The simple version

A lender takes in money at one rate and puts it out at a higher one. The difference between those two rates, measured across everything it holds, is most of this figure.

Then there is a fourth piece that people miss. Some of the money a lender uses costs it nothing at all, because plenty of balances sit there earning nothing for the person whose money it is.

That free funding widens the result above the plain difference between the two rates. The published table sets out all four steps and they add up exactly.

The numbers

• All figures are from Capital One Financial Corporation's Q3 2026 results, furnished as exhibits 99.1 and 99.2 to a Form 8-K filed with the Securities and Exchange Commission on October 20, 2026, accession number 0000927628-26-000142, period of report October 20, 2026
• The summary exhibit states a net interest margin of 8.41 percent, an increase of 40 basis points (exhibit 99.1)
• The supplement defines the measure as annualized net interest income for the period divided by average interest-earning assets for the period (exhibit 99.2, note 5)
• Table 6 of the supplement, headed Average Balances, Net Interest Income and Net Interest Margin, gives three columns: the quarter ended September 2026, the quarter ended June 2026, and the quarter ended September 2025 (exhibit 99.2)
• Quarter ended September 2026: total interest-earning assets averaged $612,521 million earning $16,899 million, a yield of 11.04 percent. Total interest-bearing liabilities averaged $505,122 million costing $4,013 million, a rate of 3.18 percent (same table)
• Same quarter: net interest income of $12,886 million and a spread of 7.86 percent, an impact of non-interest-bearing funding of 0.55, and a net interest margin of 8.41 percent (same table)
• Quarter ended June 2026: yield 10.61 percent, cost of liabilities 3.15 percent, spread 7.46 percent, non-interest-bearing impact 0.55, margin 8.01 percent (same table)
• Quarter ended September 2025: yield 11.30 percent, cost of liabilities 3.55 percent, spread 7.75 percent, non-interest-bearing impact 0.61, margin 8.36 percent (same table)
• Selected metrics in the supplement give the margin across five quarters as 8.41, 8.01, 7.87, 8.26 and 8.36 percent, from the quarter ended September 2026 back to the quarter ended September 2025, with the change against the prior quarter shown as 40 basis points and the change against the year-earlier quarter shown as 5 (exhibit 99.2)
• The same metrics table gives the margin for the nine months ended September 2026 as 8.10 percent against 7.69 percent a year earlier, a change of 41 basis points (exhibit 99.2)

The four steps

Step one is the rate earned on everything put out to work. For the September quarter that was 11.04 percent across an average of $612,521 million.

Step two is the rate paid for the borrowed money behind it, which was 3.18 percent across an average of $505,122 million. Take the second away from the first and you get the spread, 7.86 percent.

Step three is the piece that is easy to miss. What is lent out is larger than the borrowed money behind it, and the difference is funded by balances that carry no rate at all, which the table puts at 0.55.

Step four is where they combine. Spread plus that free funding benefit gives the final figure of 8.41 percent, and the table prints all four numbers so the total can be checked.

The actual math on the bridge

Take the September quarter first. 11.04 minus 3.18 is 7.86, which is the spread the table prints, and 7.86 plus 0.55 is 8.41, which is the margin it prints.

The June quarter works the same way. 10.61 minus 3.15 is 7.46, and 7.46 plus 0.55 is 8.01. The year-earlier quarter: 11.30 minus 3.55 is 7.75, and 7.75 plus 0.61 is 8.36.

Now the comparison that the headline rests on. 8.41 against the previous quarter's 8.01 is a rise of 0.40, which is the 40 basis points quoted, while 8.41 against the year-earlier 8.36 is a rise of 0.05.

The two comparisons differ by a factor of eight, and both are in the same document. Year over year the rate earned actually fell, from 11.30 to 11.04, and the figure rose anyway because the cost of money fell further and the free funding benefit shrank from 0.61 to 0.55.

What this means

Whenever a change is quoted in basis points, the first question is what it is measured against. A move against the previous quarter and a move against the same quarter a year earlier are different claims, and here they differ by a factor of eight.

The free funding step is also worth carrying away. Part of what a lender keeps comes from balances that pay their owners nothing, and when that benefit shrinks it has to be made up elsewhere.

One more caution about comparing lenders. A figure above eight percent reflects what this company lends against, and reading it next to a lender with a different mix of lending would not be comparing like with like.

What this is NOT

This article explains how net interest margin is built and how the quoted change depends on the comparison period, using Capital One Financial Corporation's Q3 2026 results furnished as exhibits 99.1 and 99.2 to a Form 8-K filed October 20, 2026, accession number 0000927628-26-000142, read on October 20, 2026. It is not investment advice and it is not a recommendation to buy, hold, sell, or avoid any security, including this company's. It is not a view on whether this company is well run, safe, or attractive, and it draws no conclusion about its condition from any figure here. It is not advice about where to hold savings or deposits, it compares no account or product, and it does not suggest that any rate anyone is paid is too high or too low. It is not a forecast: no figure here is projected forward and no future period is described. It makes no comparison to any other lender, and it says in the body that a figure like this is not comparable across lenders with different mixes of lending. The arithmetic shown is only the addition and subtraction the table itself prints, checked against the table's own printed results, and nothing is annualized or estimated by this article. It does not quote or paraphrase any person and does not name any officer or executive. This is not a political endorsement or criticism of anyone.

Sources

• Capital One Financial Corporation, Q3 2026 results, exhibit 99.1 to Form 8-K, filed with the Securities and Exchange Commission October 20, 2026, accession number 0000927628-26-000142, read October 20, 2026: https://www.sec.gov/Archives/edgar/data/927628/000092762826000142/ex991q32026earningsrelease.htm
• Capital One Financial Corporation, Q3 2026 Financial Supplement, exhibit 99.2 to the same Form 8-K, including note 5 and Table 6, Average Balances, Net Interest Income and Net Interest Margin, read October 20, 2026: https://www.sec.gov/Archives/edgar/data/927628/000092762826000142/ex992q32026earningsrelease.htm