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 30, 2021

OR

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

For the transition period from              to             

Commission File No. 001-13300

____________________________________

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, 2021, there were 446,113,769 shares of the registrant’s Common Stock outstanding.

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TABLE OF CONTENTS

						Page
PART I—FINANCIAL INFORMATION						4
Item 1.			Financial Statements and Notes			67
			Consolidated Statements of Income			68
			Consolidated Statements of Comprehensive Income			69
			Consolidated Balance Sheets			70
			Consolidated Statements of Changes in Stockholders’ Equity			71
			Consolidated Statements of Cash Flows			73
			Notes to Consolidated Financial Statements			75
			Note 1—Summary of Significant Accounting Policies			75
			Note 2—Investment Securities			77
			Note 3—Loans			80
			Note 4—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments			90
			Note 5—Variable Interest Entities and Securitizations			94
			Note 6—Goodwill and Intangible Assets			98
			Note 7—Deposits and Borrowings			99
			Note 8—Derivative Instruments and Hedging Activities			100
			Note 9—Stockholders’ Equity			110
			Note 10—Earnings Per Common Share			114
			Note 11—Fair Value Measurement			115
			Note 12—Business Segments and Revenue from Contracts with Customers			122
			Note 13—Commitments, Contingencies, Guarantees and Others			126
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			36
			Credit Risk Profile			37
			Liquidity Risk Profile			50
			Market Risk Profile			53
			Supervision and Regulation			57
			Forward-Looking Statements			58
			Supplemental Table			60
			Glossary and Acronyms			61

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Item 3.			Quantitative and Qualitative Disclosures about Market Risk			129
Item 4.			Controls and Procedures			129
PART II—OTHER INFORMATION						130
Item 1.			Legal Proceedings			130
Item 1A.			Risk Factors			130
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			130
Item 3.			Defaults Upon Senior Securities			130
Item 4.			Mine Safety Disclosures			130
Item 5.			Other Information			130
Item 6.			Exhibits			130
EXHIBIT INDEX						131
SIGNATURES						132

			2			Capital One Financial Corporation (COF)

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INDEX OF MD&A AND SUPPLEMENTAL TABLE

MD&A Tables:						Page
1			Consolidated Financial Highlights			6
2			Average Balances, Net Interest Income and Net Interest Margin			11
3			Rate/Volume Analysis of Net Interest Income			14
4			Non-Interest Income			15
5			Non-Interest Expense			16
6			Investment Securities			17
7			Loans Held for Investment			18
8			Funding Sources Composition			18
9			Business Segment Results			20
10			Credit Card Business Results			21
10.1			Domestic Card Business Results			23
11			Consumer Banking Business Results			25
12			Commercial Banking Business Results			26
13			Other Category Results			28
14			Capital Ratios Under Basel III			32
15			Regulatory Risk-Based Capital Components and Regulatory Capital Metrics			33
16			Preferred Stock Dividends Paid Per Share			35
17			Portfolio Composition of Loans Held for Investment			38
18			Credit Card Portfolio by Geographic Region			39
19			Consumer Banking Portfolio by Geographic Region			40
20			Commercial and Multifamily Real Estate Portfolio by Region			41
21			Commercial Loans by Industry			41
22			Credit Score Distribution			42
23			30+ Day Delinquencies			42
24			Aging and Geography of 30+ Day Delinquent Loans			43
25			90+ Day Delinquent Loans Accruing Interest			44
26			Nonperforming Loans and Other Nonperforming Assets			44
27			Net Charge-Offs			45
28			Troubled Debt Restructurings			46
29			Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity			47
30			Allowance Coverage Ratios for Specified Loan Category			49
31			Liquidity Reserves			50
32			Deposits Composition and Average Deposits Interest Rates			51
33			Long-Term Funding			52
34			Senior Unsecured Long-Term Debt Credit Ratings			53
35			Interest Rate Sensitivity Analysis			54
Supplemental Table:
A			Reconciliation of Non-GAAP Measures			60

			3			Capital One Financial Corporation (COF)

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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 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 30, 2021, our principal subsidiaries included:

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

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•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 the summer of 2021. Our current 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)

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SELECTED FINANCIAL DATA

The following table presents selected consolidated financial data and performance from our results of operations for the second quarter and first six months of 2021 and 2020 and selected comparative balance sheet data as of June 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,
(Dollars in millions, except per share data and as noted)						2021						2020						Change						2021						2020																								Change
Income statement
Net interest income						$	5,743					$	5,460					5		%				11,565						$	11,485																							1		%
Non-interest income						1,631						1,096						49						2,922						2,320																								26
Total net revenue						7,374						6,556						12						14,487						13,805																								5
Provision (benefit) for credit losses						(1,160)						4,246						**						(1,983)						9,669																								**
Non-interest expense:
Marketing						620						273						127						1,121						764																								47
Operating expense						3,346						3,497						(4)						6,585						6,735																								(2)
Total non-interest expense						3,966						3,770						5						7,706						7,499																								3
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)						(33)						(121)						(145)																								(17)
Issuance cost for redeemed preferred stock						—						—						—						—						(22)																								**
Net income (loss) available to common stockholders						$	3,446					$	(1,009)					**						$	6,682					$	(2,429)																							**
Common share statistics
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)																							**
Weighted-average common shares outstanding (in millions):
Basic						450.6						456.7						(1)		%				454.6						457.1																								(1)		%
Diluted						452.3						456.7						(1)						456.2						457.1																								—
Common shares outstanding (period-end, in millions)						446.1						456.3						(2)						446.1						456.3																								(2)
Dividends declared and paid per common share						$	0.40					$	0.40					—						$	0.80					$	0.80																							—
Tangible book value per common share (period-end)(1)						97.20						78.82						23						97.20						78.82																								23
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

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						Three Months Ended June 30,																		Six Months Ended June 30,
(Dollars in millions, except per share data and as noted)						2021						2020						Change						2021						2020																								Change
Total deposits						308,217						288,344						7						306,645						276,498																								11
Borrowings						37,054						49,827						(26)						38,475						50,810																								(24)
Common equity						56,885						52,413						9						56,333						52,799																								7
Total stockholders’ equity						62,376						57,623						8						61,504						58,096																								6
Selected performance metrics
Purchase volume						$	132,676					$	90,149					47		%				$	241,009					$	190,069																							27		%
Total net revenue margin(2)						7.56		%				6.93		%				63		bps				7.44		%				7.53		%																						(9)		bps
Net interest margin						5.89						5.78						11						5.94						6.26																								(32)
Return on average assets(3)						3.34						(0.89)						4		%				3.25						(1.13)																								4		%
Return on average tangible assets(4)						3.46						(0.93)						4						3.36						(1.17)																								5
Return on average common equity(5)						24.24						(7.69)						32						23.73						(9.20)																								33
Return on average tangible common equity(6)						32.75						(10.74)						43						32.19						(12.81)																								45
Equity-to-assets ratio(7)						14.71						14.02						69		bps				14.54						14.49																								5		bps
Non-interest expense as a percentage of average loans held for investment						6.44						5.95						49						6.29						5.81																								48
Efficiency ratio(8)						53.78						57.50						(4)		%				53.19						54.32																								(113)
Operating efficiency ratio(9)						45.38						53.34						(8)						45.45						48.79																								(334)
Effective income tax rate from continuing operations						22.6						37.2						(15)						21.7						32.9																								(11)		%
Net charge-offs						$	541					$	1,505					(64)						$	1,281					$	3,296																							(61)
Net charge-off rate						0.88		%				2.38		%				(150)		bps				1.04		%				2.55		%																						(151)		bps

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

__________

(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.

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(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.

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EXECUTIVE SUMMARY AND BUSINESS OUTLOOK

Financial Highlights

We reported net income of $3.5 billion ($7.62 per diluted common share) on total revenue of $7.4 billion and net income of $6.9 billion ($14.65 per diluted common share) on total net revenue of $14.5 billion for the second quarter and first six months of 2021. In comparison, we reported net loss of $918 million ($2.21 per diluted common share) on total net revenue of $6.6 billion and net loss of $2.3 billion ($5.31 per diluted common share) on total net revenue of $13.8 billion for the second quarter and first six months of 2020.

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

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 billion of shares of our common stock during the second quarter of 2021 and $2.2 billion during the first six months of 2021, consistent with the Federal Reserve’s temporary capital distribution restrictions in place during the first six months of 2021. See “MD&A—Capital Management—Dividend Policy and Stock Purchases” for additional information.

Below are additional highlights of our performance in the second quarter and first six months of 2021. These highlights are based on a comparison between the results of the second quarter and first six 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 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 to $3.5 billion in the second quarter of 2021 compared to the second quarter of 2020 and increased by $9.1 billion to $6.9 billion in the first six 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 lower interest rates paid on interest-bearing deposits and higher average outstanding balances in our auto loan portfolio, partially offset by lower average outstanding balances in our domestic card loan portfolio.

•Loans Held for Investment:

◦Period-end loans held for investment decreased by $2.0 billion to $249.6 billion as of June 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 by growth in our auto loan portfolio.

◦Average loans held for investment decreased by $6.9 billion to $246.5 billion in the second quarter of 2021 compared to the second 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 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.

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Our 30+ day delinquency rate decreased by 72 basis points to 1.89% as of June 30, 2021 from December 31, 2020 due to seasonally lower delinquency inventories and strong credit performance in our auto and domestic card loan portfolios.

•Allowance for Credit Losses: Our allowance for credit losses decreased by $3.2 billion to $12.3 billion, and our allowance coverage ratio decreased by 124 basis points to 4.95% as of June 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 Expectations

We expect that the auto net charge-off rate will increase from the unusually low level observed in the second quarter of 2021.

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CONSOLIDATED RESULTS OF OPERATIONS

The section below provides a comparative discussion of our consolidated financial performance for the second quarter and first six 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.

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Table 2 below presents the average outstanding balance, interest income earned, interest expense incurred and average yield for the second quarter and first six 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,
						2021																		2020
(Dollars in millions)						Average Balance						Interest Income/ Expense						Average Yield/ Rate						Average Balance						Interest Income/ Expense						Average Yield/ Rate
Assets:
Interest-earning assets:
Loans:(1)
Credit card						$	101,642					$	3,568					14.04		%				$	108,748					$	3,731					13.72		%
Consumer banking						72,705						1,451						7.99						64,851						1,364						8.41
Commercial banking(2)						74,933						510						2.72						80,803						608						3.01
Other(3)						—						224						**						—						117						**
Total loans, including loans held for sale						249,280						5,753						9.23						254,402						5,820						9.15
Investment securities						100,071						370						1.48						81,095						482						2.38
Cash equivalents and other interest-earning assets						40,778						16						0.16						42,648						16						0.15
Total interest-earning assets						390,129						6,139						6.29						378,145						6,318						6.68
Cash and due from banks						5,417																		5,355
Allowance for credit losses						(14,007)																		(14,107)
Premises and equipment, net						4,275																		4,332
Other assets						38,285																		37,350
Total assets						$	424,099																	$	411,075
Liabilities and stockholders’ equity:
Interest-bearing liabilities:
Interest-bearing deposits						$	273,476					$	237					0.35		%				$	261,256					$	611					0.94		%
Securitized debt obligations						10,890						28						1.03						16,432						56						1.37
Senior and subordinated notes						25,487						122						1.92						31,294						180						2.30
Other borrowings and liabilities						2,198						9						1.67						3,554						11						1.21
Total interest-bearing liabilities						312,051						396						0.50						312,536						858						1.10
Non-interest-bearing deposits						34,741																		27,088
Other liabilities						14,931																		13,828
Total liabilities						361,723																		353,452
Stockholders’ equity						62,376																		57,623
Total liabilities and stockholders’ equity						$	424,099																	$	411,075
Net interest income/spread												$	5,743					5.79												$	5,460					5.58
Impact of non-interest-bearing funding																		0.10																		0.20
Net interest margin																		5.89		%																5.78		%

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						Six Months Ended June 30,
						2021																		2020
(Dollars in millions)						Average Balance						Interest Income/ Expense						Average Yield/ Rate						Average Balance						Interest Income/ Expense						Average Yield/ Rate
Assets:
Interest-earning assets:
Loans:(1)
Credit card						$	102,078					$	7,281					14.26		%				$	115,801					$	8,168					14.11		%
Consumer banking						70,979						2,864						8.07						64,262						2,711						8.44
Commercial banking(2)						74,927						1,026						2.74						78,954						1,354						3.43
Other(3)						—						436						**						—						129						**
Total loans, including loans held for sale						247,984						11,607						9.36						259,017						12,362						9.55
Investment securities						99,189						761						1.53						79,654						1,012						2.54
Cash equivalents and other interest-earning assets						42,182						32						0.15						28,075						53						0.38
Total interest-earning assets						389,355						12,400						6.37						366,746						13,427						7.32
Cash and due from banks						5,251																		5,024
Allowance for credit losses						(14,773)																		(12,258)
Premises and equipment, net						4,279																		4,338
Other assets						38,847																		36,995
Total assets						$	422,959																	$	400,845
Liabilities and stockholders’ equity:
Interest-bearing liabilities:
Interest-bearing deposits						$	273,417					$	506					0.37		%				$	251,185					$	1,342					1.07		%
Securitized debt obligations						11,561						60						1.04						17,243						155						1.80
Senior and subordinated notes						26,223						251						1.92						31,318						419						2.67
Other borrowings and liabilities						2,205						18						1.65						3,667						26						1.42
Total interest-bearing liabilities						313,406						835						0.53						303,413						1,942						1.28
Non-interest-bearing deposits						33,228																		25,313
Other liabilities						14,821																		14,023
Total liabilities						361,455																		342,749
Stockholders’ equity						61,504																		58,096
Total liabilities and stockholders’ equity						$	422,959																	$	400,845
Net interest income/spread												$	11,565					5.84												$	11,485					6.04
Impact of non-interest-bearing funding																		0.10																		0.22
Net interest margin																		5.94		%																6.26		%

__________

(1)Past due fees included in interest income totaled approximately $302 million and $612 million in the second quarter and first six months of 2021, respectively, and $265 million and $656 million in the second quarter and first six 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 million and $38 million in the second quarter and first six months of 2021, respectively, and $21 million and $41 million in the second quarter and first six 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.

