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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________
FORM 10-Q
___________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023
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: (703720-1000
(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 June 30, 2023, there were 381,441,449 shares of the registrant’s Common Stock outstanding.



TABLE OF CONTENTS
Page
1
Capital One Financial Corporation (COF)


2
Capital One Financial Corporation (COF)


INDEX OF MD&A AND SUPPLEMENTAL TABLE
Page
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2
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4
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6
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8
9
9.1
10
11
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13
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19
20
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23
24
25
26
27
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29
30
31
32
A
3
Capital One Financial Corporation (COF)

Table of Contents
PART I—FINANCIAL INFORMATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
This discussion contains forward-looking statements that are based upon management’s current expectations and are subject to significant uncertainties and changes in circumstances. Please review “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 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 2022 Annual Report on Form 10-K (“2022 Form 10-K”) and “Part II—Item 1A. Risk Factors” in this Report. Unless otherwise specified, references to notes to our consolidated financial statements refer to the notes to our consolidated financial statements as of June 30, 2023 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 2022 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 June 30, 2023, Capital One Financial Corporation’s principal operating subsidiary was Capital One, National Association (“CONA”). 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 is hereafter collectively referred to as “we,” “us” or “our.” References to the “Bank” shall mean and refer to (i) CONA from and after the Bank Merger and (ii) CONA and COBNA collectively prior to the Bank Merger.
Our consolidated total net revenues are derived primarily from lending to consumer and commercial customers net of funding costs associated with 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 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 and asset/liability management by our centralized Corporate Treasury group, are included in the Other category. The Other category also includes unallocated corporate 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, as well as residual tax expense or benefit to arrive at the consolidated effective tax rate that is not assessed to our primary business segments.
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.
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Commercial Banking: Consists of our lending, deposit gathering, capital markets and treasury management services to commercial real estate and commercial and industrial customers. Our customers typically include companies with annual revenues between $20 million and $2 billion.
Business Developments
We regularly explore and evaluate 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 our growth strategy. We also explore opportunities to acquire technology companies and related assets to improve our information technology infrastructure and to deliver on our digital strategy. We may issue equity or debt to fund our acquisitions. In addition, we regularly consider the potential disposition of certain of our assets, branches, partnership agreements or lines of business.
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SELECTED FINANCIAL DATA
The following table presents selected consolidated financial data and performance from our results of operations for the second quarter and first six months of 2023 and 2022 and selected comparative balance sheet data as of June 30, 2023 and December 31, 2022. 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. These non-GAAP measures should not be viewed as a substitute for reported results determined in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”), nor are they necessarily comparable to non-GAAP measures that may be presented by other companies.
Table 1: Consolidated Financial Highlights
Three Months Ended June 30,Six Months Ended June 30,
(Dollars in millions, except per share data and as noted)20232022Change20232022Change
Income statement
Net interest income$7,113$6,5179%$14,299$12,91411%
Non-interest income1,8991,715113,6163,4914
Total net revenue9,0128,232917,91516,4059
Provision for credit losses2,4901,0851295,2851,762200
Non-interest expense:
Marketing8861,003(12)1,7831,921(7)
Operating expense3,9083,58097,9567,21310
Total non-interest expense4,7944,58359,7399,1347
Income from continuing operations before income taxes1,7282,564(33)2,8915,509(48)
Income tax provision297533(44)5001,075(53)
Net income1,4312,031(30)2,3914,434(46)
Dividends and undistributed earnings allocated to participating securities(23)(25)(8)(39)(53)(26)
Preferred stock dividends(57)(57)(114)(114)
Net income available to common stockholders$1,351$1,949(31)$2,238$4,267(48)
Common share statistics 
Basic earnings per common share:
Net income per basic common share$3.53$4.98(29)%$5.85$10.65(45)%
Diluted earnings per common share:
Net income per diluted common share$3.52$4.96(29)%$5.83$10.61(45)%
Weighted-average common shares outstanding (in millions):
Basic 382.8391.2(2)%382.7400.8(5)%
Diluted383.7392.6(2)383.8402.3(5)
Common shares outstanding (period-end, in millions)381.4383.8(1)381.4383.8(1)
Dividends declared and paid per common share$0.60$0.60$1.20$1.20
Tangible book value per common share (period-end)(1)
90.0787.84390.0787.843
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Three Months Ended June 30,Six Months Ended June 30,
(Dollars in millions, except per share data and as noted)20232022Change20232022Change
Balance sheet (average balances)
Loans held for investment$309,655$286,1108%$308,711$280,75610%
Interest-earning assets439,139398,93410437,180396,52110
Total assets466,652435,3277464,459432,8067
Interest-bearing deposits313,207268,10417311,010269,95315
Total deposits343,678305,95412341,910307,76511
Borrowings48,46853,208(9)48,24347,7731
Common equity50,51149,319250,22151,940(3)
Total stockholders’ equity55,35754,165255,06656,786(3)
Selected performance metrics 
Purchase volume$157,937$148,4916%$299,595$282,1536%
Total net revenue margin(2)
8.21%8.25%(4)bps8.20%8.27%(7)bps
Net interest margin6.48 6.54(6)6.54 6.51
Return on average assets(3)
1.23 1.87(64)1.03 2.05(102)
Return on average tangible assets(4)
1.27 1.93(66)1.06 2.12(106)
Return on average common equity(5)
10.70 15.81(511)8.91 16.43(752)
Return on average tangible common equity(6)
15.30 22.63(733)12.74 23.03(1,029)
Equity-to-assets ratio(7)
11.86 12.44(58)11.86 13.12(126)
Efficiency ratio(8)
53.20 55.67(247)54.36 55.68(132)
Operating efficiency ratio(9)
43.36 43.49(13)44.41 43.9744 
Effective income tax rate from continuing operations17.2 20.8(360)17.3 19.5(220)
Net charge-offs$2,185 $845159%$3,882 $1,612141%
Net charge-off rate2.82 %1.18%164bps2.52 %1.15%137bps
    
(Dollars in millions, except as noted)June 30, 2023December 31, 2022Change
Balance sheet (period-end)  
Loans held for investment$311,323$312,331
Interest-earning assets441,250427,2483%
Total assets467,800455,2493
Interest-bearing deposits314,393300,7895
Total deposits343,705332,9923
Borrowings50,25848,7153
Common equity49,71347,7374
Total stockholders’ equity54,55952,5824
Credit quality metrics
Allowance for credit losses$14,646$13,24011%
Allowance as a percentage of loans held for investment (“allowance coverage ratio”)4.70 %4.24%46bps
30+ day performing delinquency rate3.08 2.9612
30+ day delinquency rate3.36 3.2115
Capital ratios 
Common equity Tier 1 capital(10)
12.7 %12.5%20bps
Tier 1 capital(10)
14.0 13.910
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(Dollars in millions, except as noted)June 30, 2023December 31, 2022Change
Total capital(10)
16.0 15.820bps
Tier 1 leverage(10)
11.0 11.1(10)
Tangible common equity(11)
7.6 7.510
Supplementary leverage(10)
9.4 9.5(10)
Other
Employees (period end, in thousands)55.6 56.0(1)%
__________
(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 “Supplemental Table—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 “Supplemental Table—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 “Supplemental Table—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 “Capital Management” for additional information.
(11)Tangible common equity ratio is a non-GAAP measure calculated based on TCE divided by tangible assets. See “Supplemental Table—Table A—Reconciliation of Non-GAAP Measures” for the calculation of this measure and reconciliation to the comparative U.S. GAAP measure.
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EXECUTIVE SUMMARY
Financial Highlights
We reported net income of $1.4 billion ($3.52 per diluted common share) on total net revenue of $9.0 billion and net income of $2.4 billion ($5.83 per diluted common share) on total net revenue of $17.9 billion for the second quarter and first six months of 2023, respectively. In comparison, we reported net income of $2.0 billion ($4.96 per diluted common share) on total net revenue of $8.2 billion and net income of $4.4 billion ($10.61 per diluted common share) on total net revenue of $16.4 billion for the second quarter and first six months of 2022, respectively.
Our common equity Tier 1 capital ratio as calculated under the Basel III standardized approach was 12.7% and 12.5% as of June 30, 2023 and December 31, 2022, respectively. See “Capital Management” for additional information.
In the second quarter of 2023, we declared and paid common stock dividends of $233 million and repurchased $150 million of shares of our common stock. During the first six months of 2023, we declared and paid common stock dividends of $470 million and repurchased $300 million of shares of our common stock. See “Capital Management—Dividend Policy and Stock Purchases” for additional information.
Below are additional highlights of our performance in the second quarter and first six months of 2023. These highlights are based on a comparison between the results of the second quarter and first six months of 2023 and 2022, except as otherwise noted. The changes in our financial condition and credit performance are generally based on our financial condition and credit performance as of June 30, 2023 compared to December 31, 2022. 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 $600 million to $1.4 billion in the second quarter of 2023 compared to the second quarter of 2022 and decreased by $2.0 billion to $2.4 billion in the first six months of 2023 compared to the first six months of 2022 primarily driven by:
Higher provision for credit losses primarily driven by higher net charge-offs due to continued credit normalization and an allowance build in our credit card loan portfolio, compared to allowance releases in our credit card loan portfolio in the second quarter and first six months of 2022.
Higher non-interest expense primarily driven by increased salaries and associate benefits.
These drivers were partially offset by:
Higher net interest income primarily driven by higher average loan balances in our credit card loan portfolio.
Loans Held for Investment:
Period-end loans held for investment remained substantially flat at $311.3 billion as of June 30, 2023 compared to December 31, 2022.
Average loans held for investment increased by $23.5 billion to $309.7 billion in the second quarter of 2023 compared to the second quarter of 2022 and increased by $28.0 billion to $308.7 billion in the first six months of 2023 compared to the first six months of 2022 primarily driven by growth in our credit card loan portfolio.
Net Charge-Off and Delinquency Metrics:
Our net charge-off rate increased by 164 basis points (“bps”) to 2.82% in the second quarter of 2023 compared to the second quarter of 2022 and increased by 137 bps to 2.52% in the first six months of 2023 compared to the first six months of 2022 primarily driven by continued credit normalization in our credit card and auto loan portfolios, as well as higher losses in our commercial office real estate portfolio.
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Our 30+ day delinquency rate increased by 15 bps to 3.36% as of June 30, 2023 from December 31, 2022 primarily driven by continued credit normalization in our credit card loan portfolio, partially offset by seasonally lower auto delinquency inventories.
Allowance for Credit Losses: Our allowance for credit losses increased by $1.4 billion to $14.6 billion and our allowance coverage ratio increased by 46 bps to 4.70% as of June 30, 2023 compared to December 31, 2022.
CONSOLIDATED RESULTS OF OPERATIONS
The section below provides a comparative discussion of our consolidated financial performance for the second quarter and first six months of 2023 and 2022. We provide a discussion of our business segment results in the following section, “Business Segment Financial Performance.” This section should be read together with our “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, net of reversals, on loans that we deem collectible. Our net interest margin, based on our consolidated results, represents the difference between the yield on our interest-earning assets and the cost of our interest-bearing liabilities, including the notional impact of non-interest-bearing funding. We expect net interest income and our net interest margin to fluctuate based on changes in interest rates and changes in the amount and composition of our interest-earning assets and interest-bearing liabilities.
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Table 2 below presents the average outstanding balance, interest income earned, interest expense incurred and average yield for the second quarter and first six months of 2023 and 2022 for each major category of our interest-earning assets and interest-bearing liabilities. Nonperforming loans are included in the average loan balances below.
Table 2: Average Balances, Net Interest Income and Net Interest Margin
 Three Months Ended June 30,
 20232022
(Dollars in millions)Average
Balance
Interest Income/
Expense
Average Yield/
Rate(1)
Average
Balance
Interest Income/
Expense
Average Yield/
Rate(1)
Assets:
Interest-earning assets:
Loans:(2)
Credit card$138,762 $6,302 18.17%$115,835 $4,413 15.24%
Consumer banking77,699 1,486 7.6581,096 1,433 7.07 
Commercial banking(3)
93,874 1,580 6.7490,203 716 3.17 
Other(4)
 (311)**— 43 **
Total loans, including loans held for sale310,335 9,057 11.67287,134 6,605 9.20 
Investment securities89,994 639 2.8492,062 435 1.89 
Cash equivalents and other interest-earning assets38,810 470 4.8419,738 55 1.10 
Total interest-earning assets439,139 10,166 9.26398,934 7,095 7.11 
Cash and due from banks3,928 5,162 
Allowance for credit losses(14,323)(11,303)
Premises and equipment, net4,369 4,262 
Other assets33,539 38,272 
Total assets$466,652 $435,327 
Liabilities and stockholders’ equity:
Interest-bearing liabilities:
Interest-bearing deposits$313,207 $2,277 2.91%$268,104 $293 0.44%
Securitized debt obligations17,771 236 5.3115,041 65 1.73 
Senior and subordinated notes30,161 528 7.0028,919 194 2.68 
Other borrowings and liabilities2,419 12 1.9510,922 26 0.98 
Total interest-bearing liabilities363,558 3,053 3.36322,986 578 0.72 
Non-interest-bearing deposits30,471 37,850 
Other liabilities17,266 20,326 
Total liabilities411,295 381,162 
Stockholders’ equity55,357 54,165 
Total liabilities and stockholders’ equity$466,652 $435,327 
Net interest income/spread$7,113 5.90$6,517 6.40 
Impact of non-interest-bearing funding0.580.14 
Net interest margin6.48%6.54 %
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 Six Months Ended June 30,
 20232022
(Dollars in millions)Average
Balance
Interest Income/
Expense
Average Yield/
Rate(1)
Average
Balance
Interest Income/
Expense
Average Yield/
Rate(1)
Assets:
Interest-earning assets:
Loans:(2)
Credit card$136,727 $12,355 18.07%$115,007 $8,687 15.11%
Consumer banking78,346 2,947 7.5279,957 2,844 7.11
Commercial banking(3)
94,158 3,068 6.5288,136 1,287 2.92
Other(4)
 (590)**— 154 **
Total loans, including loans held for sale309,231 17,780 11.50283,100 12,972 9.16
Investment securities89,977 1,254 2.7993,374 837 1.79
Cash equivalents and other interest-earning assets37,972 886 4.6720,047 70 0.69
Total interest-earning assets437,180 19,920 9.11396,521 13,879 7.00
Cash and due from banks4,028 5,206 
Allowance for credit losses(13,766)(11,365)
Premises and equipment, net4,359 4,248 
Other assets32,658 38,196 
Total assets$464,459 $432,806 
Liabilities and stockholders’ equity:
Interest-bearing liabilities:
Interest-bearing deposits$311,010 $4,133 2.66%$269,953 $511 0.38%
Securitized debt obligations17,512 447 5.1014,394 94 1.31
Senior and subordinated notes30,149 1,017 6.7527,707 325 2.34
Other borrowings and liabilities2,377 24 2.017,298 35 0.98
Total interest-bearing liabilities361,048 5,621 3.11319,352 965 0.60
Non-interest-bearing deposits30,900 37,812 
Other liabilities17,445 18,856 
Total liabilities409,393 376,020 
Stockholders’ equity55,066 56,786 
Total liabilities and stockholders’ equity$464,459 $432,806 
Net interest income/spread$14,299 6.00$12,914 6.40
Impact of non-interest-bearing funding0.540.11
Net interest margin6.54%6.51%
__________
(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.
(2)Past due fees, net of reversals, included in interest income totaled approximately $526 million and $1.0 billion in the second quarter and first six months of 2023, respectively, and $439 million and $877 million in the second quarter and first six months of 2022, respectively.
(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. Taxable-equivalent adjustments included in the interest income and yield computations for our commercial loans totaled approximately $19 million and $37 million in the second quarter and first six months of 2023, respectively, and $18 million and $36 million in the the second quarter and first six months of 2022, 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 $596 million to $7.1 billion in the second quarter of 2023 compared to the second quarter of 2022 and increased by $1.4 billion to $14.3 billion in the first six months of 2023 compared to the first six months of 2022, primarily driven by higher asset yields and higher average loan balances in our credit card loan portfolio.
Net interest margin remained substantially flat at 6.48% in the second quarter of 2023 compared to the second quarter of 2022 and 6.54% in the first six months of 2023 compared to the first six months of 2022.
Table 3 displays the change in our net interest income between periods and the extent to which the variance is attributable to:
changes in the volume of our interest-earning assets and interest-bearing liabilities; or
changes in the interest rates related to these assets and liabilities.
Table 3: Rate/Volume Analysis of Net Interest Income(1)
Three Months Ended June 30,Six Months Ended June 30,
 2023 vs. 20222023 vs. 2022
(Dollars in millions)Total VarianceVolumeRateTotal VarianceVolumeRate
Interest income:
Loans:
Credit card$1,889 $951 $938 $3,668 $1,785 $1,883 
Consumer banking53 (60)113 103 (57)160 
Commercial banking(2)
864 30 834 1,781 93 1,688 
Other(3)
(354) (354)(744) (744)
Total loans, including loans held for sale2,452 921 1,531 4,808 1,821 2,987 
Investment securities204 (10)214 417 (31)448 
Cash equivalents and other interest-earning assets415 76 339 816 90 726 
Total interest income3,071 987 2,084 6,041 1,880 4,161 
Interest expense:
Interest-bearing deposits1,984 56 1,928 3,622 88 3,534 
Securitized debt obligations171 13 158 353 24 329 
Senior and subordinated notes334 9 325 692 31 661 
Other borrowings and liabilities(14)(20)6 (11)(24)13 
Total interest expense2,475 58 2,417 4,656 119 4,537 
Net interest income$596 $929 $(333)$1,385 $1,761 $(376)
__________
(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 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.
(3)Interest income/expense in the Other category represents the impact of hedge accounting on our loan portfolios and the offsetting reduction of the taxable-equivalent adjustments of our commercial loans as described above.
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Non-Interest Income
Table 4 displays the components of non-interest income for the second quarter and first six months of 2023 and 2022.
Table 4: Non-Interest Income
 Three Months Ended June 30,Six Months Ended June 30,
(Dollars in millions)2023202220232022
Interchange fees, net$1,213 $1,201 $2,352$2,234 
Service charges and other customer-related fees411 415 790815 
Other(1)(2)
275 99 474442 
Total non-interest income$1,899 $1,715 $3,616$3,491 
________
(1)Primarily consists of revenue from Capital One Shopping, our credit card partnership agreements, commercial mortgage banking revenue and treasury and other investment income.
(2)Includes gains of $25 million and $49 million on deferred compensation plan investments in the second quarter and first six months of 2023, respectively, and losses of $62 million and $87 million on deferred compensation plan investments in the second quarter and first six months of 2022, respectively. These amounts have corresponding offsets in non-interest expense.

Non-interest income increased by $184 million to $1.9 billion primarily driven by gains on deferred compensation plan investments in the second quarter of 2023 compared to losses in the second quarter of 2022. Non-interest income increased by $125 million to $3.6 billion in the first six months of 2023 compared to the first six months of 2022 primarily driven by higher net interchange fees due to an increase in purchase volume and gains on our deferred compensation plan investments, offset by the absence of the gain on the sale of partnership loan portfolios in 2022.
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 $1.4 billion to $2.5 billion in the second quarter of 2023 and increased by $3.5 billion to $5.3 billion in the first six months of 2023 primarily driven by higher net charge-offs due to continued credit normalization and an allowance build in our credit card loan portfolio, compared to allowance releases in our credit card loan portfolio in the second quarter and first six months of 2022.
We provide additional information on the provision for credit losses and changes in the allowance for credit losses within “Credit Risk Profile” and “Part I—Item 1. Financial Statements and Supplementary Data—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 “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2022 Form 10-K.
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Non-Interest Expense
Table 5 displays the components of non-interest expense for the second quarter and first six months of 2023 and 2022.
Table 5: Non-Interest Expense
Three Months Ended June 30,Six Months Ended June 30,
(Dollars in millions)2023202220232022
Operating Expense:
    Salaries and associate benefits(1)
$2,317 $1,946 $4,744 $3,972 
    Occupancy and equipment506 481 1,014 994 
    Professional services290 458 614 855 
    Communications and data processing344 339 694 678 
    Amortization of intangibles22 14 36 28 
    Other non-interest expense:
    Bankcard, regulatory and other fee assessments51 61 135 121 
    Collections89 79 172 163 
    Other289 202 547 402 
    Total other non-interest expense429 342 854 686 
Total operating expense$3,908 $3,580 $7,956 $7,213 
Marketing886 1,003 1,783 1,921 
Total non-interest expense$4,794 $4,583 $9,739 $9,134 
_________
(1)Includes expenses of $25 million and $49 million related to our deferred compensation plan for the second quarter and first six months of 2023, respectively, and benefits of $62 million and $87 million related to our deferred compensation plan investments for the second quarter and first six months of 2022, respectively. These amounts have corresponding offsets from investments in other non-interest income.
Non-interest expense increased by $211 million to $4.8 billion in the second quarter of 2023 compared to the the second quarter of 2022 and increased by $605 million to $9.7 billion in the first six months of 2023 compared to the first six months of 2022 primarily driven by increased salaries and associate benefits.
Income Taxes
We recorded an income tax provision of $297 million (17.2% effective income tax rate) and $500 million (17.3% effective income tax rate) in the second quarter and first six months of 2023, respectively, compared to an income tax provision of $533 million (20.8% effective income tax rate) and $1.1 billion (19.5% effective income tax rate) in the second quarter and first six months of 2022, 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.
We provide additional information on items affecting our income taxes and effective tax rate in “Part II—Item 8. Financial Statements and Supplementary Data—Note 15—Income Taxes” in our 2022 Form 10-K.

