Capital One Closes Wholesale Mortgage Unit

Revises 2007 EPS guidance down by $2.15 per share;

expects 2007 EPS of approximately $5.00 per share

    MCLEAN, Va., Aug. 20 /PRNewswire-FirstCall/ -- Capital One Financial
 Corporation ( COF) today announced that it will cease residential
 mortgage origination operations at its wholesale mortgage banking unit,
 GreenPoint Mortgage, effective immediately. Current conditions in the
 secondary mortgage markets create significant near-term profitability
 challenges, given the company's "originate and sell" business model.
 Further, recent and continuing developments in the mortgage markets reduce
 the long- term outlook for profitability in the business, as the company
 expects markets for prime, non-conforming mortgage products are likely to
 remain challenged for the foreseeable future. GreenPoint Mortgage will
 cease making new loan commitments immediately, however, it will continue to
 meet its contractual obligations to customers for loan commitments that are
 in the pipeline with rates locked.
     The company estimated that the total after-tax charge associated with
 this closure will be approximately $860 million, or $2.15 per share, the
 vast majority of which is expected to be incurred in 2007. Approximately
 $650 million of these expenses result from the non-cash write-down of
 goodwill associated with the acquisition of GreenPoint Mortgage as part of
 the North Fork Bancorporation in December 2006. The remaining $210 million
 of after-tax charges includes approximately $100 million in after-tax
 restructuring charges associated with severance benefits and facilities
 closure, and approximately $110 million after-tax valuation adjustments
 related to ongoing operations in the third quarter.
     As a result of the expected charges, the company is revising 2007
 earnings guidance down by $2.15 per share (diluted). The company now
 expects 2007 earnings of approximately $5.00 per share (diluted). Without
 the charges related to the mortgage banking business, the company would
 have maintained its existing earnings guidance. Capital One's other
 businesses remain on a solid trajectory, with revenue growth and credit
 performance in line with expectations.
     "The reductions in demand and pricing in the secondary mortgage markets
 make it difficult to operate our wholesale mortgage banking business
 profitably," said Gary Perlin, Capital One's Chief Financial Officer.
 "Beyond that, Capital One's other businesses are supported by ample
 liquidity and funding including deep access to deposits, a "stockpile" of
 subordinated credit card funding in place that allows approximately $9
 billion of AAA credit card funding going forward, and a $25 billion
 portfolio of highly liquid securities."
     GreenPoint Mortgage became a subsidiary of Capital One in December
 2006, as part of the company's acquisition of North Fork Bancorporation.
 GreenPoint's focus had long been the prime non-conforming and near-prime
 markets, especially the Alt-A mortgage sector.
     Capital One Home Loans, based in Overland Park, KS, and Capital One
 N.A., including its 725 local retail bank branch locations in New York, New
 Jersey, Connecticut, Texas, and Louisiana, are not directly affected by
 this decision. Capital One intends to continue to originate and sell
 mortgage loans through Home Loans and its bank branches where it has direct
 interactions with customers, rather than brokers, which provides greater
 control of the underwriting and origination process.
     Capital One will retain a $12.5 billion mortgage portfolio, the vast
 majority of which was held-for- investment (HFI) by Hibernia and North Fork
 Banks at the time of their acquisition by Capital One in 2005 and 2006.
 These loans continue to demonstrate solid credit performance and generally
 consist of first liens with relatively low loan-to-value ratios. The
 portfolio also includes approximately $680 million of second lien mortgages
 originated by GreenPoint Mortgage in late 2006 and early 2007. In addition
 to the HFI portfolio, Capital One will retain exposure to GreenPoint
 Mortgage's held-for- sale (HFS) mortgage portfolio with $2.6 billion
 outstandings, the majority of which is committed for sale under forward
 flow agreements. The company also will retain exposure to future
 repurchases of past GreenPoint production to meet representation and
 warranty claims. With the addition of the estimated $110 million after-tax
 valuation adjustments referenced above, Capital One believes that it has
 adequately reflected the risk associated with these remaining exposures.
     As part of this decision, the company will close GreenPoint's
 California- based headquarters along with 31 locations across 19 states.
 The change will result in the elimination of approximately 1,900 positions
 with the vast majority of these positions being eliminated by the end of
 the year.
     Impacted associates will receive career transition services including
 one- on-one counseling and career seminars. All full-time associates will
 be eligible for severance packages and will receive outplacement and
 retraining assistance.
     "Despite the difficult impact of this decision on GreenPoint and its
 associates, Capital One remains a strong, diversified institution as we
 continue to focus on our core banking and lending businesses," said Capital
 One's Chairman and CEO Richard D. Fairbank.
     Forward-looking statements
     The company cautions that its current expectations in this release and
 in its Form 8-K dated August 20, 2007 regarding its ongoing costs and
 financial risks, the accounting charges and overall benefits associated
 with the decision to discontinue certain mortgage operations, and the
 company's plans, objectives, expectations, intentions, and guidance on 2007
 financial performance are forward-looking statements and actual results
 could differ materially from current expectations due to a number of
 factors, including: the success, timeliness and financial impact of the
 decision to discontinue certain mortgage operations, including financial
 charges and costs; continued intense competition from numerous providers of
 products and services that compete with Capital One's businesses; changes
 in our aggregate accounts and balances, and the growth rate and composition
 thereof; the success of the company's marketing efforts; general economic
 conditions affecting interest rates and consumer income, spending, and
 savings which may affect consumer bankruptcies, defaults, charge-offs and
 deposit activity; economic conditions in the mortgage industry and in the
 secondary mortgage markets specifically; and the company's ability to
 execute on its strategic and operational plans.
     About Capital One
     Headquartered in McLean, Virginia, Capital One Financial Corporation
 (http://www.capitalone.com) is a financial holding company, with 725
 locations in New York, New Jersey, Connecticut, Texas and Louisiana. Its
 principal subsidiaries, Capital One Bank, 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 $85.7 billion in deposits and $144.2
 billion in managed loans outstanding as of June 30, 2007. 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.
 
 

SOURCE Capital One Financial Corporation