**    Not meaningful.

Net interest income increased by $283 million to $5.7 billion in the second quarter of 2021 compared to the second 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 and higher average outstanding balances in our auto loan portfolio, partially offset by lower average outstanding balances in our domestic card loan portfolio.

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Net interest margin increased by 11 basis points to 5.89% in the second quarter of 2021 compared to the second quarter of 2020 driven by lower interest rate paid on interest-bearing deposits, partially offset by higher balances and lower yield on investment securities.

Net interest margin decreased by 32 basis points to 5.94% in the first six months of 2021 compared to the first six 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.

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,
						2021 vs. 2020																		2021 vs. 2020
(Dollars in millions)						Total Variance						Volume						Rate						Total Variance						Volume						Rate
Interest income:
Loans:
Credit card						$	(163)					$	(244)					$	81					$	(887)					$	(968)					$	81
Consumer banking						87						157						(70)						153						271						(118)
Commercial banking(2)						(98)						(42)						(56)						(328)						(66)						(262)
Other(3)						107						—						107						307						—						307
Total loans, including loans held for sale						(67)						(129)						62						(755)						(763)						8
Investment securities						(112)						70						(182)						(251)						150						(401)
Cash equivalents and other interest-earning assets						—						(1)						1						(21)						11						(32)
Total interest income						(179)						(60)						(119)						(1,027)						(602)						(425)
Interest expense:
Interest-bearing deposits						(374)						11						(385)						(836)						41						(877)
Securitized debt obligations						(28)						(16)						(12)						(95)						(40)						(55)
Senior and subordinated notes						(58)						(31)						(27)						(168)						(60)						(108)
Other borrowings and liabilities						(2)						(4)						2						(8)						(10)						2
Total interest expense						(462)						(40)						(422)						(1,107)						(69)						(1,038)
Net interest income						$	283					$	(20)					$	303					$	80					$	(533)					$	613

__________

(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.

(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.

(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.

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Non-Interest Income

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

Table 4: Non-Interest Income

						Three Months Ended June 30,												Six Months Ended June 30,
(Dollars in millions)						2021						2020						2021						2020
Interchange fees, net						$	1,016					$	672					$	1,833					$	1,424
Service charges and other customer-related fees						384						258						736						585
Net securities gains						—						—						4						—
Other non-interest income:(1)
Mortgage banking revenue						40						38						100						106
Treasury and other investment income						94						63						78						56
Other						97						65						171						149
Total other non-interest income						231						166						349						311
Total non-interest income						$	1,631					$	1,096					$	2,922					$	2,320

________

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

Non-interest income increased by $535 million to $1.6 billion in the the second quarter of 2021 compared to the second quarter of 2020 and increased by $602 million to $2.9 billion in the first six months of 2021 compared to the first six months of 2020 primarily driven by higher net interchange fees due to an increase in purchase volume in Domestic Card.

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 losses decreased by $5.4 billion to a benefit of $1.2 billion in the second quarter of 2021 and decreased by $11.7 billion to a benefit of $2.0 billion in the first six months of 2021. These decreases were primarily driven by 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 quarter and first six months of 2021 and 2020.

Table 5: Non-Interest Expense

						Three Months Ended June 30,												Six Months Ended June 30,
(Dollars in millions)						2021						2020						2021						2020
Salaries and associate benefits(1)						$	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 non-interest expense:
Bankcard, regulatory and other fee assessments						38						66						90						141
Collections						95						76						179						181
Fraud losses						40						71						75						150
Other(2)						208						429						357						653
Total other non-interest expense						381						642						701						1,125
Total non-interest expense						$	3,966					$	3,770					$	7,706					$	7,499

_________

(1)Includes expense of $26 million and $45 million related to our deferred compensation plan investments for the second quarter and first six months of 2021, respectively, and expense of $44 million and benefit of $15 million related to our deferred compensation plan investments for the second quarter and first six 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 million to $4.0 billion in the second quarter of 2021 compared to the second quarter of 2020 and increased by $207 million to $7.7 billion in the first six months of 2021 compared to the first six months of 2020, primarily driven by increased marketing spend.

Income Taxes

We recorded an income tax provision of $1.0 billion (22.6% effective income tax rate) and $1.9 billion (21.7% effective income tax rate) in the second quarter and first six months of 2021, respectively, compared to an income tax benefit of $543 million (37.2% effective income tax rate) and $1.1 billion (32.9% effective income tax rate) in the second quarter and first six 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 effective income tax rate in the second quarter and first six 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 in 2020 driven by expectations of economic worsening that existed at the start of the COVID-19 pandemic in 2020.

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.

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CONSOLIDATED BALANCE SHEETS ANALYSIS

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

Total liabilities decreased by $2.6 billion to $358.8 billion as of June 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.

Stockholders’ equity increased by $4.4 billion to $64.6 billion as of June 30, 2021 from December 31, 2020 primarily due to our net income of $6.9 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 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 30, 2021 and December 31, 2020.

The fair value of our available for sale securities portfolio increased by $1.3 billion to $101.8 billion as of June 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 30, 2021 and December 31, 2020.

Table 6: Investment Securities

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

__________

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

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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 30, 2021 and December 31, 2020.

Table 7: Loans Held for Investment

						June 30, 2021																		December 31, 2020
(Dollars in millions)						Loans						Allowance						Net Loans						Loans						Allowance						Net Loans
Credit Card						$	101,017					$	8,873					$	92,144					$	106,956					$	11,191					$	95,765
Consumer Banking						74,759						2,203						72,556						68,888						2,715						66,173
Commercial Banking						73,821						1,270						72,551						75,780						1,658						74,122
Total						$	249,597					$	12,346					$	237,251					$	251,624					$	15,564					$	236,060

Loans held for investment decreased by $2.0 billion to $249.6 billion as of June 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 by growth in our auto loan portfolio and higher purchase volume in Domestic Card.

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

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, securitized debt obligations, federal funds purchased, securities loaned or sold under agreements to repurchase, and Federal Home Loan Banks (“FHLB”) advances secured by certain portions of our loan and securities portfolios.

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

Table 8: Funding Sources Composition

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

__________

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

Total deposits increased by $866 million to $306.3 billion as of June 30, 2021 from December 31, 2020 primarily driven by increased consumer savings, as well as commercial clients holding elevated levels of liquidity.

Securitized debt obligations decreased by $1.9 billion to $10.6 billion as of June 30, 2021 from December 31, 2020 primarily driven 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.”

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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 quarter and first six 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 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 quarter and first six months of 2021 and 2020.

Table 9: Business Segment Results

						Three Months Ended June 30,
						2021																								2020
						Total Net Revenue (Loss)(1)												Net Income (Loss)(2)												Total Net Revenue (Loss)(1)												Net Loss(2)
(Dollars in millions)						Amount						% of Total						Amount						% of Total						Amount						% of Total						Amount						% of Total
Credit Card						$	4,470					61		%				$	2,170					61		%				$	4,214					64		%				$	(533)					58		%
Consumer Banking						2,245						30						1,091						31						1,762						27						(114)						12
Commercial Banking(3)						717						10						396						11						698						11						(118)						13
Other(3)						(58)						(1)						(120)						(3)						(118)						(2)						(152)						17
Total						$	7,374					100		%				$	3,537					100		%				$	6,556					100		%				$	(917)					100		%

						Six Months Ended June 30,
						2021																								2020
						Total Net Revenue (Loss)(1)												Net Income (Loss)(2)												Total Net Revenue(1)												Net Loss(2)
(Dollars in millions)						Amount						% of Total						Amount						% of Total						Amount						% of Total						Amount						% of Total
Credit Card						$	8,871					61		%				$	4,275					62		%				$	8,827					64		%				$	(1,524)					68		%
Consumer Banking						4,416						31						1,993						29						3,545						26						(166)						7
Commercial Banking(3)						1,477						10						812						12						1,427						10						(529)						23
Other(3)						(277)						(2)						(216)						(3)						6						—						(38)						2
Total						$	14,487					100		%				$	6,864					100		%				$	13,805					100		%				$	(2,257)					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 billion and $4.3 billion in the second quarter and first six months of 2021, respectively, compared to net loss of $533 million and $1.5 billion in the second quarter and first six months of 2020, respectively.

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,
(Dollars in millions, except as noted)						2021						2020						Change						2021						2020												Change
Selected income statement data:
Net interest income						$	3,217					$	3,369					(5)		%				$	6,589					$	7,071											(7)		%
Non-interest income						1,253						845						48						2,282						1,756												30
Total net revenue(1)						4,470						4,214						6						8,871						8,827												—
Provision (benefit) for credit losses						(635)						2,944						**						(1,127)						6,646												**
Non-interest expense						2,263						1,969						15						4,398						4,177												5
Income (loss) from continuing operations before income taxes						2,842						(699)						**						5,600						(1,996)												**
Income tax provision (benefit)						672						(166)						**						1,325						(472)												**
Income (loss) from continuing operations, net of tax						$	2,170					$	(533)					**						$	4,275					$	(1,524)											**
Selected performance metrics:
Average loans held for investment						$	99,674					$	108,748					(8)						$	100,102					$	115,762											(14)
Average yield on loans(2)						14.04		%				13.72		%				32		bps				14.26		%				14.11		%										15		bps
Total net revenue margin(3)						17.59						15.50						209						17.38						15.25												213
Net charge-offs						$	571					$	1,211					(53)		%				$	1,204					$	2,647											(55)		%
Net charge-off rate						2.29		%				4.46		%				(217)		bps				2.41		%				4.57		%										(216)		bps
Purchase volume						$	132,676					$	90,149					47		%				$	241,009					$	190,069											27		%
(Dollars in millions, except as noted)						June 30, 2021						December 31, 2020						Change
Selected period-end data:
Loans held for investment						$	101,017					$	106,956					(6)		%
30+ day performing delinquency rate						1.75		%				2.44		%				(69)		bps
30+ day delinquency rate						1.75						2.45						(70)
Nonperforming loan rate(4)						0.01						0.02						(1)
Allowance for credit losses						$	8,873					$	11,191					(21)		%
Allowance coverage ratio						8.78		%				10.46		%				(168)		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 million and $355 million in the second quarter and first six months of 2021, respectively, compared to $318 million and $707 million in the second quarter and first six 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 quarter and first six months of 2021 compared to the second quarter and first six months of 2020, and changes in financial condition and credit performance between June 30, 2021 and December 31, 2020 include the following:

•Net Interest Income: Net interest income decreased by $152 million to $3.2 billion in the second quarter of 2021 and decreased by $482 million to $6.6 billion in the first six months of 2021 primarily driven by lower average loan balances.

•Non-Interest Income: Non-interest income increased by $408 million to $1.3 billion in the second quarter of 2021 and increased by $526 million to $2.3 billion in the first six 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 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 billion in the first six 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 million to $2.3 billion in the second quarter of 2021 and increased by $221 million to $4.4 billion in the first six months of 2021 primarily driven by increased marketing spend.

•Loans Held for Investment:

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

◦Average loans held for investment decreased by $9.1 billion to $99.7 billion in the second quarter of 2021 compared to the second quarter of 2020 and decreased by $15.7 billion to $100.1 billion in the first six months of 2021 compared to the first six months of 2020 primarily due to higher customer payments, partially offset by higher purchase volume in Domestic Card.

•Net Charge-Off and Delinquency Metrics: The net charge-off rate decreased by 217 basis points to 2.29% in the second quarter of 2021 compared to the second quarter of 2020 and decreased by 216 basis points to 2.41% in the first six months of 2021 compared to the first six 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.

The 30+ day delinquency rate decreased by 70 basis points to 1.75% as of June 30, 2021 from December 31, 2020 due to seasonally lower delinquency inventories and strong credit performance in our domestic credit card loan portfolio.

			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 billion and $4.0 billion in the second quarter and first six months of 2021, respectively, compared to net loss of $605 million and $1.5 billion in the second quarter and first six months of 2020, respectively. In the second quarter and first six 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,
(Dollars in millions, except as noted)						2021						2020						Change						2021						2020												Change
Selected income statement data:
Net interest income						$	2,944					$	3,094					(5)		%				$	6,039					$	6,475											(7)		%
Non-interest income						1,183						795						49						2,142						1,637												31
Total net revenue(1)						4,127						3,889						6						8,181						8,112												1
Provision (benefit) for credit losses						(561)						2,906						**						(1,052)						6,370												**
Non-interest expense						2,034						1,776						15						3,957						3,760												5
Income (loss) from continuing operations before income taxes						2,654						(793)						**						5,276						(2,018)												**
Income tax provision (benefit)						626						(188)						**						1,245						(478)												**
Income (loss) from continuing operations, net of tax						$	2,028					$	(605)					**						$	4,031					$	(1,540)											**
Selected performance metrics:
Average loans held for investment						$	91,535					$	100,996					(9)						$	92,062					$	107,354											(14)
Average yield on loans(2)						13.91		%				13.52		%				39		bps				14.13		%				13.93		%										20		bps
Total net revenue margin(3)						17.66						15.40						226						17.40						15.11												229
Net charge-offs						$	522					$	1,143					(54)		%				$	1,109					$	2,474											(55)		%
Net charge-off rate						2.28		%				4.53		%				(225)		bps				2.41		%				4.61		%										(220)		bps
Purchase volume						$	122,456					$	82,860					48		%				$	222,416					$	175,108											27		%
(Dollars in millions, except as noted)						June 30, 2021						December 31, 2020						Change
Selected period-end data:
Loans held for investment						$	95,309					$	98,504					(3)		%
30+ day performing delinquency rate						1.68		%				2.42		%				(74)		bps
Allowance for credit losses						$	8,489					$	10,650					(20)		%
Allowance coverage ratio						8.91		%				10.81		%				(190)		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. Finance charges and fees charged off as uncollectible are reflected as a reduction in total net revenue.

(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.

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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 quarter of 2021 and in the first six months of 2021 compared to the second quarter of 2020 and the first six months of 2020 primarily driven by:

•lower provision for credit losses 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

•higher non-interest income primarily due to higher net interchange fees from an increase in purchase volume.

