Capital One 2015 Annual Report Download - page 112

93 Capital One Financial Corporation (COF)
debt and preferred stock ratings received upgrades, while on June 19, 2015, COBNA and CONA’s senior unsecured debt ratings
received a downgrade of one level.
Contractual Obligations
In the normal course of business, we enter into various contractual obligations that may require future cash payments that affect
our short- and long-term liquidity and capital resource needs. Our future cash outflows primarily relate to deposits, borrowings
and operating leases. Table 35 summarizes, by remaining contractual maturity, our significant contractual cash obligations based
on the undiscounted future cash payments as of December 31, 2015. The actual timing and amounts of future cash payments may
differ from the amounts presented below due to a number of factors, such as discretionary debt repurchases. Table 35 excludes
certain obligations where the obligation is short-term or subject to valuation based on market factors, such as trade payables and
trading liabilities. The table also excludes the representation and warranty reserve of $610 million as of December 31, 2015 and
obligations for pension and post-retirement benefit plans, which are discussed in more detail in “Note 17—Employee Benefit
Plans.”
Table 35: Contractual Obligations
December 31, 2015
(Dollars in millions)
Up to
1 Year
> 1 Years
to 3 Years
> 3 Years
to 5 Years > 5 Years Total
Interest-bearing time deposits(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,864 $ 4,072 $ 4,023 $ 121 $ 13,080
Securitized debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,519 9,595 2,700 352 16,166
Other debt:
Federal funds purchased and securities loaned or sold under agreements
to repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 981 — — — 981
Senior and subordinated notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,430 7,756 3,834 7,817 21,837
Other borrowings(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 30 1,003 19,079 20,131
Total other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,430 7,786 4,837 26,896 42,949
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292 547 435 1,027 2,301
Purchase obligations(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 241 66 — 482
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,280 $ 22,241 $ 12,061 $ 28,396 $ 74,978
_________
(1) Includes only those interest-bearing deposits which have a contractual maturity date.
(2) Other borrowings include FHLB advances and capital lease obligations.
(3) Represents substantial agreements to purchase goods or services that are enforceable and legally binding and specify all significant terms. The purchase
obligations are included through the termination date of the agreements even if the contract is renewable. These include capital expenditures, contractual
commitments to purchase equipment and services, software acquisition/license commitments, contractual minimum media commitments and any contractually
required cash payments for acquisitions, and exclude funding commitments entered into in the ordinary course of business. See “Note 21—Commitments,
Contingencies, Guarantees and Others” for further details.
MARKET RISK PROFILE
Market risk is inherent in the financial instruments associated with our operations and activities, including loans, deposits, securities,
short-term borrowings, long-term debt and derivatives. Below we provide additional information about our primary sources of
market risk, our market risk management strategies and the measures we use to evaluate our market risk exposure.
Primary Market Risk Exposures
Our primary source of market risk is interest rate risk. We also have exposure to foreign exchange risk.
Interest Rate Risk
Interest rate risk, which represents exposure to instruments whose yield or price varies with the volatility of interest rates, is our
most significant source of market risk exposure. Banks are inevitably exposed to interest rate risk due to differences in the timing
between the maturities or re-pricing of assets and liabilities.