0000927628us-gaap:~~FairValueMeasurementsRecurringMemberus-gaap:ResidentialMortgageBackedSecuritiesMemberus-gaap:FairValueInputsLevel2Member2021-06-30~~AccumulatedTranslationAdjustmentMember2021-01-012021-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-13300

CAPITAL ONE FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)


Delaware		54-1719854
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
1680 Capital One Drive,
McLean,	Virginia	22102
(Address of principal executive offices)		(Zip Code)

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

(Not Applicable)

(Former name, former address and former fiscal year, if changed since last report)

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


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock (par value $.01 per share)	COF	New York Stock Exchange
Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series G	COF PRG	New York Stock Exchange
Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series H	COF PRH	New York Stock Exchange
Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series I	COF PRI	New York Stock Exchange
Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series J	COF PRJ	New York Stock Exchange
Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series K	COF PRK	New York Stock Exchange
Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series L	COF PRL	New York Stock Exchange
Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series N	COF PRN	New York Stock Exchange
0.800% Senior Notes Due 2024	COF24	New York Stock Exchange
1.650% Senior Notes Due 2029	COF29	New York Stock Exchange

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

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

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

As of ~~June 30,~~October 29, 2021, there were ~~446,113,769~~425,622,058 shares of the registrant’s Common Stock outstanding.

TABLE OF CONTENTS


		Page
PART I—FINANCIAL INFORMATION		4













Item 1.	Financial Statements and Notes	6768
	Consolidated Statements of Income	6869
	Consolidated Statements of Comprehensive Income	6970
	Consolidated Balance Sheets	7071
	Consolidated Statements of Changes in Stockholders’ Equity	7172
	Consolidated Statements of Cash Flows	7374
	Notes to Consolidated Financial Statements	7576
	Note 1—Summary of Significant Accounting Policies	7576

	Note 2—Investment Securities	7778
	Note 3—Loans	8081
	Note 4—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments	9092
	Note 5—Variable Interest Entities and Securitizations	9496
	Note 6—Goodwill and Intangible Assets	98100
	Note 7—Deposits and Borrowings	99101
	Note 8—Derivative Instruments and Hedging Activities	~~100~~102
	Note 9—Stockholders’ Equity	~~110~~112
	Note 10—Earnings Per Common Share	~~114~~116
	Note 11—Fair Value Measurement	~~115~~117
	Note 12—Business Segments and Revenue from Contracts with Customers	~~122~~125
	Note 13—Commitments, Contingencies, Guarantees and Others	~~126~~129





Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)	4
	Introduction	4
	Selected Financial Data	6
	Executive Summary and Business Outlook	9
	Consolidated Results of Operations	11
	Consolidated Balance Sheets Analysis	17
	Off-Balance Sheet Arrangements	19
	Business Segment Financial Performance	19
	Critical Accounting Policies and Estimates	29
	Accounting Changes and Developments	30
	Capital Management	30
	Risk Management	3637
	Credit Risk Profile	3738
	Liquidity Risk Profile	5052
	Market Risk Profile	5355
	Supervision and Regulation	5759
	Forward-Looking Statements	5859
	Supplemental Table	6061
	Glossary and Acronyms	6162



			1			Capital One Financial Corporation (COF)



			2			Capital One Financial Corporation (COF)

INDEX OF MD&A AND SUPPLEMENTAL TABLE


MD&A Tables:	MD&A Tables:		Page	MD&A Tables:		Page
1	1	Consolidated Financial Highlights	6	1	Consolidated Financial Highlights	6
2	2	Average Balances, Net Interest Income and Net Interest Margin	11	2	Average Balances, Net Interest Income and Net Interest Margin	11
3	3	Rate/Volume Analysis of Net Interest Income	14	3	Rate/Volume Analysis of Net Interest Income	14
4	4	Non-Interest Income	15	4	Non-Interest Income	15
5	5	Non-Interest Expense	16	5	Non-Interest Expense	16
6	6	Investment Securities	17	6	Investment Securities	17

7	7	Loans Held for Investment	18	7	Loans Held for Investment	18
8	8	Funding Sources Composition	18	8	Funding Sources Composition	18
9	9	Business Segment Results	20	9	Business Segment Results	20
10	10	Credit Card Business Results	21	10	Credit Card Business Results	21
10.1	10.1	Domestic Card Business Results	23	10.1	Domestic Card Business Results	23
11	11	Consumer Banking Business Results	25	11	Consumer Banking Business Results	25
12	12	Commercial Banking Business Results	26	12	Commercial Banking Business Results	27
13	13	Other Category Results	28	13	Other Category Results	29
14	14	Capital Ratios Under Basel III	32	14	Capital Ratios Under Basel III	33
15	15	Regulatory Risk-Based Capital Components and Regulatory Capital Metrics	33	15	Regulatory Risk-Based Capital Components and Regulatory Capital Metrics	34
16	16	Preferred Stock Dividends Paid Per Share	35	16	Preferred Stock Dividends Paid Per Share	36
17	17	Portfolio Composition of Loans Held for Investment	38	17	Portfolio Composition of Loans Held for Investment	39

18	18	Credit Card Portfolio by Geographic Region	39	18	Credit Card Portfolio by Geographic Region	40
19	19	Consumer Banking Portfolio by Geographic Region	40	19	Consumer Banking Portfolio by Geographic Region	41
20	20	Commercial and Multifamily Real Estate Portfolio by Region	41	20	Commercial and Multifamily Real Estate Portfolio by Region	41
21	21	Commercial Loans by Industry	41	21	Commercial Loans by Industry	42
22	22	Credit Score Distribution	42	22	Credit Score Distribution	43
23	23	30+ Day Delinquencies	42	23	30+ Day Delinquencies	43
24	24	Aging and Geography of 30+ Day Delinquent Loans	43	24	Aging and Geography of 30+ Day Delinquent Loans	44
25	25	90+ Day Delinquent Loans Accruing Interest	44	25	90+ Day Delinquent Loans Accruing Interest	45
26	26	Nonperforming Loans and Other Nonperforming Assets	44	26	Nonperforming Loans and Other Nonperforming Assets	46
27	27	Net Charge-Offs	45	27	Net Charge-Offs	47
28	28	Troubled Debt Restructurings	46	28	Troubled Debt Restructurings	48
29	29	Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity	47	29	Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity	49
30	30	Allowance Coverage Ratios for Specified Loan Category	49	30	Allowance Coverage Ratios for Specified Loan Category	52
31	31	Liquidity Reserves	50	31	Liquidity Reserves	52
32	32	Deposits Composition and Average Deposits Interest Rates	51	32	Deposits Composition and Average Deposits Interest Rates	54

33	33	Long-Term Funding	52	33	Long-Term Funding	55
34	34	Senior Unsecured Long-Term Debt Credit Ratings	53	34	Senior Unsecured Long-Term Debt Credit Ratings	55

35	35	Interest Rate Sensitivity Analysis	54	35	Interest Rate Sensitivity Analysis	56

Supplemental Table:	Supplemental Table:			Supplemental Table:

A	A	Reconciliation of Non-GAAP Measures	60	A	Reconciliation of Non-GAAP Measures	61



			3			Capital One Financial Corporation (COF)

Table of Contents

PART I—FINANCIAL INFORMATION

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

This discussion contains forward-looking statements that are based upon management’s current expectations and are subject to significant uncertainties and changes in circumstances. Please review “MD&A—Forward-Looking Statements” for more information on the forward-looking statements in this Quarterly Report on Form 10-Q (“this Report”). All statements that address operating performance, events or developments that we expect or anticipate will occur in the future, including those relating to operating results and “Note 13—Commitments, Contingencies, Guarantees and Others” as well as the potential impacts of the COVID-19 pandemic described in “MD&A—Introduction—Coronavirus Disease 2019 (COVID-19) Pandemic” are forward-looking statements. Our actual results may differ materially from those included in these forward-looking statements due to a variety of factors including, but not limited to, those described in “Part I—Item 1A. Risk Factors” in our 2020 Annual Report on Form 10-K (“2020 Form 10-K”) and “Part II—Item 1A. Risk Factors” in this Report. Unless otherwise specified, references to notes to our consolidated financial statements refer to the notes to our consolidated financial statements as of ~~June~~September 30, 2021 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 2020 Form 10-K.


INTRODUCTION

Capital One Financial Corporation, a Delaware corporation established in 1994 and headquartered in McLean, Virginia, is a diversified financial services holding company with banking and non-banking subsidiaries. Capital One Financial Corporation and its subsidiaries (the “Company”) offer a broad array of financial products and services to consumers, small businesses and commercial clients through digital channels, branches, Cafés and other distribution channels.

As of ~~June~~September 30, 2021, our principal subsidiaries included:

•Capital One Bank (USA), National Association (“COBNA”), which offers credit ~~and debit~~ card products along with other lending products and ~~deposit products;~~consumer services; and

•Capital One, National Association (“CONA”), which offers a broad spectrum of banking products and financial services to consumers, small businesses and commercial clients.

The Company is hereafter collectively referred to as “we,” “us” or “our.” COBNA and CONA are collectively referred to as the “Banks.” Certain business terms used in this document are defined in the “MD&A—Glossary and Acronyms” and should be read in conjunction with the consolidated financial statements included in this Report.

Our consolidated total net revenues are derived primarily from lending to consumer, small business and commercial customers net of funding costs associated with interest on deposits, long-term debt and other borrowings. We also earn non-interest income which primarily consists of interchange income, net of reward expenses, service charges and other customer-related fees. Our expenses primarily consist of the provision for credit losses, operating expenses, marketing expenses and income taxes.

Our principal operations are organized for management reporting purposes into three major business segments, which are defined primarily based on the products and services provided or the types of customer served: Credit Card, Consumer Banking and Commercial Banking. The operations of acquired businesses have been integrated into or managed as a part of our existing business segments. Certain activities that are not part of a segment, such as management of our corporate investment portfolio, asset/liability management by our centralized Corporate Treasury group and residual tax expense or benefit to arrive at the consolidated effective tax rate that is not assessed to our primary business segments, are included in the Other category.

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



			4			Capital One Financial Corporation (COF)

Table of Contents

•Consumer Banking: Consists of our deposit gathering and lending activities for consumers and small businesses, and national auto lending.

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

Business Developments

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

Coronavirus Disease 2019 (COVID-19) Pandemic

The COVID-19 pandemic resulted in a global public-health crisis, disrupting economies and introducing significant volatility into financial markets. We transformed how we work in order to protect the well-being of our associates and our customers, and were able to continue to serve our customers, successfully manage critical functions, and keep our lines of business operating.

Since the start of the COVID-19 pandemic, a significant majority of our associates across our workforce have transitioned to working remotely, relying on our technology infrastructure and systems that have been designed for resilience and security. The majority of our associates ~~will~~ continue to work ~~remotely through~~remotely. In the ~~summer of 2021. Our current~~future, we plan is to adopt a hybrid work methodology ~~on September 7, 2021~~ that allows for in-office collaboration while still enabling associates to work remotely. We continue to monitor local conditions to ensure the safety of our associates.

For more information see “Part I—Item 1. Business—Overview—Coronavirus Disease 2019 (COVID-19) Pandemic” and “Part I—Item 1A. Risk Factors” in our 2020 Form 10-K along with “Part I—Item 2. MD&A—Introduction—Coronavirus Disease 2019 (COVID-19) Pandemic” and “Part I—Item 2. MD&A—Credit Risk Profile—COVID-19 Customer Assistance Programs and Loan Modifications” in our Quarterly Report on Form 10-Q for the period ended March 31, 2021.



			5			Capital One Financial Corporation (COF)

Table of Contents


SELECTED FINANCIAL DATA

The following table presents selected consolidated financial data and performance from our results of operations for the ~~second~~third quarter and first ~~six~~nine months of 2021 and 2020 and selected comparative balance sheet data as of ~~June~~September 30, 2021 and December 31, 2020. We also provide selected key metrics we use in evaluating our performance, including certain metrics that are computed using non-GAAP measures. We consider these metrics to be key financial measures that management uses in assessing our operating performance, capital adequacy and the level of returns generated. We believe these non-GAAP metrics provide useful insight to investors and users of our financial information as they provide an alternate measurement of our performance and assist in assessing our capital adequacy and the level of return generated.

Table 1: Consolidated Financial Highlights


		Three Months Ended June 30,						Six Months Ended June 30,				Three Months Ended September 30,			Nine Months Ended September 30,
(Dollars in millions, except per share data and as noted)	(Dollars in millions, except per share data and as noted)	2021		2020		Change		2021		2020			Change			(Dollars in millions, except per share data and as noted)	2021		2020		Change	2021		2020		Change
Income statement	Income statement															Income statement

Net interest income	Net interest income	$	5,743	$	5,460	5	%	11,565		$	11,485		1	%		Net interest income	$	6,156	$	5,555	11%	$	17,721	$	17,040	4%
Non-interest income	Non-interest income	1,631		1,096		49		2,922		2,320			26			Non-interest income	1,674		1,826		(8)	4,596		4,146		11
Total net revenue	Total net revenue	7,374		6,556		12		14,487		13,805			5			Total net revenue	7,830		7,381		6	22,317		21,186		5
Provision (benefit) for credit losses	Provision (benefit) for credit losses	(1,160)		4,246		**		(1,983)		9,669			**			Provision (benefit) for credit losses	(342)		331		**	(2,325)		10,000		**
Non-interest expense:	Non-interest expense:															Non-interest expense:
Marketing	Marketing	620		273		127		1,121		764			47			Marketing	751		283		165	1,872		1,047		79
Operating expense	Operating expense	3,346		3,497		(4)		6,585		6,735			(2)			Operating expense	3,435		3,265		5	10,020		10,000		—
Total non-interest expense	Total non-interest expense	3,966		3,770		5		7,706		7,499			3			Total non-interest expense	4,186		3,548		18	11,892		11,047		8

Income (loss) from continuing operations before income taxes		4,568		(1,460)		**		8,764		(3,363)			**
Income from continuing operations before income taxes																Income from continuing operations before income taxes	3,986		3,502		14	12,750		139		**
Income tax provision (benefit)	Income tax provision (benefit)	1,031		(543)		**		1,900		(1,106)			**			Income tax provision (benefit)	882		1,096		(20)	2,782		(10)		**
Income (loss) from continuing operations, net of tax		3,537		(917)		**		6,864		(2,257)			**
Income from continuing operations, net of tax																Income from continuing operations, net of tax	3,104		2,406		29	9,968		149		**
Loss from discontinued operations, net of tax	Loss from discontinued operations, net of tax	(1)		(1)		—		(3)		(1)			**			Loss from discontinued operations, net of tax	—		—		—	(3)		(1)		**
Net income (loss)		3,536		(918)		**		6,861		(2,258)			**
Net income																Net income	3,104		2,406		29	9,965		148		**
Dividends and undistributed earnings allocated to participating securities	Dividends and undistributed earnings allocated to participating securities	(30)		(1)		**		(58)		(4)			**			Dividends and undistributed earnings allocated to participating securities	(26)		(20)		30	(84)		(5)		**
Preferred stock dividends	Preferred stock dividends	(60)		(90)		(33)		(121)		(145)			(17)			Preferred stock dividends	(79)		(67)		18	(200)		(212)		(6)
Issuance cost for redeemed preferred stock	Issuance cost for redeemed preferred stock	—		—		—		—		(22)			**			Issuance cost for redeemed preferred stock	(12)		—		**	(12)		(22)		(45)
Net income (loss) available to common stockholders	Net income (loss) available to common stockholders	$	3,446	$	(1,009)	**		$	6,682	$	(2,429)		**			Net income (loss) available to common stockholders	$	2,987	$	2,319	29	$	9,669	$	(91)	**
Common share statistics	Common share statistics															Common share statistics
Basic earnings per common share:	Basic earnings per common share:															Basic earnings per common share:
Net income (loss) from continuing operations	Net income (loss) from continuing operations	$	7.65	$	(2.21)	**		$	14.70	$	(5.31)		**			Net income (loss) from continuing operations	$	6.81	$	5.07	34%	$	21.53	$	(0.20)	**
Loss from discontinued operations																Loss from discontinued operations	—		—		—	(0.01)		—		**
Net income (loss) per basic common share	Net income (loss) per basic common share	$	7.65	$	(2.21)	**		$	14.70	$	(5.31)		**			Net income (loss) per basic common share	$	6.81	$	5.07	34	$	21.52	$	(0.20)	**
Diluted earnings per common share:	Diluted earnings per common share:															Diluted earnings per common share:
Net income (loss) from continuing operations	Net income (loss) from continuing operations	$	7.62	$	(2.21)	**		$	14.65	$	(5.31)		**			Net income (loss) from continuing operations	$	6.78	$	5.06	34%	$	21.45	$	(0.20)	**
Loss from discontinued operations																Loss from discontinued operations	—		—		—	(0.01)		—		**
Net income (loss) per diluted common share	Net income (loss) per diluted common share	$	7.62	$	(2.21)	**		$	14.65	$	(5.31)		**			Net income (loss) per diluted common share	$	6.78	$	5.06	34	$	21.44	$	(0.20)	**
Weighted-average common shares outstanding (in millions):	Weighted-average common shares outstanding (in millions):															Weighted-average common shares outstanding (in millions):
Basic	Basic	450.6		456.7		(1)	%	454.6		457.1			(1)	%		Basic	438.8		457.8		(4)%	449.2		457.4		(2)%
Diluted	Diluted	452.3		456.7		(1)		456.2		457.1			—			Diluted	440.5		458.5		(4)	450.9		457.4		(1)
Common shares outstanding (period-end, in millions)	Common shares outstanding (period-end, in millions)	446.1		456.3		(2)		446.1		456.3			(2)			Common shares outstanding (period-end, in millions)	430.4		457.4		(6)	430.4		457.4		(6)
Dividends declared and paid per common share	Dividends declared and paid per common share	$	0.40	$	0.40	—		$	0.80	$	0.80		—			Dividends declared and paid per common share	$	1.20	$	0.10	**	$	2.00	$	0.90	122

Tangible book value per common share (period-end)(1)	Tangible book value per common share (period-end)(1)	97.20		78.82		23		97.20		78.82			23			Tangible book value per common share (period-end)(1)	99.60		83.67		19	99.60		83.67		19

Balance sheet (average balances)
Loans held for investment		$	246,463	$	253,358	(3)	%	$	245,207	$	258,124		(5)	%
Interest-earning assets		390,129		378,145		3		389,355		366,746			6
Total assets		424,099		411,075		3		422,959		400,845			6
Interest-bearing deposits		273,476		261,256		5		273,417		251,185			9



			6			Capital One Financial Corporation (COF)

Table of Contents


		Three Months Ended June 30,								Six Months Ended June 30,						Three Months Ended September 30,			Nine Months Ended September 30,
(Dollars in millions, except per share data and as noted)	(Dollars in millions, except per share data and as noted)	2021			2020			Change		2021			2020				Change			(Dollars in millions, except per share data and as noted)	2021			2020			Change		2021			2020			Change
Balance sheet (average balances)																				Balance sheet (average balances)
Loans held for investment																				Loans held for investment	$	253,101		$	249,511		1%		$	247,867		$	255,232		(3)%
Interest-earning assets																				Interest-earning assets	387,766			391,451			(1)		388,820			375,041			4
Total assets																				Total assets	424,506			422,854			—		423,457			408,233			4
Interest-bearing deposits																				Interest-bearing deposits	269,278			276,339			(3)		272,022			259,631			5
Total deposits	Total deposits	308,217			288,344			7		306,645			276,498				11			Total deposits	305,035			305,516			—		306,102			286,242			7
Borrowings	Borrowings	37,054			49,827			(26)		38,475			50,810				(24)			Borrowings	37,464			44,161			(15)		38,134			48,577			(21)
Common equity	Common equity	56,885			52,413			9		56,333			52,799				7			Common equity	58,230			51,995			12		56,972			52,529			8
Total stockholders’ equity	Total stockholders’ equity	62,376			57,623			8		61,504			58,096				6			Total stockholders’ equity	64,682			57,223			13		62,575			57,802			8

Selected performance metrics	Selected performance metrics																			Selected performance metrics
Purchase volume	Purchase volume	$	132,676		$	90,149		47	%	$	241,009		$	190,069			27	%		Purchase volume	$	136,614		$	107,102		28	%	$	377,623		$	297,171		27	%
Total net revenue margin(2)	Total net revenue margin(2)	7.56		%	6.93		%	63	bps	7.44		%	7.53		%		(9)	bps		Total net revenue margin(2)	8.08		%	7.54		%	54	bps	7.65		%	7.53		%	12	bps
Net interest margin	Net interest margin	5.89			5.78			11		5.94			6.26				(32)			Net interest margin	6.35			5.68			67		6.08			6.06			2
Return on average assets(3)	Return on average assets(3)	3.34			(0.89)			4	%	3.25			(1.13)				4	%		Return on average assets(3)	2.92			2.28			64		3.14			0.05			309
Return on average tangible assets(4)	Return on average tangible assets(4)	3.46			(0.93)			4		3.36			(1.17)				5			Return on average tangible assets(4)	3.03			2.36			67		3.25			0.05			320
Return on average common equity(5)	Return on average common equity(5)	24.24			(7.69)			32		23.73			(9.20)				33			Return on average common equity(5)	20.52			17.84			268		22.64			(0.23)			23	%
Return on average tangible common equity(6)	Return on average tangible common equity(6)	32.75			(10.74)			43		32.19			(12.81)				45			Return on average tangible common equity(6)	27.50			24.98			252		30.57			(0.32)			31
Equity-to-assets ratio(7)	Equity-to-assets ratio(7)	14.71			14.02			69	bps	14.54			14.49				5	bps		Equity-to-assets ratio(7)	15.24			13.53			171		14.78			14.16			62	bps
Non-interest expense as a percentage of average loans held for investment	Non-interest expense as a percentage of average loans held for investment	6.44			5.95			49		6.29			5.81				48			Non-interest expense as a percentage of average loans held for investment	6.62			5.69			93		6.40			5.77			63
Efficiency ratio(8)	Efficiency ratio(8)	53.78			57.50			(4)	%	53.19			54.32				(113)			Efficiency ratio(8)	53.46			48.07			5	%	53.29			52.14			115
Operating efficiency ratio(9)	Operating efficiency ratio(9)	45.38			53.34			(8)		45.45			48.79				(334)			Operating efficiency ratio(9)	43.87			44.24			(37)	bps	44.90			47.20			(230)
Effective income tax rate from continuing operations	Effective income tax rate from continuing operations	22.6			37.2			(15)		21.7			32.9				(11)	%		Effective income tax rate from continuing operations	22.1			31.3			(9)	%	21.8			(7.2)			29	%
Net charge-offs	Net charge-offs	$	541		$	1,505		(64)		$	1,281		$	3,296			(61)			Net charge-offs	$	426		$	1,073		(60)		$	1,707		$	4,369		(61)
Net charge-off rate	Net charge-off rate	0.88		%	2.38		%	(150)	bps	1.04		%	2.55		%		(151)	bps		Net charge-off rate	0.67		%	1.72		%	(105)	bps	0.92		%	2.28		%	(136)	bps


(Dollars in millions, except as noted)	(Dollars in millions, except as noted)	June 30, 2021			December 31, 2020			Change		(Dollars in millions, except as noted)	September 30, 2021			December 31, 2020			Change
Balance sheet (period-end)	Balance sheet (period-end)									Balance sheet (period-end)
Loans held for investment	Loans held for investment	$	249,597		$	251,624		(1)	%	Loans held for investment	$	261,390		$	251,624		4	%
Interest-earning assets	Interest-earning assets	387,295			388,917			—		Interest-earning assets	387,208			388,917			—
Total assets	Total assets	423,420			421,602			—		Total assets	425,377			421,602			1
Interest-bearing deposits	Interest-bearing deposits	271,314			274,300			(1)		Interest-bearing deposits	269,134			274,300			(2)
Total deposits	Total deposits	306,308			305,442			—		Total deposits	305,938			305,442			—
Borrowings	Borrowings	36,343			40,539			(10)		Borrowings	37,501			40,539			(7)
Common equity	Common equity	58,136			55,356			5		Common equity	57,632			55,356			4
Total stockholders’ equity	Total stockholders’ equity	64,624			60,204			7		Total stockholders’ equity	63,544			60,204			6
Credit quality metrics	Credit quality metrics									Credit quality metrics
Allowance for credit losses	Allowance for credit losses	$	12,346		$	15,564		(21)	%	Allowance for credit losses	$	11,573		$	15,564		(26)	%
Allowance as a percentage of loans held for investment (“allowance coverage ratio”)	Allowance as a percentage of loans held for investment (“allowance coverage ratio”)	4.95		%	6.19		%	(124)	bps	Allowance as a percentage of loans held for investment (“allowance coverage ratio”)	4.43		%	6.19		%	(176)	bps
30+ day performing delinquency rate	30+ day performing delinquency rate	1.75			2.41			(66)		30+ day performing delinquency rate	1.97			2.41			(44)
30+ day delinquency rate	30+ day delinquency rate	1.89			2.61			(72)		30+ day delinquency rate	2.13			2.61			(48)
Capital ratios	Capital ratios									Capital ratios
Common equity Tier 1 capital(10)	Common equity Tier 1 capital(10)	14.5		%	13.7		%	80	bps	Common equity Tier 1 capital(10)	13.8		%	13.7		%	10	bps
Tier 1 capital(10)	Tier 1 capital(10)	16.6			15.3			130		Tier 1 capital(10)	15.7			15.3			40
Total capital(10)	Total capital(10)	18.8			17.7			110		Total capital(10)	18.2			17.7			50
Tier 1 leverage(10)	Tier 1 leverage(10)	12.4			11.2			120		Tier 1 leverage(10)	12.2			11.2			100
Tangible common equity(11)	Tangible common equity(11)	10.6			10.0			60		Tangible common equity(11)	10.4			10.0			40
Supplementary leverage(10)(12)	Supplementary leverage(10)(12)	10.7			10.7			—		Supplementary leverage(10)(12)	10.4			10.7			(30)
Other	Other									Other
Employees (period end, in thousands)	Employees (period end, in thousands)	52.0			52.0			—		Employees (period end, in thousands)	50.8			52.0			(2)



			7			Capital One Financial Corporation (COF)

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__________

(1)Tangible book value per common share is a non-GAAP measure calculated based on tangible common equity divided by common shares outstanding. See “MD&A—Table A —Reconciliation of Non-GAAP Measures” for additional information on non-GAAP measures.

(2)Total net revenue margin is calculated based on annualized total net revenue for the period divided by average interest-earning assets for the period.

(3)Return on average assets is calculated based on annualized income from continuing operations, net of tax, for the period divided by average total assets for the period.



			7			~~Capital One Financial Corporation (COF)~~

~~Table of Contents~~

(4)Return on average tangible assets is a non-GAAP measure calculated based on annualized income from continuing operations, net of tax, for the period divided by average tangible assets for the period. See “MD&A—Table A—Reconciliation of Non-GAAP Measures” for additional information on non-GAAP measures.

(5)Return on average common equity is calculated based on annualized net income (loss) available to common stockholders less annualized income (loss) from discontinued operations, net of tax, for the period, divided by average common equity. Our calculation of return on average common equity may not be comparable to similarly-titled measures reported by other companies.

(6)Return on average tangible common equity (“TCE”) is a non-GAAP measure calculated based on annualized net income (loss) available to common stockholders less annualized income (loss) from discontinued operations, net of tax, for the period, divided by average tangible common equity. Our calculation of return on average TCE may not be comparable to similarly-titled measures reported by other companies. See “MD&A—Table A—Reconciliation of Non-GAAP Measures” for additional information on non-GAAP measures.

(7)Equity-to-assets ratio is calculated based on average stockholders’ equity for the period divided by average total assets for the period.

(8)Efficiency ratio is calculated based on total non-interest expense for the period divided by total net revenue for the period.

(9)Operating efficiency ratio is calculated based on operating expense for the period divided by total net revenue for the period.

(10)Capital ratios are calculated based on the Basel III Standardized Approach framework, see “MD&A—Capital Management” for additional information.

(11)Tangible common equity ratio is a non-GAAP measure calculated based on TCE divided by tangible assets. See “MD&A—Table A—Reconciliation of Non-GAAP Measures” for the calculation of this measure and reconciliation to the comparative U.S. GAAP measure.

(12)The Company’s supplementary leverage ratio as of December 31, 2020 reflected the temporary exclusions of U.S Treasury securities and deposits at Federal Reserve Banks from the denominator of the supplementary leverage ratio. See “Part I—Item 1. Business—Supervision and Regulation—Capital and Liquidity Regulation” in our 2020 Form 10-K for additional details.

** Not meaningful.



			8			Capital One Financial Corporation (COF)

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EXECUTIVE SUMMARY AND BUSINESS OUTLOOK

Financial Highlights

We reported net income of ~~$3.5~~$3.1 billion ($~~7.62~~6.78 per diluted common share) on total revenue of ~~$7.4~~$7.8 billion and net income of ~~$6.9~~$10.0 billion ($~~14.65~~21.44 per diluted common share) on total net revenue of ~~$14.5~~$22.3 billion for the ~~second~~third quarter and first ~~six~~nine months of 2021. In comparison, we reported net ~~loss~~income of ~~$918 million~~$2.4 billion ($~~2.21~~5.06 per diluted common share) on total net revenue of ~~$6.6~~$7.4 billion and net income of $148 million (which after considering preferred stock dividends and other items equated to a net loss of ~~$2.3 billion ($5.31~~$0.20 per diluted common share) on total net revenue of ~~$13.8~~$21.2 billion for the ~~second~~third quarter and first ~~six~~nine months of 2020.

Our common equity Tier 1 capital ratio as calculated under the Basel III Standardized Approach was ~~14.5%~~13.8% and 13.7% as of ~~June~~September 30, 2021 and December 31, 2020, respectively. See “MD&A—Capital Management” for additional information.

Below are additional highlights of our performance in the ~~second~~third quarter and first ~~six~~nine months of 2021. These highlights are based on a comparison between the results of the ~~second~~third quarter and first ~~six~~nine months of 2021 and 2020, except as otherwise noted. The changes in our financial condition and credit performance are generally based on our financial condition and credit performance as of ~~June~~September 30, 2021 compared to December 31, 2020. We provide a more detailed discussion of our financial performance in the sections following this “Executive Summary and Business Outlook.”

Total Company Performance

•Earnings:

Our net income increased by ~~$4.5 billion~~$698 million to ~~$3.5~~$3.1 billion in the ~~second~~third quarter of 2021 ~~compared~~primarily driven by:

◦lower provision resulting from an allowance release primarily due to ~~the second quarter of 2020~~strong credit performance; and

◦higher net interest income primarily driven byhigher margins and average loans outstanding in our credit card loan portfolio and higher average loans outstanding in our auto loan portfolio.

These drivers were partially offset by higher non-interest expense, primarily driven by increased marketing spend.

Our net income increased by ~~$9.1~~$9.8 billion to ~~$6.9~~$10.0 billion in the first ~~six~~nine months of 2021 ~~compared to the first six months of 2020~~ primarily driven by:

◦lower provision resulting from allowance releases in ~~the first and second quarters of~~ 2021 due to continued strong credit performance and an improved economic outlook, compared to allowance builds in ~~the first and second quarters of~~ 2020 driven by expectations of economic worsening at the start of the COVID-19 pandemic;

◦higher ~~non-interest income from interchange fees due to an increase in purchase volume in Domestic Card; and~~

◦~~higher~~ net interest income ~~due to~~driven by lower interest rates paid on interest-bearing deposits and higher average outstanding balances in our auto loan ~~portfolio,~~portfolio; and

◦higher non-interest income primarily driven by higher net interchange fees due to an increase in purchase volume, partially offset by ~~lower average outstanding balances~~the absence of a gain on our equity investment in ~~our domestic card loan portfolio.~~Snowflake Inc.

These drivers were partially offset by higher non-interest expense, primarily driven by increased marketing spend.

•Loans Held for Investment:

◦Period-end loans held for investment ~~decreased~~increased by ~~$2.0~~$9.8 billion to ~~$249.6~~$261.4 billion as of ~~June~~September 30, 2021 from December 31, 2020 primarily ~~due to higher customer payments and the transfer of $4.1 billion in loans to held for sale, partially offset~~driven by growth in our auto and commercial loan ~~portfolio.~~portfolios, partially offset by the transfer of a $2.6 billion international card partnership portfolio to held for sale in the second quarter of 2021.

◦Average loans held for investment ~~decreased~~increased by ~~$6.9~~$3.6 billion to ~~$246.5~~$253.1 billion in the ~~second~~third quarter of 2021 compared to the ~~second~~third quarter ~~of 2020 and decreased by $12.9 billion to $245.2 billion in the first six months of 2021 compared to the first six months~~ of 2020 primarily driven by ~~lower outstanding balances in Domestic Card due to higher customer payments, partially offset by higher purchase volume and~~ growth in our auto loan ~~portfolio.~~

•~~Net Charge-Off and Delinquency Metrics:~~ ~~Our net charge-off rate decreased~~portfolio, partially offset by ~~150 basis points to 0.88% in~~ the second quarter of 2021 compared to the second quarter of 2020 and decreased by 151 basis points to 1.04% in the first six months of 2021 compared to the first six months of 2020, primarily driven by strong credit performance in our domestic card and auto loan portfolios.



			9			Capital One Financial Corporation (COF)

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transfer of a $2.6 billion international card partnership portfolio to held for sale in the second quarter of 2021. Average loans held for investment decreased by $7.4 billion to $247.9 billion in the first nine months of 2021 compared to the first nine months of 2020 primarily driven by lower outstanding balances in Credit Card due to higher customer payments, partially offset by higher purchase volume as well as growth in our auto loan portfolio.

•Net Charge-Off and Delinquency Metrics: Our net charge-off rate decreased by 105 basis points (“bps”) to 0.67% in the third quarter of 2021 compared to the third quarter of 2020 and decreased by 136 basis points to 0.92% in the first nine months of 2021 compared to the first nine months of 2020, primarily driven by strong credit performance in Credit Card.

Our 30+ day delinquency rate decreased by 7248 basis points to ~~1.89%~~2.13% as of ~~June~~September 30, 2021 from December 31, 2020 due to ~~seasonally lower delinquency inventories and~~ strong credit performance in our ~~auto~~credit card and ~~domestic card~~auto loan portfolios.

•Allowance for Credit Losses: Our allowance for credit losses decreased by ~~$3.2~~$4.0 billion to ~~$12.3~~$11.6 billion, and our allowance coverage ratio decreased by ~~124~~176 basis points to ~~4.95%~~4.43% as of ~~June~~September 30, 2021 from December 31, 2020, driven by strong credit performance and an improved economic outlook.

Business Outlook

We discuss in this Report our expectations as of the time this Report was filed regarding our total company performance and the performance of our business segments based on market conditions, the regulatory environment and our business strategies. The statements contained in this Report are based on our current expectations regarding our outlook for our financial results and business strategies. Our expectations take into account, and should be read in conjunction with, our expectations regarding economic trends and analysis of our business as discussed in “Part I—Item 1. Business” and “Part II—Item 7. MD&A” in our 2020 Form 10-K. Certain statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those in our forward-looking statements. Except as otherwise disclosed, forward-looking statements do not reflect:

•any change in current dividend or repurchase strategies;

•the effect of any acquisitions, divestitures or similar transactions that have not been previously disclosed; or

•any changes in laws, regulations or regulatory interpretations, in each case after the date as of which such statements are made.

The extent to which the COVID-19 pandemic ultimately impacts our business, results of operations, and financial condition will depend on future developments that are still uncertain and cannot be predicted, including the scope and duration of the COVID-19 pandemic and actions taken by governmental authorities and other third parties in response to the COVID-19 pandemic.

See “MD&A—Forward-Looking Statements” in this Report for more information on the forward-looking statements and “Part I—Item 1A. Risk Factors” in our 2020 Form 10-K for factors that could materially influence our results.

~~Business Segment~~Total Company Expectations

•We expect ~~that~~marketing expense for the ~~auto net charge-off rate will increase from~~fourth quarter of 2021 to be higher than the ~~unusually low level observed~~third quarter of 2021, consistent with historical seasonal patterns.

•Investments in our technology strategy, driven by the rapidly changing marketplace, are likely to pressure the operating efficiency ratio.

•We expect to pay preferred stock dividends of $74 million in the ~~second~~fourth quarter of ~~2021.~~2021 and $57 million per quarter in 2022, barring additional activity and subject to Board approval.



			10			Capital One Financial Corporation (COF)

Table of Contents


CONSOLIDATED RESULTS OF OPERATIONS

The section below provides a comparative discussion of our consolidated financial performance for the ~~second~~third quarter and first ~~six~~nine months of 2021 and 2020. We provide a discussion of our business segment results in the following section, “MD&A—Business Segment Financial Performance.” This section should be read together with our “MD&A—Executive Summary and Business Outlook,” where we discuss trends and other factors that we expect will affect our future results of operations.

Net Interest Income

Net interest income represents the difference between interest income, including certain fees, earned on our interest-earning assets and the interest expense incurred on our interest-bearing liabilities. Our interest-earning assets include loans, investment securities and other interest-earning assets, while our interest-bearing liabilities include interest-bearing deposits, securitized debt obligations, senior and subordinated notes, other borrowings and other interest-bearing liabilities. Generally, we include in interest income any past due fees on loans that we deem collectible. Our net interest margin, based on our consolidated results, represents the difference between the yield on our interest-earning assets and the cost of our interest-bearing liabilities, including the notional impact of non-interest-bearing funding. We expect net interest income and our net interest margin to fluctuate based on changes in interest rates and changes in the amount and composition of our interest-earning assets and interest-bearing liabilities.



			11			Capital One Financial Corporation (COF)

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Table 2 below presents the average outstanding balance, interest income earned, interest expense incurred and average yield for the ~~second~~third quarter and first ~~six~~nine months of 2021 and 2020 for each major category of our interest-earning assets and interest-bearing liabilities. Nonperforming loans are included in the average loan balances below.

Table 2: Average Balances, Net Interest Income and Net Interest Margin


		Three Months Ended June 30,													Three Months Ended September 30,
		2021						2020							2021						2020
(Dollars in millions)	(Dollars in millions)	Average Balance		Interest Income/ Expense		Average Yield/ Rate		Average Balance		Interest Income/ Expense		Average Yield/ Rate		(Dollars in millions)	Average Balance		Interest Income/ Expense		Average Yield/ Rate		Average Balance		Interest Income/ Expense		Average Yield/ Rate
Assets:	Assets:													Assets:
Interest-earning assets:	Interest-earning assets:													Interest-earning assets:
Loans:(1)	Loans:(1)													Loans:(1)
Credit card	Credit card	$	101,642	$	3,568	14.04	%	$	108,748	$	3,731	13.72	%	Credit card	$	106,566	$	3,965	14.88	%	$	105,390	$	3,644	13.83	%
Consumer banking	Consumer banking	72,705		1,451		7.99		64,851		1,364		8.41		Consumer banking	75,997		1,479		7.78		67,822		1,417		8.36
Commercial banking(2)	Commercial banking(2)	74,933		510		2.72		80,803		608		3.01		Commercial banking(2)	77,672		538		2.77		77,313		544		2.82
Other(3)	Other(3)	—		224		**		—		117		**		Other(3)	—		223		**		—		153		**
Total loans, including loans held for sale	Total loans, including loans held for sale	249,280		5,753		9.23		254,402		5,820		9.15		Total loans, including loans held for sale	260,235		6,205		9.54		250,525		5,758		9.19
Investment securities(4)	Investment securities(4)	100,071		370		1.48		81,095		482		2.38		Investment securities(4)	98,802		317		1.28		91,777		443		1.93
Cash equivalents and other interest-earning assets	Cash equivalents and other interest-earning assets	40,778		16		0.16		42,648		16		0.15		Cash equivalents and other interest-earning assets	28,729		16		0.22		49,149		14		0.11
Total interest-earning assets	Total interest-earning assets	390,129		6,139		6.29		378,145		6,318		6.68		Total interest-earning assets	387,766		6,538		6.74		391,451		6,215		6.35
Cash and due from banks	Cash and due from banks	5,417						5,355						Cash and due from banks	5,467						4,697
Allowance for credit losses	Allowance for credit losses	(14,007)						(14,107)						Allowance for credit losses	(12,341)						(16,839)
Premises and equipment, net	Premises and equipment, net	4,275						4,332						Premises and equipment, net	4,238						4,319
Other assets	Other assets	38,285						37,350						Other assets	39,376						39,226
Total assets	Total assets	$	424,099					$	411,075					Total assets	$	424,506					$	422,854
Liabilities and stockholders’ equity:	Liabilities and stockholders’ equity:													Liabilities and stockholders’ equity:
Interest-bearing liabilities:	Interest-bearing liabilities:													Interest-bearing liabilities:
Interest-bearing deposits	Interest-bearing deposits	$	273,476	$	237	0.35	%	$	261,256	$	611	0.94	%	Interest-bearing deposits	$	269,278	$	228	0.34	%	$	276,339	$	476	0.69	%
Securitized debt obligations	Securitized debt obligations	10,890		28		1.03		16,432		56		1.37		Securitized debt obligations	12,420		29		0.93		15,032		43		1.14
Senior and subordinated notes	Senior and subordinated notes	25,487		122		1.92		31,294		180		2.30		Senior and subordinated notes	24,241		116		1.91		28,497		132		1.86
Other borrowings and liabilities	Other borrowings and liabilities	2,198		9		1.67		3,554		11		1.21		Other borrowings and liabilities	2,357		9		1.49		2,119		9		1.77
Total interest-bearing liabilities	Total interest-bearing liabilities	312,051		396		0.50		312,536		858		1.10		Total interest-bearing liabilities	308,296		382		0.49		321,987		660		0.82
Non-interest-bearing deposits	Non-interest-bearing deposits	34,741						27,088						Non-interest-bearing deposits	35,757						29,177
Other liabilities	Other liabilities	14,931						13,828						Other liabilities	15,771						14,467
Total liabilities	Total liabilities	361,723						353,452						Total liabilities	359,824						365,631
Stockholders’ equity	Stockholders’ equity	62,376						57,623						Stockholders’ equity	64,682						57,223
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	424,099					$	411,075					Total liabilities and stockholders’ equity	$	424,506					$	422,854
Net interest income/spread	Net interest income/spread			$	5,743	5.79				$	5,460	5.58		Net interest income/spread			$	6,156	6.25				$	5,555	5.53
Impact of non-interest-bearing funding	Impact of non-interest-bearing funding					0.10						0.20		Impact of non-interest-bearing funding					0.10						0.15
Net interest margin	Net interest margin					5.89	%					5.78	%	Net interest margin					6.35	%					5.68	%



			12			Capital One Financial Corporation (COF)

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		Six Months Ended June 30,														Nine Months Ended September 30,
		2021						2020						2021				2020
(Dollars in millions)	(Dollars in millions)	Average Balance		Interest Income/ Expense		Average Yield/ Rate		Average Balance		Interest Income/ Expense		Average Yield/ Rate			(Dollars in millions)	Average Balance		Interest Income/ Expense		Average Yield/ Rate		Average Balance		Interest Income/ Expense		Average Yield/ Rate
Assets:	Assets:														Assets:
Interest-earning assets:	Interest-earning assets:														Interest-earning assets:
Loans:(1)	Loans:(1)														Loans:(1)
Credit card	Credit card	$	102,078	$	7,281	14.26	%	$	115,801	$	8,168	14.11	%		Credit card	$	103,591	$	11,246	14.47	%	$	112,305	$	11,812	14.02	%
Consumer banking	Consumer banking	70,979		2,864		8.07		64,262		2,711		8.44			Consumer banking	72,670		4,343		7.97		65,457		4,128		8.41
Commercial banking(2)	Commercial banking(2)	74,927		1,026		2.74		78,954		1,354		3.43			Commercial banking(2)	75,852		1,564		2.75		78,403		1,898		3.23
Other(3)	Other(3)	—		436		**		—		129		**			Other(3)	—		659		**		—		282		**
Total loans, including loans held for sale	Total loans, including loans held for sale	247,984		11,607		9.36		259,017		12,362		9.55			Total loans, including loans held for sale	252,113		17,812		9.42		256,165		18,120		9.43
Investment securities	Investment securities	99,189		761		1.53		79,654		1,012		2.54			Investment securities	99,059		1,078		1.45		83,724		1,455		2.32
Cash equivalents and other interest-earning assets	Cash equivalents and other interest-earning assets	42,182		32		0.15		28,075		53		0.38			Cash equivalents and other interest-earning assets	37,648		48		0.17		35,152		67		0.25
Total interest-earning assets	Total interest-earning assets	389,355		12,400		6.37		366,746		13,427		7.32			Total interest-earning assets	388,820		18,938		6.49		375,041		19,642		6.98
Cash and due from banks	Cash and due from banks	5,251						5,024							Cash and due from banks	5,300						4,913
Allowance for credit losses	Allowance for credit losses	(14,773)						(12,258)							Allowance for credit losses	(13,954)						(13,796)
Premises and equipment, net	Premises and equipment, net	4,279						4,338							Premises and equipment, net	4,265						4,332
Other assets	Other assets	38,847						36,995							Other assets	39,026						37,743
Total assets	Total assets	$	422,959					$	400,845						Total assets	$	423,457					$	408,233
Liabilities and stockholders’ equity:	Liabilities and stockholders’ equity:														Liabilities and stockholders’ equity:
Interest-bearing liabilities:	Interest-bearing liabilities:														Interest-bearing liabilities:
Interest-bearing deposits	Interest-bearing deposits	$	273,417	$	506	0.37	%	$	251,185	$	1,342	1.07	%		Interest-bearing deposits	$	272,022	$	734	0.36	%	$	259,631	$	1,818	0.93	%
Securitized debt obligations	Securitized debt obligations	11,561		60		1.04		17,243		155		1.80			Securitized debt obligations	11,851		89		1.00		16,500		198		1.60
Senior and subordinated notes	Senior and subordinated notes	26,223		251		1.92		31,318		419		2.67			Senior and subordinated notes	25,555		367		1.92		30,371		551		2.42
Other borrowings and liabilities	Other borrowings and liabilities	2,205		18		1.65		3,667		26		1.42			Other borrowings and liabilities	2,256		27		1.59		3,147		35		1.50
Total interest-bearing liabilities	Total interest-bearing liabilities	313,406		835		0.53		303,413		1,942		1.28			Total interest-bearing liabilities	311,684		1,217		0.52		309,649		2,602		1.12
Non-interest-bearing deposits	Non-interest-bearing deposits	33,228						25,313							Non-interest-bearing deposits	34,080						26,611
Other liabilities	Other liabilities	14,821						14,023							Other liabilities	15,118						14,171
Total liabilities	Total liabilities	361,455						342,749							Total liabilities	360,882						350,431
Stockholders’ equity	Stockholders’ equity	61,504						58,096							Stockholders’ equity	62,575						57,802
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	422,959					$	400,845						Total liabilities and stockholders’ equity	$	423,457					$	408,233
Net interest income/spread	Net interest income/spread			$	11,565	5.84				$	11,485	6.04			Net interest income/spread			$	17,721	5.97				$	17,040	5.86
Impact of non-interest-bearing funding	Impact of non-interest-bearing funding					0.10						0.22			Impact of non-interest-bearing funding					0.11						0.20
Net interest margin	Net interest margin					5.94	%					6.26	%		Net interest margin					6.08	%					6.06	%

__________

(1)Past due fees included in interest income totaled approximately ~~$302~~$401 million and ~~$612 million~~$1.0 billion in the ~~second~~third quarter and first ~~six~~nine months of 2021, respectively, and ~~$265~~$277 million and ~~$656~~$933 million in the ~~second~~third quarter and first ~~six~~nine months of 2020, respectively.

(2)Some of our commercial loans generate tax-exempt income. Accordingly, we present our Commercial Banking interest income and yields on a taxable-equivalent basis, calculated using the federal statutory rate of 21% and state taxes where applicable, with offsetting reductions to the Other category. Taxable-equivalent adjustments included in the interest income and yield computations for our commercial loans totaled approximately ~~$19~~$18 million and ~~$38~~$56 million in the ~~second~~third quarter and first ~~six~~nine months of 2021, respectively, and ~~$21~~$20 million and ~~$41~~$61 million in the ~~second~~third quarter and first ~~six~~nine months of 2020, respectively, with corresponding reductions to the Other category.

(3)Interest income/expense in the Other category represents the impact of hedge accounting on our loan portfolios and the offsetting reduction of the taxable-equivalent adjustments of our commercial loans as described above.

(4)Includes a catch-up in amortization expense related to prepayment activity on certain securities that reduced yield by 20 basis points for the three months ended September 30, 2021.

** Not meaningful.

Net interest income increased by ~~$283~~$601 million to ~~$5.7~~$6.2 billion in the ~~second~~third quarter of 2021 compared to the ~~second~~third quarter ~~of 2020, and increased by $80 million to $11.6 billion in the first six months of 2021 compared to the first six months~~ of 2020, primarily driven by ~~lower interest rates paid on interest-bearing deposits~~higher margins and average loans outstanding in our credit card loan portfolio and higher average loans outstanding ~~balances~~ in our auto loan ~~portfolio, partially offset~~portfolio. Net interest income increased by ~~lower average outstanding balances~~$681 million to $17.7 billion in ~~our domestic card loan portfolio.~~the first nine months of



			13			Capital One Financial Corporation (COF)

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2021 compared to the first nine months of 2020 primarily driven by lower interest rates paid on interest-bearing deposits and higher average outstanding balances in our auto loan portfolio.

Net interest margin increased by 1167 basis points to ~~5.89%~~6.35% in the ~~second~~third quarter of 2021 compared to the ~~second~~third quarter of 2020 primarily driven by lower interest ~~rate~~rates paid on interest-bearing ~~deposits,~~liabilities, higher average loan balances and lower average cash balances, partially offset by higher ~~balances and lower yield on~~average investment ~~securities.~~

securities balances. Net interest margin ~~decreased by 32 basis points to 5.94%~~remained relatively flat at 6.08% in the first ~~six~~nine months of 2021 compared to the first ~~six~~nine months of 2020 primarily driven by a shift in our asset mix with cash and investment securities representing a greater portion of total average interest-earnings assets, partially offset by lower rates paid on interest-bearing liabilities.2020.

Table 3 displays the change in our net interest income between periods and the extent to which the variance is attributable to:

•changes in the volume of our interest-earning assets and interest-bearing liabilities; or

•changes in the interest rates related to these assets and liabilities.

Table 3: Rate/Volume Analysis of Net Interest Income(1)


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,						Nine Months Ended September 30,
		2021 vs. 2020						2021 vs. 2020							2021 vs. 2020						2021 vs. 2020
(Dollars in millions)	(Dollars in millions)	Total Variance		Volume		Rate		Total Variance		Volume		Rate		(Dollars in millions)	Total Variance		Volume		Rate		Total Variance		Volume		Rate
Interest income:	Interest income:													Interest income:
Loans:	Loans:													Loans:
Credit card	Credit card	$	(163)	$	(244)	$	81	$	(887)	$	(968)	$	81	Credit card	$	321	$	41	$	280	$	(566)	$	(917)	$	351
Consumer banking	Consumer banking	87		157		(70)		153		271		(118)		Consumer banking	62		159		(97)		215		431		(216)
Commercial banking(2)	Commercial banking(2)	(98)		(42)		(56)		(328)		(66)		(262)		Commercial banking(2)	(6)		2		(8)		(334)		(60)		(274)
Other(3)	Other(3)	107		—		107		307		—		307		Other(3)	70		—		70		377		—		377
Total loans, including loans held for sale	Total loans, including loans held for sale	(67)		(129)		62		(755)		(763)		8		Total loans, including loans held for sale	447		202		245		(308)		(546)		238
Investment securities	Investment securities	(112)		70		(182)		(251)		150		(401)		Investment securities	(126)		23		(149)		(377)		167		(544)
Cash equivalents and other interest-earning assets	Cash equivalents and other interest-earning assets	—		(1)		1		(21)		11		(32)		Cash equivalents and other interest-earning assets	2		(6)		8		(19)		3		(22)
Total interest income	Total interest income	(179)		(60)		(119)		(1,027)		(602)		(425)		Total interest income	323		219		104		(704)		(376)		(328)
Interest expense:	Interest expense:													Interest expense:
Interest-bearing deposits	Interest-bearing deposits	(374)		11		(385)		(836)		41		(877)		Interest-bearing deposits	(248)		(12)		(236)		(1,084)		33		(1,117)
Securitized debt obligations	Securitized debt obligations	(28)		(16)		(12)		(95)		(40)		(55)		Securitized debt obligations	(14)		(7)		(7)		(109)		(45)		(64)
Senior and subordinated notes	Senior and subordinated notes	(58)		(31)		(27)		(168)		(60)		(108)		Senior and subordinated notes	(16)		(20)		4		(184)		(79)		(105)
Other borrowings and liabilities	Other borrowings and liabilities	(2)		(4)		2		(8)		(10)		2		Other borrowings and liabilities	—		1		(1)		(8)		(10)		2
Total interest expense	Total interest expense	(462)		(40)		(422)		(1,107)		(69)		(1,038)		Total interest expense	(278)		(38)		(240)		(1,385)		(101)		(1,284)
Net interest income	Net interest income	$	283	$	(20)	$	303	$	80	$	(533)	$	613	Net interest income	$	601	$	257	$	344	$	681	$	(275)	$	956

__________

(1)We calculate the change in interest income and interest expense separately for each item. The portion of interest income or interest expense attributable to both volume and rate is allocated proportionately when the calculation results in a positive value. When the portion of interest income or interest expense attributable to both volume and rate results in a negative value, the total amount is allocated to volume or rate, depending on which amount is positive.



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Non-Interest Income

Table 4 displays the components of non-interest income for the ~~second~~third quarter and first ~~six~~nine months of 2021 and 2020.

