Capital One Financial Company Overview
Capital One monetary agency (the “organisation”) is a maintaining company, integrated in Delaware on July 21, 1994, whose subsidiaries market a ramification of
purchaser economic products and services. In 2004, the corporation have become a financial institution protecting employer. The company’s subsidiary, Capital One bank (the“bank”) a Virginia state chartered financial institution, presently offers credit card products and takes retail deposits; the bank can also, steady with its charter, have interaction in a Extensive type of lending and other economic activities. Capital One, F.S.B. (the “savings financial institution”), a federally chartered savings financial institution, offers client and Commercial lending and customer deposit merchandise, and Capital One car Finance, Inc. (“COAF”) offers vehicle and other motor car financing merchandise.
Capital One offerings, Inc., any other subsidiary of the corporation, offers various running, administrative and different offerings to the employer and its
subsidiaries. until indicated otherwise, the terms “company”, “we”, “us”, and “our” consult with the agency and its consolidated subsidiaries. As of December 31, 2004, we had 48.6 million accounts and $seventy nine.nine billion in controlled consumer loans exquisite. we’re a number of the five largest issuers of Visa® (“Visa”) and credit card® (“credit card”) credit playing cards inside the u.s.a. based totally on managed credit card loans extraordinary as of December 31, 2004. critical
elements underlying the increase of our controlled credit score card loans and accounts encompass credit score card enterprise dynamics, which include the level of competition, and our business strategies around constructing, reading and applying consequences derived from large portions of information to lessen credit score danger, mass personalize products for customers and enhance operational efficiency. We generally have categorised those strategies our “facts primarily based strategy” or “IBS”. With the conversion of the organization to a financial institution holding agency and the conversion of the financial institution to a full-carrier bank, the financial institution has the ability to engage in an expansion of client lending and other banking sports.
We offer our merchandise for the duration of america. We additionally offer our merchandise outside of the usa mainly thru Capital One bank (Europe) p.c, an oblique subsidiary of the bank prepared and positioned in the united kingdom (the “U.k. bank”), and a department of the financial institution in Canada. Our U.ok. bank has authority to just accept deposits and offer credit score card and installment loans.
We generally try to use IBS to distinguish among clients based on credit score chance, utilization and different traits and to suit customer characteristics with suitable product services. To do that, we have built, and retain to beautify, state-of-the-art fashions and statistics systems, whilst employing a nicely-educated staff and a bendy way of life to identify, expand and marketplace credit card or other services and products to meet the demands of a competitive and ever converting market. By means of actively checking out a huge variety of product and service functions, advertising and marketing channels and other aspects of offerings, we layout customized solicitations, products and services that are focused at particular credit score purchaser segments, thereby improving reaction tiers and maximizing returns on funding inside given underwriting parameters.
We build on records derived from our preliminary resources with persisted included trying out and version development to enhance the pleasant, overall performance and profitability of our solicitation and account control tasks. We use this method in all regions of our commercial enterprise, which include solicitations, account Management, credit line control, pricing strategies, utilization stimulation, collections, recoveries, and account and balance retention.
Our not unusual stock is indexed at the the big apple inventory change below the image COF and our upper DECs® securities are listed on the big apple stock exchange underneath the symbol COFPRC. Our main govt office is placed at 1680 Capital One power, McLean, Virginia 22102 (phone wide variety (703)720-1000). The employer keeps a internet site at www.capitalone.com. documents to be had on our internet site encompass the organisation’s (i) Code of commercial enterprise behavior and Ethics, (ii) corporate Governance ideas; (iii) and charters for the Audit and risk, repayment, Finance, and Governance and Nominating Committees. these files also are to be had in print to any shareholder who requests a duplicate. similarly, we make to be had free of fee via our website our annual reports on form 10-okay quarterly reports on shape 10-Q, contemporary reviews on shape 8-k and amendments to those reviews as soon as fairly plausible after digital filing or furnishing of such fabric with the SEC.
