Item 7A. Quantitative and Qualitative Disclosures about Market Risk

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Item 7A. Quantitative and Qualitative Disclosures about Market Risk

For a discussion of the quantitative and qualitative disclosures about market risk, see “Item 7. MD&A—Market Risk Profile.”



			129			Capital One Financial Corporation (COF)


Item 8. Financial Statements and Supplementary Data
			Page
Management’s Report on Internal Control Over Financial Reporting			131
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting (PCAOB ID 42)			132
Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements (PCAOB ID 42)			133
Consolidated Financial Statements			135
Consolidated Statements of Income			135
Consolidated Statements of Comprehensive Income			136
Consolidated Balance Sheets			137
Consolidated Statements of Changes in Stockholders’ Equity			138
Consolidated Statements of Cash Flows			139
Notes to Consolidated Financial Statements			141
Note 1—Summary of Significant Accounting Policies			141
Note 2—Business Combinations			156
Note 3—Investment Securities			157
Note 4—Loans			160
Note 5—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments			174
Note 6—Variable Interest Entities and Securitizations			178
Note 7—Goodwill and Other Intangible Assets			182
Note 8 —Premises, Equipment and Leases			185
Note 9—Deposits and Borrowings			187
Note 10—Derivative Instruments and Hedging Activities			189
Note 11—Stockholders’ Equity			198
Note 12—Regulatory and Capital Adequacy			201
Note 13—Earnings Per Common Share			203
Note 14—Stock-Based Compensation Plans			204
Note 15—Employee Benefit Plans			206
Note 16—Income Taxes			208
Note 17—Fair Value Measurement			211
Note 18—Business Segments and Revenue from Contracts with Customers			220
Note 19—Commitments, Contingencies, Guarantees and Others			225
Note 20—Capital One Financial Corporation (Parent Company Only)			229
Note 21—Related Party Transactions			231



			130			Capital One Financial Corporation (COF)

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Capital One Financial Corporation (the “Company” or “Capital One”) is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.

Capital One’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on its financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024, based on the framework in “2013 Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), commonly referred to as the “2013 Framework.”

Based on this assessment, management concluded that, as of December 31, 2024, the Company’s internal control over financial reporting was effective based on the criteria established by COSO in the 2013 Framework. Additionally, based upon management’s assessment, the Company determined that there were no material weaknesses in its internal control over financial reporting as of December 31, 2024.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2024, has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their accompanying report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024.


/s/ RICHARD D. FAIRBANK
Richard D. Fairbank
Chair and Chief Executive Officer

/s/ ANDREW M. YOUNG
Andrew M. Young
Chief Financial Officer

February 20, 2025



			131			Capital One Financial Corporation (COF)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Capital One Financial Corporation

Opinion on Internal Control Over Financial Reporting

We have audited Capital One Financial Corporation’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Capital One Financial Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria**.**

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and our report dated February 20, 2025 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


/s/ Ernst & Young LLP

Tysons, Virginia
February 20, 2025



			132			Capital One Financial Corporation (COF)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Capital One Financial Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Capital One Financial Corporation (the Company) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 20, 2025 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.



			133			Capital One Financial Corporation (COF)


						Allowance for credit losses – Credit Card
Description of the Matter						On December 31, 2024, the Company’s allowance for credit losses for the credit card portfolio was $13.0 billion. As more fully described in Note 1 and Note 5 of the consolidated financial statements, the allowance for credit losses (ACL or allowance) represents management’s current estimate of expected credit losses over the contractual terms of the Company’s held for investment (HFI) loan portfolios as of the balance sheet date and is comprised of two elements. The first is ‘quantitative’ and involves the use of loss forecasting models based upon various statistical analyses with adjustments for current conditions and reasonable and supportable forecasts of conditions, which includes expected economic conditions. The second is ‘qualitative’ and involves factors that represent management’s judgment of the imprecision and risks inherent in the processes and assumptions used in establishing the allowance for credit losses. Auditing the allowance for the credit card portfolio was especially challenging and highly judgmental due to the significant judgment required in establishing certain components of the qualitative element. The qualitative element requires management to make judgments regarding current and forward-looking conditions, internal and external factors, and uncertainty as it relates to economic, model, or forecast risks, where not already captured in the modeled results.
How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design, and tested the operating effectiveness of the internal controls over the ACL process, including, among others, controls over the development, operation, and monitoring of loss forecasting models and management review controls over key assumptions and qualitative judgments used in reviewing the final credit card allowance results. Our tests of controls included observation of certain of management’s quarterly ACL governance meetings, at which key management judgments, qualitative adjustments, and final ACL results are subjected to critical challenge by management groups independent of the group responsible for producing the ACL estimate. Our audit response included evaluating the comprehensive framework of the ACL, which involved engaging EY Specialists to evaluate the model methodology, model performance and model governance, as well as the conceptual soundness of certain qualitative elements. We also performed testing on data inputs utilized in the qualitative element calculation, as well as recalculated the qualitative element based on the framework. We evaluated the overall credit card ACL, inclusive of qualitative elements, and whether the recorded ACL appropriately reflects expected credit losses on the portfolio. Additionally, we performed searches for contrary evidence, which included reviewing historical loss statistics, peer bank metrics, and subsequent events and considered whether such information indicated that management’s judgements were not reasonable or consistently applied.


/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1994.

Tysons, Virginia
February 20, 2025



			134			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME


	Year Ended December 31,
(Dollars in millions, except per share-related data)		2024		2023		2022
Interest income:
Loans, including loans held for sale		$	40,894	$	37,410	$	28,910
Investment securities		2,873		2,550		1,884
Other		2,267		1,978		443
Total interest income		46,034		41,938		31,237
Interest expense:
Deposits		11,493		9,489		2,535
Securitized debt obligations		958		959		384
Senior and subordinated notes		2,333		2,204		1,074
Other borrowings		42		45		130
Total interest expense		14,826		12,697		4,123
Net interest income		31,208		29,241		27,114
Provision for credit losses		11,716		10,426		5,847
Net interest income after provision for credit losses		19,492		18,815		21,267
Non-interest income:
Interchange fees, net		4,882		4,793		4,606
Service charges and other customer-related fees		1,976		1,667		1,625
Net securities losses		(35)		(34)		(9)
Other		1,081		1,120		914
Total non-interest income		7,904		7,546		7,136
Non-interest expense:
Salaries and associate benefits		9,398		9,302		8,425
Occupancy and equipment		2,366		2,160		2,050
Marketing		4,562		4,009		4,017
Professional services		1,610		1,268		1,807
Communications and data processing		1,462		1,383		1,379
Amortization of intangibles		77		82		70
Other		2,011		2,112		1,415
Total non-interest expense		21,486		20,316		19,163
Income from continuing operations before income taxes		5,910		6,045		9,240
Income tax provision		1,163		1,158		1,880
Income from continuing operations, net of tax		4,747		4,887		7,360
Income from discontinued operations, net of tax		3		0		0
Net income		4,750		4,887		7,360
Dividends and undistributed earnings allocated to participating securities		(77)		(77)		(88)
Preferred stock dividends		(228)		(228)		(228)

Net income available to common stockholders		$	4,445	$	4,582	$	7,044
Basic earnings per common share:
Net income from continuing operations		$	11.60	$	11.98	$	17.98
Income from discontinued operations		0.01		0.00		0.00
Net income per basic common share		$	11.61	$	11.98	$	17.98
Diluted earnings per common share:
Net income from continuing operations		$	11.58	$	11.95	$	17.91
Income from discontinued operations		0.01		0.00		0.00
Net income per diluted common share		$	11.59	$	11.95	$	17.91


See Notes to Consolidated Financial Statements.
			135			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Year Ended December 31,
(Dollars in millions)		2024		2023		2022
Net income		$	4,750	$	4,887	$	7,360
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on securities available for sale		(775)		907		(7,973)
Net unrealized gains (losses) on hedging relationships		(227)		689		(2,300)
Foreign currency translation adjustments		(23)		46		1
Other		7		6		(18)
Other comprehensive income (loss), net of tax		(1,018)		1,648		(10,290)
Comprehensive income (loss)		$	3,732	$	6,535	$	(2,930)


See Notes to Consolidated Financial Statements.
			136			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS


(Dollars in millions, except per share-related data)	December 31, 2024		December 31, 2023
Assets:
Cash and cash equivalents:
Cash and due from banks	$	3,028	$	4,903
Interest-bearing deposits and other short-term investments	40,202		38,394
Total cash and cash equivalents	43,230		43,297
Restricted cash for securitization investors	441		458
Securities available for sale (amortized cost of $93.0 billion and $88.1 billion and allowance for credit losses of $4 million as of both December 31, 2024 and 2023)	83,013		79,117
Loans held for investment:
Unsecuritized loans held for investment	298,241		289,229
Loans held in consolidated trusts	29,534		31,243
Total loans held for investment	327,775		320,472
Allowance for credit losses	(16,258)		(15,296)
Net loans held for investment	311,517		305,176
Loans held for sale ($87 million and $347 million carried at fair value as of December 31, 2024 and 2023, respectively)	202		854
Premises and equipment, net	4,511		4,375
Interest receivable	2,532		2,478
Goodwill	15,059		15,065
Other assets	29,639		27,644
Total assets	$	490,144	$	478,464

Liabilities:
Interest payable	$	666	$	649
Deposits:
Non-interest-bearing deposits	26,122		28,024
Interest-bearing deposits	336,585		320,389
Total deposits	362,707		348,413
Securitized debt obligations	14,264		18,043
Other debt:
Federal funds purchased and securities loaned or sold under agreements to repurchase	562		538
Senior and subordinated notes	30,696		31,248
Other borrowings	29		27
Total other debt	31,287		31,813
Other liabilities	20,436		21,457
Total liabilities	429,360		420,375
Commitments, contingencies and guarantees (see Note 19)
Stockholders’ equity:
Preferred stock (par value $0.01 per share; 50,000,000 shares authorized; 4,975,000 shares issued and outstanding as of both December 31, 2024 and 2023)	0		0
Common stock (par value $0.01 per share; 1,000,000,000 shares authorized; 702,224,674 and 696,242,668 shares issued as of December 31, 2024 and 2023, respectively; 381,230,343 and 380,389,609 shares outstanding as of December 31, 2024 and 2023, respectively)	7		7
Additional paid-in capital, net	36,428		35,541
Retained earnings	64,505		60,945
Accumulated other comprehensive loss	(9,286)		(8,268)
Treasury stock, at cost (par value $0.01 per share; 320,994,331 and 315,853,059 shares as of December 31, 2024 and 2023, respectively)	(30,870)		(30,136)
Total stockholders’ equity	60,784		58,089
Total liabilities and stockholders’ equity	$	490,144	$	478,464


See Notes to Consolidated Financial Statements.
			137			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY



(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, 2021	4,975,000	$	0	685,057,944	$	7	$	34,112	$	51,006	$	374	$	(24,470)	$	61,029

Comprehensive income (loss)									7,360		(10,290)				(2,930)
Dividends—common stock(1)				33,511	0		4		(954)						(950)
Dividends—preferred stock									(228)						(228)
Purchases of treasury stock													(4,948)		(4,948)
Issuances of common stock and restricted stock, net of forfeitures				4,909,173	0		276								276
Exercises of stock options				333,794	0		19								19


Compensation expense for restricted stock units							314								314
Balance as of December 31, 2022	4,975,000	$	0	690,334,422	$	7	$	34,725	$	57,184	$	(9,916)	$	(29,418)	$	52,582
Cumulative effects of accounting standards adoption(2)(3)									37						37
Comprehensive income									4,887		1,648				6,535
Dividends—common stock(1)				39,420	0		4		(935)						(931)
Dividends—preferred stock									(228)						(228)
Purchases of treasury stock													(718)		(718)
Issuances of common stock and restricted stock, net of forfeitures				5,731,927	0		299								299
Exercises of stock options				136,899	0		10								10



Compensation expense for restricted stock units							503								503








Balance as of December 31, 2023	4,975,000	$	0	696,242,668	$	7	$	35,541	$	60,945	$	(8,268)	$	(30,136)	$	58,089








Cumulative effects of accounting standards adoption(4)									(25)						(25)
Comprehensive income (loss)									4,750		(1,018)				3,732
Dividends—common stock(1)				38,319	0		5		(937)						(932)
Dividends—preferred stock									(228)						(228)
Purchases of treasury stock													(734)		(734)
Issuances of common stock and restricted stock, net of forfeitures				5,767,946	0		323								323
Exercises of stock options				175,741	0		4								4


Compensation expense for restricted stock units							555								555
Balance as of December 31, 2024	4,975,000	$	0	702,224,674	$	7	$	36,428	$	64,505	$	(9,286)	$	(30,870)	$	60,784

(1)We declared dividends per share on our common stock of $0.60 in each quarter of 2024, 2023 and 2022.

(2)Impact from the adoption of ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings (“TDR”) and Vintage Disclosures as of January 1, 2023.

(3)We have equity method investments in certain non-public entities which adopted ASU 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) as of January 1, 2023*.* The impact to retained earnings was recorded in the second quarter of 2023, on a one quarter lag consistent with our standard operating procedures for equity method investments.

(4)Impact from the adoption of 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.
			138			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Year Ended December 31,
(Dollars in millions)	2024		2023		2022
Operating activities:
Income from continuing operations, net of tax	$	4,747	$	4,887	$	7,360
Income from discontinued operations, net of tax	3		0		0
Net income	4,750		4,887		7,360
Adjustments to reconcile net income to net cash from operating activities:
Provision for credit losses	11,716		10,426		5,847
Depreciation and amortization, net	3,237		3,226		3,210
Deferred tax provision (benefit)	(853)		(723)		(772)
Net securities losses	35		34		9
Loss (gain) on sales of loans	29		6		(196)
Stock-based compensation expense	569		513		314
Other	65		51		40
Loans held for sale:
Originations and purchases	(3,688)		(4,602)		(8,822)
Proceeds from sales and paydowns	3,870		4,432		9,679
Changes in operating assets and liabilities:
Changes in interest receivable	(54)		(359)		(641)
Changes in other assets	(426)		716		(2,973)
Changes in interest payable	17		122		246
Changes in other liabilities	(1,104)		1,846		511
Net change from discontinued operations	(4)		0		(3)
Net cash from operating activities	18,159		20,575		13,809
Investing activities:

Securities available for sale:
Purchases	(17,183)		(10,446)		(14,850)
Proceeds from paydowns and maturities	11,849		8,841		19,074
Proceeds from sales	175		290		2,570



Loans:
Net changes in loans originated as held for investment	(21,431)		(17,822)		(35,885)
Principal recoveries of loans previously charged off	3,001		2,288		2,091
Changes in premises and equipment	(1,204)		(961)		(934)
Net cash used in acquisitions	0		(2,785)		(1,176)
Net cash used in other investing activities	(1,617)		(1,325)		(628)
Net cash used in investing activities	$	(26,410)	(21,920)		(29,738)


See Notes to Consolidated Financial Statements.
			139			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Year Ended December 31,
(Dollars in millions)	2024		2023		2022
Financing activities:
Deposits and borrowings:
Changes in deposits	$	14,156	$	15,172	$	22,539
Issuance of securitized debt obligations	1,805		3,292		9,728
Maturities and paydowns of securitized debt obligations	(5,828)		(2,483)		(7,060)
Issuance of senior and subordinated notes	3,985		8,218		21,272
Maturities and paydowns of senior and subordinated notes	(4,411)		(8,436)		(15,561)
Changes in other borrowings	27		(351)		44
Common stock:
Net proceeds from issuances	323		299		276
Dividends paid	(932)		(931)		(950)
Preferred stock:

Dividends paid	(228)		(228)		(228)

Purchases of treasury stock	(734)		(718)		(4,948)
Proceeds from share-based payment activities	4		10		19
Net cash from financing activities	8,167		13,844		25,131
Changes in cash, cash equivalents and restricted cash for securitization investors	(84)		12,499		9,202
Cash, cash equivalents and restricted cash for securitization investors, beginning of the period	43,755		31,256		22,054
Cash, cash equivalents and restricted cash for securitization investors, end of the period	$	43,671	$	43,755	$	31,256
Supplemental cash flow information:
Interest paid	13,201		10,823		3,609
Income tax paid	1,105		1,355		1,852


See Notes to Consolidated Financial Statements.
			140			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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 December 31, 2024, 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 18—Business Segments and Revenue from Contracts with Customers.”

Basis of Presentation and Use of Estimates

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”). The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and in the related disclosures. These estimates are based on information available as of the date of the consolidated financial statements. While management makes its best judgments, actual amounts or results could differ from these estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of Capital One Financial Corporation and all other entities in which we have a controlling financial interest. We determine whether we have a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity (“VOE”) or a variable interest entity (“VIE”). All intercompany account balances and transactions have been eliminated.

Voting Interest Entities

VOEs are entities that have sufficient equity and provide the equity investors voting rights that give them the power to make significant decisions relating to the entity’s operations. Since a controlling financial interest in an entity is typically obtained through ownership of a majority voting interest, we consolidate our majority-owned subsidiaries and other voting interest entities in which we hold, directly or indirectly, more than 50% of the voting rights or where we exercise control through other contractual rights.

Investments in which we do not hold a controlling financial interest but have significant influence over the entity’s financial and operating decisions are accounted for under the equity method. If we do not have significant influence, we measure equity investments at fair value with changes in fair value recorded through net income, except those that do not have a readily determinable fair value (for which a measurement alternative is applied). We report equity investments in other assets on our consolidated balance sheets and include our share of income or loss for investments accounted for under the equity method and dividends from other equity investments in other non-interest income in our consolidated statements of income. The carrying value of investments included in other assets, excluding tax advantage investments, totaled $1.2 billion and $1.0 billion as of December 31, 2024 and 2023, respectively, which primarily included equity investments measured using the alternative measurement method and equity method investments. The carrying value of equity investments measured using the alternative measurement method totaled $757 million and $669 million as of December 31, 2024 and 2023, respectively.



			141			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Variable Interest Entities

VIEs are entities that, by design, either (i) lack sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties; or (ii) have equity investors that do not have the ability to make significant decisions relating to the entity’s operations through voting rights, or do not have the obligation to absorb the expected losses, or do not have the right to receive the residual returns of the entity. The entity that is deemed the primary beneficiary of a VIE is required to consolidate the VIE. An entity is deemed to be the primary beneficiary of a VIE if that entity has both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

In determining whether we are the primary beneficiary of a VIE, we consider both qualitative and quantitative factors regarding the nature, size and form of our involvement with the VIE, such as our role in establishing the VIE and our ongoing rights and responsibilities; our economic interests, including debt and equity investments, servicing fees and other arrangements deemed to be variable interests in the VIE; the design of the VIE, including the capitalization structure, subordination of interests, payment priority, relative share of interests held across various classes within the VIE’s capital structure and the reasons why the interests are held by us.

We perform on-going reassessments to evaluate whether changes in an entity’s capital structure or changes in the nature of our involvement with the entity result in a change to the VIE designation or a change to our consolidation conclusion. See “Note 6—Variable Interest Entities and Securitizations” for further details.

Balance Sheet Offsetting of Financial Assets and Liabilities

Derivative contracts that we execute bilaterally in the over-the-counter (“OTC”) market or are centrally cleared 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. See “Note 10—Derivative Instruments and Hedging Activities” for more details.

We also elect to present securities purchased or sold under resale or repurchase agreements on a net basis when a legally enforceable master netting agreement exists and other applicable criteria are met. Security collateral received from or pledged to the counterparties are not eligible for netting and are presented gross in our consolidated balance sheet. See “Note 9—Deposits and Borrowings” and “Note 10—Derivative Instruments and Hedging Activities” for more details.

Cash and Cash Equivalents

Cash and cash equivalents include cash and due from banks, interest-bearing deposits and other short-term investments, all of which, if applicable, have stated maturities of three months or less when acquired.

Securities Resale and Repurchase Agreements

Securities purchased under resale agreements and securities loaned or sold under agreements to repurchase, principally U.S. government and agency obligations, are not accounted for as sales but as collateralized financing transactions and recorded at the amounts at which the securities were acquired or sold, plus accrued interest. We continually monitor the market value of these securities and deliver additional collateral to or obtain additional collateral from counterparties, as appropriate. See “Note 9—Deposits and Borrowings.”

Investment Securities

Our investment portfolio consists primarily of the following: U.S. Treasury securities; U.S. government-sponsored enterprise or agency (“GSE” or “Agency”) and non-agency residential mortgage-backed securities (“RMBS”); Agency commercial mortgage-backed securities (“CMBS”); and other securities. The accounting and measurement framework for our investment securities differs depending on the security classification.



			142			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We classify securities as available for sale or held to maturity based on our investment strategy and management’s assessment of our intent and ability to hold the securities until maturity. We did not have any securities that were classified as held to maturity as of December 31, 2024 and 2023.

