About Capital One Financial Corp

Capital One Financial Corporation operates as a financial services holding company that offers financial products and services to consumers, small businesses and commercial clients through digital channels, branch locations, Cafés and other distribution channels. As of December 31, 2022, the company’s principal subsidiaries included Capital One Bank (USA), National Association (COBNA). On October 1, 2022, the company completed the merger of Capital One Bank (USA), National Association (COBNA), with and into CONA, with CONA as the surviving entity (the Bank Merger). The company operates as an issuer of Visa (Visa) and MasterCard (MasterCard) credit cards in the United States of America (U.S.). In addition to credit cards, the company offers debit cards, bank lending, treasury management and depository services, auto loans and other consumer lending products in markets across the U.S. The company services banking customer accounts through digital channels, and its network of branch locations, cafés, call centers and automated teller machines (ATMs). The company also offers products and services outside of the U.S. principally through Capital One (Europe) plc (COEP), an indirect subsidiary of CONA organized and located in the United Kingdom (U.K.), and through a branch of CONA in Canada. Both COEP and its Canadian branch of CONA have the authority to provide credit card loans. Business Developments The company regularly explores and evaluates opportunities to acquire financial products and services, as well as financial assets, including credit card and other loan portfolios, and enter into strategic partnerships as part of its growth strategy. The company also explores opportunities to acquire technology companies and related assets to improve its information technology infrastructure and to deliver on its digital strategy. The company may issue equity or debt to fund its acquisitions. In addition, the company regularly considers the potential disposition of certain of its assets, branches, partnership agreements or lines of business. Operations and Business Segments The company operates through three segments: Credit Card, Consumer Banking, and Commercial Banking. Credit Card: Consists of the company’s domestic consumer and small business card lending, and international card businesses in the United Kingdom and Canada. Consumer Banking: Consists of the company’s deposit gathering and lending activities for consumers and small businesses, and national auto lending. Commercial Banking: Consists of the company’s lending, deposit gathering, capital markets and treasury management services to commercial real estate and commercial and industrial customers. The company’s customers typically include companies with annual revenues between $20 million and $2 billion. Primary Loan Products The company provides a variety of lending products. The company’s primary loan products include credit cards, auto loans and commercial lending products. Credit Cards: The company originates both prime and subprime credit cards through a variety of channels. The company’s credit cards generally have variable interest rates. Credit card accounts are primarily underwritten using an automated underwriting system based on predictive models that the company has developed. The underwriting criteria, which are customized for individual products and marketing programs, are established based on an analysis of the net present value of expected revenues, expenses and losses, subject to further analysis using a variety of stress conditions. Underwriting decisions are generally based on credit bureau information, including payment history, debt burden and credit scores, such as FICO scores, and on other factors, such as applicant income. The company maintains a credit card securitization program and selectively sell charged-off credit card loans. Auto: The company originates both prime and subprime auto loans through a network of auto dealers and direct marketing. The company’s auto loans generally have fixed interest rates and loan terms of 75 months or less, but can go up to 84 months. Loan size limits are customized by program and are generally less than $75,000. Similar to credit card accounts, the underwriting criteria are customized for individual products and marketing programs and based on analysis of net present value of expected revenues, expenses and losses, and are subject to maintaining resilience under a variety of stress conditions. Underwriting decisions are generally based on an applicant’s income, estimated net disposable income, and credit bureau information, including FICO scores, along with collateral characteristics such as loan-to-value (LTV) ratio. The company maintains an auto securitization program. Commercial: The company offers a range of commercial lending products, including loans secured by commercial real estate and loans to middle market commercial and industrial companies. The company’s commercial loans may have a fixed or variable interest rate; however, the majority of its commercial loans have variable rates. The company’s underwriting standards require an analysis of the borrower’s financial condition and prospects, as well as an assessment of the industry in which the borrower operates. Where relevant, the company evaluates and appraises underlying collateral and guarantees. The company maintains underwriting guidelines and limits for major types of borrowers and loan products that specify, where applicable, guidelines for debt service coverage, leverage, LTV ratio and standard covenants and conditions. The company assigns a risk rating and establish a monitoring schedule for loans based on the risk profile of the borrower, industry segment, source of repayment, the underlying collateral and guarantees, if any, and current market conditions. Although the company generally retains the commercial loans it underwrites, it may syndicate positions for risk mitigation purposes, including bridge financing transactions it has underwritten. In addition, the company originates and services multifamily commercial real estate loans which are sold to government-sponsored enterprises. Investment Securities The company’s 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. Deposits The company’s deposits, which include checking accounts, money market deposits, negotiable order of withdrawals, savings deposits and time deposits, represent its largest source of funding for its assets and operations. The company also uses a variety of other funding sources including short-term borrowings, senior and subordinated notes, securitized debt obligations and other borrowings. The company’s total short-term borrowings generally consist of federal funds purchased, securities loaned or sold under agreements to repurchase and Federal Home Loan Banks (FHLB) advances. The company’s long-term debt consists of borrowings with an original contractual maturity of greater than one year. Competition The company’s Credit Card business competes with international, national, regional and local issuers of Visa and MasterCard credit cards, as well as with American Express, Discover Card, private-label card brands, and to a certain extent, issuers of debit cards. Supervision