These drivers were partially offset by:

•higher non-interest expense primarily driven by increased marketing spend; and

•lower net interest income primarily due to lower average outstanding 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 and $2.0 billion in the second quarter and first six months of 2021, respectively, compared to net loss of $114 million and $166 million in the second quarter and first six 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,
(Dollars in millions, except as noted)						2021						2020						Change						2021						2020												Change
Selected income statement data:
Net interest income						$	2,101					$	1,665					26		%				$	4,131					$	3,322											24		%
Non-interest income						144						97						48						285						223												28
Total net revenue						2,245						1,762						27						4,416						3,545												25
Provision (benefit) for credit losses						(306)						876						**						(432)						1,736												**
Non-interest expense						1,123						1,036						8						2,240						2,027												11
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)											**
Selected performance metrics:
Average loans held for investment:
Auto						$	69,543					$	61,798					13						$	67,873					$	61,401											11
Retail banking						3,162						3,053						4						3,106						2,860												9
Total consumer banking						$	72,705					$	64,851					12						$	70,979					$	64,261											10
Average yield on loans held for investment(1)						7.99		%				8.41		%				(42)		bps				8.07		%				8.44		%										(37)		bps
Average deposits						$	252,488					$	232,293					9		%				$	251,002					$	223,682											12		%
Average deposits interest rate						0.31		%				0.89		%				(58)		bps				0.33		%				0.97		%										(64)		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
Auto loan originations						$	12,959					$	8,292					56		%				$	21,792					$	15,931											37		%
(Dollars in millions, except as noted)						June 30, 2021						December 31, 2020						Change
Selected period-end data:
Loans held for investment:
Auto						$	71,713					$	65,762					9		%
Retail banking						3,046						3,126						(3)
Total consumer banking						$	74,759					$	68,888					9
30+ day performing delinquency rate						3.16		%				4.62		%				(146)		bps
30+ day delinquency rate						3.40						5.00						(160)
Nonperforming loan rate						0.35						0.47						(12)
Nonperforming asset rate(2)						0.40						0.54						(14)
Allowance for credit losses						$	2,203					$	2,715					(19)		%
Allowance coverage ratio						2.95		%				3.94		%				(99)		bps
Deposits						$	251,155					$	249,815					1		%

			25			Capital One Financial Corporation (COF)

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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 quarter and first six months of 2021 compared to the second quarter and first six months of 2020, and changes in financial condition and credit performance between June 30, 2021 and December 31, 2020 include the following:

•Net Interest Income: Net interest income increased by $436 million to $2.1 billion in the second quarter of 2021 and increased by $809 million to $4.1 billion in the first six 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 million in the second quarter of 2021 and increased by $62 million to $285 million in the first six months of 2021 primarily driven by higher interchange fees from an increase in debit card purchase volume and growth in our auto loan portfolio.

•Provision for Credit Losses: Provision for credit losses decreased by $1.2 billion to a benefit of $306 million in the second quarter of 2021 and decreased by $2.2 billion to a benefit of $432 million in the first six months of 2021 resulting from allowance releases 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 million to $1.1 billion in the second quarter of 2021 and increased by $213 million to $2.2 billion in the first six months of 2021 primarily driven by 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 billion to $74.8 billion as of June 30, 2021 from December 31, 2020, and average loans held for investment increased by $7.9 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 months of 2021 compared to the first six months of 2020 primarily driven by growth in our auto loan portfolio due to higher originations.

•Deposits: Period-end deposits increased by $1.3 billion to $251.2 billion as of June 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% in the second quarter of 2021 compared to the second quarter of 2020 and decreased by 113 basis points to 0.23% in the first six months of 2021 compared to the first six months of 2020 primarily driven by strong credit performance and the impact of elevated auction prices on recoveries.

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

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 million and $812 million in the second quarter of 2021, respectively, compared to net loss of $118 million and $529 million in the second quarter and first six months of 2020, respectively.

			26			Capital One Financial Corporation (COF)

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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,
(Dollars in millions, except as noted)						2021						2020						Change						2021						2020												Change
Selected income statement data:
Net interest income						$	460					$	518					(11)		%				$	980					$	1,009											(3)		%
Non-interest income						257						180						43						497						418												19
Total net revenue(1)						717						698						3						1,477						1,427												4
Provision (benefit) for credit losses(2)						(219)						427						**						(422)						1,283												**
Non-interest expense						417						425						(2)						836						837												—
Income (loss) from continuing operations before income taxes						519						(154)						**						1,063						(693)												**
Income tax provision (benefit)						123						(36)						**						251						(164)												**
Income (loss) from continuing operations, net of tax						$	396					$	(118)					**						$	812					$	(529)											**
Selected performance metrics:
Average loans held for investment:
Commercial and multifamily real estate						$	30,124					$	31,723					(5)						$	29,991					$	31,402											(4)
Commercial and industrial						43,960						48,036						(8)						44,135						46,699												(5)
Total commercial banking						$	74,084					$	79,759					(7)						$	74,126					$	78,101											(5)
Average yield on loans held for investment(1)(3)						2.72		%				3.00		%				(28)		bps				2.74		%				3.43		%										(69)		bps
Average deposits						$	42,311					$	34,635					22		%				$	41,215					$	33,437											23		%
Average deposits interest rate						0.14		%				0.30		%				(16)		bps				0.16		%				0.58		%										(42)		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
(Dollars in millions, except as noted)						June 30, 2021						December 31, 2020						Change
Selected period-end data:
Loans held for investment:
Commercial and multifamily real estate						$	29,616					$	30,681					(3)		%
Commercial and industrial						44,205						45,099						(2)
Total commercial banking						$	73,821					$	75,780					(3)
Nonperforming loan rate						1.03		%				0.86		%				17		bps
Nonperforming asset rate(4)						1.03						0.86						17
Allowance for credit losses(2)						$	1,270					$	1,658					(23)		%
Allowance coverage ratio						1.72		%				2.19		%				(47)		bps
Deposits						$	42,973					$	39,590					9		%
Loans serviced for others						45,898						44,162						4

__________

(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 million and $195 million as of June 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.

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

•Net Interest Income: Net interest income decreased by $58 million to $460 million in the second quarter of 2021 and decreased by $29 million to $980 million in the first six months of 2021 primarily driven 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.

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

•Provision for Credit Losses: Provision for credit losses decreased by $646 million to a benefit of $219 million in the second quarter of 2021 and decreased by $1.7 billion to a benefit of $422 million in the first six months of 2021 resulting from allowance releases due to an improved economic outlook and improvement in our energy 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 million in the second quarter of 2021 and $836 million in the first six months of 2021.

•Loans Held for Investment:

◦Period-end loans held for investment decreased by $2.0 billion to $73.8 billion as of June 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.

◦Average loans held for investment decreased by $5.7 billion to $74.1 billion in the second quarter of 2021 compared to the second quarter of 2020 and decreased by $4.0 billion to $74.1 billion in the first six months of 2021 compared to the first six 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 billion to $43.0 billion as of June 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 62 basis points to a net recovery of 0.11% in the second quarter of 2021 and decreased by 55 basis points to a net recovery of 0.01% in the first six months of 2021 primarily driven by lower net charge-offs in our energy loan portfolio.

The nonperforming loan rate increased by 17 basis points to 1.03% as of June 30, 2021 from December 31, 2020 driven by isolated credit downgrades in our real estate portfolio.

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.

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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,
(Dollars in millions)						2021						2020						Change						2021						2020												Change
Selected income statement data:
Net interest income (loss)						$	(35)					$	(92)					(62)		%				$	(135)					$	83											**
Non-interest loss						(23)						(26)						(12)						(142)						(77)												84		%
Total net revenue (loss)(1)						(58)						(118)						(51)						(277)						6												**
Provision (benefit) for credit losses						—						(1)						**						(2)						4												**
Non-interest expense(2)						163						340						(52)						232						458												(49)
Loss from continuing operations before income taxes						(221)						(457)						(52)						(507)						(456)												11
Income tax benefit						(101)						(305)						(67)						(291)						(418)												(30)
Loss from continuing operations, net of tax						$	(120)					$	(152)					(21)						$	(216)					$	(38)											**

__________

(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)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 by $32 million to a loss of $120 million in the second quarter of 2021, primarily driven by lower legal reserve builds in non-interest expense, as well as a one-time earned fee in net interest income (loss) for unwinding the internal funding related to moving $1.5 billion in commercial loans to held for sale, partially offset by a decrease in income tax benefit due to an improvement in pre-tax loss and the relative impact of the tax credits.

Loss from continuing operations increased by $178 million to a loss of $216 million in the first six months of 2021, primarily driven by the decrease in net interest income (loss) from a decline in market interest rates and reduced funding needs of our business segments, as well as a decrease in income tax benefit due to the relative impact of the tax credits, partially offset by 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.

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 30, 2021

There were no relevant new accounting standards issued but not adopted as of June 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. 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” 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. We remain subject to 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.

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 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, 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 Banking Agencies set an earlier effective date.

Based on the Company’s 2020 supervisory stress testing results, the Company’s stress capital buffer requirement is 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 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 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 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. 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 30, 2021, the 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.

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 30, 2021 and December 31, 2020.

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

						June 30, 2021																		December 31, 2020
						Ratio						Minimum Capital Adequacy						Well- Capitalized						Ratio						Minimum Capital Adequacy						Well- Capitalized
Capital One Financial Corp:
Common equity Tier 1 capital(3)						14.5		%				4.5		%				N/A						13.7		%				4.5		%				N/A
Tier 1 capital(4)						16.6						6.0						6.0		%				15.3						6.0						6.0		%
Total capital(5)						18.8						8.0						10.0						17.7						8.0						10.0
Tier 1 leverage(6)						12.4						4.0						N/A						11.2						4.0						N/A
Supplementary leverage(7)(8)						10.7						3.0						N/A						10.7						3.0						N/A
COBNA:
Common equity Tier 1 capital(3)						20.2						4.5						6.5						21.5						4.5						6.5
Tier 1 capital(4)						20.2						6.0						8.0						21.5						6.0						8.0
Total capital(5)						21.8						8.0						10.0						23.4						8.0						10.0
Tier 1 leverage(6)						18.0						4.0						5.0						18.3						4.0						5.0
Supplementary leverage(7)						14.3						3.0						N/A						14.7						3.0						N/A
CONA:
Common equity Tier 1 capital(3)						12.6						4.5						6.5						12.4						4.5						6.5
Tier 1 capital(4)						12.6						6.0						8.0						12.4						6.0						8.0
Total capital(5)						13.8						8.0						10.0						13.7						8.0						10.0
Tier 1 leverage(6)						7.9						4.0						5.0						7.6						4.0						5.0
Supplementary leverage(7)						7.1						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 30, 2021 are preliminary. As we continue to validate our data, the calculations are subject to change until we file our June 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.

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

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

(Dollars in millions)						June 30, 2021						December 31, 2020
Regulatory Capital Under Basel III Standardized Approach
Common equity excluding AOCI						$	58,969					$	55,299
Adjustments:
AOCI, net of tax(1)						(5)						(29)
Goodwill, net of related deferred tax liabilities						(14,440)						(14,448)
Intangible assets, net of related deferred tax liabilities						(76)						(86)
Other(2)						(16)						—
Common equity Tier 1 capital						44,432						40,736
Tier 1 capital instruments						6,488						4,847
Tier 1 capital						50,920						45,583
Tier 2 capital instruments						3,106						3,385
Qualifying allowance for credit losses						3,906						3,820
Tier 2 capital						7,012						7,205
Total capital						$	57,932					$	52,788
Regulatory Capital Metrics
Risk-weighted assets						$	307,334					$	297,903
Adjusted average assets						411,032						406,762
Total leverage exposure						477,932						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 billion of shares of our common stock during the second quarter of 2021 and $2.2 billion during the first six 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 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 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 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, 2021, we announced that we will redeem all outstanding shares of our Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series E, $0.01 par value per share on September 1, 2021. We expect this redemption will reduce net income available to common shareholders by approximately $12 million in the third quarter of 2021.

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Dividend Policy and Stock Purchases

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

Table 16: Preferred Stock Dividends Paid Per Share

Series

Description

Issuance Date

Per Annum Dividend Rate

Dividend Frequency

2021

Q2

Q1

Series E

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 G

5.200% Non-Cumulative

July 29, 2016

5.200%

Quarterly

13.00

13.00

Series H

6.000% Non-Cumulative

November 29, 2016

6.000

Quarterly

15.00

15.00

Series I

5.000% Non-Cumulative

September 11, 2019

5.000

Quarterly

12.50

12.50

Series J

4.800% Non-Cumulative

January 31, 2020

4.800

Quarterly

12.00

12.00

Series K

4.625% Non-Cumulative

September 17, 2020

4.625

Quarterly

11.56

11.56

Series L

4.375% Non-Cumulative

May 4, 2021

4.375

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

—

—

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 30, 2021, funds available for dividend payments from COBNA and CONA were $2.1 billion and $1.5 billion, respectively. There can be no assurance that we will declare and pay any dividends to stockholders.

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 billion of shares of our common stock during the second quarter of 2021 and $2.2 billion during the first six months of 2021, consistent with the Federal Reserve’s temporary capital distribution restrictions in place during the first six months of 2021.

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.

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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

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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.”

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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 billion and $2.7 billion as of June 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 30, 2021 and December 31, 2020.

Table 17: Portfolio Composition of Loans Held for Investment

						June 30, 2021												December 31, 2020
(Dollars in millions)						Loans						% of Total						Loans						% of Total
Credit Card:
Domestic credit card						$	95,309					38.2		%				$	98,504					39.1		%
International card businesses						5,708						2.3						8,452						3.4
Total credit card						101,017						40.5						106,956						42.5
Consumer Banking:
Auto						71,713						28.7						65,762						26.2
Retail banking(1)						3,046						1.2						3,126						1.2
Total consumer banking						74,759						29.9						68,888						27.4
Commercial Banking:(1)
Commercial and multifamily real estate						29,616						11.9						30,681						12.2
Commercial and industrial						44,205						17.7						45,099						17.9
Total commercial banking						73,821						29.6						75,780						30.1
Total loans held for investment						$	249,597					100.0		%				$	251,624					100.0		%

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

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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 30, 2021 and December 31, 2020.

Table 18: Credit Card Portfolio by Geographic Region

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

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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 30, 2021 and December 31, 2020.

