UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2007

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)

216-222-2000
(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 þ   NO o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer      þ                          Accelerated filer o                      Non-accelerated filer       o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES o   NO þ

     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 October 31, 2007 — 633,846,228

QUARTER ENDED September 30, 2007

FINANCIAL REPORT
AND FORM 10-Q

FINANCIAL REPORT AND FORM 10-Q
QUARTER ENDED September 30, 2007

All reports filed electronically by National City Corporation (National City or the Corporation) with the United States Securities and Exchange Commission (SEC), including the Annual Report on Form 10-K, quarterly reports on Form 10-Q, and current event reports on Form 8-K, as well as any amendments to those reports, are accessible at no cost on the Corporation’s Web site at NationalCity.com. These filings are also accessible on the SEC’s Web site at www.sec.gov.

TABLE OF CONTENTS

	Page
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		8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations:
Financial Review		55
Consolidated Average Balance Sheets		80
Daily Average Balances/Net Interest Income/Rates		81
Item 3. Quantitative and Qualitative Disclosures About Market Risk		84
Item 4. Controls and Procedures		84
Part II — Other Information
Item 1. Legal Proceedings		84
Item 1A. Risk Factors		84
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		85
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		85
Signatures		91
EX-12.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

2

PART I – FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS

	Three Months Ended						Nine Months Ended
	September 30						September 30
(Dollars In Thousands, Except Per Share Amounts)	2007			2006			2007			2006
Tax-equivalent net interest income	$	1,101,903		$	1,149,357		$	3,316,271		$	3,500,700
Provision for credit losses		361,544			72,932			611,511			159,892
Noninterest income		624,209			877,475			2,009,268			2,317,203
Noninterest expense		1,403,517			1,184,198			3,762,550			3,506,648
Income tax (benefit) expense and tax-equivalent adjustment		(19,944	)		243,256			304,667			693,184
Net (loss) income	$	(19,005	)	$	526,446		$	646,811		$	1,458,179
Net (loss) income per common share
Basic	$	(.03	)	$	.87		$	1.08		$	2.39
Diluted		(.03	)		.86			1.07			2.36
Dividends paid per common share		.41			.39			1.19			1.13
Return on average common equity		—			16.45	%		6.60	%		15.49	%
Return on average assets		—			1.51			.62			1.40
Net interest margin		3.43			3.73			3.57			3.76
Efficiency ratio		81.31			58.43			70.65			60.27
Average equity to average assets		8.71			9.16			9.31			9.03
Annualized net charge-offs to average portfolio loans		.54			.48			.51			.41
Average shares
Basic		588,134,030			603,848,871			597,365,121			608,442,541
Diluted		592,596,077			612,063,772			604,329,623			616,635,735
At September 30
Assets							$	154,166,008		$	138,122,696
Portfolio loans								111,990,677			92,963,492
Loans held for sale or securitization								11,987,399			19,505,252
Securities, at fair value								8,976,731			7,906,165
Deposits								98,248,968			82,782,188
Stockholders’ equity								13,842,851			12,901,823
Book value per common share							$	21.86		$	21.44
Market value per common share								25.09			36.60
Equity to assets								8.98	%		9.34	%
Allowance for loan losses as a percentage of period-end portfolio loans								1.23			1.00
Nonperforming assets to period-end portfolio loans and other nonperforming assets								1.08			.74
Common shares outstanding								633,345,384			601,875,473
Full-time equivalent employees								34,024			33,621

3

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended					Nine Months Ended
	September 30					September 30
(Dollars in Thousands, Except Per Share Amounts)	2007			2006		2007		2006
Interest Income
Loans	$	2,202,339		$	2,143,202	$	6,372,217	$	6,243,955
Securities:
Taxable		98,216			98,585		281,649		285,658
Exempt from Federal income taxes		4,574			6,217		15,316		19,569
Dividends		427			256		1,344		1,952
Federal funds sold and security resale agreements		15,807			8,840		53,259		19,847
Other investments		31,892			33,132		87,294		100,461
Total interest income		2,353,255			2,290,232		6,811,079		6,671,442
Interest Expense
Deposits		783,618			638,290		2,196,919		1,756,650
Federal funds borrowed and security repurchase agreements		72,382			82,632		207,290		195,806
Borrowed funds		33,632			23,387		85,816		77,796
Long-term debt and capital securities		368,403			403,899		1,026,580		1,162,612
Total interest expense		1,258,035			1,148,208		3,516,605		3,192,864
Net Interest Income		1,095,220			1,142,024		3,294,474		3,478,578
Provision for Credit Losses		361,544			72,932		611,511		159,892
Net interest income after provision for credit losses		733,676			1,069,092		2,682,963		3,318,686
Noninterest Income
Deposit service charges		229,182			214,354		656,493		606,489
Loan sale revenue		(74,397	)		215,479		110,961		644,576
Loan servicing revenue		158,994			103,556		286,737		38,906
Trust and investment management fees		79,050			74,442		237,121		227,528
Leasing revenue		41,778			53,514		142,285		174,790
Brokerage revenue		40,876			35,217		135,370		99,048
Other service fees		33,884			34,214		102,382		103,098
Card-related fees		31,374			26,930		92,322		81,236
Insurance revenue		28,964			33,767		97,776		98,491
Securities gains, net		828			283		26,499		12,989
Other		53,676			85,719		121,322		230,052
Total noninterest income		624,209			877,475		2,009,268		2,317,203
Noninterest Expense
Salaries, benefits, and other personnel		642,331			649,031		1,917,174		1,925,638
Impairment, fraud, and other losses		264,378			21,816		301,640		54,294
Third-party services		80,707			87,111		255,619		257,227
Net occupancy		76,930			73,053		230,837		219,668
Equipment		76,061			74,158		243,830		231,833
Marketing and public relations		41,515			36,092		119,087		102,263
Leasing expense		28,701			37,861		95,224		123,220
Other		192,894			205,076		599,139		592,505
Total noninterest expense		1,403,517			1,184,198		3,762,550		3,506,648
(Loss) Income before income tax (benefit) expense		(45,632	)		762,369		929,681		2,129,241
Income tax (benefit) expense		(26,627	)		235,923		282,870		671,062
Net (Loss) Income	$	(19,005	)	$	526,446	$	646,811	$	1,458,179
Net (Loss) Income Per Common Share
Basic	$	(.03	)	$	.87	$	1.08	$	2.39
Diluted		(.03	)		.86		1.07		2.36
Average Common Shares Outstanding
Basic		588,134,030			603,848,871		597,365,121		608,442,541
Diluted		592,596,077			612,063,772		604,329,623		616,635,735
Dividends declared per common share	$	.41		$	.39	$	1.19	$	1.13

See Notes to Consolidated Financial Statements

4

CONSOLIDATED BALANCE SHEETS

	September 30			December 31			September 30
(Dollars in Thousands, Except Per Share Amounts)	2007			2006			2006
Assets
Cash and demand balances due from banks	$	2,912,349		$	3,521,153		$	3,035,430
Federal funds sold and security resale agreements		337,932			1,551,350			371,610
Securities available for sale, at fair value		8,976,731			7,508,820			7,906,165
Other investments		2,372,410			6,317,779			1,813,649
Loans held for sale or securitization:
Commercial		159,094			33,661			36,263
Commercial real estate		369,385			177,312			336,995
Residential real estate		10,381,672			9,327,783			15,596,231
Home equity lines of credit		1,076,568			2,888,512			3,522,022
Credit card		—			425,000			—
Student loans		680			638			13,741
Total loans held for sale or securitization		11,987,399			12,852,906			19,505,252
Portfolio loans:
Commercial		29,437,609			26,969,081			26,051,077
Commercial leases		4,399,246			4,082,940			3,811,656
Commercial construction		8,655,760			7,160,310			6,712,833
Commercial real estate		14,703,736			12,436,458			12,022,002
Residential real estate		29,241,677			21,881,602			20,963,692
Home equity lines of credit		17,523,913			14,594,782			15,293,584
Credit card and other unsecured lines of credit		3,476,372			3,006,789			2,704,794
Other consumer		4,552,364			5,360,110			5,403,854
Total portfolio loans		111,990,677			95,492,072			92,963,492
Allowance for loan losses		(1,372,879	)		(1,131,175	)		(932,058	)
Net portfolio loans		110,617,798			94,360,897			92,031,434
Properties and equipment		1,651,750			1,402,150			1,325,761
Equipment leased to others		407,406			572,952			594,303
Other real estate owned		323,964			229,070			196,937
Mortgage servicing rights		2,503,089			2,094,387			2,264,104
Goodwill		5,625,010			3,815,911			3,339,631
Other intangible assets		375,954			183,648			157,403
Derivative assets		626,662			612,914			693,444
Accrued income and other assets		5,447,554			5,166,905			4,887,573
Total Assets	$	154,166,008		$	140,190,842		$	138,122,696
Liabilities
Deposits:
Noninterest bearing	$	16,693,513		$	17,537,278		$	16,188,883
NOW and money market		36,769,018			30,335,531			28,734,045
Savings		2,913,662			1,881,444			1,821,496
Consumer time		30,073,886			23,620,821			22,043,743
Other		3,604,197			4,119,756			5,199,389
Foreign		8,194,692			9,738,760			8,794,632
Total deposits		98,248,968			87,233,590			82,782,188
Federal funds borrowed and security repurchase agreements		6,248,924			5,283,997			7,346,405
Borrowed funds		2,505,742			1,648,967			3,956,550
Long-term debt		26,758,298			25,406,971			26,348,126
Junior subordinated debentures owed to unconsolidated subsidiary trusts		1,881,269			948,705			341,617
Derivative liabilities		555,716			717,830			668,477
Accrued expenses and other liabilities		4,124,240			4,369,779			3,777,510
Total Liabilities	$	140,323,157		$	125,609,839		$	125,220,873
Stockholders’ Equity
Preferred stock	$	—		$	—		$	—
Common stock		2,533,382			2,529,527			2,407,502
Capital surplus		6,361,320			4,793,537			3,766,184
Retained earnings		5,002,284			7,328,853			6,739,515
Accumulated other comprehensive loss		(54,135	)		(70,914	)		(11,378	)
Total Stockholders’ Equity		13,842,851			14,581,003			12,901,823
Total Liabilities and Stockholders’ Equity	$	154,166,008		$	140,190,842		$	138,122,696

See Notes to Consolidated Financial Statements

5

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Nine Months Ended
	September 30
(In Thousands)	2007			2006
Operating Activities
Net income	$	646,811		$	1,458,179
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		611,511			159,892
Depreciation and amortization of properties and equipment		279,430			298,629
Amortization on securities, loans, deposits, and debt obligations		3,820			141,431
MSR fair value changes		88,685			274,737
Amortization of intangible assets and other servicing assets		93,898			70,557
Derivative losses, net		307,945			261,454
Securities gains, net		(26,499	)		(12,989	)
Gains on loans sold or securitized, net		(226,086	)		(566,116	)
Other losses, net		24,950			3,028
Originations and purchases of loans held for sale or securitization		(42,197,005	)		(50,202,851	)
Principal payments on and proceeds from sales of loans held for sale or securitization		36,783,794			50,592,924
Net change in trading assets and liabilities		(457,879	)		287,628
Excess tax benefit for share based payments		(13,450	)		(17,428	)
Increase in accrued interest receivable		(86,025	)		(18,811	)
(Decrease) increase in accrued interest payable		(699	)		34,323
Other operating activities, net		(313,257	)		(99,536	)
Net cash (used in) provided by operating activities		(4,480,056	)		2,665,051
Lending and Investing Activities
Net decrease (increase) in federal funds sold, security resale agreements, and other investments		5,908,658			(188,063	)
Purchases of available-for-sale securities		(1,853,497	)		(1,578,550	)
Proceeds from sales of available-for-sale securities		1,736,013			610,802
Proceeds from maturities, calls, and prepayments of available-for-sale securities		933,407			1,079,089
Net (increase) decrease in portfolio loans		(2,381,818	)		1,013,533
Proceeds from sales of loans		1,052,624			1,228,453
Proceeds from securitizations of loans		425,000			555,074
Net increase in properties and equipment		(116,632	)		(187,341	)
Net cash paid for acquisitions		(248,353	)		(82,216	)
Net cash provided by lending and investing activities		5,455,402			2,450,781
Deposit and Financing Activities
Net increase (decrease) in deposits		258,744			(1,634,588	)
Net increase in federal funds borrowed and security repurchase agreements		501,551			825,173
Net increase in borrowed funds		795,106			430,904
Repayments of long-term debt		(7,717,051	)		(11,228,118	)
Proceeds from issuances of long-term debt		8,278,023			6,959,660
Dividends paid		(722,458	)		(696,599	)
Issuances of common stock		239,378			229,259
Repurchases of common stock		(3,230,893	)		(691,186	)
Excess tax benefit for share based payments		13,450			17,428
Net cash used in deposit and financing activities		(1,584,150	)		(5,788,067	)
Net decrease in cash and demand balances due from banks		(608,804	)		(672,235	)
Cash and demand balances due from banks, January 1		3,521,153			3,707,665
Cash and Demand Balances Due from Banks, September 30	$	2,912,349		$	3,035,430
Supplemental Information
Cash paid for:
Interest	$	3,517,304		$	3,158,541
Income taxes		682,705			428,156
Noncash items:
Transfers of portfolio loans and property to other real estate		502,035			325,661
Transfers of portfolio loans to held for sale		609,840			10,491,918
Transfers of held for sale loans to portfolio		6,111,452			39,855
Common shares and stock options issued for acquisitions		2,336,353			(4,344	)

6

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

												Accumulated
												Other
	Preferred		Common			Capital			Retained			Comprehensive
(Dollars in Thousands, Except Per Share Amounts)	Stock		Stock			Surplus			Earnings			Income (Loss)			Total
Balance, January 1, 2006	$	—	$	2,460,191		$	3,681,603		$	6,459,212		$	11,865		$	12,612,871
Comprehensive income:
Net income										1,458,179						1,458,179
Other comprehensive income, net of tax:
Change in unrealized gains and losses on securities, net of reclassification adjustment for net gains included in net income													(5,585	)		(5,585	)
Change in unrealized gains and losses on derivative instruments used in cash flow hedging relationships, net of reclassification adjustment for net losses included in net income													(17,658	)		(17,658	)
Total comprehensive income																1,434,936
Cumulative effect of change in accounting for mortgage servicing assets										16,886						16,886
Common dividends declared, $1.13 per share										(695,332	)					(695,332	)
Preferred dividends declared, $18.03 per share										(1,267	)					(1,267	)
Issuance of 6,322,714 common shares under stock option plans				25,461			199,454									224,915
Repurchase of 19,537,475 common shares				(78,150	)		(114,873	)		(498,163	)					(691,186	)
Balance, September 30, 2006	$	—	$	2,407,502		$	3,766,184		$	6,739,515		$	(11,378	)	$	12,901,823
Balance, January 1, 2007	$	—	$	2,529,527		$	4,793,537		$	7,328,853		$	(70,914	)	$	14,581,003
Comprehensive income:
Net income										646,811						646,811
Other comprehensive income, net of tax:
Change in unrealized gains and losses on securities, net of reclassification adjustment for net gains included in net income													(14,602	)		(14,602	)
Change in unrealized gains and losses on derivative instruments used in cash flow hedging relationships, net of reclassification adjustment for net gains included in net income													31,075			31,075
Change in accumulated unrealized losses for pension and other postretirement obligations													306			306
Total comprehensive income																663,590
Cumulative effect of change in accounting for uncertainty in income taxes										(24,122	)					(24,122	)
Common dividends declared, $1.19 per share										(721,124	)					(721,124	)
Preferred dividends declared, $18.99 per share										(1,334	)					(1,334	)
Issuance of 6,632,285 common shares under stock-based compensation plans				26,956			212,422									239,378
Issuance of 80,291,037 common shares pursuant to acquisitions(1)				321,165			2,015,188									2,336,353
Repurchase of 86,066,638 common shares				(344,266	)		(659,827	)		(2,226,800	)					(3,230,893	)
Balance, September 30, 2007	$	—	$	2,533,382		$	6,361,320		$	5,002,284		$	(54,135	)	$	13,842,851

⁽¹⁾  Includes fair value of stock options exchanged.

See Notes to Consolidated Financial Statements

7

Notes to Consolidated Financial Statements

Nature of Operations

National City Corporation (National City or the Corporation) is a financial holding company headquartered in Cleveland, Ohio. National City operates through an extensive branch bank network in Ohio, Florida, Illinois, Indiana, Kentucky, Michigan, Missouri, Pennsylvania, and Wisconsin, and also conducts selected lending businesses and provides other financial services on a nationwide basis. Primary businesses include commercial and retail banking, mortgage financing and servicing, consumer finance, and asset management.

1.  Basis of Presentation and Significant Accounting Policies

The accompanying Consolidated Financial Statements include the accounts of the Corporation and its consolidated subsidiaries. All significant intercompany transactions and balances have been eliminated. Certain prior period amounts have been reclassified to conform with the current period presentation.

Consolidation: Accounting Research Bulletin 51 (ARB 51), Consolidated Financial Statements, requires a company’s consolidated financial statements include subsidiaries in which a company has a controlling financial interest. This requirement usually has been applied to subsidiaries in which a company has a majority voting interest. Investments in companies in which the Corporation controls operating and financing decisions (principally defined as owning a voting or economic interest greater than 50%) are consolidated. Investments in companies in which the Corporation has significant influence over operating and financing decisions (principally defined as owning a voting or economic interest of 20% to 50%) and limited partnership investments are generally accounted for by the equity method of accounting. These investments are principally included in other assets, and National City’s proportionate share of income or loss is included in other noninterest income.

