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 September 30, 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

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CAPITAL ONE FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter) 

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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 20, 2023, there were 380,846,771 shares of the registrant’s Common Stock outstanding.

TABLE OF CONTENTS

		Page
PART I—FINANCIAL INFORMATION		4
Item 1.	Financial Statements and Notes	67
	Consolidated Statements of Income	68
	Consolidated Statements of Comprehensive Income	69
	Consolidated Balance Sheets	70
	Consolidated Statements of Changes in Stockholders’ Equity	71
	Consolidated Statements of Cash Flows	73
	Notes to Consolidated Financial Statements	75
	Note 1—Summary of Significant Accounting Policies	75
	Note 2—Investment Securities	77
	Note 3—Loans	80
	Note 4—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments	92
	Note 5—Variable Interest Entities and Securitizations	97
	Note 6—Goodwill and Other Intangible Assets	101
	Note 7—Deposits and Borrowings	102
	Note 8—Derivative Instruments and Hedging Activities	103
	Note 9—Stockholders’ Equity	112
	Note 10—Earnings Per Common Share	115
	Note 11—Fair Value Measurement	116
	Note 12—Business Segments and Revenue from Contracts with Customers	124
	Note 13—Commitments, Contingencies, Guarantees and Others	128
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	30
	Risk Management	34
	Credit Risk Profile	36
	Liquidity Risk Profile	47
	Market Risk Profile	52
	Supervision and Regulation	55
	Forward-Looking Statements	56
	Supplemental Table	59
	Glossary and Acronyms	61

1 Capital One Financial Corporation (COF)

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	131
Item 4.	Controls and Procedures	131
PART II—OTHER INFORMATION		132
Item 1.	Legal Proceedings	132
Item 1A.	Risk Factors	132
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	132
Item 3.	Defaults Upon Senior Securities	132
Item 4.	Mine Safety Disclosures	132
Item 5.	Other Information	132
Item 6.	Exhibits	133
EXHIBIT INDEX		134
SIGNATURES		135

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	32
14	Regulatory Risk-Based Capital Components and Regulatory Capital Metrics	33
15	Preferred Stock Dividends Paid Per Share	34
16	Portfolio Composition of Loans Held for Investment	36
17	Credit Card Portfolio by Geographic Region	37
18	Consumer Banking Portfolio by Geographic Region	37
19	Commercial Real Estate Portfolio by Region	38
20	Commercial Loans by Industry	39
21	Credit Score Distribution	39
22	30+ Day Delinquencies	40
23	Aging and Geography of 30+ Day Delinquent Loans	41
24	90+ Day Delinquent Loans Accruing Interest	42
25	Nonperforming Loans and Other Nonperforming Assets	42
26	Net Charge-Offs	44
27	Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity	46
28	Liquidity Reserves	48
29	Deposits Composition and Average Deposits Interest Rates	49
30	Long-Term Debt Funding Activities	51
31	Senior Unsecured Long-Term Debt Credit Ratings	51
32	Interest Rate Sensitivity Analysis	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 “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 September 30, 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 September 30, 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 third quarter and first nine months of 2023 and 2022 and selected comparative balance sheet data as of September 30, 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 September 30,					Nine Months Ended September 30,
(Dollars in millions, except per share data and as noted)	2023		2022		Change	2023		2022		Change
Income statement
Net interest income	$	7,423	$	7,003	6%	$	21,722	$	19,917	9%
Non-interest income	1,943		1,802		8	5,559		5,293		5
Total net revenue	9,366		8,805		6	27,281		25,210		8
Provision for credit losses	2,284		1,669		37	7,569		3,431		121
Non-interest expense:
Marketing	972		978		(1)	2,755		2,899		(5)
Operating expense	3,888		3,971		(2)	11,844		11,184		6
Total non-interest expense	4,860		4,949		(2)	14,599		14,083		4
Income from continuing operations before income taxes	2,222		2,187		2	5,113		7,696		(34)
Income tax provision	432		493		(12)	932		1,568		(41)
Net income	1,790		1,694		6	4,181		6,128		(32)
Dividends and undistributed earnings allocated to participating securities	(28)		(21)		33	(67)		(74)		(9)
Preferred stock dividends	(57)		(57)		—	(171)		(171)		—
Net income available to common stockholders	$	1,705	$	1,616	6	$	3,943	$	5,883	(33)
Common share statistics
Basic earnings per common share:
Net income per basic common share	$	4.46	$	4.21	6%	$	10.31	$	14.90	(31)%
Diluted earnings per common share:
Net income per diluted common share	$	4.45	$	4.20	6%	$	10.28	$	14.84	(31)%
Weighted-average common shares outstanding (in millions):
Basic	382.5		383.4		—	382.7		394.9		(3)%
Diluted	383.3		384.6		—	383.6		396.4		(3)
Common shares outstanding (period-end, in millions)	381.0		382.0		—	381.0		382.0		—
Dividends declared and paid per common share	$	0.60	$	0.60	—	$	1.80	$	1.80	—
Tangible book value per common share (period-end)(1)	87.97		81.38		8%	87.97		81.38		8

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)	2023		2022			Change		2023		2022			Change
Balance sheet (average balances)
Loans held for investment	$	312,759	$	300,186		4%		$	310,075	$	287,304		8%
Interest-earning assets	443,532		412,171			8		439,321		401,793			9
Total assets	469,860		447,088			5		466,279		437,523			7
Interest-bearing deposits	316,032		275,900			15		312,702		271,957			15
Total deposits	345,013		311,928			11		342,956		309,168			11
Borrowings	49,736		58,628			(15)		48,746		51,431			(5)
Common equity	50,166		49,696			1		50,202		51,184			(2)
Total stockholders’ equity	55,012		54,541			1		55,048		56,030			(2)
Selected performance metrics
Purchase volume	$	158,640	$	149,497		6%		$	458,235	$	431,650		6%
Total net revenue margin(2)	8.45%		8.55		%	(10)	bps	8.28%		8.37		%	(9)	bps
Net interest margin	6.69		6.80			(11)		6.59		6.61			(2)
Return on average assets