Table 19: Consumer Banking Portfolio by Geographic Region

						June 30, 2021												December 31, 2020
(Dollars in millions)						Amount						% of Total						Amount						% of Total
Auto:
Texas						$	8,835					11.8		%				$	8,207					11.9		%
California						8,432						11.3						7,573						11.0
Florida						6,105						8.2						5,544						8.1
Georgia						3,196						4.3						2,989						4.3
Ohio						2,956						4.0						2,770						4.0
Pennsylvania						2,871						3.8						2,569						3.7
Illinois						2,694						3.6						2,431						3.5
North Carolina						2,453						3.3						2,280						3.3
Other						34,171						45.6						31,399						45.7
Total auto						71,713						95.9						65,762						95.5
Retail banking:
New York						1,103						1.5						1,081						1.6
Louisiana						565						0.8						634						0.9
Texas						540						0.7						576						0.8
Maryland						232						0.3						224						0.3
New Jersey						212						0.3						222						0.3
Virginia						172						0.2						179						0.3
Other						222						0.3						210						0.3
Total retail banking						3,046						4.1						3,126						4.5
Total consumer banking						$	74,759					100.0		%				$	68,888					100.0		%

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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 30, 2021 and December 31, 2020.

Table 20: Commercial Real Estate Portfolio by Region

						June 30, 2021												December 31, 2020
(Dollars in millions)						Amount						% of Total						Amount						% of Total
Geographic concentration:(1)
Northeast						$	15,334					51.78		%				$	17,290					56.35		%
South						4,138						13.97						3,806						12.40
Pacific West						3,657						12.35						3,424						11.16
Mid-Atlantic						3,569						12.05						3,344						10.90
Midwest						2,067						6.98						1,993						6.50
Mountain						851						2.87						824						2.69
Total						$	29,616					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, 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, OH, SD and WS. Mountain consists of: AZ, CO, ID, MT, NM, NV, UT and WY.

Commercial Loans by Industry

Table 21 summarizes our commercial loans held for investment portfolio by industry classification as of June 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)						June 30, 2021						December 31, 2020
Industry Classification:
Real estate						38		%				39		%
Finance						20						17
Healthcare						10						11
Business services						6						6
Educational services						5						5
Public administration						4						4
Construction and land						3						3
Retail trade						3						3
Oil and gas						2						3
Other						9						9
Total						100		%				100		%

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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 30, 2021 and December 31, 2020.

Table 22: Credit Score Distribution

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

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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 30, 2021 and December 31, 2020.

Table 23: 30+ Day Delinquencies

						June 30, 2021																								December 31, 2020
						30+ Day Performing Delinquencies												30+ Day Delinquencies												30+ Day Performing Delinquencies												30+ Day Delinquencies
(Dollars in millions)						Amount						Rate(1)						Amount						Rate(1)						Amount						Rate(1)						Amount						Rate(1)
Credit Card:
Domestic credit card						$	1,598					1.68		%				$	1,598					1.68		%				$	2,388					2.42		%				$	2,388					2.42		%
International card businesses						165						2.89						172						3.01						221						2.61						234						2.77
Total credit card						1,763						1.75						1,770						1.75						2,609						2.44						2,622						2.45
Consumer Banking:
Auto						2,336						3.26						2,491						3.47						3,140						4.78						3,381						5.14
Retail banking						24						0.79						47						1.56						41						1.32						62						1.99
Total consumer banking						2,360						3.16						2,538						3.40						3,181						4.62						3,443						5.00
Commercial Banking:
Commercial and multifamily real estate						11						0.04						140						0.47						202						0.66						341						1.11
Commercial and industrial						223						0.51						281						0.64						84						0.19						158						0.35
Total commercial banking						234						0.32						421						0.57						286						0.38						499						0.66
Total						$	4,357					1.75						$	4,729					1.89						$	6,076					2.41						$	6,564					2.61

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(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 30, 2021 and December 31, 2020.

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

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

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

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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 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
(Dollars in millions)						Amount						Rate(1)						Amount						Rate(1)
Loan category:
Credit card						$	821					0.81		%				$	1,251					1.17		%
Commercial banking						2						—						51						0.07
Total						$	823					0.33						$	1,302					0.52
Geographic region:
Domestic						$	758					0.31		%				$	1,220					0.50		%
International						65						1.14						82						0.97
Total						$	823					0.33						$	1,302					0.52

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

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 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
(Dollars in millions)						Amount						Rate						Amount						Rate
Nonperforming loans held for investment:(2)
Credit Card:
International card businesses						$	12					0.20		%				$	21					0.24		%
Total credit card						12						0.01						21						0.02
Consumer Banking:
Auto						209						0.29						294						0.45
Retail banking						53						1.75						30						0.96
Total consumer banking						262						0.35						324						0.47
Commercial Banking:
Commercial and multifamily real estate						301						1.02						200						0.65
Commercial and industrial						458						1.03						450						1.00
Total commercial banking						759						1.03						650						0.86
Total nonperforming loans held for investment(3)						$	1,033					0.41						$	995					0.40
Other nonperforming assets(4)						35						0.02						45						0.01
Total nonperforming assets						$	1,068					0.43						$	1,040					0.41

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(1)We recognized interest income for loans classified as nonperforming of $8 million and $11 million in the first six months of 2021 and 2020, respectively. Interest income foregone related to nonperforming loans was $30 million and $35 million in the first six 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% and 0.65% as of June 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.

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 quarter and first six months of 2021 and 2020.

Table 27: Net Charge-Offs (Recoveries)

						Three Months Ended June 30,																								Six Months Ended June 30,
						2021												2020												2021												2020
(Dollars in millions)						Amount						Rate(1)						Amount						Rate(1)						Amount						Rate(1)						Amount						Rate(1)
Credit Card:
Domestic credit card						$	522					2.28		%				$	1,143					4.53		%				$	1,109					2.41		%				$	2,474					4.61		%
International card businesses						49						2.41						68						3.47						95						2.36						173						4.11
Total credit card						571						2.29						1,211						4.46						1,204						2.41						2,647						4.57
Consumer Banking:
Auto						(22)						(0.12)						179						1.16						56						0.17						409						1.33
Retail banking						11						1.41						13						1.78						24						1.54						29						2.05
Total consumer banking						(11)						(0.06)						192						1.19						80						0.23						438						1.36
Commercial Banking:
Commercial and multifamily real estate						4						0.04						7						0.09						8						0.05						7						0.04
Commercial and industrial						(23)						(0.21)						95						0.78						(11)						(0.05)						204						0.87
Total commercial banking						(19)						(0.11)						102						0.51						(3)						(0.01)						211						0.54
Total net charge-offs						$	541					0.88						$	1,505					2.38						$	1,281					1.04						$	3,296					2.55
Average loans held for investment						$	246,463											$	253,358											$	245,207											$	258,124

__________

(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.

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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 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 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
(Dollars in millions)						Amount						% of Total Modifications						Amount						% of Total Modifications
Credit Card:
Domestic credit card						$	441					24.1		%				$	511					24.5		%
International card businesses						188						10.3						217						10.4
Total credit card						629						34.4						728						34.9
Consumer banking:
Auto						605						33.1						615						29.5
Retail banking						13						0.7						18						0.9
Total consumer banking						618						33.8						633						30.4
Commercial banking						581						31.8						723						34.7
Total						$	1,828					100.0		%				$	2,084					100.0		%
Status of TDRs:
Performing						$	1,421					77.7		%				$	1,718					82.4		%
Nonperforming						407						22.3						366						17.6
Total						$	1,828					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

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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 quarter and first six 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
						Credit Card																		Consumer Banking
(Dollars in millions)						Domestic Card						International Card Businesses						Total Credit Card						Auto						Retail Banking						Total Consumer Banking						Commercial Banking						Total
Allowance for credit losses:
Balance as of March 31, 2021						$	9,572					$	500					$	10,072					$	2,405					$	93					$	2,498					$	1,447					$	14,017
Charge-offs						(874)						(93)						(967)						(245)						(15)						(260)						(8)						(1,235)
Recoveries(1)						352						44						396						267						4						271						27						694
Net recoveries (charge-offs)						(522)						(49)						(571)						22						(11)						11						19						(541)
Provision (benefit) for credit losses						(561)						(74)						(635)						(305)						(1)						(306)						(196)						(1,137)
Allowance build (release) for credit losses						(1,083)						(123)						(1,206)						(283)						(12)						(295)						(177)						(1,678)
Other changes(2)						—						7						7						—						—						—						—						7
Balance as of June 30, 2021						8,489						384						8,873						2,122						81						2,203						1,270						12,346
Reserve for unfunded lending commitments:
Balance as of March 31, 2021						—						—						—						—						—						—						187						187
Provision (benefit) for losses on unfunded lending commitments						—						—						—						—						—						—						(23)						(23)
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

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						Six Months Ended June 30, 2021
						Credit Card																		Consumer Banking
(Dollars in millions)						Domestic Card						International Card Businesses						Total Credit Card						Auto						Retail Banking						Total Consumer Banking						Commercial Banking						Total
Allowance for credit losses:
Balance as of December 31, 2020						$	10,650					$	541					$	11,191					$	2,615					$	100					$	2,715					$	1,658					$	15,564
Charge-offs						(1,778)						(182)						(1,960)						(569)						(33)						(602)						(27)						(2,589)
Recoveries(1)						669						87						756						513						9						522						30						1,308
Net recoveries (charge-offs)						(1,109)						(95)						(1,204)						(56)						(24)						(80)						3						(1,281)
Provision (benefit) for credit losses						(1,052)						(75)						(1,127)						(437)						5						(432)						(391)						(1,950)
Allowance build (release) for credit losses						(2,161)						(170)						(2,331)						(493)						(19)						(512)						(388)						(3,231)
Other changes(2)						—						13						13						—						—						—						—						13
Balance as of June 30, 2021						8,489						384						8,873						2,122						81						2,203						1,270						12,346
Reserve for unfunded lending commitments:
Balance as of December 31, 2020						—						—						—						—						—						—						195						195
Provision (benefit) for losses on unfunded lending commitments						—						—						—						—						—						—						(31)						(31)
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

						Three Months Ended June 30, 2020
						Credit Card																		Consumer Banking
(Dollars in millions)						Domestic Card						International Card Businesses						Total Credit Card						Auto						Retail Banking						Total Consumer Banking						Commercial Banking												Total
Allowance for credit losses:
Balance as of March 31, 2020						$	9,806					$	540					$	10,346					$	2,058					$	96					$	2,154					$	1,573											$	14,073
Charge-offs						(1,493)						(119)						(1,612)						(399)						(17)						(416)						(103)												(2,131)
Recoveries(1)						350						51						401						220						4						224						1												626
Net charge-offs						(1,143)						(68)						(1,211)						(179)						(13)						(192)						(102)												(1,505)
Provision (benefit) for credit losses						2,906						38						2,944						847						29						876						432												4,252
Allowance build (release) for credit losses						1,763						(30)						1,733						668						16						684						330												2,747
Other changes(2)						—						12						12						—						—						—						—												12
Balance as of June 30, 2020						11,569						522						12,091						2,726						112						2,838						1,903												16,832
Reserve for unfunded lending commitments:
Balance as of March 31, 2020						—						—						—						—						—						—						223												223
Provision (benefit) for losses on unfunded lending commitments						—						—						—						—						—						—						(5)												(5)
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

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						Six Months Ended June 30, 2020
						Credit Card																		Consumer Banking
(Dollars in millions)						Domestic Card						International Card Businesses						Total Credit Card						Auto						Retail Banking						Total Consumer Banking						Commercial Banking												Total
Allowance for credit losses:
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						2,237						4						2,241						477						25						502						102												2,845
Finance charge and fee reserve reclassification(3)						439						23						462						—						—						—						—												462
Balance as of January 1, 2020						7,673						425						8,098						1,461						79						1,540						877												10,515
Charge-offs						(3,208)						(253)						(3,461)						(875)						(37)						(912)						(215)												(4,588)
Recoveries(1)						734						80						814						466						8						474						4												1,292
Net charge-offs						(2,474)						(173)						(2,647)						(409)						(29)						(438)						(211)												(3,296)
Provision (benefit) for credit losses						6,370						276						6,646						1,674						62						1,736						1,237												9,619
Allowance build (release) for credit losses						3,896						103						3,999						1,265						33						1,298						1,026												6,323
Other changes(2)						—						(6)						(6)						—						—						—						—												(6)
Balance as of June 30, 2020						11,569						522						12,091						2,726						112						2,838						1,903												16,832
Reserve for unfunded lending commitments:
Balance as of December 31, 2019						—						—						—						—						5						5						130												135
Cumulative effects from adoption of the CECL standard						—						—						—						—						(5)						(5)						42												37
Balance as of January 1, 2020						—						—						—						—						—						—						172												172
Provision (benefit) for losses on unfunded lending commitments						—						—						—						—						—						—						46												46
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

__________

(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.

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 30, 2021 and December 31, 2020.

Table 30: Allowance Coverage Ratios for Specified Loan Category

						June 30, 2021																		December 31, 2020
(Dollars in millions)						Allowance for Credit Losses						Amount(1)						Allowance Coverage Ratio						Allowance for Credit Losses						Amount(1)						Allowance Coverage Ratio
Credit Card						$	8,873					$	1,770					501.32		%				$	11,191					$	2,622					426.80		%
Consumer Banking						2,203						2,538						86.80						2,715						3,443						78.85
Commercial Banking						1,270						759						167.41						1,658						650						254.97
Total						$	12,346					249,597						4.95						$	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 billion to $12.3 billion, and our allowance coverage ratio decreased by 124 basis points to 4.95% as of June 30, 2021 from December 31, 2020, driven by strong credit performance and an improved economic outlook.

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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 30, 2021 and December 31, 2020.

Table 31: Liquidity Reserves

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

Our liquidity reserves decreased by $7.0 billion to $137.0 billion as of June 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.

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 quarter of 2021 was 141%, 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.

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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 30, 2021, we pledged both loans and securities to the FHLB to secure a maximum borrowing capacity of $19.2 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 30, 2021 and December 31, 2020, respectively, which was determined in part based on our outstanding advances. As of June 30, 2021, we pledged loans to secure a borrowing capacity of $21.3 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 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.

