Capital One Financial 10-Q 2025-06-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended June 30, 2025

OR

For the transition period from to

Commission File No. 001-13300

CAPITAL ONE FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

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

(Not Applicable) (Former name, former address and former fiscal year, if changed since last report)____________________________________

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of June 30, 2025, there were 639,517,306 shares of the registrant’s Common Stock outstanding.

TABLE OF CONTENTS

INDEX OF MD&A AND SUPPLEMENTAL TABLE

PART I**—**FINANCIAL INFORMATION

This discussion contains forward-looking statements that are based upon management’s current expectations and are subject to significant uncertainties and changes in circumstances. Please review “Forward-Looking Statements” for more information on the forward-looking statements in this Quarterly Report on Form 10-Q (“this Report”). All statements that address operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. Our actual results may differ materially from those included in these forward-looking statements due to a variety of factors including, but not limited to, those described in “Part II—Item 1A. Risk Factors” in this Report. Unless otherwise specified, references to notes to our consolidated financial statements refer to the notes to our consolidated financial statements as of June 30, 2025 included in this Report.

Management monitors a variety of key indicators to evaluate our business results and financial condition. The following MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and related notes in this Report and the more detailed information contained in our 2024 Form 10-K.

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.

Capital One Financial Corporation’s principal operating subsidiary was Capital One, National Association (“CONA”). On May 18, 2025 (the “Closing Date”), Discover Financial Services (“Discover”) merged into Capital One and Discover Bank merged into CONA. See “Part I—Item 1. Financial Statements—Note 2—Business Combinations and Discontinued Operations” for additional information. The Company is hereafter collectively referred to as “we,” “us” or “our.” CONA is referred to as the “Bank.”

We are one of the largest issuers of credit cards in the United States of America (“U.S.”) based on the outstanding balance of credit card loans as of June 30, 2025. In addition to credit cards, we also offer debit cards, bank lending, treasury management and depository services, auto loans, and other consumer lending products in markets across the U.S. As one of the nation’s largest banks based on deposits as of June 30, 2025, we service banking customer accounts through digital channels and our network of branch locations, cafés, call centers and automated teller machines (“ATMs”). Additionally, through the acquisition of Discover, we acquired new products including personal loans as well as the Discover Network, the PULSE Network, Diners Club International, and Network Partners (collectively, the “Global Payment Network”). The Discover Network processes transactions for Discover-branded credit and debit cards and provides payment transaction processing and settlement services. The PULSE Network operates an electronic funds transfer network, providing financial institutions issuing debit cards on the PULSE Network with access to ATMs domestically and internationally, as well as merchant acceptance throughout the U.S. for debit card transactions. Diners Club International (“Diners Club”) is a global payments network of licensees, which are generally financial institutions, that issue Diners Club-branded charge cards and/or provide card acceptance services. We also have agreements with a number of financial institutions, financial technology firms, networks, network-to-network partners and other commercial service providers (collectively, “Network Partners”) for the provision of card issuing, payments processing and related services on the Global Payment Network. In our newly acquired network business, we compete with other networks for transaction volume and to attract Network Partners to issue credit, debit and prepaid cards on the Global Payment Network.

We also offer credit card products and certain other services outside of the U.S. 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. In addition, we offer Global Payment Network services globally.

Our consolidated total net revenues are derived primarily from lending to consumer and commercial customers net of funding costs associated with our deposits, long-term debt and other borrowings. We also earn non-interest income which primarily

consists of discount and interchange income, net of reward expenses, service charges and other customer-related fees. Our expenses primarily consist of the provision for credit losses, operating expenses, marketing expenses and income taxes.

Our principal operations are organized for management reporting purposes into three major business segments, which are defined primarily based on the products and services provided or the types of customers served: Credit Card, Consumer Banking and Commercial Banking. The operations of acquired businesses have been integrated into or managed as a part of our existing business segments. Certain activities that are not part of a 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. 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 acquisition of Discover.

• Credit Card: Consists of our domestic consumer card lending, personal loans, domestic 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, national auto lending and services offered by the Global Payment Network.

