Capital One 2006 Annual Report Download - page 101
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83
Asset-Backed Securities. The unrealized losses on the Companys 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, 2006 and 2005.
Other. The unrealized losses on the Companys investments in other items were primarily a reflection of the interest rate
environment. Since the decline in market value is primarily 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, 2006 and
2005.
Weighted Average Yields
1 Year
or Less
15
Years
510
Years
Over 10
Years
December 31, 2006
U.S. Treasury and other U.S. government agency obligations 3.58% 4.76% 4.42% 5.44%
Collateralized mortgage obligations 4.96 5.11 5.45 4.82
Mortgage backed securities 6.74 5.03 5.04 6.25
Asset backed securities 4.47 4.94 5.69
Other 3.74 3.79 3.82 4.84
Total 3.93% 5.02% 4.98% 5.73%
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
$36.8 million, $7.4 million, and $1.3 million for the years ended December 31, 2006, 2005 and 2004, respectively. Gross
realized losses were $66.0 million, $14.2 million, and $24.4 million for the years ended December 31, 2006, 2005 and 2004,
respectively.
Note 5
Allowance for Loan and Lease Losses
The following is a summary of changes in the allowance for loan and lease losses:
Year Ended December 31
2006 2005 2004
Balance at beginning of year $ 1,790,000
$ 1,505,000 $ 1,595,000
Provision for loan losses 1,476,438
1,491,072 1,220,852
Acquisitions 225,890
224,144
Other 72,821
(12,731) (15,284)
Charge-offs (1,932,453) (1,865,836) (1,749,273)
Principal recoveries 547,304
448,351 453,705
Net charge-offs (1,385,149) (1,417,485) (1,295,568)
Balance at end of year $ 2,180,000
$ 1,790,000 $ 1,505,000
Loans totaling approximately $573.0 million and $422.3 million, representing amounts which were greater than 90 days past
due, were included in the Companys reported loan portfolio as of December 31, 2006 and 2005, respectively.