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 September 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 October 28, 2022, there were 381,698,572 shares of the registrant’s Common Stock outstanding.

TABLE OF CONTENTS

		Page
PART I—FINANCIAL INFORMATION		4
Item 1.	Financial Statements and Notes	66
	Consolidated Statements of Income	67
	Consolidated Statements of Comprehensive Income	68
	Consolidated Balance Sheets	69
	Consolidated Statements of Changes in Stockholders’ Equity	70
	Consolidated Statements of Cash Flows	72
	Notes to Consolidated Financial Statements	74
	Note 1—Summary of Significant Accounting Policies	74
	Note 2—Investment Securities	76
	Note 3—Loans	79
	Note 4—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments	88
	Note 5—Variable Interest Entities and Securitizations	91
	Note 6—Goodwill and Other Intangible Assets	95
	Note 7—Deposits and Borrowings	96
	Note 8—Derivative Instruments and Hedging Activities	97
	Note 9—Stockholders’ Equity	107
	Note 10—Earnings Per Common Share	111
	Note 11—Fair Value Measurement	112
	Note 12—Business Segments and Revenue from Contracts with Customers	119
	Note 13—Commitments, Contingencies, Guarantees and Others	123
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	29
	Accounting Changes and Developments	30
	Capital Management	31
	Risk Management	36
	Credit Risk Profile	37
	Liquidity Risk Profile	48
	Market Risk Profile	52
	Supervision and Regulation	56
	Forward-Looking Statements	56
	Supplemental Table	59
	Glossary and Acronyms	60

1 Capital One Financial Corporation (COF)

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	126
Item 4.	Controls and Procedures	126
PART II—OTHER INFORMATION		127
Item 1.	Legal Proceedings	127
Item 1A.	Risk Factors	127
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	127
Item 3.	Defaults Upon Senior Securities	127
Item 4.	Mine Safety Disclosures	127
Item 5.	Other Information	127
Item 6.	Exhibits	127
EXHIBIT INDEX		128
SIGNATURES		129

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	26
12	Other Category Results	28
13	Capital Ratios Under Basel III	33
14	Regulatory Risk-Based Capital Components and Regulatory Capital Metrics	34
15	Preferred Stock Dividends Paid Per Share	35
16	Portfolio Composition of Loans Held for Investment	37
17	Credit Card Portfolio by Geographic Region	38
18	Consumer Banking Portfolio by Geographic Region	38
19	Commercial Real Estate Portfolio by Region	39
20	Commercial Loans by Industry	40
21	Credit Score Distribution	40
22	30+ Day Delinquencies	41
23	Aging and Geography of 30+ Day Delinquent Loans	42
24	90+ Day Delinquent Loans Accruing Interest	42
25	Nonperforming Loans and Other Nonperforming Assets	43
26	Net Charge-Offs (Recoveries)	44
27	Troubled Debt Restructurings	44
28	Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity	46
29	Allowance Coverage Ratios for Specified Loan Category	48
30	Liquidity Reserves	48
31	Deposits Composition and Average Deposits Interest Rates	49
32	Long-Term Debt Funding Activities	51
33	Senior Unsecured Long-Term Debt Credit Ratings	51
34	Interest Rate Sensitivity Analysis	53
35	LIBOR Exposures on Derivatives and Commercial Loans	54
Supplemental Table:
A	Reconciliation of Non-GAAP Measures	59

3 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 “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 September 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 September 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.

On October 1, 2022, the Company completed the merger of COBNA with and into CONA, with CONA as the surviving entity.

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.

4 Capital One Financial Corporation (COF)

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

•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.

During the COVID-19 pandemic, a significant majority of our associates across our workforce transitioned to working remotely. In the third quarter of 2022, we moved 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)

