Capital One 2012 Annual Report Download - page 267

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
consistent with current market rates for FHLB advances with similar remaining terms. We engage multiple third
party pricing services in order to estimate the fair value of junior subordinated borrowings. The pricing service
utilizes a pricing model that incorporates available trade information. It also incorporates available market and
credit information into the pricing process. The increase in fair value of our other borrowings above carrying
values at December 31, 2012 was primarily due to market interest rates being slightly lower than the interest
rates on the debt we own.
Interest Payable
The carrying amount of interest payable approximates the fair value of this liability due to its relatively short-
term nature.
Commitments
We provide commitments that include extending credit and letters of credit. These financial instruments are
generally not sold or traded. The fair values of the financial guarantees outstanding and included in other
liabilities as of December 31, 2012 and 2011 that have been issued since January 1, 2003 were $4 million. The
estimated fair values of extensions of credit and letters of credit are not readily available. However, the fair value
of commitments to extend credit and letters of credit is based on fees currently charged to enter into similar
agreements with comparable credit risks and the current creditworthiness of the counterparties. Commitments to
extend credit issued by us are generally short-term in nature and, if drawn upon, are issued under current market
terms and conditions for credits with comparable risks. As of December 31, 2012 and 2011, there was no
material unrealized appreciation or depreciation on these financial instruments.
NOTE 20—BUSINESS SEGMENTS
Our principal operations are currently organized for management reporting purposes into three primary business
segments, which are defined primarily based on the products and services provided or the type of customer
served: Credit Card, Consumer Banking and Commercial Banking. The operations of acquired businesses have
been integrated into our existing business segments. The acquired ING Direct business is primarily reflected in
our Consumer Banking business, while the business acquired in the 2012 U.S. card acquisition is reflected in our
Credit Card business. Certain activities that are not part of a segment are included in the “Other” category.
•Credit Card: Consists of our domestic consumer and small business card lending, national small business
lending, national closed end installment lending and the international card lending businesses in Canada and
the United Kingdom.
•Consumer Banking: Consists of our branch-based lending and deposit gathering activities for consumers and
small businesses, national deposit gathering, national auto lending and consumer home loan lending and
servicing activities.
•Commercial Banking: Consists of our lending, deposit gathering and treasury management services to
commercial real estate and commercial and industrial customers. Our commercial and industrial customers
typically include companies with annual revenues between $10 million to $1.0 billion.
•Other Category: Includes the residual impact of the allocation of our centralized Corporate Treasury group
activities, such as management of our corporate investment portfolio and asset/liability management, to our
business segments. Accordingly, net gains and losses on our investment securities portfolio and certain
trading activities are included in the Other category. The Other category also includes foreign exchange-rate
fluctuations related to the revaluation of foreign currency-denominated investments; certain gains (losses)
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