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CAPITAL ONE FINANCIAL CORP - Quarter Report: 2022 September (Form 10-Q)


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 September 30, 2022
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 ClassTrading 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 ICOF 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 JCOF 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 KCOF 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 LCOF 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 NCOF PRN
New York Stock Exchange
0.800% Senior Notes Due 2024COF24
New York Stock Exchange
1.650% Senior Notes Due 2029COF29
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 October 28, 2022, there were 381,698,572 shares of the registrant’s Common Stock outstanding.


TABLE OF CONTENTS
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Capital One Financial Corporation (COF)

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Capital One Financial Corporation (COF)

INDEX OF MD&A AND SUPPLEMENTAL TABLE
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9.1
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24
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Net Charge-Offs (Recoveries)
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34
35
A
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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 the Cybersecurity Incident described in “Note 13—Commitments, Contingencies, Guarantees and Others” as well as the potential impacts of the Coronavirus Disease of 2019 (“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 2021 Annual Report on Form 10-K (“2021 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 September 30, 2022 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 2021 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” or “Capital One”) offer a broad array of financial products and services to consumers, small businesses and commercial clients through digital channels, branch locations, Cafés and other distribution channels.
As of September 30, 2022, our principal subsidiaries included:
•Capital One Bank (USA), National Association (“COBNA”), which offers credit card products along with other lending products and consumer services; and
•Capital One, National Association (“CONA”), which offers a broad spectrum of banking products and financial services to consumers, small businesses and commercial clients.
On October 1, 2022, the Company completed the merger of COBNA with and into CONA, with CONA as the surviving entity.
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.
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•Credit Card: Consists of our domestic consumer and small business card lending, and international card businesses in the United Kingdom (“U.K.”) and Canada.
•Consumer Banking: Consists of our deposit gathering and lending activities for consumers and small businesses, and national auto lending.
•Commercial Banking: Consists of our lending, deposit gathering, capital markets and treasury management services to commercial real estate and commercial and industrial customers. Our 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 or exit 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.
During the COVID-19 pandemic, a significant majority of our associates across our workforce transitioned to working remotely. In the third quarter of 2022, we moved to a hybrid work methodology 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 the extent to which the COVID-19 pandemic impacted our financial results, refer to “Part I—Item 2. MD&A.” 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. For more information see “Part I—Item 1A. Risk Factors” in our 2021 Form 10-K.
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SELECTED FINANCIAL DATA
The following table presents selected consolidated financial data and performance from our results of operations for the third quarter and first nine months of 2022 and 2021 and selected comparative balance sheet data as of September 30, 2022 and December 31, 2021. 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 September 30,Nine Months Ended September 30,
(Dollars in millions, except per share data and as noted)20222021Change20222021Change
Income statement
Net interest income$7,003$6,15614%$19,917$17,72112%
Non-interest income1,8021,67485,2934,59615
Total net revenue8,8057,8301225,21022,31713
Provision (benefit) for credit losses1,669(342)**3,431(2,325)**
Non-interest expense:
Marketing978751302,8991,87255
Operating expense3,9713,4351611,18410,02012
Total non-interest expense4,9494,1861814,08311,89218
Income from continuing operations before income taxes2,1873,986(45)7,69612,750(40)
Income tax provision493882(44)1,5682,782(44)
Income from continuing operations, net of tax1,6943,104(45)6,1289,968(39)
Income (loss) from discontinued operations, net of tax————(3)**
Net income1,6943,104(45)6,1289,965(39)
Dividends and undistributed earnings allocated to participating securities(21)(26)(19)(74)(84)(12)
Preferred stock dividends(57)(79)(28)(171)(200)(15)
Issuance cost for redeemed preferred stock—(12)**—(12)**
Net income available to common stockholders$1,616$2,987(46)$5,883$9,669(39)
Common share statistics 
Basic earnings per common share:
Net income from continuing operations$4.21$6.81(38)%$14.90$21.53(31)%
Income (loss) from discontinued operations————(0.01)**
Net income per basic common share$4.21$6.81(38)$14.90$21.52(31)
Diluted earnings per common share:
Net income from continuing operations$4.20$6.78(38)%$14.84$21.45(31)%
Income (loss) from discontinued operations————(0.01)**
Net income per basic common share$4.20$6.78(38)$14.84$21.44(31)
Weighted-average common shares outstanding (in millions):
Basic 383.4438.8(13)%394.9449.2(12)%
Diluted384.6440.5(13)396.4450.9(12)
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Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions, except per share data and as noted)20222021Change20222021Change
Common shares outstanding (period-end, in millions)382.0430.4(11)382.0430.4(11)
Dividends declared and paid per common share$0.60$1.20(50)$1.80$2.00(10)
Tangible book value per common share (period-end)(1)
81.3899.60(18)81.3899.60(18)
Balance sheet (average balances)
Loans held for investment$300,186$253,10119%$287,304$247,86716%
Interest-earning assets412,171387,7666 401,793388,8203 
Total assets447,088424,5065 437,523423,4573 
Interest-bearing deposits275,900269,2782 271,957272,022— 
Total deposits311,928305,0352 309,168306,1021 
Borrowings58,62837,46456 51,43138,13435 
Common equity49,69658,230(15)51,18456,972(10)
Total stockholders’ equity54,54164,682(16)56,03062,575(10)
Selected performance metrics 
Purchase volume$149,497$136,6149%$431,650$377,62314%
Total net revenue margin(2)
8.55 %8.08%47 bps8.37 %7.65%72 bps
Net interest margin6.80 6.3545 6.61 6.0853 
Return on average assets(3)
1.52 2.92(140)1.87 3.14(127)
Return on average tangible assets(4)
1.57 3.03(146)1.93 3.25(132)
Return on average common equity(5)
13.01 20.52(8)%15.33 22.64(7)%
Return on average tangible common equity(6)
18.59 27.50(9)21.62 30.57(9)
Equity-to-assets ratio(7)
12.20 15.24(304)bps12.81 14.78(197)bps
Non-interest expense as a percentage of average loans held for investment6.59 6.62(3)6.54 6.4014 
Efficiency ratio(8)
56.21 53.46275 55.86 53.29257 
Operating efficiency ratio(9)
45.10 43.87123 44.36 44.90(54)
Effective income tax rate from continuing operations22.5 22.140 20.4 21.8(140)
Net charge-offs$931 $426119%$2,543 $1,70749%
Net charge-off rate1.24 %0.67%57 bps1.18 %0.92%26 bps
(Dollars in millions, except as noted)September 30, 2022December 31, 2021Change
Balance sheet (period-end)  
Loans held for investment$303,943 $277,34010%
Interest-earning assets415,262 397,3415 
Total assets444,232 432,3813 
Interest-bearing deposits282,802 272,9374 
Total deposits317,193 310,9802 
Borrowings54,607 43,08627 
Common equity46,015 56,184(18)
Total stockholders’ equity50,861 61,029(17)
Credit quality metrics
Allowance for credit losses$12,209 $11,4307%
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(Dollars in millions, except as noted)September 30, 2022December 31, 2021Change
Allowance as a percentage of loans held for investment (“allowance coverage ratio”)4.02 %4.12%(10)bps
30+ day performing delinquency rate2.58 2.2533 
30+ day delinquency rate2.78 2.4137 
Capital ratios 
Common equity Tier 1 capital(10)
12.2 %13.1%(90)bps
Tier 1 capital(10)
13.6 14.5(90)
Total capital(10)
15.7 16.9(120)
Tier 1 leverage(10)
11.0 11.6(60)
Tangible common equity(11)
7.2 9.9(270)
Supplementary leverage(10)
9.4 9.9(50)
Other
Employees (period end, in thousands)55.1 50.88%
__________
(1)Tangible book value per common share is a non-GAAP measure calculated based on tangible common equity (“TCE”) 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.
(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 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 TCE. 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.
**    Not meaningful.
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EXECUTIVE SUMMARY
Financial Highlights
We reported net income of $1.7 billion ($4.20 per diluted common share) on total net revenue of $8.8 billion and net income of $6.1 billion ($14.84 per diluted common share) on total net revenue of $25.2 billion for the third quarter and first nine months of 2022. In comparison, we reported net income of $3.1 billion ($6.78 per diluted common share) on total net revenue of $7.8 billion and net income of $10.0 billion ($21.44 per diluted common share) on total net revenue of $22.3 billion for the third quarter and first nine months of 2021.
Relative to 2021, we expect our annual operating efficiency ratio, net of any adjustments, to be approximately flat in 2022 and modestly down in 2023.
Our common equity Tier 1 capital ratio as calculated under the Basel III Standardized Approach was 12.2% and 13.1% as of September 30, 2022 and December 31, 2021, respectively. See “MD&A—Capital Management” for additional information.
In January 2022, our Board of Directors authorized the repurchase of up to $5.0 billion of shares of our common stock. In April 2022, our Board of Directors authorized the repurchase of up to an additional $5.0 billion of shares of our common stock. We repurchased approximately $313 million of shares of our common stock during the third quarter of 2022 and $4.7 billion during the first nine months of 2022. See “MD&A—Capital Management—Dividend Policy and Stock Purchases” for additional information.
Below are additional highlights of our performance in the third quarter and first nine months of 2022. These highlights are based on a comparison between the results of the third quarter and first nine months of 2022 and 2021, 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 September 30, 2022 compared to December 31, 2021. We provide a more detailed discussion of our financial performance in the sections following this “Executive Summary.”
Total Company Performance
•Earnings:
Our net income decreased by $1.4 billion to $1.7 billion in the third quarter of 2022 compared to the third quarter of 2021 and decreased by $3.8 billion to $6.1 billion in the first nine months of 2022 compared to the first nine months of 2021 primarily driven by:
◦Higher provision for credit losses primarily driven by a net allowance build across all of our segments due to loan growth, compared to a net allowance release across all of our segments in the third quarter of 2021 and the first nine months of 2021.
◦Higher non-interest expense primarily driven by increased marketing spend, as well as continued investment in technology.
These drivers were partially offset by:
◦Higher net interest income primarily driven by higher average loan balances in our credit card loan portfolio.
◦Higher non-interest income primarily driven by higher net interchange fees due to an increase in purchase volume.
•Loans Held for Investment:
◦Period-end loans held for investment increased by $26.6 billion to $303.9 billion as of September 30, 2022 from December 31, 2021 primarily driven by growth across all of our segments.
◦Average loans held for investment increased by $47.1 billion to $300.2 billion in the third quarter of 2022 compared to the third quarter of 2021 and increased by $39.4 billion to $287.3 billion in the first nine months of 2022 compared to the first nine months of 2021 primarily driven by growth across all of our segments.

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•Net Charge-Off and Delinquency Metrics:
◦Our net charge-off rate increased by 57 basis points (“bps”) to 1.24% in the third quarter of 2022 compared to the third quarter of 2021 and increased by 26 basis points to 1.18% in the first nine months of 2022 compared to the first nine months of 2021 primarily driven by continued gradual credit normalization.
◦Our 30+ day delinquency rate increased by 37 basis points to 2.78% as of September 30, 2022 from December 31, 2021 primarily driven by continued gradual credit normalization.
•Allowance for Credit Losses: Our allowance for credit losses increased by $779 million to $12.2 billion as of September 30, 2022 compared to December 31, 2021 primarily driven by loan growth. Our allowance coverage ratio remained substantially flat at 4.02% as of September 30, 2022 compared to December 31, 2021.
CONSOLIDATED RESULTS OF OPERATIONS
The section below provides a comparative discussion of our consolidated financial performance for the third quarter and first nine months of 2022 and 2021. 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,” 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 third quarter and first nine months of 2022 and 2021 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 September 30,
 20222021
(Dollars in millions)Average
Balance		Interest Income/
Expense
Average Yield/
Rate(1)
Average
Balance		Interest Income/
Expense		Average Yield/
Rate
Assets:
Interest-earning assets:
Loans:(2)
Credit card$123,357 $5,161 16.74 %$106,566 $3,965 14.88 %
Consumer banking81,411 1,464 7.19 75,997 1,479 7.78 
Commercial banking(3)
96,184 1,057 4.40 77,672 538 2.77 
Other(4)
— (104)**— 223 **
Total loans, including loans held for sale300,952 7,578 10.07 260,235 6,205 9.54 
Investment securities88,666 499 2.25 98,802 317 1.28 
Cash equivalents and other interest-earning assets22,553 123 2.19 28,729 16 0.22 
Total interest-earning assets412,171 8,200 7.96 387,766 6,538 6.74 
Cash and due from banks4,778 5,467 
Allowance for credit losses(11,502)(12,341)
Premises and equipment, net4,266 4,238 
Other assets37,375 39,376 
Total assets$447,088 $424,506 
Liabilities and stockholders’ equity:
Interest-bearing liabilities:
Interest-bearing deposits$275,900 $689 1.00 %$269,278 $228 0.34 %
Securitized debt obligations17,108 120 2.81 12,420 29 0.93 
Senior and subordinated notes30,962 319 4.13 24,241 116 1.91 
Other borrowings and liabilities12,296 69 2.20 2,357 9 1.49 
Total interest-bearing liabilities336,266 1,197 1.42 308,296 382 0.49 
Non-interest-bearing deposits36,028 35,757 
Other liabilities20,253 15,771 
Total liabilities392,547 359,824 
Stockholders’ equity54,541 64,682 
Total liabilities and stockholders’ equity$447,088 $424,506 
Net interest income/spread$7,003 6.53 $6,156 6.25 
Impact of non-interest-bearing funding0.27 0.10 
Net interest margin6.80 %6.35 %
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 Nine Months Ended September 30,
 20222021
(Dollars in millions)Average
Balance		Interest Income/
Expense
Average Yield/
Rate(1)
Average
Balance		Interest Income/
Expense		Average Yield/
Rate
Assets:
Interest-earning assets:
Loans:(2)
Credit card$117,821 $13,848 15.67 %$103,591 $11,246 14.47 %
Consumer banking80,447 4,308 7.14 72,670 4,343 7.97 
Commercial banking(3)
90,848 2,344 3.44 75,852 1,564 2.75 
Other(4)
— 50 **— 659 **
Total loans, including loans held for sale289,116 20,550 9.48 252,113 17,812 9.42 
Investment securities91,788 1,336 1.94 99,059 1,078 1.45 
Cash equivalents and other interest-earning assets20,889 193 1.23 37,648 48 0.17 
Total interest-earning assets401,793 22,079 7.33 388,820 18,938 6.49 
Cash and due from banks5,014 5,300 
Allowance for credit losses(11,411)(13,954)
Premises and equipment, net4,254 4,265 
Other assets37,873 39,026 
Total assets$437,523 $423,457 
Liabilities and stockholders’ equity:
Interest-bearing liabilities:
Interest-bearing deposits$271,957 $1,200 0.59 %$272,022 $734 0.36 %
Securitized debt obligations15,309 214 1.87 11,851 89 1.00 
Senior and subordinated notes28,804 644 2.98 25,555 367 1.92 
Other borrowings and liabilities8,982 104 1.53 2,256 27 1.59 
Total interest-bearing liabilities325,052 2,162 0.89 311,684 1,217 0.52 
Non-interest-bearing deposits37,211 34,080 
Other liabilities19,230 15,118 
Total liabilities381,493 360,882 
Stockholders’ equity56,030 62,575 
Total liabilities and stockholders’ equity$437,523 $423,457 
Net interest income/spread$19,917 6.44 $17,721 5.97 
Impact of non-interest-bearing funding0.17 0.11 
Net interest margin6.61 %6.08 %
__________
(1)Average yield is calculated based on annualized interest income for the period divided by average loans during the period. Annualized interest income does not include any allocations, such as funds transfer pricing. Average yield is calculated using whole dollar values for average balances and interest income/expense. Accordingly, total interest earning assets less total interest bearing liabilities may not total net interest income/spread.
(2)Past due fees included in interest income totaled approximately $534 million and $1.4 billion in the third quarter and first nine months of 2022, respectively, and $401 million and $1.0 billion in the the third quarter and first nine months of 2021, respectively.
(3)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 $20 million and $56 million in the third quarter and first nine months of 2022, respectively, and $18 million and $56 million in the the third quarter and first nine months of 2021, respectively, with corresponding reductions to the Other category.
(4)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.
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Net interest income increased by $847 million to $7.0 billion in the third quarter of 2022 compared to the third quarter of 2021 and increased by $2.2 billion to $19.9 billion in the first nine months of 2022 compared to the first nine months of 2021 primarily driven by higher average loan balances in our credit card loan portfolio.
Net interest margin increased by 45 basis points to 6.80% in the third quarter of 2022 compared to the third quarter of 2021 and increased by 53 basis points to 6.61% in the first nine months of 2022 compared to the first nine months of 2021 primarily driven by higher yields on average interest-earning assets as well as lower securities and cash balances partially offset by higher 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 September 30,Nine Months Ended September 30,
 2022 vs. 20212022 vs. 2021
(Dollars in millions)Total VarianceVolumeRateTotal VarianceVolumeRate
Interest income:
Loans:
Credit card$1,196 $666 $530 $2,602 $1,621 $981 
Consumer banking(15)97 (112)(35)416 (451)
Commercial banking(2)
519 147 372 780 340 440 
Other(3)
(327)— (327)(609)— (609)
Total loans, including loans held for sale1,373 910 463 2,738 2,377 361 
Investment securities182 (33)215 258 (79)337 
Cash equivalents and other interest-earning assets107 (3)110 145 (21)166 
Total interest income1,662 874 788 3,141 2,277 864 
Interest expense:
Interest-bearing deposits461 6 455 466 — 466 
Securitized debt obligations91 14 77 125 31 94 
Senior and subordinated notes203 38 165 277 51 226 
Other borrowings and liabilities60 49 11 77 78 (1)
Total interest expense815 107 708 945 160 785 
Net interest income$847 $767 $80 $2,196 $2,117 $79 
__________
(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 third quarter and first nine months of 2022 and 2021.
Table 4: Non-Interest Income
 Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions)2022202120222021
Interchange fees, net$1,195 $1,022 $3,429 $2,855 
Service charges and other customer-related fees415 407 1,230 1,143 
Other non-interest income:(1)
Mortgage banking revenue51 84 145 184 
Treasury and other investment income7 50 (37)128 
Other134 111 526 286 
Total other non-interest income192 245 634 598 
Total non-interest income$1,802 $1,674 $5,293 $4,596 
________
(1)Includes losses of $19 million and $106 million on deferred compensation plan investments for the third quarter and first nine months of 2022, respectively, and a loss of $1 million and a gain of $44 million on deferred compensation plan investments for the third quarter and first nine months of 2021, respectively. These amounts have corresponding offsets in non-interest expense.
Non-interest income increased by $128 million to $1.8 billion in the third quarter of 2022 compared to the third quarter of 2021 and increased by $697 million to $5.3 billion in the first nine months of 2022 compared to the first nine months of 2021 primarily driven by higher net interchange fees due to an increase in purchase volume in our Credit Card business.
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 increased by $2.0 billion to $1.7 billion in the third quarter of 2022 and increased by $5.8 billion to $3.4 billion in the first nine months of 2022 primarily driven by a net allowance build across all of our segments due to loan growth, compared to a net allowance release across all of our segments in the third quarter of 2021 and the first nine months of 2021.
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 2021 Form 10-K.
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Non-Interest Expense
Table 5 displays the components of non-interest expense for the third quarter and first nine months of 2022 and 2021.
Table 5: Non-Interest Expense
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions)2022202120222021
Salaries and associate benefits(1)
$2,187 $1,852 $6,159 $5,480 
Occupancy and equipment502 481 1,496 1,476 
Marketing978 751 2,899 1,872 
Professional services471 358 1,326 991 
Communications and data processing349 319 1,027 936 
Amortization of intangibles17 5 45 16 
Other non-interest expense:
Bankcard, regulatory and other fee assessments90 50 211 140 
Collections83 93 246 272 
Other272 277 674 709 
Total other non-interest expense445 420 1,131 1,121 
Total non-interest expense$4,949 $4,186 $14,083 $11,892 
_________
(1)Includes a benefit of $19 million and $106 million related to our deferred compensation plan investments for the third quarter and first nine months of 2022, respectively, and a benefit of $1 million and expense of $44 million related to our deferred compensation plan investments for the third quarter and first nine months of 2021, respectively. These amounts have corresponding offsets from investments in other non-interest income.

Non-interest expense increased by $763 million to $4.9 billion in the third quarter of 2022 compared to the third quarter of 2021 and increased by $2.2 billion to $14.1 billion in the first nine months of 2022 compared to the first nine months of 2021 primarily driven by increased marketing spend and increased salaries and associate benefits due to continued investment in technology.
We expect the increase in operating expense, net of any adjustments, from the third quarter of 2022 to the fourth quarter of 2022 will be less than the average increase over the last five years.
Income Taxes
We recorded an income tax provision of $493 million (22.5% effective income tax rate) and $1.6 billion (20.4% effective income tax rate) in the third quarter and first nine months of 2022, respectively, compared to an income tax provision of $882 million (22.1% effective income tax rate) and $2.8 billion (21.8% effective income tax rate) in the third quarter and first nine months of 2021, 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.
Our effective income tax rate increased in the third quarter of 2022 and decreased in the first nine months of 2022 compared to the same periods in 2021 primarily driven by the relationship of our tax credits, tax-exempt income and non-deductible expenses in proportion to our pre-tax earnings.
We provide additional information on items affecting our income taxes and effective tax rate in “Note 15—Income Taxes” in our 2021 Form 10-K.
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CONSOLIDATED BALANCE SHEETS ANALYSIS
Total assets increased by $11.9 billion to $444.2 billion as of September 30, 2022 from December 31, 2021 primarily driven by growth in our loan portfolios, partially offset by a decline in the fair value of our investment securities portfolio.
Total liabilities increased by $22.0 billion to $393.4 billion as of September 30, 2022 from December 31, 2021 primarily driven by deposit growth and net issuances of Federal Home Loan Banks (“FHLB”) advances and senior unsecured debt.
Stockholders’ equity decreased by $10.2 billion to $50.9 billion as of September 30, 2022 from December 31, 2021 primarily driven by a decrease in accumulated other comprehensive income due to a decline in the fair value of our investment securities portfolio and our common stock repurchases, partially offset by net income of $6.1 billion.
The following is a discussion of material changes in the major components of our assets and liabilities during the first nine months of 2022. 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 98% and 96% of our total investment securities portfolio as of September 30, 2022 and December 31, 2021, respectively.
The fair value of our available for sale securities portfolio decreased by $20.0 billion to $75.3 billion as of September 30, 2022 from December 31, 2021, primarily driven by increases in interest rates and credit spreads as well as actions taken to further decrease the portfolio size through sales and the decision not to reinvest a portion of the principal proceeds back into the investment portfolio. See “Note 2—Investment Securities” for more information.
Loans Held for Investment
Total loans held for investment consists of both unsecuritized loans and loans held in our consolidated trusts. Table 6 summarizes, by portfolio segment, the carrying value of our loans held for investment, the allowance for credit losses and net loan balance as of September 30, 2022 and December 31, 2021.
Table 6: Loans Held for Investment
 September 30, 2022December 31, 2021
(Dollars in millions)LoansAllowanceNet LoansLoansAllowanceNet Loans
Credit Card$126,913 $8,716 $118,197 $114,772 $8,345 $106,427 
Consumer Banking81,199 2,108 79,091 77,646 1,918 75,728 
Commercial Banking95,831 1,385 94,446 84,922 1,167 83,755 
Total$303,943 $12,209 $291,734 $277,340 $11,430 $265,910 
Loans held for investment increased by $26.6 billion to $303.9 billion as of September 30, 2022 from December 31, 2021 primarily driven by growth across all of our segments.
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
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purchased, securities loaned or sold under agreements to repurchase, and FHLB advances secured by certain portions of our loan and securities portfolios.
Table 7 provides the composition of our primary sources of funding as of September 30, 2022 and December 31, 2021.
Table 7: Funding Sources Composition
September 30, 2022December 31, 2021
(Dollars in millions)Amount% of TotalAmount% of Total
Deposits:
Consumer Banking$256,661 69 %$256,407 72 %
Commercial Banking41,058 11 44,809 13 
Other(1)
19,474 5 9,764 3 
Total deposits317,193 85 310,980 88 
Securitized debt obligations15,926 4 14,994 4 
Other debt38,681 11 28,092 8 
Total funding sources$371,800 100 %$354,066 100 %
__________
(1)Includes brokered deposits of $18.4 billion and $8.6 billion as of September 30, 2022 and December 31, 2021, respectively.
Total deposits increased by $6.2 billion to $317.2 billion as of September 30, 2022 from December 31, 2021 primarily driven by issuances of brokered deposits.
Securitized debt obligations increased by $932 million to $15.9 billion as of September 30, 2022 from December 31, 2021 primarily driven by net issuances in our auto securitization program.
Other debt increased by $10.6 billion to $38.7 billion as of September 30, 2022 from December 31, 2021 primarily driven by a net increase in FHLB advances.
We provide additional information on our funding sources in “MD&A—Liquidity Risk Profile” and “Note 7—Deposits and Borrowings.”
OFF-BALANCE SHEET ARRANGEMENTS
In the ordinary course of business, we engage in certain activities that are not reflected on our consolidated balance sheets, generally referred to as off-balance sheet arrangements. These activities typically involve transactions with unconsolidated variable interest entities (“VIEs”) as well as other arrangements, such as letters of credit, loan commitments and guarantees, to meet the financing needs of our customers and support their ongoing operations. We provide additional information regarding these types of activities in “Note 5—Variable Interest Entities and Securitizations” and “Note 13—Commitments, Contingencies, Guarantees and Others.”
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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 2021 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 generally accepted accounting principles in the U.S. (“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 third quarter and first nine months of 2022 and 2021 and provide a comparative discussion of these results, as well as changes in our financial condition and credit performance metrics as of September 30, 2022 compared to December 31, 2021. 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.”
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Business Segment Financial Performance
Table 8 summarizes our business segment results, which we report based on revenue (loss) and income (loss) from continuing operations, for the third quarter and first nine months of 2022 and 2021.
Table 8: Business Segment Results
 Three Months Ended September 30,
 20222021
 