We report securities available for sale on our consolidated balance sheets at fair value. The amortized cost of investment securities reflects the amount for which the security was acquired, adjusted for accrued interest, amortization of premiums, discounts, and net deferred fees and costs, any applicable fair value hedge accounting adjustments, collection of cash, and charge-offs. Unrealized gains or losses are recorded, net of tax, as a component of accumulated other comprehensive income (“AOCI”). Unamortized premiums, discounts and other basis adjustments for available for sale securities are generally recognized in interest income over the contractual lives of the securities using the interest method. However, premiums on certain callable investment securities are amortized to the earliest call date. We record purchases and sales of investment securities available for sale on a trade date basis. Realized gains or losses from the sale of debt securities are computed using the first-in first-out method of identification, and are included in non-interest income in our consolidated statements of income. We elect to present accrued interest for securities available for sale within interest receivable on our consolidated balance sheets.

An individual debt security is impaired when the fair value of the security is less than its amortized cost. If we intend to sell an available for sale security in an unrealized loss position or it is more likely than not that we will be required to sell the security prior to recovery of its amortized cost basis, any allowance for credit losses is reversed through our provision for credit losses and the difference between the amortized cost basis of the security and its fair value is recognized in our consolidated statements of income.

For impaired debt securities that we have both the intent and ability to hold, the securities are evaluated to determine if a credit loss exists. The allowance for credit losses on our investment securities is recognized through our provision for credit losses and limited by the unrealized losses of a security measured as the difference between the security’s amortized cost and fair value. See further discussion below under the “Allowance for Credit Losses - Available for Sale Investment Securities” section of this Note.

We charge off any portion of an investment security that we determine is uncollectible. The amortized cost basis, excluding accrued interest, is charged off through the allowance for credit losses. Accrued interest is charged off as a reduction to interest income. Recoveries of previously charged off principal amounts are recognized in our provision for credit losses when received.

Allowance for Credit Losses - Available for Sale Investment Securities

We maintain an allowance for credit losses that represents management’s current estimate of expected credit losses over the contractual terms of our investment securities classified as available for sale. When an investment security available for sale is impaired due to credit factors, we recognize that impairment through the provision for credit losses in our consolidated statements of income and correspondingly establish an allowance for credit losses on our consolidated balance sheets. Credit losses recognized in the allowance for credit losses are limited to the amount by which the investment security’s amortized cost basis exceeds its fair value. Investment securities in unrealized gain positions do not have any allowance for credit losses as the investment security could be sold at its fair value to prevent realization of any credit losses. We exclude accrued interest from the fair value and amortized cost basis of an investment security for purposes of measuring impairment. Charge-offs of uncollectible amounts of investment securities are deducted from the allowance for credit losses.

For certain of our securities available for sale, we have determined that there is no risk of impairment due to credit factors. These investment securities include high quality debt instruments that are issued and guaranteed by the United States government and its agencies, certain government-sponsored enterprises, and certain foreign sovereign governments or supranational organizations. Management performs periodic assessments to reevaluate this conclusion by considering any changes in historical losses, current conditions, and reasonable and supportable forecasts.

We evaluate impairment on a quarterly basis at the individual security level and determine whether any portion of the decline in fair value is due to a credit loss. We make this determination through the use of quantitative and qualitative analyses. Our qualitative analysis includes factors such as the extent to which fair value is less than amortized cost, any changes in the security’s credit rating, past defaults or delayed payments, and adverse conditions impacting the security or issuer. A credit loss exists to the extent that management does not expect to recover the amortized cost basis.



			143			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For investment securities which require further assessment, we perform a quantitative analysis using a discounted cash flow (“DCF”) methodology and compare the present value of expected future cash flows to the security’s amortized cost basis. Projected future cash flows reflect management’s best estimate and are based on our understanding of past events, current conditions, reasonable and supportable forecasts, and are discounted by the security’s effective interest rate adjusted for prepayments. The allowance for credit losses for investment securities reflects the difference by which the amortized cost basis exceeds the present value of future cash flows and is limited to the amount by which the security’s amortized cost exceeds its fair value. See “Note 3—Investment Securities” for additional information.

Loans

Our loan portfolio consists of loans held for investment, including loans held in our consolidated securitization trusts, and loans held for sale and is divided into three portfolio segments: credit card, consumer banking and commercial banking loans. 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 loans as well as commercial and industrial loans.

Loan Classification

We classify loans as held for investment or held for sale based on our investment strategy and management’s intent and ability with regard to the loans, which may change over time. The accounting and measurement framework for loans differs depending on the loan classification, whether we elect the fair value option, whether the loans are originated or purchased and whether purchased loans are considered to have experienced a more-than-insignificant deterioration in credit quality since origination. The presentation within the consolidated statements of cash flows is based on management’s intent at acquisition or origination. Cash flows related to loans that are acquired or originated with the intent to hold for investment are included in cash flows from investing activities on our consolidated statements of cash flows. Cash flows related to loans that are acquired or originated with the intent to sell are included in cash flows from operating activities on our consolidated statements of cash flows.

Loans Held for Investment

Loans that we have the ability and intent to hold for the foreseeable future and loans associated with consolidated securitization transactions are classified as held for investment. Loans classified as held for investment, except for credit card loans, are reported at their amortized cost basis, excluding accrued interest. For these loans, we elect to present accrued interest within interest receivable on our consolidated balance sheets. For credit card loans classified as held for investment, earned finance charges and fees are included in either loans held for investment (if they have been billed to the customer) or interest receivable (if they have not yet been billed to the customer).

Interest income is recognized on performing loans on an accrual basis. We defer loan origination fees and direct loan origination costs on originated loans, premiums and discounts on purchased loans and loan commitment fees. We recognize these amounts in interest income as yield adjustments over the life of the loan and/or commitment period using the interest method. For credit card loans, loan origination fees and direct loan origination costs are amortized on a straight-line basis over a 12-month period. The amortized cost of loans held for investment is subject to our allowance for credit losses methodology described below under the “Allowance for Credit Losses - Loans Held for Investment” section of this Note.

Loans Held for Sale

Loans that we intend to sell or for which we do not have the ability and intent to hold for the foreseeable future are classified as held for sale. Multifamily commercial real estate loans originated with the intent to sell to government-sponsored enterprises are accounted for under the fair value option. We elect the fair value option on these loans as part of our management of interest rate risk along with the corresponding forward sale commitments. Loan origination fees and direct loan origination costs are recognized as incurred and are reported in other non-interest income in the consolidated statements of income. Interest income is calculated based on the loan's stated rate of interest and is reported in interest income in the consolidated statements of income. Fair value adjustments are recorded in other non-interest income in the consolidated statements of income.

All other loans classified as held for sale are recorded at the lower of cost or fair value. Loan origination fees, direct loan origination costs and any discounts and premiums are deferred until the loan is sold and are then recognized as part of the total gain or loss on sale. The fair value of loans held for sale is generally determined on an aggregate portfolio basis for each loan



			144			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

type, however, fair value may be determined on an individual basis when circumstances warrant. Fair value adjustments are recorded in other non-interest income in the consolidated statements of income.

If a loan is transferred from held for investment to held for sale, then on the transfer date, any decline in fair value related to credit is recorded as a charge-off and any remaining allowance for credit losses is reversed through our provision for credit losses. The loan is then reclassified to held for sale at its amortized cost at the date of the transfer. A valuation allowance is established, if needed, such that the loan held for sale is recorded at the lower of cost or fair value. Subsequent to transfer, we report write-downs or recoveries in fair value up to the carrying value at the date of transfer and realized gains or losses on loans held for sale in our consolidated statements of income as a component of other non-interest income. We calculate the gain or loss on loan sales as the difference between the proceeds received and the carrying value of the loans sold, net of the fair value of any interests retained.

Loans Acquired

All purchased loans, including loans transferred in a business combination, are initially recorded at fair value, which includes consideration of expected future losses, as of the date of the acquisition. To determine the fair value of loans at acquisition, we estimate discounted contractual cash flows due using an observable market rate of interest, when available, adjusted for factors that a market participant would consider in determining fair value. In determining fair value, contractual cash flows are adjusted to include prepayment estimates based upon historical payment trends, forecasted default rates and loss severities and other relevant factors. The difference between the fair value and the unpaid principal balance is recorded as a loan premium or discount, which may relate to either credit or non-credit factors, at acquisition.

We account for purchased loans under the accounting guidance for purchased financial assets with credit deterioration when, at the time of purchase, the loans have experienced a more-than-insignificant deterioration in credit quality since origination. These loans are herein referred to as purchased credit-deteriorated (“PCD”) loans and require the recognition of an allowance for credit losses at the time of acquisition.

We recognize an allowance for credit losses on purchased loans that have not experienced a more-than-insignificant deterioration in credit quality since origination at the time of purchase through earnings in a manner that is consistent with originated loans. The policies relating to the allowance for credit losses on loans is described below in the “Allowance for Credit Losses - Loans Held for Investment” section of this Note.

Loan Modifications and Restructurings

As part of our loss mitigation efforts, we may provide modifications to a borrower experiencing financial difficulty to improve long-term collectability of the loan and to avoid the need for foreclosure or repossession of collateral, if any. Loan modifications to a borrower experiencing financial difficulty in the form of principal forgiveness, an interest rate reduction, a delay in payment, including payment deferrals or a term extension are reported as Financial Difficulty Modifications (“FDMs”). As restructurings offered to borrowers experiencing financial difficulty are typically not at market terms, FDMs are generally accounted for as a continuation of the existing loan. See “Note 4—Loans” for additional information on our loan modifications and restructurings.

Loan Modifications and Restructurings Prior to Adoption of ASU No. 2022-02

In periods prior to 2023, a loan modification in which a concession is granted to a borrower experiencing financial difficulty was accounted for and reported as a TDR. These loan modifications typically include short-term payment deferrals, an extension of the loan term, a reduction in the interest rate, a reduction in the loan balance, or a combination of these modifications. See “Note 4—Loans” for additional information on our loan modifications and restructurings.

Delinquent and Nonperforming Loans



			145			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The entire balance of a loan is considered contractually delinquent if the minimum required payment is not received by the first statement cycle date equal to or following the due date specified on the customer’s billing statement. Delinquency is reported on loans that are 30 or more days past due. Interest and fees continue to accrue on past due loans until the date the loan is placed on nonaccrual status, if applicable. For loan modifications, delinquency and nonaccrual status are reported in accordance with the revised terms of the loans. We generally place consumer and commercial loans on nonaccrual status when we believe the collectability of interest and principal is not reasonably assured.

Nonperforming loans generally include loans that have been placed on nonaccrual status. Loans classified as held for sale are excluded from nonperforming classification consideration.

Our policies for classifying loans as nonperforming, by loan category, are as follows:

Credit card loans: As permitted by regulatory guidance issued by the Federal Financial Institutions Examination Council (“FFIEC”), our policy is generally to exempt credit card loans from being classified as nonperforming, as these loans are generally charged off in the period the account becomes 180 days past due. Consistent with industry conventions, we generally continue to accrue interest and fees on delinquent credit card loans until the loans are charged off, though any amounts deemed uncollectible are reserved for in our allowance for credit losses.
Consumer banking loans: We classify consumer banking loans as nonperforming when we determine that the collectability of all interest and principal on the loan is not reasonably assured, which is generally when the loan becomes 90 days past due.
Commercial banking loans: We classify commercial banking loans as nonperforming as of the date we determine that the collectability of all interest and principal on the loan is not reasonably assured.
Modified loans and troubled debt restructurings: Modified loans, including TDRs for periods ending on or before December 31, 2022 and FDMs for periods beginning on or after January 1, 2023, that are current at the time of the restructuring remain in accrual status if there is demonstrated performance prior to the restructuring and continued performance under the modified terms is expected. Otherwise, the modified loan is classified as nonperforming.

Interest and fees accrued but not collected at the date a loan is placed on nonaccrual status are reversed against earnings. In addition, the amortization of deferred loan fees, costs, premiums and discounts is suspended. Interest and fee income are subsequently recognized only upon the receipt of cash payments. However, if there is doubt regarding the ultimate collectability of loan principal, cash received is generally applied against the principal balance of the loan. Nonaccrual loans are generally returned to accrual status when all principal and interest is current and repayment of the remaining contractual principal and interest is reasonably assured, or when the loan is both well-secured and in the process of collection and collectability is no longer doubtful.



			146			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Charge-Offs

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 based on the time frames presented below. Accrued interest on loans other than credit card loans determined to be uncollectible is reversed as a reduction of interest income when the loan is classified as nonperforming. For credit card loans, accrued interest is charged off simultaneously with the charge-off of other components of amortized cost and as a reduction of interest income. When received, recoveries of previously charged off amounts are recorded as an increase to the allowance for credit losses (see the “Allowance for Credit Losses - Loans Held for Investment” section of this Note for information on how we account for expected recoveries). Costs to recover charged off loans are recorded as collection expense and included in our consolidated statements of income as a component of other non-interest expense as incurred. Our charge-off time frames by loan type are presented below.

Credit card loans: We generally charge off credit card loans in the period the account becomes 180 days past due. We charge off delinquent credit card loans for which revolving privileges have been revoked as part of loan workout when the account becomes 120 days past due. Credit card loans in bankruptcy are generally charged off by the end of the month following 30 days after the receipt of a complete bankruptcy notification from the bankruptcy court. Credit card loans of deceased account holders are generally charged off 5 days after receipt of notification.
Consumer banking loans: We generally charge off consumer banking loans at the earlier of the date when the account is a specified number of days past due or upon repossession of the underlying collateral. Our charge-off period for auto loans is 120 days past due. Small business banking loans generally charge off at 120 days past due or based on the date the amortized cost basis is deemed uncollectible. Auto loans that have not been previously charged off where the borrower has filed for bankruptcy and the loan has not been reaffirmed charge off in the period that is 60 days from the bankruptcy notification date, regardless of delinquency status. Auto loans that have not been previously charged off and have been discharged under Chapter 7 bankruptcy are charged off at the end of the month in which the bankruptcy discharge occurs. Remaining consumer loans generally are charged off within 40 days of receipt of notification from the bankruptcy court. In certain bankruptcy discharges, the loan is written down to the collateral value and the charged off amount is reported as principal reduction. Charge-off is determined using the present value of expected cash flows or a collateral evaluation for certain auto loans where the collateral value is lower than the amortized cost. Consumer loans of deceased account holders are charged off by the end of the month following 60 days of receipt of notification.
Commercial banking loans: We charge off commercial loans in the period we determine that the amortized cost basis is uncollectible.

Allowance for Credit Losses - Loans Held for Investment

We maintain an allowance for credit losses (“allowance”) that represents management’s current estimate of expected credit losses over the contractual terms of our loans held for investment. We measure the allowance on a quarterly basis through consideration of past events, including historical experience, current conditions and reasonable and supportable forecasts.

We measure current expected credit losses (“CECL”) over the contractual terms of our loans. The contractual terms are adjusted for expected prepayments but are not extended for renewals or extensions, except when an extension or renewal arises from a borrower option that is not unconditionally cancellable.

We aggregate loans sharing similar risk characteristics into pools for purposes of measuring expected credit losses. Pools are reassessed periodically to confirm that all loans within each pool continue to share similar risk characteristics. Expected credit losses for loans that do not share similar risk characteristics with other financial assets are measured individually.

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. At times expected recoveries may result in a negative allowance. We limit the allowance recovery expectations to amounts previously charged off and expected to be charged off. Charge-offs of uncollectible amounts result in a reduction to the allowance and recoveries of previously charged off amounts result in an increase to the allowance.



			147			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

When developing an estimate of expected credit losses, we use both quantitative and qualitative methods in considering all available information relevant to assessing collectability. This may include internal information, external information, or a combination of both relating to past events, current conditions, and reasonable and supportable forecasts. Judgment is applied to the development and duration of reasonable and supportable forecasts used in our estimation of lifetime losses. We estimate expected credit losses over the duration of those forecasts and then revert, on a rational and systematic basis, to historical losses at each relevant loss component of the estimate. Expected losses for contractual terms extending beyond the reasonable and supportable forecast and reversion periods are based on those historical losses.

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. Management’s judgment may involve an assessment of current and forward-looking conditions including but not limited to changes in lending policies and procedures, nature and volume of the portfolio, external factors, and uncertainty as it relates to economic, model or forecast risks, where not already captured in the modeled results.

Expected credit losses for collateral-dependent loans are based on the fair value of the underlying collateral. When we intend to liquidate the collateral, the fair value of the collateral is adjusted for expected costs to sell. A loan is deemed to be a collateral-dependent loan when (i) we determine foreclosure or repossession of the underlying collateral is probable, or (ii) foreclosure or repossession is not probable, but the borrower is experiencing financial difficulty and we expect repayment to be provided substantially through the operation or sale of the collateral. The allowance for a collateral-dependent loan reflects the difference between the loan’s amortized cost basis and the fair value (less selling costs, where applicable) of the loan’s underlying collateral.

Our credit card and consumer banking loan portfolios consist of smaller-balance, homogeneous loans. The consumer banking loan portfolio is divided into two primary portfolio segments: auto loans and retail banking loans. We assess our credit card and consumer banking loan portfolios based on common risk characteristics, such as origination year, contract type, interest rate, borrower credit score and geography. The commercial banking loan portfolio is primarily composed of larger-balance, non-homogeneous loans. These loans are subject to reviews that result in internal risk ratings. In assessing the risk rating of a particular commercial banking loan, among the factors we consider are the financial condition of the borrower, geography, collateral performance, historical loss experience and industry-specific information that management believes is relevant in determining and measuring expected credit losses. Subjective assessment and interpretation are involved. Emphasizing one factor over another or considering additional factors could impact the risk rating assigned to that commercial banking loan.

For consumer banking and commercial banking loans, the contractual period typically does not include renewals or extensions because the renewals and extensions are generally not at the borrower’s exclusive option to exercise. The undrawn credit exposure associated with our credit card loans is unconditionally cancellable. For this reason, expected credit losses are measured based only on the drawn balance at each quarterly measurement date and not on the undrawn exposure. Because credit card loans do not have a defined contractual life, management estimates both the volume and application of payments to determine a contractual life of the drawn balance at the measurement date over which expected credit losses are developed for credit card loans.

For consumer banking and commercial banking loans, we have made a policy election to not measure an allowance on accrued interest for loans held for investment because we reverse uncollectible accrued interest in a timely manner. See the “Delinquent and Nonperforming Loans” and “Charge-Offs” sections of this Note for information on what we consider timely. For credit card loans, we do not make this election, and we reserve for uncollectible accrued interest relating to credit card loans in the allowance.



			148			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The allowance related to credit card and consumer banking loans is assessed on a pooled basis is based on a modeled calculation, which is supplemented by management judgment as described above. Because of the homogeneous nature of our consumer loan portfolios, the allowance is based on the aggregated portfolio segment evaluations. The allowance is established through a process that begins with estimates of historical losses in each pool based upon various statistical analyses, with adjustments for current conditions and reasonable and supportable forecasts of future conditions, which includes expected economic conditions. Loss forecast models are utilized to estimate expected credit losses and consider several portfolio indicators including, but not limited to, expected economic conditions, historical loss experience, account seasoning, the value of collateral underlying secured loans, estimated foreclosures or defaults based on observable trends, delinquencies, bankruptcy filings, unemployment, borrower credit scores and general business trends. Management also considers an evaluation of overall portfolio credit quality based on indicators such as changes in our credit evaluation, underwriting and collection management policies, the effect of other external factors such as competition and legal and regulatory requirements, general economic conditions and business trends, and uncertainties in forecasting and modeling techniques used in estimating our allowance.

The allowance related to commercial banking loans assessed on a pooled basis and is based on our historical loss experience for loans with similar risk characteristics and consideration of the current credit quality of the portfolio, which is supplemented by management judgment as described above. These are adjusted for current conditions, and reasonable and supportable forecasts of conditions likely to cause future losses which vary from historical levels. We apply internal risk ratings to commercial banking loans, which we use to assess credit quality and derive a total loss estimate based on an estimated probability of default (“default rate”) and loss given default (“loss severity”). Management may also apply judgment to adjust the loss factors derived, taking into consideration both quantitative and qualitative factors, including general economic conditions, industry-specific and geographic trends, portfolio concentrations, trends in internal credit quality indicators, and current and past underwriting standards that have occurred but are not yet reflected in the historical data underlying our loss estimates.

The allowance related to smaller-balance homogeneous credit card and consumer banking loans whose terms have been modified is calculated on a pool basis using historical loss experience, adjusted for current conditions and reasonable and supportable forecasts of conditions likely to cause future losses which vary from historical levels for the respective class of assets. The allowance related to consumer banking loans that are assessed at a loan-level is determined based on key considerations that include the borrower’s overall financial condition, resources and payment history, prospects for support from financially responsible guarantors, and when applicable, the estimated realizable value of any collateral. The allowance related to commercial banking loans that are assessed at a loan-level is generally determined in accordance with our policy for estimating expected credit losses for collateral-dependent loans as described above.

Off-balance sheet credit exposures

In addition to the allowance, we also measure expected credit losses related to unfunded lending commitments that are not unconditionally cancellable in our Commercial Banking business. This reserve is measured using the same measurement objectives as the allowance for loans held for investment and is recorded within other liabilities on our consolidated balance sheets. These commitments are segregated by risk according to our internal risk rating scale, which we use to assess credit quality and derive an expected credit loss estimate. We assess these risk classifications, taking into consideration both quantitative and qualitative factors, including historical loss experience, adjusted for current conditions and reasonable and supportable forecasts of conditions likely to cause future losses which vary from historical levels, and utilization assumptions to estimate the reserve for unfunded lending commitments. Expected credit losses are not measured on unfunded lending commitments that are unconditionally cancellable, including all of our unfunded credit card and consumer banking lending commitments and certain of our unfunded commercial banking lending commitments.

