Published
# Capital One Financial Corporation (COF) — Business, Risks and Management's Discussion
Sources: the annual report on Form 10-K for the fiscal year ended December 31, 2025 (SEC accession 0000927628-26-000024, filed February 19, 2026) and the quarterly report on Form 10-Q for the quarter ended June 30, 2026 (SEC accession 0000927628-26-000089, filed July 28, 2026), supplemented for post-quarter developments by current reports on Form 8-K identified in place.
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## Business
*From the FY2025 10-K, accession 0000927628-26-000024.*
Capital One is a diversified financial services holding company and a global payments provider. It lends to and takes deposits from consumers, small businesses and commercial clients across the United States, and it operates a payment network. It was the largest issuer of credit cards in the United States measured by outstanding credit card loan balances as of December 31, 2025, and is one of the largest U.S. banks by deposits. Alongside credit cards it offers debit cards, personal loans, bank lending, treasury management and depository services, national auto lending, and other consumer lending products, distributed through digital channels and a network of branch locations, cafés, call centers and ATMs. It also issues credit cards outside the U.S. through Capital One (Europe) plc in the United Kingdom and through a Canadian branch of its principal bank subsidiary.
Consolidated net revenue comes primarily from lending to consumer and commercial customers, net of the funding cost of deposits, long-term debt and other borrowings. Non-interest income consists mainly of discount and interchange income net of rewards expense, plus service charges and other customer-related fees. Expenses consist primarily of the provision for credit losses, operating expenses, marketing expenses and income taxes.
The principal operating subsidiary is Capital One, National Association (the Bank), a national association whose deposits are FDIC-insured. Capital One Financial Corporation is a Delaware corporation established in 1994 and headquartered in McLean, Virginia.
### Segments
Operations are organized for management reporting into three segments, with residual items in an Other category:
- **Credit Card** — domestic consumer card lending, personal loans, domestic small business card lending, and the international card businesses in the U.K. and Canada. Revenue is net interest income, net discount and interchange income, and customer fees. The Domestic Card sub-business accounted for more than 90% of Credit Card total net revenue in each of 2025, 2024 and 2023.
- **Consumer Banking** — deposit gathering and lending for consumers and small businesses, national auto lending, and the services offered by the Global Payment Network. Insured Consumer Banking deposits are the company's primary funding source, described in the filing as relatively stable and low-cost.
- **Commercial Banking** — lending, deposit gathering, capital markets and treasury management for commercial real estate and commercial and industrial customers, typically companies with annual revenues between $20 million and $2 billion. Because parts of this book generate tax-exempt income and tax credits, its revenue is presented on a taxable-equivalent basis.
The Other category holds the corporate investment portfolio and asset/liability positions run by the centralized Corporate Treasury group, residual tax expense or benefit needed to arrive at the consolidated effective tax rate, and unallocated corporate costs including certain restructuring charges and Discover integration expenses.
### The payment network
The acquisition of Discover brought a Global Payment Network — the Discover Network, the PULSE Network, Diners Club International, and Network Partners — as well as personal loans as a product. The Discover Network processes transactions for credit and debit cards issued on it and provides payment transaction processing and settlement. PULSE operates an electronic funds transfer network giving issuers of debit cards on PULSE access to ATMs domestically and internationally and merchant acceptance across the U.S. Diners Club is a global network of licensees, generally financial institutions, that issue Diners Club-branded charge cards and/or provide card acceptance services. Network Partners are financial institutions, financial technology firms, networks and other commercial service providers for whom Capital One provides card issuing, payments processing and related services.
The network earns fees paid by network participants — primarily acquirers, merchants and issuers. For transactions on Bank-issued cards processed on the Global Payment Network, part of what merchants pay the network is passed through to the Bank. Where the Bank issues cards on other (four-party) networks it earns interchange fees paid by merchants; for cards issued on the Global Payment Network, a three-party network, the Bank earns an issuer rate instead of interchange. Capital One has substantially completed reissuing legacy Capital One customer debit cards onto the Global Payment Network.
### How the Discover and Brex transactions shaped the company
The Discover acquisition closed on May 18, 2025 (the Closing Date), when Discover Financial Services merged into Capital One and Discover Bank merged into Capital One, National Association. Each Discover common share was converted into 1.0192 Capital One common shares, with cash for fractional shares; two series of Discover preferred stock were converted into newly created Capital One series. Purchase consideration transferred had a fair value of $51.8 billion; total identifiable assets acquired had a fair value of $168.6 billion, including $108.2 billion of loans held for investment, and deposits assumed were $106.9 billion. Capital One sold the Discover Home Loan Business on November 24, 2025, and reports that business as discontinued operations, excluded from continuing operations and from segment results.
The 10-K also disclosed, as a subsequent event, the January 22, 2026 merger agreement to acquire Brex Inc. That transaction has since closed; see Current quarter below.
Capital One says it regularly explores acquisitions of financial products, services and financial assets (including credit card and other loan portfolios), strategic partnerships, and acquisitions of technology companies, and may issue equity or debt to fund them; it also regularly considers disposing of assets, branches, partnership agreements or lines of business.
### Competition
Each segment operates in a highly competitive environment against both bank and non-bank providers. Credit Card competes with international, national, regional and local Visa and Mastercard issuers, with American Express, with private-label card brands and to an extent with debit card issuers, largely on price, credit limit, rewards, customer experience and product features. Consumer Banking and Commercial Banking compete with national, state and direct banks, savings and loan associations, credit unions, automotive finance companies and non-bank providers. Through the Global Payment Network, Capital One now competes in the global payments industry against both traditional networks and emerging alternative payment providers, including digital and mobile payments firms and other financial technology providers.
### Regulation
Capital One Financial Corporation is a bank holding company and a financial holding company under the Bank Holding Company Act, supervised, examined and regulated by the Federal Reserve. The Bank is supervised by the OCC, the FDIC and the CFPB. The company is also registered as a financial institution holding company in Virginia. Internationally, the U.K. business operates through Capital One (Europe) plc, an authorized payment institution regulated by the Financial Conduct Authority, and the Canadian branch is regulated by OSFI and the FCAC; neither takes deposits.
As a bank holding company with total consolidated assets of at least $250 billion but less than $700 billion, and not exceeding applicable risk-based thresholds, Capital One is a **Category III institution** under the Basel III Capital Rules, and the Bank is a Category III bank. Category III status lets the company exclude certain elements of accumulated other comprehensive income from regulatory capital and apply an 85% outflow adjustment percentage in the liquidity coverage ratio and an 85% required-stable-funding threshold in the net stable funding ratio. Capital One is not a global systemically important bank and is not subject to a G-SIB surcharge. Minimum ratios are a 4.5% CET1 ratio, 6.0% Tier 1 ratio, 8.0% total capital ratio, 4.0% leverage ratio and 3.0% supplementary leverage ratio, plus buffers.
Based on the 2025 supervisory stress test, the company's stress capital buffer requirement for October 1, 2025 through September 30, 2026 is 4.5%. On February 4, 2026 the Federal Reserve told participating firms it was holding stress capital buffer requirements at current levels while its Stress Testing Transparency Proposal remains out for comment, so absent further action the requirement stays at 4.5% until September 30, 2027 — putting minimums plus the standardized-approach capital conservation buffer at 9.0% CET1, 10.5% Tier 1 and 12.5% total capital from October 1, 2025 through September 30, 2027. The Bank's capital conservation buffer is fixed at 2.5% by OCC rule, giving it 7.0%/8.5%/10.5% requirements. The countercyclical capital buffer is currently 0%. Both the Company and the Bank are subject to the Market Risk Rule as of December 31, 2025.
Rulemakings the filing flags as unresolved: the April 2025 SCB Averaging Proposal (would average two years of stress test results and move the effective date from October 1 to January 1); the July 2023 Basel III Finalization Proposal (an Expanded Risk-Based Approach that agencies have signalled they intend to repropose, which for Category III institutions would also require recognizing certain AOCI elements in CET1 and lower deduction thresholds); the October 2025 Stress Testing Transparency Proposal; the long-term debt and "clean holding company" proposal for organizations with $100 billion or more in assets; and the OCC's October 2025 proposal to rescind its recovery planning guidelines.
Resolution planning: because of the Discover transaction, the Federal Reserve and FDIC required an interim resolution plan update by October 1, 2025 and extended the next full submission from October 1, 2025 to **July 1, 2026**. The Bank files its own resolution plan with the FDIC under a June 2024 final rule.
The Bank is a member of the Deposit Insurance Fund and is subject to the FDIC's special assessment recovering losses from the Silicon Valley Bank and Signature Bank failures. Under the FDIC's December 16, 2025 interim final rule, collection runs at 3.36 basis points a quarter for seven quarters beginning in the second quarter of 2024, with the eighth collection quarter (invoice payment date March 30, 2026) reduced to 2.97 basis points.
Broker-dealer subsidiaries Capital One Securities, Inc., KippsDeSanto & Company and TripleTree, LLC are registered with the SEC and FINRA and subject to net capital rules that limit transfers of capital to affiliates.
### Technology and third parties
Capital One describes digital technology, cloud services, data and software development as deeply embedded in its business model, and says it has substantially migrated primarily all aspects of its core information technology infrastructure, systems and customer-facing applications to third-party cloud platforms, principally Amazon Web Services — with Discover's integration still ongoing. Other named dependencies: Total System Services LLC (TSYS) for consumer and commercial credit card processing in North America and the U.K., and Fidelity Information Services (FIS) for certain banking systems. Certain acquired Discover businesses, including the Global Payment Network, run through a combination of data centers and third-party vendors.
### Seasonality
Purchase volume and outstanding card receivables fluctuate with seasonal consumer spending and payment patterns and have historically been highest around the winter holiday season. Card net charge-off rates have historically been highest in the first quarter.
### Properties
The corporate and banking real estate portfolio is roughly 12.3 million square feet: about 10.4 million square feet of corporate office space (7 million owned, 3.4 million leased), primarily in Virginia, New York, Texas and Illinois including the McLean headquarters; and about 1.9 million square feet of bank branches and cafés (1.4 million leased, 476 thousand owned), primarily in New York, Louisiana, Texas, Maryland, Virginia, New Jersey and the District of Columbia.
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## Risk factors
*From the FY2025 10-K, accession 0000927628-26-000024. In the Q2 2026 10-Q (accession 0000927628-26-000089) management states it is not aware of any material changes from these risk factors.*
### Macroeconomic and interest rate
Results depend on the level of consumer and business activity. The filing lists as potential disruptors: monetary policy and rate changes by the Federal Reserve and the U.K. and Canadian central banks, a growing fiscal deficit and rising debt-to-GDP; fiscal policy and changes to government-funded programs; geopolitical conflict (Ukraine, the Middle East, political instability in Venezuela, U.S.–China tensions); trade wars, tariffs, sanctions, labor shortages and supply-chain disruption including effects on the auto industry; U.S. government shutdowns, debt-ceiling developments, default or credit-rating downgrades; inflation and deflation; recession concerns; technology-driven disruption from AI, robotics and cryptocurrency; bank and non-bank financial institution failures and capital-markets volatility; immigration policy effects on the labor market; lower credit demand and shifts away from cards or deposits; and changes in commercial real estate usage that could durably depress utilization rates and values.
Rate risk runs both ways. Higher rates raise borrowing costs, the interest paid on deposits and the discount on securities holdings, and hinder some borrowers' ability to pay; but if growth slowed sharply and the Federal Reserve cut rates, net income could suffer because variable-rate assets reprice faster than most deposit liabilities. Hedging strategies rely on assumptions and projections that may prove wrong.
### Credit
The central risk is that customers do not repay. Specific exposures named:
- **Business mix.** Capital One originates a relatively greater proportion of consumer loans than large bank peers and originates both prime and subprime credit card accounts and auto loans, so it may see higher delinquencies, more accounts charging off, and greater volatility in those metrics than peers — with attendant credit losses, operating costs and regulatory scrutiny.
- **Allowance estimation.** The allowance is measured under CECL on management's best estimate of expected lifetime losses and requires forecasts of economic conditions; incorrect assumptions could materially understate expected losses.
- **Collateral.** Auto collateral is exposed to used-car auction values and to technological change that obsoletes older cars faster; commercial real estate collateral is exposed to vacancy rates and property values.
- **Geographic and industry concentration.** Roughly **36% of the commercial real estate loan portfolio is concentrated in the Northeast**, and Commercial Banking pursues an industry-specific focus.
- **Counterparty credit risk** from business-facing activity including operation of the Global Payment Network, derivatives, syndication bridge financing, operational cash held at other institutions, foreign exchange and customer overdrafts.
- Changes in customer behavior such as increased use of debt settlement companies, which can raise charge-offs and impair recoveries.
### Capital and liquidity
Capital and liquidity requirements constrain lending, deposit growth, acquisitions and capital distributions, and failure to maintain adequate levels can trigger restrictions and remedial action. The company notes that its internal stress modeling and the Federal Reserve's supervisory projections can differ significantly, so disclosed stress capital levels may overstate real capacity to return capital. Growth in total consolidated assets (including from Discover) or in cross-jurisdictional activity could push the company past the **$700 billion asset or $75 billion cross-jurisdictional thresholds into Category II**, which would impose the full 100% LCR outflow adjustment and 100% NSFR requirement, daily rather than monthly liquidity reporting, no AOCI exclusion from regulatory capital, a stricter deductions framework and the advanced approaches framework. As a holding company, Capital One depends on dividends from the Bank and broker-dealer subsidiaries, which are limited by capital and buffer requirements, net-profits rules, Sections 23A and 23B and Regulation W, and net capital rules. Credit ratings could be downgraded without notice, raising funding and capital costs and triggering additional collateral requirements.
Funding risk includes competition for deposits — explicitly including institutions with tokenized deposit programs — and the possibility that securitizations amortize early if charge-offs, rate volatility or refinancing activity rise.
### Operational, technology and fraud
Operational risk manifests as execution errors, inadequate processes, inaccurate models, faulty or disabled infrastructure, malicious disruption, and fraud by employees or outsiders. Heavy outsourcing concentrates risk: the filing cites a **multi-day system outage in January 2025 caused by a technical issue at FIS** that temporarily affected certain customer services, and notes that AWS and other providers have experienced and may again experience outages, degradation and security incidents outside the company's control. Integration of Discover adds exposure to processing large transaction volumes in multiple currencies and in jurisdictions where Capital One has not historically operated, and to previously undetected cybersecurity threats in Discover's systems.
Cybersecurity risk is described at length. The filing recalls the **2019 Cybersecurity Incident** — unauthorized access on March 22 and 23, 2019, announced July 29, 2019, in which an outside individual obtained personal information on credit card applicants and customers — which, though remediated, resulted in fines, litigation, consent orders, settlements and government investigations. Threat vectors listed include ransomware, supply-chain attacks, credential stuffing, account takeover, insider threats, business email compromise, phishing/vishing/smishing, deep fakes and social engineering, amplified by AI and, prospectively, quantum computing. Insurance may not cover a material loss event.
Fraud risk rises as third parties holding consumer data suffer breaches, as the digital business grows and as new products (including the Global Payment Network) are added. Two newer vectors are named: generative AI producing synthetic video, images and identity documents, and **agentic commerce**, in which autonomous AI agents initiate and execute transactions on users' behalf, which may increase fraud losses and shift when merchant or issuer bears liability — against legal frameworks the filing describes as nascent.
### Models and AI
Capital One uses models and AI in pricing, fraud identification, loan grading, credit extension, market and interest rate risk measurement, deposit and loss prediction, capital adequacy assessment, valuation, software development and customer personalization, and expects use of generative AI to increase. Risks include hallucinatory or misleading outputs, degradation of predictive power under extreme market movements or changed customer behavior, largely manual data-management and aggregation processes subject to human error, and regulatory exposure as AI rules evolve — the filing specifically notes Colorado and California among states legislating on AI.
### Legal and regulatory
The company is subject to overlapping banking, tax, consumer lending, payment services, privacy and data security regimes, and to examination by the Federal Banking Agencies, the SEC, the CFTC and the CFPB. Two items are specific and current:
- **In December 2025 the OCC issued a report of preliminary findings** from its ongoing supervisory review under Executive Order 14331 ("Guaranteeing Fair Banking for All Americans") of the nine largest OCC-regulated banks, including the Bank, into whether they debanked or discriminated against customers on the basis of political or religious beliefs or lawful business activities. The OCC said the review is ongoing and that it intends to hold reviewed banks accountable for any unlawful debanking, including by referral to the Attorney General.
- Through the Discover transaction the company **assumed Discover's contingencies and liabilities**, including ongoing litigation, claims, government investigations and enforcement actions relating to Discover's pre-transaction conduct, with significant uncertainty remaining over them.
Because Capital One has a large number of card and auto accounts and deliberately originates subprime card and auto loans, it has significant involvement with credit bureau reporting and with collection and recovery of delinquent and charged-off debt — customer litigation, periodic charged-off debt sales, and vehicle repossession — activities subject to heightened scrutiny.
### Interchange and network economics
Interchange fees are a meaningful revenue source and are under sustained legislative, regulatory and litigation pressure. In the U.S., Regulation II caps debit interchange and imposes routing requirements on four-party-network debit cards. **In August 2025 a North Dakota district court ruled that the Federal Reserve exceeded its statutory authority in promulgating Regulation II in 2011 and vacated the rule**, staying the vacatur pending appeal and allowing the Federal Reserve's 2023 proposed rule to take effect if finalized; a Kentucky district court reached the opposite conclusion and upheld the regulation. Lower four-party debit interchange could create market pressure reducing the discount rate on Global Payment Network debit cards. Internationally, U.K. interchange is capped for both consumer credit and debit transactions, and in Canada Visa and Mastercard have voluntary agreements with the Department of Finance to maintain an agreed average rate.
The filing states plainly that **if a change in law or regulation brought debit transactions on three-party networks — such as Bank-issued debit cards on the Global Payment Network — within the Regulation II interchange cap, the Company could fail to recognize a significant majority of the network revenue synergies it anticipated from the Discover transaction.**
Network-specific risks include: dependence on Diners Club licensees and network alliance partners who issue cards and maintain merchant acceptance in their own markets (outside the U.S., Capital One does not issue cards accepted on its networks or set their terms); the possibility that the largest Discover Network and PULSE Network merchants condition continued participation on better pricing, and that small and mid-size merchants on those networks, not contractually committed for any period, leave on short notice; uncertainty over achieving global card acceptance parity with Visa and Mastercard; American Express as a strong international competitor against Diners Club; and pressure on transaction fees. Any disruption to existing Visa or Mastercard relationships — which have historically been significant to the card-issuing and transaction processing businesses — is also flagged.
### Other business risks
Merger and acquisition activity, including the Discover transaction, carries integration cost overruns, loss of key employees, systems implementation errors, inherited cybersecurity and regulatory exposure, inaccurate deal assumptions and target-specific risk. Competitive risks include larger competitors with lower funding costs and broader distribution; non-bank competitors not subject to the same regulation; the GENIUS Act of 2025 creating a legal framework for U.S. stablecoin issuance that may let competitors bid for funds that would otherwise be bank deposits; dependence on co-brand and private-label partners to promote products; and aggressive deposit pricing in direct banking, where the flexibility of digital channels and the sophistication of the online customer base make balance shifts potentially rapid.
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## Management's discussion — fiscal year 2025
*From the FY2025 10-K, accession 0000927628-26-000024. Changes below compare 2025 with 2024 unless stated; the year-over-year changes in financial condition and credit performance were primarily driven by the Discover transaction.*
### Headline
Net income was **$2.5 billion, or $4.03 per diluted common share, on total net revenue of $53.4 billion** for 2025, against net income of $4.8 billion ($11.59 per diluted share) on $39.1 billion of revenue in 2024 and $4.9 billion ($11.95 per diluted share) on $36.8 billion in 2023. The CET1 capital ratio under the Basel III standardized approach was **14.3%** at December 31, 2025, up from 13.5% a year earlier.
Net income fell $2.3 billion. Management attributes the decline principally to a higher provision for credit losses — driven by the initial allowance established for non-purchased-credit-deteriorated loans acquired in the transaction — and higher non-interest expense from transaction impacts including integration expenses, continued technology investment and higher marketing spend. Partly offsetting: higher net interest income from higher loan balances (including the transaction) and lower rates paid on deposits, and higher non-interest income from credit card portfolio growth and from acquiring the Global Payment Network.
### Revenue and expense lines
- **Net interest income** rose $11.7 billion to **$42.9 billion**; net interest margin rose 96 basis points to **7.84%**, in both cases on higher loan balances including the transaction and lower deposit rates. Past due fees net of reversals included in interest income were about $2.6 billion in 2025, $2.3 billion in 2024 and $2.2 billion in 2023. The total company cumulative interest-bearing deposit beta — the ratio of the change in average rate paid on average interest-bearing deposits to the change in the upper bound of the federal funds rate during the falling-rate cycle — rose to 23% at December 31, 2025 from 11% a year earlier.
- **Non-interest income** rose $2.7 billion to **$10.6 billion** on credit card growth and the Global Payment Network.
- **Provision for credit losses** rose $8.9 billion to **$20.7 billion** (from $11.7 billion in 2024 and $10.4 billion in 2023), primarily the **$8.8 billion initial allowance for non-PCD loans acquired in the transaction**.
- **Non-interest expense** rose $9.0 billion to **$30.5 billion**. Integration expenses related to the transaction were **$1.1 billion in 2025** and $234 million in 2024, mostly salaries, associate benefits and professional services, recorded in operating expense.
- **Income tax expense** was $193 million, an 8.5% effective rate, versus $1.2 billion (19.7%) in 2024 and $1.2 billion (19.2%) in 2023. A discrete tax benefit of $123 million in 2025 was primarily a $128 million benefit from a State of California law change.
- **Discontinued operations** contributed net income of $365 million in 2025, primarily a **$483 million pre-tax gain on the fourth-quarter sale of the Discover Home Loans business**.
### Balance sheet
Total assets rose $178.9 billion to **$669.0 billion**, primarily the transaction (which contributed $168.6 billion of identifiable assets at closing) plus credit card and auto growth. Total liabilities rose $126 billion to $555.4 billion; the transaction contributed $130.2 billion of identifiable liabilities, partly offset by maturities and paydowns of securitized debt and senior and subordinated notes. Stockholders' equity rose $52.8 billion to **$113.6 billion**, primarily $50.6 billion of treasury stock reissued for the transaction.
Loans held for investment rose $125.8 billion to **$453.6 billion** (the transaction contributed $108.2 billion at closing), and average loans held for investment rose $79.3 billion to $396.7 billion. Investment securities' fair value rose $8.0 billion to **$91.1 billion**; Agency and U.S. Treasury securities were 97% of the portfolio (96% in 2024). Total deposits rose $113.1 billion to **$475.8 billion** — the transaction contributed $106.9 billion, with the rest from the national banking strategy — of which brokered deposits were $19.2 billion (up from $11.6 billion) and estimated uninsured deposits were $71.9 billion, about 15% of total deposits (18% in 2024). Securitized debt obligations fell $1.4 billion to $12.9 billion on net maturities and paydowns; other debt rose $6.9 billion to $38.1 billion, with $7.5 billion from the transaction. Net deferred tax assets were about $5.9 billion, down $3.1 billion, mainly on purchase accounting adjustments including new intangibles and the revaluation of Discover's assets and liabilities, favorable changes for capitalized research costs under the One Big Beautiful Bill Act, and lower unrealized losses on available-for-sale securities and derivatives — partly offset by the initial Discover-related allowance. Valuation allowances were $320 million (from $529 million).
Total funding sources were **$526.8 billion** at December 31, 2025 versus $408.3 billion a year earlier, primarily consumer deposits. Liquidity reserves were **$144 billion** (from $123.8 billion), and available contingent liquidity sources reached **$108.9 billion**.
### Credit performance
The consolidated net charge-off rate fell 9 basis points to **3.30%**, and the 30+ day delinquency rate fell 39 basis points to **3.59%** at December 31, 2025. The allowance for credit losses rose $7.2 billion to **$23.4 billion**, primarily the initial allowance acquired in the transaction, and the allowance coverage ratio rose 20 basis points to **5.16%** on a higher concentration of credit card loans, which carry higher coverage than auto and commercial loans.
Two mechanics matter to reading the card credit metrics: charge-offs exclude **$19.4 billion of acquired Discover loans that were fully charged off in the second quarter of 2025**, with $3.3 billion of expected recoveries recorded as a benefit to the allowance ($18.0 billion and $3.1 billion respectively for Domestic Card); and total net revenue was reduced by $3.3 billion in 2025 ($2.6 billion in 2024, $1.9 billion in 2023) for finance charges and fees charged off as uncollectible.
### Segment results, 2025
**Credit Card** earned income from continuing operations, net of tax, of **$645 million**, against $3.3 billion in 2024 and $3.5 billion in 2023. Net interest income rose $9.7 billion to $31.8 billion and non-interest income rose $1.7 billion to $7.7 billion, both on higher balances and portfolio growth including the transaction. Provision rose $8.8 billion to $19.1 billion on the initial non-PCD allowance, and non-interest expense rose $6.1 billion to $19.6 billion on the transaction, technology investment and marketing. Period-end loans held for investment rose $117.1 billion to $279.6 billion; average loans rose $74.4 billion to $227.3 billion. The net charge-off rate fell 79 basis points to 5.09% — the acquired portfolio itself lowered the rate by 35 basis points — and the 30+ day delinquency rate fell 60 basis points to 3.94%, with the acquired portfolio lowering it by 44 basis points. Within Credit Card, **Domestic Card** earned $858 million, against $3.1 billion and $3.3 billion.
**Consumer Banking** earned **$1.2 billion**, against $1.5 billion in 2024 and $2.3 billion in 2023. Net interest income rose $735 million to $8.8 billion on higher deposits from the transaction and higher average auto balances; non-interest income rose $980 million to $1.7 billion on the Global Payment Network. Provision fell $133 million to $1.3 billion on favorable auto credit performance, while non-interest expense rose $2.2 billion to $7.5 billion on the transaction, an increase in the litigation accrual, technology investment and marketing. Period-end loans rose $6.7 billion to $84.8 billion on auto growth; period-end deposits rose $105.6 billion to $423.9 billion, of which $91.7 billion came from the transaction at closing. The net charge-off rate fell 51 basis points to 1.59% and the 30+ day delinquency rate fell 100 basis points to 5.73%.
**Commercial Banking** earned **$1.0 billion**, against $1.2 billion in 2024 and $691 million in 2023. Net interest income fell $57 million to $2.3 billion on lower margins; non-interest income rose $111 million to $1.3 billion on the capital markets business. Provision rose $279 million to $287 million, reflecting a net allowance build against a net release in 2024, and non-interest expense was substantially flat at $2.0 billion. Period-end loans rose $2.1 billion to $89.3 billion as originations outpaced customer payments, while average loans were flat at $88.2 billion; period-end deposits fell $441 million to $31.3 billion on isolated attrition. The net charge-off rate rose 8 basis points to 0.27% and the nonperforming loan rate fell 3 basis points to 1.36%. The reserve for unfunded lending commitments was $142 million, against $143 million and $158 million.
### Capital return
For 2025 Capital One declared and paid **$1.5 billion of common dividends and repurchased $3.8 billion of common stock**. On October 20, 2025 the Board authorized repurchases of up to **$16 billion** of common stock, effective October 21, 2025, replacing an April 2022 authorization. There were no sales of unregistered equity securities in 2025.
### Critical accounting estimates
The filing identifies loan loss reserves, goodwill, fair value and the customer rewards reserve as its critical accounting estimates and judgments.
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## Current quarter — second quarter and first six months of 2026
*From the Q2 2026 10-Q, accession 0000927628-26-000089, for the quarter ended June 30, 2026. Income statement comparisons are against the corresponding 2025 periods; balance sheet and credit comparisons are against December 31, 2025.*
### Headline
Net income was **$3.0 billion, or $4.73 per diluted common share, on total net revenue of $15.9 billion** for the second quarter, and **$5.2 billion, or $8.07 per diluted common share, on total net revenue of $31.1 billion** for the first six months. The prior-year comparatives were losses: a net loss of $4.3 billion, or $(8.58) per diluted share, on $12.5 billion of revenue in the second quarter of 2025, and a net loss of $2.9 billion, or $(6.74) per diluted share, on $22.5 billion in the first six months of 2025 — periods that carried the initial Discover allowance.
Net income improved $7.3 billion year over year in the quarter and $8.1 billion in the half. Management attributes the swing chiefly to a lower provision for credit losses, reflecting the absence of the initial allowance for loans acquired in the Discover acquisition; to higher net interest income on higher average credit card loan balances, largely from the addition of Discover; and to higher non-interest income from credit card portfolio growth including Discover and from the reissuance of legacy Capital One customer debit cards onto the Global Payment Network. Higher non-interest expense — the addition of Discover and higher acquisition amortization — partly offset.
The CET1 capital ratio was **13.7%** at June 30, 2026, down from 14.3% at December 31, 2025; the ratio is described as preliminary pending the June 30, 2026 FR Y-9C and Call Reports. Both the Company and the Bank exceeded minimum capital and capital conservation buffer requirements and were well capitalized. The tangible common equity ratio was 10.2%, down 50 basis points from 10.7%. Period-end employees were 78.4 thousand, up 3% year over year.
### What changed this quarter
**The Brex acquisition closed.** On **April 7, 2026** Capital One completed its acquisition of **Brex Inc.**, under the merger agreement dated January 22, 2026. Brex offers businesses solutions to issue corporate cards, automate expense management and make secure real-time payments, and the company says the acquisition enhances its offerings in the business payments marketplace. **Total consideration paid to Brex shareholders was approximately $4.5 billion, comprising $2.6 billion of cash and 10.6 million Capital One common shares with a fair value of $1.9 billion**, subject to customary post-closing adjustments. Immediately after closing, Capital One **paid off Brex's outstanding debt of $1.1 billion**. (The signed agreement had contemplated $5.15 billion in aggregate consideration, about $2.58 billion of it cash, subject to adjustment.) Brex-related integration expenses were $96 million in both the second quarter and the first six months of 2026, recorded in operating expense and, for segment purposes, within Domestic Card. The Credit Card segment description now includes **corporate card lending**, and the legacy corporate card product has been reclassified out of Commercial Banking into Domestic Card.
**Discover integration continues.** Discover integration expenses were substantially flat at $298 million in the second quarter and rose $304 million to $713 million in the first six months, on higher salaries and associate benefits; **cumulative Discover integration expense since the transaction was announced in the first quarter of 2024 reached $2.1 billion as of June 30, 2026.**
**Volumes.** Purchase volume was **$253.8 billion in the quarter, up 26%**, and $474.3 billion in the half, up 32%. **Global Payment Network volume was $189.6 billion in the quarter and $363.9 billion in the half**, against $74.0 billion in each 2025 period — 2025 reflecting only the post-closing stub.
### Consolidated lines
- **Net interest income** rose $2.4 billion to **$12.4 billion** in the quarter and $6.5 billion to $24.5 billion in the half, on higher average credit card balances largely from Discover. **Net interest margin rose 39 basis points to 8.01%** in the quarter and 65 basis points to 7.94% in the half. The cumulative interest-bearing deposit beta rose to **37%** at June 30, 2026 from 23% at December 31, 2025.
- **Non-interest income** rose $979 million to **$3.5 billion** in the quarter and $2.1 billion to $6.6 billion in the half, on card portfolio growth including Discover and the debit card reissuance onto the Global Payment Network.
- **Provision for credit losses** fell $8.4 billion to **$3.0 billion** in the quarter and $6.7 billion to $7.1 billion in the half, on the absence of the initial Discover allowance.
- **Non-interest expense** rose $2.1 billion to **$9.0 billion** in the quarter and $4.6 billion to $17.5 billion in the half, on the addition of Discover and higher acquisition amortization.
- **Income tax expense** was $798 million (20.9% effective rate) in the quarter and $1.3 billion (20.2%) in the half, against benefits of $1.7 billion (28.1%) and $1.3 billion (31.9%) in the 2025 periods — the difference driven by the $8.8 billion initial Discover allowance booked in the second quarter of 2025.
### Balance sheet and funding
Total assets rose $4.8 billion to **$673.8 billion** on loan growth; total liabilities rose $4.6 billion to $560.0 billion on continued deposit growth from the national banking strategy, partly offset by securitized debt maturities; stockholders' equity was substantially flat at **$113.8 billion**, with net income offset by net treasury stock purchases.
Loans held for investment rose $3.5 billion to **$457.2 billion**, on auto and commercial growth partly offset by seasonal credit card paydowns; average loans rose $72.5 billion to $450.7 billion in the quarter and $98.0 billion to $448.5 billion in the half, primarily the addition of Discover. Investment securities' carrying value rose $1.7 billion to **$92.8 billion** on net purchases, with Agency and Treasury securities at 96% of the portfolio; the portfolio now includes $2.7 billion of held-to-maturity securities where there were none at year-end 2025.
