CAPITAL ONE FINANCIAL CORP
10-Qs and 10-Ks
PROXIES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM
10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the quarterly period ended
March 31, 2025
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the transition period from
to
Commission File No.
001-13300
____________________________________
(Exact name of registrant as specified in its charter)
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Registrant’s telephone number, including area code: (
703
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720-1000
(Not Applicable)
(Former name, former address and former fiscal year, if changed since last report)
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(Former name, former address and former fiscal year, if changed since last report)
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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☒ | Accelerated filer |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
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No
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As of
April 30, 2025
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there were
383,137,556
shares of the registrant’s Common Stock outstanding.
TABLE OF CONTENTS
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1
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Capital One Financial Corporation (COF) | |||||||
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2
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Capital One Financial Corporation (COF) | |||||||
INDEX OF MD&A AND SUPPLEMENTAL TABLE
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3
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Capital One Financial Corporation (COF) | |||||||
PART I
—
FINANCIAL INFORMATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
This discussion contains forward-looking statements that are based upon management’s current expectations and are subject to significant uncertainties and changes in circumstances. Please review “Forward-Looking Statements” for more information on the forward-looking statements in this Quarterly Report on Form 10-Q (“this Report”). All statements that address operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. Our actual results may differ materially from those included in these forward-looking statements due to a variety of factors including, but not limited to, those described in “Part I—Item 1A. Risk Factors” in our 2024 Annual Report on Form 10-K (“2024 Form 10-K”) and “Part II—Item 1A. Risk Factors” in this Report. Unless otherwise specified, references to notes to our consolidated financial statements refer to the notes to our consolidated financial statements as of March 31, 2025 included in this Report.
Management monitors a variety of key indicators to evaluate our business results and financial condition. The following MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and related notes in this Report and the more detailed information contained in our 2024 Form 10-K.
| INTRODUCTION | ||
Capital One Financial Corporation, a Delaware corporation established in 1994 and headquartered in McLean, Virginia, is a diversified financial services holding company with banking and non-banking subsidiaries. Capital One Financial Corporation and its subsidiaries (the “Company” or “Capital One”) offer a broad array of financial products and services to consumers, small businesses and commercial clients through digital channels, branch locations, cafés and other distribution channels.
As of March 31, 2025, Capital One Financial Corporation’s principal operating subsidiary was Capital One, National Association (“CONA”). The Company is hereafter collectively referred to as “we,” “us” or “our.” CONA is referred to as the “Bank.”
Our consolidated total net revenues are derived primarily from lending to consumer and commercial customers net of funding costs associated with our deposits, long-term debt and other borrowings. We also earn non-interest income which primarily consists of interchange income, net of reward expenses, service charges and other customer-related fees. Our expenses primarily consist of the provision for credit losses, operating expenses, marketing expenses and income taxes.
Our principal operations are organized for management reporting purposes into three major business segments, which are defined primarily based on the products and services provided or the types of customers served: Credit Card, Consumer Banking and Commercial Banking. The operations of acquired businesses have been integrated into or managed as a part of our existing business segments. Certain activities that are not part of a business segment are included in the Other category, such as the management of our corporate investment portfolio and asset/liability positions performed by our centralized Corporate Treasury group and any residual tax expense or benefit beyond what is assessed to our business segments in order to arrive at the consolidated effective tax rate. The Other category also includes unallocated corporate expenses that do not directly support the operations of the business segments or for which the business segments are not considered financially accountable in evaluating their performance, such as certain restructuring charges and integration expenses related to the Transaction (as defined below).
•
Credit Card:
Consists of our domestic consumer and small business card lending, and international card businesses in the United Kingdom (“U.K.”) and Canada.
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Consumer Banking:
Consists of our deposit gathering and lending activities for consumers and small businesses, and national auto lending.
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Commercial Banking:
Consists of our lending, deposit gathering, capital markets and treasury management services to commercial real estate and commercial and industrial customers. Our customers typically include companies with annual revenues between $20 million and $2 billion.
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4
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Capital One Financial Corporation (COF) | |||||||
Business Developments
We regularly explore and evaluate opportunities to acquire financial products and services as well as financial assets, including credit card and other loan portfolios, and enter into strategic partnerships as part of our growth strategy. We also explore opportunities to acquire technology companies and related assets to improve our information technology infrastructure and to deliver on our digital strategy. We may issue equity or debt to fund our acquisitions. In addition, we regularly consider the potential disposition of certain of our assets, branches, partnership agreements or lines of business.
Agreement to Acquire Discover
On February 19, 2024, the Company entered into an agreement and plan of merger (the “Merger Agreement”), by and among Capital One, Discover Financial Services, a Delaware corporation (“Discover”) and Vega Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of the Company (“Merger Sub”), pursuant to which (a) Merger Sub will merge with and into Discover, with Discover as the surviving entity in the merger (the “Merger”); (b) immediately following the Merger, Discover, as the surviving entity, will merge with and into Capital One, with Capital One as the surviving entity in the second-step merger (the “Second Step Merger”); and (c) immediately following the Second Step Merger, Discover Bank, a Delaware-chartered and wholly owned subsidiary of Discover, will merge with and into CONA, with CONA as the surviving entity in the merger (the “CONA Bank Merger,” and collectively with the Merger and the Second Step Merger, the “Transaction”). The Merger Agreement was unanimously approved by the Boards of Directors of each of Capital One and Discover.
At the effective time of the Merger, each share of common stock of Discover outstanding immediately prior to the effective time of the Merger, other than certain shares held by Discover or Capital One, will be converted into the right to receive 1.0192 shares of common stock of Capital One. Holders of Discover common stock will receive cash in lieu of fractional shares. At the effective time of the Second Step Merger, each share of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series C, of Discover, and each share of 6.125% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series D, of Discover, in each case outstanding immediately prior to the effective time of the Second Step Merger, will be converted into the right to receive a share of newly created series of preferred stock of Capital One having terms that are not materially less favorable than the applicable series of Discover preferred stock.
On February 18, 2025, Capital One and Discover each held a special meeting of their respective stockholders during which the issuance of Capital One common stock as merger consideration to the holders of Discover common stock was approved by the requisite vote of the Capital One stockholders and the Merger Agreement was adopted by the requisite vote of the Discover stockholders.
On April 18, 2025, Capital One received approval from the Office of the Comptroller of the Currency (“OCC”) and the Board of Governors of the Federal Reserve System (“Federal Reserve”) to complete the Transaction. The Federal Reserve approval was accompanied by announcement of a new enforcement action by the Federal Reserve against Discover Bank which Capital One has committed to comply with and remediate following closing. The OCC approval included a condition requiring CONA to provide a detailed plan to the OCC following closing to address the underlying root causes of outstanding enforcement actions against Discover Bank.
Following receipt of the OCC and Federal Reserve approvals, all required regulatory approvals to complete the Transaction have been received. The closing of the Transaction is expected to occur on May 18, 2025 subject to the satisfaction or waiver of the remaining closing conditions set forth in the Merger Agreement.
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5
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Capital One Financial Corporation (COF) | |||||||
| SELECTED FINANCIAL DATA | ||||||||||||||||||||
The following table presents selected consolidated financial data and performance from our results of operations for the first quarters of 2025 and 2024 and selected comparative balance sheet data as of March 31, 2025 and December 31, 2024. We also provide selected key metrics we use in evaluating our performance, including certain metrics that are computed using non-GAAP measures. We consider these metrics to be key financial measures that management uses in assessing our operating performance, capital adequacy and the level of returns generated. We believe these non-GAAP metrics provide useful insight to investors and users of our financial information as they provide an alternate measurement of our performance and assist in assessing our capital adequacy and the level of return generated. These non-GAAP measures should not be viewed as a substitute for reported results determined in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), nor are they necessarily comparable to non-GAAP measures that may be presented by other companies.
Table 1: Consolidated Financial Highlights
| Three Months Ended March 31, | ||||||||||||||||||||
| (Dollars in millions, except per share data and as noted) | 2025 | 2024 | Change | |||||||||||||||||
| Income statement | ||||||||||||||||||||
| Net interest income | $ | 8,013 | $ | 7,488 | 7% | |||||||||||||||
| Non-interest income | 1,987 | 1,914 | 4 | |||||||||||||||||
| Total net revenue | 10,000 | 9,402 | 6 | |||||||||||||||||
| Provision for credit losses | 2,369 | 2,683 | (12) | |||||||||||||||||
| Non-interest expense: | ||||||||||||||||||||
| Marketing | 1,202 | 1,010 | 19 | |||||||||||||||||
| Operating expense | 4,700 | 4,127 | 14 | |||||||||||||||||
| Total non-interest expense | 5,902 | 5,137 | 15 | |||||||||||||||||
| Income from continuing operations before income taxes | 1,729 | 1,582 | 9 | |||||||||||||||||
| Income tax provision | 325 | 302 | 8 | |||||||||||||||||
| Net income | 1,404 | 1,280 | 10 | |||||||||||||||||
| Dividends and undistributed earnings allocated to participating securities | (22) | (23) | (4) | |||||||||||||||||
| Preferred stock dividends | (57) | (57) | — | |||||||||||||||||
| Net income available to common stockholders | $ | 1,325 | $ | 1,200 | 10 | |||||||||||||||
| Common share statistics | ||||||||||||||||||||
| Basic earnings per common share: | ||||||||||||||||||||
| Net income per basic common share | $ | 3.46 | $ | 3.14 | 10% | |||||||||||||||
| Diluted earnings per common share: | ||||||||||||||||||||
| Net income per diluted common share | $ | 3.45 | $ | 3.13 | 10% | |||||||||||||||
| Weighted-average common shares outstanding (in millions): | ||||||||||||||||||||
| Basic | 383.1 | 382.2 | — | |||||||||||||||||
| Diluted | 384.0 | 383.4 | — | |||||||||||||||||
| Common shares outstanding (period-end, in millions) | 383.0 | 382.1 | — | |||||||||||||||||
| Dividends declared and paid per common share | $ | 0.60 | $ | 0.60 | — | |||||||||||||||
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Tangible book value per common share (period-end)
(1)
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113.74 | 98.67 | 15% | |||||||||||||||||
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6
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Capital One Financial Corporation (COF) | |||||||
| Three Months Ended March 31, | ||||||||||||||||||||
| (Dollars in millions, except per share data and as noted) | 2025 | 2024 | Change | |||||||||||||||||
| Balance sheet (average balances) | ||||||||||||||||||||
| Loans held for investment | $ | 322,385 | $ | 314,614 | 2% | |||||||||||||||
| Interest-earning assets | 462,771 | 447,803 | 3 | |||||||||||||||||
| Total assets | 491,817 | 474,995 | 4 | |||||||||||||||||
| Interest-bearing deposits | 337,840 | 318,450 | 6 | |||||||||||||||||
| Total deposits | 364,078 | 345,657 | 5 | |||||||||||||||||
| Borrowings | 44,448 | 50,474 | (12) | |||||||||||||||||
| Common equity | 57,395 | 53,152 | 8 | |||||||||||||||||
| Total stockholders’ equity | 62,240 | 57,998 | 7 | |||||||||||||||||
| Selected performance metrics | ||||||||||||||||||||
| Purchase volume | $ | 157,948 | $ | 150,171 | 5% | |||||||||||||||
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Total net revenue margin
(2)
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8.64% | 8.40% | 24 | bps | ||||||||||||||||
| Net interest margin | 6.93 | 6.69 | 24 | |||||||||||||||||
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Return on average assets
(3)
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1.14 | 1.08 | 6 | |||||||||||||||||
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Return on average tangible assets
(4)
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1.18 | 1.11 | 7 | |||||||||||||||||
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Return on average common equity
(5)
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9.23 | 9.03 | 20 | |||||||||||||||||
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Return on average tangible common equity
(6)
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12.55 | 12.67 | (12) | |||||||||||||||||
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Equity-to-assets ratio
(7)
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12.66 | 12.21 | 45 | |||||||||||||||||
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Efficiency ratio
(8)
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59.02 | 54.64 | 438 | |||||||||||||||||
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Operating efficiency ratio
(9)
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47.00 | 43.89 | 311 | |||||||||||||||||
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Adjusted operating efficiency ratio
(10)
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43.92 | 43.45 | 47 | |||||||||||||||||
| Effective income tax rate from continuing operations | 18.8 | 19.1 | (30) | |||||||||||||||||
| Net charge-offs | $ | 2,736 | $ | 2,616 | 5% | |||||||||||||||
| Net charge-off rate | 3.40 | % | 3.33 | % | 7 | bps | ||||||||||||||
| (Dollars in millions, except as noted) | March 31, 2025 | December 31, 2024 | Change | ||||||||||||||||||||
| Balance sheet (period-end) | |||||||||||||||||||||||
| Loans held for investment | $ | 323,598 | $ | 327,775 | (1)% | ||||||||||||||||||
| Interest-earning assets | 463,414 | 463,058 | — | ||||||||||||||||||||
| Total assets | 493,604 | 490,144 | 1 | ||||||||||||||||||||
| Interest-bearing deposits | 340,964 | 336,585 | 1 | ||||||||||||||||||||
| Total deposits | 367,464 | 362,707 | 1 | ||||||||||||||||||||
| Borrowings | 41,773 | 45,551 | (8) | ||||||||||||||||||||
| Common equity | 58,697 | 55,938 | 5 | ||||||||||||||||||||
| Total stockholders’ equity | 63,542 | 60,784 | 5 | ||||||||||||||||||||
| Credit quality metrics | |||||||||||||||||||||||
| Allowance for credit losses | $ | 15,899 | $ | 16,258 | (2)% | ||||||||||||||||||
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Allowance coverage ratio
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4.91 | % | 4.96 | % | (5)bps | ||||||||||||||||||
| 30+ day performing delinquency rate | 3.29 | 3.69 | (40) | ||||||||||||||||||||
| 30+ day delinquency rate | 3.51 | 3.98 | (47) | ||||||||||||||||||||
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7
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Capital One Financial Corporation (COF) | |||||||
| (Dollars in millions, except as noted) | March 31, 2025 | December 31, 2024 | Change | ||||||||||||||||||||
| Capital ratios | |||||||||||||||||||||||
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Common equity Tier 1 capital
(11)
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13.6 | % | 13.5 | % | 10 | bps | |||||||||||||||||
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Tier 1 capital
(11)
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14.9 | 14.8 | 10 | ||||||||||||||||||||
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Total capital
(11)
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17.0 | 16.4 | 60 | ||||||||||||||||||||
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Tier 1 leverage
(11)
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11.6 | 11.6 | — | ||||||||||||||||||||
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Tangible common equity
(12)
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9.1 | 8.6 | 50 | ||||||||||||||||||||
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Supplementary leverage
(11)
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9.9 | 9.9 | — | ||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Employees (period end, in thousands) | 53.9 | 52.6 | 2% | ||||||||||||||||||||
(1)
Tangible book value per common share is a non-GAAP measure calculated based on tangible common equity (“TCE”) divided by common shares outstanding. See “Supplemental Table—Table A—Reconciliation of Non-GAAP Measures” for additional information on non-GAAP measures.
(2)
Total net revenue margin is calculated based on annualized total net revenue for the period divided by average interest-earning assets for the period.
(3)
Return on average assets is calculated based on annualized income from continuing operations, net of tax, for the period divided by average total assets for the period.
(4)
Return on average tangible assets is a non-GAAP measure calculated based on annualized income from continuing operations, net of tax, for the period divided by average tangible assets for the period. See “Supplemental Table—Table A—Reconciliation of Non-GAAP Measures” for additional information on non-GAAP measures.
(5)
Return on average common equity is calculated based on annualized net income (loss) available to common stockholders less annualized income (loss) from discontinued operations, net of tax, for the period, divided by average common equity. Our calculation of return on average common equity may not be comparable to similarly-titled measures reported by other companies.
(6)
Return on average tangible common equity is a non-GAAP measure calculated based on annualized net income (loss) available to common stockholders less annualized income (loss) from discontinued operations, net of tax, for the period, divided by average TCE. Our calculation of return on average TCE may not be comparable to similarly-titled measures reported by other companies. See “Supplemental Table—Table A—Reconciliation of Non-GAAP Measures” for additional information on non-GAAP measures.
(7)
Equity-to-assets ratio is calculated based on average stockholders’ equity for the period divided by average total assets for the period.
(8)
Efficiency ratio is calculated based on total non-interest expense for the period divided by total net revenue for the period.
(9)
Operating efficiency ratio is calculated based on operating expense for the period divided by total net revenue for the period.
(10)
Adjusted operating efficiency ratio is a non-GAAP measure. See “Supplemental Table—Table A—Reconciliation of Non-GAAP Measures” for a reconciliation of our adjusted operating efficiency ratio (non-GAAP) to our operating efficiency ratio (GAAP).
(11)
Capital ratios are calculated based on the Basel III standardized approach framework. See “Capital Management” for additional information.
(12)
Tangible common equity ratio is a non-GAAP measure calculated based on TCE divided by tangible assets. See “Supplemental Table—Table A—Reconciliation of Non-GAAP Measures” for the calculation of this measure and reconciliation to the comparative U.S. GAAP measure.
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8
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Capital One Financial Corporation (COF) | |||||||
| EXECUTIVE SUMMARY | ||
Financial Highlights
We reported net income of $1.4 billion ($3.45 per diluted common share) on total net revenue of $10.0 billion for the first quarter of 2025. In comparison, we reported net income of $1.3 billion ($3.13 per diluted common share) on total net revenue of $9.4 billion for the first quarter of 2024.
Our common equity Tier 1 (“CET1”) capital ratio as calculated under the Basel III standardized approach was 13.6% and
13.5% as of
March 31, 2025 and December 31, 2024, respectively. See “Capital Management” for additional information.
In the first quarter of 2025, we declared and paid common stock dividends of $236 million and repurchased $150 million of shares of our common stock. See “Capital Management—Dividend Policy and Stock Purchases” for additional information.
Below are additional highlights of our performance in the first quarter of 2025. These highlights are based on a comparison between the results of the first quarters of 2025 and 2024, except as otherwise noted. The changes in our financial condition and credit performance are generally based on our financial condition and credit performance as of March 31, 2025 compared to December 31, 2024. We provide a more detailed discussion of our financial performance in the sections following this “Executive Summary.”
Total Company Performance
•
Earnings:
Our net income increased by $124 million to $1.4 billion in the first quarter of 2025 compared to the first quarter of 2024 primarily driven by:
◦
Higher net-interest income primarily driven by higher average loan balances in our credit card loan portfolio and the impacts of the elimination of revenue sharing provisions due to the Walmart Program Termination.
◦
Lower provision for credit losses primarily driven by an allowance release of $473 million in our credit card loan portfolio, partially offset by an allowance build of $117 million in our commercial loan portfolio.
These drivers were partially offset by:
◦
Higher non-interest expense primarily driven by continued investment in technology, an increase to the litigation accrual and increased marketing spend.
•
Loans Held for Investment:
◦
Period-end loans held for investment decreased by $4.2 billion to $323.6 billion as of March 31, 2025 from December 31, 2024 primarily driven by seasonal paydowns in our credit card loan portfolio.
◦
Average loans held for investment increased by $7.8 billion to $322.4 billion in the first quarter of 2025 compared to the first quarter of 2024 primarily driven by growth in our credit card loan portfolio.
•
Net Charge-Off and Delinquency Metrics:
◦
Our net charge-off rate increased by 7 basis points (“bps”) to 3.40% in the first quarter of 2025 compared to the first quarter of 2024.
◦
Our 30+ day delinquency rate decreased by 47 bps to 3.51% as of March 31, 2025 from December 31, 2024.
•
Allowance for Credit Losses:
Our allowance for credit losses decreased by $359 million to $15.9 billion and our allowance coverage ratio decreased by 5 bps to 4.91% as of March 31, 2025 compared to December 31, 2024 primarily driven by an allowance release of $473 million in our credit card loan portfolio, partially offset by an allowance build of $117 million in our commercial loan portfolio.
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9
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Capital One Financial Corporation (COF) | |||||||
| CONSOLIDATED RESULTS OF OPERATIONS | ||
The section below provides a comparative discussion of our consolidated financial performance for the first quarters of 2025 and 2024. We provide a discussion of our business segment results in the following section, “Business Segment Financial Performance.” This section should be read together with our “Executive Summary,” where we discuss trends and other factors that we expect will affect our future results of operations.
Net Interest Income
Net interest income represents the difference between interest income, including certain fees, earned on our interest-earning assets and the interest expense incurred on our interest-bearing liabilities. Our interest-earning assets include loans, investment securities and other interest-earning assets, while our interest-bearing liabilities include interest-bearing deposits, securitized debt obligations, senior and subordinated notes, other borrowings and other interest-bearing liabilities. Generally, we include in interest income any past due fees, net of reversals, on loans that we deem collectible. Our net interest margin represents the difference between the yield on our interest-earning assets and the cost of our interest-bearing liabilities, including the notional impact of non-interest-bearing funding. We expect net interest income and our net interest margin to fluctuate based on changes in interest rates and changes in the amount and composition of our interest-earning assets and interest-bearing liabilities.
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10
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Capital One Financial Corporation (COF) | |||||||
Table 2 below presents the average outstanding balance, interest income earned, interest expense incurred and average yield for the first quarters of 2025 and 2024 for each major category of our interest-earning assets and interest-bearing liabilities. Nonperforming loans are included in the average loan balances below.
Table 2: Average Balances, Net Interest Income and Net Interest Margin
__________
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||||||||||||||
| (Dollars in millions) |
Average
Balance |
Interest Income/
Expense |
Average Yield/
Rate
(1)
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Average
Balance |
Interest Income/
Expense |
Average Yield/
Rate
(1)
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| Assets: | ||||||||||||||||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||||||||||||||||
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Loans:
(2)
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| Credit card | $ | 156,408 | $ | 7,248 | 18.54 | % | $ | 150,049 | $ | 7,067 | 18.84 | % | ||||||||||||||||||||||||||
| Consumer banking | 78,480 | 1,773 | 9.03 | 75,091 | 1,564 | 8.33 | ||||||||||||||||||||||||||||||||
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Commercial banking
(3)
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87,884 | 1,382 | 6.29 | 90,423 | 1,612 | 7.13 | ||||||||||||||||||||||||||||||||
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Other
(4)
|
— | (246) | ** | — | (323) | ** | ||||||||||||||||||||||||||||||||
| Total loans, including loans held for sale | 322,772 | 10,157 | 12.59 | 315,563 | 9,920 | 12.57 | ||||||||||||||||||||||||||||||||
| Investment securities | 92,659 | 770 | 3.32 | 88,581 | 687 | 3.10 | ||||||||||||||||||||||||||||||||
| Cash equivalents and other interest-earning assets | 47,340 | 491 | 4.14 | 43,659 | 570 | 5.21 | ||||||||||||||||||||||||||||||||
| Total interest-earning assets | 462,771 | 11,418 | 9.87 | 447,803 | 11,177 | 9.98 | ||||||||||||||||||||||||||||||||
| Cash and due from banks | 4,071 | 3,947 | ||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | (16,253) | (15,293) | ||||||||||||||||||||||||||||||||||||
| Premises and equipment, net | 4,534 | 4,391 | ||||||||||||||||||||||||||||||||||||
| Other assets | 36,694 | 34,147 | ||||||||||||||||||||||||||||||||||||
| Total assets | $ | 491,817 | $ | 474,995 | ||||||||||||||||||||||||||||||||||
| Liabilities and stockholders’ equity: | ||||||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||||
| Interest-bearing deposits | $ | 337,840 | $ | 2,715 | 3.22 | % | $ | 318,450 | $ | 2,812 | 3.53% | |||||||||||||||||||||||||||
| Securitized debt obligations | 13,731 | 176 | 5.11 | 17,836 | 261 | 5.85 | ||||||||||||||||||||||||||||||||
| Senior and subordinated notes | 30,331 | 505 | 6.66 | 32,211 | 606 | 7.52 | ||||||||||||||||||||||||||||||||
|
Other borrowings and interest-bearing liabilities
(5)
|
2,312 | 9 | 1.57 | 2,373 | 10 | 1.78 | ||||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 384,214 | 3,405 | 3.54 | 370,870 | 3,689 | 3.98 | ||||||||||||||||||||||||||||||||
| Non-interest-bearing deposits | 26,238 | 27,207 | ||||||||||||||||||||||||||||||||||||
| Other liabilities | 19,125 | 18,920 | ||||||||||||||||||||||||||||||||||||
| Total liabilities | 429,577 | 416,997 | ||||||||||||||||||||||||||||||||||||
| Stockholders’ equity | 62,240 | 57,998 | ||||||||||||||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 491,817 | $ | 474,995 | ||||||||||||||||||||||||||||||||||
| Net interest income/spread | $ | 8,013 | 6.32 | $ | 7,488 | 6.00 | ||||||||||||||||||||||||||||||||
| Impact of non-interest-bearing funding | 0.61 | 0.69 | ||||||||||||||||||||||||||||||||||||
|
Net interest margin
(6)
|
6.93 | % | 6.69% | |||||||||||||||||||||||||||||||||||
(1)
Average yield is calculated based on annualized interest income for the period divided by average loans during the period. Annualized interest income does not include any allocations, such as funds transfer pricing. Average yield is calculated using whole dollar values for average balances and interest income/expense.
(2)
Past due fees, net of reversals, included in interest income totaled approximately $549 million and $547 million in the first quarters of 2025 and 2024, respectively.
(3)
Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting reductions to the Other category. Taxable-equivalent adjustments included in the interest income and yield computations for our commercial loans totaled approximately $20 million and $19 million in the first quarters of 2025 and 2024, respectively, with corresponding reductions to the Other category.
(4)
Interest income/expense in the Other category represents the impact of hedge accounting on our loan portfolios and the offsetting reduction of the taxable-equivalent adjustments of our commercial loans as described above.
(5)
Includes amounts related to entities that provide capital to low-income and rural communities of $1.9 billion in the first quarters of both 2025 and 2024. Related interest expense was $7 million and $8 million in the first quarters of 2025 and 2024, respectively.
(6)
The termination of our Walmart program agreement, effective May 21, 2024, (“Walmart Program Termination”) increased net interest margin by 20 bps
|
11
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Capital One Financial Corporation (COF) | |||||||
in the first quarter of 2025. Excluding this impact, the net interest margin would have been 6.73% in the first quarter of 2025.
** Not meaningful.
Net interest income increased by $525 million to $8.0 billion in the first quarter of 2025 compared to the first quarter of 2024 primarily driven by higher average loan balances in our credit card loan portfolio and the impacts of the elimination of revenue sharing provisions due to the Walmart Program Termination.
Net interest margin increased by 24 bps to 6.93% in the first quarter of 2025 compared to the first quarter of 2024 primarily driven by lower funding costs and growth in our credit card loan portfolio.
Our total company cumulative interest-bearing deposit beta increased to 34% as of March 31, 2025, from 11% as of December 31, 2024. We define cumulative deposit beta as the ratio of changes in the average rate paid on our average interest-bearing deposits to changes in the upper bound of the federal funds rate during the current falling interest rate cycle.
Table 3 displays the change in our net interest income between periods and the extent to which the variance is attributable to:
•
changes in the volume of our interest-earning assets and interest-bearing liabilities; or
•
changes in the interest rates related to these assets and liabilities.
Table 3: Rate/Volume Analysis of Net Interest Income
(1)
| Three Months Ended March 31, | ||||||||||||||||||||
| 2025 vs. 2024 | ||||||||||||||||||||
| (Dollars in millions) | Total Variance | Volume | Rate | |||||||||||||||||
| Interest income: | ||||||||||||||||||||
| Loans: | ||||||||||||||||||||
| Credit card | $ | 181 | $ | 295 | $ | (114) | ||||||||||||||
| Consumer banking | 209 | 73 | 136 | |||||||||||||||||
|
Commercial banking
(2)
|
(230) | (44) | (186) | |||||||||||||||||
|
Other
(3)
|
77 | — | 77 | |||||||||||||||||
| Total loans, including loans held for sale | 237 | 324 | (87) | |||||||||||||||||
| Investment securities | 83 | 32 | 51 | |||||||||||||||||
| Cash equivalents and other interest-earning assets | (79) | 38 | (117) | |||||||||||||||||
| Total interest income | 241 | 394 | (153) | |||||||||||||||||
| Interest expense: | ||||||||||||||||||||
| Interest-bearing deposits | (97) | 156 | (253) | |||||||||||||||||
| Securitized debt obligations | (85) | (55) | (30) | |||||||||||||||||
| Senior and subordinated notes | (101) | (34) | (67) | |||||||||||||||||
| Other borrowings and liabilities | (1) | — | (1) | |||||||||||||||||
| Total interest expense | (284) | 67 | (351) | |||||||||||||||||
| Net interest income | $ | 525 | $ | 327 | $ | 198 | ||||||||||||||
(1)
We calculate the change in interest income and interest expense separately for each item. The portion of interest income or interest expense attributable to both volume and rate is allocated proportionately when the calculation results in a positive value. When the portion of interest income or interest expense attributable to both volume and rate results in a negative value, the total amount is allocated to volume or rate, depending on which amount is positive.
(2)
Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting reductions to the Other category.
(3)
Interest income/expense in the Other category represents the impact of hedge accounting on our loan portfolios and the offsetting reduction of the taxable-equivalent adjustments of our commercial loans as described above.
|
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Capital One Financial Corporation (COF) | |||||||
Non-Interest Income
Table 4 displays the components of non-interest income for the first quarters of 2025 and 2024.
Table 4: Non-Interest Income
| Three Months Ended March 31, | ||||||||||||||
| (Dollars in millions) | 2025 | 2024 | ||||||||||||
| Interchange fees, net | $ | 1,223 | $ | 1,145 | ||||||||||
| Service charges and other customer-related fees | 509 | 462 | ||||||||||||
|
Other
(1)(2)
|
255 | 307 | ||||||||||||
| Total non-interest income | $ | 1,987 | $ | 1,914 | ||||||||||
__________
(1)
Primarily consists of revenue from Capital One Shopping, treasury and other investment income and commercial mortgage banking revenue.
(2)
Includes losses of $16 million and gains of $42 million on deferred compensation plan investments for the first quarters of 2025
and 2024, respectively. These amounts have corresponding offsets in non-interest expense.
Non-interest income increased by $73 million to $2.0 billion in the first quarter of 2025 compared to the first quarter of 2024 primarily driven by higher net interchange fees due to an increase in purchase volume.
Provision for Credit Losses
Our provision for credit losses in each period is driven by net charge-offs, changes to the allowance for credit losses and changes to the reserve for unfunded lending commitments. Our provision for credit losses decreased by $314 million to $2.4 billion in the first quarter of 2025 compared to the first quarter of 2024 primarily driven by an allowance release of $473 million in our credit card loan portfolio, partially offset by an allowance build of $117 million in our commercial loan portfolio.
We provide additional information on the provision for credit losses and changes in the allowance for credit losses within “Credit Risk Profile” and “Part I—Item 1. Financial Statements—Note 5—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments.” For information on the allowance methodology for each of our loan categories, see “Part II— Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2024 Form 10-K.
|
13
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Capital One Financial Corporation (COF) | |||||||
Non-Interest Expense
Table 5 displays the components of non-interest expense for the first quarters of 2025 and 2024.
Table 5: Non-Interest Expense
| Three Months Ended March 31, | ||||||||||||||
| (Dollars in millions) | 2025 | 2024 | ||||||||||||
| Operating Expense: | ||||||||||||||
|
Salaries and associate benefits
(1)
|
$ | 2,546 | $ | 2,478 | ||||||||||
| Occupancy and equipment | 615 | 554 | ||||||||||||
| Professional services | 437 | 262 | ||||||||||||
| Communications and data processing | 399 | 351 | ||||||||||||
| Amortization of intangibles | 16 | 19 | ||||||||||||
| Other non-interest expense: | ||||||||||||||
| Bankcard, regulatory and other fee assessments | 65 | 119 | ||||||||||||
| Collections | 108 | 83 | ||||||||||||
| Other | 514 | 261 | ||||||||||||
| Total other non-interest expense | 687 | 463 | ||||||||||||
| Total operating expense | $ | 4,700 | $ | 4,127 | ||||||||||
| Marketing | 1,202 | 1,010 | ||||||||||||
| Total non-interest expense | $ | 5,902 | $ | 5,137 | ||||||||||
(1)
Includes a benefit of $16 million and
expenses of
$42 million related to our deferred compensation plan for the first quarters of 2025 and 2024, respectively. These amounts have corresponding offsets from investments in other non-interest income.
Non-interest expense increased by $765 million to $5.9 billion in the first three months of 2025, primarily driven by continued investment in technology, an increase to the litigation accrual and increased marketing spend.
In the first quarter of 2025, we incurred $110 million of integration expenses related to the Transaction, primarily driven by professional services, which are included within operating expense in our consolidated statements of income. Since the announcement of the Transaction in the first quarter of 2024, we have incurred $344 million of integration expenses as of March 31, 2025.
|
14
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Capital One Financial Corporation (COF) | |||||||
Income Taxes
We recorded an income tax provision of $325 million (18.8% effective income tax rate) and $302 million (19.1% effective income tax rate) in the first quarters of 2025 and 2024, respectively. Our effective tax rate on income from continuing operations varies between periods due, in part, to the impact of changes in pre-tax income and changes in tax credits, tax-exempt income and non-deductible expenses relative to our pre-tax earnings.
We provide additional information on items affecting our income taxes and effective tax rate in “Part II—Item 8. Financial Statements and Supplementary Data—Note 16—Income Taxes” in our 2024 Form 10-K.
| CONSOLIDATED BALANCE SHEETS ANALYSIS | ||
Total assets increased by $3.5 billion to $493.6 billion as of March 31, 2025 from December 31, 2024 primarily driven by increases in our cash balances from deposit growth and higher securities available for sale balances, partially offset by seasonal paydowns in our credit card loan portfolio.
Total liabilities increased by $702 million to $430.1 billion as of March 31, 2025 from December 31, 2024 primarily driven by deposit growth due to our national consumer banking strategy, partially offset by net maturities of our securitized debt obligations and unsecured senior debt. Our national consumer banking strategy includes our national brand and marketing strategy, cafés and tech/digital investments, which have enabled us to both deepen and grow our overall customer base.
Stockholders’ equity increased by $2.8 billion to $63.5 billion as of March 31, 2025 from December 31, 2024 primarily driven by a decrease in accumulated other comprehensive loss and net income in 2025.
The following is a discussion of material changes in the major components of our assets and liabilities during the first quarter of 2025. Period-end balance sheet amounts may vary from average balance sheet amounts due to the timing of normal balance sheet management activities that are intended to support our capital and liquidity positions, our market risk profile and the needs of our customers.
Investment Securities
Our investment securities portfolio consists of the following: U.S. government-sponsored enterprise or agency (“GSE” or “Agency”) and non-agency residential mortgage-backed securities (“RMBS”), agency commercial mortgage-backed securities (“CMBS”), U.S. Treasury securities and other securities. Agency securities include Government National Mortgage Association (“Ginnie Mae”) guaranteed securities, Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”) issued securities. The carrying value of our investments in Agency and U.S. Treasury securities represented 97% and 96% of our total investment securities portfolio as of March 31, 2025 and December 31, 2024, respectively.
The fair value of our available for sale securities portfolio increased by $1.3 billion to $84.4 billion as of March 31, 2025 from December 31, 2024, primarily driven by decreases in relevant benchmark interest rates and net purchases. See “Part I—Item 1. Financial Statements—Note 3—Investment Securities” for more information.
|
15
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Capital One Financial Corporation (COF) | |||||||
Loans Held for Investment
Total loans held for investment consists of both unsecuritized loans and loans held in our consolidated trusts. Table 6 summarizes, by portfolio segment, the carrying value of our loans held for investment, the allowance for credit losses and net loan balance as of March 31, 2025 and December 31, 2024.
Table 6: Loans Held for Investment
| March 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Loans | Allowance | Net Loans | Loans | Allowance | Net Loans | ||||||||||||||||||||||||||||||||
| Credit Card | $ | 157,189 | $ | (12,510) | $ | 144,679 | $ | 162,508 | $ | (12,974) | $ | 149,534 | ||||||||||||||||||||||||||
| Consumer Banking | 78,896 | (1,872) | 77,024 | 78,092 | (1,884) | 76,208 | ||||||||||||||||||||||||||||||||
| Commercial Banking | 87,513 | (1,517) | 85,996 | 87,175 | (1,400) | 85,775 | ||||||||||||||||||||||||||||||||
| Total | $ | 323,598 | $ | (15,899) | $ | 307,699 | $ | 327,775 | $ | (16,258) | $ | 311,517 | ||||||||||||||||||||||||||
Loans held for investment decreased by $4.2 billion to $323.6 billion as of March 31, 2025 compared to December 31, 2024 primarily driven by seasonal paydowns in our credit card loan portfolio.
We provide additional information on the composition of our loan portfolio and credit quality in “Credit Risk Profile,” “Consolidated Results of Operations” and “Part I—Item 1. Financial Statements—Note 4—Loans.”
Funding Sources
Our primary source of funding comes from insured deposits in our Consumer Banking business, as they are a relatively stable and lower cost source of funding. In addition to deposits, we raise funding through the issuance of senior and subordinated notes, securitized debt obligations, federal funds purchased, securities loaned or sold under agreements to repurchase, and Federal Home Loan Bank (“FHLB”) advances secured by certain portions of our loan and securities portfolios.
Table 7 provides the composition of our primary sources of funding as of March 31, 2025 and December 31, 2024.
Table 7: Funding Sources Composition
| March 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| (Dollars in millions) | Amount | % of Total | Amount | % of Total | ||||||||||||||||||||||
| Deposits: | ||||||||||||||||||||||||||
| Consumer Banking | $ | 324,920 | 79 | % | $ | 318,329 | 78 | % | ||||||||||||||||||
| Commercial Banking | 29,984 | 7 | 31,691 | 8 | ||||||||||||||||||||||
|
Other
(1)
|
12,560 | 4 | 12,687 | 3 | ||||||||||||||||||||||
|
Total deposits
|
367,464 | 90 | 362,707 | 89 | ||||||||||||||||||||||
| Securitized debt obligations | 11,716 | 3 | 14,264 | 3 | ||||||||||||||||||||||
| Other debt | 30,057 | 7 | 31,287 | 8 | ||||||||||||||||||||||
| Total funding sources | $ | 409,237 | 100 | % | $ | 408,258 | 100 | % | ||||||||||||||||||
(1)
Includes brokered deposits of $11.5 billion and $11.6 billion as of March 31, 2025 and December 31, 2024, respectively.
Total deposits increased by $4.8 billion to $367.5 billion as of March 31, 2025 from December 31, 2024 primarily driven by our national consumer banking strategy.
As of March 31, 2025 and December 31, 2024, we held $63.7 billion and $64.9 billion, respectively, of estimated uninsured deposits. These amounts were primarily comprised of checking and savings deposits. These estimated uninsured deposits comprised approximately 17% and 18% of our total deposits as of March 31, 2025 and December 31, 2024. We estimate our uninsured amounts based on methodologies and assumptions used for our “Consolidated Reports of Condition and Income” (Federal Financial Institutions Examination Council (“FFIEC”) 031) filed with the Federal Reserve, OCC and the Federal Deposit Insurance Corporation (“FDIC”), hereafter collectively referred to as the “Federal Banking Agencies,” adjusted to exclude intercompany balances and cash collateral received on certain derivative contracts which are not presented within deposits on our consolidated balance sheet.
