Capital One 2011 Annual Report Download - page 161

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED STATEMENTS—(Continued)
Cash and Cash Equivalents
Cash and cash equivalents include cash and due from banks, federal funds sold and resale agreements and
interest-bearing deposits at other banks, all of which, if applicable, have stated maturities of three months or less
when acquired. Cash payments for interest expense totaled $2.3 billion, $2.9 billion and $3.1 billion in 2011,
2010 and 2009, respectively. Cash payments for income taxes totaled $982 million, $350 million and $409
million in 2011, 2010 and 2009, respectively.
Resale and Repurchase Agreements
Securities purchased under agreements to resell and securities sold under agreements to repurchase, principally
U.S. government and agency obligations, are not accounted for as sales but as collateralized financing
transactions and recorded at the amounts at which the securities were acquired or sold, plus accrued interest. We
receive securities purchased under agreements to resell, make delivery of securities sold under agreements to
repurchase, continually monitor the market value of these securities and deliver or obtain additional collateral as
appropriate.
Investment Securities
Our investment securities consist primarily of fixed-income debt securities and equity securities. The accounting
and measurement framework for our investment securities differs depending on the security classification. We
classify securities as available for sale or held to maturity based on our investment strategy and management’s
assessment of our intent and ability to hold the securities until maturity. Securities that we intend to hold for an
indefinite period of time and may sell prior to maturity in response to changes in our investment strategy,
liquidity needs, interest rate risk profile or for other reasons are classified as available for sale. All of our
investment securities were classified as available for sale as of December 31, 2011 and 2010. Although we
currently do not have any securities classified as held-to-maturity, we may elect to do so in the future.
Available-for-sale securities are carried at fair value with unrealized net gains or losses, net of taxes, recorded in
accumulated other comprehensive income in stockholders’ equity. For most of our investment securities, interest
income is recognized using the effective interest method. Deferred items, including unamortized premiums,
discounts and other basis adjustments, are recognized in interest income over the contractual lives of the
securities using the effective interest method. We record purchases and sales of securities on a trade date basis.
Realized gains and losses from the sale of debt securities are computed using the specific identification method
and included in non-interest income in our consolidated statements of income.
We regularly evaluate our securities whose value has declined below amortized cost to assess whether the decline
in fair value is other-than-temporary. Amortized cost reflects historical cost adjusted for amortization of
premiums, accretion of discounts and other-than-temporary impairment writedowns. We discuss our assessment
of and accounting for other-than-temporary impairment in “Note 4—Investment Securities.” We discuss the
techniques we use in determining the fair value of our investment securities in “Note 19—Fair Value of Financial
Instruments.”
Loans
Our loan portfolio consists of credit card, other consumer and commercial loans. Other consumer loans consist of
auto, home, and retail banking loans. Commercial loans consist of commercial and multifamily real estate,
middle market, specialty lending and small-ticket commercial real estate loans. We historically have securitized
credit card loans, auto loans, home loans and installment loans through trusts we established to purchase the
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