Deposits

Table 32 provides a comparison of average balances, interest expense and average deposits interest rates for the second quarter and first six 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

__________

(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 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

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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 million to $845 million as of June 30, 2021 from December 31, 2020 driven by an increase in repurchase agreements.

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

The following table summarizes issuances of securitized debt obligations, senior and subordinated notes and their respective maturities or redemptions for the second quarter and first six 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
						Three Months Ended June 30,												Three Months Ended June 30,
(Dollars in millions)						2021						2020												2021						2020
Securitized debt obligations						$	—					$	—											$	1,502					$	1,383
Senior and subordinated notes						—						2,000												585						5,592
Total						$	—					$	2,000											$	2,087					$	6,975

						Issuances												Maturities/Redemptions
						Six Months Ended June 30,												Six Months Ended June 30,
(Dollars in millions)						2021						2020												2021						2020
Securitized debt obligations						$	—					$	1,250											$	1,773					$	3,593
Senior and subordinated notes						—						4,000												2,085						7,092
Total						$	—					$	5,250											$	3,858					$	10,685

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Credit Ratings

Our credit ratings impact our ability to access capital markets and our borrowing costs. Rating agencies base their ratings 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 30, 2021 and December 31, 2020.

Table 34: Senior Unsecured Long-Term Debt Credit Ratings

June 30, 2021

December 31, 2020

Capital One Financial Corporation

COBNA

CONA

Capital One Financial Corporation

COBNA

CONA

Moody’s

Baa1

A3

A3

Baa1

Baa1

Baa1

S&P

BBB

BBB+

BBB+

BBB

BBB+

BBB+

Fitch

A-

A-

A-

A-

A-

A-

As of July 26, 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.

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. 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.

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 in moderately higher interest rate scenarios (+50 and +100 bps), while decreasing in a lower interest rate scenario (-50 bps). 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.

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 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
Estimated impact on projected baseline net interest income:
+200 basis points						4.0		%				5.6		%
+100 basis points						3.3						4.3
+50 basis points						1.9						2.4
–50 basis points						(1.3)						(0.9)
Estimated impact on economic value of equity:
+200 basis points						(0.2)						4.2
+100 basis points						2.8						6.0
+50 basis points						2.1						4.0
–50 basis points						(3.7)						(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 320 million GBP as of both June 30, 2021 and December 31, 2020, and 4.7 billion CAD and 5.3 billion CAD as of June 30, 2021 and December 31, 2020, respectively. Our EUR-denominated borrowings outstanding were 1.3 billion EUR as of both June 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 1.7 billion GBP as of both June 30, 2021 and December 31, 2020, and 1.7 billion CAD and 1.5 billion CAD as of June 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.

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.

We also continue to focus our transition efforts on:

•monitoring market developments and industry practices 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;

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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.

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.

We provided additional 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 on Form 10-Q for the period ended March 31, 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;

•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)						June 30, 2021						December 31, 2020
Tangible Common Equity (Period-End):
Stockholders’ equity						$	64,624					$	60,204
Goodwill and intangible assets(1)						(14,774)						(14,809)
Noncumulative perpetual preferred stock						(6,488)						(4,847)
Tangible common equity						$	43,362					$	40,548
Tangible Common Equity (Quarterly Average):
Stockholders’ equity						$	62,376					$	59,389
Goodwill and intangible assets(1)						(14,788)						(14,824)
Noncumulative perpetual preferred stock						(5,491)						(5,168)
Tangible common equity						$	42,097					$	39,397
Tangible Assets (Period-End):
Total assets						$	423,420					$	421,602
Goodwill and intangible assets(1)						(14,774)						(14,809)
Tangible assets						$	408,646					$	406,793
Tangible Assets (Quarterly Average):
Total assets						$	424,099					$	420,011
Goodwill and intangible assets(1)						(14,788)						(14,824)
Tangible assets						$	409,311					$	405,187
Non-GAAP Ratio:
Tangible common equity (“TCE”)(2)						10.6		%				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, other lending products and deposit products.

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.

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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.

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.

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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.

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.

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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

CCAR: Comprehensive Capital Analysis and Review

CCP: Central Counterparty Clearinghouse, or Central Clearinghouse

CDE: Community development entities

CECL: Current expected credit loss

CMBS: Commercial mortgage-backed securities

CME: Chicago Mercantile Exchange

COEP: Capital One (Europe) plc

COF: Capital One Financial Corporation

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

LCR: Liquidity coverage ratio

LIBOR: London Interbank Offered Rate

MDL: Multi-district litigation

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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			68
Consolidated Statements of Income			68
Consolidated Statements of Comprehensive Income			69
Consolidated Balance Sheets			70
Consolidated Statements of Changes in Stockholders’ Equity			71
Consolidated Statements of Cash Flows			73
Notes to Consolidated Financial Statements			75
Note 1—Summary of Significant Accounting Policies			75
Note 2—Investment Securities			77
Note 3—Loans			80
Note 4—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments			90
Note 5—Variable Interest Entities and Securitizations			94
Note 6—Goodwill and Intangible Assets			98
Note 7—Deposits and Borrowings			99
Note 8—Derivative Instruments and Hedging Activities			100
Note 9—Stockholders’ Equity			110
Note 10—Earnings Per Common Share			114
Note 11—Fair Value Measurement			115
Note 12—Business Segments and Revenue from Contracts with Customers			122
Note 13—Commitments, Contingencies, Guarantees and Others			126

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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)

See Notes to Consolidated Financial Statements.
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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 (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)
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

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)						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

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)						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																																				(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

__________

(1)We declared dividends per share on our common stock of $0.40 in the second quarter of 2021 and 2020, and $0.80 in the first six months of 2021 and 2020.

See Notes to Consolidated Financial Statements.
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CAPITAL ONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

						Six Months Ended June 30,
(Dollars in millions)						2021						2020
Operating activities:
Income (loss) from continuing operations, net of tax						$	6,864					$	(2,257)
Loss from discontinued operations, net of tax						(3)						(1)
Net income (loss)						6,861						(2,258)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Provision (benefit) for credit losses						(1,983)						9,669
Depreciation and amortization, net						1,714						1,804
Deferred tax provision (benefit)						574						(1,574)
Net securities losses (gains)						(4)						0
Gain on sales of loans						(5)						(11)
Stock-based compensation expense						206						74
Other (including (gains) and losses from equity investments)						38						(7)
Loans held for sale:
Originations and purchases						(3,233)						(4,347)
Proceeds from sales and paydowns						3,707						4,002
Changes in operating assets and liabilities:
Changes in interest receivable						99						184
Changes in other assets						(3,183)						954
Changes in interest payable						(51)						(59)
Changes in other liabilities						957						783
Net change from discontinued operations						(3)						1
Net cash from operating activities						5,694						9,215
Investing activities:
Securities available for sale:
Purchases						(18,185)						(14,568)
Proceeds from paydowns and maturities						14,142						9,113
Proceeds from sales						595						144
Loans:
Net changes in loans held for investment						(5,160)						9,797
Principal recoveries of loans previously charged off						1,308						1,292
Net purchases of premises and equipment						(341)						(342)
Net cash from acquisition activities						(24)						0
Net cash from other investing activities						(26)						(377)
Net cash from investing activities						(7,691)						5,059

See Notes to Consolidated Financial Statements.
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CAPITAL ONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

						Six Months Ended June 30,
(Dollars in millions)						2021						2020
Financing activities:
Deposits and borrowings:
Changes in deposits						$	945					$	41,234
Issuance of securitized debt obligations						0						1,248
Maturities and paydowns of securitized debt obligations						(1,773)						(3,593)
Issuance of senior and subordinated notes and long-term FHLB advances						0						3,987
Maturities and paydowns of senior and subordinated notes and long-term FHLB advances						(2,085)						(7,156)
Changes in other borrowings						161						(6,759)
Common stock:
Net proceeds from issuances						120						121
Dividends paid						(365)						(368)
Preferred stock:
Net proceeds from issuances						1,641						1,209
Dividends paid						(121)						(145)
Redemptions						0						(875)
Purchases of treasury stock						(2,243)						(388)
Proceeds from share-based payment activities						34						20
Net cash from financing activities						(3,686)						28,535
Changes in cash, cash equivalents and restricted cash for securitization investors						(5,683)						42,809
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						$	35,088					$	56,558
Supplemental cash flow information:
Non-cash items:
Net transfers from (to) loans held for investment to (from) loans held for sale						$	4,575					$	(36)
Interest paid						1,145						2,088
Income tax paid						1,013						137

See Notes to Consolidated Financial Statements.
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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 30, 2021, our principal subsidiaries included:

•Capital One Bank (USA), National Association (“COBNA”), which offers credit and debit card products, other lending products and deposit products; 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 three major business segments, which are defined primarily based on the products and services provided or the types of customer served: Credit Card, Consumer Banking and Commercial Banking. We provide details on our business segments, the integration of 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”).

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Newly Adopted Accounting Standards During the Six Months Ended June 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.

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NOTE 2—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 30, 2021 and December 31, 2020.

The table below presents the amortized cost, gross unrealized gains and losses, and fair value of securities available for sale as of June 30, 2021 and December 31, 2020. Accrued interest receivable of $221 million and $230 million as of June 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
(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						$	9,211					$	0					$	20					$	0					$	9,231
RMBS:
Agency						76,318						0						1,433						(545)						77,206
Non-agency						908						(1)						209						0						1,116
Total RMBS						77,226						(1)						1,642						(545)						78,322
Agency CMBS						10,781						0						335						(29)						11,087
Other securities(1)						3,118						0						8						0						3,126
Total investment securities available for sale						$	100,336					$	(1)					$	2,005					$	(574)					$	101,766

						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 30, 2021, and December 31, 2020, respectively. The remaining amount is primarily comprised of supranational bonds and foreign government bonds.

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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 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
						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						$	34,165					$	(485)					$	1,685					$	(59)					$	35,850					$	(544)
Non-agency						6						0						0						0						6						0
Total RMBS						34,171						(485)						1,685						(59)						35,856						(544)
Agency CMBS						2,028						(27)						223						(2)						2,251						(29)
Other securities(1)						529						0						0						0						529						0
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)

						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 and 320 securities in gross unrealized loss positions as of June 30, 2021 and December 31, 2020, respectively.

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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 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
(Dollars in millions)						Due in 1 Year or Less						Due > 1 Year through 5 Years						Due > 5 Years through 10 Years						Due > 10 Years						Total
Fair value of securities available for sale:
U.S. Treasury securities						$	1,401					$	7,830					$	0					$	0					$	9,231
RMBS(1):
Agency						0						97						1,139						75,970						77,206
Non-agency						0						0						0						1,116						1,116
Total RMBS						0						97						1,139						77,086						78,322
Agency CMBS(1)						399						2,666						5,133						2,889						11,087
Other securities						298						2,560						268						0						3,126
Total securities available for sale						$	2,098					$	13,153					$	6,540					$	79,975					$	101,766
Amortized cost of securities available for sale						$	2,096					$	13,087					$	6,376					$	78,777					$	100,336
Weighted-average yield for securities available for sale						0.66		%				0.53		%				1.51		%				1.77		%				1.57		%

__________

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

Net Securities Gains or Losses and Proceeds from Sales

Total proceeds from sales of our securities were $595 million, with gains of $4 million for the six months ended June 30, 2021. We had no sales of securities both for the three months ended June 30, 2021 and 2020. For the six months ended June 30, 2020, total proceeds from the sale of our securities were $144 million and we recognized less than $1 million of gains.

Securities Pledged and Received

We pledged investment securities totaling $19.2 billion and $16.5 billion as of June 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 30, 2021 and December 31, 2020, related to our derivative transactions.

			79			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 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 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
												Delinquent Loans
(Dollars in millions)						Current						30-59 Days						60-89 Days						> 90 Days						Total Delinquent Loans						Total Loans
Credit Card:
Domestic credit card						$	93,711					$	525					$	317					$	756					$	1,598					$	95,309
International card businesses						5,536						67						37						68						172						5,708
Total credit card						99,247						592						354						824						1,770						101,017
Consumer Banking:
Auto						69,222						1,717						645						129						2,491						71,713
Retail banking						2,999						21						8						18						47						3,046
Total consumer banking						72,221						1,738						653						147						2,538						74,759
Commercial Banking:
Commercial and multifamily real estate						29,476						4						23						113						140						29,616
Commercial and industrial						43,924						201						25						55						281						44,205
Total commercial banking						73,400						205						48						168						421						73,821
Total loans(1)						$	244,868					$	2,535					$	1,055					$	1,139					$	4,729					$	249,597
% of Total loans						98.11		%				1.01		%				0.42		%				0.46		%				1.89		%				100.00		%

			80			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 billion and $1.1 billion as of June 30, 2021 and December 31, 2020, respectively.

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 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
(Dollars in millions)						> 90 Days and Accruing						Nonperforming Loans(1)						Nonperforming  Loans Without an Allowance						> 90 Days and Accruing						Nonperforming Loans(1)						Nonperforming  Loans Without an Allowance
Credit Card:
Domestic credit card						$	756					N/A						$	0					$	1,169					N/A						$	0
International card businesses						65						$	12					0						82						$	21					0
Total credit card						821						12						0						1,251						21						0
Consumer Banking:
Auto						0						209						0						0						294						0
Retail banking						0						53						20						0						30						0
Total consumer banking						0						262						20						0						324						0
Commercial Banking:
Commercial and multifamily real estate						2						301						249						51						200						184
Commercial and industrial						0						458						280						0						450						265
Total commercial banking						2						759						529						51						650						449
Total						$	823					$	1,033					$	549					$	1,302					$	995					$	449
% of Total loans held for investment						0.3		%				0.4		%				0.2		%				0.5		%				0.4		%				0.2		%

__________

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

			81			Capital One Financial Corporation (COF)

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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.