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CONSOLIDATED BALANCE SHEETS ANALYSIS
Total assets increased by $12.6 billion to $467.8 billion as of June 30, 2023 from December 31, 2022 primarily driven by increases in our cash balances as we continue to hold modestly elevated levels of liquidity given the market volatility.
Total liabilities increased by $10.6 billion to $413.2 billion as of June 30, 2023 from December 31, 2022 primarily driven by deposit growth due to our national consumer banking strategy.
Stockholders’ equity increased by $2.0 billion to $54.6 billion as of June 30, 2023 from December 31, 2022 primarily driven by net income of $2.4 billion.
The following is a discussion of material changes in the major components of our assets and liabilities during the first six months of 2023. 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 97% of our total investment securities portfolio as of both June 30, 2023 and December 31, 2022.
The fair value of our available for sale securities portfolio increased by $1.5 billion to $78.4 billion as of June 30, 2023 from December 31, 2022, primarily driven by net purchases in the first quarter of 2023. See “Part I—Item 1. Financial Statements and Supplementary Data—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 June 30, 2023 and December 31, 2022.
Table 6: Loans Held for Investment
 June 30, 2023December 31, 2022
(Dollars in millions)LoansAllowanceNet LoansLoansAllowanceNet Loans
Credit Card$142,491 $10,976 $131,515 $137,730 $9,545 $128,185 
Consumer Banking77,280 2,185 75,095 79,925 2,237 77,688 
Commercial Banking91,552 1,485 90,067 94,676 1,458 93,218 
Total$311,323 $14,646 $296,677 $312,331 $13,240 $299,091 
Loans held for investment remained substantially flat at $311.3 billion as of June 30, 2023 compared to December 31, 2022.
We provide additional information on the composition of our loan portfolio and credit quality in “Credit Risk Profile,” “Consolidated Results of Operations” and “Part I—Item 1. Financial Statements and Supplementary Data—Note 3—Loans.”
Funding Sources
Our primary source of funding comes from retail deposits, as they are a relatively stable and lower cost source of funding. In addition to deposits, we raise funding through the issuance of senior and subordinated notes, securitized debt obligations, federal funds purchased, securities loaned or sold under agreements to repurchase, and Federal Home Loan Bank (“FHLB”) advances secured by certain portions of our loan and securities portfolios.
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Table 7 provides the composition of our primary sources of funding as of June 30, 2023 and December 31, 2022.
Table 7: Funding Sources Composition
June 30, 2023December 31, 2022
(Dollars in millions)Amount% of TotalAmount% of Total
Deposits:
Consumer Banking$286,174 73%$270,592 71%
Commercial Banking36,793 940,808 11
Other(1)
20,738 521,592 6
Total deposits(2)
343,705 87332,992 88
Securitized debt obligations17,861 516,973 4
Other debt32,397 831,742 8
Total funding sources$393,963 100%$381,707 100%
__________
(1)Includes brokered deposits of $19.7 billion and $20.6 billion as of June 30, 2023 and December 31, 2022, respectively.
(2)As of June 30, 2023 and December 31, 2022, we held $71.5 billion and $80.7 billion, respectively, of estimated uninsured deposits that exclude intercompany balances. These amounts are primarily comprised of checking and savings deposits. These estimated uninsured deposits comprise approximately 21% and 24% of our total deposits as of June 30, 2023 and December 31, 2022, respectively. We estimate our uninsured amounts based on methodologies and assumptions used for our “Consolidated Reports of Condition and Income” (FFIEC 031) filed with the Federal Banking Agencies.
Total deposits increased by $10.7 billion to $343.7 billion as of June 30, 2023 from December 31, 2022 primarily driven by our national banking strategy, which includes originations from periodic limited time offerings in time deposits.
Securitized debt obligations increased by $888 million to $17.9 billion as of June 30, 2023 from December 31, 2022 primarily driven by net issuances in our credit card and auto securitization programs.
Other debt increased by $655 million to $32.4 billion as of June 30, 2023 from December 31, 2022 primarily driven by net issuances of senior debt, partially offset by maturities of subordinated debt.
We provide additional information on our funding sources in “Liquidity Risk Profile” and “Part I—Item 1. Financial Statements and Supplementary Data—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 “Part I—Item 1. Financial Statements and Supplementary Data—Note 5—Variable Interest Entities and Securitizations” and “Part I—Item 1. Financial Statements and Supplementary Data—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 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 is managed by our centralized Corporate Treasury group and 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 is unique to each business segment and acquired business and is based on the composition of assets and liabilities. The funds transfer pricing process considers the interest rate and liquidity risk characteristics of assets and liabilities and off-balance sheet products. Periodically, the methodology and assumptions utilized in the funds transfer pricing process are adjusted to reflect economic conditions and other factors, which may impact the allocation of net interest income to the business segments. 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 “Part II—Item 8. Financial Statements and Supplementary Data—Note 17—Business Segments and Revenue from Contracts with Customers” in our 2022 Form 10-K.
We refer to the business segment results derived from our internal management accounting and reporting process as our “managed” presentation, which differs in some cases from our reported results prepared based on U.S. GAAP. There is no comprehensive authoritative body of guidance for management accounting equivalent to U.S. GAAP; therefore, the managed presentation of our business segment results may not be comparable to similar information provided by other financial services companies. In addition, our individual business segment results should not be used as a substitute for comparable results determined in accordance with U.S. GAAP.
We summarize our business segment results for the second quarter and first six months of 2023 and 2022 and provide a comparative discussion of these results for, as well as changes in our financial condition and credit performance metrics as of June 30, 2023 compared to December 31, 2022. We provide a reconciliation of our total business segment results to our reported consolidated results in “Part I—Item 1. Financial Statements and Supplementary Data—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 second quarter and first six months of 2023 and 2022.
Table 8: Business Segment Results
 Three Months Ended June 30,
 20232022
 
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$6,226 69%$857 59%$5,309 65%$1,491 74%
Consumer Banking2,418 27709 502,243 27516 25
Commercial Banking(3)
889 10200 14907 11152 7
Other(3)
(521)(6)(335)(23)(227)(3)(128)(6)
Total
$9,012 100%$1,431 100%$8,232 100%$2,031 100%
Six Months Ended June 30,
 
20232022
 
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$12,246 69%$1,406 58%$10,606 65%$2,991 68%
Consumer Banking4,913 271,425 604,461 271,166 26
Commercial Banking(3)
1,749 10254 111,791 11448 10
Other(3)
(993)(6)(694)(29)(453)(3)(171)(4)
Total$17,915 100%$2,391 100%$16,405 100%$4,434 100%
__________
(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 $857 million and $1.4 billion in the second quarter and first six months of 2023, respectively, and $1.5 billion and $3.0 billion in the second quarter and first six months of 2022, 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 June 30,Six Months Ended June 30,
(Dollars in millions, except as noted)20232022Change20232022Change
Selected income statement data:
Net interest income$4,727$3,899 21%$9,384$7,73821%
Non-interest income1,4991,410 62,8622,868
Total net revenue(1)
6,2265,309 1712,24610,60615
Provision for credit losses2,084581 **4,3451,126**
Non-interest expense3,0202,771 96,0585,5549
Income from continuing operations before income taxes1,1221,957 (43)1,8433,926(53)
Income tax provision265466 (43)437935(53)
Income from continuing operations, net of tax$857$1,491 (43)$1,406$2,991(53)
Selected performance metrics:
Average loans held for investment$138,762$115,83520$136,727$113,67020
Average yield on loans(2)
18.17 %15.24 %293bps18.07 %15.11 %296bps
Total net revenue margin(3)
17.95 18.33 (38)17.9118.44(53)
Net charge-offs$1,528 $678 125%$2,897$1,285125%
Net charge-off rate4.41 %2.34 %207bps4.24 %2.26 %198bps
Purchase volume$157,937$148,4916%$299,595$282,1536%
(Dollars in millions, except as noted)June 30, 2023December 31, 2022Change
Selected period-end data:
Loans held for investment$142,491$137,7303%
30+ day performing delinquency rate3.77 %3.46 %31bps
30+ day delinquency rate3.77 3.46 31
Nonperforming loan rate(4)
0.01 0.01 
Allowance for credit losses$10,976 $9,54515%
Allowance coverage ratio7.70%6.93 %77bps
__________
(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 any uncollectible amounts. Total net revenue was reduced by $443 million and $848 million in the second quarter and first six months of 2023, respectively, compared to $211 million and $403 million in the second quarter and first six months of 2022, 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 “Nonperforming Loans and Other Nonperforming Assets” for additional information.
**    Not meaningful.
Key factors affecting the results of our Credit Card business for the second quarter and first six months of 2023 compared to the second quarter and first six months of 2022, and changes in financial condition and credit performance between June 30, 2023 and December 31, 2022 include the following:
Net Interest Income: Net interest income increased by $828 million to $4.7 billion in the second quarter of 2023 and increased by $1.6 billion to $9.4 billion in the first six months of 2023 primarily driven by higher average loan balances.
Non-Interest Income: Non-interest income increased by $89 million to $1.5 billion in the second quarter of 2023 primarily driven by gains on our deferred compensation plan investments. Non-interest income remained substantially flat at $2.9 billion in the first six months of 2023 compared to the first six months of 2022 due to higher net interchange and gains on our deferred compensation plan investments, offset by the absence of the gain on the sale of partnership loan portfolios in 2022.
Provision for Credit Losses: Provision for credit losses increased by $1.5 billion to $2.1 billion in the second quarter of 2023 and increased by $3.2 billion to $4.3 billion in the first six months of 2023 primarily driven by higher net charge-offs due to continued credit normalization combined with an allowance build, compared to allowance releases in the second quarter and first six months of 2022.
Non-Interest Expense: Non-interest expense increased by $249 million to $3.0 billion in the second quarter of 2023 and increased by $504 million to $6.1 billion in the first six months of 2023 primarily driven by increased salaries and associate benefits.
Loans Held for Investment:
Period-end loans held for investment increased by $4.8 billion to $142.5 billion as of June 30, 2023 from December 31, 2022 primarily driven by growth across our portfolio.

Average loans held for investment increased by $22.9 billion to $138.8 billion in the second quarter of 2023 compared to the second quarter of 2022 and increased by $23.1 billion to $136.7 billion in the first six months of 2023 compared to the first six months of 2022 primarily driven by growth across our portfolio.
Net Charge-Off and Delinquency Metrics:
The net charge-off rate increased by 207 bps to 4.41% in the second quarter of 2023 compared to the second quarter of 2022 and increased by 198 bps to 4.24% in the first six months of 2023 compared to the first six months of 2022 primarily driven by continued credit normalization.

The 30+ day delinquency rate increased by 31 bps to 3.77% as of June 30, 2023 from December 31, 2022 primarily driven by continued credit normalization.
Domestic Card Business
The Domestic Card business generated net income from continuing operations of $828 million and $1.3 billion in the second quarter and first six months of 2023, respectively, and $1.5 billion and $2.8 billion in the the second quarter and first six months of 2022, respectively. In the second quarter and first six months of 2023 and 2022, 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 June 30,Six Months Ended June 30,
(Dollars in millions, except as noted)20232022Change20232022Change
Selected income statement data:
Net interest income$4,453$3,65122%$8,843$7,27122%
Non-interest income1,4311,34072,7292,5885
Total net revenue(1)
5,8844,9911811,5729,85917
Provision for credit losses1,995494**4,1691,053**
Non-interest expense2,8052,59485,6525,15810
Income from continuing operations before income taxes1,0841,903(43)1,7513,648(52)
Income tax provision256450(43)413864(52)
Income from continuing operations, net of tax$828$1,453(43)$1,338$2,784(52)
Selected performance metrics:
Average loans held for investment$132,505$109,96221$130,544$107,76121
Average yield on loans(2)
18.07 %15.03%304bps17.98 %14.92 %306bps
Total net revenue margin(3)
17.7618.16 (40)17.7318.21(48)
Net charge-offs$1,451$622 133%$2,750$1,181133%
Net charge-off rate4.38%2.26%212bps4.21 %2.19 %202bps
Purchase volume$154,184$144,6687%$292,494$270,9528%
(Dollars in millions, except as noted)June 30, 2023December 31, 2022Change
Selected period-end data:
Loans held for investment$135,975$131,5813%
30+ day performing delinquency rate3.74 %3.43 %31bps
Allowance for credit losses$10,576$9,16515%
Allowance coverage ratio7.78 %6.97 %81bps
__________
(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 any 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 second quarter of 2023 and in the first six months of 2023 compared to the second quarter of 2022 and in the first six months of 2022 primarily driven by:
Higher provision for credit losses primarily driven by higher net charge-offs due to continued credit normalization combined with an allowance build, compared to allowance releases in the second quarter and first six months of 2022.
Higher non-interest expense primarily driven by increased salaries and associate benefits.
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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 and gains on our deferred compensation plan investments, offset by the absence of the gain on the sale of a partnership loan portfolio in 2022.
Consumer Banking Business
The primary sources of revenue for our Consumer Banking business are net interest income from loans and deposits as well as service charges and customer-related fees. Expenses primarily consist of the provision for credit losses, operating costs and marketing expenses.
Our Consumer Banking business generated net income from continuing operations of $709 million and $1.4 billion in the second quarter and first six months of 2023, respectively, and $516 million and $1.2 billion in the second quarter and first six months of 2022, 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 June 30,Six Months Ended June 30,
(Dollars in millions, except as noted)20232022Change20232022Change
Selected income statement data:
Net interest income$2,269$2,1476%$4,629$4,2609%
Non-interest income149965528420141
Total net revenue2,4182,24384,9134,46110
Provision for credit losses259281(8)53441130
Non-interest expense1,2311,286(4)2,5142,522
Income from continuing operations before income taxes928676371,8651,52822
Income tax provision2191603744036222
Income from continuing operations, net of tax$709$51637$1,425$1,16622
Selected performance metrics:
Average loans held for investment:
Auto$76,233$79,313(4)$76,846$78,109(2)
Retail banking1,4651,668(12)1,4971,732(14)
Total consumer banking$77,698$80,981(4)$78,343$79,841(2)
Average yield on loans held for investment(1)
7.65 %7.08%57bps7.52 %7.13%39bps
Average deposits$285,647$254,33612%$282,229$254,79811%
Average deposits interest rate2.46 %0.38 %208bps2.21 %0.33 %188bps
Net charge-offs$279$136 105%$586$282 108%
Net charge-off rate1.43 %0.67 %76bps1.50 %0.71 %79bps
Auto loan originations$7,160$10,328(31)%$13,371$22,041(39)%
(Dollars in millions, except as noted)June 30, 2023December 31, 2022Change
Selected period-end data:
Loans held for investment:
Auto$75,841$78,373(3)%
Retail banking1,4391,552(7)
Total consumer banking$77,280$79,925(3)
30+ day performing delinquency rate5.30 %5.53 %(23)bps
30+ day delinquency rate5.956.18(23)
Nonperforming loan rate0.820.793
Nonperforming asset rate(2)
0.880.871
Allowance for credit losses$2,185$2,237(2)%
Allowance coverage ratio2.83 %2.80 %3bps
Deposits$286,174$270,5926
_________
(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.


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Key factors affecting the results of our Consumer Banking business for the second quarter and first six months of 2023 compared to the second quarter and first six months of 2022, and changes in financial condition and credit performance between June 30, 2023 and December 31, 2022 include the following:
Net Interest Income: Net interest income increased by $122 million to $2.3 billion in the second quarter of 2023 and increased by $369 million to $4.6 billion in the first six months of 2023 primarily driven by higher margins and deposits in our retail banking business due to the increases in interest rates, partially offset by lower margins in our auto business.
Non-Interest Income: Non-interest income increased by $53 million to $149 million in the second quarter of 2023 and increased by $83 million to $284 million in the first six months of 2023 primarily driven by gains on our deferred compensation plan investments and higher interchange fees from an increase in debit card purchase volume.
Provision for Credit Losses: Provision for credit losses remained substantially flat at $259 million in the second quarter of 2023 compared to the second quarter of 2022. Provision for credit losses increased by $123 million to $534 million in the first six months of 2023 primarily driven by continued credit normalization.
Non-Interest Expense: Non-interest expense decreased by $55 million to $1.2 billion in the second quarter of 2023 primarily driven by decreased marketing spend. Non-interest expense remained substantially flat at $2.5 billion in the first six months of 2023 compared to the first six months of 2022.
Loans Held for Investment: 
Period-end loans held for investment decreased by $2.6 billion to $77.3 billion as of June 30, 2023 from December 31, 2022 primarily driven by customer payments, which outpaced auto loan originations.
Average loans held for investment decreased by $3.3 billion to $77.7 billion in the second quarter of 2023 compared to the second quarter of 2022 and decreased by $1.5 billion to $78.3 billion in the first six months of 2023 compared to the first six months of 2022 primarily driven by lower auto loan originations.
Deposits: 
Period-end deposits increased by $15.6 billion to $286.2 billion as of June 30, 2023 from December 31, 2022 primarily driven by our national banking strategy, which includes originations from periodic limited time offerings in time deposits.
Net Charge-Off and Delinquency Metrics: 
The net charge-off rate increased by 76 bps to 1.43% in the second quarter of 2023 compared to the the second quarter of 2022 and increased by 79 bps to 1.50% in the first six months of 2023 compared to the first six months of 2022 primarily driven by continued credit normalization in our auto loan portfolio.
The 30+ day delinquency rate decreased by 23 bps to 5.95% as of June 30, 2023 from December 31, 2022 primarily driven by seasonally lower auto delinquency inventories.
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 $200 million and $254 million in the second quarter and first six months of 2023, respectively, and $152 million and $448 million in the the second quarter and first six months of 2022, 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 June 30,Six Months Ended June 30,
(Dollars in millions, except as noted)20232022Change20232022Change
Selected income statement data:
Net interest income$632$635 $1,280$1,2423%
Non-interest income257272 (6)%469549(15)
Total net revenue(1)
889907 (2)1,7491,791(2)
Provision for credit losses(2)
146222 (34)40523076
Non-interest expense482485 (1)1,0129734
Income from continuing operations before income taxes261200 31332588(44)
Income tax provision6148 2778140(44)
Income from continuing operations, net of tax$200$152 32$254$448(43)
Selected performance metrics:
Average loans held for investment:
Commercial and multifamily real estate$37,068$35,7544$37,220$35,2156
Commercial and industrial56,12753,540556,42152,0308
Total commercial banking$93,195$89,2944$93,641$87,2457
Average yield on loans held for investment(1)(3)
6.75 %3.18 %357bps6.53 %2.92 %361bps
Average deposits$37,960$40,536(6)%$38,945$42,760(9)%
Average deposits interest rate2.68 %0.19 %249bps2.51 %0.15 %236bps
Net charge-offs$378 $31 **$399 $45 **
Net charge-off rate1.62 %0.14 %148bps0.85 %0.10 %75bps
(Dollars in millions, except as noted)June 30, 2023December 31, 2022Change
Selected period-end data:
Loans held for investment:
Commercial and multifamily real estate$36,041$37,453(4)%
Commercial and industrial55,51157,223(3)
Total commercial banking$91,552$94,676(3)
Nonperforming loan rate0.89 %0.74 %15bps
Nonperforming asset rate(4)
0.89 0.74 15
Allowance for credit losses(2)
$1,485$1,4582%
Allowance coverage ratio1.62%1.54%8bps
Deposits$36,793$40,808(10)%
Loans serviced for others52,05951,918— 
__________
(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 $197 million and $218 million as of June 30, 2023 and December 31, 2022, respectively.
(3)Average yield is calculated based on annualized interest income for the period divided by average loans during the period and does not include any allocations, such as funds transfer pricing.
(4)Nonperforming assets consist of nonperforming loans and other foreclosed assets. The total nonperforming asset rate is calculated based on total nonperforming assets divided by the combined period-end total loans held for investment and other foreclosed assets.
**    Not meaningful.
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Key factors affecting the results of our Commercial Banking business for the second quarter and first six months of 2023 compared to the second quarter and first six months of 2022, and changes in financial condition and credit performance between June 30, 2023 and December 31, 2022 include the following:
Net Interest Income: Net interest income remained substantially flat at $632 million in the second quarter of 2023 compared to the second quarter of 2022 and $1.3 billion in the first six months of 2023 compared to the first six months of 2022.
Non-Interest Income: Non-interest income remained substantially flat at $257 million in the second quarter of 2023 compared to the the second quarter of 2022. Non-interest income decreased by $80 million to $469 million in the first six months of 2023 primarily driven by our agency and capital markets businesses.
Provision for Credit Losses: Provision for credit losses decreased by $76 million to $146 million in the second quarter of 2023 primarily driven by an allowance release due to lower outstanding loan balances, partially offset by higher charge-offs in our office real estate portfolio. Provision for credit losses increased by $175 million to $405 million in the first six months of 2023 primarily driven by higher charge-offs and a net allowance build in our office real estate portfolio.
Non-Interest Expense: Non-interest expense remained substantially flat at $482 million in the second quarter of 2023 compared to the second quarter of 2022 and $1.0 billion in the first six months of 2023 compared to the first six months of 2022.
Loans Held for Investment:
Period-end loans held for investment decreased by $3.1 billion to $91.6 billion as of June 30, 2023 from December 31, 2022 primarily driven by customer payments outpacing loan originations.
Average loans held for investment increased by $3.9 billion to $93.2 billion in the second quarter of 2023 compared to the second quarter of 2022 and increased by $6.4 billion to $93.6 billion in the first six months of 2023 compared to the first six months of 2022 primarily driven by growth across our loan portfolio.
Deposits:
Period-end deposits decreased by $4.0 billion to $36.8 billion as of June 30, 2023 from December 31, 2022 primarily driven by our commercial deposit strategy.
Net Charge-Off and Nonperforming Metrics:
The net charge-off rate increased by 148 bps to 1.62% in the second quarter of 2023 and increased by 75 bps to 0.85% in the first six months of 2023 primarily driven by charge offs in our office real estate portfolio.
The nonperforming loan rate increased by 15 bps to 0.89% as of June 30, 2023 compared to December 31, 2022 primarily driven by isolated credit downgrades in our office real estate portfolio.
Other Category
Other includes unallocated amounts related to our centralized Corporate Treasury group activities, such as management of our corporate investment securities portfolio, asset/liability management and oversight of our funds transfer pricing process. Other also includes:
unallocated corporate revenue and expenses that do not directly support the operations of the business segments or for which the business segments are not considered financially accountable in evaluating their performance, such as certain restructuring charges;
offsets related to certain line-item reclassifications;
residual tax expense or benefit to arrive at the consolidated effective tax rate that is not assessed to our primary business segments; and
foreign exchange-rate fluctuations on foreign currency-denominated balances.
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Table 12 summarizes the financial results of our Other category for the periods indicated.
Table 12: Other Category Results
 Three Months Ended June 30,Six Months Ended June 30,
(Dollars in millions)20232022Change20232022Change
Selected income statement data:
Net interest loss$(515)$(164)**$(994)$(326)**
Non-interest income (loss)(6)(63)(90)%1 (127)**
Total net loss(1)
(521)(227)130(993)(453)119%
Provision (benefit) for credit losses1 1 (5)**
Non-interest expense61 41 49155 8582
Loss from continuing operations before income taxes(583)(269)117(1,149)(533)116
Income tax benefit(248)(141)76(455)(362)26
Loss from continuing operations, net of tax$(335)$(128)162$(694)$(171)**
__________
(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 $207 million to a loss of $335 million in the second quarter of 2023 compared to the second quarter of 2022 and increased by $523 million to a loss of $694 million in the first six months of 2023 compared to the first six months of 2022 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 “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2022 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 2022 Form 10-K under “Part II—Item 7. MD&A—Critical Accounting Policies and Estimates.”
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ACCOUNTING CHANGES AND DEVELOPMENTS
Accounting Standards Issued but Not Adopted as of June 30, 2023
StandardGuidanceAdoption Timing and
Financial Statement Impacts
Tax Credit Investments
ASU 2023-02, Investments - Equity Method and Joint Ventures (Topic 323), Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method

Issued March 2023
The amendments in this update permit reporting entities to elect to account for their tax equity investments, regardless of tax credit program from which the income tax credits are received, using the proportional amortization method, if certain criteria are met. Previously, only Low-Income Housing Tax Credit investments were eligible to apply the proportional amortization method.
This ASU becomes effective for us on January 1, 2024, with early adoption permitted and can be adopted using either a retrospective or modified retrospective transition method.


We do not expect the adoption of this standard 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 Bank 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 under the Basel III Capital Rules.
The Bank, as a subsidiary of a Category III institution, is a Category III bank. Moreover, the Bank, as an insured depository institution, is 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 requirement and countercyclical capital buffer requirement, each as described below. Our capital and leverage ratios are calculated based on the Basel III standardized approach framework.
We have elected to exclude certain elements of accumulated other comprehensive income (“AOCI”) from our regulatory capital as permitted for a Category III institution.
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 the Federal Deposit Insurance Corporation (“FDIC”), hereafter collectively referred to as the “Federal Banking Agencies,” set an earlier effective date.
The Company’s stress capital buffer requirement is 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 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
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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.
Based on the Company’s 2023 supervisory stress test results, the Company’s preliminary stress capital buffer requirement for the period beginning on October 1, 2023 through September 30, 2024 is 4.8%. 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 expected to be 9.3%, 10.8% and 12.8%, respectively, for the period from October 1, 2023 through September 30, 2024. The Federal Reserve is expected to provide the Company with its final stress capital buffer requirement by August 31, 2023.
The Stress Capital Buffer Rule does not apply to the Bank. The capital conservation buffer for the Bank continues to be fixed at 2.5%. Accordingly, the 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 the Bank 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 June 30, 2023 and December 31, 2022, respectively, the Company and the Bank each exceeded the minimum capital requirements and the capital conservation buffer requirements applicable to them, and the Company and the Bank were each “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 Bank 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 June 30, 2023, the Company and the Bank are subject to the Market Risk Rule. See “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 losses (“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 have phased in 50% of this amount, leaving $1.2 billion to be phased in over 2024-2025. As of June 30, 2023, the Company’s CET1 capital ratio, reflecting the CECL Transition Rule, was 12.7% and would have been 12.4% 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 “Part I—Item 1. Business—Supervision and Regulation” in our 2022 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 June 30, 2023 and December 31, 2022.
Table 13: Capital Ratios Under Basel III(1)(2)
 June 30, 2023December 31, 2022
RatioMinimum
Capital
Adequacy
Well-
Capitalized
RatioMinimum
Capital
Adequacy
Well-
Capitalized
Capital One Financial Corp:
Common equity Tier 1 capital(3)
12.7 %4.5 %N/A12.5 %4.5 %N/A
Tier 1 capital(4)
14.0 6.0 6.0 %13.9 6.0 6.0 %
Total capital(5)
16.0 8.0 10.0 15.8 8.0 10.0
Tier 1 leverage(6)
11.0 4.0 N/A11.1 4.0 N/A
Supplementary leverage(7)
9.4 3.0 N/A9.5 3.0 N/A
CONA:
Common equity Tier 1 capital(3)
13.0 4.5 6.5 13.1 4.5 6.5
Tier 1 capital(4)
13.0 6.0 8.0 13.1 6.0 8.0
Total capital(5)
14.3 8.0 10.0 14.4 8.0 10.0
Tier 1 leverage(6)
10.2 4.0 5.0 10.5 4.0 5.0
Supplementary leverage(7)
8.7 3.0 N/A9.0 3.0 N/A
__________
(1)Capital requirements that are not applicable are denoted by “N/A.”
(2)Ratios as of June 30, 2023 are preliminary and therefore subject to change until we file our June 30, 2023 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 June 30, 2023 and December 31, 2022.
Table 14: Regulatory Risk-Based Capital Components and Regulatory Capital Metrics
(Dollars in millions)June 30, 2023December 31, 2022
Regulatory capital under Basel III standardized approach
Common equity excluding AOCI$60,729 $59,450
Adjustments and deductions:
AOCI, net of tax(1)
31 (17)
Goodwill, net of related deferred tax liabilities(14,813)(14,540)
Other intangible and deferred tax assets, net of deferred tax liabilities(358)(162)
Common equity Tier 1 capital45,589 44,731
Tier 1 capital instruments4,845 4,845
Tier 1 capital50,434 49,576
Tier 2 capital instruments2,573 2,585
Qualifying allowance for credit losses4,600 4,553
Tier 2 capital7,173 7,138
Total capital$57,607 $56,714
Regulatory capital metrics
Risk-weighted assets$359,613 $357,920
Adjusted average assets(2)
459,732 444,704
Total leverage exposure(3)
535,504 522,136
__________
(1)Excludes certain components of AOCI in accordance with rules applicable to Category III institutions. See Capital Management—Basel III and United States Capital Rules” in this Report.
(2)Includes on-balance sheet asset adjustments subject to deduction from Tier 1 capital under the Basel III Capital Rules.
(3)Reflects on- and off-balance sheet amounts for the denominator of the supplementary leverage ratio as set forth by the Basel III Capital Rules.
Capital Planning and Regulatory Stress Testing
We repurchased $150 million of shares of our common stock during the second quarter of 2023 and $300 million of shares of our common stock during the first six months of 2023.
On June 28, 2023, the Federal Reserve released the supervisory stress test results for the 2023 Comprehensive Capital Analysis and Review (“CCAR”) cycle. Based on the Company’s 2023 supervisory stress test results, the Company’s preliminary stress capital buffer requirement for the period beginning on October 1, 2023 through September 30, 2024 is 4.8%. 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 expected to be 9.3%, 10.8% and 12.8%, respectively, for the period from October 1, 2023 through September 30, 2024. The Federal Reserve is expected to provide the Company with its final stress capital buffer requirement by August 31, 2023.
For the description of the regulatory capital planning rules and stress testing requirements to which we are subject, see “Supervision and Regulation” in this Report and “Part I—Item 1. Business—Supervision and Regulation” in our 2022 Form 10-K.