The voting interest approach defined in ARB 51 is not applicable in identifying controlling financial interests in entities that are not controllable through voting interests or in which the equity investors do not bear the residual economic risks. In such instances, Financial Accounting Standards Board Interpretation 46(R) (FIN 46R), Consolidation of Variable Interest Entities (VIE), provides guidance on when a company should include in its financial statements the assets, liabilities, and activities of another entity. In general, a VIE is a corporation, partnership, trust, or any other legal structure used for business purposes that either does not have equity investors with voting rights or has equity investors that do not provide sufficient financial resources for the entity to support its activities. FIN 46R requires a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss from the VIE’s activities or entitled to receive a majority of the entity’s residual returns or both. A company that consolidates a VIE is called the primary beneficiary of that entity. The Corporation’s consolidated financial statements include the assets, liabilities, and activities of VIEs for which it is deemed to be the primary beneficiary.

The Corporation uses special-purpose entities (SPEs), primarily securitization trusts, to diversify its funding sources. SPEs are not operating entities, generally have no employees, and usually have a limited life. The basic SPE structure involves the Corporation transferring assets to the SPE. The SPE funds the purchase of those assets by issuing asset-backed securities to investors. The legal documents governing the SPE describe how the cash received on the assets held in the SPE must be allocated to the investors and other parties that have rights to these cash flows. National City structures these SPEs to be bankruptcy remote, thereby insulating investors from the impact of the creditors of other entities, including the transferor of the assets.

Where the Corporation is a transferor of assets to an SPE, the assets sold to the SPE generally are no longer recorded on the balance sheet and the SPE is not consolidated when the SPE is a qualifying special-purpose entity (QSPE). Statement of Financial Accounting Standards 140 (SFAS 140), Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, provides specific criteria for determining when an SPE meets the definition of a QSPE. In determining whether to consolidate nonqualifying SPEs where assets are legally isolated from National City’s creditors, the Corporation considers such factors as the amount of third-party equity, the retention of risks and rewards, and the extent of control available to third parties. The Corporation currently services credit card and automobile loans that were sold to securitization trusts. Further discussion regarding these securitization trusts is included in Note 5.

Use of Estimates: The accounting and reporting policies of National City conform with U.S. generally accepted accounting principles (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. Actual realized amounts could differ materially from those estimates. These interim financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and serve to update National City’s 2006 Annual Report on Form 10-K (Form 10-K). These financial statements may not include all information and notes necessary to constitute a complete set of financial statements under GAAP applicable to annual periods and accordingly should be read in conjunction with the financial information contained in the Form 10-K. Management believes these unaudited consolidated financial statements reflect all adjustments, including those of a normal recurring

8

nature, which are necessary for a fair presentation of the results 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.

Statement of Cash Flows: Cash and demand balances due from banks are considered cash and cash equivalents for financial reporting purposes.

Business Combinations: Business combinations are accounted for under the purchase method of accounting. Under the purchase method, assets and liabilities of the business acquired are recorded at their estimated fair values as of the date of acquisition with any excess of the cost of the acquisition over the fair value of the net tangible and intangible assets acquired recorded as goodwill. Results of operations of the acquired business are included in the income statement from the date of acquisition. Refer to Note 3 for further discussion.

Loans and Leases: Loans that the Corporation has both the intent and ability to hold for the foreseeable future, or until maturity or payoff, are classified in the balance sheet as portfolio loans. Portfolio loans are carried at the principal amount outstanding net of unearned income, unamortized premiums or discounts, deferred loan origination fees and costs, and acquisition fair value adjustments, if any. Loans that the Corporation has the intent and ability to sell or securitize are classified as held for sale or securitization. Loans held for sale or securitization are carried at the lower of cost or fair value applied on an aggregate basis by type of loan. Fair value is measured based on purchase commitments, bids received from potential purchasers, quoted prices for the same or similar loans, or prices of recent sales or securitizations. Management considers in its assessment the probability that buyer commitments may not close. In the absence of an active market, fair value is based upon a discounted cash flow model which utilizes inputs and assumptions which are believed to be consistent with market participants’ views.

When a decision is made to sell or securitize a loan that was not originated or initially acquired with the intent to sell or securitize, the loan is reclassified from portfolio into held for sale or securitization. Such reclassifications may occur, and have occurred in the past, due to a change in strategy in managing the liquidity of the balance sheet, a strategic decision to divest an operation or product, the maturity of an existing securitization structure, or favorable terms offered in sale or securitization markets. Conversely, due to changing market conditions or other strategic initiatives, loans previously classified as held for sale may be reclassified into portfolio. Loans transferred between loans held for sale and portfolio classifications are recorded at the lower of cost or market at the date of transfer.

When the Corporation sells a loan or group of loans which qualify as a sale pursuant to SFAS 140, the loans are removed from the balance sheet and a gain or loss is recognized in loan sale revenue.

Interest income is recognized utilizing the interest method. Loan origination fees, certain direct origination costs, and unearned discounts are deferred and amortized into interest income utilizing the interest method to achieve a level effective yield over the term of the loan. Loan commitment fees are generally deferred and amortized into fee income on a straight-line basis over the commitment period. Other credit-related fees, including letter and line of credit fees and loan syndication fees, are recognized as fee income when earned.

Leases are classified as either direct financing leases or operating leases, based on the terms of the lease arrangement. To be classified as a direct financing lease, the lease must have at least one of the following four characteristics: 1) the lease transfers ownership of the property to the lessee by the end of the lease term, 2) the lease contains a bargain purchase option, 3) the lease term is equal to 75% or more of the estimated economic life of the leased property, or 4) the present value of the minimum lease payments are at least 90% of the cost of the leased property. Leases that do not meet any of these four criteria are classified as operating leases and reported as equipment leased to others on the balance sheet.

Income on operating leases is recognized on a straight-line basis over the lease term. Income on direct financing leases is recognized on a basis that achieves a constant periodic rate of return on the outstanding investment. Income on leveraged leases is recognized on a basis that achieves a constant periodic rate of return on the outstanding investment in the lease, net of the related deferred tax liability, in the years in which the net investment is positive.

At the inception of a lease, residual value is determined based on the estimated fair market value of the asset at the end of the original lease term. For automobile leases, fair value was based upon published industry market guides. For commercial equipment leases, fair value may be based upon observable market prices, third-party valuations, or prices received on sales of similar assets at the end of the lease term. Renewal options and extensions are not considered in the original lease term due to the absence of penalties for nonrenewal.

Automobile lease residual values and certain types of commercial equipment lease residuals are guaranteed by third parties. Although these guarantees of residual value are not considered in determining the initial accounting for these leases, the guarantees can affect the future accounting for the residual values. Commercial equipment residual values not protected by a guarantee are reviewed quarterly for other-than-temporary impairment. Impairment is assessed by comparing the carrying value of the leased asset’s residual value to both current and end of lease term market values. Where this analysis indicates that an other-than-temporary impairment has occurred, the carrying value of the lease residual is reduced to the estimated fair value, with the write-down generally recognized in other noninterest expense in the income statement.

9

Commercial loans and leases and commercial loans secured by real estate are designated as nonperforming when either principal or interest payments are 90 days or more past due (unless the loan or lease is sufficiently collateralized such that full repayment of both principal and interest is expected and is in the process of collection), terms are renegotiated below market levels, or when an individual analysis of a borrower’s creditworthiness indicates a credit should be placed on nonperforming status. When a loan is placed on nonperforming status, uncollected interest accrued in prior years is charged against the allowance for loan losses, while uncollected interest accrued in the current year is reversed against interest income. Interest income is recorded on a cash basis during the period the loan is on nonperforming status after recovery of principal is reasonably assured.

Nonperforming commercial loans and leases and commercial loans secured by real estate are generally charged off to the extent principal and interest due exceed the net realizable value of the collateral, with the charge-off occurring when the loss is reasonably quantifiable but not later than when the loan becomes 180 days past due.

Commercial and commercial real estate loans exceeding $5 million are evaluated for impairment in accordance with the provisions of SFAS 114, Accounting by Creditors for Impairment of a Loan, which requires an allowance to be established as a component of the allowance for loan losses when it is probable all amounts due will not be collected pursuant to the contractual terms of the loan and the recorded investment in the loan exceeds its fair value. Fair value is measured using either the present value of expected future cash flows discounted at the loan’s effective interest rate, the observable market price of the loan, or the fair value of the collateral if the loan is collateral dependent. All loans subject to evaluation and considered impaired are included in nonperforming assets.

Loans secured by one-to-four family residential real estate, including home equity lines of credit and loans, are designated as nonperforming based upon several factors including payment delinquency, bankruptcy status, and prior principal charge-offs. When a loan is placed on nonperforming status, uncollected interest accrued in prior years is charged against the allowance for loan losses, while uncollected interest accrued in the current year is reversed against interest income. Additionally, these loan types are generally charged off to the extent principal and interest due exceed the estimated realizable value of the collateral on the date the loan becomes 180 days past due or at the earlier of the foreclosure sale or when an appraisal indicates a value less than the loan value. Loans covered by lender-paid mortgage insurance are not charged off to the extent an insurance recovery is probable.

Consumer loans are subject to mandatory charge-off at a specified delinquency date and, except for residential real estate loans, are usually not classified as nonperforming prior to being charged off. Closed-end consumer loans, which include installment and student loans and automobile leases, are generally charged off in full no later than when the loan becomes 120 days past due. Open-end, unsecured consumer loans, such as credit card loans, are generally charged off in full no later than when the loan becomes 150 days past due.

The Corporation sells residential and commercial real estate loans to Government National Mortgage Association (GNMA) and Federal National Mortgage Association (FNMA) in the normal course of business. These loan sale programs allow the Corporation to repurchase individual delinquent loans that meet certain criteria. Without the sponsoring entity’s prior authorization, the Corporation has the option to repurchase the delinquent loan for an amount equal to 100% of the remaining principal balance of the loan. Under SFAS 140, once the Corporation has the unconditional ability to repurchase the delinquent loan, effective control over the loan has been regained. At this point, the Corporation is required to recognize the loan and a related liability on its balance sheet, regardless of the Corporation’s intent to repurchase the loan. Refer to Note 7 for balances recognized under these programs.

Allowance for Loan Losses and Allowance for Losses on Lending-Related Commitments: The allowance for loan losses is maintained at a level believed adequate by management to absorb probable incurred losses within the loan portfolio and is based on the size and current risk characteristics of the loan portfolio, an assessment of individual problem loans and actual loss experience, probable recoveries under lender paid mortgage insurance, current economic events in specific industries and geographical areas, including unemployment levels, and other pertinent factors, including regulatory guidance and general economic conditions. Determination of the allowance is inherently subjective as it requires significant estimates, including the amounts and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, insurance coverage limits, and consideration of current environmental factors and economic trends, all of which may be susceptible to significant change. Loan losses are charged off against the allowance, while recoveries of amounts previously charged off are credited to the allowance. A provision for credit losses is recorded based on management’s periodic evaluation of the factors previously mentioned, as well as other pertinent factors. Evaluations are conducted at least quarterly and more often if deemed necessary. When portfolio loans are identified for sale or securitization, the attributed loan loss allowance is reclassified to held for sale as a reduction to the carrying value of the loans. If a loss attributable to deterioration of the creditworthiness of the borrower is anticipated upon sale, a charge-off is recognized upon transfer.

The Corporation maintains an allowance for losses on unfunded commercial lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The allowance is computed using a methodology similar to that used to determine the allowance for loan losses, modified to take into account the probability of a drawdown on the commitment. This allowance is reported as a liability on the balance sheet within accrued expenses and other liabilities, while the corresponding provision for these losses is recorded as a component of the provision for credit losses.

10

Other Real Estate Owned: Other real estate owned (OREO) is comprised principally of commercial and residential real estate properties obtained in partial or total satisfaction of loan obligations, as well as bank premises qualifying as held for sale under SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets. OREO obtained in satisfaction of a loan is recorded at the estimated fair value less anticipated selling costs based upon the property’s appraised value at the date of transfer, with any difference between the fair value of the property and the carrying value of the loan charged to the allowance for loan losses. Bank premises are transferred at the lower of carrying value or estimated fair value less anticipated selling costs. Subsequent changes in value are reported as adjustments to the carrying amount, not to exceed the initial carrying value of the assets at the time of transfer. Changes in value subsequent to transfer are recorded in noninterest expense on the income statement. Gains or losses not previously recognized resulting from the sale of OREO are recognized in noninterest expense on the date of sale.

Securities: Investments in debt securities and certain equity securities with readily determinable fair values, other than those classified as principal investments or accounted for under the equity method, are accounted for under SFAS 115, Accounting for Certain Investments in Debt and Equity Securities. SFAS 115 requires investments to be classified within one of three categories: trading, held to maturity, or available for sale, based on the type of security and management’s ability and intent with regard to selling the security.

Securities purchased with the intention of realizing short-term profits or that are used to manage risk in other balance sheet assets and liabilities carried at fair value, are considered trading securities, carried at fair value, and are included in other investments on the balance sheet. Depending on the purpose for holding the securities, realized and unrealized gains and losses are included in either brokerage revenue, loan servicing revenue or other noninterest income in the statement of income. Interest on trading account securities is recorded in interest income. Loans are classified as trading where positions are bought and sold primarily to make profits on short-term appreciation or for other trading purposes. Trading loans are also included in other investments on the balance sheet and are carried at fair value, with gains and losses included in other noninterest income. See Note 9 for further information on trading securities.

Debt securities are classified as held to maturity when management has the positive intent and ability to hold the securities to maturity. Securities held to maturity, when present, are carried at amortized cost. National City held no securities classified as held to maturity at September 30, 2007, December 31, 2006, or September 30, 2006.

Debt and marketable equity securities not classified as held to maturity or trading are classified as available for sale. Securities available for sale are carried at fair value with unrealized gains and unrealized losses not deemed other-than-temporary reported in accumulated other comprehensive income, net of tax. Realized gains and losses on the sale of, and other-than-temporary impairment charges, on available-for-sale securities are recorded in securities gains or losses in the statement of income.

Interest and dividends on securities, including amortization of premiums and accretion of discounts using the effective interest method over the period to maturity, are included in interest income. Realized gains and losses on the sale of and other-than-temporary impairment charges on securities are determined using the specific-identification method. Purchases and sales of securities are recognized on a trade date basis.

Certain equity security investments that do not have readily determinable fair values and for which the Corporation does not exercise significant influence are carried at cost and classified either within other investments or other assets on the balance sheet depending on the frequency of dividend declarations. Cost method investments classified within other investments, which consist solely of shares of Federal Home Loan Bank and Federal Reserve Bank stock, totaled $808 million, $483 million, and $479 million at September 30, 2007, December 31, 2006, and September 30, 2006, respectively. Cost method investments classified within other assets were less than $1 million at September 30, 2007, December 31, 2006, and September 30, 2006. Cost method investments are reviewed for impairment at least annually or sooner if events or changes in circumstances indicate the carrying value may not be recoverable.

Principal Investments: Principal investments, which include direct investments in private and public companies and indirect investments in private equity funds, are carried at estimated fair value with changes in fair value recognized in other noninterest income.

Direct investments include equity and mezzanine investments in the form of common stock, preferred stock, limited liability company interests, warrants, and subordinated debt. Direct mezzanine investments in the form of subordinated debt and preferred stock, which earn interest or dividends, are included in other investments on the balance sheet, while the remainder of the direct investments are included in other assets. Indirect investments include ownership interests in private equity funds managed by third-party general partners and are included in other assets on the balance sheet.

The fair values of publicly traded investments are determined using quoted market prices, subject to various discount factors related to sales restrictions and regulations, when appropriate. Investments that are not publicly traded are initially recorded at cost, and subsequent adjustments to fair value are estimated in good faith by management. Factors used in determining the fair value of direct investments include consideration of the company’s business model, current and projected financial performance, liquidity, management team, and overall economic and market conditions. Factors used in determining the fair value of indirect investments include evaluation of the investments owned by the private equity funds, the general partner’s valuation techniques, and overall economic and market conditions.

11

The fair value estimates of the investments are based upon currently available information and may not necessarily represent amounts that will ultimately be realized, which depend on future events and circumstances.

Interest and dividends on direct mezzanine debt and preferred stock investments are recorded in interest income. All other income on principal investments, including fair value adjustments, realized gains and losses on the return of capital, and principal investment write-offs, is recognized in other noninterest income.

Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase: Securities purchased under agreements to resell and securities sold under agreements to repurchase are generally accounted for as collateralized financing transactions and are recorded at the amounts at which the securities were acquired or sold plus accrued interest. Securities, generally U.S. government and federal agency securities, pledged as collateral under these financing arrangements cannot be sold or repledged by the secured party. The fair value of collateral either received from or provided to a third party is continually monitored, and additional collateral is obtained or requested to be returned as appropriate.

Goodwill and Other Intangible Assets: Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. Other intangible assets represent purchased assets that also lack physical substance but can be separately distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged, either on its own or in combination with a related contract, asset, or liability. Goodwill impairment testing is performed annually, or more frequently if events or circumstances indicate possible impairment. Goodwill is allocated to reporting units one level below business segments. Fair values of reporting units are determined using either market-based valuation multiples for comparable businesses if available, or discounted cash flow analyses based on internal financial forecasts. Note 11 contains additional information regarding goodwill and the carrying values by major lines of business.

Intangible assets with finite lives include those associated with core deposits, credit cards, and other items. Intangible assets are subject to impairment testing whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Core deposit intangibles are primarily amortized over a period not to exceed 10 years using an accelerated amortization method. Credit card intangibles are amortized over their estimated useful lives on a straight-line basis, which range from one to seven years. Other intangibles, primarily customer contracts and noncompete agreements, are amortized over the period benefited ranging from three to eleven years. Amortization expense for core deposits and other intangibles is recognized in noninterest expense. Note 11 includes a summary of other intangible assets.