Total Net
Revenue (Loss)(1)
Net Income
(Loss)(2)
Total Net
Revenue (Loss)(1)
Net Income
(Loss)(2)
(Dollars in millions)Amount% of
Total		Amount% of
Total		Amount% of
Total		Amount% of
Total
Credit Card$5,767 65%$1,146 67%$4,883 63%$2,030 65%
Consumer Banking2,440 28622 372,286 29909 29
Commercial Banking(3)
1,018 12270 16884 11365 12
Other(3)
(420)(5)(344)(20)(223)(3)(200)(6)
Total
$8,805 100%$1,694 100%$7,830 100%$3,104 100%
Nine Months Ended September 30,
 
20222021
 
Total Net
Revenue (Loss)(1)
Net Income
(Loss)(2)
Total Net
Revenue (Loss)(1)
Net Income
(Loss)(2)
(Dollars in millions)Amount% of
Total		Amount% of
Total		Amount% of
Total		Amount% of
Total
Credit Card$16,373 65%$4,137 67%$13,754 61%$6,305 63%
Consumer Banking6,901 271,788 296,702 302,902 29
Commercial Banking(3)
2,809 11718 122,361 111,177 12
Other(3)
(873)(3)(515)(8)(500)(2)(416)(4)
Total$25,210 100%$6,128 100%$22,317 100%$9,968 100%
__________
(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.
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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 $1.1 billion and $4.1 billion in the third quarter and first nine months of 2022, respectively, and $2.0 billion and $6.3 billion in the third quarter and first nine months of 2021, respectively.
Table 9 summarizes the financial results of our Credit Card business and displays selected key metrics for the periods indicated.
Table 9: Credit Card Business Results
 Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions, except as noted)20222021Change20222021Change
Selected income statement data:
Net interest income$4,313$3,620 19%$12,051$10,20918%
Non-interest income1,4541,263 154,3223,54522
Total net revenue(1)
5,7674,883 1816,37313,75419
Provision (benefit) for credit losses1,261(198)**2,387(1,325)**
Non-interest expense3,0042,424 248,5586,82225
Income from continuing operations before income taxes1,5022,657 (43)5,4288,257(34)
Income tax provision356627 (43)1,2911,952(34)
Income from continuing operations, net of tax$1,146$2,030 (44)$4,137$6,305(34)
Selected performance metrics:
Average loans held for investment$123,357$102,04621$116,934$100,75716
Average yield on loans(2)
16.74 %14.88 %186bps15.67 %14.47 %120bps
Total net revenue margin(3)
18.70 18.33 3718.5317.7083
Net charge-offs$695 $366 90%$1,980$1,57026%
Net charge-off rate2.25 %1.43 %82bps2.26 %2.08 %18bps
Purchase volume$149,497$136,6149%$431,650$377,62314%
(Dollars in millions, except as noted)September 30, 2022December 31, 2021Change
Selected period-end data:
Loans held for investment$126,913$114,77211%
30+ day performing delinquency rate3.01 %2.28 %73bps
30+ day delinquency rate3.02 2.29 73
Nonperforming loan rate(4)
0.01 0.01 —
Allowance for credit losses$8,716 $8,3454%
Allowance coverage ratio6.87 %7.27 %(40)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 $222 million and $625 million in the third quarter and first nine months of 2022, respectively, compared to $123 million and $478 million in the third quarter and first nine months of 2021, respectively, for 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.
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(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.
Key factors affecting the results of our Credit Card business for the third quarter and first nine months of 2022 compared to the third quarter and first nine months of 2021, and changes in financial condition and credit performance between September 30, 2022 and December 31, 2021 include the following:
•Net Interest Income: Net interest income increased by $693 million to $4.3 billion in the third quarter of 2022 and increased by $1.8 billion to $12.1 billion in the first nine months of 2022 primarily driven by higher average loan balances.
•Non-Interest Income: Non-interest income increased by $191 million to $1.5 billion in the third quarter of 2022 and increased by $777 million to $4.3 billion in the first nine months of 2022 primarily driven by higher net interchange fees due to an increase in purchase volume.
•Provision for Credit Losses: Provision for credit losses increased by $1.5 billion to $1.3 billion in the third quarter of 2022 and increased by $3.7 billion to $2.4 billion in the first nine months of 2022 primarily driven by a net allowance build due to loan growth, compared to a net allowance release in the third quarter of 2021 and the first nine months of 2021.
•Non-Interest Expense: Non-interest expense increased by $580 million to $3.0 billion in the third quarter of 2022 and increased by $1.7 billion to $8.6 billion in the first nine months of 2022 primarily driven by increased marketing spend, as well as continued investment in technology.
Loans Held for Investment:
•Period-end loans held for investment increased by $12.1 billion to $126.9 billion as of September 30, 2022 from December 31, 2021 primarily driven by continued strength in purchase volume, which outpaced customer payments.

•Average loans held for investment increased by $21.3 billion to $123.4 billion in the third quarter of 2022 compared to the third quarter of 2021 and increased by $16.2 billion to $116.9 billion in the first nine months of 2022 compared to the first nine months of 2021 primarily driven by continued strength in purchase volume, which outpaced customer payments.
Net Charge-Off and Delinquency Metrics:
•The net charge-off rate increased by 82 basis points to 2.25% in the third quarter of 2022 compared to the third quarter of 2021 and increased by 18 basis points to 2.26% in the first nine months of 2022 compared to the first nine months of 2021 primarily driven by continued gradual credit normalization.

•The 30+ day delinquency rate increased by 73 basis points to 3.02% as of September 30, 2022 from December 31, 2021 primarily driven by continued gradual credit normalization, partially offset by higher ending loan balances.
Domestic Card Business
The Domestic Card business generated net income from continuing operations of $1.1 billion and $3.9 billion in the third quarter and first nine months of 2022, respectively, and $1.9 billion and $6.0 billion in the third quarter and first nine months of 2021, respectively. In the third quarter and first nine months of 2022 and 2021, the Domestic Card business accounted for greater than 90% of total net revenue of our Credit Card business.
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Table 9.1 summarizes the financial results for Domestic Card business and displays selected key metrics for the periods indicated.
Table 9.1: Domestic Card Business Results
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions, except as noted)20222021Change20222021Change
Selected income statement data:
Net interest income$4,065$3,31922%$11,336$9,35821%
Non-interest income1,3831,200153,9713,34219
Total net revenue(1)
5,4484,5192115,30712,70021
Provision (benefit) for credit losses1,167(200)**2,220(1,252)**
Non-interest expense2,8032,191287,9616,14829
Income from continuing operations before income taxes1,4782,528(42)5,1267,804(34)
Income tax provision351597(41)1,2151,842(34)
Income from continuing operations, net of tax$1,127$1,931(42)$3,911$5,962(34)
Selected performance metrics:
Average loans held for investment$117,467$96,30922%$111,032$93,49319%
Average yield on loans(2)
16.61 %14.80%181bps15.51 %14.36%115bps
Total net revenue margin(3)
18.5518.40 1518.3317.7459
Net charge-offs$647$327 98%$1,828$1,43627%
Net charge-off rate2.20%1.36%84bps2.19%2.05%14bps
Purchase volume$145,805$126,05716%$416,757$348,47220%
(Dollars in millions, except as noted)September 30, 2022December 31, 2021Change
Selected period-end data:
Loans held for investment$121,279$108,72312%
30+ day performing delinquency rate2.97 %2.22 %75bps
Allowance for credit losses$8,370$7,9685%
Allowance coverage ratio6.90 %7.33 %(43)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.

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 decreased in the third quarter of 2022 and in the first nine months of 2022 compared to the third quarter of 2021 and in the first nine months of 2021 primarily driven by:
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•Higher provision for credit losses primarily driven by a net allowance build due to loan growth, compared to a net allowance release in the third quarter of 2021 and the first nine months of 2021.
•Higher non-interest expense primarily driven by increased marketing spend, as well as continued investment in technology.
These drivers were partially offset by:
•Higher net interest income primarily driven by higher average loan balances.
•Higher non-interest income primarily driven by higher net interchange fees due to an increase in purchase volume.
Consumer Banking Business
The primary sources of revenue for our Consumer Banking business are net interest income from loans and deposits. 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 $622 million and $1.8 billion in the third quarter and first nine months of 2022, respectively, and $909 million and $2.9 billion in the third quarter and first nine months of 2021, respectively.
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Table 10 summarizes the financial results of our Consumer Banking business and displays selected key metrics for the periods indicated.
Table 10: Consumer Banking Business Results
 Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions, except as noted)20222021Change20222021Change
Selected income statement data:
Net interest income$2,311$2,1597%$6,571$6,2904%
Non-interest income1291272330412(20)
Total net revenue2,4402,28676,9016,7023
Provision (benefit) for credit losses285(91)**696(523)**
Non-interest expense1,3401,186133,8623,42613
Income from continuing operations before income taxes8151,191(32)2,3433,799(38)
Income tax provision193282(32)555897(38)
Income from continuing operations, net of tax$622$909(32)$1,788$2,902(38)
Selected performance metrics:
Average loans held for investment:
Auto$79,741$73,2969$78,659$69,70013
Retail banking1,5982,700(41)1,6872,969(43)
Total consumer banking$81,339$75,9967$80,346$72,66911
Average yield on loans held for investment(1)
7.20 %7.78%(58)bps7.15 %7.97%(82)bps
Average deposits$255,843$251,3072%$255,150$251,1052%
Average deposits interest rate0.79 %0.30 %49bps0.49 %0.32 %17bps
Net charge-offs$224$51 **$506$131 **
Net charge-off rate1.10 %0.27 %83bps0.84 %0.24 %60bps
Auto loan originations$8,289$11,570(28)%$30,330$33,362(9)%
(Dollars in millions, except as noted)September 30, 2022December 31, 2021Change
Selected period-end data:
Loans held for investment:
Auto$79,580$75,7795%
Retail banking1,6191,867(13)
Total consumer banking$81,199$77,6465
30+ day performing delinquency rate4.77 %4.26 %51bps
30+ day delinquency rate5.284.6662
Nonperforming loan rate0.640.5014
Nonperforming asset rate(2)
0.710.5615
Allowance for credit losses$2,108$1,91810%
Allowance coverage ratio2.60 %2.47 %13bps
Deposits$256,661$256,407—
__________
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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 third quarter and first nine months of 2022 compared to the third quarter and first nine months of 2021, and changes in financial condition and credit performance between September 30, 2022 and December 31, 2021 include the following:
•Net Interest Income: Net interest income increased by $152 million to $2.3 billion in the third quarter of 2022 and increased by $281 million to $6.6 billion in the first nine months of 2022 primarily driven by higher margins in our Retail Banking business due to the increases in interest rates, partially offset by lower margins in Auto.
•Non-Interest Income: Non-interest income remained substantially flat at $129 million in the third quarter of 2022. Non-interest income decreased by $82 million to $330 million in the first nine months of 2022 primarily driven by changes to our customer overdraft and non-sufficient funds policies in our Retail Banking business.
•Provision for Credit Losses: Provision for credit losses increased by $376 million to $285 million in the third quarter of 2022 and increased by $1.2 billion to $696 million in the first nine months of 2022 primarily driven by a net allowance build due to loan growth, compared to a net allowance release in the third quarter of 2021 and the first nine months of 2021.
•Non-Interest Expense: Non-interest expense increased by $154 million to $1.3 billion in the third quarter of 2022 and increased by $436 million to $3.9 billion in the first nine months of 2022 primarily driven by continued investment in technology.
Loans Held for Investment: 
•Period-end loans held for investment increased by $3.6 billion to $81.2 billion as of September 30, 2022 from December 31, 2021 primarily driven by growth in our auto loan portfolio.
•Average loans held for investment increased by $5.3 billion to $81.3 billion in the third quarter of 2022 compared to the the third quarter of 2021 and increased by $7.7 billion to $80.3 billion in the first nine months of 2022 compared to the first nine months of 2021 primarily driven by growth in our auto loan portfolio.
Deposits: 
•Period-end deposits remained substantially flat at $256.7 billion as of September 30, 2022 compared to $256.4 billion as of December 31, 2021.
Net Charge-Off and Delinquency Metrics: 
•The net charge-off rate increased by 83 basis points to 1.10% in the third quarter of 2022 compared to the the third quarter of 2021 and increased by 60 basis points to 0.84% in the first nine months of 2022 compared to the first nine months of 2021 primarily driven by continued gradual credit normalization in our auto loan portfolio.
•The 30+ day delinquency rate increased by 62 basis points to 5.28% as of September 30, 2022 from December 31, 2021 primarily driven by continued gradual credit normalization in our auto loan portfolio.
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Commercial Banking Business
The primary sources of revenue for our Commercial Banking business are net interest income from loans and deposits and non-interest income earned from products and services provided to our clients such as advisory services, 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 $270 million and $718 million in the third quarter and first nine months of 2022, respectively, and $365 million and $1.2 billion in the third quarter and first nine months of 2021, respectively.
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Table 11 summarizes the financial results of our Commercial Banking business and displays selected key metrics for the periods indicated.
Table 11: Commercial Banking Business Results
 Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions, except as noted)20222021Change20222021Change
Selected income statement data:
Net interest income$699$578 21%$1,941$1,55825%
Non-interest income319306 4 8688038
Total net revenue(1)
1,018884 15 2,8092,36119
Provision (benefit) for credit losses(2)
123(53)**353(475)**
Non-interest expense542459 18 1,5151,29517
Income from continuing operations before income taxes353478 (26)9411,541(39)
Income tax provision83113 (27)223364(39)
Income from continuing operations, net of tax$270$365 (26)$718$1,177(39)
Selected performance metrics:
Average loans held for investment:
Commercial and multifamily real estate$38,230$30,31426 $36,231$30,10020
Commercial and industrial57,26044,74528 53,79344,34121
Total commercial banking$95,490$75,05927 $90,024$74,44121
Average yield on loans held for investment(1)(3)
4.40 %2.77 %163bps3.44 %2.75 %69bps
Average deposits$39,799$42,729(7)%$41,762$41,725—
Average deposits interest rate0.83 %0.15 %68bps0.37 %0.15 %22bps
Net charge-offs$12 $9 33%$57 $6 **
Net charge-off rate0.05 %0.05 %—0.08 %0.01 %7bps
(Dollars in millions, except as noted)September 30, 2022December 31, 2021Change
Selected period-end data:
Loans held for investment:
Commercial and multifamily real estate$38,225$35,2628%
Commercial and industrial57,60649,66016 
Total commercial banking$95,831$84,92213 
Nonperforming loan rate0.57 %0.82 %(25)bps
Nonperforming asset rate(4)
0.57 0.82 (25)
Allowance for credit losses(2)
$1,385$1,16719%
Allowance coverage ratio1.45%1.37%8 bps
Deposits$41,058$44,809(8)%
Loans serviced for others50,21148,5623 
__________
(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 $243 million and $165 million as of September 30, 2022 and December 31, 2021, 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.
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(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.
Key factors affecting the results of our Commercial Banking business for the third quarter and first nine months of 2022 compared to the third quarter and first nine months of 2021, and changes in financial condition and credit performance between September 30, 2022 and December 31, 2021 include the following:
•Net Interest Income: Net interest income increased by $121 million to $699 million in the third quarter of 2022 and increased by $383 million to $1.9 billion in the first nine months of 2022 primarily driven by higher average loan balances.
•Non-Interest Income: Non-interest income remained substantially flat at $319 million in the third quarter of 2022. Non-interest income increased by $65 million to $868 million in the first nine months of 2022 primarily driven by higher activity in our capital markets business.
•Provision for Credit Losses: Provision for credit losses increased by $176 million to $123 million in the third quarter of 2022 and increased by $828 million to $353 million in the first nine months of 2022 primarily driven by a net allowance build due to loan growth, compared to a net allowance release in the third quarter of 2021 and the first nine months of 2021.
•Non-Interest Expense: Non-interest expense increased by $83 million to $542 million in the third quarter of 2022 and increased by $220 million to $1.5 billion in the first nine months of 2022 primarily driven by continued investment in technology.
Loans Held for Investment:
•Period-end loans held for investment increased by $10.9 billion to $95.8 billion as of September 30, 2022 from December 31, 2021 primarily driven by growth across our loan portfolio.
•Average loans held for investment increased by $20.4 billion to $95.5 billion in the third quarter of 2022 compared to the third quarter of 2021 and increased by $15.6 billion to $90.0 billion in the first nine months of 2022 compared to the first nine months of 2021 primarily driven by growth across our loan portfolio.
Deposits:
•Period-end deposits decreased by $3.8 billion to $41.1 billion as of September 30, 2022 from December 31, 2021 primarily driven by the transfer of deposits to our retail banking portfolio in the second quarter of 2022.
Net Charge-Off and Nonperforming Metrics:
•The net charge-off rate remained flat at 0.05% in the third quarter of 2022. The net charge-off rate increased by 7 basis points to 0.08% in the first nine months of 2022 primarily driven by isolated charge offs in our commercial and industrial loan portfolio.
•The nonperforming loan rate decreased by 25 basis points to 0.57% as of September 30, 2022 compared to December 31, 2021 primarily driven by improvements in our commercial real estate portfolio and higher ending loan balances.
Other Category
Other includes unallocated amounts related to our centralized Corporate Treasury group activities, such as management of our corporate investment securities portfolio, asset/liability management and certain capital management activities. Other also includes:
•unallocated corporate revenue and expenses that do not directly support the operations of the business segments or for which the business segments are not considered financially accountable in evaluating their performance, such as certain restructuring charges;
•offsets related to certain line-item reclassifications;
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•residual tax expense or benefit to arrive at the consolidated effective tax rate that is not assessed to our primary business segments; and
•foreign exchange-rate fluctuations on foreign currency-denominated balances.
Table 12 summarizes the financial results of our Other category for the periods indicated.
Table 12: Other Category Results
 Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions)20222021Change20222021Change
Selected income statement data:
Net interest loss$(320)$(201)59%$(646)$(336)92%
Non-interest loss(100)(22)**(227)(164)38
Total net loss(1)
(420)(223)88%(873)(500)75
Provision (benefit) for credit losses— — —(5)(2)150
Non-interest expense63 117 (46)148 349(58)
Loss from continuing operations before income taxes(483)(340)42(1,016)(847)20
Income tax benefit(139)(140)(1)(501)(431)16
Loss from continuing operations, net of tax$(344)$(200)72$(515)$(416)24
__________
(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.
**    Not meaningful.
Loss from continuing operations increased by $144 million to a loss of $344 million in the third quarter of 2022 compared to the third quarter of 2021 and increased by $99 million to a loss of $515 million in the first nine months of 2022 compared to the first nine months of 2021 primarily driven by higher net interest losses due to higher funding costs driven by higher market interest rates.
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 2021 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
•Goodwill
•Fair value
•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 2021 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 September 30, 2022
StandardGuidanceAdoption Timing and Financial Statement Impacts
TDR and Vintage Disclosures
ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructuring and Vintage Disclosures
Issued March 2022

The amendments in this update eliminate the accounting guidance for Troubled Debt Restructurings, while enhancing disclosure requirements for certain loan refinancings and restructurings for borrowers experiencing financial difficulty. The amendments also require public entities to disclose current-period gross charge offs by year of origination for loans held for investment.
This ASU is effective for us on January 1, 2023.