Determining the appropriateness of the allowance and the reserve for unfunded lending commitments is complex and requires judgment by management about the effect of matters that are inherently uncertain. Subsequent evaluations of the loan portfolio, in light of the factors then prevailing, may result in significant changes in the allowance and the reserve for unfunded lending commitments in future periods. See “Note 5—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments” for additional information.



			149			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Securitization of Loans

Our loan securitization activities provide a source of funding and primarily involve the securitization of credit card and auto loans. Loan securitization involves the transfer of a pool of loan receivables from our portfolio to a trust. The trust then sells undivided interests in the pool of loan receivables to third-party investors through the issuance of debt securities and transfers the proceeds from the debt issuance to us as consideration for the loan receivables transferred. The debt securities are collateralized by the loan receivables transferred from our portfolio. We remove loans from our consolidated balance sheets if securitizations qualify as sales to unconsolidated VIEs, recognize assets retained and liabilities assumed at fair value and record a gain or loss on the transferred loans. Alternatively, if the transfer does not qualify as a sale but instead is considered a secured borrowing, the loans will remain on our consolidated balance sheets with an offsetting liability recognized for the amount of proceeds received. See “Note 6—Variable Interest Entities and Securitizations” for additional details.

Premises, Equipment and Leases

Premises and Equipment

Premises and equipment, including leasehold improvements, are carried at cost less accumulated depreciation and amortization. Land is carried at cost. We capitalize direct costs incurred during the application development stage of internally developed software projects. Depreciation and amortization expenses are calculated using the straight-line method over the estimated useful lives of the assets. Useful lives for premises and equipment are generally estimated as follows:


Premises and Equipment						Useful Lives
Buildings and improvements						5-39 years
Furniture and equipment						3-10 years
Computer software						3 years
Leasehold improvements						Lesser of the useful life or the remaining lease term

Expenditures for maintenance and repairs are expensed as incurred and gains or losses upon disposition are recognized in our consolidated statements of income as realized. See “Note 8—Premises, Equipment and Leases” for additional information.

Leases

Lease classification is determined at inception for all lease transactions with an initial term greater than one year. Operating leases are included as right-of-use (“ROU”) assets within other assets, and operating lease liabilities are classified as other liabilities on our consolidated balance sheets. Finance leases are included in premises and equipment, and other borrowings on our consolidated balance sheets. Our operating lease expense is included in occupancy and equipment within non-interest expense in our consolidated statements of income. Lease expense for minimum lease payments are recognized on a straight-line basis over the lease term. See “Note 8—Premises, Equipment and Leases” for additional information.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the fair value of the consideration transferred, plus the fair value of any non-controlling interests in the acquiree, over the fair value of the assets acquired and liabilities assumed as of the acquisition date and is generally assigned to one or more reporting units at acquisition date. A reporting unit is defined as an operating segment, or a business unit that is one level below an operating segment. We have four reporting units: Credit Card, Auto Finance, Other Consumer Banking, and Commercial Banking. Goodwill is not amortized but is tested for impairment at the reporting unit level annually or more frequently if adverse circumstances indicate that it is more likely than not that the carrying amount of a reporting unit exceeds its fair value. These indicators could include a sustained, significant decline in the Company’s stock price, a decline in expected future cash flows, significant disposition activity, a significant adverse change in the economic or business environment, and the testing for recoverability of a significant asset group, among others.

Intangible assets with finite useful lives are amortized on either an accelerated or straight-line basis over their estimated useful lives and are evaluated for impairment whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. See “Note 7—Goodwill and Other Intangible Assets” for additional information.



			150			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Mortgage Servicing Rights

Mortgage servicing rights (“MSRs”) are initially recorded at fair value when mortgage loans are sold or securitized in the secondary market and we retain the right to service these loans in exchange for a servicing fee. Commercial MSRs are subsequently accounted for under the amortization method. We evaluate for impairment as of each reporting date and recognize any impairment in other non-interest income. See “Note 7—Goodwill and Other Intangible Assets” for additional information.

Foreclosed Property and Repossessed Assets

Foreclosed property and repossessed assets obtained through our lending activities typically include commercial real estate or personal property, such as automobiles, and are recorded at net realizable value. For foreclosed property and repossessed assets, we generally reclassify the loan to repossessed assets upon repossession of the property in satisfaction of the loan. Net realizable value is the estimated fair value of the underlying collateral less estimated selling costs and is based on appraisals, when available. Subsequent to initial recognition, foreclosed property and repossessed assets are recorded at the lower of our initial cost basis or net realizable value, which is routinely monitored and updated. Any changes in net realizable value and gains or losses realized from disposition of the property are recorded in other non-interest expense. See “Note 17—Fair Value Measurement” for details.

Restricted Equity Investments

We have investments in Federal Home Loan Bank (“FHLB”) stock and in Federal Reserve Bank stock. These investments, which are included in other assets on our consolidated balance sheets, are not marketable, are carried at cost, and are reviewed for impairment if there is any indicator of impairment.

Litigation

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. Professional service costs, including fees for attorneys and experts, expected to be incurred in connection with a loss contingency are expensed as services are provided. See “Note 19—Commitments, Contingencies, Guarantees and Others” for additional information.

Customer Rewards Reserve

We offer products, primarily credit cards, which include programs that allow members to earn rewards based on account activity that can be redeemed for cash (primarily in the form of statement credits), gift cards, travel, or covering eligible charges. The amount of rewards that a customer earns varies based on the terms and conditions of the rewards program and product. When rewards are earned by a customer, the cost of the rewards is generally recorded as an offset to interchange income, with a corresponding increase to the customer rewards reserve. The customer rewards reserve is computed based on the estimated future cost of earned rewards that are expected to be redeemed and is reduced as rewards are redeemed. In estimating the customer rewards reserve, we consider historical redemption and spending behavior, as well as the terms and conditions of the current rewards programs, among other factors. Our customer rewards reserve assumes the substantial majority of all rewards earned will eventually be redeemed.

Revenue Recognition

Interest Income and Fees

Interest income and fees on loans and investment securities are recognized based on the contractual provisions of the underlying arrangements.

Loan origination fees, direct loan origination costs, premiums and discounts on loans held for investment are deferred and generally amortized into interest income as yield adjustments over the contractual life and/or commitment period using the interest method. Costs deferred include, among other things, incentives paid to our network of auto dealers for loan referrals. We may elect to factor prepayment estimates into the calculation of the constant effective yield to apply the interest method for certain loan portfolios. Prepayment estimates are based on historical prepayment data, existing and forecasted interest rates, and



			151			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

economic data. For credit card loans, loan origination fees and direct loan origination costs are amortized on a straight-line basis over a 12-month period.

The unamortized premiums, discounts and other basis adjustments on investment securities are included as components of the investment securities’ carrying value and are generally recognized in interest income as yield adjustments over the contractual lives of the securities using the interest method. However, premiums for certain callable investment securities are amortized to the earliest call date.

Finance charges and fees on credit card loans are recorded in revenue when earned and presented on our consolidated balance sheets within either loan receivables (if they have been billed to the customer) or interest receivable (if they have not yet been billed to the customer). Annual membership fees are classified as service charges and other customer-related fees in our consolidated statements of income and are deferred and amortized into income over 12 months on a straight-line basis.

Interchange Income

Interchange income generally represents fees for standing ready to authorize and providing settlement on credit and debit card transactions processed through the MasterCard® (“MasterCard”) and Visa® (“Visa”) interchange networks. The levels and structure of interchange rates set by MasterCard and Visa can vary based on cardholder purchase volumes, among other factors. We recognize interchange income upon settlement. See “Note 18—Business Segments and Revenue from Contracts with Customers” for additional details.

Card Partnership Agreements

We have contractual agreements with certain retailers and other partners to provide lending and other services to a mutual customer base. We primarily issue private-label and cobrand credit card loans to these customers over the terms of the partnership agreements.

Certain partners assist in or perform marketing activities on our behalf and promote our products and services to their customers. As compensation for providing these services, we often pay royalties, bounties or other special bonuses to these partners. Our payments to partners are generally recorded as reductions of revenue or as marketing expenses, depending on the nature of the payments. Our credit card partnership agreements may also provide for profit or revenue sharing payments which are presented as a reduction of the related revenue line item(s) when owed to the partner.

When a partner agrees to share a portion of the credit losses associated with the partnership, we evaluate the contractual provisions for the loss share payments as well as applicable accounting guidance to determine whether to present the sharing of losses on a gross or net basis in our consolidated financial statements. When loss sharing amounts due from partners are presented on a net basis, they are recorded as a reduction to our provision for credit losses in our consolidated statements of income and reduce the charge-off amounts that we report. The allowance for credit losses attributable to these portfolios is also reduced by the expected reimbursements from these partners for loss sharing amounts. See “Note 5—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments” for additional information related to our loss sharing arrangements.

Stock-Based Compensation

We are authorized to issue stock–based compensation to employees and directors in various forms, primarily as restricted stock units (“RSUs”) and performance share units (“PSUs”). In addition, we also issue cash-settled RSUs which are not counted against the common shares reserved for issuance or available for issuance because they are settled in cash.

For awards settled in shares, we generally recognize compensation expense on a straight-line basis over the award’s requisite service period based on the fair value of the award at the grant date. If an award settled in shares contains a performance condition with graded vesting, we recognize compensation expense using the accelerated attribution method. Restricted stock units that are cash-settled are accounted for as liability awards which results in quarterly expense fluctuations based on changes in our stock price through the date that the awards are settled. Awards to participants that are eligible for retirement or become eligible during the vesting period are expensed immediately or over the time period between the grant date and when the participant becomes retirement eligible, respectively. Stock-based compensation expense is included in salaries and associate benefits in the consolidated statements of income.



			152			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For RSUs and PSUs, the fair value of stock-based compensation used in determining compensation expense will generally equal the fair market value of our common stock on the date of grant. Certain share-settled awards have discretionary vesting conditions which result in the remeasurement of these awards at fair value each reporting period and the potential for compensation expense to fluctuate with changes in our stock price. See “Note 14—Stock-Based Compensation Plans” for additional details.

Marketing Expenses

Marketing expense includes the cost of our various promotional efforts to attract and retain customers such as advertising, promotional materials and certain customer incentives, including spend-based bonuses. We expense marketing costs as incurred.

Income Taxes

We recognize the current and deferred tax consequences of all transactions that have been recognized in the financial statements using the provisions of the enacted tax laws. Current income tax expense represents our estimated taxes to be paid or refunded for the current period and includes income tax expense related to our uncertain tax positions, as well as tax-related interest and penalties. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. We record valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized. We record the effect of remeasuring deferred tax assets and liabilities due to a change in tax rates or laws as a component of income tax expense related to continuing operations for the period in which the change is enacted. We release income tax effects stranded in AOCI when an entire portfolio of the type of item is sold, terminated or extinguished. Income tax benefits are recognized when, based on their technical merits, they are more likely than not to be sustained upon examination. The amount recognized is the largest amount of benefit that is more likely than not to be realized upon settlement. See “Note 16—Income Taxes” for additional details.

Earnings Per Share

Earnings per share is calculated and reported under the “two-class” method. The “two-class” method is an earnings allocation method under which earnings per share is calculated for each class of common stock and participating security considering both dividends declared or accumulated and participation rights in undistributed earnings as if all such earnings had been distributed during the period. We have unvested share-based payment awards which have a right to receive non-forfeitable dividends and are therefore deemed to be participating securities.

We calculate basic earnings per share by dividing net income, after deducting dividends on preferred stock and participating securities as well as undistributed earnings allocated to participating securities, by the average number of common shares outstanding during the period, net of any treasury shares. We calculate diluted earnings per share in a similar manner after consideration of the potential dilutive effect of common stock equivalents on the average number of common shares outstanding during the period. Common stock equivalents include stock options, RSUs and PSUs. Common stock equivalents are calculated based upon the treasury stock method using an average market price of common shares during the period. Dilution is not considered when a net loss is reported. Common stock equivalents that have an antidilutive effect are excluded from the computation of diluted earnings per share. See “Note 13—Earnings Per Common Share” for additional details.

Derivative Instruments and Hedging Activities

All derivative financial instruments, whether designated in a qualifying hedge accounting relationship or not, are reported at their fair value on our consolidated balance sheets as either assets or liabilities. See “Note 10—Derivative Instruments and Hedging Activities” for additional details.



			153			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair Value

Accounting for Acquisitions

We account for business combinations under the acquisition method of accounting. Under the acquisition method, identifiable tangible and intangible assets acquired, liabilities assumed and any non-controlling interest in the acquiree are recorded at fair value as of the acquisition date, with limited exceptions. Transaction costs and any costs to restructure the acquired company are expensed as incurred. Goodwill is recognized as the excess of the acquisition price over the estimated fair value of the assets acquired and liabilities assumed. If the fair value of the assets acquired and liabilities assumed is greater than the acquisition price, a bargain purchase gain is recognized and recorded in other non-interest income.

If the acquired set of activities and assets do not meet the accounting definition of a business, the transaction is accounted for as an asset acquisition. In an asset acquisition, the assets acquired are recorded at the purchase price plus any transaction costs incurred and no goodwill is recognized.



			154			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Newly Adopted Accounting Standards During the Year Ended December 31, 2024


Standard	Guidance	Adoption Timing and Financial Statement Impacts

Tax Credit Investments ASU No. 2023-02, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method Issued March 2023	Permits entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method, if certain criteria are met. Previously, only Low-Income Housing Tax Credit investments were eligible for application of the proportional amortization method.	We adopted this standard on its effective date of January 1, 2024 using a modified retrospective transition method, which results in a cumulative-effect adjustment to retained earnings in the period of adoption. Our adoption of this standard did not have a material impact on our consolidated financial statements. See “Consolidated Statements of Changes in Stockholders’ Equity” and “Note 6—Variable Interest Entities and Securitizations” for additional disclosures.
Segment Reporting Disclosures ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures Issued November 2023	Requires disclosure of incremental segment information on an annual and interim basis.	We adopted this standard as of December 31, 2024 using a retrospective transition method. See “Note 18—Business Segments and Revenue from Contracts with Customers” for additional disclosures.



			155			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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 the respective meetings, Capital One stockholders approved by the requisite vote the issuance of Capital One common stock as merger consideration to the holders of Discover common stock, and Discover stockholders adopted by the requisite vote the Merger Agreement. The closing of the Transaction remains subject to the satisfaction of other customary closing conditions, including the receipt of required regulatory approvals.

For the year ended December 31, 2024, we have incurred $234 million of integration expenses related to the agreement to acquire Discover, which are included in operating expenses in our Consolidated Statements of Income.



			156			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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 96% and 97% of our total investment securities portfolio as of December 31, 2024 and 2023, 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 December 31, 2024 and 2023. Accrued interest receivable of $262 million and $227 million as of December 31, 2024 and 2023, respectively, is not included in the table below.

Table 3.1: 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	$	6,114	$	0	$	5	$	(9)	$	6,110
RMBS:
Agency	74,177		0		57		(9,527)		64,707
Non-agency	567		(4)		64		(6)		621
Total RMBS	74,744		(4)		121		(9,533)		65,328
Agency CMBS	8,389		0		17		(581)		7,825
Other securities(1)	3,748		0		5		(3)		3,750
Total investment securities available for sale	$	92,995	$	(4)	$	148	$	(10,126)	$	83,013


	December 31, 2023
(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	$	5,330	$	0	$	1	$	(49)	$	5,282
RMBS:
Agency	71,294		0		104		(8,450)		62,948
Non-agency	610		(4)		89		(5)		690
Total RMBS	71,904		(4)		193		(8,455)		63,638
Agency CMBS	8,961		0		14		(652)		8,323
Other securities(1)	1,868		0		6		0		1,874
Total investment securities available for sale	$	88,063	$	(4)	$	214	$	(9,156)	$	79,117

(1)Includes $2.0 billion and $1.4 billion of asset-backed securities (“ABS”) as of December 31, 2024 and 2023, respectively. The remaining amount is primarily comprised of supranational bonds, foreign government bonds and U.S. agency debt bonds.



			157			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 December 31, 2024 and 2023. The amounts include securities available for sale without an allowance for credit losses.

Table 3.2: Securities in a Gross Unrealized Loss Position


	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	$	1,724	$	(6)	$	931	$	(3)	$	2,655	$	(9)
RMBS:
Agency	11,324		(178)		48,707		(9,349)		60,031		(9,527)
Non-agency	3		0		11		(1)		14		(1)
Total RMBS	11,327		(178)		48,718		(9,350)		60,045		(9,528)
Agency CMBS	700		(7)		5,677		(574)		6,377		(581)
Other securities	1,438		(3)		0		0		1,438		(3)
Total investment securities available for sale in a gross unrealized loss position without an allowance for credit losses(1)	$	15,189	$	(194)	$	55,326	$	(9,927)	$	70,515	$	(10,121)


	December 31, 2023
	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	$	733	$	0	$	2,242	$	(49)	$	2,975	$	(49)
RMBS:
Agency	3,511		(43)		53,987		(8,407)		57,498		(8,450)
Non-agency	1		0		13		(1)		14		(1)
Total RMBS	3,512		(43)		54,000		(8,408)		57,512		(8,451)
Agency CMBS	547		(7)		6,465		(645)		7,012		(652)
Other securities	276		0		4		0		280		0
Total investment securities available for sale in a gross unrealized loss position without an allowance for credit losses(1)	$	5,068	$	(50)	$	62,711	$	(9,102)	$	67,779	$	(9,152)

(1) Consists of approximately 2,740 securities in gross unrealized loss positions as of both December 31, 2024 and 2023.

Maturities and Yields of Investment Securities

The table below summarizes, as of December 31, 2024, 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



			158			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

cost of each security, inclusive of the contractual coupon, the impact of any premium amortization or discount accretion and any hedge accounting relationships.

Table 3.3: Contractual Maturities and Weighted-Average Yields of Securities


	December 31, 2024
(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	$	2,995	$	1,445	$	1,670	$	0	$	6,110
RMBS(1):
Agency	0		68		1,133		63,506		64,707
Non-agency	0		0		16		605		621
Total RMBS	0		68		1,149		64,111		65,328
Agency CMBS(1)	633		2,621		2,608		1,963		7,825
Other securities	226		3,524		0		0		3,750
Total securities available for sale	$	3,854	$	7,658	$	5,427	$	66,074	$	83,013
Amortized cost of securities available for sale	$	3,863	$	7,800	$	5,761	$	75,571	$	92,995
Weighted-average yield for securities available for sale	2.46%		4.05%		3.68%		3.72%		3.69%

(1)As of December 31, 2024, the weighted-average expected maturities of RMBS and Agency CMBS were 8.1 years and 4.8 years, respectively.

Table 3.4 Net Securities Gains or Losses and Proceeds from Sales

The following table presents the gross realized gains or losses and proceeds from the sale of securities available for sale for the years ended December 31, 2024, 2023 and 2022.


	Year Ended December 31,
(Dollars in millions)	2024		2023		2022
Realized gains (losses):
Gross realized gains	$	0	$	0	$	1
Gross realized losses	(35)		(34)		(10)
Net realized losses	$	(35)	$	(34)	$	(9)
Total proceeds from sales	$	175	$	290	$	2,570

Securities Pledged and Received

We pledged investment securities totaling $39.4 billion and $45.1 billion as of December 31, 2024 and 2023, respectively. These securities are primarily pledged to support our access to 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 $18 million and $16 million as of December 31, 2024 and 2023, respectively, related to our derivative transactions.



			159			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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 December 31, 2024 and 2023 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 December 31, 2024 and 2023. The delinquency aging includes all past due loans, both performing and nonperforming.

Table 4.1: Loan Portfolio Composition and Aging Analysis


	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	$	148,565	$	1,973	$	1,503	$	3,577	$	7,053	$	155,618
International card businesses	6,570		107		72		141		320		6,890
Total credit card	155,135		2,080		1,575		3,718		7,373		162,508
Consumer Banking:
Auto	71,600		3,149		1,529		551		5,229		76,829
Retail banking	1,237		13		3		10		26		1,263
Total consumer banking	72,837		3,162		1,532		561		5,255		78,092
Commercial Banking:
Commercial and multifamily real estate	31,733		31		9		130		170		31,903
Commercial and industrial	55,030		3		22		217		242		55,272
Total commercial banking	86,763		34		31		347		412		87,175
Total loans(1)	$	314,735	$	5,276	$	3,138	$	4,626	$	13,040	$	327,775
% of Total loans	96.02%		1.61%		0.96%		1.41%		3.98%		100.00%


	December 31, 2023
			Delinquent Loans
(Dollars in millions)	Current		30-59 Days		60-89 Days		> 90 Days		Total Delinquent Loans		Total Loans
Credit Card:
Domestic credit card	$	140,860	$	1,968	$	1,471	$	3,367	$	6,806	$	147,666
International card businesses	6,552		116		76		137		329		6,881
Total credit card	147,412		2,084		1,547		3,504		7,135		154,547
Consumer Banking:
Auto	68,768		3,268		1,555		484		5,307		74,075
Retail banking	1,329		15		3		15		33		1,362
Total consumer banking	70,097		3,283		1,558		499		5,340		75,437



			160			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	December 31, 2023
			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	34,325		0		14		107		121		34,446
Commercial and industrial	55,861		0		0		181		181		56,042
Total commercial banking	90,186		0		14		288		302		90,488
Total loans(1)	$	307,695	$	5,367	$	3,119	$	4,291	$	12,777	$	320,472
% of Total loans	96.01%		1.68%		0.97%		1.34%		3.99%		100.00%

(1)Loans include unamortized premiums, discounts, and deferred fees and costs totaling $1.2 billion and $1.4 billion as of December 31, 2024 and 2023, respectively.