Commercial Enterprise Description
With more than forty eight.6 million accounts, Capital One is one of the global’s largest financial services franchises. we are a varied financial offerings employercentered normally on consumer lending. Our principal enterprise segments are domestic credit card lending, automobile and different motor car financing andglobal economic services. For similarly discussion of our segments, see pages forty five-47 in item 7 “management’s discussion and evaluation of economic condition andresults of Operations—Reportable Segments” and pages sixty eight-70 in object 8 “monetary Statements and Supplementary information—Notes to the Consolidated monetaryStatements—observe 2”.U.S. Card segment. We provide a extensive kind of credit card merchandise at some stage in the united states. We customize our merchandise to attraction to one of a kind consumerpreferences and desires by means of combining unique product features, which include annual percentage rates, charges and credit score limits, rewards packages and other specialfunctions. We mechanically test new merchandise to expand ones that appeal to distinctive and changing client choices. Our custom designed products encompass bothmerchandise presented to a wide variety of consumer credit hazard profiles, in addition to merchandise aimed at unique patron hobbies. Our pricing strategies are danger-based totally;lower threat customers may also probable be presented merchandise with greater favorable pricing and we expect those merchandise to yield decrease delinquencies and credit score losses. Onmerchandise provided to higher risk customers, but, we are likely to enjoy better delinquencies and losses, and we charge these products as a consequence.auto Finance phase. We additionally observe IBS to our automobile finance business. thru COAF, we buy retail installment contracts, secured by way of motors or othermotor automobiles, thru provider networks during america. additionally, we make use of direct marketing to offer vehicle financing without delay toconsumers. Our direct advertised products consist of financing for the purchase of recent and used vehicles, as well as refinancing of current motor car loans. InOctober 2001, we obtained PeopleFirst Inc., the nation’s largest on-line company of direct motor car loans. In January 2005, we acquired Onyx acceptanceagency, an auto finance employer that provides financing to franchised and pick unbiased dealerships throughout america. similar to our creditcard approach, we customize product features, such as hobby fee, loan amount, and loan terms, enabling us to lend to customers with a extensive range of credit scoreprofiles.global monetary services segment. Our global financial services (“GFS”) section includes an expansion of numerous products for consumers within the usa andthe world over. regionally, GFS manages installment lending, healthcare financing (through Amerifee agency, which we received in might also 2001), andsmall business lending activities. further, in 2004, the organization entered right into a definitive settlement to gather a mortgage lending enterprise, eSmartloan andan insurance brokerage business, InsLogic. each acquisitions closed in early 2005. we have, and can within the future achieve similarly diversification throughacquisition, natural growth or each. GFS also includes our global corporations, in which we’re the use of methodologies and processes we’ve got discovered in ourU.S. credit card and other client lending businesses in new geographies. the world over, we are presently operating primarily in the united kingdom andCanada. In 2004, we persisted to develop within the range of accounts and loan balances in our international lending commercial enterprise, with maximum of our growth coming fromthe United Kingdom. The company additionally completed its acquisition of Hfs organization, a domestic equity broker inside the united kingdom, in January 2005.
Organisation Risk Management
Risk is an inherent part of the business enterprise’s business and sports. The enterprise has an employer hazard control (ERM) application designed to make certainsuitable and comprehensive oversight and control of risk. The ERM software has 3 additives. First, the Board of administrators and senior managementcommittees oversee hazard and threat control practices. second, the centralized departments headed with the aid of the chief employer danger Officer and the leader credit scoreOfficer establish hazard management methodologies, methods and standards. 0.33, the individual enterprise areas throughout the company are liable fordealing with risk in their companies and acting ongoing identification, evaluation and response to dangers. The organisation’s ERM framework consists of 8classes of chance: credit, liquidity, marketplace, operational, felony, strategic, popularity, and compliance.l
Legal Responsibility for typically-controlled establishments
under the “pass-guarantee” provision of the financial institutions Reform, restoration and Enforcement Act of 1989 (“FIRREA”), insured depository establishmentsalong with the financial institution and the financial savings bank may be at risk of the FDIC with admire to any loss or moderately anticipated loss incurred via the FDIC resulting from thedefault of, or FDIC help to, any commonly managed insured depository group. The financial institution and the financial savings bank are generally controlled inside thethat means of the FIRREA cross-assure provision.
Auto Finance Phase
the auto Finance phase mostly consists of car financing sports. overall vehicle Finance phase loans multiplied 18% to $10.0 billion at December 311, 2004, compared to $eight.five billion at December 31, 2003. The growth in vehicle loans become more often than not the result of boom in prime loans originated through the net and boom in loans originated inside the dealer section. For the yr ended December 31, 2004, the net profits contribution from the automobile Finance section extended $sixty four.five million, or sixty five% in comparison to 2003, as a result of growth inside the loan portfolio and enhancing credit score loss experience.
