MCLEAN, Va.--(BUSINESS WIRE)--June 16, 2006--The residual economic impact of Hurricanes Katrina and Rita on key cities in the Gulf Coast region continued through the first quarter of 2006. The economic growth driven by construction and manufacturing in Pascagoula, Miss., and Lake Charles, La., parallels the aggressive recovery patterns that most regions encounter following a major natural disaster. By contrast, the recovery in New Orleans and Biloxi-Gulfport are expected to lag until housing and commercial construction begins and the casino industry expands.

These results are reported in a study by noted economist Dr. Loren C. Scott and sponsored by Capital One, N.A.

"Pascagoula and Lake Charles continue to lead Biloxi-Gulfport and New Orleans with their rapid economic recovery from the effects of hurricanes Katrina and Rita last year," Scott said. "From an employment perspective, these areas are enjoying a solid recovery, and the construction sector is driving their momentum."

Employment trends were among 12 key economic variables tracked in Scott's study. The results showed that, generally, Pascagoula and Lake Charles have experienced similar recovery tracks. One area in which Pascagoula is outperforming its Louisiana counterpart is in the trade, transportation and utilities sectors, where the Pascagoula region is showing job gains. This region has also aggressively reduced government employment to reflect the change in the overall economy caused by Hurricane Katrina.

Total employment in the New Orleans area was down 31 percent, or 191,000 jobs, between April 2005 and April 2006. But Scott points to a silver lining for the local economy in New Orleans. "When compared to the post-Katrina employment low in the fourth quarter of 2005, total employment in the region rose by 24,600 jobs as of the end of April. The healthcare, education, construction and tourism industries account for much of the employment growth between the end of 2005 and now," Scott said.

In the Biloxi-Gulfport region, the severity of housing damage has slowed the area's recovery, with storm surges leaving only concrete slabs in many cases. Non-farm employment suffered two rounds of losses, with a 14,400 decline between August and November 2005. A drop of approximately 8,000 jobs followed between December 2005 and January 2006. This second round of layoffs is heavily concentrated in the leisure and hospitality sector. The natural resources and construction sectors represent a bright spot for the region. Employment in these sectors was up 8.9 percent between April 2005 and April 2006.

The quarterly economic study by Scott, Advancing in the Aftermath II: Tracking the Recovery from Katrina and Rita, attempts to benchmark the recovery of the hurricane-impacted regions of Louisiana and Mississippi. The full report is available at www.lorenscottassociates.com. Scott is professor emeritus of economics at Louisiana State University and president of Loren C. Scott & Associates, Inc.

About Capital One

Headquartered in McLean, Virginia, Capital One Financial Corporation (www.capitalone.com) is a financial holding company, with more than 316 locations in Texas and Louisiana. Its principal subsidiaries, Capital One Bank, Capital One, F.S.B., Capital One Auto Finance, Inc., and Capital One, N.A., offer a broad spectrum of financial products and services to consumers, small businesses and commercial clients. Capital One's subsidiaries collectively had $47.8 billion in deposits and $103.9 billion in managed loans outstanding as of March 31, 2006. Capital One, a Fortune 500 company, trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 500 index.

       Advancing in the Aftermath II: Tracking the Recovery from
                           Katrina and Rita
                            Summary Results

The quarterly study by Dr. Loren C. Scott and sponsored by Capital
One, N.A., Advancing in the Aftermath II: Tracking the Recovery from
Katrina and Rita, attempts to benchmark the recovery of the
hurricane-impacted regions of Louisiana and Mississippi. The full
report is available at www.lorenscottassociates.com. Scott is
professor emeritus of economics at Louisiana State University and
president of Loren C. Scott & Associates, Inc.

