Economic Recovery Along the Gulf Coast Remains Mixed.

Storm-damaged Mississippi coast and Southwest Louisiana recovering faster than flooded areas of Greater New Orleans

NEW ORLEANS -- Employment statistics, sales tax collections, large construction projects and other key economic indicators point to an accelerating recovery -- and even growth -- in many Gulf Coast communities damaged by hurricanes Katrina and Rita. However, massive home damage caused by Hurricane Katrina's floodwaters, widespread lack of flood insurance and the continued delays in transferring grant assistance to homeowners are slowing recovery in metropolitan New Orleans.

These results are reported in "Advancing in the Aftermath IV: Tracking the Recovery from Katrina and Rita," the fourth and final installment of a study by noted economist Dr. Loren C. Scott and sponsored by Capital One, N.A.

Economic growth driven by construction and manufacturing in Pascagoula, Miss., and Lake Charles, La., continues to parallel the aggressive recovery patterns that most regions encounter following a major natural disaster, his study shows. In fact, employment, school enrollment and airport traffic in Lake Charles, and employment and port traffic in Pascagoula, have reached or surpassed pre-storm levels.

"Following a natural disaster, employment initially falls, then all of the private insurance and federal rebuilding money is pumped into the economy, and the construction sector leads the economy out of the slump," Scott said. "This is occurring in Lake Charles, Pascagoula and now Biloxi-Gulfport (Miss.)."

In heavily damaged Biloxi-Gulfport, the local economy added approximately 1,250 jobs per month during the last half of 2006, because of new construction projects and reopened land-based casinos. Home renovation and construction along the Mississippi Gulf Coast also benefited from 11,827 homeowners receiving federal assistance grants by January 2007. By contrast, the distribution of available funds progresses slowly in New Orleans.

Employment trends are among 12 key economic variables tracked in Scott's study. Total employment in the New Orleans area was increasing slowly but was still down 163,100 jobs compared to August 2005. Local employment at area refineries and chemical plants has reached pre-Katrina levels, with the transportation equipment sector following close behind.

Overall, the report states that large industries and manufacturers, including shipbuilding operations and ports, have recovered faster than small businesses.

"In Biloxi-Gulfport, Lake Charles and Pascagoula, the construction and manufacturing sectors are leading these areas back from the brink," Scott said.

Scott stated that the extension of the Gulf Opportunity Zone Act until Dec. 21, 2010, will allow companies to complete their projects across the storm-damaged areas in time to receive the act's benefits.

Major construction projects in the Greater New Orleans area could emerge as a major factor in the region's long-term recovery, according to Scott. He pointed to several large projects that are underway or are in the planning stages in the area as key indicators for growth. These projects include the $803 million I-10 bridge between New Orleans East and Slidell, the $705 million widening of the Huey P. Long Bridge, a $3.2 billion refinery expansion in Garyville, La., a $1 billion liquefied natural gas (LNG) port near the mouth of the Mississippi River and a number of residential, commercial and medical property developments earmarked for downtown New Orleans.

The economic study attempts to provide a benchmark for the recovery of the hurricane-impacted regions of Louisiana, Mississippi and Texas. 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 700 locations in Louisiana, Texas, New York, New Jersey and Connecticut that offers a broad spectrum of financial products and services to consumers, small businesses and commercial clients. Its principal subsidiaries, Capital One Bank, Capital One, F.S.B., Capital One Auto Finance, Inc., Capital One, N.A., and North Fork Bank collectively had $85.8 billion in deposits and $146.2 billion in managed loans outstanding as of December 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 100 index.

Advancing in the Aftermath IV: 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 IV: 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 include 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:

New Orleans MSA 

--  Within the seven-parish New Orleans MSA, Orleans and St. Bernard
    parishes remain the most affected and slowest to recover from
    Hurricane Katrina. There were 515,249 houses damaged by Katrina
    and Rita in the state, and 204,737 were damaged so badly that they
    were rendered un-inhabitable, at least without major repairs. This
    latter number is many times larger than any other natural disaster
    in U.S. history. More than 180,000 of these homes that incurred
    major and severe damage were in the New Orleans MSA. Almost 60% of
    the homes damaged in the New Orleans MSA incurred major or severe
    damage. The widespread flooding in these areas also has impeded
    recovery on a number of fronts, including difficulty of repairs
    and insurance settlement issues. Only 26% of homeowners in the New
    Orleans MSA had flood insurance.

--  Huge sums are being -- and will be -- spent by the Army Corps of
    Engineers to shore up the levee system. About $1 billion has
    already been spent on the levee system since Katrina, and another
    $1 billion is scheduled for 2007. In addition, another $3.5
    billion will be spent between 2008 and 2010, amounts that will
    represent a huge infusion of spending into this region's economy
    over the next several years.