The enterprise offered $901.3 million and $1.nine billion of vehicle loans in 2004 and 2003, respectively. those transactions led to pre-tax profits of $forty.3 million and $66.4 million for the years ended December 31, 2004 and 2003, respectively. Pre-tax profits allotted to the car Finance segment, which includes allocations associated to price range switch pricing, were $41.7 million and $fifty seven.3 million in 2004 and 2003, respectively. in the course of 2004, the corporation terminated its forward drift auto receivables agreement; however, the corporation plans to retain to promote auto receivables through other channels.
For the yr ended December 31, 2004, the auto Finance segment’s internet price-off price turned into 3.28%, down 134 foundation points from the earlier yr. net fee-offs of automobile Finance phase loans reduced $54.8 million, or 15%, at the same time as average auto Finance loans for the 12 months ended December 31, 2004 grew $1.five billion, or 19%, compared to the previous year. The lower in the rate-off price became primarily pushed through improved loan nice, collections overall performance and favorableindustry tendencies, partially offset via a $20.four million one-time acceleration of fee-offs associated with a trade in the rate-off reputation system for vehicle loans in bankruptcy.
The 30-plus day delinquency price for the car Finance section turned into five.50 % at December 31, 2004, down 205 foundation points from 7.fifty five% at December 31, 2003.
The lower in delinquencies changed into the result of a higher blend of top loans and advanced delinquency performance of non-high loans.
Global Financial offerings Phase
the global monetary services phase consists of global lending sports (such as credit score card lending), installment lending, small enterprise lending and
healthcare financing. total international financial services phase loans elevated 29% to $21.2 billion at December 31, 2004, as compared to $sixteen.5 billion at December
31, 2003. The boom in overall loans displays the corporation’s endured successful efforts to diversify its mortgage portfolio, an growth in account increase and the impact of adjustments in overseas currency trading prices. net profits contribution from the global financial offerings phase for the 12 months ended December 31, 2004, expanded $148.2 million, to $213.1 million, as compared to the earlier yr. international economic offerings segment internet profits consists of after-tax fees of $17.zero million related to severance and facility consolidation as a consequence of fee reduction projects, $2.four million related to modifications in asset capitalization thresholds,
and $10.three million from the impairment of internally advanced software. the overall development within the international financial offerings section’s monetary performance became broadly speaking because of the success of some of the enterprise’s larger diversification organizations inside the U.S. and U.k. throughout 2004, the company sold its hobby in a South African joint challenge with a ebook value of $3.nine million to its joint assignment companion. The business enterprise received $26.2 million in cash, turned into forgiven $nine.2 million in liabilities and recognized a pre-tax advantage of $31.5 million. additionally at some point of 2004, the employer offered its French mortgage
portfolio with a book fee of $one hundred forty four.8 million to an outside celebration. The organisation acquired $178.7 million in coins, recorded $7.2 million in notes receivable and recognized a pre-tax gain of $forty one.1 million. The respective profits had been recorded in non-interest profits and pronounced in the worldwide monetary offerings phase.
Funding
Funding Availability
The organisation has hooked up access to a variety of investment options in addition to securitization of its consumer loans. table 10 illustrates the organisation’s
unsecured investment assets.
REAFFIRMATION OF WARRANTY
THIS REAFFIRMATION of guaranty (this “Reaffirmation”) is made as of this 1st day of March, 2004, through CAPITAL ONE financial institution, a Virginia banking business enterprise (the “Guarantor”) for the gain of (i) Wells Fargo bank Northwest, countrywide affiliation (previously, First security bank, N.A., the proper name of which turned into First security financial institution, country wide affiliation), a national banking association, and Val T. Orton, not individually, but solely in their capacities as
owner Trustee of the COB actual property agree with 1995-1 (collectively, the “Lessor”), (ii) Wachovia bank, countrywide affiliation (previously, First Union countrywide bank),
now not personally, but completely in its ability as Indenture Trustee (the “Indenture Trustee”) and legal professionals identify Realty offerings, Inc, in its ability as deed of accept as true with trustee under the Indenture (the “Deed of trust Trustee”), (iii) the observe consumers, (iv) the Registered proprietors and (v) BTM Capital business enterprise (the “LCissuer”). The Lessor, the Indenture Trustee, the Deed of believe Trustee, the observe consumers, the Registered owners and the LC issuer are, hereinafter, collectively referred to as the “Obligees”.
