This discussion contains forward-looking statements that are based upon management's current expectations and are subject to significant uncertainties and changes in circumstances. Please review "MD&A-Forward-Looking Statements" for more information on the forward-looking statements in this Quarterly Report on Form 10-Q ("this Report"). All statements that address operating performance, events or developments that we expect or anticipate will occur in the future, including those relating to operating results and the Cybersecurity Incident described in "MD&A-Introduction-Cybersecurity Incident" and "Note 13-Commitments, Contingencies, Guarantees and Others" as well as the potential impacts of the COVID-19 pandemic described in "MD&A-Introduction-Coronavirus Disease 2019 (COVID-19) Pandemic" are forward-looking statements. Our actual results may differ materially from those included in these forward-looking statements due to a variety of factors including, but not limited to, those described in "Part I-Item 1A. Risk Factors" in our 2019 Annual Report on Form 10-K ("2019 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 March 31, 2020 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 2019 Form 10-K.





INTRODUCTION

We are a diversified financial services holding company with banking and non-banking subsidiaries. Capital One Financial Corporation and its subsidiaries (the "Company") offer a broad array of financial products and services to consumers, small businesses and commercial clients through digital channels, branches, Cafés and other distribution channels. As of March 31, 2020, our principal subsidiaries included: • Capital One Bank (USA), National Association ("COBNA"), which offers credit

and debit card products, other lending products and deposit products; and

• Capital One, National Association ("CONA"), which offers a broad spectrum of

banking products and financial services to consumers, small businesses and

commercial clients.




The Company is hereafter collectively referred to as "we," "us" or "our." COBNA
and CONA are collectively referred to as the "Banks." Certain business terms
used in this document are defined in the "MD&A-Glossary and Acronyms" and should
be read in conjunction with the consolidated financial statements included in
this Report.
Our consolidated total net revenues are derived primarily from lending to
consumer, small business and commercial customers net of funding costs
associated with interest on deposits, short-term borrowings and long-term debt.
We also earn non-interest income which primarily consists of interchange income
net of reward expenses, and service charges and other customer-related fees. Our
expenses primarily consist of the provision for credit losses, operating
expenses, marketing expenses and income taxes.
Our principal operations are organized for management reporting purposes into
three major business segments, which are defined primarily based on the products
and services provided or the types of customer served: Credit Card, Consumer
Banking and Commercial Banking. The operations of acquired businesses have been
integrated into our existing business segments. Certain activities that are not
part of a segment, such as management of our corporate investment portfolio,
asset/liability management by our centralized Corporate Treasury group and
residual tax expense or benefit to arrive at the consolidated effective tax rate
that is not assessed to our primary business segments, are included in the Other
category.
•    Credit Card: Consists of our domestic consumer and small business card

lending, and international card businesses in Canada and the United Kingdom

("U.K.").

• 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 commercial and industrial customers
     typically include companies with annual revenues between $20 million and $2
     billion.


