CAPITAL ONE FINANCIAL CORP

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 capital markets, advisory services, net interchange 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 $1.2 billion, $691 million and $843 million in 2024, 2023 and 2022, respectively.

Table 10 summarizes the financial results of our Commercial Banking business and displays selected key metrics for the periods indicated.

Table 10: Commercial Banking Business Results

(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 $143 million, $158 million and $218 million as of December 31, 2024, 2023 and 2022, respectively.

(3)Average yield is calculated based on 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.

Key factors affecting the results of our Commercial Banking business for 2024 compared to 2023, and changes in financial condition and credit performance between December 31, 2024 and 2023 include the following:

•Net Interest Income: Net interest income decreased by $127 million to $2.4 billion in 2024 primarily driven by lower average loan and deposit balances.

•Non-Interest Income: Non-interest income increased by $208 million to $1.2 billion in 2024 primarily driven by increased fees in our capital markets business.

•Provision for Credit Losses: Provision for credit losses decreased by $597 million to $8 million in 2024 primarily driven by lower net charge-offs in our office real estate portfolio and an allowance release compared to an allowance build in 2023.

•Non-Interest Expense: Non-interest expense remained flat at $2.0 billion in 2024 compared to 2023.

•Period-end loans held for investment decreased by $3.3 billion to $87.2 billion as of December 31, 2024 from December 31, 2023 primarily driven by customer payments outpacing originations.

•Average loans held for investment decreased by $3.9 billion to $88.6 billion in 2024 compared to 2023 primarily driven by customer payments outpacing originations.

Deposits:

•Period-end deposits decreased by $1.0 billion to $31.7 billion as of December 31, 2024 from December 31, 2023 primarily driven by an intentional reduction in lower margin deposit balances in the first half of the year, partially offset by growth in the second half of the year.

Net Charge-Off and Nonperforming Metrics:

•The net charge-off rate decreased by 43 bps to 0.19% in 2024 compared to 2023 primarily driven by lower net charge-offs in our office real estate portfolio.

•The nonperforming loan rate increased by 55 bps to 1.39% as of December 31, 2024 compared to December 31, 2023 primarily driven by credit downgrades.