Depreciable Assets: Properties and equipment are stated at cost less accumulated depreciation and amortization. Maintenance and repairs are charged to expense as incurred, while improvements which extend an asset’s useful life are capitalized and depreciated over the estimated remaining life of the asset. Depreciation and amortization are calculated using the straight-line method over the estimated useful life of the asset. Useful lives range from one to 10 years for furniture, fixtures, and equipment; three to five years for software, hardware, and data handling equipment; and 10 to 40 years for buildings and building improvements. Land improvements are amortized over a period of 15 years. Leasehold improvements are amortized over the shorter of the asset’s useful life or the remaining lease term, including renewal periods when reasonably assured pursuant to SFAS 13, Accounting for Leases. For leasehold improvements acquired in a business combination, lease renewals reasonably assured at the date of acquisition are included in the remaining lease term. For leasehold improvements placed in service after the inception of the lease, lease renewals reasonably assured at the date of purchase are included in the remaining lease term.

Long-lived depreciable assets are evaluated periodically for impairment when events or changes in circumstances indicate the carrying amount may not be recoverable. Impairment exists when the expected undiscounted future cash flows of a long-lived asset are less than its carrying value. In that event, the Corporation recognizes a loss for the difference between the carrying amount and the estimated fair value of the asset based on a quoted market price, if available, or a discounted cash flow analysis. Impairment losses are recorded in other noninterest expense.

Equipment leased to others is stated at cost less accumulated depreciation. Depreciation expense is recorded on a straight-line basis over the life of the lease considering the estimated residual value. On a periodic basis, a review is undertaken to determine if leased equipment is impaired by comparing expected undiscounted cash flows from rental income to the carrying value. An impairment loss is recognized if the carrying amount of the equipment exceeds the future expected cash flows.

Asset Securitizations: National City uses the securitization of financial assets as a source of funding. In a securitization, financial assets, including pools of credit card and automobile loans, are transferred into trusts or to SPEs in transactions which are effective under applicable banking rules and regulations to legally isolate the assets from National City Bank (the Bank), a subsidiary of the Corporation. Where the transferor is a depository institution, such as the Bank, legal isolation is accomplished through compliance with specific rules and regulations of the relevant regulatory authorities. In addition, the Corporation has from time to time purchased the guaranteed portion of Small Business Administration (SBA) loans from third-party lenders and then securitized these loans into SBA guaranteed pooled securities through the use of a fiscal and transfer agent approved by the SBA. The certificates are then sold directly to institutional investors, achieving legal isolation.

12

SFAS 140 requires a true sale analysis of the treatment of the transfer under state law as if the Corporation was a debtor under the bankruptcy code. A true sale legal analysis includes several legally relevant factors, such as the nature and level of recourse to the transferor, and the nature of retained interests in the loans sold. The analytical conclusion as to a true sale is never absolute and unconditional, but contains qualifications based on the inherent equitable powers of a bankruptcy court, as well as the unsettled state of the common law. Once the legal isolation test has been met under SFAS 140, other factors concerning the nature and extent of the transferor’s control over the transferred assets are taken into account in order to determine whether derecognition of assets is warranted, including whether the SPE has complied with rules concerning qualifying special-purpose entities.

A legal opinion regarding legal isolation has been obtained by the Bank for each credit card securitization. These opinions stated in their conclusions that the Federal Deposit Insurance Corporation (FDIC) regulation, Treatment by the Federal Deposit Insurance Corporation as Conservator or Receiver of Financial Assets Transferred by an Insured Depository Institution in Connection with a Securitization or Participation (Securitization Rule) would be applicable to the transfer of such assets. The Securitization Rule provides reasonable assurance that neither the FDIC acting as conservator or receiver for the transferring bank subsidiary, nor any other creditor of the bank, may reclaim or recover the assets from the securitization trust or recharacterize the assets as property of the transferring bank subsidiary or of the conservatorship or receivership for the bank. The opinion further reasoned, even if the Securitization Rule did not apply, then pursuant to various FDIC pronouncements, the FDIC would uphold the effectiveness of the security interest granted in the financial assets.

Legal opinions were also obtained for each automobile loan securitization, which were all structured as two-step transfers. While noting each of these transactions fall within the meaning of a securitization under the Securitization Rule, in accordance with accounting guidance, an analysis was also rendered under state law as if the transferring Bank was a debtor under the bankruptcy code. The true sale opinion obtained for each of these transactions provides reasonable assurance that the purchased assets would not be characterized as the property of the transferring bank’s receivership or conservatorship estate in the event of insolvency and also states the transferor would not be required to substantively consolidate the assets and liabilities of the purchaser SPE with those of the transferor upon such event.

The process of securitizing SBA loans into pools of SBA certificates is prescribed by the SBA and must be followed to obtain the SBA guarantee. This process meets the requirements for sale treatment under SFAS 140.

In a securitization, the trust issues beneficial interests in the form of senior and subordinated asset-backed securities backed or collateralized by the assets sold to the trust. The senior classes of the asset-backed securities typically receive investment grade credit ratings at the time of issuance. These ratings are generally achieved through the creation of lower-rated subordinated classes of asset-backed securities, as well as subordinated interests retained by an affiliate of the Corporation. In all cases, the Corporation or its affiliates may retain interests in the securitized assets, which may take the form of seller certificates, subordinated tranches, cash reserve balances or interest-only strips representing the cash flows generated by the assets in excess of the contractual cash flows required to be paid to the investors.

An SBA approved fiscal and transfer agent associated with the SBA securitizations issues certificates once all the necessary documents to support the transaction have been provided. The Corporation has retained beneficial interests in the securitized assets in the form of interest-only strips. The SBA guarantees the credit risk with respect to the loans sold.

In accordance with SFAS 140, securitized loans are removed from the balance sheet and a net gain or loss is recognized in income at the time of initial sale and each subsequent sale when the combined net sales proceeds and, if applicable, retained interests differ from the loans’ allocated carrying amount. Net gains or losses resulting from securitizations are recorded in loan sale revenue within noninterest income.

Retained interests in the subordinated tranches and interest-only strips are recorded at their fair value and included in the available-for-sale or the trading securities portfolio. Retained interests from the credit card and automobile loan securitizations are classified as available-for-sale securities. Retained interests from the SBA securitizations are classified as trading securities and are included in other investments on the Consolidated Balance Sheet. Subsequent adjustments to the fair value of retained interests classified as available for sale are recorded through accumulated other comprehensive income within stockholders’ equity, or in security losses in the income statement if the fair value has declined below the carrying amount, and such decline has been determined to be other-than-temporary. Fair value adjustments to retained interests classified as trading securities are recorded in other noninterest income while other-than-temporary impairments are recorded within security (losses) gains.

Management uses assumptions and estimates in determining the fair value allocated to the retained interests at the time of sale and each subsequent sale in accordance with SFAS 140. These assumptions and estimates include projections concerning rates charged to customers, the expected life of the loans, credit loss experience, loan repayment rates, the cost of funds, and discount rates commensurate with the risks involved. On a quarterly basis, management reviews the historical performance of each retained interest and the assumptions used to project future cash flows. If past performance or future expectations dictate, assumptions are revised and the present value of future cash flows is recalculated. Refer to Note 5 for further analysis of the assumptions used in the determination of fair value or

13

retained interests. The value of these retained interests represent National City’s maximum loss exposure with respect to securitization vehicles. The investors in the asset-backed securities issued by the SPEs have no further recourse against the Corporation if cash flows generated by the securitized assets are inadequate to service the obligations of the SPEs.

For credit card securitizations, the Corporation’s continuing involvement in the securitized assets includes maintaining an undivided, pro rata interest in all credit card assets that are in the trust, referred to as seller’s interest. The seller’s interest ranks equally with the investors’ interests in the trust. As the amount of the assets in the securitized pool fluctuates due to customer payments, purchases, cash advances, and credit losses, the carrying amount of the seller’s interest will vary. However, the Corporation is required to maintain its seller’s interest at a minimum level of 5% of the initial invested amount in each series to ensure sufficient assets are available for allocation to the investors’ interests.

Also with regard to credit card securitizations, the trust is not required to make principal payments to the investors during the revolving period, which generally approximates 48 months. Instead, the trust uses principal payments received on the accounts to purchase new credit card loans. Therefore, the principal dollar amount of the investor’s interest in the assets within the trust remains unchanged. Once the revolving period ends, the trust will distribute principal payments to the investors according to the terms of the transaction. Distribution of principal to the investors in the credit card trust may begin earlier if the average annualized yield on the loans securitized (generally equal to the sum of interest income, interchange and other fees, less principal credit losses during the period) for three consecutive months drops below a minimum yield (generally equal to the sum of the coupon rate payable to investors plus contractual servicing fees), or certain other events occur.

Transaction costs associated with revolving loan securitizations are deferred at the time of sale and amortized over the revolving term of the securitization, while transaction costs associated with fixed-term securitizations are recognized as a component of the gain or loss at the time of sale.

Servicing Assets: The Corporation periodically sells or securitizes loans while retaining the obligation to perform the servicing of such loans. In addition, the Corporation may purchase or assume the right to service loans originated by others. Whenever the Corporation undertakes an obligation to service a loan, management assesses whether a servicing asset or liability should be recognized. A servicing asset is recognized whenever the compensation for servicing is expected to exceed current market servicing prices. Likewise, a servicing liability would be recognized in the event that servicing fees to be received are not expected to adequately compensate the Corporation for its expected cost. Servicing assets related to residential real estate loans sold are separately presented on the balance sheet as mortgage servicing rights (MSRs). Servicing assets associated with the sale or securitization of commercial real estate and other consumer loans are presented within other assets on the balance sheet. The Corporation does not presently have any servicing liabilities.

All separately recognized servicing assets and/or liabilities are initially recognized at fair value. For subsequent measurement of servicing rights, the Corporation has elected the fair value method for MSRs while all other servicing assets follow the amortization method. Under the fair value measurement method, MSRs are recorded at fair value each reporting period, and changes in fair value are reported in loan servicing revenue in the income statement. Under the amortization method, other servicing assets are amortized in proportion to, and over the period of, estimated servicing income and assessed for impairment based on fair value at each reporting period. Contractual servicing fees including ancillary income and late fees, fair value adjustments, associated derivative gains and losses, and impairment losses, if any, are reported in loan servicing revenue in the income statement.

The fair value of MSRs is estimated by using a cash flow valuation model which calculates the present value of estimated future net servicing cash flows, taking into consideration actual and expected mortgage loan prepayment rates, discount rates, servicing costs, and other economic factors, which are determined based on current market condition. Expected mortgage loan prepayment assumptions are derived from an internal proprietary model and consider empirical data drawn from the historical performance of the Corporation’s managed portfolio. Prepayment rates have a lesser impact on the value of servicing assets associated with commercial real estate loans as these loans have lockout and prepayment penalties generally ranging from five to nine years.

Future interest rates are another significant factor in the valuation of MSRs.  In the second quarter of 2007, the Corporation refined its MSR valuation model to incorporate market implied forward interest rates to estimate the future direction of mortgage and discount rates.  The forward rates utilized are derived from the current yield curve for U.S. dollar interest rate swaps and are consistent with pricing of capital markets instruments.  In prior periods, the MSR valuation model assumed that interest rates remained constant over the life of the servicing asset cash flows.

Derivative Instruments: The Corporation enters into derivative transactions principally to protect against the risk of adverse price or interest-rate movements on the value of certain assets and liabilities and on future cash flows. In addition, certain contracts and commitments, such as mortgage loan commitments, are defined as derivatives under generally accepted accounting principles.

Under the requirements of SFAS 133, Accounting for Derivative Instruments and Hedging Activities, as amended, all derivative instruments are carried at fair value on the balance sheet. SFAS 133 provides special hedge accounting provisions, which permit the

14

change in the fair value of the hedged item related to the risk being hedged to be recognized in earnings in the same period and in the same income statement line as the change in the fair value of the derivative.

Derivative instruments designated in a hedge relationship to mitigate exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest-rate risk, are considered fair value hedges under SFAS 133. Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. The Corporation formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking each hedge transaction.

Fair value hedges are accounted for by recording the fair value of the derivative instrument, the fair value of the hedged risk of the hedged asset or liability, with corresponding offsets recorded in the income statement. The fair values of derivatives are recorded as freestanding assets or liabilities on the balance sheet, while fair value adjustments to the hedged assets or liabilities are included in the basis of the hedged items. Actual cash receipts or payments and related amounts accrued during the period on derivatives included in a fair value hedge relationship are recorded as adjustments to the income or expense recorded on the hedged asset or liability.

Cash flow hedges are accounted for by recording the fair value of the derivative instrument on the balance sheet as either a freestanding asset or liability, with a corresponding offset recorded in accumulated other comprehensive income within stockholders’ equity, net of tax. Amounts are reclassified from accumulated other comprehensive income to the income statement in the period or periods the hedged forecasted transaction affects earnings.

Under both the fair value and cash flow hedge methods, derivative gains and losses not effective in hedging the change in fair value or expected cash flows of the hedged item are recognized immediately in the income statement. At the hedge’s inception and at least quarterly thereafter, a formal assessment is performed to determine whether changes in the fair values or cash flows of the derivative instruments have been highly effective in offsetting changes in the fair values or cash flows of the hedged items and whether they are expected to be highly effective in the future. If it is determined a derivative instrument has not been or will not continue to be highly effective as a hedge, hedge accounting is discontinued. When this occurs, SFAS 133 basis adjustments recorded on hedged assets and liabilities are amortized over the remaining life of the hedged item beginning no later than when hedge accounting ceases.

Share-Based Payment: Compensation cost is recognized for stock options and restricted stock awards issued to employees. Compensation cost is measured as the fair value of these awards on their date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Corporation’s common stock at the date of grant is used to estimate the fair value of restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period for stock option awards and as the restriction period for restricted stock awards. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. When an award is granted to an employee who is retirement eligible, compensation cost of these awards is recognized over the period up to the date the employee first becomes eligible to retire.

Advertising Costs: Advertising costs are generally expensed as incurred.

Income Taxes: The Corporation and its subsidiaries file a consolidated federal income tax return. The provision for income taxes is based upon income in the consolidated financial statements, rather than amounts reported on the income tax return. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date.

Positions taken in the Corporation’s tax returns may be subject to challenge by the taxing authorities upon examination. Uncertain tax positions are initially recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions are both initially and subsequently measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement with the tax authority, assuming full knowledge of the position and all relevant facts. The Corporation provides for interest and, in some cases, penalties on tax positions that may be challenged by the taxing authorities. Interest expense is recognized beginning in the first period that such interest would begin accruing. Penalties are recognized in the period that the Corporation claims the position in the tax return. Interest and penalties on income tax uncertainties are classified within income tax expense in the income statement.

Stock Repurchases: The Corporation periodically repurchases shares of its outstanding common stock through open market purchases or other methods. Repurchased shares are recorded as treasury shares on the trade date using the par value method, and the cash paid is allocated to common stock, capital surplus, and retained earnings. Treasury shares are available for reissuance upon exercise of employee stock awards.

15

2.  Recent Accounting Pronouncements

Accounting for Uncertainty in Income Taxes: In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, an interpretation of SFAS 109, Accounting for Income Taxes. FIN 48 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under FIN 48, tax positions shall initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions shall initially and subsequently be measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement with the tax authority assuming full knowledge of the position and all relevant facts. FIN 48 also revises disclosure requirements to include an annual tabular rollforward of uncertain tax positions. The provisions of this interpretation were adopted by the Corporation on January 1, 2007. Upon adoption, the Corporation increased its reserves for uncertain tax positions by $31 million which was recognized by way of a cumulative effect adjustment to retained earnings ($24 million net of tax).

Fair Value Option: In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. This statement allows a company to elect to measure certain financial assets and financial liabilities at fair value. This statement also requires disclosure of additional information to identify the effects of a company’s fair value election on its earnings. National City plans to elect the fair value option for mortgage loans held for sale, currently designated in SFAS 133 hedge relationships, and a portion of its commercial real estate loans held for sale portfolio, effective January 1, 2008. The impact of adoption on the financial condition, results of operations, and liquidity is not yet determinable.

Fair Value Measurements: In September 2006, the FASB issued SFAS 157, Fair Value Measurements, which upon adoption will replace various definitions of fair value in existing accounting literature with a single definition, will establish a framework for measuring fair value, and will require additional disclosures about fair value measurements. SFAS 157 clarifies that fair value is the price that would be received to sell an asset or the price paid to transfer a liability in the principal or most advantageous market available to the entity and emphasizes that fair value is a market-based measurement and should be based on the assumptions market participants would use. The statement also creates a three-level hierarchy under which individual fair value estimates are to be ranked based on the relative reliability of the inputs used in the valuation. This hierarchy is the basis for the disclosure requirements, with fair value estimates based on the least reliable inputs requiring more extensive disclosures about the valuation method used and the gains and losses associated with those estimates. SFAS 157 is required to be applied whenever another financial accounting standard requires or permits an asset or liability to be measured at fair value. The statement does not expand the use of fair value to any new circumstances. The Corporation will be required to apply the new guidance beginning January 1, 2008. The impact of adoption on the financial condition, results of operations, and liquidity is not expected to be material.

Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans: In September 2006, the FASB issued SFAS 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans. On December 31, 2006, the Corporation adopted the recognition and disclosure provisions of this statement which resulted in the recording of the funded status of its pension and postretirement plans as either assets or liabilities on the Consolidated Balance Sheet, the recording of unrecognized actuarial gains/losses, prior service costs, and transition obligations totaling $71 million as a separate component of accumulated other comprehensive income, net of tax. SFAS 158 also requires the Corporation to change the date used to measure its defined benefit pension and other postretirement obligations from October 31 to December 31. The measurement date change will be effective as of December 31, 2008. The incremental pension cost recognized as a result of this change in measurement date will be recorded as an adjustment to retained earnings. The measurement date change is not expected to have a material impact on financial condition, results of operations, or liquidity.

Accounting for Certain Hybrid Financial Instruments: In February 2006, the FASB issued SFAS 155, Accounting for Certain Hybrid Financial Instruments, which amends SFAS 133 and SFAS 140. SFAS 155 requires entities to evaluate and identify whether interests in securitized financial assets are freestanding derivatives, hybrid financial instruments that contain an embedded derivative requiring bifurcation, or hybrid financial instruments that contain embedded derivatives that do not require bifurcation. SFAS 155 also permits fair value measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. This statement was effective for all financial instruments acquired or issued by the Corporation on or after January 1, 2007. The adoption of this statement did not have a material impact on financial condition, results of operations, or liquidity.

Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction: In July 2006, the FASB issued FASB Staff Position (FSP) 13-2, Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction. This FSP amends SFAS 13, Accounting for Leases, to require a lessor in a leveraged lease transaction to recalculate the leveraged lease for the effects of a change or projected change in the timing of cash flows relating to income taxes that are generated by the leveraged lease. The Corporation adopted FSP 13-2 on January 1, 2007, and the adoption did not have a material impact on financial condition, results of operations, or liquidity.

Amendment of FASB Interpretation No. 39: In April 2007, the FASB issued FSP 39-1, Amendment of FASB Interpretation No. 39, Offsetting of Amounts Related to Certain Contracts. FSP 39-1 permits companies to offset fair value amounts recognized for multiple

16

derivative instruments executed with the same counterparty under a master netting agreement. FSP 39-1 clarifies that the fair value amounts recognized for the right to reclaim cash collateral, or the obligation to return cash collateral, arising from the same master netting arrangement, may also be offset against the fair value of the related derivative instruments. The Corporation will have a choice as to whether or not it wants to offset the fair values of its collateral received/pledged against the fair value of the related derivative instruments. The guidance in this FSP will be effective as of January 1, 2008, with earlier application permitted. The Corporation has historically presented all of its derivative positions and related collateral on a gross basis. Management is pursuing master netting agreements with its major derivative counterparties which would enable netting of derivative positions under FIN 39, as amended by FSP 39-1. Subject to master netting agreements being in place, management plans to adopt a net presentation for its offsetting derivative positions and related cash collateral effective January 1, 2008.

Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards: In June 2007, the FASB ratified the consensus reached in EITF 06-11, Accounting for Income Tax Benefits on Share-Based Payment Awards. EITF 06-11 applies to entities that have share-based payment arrangements that entitle employees to receive dividends or dividend equivalents on equity-classified nonvested shares when those dividends or dividend equivalents are charged to retained earnings and result in an income tax deduction. Entities that have share-based payment arrangements that fall within the scope of this EITF will be required to increase additional paid in capital for any realized income tax benefit associated with dividends or dividend equivalents paid to employees for equity classified nonvested equity awards. Any increase recorded to additional paid in capital is required to be included in an entity’s pool of excess tax benefits that are available to absorb potential future tax deficiencies on share-based payment awards. EITF 06-11 will be required to be adopted prospectively on January 1, 2008. The adoption of this EITF is not expected to have a material impact on financial condition, results of operations, or liquidity.

3.  Acquisitions and Divestitures

Acquisitions: On May 1, 2006, in a cash transaction, the Corporation completed its acquisition of Forbes First Financial Corporation (Pioneer), a privately held bank holding company operating eight branches in the St. Louis, Missouri, metropolitan area through its subsidiary Pioneer Bank. As of the acquisition date, the fair value of Pioneer’s loans and deposits were $372 million and $430 million, respectively. Goodwill and intangibles resulting from this acquisition total $60 million.

On December 1, 2006, the Corporation completed its acquisition of Harbor Florida Bancshares, Inc. (Harbor), a banking company operating 42 branches along the central east coast of Florida through its subsidiary Harbor Federal Savings Bank. Under the terms of the agreement, each share of Harbor common stock was exchanged for 1.2206 shares of National City common stock. Approximately 29 million shares of National City common stock were issued in conjunction with this transaction. The common shares issued were valued at $36.68 per share, representing the average of closing market prices for two days prior and subsequent to the date the exchange ratio was finalized. The total cost of the transaction was $1.1 billion, and included $14 million for the fair value of stock options exchanged.

On January 5, 2007, the Corporation completed its acquisition of Fidelity Bankshares, Inc. (Fidelity), a banking company operating 52 branches along Florida’s southeast coast through its subsidiary Fidelity Federal Bank & Trust. Under the terms of the agreement, Fidelity shareholders elected to receive either $39.50 in cash or 1.0977 shares of National City common stock for each share of Fidelity stock outstanding. Shareholder elections were subject to an allocation process that resulted in 50% of Fidelity’s outstanding shares being exchanged for cash and 50% exchanged for National City common stock, resulting in the issuance of approximately 14 million shares of National City common stock and a cash payment of $506 million. The common shares were valued at $36.16 per share, representing the average of closing market prices for two days prior and subsequent to the date the merger was announced. The total cost of the transaction was $1.0 billion, including $20 million related to stock options settled in cash.

On September 1, 2007, the Corporation completed its acquisition of MAF Bancorp, Inc. (MAF), a banking company operating 82 branches throughout Chicago and Milwaukee and surrounding areas. Under the terms of the agreement, each share of MAF common stock was exchanged for 1.9939 shares of National City common stock. Approximately 67 million shares of National City common stock were issued in conjunction with this transaction. The common shares issued were valued at $27.16 per share, representing the average of closing market prices for two days prior and subsequent to the date the exchange ratio was finalized. The total cost of the transaction was $1.8 billion, and included $35 million for the fair value of stock options exchanged.

Assets and liabilities of acquired entities are recorded on the Consolidated Balance Sheet at estimated fair values as of respective acquisition dates, and the results of acquired entity operations are included in the Consolidated Statement of Income from those dates. The fair values of acquired assets and liabilities, including identifiable intangible assets, are finalized as quickly as possible following an acquisition. The purchase price allocations for Harbor and Fidelity are substantially complete. As of September 30, 2007, elements of the MAF purchase price allocation which were not yet finalized included fair values assigned to acquired real property, other identifiable intangible assets, certain assumed benefit plan obligations and various other matters. The Corporation is awaiting the results of third-party valuations and other information to finalize the fair values of these acquired assets and liabilities. The Corporation expects to substantially complete these purchase price allocations during the fourth quarter of 2007. Valuations are subject to revision, however, as additional

17

information becomes available and exit plans are finalized. Purchase accounting adjustments determinable within 12 months of acquisition date result in adjustments to goodwill.

The following table shows the excess purchase price over carrying value of net assets acquired, purchase price allocation and resulting goodwill recorded to date for recent acquisitions.

(In Thousands)	Harbor			Fidelity			MAF
Purchase price	$	1,080,145		$	1,034,828		$	1,844,522
Carrying value of net assets acquired		(344,162	)		(269,008	)		(698,718	)
Excess of purchase price over carrying value of net assets acquired		735,983			765,820			1,145,804
Purchase accounting adjustments
Securities		9,699			(531	)		965
Loans		(29,852	)		(52,929	)		(9,770	)
Loans Held for Sale		—			—			(914	)
Premises and equipment		(26,643	)		(38,384	)		15,852
Mortgage servicing rights		(3,253	)		(3,749	)		(18,374	)
Other assets		(9,039	)		(440	)		19,991
Deposits		(1,244	)		(1,416	)		(5,013	)
Borrowings		(769	)		2,854			(2,628	)
Severance and exit costs		11,236			31,612			45,426
Other liabilities		24,471			22,663			6,345
Deferred taxes		28,353			66,127			38,157
Subtotal		738,942			791,627			1,235,841
Core deposit intangibles		(36,935	)		(84,972	)		(154,103	)
Other identifiable intangible assets		(9,108	)		(2,060	)		—
Goodwill	$	692,899		$	704,595		$	1,081,738

The following table summarizes the estimated fair value of net assets acquired related to recent acquisitions.

(In Thousands)	Harbor		Fidelity		MAF
Assets
Cash and cash equivalents	$	242,124	$	142,483	$	141,860
Federal funds sold		—		—		107,709
Securities		389,869		628,068		1,820,853
Loans, net of allowance for loan losses		2,638,892		3,569,353		7,074,697
Premises and other equipment		88,177		132,811		149,533
Goodwill and other intangibles		738,942		791,627		1,235,841
Mortgage servicing rights		4,741		7,074		37,480
Other assets		63,206		95,096		339,999
Total Assets		4,165,951		5,366,512		10,907,972
Liabilities
Deposits		2,389,861		3,375,712		7,348,582
Borrowings		614,680		763,931		1,473,782
Other liabilities		81,265		192,041		241,086
Total Liabilities		3,085,806		4,331,684		9,063,450
Fair value of net assets acquired	$	1,080,145	$	1,034,828	$	1,844,522

18

The following unaudited pro forma consolidated financial information presents the combined results of operations of the Corporation as if the Pioneer, Harbor, Fidelity and MAF acquisitions had occurred as of the beginning of 2006 and 2007, respectively.

	Three Months Ended					Nine Months Ended
(In Thousands)	September 30, 2007			September 30, 2006		September 30, 2007		September 30, 2006
Net interest income	$	1,133,107		$	1,254,080	$	3,436,707	$	3,813,558
Provision for credit losses		361,544			75,013		618,309		165,089
Net interest income after provision for credit losses		771,563			1,179,067		2,818,398		3,648,469
Noninterest income		638,736			913,298		2,068,690		2,421,569
Noninterest expense		1,436,993			1,311,081		3,913,311		3,900,834
(Loss) Income before income tax (benefit) expense		(26,694	)		781,284		973,777		2,169,204
Income tax (benefit) expense		(17,969	)		243,803		299,796		685,940
Net (Loss) Income	$	(8,725	)	$	537,481	$	673,981	$	1,483,264
Net (Loss) Income Per Common Share
Basic	$	(.01	)	$	.75	$	1.02	$	2.07
Diluted		(.01	)		.74		1.01		2.03
Average Common Shares Outstanding
Basic		632,558,681			712,958,344		656,855,601		717,430,631
Diluted		638,524,069			724,398,700		666,120,642		728,816,678

The pro forma results include amortization of fair value adjustments on loans, deposits, and debt, amortization of newly created intangibles and post-merger acquisition related charges. The pro forma number of average common shares outstanding includes adjustments for shares issued for the acquisitions and the impact of additional dilutive securities but does not assume any incremental share repurchases. The pro forma results presented do not reflect cost savings or revenue enhancements anticipated from the acquisitions and are not necessarily indicative of what actually would have occurred if the acquisitions had been completed as of the beginning of the periods presented, nor are they necessarily indicative of future consolidated results.

Divestitures: On December 30, 2006, the Corporation completed the sale of its First Franklin nonconforming mortgage origination network and related servicing platform. The Corporation recognized a pretax gain of $984 million or $622 million after tax on this transaction. The purchase price and the resulting gain are subject to adjustment based on the closing date values of assets and liabilities sold, as well as other negotiated matters. The amount of such adjustment, if any, is not determinable at this time. Refer to Note 21 for further discussion regarding potential purchase price adjustments.

4. Restructuring Charges

Restructuring programs consist of our Best in Class initiative, acquisition and divestiture related activities as well as other strategic initiatives including as our recent downsizing of our mortgage operations.

Best In Class is a series of projects designed to drive long-term performance improvement and cultural change. Restructuring costs related to the program include employee severance, lease exits, contract terminations, asset impairment, and other items. The Corporation did not recognize any significant costs related to Best In Class during the three-month periods ended September 30, 2007 and September 30, 2006. Restructuring charges for the nine months ended September 30, 2007 and September 30, 2006 were $1 million and $7 million, respectively. The charges were primarily related to severance benefits. Charges recognized since the inception of the program total $77 million, substantially all recorded within the Parent and Other segment. As of September 30, 2007, payments related to the Best In Class restructuring liability are scheduled to occur through August 2008 for severance benefits and through December 2010 for lease obligations on vacated facilities.

The Corporation has also implemented restructuring plans related to the integration of recently acquired entities. These plans are formulated prior to each acquisition. Costs incurred for acquisition-related employee terminations consist of severance, retention, and outplacement benefits. Severance and outplacement benefit costs are recognized in the allocation of the purchase price to acquired assets and liabilities. Retention benefits are recorded to salaries expense over the required service period. Exit and termination costs relating to the exit of certain businesses, facility leases, and other contract termination costs are also recognized in the allocation of the purchase price to acquired assets and liabilities. The activity shown in the table below includes severance and restructuring costs associated with the MAF Bancorp acquisition completed on September 1, 2007.

19

During the three-month periods ended September 30, 2007 and September 30, 2006, the Corporation recorded expense of $26 million and $14 million, respectively. The 2007 charges are primarily related to severance and other restructuring costs for downsizing our mortgage operations. In the third quarter a year ago, the charges primarily reflect severance and other employee-related termination costs related to acquisitions and divestitures. Restructuring costs for the nine-month periods ended September 30, 2007 and September 30, 2006 totaled $36 million and $19 million, respectively. The three and nine-month periods ended September 30, 2007 included acquisition-related retention benefits expense of $3 million and $5 million, respectively. The three- and nine-month periods ended September 30, 2006 included divestiture-related retention benefits expense of $3 million. Payments will continue to be made for acquisition-related restructuring plan costs through 2010 for severance benefits and 2013 for lease obligations on vacated facilities.

Severance and other employee-related restructuring costs not associated with acquisitions are recorded in salaries, benefits and other personnel costs in the income statement. Other restructuring costs, which consist primarily of consulting and lease exit costs unrelated to acquisitions, are recorded in third-party services and other noninterest expense, respectively, in the income statement.

Activity in the severance and restructuring liability for the three- and nine-month periods ended September 30, 2007 and 2006 is presented in the following table. Severance costs shown below include those costs incurred in the normal course of business. The majority of severance and other termination expenses are recorded as unallocated corporate charges within the Parent and Other segment. However, for the three and nine months ended September 30, 2007, severance and other employee-related costs of $19 million were recorded within the Mortgage Banking segment.

	Three Months Ended									Nine Months Ended
	September 30, 2007									September 30, 2007
				Best In			Acquisitions						Best In			Acquisitions
(In Thousands)	Total			Class			and Other			Total			Class			And Other
Beginning balance	$	52,185		$	10,749		$	41,436		$	72,604		$	15,219		$	57,385
Severance and other employee related costs:
Charged to expense		25,957			(76	)		26,033			37,428			1,240			36,188
Recognized in purchase price allocation		47,111			—			47,111			62,373			—			62,373
Payments		(19,212	)		(1,263	)		(17,949	)		(64,848	)		(5,769	)		(59,079	)
Exit costs, contract terminations and other:
Charged to expense		1,902			(3	)		1,905			3,029			43			2,986
Recognized in purchase price allocation		7,753			—			7,753			15,799			—			15,799
Payments		(4,027	)		(150	)		(3,877	)		(14,716	)		(1,476	)		(13,240	)
Ending balance	$	111,669		$	9,257		$	102,412		$	111,669		$	9,257		$	102,412

	Three Months Ended									Nine Months Ended
	September 30, 2006									September 30, 2006
				Best In			Acquisitions						Best In			Acquisitions
(In Thousands)	Total			Class			and Other			Total			Class			And Other
Beginning balance	$	60,564		$	24,289		$	36,275		$	87,853		$	47,690		$	40,163
Severance and other employee related costs:
Charged to expense		12,135			(1,688	)		13,823			24,657			5,535			19,122
Recognized in purchase price allocation		(136	)		—			(136	)		(379	)		—			(379	)
Payments		(11,932	)		(6,061	)		(5,871	)		(47,048	)		(34,482	)		(12,566	)
Exit costs, contract terminations and other:
Charged to expense		257			257			—			1,944			1,944			—
Recognized in purchase price allocation		—			—			—			1,142			—			1,142
Payments		(1,756	)		(761	)		(995	)		(9,037	)		(4,651	)		(4,386	)
Ending balance	$	59,132		$	16,036		$	43,096		$	59,132		$	16,036		$	43,096

During the fourth quarter of 2007, the Corporation expects to incur additional severance related expense of approximately $40 million related to company-wide workforce reductions. The majority of these costs are expected to be recorded within the Parent and Other segment.

5.  Securitization Activity

The Corporation has securitized pools of credit card, automobile, and Small Business Administration (SBA) loans. Recent securitization activities are described below.

20

Credit Card: In the first quarter of 2007, the Corporation securitized a $425 million pool of credit card receivables (Series 2007-1) following the maturity of its Series 2002-1 securitization. A pretax gain of approximately $2 million was recognized on this transaction within loan sale revenue. Retained interests of $31 million were recognized at the date of sale. Retained interests included a seller’s interest in the loans, accrued interest, and an interest-only strip. The initial carrying values were determined by allocating the carrying value among the assets sold and retained based on their relative fair values at the date of sale. The fair value of the interest-only strip was estimated by discounting the projected future cash flows of this security. The Corporation retained the right to service these loans. Servicing fees to be received approximated the current market rate for servicing fees; therefore, no servicing asset or liability was recognized. Transaction costs of $2 million were capitalized and are being amortized over the revolving period of this securitization of four years.

