NATIONAL CITY CORP
10-Q, 2000-05-02
NATIONAL COMMERCIAL BANKS
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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2000

Commission file number 1-10074

NATIONAL CITY CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE

(State or other jurisdiction of
incorporation or organization)
34-1111088

(I.R.S. Employer
Identification No.)

1900 EAST NINTH STREET
CLEVELAND, OHIO 44114
(Address of principal executive office)

216-575-2000
(Registrant’s telephone number, including area code)

      Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

         
YES X NO

      Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock as of the latest practicable date.

Common stock — $4.00 Par Value
Outstanding as of March 31, 2000 — 606,227,792

TABLE OF CONTENTS

FINANCIAL HIGHLIGHTS
CONSOLIDATED STATEMENTS OF INCOME
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MANAGEMENT’S DISCUSSION AND ANALYSIS
DAILY AVERAGE BALANCES/NET INTEREST INCOME/RATES
SIGNATURE

[NATIONAL CITY CORPORATION LOGO]

Quarter Ended March 31, 2000

Financial Report

and Form 10-Q

Table of Contents

FINANCIAL REPORT AND FORM 10-Q
QUARTER ENDED MARCH 31, 2000

TABLE OF CONTENTS

             
Part I — Financial Information
Financial Highlights 3
Item 1. Financial Statements:
Consolidated Statements of Income 4
Consolidated Balance Sheets 5
Consolidated Statements of Cash Flows 6
Consolidated Statements of Changes in Stockholders’ Equity 7
Notes to Consolidated Financial Statements 7
Item 2. Management’s Discussion and Analysis 15
Daily Average Balances/Net Interest Income/Rates 20
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk disclosures are presented in the Net Interest Income section of Management’s Discussion and Analysis.
Part II — Other Information
Item 1. Legal Proceedings
The information contained in Note 12 to the Consolidated Financial Statements on page 11 of this Quarterly Report is incorporated herein by reference.
Item 2. Changes in Securities and Use of Proceeds (None)
Item 3. Defaults Upon Senior Securities (None)
Item 4. Submission of Matters to a Vote of Security Holders (None)
Item 5. Other Information (None)
Item 6. Exhibits and Reports on Form 8-K
Exhibits:
Exhibit 12 — Computation of Ratio of Earnings to Fixed Charges
Exhibit 27 — Financial Data Schedule
Reports on Form 8-K:
January 14, 2000 — National City Corporation reported earnings for the fourth quarter and fiscal year 1999.
Signature 23

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FINANCIAL HIGHLIGHTS

                             
Three Months Ended
March 31
Percent
2000 1999 Change
EARNINGS (In Thousands)
Net interest income — tax-equivalent $740,895 $764,699 (3 )%
Provision for loan losses 66,326 68,034 (3 )
Fees and other income(a) 557,366 554,093 1
Securities gains 21,533 23,688 (9 )
Noninterest expense 759,093 739,202 3
Net income before nonrecurring items(a) 321,343 347,871 (8 )
Net income 321,343 351,019 (8 )
 
PERFORMANCE RATIOS
Return on average common equity(a) 22.45 % 20.94 %
Return on average assets(a) 1.50 1.65
Efficiency ratio(a) 58.47 56.05
Net interest margin 3.79 4.02
 
PER COMMON SHARE
Net income:
Basic $.53 $.55 (4 )
Diluted .53 .54 (2 )
Diluted-adjusted(a) .53 .53 —
Dividends paid .285 .26 10
Book value 9.71 9.90 (2 )
Market value (close) 20.63 33.19 (38 )
Average shares — diluted 610,694,306 652,220,500 (6 )
 
AT PERIOD END (Dollars in Millions)
Assets $86,895 $84,094 3
Loans 61,857 57,313 8
Securities (at fair value) 13,783 15,264 (10 )
Earning assets 78,946 75,870 4
Deposits 50,613 52,051 (3 )
Stockholders’ equity 5,918 6,257 (5 )
Equity to assets ratio 6.81 % 7.44 %
Common shares outstanding 606,227,792 628,841,942 (4 )
Full-time equivalent employees 36,961 39,742 (7 )
 
ASSET QUALITY
Net charge-offs to average loans (annualized) .44 % .48 %
Allowance for loan losses as a percentage of period-end loans 1.57 1.69
Nonperforming assets to loans and OREO .51 .47

(a)  Amount for 1999 excludes nonrecurring items. See further discussion in Note 3 to the Consolidated Financial Statements.

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FINANCIAL STATEMENTS

 
CONSOLIDATED STATEMENTS OF INCOME
                       
Three Months Ended
March 31
(Dollars In Thousands, Except Per Share Amounts) 2000 1999
Interest Income
Loans   $ 1,342,266   $ 1,212,303
Securities:
Taxable 202,255 213,298
Exempt from Federal income taxes 11,171 10,199
Dividends 13,463 10,615
Federal funds sold and security resale agreements 6,958 11,013
Other short-term investments 3,906 3,062
Total interest income 1,580,019 1,460,490
Interest Expense
Deposits 443,939 419,023
Federal funds borrowed and security repurchase agreements 102,568 99,694
Borrowed funds 43,281 28,484
Long-term debt and capital securities 257,775 157,154
Total interest expense 847,563 704,355
Net Interest Income 732,456 756,135
Provision for Loan Losses 66,326 68,034
Net interest income after provision for loan losses 666,130 688,101
Noninterest Income
Item processing revenue 94,369 121,703
Service charges on deposits 106,313 99,863
Trust and investment management fees 83,624 81,847
Mortgage banking revenue 111,294 92,995
Card-related fees 43,646 45,310
Other 118,120 149,173
Total fees and other income 557,366 590,891
Securities gains 21,533 23,688
Total noninterest income 578,899 614,579
Noninterest Expense
Salaries, benefits and other personnel 406,871 400,764
Equipment 57,682 52,761
Net occupancy 52,668 54,127
Third-party services 45,148 45,570
Other 196,724 185,980
Total noninterest expense 759,093 739,202
Income before income tax expense 485,936 563,478
Income tax expense 164,593 212,459
Net Income   $ 321,343   $ 351,019
Net Income Per Common Share
Basic $.53 $.55
Diluted .53 .54
Average Common Shares Outstanding
Basic 605,766,137 640,989,054
Diluted 610,694,306 652,220,500

See notes to consolidated financial statements.

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CONSOLIDATED BALANCE SHEETS

                                 
March 31 December 31 March 31
(In Thousands) 2000 1999 1999
Assets
Loans:
Commercial $ 23,714,907 $ 23,402,556 $ 22,306,928
Real estate — commercial 6,062,272 6,012,016 6,309,277
Real estate — residential 9,625,271 8,777,422 8,693,757
Consumer 16,159,486 15,986,133 15,022,782
Credit card 2,404,230 2,339,658 1,846,719
Home equity 3,890,385 3,686,119 3,133,121
Total loans 61,856,551 60,203,904 57,312,584
Allowance for loan losses (970,642 ) (970,463 ) (970,336 )
Net loans 60,885,909 59,233,441 56,342,248
Mortgage loans held for sale 2,330,395 2,731,166 2,519,462
Securities available for sale, at fair value 13,783,119 14,904,343 15,263,581
Federal funds sold and security resale agreements 408,228 556,351 978,138
Other short-term investments 126,624 231,099 101,696
Cash and demand balances due from banks 3,229,032 3,480,756 3,443,365
Properties and equipment 1,116,332 1,127,980 1,164,472
Accrued income and other assets 5,015,754 4,856,363 4,281,534
Total Assets $ 86,895,393 $ 87,121,499 $ 84,094,496
Liabilities and Stockholders’ Equity
Liabilities:
Noninterest bearing deposits $ 11,034,147 $ 11,182,681 $ 11,200,312
NOW and money market accounts 16,488,169 16,561,494 16,800,510
Savings accounts 3,430,306 3,470,700 3,957,576
Time deposits of individuals 15,285,430 14,700,944 15,274,913
Other time deposits 2,764,812 2,897,166 2,886,996
Deposits in overseas offices 1,610,489 1,253,325 1,930,292
Total deposits 50,613,353 50,066,310 52,050,599
Federal funds borrowed and security repurchase agreements 6,307,165 5,182,506 8,753,759
Borrowed funds 5,540,814 9,772,611 2,840,983
Long-term debt 16,803,105 14,858,014 11,999,109
Corporation-obligated mandatorily redeemable capital securities of subsidiary trusts holding solely debentures of the Corporation 180,000 180,000 679,896
Accrued expenses and other liabilities 1,533,348 1,334,325 1,513,241
Total Liabilities 80,977,785 81,393,766 77,837,587
Stockholders’ Equity:
Preferred stock 29,982 30,233 30,513
Common stock 5,887,626 5,697,500 6,226,396
Total Stockholders’ Equity 5,917,608 5,727,733 6,256,909
Total Liabilities and Stockholders’ Equity $ 86,895,393 $ 87,121,499 $ 84,094,496

