On February 19, 2024, the Company entered into an agreement and plan of merger (the “Merger Agreement”), by and among Capital One, Discover, a Delaware corporation and Vega Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of the Company (“Merger Sub”). On May 18, 2025, the Company closed the acquisition of Discover, pursuant to which (i) Merger Sub merged with and into Discover, with Discover as the surviving entity in the merger (the “Merger”); (ii) immediately following the Merger, Discover, as the surviving entity, merged with and into Capital One, with Capital One as the surviving entity in the second-step merger (the “Second Step Merger”); and (iii) immediately following the Second Step Merger, Discover Bank, a Delaware-chartered and wholly owned subsidiary of Discover, merged with and into CONA, with CONA as the surviving entity in the merger (the “CONA Bank Merger,” and collectively with the Merger and Second Step Merger, the “Transaction”). The Transaction will enable the Company to leverage its newly acquired networks, customer base, technology, and data ecosystem to drive value for merchants, consumers, and small businesses.

Upon closing, 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, was converted into the right to receive 1.0192 shares of common stock of Capital One. Holders of Discover common stock received 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, was converted into the right to receive a share of newly created Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series O or 6.125% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series P of Capital One. The following table summarizes the terms of the preferred stock issued as part of the Transaction.

Table 2.1: Summary of Preferred Stock Terms

Redeemable by Issuer Beginning

Per Annum Dividend Rate

Dividend Frequency

Liquidation Preference per Share

Total Shares Issued

Series

Description

Issuance Date

Series O

Fixed-to-Floating Rate Non-Cumulative

May 18,

2025

October 30, 2027

5.500% through 10/29/2027; resets 10/30/2027 and every quarter thereafter at three-month term SOFR + 3.338%

Semi-Annually through 10/30/2027;Quarterly thereafter

100,000

5,700

Series P(1)

6.125% Fixed- Rate Reset

Non-Cumulative

May 18,

2025

June 23, 2025

6.125% through 9/22/2025; resets 9/23/2025 and every subsequent 5 year anniversary at 5-Year Treasury Rate +5.783%

Semi-Annually

100,000

5,000

The Company reissued 256,497,213 shares of treasury stock valued at $50.6 billion as of the Closing Date to holders of Discover common stock, issued the 10,700 shares of Series O and Series P preferred stock described in the table above to holders of Discover preferred stock valued at $1.1 billion, and exchanged Discover stock-based compensation awards for Capital One replacement awards with a Closing Date value of $136 million, representing total purchase consideration of $51.8 billion.

For the three and six months ended June 30, 2025, we have incurred $299 million and $409 million, respectively, of integration expenses related to the Transaction, primarily driven by salaries and associate benefits and professional services, which are included within operating expense in our consolidated statements of income. Since the announcement of the Transaction in the first quarter of 2024, we have incurred $643 million of integration expenses through June 30, 2025.

We accounted for the Transaction as a business combination in accordance with Topic 805, Business Combinations (“ASC 805”), with the Company as the accounting acquirer. Accordingly, we recorded the tangible and intangible assets acquired and liabilities assumed at their respective fair values as of the Closing Date, unless otherwise required. The determination of fair value requires management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are subjective in nature and subject to change. Fair value estimates related to the assets acquired and liabilities

assumed are subject to adjustment for up to one year after the Closing Date as additional information becomes available. The Company’s purchase consideration allocation is considered preliminary as certain estimates related to the assets acquired and liabilities assumed are subject to continuing refinement. Valuations subject to refinement include, but are not limited to, loans, intangible assets, deposits and certain other assets and liabilities.