Table 4: Non-Interest Income


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	(Dollars in millions)	2021		2020		2021		2020		(Dollars in millions)	2021		2020		2021		2020
Interchange fees, net	Interchange fees, net	$	1,016	$	672	$	1,833	$	1,424	Interchange fees, net	$	1,022	$	775	$	2,855	$	2,199
Service charges and other customer-related fees	Service charges and other customer-related fees	384		258		736		585		Service charges and other customer-related fees	407		320		1,143		905
Net securities gains		—		—		4		—
Net securities gains (losses)										Net securities gains (losses)	2		25		6		25
Other non-interest income:(1)	Other non-interest income:(1)									Other non-interest income:(1)
Mortgage banking revenue	Mortgage banking revenue	40		38		100		106		Mortgage banking revenue	84		66		184		172
Treasury and other investment income	Treasury and other investment income	94		63		78		56		Treasury and other investment income	50		516		128		572
Other	Other	97		65		171		149		Other	109		124		280		273
Total other non-interest income	Total other non-interest income	231		166		349		311		Total other non-interest income	243		706		592		1,017
Total non-interest income	Total non-interest income	$	1,631	$	1,096	$	2,922	$	2,320	Total non-interest income	$	1,674	$	1,826	$	4,596	$	4,146

________

(1)Includes ~~gains~~a loss of ~~$26~~$1 million and ~~$45~~a gain of $44 million on deferred compensation plan investments for the ~~second~~third quarter and first ~~six~~nine months of 2021, respectively, and gains of ~~$44~~$19 million and ~~losses of $15~~$4 million on deferred compensation plan investments for the ~~second~~third quarter and first ~~six~~nine months of 2020, respectively. These amounts have corresponding offsets in other non-interest expense.

Non-interest income ~~increased~~decreased by ~~$535~~$152 million to ~~$1.6~~$1.7 billion in the ~~the second~~third quarter of 2021 compared to the ~~second~~third quarter of 2020 ~~and~~primarily driven by the absence of a gain on our equity investment in Snowflake Inc. in the third quarter of 2020, partially offset by higher net interchange fees due to an increase in purchase volume.

Non-interest income increased by ~~$602~~$450 million to ~~$2.9~~$4.6 billion in the first ~~six~~nine months of 2021 compared to the first ~~six~~nine months of 2020 primarily driven by higher net interchange fees due to an increase in purchase volume, partially offset by the absence of a gain on our equity investment in ~~Domestic Card.~~Snowflake Inc.

Provision for Credit Losses

Our provision for credit losses in each period is driven by net charge-offs, changes to the allowance for credit losses and changes to the reserve for unfunded lending commitments. Our provision for credit ~~loss~~eslosses decreased by ~~$5.4 billion~~ $673 million to a benefit of ~~$1.2 billion i~~n $342 million in the ~~second~~third quarter of 2021 ~~and~~ compared to the third quarter of 2020 driven by an allowance release primarily due to strong credit performance. Our provision for credit losses decreased by ~~$11.7~~$12.3 billion to a benefit of ~~$2.0~~ $2.3 billion in the first ~~six~~nine months of ~~2021. These decreases were primarily driven by~~2021 as a result of allowance releases in ~~the first and second quarters of~~ 2021 due to continued strong credit performance and an improved economic outlook, compared to allowance builds in ~~the first and second quarters of~~ 2020 driven by expectations of economic worsening at the start of the COVID-19 pandemic.

We provide additional information on the provision for credit losses and changes in the allowance for credit losses within “MD&A—Credit Risk Profile” and “Note 4—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments.” For information on the allowance methodology for each of our loan categories, see “Note 1—Summary of Significant Accounting Policies” in our 2020 Form 10-K.



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Non-Interest Expense

Table 5 displays the components of non-interest expense for the ~~second~~third quarter and first ~~six~~nine months of 2021 and 2020.

Table 5: Non-Interest Expense


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	(Dollars in millions)	2021		2020		2021		2020		(Dollars in millions)	2021		2020		2021		2020
Salaries and associate benefits(1)	Salaries and associate benefits(1)	$	1,781	$	1,704	$	3,628	$	3,331	Salaries and associate benefits(1)	$	1,852	$	1,719	$	5,480	$	5,050
Occupancy and equipment	Occupancy and equipment	523		523		995		1,040		Occupancy and equipment	481		506		1,476		1,546
Marketing	Marketing	620		273		1,121		764		Marketing	751		283		1,872		1,047
Professional services	Professional services	341		304		633		591		Professional services	358		327		991		918
Communications and data processing	Communications and data processing	315		308		617		610		Communications and data processing	319		310		936		920
Amortization of intangibles	Amortization of intangibles	5		16		11		38		Amortization of intangibles	5		14		16		52
Other non-interest expense:	Other non-interest expense:									Other non-interest expense:
Bankcard, regulatory and other fee assessments	Bankcard, regulatory and other fee assessments	38		66		90		141		Bankcard, regulatory and other fee assessments	50		69		140		210
Collections	Collections	95		76		179		181		Collections	93		74		272		255
Fraud losses	Fraud losses	40		71		75		150		Fraud losses	42		56		117		206
Other~~(2)~~	Other~~(2)~~	208		429		357		653		Other~~(2)~~	235		190		592		843
Total other non-interest expense	Total other non-interest expense	381		642		701		1,125		Total other non-interest expense	420		389		1,121		1,514
Total non-interest expense	Total non-interest expense	$	3,966	$	3,770	$	7,706	$	7,499	Total non-interest expense	$	4,186	$	3,548	$	11,892	$	11,047

_________

(1)Includes a benefit of $1 million and expense of ~~$26 million and $45~~$44 million related to our deferred compensation plan investments for the ~~second~~third quarter and first ~~six~~nine months of 2021, respectively, and expense of ~~$44~~$19 million and ~~benefit of $15~~$4 million related to our deferred compensation plan investments for the ~~second~~third quarter and first ~~six~~nine months of 2020, respectively. These amounts have corresponding offsets in other non-interest income.

~~(2)Includes legal reserve builds of $55 million for the second quarter and first six months of 2021 and $265 million and $310 million for the second quarter and first six months of 2020, respectively.~~

Non-interest expense increased by ~~$196~~$638 million to ~~$4.0~~$4.2 billion in the ~~second~~third quarter of 2021 compared to the ~~second~~third quarter of 2020 driven by increased marketing spend and increased salaries and associate benefits due to continued investment in technology.

Non-interest expense increased by ~~$207~~$845 million to ~~$7.7~~$11.9 billion in the first ~~six~~nine months of 2021 compared to the first ~~six~~nine months of 2020, primarily driven by increased marketing ~~spend.~~spend and increased salaries and associate benefits due to continued investment in technology, partially offset by lower legal reserve builds.

Income Taxes

We recorded an income tax provision of ~~$1.0 billion (22.6%~~$882 million (22.1% effective income tax rate) and ~~$1.9~~$2.8 billion ~~(21.7%~~(21.8% effective income tax rate) in the ~~second~~third quarter and first ~~six~~nine months of 2021, respectively, compared to an income tax ~~benefit~~expense of ~~$543 million (37.2%~~$1.1 billion (31.3% effective income tax rate) and ~~$1.1 billion (32.9%~~an income tax benefit of $10 million (negative 7.2% effective income tax rate) in the ~~second~~third quarter and first ~~six~~nine months of 2020, respectively. Our effective tax rate on income from continuing operations varies between periods due, in part, to the impact of changes in pre-tax income and changes in tax credits, tax-exempt income and non-deductible expenses relative to our pre-tax earnings.

~~The decrease in our~~Our effective income tax rate indecreased for the ~~second~~third quarter of 2021 and increased for the first ~~six~~nine months of 2021 compared to the ~~second quarter and first six months of 2020 was primarily due to significantly higher positive pre-tax earnings in 2021 compared to pre-tax losses~~same periods in 2020 primarily driven by ~~expectations~~the impact of ~~economic worsening that existed at~~changes in pre-tax income and the ~~start~~relationship of ~~the COVID-19 pandemic~~our tax credits in ~~2020.~~proportion to our pre-tax earnings.

We provide additional information on items affecting our income taxes and effective tax rate in “Note 15—Income Taxes” in our 2020 Form 10-K.



			16			Capital One Financial Corporation (COF)

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CONSOLIDATED BALANCE SHEETS ANALYSIS

Total assets increased by ~~$1.8~~$3.8 billion to ~~$423.4~~$425.4 billion as of ~~June~~September 30, 2021 from December 31, 2020 primarily driven by ~~an increase in~~ loan ~~balances, net of higher customer payments, which was~~growth and allowance releases, partially offset by a decrease in our cash ~~balances due to paydowns of our securitized debt obligations and redemptions of our senior unsecured debt.~~balances.

Total liabilities ~~decreased by $2.6 billion to $358.8~~remained substantially flat at $361.8 billion as of ~~June~~September 30, 2021 from December 31, 2020 primarily driven by redemptions of our senior unsecured debt and paydowns of our securitization debt obligations, partially offset by growth in deposits driven by increased consumer savings.2021.

Stockholders’ equity increased by ~~$4.4~~$3.3 billion to ~~$64.6~~$63.5 billion as of ~~June~~September 30, 2021 from December 31, 2020 primarily due to our net income of ~~$6.9~~$10.0 billion, partially offset by the repurchase of shares of our common stock.

The following is a discussion of material changes in the major components of our assets and liabilities during the first ~~six~~nine months of 2021. Period-end balance sheet amounts may vary from average balance sheet amounts due to liquidity and balance sheet management activities that are intended to support the adequacy of capital while managing our liquidity requirements, our customers and our market risk exposure in accordance with our risk appetite.

Investment Securities

Our investment securities portfolio consists of the following: U.S. government-sponsored enterprise or agency (“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% of our total investment securities portfolio as of both ~~June~~September 30, 2021 and December 31, 2020.

The fair value of our available for sale securities portfolio ~~increased~~decreased by ~~$1.3~~$2.3 billion to ~~$101.8~~$98.1 billion as of ~~June~~September 30, 2021 from December 31, 2020, primarily driven ~~by net purchases, partially offset~~ by the increase in interest rates. See “Note 2—Investment Securities” for more information.

Table 6 presents the amortized cost and fair value for the major security types in our available for sale securities portfolio as of ~~June~~September 30, 2021 and December 31, 2020.

Table 6: Investment Securities


		June 30, 2021				December 31, 2020				September 30, 2021				December 31, 2020
(Dollars in millions)	(Dollars in millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value			(Dollars in millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Investment securities available for sale:	Investment securities available for sale:										Investment securities available for sale:
U.S. Treasury securities	U.S. Treasury securities	$	9,211	$	9,231	$	9,302	$	9,318		U.S. Treasury securities	$	9,094	$	9,109	$	9,302	$	9,318
RMBS:	RMBS:										RMBS:
Agency	Agency	76,318		77,206		73,248		75,466			Agency	73,924		74,632		73,248		75,466
Non-agency	Non-agency	908		1,116		1,035		1,237			Non-agency	844		1,049		1,035		1,237
Total RMBS	Total RMBS	77,226		78,322		74,283		76,703			Total RMBS	74,768		75,681		74,283		76,703
Agency CMBS	Agency CMBS	10,781		11,087		11,298		11,735			Agency CMBS	9,973		10,197		11,298		11,735
Other securities(1)	Other securities(1)	3,118		3,126		2,686		2,689			Other securities(1)	3,154		3,162		2,686		2,689
Total investment securities available for sale	Total investment securities available for sale	$	100,336	$	101,766	$	97,569	$	100,445		Total investment securities available for sale	$	96,989	$	98,149	$	97,569	$	100,445

__________

(1)Includes $2.3 billion and $1.8 billion of asset-backed securities as of ~~June~~September 30, 2021 and December 31, 2020, respectively. The remaining amount is primarily comprised of supranational bonds and foreign government bonds.



			17			Capital One Financial Corporation (COF)

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Loans Held for Investment

Total loans held for investment consists of both unsecuritized loans and loans held in our consolidated trusts. Table 7 summarizes, by portfolio segment, the carrying value of our loans held for investment, the allowance for credit losses and net loan balance as of ~~June~~September 30, 2021 and December 31, 2020.

Table 7: Loans Held for Investment


		June 30, 2021						December 31, 2020							September 30, 2021						December 31, 2020
(Dollars in millions)	(Dollars in millions)	Loans		Allowance		Net Loans		Loans		Allowance		Net Loans		(Dollars in millions)	Loans		Allowance		Net Loans		Loans		Allowance		Net Loans
Credit Card	Credit Card	$	101,017	$	8,873	$	92,144	$	106,956	$	11,191	$	95,765	Credit Card	$	105,030	$	8,306	$	96,724	$	106,956	$	11,191	$	95,765
Consumer Banking	Consumer Banking	74,759		2,203		72,556		68,888		2,715		66,173		Consumer Banking	77,112		2,061		75,051		68,888		2,715		66,173
Commercial Banking	Commercial Banking	73,821		1,270		72,551		75,780		1,658		74,122		Commercial Banking	79,248		1,206		78,042		75,780		1,658		74,122
Total	Total	$	249,597	$	12,346	$	237,251	$	251,624	$	15,564	$	236,060	Total	$	261,390	$	11,573	$	249,817	$	251,624	$	15,564	$	236,060

Loans held for investment ~~decreased~~increased by ~~$2.0~~$9.8 billion to ~~$249.6~~$261.4 billion as of ~~June~~September 30, 2021 from December 31, 2020 primarily ~~due to higher customer payments in Domestic Card and the transfer of $4.1 billion in loans to held for sale, partially offset~~driven by growth in our auto and commercial loan portfolios, partially offset by the transfer of a $2.6 billion international card partnership portfolio ~~and higher purchase volume~~to held for sale in ~~Domestic Card.~~the second quarter of 2021.

We provide additional information on the composition of our loan portfolio and credit quality in “MD&A—Credit Risk Profile,” “MD&A—Consolidated Results of Operations” and “Note 3—Loans.”

Funding Sources

Table 8 provides the composition of our primary sources of funding as of ~~June~~September 30, 2021 and December 31, 2020.

Table 8: Funding Sources Composition


		June 30, 2021				December 31, 2020					September 30, 2021				December 31, 2020
(Dollars in millions)	(Dollars in millions)	Amount		% of Total		Amount		% of Total		(Dollars in millions)	Amount		% of Total		Amount		% of Total
Deposits:	Deposits:									Deposits:
Consumer Banking	Consumer Banking	$	251,155	73	%	$	249,815	72	%	Consumer Banking	$	252,387	73	%	$	249,815	72	%
Commercial Banking	Commercial Banking	42,973		12		39,590		11		Commercial Banking	43,347		13		39,590		11
Other(1)	Other(1)	12,180		4		16,037		5		Other(1)	10,204		3		16,037		5
Total deposits	Total deposits	306,308		89		305,442		88		Total deposits	305,938		89		305,442		88
Securitized debt obligations	Securitized debt obligations	10,561		3		12,414		4		Securitized debt obligations	12,635		4		12,414		4
Other debt	Other debt	25,782		8		28,125		8		Other debt	24,866		7		28,125		8
Total funding sources	Total funding sources	$	342,651	100	%	$	345,981	100	%	Total funding sources	$	343,439	100	%	$	345,981	100	%

__________

(1)Includes brokered deposits of ~~$11.1~~$9.1 billion and $15.0 billion as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

Total deposits increased by ~~$866~~$496 million to ~~$306.3~~$305.9 billion as of ~~June~~September 30, 2021 from December 31, 2020 primarily driven by increased consumer savings, as well as commercial clients holding elevated levels of ~~liquidity.~~liquidity, partially offset by maturities in brokered deposits.

Securitized debt obligations ~~decreased~~increased by ~~$1.9 billion~~$221 million to ~~$10.6~~$12.6 billion as of ~~June~~September 30, 2021 from December 31, 2020 primarily driven by issuances in our credit card securitization program, partially offset by maturities and paydowns in our ~~securitizations.~~

~~Other debt decreased by $2.3 billion to $25.8 billion as of June 30, 2021 from December 31, 2020 primarily driven by redemptions of our senior unsecured debt.~~

~~We provide additional information on our funding sources in “MD&A—Liquidity Risk Profile” and “Note 7—Deposits and Borrowings.”~~securitization programs.



			18			Capital One Financial Corporation (COF)

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Other debt decreased by $3.3 billion to $24.9 billion as of September 30, 2021 from December 31, 2020 primarily driven by redemptions of our senior debt, partially offset by the issuance of subordinated debt.

We provide additional information on our funding sources in “MD&A—Liquidity Risk Profile” and “Note 7—Deposits and Borrowings.”


OFF-BALANCE SHEET ARRANGEMENTS

In the ordinary course of business, we engage in certain activities that are not reflected on our consolidated balance sheets, generally referred to as off-balance sheet arrangements. These activities typically involve transactions with unconsolidated variable interest entities (“VIEs”) as well as other arrangements, such as letters of credit, loan commitments and guarantees, to meet the financing needs of our customers and support their ongoing operations. We provide additional information regarding these types of activities in “Note 5—Variable Interest Entities and Securitizations” and “Note 13—Commitments, Contingencies, Guarantees and Others.”


BUSINESS SEGMENT FINANCIAL PERFORMANCE

Our principal operations are organized for management reporting purposes into three major business segments, which are defined primarily based on the products and services provided or the types of customer served: Credit Card, Consumer Banking and Commercial Banking. The operations of acquired businesses have been integrated into or managed as a part of our existing business segments. Certain activities that are not part of a segment, such as management of our corporate investment portfolio, asset/liability management by our centralized Corporate Treasury group and calculation of our residual tax expense or benefit to arrive at the consolidated effective tax rate that is not assessed to our primary business segments, are included in the Other category.

The results of our individual businesses, which we report on a continuing operations basis, reflect the manner in which management evaluates performance and makes decisions about funding our operations and allocating resources. We may periodically change our business segments or reclassify business segment results based on modifications to our management reporting methodologies and changes in organizational alignment. Our business segment results are intended to reflect each segment as if it were a stand-alone business. We use an internal management and reporting process to derive our business segment results. Our internal management and reporting process employs various allocation methodologies, including funds transfer pricing, to assign certain balance sheet assets, deposits and other liabilities and their related revenue and expenses directly or indirectly attributable to each business segment. Total interest income and non-interest income are directly attributable to the segment in which they are reported. The net interest income of each segment reflects the results of our funds transfer pricing process, which is primarily based on a matched funding concept that takes into consideration market interest rates. Our funds transfer pricing process 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 segment. The allocation process is unique to each business segment and acquired business. 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. We provide additional information on the allocation methodologies used to derive our business segment results in “Note 17—Business Segments and Revenue from Contracts with Customers” in our 2020 Form 10-K.

We refer to the business segment results derived from our internal management accounting and reporting process as our “managed” presentation, which differs in some cases from our reported results prepared based on U.S. GAAP. There is no comprehensive authoritative body of guidance for management accounting equivalent to U.S. GAAP; therefore, the managed presentation of our business segment results may not be comparable to similar information provided by other financial services companies. In addition, our individual business segment results should not be used as a substitute for comparable results determined in accordance with U.S. GAAP.

We summarize our business segment results for the ~~second~~third quarter and first ~~six~~nine months of 2021 and 2020 and provide a comparative discussion of these results, as well as changes in our financial condition and credit performance metrics as of ~~June~~September 30, 2021 compared to December 31, 2020. We provide a reconciliation of our total business segment results to our reported consolidated results in “Note 12—Business Segments and Revenue from Contracts with Customers.”



			19			Capital One Financial Corporation (COF)

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Business Segment Financial Performance

Table 9 summarizes our business segment results, which we report based on revenue (loss) and income (loss) from continuing operations, for the ~~second~~third quarter and first ~~six~~nine months of 2021 and 2020.

Table 9: Business Segment Results


		Three Months Ended June 30,																Three Months Ended September 30,
		2021								2020									2021					2020
		Total Net Revenue (Loss)(1)				Net Income (Loss)(2)				Total Net Revenue (Loss)(1)				Net Loss(2)						Total Net Revenue (Loss)(1)		Net Income (Loss)(2)				Total Net Revenue(1)				Net Income (Loss)(2)
(Dollars in millions)	(Dollars in millions)	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total					(Dollars in millions)	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total
Credit Card	Credit Card	$	4,470	61	%	$	2,170	61	%	$	4,214	64	%	$	(533)	58	%				Credit Card	$	4,883	63	%	$	2,030	65	%	$	4,305	58	%	$	1,414	59	%
Consumer Banking	Consumer Banking	2,245		30		1,091		31		1,762		27		(114)		12					Consumer Banking	2,286		29		909		29		2,011		27		796		33
Commercial Banking(3)	Commercial Banking(3)	717		10		396		11		698		11		(118)		13					Commercial Banking(3)	884		11		365		12		754		10		309		13
Other(3)	Other(3)	(58)		(1)		(120)		(3)		(118)		(2)		(152)		17					Other(3)	(223)		(3)		(200)		(6)		311		5		(113)		(5)
Total	Total	$	7,374	100	%	$	3,537	100	%	$	6,556	100	%	$	(917)	100	%				Total	$	7,830	100	%	$	3,104	100	%	$	7,381	100	%	$	2,406	100	%


		Six Months Ended June 30,																Nine Months Ended September 30,
		2021								2020									2021					2020
		Total Net Revenue (Loss)(1)				Net Income (Loss)(2)				Total Net Revenue(1)				Net Loss(2)						Total Net Revenue (Loss)(1)		Net Income (Loss)(2)				Total Net Revenue(1)				Net Income (Loss)(2)
(Dollars in millions)	(Dollars in millions)	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total					(Dollars in millions)	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total
Credit Card	Credit Card	$	8,871	61	%	$	4,275	62	%	$	8,827	64	%	$	(1,524)	68	%				Credit Card	$	13,754	61	%	$	6,305	63	%	$	13,132	62	%	$	(110)	(74)	%
Consumer Banking	Consumer Banking	4,416		31		1,993		29		3,545		26		(166)		7					Consumer Banking	6,702		30		2,902		29		5,556		26		630		423
Commercial Banking(3)	Commercial Banking(3)	1,477		10		812		12		1,427		10		(529)		23					Commercial Banking(3)	2,361		11		1,177		12		2,181		10		(220)		(148)
Other(3)	Other(3)	(277)		(2)		(216)		(3)		6		—		(38)		2					Other(3)	(500)		(2)		(416)		(4)		317		2		(151)		(101)
Total	Total	$	14,487	100	%	$	6,864	100	%	$	13,805	100	%	$	(2,257)	100	%				Total	$	22,317	100	%	$	9,968	100	%	$	21,186	100	%	$	149	100	%

__________

(1)Total net revenue (loss) consists of net interest income and non-interest income.

(2)Net income (loss) for our business segments and the Other category is based on income (loss) from continuing operations, net of tax.

(3)Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting reductions to the Other category.



			20			Capital One Financial Corporation (COF)

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Credit Card Business

The primary sources of revenue for our Credit Card business are net interest income, net interchange income and fees collected from customers. Expenses primarily consist of the provision for credit losses, operating costs and marketing expenses.

Our Credit Card business generated net income from continuing operations of ~~$2.2~~$2.0 billion and ~~$4.3~~$6.3 billion in the ~~second~~third quarter and first ~~six~~nine months of 2021, respectively, compared to net ~~loss~~income of ~~$533 million and $1.5~~$1.4 billion in the ~~second~~third quarter of 2020 and net loss of $110 million in the first ~~six~~nine months of ~~2020, respectively.~~2020.

Table 10 summarizes the financial results of our Credit Card business and displays selected key metrics for the periods indicated.

Table 10: Credit Card Business Results


		Three Months Ended June 30,								Six Months Ended June 30,							Three Months Ended September 30,					Nine Months Ended September 30,
(Dollars in millions, except as noted)	(Dollars in millions, except as noted)	2021			2020			Change		2021			2020			Change		(Dollars in millions, except as noted)	2021			2020			Change		2021			2020			Change
Selected income statement data:	Selected income statement data:																	Selected income statement data:
Net interest income	Net interest income	$	3,217		$	3,369		(5)	%	$	6,589		$	7,071		(7)	%	Net interest income	$	3,620		$	3,292		10	%	$	10,209		$	10,363		(1)	%
Non-interest income	Non-interest income	1,253			845			48		2,282			1,756			30		Non-interest income	1,263			1,013			25		3,545			2,769			28
Total net revenue(1)	Total net revenue(1)	4,470			4,214			6		8,871			8,827			—		Total net revenue(1)	4,883			4,305			13		13,754			13,132			5
Provision (benefit) for credit losses	Provision (benefit) for credit losses	(635)			2,944			**		(1,127)			6,646			**		Provision (benefit) for credit losses	(198)			450			**		(1,325)			7,096			**
Non-interest expense	Non-interest expense	2,263			1,969			15		4,398			4,177			5		Non-interest expense	2,424			2,003			21		6,822			6,180			10
Income (loss) from continuing operations before income taxes	Income (loss) from continuing operations before income taxes	2,842			(699)			**		5,600			(1,996)			**		Income (loss) from continuing operations before income taxes	2,657			1,852			43		8,257			(144)			**
Income tax provision (benefit)	Income tax provision (benefit)	672			(166)			**		1,325			(472)			**		Income tax provision (benefit)	627			438			43		1,952			(34)			**
Income (loss) from continuing operations, net of tax	Income (loss) from continuing operations, net of tax	$	2,170		$	(533)		**		$	4,275		$	(1,524)		**		Income (loss) from continuing operations, net of tax	$	2,030		$	1,414		44		$	6,305		$	(110)		**
Selected performance metrics:	Selected performance metrics:																	Selected performance metrics:
Average loans held for investment	Average loans held for investment	$	99,674		$	108,748		(8)		$	100,102		$	115,762		(14)		Average loans held for investment	$	102,046		$	105,367		(3)		$	100,757		$	112,272		(10)
Average yield on loans(2)	Average yield on loans(2)	14.04		%	13.72		%	32	bps	14.26		%	14.11		%	15	bps	Average yield on loans(2)	14.88		%	13.83		%	105	bps	14.47		%	14.03		%	44	bps
Total net revenue margin(3)	Total net revenue margin(3)	17.59			15.50			209		17.38			15.25			213		Total net revenue margin(3)	18.33			16.34			199		17.70			15.59			211
Net charge-offs	Net charge-offs	$	571		$	1,211		(53)	%	$	1,204		$	2,647		(55)	%	Net charge-offs	$	366		$	943		(61)	%	$	1,570		$	3,590		(56)	%
Net charge-off rate	Net charge-off rate	2.29		%	4.46		%	(217)	bps	2.41		%	4.57		%	(216)	bps	Net charge-off rate	1.43		%	3.58		%	(215)	bps	2.08		%	4.26		%	(218)	bps
Purchase volume	Purchase volume	$	132,676		$	90,149		47	%	$	241,009		$	190,069		27	%	Purchase volume	$	136,614		$	107,102		28	%	$	377,623		$	297,171		27	%

(Dollars in millions, except as noted)	(Dollars in millions, except as noted)	June 30, 2021			December 31, 2020			Change										(Dollars in millions, except as noted)	September 30, 2021			December 31, 2020			Change
Selected period-end data:	Selected period-end data:																	Selected period-end data:
Loans held for investment	Loans held for investment	$	101,017		$	106,956		(6)	%									Loans held for investment	$	105,030		$	106,956		(2)	%
30+ day performing delinquency rate	30+ day performing delinquency rate	1.75		%	2.44		%	(69)	bps									30+ day performing delinquency rate	2.00		%	2.44		%	(44)	bps
30+ day delinquency rate	30+ day delinquency rate	1.75			2.45			(70)										30+ day delinquency rate	2.00			2.45			(45)
Nonperforming loan rate(4)	Nonperforming loan rate(4)	0.01			0.02			(1)										Nonperforming loan rate(4)	0.01			0.02			(1)
Allowance for credit losses	Allowance for credit losses	$	8,873		$	11,191		(21)	%									Allowance for credit losses	$	8,306		$	11,191		(26)	%
Allowance coverage ratio	Allowance coverage ratio	8.78		%	10.46		%	(168)	bps									Allowance coverage ratio	7.91		%	10.46		%	(255)	bps

__________

(1)We recognize finance charges and fee income on open-ended loans in accordance with the contractual provisions of the credit arrangements and charge off uncollectible amounts. Total net revenue was reduced by ~~$175~~$123 million and ~~$355~~$478 million in the ~~second~~third quarter and first ~~six~~nine months of 2021, respectively, compared to ~~$318~~$235 million and ~~$707~~$942 million in the ~~second~~third quarter and first ~~six~~nine months of 2020, respectively, for credit card finance charges and fees charged off as uncollectible.

(2)Average yield is calculated based on annualized interest income for the period divided by average loans during the period and does not include any allocations, such as funds transfer pricing.

(3)Total net revenue margin is calculated based on annualized total net revenue for the period divided by average loans during the period.

(4)Within our credit card loan portfolio, only certain loans in our international card businesses are classified as nonperforming. See “MD&A—Nonperforming Loans and Other Nonperforming Assets” for additional information.

** Not meaningful.



			21			Capital One Financial Corporation (COF)

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Key factors affecting the results of our Credit Card business for the ~~second~~third quarter and first ~~six~~nine months of 2021 compared to the ~~second~~third quarter and first ~~six~~nine months of 2020, and changes in financial condition and credit performance between ~~June~~September 30, 2021 and December 31, 2020 include the following:

•Net Interest Income: Net interest income ~~decreased~~increased by ~~$152~~$328 million to ~~$3.2~~$3.6 billion in the ~~second~~third quarter of 2021 primarily driven by higher margins and higher average loan balances. Net interest income decreased by ~~$482~~$154 million to ~~$6.6~~$10.2 billion in the first ~~six~~nine months of 2021 primarily driven by lower average loan balances.

•Non-Interest Income: Non-interest income increased by ~~$408~~$250 million to $1.3 billion in the ~~second~~third quarter of 2021 and increased by ~~$526~~$776 million to ~~$2.3~~$3.5 billion in the first ~~six~~nine months of 2021 primarily driven by higher net interchange fees due to an increase in purchase volume.

•Provision for Credit Losses: Provision for credit losses decreased by ~~$3.6~~$648 million to a benefit of $198 million in the third quarter of 2021 driven by an allowance release primarily due to strong credit performance. Provision for credit losses decreased by $8.4 billion to a benefit of ~~$635 million in the second quarter of 2021 and decreased by $7.8 billion to a benefit of $1.1~~$1.3 billion in the first ~~six~~nine months of 2021 resulting from allowance releases in ~~the first and second quarters of~~ 2021 due to continued strong credit performance and an improved economic outlook, compared to allowance builds in ~~the first and second quarters of~~ 2020 driven by expectations of economic worsening at the start of the COVID-19 pandemic.

•Non-Interest Expense: Non-interest expense increased by ~~$294~~$421 million to ~~$2.3~~$2.4 billion in the ~~second~~third quarter of 2021 and increased by ~~$221~~$642 million to ~~$4.4~~$6.8 billion in the first ~~six~~nine months of 2021 primarily driven by increased marketing spend.

•Loans Held for Investment:

◦Period-end loans held for investment decreased by ~~$5.9~~$1.9 billion to ~~$101.0~~$105.0 billion as of ~~June~~September 30, 2021 from December 31, 2020 primarily due to higher customer payments and the transfer of a $2.6 billion international card partnership portfolio to held for sale asin the second quarter of ~~June 30,~~ 2021, partially offset by higher purchase ~~volume in Domestic Card.~~volume.

◦Average loans held for investment decreased by ~~$9.1~~$3.3 billion to ~~$99.7~~$102.0 billion in the ~~second~~third quarter of 2021 compared to the ~~second~~third quarter of 2020 and decreased by ~~$15.7~~$11.5 billion to ~~$100.1~~$100.8 billion in the first ~~six~~nine months of 2021 compared to the first ~~six~~nine months of 2020 primarily due to higher customer payments and the transfer of a $2.6 billion international card partnership portfolio to held for sale in the second quarter of 2021, partially offset by higher purchase ~~volume in Domestic Card.~~volume.

•Net Charge-Off and Delinquency Metrics: The net charge-off rate decreased by ~~217~~215 basis points to ~~2.29%~~1.43% in the ~~second~~third quarter of 2021 compared to the ~~second~~third quarter of 2020 and decreased by ~~216~~218 basis points to ~~2.41%~~2.08% in the first ~~six~~nine months of 2021 compared to the first ~~six~~nine months of 2020 primarily driven by strong credit ~~performance in Domestic Card due to higher customer payments, partially offset by lower average loans held for investment.~~performance.

The 30+ day delinquency rate decreased by 7045 basis points to ~~1.75%~~2.00% as of ~~June~~September 30, 2021 from December 31, 2020 ~~due to seasonally lower delinquency inventories and~~driven by strong credit ~~performance in our domestic credit card loan portfolio.~~performance.



			22			Capital One Financial Corporation (COF)

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Domestic Card Business

The Domestic Card business generated net income from continuing operations of ~~$2.0~~$1.9 billion and ~~$4.0~~$6.0 billion in the ~~second~~third quarter and first ~~six~~nine months of 2021, respectively, compared to net ~~loss~~income of ~~$605 million and $1.5~~$1.3 billion in the ~~second~~third quarter of 2020 and net loss of $192 million in the first nine months of 2020. In the third quarter and first ~~six months of 2020, respectively. In the second quarter and first six~~nine months of 2021 and 2020, the Domestic Card business accounted for greater than 90% of total net revenue of our Credit Card business.

Table 10.1 summarizes the financial results for Domestic Card business and displays selected key metrics for the periods indicated.

Table 10.1: Domestic Card Business Results


		Three Months Ended June 30,								Six Months Ended June 30,							Three Months Ended September 30,					Nine Months Ended September 30,
(Dollars in millions, except as noted)	(Dollars in millions, except as noted)	2021			2020			Change		2021			2020			Change		(Dollars in millions, except as noted)	2021			2020			Change		2021			2020			Change
Selected income statement data:	Selected income statement data:																	Selected income statement data:
Net interest income	Net interest income	$	2,944		$	3,094		(5)	%	$	6,039		$	6,475		(7)	%	Net interest income	$	3,319		$	2,995		11	%	$	9,358		$	9,470		(1)	%
Non-interest income	Non-interest income	1,183			795			49		2,142			1,637			31		Non-interest income	1,200			952			26		3,342			2,589			29
Total net revenue(1)	Total net revenue(1)	4,127			3,889			6		8,181			8,112			1		Total net revenue(1)	4,519			3,947			14		12,700			12,059			5
Provision (benefit) for credit losses	Provision (benefit) for credit losses	(561)			2,906			**		(1,052)			6,370			**		Provision (benefit) for credit losses	(200)			378			**		(1,252)			6,748			**
Non-interest expense	Non-interest expense	2,034			1,776			15		3,957			3,760			5		Non-interest expense	2,191			1,802			22		6,148			5,562			11
Income (loss) from continuing operations before income taxes	Income (loss) from continuing operations before income taxes	2,654			(793)			**		5,276			(2,018)			**		Income (loss) from continuing operations before income taxes	2,528			1,767			43		7,804			(251)			**
Income tax provision (benefit)	Income tax provision (benefit)	626			(188)			**		1,245			(478)			**		Income tax provision (benefit)	597			419			42		1,842			(59)			**
Income (loss) from continuing operations, net of tax	Income (loss) from continuing operations, net of tax	$	2,028		$	(605)		**		$	4,031		$	(1,540)		**		Income (loss) from continuing operations, net of tax	$	1,931		$	1,348		43		$	5,962		$	(192)		**
Selected performance metrics:	Selected performance metrics:																	Selected performance metrics:
Average loans held for investment	Average loans held for investment	$	91,535		$	100,996		(9)		$	92,062		$	107,354		(14)		Average loans held for investment	$	96,309		$	97,306		(1)		$	93,493		$	103,980		(10)
Average yield on loans(2)	Average yield on loans(2)	13.91		%	13.52		%	39	bps	14.13		%	13.93		%	20	bps	Average yield on loans(2)	14.80		%	13.57		%	123	bps	14.36		%	13.82		%	54	bps
Total net revenue margin(3)	Total net revenue margin(3)	17.66			15.40			226		17.40			15.11			229		Total net revenue margin(3)	18.40			16.22			218		17.74			15.46			228
Net charge-offs	Net charge-offs	$	522		$	1,143		(54)	%	$	1,109		$	2,474		(55)	%	Net charge-offs	$	327		$	885		(63)	%	$	1,436		$	3,359		(57)	%
Net charge-off rate	Net charge-off rate	2.28		%	4.53		%	(225)	bps	2.41		%	4.61		%	(220)	bps	Net charge-off rate	1.36		%	3.64		%	(228)	bps	2.05		%	4.31		%	(226)	bps
Purchase volume	Purchase volume	$	122,456		$	82,860		48	%	$	222,416		$	175,108		27	%	Purchase volume	$	126,057		$	98,107		28	%	$	348,472		$	273,215		28	%

(Dollars in millions, except as noted)	(Dollars in millions, except as noted)	June 30, 2021			December 31, 2020			Change										(Dollars in millions, except as noted)	September 30, 2021			December 31, 2020			Change
Selected period-end data:	Selected period-end data:																	Selected period-end data:
Loans held for investment	Loans held for investment	$	95,309		$	98,504		(3)	%									Loans held for investment	$	99,258		$	98,504		1	%
30+ day performing delinquency rate	30+ day performing delinquency rate	1.68		%	2.42		%	(74)	bps									30+ day performing delinquency rate	1.93		%	2.42		%	(49)	bps
Allowance for credit losses	Allowance for credit losses	$	8,489		$	10,650		(20)	%									Allowance for credit losses	$	7,968		$	10,650		(25)	%
Allowance coverage ratio	Allowance coverage ratio	8.91		%	10.81		%	(190)	bps									Allowance coverage ratio	8.03		%	10.81		%	(278)	bps

__________

(2)Average yield is calculated based on annualized interest income for the period divided by average loans during the period and does not include any allocations, such as funds transfer pricing.

(3)Total net revenue margin is calculated based on annualized total net revenue for the period divided by average loans during the period.

** Not meaningful.



			23			Capital One Financial Corporation (COF)

Table of Contents

Because our Domestic Card business accounts for the substantial majority of our Credit Card business, the key factors driving the results are similar to the key factors affecting our total Credit Card business. Net income for our Domestic Card business increased in the ~~second~~third quarter of 2021 and in the first ~~six~~nine months of 2021 compared to the ~~second~~third quarter of 2020 and the first ~~six~~nine months of 2020 primarily driven by:

•~~lower~~Lower provision for credit losses in the third quarter and first nine months of 2021 resulting from allowance releases in ~~the first and second quarters of~~ 2021 due to continued strong credit performance and an improved economic outlook, compared to allowance builds in ~~the first and second quarters of~~ 2020 driven by expectations of economic worsening at the start of the COVID-19 ~~pandemic; and~~pandemic.

•Higher net interest income in the third quarter of 2021 primarily driven by higher margins and higher average loan balances.

•Higher non-interest income in the third quarter and first nine months of 2021 primarily due to higher net interchange fees from an increase in purchase volume.

These drivers were partially offset by:

•~~higher~~Higher non-interest expense in the third quarter and first nine months of 2021 primarily driven by increased marketing ~~spend; and~~spend.

•~~lower~~Lower net interest income ~~primarily due to~~in the first nine months of 2021 driven by lower average ~~outstanding~~loan balances.



			24			Capital One Financial Corporation (COF)

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Consumer Banking Business

The primary sources of revenue for our Consumer Banking business are net interest income from loans and deposits as well as service charges and customer-related fees. Expenses primarily consist of the provision for credit losses, operating costs and marketing expenses.

Our Consumer Banking business generated net income from continuing operations of ~~$1.1 billion~~$909 million and ~~$2.0~~$2.9 billion in the ~~second~~third quarter and first ~~six~~nine months of 2021, respectively, ~~compared to net loss of $114~~and $796 million and ~~$166~~$630 million in the ~~second~~third quarter and first ~~six~~nine months of 2020, respectively.

Table 11 summarizes the financial results of our Consumer Banking business and displays selected key metrics for the periods indicated.

Table 11: Consumer Banking Business Results


		Three Months Ended June 30,								Six Months Ended June 30,							Three Months Ended September 30,					Nine Months Ended September 30,
(Dollars in millions, except as noted)	(Dollars in millions, except as noted)	2021			2020			Change		2021			2020			Change		(Dollars in millions, except as noted)	2021			2020			Change		2021			2020			Change
Selected income statement data:	Selected income statement data:																	Selected income statement data:
Net interest income	Net interest income	$	2,101		$	1,665		26	%	$	4,131		$	3,322		24	%	Net interest income	$	2,159		$	1,904		13	%	$	6,290		$	5,226		20	%
Non-interest income	Non-interest income	144			97			48		285			223			28		Non-interest income	127			107			19		412			330			25
Total net revenue	Total net revenue	2,245			1,762			27		4,416			3,545			25		Total net revenue	2,286			2,011			14		6,702			5,556			21
Provision (benefit) for credit losses	Provision (benefit) for credit losses	(306)			876			**		(432)			1,736			**		Provision (benefit) for credit losses	(91)			(43)			112		(523)			1,693			**
Non-interest expense	Non-interest expense	1,123			1,036			8		2,240			2,027			11		Non-interest expense	1,186			1,011			17		3,426			3,038			13
Income (loss) from continuing operations before income taxes		1,428			(150)			**		2,608			(218)			**
Income tax provision (benefit)		337			(36)			**		615			(52)			**
Income (loss) from continuing operations, net of tax		$	1,091		$	(114)		**		$	1,993		$	(166)		**
Income from continuing operations before income taxes																		Income from continuing operations before income taxes	1,191			1,043			14		3,799			825			**
Income tax provision																		Income tax provision	282			247			14		897			195			**
Income from continuing operations, net of tax																		Income from continuing operations, net of tax	$	909		$	796		14		$	2,902		$	630		**
Selected performance metrics:	Selected performance metrics:																	Selected performance metrics:
Average loans held for investment:	Average loans held for investment:																	Average loans held for investment:
Auto	Auto	$	69,543		$	61,798		13		$	67,873		$	61,401		11		Auto	$	73,296		$	64,476		14		$	69,700		$	62,434		12
Retail banking	Retail banking	3,162			3,053			4		3,106			2,860			9		Retail banking	2,700			3,346			(19)		2,969			3,023			(2)
Total consumer banking	Total consumer banking	$	72,705		$	64,851		12		$	70,979		$	64,261		10		Total consumer banking	$	75,996		$	67,822		12		$	72,669		$	65,457		11
Average yield on loans held for investment(1)	Average yield on loans held for investment(1)	7.99		%	8.41		%	(42)	bps	8.07		%	8.44		%	(37)	bps	Average yield on loans held for investment(1)	7.78		%	8.36		%	(58)	bps	7.97		%	8.41		%	(44)	bps
Average deposits	Average deposits	$	252,488		$	232,293		9	%	$	251,002		$	223,682		12	%	Average deposits	$	251,307		$	248,418		1	%	$	251,105		$	231,988		8	%
Average deposits interest rate	Average deposits interest rate	0.31		%	0.89		%	(58)	bps	0.33		%	0.97		%	(64)	bps	Average deposits interest rate	0.30		%	0.66		%	(36)	bps	0.32		%	0.86		%	(54)	bps
Net charge-offs (recoveries)		$	(11)		$	192		**		$	80		$	438		(82)	%
Net charge-off (recovery) rate		(0.06)		%	1.19		%	(125)	bps	0.23		%	1.36		%	(113)	bps
Net charge-offs																		Net charge-offs	$	51		$	48		6	%	$	131		$	486		(73)	%
Net charge-off rate																		Net charge-off rate	0.27		%	0.28		%	(1)	bps	0.24		%	0.99		%	(75)	bps
Auto loan originations	Auto loan originations	$	12,959		$	8,292		56	%	$	21,792		$	15,931		37	%	Auto loan originations	$	11,570		$	8,979		29	%	$	33,362		$	24,910		34	%

(Dollars in millions, except as noted)	(Dollars in millions, except as noted)	June 30, 2021			December 31, 2020			Change										(Dollars in millions, except as noted)	September 30, 2021			December 31, 2020			Change
Selected period-end data:	Selected period-end data:																	Selected period-end data:
Loans held for investment:	Loans held for investment:																	Loans held for investment:
Auto	Auto	$	71,713		$	65,762		9	%									Auto	$	74,716		$	65,762		14	%
Retail banking	Retail banking	3,046			3,126			(3)										Retail banking	2,396			3,126			(23)
Total consumer banking	Total consumer banking	$	74,759		$	68,888		9										Total consumer banking	$	77,112		$	68,888		12
30+ day performing delinquency rate	30+ day performing delinquency rate	3.16		%	4.62		%	(146)	bps									30+ day performing delinquency rate	3.58		%	4.62		%	(104)	bps
30+ day delinquency rate	30+ day delinquency rate	3.40			5.00			(160)										30+ day delinquency rate	3.88			5.00			(112)
Nonperforming loan rate	Nonperforming loan rate	0.35			0.47			(12)										Nonperforming loan rate	0.42			0.47			(5)
Nonperforming asset rate(2)	Nonperforming asset rate(2)	0.40			0.54			(14)										Nonperforming asset rate(2)	0.47			0.54			(7)
Allowance for credit losses	Allowance for credit losses	$	2,203		$	2,715		(19)	%									Allowance for credit losses	$	2,061		$	2,715		(24)	%
Allowance coverage ratio	Allowance coverage ratio	2.95		%	3.94		%	(99)	bps									Allowance coverage ratio	2.67		%	3.94		%	(127)	bps
Deposits	Deposits	$	251,155		$	249,815		1	%									Deposits	$	252,387		$	249,815		1	%



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__________

(1)Average yield is calculated based on annualized interest income for the period divided by average loans during the period and does not include any allocations, such as funds transfer pricing.

(2)Nonperforming assets primarily consist of nonperforming loans and repossessed assets. The total nonperforming asset rate is calculated based on total nonperforming assets divided by the combined period-end total loans held for investment and repossessed assets.

** Not meaningful.

Key factors affecting the results of our Consumer Banking business for the ~~second~~third quarter and first ~~six~~nine months of 2021 compared to the ~~second~~third quarter and first ~~six~~nine months of 2020, and changes in financial condition and credit performance between ~~June~~September 30, 2021 and December 31, 2020 include the following:

•Net Interest Income: Net interest income increased by ~~$436~~$255 million to ~~$2.1~~$2.2 billion in the ~~second~~third quarter of 2021 and increased by ~~$809 million~~$1.1 billion to ~~$4.1~~$6.3 billion in the first ~~six~~nine months of 2021 primarily driven by higher margins and deposits in our Retail Banking business as well as growth in our auto loan portfolio.

•Non-Interest Income: Non-interest income ~~increased by $47 million to $144~~remained substantially flat at $127 million in the ~~second~~third quarter of ~~2021 and~~2021. Non-interest income increased by ~~$62~~$82 million to ~~$285~~$412 million in the first ~~six~~nine months of 2021 primarily driven by growth in our auto loan portfolio and higher interchange fees from an increase in debit card purchase ~~volume and growth in our auto loan portfolio.~~volume.

•Provision for Credit Losses: Provision for credit losses decreased by ~~$1.2 billion~~$48 million to a benefit of ~~$306~~$91 million in the ~~second~~third quarter of 2021 ~~and~~driven by an allowance release primarily due to strong credit performance in our auto loan portfolio. Provision for credit losses decreased by $2.2 billion to a benefit of ~~$432~~$523 million in the first ~~six~~nine months of 2021 resulting from allowance releases in 2021 due to continued strong credit performance, an improved economic outlook and auction price favorability, compared to allowance builds in ~~the first and second quarters of~~ 2020 driven by expectations of economic worsening at the start of the COVID-19 pandemic.

•Non-Interest Expense: Non-interest expense increased by ~~$87~~$175 million to ~~$1.1~~$1.2 billion in the ~~second~~third quarter of 2021 and increased by ~~$213~~$388 million to ~~$2.2~~$3.4 billion in the first ~~six~~nine months of 2021 primarily driven by increased marketing spend, growth in our auto loan portfolio, as well as continued investment in infrastructure and technology.

•Loans Held for Investment:

◦Period-end loans held for investment increased by ~~$5.9~~$8.2 billion to ~~$74.8~~$77.1 billion as of ~~June~~September 30, 2021 from December 31, 2020 ~~and average~~primarily driven by growth in our auto loan portfolio due to higher originations.

◦Average loans held for investment increased by ~~$7.9~~$8.2 billion to $76.0 billion in the third quarter of 2021 compared to the third quarter of 2020 and increased by $7.2 billion to $72.7 billion in the ~~second quarter of 2021 compared to the second quarter of 2020 and increased by $6.7 billion to $71.0 billion in the~~ first ~~six~~nine months of 2021 compared to the first ~~six~~nine months of 2020 primarily driven by growth in our auto loan portfolio due to higher originations.

•Deposits: Period-end deposits increased by ~~$1.3~~$2.6 billion to ~~$251.2~~$252.4 billion as of ~~June~~September 30, 2021 from December 31, 2020 primarily driven by increased consumer savings.

•Net Charge-Off and Delinquency Metrics: The net charge-off rate ~~decreased by 125 basis points to a net recovery of 0.06%~~remained substantially flat at 0.27% in the ~~second~~third quarter of 2021 compared to the ~~second~~third quarter of 2020 and decreased by ~~113~~75 basis points to ~~0.23%~~0.24% in the first ~~six~~nine months of 2021 compared to the first ~~six~~nine months of 2020 primarily driven by strong credit performance ~~and~~in our auto loan portfolio, including the impact of elevated auction ~~prices on recoveries.~~prices.

The 30+ day delinquency rate decreased by ~~160~~112 basis points to ~~3.40%~~3.88% as of ~~June~~September 30, 2021 from December 31, 2020 driven by ~~seasonally~~ lower delinquency inventories ~~and~~due to strong credit performance and growth in our auto loan portfolio.



			26			Capital One Financial Corporation (COF)

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Commercial Banking Business

The primary sources of revenue for our Commercial Banking business are net interest income from loans and deposits and non-interest income earned from products and services provided to our clients such as capital markets and treasury management. Because our Commercial Banking business has loans and investments that generate tax-exempt income, tax credits or other tax benefits, we present the revenues on a taxable-equivalent basis. Expenses primarily consist of the provision for credit losses and operating costs.

Our Commercial Banking business generated net income from continuing operations of ~~$396~~$365 million and ~~$812 million~~$1.2 billion in the ~~second~~third quarter and first nine months of 2021, respectively, compared to net ~~loss~~income of ~~$118 million and $529~~$309 million in the ~~second~~third quarter of 2020 and net loss of $220 million in the first ~~six~~nine months of ~~2020, respectively.~~



			26			~~Capital One Financial Corporation (COF)~~

~~Table of Contents~~

2020.

Table 12 summarizes the financial results of our Commercial Banking business and displays selected key metrics for the periods indicated.

Table 12: Commercial Banking Business Results


		Three Months Ended June 30,								Six Months Ended June 30,							Three Months Ended September 30,					Nine Months Ended September 30,
(Dollars in millions, except as noted)	(Dollars in millions, except as noted)	2021			2020			Change		2021			2020			Change		(Dollars in millions, except as noted)	2021			2020			Change		2021			2020			Change
Selected income statement data:	Selected income statement data:																	Selected income statement data:
Net interest income	Net interest income	$	460		$	518		(11)	%	$	980		$	1,009		(3)	%	Net interest income	$	578		$	517		12	%	$	1,558		$	1,526		2	%
Non-interest income	Non-interest income	257			180			43		497			418			19		Non-interest income	306			237			29		803			655			23
Total net revenue(1)	Total net revenue(1)	717			698			3		1,477			1,427			4		Total net revenue(1)	884			754			17		2,361			2,181			8
Provision (benefit) for credit losses(2)	Provision (benefit) for credit losses(2)	(219)			427			**		(422)			1,283			**		Provision (benefit) for credit losses(2)	(53)			(74)			(28)		(475)			1,209			**
Non-interest expense	Non-interest expense	417			425			(2)		836			837			—		Non-interest expense	459			424			8		1,295			1,261			3
Income (loss) from continuing operations before income taxes	Income (loss) from continuing operations before income taxes	519			(154)			**		1,063			(693)			**		Income (loss) from continuing operations before income taxes	478			404			18		1,541			(289)			**
Income tax provision (benefit)	Income tax provision (benefit)	123			(36)			**		251			(164)			**		Income tax provision (benefit)	113			95			19		364			(69)			**
Income (loss) from continuing operations, net of tax	Income (loss) from continuing operations, net of tax	$	396		$	(118)		**		$	812		$	(529)		**		Income (loss) from continuing operations, net of tax	$	365		$	309		18		$	1,177		$	(220)		**
Selected performance metrics:	Selected performance metrics:																	Selected performance metrics:
Average loans held for investment:	Average loans held for investment:																	Average loans held for investment:
Commercial and multifamily real estate	Commercial and multifamily real estate	$	30,124		$	31,723		(5)		$	29,991		$	31,402		(4)		Commercial and multifamily real estate	$	30,314		$	30,918		(2)		$	30,100		$	31,239		(4)
Commercial and industrial	Commercial and industrial	43,960			48,036			(8)		44,135			46,699			(5)		Commercial and industrial	44,745			45,404			(1)		44,341			46,264			(4)

Total commercial banking	Total commercial banking	$	74,084		$	79,759		(7)		$	74,126		$	78,101		(5)		Total commercial banking	$	75,059		$	76,322		(2)		$	74,441		$	77,503		(4)
Average yield on loans held for investment(1)(3)	Average yield on loans held for investment(1)(3)	2.72		%	3.00		%	(28)	bps	2.74		%	3.43		%	(69)	bps	Average yield on loans held for investment(1)(3)	2.77		%	2.82		%	(5)	bps	2.75		%	3.23		%	(48)	bps
Average deposits	Average deposits	$	42,311		$	34,635		22	%	$	41,215		$	33,437		23	%	Average deposits	$	42,729		$	36,278		18	%	$	41,725		$	34,391		21	%
Average deposits interest rate	Average deposits interest rate	0.14		%	0.30		%	(16)	bps	0.16		%	0.58		%	(42)	bps	Average deposits interest rate	0.15		%	0.25		%	(10)	bps	0.15		%	0.47		%	(32)	bps
Net charge-offs (recoveries)		$	(19)		$	102		**		$	(3)		$	211		**
Net charge-off (recovery) rate		(0.11)		%	0.51		%	(62)	bps	(0.01)		%	0.54		%	(55)	bps
Net charge-offs																		Net charge-offs	$	9		$	82		(89)	%	$	6		$	293		(98)	%
Net charge-off rate																		Net charge-off rate	0.05		%	0.43		%	(38)	bps	0.01		%	0.50		%	(49)	bps

(Dollars in millions, except as noted)	(Dollars in millions, except as noted)	June 30, 2021			December 31, 2020			Change										(Dollars in millions, except as noted)	September 30, 2021			December 31, 2020			Change
Selected period-end data:	Selected period-end data:																	Selected period-end data:
Loans held for investment:	Loans held for investment:																	Loans held for investment:
Commercial and multifamily real estate	Commercial and multifamily real estate	$	29,616		$	30,681		(3)	%									Commercial and multifamily real estate	$	33,096		$	30,681		8	%
Commercial and industrial	Commercial and industrial	44,205			45,099			(2)										Commercial and industrial	46,152			45,099			2
Total commercial banking	Total commercial banking	$	73,821		$	75,780		(3)										Total commercial banking	$	79,248		$	75,780		5
Nonperforming loan rate	Nonperforming loan rate	1.03		%	0.86		%	17	bps									Nonperforming loan rate	0.76		%	0.86		%	(10)	bps
Nonperforming asset rate(4)	Nonperforming asset rate(4)	1.03			0.86			17										Nonperforming asset rate(4)	0.76			0.86			(10)
Allowance for credit losses(2)	Allowance for credit losses(2)	$	1,270		$	1,658		(23)	%									Allowance for credit losses(2)	$	1,206		$	1,658		(27)	%
Allowance coverage ratio	Allowance coverage ratio	1.72		%	2.19		%	(47)	bps									Allowance coverage ratio	1.52		%	2.19		%	(67)	bps
Deposits	Deposits	$	42,973		$	39,590		9	%									Deposits	$	43,347		$	39,590		9	%
Loans serviced for others	Loans serviced for others	45,898			44,162			4										Loans serviced for others	47,393			44,162			7



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__________

(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)The provision for losses on unfunded lending commitments is included in the provision for credit losses in our consolidated statements of income and the related reserve is included in other liabilities on our consolidated balance sheets. Our reserve for unfunded lending commitments totaled ~~$164~~$166 million and $195 million as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

(3)Average yield is calculated based on annualized interest income for the period divided by average loans during the period and does not include any allocations, such as funds transfer pricing.