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

Table 3.3: Credit Card Delinquency Status

												June 30, 2021																		December 31, 2020
(Dollars in millions)												Revolving Loans						Revolving Loans Converted to Term						Total						Revolving Loans						Revolving Loans Converted to Term						Total
Credit Card:
Domestic credit card:
Current												$	93,304					$	407					$	93,711					$	95,629					$	487					$	96,116
30-59 days												512						13						525						734						21						755
60-89 days												308						9						317						451						13						464
Greater than 90 days												747						9						756						1,155						14						1,169
Total domestic credit card												94,871						438						95,309						97,969						535						98,504
International card businesses:
Current												5,484						52						5,536						8,152						66						8,218
30-59 days												61						6						67						79						11						90
60-89 days												33						4						37						47						11						58
Greater than 90 days												64						4						68						76						10						86
Total international card businesses												5,642						66						5,708						8,354						98						8,452
Total credit card												$	100,513					$	504					$	101,017					$	106,323					$	633					$	106,956

			82			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 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
						Term Loans by Vintage Year
(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)
Greater than 660						$	11,276					$	10,874					$	6,258					$	3,396					$	1,855					$	683					$	34,342					$	0					$	0					$	34,342
621-660						4,130						4,752						2,817						1,496						815						326						14,336						0						0						14,336
620 or below						5,536						7,988						4,960						2,509						1,404						638						23,035						0						0						23,035
Total auto						20,942						23,614						14,035						7,401						4,074						1,647						71,713						0						0						71,713
Retail banking—Delinquency status:
Current						511						745						210						198						195						597						2,456						535						8						2,999
30-59 days						0						0						0						0						0						3						3						18						0						21
60-89 days						0						0						0						0						1						4						5						3						0						8
Greater than 90 days						0						0						0						1						2						4						7						10						1						18
Total retail banking(2)						511						745						210						199						198						608						2,471						566						9						3,046
Total consumer banking						$	21,453					$	24,359					$	14,245					$	7,600					$	4,272					$	2,255					$	74,184					$	566					$	9					$	74,759

			83			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 and $919 million as of June 30, 2021 and December 31, 2020, 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.

			84			Capital One Financial Corporation (COF)

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The following table presents our commercial banking portfolio of loans held for investment by internal risk ratings as of June 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
						Term Loans by Vintage Year
(Dollars in millions)						2021						2020						2019						2018						2017						Prior						Total Term Loans						Revolving Loans						Revolving Loans Converted to Term						Total
Internal risk rating:(1)
Commercial and multifamily real estate
Noncriticized						$	1,636					$	3,437					$	4,331					$	2,956					$	1,025					$	4,838					$	18,223					$	7,983					$	0					$	26,206
Criticized performing						156						291						426						381						310						1,459						3,023						61						25						3,109
Criticized nonperforming						0						0						8						29						10						254						301						0						0						301
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
Commercial and industrial
Noncriticized						4,905						8,160						6,730						3,563						2,305						4,001						29,664						11,596						15						41,275
Criticized performing						87						169						844						275						163						200						1,738						734						0						2,472
Criticized nonperforming						47						62						57						74						29						21						290						168						0						458
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 banking(2)						$	6,831					$	12,119					$	12,396					$	7,278					$	3,842					$	10,773					$	53,239					$	20,542					$	40					$	73,821

						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 million and $238 million as of June 30, 2021 and December 31, 2020, respectively.

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

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 months ended June 30, 2021 and 2020.

Table 3.6: Troubled Debt Restructurings

												Three Months Ended June 30, 2021
												Reduced Interest Rate												Term Extension
(Dollars in millions)						Total Loans Modified(1)						% of TDR Activity(2)						Average Rate Reduction						% of TDR Activity(2)						Average Term Extension (Months)
Credit Card:
Domestic credit card						$	33					100		%				16.07		%				0		%				0
International card businesses						27						100						27.45						0						0
Total credit card						60						100						21.22						0						0
Consumer Banking:
Auto						65						39						8.62						91						4
Retail banking						1						0						0.00						100						41
Total consumer banking						66						38						8.62						91						4
Commercial Banking:
Commercial and multifamily real estate						0						0						0.00						0						0
Commercial and industrial						34						0						0.00						56						17
Total commercial banking						34						0						0.00						56						17
Total						$	160					53						9.38						49						3

			86			Capital One Financial Corporation (COF)

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												Six Months Ended June 30, 2021
												Reduced Interest Rate												Term Extension
(Dollars in millions)						Total Loans Modified(1)						% of TDR Activity(2)						Average Rate Reduction						% of TDR Activity(2)						Average Term Extension (Months)
Credit Card:
Domestic credit card						$	77					100		%				16.10		%				0		%				0
International card businesses						66						100						27.62						0						0
Total credit card						143						100						21.43						0						0
Consumer Banking:
Auto						180						36						8.87						94						3
Retail banking						1						31						3.77						69						28
Total consumer banking						181						36						8.85						94						3
Commercial Banking:
Commercial and multifamily real estate						20						0						0.00						100						14
Commercial and industrial						78						0						0.00						38						8
Total commercial banking						98						0						0.00						51						11
Total						$	422					49						8.64						52						3

						Total Loans Modified(1)						Three Months Ended June 30, 2020
												Reduced Interest Rate												Term Extension												Balance Reduction
(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
Credit Card:
Domestic credit card						$	56					100		%				15.41		%				0		%				0						0		%				$	0
International card businesses						28						100						26.56						0						0						0						0
Total credit card						84						100						19.14						0						0						0						0
Consumer Banking:
Auto						137						5						4.12						95						3						0						0
Retail banking						1						10						8.37						59						4						0						0
Total consumer banking						138						5						4.19						95						3						0						0
Commercial Banking:
Commercial and multifamily real estate						9						0						0.00						100						7						0						0
Commercial and industrial						181						0						0.00						52						8						9						7
Total commercial banking						190						0						0.00						55						8						8						7
Total						$	412					22						17.96						57						5						4						$	7

			87			Capital One Financial Corporation (COF)

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						Total Loans Modified(1)						Six Months Ended June 30, 2020
												Reduced Interest Rate												Term Extension												Balance Reduction
(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
Credit Card:
Domestic credit card						$	145					100		%				16.05		%				0		%				0						0		%				$	0
International card businesses						79						100						27.05						0						0						0						0
Total credit card						224						100						19.94						0						0						0						0
Consumer Banking:
Auto						260						12						3.51						95						4						0						0
Retail banking						4						4						11.42						15						4						0						0
Total consumer banking						264						12						3.55						93						4						0						0
Commercial Banking:
Commercial and multifamily real estate						28						0						0.00						100						10						0						0
Commercial and industrial						188						0						0.00						50						8						8						7
Total commercial banking						216						0						0.00						57						9						7						7
Total						$	704					36						17.90						52						5						2						$	7

__________

(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.

			88			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,
						2021												2020												2021												2020
(Dollars in millions)						Number of Contracts						Amount						Number of Contracts						Amount						Number of Contracts						Amount						Number of Contracts						Amount
Credit Card:
Domestic credit card						4,226						$	8					9,582						$	21					9,360						$	18					20,468						$	43
International card businesses						14,827						23						17,508						25						32,029						51						35,365						51
Total credit card						19,053						31						27,090						46						41,389						69						55,833						94
Consumer Banking:
Auto						2,271						35						860						11						4,302						64						2,135						27
Retail banking						3						0						3						0						8						0						4						0
Total consumer banking						2,274						35						863						11						4,310						64						2,139						27
Commercial Banking:
Commercial and multifamily real estate						1						50						0						0						1						50						0						0
Commercial and industrial						6						82						1						21						6						82						7						49
Total commercial banking						7						132						1						21						7						132						7						49
Total						21,334						$	198					27,954						$	78					45,706						$	265					57,979						$	170

Loans Pledged

We pledged loan collateral of $11.6 billion and $14.1 billion to secure the majority of our FHLB borrowing capacity of $19.2 billion and $19.6 billion as of June 30, 2021 and December 31, 2020, respectively. We also pledged loan collateral of $26.9 billion and $25.5 billion to secure our Federal Reserve Discount Window borrowing capacity of $21.3 billion and $20.0 billion as of June 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 months ended June 30, 2021, we converted $38 million and $135 million of revolving loans to term loans, respectively, primarily in our domestic credit card and commercial banking loan portfolios. For the three and six months ended June 30, 2020, we converted $89 million and $249 million of revolving loans to term loans, respectively, primarily in our domestic credit card loan portfolio.

			89			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 months ended June 30, 2021 and 2020. Our allowance for credit losses decreased by $3.2 billion to $12.3 billion as of June 30, 2021 from December 31, 2020, primarily driven by strong credit performance and an improved economic outlook.

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

						Three Months Ended June 30, 2021
(Dollars in millions)						Credit Card						Consumer Banking						Commercial Banking												Total
Allowance for credit losses:
Balance as of March 31, 2021						$	10,072					$	2,498					$	1,447											$	14,017
Charge-offs						(967)						(260)						(8)												(1,235)
Recoveries(1)						396						271						27												694
Net recoveries (charge-offs)						(571)						11						19												(541)
Provision (benefit) for credit losses						(635)						(306)						(196)												(1,137)
Allowance build (release) for credit losses						(1,206)						(295)						(177)												(1,678)
Other changes(2)						7						0						0												7
Balance as of June 30, 2021						8,873						2,203						1,270												12,346
Reserve for unfunded lending commitments:
Balance as of March 31, 2021						0						0						187												187
Provision (benefit) for losses on unfunded lending commitments						0						0						(23)												(23)
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

						Six Months Ended June 30, 2021
(Dollars in millions)						Credit Card						Consumer Banking						Commercial Banking												Total
Allowance for credit losses:
Balance as of December 31, 2020						$	11,191					$	2,715					$	1,658											$	15,564
Charge-offs						(1,960)						(602)						(27)												(2,589)
Recoveries(1)						756						522						30												1,308
Net recoveries (charge-offs)						(1,204)						(80)						3												(1,281)
Provision (benefit) for credit losses						(1,127)						(432)						(391)												(1,950)
Allowance build (release) for credit losses						(2,331)						(512)						(388)												(3,231)
Other changes(2)						13						0						0												13
Balance as of June 30, 2021						8,873						2,203						1,270												12,346
Reserve for unfunded lending commitments:
Balance as of December 31, 2020						0						0						195												195
Provision (benefit) for losses on unfunded lending commitments						0						0						(31)												(31)
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

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						Three Months Ended June 30, 2020
(Dollars in millions)						Credit Card						Consumer Banking						Commercial Banking												Total
Allowance for credit losses:
Balance as of March 31, 2020						$	10,346					$	2,154					$	1,573											$	14,073
Charge-offs						(1,612)						(416)						(103)												(2,131)
Recoveries(1)						401						224						1												626
Net charge-offs						(1,211)						(192)						(102)												(1,505)
Provision (benefit) for credit losses						2,944						876						432												4,252
Allowance build (release) for credit losses						1,733						684						330												2,747
Other changes(2)						12						0						0												12
Balance as of June 30, 2020						12,091						2,838						1,903												16,832
Reserve for unfunded lending commitments:
Balance as of March 31, 2020						0						0						223												223
Provision (benefit) for losses on unfunded lending commitments						0						0						(5)												(5)
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

						Six Months Ended June 30, 2020
(Dollars in millions)						Credit Card						Consumer Banking						Commercial Banking												Total
Allowance for credit losses:
Balance as of December 31, 2019						$	5,395					$	1,038					$	775											$	7,208
Cumulative effects from adoption of the CECL standard						2,241						502						102												2,845
Finance charge and fee reserve reclassification(3)						462						0						0												462
Balance as of January 1, 2020						8,098						1,540						877												10,515
Charge-offs						(3,461)						(912)						(215)												(4,588)
Recoveries(1)						814						474						4												1,292
Net charge-offs						(2,647)						(438)						(211)												(3,296)
Provision (benefit) for credit losses						6,646						1,736						1,237												9,619
Allowance build (release) for credit losses						3,999						1,298						1,026												6,323
Other changes(2)						(6)						0						0												(6)
Balance as of June 30, 2020						12,091						2,838						1,903												16,832
Reserve for unfunded lending commitments:
Balance as of December 31, 2019						0						5						130												135
Cumulative effects from adoption of the CECL standard						0						(5)						42												37
Balance as of January 1, 2020						0						0						172												172
Provision (benefit) for losses on unfunded lending commitments						0						0						46												46
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

__________

(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.

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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 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 months ended June 30, 2021 and 2020.

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

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

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

			93			Capital One Financial Corporation (COF)

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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 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
						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)						$	20,671					$	9,115					$	0					$	0					$	0
Auto loan securitizations						1,768						1,509						0						0						0
Total securitization-related VIEs						22,439						10,624						0						0						0
Other VIEs:(3)
Affordable housing entities						272						31						4,763						1,427						4,763
Entities that provide capital to low-income and rural communities						2,035						26						0						0						0
Other						0						0						411						0						411
Total other VIEs						2,307						57						5,174						1,427						5,174
Total VIEs						$	24,746					$	10,681					$	5,174					$	1,427					$	5,174

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						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 million of liabilities as of June 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.

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

Table 5.2: Continuing Involvement in Securitization-Related VIEs

(Dollars in millions)						Credit Card						Auto
June 30, 2021:
Securities held by third-party investors						$	9,054					$	1,507
Receivables in the trust						21,803						1,664
Cash balance of spread or reserve accounts						0						10
Retained interests						Yes						Yes
Servicing retained						Yes						Yes
December 31, 2020:
Securities held by third-party investors						$	10,361					$	2,053
Receivables in the trust						23,683						2,243
Cash balance of spread or reserve accounts						0						10
Retained interests						Yes						Yes
Servicing retained						Yes						Yes

Credit Card Securitizations

We securitize a portion of our credit card loans which provides a source of funding for us. Credit card securitizations involve the transfer of credit card receivables to securitization trusts. These trusts then issue debt securities collateralized by the transferred receivables to third-party investors. We hold certain retained interests in our credit card securitizations and continue to service the receivables in these trusts. We consolidate these trusts because we are deemed to be the primary beneficiary as we have the power to direct the activities that most significantly impact the economic performance of the trusts, and the right to receive benefits or the obligation to absorb losses that could potentially be significant to the trusts.