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Capital One Financial Corporation (COF) | |||||||
Securitized debt obligations decreased by $2.5 billion to $11.7 billion as of March 31, 2025 from December 31, 2024 primarily due to
maturities.
Other debt decreased by $1.2 billion to $30.1 billion as of March 31, 2025 from December 31, 2024 primarily driven by
maturities of unsecured senior debt, partially offset by issuances of subordinated debt.
We provide additional information on our funding sources in “Liquidity Risk Profile” and “Part I—Item 1. Financial Statements—Note 8—Deposits and Borrowings.”
|
17
|
Capital One Financial Corporation (COF) | |||||||
| OFF-BALANCE SHEET ARRANGEMENTS | ||
In the ordinary course of business, we engage in certain activities that are not reflected on our consolidated balance sheets, generally referred to as off-balance sheet arrangements. These activities typically involve transactions with unconsolidated variable interest entities (“VIEs”) as well as other arrangements, such as letters of credit, loan commitments and guarantees, to meet the financing needs of our customers and support their ongoing operations. We provide additional information regarding these types of activities in “Part I—Item 1. Financial Statements—Note 6—Variable Interest Entities and Securitizations” and “Part I—Item 1. Financial Statements—Note 14—Commitments, Contingencies, Guarantees and Others.”
|
18
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Capital One Financial Corporation (COF) | |||||||
| BUSINESS SEGMENT FINANCIAL PERFORMANCE | ||
Our principal operations are organized for management reporting purposes into three major business segments, which are defined primarily based on the products and services provided or the types of customer served: Credit Card, Consumer Banking and Commercial Banking. The operations of acquired businesses have been integrated into or managed as a part of our existing business segments. Certain activities that are not part of a business segment are included in the Other category, such as the management of our corporate investment portfolio and asset/liability positions performed by our centralized Corporate Treasury group and any residual tax expense or benefit beyond what is assessed to our business segments in order to arrive at the consolidated effective tax rate. The Other category also includes unallocated corporate expenses that do not directly support the operations of the business segments or for which the business segments are not considered financially accountable in evaluating their performance, such as certain restructuring charges and integration expenses related to the Transaction.
The results of our individual businesses, which we report on a continuing operations basis, reflect the manner in which management evaluates performance and makes decisions about funding our operations and allocating resources. We may periodically change our business segments or reclassify business segment results based on modifications to our management reporting methodologies and changes in organizational alignment. Our business segment results are intended to reflect each segment as if it were a stand-alone business. We use an internal management and reporting process to derive our business segment results. Our internal management and reporting process employs various allocation methodologies, including funds transfer pricing, to assign certain balance sheet assets, deposits and other liabilities and their related revenues and expenses directly or indirectly attributable to each business segment. Total interest income and non-interest income are directly attributable to the segment in which they are reported. The net interest income of each segment reflects the results of our funds transfer pricing process, which is primarily based on a matched funding concept that takes into consideration market interest rates. Our funds transfer pricing process is managed by our centralized Corporate Treasury group and provides a funds credit for sources of funds, such as deposits generated by our Consumer Banking and Commercial Banking businesses, and a charge for the use of funds by each business segment. The allocation is unique to each business segment and acquired business and is based on the composition of assets and liabilities. The funds transfer pricing process considers the interest rate and liquidity risk characteristics of assets and liabilities and off-balance sheet products. Periodically, the methodology and assumptions utilized in the funds transfer pricing process are adjusted to reflect economic conditions and other factors, which may impact the allocation of net interest income to the business segments. We regularly assess the assumptions, methodologies and reporting classifications used for segment reporting, which may result in the implementation of refinements or changes in future periods. We provide additional information on the allocation methodologies used to derive our business segment results in “Part II—Item 8. Financial Statements and Supplementary Data—Note 18—Business Segments and Revenue from Contracts with Customers” in our 2024 Form 10-K.
We refer to the business segment results derived from our internal management accounting and reporting process as our “managed” presentation, which differs in some cases from our reported results prepared based on U.S. GAAP. There is no comprehensive authoritative body of guidance for management accounting equivalent to U.S. GAAP; therefore, the managed presentation of our business segment results may not be comparable to similar information provided by other financial services companies. In addition, our individual business segment results should not be used as a substitute for comparable results determined in accordance with U.S. GAAP.
We summarize our business segment results for the first quarters of 2025 and 2024 and provide a comparative discussion of these results, as well as changes in our financial condition and credit performance metrics as of March 31, 2025 compared to December 31, 2024. We provide a reconciliation of our total business segment results to our reported consolidated results in “Part I—Item 1. Financial Statements—Note 13—Business Segments and Revenue from Contracts with Customers.”
|
19
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Capital One Financial Corporation (COF) | |||||||
Business Segment Financial Performance
Table 8 summarizes our business segment results, which we report based on total net revenue (loss) and net income (loss) from continuing operations, for the first quarters of 2025 and 2024.
Table
8
: Business Segment Results
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
2025 | 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||
|
|
Total Net
Revenue (Loss) (1) |
Net Income
(Loss)
(2)
|
Total Net
Revenue (Loss) (1) |
Net Income
(Loss)
(2)
|
||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Amount |
% of
Total |
Amount |
% of
Total |
Amount |
% of
Total |
Amount |
% of
Total |
||||||||||||||||||||||||||||||||||||||||||
| Credit Card | $ | 7,165 | 72% | $ | 1,219 | 87% | $ | 6,748 | 72% | $ | 961 | 75% | ||||||||||||||||||||||||||||||||||||||
| Consumer Banking | 2,126 | 21 | 186 | 13 | 2,170 | 23 | 381 | 30 | ||||||||||||||||||||||||||||||||||||||||||
|
Commercial Banking
(3)
|
884 | 9 | 195 | 14 | 880 | 9 | 280 | 22 | ||||||||||||||||||||||||||||||||||||||||||
|
Other
(3)
|
(175) | (2) | (196) | (14) | (396) | (4) | (342) | (27) | ||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 10,000 | 100% | $ | 1,404 | 100% | $ | 9,402 | 100% | $ | 1,280 | 100% | ||||||||||||||||||||||||||||||||||||||
(1)
Total net revenue (loss) consists of net interest income and non-interest income.
(2)
Net income (loss) for our business segments and the Other category is based on income (loss) from continuing operations, net of tax.
(3)
Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting reductions to the Other category.
|
20
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Capital One Financial Corporation (COF) | |||||||
Credit Card Business
The primary sources of revenue for our Credit Card business are net interest income, net interchange income and fees collected from customers. Expenses primarily consist of the provision for credit losses, operating costs and marketing expenses.
Our Credit Card business generated net income from continuing operations of $1.2 billion and $961 million in the first quarters of 2025 and 2024, respectively.
Table 9 summarizes the financial results of our Credit Card business and displays selected key metrics for the periods indicated.
Table 9: Credit Card Business Results
| Three Months Ended March 31, | ||||||||||||||||||||
| (Dollars in millions, except as noted) | 2025 | 2024 | Change | |||||||||||||||||
| Selected income statement data: | ||||||||||||||||||||
| Net interest income | $ | 5,654 | $ | 5,272 | 7% | |||||||||||||||
| Non-interest income | 1,511 | 1,476 | 2 | |||||||||||||||||
|
Total net revenue
(1)
|
7,165 | 6,748 | 6 | |||||||||||||||||
|
Provision for credit losses
|
1,926 | 2,259 | (15) | |||||||||||||||||
| Non-interest expense | 3,638 | 3,229 | 13 | |||||||||||||||||
| Income from continuing operations before income taxes | 1,601 | 1,260 | 27 | |||||||||||||||||
| Income tax provision | 382 | 299 | 28 | |||||||||||||||||
| Income from continuing operations, net of tax | $ | 1,219 | $ | 961 | 27 | |||||||||||||||
| Selected performance metrics: | ||||||||||||||||||||
| Average loans held for investment | $ | 156,407 | $ | 149,645 | 5 | |||||||||||||||
|
Average yield on loans
(2)
|
18.54 | % | 18.84 | % | (30)bps | |||||||||||||||
|
Total net revenue margin
(3)
|
18.32 | 17.99 | 33 | |||||||||||||||||
| Net charge-offs | $ | 2,399 | $ | 2,207 | 9% | |||||||||||||||
| Net charge-off rate | 6.14 | % | 5.90 | % | 24bps | |||||||||||||||
| Purchase volume | $ | 157,948 | $ | 150,171 | 5% | |||||||||||||||
| (Dollars in millions, except as noted) | March 31, 2025 | December 31, 2024 | Change | |||||||||||||||||
| Selected period-end data: | ||||||||||||||||||||
| Loans held for investment | $ | 157,189 | $ | 162,508 | (3)% | |||||||||||||||
| 30+ day performing delinquency rate | 4.26 | % | 4.53 | % | (27)bps | |||||||||||||||
| 30+ day delinquency rate | 4.27 | 4.54 | (27) | |||||||||||||||||
|
Nonperforming loan rate
(4)
|
0.01 | 0.01 | — | |||||||||||||||||
| Allowance for credit losses | $ | 12,510 | $ | 12,974 | (4)% | |||||||||||||||
| Allowance coverage ratio | 7.96% | 7.98 | % | (2)bps | ||||||||||||||||
(1)
We recognize finance charges and fee income on open-ended loans in accordance with the contractual provisions of the credit arrangements and charge off any uncollectible amounts. Total net revenue was reduced by $705 million and $630 million in the first quarters of 2025 and 2024, respectively, for finance charges and fees charged-off as uncollectible.
(2)
Average yield is calculated based on annualized interest income for the period divided by average loans during the period and does not include any allocations, such as funds transfer pricing.
(3)
Total net revenue margin is calculated based on annualized total net revenue for the period divided by average loans during the period.
(4)
Within our credit card loan portfolio, certain loans in our international card businesses are classified as nonperforming. See “Nonperforming Loans and Other Nonperforming Assets” for additional information.
|
21
|
Capital One Financial Corporation (COF) | |||||||
Key factors affecting the results of our Credit Card business for the first quarter of 2025 compared to the first quarter of 2024, and changes in financial condition and credit performance between March 31, 2025 and December 31, 2024 include the following:
•
Net Interest Income:
Net interest income increased by $382 million to $5.7 billion in the first quarter of 2025 primarily driven by higher average loan balances and the impacts of the elimination of revenue sharing provisions due to the Walmart Program Termination.
•
Non-Interest Income:
Non-interest income increased by $35 million to $1.5 billion in the first quarter of 2025 primarily due to higher net interchange fees due to an increase in purchase volume.
•
Provision for Credit Losses:
Provision for credit losses decreased by $333 million to $1.9 billion in the first quarter of 2025 primarily driven by an allowance release of $473 million compared to an allowance build of $52 million in the first quarter of 2024.
•
Non-Interest Expense:
Non-interest expense increased by $409 million to $3.6 billion in the first quarter of 2025 primarily driven by continued investment in technology and increased marketing spend.
Loans Held for Investment:
•
Period-end loans held for investment decreased by $5.3 billion to $157.2 billion as of March 31, 2025 from December 31, 2024 primarily driven by seasonal paydowns.
•
Average loans held for investment increased by $6.8 billion to $156.4 billion in the first quarter of 2025 compared to the first quarter of 2024 driven by growth in purchase volume.
Net Charge-Off and Delinquency Metrics:
•
The net charge-off rate increased by 24 bps to 6.14% in the first quarter of 2025 compared to the first quarter of 2024 primarily driven by the 41 bps impact of the elimination of loss sharing provisions due to the Walmart Program Termination. Absent the impact of the elimination of these loss sharing provisions, the net charge-off rate would have been 5.73% in the first quarter of 2025.
•
The 30+ day delinquency rate decreased by 27 bps to 4.27% as of March 31, 2025 from December 31, 2024.
|
22
|
Capital One Financial Corporation (COF) | |||||||
Domestic Card Business
The Domestic Card business generated net income from continuing operations of $1.2 billion and $918 million in the first quarters of 2025 and 2024, respectively. In the first quarters of 2025 and 2024, the Domestic Card business accounted for greater than 90% of total net revenue of our Credit Card business.
Table 9.1 summarizes the financial results for our Domestic Card business and displays selected key metrics for the periods indicated.
Table 9.1: Domestic Card Business Results
| Three Months Ended March 31, | ||||||||||||||||||||
| (Dollars in millions, except as noted) | 2025 | 2024 | Change | |||||||||||||||||
| Selected income statement data: | ||||||||||||||||||||
| Net interest income | $ | 5,343 | $ | 4,972 | 7% | |||||||||||||||
| Non-interest income | 1,460 | 1,411 | 3 | |||||||||||||||||
|
Total net revenue
(1)
|
6,803 | 6,383 | 7 | |||||||||||||||||
|
Provision for credit losses
|
1,856 | 2,157 | (14) | |||||||||||||||||
| Non-interest expense | 3,422 | 3,025 | 13 | |||||||||||||||||
| Income from continuing operations before income taxes | 1,525 | 1,201 | 27 | |||||||||||||||||
| Income tax provision | 363 | 283 | 28 | |||||||||||||||||
| Income from continuing operations, net of tax | $ | 1,162 | $ | 918 | 27 | |||||||||||||||
| Selected performance metrics: | ||||||||||||||||||||
| Average loans held for investment | $ | 149,639 | $ | 142,887 | 5 | |||||||||||||||
|
Average yield on loans
(2)
|
18.42 | % | 18.76 | % | (34)bps | |||||||||||||||
|
Total net revenue margin
(3)(4)
|
18.19 | 17.82 | 37 | |||||||||||||||||
| Net charge-offs | $ | 2,314 | $ | 2,120 | 9% | |||||||||||||||
|
Net charge-off rate
(5)
|
6.19 | % | 5.94 | % | 25bps | |||||||||||||||
| Purchase volume | $ | 154,391 | $ | 146,696 | 5% | |||||||||||||||
| (Dollars in millions, except as noted) | March 31, 2025 | December 31, 2024 | Change | |||||||||||||||||
| Selected period-end data: | ||||||||||||||||||||
| Loans held for investment | $ | 150,309 | $ | 155,618 | (3)% | |||||||||||||||
| 30+ day performing delinquency rate | 4.25 | % | 4.53 | % | (28) | bps | ||||||||||||||
| Allowance for credit losses | $ | 12,036 | $ | 12,494 | (4)% | |||||||||||||||
|
Allowance coverage ratio
|
8.01 | % | 8.03 | % | (2) | bps | ||||||||||||||
(1)
We recognize finance charges and fee income on open-ended loans in accordance with the contractual provisions of the credit arrangements and charge off any uncollectible amounts. Finance charges and fees charged off as uncollectible are reflected as a reduction in total net revenue.
(2)
Average yield is calculated based on annualized interest income for the period divided by average loans during the period and does not include any allocations, such as funds transfer pricing.
(3)
Total net revenue margin is calculated based on annualized total net revenue for the period divided by average loans during the period.
(4)
The Walmart Program Termination increased Domestic Card net revenue margin by 52 bps in the first quarter of 2025. Excluding this impact, the Domestic Card net revenue margin would have been 17.67% in the first quarter of 2025.
(5)
The Walmart Program Termination increased the Domestic Card net charge-off rate by 42 bps for the first quarter of 2025. Excluding this impact, the Domestic Card net charge-off rate would have been 5.77% for the first quarter of 2025.
Because our Domestic Card business accounts for the substantial majority of our Credit Card business, the key factors driving the results are similar to the key factors affecting our total Credit Card business. Net income for our Domestic Card business increased in the first quarter of 2025 compared to the first quarter of 2024 primarily driven by:
•
Higher net interest income primarily driven by higher average loan balances and the impacts of the elimination of revenue sharing provisions due to the Walmart Program Termination.
|
23
|
Capital One Financial Corporation (COF) | |||||||
•
Lower provision for credit losses primarily driven by an allowance release in the first quarter of 2025 compared to an allowance build in the first quarter of 2024.
These drivers were partially offset by:
•
Higher non-interest expense primarily driven by continued investment in technology and increased marketing spend.
Consumer Banking Business
The primary sources of revenue for our Consumer Banking business are net interest income from loans and deposits as well as service charges and customer-related fees. Expenses primarily consist of the provision for credit losses and operating costs.
Our Consumer Banking business generated net income from continuing operations of $186 million and $381 million in the first quarters of 2025 and 2024, respectively.
Table 10 summarizes the financial results of our Consumer Banking business and displays selected key metrics for the periods indicated.
Table 10: Consumer Banking Business Results
Table 10 summarizes the financial results of our Consumer Banking business and displays selected key metrics for the periods indicated.
Table 10: Consumer Banking Business Results
| Three Months Ended March 31, | ||||||||||||||||||||
| (Dollars in millions, except as noted) | 2025 | 2024 | Change | |||||||||||||||||
| Selected income statement data: | ||||||||||||||||||||
| Net interest income | $ | 1,943 | $ | 2,011 | (3)% | |||||||||||||||
| Non-interest income | 183 | 159 | 15 | |||||||||||||||||
| Total net revenue | 2,126 | 2,170 | (2) | |||||||||||||||||
|
Provision for credit losses
|
301 | 426 | (29) | |||||||||||||||||
| Non-interest expense | 1,581 | 1,246 | 27 | |||||||||||||||||
| Income from continuing operations before income taxes | 244 | 498 | (51) | |||||||||||||||||
| Income tax provision | 58 | 117 | (50) | |||||||||||||||||
| Income from continuing operations, net of tax | $ | 186 | $ | 381 | (51) | |||||||||||||||
| Selected performance metrics: | ||||||||||||||||||||
| Average loans held for investment: | ||||||||||||||||||||
| Auto | $ | 77,228 | $ | 73,768 | 5 | |||||||||||||||
| Retail banking | 1,252 | 1,324 | (5) | |||||||||||||||||
| Total consumer banking | $ | 78,480 | $ | 75,092 | 5 | |||||||||||||||
|
Average yield on loans held for investment
(1)
|
9.03 | % | 8.33% | 70bps | ||||||||||||||||
| Average deposits | $ | 319,950 | $ | 294,448 | 9% | |||||||||||||||
| Average deposits interest rate | 3.00 | % | 3.15 | % | (15)bps | |||||||||||||||
| Net charge-offs | $ | 313 | $ | 380 | (18)% | |||||||||||||||
| Net charge-off rate | 1.60 | % | 2.03 | % | (43)bps | |||||||||||||||
| Auto loan originations | $ | 9,210 | $ | 7,522 | 22% | |||||||||||||||
|
24
|
Capital One Financial Corporation (COF) | |||||||
| (Dollars in millions, except as noted) | March 31, 2025 | December 31, 2024 | Change | |||||||||||||||||
| Selected period-end data: | ||||||||||||||||||||
| Loans held for investment: | ||||||||||||||||||||
| Auto | $ | 77,656 | $ | 76,829 | 1% | |||||||||||||||
| Retail banking | 1,240 | 1,263 | (2) | |||||||||||||||||
| Total consumer banking | $ | 78,896 | $ | 78,092 | 1 | |||||||||||||||
| 30+ day performing delinquency rate | 4.87 | % | 5.87 | % | (100) | bps | ||||||||||||||
| 30+ day delinquency rate | 5.47 | 6.73 | (126) | |||||||||||||||||
| Nonperforming loan rate | 0.74 | 0.99 | (25) | |||||||||||||||||
|
Nonperforming asset rate
(2)
|
0.82 | 1.08 | (26) | |||||||||||||||||
| Allowance for credit losses | $ | 1,872 | $ | 1,884 | (1)% | |||||||||||||||
| Allowance coverage ratio | 2.37 | % | 2.41 | % | (4)bps | |||||||||||||||
| Deposits | $ | 324,920 | $ | 318,329 | 2% | |||||||||||||||
(1)
Average yield is calculated based on annualized interest income for the period divided by average loans during the period and does not include any allocations, such as funds transfer pricing.
(2)
Nonperforming assets primarily consist of nonperforming loans and repossessed assets. The total nonperforming asset rate is calculated based on total nonperforming assets divided by the combined period-end total loans held for investment and repossessed assets.
Key factors affecting the results of our Consumer Banking business for the first quarter of 2025 compared to the first quarter of 2024, and changes in financial condition and credit performance between March 31, 2025 and December 31, 2024 include the following:
•
Net Interest Income:
Net interest income decreased by $68 million to $1.9 billion in the first quarter of 2025 primarily driven by lower margins in our retail banking business, partially offset by higher deposits in our retail banking business and higher average loan balances in our auto business.
•
Non-Interest Income:
Non-interest income increased by $24 million to $183 million in the first quarter of 2025 primarily driven by higher interchange revenue from an increase in debit card purchase volume and revenue earned from auto industry services.
•
Provision for Credit Losses:
Provision for credit losses decreased by $125 million to $301 million in the first quarter of 2025 primarily driven by our auto loan portfolio due to lower net charge-offs and an allowance release of $14 million compared to an allowance build of $55 million in the first quarter of 2024.
•
Non-Interest Expense:
Non-interest expense increased by $335 million to $1.6 billion in the first quarter of 2025 primarily driven by an increase to the litigation accrual, continued investment in technology and increased marketing spend.
Loans Held for Investment:
•
Period-end loans held for investment increased by $804 million to $78.9 billion as of March 31, 2025 from December 31, 2024 primarily driven by growth in our auto loan portfolio.
•
Average loans held for investment increased by $3.4 billion to $78.5 billion in the first quarter of 2025 compared to the first quarter of 2024 primarily driven by growth in our auto loan portfolio.
Deposits:
•
Period-end deposits increased by $6.6 billion to $324.9 billion as of March 31, 2025 from December 31, 2024 primarily driven by continued growth from our national consumer banking strategy.
Net Charge-Off and Delinquency Metrics:
•
The net charge-off rate decreased by 43 bps to 1.60% in the first quarter of 2025 compared to the first quarter of 2024.
|
25
|
Capital One Financial Corporation (COF) | |||||||
•
The 30+ day delinquency rate decreased by 126 bps to 5.47% as of March 31, 2025 compared to December 31, 2024.
Commercial Banking Business
The primary sources of revenue for our Commercial Banking business are net interest income from loans and deposits and non-interest income earned from products and services provided to our clients such as capital markets, advisory services, net interchange and treasury management. Because our Commercial Banking business has loans and investments that generate tax-exempt income, tax credits or other tax benefits, we present the revenues on a taxable-equivalent basis. Expenses primarily consist of the provision for credit losses and operating costs.
Our Commercial Banking business generated net income from continuing operations of $195 million and $280 million in the first quarters of 2025 and 2024, respectively.
|
26
|
Capital One Financial Corporation (COF) | |||||||
Table 11 summarizes the financial results of our Commercial Banking business and displays selected key metrics for the periods indicated.
Table 11: Commercial Banking Business Results
| Three Months Ended March 31, | ||||||||||||||||||||
| (Dollars in millions, except as noted) | 2025 | 2024 | Change | |||||||||||||||||
| Selected income statement data: | ||||||||||||||||||||
| Net interest income | $ | 572 | $ | 599 | (5)% | |||||||||||||||
| Non-interest income | 312 | 281 | 11 | |||||||||||||||||
|
Total net revenue
(1)
|
884 | 880 | — | |||||||||||||||||
|
Provision (benefit) for credit losses
(2)
|
142 | (2) | ** | |||||||||||||||||
| Non-interest expense | 486 | 515 | (6) | |||||||||||||||||
| Income from continuing operations before income taxes | 256 | 367 | (30) | |||||||||||||||||
| Income tax provision | 61 | 87 | (30) | |||||||||||||||||
| Income from continuing operations, net of tax | $ | 195 | $ | 280 | (30) | |||||||||||||||
| Selected performance metrics: | ||||||||||||||||||||
| Average loans held for investment: | ||||||||||||||||||||
| Commercial and multifamily real estate | $ | 31,733 | $ | 34,310 | (8) | |||||||||||||||
| Commercial and industrial | 55,765 | 55,567 | — | |||||||||||||||||
| Total commercial banking | $ | 87,498 | $ | 89,877 | (3) | |||||||||||||||
|
Average yield on loans held for investment
(1)(3)
|
6.29 | % | 7.14 | % | (85)bps | |||||||||||||||
| Average deposits | $ | 31,654 | $ | 31,844 | (1)% | |||||||||||||||
| Average deposits interest rate | 2.13 | % | 2.65 | % | (52)bps | |||||||||||||||
| Net charge-offs | $ | 24 | $ | 29 | (17)% | |||||||||||||||
| Net charge-off rate | 0.11 | % | 0.13 | % | (2)bps | |||||||||||||||
| (Dollars in millions, except as noted) | March 31, 2025 | December 31, 2024 | Change | |||||||||||||||||
| Selected period-end data: | ||||||||||||||||||||
| Loans held for investment: | ||||||||||||||||||||
| Commercial and multifamily real estate | $ | 31,971 | $ | 31,903 | — | |||||||||||||||
| Commercial and industrial | 55,542 | 55,272 | — | |||||||||||||||||
| Total commercial banking | $ | 87,513 | $ | 87,175 | — | |||||||||||||||
| Nonperforming loan rate | 1.40 | % | 1.39 | % | 1 | bps | ||||||||||||||
|
Nonperforming asset rate
(4)
|
1.40 | 1.39 | 1 | |||||||||||||||||
|
Allowance for credit losses
(2)
|
$ | 1,517 | $ | 1,400 | 8% | |||||||||||||||
| Allowance coverage ratio | 1.73% | 1.61% | 12 | bps | ||||||||||||||||
| Deposits | $ | 29,984 | $ | 31,691 | (5)% | |||||||||||||||
| Loans serviced for others | 52,298 | 52,749 | (1) | |||||||||||||||||
(1)
Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting reductions to the Other category.
(2)
The provision for losses on unfunded lending commitments is included in the provision for credit losses in our consolidated statements of income and the related reserve is included in other liabilities on our consolidated balance sheets. Our reserve for unfunded lending commitments totaled $144 million and $143 million as of March 31, 2025 and December 31, 2024, respectively.
(3)
Average yield is calculated based on annualized interest income for the period divided by average loans during the period and does not include any allocations, such as funds transfer pricing.
(4)
Nonperforming assets consist of nonperforming loans and other foreclosed assets. The total nonperforming asset rate is calculated based on total nonperforming assets divided by the combined period-end total loans held for investment and other foreclosed assets.
** Not meaningful.
|
27
|
Capital One Financial Corporation (COF) | |||||||
Key factors affecting the results of our Commercial Banking business for the first quarter of 2025 compared to the first quarter of 2024, and changes in financial condition and credit performance between March 31, 2025 and December 31, 2024 include the following:
•
Net Interest Income:
Net interest income decreased by $27 million to $572 million in the first quarter of 2025 primarily driven by lower average loan balances.
•
Non-Interest Income:
Non-interest income increased by $31 million to $312 million in the first quarter of 2025 primarily driven by increased fees in our capital markets business.
•
Provision for Credit Losses:
Provision for credit losses increased by $144 million to $142 million in the first quarter of 2025 primarily driven by an allowance build of $117 million compared to an allowance release of $7 million in the first quarter of 2024.
•
Non-Interest Expense:
Non-interest expense decreased by $29 million to $486 million in the first quarter of 2025 primarily driven by decreased operating expenses.
Loans Held for Investment:
•
Period-end loans held for investment remained substantially flat at $87.5 billion as of March 31, 2025 compared to December 31, 2024.
•
Average loans held for investment decreased by $2.4 billion to $87.5 billion in the first quarter of 2025 compared to the first quarter of 2024 primarily driven by customer payments outpacing originations.
Deposits:
•
Period-end deposits decreased by $1.7 billion to $30.0 billion as of March 31, 2025 from December 31, 2024 primarily driven by seasonality.
Net Charge-Off and Nonperforming Metrics:
•
The net charge-off rate decreased by 2 bps to 0.11% in the first quarter of 2025 compared to the first quarter of 2024.
•
The nonperforming loan rate increased by 1 bps to 1.40% as of March 31, 2025 compared to December 31, 2024.
Other Category
Other includes unallocated amounts related to our centralized Corporate Treasury group activities, such as management of our corporate investment securities portfolio, asset/liability management and oversight of our funds transfer pricing process. Other also includes:
•
unallocated corporate revenue and expenses that do not directly support the operations of the business segments or for which the business segments are not considered financially accountable in evaluating their performance, such as certain restructuring charges and integration expenses related to the Transaction;
•
residual tax expense or benefit to arrive at the consolidated effective tax rate that is not assessed to our primary business segments; and
•
foreign exchange-rate fluctuations on foreign currency-denominated balances.
|
28
|
Capital One Financial Corporation (COF) | |||||||
Table 12 summarizes the financial results of our Other category for the periods indicated.
Table 12: Other Category Results
| Three Months Ended March 31, | ||||||||||||||||||||
| (Dollars in millions) | 2025 | 2024 | Change | |||||||||||||||||
| Selected income statement data: | ||||||||||||||||||||
| Net interest loss | $ | (156) | $ | (394) | (60)% | |||||||||||||||
| Non-interest loss | (19) | (2) | ** | |||||||||||||||||
|
Total net loss
(1)
|
(175) | (396) | (56) | |||||||||||||||||
| Non-interest expense | 197 | 147 | 34 | |||||||||||||||||
| Loss from continuing operations before income taxes | (372) | (543) | (31) | |||||||||||||||||
| Income tax benefit | (176) | (201) | (12) | |||||||||||||||||
| Loss from continuing operations, net of tax | $ | (196) | $ | (342) | (43) | |||||||||||||||
(1)
Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting reductions to the Other category.
** Not meaningful.
Loss from continuing operations decreased by $146 million to a loss of $196 million in the first quarter of 2025 compared to the first quarter of 2024 primarily driven by higher treasury income.
| CRITICAL ACCOUNTING POLICIES AND ESTIMATES | ||
The preparation of financial statements in accordance with U.S. GAAP requires management to make a number of judgments, estimates and assumptions that affect the amount of assets, liabilities, income and expenses on the consolidated financial statements. Understanding our accounting policies and the extent to which we use management judgment and estimates in applying these policies is integral to understanding our financial statements. We provide a summary of our significant accounting policies under “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2024 Form 10-K.
We have identified the following accounting estimates as critical because they require significant judgments and assumptions about highly complex and inherently uncertain matters and the use of reasonably different estimates and assumptions could have a material impact on our results of operations or financial condition. Our critical accounting policies and estimates are as follows:
•
Loan loss reserves
•
Goodwill
•
Fair value
•
Customer rewards reserve
We evaluate our critical accounting estimates and judgments on an ongoing basis and update them as necessary, based on changing conditions. There have been no changes to our critical accounting policies and estimates described in our 2024 Form 10-K under “Part II—Item 7. MD&A—Critical Accounting Policies and Estimates.”
|
29
|
Capital One Financial Corporation (COF) | |||||||
| ACCOUNTING CHANGES AND DEVELOPMENTS | ||
Accounting Standards Issued but Not Adopted as of March 31, 2025
| Standard | Guidance |
Adoption Timing and
Financial Statement Impacts |
||||||||||||
|
Income Tax Disclosures
Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740):
Improvements to Income Tax Disclosures
Issued December 2023
|
Requires entities to annually provide additional information on income tax rate reconciliations and make additional disclosures about income taxes paid.
|
Effective beginning with our annual period ending on December 31, 2025, with early adoption permitted. Prospective application is required and retrospective application is also permitted.
We plan to adopt this standard for the above annual period and to apply the new requirements prospectively. We are still assessing the extent of the impacts of adoption to the disclosures.
|
||||||||||||
|
Disaggregation of Income Statement Expenses
ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):
Disaggregation of Income Statement Expenses
Issued November 2024
|
Requires entities to separately disclose specific disaggregated expense categories on an annual and interim basis as well as disclose selling expenses on an annual basis.
|
Effective beginning with our annual period ending on December 31, 2027, with early adoption permitted. Prospective application is required and retrospective application is also permitted.
We are still assessing the extent of the impacts of adoption to the disclosures.
|
||||||||||||
|
30
|
Capital One Financial Corporation (COF) | |||||||
| CAPITAL MANAGEMENT | ||
The level and composition of our capital are determined by multiple factors, including our consolidated regulatory capital requirements as described in more detail below and internal risk-based capital assessments such as internal stress testing. The level and composition of our capital may also be influenced by rating agency guidelines, subsidiary capital requirements, business environment, conditions in the financial markets and assessments of potential future losses due to adverse changes in our business and market environments.
Capital Standards and Prompt Corrective Action
The Company and the Bank are subject to the regulatory capital requirements established by the Federal Reserve and the OCC, respectively (the “Basel III Capital Rules”). The Basel III Capital Rules implement certain capital requirements published by the Basel Committee on Banking Supervision (“Basel Committee”), along with certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) and other capital provisions.
As a bank holding company (“BHC”) with total consolidated assets of at least $250 billion but less than $700 billion and not exceeding any of the applicable risk-based thresholds, the Company is a Category III institution under the Basel III Capital Rules.
The Bank, as a subsidiary of a Category III institution, is a Category III bank. Moreover, the Bank, as an insured depository institution, is subject to prompt corrective action (“PCA”) capital regulations.
Basel III and U.S. Capital Rules
Under the Basel III Capital Rules, we must maintain a minimum CET1 capital ratio
of 4.5%, a Tier 1 capital ratio of 6.0% and a total capital ratio of 8.0%, in each case in relation to risk-weighted assets. In addition, we must maintain a minimum leverage ratio of 4.0% and a minimum supplementary leverage ratio of 3.0%. We are also subject to the capital conservation buffer requirement and countercyclical capital buffer requirement, each as described below. Our capital and leverage ratios are calculated based on the Basel III standardized approach framework.
We have elected to exclude certain elements of accumulated other comprehensive income (“AOCI”) from our regulatory capital as permitted for a Category III institution. For information on the recognition of AOCI in regulatory capital under the proposed changes to the Basel III Capital Rules, see “Part I—Item 1. Business—Supervision and Regulation—Prudential Regulation of Banking—Capital and Stress Testing Regulation—Basel III Finalization Proposal” in our 2024 Form 10-K.
Global systemically important banks (“G-SIBs”) that are based in the U.S. are subject to an additional CET1 capital requirement known as the “G-SIB Surcharge.” We are not a G-SIB based on the most recent available data and thus we are not subject to a G-SIB Surcharge.
Stress Capital Buffer Rule
The Basel III Capital Rules require banking institutions to maintain a capital conservation buffer, composed of CET1 capital, above the regulatory minimum ratios. Under the Federal Reserve’s final rule to implement the stress capital buffer requirement (“Stress Capital Buffer Rule”), the Company’s “standardized approach capital conservation buffer” includes its stress capital buffer requirement (as described below), any G-SIB Surcharge (which is not applicable to us) and the countercyclical capital buffer requirement (which is currently set at 0%). Any determination to increase the countercyclical capital buffer generally would be effective twelve months after the announcement of such an increase, unless the
Federal Reserve
sets an earlier effective date.
The Company’s stress capital buffer requirement is recalibrated every year based on the Company’s supervisory stress test results. In particular, the Company’s stress capital buffer requirement equals, subject to a floor of 2.5%, the sum of (i) the difference between the Company’s starting CET1 capital ratio and its lowest projected CET1 capital ratio under the severely adverse scenario of the Federal Reserve’s supervisory stress test plus (ii) the ratio of the Company’s projected four quarters of common stock dividends (for the fourth to seventh quarters of the planning horizon) to the projected risk-weighted assets for the quarter in which the Company’s projected CET1 capital ratio reaches its minimum under the supervisory stress test.
Based on the Company’s 2024 supervisory stress test results, the Company’s stress capital buffer requirement for the period beginning on October 1, 2024 through September
30, 2025 is 5.5%. Therefore, the Company’s minimum capital requirements
|
31
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Capital One Financial Corporation (COF) | |||||||
plus the standardized approach capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios under the stress capital buffer framework are 10.0%, 11.5% and 13.5%, respe
ctively, for the period from October 1, 2024 through September 30, 2025
. For additional information regarding a proposed rulemaking to modify the stress capital buffer framework, including the recalibration and annual effective date of the stress capital buffer requirement, see
“
Supervision and Regulation
—Capital and Stress Testing Regulation Update” in this Report.
The Stress Capital Buffer Rule does not apply to the Bank. Pursuant to the OCC’s capital regulations, which are only applicable to the Bank, the capital conservation buffer for the Bank continues to be fixed at 2.5%. Therefore, the Bank’s minimum capital requirements plus its capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios are 7.0%, 8.5% and 10.5%, respectively.
If the Company or the Bank fails to maintain its capital ratios above the minimum capital requirements plus the applicable capital conservation buffers, it will face increasingly strict automatic limitations on capital distributions and discretionary bonus payments to certain executive officers.
As of March 31, 2025 and December 31, 2024, respectively, the Company and the Bank each exceeded the minimum capital requirements and the capital conservation buffer requirements applicable to them
,
and the Company and the Bank were each “
well-capitalized.
” The “well-capitalized” standards applicable to the Company are established in the Federal Reserve’s regulations, and the “well-capitalized” standards applicable to the Bank are established in the OCC’s PCA capital requirements.
Market Risk Rule
The “Market Risk Rule” supplements the Basel III Capital Rules by requiring institutions subject to the rule to adjust their risk-based capital ratios to reflect the market risk in their trading book. The Market Risk Rule generally applies to institutions with aggregate trading assets and liabilities equal to 10% or more of total assets or $1 billion or more. As of March 31, 2025, the Company and the Bank are subject to the Market Risk Rule. See “Market Risk Profile” below for additional information.
For the description of the regulatory capital rules to which we are subject, including recent proposed amendments to these rules under the Basel III Finalization Proposal, see “Part I—Item 1. Business—Supervision and Regulation” in our 2024 Form 10-K.
|
32
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Capital One Financial Corporation (COF) | |||||||
Table 13 provides a comparison of our regulatory capital ratios under the Basel III standardized approach, the regulatory minimum capital adequacy ratios and the applicable well-capitalized standards as of March 31, 2025 and December 31, 2024.