(4)Nonperforming assets consist of nonperforming loans and other foreclosed assets. The total nonperforming asset rate is calculated based on total nonperforming assets divided by the combined period-end total loans held for investment and other foreclosed assets.

** Not meaningful.



			27			~~Capital One Financial Corporation (COF)~~

~~Table of Contents~~

Key factors affecting the results of our Commercial Banking business for the ~~second~~third quarter and first ~~six~~nine months of 2021 compared to the ~~second~~third quarter and first ~~six~~nine months of 2020, and changes in financial condition and credit performance between ~~June~~September 30, 2021 and December 31, 2020 include the following:

•Net Interest Income: Net interest income ~~decreased~~increased by ~~$58~~$61 million to ~~$460~~$578 million in the ~~second~~third quarter of 2021 ~~and decreased~~primarily driven by ~~$29~~higher margins. Net interest income increased by $32 million to ~~$980 million~~$1.6 billion in the first ~~six~~nine months of 2021 primarily driven by higher average deposit balances, partially offset by a one-time charge for unwinding the internal funding related to moving $1.5 billion in loans to held for sale ~~as well as lower average loan balances and higher average deposits.~~in the second quarter of 2021.

•Non-Interest Income: Non-interest income increased by ~~$77~~$69 million to ~~$257~~$306 million in the ~~second~~third quarter of 2021 and increased by ~~$79~~$148 million to ~~$497~~$803 million in the first ~~six~~nine months of 2021 driven by higher activity in our capital markets business.

•Provision for Credit Losses: Provision for credit losses ~~decreased by $646~~was a benefit of $53 million in the third quarter of 2021 resulting from an improvement in our energy loan portfolio, compared to a benefit of ~~$219~~$74 million in the ~~second~~third quarter of ~~2021 and~~2020 driven by an allowance release primarily due to lower loan balances. Provision for credit losses decreased by $1.7 billion to a benefit of ~~$422~~$475 million in the first ~~six~~nine months of 2021 resulting from allowance releases due to an improved economic outlook and improvement in our energy loan portfolio, compared to allowance builds in ~~the first and second quarter of~~ 2020 driven by expectations of economic worsening at the start of the COVID-19 pandemic as well as credit deterioration in our energy loan portfolio.

•Non-Interest Expense: Non-interest expense ~~has remained substantially flat at $417~~increased by $35 million to $459 million in the ~~second~~third quarter of 2021 and ~~$836~~increased by $34 million to $1.3 billion in the first ~~six~~nine months of ~~2021.~~2021 primarily driven by continued investment in infrastructure and technology.

•Loans Held for Investment:

◦Period-end loans held for investment ~~decreased~~increased by ~~$2.0~~$3.5 billion to ~~$73.8~~$79.2 billion as of ~~June~~September 30, 2021 from December 31, 2020 ~~primarily~~ driven by ~~higher utilization of credit lines in 2020 due to the COVID-19 pandemic and the transfer of $1.5 billion in loans to held for sale as of June 30, 2021.~~growth across our commercial loan portfolio.

◦Average loans held for investment decreased by ~~$5.7~~$1.3 billion to ~~$74.1~~$75.1 billion in the ~~second~~third quarter of 2021 compared to the ~~second~~third quarter of 2020 and decreased by ~~$4.0~~$3.1 billion to ~~$74.1~~$74.4 billion in the first ~~six~~nine months of 2021 compared to the first ~~six~~nine months of 2020 driven by higher utilization of credit lines in 2020 due to the COVID-19 pandemic.

•Deposits: Period-end deposits increased by ~~$3.4~~$3.8 billion to ~~$43.0~~$43.3 billion as of ~~June~~September 30, 2021 from December 31, 2020 primarily driven by elevated client liquidity.

•Net Charge-Off and Nonperforming Metrics: The net charge-off rate decreased by 6238 basis points to ~~a net recovery of 0.11%~~0.05% in the ~~second~~third quarter of 2021 driven by lower net charge-offs in our energy and real estate loan portfolios. The net charge-off rate decreased by 5549 basis points to ~~a net recovery of~~ 0.01% in the first ~~six~~nine months of 2021 primarily driven by lower net charge-offs in our energy loan portfolio.

The nonperforming loan rate ~~increased~~decreased by 1710 basis points to ~~1.03%~~0.76% as of ~~June~~September 30, 2021 from December 31, 2020 driven by improvements in our energy loan portfolio, partially offset by isolated credit downgrades in our real estate portfolio.



			28			Capital One Financial Corporation (COF)

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Other Category

Other includes unallocated amounts related to our centralized Corporate Treasury group activities, such as management of our corporate investment securities portfolio, asset/liability management and certain capital management activities. Other also includes:

•unallocated corporate revenue and 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;

•offsets related to certain line-item reclassifications;

•residual tax expense or benefit to arrive at the consolidated effective tax rate that is not assessed to our primary business segments; and

•foreign exchange-rate fluctuations on foreign currency-denominated balances.



			28			~~Capital One Financial Corporation (COF)~~

~~Table of Contents~~

Table 13 summarizes the financial results of our Other category for the periods indicated.

Table 13: Other Category Results


		Three Months Ended June 30,						Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	(Dollars in millions)	2021		2020		Change		2021		2020		Change		(Dollars in millions)	2021		2020		Change		2021		2020		Change
Selected income statement data:	Selected income statement data:													Selected income statement data:
Net interest income (loss)		$	(35)	$	(92)	(62)	%	$	(135)	$	83	**
Non-interest loss		(23)		(26)		(12)		(142)		(77)		84	%
Net interest loss														Net interest loss	$	(201)	$	(158)	27	%	$	(336)	$	(75)	**
Non-interest income (loss)														Non-interest income (loss)	(22)		469		**		(164)		392		**
Total net revenue (loss)(1)	Total net revenue (loss)(1)	(58)		(118)		(51)		(277)		6		**		Total net revenue (loss)(1)	(223)		311		**		(500)		317		**
Provision (benefit) for credit losses	Provision (benefit) for credit losses	—		(1)		**		(2)		4		**		Provision (benefit) for credit losses	—		(2)		**		(2)		2		**
Non-interest expense~~(2)~~	Non-interest expense~~(2)~~	163		340		(52)		232		458		(49)		Non-interest expense~~(2)~~	117		110		6		349		568		(39)	%
Loss from continuing operations before income taxes		(221)		(457)		(52)		(507)		(456)		11
Income tax benefit		(101)		(305)		(67)		(291)		(418)		(30)
Income (loss) from continuing operations before income taxes														Income (loss) from continuing operations before income taxes	(340)		203		**		(847)		(253)		**
Income tax provision (benefit)														Income tax provision (benefit)	(140)		316		**		(431)		(102)		**
Loss from continuing operations, net of tax	Loss from continuing operations, net of tax	$	(120)	$	(152)	(21)		$	(216)	$	(38)	**		Loss from continuing operations, net of tax	$	(200)	$	(113)	77		$	(416)	$	(151)	175

__________

~~(2)Includes legal reserve builds of $55 million in the second quarter and first six months of 2021 and $265 million and $310 million in the second quarter and first six months of 2020, respectively.~~

** Not meaningful.

Loss from continuing operations ~~decreased~~increased by ~~$32~~$87 million to a loss of ~~$120~~$200 million in the ~~second~~third quarter of 2021, primarily driven by ~~lower legal reserve builds~~the absence of a gain on our equity investment in ~~non-interest expense, as well as a one-time earned fee~~Snowflake Inc. in ~~net interest income (loss) for unwinding~~ the ~~internal funding related to moving $1.5 billion in commercial loans to held for sale,~~third quarter of 2020, partially offset by ~~a decrease~~an increase in income tax benefit due to ~~an improvement~~a change from pre-tax income in 2020 to pre-tax loss in 2021, and the relative impact of the tax credits.

Loss from continuing operations increased by ~~$178~~$265 million to a loss of ~~$216~~$416 million in the first ~~six~~nine months of 2021, primarily driven by the ~~decrease~~absence of a gain on our equity investment in ~~net interest income (loss) from a decline~~Snowflake Inc. in ~~market interest rates~~the third quarter of 2020, and reduced funding needs of our business segments ~~as well as a decrease~~in the first nine months of 2021. These drivers were partially offset by an increase in income tax benefit due to a higher pre-tax loss and the relative impact of the tax credits, ~~partially offset by~~as well as lower legal reserve builds in non-interest expense.


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in accordance with U.S. GAAP requires management to make a number of judgments, estimates and assumptions that affect the amount of assets, liabilities, income and expenses on the consolidated financial statements. Understanding our accounting policies and the extent to which we use management judgment and estimates in applying these policies is integral to understanding our financial statements. We provide a summary of our significant accounting policies under “Note 1—Summary of Significant Accounting Policies” in our 2020 Form 10-K.



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We have identified the following accounting estimates as critical because they require significant judgments and assumptions about highly complex and inherently uncertain matters and the use of reasonably different estimates and assumptions could have a material impact on our results of operations or financial condition. Our critical accounting policies and estimates are as follows:

•Loan loss reserves

•Asset impairment

•Fair value of financial instruments

•Customer rewards reserve

We evaluate our critical accounting estimates and judgments on an ongoing basis and update them as necessary, based on changing conditions. There have been no changes to our critical accounting policies and estimates described in our December 31, 2020 Form 10-K under “MD&A—Critical Accounting Policies and Estimates.”



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ACCOUNTING CHANGES AND DEVELOPMENTS

Accounting Standards Issued but Not Adopted as of ~~June~~September 30, 2021

There were no relevant new accounting standards issued but not adopted as of ~~June~~September 30, 2021. See “Note 1—Summary of Significant Accounting Policies” for information on the accounting standards we adopted in 2021.


CAPITAL MANAGEMENT

The level and composition of our capital are determined by multiple factors, including our consolidated regulatory capital requirements as described in more detail below and internal risk-based capital assessments such as internal stress testing and economic capital. The level and composition of our capital may also be influenced by rating agency guidelines, subsidiary capital requirements, business environment, conditions in the financial markets and assessments of potential future losses due to adverse changes in our business and market environments.

Capital Standards and Prompt Corrective Action

The Company and the Banks are subject to the Basel III Capital Rules 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.

Following the tailoring of the Basel III Capital Rules, the Company, 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, is a Category III institution.

The Banks, as subsidiaries of a Category III institution, are Category III banks. Moreover, the Banks, as insured depository institutions, are subject to prompt corrective action (“PCA”) capital regulations.

Basel III and United States Capital Rules

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 and countercyclical capital buffer requirements, as described below.

In October 2019, the Federal Reserve, OCC and Federal Deposit Insurance Corporation (the “FDIC,” and collectively, the “Federal Banking Agencies”) amended the Basel III Capital Rules to provide for tailored application of certain capital requirements across different categories of banking institutions (the “Tailoring Rules”). These categories are determined primarily by an institution’s asset size, with adjustments to a more stringent category possible if the institution exceeds certain risk-based thresholds. As ~~a bank holding company (“BHC”) with total consolidated assets of at least $250 billion that does not exceed any of the applicable risk-based thresholds, we are~~ a Category III institution, ~~under the Tailoring Rules. Therefore,~~ effective January 1, 2020, we are no longer subject to the Basel III ~~“Advanced Approaches”~~Advanced Approaches framework and certain associated capital requirements, and we have elected to exclude certain elements of accumulated other comprehensive income (“AOCI”) from our regulatory capital as permitted ~~by the Tailoring Rules.~~for a Category III institution. We remain subject to



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the countercyclical capital buffer requirement (which is currently set at 0%) and supplementary leverage ratio requirement ~~which were previously required only for Basel III Advanced Approaches institutions.~~of 3.0%.

Global systemically important banks (“G-SIBs”) that are based in the U.S. are subject to an additional CET1 capital requirement known as the G-SIB Surcharge. We are not a G-SIB based on the most recent available data and thus we are not subject to a G-SIB Surcharge.

Stress Capital Buffer Rule

The Basel III Capital Rules require banking institutions to maintain a capital conservation buffer, composed of CET1 capital, above the regulatory minimum ratios. The capital conservation buffer for BHCs was previously fixed at 2.5%. In March 2020, the Federal Reserve issued a final rule to implement the stress capital buffer requirement (the “Stress Capital Buffer Rule”). The stress capital buffer requirement is institution-specific and replaces the fixed 2.5% capital conservation buffer for BHCs.

Pursuant to the Stress Capital Buffer Rule, the Federal Reserve ~~will use~~uses the results of its supervisory stress test to determine the size of a BHC’s stress capital buffer requirement. In particular, a BHC’s stress capital buffer requirement ~~will equal,~~equals, subject to a floor of 2.5%, the sum of (i) the difference between the BHC’s starting CET1 capital ratio and its lowest projected CET1 capital



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ratio under the severely adverse scenario of the Federal Reserve’s supervisory stress test plus (ii) the ratio of the BHC’s projected four quarters of common stock dividends (for the fourth to seventh quarters of the planning horizon) to the projected risk-weighted assets for the quarter in which the BHC’s projected CET1 capital ratio reaches its minimum under the supervisory stress test.

Under the Stress Capital Buffer Rule framework, the Company’s ~~new~~ “standardized approach capital conservation buffer” includes its stress capital buffer requirement (which will be recalibrated every year based on the Company’s supervisory stress test results), any G-SIB surcharge (which is not applicable to us) and the countercyclical capital buffer requirement (which is currently set at 0%). Any determination to increase the countercyclical capital buffer generally would be effective twelve months after the announcement of such an increase, unless the Federal Reserve, OCC and Federal Deposit Insurance Corporation (the “FDIC”), hereafter collectively referred to as the “Federal Banking ~~Agencies~~Agencies”, set an earlier effective date.

Based on the Company’s 2020 supervisory stress testing results, the Company’s stress capital buffer requirement is was 5.6% for the period from October 1, 2020 through September 30, 2021. Therefore, the Company’s minimum capital requirements plus the standardized approach capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios under the stress capital buffer framework ~~are~~ were 10.1%, 11.6% and 13.6%, respectively, for the period from October 1, 2020 through September 30, 2021.

Based on the Company’s 2021 supervisory stress testing results, the Company’s stress capital buffer requirement for the period beginning on October 1, 2021 through September 30, 2022 is 2.5%. Therefore, the Company’s minimum capital requirements plus the standardized approach capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios under the stress capital buffer framework are 7.0%, 8.5% and 10.5%, respectively, for the period from October 1, 2021 through September 30, 2022.

The Stress Capital Buffer Rule does not apply to the Banks. The capital conservation buffer for the Banks continues to be fixed at 2.5%. Accordingly, each Bank’s minimum capital requirements plus its capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios ~~remain at~~ are 7.0%, 8.5% and 10.5% respectively.

If we fail to maintain our capital ratios above the minimum capital requirements plus the applicable buffer requirements, we will face increasingly strict automatic limitations on capital distributions and discretionary bonus payments to certain executive officers.

As of ~~June~~September 30, 2021 and December 31, 2020, respectively, each of the Company and the Banks exceeded the minimum capital requirements and the buffer requirements applicable to them, and each of the Banks was “well capitalized” under PCA requirements.

Market Risk Rule

The “Market Risk Rule” supplements the Basel III Capital Rules by requiring institutions subject to the rule to adjust their risk-based capital ratios to reflect the market risk in their trading ~~portfolios.~~book. The Market Risk Rule generally applies to institutions with aggregate trading assets and liabilities equal to 10% or more of total assets or $1 billion or more. As of ~~June~~September 30, 2021, the



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Company and CONA are subject to the Market Risk Rule. See “MD&A—Market Risk Profile” below for additional information.

CECL Transition Rule

The Federal Banking Agencies adopted a final rule (the “2020 CECL Transition Rule”) that provides banking institutions an optional five-year transition period to phase in the impact of the current expected credit loss (“CECL”) standard on their regulatory capital (the “2020 CECL Transition Election”).

Pursuant to the 2020 CECL Transition Rule, a banking institution may 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 use 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 are 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. Beginning January 1, 2022 through December 31, 2024, the after-tax “day 1” CECL adoption impact and the cumulative “day 2” ongoing impact will be 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.



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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

We adopted the CECL standard (for accounting purposes) as of January 1, 2020, and made the 2020 CECL Transition Election (for regulatory capital purposes) in the first quarter of 2020. Therefore, the applicable amounts presented in this Report reflect such election.

For the description of the regulatory capital rules we are subject to, see “MD&A—Supervision and Regulation” in this Report as well as “Part I—Item 1. Business—Supervision and Regulation” in our 2020 Form 10-K.



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Table 14 provides a comparison of our regulatory capital ratios under the Basel III Standardized Approach, the regulatory minimum capital adequacy ratios and the PCA well-capitalized level for each ratio, where applicable, as of ~~June~~September 30, 2021 and December 31, 2020.

Table 14: Capital Ratios Under Basel III(1)(2)


		June 30, 2021						December 31, 2020							September 30, 2021						December 31, 2020
		Ratio		Minimum Capital Adequacy		Well- Capitalized		Ratio		Minimum Capital Adequacy		Well- Capitalized			Ratio		Minimum Capital Adequacy		Well- Capitalized		Ratio		Minimum Capital Adequacy		Well- Capitalized
Capital One Financial Corp:	Capital One Financial Corp:													Capital One Financial Corp:
Common equity Tier 1 capital(3)	Common equity Tier 1 capital(3)	14.5	%	4.5	%	N/A		13.7	%	4.5	%	N/A		Common equity Tier 1 capital(3)	13.8	%	4.5	%	N/A		13.7	%	4.5	%	N/A
Tier 1 capital(4)	Tier 1 capital(4)	16.6		6.0		6.0	%	15.3		6.0		6.0	%	Tier 1 capital(4)	15.7		6.0		6.0	%	15.3		6.0		6.0	%
Total capital(5)	Total capital(5)	18.8		8.0		10.0		17.7		8.0		10.0		Total capital(5)	18.2		8.0		10.0		17.7		8.0		10.0
Tier 1 leverage(6)	Tier 1 leverage(6)	12.4		4.0		N/A		11.2		4.0		N/A		Tier 1 leverage(6)	12.2		4.0		N/A		11.2		4.0		N/A
Supplementary leverage(7)(8)	Supplementary leverage(7)(8)	10.7		3.0		N/A		10.7		3.0		N/A		Supplementary leverage(7)(8)	10.4		3.0		N/A		10.7		3.0		N/A
COBNA:	COBNA:													COBNA:
Common equity Tier 1 capital(3)	Common equity Tier 1 capital(3)	20.2		4.5		6.5		21.5		4.5		6.5		Common equity Tier 1 capital(3)	18.3		4.5		6.5		21.5		4.5		6.5
Tier 1 capital(4)	Tier 1 capital(4)	20.2		6.0		8.0		21.5		6.0		8.0		Tier 1 capital(4)	18.3		6.0		8.0		21.5		6.0		8.0
Total capital(5)	Total capital(5)	21.8		8.0		10.0		23.4		8.0		10.0		Total capital(5)	19.9		8.0		10.0		23.4		8.0		10.0
Tier 1 leverage(6)	Tier 1 leverage(6)	18.0		4.0		5.0		18.3		4.0		5.0		Tier 1 leverage(6)	16.1		4.0		5.0		18.3		4.0		5.0
Supplementary leverage(7)	Supplementary leverage(7)	14.3		3.0		N/A		14.7		3.0		N/A		Supplementary leverage(7)	12.9		3.0		N/A		14.7		3.0		N/A
CONA:	CONA:													CONA:
Common equity Tier 1 capital(3)	Common equity Tier 1 capital(3)	12.6		4.5		6.5		12.4		4.5		6.5		Common equity Tier 1 capital(3)	11.7		4.5		6.5		12.4		4.5		6.5
Tier 1 capital(4)	Tier 1 capital(4)	12.6		6.0		8.0		12.4		6.0		8.0		Tier 1 capital(4)	11.7		6.0		8.0		12.4		6.0		8.0
Total capital(5)	Total capital(5)	13.8		8.0		10.0		13.7		8.0		10.0		Total capital(5)	12.9		8.0		10.0		13.7		8.0		10.0
Tier 1 leverage(6)	Tier 1 leverage(6)	7.9		4.0		5.0		7.6		4.0		5.0		Tier 1 leverage(6)	7.6		4.0		5.0		7.6		4.0		5.0
Supplementary leverage(7)	Supplementary leverage(7)	7.1		3.0		N/A		6.9		3.0		N/A		Supplementary leverage(7)	6.8		3.0		N/A		6.9		3.0		N/A

__________

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

(2)Ratios as of ~~June~~September 30, 2021 are preliminary. As we continue to validate our data, the calculations are subject to change until we file our ~~June~~September 30, 2021 Form FR Y-9C—Consolidated Financial Statements for Holding Companies and Call Reports.

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

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

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

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

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



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(8)The Company’s supplementary leverage ratio as of December 31, 2020 reflected the temporary exclusions of U.S Treasury securities and deposits at Federal Reserve Banks from the denominator of the supplementary leverage ratio. See “Part I—Item 1. Business—Supervision and Regulation—Capital and Liquidity Regulation” in our 2020 Form 10-K for additional details.



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Table 15 presents regulatory capital under the Basel III Standardized Approach and regulatory capital metrics as of ~~June~~September 30, 2021 and December 31, 2020.

Table 15: Regulatory Risk-Based Capital Components and Regulatory Capital Metrics


(Dollars in millions)	(Dollars in millions)	June 30, 2021		December 31, 2020		(Dollars in millions)	September 30, 2021		December 31, 2020
Regulatory Capital Under Basel III Standardized Approach	Regulatory Capital Under Basel III Standardized Approach					Regulatory Capital Under Basel III Standardized Approach
Common equity excluding AOCI	Common equity excluding AOCI	$	58,969	$	55,299	Common equity excluding AOCI	$	58,705	$	55,299
Adjustments:	Adjustments:					Adjustments:
AOCI, net of tax(1)	AOCI, net of tax(1)	(5)		(29)		AOCI, net of tax(1)	(33)		(29)
Goodwill, net of related deferred tax liabilities	Goodwill, net of related deferred tax liabilities	(14,440)		(14,448)		Goodwill, net of related deferred tax liabilities	(14,435)		(14,448)
Intangible assets, net of related deferred tax liabilities	Intangible assets, net of related deferred tax liabilities	(76)		(86)		Intangible assets, net of related deferred tax liabilities	(84)		(86)
Other(2)	Other(2)	(16)		—		Other(2)	(15)		—
Common equity Tier 1 capital	Common equity Tier 1 capital	44,432		40,736		Common equity Tier 1 capital	44,138		40,736
Tier 1 capital instruments	Tier 1 capital instruments	6,488		4,847		Tier 1 capital instruments	5,911		4,847

Tier 1 capital	Tier 1 capital	50,920		45,583		Tier 1 capital	50,049		45,583
Tier 2 capital instruments	Tier 2 capital instruments	3,106		3,385		Tier 2 capital instruments	3,762		3,385
Qualifying allowance for credit losses	Qualifying allowance for credit losses	3,906		3,820		Qualifying allowance for credit losses	4,040		3,820
Tier 2 capital	Tier 2 capital	7,012		7,205		Tier 2 capital	7,802		7,205
Total capital	Total capital	$	57,932	$	52,788	Total capital	$	57,851	$	52,788

Regulatory Capital Metrics	Regulatory Capital Metrics					Regulatory Capital Metrics
Risk-weighted assets	Risk-weighted assets	$	307,334	$	297,903	Risk-weighted assets	$	318,729	$	297,903
Adjusted average assets	Adjusted average assets	411,032		406,762		Adjusted average assets	411,216		406,762
Total leverage exposure	Total leverage exposure	477,932		427,522		Total leverage exposure	480,232		427,522

__________

(1)Excludes certain components of AOCI as permitted under the Tailoring Rules.

(2)Includes deferred tax assets deducted from regulatory capital.

Capital Planning and Regulatory Stress Testing

On June 24, 2021, the Federal Reserve released the results of its supervisory stress tests for the 2021 cycle. Based on the results, all participating BHCs, including the Company, remained above their risk-based minimum capital requirements in the hypothetical stress scenario. Accordingly, as laid out previously by the Federal Reserve, the temporary capital distribution restrictions put in place in the third quarter of 2020 following the outbreak of COVID-19 ended for all participating BHCs, including the Company, after the second quarter of 2021. All participating BHCs, including the Company, remain subject to the normal capital distribution restrictions of the stress capital buffer framework.

On January 25, 2021, our Board of Directors authorized the repurchase of up to $7.5 billion of shares of our common stock. We repurchased approximately ~~$1.7~~$2.7 billion of shares of our common stock during the ~~second~~third quarter of 2021 and ~~$2.2~~$4.9 billion during the first ~~six~~nine months of ~~2021, consistent with the Federal Reserve’s temporary capital distribution restrictions in place during the first six months of~~ 2021.On July 28, 2021, our Board of Directors authorized a special dividend of $0.60 per share of common stock payable in the third quarter of 2021. In addition to the special dividend, the Board of Directors authorized an increase to our quarterly common stock dividend from $0.40 per share to $0.60 per share beginning with our dividend payable in the third quarter of 2021.

For the description of the regulatory capital planning rules we are subject to, see “MD&A—Supervision and Regulation” in this Report as well as “Part I—Item 1. Business—Supervision and Regulation” in our 2020 Form 10-K.



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Equity Offerings and Transactions

On May 4, 2021, we issued 27,000,000 depositary shares, each representing a 1/40th interest in a share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series L, $0.01 par value, with a liquidation preference of $25 per depositary share (“Series L Preferred Stock”). The net proceeds of the offering of Series L Preferred Stock were approximately ~~$652.9~~$653 million after deducting underwriting commissions and offering expenses. Dividends on the Series L Preferred Stock are payable quarterly in arrears at a rate of 4.375% per annum.

On June 10, 2021, we issued 1,000,000 shares of Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series M, $0.01 par value, with a liquidation preference of $1,000 per share (the “Series M Preferred Stock”). The net proceeds of the offering of Series M Preferred Stock were approximately ~~$988.2~~$988 million, after deducting underwriting commissions and offering expenses. Dividends on the Series M Preferred Stock are payable quarterly in arrears at a rate of 3.950% per annum through August 31, 2026. Effective September 1, 2026, and at every subsequent five-year anniversary, the dividend rate resets to the 5-Year Treasury Rate plus 3.157% per annum.

On July 29, 2021, we issued 17,000,000 depositary shares, each representing a 1/40th interest in a share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series N, $0.01 par value, with a liquidation preference of $25 per depositary share (“Series N Preferred Stock”). The net proceeds of the offering of Series N Preferred Stock were approximately ~~$411.8~~$412 million after deducting underwriting commissions and offering expenses. Dividends on the Series N Preferred Stock are payable quarterly in arrears at a rate of 4.25% per annum.

On ~~July 29,~~September 1, 2021, we ~~announced that we will redeem~~redeemed all outstanding shares of our Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series E ~~$0.01 par value per share~~for $1.0 billion. The redemption reduced our net income available to common shareholders by $12 million in the third quarter of 2021 as we recognized the previously deferred issuance costs associated with this series.

On October 18, 2021, we announced that we will redeem all outstanding shares of our Fixed Rate 5.20% Non-Cumulative Perpetual Preferred Stock, Series G, and our Fixed Rate 6.00% Non-Cumulative Perpetual Preferred Stock, Series H, on ~~September~~December 1, ~~2021.~~2021 for an aggregate redemption price of $1.1 billion. We expect ~~this redemption~~these redemptions will reduce our net income available to common shareholders by approximately ~~$12~~$34 million in the ~~third~~fourth quarter of ~~2021.~~

2021 as we recognize the previously deferred issuance costs associated with these series.
For additional information on the expected preferred stock dividends to be paid in the fourth quarter of 2021 and per quarter in 2022, see “MD&A—Executive Summary and Business Outlook—Business Outlook—Total Company Expectations” in this Report.



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Dividend Policy and Stock Purchases

In the first ~~six~~nine months of 2021, we declared and paid common stock dividends of ~~$367~~$897 million, or ~~$0.80~~$2.00 per share, and preferred stock dividends of ~~$121~~$200 million. The following table summarizes the dividends paid per share on our various preferred stock series in the first ~~six~~nine months of 2021.

Table 16: Preferred Stock Dividends Paid Per Share

Series

Description

Issuance Date

Per Annum
Dividend Rate

Dividend Frequency

2021

Series

Description

Issuance Date

Per Annum
Dividend Rate

Dividend Frequency

2021

Series E(1)

Fixed-to-Floating Rate
Non-Cumulative

May 14, 2015

5.550% through 5/31/2020;
3-mo. LIBOR + 380 bps thereafter

Semi-Annually through 5/31/2020;
Quarterly thereafter

$10.20

$10.06

Series E(1)

Fixed-to-Floating Rate
Non-Cumulative

May 14, 2015

5.550% through 5/31/2020;
3-mo. LIBOR + 380 bps thereafter

Semi-Annually through 5/31/2020;
Quarterly thereafter

$10.06

$10.20

$10.06

Series G

5.200%
Non-Cumulative

July 29, 2016

5.200%

Quarterly

13.00

Series G

5.200%
Non-Cumulative

July 29, 2016

5.200%

Quarterly

13.00

Series H

6.000%
Non-Cumulative

November 29, 2016

6.000

Quarterly

15.00

Series H

6.000%
Non-Cumulative

November 29, 2016

6.000

Quarterly

15.00

Series I

5.000%
Non-Cumulative

September 11, 2019

5.000

Quarterly

12.50

Series I

5.000%
Non-Cumulative

September 11, 2019

5.000

Quarterly

12.50

Series J

4.800%
Non-Cumulative

January 31, 2020

4.800

Quarterly

12.00

Series J

4.800%
Non-Cumulative

January 31, 2020

4.800

Quarterly

12.00

Series K

4.625%
Non-Cumulative

September 17, 2020

4.625

Quarterly

11.56

Series K

4.625%
Non-Cumulative

September 17, 2020

4.625

Quarterly

11.56

Series L

4.375%
Non-Cumulative

May 4, 2021

4.375

Quarterly

—

Series L

4.375%
Non-Cumulative

May 4, 2021

4.375

Quarterly

14.22

—

Series M

3.950% Fixed Rate Reset
Non-Cumulative

June 10, 2021

3.950% through 8/31/2026; resets 9/1/2026 and every subsequent 5 year anniversary at 5-Year Treasury +3.157%

Quarterly

—

Series M

3.950% Fixed Rate Reset
Non-Cumulative

June 10, 2021

3.950% through 8/31/2026; resets 9/1/2026 and every subsequent 5 year anniversary at 5-Year Treasury +3.157%

Quarterly

8.89

—

Series N

4.250%
Non-Cumulative

July 29, 2021

4.250

Quarterly

—

__________

(1)On September 1, 2021, we redeemed all outstanding shares of our preferred stock Series E.

The declaration and payment of dividends to our stockholders, as well as the amount thereof, are subject to the discretion of our Board of Directors and depend upon our results of operations, financial condition, capital levels, cash requirements, future prospects, regulatory requirements and other factors deemed relevant by the Board of Directors. As a BHC, our ability to pay dividends is largely dependent upon the receipt of dividends or other payments from our subsidiaries. The Banks are subject to regulatory restrictions that limit their ability to transfer funds to our BHC. As of ~~June~~September 30, 2021, funds available for dividend payments from COBNA and CONA were ~~$2.1~~$1.1 billion and ~~$1.5 billion~~,$715 million, respectively. There can be no assurance that we will declare and pay any dividends to stockholders.

The timing and exact amount of any future common stock repurchases will depend on various factors, including regulatory approval, market conditions, opportunities for growth, our capital position and the amount of retained earnings. Our stock repurchase program does not include specific price targets, may be executed through open market purchases or privately negotiated transactions, including utilizing Rule 10b5-1 programs, and may be suspended at any time. For additional information on dividends and stock repurchases, see “MD&A—Capital Management—Capital Planning and Regulatory Stress Testing” and “Part I—Item 1. Business—Supervision and Regulation—Dividends, Stock Repurchases and Transfers of Funds”in our 2020 Form 10-K.



			3536			Capital One Financial Corporation (COF)

Table of Contents


RISK MANAGEMENT

Risk Management Framework

Our Risk Management Framework (the “Framework”) sets consistent expectations for risk management across the Company. It also sets expectations for our “Three Lines of Defense” model, which defines the roles, responsibilities and accountabilities for taking and managing risk across the Company. Accountability for overseeing an effective Framework resides with our Board of Directors either directly or through its committees.

The “First Line of Defense” consists of any line of business or function that is accountable for risk taking and is responsible for: (i) engaging in activities designed to generate revenue or reduce expenses; (ii) providing operational support or servicing to any business function for the delivery of products or services to customers; or (iii) providing technology services in direct support of first line business areas. Each line of business or first line function is responsible for managing the risks associated with their activities, including identifying, assessing, measuring, monitoring, controlling and reporting the risks within its business activities, consistent with the risk framework. The “Second Line of Defense” consists of two types of functions: Independent Risk Management (“IRM”) and Support Functions. IRM oversees risk-taking activities and assesses risks and issues independent from the first line of defense. Support Functions are centers of specialized expertise (e.g., Human Resources, Accounting, Legal) that provide support services to the Company. The “Third Line of Defense” is comprised of the Internal Audit and Credit Review functions. The third line provides independent and objective assurance to senior management and to the Board of Directors that the first and second lines of defense have systems and governance processes which are well-designed and working as intended, and that the Framework is appropriate for our size, complexity and risk profile.

Our Framework consists of the following nine elements:

Governance and Accountability

Strategy and Risk Alignment

Risk Identification

Assessment, Measurement

and Response

Monitoring and Testing

Aggregation, Reporting and Escalation

Capital and Liquidity Management (including Stress Testing)

Risk Data and Enabling Technology

Culture and Talent Management



			3637			Capital One Financial Corporation (COF)

Table of Contents

We provide additional discussion of our risk management principles, roles and responsibilities, framework and risk appetite under “MD&A—Risk Management” in our 2020 Form 10-K.

Risk Categories

We apply our Framework to protect the Company from the major categories of risk that we are exposed to through our business activities. We have seven major categories of risk as noted below. We provide a description of these categories and how we manage them under “MD&A—Risk Management” in our 2020 Form 10-K.

•Compliance risk

•Credit risk

•Liquidity risk

•Market risk

•Operational risk

•Reputation risk

•Strategic risk


CREDIT RISK PROFILE

Our loan portfolio accounts for the substantial majority of our credit risk exposure. Our lending activities are governed under our credit policy and are subject to independent review and approval. Below we provide information about the composition of our loan portfolio, key concentrations and credit performance metrics.

We also engage in certain non-lending activities that may give rise to ongoing credit and counterparty settlement risk, including purchasing securities for our investment securities portfolio, entering into derivative transactions to manage our market risk exposure and to accommodate customers, extending short-term advances on syndication activity including bridge financing transactions we have underwritten, depositing certain operational cash balances in other financial institutions, executing certain foreign exchange transactions and extending customer overdrafts. We provide additional information related to our investment securities portfolio under “MD&A—Consolidated Balance Sheets Analysis—Investment Securities” and credit risk related to derivative transactions in “Note 8—Derivative Instruments and Hedging Activities.”



			3738			Capital One Financial Corporation (COF)

Table of Contents

Portfolio Composition ~~and Maturity Profile~~ of Loans Held for Investment

We provide a variety of lending products. Our primary products include credit cards, auto loans and commercial lending products. For information on our lending policies and procedures, including our underwriting criteria for our primary loan products, see “MD&A—Credit Risk Profile” in our 2020 Form 10-K.

Our loan portfolio consists of loans held for investment, including loans held in our consolidated trusts, and loans held for sale. The information presented in this section excludes loans held for sale, which totaled ~~$6.5~~$6.3 billion and $2.7 billion as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

Table 17 presents the composition of our portfolio of loans held for investment by portfolio segment as of ~~June~~September 30, 2021 and December 31, 2020.

Table 17: Portfolio Composition of Loans Held for Investment


		June 30, 2021				December 31, 2020					September 30, 2021				December 31, 2020
(Dollars in millions)	(Dollars in millions)	Loans		% of Total		Loans		% of Total		(Dollars in millions)	Loans		% of Total		Loans		% of Total
Credit Card:	Credit Card:									Credit Card:
Domestic credit card	Domestic credit card	$	95,309	38.2	%	$	98,504	39.1	%	Domestic credit card	$	99,258	38.0	%	$	98,504	39.1	%
International card businesses	International card businesses	5,708		2.3		8,452		3.4		International card businesses	5,772		2.2		8,452		3.4
Total credit card	Total credit card	101,017		40.5		106,956		42.5		Total credit card	105,030		40.2		106,956		42.5
Consumer Banking:	Consumer Banking:									Consumer Banking:
Auto	Auto	71,713		28.7		65,762		26.2		Auto	74,716		28.6		65,762		26.2
Retail banking(1)	Retail banking(1)	3,046		1.2		3,126		1.2		Retail banking(1)	2,396		0.9		3,126		1.2
Total consumer banking	Total consumer banking	74,759		29.9		68,888		27.4		Total consumer banking	77,112		29.5		68,888		27.4
Commercial Banking:(1)	Commercial Banking:(1)									Commercial Banking:(1)
Commercial and multifamily real estate	Commercial and multifamily real estate	29,616		11.9		30,681		12.2		Commercial and multifamily real estate	33,096		12.7		30,681		12.2
Commercial and industrial	Commercial and industrial	44,205		17.7		45,099		17.9		Commercial and industrial	46,152		17.6		45,099		17.9
Total commercial banking	Total commercial banking	73,821		29.6		75,780		30.1		Total commercial banking	79,248		30.3		75,780		30.1
Total loans held for investment	Total loans held for investment	$	249,597	100.0	%	$	251,624	100.0	%	Total loans held for investment	$	261,390	100.0	%	$	251,624	100.0	%

__________

(1)Includes Paycheck Protection Program (“PPP”) loans of ~~$1.1 billion~~$538 million and ~~$296~~$182 million in our retail and commercial loan portfolios, respectively, as of ~~June~~September 30, 2021 and $919 million and $238 million as of December 31, 2020, respectively.



			3839			Capital One Financial Corporation (COF)

Table of Contents

Geographic Composition

We market our credit card products throughout the United States, Canada and the United Kingdom. Our credit card loan portfolio is geographically diversified due to our product and marketing approach. The table below presents the geographic profile of our credit card loan portfolio as of ~~June~~September 30, 2021 and December 31, 2020.

Table 18: Credit Card Portfolio by Geographic Region


		June 30, 2021				December 31, 2020					September 30, 2021				December 31, 2020
(Dollars in millions)	(Dollars in millions)	Amount		% of Total		Amount		% of Total		(Dollars in millions)	Amount		% of Total		Amount		% of Total
Domestic credit card:	Domestic credit card:									Domestic credit card:
California	California	$	9,698	9.6	%	$	9,943	9.3	%	California	$	10,066	9.6	%	$	9,943	9.3	%
Texas	Texas	7,899		7.8		8,090		7.6		Texas	8,278		7.9		8,090		7.6
Florida	Florida	6,650		6.6		6,910		6.5		Florida	6,989		6.7		6,910		6.5
New York	New York	6,106		6.0		6,327		5.9		New York	6,384		6.1		6,327		5.9
Pennsylvania	Pennsylvania	3,990		3.9		4,158		3.9		Pennsylvania	4,147		3.9		4,158		3.9
Illinois	Illinois	3,967		3.9		4,149		3.9		Illinois	4,103		3.9		4,149		3.9
Ohio	Ohio	3,456		3.4		3,645		3.4		Ohio	3,590		3.4		3,645		3.4
New Jersey	New Jersey	3,082		3.1		3,179		3.0		New Jersey	3,219		3.1		3,179		3.0
Georgia	Georgia	2,944		2.9		3,046		2.8		Georgia	3,099		3.0		3,046		2.8
Michigan	Michigan	2,894		2.9		3,010		2.8		Michigan	3,028		2.9		3,010		2.8
Other	Other	44,623		44.2		46,047		43.0		Other	46,355		44.0		46,047		43.0
Total domestic credit card	Total domestic credit card	95,309		94.3		98,504		92.1		Total domestic credit card	99,258		94.5		98,504		92.1
International card businesses:	International card businesses:									International card businesses:
Canada	Canada	2,975		3.0		5,728		5.4		Canada	2,947		2.8		5,728		5.4
United Kingdom	United Kingdom	2,733		2.7		2,724		2.5		United Kingdom	2,825		2.7		2,724		2.5
Total international card businesses	Total international card businesses	5,708		5.7		8,452		7.9		Total international card businesses	5,772		5.5		8,452		7.9
Total credit card	Total credit card	$	101,017	100.0	%	$	106,956	100.0	%	Total credit card	$	105,030	100.0	%	$	106,956	100.0	%



			3940			Capital One Financial Corporation (COF)

Table of Contents

Our auto loan portfolio is geographically diversified in the United States due to our product and marketing approach. Retail banking includes small business loans and other consumer lending products originated through our branch network. The table below presents the geographic profile of our auto loan and retail banking portfolios as of ~~June~~September 30, 2021 and December 31, 2020.

Table 19: Consumer Banking Portfolio by Geographic Region


		June 30, 2021				December 31, 2020					September 30, 2021				December 31, 2020
(Dollars in millions)	(Dollars in millions)	Amount		% of Total		Amount		% of Total		(Dollars in millions)	Amount		% of Total		Amount		% of Total
Auto:	Auto:									Auto:
Texas	Texas	$	8,835	11.8	%	$	8,207	11.9	%	Texas	$	9,173	11.9	%	$	8,207	11.9	%
California	California	8,432		11.3		7,573		11.0		California	8,896		11.5		7,573		11.0
Florida	Florida	6,105		8.2		5,544		8.1		Florida	6,354		8.2		5,544		8.1
Georgia	Georgia	3,196		4.3		2,989		4.3		Georgia	3,292		4.3		2,989		4.3
Pennsylvania										Pennsylvania	3,061		4.0		2,569		3.7
Ohio	Ohio	2,956		4.0		2,770		4.0		Ohio	3,051		4.0		2,770		4.0
Pennsylvania		2,871		3.8		2,569		3.7
Illinois	Illinois	2,694		3.6		2,431		3.5		Illinois	2,840		3.7		2,431		3.5
North Carolina		2,453		3.3		2,280		3.3
New York										New York	2,510		3.3		2,267		3.3
Other	Other	34,171		45.6		31,399		45.7		Other	35,539		46.0		31,412		45.7
Total auto	Total auto	71,713		95.9		65,762		95.5		Total auto	74,716		96.9		65,762		95.5
Retail banking:	Retail banking:									Retail banking:
New York	New York	1,103		1.5		1,081		1.6		New York	830		1.1		1,081		1.6
Louisiana	Louisiana	565		0.8		634		0.9		Louisiana	471		0.6		634		0.9
Texas	Texas	540		0.7		576		0.8		Texas	459		0.6		576		0.8
New Jersey										New Jersey	170		0.2		222		0.3
Maryland	Maryland	232		0.3		224		0.3		Maryland	167		0.2		224		0.3
New Jersey		212		0.3		222		0.3
Virginia	Virginia	172		0.2		179		0.3		Virginia	125		0.2		179		0.3
Other	Other	222		0.3		210		0.3		Other	174		0.2		210		0.3
Total retail banking	Total retail banking	3,046		4.1		3,126		4.5		Total retail banking	2,396		3.1		3,126		4.5
Total consumer banking	Total consumer banking	$	74,759	100.0	%	$	68,888	100.0	%	Total consumer banking	$	77,112	100.0	%	$	68,888	100.0	%



			40			~~Capital One Financial Corporation (COF)~~

~~Table of Contents~~

We originate commercial and multifamily real estate loans in most regions of the United States. The table below presents the geographic profile of our commercial real estate portfolio of ~~June~~September 30, 2021 and December 31, 2020.

Table 20: Commercial Real Estate Portfolio by Region


		June 30, 2021				December 31, 2020					September 30, 2021				December 31, 2020
(Dollars in millions)	(Dollars in millions)	Amount		% of Total		Amount		% of Total		(Dollars in millions)	Amount		% of Total		Amount		% of Total
Geographic concentration:(1)	Geographic concentration:(1)									Geographic concentration:(1)
Northeast	Northeast	$	15,334	51.78	%	$	17,290	56.35	%	Northeast	$	15,590	47.10	%	$	17,290	56.35	%
South	South	4,138		13.97		3,806		12.40		South	5,460		16.50		3,806		12.40
Pacific West	Pacific West	3,657		12.35		3,424		11.16		Pacific West	5,086		15.37		3,424		11.16
Mid-Atlantic	Mid-Atlantic	3,569		12.05		3,344		10.90		Mid-Atlantic	3,462		10.46		3,344		10.90
Midwest	Midwest	2,067		6.98		1,993		6.50		Midwest	2,351		7.10		1,993		6.50
Mountain	Mountain	851		2.87		824		2.69		Mountain	1,147		3.47		824		2.69
Total	Total	$	29,616	100.00	%	$	30,681	100.00	%	Total	$	33,096	100.00	%	$	30,681	100.00	%

__________

(1)Geographic concentration is generally determined by the location of the borrower’s business or the location of the collateral associated with the loan. Northeast consists of CT, MA, ME, NH, NJ, NY, PA, RI and VT. South consists of AL, AR, FL, GA, KY, LA, MS, NC, OK, SC, TN and TX. Pacific West consists of: AK, CA, HI, OR and WA. Mid-Atlantic consists of DC, DE, MD, VA and WV. Midwest consists of: IA, IL, IN, KS, MI, MN, MO, ~~NB,~~ ND, NE, OH, SD and ~~WS.~~WI. Mountain consists of: AZ, CO, ID, MT, NM, NV, UT and WY.



			41			Capital One Financial Corporation (COF)

Table of Contents

Commercial Loans by Industry

Table 21 summarizes our commercial loans held for investment portfolio by industry classification as of ~~June~~September 30, 2021 and December 31, 2020. Industry classifications below are based on our interpretation of the North American Industry Classification System codes as they pertain to each individual loan.

Table 21: Commercial Loans by Industry


(Percentage of portfolio)	(Percentage of portfolio)	June 30, 2021		December 31, 2020		(Percentage of portfolio)	September 30, 2021		December 31, 2020
Industry Classification:	Industry Classification:					Industry Classification:
Real estate	Real estate	38	%	39	%	Real estate	36	%	39	%
Finance	Finance	20		17		Finance	24		17
Healthcare	Healthcare	10		11		Healthcare	9		11
Business services	Business services	6		6		Business services	6		6
Educational services	Educational services	5		5		Educational services	4		5
Public administration	Public administration	4		4		Public administration	4		4
Construction and land	Construction and land	3		3		Construction and land	3		3
Retail trade	Retail trade	3		3		Retail trade	3		3
Oil and gas	Oil and gas	2		3		Oil and gas	2		3
Other	Other	9		9		Other	9		9
Total	Total	100	%	100	%	Total	100	%	100	%



			4142			Capital One Financial Corporation (COF)

Table of Contents

Credit Risk Measurement

We closely monitor economic conditions and loan performance trends to assess and manage our exposure to credit risk. Trends in delinquency rates are the key credit quality indicator for our credit card and retail banking loan portfolios as changes in delinquency rates can provide an early warning of changes in potential future credit losses. The key indicator we monitor when assessing the credit quality and risk of our auto loan portfolio is borrower credit scores as they provide insight into borrower risk profiles, which give indications of potential future credit losses. The key credit quality indicator for our commercial loan portfolios is our internal risk ratings as we generally classify loans that have been delinquent for an extended period of time and other loans with significant risk of loss as nonperforming. In addition to these credit quality indicators, we also manage and monitor other credit quality metrics such as level of nonperforming loans and net charge-off rates.

We underwrite most consumer loans using proprietary models, which typically include credit bureau data, such as borrower credit scores, application information and, where applicable, collateral and deal structure data. We continuously adjust our management of credit lines and collection strategies based on customer behavior and risk profile changes. We also use borrower credit scores for subprime classification, for competitive benchmarking and, in some cases, to drive product segmentation decisions.

Table 22 provides details on the credit scores of our domestic credit card and auto loan portfolios as of ~~June~~September 30, 2021 and December 31, 2020.

Table 22: Credit Score Distribution


(Percentage of portfolio)	(Percentage of portfolio)	June 30, 2021		December 31, 2020		(Percentage of portfolio)	September 30, 2021		December 31, 2020
Domestic credit card—Refreshed FICO scores:(1)	Domestic credit card—Refreshed FICO scores:(1)					Domestic credit card—Refreshed FICO scores:(1)
Greater than 660	Greater than 660	72	%	69	%	Greater than 660	71	%	69	%
660 or below	660 or below	28		31		660 or below	29		31
Total	Total	100	%	100	%	Total	100	%	100	%
Auto—At origination FICO scores:(2)	Auto—At origination FICO scores:(2)					Auto—At origination FICO scores:(2)
Greater than 660	Greater than 660	48	%	46	%	Greater than 660	49	%	46	%
621 - 660	621 - 660	20		20		621 - 660	20		20
620 or below	620 or below	32		34		620 or below	31		34
Total	Total	100	%	100	%	Total	100	%	100	%

__________

(1)Percentages represent period-end loans held for investment in each credit score category. Domestic card credit scores generally represent FICO scores. These scores are obtained from one of the major credit bureaus at origination and are refreshed monthly thereafter. We approximate non-FICO credit scores to comparable FICO scores for consistency purposes. Balances for which no credit score is available or the credit score is invalid are included in the 660 or below category.

(2)Percentages 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.

We present information in the section below on the credit performance of our loan portfolio, including the key metrics we use in tracking changes in the credit quality of our loan portfolio. See “Note 3—Loans” for additional credit quality information and see “Note 1—Summary of Significant Accounting Policies” for information on our accounting policies for delinquent and nonperforming loans, charge-offs and troubled debt restructurings (“TDRs”) for each of our loan categories.

Delinquency Rates

We consider the entire balance of an account to be delinquent if the minimum required payment is not received by the customer’s due date, measured at each balance sheet date. Our 30+ day delinquency metrics include all loans held for investment that are 30 or more days past due, whereas our 30+ day performing delinquency metrics include all loans held for investment that are 30 or more days past due but are currently classified as performing and accruing interest. The 30+ day delinquency and 30+ day performing delinquency metrics are the same for domestic credit card loans, as we continue to classify these loans as performing until the account is charged off, typically when the account is 180 days past due. See “Note 1—Summary of Significant Accounting Policies” in our 2020 Form 10-K for information on our policies for classifying loans as nonperforming for each of our loan categories. We provide additional information on our credit quality metrics in “MD&A—Business Segment Financial Performance.”



			4243			Capital One Financial Corporation (COF)

Table of Contents

Table 23 presents our 30+ day performing delinquency rates and 30+ day delinquency rates of our portfolio of loans held for investment, by portfolio segment, as of ~~June~~September 30, 2021 and December 31, 2020.