Employment trends were among 12 key economic variables tracked in
Scott's study (other economic indicators, including housing
reconstruction and repair, healthcare and hospitals, airport traffic
and casino performance). Scott's study highlights economic recovery
benchmarks for the following areas affected by hurricanes Katrina and
Rita:

    --  The residual economic impact of Hurricane Katrina on the seven
        parishes of the New Orleans MSA continued through the first
        quarter of 2006. Total employment in the New Orleans area was
        down 31 percent, or 191,000 jobs, between April 2005 and April
        2006. But there is a silver lining for the local economy,
        according to Scott. When compared to New Orleans' post-Katrina
        employment low in the fourth quarter of 2005, total employment
        in the region rose by 24,600 jobs as of the end of April. The
        healthcare, education, construction and tourism industries
        account for much of the employment growth between the end of
        2005 and now. Scott cited good employment news among
        transportation equipment manufacturers during the study
        period:

    --  Northrop Grumman Avondale Shipyard reported 5,700 jobs, or
        almost 90 percent of its pre-Katrina work force.

    --  Textron Marine and Land employed more workers at the end of
        the study period than it did prior to Hurricane Katrina. The
        company currently has 1,160 employees and has announced plans
        to add 300 to 400 more jobs to manufacture armored security
        vehicles for the military.

    --  Bollinger Shipyards employed its pre-Katrina level of 2,700
        workers at the end of the study period.

    --  Lockheed Martin Aerospace's work force totaled 2,067 at the
        end of the study period, which is comparable to pre-Katrina
        employment. Construction employment surged in the first two
        months after Katrina, Scott reports, but since then the sector
        has struggled, suffering an unexpected decline of 300 jobs
        between March 2006 and April 2006. On the positive side, Scott
        cited the economic potential of large construction projects
        under way or scheduled to begin soon, including $963 million
        to build a new six-lane Interstate 10 twin span over Lake
        Pontchartrain between eastern New Orleans and Slidell, $660
        million to widen the Huey P. Long Bridge, $314.9 million to
        expand the Ernest N. Morial Convention Center, $1.5 billion
        for debris removal and $1.2 billion by the U.S. Army Corps of
        Engineers for flood-control projects. For the remainder of
        2006, Scott estimates that billions of federal dollars and
        insurance money should begin to flow into the rebuilding of
        individual homes in the region. This influx of funds is
        expected to push construction employment to record levels.

    --  The Lake Charles, La., area's economic performance during the
        first quarter of 2006 parallels the aggressive recovery
        patterns that most regions encounter following a major natural
        disaster. For the Lake Charles metropolitan statistical area
        (MSA), which includes Calcasieu and Cameron parishes, non-farm
        employment increased by 1,500 jobs, or 2.1 percent, between
        April 2005 and April 2006. Leading the way was a 27.1 percent
        increase in the natural resources and construction sectors,
        which encompass many of the rebuilding projects under way in
        the region. The housing construction and repair, healthcare
        and hospitals, airport traffic and gaming industries also
        reported employment increases between April 2005 and April
        2006. Professional and business services also grew because of
        the demand for engineers and architects in the rebuilding
        effort. Calcasieu Parish is the home to 25 chemical plants and
        three refineries, all of which employed 6,472 workers at the
        end of the study period. Although major refineries were shut
        down after Hurricane Rita, all were back in operation by
        December. Scott reports that construction was expected to be a
        major driver in the area before Hurricane Rita. Today, three
        liquefied natural gas (LNG) import facilities are under
        construction in the region at a total cost of more than $1.5
        billion. Three additional LNG facilities are in the permitting
        stage, representing $2.4 billion in new investment.

    --  The Pascagoula, Miss., MSA is experiencing a recovery track
        similar to Lake Charles, Scott reports, showing employment
        gains in the sectors covering the trade, transportation,
        utility, natural resources, mining and construction
        industries. This region has aggressively reduced government
        employment to reflect the change in the overall economy caused
        by Hurricane Katrina. According to Scott, manufacturing plays
        an unusually dominant role in Pascagoula's economy, where it
        comprises 29.5 percent of the area's total employment,
        compared to 15.8 percent statewide in Mississippi and 7.8
        percent in Louisiana. The Northrop Grumman Ingalls Shipyard
        employed 13,000 of the area's 16,500 manufacturing workers
        prior to Hurricane Katrina. After suffering more than $1
        billion in damages, the shipyard restored its work force to
        12,000 workers by the end of the study period. The
        availability of labor and housing represent the basis for
        future hiring at this major manufacturer. As an example, a
        large number of the company's workers still reside in
        temporary quarters at the shipyard or nearby. Construction
        jobs in the area stabilized at 2,800 in April 2006, an
        increase of 500 jobs compared to April 2005. According to
        Scott, the construction sector should enjoy another spike in
        employment as insurance proceeds become available and federal
        housing grants are distributed. Likewise, housing permit
        activity is expected to increase dramatically as federal
        relief flows into the region.