(in millions, except share and per share data)	Fair Value
Purchase consideration:
Shares of Discover common stock issued and outstanding immediately prior to the acquisition	251,679,740
Exchange ratio	1.0192
Number of shares of Capital One treasury stock reissued in the acquisition before fractional shares adjustment	256,511,991
Less: Number of fractional shares	(14,778)
Number of shares of Capital One treasury stock reissued in the acquisition	256,497,213
Price per share of Capital One common stock	$	197.22
Fair value of consideration for outstanding common stock	50,586
Fair value of consideration for preferred stock	1,068
Fair value of consideration related to stock-based compensation awards	136
Cash in lieu of fractional shares	3
Fair value of purchase consideration	$	51,793
Allocation of purchase consideration to net assets acquired:
Preliminary fair value of assets acquired:
Cash and cash equivalents and Restricted cash for securitization investors(1)	$	16,467
Securities available for sale	14,108
Net loans held for investment (see Table 2.3)	108,609
Premises and equipment	1,065
Interest receivable	926
Intangible assets (see Table 2.4)	18,210
Other assets (2)	1,254
Assets of discontinued operations(3)	7,982
Preliminary fair value of liabilities assumed:
Interest payable	347
Non-interest-bearing deposits	1,516
Interest-bearing deposits (see Table 2.5)	105,201
Securitized debt obligations	5,827
Senior and subordinated notes	6,917
Other borrowings	538
Deferred tax liability(4)	3,603
Other liabilities(5)	6,121
Preliminary fair value of net assets acquired	$	38,551
Preliminary Goodwill	$	13,242

________

(5)Includes rewards liabilities, associate compensation and benefit related liabilities, derivative liabilities, and other accrued expenses. Also includes the liability related to the card product misclassification matter as of the Closing Date. For additional information, refer to “Note 14—Commitments, Contingencies, Guarantees and Others.”


(Dollars in millions)	Unpaid Principal Balance		Premium/(Discount)(1)		Loans held for investment		Allowance for credit losses		Net loans held for investment
Non-PCD loans	$	101,614	$	1,069	$	102,683	$	—	$	102,683
PCD loans	6,894		(538)		6,356		(2,870)		3,486
Recoveries on acquired Discover loans that are fully charged off(2)	N/A		(865)		(865)		3,305		2,440
Total	$	108,508	$	(334)	$	108,174	$	435	$	108,609

________

Purchased loans were evaluated to determine if, at the time of purchase, the loans had experienced a more-than-insignificant deterioration in credit quality since origination. In evaluating PCD loans, we considered a variety of factors including but not limited to delinquency, loan modification, revocation of revolving privileges and other qualitative factors that indicate deterioration in credit quality. Contractual rights to collect on recoveries of loans charged off by Discover were also considered in scope of the PCD accounting model.


(Dollars in millions)	Useful Life (1)	Amortization Methodology	Fair Value
Purchased credit card relationships	11	Accelerated	$	10,300
Network and financial partner relationships	11	Straight-line	1,500
Core deposit	10	Accelerated	1,040
Intangible assets with definite lives			12,840
Discover Network	N/A	N/A - Indefinite useful life	3,100
Brand/Trade names	N/A	N/A - Indefinite useful life	2,270
Intangible assets with indefinite lives			5,370
Total intangible assets			$	18,210

________


(Dollars in millions)	Fair Value
Time deposits	$	39,623
Other interest-bearing deposits	65,578
Total interest-bearing deposits	$	105,201

We recorded preliminary goodwill of $13.2 billion, representing the amount by which total purchase consideration exceeded the preliminary fair value of the net assets acquired. As the Company continues to evaluate the underlying inputs and assumptions that are being used in the fair value estimates of net assets acquired, we may obtain additional information during the measurement period that may result in changes to the preliminary estimate of fair value of net assets acquired, preliminary goodwill, and the allocation of preliminary goodwill to our business segments. The preliminary goodwill has been temporarily allocated to the Other category, given the size and complexity of the Transaction. Goodwill will be reallocated to the appropriate reporting units prior to our annual goodwill impairment test, which will be performed as of October 1, 2025. The preliminary goodwill is primarily attributable to the revenue and cost synergies expected to arise from the Transaction. As the Transaction is nontaxable, goodwill is not deductible for tax purposes.