Total deposits rose $8.5 billion to **$484.3 billion** on the national banking strategy; brokered deposits fell to $16.7 billion from $19.2 billion; estimated uninsured deposits were $72.3 billion, about 15% of total deposits, as at year-end. Securitized debt obligations fell $4.4 billion to $8.5 billion on net maturities and paydowns. Other debt fell $1.3 billion to $36.9 billion on net maturities of subordinated debt and FHLB advances, partly offset by net issuances of unsecured senior debt; short-term borrowings fell $393 million to $694 million.
Liquidity reserves were **$144.1 billion**, essentially flat against $144.0 billion at year-end, and available contingent liquidity sources totalled **$113.3 billion** through prepositioned collateral at the Federal Reserve Discount Window, Standing Repo Operations, FHLB and FICC-GSD. Total funding sources were **$529.6 billion**, against $526.8 billion. Available issuance capacity under the credit card and auto securitization shelf registrations was $39.0 billion; loans were pledged for $55.0 billion of Discount Window borrowing capacity, with $23.9 billion of readily available borrowing capacity secured by investment securities. Funds available for dividend payments from the Bank were $2.5 billion. Aggregate purchase obligations for goods and services were $4.0 billion, against $3.8 billion.
### Credit performance
The consolidated net charge-off rate fell 1 basis point to **3.23%** in the quarter and rose 3 basis points to 3.34% in the half. The 30+ day delinquency rate fell 46 basis points to **3.13%** at June 30, 2026. The allowance for credit losses fell $443 million to **$23.0 billion**, on a release in the Domestic Card portfolio partly offset by a build in auto, and the allowance coverage ratio fell 14 basis points to **5.02%** on favorable Domestic Card credit performance. Excluding domestic credit card loans, nonperforming loans were 0.90% of total loans held for investment, against 0.95% at year-end.
### Segment results
**Credit Card** earned income from continuing operations, net of tax, of **$2.4 billion in the quarter and $4.3 billion in the half**. Net interest income rose $2.0 billion to $9.3 billion in the quarter (up $5.5 billion to $18.5 billion in the half) and non-interest income rose $711 million to $2.5 billion ($1.4 billion to $4.7 billion), both largely on Discover. Provision fell $8.6 billion to $2.5 billion in the quarter and $7.1 billion to $5.9 billion in the half on the absence of the initial Discover allowance, while non-interest expense rose $1.7 billion to $6.1 billion in the quarter and $3.5 billion to $11.6 billion in the half on portfolio growth including Discover and higher acquisition amortization. Period-end loans held for investment fell $4.2 billion to **$275.4 billion** on seasonal paydowns, partly offset by the Brex acquisition; average loans rose $61.5 billion to $271.2 billion in the quarter. The net charge-off rate fell 49 basis points to **4.71%** in the quarter and 72 basis points to 4.88% in the half on favorable observed credit performance, and the 30+ day delinquency rate fell 57 basis points to 3.37%. Within the segment, **Domestic Card** earned $2.3 billion in the quarter and $4.0 billion in the half, against losses from continuing operations of $4.4 billion and $3.3 billion in the 2025 periods, and again accounted for more than 90% of Credit Card total net revenue.
**Consumer Banking** earned **$486 million in the quarter and $784 million in the half**. Net interest income rose $269 million to $2.4 billion in the quarter (up $555 million to $4.7 billion in the half) on higher deposits from Discover and higher average auto balances, partly offset by lower retail banking margins. Non-interest income rose $384 million to $778 million in the quarter ($884 million to $1.5 billion in the half) on the addition of the Global Payment Network and the debit card reissuance. Provision rose $192 million to $444 million in the quarter and $410 million to $963 million in the half on auto allowance builds against releases in the first and second quarters of 2025. Non-interest expense rose $408 million to $2.1 billion in the quarter and $825 million to $4.1 billion in the half on Discover, marketing and technology investment, partly offset by the absence of legal reserve builds taken in the first half of 2025. Period-end loans rose $5.7 billion to **$90.5 billion** on auto growth, and period-end deposits rose $11.3 billion to **$435.2 billion**. The net charge-off rate rose 18 basis points to **1.48%** in the quarter and 14 basis points to 1.59% in the half, while the 30+ day delinquency rate fell 97 basis points to 4.76%.
**Commercial Banking** earned **$239 million in the quarter and $445 million in the half**, against $280 million and $475 million in the 2025 periods. Net interest income was substantially flat at $585 million in the quarter and $1.2 billion in the half. Non-interest income fell $70 million to $265 million in the quarter and $54 million to $593 million in the half, on the reclassification of the legacy corporate card product into Domestic Card and lower revenue on certain capital markets services; non-interest expense fell $27 million to $462 million and $15 million to $960 million for the same reclassification reason. Provision was substantially flat at $71 million in the quarter and $209 million in the half. Period-end loans rose $2.0 billion to **$91.3 billion** on growth across the portfolio, and period-end deposits were substantially flat at $30.8 billion. The net charge-off rate rose 20 basis points to **0.53%** in the quarter and 19 basis points to 0.41% in the half, while the nonperforming loan rate fell 4 basis points to 1.32%.
### Capital return
In the second quarter of 2026 Capital One declared and paid **$501 million of common dividends and repurchased $2.7 billion of common stock**; for the first six months, **$1.0 billion of dividends and $5.2 billion of repurchases**. The $16 billion authorization approved on October 20, 2025 remains the operative authority, and the timing and amount of future repurchases depend on market conditions, growth opportunities, capital position, retained earnings and regulatory considerations.