Business Developments
We regularly explore and evaluate opportunities to acquire financial services
and products as well as financial assets, including credit card and other loan
portfolios, and enter into strategic partnerships as part of our growth
strategy. We also explore opportunities to acquire technology companies and
related assets to improve our information technology infrastructure and to
deliver on our digital strategy. We may issue equity or debt to fund our
acquisitions. In addition, we regularly consider the potential disposition of
certain of our assets, branches, partnership agreements or lines of business.
On September 24, 2019, we launched a new credit card issuance program with
Walmart Inc. ("Walmart") and are now the exclusive issuer of Walmart's cobrand
and private label credit card program in the U.S. On October 11, 2019, we
completed the acquisition of the existing portfolio of Walmart's cobrand and
private label credit card receivables, which added approximately $8.1 billion to
our domestic credit card loans held for investment portfolio as of the
acquisition date.
In the second quarter of 2019, we made the decision to exit several small
partnership portfolios in our Credit Card business. We sold approximately $900
million of receivables and transferred approximately $100 million to loans held
for sale as of June 30, 2019, which resulted in a gain on sale of $49 million
recognized in other non-interest income and an allowance release of $68 million.
Coronavirus Disease 2019 (COVID-19) Pandemic
The COVID-19 pandemic has resulted in a global public-health crisis, disrupting
economies and introducing significant volatility into financial markets and
uncertainty as to when economic and operating conditions will return to
normalcy. This crisis is impacting individuals, households and businesses in a
multitude of ways. Companies in the U.S. and abroad are experiencing
unprecedented disruptions to normal business operations, including
customer-facing interactions, supply chains, office closures, changes in demand
for products and services, and others. Financial institutions, including us,
have been deemed an essential service and exempted from the myriad of shutdowns
across the country, we are transforming how we work in order to protect the
well-being of our associates and our customers, serve our customers, support our
communities, and position ourselves to navigate the challenges ahead.
Across our workforce, more than 40,000 associates have transitioned to working
remotely, relying on our technology infrastructure and systems that we have
designed for resilience and security. We have been able to continue serving
customers, successfully managing critical functions and keeping our lines of
business operating. On March 11, we announced increased paid leave and more
flexible attendance policies to allow associates to care for their families and
loved ones. We temporarily closed banking locations that do not have a physical
barrier between associates and customers, including all of our Cafés and some of
our branches. At locations with drive-through windows or glass barriers, we
continue to provide critical banking services with new safety precautions. We
increased pay for branch associates working in open locations and associates
that perform essential and time-sensitive banking activities that cannot be
performed remotely. We also increased pay for other U.S.-based associates in
roles instrumental to maintaining essential customer support, such as our call
center agents and branch associates and have been able to significantly increase
the number of customer support associates who now can work remotely.
We are offering a range of policies and programs to accommodate customer
hardship across our lines of business. In our Credit Card and Auto Finance
businesses, our customers can seek forbearance primarily in the form of
short-term payment deferrals or extensions and fee waivers. In addition, we are
pausing involuntary repossessions for our auto customers. For our retail bank
customers, we are waiving select fees for impacted customers. We are also
working with our Commercial Banking customers on a more customized basis. As of
April 17th, short-term payment deferral enrollments in our Domestic Card
business covered about 1% of active accounts, representing 2% of loan balances,
and about 9% of our Auto Finance customers, representing 11% of loan balances
have been granted short-term payment extensions.
In the first quarter of 2020, the expected economic worsening and significant
uncertainty due to the COVID-19 pandemic was the primary driver of a substantial
build in our allowance for credit losses, resulting in a net loss of $1.3
billion, or $3.10 per share. In addition, the combination of the allowance build
and adoption impact of the Current expected credit loss ("CECL") standard
doubled our allowance coverage ratio to 5.4% as of March 31, 2020 from 2.7% as
of December 31, 2019. For more information,

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see "MD&A-Executive Summary and Business Outlook" and "MD&A-Credit Risk
Profile." We have evaluated the potential impact on our goodwill as well as
considered and incorporated recent market events and volatility into our fair
value measurements, including our investment securities portfolio and derivative
positions. See more details in "MD&A-Critical Accounting Policies and
Estimates," "MD&A-Market Risk Profile" and "Note 8-Derivative Instruments and
Hedging Activities." See "MD&A-Liquidity Risk Profile" for information relating
to our liquidity reserves as of March 31, 2020.
Beginning in late March 2020, the COVID-19 pandemic began impacting the demand
for our products and services, including a decline in the purchase volumes of
certain categories of goods and services in our Credit Card business and a
decline in auto loan origination activity in our Auto Finance business. There is
significant uncertainty surrounding the course of this pandemic and the
magnitude and duration of the disruption to economic activity and how this
disruption will continue to impact demand for our products and services.
Due to the economic disruption and significant uncertainty caused by the
COVID-19 pandemic, it is difficult to forecast specific efficiency targets or
time frames while the pandemic runs its course. Therefore, we withdrew our
efficiency ratio guidance, including our guidance of annual operating efficiency
ratio of 42% in 2021, net of adjustments. In addition, we withdrew our marketing
guidance for full-year 2020. We are decreasing marketing in the near term based
on our current view of the COVID-19 risks. However, we continue to make
marketing decisions based on our dynamic assessment of market risks and
opportunities.
We are actively monitoring and responding to developments across the myriad of
landscapes affected by the COVID-19 pandemic, including social, financial,
legal, regulatory and governmental. We are continuing to evaluate the impacts of
the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"),
enacted in March 2020, on us and our customers. As other guidance is issued by
our regulators, we will continue to assess the impacts to us. As government
authorities implement and modify social distancing plans, stay-at-home orders or
other measures to contain the further spread of COVID-19, we will adjust our
business operations and practices, keeping the best interests of our associates,
customers and business partners at the forefront. We will also evaluate and
enhance our policies and programs to continue helping our customers through the
COVID-19 pandemic. See more updates related to the COVID-19 pandemic in
"MD&A-Supervision and Regulation."
See "Part II-Item 1A. Risk Factors" for additional information regarding risks
and the significant uncertainties relating to the COVID-19 pandemic.

