Capital One 2005 Annual Report Download - page 86

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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
old the fixed income securities to maturity. h
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,
2005 and 2004.
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
ecember 31, 2005 and 2004. D
Mortgage-Backed Securities. The unrealized losses of the Company’ s investment in federal agency mortgage-backed
securities were caused by interest rate increases. 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,
005 and 2004. 2
Asset-Backed Securities. The unrealized losses on the Company’ s investments in asset-backed security items were primarily
a reflection of the interest rate environment. Since the decline in market value is attributable to a rise 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, 2005 and 2004.
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, 2005 and 2004.
Wei hted Average Yields g
1–5
1 Year
or Less Years 5–10
Years Over 1 0
Years
December 31, 2005
U.S. Treasury and other U.S. government agency obligations 4.29% 4.67% 4.51% 4.46 %
Collateralized mortgage obligations 4.98 5.20 5.38 —
Mortgage backed securities 8.01 5.06 5.52 6.67
Asset backed securities 4.67 4.71 4.69 —
Other 5.52 3.65 3.34 4.12
Total 4.57% 4.98% 4.90% 4.26%
The distribution of mortgage-backed securities, collateralized mortgage obligations, and asset backed securities 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 $7.4
million, $1.3 million, and $10.5 million for the years ended December 31, 2005, 2004 and 2003, respectively. Gross realized
losses were $14.2 million, $24.4 million, and $19.9 million for the years ended December 31, 2005, 2004 and 2003,
r spectively. e
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