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 March 31, 2023

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 April 30, 2023, there were 381,806,215 shares of the registrant’s Common Stock outstanding.

TABLE OF CONTENTS

		Page
PART I—FINANCIAL INFORMATION		4
Item 1.	Financial Statements and Notes	63
	Consolidated Statements of Income	64
	Consolidated Statements of Comprehensive Income	65
	Consolidated Balance Sheets	66
	Consolidated Statements of Changes in Stockholders’ Equity	67
	Consolidated Statements of Cash Flows	68
	Notes to Consolidated Financial Statements	70
	Note 1—Summary of Significant Accounting Policies	70
	Note 2—Investment Securities	72
	Note 3—Loans	75
	Note 4—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments	85
	Note 5—Variable Interest Entities and Securitizations	89
	Note 6—Goodwill and Other Intangible Assets	93
	Note 7—Deposits and Borrowings	94
	Note 8—Derivative Instruments and Hedging Activities	95
	Note 9—Stockholders’ Equity	103
	Note 10—Earnings Per Common Share	106
	Note 11—Fair Value Measurement	107
	Note 12—Business Segments and Revenue from Contracts with Customers	114
	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	15
	Off-Balance Sheet Arrangements	16
	Business Segment Financial Performance	16
	Critical Accounting Policies and Estimates	25
	Accounting Changes and Developments	26
	Capital Management	27
	Risk Management	32
	Credit Risk Profile	34
	Liquidity Risk Profile	45
	Market Risk Profile	48
	Supervision and Regulation	53
	Forward-Looking Statements	53
	Supplemental Table	55
	Glossary and Acronyms	57

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	12
4	Non-Interest Income	13
5	Non-Interest Expense	14
6	Loans Held for Investment	15
7	Funding Sources Composition	15
8	Business Segment Results	17
9	Credit Card Business Results	18
9.1	Domestic Card Business Results	19
10	Consumer Banking Business Results	21
11	Commercial Banking Business Results	22
12	Other Category Results	24
13	Capital Ratios Under Basel III	29
14	Regulatory Risk-Based Capital Components and Regulatory Capital Metrics	30
15	Preferred Stock Dividends Paid Per Share	31
16	Portfolio Composition of Loans Held for Investment	34
17	Credit Card Portfolio by Geographic Region	35
18	Consumer Banking Portfolio by Geographic Region	35
19	Commercial Real Estate Portfolio by Region	36
20	Commercial Loans by Industry	37
21	Credit Score Distribution	37
22	30+ Day Delinquencies	38
23	Aging and Geography of 30+ Day Delinquent Loans	39
24	90+ Day Delinquent Loans Accruing Interest	40
25	Nonperforming Loans and Other Nonperforming Assets	40
26	Net Charge-Offs	42
27	Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity	44
28	Liquidity Reserves	45
29	Deposits Composition and Average Deposits Interest Rates	46
30	Long-Term Debt Funding Activities	47
31	Senior Unsecured Long-Term Debt Credit Ratings	47
32	Interest Rate Sensitivity Analysis	50
33	LIBOR Exposures on Derivatives and Commercial Loans	51
Supplemental Table:
A	Reconciliation of Non-GAAP Measures	55

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 “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 2022 Annual Report on Form 10-K (“2022 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, 2023 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 2022 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, 2023, Capital One Financial Corporation’s principal operating subsidiary was Capital One, National Association (“CONA”). On October 1, 2022, the Company completed the merger of Capital One Bank (USA), National Association (“COBNA”), with and into CONA, with CONA as the surviving entity (the “Bank Merger”). The Company is hereafter collectively referred to as “we,” “us” or “our.” References to the “Bank” shall mean and refer to (i) CONA from and after the Bank Merger and (ii) CONA and COBNA collectively prior to the Bank Merger.

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

•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.

4 Capital One Financial Corporation (COF)

•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.

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.

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 first quarters of 2023 and 2022 and selected comparative balance sheet data as of March 31, 2023 and December 31, 2022. 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 U.S. (“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)	2023		2022		Change
Income statement
Net interest income	$	7,186	$	6,397	12%
Non-interest income	1,717		1,776		(3)
Total net revenue	8,903		8,173		9
Provision for credit losses	2,795		677		**
Non-interest expense:
Marketing	897		918		(2)
Operating expense	4,048		3,633		11
Total non-interest expense	4,945		4,551		9
Income from continuing operations before income taxes	1,163		2,945		(61)
Income tax provision	203		542		(63)
Net income	960		2,403		(60)
Dividends and undistributed earnings allocated to participating securities	(16)		(28)		(43)
Preferred stock dividends	(57)		(57)		—
Net income available to common stockholders	$	887	$	2,318	(62)
Common share statistics
Basic earnings per common share:
Net income per basic common share	$	2.32	$	5.65	(59)%
Diluted earnings per common share:
Net income per diluted common share	$	2.31	$	5.62	(59)%
Weighted-average common shares outstanding (in millions):
Basic	382.6		410.4		(7)%
Diluted	383.8		412.2		(7)
Common shares outstanding (period-end, in millions)	382.0		399.0		(4)
Dividends declared and paid per common share	$	0.60	$	0.60	—
Tangible book value per common share (period-end)(1)	90.86		91.77		(1)