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

                       
Three Months Ended March 31
(In Thousands) 2000 1999
Operating Activities
Net income $ 321,343 $ 351,019
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 66,326 68,034
Depreciation and amortization of properties and equipment 42,205 40,493
Amortization of intangibles and servicing rights 43,814 41,902
Amortization of premiums/discounts on securities and  debt (2,888 ) (5,071 )
Securities gains (21,533 ) (23,688 )
Other gains and losses, net (49,963 ) (88,493 )
Originations and purchases of mortgage loans held for sale (4,172,711 ) (4,443,703 )
Proceeds from sales of mortgage loans held for sale 4,552,897 5,778,733
Increase in interest receivable (27,807 ) (21,801 )
(Decrease) increase in interest payable (16,073 ) 42,221
Net change in other assets/liabilities 319,556 10,388
Net cash provided by operating activities 1,055,166 1,750,034
Lending and Investing Activities
Net decrease in federal funds sold, security resale agreements and other short-term investments 252,598 73,205
Purchases of available-for-sale securities (228,054 ) (1,256,769 )
Proceeds from sales of available-for-sale securities 700,706 982,094
Proceeds from maturities and prepayments of available-for-sale securities 527,101 1,048,873
Net (increase) decrease in loans (1,760,901 ) 220,782
Proceeds from sales of loans 43,370 46,896
Net increase in properties and equipment (29,817 ) (15,172 )
Disposals — 8,535
Net cash (used in) provided by lending and investing activities (494,997 ) 1,108,444
Deposit and Financing Activities
Net increase (decrease) in Federal funds borrowed and security repurchase agreements 1,124,659 (673,550 )
Net (decrease) increase in borrowed funds (4,231,797 ) 723,067
Net increase (decrease) in noninterest bearing, savings, NOW, money market accounts, and deposits in overseas offices 94,911 (4,626,342 )
Net increase (decrease) in time deposits 452,132 (1,569,968 )
Repayment of long-term debt and capital securities (1,808,580 ) (570,143 )
Proceeds from issuance of long-term debt, net 3,754,247 3,560,000
Dividends paid (173,383 ) (170,388 )
Issuances of common stock 23,060 56,299
Repurchases of common stock (47,142 ) (927,579 )
Net cash used in deposit and financing activities (811,893 ) (4,198,604 )
Net decrease in cash and demand balances due from banks (251,724 ) (1,340,126 )
Cash and demand balances due from banks, January 1 3,480,756 4,783,491
Cash and demand balances due from banks, March 31 $ 3,229,032 $ 3,443,365
Supplemental Disclosures
Interest paid $ 863,636 $ 662,134
Income taxes paid 37,792 30,169

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
                                                       
Accumulated
Other
(Dollars in Thousands, Preferred Common Capital Retained Comprehensive
 Except Per Share Amounts) Stock Stock Surplus Earnings Income Total
Balance, January 1, 1999 $ 36,098 $ 1,305,309 $ 1,968,751 $ 3,430,672 $ 272,078 $ 7,012,908
Comprehensive Income:
Net income 351,019 351,019
Other comprehensive income, net of tax:
Change in unrealized gains and losses on securities of $(56,172), net of reclassification adjustment for gains included in net income of $15,397 (71,569 ) (71,569 )
Total comprehensive income 279,450
Common dividends declared, $.26 per  share (163,754 ) (163,754 )
Preferred dividends declared (415 ) (415 )
Issuance of 2,295,878 common shares under corporate stock and dividend reinvestment plans 4,592 51,707 56,299
Purchase of 26,447,000 common shares (52,894 ) (45,484 ) (829,201 ) (927,579 )
Conversion of 111,697 shares of preferred stock to 338,344 common shares (5,585 ) 677 4,908 —
Balance, March 31, 1999 $ 30,513 $ 1,257,684 $ 1,979,882 $ 2,788,321 $ 200,509 $ 6,256,909
Balance, January 1, 2000 $ 30,233 $ 2,428,234 $ 782,960 $ 2,665,674 $ (179,368 ) $ 5,727,733
Comprehensive Income:
Net income 321,343 321,343
Other comprehensive income, net of tax:
Change in unrealized gains and losses on securities of $(93,207), net of reclassification adjustment for gains included in net income of $13,996 (107,203 ) (107,203 )
Total comprehensive income 214,140
Issuance of 1,304,245 common shares under corporate stock and dividend reinvestment plans 5,217 17,843 23,060
Purchase of 2,150,000 common shares (8,600 ) (2,007 ) (36,535 ) (47,142 )
Conversion of 5,013 shares of preferred stock to 15,183 common shares (251 ) 61 190 —
Other (183 ) (183 )
Balance, March 31, 2000 $ 29,982 $ 2,424,912 $ 798,986 $ 2,950,299 $ (286,571 ) $ 5,917,608

See notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     National City Corporation (“National City” or “the Corporation”) is a diversified financial services company headquartered in Cleveland, Ohio. National City operates banks and other financial service subsidiaries principally in Ohio, Michigan, Pennsylvania, Indiana, Kentucky and Illinois. Principal activities include commercial and retail banking, consumer finance, asset management, mortgage financing and servicing, and item processing.

1.  ACCOUNTING POLICIES

    In the opinion of management, the accompanying unaudited consolidated financial statements of National City have been prepared on a basis consistent with accounting principles applied in the prior periods and include all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period.

    Certain prior period amounts have been reclassified to conform with the current period presentation.

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2.  RECENT ACCOUNTING PRONOUNCEMENTS

    Accounting for Derivative Instruments and Hedging Activities: Statement of Financial Accounting Standards (“SFAS”) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities — Deferral of the Effective Date of FASB Statement No. 133, requires derivative instruments be carried at fair value on the balance sheet. The statement continues to allow derivative instruments to be used to hedge various risks and sets forth specific criteria to be used to determine when hedge accounting can be used. The statement also provides for offsetting changes in fair value or cash flows of both the derivative and the hedged asset or liability to be recognized in earnings in the same period; however, any changes in fair value or cash flow that represent the ineffective portion of a hedge are required to be recognized in earnings and cannot be deferred. For derivative instruments not accounted for as hedges, changes in fair value are required to be recognized in earnings.

    The Corporation plans to adopt the provisions of this statement, as amended, for its quarterly and annual reporting beginning January 1, 2001, the statement’s effective date. The impact of adopting the provisions of this statement on National City’s financial position, results of operations and cash flow subsequent to the effective date is not currently estimable and will depend on the financial position of the Corporation and the nature and purpose of the derivative instruments in use at that time.
 
3.  NONRECURRING ITEMS

    Certain events designated as nonrecurring were included in the Corporation’s first quarter 1999 results. The aggregate net gain from the nonrecurring items, described in further detail below, was $36.8 million pre-tax, or $3.1 million after-tax, and was included in other noninterest income in the Consolidated Statements of Income.

    National City sold its 20% ownership interest in Electronic Payment Services, Inc. (“EPS”), a provider of transaction processing services, to Concord EFS, Inc. (“Concord”) and recognized a gain of $95.7 million pre-tax, or $62.2 million after-tax. The transaction was effected by exchanging each common share of EPS for 7.9091 shares of unregistered Concord common stock. National City received 5.9 million shares of unregistered Concord common stock as a result of the exchange.
    National City also sold its interest in Stored Value Systems, Inc., a subsidiary that had been involved in the development of smart card technology, for a gain of $6.1 million pre-tax, or $4.0 million after-tax.
    National Processing, Inc. (“National Processing”), an 88%-owned subsidiary of the Corporation, adopted a formal plan to either sell, liquidate or dispose of its freight payables, payables outsourcing, remittance and merchant check services business lines. A $65.0 million pre-tax, or $63.1 million after-tax, impairment loss, net of minority interest benefit, was recorded related to these planned dispositions.

4.  LOANS AND ALLOWANCE FOR LOAN LOSSES

    The following table presents the activity in the allowance for loan losses:

                   
Three Months Ended
March 31
(In Thousands) 2000 1999
Balance at beginning of period $ 970,463 $ 970,243
Allowance related to loans acquired — 93
Provision 66,326 68,034
Charge-offs:
Commercial 24,141 13,023
Real estate — commercial 255 1,377
Real estate — residential 2,056 1,702
Consumer 45,212 55,671
Credit card 25,910 27,106
Home equity 1,124 2,009
Total charge-offs 98,698 100,888
Recoveries:
Commercial 5,691 3,519
Real estate — commercial 1,626 1,423
Real estate — residential 105 143
Consumer 18,495 21,437
Credit card 5,894 5,326
Home equity 740 1,006
Total recoveries 32,551 32,854
Net charge-offs 66,147 68,034
Balance at end of period $ 970,642 $ 970,336

    The allowance for loan losses is that amount believed adequate to absorb estimated credit losses in the portfolio based on management’s evaluation of various factors including overall growth in the portfolio, an analysis of individual credits, adverse situations that could affect a borrower’s ability to repay (including the timing of future payments), prior and current loss experience, and economic conditions. Loan losses are charged off against the allowance, while recoveries of amounts previously charged off are credited to the allowance. A provision for loan losses is charged to operations based on management’s periodic evaluation of the factors previously mentioned as well as other pertinent factors.