			161			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 December 31, 2024 and 2023. Nonperforming loans generally include loans that have been placed on nonaccrual status.

Table 4.2: 90+ Day Delinquent Loans Accruing Interest and Nonperforming Loans


	December 31, 2024									December 31, 2023
(Dollars in millions)	> 90 Days and Accruing			Nonperforming Loans(1)			Nonperforming Loans Without an Allowance			> 90 Days and Accruing			Nonperforming Loans(1)			Nonperforming Loans Without an Allowance
Credit Card:
Domestic credit card	$	3,577		N/A			$	0		$	3,367		N/A			$	0
International card businesses	134			$	10		0			132			$	9		0
Total credit card	3,711			10			0			3,499			9			0
Consumer Banking:
Auto	0			750			0			0			712			0
Retail banking	0			25			12			0			46			19
Total consumer banking	0			775			12			0			758			19
Commercial Banking:
Commercial and multifamily real estate	0			509			227			0			425			335
Commercial and industrial	96			701			607			55			336			193
Total commercial banking	96			1,210			834			55			761			528
Total	$	3,807		$	1,995		$	846		$	3,554		$	1,528		$	547
% of Total loans held for investment	1.16		%	0.61		%	0.26		%	1.11		%	0.48		%	0.17		%

(1)We recognized interest income for loans classified as nonperforming of $111 million and $91 million for the years ended December 31, 2024 and 2023, respectively.



			162			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 December 31, 2024 and 2023.

Table 4.3: Credit Card Delinquency Status


	December 31, 2024						December 31, 2023
(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	$	148,112	$	453	$	148,565	$	140,521	$	339	$	140,860
30-59 days	1,944		29		1,973		1,940		28		1,968
60-89 days	1,483		20		1,503		1,454		17		1,471
Greater than 90 days	3,549		28		3,577		3,339		28		3,367
Total domestic credit card	155,088		530		155,618		147,254		412		147,666

International card businesses:
Current	6,533		37		6,570		6,521		31		6,552
30-59 days	102		5		107		112		4		116
60-89 days	69		3		72		72		4		76
Greater than 90 days	135		6		141		132		5		137
Total international card businesses	6,839		51		6,890		6,837		44		6,881
Total credit card	$	161,927	$	581	$	162,508	$	154,091	$	456	$	154,547



			163			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 December 31, 2024 and 2023. 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


	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	$	17,057	$	8,333	$	8,194	$	5,621	$	1,482	$	394	$	41,081	$	0	$	0	$	41,081
621-660	5,584		3,492		2,906		1,986		667		235		14,870		0		0		14,870
620 or below	8,102		4,882		3,626		2,546		1,207		515		20,878		0		0		20,878
Total auto	30,743		16,707		14,726		10,153		3,356		1,144		76,829		0		0		76,829

Retail banking—Delinquency status:
Current	143		78		93		49		51		469		883		351		3		1,237
30-59 days	0		0		0		0		0		2		2		11		0		13
60-89 days	0		0		0		0		0		1		1		2		0		3
Greater than 90 days	0		0		0		0		1		7		8		1		1		10
Total retail banking	143		78		93		49		52		479		894		365		4		1,263
Total consumer banking	$	30,886	$	16,785	$	14,819	$	10,202	$	3,408	$	1,623	$	77,723	$	365	$	4	$	78,092



			164			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	December 31, 2023
	Term Loans by Vintage Year
(Dollars in millions)	2023		2022		2021		2020		2019		Prior		Total Term Loans		Revolving Loans		Revolving Loans Converted to Term		Total

Auto—At origination FICO scores:(1)
Greater than 660	$	12,219	$	12,593	$	9,505	$	3,124	$	1,213	$	309	$	38,963	$	0	$	0	$	38,963
621-660	4,863		4,432		3,346		1,337		592		192		14,762		0		0		14,762
620 or below	6,647		5,539		4,283		2,349		1,131		401		20,350		0		0		20,350
Total auto	23,729		22,564		17,134		6,810		2,936		902		74,075		0		0		74,075

Retail banking—Delinquency status:
Current	98		157		57		65		117		468		962		363		4		1,329
30-59 days	1		0		1		1		0		1		4		11		0		15
60-89 days	0		0		0		0		0		1		1		2		0		3
Greater than 90 days	0		0		0		0		0		8		8		6		1		15
Total retail banking	99		157		58		66		117		478		975		382		5		1,362
Total consumer banking	$	23,828	$	22,721	$	17,192	$	6,876	$	3,053	$	1,380	$	75,050	$	382	$	5	$	75,437

(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.



			165			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 December 31, 2024 and 2023. The internal risk rating status includes all past due loans, both performing and nonperforming.

Table 4.5: Commercial Banking Portfolio by Internal Risk Ratings


	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	$	1,820	$	2,574	$	3,846	$	2,230	$	903	$	4,887	$	16,260	$	12,691	$	49	$	29,000
Criticized performing	71		89		1,072		35		110		922		2,299		93		2		2,394
Criticized nonperforming	23		0		46		103		86		249		507		2		0		509
Total commercial and multifamily real estate	1,914		2,663		4,964		2,368		1,099		6,058		19,066		12,786		51		31,903
Commercial and industrial
Noncriticized	5,694		6,092		9,952		5,009		2,730		6,239		35,716		15,449		266		51,431
Criticized performing	101		190		680		932		92		258		2,253		887		0		3,140
Criticized nonperforming	41		13		186		43		184		91		558		143		0		701
Total commercial and industrial	5,836		6,295		10,818		5,984		3,006		6,588		38,527		16,479		266		55,272
Total commercial banking	$	7,750	$	8,958	$	15,782	$	8,352	$	4,105	$	12,646	$	57,593	$	29,265	$	317	$	87,175



			166			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	December 31, 2023
	Term Loans by Vintage Year
(Dollars in millions)	2023		2022		2021		2020		2019		Prior		Total Term Loans		Revolving Loans		Revolving Loans Converted to Term		Total
Internal risk rating:(1)
Commercial and multifamily real estate
Noncriticized	$	3,068	$	4,665	$	2,773	$	1,019	$	2,104	$	3,670	$	17,299	$	12,565	$	25	$	29,889
Criticized performing	148		1,494		706		284		463		904		3,999		133		0		4,132
Criticized nonperforming	65		26		124		0		47		163		425		0		0		425
Total commercial and multifamily real estate	3,281		6,185		3,603		1,303		2,614		4,737		21,723		12,698		25		34,446
Commercial and industrial
Noncriticized	6,909		11,935		6,994		3,566		2,359		5,117		36,880		14,822		167		51,869
Criticized performing	353		706		655		237		348		349		2,648		1,189		0		3,837
Criticized nonperforming	13		53		30		18		123		68		305		31		0		336
Total commercial and industrial	7,275		12,694		7,679		3,821		2,830		5,534		39,833		16,042		167		56,042
Total commercial banking	$	10,556	$	18,879	$	11,282	$	5,124	$	5,444	$	10,271	$	61,556	$	28,740	$	192	$	90,488

(1)Criticized exposures correspond to the “Special Mention,” “Substandard” and “Doubtful” asset categories defined by bank regulatory authorities.

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 FDMs, see “Note 1—Summary of Significant Accounting Policies.”

The following tables present the major modification types, amortized cost amounts for each modification type and financial effects for all FDMs undertaken during the year ended December 31, 2024 and 2023.

Table 4.6: Financial Difficulty Modifications to Borrowers


	Year Ended December 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	$	570		$	123		$	693		—			—			—			—			—			—			$	693
Term extension	—			—			—			$	32		$	5		$	37		$	471		$	581		$	1,052		1,089
Principal balance reduction	—			—			—			21			—			21			—			15			15			36

Interest rate reduction and term extension	9			—			9			665			—			665			—			114			114			788

Other(1)	—			—			—			4			1			5			68			69			137			142
Total loans modified	$	579		$	123		$	702		$	722		$	6		$	728		$	539		$	779		$	1,318		$	2,748
% of total class of receivables	0.37		%	1.79		%	0.43		%	0.94		%	0.48		%	0.93		%	1.69		%	1.41		%	1.51		%	0.84		%



			167			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Year Ended December 31, 2023
	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	$	590		$	97		$	687		—			—			—			—			—			—			$	687
Term extension	—			—			—			$	65		$	6		$	71		$	463		$	436		$	899		970
Principal balance reduction	—			—			—			21			—			21			—			—			—			21
Principal balance reduction and term extension	—			—			—			—			—			—			—			11			11			11
Interest rate reduction and term extension	12			—			12			672			1			673			—			26			26			711

Other(1)	—			—			—			4			3			7			2			451			453			460
Total loans modified	$	602		$	97		$	699		$	762		$	10		$	772		$	465		$	924		$	1,389		$	2,860
% of total class of receivables	0.41		%	1.41		%	0.45		%	1.03		%	0.74		%	1.02		%	1.35		%	1.65		%	1.54		%	0.89		%

(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.

Table 4.7: Financial Effects of Financial Difficulty Modifications to Borrowers


	Year Ended December 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	20.12%	26.71%		8.83%	3.48%		0.79%	1.90%
Payment delay duration (in months)	12	—		6	3		10	16
Principal balance reduction	—	—		$1	—		—	$15


	Year Ended December 31, 2023
	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	19.32%	27.10%	8.72%	2.00%	—%	0.25%
Payment delay duration (in months)	12	—	6	10	13	7
Principal balance reduction	—	—	$1	—	$20	$3



			168			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Performance of Financial Difficulty Modifications to Borrowers

We monitor loan performance trends, including FDMs, to assess and manage our exposure to credit risk. See “Note 1—Summary of Significant Accounting Policies” for additional information on how the allowance for modified loans is calculated for each portfolio segment.

The following tables present FDMs over a rolling 12 month period by delinquency status as of December 31, 2024 and 2023.

Table 4.8 Delinquency Status of Financial Difficulty Modifications to Borrowers**(1)**


	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	$	397	$	57	$	43	$	82	$	182	$	579
International card businesses	68		11		10		34		55		123
Total credit card	465		68		53		116		237		702
Consumer Banking:
Auto	522		101		70		29		200		722
Retail banking	4		1		0		1		2		6
Total consumer banking	526		102		70		30		202		728
Commercial Banking:
Commercial and multifamily real estate	535		2		0		2		4		539
Commercial and industrial	696		0		19		64		83		779
Total commercial banking	1,231		2		19		66		87		1,318
Total	$	2,222	$	172	$	142	$	212	$	526	$	2,748


	December 31, 2023
			Delinquent Loans
(Dollars in millions)	Current		30-59 Days		60-89 Days		> 90 Days		Total Delinquent Loans		Total Loans
Credit Card:
Domestic credit card	$	384	$	81	$	46	$	91	$	218	$	602
International card businesses	49		9		9		30		48		97
Total credit card	433		90		55		121		266		699
Consumer Banking:
Auto	548		107		76		31		214		762
Retail banking	10		0		0		0		0		10
Total consumer banking	558		107		76		31		214		772
Commercial Banking:
Commercial and multifamily real estate	426		0		0		39		39		465
Commercial and industrial	820		0		0		104		104		924
Total commercial banking	1,246		0		0		143		143		1,389
Total	$	2,237	$	197	$	131	$	295	$	623	$	2,860



			169			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)Commitments to lend additional funds on FDMs totaled $334 million and $109 million as of December 31, 2024 and 2023, 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 “Note 1—Summary of Significant Accounting Policies” for additional information.

The following table presents FDMs that entered subsequent default for the year ended December 31, 2024 and 2023.

Table 4.9 Subsequent Defaults of Financial Difficulty Modifications to Borrowers


	Year Ended December 31, 2024
(Dollars in millions)	Interest Rate Reduction		Term Extension		Interest Rate Reduction and Term Extension		Other Modifications		Total Loans
Credit Card:
Domestic credit card	$	228	$	0	$	3	$	0	$	231
International card businesses	76		0		0		0		76
Total credit card	304		0		3		0		307
Consumer Banking:
Auto	0		8		448		0		456
Retail banking	0		1		0		0		1
Total consumer banking	0		9		448		0		457
Commercial Banking:
Commercial and multifamily real estate	0		169		0		54		223
Commercial and industrial	0		125		0		255		380
Total commercial banking	0		294		0		309		603
Total	$	304	$	303	$	451	$	309	$	1,367


	Year Ended December 31, 2023
(Dollars in millions)	Interest Rate Reduction		Term Extension		Interest Rate Reduction and Term Extension		Total Loans
Credit Card:
Domestic credit card	$	89	$	0	$	1	$	90
International card businesses	20		0		0		20
Total credit card	109		0		1		110
Consumer Banking:
Auto	0		15		235		250

Total consumer banking	0		15		235		250
Commercial Banking:
Commercial and multifamily real estate	0		46		0		46
Commercial and industrial	0		51		0		51
Total commercial banking	0		97		0		97
Total	$	109	$	112	$	236	$	457



			170			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Troubled Debt Restructurings

We adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures on January 1, 2023, and elected the modified retrospective adoption method. The ASU eliminates the accounting guidance for TDRs, and establishes disclosure requirements, to be applied prospectively, for loans with FDMs.

The following tables present the major modification types, amortized cost amounts and financial effects of loans modified in a TDR during the year ended December 31, 2022.

Table 4.10: Troubled Debt Restructurings**(1)**


			Year Ended December 31, 2022
			Reduced Interest Rate		Term Extension
(Dollars in millions)	Total Loans Modified(2)		% of TDR Activity(3)	Average Rate Reduction	% of TDR Activity(3)	Average Term Extension (Months)
Credit Card:
Domestic credit card	$	306	100%	16.54%	N/A	N/A
International card businesses	127		100	27.42	N/A	N/A
Total credit card	433		100	19.73	N/A	N/A
Consumer Banking:
Auto	1,070		57	8.53	97%	4
Retail banking	7		N/A	N/A	92	13
Total consumer banking	1,077		57	8.53	97	4
Commercial Banking:
Commercial and multifamily real estate	385		8	0.28	84	13
Commercial and industrial	357		N/A	N/A	64	13
Total commercial banking	742		4	0.28	74	13
Total	$	2,252

(1)Commitments to lend additional funds on loans modified in TDRs totaled $219 million as of December 31, 2022.

(2)Represents the amortized cost of total loans modified in TDRs at the end of the period in which they were modified. As not every modification type is included in the table above, the total percentage of TDR activity may not add up to 100%. Some loans may receive more than one type of modification.

(3)Due to multiple modification types granted to some troubled borrowers, percentages may total more than 100% for certain loan types.

Subsequent Defaults of Completed TDR Modifications

The following table presents the type, number and amortized cost of loans modified in a TDR that experienced a default during the period and had completed a modification event in the twelve months prior to the default. A default occurs if the loan is either 90 days or more delinquent, has been charged off as of the end of the period presented or has been reclassified from accrual to nonaccrual status.

Table 4.11: TDR—Subsequent Defaults



	Year Ended December 31, 2022

(Dollars in millions)	Number of Contracts	Amount
Credit Card:
Domestic credit card	37,029	$	75
International card businesses	74,432	79
Total credit card	111,461	154



			171			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Year Ended December 31, 2022

(Dollars in millions)	Number of Contracts	Amount
Consumer Banking:
Auto	16,100	285
Retail banking	1	1
Total consumer banking	16,101	286
Commercial Banking:
Commercial and multifamily real estate	2	27
Commercial and industrial	5	56
Total commercial banking	7	83
Total	127,569	$	523

Loans Pledged

We pledged loan collateral of $6.7 billion and $7.4 billion to secure a portion of our FHLB borrowing capacity of $35.1 billion and $32.1 billion as of December 31, 2024 and 2023, respectively. We also pledged loan collateral of $80.2 billion and $78.3 billion to secure our Federal Reserve Discount Window borrowing capacity of $46.7 billion and $41.4 billion as of December 31, 2024 and 2023, 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.



			172			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Loans Held for Sale

Our total loans held for sale was $202 million and $854 million as of December 31, 2024 and 2023, respectively. We originated for sale $3.3 billion, $4.4 billion and $8.6 billion of commercial multifamily real estate loans in 2024, 2023 and 2022, respectively, and typically retain servicing rights upon the sale of these loans.

Revolving Loans Converted to Term Loans

For the years ended December 31, 2024 and 2023, we converted $847 million and $617 million of revolving loans to term loans, respectively, primarily in our domestic credit card and commercial banking loan portfolios.



			173			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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.

For credit card loans, finance charges and fees are charged off simultaneously with the charge-off of other components of amortized cost as a reduction of revenue. Total net revenue was reduced by $2.6 billion, $1.9 billion and $946 million in 2024, 2023 and 2022, respectively, for finance charges and fees charged-off as uncollectible.

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 “Note 1—Summary of Significant Accounting Policies” 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.

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 years ended December 31, 2024, 2023 and 2022.

Table 5.1: Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity


	Year Ended December 31, 2024
(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking		Total
Allowance for credit losses:
Balance as of December 31, 2021	$	8,345	$	1,918	$	1,167	$	11,430
Charge-offs	(4,362)		(1,614)		(88)		(6,064)
Recoveries(1)	1,314		760		17		2,091
Net charge-offs	(3,048)		(854)		(71)		(3,973)
Provision for credit losses	4,265		1,173		362		5,800
Allowance build for credit losses	1,217		319		291		1,827
Other changes(2)	(17)		0		0		(17)
Balance as of December 31, 2022	9,545		2,237		1,458		13,240
Reserve for unfunded lending commitments:
Balance as of December 31, 2021	0		0		165		165
Provision for losses on unfunded lending commitments	0		0		53		53
Balance as of December 31, 2022	0		0		218		218
Combined allowance and reserve as of December 31, 2022	$	9,545	$	2,237	$	1,676	$	13,458



			174			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Year Ended December 31, 2024
(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking		Total
Allowance for credit losses:
Balance as of December 31, 2022	$	9,545	$	2,237	$	1,458	$	13,240
Cumulative effects of accounting standards adoption(3)	(63)		0		0		(63)
Balance as of January 1, 2023	9,482		2,237		1,458		13,177
Charge-offs	(7,787)		(2,327)		(588)		(10,702)
Recoveries(1)	1,315		963		10		2,288
Net charge-offs	(6,472)		(1,364)		(578)		(8,414)
Provision for credit losses	8,651		1,169		665		10,485
Allowance build for credit losses	2,179		(195)		87		2,071
Other changes(2)	48		0		0		48
Balance as of December 31, 2023	11,709		2,042		1,545		15,296
Reserve for unfunded lending commitments:
Balance as of December 31, 2022	0		0		218		218
Provision (benefit) for losses on unfunded lending commitments	0		0		(60)		(60)
Balance as of December 31, 2023	0		0		158		158
Combined allowance and reserve as of December 31, 2023	$	11,709	$	2,042	$	1,703	$	15,454
Allowance for credit losses:
Balance as of December 31, 2023	$	11,709	$	2,042	$	1,545	$	15,296


Charge-offs	(10,757)		(2,758)		(234)		(13,749)
Recoveries(1)	1,770		1,165		66		3,001
Net charge-offs	(8,987)		(1,593)		(168)		(10,748)
Provision for credit losses	10,272		1,435		23		11,730
Allowance build (release) for credit losses(4)	1,285		(158)		(145)		982
Other changes(2)	(20)		0		0		(20)
Balance as of December 31, 2024	12,974		1,884		1,400		16,258
Reserve for unfunded lending commitments:
Balance as of December 31, 2023	0		0		158		158
Provision (benefit) for losses on unfunded lending commitments	0		0		(15)		(15)
Balance as of December 31, 2024	0		0		143		143
Combined allowance and reserve as of December 31, 2024	$	12,974	$	1,884	$	1,543	$	16,401

(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 for the year ended December 31, 2024. Primarily represents foreign currency translation adjustments and the initial allowance for PCD loans for the years ended December 31, 2023 and 2022. The initial allowance of PCD loans was $32 million and $10 million for the years ended December 31, 2023 and 2022, respectively.

(3)Impact from the adoption of ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326): TDR and Vintage Disclosures as of January 1, 2023.

(4)The termination of our Walmart program agreement, effective May 21, 2024 (“Walmart Program Termination”), resulted in an allowance for credit losses build in Domestic Card of $826 million in the second quarter of 2024.

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.



			175			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The table below presents gross charge-offs for loans held for investment by vintage year during the year ended December 31, 2024.