Auto Securitizations

Similar to our credit card securitizations, we securitize a portion of our auto loans which provides a source of funding for us. Auto 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 months ended June 30, 2021 and June 30, 2020, we recognized amortization of $317 million and $285 million, respectively, and tax credits of $423 million and $622 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 billion and $4.5 billion as of June 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

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

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 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 billion and $11.0 billion as of June 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 $2.0 billion as of both June 30, 2021 and December 31, 2020 are reflected on our consolidated balance sheets in cash, loans held for investment, and other assets. The liabilities are reflected in other liabilities. The creditors of the VIEs have no recourse to our general credit. We have not provided additional financial or other support other than during the period that we are contractually required to provide it.

Other

We hold variable interests in other VIEs, including companies that promote renewable energy sources and other equity method investments. We 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 million and $436 million as of June 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.

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NOTE 6—GOODWILL AND INTANGIBLE ASSETS

The table below presents our goodwill, intangible assets and MSRs as of June 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
(Dollars in millions)						Carrying Amount of Assets						Accumulated Amortization						Net Carrying Amount
Goodwill						$	14,654					N/A						$	14,654
Intangible assets:
Purchased credit card relationship (“PCCR”) intangibles						148						$	(139)					9
Other(1)						183						(112)						71
Total intangible assets						331						(251)						80
Total goodwill and intangible assets						$	14,985					$	(251)					$	14,734
Commercial MSRs(2)						$	582					$	(189)					$	393
						December 31, 2020
(Dollars in millions)						Carrying Amount of Assets						Accumulated Amortization						Net Carrying Amount
Goodwill						$	14,653					N/A						$	14,653
Intangible assets:
PCCR intangibles						148						$	(138)					10
Other(1)						248						(168)						80
Total intangible assets						396						(306)						90
Total goodwill and intangible assets						$	15,049					$	(306)					$	14,743
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 million for the three and six months ended June 30, 2021, respectively, and $16 million and $38 million for the three and six months ended June 30, 2020, respectively.

Goodwill

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

Table 6.2: Goodwill by Business Segments

(Dollars in millions)						Credit Card						Consumer Banking						Commercial Banking						Total
Balance as of December 31, 2020						$	5,088					$	4,645					$	4,920					$	14,653
Other adjustments(1)						1						0						0						1
Balance as of June 30, 2021						$	5,089					$	4,645					$	4,920					$	14,654

__________

(1)Represents foreign currency translation adjustments.

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

						June 30, 2021																								December 31, 2020
(Dollars in millions)						Maturity Dates						Stated Interest Rates						Weighted-Average Interest Rate						Carrying Value						Carrying Value
Long-term debt:
Securitized debt obligations						2021-2026						0.42% - 2.84%						1.85		%				$	10,561					$	12,414
Senior and subordinated notes:
Fixed unsecured senior debt(2)						2021-2029						0.80 - 4.75						3.20						18,883						21,045
Floating unsecured senior debt						2022-2023						0.91 - 1.34						1.09						1,359						1,609
Total unsecured senior debt																		3.06						20,242						22,654
Fixed unsecured subordinated debt						2023-2026						3.38 - 4.20						3.78						4,636						4,728
Total senior and subordinated notes																								24,878						27,382
Other long-term borrowings:
Finance lease liabilities						2021-2031						0.25 - 9.91						4.07						59						75
Total other long-term borrowings																								59						75
Total long-term debt																								$	35,498					$	39,871
Total short-term borrowings and long-term debt																								$	36,343					$	40,539

__________

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

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

			99			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			Capital One Financial Corporation (COF)

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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			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 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
						Notional or Contractual Amount						Derivative(1)												Notional or Contractual Amount						Derivative(1)
(Dollars in millions)												Assets						Liabilities												Assets						Liabilities
Derivatives designated as accounting hedges:
Interest rate contracts:
Fair value hedges						$	44,361					$	5					$	7					$	47,349					$	9					$	10
Cash flow hedges						86,900						481						12						82,150						748						1
Total interest rate contracts						131,261						486						19						129,499						757						11
Foreign exchange contracts:
Fair value hedges						1,482						83						0						1,527						164						0
Cash flow hedges						4,233						35						33						4,582						0						161
Net investment hedges						3,397						0						144						3,116						0						196
Total foreign exchange contracts						9,112						118						177						9,225						164						357
Total derivatives designated as accounting hedges						140,373						604						196						138,724						921						368
Derivatives not designated as accounting hedges:
Customer accommodation:
Interest rate contracts						68,537						935						173						68,459						1,429						198
Commodity contracts						16,776						2,093						1,963						16,871						935						820
Foreign exchange and other contracts						4,450						39						31						4,677						58						70
Total customer accommodation						89,763						3,067						2,167						90,007						2,422						1,088
Other interest rate exposures(2)						1,209						45						46						1,770						71						56
Other contracts						1,988						0						1						1,826						1						6
Total derivatives not designated as accounting hedges						92,960						3,112						2,214						93,603						2,494						1,150
Total derivatives						$	233,333					$	3,716					$	2,410					$	232,327					$	3,415					$	1,518
Less: netting adjustment(3)												(964)						(850)												(1,148)						(739)
Total derivative assets/liabilities												$	2,752					$	1,560											$	2,267					$	779

__________

(1)Does not reflect $23 million and $31 million recognized as a net valuation allowance on derivative assets and liabilities for non-performance risk as of June 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			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 30, 2021 and December 31, 2020.

Table 8.2: Hedged Items in Fair Value Hedging Relationships

						June 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
(Dollars in millions)												Total Assets/(Liabilities)						Discontinued-Hedging Relationships												Total Assets/(Liabilities)						Discontinued-Hedging Relationships
Line item on our consolidated balance sheets in which the hedged item is included:
Investment securities available for sale(1)(2)						$	9,936					$	467					$	188					$	9,797					$	590					$	200
Interest-bearing deposits						(9,882)						(124)						0						(11,312)						(213)						0
Securitized debt obligations						(6,926)						(84)						9						(7,609)						(171)						20
Senior and subordinated notes						(20,267)						(879)						(597)						(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 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 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.

			103			Capital One Financial Corporation (COF)

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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
(Dollars in millions)												Financial Instruments						Cash Collateral Received
As of June 30, 2021
Derivative assets(1)						$	3,716					$	(441)					$	(523)					$	2,752					$	0					$	2,752
As of December 31, 2020
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
(Dollars in millions)												Financial Instruments						Cash Collateral Pledged
As of June 30, 2021
Derivative liabilities(1)						$	2,410					$	(441)					$	(409)					$	1,560					$	0					$	1,560
Repurchase agreements(2)						845						0						0						845						(845)						0
As of December 31, 2020
Derivative liabilities(1)						1,518						(383)						(356)						779						0						779
Repurchase agreements(2)						668						0						0						668						(668)						0

__________

(1)We received cash collateral from derivative counterparties totaling $574 million and $862 million as of June 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 30, 2021 and December 31, 2020, respectively, which we have the ability to re-pledge. We posted $2.1 billion and $1.5 billion of cash collateral as of June 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 million and $682 million as of June 30, 2021 and December 31, 2020, respectively, primarily consisting of agency RMBS securities.

			104			Capital One Financial Corporation (COF)

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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 months ended June 30, 2021 and 2020.

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

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

			105			Capital One Financial Corporation (COF)

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						Six Months Ended June 30, 2021
						Net Interest Income																																				Non-Interest Income
(Dollars in millions)						Investment Securities						Loans, Including Loans Held for Sale						Other						Interest-bearing Deposits						Securitized Debt Obligations						Senior and Subordinated Notes						Other
Total amounts presented in our consolidated statements of income						$	761					$	11,607					$	32					$	(506)					$	(60)					$	(251)					$	349
Fair value hedging relationships:
Interest rate and foreign exchange contracts:
Interest recognized on derivatives						$	(50)					$	0					$	0					$	70					$	63					$	118					$	0
Gains (losses) recognized on derivatives						111						0						0						(89)						(97)						(336)						(45)
Gains (losses) recognized on hedged items(1)						(123)						0						0						89						86						401						45
Excluded component of fair value hedges(2)						0						0						0						0						0						(1)						0
Net income (expense) recognized on fair value hedges						$	(62)					$	0					$	0					$	70					$	52					$	182					$	0
Cash flow hedging relationships:(3)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income						$	20					$	460					$	0					$	0					$	0					$	0					$	0
Foreign exchange contracts:
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						$	20					$	460					$	1					$	0					$	0					$	0					$	1

			106			Capital One Financial Corporation (COF)

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

			107			Capital One Financial Corporation (COF)

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						Six Months Ended June 30, 2020
						Net Interest Income																																				Non-Interest Income
(Dollars in millions)						Investment Securities						Loans, Including Loans Held for Sale						Other						Interest-bearing Deposits						Securitized Debt Obligations						Senior and Subordinated Notes						Other
Total amounts presented in our consolidated statements of income						$	1,012					$	12,362					$	53					$	(1,342)					$	(155)					$	(419)					$	311
Fair value hedging relationships:
Interest rate and foreign exchange contracts:
Interest recognized on derivatives						$	(28)					$	0					$	0					$	25					$	52					$	110					$	0
Gains (losses) recognized on derivatives						(364)						0						0						296						269						1,129						3
Gains (losses) recognized on hedged items(1)						360						0						0						(296)						(292)						(1,159)						(3)
Excluded component of fair value hedges(2)						0						0						0						0						0						(1)						0
Net income (expense) recognized on fair value hedges						$	(32)					$	0					$	0					$	25					$	29					$	79					$	0
Cash flow hedging relationships:(3)
Interest rate contracts:
Realized gains reclassified from AOCI into net income						$	9					$	159					$	0					$	0					$	0					$	0					$	0
Foreign exchange contracts:
Realized gains (losses) reclassified from AOCI into net income(4)						0						0						9						0						0						0						(2)
Net income (expense) recognized on cash flow hedges						$	9					$	159					$	9					$	0					$	0					$	0					$	(2)

_________

(1)Includes amortization benefit of $22 million and $44 million for the three and six months ended June 30, 2021, respectively, and amortization expense of $17 million and $53 million, respectively, for the three and six months ended June 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 million and $162 million for the three and six months ended June 30, 2021, respectively, and a loss of $299 million and a gain of $93 million for the three and six months ended June 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 million recorded in AOCI as of June 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 years as of June 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 months ended June 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

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NOTE 9—STOCKHOLDERS’ EQUITY

Preferred Stock

The following table summarizes our preferred stock outstanding as of June 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)
Series						Description						Issuance Date																																				June 30, 2021						December 31, 2020
Series E						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 G						5.200% Non-Cumulative						July 29, 2016						December 1, 2021						5.200						Quarterly						1,000						600,000						583						583
Series H						6.000% Non-Cumulative						November 29, 2016						December 1, 2021						6.000						Quarterly						1,000						500,000						483						483
Series I						5.000% Non-Cumulative						September 11, 2019						December 1, 2024						5.000						Quarterly						1,000						1,500,000						1,462						1,462
Series J						4.800% Non-Cumulative						January 31, 2020						June 1, 2025						4.800						Quarterly						1,000						1,250,000						1,209						1,209
Series K						4.625% Non-Cumulative						September 17, 2020						December 1, 2025						4.625						Quarterly						1,000						125,000						122						122
Series L						4.375% Non-Cumulative						May 4, 2021						September 1, 2026						4.375						Quarterly						1,000						675,000						653						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
Total																																																$	6,488					$	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.

Accumulated Other Comprehensive Income

AOCI primarily consists of accumulated net unrealized gains or losses associated with securities available for sale, changes in fair value of derivatives in hedging relationships, and foreign currency translation adjustments.

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

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Table 9.2: AOCI

						Three Months Ended June 30, 2021
(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
Other comprehensive income (loss) before reclassifications						51						193						9						0						253
Amounts reclassified from AOCI into earnings						0						(244)						0						0						(244)
Other comprehensive income (loss), net of tax						51						(51)						9						0						9
AOCI as of June 30, 2021						$	1,089					$	730					$	(3)					$	(24)					$	1,792

						Six Months Ended June 30, 2021
(Dollars in millions)						Securities Available for Sale						Hedging Relationships(1)						Foreign Currency Translation Adjustments(2)						Other						Total
AOCI as of December 31, 2020						$	2,186					$	1,362					$	(31)					$	(23)					$	3,494
Other comprehensive income (loss) before reclassifications						(1,094)						(145)						28						0						(1,211)
Amounts reclassified from AOCI into earnings						(3)						(487)						0						(1)						(491)
Other comprehensive income (loss), net of tax						(1,097)						(632)						28						(1)						(1,702)
AOCI as of June 30, 2021						$	1,089					$	730					$	(3)					$	(24)					$	1,792

						Three Months Ended June 30, 2020
(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
Other comprehensive income (loss) before reclassifications						222						(60)						23						0						185
Amounts reclassified from AOCI into earnings						0						117						0						0						117
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

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

__________

(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 of $13 million and $34 million for the three and six months ended June 30, 2021, respectively, and other comprehensive loss of $8 million and gain of $134 million for the three and six months ended June 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 months ended June 30, 2021 and 2020.

