Capital One 1999 Annual Report Download - page 39

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Internationally, the Company has funding programs
designed for foreign investors or to raise funds in foreign cur-
rencies. The Company has accessed the international
securitization market for a number of years with both US$ and
foreign denominated transactions. Both of the Company’s com-
mitted revolving credit facilities offer foreign currency funding
options. The Bank has established a $1.0 billion Euro Medium
Term Note program that is targeted to non-U.S. investors. The
Company funds its foreign assets by directly or synthetically bor-
rowing or securitizing in the local currency to mitigate the
financial statement effect of currency translation.
38
allowance for loan loss policy can be found in Note A to the
Consolidated Financial Statements.
Table 8 sets forth the activity in the allowance for loan
losses for the periods indicated. See “Asset Quality,” “Delin-
For the year ended December 31, 1999, the provision for
loan losses increased to $382.9 million, or 43%, from the 1998
provision for loan losses of $267.0 million as average reported
loans increased by 43%. The Company increased the allowance
for loan losses by $111.0 million during 1999 due to the
increase in the delinquency rate, the growth in reported loans
and the increase in the dollar amount of net charge-offs.
For the year ended December 31, 1998, the provision for
loan losses increased to $267.0 million, or 2%, from the 1997
provision for loan losses of $262.8 million as average reported
loans increased by 30%, offset by general improvements in con-
sumer credit performance. The Company increased the
allowance for loan losses by $48.0 million during 1998 prima-
rily due to the growth in reported loans.
FUNDING
The Company has established access to a wide range of domes-
tic funding alternatives, in addition to securitization of its con-
sumer loans. The Company primarily issues senior unsecured
debt of the Bank through its $8 billion bank note program, of
which $3.6 billion was outstanding as of December 31, 1999,
with original terms of one to ten years. During 1999, the Bank
continued to expand its fixed income investor base by launching
$925 million of benchmark underwritten senior note transac-
tions. The Corporation continued to access the capital markets
with a $225 million seven-year senior note.
funding (in millions)
total funding: $10,745 total funding: $7,481
December 31, 1999 December 31, 1998
$3,784 $2,780
$2,230
$1,951
$2,000 $1,742
$2,478
$1,261
interest-bearing deposits
other borrowings
senior notes <3 years
senior notes >3 years
table 8: SUMMARY OF ALLOWANCE FOR LOAN LOSSES
Year Ended December 31 (Dollars in Thousands) 1999 1998 1997 1996 1995
Balance at beginning of year $ 231,000 $ 183,000 $ 118,500 $ 72,000 $ 68,516
Provision for loan losses 382,948 267,028 262,837 167,246 65,895
Acquisitions/other 3,522 7,503 (2,770) (18,887) (11,504)
Charge-offs (400,143) (294,295) (223,029) (115,159) (64,260)
Recoveries 124,673 67,764 27,462 13,300 13,353
Net charge-offs (275,470) (226,531) (195,567) (101,859) (50,907)
Balance at end of year $ 342,000 $ 231,000 $ 183,000 $ 118,500 $ 72,000
Allowance for loan losses to loans
at end of year 3.45% 3.75% 3.76% 2.73% 2.86%
quencies” and “Net Charge-Offs” for a more complete analysis
of asset quality.