excess Benefit Cash
Balance Plan, as amended (incorporated by reference
to Exhibit 10.21 of the 1995 Form 10-K).
10.15 Capital One Financial Corporation 1994 Deferred
Compensation Plan, as amended (incorporated by
reference to Exhibit 10.22 of the 1995 Form 10-K).
10.16 1995 Non-Employee Directors Stock Incentive Plan,
(incorporated by reference to Registrant's
Registration Statement on Form S-8 Commission File
No. 33-91790, filed May 1995).
10.17 Capital One Financial Corporation Severance Pay Plan
(incorporated by reference to Exhibit 10.26 of the
1994 Form 10-K).
10.18 Credit Agreement, dated as of November 17, 1995,
among Capital One Financial Corporation and Capital
One Bank, as borrowers, The Chase Manhattan Bank, as
administrative agent, and the lenders named therein
(terminated effective November 25, 1996)
(incorporated by reference to Exhibit 10.32 of the
1995 Form 10-K).
29
SEQUENTIAL
EXHIBIT NUMBER DESCRIPTION PAGE NUMBER
-------------- ----------- -----------
10.19 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).
10.20.1 Participation Agreement dated as of January 5, 1996,
among Capital One Bank, as construction agent and as
lessee, First Security Bank of Utah, N.A., as
owner/trustee for the COB Real Estate Trust 1995-1,
NationsBank of Texas, N.A., as administrative agent
and the holders and lenders named therein
(incorporated by reference to Exhibit 10.34.1 of the
1995 Form 10-K).
10.20.2 First Amendment to Operative Documents dated as of
June 5, 1996, among Capital One Bank, as construction
agent and as lessee, First Security Bank of Utah,
N.A., as owner/trustee for the COB Real Estate Trust
1995-1, NationsBank of Texas, N.A., as administrative
agent, initial lender and initial holder named therein
(incorporated by reference to Exhibit 10.3 of the
Company's quarterly report on Form 10-Q for period
ending June 30, 1996).
10.20.3 Second Amendment to Operative Agreements dated as of
October 11, 1996, among Capital One Bank, as
construction agent and as lessee, First Security Bank
of Utah, N.A., as owner/trustee for the COB Real
Estate Trust 1995-1, NationsBank of Texas, N.A., as
administrative agent, initial lender and initial
holder named therein.
10.20.4 Assignment, Consent and Third Amendment to Operative
Agreement dated November 8, 1996, by and among
Capital One Bank, Capital One Realty, Inc., First
Security Bank of Utah, N.A., as owner/trustee for the
COB Real Estate Trust 1995-1, and NationsBank of
Texas, N.A., as administrative agent.
10.20.5 Lease Agreement dated as of January 5, 1996, between
First Security Bank of Utah, N.A., as owner/trustee
for the COB Real Estate Trust 1995-1, as lessor and
Capital One Bank, as lessee (incorporated by
reference to Exhibit 10.34.2 of the 1995 Form 10-K).
10.20.6 Credit Agreement dated as of January 5, 1996, among
First Security Bank of Utah, N.A., as owner/trustee
for the COB Real Estate Trust 1995-1, as borrower,
the lenders named therein and NationsBank of Texas,
N.A., as administrative agent (incorporated by
reference to Exhibit 10.34.3 of the 1995 Form 10-K).
10.21 Amended and Restated Credit Agreement, dated as of
November 25, 1996, among Capital One Financial
Corporation, Capital One Bank, Capital One F.S.B. and
The Chase Manhattan Bank, as Administrative Agent.
30
SEQUENTIAL
EXHIBIT NUMBER DESCRIPTION PAGE NUMBER
-------------- ----------- -----------
11 Computation of Per Share Earnings.
13 The portions of the Company's 1996 Annual Report to
Stockholders which are incorporated by reference
herein.
21 Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP.