UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________

FORM 10-Q

___________________________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

☐ 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

____________________________________

CAPITAL ONE FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter) 

____________________________________

Delaware		54-1719854
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
1680 Capital One Drive,
McLean,	Virginia	22102
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (703) 720-1000

(Not Applicable)

(Former name, former address and former fiscal year, if changed since last report)

____________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock (par value $.01 per share)	COF	New York Stock Exchange
Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series I	COF PRI	New York Stock Exchange
Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series J	COF PRJ	New York Stock Exchange
Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series K	COF PRK	New York Stock Exchange
Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series L	COF PRL	New York Stock Exchange
Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series N	COF PRN	New York Stock Exchange
0.800% Senior Notes Due 2024	COF24	New York Stock Exchange
1.650% Senior Notes Due 2029	COF29	New York Stock Exchange

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. Yes ☒  No ☐

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.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of June 30, 2022, there were 383,817,721 shares of the registrant’s Common Stock outstanding.

TABLE OF CONTENTS

		Page
PART I—FINANCIAL INFORMATION		4
Item 1.	Financial Statements and Notes	64
	Consolidated Statements of Income	65
	Consolidated Statements of Comprehensive Income	66
	Consolidated Balance Sheets	67
	Consolidated Statements of Changes in Stockholders’ Equity	68
	Consolidated Statements of Cash Flows	69
	Notes to Consolidated Financial Statements	71
	Note 1—Summary of Significant Accounting Policies	71
	Note 2—Investment Securities	72
	Note 3—Loans	75
	Note 4—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments	84
	Note 5—Variable Interest Entities and Securitizations	87
	Note 6—Goodwill and Other Intangible Assets	91
	Note 7—Deposits and Borrowings	92
	Note 8—Derivative Instruments and Hedging Activities	93
	Note 9—Stockholders’ Equity	102
	Note 10—Earnings Per Common Share	105
	Note 11—Fair Value Measurement	106
	Note 12—Business Segments and Revenue from Contracts with Customers	113
	Note 13—Commitments, Contingencies, Guarantees and Others	117
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)	4
	Introduction	4
	Selected Financial Data	6
	Executive Summary	9
	Consolidated Results of Operations	10
	Consolidated Balance Sheets Analysis	16
	Off-Balance Sheet Arrangements	17
	Business Segment Financial Performance	18
	Critical Accounting Policies and Estimates	28
	Accounting Changes and Developments	29
	Capital Management	29
	Risk Management	34
	Credit Risk Profile	35
	Liquidity Risk Profile	47
	Market Risk Profile	50
	Supervision and Regulation	54
	Forward-Looking Statements	55
	Supplemental Table	57
	Glossary and Acronyms	58

1 Capital One Financial Corporation (COF)

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	120
Item 4.	Controls and Procedures	120
PART II—OTHER INFORMATION		121
Item 1.	Legal Proceedings	121
Item 1A.	Risk Factors	121
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	121
Item 3.	Defaults Upon Senior Securities	121
Item 4.	Mine Safety Disclosures	121
Item 5.	Other Information	121
Item 6.	Exhibits	121
EXHIBIT INDEX		122
SIGNATURES		123

2 Capital One Financial Corporation (COF)

INDEX OF MD&A AND SUPPLEMENTAL TABLE

MD&A Tables:		Page
1	Consolidated Financial Highlights	6
2	Average Balances, Net Interest Income and Net Interest Margin	11
3	Rate/Volume Analysis of Net Interest Income	13
4	Non-Interest Income	14
5	Non-Interest Expense	15
6	Loans Held for Investment	16
7	Funding Sources Composition	16
8	Business Segment Results	19
9	Credit Card Business Results	20
9.1	Domestic Card Business Results	21
10	Consumer Banking Business Results	23
11	Commercial Banking Business Results	25
12	Other Category Results	27
13	Capital Ratios Under Basel III	31
14	Regulatory Risk-Based Capital Components and Regulatory Capital Metrics	32
15	Preferred Stock Dividends Paid Per Share	33
16	Portfolio Composition of Loans Held for Investment	35
17	Credit Card Portfolio by Geographic Region	36
18	Consumer Banking Portfolio by Geographic Region	36
19	Commercial Real Estate Portfolio by Region	37
20	Commercial Loans by Industry	38
21	Credit Score Distribution	38
22	30+ Day Delinquencies	40
23	Aging and Geography of 30+ Day Delinquent Loans	41
24	90+ Day Delinquent Loans Accruing Interest	41
25	Nonperforming Loans and Other Nonperforming Assets	41
26	Net Charge-Offs (Recoveries)	42
27	Troubled Debt Restructurings	43
28	Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity	45
29	Allowance Coverage Ratios for Specified Loan Category	46
30	Liquidity Reserves	47
31	Deposits Composition and Average Deposits Interest Rates	48
32	Long-Term Debt Funding Activities	49
33	Senior Unsecured Long-Term Debt Credit Ratings	49
34	Interest Rate Sensitivity Analysis	51
35	LIBOR Exposures on Derivatives and Commercial Loans	53
Supplemental Table:
A	Reconciliation of Non-GAAP Measures	57