Table 23: 30+ Day Delinquencies


		June 30, 2021								December 31, 2020									September 30, 2021								December 31, 2020
		30+ Day Performing Delinquencies				30+ Day Delinquencies				30+ Day Performing Delinquencies				30+ Day Delinquencies					30+ Day Performing Delinquencies				30+ Day Delinquencies				30+ Day Performing Delinquencies				30+ Day Delinquencies
(Dollars in millions)	(Dollars in millions)	Amount		Rate(1)		Amount		Rate(1)		Amount		Rate(1)		Amount		Rate(1)		(Dollars in millions)	Amount		Rate(1)		Amount		Rate(1)		Amount		Rate(1)		Amount		Rate(1)
Credit Card:	Credit Card:																	Credit Card:
Domestic credit card	Domestic credit card	$	1,598	1.68	%	$	1,598	1.68	%	$	2,388	2.42	%	$	2,388	2.42	%	Domestic credit card	$	1,912	1.93	%	$	1,912	1.93	%	$	2,388	2.42	%	$	2,388	2.42	%
International card businesses	International card businesses	165		2.89		172		3.01		221		2.61		234		2.77		International card businesses	189		3.27		193		3.35		221		2.61		234		2.77
Total credit card	Total credit card	1,763		1.75		1,770		1.75		2,609		2.44		2,622		2.45		Total credit card	2,101		2.00		2,105		2.00		2,609		2.44		2,622		2.45
Consumer Banking:	Consumer Banking:																	Consumer Banking:
Auto	Auto	2,336		3.26		2,491		3.47		3,140		4.78		3,381		5.14		Auto	2,730		3.65		2,946		3.94		3,140		4.78		3,381		5.14
Retail banking	Retail banking	24		0.79		47		1.56		41		1.32		62		1.99		Retail banking	27		1.15		49		2.05		41		1.32		62		1.99
Total consumer banking	Total consumer banking	2,360		3.16		2,538		3.40		3,181		4.62		3,443		5.00		Total consumer banking	2,757		3.58		2,995		3.88		3,181		4.62		3,443		5.00
Commercial Banking:	Commercial Banking:																	Commercial Banking:
Commercial and multifamily real estate	Commercial and multifamily real estate	11		0.04		140		0.47		202		0.66		341		1.11		Commercial and multifamily real estate	6		0.02		123		0.37		202		0.66		341		1.11
Commercial and industrial	Commercial and industrial	223		0.51		281		0.64		84		0.19		158		0.35		Commercial and industrial	282		0.61		344		0.75		84		0.19		158		0.35
Total commercial banking	Total commercial banking	234		0.32		421		0.57		286		0.38		499		0.66		Total commercial banking	288		0.36		467		0.59		286		0.38		499		0.66
Total	Total	$	4,357	1.75		$	4,729	1.89		$	6,076	2.41		$	6,564	2.61		Total	$	5,146	1.97		$	5,567	2.13		$	6,076	2.41		$	6,564	2.61

__________

(1)Delinquency rates are calculated by dividing delinquency amounts by period-end loans held for investment for each specified loan category.

Table 24 presents our 30+ day delinquent loans, by aging and geography, as of ~~June~~September 30, 2021 and December 31, 2020.

Table 24: Aging and Geography of 30+ Day Delinquent Loans


		June 30, 2021				December 31, 2020					September 30, 2021				December 31, 2020
(Dollars in millions)	(Dollars in millions)	Amount		Rate(1)		Amount		Rate(1)		(Dollars in millions)	Amount		Rate(1)		Amount		Rate(1)
Delinquency status:	Delinquency status:									Delinquency status:
30 – 59 days	30 – 59 days	$	2,535	1.01	%	$	3,330	1.32	%	30 – 59 days	$	2,993	1.14	%	$	3,330	1.32	%
60 – 89 days	60 – 89 days	1,055		0.42		1,485		0.59		60 – 89 days	1,379		0.53		1,485		0.59
> 90 days	> 90 days	1,139		0.46		1,749		0.70		> 90 days	1,195		0.46		1,749		0.70
Total	Total	$	4,729	1.89	%	$	6,564	2.61	%	Total	$	5,567	2.13	%	$	6,564	2.61	%
Geographic region:	Geographic region:									Geographic region:
Domestic	Domestic	$	4,557	1.82	%	$	6,330	2.52	%	Domestic	$	5,374	2.06	%	$	6,330	2.52	%
International	International	172		0.07		234		0.09		International	193		0.07		234		0.09
Total	Total	$	4,729	1.89	%	$	6,564	2.61	%	Total	$	5,567	2.13	%	$	6,564	2.61	%

__________

(1)Delinquency rates are calculated by dividing delinquency amounts by total period-end loans held for investment.



			4344			Capital One Financial Corporation (COF)

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Table 25 summarizes loans that were 90+ days delinquent as to interest or principal, and still accruing interest as of ~~June~~September 30, 2021 and December 31, 2020. These loans consist primarily of credit card accounts between 90 days and 179 days past due. As permitted by regulatory guidance issued by the Federal Financial Institutions Examination Council, we continue to accrue interest and fees on domestic credit card loans through the date of charge off, which is typically in the period the account becomes 180 days past due.

Table 25: 90+ Day Delinquent Loans Accruing Interest


		June 30, 2021				December 31, 2020					September 30, 2021				December 31, 2020
(Dollars in millions)	(Dollars in millions)	Amount		Rate(1)		Amount		Rate(1)		(Dollars in millions)	Amount		Rate(1)		Amount		Rate(1)
Loan category:	Loan category:									Loan category:
Credit card	Credit card	$	821	0.81	%	$	1,251	1.17	%	Credit card	$	915	0.87	%	$	1,251	1.17	%
Commercial banking	Commercial banking	2		—		51		0.07		Commercial banking	7		0.01		51		0.07
Total	Total	$	823	0.33		$	1,302	0.52		Total	$	922	0.35		$	1,302	0.52
Geographic region:	Geographic region:									Geographic region:
Domestic	Domestic	$	758	0.31	%	$	1,220	0.50	%	Domestic	$	848	0.33	%	$	1,220	0.50	%
International	International	65		1.14		82		0.97		International	74		1.28		82		0.97
Total	Total	$	823	0.33		$	1,302	0.52		Total	$	922	0.35		$	1,302	0.52

__________

(1)Delinquency rates are calculated by dividing delinquency amounts by period-end loans held for investment for each specified loan category.



			45			Capital One Financial Corporation (COF)

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Nonperforming Loans and Nonperforming Assets

Nonperforming assets consist of nonperforming loans, repossessed assets and other foreclosed assets. Nonperforming loans include loans that have been placed on nonaccrual status. See “Note 1—Summary of Significant Accounting Policies” in our 2020 Form 10-K for information on our policies for classifying loans as nonperforming for each of our loan categories.

Table 26 presents our nonperforming loans, by portfolio segment, and other nonperforming assets as of ~~June~~September 30, 2021 and December 31, 2020. We do not classify loans held for sale as nonperforming. We provide additional information on our credit quality metrics in “MD&A—Business Segment Financial Performance.”

Table 26: Nonperforming Loans and Other Nonperforming Assets(1)


		June 30, 2021				December 31, 2020					September 30, 2021				December 31, 2020
(Dollars in millions)	(Dollars in millions)	Amount		Rate		Amount		Rate		(Dollars in millions)	Amount		Rate		Amount		Rate
Nonperforming loans held for investment:(2)	Nonperforming loans held for investment:(2)									Nonperforming loans held for investment:(2)
Credit Card:	Credit Card:									Credit Card:
International card businesses	International card businesses	$	12	0.20	%	$	21	0.24	%	International card businesses	$	9	0.16	%	$	21	0.24	%
Total credit card	Total credit card	12		0.01		21		0.02		Total credit card	9		0.01		21		0.02
Consumer Banking:	Consumer Banking:									Consumer Banking:
Auto	Auto	209		0.29		294		0.45		Auto	270		0.36		294		0.45
Retail banking	Retail banking	53		1.75		30		0.96		Retail banking	53		2.20		30		0.96
Total consumer banking	Total consumer banking	262		0.35		324		0.47		Total consumer banking	323		0.42		324		0.47
Commercial Banking:	Commercial Banking:									Commercial Banking:
Commercial and multifamily real estate	Commercial and multifamily real estate	301		1.02		200		0.65		Commercial and multifamily real estate	287		0.87		200		0.65
Commercial and industrial	Commercial and industrial	458		1.03		450		1.00		Commercial and industrial	314		0.68		450		1.00
Total commercial banking	Total commercial banking	759		1.03		650		0.86		Total commercial banking	601		0.76		650		0.86
Total nonperforming loans held for investment(3)	Total nonperforming loans held for investment(3)	$	1,033	0.41		$	995	0.40		Total nonperforming loans held for investment(3)	$	933	0.35		$	995	0.40
Other nonperforming assets(4)	Other nonperforming assets(4)	35		0.02		45		0.01		Other nonperforming assets(4)	42		0.02		45		0.01
Total nonperforming assets	Total nonperforming assets	$	1,068	0.43		$	1,040	0.41		Total nonperforming assets	$	975	0.37		$	1,040	0.41

__________



			44			~~Capital One Financial Corporation (COF)~~

~~Table of Contents~~

(1)We recognized interest income for loans classified as nonperforming of $8$21 million and ~~$11~~$22 million in the first ~~six~~nine months of 2021 and 2020, respectively. Interest income foregone related to nonperforming loans was ~~$30~~$40 million and ~~$35~~$40 million in the first ~~six~~nine months of 2021 and 2020, respectively. Foregone interest income represents the amount of interest income in excess of recognized interest income that would have been recorded during the period for nonperforming loans as of the end of the period had the loans performed according to their contractual terms.

(2)Nonperforming loan rates are calculated based on nonperforming loans for each category divided by period-end total loans held for investment for each respective category.

(3)Excluding the impact of domestic credit card loans, nonperforming loans as a percentage of total loans held for investment was ~~0.67%~~0.58% and 0.65% as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

(4)The denominators used in calculating nonperforming asset rates consist of total loans held for investment and other nonperforming assets.



			46			Capital One Financial Corporation (COF)

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Net Charge-Offs

Net charge-offs consist of the amortized cost basis, excluding accrued interest, of loans held for investment that we determine to be uncollectible, net of recovered amounts. We charge off loans as a reduction to the allowance for credit losses when we determine the loan is uncollectible and record subsequent recoveries of previously charged off amounts as increases to the allowance for credit losses. Uncollectible finance charges and fees are reversed through revenue and certain fraud losses are recorded in other non-interest expense. Generally, costs to recover charged off loans are recorded as collection expenses as incurred and included in our consolidated statements of income as a component of other non-interest expense. Our charge-off policy for loans varies based on the loan type. See “Note 1—Summary of Significant Accounting Policies” in our 2020 Form 10-K for information on our charge-off policy for each of our loan categories.

Table 27 presents our net charge-off amounts and rates, by portfolio segment, in the ~~second~~third quarter and first ~~six~~nine months of 2021 and 2020.

Table 27: Net Charge-Offs (Recoveries)


		Three Months Ended June 30,								Six Months Ended June 30,										Three Months Ended September 30,								Nine Months Ended September 30,
		2021				2020				2021				2020				2021				2020				2021				2020
(Dollars in millions)	(Dollars in millions)	Amount		Rate(1)		Amount		Rate(1)		Amount		Rate(1)		Amount		Rate(1)			(Dollars in millions)	Amount		Rate(1)		Amount		Rate(1)		Amount		Rate(1)		Amount		Rate(1)
Credit Card:	Credit Card:																		Credit Card:
Domestic credit card	Domestic credit card	$	522	2.28	%	$	1,143	4.53	%	$	1,109	2.41	%	$	2,474	4.61	%		Domestic credit card	$	327	1.36	%	$	885	3.64	%	$	1,436	2.05	%	$	3,359	4.31	%
International card businesses	International card businesses	49		2.41		68		3.47		95		2.36		173		4.11			International card businesses	39		2.72		58		2.89		134		2.45		231		3.71
Total credit card	Total credit card	571		2.29		1,211		4.46		1,204		2.41		2,647		4.57			Total credit card	366		1.43		943		3.58		1,570		2.08		3,590		4.26
Consumer Banking:	Consumer Banking:																		Consumer Banking:
Auto	Auto	(22)		(0.12)		179		1.16		56		0.17		409		1.33			Auto	34		0.18		36		0.23		90		0.17		445		0.95
Retail banking	Retail banking	11		1.41		13		1.78		24		1.54		29		2.05			Retail banking	17		2.45		12		1.38		41		1.82		41		1.80
Total consumer banking	Total consumer banking	(11)		(0.06)		192		1.19		80		0.23		438		1.36			Total consumer banking	51		0.27		48		0.28		131		0.24		486		0.99
Commercial Banking:	Commercial Banking:																		Commercial Banking:
Commercial and multifamily real estate	Commercial and multifamily real estate	4		0.04		7		0.09		8		0.05		7		0.04			Commercial and multifamily real estate	1		0.01		32		0.41		9		0.04		39		0.17
Commercial and industrial	Commercial and industrial	(23)		(0.21)		95		0.78		(11)		(0.05)		204		0.87			Commercial and industrial	8		0.07		50		0.45		(3)		(0.01)		254		0.73
Total commercial banking	Total commercial banking	(19)		(0.11)		102		0.51		(3)		(0.01)		211		0.54			Total commercial banking	9		0.05		82		0.43		6		0.01		293		0.50
Total net charge-offs	Total net charge-offs	$	541	0.88		$	1,505	2.38		$	1,281	1.04		$	3,296	2.55			Total net charge-offs	$	426	0.67		$	1,073	1.72		$	1,707	0.92		$	4,369	2.28
Average loans held for investment	Average loans held for investment	$	246,463			$	253,358			$	245,207			$	258,124				Average loans held for investment	$	253,101			$	249,511			$	247,867			$	255,232

__________

(1)Net charge-off (recovery) rates are calculated by dividing annualized net charge-offs (recoveries) by average loans held for investment for the period for each loan category.



			4547			Capital One Financial Corporation (COF)

Table of Contents

Troubled Debt Restructurings

As part of our loss mitigation efforts, we may provide short-term (three to twelve months) or long-term (greater than twelve months) modifications to a borrower experiencing financial difficulty to improve long-term collectability of the loan and to avoid the need for repossession or foreclosure of collateral.

Guidance issued by the Federal Banking Agencies and contained in the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) provides banking organizations with TDR relief for loan modifications to current borrowers impacted by the COVID-19 pandemic. The majority of enrollments in our COVID-19 programs through ~~June~~September 30, 2021 would generally not have resulted in TDR classification under our existing policies as the concession granted was insignificant. We consider the impact of all loan modifications, including those classified as TDRs and those offered in response to the COVID-19 pandemic, when estimating the credit quality of our loan portfolio and establishing allowance levels.

Table 28 presents our amortized cost of loans modified in TDRs as of ~~June~~September 30, 2021 and December 31, 2020, which excludes loan modifications that do not meet the definition of a TDR and loans that received relief under the guidance issued by the Federal Banking Agencies and contained in the CARES Act in response to the COVID-19 pandemic.

Table 28: Troubled Debt Restructurings


		June 30, 2021				December 31, 2020					September 30, 2021				December 31, 2020
(Dollars in millions)	(Dollars in millions)	Amount		% of Total Modifications		Amount		% of Total Modifications		(Dollars in millions)	Amount		% of Total Modifications		Amount		% of Total Modifications
Credit Card:	Credit Card:									Credit Card:
Domestic credit card	Domestic credit card	$	441	24.1	%	$	511	24.5	%	Domestic credit card	$	412	24.2	%	$	511	24.5	%
International card businesses	International card businesses	188		10.3		217		10.4		International card businesses	179		10.5		217		10.4
Total credit card	Total credit card	629		34.4		728		34.9		Total credit card	591		34.7		728		34.9
Consumer banking:	Consumer banking:									Consumer banking:
Auto	Auto	605		33.1		615		29.5		Auto	600		35.2		615		29.5
Retail banking	Retail banking	13		0.7		18		0.9		Retail banking	12		0.7		18		0.9
Total consumer banking	Total consumer banking	618		33.8		633		30.4		Total consumer banking	612		35.9		633		30.4
Commercial banking	Commercial banking	581		31.8		723		34.7		Commercial banking	500		29.4		723		34.7
Total	Total	$	1,828	100.0	%	$	2,084	100.0	%	Total	$	1,703	100.0	%	$	2,084	100.0	%
Status of TDRs:	Status of TDRs:									Status of TDRs:
Performing	Performing	$	1,421	77.7	%	$	1,718	82.4	%	Performing	$	1,357	79.7	%	$	1,718	82.4	%
Nonperforming	Nonperforming	407		22.3		366		17.6		Nonperforming	346		20.3		366		17.6
Total	Total	$	1,828	100.0	%	$	2,084	100.0	%	Total	$	1,703	100.0	%	$	2,084	100.0	%

In our Credit Card business, the majority of our credit card loans modified in TDRs involve reducing the interest rate on the account and placing the customer on a fixed payment plan not exceeding 60 months. The effective interest rate in effect immediately prior to the loan modification is used as the effective interest rate for purposes of measuring impairment using the present value of expected cash flows. If the customer does not comply with the modified payment terms, then the credit card loan agreement may revert to its original payment terms, generally resulting in any loan outstanding reflected in the appropriate delinquency category and charged off in accordance with our standard charge-off policy.

In our Consumer Banking business, the majority of our loans modified in TDRs receive an extension, an interest rate reduction or principal reduction, or a combination of these concessions. In addition, TDRs also occur in connection with bankruptcy of the borrower. In certain bankruptcy discharges, the loan is written down to the collateral value and the charged off amount is reported as principal reduction. Impairment 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.

In our Commercial Banking business, the majority of loans modified in TDRs receive an extension, with a portion of these loans receiving an interest rate reduction or a gross balance reduction. The impairment on modified commercial loans is generally determined based on the underlying collateral value.

We provide additional information on modified loans accounted for as TDRs, including the performance of those loans



			4648			Capital One Financial Corporation (COF)

Table of Contents

subsequent to modification, in “Note 3—Loans.”

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. We also estimate expected credit losses related to unfunded lending commitments that are not unconditionally cancellable. The provision for losses on unfunded lending commitments is included in the provision for credit losses in our consolidated statements of income and the related reserve for unfunded lending commitments is included in other liabilities on our consolidated balance sheets. We provide additional information on the methodologies and key assumptions used in determining our allowance for credit losses in “Note 1—Summary of Significant Accounting Policies” in our 2020 Form 10-K.

Table 29 presents changes in our allowance for credit losses and reserve for unfunded lending commitments for the ~~second~~third quarter and first ~~six~~nine months of 2021 and 2020, and details by portfolio segment for the provision for credit losses, charge-offs and recoveries.

Table 29: Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity


		Three Months Ended June 30, 2021																	Three Months Ended September 30, 2021
		Credit Card						Consumer Banking											Credit Card						Consumer Banking
(Dollars in millions)	(Dollars in millions)	Domestic Card		International Card Businesses		Total Credit Card		Auto		Retail Banking		Total Consumer Banking		Commercial Banking		Total		(Dollars in millions)	Domestic Card		International Card Businesses		Total Credit Card		Auto		Retail Banking		Total Consumer Banking		Commercial Banking		Total
Allowance for credit losses:	Allowance for credit losses:																	Allowance for credit losses:
Balance as of March 31, 2021		$	9,572	$	500	$	10,072	$	2,405	$	93	$	2,498	$	1,447	$	14,017
Balance as of June 30, 2021																		Balance as of June 30, 2021	$	8,489	$	384	$	8,873	$	2,122	$	81	$	2,203	$	1,270	$	12,346
Charge-offs	Charge-offs	(874)		(93)		(967)		(245)		(15)		(260)		(8)		(1,235)		Charge-offs	(658)		(77)		(735)		(244)		(20)		(264)		(20)		(1,019)
Recoveries(1)	Recoveries(1)	352		44		396		267		4		271		27		694		Recoveries(1)	331		38		369		210		3		213		11		593
Net recoveries (charge-offs)		(522)		(49)		(571)		22		(11)		11		19		(541)
Net charge-offs																		Net charge-offs	(327)		(39)		(366)		(34)		(17)		(51)		(9)		(426)
Provision (benefit) for credit losses	Provision (benefit) for credit losses	(561)		(74)		(635)		(305)		(1)		(306)		(196)		(1,137)		Provision (benefit) for credit losses	(200)		2		(198)		(100)		9		(91)		(55)		(344)
Allowance build (release) for credit losses	Allowance build (release) for credit losses	(1,083)		(123)		(1,206)		(283)		(12)		(295)		(177)		(1,678)		Allowance build (release) for credit losses	(527)		(37)		(564)		(134)		(8)		(142)		(64)		(770)
Other changes~~(2)~~(4)	Other changes~~(2)~~(4)	—		7		7		—		—		—		—		7		Other changes~~(2)~~(4)	6		(9)		(3)		—		—		—		—		(3)
Balance as of September 30, 2021																		Balance as of September 30, 2021	7,968		338		8,306		1,988		73		2,061		1,206		11,573
Reserve for unfunded lending commitments:																		Reserve for unfunded lending commitments:
Balance as of June 30, 2021	Balance as of June 30, 2021	8,489		384		8,873		2,122		81		2,203		1,270		12,346		Balance as of June 30, 2021	—		—		—		—		—		—		164		164
Reserve for unfunded lending commitments:
Balance as of March 31, 2021		—		—		—		—		—		—		187		187
Provision (benefit) for losses on unfunded lending commitments	Provision (benefit) for losses on unfunded lending commitments	—		—		—		—		—		—		(23)		(23)		Provision (benefit) for losses on unfunded lending commitments	—		—		—		—		—		—		2		2

Balance as of June 30, 2021		—		—		—		—		—		—		164		164
Combined allowance and reserve as of June 30, 2021		$	8,489	$	384	$	8,873	$	2,122	$	81	$	2,203	$	1,434	$	12,510
Balance as of September 30, 2021																		Balance as of September 30, 2021	—		—		—		—		—		—		166		166
Combined allowance and reserve as of September 30, 2021																		Combined allowance and reserve as of September 30, 2021	$	7,968	$	338	$	8,306	$	1,988	$	73	$	2,061	$	1,372	$	11,739



			4749			Capital One Financial Corporation (COF)

Table of Contents


		Six Months Ended June 30, 2021																	Nine Months Ended September 30, 2021
		Credit Card						Consumer Banking											Credit Card						Consumer Banking
(Dollars in millions)	(Dollars in millions)	Domestic Card		International Card Businesses		Total Credit Card		Auto		Retail Banking		Total Consumer Banking		Commercial Banking		Total		(Dollars in millions)	Domestic Card		International Card Businesses		Total Credit Card		Auto		Retail Banking		Total Consumer Banking		Commercial Banking		Total
Allowance for credit losses:	Allowance for credit losses:																	Allowance for credit losses:
Balance as of December 31, 2020	Balance as of December 31, 2020	$	10,650	$	541	$	11,191	$	2,615	$	100	$	2,715	$	1,658	$	15,564	Balance as of December 31, 2020	$	10,650	$	541	$	11,191	$	2,615	$	100	$	2,715	$	1,658	$	15,564
Charge-offs	Charge-offs	(1,778)		(182)		(1,960)		(569)		(33)		(602)		(27)		(2,589)		Charge-offs	(2,436)		(259)		(2,695)		(813)		(53)		(866)		(47)		(3,608)
Recoveries(1)	Recoveries(1)	669		87		756		513		9		522		30		1,308		Recoveries(1)	1,000		125		1,125		723		12		735		41		1,901
Net recoveries (charge-offs)		(1,109)		(95)		(1,204)		(56)		(24)		(80)		3		(1,281)
Net charge-offs																		Net charge-offs	(1,436)		(134)		(1,570)		(90)		(41)		(131)		(6)		(1,707)
Provision (benefit) for credit losses	Provision (benefit) for credit losses	(1,052)		(75)		(1,127)		(437)		5		(432)		(391)		(1,950)		Provision (benefit) for credit losses	(1,252)		(73)		(1,325)		(537)		14		(523)		(446)		(2,294)
Allowance build (release) for credit losses	Allowance build (release) for credit losses	(2,161)		(170)		(2,331)		(493)		(19)		(512)		(388)		(3,231)		Allowance build (release) for credit losses	(2,688)		(207)		(2,895)		(627)		(27)		(654)		(452)		(4,001)
Other changes~~(2)~~(4)	Other changes~~(2)~~(4)	—		13		13		—		—		—		—		13		Other changes~~(2)~~(4)	6		4		10		—		—		—		—		10
Balance as of June 30, 2021		8,489		384		8,873		2,122		81		2,203		1,270		12,346
Balance as of September 30, 2021																		Balance as of September 30, 2021	7,968		338		8,306		1,988		73		2,061		1,206		11,573
Reserve for unfunded lending commitments:	Reserve for unfunded lending commitments:																	Reserve for unfunded lending commitments:
Balance as of December 31, 2020	Balance as of December 31, 2020	—		—		—		—		—		—		195		195		Balance as of December 31, 2020	—		—		—		—		—		—		195		195
Provision (benefit) for losses on unfunded lending commitments	Provision (benefit) for losses on unfunded lending commitments	—		—		—		—		—		—		(31)		(31)		Provision (benefit) for losses on unfunded lending commitments	—		—		—		—		—		—		(29)		(29)
Balance as of June 30, 2021		—		—		—		—		—		—		164		164
Combined allowance and reserve as of June 30, 2021		$	8,489	$	384	$	8,873	$	2,122	$	81	$	2,203	$	1,434	$	12,510
Balance as of September 30, 2021																		Balance as of September 30, 2021	—		—		—		—		—		—		166		166
Combined allowance and reserve as of September 30, 2021																		Combined allowance and reserve as of September 30, 2021	$	7,968	$	338	$	8,306	$	1,988	$	73	$	2,061	$	1,372	$	11,739


		Three Months Ended June 30, 2020																Three Months Ended September 30, 2020
		Credit Card						Consumer Banking												Credit Card						Consumer Banking
(Dollars in millions)	(Dollars in millions)	Domestic Card		International Card Businesses		Total Credit Card		Auto		Retail Banking		Total Consumer Banking		Commercial Banking		Total			(Dollars in millions)	Domestic Card		International Card Businesses		Total Credit Card		Auto		Retail Banking		Total Consumer Banking		Commercial Banking		Total
Allowance for credit losses:	Allowance for credit losses:																		Allowance for credit losses:
Balance as of March 31, 2020		$	9,806	$	540	$	10,346	$	2,058	$	96	$	2,154	$	1,573	$	14,073
Balance as of June 30, 2020																			Balance as of June 30, 2020	$	11,569	$	522	$	12,091	$	2,726	$	112	$	2,838	$	1,903	$	16,832
Charge-offs	Charge-offs	(1,493)		(119)		(1,612)		(399)		(17)		(416)		(103)		(2,131)			Charge-offs	(1,198)		(98)		(1,296)		(280)		(15)		(295)		(88)		(1,679)
Recoveries(1)	Recoveries(1)	350		51		401		220		4		224		1		626			Recoveries(1)	313		40		353		244		3		247		6		606
Net charge-offs	Net charge-offs	(1,143)		(68)		(1,211)		(179)		(13)		(192)		(102)		(1,505)			Net charge-offs	(885)		(58)		(943)		(36)		(12)		(48)		(82)		(1,073)
Provision (benefit) for credit losses	Provision (benefit) for credit losses	2,906		38		2,944		847		29		876		432		4,252			Provision (benefit) for credit losses	378		72		450		(43)		—		(43)		(51)		356
Allowance build (release) for credit losses	Allowance build (release) for credit losses	1,763		(30)		1,733		668		16		684		330		2,747			Allowance build (release) for credit losses	(507)		14		(493)		(79)		(12)		(91)		(133)		(717)
Other changes(2)	Other changes(2)	—		12		12		—		—		—		—		12			Other changes(2)	—		14		14		—		—		—		—		14
Balance as of September 30, 2020																			Balance as of September 30, 2020	11,062		550		11,612		2,647		100		2,747		1,770		16,129
Reserve for unfunded lending commitments:																			Reserve for unfunded lending commitments:
Balance as of June 30, 2020	Balance as of June 30, 2020	11,569		522		12,091		2,726		112		2,838		1,903		16,832			Balance as of June 30, 2020	—		—		—		—		—		—		218		218
Reserve for unfunded lending commitments:
Balance as of March 31, 2020		—		—		—		—		—		—		223		223
Provision (benefit) for losses on unfunded lending commitments	Provision (benefit) for losses on unfunded lending commitments	—		—		—		—		—		—		(5)		(5)			Provision (benefit) for losses on unfunded lending commitments	—		—		—		—		—		—		(23)		(23)
Balance as of June 30, 2020		—		—		—		—		—		—		218		218
Combined allowance and reserve as of June 30, 2020		$	11,569	$	522	$	12,091	$	2,726	$	112	$	2,838	$	2,121	$	17,050
Balance as of September 30, 2020																			Balance as of September 30, 2020	—		—		—		—		—		—		195		195
Combined allowance and reserve as of September 30, 2020																			Combined allowance and reserve as of September 30, 2020	$	11,062	$	550	$	11,612	$	2,647	$	100	$	2,747	$	1,965	$	16,324



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		Six Months Ended June 30, 2020																Nine Months Ended September 30, 2020
		Credit Card						Consumer Banking												Credit Card						Consumer Banking
(Dollars in millions)	(Dollars in millions)	Domestic Card		International Card Businesses		Total Credit Card		Auto		Retail Banking		Total Consumer Banking		Commercial Banking		Total			(Dollars in millions)	Domestic Card		International Card Businesses		Total Credit Card		Auto		Retail Banking		Total Consumer Banking		Commercial Banking		Total
Allowance for credit losses:	Allowance for credit losses:																		Allowance for credit losses:
Balance as of December 31, 2019	Balance as of December 31, 2019	$	4,997	$	398	$	5,395	$	984	$	54	$	1,038	$	775	$	7,208		Balance as of December 31, 2019	$	4,997	$	398	$	5,395	$	984	$	54	$	1,038	$	775	$	7,208
Cumulative effects from adoption of the CECL standard	Cumulative effects from adoption of the CECL standard	2,237		4		2,241		477		25		502		102		2,845			Cumulative effects from adoption of the CECL standard	2,237		4		2,241		477		25		502		102		2,845
Finance charge and fee reserve reclassification(3)	Finance charge and fee reserve reclassification(3)	439		23		462		—		—		—		—		462			Finance charge and fee reserve reclassification(3)	439		23		462		—		—		—		—		462
Balance as of January 1, 2020	Balance as of January 1, 2020	7,673		425		8,098		1,461		79		1,540		877		10,515			Balance as of January 1, 2020	7,673		425		8,098		1,461		79		1,540		877		10,515
Charge-offs	Charge-offs	(3,208)		(253)		(3,461)		(875)		(37)		(912)		(215)		(4,588)			Charge-offs	(4,406)		(351)		(4,757)		(1,155)		(52)		(1,207)		(303)		(6,267)
Recoveries(1)	Recoveries(1)	734		80		814		466		8		474		4		1,292			Recoveries(1)	1,047		120		1,167		710		11		721		10		1,898
Net charge-offs	Net charge-offs	(2,474)		(173)		(2,647)		(409)		(29)		(438)		(211)		(3,296)			Net charge-offs	(3,359)		(231)		(3,590)		(445)		(41)		(486)		(293)		(4,369)
Provision (benefit) for credit losses	Provision (benefit) for credit losses	6,370		276		6,646		1,674		62		1,736		1,237		9,619			Provision (benefit) for credit losses	6,748		348		7,096		1,631		62		1,693		1,186		9,975
Allowance build (release) for credit losses	Allowance build (release) for credit losses	3,896		103		3,999		1,265		33		1,298		1,026		6,323			Allowance build (release) for credit losses	3,389		117		3,506		1,186		21		1,207		893		5,606
Other changes(2)	Other changes(2)	—		(6)		(6)		—		—		—		—		(6)			Other changes(2)	—		8		8		—		—		—		—		8
Balance as of June 30, 2020		11,569		522		12,091		2,726		112		2,838		1,903		16,832
Balance as of September 30, 2020																			Balance as of September 30, 2020	11,062		550		11,612		2,647		100		2,747		1,770		16,129
Reserve for unfunded lending commitments:	Reserve for unfunded lending commitments:																		Reserve for unfunded lending commitments:
Balance as of December 31, 2019	Balance as of December 31, 2019	—		—		—		—		5		5		130		135			Balance as of December 31, 2019	—		—		—		—		5		5		130		135
Cumulative effects from adoption of the CECL standard	Cumulative effects from adoption of the CECL standard	—		—		—		—		(5)		(5)		42		37			Cumulative effects from adoption of the CECL standard	—		—		—		—		(5)		(5)		42		37
Balance as of January 1, 2020	Balance as of January 1, 2020	—		—		—		—		—		—		172		172			Balance as of January 1, 2020	—		—		—		—		—		—		172		172
Provision (benefit) for losses on unfunded lending commitments	Provision (benefit) for losses on unfunded lending commitments	—		—		—		—		—		—		46		46			Provision (benefit) for losses on unfunded lending commitments	—		—		—		—		—		—		23		23
Balance as of June 30, 2020		—		—		—		—		—		—		218		218
Combined allowance and reserve as of June 30, 2020		$	11,569	$	522	$	12,091	$	2,726	$	112	$	2,838	$	2,121	$	17,050
Balance as of September 30, 2020																			Balance as of September 30, 2020	—		—		—		—		—		—		195		195
Combined allowance and reserve as of September 30, 2020																			Combined allowance and reserve as of September 30, 2020	$	11,062	$	550	$	11,612	$	2,647	$	100	$	2,747	$	1,965	$	16,324

__________

(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)Represents foreign currency translation adjustments.

(3)Concurrent with our adoption of the CECL standard in the first quarter of 2020, we reclassified our finance charge and fee reserve to our allowance for credit losses, with a corresponding increase to credit card loans held for investment.

(4)Represents foreign currency translation adjustments and an initial allowance for purchased credit-deteriorated loans of $6 million.



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Allowance coverage ratios are calculated based on the allowance for credit losses for each specified portfolio segment divided by period-end loans held for investment within the specified loan category, as defined below. Table 30 presents the allowance coverage ratios as of ~~June~~September 30, 2021 and December 31, 2020.

Table 30: Allowance Coverage Ratios for Specified Loan Category


		June 30, 2021						December 31, 2020							September 30, 2021						December 31, 2020
(Dollars in millions)	(Dollars in millions)	Allowance for Credit Losses		Amount(1)		Allowance Coverage Ratio		Allowance for Credit Losses		Amount(1)		Allowance Coverage Ratio		(Dollars in millions)	Allowance for Credit Losses		Amount(1)		Allowance Coverage Ratio		Allowance for Credit Losses		Amount(1)		Allowance Coverage Ratio
Credit Card	Credit Card	$	8,873	$	1,770	501.32	%	$	11,191	$	2,622	426.80	%	Credit Card	$	8,306	$	2,105	394.50	%	$	11,191	$	2,622	426.80	%
Consumer Banking	Consumer Banking	2,203		2,538		86.80		2,715		3,443		78.85		Consumer Banking	2,061		2,995		68.83		2,715		3,443		78.85
Commercial Banking	Commercial Banking	1,270		759		167.41		1,658		650		254.97		Commercial Banking	1,206		601		200.51		1,658		650		254.97
Total	Total	$	12,346	249,597		4.95		$	15,564	251,624		6.19		Total	$	11,573	261,390		4.43		$	15,564	251,624		6.19

__________

(1)Represents period-end 30+ day delinquent loans for our credit card and consumer banking loan portfolios, nonperforming loans for our commercial banking loan portfolio and total loans held for investment for the total ratio.

Our allowance for credit losses decreased by ~~$3.2~~$4.0 billion to ~~$12.3~~$11.6 billion, and our allowance coverage ratio decreased by ~~124~~176 basis points to ~~4.95%~~4.43% as of ~~June~~September 30, 2021 from December 31, 2020, driven by strong credit performance and an improved economic outlook.



			49			~~Capital One Financial Corporation (COF)~~

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LIQUIDITY RISK PROFILE

We have established liquidity practices that are intended to ensure that we have sufficient asset-based liquidity to cover our funding requirements and maintain adequate reserves to withstand the potential impact of deposit attrition or diminished liquidity in the funding markets. In addition to our cash and cash equivalents, we maintain reserves in the form of investment securities and certain loans that are either readily-marketable or pledgeable.

Table 31 below presents the composition of our liquidity reserves as of ~~June~~September 30, 2021 and December 31, 2020.

Table 31: Liquidity Reserves


(Dollars in millions)	(Dollars in millions)	June 30, 2021		December 31, 2020		(Dollars in millions)	September 30, 2021		December 31, 2020
Cash and cash equivalents	Cash and cash equivalents	$	34,846	$	40,509	Cash and cash equivalents	$	26,624	$	40,509
Investment securities available for sale, at fair value	Investment securities available for sale, at fair value	101,766		100,445		Investment securities available for sale, at fair value	98,149		100,445
FHLB borrowing capacity secured by loans	FHLB borrowing capacity secured by loans	8,403		10,162		FHLB borrowing capacity secured by loans	7,852		10,162
Outstanding FHLB advances and letters of credit secured by loans	Outstanding FHLB advances and letters of credit secured by loans	(41)		(72)		Outstanding FHLB advances and letters of credit secured by loans	(41)		(72)
Investment securities encumbered for Public Funds and others	Investment securities encumbered for Public Funds and others	(8,016)		(7,052)		Investment securities encumbered for Public Funds and others	(8,191)		(7,052)
Total liquidity reserves	Total liquidity reserves	$	136,958	$	143,992	Total liquidity reserves	$	124,393	$	143,992

Our liquidity reserves decreased by ~~$7.0~~$19.6 billion to ~~$137.0~~$124.4 billion as of ~~June~~September 30, 2021 from December 31, 2020 primarily driven by a decrease in cash and cash equivalents. See “MD&A—Risk Management” in our 2020 Form 10-K for additional information on our management of liquidity risk.



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Liquidity Coverage Ratio

We are subject to the liquidity coverage ratio (“LCR”) standard as implemented by the Federal Reserve and OCC (the “LCR Rule”). The LCR Rule requires us to calculate our LCR daily. It also requires the Company to publicly disclose, on a quarterly basis, its LCR, certain related quantitative liquidity metrics, and a qualitative discussion of its LCR. Our average LCR during the ~~second~~third quarter of 2021 was ~~141%~~ 143%, which exceeded the LCR Rule requirement of 100%. The calculation and the underlying components are based on our interpretations, expectations and assumptions of relevant regulations, as well as interpretations provided by our regulators, and are subject to change based on changes to future regulations and interpretations. See “Part I—Item 1. Business—Supervision and Regulation” in our 2020 Form 10-K for additional information.

Net Stable Funding Ratio

In October 2020, the Federal Banking Agencies finalized a rule to implement the Net Stable Funding Ratio in the United States (the “NSFR Rule”). The NSFR Rule requires the Company and each of the Banks to maintain an amount of available stable funding, which is a weighted measure of a company’s funding sources over a one-year time horizon, calculated by applying standardized weightings to equity and liabilities based on their expected stability, that is no less than the amount of required stable funding, which is calculated by applying standardized weightings to assets, derivatives exposures and certain other items based on their liquidity characteristics. As a Category III institution, the Company and the Banks are required to maintain available stable funding in an amount at least equal to 85% of its required stable funding. The NSFR Rule became effective on July 1, 2021 and applies to the Company and each of the Banks. The NSFR Rule includes a semi-annual disclosure requirement, with the first public disclosure required after June 30, 2023.

Borrowing Capacity

We maintain a shelf registration with the U.S. Securities and Exchange Commission (“SEC”) so that we may periodically offer and sell an indeterminate aggregate amount of senior or subordinated debt securities, preferred stock, depositary shares, common stock, purchase contracts, warrants and units. There is no limit under this shelf registration to the amount or number of such securities that we may offer and sell, subject to market conditions. In addition, we also maintain a shelf registration that allows us to periodically offer and sell up to $25 billion of securitized debt obligations from our credit card loan securitization trust and a shelf registration that allows us to periodically offer and sell up to $20 billion from our auto loan securitization trusts.



			50			~~Capital One Financial Corporation (COF)~~

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In addition to our issuance capacity under the shelf registration statements, we also have access to FHLB advances and the Federal Reserve Discount Window. The ability to borrow utilizing these sources is based on membership status and the amount is dependent upon the Banks’ ability to post collateral. As of ~~June~~September 30, 2021, we pledged both loans and securities to the FHLB to secure a maximum borrowing capacity of ~~$19.2~~$18.8 billion, of which $41 million was used. Our FHLB membership is supported by our investment in FHLB stock of $32 million and $30 million as of ~~June~~September 30, 2021 and December 31, 2020, respectively, which was determined in part based on our outstanding advances. As of ~~June~~September 30, 2021, we pledged loans to secure a borrowing capacity of ~~$21.3~~$19.9 billion under the Federal Reserve Discount Window. Our membership with the Federal Reserve is supported by our investment in Federal Reserve stock, which totaled $1.3 billion as of both ~~June~~September 30, 2021 and December 31, 2020.

Funding

Our primary source of funding comes from deposits, as they are a stable and relatively low cost source of funding. In addition to deposits, we raise funding through the issuance of senior and subordinated notes and securitized debt obligations, federal funds purchased, securities loaned or sold under agreements to repurchase and FHLB advances secured by certain portions of our loan and securities portfolios. A key objective in our use of these markets is to maintain access to a diversified mix of wholesale funding sources. See “MD&A—Consolidated Balance Sheets Analysis—Funding Sources Composition” for additional information on our primary sources of funding.



			53			Capital One Financial Corporation (COF)

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Deposits

Table 32 provides a comparison of average balances, interest expense and average deposits interest rates for the ~~second~~third quarter and first ~~six~~nine months of 2021 and 2020.

Table 32: Deposits Composition and Average Deposits Interest Rates

Three Months Ended June 30,
2021 2020
(Dollars in millions) Average
Balance Interest
Expense Average
Deposits
Interest Rate Average
Balance Interest
Expense Average
Deposits
Interest Rate
Interest-bearing checking accounts(1)
$ 44,795 $ 18 0.16 % $ 36,105 $ 28 0.31 %
Saving deposits(2)
204,737 156 0.31 180,103 372 0.83
Time deposits less than $100,000 16,820 50 1.18 28,607 138 1.94
Total interest-bearing core deposits 266,352 224 0.34 244,815 538 0.88
Time deposits of $100,000 or more 7,124 13 0.72 16,441 73 1.77
Total interest-bearing deposits $ 273,476 $ 237 0.35 $ 261,256 $ 611 0.94
Six Months Ended June 30,
2021 2020
(Dollars in millions) Average
Balance Interest
Expense Average
Deposits
Interest Rate Average
Balance Interest
Expense Average
Deposits
Interest Rate
Interest-bearing checking accounts(1)
$ 43,463 $ 37 0.17 % $ 35,234 $ 81 0.46 %
Saving deposits(2)
203,213 316 0.31 171,082 798 0.94
Time deposits less than $100,000 18,326 111 1.22 27,908 295 2.13
Total interest-bearing core deposits 265,002 464 0.35 234,224 1,174 1.01
Time deposits of $100,000 or more 8,415 42 1.01 16,961 168 1.99
Total interest-bearing deposits $ 273,417 $ 506 0.37 $ 251,185 $ 1,342 1.07


	Three Months Ended September 30,
	2021						2020
(Dollars in millions)	Average Balance		Interest Expense		Average Deposits Interest Rate		Average Balance		Interest Expense		Average Deposits Interest Rate
Interest-bearing checking accounts(1)	$	45,511	$	19	0.17	%	$	38,115	$	25	0.26	%
Saving deposits(2)	202,955		156		0.30		196,575		287		0.58
Time deposits less than $100,000	14,796		42		1.12		26,626		112		1.67
Total interest-bearing core deposits	263,262		217		0.33		261,316		424		0.65
Time deposits of $100,000 or more	6,016		11		0.70		15,023		52		1.40
Total interest-bearing deposits	$	269,278	$	228	0.34		$	276,339	$	476	0.69


	Nine Months Ended September 30,
	2021						2020
(Dollars in millions)	Average Balance		Interest Expense		Average Deposits Interest Rate		Average Balance		Interest Expense		Average Deposits Interest Rate
Interest-bearing checking accounts(1)	$	44,153	$	56	0.17	%	$	36,201	$	106	0.39	%
Saving deposits(2)	203,127		472		0.31		179,643		1,085		0.81
Time deposits less than $100,000	17,136		153		1.19		27,477		407		1.98
Total interest-bearing core deposits	264,416		681		0.34		243,321		1,598		0.88
Time deposits of $100,000 or more	7,606		53		0.93		16,310		220		1.81
Total interest-bearing deposits	$	272,022	$	734	0.36		$	259,631	$	1,818	0.93

__________

(1)Includes negotiable order of withdrawal accounts.

(2)Includes money market deposit accounts.

The FDIC limits the acceptance of brokered deposits to well-capitalized insured depository institutions and, with a waiver from the FDIC, to adequately-capitalized institutions. COBNA and CONA were well-capitalized, as defined under the federal banking regulatory guidelines, as of ~~June~~September 30, 2021 and December 31, 2020, respectively. See “Part I—Item 1. Business—Supervision and Regulation” in our 2020 Form 10-K for additional information. We provide additional information on the



			51			~~Capital One Financial Corporation (COF)~~

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composition of deposits in “MD&A—Consolidated Balance Sheets Analysis—Funding Sources Composition” and in “Note 7—Deposits and Borrowings.”

Short-Term Borrowings and Long-Term Debt

We access the capital markets to meet our funding needs through the issuance of senior and subordinated notes, securitized debt obligations and federal funds purchased and securities loaned or sold under agreements to repurchase. In addition, we may utilize short-term and long-term FHLB advances secured by certain of our investment securities, multifamily real estate loans and commercial real estate loans.

Our short-term borrowings include those borrowings with an original contractual maturity of one year or less and do not include the current portion of long-term debt. The short-term borrowings, which consist of federal funds purchased, securities loaned or sold under agreements to repurchase, increased by ~~$177~~$157 million to ~~$845~~$825 million as of ~~June~~September 30, 2021 from December 31, 2020 driven by an increase in repurchase ~~agreements.~~agreement activity.

Our long-term debt, which primarily consists of securitized debt obligations and senior and subordinated notes, decreased by ~~$4.4~~$3.2 billion to ~~$35.5~~$36.7 billion as of ~~June~~September 30, 2021 from December 31, 2020 primarily driven by redemptions of our senior ~~unsecured~~ debt, ~~and maturities and paydowns in our securitizations.~~partially offset by the issuance of subordinated debt. We provide more information on our securitization activity in “Note 5—Variable Interest Entities and Securitizations.”



			54			Capital One Financial Corporation (COF)

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The following table summarizes issuances of securitized debt obligations, senior and subordinated notes and their respective maturities or redemptions for the ~~second~~third quarter and first ~~six~~nine months of 2021 and 2020.~~We did not have any such issuances for the second quarter and first six months of 2021.~~

Table 33: Long-Term Funding


		Issuances				Maturities/Redemptions					Issuances		Maturities/Redemptions
		Three Months Ended June 30,				Three Months Ended June 30,					Three Months Ended September 30,		Three Months Ended September 30,
(Dollars in millions)	(Dollars in millions)	2021		2020			2021		2020			(Dollars in millions)	2021		2020		2021		2020
Securitized debt obligations	Securitized debt obligations	$	—	$	—		$	1,502	$	1,383		Securitized debt obligations	$	3,000	$	—	$	865	$	2,159
Senior and subordinated notes	Senior and subordinated notes	—		2,000			585		5,592			Senior and subordinated notes	1,000		—		1,766		—

Total	Total	$	—	$	2,000		$	2,087	$	6,975		Total	$	4,000	$	—	$	2,631	$	2,159


		Issuances				Maturities/Redemptions					Issuances		Maturities/Redemptions
		Six Months Ended June 30,				Six Months Ended June 30,					Nine Months Ended September 30,		Nine Months Ended September 30,
(Dollars in millions)	(Dollars in millions)	2021		2020			2021		2020			(Dollars in millions)	2021		2020		2021		2020
Securitized debt obligations	Securitized debt obligations	$	—	$	1,250		$	1,773	$	3,593		Securitized debt obligations	$	3,000	$	1,250	$	2,638	$	5,752
Senior and subordinated notes	Senior and subordinated notes	—		4,000			2,085		7,092			Senior and subordinated notes	1,000		4,000		3,851		7,092

Total	Total	$	—	$	5,250		$	3,858	$	10,685		Total	$	4,000	$	5,250	$	6,489	$	12,844



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Credit Ratings

Our credit ratings impact our ability to access capital markets and our borrowing costs. Rating agencies ~~base~~assign their ratings based on numerous factors, including liquidity, capital adequacy, asset quality, quality of earnings and the probability of systemic support. Significant changes in these factors could result in different ratings.

Table 34 provides a summary of the credit ratings for the senior unsecured long-term debt of Capital One Financial Corporation, COBNA and CONA as of ~~June~~September 30, 2021 and December 31, 2020.

Table 34: Senior ~~Unsecured~~ Long-Term Debt Credit Ratings

~~June~~September 30, 2021

December 31, 2020

Capital One
Financial
Corporation

COBNA

CONA

Capital One
Financial
Corporation

COBNA

CONA

Moody’s

Baa1

S&P

BBB

BBB+

BBB

BBB+

Fitch

A-

A-A

A-

As of ~~July 26,~~October 25, 2021, Moody’s Investors Service (“Moody’s”), Standard & Poor’s (“S&P”) and Fitch Ratings (“Fitch”) have our credit ratings on a stable outlook.


MARKET RISK PROFILE

Market risk is the risk of economic loss in the value of our financial instruments due to changes in market factors. Our primary market risk exposures include interest rate risk, foreign exchange risk and commodity pricing risk. We are exposed to market risk primarily from the following operations and activities:

•Traditional banking activities of deposit gathering and lending;

•Asset/liability management activities including the management of investment securities, short-term and long-term borrowings and derivatives;

•Foreign operations in the U.K. and Canada within our Credit Card business; and

•Customer accommodation activities within our Commercial Banking business.



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We have enterprise-wide risk management policies and limits, approved by our Board of Directors, which govern our market risk management activities. Our objective is to manage our exposure to market risk in accordance with these policies and limits based on prevailing market conditions and long-term expectations. We provide additional information below about our primary sources of market risk, our market risk management strategies and the measures that we use to evaluate these exposures.



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Interest Rate Risk

Interest rate risk represents exposure to financial instruments whose values vary with the level or volatility of interest rates. We are exposed to interest rate risk primarily from the differences in the timing between the maturities or re-pricing of assets and liabilities. We manage our interest rate risk primarily by entering into interest rate swaps and other derivative instruments which could include caps, floors, options, futures and forward contracts.

We use various industry standard market risk measurement techniques and analyses to measure, assess and manage the impact of changes in interest rates on our net interest income and our economic value of equity and changes in foreign exchange rates on our non-dollar-denominated funding and non-dollar equity investments in foreign operations.

Net Interest Income Sensitivity

Our net interest income sensitivity measure estimates the impact on our projected 12-month baseline net interest income resulting from movements in interest rates. In addition to our existing assets and liabilities, we incorporate expected future business growth assumptions, such as loan and deposit growth and pricing, and plans for projected changes in our funding mix in our baseline forecast. In measuring the sensitivity of interest rate movements on our projected net interest income, we assume a hypothetical instantaneous parallel shift in the level of interest rates detailed in Table 35 ~~below.~~below. At the current level of interest rates, our net interest income is expected to increase in higher rate scenarios and decrease modestly in lower rate scenarios. Our current sensitivity to upward shocks has decreased as compared to December 31, 2020, mainly due to the increase in long-term interest ~~rates.~~rates and a decrease in cash balance.

Economic Value of Equity

Our economic value of equity sensitivity measure estimates the impact on the net present value of our assets and liabilities, including derivative exposures, resulting from movements in interest rates. Our economic value of equity sensitivity measure is calculated based on our existing assets and liabilities, including derivatives, and does not incorporate business growth assumptions or projected balance sheet changes. Key assumptions used in the calculation include projecting rate sensitive prepayments for mortgage securities, loans and other assets, term structure modeling of interest rates, discount spreads, and deposit volume and pricing assumptions. In measuring the sensitivity of interest rate movements on our economic value of equity, we assume a hypothetical instantaneous parallel shift in the level of interest rates detailed in Table 35 below. Our current economic value of equity sensitivity profile demonstrates that our economic value of equity ~~increasing~~increases in ~~moderately~~ higher interest rate scenarios, ~~(+50 and +100 bps),~~ while decreasing in a lower interest rate ~~scenario (-50 bps).~~scenario. Similar to the changes in net interest income sensitivity, our current economic value of equity sensitivity to upward shocks has also decreased as compared to December 31, 2020 mainly due to the increase in long term interest ~~rates.~~rates and a decrease in cash balance.

Table 35 shows the estimated percentage impact on our projected baseline net interest income and economic value of equity calculated under the methodology described above as of ~~June~~September 30, 2021 and December 31, 2020. In instances where an interest rate scenario would result in a rate less than 0%, we assume a rate of 0% for that scenario. This assumption applies only to jurisdictions that do not have negative policy rates. In jurisdictions that have negative policy rates, we do not floor interest rates at 0%.



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Table 35: Interest Rate Sensitivity Analysis


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Estimated impact on projected baseline net interest income:	Estimated impact on projected baseline net interest income:					Estimated impact on projected baseline net interest income:
+200 basis points	+200 basis points	4.0	%	5.6	%	+200 basis points	4.3	%	5.6	%

+100 basis points	+100 basis points	3.3		4.3		+100 basis points	3.4		4.3
+50 basis points	+50 basis points	1.9		2.4		+50 basis points	1.9		2.4
–50 basis points	–50 basis points	(1.3)		(0.9)		–50 basis points	(1.4)		(0.9)

Estimated impact on economic value of equity:	Estimated impact on economic value of equity:					Estimated impact on economic value of equity:
+200 basis points	+200 basis points	(0.2)		4.2		+200 basis points	0.7		4.2

+100 basis points	+100 basis points	2.8		6.0		+100 basis points	2.8		6.0
+50 basis points	+50 basis points	2.1		4.0		+50 basis points	2.0		4.0
–50 basis points	–50 basis points	(3.7)		(7.0)		–50 basis points	(3.4)		(7.0)

In addition to these industry standard measures, we also consider the potential impact of alternative interest rate scenarios, such as stressed rate shocks as well as steepening and flattening yield curve scenarios in our internal interest rate risk management decisions.

Limitations of Market Risk Measures

The interest rate risk models that we use in deriving these measures incorporate contractual information, internally-developed assumptions and proprietary modeling methodologies, which project borrower and depositor behavior patterns in certain interest rate environments. Other market inputs, such as interest rates, market prices and interest rate volatility, are also critical components of our interest rate risk measures. We regularly evaluate, update and enhance these assumptions, models and analytical tools as we believe appropriate to reflect our best assessment of the market environment and the expected behavior patterns of our existing assets and liabilities.