In the first quarter of 2006, the Corporation securitized a $425 million pool of credit card receivables (Series 2006-1) following the maturity of its Series 2001-1 securitization. A pretax gain of $2 million was recognized on this transaction within loan sale revenue. Retained interests in these loans of $28 million were recognized at the date of sale. Retained interests included a seller’s interest in the loans, accrued interest, and an interest-only strip. The initial carrying values of these retained interests were determined by allocating the carrying value among the assets sold and retained based on their relative fair values at the date of sale. The fair value of the interest-only strip was estimated by discounting the projected future cash flows of this security. The Corporation has also retained the right to service these loans. Servicing fees to be received approximated the current market rate for servicing fees; therefore, no servicing asset or liability was recognized. Transaction costs associated with this revolving-term securitization of $1 million were capitalized and are being amortized over the revolving period of this securitization of four years.

At the inception of each securitization, the assumptions used to value retained interests were as follows:

	Weighted-		Variable			Monthly			Expected
	Average		Annual			Principal			Annual			Annual
	Life		Coupon Rate			Repayment			Credit			Discount
	(in months)		To Investors			Rate			Losses			Rate			Yield
Credit Card Loans:
Interest-only strip (Series 2005-1)		3.2		3.75	%		18.21	%		5.35	%		15.00	%		12.00	%
Interest-only strip (Series 2006-1)		3.1		4.81			19.01			4.77			15.00			13.79
Interest-only strip (Series 2007-1)		3.1		5.39			19.19			4.04			15.00			13.13

	Weighted-		Monthly			Expected
	Average		Prepayment			Cumulative			Annual			Weighted-
	Life		Speed			Credit			Discount			Average
	(in months)		(% ABS)			Losses			Rate			Coupon
Automobile Loans:
Interest-only strip (Series 2004-A)		21.8		1.50	%		1.75	%		12.00	%		6.79	%
Servicing asset (Series 2004-A)		21.8		1.50			1.75			11.00			6.79
Interest-only strip (Series 2005-A)		16.6		1.50			2.18			12.00			7.06
Servicing asset (Series 2005-A)		12.5		1.50			2.18			10.00			7.06

A summary of the components of managed loans, representing both owned and securitized loans, along with quantitative information about delinquencies and net credit losses follows:

					Three Months Ended				Nine Months Ended
	As of September 30, 2007				September 30, 2007				September 30, 2007
			Loans Past
			Due 30
	Principal		Days or		Average		Net Credit		Average		Net Credit
(In Millions)	Balance		More		Balances		Losses		Balances		Losses
Type of loan:
Credit Card	$	2,946.0	$	114.6	$	2,884.1	$	28.4	$	2,734.2	$	85.9
Automobile		929.1		25.4		1,029.2		2.4		1,254.6		8.1
SBA		181.2		11.8		194.9		—		213.1		—
Total loans managed or securitized		4,056.3		151.8		4,108.2		30.8		4,201.9		94.0
Less loans securitized:
Credit Card		1,450.0		50.1		1,450.0		14.4		1,328.6		39.7
Automobile		839.2		19.5		922.2		2.4		1,118.5		8.5
SBA		181.2		11.8		194.9		—		213.1		—
Less loans held for securitization:
Credit Card		—		—		—		—		121.4		—
Loans held in portfolio	$	1,585.9	$	70.4	$	1,541.1	$	14.0	$	1,420.3	$	45.8

21

					Three Months Ended				Nine Months Ended
	As of September 30, 2006				September 30, 2006				September 30, 2006
			Loans Past
			Due 30
	Principal		Days or		Average		Net Credit		Average		Net Credit
(In Millions)	Balance		More		Balances		Losses		Balances		Losses
Type of loan:
Credit Card	$	2,439.3	$	106.6	$	2,408.3	$	24.5	$	2,374.0	$	68.1
Automobile		1,896.0		39.9		2,053.5		3.8		2,411.1		12.6
SBA		159.0		27.8		97.8		—		64.3		—
Total loans managed or securitized		4,494.3		174.3		4,559.6		28.3		4,849.4		80.7
Less loans securitized:
Credit Card		1,450.0		56.7		1,450.0		14.8		1,313.1		35.7
Automobile		1,668.2		25.3		1,801.2		4.4		2,133.5		11.4
SBA		159.0		27.8		97.8		—		64.3		—
Less loans held for securitization:
Credit Card		—		—		—		—		137.0		—
Loans held in portfolio	$	1,217.1	$	64.5	$	1,210.6	$	9.1	$	1,201.5	$	33.6

Certain cash flows received from the securitization trusts follow:

	Three Months Ended						Nine Months Ended
	September 30, 2007						September 30, 2007
	Credit						Credit
(In Millions)	Card		Automobile		SBA		Card		Automobile		SBA
Proceeds from new securitizations	$	—	$	—	$	—	$	425.0	$	—	$	—
Proceeds from collections reinvested in previous securitizations		810.7		—		—		2,230.1		—		—
Servicing fees received		7.3		2.4		—		20.0		8.6		—
Other cash flows received on interests that continue to be held		22.5		1.1		.6		59.5		4.2 1		.9
Proceeds from sales of previously charged-off accounts		.5		—		—		2.7		—		—
Purchases of delinquent or foreclosed assets		—		—		—		—		—		—

	Three Months Ended								Nine Months Ended
	September 30, 2006								September 30, 2006
	Credit						Credit				Home
(In Millions)	Card		Automobile		SBA		Card		Automobile		Equity		SBA
Proceeds from new securitizations	$	—	$	—	$	130.1	$	425.0	$	—	$	—	$	130.1
Proceeds from collections reinvested in previous securitizations		874.9		—		—		2,334.8		—		—		—
Servicing fees received		7.3		4.6		—		19.6		16.2		—		—
Other cash flows received on interests that continue to be held		28.7		2.7		.3		65.2		27.7		—		.9
Proceeds from sales of previously charged-off accounts		.4		—		—		4.4		—		—		—
Purchases of delinquent or foreclosed assets		—		—		—		—		—		.1		—

The Corporation holds certain interests in securitized credit card and automobile loans consisting of interest-only strips and servicing assets. The table below presents the weighted-average assumptions used to measure the fair values of these retained interests as of September 30, 2007. The sensitivity of these fair values to immediate 10% and 20% adverse changes in key assumptions is also shown. These sensitivities are hypothetical. Changes in fair value based on a 10% variation in assumptions generally cannot be extrapolated because the relationship of the change in the assumption to the change in fair value may not be linear. Also, the effect of a variation in a

22

particular assumption on the fair value of the retained interests is calculated without changing any other assumption; in reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments and increased credit losses), which might magnify or counteract the sensitivities.

			Weighted-		Variable			Monthly			Expected
			Average		Annual			Principal			Annual			Annual
	Fair		Life		Coupon Rate to			Repayment			Credit			Discount
(Dollars in Millions)	Value		(in months)		Investors			Rate			Losses			Rate			Yield
Credit Card Loans
Interest-only strips	$	5.7		3.2		5.20	%		18.68	%		4.20	%		15.00	%		12.98	%
Decline in fair value of 10% adverse change					$	2.0		$	0.4		$	1.6		$	—		$	4.8
Decline in fair value of 20% adverse change						3.8			0.7			3.1			—			5.6

			Weighted-		Monthly			Expected
			Average		Prepayment			Cumulative			Annual			Weighted-
	Fair		Life		Speed			Credit			Discount			Average
(Dollars in Millions)	Value		(in months)		(% ABS)(a)			Losses			Rate			Coupon
Automobile Loans
Interest-only strip	$	13.8		4.0		1.26	%		1.66	%		12.00	%		7.02	%
Decline in fair value of 10% adverse change					$	—		$	2.6		$	0.2		$	3.8
Decline in fair value of 20% adverse change						—			5.9			0.4			6.1
Servicing asset(b)	$	4.9		6.8		1.26	%		1.66	%		10.13	%		7.02	%
Decline in fair value of 10% adverse change					$	0.3		$	—		$	—		$	—
Decline in fair value of 20% adverse change						0.6			—			0.1			—

(a)	Absolute prepayment speed.
(b)	Carrying value of servicing asset at September 30, 2007 was $3 million.

6.  Leases

National City leases commercial equipment and automobiles to customers. The leases are classified as either lease financings or operating leases based on the terms of the lease arrangement. When a lease is classified as a lease financing, the future lease payments, net of unearned income and the estimated residual value of the leased property at the end of the lease term, are recorded as an asset within the loan portfolio. The amortization of the unearned income is recorded as interest income. When a lease is classified as an operating lease, the cost of the leased property, net of depreciation, is recorded as equipment leased to others on the balance sheet. Rental income is recorded in noninterest income while the depreciation on the leased property is recorded in noninterest expense. At the expiration of a lease, the leased property is either sold or a new lease agreement is initiated.

Lease Financings: Lease financings, included in portfolio loans on the Consolidated Balance Sheet, consist of direct financing and leveraged leases of commercial and other equipment, primarily computers and office equipment, manufacturing and mining equipment, commercial trucks and trailers, airplanes, medical, construction, data processing, along with retail automobile lease financings. Commercial equipment lease financings are included in commercial leases, while automobile lease financings are included in other consumer loans. The Corporation no longer originates automobile leases; accordingly, the retail portfolio will run off over time as the leases expire and the automobiles are sold.

A summary of lease financings by type follows:

	September 30		December 31		September 30
(In Thousands)	2007		2006		2006
Commercial
Direct financings	$	4,241,453	$	3,868,271	$	3,591,651
Leveraged leases		157,793		214,669		220,005
Total commercial lease financings		4,399,246		4,082,940		3,811,656
Consumer
Retail automobile lease financings		179,412		299,704		326,982
Total net investment in lease financings	$	4,578,658	$	4,382,644	$	4,138,638

23

The components of the net investment in lease financings by type follow:

	September 30			December 31			September 30
(In Thousands)	2007			2006			2006
Commercial
Lease payments receivable	$	4,660,348		$	4,260,255		$	3,926,052
Estimated residual value of leased assets		387,822			408,809			417,463
Gross investment in commercial lease financings		5,048,170			4,669,064			4,343,515
Unearned income		(648,924	)		(586,124	)		(531,859	)
Total net investment in commercial lease financings	$	4,399,246		$	4,082,940		$	3,811,656
Consumer
Lease payments receivable	$	53,916		$	117,176		$	140,667
Estimated residual value of leased assets		133,449			201,723			210,341
Gross investment in consumer lease financings		187,365			318,899			351,008
Unearned income		(7,953	)		(19,195	)		(24,026	)
Total net investment in consumer lease financings	$	179,412		$	299,704		$	326,982

A rollforward of the residual value component of lease financings by type follows:

	Three Months Ended						Nine Months Ended
	September 30						September 30
(In Thousands)	2007			2006			2007			2006
Commercial
Beginning balance	$	378,076		$	466,211		$	408,809		$	482,049
Additions		32,563			19,167			91,645			56,017
Runoff		(22,817	)		(67,915	)		(112,632	)		(113,923	)
Write-downs		—			—			—			(6,680	)
Ending balance	$	387,822		$	417,463		$	387,822		$	417,463
Consumer
Beginning balance	$	162,649		$	218,912		$	201,723		$	231,582
Runoff		(29,200	)		(8,571	)		(68,274	)		(21,241	)
Ending balance	$	133,449		$	210,341		$	133,449		$	210,341

Equipment Leased to Others: Equipment leased to others represents equipment owned by National City that is leased to customers under operating leases. Commercial equipment includes aircraft and other transportation, manufacturing, construction, data processing, medical, and office equipment leased to commercial customers while consumer equipment consists of automobiles leased to retail customers. The totals below also include the carrying value of any equipment previously leased to customers under either operating or financing leases that are in the process of being either re-leased or sold.

A summary of the net carrying value of equipment leased to others by type follows:

	September 30			December 31			September 30
(In Thousands)	2007			2006			2006
Commercial
Cost	$	564,298		$	616,787		$	590,001
Accumulated depreciation		(187,454	)		(151,358	)		(148,346	)
Net carrying value of commercial leased equipment		376,844			465,429			441,655
Consumer
Cost		37,611			160,430			221,054
Accumulated depreciation		(7,049	)		(52,907	)		(68,406	)
Net carrying value of consumer leased equipment		30,562			107,523			152,648
Total net carrying value of equipment leased to others	$	407,406		$	572,952		$	594,303

7.  Loans, Allowance for Loan Losses and Allowance for Losses on Lending-Related Commitments

Total portfolio loans outstanding were recorded net of unearned income, unamortized premiums and discounts, deferred loan fees and costs, and fair value adjustments associated with acquired loans of $429 million, $387 million, and $355 million, at September 30, 2007, December 31, 2006, and September 30, 2006, respectively. Loans held for sale are recorded at lower of cost or market on an aggregate basis by loan type. The valuation allowance recognized to reduce the carrying value of mortgage loans held for sale to fair value was $45 million at September 30, 2007, $65 million at December 31, 2006, and $16 million at September 30, 2006.

24

The Corporation has the option to repurchase certain delinquent loans that were sold in prior periods. The Corporation has recognized these loans and the related repurchase obligation on its balance sheet as follows:

	September 30		December 31		September 30
(In Millions)	2007		2006		2006
Residential real estate portfolio loans	$	287	$	297	$	269
Commercial real estate loans held for sale		7		8		15
Other borrowed funds	$	294	$	305	$	284

To provide for probable losses in the loan portfolio, National City maintains an allowance for loan losses and an allowance for losses on lending-related commitments.

Activity in the allowance for loan losses follows:

	Three Months Ended					Nine Months Ended
	September 30					September 30
(In Thousands)	2007		2006			2007			2006
Balance at beginning of period	$	1,135,766	$	989,405		$	1,131,175		$	1,094,047
Provision for credit losses		368,763		69,598			635,271			163,486
Charge-offs:
Commercial		17,061		31,137			43,537			56,243
Commercial leases		8,872		5,614			46,005			54,122
Commercial construction		10,364		1,880			20,352			4,302
Commercial real estate		6,991		1,994			12,621			13,777
Residential real estate		71,430		81,949			194,610			174,077
Home equity lines of credit		33,505		19,637			76,782			55,674
Credit cards and other unsecured lines of credit		28,749		20,134			91,614			68,074
Other consumer		12,595		12,138			39,942			48,803
Total charge-offs		189,567		174,483			525,463			475,072
Recoveries:
Commercial		5,051		7,079			15,794			26,312
Commercial leases		3,594		7,254			15,267			14,532
Commercial construction		23		166			(54	)		769
Commercial real estate		4,168		2,684			9,425			5,744
Residential real estate		20,355		23,515			47,231			53,725
Home equity lines of credit		7,216		4,786			20,829			13,398
Credit cards and other unsecured lines of credit		2,885		2,946			11,734			12,941
Other consumer		5,284		8,645			19,555			33,760
Total recoveries		48,576		57,075			139,781			161,181
Net charge-offs		140,991		117,408			385,682			313,891
Other(a)		9,341		(9,537	)		(7,885	)		(11,584	)
Balance at end of period	$	1,372,879	$	932,058		$	1,372,879		$	932,058

(a)  Includes the allowance for loan losses associated with acquisitions, portfolio loans transferred to held for sale, and in 2007, reinsurance claims paid to third parties.

The Corporation’s insurance subsidiary provides reinsurance to a third party who provides the primary mortgage insurance on certain portfolio loans. Under this arrangement, National City assumes a 50% pro rata share of credit losses on the insured portfolio loans subject to certain limits. The provision for credit losses included expected reinsurance losses associated with insured nonconforming mortgage loans of $15 million and $8 million for the three months ended September 30, 2007 and 2006, respectively. On a year-to-date basis, the provision for credit losses included $33 million in 2007 and $14 million in 2006 for reinsurance losses.

Activity in the allowance for losses on lending-related commitments follows:

	Three Months Ended					Nine Months Ended
	September 30					September 30
(In Thousands)	2007			2006		2007			2006
Balance at beginning of period	$	61,445		$	76,673	$	77,986		$	83,601
Net provision for credit losses on lending-related commitments		(7,219	)		3,334		(23,760	)		(3,594	)
Balance at end of period	$	54,226		$	80,007	$	54,226		$	80,007

25

Nonperforming loans totaled $861 million, $500 million, and $470 million as of September 30, 2007, December 31, 2006, and September 30, 2006, respectively. For loans classified as nonperforming at September 30, 2007, the contractual interest due and actual interest recognized on those loans during the nine months ended September 30, 2007 was $61 million and $13 million, respectively.

Impaired loans, as defined under SFAS 114, are included in nonperforming loans. Average impaired loans for the first nine months of 2007 and 2006 totaled $200 million and $154 million, respectively. During the first nine months of 2007 and 2006, interest recognized on impaired loans while they were considered impaired was not material. The majority of the loans deemed impaired were evaluated using the fair value of the collateral as the measurement method. The following table presents details on the allowance for loan losses related to impaired loans.

