Capital One 1997 Annual Report Download - page 49

Note C: Allowance for Loan Losses
The following is a summary of changes in the allowance for
loan losses:
Year Ended December 31
1997 1996 1995
Balance at beginning of year $(118,500 $(72,000 $(68,516
Provision for loan losses 262,837 167,246 65,895
Transfer to loans held for
securitization (2,770) (27,887) (11,504)
Increase from consumer
loan purchase 9,000
Charge-offs (223,029) (115,159) (64,260)
Recoveries 27,462 13,300 13,353
Net charge-offs (195,567) (101,859) (50,907)
Balance at end of year $(183,000 $(118,500 $(72,000
Note D: Borrowings
Borrowings as of December 31, 1997 and 1996 were as follows:
1997 1996
Weighted Weighted
Average Average
Outstanding Rate Outstanding Rate
Interest-
bearing
deposits $1,313,654 4.49% $ 943,022 4.31%
Other
borrowings
Federal funds
purchased and
resale agreements $ 705,863 5.75% $ 445,600 6.26%
Other 90,249 7.09 85,383 6.43
Total $ 796,112 $ 530,983
Senior notes
Bank—fixed rate $2,793,778 7.03% $3,140,237 7.31%
Bank—variable rate 414,000 6.19 429,000 5.99
Corporation 125,000 7.25 125,000 7.25
Total $3,332,778 $3,694,237
Deposit notes
Fixed rate $ 224,996 6.71% $ 224,996 6.71%
Variable rate 75,000 6.15 75,000 5.86
Total $ 299,996 $ 299,996
As of December 31, 1997, the aggregate amount of interest-
bearing deposits with accounts exceeding $100 was $228,428. 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 approximately
$421,000.
In November 1996, the Company entered into a four-year,
$1,700,000 unsecured revolving credit arrangement (the “Credit
Facility”).The Credit Facility is comprised of two tranches: a
$1,375,000 Tranche A facility available to the Bank and the Savings
Bank, including an option for up to $225,000 in multi-currency
availability, and a $325,000 Tranche B facility available to the Cor-
poration, the Bank and the Savings Bank, including an option for up
to $100,000 in multi-currency availability. Each tranche under the
facility is structured as a four-year commitment and is available for
general corporate purposes.The borrowings of the Savings Bank
are limited to $750,000. All borrowings under the Credit Facility are
based on varying terms of the London InterBank Offered Rate
(“LIBOR”).The Bank has irrevocably undertaken to honor any
demand by the lenders to repay any borrowings which are due and
payable by the Savings Bank but which have not been paid. Any
borrowings under the Credit Facility will mature on November 24,
2000; however, the final maturity of each tranche may be extended
for three additional one-year periods. As of December 31, 1997 and
1996, the Company had no outstandings under the Credit Facility.
In August 1997, the Company entered into a three-year,
$350,000 equivalent unsecured revolving credit arrangement
(the “UK/Canada Facility”), which will be used to finance the
Company’s expansion in the United Kingdom and Canada.The
UK/Canada Facility is comprised of two tranches: a Tranche A facil-
ity in the amount of £156,458 ($249,800 equivalent based on the
exchange rate at closing) and a Tranche B facility in the amount of
C$139,609 ($100,200 equivalent based on the exchange rate at
closing). An amount of £34,574 or C$76,910 ($55,200 equivalent
based on the exchange rates at closing) may be transferred between
the Tranche A facility and the Tranche B facility, respectively, upon
the request of the Company. Each tranche under the facility is struc-
tured as a three-year commitment and will be available for general
corporate purposes. All borrowings under the UK/Canada Facility
are based on varying terms of LIBOR.The Corporation serves as
the guarantor of all borrowings under the UK/Canada Facility. As
of December 31, 1997, the Company had no outstandings under the
UK/Canada Facility.
In April 1997, the Bank increased the aggregate amount of bank
notes available under its bank note program. Under the program,
the Bank from time to time may issue up to $7,800,000 of senior
bank notes with maturities from thirty days to thirty years and up
to $200,000 of subordinated bank notes (none issued as of Decem-
ber 31, 1997 and 1996) with maturities from five to thirty years.
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