Business Combinations

3 Months Ended

Mar. 31, 2025

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]


NOTE 2—BUSINESS COMBINATIONS

On February 19, 2024, the Company entered into an agreement and plan of merger (the “Merger Agreement”), by and among Capital One, Discover Financial Services, a Delaware corporation (“Discover”) and Vega Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of the Company (“Merger Sub”), pursuant to which (a) Merger Sub will merge with and into Discover, with Discover as the surviving entity in the merger (the “Merger”); (b) immediately following the Merger, Discover, as the surviving entity, will merge with and into Capital One, with Capital One as the surviving entity in the second-step merger (the “Second Step Merger”); and (c) immediately following the Second Step Merger, Discover Bank, a Delaware-chartered and wholly owned subsidiary of Discover, will merge with and into CONA, with CONA as the surviving entity in the merger (the “CONA Bank Merger,” and collectively with the Merger and the Second Step Merger, the “Transaction”). The Merger Agreement was unanimously approved by the Boards of Directors of each of Capital One and Discover.

At the effective time of the Merger, each share of common stock of Discover outstanding immediately prior to the effective time of the Merger, other than certain shares held by Discover or Capital One, will be converted into the right to receive 1.0192 shares of common stock of Capital One. Holders of Discover common stock will receive cash in lieu of fractional shares. At the effective time of the Second Step Merger, each share of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series C, of Discover, and each share of 6.125% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series D, of Discover, in each case outstanding immediately prior to the effective time of the Second Step Merger, will be converted into the right to receive a share of newly created series of preferred stock of Capital One having terms that are not materially less favorable than the applicable series of Discover preferred stock.

On February 18, 2025, Capital One and Discover each held a special meeting of their respective stockholders during which the issuance of Capital One common stock as merger consideration to the holders of Discover common stock was approved by the requisite vote of the Capital One stockholders and the Merger Agreement was adopted by the requisite vote of the Discover stockholders.

On April 18, 2025, Capital One received approval from the Office of the Comptroller of the Currency (“OCC”) and the Board of Governors of the Federal Reserve System (“Federal Reserve”) to complete the Transaction. The Federal Reserve approval was accompanied by announcement of a new enforcement action by the Federal Reserve against Discover Bank which Capital One has committed to comply with and remediate following closing. The OCC approval included a condition requiring CONA to provide a detailed plan to the OCC following closing to address the underlying root causes of outstanding enforcement actions against Discover Bank.

Following receipt of the OCC and Federal Reserve approvals, all required regulatory approvals to complete the Transaction have been received. The closing of the Transaction is expected to occur on May 18, 2025 subject to the satisfaction or waiver of the remaining closing conditions set forth in the Merger Agreement.

In the first quarter of 2025, we incurred $110 million of integration expenses related to the Transaction, which are included in operating expenses in our Consolidated Statements of Income. Since the announcement of the Transaction in the first quarter of 2024, we have incurred $344 million of integration expenses as of March 31, 2025.