	September 30		December 31		September 30
(In Thousands)	2007		2006		2006
Impaired loans with an associated allowance	$	245,768	$	118,127	$	77,410
Impaired loans without an associated allowance		88,007		71,360		84,525
Total impaired loans	$	333,775	$	189,487	$	161,935
Allowance for loan losses allocated to impaired loans	$	54,863	$	29,545	$	21,728

8.  Securities

Securities available for sale follow:

	Amortized		Unrealized		Unrealized		Fair
(In Thousands)	Cost		Gains		Losses		Value
September 30, 2007
U.S. Treasury	$	1,057,063	$	11,626	$	1,469	$	1,067,220
Federal agency		286,812		3,592		451		289,953
Mortgage-backed securities		6,801,013		24,845		69,571		6,756,287
Asset-backed and corporate debt securities		213,961		593		3,207		211,347
States and political subdivisions		429,030		4,105		852		432,283
Other		205,667		14,734		760		219,641
Total securities	$	8,993,546	$	59,495	$	76,310	$	8,976,731
December 31, 2006
U.S. Treasury	$	1,051,590	$	8,872	$	12,001	$	1,048,461
Federal agency		250,054		2,458		1,589		250,923
Mortgage-backed securities		5,305,629		41,119		51,919		5,294,829
Asset-backed and corporate debt securities		174,829		2,188		20		176,997
States and political subdivisions		499,563		7,205		972		505,796
Other		221,327		10,834		347		231,814
Total securities	$	7,502,992	$	72,676	$	66,848	$	7,508,820
September 30, 2006
U.S. Treasury	$	1,055,170	$	11,585	$	9,930	$	1,056,825
Federal agency		189,265		2,439		1,854		189,850
Mortgage-backed securities		5,761,889		37,112		77,672		5,721,329
Asset-backed and corporate debt securities		193,650		2,117		21		195,746
States and political subdivisions		530,707		9,329		973		539,063
Other		190,260		13,719		627		203,352
Total securities	$	7,920,941	$	76,301	$	91,077	$	7,906,165

Other securities included retained interests from securitizations as well as equity securities.

26

The following table presents the age of gross unrealized losses and associated fair value by investment category.

	September 30, 2007
	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(In Thousands)	Value		Losses		Value		Losses		Value		Losses
U.S. Treasury		—		—	$	360,870	$	1,469	$	360,870	$	1,469
Federal agency		—		—		55,442		451		55,442		451
Mortgage-backed securities	$	1,742,736	$	19,678		2,056,795		49,893		3,799,531		69,571
Asset-backed securities		140,473		3,199		1,972		8		142,445		3,207
States and political subdivisions		22,056		136		47,472		716		69,528		852
Other		22,634		619		8,021		141		30,655		760
Total	$	1,927,899	$	23,632	$	2,530,572	$	52,678	$	4,458,471	$	76,310

Securities available for sale are reviewed quarterly for possible other-than-temporary impairment. The review includes an analysis of the facts and circumstances of each individual investment including the severity of loss, the creditworthiness of the issuer, the length of time the fair value has been below cost, and management’s intent and ability to hold the security for the time necessary to recover the amortized cost, taking into consideration balance sheet management strategies and management’s market view and outlook. At September 30, 2007, management concluded that none of the individual unrealized losses represented an other-than-temporary impairment as management attributes the declines in value to changes in market interest rates, not credit quality or other factors, and management had the intent and ability to hold these securities for the time necessary to recover the amortized cost. The majority of the losses related to securities issued by the U.S. government or government-sponsored agencies and other investment-grade issuers.

At September 30, 2007, the fair value of securities pledged to secure public and trust deposits, U.S. Treasury notes, security repurchase agreements, FHLB borrowings, and derivative instruments totaled $7.8 billion. At September 30, 2007, there were no securities of a single issuer, other than U.S. Treasury and Federal agency debentures and other U.S. government-sponsored agency securities, which exceeded 10% of stockholders’ equity.

For the nine months ended September 30, 2007 and 2006, gross securities gains of $32 million and $16 million, respectively, were recognized, while gross securities losses were $6 million and $3 million, respectively.

9.  Trading Assets and Liabilities

Securities, loans, and derivative instruments are classified as trading when they are entered into for the purpose of making short-term profits or to provide risk management products to customers. Certain securities used to manage risk related to mortgage servicing assets are also classified as trading securities. All trading instruments are carried at fair value. Trading securities primarily include U.S. Treasury securities, U.S. government agency securities, mortgage-backed securities, and corporate bonds. Trading loans include the guaranteed portion of Small Business Administration loans and syndicated commercial loans held for distribution to others. Trading securities and loans are classified within other investments on the balance sheet. Trading derivative instruments principally represent interest-rate swap and option contracts and foreign currency futures and forward contracts entered into to meet the risk management needs of commercial banking customers. The fair values of trading derivatives are included in derivative assets and derivative liabilities on the balance sheet. Further detail on derivative instruments is included in Note 24. Trading liabilities also include securities sold short, which are obligations to purchase securities that have already been sold to other third parties. Liabilities for securities sold short are classified within borrowed funds on the balance sheet.

The following table presents the fair values of trading assets and liabilities.

	September 30		December 31		September 30
(In Thousands)	2007		2006		2006
Trading assets:
Securities	$	962,558	$	447,031	$	332,098
Loans		135,142		213,514		319,686
Derivative instruments		152,739		118,962		126,906
Total trading assets	$	1,250,439	$	779,507	$	778,690
Trading liabilities:
Securities sold short	$	34,854	$	52,122	$	33,967
Derivative instruments		127,906		97,585		95,563
Total trading liabilities	$	162,760	$	149,707	$	129,530

27

Trading revenue includes both net interest income from trading securities, loans, and securities sold short, and gains and losses from changes in the fair value of trading instruments. Gains and losses on trading instruments are included either within loan servicing revenue, brokerage revenue, or other income on the income statement. Total revenue from trading activities was as follows:

	Three Months Ended						Nine Months Ended
	September 30						September 30
(In Thousands)	2007			2006			2007			2006
Net interest income	$	7,859		$	12,892		$	20,041		$	38,860
Gains (losses) in noninterest income:
Securities and securities sold short		9,872			717			(3,639	)		6,738
Loans		(6,927	)		(1,752	)		(6,465	)		(13,516	)
Derivative instruments		(2,927	)		4,277			5,637			15,979
Subtotal		18			3,242			(4,467	)		9,201
Total net trading (loss) revenue	$	7,877		$	16,134		$	15,574		$	48,061

10.  Principal Investments

The principal investment portfolio includes direct investments in private and public companies, as well as indirect investments in private equity funds which are managed by third parties. The direct portfolio consists of investments in the consumer, retail, manufacturing, automotive, commercial services, healthcare, commercial/industrial distribution, and building products industries with the largest industry, manufacturing, constituting approximately 13% of the total principal investment portfolio. The indirect portfolio is diversified according to the terms of the fund’s agreement and the general partner’s direction. Principal investments are classified within other investments on the balance sheet. A rollforward of principal investments follows:

	Three Months Ended						Nine Months Ended
	September 30						September 30
(In Thousands)	2007			2006			2007			2006
Direct Investments:
Carrying value at beginning of period	$	339,496		$	326,121		$	311,218		$	316,974
Investments — new fundings		31,896			13,058			65,304			43,876
Returns of capital and write-offs		(3,757	)		(27,668	)		(14,932	)		(40,558	)
Fair value adjustments		(3,750	)		—			2,295			(8,781	)
Carrying value at end of period	$	363,885		$	311,511		$	363,885		$	311,511
Indirect Investments:
Carrying value at beginning of period	$	371,547		$	354,824		$	354,278		$	343,864
Investments — new fundings		18,752			20,225			63,466			63,119
Returns of capital and write-offs		(15,931	)		(22,191	)		(42,881	)		(54,332	)
Fair value adjustments		(86	)		224			(581	)		431
Carrying value at end of period	$	374,282		$	353,082		$	374,282		$	353,082
Total Principal Investments:
Carrying value at beginning of period	$	711,043		$	680,945		$	665,496		$	660,838
Investments — new fundings		50,648			33,283			128,770			106,995
Returns of capital and write-offs		(19,688	)		(49,859	)		(57,813	)		(94,890	)
Fair value adjustments		(3,836	)		224			1,714			(8,350	)
Carrying value at end of period	$	738,167		$	664,593		$	738,167		$	664,593

	Three Months Ended				Nine Months Ended
	September 30				September 30
(In Thousands)	2007		2006		2007		2006
Principal investment revenue(a)	$	7,285	$	6,883	$	20,375	$	20,266
Net principal investment gains(b)		24,103		30,270		54,090		88,525

(a)	Consists primarily of interest, dividends, and fee income
(b)	Consists primarily of fair value adjustments and realized gains and losses on investments

The principal investment portfolio is managed primarily within the Commercial Banking – National line of business. Accounting policies for principal investments are included in Note 1. Commitments to fund principal investments are discussed in Note 21.

28

11.  Goodwill and Other Intangible Assets

The carrying value of goodwill was $5.6 billion, $3.8 billion, and $3.3 billion at September 30, 2007, December 31, 2006 and September 30, 2006, respectively. During 2007, the Corporation completed acquisitions of MAF Bancorp, Inc and Fidelity Bankshares, Inc. which increased goodwill by $1.1 billion and $705 million, respectively. The goodwill associated with these acquisitions was allocated to the Corporation’s segments as shown in the table below. Retail Banking received the largest allocation of goodwill. The fair value of the business added by each acquisition to the segments shown below was estimated based on generally accepted valuation techniques including discounted projected cash flows, earnings multiples, and comparable transactions. Refer to Note 3 for further discussion on recent acquisitions. 

A rollforward of goodwill by line of business for the nine months ended September 30, 2007 follows:

	January 1		Goodwill		Impairment		September 30
(In Thousands)	2007		Adjustments(a)		Losses		2007
Retail Banking	$	1,501,931	$	1,244,337	$	—	$	2,746,268
Commercial Banking – Regional		1,671,003		409,019		—		2,080,022
Commercial Banking – National		336,897		12,109		—		349,006
Mortgage Banking		76,031		106,855		—		182,886
Asset Management		230,049		36,779		—		266,828
Parent and Other		—		—		—		—
Total	$	3,815,911	$	1,809,099	$	—	$	5,625,010

(a) Represents goodwill associated with acquisitions, purchase accounting adjustments, as well as the realignment of goodwill among segments.

No impairment of goodwill was recognized in either of the nine months ended September 30, 2007 or 2006. The Corporation completed its most recent annual goodwill impairment test as of November 30, 2006. During the third quarter of 2007, the mortgage markets experienced unprecedented disruption resulting in limited to no ability to sell certain types of mortgage and home equity loans. Due to these adverse market conditions, an interim impairment test was performed of goodwill allocated to the Mortgage Banking segment as of August 31, 2007. The fair value of this business was estimated by use of observable market prices for a comparable public company. As the estimated fair value exceeded carrying value; no impairment of goodwill was required.

Finite-lived intangible assets capitalized on the balance sheet include core deposit, credit card and other intangibles. Recent acquisitions added $239 million of core deposit intangibles and $11 million of other intangibles in 2007. The amortization periods for newly capitalized intangibles are ten years for core deposits and one to ten years for other intangibles. A summary of these intangible assets follows:

	September 30		December 31		September 30
(In Thousands)	2007		2006		2006
Core deposit intangibles
Gross carrying amount	$	475,692	$	239,289	$	202,354
Less: accumulated amortization		124,326		85,876		77,494
Net carrying amount		351,366		153,413		124,860
Credit card intangibles
Gross carrying amount		6,310		7,699		7,699
Less: accumulated amortization		3,993		2,914		2,631
Net carrying amount		2,317		4,785		5,068
Other intangibles
Gross carrying amount		73,098		62,183		60,072
Less: accumulated amortization		50,827		36,733		32,597
Net carrying amount		22,271		25,450		27,475
Total finite-lived intangibles
Gross carrying amount		555,100		309,171		270,125
Less: accumulated amortization		179,146		125,523		112,722
Net carrying amount	$	375,954	$	183,648	$	157,403

Amortization expense on finite-lived intangible assets totaled $20 million and $12 million for the three months ended September 30, 2007 and 2006, respectively. Amortization expense on finite-lived intangible assets totaled $56 million and $38 million for the nine months ended September 30, 2007 and 2006, respectively. Amortization expense on finite-lived intangible assets is expected to total $80 million, $69 million, $57 million, $47 million, and $37 million for fiscal years 2008 through 2012, respectively.

29

12. Servicing Assets

The Corporation has obligations to service residential mortgage loans, commercial real estate loans, automobile loans, and other consumer loans. Classes of servicing assets are identified based on loan type and the method of managing the risks associated with these assets. A description of the various classes of servicing assets follows.

Residential Mortgage Servicing Rights: The Corporation recognizes mortgage servicing right (MSR) assets on residential real estate loans when it retains the obligation to service these loans upon sale and the servicing fee is more than adequate compensation. MSRs are subject to declines in value from actual or expected prepayments of the underlying loans. The Corporation manages this risk by hedging the fair value of MSRs with securities and derivative instruments which are expected to increase in value when the value of MSRs declines.

Effective January 1, 2006, the Corporation adopted the provisions of SFAS 156 and elected the fair value measurement method for MSRs. Upon adoption, the carrying value of the MSRs was increased to fair value by recognizing a cumulative effect adjustment of $26 million pretax, or $17 million after tax. Management selected the fair value measurement method of accounting for MSRs to be consistent with its risk management strategy to hedge the fair value of these assets. The fair value method of accounting for MSRs matches the accounting for the related securities and derivative instruments. Changes in the fair value of MSRs, as well as changes in fair value of the related securities and derivative instruments, are recognized each period within loan servicing revenue on the income statement.

On December 30, 2006, the First Franklin nonconforming mortgage servicing platform and servicing rights valued at $223 million were sold.

Changes in the carrying value of MSRs, accounted for at fair value, follow:

	Three Months Ended September 30
(In Thousands)	2007			2006
Balance at beginning of period	$	2,467,749		$	2,541,250
Additions:
From loans sold with servicing retained		171,073			140,364
From acquisitions		37,480			—
Changes in fair value due to:
Time decay and payoffs(a)		(84,383	)		(99,415	)
All other changes in valuation inputs or assumptions(b)		(88,830	)		(318,095	)
Fair value of MSRs at end of period	$	2,503,089		$	2,264,104

	Nine Months Ended September 30
(In Thousands)	2007			2006
Balance at beginning of period	$	2,094,387		$	2,115,715
Cumulative effect of change in accounting		—			26,392
Additions:
From loans sold with servicing retained		452,833			396,930
From acquisitions		44,554			—
Subtractions from sales of servicing rights		—			(196	)
Changes in fair value due to:
Time decay and payoffs(a)		(259,269	)		(302,720	)
Implementation of internal prepayment model		—			(55,983	)
All other changes in valuation inputs or assumptions(b)		170,584			83,966
Fair value of MSRs at end of period	$	2,503,089		$	2,264,104
Unpaid principal balance of loans serviced for others (in millions)	$	173,682		$	190,828

(a)	Represents decrease in MSR value due to passage of time, including the impact from both regularly scheduled loan principal payments and loans that paid down or paid off during the period.
(b)	Represents MSR value change resulting primarily from market-driven changes in interest rates.

The fair value of MSRs is estimated using a valuation model that calculates the present value of estimated future net servicing cash flows, taking into consideration actual and expected mortgage loan prepayment rates, discount rates, servicing costs, and other economic factors, which are determined based on current market conditions. The current mortgage interest rate influences the expected prepayment rate and therefore, the length of the cash flows associated with the servicing asset, while the discount rate determines the present value of those cash flows. Expected mortgage loan prepayment assumptions are estimated by an internal proprietary model and consider empirical data drawn from the historical performance of the Corporation’s managed loan portfolio.

30

Future interest rates are another significant factor in the valuation of MSRs. In the second quarter of 2007, the Corporation refined its MSR valuation model to incorporate market implied forward interest rates to estimate the future direction of mortgage and discount rates. The forward rates utilized are derived from the current yield curve for U.S. dollar interest rate swaps and are consistent with pricing of capital markets instruments. In prior periods, the MSR valuation model assumed that interest rates remained constant over the life of the servicing asset cash flows.

Management periodically obtains third-party valuations of the MSR portfolio to assess the reasonableness of the fair value calculated by the valuation model.

The key economic assumptions used in determining the fair value of MSRs capitalized during the three and nine months ended September 30, 2007 and 2006 were as follows:

	Three Months Ended September 30						Nine Months Ended September 30
	2007			2006			2007			2006
Weighted-average life (in years)		7.3			3.5			6.4			4.0
Weighted-average CPR		12.26	%		30.50	%		17.11	%		27.07	%
Spread over forward interest rate swap rates(a)		5.69			—			5.68			—
Weighted-average discount rate(b)		—			11.42			10.14			11.19

(a)	Spread for the months of May through September 2007. Utilized to discount the servicing cash flows.
(b)	Represents the weighted-average discount rate through April 2007.

The key economic assumptions used in determining the fair value of MSRs as of September 30, 2007 and 2006 were as follows:

	2007			2006
Weighted-average life (in years)		6.1			4.7
Weighted-average CPR		13.49	%		18.86	%
Spread over forward interest rate swap rates		5.61			—
Weighted-average discount rate		—			10.11

Commercial Real Estate Servicing Assets: Commercial real estate servicing assets are recognized upon selling commercial real estate loans into the secondary market, while retaining the obligation to service those loans, or from purchasing or assuming the right to service commercial real estate loans originated by others. These servicing assets are initially measured at fair value and subsequently accounted for using the amortization method. Under this method, the assets are amortized in proportion to and over the period of estimated servicing income and are evaluated for impairment on a quarterly basis. For purposes of the impairment analysis, management stratifies these servicing assets by loan type as well as by the term of the underlying loans. When the carrying value exceeds the fair value and is believed to be temporary, a valuation allowance is established by a charge to loan servicing revenue in the income statement. Other-than-temporary impairment is recognized when the recoverability of the carrying value is determined to be remote. When this situation occurs, the unrecoverable portion of the valuation allowance is applied as a direct write-down to the carrying value of the servicing asset. Unlike a valuation allowance, a direct write-down permanently reduces the carrying value of the servicing asset and the valuation allowance, precluding recognition of subsequent recoveries. There were no other-than-temporary impairments on commercial real estate servicing assets recognized during the three or nine months ended September 30, 2007 or 2006.