3 Capital One Financial Corporation (COF)

Table of Contents

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 “MD&A—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, including those relating to operating results and the Cybersecurity Incident described in “Note 13—Commitments, Contingencies, Guarantees and Others” as well as the potential impacts of the Coronavirus Disease of 2019 (“COVID-19”) pandemic described in “MD&A—Introduction—Coronavirus Disease 2019 (COVID-19) Pandemic” 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 2021 Annual Report on Form 10-K (“2021 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 June 30, 2022 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 2021 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 June 30, 2022, our principal subsidiaries included:

•Capital One Bank (USA), National Association (“COBNA”), which offers credit card products along with other lending products and consumer services; and

•Capital One, National Association (“CONA”), which offers a broad spectrum of banking products and financial services to consumers, small businesses and commercial clients.

The Company is hereafter collectively referred to as “we,” “us” or “our.” COBNA and CONA are collectively referred to as the “Banks.” Certain business terms used in this document are defined in the “MD&A—Glossary and Acronyms” and should be read in conjunction with the consolidated financial statements included in this Report.

Our consolidated total net revenues are derived primarily from lending to consumer, small business and commercial customers net of funding costs associated with interest on 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 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 segment, such as management of our corporate investment portfolio, asset/liability management by our centralized Corporate Treasury group and residual tax expense or benefit to arrive at the consolidated effective tax rate that is not assessed to our primary business segments, are included in the Other category.

•Credit Card: Consists of our domestic consumer and small business card lending, and international card businesses in the United Kingdom (“U.K.”) and Canada.

4 Capital One Financial Corporation (COF)

Table of Contents

•Consumer Banking: Consists of our deposit gathering and lending activities for consumers and small businesses, and national auto lending.

•Commercial Banking: Consists of our lending, deposit gathering, capital markets and treasury management services to commercial real estate and commercial and industrial customers. Our commercial and industrial customers typically include companies with annual revenues between $20 million and $2 billion.

Business Developments

We regularly explore and evaluate opportunities to acquire financial services and products 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 or exit of certain assets, branches, partnership agreements or lines of business.

Coronavirus Disease 2019 (COVID-19) Pandemic

The COVID-19 pandemic resulted in a global public-health crisis, disrupting economies and introducing significant volatility into financial markets. We transformed how we work in order to protect the well-being of our associates and our customers, and were able to continue to serve our customers, successfully manage critical functions, and keep our lines of business operating.

Since the start of the COVID-19 pandemic, a significant majority of our associates across our workforce have transitioned to working remotely, relying on our technology infrastructure and systems that have been designed for resilience and security. The majority of our associates continue to work remotely. In the third quarter of 2022, we plan to move to a hybrid work methodology that allows for in-office collaboration while still enabling associates to work remotely. We continue to monitor local conditions to ensure the safety of our associates.

For the extent to which the COVID-19 pandemic impacted our financial results, refer to “Part I—Item 2. MD&A.” The extent to which the COVID-19 pandemic ultimately impacts our business, results of operations, and financial condition will depend on future developments that are still uncertain and cannot be predicted, including the scope and duration of the COVID-19 pandemic and actions taken by governmental authorities and other third parties in response to the COVID-19 pandemic. For more information see “Part I—Item 1A. Risk Factors” in our 2021 Form 10-K.

5 Capital One Financial Corporation (COF)

Table of Contents

SELECTED FINANCIAL DATA

The following table presents selected consolidated financial data and performance from our results of operations for the second quarter and first six months of 2022 and 2021 and selected comparative balance sheet data as of June 30, 2022 and December 31, 2021. 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.