We plan to adopt the standard on its effective date using the modified retrospective method. We do not expect such adoption to have a material impact on our consolidated financial statements.
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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. 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 regulatory capital requirements established by the Board of Governors of the Federal Reserve System (“Federal Reserve”) and the Office of the Comptroller of the Currency (“OCC”) respectively (the “Basel III Capital Rules”). The Basel III Capital Rules implement certain capital requirements published by the Basel Committee on Banking Supervision (“Basel Committee”), along with certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) and other capital provisions.
As a bank holding company (“BHC”) with total consolidated assets of at least $250 billion but less than $700 billion and not exceeding any of the applicable risk-based thresholds, the Company is a Category III institution.
The Banks, as subsidiaries of a Category III institution, are Category III banks. Moreover, the Banks, as insured depository institutions, are subject to prompt corrective action (“PCA”) capital regulations.
Basel III and United States Capital Rules
Under the Basel III Capital Rules, we must maintain a minimum common equity Tier 1 (“CET1”) capital ratio of 4.5%, a Tier 1 capital ratio of 6.0% and a total capital ratio of 8.0%, in each case in relation to risk-weighted assets. In addition, we must maintain a minimum leverage ratio of 4.0% and a minimum supplementary leverage ratio of 3.0%. We are also subject to the capital conservation buffer and countercyclical capital buffer requirements as described below. Our capital and leverage ratios are calculated based on the Basel III Standardized Approach framework.
As a Category III institution, we have elected to exclude certain elements of accumulated other comprehensive income (“AOCI”) from our regulatory capital as permitted under the Basel III Capital Rules.
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. Under the Federal Reserve’s final rule to implement the stress capital buffer requirement (the “Stress Capital Buffer Rule”), the Company’s “standardized approach capital conservation buffer” includes its stress capital buffer requirement (as described below), any G-SIB Surcharge (which is not applicable to us) and the countercyclical capital buffer requirement (which is currently set at 0%). Any determination to increase the countercyclical capital buffer generally would be effective twelve months after the announcement of such an increase, unless the Federal Reserve, OCC and Federal Deposit Insurance Corporation (the “FDIC”), hereafter collectively referred to as the “Federal Banking Agencies,” set an earlier effective date.
The Company’s stress capital buffer requirement will be recalibrated every year based on the Company’s supervisory stress test results. In particular, the Company’s stress capital buffer requirement equals, subject to a floor of 2.5%, the sum of (i) the difference between the Company’s starting CET1 capital ratio and its lowest projected CET1 capital ratio under the severely adverse scenario of the Federal Reserve’s supervisory stress test plus (ii) the ratio of the Company’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 Company’s projected CET1 capital ratio reaches its minimum under the supervisory stress test.
Based on the Company’s 2021 supervisory stress test results, the Company’s stress capital buffer requirement for the period beginning on October 1, 2021 through September 30, 2022 was 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
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stress capital buffer framework were 7.0%, 8.5% and 10.5%, respectively, for the period from October 1, 2021 through September 30, 2022.
Based on the Company’s 2022 supervisory stress test results, the Company’s stress capital buffer requirement for the period beginning on October 1, 2022 through September 30, 2023 is 3.1%. 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 7.6%, 9.1% and 11.1%, respectively, for the period from October 1, 2022 through September 30, 2023.
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 are 7.0%, 8.5% and 10.5% respectively.
If the Company or any of the Banks fails to maintain its capital ratios above the minimum capital requirements plus the applicable capital conservation buffer requirements, it will face increasingly strict automatic limitations on capital distributions and discretionary bonus payments to certain executive officers.
As of September 30, 2022 and December 31, 2021, respectively, each of the Company and the Banks exceeded the minimum capital requirements and the capital conservation buffer requirements applicable to them, and each of the Company and the Banks were “well-capitalized.” The “well-capitalized” standards applicable to the Company are established in the Federal Reserve’s regulations, and the “well-capitalized” standards applicable to the Banks are established in the OCC’s PCA capital 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 book. The Market Risk Rule generally applies to institutions with aggregate trading assets and liabilities equal to 10% or more of total assets or $1 billion or more. As of September 30, 2022, 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 “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 “CECL Transition Election”). We adopted the CECL standard (for accounting purposes) as of January 1, 2020, and made the CECL Transition Election (for regulatory capital purposes) in the first quarter of 2020. Therefore, the applicable amounts presented in this Report reflect such election.
Pursuant to the CECL Transition Rule, a banking institution could elect to delay the estimated impact of adopting CECL on its regulatory capital through December 31, 2021 and then phase in the estimated cumulative impact from January 1, 2022 through December 31, 2024. For the “day 2” ongoing impact of CECL during the initial two years, the Federal Banking Agencies used a uniform “scaling factor” of 25% as an approximation of the increase in the allowance under the CECL standard compared to the prior incurred loss methodology. Accordingly, from January 1, 2020 through December 31, 2021, electing banking institutions were permitted to add back to their regulatory capital an amount equal to the sum of the after-tax “day 1” CECL adoption impact and 25% of the increase in the allowance since the adoption of the CECL standard. From January 1, 2022 through December 31, 2024, the after-tax “day 1” CECL adoption impact and the cumulative “day 2” ongoing impact are being phased in to regulatory capital at 25% per year. The following table summarizes the capital impact delay and phase in period on our regulatory capital from years 2020 to 2025.
Capital Impact Delayed
Phase In Period
202020212022202320242025
“Day 1” CECL adoption impactCapital impact delayed to 202225% Phased In50% Phased In75% Phased InFully Phased In
Cumulative “day 2” ongoing impact 25% scaling factor as an approximation of the increase in allowance under CECL
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As of December 31, 2021, we added back an aggregate amount of $2.4 billion to our regulatory capital pursuant to the CECL Transition Rule. Consistent with the rule, we phased in 25% of this amount, or $599 million, on January 1, 2022, leaving $1.8 billion to be phased in over 2023-2025. As of September 30, 2022, the Company’s CET1 capital ratio, reflecting the CECL Transition Rule, was 12.2% and would have been 11.8% excluding the impact of the CECL Transition Rule (or “on a fully phased-in basis”).
For the description of the regulatory capital rules to which we are subject, see “MD&A—Supervision and Regulation” of this Report as well as “Part I—Item 1. Business—Supervision and Regulation” in our 2021 Form 10-K.
Table 13 provides a comparison of our regulatory capital ratios under the Basel III Standardized Approach, the regulatory minimum capital adequacy ratios and the applicable well-capitalized standards as of September 30, 2022 and December 31, 2021.
Table 13: Capital Ratios Under Basel III(1)(2)
 September 30, 2022December 31, 2021
RatioMinimum
Capital
Adequacy		Well-
Capitalized		RatioMinimum
Capital
Adequacy		Well-
Capitalized
Capital One Financial Corp:
Common equity Tier 1 capital(3)
12.2 %4.5 %N/A13.1 %4.5 %N/A
Tier 1 capital(4)
13.6 6.0 6.0 %14.5 6.0 6.0 %
Total capital(5)
15.7 8.0 10.0 16.9 8.0 10.0 
Tier 1 leverage(6)
11.0 4.0 N/A11.6 4.0 N/A
Supplementary leverage(7)
9.4 3.0 N/A9.9 3.0 N/A
COBNA:
Common equity Tier 1 capital(3)
18.0 4.5 6.5 16.5 4.5 6.5 
Tier 1 capital(4)
18.0 6.0 8.0 16.5 6.0 8.0 
Total capital(5)
19.3 8.0 10.0 18.0 8.0 10.0 
Tier 1 leverage(6)
16.2 4.0 5.0 14.9 4.0 5.0 
Supplementary leverage(7)
13.3 3.0 N/A12.0 3.0 N/A
CONA:
Common equity Tier 1 capital(3)
11.1 4.5 6.5 11.1 4.5 6.5 
Tier 1 capital(4)
11.1 6.0 8.0 11.1 6.0 8.0 
Total capital(5)
12.3 8.0 10.0 12.2 8.0 10.0 
Tier 1 leverage(6)
7.3 4.0 5.0 7.4 4.0 5.0 
Supplementary leverage(7)
6.5 3.0 N/A6.6 3.0 N/A
__________
(1)Capital requirements that are not applicable are denoted by “N/A.”
(2)Ratios as of September 30, 2022 are preliminary and therefore subject to change until we file our September 30, 2022 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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Table 14 presents regulatory capital under the Basel III Standardized Approach and regulatory capital metrics as of September 30, 2022 and December 31, 2021.
Table 14: Regulatory Risk-Based Capital Components and Regulatory Capital Metrics
(Dollars in millions)September 30, 2022December 31, 2021
Regulatory Capital Under Basel III Standardized Approach
Common equity excluding AOCI$58,516 $58,206 
Adjustments:
AOCI, net of tax(1)
(120)(23)
Goodwill, net of related deferred tax liabilities(14,537)(14,562)
Other Intangible assets, net of related deferred tax liabilities(180)(108)
Other(2)
(14)(12)
Common equity Tier 1 capital43,665 43,501 
Tier 1 capital instruments4,845 4,845 
Tier 1 capital48,510 48,346 
Tier 2 capital instruments2,900 3,532 
Qualifying allowance for credit losses4,528 4,211 
Tier 2 capital7,428 7,743 
Total capital$55,938 $56,089 
Regulatory Capital Metrics
Risk-weighted assets$356,801 $332,673 
Adjusted average assets439,479 415,141 
Total leverage exposure516,107 486,405 
__________
(1)Excludes certain components of AOCI in accordance with rules applicable to Category III institutions. See “MD&A—Capital Management—Basel III and United States Capital Rules” in this Report.
(2)Includes deferred tax assets deducted from regulatory capital.
Capital Planning and Regulatory Stress Testing
In January 2022, our Board of Directors authorized the repurchase of up to $5.0 billion of shares of our common stock. In April 2022, our Board of Directors authorized the repurchase of up to an additional $5.0 billion of shares of our common stock. We repurchased approximately $313 million of shares of our common stock during the third quarter of 2022 and $4.7 billion during the first nine months of 2022.
On June 23, 2022, the Federal Reserve released the supervisory stress test results for the 2022 Comprehensive Capital Analysis and Review (“CCAR”) cycle. Based on the Company’s 2022 supervisory stress test results, the Company’s stress capital buffer requirement for the period beginning on October 1, 2022 through September 30, 2023 is 3.1%. 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 7.6%, 9.1% and 11.1%, respectively, for the period from October 1, 2022 through September 30, 2023.
For the description of the regulatory capital planning rules and stress testing requirements to which we are subject, see “MD&A—Supervision and Regulation” in this Report as well as “Part I—Item 1. Business—Supervision and Regulation” in our 2021 Form 10-K.
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Dividend Policy and Stock Purchases
In the first nine months of 2022, we declared and paid common stock dividends of $723 million, or $1.80 per share, and preferred stock dividends of $171 million. The following table summarizes the dividends paid per share on our various preferred stock series in the first nine months of 2022.
Table 15: Preferred Stock Dividends Paid Per Share
SeriesDescriptionIssuance DatePer Annum
Dividend Rate		Dividend Frequency2022
Q3Q2Q1
Series I5.000%
Non-Cumulative		September 11, 20195.000%Quarterly$12.50$12.5012.50
Series J4.800%
Non-Cumulative		January 31, 20204.800Quarterly12.0012.0012.00
Series K4.625%
Non-Cumulative		September 17, 20204.625Quarterly11.5611.5611.56
Series L4.375%
Non-Cumulative		May 4, 20214.375Quarterly10.9410.9410.94
Series M3.950% Fixed Rate Reset
Non-Cumulative		June 10, 20213.950% through 8/31/2026; resets 9/1/2026 and every subsequent 5 year anniversary at 5-Year Treasury Rate +3.157%Quarterly9.889.889.88
Series N4.250%
Non-Cumulative		July 29, 20214.250Quarterly10.6310.6310.63
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 September 30, 2022, funds available for dividend payments from COBNA and CONA were $4.6 billion and $2.4 billion, respectively. On October 1, 2022, COBNA merged with and into CONA, with CONA as the surviving entity. See “MD&A—Supervision and Regulation” of this Report for additional information on the merger. There can be no assurance that we will declare and pay any dividends to stockholders.
In January 2022, our Board of Directors authorized the repurchase of up to $5.0 billion of shares of our common stock. In April 2022, our Board of Directors authorized the repurchase of up to an additional $5.0 billion of shares of our common stock. We repurchased approximately $313 million of shares of our common stock during the third quarter of 2022 and $4.7 billion during the first nine months of 2022.
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, tender offers, 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 2021 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

We provide additional discussion of our risk management principles, roles and responsibilities, framework and risk appetite under “MD&A—Risk Management” in our 2021 Form 10-K.
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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 2021 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.”
Portfolio and Geographic Composition of Loans Held for Investment
We provide a variety of lending products. Our primary loan 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 2021 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 $1.7 billion and $5.9 billion as of September 30, 2022 and December 31, 2021, respectively.
Table 16 presents the composition of our portfolio of loans held for investment by portfolio segment as of September 30, 2022 and December 31, 2021.
Table 16: Portfolio Composition of Loans Held for Investment
September 30, 2022December 31, 2021
(Dollars in millions)Loans% of TotalLoans% of Total
Credit Card:
Domestic credit card$121,279 39.9 %$108,723 39.2 %
International card businesses5,634 1.9 6,049 2.2 
Total credit card126,913 41.8 114,772 41.4 
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September 30, 2022December 31, 2021
(Dollars in millions)Loans% of TotalLoans% of Total
Consumer Banking:
Auto79,580 26.2 75,779 27.3 
Retail banking(1)
1,619 0.5 1,867 0.7 
Total consumer banking81,199 26.7 77,646 28.0 
Commercial Banking:(1)
Commercial and multifamily real estate38,225 12.5 35,262 12.7 
Commercial and industrial57,606 19.0 49,660 17.9 
Total commercial banking95,831 31.5 84,922 30.6 
Total loans held for investment$303,943 100.0 %$277,340 100.0 %
__________
(1)Includes Paycheck Protection Program (“PPP”) loans of $38 million and $32 million in our retail and commercial loan portfolios, respectively, as of September 30, 2022 and $232 million and $102 million as of December 31, 2021, respectively.
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 September 30, 2022 and December 31, 2021.
Table 17: Credit Card Portfolio by Geographic Region
September 30, 2022December 31, 2021
(Dollars in millions)Amount% of TotalAmount% of Total
Domestic credit card:
California$12,612 9.9 %$11,096 9.7 %
Texas10,298 8.1 9,100 7.9 
Florida8,727 6.9 7,738 6.7 
New York7,787 6.1 6,972 6.1 
Pennsylvania4,987 3.9 4,568 4.0 
Illinois4,887 3.9 4,478 3.9 
Ohio4,279 3.4 3,949 3.4 
New Jersey3,927 3.1 3,520 3.1 
Georgia3,824 3.0 3,397 3.0 
Michigan3,629 2.9 3,306 2.9 
Other56,322 44.4 50,599 44.0 
Total domestic credit card121,279 95.6 108,723 94.7 
International card businesses:
Canada2,873 2.2 3,015 2.6 
United Kingdom2,761 2.2 3,034 2.7 
Total international card businesses5,634 4.4 6,049 5.3 
Total credit card$126,913 100.0 %$114,772 100.0 %
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 and Café network. The table below presents the geographic profile of our auto loan and retail banking portfolios as of September 30, 2022 and December 31, 2021.
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Table 18: Consumer Banking Portfolio by Geographic Region
 September 30, 2022December 31, 2021
(Dollars in millions)Amount% of TotalAmount% of Total
Auto:
California$9,768 12.0 %$9,127 11.8 %
Texas9,728 12.0 9,292 12.0 
Florida6,823 8.4 6,443 8.3 
Pennsylvania3,345 4.1 3,139 4.0 
Georgia3,329 4.1 3,283 4.2 
Ohio3,173 3.9 3,053 3.9 
Illinois3,149 3.9 2,899 3.7 
New Jersey2,738 3.4 2,356 3.0 
Other37,527 46.2 36,187 46.7 
Total auto79,580 98.0 $75,779 97.6 %
Retail banking:
New York494 0.6 613 0.8 
Texas344 0.4 383 0.5 
Louisiana304 0.4 363 0.4 
New Jersey131 0.2 149 0.2 
Maryland102 0.1 118 0.2 
Virginia68 0.1 93 0.1 
Other176 0.2 148 0.2 
Total retail banking1,619 2.0 1,867 2.4 
Total consumer banking$81,199 100.0 %$77,646 100.0 %
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 as of September 30, 2022 and December 31, 2021.
Table 19: Commercial Real Estate Portfolio by Region
September 30, 2022December 31, 2021
(Dollars in millions)Amount% of TotalAmount% of Total
Geographic concentration:(1)
Northeast$15,688 41.1 %$16,025 45.4 %
South8,704 22.8 6,210 17.6 
Pacific West6,007 15.7 5,556 15.8 
Mid-Atlantic3,332 8.7 3,105 8.8 
Midwest2,376 6.2 2,863 8.1 
Mountain2,118 5.5 1,503 4.3 
Total$38,225 100.0 %$35,262 100.0 %
__________
(1)Geographic concentration is generally determined by the location of the borrower’s business or the location of the collateral associated with the loan. Northeast consists of CT, MA, ME, NH, NJ, NY, PA, RI and VT. South consists of AL, AR, FL, GA, KY, LA, MS, NC, OK, SC, TN and TX. Pacific West consists of: AK, CA, HI, OR and WA. Mid-Atlantic consists of DC, DE, MD, VA and WV. Midwest consists of: IA, IL, IN, KS, MI, MN, MO, ND, NE, OH, SD and WI. Mountain consists of: AZ, CO, ID, MT, NM, NV, UT and WY.
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Commercial Loans by Industry
Table 20 summarizes our commercial loans held for investment portfolio by industry classification as of September 30, 2022 and December 31, 2021. Industry classifications below are based on our interpretation of the North American Industry Classification System codes as they pertain to each individual loan.
Table 20: Commercial Loans by Industry
(Percentage of portfolio)September 30, 2022December 31, 2021
Industry Classification:
Real estate30 %35 %
Finance29 25 
Healthcare8 9 
Business services6 6 
Educational services4 4 
Public administration4 4 
Construction and land3 3 
Retail trade3 3 
Oil and gas2 2 
Other11 9 
Total100 %100 %
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 21 provides details on the credit scores of our domestic credit card and auto loan portfolios as of September 30, 2022 and December 31, 2021.
Table 21: Credit Score Distribution
(Percentage of portfolio)September 30, 2022December 31, 2021
Domestic credit card—Refreshed FICO scores:(1)
Greater than 66070 %71 %
660 or below30 29 
Total100 %100 %
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(Percentage of portfolio)September 30, 2022December 31, 2021
Auto—At origination FICO scores:(2)
Greater than 66052 %50 %
621 - 66020 20 
620 or below28 30 
Total100 %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” in our 2021 Form 10-K for information on our accounting policies for delinquent and nonperforming loans, charge-offs and troubled debt restructurings (“TDR”) 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 2021 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.”
Table 22 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 September 30, 2022 and December 31, 2021.
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Table 22: 30+ Day Delinquencies
 September 30, 2022December 31, 2021
 30+ Day Performing Delinquencies30+ Day Delinquencies30+ Day Performing Delinquencies30+ Day Delinquencies
(Dollars in millions)Amount
Rate(1)
Amount
Rate(1)
Amount
Rate(1)
Amount
Rate(1)
Credit Card:
Domestic credit card$3,603 2.97 %$3,603 2.97 %$2,411 2.22 %$2,411 2.22 %
International card businesses220 3.90 225 4.00 207 3.42 213 3.51 
Total credit card3,823 3.01 3,828 3.02 2,618 2.28 2,624 2.29 
Consumer Banking:
Auto3,862 4.85 4,251 5.34 3,271 4.32 3,558 4.69 
Retail banking14 0.84 39 2.38 36 1.92 60 3.20 
Total consumer banking3,876 4.77 4,290 5.28 3,307 4.26 3,618 4.66 
Commercial Banking:
Commercial and multifamily real estate138 0.36 169 0.44 108 0.31 162 0.46 
Commercial and industrial15 0.03 150 0.26 211 0.43 281 0.57 
Total commercial banking153 0.16 319 0.33 319 0.38 443 0.52 
Total$7,852 2.58 $8,437 2.78 $6,244 2.25 $6,685 2.41 
__________
(1)Delinquency rates are calculated by dividing delinquency amounts by period-end loans held for investment for each specified loan category.
Table 23 presents our 30+ day delinquent loans, by aging and geography, as of September 30, 2022 and December 31, 2021.
Table 23: Aging and Geography of 30+ Day Delinquent Loans
 September 30, 2022December 31, 2021
(Dollars in millions)Amount
Rate(1)
Amount
Rate(1)
Delinquency status:
30 – 59 days$4,230 1.39 %$3,501 1.26 %
60 – 89 days2,091 0.69 1,656 0.60 
> 90 days
2,116 0.70 1,528 0.55 
Total$8,437 2.78 %$6,685 2.41 %
Geographic region:
Domestic$8,212 2.71 %$6,472 2.33 %
International225 0.07 213 0.08 
Total$8,437 2.78 %$6,685 2.41 %
__________
(1)Delinquency rates are calculated by dividing delinquency amounts by total period-end loans held for investment.
Table 24 summarizes loans that were 90+ days delinquent as to interest or principal and still accruing interest as of September 30, 2022 and December 31, 2021. 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 (“FFIEC”), 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.
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Table 24: 90+ Day Delinquent Loans Accruing Interest
 September 30, 2022December 31, 2021
(Dollars in millions)Amount
Rate(1)
Amount
Rate(1)
Loan category:
Credit card$1,697 1.34 %$1,192 1.04 %
Commercial banking3 — 3 — 
Total$1,700 0.56 $1,195 0.43 
Geographic region:
Domestic$1,610 0.54 $1,113 0.41 
International90 1.58 82 1.36 
Total$1,700 0.56 $1,195 0.43 
__________
(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 loans include loans that have been placed on nonaccrual status. Nonperforming assets consist of nonperforming loans, repossessed assets and other foreclosed assets. See “Note 1—Summary of Significant Accounting Policies” in our 2021 Form 10-K for information on our policies for classifying loans as nonperforming for each of our loan categories.
Table 25 presents our nonperforming loans, by portfolio segment, and other nonperforming assets as of September 30, 2022 and December 31, 2021. 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 25: Nonperforming Loans and Other Nonperforming Assets(1)
 September 30, 2022December 31, 2021
(Dollars in millions)AmountRateAmountRate
Nonperforming loans held for investment:(2)
Credit Card:
International card businesses$8 0.14 %$10 0.16 %
Total credit card8 0.01 10 0.01 
Consumer Banking:
Auto474 0.60 344 0.45 
Retail banking43 2.62 47 2.51 
Total consumer banking517 0.64 391 0.50 
Commercial Banking:
Commercial and multifamily real estate243 0.64 383 1.09 
Commercial and industrial307 0.53 316 0.64 
Total commercial banking550 0.57 699 0.82 
Total nonperforming loans held for investment(3)
1,075 0.35 1,100 0.40 
Other nonperforming assets(4)
59 0.02 41 0.01 
Total nonperforming assets$1,134 0.37 $1,141 0.41 
__________
(1)We recognized interest income for loans classified as nonperforming of $29 million and $21 million in the first nine months of 2022 and 2021, respectively. Interest income foregone related to nonperforming loans was $59 million and $40 million in the first nine months of 2022 and 2021, 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 0.59% and 0.65% as of September 30, 2022 and December 31, 2021, respectively.
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(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 are 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 2021 Form 10-K for information on our charge-off policy for each of our loan categories.
Table 26 presents our net charge-off amounts and rates, by portfolio segment, in the third quarter and first nine months of 2022 and 2021.
Table 26: Net Charge-Offs (Recoveries)
 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
(Dollars in millions)Amount
Rate(1)
Amount
Rate(1)
Amount
Rate(1)
Amount
Rate(1)
Credit Card:
Domestic credit card$647 2.20 %$327 1.36 %$1,828 2.19 %$1,436 2.05 %
International card businesses48 3.30 39 2.72 152 3.44 134 2.45 
Total credit card695 2.25 366 1.43 1,980 2.26 1,570 2.08 
Consumer Banking:
Auto208 1.05 34 0.18 456 0.77 90 0.17 
Retail banking16 3.89 17 2.45 50 3.95 41 1.82 
Total consumer banking224 1.10 51 0.27 506 0.84 131 0.24 
Commercial Banking:
Commercial and multifamily real estate2 0.03 1 0.01 (5)(0.02)9 0.04 
Commercial and industrial10 0.06 8 0.07 62 0.15 (3)(0.01)
Total commercial banking12 0.05 9 0.05 57 0.08 6 0.01 
Total net charge-offs$931 1.24 $426 0.67 $2,543 1.18 $1,707 0.92 
Average loans held for investment$300,186 $253,101 $287,304 $247,867 
__________
(1)Net charge-off (recovery) rates are calculated by dividing annualized net charge-offs by average loans held for investment for the period for each loan category.
Troubled Debt Restructurings
As part of our loss mitigation efforts, we may provide short-term (one to twelve months) or long-term (greater than twelve months) modifications to a borrower experiencing financial difficulty to improve long-term collectability of the loan and to avoid the need for repossession or foreclosure of collateral.
We consider the impact of all loan modifications, whether or not that modification is classified as a TDR, when estimating the credit quality of our loan portfolio and establishing allowance levels. For our Commercial Banking customers, loan modifications are also considered in the assignment of an internal risk rating.
In our Credit Card business, the majority of our credit card loans modified as 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 on the loan 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
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loan agreement may revert to its original payment terms, generally resulting in any loan outstanding being 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 as TDRs receive an extension, an interest rate reduction, principal reduction, or a combination of these modifications. 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 as 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.
As part of our response to the COVID-19 pandemic, we offered programs to accommodate customer hardship across our lines of business beginning in the first quarter of 2020. Our COVID-19 programs were designed to be short-term accommodations so that we could provide our customers with prompt relief. Also in response to the COVID-19 pandemic, additional guidance was issued by the Federal Banking Agencies and contained in the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which provided banking organizations with TDR relief for loan modifications to certain qualifying borrowers impacted by the COVID-19 pandemic.
While the majority of enrollments in our COVID-19 programs were short-term and would generally not have resulted in TDR classification under our existing policies, some of these modification would have been designated as TDRs without the relief provided by the additional guidance issued by the Federal Banking Agencies and contained in the CARES Act. Therefore, the expiry of the guidance in the CARES Act on January 1, 2022, along with our concurrent cessation in applying the additional guidance issued by the Federal Banking Agencies, drove an increase in reported TDRs for periods ending after December 31, 2021.
Table 27 presents our amortized cost of loans modified in TDR as of September 30, 2022 and December 31, 2021, which excludes loan modifications that do not meet the definition of a TDR.
Table 27: Troubled Debt Restructurings
 September 30, 2022December 31, 2021
(Dollars in millions)Amount% of Total ModificationsAmount% of Total Modifications
Credit Card:
Domestic credit card$404 17.5 %$390 23.8 %
International card businesses149 6.4177 10.8 
Total credit card553 23.9567 34.6 
Consumer banking:
Auto975 42.1 603 36.7 
Retail banking12 0.5 13 0.8 
Total consumer banking987 42.6 616 37.5 
Commercial banking776 33.5 457 27.9 
Total$2,316 100.0 %$1,640 100.0 %
Status of TDR:
Performing$1,787 77.2 %$1,282 78.2 %
Nonperforming529 22.8 358 21.8 
Total$2,316 100.0 %$1,640 100.0 %
We provide additional information on modified loans accounted for as a TDR, including the performance of those loans subsequent to modification, in “Note 3—Loans.” A recently issued accounting standard eliminates the accounting guidance for TDRs effective for fiscal years beginning on or after December 15, 2022. See “MD&A—Accounting Changes and Developments” for additional information on these accounting standards, which we have not yet adopted.
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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 2021 Form 10-K.
Table 28 presents changes in our allowance for credit losses and reserve for unfunded lending commitments for the third quarter and first nine months of 2022 and 2021, and details by portfolio segment for the provision for credit losses, charge-offs and recoveries.
Table 28: Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity
Three Months Ended September 30, 2022
Credit CardConsumer Banking
(Dollars in millions)Domestic CardInternational Card BusinessesTotal Credit CardAutoRetail BankingTotal Consumer BankingCommercial BankingTotal
Allowance for credit losses:
Balance as of June 30, 2022$7,840 $326 $8,166 $1,999 $48 $2,047 $1,278 $11,491 
Charge-offs
(960)(87)(1,047)(389)(21)(410)(13)(1,470)
Recoveries(1)
313 39 352 181 5 186 1 539 
Net charge-offs(647)(48)(695)(208)(16)(224)(12)(931)
Provision (benefit) for credit losses1,167 94 1,261 266 19 285 119 1,665 
Allowance build (release) for credit losses520 46 566 58 3 61 107 734 
Other changes(2)
10 (26)(16)— — — — (16)
Balance as of September 30, 20228,370 346 8,716 2,057 51 2,108 1,385 12,209 
Reserve for unfunded lending commitments:
Balance as of June 30, 2022— — — — — — 239 239 
Provision for losses on unfunded lending commitments— — — — — — 4 4 
Balance as of September 30, 2022— — — — — — 243 243 
Combined allowance and reserve as of September 30, 2022$8,370 $346 $8,716 $2,057 $51 $2,108 $1,628 $12,452 
Nine Months Ended September 30, 2022
Credit CardConsumer Banking
(Dollars in millions)Domestic CardInternational Card BusinessesTotal Credit CardAutoRetail BankingTotal Consumer BankingCommercial BankingTotal
Allowance for credit losses:
Balance as of December 31, 2021$7,968 $377 $8,345 $1,852 $66 $1,918 $1,167 $11,430 
Charge-offs
(2,747)(264)(3,011)(1,026)(64)(1,090)(73)(4,174)
Recoveries(1)
919 112 1,031 570 14 584 16 1,631 
Net charge-offs(1,828)(152)(1,980)(456)(50)(506)(57)(2,543)
Provision (benefit) for credit losses2,220 167 2,387 661 35 696 275 3,358 
Allowance build (release) for credit losses392 15 407 205 (15)190 218 815 
Other changes(2)
10 (46)(36)— — — — (36)
Balance as of September 30, 20228,370 346 8,716 2,057 51 2,108 1,385 12,209 
Reserve for unfunded lending commitments:
Balance as of December 31, 2021— — — — — — 165 165 
Provision for losses on unfunded lending commitments— — — — — — 78 78 
Balance as of September 30, 2022— — — — — — 243 243 
Combined allowance and reserve as of September 30, 2022$8,370 $346 $8,716 $2,057 $51 $2,108 $1,628 $12,452 
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Three Months Ended September 30, 2021
Credit CardConsumer Banking
(Dollars in millions)Domestic CardInternational Card BusinessesTotal Credit CardAutoRetail BankingTotal Consumer BankingCommercial BankingTotal
Allowance for credit losses:
Balance as of June 30, 2021$8,489 $384 $8,873 $2,122 $81 $2,203 $1,270 $12,346 
Charge-offs
(658)(77)(735)(244)(20)(264)(20)(1,019)
Recoveries(1)
331 38 369 210 3 213 11 593 
Net charge-offs(327)(39)(366)(34)(17)(51)(9)(426)
Provision (benefit) for credit losses(200)2 (198)(100)9 (91)(55)(344)
Allowance build (release) for credit losses(527)(37)(564)(134)(8)(142)(64)(770)
Other changes(2)
6 (9)(3)— — — — (3)
Balance as of September 30, 20217,968 338 8,306 1,988 73 2,061 1,206 11,573 
Reserve for unfunded lending commitments:
Balance as of June 30, 2021— — — — — — 164 164 
Provision (benefit) for losses on unfunded lending commitments— — — — — — 2 2 
Balance as of September 30, 2021— — — — — — 166 166 
Combined allowance and reserve as of September 30, 2021$7,968 $338 $8,306 $1,988 $73 $2,061 $1,372 $11,739 
Nine Months Ended September 30, 2021
Credit CardConsumer Banking
(Dollars in millions)Domestic CardInternational Card BusinessesTotal Credit CardAutoRetail BankingTotal Consumer BankingCommercial BankingTotal
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
(2,436)(259)(2,695)(813)(53)(866)(47)(3,608)
Recoveries(1)
1,000 125 1,125 723 12 735 41 1,901 
Net charge-offs(1,436)(134)(1,570)(90)(41)(131)(6)(1,707)
Provision (benefit) for credit losses(1,252)(73)(1,325)(537)14 (523)(446)(2,294)
Allowance build (release) for credit losses(2,688)(207)(2,895)(627)(27)(654)(452)(4,001)
Other changes(2)
6 4 10 — — — — 10 
Balance as of September 30, 20217,968 338 8,306 1,988 73 2,061 1,206 11,573 
Reserve for unfunded lending commitments:
Balance as of December 31, 2020— — — — — — 195 195 
Provision (benefit) for losses on unfunded lending commitments— — — — — — (29)(29)
Balance as of September 30, 2021— — — — — — 166 166 
Combined allowance and reserve as of September 30, 2021$7,968 $338 $8,306 $1,988 $73 $2,061 $1,372 $11,739 
__________
(1)The amount and timing of recoveries are impacted by our collection strategies, which are based on customer behavior and risk profile and include direct customer communications, repossession of collateral, the periodic sale of charged off loans as well as additional strategies, such as litigation.
(2)Primarily represents foreign currency translation adjustments and the initial allowance for purchase credit-deteriorated loans. The initial allowance of purchase credit-deteriorated loans was $10 million for the three and nine months ended September 30, 2022 and $6 million for the three and nine months ended September 30, 2021.