Table 5.2: Gross Charge-Offs by Vintage Year


	Year Ended 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
Credit Card
Domestic credit card	N/A		N/A		N/A		N/A		N/A		N/A		N/A		$	10,132	$	114	$	10,246
International card business	N/A		N/A		N/A		N/A		N/A		N/A		N/A		497		14		511
Total credit card	N/A		N/A		N/A		N/A		N/A		N/A		N/A		10,629		128		10,757
Consumer Banking
Auto	$	179	$	666	$	837	$	599	$	237	$	156	$	2,674	0		0		2,674
Retail banking	1		0		0		0		1		2		4		79		1		84
Total consumer banking	180		666		837		599		238		158		2,678		79		1		2,758
Commercial Banking
Commercial and multifamily real estate	0		0		4		31		9		82		126		0		0		126
Commercial and industrial	0		0		58		6		17		16		97		11		0		108
Total commercial banking	0		0		62		37		26		98		223		11		0		234
Total	$	180	$	666	$	899	$	636	$	264	$	256	$	2,901	$	10,719	$	129	$	13,749



			176			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 “Note 1—Summary of Significant Accounting Policies” for further discussion of our credit card partnership agreements.

The table below summarizes the changes in the estimated reimbursements from these partners for the years ended December 31, 2024, 2023 and 2022.

Table 5.3: Summary of Credit Card Partnership Loss Sharing Arrangements Impacts


	Year Ended December 31,
(Dollars in millions)	2024(1)		2023		2022
Estimated reimbursements from partners, beginning of period	$	2,014	$	1,558	$	1,450
Amounts due from partners for charged off loans	(904)		(980)		(515)
Change in estimated partner reimbursements that (increased) decreased provision for credit losses	(100)		1,436		623
Estimated reimbursements from partners, end of period	$	1,010	$	2,014	$	1,558

(1) The Walmart Program Termination resulted in an allowance for credit losses build of $826 million in the second quarter of 2024.



			177			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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 VIEs. 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 December 31, 2024 and 2023. We separately present information for consolidated and unconsolidated VIEs.

Table 6.1: Carrying Amount of Consolidated and Unconsolidated VIEs


	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)	$	24,753	$	11,500	$	0	$	0	$	0
Auto loan securitizations	4,100		3,204		0		0		0
Total securitization-related VIEs	28,853		14,704		0		0		0
Other VIEs:(3)
Affordable housing entities	354		75		5,544		1,877		5,544
Entities that provide capital to low-income and rural communities	2,605		9		0		0		0
Other(4)	0		0		874		110		874
Total other VIEs	2,959		84		6,418		1,987		6,418
Total VIEs	$	31,812	$	14,788	$	6,418	$	1,987	$	6,418



			178			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	December 31, 2023
	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)	$	25,474	$	14,692	$	0	$	0	$	0
Auto loan securitizations	5,019		4,021		0		0		0
Total securitization-related VIEs	30,493		18,713		0		0		0
Other VIEs:(3)
Affordable housing entities	297		23		5,726		2,085		5,726
Entities that provide capital to low-income and rural communities	2,498		10		0		0		0
Other(4)	0		0		449		0		449
Total other VIEs	2,795		33		6,175		2,085		6,175
Total VIEs	$	33,288	$	18,746	$	6,175	$	2,085	$	6,175

(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 $2.7 billion of assets and $1.0 billion of liabilities as of December 31, 2024, and $2.6 billion of assets and $989 million of liabilities as of December 31, 2023.

(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.

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 MSRs and service the transferred loans pursuant to the guidelines set forth by the GSEs. As an investor, we hold primarily RMBS, CMBS, and ABS in our investment securities portfolio, which represent variable interests in the respective securitization trusts from which those securities were issued. 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 19—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. 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.



			179			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The table below presents our continuing involvement in certain securitization-related VIEs as of December 31, 2024 and 2023.

Table 6.2: Continuing Involvement in Securitization-Related VIEs


(Dollars in millions)	Credit Card		Auto
December 31, 2024:
Securities held by third-party investors	$	11,066	$	3,198
Receivables in the trusts	25,639		3,895
Cash balance of spread or reserve accounts	0		22
Retained interests	Yes		Yes
Servicing retained	Yes		Yes
December 31, 2023:
Securities held by third-party investors	$	14,029	$	4,014
Receivables in the trusts	26,404		4,839
Cash balance of spread or reserve accounts	0		19
Retained interests	Yes		Yes
Servicing retained	Yes		Yes

Credit Card Securitizations

We securitize a portion of our credit card loans which provides a source of funding for us. Credit card securitizations involve the transfer of credit card receivables to securitization trusts. These trusts then issue debt securities collateralized by the transferred receivables to third-party investors. We hold certain retained interests in our credit card securitizations and continue to service the receivables 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.

Auto Securitizations

Similar to our credit card securitizations, we securitize a portion of our auto loans which provides a source of funding for us. Auto securitizations involve the transfer of auto loans to securitization trusts. These trusts then issue debt securities collateralized by the transferred loans to third-party investors. We hold certain retained interests and continue to service the loans 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.

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 year ended December 31, 2024 and 2023, we recognized amortization of $701 million and $682 million, respectively, and tax credits of $718 million and $721 million, respectively, associated with these investments within income tax provision. The carrying value of our equity investments in these qualified affordable housing projects was $5.3 billion and $5.5 billion as of December 31, 2024 and 2023, 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 $2.1 billion and $2.3 billion as of December 31, 2024 and 2023, respectively, and is largely expected to be paid from 2025 to 2028.



			180			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 and $5.7 billion as of December 31, 2024 and 2023, respectively. 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 and $18.6 billion as of December 31, 2024 and 2023, respectively.

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 $2.6 billion and $2.5 billion as of December 31, 2024 and 2023, 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.

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 $874 million and $449 million as of December 31, 2024 and 2023, 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 $562 million as of December 31, 2024. For the year ended December 31, 2024, we recognized amortization of $28 million and tax credits of $21 million associated with these investments within income tax provision. We are periodically required to provide additional financial or other support during the period of the investments. Our liability for these unfunded commitments was $110 million as of December 31, 2024, and is expected to be paid from 2025 to 2033.



			181			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 7—GOODWILL AND OTHER INTANGIBLE ASSETS

The table below presents our goodwill, other intangible assets and MSRs as of December 31, 2024 and 2023. 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


	December 31, 2024
(Dollars in millions)	Carrying Amount of Assets		Accumulated Amortization		Net Carrying Amount		Weighted Average Remaining Amortization Period
Goodwill	$	15,059	N/A		$	15,059	N/A
Other intangible assets:
Purchased credit card relationship (“PCCR”) intangibles	369		$	(164)	205		6.1 years

Other(1)	134		(106)		28		5.1 years
Total other intangible assets	503		(270)		233		6.0 years
Total goodwill and other intangible assets	$	15,562	$	(270)	$	15,292
Commercial MSRs(2)	$	653	$	(309)	$	344

	December 31, 2023
(Dollars in millions)	Carrying Amount of Assets		Accumulated Amortization		Net Carrying Amount		Weighted Average Remaining Amortization Period
Goodwill	$	15,065	N/A		$	15,065	N/A
Other intangible assets:
Purchased credit card relationship (“PCCR”) intangibles	369		$	(96)	273		7.1 years

Other(1)	171		(134)		37		5.7 years
Total other intangible assets	540		(230)		310		6.9 years
Total goodwill and other intangible assets	$	15,605	$	(230)	$	15,375
Commercial MSRs(2)	$	653	$	(263)	$	390

(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 under which we recorded $77 million and $88 million of amortization expense for the years ended December 31, 2024 and 2023, respectively.



			182			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Goodwill

The following table presents changes in the carrying amount of goodwill by each of our business segments for the years ended December 31, 2024, 2023 and 2022. We did not recognize any goodwill impairment during 2024, 2023 and 2022.

Table 7.2: Goodwill by Business Segments


(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking		Total




Balance as of December 31, 2021	$	5,087	$	4,645	$	5,050	$	14,782


Other adjustments(1)	(9)		0		4		(5)
Balance as of December 31, 2022	5,078		4,645		5,054		14,777
Acquisitions	273		0		0		273
Other adjustments(1)	15		0		0		15
Balance as of December 31, 2023	$	5,366	$	4,645	$	5,054	$	15,065


Other adjustments(1)	(6)		0		0		(6)
Balance as of December 31, 2024	$	5,360	$	4,645	$	5,054	$	15,059

(1)Primarily represents foreign currency translation adjustments.

The goodwill impairment test is performed as of October 1 of each year. An impairment of a reporting unit’s goodwill is determined based on the amount by which the reporting unit’s carrying value exceeds its fair value, limited to the amount of goodwill allocated to the reporting unit.

The fair value of reporting units is calculated using a discounted cash flow methodology, a form of the income approach. The calculation uses projected cash flows based on each reporting unit’s internal forecast and uses the perpetuity growth method to calculate terminal values. These cash flows and terminal values are then discounted using appropriate discount rates, which are largely based on our external cost of equity with adjustments for the risk inherent in each reporting unit. The carrying amount for a reporting unit is the sum of its respective capital requirements, goodwill and other intangibles balances. Capital is allocated based on each reporting unit’s specific regulatory capital requirements and underlying risks. Consolidated stockholder’s equity in excess of the sum of all reporting unit’s capital requirements that is not identified for future capital needs, such as dividends, share buybacks, or other strategic initiatives, is allocated to the reporting units and the Other category and assumed distributed to equity holders in future periods. Our discounted cash flow analysis requires management to make judgments about future loan and deposit growth, revenue growth, credit losses, and capital rates. The reasonableness of our fair value calculation is assessed by reference to a market-based approach using comparable market multiples and recent market transactions where available.



			183			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Intangible Assets

In connection with our acquisitions, we recorded intangible assets that include PCCR, sponsorship, customer and merchant relationships, partnership, trade names, and other customer contract intangibles. At acquisition, the PCCR intangibles reflect the estimated value of existing credit card holder relationships. There were no impairments of intangible assets in 2024 and 2023 and there was a $10 million impairment of intangible assets in 2022.

Intangible assets are typically amortized over their respective estimated useful lives on either an accelerated or straight-line basis. The following table summarizes the actual amortization expense recorded for the years ended December 31, 2024, 2023, 2022 and the estimated future amortization expense for intangible assets as of December 31, 2024:

Table 7.3: Amortization Expense


(Dollars in millions)	Amortization Expense
Actual for the year ended December 31,
2022	$	60
2023	82
2024	77
Estimated future amounts for the year ending December 31,
2025	65
2026	52
2027	41
2028	31
2029	21
Thereafter	15
Total estimated future amounts	$	225



			184			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 8—PREMISES, EQUIPMENT AND LEASES

Premises and Equipment

The following table presents our premises and equipment as of December 31, 2024 and 2023.

Table 8.1 Components of Premises and Equipment


(Dollars in millions)	December 31, 2024		December 31, 2023
Land	$	303	$	305
Buildings and improvements	4,276		4,297
Furniture and equipment	1,751		1,800
Computer software	3,357		2,863
In progress	426		291
Total premises and equipment, gross	10,113		9,556
Less: Accumulated depreciation and amortization	(5,602)		(5,181)
Total premises and equipment, net	$	4,511	$	4,375

Depreciation and amortization expense was $1.1 billion, $939 million and $790 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Leases

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.

Our right-of-use assets and lease liabilities for operating leases are included in other assets and other liabilities on our consolidated balance sheets. As most of our operating leases do not provide an implicit rate, we use our incremental borrowing rate in determining the present value of future lease payments. Our operating lease expense is included in occupancy and equipment within non-interest expense in our consolidated statements of income. Total operating lease expense consists of operating lease cost, which is recognized on a straight-line basis over the lease term, and variable lease cost, which is recognized based on actual amounts incurred. We also sublease certain premises, and sublease income is included in other non-interest income in our consolidated statements of income.

The following tables present information about our operating lease portfolio and the related lease costs as of and for the years ended December 31, 2024 and 2023.

Table 8.2 Operating Lease Portfolio


(Dollars in millions)	December 31, 2024			December 31, 2023
Right-of-use assets	$	974		$	1,009
Lease liabilities	1,265			1,312
Weighted-average remaining lease term	7.9 years			8.2 years
Weighted-average discount rate	3.3		%	3.2		%



			185			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Table 8.3 Total Operating Lease Expense and Other Information


	Year Ended December 31,
(Dollars in millions)	2024		2023
Operating lease cost	$	224	$	241
Variable lease cost	48		47

Total lease cost	272		288
Sublease income	(14)		(18)
Net lease cost	$	258	$	270
Cash paid for amounts included in the measurement of lease liabilities	$	261	$	285
Right-of-use assets obtained in exchange for lease liabilities	145		83

The following table presents a maturity analysis of our operating leases and a reconciliation of the undiscounted cash flows to our lease liabilities as of December 31, 2024.

Table 8.4 Maturities of Operating Leases and Reconciliation to Lease Liabilities


(Dollars in millions)	December 31, 2024
2025	$	235
2026	223
2027	196
2028	177
2029	161
Thereafter	488
Total undiscounted lease payments	1,480
Less: Imputed interest	215
Total lease liabilities	$	1,265

As of December 31, 2024, we had approximately $20 million and $29 million of right-of-use assets and lease liabilities, respectively, for finance leases with a weighted-average remaining lease term of 4.1 years. As of December 31, 2023, we had approximately $15 million and $27 million of right-of-use assets and lease liabilities, respectively, for finance leases with a weighted-average remaining lease term of 4.1 years. These right-of-use assets and lease liabilities are included in premises and equipment, net and other borrowings, respectively, on our consolidated balance sheets. We recognized $10 million and $16 million of total finance lease expense for the years ended December 31, 2024 and 2023, respectively.



			186			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 9—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 December 31, 2024 and 2023. 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 9.1: Components of Deposits, Short-Term Borrowings and Long-Term Debt


(Dollars in millions)	December 31, 2024		December 31, 2023
Deposits:
Non-interest-bearing deposits	$	26,122	$	28,024
Interest-bearing deposits(1)	336,585		320,389
Total deposits	$	362,707	$	348,413
Short-term borrowings:
Federal funds purchased and securities loaned or sold under agreements to repurchase	$	562	$	538

Total short-term borrowings	$	562	$	538


	December 31, 2024					December 31, 2023
(Dollars in millions)	Maturity Dates	Stated Interest Rates	Weighted-Average Interest Rate	Carrying Value		Carrying Value
Long-term debt:
Securitized debt obligations	2025-2030	0.77% - 5.91%	3.48%	$	14,264	$	18,043
Senior and subordinated notes:
Fixed unsecured senior debt(2)	2025-2035	1.65 - 7.62	4.84	26,930		27,168
Floating unsecured senior debt	—	—	—	0		349
Total unsecured senior debt			4.84	26,930		27,517
Fixed unsecured subordinated debt	2025-2032	2.36 - 4.20	3.57	3,766		3,731
Total senior and subordinated notes				30,696		31,248
Other long-term borrowings	2025-2031	1.46 - 9.91	5.72	29		27
Total long-term debt				$	44,989	$	49,318
Total short-term borrowings and long-term debt				$	45,551	$	49,856

(1)Some customers have time deposits in excess of the federal deposit insurance limit, making a portion of the deposit uninsured. 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. As of December 31, 2023, the total time deposit amount with some portion in excess of the insured amount was $15.8 billion and the portion of total time deposits estimated to be uninsured was $9.0 billion.

(2)Includes $473 million and $1.3 billion of Euro (“EUR”) denominated unsecured notes as of December 31, 2024 and 2023, respectively.



			187			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the carrying value of our interest-bearing time deposits with contractual maturities, securitized debt obligations and other debt by remaining contractual maturity as of December 31, 2024.

Table 9.2: Maturity Profile of Borrowings


(Dollars in millions)	2025		2026		2027		2028		2029		Thereafter		Total
Interest-bearing time deposits	$	63,855	$	5,953	$	6,256	$	1,876	$	994	$	11	$	78,945
Securitized debt obligations	6,278		2,835		2,492		2,224		372		63		14,264
Federal funds purchased and securities loaned or sold under agreements to repurchase	562		0		0		0		0		0		562
Senior and subordinated notes	3,221		4,499		4,207		2,863		3,171		12,735		30,696
Other borrowings	9		6		6		6		1		1		29
Total	$	73,925	$	13,293	$	12,961	$	6,969	$	4,538	$	12,810	$	124,496



			188			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 10—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 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.



			189			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 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 10.3 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.



			190			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 December 31, 2024 and 2023, 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 10.1: Derivative Assets and Liabilities at Fair Value


	December 31, 2024						December 31, 2023
	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	$	61,250	$	3	$	13	$	68,987	$	18	$	26
Cash flow hedges	102,550		123		24		70,350		216		23
Total interest rate contracts	163,800		126		37		139,337		234		49
Foreign exchange contracts:
Fair value hedges	518		0		101		1,380		0		113
Cash flow hedges	2,549		74		0		2,488		0		66
Net investment hedges	4,858		190		0		4,870		1		89
Total foreign exchange contracts	7,925		264		101		8,738		1		268
Total derivatives designated as accounting hedges	171,725		390		138		148,075		235		317
Derivatives not designated as accounting hedges:
Customer accommodation:
Interest rate contracts	108,754		865		1,014		103,489		1,188		1,382
Commodity contracts	34,185		858		814		33,495		1,161		1,147
Foreign exchange and other contracts	6,951		80		52		5,153		50		47
Total customer accommodation	149,890		1,803		1,880		142,137		2,399		2,576
Other interest rate exposures(2)	909		14		9		872		21		31
Other contracts	3,254		25		5		2,955		20		8
Total derivatives not designated as accounting hedges	154,053		1,842		1,894		145,964		2,440		2,615
Total derivatives	$	325,778	$	2,232	$	2,032	$	294,039	$	2,675	$	2,932
Less: netting adjustment(3)			(1,056)		(304)				(1,005)		(597)
Total derivative assets/liabilities			$	1,176	$	1,728			$	1,670	$	2,335

(1)Does not reflect $1 million and $2 million recognized as a net valuation allowance on derivative assets and liabilities for non-performance risk as of December 31, 2024 and 2023, 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.



			191			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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 December 31, 2024 and 2023.

Table 10.2: Hedged Items in Fair Value Hedging Relationships


	December 31, 2024								December 31, 2023
	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)	$	8,312		$	(38)		$	78	$	6,108	$	(8)	$	126
Interest-bearing deposits	(10,331)			160			0		(17,374)		277		0
Securitized debt obligations	(11,011)			276			0		(13,375)		503		0
Senior and subordinated notes	(30,696)			1,069			(225)		(30,899)		971		(372)

(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 $3.4 billion and $2.2 billion as of December 31, 2024 and 2023, respectively. The amount of the designated hedged items was $2.1 billion and $1.5 billion as of December 31, 2024 and 2023, respectively. The cumulative basis adjustments associated with these hedges was $16 million and $33 million as of December 31, 2024 and 2023, respectively.

(2)Carrying value represents amortized cost.

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 December 31, 2024 and 2023. 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.



			192			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Table 10.3: 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 December 31, 2024
Derivative assets(1)	$	2,232		$	(202)		$	(854)	$	1,176	$	(22)	$	1,154
As of December 31, 2023
Derivative assets(1)	2,675			(433)			(572)		1,670		(22)		1,648


	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 December 31, 2024
Derivative liabilities(1)	$	2,032		$	(202)		$	(102)	$	1,728	$	(53)	$	1,675
Repurchase agreements(2)	562			0			0		562		(562)		0
As of December 31, 2023
Derivative liabilities(1)	2,932			(433)			(164)		2,335		(13)		2,322
Repurchase agreements(2)	538			0			0		538		(538)		0

(1)We received cash collateral from derivative counterparties totaling $1.1 billion and $858 million as of December 31, 2024 and 2023, respectively. We also received securities from derivative counterparties with a fair value of approximately $18 million and $16 million as of December 31, 2024 and 2023, respectively, which we have the ability to re-pledge. We posted $1.6 billion and $1.7 billion of cash collateral as of December 31, 2024 and 2023, respectively.

(2)Under our customer repurchase agreements, which mature the next business day, we pledged collateral with a fair value of $573 million and $549 million as of December 31, 2024 and 2023, respectively, primarily consisting of agency RMBS securities.



			193			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 years ended December 31, 2024, 2023 and 2022.

