Capital One 1997 Annual Report Download - page 31

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percentage of on-balance sheet consumer loans increased to 3.76%
as of December 31, 1997 from 2.73% as of December 31, 1996 pri-
marily due to increases in the net charge-off rate to 4.83% for 1997
from 3.63% in 1996, resulting from continued loan seasoning, gen-
eral economic trends in consumer credit performance and the modi-
fication in charge-off policy described earlier.The provision increase
also reflected the increase in on-balance sheet consumer loans to
$4.9 billion as of December 31, 1997, an increase of 12% from
December 31, 1996 and the continued growth of second generation
products. In consideration of these factors, the Company increased
the allowance for loan losses by $64.5 million during 1997.
For the year ended December 31, 1996, the provision for loan
losses increased to $167.2 million, or 154%, from the 1995 provi-
sion for loan losses of $65.9 million.The increase in the provision
for loan losses resulted from increases in average reported con-
sumer loans of 24%, continued loan seasoning, a shift in the compo-
sition of reported consumer loans and general economic trends in
consumer credit performance. Net charge-offs as a percentage of
average reported consumer loans increased to 3.63% for the year
ended December 31, 1996 from 2.03% in the prior year. Addition-
ally, growth in second generation products, which in some cases
have modestly higher charge-off rates than first generation prod-
ucts, increased the amount of provision necessary to absorb credit
losses. In consideration of these factors, the Company increased the
allowance for loan losses by $46.5 million during 1996.
Funding
Table 9 reflects the costs of other borrowings of the Company as of
and for each of the years ended December 31, 1997, 1996 and 1995.
PAGE 29
Table 9: Other Borrowings
Maximum
Outstanding As Of Outstanding Average Average Year-End
(Dollars in Thousands) Any Month-End As Of Year-End Outstanding Interest Rate Interest Rate
1997
Federal funds purchased and resale agreements $ 999,200 $705,863 $ 503,843 5.54% 5.75%
Other 160,144 90,249 128,033 8.71 7.09
Total $796,112 $ 631,876 6.18% 5.90%
1996
Federal funds purchased and resale agreements $ 617,303 $445,600 $ 342,354 5.63% 6.26%
Other 207,689 85,383 112,545 8.20 6.43
Total $530,983 $ 454,899 6.27% 6.29%
1995
Federal funds purchased and resale agreements $1,146,678 $709,803 $ 747,350 6.14% 5.76%
Other 1,000,000 100,000 280,725 7.24 6.03
Total $809,803 $1,028,075 6.44% 5.79%
Table 10 shows the maturation of certificates of deposit in
denominations of $100,000 or greater (large denomination CDs)
as of December 31, 1997.
Table 10: Maturities of Domestic Large
Denomination Certificates—
$100,000 or More
December 31, 1997
(Dollars in Thousands) Balance Percent
3 months or less $ 97,363 42.62%
Over 3 through 6 months 43,523 19.06%
Over 6 through 12 months 49,210 21.54%
Over 12 months 38,332 16.78%
Total $228,428 100.00%
In September 1997, the Savings Bank completed the purchase of
the national retail deposit franchise of JCPenney National Bank.
Retail deposit balances acquired under the agreement were approx-
imately $421 million.The chart on page 31 indicates that during
1997 the Company increased its interest-bearing deposits to $1.3
billion as of December 31, 1997 from $.9 billion in the prior year.