There are inherent limitations in any methodology used to estimate the exposure to changes in market interest rates. The sensitivity analysis described above contemplates only certain movements in interest rates and is performed at a particular point in time based on the existing balance sheet and, in some cases, expected future business growth and funding mix assumptions. The strategic actions that management may take to manage our balance sheet may differ significantly from our projections, which could cause our actual earnings and economic value of equity sensitivities to differ substantially from the above sensitivity analysis.

For further information on our interest rate exposures, see “Note 8—Derivative Instruments and Hedging Activities.”

Foreign Exchange Risk

Foreign exchange risk represents exposure to changes in the values of current holdings and future cash flows denominated in other currencies. We are exposed to foreign exchange risk primarily from the intercompany funding denominated in pound sterling (“GBP”) and the Canadian dollar (“CAD”) that we provide to our businesses in the U.K. and Canada and net equity investments in those businesses. We are also exposed to foreign exchange risk due to changes in the dollar-denominated value of future earnings and cash flows from our foreign operations and from our Euro (“EUR”)-denominated borrowings.

Our non-dollar denominated intercompany funding and EUR-denominated borrowings expose our earnings to foreign exchange transaction risk. We manage these transaction risks by using forward foreign currency derivatives and cross-currency swaps to hedge our exposures. We measure our foreign exchange transaction risk exposures by applying a 1% U.S. dollar appreciation shock against the value of the non-dollar denominated intercompany funding and EUR-denominated borrowings and their related hedges, which shows the impact to our earnings from foreign exchange risk. Our intercompany funding outstanding was 415 million GBP and 320 million GBP as of ~~both June~~September 30, 2021 and December 31, 2020, respectively, and 4.7 billion CAD and 5.3 billion CAD as of ~~June~~September 30, 2021 and December 31, 2020, respectively. Our EUR-denominated borrowings outstanding were 1.3 billion EUR as of both ~~June~~September 30, 2021 and December 31, 2020.



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Our non-dollar equity investments in foreign operations expose our balance sheet to translation risk in AOCI and our capital ratios. We manage our AOCI exposure by entering into foreign currency derivatives designated as net investment hedges. We measure these exposures by applying a 30% U.S. dollar appreciation shock, which we believe approximates a significant adverse shock over a one-year time horizon, against the value of the equity invested in our foreign operations net of related net investment hedges where applicable. Our gross equity exposures in our U.K. and Canadian operations were 1.8 billion GBP and 1.7 billion GBP as of ~~both June~~September 30, 2021 and December 31, 2020, respectively, and ~~1.7~~1.8 billion CAD and 1.5 billion CAD as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

As a result of our derivative management activities, we believe our net exposure to foreign exchange risk is minimal.

Risk related to Customer Accommodation Derivatives

We offer interest rate, commodity and foreign currency derivatives as an accommodation to our customers within our Commercial Banking business. We offset the majority of the market risk of these customer accommodation derivatives by entering into offsetting derivatives transactions with other counterparties. We use value-at-risk (“VaR”) as the primary method to measure the market risk in our customer accommodation derivative activities on a daily basis. VaR is a statistical risk measure used to estimate the potential loss from movements observed in the recent market environment. We employ a historical simulation approach using the most recent 500 business days and use a 99 percent confidence level and a holding period of one business day. As a result of offsetting our customer exposures with other counterparties, we believe that our net exposure to market risk in our customer accommodation derivatives is minimal. For further information on our risk related to customer accommodation derivatives, see “Note 8—Derivative Instruments and Hedging Activities.”

London Interbank Offered Rate (“LIBOR”) Transition

On July 27, 2017, the U.K. Financial Conduct Authority (“FCA”), the regulator for the administration of LIBOR, announced that LIBOR would be transitioned as an interest rate benchmark and that it will no longer compel banks to contribute LIBOR data beyond December 31, 2021. In the U.S., the Federal Reserve Board and the Federal Reserve Bank of New York established the Alternative Reference Rates Committee (“ARRC”), a group of private market participants and ex-officio members representing banking and financial sector regulators. The ARRC has recommended Secured Overnight Financing Rate (“SOFR”) as the preferred alternative rate for certain U.S. dollar derivative and cash instruments. While the ARRC has recommended SOFR as the replacement rate for LIBOR, some market participants have begun using alternate rates featuring a credit-sensitive element. We are continuing to evaluate the different LIBOR alternatives and how their progression will impact our transition efforts.

On March 5, 2021, the ICE Benchmark Administration (“(��IBA”), the administrator of LIBOR, confirmed its intention to cease publication of the 1-week and 2-month USD LIBOR settings immediately following the LIBOR publication on December 31, 2021, and the remaining USD LIBOR tenors (overnight; 1, 3, 6, and 12 months) immediately following the LIBOR publication on June 30, 2023. The continuation of USD LIBOR as a representative rate into mid-2023 will allow many legacy USD LIBOR contracts to mature prior to cessation. Following IBA’s announcement, the FCA formally announced the future permanent cessation and loss of representativeness of LIBOR benchmarks.

In the U.S., the Secured Overnight Financing Rate (“SOFR”) has been selected as the preferred alternative rate for certain U.S. dollar derivative and cash instruments. While SOFR continues to be the industry recommended replacement rate for LIBOR, some market participants have begun using alternate rates featuring a credit-sensitive element. We are continuing to evaluate the different LIBOR alternatives and how their progression will impact our transition efforts.

We have exposures to LIBOR, including loans, derivative contracts, unsecured debt, securitizations, vendor agreements and other instruments with attributes that are either directly or indirectly dependent on LIBOR. To facilitate an orderly transition from LIBOR, we have established a company-wide, cross-functional initiative to oversee and manage our transition away from LIBOR and other Interbank Offered Rates (“IBORs”) to alternative reference rates.

We have made progress on our transition efforts as we continue to insert LIBOR transition language (“fallback language”) in new and existing lending contracts as well as ~~fallback language~~ in derivatives contracts and agreements that adheres to the International Swaps and Derivatives Association (“ISDA”) fallback protocol. Furthermore, we continue to originate loans and transact in instruments indexed to SOFR and other LIBOR replacement rates.

We also continue to focus our transition efforts on:

•monitoring market developments and ~~industry practices~~managing our activities related to SOFR and other LIBOR replacement indexes;

•~~originating loans and transacting in instruments indexed to SOFR and other LIBOR replacement rates;~~

•reviewing existing legal contracts and agreements and assessing fallback language impacts;

•monitoring and reducing our inventory of LIBOR exposures;

•building internal operational readiness and risk management processes, including exposure reporting;



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•~~building internal operational readiness and risk management processes, including exposure reporting;~~

•implementing necessary updates to our infrastructure including systems, models, valuation tools and processes; and

•engaging with our clients, industry working groups, and regulators.

For a further discussion of the various risks we face in connection with the expected replacement of LIBOR on our operations, see “Part I—Item 1A. Risk Factors—Uncertainty regarding, and transition away from, LIBOR may adversely affect our business” in our 2020 Form 10-K.


SUPERVISION AND REGULATION

~~Dividends and Stock Repurchases Update~~

On June 24, 2021, the Federal Reserve released the results of its supervisory stress tests for the 2021 cycle. Based on the results, all participating BHCs remained above their risk-based minimum capital requirements in the hypothetical stress scenario. Accordingly, as laid out previously by the Federal Reserve, the temporary capital distribution restrictions put in place in the third quarter of 2020 following the outbreak of COVID-19 ended for all participating BHCs after the second quarter of 2021. All participating BHCs remain subject to the normal capital distribution restrictions of the stress capital buffer framework.

We ~~provided additional~~provide information on our Supervision and Regulation in our 2020 Form 10-K under “Part I—Item 1. Business—Supervision and Regulation” and in our Quarterly ~~Report~~Reports on Form 10-Q for the period ended March 31, 2021 and for the period ended June 30, 2021 under “Part I—Item 2. MD&A—Supervision and Regulation.”



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FORWARD-LOOKING STATEMENTS

From time to time, we have made and will make forward-looking statements, including those that discuss, among other things, strategies, goals, outlook or other non-historical matters; projections, revenues, income, returns, expenses, capital measures, capital allocation plans, accruals for claims in litigation and for other claims against us; earnings per share, efficiency ratio, operating efficiency ratio, or other financial measures for us; future financial and operating results; our plans, objectives, expectations and intentions; and the assumptions that underlie these matters.

To the extent that any such information is forward-looking, it is intended to fit within the safe harbor for forward-looking information provided by the Private Securities Litigation Reform Act of 1995.

Forward-looking statements often use words such as “will,” “anticipate,” “target,” “expect,” “estimate,” “intend,” “plan,” “goal,” “believe,” “forecast,” “outlook” or other words of similar meaning. Any forward-looking statements made by us or on our behalf speak only as of the date they are made or as of the date indicated, and we do not undertake any obligation to update forward-looking statements as a result of new information, future events or otherwise. For additional information on factors that could materially influence forward-looking statements included in this Report, see the risk factors set forth under “Part I—Item 1A. Risk Factors” in our 2020 Form 10-K. You should carefully consider the factors discussed above, and in our Risk Factors or other disclosure, in evaluating these forward-looking statements.

Numerous factors could cause our actual results to differ materially from those described in such forward-looking statements, including, among other things:

•the impact of the COVID-19 pandemic and related public health measures on our business, financial condition and results of operations, including the increased estimation and forecast uncertainty as a result of the pandemic on our estimates of lifetime expected credit losses in our loan portfolios required in computing our allowance for credit losses;

•general economic and business conditions in our local markets, including conditions affecting employment levels, interest rates, tariffs, collateral values, consumer income, creditworthiness and confidence, spending and savings that may affect consumer bankruptcies, defaults, charge-offs and deposit activity;

•an increase or decrease in credit losses, or increased delinquencies, including increases due to a worsening of general economic conditions in the credit environment, and the impact of inaccurate estimates or inadequate reserves;

•compliance with new and existing laws, regulations and regulatory expectations including the implementation of a regulatory reform agenda;

•our ability to manage adequate capital or liquidity levels, which could have a negative impact on our financial results and our ability to return capital to our stockholders;

•the extensive use, reliability, disruption, and accuracy of the models and data we rely on;

•increased costs, reductions in revenue, reputational damage, legal liability and business disruptions that can result from data protection or privacy incidents or the theft, loss or misuse of information, including as a result of a cyber-attack;



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•developments, changes or actions relating to any litigation, governmental investigation or regulatory enforcement action or matter involving us;

•the amount and rate of deposit growth and changes in deposit costs;

•our ability to execute on our strategic and operational plans;

•our response to competitive pressures;

•our business, financial condition and results of operations may be adversely affected by merchants’ increasing focus on the fees charged by credit card networks and by legislation and regulation impacting such fees;

•our success in integrating acquired businesses and loan portfolios, and our ability to realize anticipated benefits from announced transactions and strategic partnerships;



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•our ability to maintain a compliance, operational, technology and organizational infrastructure suitable for the nature of our business;

•the success of our marketing efforts in attracting and retaining customers;

•our risk management strategies;

•changes in the reputation of, or expectations regarding, the financial services industry or us with respect to practices, products or financial condition;

•increases or decreases in interest rates and uncertainty with respect to the interest rate environment, including the possibility of a prolonged low-interest rate environment or of negative interest rates;

•uncertainty regarding, and transition away from, the London Interbank Offered Rate;

•our ability to attract, retain and motivate skilled employees;

•our assumptions or estimates in our financial statements;

•limitations on our ability to receive dividends from our subsidiaries;

•the soundness of other financial institutions and other third parties; and

•other risk factors identified from time to time in our public disclosures, including in the reports that we file with the SEC.

We expect that the effects of the COVID-19 pandemic will heighten the risks associated with many of these factors.



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SUPPLEMENTAL TABLE

Reconciliation of Non-GAAP Measures

The following non-GAAP measures consist of TCE, tangible assets and metrics computed using these amounts, which include tangible book value per common share, return on average tangible assets, return on average TCE and TCE ratio. We consider these metrics to be key financial performance measures that management uses in assessing capital adequacy and the level of returns generated. While these non-GAAP measures are widely used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies, they may not be comparable to similarly-titled measures reported by other companies. The following table presents reconciliations of these non-GAAP measures to the applicable amounts measured in accordance with GAAP.

Table A—Reconciliation of Non-GAAP Measures


(Dollars in millions, except as noted)	(Dollars in millions, except as noted)	June 30, 2021			December 31, 2020			(Dollars in millions, except as noted)	September 30, 2021			December 31, 2020
Tangible Common Equity (Period-End):	Tangible Common Equity (Period-End):							Tangible Common Equity (Period-End):
Stockholders’ equity	Stockholders’ equity	$	64,624		$	60,204		Stockholders’ equity	$	63,544		$	60,204
Goodwill and intangible assets(1)	Goodwill and intangible assets(1)	(14,774)			(14,809)			Goodwill and intangible assets(1)	(14,766)			(14,809)
Noncumulative perpetual preferred stock	Noncumulative perpetual preferred stock	(6,488)			(4,847)			Noncumulative perpetual preferred stock	(5,912)			(4,847)
Tangible common equity	Tangible common equity	$	43,362		$	40,548		Tangible common equity	$	42,866		$	40,548
Tangible Common Equity (Quarterly Average):	Tangible Common Equity (Quarterly Average):							Tangible Common Equity (Quarterly Average):
Stockholders’ equity	Stockholders’ equity	$	62,376		$	59,389		Stockholders’ equity	$	64,682		$	59,389
Goodwill and intangible assets(1)	Goodwill and intangible assets(1)	(14,788)			(14,824)			Goodwill and intangible assets(1)	(14,777)			(14,824)
Noncumulative perpetual preferred stock	Noncumulative perpetual preferred stock	(5,491)			(5,168)			Noncumulative perpetual preferred stock	(6,452)			(5,168)
Tangible common equity	Tangible common equity	$	42,097		$	39,397		Tangible common equity	$	43,453		$	39,397
Tangible Assets (Period-End):	Tangible Assets (Period-End):							Tangible Assets (Period-End):
Total assets	Total assets	$	423,420		$	421,602		Total assets	$	425,377		$	421,602
Goodwill and intangible assets(1)	Goodwill and intangible assets(1)	(14,774)			(14,809)			Goodwill and intangible assets(1)	(14,766)			(14,809)
Tangible assets	Tangible assets	$	408,646		$	406,793		Tangible assets	$	410,611		$	406,793
Tangible Assets (Quarterly Average):	Tangible Assets (Quarterly Average):							Tangible Assets (Quarterly Average):
Total assets	Total assets	$	424,099		$	420,011		Total assets	$	424,506		$	420,011
Goodwill and intangible assets(1)	Goodwill and intangible assets(1)	(14,788)			(14,824)			Goodwill and intangible assets(1)	(14,777)			(14,824)
Tangible assets	Tangible assets	$	409,311		$	405,187		Tangible assets	$	409,729		$	405,187
Non-GAAP Ratio:	Non-GAAP Ratio:							Non-GAAP Ratio:
Tangible common equity (“TCE”)(2)	Tangible common equity (“TCE”)(2)	10.6		%	10.0		%	Tangible common equity (“TCE”)(2)	10.4		%	10.0		%

__________

(1)Includes impact of related deferred taxes.

(2)TCE ratio is a non-GAAP measure calculated based on TCE divided by tangible assets.



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Glossary and Acronyms

Amortized cost: The amount at which a financing receivable or investment is originated or acquired, adjusted for applicable accrued interest, accretion, or amortization of premium, discount, and net deferred fees or costs, collection of cash, write-offs, foreign exchange and fair value hedge accounting adjustments.

Annual Report: References to our “2020 Form 10-K” or “2020 Annual Report” are to our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Banks: Refers to COBNA and CONA.

Basel Committee: The Basel Committee on Banking Supervision.

Basel III Advanced Approaches: Following the Tailoring Rule, the Basel III Advanced Approaches was mandatory for Category I and II institutions. Category III institutions, such as us, are no longer subject to the Basel III Advanced Approaches framework effective January 1, 2020.

Basel III Capital Rules: The regulatory capital requirements established by the Federal Banking Agencies in July 2013 to implement the Basel III capital framework developed by the Basel Committee as well as certain Dodd-Frank Act and other capital provisions.

Basel III Standardized Approach: The Basel III Capital Rules modified Basel I to create the Basel III Standardized Approach.

Capital One or the Company: Capital One Financial Corporation and its subsidiaries.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”): Legislation signed into law on March 27, 2020. This law, among other things, authorized a number of lending programs to support the flow of credit to consumers and businesses and gave the banking organizations an option to temporarily suspend the determination of certain qualified loans modified as a result of COVID-19 as being TDRs, which was extended by the Consolidated Appropriations Act 2021.

Carrying value (with respect to loans): The amount at which a loan is recorded on the consolidated balance sheets. For loans recorded at amortized cost, carrying value is the unpaid principal balance net of unamortized deferred loan origination fees and costs, and unamortized purchase premium or discount. For loans that are or have been on nonaccrual status, the carrying value is also reduced by any net charge-offs that have been recorded and the amount of interest payments applied as a reduction of principal under the cost recovery method. For credit card loans, the carrying value also includes interest that has been billed to the customer, net of any related reserves. Loans held for sale are recorded at either fair value (if we elect the fair value option) or at the lower of cost or fair value.

CECL: In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU requires an impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected rather than incurred losses, with an anticipated result of more timely loss recognition. This guidance was effective for us on January 1, 2020.

COBNA: Capital One Bank (USA), National Association, one of our fully owned subsidiaries, which offers credit ~~and debit~~ card products along with other lending products and ~~deposit products.~~consumer services.

Common equity Tier 1 (“CET1”) capital: Calculated as the sum of common equity, related surplus and retained earnings, and accumulated other comprehensive income net of applicable phase-ins, less goodwill and intangibles net of associated deferred tax liabilities and applicable phase-ins, less other deductions, as defined by regulators.

CONA: Capital One, National Association, one of our fully owned subsidiaries, which offers a broad spectrum of banking products and financial services to consumers, small businesses and commercial clients.

Credit risk: The risk of loss from an obligor’s failure to meet the terms of any contract or otherwise fail to perform as agreed.



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Cybersecurity Incident: The unauthorized access by an outside individual who obtained certain types of personal information relating to people who had applied for our credit card products and to our credit card customers that we announced on July 29, 2019.

Derivative: A contract or agreement whose value is derived from changes in interest rates, foreign exchange rates, prices of securities or commodities, credit worthiness for credit default swaps or financial or commodity indices.

Discontinued operations: The operating results of a component of an entity, as defined by Accounting Standards Codification (“ASC”) 205, that are removed from continuing operations when that component has been disposed of or it is management’s intention to sell the component.

Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”): Regulatory reform legislation signed into law on July 21, 2010. This law broadly affects the financial services industry and contains numerous provisions aimed at strengthening the sound operation of the financial services sector.

Exchange Act: The Securities Exchange Act of 1934, as amended.

eXtensible Business Reporting Language (“XBRL”): A language for the electronic communication of business and financial data.

Federal Banking Agencies: The Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation.

Federal Reserve: The Board of Governors of the Federal Reserve System.

FICO score: A measure of consumer credit risk provided by credit bureaus, typically produced from statistical modeling software created by FICO (formerly known as “Fair Isaac Corporation”) utilizing data collected by the credit bureaus.

~~Foreign currency derivative contracts:~~ ~~An agreement to exchange contractual amounts of one currency for another currency at one or more future dates.~~

Foreign exchange contracts: Contracts that provide for the future receipt or delivery of foreign currency at previously agreed-upon terms.

GSE or Agency: A government-sponsored enterprise or agency is a financial services corporation created by the United States Congress. Examples of U.S. government agencies include Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”), Government National Mortgage Association (“Ginnie Mae”) and the Federal Home Loan Banks (“FHLB”).

Interest rate sensitivity: The exposure to interest rate movements.

Interest rate swaps: Contracts in which a series of interest rate flows in a single currency are exchanged over a prescribed period. Interest rate swaps are the most common type of derivative contract that we use in our asset/liability management activities.

Investment grade: Represents a Moody’s long-term rating of Baa3 or better; and/or a S&P long-term rating of BBB- or better; and/or a Fitch long-term rating of BBB- or better; or if unrated, an equivalent rating using our internal risk ratings. Instruments that fall below these levels are considered to be non-investment grade.

Investor entities: Entities that invest in community development entities (“CDE”) that provide debt financing to businesses and non-profit entities in low-income and rural communities.

LCR Rule: In September 2014, the Federal Banking Agencies issued final rules implementing the Basel III Liquidity Coverage Ratio (“LCR”) in the United States. The LCR is calculated by dividing the amount of an institution’s high quality, unencumbered liquid assets by its estimated net cash outflow, as defined and calculated in accordance with the LCR Rule.

Leverage ratio: Tier 1 capital divided by average assets after certain adjustments, as defined by the regulators.

Liquidity risk: The risk that the Company will not be able to meet its future financial obligations as they come due, or invest in future asset growth because of an inability to obtain funds at a reasonable price within a reasonable time period.



			62			~~Capital One Financial Corporation (COF)~~

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Loan-to-value (“LTV”) ratio: The relationship, expressed as a percentage, between the principal amount of a loan and the appraised value of the collateral securing the loan.



			63			Capital One Financial Corporation (COF)

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Managed presentation: A non-GAAP presentation of business segment results derived from our internal management accounting and reporting process, which 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. The results of our individual businesses reflect the manner in which management evaluates performance and makes decisions about funding our operations and allocating resources and are intended to reflect each segment as if it were a stand-alone business.

Market risk: The risk that an institution’s earnings or the economic value of equity could be adversely impacted by changes in interest rates, foreign exchange rates or other market factors.

Master netting arrangements: An agreement between two counterparties that have multiple contracts with each other that provides for the net settlement of all contracts through a single payment in the event of default or termination of any one contract.

~~Mortgage-backed security (“MBS”):~~ ~~An asset-backed security whose cash flows are backed by the principal and interest payments of a set of mortgage loans.~~

Mortgage servicing rights (“MSRs”): The right to service a mortgage loan when the underlying loan is sold or securitized. Servicing includes collections for principal, interest and escrow payments from borrowers and accounting for and remitting principal and interest payments to investors.

Net charge-off rate: Represents (annualized) net charge-offs divided by average loans held for investment for the period. Negative net charge-offs and related rates are captioned as net recoveries.

Net interest margin: Represents (annualized) net interest income divided by average interest-earning assets for the period.

NSFR Rule: The Federal Banking Agencies issued a rule in October 2020 implementing the net stable funding ratio (“NSFR”). The NSFR measures the stability of our funding profile and requires us to maintain minimum amounts of stable funding to support our assets, commitments and derivatives exposures over a one-year period.

Nonperforming loans: Generally include loans that have been placed on nonaccrual status. We do not report loans classified as held for sale as nonperforming.

Public Funds deposits: Deposits that are derived from a variety of political subdivisions such as school districts and municipalities.

Purchase volume: Consists of purchase transactions, net of returns, for the period, and excludes cash advance and balance transfer transactions.

Rating agency: An independent agency that assesses the credit quality and likelihood of default of an issue or issuer and assigns a rating to that issue or issuer.

Repurchase agreement: An instrument used to raise short-term funds whereby securities are sold with an agreement for the seller to buy back the securities at a later date.

Restructuring charges: Charges associated with the realignment of resources supporting various businesses, primarily consisting of severance and related benefits pursuant to our ongoing benefit programs and impairment of certain assets related to business locations and activities being exited.

Risk-weighted assets: On- and off-balance sheet assets that are assigned to one of several broad risk categories and weighted by factors representing their risk and potential for default.

Securitized debt obligations: A type of asset-backed security and structured credit product constructed from a portfolio of fixed-income assets.



			63			~~Capital One Financial Corporation (COF)~~

~~Table of Contents~~

Stress capital buffer: A component of our new standardized approach capital conservation buffer, which will be recalibrated annually based on the results of our supervisory stress tests.

Subprime: For purposes of lending in our Credit Card business, we generally consider FICO scores of 660 or below, or other equivalent risk scores, to be subprime. For purposes of auto lending in our Consumer Banking business, we generally consider FICO scores of 620 or below to be subprime.



			64			Capital One Financial Corporation (COF)

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Tailoring Rules: In October 2019, the Federal Banking Agencies released final rules that provide for tailored application of certain capital, liquidity and stress-testing requirements across different categories of banking institutions. As a bank holding company with total consolidated assets of at least $250 billion that does not exceed any of the applicable risk-based thresholds, we are a Category III institution under the Tailoring Rules.

Tangible common equity: A non-GAAP financial measure. Common equity less goodwill and intangible assets adjusted for deferred tax liabilities associated with non-tax deductible intangible assets and tax deductible goodwill.

~~Tax Act:~~ ~~The Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018 enacted on December 22, 2017.~~

Troubled debt restructuring (“TDR”): A TDR is deemed to occur when the contractual terms of a loan agreement are modified by granting a concession to a borrower that is experiencing financial difficulty.

Unfunded commitments: Legally binding agreements to provide a defined level of financing until a specified future date.

U.K. PPI Reserve: U.K. payment protection insurance customer refund reserve.

U.S. GAAP: Accounting principles generally accepted in the United States of America. Accounting rules and conventions defining acceptable practices in preparing financial statements in the U.S.

Variable interest entity (“VIE”): An entity that (i) lacks enough equity investment at risk to permit the entity to finance its activities without additional financial support from other parties; (ii) has equity owners that lack the right to make significant decisions affecting the entity’s operations; and/or (iii) has equity owners that do not have an obligation to absorb or the right to receive the entity’s losses or return.



			6465			Capital One Financial Corporation (COF)

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Acronyms

AML: Anti-money laundering

ABS: Asset-backed securities

AOCI: Accumulated other comprehensive income

ARRC: Alternative Reference Rates Committee

ASU: Accounting Standards Update

ASC: Accounting Standards Codification

ATM: Automated teller machine

BHC: Bank holding company

bps: Basis points

CAD: Canadian dollar

CARES: Coronavirus Aid, Relief, and Economic Security

CCAR: Comprehensive Capital Analysis and Review

CCP: Central Counterparty Clearinghouse, or Central Clearinghouse

CDE: Community development entities

CECL: Current expected credit loss

CET1: Common equity Tier 1 capital

CMBS: Commercial mortgage-backed securities

CME: Chicago Mercantile Exchange

COEP: Capital One (Europe) plc

COF: Capital One Financial Corporation

COVID-19: Coronavirus disease of 2019

CVA: Credit valuation adjustment

DVA: Debit valuation adjustment

EUR: Euro

Fannie Mae: Federal National Mortgage Association

FASB: Financial Accounting Standards Board

FCA: U.K. Financial Conduct Authority

FCM: Futures commission merchant

FDIC: Federal Deposit Insurance Corporation

FHLB: Federal Home Loan Banks

Fitch: Fitch Ratings

FOS: Financial Ombudsman Service

Freddie Mac: Federal Home Loan Mortgage Corporation

GAAP: Generally accepted accounting principles in the U.S.

GBP: Pound sterling

Ginnie Mae: Government National Mortgage Association

G-SIB: Global systemically important banks

GSE or Agency: Government-sponsored enterprise

IBA: ICE Benchmark Administration

IBOR: Interbank Offered Rate

IRM: Independent Risk Management

LCH: LCH Group



			66			Capital One Financial Corporation (COF)

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LCR: Liquidity coverage ratio

LIBOR: London Interbank Offered Rate

MDL: Multi-district litigation



			65			~~Capital One Financial Corporation (COF)~~

~~Table of Contents~~

Moody’s: Moody’s Investors Service

MSRs: Mortgage servicing rights

NSFR: Net stable funding ratio

OCC: Office of the Comptroller of the Currency

OTC: Over-the-counter

PCA: Prompt corrective action

PCI: Purchased credit-impaired

PCCR: Purchased credit card relationship

PPI: Payment protection insurance

PPP: Paycheck Protection Program

RMBS: Residential mortgage-backed securities

RSU: Restricted stock unit

S&P: Standard & Poor’s

SEC: U.S. Securities and Exchange Commission

~~SCB:~~ ~~Stress Capital Buffer~~

SOFR: Secured Overnight Financing Rate

TCE: Tangible common equity

TDR: Troubled debt restructuring

U.K.: United Kingdom

U.S.: United States of America

VIE: Variable interest entity

XBRL: Extensible business reporting language



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Item 1. Financial Statements and Notes
			Page



Consolidated Financial Statements			6869
Consolidated Statements of Income			6869
Consolidated Statements of Comprehensive Income			6970
Consolidated Balance Sheets			7071
Consolidated Statements of Changes in Stockholders’ Equity			7172
Consolidated Statements of Cash Flows			7374
Notes to Consolidated Financial Statements			7576
Note 1—Summary of Significant Accounting Policies			7576
Note 2—Investment Securities			7778
Note 3—Loans			8081
Note 4—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments			9092
Note 5—Variable Interest Entities and Securitizations			9496
Note 6—Goodwill and Intangible Assets			98100

Note 7—Deposits and Borrowings			99101
Note 8—Derivative Instruments and Hedging Activities			~~100~~102
Note 9—Stockholders’ Equity			~~110~~112

Note 10—Earnings Per Common Share			~~114~~116



Note 11—Fair Value Measurement			~~115~~117
Note 12—Business Segments and Revenue from Contracts with Customers			~~122~~125
Note 13—Commitments, Contingencies, Guarantees and Others			~~126~~129



			6768			Capital One Financial Corporation (COF)

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CAPITAL ONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Three Months Ended June 30, Six Months Ended June 30,
(Dollars in millions, except per share-related data) 2021 2020 2021 2020
Interest income:
Loans, including loans held for sale $ 5,753 $ 5,820 $ 11,607 $ 12,362
Investment securities 370 482 761 1,012
Other 16 16 32 53
Total interest income 6,139 6,318 12,400 13,427
Interest expense:
Deposits 237 611 506 1,342
Securitized debt obligations 28 56 60 155
Senior and subordinated notes 122 180 251 419
Other borrowings 9 11 18 26
Total interest expense 396 858 835 1,942
Net interest income 5,743 5,460 11,565 11,485
Provision (benefit) for credit losses (1,160) 4,246 (1,983) 9,669
Net interest income after provision for credit losses 6,903 1,214 13,548 1,816
Non-interest income:
Interchange fees, net 1,016 672 1,833 1,424
Service charges and other customer-related fees 384 258 736 585
Net securities gains 0 0 4 0
Other 231 166 349 311
Total non-interest income 1,631 1,096 2,922 2,320
Non-interest expense:
Salaries and associate benefits 1,781 1,704 3,628 3,331
Occupancy and equipment 523 523 995 1,040
Marketing 620 273 1,121 764
Professional services 341 304 633 591
Communications and data processing 315 308 617 610
Amortization of intangibles 5 16 11 38
Other 381 642 701 1,125
Total non-interest expense 3,966 3,770 7,706 7,499
Income (loss) from continuing operations before income taxes 4,568 (1,460) 8,764 (3,363)
Income tax provision (benefit) 1,031 (543) 1,900 (1,106)
Income (loss) from continuing operations, net of tax 3,537 (917) 6,864 (2,257)
Loss from discontinued operations, net of tax (1) (1) (3) (1)
Net income (loss) 3,536 (918) 6,861 (2,258)
Dividends and undistributed earnings allocated to participating securities (30) (1) (58) (4)
Preferred stock dividends (60) (90) (121) (145)
Issuance cost for redeemed preferred stock 0 0 0 (22)
Net income (loss) available to common stockholders $ 3,446 $ (1,009) $ 6,682 $ (2,429)
Basic earnings per common share:
Net income (loss) from continuing operations $ 7.65 $ (2.21) $ 14.70 $ (5.31)
Net income (loss) per basic common share $ 7.65 $ (2.21) $ 14.70 $ (5.31)
Diluted earnings per common share:
Net income (loss) from continuing operations $ 7.62 $ (2.21) $ 14.65 $ (5.31)
Net income (loss) per diluted common share $ 7.62 $ (2.21) $ 14.65 $ (5.31)


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions, except per share-related data)	2021		2020		2021		2020
Interest income:
Loans, including loans held for sale	$	6,205	$	5,758	$	17,812	$	18,120
Investment securities	317		443		1,078		1,455
Other	16		14		48		67
Total interest income	6,538		6,215		18,938		19,642
Interest expense:
Deposits	228		476		734		1,818
Securitized debt obligations	29		43		89		198
Senior and subordinated notes	116		132		367		551
Other borrowings	9		9		27		35
Total interest expense	382		660		1,217		2,602
Net interest income	6,156		5,555		17,721		17,040
Provision (benefit) for credit losses	(342)		331		(2,325)		10,000
Net interest income after provision for credit losses	6,498		5,224		20,046		7,040
Non-interest income:
Interchange fees, net	1,022		775		2,855		2,199
Service charges and other customer-related fees	407		320		1,143		905
Net securities gains	2		25		6		25
Other	243		706		592		1,017
Total non-interest income	1,674		1,826		4,596		4,146
Non-interest expense:
Salaries and associate benefits	1,852		1,719		5,480		5,050
Occupancy and equipment	481		506		1,476		1,546
Marketing	751		283		1,872		1,047
Professional services	358		327		991		918
Communications and data processing	319		310		936		920
Amortization of intangibles	5		14		16		52
Other	420		389		1,121		1,514
Total non-interest expense	4,186		3,548		11,892		11,047
Income from continuing operations before income taxes	3,986		3,502		12,750		139
Income tax provision (benefit)	882		1,096		2,782		(10)
Income from continuing operations, net of tax	3,104		2,406		9,968		149
Income (loss) from discontinued operations, net of tax	0		0		(3)		(1)
Net income	3,104		2,406		9,965		148
Dividends and undistributed earnings allocated to participating securities	(26)		(20)		(84)		(5)
Preferred stock dividends	(79)		(67)		(200)		(212)
Issuance cost for redeemed preferred stock	(12)		0		(12)		(22)
Net income (loss) available to common stockholders	$	2,987	$	2,319	$	9,669	$	(91)
Basic earnings per common share:
Net income (loss) from continuing operations	$	6.81	$	5.07	$	21.53	$	(0.20)
Income (loss) from discontinued operations	0.00		0.00		(0.01)		0.00
Net income (loss) per basic common share	$	6.81	$	5.07	$	21.52	$	(0.20)
Diluted earnings per common share:
Net income (loss) from continuing operations	$	6.78	$	5.06	$	21.45	$	(0.20)
Income (loss) from discontinued operations	0.00		0.00		(0.01)		0.00
Net income (loss) per diluted common share	$	6.78	$	5.06	$	21.44	$	(0.20)

~~See Notes to Consolidated Financial Statements.~~

~~Capital One Financial Corporation (COF)~~

~~Table of Contents~~

~~CAPITAL ONE FINANCIAL CORPORATION~~

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)~~

Three Months Ended June 30, Six Months Ended June 30,
(Dollars in millions) 2021 2020 2021 2020
Net income (loss) $ 3,536 $ (918) $ 6,861 $ (2,258)
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on securities available for sale 51 222 (1,097) 1,446
Net unrealized gains (losses) on hedging relationships (51) 57 (632) 1,431
Foreign currency translation adjustments 9 23 28 (44)
Other 0 0 (1) 0
Other comprehensive income (loss), net of tax 9 302 (1,702) 2,833
Comprehensive income (loss) $ 3,545 $ (616) $ 5,159 $ 575


See Notes to Consolidated Financial Statements.
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CAPITAL ONE FINANCIAL CORPORATION

CONSOLIDATED ~~BALANCE SHEETS~~STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(Dollars in millions, except per share-related data) June 30, 2021 December 31, 2020
Assets:
Cash and cash equivalents:
Cash and due from banks $ 5,312 $ 4,708
Interest-bearing deposits and other short-term investments 29,534 35,801
Total cash and cash equivalents 34,846 40,509
Restricted cash for securitization investors 242 262
Securities available for sale (amortized cost of $100.3 billion and $97.6 billion and allowance for credit losses of $1 million as of both June 30, 2021 and December 31, 2020) 101,766 100,445
Loans held for investment:
Unsecuritized loans held for investment 226,130 225,698
Loans held in consolidated trusts 23,467 25,926
Total loans held for investment 249,597 251,624
Allowance for credit losses (12,346) (15,564)
Net loans held for investment 237,251 236,060
Loans held for sale ($371 million and $596 million carried at fair value as of June 30, 2021 and December 31, 2020, respectively) 6,522 2,710
Premises and equipment, net 4,227 4,287
Interest receivable 1,372 1,471
Goodwill 14,654 14,653
Other assets 22,540 21,205
Total assets $ 423,420 $ 421,602
Liabilities:
Interest payable $ 301 $ 352
Deposits:
Non-interest-bearing deposits 34,994 31,142
Interest-bearing deposits 271,314 274,300
Total deposits 306,308 305,442
Securitized debt obligations 10,561 12,414
Other debt:
Federal funds purchased and securities loaned or sold under agreements to repurchase 845 668
Senior and subordinated notes 24,878 27,382
Other borrowings 59 75
Total other debt 25,782 28,125
Other liabilities 15,844 15,065
Total liabilities 358,796 361,398
Commitments, contingencies and guarantees (see Note 13) 0 0
Stockholders’ equity:
Preferred stock (par value $0.01 per share; 50,000,000 shares authorized; 6,650,000 and 4,975,000 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively) 0 0
Common stock (par value $0.01 per share; 1,000,000,000 shares authorized; 683,559,818 and 679,932,837 shares issued as of June 30, 2021 and December 31, 2020, respectively; 446,113,769 and 458,972,202 shares outstanding as of June 30, 2021 and December 31, 2020, respectively) 7 7
Additional paid-in capital, net 35,472 33,480
Retained earnings 46,461 40,088
Accumulated other comprehensive income 1,792 3,494
Treasury stock, at cost (par value $0.01 per share; 237,446,049 and 220,960,635 shares as of June 30, 2021 and December 31, 2020, respectively) (19,108) (16,865)
Total stockholders’ equity 64,624 60,204
Total liabilities and stockholders’ equity $ 423,420 $ 421,602


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2021		2020		2021		2020
Net income	$	3,104	$	2,406	$	9,965	$	148
Other comprehensive income, net of tax:
Net unrealized gains on securities available for sale	(208)		1		(1,305)		1,447
Net unrealized gains (losses) on hedging relationships	(195)		(175)		(827)		1,256
Foreign currency translation adjustments	(27)		28		1		(16)
Other	(2)		(2)		(3)		(2)
Other comprehensive income (loss), net of tax	(432)		(148)		(2,134)		2,685
Comprehensive income	$	2,672	$	2,258	$	7,831	$	2,833


See Notes to Consolidated Financial Statements.
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CAPITAL ONE FINANCIAL CORPORATION

CONSOLIDATED ~~STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY~~BALANCE SHEETS (UNAUDITED)

(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, 2020 4,975,000 $ 0 679,932,837 $ 7 $ 33,480 $ 40,088 $ 3,494 $ (16,865) $ 60,204
Comprehensive income 3,325 (1,711) 1,614
Dividends—common stock(1)
13,356 0 1 (185) (184)
Dividends—preferred stock (61) (61)
Purchases of treasury stock (575) (575)
Issuances of common stock and restricted stock, net of forfeitures 2,531,966 0 60 60
Exercises of stock options 283,398 0 19 19
Compensation expense for restricted stock units 111 111
Balance as of March 31, 2021 4,975,000 $ 0 682,761,557 $ 7 $ 33,671 $ 43,167 $ 1,783 $ (17,440) $ 61,188
Comprehensive income 3,536 9 3,545
Dividends—common stock(1)
4,954 0 1 (182) (181)
Dividends—preferred stock (60) (60)
Purchases of treasury stock (1,668) (1,668)
Issuances of common stock and restricted stock, net of forfeitures 583,779 0 60 60
Exercises of stock options 209,528 0 15 15
Issuances of preferred stock 1,675,000 0 1,641 1,641
Compensation expense for restricted stock units 84 84
Balance as of June 30, 2021 6,650,000 $ 0 683,559,818 $ 7 $ 35,472 $ 46,461 $ 1,792 $ (19,108) $ 64,624


(Dollars in millions, except per share-related data)	September 30, 2021		December 31, 2020
Assets:
Cash and cash equivalents:
Cash and due from banks	$	5,444	$	4,708
Interest-bearing deposits and other short-term investments	21,180		35,801
Total cash and cash equivalents	26,624		40,509
Restricted cash for securitization investors	234		262
Securities available for sale (amortized cost of $97.0 billion and $97.6 billion and allowance for credit losses of $1 million as of both September 30, 2021 and December 31, 2020)	98,149		100,445
Loans held for investment:
Unsecuritized loans held for investment	238,475		225,698
Loans held in consolidated trusts	22,915		25,926
Total loans held for investment	261,390		251,624
Allowance for credit losses	(11,573)		(15,564)
Net loans held for investment	249,817		236,060
Loans held for sale ($1.7 billion and $596 million carried at fair value as of September 30, 2021 and December 31, 2020, respectively)	6,300		2,710
Premises and equipment, net	4,204		4,287
Interest receivable	1,418		1,471
Goodwill	14,652		14,653
Other assets	23,979		21,205
Total assets	$	425,377	$	421,602

Liabilities:
Interest payable	$	241	$	352
Deposits:
Non-interest-bearing deposits	36,804		31,142
Interest-bearing deposits	269,134		274,300
Total deposits	305,938		305,442
Securitized debt obligations	12,635		12,414
Other debt:
Federal funds purchased and securities loaned or sold under agreements to repurchase	825		668
Senior and subordinated notes	23,983		27,382
Other borrowings	58		75
Total other debt	24,866		28,125
Other liabilities	18,153		15,065
Total liabilities	361,833		361,398
Commitments, contingencies and guarantees (see Note 13)	0		0
Stockholders’ equity:
Preferred stock (par value $0.01 per share; 50,000,000 shares authorized; 6,075,000 and 4,975,000 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively)	0		0
Common stock (par value $0.01 per share; 1,000,000,000 shares authorized; 684,515,909 and 679,932,837 shares issued as of September 30, 2021 and December 31, 2020, respectively; 430,375,948 and 458,972,202 shares outstanding as of September 30, 2021 and December 31, 2020, respectively)	7		7
Additional paid-in capital, net	35,051		33,480
Retained earnings	48,944		40,088
Accumulated other comprehensive income	1,360		3,494
Treasury stock, at cost (par value $0.01 per share; 254,139,961 and 220,960,635 shares as of September 30, 2021 and December 31, 2020, respectively)	(21,818)		(16,865)
Total stockholders’ equity	63,544		60,204
Total liabilities and stockholders’ equity	$	425,377	$	421,602


See Notes to Consolidated Financial Statements.
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CAPITAL ONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)


(Dollars in millions)	(Dollars in millions)	Preferred Stock			Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total 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													Shares	Amount		Shares	Amount
Balance as of December 31, 2019		4,975,000	$	0	672,969,391	$	7	$	32,980	$	40,340	$	1,156	$	(16,472)	$	58,011
Cumulative effects from adoption of the CECL standard										(2,184)		(8)				(2,192)

Balance as of December 31, 2020																		Balance as of December 31, 2020	4,975,000	$	0	679,932,837	$	7	$	33,480	$	40,088	$	3,494	$	(16,865)	$	60,204
Comprehensive income (loss)																		Comprehensive income (loss)									3,325		(1,711)				1,614
Dividends—common stock(1)																		Dividends—common stock(1)				13,356	0		1		(185)						(184)
Dividends—preferred stock																		Dividends—preferred stock									(61)						(61)
Purchases of treasury stock																		Purchases of treasury stock													(575)		(575)
Issuances of common stock and restricted stock, net of forfeitures																		Issuances of common stock and restricted stock, net of forfeitures				2,531,966	0		60								60
Exercises of stock options																		Exercises of stock options				283,398	0		19								19
Compensation expense for restricted stock units																		Compensation expense for restricted stock units							111								111
Balance as of March 31, 2021																		Balance as of March 31, 2021	4,975,000	$	0	682,761,557	$	7	$	33,671	$	43,167	$	1,783	$	(17,440)	$	61,188
Comprehensive income	Comprehensive income									(1,340)		2,531				1,191		Comprehensive income									3,536		9				3,545
Dividends—common stock(1)	Dividends—common stock(1)				23,213	0		2		(187)						(185)		Dividends—common stock(1)				4,954	0		1		(182)						(181)
Dividends—preferred stock	Dividends—preferred stock									(55)						(55)		Dividends—preferred stock									(60)						(60)
Purchases of treasury stock	Purchases of treasury stock													(386)		(386)		Purchases of treasury stock													(1,668)		(1,668)
Issuances of common stock and restricted stock, net of forfeitures	Issuances of common stock and restricted stock, net of forfeitures				2,618,628	0		63								63		Issuances of common stock and restricted stock, net of forfeitures				583,779	0		60								60
Exercises of stock options	Exercises of stock options				559,333	0		20								20		Exercises of stock options				209,528	0		15								15
Issuances of preferred stock	Issuances of preferred stock	1,250,000	0					1,209								1,209		Issuances of preferred stock	1,675,000	0					1,641								1,641
Redemptions of preferred stock		(875,000)	0					(853)		(22)						(875)
Compensation expense for restricted stock units and stock options								29								29
Balance as of March 31, 2020		5,350,000	$	0	676,170,565	$	7	$	33,450	$	36,552	$	3,679	$	(16,858)	$	56,830
Compensation expense for restricted stock units																		Compensation expense for restricted stock units							84								84
Balance as of June 30, 2021																		Balance as of June 30, 2021	6,650,000	$	0	683,559,818	$	7	$	35,472	$	46,461	$	1,792	$	(19,108)	$	64,624

Comprehensive income (loss)	Comprehensive income (loss)									(918)		302				(616)		Comprehensive income (loss)									3,104		(432)				2,672
Dividends—common stock(1)	Dividends—common stock(1)				6,521	0		0		(183)						(183)		Dividends—common stock(1)				6,531	0		1		(530)						(529)
Dividends—preferred stock	Dividends—preferred stock									(90)						(90)		Dividends—preferred stock									(79)						(79)
Purchases of treasury stock	Purchases of treasury stock													(2)		(2)		Purchases of treasury stock													(2,710)		(2,710)
Issuances of common stock and restricted stock, net of forfeitures	Issuances of common stock and restricted stock, net of forfeitures				1,041,311	0		58								58		Issuances of common stock and restricted stock, net of forfeitures				531,629	0		71								71
Exercises of stock options	Exercises of stock options				8,410	0		0								0		Exercises of stock options				417,931	0		20								20
Compensation expense for restricted stock units and stock options								48								48
Balance as of June 30, 2020		5,350,000	$	0	677,226,807	$	7	$	33,556	$	35,361	$	3,981	$	(16,860)	$	56,045
Issuances of preferred stock																		Issuances of preferred stock	425,000	0					412								412
Redemptions of preferred stock																		Redemptions of preferred stock	(1,000,000)	0					(988)		(12)						(1,000)
Compensation expense for restricted stock units																		Compensation expense for restricted stock units							63								63
Balance as of September 30, 2021																		Balance as of September 30, 2021	6,075,000	$	0	684,515,909	$	7	$	35,051	$	48,944	$	1,360	$	(21,818)	$	63,544


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

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CAPITAL ONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)


(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, 2019	4,975,000	$	0	672,969,391	$	7	$	32,980	$	40,340	$	1,156	$	(16,472)	$	58,011
Cumulative effects from adoption of the CECL standard									(2,184)		(8)				(2,192)
Comprehensive income (loss)									(1,340)		2,531				1,191
Dividends—common stock(1)				23,213	0		2		(187)						(185)
Dividends—preferred stock									(55)						(55)
Purchases of treasury stock													(386)		(386)
Issuances of common stock and restricted stock, net of forfeitures				2,618,628	0		63								63
Exercises of stock options				559,333	0		20								20
Issuances of preferred stock	1,250,000	0					1,209								1,209
Redemptions of preferred stock	(875,000)	0					(853)		(22)						(875)
Compensation expense for restricted stock units and stock options							29								29
Balance as of March 31, 2020	5,350,000	$	0	676,170,565	$	7	$	33,450	$	36,552	$	3,679	$	(16,858)	$	56,830
Comprehensive income (loss)									(918)		302				(616)
Dividends—common stock(1)				6,521	0		0		(183)						(183)
Dividends—preferred stock									(90)						(90)
Purchases of treasury stock													(2)		(2)
Issuances of common stock and restricted stock, net of forfeitures				1,041,311	0		58								58
Exercises of stock options				8,410	0		0								0
Compensation expense for restricted stock units and stock options							48								48
Balance as of June 30, 2020	5,350,000	$	0	677,226,807	$	7	$	33,556	$	35,361	$	3,981	$	(16,860)	$	56,045
Comprehensive income (loss)									2,406		(148)				2,258
Dividends—common stock(1)				1,608	0		0		(47)						(47)
Dividends—preferred stock									(67)						(67)
Purchases of treasury stock													(2)		(2)
Issuances of common stock and restricted stock, net of forfeitures				1,073,323	0		63								63
Exercises of stock options				16,591	0		1								1
Issuances of preferred stock	125,000	0					121								121
Compensation expense for restricted stock units and stock options							52								52
Balance as of September 30, 2020	5,475,000	$	0	678,318,329	$	7	$	33,793	$	37,653	$	3,833	$	(16,862)	$	58,424

__________

(1)We declared dividends per share on our common stock of ~~$0.40~~$1.20 and $0.10 in the ~~second~~third quarter of 2021 and 2020, respectively, and ~~$0.80~~$2.00 and $0.90 in the first ~~six~~nine months of 2021 and ~~2020.~~2020, respectively.


See Notes to Consolidated Financial Statements.
	7273	Capital One Financial Corporation (COF)

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CAPITAL ONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


		Six Months Ended June 30,				Nine Months Ended September 30,
(Dollars in millions)	(Dollars in millions)	2021		2020			(Dollars in millions)	2021		2020
Operating activities:	Operating activities:						Operating activities:
Income (loss) from continuing operations, net of tax		$	6,864	$	(2,257)
Income from continuing operations, net of tax							Income from continuing operations, net of tax	$	9,968	$	149
Loss from discontinued operations, net of tax	Loss from discontinued operations, net of tax	(3)		(1)			Loss from discontinued operations, net of tax	(3)		(1)
Net income (loss)		6,861		(2,258)
Net income							Net income	9,965		148
Adjustments to reconcile net income (loss) to net cash from operating activities:	Adjustments to reconcile net income (loss) to net cash from operating activities:						Adjustments to reconcile net income (loss) to net cash from operating activities:
Provision (benefit) for credit losses	Provision (benefit) for credit losses	(1,983)		9,669			Provision (benefit) for credit losses	(2,325)		10,000
Depreciation and amortization, net	Depreciation and amortization, net	1,714		1,804			Depreciation and amortization, net	2,628		2,701
Deferred tax provision (benefit)	Deferred tax provision (benefit)	574		(1,574)			Deferred tax provision (benefit)	580		(1,420)
Net securities losses (gains)	Net securities losses (gains)	(4)		0			Net securities losses (gains)	(6)		(25)
Gain on sales of loans	Gain on sales of loans	(5)		(11)			Gain on sales of loans	(8)		(15)
Stock-based compensation expense	Stock-based compensation expense	206		74			Stock-based compensation expense	270		128
Other (including (gains) and losses from equity investments)	Other (including (gains) and losses from equity investments)	38		(7)			Other (including (gains) and losses from equity investments)	8		(477)
Loans held for sale:	Loans held for sale:						Loans held for sale:
Originations and purchases	Originations and purchases	(3,233)		(4,347)			Originations and purchases	(7,011)		(6,739)
Proceeds from sales and paydowns	Proceeds from sales and paydowns	3,707		4,002			Proceeds from sales and paydowns	6,227		5,833
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:						Changes in operating assets and liabilities:
Changes in interest receivable	Changes in interest receivable	99		184			Changes in interest receivable	59		207
Changes in other assets	Changes in other assets	(3,183)		954			Changes in other assets	(4,833)		1,052
Changes in interest payable	Changes in interest payable	(51)		(59)			Changes in interest payable	(111)		(107)
Changes in other liabilities	Changes in other liabilities	957		783			Changes in other liabilities	2,211		785
Net change from discontinued operations	Net change from discontinued operations	(3)		1			Net change from discontinued operations	(6)		1
Net cash from operating activities	Net cash from operating activities	5,694		9,215			Net cash from operating activities	7,648		12,072
Investing activities:	Investing activities:						Investing activities:

Securities available for sale:	Securities available for sale:						Securities available for sale:
Purchases	Purchases	(18,185)		(14,568)			Purchases	(21,951)		(35,189)
Proceeds from paydowns and maturities	Proceeds from paydowns and maturities	14,142		9,113			Proceeds from paydowns and maturities	20,795		15,593
Proceeds from sales	Proceeds from sales	595		144			Proceeds from sales	1,735		812

Loans:	Loans:						Loans:
Net changes in loans held for investment	Net changes in loans held for investment	(5,160)		9,797			Net changes in loans held for investment	(16,185)		9,083
Principal recoveries of loans previously charged off	Principal recoveries of loans previously charged off	1,308		1,292			Principal recoveries of loans previously charged off	1,901		1,898
Net purchases of premises and equipment	Net purchases of premises and equipment	(341)		(342)			Net purchases of premises and equipment	(504)		(543)
Net cash from acquisition activities	Net cash from acquisition activities	(24)		0			Net cash from acquisition activities	(551)		(7)
Net cash from other investing activities	Net cash from other investing activities	(26)		(377)			Net cash from other investing activities	(286)		(564)
Net cash from investing activities	Net cash from investing activities	(7,691)		5,059			Net cash from investing activities	(15,046)		(8,917)


See Notes to Consolidated Financial Statements.
	7374	Capital One Financial Corporation (COF)

Table of Contents

CAPITAL ONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


		Six Months Ended June 30,				Nine Months Ended September 30,
(Dollars in millions)	(Dollars in millions)	2021		2020			(Dollars in millions)	2021		2020
Financing activities:	Financing activities:						Financing activities:
Deposits and borrowings:	Deposits and borrowings:						Deposits and borrowings:
Changes in deposits	Changes in deposits	$	945	$	41,234		Changes in deposits	$	597	$	42,763
Issuance of securitized debt obligations	Issuance of securitized debt obligations	0		1,248			Issuance of securitized debt obligations	2,991		1,248
Maturities and paydowns of securitized debt obligations	Maturities and paydowns of securitized debt obligations	(1,773)		(3,593)			Maturities and paydowns of securitized debt obligations	(2,638)		(5,752)
Issuance of senior and subordinated notes and long-term FHLB advances	Issuance of senior and subordinated notes and long-term FHLB advances	0		3,987			Issuance of senior and subordinated notes and long-term FHLB advances	996		3,987
Maturities and paydowns of senior and subordinated notes and long-term FHLB advances	Maturities and paydowns of senior and subordinated notes and long-term FHLB advances	(2,085)		(7,156)			Maturities and paydowns of senior and subordinated notes and long-term FHLB advances	(3,851)		(7,156)
Changes in other borrowings	Changes in other borrowings	161		(6,759)			Changes in other borrowings	139		(6,636)
Common stock:	Common stock:						Common stock:
Net proceeds from issuances	Net proceeds from issuances	120		121			Net proceeds from issuances	191		184
Dividends paid	Dividends paid	(365)		(368)			Dividends paid	(894)		(415)
Preferred stock:	Preferred stock:						Preferred stock:
Net proceeds from issuances	Net proceeds from issuances	1,641		1,209			Net proceeds from issuances	2,053		1,330
Dividends paid	Dividends paid	(121)		(145)			Dividends paid	(200)		(212)
Redemptions	Redemptions	0		(875)			Redemptions	(1,000)		(875)
Purchases of treasury stock	Purchases of treasury stock	(2,243)		(388)			Purchases of treasury stock	(4,953)		(390)
Proceeds from share-based payment activities	Proceeds from share-based payment activities	34		20			Proceeds from share-based payment activities	54		21
Net cash from financing activities	Net cash from financing activities	(3,686)		28,535			Net cash from financing activities	(6,515)		28,097
Changes in cash, cash equivalents and restricted cash for securitization investors	Changes in cash, cash equivalents and restricted cash for securitization investors	(5,683)		42,809			Changes in cash, cash equivalents and restricted cash for securitization investors	(13,913)		31,252
Cash, cash equivalents and restricted cash for securitization investors, beginning of the period	Cash, cash equivalents and restricted cash for securitization investors, beginning of the period	40,771		13,749			Cash, cash equivalents and restricted cash for securitization investors, beginning of the period	40,771		13,749
Cash, cash equivalents and restricted cash for securitization investors, end of the period	Cash, cash equivalents and restricted cash for securitization investors, end of the period	$	35,088	$	56,558		Cash, cash equivalents and restricted cash for securitization investors, end of the period	$	26,858	$	45,001
Supplemental cash flow information:	Supplemental cash flow information:						Supplemental cash flow information:
Non-cash items:	Non-cash items:						Non-cash items:
Net transfers from (to) loans held for investment to (from) loans held for sale	Net transfers from (to) loans held for investment to (from) loans held for sale	$	4,575	$	(36)		Net transfers from (to) loans held for investment to (from) loans held for sale	$	4,577	$	2,173

Interest paid	Interest paid	1,145		2,088			Interest paid	1,703		2,944
Income tax paid	Income tax paid	1,013		137			Income tax paid	1,672		625


See Notes to Consolidated Financial Statements.
	7475	Capital One Financial Corporation (COF)

Table of Contents


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”) offer a broad array of financial products and services to consumers, small businesses and commercial clients through digital channels, branches, Cafés and other distribution channels. As of ~~June~~September 30, 2021, our principal subsidiaries included:

•Capital One Bank (USA), National Association (“COBNA”), which offers credit ~~and debit~~ card products along with other lending products and ~~deposit products;~~consumer services; and

•Capital One, National Association (“CONA”), which offers a broad spectrum of banking products and financial services to consumers, small businesses and commercial clients.