--  Road Home funds from the federal government intended to help fill
    the gap between insurance compensation and the actual cost of
    repair or replacement of a home were not available until April.
    The first checks were not issued until September, and only 258
    checks were issued by Jan. 31, 2007.

--  Employment has added jobs at an average rate of 3,700 per month
    since October 2005, averaging 1,900 new jobs since June 2006.
    Employment at area refineries and chemical plants has stabilized
    at pre-storm levels. Construction employment is slowly rebuilding.
    The pace is slow, according to Scott, because of the time it is
    taking for insurance funds to flow into the market, a dramatically
    reduced population, a shortage of labor exacerbated by the
    vastness of the destruction and the slow pace of federal aid. New
    large-scale construction projects have been announced but not
    started. Examples are $803 million for a new six-lane I-10 span
    over Lake Pontchartrain between eastern New Orleans and Slidell
    and $705 million to widen the Huey P. Long Bridge over the
    Mississippi River.

--  Hospitals and healthcare are still on the critical list in Orleans
    and St. Bernard parishes, although other parishes in the New
    Orleans MSA have reopened most of their facilities. All areas,
    however, still face shortages of doctors and other healthcare
    professionals, according to Scott.

--  Area casinos are experiencing a remarkable year of revenues, with
    Boomtown Casino seeing a 43% increase in revenue between December
    2004 and December 2006. Harrah's experienced a 30% increase in
    revenue during the same period.

--  Only 13% of St. Bernard Parish schools are open; 44% in Orleans
    Parish. Most schools in other parishes within the New Orleans MSA
    suffered less damage and are operational.

--  Hotel occupancy is stabilizing, and the area has recovered about
    75% of pre-Katrina hotel rooms, according to Scott.

--  Since the beginning of 2006, sales tax collections have remained
    higher than normal. Collections in the first eight months of 2006
    were a significant 31.7% higher than in the same period of 2005
    (pre-storms). The early spending surge is tapering off, as sales
    tax collections have been drifting downward since January 2006.

--  Total tonnage of cargo passing through the Port of New Orleans has
    basically returned to its pre-Katrina levels. General cargo is up
    9.5% in the first eight months of 2006. Breakbulk cargo is up 38%
    in the first eight months of 2006, largely because of an increase
    in steel imports, which rose from 1.27 million tons to 3.44
    million tons. On the other hand, container cargo was actually down
    one third, mainly because of a loss of business with the Maersk
    Line. The Port of St. Bernard is 100% recovered. Cruise line
    activity is expanding.

Lake Charles MSA

--  The Lake Charles MSA is the only area directly hit by Rita,
    although the storm did cause parts of New Orleans to re-flood.

--  With the exception of lower Cameron Parish, the most sparsely
    populated parish in the state, Lake Charles experienced virtually
    no floodwater damage. This MSA is performing like most regions
    that suffer from a major natural disaster; the construction sector
    has led a rather quick rebound from the effects of the storm.
    There were 47,384 homes damaged by Rita in this MSA. Of that
    total, 2,284 incurred severe damage, and 6,673 experienced major
    damage.

--  After a decline of 6,100 jobs (6.7%) in October 2005, the area
    regained all of those jobs, plus some, within two months. The
    broad employment category of "natural resources and construction"
    was up by 3,500 jobs in December 2006 compared to October 2005 --
    a significant 35% increase.

--  The construction sector will be a major factor in Lake Charles'
    growth in the immediate future. Note the following activities on
    the horizon:

    --  Significant amounts of private insurance funds will be spent
        on home and commercial establishments. The thrust in
        construction spending started in 2006 should continue well
        into 2008.

    --  Pinnacle Entertainment will be spending $350 million to build
        the new Sugarcane Bay Casino Resort.

    --  L' Auberge de Lac will spend another $45 million next year to
        add a 250-room tower to its hotel complex.

    --  Officials at Chennault Airpark will spend $40 million over the
        next two years to repair damage to hangars at the airfield.
        Delta Downs will spend about $12 million to repair hurricane
        damage at that racino.

    --  The Lake Charles area remains a hot area for new LNG import
        facilities, with five Greenfield or expansion LNG sites in
        this area that represent more than $2.6 billion in capital
        investment.

--  Housing remained largely intact in Lake Charles, alleviating the
    issue of living quarters for workers.

--  Hospitals in the Lake Charles MSA suffered varying degrees of
    damage, but, with the exception of South Cameron Memorial, all
    were reopened shortly after the storm.

--  The Lake Charles Regional Airport now is operating a full
    commercial schedule and enjoyed an 11.6% increase in enplanements
    during the first six months of 2006. All commercial flights are
    arriving and departing from a temporary passenger terminal located
    near the original terminal. The new terminal will comprise
    approximately 65,000 square feet, compared to the present terminal
    with 44,000 square feet.