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Cybersecurity Incident
On July 29, 2019, we announced there was 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
(the "Cybersecurity Incident"). The Cybersecurity Incident occurred on March 22
and 23, 2019. We believe the individual was able to exploit a specific
configuration vulnerability in our infrastructure. We immediately fixed the
configuration vulnerability that this individual exploited and verified there
are no other instances in our environment. The person responsible was arrested
by the Federal Bureau of Investigation on July 29, 2019 and federal prosecution
of the responsible person has commenced. The U.S. Attorney's Office has stated
they believe the data has been recovered and that there is no evidence the data
was used for fraud or shared by this individual.
This event affected approximately 100 million individuals in the United States
and approximately 6 million in Canada. We believe no credit card account numbers
or log-in credentials were compromised. The largest category of information
accessed was information on consumers and small businesses as of the time they
applied for one of our credit card products from 2005 through early 2019. This
information included personal information that we routinely collect at the time
we receive credit card applications, including names, addresses, zip
codes/postal codes, phone numbers, email addresses, dates of birth, and
self-reported income. In addition to credit card application data, the
individual also obtained portions of credit card customer data, including
customer status data (e.g., credit scores, credit limits, balances, payment
history, contact information) and fragments of transaction data from a total of
23 days during 2016, 2017 and 2018. Approximately 120,000 Social Security
numbers of our credit card customers and approximately 80,000 linked bank
account numbers of our secured credit card customers were compromised in this
incident. For our Canadian credit card customers, approximately 1 million Social
Insurance Numbers were compromised in this incident.
We provided required notification to affected individuals and made free credit
monitoring and identity protection available. We retained a leading independent
cybersecurity firm that confirmed we correctly identified and fixed the specific
configuration vulnerability exploited in the Cybersecurity Incident.
During the first quarter of 2020, we incurred $14 million of incremental
expenses related to the remediation of and response to the Cybersecurity
Incident, largely driven by technology costs and professional support, offset by
$10 million of insurance recoveries. To date, we have incurred $86 million of
incremental expenses related to the remediation of and response to the
Cybersecurity Incident, largely driven by customer notifications, credit
monitoring, technology costs, and professional support, offset by $44 million of
insurance recoveries pursuant to our insurance coverage described below. We
continue to expect these costs will be at the low end of the $100 million to
$150 million range previously disclosed and that they will extend to subsequent
quarters in 2020. As the timing of recognizing insurance reimbursements may
differ from the timing of recognizing the associated expenses, any such
reimbursements are not considered in this range, though we continue to expect
that a significant portion of these expenses will be covered by insurance. The
incremental expenses and insurance reimbursements will be treated as adjusting
items as they relate to our financial results ("Cyber Adjusting Items").
We carry insurance to cover certain costs associated with a cyber risk event.
This insurance has a total coverage limit of $400 million and is subject to a
$10 million deductible, which was met in the third quarter of 2019, as well as
standard exclusions.
We continue to invest significantly in cybersecurity and expect to make
additional investments as we continue to assess our cybersecurity program. These
estimated investments are in addition to the estimated Cyber Adjusting Items.
Although the ultimate magnitude and timing of expenses or other impacts to our
business or reputation related to the Cybersecurity Incident are uncertain, they
may be significant, and some of the costs may not be covered by insurance.
However, we do not believe that this incident will negatively impact our
strategy or our long-term financial health. For more information, see "Note
13-Commitments, Contingencies, Guarantees and Others."
Our reported results excluding adjusting items, including the Cyber Adjusting
Items, represent non-GAAP measures which we believe help users of our financial
information understand the impact of these adjusting items on our reported
results as well as provide an alternate measurement of our operating
performance.
SELECTED FINANCIAL DATA

The following table presents selected consolidated financial data and performance from our results of operations for the first quarters of 2020 and 2019 and selected comparative balance sheet data as of March 31, 2020 and December 31, 2019. We also

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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 level of return generated.

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