The fair value of commercial real estate servicing assets is estimated by using either a third-party opinion of value or an internal valuation model. Both methods are based on calculating the present value of estimated future net servicing cash flows, taking into consideration discount rates, prepayments, and servicing costs. The internal valuation model is validated at least annually through a third-party valuation.

Commercial real estate servicing assets are classified in other assets on the balance sheet. Changes in the carrying value of the commercial real estate servicing assets and the associated valuation allowance follow:

	Three Months Ended				Nine Months Ended
	September 30				September 30
(In Thousands)	2007		2006		2007		2006
Commercial real estate servicing assets
Balance at beginning of period	$	147,141	$	145,922	$	146,867	$	138,408
Additions:
From loans sold with servicing retained		5,546		4,230		16,602		20,822
From assumptions of servicing		—		51		276		838
From purchases of servicing		1,989		1,470		3,710		2,312

31

	Three Months Ended						Nine Months Ended
	September 30						September 30
(In Thousands)	2007			2006			2007			2006
Subtractions:
Amortization		(5,564	)		(5,133	)		(18,259	)		(15,724	)
Sales		(612	)		—			(696	)		(116	)
Carrying value before valuation allowance at end of period		148,500			146,540			148,500			146,540
Valuation allowance
Balance at beginning of period		(842	)		(945	)		(957	)		(1,075	)
Impairment (charges) recoveries		(73	)		28			42			158
Balance at end of period		(915	)		(917	)		(915	)		(917	)
Net carrying value of servicing assets at end of period	$	147,585		$	145,623		$	147,585		$	145,623
Unpaid principal balance of commercial real estate loans serviced for others (in millions)	$	17,170		$	16,227
Fair value of servicing assets:
Beginning of period	$	198,069		$	190,595		$	188,716		$	163,182
End of period		192,386			191,390			192,386			191,390

The key economic assumptions used to estimate the fair value of these servicing assets as of September 30, 2007 and 2006 were as follows:

	2007			2006
Weighted-average life (in years)		8.0			8.5
Weighted-average discount rate		13.17	%		13.37	%

Other Consumer Loans: The Corporation also has servicing assets related to sales or securitizations of automobile loans and certain home equity loans and home equity lines of credit. These servicing assets are accounted for using the amortization method and are included in other assets on the balance sheet. The servicing asset related to securitized automobile loans was $3 million, $8 million, and $11 million as of September 30, 2007, December 31, 2006 and September 30, 2006, respectively. The servicing asset related to home equity loans and lines of credit was $29 million, $22 million, and $15 million at September 30, 2007, December 31, 2006 and September 30, 2006, respectively. No servicing asset or liability has been recognized related to the Corporation’s obligation to service credit card loans as the fee received for performing this service is deemed to approximate the amount that would be paid to fairly compensate a substitute servicer, should one be required.

Contractual Servicing Fees: Contractual servicing fees, including late fees and ancillary income, for each type of loan serviced are presented below. Contractual servicing fees are included within loan servicing revenue on the income statement.

	Three Months Ended September 30				Nine Months Ended September 30
(In Thousands)	2007		2006		2007		2006
Residential real estate	$	134,585	$	158,318	$	391,319	$	459,912
Credit card		25,527		20,116		72,618		78,472
Commercial real estate		8,056		8,102		28,007		23,650
Automobile		4,197		7,735		15,246		29,307
Home equity lines of credit		13,969		9,439		40,167		15,546
Home equity loans		4,388		1,184		11,099		1,601
Total contractual servicing fees	$	190,722	$	204,894	$	558,456	$	608,488

13. Properties and Equipment

The composition of properties and equipment follows:

	September 30		December 31		September 30
(In Thousands)	2007		2006		2006
Land	$	363,696	$	245,249	$	206,980
Buildings and leasehold improvements		1,310,171		1,074,422		1,073,726
Equipment		1,102,528		1,058,034		1,197,995
		2,776,395		2,377,705		2,478,701
Less accumulated depreciation and amortization		1,124,645		975,555		1,152,940
Net properties and equipment	$	1,651,750	$	1,402,150	$	1,325,761

Depreciation and amortization of properties and equipment, including assets recorded under capital leases, totaled $57 million and $189 million for the three and nine months ended September 30, 2007, respectively. Depreciation and amortization of properties and

32

equipment, including assets recorded under capital leases, totaled $56 million and $180 million for the three and nine months ended September 30, 2006, respectively.

Adverse conditions in the mortgage markets led to the curtailment of certain mortgage products offered by the Corporation in the third quarter of 2007. As a result of these conditions, an impairment analysis was performed on software used to originate mortgage loans within the correspondent lending business. The fair value of this software was estimated using the expected future cash flows of this business. As this business did not have sufficient positive cash flows, this asset was deemed impaired. In addition, certain other mortgage-related software was disposed of due to changes in expected future mortgage production. As a result, the Corporation recognized a $43 million asset impairment charge for the quarter ending September 30, 2007. This charge was recorded within the Mortgage Banking segment.

14. Borrowed Funds

Detail of borrowed funds follows:

	September 30			December 31			September 30
(In Thousands)	2007			2006			2006
Commercial paper	$	1,117,629		$	811,842		$	1,118,042
Federal Home Loan Bank advances		514,000			—			—
U.S. Treasury notes		340,000			433,829			2,429,819
Senior bank notes		86,400			—			60,000
Other		447,713			403,296			348,689
Total borrowed funds	$	2,505,742		$	1,648,967		$	3,956,550
Weighted-average rate		4.66	%		4.96	%		5.05	%

Commercial paper is issued by the Corporation’s subsidiary, National City Credit Corporation. As of September 30, 2007, the entire balance had maturities of six months or less. Federal Home Loan Bank advances represent short-term borrowings with the Federal Home Loan Bank and mature within 11 months. U.S. Treasury notes represent secured borrowings from the U.S. Treasury. These borrowings are collateralized by qualifying securities and commercial loans. The funds are placed at the discretion of the U.S. Treasury. At September 30, 2007, the entire balance of outstanding U.S. Treasury notes was callable on demand by the U.S. Treasury.

The other category at September 30, 2007, December 31, 2006, and September 30, 2006 included liabilities totaling $294 million, $305 million, and $284 million, respectively, related to mortgage loans available for repurchase under GNMA and FNMA loan sale programs. See further discussion in Note 1. The other category also included obligations totaling $55 million, $52 million, and $34 million at September 30, 2007, December 31, 2006, and September 30, 2006, respectively, related to securities sold short, which are obligations to purchase securities that have already been sold to other third parties. Some short sales are held for trading purposes, while others are used to economically hedge risk associated with other assets or liabilities. See further discussion in Note 9.

15. Long-Term Debt

The composition of long-term debt follows. This note excludes the junior subordinated notes owed to the unconsolidated subsidiary trusts. See Note 16 for further discussion on these obligations.

	September 30		December 31		September 30
(In Thousands)	2007		2006		2006
3.20% senior notes due 2008	$	296,459	$	291,764	$	290,583
3.125% senior notes due 2009		194,018		190,898		190,240
5.75% subordinated notes due 2009		301,003		302,550		303,248
Variable-rate senior note due 2009		600,000		—		—
Variable-rate senior note due 2010		299,925		299,908		299,901
4.90% senior notes due 2015		384,123		389,674		389,571
6.875% subordinated notes due 2019		753,091		764,052		766,317
8.375% senior note due 2032		—		69,960		69,245
Total holding company		2,828,619		2,308,806		2,309,105
Senior bank notes		14,232,317		18,580,239		20,125,989
Federal Home Loan Bank advances		5,900,189		1,998,923		1,887,499
7.25% subordinated notes due 2010		236,488		239,052		240,172
6.30% subordinated notes due 2011		209,698		208,065		208,716
7.25% subordinated notes due 2011		199,894		197,933		197,956
6.25% subordinated notes due 2011		307,681		310,214		311,022
6.20% subordinated notes due 2011		508,797		507,892		508,497
4.63% subordinated notes due 2013		294,812		295,326		295,265

33

	September 30		December 31		September 30
(In Thousands)	2007		2006		2006
5.25% subordinated notes due 2016		239,052		244,697		—
Variable-rate subordinated notes due 2016		249,605		249,486		—
Variable-rate subordinated notes due 2017		523,060		—		—
5.80% subordinated notes due 2017		429,105		—		—
4.25% subordinated notes due 2018		222,737		224,354		224,221
Repurchase agreements		320,651		—		—
Secured debt financings		46,796		31,067		26,969
Other		8,797		10,917		12,715
Total subsidiaries		23,929,679		23,098,165		24,039,021
Total long-term debt	$	26,758,298	$	25,406,971	$	26,348,126

The amounts above represent the par value of the debt adjusted for any unamortized discount, other basis adjustments related to hedging the debt with derivative instruments, and fair value adjustments recognized in connection with debt acquired through acquisitions. The Corporation uses derivative instruments, primarily interest-rate swaps and caps, to manage interest-rate risk on its long-term debt. Interest-rate swaps are used to hedge the fair value of certain fixed-rate debt by converting the debt to variable rate and are also used to hedge the cash flow variability associated with certain variable-rate debt by converting the debt to fixed rate. Interest-rate caps are also used to hedge cash flow variability by capping the interest payments associated with variable-rate debt issuances. Further discussion on derivative instruments is included in Notes 1 and 24.

The subordinated notes of the holding company and National City Bank qualify for Tier 2 capital under the regulatory capital requirements of the federal banking agencies. Further discussion on regulatory capital requirements is included in Note 17.

A summary of par values and weighted-average rates of long-term debt as of September 30, 2007, follows. The weighted-average effective rate includes the effects of derivative instruments used to manage interest-rate risk, amortization of discounts, and amortization of fair value adjustments associated with debt acquired through acquisitions.

			Weighted-Average			Weighted-Average
(Dollars in Thousands)	Par Value		Contractual Rate			Effective Rate
Senior bank notes	$	14,255,727		5.23	%		5.40	%
Subordinated notes		4,425,000		6.05			6.17
Senior notes		1,800,000		4.81			4.99
FHLB advances		5,883,531		5.24			5.43
Repurchase agreements		325,000		4.38			4.71
Secured debt financings		46,796		7.97			7.97
Other		8,797		6.09			6.09
Total long-term debt	$	26,744,851		5.34	%		5.47	%

National City Bank has issued senior and subordinated bank notes. During 2007, National City Bank issued senior bank notes with a par value of $2.1 billion and subordinated bank notes with par values totaling $950 million. At September 30, 2007, senior bank notes totaling $1.9 billion were contractually based on a fixed rate of interest and $12.4 billion were contractually based on a variable rate of interest. Senior bank notes have maturities ranging from 2007 to 2078. All but two subordinated notes of National City Bank were issued at fixed rates, pay interest semi-annually and may not be redeemed prior to maturity. The variable-rate subordinated note due 2016 is based on three-month LIBOR plus 35 basis points, resets quarterly, and was 6.04% at September 30, 2007. The variable-rate subordinated note due 2017 is based on three-month LIBOR plus 37 basis points, resets quarterly, and was 6.09% at September 30, 2007. National City acquired repurchase agreements as part of the MAF Bancorp acquisition, which at September 30, 2007, consisted of $100 million of fixed-rate obligations and $225 million of variable-rate obligations and have maturities ranging from 2008 to 2014.

The holding company has issued both senior and subordinated notes. All but two of the notes issued by the holding company are fixed rate. The $600 million variable-rate note due 2009 was issued during the first quarter of 2007. The interest rate on this note is based on three-month LIBOR plus 1.5 basis points, is reset quarterly, and was 5.603% at September 30, 2007. The interest rate on the variable-rate senior note due 2010 is based on three-month LIBOR plus 17 basis points, is reset quarterly and was 5.864% at September 30, 2007. The 8.375% senior note of the holding company was called on July 15, 2007. All remaining senior notes and subordinated notes of the holding company pay interest semi-annually and may not be redeemed prior to maturity.

At September 30, 2007, Federal Home Loan Bank (FHLB) advances consisted of $1.8 billion of fixed-rate obligations and $4.1 million of variable-rate obligations. The Corporation’s maximum remaining borrowing limit with the FHLB was $2.9 billion at September 30, 2007. The Corporation pledged $17.7 billion in residential real estate loans, $7.0 billion in home equity lines of credit, and $18 million in mortgage-backed securities as collateral against FHLB borrowings at September 30, 2007. FHLB advances have maturities ranging from 2007 to 2030.

34

16. Junior Subordinated Debentures Owed to Unconsolidated Subsidiary Trusts and Corporation-Obligated Mandatorily Redeemable Capital Securities of Subsidiary Trusts Holding Solely Debentures of the Corporation

As of September 30, 2007, National City sponsored seven trusts, of which 100% of the common equity is owned by the Corporation, formed for the purpose of issuing corporation-obligated mandatorily redeemable capital securities (the capital securities) to third-party investors and investing the proceeds from the sale of such capital securities solely in junior subordinated debt securities of the Corporation (the debentures). The debentures held by each trust are the sole assets of that trust which issued common securities to the Corporation and preferred capital securities to third-party investors. The capital securities of these trusts qualify as Tier I capital of the Corporation for regulatory purposes. On May 25, 2007 and August 30, 2007, the Corporation issued $500 million and $518 million of junior subordinated debentures, respectively.

The $500 million junior subordinated debentures owed to National City Capital Trust III bear interest at a fixed rate of 6.625%, payable quarterly in arrears. These debentures are redeemable at par plus accrued unpaid interest, in whole or in part, anytime after May 25, 2012, with the prior approval of the Federal Reserve Board. The $500 million junior subordinated debentures have a scheduled maturity date of May 25, 2047. Upon the scheduled maturity date, the Corporation will be required to refinance these debentures with securities that are treated as capital for regulatory purposes. If the Corporation is unable to refinance these securities, they will remain outstanding until their legal maturity date of May 25, 2067, and bear interest at a variable rate equal to one-month LIBOR plus 2.1263 basis points. These debentures rank pari-passu to the Corporation’s other junior subordinated debentures issued to National City Capital Trust II and IV, junior to the Corporation’s outstanding debt, and junior to its other outstanding junior subordinated debentures.

The $518 million junior subordinated debentures owed to National City Capital Trust IV bear interest at a fixed rate of 8.0%, payable quarterly in arrears. These debentures are redeemable at par plus accrued unpaid interest, in whole or in part, anytime after August 30, 2012, with the prior approval of the Federal Reserve Board. These debentures have a scheduled maturity date of September 15, 2047. Upon the scheduled maturity date, the Corporation will be required to refinance these debentures with securities that are treated as capital for regulatory purposes. If the Corporation is unable to refinance these securities, they will remain outstanding until their legal maturity date of August 30, 2067 and bear interest at a variable rate equal to one-month LIBOR plus 3.487 basis points. These debentures rank pari-passu to the Corporation’s junior subordinated debentures issued to National City Capital Trust II and III, junior to the Corporation’s outstanding debt, and junior to its other outstanding junior subordinated debentures.

Consolidated debt obligations related to subsidiary trusts holding solely debentures of the Corporation follow. These amounts represent the par value of the obligations owed to the subsidiary trusts, including the Corporation’s ownership interest in the trusts, plus basis adjustments related to hedging the obligations with derivative instruments and fair value adjustments recognized in connection with obligations acquired through acquisitions.

	September 30		December 31		September 30
(In Thousands)	2007		2006		2006
6.625% junior subordinated debentures owed to National City Capital Trust II due November 15, 2036	$	748,579	$	752,681	$	—
6.625% junior subordinated debentures owed to National City Capital Trust III due May 25, 2047		487,695		—		—
8.000% junior subordinated debentures owed to National City Capital Trust IV due September 15, 2047		518,327		—		—
Variable-rate junior subordinated debentures owed to MAF Bancorp Capital Trust II due September 15, 2035		38,245		—		—
Variable-rate junior subordinated debentures owed to MAF Bancorp Capital Trust I due June 15, 2035		32,777		—		—
Variable-rate junior subordinated debentures owed to Fidelity Capital Trust III due November 23, 2034		32,153		—		—
Variable-rate junior subordinated debentures owed to Fidelity Capital Trust II due January 23, 2034		23,493		—		—
9.85% junior subordinated debentures owed to Fort Wayne Capital Trust I redeemed April 15, 2007		—		30,928		30,928
Variable-rate junior subordinated debentures owed to Banc Services Corp. Statutory Trust I redeemed June 26, 2007		—		7,317		7,368
Variable-rate junior subordinated debentures owed to Forbes First Financial Statutory Trust I redeemed June 26, 2007		—		3,139		3,167
8.12% junior subordinated debentures owed to First of America Capital Trust I redeemed January 31, 2007		—		154,640		154,640
9.00% junior subordinated debentures owed to Allegiant Capital Trust II redeemed October 2, 2006		—		—		41,300
8.60% junior subordinated debentures owed to Provident Capital Trust I redeemed December 1, 2006		—		—		104,214
Total junior subordinated debentures owed to unconsolidated subsidiary trusts	$	1,881,269	$	948,705	$	341,617

35

Distributions on the capital securities issued by National City Capital Trust II, III and IV are payable quarterly at a rate per annum equal to the interest rate being earned by the trust on the debentures held by these trusts. Distributions on the capital securities issued by Fidelity Capital Trust III are payable quarterly at a variable rate equal to the three-month LIBOR rate plus 1.97 basis points, with no maximum interest rate. The interest rate associated with Fidelity Capital Trust III was 7.46% at September 30, 2007. Distributions on the capital securities issued by Fidelity Capital Trust II are payable quarterly at a variable rate equal to the three-month LIBOR rate plus 2.85 basis points, with no maximum interest rate. The interest rate associated with Fidelity Capital Trust II was 8.21% at September 30, 2007. Distributions on the capital securities issued by MAF Bancorp Capital Trust I are payable quarterly at a variable rate equal to the three-month LIBOR rate plus 1.75 basis points, with no maximum interest rate. The interest rate associated with MAF Bancorp Capital Trust I was 7.44% at September 30, 2007. Distributions on the capital securities issued by MAF Bancorp Capital Trust II are payable quarterly at a variable rate equal to the three-month LIBOR rate plus 1.40 basis points, with no maximum interest rate. The interest rate associated with MAF Bancorp Capital Trust II was 7.09% at September 30, 2007.

