Capital One 2011 Annual Report Download - page 100

business, home loans in our Consumer Banking business and small-ticket commercial real estate loans in our
Commercial Banking business. We provide additional information on the composition of our loan portfolio and
credit quality below in “Credit Risk Profile.”
Deposits
Our deposits have become our largest source of funding for our operations and asset growth. Total deposits
increased by $6.0 billion, or 5%, in 2011, to $128.2 billion as of December 31, 2011, from $122.2 billion as of
December 31, 2010. The increase in deposits reflects our increased retail marketing efforts to attract new
business and continued strategy to leverage our bank outlets to attract lower cost deposit funding. We provide
additional information on the composition of our deposits, average outstanding balances, interest expense and
yield, below in “Liquidity Risk Profile.”
Senior and Subordinated Notes and Other Borrowings
Senior and subordinated notes and other borrowings increased to $23.0 billion as of December 31, 2011, from
$14.9 billion as of December 31, 2010. The $8.2 billion increase in our debt, which excludes securitized debt
obligations, was primarily attributable to the proceeds of approximately $3.0 billion from the issuance of senior
notes, a $5.8 billion increase in short-term FHLB advances and a decrease of $854 million due to the maturity of
one senior note. We provide additional information on our borrowings in “Note 10—Deposits and Borrowings.”
The $3.0 billion of senior notes were issued in July 2011 and included four different series of our senior notes
(the “2011 Notes”): $250 million aggregate principal amount of our Floating Rate Senior Notes due 2014; $750
million aggregate principal amount of our 2.125% Senior Notes due 2014; $750 million aggregate principal
amount of our 3.150% Senior Notes due 2016 and $1.25 billion aggregate principal amount of our 4.750% Senior
Notes due 2021.
Securitized Debt Obligations
Borrowings owed to securitization investors decreased by $10.4 billion to $16.5 billion as of December 31, 2011,
from $26.9 billion as of December 31, 2010. This decrease was attributable to pay downs of the loans underlying
the consolidated non-credit card securitization trusts, and the scheduled maturities of the debt within our credit
card securitization trusts.
Potential Mortgage Representation & Warranty Liabilities
In recent years, we acquired three subsidiaries that originated residential mortgage loans and sold them to various
purchasers, including purchasers who created securitization trusts. These subsidiaries are Capital One Home
Loans, which was acquired in February 2005; GreenPoint Mortgage Funding, Inc. (“GreenPoint”), which was
acquired in December 2006 as part of the North Fork acquisition; and Chevy Chase Bank, which was acquired in
February 2009 and subsequently merged into CONA.
In connection with their sales of mortgage loans, the subsidiaries entered into agreements containing varying
representations and warranties about, among other things, the ownership of the loan, the validity of the lien
securing the loan, the loan’s compliance with any applicable loan criteria established by the purchaser, including
underwriting guidelines and the ongoing existence of mortgage insurance, and the loan’s compliance with
applicable federal, state and local laws. The representations and warranties do not address the credit performance
of the mortgage loans, but mortgage loan performance often influences whether a claim for breach of
representation and warranty will be asserted and has an effect on the amount of any loss in the event of a breach
of a representation or warranty.
80