SELECTED FINANCIAL DATA

The following table presents selected consolidated financial data and performance from our results of operations for the third quarter and first nine months of 2022 and 2021 and selected comparative balance sheet data as of September 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 September 30,					Nine Months Ended September 30,
(Dollars in millions, except per share data and as noted)	2022		2021		Change	2022		2021		Change
Income statement
Net interest income	$	7,003	$	6,156	14%	$	19,917	$	17,721	12%
Non-interest income	1,802		1,674		8	5,293		4,596		15
Total net revenue	8,805		7,830		12	25,210		22,317		13
Provision (benefit) for credit losses	1,669		(342)		**	3,431		(2,325)		**
Non-interest expense:
Marketing	978		751		30	2,899		1,872		55
Operating expense	3,971		3,435		16	11,184		10,020		12
Total non-interest expense	4,949		4,186		18	14,083		11,892		18
Income from continuing operations before income taxes	2,187		3,986		(45)	7,696		12,750		(40)
Income tax provision	493		882		(44)	1,568		2,782		(44)
Income from continuing operations, net of tax	1,694		3,104		(45)	6,128		9,968		(39)
Income (loss) from discontinued operations, net of tax	—		—		—	—		(3)		**
Net income	1,694		3,104		(45)	6,128		9,965		(39)
Dividends and undistributed earnings allocated to participating securities	(21)		(26)		(19)	(74)		(84)		(12)
Preferred stock dividends	(57)		(79)		(28)	(171)		(200)		(15)
Issuance cost for redeemed preferred stock	—		(12)		**	—		(12)		**
Net income available to common stockholders	$	1,616	$	2,987	(46)	$	5,883	$	9,669	(39)
Common share statistics
Basic earnings per common share:
Net income from continuing operations	$	4.21	$	6.81	(38)%	$	14.90	$	21.53	(31)%
Income (loss) from discontinued operations	—		—		—	—		(0.01)		**
Net income per basic common share	$	4.21	$	6.81	(38)	$	14.90	$	21.52	(31)
Diluted earnings per common share:
Net income from continuing operations	$	4.20	$	6.78	(38)%	$	14.84	$	21.45	(31)%
Income (loss) from discontinued operations	—		—		—	—		(0.01)		**
Net income per basic common share	$	4.20	$	6.78	(38)	$	14.84	$	21.44	(31)
Weighted-average common shares outstanding (in millions):
Basic	383.4		438.8		(13)%	394.9		449.2		(12)%
Diluted	384.6		440.5		(13)	396.4		450.9		(12)

6 Capital One Financial Corporation (COF)

	Three Months Ended September 30,							Nine Months Ended September 30,
(Dollars in millions, except per share data and as noted)	2022			2021		Change		2022			2021		Change
Common shares outstanding (period-end, in millions)	382.0			430.4		(11)		382.0			430.4		(11)
Dividends declared and paid per common share	$	0.60		$	1.20	(50)		$	1.80		$	2.00	(10)
Tangible book value per common share (period-end)(1)	81.38			99.60		(18)		81.38			99.60		(18)
Balance sheet (average balances)
Loans held for investment	$	300,186		$	253,101	19%		$	287,304		$	247,867	16%
Interest-earning assets	412,171			387,766		6		401,793			388,820		3
Total assets	447,088			424,506		5		437,523			423,457		3
Interest-bearing deposits	275,900			269,278		2		271,957			272,022		—
Total deposits	311,928			305,035		2		309,168			306,102		1
Borrowings	58,628			37,464		56		51,431			38,134		35
Common equity	49,696			58,230		(15)		51,184			56,972		(10)
Total stockholders’ equity	54,541			64,682		(16)		56,030			62,575		(10)
Selected performance metrics
Purchase volume	$	149,497		$	136,614	9%		$	431,650		$	377,623	14%
Total net revenue margin(2)	8.55		%	8.08%		47	bps	8.37		%	7.65%		72	bps
Net interest margin	6.80			6.35		45		6.61			6.08		53
Return on average assets(3)	1.52			2.92		(140)		1.87			3.14		(127)
Return on average tangible assets(4)	1.57			3.03		(146)		1.93			3.25		(132)
Return on average common equity(5)	13.01			20.52		(8)%		15.33			22.64		(7)%
Return on average tangible common equity(6)	18.59			27.50		(9)		21.62			30.57		(9)
Equity-to-assets ratio(7)	12.20			15.24		(304)	bps	12.81			14.78		(197)	bps
Non-interest expense as a percentage of average loans held for investment	6.59			6.62		(3)		6.54			6.40		14
Efficiency ratio(8)	56.21			53.46		275		55.86			53.29		257
Operating efficiency ratio(9)	45.10			43.87		123		44.36			44.90		(54)
Effective income tax rate from continuing operations	22.5			22.1		40		20.4			21.8		(140)
Net charge-offs	$	931		$	426	119%		$	2,543