Capital One 2003 Annual Report Download - page 114

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Note T
Significant Concentration of Credit Risk
The Company is active in originating consumer loans, primarily in the United States. The Company reviews each
potential customer’s credit application and evaluates the applicant’s financial history and ability and willingness
to repay. Loans are made primarily on an unsecured basis; however, certain loans require collateral in the form of
cash deposits and automobiles and other motor vehicles serve as collateral for auto loans. International consumer
loans are originated primarily in Canada and the United Kingdom. The geographic distribution of the Company’s
consumer loans was as follows:
December 31
2003 2002
Loans
Percentage
of Total Loans
Percentage
of Total
Geographic Region:
Domestic
South $ 23,262,643 32.65% $ 20,394,077 34.13%
West 14,662,193 20.58 12,507,242 20.93
Midwest 13,643,202 19.15 11,396,942 19.08
Northeast 12,029,894 16.89 10,117,735 16.94
Total Domestic 63,597,932 89.27% 54,415,996 91.08%
International
U.K. 5,546,644 7.78% 3,847,287 6.44%
Canada 1,935,396 2.72 1,317,532 2.20
Other 164,824 0.23 165,722 0.28
Total International 7,646,864 10.73% 5,330,541 8.92%
71,244,796 100.00% 59,746,537 100.00%
Less securitization adjustments (38,394,527) (32,402,607)
Total $ 32,850,269 $ 27,343,930
Note U
Disclosures About Fair Value of Financial Instruments
The following discloses the fair value of financial instruments whether or not recognized in the balance sheets as
of December 31, 2003 and 2002. In cases where quoted market prices were not available, fair values were based
on estimates using present value or other valuation techniques. Those techniques were significantly affected by
the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived
fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not
be realized in immediate settlement of the instrument. As required under GAAP, these disclosures exclude
certain financial instruments and all non-financial instruments. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
The Company, in estimating the fair value of its financial instruments as of December 31, 2003 and 2002, used
the following methods and assumptions:
Financial Assets
Cash and cash equivalents
The carrying amounts of cash and due from banks, federal funds sold and resale agreements and interest-bearing
deposits at other banks approximated fair value.
96