Capital One 2004 Annual Report Download - page 94

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The Company has determined that these investments have only temporary impairment based on a number of
criteria, including the timeframe of the unrealized loss position, the nature of the investments and the Company’s
intent and ability to hold the fixed income securities to maturity.
U.S. Treasury and other U.S. government agency Obligations. The unrealized losses on the Company’s
investments in U.S. Treasury obligations and direct obligations of U.S. government agencies were caused by
interest rate increases. The contractual terms of these investments do not permit the issuer to settle the securities
at a price less than the amortized cost of the investment. Because the Company has the ability and intent to hold
these investments until a recovery of fair value, which may be maturity, the Company does not consider these
investments to be other-than-temporarily impaired at December 31, 2004 and 2003.
Collateralized Mortgage Obligations. The unrealized losses on the Company’s investment in collateralized
mortgage obligations were caused by interest rate increases. Since the decline in market value is attributable to
changes in interest rates and not credit quality and because the Company has the ability and intent to hold these
investments until a recovery of fair value, which may be maturity, the Company does not consider these
investments to be other-than-temporarily impaired at December 31, 2004 and 2003.
Mortgage-Backed Securities. The unrealized losses on the Company’s investment in federal agency mortgage-
backed securities were caused by interest rate increases. The Company purchased these investments at a discount
relative to their face amount, and the contractual cash flows of these investments are guaranteed by an agency of
the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the
amortized cost of the Company’s investment. Since the decline in market value is attributable to changes in
interest rates and not credit quality and because the Company has the ability and intent to hold these investments
until a recovery of fair value, which may be maturity, the Company does not consider these investments to be
other-than-temporarily impaired at December 31, 2004 and 2003.
Other. The unrealized losses on the Company’s investments in other items were a reflection of the interest rate
environment. Since the decline in market value is attributable to changes in interest rates and not credit quality
and because the Company has the ability and intent to hold these investments until a recovery of fair value,
which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired
at December 31, 2004 and 2003.
Weighted Average Yields
1Year
or Less
1–5
Years
5–10
Years
Over 10
Years
December 31, 2004
U.S. Treasury and other U.S. government agency obligations 1.97% 3.04% 4.43% —
Collateralized mortgage obligations 5.57 4.97 4.15 4.37%
Mortgage backed securities — 5.16 — 4.73
Other 2.61 6.47 6.76 4.88
Total 3.03% 4.16% 4.41% 4.69%
The distribution of mortgage-backed securities and collateralized mortgage obligations is based on average
expected maturities. Actual maturities could differ because issuers may have the right to call or prepay
obligations.
Weighted average yields were determined based on amortized cost. Gross realized gains on sales of securities
were $1.3 million, $10.5 million, and $96.9 million for the years ended December 31, 2004, 2003 and 2002,
respectively. Gross realized losses were $24.4 million, $19.9 million, and $19.4 million for the years ended
December 31, 2004, 2003 and 2002, respectively.
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