Borrowings

6 Months Ended

Jun. 30, 2011

Borrowings [Abstract]

Borrowings

Note 10.   Borrowings

For additional information on our borrowings, see Note 11, Borrowings, in our audited consolidated financial statements for the year ended December 31, 2010, included in our Form 10-K.

As of June 30, 2011 and December 31, 2010, the composition of our outstanding borrowings was as follows:

	June 30,		December 31,
	2011		2010
	($ in thousands)
Credit facilities	$	—	$	67,508
Term debt(1)		697,910		979,254
Other borrowings:
Convertible debt, net(2)		528,909		523,650
Subordinated debt		440,168		437,286
FHLB SF borrowings		480,000		412,000
Notes payable		2,906		2,948
Total other borrowings		1,451,983		1,375,884
Total borrowings	$	2,149,893	$	2,422,646

(1)	Amounts presented are net of discounts of $12.8 million and $14.4 million as of June 30, 2011 and December 31, 2010, respectively.
(2)	Amounts presented are net of discounts of $1.6 million and $6.9 million as of June 30, 2011 and December 31, 2010, respectively.

Credit Facilities

As of December 31, 2010, we had access to one secured credit facility with committed capacity of $167.5 million to finance our commercial loans and for general corporate purposes. Undrawn capacity on the secured credit facility was limited by issued and outstanding letters of credit totaling $21.0 million as of December 31, 2010. We terminated this credit facility on April 12, 2011.

Term Debt

As of June 30, 2011 and December 31, 2010, the carrying amounts of our term debt related to securitizations were $410.6 million and $693.5 million, respectively. In June 2011, all outstanding term debt of the 2007-2 securitization held by third parties was repaid in full. As of June 30, 2011 and December 31, 2010, our 2014 Senior Secured Notes had balances of $287.3 million and $285.7 million, respectively, net of discounts of $12.7 million and $14.3 million, respectively.

Convertible Debt

In July 2011, we repurchased our outstanding 3.5% and 4.0% Convertible Debentures for an aggregate of $280.5 million. As of June 30, 2011 and December 31, 2010, the carrying amounts of the liability and equity components of our convertible debt were as follows:

	June 30,			December 31,
	2011			2010
	($ in thousands)
Convertible debt principal	$	530,523		$	530,523
Less: debt discount		(1,614	)		(6,873	)
Net carrying value	$	528,909		$	523,650
Equity components recorded in additional paid-in capital	$	101,220		$	101,220

As of June 30, 2011, the conversion prices and the numbers of shares used to determine the aggregate consideration that would have been delivered upon conversion of our convertible debentures were as follows:

	Conversion Price		Number of Shares
3.5% Senior Convertible Debentures due 2034	$	20.74		407,224
4.0% Senior Subordinated Convertible Debentures due 2034		20.74		13,118,193
7.25% Senior Subordinated Convertible Debentures due 2037		27.09		9,226,975

For the three and six months ended June 30, 2011 and 2010, the interest expense recognized on our Convertible Debentures and the effective interest rates on the liability components were as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
	($ in thousands)
Interest expense recognized on:
Contractual interest coupon	$	4,884		$	7,586		$	12,261		$	15,254
Amortization of deferred financing fees		203			357			503			730
Amortization of debt discount		1,764			2,644			4,368			5,275
Total interest expense recognized	$	6,851		$	10,587		$	17,132		$	21,259
Effective interest rate on the liability component:
3.5% Senior Convertible Debentures due 2034		7.16	%		7.16	%		7.16	%		7.16	%
4.0% Senior Subordinated Convertible Debentures due 2034		7.85	%		7.68	%		7.85	%		7.68	%
7.25% Senior Subordinated Convertible Debentures due 2037		7.79	%		7.79	%		7.79	%		7.79	%

The unamortized discounts on our 7.25% Convertible Debentures will be amortized through the first put date of July 15, 2012.

FHLB SF Borrowings and FRB Credit Program

CapitalSource Bank is a member of the FHLB SF. As of June 30, 2011 and December 31, 2010, CapitalSource Bank had borrowing capacity with the FHLB SF based on pledged collateral as follows:

	June 30,			December 31,
	2011			2010
	($ in thousands)
Borrowing capacity	$	962,818		$	885,842
Less: outstanding principal		(480,000	)		(412,000	)
Less: outstanding letters of credit		(600	)		(600	)
Unused borrowing capacity	$	482,218		$	473,242

CapitalSource Bank is an approved depository institution under the primary credit program of the FRB of San Francisco’s discount window eligible to borrow from the FRB for short periods, generally overnight. As of June 30, 2011 and December 31, 2010, collateral with amortized costs of $133.0 million and $179.0 million, respectively, and fair values of $131.9 million and $188.0 million, respectively, had been pledged under this program. As of June 30, 2011 and December 31, 2010, there were no borrowings outstanding.