and Regulation The company is a bank holding company (BHC) and a financial holding company (FHC) under the Bank Holding Company Act of 1956, as amended (BHC Act), and is subject to the requirements of the BHC Act, including approval requirements for investments in or acquisitions of banking organizations, capital adequacy standards and limitations on non-banking activities. As a BHC and FHC, the company is subject to supervision, examination and regulation by the Board of Governors of the Federal Reserve System (Federal Reserve). The banks are national associations chartered under the National Bank Act, and the deposits of which are insured by the Deposit Insurance Fund (DIF) of the Federal Deposit Insurance Corporation (FDIC) up to applicable limits. The banks are subject to comprehensive regulation and periodic examination by the Office of the Comptroller of the Currency (OCC), the FDIC and the Consumer Financial Protection Bureau (CFPB). The company is registered as a financial institution holding company under the laws of the Commonwealth of Virginia and as such, it is subject to periodic examination by the Virginia Bureau of Financial Institutions. The business activities of the company and the banks are also subject to regulation and supervision under various laws and regulations. The activities of the banks as consumer lenders are subject to regulation under various federal laws, including for example, the Truth in Lending Act (TILA), the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Community Reinvestment Act (CRA), the Servicemembers Civil Relief Act and the Military Lending Act, as well as under various state laws. TILA, as amended, and together with its implementing rule, Regulation Z, imposes a number of restrictions on credit card practices impacting rates and fees, requires that a consumer’s ability to pay be taken into account before issuing credit or increasing credit limits, and imposes revised disclosures required for open-end credit. The company is subject to a variety of continuously evolving and developing laws and regulations in the United States and abroad regarding privacy, data protection and data security, including those related to the collection, storage, handling, use, disclosure, transfer, security, and other processing of personal information. These areas have seen a considerable increase in legislative and regulatory activity over the past several years. For example, in November 2021, the Federal Reserve, OCC, and FDIC (collectively, the Federal Banking Agencies) issued a final rule that, among other things, requires a banking organization to notify its primary federal regulators as soon as possible and no later than 36 hours after determining that a significant computer-security incident has occurred. For example, in the United States, the company is subject to the Gramm-Leach Bliley Act (GLBA), among other laws and regulations, at the federal level. In Canada, the company is subject to the Personal Information Protection and Electronic Documents Act (PIPEDA). In addition, the European Union (EU) General Data Protection Regulation (GDPR) applies EU data protection laws to companies that process data of EU residents. The company is also subject to the U.K. General Data Protection Regulation (U.K. GDPR). At the U.S. state level, the company is subject to a number of laws and regulations, such as the California Consumer Privacy Act (CCPA) and its implementing regulations (as amended by the California Privacy Rights Act, the “CPRA”), which creates obligations on covered companies to, among other things, share certain information they have collected about California residents with those individuals, subject to certain exceptions. Certain of the company’s non-bank subsidiaries are subject to regulation and supervision by various federal and state authorities. Capital One Securities, Inc., KippsDeSanto & Company and TripleTree, LLC are registered broker-dealers regulated by the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). Capital One Securities, Inc., KippsDeSanto & Company, and TripleTree, LLC are registered broker-dealers regulated by the SEC and the Financial Industry Regulatory Authority. CONA provisionally registered with the Commodity Futures Trading Commission (the CFTC) as a swap dealer in the third quarter of 2020. Registration as a swap dealer subjects CONA to additional regulatory requirements with respect to its swaps and other derivatives activities. As a result of CONA’s swap dealer registration, it is subject to the rules of the OCC concerning capital and margin requirements for swap dealers, including the mandatory exchange of variation margin and initial margin with certain counterparties. Additionally, as a provisionally registered swap dealer, CONA is subject to requirements under the CFTC’s regulatory regime, including rules regarding business conduct standards, recordkeeping obligations, regulatory reporting and procedures relating to swaps trading. CONA’s swaps and other derivatives activities do not require it to register with the SEC as a security-based swap dealer. Additionally, COBNA and CONA are banks within the meaning of Chapter 7 of Title 6.2 of the Code of Virginia governing the acquisition of interests in Virginia financial institutions (Financial Institution Holding Company Act). The Virginia Financial Institution Holding Company Act prohibits any person or entity from acquiring, or making any public offer to acquire, control of a Virginia financial institution or its holding company without making application to, and receiving prior approval from, the Virginia Bureau of Financial Institutions. The bank, as an insured depository institution, is a member of the Deposit Insurance Fund (DIF) maintained by the FDIC. Through the DIF, the FDIC insures the deposits of insured depository institutions up to prescribed limits for each depositor. The FDIC sets a Designated Reserve Ratio (DRR) for the DIF. The company and each of its subsidiaries, including the banks, are subject to the Volcker Rule, a provision of the Dodd-Frank Act that contains prohibitions on proprietary trading and certain investments in, and relationships with, covered funds (hedge funds, private equity funds and similar funds), subject to certain exemptions, in each case as the applicable terms are defined in the Volcker Rule and the implementing regulations. COBNA is subject to laws and regulations in foreign jurisdictions where it operates, currently in the United Kingdom (U.K.) and Canada. In the U.K., COBNA operates through COEP and is an authorized payment institution regulated by the Financial Conduct Authority (FCA). COEP’s indirect parent, Capital One Global Corporation, is wholly-owned by COBNA and is subject to regulation by the Federal Reserve as an agreement corporation under the Federal Reserve’s Regulation K. In Canada, COBNA operates as an authorized foreign bank and is permitted to conduct its credit card business in Canada through its Canadian branch, Capital One Bank (Canada Branch) (Capital One Canada). The primary regulator of Capital One Canada is the Office of the Superintendent of Financial Institutions. History Capital One Financial Corporation was founded in 1988. The company was incorporated in 1994.