Table 1: Consolidated Financial Highlights

	Three Months Ended June 30,					Six Months Ended June 30,
(Dollars in millions, except per share data and as noted)	2022		2021		Change	2022		2021		Change
Income statement
Net interest income	$	6,517	$	5,743	13%	$	12,914	$	11,565	12%
Non-interest income	1,715		1,631		5	3,491		2,922		19
Total net revenue	8,232		7,374		12	16,405		14,487		13
Provision (benefit) for credit losses	1,085		(1,160)		**	1,762		(1,983)		**
Non-interest expense:
Marketing	1,003		620		62	1,921		1,121		71
Operating expense	3,580		3,346		7	7,213		6,585		10
Total non-interest expense	4,583		3,966		16	9,134		7,706		19
Income from continuing operations before income taxes	2,564		4,568		(44)	5,509		8,764		(37)
Income tax provision	533		1,031		(48)	1,075		1,900		(43)
Income from continuing operations, net of tax	2,031		3,537		(43)	4,434		6,864		(35)
Income (loss) from discontinued operations, net of tax	—		(1)		**	—		(3)		**
Net income	2,031		3,536		(43)	4,434		6,861		(35)
Dividends and undistributed earnings allocated to participating securities	(25)		(30)		(17)	(53)		(58)		(9)
Preferred stock dividends	(57)		(60)		(5)	(114)		(121)		(6)
Net income available to common stockholders	$	1,949	$	3,446	(43)	$	4,267	$	6,682	(36)
Common share statistics
Basic earnings per common share:
Net income from continuing operations	$	4.98	$	7.65	(35)%	$	10.65	$	14.70	(28)%
Net income per basic common share	$	4.98	$	7.65	(35)	$	10.65	$	14.70	(28)
Diluted earnings per common share:
Net income from continuing operations	$	4.96	$	7.62	(35)%	$	10.61	$	14.65	(28)%
Net income per basic common share	$	4.96	$	7.62	(35)	$	10.61	$	14.65	(28)
Weighted-average common shares outstanding (in millions):
Basic	391.2		450.6		(13)%	400.8		454.6		(12)%
Diluted	392.6		452.3		(13)	402.3		456.2		(12)
Common shares outstanding (period-end, in millions)	383.8		446.1		(14)	383.8		446.1		(14)
Dividends declared and paid per common share	$	0.60	$	0.40	50	$	1.20	$	0.80	50

6 Capital One Financial Corporation (COF)

Table of Contents

	Three Months Ended June 30,							Six Months Ended June 30,
(Dollars in millions, except per share data and as noted)	2022			2021		Change		2022			2021		Change
Tangible book value per common share (period-end)(1)	87.84			97.20		(10)		87.84			97.20		(10)
Balance sheet (average balances)
Loans held for investment	$	286,110		$	246,463	16	%	$	280,756		$	245,207	14	%
Interest-earning assets	398,934			390,129		2		396,521			389,355		2
Total assets	435,327			424,099		3		432,806			422,959		2
Interest-bearing deposits	268,104			273,476		(2)		269,953			273,417		(1)
Total deposits	305,954			308,217		(1)		307,765			306,645		—
Borrowings	53,208			37,054		44		47,773			38,475		24
Common equity	49,319			56,885		(13)		51,940			56,333		(8)
Total stockholders’ equity	54,165			62,376		(13)		56,786			61,504		(8)
Selected performance metrics
Purchase volume	$	148,491		$	132,676	12	%	$	282,153		$	241,009	17	%
Total net revenue margin(2)	8.25		%	7.56%		69	bps	8.27		%	7.44%		83	bps
Net interest margin	6.54			5.89		65		6.51			5.94		57
Return on average assets(3)	1.87			3.34		(147)		2.05			3.25		(120)
Return on average tangible assets(4)	1.93			3.46		(153)		2.12			3.36		(124)
Return on average common equity(5)	15.81			24.24		(8)	%	16.43			23.73		(7)	%
Return on average tangible common equity(6)	22.63			32.75		(10)		23.03			32.19		(9)
Equity-to-assets ratio(7)	12.44			14.71		(227)	bps	13.12			14.54		(142)	bps
Non-interest expense as a percentage of average loans held for investment	6.41			6.44		(3)		6.51			6.29		22
Efficiency ratio(8)	55.67			53.78		189		55.68			53.19		249
Operating efficiency ratio(9)	43.49			45.38		(189)		43.97			45.45		(148)
Effective income tax rate from continuing operations	20.8			22.6		(180)		19.5			21.7		(220)
Net charge-offs	$	845		$	541	56	%	$	1,612		$	1,281	26	%
Net charge-off rate	1.18		%	0.88%		30	bps	1.15		%	1.04%		11	bps

(Dollars in millions, except as noted)	June 30, 2022		December 31, 2021		Change
Balance sheet (period-end)
Loans held for investment	$	296,384	$	277,340	7	%
Interest-earning assets	406,565		397,341		2
Total assets	440,288		432,381		2
Interest-bearing deposits	270,881		272,937		(1)
Total deposits	307,885		310,980		(1)
Borrowings	58,938		43,086		37
Common equity	48,564		56,184		(14)
Total stockholders’ equity	53,410		61,029		(12)
Credit quality metrics