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Dividend Policy and Stock Purchases
In the first six months of 2023, we declared and paid common stock dividends of $470 million, or $1.20 per share, and preferred stock dividends of $114 million. The following table summarizes the dividends paid per share on our various preferred stock series in the first six months of 2023.
Table 15: Preferred Stock Dividends Paid Per Share
SeriesDescriptionIssuance DatePer Annum
Dividend Rate
Dividend Frequency2023
Q2Q1
Series I5.000%
Non-Cumulative
September 11, 20195.000%Quarterly$12.50$12.50
Series J4.800%
Non-Cumulative
January 31,
2020
4.800Quarterly12.0012.00
Series K4.625%
Non-Cumulative
September 17, 20204.625Quarterly11.5611.56
Series L4.375%
Non-Cumulative
May 4,
2021
4.375Quarterly10.9410.94
Series M3.950% Fixed Rate Reset
Non-Cumulative
June 10,
2021
3.950% through 8/31/2026; resets 9/1/2026 and every subsequent 5 year anniversary at 5-Year Treasury Rate +3.157%Quarterly9.889.88
Series N4.250%
Non-Cumulative
July 29,
2021
4.250Quarterly10.6310.63
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 Bank is subject to regulatory restrictions that limit its ability to transfer funds to our BHC. As of June 30, 2023, funds available for dividend payments from the Bank were $3.8 billion. There can be no assurance that we will declare and pay any dividends to stockholders.
We repurchased $150 million of shares of our common stock during the second quarter of 2023 and $300 million of shares of our common stock during the first six months of 2023. 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. The Board authorized 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, does not have a set expiration date and may be suspended at any time. For additional information on dividends and stock repurchases, see “Capital Management—Capital Planning and Regulatory Stress Testing” and “Part II—Item 2. Unregistered Sales of Equity Securities and Use of Proceeds” in this Report as well as “Part I—Item 1. Business—Supervision and Regulation—Dividends, Stock Repurchases and Transfers of Funds” in our 2022 Form 10-K.
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.

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First Line

Identifies and Owns Risk
Second Line

Advises & Challenges First Line
Third Line

Provides Independent Assurance
DefinitionBusiness areas that are accountable for risk and responsible for: i) generating revenue or reducing expenses; ii) supporting the business to provide products or services to customers; or iii) providing technology services for the first line.Independent Risk Management (“IRM”) and Support Functions (e.g., Human Resources, Accounting, Legal) that provide support services to the Company.Internal Audit and Credit Review
Key ResponsibilitiesIdentify, assess, measure, monitor, control, and report the risks associated with their business.IRM: Independently oversees and assesses risk taking activities for the first line of defense.

Support Functions: Centers of specialized expertise that provide support services to the enterprise.
Provides independent and objective assurance to the Board of Directors and senior management that the systems and governance processes are designed and working as intended.
Our Framework sets consistent expectations for risk management across the Company and consists of the following nine elements:

 Governance and Accountability


Strategy and Risk Alignment


Risk Identification

Assessment, Measurement
and Response


Monitoring and Testing


Aggregation, Reporting and Escalation


Capital and Liquidity Management (including Stress Testing)


Risk Data and Enabling Technology


Culture and Talent Management

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We provide additional discussion of our risk management principles, roles and responsibilities, framework and risk appetite under “Part II—Item 7. MD&A—Risk Management” in our 2022 Form 10-K.
Risk Categories
We apply our Framework to protect the Company from the major categories of risk that we are exposed to through our business activities. We have seven major categories of risk as noted below. We provide a description of these categories and how we manage them under “Part II—Item 7. MD&A—Risk Management” in our 2022 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 “Consolidated Balance Sheets Analysis—Investment Securities” and “Part I—Item 1. Financial Statements and Supplementary Data—Note 2—Investment Securities” as well as credit risk related to derivative transactions in “Part I—Item 1. Financial Statements and Supplementary Data—Note 8—Derivative Instruments and Hedging Activities.”
Portfolio and Geographic Composition of Loans Held for Investment
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 $1.2 billion and $203 million as of June 30, 2023 and December 31, 2022, respectively.
Table 16 presents the composition of our portfolio of loans held for investment by portfolio segment as of June 30, 2023 and December 31, 2022.
Table 16: Portfolio Composition of Loans Held for Investment
June 30, 2023December 31, 2022
(Dollars in millions)Loans% of TotalLoans% of Total
Credit Card:
Domestic credit card$135,975 43.7 %$131,581 42.1 %
International card businesses6,516 2.1 6,149 2.0 
Total credit card142,491 45.8 137,730 44.1 
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June 30, 2023December 31, 2022
(Dollars in millions)Loans% of TotalLoans% of Total
Consumer Banking:
Auto75,841 24.3 78,373 25.1 
Retail banking1,439 0.5 1,552 0.5 
Total consumer banking77,280 24.8 79,925 25.6 
Commercial Banking:
Commercial and multifamily real estate36,041 11.6 37,453 12.0 
Commercial and industrial55,511 17.8 57,223 18.3 
Total commercial banking91,552 29.4 94,676 30.3 
Total loans held for investment$311,323 100.0 %$312,331 100.0 %
Geographic Composition
We market our credit card products throughout the United States, the United Kingdom and Canada. Our credit card loan portfolio is geographically diversified due to our product and marketing approach. The table below presents the geographic profile of our credit card loan portfolio as of June 30, 2023 and December 31, 2022.
Table 17: Credit Card Portfolio by Geographic Region
June 30, 2023December 31, 2022
(Dollars in millions)Amount% of TotalAmount% of Total
Domestic credit card:
California$13,939 9.8%$13,707 10.0%
Texas11,507 8.111,202 8.1
Florida10,201 7.29,549 6.9
New York8,911 6.38,366 6.1
Pennsylvania5,591 3.95,425 3.9
Illinois5,311 3.75,260 3.8
Ohio4,705 3.34,662 3.4
New Jersey4,485 3.14,243 3.1
Georgia4,312 3.04,172 3.0
Michigan3,980 2.83,920 2.8
Other63,033 44.261,075 44.4
Total domestic credit card135,975 95.4 131,581 95.5
International card businesses:
United Kingdom3,409 2.4 3,129 2.3
Canada3,107 2.2 3,020 2.2
Total international card businesses6,516 4.66,149 4.5
Total credit card$142,491 100.0 %$137,730 100.0%
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 June 30, 2023 and December 31, 2022.
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Table 18: Consumer Banking Portfolio by Geographic Region
 June 30, 2023December 31, 2022
(Dollars in millions)Amount% of TotalAmount% of Total
Auto:
Texas$9,225 11.9%$9,586 12.0 %
California9,127 11.8 9,570 12.0 
Florida6,612 8.5 6,755 8.5 
Pennsylvania3,250 4.2 3,303 4.1 
Ohio3,135 4.1 3,143 3.9 
Georgia3,081 4.0 3,243 4.1 
Illinois3,041 3.9 3,119 3.9 
New Jersey2,684 3.5 2,742 3.4 
Other35,686 46.2 36,912 46.2 
Total auto75,841 98.1 78,373 98.1 
Retail banking:
New York439 0.6 477 0.6 
Texas306 0.4 333 0.4 
Louisiana256 0.3 283 0.3 
New Jersey113 0.2 122 0.2 
Maryland88 0.1 97 0.1 
Virginia63 0.1 67 0.1 
Other174 0.2 173 0.2 
Total retail banking1,439 1.9 1,552 1.9 
Total consumer banking$77,280 100.0 %$79,925 100.0 %
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 June 30, 2023 and December 31, 2022.
Table 19: Commercial Real Estate Portfolio by Region
June 30, 2023December 31, 2022
(Dollars in millions)Amount% of TotalAmount% of Total
Geographic concentration:(1)
Northeast$13,198 36.6 %$15,055 40.2 %
South9,288 25.8 8,706 23.2 
Pacific West5,986 16.6 5,902 15.7 
Mid-Atlantic3,134 8.7 3,129 8.4 
Mountain2,251 6.2 2,267 6.1 
Midwest2,184 6.1 2,394 6.4 
Total$36,041 100.0 %$37,453 100.0 %
__________
(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 June 30, 2023 and December 31, 2022. 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)June 30, 2023December 31, 2022
Industry Classification:
Finance31%29%
Real estate(1)(2)
30 31 
Healthcare8 
Business services6 
Educational services4 
Public administration4 
Construction and land3 
Retail trade3 
Oil and gas2 
Other9 10 
Total100 %100 %
__________
(1)The funded balance for commercial office real estate held for investment totaled $2.6 billion, or 3%, and $4.0 billion, or 4%, as of June 30, 2023 and December 31, 2022, respectively. Commercial office real estate exposures does not include loans in our healthcare real estate business secured by medical office properties and loans to office real estate investment trusts or real estate investment funds.
(2)We reclassified $888 million in commercial office real estate loans from loans held for investment to loans held for sale as of June 30, 2023.

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 June 30, 2023 and December 31, 2022.
Table 21: Credit Score Distribution
(Percentage of portfolio)June 30, 2023December 31, 2022
Domestic credit card—Refreshed FICO scores:(1)
Greater than 66069 %69 %
660 or below31 31 
Total100 %100 %
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(Percentage of portfolio)June 30, 2023December 31, 2022
AutoAt origination FICO scores:(2)
Greater than 66052 %53 %
621 - 66020 20 
620 or below28 27 
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.
In our commercial loan portfolio, 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.
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 “Part I—Item 1. Financial Statements and Supplementary Data—Note 3—Loans” for additional credit quality information and see “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2022 Form 10-K for information on our accounting policies for delinquent and nonperforming loans, charge-offs and troubled debt restructurings (“TDRs”) for each of our loan categories.
Delinquency Rates
We consider the entire balance of an account to be delinquent if the minimum required payment is not received by the customer’s due date, measured at each balance sheet date. Our 30+ day delinquency metrics include all loans held for investment that are 30 or more days past due, whereas our 30+ day performing delinquency metrics include all loans held for investment that are 30 or more days past due but are currently classified as performing and accruing interest. The 30+ day delinquency and 30+ day performing delinquency metrics are the same for domestic credit card loans, as we continue to classify these loans as performing until the account is charged off, typically when the account is 180 days past due. See “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2022 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 “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 June 30, 2023 and December 31, 2022.
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Table 22: 30+ Day Delinquencies
 June 30, 2023December 31, 2022
 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$5,089 3.74 %$5,089 3.74 %$4,515 3.43 %$4,515 3.43 %
International card businesses277 4.24 284 4.37 248 4.03 254 4.13 
Total credit card5,366 3.77 5,373 3.77 4,763 3.46 4,769 3.46 
Consumer Banking:
Auto4,081 5.38 4,568 6.02 4,402 5.62 4,906 6.26 
Retail banking17 1.19 32 2.22 16 1.02 34 2.22 
Total consumer banking4,098 5.30 4,600 5.95 4,418 5.53 4,940 6.18 
Commercial Banking:
Commercial and multifamily real estate39 0.11 136 0.38 — 36 0.10 
Commercial and industrial91 0.16 356 0.64 78 0.14 281 0.49 
Total commercial banking130 0.14 492 0.54 79 0.08 317 0.33 
Total$9,594 3.08 $10,465 3.36 $9,260 2.96 $10,026 3.21 
__________
(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 held for investment, by aging and geography, as of June 30, 2023 and December 31, 2022.
Table 23: Aging and Geography of 30+ Day Delinquent Loans
 June 30, 2023December 31, 2022
(Dollars in millions)Amount
Rate(1)
Amount
Rate(1)
Delinquency status:
30 – 59 days$4,601 1.48 %$4,666 1.50 %
60 – 89 days2,756 0.88 2,511 0.80 
> 90 days
3,108 1.00 2,849 0.91 
Total$10,465 3.36 %$10,026 3.21 %
Geographic region:
Domestic$10,181 3.27 %$9,772 3.13 %
International284 0.09 254 0.08 
Total$10,465 3.36 %$10,026 3.21 %
__________
(1)Delinquency rates are calculated by dividing delinquency amounts by total period-end loans held for investment.
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Table 24 summarizes loans that were 90+ days delinquent, in regards to interest or principal payments, and still accruing interest as of June 30, 2023 and December 31, 2022. 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.
Table 24: 90+ Day Delinquent Loans Accruing Interest
 June 30, 2023December 31, 2022
(Dollars in millions)Amount
Rate(1)
Amount
Rate(1)
Loan category:
Credit card$2,491 1.75 %$2,240 1.63 %
Total$2,491 0.80 $2,240 0.72 
Geographic region:
Domestic$2,375 0.78 $2,135 0.70 
International116 1.78 105 1.71 
Total$2,491 0.80 $2,240 0.72 
__________
(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 “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2022 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 June 30, 2023 and December 31, 2022. We do not classify loans held for sale as nonperforming. We provide additional information on our credit quality metrics in “Business Segment Financial Performance.”
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Table 25: Nonperforming Loans and Other Nonperforming Assets(1)
 June 30, 2023December 31, 2022
(Dollars in millions)AmountRateAmountRate
Nonperforming loans held for investment:(2)
Credit Card:
International card businesses$10 0.16 %$0.14 %
Total credit card10 0.01 0.01 
Consumer Banking:
Auto588 0.77 595 0.76 
Retail banking43 2.99 39 2.49 
Total consumer banking631 0.82 634 0.79 
Commercial Banking:
Commercial and multifamily real estate416 1.15 271 0.72 
Commercial and industrial395 0.71 430 0.75 
Total commercial banking811 0.89 701 0.74 
Total nonperforming loans held for investment(3)
1,452 0.47 1,344 0.43 
Other nonperforming assets(4)
53 0.01 61 0.02 
Total nonperforming assets$1,505 0.48 $1,405 0.45 
__________
(1)We recognized interest income for loans classified as nonperforming of $17 million and $11 million in the first six months of 2023 and 2022, respectively. Interest income foregone related to nonperforming loans was $67 million and $40 million in the first six months of 2023 and 2022, 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 0.83% and 0.74% as of June 30, 2023 and December 31, 2022, respectively.
(4)The denominators used in calculating nonperforming asset rates consist of total loans held for investment and other nonperforming assets.
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Net Charge-Offs
Net charge-offs consist of the amortized cost basis, excluding accrued interest, of loans held for investment that we determine to be uncollectible, net of recovered amounts. We charge off loans as a reduction to the allowance for credit losses when we determine the loan is uncollectible and record subsequent recoveries of previously charged off amounts as increases to the allowance for credit losses. Uncollectible finance charges and fees are reversed through revenue and certain fraud losses are recorded in other non-interest expense. Generally, costs to recover charged off loans are recorded as collection expenses as incurred and 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 “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2022 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 second quarter and first six months of 2023 and 2022.
Table 26: Net Charge-Offs
 Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
(Dollars in millions)Amount
Rate(1)
Amount
Rate(1)
Amount
Rate(1)
Amount
Rate(1)
Credit Card:
Domestic credit card$1,451 4.38 %$622 2.26 %$2,750 4.21 %$1,181 2.19 %
International card businesses77 4.98 56 3.82 147 4.77 104 3.51 
Total credit card1,528 4.41 678 2.34 2,897 4.24 1,285 2.26 
Consumer Banking:
Auto267 1.40 121 0.61 563 1.46 248 0.63 
Retail banking12 3.25 15 3.62 23 3.10 34 3.98 
Total consumer banking279 1.43 136 0.67 586 1.50 282 0.71 
Commercial Banking:
Commercial and multifamily real estate363 3.91 (7)(0.08)380 2.04 (7)(0.04)
Commercial and industrial15 0.11 38 0.29 19 0.07 52 0.20 
Total commercial banking378 1.62 31 0.14 399 0.85 45 0.10 
Total net charge-offs$2,185 2.82 $845 1.18 $3,882 2.52 $1,612 1.15 
Average loans held for investment$309,655 $286,110 $308,711 $280,756 
__________
(1)Net charge-off rates are calculated by dividing annualized net charge-offs by average loans held for investment for the period for each loan category.
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Financial Difficulty Modifications to Borrowers
We adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures on January 1, 2023. The ASU eliminates the accounting guidance for TDRs and establishes disclosure requirements for certain loan refinancing and restructurings for borrowers experiencing financial difficulty, which results in a more than insignificant impact to the timing or amount of contractual cash flows.
Prior to the adoption of ASU 2022-02, a modification was deemed a TDR when the contractual terms of a loan agreement were modified by granting a concession to a borrower experiencing financial difficulty. ASU 2022-02 eliminated the concession requirement for modifications. After the adoption of ASU 2022-02, a financial difficulty modification (“FDM”) occurs when a modification in the form of principal forgiveness, interest rate reduction, an other-than-insignificant payment delay, a term extension or a combination of these modifications is granted to a borrower experiencing financial difficulty.
The types of modifications we offer to borrowers experiencing financial difficulty have not changed as a result of ASU 2022-02. 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, including FDMs, 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 FDMs receive an interest rate reduction and are placed 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 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 FDMs receive an extension, an interest rate reduction, principal reduction, or a combination of these modifications. 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 our FDMs receive an extension. A portion of FDMs receive an interest rate reduction, principal reduction, or a combination of modifications.
For additional information on accounting standards adopted during the six months ended June 30, 2023, see “Part I—Item 1. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies.” For more information on FDMs in the second quarter of 2023 and TDRs in the second quarter of 2022, see “Part I—Item 1. Financial Statements and Supplementary Data—Note 3—Loans.”
Allowance for Credit Losses and Reserve for Unfunded Lending Commitments
Our allowance for credit losses represents management’s current estimate of expected credit losses over the contractual terms of our loans held for investment as of each balance sheet date. Expected recoveries of amounts previously charged off or expected to be charged off are recognized within the allowance. We also estimate expected credit losses related to unfunded lending commitments that are not unconditionally cancellable. The provision for losses on unfunded lending commitments is included in the provision for credit losses in our consolidated statements of income and the related reserve for unfunded lending commitments is included in other liabilities on our consolidated balance sheets. We provide additional information on the methodologies and key assumptions used in determining our allowance for credit losses in “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2022 Form 10-K.
Table 27 presents changes in our allowance for credit losses and reserve for unfunded lending commitments for the second quarter and first six months of 2023 and 2022, and details by portfolio segment for the provision for credit losses, charge-offs
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and recoveries.


Table 27: Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity
Three Months Ended June 30, 2023
Credit CardConsumer Banking
(Dollars in millions)Domestic CardInternational Card BusinessesTotal Credit CardAutoRetail BankingTotal Consumer BankingCommercial BankingTotal
Allowance for credit losses:
Balance as of March 31, 2023$10,032 $378 $10,410 $2,165 $40 $2,205 $1,703 $14,318 
Charge-offs(1,758)(110)(1,868)(508)(18)(526)(378)(2,772)
Recoveries(1)
307 33 340 241 6 247  587 
Net charge-offs(1,451)(77)(1,528)(267)(12)(279)(378)(2,185)
Provision for credit losses1,995 89 2,084 252 7 259 160 2,503 
Allowance build (release) for credit losses544 12 556 (15)(5)(20)(218)318 
Other changes(2)
 10 10     10 
Balance as of June 30, 202310,576 400 10,976 2,150 35 2,185 1,485 14,646 
Reserve for unfunded lending commitments:
Balance as of March 31, 2023— — — — — — 211 211 
Provision (benefit) for losses on unfunded lending commitments      (14)(14)
Balance as of June 30, 2023      197 197 
Combined allowance and reserve as of June 30, 2023$10,576 $400 $10,976 $2,150 $35 $2,185 $1,682 $14,843 
Six Months Ended June 30, 2023
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, 2022$9,165 $380 $9,545 $2,187 $50 $2,237 $1,458 $13,240 
Cumulative effects of accounting standards adoption(3)
(40)(23)(63)— — — — (63)
Balance as of January 1, 20239,125 357 9,482 2,187 50 2,237 1,458 13,177 
Charge-offs
(3,345)(211)(3,556)(1,023)(34)(1,057)(402)(5,015)
Recoveries(1)
595 64 659 460 11 471 3 1,133 
Net charge-offs(2,750)(147)(2,897)(563)(23)(586)(399)(3,882)
Provision for credit losses4,169 176 4,345 526 8 534 426 5,305 
Allowance build (release) for credit losses1,419 29 1,448 (37)(15)(52)27 1,423 
Other changes(2)
32 14 46     46 
Balance as of June 30, 202310,576 400 10,976 2,150 35 2,185 1,485 14,646 
Reserve for unfunded lending commitments:
Balance as of December 31, 2022— — — — — — 218 218 
Provision (benefit) for losses on unfunded lending commitments      (21)(21)
Balance as of June 30, 2023      197 197 
Combined allowance and reserve as of June 30, 2023$10,576 $400 $10,976 $2,150 $35 $2,185 $1,682 $14,843 
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Three Months Ended June 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 March 31, 2022$7,968 $312 $8,280 $1,852 $50 $1,902 $1,126 $11,308 
Charge-offs
(920)(89)(1,009)(311)(20)(331)(43)(1,383)
Recoveries(1)
298 33 331 190 195 12 538 
Net charge-offs(622)(56)(678)(121)(15)(136)(31)(845)
Provision (benefit) for credit losses494 87 581 268 13 281 183 1,045 
Allowance build (release) for credit losses(128)31 (97)147 (2)145 152 200 
Other changes(2)
— (17)(17)— — — — (17)
Balance as of June 30, 20227,840 326 8,166 1,999 48 2,047 1,278 11,491 
Reserve for unfunded lending commitments:
Balance as of March 31, 2022— — — — — — 200 200 
Provision for losses on unfunded lending commitments— — — — — — 39 39 
Balance as of June 30, 2022— — — — — — 239 239 
Combined allowance and reserve as of June 30, 2022$7,840 $326 $8,166 $1,999 $48 $2,047 $1,517 $11,730 
Six Months Ended June 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(1,787)(177)(1,964)(637)(43)(680)(60)(2,704)
Recoveries(1)
606 73 679 389 398 15 1,092 
Net charge-offs(1,181)(104)(1,285)(248)(34)(282)(45)(1,612)
Provision (benefit) for credit losses1,053 73 1,126 395 16 411 156 1,693 
Allowance build (release) for credit losses(128)(31)(159)147 (18)129 111 81 
Other changes(2)
— (20)(20)— — — — (20)
Balance as of June 30, 20227,840 326 8,166 1,999 48 2,047 1,278 11,491 
Reserve for unfunded lending commitments:
Balance as of December 31, 2021— — — — — — 165 165 
Provision for losses on unfunded lending commitments— — — — — — 74 74 
Balance as of June 30, 2022— — — — — — 239 239 
Combined allowance and reserve as of June 30, 2022$7,840 $326 $8,166 $1,999 $48 $2,047 $1,517 $11,730 
________
(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 the initial allowance for purchased credit-deteriorated loans and foreign currency translation adjustments. The initial allowance of purchased credit-deteriorated loans was $0 million and $32 million for the three and six months ended June 30, 2023, respectively.
(3)Impact from the adoption of ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures as of January 1, 2023.
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 liquidity reserves in the form of investment securities and certain loans that are either readily-marketable or pledgeable.
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Table 28 below presents the composition of our liquidity reserves as of June 30, 2023 and December 31, 2022.
Table 28: Liquidity Reserves
(Dollars in millions)June 30, 2023December 31, 2022
Cash and cash equivalents$41,596 $30,856 
Securities available for sale78,412 76,919 
FHLB borrowing capacity secured by loans5,322 6,436 
Outstanding FHLB advances and letters of credit secured by loans and investment securities(50)(51)
Other encumbrances of investment securities(7,317)(7,583)
Total liquidity reserves$117,963 $106,577 