Table 13: Capital Ratios Under Basel III
(1)(2)(3)
| March 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||
| Ratio |
Minimum
Capital Adequacy |
Well-
Capitalized |
Ratio
|
Minimum
Capital Adequacy |
Well-
Capitalized |
|||||||||||||||||||||||||||||||||
| Capital One Financial Corp: | ||||||||||||||||||||||||||||||||||||||
|
Common equity Tier 1 capital
(4)
|
13.6 | % | 4.5 | % | N/A | 13.5 | % | 4.5 | % | N/A | ||||||||||||||||||||||||||||
|
Tier 1 capital
(5)
|
14.9 | 6.0 | 6.0 | % | 14.8 | 6.0 | 6.0 | % | ||||||||||||||||||||||||||||||
|
Total capital
(6)
|
17.0 | 8.0 | 10.0 | 16.4 | 8.0 | 10.0 | ||||||||||||||||||||||||||||||||
|
Tier 1 leverage
(7)
|
11.6 | 4.0 | N/A | 11.6 | 4.0 | N/A | ||||||||||||||||||||||||||||||||
|
Supplementary leverage
(8)
|
9.9 | 3.0 | N/A | 9.9 | 3.0 | N/A | ||||||||||||||||||||||||||||||||
| CONA: | ||||||||||||||||||||||||||||||||||||||
|
Common equity Tier 1 capital
(4)
|
13.9 | 4.5 | 6.5 | 13.6 | 4.5 | 6.5 | ||||||||||||||||||||||||||||||||
|
Tier 1 capital
(5)
|
13.9 | 6.0 | 8.0 | 13.6 | 6.0 | 8.0 | ||||||||||||||||||||||||||||||||
|
Total capital
(6)
|
15.5 | 8.0 | 10.0 | 15.2 | 8.0 | 10.0 | ||||||||||||||||||||||||||||||||
|
Tier 1 leverage
(7)
|
10.8 | 4.0 | 5.0 | 10.7 | 4.0 | 5.0 | ||||||||||||||||||||||||||||||||
|
Supplementary leverage
(8)
|
9.3 | 3.0 | N/A | 9.2 | 3.0 | N/A | ||||||||||||||||||||||||||||||||
(1)
Capital requirements that are not applicable are denoted by “N/A.”
(2)
Capital ratios as of December 31, 2024 reflect the Company’s and the Bank’s election to adopt the optional five-year transition period provided by the Federal Banking Agencies’ final rule (“CECL Transition Rule”) as of January 1, 2020, which was fully phased in effective January 1, 2025. For more information related to the CECL Transition Rule, see “Part II—Item 7. MD&A—Capital Management—CECL Transition Rule” in our 2024 Form 10-K.
(3)
Ratios as of March 31, 2025 are preliminary and therefore subject to change until we file our March 31, 2025 Form FR Y-9C—Consolidated Financial Statements for Holding Companies and Call Reports.
(4)
Common equity Tier 1 capital ratio is a regulatory capital measure calculated based on common equity Tier 1 capital divided by risk-weighted assets.
(5)
Tier 1 capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by risk-weighted assets.
(6)
Total capital ratio is a regulatory capital measure calculated based on total capital divided by risk-weighted assets.
(7)
Tier 1 leverage ratio is a regulatory capital measure calculated based on Tier 1 capital divided by adjusted average assets.
(8)
Supplementary leverage ratio is a regulatory capital measure calculated based on Tier 1 capital divided by total leverage exposure.
|
33
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Capital One Financial Corporation (COF) | |||||||
Table 14 presents regulatory capital under the Basel III standardized approach and regulatory capital metrics as of March 31, 2025 and December 31, 2024.
Table 14: Regulatory Risk-Based Capital Components and Regulatory Capital Metrics
(1)
| (Dollars in millions) | March 31, 2025 | December 31, 2024 | ||||||||||||
| Regulatory capital under Basel III standardized approach | ||||||||||||||
|
Common equity excluding AOCI
|
$ | 66,225 | $ | 65,823 | ||||||||||
| Adjustments and deductions: | ||||||||||||||
|
AOCI, net of tax
(2)
|
19 | 1 | ||||||||||||
| Goodwill, net of related deferred tax liabilities | (14,792) | (14,786) | ||||||||||||
| Other intangible and deferred tax assets, net of deferred tax liabilities | (247) | (231) | ||||||||||||
| Common equity Tier 1 capital | 51,205 | 50,807 | ||||||||||||
| Tier 1 capital instruments | 4,845 | 4,845 | ||||||||||||
| Tier 1 capital | 56,050 | 55,652 | ||||||||||||
| Tier 2 capital instruments | 3,044 | 1,307 | ||||||||||||
| Qualifying allowance for credit losses | 4,832 | 4,846 | ||||||||||||
| Tier 2 capital | 7,876 | 6,153 | ||||||||||||
| Total capital | $ | 63,926 | $ | 61,805 | ||||||||||
| Regulatory capital metrics | ||||||||||||||
| Risk-weighted assets | $ | 375,538 | $ | 377,145 | ||||||||||
|
Adjusted average assets
(3)
|
483,888 | 480,794 | ||||||||||||
|
Total leverage exposure
(4)
|
565,020 | 559,399 | ||||||||||||
(1)
Common equity as of December 31, 2024 reflects the Company’s and the Bank’s election to adopt the CECL Transition Rule as of January 1, 2020, which was fully phased in effective January 1, 2025. For more information related to the CECL Transition Rule, see “Part II—Item 7. MD&A—Capital Management—CECL Transition Rule” in our 2024 Form 10-K.
(2)
Excludes certain components of AOCI in accordance with rules applicable to Category III institutions. See “Capital Management—Capital Standards and Prompt Corrective Action—Basel III and U.S. Capital Rules” in this Report.
(3)
Includes on-balance sheet asset adjustments subject to deduction from Tier 1 capital under the Basel III Capital Rules.
(4)
Reflects on- and off-balance sheet amounts for the denominator of the supplementary leverage ratio as set forth by the Basel III Capital Rules.
Capital Planning and Regulatory Stress Testing
We repurchas
ed $150 million of
shares of our common stock during the first quarter of 2025.
On April 4, 2025, we submitted our capital plan to the Federal Reserve as part of the 2025 stress testing cycle. The supervisory stress test results are expected to be released by the Federal Reserve by June 30, 2025. Our 2025 supervisory stress test result will determine the size of our stress capital buffer requirement for the period beginning on October 1, 2025 through September 30, 2026
. For additional information regarding a proposed rulemaking to modify the stress capital buffer framework, including the recalibration and annual effective date of the stress capital buffer requirement, see
“
Supervision and Regulation
—Capital and Stress Testing Regulation Update” in this Report.
For the description of the regulatory capital planning rules and stress testing requirements to which we are subject, see “Part I—Item 1. Business—Supervision and Regulation” in our 2024 Form 10-K.
|
34
|
Capital One Financial Corporation (COF) | |||||||
Dividend Policy and Stock Purchases
In the first three months of 2025, we declared and paid co
mmon stock dividends of $236 million, or $0.60 per share, and preferred stock dividends of $57 million. Wh
ile the Merger Agreement is in effect and until the Merger Agreement is terminated or the Transaction is completed, we are restricted from paying quarterly cash dividends on our common stock in excess of $0.60 per share per quarter.
The following table summarizes the dividends paid per share on our various preferred stock series in the first three months of 2025.
Table 15: Preferred Stock Dividends Paid Per Share
| Series | Description | Issuance Date |
Per Annum
Dividend Rate |
Dividend Frequency | 2025 | |||||||||||||||||||||||||||
| Q1 | ||||||||||||||||||||||||||||||||
| Series I |
5.000%
Non-Cumulative |
September 11,
2019 |
5.000% | Quarterly | $12.50 | |||||||||||||||||||||||||||
| Series J |
4.800%
Non-Cumulative |
January 31,
2020 |
4.800 | Quarterly | 12.00 | |||||||||||||||||||||||||||
| Series K |
4.625%
Non-Cumulative |
September 17,
2020 |
4.625 | Quarterly | 11.56 | |||||||||||||||||||||||||||
| Series L |
4.375%
Non-Cumulative |
May 4,
2021 |
4.375 | Quarterly | 10.94 | |||||||||||||||||||||||||||
| Series M |
3.950% Fixed Rate Reset
Non-Cumulative |
June 10,
2021 |
3.950% through 8/31/2026; resets 9/1/2026 and every subsequent 5 year anniversary at 5-Year Treasury Rate +3.157% | Quarterly | 9.88 | |||||||||||||||||||||||||||
| Series N |
4.250%
Non-Cumulative |
July 29,
2021 |
4.250 | Quarterly | 10.63 | |||||||||||||||||||||||||||
The declaration and payment of dividends to our stockholders, as well as the amount thereof, are subject to the discretion of our Board of Directors and depend upon our results of operations, financial condition, capital levels, cash requirements, future prospects, regulatory requirements and other factors deemed relevant by the Board of Directors. For additional information related to capital distributions
, see “Capital Management
—
Capital Planning and Regulatory Stress Testing” in this Report.
As a BHC, our ability to pay dividends is largely dependent upon the receipt of dividends or other payments from our subsidiaries. The Bank is subject to regulatory restrictions that limit its ability to transfer funds to our BHC. As of March 31, 2025, funds available for dividend payments from the Bank were $7.2 billion. There can be no assurance that we will declare and pay any dividends to stockholders.
We repu rchased $150 million of shares of our common stock during the first quarter of 2025. The timing and exact amount of any future common stock repurchases will depend on various factors, including regulatory approval, market conditions, opportunities for growth, our capital position and the amount of retained earnings. The Board authorized stock repurchase program does not include specific price targets, may be executed through open market purchases, tender offers, or privately negotiated transactions, including utilizing Rule 10b5-1 programs, does not have a set expiration date and may be suspended at any time. For additional information on dividends and stock repurchases, see “Capital Management—Capital Planning and Regulatory Stress Testing” and “Part II—Item 2. Unregistered Sales of Equity Securities and Use of Proceeds” in this Report, and “Part I—Item 1. Business—Supervision and Regulation—Prudential Regulation of Banking” and “Part I—Item 1. Business—Supervision and Regulation— Funding and Dividends from Subsidiaries ” in our 2024 Form 10-K.
We repu rchased $150 million of shares of our common stock during the first quarter of 2025. The timing and exact amount of any future common stock repurchases will depend on various factors, including regulatory approval, market conditions, opportunities for growth, our capital position and the amount of retained earnings. The Board authorized stock repurchase program does not include specific price targets, may be executed through open market purchases, tender offers, or privately negotiated transactions, including utilizing Rule 10b5-1 programs, does not have a set expiration date and may be suspended at any time. For additional information on dividends and stock repurchases, see “Capital Management—Capital Planning and Regulatory Stress Testing” and “Part II—Item 2. Unregistered Sales of Equity Securities and Use of Proceeds” in this Report, and “Part I—Item 1. Business—Supervision and Regulation—Prudential Regulation of Banking” and “Part I—Item 1. Business—Supervision and Regulation— Funding and Dividends from Subsidiaries ” in our 2024 Form 10-K.
|
35
|
Capital One Financial Corporation (COF) | |||||||
| RISK MANAGEMENT | ||
Risk Management Framework
Our Risk Management Framework (the “Framework”) sets consistent expectations for risk management across the Company. It also sets expectations for our “Three Lines of Defense” model, which defines the roles, responsibilities and accountabilities for taking and managing risk across the Company. Accountability for overseeing an effective Framework resides with our Board of Directors either directly or through its committees.
|
First Line
Identifies and Owns Risk |
Second Line
Advises & Challenges First Line |
Third Line
Provides Independent Assurance |
|||||||||||||||
| Definition |
Business areas that are accountable for risk and responsible for: i) generating revenue or reducing expenses; ii) supporting the business to provide products or services to customers; or iii) providing technology services for the first line.
|
Independent Risk Management (“IRM”) and Support Functions (e.g., Human Resources, Accounting, Legal) that provide support services to the Company.
|
Internal Audit and Credit Review. | ||||||||||||||
| Key Responsibilities |
Identify, assess, measure, monitor, control and report the risks associated with their business.
|
IRM: Independently oversees and assesses risk taking activities for the first line of defense.
Support Functions: Centers of specialized expertise that provide support services to the enterprise. |
Provides independent and objective assurance to the Board of Directors and senior management that the systems and governance processes are designed and working as intended.
|
||||||||||||||
|
36
|
Capital One Financial Corporation (COF) | |||||||
Our Framework sets consistent expectations for risk management across the Company and consists of the following nine elements:
|
Governance and Accountability |
||||||||||||||||||||
|
Strategy and Risk Alignment |
||||||||||||||||||||
|
Risk Identification |
Assessment, Measurement and Response |
Monitoring and Testing |
Aggregation, Reporting and Escalation |
|||||||||||||||||
|
Capital and Liquidity Management (including Stress Testing) |
||||||||||||||||||||
|
Risk Data and Enabling Technology |
||||||||||||||||||||
|
Culture and Talent Management |
||||||||||||||||||||
We provide additional discussion of our risk management principles, roles and responsibilities, framework and risk appetite under “Part II—Item 7. MD&A—Risk Management” in our 2024 Form 10-K.
Risk Categories
We apply our Framework to protect the Company from the major categories of risk that we are exposed to through our business activities. We have seven major categories of risk as noted below. We provide a description of these categories and how we manage them under “Part II—Item 7. MD&A—Risk Management” in our 2024 Form 10-K.
•
Compliance risk
•
Credit risk
•
Liquidity risk
•
Market risk
•
Operational risk
•
Reputation risk
•
Strategic risk
|
37
|
Capital One Financial Corporation (COF) | |||||||
| CREDIT RISK PROFILE | ||
Our loan portfolio accounts for the substantial majority of our credit risk exposure. Our lending activities are governed under our credit policies and are subject to independent review and approval. Below we provide information about the composition of our loan portfolio, key concentrations and credit performance metrics.
We also engage in certain non-lending activities that may give rise to ongoing credit and counterparty settlement risk, including purchasing securities for our investment securities portfolio, entering into derivative transactions to manage our market risk exposure and to accommodate customers, extending short-term advances on syndication activity including bridge financing transactions we have underwritten, depositing certain operational cash balances in other financial institutions, executing certain foreign exchange transactions and extending customer overdrafts. We provide additional information related to our investment securities portfolio under “Consolidated Balance Sheets Analysis—Investment Securities” and “Part I—Item 1. Financial Statements—Note 3—Investment Securities” as well as credit risk related to derivative transactions in “Part I—Item 1. Financial Statements—Note 9—Derivative Instruments and Hedging Activities.”
|
38
|
Capital One Financial Corporation (COF) | |||||||
Geographic Composition
We market our credit card products throughout the United States, the U.K. and Canada. Our credit card loan portfolio is geographically diversified due to our product and marketing approach. The table below presents the geographic profile of our credit card loan portfolio as of March 31, 2025 and December 31, 2024.
Table 16: Credit Card Portfolio by Geographic Region
| March 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| (Dollars in millions) | Amount | % of Total | Amount | % of Total | ||||||||||||||||||||||
| Domestic credit card: | ||||||||||||||||||||||||||
| California | $ | 15,455 | 9.8 | % | $ | 15,978 | 9.8% | |||||||||||||||||||
| Texas | 13,070 | 8.3 | 13,430 | 8.3 | ||||||||||||||||||||||
| Florida | 11,674 | 7.4 | 12,039 | 7.4 | ||||||||||||||||||||||
| New York | 9,641 | 6.1 | 10,010 | 6.2 | ||||||||||||||||||||||
| Pennsylvania | 6,030 | 3.8 | 6,299 | 3.9 | ||||||||||||||||||||||
| Illinois | 5,685 | 3.6 | 5,921 | 3.6 | ||||||||||||||||||||||
| Ohio | 5,082 | 3.2 | 5,314 | 3.3 | ||||||||||||||||||||||
| New Jersey | 4,924 | 3.1 | 5,097 | 3.1 | ||||||||||||||||||||||
| Georgia | 4,816 | 3.1 | 4,965 | 3.1 | ||||||||||||||||||||||
|
North Carolina
|
4,342 | 2.8 | 4,477 | 2.8 | ||||||||||||||||||||||
| Other | 69,590 | 44.4 | 72,088 | 44.3 | ||||||||||||||||||||||
| Total domestic credit card | 150,309 | 95.6 | 155,618 | 95.8 | ||||||||||||||||||||||
| International card businesses: | ||||||||||||||||||||||||||
| United Kingdom | 4,087 | 2.6 | 3,980 | 2.4 | ||||||||||||||||||||||
| Canada | 2,793 | 1.8 | 2,910 | 1.8 | ||||||||||||||||||||||
| Total international card businesses | 6,880 | 4.4 | 6,890 | 4.2 | ||||||||||||||||||||||
| Total credit card | $ | 157,189 | 100.0 | % | $ | 162,508 | 100.0% | |||||||||||||||||||
|
39
|
Capital One Financial Corporation (COF) | |||||||
Our auto loan portfolio is geographically diversified in the United States due to our product and marketing approach. Retail banking primarily includes small business loans. The table below presents the geographic profile of our auto loan and retail banking portfolios as of March 31, 2025 and December 31, 2024.
Table 17: Consumer Banking Portfolio by Geographic Region
| March 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| (Dollars in millions) | Amount | % of Total | Amount | % of Total | ||||||||||||||||||||||
| Auto: | ||||||||||||||||||||||||||
| Texas | $ | 9,684 | 12.3 | % | $ | 9,459 | 12.1 | % | ||||||||||||||||||
| California | 8,648 | 11.0 | 8,786 | 11.2 | ||||||||||||||||||||||
| Florida | 6,938 | 8.8 | 6,866 | 8.8 | ||||||||||||||||||||||
| Ohio | 3,519 | 4.5 | 3,402 | 4.4 | ||||||||||||||||||||||
| Pennsylvania | 3,472 | 4.4 | 3,408 | 4.4 | ||||||||||||||||||||||
| Illinois | 3,167 | 4.0 | 3,124 | 4.0 | ||||||||||||||||||||||
| Georgia | 3,003 | 3.8 | 2,962 | 3.8 | ||||||||||||||||||||||
| New Jersey | 2,630 | 3.3 | 2,662 | 3.4 | ||||||||||||||||||||||
| Other | 36,595 | 46.3 | 36,160 | 46.3 | ||||||||||||||||||||||
| Total auto | 77,656 | 98.4 | 76,829 | 98.4 | ||||||||||||||||||||||
| Retail banking: | ||||||||||||||||||||||||||
| New York | 364 | 0.5 | 376 | 0.5 | ||||||||||||||||||||||
| Texas | 272 | 0.3 | 278 | 0.4 | ||||||||||||||||||||||
| Louisiana | 188 | 0.2 | 198 | 0.2 | ||||||||||||||||||||||
| New Jersey | 85 | 0.1 | 84 | 0.1 | ||||||||||||||||||||||
| Maryland | 69 | 0.1 | 71 | 0.1 | ||||||||||||||||||||||
| Florida | 58 | 0.1 | 53 | 0.1 | ||||||||||||||||||||||
| Other | 204 | 0.3 | 203 | 0.2 | ||||||||||||||||||||||
| Total retail banking | 1,240 | 1.6 | 1,263 | 1.6 | ||||||||||||||||||||||
| Total consumer banking | $ | 78,896 | 100.0 | % | $ | 78,092 | 100.0 | % | ||||||||||||||||||
|
40
|
Capital One Financial Corporation (COF) | |||||||
We originate commercial and multifamily real estate loans in most regions of the United States. The table below presents the geographic profile of our commercial real estate portfolio as of March 31, 2025 and December 31, 2024.
Table 18: Commercial Real Estate Portfolio by Region
| March 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| (Dollars in millions) | Amount | % of Total | Amount | % of Total | ||||||||||||||||||||||
|
Geographic concentration:
(1)
|
||||||||||||||||||||||||||
| Northeast | $ | 11,616 | 36.3 | % | $ | 12,152 | 38.1 | % | ||||||||||||||||||
| South | 8,118 | 25.4 | 7,900 | 24.8 | ||||||||||||||||||||||
| Pacific West | 4,976 | 15.6 | 4,213 | 13.2 | ||||||||||||||||||||||
| Mid-Atlantic | 3,002 | 9.4 | 2,901 | 9.1 | ||||||||||||||||||||||
|
Mountain
|
2,184 | 6.8 | 2,536 | 7.9 | ||||||||||||||||||||||
|
Midwest
|
2,075 | 6.5 | 2,201 | 6.9 | ||||||||||||||||||||||
| Total | $ | 31,971 | 100.0 | % | $ | 31,903 | 100.0 | % | ||||||||||||||||||
(1)
Geographic concentration is generally determined by the location of the borrower’s business or the location of the collateral associated with the loan. Northeast consists of CT, MA, ME, NH, NJ, NY, PA, RI and VT. South consists of AL, AR, FL, GA, KY, LA, MS, NC, OK, SC, TN and TX. Pacific West consists of: AK, CA, HI, OR and WA. Mid-Atlantic consists of DC, DE, MD, VA and WV. Midwest consists of: IA, IL, IN, KS, MI, MN, MO, ND, NE, OH, SD and WI. Mountain consists of: AZ, CO, ID, MT, NM, NV, UT and WY.
|
41
|
Capital One Financial Corporation (COF) | |||||||
Commercial Loans by Industry
Table 19 summarizes our commercial loans held for investment portfolio by industry classification as of March 31, 2025 and December 31, 2024. Industry classifications below are based on our interpretation of the Federal Loan Classification codes as they pertain to each individual loan.
Table 19:
Commercial Loans by Industry
| (Percentage of portfolio) | March 31, 2025 | December 31, 2024 | ||||||||||||
| Industry Classification: | ||||||||||||||
|
Finance
|
39% | 39% | ||||||||||||
|
Real Estate & Construction
|
27 | 26 | ||||||||||||
| Government & Education | 8 | 8 | ||||||||||||
| Health Care & Pharmaceuticals | 4 | 4 | ||||||||||||
| Commercial Services | 3 | 4 | ||||||||||||
|
Technology, Telecommunications & Media
|
3 | 3 | ||||||||||||
|
Oil, Gas & Pipelines
|
3 | 3 | ||||||||||||
| Other | 13 | 13 | ||||||||||||
| Total | 100 | % | 100 | % | ||||||||||
|
42
|
Capital One Financial Corporation (COF) | |||||||
Credit Risk Measurement
We closely monitor economic conditions and loan performance trends to assess and manage our exposure to credit risk. Trends in delinquency rates are the key credit quality indicator for our credit card and retail banking loan portfolios as changes in delinquency rates can provide an early warning of changes in potential future credit losses. The key indicator we monitor when assessing the credit quality and risk of our auto loan portfolio is borrower credit scores as they provide insight into borrower risk profiles, which give indications of potential future credit losses. The key credit quality indicator for our commercial loan portfolios is our internal risk ratings as we generally classify loans that have been delinquent for an extended period of time and other loans with significant risk of loss as nonperforming. In addition to these credit quality indicators, we also manage and monitor other credit quality metrics such as level of nonperforming loans and net charge-off rates.
We underwrite most consumer loans using proprietary models, which typically include credit bureau data, such as borrower credit scores, application information and, where applicable, collateral and deal structure data. We continuously adjust our management of credit lines and collection strategies based on customer behavior and risk profile changes. We also use borrower credit scores for subprime classification, for competitive benchmarking and, in some cases, to drive product segmentation decisions.
Table 20 provides details on the credit scores of our domestic credit card and auto loan portfolios as of March 31, 2025 and December 31, 2024.
Table 20: Credit Score Distribution
| (Percentage of portfolio) | March 31, 2025 | December 31, 2024 | ||||||||||||
|
Domestic credit card—Refreshed FICO scores:
(1)
|
||||||||||||||
| Greater than 660 | 69 | % | 69 | % | ||||||||||
| 660 or below | 31 | 31 | ||||||||||||
| Total | 100 | % | 100 | % | ||||||||||
|
Auto
—
At origination FICO scores:
(2)
|
||||||||||||||
| Greater than 660 | 53 | % | 54 | % | ||||||||||
| 621 - 660 | 19 | 19 | ||||||||||||
| 620 or below | 28 | 27 | ||||||||||||
| Total | 100 | % | 100 | % | ||||||||||
(1)
Percentages represent period-end loans held for investment in each credit score category. Domestic Card credit scores generally represent Fair Isaac Corporation (“FICO”) scores. These scores are obtained from one of the major credit bureaus at origination and are refreshed monthly thereafter. We approximate non-FICO credit scores to comparable FICO scores for consistency purposes. Balances for which no credit score is available or the credit score is invalid are included in the 660 or below category.
(2)
Percentages represent period-end loans held for investment in each credit score category. Auto credit scores generally represent average FICO scores obtained from three credit bureaus at the time of application and are not refreshed thereafter. Balances for which no credit score is available or the credit score is invalid are included in the 620 or below category.
In our commercial loan portfolio, we assign internal risk ratings to loans based on relevant information about the ability of the borrowers to repay their debt. In determining the risk rating of a particular loan, some of the factors considered are the borrower’s current financial condition, historical and projected future credit performance, prospects for support from financially responsible guarantors, the estimated realizable value of any collateral and current economic trends.
We present information in the section below on the credit performance of our loan portfolio, including the key metrics we use in tracking changes in the credit quality of our loan portfolio. See “Part I—Item 1. Financial Statements—Note 4—Loans” for additional credit quality information and see “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2024 Form 10-K for information on our accounting policies for delinquent and nonperforming loans, charge-offs and loan modifications and restructurings for each of our loan categories.
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Capital One Financial Corporation (COF) | |||||||
Delinquency Rates
We consider the entire balance of an account to be delinquent if the minimum required payment is not received by the customer’s due date, measured at each balance sheet date. Our 30+ day delinquency metrics include all loans held for investment that are 30 or more days past due, whereas our 30+ day performing delinquency metrics include all loans held for investment that are 30 or more days past due but are currently classified as performing and accruing interest. The 30+ day delinquency and 30+ day performing delinquency metrics are the same for domestic credit card loans, as we continue to classify these loans as performing until the account is charged off, typically when the account is 180 days past due. See “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2024 Form 10-K for information on our policies for classifying loans as nonperforming for each of our loan categories. We provide additional information on our credit quality metrics in “Business Segment Financial Performance.”
Table 21 presents our 30+ day performing delinquency rates and 30+ day delinquency rates of our portfolio of loans held for investment, by portfolio segment, as of March 31, 2025 and December 31, 2024.
Table 21:
30+ Day Delinquencies
__________
| March 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||
| 30+ Day Performing Delinquencies | 30+ Day Delinquencies | 30+ Day Performing Delinquencies | 30+ Day Delinquencies | |||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Amount |
Rate
(1)
|
Amount |
Rate
(1)
|
Amount |
Rate
(1)
|
Amount |
Rate
(1)
|
||||||||||||||||||||||||||||||||||||||||||
| Credit Card: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Domestic credit card | $ | 6,389 | 4.25 | % | $ | 6,389 | 4.25 | % | $ | 7,053 | 4.53 | % | $ | 7,053 | 4.53 | % | ||||||||||||||||||||||||||||||||||
| International card businesses | 313 | 4.56 | 321 | 4.66 | 311 | 4.52 | 320 | 4.64 | ||||||||||||||||||||||||||||||||||||||||||
| Total credit card | 6,702 | 4.26 | 6,710 | 4.27 | 7,364 | 4.53 | 7,373 | 4.54 | ||||||||||||||||||||||||||||||||||||||||||
| Consumer Banking: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Auto | 3,832 | 4.93 | 4,296 | 5.53 | 4,572 | 5.95 | 5,229 | 6.81 | ||||||||||||||||||||||||||||||||||||||||||
| Retail banking | 14 | 1.13 | 21 | 1.70 | 14 | 1.12 | 26 | 2.05 | ||||||||||||||||||||||||||||||||||||||||||
| Total consumer banking | 3,846 | 4.87 | 4,317 | 5.47 | 4,586 | 5.87 | 5,255 | 6.73 | ||||||||||||||||||||||||||||||||||||||||||
| Commercial Banking: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and multifamily real estate | 1 | — | 15 | 0.05 | 40 | 0.13 | 170 | 0.53 | ||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | 86 | 0.15 | 305 | 0.55 | 99 | 0.18 | 242 | 0.44 | ||||||||||||||||||||||||||||||||||||||||||
| Total commercial banking | 87 | 0.10 | 320 | 0.37 | 139 | 0.16 | 412 | 0.47 | ||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 10,635 | 3.29 | $ | 11,347 | 3.51 | $ | 12,089 | 3.69 | $ | 13,040 | 3.98 | ||||||||||||||||||||||||||||||||||||||
(1)
Delinquency rates are calculated by dividing delinquency amounts by period-end loans held for investment for each specified loan category.
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Capital One Financial Corporation (COF) | |||||||
Table 22 presents our 30+ day delinquent loans held for investment, by aging and geography, as of March 31, 2025 and December 31, 2024.
Table 22:
Aging and Geography of 30+ Day Delinquent Loans
| March 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| (Dollars in millions) | Amount |
Rate
(1)
|
Amount |
Rate
(1)
|
||||||||||||||||||||||
| Delinquency status: | ||||||||||||||||||||||||||
| 30 – 59 days | $ | 4,775 | 1.48 | % | $ | 5,276 | 1.61 | % | ||||||||||||||||||
| 60 – 89 days | 2,663 | 0.82 | 3,138 | 0.96 | ||||||||||||||||||||||
|
>
90 days
|
3,909 | 1.21 | 4,626 | 1.41 | ||||||||||||||||||||||
| Total | $ | 11,347 | 3.51 | % | $ | 13,040 | 3.98 | % | ||||||||||||||||||
| Geographic region: | ||||||||||||||||||||||||||
| Domestic | $ | 11,026 | 3.41 | % | $ | 12,720 | 3.88 | % | ||||||||||||||||||
| International | 321 | 0.10 | 320 | 0.10 | ||||||||||||||||||||||
| Total | $ | 11,347 | 3.51 | % | $ | 13,040 | 3.98 | % | ||||||||||||||||||
(1)
Delinquency rates are calculated by dividing delinquency amounts by total period-end loans held for investment.
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Capital One Financial Corporation (COF) | |||||||
Table 23 summarizes loans that were 90+ days delinquent, in regards to interest or principal payments, and still accruing interest as of March 31, 2025 and December 31, 2024. These loans consist primarily of credit card accounts between 90 days and 179 days past due. As permitted by regulatory guidance issued by the FFIEC, we continue to accrue interest and fees on domestic credit card loans through the date of charge off, which is typically in the period the account becomes 180 days past due.
Table 23: 90+ Day Delinquent Loans Accruing Interest
| March 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| (Dollars in millions) | Amount |
Rate
(1)
|
Amount |
Rate
(1)
|
||||||||||||||||||||||
| Loan category: | ||||||||||||||||||||||||||
| Credit card | $ | 3,365 | 2.14 | % | $ | 3,711 | 2.28 | % | ||||||||||||||||||
| Commercial banking | — | — | 96 | 0.11 | ||||||||||||||||||||||
| Total | $ | 3,365 | 1.04 | $ | 3,807 | 1.16 | ||||||||||||||||||||
| Geographic region: | ||||||||||||||||||||||||||
| Domestic | $ | 3,224 | 1.02 | % | $ | 3,673 | 1.14 | % | ||||||||||||||||||
| International | 141 | 2.05 | 134 | 1.95 | ||||||||||||||||||||||
| Total | $ | 3,365 | 1.04 | $ | 3,807 | 1.16 | ||||||||||||||||||||
(1)
Delinquency rates are calculated by dividing delinquency amounts by period-end loans held for investment for each specified loan category.
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Capital One Financial Corporation (COF) | |||||||
Nonperforming Loans and Nonperforming Assets
Nonperforming loans include loans that have been placed on nonaccrual status. Nonperforming assets consist of nonperforming loans, repossessed assets and other foreclosed assets. See “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2024 Form 10-K for information on our policies for classifying loans as nonperforming for each of our loan categories.
Table 24 presents our nonperforming loans, by portfolio segment, and other nonperforming assets as of March 31, 2025 and December 31, 2024. We do not classify loans held for sale as nonperforming. We provide additional information on our credit quality metrics in “Business Segment Financial Performance.”
Table 24: Nonperforming Loans and Other Nonperforming Assets
(1)
| March 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| (Dollars in millions) | Amount | Rate | Amount | Rate | ||||||||||||||||||||||
|
Nonperforming loans held for investment:
(2)
|
||||||||||||||||||||||||||
| Credit Card: | ||||||||||||||||||||||||||
| International card businesses | $ | 9 | 0.13 | % | $ | 10 | 0.15 | % | ||||||||||||||||||
| Total credit card | 9 | 0.01 | 10 | 0.01 | ||||||||||||||||||||||
| Consumer Banking: | ||||||||||||||||||||||||||
| Auto | 561 | 0.72 | 750 | 0.98 | ||||||||||||||||||||||
| Retail banking | 23 | 1.89 | 25 | 1.94 | ||||||||||||||||||||||
| Total consumer banking | 584 | 0.74 | 775 | 0.99 | ||||||||||||||||||||||
| Commercial Banking: | ||||||||||||||||||||||||||
| Commercial and multifamily real estate | 393 | 1.23 | 509 | 1.60 | ||||||||||||||||||||||
| Commercial and industrial | 831 | 1.50 | 701 | 1.27 | ||||||||||||||||||||||
| Total commercial banking | 1,224 | 1.40 | 1,210 | 1.39 | ||||||||||||||||||||||
|
Total nonperforming loans held for investment
(3)
|
1,817 | 0.56 | 1,995 | 0.61 | ||||||||||||||||||||||
|
Other nonperforming assets
(4)
|
62 | 0.02 | 65 | 0.02 | ||||||||||||||||||||||
| Total nonperforming assets | $ | 1,879 | 0.58 | $ | 2,060 | 0.63 | ||||||||||||||||||||
(1)
We recognized interest income for loans classified as nonperforming of $3 million and $5 million in the first quarters of 2025 and 2024, respectively.
(2)
Nonperforming loan rates are calculated based on nonperforming loans for each category divided by period-end total loans held for investment for each respective category.
(3)
Excluding the impact of domestic credit card loans, nonperforming loans as a percentage of total loans held for investment was 1.05% and 1.16% as of March 31, 2025 and December 31, 2024, respectively.
(4)
The denominators used in calculating nonperforming asset rates consist of total loans held for investment and other nonperforming assets.
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Capital One Financial Corporation (COF) | |||||||
Net Charge-Offs
Net charge-offs consist of the amortized cost basis, excluding accrued interest, of loans held for investment that we determine to be uncollectible, net of recovered amounts. We charge off loans as a reduction to the allowance for credit losses when we determine the loan is uncollectible and record subsequent recoveries of previously charged off amounts as increases to the allowance for credit losses. Uncollectible finance charges and fees are reversed through revenue and certain fraud losses are recorded in other non-interest expense. Generally, costs to recover charged off loans are recorded as collection expenses as incurred and are included in our consolidated statements of income as a component of other non-interest expense. Our charge-off policy for loans varies based on the loan type. See “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2024 Form 10-K for information on our charge-off policy for each of our loan categories.
Table 25 presents our net charge-off amounts and rates, by portfolio segment, in the first quarters of 2025 and 2024.
Table 25: Net Charge-Offs (Recoveries)
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
| (Dollars in millions) | Amount |
Rate
(1)
|
Amount |
Rate
(1)
|
||||||||||||||||||||||
| Credit Card: | ||||||||||||||||||||||||||
|
Domestic credit card
(2)
|
$ | 2,314 | 6.19 | % | $ | 2,120 | 5.94 | % | ||||||||||||||||||
| International card businesses | 85 | 5.02 | 87 | 5.16 | ||||||||||||||||||||||
| Total credit card | 2,399 | 6.14 | 2,207 | 5.90 | ||||||||||||||||||||||
| Consumer Banking: | ||||||||||||||||||||||||||
| Auto | 299 | 1.55 | 367 | 1.99 | ||||||||||||||||||||||
| Retail banking | 14 | 4.75 | 13 | 4.04 | ||||||||||||||||||||||
| Total consumer banking | 313 | 1.60 | 380 | 2.03 | ||||||||||||||||||||||
| Commercial Banking: | ||||||||||||||||||||||||||
| Commercial and multifamily real estate | 7 | 0.09 | 18 | 0.20 | ||||||||||||||||||||||
| Commercial and industrial | 17 | 0.12 | 11 | 0.08 | ||||||||||||||||||||||
| Total commercial banking | 24 | 0.11 | 29 | 0.13 | ||||||||||||||||||||||
| Total net charge-offs | $ | 2,736 | 3.40 | $ | 2,616 | 3.33 | ||||||||||||||||||||
| Average loans held for investment | $ | 322,385 | $ | 314,614 | ||||||||||||||||||||||
(1)
Net charge-off rates are calculated by dividing annualized net charge-offs by average loans held for investment for the period for each loan category.
(2)
The Walmart Program Termination increased the Domestic Card net charge-off rate by 42 bps for the first quarter of 2025. Excluding this impact, the Domestic Card net charge-off rate would have been 5.77% for the first quarter of 2025.
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Capital One Financial Corporation (COF) | |||||||
Financial Difficulty Modifications to Borrowers
A financial difficulty modification (“FDM”) occurs when a modification in the form of principal forgiveness, interest rate reduction, an other-than-insignificant payment delay, a term extension or a combination of these modifications is granted to a borrower experiencing financial difficulty.
As part of our loss mitigation efforts, we may provide short-term (one to twelve months) or long-term (greater than twelve months) modifications to a borrower experiencing financial difficulty to improve long-term collectibility of the loan and to avoid the need for repossession or foreclosure of collateral.
We consider the impact of all loan modifications, including FDMs, when estimating the credit quality of our loan portfolio and establishing allowance levels. For our Commercial Banking customers, loan modifications are also considered in the assignment of an internal risk rating.
In our Credit Card business, the majority of our FDMs receive an interest rate reduction and are placed on a fixed payment plan not exceeding 60 months. If the customer does not comply with the modified payment terms, then the credit card loan agreement may revert to its original payment terms, generally resulting in any loan outstanding being reflected in the appropriate delinquency category and charged off in accordance with our standard charge-off policy.
In our Consumer Banking business, the majority of our FDMs receive an extension, an interest rate reduction, principal reduction, or a combination of these modifications.
In our Commercial Banking business, the majority of our FDMs receive an extension. A portion of FDMs receive an interest rate reduction, principal reduction, or a combination of modifications.
For more information on FDMs, see “Item 1. Financial Statements—Note 4—Loans.”
Allowance for Credit Losses and Reserve for Unfunded Lending Commitments
Our allowance for credit losses represents management’s current estimate of expected credit losses over the contractual terms of our loans held for investment as of each balance sheet date. Expected recoveries of amounts previously charged off or expected to be charged off are recognized within the allowance. We also estimate expected credit losses related to unfunded lending commitments that are not unconditionally cancellable. The provision for losses on unfunded lending commitments is included in the provision for credit losses in our consolidated statements of income and the related reserve for unfunded lending commitments is included in other liabilities on our consolidated balance sheets. We provide additional information on the methodologies and key assumptions used in determining our allowance for credit losses in “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2024 Form 10-K.
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Capital One Financial Corporation (COF) | |||||||
Table 26 presents changes in our allowance for credit losses and reserve for unfunded lending commitments for the first quarters of 2025 and 2024, and details by portfolio segment for the provision for credit losses, charge-offs and recoveries.