Cash and cash equivalents and Restricted cash for securitization investors: The carrying amount of these assets was a reasonable estimate of fair value based on the short-term nature of these assets, with the exception of certain securities maturing in less than 90 days from the Closing Date, which followed the same fair value methodology as Investment Securities.

Investment Securities: Fair values for investment securities were based on quoted market prices, where available. If quoted market prices were not available, fair value estimates were based on observable inputs including quoted market prices for similar instruments, quoted market prices that were not in an active market or other inputs that were observable in the market. In the absence of observable inputs, fair value was estimated based on pricing models and/or discounted cash flow methodologies. This fair value methodology is consistent with that described in “Note 12—Fair Value Measurement” for our investment securities portfolio.

Loans: Fair values for loans held for investment were based on a discounted cash flow methodology that considered credit loss expectations, market interest rates and other market factors from the perspective of a market participant. Loans were grouped together according to similar characteristics when applying various valuation assumptions. The probability of default, loss given default and prepayment assumptions were the key factors driving credit losses which were embedded into the estimated cash flows. These assumptions were informed by internal data on loan characteristics, historical loss experience, and market data. The interest component of the estimate was determined by discounting interest and principal cash flows through the life of each loan. The discount rates used for loans reflect market participants' considerations of prepayment, default, market, liquidity and other risk associated with the portfolio.

Intangible assets: The intangible assets identified in the Transaction include purchased credit card relationships, the Discover Network, brand/trade names, network and financial partner relationships and a core deposit intangible. All intangible assets were valued using an income approach under which future cash flows for each intangible asset were forecasted, tax-effected and then discounted using an appropriately risk-adjusted discount rate. A description of each intangible asset, along with the key inputs used in its valuation, is provided below:

•Purchased credit card relationships: represent the value of future activity from existing credit card relationships over their expected lives. The fair value was estimated utilizing the multi-period excess earnings method, a type of the income approach. The key inputs into the valuation included projected future finance charge and fee income using assumptions of cardholder activity, relevant operating costs for managing these relationships, attrition based on

cardholder account retention levels, contributory asset charges reflective of the other assets of the business that are required to generate these cash flows, a discount rate determined based on the estimated cost of equity, risk-free return rate and risk premium for the market and the specific risk profile of the intangible asset relative to the other assets acquired and the overall business, and the tax rate reflective of the jurisdictions in which the Company operates.

•Network and financial partner relationships: represent the value associated with the economics generated by the existing third-party partners, including third-party issuers of PULSE debit cards. The fair value was estimated utilizing the multi-period excess earnings method, a type of the income approach. The key inputs into the valuation included cash flow forecasts derived from revenue attributable to the partner relationships less applicable operating costs, attrition based on customer retention levels, the discount rate determined based on the estimated cost of equity, risk-free return rate and risk premium for the market and the specific risk profile of the respective intangible assets relative to the other assets acquired and the overall business, and the tax rate reflective of the jurisdictions in which the Company operates.

•Core deposit: represents the economics associated with the favorable funding spread between the acquired core deposit base and alternative sources of funding. The fair value was estimated utilizing the cost savings method, a type of the income approach. The key inputs into the valuation included attrition based on customer retention levels, alternative cost of funds at the time of acquisition, expected balance inflation over time, the discount rate determined based on the estimated cost of equity, risk-free return rate and risk premium for the market and the specific risk profile of the intangible asset relative to the other assets acquired and the overall business, and the tax rate reflective of the jurisdictions in which the Company operates.

•Discover Network: represents the value associated with the economics generated by the proprietary payment network, including any expected synergies. The fair value was estimated utilizing the multi-period excess earnings method, a type of the income approach. The key inputs into the valuation included the cash flow forecast derived from projected future revenues and costs associated with the network (inclusive of any synergies), contributory asset charges reflective of the other assets that are required in order for the network to generate these projected cash flows, a discount rate determined based on the estimated cost of equity, risk-free return rate and risk premium for the market and the specific risk profile of the intangible asset relative to the other assets acquired and the overall business, and the tax rate reflective of the jurisdictions in which the Company operates.