6 Capital One Financial Corporation (COF)

	Three Months Ended March 31,
(Dollars in millions, except per share data and as noted)	2023			2022		Change
Balance sheet (average balances)
Loans held for investment	$	307,756		$	275,342	12%
Interest-earning assets	435,199			394,082		10
Total assets	462,324			430,372		7
Interest-bearing deposits	308,788			271,823		14
Total deposits	340,123			309,597		10
Borrowings	48,016			42,277		14
Common equity	49,927			54,591		(9)
Total stockholders’ equity	54,773			59,437		(8)
Selected performance metrics
Purchase volume	$	141,658		$	133,662	6%
Total net revenue margin(2)	8.18		%	8.30%		(12)bps
Net interest margin	6.60			6.49		11
Return on average assets(3)	0.83			2.23		(140)
Return on average tangible assets(4)	0.86			2.31		(145)
Return on average common equity(5)	7.11			16.98		(987)
Return on average tangible common equity(6)	10.15			23.36		(1,321)
Equity-to-assets ratio(7)	11.85			13.81		(196)
Efficiency ratio(8)	55.54			55.68		(14)
Operating efficiency ratio(9)	45.47			44.45		102
Effective income tax rate from continuing operations	17.5			18.4		(90)
Net charge-offs	$	1,697		$	767	121%
Net charge-off rate	2.21		%	1.11%		110bps

    

(Dollars in millions, except as noted)	March 31, 2023			December 31, 2022		Change
Balance sheet (period-end)
Loans held for investment	$	308,836		$	312,331	(1)%
Interest-earning assets	445,166			427,248		4
Total assets	471,660			455,249		4
Interest-bearing deposits	318,641			300,789		6
Total deposits	349,827			332,992		5
Borrowings	48,777			48,715		—
Common equity	49,807			47,737		4
Total stockholders’ equity	54,653			52,582		4
Credit quality metrics
Allowance for credit losses	$	14,318		$	13,240	8%
Allowance as a percentage of loans held for investment (“allowance coverage ratio”)	4.64		%	4.24%		40bps
30+ day performing delinquency rate	2.88			2.96		(8)
30+ day delinquency rate	3.09			3.21		(12)
Capital ratios
Common equity Tier 1 capital(10)	12.5		%	12.5%		—
Tier 1 capital(10)	13.9			13.9		—
Total capital(10)	15.9			15.8		10bps

7 Capital One Financial Corporation (COF)

(Dollars in millions, except as noted)	March 31, 2023	December 31, 2022	Change
Tier 1 leverage(10)	10.9	11.1	(20)
Tangible common equity(11)	7.6	7.5	10
Supplementary leverage(10)	9.3	9.5	(20)
Other
Employees (period end, in thousands)	56.1	56.0	—

__________

(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)Capital ratios are calculated based on the Basel III standardized approach framework, see “Capital Management” for additional information.

(11)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.

**    Not meaningful.

8 Capital One Financial Corporation (COF)

EXECUTIVE SUMMARY

Financial Highlights

We reported net income of $960 million ($2.31 per diluted common share) on total net revenue of $8.9 billion for the first quarter of 2023. In comparison, we reported net income of $2.4 billion ($5.62 per diluted common share) on total net revenue of $8.2 billion for the first quarter of 2022.

Our common equity Tier 1 capital ratio as calculated under the Basel III standardized approach was 12.5% as of both March 31, 2023 and December 31, 2022. See “Capital Management” for additional information.

In January 2022, our Board of Directors authorized the repurchase of up to $5.0 billion of shares of our common stock. In April 2022, our Board of Directors authorized the repurchase of up to an additional $5.0 billion of shares of our common stock. Under these authorizations, we repurchased $4.8 billion of shares of our common stock as of December 31, 2022 and approximately $150 million of shares of our common stock during the first three months of 2023. See “Capital Management—Dividend Policy and Stock Purchases” for additional information.