    The allowance established for certain impaired loans is determined based on the fair value of the investment measured using either the present value of expected future cash flows based on the initial effective interest rate on the loan, the observable market price of the loan or the fair value of the collateral if the loan is collateral dependent.
    The allowance for loan losses consists of an allocated component and an unallocated component. The allocated component of the allowance for loan losses reflects expected losses resulting from the analysis of individual loans, developed through specific credit allocations for individual loans and historical loss experience for each loan category. The specific credit allocations are based on a regular analysis of all loans and commitments over a fixed dollar amount where the internal credit rating is at or below a predetermined classification. The historical loan loss element is determined statistically using a loss migration analysis that examines loss experience and the related internal grading of loans charged off. The loss migration analysis is performed quarterly and loss factors are periodically updated based on actual experience. The allocated component of the allowance for loan losses also in-

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cludes management’s determination of the amounts necessary for concentrations and changes in portfolio mix and volume.
    The unallocated portion of the allowance is determined based on management’s assessment of general economic conditions as well as specific economic factors in the individual markets in which National City operates. This determination inherently involves a higher degree of uncertainty and considers current risk factors that may not have yet manifested themselves in the Corporation’s historical loss factors used to determine the allocated component of the allowance, and it recognizes that knowledge of the portfolio may be incomplete.
    Details regarding nonperforming loans are included in the Asset Quality section of Management’s Discussion and Analysis. At March 31, 2000, December 31, 1999 and March 31, 1999, impaired loans totaled $47.1 million, $24.9 million and $34.2 million, respectively. The related allowance allocated to these loans was $23.0 million, $10.9 million and $13.6 million, respectively. All impaired loans were included in nonperforming assets and had an associated allowance. The contractual interest due and actual interest recorded on nonperforming loans for the three months ended March 31, 2000, was $8.1 million and $2.3 million, respectively, compared with $6.9 million and $2.0 million, respectively, for the three months ended March 31, 1999.

5.  SECURITIES

    The following table summarizes the Corporation’s portfolio of securities available for sale. Fair value fluctuations occur over the lives of the instruments due to changes in market interest rates.
    Gross unrealized gains for the entire portfolio totaled $28.4 million, $109.9 million and $369.0 million at March 31, 2000, December 31, 1999 and March 31, 1999, respectively. Gross unrealized losses at the same period ends totaled $469.3 million, $385.8 million and $60.8 million, respectively.
    For the three months ended March 31, 2000 and 1999, gross securities gains of $23.9 million and $31.1 million, and gross securities losses of $2.4 million and $7.4 million were recognized, respectively.
    Other securities includes the Corporation’s internally-managed equity portfolio of bank and thrift common stock investments, which had an amortized cost and fair value of $721.0 million and $721.3 million, respectively, as of March 31, 2000.
    As of March 31, 2000, there were no securities of a single issuer, other than U.S. Treasury securities and other U.S. government agency securities, which exceeded 10% of stockholders’ equity.
                   
March 31, 2000
Amortized Fair
(In Thousands) Cost Value
U.S. Treasury and Federal agency debentures $ 1,170,411 $ 1,123,146
Mortgage-backed securities 8,879,869 8,511,813
Asset-backed and corporate debt securities 2,194,232 2,157,627
States and political subdivisions 806,503 813,123
Other 1,172,985 1,177,410
Total securities $ 14,224,000 $ 13,783,119
                   
December 31, 1999
Amortized Fair
(In Thousands) Cost Value
U.S. Treasury and Federal agency debentures $ 1,171,397 $ 1,119,508
Mortgage-backed securities 9,629,200 9,351,797
Asset-backed and corporate debt securities 2,633,335 2,600,128
States and political subdivisions 825,941 828,810
Other 920,376 1,004,100
Total securities $ 15,180,249 $ 14,904,343
                   
March 31, 1999
Amortized Fair
(In Thousands) Cost Value
U.S. Treasury and Federal agency debentures $ 1,162,635 $ 1,165,212
Mortgage-backed securities 9,168,546 9,183,001
Asset-backed and corporate debt securities 2,693,953 2,696,663
States and political subdivisions 891,417 935,046
Other 1,038,813 1,283,659
Total securities $ 14,955,364 $ 15,263,581

6. BORROWED FUNDS

                           
Mar. 31 Dec. 31 Mar. 31
(In Thousands) 2000 1999 1999
U.S. Treasury demand notes $ 4,304,064 $ 9,228,154 $ 895,645
Commercial paper 1,219,932 313,396 950,683
Other 16,818 231,061 994,655
Total borrowed funds $ 5,540,814 $ 9,772,611 $ 2,840,983

  U.S. Treasury demand notes represent secured borrowings from the U.S. Treasury. These borrowings are collateralized by qualifying securities and loans. The funds are placed with the banks at the discretion of the U.S. Treasury and may be called at any time.

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7.  LONG-TERM DEBT

                             
Mar. 31 Dec. 31 Mar. 31
(Dollars in Thousands) 2000 1999 1999
9 7/8% subordinated notes due 1999 $ — $ — $ 64,977
6.50% subordinated notes due 2000 99,996 99,983 99,944
8.50% subordinated notes due 2002 99,949 99,943 99,926
6 5/8% subordinated notes due 2004 249,493 249,460 249,363
7.75% subordinated notes due 2004 198,889 198,825 198,633
8.50% subordinated notes due 2004 149,516 149,484 149,390
7.20% subordinated notes due 2005 249,850 249,843 249,819
5.75% subordinated notes due 2009 298,985 298,956 298,870
6 7/8% subordinated notes due 2019 698,824 698,809 —
Other 10,000 10,000 11,977
Total parent company 2,055,502 2,055,303 1,422,899
6.50% subordinated notes due 2003 199,768 199,750 199,694
7.25% subordinated notes due 2010 223,312 223,271 223,148
6.30% subordinated notes due 2011 200,000 200,000 200,000
7.25% subordinated notes due 2011 197,721 197,672 197,524
6.25% subordinated notes due 2011 297,452 297,394 297,220
Other 897 1,142 1,216
Total subsidiary 1,119,150 1,119,229 1,118,802
Total long-term debt
qualifying for Tier 2 Capital		 3,174,652 3,174,532 2,541,701
 
Senior bank notes 10,790,627 8,918,601 6,987,144
Federal Home Loan Bank advances 2,832,411 2,757,648 2,462,286
Other 5,415 7,233 7,978
Total other long-term debt 13,628,453 11,683,482 9,457,408
Total long-term debt $ 16,803,105 $ 14,858,014 $ 11,999,109

  A credit agreement dated March 14, 1997, with a group of unaffiliated banks, allows the Corporation to borrow up to $350 million until February 1, 2001, with a provision to extend the expiration date under certain circumstances. The Corporation pays an annual facility fee of 10 basis points on the amount of the line. There were no borrowings outstanding under this agreement at March 31, 2000.

 
8.  CORPORATION-OBLIGATED MANDATORILY REDEEMABLE CAPITAL SECURITIES OF SUBSIDIARY TRUSTS HOLDING SOLELY DEBENTURES OF THE CORPORATION
                             
Mar. 31 Dec. 31 Mar. 31
(Dollars in Thousands) 2000 1999 1999
8.12% capital securities of First of America Capital Trust  I,
due January 31, 2027		 $ 150,000 $ 150,000 $ 150,000
9.85% capital securities of Fort Wayne Capital Trust I, due April 15, 2027 30,000 30,000 30,000
Total capital securities qualifying as Tier 1 capital 180,000 180,000 180,000
6.75% capital securities of National City Capital Trust I — — 499,896
Total capital securities $ 180,000 $ 180,000 $ 679,896

    The corporation-obligated mandatorily redeemable capital securities (the “capital securities”) of subsidiary trusts holding solely junior subordinated debt securities of the Corporation (the “debentures”) were issued by three statutory business trusts, First of America Capital Trust I, Fort Wayne Capital Trust I and National City Capital Trust I, of which 100% of the common equity in each of the trusts is owned by the Corporation. The trusts were formed for the purpose of issuing the capital securities and investing the proceeds from the sale of such capital securities in the debentures. The debentures held by each trust are the sole assets of that trust. Distributions on the capital securities issued by each trust are payable semiannually at a rate per annum equal to the interest rate being earned by the trust on the debentures held by that trust and are recorded as interest expense by the Corporation. The capital securities are subject to mandatory redemption, in whole or in part, upon repayment of the debentures. The Corporation has entered into agreements which, taken collectively, fully and unconditionally guarantee the capital securities subject to the terms of each of the guarantees.

    The debentures held by First of America Capital Trust I and Fort Wayne Capital Trust I are first redeemable, in whole or in part, by the Corporation on January 31, 2007 and April 15, 2007, respectively. The debentures held by National City Capital Trust I were redeemed by the Corporation on June 1, 1999.

9.  REGULATORY RESTRICTIONS AND CAPITAL RATIOS

  The Corporation and its banking subsidiaries are subject to various regulatory capital requirements administrated by the federal banking agencies that involve quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Failure to meet minimum capital requirements can result in certain mandatory and possible additional discretionary actions by regulators that could have a material effect on the Corporation’s financial statements and operations.

  Dividends paid by the subsidiary banks to the Parent company are also subject to various legal and regulatory restrictions. At March 31, 2000, bank subsidiaries may pay the Parent company, without prior regulatory approval, $1.7 billion of dividends.

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  The following table reflects various measures of capital:
                                                 
Mar. 31 Dec. 31 Mar. 31
2000 1999 1999
(Dollars in
Millions) Amount Ratio Amount Ratio Amount Ratio
Total equity (a) $ 5,917.6 6.81 % $ 5,727.7 6.57 % $ 6,256.9 7.44 %
Total common equity(a) 5,887.6 6.78 5,697.5 6.54 6,226.4 7.40
Tangible  common equity (b) 4,603.3 5.38 4,391.1 5.12 5,122.5 6.17
Tier 1 capital(c) 5,131.1 6.98 4,828.0 6.61 5,152.9 7.34
Total risk- based capital (d) 8,616.4 11.72 8,190.2 11.22 8,388.6 11.96
Leverage(e) 5,131.1 6.03 4,828.0 5.72 5,152.9 6.13
(a)  Computed in accordance with generally accepted accounting principles, including unrealized fair value adjustment of securities available for sale.
(b)  Common stockholders’ equity less all intangible assets; computed as a ratio to total assets less all intangible assets.
(c)  Stockholders’ equity plus qualifying capital securities less certain intangibles and the unrealized fair value adjustment of securities available for sale; computed as a ratio to risk-adjusted assets, as defined.
(d)  Tier 1 capital plus qualifying loan loss allowance and subordinated debt and unrealized holding gains on certain equity securities; computed as a ratio to risk-adjusted assets, as defined.
(e)  Tier 1 capital; computed as a ratio to average total assets less certain intangible assets.
  National City’s Tier 1, total risk-based capital and leverage ratios for the current period are based on preliminary data. Such ratios are above the required minimum levels of 4.00%, 8.00%, and 3.00% respectively.
  The capital levels at all of National City’s subsidiary banks are maintained at or above the well-capitalized minimums of 6.00%, 10.00% and 5.00% for the Tier 1 capital, total risk-based capital and leverage ratios, respectively.
  Intangible asset amounts used in the capital ratio calculations are summarized below:
                           
Mar. 31 Dec. 31 Mar. 31
(In Millions) 2000 1999 1999
Goodwill $ 1,193.1 $ 1,210.4 $ 1,025.3
Other intangibles 91.2 96.0 78.6
Total intangibles $ 1,284.3 $ 1,306.4 $ 1,103.9

10.  STOCKHOLDERS’ EQUITY

                         
Mar. 31 Dec. 31 Mar. 31
2000 1999 1999
(Outstanding Shares)
Preferred Stock, no par value, authorized 5,000,000 shares 599,639 604,652 610,258
Common Stock, $4 par value, authorized 1,400,000,000 shares 606,227,792 607,058,364 628,841,942

    National City’s preferred stock has a stated value of $50 per share. The holders of the preferred shares are entitled to receive cumulative preferred dividends payable quarterly at the annual rate of 6%. The preferred shares may be redeemed by the Corporation at its option at any time, or from time to time, on or after April 1, 2002 at $50 per share, plus accrued and unpaid dividends. Such redemption may be subject to prior approval by the Federal Reserve Bank. Holders of the preferred shares have the right, at any time at their option, to convert each share of preferred stock into 3.0291 shares of National City common stock.

    During the fourth quarter of 1999, the board of directors authorized the purchase of up to 30 million shares of National City common stock subject to an aggregate purchase amount of $1.0 billion. To date, 4.7 million shares have been repurchased, of which 2.1 million were repurchased during the first quarter of 2000.

11.  INCOME TAX EXPENSE

    The composition of income tax expense follows:

                   
Three Months Ended
March 31
(In Thousands) 2000 1999
Applicable to income exclusive of securities transactions $ 157,056 $ 204,168
Applicable to securities transactions 7,537 8,291
Total income tax expense $ 164,593 $ 212,459

    The effective tax rate was 33.9% and 37.7% for the three months ended March 31, 2000 and 1999, respectively. Income taxes for the first quarter of 1999 included the effect of the write-off of nondeductible goodwill related to the planned disposal of certain National Processing business lines. See Note 3.

12.  CONTINGENT LIABILITIES

    During the fourth quarter of 1999, the Corporation was notified by the Internal Revenue Service (“IRS”) of adjustments relating to its corporate-owned life insurance (“COLI”) programs proposed in the Revenue Agent’s Reports for the Corporation’s Federal income tax returns for the years 1990 through 1995. These proposed adjustments involve the disallowance of certain deductions, which, with the expected effect on tax returns for years subsequent to 1995, represent an exposure for tax and interest of approximately $200 million. In the first quarter of 2000, the Corporation made payments of taxes and interest attributable to COLI interest deductions for years 1990 through 1995 to avoid the potential assessment by the IRS of any additional above-market rate interest on the contested amount. The payments to the IRS are included on the balance sheet in other assets pending the resolution of this matter. The Corporation will seek refund, either administratively or through litigation, of all amounts paid plus interest. Management does not agree with these proposed adjustments and will vigorously contest this claim. In the event resolution of this matter is unfavorable, it may have a material adverse effect on the Corporation’s net income for the period in which such unfavorable resolution occurs.

    National City or its subsidiaries are also involved in a number of legal proceedings arising out of their businesses and regularly face various claims, including unasserted claims, which may ultimately result in litigation. Exclusive of the aforementioned claim by the IRS, it is management’s opinion that the consolidated financial statements would not be materially affected by the outcome of any present legal proceedings, commitments or asserted claims.

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13.  NET INCOME PER SHARE

    The calculation of net income per common share follows:

                   
Three Months
Ended
March 31
In Thousands, Except
Per Share Amounts)  2000   1999
Basic:
Net income $ 321,343 $ 351,019
Less preferred dividends 450 415
Net income applicable to common stock $ 320,893 $ 350,604
Average common shares outstanding 605,766 640,989
Net income per common share — basic $.53 $.55
Diluted:
Net income $ 321,343 $ 351,019
Average common shares outstanding 605,766 640,989
Stock option adjustment 3,106 9,401
Preferred stock adjustment 1,822 1,831
Average common shares outstanding — diluted 610,694 652,221
Net income per common share — diluted $.53 $.54
 
14.  OFF-BALANCE SHEET FINANCIAL AGREEMENTS

    The Corporation uses a variety of off-balance sheet financial instruments such as interest rate swaps, futures, options, forwards, and cap and floor contracts. These financial agreements, frequently called interest rate derivatives, enable the Corporation to efficiently manage its exposure to changes in interest rates. As with any financial instrument, derivatives have inherent risks. Market risk includes the risk of gains and losses that result from changes in interest rates. These gains and losses may be offset by other on- or off-balance sheet transactions. Credit risk is the risk that a counterparty to a derivative contract with an unrealized gain fails to perform according to the terms of the agreement. Credit risk can be measured as the cost of acquiring a new derivative agreement with cash flows identical to those of a defaulted agreement in the current interest rate environment. The credit exposure to counterparties is managed by limiting the aggregate amount of net unrealized gains in agreements outstanding, monitoring the size and the maturity structure of the derivatives portfolio, applying uniform credit standards maintained for all activities with credit risk and by collateralizing unrealized gains. The Corporation has established bilateral collateral agreements with its major off-balance sheet counterparties that provide for exchanges of marketable securities to collateralize either party’s unrealized gains.

    Interest Rate Risk Management: The Corporation uses interest rate derivatives principally to manage exposure to interest rate risk. Receive fixed interest rate swaps are used to convert variable rate loans and securities into fixed rate instruments and to convert fixed rate funding sources into variable rate funding instruments. Pay fixed interest rate swaps and futures contracts are used to convert fixed rate loans and securities into variable rate instruments and to convert variable rate funding sources into fixed rate funding instruments. Interest rate cap and floor contracts are used to help protect the Corporation’s interest margin in periods of extremely high or low interest rates. Basis swaps are used to manage the short term repricing risk of variable rate assets and liabilities.
    Mortgage Servicing Risk Management: The carrying value of mortgage servicing assets at March 31, 2000 and December 31, 1999 was $876.6 million and $785.0 million, respectively, and included capitalized net cash flows of $58.1 million and $9.7 million, respectively, related to off-balance sheet derivative contracts. The Corporation uses off-balance sheet derivative contracts to hedge the market value of its mortgage servicing portfolio. The market value of the mortgage servicing portfolio is adversely affected when mortgage interest rates decline and mortgage loan prepayments increase. To hedge this exposure, the Corporation enters into receive fixed interest rate swaps, purchased interest rate floors and purchased interest rate caps. The Corporation also enters into interest rate swaps where the Corporation receives the periodic total return of principal only mortgage-backed securities and pays a variable rate based on one-month Eurodollar rates.

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    Summary information regarding derivatives used for interest rate and mortgage servicing risk management at March 31, 2000 and December 31, 1999 follows:
                                             
Interest Rate Risk Management
Notional Amount Applicable to Hedged Item
Total Net Unrealized
(In Thousands) Loans Securities Funding Notional Gain (Loss)
March 31, 2000:
Interest rate swaps
Receive fixed swaps $ 680,398 $ — $ 5,969,000 $ 6,649,398 $ (248,359 )
Pay fixed swaps 2,870,294 656,000 1,000,000 4,526,294 126,054
Basis swaps 2,150,000 — 2,976,000 5,126,000 (15,158 )
Principal only swaps — — — — —
Total interest rate swaps 5,700,692 656,000 9,945,000 16,301,692 (137,463 )
Interest rate caps and floors
Eurodollar caps purchased 3,553 70,000 1,000,000 1,073,553 (220 )
Eurodollar caps sold 145,000 — — 145,000 1,352
Eurodollar floors purchased 1,165,000 25,000 — 1,190,000 (4,115 )
Eurodollar floors sold 50,000 — — 50,000 (1,521 )
U.S. Treasury caps purchased — — — — —
U.S. Treasury floors purchased — — — — —
Total interest rate caps and floors 1,363,553 95,000 1,000,000 2,458,553 (4,504 )
Interest rate futures
Eurodollar futures purchased 369,000 — — 369,000 28
Eurodollar futures sold 1,832,000 14,524,000 — 16,356,000 (83 )
U.S. Treasury futures sold — 143,000 — 143,000 —
Total interest rate futures 2,201,000 14,667,000 — 16,868,000 (55 )
Total interest rate swaps, caps, floors and futures $ 9,265,245 $ 15,418,000 $ 10,945,000 $ 35,628,245 $ (142,022 )
December 31, 1999:
Interest rate swaps
Receive fixed swaps $ 961,488 $ — $ 4,792,000 $ 5,753,488 $ (210,781 )
Pay fixed swaps 2,690,841 156,000 1,000,000 3,846,841 100,366
Basis swaps 2,000,000 — 4,091,000 6,091,000 (4,676 )
Principal only swaps — — — — —
Total interest rate swaps 5,652,329 156,000 9,883,000 15,691,329 (115,091 )
Interest rate caps and floors
Eurodollar caps purchased 3,605 70,000 1,500,000 1,573,605 (592 )
Eurodollar caps sold 35,000 — — 35,000 (190 )
Eurodollar floors purchased 665,000 525,000 — 1,190,000 (2,649 )
Eurodollar floors sold 10,000 — — 10,000 92
U.S. Treasury caps purchased — — — — —
U.S. Treasury floors purchased — — — — —
Total interest rate caps and floors 713,605 595,000 1,500,000 2,808,605 (3,339 )
Interest rate futures
Eurodollar futures purchased 637,000 — — 637,000 (203 )
Eurodollar futures sold 808,000 10,613,000 — 11,421,000 1,135
U.S. Treasury futures sold — 143,000 — 143,000 —
Total interest rate futures 1,445,000 10,756,000 — 12,201,000 932
Total interest rate swaps, caps, floors and futures $ 7,810,934 $ 11,507,000 $ 11,383,000 $ 30,700,934 $ (117,498 )

[Additional columns below]

[Continued from above table, first column(s) repeated]
                     
Mortgage Servicing Risk
Management
Net Unrealized
(In Thousands) Notional Gain (Loss)
March 31, 2000:
Interest rate swaps
Receive fixed swaps $ 1,533,000 $ (63,799 )
Pay fixed swaps — —
Basis swaps — —
Principal only swaps 410,615 (47,226 )
Total interest rate swaps 1,943,615 (111,025 )
Interest rate caps and floors
Eurodollar caps purchased — —
Eurodollar caps sold — —
Eurodollar floors purchased — —
Eurodollar floors sold — —
U.S. Treasury caps purchased 2,690,000 14,409
U.S. Treasury floors purchased 300,000 252
Total interest rate caps and floors 2,990,000 14,661
Interest rate futures
Eurodollar futures purchased — —
Eurodollar futures sold — —
U.S. Treasury futures sold — —
Total interest rate futures — —
Total interest rate swaps, caps, floors and futures $ 4,933,615 $ (96,364 )
December 31, 1999:
Interest rate swaps
Receive fixed swaps $ 1,808,000 $ (102,915 )
Pay fixed swaps — —
Basis swaps — —
Principal only swaps 364,792 (60,332 )
Total interest rate swaps 2,172,792 (163,247 )
Interest rate caps and floors
Eurodollar caps purchased — —
Eurodollar caps sold — —
Eurodollar floors purchased — —
Eurodollar floors sold — —
U.S. Treasury caps purchased 2,690,000 29,334
U.S. Treasury floors purchased 700,000 143
Total interest rate caps and floors 3,390,000 29,477
Interest rate futures
Eurodollar futures purchased — —
Eurodollar futures sold — —
U.S. Treasury futures sold — —
Total interest rate futures — —
Total interest rate swaps, caps, floors and futures $ 5,562,792 $ (133,770 )

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15.  LINE OF BUSINESS REPORTING

    National City operates six major lines of business: corporate banking, retail sales and distribution, consumer finance, asset management, National City Mortgage and National Processing.

    Corporate banking includes lending and related financial services to large and medium-sized corporations. Retail sales and distribution includes direct lending, deposit gathering and small business services. Consumer finance is comprised of credit card lending, education finance, dealer finance, national home equity lending and nonconforming residential lending. Asset management includes the institutional trust, brokerage and wealth management businesses. National City Mortgage represents conforming mortgage banking activities conducted through the Corporation’s wholly-owned subsidiary, National City Mortgage Co. National Processing consists of merchant card processing services and corporate outsourcing services conducted through National Processing, Inc., National City’s 88%-owned item processing subsidiary.
    The business units are identified by the product or services offered and the channel through which the product or service is delivered. The accounting policies of the individual business units are the same as those of the Corporation. Prior period amounts were reclassified to conform to the current line of business reporting structure.
    The reported results reflect the underlying economics of the businesses. Expenses for centrally provided services are allocated based upon estimated usage of those services. The business units’ assets and liabilities are match-funded and interest rate risk is centrally managed. Transactions between business units are primarily conducted at fair value, resulting in profits that are eliminated for reporting consolidated results of operations.
    Parent and other is comprised of several smaller business units, the results of investment/funding activities, intersegment revenue (expense) eliminations and unallocated amounts. Operating results of the business units are discussed in the Line of Business Results section of Management’s Discussion and Analysis. Selected financial information by line of business is included in the table below.
                                         
Corporate Retail Sales Consumer Asset National City
(In Thousands) Banking and Distribution Finance Management Mortgage
Quarter Ended
March 31, 2000
Net interest income (expense)(a) $ 219,964 $ 368,600 $ 156,796 $ 23,904 $ 8,056
Provision (benefit) for loan losses 15,414 9,153 44,999 890 —
Net interest income (expense) after provision 204,550 359,447 111,797 23,014 8,056
Noninterest income 53,943 129,035 39,739 121,033 95,553
Noninterest expense 103,384 283,446 95,568 88,432 78,639
Income (loss) before taxes 155,109 205,036 55,968 55,615 24,970
Income tax expense (benefit)(a) 58,577 78,651 21,413 20,686 9,521
Net income $ 96,532 $ 126,385 $ 34,555 $ 34,929 $ 15,449
Intersegment revenue (expense) $ — $ 4,322 $ — $ 7,542 $ 2,816
Average assets (in  millions) $ 26,887 $ 16,550 $ 18,376 $ 2,373 $ 2,779
 
Quarter Ended
March 31, 1999
Net interest income (expense)(a) $ 212,441 $ 367,031 $ 146,949 $ 21,114 $ 15,543
Provision (benefit) for loan losses 7,653 12,567 55,138 1,036 —
Net interest income after provision 204,788 354,464 91,811 20,078 15,543
Noninterest income 52,256 137,976 21,129 115,227 82,803
Noninterest expense 94,994 295,779 66,483 84,192 59,879
Income (loss) before taxes 162,050 196,661 46,457 51,113 38,467
Income tax expense (a) 60,337 74,522 17,579 18,716 14,687
Net income (loss) $ 101,713 $ 122,139 $ 28,878 $ 32,397 $ 23,780
Intersegment revenue (expense) $ — $ 31,721 $ — $ 6,876 $ 2,470
Average assets (in  millions) $ 25,822 $ 18,445 $ 14,922 $ 2,205 $ 2,963

[Additional columns below]

[Continued from above table, first column(s) repeated]
                         
National Parent Consolidated
(In Thousands) Processing and Other Total
Quarter Ended
March 31, 2000
Net interest income (expense)(a) $ 1,858 $ (38,283 ) $ 740,895
Provision (benefit) for loan losses — (4,130 ) 66,326
Net interest income (expense) after provision 1,858 (34,153 ) 674,569
Noninterest income 96,281 43,315 578,899
Noninterest expense 83,858 25,766 759,093
Income (loss) before taxes 14,281 (16,604 ) 494,375
Income tax expense (benefit)(a) 5,899 (21,715 ) 173,032
Net income $ 8,382 $ 5,111 $ 321,343
Intersegment revenue (expense) $ — $ (14,680 ) $ —
Average assets (in  millions) $ 365 $ 18,621 $ 85,951
Quarter Ended
March 31, 1999
Net interest income (expense)(a) $ 1,665 $ (44 ) $ 764,699
Provision (benefit) for loan losses — (8,360 ) 68,034
Net interest income after provision 1,665 8,316 696,665
Noninterest income 51,608 153,580 614,579
Noninterest expense 113,305 24,570 739,202
Income (loss) before taxes (60,032 ) 137,326 572,042
Income tax expense (a) 842 34,340 221,023
Net income (loss) $ (60,874 ) $ 102,986 $ 351,019
Intersegment revenue (expense) $ — $ (41,067 ) $ —
Average assets (in  millions) $ 506 $ 20,657 $ 85,520

(a) Includes tax-equivalent adjustment for tax-exempt interest income.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

Financial Highlights

     Net income for the quarter ended March 31, 2000 was $321.3 million, or $.53 per diluted share, compared with $347.9 million for the quarter ended March 31, 1999, or $.53 per diluted share, excluding the effects of the nonrecurring items described in Note 3 to the Consolidated Financial Statements. On this same basis, returns on average common equity and average assets for the first quarter of 2000 were 22.5% and 1.50%, respectively, compared with 20.9% and 1.65% for the same period in 1999. Including the nonrecurring items, reported net income was $351.0 million, or $.54 per diluted share, in the 1999 first quarter and returns on average common equity and average assets were 21.1% and 1.66%, respectively.
     Financial performance for the first quarter of 2000 reflected solid fundamentals in most of the Corporation’s businesses, led by strength in commercial and consumer lending, asset management and item processing. Rapidly rising interest rates, however, have compressed margins and thus net interest income.
Table 1:  Net Income by Line of Business
                   
Three Months
Ended
March 31
(In Millions) 2000 1999
Corporate banking $ 96.5 $ 101.7
Retail sales and distribution 126.4 122.1
Consumer finance 34.6 28.9
Asset management 34.9 32.4
National City Mortgage 15.4 23.8
National Processing 8.4 (60.9 )
Parent and other 5.1 103.0
Consolidated total $ 321.3 $ 351.0

Line of Business Results

     National City’s operations are managed along six major lines of business: corporate banking, retail sales and distribution, consumer finance, asset management, National City Mortgage and National Processing. Note 15 to the Consolidated Financial Statements provides selected financial information for each business line. Table 1 summarizes net income by line of business.

     Corporate banking earned $96.5 million in first quarter 2000 compared to $101.7 million in first quarter 1999. The decline was due to increases in the provision for loan losses and noninterest expense partially offset by higher net interest income. Expenses of new offices in Philadelphia, Detroit and Chicago contributed to higher noninterest expense and higher net charge-offs led to the increased provision for loan losses, while the improvement in net interest income resulted from growth in earning assets.
     Net income for retail sales and distribution was $126.4 million in first quarter 2000, up from $122.1 million in the same quarter last year. Net income for the 2000 quarter increased due primarily to lower noninterest expense, partially offset by a decline in fee income. Cost efficiencies from functional centralization and branch rationalization initiatives drove the decline in noninterest expense.
     Consumer finance net income was $34.6 million in first quarter 2000, up from $28.9 million in the 1999 first quarter. Strong loan origination volumes and the second half 1999 acquisition of a leading wholesale originator of nonconforming residential mortgage loans boosted the increase in 2000 earnings. An improvement in net interest and noninterest income was offset in part by volume-related expense growth. Net income also benefited from lower credit costs.
     Asset management reported net income of $34.9 million in the 2000 quarter and $32.4 million in the same 1999 quarter, representing an increase of 8%. An increase in assets under administration and strong loan and deposit growth led to the increase in net income.
     National City Mortgage reported net income of $15.4 million and $23.8 million for the first quarters of 2000 and 1999, respectively. Although servicing revenue was strong, the rapidly rising interest rate environment in 2000 dampened origination volume and associated revenue, in contrast to the favorable interest rate environment in 1999, which fueled record origination volume.
     National Processing’s net income, after minority interest, was $8.4 million in the 2000 first quarter versus a net loss of $60.9 million in the 1999 first quarter. The earnings for 2000 reflected strong revenue and volume growth in the merchant card base, while the net loss for 1999 stemmed from losses accrued

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for the divestiture of certain business lines.
     The parent and other category for 1999 includes the effects of nonrecurring items other than the loss on the sale of National Processing businesses. These nonrecurring items, discussed further in the “Noninterest Income” section, increased noninterest income by $101.8 million. Excluding these items, parent and other net income in 2000 decreased to $5.1 million from $36.8 million in 1999 due largely to the effect of rising interest rates on investment and funding activities.
Table 2:  Average Earning Assets
                           
Three Months Ended

(In Millions)		 Mar. 31
2000		 Dec. 31
1999		 Mar. 31
1999
Loans $ 63,144 $ 61,561 $ 60,295
Securities (at cost) 14,600 15,403 15,126
Other 635 798 1,093
Total earning assets $ 78,379 $ 77,762 $ 76,514

Table 3:  Average Sources of Funding

                           
Three Months Ended

(In Millions)		 Mar. 31
2000		 Dec. 31
1999		 Mar. 31
1999
Noninterest bearing deposits $ 10,716 $ 11,278 $ 11,681
Interest bearing deposits 41,100 41,009 42,776
Short-term borrowings 10,849 11,137 11,842
Long-term debt and capital securities 16,259 15,081 11,301
Total funding $ 78,924 $ 78,505 $ 77,600

Table 4:  Percentage Composition of Average Funding Sources

                           
Three Months Ended

(In Millions)		 Mar.  31
2000		 Dec.  31
1999		 Mar.  31
1999
Deposits 65.7 % 66.6 % 70.2 %
Short-term borrowings 13.7 14.2 15.2
Long-term debt and capital securities 20.6 19.2 14.6
Total 100.0 % 100.0 % 100.0 %

Net Interest Income

     Tax-equivalent net interest income for the 2000 first quarter was $740.9 million, versus $756.4 million last quarter and the $764.7 million earned in the 1999 first quarter. The lower net interest income reflects tighter margins and is attributable to the Corporation’s liability sensitivity in a rising interest rate environment coupled with greater reliance on longer-term, wholesale funding.

     The net interest margin was 3.79% in the 2000 first quarter, down from 3.87% last quarter and 4.02% in the 1999 first quarter. Consistent with industry trends, the Corporation’s net interest margin has been narrowing. Recent and successive increases in short-term interest rates by the Federal Reserve have also pressured the Corporation’s net interest margin. While loan demand has generally been healthy and the Corporation’s asset mix continues to shift favorably toward higher-yielding consumer and commercial loans and away from thinner-spread investment securities and conventional residential mortgages, the effect has not been sufficient to fully offset the compression in the margin. In addition, the interest expense incurred as a result of funding share repurchase activity has had the effect of reducing the 2000 first quarter margin by approximately 19 basis points versus 7 basis points in the 1999 first quarter.
     Average earning assets (Table 2) for the first quarter were $78.4 billion, up from $77.8 billion last quarter and up from $76.5 billion in the 1999 first quarter. The increase in average earning assets was driven by growth in loans, offset in part by declines in investment securities. Average loans, excluding real estate, rose to $45.7 billion in the 2000 first quarter, up 8.7% compared to $42.1 billion in last year’s first quarter and represented 12.2% annualized growth from last quarter’s $44.4 billion. Strong sales efforts in the corporate and consumer banking units led to double-digit year-over-year growth in consumer loans and 7.3% growth in general commercial loans and leases.
     Average interest-bearing liabilities in the 2000 first quarter were $68.2 billion, up from $67.2 billion last quarter and up from $65.9 billion in the 1999 first quarter. Increases in average interest-bearing liabilities supported the overall growth in earning assets. Competition from nontraditional financial service providers and shifting customer preferences have made it difficult to grow core deposits, the most significant and lowest cost funding source for the Corporation (Table 3). As a result, the Corporation has increased its reliance upon purchased funding to fund loan growth and its share repurchase program (Table 4).
     Management is responsible for monitoring and limiting the Corporation’s exposure to interest rate risk within established

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guidelines while maximizing net interest income and the net value of the Corporation’s future cash flows. As part of carrying out these responsibilities, management continually takes into consideration many factors, primarily expected future interest rate movements, variability and timing of balance sheet cash flows, mortgage prepayments, and potential changes in core deposits.
     Interest rate risk is monitored principally through the use of two complementary measures: earnings simulation modeling and net present value estimation. While each of these interest rate risk measurements has limitations, taken together they represent a reasonably compre-hensive view of the magnitude of interest rate risk in the Corporation, the distribution of risk along the yield curve, the level of risk through time, and the amount of exposure to changes in certain interest rate relationships.
     At March 31, 2000, the earnings simulation model projects net income would increase by approximately 2.3% of stable-rate net income if rates fall gradually by two percentage points over the next year. It projects a decrease of approximately 2.4% if rates rise gradually by two percentage points. The projected decrease is within the Corporation’s guideline of minus 5.0%.
     At March 31, 2000, the net present value model indicates that a 150 basis point immediate decrease in rates was estimated to increase the net present value of the balance sheet by 1.2%. Additionally, net present value was projected to decrease by 4.5% if rates immediately increased by 150 basis points. Policy limits restrict the amount of the estimated decline in net present value to minus 15.0%.

Noninterest Income

     Certain events designated as nonrecurring were included in the Corporation’s 1999 first quarter results. The aggregate net gain from the nonrecurring items, described in further detail below, was $36.8 million pre-tax, or $3.1 million after-tax and is included in other noninterest income in the Consolidated Statements of Income.