Table 26: Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity
| Three Months Ended March 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Credit Card | Consumer Banking | |||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Domestic Card | International Card Businesses | Total Credit Card | Auto | Retail Banking | Total Consumer Banking | Commercial Banking | Total | ||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2024 | $ | 12,494 | $ | 480 | $ | 12,974 | $ | 1,859 | $ | 25 | $ | 1,884 | $ | 1,400 | $ | 16,258 | ||||||||||||||||||||||||||||||||||
|
Charge-offs
|
(2,852) | (126) | (2,978) | (656) | (20) | (676) | (38) | (3,692) | ||||||||||||||||||||||||||||||||||||||||||
|
Recoveries
(1)
|
538 | 41 | 579 | 357 | 6 | 363 | 14 | 956 | ||||||||||||||||||||||||||||||||||||||||||
| Net charge-offs | (2,314) | (85) | (2,399) | (299) | (14) | (313) | (24) | (2,736) | ||||||||||||||||||||||||||||||||||||||||||
| Provision for credit losses | 1,856 | 70 | 1,926 | 285 | 16 | 301 | 141 | 2,368 | ||||||||||||||||||||||||||||||||||||||||||
|
Allowance build (release) for credit losses
|
(458) | (15) | (473) | (14) | 2 | (12) | 117 | (368) | ||||||||||||||||||||||||||||||||||||||||||
|
Other changes
(2)
|
— | 9 | 9 | — | — | — | — | 9 | ||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2025 | 12,036 | 474 | 12,510 | 1,845 | 27 | 1,872 | 1,517 | 15,899 | ||||||||||||||||||||||||||||||||||||||||||
| Reserve for unfunded lending commitments: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2024 | — | — | — | — | — | — | 143 | 143 | ||||||||||||||||||||||||||||||||||||||||||
| Provision (benefit) for losses on unfunded lending commitments | — | — | — | — | — | — | 1 | 1 | ||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2025 | — | — | — | — | — | — | 144 | 144 | ||||||||||||||||||||||||||||||||||||||||||
| Combined allowance and reserve as of March 31, 2025 | $ | 12,036 | $ | 474 | $ | 12,510 | $ | 1,845 | $ | 27 | $ | 1,872 | $ | 1,661 | $ | 16,043 | ||||||||||||||||||||||||||||||||||
| Three Months Ended March 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Credit Card | Consumer Banking | |||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Domestic Card | International Card Businesses | Total Credit Card | Auto | Retail Banking | Total Consumer Banking | Commercial Banking | Total | ||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | 11,261 | $ | 448 | $ | 11,709 | $ | 2,002 | $ | 40 | $ | 2,042 | $ | 1,545 | $ | 15,296 | ||||||||||||||||||||||||||||||||||
|
Charge-offs
|
(2,452) | (122) | (2,574) | (642) | (18) | (660) | (39) | (3,273) | ||||||||||||||||||||||||||||||||||||||||||
|
Recoveries
(1)
|
332 | 35 | 367 | 275 | 5 | 280 | 10 | 657 | ||||||||||||||||||||||||||||||||||||||||||
| Net charge-offs | (2,120) | (87) | (2,207) | (367) | (13) | (380) | (29) | (2,616) | ||||||||||||||||||||||||||||||||||||||||||
|
Provision for credit losses
|
2,157 | 102 | 2,259 | 422 | 4 | 426 | 22 | 2,707 | ||||||||||||||||||||||||||||||||||||||||||
| Allowance build (release) for credit losses | 37 | 15 | 52 | 55 | (9) | 46 | (7) | 91 | ||||||||||||||||||||||||||||||||||||||||||
|
Other changes
(2)
|
— | (7) | (7) | — | — | — | — | (7) | ||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2024 | 11,298 | 456 | 11,754 | 2,057 | 31 | 2,088 | 1,538 | 15,380 | ||||||||||||||||||||||||||||||||||||||||||
| Reserve for unfunded lending commitments: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | — | — | — | — | — | — | 158 | 158 | ||||||||||||||||||||||||||||||||||||||||||
| Provision (benefit) for losses on unfunded lending commitments | — | — | — | — | — | — | (24) | (24) | ||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2024 | — | — | — | — | — | — | 134 | 134 | ||||||||||||||||||||||||||||||||||||||||||
| Combined allowance and reserve as of March 31, 2024 | $ | 11,298 | $ | 456 | $ | 11,754 | $ | 2,057 | $ | 31 | $ | 2,088 | $ | 1,672 | $ | 15,514 | ||||||||||||||||||||||||||||||||||
(1)
The amount and timing of recoveries are impacted by our collection strategies, which are based on customer behavior and risk profile and include direct customer communications, repossession of collateral, the periodic sale of charged off loans as well as additional strategies, such as litigation.
(2)
Primarily represents foreign currency translation adjustments.
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50
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Capital One Financial Corporation (COF) | |||||||
| LIQUIDITY RISK PROFILE | ||
We manage our funding and liquidity risk in an integrated manner in support of the current and future cash flow needs of our business. We maintained liquidity reserves of $131.1 billion and $123.8 billion as of March 31, 2025 and December 31, 2024, respectively, as shown in Table 27 below. Included in liquidity reserves are cash and cash equivalents, investment securities and FHLB borrowing capacity secured by loans.
As of March 31, 2025, we had available issuance capacity
of $40.2 billion unde
r shelf registrations associated with our credit card and auto loan securitization programs. We also maintain a shelf registration that enables us to issue an indeterminate amount of senior or subordinated debt securities, preferred stock, depositary shares, common stock, purchase contracts, warrants and units. Our ability to issue under each shelf registration is subject to market conditions.
Finally,
as of March 31, 2025, we had access to available contingent liquidity sources totaling $100.7 billion
through the prepositioning of collateral, including a portion of the investment securities included in the liquidity reserves amount in the following table, at the Federal Reserve Discount Window, the Standing Repo Facility, FHLB and the Fixed Income Clearing Corporation—Government Securities Division (“FICC—GSD”).
As of March 31, 2025 and December 31, 2024, our funding sources totaled $409.2 billion and $408.3 billion, respectively,
primarily composed of consumer deposits
, as shown in “Consolidated Balance Sheets Analysis—Funding Sources Composition.”
Our liquidity reserves, borrowing capacity, contingent liquidity sources and total funding sources are all discussed in more detail in the following sections.
Table 27 below presents the composition of our liquidity reserves as of March 31, 2025 and December 31, 2024.
Table 27: Liquidity Reserves
| (Dollars in millions) | March 31, 2025 | December 31, 2024 | ||||||||||||
| Cash and cash equivalents | $ | 48,573 | $ | 43,230 | ||||||||||
|
Securities available for sale
(1)
|
84,362 | 83,013 | ||||||||||||
| FHLB borrowing capacity secured by loans | 4,530 | 4,279 | ||||||||||||
| Outstanding FHLB advances and letters of credit secured by loans and investment securities | (48) | (48) | ||||||||||||
| Other encumbrances of investment securities | (6,333) | (6,648) | ||||||||||||
| Total liquidity reserves | $ | 131,084 | $ | 123,826 | ||||||||||
(1)
Includes securities that have been pledged or otherwise encumbered within the below Liquidity Reserves line items “Outstanding FHLB advances and letters of credit secured by loans and investment securities” and “Other encumbrances of investment securities
.
”
Our liquidity reserves increased by $7.3 billion to $131.1 billion as of March 31, 2025 from December 31, 2024, primarily
due to increases in cash and cash equivalents.
In addition to these liquidity reserves, we maintain access to a diversified mix of funding sources as discussed in the “Borrowing Capacity” and “Funding” sections below. See “Part II—Item 7. MD&A—Risk Management” in our 2024 Form 10-K for additional information on our management of liquidity risk.
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Liquidity Coverage Ratio
We are subject to the final rules published by the Basel Committee and as implemented by the Federal Reserve and the OCC for the Basel III Liquidity Coverage Ratio (“LCR”) in the United States (the “LCR Rule”).
The LCR Rule requires each of the Company and the Bank to calculate its respective LCR daily. It also requires the Company to publicly disclose, on a quarterly basis, its LCR, certain related quantitative liquidity metrics, and a qualitative discussion of its LCR. Our average LCR during the first quarter of 2025 was 152%, which exceeded the LCR Rule requirement of 100%. The calculation and the underlying components are based on our interpretations, expectations and assumptions of relevant regulations, as well as interpretations provided by our regulators, and are subject to change based on changes to future regulations and interpretations. See “Part I—Item 1. Business—Supervision and Regulation” in our 2024 Form 10-K for additional information.
Net Stable Funding Ratio
We are subject to the final rules published by the Basel Committee and as implemented by the Federal Reserve and the OCC for the Basel III Net Stable Funding Ratio (“NSFR”) in the United States (the “NSFR Rule”). The NSFR Rule requires each of the Company and the Bank to maintain an NSFR of 100% on an ongoing basis. It also requires the Company to publicly disclose, on a semi-annual basis each second and fourth quarter, its NSFR, certain related quantitative liquidity metrics and qualitative discussion of its NSFR
. Our average NSFR for the first quarter of 2025 exceeded the NSFR Rule requirement of 100%.
The calculation and the underlying components are based on our interpretations, expectations and assumptions of the relevant regulations, as well as interpretations provided by our regulators, and are subject to change based on changes to future regulations and interpretations. See “Part I—Item 1. Business—Supervision and Regulation” in our 2024 Form 10-K for additional information.
Borrowing Capacity
We maintain a shelf registration with the U.S. Securities and Exchange Commission (“SEC”) so that we may periodically offer and sell an indeterminate aggregate amount of senior or subordinated debt securities, preferred stock, depositary shares, common stock, purchase contracts, warrants and units. There is no limit under this shelf registration to the amount or number of such securities that we m
ay offer and sell, subject to market conditions. In addition, we also maintain a shelf registration associated with our credit card securitization trust that allows us to periodically offer and sell up to $30.0 billion of securitized debt obligations and a shelf registration associated with our auto loan securitization trusts that allows us to periodically offer and sell up to $25.0 billion of securitized debt obligations, each as of March 31, 2025. The registered amounts under these shelf registration statements are subject to continuing review and change in the future, including as part of the routine renewal process. As of March 31, 2025, we had $21.6 billion and $18.6 billion of available issuance capacity in our credit card and auto loan securitization programs, respectively.
In addition to our issuance capacity under the shelf registration statements, we also have collateral pledged to support our access to FHLB advances, the Federal Reserve Discount Window,
the Standing Repo Facility
and FICC—GSD general collateral financing repurchase agreement service. For each of these programs, the ability to borrow utilizing these sources is dependent on meeting the respective membership requirements. Our borrowing capacity in each program is a function of the collateral the Bank has posted with each counterparty, including any respective haircuts applied to that collateral.
As of March 31, 2025, we pledged loans and securities to the FHLB to secure a maximum borrowing capacity of $34.9 billion, of which $48 million was used. Our FHLB membership is supported by our investment in FHLB stock of $18 million
as of both March 31, 2025 and December 31, 2024.
As a member of FICC—GSD, we have $21.4 billion of readily available borrowing capacity secured by securities from our investment portfolio as of March 31, 2025. Our FICC—GSD membership is supported by our investment in Depository Trust and Clearing Corporation (“DTCC”) common stock of $488 thousand and $412 thousand as of March 31, 2025 and December 31, 2024, respectively.
As of March 31, 2025, we pledged loans to secure a borrowing capacity of $44.4 billion under the Federal Reserve Discount Window. Our membership with the Federal Reserve is supported by our investment in Federal Reserve stock, which totaled
$1.3 billion
as of both March 31, 2025 and December 31, 2024.
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Deposits
Table 28 provides a comparison of the average balances, interest expense and average deposits interest rates for the three months ended March 31, 2025 and 2024.
Table 28: Deposits Composition and Average Deposits Interest Rates
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||||||||||||||
| (Dollars in millions) |
Average
Balance |
Interest
Expense |
Average
Deposits Interest Rate |
Average
Balance |
Interest
Expense |
Average
Deposits Interest Rate |
||||||||||||||||||||||||||||||||
|
Interest-bearing checking accounts
(1)
|
$ | 36,285 | $ | 119 | 1.31 | % | $ | 35,707 | $ | 148 | 1.66 | % | ||||||||||||||||||||||||||
|
Saving deposits
(2)
|
227,780 | 1,768 | 3.11 | 206,621 | 1,721 | 3.33 | ||||||||||||||||||||||||||||||||
| Time deposits | 73,775 | 828 | 4.49 | 76,122 | 943 | 4.95 | ||||||||||||||||||||||||||||||||
| Total interest-bearing deposits | $ | 337,840 | $ | 2,715 | 3.22 | $ | 318,450 | $ | 2,812 | 3.53 | ||||||||||||||||||||||||||||
(1)
Includes negotiable order of withdrawal accounts.
(2)
Includes money market deposit accounts.
The FDIC limits the acceptance of brokered deposits to well-capitalized insured depository institutions and, with a waiver from the FDIC, to adequately-capitalized institution
s. The Bank was well-capitalized, as defined under the federal banking regulatory guidelines, as of both March 31, 2025
and December 31, 2024. See “Part I—Item 1. Business—Supervision and Regulation” in our 2024 Form 10-K for additional information. We provide additional information on the composition of deposits in “Consolidated Balance Sheets Analysis—
Table 7
: Funding Sources Composition” and in “Part I—Item 1. Financial Statements—Note 8—Deposits and Borrowings.”
Funding
Our primary source of funding comes from insured deposits in our Consumer Banking business, as they are a relatively stable and lower cost source of funding. In addition to deposits, we raise funding through the issuance of senior and subordinated notes and securitized debt obligations, federal funds purchased, securities loaned or sold under agreements to repurchase and FHLB advances secured by certain portions of our loan and securities portfolios. A key objective in our use of these markets is to maintain access to a diversified mix of wholesale funding sources. See “Consolidated Balance Sheets Analysis—
Table 7:
Funding Sources Composition” for additional information on our primary sources of funding.
In the normal course of business, we enter into various contractual obligations that may require future cash payments that affect our short-term and long-term liquidity and capital resource needs. Our future cash outflows primarily relate to deposits, borrowings and operating leases. The actual timing and amounts of future cash payments may vary over time due to a number of factors, such as early debt redemptions and changes in deposit balances.
Short-Term Borrowings and Long-Term Debt
We access the capital markets to meet our funding needs through the issuance of senior and subordinated notes, securitized debt obligations and federal funds purchased and securities loaned or sold under agreements to repurchase. In addition, we have access to short-term and long-term FHLB advances secured by certain investment securities, multifamily real estate loans and commercial real estate loans.
Our short-term borrowings, which include those borrowings with an original contractual maturity of one year or less, typically consist of federal funds purchased, securities loaned or sold under agreements to repurchase or short-term FHLB advances, and do not include the current portion of long-term debt. Our short-term borrowings
increased
by
$11 million
to
$573 million as of March 31, 2025 from December 31, 2024 driven
by an increase in repurchase agreements.
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Our long-term funding, which primarily consists of securitized debt obligations and senior and subordinated notes,
decreased
by
$3.8 billion
to
$41.2 billion
as of March 31, 2025 from December 31, 2024
primarily driven by maturities in securitized debt obligations and unsecured senior debt, partially offset by issuances of subordinated debt. We provide more information on our securitization activit
y in “Part I—Item 1. Financial Statements—Note 6—Variable Interest Entities and Securitizations” and on our borrowings in “Part I—Item 1. Financial Statements—Note 8—Deposits and Borrowings.”
The following table summarizes issuances of securitized debt obligations, senior and subordinated notes, and their respective maturities or redemptions for the three months ended March 31, 2025 and 2024.
Table 29: Long-Term Debt Funding Activities
| Issuances | Maturities/Redemptions | |||||||||||||||||||||||||
| Three Months Ended March 31, | Three Months Ended March 31, | |||||||||||||||||||||||||
| (Dollars in millions) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Securitized debt obligations | $ | — | $ | — | $ | 2,626 | $ | 367 | ||||||||||||||||||
| Senior and subordinated notes | 1,750 | 2,000 | 3,447 | 750 | ||||||||||||||||||||||
| Total | $ | 1,750 | $ | 2,000 | $ | 6,073 | $ | 1,117 | ||||||||||||||||||
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Credit Ratings
Our credit ratings impact our ability to access capital markets and our borrowing costs. For more information, see “Part I—Item 1A. Risk Factors” under the heading in our
2024
Form 10-K
“A downgrade in our credit ratings could significantly impact our liquidity, funding costs and access to the capital markets.”
Table 30 provides a summary of the credit ratings for the senior unsecured long-term debt of Capital One Financial Corporation and CONA as of March 31, 2025 and December 31, 2024.
Table 30: Senior Unsecured Long-Term Debt Credit Ratings
| March 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||
|
Capital One
Financial Corporation |
CONA |
Capital One
Financial Corporation |
CONA | |||||||||||||||||||||||
| Moody’s | Baa1 | A3 | Baa1 | A3 | ||||||||||||||||||||||
| S&P | BBB | BBB+ | BBB | BBB+ | ||||||||||||||||||||||
| Fitch | A- | A | A- | A | ||||||||||||||||||||||
As of April 25, 2025 Standard & Poor’s (“S&P”) and Fitch Ratings (“Fitch”) have our credit ratings on a stable outlook. Following the Company’s February 19, 2024 announcement of the Merger Agreement, Moody’s Investors Service (“Moody’s”) placed our credit ratings on review for a downgrade. Moody’s said its review for downgrade may continue until the Transaction has been completed.
Other Commitments
In the normal course of business, we enter into other contractual obligations that may require future cash payments that affect our short-term and long-term liquidity and capital resource needs. Our other contractual obligations include lending commitments, leases, purchase obligations and other contractual arrangements.
As of March 31, 2025 and December 31, 2024, our total unfunded lending commitments we
re $471.7 billion a
nd $458.1 billion, respectively, consisting of credit card lines, loan commitments to customers of both our Commercial Banking and Consumer Banking businesses, as well as standby and commercial letters of credit. We generally manage the potential risk of unfunded lending commitments by limiting the total amount of arrangements, monitoring the size and maturity structure of these portfolios and applying the same credit standards for all of our credit activities. For additional information, refer to “Part I—Item 1. Financial Statements—Note 14—Commitments, Contingencies, Guarantees and Others” in this Report.
Our primary involvement with leases is in the capacity as a lessee where we lease premises to support our business. The majority of our leases are operating leases of office space, retail bank branches and cafés. Our operating leases expire at various dates through 2071, although some have extension or termination options, and we assess the likelihood of exercising such options. If it is reasonably certain that we will exercise the options, then we include the impact in the measurement of our right-of-use assets and lease liabilities. As of both March 31, 2025 and December 31, 2024, we ha
d $1.5 billion
in aggregate operating lease obligations. We provide more information on our lease activity in “Part II—Item 8. Financial Statements and Supplementary Data—Note 8—Premises, Equipment and Leases” in our 2024 Form 10-K.
We have enforceable and legally binding purchase obligations for goods and services such as data management, media and other software and third-party services. As of March 31, 2025 and December 31, 2024, we had $3.3 billion and $4.0 billion, respectively, in aggregate purchase obligations.
We also enter into various contractual arrangements that may require future cash payments, including short-term obligations such as trade payables, commitments to fund certain equity investments, obligations for pension and post-retirement benefit plans, and representation and warranty reserves. These arrangements are discussed in more detail in “Part I—Item 1. Financial Statements—Note 6—Variable Interest Entities and Securitizations,” and “Part I—Item 1. Financial Statements—Note 14—Commitments, Contingencies, Guarantees and Others” in this Report and “Part II—Item 8. Financial Statements and Supplementary Data—Note 15—Employee Benefit Plans” in our 2024 Form 10-K.
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| MARKET RISK PROFILE | ||
Our primary market risk exposures include interest rate risk, foreign exchange risk and commodity pricing risk. We are exposed to market risk primarily from the following operations and activities:
•
Traditional banking activities of deposit gathering and lending;
•
Asset/liability management activities including the management of investment securities, short-term and long-term borrowings and derivatives;
•
Foreign operations in the U.K. and Canada within our Credit Card business; and
•
Customer accommodation activities within our Commercial Banking business.
We have enterprise-wide risk management policies and limits, approved by our Board of Directors, which govern our market risk management activities. Our objective is to manage our exposure to market risk in accordance with these policies and limits based on prevailing market conditions and long-term expectations. We provide additional information below about our primary sources of market risk, our market risk management strategies and the measures that we use to evaluate these exposures.
Interest Rate Risk
Interest rate risk represents exposure to financial instruments whose values vary with the level or volatility of interest rates. We are exposed to interest rate risk primarily from the differences in the timing between the maturities or repricing of assets and liabilities. We manage our interest rate risk primarily by entering into interest rate swaps and other derivative instruments which could include caps, floors, options, futures and forward contracts.
We use various industry standard market risk measurement techniques and analyses to measure, assess and manage the impact of changes in interest rates on our net interest income and our economic value of equity and changes in foreign exchange rates on our non-dollar-denominated funding and non-dollar equity investments in foreign operations.
Net Interest Income Sensitivity
Our net interest income sensitivity measure estimates the impact of hypothetical instantaneous movements in interest rates relative to our baseline interest rate forecast on our projected 12-month net interest income. Net interest income sensitivity metrics are derived using the following key assumptions:
•
As of March 31, 2025, our metrics assume a market implied baseline interest rate projection for the upper limit of the Federal Funds Target Rate of 3.75% and 3.50% at December 31, 2025 and 2026, respectively.
•
In addition to our existing assets, liabilities and derivative positions, we incorporate expected future business growth assumptions. These assumptions include loan and deposit growth, pricing, plans for projected changes in our funding mix and our securities and cash position from our internal corporate outlook that is used in our financial planning process.
•
The analysis assumes this forecast of expected future business growth remains unchanged between the baseline rate forecast and rate shock scenarios, including no changes to our interest rate risk management activities like securities and hedging actions.
•
We incorporate the dynamic nature of deposit re-pricing, which includes pricing lags and changes in deposit beta and mix as interest rates change, and the prepayment sensitivity of our mortgage securities to the level of interest rates. In our models,
deposit betas and mortgage security prepayments vary dynamically based on the level of interest rates and by product type. In the contexts used in this section, “beta” refers to the change in deposit rate paid relative to the change in the federal funds rate.
•
In instances where an interest rate scenario would result in a rate less th
an 0%, we assume a rate of 0% for
that scenario. This assumption applies only to jurisdictions that do not have a practice of employing negative policy rates. In jurisdictions that have negative policy rates, we do not floor interest rates a
t 0%.
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At the current level of interest rates, our projected 12-month net interest income is expected to increase in higher rate scenarios and decrease in lower rate scenarios. The decrease in lower rate scenarios is driven by lower interest income from our assets, including floating rate credit card and commercial loans, being partially offset by lower interest expense from our deposits and other liabilities, net of our interest rate hedges. Our 12-month net interest income sensitivity was largely unchanged as compared to December 31, 2024.
Economic Value of Equity Sensitivity
Our economic value of equity sensitivity measure estimates the impact of hypothetical instantaneous movements in interest rates on the net present value of our assets and liabilities, including derivative exposures. Economic value of equity sensitivity metrics are derived using the following key assumptions:
•
As of March 31, 2025, our metrics assume a market implied baseline interest rate projection for the upper limit of the Federal Funds Target Rate of 3.75% and 3.50% at December 31, 2025 and 2026, respectively.
•
The analysis includes only existing assets, liabilities and derivative positions and does not incorporate business growth assumptions or projected balance sheet changes.
•
Similar to our net interest income sensitivity measure, we incorporate the dynamic nature of deposit repricing and attrition, which includes pricing lags and changes in deposit beta as interest rates change and the prepayment sensitivity of our mortgage securities to the level of interest rates. In our models, deposit betas and mortgage security prepayments vary dynamically based on the level of interest rates and by product type.
•
Balance attrition assumptions for loans, including credit card, auto and commercial loans, remain unchanged between the baseline interest rate forecast and interest rate shock scenarios as those loans are mainly floating rate or shorter duration fixed rate loans and hence paydowns have a low sensitivity to the level of interest rates.
•
For assets and liabilities with embedded optionality, such as mortgage securities and deposit balances, we utilize Monte Carlo simulations to assess economic value with industry-standard term structure modeling of interest rates.
•
Our calculations of net present value apply appropriate spreads over the benchmark yield curve for select assets and liabilities to capture the inherent risks (including credit risk) to discount expected interest and principal cash flows.
•
In instances where an interest rate scenario would result in a rate less than 0%, we assume a rate of 0% for that scenario. This assumption applies only to jurisdictions that do not have a practice of employing negative policy rates.
In jurisdictions that have negative policy rates, we do not floor interest rates at 0%.
Our current economic value of equity sensitivity profile demonstrates that our economic value of equity decreases in higher interest rate scenarios and increases in lower interest rate scenarios. The decrease in higher rate scenarios is due to the declines in the projected value of our fixed rate assets being only partially offset by corresponding movements in the projected value of our deposits and other liabilities. The pace of economic value of equity decrease is larger for the +200 bps scenario as our deposits are assumed to reprice more rapidly in higher interest rate environments. Our current economic value of equity sensitivity was largely unchanged for higher rate scenarios and decreased modestly for lower rate scenarios as compared to December 31, 2024.
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Table 31 shows the estimated percentage impact on our projected baseline net interest income and our current economic value of equity calculated under the methodology described above as of March 31, 2025 and December 31, 2024.
Table 31: Interest Rate Sensitivity Analysis
| March 31, 2025 | December 31, 2024 | |||||||||||||
| Estimated impact on projected baseline net interest income: | ||||||||||||||
| +200 basis points | 1.5 | % | 1.3 | % | ||||||||||
| +100 basis points | 0.9 | 0.8 | ||||||||||||
| +50 basis points | 0.5 | 0.4 | ||||||||||||
| –50 basis points | (0.4) | (0.4) | ||||||||||||
| –100 basis points | (0.9) | (0.8) | ||||||||||||
| –200 basis points | (2.1) | (1.9) | ||||||||||||
| Estimated impact on economic value of equity: | ||||||||||||||
| +200 basis points | (6.3) | (6.3) | ||||||||||||
| +100 basis points | (2.9) | (3.0) | ||||||||||||
| +50 basis points | (1.4) | (1.4) | ||||||||||||
| –50 basis points | 1.2 | 1.3 | ||||||||||||
| –100 basis points | 2.2 | 2.5 | ||||||||||||
| –200 basis points | 3.0 | 3.9 | ||||||||||||
In addition to these industry standard measures, we also consider the potential impact of alternative interest rate scenarios, such as larger rate shocks, higher than +/- 200 bps, as well as steepening and flattening yield curve scenarios in our internal interest rate risk management decisions. We also regularly review the sensitivity of our interest rate risk metrics to changes in our key modeling assumptions, such as our loan and deposit balance forecasts, mortgage prepayments and deposit repricing.
Limitations of Market Risk Measures
The interest rate risk models that we use in deriving these measures incorporate contractual information, internally-developed assumptions and proprietary modeling methodologies, which project borrower and depositor behavior patterns in certain interest rate environments. Other market inputs, such as interest rates, market prices and interest rate volatility, are also critical components of our interest rate risk measures. We regularly evaluate, update and enhance these assumptions, models and analytical tools as we believe appropriate to reflect our best assessment of the market environment and the expected behavior patterns of our existing assets and liabilities.
There are inherent limitations in any methodology used to estimate the exposure to changes in market interest rates. The sensitivity analysis described above contemplates only certain movements in interest rates and is performed at a particular point in time based on our existing balance sheet and, in some cases, expected future business growth and funding mix assumptions. The strategic actions that management may take to manage our balance sheet may differ significantly from our projections, which could cause our actual earnings and economic value of equity sensitivities to differ substantially from the above sensitivity analysis.
For further information on our interest rate exposures, see “Part I—Item 1. Financial Statements—Note 9—Derivative Instruments and Hedging Activities.”
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Foreign Exchange Risk
Foreign exchange risk represents exposure to changes in the values of current holdings and future cash flows denominated in other currencies. We are exposed to foreign exchange risk primarily from the intercompany funding denominated in pound sterling (“GBP”) and the Canadian dollar (“CAD”) that we provide to our businesses in the U.K. and Canada and net equity investments in those businesses. We are also exposed to foreign exchange risk due to changes in the dollar-denominated value of future earnings and cash flows from our foreign operations and from our Euro (“EUR”)-denominated borrowings.
Our non-dollar denominated intercompany funding and EUR-denominated borrowings expose our earnings to foreign exchange transaction risk. We manage these transaction risks by using forward foreign currency derivatives and cross-currency swaps to hedge our exposures. We measure our foreign exchange transaction risk exposures by applying a 1% U.S. dollar appreciation shock against the value of the non-dollar denominated intercompany funding and EUR-denominated borrowings and their related hedges, which shows the impact to our earnings from foreign exchange risk. Our nominal intercompany funding outstanding was 1.2 billion GBP and 1.3 billion GBP as of March 31, 2025 and December 31, 2024, respectively, and 1.2 billion CAD and 1.4 billion CAD as of March 31, 2025 and December 31, 2024, respectively. Our nominal EUR-denominated borrowings outstanding were 507 million EUR and 505 million EUR as of March 31, 2025 and December 31, 2024, respectively.
Our non-dollar equity investments in foreign operations expose our balance sheet and capital ratios to translation risk in AOCI. We manage our translation risk by entering into foreign currency derivatives designated as net investment hedges. We measure these exposures by applying a 30% U.S. dollar appreciation shock, which we believe approximates a significant adverse shock over a one-year time horizon, against the value of the equity invested in our foreign operations net of related net investment hedges where applicable. Our gross equity exposures in our U.K. and Canadian operations were 2.3 billion GBP and 2.2 billion GBP as of March 31, 2025 and December 31, 2024, respectively, and 2.6 billion CAD as of both March 31, 2025 and December 31, 2024.
As a result of our derivative management activities, we believe our net exposure to foreign exchange risk is minimal. For m
ore information, see “
Item 1. Financial Statements—Note 9—Derivative Instruments and Hedging Activities” and “Item 1. Financial Statements—Note 10—Stockholders’ Equity.”
Risk Related to Customer Accommodation Derivatives
We offer interest rate, commodity and foreign currency derivatives as an accommodation to our customers within our Commercial Banking business. We offset the majority of the market risk of these customer accommodation derivatives by entering into offsetting derivatives transactions with other counterparties. We use value-at-risk (“VaR”) as the primary method to measure the market risk in our customer accommodation derivative activities on a daily basis. VaR is a statistical risk measure used to estimate the potential loss from movements observed in the recent market environment. We employ a historical simulation approach using the most recent 500 business days and use a 99% confidence level and a holding period of one business day. As a result of offsetting our customer exposures with other counterparties, we believe that our net exposure to market risk in our customer accommodation derivatives is minimal. For further information on our risk related to customer accommodation derivatives, see “Item 1. Financial Statements—Note 9—Derivative Instruments and Hedging Activities.”
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Capital One Financial Corporation (COF) | |||||||
| SUPERVISION AND REGULATION | ||
Regulation of Consumer Lending Activities Update
In March 2024, the Consumer Financial Protection Bureau (“CFPB”) issued a final rule amending Regulation Z that, if it went into effect as issued, would significantly lower the safe harbor amount for past due fees that large credit card issuers, including the Bank, can charge on consumer credit card accounts. In April 2025, the final rule was vacated by the U.S. District Court for the Northern District of Texas.
Capital and Stress Testing Regulation Update
In April 2025, the Federal Reserve issued a notice of proposed rulemaking to amend its capital plan rule and stress capital buffer framework applicable to large banking organizations, including the Company. The proposal would average stress test results over two consecutive years for purposes of determining the stress capital buffer requirement. The proposal would also modify the annual effective date of the stress capital buffer requirement from October 1 to January 1.
We provide additional information on our Supervision and Regulation in our 2024 Form 10-K under “Part I—Item 1. Business—Supervision and Regulation.”
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Capital One Financial Corporation (COF) | |||||||
| FORWARD-LOOKING STATEMENTS | ||
From time to time, we have made and will make forward-looking statements, including those that discuss, among other things: strategies, goals, outlook or other non-historical matters; projections, revenues, income, returns, expenses, assets, liabilities, capital and liquidity measures, capital allocation plans, accruals for claims in litigation and for other claims against us; earnings per share, efficiency ratio, operating efficiency ratio or other financial measures for us; future financial and operating results; our plans, objectives, expectations and intentions; and the assumptions that underlie these matters.
To the extent that any such information is forward-looking, it is intended to fit within the safe harbor for forward-looking information provided by the Private Securities Litigation Reform Act of 1995.
Forward-looking statements often use words such as “will,” “anticipate,” “target,” “expect,” “think,” “estimate,” “intend,” “plan,” “goal,” “believe,” “forecast,” “outlook” or other words of similar meaning. Any forward-looking statements made by us or on our behalf speak only as of the date they are made or as of the date indicated, and we do not undertake any obligation to update forward-looking statements as a result of new information, future events or otherwise. For additional information on factors that could materially influence forward-looking statements included in this Report, see the risk factors set forth under “Part I—Item 1A. Risk Factors” in our 2024 Form 10-K. You should carefully consider the factors discussed below, and in our Risk Factors or other disclosures, in evaluating these forward-looking statements.
Numerous factors could cause our actual results to differ materially from those described in such forward-looking statements, including, among other things:
•
risks relating to the pending Transaction, including the risk that the cost savings and any revenue synergies and other anticipated benefits from the Transaction may not be fully realized or may take longer than anticipated to be realized; disruption to our business and to Discover’s business as a result of the announcement and pendency of the Transaction; the risk that the integration of Discover’s business and operations into ours, including into our compliance management program, will be materially delayed or will be more costly or difficult than expected, or that we are otherwise unable to successfully integrate Discover’s business into ours, including as a result of unexpected factors or events; reputational risk and the reaction of customers, suppliers, employees or other business partners of ours or of Discover to the Transaction; the failure of the remaining closing conditions in the Merger Agreement to be satisfied, or any unexpected delay in completing the Transaction or the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement; the dilution caused by our issuance of additional shares of our common stock in connection with the Transaction; the possibility that the Transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; risks related to management and oversight of our expanded business and operations following the Transaction due to the increased size and complexity of our business; the possibility of increased scrutiny by, and/or additional regulatory requirements of, governmental authorities as a result of the Transaction or the size, scope and complexity of our business operations following the Transaction; the outcome of any legal or regulatory proceedings that may be currently pending or later instituted against us (before or after the Transaction) or against Discover; the risk that expectations regarding the timing, completion and accounting and tax treatments of the Transaction are not met; the risk that any announcements relating to the Transaction could have adverse effects on the market price of our common stock; certain restrictions during the pendency of the Transaction; the diversion of management’s attention from ongoing business operations and opportunities; the risk that revenues following the Transaction may be lower than expected and/or the risk that certain expenses, such as the provision for credit losses, of Discover or the surviving entity may be greater than expected; our and Discover’s success in executing their respective business plans and strategies and managing the risks involved in the foregoing; effects of the announcement, pendency or completion of the Transaction on our or Discover’s ability to retain customers and retain and hire key personnel and maintain relationships with our and Discover’s suppliers and other business partners, and on our and Discover’s operating results and businesses generally; any other factors that may affect our future results or the future results of Discover; and other actions of the Federal Reserve and legislative and regulatory actions and reforms;
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•
changes and instability in the macroeconomic environment, resulting from factors that include, but are not limited to monetary, fiscal and trade policy actions such as tariffs, geopolitical conflicts or instability, such as the war between Ukraine and Russia and the conflict in the Middle East, labor shortages, government shutdowns, inflation and deflation, potential recessions, technology-driven disruption of certain industries, lower demand for credit, changes in deposit practices and payment patterns;
•
increases in credit losses and delinquencies and the impact of incorrectly estimated expected losses, which could result in inadequate reserves;
•
compliance with new and existing domestic and foreign laws, regulations and regulatory expectations, which may change over time including as a result of the political and policy goals of elected officials;
•
limitations on our ability to receive dividends from our subsidiaries;
•
our ability to maintain adequate capital or liquidity levels or to comply with revised capital or liquidity requirements, which could have a negative impact on our financial results and our ability to return capital to our stockholders;
•
the use, reliability, and accuracy of the models, artificial intelligence, and data on which we rely;
•
our ability to manage fraudulent activity risks;
•
increased costs, reductions in revenue, reputational damage, legal exposure and business disruptions that can result from a cyber-attack or other security incident on us or third parties (including their supply chains) with which we conduct business, including an incident that results in the theft, loss, manipulation or misuse of information, or the disabling of systems and access to information critical to business operations;
•
developments, changes or actions relating to any litigation, governmental investigation or regulatory enforcement action or matter involving us;
•
the amount and rate of deposit growth and changes in deposit costs;
•
our ability to execute on our strategic initiatives and operational plans;
•
our response to competitive pressures;
•
legislation, regulation and merchants’ efforts to reduce the interchange fees charged by credit and debit card networks to facilitate card transactions, and by legislation and regulation impacting such fees;
•
our success in integrating acquired businesses and loan portfolios, and our ability to realize anticipated benefits from announced transactions and strategic partnerships;
•
our ability to develop, operate, and adapt our operational, technology and organizational infrastructure suitable for the nature of our business;
•
the success of our marketing efforts in attracting and retaining customers;
•
our risk management strategies;
•
changes in the reputation of, or expectations regarding, us or the financial services industry with respect to practices, products, services or financial condition;
•
fluctuations in interest rates;
•
our ability to maintain adequate sources of funding and liquidity to operate our business;
•
our ability to attract, develop, retain and motivate key senior leaders and skilled employees;
•
climate change manifesting as physical or transition risks;
•
our assumptions or estimates in our financial statements;
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•
the soundness of other financial institutions and other third parties, actual or perceived;
•
our ability to invest successfully in and introduce digital and other technological developments across all our businesses;
•
a downgrade in our credit ratings;
•
our ability to manage risks from catastrophic events;
•
compliance with applicable laws and regulations related to privacy, data protection and data security, in addition to compliance with our own privacy policies and contractual obligations to third parties;
•
our ability to protect our intellectual property rights; and
•
other risk factors identified from time to time in our public disclosures, including in the reports that we file with the SEC.
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| SUPPLEMENTAL TABLE | ||
Reconciliation of Non-GAAP Measures
The following non-GAAP measure consists of our adjusted results that we believe helps investors and users of our financial information understand the effect of adjusting items on our selected reported results; however, it may not be comparable to similarly-titled measures reported by other companies. This adjusted result provides alternate measurements of our operating performance, both for the current period and trends across multiple periods. The following table presents reconciliations of the non-GAAP measure to the applicable amounts measured in accordance with U.S. GAAP. The non-GAAP measure below should not be viewed as a substitute for reported results determined in accordance with U.S. GAAP.