Our liquidity reserves increased by $11.4 billion to $118.0 billion as of June 30, 2023 from December 31, 2022, primarily due to increases in cash and cash equivalents. 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 “Part II—Item 7. MD&A—Risk Management” in our 2022 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 the OCC (the “LCR Rule”). The LCR Rule requires each of the Company and the Bank to calculate its 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 second quarter of 2023 was 150%, which exceeded the LCR Rule requirement of 100%. The calculation and the underlying components are based on our interpretations, expectations and assumptions of relevant regulations, as well as interpretations provided by our regulators, and are subject to change based on changes to future regulations and interpretations. See “Part I—Item 1. Business—Supervision and Regulation” in our 2022 Form 10-K for additional information.
Net Stable Funding Ratio
We are subject to the net stable funding ratio (“NSFR”) standard as implemented by the Federal Reserve and the OCC (the “NSFR Rule”). The NSFR Rule requires each of the Company and the Bank to maintain an NSFR of 100% on an ongoing basis. It also requires the Company to publicly disclose, on a semi-annual basis each second and fourth quarter, its NSFR, certain related quantitative liquidity metrics and qualitative discussion of its NSFR. Our average NSFR for each of the first and second quarters of 2023 was 134%, which exceeded the NSFR Rule requirement of 100%. The calculation and the underlying components are based on our interpretations, expectations and assumptions of the 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 2022 Form 10-K for additional information.
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.
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In addition to our issuance capacity under the shelf registration statements, we also have access to FHLB advances, the Federal Reserve Discount Window, the Bank Term Funding Program 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 Bank’s ability to post collateral. As of June 30, 2023, we pledged both loans and securities to the FHLB to secure a maximum borrowing capacity of $34.2 billion, of which $50 million was used. Our FHLB membership is supported by our investment in FHLB stock of $15 million as of both June 30, 2023 and December 31, 2022.
As of June 30, 2023, we pledged loans to secure a borrowing capacity of $41.5 billion under the Federal Reserve Discount Window. Additionally, we pledged securities to secure a borrowing capacity of $9.9 billion under the Bank Term Funding Program. Our membership with the Federal Reserve is supported by our investment in Federal Reserve stock, which totaled $1.3 billion as of both June 30, 2023 and December 31, 2022.
Deposits
Table 29 provides a comparison of average balances, interest expense and average deposits interest rates for the second quarter and first six months of 2023 and 2022.
Table 29: Deposits Composition and Average Deposits Interest Rates
Three Months Ended June 30,
20232022
(Dollars in millions)Average
Balance
Interest
Expense
Average
Deposits
Interest Rate
Average
Balance
Interest
Expense
Average
Deposits
Interest Rate
Interest-bearing checking accounts(1)
$42,587 $208 1.96 %$47,267 $28 0.24 %
Saving deposits(2)
193,730 1,216 2.51 202,069 205 0.40 
Time deposits76,890 853 4.44 18,768 60 1.28 
Total interest-bearing deposits$313,207 $2,277 2.91 $268,104 $293 0.44 
Six Months Ended June 30,
20232022
(Dollars in millions)Average
Balance
Interest
Expense
Average
Deposits
Interest Rate
Average
Balance
Interest
Expense
Average
Deposits
Interest Rate
Interest-bearing checking accounts(1)
$43,883 $405 1.85 %$48,330 $48 0.20 %
Saving deposits(2)
198,728 2,283 2.30 203,651 359 0.35 
Time deposits68,399 1,445 4.23 17,972 104 1.17 
Total interest-bearing deposits$311,010 $4,133 2.66 $269,953 $511 0.38 
__________
(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. The Bank was well-capitalized, as defined under the federal banking regulatory guidelines, as of June 30, 2023 and December 31, 2022. See “Part I—Item 1. Business—Supervision and Regulation” in our 2022 Form 10-K for additional information. We provide additional information on the composition of deposits in “Consolidated Balance Sheets Analysis—Funding Sources Composition” and in “Part I—Item 1. Financial Statements and Supplementary Data—Note 7—Deposits and Borrowings.”
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Funding
Our primary source of funding comes from retail deposits, as they are a relatively stable and lower 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 “Consolidated Balance Sheets Analysis—Funding Sources Composition” for additional information on our primary sources of funding.
In the normal course of business, we enter into various contractual obligations that may require future cash payments that affect our short-term and long-term liquidity and capital resource needs. Our future cash outflows primarily relate to deposits, borrowings and operating leases. The actual timing and amounts of future cash payments may vary over time due to a number of factors, such as early debt redemptions and changes in deposit balances.
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 include those borrowings with an original contractual maturity of one year or less, typically consist of federal funds purchased, securities loaned or sold under agreements to repurchase or short-term FHLB advances, and do not include the current portion of long-term debt. Our short-term borrowings decreased by $234 million to $649 million as of June 30, 2023 from December 31, 2022 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 $1.8 billion to $49.6 billion as of June 30, 2023 from December 31, 2022 primarily driven by net issuances of senior unsecured debt and net issuances in our credit card and auto securitization programs. We provide more information on our securitization activity in “Part I—Item 1. Financial Statements and Supplementary Data—Note 5—Variable Interest Entities and Securitizations” and on our borrowings in “Part I—Item 1. Financial Statements and Supplementary Data—Note 7—Deposits and Borrowings.”
The following table summarizes issuances of securitized debt obligations, senior and subordinated notes, long term FHLB advances and their respective maturities or redemptions for the second quarter and first six months of 2023 and 2022.
Table 30: Long-Term Debt Funding Activities
IssuancesMaturities/Redemptions
Three Months Ended June 30,Three Months Ended June 30,
(Dollars in millions)2023202220232022
Securitized debt obligations$1,200 $4,250 $991 $395 
Senior and subordinated notes3,500 4,000 1,839 — 
FHLB advances 10,500  — 
Total$4,700 $18,750 $2,830 $395 
IssuancesMaturities/Redemptions
Six Months Ended June 30,Six Months Ended June 30,
(Dollars in millions)2023202220232022
Securitized debt obligations$2,450 $6,500 $1,551 $3,593 
Senior and subordinated notes5,750 7,050 4,886 2,357 
FHLB advances 10,500  — 
Total$8,200 $24,050 $6,437 $5,950 
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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 31 provides a summary of the credit ratings for the senior unsecured long-term debt of Capital One Financial Corporation and CONA as of June 30, 2023 and December 31, 2022.
Table 31: Senior Unsecured Long-Term Debt Credit Ratings
June 30, 2023December 31, 2022
Capital One
Financial
Corporation
CONACapital One
Financial
Corporation
CONA
Moody’sBaa1A3Baa1A3
S&PBBBBBB+BBBBBB+
FitchA-AA-A
As of July 25, 2023, Moody’s Investors Service (“Moody’s”), Standard & Poor’s (“S&P”) and Fitch Ratings (“Fitch”) have our credit ratings on a stable outlook.
Other Commitments
In the normal course of business, we enter into other contractual obligations that may require future cash payments that affect our short-term and long-term liquidity and capital resource needs. Our other contractual obligations include lending commitments, leases, purchase obligations and other contractual arrangements.
As of June 30, 2023 and December 31, 2022, our total unfunded lending commitments were $432.9 billion and $409.3 billion, respectively, primarily consisting of credit card lines and 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 “Part I—Item 1. Financial Statements and Supplementary Data—Note 13—Commitments, Contingencies, Guarantees and Others” in this Report.
Our primary involvement with leases is in the capacity as a lessee where we lease premises to support our business. The majority of our leases are operating leases of office space, retail bank branches and cafés. Our operating leases expire at various dates through 2071, although some have extension or termination options. As of June 30, 2023 and December 31, 2022, we had $1.6 billion and $1.7 billion, respectively, in aggregate operating lease obligations. We provide more information on our lease activity in “Part II—Item 8. Financial Statements and Supplementary Data—Note 7—Premises, Equipment and Leases” in our 2022 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 June 30, 2023 and December 31, 2022, we had $621 million and $1.1 billion, respectively, in aggregate purchase obligation liabilities.
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 “Part I—Item 1. Financial Statements and Supplementary Data—Note 5—Variable Interest Entities and Securitizations,” and “Part I—Item 1. Financial Statements and Supplementary Data—Note 13—Commitments, Contingencies, Guarantees and Others” in this Report and “Part II—Item 8. Financial Statements and Supplementary Data—Note 14—Employee Benefit Plans” in our 2022 Form 10-K.
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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 repricing of assets and liabilities. Our balance sheet is structurally asset sensitive as our loans, which are primarily floating rate or fixed rate with short durations, reprice faster than our fixed rate debt and a portion of our deposits when interest rates change. We take actions to reduce the interest rate risk from this structural balance sheet position primarily by investing in fixed rate securities in our investment portfolio and executing interest rate swaps and other derivative instruments.
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. We also incorporate the dynamic nature of deposit repricing, which includes pricing lags and changes in deposit beta and mix as interest rates change, and the prepayment sensitivity of our mortgage securities to the level of interest rates. 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 32 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 sensitivity to both upward and downward shocks is largely unchanged as compared to December 31, 2022, as the increase in cash balances was offset by an increase in deposit beta, which was driven by higher interest rates and mix shift toward higher rate paid deposit products. Cash balances reprice relatively rapidly, whereas deposit rates reprice less with both lag and beta effects. In the contexts used in this section, “beta” refers to the percentage of deposit rate repricing relative to an external reference rate such as federal funds. In our models, deposit betas vary dynamically and by product type.
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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. Similar to our net interest income sensitivity measure, we incorporate the dynamic nature of deposit repricing and attrition, which includes pricing lags and changes in deposit beta as interest rates change and the prepayment sensitivity of our mortgage securities to the level of interest rates. Other key assumptions used in the calculation include attrition assumptions for loans and other assets, term structure modeling of interest rates and discount spreads. 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 32 below. Our current economic value of equity sensitivity profile demonstrates that our economic value of equity decreases in higher interest rate scenarios and is largely unchanged in lower interest rate scenarios. The decrease in higher rate scenarios is due to the declines in the projected value of our fixed rate assets being only partially offset by corresponding movements in the projected value of our deposits and other liabilities. The pace of economic value of equity decrease is larger for the +200 bps scenario as our deposits are assumed to reprice more rapidly in higher interest rate environments. Our current economic value of equity sensitivity increased as compared to December 31, 2022, primarily due to an increase in deposit beta driven by higher interest rates and mix shift towards higher rate paid deposit products.
Table 32 shows the estimated percentage impact on our projected baseline net interest income and our current economic value of equity calculated under the methodology described above as of June 30, 2023 and December 31, 2022. 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 a practice of employing negative policy rates. In jurisdictions that have negative policy rates, we do not floor interest rates at 0%.
Table 32: Interest Rate Sensitivity Analysis
June 30, 2023December 31, 2022
Estimated impact on projected baseline net interest income:
+200 basis points0.8 %0.4 %
+100 basis points0.9 0.8 
+50 basis points0.5 0.4 
–50 basis points(0.5)(0.7)
–100 basis points(1.2)(1.3)
–200 basis points(2.5)(2.6)
Estimated impact on economic value of equity:
+200 basis points(5.2)(4.3)
+100 basis points(2.0)(1.5)
+50 basis points(0.9)(0.7)
–50 basis points0.7 0.4 
–100 basis points1.2 0.6 
–200 basis points0.8 (0.2)
In addition to these industry standard measures, we 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. We also regularly review the sensitivity of our interest rate risk metrics to changes in our key modeling assumptions, such as our loan and deposit balance forecasts, mortgage prepayments and deposit repricing.
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
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analytical tools as we believe appropriate to reflect our best assessment of the market environment and the expected behavior patterns of our existing assets and liabilities.
There are inherent limitations in any methodology used to estimate the exposure to changes in market interest rates. The sensitivity analysis described above contemplates only certain movements in interest rates and is performed at a particular point in time based on 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 “Part I—Item 1. Financial Statements and Supplementary Data—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 861 million GBP and 785 million GBP as of June 30, 2023 and December 31, 2022, respectively, and 1.6 billion CAD and 1.7 billion CAD as of June 30, 2023 and December 31, 2022, respectively. Our nominal EUR-denominated borrowings outstanding were 1.3 billion EUR as of both June 30, 2023 and December 31, 2022.
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 2.1 billion GBP and 1.9 billion GBP as of June 30, 2023 and December 31, 2022, respectively, and 2.3 billion CAD and 2.2 billion CAD as of June 30, 2023 and December 31, 2022, 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 “Part I—Item 1. Financial Statements and Supplementary Data—Note 8—Derivative Instruments and Hedging Activities.”

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London Interbank Offered Rate Transition
As of June 30, 2023, our remaining exposure to the London Interbank Offered Rate (“LIBOR”) is limited to contracts that will transition via contractual fallback language or, to a lesser extent, the LIBOR Act to an identified replacement rate alternative on their next respective scheduled reset dates. In the U.S., the Secured Overnight Financing Rate (“SOFR”) has been selected as the preferred alternative rate by the Alternative Reference Rates Committee (“ARRC”) for certain U.S. dollar derivative and cash instruments. The majority of LIBOR contracts that we have transitioned to alternative rates have employed SOFR.
SUPERVISION AND REGULATION
Stress Capital Buffer Requirement Update
On June 28, 2023, the Federal Reserve released the results of its supervisory stress tests for the 2023 cycle. Based on the Company’s 2023 supervisory stress test results, the Company’s preliminary stress capital buffer requirement for the period beginning on October 1, 2023 through September 30, 2024 is 4.8%. 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 expected to be 9.3%, 10.8% and 12.8%, respectively, for the period from October 1, 2023 through September 30, 2024. The Federal Reserve is expected to provide the Company with its final stress capital buffer requirement by August 31, 2023.
Deposit Insurance Assessments Update
On May 11, 2023, the FDIC released a notice of proposed rulemaking, which would implement a special assessment to recover the loss to the Deposit Insurance Fund arising from the protection of uninsured depositors in connection with the systemic risk determination announced on March 12, 2023, following the closures of Silicon Valley Bank and Signature Bank. The FDIC is proposing to collect the special assessment at an annual rate of approximately 12.5 bps over eight quarterly assessment periods. The proposed assessment base for the special assessment would be equal to an insured depository institution’s estimated uninsured deposits reported as of December 31, 2022 on its Consolidated Reports of Condition and Income (Call Report), adjusted to exclude the first $5 billion.
Basel III Capital Rules Update
On July 27, 2023, the Federal Banking Agencies released a notice of proposed rulemaking to revise the Basel III Capital Rules applicable to the Company and the Bank. We are in the process of evaluating this proposed rulemaking and assessing its potential impact on Capital One.
We provide information on our Supervision and Regulation in our 2022 Form 10-K under “Part I—Item 1. Business—Supervision and Regulation.”
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FORWARD-LOOKING STATEMENTS
From time to time, we have made and will make forward-looking statements, including those that discuss, among other things: strategies, goals, outlook or other non-historical matters; projections, revenues, income, returns, expenses, assets, liabilities, capital and liquidity 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,” “think,” “estimate,” “intend,” “plan,” “goal,” “believe,” “forecast,” “outlook” or other words of similar meaning. Any forward-looking statements made by us or on our behalf speak only as of the date they are made or as of the date indicated, and we do not undertake any obligation to update forward-looking statements as a result of new information, future events or otherwise. For additional information on factors that could materially influence forward-looking statements included in this Report, see the risk factors set forth under “Part I—Item 1A. Risk Factors” in our 2022 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:
general economic and business conditions in our local markets, including conditions affecting employment levels, interest rates, collateral values, consumer income, creditworthiness and confidence, spending and savings that may affect consumer bankruptcies, defaults, charge-offs and deposit activity;
increases or fluctuations in credit losses and delinquencies and the impact of inaccurate estimates or inadequate reserves;
the impact of the Coronavirus disease pandemic on our business, financial condition and results of operations may persist for an extended period or worsen, including labor shortages, disruption of global supply chains and inflationary pressures, and could impact our estimates of credit losses in our loan portfolios required in computing our allowance for credit losses;
compliance with new and existing laws, regulations and regulatory expectations;
limitations on our ability to receive dividends from our subsidiaries;
our ability to maintain adequate capital or liquidity levels or to comply with revised capital or liquidity requirements, which could have a negative impact on our financial results and our ability to return capital to our stockholders;
the extensive use, reliability, and accuracy of the models and data on which we rely;
increased costs, reductions in revenue, reputational damage, legal exposure and business disruptions that can result from data protection or security incidents or a cyber-attack or other similar incidents, including one that results in the theft, loss, manipulation or misuse of information, or the disabling of systems and access to information critical to business operations;
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;
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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 develop, operate, and adapt our 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, us or the financial services industry with respect to practices, products or financial condition;
fluctuations in market interest rates or volatility in the capital markets;
our ability to attract, retain and motivate key senior leaders and 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;
our ability to invest successfully in and introduce digital and other technological developments across all our businesses;
our ability to manage risks from catastrophic events;
compliance with applicable laws and regulations related to privacy, data protection and data security;
our ability to protect our intellectual property; and
other risk factors identified from time to time in our public disclosures, including in the reports that we file with the SEC.
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SUPPLEMENTAL TABLE
Reconciliation of Non-GAAP Measures
The following table summarizes our non-GAAP measures. 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. Management believes that these non-GAAP measures are useful in assessing capital adequacy and the level of returns generated. The following table presents reconciliations of these non-GAAP measures to the applicable amounts measured in accordance with GAAP. These non-GAAP measures should not be viewed as a substitute for reported results determined in accordance with GAAP.
Table A—Reconciliation of Non-GAAP Measures
(Dollars in millions, except as noted)June 30, 2023December 31, 2022
Tangible Common Equity (Period-End):
Stockholders’ equity$54,559 $52,582
Goodwill and other intangible assets(1)
(15,356)(14,902)
Noncumulative perpetual preferred stock(4,845)(4,845)
Tangible common equity$34,358 $32,835
Tangible Assets (Period-End):
Total assets$467,800 $455,249
Goodwill and other intangible assets(1)
(15,356)(14,902)
Tangible assets$452,444 $440,347
Non-GAAP Ratio:
TCE(2)
7.6%7.5%
Three Months EndedSix Months Ended
(Dollars in millions, except as noted)June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Average Tangible Common Equity:
Stockholders’ equity$55,357 $54,165$55,066 $56,786
Goodwill and other intangible assets(1)
(15,187)(14,875)(15,086)(14,889)
Noncumulative perpetual preferred stock(4,845)(4,845)(4,845)(4,845)
Average tangible common equity$35,325 $34,445$35,135 $37,051
Average Tangible Assets:
Total assets$466,652 $435,327$464,459 $432,806
Goodwill and other intangible assets(1)
(15,187)(14,875)(15,086)(14,889)
Average tangible assets$451,465 $420,452$449,373 $417,917
Tangible Book Value per Share:
Tangible common equity (period-end)$34,358$33,715$34,358$33,715
Outstanding Common Shares381.4383.8381.4383.8
Tangible book value per common share (period-end)$90.07$87.84$90.07$87.84
Return on Average Tangible Assets:
Net income$1,431$2,031$2,391$4,434
Average tangible assets451,465420,452449,373417,917
Return on average tangible assets(3)
1.27%1.93%1.06%2.12%
Return on Average Tangible Common Equity:
Net income available to common stockholders$1,351$1,949$2,238$4,267
Average tangible common equity35,32534,44535,13537,051
Return on average tangible common equity(4)
15.30%22.63%12.74%23.03%
__________
(1)Includes impact of related deferred taxes.
(2)TCE ratio is a non-GAAP measure calculated based on TCE divided by period-end tangible assets.
(3)Return on average tangible assets is a non-GAAP measure calculated based on annualized income (loss) from continuing operations, net of tax, for the period divided by average tangible assets for the period.
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(4)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.
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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 “2022 Form 10-K” are to our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Bank: Refers to (i) CONA from and after the Bank Merger and (ii) CONA and COBNA collectively prior to the Bank Merger.
Bank Merger: The merger of COBNA with and into CONA, with CONA as the surviving entity, that occurred on October 1, 2022.
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.
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 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 Election: The optional five-year transition period provided to banking institutions to phase in the impact of the CECL standard on their regulatory capital.
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 through September 30, 2022, which offered credit card products along with other lending products and consumer services. On October 1, 2022, the Company completed the merger of COBNA with and into CONA, with CONA as the surviving entity.
Common equity Tier 1 (“CET1”) capital: CET1 capital primarily includes qualifying common shareholders’ equity, retained earnings and certain AOCI amounts less certain deductions for goodwill, intangible assets, and certain deferred tax assets.
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.
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.
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Cybersecurity Incident: The unauthorized access by an outside individual who obtained certain types of personal information relating to people who had applied for our credit card products and to our credit card customers that we announced on July 29, 2019.
Derivative: A contract or agreement whose value is derived from changes in interest rates, foreign exchange rates, prices of securities or commodities, credit worthiness for credit default swaps or financial or commodity indices.
Discontinued operations: The operating results of a component of an entity, as defined by Accounting Standards Codification 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.
Federal Banking Agencies: The Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation.
Federal Deposit Insurance Corporation (“FDIC”): An independent U.S. governmental agency that administers the Deposit Insurance Fund.
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.
Financial difficulty modification (“FDM”): A FDM is deemed to occur when a loan modification is made to a borrower experiencing financial difficulty in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, a term extension, or a combination of these modifications in the current reporting period. FDMs became effective with the adoption of ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures on January 1, 2023.
Foreign exchange contracts: Contracts that provide for the future receipt or delivery of foreign currency at previously agreed-upon terms.
Framework: The Capital One enterprise-wide risk management framework.
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.
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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.
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.
Nonperforming loans: Generally include loans that have been placed on nonaccrual status. We do not report loans classified as held for sale as nonperforming.
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.
Public Fund 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.
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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 requirement: A component of our standardized approach capital conservation buffer, which is recalibrated annually based on the results of our supervisory stress tests.
Stress Capital Buffer Rule: In March 2020, the Federal Reserve issued a final rule to implement the stress capital buffer requirement.
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 calculated as common equity less goodwill and other intangible assets inclusive of any related deferred tax liabilities.
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. The accounting guidance for TDRs was eliminated by ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which we adopted as of January 1, 2023.
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
ASC: Accounting Standards Codification
ASU: Accounting Standards Update
ATM: Automated teller machine
BHC: Bank holding company
bps: Basis points
CAD: Canadian dollar
CCAR: Comprehensive Capital Analysis and Review
CCP: Central Counterparty Clearinghouse, or Central Clearinghouse
CDE: Community development entities
CECL: Current expected credit loss
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
CVA: Credit valuation adjustment
DCF: Discounted cash flow
DVA: Debit valuation adjustment
EUR: Euro
Fannie Mae: Federal National Mortgage Association
FASB: Financial Accounting Standards Board
FCM: Futures commission merchant
FDM: Financial difficulty modification
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
GSE or Agency: Government-sponsored enterprise
ICE: Intercontinental Exchange
IRM: Independent Risk Management
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LCH: LCH Group
LCR: Liquidity coverage ratio
LIBOR: London Interbank Offered Rate
LTV: Loan-to-Value
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
PCD: Purchased Credit-Deteriorated
PPI: Payment protection insurance
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