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

Business Developments

We regularly explore and evaluate opportunities to acquire financial products and services as well as financial assets, including credit card and other loan portfolios, and enter into strategic partnerships as part of our growth strategy. We also explore opportunities to acquire technology companies and related assets to improve our information technology infrastructure and to deliver on our digital strategy. We may issue equity or debt to fund our acquisitions. In addition, we regularly consider the potential disposition of certain of our assets, branches, partnership agreements or lines of business.

Discover Acquisition

On February 19, 2024, the Company entered into an agreement and plan of merger (the “Merger Agreement”), by and among Capital One, Discover, a Delaware corporation and Vega Merger Sub, Inc., a Del

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For a discussion of the quantitative and qualitative disclosures about market risk, see “Part I—Item 2. MD&A— Market Risk Profile.”

Overview

We are required under applicable laws and regulations to maintain controls and procedures, which include disclosure controls and procedures as well as internal control over financial reporting, as further described below.

(a) Disclosure Controls and Procedures

Disclosure controls and procedures refer to controls and other procedures designed to provide reasonable assurance that information required to be disclosed in our financial reports is recorded, processed, summarized and reported within the time periods specified by SEC rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding our required disclosure. In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and we must apply judgment in evaluating and implementing possible controls and procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 of the Securities Exchange Act of 1934 (“Exchange Act”), our management, including the CEO and CFO, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of June 30, 2025, the end of the period covered by this Report. Based upon that evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of June 30, 2025, at a reasonable level of assurance, in recording, processing, summarizing and reporting information required to be disclosed within the time periods specified by the SEC rules and forms.

(b) Changes in Internal Control Over Financial Reporting

We regularly review our disclosure controls and procedures and make changes intended to ensure the quality of our financial reporting. As a result of the Transaction, we are in the process of incorporating Discover into our internal control over financial reporting. As permitted by the SEC, we have excluded the acquired business from our evaluation of the effectiveness of internal control over financial reporting as of June 30, 2025. See “Part I—Item 1. Financial Statements—Note 2—Business Combinations and Discontinued Operations” for further information. Other than those related to the Transaction, there have been no changes in our internal control over financial reporting during the the second quarter of 2025 that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II—OTHER INFORMATION

The information required by Item 103 of Regulation S-K is included in “Part I—Item 1. Financial Statements—Note 14—Commitments, Contingencies, Guarantees and Others.”

The following discussion sets forth what management currently believes could be the material risks and uncertainties that could impact our businesses, results of operations and financial condition. The events and consequences discussed in these risk factors could, in circumstances we may not be able to accurately predict, recognize, or control, have a material adverse effect on our business, growth, reputation, prospects, financial condition, operating results, cash flows, liquidity, and stock price. These risk factors do not identify all risks that we face; our operations could also be affected by factors, events, or uncertainties that are not presently known to us or that we currently do not consider to present significant risks to our operations. In addition, the global economic and political climate may amplify many of these risks.

Summary of Risk Factors

The following is a summary of the Risk Factors disclosure in this Item 1A. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below and should be carefully considered, together with other information in this Form 10-K and our other filings with the SEC, before making an investment decision regarding our securities.

• We may not be able to successfully integrate our businesses associated with the Transaction, or such integration may be more difficult, time consuming or costly than expected.

• We will continue to incur substantial expenses related to the integration of Discover, and the expenses may be greater than anticipated due to factors, some or all of which may be outside our control.

• We may fail to realize all of the anticipated benefits of the Transaction, or those benefits may take longer to realize than expected due to factors that may be outside our control.

• The integration of Discover may have an adverse effect on our business and results of operations due to the diversion of a substantial portion of the time and attention of our management team as well as potential employee attrition.

• Changes and instability in the macroeconomic environment could disrupt capital markets, reduce consumer and business activity, and weaken the labor market, all of which could impact borrowers’ ability to service their debt obligations and adversely impact our financial results.

• Fluctuations in interest rates could adversely affect our business, results of operations and financial condition.

• We may not be able to maintain adequate sources of funding and liquidity to operate our business.

• We may experience increases in delinquencies and credit losses, or we may incorrectly estimate expected losses, which could result in inadequate reserves.

• We may not be able to maintain adequate capital or liquidity levels or may become subject to revised capital or liquidity requirements, which could have a negative impact on our financial results and our ability to return capital to our stockholders.

• Limitations on our ability to receive dividends from our subsidiaries could affect our liquidity and ability to pay dividends and repurchase our common stock.