--  By Oct. 31, 2005, all public schools in both Calcasieu and Cameron
    parishes were open.

--  For the most part, the hotel industry in Lake Charles has
    recovered well from the aftermath of Rita and is now at 87.5% of
    pre-Rita room levels. This number really has not changed since the
    beginning of 2006.

--  Sales tax collections in the Lake Charles MSA have jumped to a new
    tier. By comparing the eight months pre-Rita with the same eight
    months in 2006, sales tax collections are up a significant 28%.

--  The Port of Lake Charles escaped flooding from Rita. There was a
    little weakness in tonnage in the late summer and early fall
    months of 2006 because of a decline throughput the port's leased
    facilities, especially at Trunkline LNG and Alcoa. The demand for
    natural gas in Europe had increased, and ships were being diverted
    from the U.S. to Europe, which led to the fall in tonnage at the
    leased facilities. There was a large spike in tonnage during
    November, followed by the sharp decline in December because of a
    ship-timing issue only. In general, the story of the port is one
    of general improvement since Rita.

Biloxi-Gulfport MSA

--  The Biloxi-Gulfport MSA is composed of three counties. Hancock and
    Harrison counties are located on the coast; Stone County is north
    and inland of them. Almost 60% of the homes in Mississippi that
    were destroyed were in this MSA. Most were in the two coastal
    counties, where water surges from the Gulf claimed many houses and
    businesses.

--  By the end of January 2007, officials in Mississippi wrote 11,827
    federal assistance checks to homeowners totaling $665 million.

--  After bottoming out in January 2006, employment rose for the next
    seven months at the paltry rate of only 360 jobs per month.
    However, in the last half of 2006, that rate improved by almost a
    factor of four to 1,250 jobs per month, a spurt of activity was
    caused by the construction and reopening of several casinos.

--  Employment in the natural resources and construction sector is up
    almost 19%. The natural resources part of this sector is quite
    small, so job gains are most certainly concentrated in the
    construction sector -- not a surprising discovery given the volume
    of repair work under way in the region.

--  Northrop Grumman's work force of 200 is fully back in Gulfport and
    may get a boost as a result of a new $2.5-billion contract with
    the Navy to build two additional amphibious assault ships. The
    area received good news when Edison Chouest Shipyards announced it
    is seriously considering opening a new shipyard along the
    Industrial Seaway in Gulfport. To be called GulfShip, this would
    involve an $18 million capital investment with a start-up work
    force of 200 and ultimately as many as 600.

--  Congressional extension of the Go Zone legislation to Dec. 21,
    2010, also will provide extra incentives for capital investment in
    this region.

--  A concern, which could greatly hinder future construction in the
    area, is the insurance crisis. Premiums for businesses in the
    "Wind Pool" -- which provides wind and hail damage protection in
    the six coastal counties -- have risen by a remarkable 268%.

--  The housing market is hot in the Biloxi-Gulfport MSA. After
    declining by 72% in the first three months after Katrina, housing
    permit activity has jumped dramatically, rising from only 46
    permits in November to 488 in June. One reason for the high level
    of permitting activity is the sheer number of homes destroyed or
    damaged by the hurricane. The Reviving the Renaissance group is
    planning a 4,200-unit development near Woolmarket that would be a
    mix of houses and apartments in the $120,000 price range, along
    with some retail development. It is estimated the complex would
    take about three years to build. Also, Congress has appropriated
    $314 million to build 1,067 homes at Keesler Air Force Base, the
    largest single appropriation of its kind in Air Force history.

--  By Nov. 15, all seven hospitals in this MSA were operating at full
    service.

--  Before Katrina, 11 casinos operated in the Biloxi-Gulfport MSA,
    and Hard Rock Casino was set to open along with the Silver
    Slipper. All of these remained closed until late December 2005,
    when the Imperial Palace reopened, followed by the Isle of Capri
    and the Palace Casino Resort. By the end of 2006, 10 casinos in
    this MSA were back in operation. New legislation allows
    shore-based gambling rather than riverboat gambling. Eight
    additional new casinos have announced plans to enter the market.

--  The Gulfport-Biloxi Regional Airport is making excellent strides
    toward returning to pre-Katrina activity levels, Scott reported.
    After declining by nearly 72% in the month after Katrina,
    enplanements in December 2006 were essentially equivalent to the
    winter months of 2005.

--  All of the public schools in this MSA are open. However,
    enrollment is more than 16% below pre-Katrina levels.

--  This MSA had nearly 15,000 hotel rooms before Katrina. By the end
    of 2005, only 4,049 had opened. That number has now more than
    doubled to 8,239, as more casinos have opened along with their
    hotels. Still, hotel room inventory remains at only 55% of its
    pre-Katrina level.