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CAPITAL ONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Three Months Ended June 30,Six Months Ended June 30,
(Dollars in millions, except per share-related data)2023202220232022
Interest income:
Loans, including loans held for sale$9,057 $6,605 $17,780 $12,972 
Investment securities639 435 1,254 837 
Other470 55 886 70 
Total interest income10,166 7,095 19,920 13,879 
Interest expense:
Deposits2,277 293 4,133 511 
Securitized debt obligations236 65 447 94 
Senior and subordinated notes528 194 1,017 325 
Other borrowings12 26 24 35 
Total interest expense3,053 578 5,621 965 
Net interest income7,113 6,517 14,299 12,914 
Provision for credit losses 2,490 1,085 5,285 1,762 
Net interest income after provision for credit losses4,623 5,432 9,014 11,152 
Non-interest income:
Interchange fees, net1,213 1,201 2,352 2,234 
Service charges and other customer-related fees411 415 790 815 
Other275 99 474 442 
Total non-interest income1,899 1,715 3,616 3,491 
Non-interest expense:
Salaries and associate benefits2,317 1,946 4,744 3,972 
Occupancy and equipment506 481 1,014 994 
Marketing886 1,003 1,783 1,921 
Professional services290 458 614 855 
Communications and data processing344 339 694 678 
Amortization of intangibles22 14 36 28 
Other429 342 854 686 
Total non-interest expense4,794 4,583 9,739 9,134 
Income from continuing operations before income taxes1,728 2,564 2,891 5,509 
Income tax provision297 533 500 1,075 
Net income1,431 2,031 2,391 4,434 
Dividends and undistributed earnings allocated to participating securities(23)(25)(39)(53)
Preferred stock dividends(57)(57)(114)(114)
Net income available to common stockholders$1,351 $1,949 $2,238 $4,267 
Basic earnings per common share:
Net income from continuing operations$3.53 $4.98 $5.85 $10.65 
Net income per basic common share$3.53 $4.98 $5.85 $10.65 
Diluted earnings per common share:
Net income from continuing operations$3.52 $4.96 $5.83 $10.61 
Net income per diluted common share$3.52 $4.96 $5.83 $10.61 
See Notes to Consolidated Financial Statements.
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CAPITAL ONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended June 30,Six Months Ended June 30,
(Dollars in millions)2023202220232022
Net income$1,431 $2,031 $2,391 $4,434 
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on securities available for sale(888)(2,288)74 (5,541)
Net unrealized losses on hedging relationships(424)(483)(23)(1,692)
Foreign currency translation adjustments34 (52)47 (57)
Other comprehensive income (loss), net of tax(1,278)(2,823)98 (7,290)
Comprehensive income (loss)$153 $(792)$2,489 $(2,856)
    
See Notes to Consolidated Financial Statements.
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CAPITAL ONE FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in millions, except per share-related data)June 30, 2023December 31, 2022
Assets:
Cash and cash equivalents:
Cash and due from banks$3,360 $5,193 
Interest-bearing deposits and other short-term investments38,236 25,663 
Total cash and cash equivalents41,596 30,856 
Restricted cash for securitization investors452 400 
Securities available for sale (amortized cost of $88.4 billion and $87.0 billion and allowance for credit losses of $4 million and $3 million as of June 30, 2023 and December 31, 2022, respectively)
78,412 76,919 
Loans held for investment:
Unsecuritized loans held for investment280,933 283,282 
Loans held in consolidated trusts30,390 29,049 
Total loans held for investment311,323 312,331 
Allowance for credit losses(14,646)(13,240)
Net loans held for investment296,677 299,091 
Loans held for sale ($542 million and $191 million carried at fair value as of June 30, 2023 and December 31, 2022, respectively)
1,211 203 
Premises and equipment, net4,359 4,351 
Interest receivable2,297 2,104 
Goodwill15,060 14,777 
Other assets27,736 26,548 
Total assets$467,800 $455,249 
Liabilities:
Interest payable$637 $527 
Deposits:
Non-interest-bearing deposits29,312 32,203 
Interest-bearing deposits314,393 300,789 
Total deposits343,705 332,992 
Securitized debt obligations17,861 16,973 
Other debt:
Federal funds purchased and securities loaned or sold under agreements to repurchase649 883 
Senior and subordinated notes31,627 30,826 
Other borrowings121 33 
Total other debt32,397 31,742 
Other liabilities18,641 20,433 
Total liabilities413,241 402,667 
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 June 30, 2023 and December 31, 2022)
0 0 
Common stock (par value $0.01 per share; 1,000,000,000 shares authorized; 694,326,955 and 690,334,422 shares issued as of June 30, 2023 and December 31, 2022, respectively; 381,441,449 and 381,318,702 shares outstanding as of June 30, 2023 and December 31, 2022, respectively)
7 7 
Additional paid-in capital, net35,163 34,725 
Retained earnings59,028 57,184 
Accumulated other comprehensive loss(9,818)(9,916)
Treasury stock, at cost (par value $0.01 per share; 312,885,506 and 309,015,720 shares as of June 30, 2023 and December 31, 2022, respectively)
(29,821)(29,418)
Total stockholders’ equity54,559 52,582 
Total liabilities and stockholders’ equity$467,800 $455,249 
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, 20224,975,000 $0 690,334,422 $7 $34,725 $57,184 $(9,916)$(29,418)$52,582 
Cumulative effects of accounting standards adoption(1)
48 48 
Comprehensive income960 1,376 2,336 
Dividends—common stock(2)
26,635 0 3 (237)(234)
Dividends—preferred stock(57)(57)
Purchases of treasury stock(246)(246)
Issuances of common stock and restricted stock, net of forfeitures2,972,149 0 76 76 
Compensation expense for restricted stock units148 148 
Balance as of March 31, 20234,975,000 $0 693,333,206 $7 $34,952 $57,898 $(8,540)$(29,664)$54,653 
Cumulative effects of accounting standards adoption(3)
(11)(11)
Comprehensive income (loss)1,431 (1,278)153 
Dividends—common stock(2)
4,745 0 1 (233)(232)
Dividends—preferred stock(57)(57)
Purchases of treasury stock(157)(157)
Issuances of common stock and restricted stock, net of forfeitures989,004 0 88 88 
Compensation expense for restricted stock units122 122 
Balance as of June 30, 20234,975,000 $0 694,326,955 $7 $35,163 $59,028 $(9,818)$(29,821)$54,559 
(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(2)
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(2)
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 
__________
(1)Impact from the adoption of ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures as of January 1, 2023.
(2)We declared dividends per share on our common stock of $0.60 in the second quarter of 2023 and 2022, respectively, and $1.20 in the first six months of 2023 and 2022, respectively.
(3)We have equity method investments in certain non-public entities which adopted ASU 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) as of January 1, 2023. The impact to retained earnings was recorded in the second quarter of 2023, on a one quarter lag consistent with our standard operating procedures for equity method investments.
See Notes to Consolidated Financial Statements.
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CAPITAL ONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30,
(Dollars in millions) 20232022
Operating activities:
Income from continuing operations, net of tax$2,391 $4,434 
Net income2,391 4,434 
Adjustments to reconcile net income to net cash from operating activities:
Provision for credit losses5,285 1,762 
Depreciation and amortization, net1,576 1,623 
Deferred tax benefit(400)(11)
Net securities losses0 6 
Loss (gain) on sales of loans(3)(181)
Stock-based compensation expense277 172 
Other(48)20 
Loans held for sale:
Originations and purchases(3,339)(4,040)
Proceeds from sales and paydowns2,975 4,354 
Changes in operating assets and liabilities:
Changes in interest receivable(178)(151)
Changes in other assets(55)(5,578)
Changes in interest payable110 52 
Changes in other liabilities(2,245)414 
Net change from discontinued operations0 (1)
Net cash from operating activities6,346 2,875 
Investing activities:
Securities available for sale:
Purchases(5,947)(7,698)
Proceeds from paydowns and maturities4,282 10,129 
Proceeds from sales0 2,240 
Loans:
Net changes in loans originated as held for investment(2,749)(17,352)
Principal recoveries of loans previously charged off1,133 1,092 
Net purchases of premises and equipment(441)(423)
Net cash used in acquisition activities(2,785)0 
Net cash used in other investing activities(652)(490)
Net cash used in investing activities(7,159)(12,502)
See Notes to Consolidated Financial Statements.
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CAPITAL ONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30,
(Dollars in millions) 20232022
Financing activities:
Deposits and borrowings:
Changes in deposits$10,743 $(2,913)
Issuance of securitized debt obligations2,444 6,483 
Maturities and paydowns of securitized debt obligations(1,551)(3,593)
Issuance of senior and subordinated notes and long-term FHLB advances5,727 17,528 
Maturities and paydowns of senior and subordinated notes and long-term FHLB advances(4,886)(2,357)
Changes in other borrowings(53)(391)
Common stock:
Net proceeds from issuances164 138 
Dividends paid(466)(487)
Preferred stock:
Dividends paid(114)(114)
Purchases of treasury stock(403)(4,472)
Proceeds from share-based payment activities0 1 
Net cash from financing activities11,605 9,823 
Changes in cash, cash equivalents and restricted cash for securitization investors10,792 196 
Cash, cash equivalents and restricted cash for securitization investors, beginning of the period31,256 22,054 
Cash, cash equivalents and restricted cash for securitization investors, end of the period$42,048 $22,250 
Supplemental cash flow information:
Non-cash items:
Net transfers from loans held for investment to loans held for sale$745 $775 
Interest paid6,324 969 
Income tax paid631 473 

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 June 30, 2023, Capital One Financial Corporation’s principal subsidiary was Capital One, National Association (“CONA”). 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 is hereafter collectively referred to as “we,” “us” or “our.” References to the “Bank” shall mean and refer to (i) CONA from and after the Bank Merger and (ii) CONA and COBNA collectively prior to the Bank Merger.
We also offer products outside of the United States of America (“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 our Canadian branch of CONA have 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 2022 Annual Report on Form 10-K (“2022 Form 10-K”).
Loan Modifications and Restructurings
We adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures on January 1, 2023, and elected the modified retrospective adoption method. The ASU eliminates the accounting guidance for troubled debt restructurings (“TDRs”) and resulted in a cumulative adjustment to retained earnings and our allowance, which was not considered material. Subsequent to adoption, our consideration of modifications in measurement of the allowance for credit losses remains substantively unchanged. The ASU also establishes prospective disclosure requirements for certain loan refinancings and restructurings for borrowers experiencing financial difficulty and current-period gross charge-offs by year of origination for financing receivables and net investments in leases. We provide information on modified loans, including the performance of those loans subsequent to modification in “Note 3—Loans” and gross charge-offs by year of origination in “Note 4—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments.”
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As part of our loss mitigation efforts, we may provide modifications to a borrower experiencing financial difficulty to improve long-term collectability of the loan and to avoid the need for foreclosure or repossession of collateral, if any. Loan modifications to a borrower experiencing financial difficulty in the form of principal forgiveness, interest rate reduction, an other-than-insignificant delay in payment, including payment deferrals, a term extension, or a combination of these modifications are reported as a financial difficulty modification (“FDM”). As restructurings offered to borrowers experiencing financial difficulty are typically not at market terms FDMs are generally accounted for as a continuation of the existing loan. See “Note 3—Loans” for additional information on our loan modifications and restructurings.
Loan Modifications and Restructurings Prior to Adoption of ASU 2022-02
In periods prior to 2023, a loan modification in which a concession is granted to a borrower experiencing financial difficulty was accounted for and reported as a TDR. These loan modifications typically include short-term payment deferrals, an extension of the loan term, a reduction in the interest rate, a reduction in the loan balance, or a combination of these modifications. See “Note 3—Loans” for additional information on our loan modifications and restructurings.
Modified loans and troubled debt restructurings: Modified loans, including TDRs for periods ending on or before December 31, 2022 and FDMs for periods beginning on or after January 1, 2023, that are current at the time of the restructuring remain in accrual status if there is demonstrated performance prior to the restructuring and continued performance under the modified terms is expected. Otherwise, the modified loan is classified as nonperforming. For additional information, see “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2022 Form 10-K.
Newly Adopted Accounting Standards During the Six Months Ended June 30, 2023
StandardGuidanceAdoption Timing and Financial Statement Impacts
Modifications to Borrowers Experiencing Financial Difficulty and Vintage Disclosures
ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures

Issued March 2022
Eliminates accounting guidance for troubled debt restructurings by creditors, and enhances disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty;
Requires an entity to disclose current-period gross writeoffs by year of origination for financing receivables and net investments in leases.

We adopted this guidance in the first quarter of 2023 using a modified retrospective adoption method, which results in a cumulative-effect adjustment to retained earnings in the period of adoption and prospective application of the enhanced disclosure requirements.

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

See “Note 3—Loans” and “Note 4—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments” for additional disclosures.
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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 97% of our total investment securities portfolio as of both June 30, 2023 and December 31, 2022, 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 June 30, 2023 and December 31, 2022. Accrued interest receivable of $224 million and $215 million as of June 30, 2023 and December 31, 2022, respectively, is not included in the table below.
Table 2.1: Investment Securities Available for Sale
June 30, 2023
(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$5,197 $0 $0 $(87)$5,110 
RMBS:
Agency72,085 0 41 (9,322)62,804 
Non-agency631 (4)92 (5)714 
Total RMBS72,716 (4)133 (9,327)63,518 
Agency CMBS8,757 0 7 (752)8,012 
Other securities(1)
1,775 0 3 (6)1,772 
Total investment securities available for sale$88,445 $(4)$143 $(10,172)$78,412 
 December 31, 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$5,129 $0 $2 $(90)$5,041 
RMBS:
Agency71,212 0 53 (9,413)61,852 
Non-agency653 (3)93 (6)737 
Total RMBS71,865 (3)146 (9,419)62,589 
Agency CMBS8,626 0 4 (760)7,870 
Other securities(1)
1,427 0 2 (10)1,419 
Total investment securities available for sale$87,047 $(3)$154 $(10,279)$76,919 
__________    
(1)Includes $1.1 billion and $707 million of asset-backed securities (“ABS”) as of June 30, 2023 and December 31, 2022, respectively. The remaining amount is primarily comprised of supranational bonds and foreign government bonds.
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Investment Securities in a Gross Unrealized Loss Position
The table below provides the gross unrealized losses and fair value of our securities available for sale aggregated by major security type and the length of time that individual securities have been in a continuous unrealized loss position as of June 30, 2023 and December 31, 2022. The amounts include securities available for sale without an allowance for credit losses.
Table 2.2: Securities in a Gross Unrealized Loss Position
June 30, 2023
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$3,458 $(33)$1,145 $(54)$4,603 $(87)
RMBS:
Agency12,256 (466)48,956 (8,856)61,212 (9,322)
Non-agency9 0 8 (1)17 (1)
Total RMBS12,265 (466)48,964 (8,857)61,229 (9,323)
Agency CMBS1,505 (49)5,783 (703)7,288 (752)
Other securities765 (2)330 (4)1,095 (6)
Total investment securities available for sale in a gross unrealized loss position without an allowance for credit losses(1)
$17,993 $(550)$56,222 $(9,618)$74,215 $(10,168)
December 31, 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$2,464 $(57)$448 $(33)$2,912 $(90)
RMBS:
Agency23,271 (1,809)36,803 (7,604)60,074 (9,413)
Non-agency14 (1)3 0 17 (1)
Total RMBS23,285 (1,810)36,806 (7,604)60,091 (9,414)
Agency CMBS4,325 (267)3,214 (493)7,539 (760)
Other securities555 (7)76 (3)631 (10)
Total investment securities available for sale in a gross unrealized loss position without an allowance for credit losses(1)
$30,629 $(2,141)$40,544 $(8,133)$71,173 $(10,274)
__________
(1)    Consists of approximately 2,860 and 2,840 securities in gross unrealized loss positions as of June 30, 2023 and December 31, 2022, respectively.
Maturities and Yields of Investment Securities
The table below summarizes, as of June 30, 2023, 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. Since 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
June 30, 2023
(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$753$4,357$0$0$5,110
RMBS(1):
Agency0791,18161,54462,804
Non-agency001713714
Total RMBS0791,18262,25763,518
Agency CMBS(1)
492,4293,4922,0428,012
Other securities4121,3303001,772
Total securities available for sale$1,214$8,195$4,704$64,299$78,412
Amortized cost of securities available for sale$1,219$8,452$5,204$73,570$88,445
Weighted-average yield for securities available for sale4.16%3.56%3.00%2.77%2.88%
__________
(1)As of June 30, 2023, the weighted-average expected maturities of RMBS and Agency CMBS were 6.9 years and 4.7 years, respectively.
Net Securities Gains or Losses and Proceeds from Sales
We had no sales of securities for the three and six months ended June 30, 2023. For the three and six months ended June 30, 2022, total proceeds from the sales of our securities were $1.8 billion and $2.2 billion, respectively, with losses of $6 million for both periods, respectively.
Securities Pledged and Received
We pledged investment securities totaling $47.1 billion and $21.3 billion as of June 30, 2023 and December 31, 2022, respectively. These securities are primarily pledged to secure Federal Home Loan Banks (“FHLB”) advances, Bank Term Funding Program and Public Fund Deposits, as well as for other purposes as required or permitted by law. We accepted pledges of securities with a fair value of approximately $66 million and $82 million as of June 30, 2023 and December 31, 2022, 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 the tables in this note 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 $2.1 billion and $1.9 billion as of June 30, 2023 and December 31, 2022, 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 June 30, 2023 and December 31, 2022. The delinquency aging includes all past due loans, both performing and nonperforming.
Table 3.1: Loan Portfolio Composition and Aging Analysis
 June 30, 2023
Delinquent Loans
(Dollars in millions)Current30-59
Days
60-89
Days
> 90
Days
Total
Delinquent
Loans
Total
Loans
Credit Card:
Domestic credit card$130,886$1,554$1,160$2,375$5,089$135,975
International card businesses6,232103591222846,516
Total credit card137,1181,6571,2192,4975,373142,491
Consumer Banking:
Auto71,2732,8311,3703674,56875,841
Retail banking1,40714414321,439
Total consumer banking72,6802,8451,3743814,60077,280
Commercial Banking:
Commercial and multifamily real estate35,9059140513636,041
Commercial and industrial55,155812322535655,511
Total commercial banking91,0609916323049291,552
Total loans(1)
$300,858$4,601$2,756$3,108$10,465$311,323
% of Total loans96.64%1.48%0.88%1.00%3.36%100.00%
    
December 31, 2022
Delinquent Loans
(Dollars in millions)Current30-59
Days
60-89
Days
> 90
Days
Total
Delinquent
Loans
Total
Loans
Credit Card:
Domestic credit card$127,066$1,405$975$2,135 $4,515 $131,581 
International card businesses5,8958658110 254 6,149 
Total credit card132,9611,4911,0332,245 4,769 137,730 
Consumer Banking:
Auto73,4673,1011,418387 4,906 78,373 
Retail banking1,51813417 34 1,552 
Total consumer banking74,9853,1141,422404 4,940 79,925 
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December 31, 2022
Delinquent Loans
(Dollars in millions)Current30-59
Days
60-89
Days
> 90
Days
Total
Delinquent
Loans
Total
Loans
Commercial Banking:
Commercial and multifamily real estate37,41701353637,453
Commercial and industrial56,942615516528157,223
Total commercial banking94,359615620031794,676
Total loans(1)
$302,305$4,666$2,511$2,849$10,026$312,331
% of Total loans96.79%1.50%0.80%0.91%3.21%100.00%
__________
(1)Loans include unamortized premiums, discounts, and deferred fees and costs totaling $1.4 billion as of both June 30, 2023 and December 31, 2022.
The following table presents our loans held for investment that are 90 days or more past due that continue to accrue interest, loans that are classified as nonperforming and loans that are classified as nonperforming without an allowance as of June 30, 2023 and December 31, 2022. Nonperforming loans generally include loans that have been placed on nonaccrual status.
Table 3.2: 90+ Day Delinquent Loans Accruing Interest and Nonperforming Loans
June 30, 2023December 31, 2022
(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$2,375 N/A$0 $2,135 N/A$0 
International card businesses116 $10 0 105 $9 0 
Total credit card2,491 10 0 2,240 9 0 
Consumer Banking:
Auto0 588 0 0 595 0 
Retail banking0 43 19 0 39 8 
Total consumer banking0 631 19 0 634 8 
Commercial Banking:
Commercial and multifamily real estate0 416 303 0 271 246 
Commercial and industrial0 395 218 0 430 294 
Total commercial banking0 811 521 0 701 540 
Total$2,491 $1,452 $540 $2,240 $1,344 $548 
% of Total loans held for investment0.80 %0.47 %0.17 %0.72 %0.43 %0.18 %
__________
(1)We recognized interest income for loans classified as nonperforming of $5 million and $17 million for the three and six months ended June 30, 2023, respectively, and $1 million and $11 million for the three and six months ended June 30, 2022, respectively.
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Credit Quality Indicators
We closely monitor economic conditions and loan performance trends to assess and manage our exposure to credit risk. We discuss these risks and our credit quality indicator for each portfolio segment below.
Credit Card
Our credit card loan portfolio is highly diversified across millions of accounts and numerous geographies without significant individual exposure. We therefore generally manage credit risk based on portfolios with common risk characteristics. The risk in our credit card loan portfolio correlates to broad economic trends, such as unemployment rates and the U.S. Real Gross 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 June 30, 2023 and December 31, 2022.
Table 3.3: Credit Card Delinquency Status
June 30, 2023December 31, 2022
(Dollars in millions)Revolving LoansRevolving Loans Converted to TermTotalRevolving LoansRevolving Loans Converted to TermTotal
Credit Card:
Domestic credit card:
Current
$130,591 $295 $130,886 $126,811 $255 $127,066 
30-59 days
1,535 19 1,554 1,388 17 1,405 
60-89 days
1,148 12 1,160 964 11 975 
Greater than 90 days
2,356 19 2,375 2,121 14 2,135 
Total domestic credit card135,630 345 135,975 131,284 297 131,581 
International card businesses:
Current
6,209 23 6,232 5,866 29 5,895 
30-59 days
101 2 103 83 3 86 
60-89 days
58 1 59 55 3 58 
Greater than 90 days
121 1 122 106 4 110 
Total international card businesses6,489 27 6,516 6,110 39 6,149 
Total credit card$142,119 $372 $142,491 $137,394 $336 $137,730 
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 consider when assessing the credit quality and risk of our auto loan portfolio is borrower credit scores as they measure the creditworthiness of borrowers. Delinquency trends are the key indicator we assess in monitoring the credit quality and risk of our retail banking loan portfolio.
The table below presents our consumer banking portfolio of loans held for investment by credit quality indicator as of June 30, 2023 and December 31, 2022. 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 Vintage Year
June 30, 2023
Term Loans by Vintage Year
(Dollars in millions)20232022202120202019PriorTotal Term LoansRevolving LoansRevolving Loans Converted to TermTotal
AutoAt origination FICO scores:(1)
Greater than 660$6,319 $15,029 $11,726 $4,147 $1,828 $695 $39,744 $0 $0 $39,744 
621-6602,632 5,284 4,145 1,756 850 388 15,055 0 0 15,055 
620 or below3,725 6,604 5,320 3,052 1,586 755 21,042 0 0 21,042 
Total auto12,676 26,917 21,191 8,955 4,264 1,838 75,841 0 0 75,841 
Retail banking—Delinquency status:
Current54 150 94 72 123 530 1,023 379 5 1,407 
30-59 days0 3 0 1 0 3 7 7 0 14 
60-89 days0 0 0 0 0 1 1 3 0 4 
Greater than 90 days0 0 0 0 0 9 9 4 1 14 
Total retail banking54 153 94 73 123 543 1,040 393 6 1,439 
Total consumer banking$12,730 $27,070 $21,285 $9,028 $4,387 $2,381 $76,881 $393 $6 $77,280 
December 31, 2022
Term Loans by Vintage Year
(Dollars in millions)20222021202020192018PriorTotal Term LoansRevolving LoansRevolving Loans Converted to TermTotal
AutoAt origination FICO scores:(1)
Greater than 660$17,872 $14,246 $5,354 $2,595 $1,032 $328 $41,427 $0 $0 $41,427 
621-6606,212 5,060 2,257 1,167 513 185 15,394 0 0 15,394 
620 or below7,717 6,501 3,898 2,144 914 378 21,552 0 0 21,552 
Total auto31,801 25,807 11,509 5,906 2,459 891 78,373 0 0 78,373 
Retail banking—Delinquency status:
Current166 128 82 133 127 470 1,106 408 4 1,518 
30-59 days2 1 0 0 0 2 5 8 0 13 
60-89 days0 1 0 0 0 1 2 2 0 4 
Greater than 90 days0 0 0 0 3 8 11 4 2 17 
Total retail banking168 130 82 133 130 481 1,124 422 6 1,552 
Total consumer banking$31,969 $25,937 $11,591 $6,039 $2,589 $1,372 $79,497 $422 $6 $79,925 
__________
(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.
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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. 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 June 30, 2023 and December 31, 2022. The internal risk rating status includes all past due loans, both performing and nonperforming.
Table 3.5: Commercial Banking Portfolio by Internal Risk Ratings
June 30, 2023
Term Loans by Vintage Year
(Dollars in millions)20232022202120202019PriorTotal Term LoansRevolving LoansRevolving Loans Converted to TermTotal
Internal risk rating:(1)
Commercial and multifamily real estate
Noncriticized$5,154 $7,819 $2,037 $608 $965 $2,536 $19,119 $13,317 $25 $32,461 
Criticized performing669 1,098 265 142 331 639 3,144 20 0 3,164 
Criticized nonperforming30 64 21 0 30 271 416 0 0 416 
Total commercial and multifamily real estate5,853 8,981 2,323 750 1,326 3,446 22,679 13,337 25 36,041 
Commercial and industrial
Noncriticized7,677 17,297 4,359 2,223 717 2,935 35,208 16,728 186 52,122 
Criticized performing407 763 330 52 260 330 2,142 852 0 2,994 
Criticized nonperforming8 22 43 24 145 97 339 56 0 395 
Total commercial and industrial8,092 18,082 4,732 2,299 1,122 3,362 37,689 17,636 186 55,511 
Total commercial banking$13,945 $27,063 $7,055 $3,049 $2,448 $6,808 $60,368 $30,973 $211 $91,552 
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December 31, 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$9,527 $4,086 $1,161 $1,671 $1,280 $2,898 $20,623 $13,254 $25 $33,902 
Criticized performing814 376 202 412 302 1,061 3,167 113 0 3,280 
Criticized nonperforming101 22 0 13 19 116 271 0 0 271 
Total commercial and multifamily real estate10,442 4,484 1,363 2,096 1,601 4,075 24,061 13,367 25 37,453 
Commercial and industrial
Noncriticized22,105 6,031 2,934 1,809 973 2,658 36,510 17,187 21 53,718 
Criticized performing992 560 156 160 167 76 2,111 964 0 3,075 
Criticized nonperforming196 21 5 87 40 5 354 76 0 430 
Total commercial and industrial23,293 6,612 3,095 2,056 1,180 2,739 38,975 18,227 21 57,223 
Total commercial banking$33,735 $11,096 $4,458 $4,152 $2,781 $6,814 $63,036 $31,594 $46 $94,676 
__________
(1)Criticized exposures correspond to the “Special Mention,” “Substandard” and “Doubtful” asset categories defined by bank regulatory authorities.
Financial Difficulty Modifications to Borrowers
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 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.
On January 1, 2023, we adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures using the modified retrospective adoption method. The ASU eliminates the accounting guidance for TDRs and enhances disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty (“FDMs”). The types of modifications we offer borrowers experiencing financial difficulty did not change as a result of ASU 2022-02. Under this new accounting guidance, FDMs are accumulated and the performance of each loan that received a FDM is reported on a rolling twelve month basis. For the interim reporting period ended June 30, 2023, FDMs and the related borrower performance information pertain to FDMs which occurred in the three and six months ended June 30, 2023. For additional information on FDMs, see “Note 1—Summary of Significant Accounting Policies.”
For the interim periods prior to adoption of ASU 2022-02, our previous TDR disclosures are included below in the “Troubled Debt Restructurings” section. For additional information on loan modifications classified as a TDR prior to January 1, 2023, see “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2022 Form 10-K. FDM disclosures are not directly comparable to the prior period TDR disclosures due to differences in the respective accounting guidance and disclosure requirements.