Table 10.4: Effects of Fair Value and Cash Flow Hedge Accounting


	Year Ended December 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	$	2,873	$	40,894	$	2,267	$	(11,493)	$	(958)	$	(2,333)	$	1,081
Fair value hedging relationships:
Interest rate and foreign exchange contracts:
Interest recognized on derivatives	$	159	$	0	$	0	$	(323)	$	(413)	$	(961)	$	0
Gains (losses) recognized on derivatives	(42)		0		0		116		226		86		(57)
Gains (losses) recognized on hedged items(1)	(30)		0		0		(117)		(227)		59		57
Excluded component of fair value hedges(2)	0		0		0		0		0		6		0
Net income (expense) recognized on fair value hedges	$	87	$	0	$	0	$	(324)	$	(414)	$	(810)	$	0
Cash flow hedging relationships:(3)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income	$	0	$	(1,207)	$	0	$	0	$	0	$	0	$	0
Foreign exchange contracts:
Realized gains (losses) reclassified from AOCI into net income(4)	0		0		11		0		0		0		0
Net income (expense) recognized on cash flow hedges	$	0	$	(1,207)	$	11	$	0	$	0	$	0	$	0



			194			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Year Ended December 31, 2023
	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	$	2,550	$	37,410	$	1,978	$	(9,489)	$	(959)	$	(2,204)	$	1,120
Fair value hedging relationships:
Interest rate and foreign exchange contracts:
Interest recognized on derivatives	$	158	$	0	$	0	$	(385)	$	(414)	$	(1,036)	$	0
Gains (losses) recognized on derivatives	(149)		0		0		220		244		733		42
Gains (losses) recognized on hedged items(1)	72		0		0		(223)		(245)		(575)		(42)
Excluded component of fair value hedges(2)	0		0		0		0		0		(3)		0
Net income (expense) recognized on fair value hedges	$	81	$	0	$	0	$	(388)	$	(415)	$	(881)	$	0
Cash flow hedging relationships:(3)
Interest rate contracts:
Realized gains reclassified from AOCI into net income	$	0	$	(1,205)	$	0	$	0	$	0	$	0	$	0
Foreign exchange contracts:
Realized gains (losses) reclassified from AOCI into net income(4)	0		0		11		0		0		0		0
Net income (expense) recognized on cash flow hedges	$	0	$	(1,205)	$	11	$	0	$	0	$	0	$	0



			195			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Year Ended December 31, 2022
	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	$	1,884	$	28,910	$	443	$	(2,535)	$	(384)	$	(1,074)	$	914
Fair value hedging relationships:
Interest rate and foreign exchange contracts:
Interest recognized on derivatives	$	48	$	0	$	0	$	2	$	(48)	$	(197)	$	0
Gains (losses) recognized on derivatives	276		0		0		(542)		(698)		(1,893)		(84)
Gains (losses) recognized on hedged items(1)	(366)		0		0		546		699		2,059		83
Excluded component of fair value hedges(2)	0		0		0		0		0		(3)		0
Net income (expense) recognized on fair value hedges	$	(42)	$	0	$	0	$	6	$	(47)	$	(34)	$	(1)
Cash flow hedging relationships:(3)
Interest rate contracts:
Realized gains reclassified from AOCI into net income	$	0	$	(121)	$	0	$	0	$	0	$	0	$	0
Foreign exchange contracts:
Realized gains reclassified from AOCI into net income(4)	0		0		3		0		0		0		(1)
Net income (expense) recognized on cash flow hedges	$	0	$	(121)	$	3	$	0	$	0	$	0	$	(1)

(1)Includes amortization benefit of $76 million, $79 million and $78 million for the years ended December 31, 2024, 2023 and 2022, 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 11—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 gain of $128 million for the year ended December 31, 2024 and losses of $66 million and $17 million for the years ended December 31, 2023 and 2022, 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 $624 million recorded in AOCI as of December 31, 2024 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 9.2 years as of December 31, 2024. 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 years



			196			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ended December 31, 2024, 2023 and 2022. These gains or losses are recognized in other non-interest income on our consolidated statements of income.

Table 10.5: Gains (Losses) on Free-Standing Derivatives


	Year Ended December 31,
(Dollars in millions)		2024		2023		2022
Gains (losses) recognized in other non-interest income:
Customer accommodation:
Interest rate contracts		$	30	$	34	$	40
Commodity contracts		18		39		49
Foreign exchange and other contracts		21		16		14
Total customer accommodation		69		89		103
Other interest rate exposures		254		264		76
Other contracts		(58)		(29)		(38)
Total		$	265	$	324	$	141



			197			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 11—STOCKHOLDERS’ EQUITY

Preferred Stock

The following table summarizes our preferred stock outstanding as of December 31, 2024 and 2023.

Table 11.1: Preferred Stock Outstanding**(1)**


			Redeemable by Issuer Beginning	Per Annum Dividend Rate	Dividend Frequency		Liquidation Preference per Share			Total Shares Outstanding as of December 31, 2024	Carrying Value (in millions)
Series	Description	Issuance Date				December 31, 2024			December 31, 2023



Series I	5.000% Non-Cumulative	September 11, 2019	December 1, 2024	5.000%	Quarterly		$	1,000		1,500,000	$	1,462	$	1,462
Series J	4.800% Non-Cumulative	January 31, 2020	June 1, 2025	4.800	Quarterly		1,000			1,250,000	1,209		1,209
Series K	4.625% Non-Cumulative	September 17, 2020	December 1, 2025	4.625	Quarterly		1,000			125,000	122		122
Series L	4.375% Non-Cumulative	May 4, 2021	September 1, 2026	4.375	Quarterly		1,000			675,000	652		652
Series M	3.950% Fixed Rate Reset Non-Cumulative	June 10, 2021	September 1, 2026	3.950% through 8/31/2026; resets 9/1/2026 and every subsequent 5 year anniversary at 5-Year Treasury Rate +3.157%	Quarterly		1,000			1,000,000	988		988
Series N	4.250% Non-Cumulative	July 29, 2021	September 1, 2026	4.250%	Quarterly		1,000			425,000	412		412
Total											$	4,845	$	4,845

(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.



			198			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 years ended December 31, 2024, 2023 and 2022.

Table 11.2: AOCI



(Dollars in millions)	Securities Available for Sale		Hedging Relationships(1)		Foreign Currency Translation Adjustments(2)		Other		Total
AOCI as of December 31, 2021	$	297	$	118	$	(21)	$	(20)	$	374
Other comprehensive income (loss) before reclassifications	(7,980)		(2,404)		1		(17)		(10,400)
Amounts reclassified from AOCI into earnings	7		104		0		(1)		110
Other comprehensive income (loss), net of tax	(7,973)		(2,300)		1		(18)		(10,290)
AOCI as of December 31, 2022	(7,676)		(2,182)		(20)		(38)		(9,916)
Other comprehensive income (loss) before reclassifications	881		(268)		46		7		666
Amounts reclassified from AOCI into earnings	26		957		0		(1)		982
Other comprehensive income, net of tax	907		689		46		6		1,648
AOCI as of December 31, 2023	(6,769)		(1,493)		26		(32)		(8,268)
Other comprehensive income (loss) before reclassifications	(801)		(1,029)		(23)		7		(1,846)
Amounts reclassified from AOCI into earnings	26		802		0		0		828
Other comprehensive income (loss), net of tax	(775)		(227)		(23)		7		(1,018)
AOCI as of December 31, 2024	$	(7,544)	$	(1,720)	$	3	$	(25)	$	(9,286)

(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 gains of $169 million, losses of $126 million and gains of $305 million for the years ended December 31, 2024, 2023 and 2022, respectively, from hedging instruments designated as net investment hedges.



			199			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents amounts reclassified from each component of AOCI to our consolidated statements of income for the years ended December 31, 2024, 2023 and 2022.

Table 11.3: Reclassifications from AOCI


(Dollars in millions)		Year Ended December 31,
AOCI Components	Affected Income Statement Line Item		2024		2023		2022
Securities available for sale:
	Non-interest income (expense)		$	(35)	$	(34)	$	(9)
	Income tax provision (benefit)		(9)		(8)		(2)
	Net income (loss)		(26)		(26)		(7)
Hedging relationships:
Interest rate contracts:	Interest income (expense)		(1,207)		(1,205)		(121)
Foreign exchange contracts:	Interest income		11		11		3
	Interest income (expense)		6		(3)		(3)
	Non-interest income (expense)		129		(66)		(17)
	Income (loss) from continuing operations before income taxes		(1,061)		(1,263)		(138)
	Income tax provision (benefit)		(259)		(306)		(34)
	Net income (loss)		(802)		(957)		(104)
Other:
	Non-interest income and non-interest expense		0		1		1
	Income tax provision (benefit)		0		0		0
	Net income (loss)		0		1		1
Total reclassifications			$	(828)	$	(982)	$	(110)

The table below summarizes other comprehensive income (loss) activity and the related tax impact for the years ended December 31, 2024, 2023 and 2022.

Table 11.4: Other Comprehensive Income (Loss)


	Year Ended December 31,
	2024						2023						2022
(Dollars in millions)	Before Tax		Provision (Benefit)		After Tax		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	$	(1,036)	$	(261)	$	(775)	$	1,183	$	276	$	907	$	(10,516)	$	(2,543)	$	(7,973)
Net unrealized gains (losses) on hedging relationships	(303)		(76)		(227)		906		217		689		(3,032)		(732)		(2,300)
Foreign currency translation adjustments(1)	32		55		(23)		6		(40)		46		98		97		1
Other	9		2		7		8		2		6		(24)		(6)		(18)
Other comprehensive income (loss)	$	(1,298)	$	(280)	$	(1,018)	$	2,103	$	455	$	1,648	$	(13,474)	$	(3,184)	$	(10,290)

(1)Includes the impact of hedging instruments designated as net investment hedges.



			200			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 12—REGULATORY AND CAPITAL ADEQUACY

Regulation and Capital Adequacy

The Company and the Bank are subject to the regulatory capital requirements established by the Board of Governors of the Federal Reserve System (“Federal Reserve”) and the Office of the Comptroller of the Currency (“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.

Under the Basel III Capital Rules, we must maintain a minimum common equity Tier 1 (“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 in “Part I—Item 1. Business—Supervision and Regulation—Capital and Stress Testing Regulation—Stress Capital Buffer Rule.” 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—Capital and Stress Testing Regulation—Basel III Finalization Proposal.”

The Federal Reserve, OCC, and the Federal Deposit Insurance Corporation (“FDIC”) (collectively, “Federal Banking Agencies”) adopted a final rule (“CECL Transition Rule”) that provides banking institutions an optional five-year transition period to phase in the impact of the CECL standard on their regulatory capital (the “CECL Transition Election”). We adopted the CECL standard (for accounting purposes) as of January 1, 2020, and made the CECL Transition Election (for regulatory capital purposes) in the first quarter of 2020. Therefore, the applicable amounts presented in this Report reflect such election.

Pursuant to the CECL Transition Rule, a banking institution could elect to delay the estimated impact of adopting CECL on its regulatory capital through December 31, 2021 and then phase in the estimated cumulative impact from January 1, 2022 through December 31, 2024. For the “day 2” ongoing impact of CECL during the initial two years, the Federal Banking Agencies used a uniform “scaling factor” of 25% as an approximation of the increase in the allowance under the CECL standard compared to the prior incurred loss methodology. Accordingly, from January 1, 2020 through December 31, 2021, electing banking institutions were permitted to add back to their regulatory capital an amount equal to the sum of the after-tax “day 1” CECL adoption impact and 25% of the increase in the allowance since the adoption of the CECL standard. From January 1, 2022 through December 31, 2024, the after-tax “day 1” CECL adoption impact and the cumulative “day 2” ongoing impact were being phased in to regulatory capital at 25% per year. The following table summarizes the capital impact delay and phase in period on our regulatory capital from years 2020 to 2025.


	Capital Impact Delayed		Phase In Period
	2020	2021	2022	2023	2024	2025
“Day 1” CECL adoption impact	Capital impact delayed to 2022		25% Phased In	50% Phased In	75% Phased In	Fully Phased In
Cumulative “day 2” ongoing impact	25% scaling factor as an approximation of the increase in allowance under CECL

As of December 31, 2021, we added back an aggregate amount of $2.4 billion to our regulatory capital pursuant to the CECL Transition Rule. Consistent with the rule, we have phased in 75% of this amount as of January 1, 2024. The remaining



			201			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

$600 million has been phased in on January 1, 2025. As of December 31, 2024, the Company’s CET1 capital ratio, reflecting the CECL Transition Rule, was 13.5% and would have been 13.3% excluding the impact of the CECL Transition Rule (or “on a fully phased-in basis”).

For additional information about the regulatory capital rules to which we are subject, including recent proposed amendments to these rules, see “Part I—Item 1. Business—Supervision and Regulation.”

The following table provides a comparison of our regulatory capital amounts and ratios under the Basel III standardized approach subject to the applicable transition provisions, the regulatory minimum capital adequacy ratios and the applicable well-capitalized standard for each ratio as of December 31, 2024 and 2023.

Table 12.1: Capital Ratios Under Basel III**(1)**


	December 31, 2024							December 31, 2023
(Dollars in millions)	Capital Amount		Capital Ratio		Minimum Capital Adequacy		Well- Capitalized	Capital Amount		Capital Ratio		Minimum Capital Adequacy		Well- Capitalized
Capital One Financial Corp:
Common equity Tier 1 capital(2)	$	50,807	13.5	%	4.5	%	N/A	$	47,615	12.9	%	4.5	%	N/A
Tier 1 capital(3)	55,652		14.8		6.0		6.0%	52,460		14.2		6.0		6.0%
Total capital(4)	61,805		16.4		8.0		10.0	59,124		16.0		8.0		10.0
Tier 1 leverage(5)	55,652		11.6		4.0		N/A	52,460		11.2		4.0		N/A
Supplementary leverage(6)	55,652		9.9		3.0		N/A	52,460		9.6		3.0		N/A
CONA:
Common equity Tier 1 capital(2)	51,118		13.6		4.5		6.5	47,933		13.1		4.5		6.5
Tier 1 capital(3)	51,118		13.6		6.0		8.0	47,933		13.1		6.0		8.0
Total capital(4)	56,937		15.2		8.0		10.0	52,636		14.3		8.0		10.0
Tier 1 leverage(5)	51,118		10.7		4.0		5.0	47,933		10.3		4.0		5.0
Supplementary leverage(6)	51,118		9.2		3.0		N/A	47,933		8.8		3.0		N/A

(1)Capital requirements that are not applicable are denoted by “N/A.”

(2)CET1 capital ratio is a regulatory capital measure calculated based on CET1 capital divided by risk-weighted assets.

(3)Tier 1 capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by risk-weighted assets.

(4)Total capital ratio is a regulatory capital measure calculated based on total capital divided by risk-weighted assets.

(5)Tier 1 leverage ratio is a regulatory capital measure calculated based on Tier 1 capital divided by adjusted average assets.

(6)Supplementary leverage ratio is a regulatory capital measure calculated based on Tier 1 capital divided by total leverage exposure.

We exceeded the minimum capital requirements and the Bank exceeded the minimum regulatory requirements and was well-capitalized under PCA requirements as of both December 31, 2024 and 2023.

Regulatory restrictions exist that limit the ability of CONA to transfer funds to our BHC. As of December 31, 2024, funds available for dividend payments from the Bank were $8.9 billion. Applicable provisions that may be contained in our borrowing agreements or the borrowing agreements of our subsidiaries may limit our subsidiaries’ ability to pay dividends to us or our ability to pay dividends to our stockholders.While 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. There can be no assurance that we will declare and pay any dividends to stockholders. For additional information on the prior approval requirement on our capital distributions associated with our capital plan resubmission, see “Part I—Item 1. Business—Supervision and Regulation—Capital and Stress Testing Regulation—Capital Planning and Stress Testing.”



			202			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 13—EARNINGS PER COMMON SHARE

The following table sets forth the computation of basic and diluted earnings per common share for the years ended December 31, 2024, 2023 and 2022. Dividends and undistributed earnings allocated to participating securities represent the application of the “two-class” method as described in “Note 1—Summary of Significant Accounting Policies.”

Table 13.1: Computation of Basic and Diluted Earnings per Common Share


	Year Ended December 31,
(Dollars and shares in millions, except per share data)		2024		2023		2022


Net income		$	4,750	$	4,887	$	7,360
Dividends and undistributed earnings allocated to participating securities		(77)		(77)		(88)
Preferred stock dividends		(228)		(228)		(228)

Net income available to common stockholders		$	4,445	$	4,582	$	7,044

Total weighted-average basic common shares outstanding		382.7		382.4		391.8
Effect of dilutive securities:(1)
Stock options		0.2		0.1		0.3
Other contingently issuable shares		0.7		0.9		1.1
Total effect of dilutive securities		0.9		1.0		1.4
Total weighted-average diluted common shares outstanding		383.6		383.4		393.2
Basic earnings per common share:
Net income from continuing operations		$	11.60	$	11.98	$	17.98
Income (loss) from discontinued operations		0.01		0.00		0.00
Net income per basic common share		$	11.61	$	11.98	$	17.98
Diluted earnings per common share:(1)
Net income from continuing operations		$	11.58	$	11.95	$	17.91
Income (loss) from discontinued operations		0.01		0.00		0.00
Net income per diluted common share		$	11.59	$	11.95	$	17.91

(1)Excluded from the computation of diluted earnings per share were awards of 32 thousand shares, 27 thousand shares and 24 thousand shares for the years ended December 31, 2024, 2023 and 2022, respectively, because their inclusion would be anti-dilutive. There were no options excluded from the computation for the years ended December 31, 2024, 2023 and 2022.



			203			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 14—STOCK-BASED COMPENSATION PLANS

Stock Plans

We have one active stock-based compensation plan available for the issuance of shares to employees and directors. As of December 31, 2024, under the Amended and Restated 2004 Stock Incentive plan (“2004 Plan”), we are authorized to issue 81 million common shares in various forms, primarily share-settled RSUs, PSUs and non-qualified stock options. Of this amount, approximately 19 million shares remain available for future issuance as of December 31, 2024. The 2004 Plan permits the use of newly issued shares or treasury shares upon the settlement of options and stock-based incentive awards, and we generally settle by issuing new shares.

We also issue cash-settled restricted stock units. These cash-settled units are not counted against the common shares authorized for issuance or available for issuance under the 2004 Plan. Cash-settled units vesting during 2024, 2023 and 2022 resulted in cash payments to associates of $5 million, $4 million and $8 million, respectively. There was no unrecognized compensation cost for unvested cash-settled units as of December 31, 2024.

Total stock-based compensation expense recognized during 2024, 2023 and 2022 was $569 million, $513 million and $314 million, respectively. The total income tax benefit for stock-based compensation recognized during 2024, 2023 and 2022 was $109 million, $99 million and $75 million, respectively.

In addition, we maintain an Associate Stock Purchase Plan (“Purchase Plan”), which is a compensatory plan under the accounting guidance for stock-based compensation. Related to the Purchase Plan, we recognized compensation expense of $42 million, $39 million and $36 million for 2024, 2023 and 2022, respectively. We also maintain a Dividend Reinvestment and Stock Purchase Plan, which allows participating stockholders to purchase additional shares of our common stock through automatic reinvestment of dividends or optional cash investments.

Restricted Stock Units and Performance Share Units

RSUs represent share-settled awards that do not contain performance conditions and are granted to certain employees at no cost to the recipient. RSUs generally vest over three years from the date of grant; however, some RSUs cliff vest on or shortly after the first or third anniversary of the grant date. RSUs are subject to forfeiture until certain restrictions have lapsed, including continued employment for a specified period of time.

PSUs represent share-settled awards that contain performance conditions and are granted to certain employees at no cost to the recipient. PSUs generally vest over three years from the date of grant; however, some PSUs cliff vest on or shortly after the third anniversary of the grant date. The number of PSUs that vest over three years can be reduced by 50% or 100% depending on whether specific performance goals are met during the vesting period. The number of three-year cliff vesting PSUs that will ultimately vest is contingent upon meeting specific performance goals over a three-year period. These PSUs also include an opportunity to receive from 0% to 150% of the target number of common shares.

A recipient of an RSU or PSU is entitled to receive a share of common stock after the applicable restrictions lapse and is generally entitled to receive cash payments or additional shares of common stock equivalent to any dividends paid on the underlying common stock during the period the RSU or PSU is outstanding, but is not entitled to voting rights. Generally, the value of RSUs and PSUs will equal the fair value of our common stock on the date of grant and the expense is recognized over the vesting period. Certain PSUs have discretionary vesting conditions and are remeasured at fair value each reporting period.



			204			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents a summary of 2024 activity for RSUs and PSUs.

Table 14.1: Summary of Restricted Stock Units and Performance Share Units


	Restricted Stock Units			Performance Share Units(1)
(Shares/units in thousands)	Units	Weighted-Average Grant Date Fair Value per Unit		Units	Weighted-Average Grant Date Fair Value per Unit
Unvested as of January 1, 2024	6,447	$	118.16	1,955	$	125.49
Granted(2)	3,024	136.69		1,039	132.71
Vested	(2,682)	124.62		(865)	118.89
Forfeited	(206)	130.05		(3)	126.63
Unvested as of December 31, 2024	6,583	$	109.56	2,126	$	131.73

(1)Granted and vested include adjustments for achievement of specific performance goals for PSUs granted in prior periods.

(2)The weighted-average grant date fair value of RSUs was $113.08 and $141.71 in 2023 and 2022, respectively. The weighted-average grant date fair value of PSUs was $115.09 and $139.00 in 2023 and 2022, respectively.

The total fair value of RSUs that vested during 2024, 2023 and 2022 was $376 million, $233 million and $248 million, respectively. The total fair value of PSUs that vested was $119 million, $91 million and $127 million in 2024, 2023 and 2022, respectively. As of December 31, 2024, the unrecognized compensation expense related to unvested RSUs is $414 million, which is expected to be amortized over a weighted-average period of approximately 1.5 years; and the unrecognized compensation related to unvested PSUs was $55 million, which is expected to be amortized over a weighted-average period of approximately 1 year.

Stock Options

Stock options have a maximum contractual term of 10 years. Generally, the exercise price of stock options will equal the fair market value of our common stock on the date of grant. Option vesting is determined at the time of grant and may be subject to the achievement of any applicable performance conditions. Options generally become exercisable over three years beginning on the first anniversary of the date of grant; however, some option grants cliff vest on or shortly after the first or third anniversary of the grant date.