RECITALS
while, the Guarantor has heretofore carried out a guaranty dated as of October 14, 1998 (as the identical may be amended, changed or supplemented every now and then, the “warranty”), in prefer of the Obligees, pursuant to which the Guarantor assured all of the duties of Capital One Realty, Inc., a Delaware enterprise (the “Lessee”) underneath (i) that sure Amended and Restated hire agreement dated as of October 14, 1998 (together with all dietary supplements
and amendments thereto and any memorandum or brief shape in appreciate of any thereof entered into for the reason of recording, the “lease”) and (ii) that positive venture of rent dated as of October 14, 1998 (collectively will all dietary supplements and amendments thereto, the “challenge of rent”); and whereas, pursuant to the hire, the Lessee, with the approval of the Indenture Trustee according with the phrases thereof, has asked to (i) substitute all of Lessor’s right, title, and interest inside the parcel of actual assets positioned in Hillsborough County, Florida and greater particularly defined in show off A connected hereto and integrated herein by way of this reference, collectively with all of Lessor’s right, name, and hobby inside the enhancements (as described inside the lease)
thereon and all easements, rights and appurtenances thereto, for all of Lessor’s proper, identify, and interest within the parcel of actual belongings located in Hillsborough County, Florida and diagnosed in the hire as Renaissance commercial enterprise Park section I, together with all of Lessor’s right, name, and hobby in the improvements thereon and all easements, rights and appurtenances thereto, and (ii) substitute all of Lessor’s proper, identify, and hobby within the parcel of actual belongings placed in Hillsborough County, Florida and greater specifically described in exhibit B attached hereto and incorporated herein by using this reference, collectively with all of Lessor’s Right, name, and interest inside the enhancements thereon and all easements, rights and appurtenances thereto, for all of Lessor’s proper, name, and hobby in the parcel of actual property positioned in Hillsborough County, Florida and recognized in the rent as Renaissance business Park segment II, collectively with all of Lessor’s right, title, and interest in the improvements thereon and all easements, rights and appurtenances thereto; and whereas, in connection with such substitutions, the Lessor and the Lessee will input into amendments or adjustments to the lease within the form of (i)that sure First amendment to Amended and Restated hire agreement and Memorandum of Amended and Restated hire agreement dated of even dateherewith and (ii) that certain lease complement dated of even date herewith (together, the “rent modification files”); andwhereas, in connection with such substitutions, the Lessor and the Indenture Trustee, with the consent of the Lessee, will input into an modification oramendment to the undertaking of lease inside the shape of that sure First change to mission of lease dated of even date herewith (the “venture oflease change”); andwhile, it’s far a condition of the execution and shipping of the lease change documents and the challenge of hire change that theGuarantor execute and deliver this Reaffirmation with a view to reaffirm its duties under the guaranty and to well known and consent to the execution anddelivery of the hire amendment documents and the task of hire amendment as hereinafter provided;NOW, therefore, in consideration of the premises, and other right and valuable attention, the receipt and sufficiency of which is herebystated, the Guarantor hereby has the same opinion as comply with
(1) Definitions
Capitalized phrases used herein but no longer defined herein shall have the meanings assigned to such phrases within the warranty.
(2)Acknowledgement and Consent.
The Guarantor hereby expressly (i) recognizes that it has acquired copies of the hire change documents and the project of hire amendment, (ii) acknowledges that it knows the character of the transactions contemplated by way of the hire modification files and the assignment of hire change, and (iii) has the same opinion to the execution, delivery and performance of the rent modification files and the challenge of hire change and to the transactions pondered thereunder.
(3)Reaffirmation and affirmation of guaranty.
The Guarantor hereby expressly ratifies, affirms and confirms to the Obligees its obligations underneath thewarranty, and acknowledges, renews and extends its persevered liability underneath the warranty and has the same opinion that the guaranty remains, and following the executionand transport of the rent modification documents and the undertaking of lease modification will continue to be, in complete force and effect and enforceable according to terms.