Capital One 1999 Annual Report Download - page 63

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65
Bank’s writ of certiorari on the remaining two counts, declining
to exercise its discretionary power to review these issues.
Because no specific measure of damages is demanded in
the complaint of the California case and the trial court entered
judgement in favor of the Bank before the parties completed
any significant discovery, an informed assessment of the ulti-
mate outcome of this case cannot be made at this time.
Management believes, however, that there are meritorious
defenses to this lawsuit and intends to defend it vigorously.
The Company is commonly subject to various other pend-
ing and threatened legal actions arising from the conduct of its
normal business activities. In the opinion of management, the
ultimate aggregate liability, if any, arising out of any pending or
threatened action will not have a material adverse effect on the
consolidated financial condition of the Company. At the present
time, however, management is not in a position to determine
whether the resolution of pending or threatened litigation will
have a material effect on the Company’s results of operations in
any future reporting period.
note l
RELATED PARTY TRANSACTIONS
In the ordinary course of business, executive officers and direc-
tors of the Company may have consumer loans issued by the
Company. Pursuant to the Company’s policy, such loans are
issued on the same terms as those prevailing at the time for
comparable loans to unrelated persons and do not involve more
than the normal risk of collectibility.
note m
SECURITIZATIONS
The Company securitized in transactions accounted for as sales
$2,586,517 ($47,642 international), $4,616,972 ($245,752
international) and $2,114,695 of consumer loan receivables
for the years ended December 31, 1999, 1998 and 1997,
respectively. As of December 31, 1999, receivables under secu-
ritizations outstanding consisted of $2,482,246 of retained
(“seller’s”) interests and $10,319,400 of investors’ undivided
interests, maturing from 2000 to 2008.
The terms of securitizations require the Company to main-
tain a certain level of assets, retained by the trust, as credit
support for the securitization. These amounts are included in
accounts receivable from securitizations and were $262,819
and $263,426 as of December 31, 1999 and 1998, respectively.
note n
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
The Company has entered into interest rate swaps to effectively
convert certain interest rates on bank notes from variable to
fixed. The pay-fixed, receive-variable swaps, which had a notional
amount totaling $157,000 as of December 31, 1999, will
mature from 2001 to 2007 to coincide with maturities of the
variable bank notes to which they are designated. The Company
has also entered into amortizing notional interest rate swaps to
effectively convert certain interest rates on fixed rate consumer
loans from fixed to variable, thereby reducing the interest rate
sensitivity of loan securitizations. These pay-fixed, receive-
variable interest rate swaps, which had an amortizing notional
amount totaling $2,789,000 as of December 31, 1999, will fully
amortize between 2004 and 2006 to coincide with the esti-
mated attrition of the fixed rate consumer loans to which they
are designated. The Company also had a pay-fixed, receive-
variable interest rate swap with an amortizing notional amount
of C$208,000, which will amortize through 2003 to coincide
with the estimated attrition of the fixed rate Canadian dollar
consumer loans to which it is designated.
The Company has also entered into currency swaps that
effectively convert fixed rate pound sterling interest receipts to
fixed rate U.S. dollar interest receipts on pound sterling denom-
inated assets. These currency swaps had notional amounts
totaling $260,000 as of December 31, 1999, and mature from
2001 to 2005, coinciding with the repayment of the assets to
which they are designated.
The Company has entered into f/x contracts to reduce the
Company’s sensitivity to foreign currency exchange rate changes
on its foreign currency denominated assets and liabilities. As of
December 31, 1999, the Company had f/x contracts with notional
amounts totaling $1,058,000 that mature in 2000 to coincide
with the repayment of the assets to which they are designated.