    --  In the Biloxi-Gulfport, Miss., MSA, the severity of housing
        damage has slowed the area's recovery, with storm surges
        leaving only concrete slabs in many cases. Non-farm employment
        suffered two rounds of losses, with a 14,400 decline between
        August and November 2005. A drop of approximately 8,000 jobs
        followed between December 2005 and January 2006. This second
        round of layoffs is heavily concentrated in the leisure and
        hospitality sector. However the natural resources and
        construction sectors represent a bright spot for the region.
        Employment in these sectors was up 8.9 percent between April
        2005 and April 2006. Casinos, hotels and restaurants remain
        affected by Katrina. For example, only three casinos were open
        as of March 2006. By comparison, 12 casinos operated on the
        Mississippi Gulf Coast prior to Hurricane Katrina. However, a
        tremendous amount of casino rebuilding is under way as a
        result of legislative action approved in the fall of 2005
        allowing shore-based rather than river boat gambling. With no
        restrictions on size, badly damaged casinos are rebuilding
        larger gaming facilities than existed prior to Hurricane
        Katrina. Scott expects seven to 10 casinos to open in the
        Biloxi-Gulfport area by the end of 2006. This new activity
        should drive direct employment higher, from approximately
        4,000 in April 2006 to approximately 10,500 by the end of the
        year. One new and three expanded casinos are expected to open
        by the end of 2007. Hotel and restaurant construction
        investment and employment growth will mirror the casino
        expansion, according to Scott. Sales tax collections offer
        more good news for the area. For example, March 2006 sales tax
        collections in Harrison County were 29.6 percent higher than
        March 2005 collections.

    --  Hurricanes Katrina and Rita cut a swath through the heart of
        offshore oil and natural gas production in the Gulf of Mexico,
        leading to massive shutdowns. The extent of the disruption
        caused by both hurricanes included damage to approximately
        2,900 offshore producing platforms, underwater pipelines and
        onshore receiving units, such as refineries and natural gas
        processing plants. As a result, a substantial amount of
        offshore production, or "flow," was interrupted, or "shut in,"
        by the industry. Shut-in rates improved to 21.4 percent for
        crude oil and 10.6 percent for natural gas at the beginning of
        May 2006, compared to shut-in rates of 95.2 percent of crude
        oil and 88 percent of natural gas production at the end of
        August 2005.

    --  Data on the banking sector in the Louisiana/Mississippi Gulf
        Coast region reveals that institutions closer to the eyes of
        the storms were more dramatically affected than those farther
        from the impact zone. Because banking sector data lags other
        economic indicators, results for this industry reflect data as
        of the end of 2005; data for first-quarter 2006 will be
        available in June. In the immediate aftermath of the storms,
        net operating income in the regional banking sector fell
        precipitously. Return on assets for all banks in the parishes
        and counties that suffered significant damage declined nearly
        44 percent from the second quarter of 2005 to the fourth
        quarter of 2005. Loan growth for all banks in these
        significantly damaged areas dropped more than 50 percent
        between the second and fourth quarters of 2005. Going forward,
        Scott reports that credit quality for banks closest to areas
        most damaged by the storms is a concern. Restoring banks'
        customer base will be important, according to Scott, since the
        long-term franchise value of a bank is tied to the economic
        vitality of its market area. In past storms, banks located in
        a hurricane's path experienced no decline in franchise value.

CONTACT: Capital One Financial Corporation
Steven Thorpe, 504-533-2753
steven.thorpe@capitalonebank.com
SOURCE: Capital One Financial Corporation