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Allowance coverage ratios are calculated based on the allowance for credit losses for each specified portfolio segment divided by period-end loans held for investment within the specified loan category, as defined below. Table 29 presents the allowance coverage ratios as of September 30, 2022 and December 31, 2021.
Table 29: Allowance Coverage Ratios for Specified Loan Category
September 30, 2022December 31, 2021
(Dollars in millions)Allowance for Credit Losses
Amount(1)
Allowance Coverage RatioAllowance for Credit Losses
Amount(1)
Allowance Coverage Ratio
Credit Card$8,716 $3,828 227.67 %$8,345 $2,624 318.08 %
Consumer Banking2,108 4,290 49.13 1,918 3,618 53.01 
Commercial Banking1,385 550 251.81 1,167 699 166.93 
Total$12,209 303,943 4.02 $11,430 277,340 4.12 
__________
(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 increased by $779 million to $12.2 billion as of September 30, 2022 compared to December 31, 2021 primarily driven by loan growth. Our allowance coverage ratio remained substantially flat at 4.02% as of September 30, 2022 compared to December 31, 2021.
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 30 below presents the composition of our liquidity reserves as of September 30, 2022 and December 31, 2021.
Table 30: Liquidity Reserves
(Dollars in millions)September 30, 2022December 31, 2021
Cash and cash equivalents$24,892 $21,746 
Investment securities available for sale, at fair value75,303 95,261 
FHLB borrowing capacity secured by loans6,668 7,109 
Outstanding FHLB advances and letters of credit secured by loans and investment securities(7,551)(8)
Other encumbrances of investment securities(6,512)(7,874)
Total liquidity reserves$92,800 $116,234 

Our liquidity reserves decreased by $23.4 billion to $92.8 billion as of September 30, 2022 from December 31, 2021 primarily due to a decline in our investment securities and an increase in outstanding FHLB advances. Our liquidity reserves, which were elevated as a result of the COVID-19 pandemic, have largely returned to pre-pandemic levels. In addition to these liquidity reserves, we maintain access to a diversified mix of funding sources as discussed in the “Borrowing Capacity” and “Funding” sections below. See “MD&A—Risk Management” in our 2021 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 the Company and each of the Banks to calculate their respective 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 third quarter of 2022 was 139%, which exceeded the LCR Rule requirement of 100%. The calculation and the underlying components are based on our interpretations, expectations and assumptions of
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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 2021 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 (“NSFR”) 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 a specified percentage of its 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 each 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 public disclosure requirement, with the first disclosure due 45 days after the end of the second quarter of 2023. The Company and the Banks exceeded the NSFR Rule requirement as of September 30, 2022.
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 associated with our credit card securitization trust that allows us to periodically offer and sell up to $30 billion of securitized debt obligations and a shelf registration associated with our auto loan securitization trusts that allows us to periodically offer and sell up to $25 billion of securitized debt obligations. The registered amounts under these shelf registration statements are subject to continuing review and change in the future, including as part of the routine renewal process.
In addition to our issuance capacity under the shelf registration statements, we also have access to FHLB advances, the Federal Reserve Discount Window and the Fixed Income Clearing Corporation’s general collateral financing repurchase agreement service. 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 September 30, 2022, we pledged both loans and securities to the FHLB to secure a maximum borrowing capacity of $18.5 billion, of which $7.6 billion was used. Our FHLB membership is supported by our investment in FHLB stock of $311 million and $32 million as of September 30, 2022 and December 31, 2021, respectively, which was determined in part based on our outstanding advances. As of September 30, 2022, we pledged loans to secure a borrowing capacity of $21.6 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 September 30, 2022 and December 31, 2021.
Deposits
Table 31 provides a comparison of average balances, interest expense and average deposits interest rates for the third quarter and first nine months of 2022 and 2021.
Table 31: Deposits Composition and Average Deposits Interest Rates
Three Months Ended September 30,
20222021
(Dollars in millions)Average
Balance		Interest
Expense		Average
Deposits
Interest Rate		Average
Balance		Interest
Expense		Average
Deposits
Interest Rate
Interest-bearing checking accounts(1)
$47,980 $89 0.73 %$45,511 $19 0.17 %
Saving deposits(2)
199,252 440 0.88 202,955 156 0.30 
Time deposits28,668 160 2.21 20,812 53 1.00 
Total interest-bearing deposits$275,900 $689 1.00 $269,278 $228 0.34 
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Nine Months Ended September 30,
20222021
(Dollars in millions)Average
Balance		Interest
Expense		Average
Deposits
Interest Rate		Average
Balance		Interest
Expense		Average
Deposits
Interest Rate
Interest-bearing checking accounts(1)
$48,212 $137 0.38 %$44,153 $56 0.17 %
Saving deposits(2)
202,168 799 0.53 203,127 472 0.31 
Time deposits21,577 264 1.63 24,742 206 1.11 
Total interest-bearing deposits$271,957 $1,200 0.59 $272,022 $734 0.36 
__________
(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. Both COBNA and CONA were well-capitalized, as defined under the federal banking regulatory guidelines, as of September 30, 2022 and December 31, 2021. See “Part I—Item 1. Business—Supervision and Regulation” in our 2021 Form 10-K for additional information. We provide additional information on the composition of deposits in “MD&A—Consolidated Balance Sheets Analysis—Funding Sources Composition” and in “Note 7—Deposits and Borrowings.”
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.
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 have access to short-term and long-term FHLB advances secured by certain investment securities, multifamily real estate loans and commercial real estate loans.
Our short-term borrowings, which includes those borrowings with an original contractual maturity of one year or less and do not include the current portion of long-term debt and consists of federal funds purchased, securities loaned or sold under agreements to repurchase and short-term FHLB advances, decreased by $292 million to $528 million as of September 30, 2022 from December 31, 2021 driven by a decrease in repurchase agreements.
Our long-term funding, which primarily consists of securitized debt obligations and senior and subordinated notes, increased by $11.8 billion to $54.1 billion as of September 30, 2022 from December 31, 2021 primarily driven by net long-term FHLB advances and net issuances of senior unsecured debt. We provide more information on our securitization activity in “Note 5—Variable Interest Entities and Securitizations.”
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The following table summarizes issuances of securitized debt obligations, senior and subordinated notes and their respective maturities or redemptions for the third quarter and first nine months of 2022 and 2021.
Table 32: Long-Term Debt Funding Activities
IssuancesMaturities/Redemptions
Three Months Ended September 30,Three Months Ended September 30,
(Dollars in millions)2022202120222021
Securitized debt obligations$1,750 $3,000 $2,979 $865 
Senior and subordinated notes2,250 1,000 1,204 1,766 
FHLB advances1,500 — 4,500 — 
Total$5,500 $4,000 $8,683 $2,631 
IssuancesMaturities/Redemptions
Nine Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions)2022202120222021
Securitized debt obligations$8,250 $3,000 $6,572 $2,638 
Senior and subordinated notes9,300 1,000 3,561 3,851 
FHLB advances12,000 — 4,500 — 
Total$29,550 $4,000 $14,633 $6,489 
Credit Ratings
Our credit ratings impact our ability to access capital markets and our borrowing costs. Rating agencies assign their ratings based on numerous factors, including liquidity, capital adequacy, asset quality, quality of earnings and the probability of systemic support. Significant changes in these factors could result in different ratings.
Table 33 provides a summary of the credit ratings for the senior unsecured long-term debt of Capital One Financial Corporation and CONA as of September 30, 2022 and December 31, 2021.
Table 33: Senior Unsecured Long-Term Debt Credit Ratings
September 30, 2022December 31, 2021
Capital One
Financial
Corporation		CONACapital One
Financial
Corporation		CONA
Moody’sBaa1A3Baa1A3
S&PBBBBBB+BBBBBB+
FitchA-AA-A
As of October 26, 2022, Moody’s Investors Service (“Moody’s”), Standard & Poor’s (“S&P”) and Fitch Ratings (“Fitch”) have our credit ratings on a stable outlook.
As of September 30, 2022 and December 31, 2021, COBNA and CONA had the same credit ratings from Moody’s, S&P and Fitch, respectively. On October 1, 2022 COBNA merged with and into CONA, with CONA as the surviving entity. See “MD&A—Supervision and Regulation” of this Report for additional information on the merger.
Other Commitments
Our primary involvement with leases is in the capacity as a lessee where we lease premises to support our business. A majority of our leases are operating leases of office space, retail bank branches and Cafés. Our operating leases expire at various dates through 2071 and certain of these leases also have extension or termination options. As of September 30, 2022 and December 31, 2021, we had $1.6 billion and $1.7 billion, respectively, in aggregate operating lease liabilities. We provide more
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information on our lease activity in “Note 7—Premises, Equipment and Leases” in our 2021 Form 10-K.
We have purchase obligations that represent substantial agreements to purchase goods or receive services such as data management, media and other software and third-party services that are enforceable and legally binding and specify significant terms. As of September 30, 2022 and December 31, 2021, we had $1.0 billion and $1.5 billion, respectively, in aggregate purchase obligation liabilities.
As of September 30, 2022 and December 31, 2021, our total unfunded lending commitments were $412.3 billion and $414.5 billion, respectively, primarily consisting 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. 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 additional information, refer to “Note 13—Commitments, Contingencies, Guarantees and Others” in this Report.
We also enter into various contractual arrangements that may require future cash payments, including short-term obligations such as trade payables, commitments to fund certain equity investments, obligations for pension and post-retirement benefit plans, and representation and warranty reserves. These arrangements are discussed in more detail in “Note 5—Variable Interest Entities and Securitizations” and “Note 13—Commitments, Contingencies, Guarantees and Others” in this Report and “Note 14—Employee Benefit Plans” in our 2021 Form 10-K.
MARKET RISK PROFILE
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.
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 34 below. At the current level of interest rates, our net interest income is expected to increase in higher rate scenarios and decrease in lower rate scenarios. Our current
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sensitivity to upward shocks has decreased as compared to December 31, 2021, mainly due to the increase in market interest rates.
Economic Value of Equity Sensitivity
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 34 below. Our current economic value of equity sensitivity profile demonstrates that our economic value of equity decreases in higher interest rate scenarios and increases in lower interest rate scenarios. Our current economic value of equity sensitivity to upward shocks in higher rate scenarios became more negative as compared to December 31, 2021, mainly due to the increase in long-term interest rates.
Table 34 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 September 30, 2022 and December 31, 2021. 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%. Due to recent increases in interest rates, we incorporated a scenario where interest rates decrease by 200 basis points into our interest rate sensitivity analysis as of September 30, 2022.
Table 34: Interest Rate Sensitivity Analysis
September 30, 2022December 31, 2021
Estimated impact on projected baseline net interest income:
+200 basis points0.3 %3.4 %
+100 basis points1.0 2.5 
+50 basis points0.5 1.5 
–50 basis points(0.6)(1.8)
–100 basis points(1.0)N/A
–200 basis points(2.8)N/A
Estimated impact on economic value of equity:
+200 basis points(5.8)(0.7)
+100 basis points(1.6)1.9 
+50 basis points(0.7)1.4 
–50 basis points0.4 (2.6)
–100 basis points0.6 N/A
–200 basis points0.0 N/A
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.
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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 our 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 nominal intercompany funding outstanding was 742 million GBP and 520 million GBP as of September 30, 2022 and December 31, 2021, respectively, and 1.7 billion CAD and 5.0 billion CAD as of September 30, 2022 and December 31, 2021, respectively. Our nominal EUR-denominated borrowings outstanding were 1.3 billion EUR and 1.2 billion EUR as of September 30, 2022 and December 31, 2021, respectively.
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 1.9 billion GBP and 1.8 billion GBP as of September 30, 2022 and December 31, 2021, respectively and 2.2 billion CAD and 1.9 billion CAD as of September 30, 2022 and December 31, 2021, 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 phased out as an interest rate benchmark and that it will no longer compel panel banks to contribute LIBOR data beyond December 31, 2021.
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 U.S. dollar (“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
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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. The Federal Banking Agencies issued further guidance that banking organizations should cease using USD LIBOR as a reference rate in new contracts as soon as practicable and in any event by December 31, 2021. Consistent with the Federal Banking Agencies’ guidance, we ceased entering into new contracts referencing USD LIBOR as a reference rate as of January 1, 2022, subject to certain permissible exceptions.

Our enterprise LIBOR transition program team, which has been working on this effort since 2018 and includes senior management representatives from across the enterprise, provides monthly reporting to senior management and quarterly reporting to our Board of Directors. The information provided to senior management and the Board of Directors includes exposure reporting, updates on progress toward our goals to reduce our LIBOR exposure and relevant regulatory or industry developments.

Our LIBOR transition effort is focused on proactively transitioning exposures to an alternative rate or incorporating transition language (“fallback language”) to provide a contractual mechanism for transitioning upon the LIBOR cessation. Our fallback language aligns with the language recommended by the Alternative Reference Rates Committee (“ARRC”) in our existing lending contracts and the International Swaps and Derivatives Association (“ISDA”) in our derivative contracts and agreements to the greatest extent possible.
We continue to focus our LIBOR transition efforts on:
•monitoring established controls to prevent the origination of LIBOR indexed instruments
•working with impacted customers and counterparties to remediate remaining LIBOR contracts
•engaging with our clients, industry working groups, and regulators
•assessing the proposed rule issued by the Federal Reserve pursuant to the implementation of the Adjustable Interest Rate (LIBOR) Act passed by Congress earlier this year in which the Federal Reserve recommends benchmark replacement rates for covered derivative transactions and cash transactions where a practicable interest rate fallback method has not been established by June 30, 2023, including those in which a government-sponsored enterprise is a party.
The majority of LIBOR contracts that we have transitioned to alternative rates have employed the Secured Overnight Financing Rate (“SOFR”). In the U.S., SOFR has been selected as the preferred alternative rate by the ARRC for certain U.S. dollar derivative and cash instruments. We have proactively worked with customers and prepared our systems, models, valuation tools and processes to focus originations on SOFR and other non-LIBOR rates and will continue to do so. While the majority of our non-LIBOR transactions have utilized SOFR, we have also employed credit sensitive alternative rates to LIBOR, to a limited extent, in response to customer demand.
To track transition status, instruments are categorized based on whether they have fallback language (which may or may not adhere to the ISDA and ARRC standards) or have no fallback language. Instruments with no fallback language represent a higher risk for not transitioning from LIBOR by June 30, 2023. The majority of the instruments maturing after June 30, 2023 are derivatives and commercial loans, which are summarized in the table below. Of these instruments, the majority contain fallback language which adheres to the ISDA and ARRC standards. The LIBOR Act provides a means for phasing out contracts that lack fallback language and which we are not able to otherwise remediate prior to LIBOR cessation. We will continue to focus on reducing our LIBOR exposures through our transition efforts, normal operations and customer interactions.
Table 35: LIBOR Exposures on Derivatives and Commercial Loans
(Dollars in millions)September 30, 2022
Exposure Type(1)
Total LIBOR CommitmentsTotal LIBOR Commitments Maturing after June 30, 2023Total LIBOR Commitments Maturing after June 30, 2023 Without Fallback Language
Derivatives$73,573 $49,064 $10,991 
Commercial loans49,560 42,328 1,458 
Total$123,133 $91,392 $12,449 
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(Dollars in millions)December 31, 2021
Exposure Type(1)
Total LIBOR CommitmentsTotal LIBOR Commitments Maturing after June 30, 2023Total LIBOR Commitments Maturing after June 30, 2023 Without Fallback Language
Derivatives$103,562 $64,605 $14,536 
Commercial loans101,488 71,874 2,047 
Total$205,050 $136,479 $16,583 
_________
(1)Commercial loan balances represent maximum potential exposures and derivatives represent notional exposure.
These transition efforts have been implemented to remediate our remaining LIBOR contracts by June 30, 2023. 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—The transition away from LIBOR may adversely affect our business” in our 2021 Form 10-K.
SUPERVISION AND REGULATION
General
On October 1, 2022, Capital One completed the merger of its wholly-owned subsidiaries COBNA and CONA, with CONA as the surviving entity after the merger.
Debit Card Transaction Processing Update
On October 3, 2022, the Federal Reserve finalized a rule that amends Regulation II to, among other things, specify that debit card issuers should enable all debit card transactions, including card-not-present transactions such as online payments, to be processed on at least two unaffiliated payment card networks. The final rule becomes effective July 1, 2023. As an issuer with over $10 billion in assets, Capital One is subject to Regulation II and will be subject to these new requirements.
Deposit Insurance Assessments Update
The Federal Deposit Insurance Act requires the FDIC to maintain the Deposit Insurance Fund (“DIF”) reserve ratio at a minimum of 1.35 percent. On October 18, 2022, the FDIC finalized a rule that increases the initial base deposit insurance assessment rate schedules by 2 basis points for all insured depository institutions to improve the likelihood that the DIF reserve ratio reaches 1.35 percent by the statutory deadline of September 30, 2028. The rule will become effective on January 1, 2023, and will be reflected in CONA’s first quarterly assessment in 2023.
We provide additional information on our Supervision and Regulation in our 2021 Form 10-K under “Part I—Item 1. Business—Supervision and Regulation” and in our Quarterly Reports on Form 10-Q for the period ended March 31, 2022 and June 30, 2022 under “Part I—Item 2. MD&A—Supervision and Regulation.”
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
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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 2021 Form 10-K. You should carefully consider the factors discussed below, and in our Risk Factors or other disclosures, 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 on our business, financial condition and results of operations may persist for an extended period or worsen, including labor shortages and disruption of global supply chains, and could impact 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;
•limitations on our ability to receive dividends from our subsidiaries;
•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 on which we rely;
•increased costs, reductions in revenue, reputational damage, legal liability and business disruptions that can result from data protection or privacy incidents or a cyber-attack or other similar incidents, including one that results in the theft, loss or misuse of information;
•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 and debit 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;
•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;
•fluctuations in interest rates and uncertainty with respect to the interest rate environment;
•the transition away from the London Interbank Offered Rate;
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•our ability to attract, retain and motivate skilled employees;
•climate change manifesting as physical or transition risks;
•our assumptions or estimates in our financial statements;
•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 TABLES
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)September 30, 2022December 31, 2021
Tangible Common Equity (Period-End):
Stockholders’ equity$50,861 $61,029 
Goodwill and other intangible assets(1)
(14,932)(14,907)
Noncumulative perpetual preferred stock(4,845)(4,845)
Tangible common equity$31,084 $41,277 
Tangible Common Equity (Quarterly Average):
Stockholders’ equity$54,541 $62,498 
Goodwill and other intangible assets(1)
(14,916)(14,847)
Noncumulative perpetual preferred stock(4,845)(5,552)
Tangible common equity$34,780 $42,099 
Tangible Assets (Period-End):
Total assets$444,232 $432,381 
Goodwill and other intangible assets(1)
(14,932)(14,907)
Tangible assets$429,300 $417,474 
Tangible Assets (Quarterly Average):
Total assets$447,088 $427,845 
Goodwill and other intangible assets(1)
(14,916)(14,847)
Tangible assets$432,172 $412,998 
Non-GAAP Ratio:
Tangible common equity(2)
7.2 %9.9 %
__________
(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
Alternative Reference Rates Committee (“ARRC”): A group of private-market participants convened by the Federal Reserve Board and the Federal Reserve Bank of New York that has recommended SOFR as the preferred alternative to replace U.S. dollar (USD) LIBOR referenced instruments.
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 “2021 Form 10-K” or “2021 Annual Report” are to our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Banks: Refers to COBNA and CONA.
Basel Committee: The Basel Committee on Banking Supervision.
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, which expired on January 1, 2022. This law, while in effect, 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 TDR, 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.
CECL Transition Rule: A rule adopted by the Federal Banking Agencies and effective in 2020 that provides banking institutions an optional five-year transition period to phase in the impact of the CECL standard on their regulatory capital.
COBNA: Capital One Bank (USA), National Association, one of our wholly-owned subsidiaries, which offers credit card products along with other lending products and consumer services.
Common equity Tier 1 (“CET1”) capital: Calculated as the sum of common equity, related surplus and retained earnings, and accumulated other comprehensive income net of applicable phase-ins, less goodwill and other 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 wholly-owned subsidiaries, which offers a broad spectrum of banking products and financial services to consumers, small businesses and commercial clients.
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Credit risk: The risk to current or projected financial condition and resilience arising from an obligor’s failure to meet the terms of any contract with the Company or otherwise perform as agreed.
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 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 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.
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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 agreement: 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 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 the business locations and/or 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.
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.
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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.
Tangible common equity (“TCE”): A non-GAAP financial measure. Common equity less goodwill and other intangible assets adjusted for deferred tax liabilities associated with non-tax deductible intangible assets and tax deductible goodwill.
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.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.
U.S. Real Gross Domestic Product (“GDP”) Rate: An inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year.
Variable interest entity (“VIE”): An entity that, by design, either (i) lacks sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties; or (ii) has equity investors that do not have (a) the ability to make significant decisions relating to the entity’s operations through voting rights, (b) the obligation to absorb the expected losses, and/or (c) the right to receive the residual returns of the entity.
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Acronyms
ABS: Asset-backed securities
AOCI: Accumulated other comprehensive income
ARRC: Alternative Reference Rates Committee
ASU: Accounting Standards Update
ASC: Accounting Standards Codification
ATM: Automated teller machine
BHC: Bank holding company
bps: Basis points
CAD: Canadian dollar
CARES: Coronavirus Aid, Relief, and Economic Security
CCAR: Comprehensive Capital Analysis and Review
CCP: Central Counterparty Clearinghouse, or Central Clearinghouse
CDE: Community development entities
CECL: Current expected credit loss
CET1: Common equity Tier 1 capital
CMBS: Commercial mortgage-backed securities
CME: Chicago Mercantile Exchange
COBNA: Capital One Bank (USA), National Association
COEP: Capital One (Europe) plc
COF: Capital One Financial Corporation
CONA: Capital One, National Association
COVID-19: Coronavirus disease of 2019
CVA: Credit valuation adjustment
DCF: Discounted cash flow
DIF: Deposit Insurance Fund
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
FFIEC: Federal Financial Institutions Examination Council
FHLB: Federal Home Loan Banks
FICO: Fair Isaac Corporation
Fitch: Fitch Ratings
Freddie Mac: Federal Home Loan Mortgage Corporation
GAAP: Generally accepted accounting principles in the U.S.
GBP: Pound sterling
GDP: U.S. Real Gross Domestic Product
Ginnie Mae: Government National Mortgage Association
G-SIB: Global systemically important banks
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GSE or Agency: Government-sponsored enterprise
IBA: ICE Benchmark Administration 
ICE: Intercontinental Exchange
IRM: Independent Risk Management
ISDA: International Swaps and Derivatives Association
LCH: LCH Group
LCR: Liquidity coverage ratio
LIBOR: London Interbank Offered Rate
LTV: Loan-to-Value
MDL: Multi-district litigation
Moody’s: Moody’s Investors Service
MSRs: Mortgage servicing rights
NSFR: Net stable funding ratio
OCC: Office of the Comptroller of the Currency
OCI: Other comprehensive income
OTC: Over-the-counter
PCA: Prompt corrective action
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
SOFR: Secured Overnight Financing Rate
TCE: Tangible common equity
TDR: Troubled debt restructuring
U.K.: United Kingdom
U.S.: United States of America
USD: United States Dollar
VIE: Variable interest entity
XBRL: Extensible business reporting language

