Capital One

(4)We recognized a loss of $1 million and a gain of $75 million for the three and six months ended June 30, 2026, respectively, and a loss of $20 million and $146 million for the three and six months ended June 30, 2025, 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 $529 million recorded in AOCI as of June 30, 2026 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 8.7 years as of June 30, 2026. 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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A failure to maintain adequate liquidity could materially and adversely affect Capital One's business, results of operations and financial condition.

Accounting for Acquisitions

We account for business combinations under the acquisition method of accounting. Under the acquisition method, identifiable tangible and intangible assets acquired, liabilities assumed and any non-controlling interest in the acquiree are recorded at fair value as of the acquisition date, with limited exceptions. Transaction costs and any costs to restructure the acquired company are expensed as incurred. Goodwill is recognized as the excess of the acquisition price over the estimated fair value of the assets acquired and liabilities assumed. If the fair value of the assets acquired and liabilities assumed is greater than the acquisition price, a bargain purchase gain is recognized and recorded in other non-interest income.

If the acquired set of activities and assets do not meet the accounting definition of a business, the transaction is accounted for as an asset acquisition. In an asset acquisition, the assets acquired are recorded at the purchase price plus any transaction costs incurred and no goodwill is recognized.

An Other category covers corporate investment portfolio and asset/liability management by Corporate Treasury, residual tax expense or benefit, and unallocated corporate expenses such as certain restructuring charges and Discover integration expenses.

As of June 30, 2025, the acquired Discover assets and assumed liabilities were integrated into Capital One's interest rate risk framework; the Transaction and subsequent business actions resulted in modest impacts to net interest income and economic value of equity sensitivities.