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The following table presents the major modification types, amortized cost amounts per modification and financial effects for all FDMs undertaken during the three and six months ended June 30, 2023.
Table 3.6: Financial Difficulty Modifications to Borrowers
Three Months Ended June 30, 2023
Credit CardConsumer BankingCommercial Banking
(Dollars in millions)Domestic CardInternational Card BusinessesTotal Credit CardAutoRetail BankingTotal Consumer BankingCommercial and Multifamily Real EstateCommercial and IndustrialTotal Commercial BankingTotal
Interest rate reduction$154 $40 $194 $ $ $ $ $ $ $194 
Term extension   41 1 42 147 172 319 361 
Principal balance reduction   7  7 64  64 71 
Interest rate reduction and term extension   173  173    173 
Other(1)
   1  1 54 21 75 76 
Total loans modified$154 $40 $194 $222 $1 $223 $265 $193 $458 $875 
% of total class of receivables0.11 %0.61 %0.14 %0.29 %0.08 %0.29 %0.74 %0.35 %0.50 %0.28 %
Six Months Ended June 30, 2023
Credit CardConsumer BankingCommercial Banking
(Dollars in millions)Domestic CardInternational Card BusinessesTotal Credit CardAutoRetail BankingTotal Consumer BankingCommercial and Multifamily Real EstateCommercial and IndustrialTotal Commercial BankingTotal
Interest rate reduction$285 $61 $346 $ $ $ $ $ $ $346 
Term extension   77 3 80 246 237 483 563 
Principal balance reduction   12  12 64  64 76 
Principal balance reduction and term extension       17 17 17 
Interest rate reduction and term extension   330  330    330 
Other(1)
   2  2 54 146 200 202 
Total loans modified$285 $61 $346 $421 $3 $424 $364 $400 $764 $1,534 
% of total class of receivables0.21 %0.94 %0.24 %0.55 %0.21 %0.55 %1.01 %0.72 %0.83 %0.49 %
__________
(1)Commercial Banking consists of modifications other than interest rate reduction, term extension, or principal balance reduction.
Table 3.7: Financial Effects of Financial Difficulty Modifications to Borrowers
Three Months Ended June 30, 2023
Credit CardConsumer BankingCommercial Banking
(Dollars in millions)Domestic CardInternational Card BusinessesAutoRetail BankingCommercial and Multifamily Real EstateCommercial and Industrial
Weighted-average interest rate reduction19.06%27.99%8.82%2.00%%%
Payment delay duration (in months)620164
Principal balance reduction$$$$$20$
Six Months Ended June 30, 2023
Credit CardConsumer BankingCommercial Banking
(Dollars in millions)Domestic CardInternational Card BusinessesAutoRetail BankingCommercial and Multifamily Real EstateCommercial and Industrial
Weighted-average interest rate reduction19.04%26.90%8.78%2.00%%%
Payment delay duration (in months)615166
Principal balance reduction$$$$$23$
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Performance of Financial Difficulty Modifications to Borrowers
We monitor loan performance trends, including FDMs, to assess and manage our exposure to credit risk. See “Note 1—Summary of Significant Accounting Policies” for additional information on how the allowance for modified loans is calculated for each portfolio segment.
The following table presents FDMs over a rolling 12 month period by delinquency status as of June 30, 2023.
Table 3.8 Delinquency Status of Loan Modifications to Borrowers Experiencing Financial Difficulty(1)
June 30, 2023
Delinquent Loans
(Dollars in millions)Current30-59 Days60-89 Days
> 90 Days
Total Delinquent LoansTotal Loans
Credit Card:
Domestic credit card$160 $42 $27 $56 $125 $285 
International card businesses24 6 6 25 37 61 
Total credit card184 48 33 81 162 346 
Consumer Banking:
Auto337 49 26 9 84 421 
Retail banking3 0 0 0 0 3 
Total consumer banking340 49 26 9 84 424 
Commercial Banking:
Commercial and multifamily real estate339 0 0 25 25 364 
Commercial and industrial275 0 13 112 125 400 
Total commercial banking614 0 13 137 150 764 
Total$1,138 $97 $72 $227 $396 $1,534 
__________
(1)Commitments to lend additional funds on FDMs totaled $48 million as of June 30, 2023.
Subsequent Defaults of Financial Difficulty Modifications to Borrowers
FDMs may subsequently enter default. A default occurs if a FDM is either 90 days or more delinquent, has been charged off, or has been reclassified from accrual to nonaccrual status. Loans that entered a modification program in any stage of delinquency are included in the aging table above. Loans that entered a modification program while in default are not considered to have subsequently defaulted for purposes of this disclosure. The allowance for any FDMs that have subsequently defaulted is measured using the same methodology as the allowance for loans held for investment. See “Note 1—Summary of Significant Accounting Policies” for additional information.
FDMs that entered default subsequent to their modification were insignificant during the three months ended March 31, 2023. The following table presents FDMs that entered subsequent default for the three months ended June 30, 2023.
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Table 3.9 Subsequent Defaults of Financial Difficulty Modifications to Borrowers
Three Months Ended June 30, 2023
(Dollars in millions)Interest Rate ReductionTerm ExtensionInterest Rate Reduction and Term ExtensionTotal Loans
Credit Card:
Domestic credit card$37 $0 $0 $37 
International card businesses4 0 0 4 
Total credit card41 0 0 41 
Consumer Banking:
Auto0 3 51 54 
Total consumer banking0 3 51 54 
Total$41 $3 $51 $95 

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Troubled Debt Restructurings
We adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures on January 1, 2023, and elected the modified retrospective adoption method. The ASU eliminates the accounting guidance for TDRs, and establishes disclosure requirements, to be applied prospectively, for loans with FDMs.
The following tables present the major modification types, amortized cost amounts and financial effects of loans modified in a TDR during the three and six months ended June 30, 2022.
Table 3.10: Troubled Debt Restructurings(1)
Three Months Ended June 30, 2022
Reduced Interest RateTerm Extension
(Dollars in millions)
Total Loans Modified(2)
% of TDR Activity(3)
Average Rate Reduction
% of TDR Activity(3)
Average Term Extension (Months)
Credit Card:
Domestic credit card$57100 %15.56 %N/AN/A
International card businesses30100 27.65 N/AN/A
Total credit card87100 19.70 N/AN/A
Consumer Banking:
Auto28049 8.56 97 %4
Total consumer banking28049 8.56 97 4
Commercial Banking:
Commercial and multifamily real estate133N/AN/A9114
Commercial and industrial129N/AN/A3313
Total commercial banking262N/AN/A6214
Total$629
Six Months Ended June 30, 2022
Reduced Interest RateTerm Extension
(Dollars in millions)
Total Loans Modified(2)
% of TDR Activity(3)
Average Rate Reduction
% of TDR Activity(3)
Average Term Extension (Months)
Credit Card:
Domestic credit card$119100 %15.09 %N/AN/A
International card businesses64100 27.83 N/AN/A
Total credit card183100 19.54 N/AN/A
Consumer Banking:
Auto51952 8.68 97 %4
Retail banking1N/AN/A10012
Total consumer banking52052 8.68 974
Commercial Banking:
Commercial and multifamily real estate2644 0.29 7713
Commercial and industrial167N/AN/A4512
Total commercial banking4312 0.29 6413
Total$1,134
__________
(1)Commitments to lend additional funds on loans modified in TDRs totaled $166 million as of June 30, 2022.
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(2)Represents the amortized cost of total loans modified in TDRs at the end of the period in which they were modified. As not every modification type is included in the table above, the total percentage of TDR activity may not add up to 100%. Some loans may receive more than one type of modification.
(3)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 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 3.11: TDR—Subsequent Defaults
 Three Months Ended June 30, 2022Six Months Ended June 30, 2022
(Dollars in millions)Number of ContractsAmountNumber of ContractsAmount
Credit Card:
Domestic credit card8,012 $17 14,024 $28 
International card businesses19,611 20 36,118 39 
Total credit card27,623 37 50,142 67 
Consumer Banking:
Auto3,539 63 5,510 96 
Retail banking0 0 0 0 
Total consumer banking3,539 63 5,510 96 
Commercial Banking:
Commercial and industrial2 4 3 35 
Total commercial banking2 4 3 35 
Total31,164 $104 55,655 $198 
Loans Pledged
We pledged loan collateral of $8.3 billion and $9.8 billion to secure a portion of our FHLB borrowing capacity of $34.2 billion and $19.9 billion as of June 30, 2023 and December 31, 2022, respectively. We also pledged loan collateral of $70.2 billion and $34.1 billion to secure our Federal Reserve Discount Window borrowing capacity of $41.5 billion and $19.7 billion as of June 30, 2023 and December 31, 2022, respectively. In addition to loans pledged, we have securitized a portion of our credit card and auto loan portfolios. See “Note 5—Variable Interest Entities and Securitizations” for additional information.
Revolving Loans Converted to Term Loans
For the three and six months ended June 30, 2023, we converted $159 million and $342 million of revolving loans to term loans, respectively, primarily in our domestic credit card and commercial banking loan portfolios. For the three and six months ended June 30, 2022, we converted $41 million and $332 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. Our estimate of expected credit losses includes a reasonable and supportable forecast period of one year and then reverts over a one-year period to historical losses at each relevant loss component of the estimate. 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 “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2022 Form 10-K for further discussion of the methodology and policy for determining our allowance for credit losses for each of our loan portfolio segments, as well as information on our reserve for unfunded lending commitments.
Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity
The table below summarizes changes in the allowance for credit losses and reserve for unfunded lending commitments by portfolio segment for the three and six months ended June 30, 2023 and 2022. Our allowance for credit losses increased by $1.4 billion to $14.6 billion as of June 30, 2023 from December 31, 2022.
Table 4.1: Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity
Three Months Ended June 30, 2023
(Dollars in millions)Credit CardConsumer BankingCommercial BankingTotal
Allowance for credit losses:
Balance as of March 31, 2023$10,410 $2,205 $1,703 $14,318 
Charge-offs
(1,868)(526)(378)(2,772)
Recoveries(1)
340 247 0 587 
Net charge-offs(1,528)(279)(378)(2,185)
Provision for credit losses2,084 259 160 2,503 
Allowance build (release) for credit losses556 (20)(218)318 
Other changes(2)
10 0 0 10 
Balance as of June 30, 202310,976 2,185 1,485 14,646 
Reserve for unfunded lending commitments:
Balance as of March 31, 20230 0 211 211 
Provision (benefit) for losses on unfunded lending commitments0 0 (14)(14)
Balance as of June 30, 20230 0 197 197 
Combined allowance and reserve as of June 30, 2023$10,976 $2,185 $1,682 $14,843 
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Six Months Ended June 30, 2023
(Dollars in millions)Credit CardConsumer BankingCommercial BankingTotal
Allowance for credit losses:
Balance as of December 31, 2022$9,545 $2,237 $1,458 $13,240 
Cumulative effects of accounting standards adoption(3)
(63)0 0 (63)
Balance as of January 1, 20239,482 2,237 1,458 13,177 
Charge-offs
(3,556)(1,057)(402)(5,015)
Recoveries(1)
659 471 3 1,133 
Net charge-offs(2,897)(586)(399)(3,882)
Provision for credit losses4,345 534 426 5,305 
Allowance build (release) for credit losses1,448 (52)27 1,423 
Other changes(2)
46 0 0 46 
Balance as of June 30, 202310,976 2,185 1,485 14,646 
Reserve for unfunded lending commitments:
Balance as of December 31, 20220 0 218 218 
Provision (benefit) for losses on unfunded lending commitments0 0 (21)(21)
Balance as of June 30, 20230 0 197 197 
Combined allowance and reserve as of June 30, 2023$10,976 $2,185 $1,682 $14,843 
Three Months Ended June 30, 2022
(Dollars in millions)Credit CardConsumer BankingCommercial BankingTotal
Allowance for credit losses:
Balance as of March 31, 2022$8,280 $1,902 $1,126 $11,308 
Charge-offs(1,009)(331)(43)(1,383)
Recoveries(1)
331 195 12 538 
Net charge-offs(678)(136)(31)(845)
Provision for credit losses581 281 183 1,045 
Allowance build (release) for credit losses(97)145 152 200 
Other changes(2)
(17)0 0 (17)
Balance as of June 30, 20228,166 2,047 1,278 11,491 
Reserve for unfunded lending commitments:
Balance as of March 31, 20230 0 200 200 
Provision for losses on unfunded lending commitments0 0 39 39 
Balance as of June 30, 20220 0 239 239 
Combined allowance and reserve as of June 30, 2022$8,166 $2,047 $1,517 $11,730 
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Six Months Ended June 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
(1,964)(680)(60)(2,704)
Recoveries(1)
679 398 15 1,092 
Net charge-offs(1,285)(282)(45)(1,612)
Provision for credit losses1,126 411 156 1,693 
Allowance build (release) for credit losses(159)129 111 81 
Other changes(2)
(20)0 0 (20)
Balance as of June 30, 20228,166 2,047 1,278 11,491 
Reserve for unfunded lending commitments:
Balance as of December 31, 20210 0 165 165 
Provision for losses on unfunded lending commitments0 0 74 74 
Balance as of June 30, 20220 0 239 239 
Combined allowance and reserve as of June 30, 2022$8,166 $2,047 $1,517 $11,730 
__________
(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 the initial allowance for purchased credit-deteriorated loans and foreign currency translation adjustments. The initial allowance of purchased credit-deteriorated loans was $32 million for the six months ended June 30, 2023. There were no purchased credit-deteriorated loans acquired in the three months ended June 30, 2023.
(3)Impact from the adoption of ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures as of January 1, 2023.
On January 1, 2023, we adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures using the modified retrospective approach, which consists of implementing disclosure requirements prospectively as of the adoption date. The ASU requires public entities to disclose current-period gross charge-offs by year of origination for financing receivables and net investments in leases.
We charge off loans when we determine that the loan is uncollectible. The amortized cost basis, excluding accrued interest, is charged off as a reduction to the allowance for credit losses in accordance with our accounting policies. For more information, see “Note 1—Summary of Significant Accounting Policies.”
Expected recoveries of amounts previously charged off or expected to be charged off are recognized within the allowance, with a corresponding reduction to our provision for credit losses.

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The table below presents gross charge-offs for loans held for investment by vintage year during the six months ended June 30, 2023.
Table 4.2: Gross Charge-Offs by Vintage Year
Six Months Ended June 30, 2023
Term Loans by Vintage Year
(Dollars in millions)20232022202120202019PriorTotal Term LoansRevolving LoansRevolving Loans Converted to TermTotal
Credit Card
Domestic credit cardN/AN/AN/AN/AN/AN/AN/A$3,310 $35 $3,345 
International card businessN/AN/AN/AN/AN/AN/AN/A205 6 211 
Total credit cardN/AN/AN/AN/AN/AN/AN/A3,515 41 3,556 
Consumer Banking
Auto$13 $344 $341 $167 $96 $63 $1,024 0 0 1,024 
Retail banking0 0 1 0 0 0 1 32 0 33 
Total consumer banking13 344 342 167 96 63 1,025 32 0 1,057 
Commercial Banking
Commercial and multifamily real estate0 29 46 22 98 185 380 0 0 380 
Commercial and industrial2 2 0 0 0 3 7 15 0 22 
Total commercial banking2 31 46 22 98 188 387 15 0 402 
Total$15 $375 $388 $189 $194 $251 $1,412 $3,562 $41 $5,015 


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Credit Card Partnership Loss Sharing Arrangements
We have certain credit card partnership agreements that are presented within our consolidated financial statements on a net basis, in which our partner agrees to share a portion of the credit losses on the underlying loan portfolio. The expected reimbursements from these partners are netted against our allowance for credit losses. Our methodology for estimating reimbursements is consistent with the methodology we use to estimate the allowance for credit losses on our credit card loan receivables. These expected reimbursements result in reductions in net charge-offs and the provision for credit losses. See “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2022 Form 10-K for further discussion of our credit card partnership agreements.
The table below summarizes the changes in the estimated reimbursements from these partners for the three and six months ended June 30, 2023 and 2022.
Table 4.3: Summary of Credit Card Partnership Loss Sharing Arrangements Impacts
Three Months Ended June 30,
(Dollars in millions)20232022
Estimated reimbursements from partners, beginning of period$1,841 $1,366 
Amounts due from partners for charged off loans(231)(119)
Change in estimated partner reimbursements that decreased provision for credit losses298 55 
Estimated reimbursements from partners, end of period$1,908 $1,302 
Six Months Ended June 30,
(Dollars in millions)20232022
Estimated reimbursements from partners, beginning of period$1,558 $1,450 
Amounts due from partners for charged off loans(432)(226)
Change in estimated partner reimbursements that decreased provision for credit losses(1)
782 78 
Estimated reimbursements from partners, end of period$1,908 $1,302 
__________
(1)Includes adjustments for purchased credit-deteriorated (“PCD”) loans acquired in the first quarter of 2023.
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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 provide a source of funding for us and enable 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 June 30, 2023 and December 31, 2022. We separately present information for consolidated and unconsolidated VIEs.
Table 5.1: Carrying Amount of Consolidated and Unconsolidated VIEs
 June 30, 2023
 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)
$24,763 $14,689 $0 $0 $0 
Auto loan securitizations4,989 4,102 0 0 0 
Total securitization-related VIEs29,752 18,791 0 0 0 
Other VIEs:(3)
Affordable housing entities266 14 5,332 1,891 5,332 
Entities that provide capital to low-income and rural communities2,562 10 0 0 0 
Other(4)
0 0 456 0 456 
Total other VIEs2,828 24 5,788 1,891 5,788 
Total VIEs$32,580 $18,815 $5,788 $1,891 $5,788 
 December 31, 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)
$23,620 $13,877 $0 $0 $0 
Auto loan securitizations4,863 4,002 0 0 0 
Total securitization-related VIEs28,483 17,879 0 0 0 
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 December 31, 2022
 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 entities261 19 4,944 1,596 4,944 
Entities that provide capital to low-income and rural communities2,301 10 0 0 0 
Other(4)
0 0 337 0 337 
Total other VIEs2,562 29 5,281 1,596 5,281 
Total VIEs$31,045 $17,908 $5,281 $1,596 $5,281 
__________
(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 $2.4 billion of assets and $780 million of liabilities as of June 30, 2023, and $2.3 billion of assets and $616 million of liabilities as of December 31, 2022.
(4)Primarily consists of variable interests in companies that promote renewable energy sources and other equity method investments.
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 solely 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 ourselves. 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 13—Commitments, Contingencies, Guarantees and Others” for information about the loss sharing agreements, “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 June 30, 2023 and December 31, 2022.
Table 5.2: Continuing Involvement in Securitization-Related VIEs
(Dollars in millions)Credit CardAuto
June 30, 2023:
Securities held by third-party investors$13,766 $4,095 
Receivables in the trusts25,589 4,801 
Cash balance of spread or reserve accounts0 20 
Retained interestsYesYes
Servicing retainedYesYes
December 31, 2022:
Securities held by third-party investors$12,976 $3,997 
Receivables in the trusts24,367 4,682 
Cash balance of spread or reserve accounts0 23 
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 six months ended June 30, 2023 and 2022, we recognized amortization of $345 million and $322 million, respectively, and tax credits of $434 million and $467 million, respectively, associated with these investments within income tax provision. The carrying value of our equity investments in these qualified affordable housing projects was $5.2 billion and $4.9 billion as of June 30, 2023 and December 31, 2022, respectively. We are periodically required to provide additional financial or other support during the period of the investments. Our liability for these unfunded commitments was
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$2.1 billion and $1.8 billion as of June 30, 2023 and December 31, 2022 respectively, and is largely expected to be paid from 2023 to 2026.
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 $5.3 billion and $4.9 billion as of June 30, 2023 and December 31, 2022, respectively. The creditors of the VIEs have no recourse to our general credit and we do not provide additional financial or other support other than during the period that we are contractually required to provide it. The total assets of the unconsolidated VIE investment funds were approximately $13.2 billion and $12.5 billion as of June 30, 2023 and December 31, 2022, 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 $2.6 billion and $2.3 billion as of June 30, 2023 and December 31, 2022, 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 $456 million and $337 million as of June 30, 2023 and December 31, 2022, 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 June 30, 2023 and December 31, 2022. 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
June 30, 2023
(Dollars in millions)Carrying Amount of AssetsAccumulated AmortizationNet Carrying Amount
Goodwill$15,060 N/A$15,060 
Other intangible assets:
Purchased credit card relationship (“PCCR”) intangibles369 $(57)312 
Other(1)
176 (132)44 
Total other intangible assets545 (189)356 
Total goodwill and other intangible assets$15,605 $(189)$15,416 
Commercial MSRs(2)
$653 $(236)$417 
December 31, 2022
(Dollars in millions)Carrying Amount of AssetsAccumulated AmortizationNet Carrying Amount
Goodwill$14,777 N/A$14,777 
Other intangible assets:
Purchased credit card relationship (“PCCR”) intangibles147 $(26)121 
Other(1)
195 (157)38 
Total other intangible assets342 (183)159 
Total goodwill and other intangible assets$15,119 $(183)$14,936 
Commercial MSRs(2)
$660 $(223)$437 
__________
(1)Primarily consists of intangibles for sponsorship, customer and merchant relationships, domain names and licenses.
(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 $22 million and $36 million for the three and six months ended June 30, 2023, respectively, and $14 million and $28 million for the three and six months ended June 30, 2022, respectively.
Goodwill
The following table presents changes in the carrying amount of goodwill by each of our business segments as of June 30, 2023 and December 31, 2022.
Table 6.2: Goodwill by Business Segments
(Dollars in millions)Credit CardConsumer BankingCommercial BankingTotal
Balance as of December 31, 2022$5,078 $4,645 $5,054 $14,777 
Acquisitions273 0 0 273 
Other adjustments(1)
10 0 0 10 
Balance as of June 30, 2023$5,361 $4,645 $5,054 $15,060 
__________
(1)Represents foreign currency translation adjustments and measurement period adjustments.
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NOTE 7—DEPOSITS AND BORROWINGS
Our deposits, which include checking accounts, money market deposits, negotiable order of withdrawals, savings deposits and time deposits, represent our largest source of funding for our assets and operations. 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, securities loaned or sold under agreements to repurchase and FHLB advances. Our long-term debt consists of borrowings with an original contractual maturity of greater than one year. The following tables summarize the components of our deposits, short-term borrowings and long-term debt as of June 30, 2023 and December 31, 2022. The carrying value presented below for these borrowings includes any unamortized debt premiums and discounts, net of debt issuance costs and fair value hedge accounting adjustments.
Table 7.1: Components of Deposits, Short-Term Borrowings and Long-Term Debt
(Dollars in millions)June 30, 2023December 31, 2022
Deposits:
Non-interest-bearing deposits$29,312 $32,203 
Interest-bearing deposits(1)
314,393 300,789 
Total deposits$343,705 $332,992 
Short-term borrowings:
Federal funds purchased and securities loaned or sold under agreements to repurchase$649 $883 
Total short-term borrowings$649 $883 
 June 30, 2023December 31, 2022
(Dollars in millions)Maturity DatesStated Interest RatesWeighted-Average Interest RateCarrying ValueCarrying Value
Long-term debt:
Securitized debt obligations2024-2028
0.32% - 5.81%
2.87%$17,861 $16,973 
Senior and subordinated notes:
Fixed unsecured senior debt(2)
2024-2034
0.80 - 6.38
4.0026,727 24,134 
Floating unsecured senior debt2024-2025
5.75 - 6.41
5.931,248 1,597 
Total unsecured senior debt4.0927,975 25,731 
Fixed unsecured subordinated debt2025-2032
2.36 - 4.20
3.573,652 5,095 
Total senior and subordinated notes31,627 30,826 
Other long-term borrowings2023-2031
0.35 - 9.91
8.29121 33 
Total long-term debt$49,609 $47,832 
Total short-term borrowings and long-term debt$50,258 $48,715 
__________
(1)Some customers have time deposits in excess of the federal deposit insurance limit, making a portion of the deposit uninsured. As of June 30, 2023, time deposits greater than the insured amount was $15.1 billion and the portion of those deposits estimated to be uninsured was $9.5 billion. As of December 31, 2022, time deposits greater than the insured amount was $6.1 billion and the portion of those deposits estimated to be uninsured was $2.0 billion.
(2)Includes $1.2 billion of Euro (“EUR”) denominated unsecured notes as of both June 30, 2023 and December 31, 2022.
    