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CAPITAL ONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions, except per share-related data)2022202120222021
Interest income:
Loans, including loans held for sale$7,578 $6,205 $20,550 $17,812 
Investment securities499 317 1,336 1,078 
Other123 16 193 48 
Total interest income8,200 6,538 22,079 18,938 
Interest expense:
Deposits689 228 1,200 734 
Securitized debt obligations120 29 214 89 
Senior and subordinated notes319 116 644 367 
Other borrowings69 9 104 27 
Total interest expense1,197 382 2,162 1,217 
Net interest income7,003 6,156 19,917 17,721 
Provision (benefit) for credit losses 1,669 (342)3,431 (2,325)
Net interest income after provision for credit losses5,334 6,498 16,486 20,046 
Non-interest income:
Interchange fees, net1,195 1,022 3,429 2,855 
Service charges and other customer-related fees415 407 1,230 1,143 
Other192 245 634 598 
Total non-interest income1,802 1,674 5,293 4,596 
Non-interest expense:
Salaries and associate benefits2,187 1,852 6,159 5,480 
Occupancy and equipment502 481 1,496 1,476 
Marketing978 751 2,899 1,872 
Professional services471 358 1,326 991 
Communications and data processing349 319 1,027 936 
Amortization of intangibles17 5 45 16 
Other445 420 1,131 1,121 
Total non-interest expense4,949 4,186 14,083 11,892 
Income from continuing operations before income taxes2,187 3,986 7,696 12,750 
Income tax provision493 882 1,568 2,782 
Income from continuing operations, net of tax1,694 3,104 6,128 9,968 
Income (loss) from discontinued operations, net of tax0 0 0 (3)
Net income1,694 3,104 6,128 9,965 
Dividends and undistributed earnings allocated to participating securities(21)(26)(74)(84)
Preferred stock dividends(57)(79)(171)(200)
Issuance cost for redeemed preferred stock0 (12)0 (12)
Net income available to common stockholders$1,616 $2,987 $5,883 $9,669 
Basic earnings per common share:
Net income from continuing operations$4.21 $6.81 $14.90 $21.53 
Income (loss) from discontinued operations0.00 0.00 0.00 (0.01)
Net income (loss) per basic common share$4.21 $6.81 $14.90 $21.52 
Diluted earnings per common share:
Net income from continuing operations$4.20 $6.78 $14.84 $21.45 
Income (loss) from discontinued operations0.00 0.00 0.00 (0.01)
Net income (loss) per diluted common share$4.20 $6.78 $14.84 $21.44 
    
See Notes to Consolidated Financial Statements.
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CAPITAL ONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions)2022202120222021
Net income$1,694 $3,104 $6,128 $9,965 
Other comprehensive income (loss), net of tax:
Net unrealized losses on securities available for sale(2,935)(208)(8,476)(1,305)
Net unrealized losses on hedging relationships(804)(195)(2,496)(827)
Foreign currency translation adjustments(48)(27)(105)1 
Other(1)(2)(1)(3)
Other comprehensive loss, net of tax(3,788)(432)(11,078)(2,134)
Comprehensive income (loss)$(2,094)$2,672 $(4,950)$7,831 

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)September 30, 2022December 31, 2021
Assets:
Cash and cash equivalents:
Cash and due from banks$3,716 $4,164 
Interest-bearing deposits and other short-term investments21,176 17,582 
Total cash and cash equivalents24,892 21,746 
Restricted cash for securitization investors399 308 
Securities available for sale (amortized cost of $86.1 billion and $94.9 billion and allowance for credit losses of $4 million and $1 million as of September 30, 2022 and December 31, 2021, respectively)
75,303 95,261 
Loans held for investment:
Unsecuritized loans held for investment277,576 252,468 
Loans held in consolidated trusts26,367 24,872 
Total loans held for investment303,943 277,340 
Allowance for credit losses(12,209)(11,430)
Net loans held for investment291,734 265,910 
Loans held for sale ($1.7 billion and $1.0 billion carried at fair value as of September 30, 2022 and December 31, 2021, respectively)
1,729 5,888 
Premises and equipment, net4,265 4,210 
Interest receivable1,853 1,460 
Goodwill14,771 14,782 
Other assets29,286 22,816 
Total assets$444,232 $432,381 
Liabilities:
Interest payable$433 $281 
Deposits:
Non-interest-bearing deposits34,391 38,043 
Interest-bearing deposits282,802 272,937 
Total deposits317,193 310,980 
Securitized debt obligations15,926 14,994 
Other debt:
Federal funds purchased and securities loaned or sold under agreements to repurchase528 820 
Senior and subordinated notes30,615 27,219 
Other borrowings7,538 53 
Total other debt38,681 28,092 
Other liabilities21,138 17,005 
Total liabilities393,371 371,352 
Commitments, contingencies and guarantees (see Note 13)
Stockholders’ equity:
Preferred stock (par value $0.01 per share; 50,000,000 shares authorized; 4,975,000 shares issued and outstanding as of both September 30, 2022 and December 31, 2021)
0 0 
Common stock (par value $0.01 per share; 1,000,000,000 shares authorized; 689,412,995 and 685,057,944 shares issued as of September 30, 2022 and December 31, 2021, respectively; 381,976,333 and 413,858,537 shares outstanding as of September 30, 2022 and December 31, 2021, respectively)
7 7 
Additional paid-in capital, net34,579 34,112 
Retained earnings56,240 51,006 
Accumulated other comprehensive income (loss)(10,704)374 
Treasury stock, at cost (par value $0.01 per share; 307,436,662 and 271,199,407 shares as of September 30, 2022 and December 31, 2021, respectively)
(29,261)(24,470)
Total stockholders’ equity50,861 61,029 
Total liabilities and stockholders’ equity$444,232 $432,381 
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 StockCommon StockAdditional
Paid-In
Capital		Retained EarningsAccumulated
Other
Comprehensive
Income (Loss)		Treasury
Stock		Total
Stockholders’
Equity
SharesAmountSharesAmount
Balance as of December 31, 20214,975,000 $0 685,057,944 $7 $34,112 $51,006 $374 $(24,470)$61,029 
Comprehensive income (loss)2,403 (4,467)(2,064)
Dividends—common stock(1)
18,408 0 2 (253)(251)
Dividends—preferred stock(57)(57)
Purchases of treasury stock(2,484)(2,484)
Issuances of common stock and restricted stock, net of forfeitures2,517,691 0 68 68 
Exercises of stock options7,809 0 1 1 
Compensation expense for restricted stock units103 103 
Balance as of March 31, 20224,975,000 $0 687,601,852 $7 $34,286 $53,099 $(4,093)$(26,954)$56,345 
Comprehensive income (loss)2,031 (2,823)(792)
Dividends—common stock(1)
4,083 0 1 (237)(236)
Dividends—preferred stock(57)(57)
Purchases of treasury stock(1,988)(1,988)
Issuances of common stock and restricted stock, net of forfeitures671,473 0 70 70 
Compensation expense for restricted stock units68 68 
Balance as of June 30, 20224,975,000 $0 688,277,408 $7 $34,425 $54,836 $(6,916)$(28,942)$53,410 
Comprehensive income (loss)1,694 (3,788)(2,094)
Dividends—common stock(1)
5,936 0 1 (233)(232)
Dividends—preferred stock(57)(57)
Purchases of treasury stock(319)(319)
Issuances of common stock and restricted stock, net of forfeitures941,581 0 76 76 
Exercises of stock options188,070 0 10 10 
Compensation expense for restricted stock units67 67 
Balance as of September 30, 20224,975,000 $0 689,412,995 $7 $34,579 $56,240 $(10,704)$(29,261)$50,861 
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 StockCommon StockAdditional
Paid-In
Capital		Retained EarningsAccumulated
Other
Comprehensive
Income (Loss)		Treasury
Stock		Total
Stockholders’
Equity
SharesAmountSharesAmount
Balance as of December 31, 20204,975,000 $0 679,932,837 $7 $33,480 $40,088 $3,494 $(16,865)$60,204 
Comprehensive income (loss)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 forfeitures2,531,966 0 60 60 
Exercises of stock options283,398 0 19 19 
Compensation expense for restricted stock units111 111 
Balance as of March 31, 20214,975,000 $0 682,761,557 $7 $33,671 $43,167 $1,783 $(17,440)$61,188 
Comprehensive income3,536 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 forfeitures583,779 0 60 60 
Exercises of stock options209,528 0 15 15 
Issuances of preferred stock1,675,000 0 1,641 1,641 
Compensation expense for restricted stock units84 84 
Balance as of June 30, 20216,650,000 $0 683,559,818 $7 $35,472 $46,461 $1,792 $(19,108)$64,624 
Comprehensive income (loss)3,104 (432)2,672 
Dividends—common stock(1)
6,531 0 1 (530)(529)
Dividends—preferred stock(79)(79)
Purchases of treasury stock(2,710)(2,710)
Issuances of common stock and restricted stock, net of forfeitures531,629 0 71 71 
Exercises of stock options417,931 0 20 20 
Issuances of preferred stock425,000 0 412 412 
Redemptions of preferred stock(1,000,000)0 (988)(12)(1,000)
Compensation expense for restricted stock units63 63 
Balance as of September 30, 20216,075,000 $0 684,515,909 $7 $35,051 $48,944 $1,360 $(21,818)$63,544 
__________
(1)We declared dividends per share on our common stock of $0.60 and $1.20 in the third quarter of 2022 and 2021, respectively, and $1.80 and $2.00 in the first nine months of 2022 and 2021, respectively.
See Notes to Consolidated Financial Statements.
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CAPITAL ONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended September 30,
(Dollars in millions) 20222021
Operating activities:
Income from continuing operations, net of tax$6,128 $9,968 
Income (loss) from discontinued operations, net of tax0 (3)
Net income6,128 9,965 
Adjustments to reconcile net income (loss) to net cash from operating activities:
Provision (benefit) for credit losses3,431 (2,325)
Depreciation and amortization, net2,367 2,628 
Deferred tax provision (benefit)(371)580 
Net securities losses (gains)9 (6)
Gain on sales of loans(193)(8)
Stock-based compensation expense238 270 
Other20 8 
Loans held for sale:
Originations and purchases(6,894)(7,011)
Proceeds from sales and paydowns6,242 6,227 
Changes in operating assets and liabilities:
Changes in interest receivable(390)59 
Changes in other assets(5,898)(4,833)
Changes in interest payable152 (111)
Changes in other liabilities812 2,211 
Net change from discontinued operations(1)(6)
Net cash from operating activities5,652 7,648 
Investing activities:
Securities available for sale:
Purchases(11,614)(21,951)
Proceeds from paydowns and maturities16,905 20,795 
Proceeds from sales2,570 1,735 
Loans:
Net changes in loans originated as held for investment(25,469)(16,185)
Principal recoveries of loans previously charged off1,631 1,901 
Net purchases of premises and equipment(644)(504)
Net cash used in acquisition activities(1,127)(551)
Net cash used in other investing activities(543)(286)
Net cash used in investing activities(18,291)(15,046)
See Notes to Consolidated Financial Statements.
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CAPITAL ONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended September 30,
(Dollars in millions) 20222021
Financing activities:
Deposits and borrowings:
Changes in deposits$6,771 $597 
Issuance of securitized debt obligations8,230 2,991 
Maturities and paydowns of securitized debt obligations(6,572)(2,638)
Issuance of senior and subordinated notes and long-term FHLB advances21,271 996 
Maturities and paydowns of senior and subordinated notes and long-term FHLB advances(8,061)(3,851)
Changes in other borrowings(307)139 
Common stock:
Net proceeds from issuances214 191 
Dividends paid(719)(894)
Preferred stock:
Net proceeds from issuances0 2,053 
Dividends paid(171)(200)
Redemptions0 (1,000)
Purchases of treasury stock(4,791)(4,953)
Proceeds from share-based payment activities11 54 
Net cash from (used in) financing activities15,876 (6,515)
Changes in cash, cash equivalents and restricted cash for securitization investors3,237 (13,913)
Cash, cash equivalents and restricted cash for securitization investors, beginning of the period22,054 40,771 
Cash, cash equivalents and restricted cash for securitization investors, end of the period$25,291 $26,858 
Supplemental cash flow information:
Non-cash items:
Net transfers from loans held for investment to loans held for sale$680 $4,577 
Interest paid1,927 1,703 
Income tax paid991 1,672 

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” or “Capital One”) offer a broad array of financial products and services to consumers, small businesses and commercial clients through digital channels, branch locations, Cafés and other distribution channels. As of September 30, 2022, our principal subsidiaries included:
•Capital One Bank (USA), National Association (“COBNA”), which offers credit card products along with other lending products and consumer services; and
•Capital One, National Association (“CONA”), which offers a broad spectrum of banking products and financial services to consumers, small businesses and commercial clients.
On October 1, 2022, the Company completed the merger of COBNA with and into CONA, with CONA as the surviving entity.
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.
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 2021 Annual Report on Form 10-K (“2021 Form 10-K”).
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Newly Adopted Accounting Standards During the Nine Months Ended September 30, 2022
StandardGuidanceAdoption Timing and Financial Statement Impacts
Fair Value Hedging

ASU No. 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layering Method

Issued March 2022
The amendments in this ASU establish the portfolio-layer method which provides flexibility to achieve fair value hedge accounting for multiple hedged layers within a single closed portfolio of financial assets.
We adopted this guidance in the second quarter of 2022 using the prospective method of adoption.

Our adoption of this standard did not have an impact on our consolidated financial statements as any designation of portfolio layer method hedges would be applied prospectively.
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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 98% and 96% of our total investment securities portfolio as of September 30, 2022 and December 31, 2021 respectively.
The table below presents the amortized cost, allowance for credit losses, gross unrealized gains and losses, and fair value aggregated by major security type as of September 30, 2022 and December 31, 2021. Accrued interest receivable of $227 million and $207 million as of September 30, 2022 and December 31, 2021, respectively, is not included in the table below.
Table 2.1: Investment Securities Available for Sale
September 30, 2022
(Dollars in millions)Amortized
Cost		Allowance
 for Credit
 Losses		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Investment securities available for sale:
U.S. Treasury securities$5,124 $0 $1 $(98)$5,027 
RMBS:
Agency71,245 0 37 (10,069)61,213 
Non-agency666 (4)112 (5)769 
Total RMBS71,911 (4)149 (10,074)61,982 
Agency CMBS8,055 0 2 (761)7,296 
Other securities(1)
1,007 0 1 (10)998 
Total investment securities available for sale$86,097 $(4)$153 $(10,943)$75,303 
 December 31, 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$9,419 $0 $23 $0 $9,442 
RMBS:
Agency72,593 0 958 (931)72,620 
Non-agency792 (1)205 0 996 
Total RMBS73,385 (1)1,163 (931)73,616 
Agency CMBS9,237 0 195 (63)9,369 
Other securities(1)
2,830 0 6 (2)2,834 
Total investment securities available for sale$94,871 $(1)$1,387 $(996)$95,261 
__________    
(1)Includes $231 million and $2.0 billion of asset-backed securities (“ABS”) as of September 30, 2022 and December 31, 2021 respectively. The remaining amount is primarily comprised of supranational bonds and foreign government bonds.
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 September 30, 2022 and December 31, 2021. The amounts include securities available for sale without an allowance for credit losses.
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Table 2.2: Securities in a Gross Unrealized Loss Position
September 30, 2022
Less than 12 Months12 Months or LongerTotal
(Dollars in millions)Fair ValueGross
Unrealized
Losses		Fair ValueGross
Unrealized
Losses		Fair ValueGross
Unrealized
Losses
Investment securities available for sale without an allowance for credit losses:
U.S. Treasury securities$4,593 $(98)$0 $0 $4,593 $(98)
RMBS:
Agency30,124 (3,285)30,154 (6,784)60,278 (10,069)
Non-agency16 (1)3 0 19 (1)
Total RMBS30,140 (3,286)30,157 (6,784)60,297 (10,070)
Agency CMBS4,866 (430)2,258 (331)7,124 (761)
Other securities(1)
522 (7)81 (3)603 (10)
Total investment securities available for sale in a gross unrealized loss position without an allowance for credit losses(2)
$40,121 $(3,821)$32,496 $(7,118)$72,617 $(10,939)
December 31, 2021
Less than 12 Months12 Months or LongerTotal
(Dollars in millions)Fair ValueGross
Unrealized
Losses		Fair ValueGross
Unrealized
Losses		Fair ValueGross
Unrealized
Losses
Investment securities available for sale without an allowance for credit losses:
RMBS:
Agency$37,492 $(632)$8,606 $(299)$46,098 $(931)
Non-agency3 0 1 0 4 0 
Total RMBS37,495 (632)8,607 (299)46,102 (931)
Agency CMBS2,999 (36)803 (27)3,802 (63)
Other securities(1)
1,207 (2)0 0 1,207 (2)
Total investment securities available for sale in a gross unrealized loss position without an allowance for credit losses(2)
$41,701 $(670)$9,410 $(326)$51,111 $(996)
__________
(1)    Includes primarily ABS, foreign government bonds, and supranational bonds.
(2)    Consists of approximately 2,730 and 740 securities in gross unrealized loss positions as of September 30, 2022 and December 31, 2021, respectively.
Maturities and Yields of Investment Securities
The table below summarizes, as of September 30, 2022, the fair value of our investment securities by major security type and contractual maturity as well as the total fair value, amortized cost and weighted-average yields of our investment securities by contractual maturity. 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.
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Table 2.3: Contractual Maturities and Weighted-Average Yields of Securities
September 30, 2022
(Dollars in millions)Due in
1 Year or Less		Due > 1 Year
through
5 Years		Due > 5 Years
through
10 Years		Due > 10 YearsTotal
Fair value of securities available for sale:
U.S. Treasury securities$0 $5,027 $0 $0 $5,027 
RMBS(1):
Agency0 113 1,123 59,977 61,213 
Non-agency0 0 0 769 769 
Total RMBS0 113 1,123 60,746 61,982 
Agency CMBS(1)
174 2,046 3,391 1,685 7,296 
Other securities242 756 0 0 998 
Total securities available for sale$416 $7,942 $4,514 $62,431 $75,303 
Amortized cost of securities available for sale$417 $8,199 $5,059 $72,422 $86,097 
Weighted-average yield for securities available for sale3.34 %1.69 %2.28 %2.23 %2.19 %
__________
(1)As of September 30, 2022, the weighted-average expected maturities of RMBS and Agency CMBS were 7.1 years and 5.1 years, respectively.
Net Securities Gains or Losses and Proceeds from Sales
For the three and nine months ended September 30, 2022, total proceeds from sales of our securities were $330 million and $2.6 billion, respectively, with losses of $3 million and $9 million, respectively. For the three and nine months ended September 30, 2021, total proceeds from sales of our securities were $1.1 billion and $1.7 billion, respectively, with gains of $2 million and $6 million, respectively.
Securities Pledged and Received
We pledged investment securities totaling $18.7 billion and $20.8 billion as of September 30, 2022 and December 31, 2021, respectively. These securities are primarily pledged to secure Public Funds deposits and Federal Home Loan Banks (“FHLB”) advances, as well as for other purposes as required or permitted by law. We accepted pledges of securities with a fair value of approximately $67 million and $1 million as of September 30, 2022 and December 31, 2021, respectively, related to our derivative transactions.
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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.
Accrued interest receivable of $1.6 billion and $1.2 billion as of September 30, 2022 and December 31, 2021, respectively, 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 September 30, 2022 and December 31, 2021. The delinquency aging includes all past due loans, both performing and nonperforming.
Table 3.1: Loan Portfolio Composition and Aging Analysis
 September 30, 2022
Delinquent Loans
(Dollars in millions)Current30-59
Days		60-89
Days
> 90
Days
Total
Delinquent
Loans		Total
Loans
Credit Card:
Domestic credit card$117,676 $1,179 $817 $1,607 $3,603 $121,279 
International card businesses5,409 79 53 93 225 5,634 
Total credit card123,085 1,258 870 1,700 3,828 126,913 
Consumer Banking:
Auto75,329 2,754 1,202 295 4,251 79,580 
Retail banking1,580 15 5 19 39 1,619 
Total consumer banking76,909 2,769 1,207 314 4,290 81,199 
Commercial Banking:
Commercial and multifamily real estate38,056 134 1 34 169 38,225 
Commercial and industrial57,456 69 13 68 150 57,606 
Total commercial banking95,512 203 14 102 319 95,831 
Total loans(1)
$295,506 $4,230 $2,091 $2,116 $8,437 $303,943 
% of Total loans97.22 %1.39 %0.69 %0.70 %2.78 %100.00 %
December 31, 2021
Delinquent Loans
(Dollars in millions)Current30-59
Days		60-89
Days
> 90
Days
Total
Delinquent
Loans		Total
Loans
Credit Card:
Domestic credit card$106,312 $773 $528 $1,110 $2,411 $108,723 
International card businesses5,836 77 50 86 213 6,049 
Total credit card112,148 850 578 1,196 2,624 114,772 
Consumer Banking:
Auto72,221 2,385 933 240 3,558 75,779 
Retail banking1,807 35 7 18 60 1,867 
Total consumer banking74,028 2,420 940 258 3,618 77,646 
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Delinquent Loans
(Dollars in millions)Current30-59
Days		60-89
Days
> 90
Days
Total
Delinquent
Loans		Total
Loans
Commercial Banking:
Commercial and multifamily real estate35,100 92 35 35 162 35,262 
Commercial and industrial49,379 139 103 39 281 49,660 
Total commercial banking84,479 231 138 74 443 84,922 
Total loans(1)
$270,655 $3,501 $1,656 $1,528 $6,685 $277,340 
% of Total loans97.59 %1.26 %0.60 %0.55 %2.41 %100.00 %
__________
(1)Loans include unamortized premiums and discounts, and unamortized deferred fees and costs totaling $1.4 billion as of both September 30, 2022 and December 31, 2021.
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 September 30, 2022 and December 31, 2021. Nonperforming loans generally include loans that have been placed on nonaccrual status.
Table 3.2: 90+ Day Delinquent Loans Accruing Interest and Nonperforming Loans
September 30, 2022December 31, 2021
(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$1,607 N/A$0 $1,110 N/A$0 
International card businesses90 $8 0 82 $10 0 
Total credit card1,697 8 0 1,192 10 0 
Consumer Banking:
Auto0 474 0 0 344 0 
Retail banking0 43 5 0 47 4 
Total consumer banking0 517 5 0 391 4 
Commercial Banking:
Commercial and multifamily real estate3 243 219 3 383 268 
Commercial and industrial0 307 200 0 316 257 
Total commercial banking3 550 419 3 699 525 
Total$1,700 $1,075 $424 $1,195 $1,100 $529 
% of Total loans held for investment0.56 %0.35 %0.14 %0.43 %0.40 %0.19 %
__________
(1)We recognized interest income for loans classified as nonperforming of $2 million and $29 million for the three and nine months ended September 30, 2022, respectively, and $1 million and $21 million for the three and nine months ended September 30, 2021, respectively.
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 the U.S. Real Gross
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Domestic Product (“GDP”) Rate, as well as consumers’ financial condition, all of which can have a material effect on credit performance. The key indicator we assess in monitoring the credit quality and risk of our credit card loan portfolio is delinquency trends, including an analysis of loan migration between delinquency categories over time.
The table below presents our credit card portfolio by delinquency status as of September 30, 2022 and December 31, 2021.
Table 3.3: Credit Card Delinquency Status
September 30, 2022December 31, 2021
(Dollars in millions)Revolving LoansRevolving Loans Converted to TermTotalRevolving LoansRevolving Loans Converted to TermTotal
Credit Card:
Domestic credit card:
Current
$117,410 $266 $117,676 $105,985 $327 $106,312 
30-59 days
1,165 14 1,179 760 13 773 
60-89 days
808 9 817 519 9 528 
Greater than 90 days
1,595 12 1,607 1,100 10 1,110 
Total domestic credit card120,978 301 121,279 108,364 359 108,723 
International card businesses:
Current
5,379 30 5,409 5,795 41 5,836 
30-59 days
76 3 79 73 4 77 
60-89 days
50 3 53 47 3 50 
Greater than 90 days
90 3 93 82 4 86 
Total international card businesses5,595 39 5,634 5,997 52 6,049 
Total credit card$126,573 $340 $126,913 $114,361 $411 $114,772 
Consumer Banking
Our consumer banking loan portfolio consists of auto and retail banking loans. Similar to our credit card loan portfolio, the risk in our consumer banking loan portfolio correlates to broad economic trends as well as consumers’ financial condition, all of which can have a material effect on credit performance. The key indicator we 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 September 30, 2022 and December 31, 2021. 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.
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Table 3.4: Consumer Banking Portfolio by Credit Quality Indicator
September 30, 2022
Term Loans by Vintage Year
(Dollars in millions)20222021202020192018PriorTotal Term LoansRevolving LoansRevolving Loans Converted to TermTotal
Auto—At origination FICO scores:(1)
Greater than 660$15,488 $15,559 $6,005 $3,020 $1,300 $502 $41,874 $0 $0 $41,874 
621-6605,301 5,543 2,535 1,349 626 270 15,624 0 0 15,624 
620 or below6,505 7,124 4,364 2,459 1,098 532 22,082 0 0 22,082 
Total auto27,294 28,226 12,904 6,828 3,024 1,304 79,580 0 0 79,580 
Retail banking—Delinquency status:
Current153 136 91 135 130 505 1,150 425 5 1,580 
30-59 days0 1 0 0 4 2 7 8 0 15 
60-89 days0 1 0 2 0 0 3 2 0 5 
Greater than 90 days0 0 1 0 3 9 13 4 2 19 
Total retail banking(2)
153 138 92 137 137 516 1,173 439 7 1,619 
Total consumer banking$27,447 $28,364 $12,996 $6,965 $3,161 $1,820 $80,753 $439 $7 $81,199 
December 31, 2021
Term Loans by Vintage Year
(Dollars in millions)20212020201920182017PriorTotal Term LoansRevolving LoansRevolving Loans Converted to TermTotal
Auto—At origination FICO scores:(1)
Greater than 660$20,758 $8,630 $4,739 $2,394 $1,153 $301 $37,975 $0 $0 $37,975 
621-6607,456 3,721 2,109 1,084 537 157 15,064 0 0 15,064 
620 or below9,522 6,336 3,767 1,840 949 326 22,740 0 0 22,740 
Total auto37,736 18,687 10,615 5,318 2,639 784 75,779 0 0 75,779 
Retail banking—Delinquency status:
Current285 171 172 161 176 491 1,456 345 6 1,807 
30-59 days0 2 2 7 0 1 12 23 0 35 
60-89 days0 4 0 0 0 2 6 1 0 7 
Greater than 90 days0 1 0 1 1 9 12 4 2 18 
Total retail banking(2)
285 178 174 169 177 503 1,486 373 8 1,867 
Total consumer banking$38,021 $18,865 $10,789 $5,487 $2,816 $1,287 $77,265 $373 $8 $77,646 
__________
(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 Paycheck Protection Program (“PPP”) loans of $38 million and $232 million as of September 30, 2022 and December 31, 2021, respectively.
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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.
The following table presents our commercial banking portfolio of loans held for investment by internal risk ratings as of September 30, 2022 and December 31, 2021. The internal risk rating status includes all past due loans, both performing and nonperforming.
Table 3.5: Commercial Banking Portfolio by Internal Risk Ratings
September 30, 2022
Term Loans by Vintage Year
(Dollars in millions)20222021202020192018PriorTotal Term LoansRevolving LoansRevolving Loans Converted to TermTotal
Internal risk rating:(1)
Commercial and multifamily real estate
Noncriticized$7,785 $4,837 $1,748 $1,986 $1,502 $3,237 $21,095 $13,861 $25 $34,981 
Criticized performing529 280 161 439 314 1,140 2,863 138 0 3,001 
Criticized nonperforming102 0 0 7 19 115 243 0 0 243 
Total commercial and multifamily real estate8,416 5,117 1,909 2,432 1,835 4,492 24,201 13,999 25 38,225 
Commercial and industrial
Noncriticized16,701 7,028 4,907 3,186 1,744 3,492 37,058 17,491 29 54,578 
Criticized performing787 566 158 293 147 123 2,074 647 0 2,721 
Criticized nonperforming148 23 6 42 41 6 266 41 0 307 
Total commercial and industrial17,636 7,617 5,071 3,521 1,932 3,621 39,398 18,179 29 57,606 
Total commercial banking(2)
$26,052 $12,734 $6,980 $5,953 $3,767 $8,113 $63,599 $32,178 $54 $95,831 
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December 31, 2021
Term Loans by Vintage Year
(Dollars in millions)20212020201920182017PriorTotal Term LoansRevolving LoansRevolving Loans Converted to TermTotal
Internal risk rating:(1)
Commercial and multifamily real estate
Noncriticized$6,590 $2,924 $3,393 $2,401 $793 $3,538 $19,639 $12,286 $0 $31,925 
Criticized performing248 195 329 317 261 1,478 2,828 101 25 2,954 
Criticized nonperforming0 0 88 20 9 266 383 0 0 383 
Total commercial and multifamily real estate6,838 3,119 3,810 2,738 1,063 5,282 22,850 12,387 25 35,262 
Commercial and industrial
Noncriticized12,662 7,039 5,506 2,750 1,730 3,033 32,720 14,310 59 47,089 
Criticized performing279 188 838 207 120 167 1,799 456 0 2,255 
Criticized nonperforming32 52 85 93 6 10 278 38 0 316 
Total commercial and industrial12,973 7,279 6,429 3,050 1,856 3,210 34,797 14,804 59 49,660 
Total commercial banking(2)
$19,811 $10,398 $10,239 $5,788 $2,919 $8,492 $57,647 $27,191 $84 $84,922 
__________
(1)Criticized exposures correspond to the “Special Mention,” “Substandard” and “Doubtful” asset categories defined by bank regulatory authorities.
(2)Includes PPP loans of $32 million and $102 million as of September 30, 2022 and December 31, 2021, respectively.
Troubled Debt Restructurings
As part of our loss mitigation efforts, we may provide short-term (one to twelve months) or long-term (greater than twelve months) modifications to a borrower experiencing financial difficulty to improve long-term collectability of the loan and to avoid the need for repossession or foreclosure of collateral.
We consider the impact of all loan modifications, whether or not that modification is classified as a troubled debt restructuring (“TDR”), when estimating the credit quality of our loan portfolio and establishing allowance levels. For our Commercial Banking customers, loan modifications are also considered in the assignment of an internal risk rating.

Additional guidance issued by the Federal Banking Agencies and contained in the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) provided banking organizations with TDR relief for loan modifications to certain qualifying borrowers impacted by the Coronavirus Disease of 2019 (“COVID-19”) pandemic. The guidance in the CARES Act expired on January 1, 2022 at which time we also concurrently ceased applying the additional guidance issued by the Federal Banking Agencies.
Total recorded TDRs were $2.3 billion and $1.6 billion as of September 30, 2022 and December 31, 2021, respectively. TDRs classified as performing in our credit card and consumer banking loan portfolios totaled $1.4 billion and $1.1 billion as of September 30, 2022 and December 31, 2021, respectively. TDRs classified as performing in our commercial banking loan portfolio totaled $415 million and $192 million as of September 30, 2022 and December 31, 2021, respectively. Commitments to lend additional funds on loans modified in a TDR totaled $214 million and $168 million as of September 30, 2022 and December 31, 2021, respectively.
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The following tables present the major modification types, amortized cost amounts and financial effects of loans modified in a TDR during the three and nine months ended September 30, 2022 and 2021.
Table 3.6: Troubled Debt Restructurings
Three Months Ended September 30, 2022
Reduced Interest RateTerm 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$77100 %16.79 %N/AN/A
International card businesses29100 27.52 N/AN/A
Total credit card106100 19.77 N/AN/A
Consumer Banking:
Auto27564 8.45 97 %5
Retail banking1N/AN/A60 14
Total consumer banking27664 8.45 97 5
Commercial Banking:
Commercial and multifamily real estate38580.78 100 11
Commercial and industrial75N/AN/A98 17
Total commercial banking11320 0.78 99 15
Total$495
Nine Months Ended September 30, 2022
Reduced Interest RateTerm 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$196100 %15.76 %N/AN/A
International card businesses93100 27.73 N/AN/A
Total credit card289100 19.63 N/AN/A
Consumer Banking:
Auto79456 8.59 97 %4
Retail banking2N/AN/A76 13
Total consumer banking79656 8.59 97 4
Commercial Banking:
Commercial and multifamily real estate30210 0.35 80 13
Commercial and industrial242N/AN/A62 14
Total commercial banking5446 0.35 72 13
Total$1,629
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Three Months Ended September 30, 2021
Reduced Interest RateTerm 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$37100 %15.80 %N/AN/A
International card businesses28100 27.75 N/AN/A
Total credit card65100 20.90 N/AN/A
Consumer Banking:
Auto8948 8.54 92 %4
Total consumer banking8948 8.54 92 4
Commercial Banking:
Commercial and multifamily real estate2114 2.50 100 12
Commercial and industrial4N/AN/A100 4
Total commercial banking2512 2.50 100 11
Total$179
Nine Months Ended September 30, 2021
Reduced Interest RateTerm ExtensionBalance Reduction
(Dollars in millions)
Total Loans Modified(1)
% of TDR Activity(2)
Average Rate Reduction
% of TDR Activity(2)
Average Term Extension (Months)
% of TDR Activity(2)
Gross Balance Reduction
Credit Card:
Domestic credit card$114100 %16.00 %N/AN/AN/AN/A
International card businesses94100 27.66 N/AN/AN/AN/A
Total credit card208100 21.26 N/AN/AN/AN/A
Consumer Banking:
Auto26940 8.74 934—$1 
Retail banking120 2.55 3667N/AN/A
Total consumer banking27040 8.72 934—1 
Commercial Banking:
Commercial and multifamily real estate417 1.29 10013N/AN/A
Commercial and industrial82N/AN/A418N/AN/A
Total commercial banking1232 1.29 6111N/AN/A
Total$601
__________
(1)Represents the amortized cost of total loans modified in TDR at the end of the period in which they were modified. As not every modification type is included in the table above, the total percentage of TDR activity may not add up to 100%. Some loans may receive more than one type of modification.
(2)Due to multiple modification types granted to some troubled borrowers, percentages may total more than 100% for certain loan types.
Subsequent Defaults of Completed TDR Modifications
The following table presents the type, number and amortized cost of loans modified in a TDR that experienced a default during the period and had completed a modification event in the twelve months prior to the default. A default occurs if the loan is
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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: TDR—Subsequent Defaults
Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
(Dollars in millions)Number of ContractsAmountNumber of ContractsAmountNumber of ContractsAmountNumber of ContractsAmount
Credit Card:
Domestic credit card9,927 $19 4,168 $7 23,951 $47 13,528 $25 
International card businesses18,971 19 12,680 17 55,089 58 44,709 68 
Total credit card28,898 38 16,848 24 79,040 105 58,237 93 
Consumer Banking:
Auto4,592 82 2,151 34 10,102 178 6,453 98 
Retail banking0 0 1 0 0 0 9 0 
Total consumer banking4,592 82 2,152 34 10,102 178 6,462 98 
Commercial Banking:
Commercial and multifamily real estate0 0 0 0 0 0 1 50 
Commercial and industrial0 0 1 38 3 35 7 120 
Total commercial banking0 0 1 38 3 35 8 170 
Total33,490 $120 19,001 $96 89,145 $318 64,707 $361 
Loans Pledged
We pledged loan collateral of $9.8 billion and $10.3 billion to secure a portion of of our FHLB borrowing capacity of $18.5 billion and $19.7 billion as of September 30, 2022 and December 31, 2021, respectively. We also pledged loan collateral of $34.5 billion and $26.5 billion to secure our Federal Reserve Discount Window borrowing capacity of $21.6 billion and $19.6 billion as of September 30, 2022 and December 31, 2021, 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 nine months ended September 30, 2022, we converted $51 million and $383 million of revolving loans to term loans, respectively, primarily in our domestic credit card and commercial banking loan portfolios. For the three and nine months ended September 30, 2021, we converted $37 million and $172 million of revolving loans to term loans, respectively, primarily in our domestic credit card and commercial banking loan portfolios.
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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. Significant judgment is applied in our estimation of lifetime credit losses. When developing an estimate of expected credit losses, we use both quantitative and qualitative methods in considering all available information relevant to assessing 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.
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 2021 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 nine months ended September 30, 2022 and 2021. Our allowance for credit losses increased by $779 million to $12.2 billion as of September 30, 2022 from December 31, 2021.
Table 4.1: Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity
Three Months Ended September 30, 2022
(Dollars in millions)Credit CardConsumer BankingCommercial BankingTotal
Allowance for credit losses:
Balance as of June 30, 2022$8,166 $2,047 $1,278 $11,491 
Charge-offs
(1,047)(410)(13)(1,470)
Recoveries(1)
352 186 1 539 
Net charge-offs(695)(224)(12)(931)
Provision (benefit) for credit losses1,261 285 119 1,665 
Allowance build (release) for credit losses566 61 107 734 
Other changes(2)
(16)0 0 (16)
Balance as of September 30, 20228,716 2,108 1,385 12,209 
Reserve for unfunded lending commitments:
Balance as of June 30, 20220 0 239 239 
Provision for losses on unfunded lending commitments0 0 4 4 
Balance as of September 30, 20220 0 243 243 
Combined allowance and reserve as of September 30, 2022$8,716 $2,108 $1,628 $12,452 
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Nine Months Ended September 30, 2022
(Dollars in millions)Credit CardConsumer BankingCommercial BankingTotal
Allowance for credit losses:
Balance as of December 31, 2021$8,345 $1,918 $1,167 $11,430 
Charge-offs
(3,011)(1,090)(73)(4,174)
Recoveries(1)
1,031 584 16 1,631 
Net charge-offs(1,980)(506)(57)(2,543)
Provision (benefit) for credit losses2,387 696 275 3,358 
Allowance build (release) for credit losses407 190 218 815 
Other changes(2)
(36)0 0 (36)
Balance as of September 30, 20228,716 2,108 1,385 12,209 
Reserve for unfunded lending commitments:
Balance as of December 31, 20210 0 165 165 
Provision for losses on unfunded lending commitments0 0 78 78 
Balance as of September 30, 20220 0 243 243 
Combined allowance and reserve as of September 30, 2022$8,716 $2,108 $1,628 $12,452 
Three Months Ended September 30, 2021
(Dollars in millions)Credit CardConsumer BankingCommercial BankingTotal
Allowance for credit losses:
Balance as of June 30, 2021$8,873 $2,203 $1,270 $12,346 
Charge-offs(735)(264)(20)(1,019)
Recoveries(1)
369 213 11 593 
Net charge-offs(366)(51)(9)(426)
Provision (benefit) for credit losses(198)(91)(55)(344)
Allowance build (release) for credit losses(564)(142)(64)(770)
Other changes(2)
(3)0 0 (3)
Balance as of September 30, 20218,306 2,061 1,206 11,573 
Reserve for unfunded lending commitments:
Balance as of June 30, 20210 0 164 164 
Provision (benefit) for losses on unfunded lending commitments0 0 2 2 
Balance as of September 30, 20210 0 166 166 
Combined allowance and reserve as of September 30, 2021$8,306 $2,061 $1,372 $11,739 
Nine Months Ended September 30, 2021
(Dollars in millions)Credit CardConsumer BankingCommercial BankingTotal
Allowance for credit losses:
Balance as of December 31, 2020$11,191 $2,715 $1,658 $15,564 
Charge-offs(2,695)(866)(47)(3,608)
Recoveries(1)
1,125 735 41 1,901 
Net charge-offs(1,570)(131)(6)(1,707)
Provision (benefit) for credit losses(1,325)(523)(446)(2,294)
Allowance build (release) for credit losses(2,895)(654)(452)(4,001)
Other changes(2)
10 0 0 10 
Balance as of September 30, 20218,306 2,061 1,206 11,573 
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Nine Months Ended September 30, 2021
(Dollars in millions)Credit CardConsumer BankingCommercial BankingTotal
Reserve for unfunded lending commitments:
Balance as of December 31, 20200 0 195 195 
Provision (benefit) for losses on unfunded lending commitments0 0 (29)(29)
Balance as of September 30, 20210 0 166 166 
Combined allowance and reserve as of September 30, 2021$8,306 $2,061 $1,372 $11,739 
__________
(1)The amount and timing of recoveries are impacted by our collection strategies, which are based on customer behavior and risk profile and include direct customer communications, repossession of collateral, the periodic sale of charged off loans as well as additional strategies, such as litigation.
(2)Primarily represents foreign currency translation adjustments and initial allowance for purchase credit-deteriorated loans. The initial allowance of purchase credit-deteriorated loans was $10 million for the three and nine months ended September 30, 2022 and $6 million for the three and nine months ended September 30, 2021.

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 2021 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 nine months ended September 30, 2022 and 2021.
Table 4.2: Summary of Credit Card Partnership Loss Sharing Arrangements Impacts
Three Months Ended September 30,
(Dollars in millions)20222021
Estimated reimbursements from partners, beginning of period$1,302 $1,711 
Amounts due from partners which reduced net charge-offs(127)(80)
Amounts expected to become due from (to) partners which reduced (increased) provision for credit losses237 (181)
Estimated reimbursements from partners, end of period$1,412 $1,450 
Nine Months Ended September 30,
(Dollars in millions)20222021
Estimated reimbursements from partners, beginning of period$1,450 $2,159 
Amounts due from partners which reduced net charge-offs(353)(349)
Amounts expected to become due from (to) partners which reduced (increased) provision for credit losses315 (360)
Estimated reimbursements from partners, end of period$1,412 $1,450 
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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 has 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 the maximum amount of any remaining funding obligations.
The tables below present a summary of VIEs in which we had continuing involvement or held a significant variable interest, aggregated based on VIEs with similar characteristics as of September 30, 2022 and December 31, 2021. We separately present information for consolidated and unconsolidated VIEs.
Table 5.1: Carrying Amount of Consolidated and Unconsolidated VIEs
 September 30, 2022
 ConsolidatedUnconsolidated
(Dollars in millions)Carrying Amount of AssetsCarrying Amount of LiabilitiesCarrying Amount of AssetsCarrying Amount of LiabilitiesMaximum Exposure to Loss
Securitization-Related VIEs:(1)
Credit card loan securitizations(2)
$20,544 $12,374 $0 $0 $0 
Auto loan securitizations5,420 4,488 0 0 0 
Total securitization-related VIEs25,964 16,862 0 0 0 
Other VIEs:(3)
Affordable housing entities259 20 4,754 1,495 4,754 
Entities that provide capital to low-income and rural communities2,337 10 0 0 0 
Other0 0 341 0 341 
Total other VIEs2,596 30 5,095 1,495 5,095 
Total VIEs$28,560 $16,892 $5,095 $1,495 $5,095 
 December 31, 2021
 ConsolidatedUnconsolidated
(Dollars in millions)Carrying Amount of AssetsCarrying Amount of LiabilitiesCarrying Amount of AssetsCarrying Amount of LiabilitiesMaximum Exposure to Loss
Securitization-Related VIEs:(1)
Credit card loan securitizations(2)
$21,569 $13,016 $0 $0 $0 
Auto loan securitizations2,552 2,187 0 0 0 
Total securitization-related VIEs24,121 15,203 0 0 0 
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 December 31, 2021
 ConsolidatedUnconsolidated
(Dollars in millions)Carrying Amount of AssetsCarrying Amount of LiabilitiesCarrying Amount of AssetsCarrying Amount of LiabilitiesMaximum Exposure to Loss
Other VIEs:(3)
Affordable housing entities263 27 4,774 1,454 4,774 
Entities that provide capital to low-income and rural communities2,074 26 0 0 0 
Other0 0 383 0 383 
Total other VIEs2,337 53 5,157 1,454 5,157 
Total VIEs$26,458 $15,256 $5,157 $1,454 $5,157 
__________
(1)Excludes insignificant VIEs from previously exited businesses.
(2)Represents the carrying amount of assets and liabilities of the VIE, which includes the seller’s interest and repurchased notes held by other related parties.
(3)In certain investment structures, we consolidate a VIE which 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 $562 million of liabilities as of September 30, 2022, and $2.2 billion of assets and $568 million of liabilities as of December 31, 2021.
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 enterprises (“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 Other 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 September 30, 2022 and December 31, 2021.
Table 5.2: Continuing Involvement in Securitization-Related VIEs
(Dollars in millions)Credit CardAuto
September 30, 2022:
Securities held by third-party investors$11,443 $4,483 
Receivables in the trusts21,155 5,212 
Cash balance of spread or reserve accounts0 23 
Retained interestsYesYes
Servicing retainedYesYes
December 31, 2021:
Securities held by third-party investors$12,808 $2,186 
Receivables in the trust22,454 2,418 
Cash balance of spread or reserve accounts0 13 
Retained interestsYesYes
Servicing retainedYesYes
Credit Card Securitizations
We securitize a portion of our credit card loans which provides a source of funding for us. Credit card securitizations involve the transfer of credit card receivables to securitization trusts. These trusts then issue debt securities collateralized by the transferred receivables to third-party investors. We hold certain retained interests in our credit card securitizations and continue to service the receivables in these trusts. We consolidate these trusts because we are deemed to be the primary beneficiary as we have the power to direct the activities that most significantly impact the economic performance of the trusts, and the right to receive benefits or the obligation to absorb losses that could potentially be significant to the trusts.
Auto Securitizations
Similar to our credit card securitizations, we securitize a portion of our auto loans which provides a source of funding for us. Auto securitizations involve the transfer of auto loans to securitization trusts. These trusts then issue debt securities collateralized by the transferred loans to third-party investors. We hold certain retained interests and continue to service the loans in these trusts. We consolidate these trusts because we are deemed to be the primary beneficiary as we have the power to direct the activities that most significantly impact the economic performance of the trusts, and the right to receive benefits or the obligation to absorb losses that could potentially be significant to the trusts.
Other VIEs
Affordable Housing Entities
As part of our community reinvestment initiatives, we invest in private investment funds that make equity investments in multifamily affordable housing properties. 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 nine months ended September 30, 2022 and 2021, we recognized amortization of $484 million and $477 million, respectively, and tax credits of $582 million and $560 million, respectively, associated with these investments within income tax provision. The carrying value of our equity investments in these qualified affordable housing projects was $4.8 billion and $4.7 billion as of September 30, 2022 and December 31, 2021, 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 $1.7 billion as of both September 30, 2022 and December 31, 2021, and is largely expected to be paid from 2022 to 2025.
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 as of both September 30, 2022 and December 31, 2021. 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 $12.5 billion and $11.9 billion as of September 30, 2022 and December 31, 2021, 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 $2.3 billion and $2.1 billion as of September 30, 2022 and December 31, 2021, respectively, are reflected on our consolidated balance sheets in cash, loans held for investment, and other assets. The liabilities are reflected in other liabilities. The creditors of the VIEs have no recourse to our general credit. We have not provided additional financial or other support other than during the period that we are contractually required to provide it.
Other
We hold variable interests in other VIEs, including companies that promote renewable energy sources and other equity method investments. We are not required to consolidate these VIEs because we do not have the power to direct the activities that most significantly impact their economic performance. Our maximum exposure to these VIEs is limited to the investments on our consolidated balance sheets of $341 million and $383 million as of September 30, 2022 and December 31, 2021, 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 OTHER INTANGIBLE ASSETS
The table below presents our goodwill, other intangible assets and MSRs as of September 30, 2022 and December 31, 2021. Goodwill is presented separately, while other intangible assets and MSRs are included in other assets on our consolidated balance sheets.
Table 6.1: Components of Goodwill, Other Intangible Assets and MSRs
September 30, 2022
(Dollars in millions)Carrying Amount of AssetsAccumulated AmortizationNet Carrying Amount
Goodwill$14,771 N/A$14,771 
Other intangible assets:
Purchased credit card relationship (“PCCR”) intangibles146 $(18)128 
Other(1)
213 (158)55 
Total other intangible assets359 (176)183 
Total goodwill and other intangible assets$15,130 $(176)$14,954 
Commercial MSRs(2)
$646 $(215)$431 
December 31, 2021
(Dollars in millions)Carrying Amount of AssetsAccumulated AmortizationNet Carrying Amount
Goodwill$14,782 N/A$14,782 
Other intangible assets:
Purchased credit card relationship (“PCCR”) intangibles29 $(10)19 
Other(1)
213 (121)92 
Total other intangible assets242 (131)111 
Total goodwill and other intangible assets$15,024 $(131)$14,893 
Commercial MSRs(2)
$622 $(202)$420 
__________
(1)Primarily consists of intangibles for sponsorship, customer and merchant relationships, partnership, trade names and other customer 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 $17 million and $45 million for the three and nine months ended September 30, 2022, respectively, and $5 million and $16 million for the three and nine months ended September 30, 2021, respectively.
Goodwill
The following table presents changes in carrying amount of goodwill by each of our business segments as of September 30, 2022 and December 31, 2021.
Table 6.2: Goodwill by Business Segments
(Dollars in millions)Credit CardConsumer BankingCommercial BankingTotal
Balance as of December 31, 2021$5,087 $4,645 $5,050 $14,782 
Other adjustments(1)
(15)0 4 (11)
Balance as of September 30, 2022$5,072 $4,645 $5,054 $14,771 
__________
(1)Represents foreign currency translation adjustments and measurement period adjustments on prior period acquisitions.
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NOTE 7—DEPOSITS AND BORROWINGS
Our deposits represent our largest source of funding for our assets and operations, and 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 September 30, 2022 and December 31, 2021. 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)September 30, 2022December 31, 2021
Deposits:
Non-interest-bearing deposits$34,391 $38,043 
Interest-bearing deposits(1)
282,802 272,937 
Total deposits$317,193 $310,980 
Short-term borrowings:
Federal funds purchased and securities loaned or sold under agreements to repurchase$528 $820 
Total short-term borrowings$528 $820 
 September 30, 2022December 31, 2021
(Dollars in millions)Maturity DatesStated Interest RatesWeighted-Average Interest RateCarrying ValueCarrying Value
Long-term debt:
Securitized debt obligations2023-2028
0.32% - 3.74%
2.27%$15,926 $14,994 
Senior and subordinated notes:
Fixed unsecured senior debt(2)
2023-2033
0.80 - 5.27
3.4423,957 19,975 
Floating unsecured senior debt2023-2025
3.53 - 4.31
3.771,597 1,709 
Total unsecured senior debt3.4625,554 21,684 
Fixed unsecured subordinated debt2023-2032
2.36 - 4.20
3.525,061 5,535 
Total senior and subordinated notes30,615 27,219 
Other long-term borrowings:
FHLB advances2023
3.07 - 3.19
3.137,500 0 
Finance lease liabilities2022 - 2031
0.30 - 9.91
3.9238 53 
Total other long-term borrowings7,538 53 
Total long-term debt$54,079 $42,266 
Total short-term borrowings and long-term debt$54,607 $43,086 
__________
(1)Includes $3.9 billion and $1.8 billion of time deposits in denominations in excess of the $250,000 federal insurance limit as of September 30, 2022 and December 31, 2021, respectively.
(2)Includes $1.1 billion and $1.4 billion of Euro (“EUR”) denominated unsecured notes as of September 30, 2022 and December 31, 2021, respectively.    
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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.
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Derivatives Counterparty Credit Risk
Counterparty Types
Derivative instruments contain an element of credit risk that stems from the potential failure of a counterparty to perform according to the terms of the contract, including making payments due upon maturity of certain derivative instruments. We execute our derivative contracts primarily in 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 agreements, where applicable, and exchanging collateral with our counterparties, typically in the form of cash or high-quality liquid securities. We exchange collateral in two primary forms: variation margin, which mitigates the risk of changes in value due to daily market movements and is exchanged daily, and initial margin, which mitigates the risk of potential future exposure of a derivative and is exchanged at the outset of a transaction and adjusted daily. We exchange variation margin and initial margin on our cleared derivatives. For uncleared bilateral derivatives, we exchange variation margin, and from September 2021 we exchange initial margin on any new trades executed after September 1, 2021, where such trades are in scope for initial margin.
The amount of collateral exchanged for variation margin is dependent upon the fair value of the derivative instruments as well as the fair value of the pledged collateral and will vary over time as market variables change. The amount of the initial margin exchanged is dependent upon 1) the calculation of initial margin exposure, as prescribed by 1(a) the U.S. prudential regulators’ margin rules for uncleared derivatives (“PR Rules”) or 1(b) the CCPs for cleared derivatives and 2) the fair value of the pledged collateral; it will vary over time as market variables change. When valuing collateral, an estimate of the variation in price and liquidity over time is subtracted in the form of a “haircut” to discount the value of the collateral pledged. Our exposure to derivative counterparty credit risk, at any point in time, is equal to the amount reported as a derivative asset on our balance sheet. The fair value of our derivatives is adjusted on an aggregate basis to take into consideration the effects of legally enforceable master netting agreements and any associated collateral received or pledged. See Table 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. We also clear exchange-traded instruments, like futures, with CCPs. Futures commission merchants (“FCMs”) serve as the intermediary between CCPs and us. CCPs require that we post initial and variation margin through our FCMs to mitigate the risk of non-payment or default. Initial margin is required by CCPs as collateral against potential losses on our exchange-traded and cleared derivative contracts and variation margin is exchanged on a daily basis to account for mark-to-market changes in those derivative contracts. For CME, ICE and LCH-cleared OTC derivatives, variation margin cash payments are required to be characterized as settlements. Our FCM agreements governing these derivative transactions include provisions that may require us to post additional collateral under certain circumstances.
•Bilateral Counterparties: We enter into master netting agreements and collateral agreements with bilateral derivative counterparties, where applicable, to mitigate the risk of default. These bilateral agreements typically provide the right to offset exposure with the same counterparty and require the party in a net liability position to post collateral. Agreements with certain bilateral counterparties require both parties to maintain collateral in the event the fair values of uncleared derivatives exceed established exposure thresholds. Certain of these bilateral agreements include provisions requiring that our debt maintain a credit rating of investment grade or above by each of the major credit rating agencies. In the event of a downgrade of our debt credit rating below investment grade, some of our counterparties would have the right to terminate their derivative contract and close out existing positions.
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Credit Risk Valuation Adjustments
We record counterparty credit valuation adjustments (“CVAs”) on our derivative assets to reflect the credit quality of our counterparties. We consider collateral and legally enforceable master netting agreements that mitigate our credit exposure to each counterparty in determining CVAs, which may be adjusted due to changes in the fair values of the derivative contracts, collateral, and creditworthiness of the counterparty. We also record debit valuation adjustments (“DVAs”) to adjust the fair values of our derivative liabilities to reflect the impact of our own credit quality.
Balance Sheet Presentation
The following table summarizes the notional amounts and fair values of our derivative instruments as of September 30, 2022 and December 31, 2021, 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
September 30, 2022December 31, 2021
Notional or Contractual Amount
Derivative(1)
Notional or Contractual Amount
Derivative(1)
(Dollars in millions)AssetsLiabilitiesAssetsLiabilities
Derivatives designated as accounting hedges:
Interest rate contracts:
Fair value hedges$58,616 $8 $136 $49,659 $2 $3 
Cash flow hedges50,600 1 551 52,400 244 16 
Total interest rate contracts109,216 9 687 102,059 246 19 
Foreign exchange contracts:
Fair value hedges1,225 0 314 1,421 13 0 
Cash flow hedges2,088 102 0 4,679 24 20 
Net investment hedges3,895 478 0 3,459 43 0 
Total foreign exchange contracts7,208 580 314 9,559 80 20 
Total derivatives designated as accounting hedges116,424 589 1,001 111,618 326 39 
Derivatives not designated as accounting hedges:
Customer accommodation:
Interest rate contracts88,875 879 2,015 71,724 620 194 
Commodity contracts35,476 3,151 2,989 22,021 1,669 1,561 
Foreign exchange and other contracts4,253 141 114 3,779 40 42 
Total customer accommodation128,604 4,171 5,118 97,524 2,329 1,797 
Other interest rate exposures(2)
2,258 38 44 1,899 33 25 
Other contracts1,989 9 12 2,028 2 7 
Total derivatives not designated as accounting hedges132,851 4,218 5,174 101,451 2,364 1,829 
Total derivatives$249,275 $4,807 $6,175 $213,069 $2,690 $1,868 
Less: netting adjustment(3)
(1,645)(1,580)(542)(544)
Total derivative assets/liabilities$3,162 $4,595 $2,148 $1,324 
__________
(1)Does not reflect $6 million and $11 million recognized as a net valuation allowance on derivative assets and liabilities for non-performance risk as of September 30, 2022 and December 31, 2021, 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.
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(3)Represents balance sheet netting of derivative assets and liabilities, and related payables and receivables for cash collateral held or placed with the same counterparty.
The following table summarizes the carrying value of our hedged assets and liabilities in fair value hedges and the associated cumulative basis adjustments included in those carrying values, excluding basis adjustments related to foreign currency risk, as of September 30, 2022 and December 31, 2021.
Table 8.2: Hedged Items in Fair Value Hedging Relationships
September 30, 2022December 31, 2021
Carrying Amount Assets/(Liabilities)Cumulative Amount of Basis Adjustments Included in the Carrying AmountCarrying Amount Assets/(Liabilities)Cumulative Amount of Basis Adjustments Included in the Carrying Amount
(Dollars in millions)Total Assets/(Liabilities)Discontinued-Hedging RelationshipsTotal 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)
$3,979 $(78)$220 $10,327 $286 $295 
Interest-bearing deposits(15,142)524 (1)(7,361)(47)(1)
Securitized debt obligations(10,389)783 0 (11,155)49 3 
Senior and subordinated notes(27,024)1,622 (573)(22,777)(531)(708)
__________
(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 $236 million and $247 million as of September 30, 2022 and December 31, 2021, respectively. The amount of the designated hedged items was $225 million as of both September 30, 2022 and December 31, 2021. The cumulative basis adjustments associated with these hedges was $14 million and $3 million as of September 30, 2022 and December 31, 2021, respectively.
(2)Carrying value represents amortized cost.
Balance Sheet Offsetting of Financial Assets and Liabilities
Derivative contracts and repurchase agreements that we execute bilaterally in the OTC market are generally governed by enforceable master netting agreements where we generally have the right to offset exposure with the same counterparty. Either counterparty can generally request to net settle all contracts through a single payment upon default on, or termination of, any one contract. We elect to offset the derivative assets and liabilities under master netting agreements for balance sheet presentation where a right of setoff exists. For derivative contracts entered into under master netting agreements for which we have not been able to confirm the enforceability of the setoff rights, or those not subject to master netting agreements, we do not offset our derivative positions for balance sheet presentation.
The following table presents the gross and net fair values of our derivative assets, derivative liabilities, resale and repurchase agreements and the related offsetting amounts permitted under U.S. GAAP as of September 30, 2022 and December 31, 2021. The table also includes cash and non-cash collateral received or pledged in accordance with such arrangements. The amount of collateral presented, however, is limited to the amount of the related net derivative fair values or outstanding balances; therefore, instances of over-collateralization are excluded.

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Table 8.3: Offsetting of Financial Assets and Financial Liabilities
Gross AmountsGross Amounts Offset in the Balance SheetNet Amounts as RecognizedSecurities Collateral Held Under Master Netting AgreementsNet Exposure
(Dollars in millions)Financial InstrumentsCash Collateral Received
As of September 30, 2022
Derivative assets(1)
$4,807 $(691)$(954)$3,162 $(80)$3,082 
As of December 31, 2021
Derivative assets(1)
2,690 (252)(290)2,148 0 2,148 
Gross AmountsGross Amounts Offset in the Balance SheetNet Amounts as RecognizedSecurities Collateral Pledged Under Master Netting AgreementsNet Exposure
(Dollars in millions)Financial InstrumentsCash Collateral Pledged
As of September 30, 2022
Derivative liabilities(1)
$6,175 $(691)$(889)$4,595 $(87)$4,508 
Repurchase agreements(2)
528 0 0 528 (528)0 
As of December 31, 2021
Derivative liabilities(1)
1,868 (252)(292)1,324 0 1,324 
Repurchase agreements(2)
820 0 0 820 (820)0 
__________
(1)We received cash collateral from derivative counterparties totaling $1.1 billion and $377 million as of September 30, 2022 and December 31, 2021, respectively. We also received securities from derivative counterparties with a fair value of $67 million as of September 30, 2022 and approximately $1 million as of December 31, 2021, which we have the ability to re-pledge. We posted $3.5 billion and $2.0 billion of cash collateral as of September 30, 2022 and December 31, 2021, respectively.
(2)Under our customer repurchase agreements, which mature the next business day, we pledged collateral with a fair value of $538 million and $836 million as of September 30, 2022 and December 31, 2021, respectively, primarily consisting of agency RMBS securities.

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Income Statement and AOCI Presentation
Fair Value and Cash Flow Hedges
The net gains (losses) recognized in our consolidated statements of income related to derivatives in fair value and cash flow hedging relationships are presented below for the three and nine months ended September 30, 2022 and 2021.
Table 8.4: Effects of Fair Value and Cash Flow Hedge Accounting
Three Months Ended September 30, 2022
Net Interest IncomeNon-Interest Income
(Dollars in millions)Investment SecuritiesLoans, Including Loans Held for SaleOtherInterest-bearing DepositsSecuritized Debt ObligationsSenior and Subordinated NotesOther
Total amounts presented in our consolidated statements of income
$499 $7,578 $123 $(689)$(120)$(319)$192 
Fair value hedging relationships:
Interest rate and foreign exchange contracts:
Interest recognized on derivatives$22 $0 $0 $4 $(21)$(71)$0 
Gains (losses) recognized on derivatives83 0 0 (381)(311)(807)(85)
Gains (losses) recognized on hedged items(1)
(102)0 0 381 312 846 85 
Excluded component of fair value hedges(2)
0 0 0 0 0 (1)0 
Net income (expense) recognized on fair value hedges$3 $0 $0 $4 $(20)$(33)$0 
Cash flow hedging relationships:(3)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income$0 $(86)$0 $0 $0 $0 $0 
Foreign exchange contracts:
Realized gains (losses) reclassified from AOCI into net income(4)
0 0 2 0 0 0 (1)
Net income (expense) recognized on cash flow hedges$0 $(86)$2 $0 $0 $0 $(1)
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Nine Months Ended September 30, 2022
Net Interest IncomeNon-Interest Income
(Dollars in millions)Investment SecuritiesLoans, Including Loans Held for SaleOtherInterest-bearing DepositsSecuritized Debt ObligationsSenior and Subordinated NotesOther
Total amounts presented in our consolidated statements of income
$1,336 $20,550 $193 $(1,200)$(214)$(644)$634 
Fair value hedging relationships:
Interest rate and foreign exchange contracts:
Interest recognized on derivatives$22 $0 $0 $46 $12 $(20)$0 
Gains (losses) recognized on derivatives294 0 0 (569)(735)(2,039)(197)
Gains (losses) recognized on hedged items(1)
(364)0 0 570 735 2,155 196 
Excluded component of fair value hedges(2)
0 0 0 0 0 (2)0 
Net income (expense) recognized on fair value hedges$(48)$0 $0 $47 $12 $94 $(1)
Cash flow hedging relationships:(3)
Interest rate contracts:
Realized gains reclassified from AOCI into net income$0 $104 $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$0 $104 $1 $0 $0 $0 $(1)


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Three Months Ended September 30, 2021
Net Interest IncomeNon-Interest Income
(Dollars in millions)Investment SecuritiesLoans, Including Loans Held for SaleOtherInterest-bearing DepositsSecuritized Debt ObligationsSenior and Subordinated NotesOther
Total amounts presented in our consolidated statements of income
$317 $6,205 $16 $(228)$(29)$(116)$245 
Fair value hedging relationships:
Interest rate and foreign exchange contracts:
Interest recognized on derivatives$(25)$0 $0 $31 $30 $50 $0 
Gains (losses) recognized on derivatives19 0 0 (28)(57)(72)(34)
Gains (losses) recognized on hedged items(1)
(83)0 0 27 54 103 34 
Excluded component of fair value hedges(2)
0 0 0 0 0 (1)0 
Net income (expense) recognized on fair value hedges$(89)$0 $0 $30 $27 $80 $0 
Cash flow hedging relationships:(3)
Interest rate contracts:
Realized gains reclassified from AOCI into net income$10 $240 $0 $0 $0 $0 $0 
Foreign exchange contracts:
Realized gains reclassified from AOCI into net income(4)
0 0 0 0 0 0 0 
Net income (expense) recognized on cash flow hedges$10 $240 $0 $0 $0 $0 $0 
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Nine Months Ended September 30, 2021
Net Interest IncomeNon-Interest Income
(Dollars in millions)Investment SecuritiesLoans, Including Loans Held for SaleOtherInterest-bearing DepositsSecuritized Debt ObligationsSenior and Subordinated NotesOther
Total amounts presented in our consolidated statements of income
$1,078 $17,812 $48 $(734)$(89)$(367)$598 
Fair value hedging relationships:
Interest rate and foreign exchange contracts:
Interest recognized on derivatives$(75)$0 $0 $101 $93 $168 $0 
Gains (losses) recognized on derivatives130 0 0 (117)(154)(408)(79)
Gains (losses) recognized on hedged items(1)
(206)0 0 116 140 504 79 
Excluded component of fair value hedges(2)
0 0 0 0 0 (2)0 
Net income (expense) recognized on fair value hedges$(151)$0 $0 $100 $79 $262 $0 
Cash flow hedging relationships:(3)
Interest rate contracts:
Realized gains reclassified from AOCI into net income$30 $700 $0 $0 $0 $0 $0 
Foreign exchange contracts:
Realized gains reclassified from AOCI into net income(4)
0 0 1 0 0 0 1 
Net income (expense) recognized on cash flow hedges$30 $700 $1 $0 $0 $0 $1 
_________
(1)Includes amortization benefit of $23 million and $57 million for the three and nine months ended September 30, 2022, respectively, and amortization expense of $34 million and benefit of $10 million for the three and nine months ended September 30, 2021, 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 $79 million and $98 million for the three and nine months ended September 30, 2022, respectively, and a gain of $83 million and $245 million for the three and nine months ended September 30, 2021, 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 a net after-tax loss of $690 million recorded in AOCI as of September 30, 2022. This amount will offset the cash flows associated with hedged forecasted transactions. The maximum length of time over which forecasted transactions were hedged was approximately 5.5 years as of September 30, 2022. 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 nine months ended September 30, 2022 and 2021. 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 September 30,Nine Months Ended September 30,
(Dollars in millions)2022202120222021
Gains (losses) recognized in other non-interest income:
Customer accommodation:
Interest rate contracts$11 $7 $31 $25 
Commodity contracts20 11 37 20 
Foreign exchange and other contracts7 3 11 11 
Total customer accommodation38 21 79 56 
Other interest rate exposures0 18 14 2 
Other contracts(24)(6)(29)(7)
Total$14 $33 $64 $51 
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NOTE 9—STOCKHOLDERS’ EQUITY
Preferred Stock
The following table summarizes our preferred stock outstanding as of September 30, 2022 and December 31, 2021.
Table 9.1: Preferred Stock Outstanding(1)
Redeemable by Issuer BeginningPer Annum Dividend RateDividend FrequencyLiquidation Preference per ShareTotal Shares Outstanding
as of
September 30, 2022		Carrying Value
(in millions)
SeriesDescriptionIssuance DateSeptember 30, 2022December 31, 2021
Series I5.000%
Non-Cumulative		September 11, 2019December 1, 20245.000%Quarterly$1,000 1,500,000 $1,462 $1,462 
Series J4.800%
Non-Cumulative		January 31, 2020June 1, 20254.800Quarterly1,000 1,250,000 1,209 1,209 
Series K4.625%
Non-Cumulative		September 17, 2020December 1, 20254.625Quarterly1,000 125,000 122 122 
Series L4.375%
Non-Cumulative		May 4, 2021September 1, 20264.375Quarterly1,000 675,000 652 652 
Series M3.950% Fixed Rate Reset
Non-Cumulative		June 10, 2021September 1, 2026
3.950% through 8/31/2026; resets 9/1/2026 and every subsequent 5 year anniversary at 5-Year Treasury Rate +3.157%
Quarterly1,000 1,000,000 988 988 
Series N4.250%
Non-Cumulative		July 29, 2021September 1, 20264.250%Quarterly1,000 425,000 412 412 
Total$4,845 $4,845 
__________
(1)Except for Series M, ownership is held in the form of depositary shares, each representing a 1/40th interest in a share of fixed-rate non-cumulative perpetual preferred stock.
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.
    
Table 9.2: AOCI
Three Months Ended September 30, 2022
(Dollars in millions)Securities Available for Sale
Hedging Relationships(1)
Foreign Currency Translation Adjustments (2)
OtherTotal
AOCI as of June 30, 2022$(5,244)$(1,574)$(78)$(20)$(6,916)
Other comprehensive income (loss) before reclassifications(2,937)(809)(48)0 (3,794)
Amounts reclassified from AOCI into earnings2 5 0 (1)6 
Other comprehensive loss, net of tax(2,935)(804)(48)(1)(3,788)
AOCI as of September 30, 2022$(8,179)$(2,378)$(126)$(21)$(10,704)
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Nine Months Ended September 30, 2022
(Dollars in millions)Securities Available for Sale
Hedging Relationships(1)
Foreign Currency Translation Adjustments (2)
OtherTotal
AOCI as of December 31, 2021$297 $118 $(21)$(20)$374 
Other comprehensive income (loss) before reclassifications(8,483)(2,344)(105)0 (10,932)
Amounts reclassified from AOCI into earnings7 (152)0 (1)(146)
Other comprehensive loss, net of tax(8,476)(2,496)(105)(1)(11,078)
AOCI as of September 30, 2022$(8,179)$(2,378)$(126)$(21)$(10,704)
Three Months Ended September 30, 2021
(Dollars in millions)Securities Available for Sale
Hedging Relationships(1)
Foreign Currency Translation Adjustments(2)
OtherTotal
AOCI as of June 30, 2021$1,089 $730 $(3)$(24)$1,792 
Other comprehensive income (loss) before reclassifications(206)57 (27)0 (176)
Amounts reclassified from AOCI into earnings(2)(252)0 (2)(256)
Other comprehensive loss, net of tax(208)(195)(27)(2)(432)
AOCI as of September 30, 2021$881 $535 $(30)$(26)$1,360 
Nine Months Ended September 30, 2021
(Dollars in millions)Securities Available for Sale
Hedging Relationships(1)
Foreign Currency Translation Adjustments(2)
OtherTotal
AOCI as of December 31, 2020$2,186 $1,362 $(31)$(23)$3,494 
Other comprehensive income (loss) before reclassifications(1,300)(88)1 0 (1,387)
Amounts reclassified from AOCI into earnings(5)(739)0 (3)(747)
Other comprehensive income (loss), net of tax(1,305)(827)1 (3)(2,134)
AOCI as of September 30, 2021$881 $535 $(30)$(26)$1,360 
__________
(1)Includes amounts related to cash flow hedges as well as the excluded component of cross-currency swaps designated as fair value hedges.
(2)Includes other comprehensive gains of $255 million and $477 million for the three and nine months ended September 30, 2022, respectively, and other comprehensive gains of $66 million and $32 million for the three and nine months ended September 30, 2021, respectively, from hedging instruments designated as net investment hedges.
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The following table presents amounts reclassified from each component of AOCI to our consolidated statements of income for the three and nine months ended September 30, 2022 and 2021.
Table 9.3: Reclassifications from AOCI
(Dollars in millions)Three Months Ended September 30,Nine Months Ended September 30,
AOCI ComponentsAffected Income Statement Line Item2022202120222021
Securities available for sale:
Non-interest income (loss)$(3)$2 $(9)$6 
Income tax provision (benefit)(1)0 (2)1 
Net income (loss)(2)2 (7)5 
Hedging relationships:
Interest rate contracts:Interest income (loss)(86)250 104 730 
Foreign exchange contracts:Interest income2 0 1 1 
Interest expense(1)0 (2)(2)
Non-interest income79 83 97 245 
Income (loss) from continuing operations before income taxes(6)333 200 974 
Income tax provision (benefit)(1)81 48 235 
Net income (loss)(5)252 152 739 
Other:
Non-interest income and non-interest expense1 3 1 4 
Income tax provision (benefit)0 1 0 1 
Net income1 2 1 3 
Total reclassifications$(6)$256 $146 $747 
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The table below summarizes other comprehensive income (loss) activity and the related tax impact for the three and nine months ended September 30, 2022 and 2021.
Table 9.4: Other Comprehensive Income (Loss)
 Three Months Ended September 30,
 20222021
(Dollars in millions)Before
Tax		Provision
(Benefit)		After
Tax		Before
Tax		Provision
(Benefit)		After
Tax
Other comprehensive income (loss):
Net unrealized losses on securities available for sale$(3,882)$(947)$(2,935)$(270)$(62)$(208)
Net unrealized losses on hedging relationships(1,065)(261)(804)(255)(60)(195)
Foreign currency translation adjustments(1)
33 81 (48)(6)21 (27)
Other(1)0 (1)(3)(1)(2)
Other comprehensive loss$(4,915)$(1,127)$(3,788)$(534)$(102)$(432)
 Nine Months Ended September 30,
 20222021
(Dollars in millions)Before
Tax		Provision
(Benefit)		After
Tax		Before
Tax		Provision
(Benefit)		After
Tax
Other comprehensive income (loss):
Net unrealized losses on securities available for sale$(11,181)$(2,705)$(8,476)$(1,716)$(411)$(1,305)
Net unrealized losses on hedging relationships(3,292)(796)(2,496)(1,089)(262)(827)
Foreign currency translation adjustments(1)
47 152 (105)11 10 1 
Other(1)0 (1)(4)(1)(3)
Other comprehensive loss$(14,427)$(3,349)$(11,078)$(2,798)$(664)$(2,134)
__________
(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 September 30,Nine Months Ended September 30,
(Dollars and shares in millions, except per share data)2022202120222021
Income from continuing operations, net of tax$1,694 $3,104 $6,128 $9,968 
Income (loss) from discontinued operations, net of tax0 0 0 (3)
Net income1,694 3,104 6,128 9,965 
Dividends and undistributed earnings allocated to participating securities(21)(26)(74)(84)
Preferred stock dividends(57)(79)(171)(200)
Issuance cost for redeemed preferred stock0 (12)0 (12)
Net income available to common stockholders$1,616 $2,987 $5,883 $9,669 
Total weighted-average basic common shares outstanding383.4 438.8 394.9 449.2 
Effect of dilutive securities:(1)
Stock options0.2 0.6 0.4 0.7 
Other contingently issuable shares1.0 1.1 1.1 1.0 
Total effect of dilutive securities1.2 1.7 1.5 1.7 
Total weighted-average diluted common shares outstanding384.6 440.5 396.4 450.9 
Basic earnings per common share:
Net income from continuing operations$4.21 $6.81 $14.90 $21.53 
Income (loss) from discontinued operations0.00 0.00 0.00 (0.01)
Net income per basic common share$4.21 $6.81 $14.90 $21.52 
Diluted earnings per common share:(1)
Net income from continuing operations$4.20 $6.78 $14.84 $21.45 
Income (loss) from discontinued operations0.00 0.00 0.00 (0.01)
Net income per diluted common share$4.20 $6.78 $14.84 $21.44 
__________
(1)Excluded from the computation of diluted earnings per share were awards of 33 thousand shares and 23 thousand shares for the three and nine months ended September 30, 2022, respectively, because their inclusion would be anti-dilutive. There were no shares excluded from the computation of dilutive earnings per share for the three months ended September 30, 2021. For the nine months ended September 30, 2021, awards of 34 thousand shares were excluded from the computation of diluted earnings per share.