Below are additional highlights of our performance in the first quarter of 2023. These highlights are based on a comparison between the results of the first quarters of 2023 and 2022, 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, 2023 compared to December 31, 2022. We provide a more detailed discussion of our financial performance in the sections following this “Executive Summary.”

Total Company Performance

•Earnings:

Our net income decreased by $1.4 billion to $960 million in the first quarter of 2023 compared to the first quarter of 2022 primarily driven by:

◦Higher provision for credit losses primarily driven by an allowance build in our credit card loan portfolio due to continued credit normalization and assumed economic worsening compared to an allowance release across all of our segments in the first quarter of 2022.

◦Higher non-interest expense primarily driven by increased salaries and associate benefits.

These drivers were partially offset by:

◦Higher net interest income primarily driven by higher average loan balances in our credit card loan portfolio.

•Loans Held for Investment:

◦Period-end loans held for investment remained substantially flat at $308.8 billion as of March 31, 2023 compared to December 31, 2022.

◦Average loans held for investment increased by $32.4 billion to $307.8 billion in the first quarter of 2023 compared to the first quarter of 2022 primarily driven by growth in our credit card loan portfolio.

•Net Charge-Off and Delinquency Metrics:

◦Our net charge-off rate increased by 110 basis points (“bps”) to 2.21% in the first quarter of 2023 compared to the first quarter of 2022 primarily driven by continued credit normalization.

◦Our 30+ day delinquency rate decreased by 12 bps to 3.09% as of March 31, 2023 from December 31, 2022 primarily driven by seasonally lower auto delinquency inventories, partially offset by continued credit normalization.

•Allowance for Credit Losses: Our allowance for credit losses increased by $1.1 billion to $14.3 billion and our allowance coverage ratio increased by 40 bps to 4.64% as of March 31, 2023 compared to December 31, 2022.

9 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 2023 and 2022. 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, based on our consolidated results, 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.

10 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 2023 and 2022 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,
	2023						2022
(Dollars in millions)	Average Balance		Interest Income/ Expense		Average Yield/ Rate(1)		Average Balance		Interest Income/ Expense		Average Yield/ Rate(1)
Assets:
Interest-earning assets:
Loans:(2)
Credit card	$	134,669	$	6,053	17.98	%	$	114,171	$	4,274	14.97%
Consumer banking	79,000		1,461		7.40		78,805		1,411		7.16
Commercial banking(3)	94,446		1,488		6.30		86,046		571		2.65
Other(4)	—		(279)		**		—		111		**
Total loans, including loans held for sale	308,115		8,723		11.32		279,022		6,367		9.13
Investment securities	89,960		615		2.73		94,700		402		1.70
Cash equivalents and other interest-earning assets	37,124		416		4.49		20,360		15		0.29
Total interest-earning assets	435,199		9,754		8.96		394,082		6,784		6.89
Cash and due from banks	4,155						5,358
Allowance for credit losses	(13,203)						(11,427)
Premises and equipment, net	4,349						4,234
Other assets	31,824						38,125
Total assets	$	462,324					$	430,372
Liabilities and stockholders’ equity:
Interest-bearing liabilities:
Interest-bearing deposits	$	308,788	$	1,856	2.40	%	$	271,823	$	218	0.32%
Securitized debt obligations	17,251		211		4.90		13,740		29		0.84
Senior and subordinated notes	30,136		489		6.49		26,481		131		1.98
Other borrowings and liabilities	2,335		12		2.08		3,633		9		1.00
Total interest-bearing liabilities	358,510		2,568		2.87		315,677		387		0.49
Non-interest-bearing deposits	31,335						37,774
Other liabilities	17,706						17,484
Total liabilities	407,551						370,935
Stockholders’ equity	54,773						59,437
Total liabilities and stockholders’ equity	$	462,324					$	430,372
Net interest income/spread			$	7,186	6.10				$	6,397	6.40
Impact of non-interest-bearing funding					0.50						0.09
Net interest margin					6.60	%					6.49%

__________

(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 $503 million and $438 million in the first quarters of 2023 and 2022, 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 $18 million as of both the first quarter of 2023 and 2022, with corresponding reductions to the Other category.

11 Capital One Financial Corporation (COF)

(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.

**    Not meaningful.

Net interest income increased by $789 million to $7.2 billion in the first quarter of 2023 compared to the first quarter of 2022 primarily driven by higher average loan balances in our credit card loan portfolio.

Net interest margin increased by 11 bps to 6.60% in the first quarter of 2023 compared to the first quarter of 2022 primarily driven by higher yields in our credit card and commercial banking loan portfolios, partially offset by higher rates paid on interest-bearing deposits.

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,
	2023 vs. 2022
(Dollars in millions)	Total Variance	Volume	Rate
Interest income:
Loans: