5 We remain focused on managing and reducing the mortgage by wangnianwu


									We remain focused on managing and reducing the mortgage portfolio’s credit risks. Although we expect
that further declines in home prices will put additional pressure on mortgage credit in 2011, we believe
that our portfolio will continue to perform relatively well.

We shut down the out-of-footprint national mortgage origination business early in the cycle (in August
2007), but Capital One is still exposed to rep and warranty risks for mortgage loans made and sold prior
to that time. While the mortgages
giving rise to this risk came with our
bank purchases, which proved to
be essential given the subsequent
economic collapse, there will be a
long tail of mortgage exposure to
work through.

Early in the recession, we retrenched
and repositioned our Auto Finance
business, scaling back originations
from $13.2 billion in 2007 to $5.3
billion in 2009. We also cut the expense
base by over 25%. We launched
our “Diamond Dealer” program to
concentrate on Capital One’s deepest
and best dealer relationships. In
2010 our Auto Finance business
really turned the corner. Profits were
very strong, and originations grew to
nearly $8 billion. By the second half
of 2010, originations were running at an annualized rate of over $9 billion. Credit improved dramatically,
with charge-offs falling from 4.55% to just 2.65%. Capital One Auto Finance remains one of the industry’s
best-positioned national players.

We converted Chevy Chase Bank to the Capital One brand in 2010. Capital One is the only top-ten bank
headquartered in the nation’s capital. We have the most branches and ATMs in the Washington, D.C.,
metropolitan area, which is one of the the premier banking markets in the country.

In 2010 we also built a unified, scalable banking infrastructure across our footprint, from New York and
New Jersey to Washington to Louisiana and Texas. The common platform means better customer service,
lower operational risk, and lower costs. It also creates new revenue opportunities.


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