The Company is hereafter collectively referred to as “we,” “us” or “our.” COBNA and CONA are collectively referred to as the “Banks.”

We also offer products outside of the United States of America (“U.S.”) principally through Capital One (Europe) plc (“COEP”), an indirect subsidiary of COBNA organized and located in the United Kingdom (“U.K.”), and through a branch of COBNA in Canada. COEP has authority, among other things, to provide credit card loans. Our branch of COBNA in Canada also has the authority to provide credit card loans.

Our principal operations are organized for management reporting purposes into 3 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 recent acquisitions, if any, into our business segments and the allocation methodologies and accounting policies used to derive our business segment results in “Note 12—Business Segments and Revenue from Contracts with Customers.”

Basis of Presentation and Use of Estimates

The accompanying unaudited interim 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. In the opinion of management, all normal, recurring adjustments have been included for a fair statement of this interim financial information. Certain prior period amounts have been reclassified to conform to the current period presentation.

These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements, and related notes thereto, included in Capital One Financial Corporation’s 2020 Annual Report on Form 10-K (“2020 Form 10-K”).



			7576			Capital One Financial Corporation (COF)

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Newly Adopted Accounting Standards During the ~~Six~~Nine Months Ended ~~June~~September 30, 2021

Standard

Guidance

Adoption Timing and Financial Statement Impacts

Income Tax Accounting Simplification

ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes

Issued December 2019

Simplifies various aspects of the guidance on accounting for income taxes.

We adopted this guidance in the first quarter of 2021 using the modified retrospective and prospective methods of adoption.

Our adoption of this standard did not have a material impact on our consolidated financial statements.



			7677			Capital One Financial Corporation (COF)

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NOTE 2—INVESTMENT SECURITIES

The table below presents the amortized cost, gross unrealized gains and losses, and fair value of securities available for sale as of ~~June~~September 30, 2021 and December 31, 2020. Accrued interest receivable of ~~$221~~$227 million and $230 million as of ~~June~~September 30, 2021, and December 31, 2020, respectively, is not included in the table below.

Table 2.1: Investment Securities Available for Sale


		June 30, 2021											September 30, 2021
(Dollars in millions)	(Dollars in millions)	Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		(Dollars in millions)	Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Investment securities available for sale:	Investment securities available for sale:											Investment securities available for sale:
U.S. Treasury securities	U.S. Treasury securities	$	9,211	$	0	$	20	$	0	$	9,231	U.S. Treasury securities	$	9,094	$	0	$	15	$	0	$	9,109
RMBS:	RMBS:											RMBS:
Agency	Agency	76,318		0		1,433		(545)		77,206		Agency	73,924		0		1,325		(617)		74,632
Non-agency	Non-agency	908		(1)		209		0		1,116		Non-agency	844		(1)		206		0		1,049
Total RMBS	Total RMBS	77,226		(1)		1,642		(545)		78,322		Total RMBS	74,768		(1)		1,531		(617)		75,681
Agency CMBS	Agency CMBS	10,781		0		335		(29)		11,087		Agency CMBS	9,973		0		265		(41)		10,197
Other securities(1)	Other securities(1)	3,118		0		8		0		3,126		Other securities(1)	3,154		0		8		0		3,162
Total investment securities available for sale	Total investment securities available for sale	$	100,336	$	(1)	$	2,005	$	(574)	$	101,766	Total investment securities available for sale	$	96,989	$	(1)	$	1,819	$	(658)	$	98,149


	December 31, 2020
(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	$	9,302	$	0	$	16	$	0	$	9,318
RMBS:
Agency	73,248		0		2,326		(108)		75,466
Non-agency	1,035		(1)		204		(1)		1,237
Total RMBS	74,283		(1)		2,530		(109)		76,703
Agency CMBS	11,298		0		448		(11)		11,735
Other securities(1)	2,686		0		3		0		2,689
Total investment securities available for sale	$	97,569	$	(1)	$	2,997	$	(120)	$	100,445

__________

(1)Includes $2.3 billion and $1.8 billion of asset-backed securities (“ABS”) as of ~~June~~September 30, 2021, and December 31, 2020, respectively. The remaining amount is primarily comprised of supranational bonds and foreign government bonds.



			7778			Capital One Financial Corporation (COF)

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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 ~~June~~September 30, 2021 and December 31, 2020. The amounts include securities available for sale without an allowance for credit losses.

Table 2.2: Securities in a Gross Unrealized Loss Position


		June 30, 2021													September 30, 2021
		Less than 12 Months				12 Months or Longer				Total					Less than 12 Months				12 Months or Longer				Total
(Dollars in millions)	(Dollars in millions)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		(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:	Investment securities available for sale without an allowance for credit losses:													Investment securities available for sale without an allowance for credit losses:

RMBS:	RMBS:													RMBS:
Agency	Agency	$	34,165	$	(485)	$	1,685	$	(59)	$	35,850	$	(544)	Agency	$	35,415	$	(519)	$	4,068	$	(98)	$	39,483	$	(617)
Non-agency	Non-agency	6		0		0		0		6		0		Non-agency	0		0		1		0		1		0
Total RMBS	Total RMBS	34,171		(485)		1,685		(59)		35,856		(544)		Total RMBS	35,415		(519)		4,069		(98)		39,484		(617)
Agency CMBS	Agency CMBS	2,028		(27)		223		(2)		2,251		(29)		Agency CMBS	1,746		(26)		561		(15)		2,307		(41)
Other securities(1)	Other securities(1)	529		0		0		0		529		0		Other securities(1)	470		0		0		0		470		0
Total investment securities available for sale in a gross unrealized loss position without an allowance for credit losses(2)	Total investment securities available for sale in a gross unrealized loss position without an allowance for credit losses(2)	$	36,728	$	(512)	$	1,908	$	(61)	$	38,636	$	(573)	Total investment securities available for sale in a gross unrealized loss position without an allowance for credit losses(2)	$	37,631	$	(545)	$	4,630	$	(113)	$	42,261	$	(658)


	December 31, 2020
	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:

RMBS:
Agency	$	7,424	$	(57)	$	1,791	$	(51)	$	9,215	$	(108)
Non-agency	12		0		0		0		12		0
Total RMBS	7,436		(57)		1,791		(51)		9,227		(108)
Agency CMBS	1,545		(7)		267		(4)		1,812		(11)
Other securities(1)	114		0		1		0		115		0
Total investment securities available for sale in a gross unrealized loss position without an allowance for credit losses(2)	$	9,095	$	(64)	$	2,059	$	(55)	$	11,154	$	(119)

__________

(1) Includes primarily other asset-backed securities, foreign government bonds, and supranational bonds.

(2) Consists of approximately~~570~~ 540 and 320 securities in gross unrealized loss positions as of ~~June~~September 30, 2021 and December 31, 2020, respectively.



			7879			Capital One Financial Corporation (COF)

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Maturities and Yields of Investment Securities

The table below summarizes, by major security type, the contractual maturities and weighted-average yields of our investment securities as of ~~June~~September 30, 2021. Because 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 and is calculated based on the amortized cost of each security.

Table 2.3: Contractual Maturities and Weighted-Average Yields of Securities


		June 30, 2021																September 30, 2021
(Dollars in millions)	(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			(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:	Fair value of securities available for sale:																Fair value of securities available for sale:
U.S. Treasury securities	U.S. Treasury securities	$	1,401		$	7,830		$	0		$	0		$	9,231		U.S. Treasury securities	$	5,203		$	3,906		$	0		$	0		$	9,109
RMBS(1):	RMBS(1):																RMBS(1):
Agency	Agency	0			97			1,139			75,970			77,206			Agency	0			137			1,106			73,389			74,632
Non-agency	Non-agency	0			0			0			1,116			1,116			Non-agency	0			0			0			1,049			1,049
Total RMBS	Total RMBS	0			97			1,139			77,086			78,322			Total RMBS	0			137			1,106			74,438			75,681
Agency CMBS(1)	Agency CMBS(1)	399			2,666			5,133			2,889			11,087			Agency CMBS(1)	570			2,489			4,462			2,676			10,197
Other securities	Other securities	298			2,560			268			0			3,126			Other securities	252			2,585			325			0			3,162
Total securities available for sale	Total securities available for sale	$	2,098		$	13,153		$	6,540		$	79,975		$	101,766		Total securities available for sale	$	6,025		$	9,117		$	5,893		$	77,114		$	98,149
Amortized cost of securities available for sale	Amortized cost of securities available for sale	$	2,096		$	13,087		$	6,376		$	78,777		$	100,336		Amortized cost of securities available for sale	$	6,019		$	9,062		$	5,761		$	76,147		$	96,989
Weighted-average yield for securities available for sale	Weighted-average yield for securities available for sale	0.66		%	0.53		%	1.51		%	1.77		%	1.57		%	Weighted-average yield for securities available for sale	0.31		%	0.72		%	1.66		%	1.71		%	1.53		%

__________

(1)As of ~~June~~September 30, 2021, the weighted-average expected maturities of RMBS and Agency CMBS ~~are 5.4~~were 5.3 years and ~~5.6~~5.5 years, respectively.

Net Securities Gains or Losses and Proceeds from Sales

~~Total~~For the three and nine months ended September 30, 2021, total proceeds from sales of our securities were ~~$595 million,~~$1.1 billion and $1.7 billion, respectively, with gains of $4$2 million ~~for~~and $6 million, respectively. For the ~~six~~three and nine months ended ~~June 30, 2021. We had 0 sales of securities both for the three months ended June 30, 2021 and 2020. For the six months ended June~~September 30, 2020, total proceeds from the sale of our securities were ~~$144~~$668 million and ~~we recognized less than $1~~$812 million respectively, with gains of ~~gains.~~$25 million in both periods.

Securities Pledged and Received

We pledged investment securities totaling ~~$19.2~~$19.6 billion and $16.5 billion as of ~~June~~September 30, 2021 and December 31, 2020, respectively. These securities are primarily pledged to secure FHLB advances and Public Funds deposits, as well as for other purposes as required or permitted by law. We accepted pledges of securities with a fair value of approximately $1 million as of both ~~June~~September 30, 2021 and December 31, 2020, related to our derivative transactions.



			7980			Capital One Financial Corporation (COF)

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NOTE 3—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 this section 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. Amounts include the impacts of COVID-19 customer assistance programs where applicable.

Accrued interest receivable of $1.2 billion as of both ~~June~~September 30, 2021 and December 31, 2020, 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 ~~June~~September 30, 2021 and December 31, 2020. The delinquency aging includes all past due loans, both performing and nonperforming.

Table 3.1: Loan Portfolio Composition and Aging Analysis


		June 30, 2021																			September 30, 2021
					Delinquent Loans																		Delinquent Loans
(Dollars in millions)	(Dollars in millions)	Current			30-59 Days			60-89 Days			> 90 Days			Total Delinquent Loans			Total Loans			(Dollars in millions)	Current		30-59 Days			60-89 Days			> 90 Days			Total Delinquent Loans			Total Loans
Credit Card:	Credit Card:																			Credit Card:
Domestic credit card	Domestic credit card	$	93,711		$	525		$	317		$	756		$	1,598		$	95,309		Domestic credit card	$	97,346	$	646		$	425		$	841		$	1,912		$	99,258
International card businesses	International card businesses	5,536			67			37			68			172			5,708			International card businesses	5,579		72			45			76			193			5,772
Total credit card	Total credit card	99,247			592			354			824			1,770			101,017			Total credit card	102,925		718			470			917			2,105			105,030
Consumer Banking:	Consumer Banking:																			Consumer Banking:
Auto	Auto	69,222			1,717			645			129			2,491			71,713			Auto	71,770		1,996			769			181			2,946			74,716
Retail banking	Retail banking	2,999			21			8			18			47			3,046			Retail banking	2,347		26			5			18			49			2,396
Total consumer banking	Total consumer banking	72,221			1,738			653			147			2,538			74,759			Total consumer banking	74,117		2,022			774			199			2,995			77,112
Commercial Banking:	Commercial Banking:																			Commercial Banking:
Commercial and multifamily real estate	Commercial and multifamily real estate	29,476			4			23			113			140			29,616			Commercial and multifamily real estate	32,973		72			1			50			123			33,096
Commercial and industrial	Commercial and industrial	43,924			201			25			55			281			44,205			Commercial and industrial	45,808		181			134			29			344			46,152
Total commercial banking	Total commercial banking	73,400			205			48			168			421			73,821			Total commercial banking	78,781		253			135			79			467			79,248
Total loans(1)	Total loans(1)	$	244,868		$	2,535		$	1,055		$	1,139		$	4,729		$	249,597		Total loans(1)	$	255,823	$	2,993		$	1,379		$	1,195		$	5,567		$	261,390
% of Total loans	% of Total loans	98.11		%	1.01		%	0.42		%	0.46		%	1.89		%	100.00		%	% of Total loans	97.87 %		1.14		%	0.53		%	0.46		%	2.13		%	100.00 %



			8081			Capital One Financial Corporation (COF)

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	December 31, 2020
				Delinquent Loans
(Dollars in millions)	Current			30-59 Days			60-89 Days			> 90 Days			Total Delinquent Loans			Total Loans
Credit Card:
Domestic credit card	$	96,116		$	755		$	464		$	1,169		$	2,388		$	98,504
International card businesses	8,218			90			58			86			234			8,452
Total credit card	104,334			845			522			1,255			2,622			106,956
Consumer Banking:
Auto	62,381			2,252			907			222			3,381			65,762
Retail banking	3,064			28			19			15			62			3,126
Total consumer banking	65,445			2,280			926			237			3,443			68,888
Commercial Banking:
Commercial and multifamily real estate	30,340			136			22			183			341			30,681
Commercial and industrial	44,941			69			15			74			158			45,099
Total commercial banking	75,281			205			37			257			499			75,780
Total loans(1)	$	245,060		$	3,330		$	1,485		$	1,749		$	6,564		$	251,624
% of Total loans	97.39		%	1.32		%	0.59		%	0.70		%	2.61		%	100.00		%

__________

(1)Loans include unamortized premiums and discounts, and unamortized deferred fees and costs totaling ~~$1.3~~$1.4 billion and $1.1 billion as of ~~June~~September 30, 2021 and December 31, 2020, respectively.



			82			Capital One Financial Corporation (COF)

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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 ~~June~~September 30, 2021 and December 31, 2020. Nonperforming loans generally include loans that have been placed on nonaccrual status.

Table 3.2: 90+ Day Delinquent Loans Accruing Interest and Nonperforming Loans


		June 30, 2021									December 31, 2020										September 30, 2021									December 31, 2020
(Dollars in millions)	(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			(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:	Credit Card:																			Credit Card:
Domestic credit card	Domestic credit card	$	756		N/A			$	0		$	1,169		N/A			$	0		Domestic credit card	$	841		N/A			$	0		$	1,169		N/A			$	0
International card businesses	International card businesses	65			$	12		0			82			$	21		0			International card businesses	74			$	9		0			82			$	21		0
Total credit card	Total credit card	821			12			0			1,251			21			0			Total credit card	915			9			0			1,251			21			0
Consumer Banking:	Consumer Banking:																			Consumer Banking:
Auto	Auto	0			209			0			0			294			0			Auto	0			270			0			0			294			0
Retail banking	Retail banking	0			53			20			0			30			0			Retail banking	0			53			19			0			30			0
Total consumer banking	Total consumer banking	0			262			20			0			324			0			Total consumer banking	0			323			19			0			324			0
Commercial Banking:	Commercial Banking:																			Commercial Banking:
Commercial and multifamily real estate	Commercial and multifamily real estate	2			301			249			51			200			184			Commercial and multifamily real estate	0			287			265			51			200			184
Commercial and industrial	Commercial and industrial	0			458			280			0			450			265			Commercial and industrial	7			314			233			0			450			265
Total commercial banking	Total commercial banking	2			759			529			51			650			449			Total commercial banking	7			601			498			51			650			449
Total	Total	$	823		$	1,033		$	549		$	1,302		$	995		$	449		Total	$	922		$	933		$	517		$	1,302		$	995		$	449
% of Total loans held for investment	% of Total loans held for investment	0.3		%	0.4		%	0.2		%	0.5		%	0.4		%	0.2		%	% of Total loans held for investment	0.35		%	0.35		%	0.20		%	0.52		%	0.40		%	0.18		%

__________

(1)We recognized interest income for loans classified as nonperforming of $3$1 million and $8$21 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, and $5$4 million and ~~$11~~$22 million for the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively.



			81			~~Capital One Financial Corporation (COF)~~

~~Table of Contents~~

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 unemployment rates and home values, 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.



			83			Capital One Financial Corporation (COF)

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The table below presents our credit card portfolio by delinquency status as of ~~June~~September 30, 2021 and December 31, 2020.

Table 3.3: Credit Card Delinquency Status


		June 30, 2021						December 31, 2020							September 30, 2021						December 31, 2020
(Dollars in millions)	(Dollars in millions)	Revolving Loans		Revolving Loans Converted to Term		Total		Revolving Loans		Revolving Loans Converted to Term		Total		(Dollars in millions)	Revolving Loans		Revolving Loans Converted to Term		Total		Revolving Loans		Revolving Loans Converted to Term		Total
Credit Card:	Credit Card:													Credit Card:
Domestic credit card:	Domestic credit card:													Domestic credit card:
Current	Current	$	93,304	$	407	$	93,711	$	95,629	$	487	$	96,116	Current	$	96,977	$	369	$	97,346	$	95,629	$	487	$	96,116
30-59 days	30-59 days	512		13		525		734		21		755		30-59 days	632		14		646		734		21		755
60-89 days	60-89 days	308		9		317		451		13		464		60-89 days	417		8		425		451		13		464
Greater than 90 days	Greater than 90 days	747		9		756		1,155		14		1,169		Greater than 90 days	832		9		841		1,155		14		1,169
Total domestic credit card	Total domestic credit card	94,871		438		95,309		97,969		535		98,504		Total domestic credit card	98,858		400		99,258		97,969		535		98,504

International card businesses:	International card businesses:													International card businesses:
Current	Current	5,484		52		5,536		8,152		66		8,218		Current	5,534		45		5,579		8,152		66		8,218
30-59 days	30-59 days	61		6		67		79		11		90		30-59 days	67		5		72		79		11		90
60-89 days	60-89 days	33		4		37		47		11		58		60-89 days	41		4		45		47		11		58
Greater than 90 days	Greater than 90 days	64		4		68		76		10		86		Greater than 90 days	72		4		76		76		10		86
Total international card businesses	Total international card businesses	5,642		66		5,708		8,354		98		8,452		Total international card businesses	5,714		58		5,772		8,354		98		8,452
Total credit card	Total credit card	$	100,513	$	504	$	101,017	$	106,323	$	633	$	106,956	Total credit card	$	104,572	$	458	$	105,030	$	106,323	$	633	$	106,956



			8284			Capital One Financial Corporation (COF)

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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, such as unemployment rates, gross domestic product and home values, as well as consumers’ financial condition, all of which can have a material effect on credit performance. The key indicator we monitor 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 ~~June~~September 30, 2021 and December 31, 2020. We present our auto loan portfolio by FICO scores at origination and our retail banking loan portfolio by delinquency status, which includes all past due loans, both performing and nonperforming.

Table 3.4: Consumer Banking Portfolio by Credit Quality Indicator


		June 30, 2021																					September 30, 2021
		Term Loans by Vintage Year																					Term Loans by Vintage Year
(Dollars in millions)	(Dollars in millions)	2021		2020		2019		2018		2017		Prior		Total Term Loans		Revolving Loans		Revolving Loans Converted to Term		Total		(Dollars in millions)	2021		2020		2019		2018		2017		Prior		Total Term Loans		Revolving Loans		Revolving Loans Converted to Term		Total

Auto—At origination FICO scores:(1)	Auto—At origination FICO scores:(1)																					Auto—At origination FICO scores:(1)
Greater than 660	Greater than 660	$	11,276	$	10,874	$	6,258	$	3,396	$	1,855	$	683	$	34,342	$	0	$	0	$	34,342	Greater than 660	$	16,685	$	9,696	$	5,448	$	2,860	$	1,475	$	462	$	36,626	$	0	$	0	$	36,626
621-660	621-660	4,130		4,752		2,817		1,496		815		326		14,336		0		0		14,336		621-660	6,093		4,212		2,435		1,276		666		231		14,913		0		0		14,913
620 or below	620 or below	5,536		7,988		4,960		2,509		1,404		638		23,035		0		0		23,035		620 or below	7,949		7,131		4,321		2,150		1,161		465		23,177		0		0		23,177
Total auto	Total auto	20,942		23,614		14,035		7,401		4,074		1,647		71,713		0		0		71,713		Total auto	30,727		21,039		12,204		6,286		3,302		1,158		74,716		0		0		74,716

Retail banking—Delinquency status:	Retail banking—Delinquency status:																					Retail banking—Delinquency status:
Current	Current	511		745		210		198		195		597		2,456		535		8		2,999		Current	420		324		184		185		187		544		1,844		497		6		2,347
30-59 days	30-59 days	0		0		0		0		0		3		3		18		0		21		30-59 days	0		1		0		0		0		4		5		20		1		26
60-89 days	60-89 days	0		0		0		0		1		4		5		3		0		8		60-89 days	0		0		0		0		0		3		3		2		0		5
Greater than 90 days	Greater than 90 days	0		0		0		1		2		4		7		10		1		18		Greater than 90 days	0		1		0		1		1		5		8		9		1		18
Total retail banking(2)	Total retail banking(2)	511		745		210		199		198		608		2,471		566		9		3,046		Total retail banking(2)	420		326		184		186		188		556		1,860		528		8		2,396
Total consumer banking	Total consumer banking	$	21,453	$	24,359	$	14,245	$	7,600	$	4,272	$	2,255	$	74,184	$	566	$	9	$	74,759	Total consumer banking	$	31,147	$	21,365	$	12,388	$	6,472	$	3,490	$	1,714	$	76,576	$	528	$	8	$	77,112



			8385			Capital One Financial Corporation (COF)

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	December 31, 2020
	Term Loans by Vintage Year
(Dollars in millions)	2020		2019		2018		2017		2016		Prior		Total Term Loans		Revolving Loans		Revolving Loans Converted to Term		Total

Auto—At origination FICO scores:(1)
Greater than 660	$	13,352	$	8,091	$	4,675	$	2,810	$	1,168	$	203	$	30,299	$	0	$	0	$	30,299
621-660	5,781		3,631		2,003		1,172		488		109		13,184		0		0		13,184
620 or below	9,550		6,298		3,317		1,985		886		243		22,279		0		0		22,279
Total auto	28,683		18,020		9,995		5,967		2,542		555		65,762		0		0		65,762

Retail banking—Delinquency status:
Current	1,041		233		206		222		167		537		2,406		651		7		3,064
30-59 days	0		0		7		1		2		2		12		15		1		28
60-89 days	0		0		1		0		5		4		10		8		1		19
Greater than 90 days	0		0		0		1		1		4		6		9		0		15
Total retail banking(2)	1,041		233		214		224		175		547		2,434		683		9		3,126
Total consumer banking	$	29,724	$	18,253	$	10,209	$	6,191	$	2,717	$	1,102	$	68,196	$	683	$	9	$	68,888

__________

(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.

(2)Includes PPP loans of ~~$1.1 billion~~$538 million and $919 million as of ~~June~~September 30, 2021 and December 31, 2020, ~~respectively.~~respectively.

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 for commercial loans. 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 also 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.



			8486			Capital One Financial Corporation (COF)

Table of Contents

The following table presents our commercial banking portfolio of loans held for investment by internal risk ratings as of ~~June~~September 30, 2021 and December 31, 2020. The internal risk rating status includes all past due loans, both performing and nonperforming.

Table 3.5: Commercial Banking Portfolio by Internal Risk Ratings


		June 30, 2021																					September 30, 2021
		Term Loans by Vintage Year																					Term Loans by Vintage Year
(Dollars in millions)	(Dollars in millions)	2021		2020		2019		2018		2017		Prior		Total Term Loans		Revolving Loans		Revolving Loans Converted to Term		Total		(Dollars in millions)	2021		2020		2019		2018		2017		Prior		Total Term Loans		Revolving Loans		Revolving Loans Converted to Term		Total
Internal risk rating:(1)	Internal risk rating:(1)																					Internal risk rating:(1)
Commercial and multifamily real estate	Commercial and multifamily real estate																					Commercial and multifamily real estate
Noncriticized	Noncriticized	$	1,636	$	3,437	$	4,331	$	2,956	$	1,025	$	4,838	$	18,223	$	7,983	$	0	$	26,206	Noncriticized	$	3,663	$	3,320	$	3,984	$	2,583	$	924	$	4,455	$	18,929	$	10,950	$	0	$	29,879
Criticized performing	Criticized performing	156		291		426		381		310		1,459		3,023		61		25		3,109		Criticized performing	216		276		406		334		237		1,335		2,804		101		25		2,930
Criticized nonperforming	Criticized nonperforming	0		0		8		29		10		254		301		0		0		301		Criticized nonperforming	0		0		8		29		10		240		287		0		0		287
Total commercial and multifamily real estate	Total commercial and multifamily real estate	1,792		3,728		4,765		3,366		1,345		6,551		21,547		8,044		25		29,616		Total commercial and multifamily real estate	3,879		3,596		4,398		2,946		1,171		6,030		22,020		11,051		25		33,096
Commercial and industrial	Commercial and industrial																					Commercial and industrial
Noncriticized	Noncriticized	4,905		8,160		6,730		3,563		2,305		4,001		29,664		11,596		15		41,275		Noncriticized	8,064		7,519		6,200		3,219		1,913		3,677		30,592		12,677		70		43,339
Criticized performing	Criticized performing	87		169		844		275		163		200		1,738		734		0		2,472		Criticized performing	150		169		881		260		184		153		1,797		702		0		2,499
Criticized nonperforming	Criticized nonperforming	47		62		57		74		29		21		290		168		0		458		Criticized nonperforming	43		57		83		42		8		18		251		63		0		314
Total commercial and industrial	Total commercial and industrial	5,039		8,391		7,631		3,912		2,497		4,222		31,692		12,498		15		44,205		Total commercial and industrial	8,257		7,745		7,164		3,521		2,105		3,848		32,640		13,442		70		46,152
Total commercial banking(2)	Total commercial banking(2)	$	6,831	$	12,119	$	12,396	$	7,278	$	3,842	$	10,773	$	53,239	$	20,542	$	40	$	73,821	Total commercial banking(2)	$	12,136	$	11,341	$	11,562	$	6,467	$	3,276	$	9,878	$	54,660	$	24,493	$	95	$	79,248


	December 31, 2020
	Term Loans by Vintage Year
(Dollars in millions)	2020		2019		2018		2017		2016		Prior		Total Term Loans		Revolving Loans		Revolving Loans Converted to Term		Total
Internal risk rating:(1)
Commercial and multifamily real estate
Noncriticized	$	3,791	$	4,932	$	3,232	$	1,437	$	1,649	$	4,904	$	19,945	$	7,114	$	0	$	27,059
Criticized performing	320		446		515		355		391		1,258		3,285		112		25		3,422
Criticized nonperforming	0		11		30		6		3		150		200		0		0		200
Total commercial and multifamily real estate	4,111		5,389		3,777		1,798		2,043		6,312		23,430		7,226		25		30,681
Commercial and industrial
Noncriticized	9,761		7,890		4,043		2,717		1,832		3,034		29,277		11,548		80		40,905
Criticized performing	316		794		521		252		106		215		2,204		1,498		42		3,744
Criticized nonperforming	74		108		25		51		9		0		267		183		0		450
Total commercial and industrial	10,151		8,792		4,589		3,020		1,947		3,249		31,748		13,229		122		45,099
Total commercial banking(2)	$	14,262	$	14,181	$	8,366	$	4,818	$	3,990	$	9,561	$	55,178	$	20,455	$	147	$	75,780

__________

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

(2)Includes PPP loans of ~~$296~~$182 million and $238 million as of ~~June~~September 30, 2021 and December 31, 2020, respectively.



			8587			Capital One Financial Corporation (COF)

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Troubled Debt Restructurings

Additional guidance issued by the Federal Banking Agencies and contained in the Coronavirus Aid, Relief, and Economic Security Act provides banking organizations with troubled debt restructurings (“TDRs”) relief for modifications of current borrowers impacted by the COVID-19 pandemic. In adherence with the guidance, we assessed all loan modifications introduced to current borrowers in response to the COVID-19 pandemic through ~~June~~September 30, 2021, that would have been designated as TDRs under our existing policies, and followed guidance that any such eligible loan modifications made on a temporary and good faith basis are not considered TDRs. We consider the impact of all loan modifications, including those classified as TDRs and those offered in response to the COVID-19 pandemic, when estimating the credit quality of our loan portfolio and establishing allowance levels. For our Commercial Banking customers, enrollment in a customer assistance program is also considered in the assignment of an internal risk rating.

Total recorded TDRs were ~~$1.8~~$1.7 billion and $2.1 billion as of ~~June~~September 30, 2021 and December 31, 2020, respectively. TDRs classified as performing in our credit card and consumer banking loan portfolios totaled ~~$1.2~~$1.1 billion and $1.3 billion as of ~~June~~September 30, 2021 and December 31, 2020, respectively. TDRs classified as performing in our commercial banking loan portfolio totaled ~~$243~~$231 million and $442 million as of ~~June~~September 30, 2021 and December 31, 2020, respectively. Commitments to lend additional funds on loans modified in TDRs totaled $164 million and $173 million as of ~~both June~~September 30, 2021 and December 31, ~~2020.~~2020, respectively.

Loans Modified in TDRs

As part of our loan modification programs to borrowers experiencing financial difficulty, we may provide multiple concessions to minimize our economic loss and improve long-term loan performance and collectability. The following tables present the major modification types, amortized cost amounts and financial effects of loans modified in TDRs during the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020.

Table 3.6: Troubled Debt Restructurings


				Three Months Ended June 30, 2021							Three Months Ended September 30, 2021
				Reduced Interest Rate				Term Extension					Reduced Interest Rate				Term Extension
(Dollars in millions)	(Dollars in millions)	Total Loans Modified(1)		% of TDR Activity(2)		Average Rate Reduction		% of TDR Activity(2)		Average Term Extension (Months)		(Dollars in millions)	Total Loans Modified(1)		% of TDR Activity(2)		Average Rate Reduction		% of TDR Activity(2)		Average Term Extension (Months)
Credit Card:	Credit Card:											Credit Card:
Domestic credit card	Domestic credit card	$	33	100	%	16.07	%	0	%	0		Domestic credit card	$	37	100	%	15.80	%	0	%	0
International card businesses	International card businesses	27		100		27.45		0		0		International card businesses	28		100		27.75		0		0
Total credit card	Total credit card	60		100		21.22		0		0		Total credit card	65		100		20.90		0		0
Consumer Banking:	Consumer Banking:											Consumer Banking:
Auto	Auto	65		39		8.62		91		4		Auto	89		48		8.54		92		4
Retail banking		1		0		0.00		100		41

Total consumer banking	Total consumer banking	66		38		8.62		91		4		Total consumer banking	89		48		8.54		92		4
Commercial Banking:	Commercial Banking:											Commercial Banking:
Commercial and multifamily real estate	Commercial and multifamily real estate	0		0		0.00		0		0		Commercial and multifamily real estate	21		14		2.50		100		12
Commercial and industrial	Commercial and industrial	34		0		0.00		56		17		Commercial and industrial	4		0		0.00		100		4
Total commercial banking	Total commercial banking	34		0		0.00		56		17		Total commercial banking	25		12		2.50		100		11
Total	Total	$	160	53		9.38		49		3		Total	$	179	61		68.95		59		6



			8688			Capital One Financial Corporation (COF)

Table of Contents


				Six Months Ended June 30, 2021							Nine Months Ended September 30, 2021
				Reduced Interest Rate				Term Extension					Reduced Interest Rate				Term Extension				Balance Reduction
(Dollars in millions)	(Dollars in millions)	Total Loans Modified(1)		% of TDR Activity(2)		Average Rate Reduction		% of TDR Activity(2)		Average Term Extension (Months)		(Dollars in millions)	Total Loans Modified(1)		% of TDR Activity(2)		Average Rate Reduction		% of TDR Activity(2)		Average Term Extension (Months)	% of TDR Activity(2)		Gross Balance Reduction
Credit Card:	Credit Card:											Credit Card:
Domestic credit card	Domestic credit card	$	77	100	%	16.10	%	0	%	0		Domestic credit card	$	114	100	%	16.00	%	0	%	0	0	%	$	0
International card businesses	International card businesses	66		100		27.62		0		0		International card businesses	94		100		27.66		0		0	0		0
Total credit card	Total credit card	143		100		21.43		0		0		Total credit card	208		100		21.26		0		0	0		0
Consumer Banking:	Consumer Banking:											Consumer Banking:
Auto	Auto	180		36		8.87		94		3		Auto	269		40		8.74		93		4	0		1
Retail banking	Retail banking	1		31		3.77		69		28		Retail banking	1		20		2.55		36		67	0		0
Total consumer banking	Total consumer banking	181		36		8.85		94		3		Total consumer banking	270		40		8.72		93		4	0		1
Commercial Banking:	Commercial Banking:											Commercial Banking:
Commercial and multifamily real estate	Commercial and multifamily real estate	20		0		0.00		100		14		Commercial and multifamily real estate	41		7		1.29		100		13	0		0
Commercial and industrial	Commercial and industrial	78		0		0.00		38		8		Commercial and industrial	82		0		0.00		41		8	0		0
Total commercial banking	Total commercial banking	98		0		0.00		51		11		Total commercial banking	123		2		1.29		61		11	0		0
Total	Total	$	422	49		8.64		52		3		Total	$	601	53		16.84		54		5	0		$	1


		Total Loans Modified(1)		Three Months Ended June 30, 2020														Three Months Ended September 30, 2020
				Reduced Interest Rate				Term Extension			Balance Reduction							Reduced Interest Rate				Term Extension			Balance Reduction
(Dollars in millions)	(Dollars in millions)			% of TDR Activity(2)		Average Rate Reduction		% of TDR Activity(2)		Average Term Extension (Months)	% of TDR Activity(2)		Gross Balance Reduction		(Dollars in millions)	Total Loans Modified(1)		% of TDR Activity(2)		Average Rate Reduction		% of TDR Activity(2)		Average Term Extension (Months)	% of TDR Activity(2)		Gross Balance Reduction
Credit Card:	Credit Card:														Credit Card:
Domestic credit card	Domestic credit card	$	56	100	%	15.41	%	0	%	0	0	%	$	0	Domestic credit card	$	50	100	%	15.53	%	0	%	0	0	%	$	0
International card businesses	International card businesses	28		100		26.56		0		0	0		0		International card businesses	39		100		27.89		0		0	0		0
Total credit card	Total credit card	84		100		19.14		0		0	0		0		Total credit card	89		100		20.94		0		0	0		0
Consumer Banking:	Consumer Banking:														Consumer Banking:
Auto	Auto	137		5		4.12		95		3	0		0		Auto	133		3		4.83		94		2	0		1
Retail banking	Retail banking	1		10		8.37		59		4	0		0		Retail banking	1		85		3.24		15		61	0		0
Total consumer banking	Total consumer banking	138		5		4.19		95		3	0		0		Total consumer banking	134		4		4.75		94		2	0		1
Commercial Banking:	Commercial Banking:														Commercial Banking:
Commercial and multifamily real estate	Commercial and multifamily real estate	9		0		0.00		100		7	0		0		Commercial and multifamily real estate	57		0		0.00		100		4	0		0
Commercial and industrial	Commercial and industrial	181		0		0.00		52		8	9		7		Commercial and industrial	201		0		0.00		54		32	0		0
Total commercial banking	Total commercial banking	190		0		0.00		55		8	8		7		Total commercial banking	258		0		0.00		64		23	0		0
Total	Total	$	412	22		17.96		57		5	4		$	7	Total	$	481	19		20.08		61		14	0		$	1



			8789			Capital One Financial Corporation (COF)

Table of Contents


		Total Loans Modified(1)		Six Months Ended June 30, 2020														Nine Months Ended September 30, 2020
				Reduced Interest Rate				Term Extension			Balance Reduction							Reduced Interest Rate				Term Extension			Balance Reduction
(Dollars in millions)	(Dollars in millions)			% of TDR Activity(2)		Average Rate Reduction		% of TDR Activity(2)		Average Term Extension (Months)	% of TDR Activity(2)		Gross Balance Reduction		(Dollars in millions)	Total Loans Modified(1)		% of TDR Activity(2)		Average Rate Reduction		% of TDR Activity(2)		Average Term Extension (Months)	% of TDR Activity(2)		Gross Balance Reduction
Credit Card:	Credit Card:														Credit Card:
Domestic credit card	Domestic credit card	$	145	100	%	16.05	%	0	%	0	0	%	$	0	Domestic credit card	$	195	100	%	15.92	%	0	%	0	0	%	$	0
International card businesses	International card businesses	79		100		27.05		0		0	0		0		International card businesses	118		100		27.33		0		0	0		0
Total credit card	Total credit card	224		100		19.94		0		0	0		0		Total credit card	313		100		20.22		0		0	0		0
Consumer Banking:	Consumer Banking:														Consumer Banking:
Auto	Auto	260		12		3.51		95		4	0		0		Auto	393		9		3.68		95		3	0		1
Retail banking	Retail banking	4		4		11.42		15		4	0		0		Retail banking	5		9		10.85		15		8	0		0
Total consumer banking	Total consumer banking	264		12		3.55		93		4	0		0		Total consumer banking	398		9		3.76		94		3	0		1
Commercial Banking:	Commercial Banking:														Commercial Banking:
Commercial and multifamily real estate	Commercial and multifamily real estate	28		0		0.00		100		10	0		0		Commercial and multifamily real estate	85		0		0.00		100		6	0		0
Commercial and industrial	Commercial and industrial	188		0		0.00		50		8	8		7		Commercial and industrial	389		0		0.00		52		21	4		7
Total commercial banking	Total commercial banking	216		0		0.00		57		9	7		7		Total commercial banking	474		0		0.00		61		16	3		7
Total	Total	$	704	36		17.90		52		5	2		$	7	Total	$	1,185	29		18.49		56		9	1		$	8

__________

(1)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 concession as part of the modification.

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



			8890			Capital One Financial Corporation (COF)

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Subsequent Defaults of Completed TDR Modifications

The following table presents the type, number and amortized cost of loans modified in TDRs 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 3.7: TDRs—Subsequent Defaults


		Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
		2021			2020			2021			2020				2021			2020			2021			2020
(Dollars in millions)	(Dollars in millions)	Number of Contracts	Amount		Number of Contracts	Amount		Number of Contracts	Amount		Number of Contracts	Amount				(Dollars in millions)	Number of Contracts	Amount		Number of Contracts	Amount		Number of Contracts	Amount		Number of Contracts	Amount
Credit Card:	Credit Card:															Credit Card:
Domestic credit card	Domestic credit card	4,226	$	8	9,582	$	21	9,360	$	18	20,468	$	43			Domestic credit card	4,168	$	7	6,554	$	14	13,528	$	25	27,022	$	57
International card businesses	International card businesses	14,827	23		17,508	25		32,029	51		35,365	51				International card businesses	12,680	17		10,673	17		44,709	68		46,038	68
Total credit card	Total credit card	19,053	31		27,090	46		41,389	69		55,833	94				Total credit card	16,848	24		17,227	31		58,237	93		73,060	125
Consumer Banking:	Consumer Banking:															Consumer Banking:
Auto	Auto	2,271	35		860	11		4,302	64		2,135	27				Auto	2,151	34		1,307	15		6,453	98		3,442	42
Retail banking	Retail banking	3	0		3	0		8	0		4	0				Retail banking	1	0		3	1		9	0		7	1
Total consumer banking	Total consumer banking	2,274	35		863	11		4,310	64		2,139	27				Total consumer banking	2,152	34		1,310	16		6,462	98		3,449	43
Commercial Banking:	Commercial Banking:															Commercial Banking:
Commercial and multifamily real estate	Commercial and multifamily real estate	1	50		0	0		1	50		0	0				Commercial and multifamily real estate	0	0		0	0		1	50		0	0
Commercial and industrial	Commercial and industrial	6	82		1	21		6	82		7	49				Commercial and industrial	1	38		4	16		7	120		11	65
Total commercial banking	Total commercial banking	7	132		1	21		7	132		7	49				Total commercial banking	1	38		4	16		8	170		11	65
Total	Total	21,334	$	198	27,954	$	78	45,706	$	265	57,979	$	170			Total	19,001	$	96	18,541	$	63	64,707	$	361	76,520	$	233

Loans Pledged

We pledged loan collateral of ~~$11.6~~$10.9 billion and $14.1 billion to secure the majority of our FHLB borrowing capacity of ~~$19.2~~$18.8 billion and $19.6 billion as of ~~June~~September 30, 2021 and December 31, 2020, respectively. We also pledged loan collateral of ~~$26.9~~$26.6 billion and $25.5 billion to secure our Federal Reserve Discount Window borrowing capacity of ~~$21.3~~$19.9 billion and $20.0 billion as of ~~June~~September 30, 2021 and December 31, 2020, respectively. In addition to loans pledged, we have securitized a portion of our credit card and auto loan portfolios. See “Note 5—Variable Interest Entities and Securitizations” for additional information.

Revolving Loans Converted to Term Loans

For the three and ~~six~~nine months ended ~~June~~September 30, 2021, we converted ~~$38~~$37 million and ~~$135~~$172 million of revolving loans to term loans, respectively, primarily in our domestic credit card and commercial banking loan portfolios. For the three and ~~six~~nine months ended ~~June~~September 30, 2020, we converted ~~$89~~$250 million and ~~$249~~$499 million of revolving loans to term loans, respectively, primarily in our domestic credit card and commercial banking loan ~~portfolio.~~portfolios.



			8991			Capital One Financial Corporation (COF)

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NOTE 4—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. 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. 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. Significant judgment is applied in our estimation of lifetime credit losses.

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, and 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” in our 2020 Form 10-K for further discussion of the methodology and policy 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 three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020. Our allowance for credit losses decreased by ~~$3.2~~$4.0 billion to ~~$12.3~~$11.6 billion as of ~~June~~September 30, 2021 from December 31, 2020, primarily driven by strong credit performance and an improved economic outlook.



			9092			Capital One Financial Corporation (COF)

Table of Contents

Table 4.1: Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity


		Three Months Ended June 30, 2021								Three Months Ended September 30, 2021
(Dollars in millions)	(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking		Total			(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking		Total
Allowance for credit losses:	Allowance for credit losses:										Allowance for credit losses:
Balance as of March 31, 2021		$	10,072	$	2,498	$	1,447	$	14,017
Balance as of June 30, 2021											Balance as of June 30, 2021	$	8,873	$	2,203	$	1,270	$	12,346
Charge-offs	Charge-offs	(967)		(260)		(8)		(1,235)			Charge-offs	(735)		(264)		(20)		(1,019)
Recoveries(1)	Recoveries(1)	396		271		27		694			Recoveries(1)	369		213		11		593
Net recoveries (charge-offs)		(571)		11		19		(541)
Net charge-offs											Net charge-offs	(366)		(51)		(9)		(426)
Provision (benefit) for credit losses	Provision (benefit) for credit losses	(635)		(306)		(196)		(1,137)			Provision (benefit) for credit losses	(198)		(91)		(55)		(344)
Allowance build (release) for credit losses	Allowance build (release) for credit losses	(1,206)		(295)		(177)		(1,678)			Allowance build (release) for credit losses	(564)		(142)		(64)		(770)
Other changes~~(2)~~(4)	Other changes~~(2)~~(4)	7		0		0		7			Other changes~~(2)~~(4)	(3)		0		0		(3)
Balance as of September 30, 2021											Balance as of September 30, 2021	8,306		2,061		1,206		11,573
Reserve for unfunded lending commitments:											Reserve for unfunded lending commitments:
Balance as of June 30, 2021	Balance as of June 30, 2021	8,873		2,203		1,270		12,346			Balance as of June 30, 2021	0		0		164		164
Reserve for unfunded lending commitments:
Balance as of March 31, 2021		0		0		187		187
Provision (benefit) for losses on unfunded lending commitments	Provision (benefit) for losses on unfunded lending commitments	0		0		(23)		(23)			Provision (benefit) for losses on unfunded lending commitments	0		0		2		2
Balance as of June 30, 2021		0		0		164		164
Combined allowance and reserve as of June 30, 2021		$	8,873	$	2,203	$	1,434	$	12,510
Balance as of September 30, 2021											Balance as of September 30, 2021	0		0		166		166
Combined allowance and reserve as of September 30, 2021											Combined allowance and reserve as of September 30, 2021	$	8,306	$	2,061	$	1,372	$	11,739


		Six Months Ended June 30, 2021								Nine Months Ended September 30, 2021
(Dollars in millions)	(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking		Total			(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking		Total
Allowance for credit losses:	Allowance for credit losses:										Allowance for credit losses:
Balance as of December 31, 2020	Balance as of December 31, 2020	$	11,191	$	2,715	$	1,658	$	15,564		Balance as of December 31, 2020	$	11,191	$	2,715	$	1,658	$	15,564
Charge-offs	Charge-offs	(1,960)		(602)		(27)		(2,589)			Charge-offs	(2,695)		(866)		(47)		(3,608)
Recoveries(1)	Recoveries(1)	756		522		30		1,308			Recoveries(1)	1,125		735		41		1,901
Net recoveries (charge-offs)		(1,204)		(80)		3		(1,281)
Net charge-offs											Net charge-offs	(1,570)		(131)		(6)		(1,707)
Provision (benefit) for credit losses	Provision (benefit) for credit losses	(1,127)		(432)		(391)		(1,950)			Provision (benefit) for credit losses	(1,325)		(523)		(446)		(2,294)
Allowance build (release) for credit losses	Allowance build (release) for credit losses	(2,331)		(512)		(388)		(3,231)			Allowance build (release) for credit losses	(2,895)		(654)		(452)		(4,001)
Other changes~~(2)~~(4)	Other changes~~(2)~~(4)	13		0		0		13			Other changes~~(2)~~(4)	10		0		0		10
Balance as of June 30, 2021		8,873		2,203		1,270		12,346
Balance as of September 30, 2021											Balance as of September 30, 2021	8,306		2,061		1,206		11,573
Reserve for unfunded lending commitments:	Reserve for unfunded lending commitments:										Reserve for unfunded lending commitments:
Balance as of December 31, 2020	Balance as of December 31, 2020	0		0		195		195			Balance as of December 31, 2020	0		0		195		195
Provision (benefit) for losses on unfunded lending commitments	Provision (benefit) for losses on unfunded lending commitments	0		0		(31)		(31)			Provision (benefit) for losses on unfunded lending commitments	0		0		(29)		(29)
Balance as of June 30, 2021		0		0		164		164
Combined allowance and reserve as of June 30, 2021		$	8,873	$	2,203	$	1,434	$	12,510

Balance as of September 30, 2021											Balance as of September 30, 2021	0		0		166		166
Combined allowance and reserve as of September 30, 2021											Combined allowance and reserve as of September 30, 2021	$	8,306	$	2,061	$	1,372	$	11,739



			9193			Capital One Financial Corporation (COF)

Table of Contents


		Three Months Ended June 30, 2020								Three Months Ended September 30, 2020
(Dollars in millions)	(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking		Total			(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking		Total
Allowance for credit losses:	Allowance for credit losses:										Allowance for credit losses:
Balance as of March 31, 2020		$	10,346	$	2,154	$	1,573	$	14,073
Balance as of June 30, 2020											Balance as of June 30, 2020	$	12,091	$	2,838	$	1,903	$	16,832
Charge-offs	Charge-offs	(1,612)		(416)		(103)		(2,131)			Charge-offs	(1,296)		(295)		(88)		(1,679)
Recoveries(1)	Recoveries(1)	401		224		1		626			Recoveries(1)	353		247		6		606
Net charge-offs	Net charge-offs	(1,211)		(192)		(102)		(1,505)			Net charge-offs	(943)		(48)		(82)		(1,073)
Provision (benefit) for credit losses	Provision (benefit) for credit losses	2,944		876		432		4,252			Provision (benefit) for credit losses	450		(43)		(51)		356
Allowance build (release) for credit losses	Allowance build (release) for credit losses	1,733		684		330		2,747			Allowance build (release) for credit losses	(493)		(91)		(133)		(717)
Other changes(2)	Other changes(2)	12		0		0		12			Other changes(2)	14		0		0		14
Balance as of September 30, 2020											Balance as of September 30, 2020	11,612		2,747		1,770		16,129
Reserve for unfunded lending commitments:											Reserve for unfunded lending commitments:
Balance as of June 30, 2020	Balance as of June 30, 2020	12,091		2,838		1,903		16,832			Balance as of June 30, 2020	0		0		218		218
Reserve for unfunded lending commitments:
Balance as of March 31, 2020		0		0		223		223
Provision (benefit) for losses on unfunded lending commitments	Provision (benefit) for losses on unfunded lending commitments	0		0		(5)		(5)			Provision (benefit) for losses on unfunded lending commitments	0		0		(23)		(23)
Balance as of June 30, 2020		0		0		218		218
Combined allowance and reserve as of June 30, 2020		$	12,091	$	2,838	$	2,121	$	17,050
Balance as of September 30, 2020											Balance as of September 30, 2020	0		0		195		195
Combined allowance and reserve as of September 30, 2020											Combined allowance and reserve as of September 30, 2020	$	11,612	$	2,747	$	1,965	$	16,324


		Six Months Ended June 30, 2020								Nine Months Ended September 30, 2020
(Dollars in millions)	(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking		Total			(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking		Total
Allowance for credit losses:	Allowance for credit losses:										Allowance for credit losses:
Balance as of December 31, 2019	Balance as of December 31, 2019	$	5,395	$	1,038	$	775	$	7,208		Balance as of December 31, 2019	$	5,395	$	1,038	$	775	$	7,208
Cumulative effects from adoption of the CECL standard	Cumulative effects from adoption of the CECL standard	2,241		502		102		2,845			Cumulative effects from adoption of the CECL standard	2,241		502		102		2,845
Finance charge and fee reserve reclassification(3)	Finance charge and fee reserve reclassification(3)	462		0		0		462			Finance charge and fee reserve reclassification(3)	462		0		0		462
Balance as of January 1, 2020	Balance as of January 1, 2020	8,098		1,540		877		10,515			Balance as of January 1, 2020	8,098		1,540		877		10,515
Charge-offs	Charge-offs	(3,461)		(912)		(215)		(4,588)			Charge-offs	(4,757)		(1,207)		(303)		(6,267)
Recoveries(1)	Recoveries(1)	814		474		4		1,292			Recoveries(1)	1,167		721		10		1,898
Net charge-offs	Net charge-offs	(2,647)		(438)		(211)		(3,296)			Net charge-offs	(3,590)		(486)		(293)		(4,369)
Provision (benefit) for credit losses	Provision (benefit) for credit losses	6,646		1,736		1,237		9,619			Provision (benefit) for credit losses	7,096		1,693		1,186		9,975
Allowance build (release) for credit losses	Allowance build (release) for credit losses	3,999		1,298		1,026		6,323			Allowance build (release) for credit losses	3,506		1,207		893		5,606
Other changes(2)	Other changes(2)	(6)		0		0		(6)			Other changes(2)	8		0		0		8
Balance as of June 30, 2020		12,091		2,838		1,903		16,832
Balance as of September 30, 2020											Balance as of September 30, 2020	11,612		2,747		1,770		16,129
Reserve for unfunded lending commitments:	Reserve for unfunded lending commitments:										Reserve for unfunded lending commitments:
Balance as of December 31, 2019	Balance as of December 31, 2019	0		5		130		135			Balance as of December 31, 2019	0		5		130		135
Cumulative effects from adoption of the CECL standard	Cumulative effects from adoption of the CECL standard	0		(5)		42		37			Cumulative effects from adoption of the CECL standard	0		(5)		42		37
Balance as of January 1, 2020	Balance as of January 1, 2020	0		0		172		172			Balance as of January 1, 2020	0		0		172		172
Provision (benefit) for losses on unfunded lending commitments	Provision (benefit) for losses on unfunded lending commitments	0		0		46		46			Provision (benefit) for losses on unfunded lending commitments	0		0		23		23
Balance as of June 30, 2020		0		0		218		218
Combined allowance and reserve as of June 30, 2020		$	12,091	$	2,838	$	2,121	$	17,050
Balance as of September 30, 2020											Balance as of September 30, 2020	0		0		195		195
Combined allowance and reserve as of September 30, 2020											Combined allowance and reserve as of September 30, 2020	$	11,612	$	2,747	$	1,965	$	16,324

__________

(2)Represents foreign currency translation adjustments.