Table
A
—Reconciliation of Non-GAAP Measures
| (Dollars in millions, except as noted) | March 31, 2025 | March 31, 2024 | ||||||||||||
| Adjusted operating efficiency ratio: | ||||||||||||||
|
Operating expense (U.S. GAAP)
|
$ | 4,700 | $ | 4,127 | ||||||||||
| Legal reserve activities | (198) | — | ||||||||||||
| Discover integration expenses | (110) | — | ||||||||||||
| FDIC special assessment | — | (42) | ||||||||||||
| Adjusted operating expense (non-GAAP) | $ | 4,392 | $ | 4,085 | ||||||||||
| Adjusted net revenue (non-GAAP) | $ | 10,000 | $ | 9,402 | ||||||||||
|
Operating efficiency ratio (U.S. GAAP)
|
47.00% | 43.89% | ||||||||||||
| Impact of adjustments noted above | (308) | bps | (44) | bps | ||||||||||
| Adjusted operating efficiency ratio (non-GAAP) | 43.92% | 43.45% | ||||||||||||
The following non-GAAP measures consist of TCE, tangible assets and metrics computed using these amounts, which include tangible book value per common share, return on average tangible assets, return on average TCE and TCE ratio. We consider these metrics to be key financial performance measures that management uses in assessing capital adequacy and the level of returns generated. While these non-GAAP measures are widely used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies, they may not be comparable to similarly-titled measures reported by other companies. The following table presents reconciliations of these non-GAAP measures to the applicable amounts measured in accordance with U.S. GAAP. These non-GAAP measures should not be viewed as a substitute for reported results determined in accordance with U.S. GAAP.
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| Three Months Ended March 31, | ||||||||||||||
| (Dollars in millions, except as noted) | 2025 | 2024 | ||||||||||||
|
Tangible Common Equity (Average):
|
||||||||||||||
| Stockholders’ equity | $ | 62,240 | $ | 57,998 | ||||||||||
|
Goodwill and other intangible assets
(1)
|
(15,149) | (15,280) | ||||||||||||
| Noncumulative perpetual preferred stock | (4,845) | (4,845) | ||||||||||||
|
Tangible common equity
|
$ | 42,246 | $ | 37,873 | ||||||||||
|
Return on Tangible Common Equity (Average):
|
||||||||||||||
| Net income available to common stockholders | $ | 1,325 | $ | 1,200 | ||||||||||
|
Tangible common equity (Average)
|
42,246 | 37,873 | ||||||||||||
|
Return on tangible common equity
(2)
|
12.55% | 12.67% | ||||||||||||
|
Tangible Assets (Average):
|
||||||||||||||
| Total assets | $ | 491,817 | $ | 474,995 | ||||||||||
|
Goodwill and other intangible assets
(1)
|
(15,149) | (15,280) | ||||||||||||
|
Tangible assets
|
$ | 476,668 | $ | 459,715 | ||||||||||
|
Return on Tangible Assets (Average):
|
||||||||||||||
| Net income | $ | 1,404 | $ | 1,280 | ||||||||||
|
Tangible assets (Average)
|
476,668 | 459,715 | ||||||||||||
|
Return on tangible assets
(3)
|
1.18% | 1.11% | ||||||||||||
| (Dollars in millions, except as noted) | March 31, 2025 | March 31, 2024 | December 31, 2024 | |||||||||||||||||
| Tangible Common Equity (Period-End): | ||||||||||||||||||||
| Stockholders’ equity | $ | 63,542 | $ | 57,801 | $ | 60,784 | ||||||||||||||
|
Goodwill and other intangible assets
(1)
|
(15,139) | (15,257) | (15,157) | |||||||||||||||||
| Noncumulative perpetual preferred stock | (4,845) | (4,845) | (4,845) | |||||||||||||||||
| Tangible common equity | $ | 43,558 | $ | 37,699 | $ | 40,782 | ||||||||||||||
| Tangible Assets (Period-End): | ||||||||||||||||||||
| Total assets | $ | 493,604 | $ | 481,720 | $ | 490,144 | ||||||||||||||
|
Goodwill and other intangible assets
(1)
|
(15,139) | (15,257) | (15,157) | |||||||||||||||||
| Tangible assets | $ | 478,465 | $ | 466,463 | $ | 474,987 | ||||||||||||||
|
Tangible Book Value per Common Share:
|
||||||||||||||||||||
|
Tangible common equity (Period-end)
|
$ | 43,558 | $ | 37,699 | $ | 40,782 | ||||||||||||||
| Outstanding Common Shares | 383.0 | 382.1 | 381.2 | |||||||||||||||||
|
Tangible book value per common share
(4)
|
$ | 113.74 | $ | 98.67 | $ | 106.97 | ||||||||||||||
| TCE Ratio | ||||||||||||||||||||
| Tangible common equity (Period-end) | $ | 43,558 | $ | 37,699 | $ | 40,782 | ||||||||||||||
| Tangible Assets (Period-end) | 478,465 | 466,463 | 474,987 | |||||||||||||||||
|
TCE Ratio
(5)
|
9.1% | 8.1% | 8.6% | |||||||||||||||||
(1)
Includes impact of related deferred taxes.
(2)
Return on average tangible common equity is a non-GAAP measure calculated based on annualized net income (loss) available to common stockholders less annualized income (loss) from discontinued operations, net of tax, for the period, divided by average TCE.
(3)
Return on average tangible assets is a non-GAAP measure calculated based on annualized income (loss) from continuing operations, net of tax, for the period divided by average tangible assets for the period.
(4)
Tangible book value per common share is a non-GAAP measure calculated based on TCE divided by common shares outstanding.
(5)
TCE ratio is a non-GAAP measure calculated based on TCE divided by period-end tangible assets.
|
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| Glossary and Acronyms | ||
2019 Cybersecurity Incident:
The unauthorized access by an outside individual who obtained certain types of personal information relating to people who had applied for our credit card products and to our credit card customers that we announced on July 29, 2019.
2022 Call Report:
Consolidated Reports of Condition and Income, (FFIEC 031) as of December 31, 2022.
Allowance coverage ratio:
Allowance for credit losses as a percentage of loans held for investment.
Amortized cost:
The amount at which a financing receivable or investment is originated or acquired, adjusted for applicable accrued interest, accretion, or amortization of premium, discount, and net deferred fees or costs, collection of cash, write-offs, foreign exchange and fair value hedge accounting adjustments.
Annual Report:
References to our “2024 Form 10-K” are to our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Bank:
CONA, Capital One Financial Corporation’s principal operating subsidiary.
Basel Committee:
The Basel Committee on Banking Supervision.
Basel III Capital Rules:
The regulatory capital requirements established by the Federal Banking Agencies in July 2013 to implement the Basel III capital framework developed by the Basel Committee as well as certain Dodd-Frank Act and other capital provisions.
Basel III Finalization Proposal:
The notice of proposed rulemaking released by the Federal Banking Agencies on July 27, 2023 to revise the Basel III Capital Rules applicable to banking organizations with total assets of $100 billion or more and their subsidiary depository institutions.
Basel III standardized approach:
The Basel III Capital Rules modified Basel I to create the Basel III standardized approach.
Capital One
or the
Company:
Capital One Financial Corporation and its subsidiaries.
Carrying value (with respect to loans
)
:
The amount at which a loan is recorded on the consolidated balance sheets. For loans recorded at amortized cost, carrying value is the unpaid principal balance net of unamortized deferred loan origination fees and costs, and unamortized purchase premium or discount. For loans that are or have been on nonaccrual status, the carrying value is also reduced by any net charge-offs that have been recorded and the amount of interest payments applied as a reduction of principal under the cost recovery method. For credit card loans, the carrying value also includes interest that has been billed to the customer, net of any related reserves. Loans held for sale are recorded at either fair value (if we elect the fair value option) or at the lower of cost or fair value.
CECL:
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments—Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments
. This ASU requires an impairment model (known as the CECL model) that is based on expected rather than incurred losses, with an anticipated result of more timely loss recognition. This guidance was effective for us on January 1, 2020.
CECL Transition Rule:
A rule adopted by the Federal Banking Agencies and effective in 2020 that provides banking institutions an optional five-year transition period to phase in the impact of the CECL standard on their regulatory capital.
Common equity Tier 1 (“CET1”) capital:
CET1 capital primarily includes qualifying common shareholders’ equity, retained earnings and certain AOCI amounts less certain deductions for goodwill, intangible assets, and certain deferred tax assets.
CONA:
Capital One, National Association, one of our wholly-owned subsidiaries, which offers a broad spectrum of banking products and financial services to consumers, small businesses and commercial clients.
Credit risk:
The risk to current or projected financial condition and resilience arising from an obligor’s failure to meet the terms of any contract with the Company or otherwise perform as agreed.
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Deposit Insurance Fund (“DIF”):
A fund maintained by the FDIC to provide insurance coverage for certain deposits. It is funded through assessments on banks.
Derivative:
A contract or agreement whose value is derived from changes in interest rates, foreign exchange rates, prices of securities or commodities, credit worthiness for credit default swaps or financial or commodity indices.
Discontinued operations:
The operating results of a component of an entity, as defined by Accounting Standards Codification 205, that are removed from continuing operations when that component has been disposed of or it is management’s intention to sell the component.
Discover:
Discover Financial Services, a Delaware corporation.
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”):
Regulatory reform legislation signed into law on July 21, 2010. This law broadly affects the financial services industry and contains numerous provisions aimed at strengthening the sound operation of the financial services sector.
Exchange Act:
The Securities Exchange Act of 1934, as amended.
eXtensible Business Reporting Language (“XBRL”):
A language for the electronic communication of business and financial data.
Federal Banking Agencies:
The Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation.
Federal Deposit Insurance Corporation (“FDIC”):
An independent U.S. governmental agency that administers the Deposit Insurance Fund.
Federal Reserve:
The Board of Governors of the Federal Reserve System.
FICO score:
A measure of consumer credit risk provided by credit bureaus, typically produced from statistical modeling software created by FICO (formerly known as “Fair Isaac Corporation”) utilizing data collected by the credit bureaus.
Financial difficulty modification (“FDM”):
A FDM is deemed to occur when a loan modification is made to a borrower experiencing financial difficulty in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, a term extension, or a combination of these modifications in the current reporting period.
Foreign exchange contracts:
Contracts that provide for the future receipt or delivery of foreign currency at previously agreed-upon terms.
Framework:
The Capital One enterprise-wide risk management framework.
GSE
or
Agency:
A government-sponsored enterprise or agency is a financial services corporation created by the United States Congress. Examples of U.S. government agencies include Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”), Government National Mortgage Association (“Ginnie Mae”) and the Federal Home Loan Bank (“FHLB”).
Interest rate sensitivity:
The exposure to interest rate movements.
Interest rate swaps:
Contracts in which a series of interest rate flows in a single currency are exchanged over a prescribed period. Interest rate swaps are the most common type of derivative contract that we use in our asset/liability management activities.
Investment grade:
Represents a Moody’s long-term rating of Baa3 or better; and/or a S&P long-term rating of BBB- or better; and/or a Fitch long-term rating of BBB- or better; or if unrated, an equivalent rating using our internal risk ratings. Instruments that fall below these levels are considered to be non-investment grade.
Investor Entities:
Entities that invest in community development entities (“CDE”) that provide debt financing to businesses and non-profit entities in low-income and rural communities.
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LCR Rule:
The final rules published by the Basel Committee and as implemented by the Federal Banking Agencies in 2014 for the Basel III Liquidity Coverage Ratio (“LCR”) in the United States. The LCR is calculated by dividing the amount of an institution’s high quality, unencumbered liquid assets by its estimated net cash outflow, as defined and calculated in accordance with the LCR Rule.
Leverage ratio:
Tier 1 capital divided by average assets after certain adjustments, as defined by regulators.
Liquidity risk:
The risk that the Company will not be able to meet its future financial obligations as they come due, or invest in future asset growth because of an inability to obtain funds at a reasonable price within a reasonable time.
Loan-to-value (“LTV”) ratio:
The relationship, expressed as a percentage, between the principal amount of a loan and the appraised value of the collateral securing the loan.
Loss severity:
Loss given default.
Managed presentation:
A non-GAAP presentation of business segment results derived from our internal management accounting and reporting process, which employs various allocation methodologies, including funds transfer pricing, to assign certain balance sheet assets, deposits and other liabilities and their related revenues and expenses directly or indirectly attributable to each business segment. The results of our individual businesses reflect the manner in which management evaluates performance and makes decisions about funding our operations and allocating resources and are intended to reflect each segment as if it were a stand-alone business.
Market risk:
The risk that an institution’s earnings or the economic value of equity could be adversely impacted by changes in interest rates, foreign exchange rates or other market factors.
Master netting agreement:
An agreement between two counterparties that have multiple contracts with each other that provides for the net settlement of all contracts through a single payment in the event of default or termination of any one contract.
Merger Agreement:
Agreement and Plan of Merger, dated as of February 19, 2024, by and among Discover, Capital One and Merger Sub.
Merger:
The merger of Merger Sub with and into Discover, with Discover as the surviving entity, pursuant to the Merger Agreement.
Merger Sub:
Vega Merger Sub, Inc.
Mortgage servicing rights (“MSRs”):
The right to service a mortgage loan when the underlying loan is sold or securitized. Servicing includes collections of principal, interest and escrow payments from borrowers and accounting for and remitting principal and interest payments to investors.
Net charge-off rate
: Represents (annualized) net charge-offs divided by average loans held for investment for the period. Negative net charge-offs and related rates are captioned as net recoveries.
Net interest margin:
Represents (annualized) net interest income divided by average interest-earning assets for the period.
Nonperforming loans:
Generally include loans that have been placed on nonaccrual status. We do not report loans classified as held for sale as nonperforming.
NSFR Rule:
The final rules published by the Basel Committee and as issued by the Federal Banking Agencies in October 2020 implementing the net stable funding ratio (“NSFR”) in the United States. The NSFR measures the stability of our funding profile and requires us to maintain minimum amounts of stable funding to support our assets, commitments and derivatives exposures over a one-year period.
PR Rules:
The U.S. prudential regulators’ margin rules for uncleared derivatives.
Public Fund Deposits:
Deposits that are derived from a variety of political subdivisions such as school districts and municipalities.
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Purchase volume:
Consists of purchase transactions, net of returns, for the period, and excludes cash advance and balance transfer transactions.
Rating agency:
An independent agency that assesses the credit quality and likelihood of default of an issue or issuer and assigns a rating to that issue or issuer.
Repurchase agreement:
An instrument used to raise short-term funds whereby securities are sold with an agreement for the seller to buy back the securities at a later date.
Restructuring charges:
Charges associated with the realignment of resources supporting various businesses, primarily consisting of severance and related benefits pursuant to our ongoing benefit programs and impairment of certain assets related to the business locations and/or activities being exited.
Risk-weighted assets:
On- and off-balance sheet assets that are assigned to one of several broad risk categories and weighted by factors representing their risk and potential for default.
Second Step Merger:
The merger of Discover with and into Capital One, with Capital One as the surviving entity.
Securitized debt obligations:
A type of asset-backed security and structured credit product constructed from a portfolio of fixed-income assets.
Stress capital buffer requirement:
A component of our standardized approach capital conservation buffer, which is recalibrated annually based on the results of our supervisory stress tests.
Stress Capital Buffer Rule:
The final rule issued by the Federal Reserve in March 2020 to implement the stress capital buffer requirement.
Subprime:
For purposes of lending in our Credit Card business, we generally consider FICO scores of 660 or below, or other equivalent risk scores, to be subprime. For purposes of auto lending in our Consumer Banking business, we generally consider FICO scores of 620 or below to be subprime.
Tangible common equity (“TCE”):
A non-GAAP financial measure calculated as common equity less goodwill and other intangible assets inclusive of any related deferred tax liabilities.
This Report:
Quarterly Report on Form 10-Q for the period ended March, 31 2025.
Transaction:
On February 19, 2024, we entered into the Merger Agreement to acquire Discover in an all-stock transaction.
Unfunded lending commitments:
Legally binding agreements to provide a defined level of financing until a specified future date.
U.S. GAAP:
Accounting principles generally accepted in the United States of America. Accounting rules and conventions defining acceptable practices in preparing financial statements in the U.S.
U.S. Real Gross Domestic Product (“GDP”)
: An inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year.
Variable interest entity (“VIE”):
An entity that, by design, either (i) lacks sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties; or (ii) has equity investors that do not have (a) the ability to make significant decisions relating to the entity’s operations through voting rights, (b) the obligation to absorb the expected losses, and/or (c) the right to receive the residual returns of the entity.
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|
Acronyms
|
||
ABS:
Asset-backed securities
AOCI:
Accumulated other comprehensive income
ASU:
Accounting Standards Update
ATM:
Automated teller machine
BHC:
Bank holding company
bps:
Basis points
CAD:
Canadian dollar
CCP:
Central Counterparty Clearinghouse, or Central Clearinghouse
CDE:
Community development entities
CECL:
Current expected credit loss
CEO:
Chief Executive Officer
CET1:
Common equity Tier 1 capital
CFO:
Chief Financial Officer
CFPB:
Consumer Financial Protection Bureau
CMBS:
Commercial mortgage-backed securities
CME:
Chicago Mercantile Exchange
COEP:
Capital One (Europe) plc
COF:
Capital One Financial Corporation
CONA
: Capital One, National Association
CVA:
Credit valuation adjustment
DCF:
Discounted cash flow
DIF:
Deposit Insurance Fund
DTCC:
Depository Trust and Clearing Corporation
DVA:
Debit valuation adjustment
EUR:
Euro
Fannie Mae:
Federal National Mortgage Association
FASB:
Financial Accounting Standards Board
FCA:
Financial Conduct Authority
FCM:
Futures commission merchant
FDM:
Financial difficulty modification
FDIC:
Federal Deposit Insurance Corporation
FFIEC:
Federal Financial Institutions Examination Council
FHLB:
Federal Home Loan Bank
FICC - GSD:
Fixed Income Clearing Corporation - Government Securities Division
FICO:
Fair Isaac Corporation
Fitch:
Fitch Ratings
Freddie Mac:
Federal Home Loan Mortgage Corporation
GAAP:
Generally accepted accounting principles in the U.S.
GBP:
Pound sterling
GDP:
U.S. Real Gross Domestic Product
Ginnie Mae:
Government National Mortgage Association
G-SIB:
Global systemically important banks
GSE or Agency:
Government-sponsored enterprise
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ICE:
Intercontinental Exchange
IRM:
Independent Risk Management
LCH:
LCH Group
LCR:
Liquidity coverage ratio
LTV:
Loan-to-Value
Moody’s:
Moody’s Investors Service
MSRs:
Mortgage servicing rights
NORA:
Notice and Opportunity to Respond and Advise
NSFR:
Net stable funding ratio
OCC:
Office of the Comptroller of the Currency
OCI:
Other comprehensive income
OPC:
Canada’s Office of Privacy Commissioner
OTC:
Over-the-counter
PCA:
Prompt corrective action
PPI:
Payment protection insurance
RMBS:
Residential mortgage-backed securities
S&P:
Standard & Poor’s
SEC:
U.S. Securities and Exchange Commission
SOFR:
Secured Overnight Financing Rate
TCE:
Tangible common equity
U.K.:
United Kingdom
U.S.:
United States of America
VaR:
Value-At-Risk
VIE:
Variable interest entity
|
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| Page | |||||
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| Three Months Ended March 31, | ||||||||||||||
| (Dollars in millions, except per share-related data) | 2025 | 2024 | ||||||||||||
| Interest income: | ||||||||||||||
| Loans, including loans held for sale | $ |
|
$ |
|
||||||||||
| Investment securities |
|
|
||||||||||||
| Other |
|
|
||||||||||||
| Total interest income |
|
|
||||||||||||
| Interest expense: | ||||||||||||||
| Deposits |
|
|
||||||||||||
| Securitized debt obligations |
|
|
||||||||||||
| Senior and subordinated notes |
|
|
||||||||||||
| Other borrowings |
|
|
||||||||||||
| Total interest expense |
|
|
||||||||||||
| Net interest income |
|
|
||||||||||||
| Provision for credit losses |
|
|
||||||||||||
| Net interest income after provision for credit losses |
|
|
||||||||||||
| Non-interest income: | ||||||||||||||
| Interchange fees, net |
|
|
||||||||||||
| Service charges and other customer-related fees |
|
|
||||||||||||
| Other |
|
|
||||||||||||
| Total non-interest income |
|
|
||||||||||||
| Non-interest expense: | ||||||||||||||
| Salaries and associate benefits |
|
|
||||||||||||
| Occupancy and equipment |
|
|
||||||||||||
| Marketing |
|
|
||||||||||||
| Professional services |
|
|
||||||||||||
| Communications and data processing |
|
|
||||||||||||
| Amortization of intangibles |
|
|
||||||||||||
| Other |
|
|
||||||||||||
| Total non-interest expense |
|
|
||||||||||||
| Income from continuing operations before income taxes |
|
|
||||||||||||
| Income tax provision |
|
|
||||||||||||
| Net income |
|
|
||||||||||||
| Dividends and undistributed earnings allocated to participating securities |
(
|
(
|
||||||||||||
| Preferred stock dividends |
(
|
(
|
||||||||||||
| Net income available to common stockholders | $ |
|
$ |
|
||||||||||
| Basic earnings per common share: | ||||||||||||||
| Net income per basic common share | $ |
|
$ |
|
||||||||||
| Diluted earnings per common share: | ||||||||||||||
| Net income per diluted common share | $ |
|
$ |
|
||||||||||
| See Notes to Consolidated Financial Statements. | ||||||||
|
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Capital One Financial Corporation (COF) | |||||||
CAPITAL ONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
| Three Months Ended March 31, | ||||||||||||||
| (Dollars in millions) | 2025 | 2024 | ||||||||||||
| Net income | $ |
|
$ |
|
||||||||||
| Other comprehensive income (loss), net of tax: | ||||||||||||||
| Net unrealized gains (losses) on securities available for sale |
|
(
|
||||||||||||
| Net unrealized gains (losses) on hedging relationships |
|
(
|
||||||||||||
| Foreign currency translation adjustments |
|
(
|
||||||||||||
| Other |
|
|
||||||||||||
| Other comprehensive income (loss), net of tax |
|
(
|
||||||||||||
| Comprehensive income | $ |
|
$ |
|
||||||||||
| See Notes to Consolidated Financial Statements. | ||||||||
|
74
|
Capital One Financial Corporation (COF) | |||||||
| (Dollars in millions, except per share-related data) | March 31, 2025 | December 31, 2024 | ||||||||||||
| Assets: | ||||||||||||||
| Cash and cash equivalents: | ||||||||||||||
| Cash and due from banks | $ |
|
$ |
|
||||||||||
| Interest-bearing deposits and other short-term investments |
|
|
||||||||||||
| Total cash and cash equivalents |
|
|
||||||||||||
| Restricted cash for securitization investors |
|
|
||||||||||||
|
Securities available for sale (amortized cost of $
|
|
|
||||||||||||
| Loans held for investment: | ||||||||||||||
| Unsecuritized loans held for investment |
|
|
||||||||||||
| Loans held in consolidated trusts |
|
|
||||||||||||
| Total loans held for investment |
|
|
||||||||||||
| Allowance for credit losses |
(
|
(
|
||||||||||||
| Net loans held for investment |
|
|
||||||||||||
|
Loans held for sale ($
|
|
|
||||||||||||
| Premises and equipment, net |
|
|
||||||||||||
| Interest receivable |
|
|
||||||||||||
| Goodwill |
|
|
||||||||||||
| Other assets |
|
|
||||||||||||
| Total assets | $ |
|
$ |
|
||||||||||
| Liabilities: | ||||||||||||||
| Interest payable | $ |
|
$ |
|
||||||||||
| Deposits: | ||||||||||||||
| Non-interest-bearing deposits |
|
|
||||||||||||
| Interest-bearing deposits |
|
|
||||||||||||
| Total deposits |
|
|
||||||||||||
| Securitized debt obligations |
|
|
||||||||||||
| Other debt: | ||||||||||||||
| Federal funds purchased and securities loaned or sold under agreements to repurchase |
|
|
||||||||||||
| Senior and subordinated notes |
|
|
||||||||||||
| Other borrowings |
|
|
||||||||||||
| Total other debt |
|
|
||||||||||||
| Other liabilities |
|
|
||||||||||||
| Total liabilities |
|
|
||||||||||||
| Commitments, contingencies and guarantees (see Note 14) |
|
|
||||||||||||
| Stockholders’ equity: | ||||||||||||||
|
Preferred stock (par value $
|
|
|
||||||||||||
|
Common stock (par value $
|
|
|
||||||||||||
| Additional paid-in capital, net |
|
|
||||||||||||
| Retained earnings |
|
|
||||||||||||
| Accumulated other comprehensive loss |
(
|
(
|
||||||||||||
|
Treasury stock, at cost (par value $
|
(
|
(
|
||||||||||||
| Total stockholders’ equity |
|
|
||||||||||||
| Total liabilities and stockholders’ equity | $ |
|
$ |
|
||||||||||
| See Notes to Consolidated Financial Statements. | ||||||||
|
75
|
Capital One Financial Corporation (COF) | |||||||
CAPITAL ONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
| (Dollars in millions) | Preferred Stock | Common Stock |
Additional
Paid-In Capital |
Retained Earnings |
Accumulated
Other Comprehensive Income (Loss) |
Treasury
Stock |
Total
Stockholders’ Equity |
|||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2024 |
|
$ |
|
|
$ |
|
$ |
|
$ |
|
$ |
(
|
$ |
(
|
$ |
|
||||||||||||||||||||||||||||||||||||||||
| Comprehensive income |
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Dividends—common stock
(1)
|
|
|
|
(
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends—preferred stock |
(
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchases of treasury stock |
(
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuances of common stock and restricted stock, net of forfeitures |
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercises of stock options |
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Compensation expense for restricted stock units |
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2025 |
|
|
|
$ |
|
$ |
|
$ |
|
$ |
(
|
$ |
(
|
$ |
|
|||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Preferred Stock | Common Stock |
Additional
Paid-In Capital |
Retained Earnings |
Accumulated
Other Comprehensive Income (Loss) |
Treasury
Stock |
Total
Stockholders’ Equity |
|||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 |
|
$ |
|
|
$ |
|
$ |
|
$ |
|
$ |
(
|
$ |
(
|
$ |
|
||||||||||||||||||||||||||||||||||||||||
|
Cumulative effects of accounting standards adoption
(2)
|
(
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Comprehensive income (loss) |
|
(
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Dividends—common stock
(1)
|
|
|
|
(
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends—preferred stock |
(
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchases of treasury stock |
(
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuances of common stock and restricted stock, net of forfeitures |
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercises of stock options |
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Compensation expense for restricted stock units |
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2024 |
|
$ |
|
|
$ |
|
$ |
|
$ |
|
$ |
(
|
$ |
(
|
$ |
|
||||||||||||||||||||||||||||||||||||||||
(1)
We declared dividends per share on our common stock of $
0.60
in the first quarters of 2025 and 2024.
(2)
Impact from the adoption of Accounting Standards Update (“ASU”) 2023-02,
Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method
as of January 1, 2024.
| See Notes to Consolidated Financial Statements. | ||||||||
|
76
|
Capital One Financial Corporation (COF) | |||||||
CAPITAL ONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| Three Months Ended March 31, | ||||||||||||||
| (Dollars in millions) | 2025 | 2024 | ||||||||||||
| Operating activities: | ||||||||||||||
| Income from continuing operations, net of tax | $ |
|
$ |
|
||||||||||
| Net income |
|
|
||||||||||||
| Adjustments to reconcile net income to net cash from operating activities: | ||||||||||||||
| Provision for credit losses |
|
|
||||||||||||
| Depreciation and amortization, net |
|
|
||||||||||||
| Deferred tax provision |
|
|
||||||||||||
| Loss (gain) on sales of loans |
(
|
|
||||||||||||
| Stock-based compensation expense |
|
|
||||||||||||
| Other |
|
|
||||||||||||
| Loans held for sale: | ||||||||||||||
| Originations and purchases |
(
|
(
|
||||||||||||
| Proceeds from sales and paydowns |
|
|
||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||
| Changes in interest receivable |
(
|
(
|
||||||||||||
| Changes in other assets |
(
|
(
|
||||||||||||
| Changes in interest payable |
(
|
|
||||||||||||
| Changes in other liabilities |
|
(
|
||||||||||||
| Net cash from operating activities |
|
|
||||||||||||
| Investing activities: | ||||||||||||||
| Securities available for sale: | ||||||||||||||
| Purchases |
(
|
(
|
||||||||||||
| Proceeds from paydowns and maturities |
|
|
||||||||||||
| Loans: | ||||||||||||||
| Net changes in loans originated as held for investment |
|
|
||||||||||||
| Principal recoveries of loans previously charged off |
|
|
||||||||||||
| Changes in premises and equipment |
(
|
(
|
||||||||||||
| Net cash used in other investing activities |
(
|
(
|
||||||||||||
| Net cash from investing activities | $ |
|
$ |
|
||||||||||
| Financing activities: | ||||||||||||||
| Deposits and borrowings: | ||||||||||||||
| Changes in deposits | $ |
|
$ |
|
||||||||||
| Maturities and paydowns of securitized debt obligations |
(
|
(
|
||||||||||||
| Issuance of senior and subordinated notes |
|
|
||||||||||||
| Maturities and paydowns of senior and subordinated notes |
(
|
(
|
||||||||||||
| Changes in other borrowings |
|
|
||||||||||||
| Common stock: | ||||||||||||||
| Net proceeds from issuances |
|
|
||||||||||||
| Dividends paid |
(
|
(
|
||||||||||||
| Preferred stock: | ||||||||||||||
| Dividends paid |
(
|
(
|
||||||||||||
| Purchases of treasury stock |
(
|
(
|
||||||||||||
| Proceeds from share-based payment activities |
|
|
||||||||||||
| Net cash from (used in) financing activities |
(
|
|
||||||||||||
| Changes in cash, cash equivalents and restricted cash for securitization investors |
|
|
||||||||||||
| Cash, cash equivalents and restricted cash for securitization investors, beginning of the period |
|
|
||||||||||||
| Cash, cash equivalents and restricted cash for securitization investors, end of the period | $ |
|
$ |
|
||||||||||
| Supplemental cash flow information: | ||||||||||||||
| Interest paid |
|
$ |
|
|||||||||||
| Income tax paid |
|
|
||||||||||||
| See Notes to Consolidated Financial Statements. | ||||||||
|
77
|
Capital One Financial Corporation (COF) | |||||||
| NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
The Company
Capital One Financial Corporation, a Delaware corporation established in 1994 and headquartered in McLean, Virginia, is a diversified financial services holding company with banking and non-banking subsidiaries. Capital One Financial Corporation and its subsidiaries (the “Company” or “Capital One”) offer a broad array of financial products and services to consumers, small businesses and commercial clients through digital channels, branch locations, cafés and other distribution channels.
As of March 31, 2025, Capital One Financial Corporation’s principal operating subsidiary was Capital One, National Association (“CONA”). The Company is hereafter collectively referred to as “we,” “us” or “our.” CONA is referred to as the “Bank.”
We also offer products outside of the United States of America (“U.S.”) principally through Capital One (Europe) plc (“COEP”), an indirect subsidiary of CONA organized and located in the United Kingdom (“U.K.”), and through a branch of CONA in Canada. Both COEP and our Canadian branch of CONA have the authority to provide credit card loans.
Our principal operations are organized for management reporting purposes into
three
major business segments, which are defined primarily based on the products and services provided or the types of customer served: Credit Card, Consumer Banking and Commercial Banking. We provide details on our business segments, the integration of any recent material acquisitions into our business segments, and the allocation methodologies and accounting policies used to derive our business segment results in “Note 13—Business Segments and Revenue from Contracts with Customers.”
Basis of Presentation and Use of Estimates
These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements, and related notes thereto, included in Capital One Financial Corporation’s 2024 Annual Report on Form 10-K (“2024 Form 10-K”).
|
78
|
Capital One Financial Corporation (COF) | |||||||
| NOTE 2—BUSINESS COMBINATIONS | ||
On February 19, 2024, the Company entered into an agreement and plan of merger (the “Merger Agreement”), by and among Capital One, Discover Financial Services, a Delaware corporation (“Discover”) and Vega Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of the Company (“Merger Sub”), pursuant to which (a) Merger Sub will merge with and into Discover, with Discover as the surviving entity in the merger (the “Merger”); (b) immediately following the Merger, Discover, as the surviving entity, will merge with and into Capital One, with Capital One as the surviving entity in the second-step merger (the “Second Step Merger”); and (c) immediately following the Second Step Merger, Discover Bank, a Delaware-chartered and wholly owned subsidiary of Discover, will merge with and into CONA, with CONA as the surviving entity in the merger (the “CONA Bank Merger,” and collectively with the Merger and the Second Step Merger, the “Transaction”). The Merger Agreement was unanimously approved by the Boards of Directors of each of Capital One and Discover.
At the effective time of the Merger, each share of common stock of Discover outstanding immediately prior to the effective time of the Merger, other than certain shares held by Discover or Capital One, will be converted into the right to receive 1.0192 shares of common stock of Capital One. Holders of Discover common stock will receive cash in lieu of fractional shares. At the effective time of the Second Step Merger, each share of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series C, of Discover, and each share of 6.125% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series D, of Discover, in each case outstanding immediately prior to the effective time of the Second Step Merger, will be converted into the right to receive a share of newly created series of preferred stock of Capital One having terms that are not materially less favorable than the applicable series of Discover preferred stock.
On February 18, 2025, Capital One and Discover each held a special meeting of their respective stockholders during which the issuance of Capital One common stock as merger consideration to the holders of Discover common stock was approved by the requisite vote of the Capital One stockholders and the Merger Agreement was adopted by the requisite vote of the Discover stockholders.
On April 18, 2025, Capital One received approval from the Office of the Comptroller of the Currency (“OCC”) and the Board of Governors of the Federal Reserve System (“Federal Reserve”) to complete the Transaction. The Federal Reserve approval was accompanied by announcement of a new enforcement action by the Federal Reserve against Discover Bank which Capital One has committed to comply with and remediate following closing. The OCC approval included a condition requiring CONA to provide a detailed plan to the OCC following closing to address the underlying root causes of outstanding enforcement actions against Discover Bank.
Following receipt of the OCC and Federal Reserve approvals, all required regulatory approvals to complete the Transaction have been received. The closing of the Transaction is expected to occur on May 18, 2025 subject to the satisfaction or waiver of the remaining closing conditions set forth in the Merger Agreement.
In the first quarter of 2025, we incurred $
110
million of integration expenses related to the Transaction, which are included in operating expenses in our Consolidated Statements of Income. Since the announcement of the Transaction in the first quarter of 2024, we have incurred $344 million of integration expenses as of March 31, 2025.
|
79
|
Capital One Financial Corporation (COF) | |||||||
| NOTE 3—INVESTMENT SECURITIES | ||
Our investment securities portfolio consists of the following: U.S. government-sponsored enterprise or agency (“GSE” or “Agency”) and non-agency residential mortgage-backed securities (“RMBS”), agency commercial mortgage-backed securities (“CMBS”), U.S. Treasury securities and other securities. Agency securities include Government National Mortgage Association (“Ginnie Mae”) guaranteed securities, Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”) issued securities. The carrying value of our investments in Agency and U.S. Treasury securities represented
97
% and
96
% of our total investment securities portfolio as of March 31, 2025 and December 31, 2024, respectively.
The table below presents the amortized cost, allowance for credit losses, gross unrealized gains and losses and fair value aggregated by major security type as of March 31, 2025 and December 31, 2024. Accrued interest receivable of $
291
million and $
262
million as of March 31, 2025 and December 31, 2024, respectively, is not included in the table below.
Table 3.1: Investment Securities Available for Sale
| March 31, 2025 | ||||||||||||||||||||||||||||||||
| (Dollars in millions) |
Amortized
Cost |
Allowance
for Credit Losses |
Gross
Unrealized Gains |
Gross
Unrealized Losses |
Fair
Value |
|||||||||||||||||||||||||||
| Investment securities available for sale: | ||||||||||||||||||||||||||||||||
| U.S. Treasury securities | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||
| RMBS: | ||||||||||||||||||||||||||||||||
| Agency |
|
|
|
(
|
|
|||||||||||||||||||||||||||
| Non-agency |
|
(
|
|
(
|
|
|||||||||||||||||||||||||||
| Total RMBS |
|
(
|
|
(
|
|
|||||||||||||||||||||||||||
| Agency CMBS |
|
|
|
(
|
|
|||||||||||||||||||||||||||
|
Other securities
(1)
|
|
|
|
(
|
|
|||||||||||||||||||||||||||
| Total investment securities available for sale | $ |
|
$ |
(
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||
| (Dollars in millions) |
Amortized
Cost |
Allowance
for Credit Losses |
Gross
Unrealized Gains |
Gross
Unrealized Losses |
Fair
Value |
|||||||||||||||||||||||||||
| Investment securities available for sale: | ||||||||||||||||||||||||||||||||
| U.S. Treasury securities | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||
| RMBS: | ||||||||||||||||||||||||||||||||
| Agency |
|
|
|
(
|
|
|||||||||||||||||||||||||||
| Non-agency |
|
(
|
|
(
|
|
|||||||||||||||||||||||||||
| Total RMBS |
|
(
|
|
(
|
|
|||||||||||||||||||||||||||
| Agency CMBS |
|
|
|
(
|
|
|||||||||||||||||||||||||||
|
Other securities
(1)
|
|
|
|
(
|
|
|||||||||||||||||||||||||||
| Total investment securities available for sale | $ |
|
$ |
(
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||
(1)
Includes $
1.8
billion and $
2.0
billion of asset-backed securities (“ABS”) as of March 31, 2025 and December 31, 2024, respectively. The remaining amount is primarily comprised of supranational bonds, foreign government bonds and U.S. agency debt bonds.
|
80
|
Capital One Financial Corporation (COF) | |||||||
Investment Securities in a Gross Unrealized Loss Position
The table below provides the gross unrealized losses and fair value of our securities available for sale aggregated by major security type and the length of time that individual securities have been in a continuous unrealized loss position as of March 31, 2025 and December 31, 2024. The amounts include securities available for sale without an allowance for credit losses.
Table 3.2: Securities in a Gross Unrealized Loss Position
| March 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Fair Value |
Gross
Unrealized Losses |
Fair Value |
Gross
Unrealized Losses |
Fair Value |
Gross
Unrealized Losses |
||||||||||||||||||||||||||||||||
| Investment securities available for sale without an allowance for credit losses: | ||||||||||||||||||||||||||||||||||||||
| U.S. Treasury securities | $ |
|
$ |
(
|
$ |
|
$ |
(
|
$ |
|
$ |
(
|
||||||||||||||||||||||||||
| RMBS: | ||||||||||||||||||||||||||||||||||||||
| Agency |
|
(
|
|
(
|
|
(
|
||||||||||||||||||||||||||||||||
| Non-agency |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total RMBS |
|
(
|
|
(
|
|
(
|
||||||||||||||||||||||||||||||||
| Agency CMBS |
|
(
|
|
(
|
|
(
|
||||||||||||||||||||||||||||||||
| Other securities |
|
(
|
|
|
|
(
|
||||||||||||||||||||||||||||||||
|
Total investment securities available for sale in a gross unrealized loss position without an allowance for credit losses
(1)
|
$ |
|
$ |
(
|
$ |
|
$ |
(
|
$ |
|
$ |
(
|
||||||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||||||||
| Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Fair Value |
Gross
Unrealized Losses |
Fair Value |
Gross
Unrealized Losses |
Fair Value |
Gross
Unrealized Losses |
||||||||||||||||||||||||||||||||
| Investment securities available for sale without an allowance for credit losses: | ||||||||||||||||||||||||||||||||||||||
| U.S. Treasury securities | $ |
|
$ |
(
|
$ |
|
$ |
(
|
$ |
|
$ |
(
|
||||||||||||||||||||||||||
| RMBS: | ||||||||||||||||||||||||||||||||||||||
| Agency |
|
(
|
|
(
|
|
(
|
||||||||||||||||||||||||||||||||
| Non-agency |
|
|
|
(
|
|
(
|
||||||||||||||||||||||||||||||||
| Total RMBS |
|
(
|
|
(
|
|
(
|
||||||||||||||||||||||||||||||||
| Agency CMBS |
|
(
|
|
(
|
|
(
|
||||||||||||||||||||||||||||||||
| Other securities |
|
(
|
|
|
|
(
|
||||||||||||||||||||||||||||||||
|
Total investment securities available for sale in a gross unrealized loss position without an allowance for credit losses
(1)
|
$ |
|
$ |
(
|
$ |
|
$ |
(
|
$ |
|
$ |
(
|
||||||||||||||||||||||||||
(1)
Consists of approxima
tely
2,480
and
2,740
se
cur
ities in gross unrealized loss positions as of March 31, 2025 and December 31, 2024, respectively.
