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 enables 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 years ended December 31, 2025 and December 31, 2024, we incurred $1.1 billion and $234 million, respectively, of integration expenses related to the Transaction. The integration expenses are primarily driven by salaries and associate benefits and professional services, along with $124 million of acquisition-related expenses incurred through the Closing Date. Integration expenses are included within operating expense in our consolidated statements of income.

We accounted for the Transaction as a business combination in accordance with Topic 805, Business Combinations, 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


(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 (1):
Fair value of assets acquired:
Cash and cash equivalents and Restricted cash for securitization investors(2)	$	16,467
Securities available for sale	14,108
Net loans held for investment (see Table 2.3)	108,609
Premises and equipment	956
Interest receivable	926
Intangible assets (see Table 2.4)	17,670
Other assets(3)	1,448
Assets of discontinued operations(4)	8,398
Fair value of liabilities assumed:
Interest payable	347
Non-interest-bearing deposits	1,710
Interest-bearing deposits (see Table 2.5)	105,208
Securitized debt obligations	5,827
Senior and subordinated notes	6,917
Other borrowings	538
Deferred tax liability(5)	3,572
Other liabilities(6)	6,094
Fair value of net assets acquired	$	38,369
Goodwill	$	13,424

________

(1)Pursuant to the guidance in Topic 805, fair value estimates related to assets acquired and liabilities assumed in a business combination are subject to adjustment for up to one year after the Closing Date as additional information becomes available (the “Measurement Period”). The Company has completed its purchase consideration allocation and the fair values of assets acquired and liabilities assumed are considered final. The amounts presented in Table 2.2 reflect Measurement Period adjustments made during the third and fourth quarters of 2025, which primarily included a $540 million decrease in the fair value of intangible assets and a $109 million decrease in the fair value of premises and equipment as well as a $416 million increase in the fair value of assets of discontinued operations and a $182 million increase in goodwill.

(6)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 19—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	$	0	$	102,683
PCD loans	6,894		(538)		6,356		(2,870)		3,486
Recoveries on acquired Discover loans that are fully charged off	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	$	10,100
Network and financial partner relationships	11	Straight-line	1,500
Core deposit	10	Accelerated	1,100
Intangible assets with definite lives			12,700
Discover Network	N/A	N/A - Indefinite useful life	2,700
Brand/Trade names	N/A	N/A - Indefinite useful life	2,270
Intangible assets with indefinite lives			4,970
Total intangible assets			$	17,670

________


(Dollars in millions)	Fair Value
Time deposits	$	39,630
Other interest-bearing deposits	65,578
Total interest-bearing deposits	$	105,208

As of December 31, 2025, we recorded goodwill from the Transaction of $13.4 billion, representing the amount by which total purchase consideration exceeded the fair value of the net assets acquired. The 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. Goodwill was allocated to the Credit Card ($6.5 billion) and Other Consumer Banking ($6.9 billion) reporting units.

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 DCF methodologies. This fair value methodology is consistent with that described in “Note 17—Fair Value Measurement” for our investment securities portfolio.

Loans: Fair values for loans held for investment were based on a DCF 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 principal and interest cash flows were estimated by forecasting the cash flows through the life of each loan. The discount rates used for loans reflect the expected timing of cash flows and market participants' considerations of prepayment, loss, market, liquidity and other risks associated with the portfolio.

Intangible assets: The intangible assets identified in the Transaction include purchased credit card relationships (“PCCR”), 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 form of the income approach. The key inputs into the valuation included projected future loan receivables balances, finance charge and fee income using assumptions of cardholder activity, relevant operating costs for managing these relationships, attrition estimated based on historical 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 for the business 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 form 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 estimated based on historical customer retention levels, the discount rate determined based on the estimated cost of equity for the business 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 form of the income approach. The key inputs into the valuation included an assessment of core and non-core deposits, attrition estimated based on historical 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 for the business 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 form 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 for the business 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 form 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 for the business 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 DCF 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 DCF analysis was used, incorporating prevailing borrowing rates for similar financial instruments.

Our results from continuing operations for the year ended December 31, 2025 include contributions to net interest income, non-interest income, and net income (loss) from continuing operations of $9.0 billion, $1.8 billion, and $(4.5) 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 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 years ended December 31, 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.

(2)Combined pro forma income from continuing operations, net of tax, was adjusted to reflect the $8.8 billion increase to the provision for credit losses for the Discover non-PCD loan portfolio recognized for the year ended December 31, 2025 as if it had been recognized consistent with a Closing Date of January 1, 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.