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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 offset the substantial majority of the market risk exposure of our customer accommodation derivatives through derivative transactions with other counterparties.
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 hedged 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 executed after September 1, 2021 and in scope for initial margin, we exchange variation margin and 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 June 30, 2023 and December 31, 2022, which are segregated by derivatives that are designated as accounting hedges and those that are not, and are further segregated by type of contract within those two categories. The total derivative assets and liabilities are adjusted on an aggregate basis to take into consideration the effects of legally enforceable master netting agreements and any associated cash collateral received or pledged. Derivative assets and liabilities are included in other assets and other liabilities, respectively, on our consolidated balance sheets, and their related gains or losses are included in operating activities as changes in other assets and other liabilities in the consolidated statements of cash flows.
Table 8.1: Derivative Assets and Liabilities at Fair Value
June 30, 2023December 31, 2022
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$67,225 $6 $25 $60,956 $3 $53 
Cash flow hedges53,100 64 32 30,350 0 451 
Total interest rate contracts120,325 70 57 91,306 3 504 
Foreign exchange contracts:
Fair value hedges1,364 0 176 1,338 0 211 
Cash flow hedges2,340 1 34 2,175 4 14 
Net investment hedges4,760 0 199 4,147 78 91 
Total foreign exchange contracts8,464 1 409 7,660 82 316 
Total derivatives designated as accounting hedges128,789 71 466 98,966 85 820 
Derivatives not designated as accounting hedges:
Customer accommodation:
Interest rate contracts116,019 1,523 1,921 91,601 1,140 1,873 
Commodity contracts29,508 1,064 1,093 28,935 1,756 1,738 
Foreign exchange and other contracts4,585 51 45 4,926 74 78 
Total customer accommodation150,112 2,638 3,059 125,462 2,970 3,689 
Other interest rate exposures(2)
999 23 14 1,135 34 22 
Other contracts2,610 13 17 2,238 9 19 
Total derivatives not designated as accounting hedges153,721 2,674 3,090 128,835 3,013 3,730 
Total derivatives$282,510 $2,745 $3,556 $227,801 $3,098 $4,550 
Less: netting adjustment(3)
(1,250)(717)(1,134)(1,235)
Total derivative assets/liabilities$1,495 $2,839 $1,964 $3,315 
__________
(1)Does not reflect $2 million and $4 million recognized as a net valuation allowance on derivative assets and liabilities for non-performance risk as of June 30, 2023 and December 31, 2022, 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 June 30, 2023 and December 31, 2022.
Table 8.2: Hedged Items in Fair Value Hedging Relationships
June 30, 2023December 31, 2022
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)
$4,118 $(97)$164 $3,983$(80)$200
Interest-bearing deposits(17,621)543 (1)(17,280)500(1)
Securitized debt obligations(13,110)761 0 (11,921)7480
Senior and subordinated notes(30,380)1,620 (453)(24,544)1,542(527)
__________
(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 $380 million and $236 million as of June 30, 2023 and December 31, 2022, respectively. The amount of the designated hedged items was $365 million and $225 million as of June 30, 2023 and December 31, 2022, respectively. The cumulative basis adjustments associated with these hedges was $11 million and $13 million as of June 30, 2023 and December 31, 2022, 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 June 30, 2023 and December 31, 2022. 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 June 30, 2023
Derivative assets(1)
$2,745 $(479)$(771)$1,495 $(71)$1,424 
As of December 31, 2022
Derivative assets(1)
3,098 (759)(375)1,964 (96)1,868 
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 June 30, 2023
Derivative liabilities(1)
$3,556 $(479)$(238)$2,839 $(56)$2,783 
Repurchase agreements(2)
649 0 0 649 (649)0 
As of December 31, 2022
Derivative liabilities(1)
4,550 (759)(476)3,315 (85)3,230 
Repurchase agreements(2)
883 0 0 883 (883)0 
__________
(1)We received cash collateral from derivative counterparties totaling $1.2 billion and $608 million as of June 30, 2023 and December 31, 2022, respectively. We also received securities from derivative counterparties with a fair value of approximately $66 million and $82 million as of June 30, 2023 and December 31, 2022, respectively, which we have the ability to re-pledge. We posted $1.9 billion and $2.3 billion of cash collateral as of June 30, 2023 and December 31, 2022, respectively.
(2)Under our customer repurchase agreements, which mature the next business day, we pledged collateral with a fair value of $662 million and $900 million as of June 30, 2023 and December 31, 2022, respectively, primarily consisting of agency RMBS securities.
Income Statement and AOCI Presentation
Fair Value and Cash Flow Hedges
The net gains (losses) recognized in our consolidated statements of income related to derivatives in fair value and cash flow hedging relationships are presented below for the three and six months ended June 30, 2023 and 2022.
Table 8.4: Effects of Fair Value and Cash Flow Hedge Accounting
Three Months Ended June 30, 2023
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$639 $9,057 $470 $(2,277)$(236)$(528)$275 
Fair value hedging relationships:
Interest rate and foreign exchange contracts:
Interest recognized on derivatives$38 $0 $0 $(96)$(101)$(259)$0 
Gains (losses) recognized on derivatives29 0 0 (224)(162)(389)8 
Gains (losses) recognized on hedged items(1)
(47)0 0 223 162 430 (8)
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Three Months Ended June 30, 2023
Net Interest IncomeNon-Interest Income
Excluded component of fair value hedges(2)
0 0 0 0 0 0 0 
Net income (expense) recognized on fair value hedges$20 $0 $0 $(97)$(101)$(218)$0 
Cash flow hedging relationships:(3)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income$0 $(297)$0 $0 $0 $0 $0 
Foreign exchange contracts:
Realized gains (losses) reclassified from AOCI into net income(4)
0 0 3 0 0 0 0 
Net income (expense) recognized on cash flow hedges$0 $(297)$3 $0 $0 $0 $0 
Six Months Ended June 30, 2023
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
$1,254 $17,780 $886 $(4,133)$(447)$(1,017)$474 
Fair value hedging relationships:
Interest rate and foreign exchange contracts:
Interest recognized on derivatives$71 $0 $0 $(174)$(185)$(479)$0 
Gains (losses) recognized on derivatives(20)0 0 (46)(14)(2)25 
Gains (losses) recognized on hedged items(1)
(16)0 0 43 13 75 (25)
Excluded component of fair value hedges(2)
0 0 0 0 0 (1)0 
Net income (expense) recognized on fair value hedges$35 $0 $0 $(177)$(186)$(407)$0 
Cash flow hedging relationships:(3)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income$0 $(559)$0 $0 $0 $0 $0 
Foreign exchange contracts:
Realized gains (losses) reclassified from AOCI into net income(4)
0 0 6 0 0 0 0 
Net income (expense) recognized on cash flow hedges$0 $(559)$6 $0 $0 $0 $0 
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Three Months Ended June 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
$435 $6,605 $55 $(293)$(65)$(194)$99 
Fair value hedging relationships:
Interest rate and foreign exchange contracts:
Interest recognized on derivatives$8 $0 $0 $21 $6 $13 $0 
Gains (losses) recognized on derivatives36 0 0 (73)(119)(376)(74)
Gains (losses) recognized on hedged items(1)
(61)0 0 74 120 413 73 
Excluded component of fair value hedges(2)
0 0 0 0 0 0 0 
Net income (expense) recognized on fair value hedges$(17)$0 $0 $22 $7 $50 $(1)
Cash flow hedging relationships:(3)
Interest rate contracts:
Realized gains reclassified from AOCI into net income$0 $63 $0 $0 $0 $0 $0 
Foreign exchange contracts:
Realized gains reclassified from AOCI into net income(4)
0 0 (1)0 0 0 0 
Net income (expense) recognized on cash flow hedges$0 $63 $(1)$0 $0 $0 $0 
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Six Months Ended June 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$837 $12,972 $70 $(511)$(94)$(325)$442 
Fair value hedging relationships:
Interest rate and foreign exchange contracts:
Interest recognized on derivatives$0 $0 $0 $42 $33 $51 $0 
Gains (losses) recognized on derivatives211 0 0 (188)(424)(1,232)(112)
Gains (losses) recognized on hedged items(1)
(262)0 0 189 423 1,309 111 
Excluded component of fair value hedges(2)
0 0 0 0 0 (1)0 
Net income (expense) recognized on fair value hedges$(51)$0 $0 $43 $32 $127 $(1)
Cash flow hedging relationships:(3)
Interest rate contracts:
Realized gains reclassified from AOCI into net income$0 $190 $0 $0 $0 $0 $0 
Foreign exchange contracts:
Realized gains (losses) reclassified from AOCI into net income(4)
0 0 (1)0 0 0 0 
Net income (expense) recognized on cash flow hedges$0 $190 $(1)$0 $0 $0 $0 
_________
(1)Includes amortization benefit of $21 million and $36 million for the three and six months ended June 30, 2023, respectively, and amortization benefit of $17 million and $34 million for the three and six months ended June 30, 2022, 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 (“OCI”). 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 loss of $22 million and $30 million for the three and six months ended June 30, 2023, respectively, and a gain of $31 million and $18 million for the three and six months ended June 30, 2022, 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 an after-tax loss of $882 million recorded in AOCI as of June 30, 2023 associated with cash flow hedges of forecasted transactions. This amount will largely offset the cash flows associated with the forecasted transactions hedged by these derivatives. The maximum length of time over which forecasted transactions were hedged was approximately 9.7 years as of June 30, 2023. The amount we expect to reclassify into earnings may change as a result of changes in market conditions and ongoing actions taken as part of our overall risk management strategy.


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Free-Standing Derivatives
The net impacts to our consolidated statements of income related to free-standing derivatives are presented below for the three and six months ended June 30, 2023 and 2022. These gains or losses are recognized in other non-interest income on our consolidated statements of income.
Table 8.5: Gains (Losses) on Free-Standing Derivatives
Three Months Ended June 30,Six Months Ended June 30,
(Dollars in millions)2023202220232022
Gains (losses) recognized in other non-interest income:
Customer accommodation:
Interest rate contracts$11 $11 $19 $20 
Commodity contracts9 11 17 17 
Foreign exchange and other contracts5 3 8 4 
Total customer accommodation25 25 44 41 
Other interest rate exposures66 (12)118 14 
Other contracts(12)(7)(17)(5)
Total$79 $6 $145 $50 
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NOTE 9—STOCKHOLDERS’ EQUITY
Preferred Stock
The following table summarizes our preferred stock outstanding as of June 30, 2023 and December 31, 2022.
Table 9.1: Preferred Stock Outstanding(1)
Redeemable by Issuer BeginningPer Annum Dividend RateDividend FrequencyLiquidation Preference per ShareTotal Shares Outstanding
as of
June 30, 2023
Carrying Value
(in millions)
SeriesDescriptionIssuance DateJune 30, 2023December 31, 2022
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,
 2020
June 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,
2021
September 1, 20264.375Quarterly1,000 675,000 652 652 
Series M3.950% Fixed Rate Reset
Non-Cumulative
June 10,
2021
September 1, 2026
3.950% through 8/31/2026; resets 9/1/2026 and every subsequent 5 year anniversary at 5-Year Treasury Rate +3.157%
Quarterly1,000 1,000,000 988 988 
Series N4.250%
Non-Cumulative
July 29,
2021
September 1, 20264.250%Quarterly1,000 425,000 412 412 
Total$4,845 $4,845 
__________
(1)Except for Series M, ownership is held in the form of depositary shares, each representing a 1/40th interest in a share of fixed-rate non-cumulative perpetual preferred stock.
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Accumulated Other Comprehensive Income
AOCI primarily consists of accumulated net unrealized gains or losses associated with securities available for sale, changes in fair value of derivatives in hedging relationships and foreign currency translation adjustments.
The following table presents the changes in AOCI by component for the three and six months ended June 30, 2023, and 2022.
Table 9.2: AOCI
Three Months Ended June 30, 2023
(Dollars in millions)Securities Available for Sale
Hedging Relationships(1)
Foreign Currency Translation Adjustments (2)
OtherTotal
AOCI as of March 31, 2023$(6,714)$(1,781)$(7)$(38)$(8,540)
Other comprehensive income (loss) before reclassifications(888)(664)34 0 (1,518)
Amounts reclassified from AOCI into earnings0 240 0 0 240 
Other comprehensive income (loss), net of tax(888)(424)34 0 (1,278)
AOCI as of June 30, 2023$(7,602)$(2,205)$27 $(38)$(9,818)
Six Months Ended June 30, 2023
(Dollars in millions)Securities Available for Sale
Hedging Relationships(1)
Foreign Currency Translation Adjustments (2)
OtherTotal
AOCI as of December 31, 2022$(7,676)$(2,182)$(20)$(38)$(9,916)
Other comprehensive income (loss) before reclassifications74 (466)47 0 (345)
Amounts reclassified from AOCI into earnings0 443 0 0 443 
Other comprehensive income (loss), net of tax74 (23)47 0 98 
AOCI as of June 30, 2023$(7,602)$(2,205)$27 $(38)$(9,818)
Three Months Ended June 30, 2022
(Dollars in millions)Securities Available for Sale
Hedging Relationships(1)
Foreign Currency Translation Adjustments (2)
OtherTotal
AOCI as of March 31, 2022$(2,956)$(1,091)$(26)$(20)$(4,093)
Other comprehensive income (loss) before reclassifications(2,293)(412)(52)0 (2,757)
Amounts reclassified from AOCI into earnings5 (71)0 0 (66)
Other comprehensive income (loss), net of tax(2,288)(483)(52)0 (2,823)
AOCI as of June 30, 2022$(5,244)$(1,574)$(78)$(20)$(6,916)
Six Months Ended June 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)$374 
Other comprehensive income (loss) before reclassifications(5,546)(1,535)(57)0 (7,138)
Amounts reclassified from AOCI into earnings5 (157)0 0 (152)
Other comprehensive income (loss), net of tax(5,541)(1,692)(57)0 (7,290)
AOCI as of June 30, 2022$(5,244)$(1,574)$(78)$(20)$(6,916)
__________
(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 losses of $78 million and $116 million for the three and six months ended June 30, 2023, respectively, and other comprehensive gains of $174 million and $222 million for the three and six months ended June 30, 2022, respectively, from hedging instruments designated as net investment hedges.
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The following table presents amounts reclassified from each component of AOCI to our consolidated statements of income for the three and six months ended June 30, 2023 and 2022.
Table 9.3: Reclassifications from AOCI
(Dollars in millions)Three Months Ended June 30,Six Months Ended June 30,
AOCI ComponentsAffected Income Statement Line Item2023202220232022
Securities available for sale:
Non-interest income (loss)$0 $(6)$0 $(6)
Income tax provision (benefit)0 (1)0 (1)
Net income (loss)0 (5)0 (5)
Hedging relationships:
Interest rate contracts:Interest income (loss)(297)63 (559)190 
Foreign exchange contracts:Interest income (loss)3 (1)6 (1)
Interest expense0 0 (1)(1)
Non-interest income (loss)(22)31 (30)18 
Income (loss) from continuing operations before income taxes(316)93 (584)206 
Income tax provision (benefit)(76)22 (141)49 
Net income (loss)(240)71 (443)157 
Other:
Non-interest income and non-interest expense0 0 0 0 
Net income0 0 0 0 
Total reclassifications$(240)$66 $(443)$152 
The table below summarizes other comprehensive income (loss) activity and the related tax impact for the three and six months ended June 30, 2023 and 2022.
Table 9.4: Other Comprehensive Income (Loss)
 Three Months Ended June 30,
 20232022
(Dollars in millions)Before
Tax
Provision
(Benefit)
After
Tax
Before
Tax
Provision
(Benefit)
After
Tax
Other comprehensive income (loss):
Net unrealized losses on securities available for sale$(1,171)$(283)$(888)$(3,012)$(724)$(2,288)
Net unrealized losses on hedging relationships(558)(134)(424)(634)(151)(483)
Foreign currency translation adjustments(1)
9 (25)34 4 56 (52)
Other comprehensive loss$(1,720)$(442)$(1,278)$(3,642)$(819)$(2,823)
 Six Months Ended June 30,
 20232022
(Dollars in millions)Before
Tax
Provision
(Benefit)
After
Tax
Before
Tax
Provision
(Benefit)
After
Tax
Other comprehensive income (loss):
Net unrealized gains (losses) on securities available for sale$96 $22 $74 $(7,299)$(1,758)$(5,541)
Net unrealized gains (losses) on hedging relationships(30)(7)(23)(2,227)(535)(1,692)
Foreign currency translation adjustments(1)
10 (37)47 14 71 (57)
Other comprehensive income (loss)$76 $(22)$98 $(9,512)$(2,222)$(7,290)
__________
(1)Includes the impact of hedging instruments designated as net investment hedges.
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NOTE 10—EARNINGS PER COMMON SHARE
The following table sets forth the computation of basic and diluted earnings per common share.
Table 10.1: Computation of Basic and Diluted Earnings per Common Share
Three Months Ended June 30,Six Months Ended June 30,
(Dollars and shares in millions, except per share data)2023202220232022
Net income$1,431 $2,031 $2,391 $4,434 
Dividends and undistributed earnings allocated to participating securities(23)(25)(39)(53)
Preferred stock dividends(57)(57)(114)(114)
Net income available to common stockholders$1,351 $1,949 $2,238 $4,267 
Total weighted-average basic common shares outstanding382.8 391.2 382.7 400.8 
Effect of dilutive securities:(1)
Stock options0.1 0.4 0.1 0.4 
Other contingently issuable shares0.8 1.0 1.0 1.1 
Total effect of dilutive securities0.9 1.4 1.1 1.5 
Total weighted-average diluted common shares outstanding383.7 392.6 383.8 402.3 
Basic earnings per common share:
Net income per basic common share$3.53 $4.98 $5.85 $10.65 
Diluted earnings per common share:(1)
Net income per diluted common share$3.52 $4.96 $5.83 $10.61 
__________
(1)There were no awards excluded from the computation of diluted earnings per share for the three months ended June 30, 2023. Excluded from the computation of diluted earnings per share were awards of 20 thousand shares for the six months ended June 30, 2023, because their inclusion would be anti-dilutive. For the three and six months ended June 30, 2022, awards of 37 thousand shares and 19 thousand shares were excluded from the computation of diluted earnings per share. There were no anti-dilutive stock options for the three months and six months ended June, 30, 2023 or the three months and six months ended June 30, 2022.

