Capital One 2004 Annual Report Download - page 106

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The most recent notifications received from the regulators categorized the Bank and the Savings Bank as “well-
capitalized.” As of December 31, 2004, the Company’s, the Bank’s and the Savings Bank’s capital exceeded all
minimum regulatory requirements to which they were subject, and there were no conditions or events since the
notifications discussed above that management believes would have changed either the Company, the Bank or
the Savings Bank’s capital category.
Regulatory
Filing
Basis
Ratios
Applying
Subprime
Guidance
Ratios Minimum for Capital
Adequacy Purposes
To Be “Well Capitalized”
Under
Prompt Corrective Action
Provisions
December 31, 2004
Capital One Financial Corp. (1)
Tier 1 Capital 16.85% 14.33% 4.00% N/A
Total Capital 19.35 16.62 8.00 N/A
Tier 1 Leverage 15.38 15.38 4.00 N/A
Capital One Bank
Tier 1 Capital 13.24% 10.63% 4.00% 6.00%
Total Capital 17.09 13.92 8.00 10.00
Tier 1 Leverage 11.33 11.33 4.00 5.00
Capital One, F.S.B.
Tier 1 Capital 15.61% 12.93% 4.00% 6.00%
Total Capital 16.91 14.21 8.00 10.00
Tier 1 Leverage 14.47 14.47 4.00 5.00
December 31, 2003
Capital One Bank
Tier 1 Capital 14.14% 11.54% 4.00% 6.00%
Total Capital 18.34 15.15 8.00 10.00
Tier 1 Leverage 13.17 13.17 4.00 5.00
Capital One, F.S.B.
Tier 1 Capital 14.79% 11.59% 4.00% 6.00%
Total Capital 16.10 12.88 8.00 10.00
Tier 1 Leverage 14.00 14.00 4.00 5.00
(1) The regulatory framework for prompt corrective action is not applicable for bank holding companies.
The Company, the Bank and Savings Bank treat a portion of their loans as “subprime” under the “Expanded
Guidance for Subprime Lending Programs” (the “Subprime Guidelines”) issued by the four federal banking
agencies and have assessed their capital and allowance for loan losses accordingly. Under the Subprime
Guidelines, the Company, the Bank and the Savings Bank exceed the minimum capital adequacy guidelines as of
December 31, 2004. Failure to meet minimum capital requirements can result in mandatory and possible
additional discretionary actions by the regulators that, if undertaken, could have a material effect on the
Company’s consolidated financial statements.
For purposes of the Subprime Guidelines, the Company has treated as subprime all loans in the Bank’s and
Savings Bank’s targeted subprime programs to customers either with a FICO score of 660 or below or with no
FICO score. The Bank and Savings Bank hold on average 200% of the total risk-based capital requirement that
would otherwise apply to such assets. This results in higher levels of required regulatory capital at the Bank and
the Savings Bank. As of December 31, 2004, approximately $5.3 billion or 18.3% of the Bank’s, and $2.3 billion
or 16.6% of the Savings Bank’s, on-balance sheet assets were treated as subprime for purposes of the Subprime
Guidelines.
Additionally, certain regulatory restrictions exist that limit the ability of the Bank and the Savings Bank to
transfer funds to the Corporation. As of December 31, 2004, retained earnings of the Bank and the Savings Bank
of $715.9 million and $633.3 million, respectively, were available for payment of dividends to the Corporation
without prior approval by the regulators.
83