Maturities and Yields of Investment Securities
The table below summarizes, as of March 31, 2025, the fair value of our investment securities by major security type and contractual maturity as well as the total fair value, amortized cost and weighted-average yields of our investment securities by contractual maturity. Since borrowers may have the right to call or prepay certain obligations, the expected maturities of our securities are likely to differ from the scheduled contractual maturities presented below. The weighted-average yield below represents the effective yield for the investment securities presented on a pre-tax basis and is calculated based on the amortized cost of each security, inclusive of the contractual coupon, the impact of any premium amortization or discount accretion and any hedge accounting relationships.
|
81
|
Capital One Financial Corporation (COF) | |||||||
Table 3.3: Contractual Maturities and Weighted-Average Yields of Securities
| March 31, 2025 | ||||||||||||||||||||||||||||||||
| (Dollars in millions) |
Due in
1 Year or Less |
Due > 1 Year
through 5 Years |
Due > 5 Years
through 10 Years |
Due > 10 Years | Total | |||||||||||||||||||||||||||
| Fair value of securities available for sale: | ||||||||||||||||||||||||||||||||
| U.S. Treasury securities | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
|
RMBS
(1)
:
|
||||||||||||||||||||||||||||||||
| Agency |
|
|
|
|
|
|||||||||||||||||||||||||||
| Non-agency |
|
|
|
|
|
|||||||||||||||||||||||||||
| Total RMBS |
|
|
|
|
|
|||||||||||||||||||||||||||
|
Agency CMBS
(1)
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Other securities |
|
|
|
|
|
|||||||||||||||||||||||||||
| Total securities available for sale | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Amortized cost of securities available for sale | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Weighted-average yield for securities available for sale |
|
|
|
|
|
|||||||||||||||||||||||||||
(1)
As of March 31, 2025, the weighted-average expected maturities of RMBS and Agency CMBS were
7.7
years and
4.6
years, respectively.
Net Securities Gains or Losses and Proceeds from Sales
We had
no
sales of securities for both the three months ended March 31, 2025 and 2024.
Securities Pledged and Received
We pledged investment securities totaling $
38.6
billion and $
39.4
billion as of March 31, 2025 and December 31, 2024, respectively. These securities are primarily pledged to support our access to Federal Home Loan Bank (“FHLB”) advances and Public Fund Deposits, as well as for other purposes as required or permitted by law. We accepted pledges of securities with a fair value of approximately $
5
million and $
18
million as of March 31, 2025 and December 31, 2024, respectively, related to our derivative transactions.
|
82
|
Capital One Financial Corporation (COF) | |||||||
| NOTE 4—LOANS | ||
Our loan portfolio consists of loans held for investment, including loans held in our consolidated trusts, and loans held for sale. We further divide our loans held for investment into
three
portfolio segments: Credit Card, Consumer Banking and Commercial Banking. Credit card loans consist of domestic and international credit card loans. Consumer banking loans consist of auto and retail banking loans. Commercial banking loans consist of commercial and multifamily real estate as well as commercial and industrial loans. The information presented in the tables in this note excludes loans held for sale, which are carried at either fair value (if we elect the fair value option) or at the lower of cost or fair value.
Accrued interest receivable of $
2.2
billion as of both March 31, 2025 and December 31, 2024 is not included in the tables in this note.
The table below presents the composition and aging analysis of our loans held for investment portfolio as of March 31, 2025 and December 31, 2024. The delinquency aging includes all past due loans, both performing and nonperforming.
Table 4.1: Loan Portfolio Composition and Aging Analysis
| March 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| Delinquent Loans | ||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Current |
30-59
Days |
60-89
Days |
>
90
Days
|
Total
Delinquent Loans |
Total
Loans |
||||||||||||||||||||||||||||||||
| Credit Card: | ||||||||||||||||||||||||||||||||||||||
| Domestic credit card | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||
| International card businesses |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total credit card |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Consumer Banking: | ||||||||||||||||||||||||||||||||||||||
| Auto |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Retail banking |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total consumer banking |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Commercial Banking: | ||||||||||||||||||||||||||||||||||||||
| Commercial and multifamily real estate |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Commercial and industrial |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total commercial banking |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
Total loans
(1)
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||
| % of Total loans |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||||||||
| Delinquent Loans | ||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Current |
30-59
Days |
60-89
Days |
>
90
Days
|
Total
Delinquent Loans |
Total
Loans |
||||||||||||||||||||||||||||||||
| Credit Card: | ||||||||||||||||||||||||||||||||||||||
| Domestic credit card | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||
| International card businesses |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total credit card |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Consumer Banking: | ||||||||||||||||||||||||||||||||||||||
| Auto |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Retail banking |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total consumer banking |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
83
|
Capital One Financial Corporation (COF) | |||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||||||||
| Delinquent Loans | ||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Current |
30-59
Days |
60-89
Days |
>
90
Days
|
Total
Delinquent Loans |
Total
Loans |
||||||||||||||||||||||||||||||||
| Commercial Banking: | ||||||||||||||||||||||||||||||||||||||
| Commercial and multifamily real estate |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Commercial and industrial |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total commercial banking |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
Total loans
(1)
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||
| % of Total loans |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
(1)
Loans include unamortized premiums, discounts and deferred fees and costs totaling $
1.3
billion and $
1.2
billion as of March 31, 2025 and December 31, 2024,
respectively
.
|
84
|
Capital One Financial Corporation (COF) | |||||||
The following table presents our loans held for investment that are 90 days or more past due that continue to accrue interest, loans that are classified as nonperforming and loans that are classified as nonperforming without an allowance as of March 31, 2025 and December 31, 2024. Nonperforming loans generally include loans that have been placed on nonaccrual status. We recognized interest income for loans classified as nonperforming of $
3
million and $
5
million for the three months ended March 31, 2025 and 2024, respectively.
Table 4.2: 90+ Day Delinquent Loans Accruing Interest and Nonperforming Loans
| March 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||
| (Dollars in millions) |
>
90 Days and Accruing
|
Nonperforming
Loans
|
Nonperforming
Loans Without an Allowance |
>
90 Days and Accruing
|
Nonperforming
Loans
|
Nonperforming
Loans Without an Allowance |
||||||||||||||||||||||||||||||||
| Credit Card: | ||||||||||||||||||||||||||||||||||||||
| Domestic credit card | $ |
|
N/A | $ |
|
$ |
|
N/A | $ |
|
||||||||||||||||||||||||||||
| International card businesses |
|
$ |
|
|
|
$ |
|
|
||||||||||||||||||||||||||||||
| Total credit card |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Consumer Banking: | ||||||||||||||||||||||||||||||||||||||
| Auto |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Retail banking |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total consumer banking |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Commercial Banking: | ||||||||||||||||||||||||||||||||||||||
| Commercial and multifamily real estate |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Commercial and industrial |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total commercial banking |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||
| % of Total loans held for investment |
|
% |
|
% |
|
% |
|
% |
|
% |
|
% | ||||||||||||||||||||||||||
|
85
|
Capital One Financial Corporation (COF) | |||||||
Credit Quality Indicators
We closely monitor economic conditions and loan performance trends to assess and manage our exposure to credit risk. We discuss these risks and our credit quality indicator for each portfolio segment below.
Credit Card
Our credit card loan portfolio is highly diversified across millions of accounts and numerous geographies without significant individual exposure. We therefore generally manage credit risk based on portfolios with common risk characteristics. The risk in our credit card loan portfolio correlates to broad economic trends, such as the U.S. unemployment rate and U.S. Real Gross Domestic Product (“GDP”) growth rate, as well as consumers’ financial condition, all of which can have a material effect on credit performance. The key indicator we assess in monitoring the credit quality and risk of our credit card loan portfolio is delinquency trends, including an analysis of loan migration between delinquency categories over time.
The table below presents our credit card portfolio by delinquency status as of March 31, 2025 and December 31, 2024.
Table 4.3: Credit Card Delinquency Status
| March 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Revolving Loans | Revolving Loans Converted to Term | Total | Revolving Loans | Revolving Loans Converted to Term | Total | ||||||||||||||||||||||||||||||||
| Credit Card: | ||||||||||||||||||||||||||||||||||||||
| Domestic credit card: | ||||||||||||||||||||||||||||||||||||||
|
Current
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||
|
30-59 days
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
60-89 days
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
Greater than 90 days
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total domestic credit card |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| International card businesses: | ||||||||||||||||||||||||||||||||||||||
|
Current
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
30-59 days
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
60-89 days
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
Greater than 90 days
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total international card businesses |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total credit card | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||
|
86
|
Capital One Financial Corporation (COF) | |||||||
Consumer Banking
Our consumer banking loan portfolio consists of auto and retail banking loans. Similar to our credit card loan portfolio, the risk in our consumer banking loan portfolio correlates to broad economic trends as well as consumers’ financial condition, all of which can have a material effect on credit performance. The key indicator we consider when assessing the credit quality and risk of our auto loan portfolio is borrower credit scores as they measure the creditworthiness of borrowers. Delinquency trends are the key indicator we assess in monitoring the credit quality and risk of our retail banking loan portfolio.
The table below presents our consumer banking portfolio of loans held for investment by credit quality indicator as of March 31, 2025 and December 31, 2024. We present our auto loan portfolio by Fair Isaac Corporation (“FICO”) scores at origination and our retail banking loan portfolio by delinquency status, which includes all past due loans, both performing and nonperforming.
Table 4.4: Consumer Banking Portfolio by Vintage Year
| March 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans by Vintage Year | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Total Term Loans | Revolving Loans | Revolving Loans Converted to Term | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Auto
—
At origination FICO scores:
(1)
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Greater than 660 | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||||||||||||||
| 621-660 |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| 620 or below |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total auto |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Retail banking—Delinquency status: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Current |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| 30-59 days |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| 60-89 days |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Greater than 90 days |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total retail banking |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer banking | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||||||||||||||
|
87
|
Capital One Financial Corporation (COF) | |||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans by Vintage Year | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Total Term Loans | Revolving Loans | Revolving Loans Converted to Term | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Auto
—
At origination FICO scores:
(1)
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Greater than 660 | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||||||||||||||
| 621-660 |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| 620 or below |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total auto |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Retail banking—Delinquency status: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Current |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| 30-59 days |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| 60-89 days |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Greater than 90 days |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total retail banking |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer banking | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||||||||||||||
(1)
Amounts represent period-end loans held for investment in each credit score category. Auto credit scores generally represent average FICO scores obtained from three credit bureaus at the time of application and are not refreshed thereafter. Balances for which no credit score is available or the credit score is invalid are included in the 620 or below category.
|
88
|
Capital One Financial Corporation (COF) | |||||||
Commercial Banking
The key credit quality indicator for our commercial loan portfolios is our internal risk ratings. We assign internal risk ratings to loans based on relevant information about the ability of the borrowers to repay their debt. In determining the risk rating of a particular loan, some of the factors considered are the borrower’s current financial condition, historical and projected future credit performance, prospects for support from financially responsible guarantors, the estimated realizable value of any collateral and current economic trends. The scale based on our internal risk rating system is as follows:
•
Noncriticized:
Loans that have not been designated as criticized, frequently referred to as “pass” loans.
•
Criticized performing:
Loans in which the financial condition of the obligor is stressed, affecting earnings, cash flows or collateral values. The borrower currently has adequate capacity to meet near-term obligations; however, the stress, left unabated, may result in deterioration of the repayment prospects at some future date.
•
Criticized nonperforming:
Loans that are not adequately protected by the current net worth and paying capacity of the obligor or the collateral pledged, if any. Loans classified as criticized nonperforming have a well-defined weakness, or weaknesses, which jeopardize the full repayment of the debt. These loans are characterized by the distinct possibility that we will sustain a credit loss if the deficiencies are not corrected and are generally placed on nonaccrual status.
We use our internal risk rating system for regulatory reporting, determining the frequency of credit exposure reviews, and evaluating and determining the allowance for credit losses. Generally, loans that are designated as criticized performing and criticized nonperforming are reviewed quarterly by management to determine if they are appropriately classified/rated and whether any impairment exists. Noncriticized loans are generally reviewed, at least annually, to determine the appropriate risk rating. In addition, we evaluate the risk rating during the renewal process of any loan or if a loan becomes past due.
The following table presents our commercial banking portfolio of loans held for investment by internal risk ratings as of March 31, 2025 and December 31, 2024. The internal risk rating status includes all past due loans, both performing and nonperforming.
Table 4.5: Commercial Banking Portfolio by Internal Risk Ratings
| March 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans by Vintage Year | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Total Term Loans | Revolving Loans | Revolving Loans Converted to Term | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Internal risk rating:
(1)
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and multifamily real estate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Noncriticized | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||||||||||||||
| Criticized performing |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Criticized nonperforming |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial and multifamily real estate |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Noncriticized |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Criticized performing |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Criticized nonperforming |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial and industrial |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial banking | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||||||||||||||
|
89
|
Capital One Financial Corporation (COF) | |||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans by Vintage Year | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Total Term Loans | Revolving Loans | Revolving Loans Converted to Term | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Internal risk rating:
(1)
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and multifamily real estate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Noncriticized | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||||||||||||||
| Criticized performing |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Criticized nonperforming |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial and multifamily real estate |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Noncriticized |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Criticized performing |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Criticized nonperforming |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial and industrial |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial banking | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||||||||||||||
(1)
Criticized exposures correspond to the “Special Mention,” “Substandard” and “Doubtful” asset categories defined by bank regulatory authorities.
|
90
|
Capital One Financial Corporation (COF) | |||||||
Financial Difficulty Modifications to Borrowers
As part of our loss mitigation efforts, we may provide short-term (one to twelve months) or long-term (greater than twelve months) modifications to a borrower experiencing financial difficulty to improve long-term collectibility of the loan and to avoid the need for repossession or foreclosure of collateral.
We consider the impact of all loan modifications when estimating the credit quality of our loan portfolio and establishing allowance levels. For our Commercial Banking customers, loan modifications are also considered in the assignment of an internal risk rating.
For additional information on
financial difficulty modifications
(“FDMs”), see “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2024 Form 10-K.
The following tables present the major modification types, amortized cost amounts for each modification type and financial effects for all FDMs undertaken during the three months ended March 31, 2025 and 2024.
Table 4.6: Financial Difficulty Modifications to Borrowers
__________
| Three Months Ended March 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Credit Card | Consumer Banking | Commercial Banking | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Domestic Card | International Card Businesses | Total Credit Card | Auto | Retail Banking | Total Consumer Banking | Commercial and Multifamily Real Estate | Commercial and Industrial | Total Commercial Banking | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate reduction | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||||||||||||||
| Term extension |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Principal balance reduction |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate reduction and term extension |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Other
(1)
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total loans modified | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||||||||||||||
| % of total class of receivables |
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
|
% | ||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended March 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Credit Card | Consumer Banking | Commercial Banking | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Domestic Card | International Card Businesses | Total Credit Card | Auto | Retail Banking | Total Consumer Banking | Commercial and Multifamily Real Estate | Commercial and Industrial | Total Commercial Banking | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate reduction | $ |
|
$ |
|
$ |
|
|
|
|
|
|
|
$ |
|
||||||||||||||||||||||||||||||||||||||||||||||||
| Term extension |
|
|
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|
||||||||||||||||||||||||||||||||||||||||||||||
| Principal balance reduction |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate reduction and term extension |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Other
(1)
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total loans modified | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||||||||||||||
| % of total class of receivables |
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
|
% | ||||||||||||||||||||||||||||||||||||||||||
(1)
Primarily consists of modifications or combinations of modifications not categorized above, such as increases in committed exposure, forbearances and other types of modifications in Commercial Banking.
|
91
|
Capital One Financial Corporation (COF) | |||||||
Table 4.7: Financial Effects of Financial Difficulty Modifications to Borrowers
| Three Months Ended March 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| Credit Card | Consumer Banking | Commercial Banking | ||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Domestic Card | International Card Businesses | Auto | Retail Banking | Commercial and Multifamily Real Estate | Commercial and Industrial | ||||||||||||||||||||||||||||||||
| Weighted-average interest rate reduction |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Payment delay duration (in months) |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Principal balance reduction |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Three Months Ended March 31, 2024 | ||||||||||||||||||||||||||||||||||||||
| Credit Card | Consumer Banking | Commercial Banking | ||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Domestic Card | International Card Businesses | Auto | Retail Banking | Commercial and Multifamily Real Estate | Commercial and Industrial | ||||||||||||||||||||||||||||||||
| Weighted-average interest rate reduction |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Payment delay duration (in months) |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Principal balance reduction |
|
|
|
|
|
$
|
||||||||||||||||||||||||||||||||
Performance of Financial Difficulty Modifications to Borrowers
We monitor loan performance trends, including FDMs, to assess and manage our exposure to credit risk. See “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2024 Form 10-K for additional information on how the allowance for modified loans is calculated for each portfolio segment. FDMs are accumulated and the performance of each loan that received an FDM is reported on a rolling twelve month basis.
The following tables present FDMs over a rolling 12 month period by delinquency status as of March 31, 2025 and 2024.
Table 4.8 Delinquency Status of Financial Difficulty Modifications to Borrowers
(1)
| March 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| Delinquent Loans | ||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Current | 30-59 Days | 60-89 Days |
>
90 Days
|
Total Delinquent Loans | Total Loans | ||||||||||||||||||||||||||||||||
| Credit Card: | ||||||||||||||||||||||||||||||||||||||
| Domestic credit card | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||
| International card businesses |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total credit card |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Consumer Banking: | ||||||||||||||||||||||||||||||||||||||
| Auto |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Retail banking |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total consumer banking |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Commercial Banking: | ||||||||||||||||||||||||||||||||||||||
| Commercial and multifamily real estate |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Commercial and industrial |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total commercial banking |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||
|
92
|
Capital One Financial Corporation (COF) | |||||||
| March 31, 2024 | ||||||||||||||||||||||||||||||||||||||
| Delinquent Loans | ||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Current | 30-59 Days | 60-89 Days |
>
90 Days
|
Total Delinquent Loans | Total Loans | ||||||||||||||||||||||||||||||||
| Credit Card: | ||||||||||||||||||||||||||||||||||||||
| Domestic credit card | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||
| International card businesses |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total credit card |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Consumer Banking: | ||||||||||||||||||||||||||||||||||||||
| Auto |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Retail banking |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total consumer banking |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Commercial Banking: | ||||||||||||||||||||||||||||||||||||||
| Commercial and multifamily real estate |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Commercial and industrial |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total commercial banking |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||
(1)
Commitments to lend additional funds on FDMs totaled $
225
million and $
190
million as of March 31, 2025 and 2024, respectively.
Subsequent Defaults of Financial Difficulty Modifications to Borrowers
FDMs may subsequently enter default. A default occurs if a FDM is either 90 days or more delinquent, has been charged off, or has been reclassified from accrual to nonaccrual status. Loans that entered a modification program while in default are not considered to have subsequently defaulted for purposes of this disclosure. The allowance for any FDMs that have subsequently defaulted is measured using the same methodology as the allowance for loans held for investment. See “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2024 Form 10-K for additional information.
|
93
|
Capital One Financial Corporation (COF) | |||||||
The following table presents FDMs that entered subsequent default for the three months ended March 31, 2025 and 2024.
Table 4.9 Subsequent Defaults of Financial Difficulty Modifications to Borrowers
| Three Months Ended March 31, 2025 | ||||||||||||||||||||||||||||||||
| (Dollars in millions) | Interest Rate Reduction | Term Extension | Interest Rate Reduction and Term Extension |
Other Modifications
|
Total Loans | |||||||||||||||||||||||||||
| Credit Card: | ||||||||||||||||||||||||||||||||
| Domestic credit card | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| International card businesses |
|
|
|
|
|
|||||||||||||||||||||||||||
| Total credit card |
|
|
|
|
|
|||||||||||||||||||||||||||
| Consumer Banking: | ||||||||||||||||||||||||||||||||
| Auto |
|
|
|
|
|
|||||||||||||||||||||||||||
| Total consumer banking |
|
|
|
|
|
|||||||||||||||||||||||||||
| Commercial Banking: | ||||||||||||||||||||||||||||||||
| Commercial and multifamily real estate |
|
|
|
|
|
|||||||||||||||||||||||||||
| Commercial and industrial |
|
|
|
|
|
|||||||||||||||||||||||||||
| Total commercial banking |
|
|
|
|
|
|||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Three Months Ended March 31, 2024 | ||||||||||||||||||||||||||
| (Dollars in millions) | Interest Rate Reduction | Term Extension | Interest Rate Reduction and Term Extension | Total Loans | ||||||||||||||||||||||
| Credit Card: | ||||||||||||||||||||||||||
| Domestic credit card | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| International card businesses |
|
|
|
|
||||||||||||||||||||||
| Total credit card |
|
|
|
|
||||||||||||||||||||||
| Consumer Banking: | ||||||||||||||||||||||||||
| Auto |
|
|
|
|
||||||||||||||||||||||
| Total consumer banking |
|
|
|
|
||||||||||||||||||||||
| Commercial Banking: | ||||||||||||||||||||||||||
| Commercial and multifamily real estate |
|
|
|
|
||||||||||||||||||||||
| Commercial and industrial |
|
|
|
|
||||||||||||||||||||||
| Total commercial banking |
|
|
|
|
||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
|
94
|
Capital One Financial Corporation (COF) | |||||||
Loans Pledged
We pledged loan collateral of $
6.9
billion and $
6.7
billion to secure a portion of our FHLB borrowing capacity of $
34.9
billion and $
35.1
billion as of March 31, 2025 and December 31, 2024, respectively. We also pledged loan collateral of $
75.9
billion and $
80.2
billion to secure our Federal Reserve Discount Window borrowing capacity of $
44.4
billion and $
46.7
billion as of March 31, 2025 and December 31, 2024, respectively. In addition to loans pledged, we have securitized a portion of our credit card and auto loan portfolios. See “Note 6—Variable Interest Entities and Securitizations” for additional information.
Revolving Loans Converted to Term Loans
For the three months ended March 31, 2025 and 2024, we converted $
141
million and $
116
million of revolving loans to term loans, respectively, primarily in our domestic credit card and commercial banking loan portfolios.
|
95
|
Capital One Financial Corporation (COF) | |||||||
| NOTE 5—ALLOWANCE FOR CREDIT LOSSES AND RESERVE FOR UNFUNDED LENDING COMMITMENTS | ||
Our allowance for credit losses represents management’s current estimate of expected credit losses over the contractual terms of our loans held for investment as of each balance sheet date. Expected recoveries of amounts previously charged off or expected to be charged off are recognized within the allowance. Significant judgment is applied in our estimation of lifetime credit losses. When developing an estimate of expected credit losses, we use both quantitative and qualitative methods in considering all available information relevant to assessing collectibility. This may include internal information, external information, or a combination of both relating to past events, current conditions and reasonable and supportable forecasts. Our estimate of expected credit losses includes a reasonable and supportable forecast period of one year and then reverts over a one-year period to historical losses at each relevant loss component of the estimate. Management will consider and may qualitatively adjust for conditions, changes and trends in loan portfolios that may not be captured in modeled results. These adjustments are referred to as qualitative factors and represent management’s judgment of the imprecision and risks inherent in the processes and assumptions used in establishing the allowance for credit losses.
We have unfunded lending commitments in our Commercial Banking business that are not unconditionally cancellable by us and for which we estimate expected credit losses in establishing a reserve. This reserve is measured using the same measurement objectives as the allowance for loans held for investment. We build or release the reserve for unfunded lending commitments through the provision for credit losses in our consolidated statements of income. The related reserve for unfunded lending commitments is included in other liabilities on our consolidated balance sheets.
See “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2024 Form 10-K for further discussion of the methodology and policies for determining our allowance for credit losses for each of our loan portfolio segments, as well as information on our reserve for unfunded lending commitments.
|
96
|
Capital One Financial Corporation (COF) | |||||||
Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity
The table below summarizes changes in the allowance for credit losses and reserve for unfunded lending commitments by portfolio segment for the three months ended March 31, 2025 and 2024. Our allowance for credit losses decreased by $
359
million to $
15.9
billion as of March 31, 2025 from December 31, 2024.
Table 5.1: Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity
| Three Months Ended March 31, 2025 | ||||||||||||||||||||||||||
| (Dollars in millions) | Credit Card | Consumer Banking | Commercial Banking | Total | ||||||||||||||||||||||
| Allowance for credit losses: | ||||||||||||||||||||||||||
| Balance as of December 31, 2024 | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
|
Charge-offs
|
(
|
(
|
(
|
(
|
||||||||||||||||||||||
|
Recoveries
(1)
|
|
|
|
|
||||||||||||||||||||||
| Net charge-offs |
(
|
(
|
(
|
(
|
||||||||||||||||||||||
|
Provision for credit losses
|
|
|
|
|
||||||||||||||||||||||
|
Allowance build (release) for credit losses
|
(
|
(
|
|
(
|
||||||||||||||||||||||
|
Other changes
(2)
|
|
|
|
|
||||||||||||||||||||||
| Balance as of March 31, 2025 |
|
|
|
|
||||||||||||||||||||||
| Reserve for unfunded lending commitments: | ||||||||||||||||||||||||||
| Balance as of December 31, 2024 |
|
|
|
|
||||||||||||||||||||||
| Provision (benefit) for losses on unfunded lending commitments |
|
|
|
|
||||||||||||||||||||||
| Balance as of March 31, 2025 |
|
|
|
|
||||||||||||||||||||||
| Combined allowance and reserve as of March 31, 2025 | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Three Months Ended March 31, 2024 | ||||||||||||||||||||||||||
| (Dollars in millions) | Credit Card | Consumer Banking | Commercial Banking | Total | ||||||||||||||||||||||
| Allowance for credit losses: | ||||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Charge-offs |
(
|
(
|
(
|
(
|
||||||||||||||||||||||
|
Recoveries
(1)
|
|
|
|
|
||||||||||||||||||||||
| Net charge-offs |
(
|
(
|
(
|
(
|
||||||||||||||||||||||
| Provision for credit losses |
|
|
|
|
||||||||||||||||||||||
| Allowance build (release) for credit losses |
|
|
(
|
|
||||||||||||||||||||||
|
Other changes
(2)
|
(
|
|
|
(
|
||||||||||||||||||||||
| Balance as of March 31, 2024 |
|
|
|
|
||||||||||||||||||||||
| Reserve for unfunded lending commitments: | ||||||||||||||||||||||||||
| Balance as of December 31, 2023 |
|
|
|
|
||||||||||||||||||||||
| Provision (benefit) for losses on unfunded lending commitments |
|
|
(
|
(
|
||||||||||||||||||||||
| Balance as of March 31, 2024 |
|
|
|
|
||||||||||||||||||||||
| Combined allowance and reserve as of March 31, 2024 | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
(1)
The amount and timing of recoveries are impacted by our collection strategies, which are based on customer behavior and risk profile and include direct customer communications, repossession of collateral, the periodic sale of charged off loans as well as additional strategies, such as litigation.
(2)
Primarily represents foreign currency translation adjustments.
|
97
|
Capital One Financial Corporation (COF) | |||||||
We charge off loans when we determine that the loan is uncollectible. The amortized cost basis, excluding accrued interest, is charged off as a reduction to the allowance for credit losses in accordance with our accounting policies. For more information, see “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2024 Form 10-K.
Expected recoveries of amounts previously charged off or expected to be charged off are recognized within the allowance, with a corresponding reduction to our provision for credit losses.
The table below presents gross charge-offs for loans held for investment by vintage year during the three months ended March 31, 2025.
Table 5.2: Gross Charge-Offs by Vintage Year
| Three Months Ended March 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans by Vintage Year | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Total Term Loans | Revolving Loans | Revolving Loans Converted to Term | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Credit Card | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Domestic credit card | N/A | N/A | N/A | N/A | N/A | N/A | N/A | $ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| International card business | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total credit card | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer Banking | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Auto | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||
| Retail banking |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer banking |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial Banking | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and multifamily real estate |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial banking |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||||||||||||||
|
98
|
Capital One Financial Corporation (COF) | |||||||
Credit Card Partnership Loss Sharing Arrangements
We have certain credit card partnership agreements that are presented within our consolidated financial statements on a net basis, in which our partner agrees to share a portion of the credit losses on the underlying loan portfolio. The expected reimbursements from these partners are netted against our allowance for credit losses. Our methodology for estimating reimbursements is consistent with the methodology we use to estimate the allowance for credit losses on our credit card loan receivables. These expected reimbursements result in reductions in net charge-offs and the provision for credit losses. See “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2024 Form 10-K for further discussion of our credit card partnership agreements.
The table below summarizes the changes in the estimated reimbursements from these partners for the three months ended March 31, 2025 and 2024.
Table 5.3: Summary of Credit Card Partnership Loss Sharing Arrangements Impacts
| Three Months Ended March 31, | ||||||||||||||
| (Dollars in millions) | 2025 |
2024
|
||||||||||||
| Estimated reimbursements from partners, beginning of period | $ |
|
$ |
|
||||||||||
| Amounts due from partners for charged off loans |
(
|
(
|
||||||||||||
|
Change in estimated partner reimbursements that decreased provision for credit losses
|
|
|
||||||||||||
| Estimated reimbursements from partners, end of period | $ |
|
$ |
|
||||||||||
|
99
|
Capital One Financial Corporation (COF) | |||||||
| NOTE 6—VARIABLE INTEREST ENTITIES AND SECURITIZATIONS | ||
In the normal course of business, we enter into various types of transactions with entities that are considered to be variable interest entity (“VIEs”)s. Our primary involvement with VIEs is related to our securitization transactions in which we transfer assets to securitization trusts. We primarily securitize credit card and auto loans, which provide a source of funding for us and enable us to transfer a certain portion of the economic risk of the loans or related debt securities to third parties.
The entity that has a controlling financial interest in a VIE is referred to as the primary beneficiary and is required to consolidate the VIE.
Summary of Consolidated and Unconsolidated VIEs
The assets of our consolidated VIEs primarily consist of cash, loan receivables and the related allowance for credit losses, which we report on our consolidated balance sheets under restricted cash for securitization investors, loans held in consolidated trusts and allowance for credit losses, respectively. The assets of a particular VIE are the primary source of funds to settle its obligations. Creditors of these VIEs typically do not have recourse to our general credit. Liabilities primarily consist of debt securities issued by the VIEs, which we report under securitized debt obligations on our consolidated balance sheets. For unconsolidated VIEs, we present the carrying amount of assets and liabilities reflected on our consolidated balance sheets and our maximum exposure to loss. Our maximum exposure to loss is estimated based on the unlikely event that all of the assets in the VIEs become worthless and we are required to meet the maximum amount of any remaining funding obligations.
The tables below present a summary of VIEs in which we had continuing involvement or held a significant variable interest, aggregated based on VIEs with similar characteristics as of March 31, 2025 and December 31, 2024. We separately present information for consolidated and unconsolidated VIEs.
Table 6.1: Carrying Amount of Consolidated and Unconsolidated VIEs
| March 31, 2025 | ||||||||||||||||||||||||||||||||
| Consolidated | Unconsolidated | |||||||||||||||||||||||||||||||
| (Dollars in millions) | Carrying Amount of Assets | Carrying Amount of Liabilities | Carrying Amount of Assets | Carrying Amount of Liabilities | Maximum Exposure to Loss | |||||||||||||||||||||||||||
|
Securitization-Related VIEs:
(1)
|
||||||||||||||||||||||||||||||||
|
Credit card loan securitizations
(2)
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Auto loan securitizations |
|
|
|
|
|
|||||||||||||||||||||||||||
| Total securitization-related VIEs |
|
|
|
|
|
|||||||||||||||||||||||||||
|
Other VIEs:
(3)
|
||||||||||||||||||||||||||||||||
| Affordable housing entities |
|
|
|
|
|
|||||||||||||||||||||||||||
| Entities that provide capital to low-income and rural communities |
|
|
|
|
|
|||||||||||||||||||||||||||
|
Other
(4)
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Total other VIEs |
|
|
|
|
|
|||||||||||||||||||||||||||
| Total VIEs | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
|
100
|
Capital One Financial Corporation (COF) | |||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||
| Consolidated | Unconsolidated | |||||||||||||||||||||||||||||||
| (Dollars in millions) | Carrying Amount of Assets | Carrying Amount of Liabilities | Carrying Amount of Assets | Carrying Amount of Liabilities | Maximum Exposure to Loss | |||||||||||||||||||||||||||
|
Securitization-Related VIEs:
(1)
|
||||||||||||||||||||||||||||||||
|
Credit card loan securitizations
(2)
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Auto loan securitizations |
|
|
|
|
|
|||||||||||||||||||||||||||
| Total securitization-related VIEs |
|
|
|
|
|
|||||||||||||||||||||||||||
|
Other VIEs:
(3)
|
||||||||||||||||||||||||||||||||
| Affordable housing entities |
|
|
|
|
|
|||||||||||||||||||||||||||
| Entities that provide capital to low-income and rural communities |
|
|
|
|
|
|||||||||||||||||||||||||||
|
Other
(4)
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Total other VIEs |
|
|
|
|
|
|||||||||||||||||||||||||||
| Total VIEs | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
(1)
Excludes insignificant VIEs from previously exited businesses.
(2)
Represents the carrying amount of assets and liabilities of the VIE, which includes the seller’s interest and repurchased notes held by other related parties.
(3)
In certain investment structures, we consolidate a VIE which holds as its primary asset an investment in an unconsolidated VIE. In these instances, we disclose the carrying amount of assets and liabilities on our consolidated balance sheets as unconsolidated VIEs to avoid duplicating our exposure, as the unconsolidated VIEs are generally the operating entities generating the exposure. The carrying amount of assets and liabilities included in the unconsolidated VIE columns above related to these investment structures were $
2.6
billion of assets and $
958
million of liabilities as of March 31, 2025, and $
2.7
billion of assets and $
1.0
billion of liabilities as of December 31, 2024.
(4)
Primarily consists of variable interests in companies that promote renewable energy sources and other equity method investments.
Securitization-Related VIEs
In a securitization transaction, assets are transferred to a trust, which generally meets the definition of a VIE. We engage in securitization activities as an issuer and an investor. Our primary securitization issuance activity includes credit card and auto securitizations, conducted through securitization trusts which we consolidate. Our continuing involvement in these securitization transactions mainly consists of acting as the primary servicer and holding certain retained interests. We also engage in securitization-related activity in our multifamily agency business, where we do not consolidate the securitization trusts employed in these transactions.
Credit Card and Auto Securitizations
We securitize a portion of our credit card receivables and auto loans which provides a source of funding for us. These securitizations involve the transfer of assets, credit card receivables and auto loans, into securitization trusts. These trusts then issue debt securities collateralized by the transferred assets to third-party investors. We hold certain retained interests and continue to service the assets in these trusts. We consolidate these trusts because we are deemed to be the primary beneficiary as we have the power to direct the activities that most significantly impact the economic performance of the trusts, and the right to receive benefits or the obligation to absorb losses that could potentially be significant to the trusts.
|
101
|
Capital One Financial Corporation (COF) | |||||||
Multifamily Agency Securitization Activity
In our multifamily agency business, we originate multifamily commercial real estate loans and transfer them to GSEs who may, in turn, securitize them. We retain the related mortgage servicing rights (“MSRs”) and service the transferred loans pursuant to the guidelines set forth by the GSEs. We do not consolidate the securitization trusts employed in these transactions as we do not have the power to direct the activities that most significantly impact the economic performance of these securitization trusts. We exclude these VIEs from the tables within this note because we do not consider our continuing involvement with these VIEs to be significant as we either solely invest in securities issued by the VIE and were not involved in the design of the VIE or no transfers have occurred between the VIE and ourselves. Our maximum exposure to loss as a result of our involvement with these VIEs is the carrying value of the MSRs and investment securities on our consolidated balance sheets as well as our contractual obligations under loss sharing arrangements. See “Note 14—Commitments, Contingencies, Guarantees and Others” for information about the loss sharing agreements, “Note 7—Goodwill and Other Intangible Assets” for information related to our MSRs associated with these securitizations and “Note 3—Investment Securities” for more information on the securities held in our investment securities portfolio.
Other VIEs
Affordable Housing Entities
As part of our community reinvestment initiatives, we invest in private investment funds that make equity investments in multifamily affordable housing properties, a majority of which are VIEs. We receive affordable housing tax credits for these investments. The activities of these entities are financed with a combination of invested equity capital and debt. We account for our investments in qualified affordable housing projects using the proportional amortization method, where costs of the investment are amortized over the period in which the investor expects to receive tax credits and other tax benefits, and the resulting amortization is recognized as a component of income tax expense attributable to continuing operations. For the three months ended March 31, 2025 and 2024, we recognized amortization of $
159
million and $
178
million, respectively, and tax credits of $
153
million and $
184
million, respectively, associated with these investments within income tax provision. The carrying value of our equity investments in these qualified affordable housing projects was $
5.2
billion and $
5.3
billion as of March 31, 2025 and December 31, 2024, respectively. We are periodically required to provide additional financial or other support during the period of the investments. Our liability for these unfunded commitments was $
1.9
billion and $
2.1
billion as of March 31, 2025 and December 31, 2024, respectively, and is largely expected to be paid from 2025 to 2028.
For those investment funds considered to be VIEs, we are not required to consolidate them if we do not have the power to direct the activities that most significantly impact the economic performance of those entities. We record our interests in these unconsolidated VIEs in loans held for investment, other assets and other liabilities on our consolidated balance sheets. Our maximum exposure to these entities is limited to our variable interests in the entities which consisted of assets of approximately $
5.5
billion as of both March 31, 2025 and December 31, 2024. The creditors of the VIEs have no recourse to our general credit and we do not provide additional financial or other support other than during the period that we are contractually required to provide it. The total assets of the unconsolidated VIE investment funds were approximately $
18.1
billion as of both March 31, 2025 and December 31, 2024.