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NOTE 11—FAIR VALUE MEASUREMENT
Fair value, also referred to as an exit price, is defined as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The fair value accounting guidance provides a three-level fair value hierarchy for classifying financial instruments. This hierarchy is based on the markets in which the assets or liabilities trade and whether the inputs to the valuation techniques used to measure fair value are observable or unobservable. The fair value measurement of a financial asset or liability is assigned a level based on the lowest level of any input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are described below:
Level 1:Valuation is based on quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2:Valuation is based on observable market-based inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3:Valuation is generated from techniques that use significant assumptions not observable in the market. Valuation techniques include pricing models, discounted cash flow (“DCF”) methodologies or similar techniques.
The accounting guidance for fair value measurements requires that we maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. 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 2021 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 September 30, 2022 and December 31, 2021.
Table 11.1: Assets and Liabilities Measured at Fair Value on a Recurring Basis
September 30, 2022
Fair Value Measurements Using
Netting Adjustments(1)
(Dollars in millions)Level 1Level 2Level 3Total
Assets:
Securities available for sale:
U.S. Treasury securities$5,027 $0 $0 — $5,027 
RMBS0 61,764 218 — 61,982 
CMBS0 7,116 180 — 7,296 
Other securities242 756 0 — 998 
Total securities available for sale5,269 69,636 398 — 75,303 
Loans held for sale0 1,724 0 — 1,724 
Other assets:
Derivative assets(2)
986 3,711 110 $(1,645)3,162 
Other(3)
429 2 36 — 467 
Total assets$6,684 $75,073 $544 $(1,645)$80,656 
Liabilities:
Other liabilities:
Derivative liabilities(2)
$1,551 $4,509 $115 $(1,580)$4,595 
Total liabilities$1,551 $4,509 $115 $(1,580)$4,595 
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Fair Value Measurements Using
Netting Adjustments(1)
(Dollars in millions)Level 1Level 2Level 3Total
Assets:
Securities available for sale:
U.S. Treasury securities$9,442 $0 $0 — $9,442 
RMBS0 73,358 258 — 73,616 
CMBS0 9,360 9 — 9,369 
Other securities206 2,628 0 — 2,834 
Total securities available for sale9,648 85,346 267 — 95,261 
Loans held for sale0 1,026 0 — 1,026 
Other assets:
Derivative assets(2)
406 2,200 84 $(542)2,148 
Other(3)
526 6 41 — 573 
Total assets$10,580 $88,578 $392 $(542)$99,008 
Liabilities:
Other liabilities:
Derivative liabilities(2)
$838 $965 $65 $(544)$1,324 
Total liabilities$838 $965 $65 $(544)$1,324 
__________
(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 $6 million and $11 million recognized as a net valuation allowance on derivative assets and liabilities for non-performance risk as of September 30, 2022 and December 31, 2021, 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 recorded through non-interest income in the consolidated statements of income.
(3)As of September 30, 2022 and December 31, 2021, other includes retained interests in securitizations of $36 million and $41 million, deferred compensation plan assets of $416 million and $490 million, and equity securities of $15 million (including unrealized losses of $17 million) and $42 million (including unrealized losses of $36 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 nine months ended September 30, 2022 and 2021. 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.
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Table 11.2: Level 3 Recurring Fair Value Rollforward
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Three Months Ended September 30, 2022
Total Gains (Losses)
(Realized/Unrealized)
Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2022(1)
(Dollars in millions)Balance, July 1, 2022
Included
in Net
Income(1)
Included in OCIPurchasesSalesIssuancesSettlementsTransfers
Into
Level 3		Transfers
Out of
Level 3		Balance, September 30, 2022
Securities available for sale:(2)
RMBS$240 $2 $(9)$0 $0 $0 $(10)$8 $(13)$218 $2 
CMBS13 (1)(1)0 0 0 (8)177 0 180 0 
Total securities available for sale253 1 (10)0 0 0 (18)185 (13)398 2 
Other assets:
Retained interests in securitizations37 (1)0 0 0 0 0 0 0 36 (1)
Net derivative assets (liabilities)(3)
(12)(22)0 0 0 (11)0 0 40 (5)(22)
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Nine Months Ended September 30, 2022
Total Gains (Losses)
(Realized/Unrealized)
Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2022(1)
(Dollars in millions)Balance, January 1, 2022
Included
in Net
Income(1)
Included in OCIPurchasesSalesIssuancesSettlementsTransfers
Into
Level 3		Transfers
Out of
Level 3		Balance, September 30, 2022
Securities available for sale:(2)
RMBS$258 $15 $(29)$0 $0 $0 $(53)$92 $(65)$218 $6 
CMBS9 (1)(2)0 0 0 (13)190 (3)180 (1)
Total securities available for sale267 14 (31)0 0 0 (66)282 (68)398 5 
Other assets:
Retained interests in securitizations41 (5)0 0 0 0 0 0 0 36 (5)
Net derivative assets (liabilities)(3)
19 (63)0 0 0 25 2 (28)40 (5)(20)
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Three Months Ended September 30, 2021
Total Gains (Losses)
(Realized/Unrealized)
Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2021(1)
(Dollars in millions)Balance, July 1, 2021
Included
in Net
Income(1)
Included in OCIPurchasesSalesIssuancesSettlementsTransfers
Into
Level 3		Transfers
Out of
Level 3		Balance, September 30, 2021
Securities available for sale:(2)
RMBS$289 $4 $(1)$0 $0 $0 $(23)$4 $(20)$253 $4 
CMBS9 0 1 0 0 0 (1)0 0 9 0 
Total securities available for sale298 4 0 0 0 0 (24)4 (20)262 4 
Other assets:
Retained interests in securitizations46 (3)0 0 0 0 0 0 0 43 (3)
Net derivative assets (liabilities)(3)
19 (31)0 0 0 44 6 0 1 39 (29)
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Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Nine Months Ended September 30, 2021
Total Gains (Losses)
(Realized/Unrealized)
Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2021(1)
(Dollars in millions)Balance, January 1, 2021
Included
in Net
Income(1)
Included in OCIPurchasesSalesIssuancesSettlementsTransfers
Into
Level 3		Transfers
Out of
Level 3		Balance, September 30, 2021
Securities available for sale:(2)
RMBS$328 $15 $3 $0 $0 $0 $(74)$88 $(107)$253 $11 
CMBS111 0 (1)0 0 0 (7)0 (94)9 0 
Total securities available for sale439 15 2 0 0 0 (81)88 (201)262 11 
Other assets:
Retained interests in securitizations55 (12)0 0 0 0 0 0 0 43 (12)
Net derivative assets (liabilities)(3)
31 (41)0 0 0 66 (23)6 0 39 (32)
_________
(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 nine months ended September 30, 2022 included in OCI related to Level 3 securities available for sale still held as of September 30, 2022 were net unrealized losses of $15 million and $53 million. For the three and nine months ended September 30, 2021, included in OCI related to Level 3 securities available for sale still held as of September 30, 2021 were no net unrealized gains and $3 million of net unrealized gains, respectively
(3)Includes derivative assets and liabilities of $110 million and $115 million, respectively, as of September 30, 2022 and $191 million and $152 million, respectively, as of September 30, 2021.
Significant Level 3 Fair Value Asset and Liability Inputs
Generally, uncertainties in fair value measurements of financial instruments, such as changes in unobservable inputs, may have a significant impact on fair value. Certain of these unobservable inputs will, in isolation, have a directionally consistent impact on the fair value of the instrument for a given change in that input. Alternatively, the fair value of the instrument may move in an opposite direction for a given change in another input. In general, an increase in the discount rate, default rates, loss severity or credit spreads, in isolation, would result in a decrease in the fair value measurement. In addition, an increase in default rates would generally be accompanied by a decrease in recovery rates, slower prepayment rates and an increase in liquidity spreads, and would lead to a decrease in the fair value measurement.
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
September 30,
2022		Significant
Valuation
Techniques		Significant
Unobservable
Inputs		Range
Weighted
Average(1)
Securities available for sale:
RMBS$218 Discounted cash flows (vendor pricing)Yield
Voluntary prepayment rate
Default rate
Loss severity
2-12%
6-25%
0-11%
30-80%
6%
10%
2%
61%
CMBS180 Discounted cash flows (vendor pricing)Yield
4-5%
5%
Other assets:
Retained interests in securitizations(2)
36 Discounted cash flowsLife of receivables (months)
Voluntary prepayment rate
Discount rate
Default rate
Loss severity
31-39
9-18%
4-8%
1-2%
78-291%
N/A
Net derivative assets (liabilities)(5)Discounted cash flowsSwap rates
3-4%
4%
Quantitative Information about Level 3 Fair Value Measurements
(Dollars in millions)Fair Value at
December 31,
2021		Significant
Valuation
Techniques		Significant
Unobservable
Inputs		Range
Weighted
Average(1)
Securities available for sale:
RMBS$258 Discounted cash flows (vendor pricing)Yield
Voluntary prepayment rate
Default rate
Loss severity
0-21%
5-40%
1-11%
30-100%
3%
11%
2%
65%
CMBS9 Discounted cash flows (vendor pricing)Yield
1-2%
1%
Other assets:
Retained interests in securitizations(2)
41 Discounted cash flowsLife of receivables (months)
Voluntary prepayment rate
Discount rate
Default rate
Loss severity
29-36
9-18%
2-8%
3-4%
72-151%
N/A
Net derivative assets (liabilities)19 Discounted cash flowsSwap rates
1-2%
2%
__________
(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.
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 September 30, 2022 and December 31, 2021, and for which a nonrecurring fair value measurement was recorded during the nine and twelve months then ended.
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Table 11.4: Nonrecurring Fair Value Measurements
September 30, 2022
Estimated Fair Value HierarchyTotal
(Dollars in millions)Level 2Level 3
Loans held for investment$0 $221 $221 
Loans held for sale5 0 5 
Other assets(1)
0 99 99 
Total$5 $320 $325 
December 31, 2021
Estimated Fair Value HierarchyTotal
(Dollars in millions)Level 2Level 3
Loans held for investment$0 $194 $194 
Loans held for sale118 0 118 
Other assets(1)
0 325 325 
Total$118 $519 $637 
__________
(1)As of September 30, 2022, other assets included investments accounted for under measurement alternative of $5 million, cost method investments of $3 million, repossessed assets of $56 million and long-lived assets held for sale of $35 million. As of December 31, 2021, other assets included equity method investments of $50 million, investments accounted for under measurement alternative of $29 million, repossessed assets of $40 million and long-lived assets held for sale of $206 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 20%, and from 0% to 100%, with a weighted average of 13%, as of September 30, 2022 and December 31, 2021, 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 September 30, 2022 and 2021.
Table 11.5: Nonrecurring Fair Value Measurements Included in Earnings
Total Gains (Losses)
Nine Months Ended September 30,
(Dollars in millions)20222021
Loans held for investment$24 $12 
Loans held for sale0 0 
Other assets(1)
(33)(65)
Total$(9)$(53)
__________
(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.
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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 September 30, 2022 and December 31, 2021.
Table 11.6: Fair Value of Financial Instruments
September 30, 2022
Carrying
Value		Estimated
Fair Value		Estimated Fair Value Hierarchy
(Dollars in millions)Level 1Level 2Level 3
Financial assets:
Cash and cash equivalents$24,892 $24,892 $3,716 $21,176 $0 
Restricted cash for securitization investors399 399 399 0 0 
Net loans held for investment291,734 296,142 0 0 296,142 
Loans held for sale5 5 0 5 0 
Interest receivable1,853 1,853 0 1,853 0 
Other investments(1)
1,623 1,623 0 1,623 0 
Financial liabilities:
Deposits with defined maturities34,758 34,380 0 34,380 0 
Securitized debt obligations15,926 15,878 0 15,878 0 
Senior and subordinated notes30,615 30,302 0 30,302 0 
Federal funds purchased and securities loaned or sold under agreements to repurchase528 528 0 528 0 
Other borrowings(2)
7,500 7,500 0 7,500 0 
Interest payable433 433 0 433 0 
 December 31, 2021
Carrying
Value		Estimated
Fair Value		Estimated Fair Value Hierarchy
(Dollars in millions)Level 1Level 2Level 3
Financial assets:
Cash and cash equivalents$21,746 $21,746 $4,164 $17,582 $0 
Restricted cash for securitization investors308 308 308 0 0 
Net loans held for investment265,910 270,508 0 0 270,508 
Loans held for sale4,862 5,091 0 5,091 0 
Interest receivable1,460 1,460 0 1,460 0 
Other investments(1)
1,344 1,344 0 1,344 0 
Financial liabilities:
Deposits with defined maturities17,923 18,062 0 18,062 0 
Securitized debt obligations14,994 15,122 0 15,122 0 
Senior and subordinated notes27,219 27,842 0 27,842 0 
Federal funds purchased and securities loaned or sold under agreements to repurchase820 820 0 820 0 
Interest payable281 281 0 281 0 
__________
(1)Other investments include FHLB and Federal Reserve stock. These investments are included in other assets on our consolidated balance sheets.
(2)Other borrowings exclude capital lease obligations.
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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 2021 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 nine months ended September 30, 2022 and 2021, selected balance sheet data as of September 30, 2022 and 2021, and a reconciliation of our total business segment results to our reported consolidated income from continuing operations, loans held for investment and deposits.
Table 12.1: Segment Results and Reconciliation
Three Months Ended September 30, 2022
(Dollars in millions)Credit CardConsumer Banking
Commercial Banking(1)
Other(1)
Consolidated Total
Net interest income (loss)$4,313 $2,311 $699 $(320)$7,003 
Non-interest income (loss)1,454 129 319 (100)1,802 
Total net revenue (loss)(2)
5,767 2,440 1,018 (420)8,805 
Provision (benefit) for credit losses1,261 285 123 0 1,669 
Non-interest expense3,004 1,340 542 63 4,949 
Income (loss) from continuing operations before income taxes1,502 815 353 (483)2,187 
Income tax provision (benefit)356 193 83 (139)493 
Income (loss) from continuing operations, net of tax$1,146 $622 $270 $(344)$1,694 
Loans held for investment$126,913 $81,199 $95,831 $0 $303,943 
Deposits0 256,661 41,058 19,474 317,193 
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Nine Months Ended September 30, 2022
(Dollars in millions)Credit CardConsumer Banking
Commercial Banking(1)
Other(1)
Consolidated Total
Net interest income (loss)$12,051 $6,571 $1,941 $(646)$19,917 
Non-interest income (loss)4,322 330 868 (227)5,293 
Total net revenue (loss)(2)
16,373 6,901 2,809 (873)25,210 
Provision (benefit) for credit losses2,387 696 353 (5)3,431 
Non-interest expense8,558 3,862 1,515 148 14,083 
Income (loss) from continuing operations before income taxes5,428 2,343 941 (1,016)7,696 
Income tax provision (benefit)1,291 555 223 (501)1,568 
Income (loss) from continuing operations, net of tax$4,137 $1,788 $718 $(515)$6,128 
Loans held for investment$126,913 $81,199 $95,831 $0 $303,943 
Deposits0 256,661 41,058 19,474 317,193 
Three Months Ended September 30, 2021
(Dollars in millions)Credit CardConsumer Banking
Commercial Banking(1)
Other(1)
Consolidated Total
Net interest income (loss)$3,620 $2,159 $578 $(201)$6,156 
Non-interest income (loss)1,263 127 306 (22)1,674 
Total net revenue (loss)(2)
4,883 2,286 884 (223)7,830 
Provision (benefit) for credit losses(198)(91)(53)0 (342)
Non-interest expense2,424 1,186 459 117 4,186 
Income (loss) from continuing operations before income taxes2,657 1,191 478 (340)3,986 
Income tax provision (benefit)627 282 113 (140)882 
Income (loss) from continuing operations, net of tax$2,030 $909 $365 $(200)$3,104 
Loans held for investment$105,030 $77,112 $79,248 $0 $261,390 
Deposits0 252,387 43,347 10,204 305,938 
                                                                                                                                                                                                                                                                                                                                                                                                                                                    
Nine Months Ended September 30, 2021
(Dollars in millions)Credit CardConsumer Banking
Commercial Banking(1)
Other(1)
Consolidated Total
Net interest income (loss)$10,209 $6,290 $1,558 $(336)$17,721 
Non-interest income (loss)3,545 412 803 (164)4,596 
Total net revenue (loss)(2)
13,754 6,702 2,361 (500)22,317 
Benefit for credit losses(1,325)(523)(475)(2)(2,325)
Non-interest expense6,822 3,426 1,295 349 11,892 
Income (loss) from continuing operations before income taxes8,257 3,799 1,541 (847)12,750 
Income tax provision (benefit)1,952 897 364 (431)2,782 
Income (loss) from continuing operations, net of tax$6,305 $2,902 $1,177 $(416)$9,968 
Loans held for investment$105,030 $77,112 $79,248 $0 $261,390 
Deposits0 252,387 43,347 10,204 305,938 
__________
(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 $222 million and $625 million in the three and nine months ended September 30, 2022, respectively, and $123 million and $478 million in the three and nine months ended September 30, 2021, respectively, for credit card finance charges and fees charged off as uncollectible.
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Revenue from Contracts with Customers
The majority of our revenue from contracts with customers consists of interchange fees, service charges and other customer-related fees, and other contract revenue. Interchange fees are primarily from our Credit Card business and are recognized upon settlement with the interchange networks, net of rewards earned by customers. Service charges and other customer-related fees within our Consumer Banking business are primarily related to fees earned on consumer deposit accounts for account maintenance and various transaction-based services such as automated teller machine (“ATM”) usage. Service charges and other customer-related fees within our Commercial Banking business are mostly related to fees earned on treasury management and capital markets services. Other contract revenue in our Credit Card business consists primarily of revenue from our partnership arrangements. Other contract revenue in our Consumer Banking business consists primarily of revenue earned 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 nine months ended September 30, 2022 and 2021.
Table 12.2: Revenue from Contracts with Customers and Reconciliation to Segment Results
Three Months Ended September 30, 2022
(Dollars in millions)Credit CardConsumer Banking
Commercial Banking(1)
Other(1)
Consolidated Total
Contract revenue:
Interchange fees, net(2)
$1,085 $83 $27 $0 $1,195 
Service charges and other customer-related fees0 23 62 0 85 
Other104 18 13 0 135 
Total contract revenue1,189 124 102 0 1,415 
Revenue (reduction) from other sources265 5 217 (100)387 
Total non-interest income (loss)$1,454 $129 $319 $(100)$1,802 
Nine Months Ended September 30, 2022
(Dollars in millions)Credit CardConsumer Banking
Commercial Banking(1)
Other(1)
Consolidated Total
Contract revenue:
Interchange fees, net(2)
$3,115 $234 $79 $1 $3,429 
Service charges and other customer-related fees0 70 190 (1)259 
Other297 56 14 0 367 
Total contract revenue3,412 360 283 0 4,055 
Revenue (reduction) from other sources910 (30)585 (227)1,238 
Total non-interest income (loss)$4,322 $330 $868 $(227)$5,293 
Three Months Ended September 30, 2021
(Dollars in millions)Credit CardConsumer Banking
Commercial Banking(1)
Other(1)
Consolidated Total
Contract revenue:
Interchange fees, net(2)
$930 $68 $24 $0 $1,022 
Service charges and other customer-related fees0 42 71 0 113 
Other98 17 1 0 116 
Total contract revenue1,028 127 96 0 1,251 
Revenue (reduction) from other sources235 0 210 (22)423 
Total non-interest income (loss)$1,263 $127 $306 $(22)$1,674 
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Nine Months Ended September 30, 2021
(Dollars in millions)Credit CardConsumer Banking
Commercial Banking(1)
Other(1)
Consolidated Total
Contract revenue:
Interchange fees, net(2)
$2,598 $192 $65 $0 $2,855 
Service charges and other customer-related fees0 131 187 0 318 
Other262 55 3 0 320 
Total contract revenue2,860 378 255 0 3,493 
Revenue (reduction) from other sources685 34 548 (164)1,103 
Total non-interest income (loss)$3,545 $412 $803 $(164)$4,596 
__________
(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 September 30, 2022 and December 31, 2021. The carrying value represents our reserve and deferred revenue on legally binding commitments.
Table 13.1: Unfunded Lending Commitments
Contractual AmountCarrying Value
(Dollars in millions)September 30, 2022December 31, 2021September 30, 2022December 31, 2021
Credit card lines$361,763 $368,508 N/AN/A
Other loan commitments(1)
49,053 44,572 $198 $125 
Standby letters of credit and commercial letters of credit(2)
1,444 1,419 32 24 
Total unfunded lending commitments$412,260 $414,499 $230 $149 
__________
(1)Includes $4.2 billion and $3.9 billion of advised lines of credit as of September 30, 2022 and December 31, 2021, respectively.
(2)These financial guarantees have expiration dates that range from 2022 to 2027 as of September 30, 2022.
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 $85 million and $90 million as of September 30, 2022 and December 31, 2021, 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 September 30, 2022 are approximately $200 million. Our reserve and reasonably possible loss estimates involve considerable judgment and reflect that there is still significant uncertainty regarding numerous factors that may impact the ultimate loss levels. Notwithstanding, our attempt to estimate a reasonably possible range of loss beyond our current accrual levels for some litigation matters based on current information, it is possible that actual future losses will exceed both the current accrual level and the range of reasonably possible losses disclosed here. Given the inherent uncertainties involved in these matters, especially those involving governmental agencies, and the very large or indeterminate damages sought in some of these matters, there is significant uncertainty as to the ultimate liability we may incur from these litigation matters and an adverse outcome in one or more of these matters could be material to our results of operations or cash flows for any particular reporting period.
Interchange
In 2005, a putative class of retail merchants filed antitrust lawsuits against MasterCard and Visa and several issuing banks, including Capital One, seeking both injunctive relief and monetary damages for an alleged conspiracy by defendants to fix the level of interchange fees. Other merchants have asserted similar claims in separate lawsuits, and while these separate cases did not name any issuing banks, Visa, MasterCard and issuers, including Capital One, have entered settlement and judgment sharing agreements allocating the liabilities of any judgment or settlement arising from all interchange-related cases.
The lawsuits were consolidated before the U.S. District Court for the Eastern District of New York for certain purposes and were settled in 2012. The class settlement, however, was invalidated by the United States Court of Appeals for the Second Circuit in June 2016, and the suit was bifurcated into separate class actions seeking injunctive and monetary relief, respectively. In addition, numerous merchant groups opted out of the 2012 settlement and have pursued their own claims. The claims by the injunctive relief class have not been resolved, but the settlement of $5.5 billion for the monetary damages class received final approval from the trial court, and has been appealed to the U.S. Court of Appeals for the Second Circuit. Visa and MasterCard have also settled a number of the opt-out cases, which required non-material payments from issuing banks, including Capital One. Visa created a litigation escrow account following its initial public offering of stock in 2008 that funds settlements for its member banks, and any settlements related to MasterCard-allocated losses have either already been paid or are reflected in our reserves.
Cybersecurity Incident
On July 29, 2019, we announced that on March 22 and 23, 2019 an outside individual gained unauthorized access to our systems. This individual obtained certain types of personal information relating to people who had applied for our credit card products and to our credit card customers (the “Cybersecurity Incident”). As a result of the Cybersecurity Incident, we are subject to numerous legal proceedings and other inquiries and could be the subject of additional proceedings and inquiries in the future.
Consumer class actions. We were named as a defendant in approximately 75 putative consumer class action cases (primarily in U.S. courts with cases also 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. 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. In the fourth quarter of 2021, the parties agreed to a settlement of the U.S. consumer class action cases for an amount within existing reserves. The court approved the settlement in September 2022. In Canada, a trial court in British Columbia preliminarily certified a class of all impacted Canadian consumers except those in Quebec in the
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second quarter of 2022, which would allow the case to proceed with discovery on a classwide basis under Canadian law. The preliminary certification decision has been appealed.
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. The court granted the Company’s motion to dismiss in September 2022.
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 have cooperated with these offices and responded 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. The OCC lifted its consent order on August 31, 2022.
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 have cooperated 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. 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 U.S. Securities and Exchange Commission (“SEC”) rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding our required disclosure. In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and we must apply judgment in evaluating and implementing possible controls and procedures. 
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 of the Securities Exchange Act of 1934 (“Exchange Act”), our management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of September 30, 2022, the end of the period covered by this Report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2022, 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 third quarter of 2022 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 2021 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table presents information related to the repurchases of shares of our common stock for each calendar month in the third quarter of 2022. 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(1)
Maximum
Amount That May
Yet be Purchased
Under the Plan
or Program(1)
(in millions)
July1,846,896 $107.92 1,846,896 $5,450 
August631,379 109.86 580,866 5,386 
September498,700 100.60 497,026 5,336 
Total2,976,975 107.11 2,924,788 
__________
(1)In January 2022, our Board of Directors authorized the repurchase of up to $5.0 billion of shares of our common stock. In April 2022, our Board of Directors authorized the repurchase of up to an additional $5.0 billion of shares of our common stock. There were 50,513 and 1,674 shares withheld in August and September, respectively, 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

Exhibit No.Description
3.1
3.2
4.1Pursuant 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.
31.1*
31.2*
32.1**
32.2**
101.INSXBRL 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.
104The cover page of Capital One Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formatted in Inline XBRL (included within the Exhibit 101 attachments).
__________
*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: November 4, 2022 By:/s/ ANDREW M. YOUNG
 Andrew M. Young
 Chief Financial Officer
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