•Brand/Trade names: represent the economic benefits of the ability to generate revenue based on the value of the trade names, which include the Discover, Diners Club and PULSE brands. The fair value for each was estimated utilizing the relief-from-royalty-method, a type of the income approach. The key inputs into the valuation included assumed royalty rates based on market transactions, cash flow forecasts derived from revenue attributable to each trade name, a discount rate determined based on the estimated cost of equity, risk-free return rate and risk premium for the market and the specific risk profile of the respective intangible assets relative to the other assets acquired and the overall business, and the tax rate reflective of the jurisdictions in which the Company operates.

Interest-bearing deposits: The fair value of the time deposits was determined using a discounted cash flow model, whereby the expected cash flows associated with these time deposits were discounted at a market rate. The carrying amount of savings deposits, money market accounts, and other interest-bearing deposits approximated their fair values.

Securitized debt obligations: Senior and subordinated notes; and Other borrowings: Fair values for securitized debt obligations, senior and subordinated notes, and other borrowings were based on quoted market prices, where available. If a market price was not available, valuations were based on quoted prices of comparable instruments. If neither approach was available, a discounted cash flow analysis was used, incorporating prevailing borrowing rates for similar financial instruments.

As a result of the Transaction, we acquired Discover's qualified 401(k) plan (the “Discover 401(k) Plan”) in which eligible U.S. associates may participate. We match participants’ contributions to this plan and also contribute a fixed amount to eligible employees. In addition to the Discover 401(k) Plan, we acquired Discover’s frozen qualified non-contributory defined benefit pension plan (the “Discover Pension Plan”). The Discover Pension Plan generally provides retirement benefits that are based on each participant’s years of credited service prior to 2009 and on compensation specified in the Discover Pension Plan. The Discover Pension Plan was over-funded as of the date of the Transaction.

Our results from continuing operations for the second quarter of 2025 include contributions to net interest income, non-interest income, and net income from continuing operations of $1.7 billion, $347 million, and $(6.4) billion, respectively, from Discover. These results include the impacts from purchase accounting and the impact to provision for credit losses for the Discover non-PCD loan portfolio and exclude any amounts from areas that have been integrated and are therefore are not distinguishable from the results of our combined results of operations.

The table below presents certain unaudited pro forma information that combines the historical results of operations of Capital One and Discover for the three and six months ended June 30, 2025 and 2024, as if the Transaction had occurred on January 1, 2024. Included in the pro forma results are adjustments to reflect the impact of amortizing certain purchase accounting adjustments, such as the amortization of intangible assets and the accretion of discounts on certain acquired loans, transaction costs, as well as reflecting the impact of Discover’s sale of its student loan portfolio in 2024.

This pro forma financial information is presented for illustrative purposes only and does not necessarily reflect what the actual combined financial results would have been had the closing of the Transaction been completed on January 1, 2024, nor is the information indicative of the results of operations in future periods. The pro forma financial information does not reflect the impact of possible business model changes nor does it consider any potential impacts of synergies, market conditions, or other factors.

In the second quarter of 2025, the Board of Directors approved a plan to exit the Discover Home Loan business acquired as a part of the Transaction. The Home Loan business includes the origination and servicing of conventional mortgage refinance and home equity loans that are single family, owner occupied, closed-end with fixed interest rates, terms and payments, and are secured by a first or second lien. We are actively marketing the business and are in the process of identifying potential buyers, with the sale expected to close within one year. As a result, the assets and liabilities of the Home Loan business have been classified as held for sale and are reported as assets of discontinued operations and liabilities of discontinued operations on the consolidated balance sheets, along with any associated hedges. The results of the Home Loan business, including any associated hedges, have been accounted for as discontinued operations and are reported as income or loss from discontinued operations, net of tax, on the consolidated statement of income.