     National City sold its 20% ownership interest in Electronic Payment Services, Inc. (“EPS”), a provider of transaction processing services, to Concord EFS, Inc. (“Concord”) and recognized a gain of $95.7 million pre-tax, or $62.2 million after-tax. The transaction was effected by exchanging each common share of EPS for 7.9091 shares of unregistered Concord common stock. National City received 5.9 million shares of unregistered Concord common stock as a result of the exchange. National City also sold its interest in Stored Value Systems, Inc. a subsidiary that had been involved in the development of smart card technology, for a gain of $6.1 million pre-tax, or $4.0 million after-tax.
     In the first quarter of 1999, National Processing adopted a formal plan to either sell, liquidate or dispose of its freight payables, payables outsourcing, remittance and merchant check services business lines. A $65.0 million pre-tax, or $63.1 million after-tax, impairment loss, net of minority interest benefit, was recorded related to these planned dispositions.
     For the first quarter of 2000, fees and other income grew 8.2% to $557.4 million from $515.0 million for the year earlier quarter, excluding the effect of divested businesses and nonrecurring items, with broad-based growth experienced in mortgage banking revenue, deposit fees, item processing, trust and investment management fees, and brokerage revenue. Purchase acquisitions in the second half of 1999 contributed $31.9 million to 2000’s first quarter mortgage banking revenue. The Corporation began retaining a portion of its nonconforming residential mortgage production during 2000 to benefit future revenue, in contrast to realizing gains on sale. Item processing revenue, after adjusting for the divestiture of certain business lines in 1999, grew 14.2% to $94.4 million in the first quarter of 2000 from $82.7 million in the 1999 first quarter.
Table 5:  Noninterest Income
                           
Three Months Ended

(In Thousands)		 Mar. 31
2000		 Dec. 31
1999		 Mar. 31
1999
Item processing revenue $ 94,369 $ 98,471 $ 121,703
Service charges on deposits 106,313 108,321 99,863
Trust and investment management fees 83,624 82,229 81,847
Mortgage banking revenue 111,294 126,011 92,995
Card-related fees 43,646 48,725 45,310
Brokerage revenue 27,011 26,031 24,444
Service fees — other 24,337 21,422 24,955
Other 66,772 68,063 99,774
Total fees and other income 557,366 579,273 590,891
Securities gains 21,533 37,095 23,688
Total noninterest income $ 578,899 $ 616,368 $ 614,579
     Fees and other income declined on a linked-quarter basis

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and were largely affected by lower mortgage banking and item processing revenue, following a seasonally strong fourth quarter. National City’s residential loan servicing portfolio grew to $48.6 billion at March 31, 2000 compared to $46.7 billion at year-end 1999 and was up 25.1% from $38.8 billion a year ago.
     In the first quarter of 2000, pre-tax securities gains totaled $21.5 million, or $.02 per share, after-tax, down from $37.1 million, or $.04 per share, after-tax, in the fourth quarter of 1999, and $23.7 million, or $.02 per share, after-tax, in the first quarter of 1999.

Noninterest Expense

     Noninterest expense (Table 6) was $759.1 million in the first quarter of 2000, compared to $780.1 million in the 1999 fourth quarter and $739.2 million in the first quarter of 1999. The volume-related fee and processing businesses, combined with the seasonality of certain expenses, led to the decline in the linked-quarter comparison of noninterest expense. Operating efficiencies have been achieved even while technology and marketing spending has been increased to support strategic growth initiatives, with associated costs included in both the current and prior quarter. Compared to the first quarter of 1999, noninterest expense rose due to technology and marketing investment, as well as expenses and intangibles amortization from the purchase acquisitions of companies whose costs were not included in the 1999 first quarter base, partially offset by lower expenses from the aforementioned disposition of certain National Processing business lines in the second quarter of 1999.

     National City’s staffing level on a full-time equivalent basis was 36,961 at March 31, 2000, down 7% from 39,742 at March 31, 1999 primarily as a result of the business line divestitures at National Processing and reductions in retail branch personnel and other support staff, offset partially by additions resulting from the second half 1999 purchase acquisitions.
     Operating expense levels are often measured by the efficiency ratio, which expresses noninterest expense as a percentage of tax-equivalent net interest income and total fees and other income. Excluding the effects of nonrecurring items, the efficiency ratio for the first three months of 2000 and 1999 was 58.5% and 56.1%, respectively.
Table 6:  Noninterest Expense
                           
Three Months Ended

(In Thousands)		 Mar. 31
2000		 Dec. 31
1999		 Mar. 31
1999
Salaries $ 335,037 $ 340,006 $ 318,761
Benefits and other personnel 71,834 60,410 82,003
Equipment 57,682 56,468 52,761
Net occupancy 52,668 49,772 54,127
Third-party services 45,148 49,723 45,570
Card processing fees 38,198 40,380 33,595
Postage and supplies 30,611 31,422 35,042
Amortization of intangibles 22,100 21,115 17,598
Telephone 20,276 20,259 18,956
Marketing and public relations 22,712 23,310 10,773
State and local taxes 7,708 14,502 12,770
Travel and entertainment 13,639 14,695 11,906
Other 41,480 58,042 45,340
Total noninterest expense $ 759,093 $ 780,104 $ 739,202

Asset Quality

     The allowance for loan losses was $970.6 million at March 31, 2000, or 1.57% of loans, compared with $970.5 million, or 1.61% of loans at December 31, 1999, and $970.3 million, or 1.69% of loans at March 31, 1999. For the 2000 first quarter, net charge-offs were $66.1 million, down from $66.6 million last quarter and $68.0 million in the 1999 first quarter.

     Table 7 presents net charge-offs as a percentage of average loans by portfolio type. Net charge-offs were .44% for the first quarter, down from .45% last quarter and .48% in the 1999 first quarter.
     Nonperforming assets (Table 8) were $314.1 million at March 31, 2000, up from $289.1 million at December 31, 1999, and $271.9 million at March 31, 1999. The increase in nonperforming assets from year-end 1999 was primarily due to the addition of several commercial credits in the manufacturing, health care and retail industries, and higher delinquencies in residential real estate. As a percentage of loans and OREO, nonperforming assets were .51% at March 31, 2000, up slightly from .48% at December 31, 1999 and .47% at March 31, 1999.

Capital

     The Corporation has consistently maintained regulatory capital ratios at or above the “well-capitalized” standards. For further detail on capital ratios, see Note 9 to the Consolidated Financial Statements.

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     At March 31, 2000, total stockholders’ equity was $5.9 billion, compared to $5.7 billion at December 31, 1999 and $6.3 billion at March 31, 1999. The repurchase of National City stock and unrealized fair value depreciation in the available-for-sale securities portfolio led to the decline in stockholders’ equity from a year ago. Book value per common share at March 31, 2000, December 31, 1999 and March 31, 1999 was $9.71, $9.39 and $9.90, respectively. Book value per common share at March 31, 2000 included unrealized losses on securities available for sale of $.47 compared with unrealized losses of $.30 at December 31, 1999 and unrealized gains of $.32 at March 31, 1999.
     During the 2000 first quarter, the Corporation repurchased 2.1 million shares of National City common stock. As of March 31, 2000, 25.2 million shares remained under the 30 million-share authorization approved by the Board of Directors in October 1999, with an aggregate limit of $1.0 billion. The shares will be acquired either in the open market or through privately-negotiated transactions in accordance with the applicable regulations of the Securities and Exchange Commission.
     The dividend payout is continually reviewed by management and the Board of Directors. Dividends of $.285 per common share were paid during the 2000 first quarter compared to $.26 per common share in the 1999 first quarter. On April 3, 2000, the Corporation declared a cash dividend of $.285 per common share indicating an annual rate of $1.14 per common share.
     Equity to assets was 6.81%, 6.57% and 7.44% at March 31, 2000, December 31, 1999 and March 31, 1999, respectively. Average equity to assets for these respective periods was 6.72%, 7.00% and 7.91%.
Table 7:  Annualized Net Charge-Offs as a Percentage of Average Loans
                   
Three Months
Ended
March  31
2000 1999
Commercial .32 % .17 %
Real estate — commercial (.09 ) —
Real estate — residential .08 .07
Consumer .67 .93
Credit card 3.45 4.83
Home equity .04 .13
Total net charge-offs to average loans .44 % .48 %

Table 8:  Nonperforming Assets

                             

(In Millions)		 Mar.  31
2000		 Dec.  31
1999		 Mar.  31
1999
Commercial:
Nonaccrual $ 138.4 $ 130.2 $ 122.3
Restructured .2 .2 .3
Total commercial 138.6 130.4 122.6
Real estate mortgage:
Nonaccrual 150.5 137.0 117.4
Restructured 1.7 1.8 2.5
Total real estate mortgage 152.2 138.8 119.9
Total nonperforming loans 290.8 269.2 242.5
Other real estate owned (OREO) 23.3 19.9 29.4
Nonperforming assets $ 314.1 $ 289.1 $ 271.9
Loans 90 days past due accruing interest $ 250.0 $ 230.0 $ 223.2
    The total market capitalization of the Corporation was approximately $12.5 billion at March 31, 2000. National City’s common stock is traded on the New York Stock Exchange under the symbol “NCC.”

Forward-Looking Statements

     The discussion regarding the Corporation’s interest rate risk position included in the section entitled “Net Interest Income” contains certain forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995). These forward-looking statements involve significant risks and uncertainties including changes in general economic and financial market conditions and the Corporation’s ability to execute its business plans. Although National City believes the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially.