(4)Represents foreign currency translation adjustments and an initial allowance for purchased credit-deteriorated loans of $6 million.



			9294			Capital One Financial Corporation (COF)

Table of Contents

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 to net charge-offs and the provision for credit losses. See ~~“Note~~��Note 1—Summary of Significant Accounting Policies” in our 2020 Form 10-K for further discussion of our credit card partnership agreements.

The table below summarizes the changes in the estimated reimbursements from these partners for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020.

Table 4.2: Summary of Credit Card Partnership Loss Sharing Arrangements Impacts


		Three Months Ended June 30,					Three Months Ended September 30,
(Dollars in millions)	(Dollars in millions)	2021		2020		(Dollars in millions)	2021		2020
Estimated reimbursements from partners, beginning of period	Estimated reimbursements from partners, beginning of period	$	2,005	$	2,653	Estimated reimbursements from partners, beginning of period	$	1,711	$	2,433
Amounts due from partners which reduced net charge-offs	Amounts due from partners which reduced net charge-offs	(128)		(293)		Amounts due from partners which reduced net charge-offs	(80)		(212)
Amounts estimated to be charged (from) to partners which reduced provision for credit losses	Amounts estimated to be charged (from) to partners which reduced provision for credit losses	(166)		73		Amounts estimated to be charged (from) to partners which reduced provision for credit losses	(181)		121
Estimated reimbursements from partners, end of period	Estimated reimbursements from partners, end of period	$	1,711	$	2,433	Estimated reimbursements from partners, end of period	$	1,450	$	2,342


		Six Months Ended June 30,					Nine Months Ended September 30,
(Dollars in millions)	(Dollars in millions)	2021		2020		(Dollars in millions)	2021		2020
Estimated reimbursements from partners, beginning of period	Estimated reimbursements from partners, beginning of period	$	2,159	$	2,166	Estimated reimbursements from partners, beginning of period	$	2,159	$	2,166
Amounts due from partners which reduced net charge-offs	Amounts due from partners which reduced net charge-offs	(269)		(595)		Amounts due from partners which reduced net charge-offs	(349)		(807)
Amounts estimated to be charged (from) to partners which reduced provision for credit losses	Amounts estimated to be charged (from) to partners which reduced provision for credit losses	(179)		862		Amounts estimated to be charged (from) to partners which reduced provision for credit losses	(360)		983
Estimated reimbursements from partners, end of period	Estimated reimbursements from partners, end of period	$	1,711	$	2,433	Estimated reimbursements from partners, end of period	$	1,450	$	2,342



			9395			Capital One Financial Corporation (COF)

Table of Contents


NOTE 5—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 variable interest entities (“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 have provided a source of funding for us and enabled 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. The majority of the VIEs in which we are involved have been consolidated in our financial statements.

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 our maximum 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 ~~June~~September 30, 2021 and December 31, 2020. We separately present information for consolidated and unconsolidated VIEs.

Table 5.1: Carrying Amount of Consolidated and Unconsolidated VIEs


		June 30, 2021											September 30, 2021
		Consolidated				Unconsolidated							Consolidated				Unconsolidated
(Dollars in millions)	(Dollars in millions)	Carrying Amount of Assets		Carrying Amount of Liabilities		Carrying Amount of Assets		Carrying Amount of Liabilities		Maximum Exposure to Loss		(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)	Securitization-Related VIEs:(1)											Securitization-Related VIEs:(1)
Credit card loan securitizations(2)	Credit card loan securitizations(2)	$	20,671	$	9,115	$	0	$	0	$	0	Credit card loan securitizations(2)	$	20,604	$	11,489	$	0	$	0	$	0
Auto loan securitizations	Auto loan securitizations	1,768		1,509		0		0		0		Auto loan securitizations	1,509		1,269		0		0		0
Total securitization-related VIEs	Total securitization-related VIEs	22,439		10,624		0		0		0		Total securitization-related VIEs	22,113		12,758		0		0		0
Other VIEs:(3)	Other VIEs:(3)											Other VIEs:(3)
Affordable housing entities	Affordable housing entities	272		31		4,763		1,427		4,763		Affordable housing entities	264		28		4,786		1,496		4,786
Entities that provide capital to low-income and rural communities	Entities that provide capital to low-income and rural communities	2,035		26		0		0		0		Entities that provide capital to low-income and rural communities	2,073		26		0		0		0
Other	Other	0		0		411		0		411		Other	0		0		400		0		400
Total other VIEs	Total other VIEs	2,307		57		5,174		1,427		5,174		Total other VIEs	2,337		54		5,186		1,496		5,186
Total VIEs	Total VIEs	$	24,746	$	10,681	$	5,174	$	1,427	$	5,174	Total VIEs	$	24,450	$	12,812	$	5,186	$	1,496	$	5,186



			9496			Capital One Financial Corporation (COF)

Table of Contents


	December 31, 2020
	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)	$	22,066	$	10,338	$	0	$	0	$	0
Auto loan securitizations	2,360		2,055		0		0		0
Total securitization-related VIEs	24,426		12,393		0		0		0
Other VIEs:(3)
Affordable housing entities	242		17		4,602		1,240		4,602
Entities that provide capital to low-income and rural communities	1,951		26		0		0		0
Other	0		0		436		0		436
Total other VIEs	2,193		43		5,038		1,240		5,038
Total VIEs	$	26,619	$	12,436	$	5,038	$	1,240	$	5,038

__________

(1)Excludes insignificant VIEs from previously exited businesses.

(2)Represents the carrying amount of assets and liabilities owned by 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 in turn 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 $2.2 billion of assets and ~~$606~~$602 million of liabilities as of ~~June~~September 30, 2021, and $2.3 billion of assets and $596 million of liabilities as of December 31, 2020.

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 Government-sponsored enterprise (“GSEs”) who may, in turn, securitize them. We retain the related mortgage servicing rights (“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 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 us. 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 6—Goodwill and Intangible Assets” for information related to our MSRs associated with these securitizations and “Note 2—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 also excluded these VIEs from the tables presented in this note. See “Note 3—Loans” for additional information regarding our lending arrangements in the normal course of business.



			9597			Capital One Financial Corporation (COF)

Table of Contents

The table below presents our continuing involvement in certain securitization-related VIEs as of ~~June~~September 30, 2021 and December 31, 2020.

Table 5.2: Continuing Involvement in Securitization-Related VIEs

(Dollars in millions)

Credit Card

Auto

(Dollars in millions)

Credit Card

Auto

June 30, 2021:

September 30, 2021:

Securities held by third-party investors

9,054

1,507

Securities held by third-party investors

11,367

1,268

Receivables in the trust

21,803

1,664

Receivables in the trusts

21,496

1,419

Cash balance of spread or reserve accounts

Retained interests

Yes

Retained interests

Yes

Servicing retained

Yes

Servicing retained

Yes

December 31, 2020:

Securities held by third-party investors

10,361

2,053

Securities held by third-party investors

10,361

2,053

Receivables in the trust

23,683

2,243

Receivables in the trust

23,683

2,243

Cash balance of spread or reserve accounts

Retained interests

Yes

Retained interests

Yes

Servicing retained

Yes

Servicing retained

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 securitization involves 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. 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 certain investments in qualified affordable housing projects using the proportional amortization method if certain criteria are met. The proportional amortization method amortizes the cost of the investment 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 ~~six~~nine months ended ~~June~~September 30, 2021 and ~~June 30,~~ 2020, we recognized amortization of ~~$317~~$477 million and ~~$285~~$428 million, respectively, and tax credits of ~~$423~~$560 million and ~~$622~~$47 million, respectively, associated with these investments within income tax provision or benefit. The carrying value of our equity investments in these qualified affordable housing projects was ~~$4.6~~$4.7 billion and $4.5 billion as of ~~June~~September 30, 2021 and December 31, 2020, respectively. We are periodically required to provide additional financial or other support during the period of the investments. Our liability for these unfunded



			9698			Capital One Financial Corporation (COF)

Table of Contents

commitments was ~~$1.6~~$1.7 billion and $1.5 billion as of ~~June~~September 30, 2021 and December 31, 2020, respectively, and is largely expected to be paid from 2021 to ~~2023.~~2024.

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 $4.8 billion and $4.6 billion as of ~~June~~September 30, 2021 and December 31, 2020, 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 ~~$11.6~~$11.9 billion and $11.0 billion as of ~~June~~September 30, 2021 and December 31, 2020, 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 be potentially 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 $2.1 billion and $2.0 billion as of ~~both June~~September 30, 2021 and December 31, 2020, 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.~~it.

Other

We hold variable interests in other VIEs, including companies that promote renewable energy sources and other equity method investments. We were 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 ~~$411~~$400 million and $436 million as of ~~June~~September 30, 2021 and December 31, 2020, 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.



			9799			Capital One Financial Corporation (COF)

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NOTE 6—GOODWILL AND INTANGIBLE ASSETS

The table below presents our goodwill, intangible assets and MSRs as of ~~June~~September 30, 2021 and December 31, 2020. Goodwill is presented separately, while intangible assets and MSRs are included in other assets on our consolidated balance sheets.

Table 6.1: Components of Goodwill, Intangible Assets and MSRs


		June 30, 2021							September 30, 2021
(Dollars in millions)	(Dollars in millions)	Carrying Amount of Assets		Accumulated Amortization		Net Carrying Amount		(Dollars in millions)	Carrying Amount of Assets		Accumulated Amortization		Net Carrying Amount
Goodwill	Goodwill	$	14,654	N/A		$	14,654	Goodwill	$	14,652	N/A		$	14,652
Intangible assets:	Intangible assets:							Intangible assets:
Purchased credit card relationship (“PCCR”) intangibles	Purchased credit card relationship (“PCCR”) intangibles	148		$	(139)	9		Purchased credit card relationship (“PCCR”) intangibles	29		$	(8)	21

Other(1)	Other(1)	183		(112)		71		Other(1)	183		(116)		67
Total intangible assets	Total intangible assets	331		(251)		80		Total intangible assets	212		(124)		88
Total goodwill and intangible assets	Total goodwill and intangible assets	$	14,985	$	(251)	$	14,734	Total goodwill and intangible assets	$	14,864	$	(124)	$	14,740
Commercial MSRs(2)	Commercial MSRs(2)	$	582	$	(189)	$	393	Commercial MSRs(2)	$	609	$	(199)	$	410

		December 31, 2020							December 31, 2020
(Dollars in millions)	(Dollars in millions)	Carrying Amount of Assets		Accumulated Amortization		Net Carrying Amount		(Dollars in millions)	Carrying Amount of Assets		Accumulated Amortization		Net Carrying Amount
Goodwill	Goodwill	$	14,653	N/A		$	14,653	Goodwill	$	14,653	N/A		$	14,653
Intangible assets:	Intangible assets:							Intangible assets:
PCCR intangibles	PCCR intangibles	148		$	(138)	10		PCCR intangibles	148		$	(138)	10

Other(1)	Other(1)	248		(168)		80		Other(1)	248		(168)		80
Total intangible assets	Total intangible assets	396		(306)		90		Total intangible assets	396		(306)		90
Total goodwill and intangible assets	Total goodwill and intangible assets	$	15,049	$	(306)	$	14,743	Total goodwill and intangible assets	$	15,049	$	(306)	$	14,743
Commercial MSRs(2)	Commercial MSRs(2)	$	542	$	(175)	$	367	Commercial MSRs(2)	$	542	$	(175)	$	367

__________

(1)Primarily consists of intangibles for sponsorship, customer and merchant relationships, partnership, trade name and other contract intangibles.

(2)Commercial MSRs are accounted for under the amortization method on our consolidated balance sheets.

Amortization expense for amortizable intangible assets, which is presented separately in our consolidated statements of income, totaled $5 million and ~~$11~~$16 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, and ~~$16~~$14 million and ~~$38~~$52 million for the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively.

Goodwill

The following table presents changes in carrying amount of goodwill by each of our business segments as of ~~June~~September 30, 2021 and December 31, 2020.

Table 6.2: Goodwill by Business Segments


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

Balance as of December 31, 2020	Balance as of December 31, 2020	$	5,088	$	4,645	$	4,920	$	14,653	Balance as of December 31, 2020	$	5,088	$	4,645	$	4,920	$	14,653

Other adjustments(1)	Other adjustments(1)	1		0		0		1		Other adjustments(1)	(1)		0		0		(1)
Balance as of June 30, 2021		$	5,089	$	4,645	$	4,920	$	14,654
Balance as of September 30, 2021										Balance as of September 30, 2021	$	5,087	$	4,645	$	4,920	$	14,652

__________

(1)Represents foreign currency translation adjustments.



			98100			Capital One Financial Corporation (COF)

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NOTE 7—DEPOSITS AND BORROWINGS

Our deposits represent our largest source of funding for our assets and operations, which include checking accounts, money market deposits, negotiable order of withdrawals, savings deposits and time deposits. 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, while 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 and securities loaned or sold under agreements to repurchase. 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 ~~June~~September 30, 2021 and December 31, 2020. The carrying value presented below for these borrowings includes unamortized debt premiums and discounts, net of debt issuance costs and fair value hedge accounting adjustments.

Table 7.1: Components of Deposits, Short-Term Borrowings and Long-Term Debt


(Dollars in millions)	(Dollars in millions)	June 30, 2021		December 31, 2020		(Dollars in millions)	September 30, 2021		December 31, 2020
Deposits:	Deposits:					Deposits:
Non-interest-bearing deposits	Non-interest-bearing deposits	$	34,994	$	31,142	Non-interest-bearing deposits	$	36,804	$	31,142
Interest-bearing deposits(1)	Interest-bearing deposits(1)	271,314		274,300		Interest-bearing deposits(1)	269,134		274,300
Total deposits	Total deposits	$	306,308	$	305,442	Total deposits	$	305,938	$	305,442
Short-term borrowings:	Short-term borrowings:					Short-term borrowings:
Federal funds purchased and securities loaned or sold under agreements to repurchase	Federal funds purchased and securities loaned or sold under agreements to repurchase	$	845	$	668	Federal funds purchased and securities loaned or sold under agreements to repurchase	$	825	$	668

Total short-term borrowings	Total short-term borrowings	$	845	$	668	Total short-term borrowings	$	825	$	668


		June 30, 2021						December 31, 2020			September 30, 2021					December 31, 2020
(Dollars in millions)	(Dollars in millions)	Maturity Dates	Stated Interest Rates	Weighted-Average Interest Rate		Carrying Value		Carrying Value		(Dollars in millions)	Maturity Dates	Stated Interest Rates	Weighted-Average Interest Rate	Carrying Value		Carrying Value
Long-term debt:	Long-term debt:									Long-term debt:
Securitized debt obligations	Securitized debt obligations	2021-2026	0.42% - 2.84%	1.85	%	$	10,561	$	12,414	Securitized debt obligations	2021-2028	0.43% - 2.84%	1.64%	$	12,635	$	12,414
Senior and subordinated notes:	Senior and subordinated notes:									Senior and subordinated notes:
Fixed unsecured senior debt(2)	Fixed unsecured senior debt(2)	2021-2029	0.80 - 4.75	3.20		18,883		21,045		Fixed unsecured senior debt(2)	2022-2029	0.80 - 4.25	3.12	17,030		21,045
Floating unsecured senior debt	Floating unsecured senior debt	2022-2023	0.91 - 1.34	1.09		1,359		1,609		Floating unsecured senior debt	2022-2023	0.85 - 1.28	1.05	1,360		1,609
Total unsecured senior debt	Total unsecured senior debt			3.06		20,242		22,654		Total unsecured senior debt			2.97	18,390		22,654
Fixed unsecured subordinated debt	Fixed unsecured subordinated debt	2023-2026	3.38 - 4.20	3.78		4,636		4,728		Fixed unsecured subordinated debt	2023-2032	2.36 - 4.20	3.52	5,593		4,728
Total senior and subordinated notes	Total senior and subordinated notes					24,878		27,382		Total senior and subordinated notes				23,983		27,382
Other long-term borrowings:	Other long-term borrowings:									Other long-term borrowings:

Finance lease liabilities	Finance lease liabilities	2021-2031	0.25 - 9.91	4.07		59		75		Finance lease liabilities	2021 - 2031	0.30 - 9.91	3.14	58		75
Total other long-term borrowings	Total other long-term borrowings					59		75		Total other long-term borrowings				58		75
Total long-term debt	Total long-term debt					$	35,498	$	39,871	Total long-term debt				$	36,676	$	39,871
Total short-term borrowings and long-term debt	Total short-term borrowings and long-term debt					$	36,343	$	40,539	Total short-term borrowings and long-term debt				$	37,501	$	40,539

__________

(1)Includes ~~$2.1~~$1.9 billion and $4.2 billion of time deposits in denominations in excess of the $250,000 federal insurance limit as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

(2)Includes $1.5 billion and $1.6 billion of EUR-denominated unsecured notes as of ~~June~~September 30, 2021andDecember 31, 2020, respectively.



			99101			Capital One Financial Corporation (COF)

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NOTE 8—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 exposures denominated in foreign currencies. We primarily use interest rate and foreign currency swaps to hedge, 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 also 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 then enter into derivative contracts with counterparties to economically hedge substantially all of our subsequent exposures.

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. Our fair value hedges primarily consist of interest rate swaps that are intended to modify our exposure to interest rate risk on various fixed-rate financial assets and liabilities.

•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 accumulated other comprehensive income (“AOCI”). Those amounts are reclassified into earnings in the same period during which the 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. Our cash flow hedges use interest rate swaps and floors that are intended to hedge the variability in interest receipts or interest payments on some of our variable-rate financial assets or liabilities. 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.



			~~100~~102			Capital One Financial Corporation (COF)

Table of Contents

Derivatives Counterparty Credit Risk

Counterparty Types

Derivative instruments contain an element of credit risk that arises 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 over-the-counter (“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 arrangements, where possible, and exchanging collateral with our counterparties, typically in the form of cash or high-quality liquid securities. The amount of collateral exchanged 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. 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 cash collateral received or pledged. See Table 8.3 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. 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 upfront by CCPs as collateral against potential losses on our 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, we characterize variation margin cash payments 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 legally enforceable master netting agreements and collateral agreements, where possible, with bilateral derivative counterparties to mitigate the risk of default. We review our collateral positions on a daily basis and exchange collateral with our counterparties in accordance with these agreements. 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 derivative instruments 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.

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.



			~~101~~103			Capital One Financial Corporation (COF)

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Balance Sheet Presentation

The following table summarizes the notional amounts and fair values of our derivative instruments as of ~~June~~September 30, 2021 and December 31, 2020, 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 8.1: Derivative Assets and Liabilities at Fair Value


		June 30, 2021						December 31, 2020							September 30, 2021						December 31, 2020
		Notional or Contractual Amount		Derivative(1)				Notional or Contractual Amount		Derivative(1)					Notional or Contractual Amount		Derivative(1)				Notional or Contractual Amount		Derivative(1)
(Dollars in millions)	(Dollars in millions)			Assets		Liabilities				Assets		Liabilities		(Dollars in millions)			Assets		Liabilities				Assets		Liabilities
Derivatives designated as accounting hedges:	Derivatives designated as accounting hedges:													Derivatives designated as accounting hedges:
Interest rate contracts:	Interest rate contracts:													Interest rate contracts:
Fair value hedges	Fair value hedges	$	44,361	$	5	$	7	$	47,349	$	9	$	10	Fair value hedges	$	44,563	$	29	$	10	$	47,349	$	9	$	10
Cash flow hedges	Cash flow hedges	86,900		481		12		82,150		748		1		Cash flow hedges	89,900		445		10		82,150		748		1
Total interest rate contracts	Total interest rate contracts	131,261		486		19		129,499		757		11		Total interest rate contracts	134,463		474		20		129,499		757		11
Foreign exchange contracts:	Foreign exchange contracts:													Foreign exchange contracts:
Fair value hedges	Fair value hedges	1,482		83		0		1,527		164		0		Fair value hedges	1,448		46		0		1,527		164		0
Cash flow hedges	Cash flow hedges	4,233		35		33		4,582		0		161		Cash flow hedges	4,278		87		2		4,582		0		161
Net investment hedges	Net investment hedges	3,397		0		144		3,116		0		196		Net investment hedges	3,325		50		34		3,116		0		196
Total foreign exchange contracts	Total foreign exchange contracts	9,112		118		177		9,225		164		357		Total foreign exchange contracts	9,051		183		36		9,225		164		357
Total derivatives designated as accounting hedges	Total derivatives designated as accounting hedges	140,373		604		196		138,724		921		368		Total derivatives designated as accounting hedges	143,514		657		56		138,724		921		368
Derivatives not designated as accounting hedges:	Derivatives not designated as accounting hedges:													Derivatives not designated as accounting hedges:
Customer accommodation:	Customer accommodation:													Customer accommodation:
Interest rate contracts	Interest rate contracts	68,537		935		173		68,459		1,429		198		Interest rate contracts	71,622		848		202		68,459		1,429		198
Commodity contracts	Commodity contracts	16,776		2,093		1,963		16,871		935		820		Commodity contracts	21,555		3,302		3,136		16,871		935		820
Foreign exchange and other contracts	Foreign exchange and other contracts	4,450		39		31		4,677		58		70		Foreign exchange and other contracts	4,077		53		39		4,677		58		70
Total customer accommodation	Total customer accommodation	89,763		3,067		2,167		90,007		2,422		1,088		Total customer accommodation	97,254		4,203		3,377		90,007		2,422		1,088
Other interest rate exposures(2)	Other interest rate exposures(2)	1,209		45		46		1,770		71		56		Other interest rate exposures(2)	2,656		42		27		1,770		71		56
Other contracts	Other contracts	1,988		0		1		1,826		1		6		Other contracts	1,983		2		3		1,826		1		6
Total derivatives not designated as accounting hedges	Total derivatives not designated as accounting hedges	92,960		3,112		2,214		93,603		2,494		1,150		Total derivatives not designated as accounting hedges	101,893		4,247		3,407		93,603		2,494		1,150
Total derivatives	Total derivatives	$	233,333	$	3,716	$	2,410	$	232,327	$	3,415	$	1,518	Total derivatives	$	245,407	$	4,904	$	3,463	$	232,327	$	3,415	$	1,518
Less: netting adjustment(3)	Less: netting adjustment(3)			(964)		(850)				(1,148)		(739)		Less: netting adjustment(3)			(975)		(904)				(1,148)		(739)
Total derivative assets/liabilities	Total derivative assets/liabilities			$	2,752	$	1,560			$	2,267	$	779	Total derivative assets/liabilities			$	3,929	$	2,559			$	2,267	$	779

__________

(1)Does not reflect ~~$23~~$17 million and $31 million recognized as a net valuation allowance on derivative assets and liabilities for non-performance risk as of ~~June~~September 30, 2021 and December 31, 2020, respectively. Non-performance risk is included in derivative assets and liabilities, which are 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.

(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.



			~~102~~104			Capital One Financial Corporation (COF)

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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 ~~June~~September 30, 2021 and December 31, 2020.

Table 8.2: Hedged Items in Fair Value Hedging Relationships


		June 30, 2021								December 31, 2020										September 30, 2021								December 31, 2020
		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							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)	(Dollars in millions)			Total Assets/(Liabilities)			Discontinued-Hedging Relationships					Total Assets/(Liabilities)			Discontinued-Hedging Relationships	(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:	Line item on our consolidated balance sheets in which the hedged item is included:																		Line item on our consolidated balance sheets in which the hedged item is included:
Investment securities available for sale(1)(2)	Investment securities available for sale(1)(2)	$	9,936		$	467		$	188	$	9,797		$	590		$	200	Investment securities available for sale(1)(2)		$	9,914		$	381		$	152	$	9,797		$	590		$	200
Interest-bearing deposits	Interest-bearing deposits	(9,882)			(124)			0		(11,312)			(213)			0		Interest-bearing deposits		(7,951)			(97)			0		(11,312)			(213)			0
Securitized debt obligations	Securitized debt obligations	(6,926)			(84)			9		(7,609)			(171)			20		Securitized debt obligations		(9,239)			(31)			5		(7,609)			(171)			20
Senior and subordinated notes	Senior and subordinated notes	(20,267)			(879)			(597)		(21,927)			(1,282)			(666)		Senior and subordinated notes		(19,889)			(774)			(561)		(21,927)			(1,282)			(666)

__________

(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 $249 million, the amount of the designated hedged items was $225 million, and the cumulative basis adjustments associated with these hedges was $1 million as of ~~June~~September 30, 2021. We had no such hedging relationships as of December 31, 2020.

(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 arrangements 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 arrangements for balance sheet presentation where a right of setoff exists. For derivative contracts entered into under master netting arrangements for which we have not been able to confirm the enforceability of the setoff rights, or those not subject to master netting arrangements, 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 ~~June~~September 30, 2021 and December 31, 2020. 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.



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Table 8.3: 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				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)	(Dollars in millions)			Financial Instruments			Cash Collateral Received					(Dollars in millions)			Financial Instruments				Cash Collateral Received
As of June 30, 2021
As of September 30, 2021																		As of September 30, 2021
Derivative assets(1)	Derivative assets(1)	$	3,716		$	(441)		$	(523)	$	2,752		$	0		$	2,752	Derivative assets(1)		$	4,904	$	(434)	$	(541)	$	3,929	$	0	$	3,929
As of December 31, 2020	As of December 31, 2020																	As of December 31, 2020
Derivative assets(1)	Derivative assets(1)	3,415			(383)			(765)		2,267			0			2,267		Derivative assets(1)		3,415		(383)		(765)		2,267		0		2,267


		Gross Amounts			Gross Amounts Offset in the Balance Sheet					Net Amounts as Recognized			Securities Collateral Pledged Under Master Netting Agreements			Net Exposure				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)	(Dollars in millions)			Financial Instruments			Cash Collateral Pledged					(Dollars in millions)			Financial Instruments				Cash Collateral Pledged
As of June 30, 2021
As of September 30, 2021																		As of September 30, 2021
Derivative liabilities(1)	Derivative liabilities(1)	$	2,410		$	(441)		$	(409)	$	1,560		$	0		$	1,560	Derivative liabilities(1)		$	3,463	$	(434)	$	(470)	$	2,559	$	0	$	2,559
Repurchase agreements(2)	Repurchase agreements(2)	845			0			0		845			(845)			0		Repurchase agreements(2)		825		0		0		825		(825)		0
As of December 31, 2020	As of December 31, 2020																	As of December 31, 2020
Derivative liabilities(1)	Derivative liabilities(1)	1,518			(383)			(356)		779			0			779		Derivative liabilities(1)		1,518		(383)		(356)		779		0		779
Repurchase agreements(2)	Repurchase agreements(2)	668			0			0		668			(668)			0		Repurchase agreements(2)		668		0		0		668		(668)		0

__________

(1)We received cash collateral from derivative counterparties totaling ~~$574~~$653 million and $862 million as of ~~June~~September 30, 2021 and December 31, 2020, respectively. We also received securities from derivative counterparties with a fair value of approximately $1 million as of both ~~June~~September 30, 2021 and December 31, 2020, respectively, which we have the ability to re-pledge. We posted ~~$2.1~~$2.5 billion and $1.5 billion of cash collateral as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

(2)Under our customer repurchase agreements, which mature the next business day, we pledged collateral with a fair value of ~~$862~~$842 million and $682 million as of ~~June~~September 30, 2021 and December 31, 2020, respectively, primarily consisting of agency RMBS securities.



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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 three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020.

Table 8.4: Effects of Fair Value and Cash Flow Hedge Accounting


		Three Months Ended June 30, 2021															Three Months Ended September 30, 2021
		Net Interest Income												Non-Interest Income			Net Interest Income												Non-Interest Income
(Dollars in millions)	(Dollars in millions)	Investment Securities		Loans, Including Loans Held for Sale		Other		Interest-bearing Deposits		Securitized Debt Obligations		Senior and Subordinated Notes		Other		(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	Total amounts presented in our consolidated statements of income	$	370	$	5,753	$	16	$	(237)	$	(28)	$	(122)	$	231	Total amounts presented in our consolidated statements of income	$	317	$	6,205	$	16	$	(228)	$	(29)	$	(116)	$	243
Fair value hedging relationships:	Fair value hedging relationships:															Fair value hedging relationships:
Interest rate and foreign exchange contracts:	Interest rate and foreign exchange contracts:															Interest rate and foreign exchange contracts:
Interest recognized on derivatives	Interest recognized on derivatives	$	(25)	$	0	$	0	$	34	$	30	$	56	$	0	Interest recognized on derivatives	$	(25)	$	0	$	0	$	31	$	30	$	50	$	0
Gains (losses) recognized on derivatives	Gains (losses) recognized on derivatives	11		0		0		(31)		(17)		0		16		Gains (losses) recognized on derivatives	19		0		0		(28)		(57)		(72)		(34)
Gains (losses) recognized on hedged items(1)	Gains (losses) recognized on hedged items(1)	(18)		0		0		31		11		33		(16)		Gains (losses) recognized on hedged items(1)	(83)		0		0		27		54		103		34
Excluded component of fair value hedges(2)	Excluded component of fair value hedges(2)	0		0		0		0		0		0		0		Excluded component of fair value hedges(2)	0		0		0		0		0		(1)		0
Net income (expense) recognized on fair value hedges	Net income (expense) recognized on fair value hedges	$	(32)	$	0	$	0	$	34	$	24	$	89	$	0	Net income (expense) recognized on fair value hedges	$	(89)	$	0	$	0	$	30	$	27	$	80	$	0
Cash flow hedging relationships:(3)	Cash flow hedging relationships:(3)															Cash flow hedging relationships:(3)
Interest rate contracts:	Interest rate contracts:															Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income	Realized gains (losses) reclassified from AOCI into net income	$	11	$	234	$	0	$	0	$	0	$	0	$	0	Realized gains (losses) reclassified from AOCI into net income	$	10	$	240	$	0	$	0	$	0	$	0	$	0
Foreign exchange contracts:	Foreign exchange contracts:															Foreign exchange contracts:
Realized gains (losses) reclassified from AOCI into net income(4)	Realized gains (losses) reclassified from AOCI into net income(4)	0		0		0		0		0		0		1		Realized gains (losses) reclassified from AOCI into net income(4)	0		0		0		0		0		0		0
Net income (expense) recognized on cash flow hedges	Net income (expense) recognized on cash flow hedges	$	11	$	234	$	0	$	0	$	0	$	0	$	1	Net income (expense) recognized on cash flow hedges	$	10	$	240	$	0	$	0	$	0	$	0	$	0



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		Six Months Ended June 30, 2021															Nine Months Ended September 30, 2021
		Net Interest Income												Non-Interest Income			Net Interest Income												Non-Interest Income
(Dollars in millions)	(Dollars in millions)	Investment Securities		Loans, Including Loans Held for Sale		Other		Interest-bearing Deposits		Securitized Debt Obligations		Senior and Subordinated Notes		Other		(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	Total amounts presented in our consolidated statements of income	$	761	$	11,607	$	32	$	(506)	$	(60)	$	(251)	$	349	Total amounts presented in our consolidated statements of income	$	1,078	$	17,812	$	48	$	(734)	$	(89)	$	(367)	$	592
Fair value hedging relationships:	Fair value hedging relationships:															Fair value hedging relationships:
Interest rate and foreign exchange contracts:	Interest rate and foreign exchange contracts:															Interest rate and foreign exchange contracts:
Interest recognized on derivatives	Interest recognized on derivatives	$	(50)	$	0	$	0	$	70	$	63	$	118	$	0	Interest recognized on derivatives	$	(75)	$	0	$	0	$	101	$	93	$	168	$	0
Gains (losses) recognized on derivatives	Gains (losses) recognized on derivatives	111		0		0		(89)		(97)		(336)		(45)		Gains (losses) recognized on derivatives	130		0		0		(117)		(154)		(408)		(79)
Gains (losses) recognized on hedged items(1)	Gains (losses) recognized on hedged items(1)	(123)		0		0		89		86		401		45		Gains (losses) recognized on hedged items(1)	(206)		0		0		116		140		504		79
Excluded component of fair value hedges(2)	Excluded component of fair value hedges(2)	0		0		0		0		0		(1)		0		Excluded component of fair value hedges(2)	0		0		0		0		0		(2)		0
Net income (expense) recognized on fair value hedges	Net income (expense) recognized on fair value hedges	$	(62)	$	0	$	0	$	70	$	52	$	182	$	0	Net income (expense) recognized on fair value hedges	$	(151)	$	0	$	0	$	100	$	79	$	262	$	0
Cash flow hedging relationships:(3)	Cash flow hedging relationships:(3)															Cash flow hedging relationships:(3)
Interest rate contracts:	Interest rate contracts:															Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income	Realized gains (losses) reclassified from AOCI into net income	$	20	$	460	$	0	$	0	$	0	$	0	$	0	Realized gains (losses) reclassified from AOCI into net income	$	30	$	700	$	0	$	0	$	0	$	0	$	0
Foreign exchange contracts:	Foreign exchange contracts:															Foreign exchange contracts:
Realized gains (losses) reclassified from AOCI into net income(4)	Realized gains (losses) reclassified from AOCI into net income(4)	0		0		1		0		0		0		1		Realized gains (losses) reclassified from AOCI into net income(4)	0		0		1		0		0		0		1
Net income (expense) recognized on cash flow hedges	Net income (expense) recognized on cash flow hedges	$	20	$	460	$	1	$	0	$	0	$	0	$	1	Net income (expense) recognized on cash flow hedges	$	30	$	700	$	1	$	0	$	0	$	0	$	1



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		Three Months Ended June 30, 2020															Three Months Ended September 30, 2020
		Net Interest Income												Non-Interest Income			Net Interest Income												Non-Interest Income
(Dollars in millions)	(Dollars in millions)	Investment Securities		Loans, Including Loans Held for Sale		Other		Interest-bearing Deposits		Securitized Debt Obligations		Senior and Subordinated Notes		Other		(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	Total amounts presented in our consolidated statements of income	$	482	$	5,820	$	16	$	(611)	$	(56)	$	(180)	$	166	Total amounts presented in our consolidated statements of income	$	443	$	5,758	$	14	$	(476)	$	(43)	$	(132)	$	706
Fair value hedging relationships:	Fair value hedging relationships:															Fair value hedging relationships:
Interest rate and foreign exchange contracts:	Interest rate and foreign exchange contracts:															Interest rate and foreign exchange contracts:
Interest recognized on derivatives	Interest recognized on derivatives	$	(17)	$	0	$	0	$	27	$	40	$	71	$	0	Interest recognized on derivatives	$	(23)	$	0	$	0	$	44	$	40	$	56	$	0
Gains (losses) recognized on derivatives	Gains (losses) recognized on derivatives	(26)		0		0		9		(13)		61		26		Gains (losses) recognized on derivatives	24		0		0		(47)		(48)		(72)		61
Gains (losses) recognized on hedged items(1)	Gains (losses) recognized on hedged items(1)	22		0		0		(10)		0		(68)		(26)		Gains (losses) recognized on hedged items(1)	(31)		0		0		48		41		111		(61)
Excluded component of fair value hedges(2)	Excluded component of fair value hedges(2)	0		0		0		0		0		0		0		Excluded component of fair value hedges(2)	0		0		0		0		0		(1)		0
Net income (expense) recognized on fair value hedges	Net income (expense) recognized on fair value hedges	$	(21)	$	0	$	0	$	26	$	27	$	64	$	0	Net income (expense) recognized on fair value hedges	$	(30)	$	0	$	0	$	45	$	33	$	94	$	0
Cash flow hedging relationships:(3)	Cash flow hedging relationships:(3)															Cash flow hedging relationships:(3)
Interest rate contracts:	Interest rate contracts:															Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income	Realized gains (losses) reclassified from AOCI into net income	$	7	$	135	$	0	$	0	$	0	$	0	$	0	Realized gains (losses) reclassified from AOCI into net income	$	8	$	171	$	0	$	0	$	0	$	0	$	0
Foreign exchange contracts:	Foreign exchange contracts:															Foreign exchange contracts:
Realized gains (losses) reclassified from AOCI into net income(4)	Realized gains (losses) reclassified from AOCI into net income(4)	0		0		2		0		0		0		(2)		Realized gains (losses) reclassified from AOCI into net income(4)	0		0		1		0		0		0		0
Net income (expense) recognized on cash flow hedges	Net income (expense) recognized on cash flow hedges	$	7	$	135	$	2	$	0	$	0	$	0	$	(2)	Net income (expense) recognized on cash flow hedges	$	8	$	171	$	1	$	0	$	0	$	0	$	0



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		Six Months Ended June 30, 2020															Nine Months Ended September 30, 2020
		Net Interest Income												Non-Interest Income			Net Interest Income												Non-Interest Income
(Dollars in millions)	(Dollars in millions)	Investment Securities		Loans, Including Loans Held for Sale		Other		Interest-bearing Deposits		Securitized Debt Obligations		Senior and Subordinated Notes		Other		(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	Total amounts presented in our consolidated statements of income	$	1,012	$	12,362	$	53	$	(1,342)	$	(155)	$	(419)	$	311	Total amounts presented in our consolidated statements of income	$	1,455	$	18,120	$	67	$	(1,818)	$	(198)	$	(551)	$	1,017
Fair value hedging relationships:	Fair value hedging relationships:															Fair value hedging relationships:
Interest rate and foreign exchange contracts:	Interest rate and foreign exchange contracts:															Interest rate and foreign exchange contracts:
Interest recognized on derivatives	Interest recognized on derivatives	$	(28)	$	0	$	0	$	25	$	52	$	110	$	0	Interest recognized on derivatives	$	(51)	$	0	$	0	$	69	$	92	$	166	$	0
Gains (losses) recognized on derivatives	Gains (losses) recognized on derivatives	(364)		0		0		296		269		1,129		3		Gains (losses) recognized on derivatives	(340)		0		0		249		221		1,057		64
Gains (losses) recognized on hedged items(1)	Gains (losses) recognized on hedged items(1)	360		0		0		(296)		(292)		(1,159)		(3)		Gains (losses) recognized on hedged items(1)	329		0		0		(248)		(251)		(1,048)		(64)
Excluded component of fair value hedges(2)	Excluded component of fair value hedges(2)	0		0		0		0		0		(1)		0		Excluded component of fair value hedges(2)	0		0		0		0		0		(2)		0
Net income (expense) recognized on fair value hedges	Net income (expense) recognized on fair value hedges	$	(32)	$	0	$	0	$	25	$	29	$	79	$	0	Net income (expense) recognized on fair value hedges	$	(62)	$	0	$	0	$	70	$	62	$	173	$	0
Cash flow hedging relationships:(3)	Cash flow hedging relationships:(3)															Cash flow hedging relationships:(3)
Interest rate contracts:	Interest rate contracts:															Interest rate contracts:
Realized gains reclassified from AOCI into net income	Realized gains reclassified from AOCI into net income	$	9	$	159	$	0	$	0	$	0	$	0	$	0	Realized gains reclassified from AOCI into net income	$	17	$	330	$	0	$	0	$	0	$	0	$	0
Foreign exchange contracts:	Foreign exchange contracts:															Foreign exchange contracts:
Realized gains (losses) reclassified from AOCI into net income(4)	Realized gains (losses) reclassified from AOCI into net income(4)	0		0		9		0		0		0		(2)		Realized gains (losses) reclassified from AOCI into net income(4)	0		0		10		0		0		0		(2)
Net income (expense) recognized on cash flow hedges	Net income (expense) recognized on cash flow hedges	$	9	$	159	$	9	$	0	$	0	$	0	$	(2)	Net income (expense) recognized on cash flow hedges	$	17	$	330	$	10	$	0	$	0	$	0	$	(2)

_________

(1)Includes amortization expense of $34 million and benefit of ~~$22 millionand $44~~$10 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, and amortization income of $19 million and expense of ~~$17 million and $53~~$34 million, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2020, 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. The initial value of the excluded component is recognized in earnings over the life of the swap under the amortization approach.

(3)See “Note 9—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 ~~$77~~$83 million and ~~$162~~$245 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, and a loss of ~~$299~~$73 million and a gain of ~~$93~~$20 million for the three and ~~six~~nine months ended ~~June~~September 30, 2020, 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 net after-tax gains of ~~$507~~$438 million recorded in AOCI as of ~~June~~September 30, 2021. These amounts will offset the cash flows associated with the hedged forecasted transactions. The maximum length of time over which forecasted transactions were hedged was approximately ~~6.7~~6.5 years as of ~~June~~September 30, 2021. 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.



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Free-Standing Derivatives

The net impacts to our consolidated statements of income related to free-standing derivatives are presented below for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020. These gains or losses are recognized in other non-interest income on our consolidated statements of income.

Table 8.5: Gains (Losses) on Free-Standing Derivatives

Three Months Ended June 30, Six Months Ended June 30,
(Dollars in millions) 2021 2020 2021 2020
Gains (losses) recognized in other non-interest income:
Customer accommodation:
Interest rate contracts $ 8 $ (1) $ 18 $ 12
Commodity contracts 4 (1) 9 16
Foreign exchange and other contracts 4 1 8 4
Total customer accommodation 16 (1) 35 32
Other interest rate exposures (27) (34) (16) (16)
Other contracts (1) 1 (1) 0
Total $ (12) $ (34) $ 18 $ 16


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2021		2020		2021		2020
Gains (losses) recognized in other non-interest income:
Customer accommodation:
Interest rate contracts	$	7	$	(5)	$	25	$	7
Commodity contracts	11		7		20		23
Foreign exchange and other contracts(1)	3		1		11		5
Total customer accommodation	21		3		56		35
Other interest rate exposures	18		17		2		1
Other contracts	(6)		0		(7)		0
Total	$	33	$	20	$	51	$	36

__________

(1) Foreign exchange and other contracts includes gains of $1 million and $8 million on FX spot transactions for the three and nine months ended September 30, 2021.



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NOTE 9—STOCKHOLDERS’ EQUITY

Preferred Stock

The following table summarizes our preferred stock outstanding as of ~~June~~September 30, 2021 and December 31, 2020.

Table 9.1: Preferred Stock Outstanding(1)


				Redeemable by Issuer Beginning		Per Annum Dividend Rate	Dividend Frequency		Liquidation Preference per Share		Total Shares Outstanding as of June 30, 2021			Carrying Value (in millions)															Redeemable by Issuer Beginning	Per Annum Dividend Rate		Dividend Frequency	Liquidation Preference per Share		Total Shares Outstanding as of September 30, 2021	Carrying Value (in millions)
Series	Series	Description	Issuance Date					June 30, 2021				December 31, 2020		Series			Description					Issuance Date									September 30, 2021			December 31, 2020
Series E(2)	Series E(2)	Fixed-to-Floating Rate Non-Cumulative	May 14, 2015		June 1, 2020			5.550% through 5/31/2020; 3-mo. LIBOR + 380 bps thereafter		Semi-Annually through 5/31/2020; Quarterly thereafter		$	1,000			1,000,000				$	988			$	988	Series E(2)		Fixed-to-Floating Rate Non-Cumulative		May 14, 2015		June 1, 2020	5.550% through 5/31/2020; 3-mo. LIBOR + 380 bps thereafter		Semi-Annually through 5/31/2020; Quarterly thereafter	$	1,000	0		$	0	$	988
Series G	Series G	5.200% Non-Cumulative	July 29, 2016	December 1, 2021		5.200	Quarterly		1,000		600,000			583				583		Series G			5.200% Non-Cumulative				July 29, 2016		December 1, 2021	5.200		Quarterly	1,000		600,000	583		583
Series H	Series H	6.000% Non-Cumulative	November 29, 2016	December 1, 2021		6.000	Quarterly		1,000		500,000			483				483		Series H			6.000% Non-Cumulative				November 29, 2016		December 1, 2021	6.000		Quarterly	1,000		500,000	483		483
Series I	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 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	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 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	Series K	4.625% Non-Cumulative	September 17, 2020	December 1, 2025		4.625	Quarterly		1,000		125,000			122				122		Series K			4.625% Non-Cumulative				September 17, 2020		December 1, 2025	4.625		Quarterly	1,000		125,000	122		122
Series L	Series L	4.375% Non-Cumulative	May 4, 2021	September 1, 2026		4.375	Quarterly		1,000		675,000			653				0		Series L			4.375% Non-Cumulative				May 4, 2021		September 1, 2026	4.375		Quarterly	1,000		675,000	653		0
Series M	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 +3.157%	Quarterly		1,000		1,000,000			988				0		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 +3.157%		Quarterly	1,000		1,000,000	988		0
Series N																				Series N			4.250% Non-Cumulative				July 29, 2021		September 1, 2026	4.250		Quarterly	1,000		425,000	412		0
Total	Total													$	6,488			$	4,847	Total																$	5,912	$	4,847

__________

(1)Except for Series E and 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.

(2)On September 1, 2021, we redeemed all outstanding shares of our preferred stock Series E.

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.



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The following table includes the AOCI impacts from the adoption of the CECL standard and the changes in AOCI by component for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020.



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Table 9.2: AOCI


		Three Months Ended June 30, 2021											Three Months Ended September 30, 2021
(Dollars in millions)	(Dollars in millions)	Securities Available for Sale		Hedging Relationships(1)		Foreign Currency Translation Adjustments(2)		Other		Total		(Dollars in millions)	Securities Available for Sale		Hedging Relationships(1)		Foreign Currency Translation Adjustments(2)		Other		Total
AOCI as of March 31, 2021		$	1,038	$	781	$	(12)	$	(24)	$	1,783
AOCI as of June 30, 2021												AOCI as of June 30, 2021	$	1,089	$	730	$	(3)	$	(24)	$	1,792
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	51		193		9		0		253		Other comprehensive income (loss) before reclassifications	(206)		57		(27)		0		(176)
Amounts reclassified from AOCI into earnings	Amounts reclassified from AOCI into earnings	0		(244)		0		0		(244)		Amounts reclassified from AOCI into earnings	(2)		(252)		0		(2)		(256)
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	51		(51)		9		0		9		Other comprehensive income (loss), net of tax	(208)		(195)		(27)		(2)		(432)
AOCI as of June 30, 2021		$	1,089	$	730	$	(3)	$	(24)	$	1,792
AOCI as of September 30, 2021												AOCI as of September 30, 2021	$	881	$	535	$	(30)	$	(26)	$	1,360


		Six Months Ended June 30, 2021											Nine Months Ended September 30, 2021
(Dollars in millions)	(Dollars in millions)	Securities Available for Sale		Hedging Relationships(1)		Foreign Currency Translation Adjustments(2)		Other		Total		(Dollars in millions)	Securities Available for Sale		Hedging Relationships(1)		Foreign Currency Translation Adjustments(2)		Other		Total

AOCI as of December 31, 2020	AOCI as of December 31, 2020	$	2,186	$	1,362	$	(31)	$	(23)	$	3,494	AOCI as of December 31, 2020	$	2,186	$	1,362	$	(31)	$	(23)	$	3,494
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	(1,094)		(145)		28		0		(1,211)		Other comprehensive income (loss) before reclassifications	(1,300)		(88)		1		0		(1,387)
Amounts reclassified from AOCI into earnings	Amounts reclassified from AOCI into earnings	(3)		(487)		0		(1)		(491)		Amounts reclassified from AOCI into earnings	(5)		(739)		0		(3)		(747)
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	(1,097)		(632)		28		(1)		(1,702)		Other comprehensive income (loss), net of tax	(1,305)		(827)		1		(3)		(2,134)
AOCI as of June 30, 2021		$	1,089	$	730	$	(3)	$	(24)	$	1,792
AOCI as of September 30, 2021												AOCI as of September 30, 2021	$	881	$	535	$	(30)	$	(26)	$	1,360


		Three Months Ended June 30, 2020											Three Months Ended September 30, 2020
(Dollars in millions)	(Dollars in millions)	Securities Available for Sale		Hedging Relationships(1)		Foreign Currency Translation Adjustments(2)		Other		Total		(Dollars in millions)	Securities Available for Sale		Hedging Relationships(1)		Foreign Currency Translation Adjustments(2)		Other		Total
AOCI as of March 31, 2020		$	2,151	$	1,728	$	(174)	$	(26)	$	3,679
AOCI as of June 30, 2020												AOCI as of June 30, 2020	$	2,373	$	1,785	$	(151)	$	(26)	$	3,981
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	222		(60)		23		0		185		Other comprehensive income (loss) before reclassifications	20		(95)		28		0		(47)
Amounts reclassified from AOCI into earnings	Amounts reclassified from AOCI into earnings	0		117		0		0		117		Amounts reclassified from AOCI into earnings	(19)		(80)		0		(2)		(101)
Other comprehensive income, net of tax		222		57		23		0		302
AOCI as of June 30, 2020		$	2,373	$	1,785	$	(151)	$	(26)	$	3,981
Other comprehensive income (loss), net of tax												Other comprehensive income (loss), net of tax	1		(175)		28		(2)		(148)
AOCI as of September 30, 2020												AOCI as of September 30, 2020	$	2,374	$	1,610	$	(123)	$	(28)	$	3,833


		Six Months Ended June 30, 2020											Nine Months Ended September 30, 2020
(Dollars in millions)	(Dollars in millions)	Securities Available for Sale		Hedging Relationships(1)		Foreign Currency Translation Adjustments(2)		Other		Total		(Dollars in millions)	Securities Available for Sale		Hedging Relationships(1)		Foreign Currency Translation Adjustments(2)		Other		Total
AOCI as of December 31, 2019	AOCI as of December 31, 2019	$	935	$	354	$	(107)	$	(26)	$	1,156	AOCI as of December 31, 2019	$	935	$	354	$	(107)	$	(26)	$	1,156
Cumulative effects from the adoption of the CECL standard	Cumulative effects from the adoption of the CECL standard	(8)		0		0		0		(8)		Cumulative effects from the adoption of the CECL standard	(8)		0		0		0		(8)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	1,446		1,635		(44)		0		3,037		Other comprehensive income (loss) before reclassifications	1,466		1,540		(16)		0		2,990
Amounts reclassified from AOCI into earnings	Amounts reclassified from AOCI into earnings	0		(204)		0		0		(204)		Amounts reclassified from AOCI into earnings	(19)		(284)		0		(2)		(305)
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	1,446		1,431		(44)		0		2,833		Other comprehensive income (loss), net of tax	1,447		1,256		(16)		(2)		2,685
AOCI as of June 30, 2020		$	2,373	$	1,785	$	(151)	$	(26)	$	3,981
AOCI as of September 30, 2020												AOCI as of September 30, 2020	$	2,374	$	1,610	$	(123)	$	(28)	$	3,833

__________

(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 ~~loss~~gains of ~~$13~~$66 million and ~~$34~~$32 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, and other comprehensive loss of $8$75 million and gain of ~~$134~~$59 million for the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively, from hedging instruments designated as net investment hedges.



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The following table presents amounts reclassified from each component of AOCI to our consolidated statements of income for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020.

Table 9.3: Reclassifications from AOCI


(Dollars in millions)	(Dollars in millions)		Three Months Ended June 30,				Six Months Ended June 30,				(Dollars in millions)		Three Months Ended September 30,				Nine Months Ended September 30,
AOCI Components	AOCI Components	Affected Income Statement Line Item	2021		2020		2021		2020		AOCI Components	Affected Income Statement Line Item	2021		2020		2021		2020
Securities available for sale:	Securities available for sale:										Securities available for sale:
		Non-interest income	$	0	$	0	$	4	$	0		Non-interest income	$	2	$	25	$	6	$	25
		Income tax provision	0		0		1		0			Income tax provision	0		6		1		6
		Net income	0		0		3		0			Net income	2		19		5		19
Hedging relationships:	Hedging relationships:										Hedging relationships:
Interest rate contracts:	Interest rate contracts:	Interest income	245		142		480		168		Interest rate contracts:	Interest income	250		179		730		347
Foreign exchange contracts:	Foreign exchange contracts:	Interest income	0		2		1		9		Foreign exchange contracts:	Interest income	0		1		1		10
		Interest expense	(1)		(1)		(2)		(2)			Interest expense	0		(1)		(2)		(3)
		Non-interest income	77		(299)		162		93			Non-interest income	83		(73)		245		20
		Income (loss) from continuing operations before income taxes	321		(156)		641		268			Income from continuing operations before income taxes	333		106		974		374
		Income tax provision (benefit)	77		(39)		154		64			Income tax provision	81		26		235		90
		Net income (loss)	244		(117)		487		204			Net income	252		80		739		284
Other:	Other:										Other:
		Non-interest income and non-interest expense	0		0		1		0			Non-interest income and non-interest expense	3		2		4		2
		Income tax provision	0		0		0		0			Income tax provision	1		0		1		0
		Net income	0		0		1		0			Net income	2		2		3		2
Total reclassifications	Total reclassifications		$	244	$	(117)	$	491	$	204	Total reclassifications		$	256	$	101	$	747	$	305



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The table below summarizes other comprehensive income (loss) activity and the related tax impact for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020.