### Interest rate positioning
The company's June 30, 2026 sensitivity metrics assume a market-implied baseline for the upper limit of the federal funds target rate of **4.25% at December 31, 2026 and 4.00% at December 31, 2027**. At current rate levels, projected 12-month net interest income is expected to remain largely unchanged in higher-rate scenarios and to decrease in lower-rate scenarios, the decline driven by lower interest income on floating-rate credit card and commercial loans. Economic value of equity decreases in higher-rate scenarios and increases in lower-rate scenarios, the former because the projected value of fixed-rate assets declines by more than it is offset elsewhere. Capital One does not publish quantitative earnings guidance in these filings.
### Legal and regulatory matters outstanding at June 30, 2026
Management estimates reasonably possible future losses above reserves for legal and regulatory matters at **up to approximately $300 million** as of June 30, 2026. Named matters:
- **Discover Card Product Misclassification.** Discover disclosed on July 19, 2023 that it had incorrectly classified certain credit cards into its highest merchant and merchant acquirer pricing tier. Discover reserved **$1.2 billion**, and a merchant class action settlement — the primary vehicle for restitution to affected merchants, acquirers and intermediaries — received **final court approval on May 20, 2026**. A related putative shareholder securities class action was dismissed without prejudice on March 31, 2025; the court allowed an amended complaint on March 13, 2026 and Capital One moved to dismiss it on April 30, 2026. An SEC investigation into the matter is ongoing, with the company cooperating. Discover and DFS Services LLC also entered a consent order with the Federal Reserve on April 18, 2025 covering board governance, risk management and internal controls, with a civil money penalty paid before closing; Capital One and CONA have committed to satisfy its obligations.
- **Discover CFPB order.** A December 2020 consent order with the CFPB on private student loan servicing practices remains in effect until December 2030 for pre-sale issues, notwithstanding Discover's sale of the portfolio and exit from servicing before closing.
- **Savings Account Litigation and New York Attorney General Litigation.** After the court denied final approval of an earlier settlement in November 2025 — over an amicus brief filed in September 2025 by the New York Attorney General on behalf of itself and 17 other state attorneys general — the parties reached a new December 2025 settlement comprising a **$425 million settlement fund** (reflected in reserves) and an agreement to raise the interest rate on 360 Savings accounts to match 360 Performance Savings. The settlement also resolves the New York Attorney General Litigation and the state attorneys general objection. The court granted **final approval on April 20, 2026**, and on **June 17, 2026 an individual objector appealed to the Fourth Circuit**.
- **Interchange antitrust litigation.** In the 2005 putative merchant class action against Mastercard, Visa and issuing banks including Capital One, Visa and Mastercard's settlement with the injunctive relief class was denied preliminary approval in June 2024; a new settlement filed in November 2025 received **preliminary approval on June 9, 2026**.
- **FDIC special assessment dispute.** On July 8, 2025 the FDIC invoiced CONA for additional special assessment fees and interest, asserting that CONA underreported estimated uninsured deposits on its December 31, 2022 Call Report. CONA disagrees and sued the FDIC on September 10, 2025 in the Eastern District of Virginia seeking a declaratory judgment; the FDIC counterclaimed on November 17, 2025 for the disputed amount. Capital One estimates **reasonably possible additional special assessment fees of approximately $150 million** based on the FDIC's December 2025 interim final rule and other factors, and has deposited collateral satisfactory to the FDIC, held by a third-party bank pending resolution.
- **Fair access to banking.** Capital One is responding to demands and requests from various federal agencies on "fair access to banking," including those arising from Executive Order 14331, and to a civil lawsuit filed by the Donald J. Trump Revocable Trust and several affiliated corporate entities, pending in the Southern District of Florida.
- Contingent exposures that carry no recorded liability: obligations to certain international merchants, international ATM acquirers and international payment networks arising from third-party settlement failures, and Discover Network merchant chargebacks. Losses on both were not material for the three and six months ended June 30, 2026.
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## Subsequent events
The Q2 2026 10-Q (accession 0000927628-26-000089) does not include a subsequent-events note; its notes run from summary of significant accounting policies through commitments, contingencies, guarantees and others. The material developments Capital One has disclosed since June 30, 2026 appear in its current reports:
- **Balance sheet actions.** All 1,000,000 outstanding shares of the Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series M were redeemed on **September 1, 2026** at **$1,000 per share**, and the Series M designation was eliminated from the Restated Certificate of Incorporation that day (accessions 0001193125-26-358268 and 0001193125-26-378455). On **September 15, 2026** Capital One closed a public offering of **€750,000,000 of 4.326% Fixed-to-Floating Rate Senior Notes due 2032 and €750,000,000 of 4.832% Fixed-to-Floating Rate Senior Notes due 2037** — €1.5 billion in aggregate — issued under the Senior Indenture dated November 1, 1996 as supplemented in November 2021 (accession 0001193125-26-391921).
- **Post-quarter credit metrics.** Capital One furnishes monthly charge-off and delinquency metrics. The most recent, for the month ended **August 31, 2026** (accession 0000927628-26-000132), shows Domestic Card period-end loans held for investment of **$260.6 billion** with a net charge-off rate of **4.16%** and a 30+ day performing delinquency rate of **3.57%**; and Auto period-end loans held for investment of **$91.9 billion** with a net charge-off rate of **1.66%**, a 30+ day performing delinquency rate of **4.54%** and a nonperforming loan rate of **0.62%**. Metrics for the months ended June 30 and July 31, 2026 were furnished on July 21 and August 17, 2026 (accessions 0000927628-26-000084 and 0000927628-26-000093).
No post-period acquisition, divestiture or material litigation outcome beyond those described above is disclosed in the filings covered here.