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Daily Average Balances/Net Interest Income/Rates
                     
(Dollars in Millions) Daily Average Balance
                                                 
2000 1999
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
Assets
Earning Assets:
Loans:
Commercial $ 23,496 $ 22,988 $ 22,066 $ 22,228 $ 22,154
Real estate — commercial 6,020 6,141 6,238 6,275 6,305
Real estate — residential(a) 11,392 11,030 10,534 10,827 11,902
Consumer 16,130 15,617 15,052 15,130 14,956
Credit Card 2,336 2,224 2,088 1,953 1,829
Home equity 3,770 3,561 3,336 3,188 3,149
Total loans 63,144 61,561 59,314 59,601 60,295
Securities:
Taxable 13,789 14,565 14,000 13,761 14,227
Tax-exempt 811 838 851 877 899
Total securities 14,600 15,403 14,851 14,638 15,126
Short-term investments 635 798 806 999 1,093
Total earning assets/
Total interest income/rates 78,379 77,762 74,971 75,238 76,514
Allowance for loan losses (996 ) (985 ) (990 ) (989 ) (985 )
Fair value (depreciation) appreciation of securities available for sale (408 ) (116 ) (8 ) 268 377
Cash and demand balances due from banks 3,140 3,376 3,306 3,506 4,068
Properties and equipment, accrued income and other assets 5,836 5,563 5,412 5,346 5,546
Total assets $ 85,951 $ 85,600 $ 82,691 $ 83,369 $ 85,520
Liabilities and Stockholders’ Equity
Interest bearing liabilities:
NOW and money market accounts $ 16,443 $ 16,580 $ 16,742 $ 16,997 $ 16,899
Savings accounts 3,413 3,605 3,795 3,922 3,955
Time deposits of individuals 15,019 14,578 14,461 14,883 15,581
Other time deposits 2,825 3,141 2,908 2,857 3,311
Deposits in overseas offices 3,400 3,105 2,389 2,342 3,030
Federal funds borrowed 3,642 3,713 2,889 2,467 3,970
Security repurchase agreements 4,081 4,531 4,814 4,910 5,034
Borrowed funds 3,126 2,893 2,808 2,977 2,838
Long-term debt and capital securities 16,259 15,081 13,532 13,305 11,301
Total interest bearing liabilities/
Total interest expense/rates 68,208 67,227 64,338 64,660 65,919
Noninterest bearing deposits 10,716 11,278 11,338 11,542 11,681
Accrued expenses and other liabilities 1,249 1,105 1,046 951 1,159
Total liabilities 80,173 79,610 76,722 77,153 78,759
Total stockholders’ equity 5,778 5,990 5,969 6,216 6,761
Total liabilities and stockholders’ equity $ 85,951 $ 85,600 $ 82,691 $ 83,369 $ 85,520
Net interest income
Interest spread
Contribution of noninterest bearing sources of funds
Net interest margin

(a)  Includes mortgage loans held for sale.

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Quarterly Interest
2000 1999
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
Assets
Earning Assets:
Loans:
Commercial $ 490.1 $ 471.6 $ 434.9 $ 423.4 $ 420.0
Real estate — commercial 130.7 134.4 135.8 133.8 133.6
Real estate — residential(a) 220.3 211.3 198.4 202.5 215.3
Consumer 342.8 333.5 318.5 317.5 313.3
Credit Card 77.7 71.7 70.3 65.5 59.6
Home equity 83.4 76.4 70.6 66.2 72.0
Total loans 1,345.0 1,298.9 1,228.5 1,208.9 1,213.8
Securities:  
Taxable 216.0 226.6 217.2 208.4 223.9
Tax-exempt 16.6 17.3 17.5 19.3 17.3
Total securities 232.6 243.9 234.7 227.7 241.2
Short-term investments 10.9 13.3 11.7 12.9 14.1
Total earning assets/  
Total interest income/rates $ 1,588.5 $ 1,556.1 $ 1,474.9 $ 1,449.5 $ 1,469.1
Allowance for loan losses
Fair value (depreciation) appreciation of securities available  for sale  
Cash and demand balances due from banks  
Properties and equipment, accrued income and other assets  
  
Total assets
Liabilities and Stockholders’ Equity
Interest bearing liabilities:
NOW and money market accounts $ 140.0 $ 135.2 $ 131.2 $ 126.7 $ 126.5
Savings accounts 14.2 15.1 16.0 16.6 16.9
Time deposits of individuals 201.0 190.3 183.5 187.7 200.1
Other time deposits 41.0 43.6 36.7 34.4 40.6
Deposits in overseas offices 47.7 41.6 30.1 27.7 35.0
Federal funds borrowed 53.9 51.3 37.5 29.6 47.8
Security repurchase agreements 48.7 49.9 50.3 49.8 51.9
Borrowed funds 43.3 41.1 37.7 36.9 28.5
Long-term debt and capital securities 257.8 231.6 194.2 181.9 157.1
Total interest bearing liabilities/  
Total interest expense/rates $ 847.6 $ 799.7 $ 717.2 $ 691.3 $ 704.4
Noninterest bearing deposits
Accrued expenses and other liabilities
Total liabilities
Total stockholders’ equity
Total liabilities and stockholders’ equity
Net interest income $ 740.9 $ 756.4 $ 757.7 $ 758.2 $ 764.7
Interest spread
Contribution of noninterest bearing sources of funds
Net interest margin
                                                 
Average Annualized Rate
2000 1999
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
Assets
Earning Assets:
Loans:
Commercial 8.39 % 8.14 % 7.82 % 7.64 % 7.69 %
Real estate — commercial 8.73 8.68 8.63 8.55 8.60
Real estate — residential(a) 7.74 7.66 7.54 7.48 7.24
Consumer 8.55 8.47 8.40 8.42 8.50
Credit Card 13.38 12.79 13.36 13.45 13.22
Home equity 8.85 8.52 8.40 8.32 9.27
Total loans 8.56 8.38 8.23 8.13 8.14
Securities:  
Taxable 6.27 6.22 6.20 6.06 6.30
Tax-exempt 8.19 8.25 8.24 8.80 7.68
Total securities 6.38 6.33 6.32 6.22 6.38
Short-term investments 6.88 6.58 5.83 5.15 5.22
Total earning assets/  
Total interest income/rates 8.14 % 7.96 % 7.83 % 7.72 % 7.75 %
Allowance for loan losses
Fair value (depreciation) appreciation of securities available  for sale  
Cash and demand balances due from banks  
Properties and equipment, accrued income and other assets  
  
Total assets
Liabilities and Stockholders’ Equity
Interest bearing liabilities:
NOW and money market accounts 3.43 % 3.24 % 3.11 % 2.99 % 3.04 %
Savings accounts 1.67 1.67 1.67 1.70 1.73
Time deposits of individuals 5.38 5.18 5.04 5.06 5.21
Other time deposits 5.84 5.51 5.00 4.84 4.98
Deposits in overseas offices 5.64 5.32 5.00 4.74 4.68
Federal funds borrowed 5.95 5.46 5.16 4.82 4.89
Security repurchase agreements 4.80 4.38 4.15 4.06 4.18
Borrowed funds 5.57 5.64 5.32 4.98 4.07
Long-term debt and capital securities 6.37 6.09 5.69 5.48 5.64
Total interest bearing liabilities/  
Total interest expense/rates 5.00 % 4.72 % 4.42 % 4.29 % 4.33 %
Noninterest bearing deposits
Accrued expenses and other liabilities
Total liabilities
Total stockholders’ equity
Total liabilities and stockholders’ equity
Net interest income
Interest spread 3.14 % 3.24 % 3.41 % 3.43 % 3.42 %
Contribution of noninterest bearing sources of funds .65 .63 .62 .61 .60
Net interest margin 3.79 % 3.87 % 4.03 % 4.04 % 4.02 %

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CORPORATE INVESTOR INFORMATION

Corporate Headquarters

     National City Center

     1900 East Ninth Street
     Cleveland, Ohio 44114-3484
     (216) 575-2000
     www.national-city.com

Transfer Agent and Registrar

     National City Bank

     Corporate Trust Operations
     Department 5352
     P.O. Box 92301
     Cleveland, Ohio 44193-0900
     1-800-622-6757

Investor Information

Jeffrey C. Douglas

Vice President and Assistant Treasurer
Investor Relations
Department 2101
P.O. Box 5756
Cleveland, Ohio 44101-0756
1-800-622-4204
Common Stock Listing

National City Corporation common stock
is traded on the New York Stock
Exchange under the symbol NCC. The
stock is abbreviated in financial
publications as NtlCity.

National City’s item processing subsidiary, National Processing, Inc., is traded on the New York Stock Exchange under the symbol “NAP.” The stock abbreviated in financial publications as NtlProc.

Dividend Reinvestment and Stock

Purchase Plan

Common stockholders participating in the Plan receive a three percent discount from market price when they reinvest their National City dividends in additional shares. Participants may also make optional cash purchases of common stock at a three percent discount from market price and pay no brokerage commissions. To obtain our Plan prospectus and authorization card, call 1-800-622-6757.

Debt Ratings

                   
Moody’s
Investors Standard Duff & Thomson
Service & Poor’s Phelps(b) BankWatch
National City Corporation A/B
Commercial paper (short-term debt) P-1 A-1 D-1+ TBW1
Senior debt A1 A AA-
Subordinated debt A2 A-  A+ A
Bank Subsidiaries:(a)
Certificates of deposit Aa3 A+ AA
Subordinated bank notes A1 A AA- A+

(a)  Includes National City Bank, National City Bank of Indiana, National City Bank of Kentucky, National City Bank of Pennsylvania and National City Bank of Michigan/Illinois.
 
(b)  Duff & Phelps ratings for certificates of deposit apply only to the banks in Ohio, Kentucky and Indiana. Duff & Phelps subordinated bank note ratings apply only to the Ohio banking subsidiary.

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FORM 10-Q — MARCH 31, 2000

 
SIGNATURE

      Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

  NATIONAL CITY CORPORATION

Date:  May 2, 2000
  /s/ ROBERT G. SIEFERS
 
  Robert G. Siefers
  Vice Chairman and
  Chief Financial Officer
  (Duly Authorized Signer and
  Principal Financial Officer)

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[NATIONAL CITY CORPORATION LOGO]

National City Center

1900 East Ninth Street

Cleveland, Ohio 44114-3484		 Bulk Rate
U.S. Postage
PAID
National City
Corporation


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