The following table presents a summary of 2024 activity for stock options and the balance of stock options exercisable as of December 31, 2024.

Table 14.2: Summary of Stock Options Activity


(Shares in thousands, and intrinsic value in millions)	Shares Subject to Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding as of January 1, 2024	404	$	75.46
Granted	0	0.00
Exercised	(176)	76.91
Forfeited	0	0.00
Expired	0	0.00
Outstanding and Exercisable as of December 31, 2024	228	$	74.34	1.56 years	$	24

There were no stock options granted in 2024, 2023 and 2022. The total intrinsic value of stock options exercised during 2024, 2023 and 2022 was $11 million, $5 million and $18 million, respectively.



			205			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 15—EMPLOYEE BENEFIT PLANS

Defined Contribution Plan

We sponsor a contributory Associate Savings Plan (the “Plan”) in which all full-time and part-time associates over the age of 18 are eligible to participate. We make non-elective contributions to each eligible associate’s account and match a portion of associate contributions. We also sponsor a voluntary non-qualified deferred compensation plan in which select groups of employees are eligible to participate. We make contributions to this plan based on participants’ deferral of salary, bonuses and other eligible pay. In addition, we match participants’ excess compensation (compensation over the Internal Revenue Service (“IRS”) compensation limit) less deferrals. We contributed $492 million during the years ended December 31, 2024 and 2023 and $444 million during the year ended December 31, 2022 to these plans.

Defined Benefit Pension and Other Postretirement Benefit Plans

We sponsor several frozen plans, including a qualified defined benefit pension plan, several non-qualified defined benefit pension plans, and a plan that provides other postretirement benefits, including medical and life insurance coverage. Our pension plans and the other postretirement benefit plan are valued using December 31 as the measurement date each year. Our policy is to amortize prior service amounts on a straight-line basis over the average remaining years of service to full eligibility for benefits of active plan participants.

We are currently in the process of terminating the qualified defined benefit pension plan noted above and certain other postretirement benefits coverage. A Notice of Intent to Terminate (“NOIT”) the plan was distributed to plan participants on January 21, 2025 and a request for qualified status determination was filed with the IRS on February 13, 2025. Termination activities are expected to continue through the first quarter of 2026.

The following table sets forth, on an aggregated basis, changes in the benefit obligation and plan assets, the funded status and how the funded status is recognized on our consolidated balance sheets.

Table 15.1: Changes in Benefit Obligation and Plan Assets


	Defined Pension Benefits				Other Postretirement Benefits
(Dollars in millions)	2024		2023		2024		2023
Change in benefit obligation:
Accumulated benefit obligation as of January 1,	$	127	$	128	$	10	$	12
Service cost	1		1		0		0
Interest cost	6		7		0		0
Benefits paid	(11)		(10)		(1)		(2)
Actuarial loss (gain)	(5)		1		0		0
Accumulated benefit obligation as of December 31,	$	118	$	127	$	9	$	10
Change in plan assets:
Fair value of plan assets as of January 1,	$	236	$	222	$	5	$	5
Actual return on plan assets	15		23		1		1
Employer contributions	1		1		1		1
Benefits paid	(11)		(10)		(1)		(2)
Fair value of plan assets as of December 31,	$	241	$	236	$	6	$	5
Over (under) funded status as of December 31,	$	123	$	109	$	(3)	$	(5)



			206			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Defined Pension Benefits				Other Postretirement Benefits
(Dollars in millions)	2024		2023		2024		2023
Balance sheet presentation as of December 31,
Other assets	$	131	$	117	$	0	$	0
Other liabilities	(8)		(8)		(3)		(5)
Net amount recognized as of December 31,	$	123	$	109	$	(3)	$	(5)

Net periodic benefit gain for our defined benefit pension plans and other postretirement benefit plan was $6 million in both 2024 and 2023 and $8 million in 2022. We recognized pre-tax gains of $8 million in 2024 and $9 million in 2023 and pre-tax losses of $24 million in 2022 in AOCI for our defined benefit pension plans and our other postretirement benefit plan.

Pre-tax amounts recognized in AOCI that have not yet been recognized as a component of net periodic benefit cost consist of net actuarial losses of $39 million and $47 million for our defined benefit pension plans as of December 31, 2024 and 2023, respectively, and net actuarial gains of $2 million for our other postretirement benefit plan as of both December 31, 2024 and 2023. There was no meaningful prior service cost recognized in AOCI.

Plan Assets and Fair Value Measurement

Plan assets are invested using a total return investment approach whereby a mix of equity securities and debt securities are used to preserve asset values, diversify risk and enhance our ability to achieve our benchmark for long-term investment return. Investment strategies and asset allocations are based on careful consideration of plan liabilities, the plan’s funded status and our financial condition. Investment performance and asset allocation are measured and monitored on a daily basis.

As of December 31, 2024 and 2023, our plan assets totaled $247 million and $241 million, respectively. We invested substantially all our plan assets in common collective trusts, which primarily consist of domestic and international equity securities, government securities and corporate and municipal bonds. Our plan assets were classified as Level 2 in the fair value hierarchy as of December 31, 2024 and 2023. For information on fair value measurements, including descriptions of Level 1, 2 and 3 of the fair value hierarchy, see “Note 17—Fair Value Measurement.”

Expected Future Benefit Payments

As of December 31, 2024, the benefits expected to be paid in the next ten years totaled $103 million for our defined pension benefit plans and $9 million for our other postretirement benefit plan, respectively.



			207			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 16—INCOME TAXES

The following table presents significant components of the provision for income taxes attributable to continuing operations for the years ended December 31, 2024, 2023 and 2022.

Table 16.1: Significant Components of the Provision for Income Taxes Attributable to Continuing Operations


	Year Ended December 31,
(Dollars in millions)	2024		2023		2022
Current income tax provision:
Federal taxes	$	1,598	$	1,423	$	2,125
State taxes	395		382		423
International taxes	23		76		104
Total current provision	$	2,016	$	1,881	$	2,652
Deferred income tax provision (benefit):
Federal taxes	$	(704)	$	(547)	$	(662)
State taxes	(178)		(145)		(112)
International taxes	29		(31)		2
Total deferred provision (benefit)	(853)		(723)		(772)
Total income tax provision	$	1,163	$	1,158	$	1,880

The international income tax provision is related to pre-tax earnings from foreign operations of approximately $266 million, $230 million and $462 million in 2024, 2023 and 2022, respectively.

Total income tax provision does not reflect the tax effects of items that are included in AOCI, which include a tax benefit of $280 million in 2024, tax provision of $455 million in 2023, and a tax benefit of $3.2 billion in 2022. See “Note 11—Stockholders’ Equity” for additional information.



			208			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the reconciliation of the U.S. federal statutory income tax rate to the effective income tax rate applicable to income from continuing operations for the years ended December 31, 2024, 2023 and 2022.

Table 16.2: Effective Income Tax Rate


	Year Ended December 31,
	2024		2023		2022
Income tax at U.S. federal statutory tax rate	21.0	%	21.0	%	21.0	%
State taxes, net of federal benefit	3.5		3.4		3.1
Non-deductible expenses	1.6		1.4		0.6
Affordable housing, new markets and other tax credits	(6.2)		(6.8)		(4.2)
Tax-exempt interest and other nontaxable income	(0.9)		(0.8)		(0.4)

Changes in valuation allowance	0.6		0.8		1.0
Other, net	0.1		0.2		(0.8)
Effective income tax rate	19.7	%	19.2	%	20.3	%

The following table presents significant components of our deferred tax assets and liabilities as of December 31, 2024 and 2023. The valuation allowance below represents the adjustment of our foreign tax credit carryforward, certain state deferred tax assets and net operating loss carryforwards to the amount we have determined is more likely than not to be realized.

Table 16.3: Significant Components of Deferred Tax Assets and Liabilities


(Dollars in millions)	December 31, 2024		December 31, 2023
Deferred tax assets:
Allowance for credit losses	$	3,730	$	3,538
Net unrealized loss on securities	2,527		2,223
Rewards programs	898		801
Premises, equipment and software	607		278
Net operating loss and tax credit carryforwards	519		514
Net unrealized loss on derivatives	505		470
Compensation and employee benefits	479		444

Other assets	997		974
Subtotal	10,262		9,242
Valuation allowance	(529)		(496)
Total deferred tax assets	9,733		8,746
Deferred tax liabilities:
Right-of-use assets	248		253

Partnership investments	133		148
Goodwill and intangibles	116		57
Mortgage servicing rights	76		85
Loan Fees & Expenses	48		48
Original issue discount	0		121


Other liabilities	60		95
Total deferred tax liabilities	681		807
Net deferred tax assets	$	9,052	$	7,939

Our gross federal net operating loss carryforwards were $3 million and $7 million as of December 31, 2024 and 2023, respectively. The net tax values of our state net operating loss and interest deduction carryforwards were $301 million and $273 million as of December 31, 2024 and 2023, respectively, and they will expire from 2025 to 2043. Our foreign tax credit carryforwards were $214 million and $207 million as of December 31, 2024 and 2023, respectively, and they will expire from 2029 to 2034.



			209			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Our valuation allowance increased by $33 million to $529 million as of December 31, 2024 compared to $496 million as of December 31, 2023. Of the total increase, $7 million is related to the current year increase in our foreign tax credit carryforwards that will not be realized prior to expiration and $29 million increase is related to increased state net operating losses and interest carryforwards to the amount we have determined is more likely than not to be realized.

We recognize accrued interest and penalties related to income taxes as a component of income tax expense. We recognized a $4 million and $1 million tax expense in 2024 and 2023, respectively, and $1 million tax benefit in 2022.

The following table presents the accrued balance of tax, interest and penalties related to unrecognized tax benefits.

Table 16.4: Reconciliation of the Change in Unrecognized Tax Benefits


(Dollars in millions)	Gross Unrecognized Tax Benefits		Accrued Interest and Penalties		Gross Tax, Interest and Penalties
Balance as of January 1, 2022	$	405	$	14	$	419
Additions for tax positions related to the current year	3		0		3
Additions for tax positions related to prior years	14		6		20
Reductions for tax positions related to prior years due to IRS and other settlements	(381)		(10)		(391)
Balance as of December 31, 2022	41		10		51
Additions for tax positions related to the current year	2		0		2
Additions for tax positions related to prior years	10		4		14
Reductions for tax positions related to prior years due to IRS and other settlements	(20)		(7)		(27)
Balance as of December 31, 2023	33		7		40
Additions for tax positions related to the current year	12		0		12
Additions for tax positions related to prior years	28		5		33
Reductions for tax positions related to prior years due to IRS and other settlements	(8)		(1)		(9)
Balance as of December 31, 2024	$	65	$	11	$	76
Portion of balance at December 31, 2024 that, if recognized, would impact the effective income tax rate	$	60	$	9	$	69

We are subject to examination by the IRS and other tax authorities in certain countries and states in which we operate. The tax years subject to examination vary by jurisdiction. During 2024, we continued to participate in the IRS Compliance Assurance Process (“CAP”) for our open federal income tax return years and have been accepted into CAP for 2025. During 2024, the IRS continued its post-filing examination of our 2021 and 2022 Federal income tax returns and pre-filings examination of our 2023 Federal income tax return.We expect our 2021, 2022 and 2023 exams to be concluded by December 31, 2025. We also expect that the IRS review of our 2024 Federal income tax return will be substantially completed in 2025 prior to its filing.

It is reasonably possible that further adjustments to the Company’s unrecognized tax benefits may be made within 12 months of the reporting date as a result of future judicial or regulatory interpretations of existing tax laws. At this time, an estimate of the potential changes to the amount of unrecognized tax benefits cannot be made.

As of December 31, 2024, the Company had approximately $1.6 billion of unremitted earnings of subsidiaries operating outside the U.S. that upon repatriation would have no additional U.S. income taxes. In accordance with the guidance for accounting for income taxes in special areas, nearly all these earnings are considered by management to be invested indefinitely.

As of December 31, 2024, retained earnings included approximately $287 million of pre-1987 bad debt reserves of acquired thrift institutions, for which no deferred federal income tax liability has been recognized. These amounts are subject to recapture and to federal income tax at the current corporate tax rate in the unlikely event that CONA, as the successor to the merged and acquired entities, makes distributions in excess of earnings and profits, redeems its stock or liquidates.



			210			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 17—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, DCF 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.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following describes the valuation techniques used in estimating the fair value of our financial assets and liabilities recorded at fair value on a recurring basis. The determination of the leveling of financial instruments in the fair value hierarchy is performed at the end of each reporting period.

Investment Securities

We measure the fair value of our U.S. Treasury securities using quoted prices in active markets. For the majority of securities in other investment categories, we utilize multiple vendor pricing services to obtain fair value measurements. We use a waterfall of pricing vendors determined using our annual assessment of pricing service performance. A pricing service may be considered as the preferred or primary pricing provider depending on how closely aligned its prices are to other vendor prices, and how consistent the prices are with other available market information. The price of each security is confirmed by comparing such price to other vendor prices before it is finalized.

RMBS and CMBS are generally classified as Level 2 or 3. When significant assumptions are not consistently observable, fair values are derived using the best available data. Such data may include quotes provided by dealers, valuation from external pricing services, independent pricing models, or other model-based valuation techniques, for example, calculation of the present values of future cash flows incorporating assumptions such as benchmark yields, spreads, prepayment speeds, credit ratings and losses. Generally, the external pricing services utilize observable market data to the extent available. Pricing models may be used, which can vary by asset class, and may also incorporate available trade, bid and other market information. Across asset classes, information such as trader/dealer inputs, credit spreads, forward curves and prepayment speeds are used to help determine appropriate valuations. Because many fixed income securities do not trade on a daily basis, the pricing models may apply available information through processes such as benchmarking curves, grouping securities based on their characteristics and using matrix pricing to prepare valuations. In addition, model processes are used by the pricing services to develop prepayment assumptions.



			211			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We validate the pricing obtained from the primary pricing providers through comparison of pricing to additional sources, including other pricing services, dealer pricing indications in transaction results and other internal sources. Pricing variances among different pricing sources are analyzed. Additionally, on an on-going basis, we request more detailed information from the valuation vendors to understand the pricing methodology and assumptions used to value the securities.

Derivative Assets and Liabilities

We use both exchange-traded and OTC derivatives to manage our interest rate, foreign currency and commodity risk exposures. When quoted market prices are available and used to value our exchange-traded derivatives, we classify them as Level 1. However, the majority of our derivatives do not have readily available quoted market prices. Therefore, we value most of our derivatives using vendor-based models. We primarily rely on market observable inputs for these models, including, for example, interest rate yield curves, credit curves, option volatility and currency rates. These inputs can vary depending on the type of derivatives and nature of the underlying rate, price or index upon which the value of the derivative is based. We typically classify derivatives as Level 2 when significant inputs can be observed in a liquid market and the model itself does not require significant judgment. When instruments are traded in less liquid markets and significant inputs are unobservable, such as interest rate swaps whose remaining terms do not correlate with market observable interest rate yield curves, such derivatives are classified as Level 3. We consider the impact of credit risk valuation adjustments when measuring the fair value of derivative contracts in order to reflect the credit quality of the counterparty and our own credit quality. Our internal pricing is compared against additional pricing sources such as external valuation agents and other internal sources. Pricing variances among different pricing sources are analyzed and validated. These derivatives are included in other assets or other liabilities on our consolidated balance sheets.

Loans Held for Sale

In our commercial business, we originate multifamily commercial real estate loans with the intent to sell them to GSEs. We elect the fair value option for such loans as part of our management of interest rate risk in our multifamily agency business. These held for sale loans are valued based on market observable inputs and are therefore classified as Level 2. Unrealized gains and losses on these loans are recorded in other non-interest income in our consolidated statements of income.

Retained Interests in Securitizations

We have retained interests in various mortgage securitizations from previous acquisitions. Our retained interests primarily include interest-only bonds and negative amortization bonds. We record these retained interests at fair value using market indications and valuation models to calculate the present value of future cash flows. Due to the use of significant unobservable inputs such as prepayment and discount rate assumptions, retained interests in securitizations are classified as Level 3 under the fair value hierarchy.

Deferred Compensation Plan Assets

We offer a voluntary non-qualified deferred compensation plan to eligible associates. In addition to participant deferrals, we make contributions to the plan. Participants invest these contributions in a variety of publicly traded mutual funds. The plan assets, which consist of those publicly traded mutual funds, are classified as Level 1.



			212			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 December 31, 2024 and 2023.

Table 17.1: Assets and Liabilities Measured at Fair Value on a Recurring Basis


	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	$	6,110	$	0	$	0	$	0		$	6,110
RMBS	0		65,212		116		0			65,328
CMBS	0		7,823		2		0			7,825
Other securities	123		3,627		0		0			3,750
Total securities available for sale	6,233		76,662		118		0			83,013
Loans held for sale	0		87		0		0			87
Other assets:
Derivative assets(2)	510		1,039		683		(1,056)			1,176
Other(3)	689		0		34		0			723
Total assets	$	7,432	$	77,788	$	835	$	(1,056)		$	84,999
Liabilities:
Other liabilities:
Derivative liabilities(2)	$	384	$	1,034	$	614	$	(304)		$	1,728
Total liabilities	$	384	$	1,034	$	614	$	(304)		$	1,728


	December 31, 2023
	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	$	5,282	$	0	$	0	$	0		$	5,282
RMBS	0		63,492		146		0			63,638
CMBS	0		8,191		132		0			8,323
Other securities	126		1,748		0		0			1,874
Total securities available for sale	5,408		73,431		278		0			79,117
Loans held for sale	0		347		0		0			347
Other assets:
Derivative assets(2)	788		1,001		886		(1,005)			1,670
Other(3)	589		3		35		0			627
Total assets	$	6,785	$	74,782	$	1,199	$	(1,005)		$	81,761
Liabilities:
Other liabilities:
Derivative liabilities(2)	$	449	$	1,655	$	828	$	(597)		$	2,335
Total liabilities	$	449	$	1,655	$	828	$	(597)		$	2,335

(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 10—Derivative Instruments and Hedging Activities” for additional information.

(2)Does not reflect approximately $1 million and $2 million recognized as a net valuation allowance on derivative assets and liabilities for non-performance risk as of December 31, 2024 and 2023, 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.



			213			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(3)As of December 31, 2024 and 2023, other includes retained interests in securitizations of $34 million and $35 million, deferred compensation plan assets of $688 million and $578 million and equity securities of $1 million and $14 million (including unrealized gains of $5 million), respectively.

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 years ended December 31, 2024, 2023 and 2022. 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 17.2: Level 3 Recurring Fair Value Rollforward


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Year Ended December 31, 2024
			Total Gains (Losses) (Realized/Unrealized)																		Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of December 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, December 31, 2024
Securities available for sale:(2)
RMBS	$	146	$	6	$	(2)	$	0	$	0	$	0	$	(11)	$	193	$	(216)	$	116	$	6
CMBS	132		0		(3)		0		0		0		(3)		0		(124)		2		0

Total securities available for sale	278		6		(5)		0		0		0		(14)		193		(340)		118		6
Other assets:

Retained interests in securitizations	35		(1)		0		0		0		0		0		0		0		34		(1)
Net derivative assets (liabilities)(3)	58		(15)		0		0		0		12		16		(2)		0		69		(25)



			214			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Year Ended December 31, 2023
			Total Gains (Losses) (Realized/Unrealized)																		Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of December 31, 2023(1)
(Dollars in millions)	Balance, January 1, 2023		Included in Net Income(1)		Included in OCI		Purchases		Sales		Issuances		Settlements		Transfers Into Level 3		Transfers Out of Level 3		Balance, December 31, 2023
Securities available for sale:(2)
RMBS	$	236	$	8	$	(2)	$	0	$	0	$	0	$	(20)	$	49	$	(125)	$	146	$	7
CMBS	142		(1)		(4)		0		0		0		(5)		0		0		132		(1)

Total securities available for sale	378		7		(6)		0		0		0		(25)		49		(125)		278		6
Other assets:

Retained interests in securitizations	36		(1)		0		0		0		0		0		0		0		35		(1)
Net derivative assets (liabilities)(3)(4)	5		(14)		0		0		0		166		69		(167)		(1)		58		63



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Year Ended December 31, 2022
			Total Gains (Losses) (Realized/Unrealized)																		Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of December 31, 2022(1)
(Dollars in millions)	Balance, January 1, 2022		Included in Net Income(1)		Included in OCI		Purchases		Sales		Issuances		Settlements		Transfers Into Level 3		Transfers Out of Level 3		Balance, December 31, 2022
Securities available for sale:(2)
RMBS	$	258	$	18	$	(32)	$	0	$	0	$	0	$	(60)	$	123	$	(71)	$	236	$	10
CMBS	9		(1)		(3)		0		0		0		(15)		190		(38)		142		(1)

Total securities available for sale	267		17		(35)		0		0		0		(75)		313		(109)		378		9
Other assets:

Retained interests in securitizations	41		(5)		0		0		0		0		0		0		0		36		(5)
Net derivative assets (liabilities)(3)(4)	19		(65)		0		0		0		36		3		(28)		40		5		(33)

(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 losses included in other comprehensive income related to Level 3 securities available for sale still held were $10 million, $5 million and $57 million as of December 31, 2024, December 31, 2023 and December 31, 2022, respectively.