Table 9.3: Reclassifications from AOCI

(Dollars in millions)												Three Months Ended June 30,												Six Months Ended June 30,
AOCI Components						Affected Income Statement Line Item						2021						2020						2021						2020
Securities available for sale:
						Non-interest income						$	0					$	0					$	4					$	0
						Income tax provision						0						0						1						0
						Net income						0						0						3						0
Hedging relationships:
Interest rate contracts:						Interest income						245						142						480						168
Foreign exchange contracts:						Interest income						0						2						1						9
						Interest expense						(1)						(1)						(2)						(2)
						Non-interest income						77						(299)						162						93
						Income (loss) from continuing operations before income taxes						321						(156)						641						268
						Income tax provision (benefit)						77						(39)						154						64
						Net income (loss)						244						(117)						487						204
Other:
						Non-interest income and non-interest expense						0						0						1						0
						Income tax provision						0						0						0						0
						Net income						0						0						1						0
Total reclassifications												$	244					$	(117)					$	491					$	204

			112			Capital One Financial Corporation (COF)

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

Table 9.4: Other Comprehensive Income (Loss)

						Three Months Ended June 30,
						2021																		2020
(Dollars in millions)						Before Tax						Provision (Benefit)						After Tax						Before Tax						Provision (Benefit)						After Tax
Other comprehensive income (loss):
Net unrealized gains on securities available for sale						$	66					$	15					$	51					$	292					$	70					$	222
Net unrealized gains (losses) on hedging relationships						(68)						(17)						(51)						76						19						57
Foreign currency translation adjustments(1)						4						(5)						9						20						(3)						23
Other						0						0						0						0						0						0
Other comprehensive income (loss)						$	2					$	(7)					$	9					$	388					$	86					$	302

						Six Months Ended June 30,
						2021																		2020
(Dollars in millions)						Before Tax						Provision (Benefit)						After Tax						Before Tax						Provision (Benefit)						After Tax
Other comprehensive income (loss):
Net unrealized gains (losses) on securities available for sale						$	(1,446)					$	(349)					$	(1,097)					$	1,902					$	456					$	1,446
Net unrealized gains (losses) on hedging relationships						(834)						(202)						(632)						1,884						453						1,431
Foreign currency translation adjustments(1)						17						(11)						28						(1)						43						(44)
Other						(1)						0						(1)						0						0						0
Other comprehensive income (loss)						$	(2,264)					$	(562)					$	(1,702)					$	3,785					$	952					$	2,833

__________

(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,
(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)
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)
Total weighted-average basic common shares outstanding						450.6						456.7						454.6						457.1
Effect of dilutive securities:(1)
Stock options						0.8						0.0						0.8						0.0
Other contingently issuable shares						0.9						0.0						0.8						0.0
Total effect of dilutive securities						1.7						0.0						1.6						0.0
Total weighted-average diluted common shares outstanding						452.3						456.7						456.2						457.1
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:(1)
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)

__________

(1)For the three months ended June 30, 2021, no shares were excluded from the computation of diluted earnings per share. For the six months ended June 30, 2021, awards of 51 thousand shares were excluded from the computation of diluted earnings per share because their inclusion would be 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 months ended June 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 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.

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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 30, 2021 and December 31, 2020.

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

						June 30, 2021
						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						$	9,231					$	0					$	0					—						$	9,231
RMBS						0						78,033						289						—						78,322
CMBS						0						11,078						9						—						11,087
Other securities						171						2,955						0						—						3,126
Total securities available for sale						9,402						92,066						298						—						101,766
Loans held for sale						0						371						0						—						371
Other assets:
Derivative assets(2)						602						2,985						129						$	(964)					2,752
Other(3)						496						2						46						0						544
Total assets						$	10,500					$	95,424					$	473					$	(964)					$	105,433
Liabilities:
Other liabilities:
Derivative liabilities(2)						$	1,144					$	1,156					$	110					$	(850)					$	1,560
Total liabilities						$	1,144					$	1,156					$	110					$	(850)					$	1,560

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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 million and $31 million recognized as a net valuation allowance on derivative assets and liabilities for non-performance risk as of June 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 30, 2021 and December 31, 2020, other includes retained interests in securitizations of $46 million and $55 million, deferred compensation plan assets of $472 million and $414 million, and equity securities of $26 million and $568 million including unrealized gains of $24 million and $535 million, respectively.

Level 3 Recurring Fair Value Rollforward

The table below presents a reconciliation for all assets and liabilities measured and recognized at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 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)
						Three Months Ended June 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)
(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
Securities available for sale:(2)
RMBS						$	326					$	4					$	2					$	0					$	0					$	0					$	(25)					$	45					$	(63)					$	289					$	4
CMBS						10						0						0						0						0						0						0						0						(1)						9						0
Total securities available for sale						336						4						2						0						0						0						(25)						45						(64)						298						4
Other assets:
Retained interests in securitizations						50						(4)						0						0						0						0						0						0						0						46						(4)
Net derivative assets (liabilities)(4)						34						11						0						0						0						(16)						(15)						6						(1)						19						11

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						Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
						Six Months Ended June 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)
(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
Securities available for sale:(2)
RMBS						$	328					$	11					$	4					$	0					$	0					$	0					$	(51)					$	84					$	(87)					$	289					$	8
CMBS						111						0						(2)						0						0						0						(6)						0						(94)						9						0
Total securities available for sale						439						11						2						0						0						0						(57)						84						(181)						298						8
Other assets:
Retained interests in securitizations						55						(9)						0						0						0						0						0						0						0						46						(9)
Net derivative assets (liabilities)(4)						31						(10)						0						0						0						22						(29)						6						(1)						19						8

						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)
						Six 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, 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
Securities available for sale:(2)(3)
RMBS						$	433					$	9					$	(24)					$	0					$	0					$	0					$	(33)					$	140					$	(51)					$	474					$	10
CMBS						13						0						(1)						0						0						0						(3)						273						0						282						(3)
Total securities available for sale						446						9						(25)						0						0						0						(36)						413						(51)						756						7
Other assets:
Retained interests in securitizations						66						(10)						0						0						0						0						0						0						0						56						(10)
Net derivative assets (liabilities)(4)						26						12						0						0						0						26						(28)						0						(2)						34						18

__________

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(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 months ended June 30, 2021, included in OCI related to Level 3 securities available for sale still held as of June 30, 2021 were net unrealized losses of $1 million and net unrealized gains of $2 million, respectively. For the three and six months ended June 30, 2020, included in OCI related to Level 3 securities available for sale still held as of June 30, 2020 were net unrealized gains of $36 million and net unrealized losses of $23 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 million and $110 million, respectively, as of June 30, 2021 and $151 million and $117 million, respectively, as of June 30, 2020.

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)

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%

3% 11% 2% 68%

CMBS

9

Discounted cash flows (vendor pricing)

Yield

0-2%

1%

Other assets:

Retained interests in securitizations(2)

46

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

Net derivative assets (liabilities)

19

Discounted cash flows

Swap rates

1-2%

1%

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%

3% 10% 2% 73%

CMBS

111

Discounted cash flows (vendor pricing)

Yield

1-3%

2%

Other assets:

Retained interests in securitizations(2)

55

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)

31

Discounted cash flows

Swap rates

1%

1%

__________

(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			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 30, 2021 and December 31, 2020, and for which a nonrecurring fair value measurement was recorded during the six and twelve months then ended.

Table 11.4: Nonrecurring Fair Value Measurements

						June 30, 2021
						Estimated Fair Value Hierarchy												Total
(Dollars in millions)						Level 2						Level 3
Loans held for investment						$	0					$	204					$	204
Other assets(1)						0						177						177
Total						$	0					$	381					$	381

						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 30, 2021, other assets included equity method investments subject to impairment of $56 million, investments accounted for under measurement alternative of $13 million, repossessed assets of $31 million and long-lived assets held for sale of $77 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%, and from 0% to 89%, with a weighted average of 14%, as of June 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 30, 2021 and December 31, 2020.

Table 11.5: Nonrecurring Fair Value Measurements Included in Earnings

						Total Gains (Losses)
						Six Months Ended June 30,
(Dollars in millions)						2021						2020
Loans held for investment						$	(97)					$	(253)
Other assets(1)						(61)						(22)
Total						$	(158)					$	(275)

__________

(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			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 30, 2021 and December 31, 2020.

Table 11.6: Fair Value of Financial Instruments

						June 30, 2021
						Carrying Value						Estimated Fair Value						Estimated Fair Value Hierarchy
(Dollars in millions)																		Level 1						Level 2						Level 3
Financial assets:
Cash and cash equivalents						$	34,846					$	34,846					$	5,312					$	29,534					$	0
Restricted cash for securitization investors						242						242						242						0						0
Net loans held for investment						237,251						242,812						0						0						242,812
Loans held for sale						6,151						6,385						0						6,385						0
Interest receivable						1,372						1,372						0						1,372						0
Other investments(1)						1,344						1,344						0						1,344						0
Financial liabilities:
Deposits with defined maturities						22,225						22,469						0						22,469						0
Securitized debt obligations						10,561						10,717						0						10,717						0
Senior and subordinated notes						24,878						25,724						0						25,724						0
Federal funds purchased and securities loaned or sold under agreements to repurchase						845						845						0						845						0
Interest payable						301						301						0						301						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 three major business segments, which are defined primarily based on the products and services provided or the types of customers served: Credit Card, Consumer Banking and Commercial Banking. The operations of acquired businesses have been integrated into or managed as a part of our existing business segments. Certain activities that are not part of a segment, such as management of our corporate investment portfolio, 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 months ended June 30, 2021 and 2020, selected balance sheet data as of June 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
(Dollars in millions)						Credit Card						Consumer Banking						Commercial Banking(1)						Other(1)						Consolidated Total
Net interest income (loss)						$	3,217					$	2,101					$	460					$	(35)					$	5,743
Non-interest income (loss)						1,253						144						257						(23)						1,631
Total net revenue (loss)(2)						4,470						2,245						717						(58)						7,374
Provision (benefit) for credit losses						(635)						(306)						(219)						0						(1,160)
Non-interest expense						2,263						1,123						417						163						3,966
Income (loss) from continuing operations before income taxes						2,842						1,428						519						(221)						4,568
Income tax provision (benefit)						672						337						123						(101)						1,031
Income (loss) from continuing operations, net of tax						$	2,170					$	1,091					$	396					$	(120)					$	3,537
Loans held for investment						$	101,017					$	74,759					$	73,821					$	0					$	249,597
Deposits						0						251,155						42,973						12,180						306,308

						Six Months Ended June 30, 2021
(Dollars in millions)						Credit Card						Consumer Banking						Commercial Banking(1)						Other(1)						Consolidated Total
Net interest income (loss)						$	6,589					$	4,131					$	980					$	(135)					$	11,565
Non-interest income (loss)						2,282						285						497						(142)						2,922
Total net revenue (loss)(2)						8,871						4,416						1,477						(277)						14,487
Provision (benefit) for credit losses						(1,127)						(432)						(422)						(2)						(1,983)
Non-interest expense						4,398						2,240						836						232						7,706
Income (loss) from continuing operations before income taxes						5,600						2,608						1,063						(507)						8,764
Income tax provision (benefit)						1,325						615						251						(291)						1,900
Income (loss) from continuing operations, net of tax						$	4,275					$	1,993					$	812					$	(216)					$	6,864
Loans held for investment						$	101,017					$	74,759					$	73,821					$	0					$	249,597
Deposits						0						251,155						42,973						12,180						306,308

						Three Months Ended June 30, 2020
(Dollars in millions)						Credit Card						Consumer Banking						Commercial Banking(1)						Other(1)						Consolidated Total
Net interest income (loss)						$	3,369					$	1,665					$	518					$	(92)					$	5,460
Non-interest income (loss)						845						97						180						(26)						1,096
Total net revenue (loss)(2)						4,214						1,762						698						(118)						6,556
Provision (benefit) for credit losses						2,944						876						427						(1)						4,246
Non-interest expense						1,969						1,036						425						340						3,770
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)
Loans held for investment						$	107,310					$	66,712					$	77,490					$	0					$	251,512
Deposits						0						246,804						35,669						21,765						304,238

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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

__________

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

(2)Total net revenue was reduced by $175 million and $355 million in the three and six months ended June 30, 2021, respectively, and $318 million and $707 million in the three and six months ended June 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 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 months ended June 30, 2021 and 2020.

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

						Three Months Ended June 30, 2021
(Dollars in millions)						Credit Card						Consumer Banking						Commercial Banking(1)						Other(1)						Consolidated Total
Contract revenue:
Interchange fees, net(2)						$	925					$	67					$	24					$	0					$	1,016
Service charges and other customer-related fees						0						45						66						0						111
Other						94						19						1						0						114
Total contract revenue						1,019						131						91						0						1,241
Revenue (reduction) from other sources						234						13						166						(23)						390
Total non-interest income (loss)						$	1,253					$	144					$	257					$	(23)					$	1,631

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						Six Months Ended June 30, 2021
(Dollars in millions)						Credit Card						Consumer Banking						Commercial Banking(1)						Other(1)						Consolidated Total
Contract revenue:
Interchange fees, net(2)						$	1,668					$	124					$	41					$	0					$	1,833
Service charges and other customer-related fees						0						89						116						0						205
Other						164						38						2						0						204
Total contract revenue						1,832						251						159						0						2,242
Revenue (reduction) from other sources						450						34						338						(142)						680
Total non-interest income (loss)						$	2,282					$	285					$	497					$	(142)					$	2,922

						Three Months Ended June 30, 2020
(Dollars in millions)						Credit Card						Consumer Banking						Commercial Banking(1)						Other(1)						Consolidated Total
Contract revenue:
Interchange fees, net(2)						$	612					$	48					$	13					$	(1)					$	672
Service charges and other customer-related fees						0						31						43						(1)						73
Other						57						3						0						0						60
Total contract revenue						669						82						56						(2)						805
Revenue (reduction) from other sources						176						15						124						(24)						291
Total non-interest income						$	845					$	97					$	180					$	(26)					$	1,096

						Six Months Ended June 30, 2020
(Dollars in millions)						Credit Card						Consumer Banking						Commercial Banking(1)						Other(1)						Consolidated Total
Contract revenue:
Interchange fees, net(2)						$	1,300					$	98					$	28					$	(2)					$	1,424
Service charges and other customer-related fees						0						95						74						(1)						168
Other						127						22						1						0						150
Total contract revenue						1,427						215						103						(3)						1,742
Revenue (reduction) from other sources						329						8						315						(74)						578
Total non-interest income						$	1,756					$	223					$	418					$	(77)					$	2,320

________

(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)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 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
(Dollars in millions)						June 30, 2021						December 31, 2020						June 30, 2021						December 31, 2020
Credit card lines						$	354,098					$	349,594					N/A						N/A
Other loan commitments(1)						38,922						35,836						$	120					$	144
Standby letters of credit and commercial letters of credit(2)						1,290						1,302						27						32
Total unfunded lending commitments						$	394,310					$	386,732					$	147					$	176

__________

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

(2)These financial guarantees have expiration dates that range from 2021 to 2023 as of June 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 million and $97 million as of June 30, 2021 and December 31, 2020, respectively.

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 30, 2021 are approximately $250 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 74 putative consumer class action cases (61 in U.S. federal courts 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 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 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 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 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 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 of our common stock for each calendar month in the second 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

__________

(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 shares withheld in May 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 (incorporated by reference to Exhibit 3.3 of the Current Report on Form 8-K, filed on May 4, 2020).
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 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, 2021

By:

/s/ ANDREW M. YOUNG

Andrew M. Young

Chief Financial Officer

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