Table 9.4: Other Comprehensive Income (Loss)


		Three Months Ended June 30,														Three Months Ended September 30,
		2021						2020						2021				2020
(Dollars in millions)	(Dollars in millions)	Before Tax		Provision (Benefit)		After Tax		Before Tax		Provision (Benefit)		After Tax			(Dollars in millions)	Before Tax		Provision (Benefit)		After Tax		Before Tax		Provision (Benefit)		After Tax
Other comprehensive income (loss):	Other comprehensive income (loss):														Other comprehensive income (loss):
Net unrealized gains on securities available for sale		$	66	$	15	$	51	$	292	$	70	$	222
Net unrealized gains (losses) on securities available for sale															Net unrealized gains (losses) on securities available for sale	$	(270)	$	(62)	$	(208)	$	1	$	0	$	1
Net unrealized gains (losses) on hedging relationships	Net unrealized gains (losses) on hedging relationships	(68)		(17)		(51)		76		19		57			Net unrealized gains (losses) on hedging relationships	(255)		(60)		(195)		(231)		(56)		(175)
Foreign currency translation adjustments(1)	Foreign currency translation adjustments(1)	4		(5)		9		20		(3)		23			Foreign currency translation adjustments(1)	(6)		21		(27)		4		(24)		28
Other	Other	0		0		0		0		0		0			Other	(3)		(1)		(2)		(2)		0		(2)
Other comprehensive income (loss)	Other comprehensive income (loss)	$	2	$	(7)	$	9	$	388	$	86	$	302		Other comprehensive income (loss)	$	(534)	$	(102)	$	(432)	$	(228)	$	(80)	$	(148)


		Six Months Ended June 30,														Nine Months Ended September 30,
		2021						2020						2021				2020
(Dollars in millions)	(Dollars in millions)	Before Tax		Provision (Benefit)		After Tax		Before Tax		Provision (Benefit)		After Tax			(Dollars in millions)	Before Tax		Provision (Benefit)		After Tax		Before Tax		Provision (Benefit)		After Tax
Other comprehensive income (loss):	Other comprehensive income (loss):														Other comprehensive income (loss):
Net unrealized gains (losses) on securities available for sale	Net unrealized gains (losses) on securities available for sale	$	(1,446)	$	(349)	$	(1,097)	$	1,902	$	456	$	1,446		Net unrealized gains (losses) on securities available for sale	$	(1,716)	$	(411)	$	(1,305)	$	1,903	$	456	$	1,447
Net unrealized gains (losses) on hedging relationships	Net unrealized gains (losses) on hedging relationships	(834)		(202)		(632)		1,884		453		1,431			Net unrealized gains (losses) on hedging relationships	(1,089)		(262)		(827)		1,653		397		1,256
Foreign currency translation adjustments(1)	Foreign currency translation adjustments(1)	17		(11)		28		(1)		43		(44)			Foreign currency translation adjustments(1)	11		10		1		3		19		(16)
Other	Other	(1)		0		(1)		0		0		0			Other	(4)		(1)		(3)		(2)		0		(2)
Other comprehensive income (loss)	Other comprehensive income (loss)	$	(2,264)	$	(562)	$	(1,702)	$	3,785	$	952	$	2,833		Other comprehensive income (loss)	$	(2,798)	$	(664)	$	(2,134)	$	3,557	$	872	$	2,685

__________

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



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NOTE 10—EARNINGS PER COMMON SHARE

The following table sets forth the computation of basic and diluted earnings per common share.

Table 10.1: Computation of Basic and Diluted Earnings per Common Share


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars and shares in millions, except per share data)	(Dollars and shares in millions, except per share data)	2021		2020		2021		2020		(Dollars and shares in millions, except per share data)	2021		2020		2021		2020
Income (loss) from continuing operations, net of tax		$	3,537	$	(917)	$	6,864	$	(2,257)
Income from continuing operations, net of tax										Income from continuing operations, net of tax	$	3,104	$	2,406	$	9,968	$	149
Loss from discontinued operations, net of tax	Loss from discontinued operations, net of tax	(1)		(1)		(3)		(1)		Loss from discontinued operations, net of tax	0		0		(3)		(1)
Net income (loss)		3,536		(918)		6,861		(2,258)
Net income										Net income	3,104		2,406		9,965		148
Dividends and undistributed earnings allocated to participating securities	Dividends and undistributed earnings allocated to participating securities	(30)		(1)		(58)		(4)		Dividends and undistributed earnings allocated to participating securities	(26)		(20)		(84)		(5)
Preferred stock dividends	Preferred stock dividends	(60)		(90)		(121)		(145)		Preferred stock dividends	(79)		(67)		(200)		(212)
Issuance cost for redeemed preferred stock	Issuance cost for redeemed preferred stock	0		0		0		(22)		Issuance cost for redeemed preferred stock	(12)		0		(12)		(22)
Net income (loss) available to common stockholders	Net income (loss) available to common stockholders	$	3,446	$	(1,009)	$	6,682	$	(2,429)	Net income (loss) available to common stockholders	$	2,987	$	2,319	$	9,669	$	(91)

Total weighted-average basic common shares outstanding	Total weighted-average basic common shares outstanding	450.6		456.7		454.6		457.1		Total weighted-average basic common shares outstanding	438.8		457.8		449.2		457.4
Effect of dilutive securities:(1)	Effect of dilutive securities:(1)									Effect of dilutive securities:(1)
Stock options	Stock options	0.8		0.0		0.8		0.0		Stock options	0.6		0.4		0.7		0.0
Other contingently issuable shares	Other contingently issuable shares	0.9		0.0		0.8		0.0		Other contingently issuable shares	1.1		0.3		1.0		0.0
Total effect of dilutive securities	Total effect of dilutive securities	1.7		0.0		1.6		0.0		Total effect of dilutive securities	1.7		0.7		1.7		0.0
Total weighted-average diluted common shares outstanding	Total weighted-average diluted common shares outstanding	452.3		456.7		456.2		457.1		Total weighted-average diluted common shares outstanding	440.5		458.5		450.9		457.4
Basic earnings per common share:	Basic earnings per common share:									Basic earnings per common share:
Net income (loss) from continuing operations	Net income (loss) from continuing operations	$	7.65	$	(2.21)	$	14.70	$	(5.31)	Net income (loss) from continuing operations	$	6.81	$	5.07	$	21.53	$	(0.20)

Income (loss) from discontinued operations										Income (loss) from discontinued operations	0.00		0.00		(0.01)		0.00
Net income (loss) per basic common share	Net income (loss) per basic common share	$	7.65	$	(2.21)	$	14.70	$	(5.31)	Net income (loss) per basic common share	$	6.81	$	5.07	$	21.52	$	(0.20)
Diluted earnings per common share:(1)	Diluted earnings per common share:(1)									Diluted earnings per common share:(1)
Net income (loss) from continuing operations	Net income (loss) from continuing operations	$	7.62	$	(2.21)	$	14.65	$	(5.31)	Net income (loss) from continuing operations	$	6.78	$	5.06	$	21.45	$	(0.20)

Income (loss) from discontinued operations										Income (loss) from discontinued operations	0.00		0.00		(0.01)		0.00
Net income (loss) per diluted common share	Net income (loss) per diluted common share	$	7.62	$	(2.21)	$	14.65	$	(5.31)	Net income (loss) per diluted common share	$	6.78	$	5.06	$	21.44	$	(0.20)

__________

(1)~~For the three months ended June 30, 2021, 0 shares were excluded~~Excluded from the computation of diluted earnings per ~~share. For the six months ended June 30, 2021,~~share were awards of 5134 thousand shares ~~were~~ ~~excluded~~for the nine months ended September 30, 2021, and 774 thousand shares related to options with an exercise price ranging from $70.96 to $86.34 for the ~~computation of diluted earnings per share~~three months ended September 30, 2020, respectively, because their inclusion would be ~~anti-dilutive.~~anti-dilutive. In periods of net loss available to common stockholders, dilutive securities are excluded as their inclusion would have an anti-dilutive effect. Accordingly, for the ~~three and six~~nine months ended ~~June~~September 30, 2020, awards of ~~362 thousand shares and options of 2.6 million shares with an exercise price ranging from~~ ~~$45.75~~ to ~~$86.34~~ ~~and awards of 956~~762 thousand shares and options of 2.7 million shares with an exercise price ranging from $36.55 to $86.34 were excluded from the computation of diluted earnings per ~~share, respectively.~~share.



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NOTE 11—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, discounted cash flow 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. 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.

The determination and classification of financial instruments in the fair value hierarchy is performed at the end of each reporting period. 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. For additional information on the valuation techniques used in estimating the fair value of our financial assets and liabilities on a recurring basis, see “Note 16—Fair Value Measurement” in our 2020 Form 10-K.

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 ~~June~~September 30, 2021 and December 31, 2020.

Table 11.1: Assets and Liabilities Measured at Fair Value on a Recurring Basis


		June 30, 2021														September 30, 2021
		Fair Value Measurements Using						Netting Adjustments(1)								Fair Value Measurements Using								Netting Adjustments(1)
(Dollars in millions)	(Dollars in millions)	Level 1		Level 2		Level 3				Total	(Dollars in millions)			Level 1				Level 2			Level 3					Total
Assets:	Assets:														Assets:
Securities available for sale:	Securities available for sale:												Securities available for sale:
U.S. Treasury securities	U.S. Treasury securities	$	9,231	$	0	$	0	—			$	9,231	U.S. Treasury securities			$	9,109		$	0		$	0	—			$	9,109
RMBS	RMBS	0		78,033		289		—			78,322		RMBS			0			75,428			253		—			75,681
CMBS	CMBS	0		11,078		9		—			11,087		CMBS			0			10,188			9		—			10,197
Other securities	Other securities	171		2,955		0		—			3,126		Other securities			152			3,010			0		—			3,162
Total securities available for sale	Total securities available for sale	9,402		92,066		298		—			101,766		Total securities available for sale			9,261			88,626			262		—			98,149
Loans held for sale	Loans held for sale	0		371		0		—			371		Loans held for sale			0			1,707			0		—			1,707
Other assets:	Other assets:												Other assets:
Derivative assets(2)	Derivative assets(2)	602		2,985		129		$	(964)		2,752		Derivative assets(2)			955			3,758			191		$	(975)		3,929
Other(3)	Other(3)	496		2		46		0			544		Other(3)			514			16			43		—			573
Total assets	Total assets	$	10,500	$	95,424	$	473	$	(964)		$	105,433	Total assets			$	10,730		$	94,107		$	496	$	(975)		$	104,358
Liabilities:	Liabilities:												Liabilities:
Other liabilities:	Other liabilities:												Other liabilities:
Derivative liabilities(2)	Derivative liabilities(2)	$	1,144	$	1,156	$	110	$	(850)		$	1,560	Derivative liabilities(2)			$	1,904		$	1,407		$	152	$	(904)		$	2,559
Total liabilities	Total liabilities	$	1,144	$	1,156	$	110	$	(850)		$	1,560	Total liabilities			$	1,904		$	1,407		$	152	$	(904)		$	2,559



			~~115~~117			Capital One Financial Corporation (COF)

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	December 31, 2020
	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	$	9,318	$	0	$	0	—		$	9,318
RMBS	0		76,375		328		—		76,703
CMBS	0		11,624		111		—		11,735
Other securities	142		2,547		0		—		2,689
Total securities available for sale	9,460		90,546		439		—		100,445
Loans held for sale	0		596		0		—		596
Other assets:
Derivative assets(2)	268		3,006		141		$	(1,148)	2,267
Other(3)	430		552		55		—		1,037
Total assets	$	10,158	$	94,700	$	635	$	(1,148)	$	104,345
Liabilities:
Other liabilities:
Derivative liabilities(2)	$	271	$	1,137	$	110	$	(739)	$	779
Total liabilities	$	271	$	1,137	$	110	$	(739)	$	779

__________

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

(2)Does not reflect ~~$23~~$17 million and $31 million recognized as a net valuation allowance on derivative assets and liabilities for non-performance risk as of ~~June~~September 30, 2021 and December 31, 2020, respectively. Non-performance risk is included in derivative assets and liabilities, which are 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.

(3)As of ~~June~~September 30, 2021 and December 31, 2020, other includes retained interests in securitizations of ~~$46~~$43 million and $55 million, deferred compensation plan assets of ~~$472~~$463 million and $414 million, and equity securities of ~~$26~~$67 million and $568 million including unrealized gains of ~~$24~~$43 million and $535 million, respectively.



			118			Capital One Financial Corporation (COF)

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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 three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020. 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 11.2: Level 3 Recurring Fair Value Rollforward


		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)																							Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
		Three Months Ended June 30, 2021																							Three Months Ended September 30, 2021
				Total Gains (Losses) (Realized/Unrealized)																		Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of June 30, 2021(1)					Total Gains (Losses) (Realized/Unrealized)																		Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2021(1)
(Dollars in millions)	(Dollars in millions)	Balance, April 1, 2021		Included in Net Income(1)		Included in OCI		Purchases		Sales		Issuances		Settlements		Transfers Into Level 3		Transfers Out of Level 3		Balance, June 30, 2021				(Dollars in millions)	Balance, July 1, 2021		Included in Net Income(1)		Included in OCI		Purchases		Sales		Issuances		Settlements		Transfers Into Level 3		Transfers Out of Level 3		Balance, September 30, 2021
Securities available for sale:(2)	Securities available for sale:(2)																							Securities available for sale:(2)
RMBS	RMBS	$	326	$	4	$	2	$	0	$	0	$	0	$	(25)	$	45	$	(63)	$	289	$	4	RMBS	$	289	$	4	$	(1)	$	0	$	0	$	0	$	(23)	$	4	$	(20)	$	253	$	4
CMBS	CMBS	10		0		0		0		0		0		0		0		(1)		9		0		CMBS	9		0		1		0		0		0		(1)		0		0		9		0

Total securities available for sale	Total securities available for sale	336		4		2		0		0		0		(25)		45		(64)		298		4		Total securities available for sale	298		4		0		0		0		0		(24)		4		(20)		262		4
Other assets:	Other assets:																						Other assets:

Retained interests in securitizations	Retained interests in securitizations	50		(4)		0		0		0		0		0		0		0		46		(4)		Retained interests in securitizations	46		(3)		0		0		0		0		0		0		0		43		(3)
Net derivative assets (liabilities)(4)	Net derivative assets (liabilities)(4)	34		11		0		0		0		(16)		(15)		6		(1)		19		11		Net derivative assets (liabilities)(4)	19		(31)		0		0		0		44		6		0		1		39		(29)


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Nine Months Ended September 30, 2021
			Total Gains (Losses) (Realized/Unrealized)																		Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2021(1)
(Dollars in millions)	Balance, January 1, 2021		Included in Net Income(1)		Included in OCI		Purchases		Sales		Issuances		Settlements		Transfers Into Level 3		Transfers Out of Level 3		Balance, September 30, 2021
Securities available for sale:(2)
RMBS	$	328	$	15	$	3	$	0	$	0	$	0	$	(74)	$	88	$	(107)	$	253	$	11
CMBS	111		0		(1)		0		0		0		(7)		0		(94)		9		0

Total securities available for sale	439		15		2		0		0		0		(81)		88		(201)		262		11
Other assets:

Retained interests in securitizations	55		(12)		0		0		0		0		0		0		0		43		(12)
Net derivative assets (liabilities)(4)	31		(41)		0		0		0		66		(23)		6		0		39		(32)



			~~116~~119			Capital One Financial Corporation (COF)

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		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)																							Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
		Six Months Ended June 30, 2021																							Three Months Ended September 30, 2020
				Total Gains (Losses) (Realized/Unrealized)																		Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of June 30, 2021(1)					Total Gains (Losses) (Realized/Unrealized)																		Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2020(1)
(Dollars in millions)	(Dollars in millions)	Balance, January 1, 2021		Included in Net Income(1)		Included in OCI		Purchases		Sales		Issuances		Settlements		Transfers Into Level 3		Transfers Out of Level 3		Balance, June 30, 2021				(Dollars in millions)	Balance, July 1, 2020		Included in Net Income(1)		Included in OCI		Purchases		Sales		Issuances		Settlements		Transfers Into Level 3		Transfers Out of Level 3		Balance, September 30, 2020
Securities available for sale:(2)	Securities available for sale:(2)																							Securities available for sale:(2)
RMBS	RMBS	$	328	$	11	$	4	$	0	$	0	$	0	$	(51)	$	84	$	(87)	$	289	$	8	RMBS	$	474	$	10	$	3	$	0	$	0	$	0	$	(22)	$	56	$	(47)	$	474	$	10
CMBS	CMBS	111		0		(2)		0		0		0		(6)		0		(94)		9		0		CMBS	282		(1)		1		0		0		0		(8)		98		0		372		(1)

Total securities available for sale	Total securities available for sale	439		11		2		0		0		0		(57)		84		(181)		298		8		Total securities available for sale	756		9		4		0		0		0		(30)		154		(47)		846		9
Other assets:	Other assets:																						Other assets:

Retained interests in securitizations	Retained interests in securitizations	55		(9)		0		0		0		0		0		0		0		46		(9)		Retained interests in securitizations	56		0		0		0		0		0		0		0		0		56		0
Net derivative assets (liabilities)(4)	Net derivative assets (liabilities)(4)	31		(10)		0		0		0		22		(29)		6		(1)		19		8		Net derivative assets (liabilities)(4)	34		8		0		0		0		13		(2)		0		(9)		44		0

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Three Months Ended June 30, 2020
Total Gains (Losses)
(Realized/Unrealized)
Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of
June 30, 2020(1)
(Dollars in millions) Balance, April 1, 2020
Included
in Net
Income(1)
Included in OCI Purchases Sales Issuances Settlements Transfers
Into
Level 3 Transfers
Out of
Level 3 Balance, June 30, 2020
Securities available for sale:(2)
RMBS $ 373 $ 6 $ 29 $ 0 $ 0 $ 0 $ (16) $ 131 $ (49) $ 474 $ 7
CMBS 36 0 (1) 0 0 0 (3) 250 0 282 (3)
Total securities available for sale 409 6 28 0 0 0 (19) 381 (49) 756 4
Other assets:
Retained interests in securitizations 59 (3) 0 0 0 0 0 0 0 56 (3)
Net derivative assets (liabilities)(4)
66 (8) 0 0 0 2 (26) 0 0 34 0


		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)																							Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
		Six Months Ended June 30, 2020																							Nine Months Ended September 30, 2020
				Total Gains (Losses) (Realized/Unrealized)																		Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of June 30, 2020(1)					Total Gains (Losses) (Realized/Unrealized)																		Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2020(1)
(Dollars in millions)	(Dollars in millions)	Balance, January 1, 2020		Included in Net Income(1)		Included in OCI		Purchases		Sales		Issuances		Settlements		Transfers Into Level 3		Transfers Out of Level 3		Balance, June 30, 2020				(Dollars in millions)	Balance, January 1, 2020		Included in Net Income(1)		Included in OCI		Purchases		Sales		Issuances		Settlements		Transfers Into Level 3		Transfers Out of Level 3		Balance, September 30, 2020
Securities available for sale:(2)(3)	Securities available for sale:(2)(3)																							Securities available for sale:(2)(3)
RMBS	RMBS	$	433	$	9	$	(24)	$	0	$	0	$	0	$	(33)	$	140	$	(51)	$	474	$	10	RMBS	$	433	$	19	$	(21)	$	0	$	0	$	0	$	(55)	$	196	$	(98)	$	474	$	20
CMBS	CMBS	13		0		(1)		0		0		0		(3)		273		0		282		(3)		CMBS	13		(1)		0		0		0		0		(11)		371		0		372		(4)

Total securities available for sale	Total securities available for sale	446		9		(25)		0		0		0		(36)		413		(51)		756		7		Total securities available for sale	446		18		(21)		0		0		0		(66)		567		(98)		846		16
Other assets:	Other assets:																						Other assets:

Retained interests in securitizations	Retained interests in securitizations	66		(10)		0		0		0		0		0		0		0		56		(10)		Retained interests in securitizations	66		(10)		0		0		0		0		0		0		0		56		(10)
Net derivative assets (liabilities)(4)	Net derivative assets (liabilities)(4)	26		12		0		0		0		26		(28)		0		(2)		34		18		Net derivative assets (liabilities)(4)	26		20		0		0		0		39		(30)		0		(11)		44		18

__________



			~~117~~			~~Capital One Financial Corporation (COF)~~

~~Table of Contents~~

(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)For the three and ~~six~~nine months ended ~~June~~September 30, 2021, included in OCI related to Level 3 securities available for sale still held as of ~~June~~September 30, 2021 were ~~net unrealized losses of $1 million and~~no net unrealized gains and $3 million of ~~$2 million,~~net unrealized gains, respectively. For the three and ~~six~~nine months ended ~~June~~September 30, 2020, included in OCI related to Level 3 securities available for sale still held as of ~~June~~September 30, 2020 were net unrealized gains of ~~$36~~$5 million and net unrealized losses of ~~$23~~$16 million, respectively.

(3)The fair value of RMBS as of January 1, 2020 includes a cumulative adjustment of $4 million from the adoption of the CECL standard.

(4)Includes derivative assets and liabilities of ~~$129~~$191 million and ~~$110~~$152 million, respectively, as of ~~June~~September 30, 2021 and ~~$151~~$153 million and ~~$117~~$109 million, respectively, as of ~~June~~September 30, 2020.



			120			Capital One Financial Corporation (COF)

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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 and 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.

Techniques and Inputs for Level 3 Fair Value Measurements

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.



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Table 11.3: Quantitative Information about Level 3 Fair Value Measurements

Quantitative Information about Level 3 Fair Value Measurements

(Dollars in millions)

Fair Value at
June 30,
2021

Significant
Valuation
Techniques

Significant
Unobservable
Inputs

Range

Weighted

Average(1)

(Dollars in millions)

Fair Value at
September 30,
2021

Significant
Valuation
Techniques

Significant
Unobservable
Inputs

Range

Weighted

Average(1)

Securities available for sale:

RMBS

289

Discounted cash flows (vendor pricing)

Yield
Voluntary prepayment rate
Default rate
Loss severity

1-19%

5-20%

1-11%

30-100%

11%

68%

RMBS

253

Discounted cash flows (vendor pricing)

Yield
Voluntary prepayment rate
Default rate
Loss severity

0-17%

5-20%

1-11%

30-100%

11%

68%

CMBS

Discounted cash flows (vendor pricing)

Yield

0-2%

CMBS

Discounted cash flows (vendor pricing)

Yield

Other assets:

Retained interests in securitizations(2)

Discounted cash flows

Life of receivables (months)
Voluntary prepayment rate
Discount rate
Default rate
Loss severity

33-40

9-15%

2-11%

2-4%

55-151%

N/A

Retained interests in securitizations(2)

Discounted cash flows

Life of receivables (months)
Voluntary prepayment rate
Discount rate
Default rate
Loss severity

30-36

9-17%

2-8%

2-4%

56-151%

N/A

Net derivative assets (liabilities)

Discounted cash flows

Swap rates

1-2%

Net derivative assets (liabilities)

Discounted cash flows

Swap rates

1-2%

Quantitative Information about Level 3 Fair Value Measurements

(Dollars in millions)

Fair Value at
December 31,
2020

Significant
Valuation
Techniques

Significant
Unobservable
Inputs

Range

Weighted

Average(1)

Securities available for sale:

RMBS

328

Discounted cash flows (vendor pricing)

Yield
Voluntary prepayment rate
Default rate
Loss severity

2-12%

8-15%

0-11%

30-100%

10%

73%

CMBS

111

Discounted cash flows (vendor pricing)

Yield

1-3%

Other assets:

Retained interests in securitizations(2)

Discounted cash flows

Life of receivables (months)
Voluntary prepayment rate
Discount rate
Default rate
Loss severity

37-52

3-13%

2-12%

3-3%

55-70%

N/A

Net derivative assets (liabilities)

Discounted cash flows

Swap rates

__________

(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.



			~~119~~122			Capital One Financial Corporation (COF)

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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 table presents the carrying value of the assets measured at fair value on a nonrecurring basis and still held as of ~~June~~September 30, 2021 and December 31, 2020, and for which a nonrecurring fair value measurement was recorded during the ~~six~~nine and twelve months then ended.

Table 11.4: Nonrecurring Fair Value Measurements


		June 30, 2021							September 30, 2021
		Estimated Fair Value Hierarchy				Total			Estimated Fair Value Hierarchy				Total
(Dollars in millions)	(Dollars in millions)	Level 2		Level 3				(Dollars in millions)	Level 2		Level 3
Loans held for investment	Loans held for investment	$	0	$	204	$	204	Loans held for investment	$	0	$	126	$	126

Other assets(1)	Other assets(1)	0		177		177		Other assets(1)	0		175		175
Total	Total	$	0	$	381	$	381	Total	$	0	$	301	$	301


	December 31, 2020
	Estimated Fair Value Hierarchy				Total
(Dollars in millions)	Level 2		Level 3
Loans held for investment	$	0	$	305	$	305
Other assets(1)	0		175		175
Total	$	0	$	480	$	480

__________

(1)As of ~~June~~September 30, 2021, other assets included equity method investments subject to impairment of ~~$56~~$53 million,, investments accounted for under measurement alternative of ~~$13~~$15 million, repossessed assets of ~~$31~~$39 million and long-lived assets held for sale of ~~$77~~$68 million. As of December 31, 2020, other assets included equity investments accounted for under the measurement alternative of $25 million, repossessed assets of $42 million and long-lived assets held for sale of $108 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 100%, with a weighted average of ~~23%~~14%, and from 0% to 89%, with a weighted average of 14%, as of ~~June~~September 30, 2021 and December 31, 2020, 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 ~~June~~September 30, 2021 and December 31, 2020.

Table 11.5: Nonrecurring Fair Value Measurements Included in Earnings


		Total Gains (Losses)					Total Gains (Losses)
		Six Months Ended June 30,					Nine Months Ended September 30,
(Dollars in millions)	(Dollars in millions)	2021		2020		(Dollars in millions)	2021		2020
Loans held for investment	Loans held for investment	$	(97)	$	(253)	Loans held for investment	$	12	$	187

Other assets(1)	Other assets(1)	(61)		(22)		Other assets(1)	(65)		(42)
Total	Total	$	(158)	$	(275)	Total	$	(53)	$	145

__________

(1)Other assets include fair value adjustments related to repossessed assets, long-lived assets held for sale and equity investments accounted for under the measurement alternative.



			~~120~~123			Capital One Financial Corporation (COF)

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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 ~~June~~September 30, 2021 and December 31, 2020.

Table 11.6: Fair Value of Financial Instruments


		June 30, 2021															September 30, 2021
		Carrying Value		Estimated Fair Value			Estimated Fair Value Hierarchy										Carrying Value			Estimated Fair Value		Estimated Fair Value Hierarchy
(Dollars in millions)	(Dollars in millions)					Level 1			Level 2			Level 3	(Dollars in millions)						Level 1			Level 2		Level 3
Financial assets:	Financial assets:															Financial assets:
Cash and cash equivalents	Cash and cash equivalents	$	34,846	$	34,846		$	5,312		$	29,534		$	0	Cash and cash equivalents		$	26,624		$	26,624	$	5,444	$	21,180	$	0
Restricted cash for securitization investors	Restricted cash for securitization investors	242		242			242			0			0		Restricted cash for securitization investors		234			234		234		0		0

Net loans held for investment	Net loans held for investment	237,251		242,812			0			0			242,812		Net loans held for investment		249,817			254,878		0		0		254,878
Loans held for sale	Loans held for sale	6,151		6,385			0			6,385			0		Loans held for sale		4,593			4,880		0		4,880		0
Interest receivable	Interest receivable	1,372		1,372			0			1,372			0		Interest receivable		1,418			1,418		0		1,418		0
Other investments(1)	Other investments(1)	1,344		1,344			0			1,344			0		Other investments(1)		1,344			1,344		0		1,344		0
Financial liabilities:	Financial liabilities:														Financial liabilities:
Deposits with defined maturities	Deposits with defined maturities	22,225		22,469			0			22,469			0		Deposits with defined maturities		19,283			19,483		0		19,483		0
Securitized debt obligations	Securitized debt obligations	10,561		10,717			0			10,717			0		Securitized debt obligations		12,635			12,782		0		12,782		0
Senior and subordinated notes	Senior and subordinated notes	24,878		25,724			0			25,724			0		Senior and subordinated notes		23,983			24,754		0		24,754		0
Federal funds purchased and securities loaned or sold under agreements to repurchase	Federal funds purchased and securities loaned or sold under agreements to repurchase	845		845			0			845			0		Federal funds purchased and securities loaned or sold under agreements to repurchase		825			825		0		825		0

Interest payable	Interest payable	301		301			0			301			0		Interest payable		241			241		0		241		0


	December 31, 2020
	Carrying Value		Estimated Fair Value		Estimated Fair Value Hierarchy
(Dollars in millions)					Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	40,509	$	40,509	$	4,708	$	35,801	$	0
Restricted cash for securitization investors	262		262		262		0		0
Net loans held for investment	236,060		244,701		0		0		244,701
Loans held for sale	2,114		2,214		0		2,214		0
Interest receivable	1,471		1,471		0		1,471		0
Other investments(1)	1,341		1,341		0		1,341		0
Financial liabilities:
Deposits with defined maturities	32,746		33,111		0		33,111		0
Securitized debt obligations	12,414		12,584		0		12,584		0
Senior and subordinated notes	27,382		28,282		0		28,282		0
Federal funds purchased and securities loaned or sold under agreements to repurchase	668		668		0		668		0

Interest payable	352		352		0		352		0

__________

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



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NOTE 12—BUSINESS SEGMENTS AND REVENUE FROM CONTRACTS WITH CUSTOMERS

Our principal operations are organized into 3 major business segments, which are defined primarily based on the products and services provided or the types of customers served: Credit Card, Consumer Banking and Commercial Banking. The operations of acquired businesses have been integrated into or managed as a part of our existing business segments. Certain activities that are not part of a segment, such as management of our corporate investment portfolio, asset/liability management by our centralized Corporate Treasury group and residual tax expense or benefit to arrive at the consolidated effective tax rate that is not assessed to our primary business segments, are included in the Other category.

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.

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 revenue and expenses directly or indirectly attributable to each business segment. Our funds transfer pricing process provides a funds credit for sources of funds, such as deposits generated by our Consumer Banking and Commercial Banking businesses, and a funds charge for the use of funds by each segment. 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 third-party 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. We provide additional information on the allocation methodologies used to derive our business segment results in “Note 17—Business Segments and Revenue from Contracts with Customers” in our 2020 Form 10-K.

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 three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, selected balance sheet data as of ~~June~~September 30, 2021 and 2020, and a reconciliation of our total business segment results to our reported consolidated income from continuing operations, loans held for investment and deposits.



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Table 12.1: Segment Results and Reconciliation


		Three Months Ended June 30, 2021											Three Months Ended September 30, 2021
(Dollars in millions)	(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total		(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total
Net interest income (loss)	Net interest income (loss)	$	3,217	$	2,101	$	460	$	(35)	$	5,743	Net interest income (loss)	$	3,620	$	2,159	$	578	$	(201)	$	6,156
Non-interest income (loss)	Non-interest income (loss)	1,253		144		257		(23)		1,631		Non-interest income (loss)	1,263		127		306		(22)		1,674
Total net revenue (loss)(2)	Total net revenue (loss)(2)	4,470		2,245		717		(58)		7,374		Total net revenue (loss)(2)	4,883		2,286		884		(223)		7,830
Provision (benefit) for credit losses	Provision (benefit) for credit losses	(635)		(306)		(219)		0		(1,160)		Provision (benefit) for credit losses	(198)		(91)		(53)		0		(342)
Non-interest expense	Non-interest expense	2,263		1,123		417		163		3,966		Non-interest expense	2,424		1,186		459		117		4,186
Income (loss) from continuing operations before income taxes	Income (loss) from continuing operations before income taxes	2,842		1,428		519		(221)		4,568		Income (loss) from continuing operations before income taxes	2,657		1,191		478		(340)		3,986
Income tax provision (benefit)	Income tax provision (benefit)	672		337		123		(101)		1,031		Income tax provision (benefit)	627		282		113		(140)		882
Income (loss) from continuing operations, net of tax	Income (loss) from continuing operations, net of tax	$	2,170	$	1,091	$	396	$	(120)	$	3,537	Income (loss) from continuing operations, net of tax	$	2,030	$	909	$	365	$	(200)	$	3,104
Loans held for investment	Loans held for investment	$	101,017	$	74,759	$	73,821	$	0	$	249,597	Loans held for investment	$	105,030	$	77,112	$	79,248	$	0	$	261,390
Deposits	Deposits	0		251,155		42,973		12,180		306,308		Deposits	0		252,387		43,347		10,204		305,938


		Six Months Ended June 30, 2021											Nine Months Ended September 30, 2021
(Dollars in millions)	(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total		(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total
Net interest income (loss)	Net interest income (loss)	$	6,589	$	4,131	$	980	$	(135)	$	11,565	Net interest income (loss)	$	10,209	$	6,290	$	1,558	$	(336)	$	17,721
Non-interest income (loss)	Non-interest income (loss)	2,282		285		497		(142)		2,922		Non-interest income (loss)	3,545		412		803		(164)		4,596
Total net revenue (loss)(2)	Total net revenue (loss)(2)	8,871		4,416		1,477		(277)		14,487		Total net revenue (loss)(2)	13,754		6,702		2,361		(500)		22,317
Provision (benefit) for credit losses		(1,127)		(432)		(422)		(2)		(1,983)
Benefit for credit losses												Benefit for credit losses	(1,325)		(523)		(475)		(2)		(2,325)
Non-interest expense	Non-interest expense	4,398		2,240		836		232		7,706		Non-interest expense	6,822		3,426		1,295		349		11,892
Income (loss) from continuing operations before income taxes	Income (loss) from continuing operations before income taxes	5,600		2,608		1,063		(507)		8,764		Income (loss) from continuing operations before income taxes	8,257		3,799		1,541		(847)		12,750
Income tax provision (benefit)	Income tax provision (benefit)	1,325		615		251		(291)		1,900		Income tax provision (benefit)	1,952		897		364		(431)		2,782
Income (loss) from continuing operations, net of tax	Income (loss) from continuing operations, net of tax	$	4,275	$	1,993	$	812	$	(216)	$	6,864	Income (loss) from continuing operations, net of tax	$	6,305	$	2,902	$	1,177	$	(416)	$	9,968
Loans held for investment	Loans held for investment	$	101,017	$	74,759	$	73,821	$	0	$	249,597	Loans held for investment	$	105,030	$	77,112	$	79,248	$	0	$	261,390
Deposits	Deposits	0		251,155		42,973		12,180		306,308		Deposits	0		252,387		43,347		10,204		305,938


		Three Months Ended June 30, 2020											Three Months Ended September 30, 2020
(Dollars in millions)	(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total		(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total
Net interest income (loss)	Net interest income (loss)	$	3,369	$	1,665	$	518	$	(92)	$	5,460	Net interest income (loss)	$	3,292	$	1,904	$	517	$	(158)	$	5,555
Non-interest income (loss)	Non-interest income (loss)	845		97		180		(26)		1,096		Non-interest income (loss)	1,013		107		237		469		1,826
Total net revenue (loss)(2)	Total net revenue (loss)(2)	4,214		1,762		698		(118)		6,556		Total net revenue (loss)(2)	4,305		2,011		754		311		7,381
Provision (benefit) for credit losses	Provision (benefit) for credit losses	2,944		876		427		(1)		4,246		Provision (benefit) for credit losses	450		(43)		(74)		(2)		331
Non-interest expense	Non-interest expense	1,969		1,036		425		340		3,770		Non-interest expense	2,003		1,011		424		110		3,548
Loss from continuing operations before income taxes		(699)		(150)		(154)		(457)		(1,460)
Income tax benefit		(166)		(36)		(36)		(305)		(543)
Loss from continuing operations, net of tax		$	(533)	$	(114)	$	(118)	$	(152)	$	(917)
Income (loss) from continuing operations before income taxes												Income (loss) from continuing operations before income taxes	1,852		1,043		404		203		3,502
Income tax provision												Income tax provision	438		247		95		316		1,096
Income (loss) from continuing operations, net of tax												Income (loss) from continuing operations, net of tax	$	1,414	$	796	$	309	$	(113)	$	2,406
Loans held for investment	Loans held for investment	$	107,310	$	66,712	$	77,490	$	0	$	251,512	Loans held for investment	$	103,641	$	68,688	$	75,894	$	0	$	248,223
Deposits	Deposits	0		246,804		35,669		21,765		304,238		Deposits	0		249,684		36,783		19,258		305,725



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Six Months Ended June 30, 2020
(Dollars in millions) Credit Card Consumer Banking
Commercial Banking(1)
Other(1)
Consolidated Total
Net interest income $ 7,071 $ 3,322 $ 1,009 $ 83 $ 11,485
Non-interest income (loss) 1,756 223 418 (77) 2,320
Total net revenue(2)
8,827 3,545 1,427 6 13,805
Provision for credit losses 6,646 1,736 1,283 4 9,669
Non-interest expense 4,177 2,027 837 458 7,499
Loss from continuing operations before income taxes (1,996) (218) (693) (456) (3,363)
Income tax benefit (472) (52) (164) (418) (1,106)
Loss from continuing operations, net of tax $ (1,524) $ (166) $ (529) $ (38) $ (2,257)
Loans held for investment $ 107,310 $ 66,712 $ 77,490 $ 0 $ 251,512
Deposits 0 246,804 35,669 21,765 304,238


	Nine Months Ended September 30, 2020
(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total
Net interest income (loss)	$	10,363	$	5,226	$	1,526	$	(75)	$	17,040
Non-interest income	2,769		330		655		392		4,146
Total net revenue(2)	13,132		5,556		2,181		317		21,186
Provision for credit losses	7,096		1,693		1,209		2		10,000
Non-interest expense	6,180		3,038		1,261		568		11,047
Income (loss) from continuing operations before income taxes	(144)		825		(289)		(253)		139
Income tax provision (benefit)	(34)		195		(69)		(102)		(10)
Income (loss) from continuing operations, net of tax	$	(110)	$	630	$	(220)	$	(151)	$	149
Loans held for investment	$	103,641	$	68,688	$	75,894	$	0	$	248,223
Deposits	0		249,684		36,783		19,258		305,725

__________

(2)Total net revenue was reduced by ~~$175~~$123 million and ~~$355~~$478 million in the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, and ~~$318~~$235 million and ~~$707~~$942 million in the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively, for credit card finance charges and fees charged off as uncollectible.

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 overdrafts and ~~Automated~~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 on certain marketing and promotional events from our auto dealers. 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 three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020.

Table 12.2: Revenue from Contracts with Customers and Reconciliation to Segment Results


		Three Months Ended June 30, 2021											Three Months Ended September 30, 2021
(Dollars in millions)	(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total		(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total
Contract revenue:	Contract revenue:											Contract revenue:
Interchange fees, net(2)	Interchange fees, net(2)	$	925	$	67	$	24	$	0	$	1,016	Interchange fees, net(2)	$	930	$	68	$	24	$	0	$	1,022
Service charges and other customer-related fees	Service charges and other customer-related fees	0		45		66		0		111		Service charges and other customer-related fees	0		42		71		0		113
Other	Other	94		19		1		0		114		Other	98		17		1		0		116
Total contract revenue	Total contract revenue	1,019		131		91		0		1,241		Total contract revenue	1,028		127		96		0		1,251
Revenue (reduction) from other sources	Revenue (reduction) from other sources	234		13		166		(23)		390		Revenue (reduction) from other sources	235		0		210		(22)		423
Total non-interest income (loss)	Total non-interest income (loss)	$	1,253	$	144	$	257	$	(23)	$	1,631	Total non-interest income (loss)	$	1,263	$	127	$	306	$	(22)	$	1,674



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		Six Months Ended June 30, 2021											Nine Months Ended September 30, 2021
(Dollars in millions)	(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total		(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total
Contract revenue:	Contract revenue:											Contract revenue:
Interchange fees, net(2)	Interchange fees, net(2)	$	1,668	$	124	$	41	$	0	$	1,833	Interchange fees, net(2)	$	2,598	$	192	$	65	$	0	$	2,855
Service charges and other customer-related fees	Service charges and other customer-related fees	0		89		116		0		205		Service charges and other customer-related fees	0		131		187		0		318
Other	Other	164		38		2		0		204		Other	262		55		3		0		320
Total contract revenue	Total contract revenue	1,832		251		159		0		2,242		Total contract revenue	2,860		378		255		0		3,493
Revenue (reduction) from other sources	Revenue (reduction) from other sources	450		34		338		(142)		680		Revenue (reduction) from other sources	685		34		548		(164)		1,103
Total non-interest income (loss)	Total non-interest income (loss)	$	2,282	$	285	$	497	$	(142)	$	2,922	Total non-interest income (loss)	$	3,545	$	412	$	803	$	(164)	$	4,596


		Three Months Ended June 30, 2020											Three Months Ended September 30, 2020
(Dollars in millions)	(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total		(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total
Contract revenue:	Contract revenue:											Contract revenue:
Interchange fees, net(2)	Interchange fees, net(2)	$	612	$	48	$	13	$	(1)	$	672	Interchange fees, net(2)	$	703	$	54	$	17	$	1	$	775
Service charges and other customer-related fees	Service charges and other customer-related fees	0		31		43		(1)		73		Service charges and other customer-related fees	0		42		50		0		92
Other	Other	57		3		0		0		60		Other	109		5		1		0		115
Total contract revenue	Total contract revenue	669		82		56		(2)		805		Total contract revenue	812		101		68		1		982
Revenue (reduction) from other sources		176		15		124		(24)		291
Revenue from other sources												Revenue from other sources	201		6		169		468		844
Total non-interest income	Total non-interest income	$	845	$	97	$	180	$	(26)	$	1,096	Total non-interest income	$	1,013	$	107	$	237	$	469	$	1,826


		Six Months Ended June 30, 2020											Nine Months Ended September 30, 2020
(Dollars in millions)	(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total		(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total
Contract revenue:	Contract revenue:											Contract revenue:
Interchange fees, net(2)	Interchange fees, net(2)	$	1,300	$	98	$	28	$	(2)	$	1,424	Interchange fees, net(2)	$	2,003	$	152	$	45	$	(1)	$	2,199
Service charges and other customer-related fees	Service charges and other customer-related fees	0		95		74		(1)		168		Service charges and other customer-related fees	0		137		124		(1)		260
Other	Other	127		22		1		0		150		Other	236		27		2		0		265
Total contract revenue	Total contract revenue	1,427		215		103		(3)		1,742		Total contract revenue	2,239		316		171		(2)		2,724
Revenue (reduction) from other sources		329		8		315		(74)		578
Revenue from other sources												Revenue from other sources	530		14		484		394		1,422
Total non-interest income	Total non-interest income	$	1,756	$	223	$	418	$	(77)	$	2,320	Total non-interest income	$	2,769	$	330	$	655	$	392	$	4,146

________

(2)Interchange fees are presented net of customer reward expenses.



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NOTE 13—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, 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 ~~June~~September 30, 2021 and December 31, 2020. The carrying value represents our reserve and deferred revenue on legally binding commitments.

Table 13.1: Unfunded Lending Commitments


		Contractual Amount				Carrying Value					Contractual Amount				Carrying Value
(Dollars in millions)	(Dollars in millions)	June 30, 2021		December 31, 2020		June 30, 2021		December 31, 2020		(Dollars in millions)	September 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Credit card lines	Credit card lines	$	354,098	$	349,594	N/A		N/A		Credit card lines	$	366,744	$	349,594	N/A		N/A
Other loan commitments(1)	Other loan commitments(1)	38,922		35,836		$	120	$	144	Other loan commitments(1)	40,545		35,836		$	121	$	144
Standby letters of credit and commercial letters of credit(2)	Standby letters of credit and commercial letters of credit(2)	1,290		1,302		27		32		Standby letters of credit and commercial letters of credit(2)	1,380		1,302		28		32
Total unfunded lending commitments	Total unfunded lending commitments	$	394,310	$	386,732	$	147	$	176	Total unfunded lending commitments	$	408,669	$	386,732	$	149	$	176

__________

(1)Includes ~~$2.6~~$2.1 billion and $1.8 billion of advised lines of credit as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

(2)These financial guarantees have expiration dates that range from 2021 to 2023 as of ~~June~~September 30, 2021.

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 the loans. Beginning January 1, 2020, we elected the fair value option on new loss sharing agreements. 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 payment under the loss sharing agreement and record our estimate of expected credit losses each period in provision for credit losses in our consolidated statements of income. The liability recognized on our consolidated balance sheets for these loss sharing agreements was ~~$93~~$90 million and $97 million as of ~~June~~September 30, 2021 and December 31, 2020, respectively.



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See “Note 4—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments” for more information related to our credit card partnership loss sharing arrangements.



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Litigation

In accordance with the current accounting standards for loss contingencies, we establish reserves for litigation-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 ~~June~~September 30, 2021 are approximately ~~$250~~$200 million. Our reserve and reasonably possible loss estimates involve considerable judgment and reflect that there is still 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 litigation matters based on current information, it is possible that actual future losses will exceed both the current accrual level and the range of reasonably possible losses disclosed here. Given the inherent uncertainties involved in these matters, especially those involving governmental agencies, and the very large or indeterminate damages sought in some of these matters, there is significant uncertainty as to the ultimate liability we may incur from these litigation 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

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. Other merchants have asserted similar claims in separate lawsuits, and while these separate cases did not name any issuing banks, Visa, MasterCard and issuers, including Capital One, have entered 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 and have pursued their own claims. The claims by the injunctive relief class have not been resolved, but the settlement of $5.5 billion for the monetary damages class received final approval from the trial court, and has been appealed to the U.S. Court of Appeals for the Second Circuit. Visa and MasterCard have also settled a number of the opt-out cases, which required non-material payments from issuing banks, including Capital One. Visa created a litigation escrow account following its initial public offering of stock in 2008 that funds settlements for its member banks, and any settlements related to MasterCard-allocated losses have either already been paid or are reflected in our reserves.

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 “Cybersecurity Incident”). As a result of the Cybersecurity Incident, we are 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 were named as a defendant in approximately 7475 putative consumer class action cases (61 in U.S. federal courts, 1 in California state court, and 13 in Canadian courts) alleging harm from the 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. The U.S. consumer class actions have been consolidated for pretrial proceedings before a multi-district litigation (“MDL”) panel in the U.S. District Court for the Eastern District of



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Virginia, Alexandria Division, where the remaining 29 consumer class actions are currently pending. In the third quarter of 2020, the MDL court denied in part and granted in part Capital One’s motion to dismiss and permitted pretrial discovery to continue.



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Securities class action. The Company and certain officers have also been named as defendants in a putative class action pending in the MDL alleging violations of certain federal securities laws in connection with statements and alleged omissions in securities filings relating to our information security standards and practices. The complaint seeks certification of a class of all persons who purchased or otherwise acquired Capital One securities from July 23, 2015 to July 29, 2019, as well as unspecified monetary damages, costs and other relief.

Governmental inquiries. We have received inquiries and requests for information relating to the Cybersecurity Incident from Congress, federal regulators, relevant Canadian regulators, the Department of Justice, and the offices of approximately fourteen state Attorneys General. We are cooperating with these offices and responding to their inquiries.

In August 2020, we entered into consent orders with the Federal Reserve and the Office of the Comptroller of the Currency (“OCC”) resulting from regulatory reviews of the 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.

Taxi Medallion Finance Investigations

Beginning in 2019, we have received subpoenas from the New York Attorney General’s office and from the U.S. Attorney’s Office for the Southern District of New York, Civil and Criminal Divisions, relating to investigations of the taxi medallion finance industry we exited beginning in 2015. The subpoenas seek, among other things, information regarding our lending counterparties and practices. We are cooperating with these investigations.

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), we received customer complaints and regulatory claims relating to PPI. As of the first quarter of 2021, 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.

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.



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Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

Item 4. Controls and Procedures

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 the ~~SEC~~U.S. Securities and Exchange Commission (“SEC”) rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, 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 Chief Executive Officer and Chief Financial Officer, 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~~September 30, 2021, the end of the period covered by this Report on Form 10-Q. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of ~~June~~September 30, 2021, 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. There were no changes in internal control over financial reporting that occurred in the ~~second~~third quarter of 2021 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.



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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

The information required by Item 103 of Regulation S-K is included in “Note 13—Commitments, Contingencies, Guarantees and Others.”

Item 1A. Risk Factors

We are not aware of any material changes from the risk factors set forth under “Part I—Item 1A. Risk Factors” in our 2020 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table presents information related to the ~~withholdings~~repurchases of shares of our common stock for each calendar month in the ~~second~~third quarter of 2021. Commission costs are excluded from the amounts presented below.

Total Number
of Shares
Purchased(1)
Average
Price
per Share Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
Maximum
Amount That May
Yet be Purchased
Under the Plan
or Program
(in millions)
April 5,559,071 $ 134.45 5,559,071 $ 6,263
May 5,910,765 155.40 5,870,500 5,350
June 15,500 160.63 15,500 5,348
Total 11,485,336 145.27 11,445,071


	Total Number of Shares Purchased(1)	Average Price per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Maximum Amount That May Yet be Purchased Under the Plan or Program (in millions)
July	6,739,636	$	158.63	6,739,636	$	4,279
August	5,228,225	168.21		5,193,719	3,405
September	4,726,051	160.85		4,726,051	2,644
Total	16,693,912	162.26		16,659,406

__________

(1)On January 25, 2021, our Board of Directors authorized the repurchase of up to $7.5 billion of shares of our common stock. There were ~~40,265~~34,506 shares withheld in ~~May~~August to cover taxes on restricted stock units (“RSUs”) whose restrictions have lapsed. See “MD&A—Capital Management—Dividend Policy and Stock Purchases” for more information.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

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



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EXHIBIT INDEX

The following exhibits are incorporated by reference or filed herewith. Reference to the “2003 Form 10-K” is to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003, filed on March 5, 2004.


Exhibit No.						Description
3.1						Restated Certificate of Incorporation of Capital One Financial Corporation (as restated May 1, 2020) (incorporated by reference to Exhibit 3.2 of the Current Report on Form 8-K, filed on May 4, 2020).
3.2						Amended and Restated Bylaws of Capital One Financial Corporation, dated ~~May 1, 2020~~September 23, 2021 (incorporated by reference to Exhibit ~~3.3~~3.1 of the Current Report on Form 8-K, filed on ~~May 4, 2020)~~September 29, 2021).





3.3.1						Certificate of Designations of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series K, dated September 16, 2020 (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K, filed on September 17, 2020).
3.3.2						Certificate of Designations of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series L, dated May 3, 2021 (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K, filed on May 4, 2021).
3.3.3						Certificate of Designations of Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series M, dated June 9, 2021 (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K, filed on June 10, 2021).
3.3.4						Certificate of Designations of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series N, dated July 28, 2021 (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K, filed on July 29, 2021).
4.1.1						Specimen certificate representing the common stock of Capital One Financial Corporation (incorporated by reference to Exhibit 4.1 of the 2003 Form 10-K).
4.1.2						Warrant Agreement, dated December 3, 2009, between Capital One Financial Corporation and Computershare Trust Company, N.A. (incorporated by reference to the Exhibit 4.1 of the Form 8-A, filed on December 4, 2009).
4.1.3						Deposit Agreement, dated August 20, 2012 (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K, filed on August 20, 2012).
4.2						Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, copies of instruments defining the rights of holders of long-term debt are not filed. The Company agrees to furnish a copy thereof to the SEC upon request.



~~10.1+~~						~~Sixth Amended and Restated 2004 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K, filed on May 7, 2021).~~
31.1*						Certification of Richard D. Fairbank.
31.2*						Certification of Andrew M. Young.
32.1**						Certification of Richard D. Fairbank.
32.2**						Certification of Andrew M. Young.
101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*						Inline XBRL Taxonomy Extension Schema Document.
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104						The cover page of Capital One Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended ~~June~~September 30, 2021, formatted in Inline XBRL (included within the Exhibit 101 attachments).

__________


+			~~Represents a management contract or compensatory plan or arrangement.~~
*			Indicates a document being filed with this Form 10-Q.
**			Indicates a document being furnished with this Form 10-Q. Information in this Form 10-Q furnished herewith shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section. Such exhibit shall not be deemed incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.



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SIGNATURES

Pursuant to the requirements 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.

CAPITAL ONE FINANCIAL CORPORATION

Date: ~~July 30,~~November 5, 2021

By:

/s/ ANDREW M. YOUNG

Andrew M. Young

Chief Financial Officer



			~~132~~135			Capital One Financial Corporation (COF)


Item 3.	Quantitative and Qualitative Disclosures about Market Risk	~~129~~132































Item 4.	Controls and Procedures	~~129~~132


PART II—OTHER INFORMATION		~~130~~133





Item 1.	Legal Proceedings	~~130~~133
Item 1A.	Risk Factors	~~130~~133
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	~~130~~133
Item 3.	Defaults Upon Senior Securities	~~130~~133
Item 4.	Mine Safety Disclosures	~~130~~133
Item 5.	Other Information	~~130~~133
Item 6.	Exhibits	~~130~~133





EXHIBIT INDEX		~~131~~134
SIGNATURES		~~132~~135