--  Employment in the leisure/hospitality sector initially declined
    from 30,500 in August 2005 to 23,400 in October 2005. Then another
    round of layoffs occurred when many of the casinos and
    restaurants, which had been carrying employees on the payroll even
    though they were not working, finally released these workers,
    according to Scott. This led to a decline of 14,700 jobs from the
    August 2005 employment peak. Employment rose by only 380 per month
    in the first five months of 2006. Then employment increased by a
    much faster rate of 1,375 per month over the June-September period
    as more casinos opened. Employment in this sector has been
    unchanged in the past three months.

--  After dropping markedly in September 2005, tonnage moving through
    the Port of Gulfport rebounded to the 30-40% level within two
    months. As of August 2006, import tonnage is still 41% below
    pre-Katrina levels, and export volume is 18% lower.

--  One of the few strongly positive economic measurements in this MSA
    is sales tax collection. In August 2006, total MSA sales taxes
    were up more than 47% year-over-year, and in Harrison County,
    collections were up more than 50% during that same period.
    Collections were smaller and recovered at slower rates in the
    other two counties in this MSA.

Pascagoula, Miss., MSA

--  The Pascagoula MSA is composed of Jackson and George counties and
    is the smallest of the four MSAs covered in this report. Even
    post-storm New Orleans is nearly eight times larger than
    Pascagoula; Biloxi-Gulfport, about 60% larger; and Lake Charles,
    nearly 69% larger. Like Lake Charles, employment recovery has been
    rapid in Pascagoula, attributable largely to construction jobs,
    according to Scott.

--  By June 2006, all of the jobs lost because of Katrina had been
    recovered, and by December 2006, the MSA was up 8,400 jobs since
    the trough in September 2005. Job recovery is being driven largely
    by construction employment, as insurance and federal rebuilding
    assistance funds are pumped into the region. Large employer
    Ingalls Shipyard has managed to return its employment back to
    about 12,000, a decline of more than 1,000 from pre-Katrina levels
    and a drop that largely explains the 1,400-job deficit that still
    exists in this sector as of August 2006. The firm is very much in
    the hiring mode, but employee housing remains a persistent
    problem, with workers still living in temporary quarters at the
    shipyard or nearby.

--  The job recovery is being driven largely by construction
    employment as insurance monies and federal rebuilding assistance
    funds are pumped into the region. Construction employment is up by
    800 jobs or 38%.

--  Housing permit activity in this MSA has been far more volatile
    post-Katrina than before the hurricane. Only one permit was issued
    in the MSA in the month following the storm. Permitting in the
    first eight months of 2006 was up 15.5% compared to the same
    period in 2005. Since the storm, there have been four months when
    permitting exceeded 120 and five months when the permitting rate
    fell below 80. Rebuilding that kind of destruction should boost
    permit activity considerably in the future.

--  All three of the hospitals in this MSA were operating by Sept. 5,
    2005, although initially they were just seeing patients in the
    emergency room.

--  The hotel sector in the Pascagoula MSA is well on its way to full
    recovery from the effects of Katrina. This is a much smaller hotel
    market than the nearby Biloxi-Gulfport MSA. This MSA's hotel
    industry provided 2,654 rooms pre-Katrina. As of December, 93% of
    those rooms are back on the market.

--  All of the public schools in George County reopened Sept. 14,
    2006, and all Jackson County public schools reopened Oct. 3.

--  As of the last quarter of 2006, the Port of Pascagoula is back to
    100 percent of its functioning capacity and cargo volumes are
    exceeding pre-Katrina levels.

--  Sales tax collection data for August indicate a decline, but
    collections were still nearly $3.2 million, or up more than 29%
    from August 2005. Detailed data by county reveal that August
    collections in Jackson County were up almost 43% and, in George
    County, were up nearly 25% compared to August 2006.

Special Section:

Oil and Gas Production in the Gulf of Mexico

Hurricanes Katrina and Rita cut a swath through the heart of the Gulf of Mexico offshore oil and natural gas production activity. Katrina swept over about 1,300 offshore platforms, and Rita covered about 1,600.

--  In the case of Katrina, more than 95% of the crude oil and 88% of
    the natural gas production was shut-in by Aug. 30, 2005. By Sept.
    9, 2005, shut-in rates had dropped to about 56-58% for oil and
    about 33-37% for natural gas.

--  Because Rita made landfall farther to the west and more into the
    center of the Gulf of Mexico production region, 100% of crude and
    80% of natural gas was shut-in.

--  The latest, and final, Minerals Management Service report on
    shut-in data in the Gulf shows that, as of June 6, 2006, 12% of
    oil and more than 9% of natural gas production remains shut-in.

--  As of year-end 2006, production was down only 128,000 barrels per
    day, or more than 2% below pre-storms peak.