Entities that Provide Capital to Low-Income and Rural Communities
We hold variable interests in entities (“Investor Entities”) that invest in community development entities (“CDEs”) that provide debt financing to businesses and non-profit entities in low-income and rural communities. Variable interests in the CDEs held by the consolidated Investor Entities are also our variable interests. The activities of the Investor Entities are financed with a combination of invested equity capital and debt. The activities of the CDEs are financed solely with invested equity capital. We receive federal and state tax credits for these investments. We consolidate the VIEs in which we have the power to direct the activities that most significantly impact the VIE’s economic performance and where we have the obligation to absorb losses or right to receive benefits that could potentially be significant to the VIE. We consolidate other investments and CDEs that are not considered to be VIEs, but where we hold a controlling financial interest. The assets of the VIEs that we consolidated, which totaled approximately $
2.8
billion and $
2.6
billion as of March 31, 2025 and December 31, 2024, respectively, are reflected on our consolidated balance sheets in cash, loans held for investment, and other assets. The liabilities are reflected in other liabilities. The creditors of the VIEs have no recourse to our general credit. We have not provided additional financial or other support other than during the period that we are contractually required to provide it.
|
102
|
Capital One Financial Corporation (COF) | |||||||
Other
We hold variable interests in other VIEs, including companies that promote renewable energy sources and other equity method investments. We are not required to consolidate these VIEs because we do not have the power to direct the activities that most significantly impact their economic performance. Our maximum exposure to these VIEs is limited to the investments on our consolidated balance sheets of $
975
million and $
874
million as of March 31, 2025 and December 31, 2024, respectively. The creditors of the other VIEs have no recourse to our general credit. We have not provided additional financial or other support other than during the period that we are contractually required to provide it.
Our renewable energy source equity investments subject to proportional amortization had a carrying value of $
670
million as of March 31, 2025. We are periodically required to provide additional financial or other support during the period of the investments. Our liability for these unfunded commitments was $
138
million as of March 31, 2025, and is expected to be paid from 2025 to 2035.
In addition, where we have certain lending arrangements in the normal course of business with entities that could be VIEs, we have excluded these VIEs from the tables presented in this note. See “Note 4—Loans” for additional information regarding our lending arrangements in the normal course of business
|
103
|
Capital One Financial Corporation (COF) | |||||||
| NOTE 7—GOODWILL AND OTHER INTANGIBLE ASSETS | ||
The table below presents our goodwill, other intangible assets and MSRs as of March 31, 2025 and December 31, 2024. Goodwill is presented separately, while other intangible assets and MSRs are included in other assets on our consolidated balance sheets.
Table 7.1: Components of Goodwill, Other Intangible Assets and MSRs
| March 31, 2025 | ||||||||||||||||||||
| (Dollars in millions) | Carrying Amount of Assets | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||
| Goodwill | $ |
|
N/A | $ |
|
|||||||||||||||
| Other intangible assets: | ||||||||||||||||||||
|
Purchased credit card relationship intangibles
|
|
$ |
(
|
|
||||||||||||||||
|
Other
(1)
|
|
(
|
|
|||||||||||||||||
| Total other intangible assets |
|
(
|
|
|||||||||||||||||
| Total goodwill and other intangible assets | $ |
|
$ |
(
|
$ |
|
||||||||||||||
|
Commercial MSRs
(2)
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||
| December 31, 2024 | ||||||||||||||||||||
| (Dollars in millions) | Carrying Amount of Assets | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||
| Goodwill | $ |
|
N/A | $ |
|
|||||||||||||||
| Other intangible assets: | ||||||||||||||||||||
|
Purchased credit card relationship intangibles
|
|
$ |
(
|
|
||||||||||||||||
|
Other
(1)
|
|
(
|
|
|||||||||||||||||
| Total other intangible assets |
|
(
|
|
|||||||||||||||||
| Total goodwill and other intangible assets | $ |
|
$ |
(
|
$ |
|
||||||||||||||
|
Commercial MSRs
(2)
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||
(1)
Primarily consists of intangibles for sponsorship, customer and merchant relationships, domain names and licenses.
(2)
Commercial MSRs are accounted for under the amortization method.
Goodwill
The following table presents changes in the carrying amount of goodwill by each of our business segments as of March 31, 2025 and December 31, 2024.
Table 7.2: Goodwill by Business Segments
| (Dollars in millions) | Credit Card | Consumer Banking | Commercial Banking | Total | ||||||||||||||||||||||
| Balance as of December 31, 2024 | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
|
Other adjustments
(1)
|
|
|
|
|
||||||||||||||||||||||
| Balance as of March 31, 2025 | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
(1)
Primarily represents foreign currency translation adjustments.
|
104
|
Capital One Financial Corporation (COF) | |||||||
| NOTE 8—DEPOSITS AND BORROWINGS | ||
Our deposits, which include checking accounts, money market deposits, negotiable order of withdrawals, savings deposits and time deposits, represent our largest source of funding for our assets and operations. We also use a variety of other funding sources including short-term borrowings, senior and subordinated notes, securitized debt obligations and other borrowings. Securitized debt obligations are presented separately on our consolidated balance sheets, as they represent obligations of consolidated securitization trusts. Federal funds purchased and securities loaned or sold under agreements to repurchase, senior and subordinated notes and other borrowings, including FHLB advances, are included in other debt on our consolidated balance sheets.
Our total short-term borrowings generally consist of federal funds purchased, securities loaned or sold under agreements to repurchase and FHLB advances. Our long-term debt consists of borrowings with an original contractual maturity of greater than one year.
The following tables summarize the components of our deposits, short-term borrowings and long-term debt as of March 31, 2025 and December 31, 2024. The carrying value presented below for these borrowings includes any unamortized debt premiums and discounts, net of debt issuance costs and fair value hedge accounting adjustments.
Table 8.1: Components of Deposits, Short-Term Borrowings and Long-Term Debt
| (Dollars in millions) | March 31, 2025 | December 31, 2024 | ||||||||||||
| Deposits: | ||||||||||||||
| Non-interest-bearing deposits | $ |
|
$ |
|
||||||||||
|
Interest-bearing deposits
(1)
|
|
|
||||||||||||
| Total deposits | $ |
|
$ |
|
||||||||||
| Short-term borrowings: | ||||||||||||||
| Federal funds purchased and securities loaned or sold under agreements to repurchase | $ |
|
$ |
|
||||||||||
| Total short-term borrowings | $ |
|
$ |
|
||||||||||
| March 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||
| (Dollars in millions) | Maturity Dates | Stated Interest Rates | Weighted-Average Interest Rate | Carrying Value | Carrying Value | |||||||||||||||||||||||||||
| Long-term debt: | ||||||||||||||||||||||||||||||||
| Securitized debt obligations | 2025 - 2030 |
|
|
$ |
|
$ |
|
|||||||||||||||||||||||||
| Senior and subordinated notes: | ||||||||||||||||||||||||||||||||
|
Fixed unsecured senior debt
(2)
|
2026 - 2035 |
|
|
|
|
|||||||||||||||||||||||||||
| Fixed unsecured subordinated debt | 2025 - 2036 |
|
|
|
|
|||||||||||||||||||||||||||
| Total senior and subordinated notes |
|
|
||||||||||||||||||||||||||||||
| Other long-term borrowings | 2025 - 2029 |
|
|
|
|
|||||||||||||||||||||||||||
| Total long-term debt | $ |
|
$ |
|
||||||||||||||||||||||||||||
| Total short-term borrowings and long-term debt | $ |
|
$ |
|
||||||||||||||||||||||||||||
__________
(1)
Some customers have time deposits in excess of the federal deposit insurance limit, making a portion of the deposit uninsured. As of March 31, 2025, the total time deposit amount with some portion in excess of the insured amount was $
12.6
billion and the portion of total time deposits estimated to be uninsured was $
8.8
billion
. As of
December 31, 2024, the total time deposit amount with some portion in excess of the insured amount was $
15.2
billion and the portion of total time deposits estimated to be uninsured was
$
10.1
billion.
(2)
Includes $
494
million and $
473
million of Euro (“EUR”) denominated unsecured notes as of March 31, 2025 and December 31, 2024, respectively.
|
105
|
Capital One Financial Corporation (COF) | |||||||
| NOTE 9—DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | ||
Use of Derivatives and Accounting for Derivatives
We regularly enter into derivative transactions to support our overall risk management activities. Our primary market risks stem from the impact on our earnings and economic value of equity due to changes in interest rates and, to a lesser extent, changes in foreign exchange rates. We manage our interest rate sensitivity by employing several techniques, which include changing the duration and re-pricing characteristics of various assets and liabilities by using interest rate derivatives. We also use foreign currency derivatives to limit our earnings and capital exposures to foreign exchange risk by hedging certain exposures denominated in foreign currencies. We primarily use interest rate and foreign currency swaps to perform these hedging activities, but we may also use a variety of other derivative instruments, including caps, floors, options, futures and forward contracts, to manage our interest rate and foreign exchange risks. We designate these risk management derivatives as either qualifying accounting hedges or free-standing derivatives. Qualifying accounting hedges are further designated as fair value hedges, cash flow hedges or net investment hedges. Free-standing derivatives are economic hedges that do not qualify for hedge accounting.
We offer interest rate, commodity, foreign currency derivatives and other contracts as an accommodation to our customers within our Commercial Banking business. We enter into these derivatives with our customers primarily to help them manage their interest rate risks, hedge their energy and other commodities exposures, and manage foreign currency fluctuations. We offset the substantial majority of the market risk exposure of our customer accommodation derivatives through derivative transactions with other counterparties.
See below for additional information on our use of derivatives and how we account for them:
•
Fair Value Hedges:
We designate derivatives as fair value hedges when they are used to manage our exposure to changes in the fair value of certain financial assets and liabilities, which fluctuate in value as a result of movements in interest rates. Changes in the fair value of derivatives designated as fair value hedges are presented in the same line item in our consolidated statements of income as the earnings effect of the hedged items. We enter into receive-fixed, pay-float interest rate swaps to hedge changes in the fair value of outstanding fixed rate debt and deposits due to fluctuations in market interest rates. We also enter into pay-fixed, receive-float interest rate swaps to hedge changes in the fair value of fixed rate investment securities.
•
Cash Flow Hedges:
We designate derivatives as cash flow hedges when they are used to manage our exposure to variability in cash flows related to forecasted transactions. Changes in the fair value of derivatives designated as cash flow hedges are recorded as a component of accumulated other comprehensive income (“AOCI”). Those amounts are reclassified into earnings in the same period during which the hedged forecasted transactions impact earnings and presented in the same line item in our consolidated statements of income as the earnings effect of the hedged items. We enter into receive-fixed, pay-float interest rate swaps and interest rate floors to modify the interest rate characteristics of designated credit card and commercial loans from floating to fixed in order to reduce the impact of changes in forecasted future cash flows due to fluctuations in market interest rates. We also enter into foreign currency forward contracts to hedge our exposure to variability in cash flows related to intercompany borrowings denominated in foreign currencies.
•
Net Investment Hedges:
We use net investment hedges to manage the foreign currency exposure related to our net investments in foreign operations that have functional currencies other than the U.S. dollar. Changes in the fair value of net investment hedges are recorded in the translation adjustment component of AOCI, offsetting the translation gain or loss from those foreign operations. We execute net investment hedges using foreign currency forward contracts to hedge the translation exposure of the net investment in our foreign operations under the forward method.
•
Free-Standing Derivatives:
Our free-standing derivatives primarily consist of our customer accommodation derivatives and other economic hedges. The customer accommodation derivatives and the related offsetting contracts are mainly interest rate, commodity and foreign currency contracts. The other free-standing derivatives are primarily used to economically hedge the risk of changes in the fair value of our commercial mortgage loan origination and purchase commitments as well as other interests held. Changes in the fair value of free-standing derivatives are recorded in earnings as a component of other non-interest income.
|
106
|
Capital One Financial Corporation (COF) | |||||||
Derivatives Counterparty Credit Risk
Counterparty Types
Derivative instruments contain an element of credit risk that stems from the potential failure of a counterparty to perform according to the terms of the contract, including making payments due upon maturity of certain derivative instruments. We execute our derivative contracts primarily in over-the-counter (“OTC”) markets. We also execute interest rate and commodity futures in the exchange-traded derivative markets. Our OTC derivatives consist of both trades cleared through central counterparty clearinghouses (“CCPs”) and uncleared bilateral contracts. The Chicago Mercantile Exchange (“CME”), the Intercontinental Exchange (“ICE”) and the LCH Group (“LCH”) are our CCPs for our centrally cleared contracts. In our uncleared bilateral contracts, we enter into agreements directly with our derivative counterparties.
Counterparty Credit Risk Management
We manage the counterparty credit risk associated with derivative instruments by entering into legally enforceable master netting agreements, where applicable, and exchanging collateral with our counterparties, typically in the form of cash or high-quality liquid securities. We exchange collateral in two primary forms: variation margin, which accounts for changes in market value due to daily market movements, and initial margin, which offsets the potential future exposure of a derivative.
We exchange variation margin and initial margin on bilateral derivatives in scope for uncleared margin rules.
The amount of collateral exchanged for variation margin is dependent upon the fair value of the derivative instruments as well as the fair value of the pledged collateral and will vary over time as market variables change. The amount of the initial margin exchanged is dependent upon 1) the calculation of initial margin exposure, as prescribed by 1(a) the U.S. prudential regulators’ margin rules for uncleared derivatives (“PR Rules”) or 1(b) the CCPs for cleared derivatives and 2) the fair value of the pledged collateral; it will vary over time as market variables change. When valuing collateral, an estimate of the variation in price and liquidity over time is subtracted in the form of a “haircut” to discount the value of the collateral pledged. Our exposure to derivative counterparty credit risk, at any point in time, is equal to the amount reported as a derivative asset on our balance sheet. The fair value of our derivatives is adjusted on an aggregate basis to take into consideration the effects of legally enforceable master netting agreements and any associated collateral received or pledged. See Table 9.3 for our net exposure associated with derivatives.
The terms under which we collateralize our exposures differ between cleared exposures and uncleared bilateral exposures.
•
CCPs
: We clear eligible OTC derivatives with CCPs as part of our regulatory requirements. We also clear exchange-traded instruments, like futures, with CCPs. Futures commission merchants (“FCMs”) serve as the intermediary between CCPs and us. CCPs require that we post initial and variation margin through our FCMs to mitigate the risk of non-payment or default. Initial margin is required by CCPs as collateral against potential losses on our exchange-traded and cleared derivative contracts and variation margin is exchanged on a daily basis to account for mark-to-market changes in those derivative contracts. For CME, ICE and LCH-cleared OTC derivatives, variation margin cash payments are required to be characterized as settlements. Our FCM agreements governing these derivative transactions include provisions that may require us to post additional collateral under certain circumstances.
•
Bilateral Counterparties
: We enter into master netting agreements and collateral agreements with bilateral derivative counterparties, where applicable, to mitigate the risk of default. These bilateral agreements typically provide the right to offset exposure with the same counterparty and require the party in a net liability position to post collateral. Agreements with certain bilateral counterparties require both parties to maintain collateral in the event the fair values of uncleared derivatives exceed established exposure thresholds. Certain of these bilateral agreements include provisions requiring that our debt maintain a credit rating of investment grade or above by each of the major credit rating agencies. In the event of a downgrade of our debt credit rating below investment grade, some of our counterparties would have the right to terminate their derivative contract and close out existing positions.
|
107
|
Capital One Financial Corporation (COF) | |||||||
Credit Risk Valuation Adjustments
We record counterparty credit valuation adjustments (“CVAs”) on our derivative assets to reflect the credit quality of our counterparties. We consider collateral and legally enforceable master netting agreements that mitigate our credit exposure to each counterparty in determining CVAs, which may be adjusted due to changes in the fair values of the derivative contracts, collateral, and creditworthiness of the counterparty. We also record debit valuation adjustments (“DVAs”) to adjust the fair values of our derivative liabilities to reflect the impact of our own credit quality.
Balance Sheet Presentation
The following table summarizes the notional amounts and fair values of our derivative instruments as of March 31, 2025 and December 31, 2024, which are segregated by derivatives that are designated as accounting hedges and those that are not, and are further segregated by type of contract within those two categories. The total derivative assets and liabilities are adjusted on an aggregate basis to take into consideration the effects of legally enforceable master netting agreements and any associated cash collateral received or pledged. Derivative assets and liabilities are included in other assets and other liabilities, respectively, on our consolidated balance sheets, and their related gains or losses are included in operating activities as changes in other assets and other liabilities in the consolidated statements of cash flows.
Table 9.1: Derivative Assets and Liabilities at Fair Value
| March 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||
| Notional or Contractual Amount |
Derivative
(1)
|
Notional or Contractual Amount |
Derivative
(1)
|
|||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Assets | Liabilities | Assets | Liabilities | ||||||||||||||||||||||||||||||||||
| Derivatives designated as accounting hedges: | ||||||||||||||||||||||||||||||||||||||
| Interest rate contracts: | ||||||||||||||||||||||||||||||||||||||
| Fair value hedges | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||
| Cash flow hedges |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total interest rate contracts |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Foreign exchange contracts: | ||||||||||||||||||||||||||||||||||||||
| Fair value hedges |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Cash flow hedges |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Net investment hedges |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total foreign exchange contracts |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total derivatives designated as accounting hedges |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Derivatives not designated as accounting hedges: | ||||||||||||||||||||||||||||||||||||||
| Customer accommodation: | ||||||||||||||||||||||||||||||||||||||
| Interest rate contracts |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Commodity contracts |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Foreign exchange and other contracts |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total customer accommodation |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
Other interest rate exposures
(2)
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Other contracts |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total derivatives not designated as accounting hedges |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Total derivatives | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||
|
Less: netting adjustment
(3)
|
(
|
(
|
(
|
(
|
||||||||||||||||||||||||||||||||||
| Total derivative assets/liabilities | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||
(1)
Does not reflect $
3
million and $
1
million
recognized as a net valuation allowance on derivative assets and liabilities for non-performance risk as of March 31, 2025 and December 31, 2024, respectively. This net valuation allowance is included as part of other assets and other liabilities on the consolidated balance sheets, and is offset through non-interest income in the consolidated statements of income.
(2)
Other interest rate exposures include commercial mortgage-related derivatives and interest rate swaps.
|
108
|
Capital One Financial Corporation (COF) | |||||||
(3)
Represents balance sheet netting of derivative assets and liabilities, and related payables and receivables for cash collateral held or placed with the same counterparty.
The following table summarizes the carrying value of our hedged assets and liabilities in fair value hedges and the associated cumulative basis adjustments included in those carrying values, excluding basis adjustments related to foreign currency risk, as of March 31, 2025 and December 31, 2024.
Table 9.2: Hedged Items in Fair Value Hedging Relationships
| March 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||
| Carrying Amount Assets/(Liabilities) | Cumulative Amount of Basis Adjustments Included in the Carrying Amount | Carrying Amount Assets/(Liabilities) | Cumulative Amount of Basis Adjustments Included in the Carrying Amount | |||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Total Assets/(Liabilities) | Discontinued-Hedging Relationships | Total Assets/(Liabilities) | Discontinued-Hedging Relationships | ||||||||||||||||||||||||||||||||||
| Line item on our consolidated balance sheets in which the hedged item is included: | ||||||||||||||||||||||||||||||||||||||
|
Investment securities available for sale
(1)(2)
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||||||
| Interest-bearing deposits |
(
|
|
|
(
|
|
|
||||||||||||||||||||||||||||||||
| Securitized debt obligations |
(
|
|
|
(
|
|
|
||||||||||||||||||||||||||||||||
| Senior and subordinated notes |
(
|
|
(
|
(
|
|
(
|
||||||||||||||||||||||||||||||||
(1)
These amounts include the amortized cost basis of our investment securities designated in hedging relationships for which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. The amortized cost basis of this portfolio was $
3.5
billion and $
3.4
billion as of March 31, 2025 and December 31, 2024, respectively. The amount of the designated hedged items was $
2.2
billion and $
2.1
billion as of March 31, 2025 and December 31, 2024, respectively. The cumulative basis adjustments associated with these hedges was $
15
million and $
16
million as of March 31, 2025 and December 31, 2024, respectively.
Balance Sheet Offsetting of Financial Assets and Liabilities
Derivative contracts and repurchase agreements that we execute bilaterally in the OTC market are generally governed by enforceable master netting agreements where we generally have the right to offset exposure with the same counterparty. Either counterparty can generally request to net settle all contracts through a single payment upon default on, or termination of, any one contract. We elect to offset the derivative assets and liabilities under master netting agreements for balance sheet presentation where a right of setoff exists. For derivative contracts entered into under master netting agreements for which we have not been able to confirm the enforceability of the setoff rights, or those not subject to master netting agreements, we do not offset our derivative positions for balance sheet presentation.
The following table presents the gross and net fair values of our derivative assets, derivative liabilities, resale and repurchase agreements and the related offsetting amounts permitted under U.S. GAAP as of March 31, 2025 and December 31, 2024. The table also includes cash and non-cash collateral received or pledged in accordance with such arrangements. The amount of collateral presented, however, is limited to the amount of the related net derivative fair values or outstanding balances; therefore, instances of over-collateralization are excluded.
|
109
|
Capital One Financial Corporation (COF) | |||||||
Table 9.3: Offsetting of Financial Assets and Financial Liabilities
| Gross Amounts | Gross Amounts Offset in the Balance Sheet | Net Amounts as Recognized | Securities Collateral Held Under Master Netting Agreements | Net Exposure | ||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Financial Instruments | Cash Collateral Received | ||||||||||||||||||||||||||||||||||||
| As of March 31, 2025 | ||||||||||||||||||||||||||||||||||||||
|
Derivative assets
(1)
|
$ |
|
$ |
(
|
$ |
(
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||||||
| As of December 31, 2024 | ||||||||||||||||||||||||||||||||||||||
|
Derivative assets
(1)
|
|
(
|
(
|
|
(
|
|
||||||||||||||||||||||||||||||||
| Gross Amounts | Gross Amounts Offset in the Balance Sheet | Net Amounts as Recognized | Securities Collateral Pledged Under Master Netting Agreements | Net Exposure | ||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Financial Instruments | Cash Collateral Pledged | ||||||||||||||||||||||||||||||||||||
| As of March 31, 2025 | ||||||||||||||||||||||||||||||||||||||
|
Derivative liabilities
(1)
|
$ |
|
$ |
(
|
$ |
(
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||||||
|
Repurchase agreements
(2)
|
|
|
|
|
(
|
|
||||||||||||||||||||||||||||||||
| As of December 31, 2024 | ||||||||||||||||||||||||||||||||||||||
|
Derivative liabilities
(1)
|
|
(
|
(
|
|
(
|
|
||||||||||||||||||||||||||||||||
|
Repurchase agreements
(2)
|
|
|
|
|
(
|
|
||||||||||||||||||||||||||||||||
(1)
We received cash collateral from derivative counterparties totaling $
519
million and $
1.1
billion as of March 31, 2025 and December 31, 2024, respectively. We also received securities from derivative counterparties with a fair value of approximately $
5
million and $
18
million as of March 31, 2025 and December 31, 2024, respectively, which we have the ability to re-pledge. We posted $
1.9
billion and $
1.6
billion of cash collateral as of March 31, 2025 and
December 31, 2024
, respectively.
(2)
Under our customer repurchase agreements, which mature the next business day, we pledged collateral with a fair value of $
584
million and $
573
million as of March 31, 2025 and
December 31, 2024
, respectively, primarily consisting of agency RMBS securities.
|
110
|
Capital One Financial Corporation (COF) | |||||||
Income Statement and AOCI Presentation
Fair Value and Cash Flow Hedges
The net gains (losses) recognized in our consolidated statements of income related to derivatives in fair value and cash flow hedging relationships are presented below for the three months ended March 31, 2025 and 2024.
Table 9.4: Effects of Fair Value and Cash Flow Hedge Accounting
| Three Months Ended March 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||
| Net Interest Income | Non-Interest Income | |||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Investment Securities | Loans, Including Loans Held for Sale | Other | Interest-bearing Deposits | Securitized Debt Obligations | Senior and Subordinated Notes | Other | |||||||||||||||||||||||||||||||||||||
|
Total amounts presented in our consolidated statements of income
|
$ |
|
$ |
|
$ |
|
$ |
(
|
$ |
(
|
$ |
(
|
$ |
|
||||||||||||||||||||||||||||||
|
Fair value hedging relationships:
|
||||||||||||||||||||||||||||||||||||||||||||
| Interest rate and foreign exchange contracts: | ||||||||||||||||||||||||||||||||||||||||||||
| Interest recognized on derivatives | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
(
|
$ |
(
|
$ |
|
||||||||||||||||||||||||||||||
| Gains (losses) recognized on derivatives |
(
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
|
Gains (losses) recognized on hedged items
(1)
|
|
|
|
(
|
(
|
(
|
(
|
|||||||||||||||||||||||||||||||||||||
|
Excluded component of fair value hedges
(2)
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
| Net income (expense) recognized on fair value hedges | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
(
|
$ |
(
|
$ |
|
||||||||||||||||||||||||||||||
|
Cash flow hedging relationships:
(3)
|
||||||||||||||||||||||||||||||||||||||||||||
| Interest rate contracts: | ||||||||||||||||||||||||||||||||||||||||||||
| Realized gains (losses) reclassified from AOCI into net income | $ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||
| Foreign exchange contracts: | ||||||||||||||||||||||||||||||||||||||||||||
|
Realized gains (losses) reclassified from AOCI into net income
(4)
|
|
|
|
|
|
|
(
|
|||||||||||||||||||||||||||||||||||||
| Net income (expense) recognized on cash flow hedges | $ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
||||||||||||||||||||||||||||||
|
111
|
Capital One Financial Corporation (COF) | |||||||
| Three Months Ended March 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||
| Net Interest Income | Non-Interest Income | |||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Investment Securities | Loans, Including Loans Held for Sale | Other | Interest-bearing Deposits | Securitized Debt Obligations | Senior and Subordinated Notes | Other | |||||||||||||||||||||||||||||||||||||
| Total amounts presented in our consolidated statements of income | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
(
|
$ |
(
|
$ |
|
||||||||||||||||||||||||||||||
| Fair value hedging relationships: | ||||||||||||||||||||||||||||||||||||||||||||
| Interest rate and foreign exchange contracts: | ||||||||||||||||||||||||||||||||||||||||||||
| Interest recognized on derivatives | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
(
|
$ |
(
|
$ |
|
||||||||||||||||||||||||||||||
| Gains (losses) recognized on derivatives |
|
|
|
(
|
(
|
(
|
(
|
|||||||||||||||||||||||||||||||||||||
|
Gains (losses) recognized on hedged items
(1)
|
(
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
|
Excluded component of fair value hedges
(2)
|
|
|
|
|
|
(
|
|
|||||||||||||||||||||||||||||||||||||
| Net income (expense) recognized on fair value hedges | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
(
|
$ |
(
|
$ |
|
||||||||||||||||||||||||||||||
|
Cash flow hedging relationships:
(3)
|
||||||||||||||||||||||||||||||||||||||||||||
| Interest rate contracts: | ||||||||||||||||||||||||||||||||||||||||||||
| Realized gains reclassified from AOCI into net income | $ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||
| Foreign exchange contracts: | ||||||||||||||||||||||||||||||||||||||||||||
|
Realized gains (losses) reclassified from AOCI into net income
(4)
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
| Net income (expense) recognized on cash flow hedges | $ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||
(1)
Includes amortization benefit of $
10
million and $
23
million for the three months ended March 31, 2025 and 2024, respectively, related to basis adjustments on discontinued hedges.
(2)
Changes in fair values of cross-currency swaps attributable to changes in cross-currency basis spreads are excluded from the assessment of hedge effectiveness and recorded in other comprehensive income (“OCI”). The initial value of the excluded component is recognized in earnings over the life of the swap under the amortization approach.
(3)
See “Note 10—Stockholders’ Equity” for the effects of cash flow and net investment hedges on AOCI and amounts reclassified to net income, net of tax.
(4)
We recognized a loss of $
126
million and gain of $
73
million for the three months ended March 31, 2025 and 2024, respectively, on foreign exchange contracts reclassified from AOCI. These amounts were largely offset by the foreign currency transaction gains (losses) on our foreign currency denominated intercompany funding included in other non-interest income on our consolidated statements of income
.
In the next 12 months, we expect to reclassify into earnings an after-tax loss of $
571
million recorded in AOCI as of March 31, 2025 associated with cash flow hedges of forecasted transactions. This amount will largely offset the cash flows associated with the forecasted transactions hedged by these derivatives. The maximum length of time over which forecasted transactions were hedged was approximately
9.0
years as of March 31, 2025. The amount we expect to reclassify into earnings may change as a result of changes in market conditions and ongoing actions taken as part of our overall risk management strategy.
Free-Standing Derivatives
The net impacts to our consolidated statements of income related to free-standing derivatives are presented below for the three
|
112
|
Capital One Financial Corporation (COF) | |||||||
months ended March 31, 2025 and 2024. These gains or losses are recognized in other non-interest income on our consolidated statements of income.
Table 9.5: Gains (Losses) on Free-Standing Derivatives
| Three Months Ended March 31, | ||||||||||||||
| (Dollars in millions) | 2025 | 2024 | ||||||||||||
| Gains (losses) recognized in other non-interest income: | ||||||||||||||
| Customer accommodation: | ||||||||||||||
| Interest rate contracts | $ |
|
$ |
|
||||||||||
| Commodity contracts |
|
|
||||||||||||
| Foreign exchange and other contracts |
|
|
||||||||||||
| Total customer accommodation |
|
|
||||||||||||
| Other interest rate exposures |
|
|
||||||||||||
| Other contracts |
(
|
(
|
||||||||||||
| Total | $ |
|
$ |
|
||||||||||
|
113
|
Capital One Financial Corporation (COF) | |||||||
| NOTE 10—STOCKHOLDERS’ EQUITY | ||
Preferred Stock
The following table summarizes our preferred stock outstanding as of March 31, 2025 and December 31, 2024. We may redeem each series of preferred stock at our option, in whole or in part, on any dividend payment date on or after the date set forth below for such series and subject to regulatory approval, at the liquidation preference per share plus any declared and unpaid dividends. For more information on the terms of our preferred stock, please refer to the relevant certificate of designations filed as exhibits to our 2024 Form 10-K.
Table 10.1: Preferred Stock Outstanding
(1)
| Redeemable by Issuer Beginning | Per Annum Dividend Rate | Dividend Frequency | Liquidation Preference per Share |
Total Shares Outstanding
as of March 31, 2025 |
Carrying Value
(in millions) |
|||||||||||||||||||||||||||||||||||||||||||||||||||
| Series | Description | Issuance Date | March 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series I |
5.000%
Non-Cumulative |
September 11,
2019 |
December 1, 2024 |
|
Quarterly | $ |
|
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||||||||||||||||
| Series J |
4.800%
Non-Cumulative |
January 31,
2020 |
June 1, 2025 |
|
Quarterly |
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Series K |
4.625%
Non-Cumulative |
September 17,
2020 |
December 1, 2025 |
|
Quarterly |
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Series L |
4.375%
Non-Cumulative |
May 4,
2021 |
September 1, 2026 |
|
Quarterly |
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Series M |
3.950% Fixed Rate Reset
Non-Cumulative |
June 10,
2021 |
September 1, 2026 |
|
Quarterly |
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Series N |
4.250%
Non-Cumulative |
July 29,
2021 |
September 1, 2026 |
|
Quarterly |
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
(1)
Except for Series
M
, ownership is held in the form of depositary shares, each representing a 1/40th interest in a share of fixed-rate non-cumulative perpetual preferred stock.
|
114
|
Capital One Financial Corporation (COF) | |||||||
Accumulated Other Comprehensive Income
AOCI primarily consists of accumulated net unrealized gains or losses associated with securities available for sale, changes in fair value of derivatives in hedging relationships and foreign currency translation adjustments.
The following table presents the changes in AOCI by component for the three months ended March 31, 2025 and 2024.
Table 10.2: AOCI
| (Dollars in millions) | Securities Available for Sale |
Hedging Relationships
(1)
|
Foreign Currency Translation Adjustments
(2)
|
Other | Total | |||||||||||||||||||||||||||
| AOCI as of December 31, 2024 | $ |
(
|
$ |
(
|
$ |
|
$ |
(
|
$ |
(
|
||||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications |
|
|
|
|
|
|||||||||||||||||||||||||||
| Amounts reclassified from AOCI into earnings |
|
|
|
|
|
|||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax |
|
|
|
|
|
|||||||||||||||||||||||||||
| AOCI as of March 31, 2025 | $ |
(
|
$ |
(
|
$ |
|
$ |
(
|
$ |
(
|
||||||||||||||||||||||
| (Dollars in millions) | Securities Available for Sale |
Hedging Relationships
(1)
|
Foreign Currency Translation Adjustments
(2)
|
Other | Total | |||||||||||||||||||||||||||
| AOCI as of December 31, 2023 | $ |
(
|
$ |
(
|
$ |
|
$ |
(
|
$ |
(
|
||||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications |
(
|
(
|
(
|
|
(
|
|||||||||||||||||||||||||||
| Amounts reclassified from AOCI into earnings |
|
|
|
|
|
|||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax |
(
|
(
|
(
|
|
(
|
|||||||||||||||||||||||||||
| AOCI as of March 31, 2024 | $ |
(
|
$ |
(
|
$ |
|
$ |
(
|
$ |
(
|
||||||||||||||||||||||
(1)
Includes amounts related to cash flow hedges as well as the excluded component of cross-currency swaps designated as fair value hedges.
(2)
Includes other comprehensive losses of $
69
million and gains of $
49
million for the three months ended March 31, 2025 and 2024, respectively, from hedging instruments designated as net investment hedges.
|
115
|
Capital One Financial Corporation (COF) | |||||||
The following table presents amounts reclassified from each component of AOCI to our consolidated statements of income for the three months ended March 31, 2025 and 2024.
Table 10.3: Reclassifications from AOCI
| (Dollars in millions) | Three Months Ended March 31, | |||||||||||||||||||
| AOCI Components | Affected Income Statement Line Item | 2025 | 2024 | |||||||||||||||||
| Securities available for sale: | ||||||||||||||||||||
|
Non-interest income (expense)
|
$ |
|
$ |
|
||||||||||||||||
| Income tax provision (benefit) |
|
|
||||||||||||||||||
| Net income (loss) |
|
|
||||||||||||||||||
| Hedging relationships: | ||||||||||||||||||||
| Interest rate contracts: |
Interest income (expense)
|
(
|
(
|
|||||||||||||||||
| Foreign exchange contracts: |
Interest income
|
|
|
|||||||||||||||||
| Interest income (expense) |
|
(
|
||||||||||||||||||
|
Non-interest income (expense)
|
(
|
|
||||||||||||||||||
| Income (loss) from continuing operations before income taxes |
(
|
(
|
||||||||||||||||||
|
Income tax provision (benefit)
|
(
|
(
|
||||||||||||||||||
|
Net income (loss)
|
(
|
(
|
||||||||||||||||||
| Other: | ||||||||||||||||||||
| Non-interest income and non-interest expense |
|
|
||||||||||||||||||
| Income tax provision (benefit) |
|
|
||||||||||||||||||
|
Net income (loss)
|
|
|
||||||||||||||||||
| Total reclassifications | $ |
(
|
$ |
(
|
||||||||||||||||
The table below summarizes other comprehensive income (loss) activity and the related tax impact for the three months ended March 31, 2025 and 2024.
Table 10.4: Other Comprehensive Income (Loss)
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||||||||||||||
| (Dollars in millions) |
Before
Tax |
Provision
(Benefit) |
After
Tax |
Before
Tax |
Provision
(Benefit) |
After
Tax |
||||||||||||||||||||||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||||||||||||||||||||||||
| Net unrealized gains (losses) on securities available for sale | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
(
|
$ |
(
|
||||||||||||||||||||||||||
| Net unrealized gains (losses) on hedging relationships |
|
|
|
(
|
(
|
(
|
||||||||||||||||||||||||||||||||
|
Foreign currency translation adjustments
(1)
|
(
|
(
|
|
|
|
(
|
||||||||||||||||||||||||||||||||
| Other |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
(
|
$ |
(
|
||||||||||||||||||||||||||
__________
(1)
Includes the impact of hedging instruments designated as net investment hedges.
|
116
|
Capital One Financial Corporation (COF) | |||||||
| NOTE 11—EARNINGS PER COMMON SHARE | ||
The following table sets forth the computation of basic and diluted earnings per common share.
Table 11.1: Computation of Basic and Diluted Earnings per Common Share
| Three Months Ended March 31, | |||||||||||||||||
| (Dollars and shares in millions, except per share data) | 2025 | 2024 | |||||||||||||||
| Net income | $ |
|
$ |
|
|||||||||||||
| Dividends and undistributed earnings allocated to participating securities |
(
|
(
|
|||||||||||||||
| Preferred stock dividends |
(
|
(
|
|||||||||||||||
| Net income available to common stockholders | $ |
|
$ |
|
|||||||||||||
| Total weighted-average basic common shares outstanding |
|
|
|||||||||||||||
|
Effect of dilutive securities:
(1)
|
|||||||||||||||||
| Stock options |
|
|
|||||||||||||||
| Other contingently issuable shares |
|
|
|||||||||||||||
| Total effect of dilutive securities |
|
|
|||||||||||||||
| Total weighted-average diluted common shares outstanding |
|
|
|||||||||||||||
| Basic earnings per common share: | |||||||||||||||||
| Net income per basic common share | $ |
|
$ |
|
|||||||||||||
|
Diluted earnings per common share:
(1)
|
|||||||||||||||||
| Net income per diluted common share | $ |
|
$ |
|
|||||||||||||
(1)
There were
no
options or awards excluded from the computation for the three months ended March 31, 2025. Excluded from the computation of diluted earnings per share were awards of
128
thousand shares for the three months ended March 31, 2024, because their inclusion would be anti-dilutive. There were
no
options excluded from the computation for the three months ended March 31, 2024.
,,
|
117
|
Capital One Financial Corporation (COF) | |||||||
| NOTE 12—FAIR VALUE MEASUREMENT | ||
Fair value, also referred to as an exit price, is defined as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The fair value accounting guidance provides a three-level fair value hierarchy for classifying financial instruments. This hierarchy is based on the markets in which the assets or liabilities trade and whether the inputs to the valuation techniques used to measure fair value are observable or unobservable. The fair value measurement of a financial asset or liability is assigned a level based on the lowest level of any input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are described below:
| Level 1: | Valuation is based on quoted prices (unadjusted) in active markets for identical assets or liabilities. | |||||||
| Level 2: | Valuation is based on observable market-based inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | |||||||
| Level 3: |
Valuation is generated from techniques that use significant assumptions not observable in the market. Valuation techniques include pricing models, discounted cash flow methodologies or similar techniques.
|
|||||||
The accounting guidance for fair value measurements requires that we maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. We consider all available information, including observable market data, indications of market liquidity and orderliness, and our understanding of the valuation techniques and significant inputs. Based upon the specific facts and circumstances of each instrument or instrument category, judgments are made regarding the significance of the observable or unobservable inputs to the instruments’ fair value measurement in its entirety. If unobservable inputs are considered significant, the instrument is classified as Level 3. The process for determining fair value using unobservable inputs is generally more subjective and involves a high degree of management judgment and assumptions. The accounting guidance provides for the irrevocable option to elect, on a contract-by-contract basis, to measure certain financial assets and liabilities at fair value at inception of the contract and record any subsequent changes in fair value in earnings.