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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. 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. Based upon the specific facts and circumstances of each instrument or instrument category, judgments are made regarding the significance of the observable or unobservable inputs to the instruments’ fair value measurement in its entirety. If unobservable inputs are considered significant, the instrument is classified as Level 3. The process for determining fair value using unobservable inputs is generally more subjective and involves a high degree of management judgment and assumptions. 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 “Part II—Item 8. Financial Statements and Supplementary Data—Note 16—Fair Value Measurement” in our 2022 Form 10-K.
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Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table displays our assets and liabilities measured on our consolidated balance sheets at fair value on a recurring basis as of June 30, 2023 and December 31, 2022.
Table 11.1: Assets and Liabilities Measured at Fair Value on a Recurring Basis
June 30, 2023
Fair Value Measurements Using
Netting Adjustments(1)
(Dollars in millions)Level 1Level 2Level 3Total
Assets:
Securities available for sale:
U.S. Treasury securities$5,110 $0 $0 0$5,110 
RMBS0 63,312 206 063,518 
CMBS0 7,879 133 08,012 
Other securities125 1,647 0 01,772 
Total securities available for sale5,235 72,838 339 078,412 
Loans held for sale0 542 0 0542 
Other assets:
Derivative assets(2)
545 988 1,212 $(1,250)1,495 
Other(3)
540 3 36 0579 
Total assets$6,320 $74,371 $1,587 $(1,250)$81,028 
Liabilities:
Other liabilities:
Derivative liabilities(2)
$482 $1,926 $1,148 $(717)$2,839 
Total liabilities$482 $1,926 $1,148 $(717)$2,839 
December 31, 2022
Fair Value Measurements Using
Netting Adjustments(1)
(Dollars in millions)Level 1Level 2Level 3Total
Assets:
Securities available for sale:
U.S. Treasury securities$5,041 $0 $0 0$5,041 
RMBS0 62,353 236 062,589 
CMBS0 7,728 142 07,870 
Other securities186 1,233 0 01,419 
Total securities available for sale5,227 71,314 378 076,919 
Loans held for sale0 191 0 0191 
Other assets:
Derivative assets(2)
474 2,545 79 $(1,134)1,964 
Other(3)
464 3 36 0503 
Total assets$6,165 $74,053 $493 $(1,134)$79,577 
Liabilities:
Other liabilities:
Derivative liabilities(2)
$823 $3,653 $74 $(1,235)$3,315 
Total liabilities$823 $3,653 $74 $(1,235)$3,315 
__________
(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 $2 million and $4 million recognized as a net valuation allowance on derivative assets and liabilities for non-performance risk as of June 30, 2023 and December 31, 2022, respectively. Non-performance risk is included in the measurement of derivative assets and liabilities on our consolidated balance sheets, and is recorded through non-interest income in the consolidated statements of income.
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(3)As of June 30, 2023 and December 31, 2022, other includes retained interests in securitizations of $36 million and $36 million, deferred compensation plan assets of $536 million and $453 million, and equity securities of $7 million (including unrealized losses of $1 million) and $14 million (including unrealized losses of $23 million), respectively.
Level 3 Recurring Fair Value Rollforward
The table below presents a reconciliation for all assets and liabilities measured and recognized at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2023 and 2022. Generally, transfers into Level 3 were primarily driven by the usage of unobservable assumptions in the pricing of these financial instruments as evidenced by wider pricing variations among pricing vendors and transfers out of Level 3 were primarily driven by the usage of assumptions corroborated by market observable information as evidenced by tighter pricing among multiple pricing sources.
Table 11.2: Level 3 Recurring Fair Value Rollforward
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Three Months Ended June 30, 2023
Total Gains (Losses)
(Realized/Unrealized)
Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of June 30, 2023(1)
(Dollars in millions)Balance, April 1, 2023
Included
in Net
Income(1)
Included in OCIPurchasesSalesIssuancesSettlementsTransfers
Into
Level 3
Transfers
Out of
Level 3
    Balance, June 30, 2023
Securities available for sale:(2)
RMBS$247 $3 $(2)$0 $0 $0 $(6)$11 $(47)$206 $2 
CMBS145 0 (11)0 0 0 (1)0 0 133 0 
Total securities available for sale392 3 (13)0 0 0 (7)11 (47)339 2 
Other assets:
Retained interests in securitizations36 0 0 0 0 0 0 0 0 36 0 
Net derivative assets (liabilities)(3)(4)
18 (13)0 0 0 69 45 (55)0 64 6 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Six Months Ended June 30, 2023
Total Gains (Losses)
(Realized/Unrealized)
Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of June 30, 2023(1)
(Dollars in millions)Balance, January 1, 2023
Included
in Net
Income(1)
Included in OCIPurchasesSalesIssuancesSettlementsTransfers
Into
Level 3
Transfers
Out of
Level 3
Balance, June 30, 2023    
Securities available for sale:(2)
RMBS$236 $4 $1 $0 $0 $0 $(11)$45 $(69)$206 $4 
CMBS142 0 (6)0 0 0 (3)0 0 133 0 
Total securities available for sale378 4 (5)0 0 0 (14)45 (69)339 4 
Other assets:
Retained interests in securitizations36 0 0 0 0 0 0 0 0 36 0 
Net derivative assets (liabilities)(3)(4)
5 (18)0 0 0 173 57 (152)(1)64 51 
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Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Three Months Ended June 30, 2022
Total Gains (Losses)
(Realized/Unrealized)
Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of June 30, 2022(1)
(Dollars in millions)Balance, April 1, 2022
Included
in Net
Income(1)
Included in OCIPurchasesSalesIssuancesSettlementsTransfers
Into
Level 3
Transfers
Out of
Level 3
Balance, June 30, 2022
Securities available for sale:(2)
RMBS$211 $3 $(8)$0 $0 $0 $(15)$72 $(23)$240 $2 
CMBS21 0 (1)0 0 0 (4)0 (3)13 0 
Total securities available for sale232 3 (9)0 0 0 (19)72 (26)253 2 
Other assets:
Retained interests in securitizations39 (2)0 0 0 0 0 0 0 37 (2)
Net derivative assets (liabilities)(3)
22 (46)0 0 0 8 4 0 0 (12)(18)
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Six Months Ended June 30, 2022
Total Gains (Losses)
(Realized/Unrealized)
Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of June 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, June 30, 2022
Securities available for sale:(2)
RMBS$258 $13 $(20)$0 $0 $0 $(43)$84 $(52)$240 $5 
CMBS9 0 (1)0 0 0 (5)13 (3)13 (1)
Total securities available for sale267 13 (21)0 0 0 (48)97 (55)253 4 
Other assets:
Retained interests in securitizations41 (4)0 0 0 0 0 0 0 37 (4)
Net derivative assets (liabilities)(3)
19 (41)0 0 0 36 2 (28)0 (12)(38)
_________
(1)Realized gains (losses) on securities available for sale are included in net securities gains (losses) and retained interests in securitizations are reported as a component of non-interest income in our consolidated statements of income. Gains (losses) on derivatives are included as a component of net interest income or non-interest income in our consolidated statements of income.
(2)For the three and six months ended June 30, 2023, included in OCI related to Level 3 securities available for sale still held as of June 30, 2023 were net unrealized losses of $13 million and $5 million. For the three and six months ended June 30, 2022, included in OCI related to Level 3 securities available for sale still held as of June 30, 2022 were net unrealized losses of $11 million and $20 million.
(3)Includes derivative assets and liabilities of $1.2 billion and $1.1 billion, respectively, as of June 30, 2023 and $131 million and $143 million, respectively, as of June 30, 2022.
(4)Transfers into Level 3 primarily consist of term SOFR-indexed interest rate derivatives.
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Significant Level 3 Fair Value Asset and Liability Inputs
Generally, uncertainties in fair value measurements of financial instruments, such as changes in unobservable inputs, may have a significant impact on fair value. Certain of these unobservable inputs will, in isolation, have a directionally consistent impact on the fair value of the instrument for a given change in that input. Alternatively, the fair value of the instrument may move in an opposite direction for a given change in another input. In general, an increase in the discount rate, default rates, loss severity 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.
Table 11.3: Quantitative Information about Level 3 Fair Value Measurements
Quantitative Information about Level 3 Fair Value Measurements
(Dollars in millions)Fair Value at
June 30,
2023
Significant
Valuation
Techniques
Significant
Unobservable
Inputs
Range
Weighted
Average(1)
Securities available for sale:
RMBS$206 Discounted cash flows (vendor pricing)Yield
Voluntary prepayment rate
Default rate
Loss severity
3-17%
5-12%
0-12%
30-80%
7%
8%
2%
57%
CMBS133 Discounted cash flows (vendor pricing)Yield
4-6%
5%
Other assets:
Retained interests in securitizations(2)
36 Discounted cash flowsLife of receivables (months)
Voluntary prepayment rate
Discount rate
Default rate
Loss severity
33-60
9-13%
5-12%
1-2%
23-163%
N/A
Net derivative assets (liabilities)64 Discounted cash flowsSwap rates
3-5%
4%
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Quantitative Information about Level 3 Fair Value Measurements
(Dollars in millions)Fair Value at
December 31,
2022
Significant
Valuation
Techniques
Significant
Unobservable
Inputs
Range
Weighted
Average(1)
Securities available for sale:
RMBS$236 Discounted cash flows (vendor pricing)Yield
Voluntary prepayment rate
Default rate
Loss severity
3-12%
4-20%
0-11%
30-80%
7%
8%
2%
58%
CMBS142 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
30-43
9-18%
4-7%
1%
62-291%
N/A
Net derivative assets (liabilities)5 Discounted cash flowsSwap rates
3-4%
4%
__________
(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 June 30, 2023 and December 31, 2022, and for which a nonrecurring fair value measurement was recorded during the six and twelve months then ended.
Table 11.4: Nonrecurring Fair Value Measurements
June 30, 2023
Estimated Fair Value HierarchyTotal
(Dollars in millions)Level 2Level 3
Loans held for investment$0 $391 $391 
Loans held for sale0 0 0 
Other assets(1)
0 85 85 
Total$0 $476 $476 
December 31, 2022
Estimated Fair Value HierarchyTotal
(Dollars in millions)Level 2Level 3
Loans held for investment$0 $284 $284 
Loans held for sale11 0 11 
Other assets(1)
0 220 220 
Total$11 $504 $515 
__________
(1)As of June 30, 2023, other assets included investments accounted for under measurement alternative of $33 million, repossessed assets of $50 million, and long-lived assets held for sale and right-of-use assets totaling $2 million. As of December 31, 2022, other assets included investments accounted for under
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measurement alternative of $4 million, cost method investments of $3 million, repossessed assets of $55 million and long-lived assets held for sale and right-of-use assets totaling $158 million.
In the above table, loans held for investment are generally valued based in part on the estimated fair value of the underlying collateral and the non-recoverable rate, which is considered to be a significant unobservable input. The non-recoverable rate ranged from 0% to 100%, with a weighted average of 20%, and from 0% to 43%, with a weighted average of 20%, as of June 30, 2023 and December 31, 2022, respectively. The weighted average non-recoverable rate is calculated based on the estimated market value of the underlying collateral. The significant unobservable inputs and related quantitative information related to fair value of the other assets are not meaningful to disclose as they vary significantly across properties and collateral.
The following table presents total nonrecurring fair value measurements for the period, included in earnings, attributable to the change in fair value relating to assets that are still held at June 30, 2023 and 2022.
Table 11.5: Nonrecurring Fair Value Measurements Included in Earnings
Total Gains (Losses)
Six Months Ended June 30,
(Dollars in millions)20232022
Loans held for investment$(275)$31 
Loans held for sale0 (6)
Other assets(1)
(45)(28)
Total$(320)$(3)
__________
(1)Other assets include fair value adjustments related to repossessed assets, long-lived assets held for sale and right-of-use assets, and equity investments accounted for under the measurement alternative.
Fair Value of Financial Instruments
The following table presents the carrying value and estimated fair value, including the level within the fair value hierarchy, of our financial instruments that are not measured at fair value on a recurring basis on our consolidated balance sheets as of June 30, 2023 and December 31, 2022.
Table 11.6: Fair Value of Financial Instruments
June 30, 2023
Carrying
Value
Estimated
Fair Value
Estimated Fair Value Hierarchy
(Dollars in millions)Level 1Level 2Level 3
Financial assets:
Cash and cash equivalents$41,596 $41,596 $3,360 $38,236 $0 
Restricted cash for securitization investors452 452 452 0 0 
Net loans held for investment296,677 299,206 0 0 299,206 
Loans held for sale(1)
669 669 0 669 0 
Interest receivable2,297 2,297 0 2,297 0 
Other investments(2)
1,326 1,326 0 1,326 0 
Financial liabilities:
Deposits with defined maturities78,336 77,924 0 77,924 0 
Securitized debt obligations17,861 17,811 0 17,811 0 
Senior and subordinated notes31,627 31,334 0 31,334 0 
Federal funds purchased and securities loaned or sold under agreements to repurchase649 649 0 649 0 
Interest payable637 637 0 637 0 
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 December 31, 2022
Carrying
Value
Estimated
Fair Value
Estimated Fair Value Hierarchy
(Dollars in millions)Level 1Level 2Level 3
Financial assets:
Cash and cash equivalents$30,856 $30,856 $5,193 $25,663 $0 
Restricted cash for securitization investors400 400 400 0 0 
Net loans held for investment299,091 302,920 0 0 302,920 
Loans held for sale11 11 0 11 0 
Interest receivable2,104 2,104 0 2,104 0 
Other investments(2)
1,326 1,326 0 1,326 0 
Financial liabilities:
Deposits with defined maturities45,858 45,531 0 45,531 0 
Securitized debt obligations16,973 16,918 0 16,918 0 
Senior and subordinated notes30,826 30,744 0 30,744 0 
Federal funds purchased and securities loaned or sold under agreements to repurchase883 883 0 883 0 
Interest payable527 527 0 527 0 
__________
(1)Represents individual loans and loan portfolios we have made the decision to sell, including a commercial office real estate loan portfolio.
(2)Other investments include FHLB and Federal Reserve stock. These investments are included in other assets on our consolidated balance sheets.

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NOTE 12—BUSINESS SEGMENTS AND REVENUE FROM CONTRACTS WITH CUSTOMERS
Our principal operations are organized into three major business segments, which are defined primarily based on the products and services provided or the types of customers served: Credit Card, Consumer Banking and Commercial Banking. The operations of acquired businesses have been integrated into or managed as a part of our existing business segments. Certain activities that are not part of a segment, such as management of our corporate investment portfolio, asset/liability management by our centralized Corporate Treasury group and residual tax expense or benefit to arrive at the consolidated effective tax rate that is not assessed to our primary business segments, are included in the Other category.
Basis of Presentation
We report the results of each of our business segments on a continuing operations basis. The results of our individual businesses reflect the manner in which management evaluates performance and makes decisions about funding our operations and allocating resources.
Business Segment Reporting Methodology
The results of our business segments are intended to present each segment as if it were a stand-alone business. Our internal management and reporting process used to derive our segment results employs various allocation methodologies, including funds transfer pricing, to assign certain balance sheet assets, deposits and other liabilities and their related revenue and expenses directly or indirectly attributable to each business segment. Our funds transfer pricing process managed by our centralized Corporate Treasury group 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 is unique to each business segment and acquired business and is based on the composition of assets and liabilities. The funds transfer pricing process considers the interest rate and liquidity risk characteristics of assets and liabilities and off-balance sheet products. Periodically the methodology and assumptions utilized in the funds transfer pricing process are adjusted to reflect economic conditions and other factors, which may impact the allocation of net interest income to the business segments. 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 market rate. 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 “Part II—Item 8. Financial Statements and Supplementary Data—Note 17—Business Segments and Revenue from Contracts with Customers” in our 2022 Form 10-K.
Segment Results and Reconciliation
We may periodically change our business segments or reclassify business segment results based on modifications to our management reporting methodologies or changes in organizational alignment. The following table presents our business segment results for the three and six months ended June 30, 2023 and 2022, selected balance sheet data as of June 30, 2023 and 2022, and a reconciliation of our total business segment results to our reported consolidated income from continuing operations, loans held for investment and deposits.
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Table 12.1: Segment Results and Reconciliation
Three Months Ended June 30, 2023
(Dollars in millions)Credit CardConsumer Banking
Commercial Banking(1)
Other(1)
Consolidated Total
Net interest income (loss)$4,727 $2,269 $632 $(515)$7,113 
Non-interest income (loss)1,499 149 257 (6)1,899 
Total net revenue (loss)(2)
6,226 2,418 889 (521)9,012 
Provision for credit losses2,084 259 146 1 2,490 
Non-interest expense3,020 1,231 482 61 4,794 
Income (loss) from continuing operations before income taxes1,122 928 261 (583)1,728 
Income tax provision (benefit)265 219 61 (248)297 
Income (loss) from continuing operations, net of tax$857 $709 $200 $(335)$1,431 
Loans held for investment$142,491 $77,280 $91,552 $0 $311,323 
Deposits0 286,174 36,793 20,738 343,705 
Six Months Ended June 30, 2023
(Dollars in millions)Credit CardConsumer Banking
Commercial Banking(1)
Other(1)
Consolidated Total
Net interest income (loss)$9,384 $4,629 $1,280 $(994)$14,299 
Non-interest income2,862 284 469 1 3,616 
Total net revenue (loss)(2)
12,246 4,913 1,749 (993)17,915 
Provision for credit losses4,345 534 405 1 5,285 
Non-interest expense6,058 2,514 1,012 155 9,739 
Income (loss) from continuing operations before income taxes1,843 1,865 332 (1,149)2,891 
Income tax provision (benefit)437 440 78 (455)500 
Income (loss) from continuing operations, net of tax$1,406 $1,425 $254 $(694)$2,391 
Loans held for investment$142,491 $77,280 $91,552 $0 $311,323 
Deposits0 286,174 36,793 20,738 343,705 
Three Months Ended June 30, 2022
(Dollars in millions)Credit CardConsumer Banking
Commercial Banking(1)
Other(1)
Consolidated Total
Net interest income (loss)$3,899 $2,147 $635 $(164)$6,517 
Non-interest income (loss)1,410 96 272 (63)1,715 
Total net revenue (loss)(2)
5,309 2,243 907 (227)8,232 
Provision for credit losses581 281 222 1 1,085 
Non-interest expense2,771 1,286 485 41 4,583 
Income (loss) from continuing operations before income taxes1,957 676 200 (269)2,564 
Income tax provision (benefit)466 160 48 (141)533 
Income (loss) from continuing operations, net of tax$1,491 $516 $152 $(128)$2,031 
Loans held for investment$120,880 $81,531 $93,973 $0 $296,384 
Deposits0 255,904 38,844 13,137 307,885 
                                                                                                                                                                                                                                                                                                                                                                                                                                        
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Six Months Ended June 30, 2022
(Dollars in millions)Credit CardConsumer Banking
Commercial Banking(1)
Other(1)
Consolidated Total
Net interest income (loss)$7,738 $4,260 $1,242 $(326)$12,914 
Non-interest income (loss)2,868 201 549 (127)3,491 
Total net revenue (loss)(2)
10,606 4,461 1,791 (453)16,405 
Provision (benefit) for credit losses1,126 411 230 (5)1,762 
Non-interest expense5,554 2,522 973 85 9,134 
Income (loss) from continuing operations before income taxes3,926 1,528 588 (533)5,509 
Income tax provision (benefit)935 362 140 (362)1,075 
Income (loss) from continuing operations, net of tax$2,991 $1,166 $448 $(171)$4,434 
Loans held for investment$120,880 $81,531 $93,973 $0 $296,384 
Deposits0 255,904 38,844 13,137 307,885 
_________
(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 $443 million and $848 million in the three and six months ended June 30, 2023, respectively, and $211 million and $403 million in the three and six months ended June 30, 2022, respectively, for credit card finance charges and fees charged off as uncollectible.
Revenue from Contracts with Customers
The majority of our revenue from contracts with customers consists of interchange fees, service charges and other customer-related fees, and other contract revenue. Interchange fees are primarily from our Credit Card business and are recognized upon settlement with the interchange networks, net of rewards earned by customers. Service charges and other customer-related fees within our Consumer Banking business are primarily related to fees earned on consumer deposit accounts for account maintenance and various transaction-based services such as automated teller machine (“ATM”) usage. Service charges and other customer-related fees within our Commercial Banking business are mostly related to fees earned on treasury management and capital markets services. Other contract revenue in our Credit Card business consists primarily of revenue from our partnership arrangements. Other contract revenue in our Consumer Banking business consists primarily of revenue earned on certain marketing and promotional events from our auto dealers. Revenue from contracts with customers is included in non-interest income in our consolidated statements of income.
The following table presents revenue from contracts with customers and a reconciliation to non-interest income by business segment for the three and six months ended June 30, 2023 and 2022.
Table 12.2: Revenue from Contracts with Customers and Reconciliation to Segment Results
Three Months Ended June 30, 2023
(Dollars in millions)Credit CardConsumer Banking
Commercial Banking(1)
Other(1)
Consolidated Total
Contract revenue:
Interchange fees, net(2)
$1,111 $92 $10 $0 $1,213 
Service charges and other customer-related fees0 22 55 0 77 
Other91 27 8 0 126 
Total contract revenue1,202 141 73 0 1,416 
Revenue (reduction) from other sources297 8 184 (6)483 
Total non-interest income (loss)$1,499 $149 $257 $(6)$1,899 
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Six Months Ended June 30, 2023
(Dollars in millions)Credit CardConsumer Banking
Commercial Banking(1)
Other(1)
Consolidated Total
Contract revenue:
Interchange fees, net(2)
$2,136 $178 $37 $1 $2,352 
Service charges and other customer-related fees0 43 95 (1)137 
Other146 46 13 0 205 
Total contract revenue2,282 267 145 0 2,694 
Revenue from other sources580 17 324 1 922 
Total non-interest income$2,862 $284 $469 $1 $3,616 
Three Months Ended June 30, 2022
(Dollars in millions)Credit CardConsumer Banking
Commercial Banking(1)
Other(1)
Consolidated Total
Contract revenue:
Interchange fees, net(2)
$1,093 $80 $28 $0 $1,201 
Service charges and other customer-related fees0 21 63 0 84 
Other98 21 3 0 122 
Total contract revenue1,191 122 94 0 1,407 
Revenue (reduction) from other sources219 (26)178 (63)308 
Total non-interest income (loss)$1,410 $96 $272 $(63)$1,715 
Six Months Ended June 30, 2022
(Dollars in millions)Credit CardConsumer Banking
Commercial Banking(1)
Other(1)
Consolidated Total
Contract revenue:
Interchange fees, net(2)
$2,030 $151 $52 $1 $2,234 
Service charges and other customer-related fees0 47 128 (1)174 
Other193 38 1 0 232 
Total contract revenue2,223 236 181 0 2,640 
Revenue (reduction) from other sources645 (35)368 (127)851 
Total non-interest income (loss)$2,868 $201 $549 $(127)$3,491 
__________
(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 and certain other unconditionally cancellable lines of credit, are legally binding conditional agreements that have fixed expirations or termination dates and specified interest rates and purposes. The contractual amount of these commitments represents the maximum possible credit risk to us should the counterparty draw upon the commitment. We generally manage the potential risk of unfunded lending commitments by limiting the total amount of arrangements, monitoring the size and maturity structure of these portfolios and applying the same credit standards for all of our credit activities.
For unused credit card lines, we have not experienced and do not anticipate that all of our customers will access their entire available line at any given point in time. Commitments to extend credit other than credit card lines generally require customers to maintain certain credit standards. Collateral requirements and loan-to-value (“LTV”) ratios are the same as those for funded transactions and are established based on management’s credit assessment of the customer. These commitments may expire without being drawn upon; therefore, the total commitment amount does not necessarily represent future funding requirements.
We also issue letters of credit, such as financial standby, performance standby and commercial letters of credit, to meet the financing needs of our customers. Standby letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party in a borrowing arrangement. Commercial letters of credit are short-term commitments issued primarily to facilitate trade finance activities for customers and are generally collateralized by the goods being shipped to the customer. These collateral requirements are similar to those for funded transactions and are established based on management’s credit assessment of the customer. Management conducts regular reviews of all outstanding letters of credit and the results of these reviews are considered in assessing the adequacy of reserves for unfunded lending commitments.
The following table presents the contractual amount and carrying value of our unfunded lending commitments as of June 30, 2023 and December 31, 2022. 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)June 30, 2023December 31, 2022June 30, 2023December 31, 2022
Credit card lines$384,993 $359,507 N/AN/A
Other loan commitments(1)
46,408 48,405 $134 $176 
Standby letters of credit and commercial letters of credit(2)
1,486 1,402 23 28 
Total unfunded lending commitments$432,887 $409,314 $157 $204 
__________
(1)Includes $4.5 billion and $4.4 billion of advised lines of credit as of June 30, 2023 and December 31, 2022, respectively.
(2)These financial guarantees have expiration dates that range from 2023 to 2027 as of June 30, 2023.
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 these originated loans. Beginning January 1, 2020, we elected the fair value option on new loss sharing agreements entered into. 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 having to make a payment 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 $128 million and $82 million as of June 30, 2023 and December 31, 2022, respectively. See “Note 4—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments” for information related to our credit card partnership loss sharing arrangements.
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Litigation
In accordance with the current accounting standards for loss contingencies, we establish reserves for litigation-related matters that arise from the ordinary course of our business activities when it is probable that a loss associated with a claim or proceeding has been incurred and the amount of the loss can be reasonably estimated. None of the amounts we currently have recorded individually or in the aggregate are considered to be material to our financial condition. Litigation claims and proceedings of all types are subject to many uncertain factors that generally cannot be predicted with assurance. Below we provide a description of potentially material legal proceedings and claims.
For some of the matters disclosed below, we are able to estimate reasonably possible losses above existing reserves, and for other disclosed matters, such an estimate is not possible at this time. For those matters below where an estimate is possible, management currently estimates the reasonably possible future losses beyond our reserves as of June 30, 2023 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 have been 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 are named as a defendant in 5 putative consumer class action cases 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. In the second quarter of 2022, a trial court in British Columbia preliminarily certified a class of all impacted Canadian consumers except those in Quebec, which would allow the case to proceed with discovery on a classwide basis under Canadian law. The preliminary certification decision has been appealed, and preliminary class certification proceedings are continuing in parallel in three other Canadian provinces (Ontario, Quebec, and Alberta).
Governmental 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
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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 and the Federal Reserve lifted its consent order on July 5, 2023. Canada’s Office of Privacy Commissioner’s (“OPC”) investigation into the Cybersecurity Incident is still open.
Walmart Litigation
On April 7, 2023, Walmart filed a lawsuit in the Southern District of New York seeking a declaratory judgment that it has the contractual right to early termination of the credit card partnership agreement under which we are the exclusive issuer of Walmart’s private label and co-branded credit card program in the U.S. and share in certain related economics. On May 2, 2023, Walmart filed an amended complaint in which it also alleges breach of contract and seeks damages caused by any delay in termination. On May 4, 2023, we filed an Answer and Counterclaim to Walmart’s amended complaint, denying that Walmart has any right to terminate the partnership and alleging that Walmart has breached its contractual obligations to Capital One.
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 “Part I—Item 2. 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 SEC rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding our required disclosure. In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and we must apply judgment in evaluating and implementing possible controls and procedures. 
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 of the Securities Exchange Act of 1934 (“Exchange Act”), our management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of June 30, 2023, 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 June 30, 2023, at a reasonable level of assurance, in recording, processing, summarizing and reporting information required to be disclosed within the time periods specified by the SEC rules and forms.
(b) Changes in Internal Control Over Financial Reporting
We regularly review our disclosure controls and procedures and make changes intended to ensure the quality of our financial reporting. There were no changes in internal control over financial reporting that occurred in the second quarter of 2023 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 “Part I—Item 1. Financial Statements and Supplementary Data—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 2022 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 second quarter of 2023. 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)
April518,255 $96.48 518,255 $4,986 
May606,392 93.34 538,541 4,936 
June457,934 109.19 457,897 4,886 
Total1,582,581 98.96 1,514,693 
__________
(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. The January authorization of up to $5.0 billion of shares of our common stock was reached during the second quarter of 2023, and subsequent repurchases continue under the April 2022 Board authorization. There were 67,851 and 37 shares withheld in May and June, respectively, to cover taxes on restricted stock units (“RSUs”) whose restrictions have lapsed. See “Part I—Item 2.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
Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements
During the three months ended June 30, 2023, certain of our officers and directors adopted or terminated Rule 10b5-1 trading arrangements as follows:
Robert M. Alexander, our Chief Information Officer, entered into a pre-arranged stock trading plan on May 3, 2023. Mr. Alexander’s plan provides for the potential exercise of vested stock options and the associated sale of up to 42,524 shares of Capital One common stock in amounts and prices determined in accordance with a formula set forth in the plan and terminates on the earlier of the date all shares under the plan are sold and July 26, 2024. This trading plan was entered into during an open insider trading window and is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Securities Exchange Act of 1934, as amended, and Capital One’s policies regarding transactions in its securities.

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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.
10.1+
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 June 30, 2023, formatted in Inline XBRL (included within the Exhibit 101 attachments).
__________
+Represents a management contract or compensatory plan or arrangement.
*Indicates a document being filed with this Form 10-Q.
**Indicates a document being furnished with this Form 10-Q. Information in this Form 10-Q furnished herewith shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, 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, as amended, or the Securities Exchange Act of 1934.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 CAPITAL ONE FINANCIAL CORPORATION
Date: July 27, 2023 By:/s/ ANDREW M. YOUNG
 Andrew M. Young
 Chief Financial Officer

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