(3)Includes derivative assets and liabilities of $683 million and $614 million, respectively, as of December 31, 2024 and $886 million and $828 million, respectively, as of December 31, 2023, and $79 million and $74 million, respectively, as of December 31, 2022.

(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.



			215			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 17.3: Quantitative Information about Level 3 Fair Value Measurements


	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	$	116	Discounted cash flows (vendor pricing)	Yield Voluntary prepayment rate Default rate Loss severity	6-10% 0-12% 0-6% 25-80%	6% 7% 1% 61%
CMBS	2		Discounted cash flows (vendor pricing)	Yield	5-7%	7%
Other assets:
Retained interests in securitizations(2)	34		Discounted cash flows	Life of receivables (months) Voluntary prepayment rate Discount rate Default rate Loss severity	31-81 7-9% 5-15% 1% 44-155%	N/A
Net derivative assets (liabilities)	69		Discounted cash flows	Swap rates	4%	4%


	Quantitative Information about Level 3 Fair Value Measurements
(Dollars in millions)	Fair Value at December 31, 2023		Significant Valuation Techniques	Significant Unobservable Inputs	Range	Weighted Average(1)
Securities available for sale:
RMBS	$	146	Discounted cash flows (vendor pricing)	Yield Voluntary prepayment rate Default rate Loss severity	2-19% 0-12% 0-10% 30-80%	7% 7% 1% 61%
CMBS	132		Discounted cash flows (vendor pricing)	Yield	5-7%	5%
Other assets:
Retained interests in securitizations(2)	35		Discounted cash flows	Life of receivables (months) Voluntary prepayment rate Discount rate Default rate Loss severity	33-69 9% 5-14% 2% 53-163%	N/A
Net derivative assets (liabilities)	58		Discounted cash flows	Swap rates	3-5%	4%

(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.



			216			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 describes the valuation techniques used in estimating the fair value of our financial assets and liabilities recorded at fair value on a nonrecurring basis.

Net Loans Held for Investment

Loans held for investment that are recorded at fair value on our consolidated balance sheets on a nonrecurring basis largely consist of impaired loans for which impairment is measured based upon the fair value of the underlying collateral. The fair value is determined using appraisal values that are obtained from independent appraisers, broker pricing opinions or other available market information, adjusted for the estimated cost to sell. Due to the use of significant unobservable inputs, these loans are classified as Level 3 under the fair value hierarchy. Fair value adjustments for individually impaired collateralized loans held for investment are recorded in provision for credit losses in the consolidated statements of income.

Loans Held for Sale

Loans held for sale for which we have not elected the fair value option are carried at the lower of aggregate cost, net of deferred fees and deferred origination costs, or fair value. These loans held for sale are valued based on market observable inputs and are therefore classified as Level 2. Fair value adjustments to these loans are recorded in other non-interest income in our consolidated statements of income.

Other Assets

Other assets subject to nonrecurring fair value measurements include equity investments accounted for under the measurement alternative, other repossessed assets and long-lived assets held for sale. The assets held for sale are carried at the lower of the carrying amount or fair value less costs to sell. The fair value is determined based on the appraisal value, listing price of the property or collateral provided by independent appraisers, and is adjusted for the estimated costs to sell. Due to the use of significant unobservable inputs, these assets are classified as Level 3 under the fair value hierarchy. Fair value adjustments for these assets are recorded in other non-interest expense in the consolidated statements of income.

The following table presents the carrying value of the assets measured at fair value on a nonrecurring basis and still held as of December 31, 2024 and 2023, and for which a nonrecurring fair value measurement was recorded during the year then ended.

Table 17.4: Nonrecurring Fair Value Measurements


	December 31, 2024
	Estimated Fair Value Hierarchy				Total
(Dollars in millions)	Level 2		Level 3
Loans held for investment	$	0	$	827	$	827
Loans held for sale	4		0		4
Other assets(1)	0		133		133
Total	$	4	$	960	$	964


	December 31, 2023
	Estimated Fair Value Hierarchy				Total
(Dollars in millions)	Level 2		Level 3
Loans held for investment	$	0	$	545	$	545
Loans held for sale	37		0		37
Other assets(1)	0		214		214
Total	$	37	$	759	$	796



			217			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)As of December 31, 2024, other assets included investments accounted for under measurement alternative of $71 million and repossessed assets of $62 million. As of December 31, 2023, other assets included investments accounted for under measurement alternative of $46 million, repossessed assets of $45 million and long-lived assets held for sale and right-of-use assets totaling $123 million.

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 0% to 61%, with a weighted average of 18%, and from 0% to 100%, with a weighted average of 18%, as of December 31, 2024 and 2023, 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 December 31, 2024 and 2023.

Table 17.5: Nonrecurring Fair Value Measurements Included in Earnings


	Total Gains (Losses)
	Year Ended December 31,
(Dollars in millions)	2024		2023
Loans held for investment	$	(246)	$	(244)
Loans held for sale	(10)		(1)
Other assets(1)	(83)		(58)
Total	$	(339)	$	(303)

(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 December 31, 2024 and 2023.

Table 17.6: Fair Value of Financial Instruments


	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	$	43,230	$	43,230	$	3,028	$	40,202	$	0
Restricted cash for securitization investors	441		441		441		0		0

Net loans held for investment	311,517		316,467		0		0		316,467
Loans held for sale	115		115		0		115		0
Interest receivable	2,532		2,532		0		2,532		0
Other investments(1)	1,329		1,329		0		1,329		0
Financial liabilities:
Deposits with defined maturities	78,944		79,091		0		79,091		0
Securitized debt obligations	14,264		14,335		0		14,335		0
Senior and subordinated notes	30,696		31,636		0		31,636		0
Federal funds purchased and securities loaned or sold under agreements to repurchase	562		562		0		562		0

Interest payable	666		666		0		666		0



			218			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	December 31, 2023
	Carrying Value		Estimated Fair Value		Estimated Fair Value Hierarchy
(Dollars in millions)			Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	43,297	$	43,297	$	4,903	$	38,394	$	0
Restricted cash for securitization investors	458		458		458		0		0
Net loans held for investment	305,176		308,044		0		0		308,044
Loans held for sale	507		515		0		515		0
Interest receivable	2,478		2,478		0		2,478		0
Other investments(1)	1,329		1,329		0		1,329		0
Financial liabilities:
Deposits with defined maturities	83,014		82,990		0		82,990		0
Securitized debt obligations	18,043		18,067		0		18,067		0
Senior and subordinated notes	31,248		31,524		0		31,524		0
Federal funds purchased and securities loaned or sold under agreements to repurchase	538		538		0		538		0

Interest payable	649		649		0		649		0

(1)Other investments include FHLB and Federal Reserve stock. These investments are included in other assets on our consolidated balance sheets.



			219			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 18—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.

Credit Card: Consists of our domestic consumer and small business card lending, and international card businesses in the 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 customers typically include companies with annual revenues between $20 million and $2 billion.

*•*Other category: Includes the residual impact of the allocation of our centralized Corporate Treasury group activities, such as management of our corporate investment portfolio, asset/liability management and oversight of our funds transfer pricing process, to our business segments. Accordingly, net gains and losses on our investment securities portfolio and certain trading activities 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 and integration expenses related to the Transaction.

Basis of Presentation

We report the results of each of our business segments on a continuing operations basis. The results of our individual businesses reflect the manner in which management evaluates performance and makes decisions about funding our operations and allocating resources. The Chief Operating Decision Maker (“CODM”) for each of our segments is the Chief Executive Officer. The CODM uses the segments’ income (loss) from continuing operations after tax to assess segment performance and decide how to allocate resources.

Business Segment Reporting Methodology

The results of our business segments are intended to present each segment as if it were a stand-alone business. Our internal management and reporting process used to derive our segment results 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. Our funds transfer pricing process managed by our centralized Corporate Treasury group 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. Due to the integrated nature of our business segments, estimates and judgments have been made in allocating certain revenue and expense items. Transactions between segments are based on specific criteria or approximate market rates. 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.

The following is additional information on the principles and methodologies used in preparing our business segment results.

*•*Net interest income: Interest income from loans and interest expense from deposits and other interest-bearing liabilities are reflected within each applicable business segment. Because funding and asset/liability management are managed



			220			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

centrally by our Corporate Treasury group, net interest income for our business segments also includes the results of a funds transfer pricing process that is intended to allocate a cost of funds used or credit for funds provided to all business segment assets and liabilities, respectively, using a matched funding concept. The taxable-equivalent benefit of tax-exempt products is also allocated to each business unit with a corresponding increase in income tax expense.

*•*Non-interest income: Non-interest fees and other revenue associated with loans or customers managed by each business segment and other direct revenues are accounted for within each business segment.

*•*Provision for credit losses: The provision for credit losses is directly attributable to the business segment in accordance with the loans each business segment manages.

*•*Non-interest expense: Non-interest expenses directly managed and incurred by a business segment are accounted for within each business segment. We allocate certain non-interest expenses indirectly incurred by business segments, such as corporate support functions, to each business segment based on various factors, including the actual cost of the services from the service providers, the utilization of the services, the number of employees or other relevant factors. Marketing expenses are included within non-interest expense and can be directly incurred by a business segment or indirectly incurred and allocated. Total marketing expense was $4.6 billion for the year ended December 31, 2024 and $4.0 billion for both the years ended December 31, 2023 and 2022. Credit Card marketing expense was $3.9 billion for the year ended December 31, 2024 and $3.4 billion for both the years ended December 31, 2023 and 2022.

*•*Goodwill and other intangible assets: Goodwill and other intangible assets are assigned to one or more segments at acquisition. Intangible amortization is included in the results of the applicable segment.

*•*Income taxes: Income taxes are assessed for each business segment based on a standard tax rate with the residual tax expense or benefit to arrive at the consolidated effective tax rate included in the Other category.

*•*Loans held for investment: Loans are reported within each business segment in accordance with the loans each business segment manages.

Deposits: Deposits are reported within each business segment based on product or customer type served by that business segment.

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 years ended December 31, 2024, 2023 and 2022, selected balance sheet data as of December 31, 2024 and 2023, and a reconciliation of our total business segment results to our reported consolidated income from continuing operations, loans held for investment and deposits.



			221			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Table 18.1: Segment Results and Reconciliation


	Year Ended December 31, 2024
(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total
Net interest income (loss)	$	22,088	$	8,023	$	2,391	$	(1,294)	$	31,208
Non-interest income (loss)	6,076		695		1,210		(77)		7,904
Total net revenue (loss)(2)	28,164		8,718		3,601		(1,371)		39,112
Provision for credit losses	10,272		1,435		8		1		11,716
Non-interest expense	13,576		5,372		2,011		527		21,486
Income (loss) from continuing operations before income taxes	4,316		1,911		1,582		(1,899)		5,910
Income tax provision (benefit)	1,024		451		373		(685)		1,163
Income (loss) from continuing operations, net of tax	$	3,292	$	1,460	$	1,209	$	(1,214)	$	4,747
Loans held for investment	$	162,508	$	78,092	$	87,175	$	0	$	327,775
Deposits	0		318,329		31,691		12,687		362,707


	Year Ended December 31, 2023
(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total
Net interest income (loss)	$	19,729	$	8,713	$	2,518	$	(1,719)	$	29,241
Non-interest income	5,940		589		1,002		15		7,546
Total net revenue (loss)(2)	25,669		9,302		3,520		(1,704)		36,787
Provision for credit losses	8,651		1,169		605		1		10,426
Non-interest expense	12,490		5,178		2,011		637		20,316
Income (loss) from continuing operations before income taxes	4,528		2,955		904		(2,342)		6,045
Income tax provision (benefit)	1,071		697		213		(823)		1,158
Income (loss) from continuing operations, net of tax	$	3,457	$	2,258	$	691	$	(1,519)	$	4,887
Loans held for investment	$	154,547	$	75,437	$	90,488	$	0	$	320,472
Deposits	0		296,171		32,712		19,530		348,413



	Year Ended December 31, 2022
(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total
Net interest income (loss)	$	16,584	$	8,965	$	2,461	$	(896)	$	27,114
Non-interest income (loss)	5,771		469		1,129		(233)		7,136
Total net revenue (loss)(2)	22,355		9,434		3,590		(1,129)		34,250
Provision (benefit) for credit losses	4,265		1,173		415		(6)		5,847
Non-interest expense	11,627		5,312		2,070		154		19,163
Income (loss) from continuing operations before income taxes	6,463		2,949		1,105		(1,277)		9,240
Income tax provision (benefit)	1,536		699		262		(617)		1,880
Income (loss) from continuing operations, net of tax	$	4,927	$	2,250	$	843	$	(660)	$	7,360
Loans held for investment	$	137,730	$	79,925	$	94,676	$	0	$	312,331
Deposits	0		270,592		40,808		21,592		332,992

(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 $2.6 billion, $1.9 billion and $946 million for the years ended December 31, 2024, 2023 and 2022, respectively, for credit card finance charges and fees charged off as uncollectible.



			222			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 partnership arrangements. 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 years ended December 31, 2024, 2023 and 2022.

Table 18.2: Revenue from Contracts with Customers and Reconciliation to Segment Results


	Year Ended December 31, 2024
(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total
Contract revenue:
Interchange fees, net(2)	$	4,340	$	434	$	106	$	2	$	4,882
Service charges and other customer-related fees	0		88		372		0		460
Other	413		142		18		0		573
Total contract revenue	4,753		664		496		2		5,915
Revenue (reduction) from other sources	1,323		31		714		(79)		1,989
Total non-interest income (loss)	$	6,076	$	695	$	1,210	$	(77)	$	7,904



			223			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Year Ended December 31, 2023
(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total
Contract revenue:
Interchange fees, net(2)	$	4,333	$	367	$	91	$	2	$	4,793
Service charges and other customer-related fees	0		86		222		(2)		306
Other	413		102		31		0		546
Total contract revenue (loss)	4,746		555		344		0		5,645
Revenue from other sources	1,194		34		658		15		1,901
Total non-interest income	$	5,940	$	589	$	1,002	$	15	$	7,546



	Year Ended December 31, 2022
(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total
Contract revenue:
Interchange fees, net(2)	$	4,178	$	320	$	109	$	(1)	$	4,606
Service charges and other customer-related fees	0		91		236		0		327
Other	395		74		16		(1)		484
Total contract revenue (loss)	4,573		485		361		(2)		5,417
Revenue (reduction) from other sources	1,198		(16)		768		(231)		1,719
Total non-interest income (loss)	$	5,771	$	469	$	1,129	$	(233)	$	7,136

(2)Interchange fees are presented net of customer reward expenses of $9.0 billion, $8.2 billion and $7.6 billion for the years ended December 31, 2024, 2023 and 2022, respectively.



			224			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 19—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 December 31, 2024 and 2023. The carrying value represents our reserve and deferred revenue on legally binding commitments.

Table 19.1: Unfunded Lending Commitments


	Contractual Amount				Carrying Value
(Dollars in millions)	December 31, 2024		December 31, 2023		December 31, 2024		December 31, 2023
Credit card lines	$	411,603	$	392,867	N/A		N/A
Other loan commitments(1)	45,145		46,951		$	73	$	99
Standby letters of credit and commercial letters of credit(2)	1,306		1,465		30		23
Total unfunded lending commitments	$	458,054	$	441,283	$	103	$	122

(1)Includes $6.0 billion and $4.7 billion of advised lines of credit as of December 31, 2024 and 2023, respectively.

(2)These financial guarantees have expiration dates that range from 2025 to 2027 as of December 31, 2024.

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 $143 million and $137 million as of December 31, 2024 and 2023, 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.



			225			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 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 December 31, 2024 are approximately $600 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 Appeals 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



			226			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

decision also has been appealed. The final two putative class actions, both of which are pending in Alberta, are continuing in parallel, but currently remain at a preliminary stage.

Governmental inquiries. In August 2020, we entered into consent orders with the Board of Governors of the Federal Reserve System (“Federal Reserve”) and the OCC resulting from regulatory reviews of the 2019 Cybersecurity Incident and relating to ongoing enhancements of our cybersecurity and operational risk management processes. We paid an $80 million penalty to the U.S. Treasury as part of the OCC agreement. The Federal Reserve agreement did not contain a monetary penalty. The OCC lifted its consent order on August 31, 2022 and the Federal Reserve lifted its consent order on July 5, 2023. On August 12, 2019, Canada’s Office of Privacy Commissioner (“OPC”) also initiated an investigation into the 2019 Cybersecurity Incident. That investigation concluded in April 2024 with no further action required.

U.K. PPI Litigation

In the U.K., we previously sold payment protection insurance (“PPI”). For several years leading up to the claims submission deadline of August 29, 2019 (as set by the U.K. Financial Conduct Authority (“FCA”)), we received customer complaints and regulatory claims relating to PPI. COEP has materially resolved the PPI complaints and regulatory claims received prior to the deadline. Some of the claimants in the U.K. PPI regulatory claims process have subsequently initiated legal proceedings, seeking additional redress. We are responding to these proceedings as we receive them.

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. The parties are engaged in discovery.

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. Capital One's response to the complaint is due March 17, 2025.

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 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 at a lower annual rate. 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



			227			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 $325 million of operating expenses related to the special assessment.

It is reasonably possible amendments will be needed to our 2022 Call Report due to future legal and regulatory developments, which could result in additional expenses associated with the special assessment. The ultimate amount of expenses associated with the special assessment will also be impacted by the finalization of the losses incurred by the FDIC in the resolutions of Silicon Valley Bank and Signature Bank. The amount of reasonably possible additional special assessment fees beyond our existing accrual due to these factors is approximately $200 million.



			228			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 20—CAPITAL ONE FINANCIAL CORPORATION (PARENT COMPANY ONLY)

Financial Information

The following parent company only financial statements are prepared in accordance with Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”).

Table 20.1: Parent Company Statements of Income


	Year Ended December 31,
(Dollars in millions)	2024		2023		2022
Interest income	$	1,762	$	1,715	$	595
Interest expense	2,303		2,160		969
Provision (benefit) for Credit Losses	0		(1)		(1)
Dividends from subsidiaries	1,500		3,300		4,352
Non-interest income (loss)	100		91		(15)
Non-interest expense	96		70		35
Income before income taxes and equity in undistributed earnings of subsidiaries	963		2,877		3,929
Income tax benefit	(81)		(73)		(181)
Equity in undistributed earnings of subsidiaries	3,706		1,937		3,250
Net income	4,750		4,887		7,360
Other comprehensive income (loss), net of tax	(1,018)		1,648		(10,290)
Comprehensive income (loss)	$	3,732	$	6,535	$	(2,930)

Table 20.2: Parent Company Balance Sheets


(Dollars in millions)	December 31, 2024		December 31, 2023
Assets:
Cash and cash equivalents	$	22,630	$	25,647
Investments in subsidiaries	56,991		54,324
Loans to subsidiaries	8,935		6,338
Securities available for sale	346		380
Other assets	2,537		2,526
Total assets	$	91,439	$	89,215

Liabilities:
Senior and subordinated notes	$	30,247	$	30,817

Accrued expenses and other liabilities	408		309
Total liabilities	30,655		31,126
Total stockholders’ equity	60,784		58,089
Total liabilities and stockholders’ equity	$	91,439	$	89,215



			229			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Table 20.3: Parent Company Statements of Cash Flows


	Year Ended December 31,
(Dollars in millions)	2024		2023		2022
Operating activities:
Net income	$	4,750	$	4,887	$	7,360
Adjustments to reconcile net income to net cash from operating activities:
Equity in undistributed earnings of subsidiaries	(3,706)		(1,936)		(3,250)
Other operating activities	496		623		(2,429)
Net cash from operating activities	1,540		3,574		1,681
Investing activities:

Proceeds from paydowns and maturities of securities available for sale	33		103		96
Purchases of securities available for sale	0		(69)		(10)
Changes in loans to subsidiaries	(2,597)		371		1,139
Net cash from investing activities	(2,564)		405		1,225
Financing activities:
Borrowings:

Issuance of senior and subordinated notes	3,985		8,219		9,271
Maturities and paydowns of senior and subordinated notes	(4,411)		(6,989)		(1,250)
Common stock:
Net proceeds from issuances	323		299		276
Dividends paid	(932)		(931)		(950)
Preferred stock:

Dividends paid	(228)		(228)		(228)

Purchases of treasury stock	(734)		(718)		(4,948)
Proceeds from share-based payment activities	4		10		19
Net cash from financing activities	(1,993)		(338)		2,190
Changes in cash and cash equivalents	(3,017)		3,641		5,096
Cash and cash equivalents, beginning of the period	25,647		22,006		16,910
Cash and cash equivalents, end of the period	$	22,630	$	25,647	$	22,006



			230			Capital One Financial Corporation (COF)

CAPITAL ONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 21—RELATED PARTY TRANSACTIONS

In the ordinary course of business, we may have loans issued to our executive officers, directors and principal stockholders. Pursuant to our policy, such loans are issued on the same terms as those prevailing at the time for comparable loans to unrelated persons and do not involve more than the normal risk of collectability.



			231			Capital One Financial Corporation (COF)

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