The determination and classification of financial instruments in the fair value hierarchy is performed at the end of each reporting period. For additional information on the valuation techniques used in estimating the fair value of our financial assets and liabilities on a recurring basis, see “Part II—Item 8.Financial Statements and Supplementary Data—Note 17—Fair Value Measurement” in our 2024 Form 10-K.
|
118
|
Capital One Financial Corporation (COF) | |||||||
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table displays our assets and liabilities measured on our consolidated balance sheets at fair value on a recurring basis as of March 31, 2025 and December 31, 2024.
The following table displays our assets and liabilities measured on our consolidated balance sheets at fair value on a recurring basis as of March 31, 2025 and December 31, 2024.
Table 12.1: Assets and Liabilities Measured at Fair Value on a Recurring Basis
| March 31, 2025 | ||||||||||||||||||||||||||||||||
| Fair Value Measurements Using |
Netting Adjustments
(1)
|
|||||||||||||||||||||||||||||||
| (Dollars in millions) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||
| Securities available for sale: | ||||||||||||||||||||||||||||||||
| U.S. Treasury securities | $ |
|
$ |
|
$ |
|
$ | 0 | $ |
|
||||||||||||||||||||||
| RMBS |
|
|
|
0 |
|
|||||||||||||||||||||||||||
| CMBS |
|
|
|
0 |
|
|||||||||||||||||||||||||||
| Other securities |
|
|
|
0 |
|
|||||||||||||||||||||||||||
| Total securities available for sale |
|
|
|
0 |
|
|||||||||||||||||||||||||||
| Loans held for sale |
|
|
|
0 |
|
|||||||||||||||||||||||||||
| Other assets: | ||||||||||||||||||||||||||||||||
|
Derivative assets
(2)
|
|
|
|
(
|
|
|||||||||||||||||||||||||||
|
Other
(3)
|
|
|
|
0 |
|
|||||||||||||||||||||||||||
| Total assets | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||
| Other liabilities: | ||||||||||||||||||||||||||||||||
|
|
$ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||
| Total liabilities | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||
| Fair Value Measurements Using |
Netting Adjustments
(1)
|
|||||||||||||||||||||||||||||||
| (Dollars in millions) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||
| Securities available for sale: | ||||||||||||||||||||||||||||||||
| U.S. Treasury securities | $ |
|
$ |
|
$ |
|
$ | 0 | $ |
|
||||||||||||||||||||||
| RMBS |
|
|
|
0 |
|
|||||||||||||||||||||||||||
| CMBS |
|
|
|
0 |
|
|||||||||||||||||||||||||||
| Other securities |
|
|
|
0 |
|
|||||||||||||||||||||||||||
| Total securities available for sale |
|
|
|
0 |
|
|||||||||||||||||||||||||||
| Loans held for sale |
|
|
|
0 |
|
|||||||||||||||||||||||||||
| Other assets: | ||||||||||||||||||||||||||||||||
|
|
|
|
|
(
|
|
|||||||||||||||||||||||||||
|
Other
(3)
|
|
|
|
0 |
|
|||||||||||||||||||||||||||
| Total assets | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||
| Other liabilities: | ||||||||||||||||||||||||||||||||
|
Derivative liabilities
(2)
|
$ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||
| Total liabilities | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||
(1)
Represents balance sheet netting of derivative assets and liabilities, and related payables and receivables for cash collateral held or placed with the same counterparty. See “Note 9—Derivative Instruments and Hedging Activities” for additional information.
(2)
Does not reflec
t approximate
ly
$
3
million
and $
1
million recognized as a net valuation allowance on derivative assets and liabilities for non-performance risk as of March 31, 2025 and December 31, 2024, respectively. Non-performance risk is included in the measurement of derivative assets and liabilities on our consolidated balance sheets, and is recorded through non-interest income in the consolidated statements of income.
|
119
|
Capital One Financial Corporation (COF) | |||||||
(3)
As of March 31, 2025 and December 31, 2024, other includes retained interests in securitizations o
f $
32
million
and $
34
million, def
erred compensation plan assets of $
701
million and $
688
million, respectively, and equity securities of $
1
million as of
December 31, 2024
.
Level 3 Recurring Fair Value Rollforward
The table below presents a reconciliation for all assets and liabilities measured and recognized at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2025 and 2024. Generally, transfers into Level 3 were primarily driven by the usage of unobservable assumptions in the pricing of these financial instruments as evidenced by wider pricing variations among pricing vendors and transfers out of Level 3 were primarily driven by the usage of assumptions corroborated by market observable information as evidenced by tighter pricing among multiple pricing sources.
Table 12.2: Level 3 Recurring Fair Value Rollforward
__________
| Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended March 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Total Gains (Losses)
(Realized/Unrealized) |
Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of March 31, 2025
(1)
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Balance, January 1, 2025 |
Included
in Net
Income
(1)
|
Included in OCI | Purchases | Sales | Issuances | Settlements |
Transfers
Into Level 3 |
Transfers
Out of Level 3 |
Balance,
March 31, 2025 |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Securities available for sale:
(2)
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RMBS | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||||||||||||||||||
| CMBS |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total securities available for sale |
|
|
|
|
|
|
(
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other assets: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Retained interests in securitizations |
|
(
|
|
|
|
|
|
|
|
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
(
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended March 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Total Gains (Losses)
(Realized/Unrealized) |
Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of March 31, 2024
(1)
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Balance, January 1, 2024 |
Included
in Net
Income
(1)
|
Included in OCI | Purchases | Sales | Issuances | Settlements |
Transfers
Into Level 3 |
Transfers
Out of Level 3 |
Balance, March 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Securities available for sale:
(2)
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RMBS | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
$ |
(
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||||||||||||||||||
| CMBS |
|
|
(
|
|
|
|
(
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total securities available for sale |
|
|
(
|
|
|
|
(
|
|
(
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other assets: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Retained interests in securitizations |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Net derivative assets (liabilities)
(3)(4)
|
|
|
|
|
|
(
|
(
|
|
|
|
(
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1)
Realized gains (losses) on securities available for sale are included in net securities gains (losses) and retained interests in securitizations are reported as a component of non-interest income in our consolidated statements of income. Gains (losses) on derivatives are included as a component of net interest income or non-interest income in our consolidated statements of income.
(2)
Net unrealized gains included in other comprehensive income related to Level 3 securities available for sale still held were $
4
million as of March 31, 2025 and net unrealized losses included in other comprehensive income related to Level 3 securities available for sale still held were $
8
million as of March 31, 2024.
|
120
|
Capital One Financial Corporation (COF) | |||||||
(3)
Includes derivative assets and liabilities of $
570
million and $
481
million, respectively, as of March 31, 2025 and $
974
million and $
920
million, respectively, as of March 31, 2024.
(4)
Transfers into Level 3 primarily consist of term Secured Overnight Financing Rate (“SOFR”)-indexed interest rate derivatives.
Significant Level 3 Fair Value Asset and Liability Inputs
Generally, uncertainties in fair value measurements of financial instruments, such as changes in unobservable inputs, may have a significant impact on fair value. Certain of these unobservable inputs will, in isolation, have a directionally consistent impact on the fair value of the instrument for a given change in that input. Alternatively, the fair value of the instrument may move in an opposite direction for a given change in another input. In general, an increase in the discount rate, default rates, loss severity or credit spreads, in isolation, would result in a decrease in the fair value measurement. In addition, an increase in default rates would generally be accompanied by a decrease in recovery rates, slower prepayment rates and an increase in
liquidity spreads, and would lead to a decrease in the fair value measurement.
Techniques and Inputs for Level 3 Fair Value Measureme
nts
The following table presents the significant unobservable inputs used to determine the fair values of our Level 3 financial instruments on a recurring basis. We utilize multiple vendor pricing services to obtain fair value for our securities. Several of our vendor pricing services are only able to provide unobservable input information for a limited number of securities due to software licensing restrictions. Other vendor pricing services are able to provide unobservable input information for all securities for which they provide a valuation. As a result, the unobservable input information for the securities available for sale presented below represents a composite summary of all information we are able to obtain. The unobservable input information for all other Level 3 financial instruments is based on the assumptions used in our internal valuation models.
Table 12.3: Quantitative Information about Level 3 Fair Value Measurements
Table 12.3: Quantitative Information about Level 3 Fair Value Measurements
| Quantitative Information about Level 3 Fair Value Measurements | ||||||||||||||||||||||||||||||||
| (Dollars in millions) |
Fair Value at
March 31, 2025 |
Significant
Valuation Techniques |
Significant
Unobservable Inputs |
Range |
Weighted
Average
(1)
|
|||||||||||||||||||||||||||
| Securities available for sale: | ||||||||||||||||||||||||||||||||
| RMBS | $ |
|
Discounted cash flows (vendor pricing) |
Yield
Voluntary prepayment rate Default rate Loss severity |
|
|
||||||||||||||||||||||||||
| CMBS |
|
Discounted cash flows (vendor pricing) |
Yield
|
|
|
|||||||||||||||||||||||||||
| Other assets: | ||||||||||||||||||||||||||||||||
|
Retained interests in securitizations
(2)
|
|
Discounted cash flows |
Life of receivables (months)
Voluntary prepayment rate Discount rate Default rate Loss severity |
|
N/A | |||||||||||||||||||||||||||
| Net derivative assets (liabilities) |
|
Discounted cash flows | Swap rates |
|
|
|||||||||||||||||||||||||||
|
121
|
Capital One Financial Corporation (COF) | |||||||
| Quantitative Information about Level 3 Fair Value Measurements | ||||||||||||||||||||||||||||||||
| (Dollars in millions) |
Fair Value at
December 31, 2024 |
Significant
Valuation Techniques |
Significant
Unobservable Inputs |
Range |
Weighted
Average
(1)
|
|||||||||||||||||||||||||||
| Securities available for sale: | ||||||||||||||||||||||||||||||||
| RMBS | $ |
|
Discounted cash flows (vendor pricing) |
Yield
Voluntary prepayment rate Default rate Loss severity |
|
|
||||||||||||||||||||||||||
| CMBS |
|
Discounted cash flows (vendor pricing) |
Yield
|
|
|
|||||||||||||||||||||||||||
| Other assets: | ||||||||||||||||||||||||||||||||
|
Retained interests in securitizations
(2)
|
|
Discounted cash flows |
Life of receivables (months)
Voluntary prepayment rate Discount rate Default rate Loss severity |
|
N/A | |||||||||||||||||||||||||||
| Net derivative assets (liabilities) |
|
Discounted cash flows | Swap rates |
|
|
|||||||||||||||||||||||||||
(1)
Weighted averages are calculated by using the product of the input multiplied by the relative fair value of the instruments.
(2)
Due to the nature of the various mortgage securitization structures in which we have retained interests, it is not meaningful to present a consolidated weighted average for the significant unobservable inputs.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
We are required to measure and recognize certain assets at fair value on a nonrecurring basis on the consolidated balance sheets. These assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, from the application of lower of cost or fair value accounting or when we evaluate for impairment).
The following table presents the carrying value of the assets measured at fair value on a nonrecurring basis and still held as of March 31, 2025 and
December 31, 2024
,
and for which a nonrecurring fair value measurement was recorded during the three and twelve months then ended.
Table 12.4: Nonrecurring Fair Value Measurements
| March 31, 2025 | ||||||||||||||||||||
| Estimated Fair Value Hierarchy | Total | |||||||||||||||||||
| (Dollars in millions) | Level 2 | Level 3 | ||||||||||||||||||
| Loans held for investment | $ |
|
$ |
|
$ |
|
||||||||||||||
| Loans held for sale |
|
|
|
|||||||||||||||||
|
Other assets
(1)
|
|
|
|
|||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
||||||||||||||
| December 31, 2024 | ||||||||||||||||||||
| Estimated Fair Value Hierarchy | Total | |||||||||||||||||||
| (Dollars in millions) | Level 2 | Level 3 | ||||||||||||||||||
| Loans held for investment | $ |
|
$ |
|
$ |
|
||||||||||||||
| Loans held for sale |
|
|
|
|||||||||||||||||
|
Other assets
(1)
|
|
|
|
|||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
||||||||||||||
(1)
As of March 31, 2025, other assets included investments accounted for under measurement alternative of $
1
million, repossessed assets of $
59
million and long-lived assets held for sale and right-of-use assets totaling $
12
million. As of December 31, 2024, other assets included investments accounted for under measurement alternative of $
71
million and repossessed assets of $
62
million.
|
122
|
Capital One Financial Corporation (COF) | |||||||
In the above table, loans held for investment are generally valued based in part on the estimated fair value of the underlying collateral and the non-recoverable rate, which is considered to be a significant unobservable input. The non-recoverable rate ranged from
8
% to
63
%, with a weighted average of
27
%, and from
0
% to
61
%, wi
th a weighted average of
18
%, as of March 31, 2025 and December 31, 2024, respectively.
The weighted average non-recoverable rate is calculated based on the estimated market value of the underlying collateral. The significant unobservable inputs and related quantitative information related to fair value of the other assets are not meaningful to disclose as they vary significantly across properties and collateral.
The following table presents total nonrecurring fair value measurements for the period, included in earnings, attributable to the change in fair value relating to assets that are still held at March 31, 2025 and 2024.
Table 12.5: Nonrecurring Fair Value Measurements Included in Earnings
| Total Gains (Losses) | ||||||||||||||
| Three Months Ended March 31, | ||||||||||||||
| (Dollars in millions) | 2025 | 2024 | ||||||||||||
| Loans held for investment | $ |
(
|
$ |
(
|
||||||||||
| Loans held for sale |
|
(
|
||||||||||||
|
Other assets
(1)
|
(
|
(
|
||||||||||||
| Total | $ |
(
|
$ |
(
|
||||||||||
(1)
Other assets primarily include fair value adjustments related to repossessed assets, long-lived assets held for sale and right-of-use assets, and equity investments accounted for under the
measurement alternative.
Fair Value of Financial Instruments
The following table presents the carrying value and estimated fair value, including the level within the fair value hierarchy, of our financial instruments that are not measured at fair value on a recurring basis on our consolidated balance sheets as of March 31, 2025 and December 31, 2024.
Table 12.6: Fair Value of Financial Instruments
| March 31, 2025 | ||||||||||||||||||||||||||||||||
|
Carrying
Value |
Estimated
Fair Value |
Estimated Fair Value Hierarchy | ||||||||||||||||||||||||||||||
| (Dollars in millions) | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||||
| Financial assets: | ||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Restricted cash for securitization investors |
|
|
|
|
|
|||||||||||||||||||||||||||
| Net loans held for investment |
|
|
|
|
|
|||||||||||||||||||||||||||
|
Loans held for sale
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Interest receivable |
|
|
|
|
|
|||||||||||||||||||||||||||
|
Other investments
(1)
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||||||||||||||
| Deposits with defined maturities |
|
|
|
|
|
|||||||||||||||||||||||||||
| Securitized debt obligations |
|
|
|
|
|
|||||||||||||||||||||||||||
| Senior and subordinated notes |
|
|
|
|
|
|||||||||||||||||||||||||||
| Federal funds purchased and securities loaned or sold under agreements to repurchase |
|
|
|
|
|
|||||||||||||||||||||||||||
| Interest payable |
|
|
|
|
|
|||||||||||||||||||||||||||
|
123
|
Capital One Financial Corporation (COF) | |||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||
|
Carrying
Value |
Estimated
Fair Value |
Estimated Fair Value Hierarchy | ||||||||||||||||||||||||||||||
| (Dollars in millions) | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||||
| Financial assets: | ||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Restricted cash for securitization investors |
|
|
|
|
|
|||||||||||||||||||||||||||
| Net loans held for investment |
|
|
|
|
|
|||||||||||||||||||||||||||
| Loans held for sale |
|
|
|
|
|
|||||||||||||||||||||||||||
| Interest receivable |
|
|
|
|
|
|||||||||||||||||||||||||||
|
Other investments
(1)
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||||||||||||||
| Deposits with defined maturities |
|
|
|
|
|
|||||||||||||||||||||||||||
| Securitized debt obligations |
|
|
|
|
|
|||||||||||||||||||||||||||
| Senior and subordinated notes |
|
|
|
|
|
|||||||||||||||||||||||||||
| Federal funds purchased and securities loaned or sold under agreements to repurchase |
|
|
|
|
|
|||||||||||||||||||||||||||
| Interest payable |
|
|
|
|
|
|||||||||||||||||||||||||||
(1)
Other investments include FHLB and Federal Reserve stock. These investments are included in other assets on our consolidated balance sheets.
|
124
|
Capital One Financial Corporation (COF) | |||||||
| NOTE 13—BUSINESS SEGMENTS AND REVENUE FROM CONTRACTS WITH CUSTOMERS | ||
Our principal operations are organized into
three
major business segments, which are defined primarily based on the products and services provided or the types of customers served: Credit Card, Consumer Banking and Commercial Banking. The operations of acquired businesses have been integrated into or managed as a part of our existing business segments. Certain activities that are not part of a business segment are included in the Other category, such as the management of our corporate investment portfolio and asset/liability positions performed by our centralized Corporate Treasury group and any residual tax expense or benefit beyond what is assessed to our business segments in order to arrive at the consolidated effective tax rate. The Other category also includes unallocated corporate expenses that do not directly support the operations of the business segments or for which the business segments are not considered financially accountable in evaluating their performance, such as certain restructuring charges and integration expenses related to the Transaction.
Basis of Presentation
Business Segment Reporting Methodology
Segment Results and Reconciliation
We may periodically change our business segments or reclassify business segment results based on modifications to our management reporting methodologies or changes in organizational alignment.
The following table presents our business segment results for the three months ended March 31, 2025 and 2024, selected balance sheet data as of March 31, 2025 and 2024, and a reconciliation of our total business segment results to our reported consolidated income from continuing operations, loans held for investment and deposits.
|
125
|
Capital One Financial Corporation (COF) | |||||||
Table 13.1: Segment Results and Reconciliation
| Three Months Ended March 31, 2025 | ||||||||||||||||||||||||||||||||
| (Dollars in millions) | Credit Card | Consumer Banking |
Commercial Banking
(1)
|
Other
(1)
|
Consolidated Total | |||||||||||||||||||||||||||
| Net interest income (loss) | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||
| Non-interest income (loss) |
|
|
|
(
|
|
|||||||||||||||||||||||||||
|
Total net revenue (loss)
(2)
|
|
|
|
(
|
|
|||||||||||||||||||||||||||
| Provision (benefit) for credit losses |
|
|
|
|
|
|||||||||||||||||||||||||||
| Non-interest expense |
|
|
|
|
|
|||||||||||||||||||||||||||
| Income (loss) from continuing operations before income taxes |
|
|
|
(
|
|
|||||||||||||||||||||||||||
| Income tax provision (benefit) |
|
|
|
(
|
|
|||||||||||||||||||||||||||
| Income (loss) from continuing operations, net of tax | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||
| Loans held for investment | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Deposits |
|
|
|
|
|
|||||||||||||||||||||||||||
| Three Months Ended March 31, 2024 | ||||||||||||||||||||||||||||||||
| (Dollars in millions) | Credit Card | Consumer Banking |
Commercial Banking
(1)
|
Other
(1)
|
Consolidated Total | |||||||||||||||||||||||||||
| Net interest income (loss) | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||
| Non-interest income (loss) |
|
|
|
(
|
|
|||||||||||||||||||||||||||
|
Total net revenue (loss)
(2)
|
|
|
|
(
|
|
|||||||||||||||||||||||||||
| Provision (benefit) for credit losses |
|
|
(
|
|
|
|||||||||||||||||||||||||||
| Non-interest expense |
|
|
|
|
|
|||||||||||||||||||||||||||
| Income (loss) from continuing operations before income taxes |
|
|
|
(
|
|
|||||||||||||||||||||||||||
| Income tax provision (benefit) |
|
|
|
(
|
|
|||||||||||||||||||||||||||
| Income (loss) from continuing operations, net of tax | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||
| Loans held for investment | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Deposits |
|
|
|
|
|
|||||||||||||||||||||||||||
(1)
Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting reductions to the Other category.
(2)
Total net revenue was reduced by $
705
million and $
630
million in the first quarters of 2025 and 2024, respectively, for credit card finance charges and fees charged off as uncollectible.
|
126
|
Capital One Financial Corporation (COF) | |||||||
Revenue from Contracts with Customers
The majority of our revenue from contracts with customers consists of interchange fees, service charges and other customer-related fees, and other contract revenue. Interchange fees are primarily from our Credit Card business and are recognized upon settlement with the interchange networks, net of rewards earned by customers. Service charges and other customer-related fees within our Consumer Banking business are primarily related to fees earned on consumer deposit accounts for account maintenance and various transaction-based services such as automated teller machine (“ATM”) usage. Service charges and other customer-related fees within our Commercial Banking business are mostly related to fees earned on treasury management and capital markets services. Other contract revenue in our Credit Card business consists primarily of revenue from our merchant relationships. Other contract revenue in our Consumer Banking business consists primarily of revenue earned from services provided to auto industry participants. Revenue from contracts with customers is included in non-interest income in our consolidated statements of income.
The following table presents revenue from contracts with customers and a reconciliation to non-interest income by business segment for the three months ended March 31, 2025 and 2024.
Table 13.2: Revenue from Contracts with Customers and Reconciliation to Segment Results
| Three Months Ended March 31, 2025 | ||||||||||||||||||||||||||||||||
| (Dollars in millions) | Credit Card | Consumer Banking |
Commercial Banking
(1)
|
Other
(1)
|
Consolidated Total | |||||||||||||||||||||||||||
| Contract revenue: | ||||||||||||||||||||||||||||||||
|
Interchange fees, net
(2)
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Service charges and other customer-related fees |
|
|
|
|
|
|||||||||||||||||||||||||||
| Other |
|
|
|
|
|
|||||||||||||||||||||||||||
|
Total contract revenue
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Revenue (reduction) from other sources |
|
(
|
|
(
|
|
|||||||||||||||||||||||||||
| Total non-interest income (loss) | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||
| Three Months Ended March 31, 2024 | ||||||||||||||||||||||||||||||||
| (Dollars in millions) | Credit Card | Consumer Banking |
Commercial Banking
(1)
|
Other
(1)
|
Consolidated Total | |||||||||||||||||||||||||||
| Contract revenue: | ||||||||||||||||||||||||||||||||
|
Interchange fees, net
(2)
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Service charges and other customer-related fees |
|
|
|
|
|
|||||||||||||||||||||||||||
| Other |
|
|
|
|
|
|||||||||||||||||||||||||||
| Total contract revenue |
|
|
|
|
|
|||||||||||||||||||||||||||
| Revenue (reduction) from other sources |
|
|
|
(
|
|
|||||||||||||||||||||||||||
| Total non-interest income (loss) | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||
(1)
Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting reductions to the Other category.
|
127
|
Capital One Financial Corporation (COF) | |||||||
| NOTE 14—COMMITMENTS, CONTINGENCIES, GUARANTEES AND OTHERS | ||
Commitments to Lend
Our unfunded lending commitments primarily consist of credit card lines, loan commitments to customers of both our Commercial Banking and Consumer Banking businesses, as well as standby and commercial letters of credit. These commitments, other than credit card lines and certain other unconditionally cancellable lines of credit, are legally binding conditional agreements that have fixed expirations or termination dates and specified interest rates and purposes. The contractual amount of these commitments represents the maximum possible credit risk to us should the counterparty draw upon the commitment. We generally manage the potential risk of unfunded lending commitments by limiting the total amount of arrangements, monitoring the size and maturity structure of these portfolios and applying the same credit standards for all of our credit activities.
For unused credit card lines, we have not experienced and do not anticipate that all of our customers will access their entire available line at any given point in time. Commitments to extend credit other than credit card lines generally require customers to maintain certain credit standards. Collateral requirements and loan-to-value (“LTV”) ratios are the same as those for funded transactions and are established based on management’s credit assessment of the customer. These commitments may expire without being drawn upon; therefore, the total commitment amount does not necessarily represent future funding requirements.
We also issue letters of credit, such as financial standby, performance standby and commercial letters of credit, to meet the financing needs of our customers. Standby letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party in a borrowing arrangement. Commercial letters of credit are short-term commitments issued primarily to facilitate trade finance activities for customers and are generally collateralized by the goods being shipped to the customer. These collateral requirements are similar to those for funded transactions and are established based on management’s credit assessment of the customer. Management conducts regular reviews of all outstanding letters of credit and the results of these reviews are considered in assessing the adequacy of reserves for unfunded lending commitments.
The following table presents the contractual amount and carrying value of our unfunded lending commitments as of March 31, 2025 and December 31, 2024. The carrying value represents our reserve and deferred revenue on legally binding commitments.
Table 14.1: Unfunded Lending Commitments
| Contractual Amount | Carrying Value | |||||||||||||||||||||||||
| (Dollars in millions) | March 31, 2025 | December 31, 2024 | March 31, 2025 | December 31, 2024 | ||||||||||||||||||||||
| Credit card lines | $ |
|
$ |
|
N/A | N/A | ||||||||||||||||||||
|
Other loan commitments
(1)
|
|
|
$ |
|
$ |
|
||||||||||||||||||||
|
Standby letters of credit and commercial letters of credit
(2)
|
|
|
|
|
||||||||||||||||||||||
| Total unfunded lending commitments | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
(1)
Includes $
6.0
billion of advised lines of credit as of both March 31, 2025 and December 31, 2024.
(2)
These financial guarantees have expiration dates that range from 2025 to 2027 as of March 31, 2025.
Loss Sharing Agreements
Within our Commercial Banking business, we originate multifamily commercial real estate loans with the intent to sell them to the GSEs. We enter into loss sharing agreements with the GSEs upon the sale of these originated loans. Beginning January 1, 2020, we elected the fair value option on new loss sharing agreements entered into. Unrealized gains and losses are recorded in other non-interest income in our consolidated statements of income. For those loss sharing agreements entered into as of and prior to December 31, 2019, we amortize the liability recorded at inception into non-interest income as we are released from risk of having to make a payment and record our estimate of expected credit losses each period through the provision for credit losses in our consolidated statements of income. The liability recognized on our consolidated balance sheets for these loss sharing agreements was $
139
million and $
143
million as of March 31, 2025 and December 31, 2024, respectively. See “Note 5—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments” for information related to our credit card partnership loss sharing arrangements.
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Litigation
In accordance with the current accounting standards for loss contingencies, we establish reserves for legal and regulatory related matters that arise from the ordinary course of our business activities when it is probable that a loss associated with a claim or proceeding has been incurred and the amount of the loss can be reasonably estimated. None of the amounts we currently have recorded individually or in the aggregate are considered to be material to our financial condition. Litigation claims and proceedings of all types are subject to many uncertain factors that generally cannot be predicted with assurance. Below we provide a description of potentially material legal and regulatory proceedings and claims.
For some of the matters disclosed below, we are able to estimate reasonably possible losses above existing reserves, and for other disclosed matters, such an estimate is not possible at this time. For those matters below where an estimate is possible, management currently estimates the reasonably possible future losses beyond our reserves as of March 31, 2025 are approximately $
300
million. Our reserve and reasonably possible loss estimates involve considerable judgment and reflect that there is significant uncertainty regarding numerous factors that may impact the ultimate loss levels. Notwithstanding our attempt to estimate a reasonably possible range of loss beyond our current accrual levels for some legal and regulatory matters based on current information, it is possible that actual future losses will exceed both the current accrual level and reasonably possible losses disclosed here. Given the inherent uncertainties involved in these matters and the very large or indeterminate damages sought in some of these, there is significant uncertainty as to the ultimate liability we may incur from these legal and regulatory matters and an adverse outcome in one or more of these matters could be material to our results of operations or cash flows for any particular reporting period.
Interchange Litigation
In 2005, a putative class of retail merchants filed antitrust lawsuits against MasterCard and Visa and several issuing banks, including Capital One, seeking both injunctive relief and monetary damages for an alleged conspiracy by defendants to fix the level of interchange fees. The Visa and MasterCard payment networks and issuing banks entered into settlement and judgment sharing agreements allocating the liabilities of any judgment or settlement arising from all interchange-related cases.
The lawsuits were consolidated before the U.S. District Court for the Eastern District of New York for certain purposes and were settled in 2012. The class settlement, however, was invalidated by the United States Court of Appeals for the Second Circuit in June 2016, and the suit was bifurcated into separate class actions seeking injunctive and monetary relief, respectively. In addition, numerous merchant groups opted out of the 2012 settlement.
The monetary relief class action settled for $
5.5
billion and was approved by the District Court in December 2019. The Second Circuit affirmed the settlement in March 2023, and it is final. Some of the merchants that opted out of the monetary relief class have brought cases, and some of those cases have settled and some remain pending. Visa created a litigation escrow account following its initial public offering of stock in 2008 that funds the portion of these settlements attributable to Visa-allocated transactions. Any settlement amounts based on MasterCard-allocated transactions that have not already been paid are reflected in our reserves. Visa and MasterCard reached a settlement with the injunctive relief class and filed a motion for preliminary approval, which was denied by the District Court in June 2024. The parties will continue to litigate unless a settlement is reached and approved.
Cybersecurity Incident
On July 29, 2019, we announced that on March 22 and 23, 2019 an outside individual gained unauthorized access to our systems. This individual obtained certain types of personal information relating to people who had applied for our credit card products and to our credit card customers (the “2019 Cybersecurity Incident”). As a result of the 2019 Cybersecurity Incident, we have been subject to numerous legal proceedings and other inquiries and could be the subject of additional proceedings and inquiries in the future.
Consumer class actions
. We are currently named as a defendant in
4
putative consumer class action cases in Canadian courts alleging harm from the 2019 Cybersecurity Incident and seeking various remedies, including monetary and injunctive relief. The lawsuits allege breach of contract, negligence, violations of various privacy laws and a variety of other legal causes of action. In the second quarter of 2022, a trial court in British Columbia preliminarily certified a class of all impacted Canadian consumers except those in Quebec. The preliminary certification decision in British Columbia was appealed, with both parties contesting portions of the ruling. On July 4, 2024, the British Columbia Court of Appeal denied both parties’ appeals. In the third quarter of 2023, a trial court in Quebec preliminarily authorized a class of all impacted consumers in Quebec. This
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decision was also appealed and, on February 25, 2025, the Quebec Court of Appeal affirmed the trial court’s ruling. The final
two
putative class actions, both of which are pending in Alberta, are continuing in parallel, but currently remain at a preliminary stage.
Savings Account Litigation and Related CFPB Litigation
On July 10, 2023, we were sued in a putative class action in the Eastern District of Virginia by savings account holders alleging breach of contract and a variety of other causes of action relating to our introduction of a new savings account product with a higher interest rate than existing savings account products (“Savings Account Litigation”). Since the original suit, we have also been sued in six similar putative class actions in federal courts in California, Illinois, Ohio, Virginia, New Jersey and New York. On March 20, 2024, we filed with the Judicial Panel on Multidistrict Litigation a motion to consolidate and transfer related actions to the Eastern District of Virginia. In June 2024, the Judicial Panel granted the motion and transferred the related actions to the Eastern District of Virginia. Plaintiffs filed a consolidated complaint on July 1, 2024, and the court set a trial date in July 2025. In November 2024, the court denied our motion to dismiss. In April 2025, the parties reached a preliminary agreement to settle the case that is subject to court approval.
In August 2024, we received a Civil Investigative Demand from the Consumer Financial Protection Bureau (“CFPB”) relating to the savings account products at issue in the litigation. In October 2024, the CFPB issued a Notice and Opportunity to Respond and Advise (“NORA”) letter indicating that the CFPB was considering an enforcement action against us on similar grounds as the claims in the Savings Account Litigation. On January 14, 2025, the CFPB filed a lawsuit against Capital One in the Eastern District of Virginia. On February 27, 2025, the CFPB voluntarily dismissed its lawsuit against Capital One with prejudice.
Other Pending and Threatened Litigation
In addition, we are commonly subject to various pending and threatened legal actions relating to the conduct of our normal business activities. In the opinion of management, the ultimate aggregate liability, if any, arising out of all such other pending or threatened legal actions is not expected to be material to our consolidated financial position or our results of operations.
Other Contingencies
Deposit Insurance Assessments
On November 16, 2023, the Federal Deposit Insurance Corporation (“FDIC”) finalized a rule to implement a special assessment to recover the loss to the Deposit Insurance Fund (“DIF”) arising from the protection of uninsured depositors in connection with the systemic risk determination announced on March 12, 2023, following the closures of Silicon Valley Bank and Signature Bank. In December 2023, the FDIC provided notification that it would be collecting the special assessment at an annual rate of approximately 13.4 basis points (“bps”) over eight quarterly collection periods, beginning with the first quarter of 2024 with the first payment due on June 28, 2024. In June 2024, the FDIC provided notification that the collection period will be extended an additional two quarters beyond the initial eight quarterly collection periods. The special assessment base is equal to an insured depository institution’s estimated uninsured deposits reported on its Consolidated Reports of Condition and Income as of December 31, 2022 (“2022 Call Report”), adjusted to exclude the first $5 billion of uninsured deposits. We recognized $
289
million in operating expense in the fourth quarter of 2023 associated with the special assessment based on our 2022 Call Report, which was revised and refiled during 2023. As a result of updates from the FDIC related to our portion of the FDIC’s estimate of relevant DIF losses, we have recognized $
328
million of operating expenses related to the special assessment as of March 31, 2025.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
For a discussion of the quantitative and qualitative disclosures about market risk, see “Part I—Item 2. MD&A— Market Risk Profile.
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Item 4. Controls and Procedures
Overview
We are required under applicable laws and regulations to maintain controls and procedures, which include disclosure controls and procedures as well as internal control over financial reporting, as further described below.
(a) Disclosure Controls and Procedures
Disclosure controls and procedures refer to controls and other procedures designed to provide reasonable assurance that information required to be disclosed in our financial reports is recorded, processed, summarized and reported within the time periods specified by SEC rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding our required disclosure. In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and we must apply judgment in evaluating and implementing possible controls and procedures.
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 of the Securities Exchange Act of 1934 (“Exchange Act”), our management, including the CEO and CFO, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of March 31, 2025, the end of the period covered by this Report. Based upon that evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of March 31, 2025, at a reasonable level of assurance, in recording, processing, summarizing and reporting information required to be disclosed within the time periods specified by the SEC rules and forms.
(b) Changes in Internal Control Over Financial Reporting
We regularly review our disclosure controls and procedures and make changes intended to ensure the quality of our financial reporting. There were
no changes in internal control over financial reporting that occurred in the first quarter of 2025 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings
The information required by Item 103 of Regulation S-K is included in “Part I—Item 1. Financial Statements—Note 14—Commitments, Contingencies, Guarantees and Others.”
Item 1A. Risk Factors
We are not aware of any material changes from the risk factors set forth under “Part I—Item 1A. Risk Factors” in our 2024 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table presents information related to the repurchases of shares of our common stock for each calendar month in the first quarter of 2025. Commission costs are excluded from the amounts presented below.
|
Total Number
of Shares
Purchased
(1)
|
Average
Price per Share |
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
(1)
|
Maximum
Amount That May
Yet be Purchased
Under the Plan
or Program
(1)
(in millions)
|
|||||||||||||||||||||||
| January | 22,383 | $ | 178.78 | 19,167 | $ | 4,030 | ||||||||||||||||||||
| February | 1,740,588 | 203.01 | 717,957 | 3,884 | ||||||||||||||||||||||
| March | 106,822 | 163.88 | — | 3,884 | ||||||||||||||||||||||
| Total | 1,869,793 | 200.48 | 737,124 | |||||||||||||||||||||||
(1)
In April 2022, our Board of Directors authorized the repurchase of up to $5.0 billion of shares of our common stock. There were 3,216, 1,022,631 and 106,822 shares withheld in January, February and March to cover taxes on restricted stock awards whose restrictions lapsed. See “Part I—Item 2. MD&A—Capital Management—Dividend Policy and Stock Purchases” for more information.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5.
Other Information
Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements
During the three months ended March 31, 2025, certain of our directors and officers
adopted
or
terminated
a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K as follows:
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Each of the trading plans was entered into during an open insider trading window and is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act and Capital One’s policies regarding transactions in its securities.
Item 6. Exhibits
An index to exhibits has been filed as part of this Report and is incorporated herein by reference.
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EXHIBIT INDEX
| Exhibit No. | Description | |||||||
| 2.1 | ||||||||
| 3.1 | ||||||||
| 3.2 | ||||||||
|
4.1
|
Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, copies of instruments defining the rights of holders of long-term debt are not filed. The Company agrees to furnish a copy thereof to the SEC upon request. | |||||||
|
10.1+
|
||||||||
|
10.2+
|
||||||||
|
10.3+
|
||||||||
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10.4+
|
||||||||
|
10.5+
|
||||||||
| 31.1* | ||||||||
| 31.2* | ||||||||
| 32.1** | ||||||||
| 32.2** | ||||||||
| 101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document. | |||||||
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document. | |||||||
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |||||||
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. | |||||||
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||
| 104 | The cover page of Capital One Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, formatted in Inline XBRL (included within the Exhibit 101 attachments). | |||||||
__________
| + | Represents a management contract or compensatory plan or arrangement. | ||||
| * | Indicates a document being filed with this Form 10-Q. | ||||
| ** | Indicates a document being furnished with this Form 10-Q. Information in this Form 10-Q furnished herewith shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. Such exhibit shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934. | ||||
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SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CAPITAL ONE FINANCIAL CORPORATION | ||||||||||||||
| Date: May 7, 2025 | By: | /s/ ANDREW M. YOUNG | ||||||||||||
| Andrew M. Young | ||||||||||||||
| Chief Financial Officer | ||||||||||||||
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TABLE OF CONTENTS
Part IprintItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations ( Md&a )printNote 1 Summary Of Significant Accounting PoliciesprintNote 2 Business CombinationsprintNote 3 Investment SecuritiesprintNote 4 LoansprintNote 5 Allowance For Credit Losses and Reserve For Unfunded Lending CommitmentsprintNote 6 Variable Interest Entities and SecuritizationsprintNote 7 Goodwill and Other Intangible AssetsprintNote 8 Deposits and BorrowingsprintNote 9 Derivative Instruments and Hedging ActivitiesprintNote 10 Stockholders EquityprintNote 11 Earnings Per Common ShareprintNote 12 Fair Value MeasurementprintNote 13 Business Segments and Revenue From Contracts with CustomersprintNote 14 Commitments, Contingencies, Guarantees and OthersprintItem 3. Quantitative and Qualitative Disclosures About Market RiskprintItem 4. Controls and ProceduresprintPart II Other InformationprintItem 1. Legal ProceedingsprintItem 1A. Risk FactorsprintItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsprintItem 3. Defaults Upon Senior SecuritiesprintItem 4. Mine Safety DisclosuresprintItem 5. Other InformationprintItem 6. Exhibitsprint