• A downgrade in our credit ratings could significantly impact our liquidity, funding costs and access to the capital markets.

• We face risks related to our operational, technological and organizational infrastructure.

• A cyber-attack or other security incident on us or third parties (including their supply chains) with which we conduct business, including an incident that results in the theft, loss, manipulation or misuse of information (including personal information), or the disabling of systems and access to information critical to business operations, may result in increased costs, reductions in revenue, reputational damage, legal exposure and business disruptions.

• We face risks resulting from the extensive use of models and data, as well as from our evolving use of AI.

• Fraudulent activity associated with our products or our networks could cause our fraud losses to increase, the use of our products to decrease and our brands to suffer reputational damage, all of which could have a material adverse effect on our business.

• Compliance with new and existing domestic and foreign laws, regulations and regulatory expectations is costly and complex, and any significant changes may adversely affect our business.

• Our required compliance with applicable laws and regulations related to privacy, data protection and data security, in addition to compliance with our own privacy policies and contractual obligations to third parties, may increase our costs, reduce our revenue, increase our legal exposure and limit our ability to pursue business opportunities.

• Our businesses are subject to the risk of increased litigation, government investigations and regulatory enforcement.

• We face intense competition in all of our markets, which could have a material adverse effect on our business and results of operations.

• A change in market preference towards other operators of payment networks and alternative payment providers could result in reduced transaction volume, limited merchant acceptance of our cards, limited issuance of cards on our networks by third parties and materially reduced earnings from our network business.

• If we are unsuccessful in creating and maintaining a strong base of network licensees and achieving meaningful global card acceptance, we may be unable to achieve long-term success in our recently acquired international network business.

• Our business, financial condition and results of operations may be adversely affected by legislation, regulation and merchants’ efforts to reduce the interchange fees charged by credit and debit card networks to facilitate card transactions.

• A reduction in the number of large merchants that accept cards on our recently acquired Discover Network or PULSE Network or in the rates they pay could materially adversely affect our business, financial condition, results of operations and cash flows.

• Merchant defaults may adversely affect our business, financial condition, cash flows and results of operations.

• If we are not able to invest successfully in and introduce digital and other technological developments across all our businesses, our financial performance may suffer.

• We may fail to realize the anticipated benefits of our mergers, acquisitions and strategic partnerships.

• Reputational risk and social factors may impact our results and damage our brand.

• If we are not able to protect our intellectual property rights, or we violate third-party intellectual property rights, our revenue and profitability could be negatively affected.

• Our risk management strategies may not be fully effective in mitigating our risk exposures in all market environments or against all types of risk.

• Our business could be negatively affected if we are unable to attract, develop, retain and motivate key senior leaders and skilled employees.

• We face risks from catastrophic events.

• Climate change manifesting as physical or transition risks could adversely affect our businesses, operations and customers and result in increased costs.

• We face risks from the use of or changes to assumptions or estimates in our financial statements.

• The soundness of other financial institutions and other third parties, actual or perceived, could adversely affect us.

Risks Relating to the Acquisition and Integration of Discover

We may not be able to successfully integrate our businesses associated with the Transaction, or such integration may be more difficult, time consuming or costly than expected.

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Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements

During the three months ended June 30, 2025, certain of our directors and officers adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K as follows:

Timothy P. Golden, our Chief Accounting Officer, entered into a pre-arranged stock trading plan on May 13, 2025. Mr. Golden’s plan provides for the associated sale of up to 3,669.292 shares of Capital One common stock in amounts and prices set forth in the plan and terminates on the earlier of the date all shares under the plan are sold and May 13, 2026.

Richard D. Fairbank, our Chair and Chief Executive Officer, entered into a pre-arranged stock trading plan on May 13, 2025. Mr. Fairbank’s plan provides for the potential exercise of vested stock options and the associated sale of up to 388,459 shares of Capital One common stock in amounts and prices set forth in the plan and terminates on the earlier of the date all shares under the plan are sold and February 2, 2027.

Each of the trading plans was entered into during an open insider trading window and is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act and Capital One’s policies regarding transactions in its securities.

An index to exhibits has been filed as part of this Report and is incorporated herein by reference.

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EXHIBIT INDEX

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SIGNATURES

Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.