Capital One 1997 Annual Report Download - page 54

Notes to Consolidated Financial Statements (continued)
(Currencies in Thousands, Except Per Share Data)
Note J: Regulatory Matters
The Bank and the Savings Bank are subject to capital adequacy
guidelines adopted by the Federal Reserve Board (the “Federal
Reserve”) and the Office of Thrift Supervision (the “OTS”) (collec-
tively, the “regulators”), respectively.The capital adequacy guide-
lines and the regulatory framework for prompt corrective action
require the Bank and the Savings Bank to maintain specific capital
levels based upon quantitative measures of their assets, liabilities
and off-balance sheet items as calculated under Regulatory
Accounting Principles.The inability to meet and maintain minimum
capital adequacy levels could result in regulators taking actions
that could have a material effect on the Company’s consolidated
financial statements. Additionally, the regulators have broad discre-
tion in applying higher capital requirements. Regulators consider a
range of factors in determining capital adequacy, such as an institu-
tion’s size, quality and stability of earnings, interest rate risk expo-
sure, risk diversification, management expertise, asset quality,
liquidity and internal controls.
As of December 31, 1997 and 1996, notifications from the
regulators categorized the Bank and the Savings Bank as “well-
capitalized.”To be categorized as “well-capitalized,” the Bank and
the Savings Bank must maintain minimum capital ratios as set
forth in the table below. As of December 31, 1997, there were no
conditions or events since the notifications discussed above that
management believes would have changed either the Bank or the
Savings Bank’s capital category.
Minimum for To Be “Well-
Capital Capitalized” Under
Adequacy Prompt Corrective
Ratios Purposes Action Provisions
December 31, 1997
Capital One Bank
Tier 1 Capital 10.49% 4.00% 6.00%
Total Capital 13.26 8.00 10.00
Tier 1 Leverage 10.75 4.00 5.00
Capital One, F.S.B.(1)
Tangible Capital 11.26% 1.50% 6.00%
Total Capital 17.91 12.00 10.00
Core Capital 11.26 8.00 5.00
December 31, 1996
Capital One Bank
Tier 1 Capital 11.61% 4.00% 6.00%
Total Capital 12.87 8.00 10.00
Tier 1 Leverage 9.04 4.00 5.00
Capital One, F.S.B.(1)
Tangible Capital 9.18% 1.50% 6.00%
Total Capital 16.29 12.00 10.00
Core Capital 9.18 8.00 5.00
(1) Until June 30, 1999, the Savings Bank is subject to capital requirements that
exceed minimum capital adequacy requirements, including the requirement to
maintain a minimum Core Capital ratio of 8% and a Total Capital ratio of 12%.
During 1996, the Bank received regulatory approval and estab-
lished a branch office in the United Kingdom. In connection with
such approval, the Company committed to the Federal Reserve that,
for so long as the Bank maintains such branch in the United King-
dom, the Company will maintain a minimum Tier 1 Leverage ratio
of 3.0%. As of December 31, 1997 and 1996, the Company’s Tier 1
Leverage ratio was 13.83% and 11.13%, respectively.
Additionally, certain regulatory restrictions exist which limit the
ability of the Bank and the Savings Bank to transfer funds to the
Corporation. As of December 31, 1997, retained earnings of the
Bank and the Savings Bank of $99,600 and $24,800, respectively,
were available for payment of dividends to the Corporation without
prior approval by the regulators.The Savings Bank, however, is
required to give the OTS at least thirty days’ advance notice of any
proposed dividend and the OTS, in its discretion, may object to such
dividend.
Note K: Commitments and Contingencies
As of December 31, 1997, the Company had outstanding lines of
credit of approximately $33,800,000 committed to its customers.
Of that total commitment, approximately $19,600,000 was unused.
While this amount represented the total available lines of credit to
customers, the Company has not experienced and does not antici-
pate that all of its customers will exercise their entire available line
at any given point in time.The Company has the right to increase,
reduce, cancel, alter or amend the terms of these available lines of
credit at any time.
Certain premises and equipment are leased under agreements
that expire at various dates through 2006, without taking into con-
sideration available renewal options. Many of these leases provide
for payment by the lessee of property taxes, insurance premiums,
cost of maintenance and other costs. In some cases, rentals are sub-
ject to increase in relation to a cost of living index.Total rental
expense amounted to $13,644, $12,603 and $5,394 for the years
ended December 31, 1997, 1996 and 1995, respectively.
Future minimum rental commitments as of December 31, 1997
for all non-cancelable operating leases with initial or remaining
terms of one year or more are as follows:
199 8 $15,362
1999 13,881
2000 12,720
2001 8,388
2002 3,298
Thereafter 4,798
Total $58,447
PAGE 52