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 the trusts are first redeemable, in whole or in part, by the Corporation as follows:

	First Call Date
Fidelity Capital Trust II	January 23, 2009
Fidelity Capital Trust III	November 23, 2009
MAF Capital Bancorp Trust I	June 15, 2010
MAF Capital Bancorp Trust II	September 15, 2010
National City Capital Trust II	November 15, 2011
National City Capital Trust III	May 25, 2012
National City Capital Trust IV	August 30, 2012

The Corporation may only redeem or repurchase its junior subordinated notes payable owed to National City Capital Trust II, III and IV more than 10 years in advance of their legal maturity dates, subject to certain limitations. During the 180 days prior to the date of that redemption or repurchase, the Corporation must have received proceeds from the issuance of equity or hybrid securities that qualify as Tier 1 capital under the Federal Reserve’s capital guidelines. The Corporation will also be required to obtain approval of the Federal Reserve prior to the issuance of such securities. The current beneficiaries of this limitation are the holders of the Corporation’s 6.875% subordinated notes due 2019.

17. Regulatory Restrictions and Capital Ratios

The Corporation and its bank subsidiaries, National City Bank and MidAmerica Bank, are subject to various regulatory capital requirements of 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 classifications 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 financial position and operations.

Regulatory and other capital measures follow:

	September 30					December 31					September 30
	2007					2006					2006
(Dollars in Thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total equity/assets	$	13,842,851		8.98	%	$	14,581,003		10.40	%	$	12,901,823		9.34	%
Total common equity/assets		13,842,851		8.98			14,581,003		10.40			12,901,823		9.34
Tangible common equity/tangible assets		7,841,887		5.29			10,581,444		7.77			9,404,789		6.99
Tier 1 capital		9,672,303		6.78			11,534,600		8.93			9,602,911		7.48
Total risk-based capital		14,801,621		10.37			15,704,502		12.16			13,215,466		10.30
Leverage		9,672,303		6.96			11,534,600		8.56			9,602,911		7.13

The tangible common equity ratio excludes goodwill and other intangible assets from both the numerator and denominator.

Tier 1 capital consists of total equity plus qualifying capital securities and minority interests, less unrealized gains and losses accumulated in other comprehensive income, certain intangible assets, and adjustments related to the valuation of servicing assets and certain equity investments in nonfinancial companies (principal investments).

Total risk-based capital is comprised of Tier 1 capital plus qualifying subordinated debt and allowance for loan losses and a portion of unrealized gains on certain equity securities.

36

Both the Tier 1 and the total risk-based capital ratios are computed by dividing the respective capital amounts by risk-weighted assets, as defined.

The leverage ratio reflects Tier 1 capital divided by average total assets for the period. Average assets used in the calculation exclude certain intangible and servicing assets.

National City Corporation’s Tier 1, total risk-based capital, and leverage ratios for the current period are above the required minimum levels of 4.00%, 8.00%, and 3.00%, respectively. The capital levels at National City Bank and MidAmerica Bank 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, as defined under the regulatory framework for prompt corrective action.

National City Bank and MidAmerica Bank from time to time are required to maintain noninterest bearing reserve balances with the Federal Reserve Bank. The required reserve balance was $22 million at September 30, 2007.

Under current Federal Reserve regulations, a bank subsidiary is limited in the amount it may loan to its parent company and nonbank subsidiaries. Loans to a single affiliate may not exceed 10% and loans to all affiliates may not exceed 20% of the bank’s capital stock, surplus and undivided profits, plus the allowance for loan losses. Loans from the subsidiary bank to nonbank affiliates, including the parent company, are also required to be collateralized.

Dividends paid by a subsidiary banks to its parent company are also subject to certain legal and regulatory limitations. In 2007, subsidiary banks may pay dividends of $589 million, plus an additional amount equal to its net profits for 2007, as defined by statute, up to the date of any such dividend declaration, without prior regulatory approval.

18. Stockholders’ Equity

The number of authorized and outstanding shares of each class of the Corporation’s stock is shown in the following table.

	September 30		December 31		September 30
	2007		2006		2006
Preferred Stock, no par value, $100 liquidation value per share, authorized 5,000,000 shares		70,272		70,272		70,272
Common Stock, $4 par value, authorized 1,400,000,000 shares		633,345,384		632,381,603		601,875,473

Preferred Stock: The Corporation issued 70,272 shares of no par, Series D convertible non-voting preferred stock in conjunction with a 2004 acquisition. Each share of Series D preferred stock is convertible at any time by the holder into 15.96 shares of National City common stock. The conversion rate is subject to adjustment in the event the Corporation takes certain actions such as paying a dividend in stock, splitting its common stock, or combining its common stock into a smaller number of shares. Common shares deliverable upon conversion of the preferred stock have been reserved for future issuance. The Corporation has no right to redeem the preferred stock. Dividends are paid on the preferred stock as dividends are paid on common stock at the dividend rate per common share multiplied by the preferred stock conversion ratio. The Series D preferred stock shall be preferred over the Corporation’s common stock in the event of liquidation or dissolution of the Corporation. In such event, the preferred holders will be entitled to receive $100 per share, or $7 million, plus accrued and unpaid dividends.

Common Stock Repurchases: On April 24, 2007, the Corporation’s Board of Directors authorized the repurchase of up to 40 million shares of National City common stock subject to an aggregate purchase limit of $1.6 billion. This authorization, which has no expiration date, was incremental to all previous authorizations. Repurchased shares are held for reissue in connection with compensation plans and for general corporate purposes. During the first nine months of 2007 and 2006, the Corporation repurchased 45.7 million and 19.5 million shares, respectively under those authorizations. Repurchases under the October 24, 2005 and December 19, 2006 share repurchase authorizations have been completed. As of September 30, 2007, 37.7 million shares remain authorized for repurchase.

On January 25, 2007, the Corporation’s Board of Directors authorized a “modified Dutch auction” tender offer to purchase up to 75 million shares of its outstanding common stock, at a price range not greater than $38.75 per share nor less than $35.00 per share, for a maximum aggregate repurchase price of $2.9 billion. The tender offer expired on February 28, 2007, and on March 7, 2007, the Corporation accepted for purchase 40.3 million shares of its common stock at $38.75 per share for an aggregate price of $1.6 billion. The share repurchase authorizations described above were unaffected by the tender offer.

37

Other Comprehensive Income: A summary of activity in accumulated other comprehensive income follows:

	Nine Months Ended
	September 30
(In Thousands)	2007			2006
Accumulated unrealized gains (losses) on securities available for sale at January 1, net of tax	$	3,938		$	(4,018	)
Net unrealized gains for the period, net of tax expense of $1,412 in 2007 and $1,539 in 2006		2,622			2,858
Reclassification adjustment for gains included in net income net of tax expense of $9,275 in 2007 and $4,497 in 2006		(17,224	)		(8,443	)
Effect on other comprehensive income for the period		(14,602	)		(5,585	)
Accumulated unrealized losses on securities available for sale at September 30, net of tax	$	(10,664	)	$	(9,603	)
Accumulated unrealized (losses) gains on derivatives used in cash flow hedging relationships at January 1, net of tax	$	(3,505	)	$	15,883
Net unrealized gains for the period, net of tax expense of $16,838 in 2007 and $4,972 in 2006		31,271			9,233
Reclassification adjustment for gains included in net income, net of tax expense of $106 in 2007 and $14,480 in 2006		(196	)		(26,891	)
Effect on other comprehensive income for the period		31,075			(17,658	)
Accumulated unrealized gains (losses) on derivatives used in cash flow hedging relationships at September 30, net of tax	$	27,570		$	(1,775	)
Accumulated unrealized losses for pension and other postretirement obligations at January 1, net of tax	$	(71,347	)		—
Amortization of prior service costs included in net periodic benefit, net of tax benefit of $984		(1,730	)		—
Amortization of transition obligation included in net periodic cost, net of tax expense of $220		387			—
Amortization of net loss included in net periodic cost, net of tax expense of $938		1,649			—
Effect on other comprehensive income for the period		306			—
Accumulated unrealized losses for pension and other postretirement obligations at September 30, net of tax	$	(71,041	)		—
Accumulated other comprehensive (loss) income at January 1, net of tax	$	(70,914	)	$	11,865
Other comprehensive income/(loss), net of tax		16,779			(23,243	)
Accumulated other comprehensive loss at September 30, net of tax	$	(54,135	)	$	(11,378	)

19. Net Income Per Common Share

Calculations of basic and diluted net income per share follow:

	Three Months Ended					Nine Months Ended
	September 30					September 30
(Dollars in Thousands, Except Per Share Amounts)	2007			2006		2007		2006
Basic
Net (loss) income	$	(19,005	)	$	526,446	$	646,811	$	1,458,179
Less preferred dividends		460			437		1,334		1,267
Net (loss) income applicable to common stock	$	(19,465	)	$	526,009	$	645,477	$	1,456,912
Average common shares outstanding		588,748,482			603,848,871		598,112,669		608,442,541
Less average unallocated ESOP shares		614,452			—		747,548		—
Average common shares outstanding — basic		588,134,030			603,848,871		597,365,121		608,442,541
Net (loss) income per common share — basic	$	(.03	)	$	.87	$	1.08	$	2.39
Diluted
Net (loss) income	$	(19,005	)	$	526,446	$	646,811	$	1,458,179
Average common shares outstanding — basic		588,134,030			603,848,871		597,365,121		608,442,541
Stock awards		3,340,506			7,093,360		5,842,961		7,071,653
Convertible preferred stock		1,121,541			1,121,541		1,121,541		1,121,541
Average common shares outstanding — diluted		592,596,077			612,063,772		604,329,623		616,635,735
Net (loss) income per common share — diluted	$	(.03	)	$	.86	$	1.07	$	2.36

38

Basic net income per common share is calculated by dividing net income, less dividend requirements on convertible preferred stock, by the weighted-average number of common shares outstanding, less unallocated Employee Stock Ownership Plan (ESOP) shares, for the period.

Diluted net income per common share takes into consideration the pro forma dilution of outstanding convertible preferred stock and certain unvested restricted stock and unexercised stock option awards. For the three and nine months ended September 30, 2007, options to purchase 26.8 million and 12.4 million shares of common stock, respectively, were outstanding but not included in the computation of diluted net income per share because the option exercise price exceeded the fair value of the stock such that their inclusion would have had an anti-dilutive effect. For the three and nine months ended September 30, 2006, options to purchase 3.7 million and 6.3 million shares of common stock, respectively, were outstanding but not included in the computation of diluted net income per share because the option exercise price exceeded the fair value of the stock such that their inclusion would have had an anti-dilutive effect. Diluted net income is not adjusted for preferred dividend requirements since preferred shares are assumed to be converted from the beginning of the period.

20. Income Taxes

The Corporation adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007. As a result of the adoption of this new accounting standard, the Corporation recorded a $31 million increase in its liability for uncertain tax positions ($24 million net of tax), which was accounted for as a cumulative effect of an accounting change, reducing the opening balance of retained earnings. As of September 30, 2007, the Corporation had a liability for uncertain tax positions of $216 million, excluding accrued interest and penalties of $56 million. The Corporation recognizes interest and penalties associated with uncertain tax positions in income tax expense. During the three and nine months ended September 30, 2007, the provision for interest and penalties was $4 million and $19 million, respectively. During the three and nine months ended September 30, 2006, the provision for interest and penalties was $7 million and $3 million, respectively.

The composition of income tax expense follows:

	Three Months Ended						Nine Months Ended
	September 30						September 30
(In Thousands)	2007			2006			2007		2006
Applicable to (loss) income exclusive of securities transactions	$	(26,917	)	$	236,001		$	273,595	$	666,565
Applicable to securities transactions		290			(78	)		9,275		4,497
Income tax (benefit) expense	$	(26,627	)	$	235,923		$	282,870	$	671,062

The effective tax rate for the three- and nine- month periods ended September 30, 2007 was 58.4% and 30.4%, respectively. The effective tax rate for the three- and nine- month periods ended September 30, 2006 was 30.9% and 31.5%, respectively.

21. Commitments, Contingent Liabilities, Guarantees, and Related Party Transactions

Commitments: A summary of the contractual amount of significant commitments follows:

	September 30		December 31		September 30
(In Thousands)	2007		2006		2006
Commitments to extend credit:
Revolving home equity and credit card lines	$	36,444,659	$	34,286,346	$	33,812,598
Commercial		26,970,458		24,851,485		24,202,970
Residential real estate		11,036,749		9,506,648		11,341,067
Other		613,651		1,047,439		585,746
Standby letters of credit		5,244,865		5,265,929		5,073,250
Commercial letters of credit		370,417		338,110		287,942
Net commitments to sell mortgage loans and mortgage-backed securities		9,353,852		3,480,387		5,152,044
Net commitments to sell commercial real estate loans		282,946		376,375		514,483
Commitments to fund civic and community investments		612,218		607,190		475,803
Commitments to purchase beneficial interests in securitized automobile loans		341,220		573,152		661,325
Commitments to fund principal investments		340,468		282,407		292,440

Commitments to extend credit are agreements to lend. Since many of these commitments expire without being drawn upon, the total commitment amounts do not necessarily represent future cash flow requirements. Certain lending commitments for residential mortgage and commercial real estate loans to be sold into the secondary market are considered derivative instruments in accordance with SFAS 133. The changes in the fair value of these commitments due to changes in interest rates are recorded on the balance sheet as either

39

derivative assets or derivative liabilities. The commitments related to residential mortgage loans and commercial real estate loans are included in residential real estate and commercial loans, respectively, in the above table. Further discussion on derivative instruments is included in Notes 1 and 24.

Standby and commercial letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party, while commercial letters of credit are issued specifically to facilitate commerce and typically result in the commitment being drawn on when the underlying transaction is consummated between the customer and the third party. The credit risk associated with loan commitments and standby and commercial letters of credit is essentially the same as that involved in extending loans to customers and is subject to normal credit policies. Collateral may be obtained based on management’s credit assessment of the customer.

The Corporation enters into forward contracts for the future delivery or purchase of fixed-rate residential mortgage loans, mortgage-backed securities, and commercial real estate loans to reduce the interest-rate risk associated with loans held for sale, commitments to fund loans, and mortgage servicing rights. These contracts are also considered derivative instruments under SFAS 133, and the fair value of these contracts are recorded on the balance sheet as either derivative assets or derivative liabilities. Further discussion on derivative instruments is included in Notes 1 and 24.

The Corporation invests in low-income housing, small-business commercial real estate, and historic tax credit projects to promote the revitalization of low-to-moderate-income neighborhoods throughout the local communities of its banking subsidiary. As a limited partner in these unconsolidated projects, the Corporation is allocated tax credits and deductions. The commitments to fund civic and community investments represent funds committed for existing and future projects.

National City Bank, a subsidiary of the Corporation, along with other financial institutions, has agreed to provide backup liquidity to an unrelated commercial paper conduit. The conduit holds various third-party assets including beneficial interests in the cash flows of trade receivables, credit cards and other financial assets, as well as automobile loans securitized by the Corporation. In the event of a disruption in the commercial paper markets, the conduit could experience a liquidity event. At such time, the conduit may require National City Bank, as well as another financial institution, to purchase an undivided interest in its note representing a beneficial interest in the securitized automobile loans. This commitment expires in December 2007 but may be renewed annually for an additional 12 months by mutual agreement of the parties.

The Corporation has principal investment commitments to provide equity and mezzanine capital financing to private and public companies through either direct investments in specific companies or through investment funds and partnerships. The timing of future cash requirements to fund such commitments is generally dependent on the investment cycle. This cycle, over which privately held companies are funded by private equity investors and ultimately sold, merged, or taken public through an initial offering, can vary based on overall market conditions as well as the nature and type of industry in which the companies operate.

Contingent Liabilities and Guarantees: The Corporation enters into agreements to sell residential mortgage loans and home equity lines of credit (collectively, loans) in the normal course of business. These agreements usually require certain representations concerning credit information, loan documentation, collateral, and insurability. On a regular basis, investors request the Corporation to indemnify them against losses on certain loans or to repurchase loans which the investors believe do not comply with applicable representations. Upon completion of its own investigation, the Corporation generally repurchases or provides indemnification on such loans. Indemnification requests are generally received within two years subsequent to sale.

Management maintains a liability for estimated losses on loans expected to be repurchased or on which indemnification is expected to be provided and regularly evaluates the adequacy of this recourse liability based on trends in repurchase and indemnification requests, actual loss experience, known and inherent risks in the loans, and current economic conditions. In connection with the sale of the First Franklin origination and sales platform, the Corporation transferred its recourse obligation associated with this unit to the buyer. At September 30, 2007, December 31, 2006 and September 30, 2006, the liability for estimated losses on repurchase and indemnification was $178 million, $171 million and $220 million, respectively, and was included in other liabilities on the balance sheet. Further details on loans sold subject to indemnification provisions, loans repurchased or indemnified, and losses charged against the liability follow:

	Three Months Ended				Nine Months Ended
	September 30				September 30
(In Millions)	2007		2006(a)		2007		2006(b)
Total loans sold	$	10,939	$	18,184	$	34,747	$	48,263
Total loans repurchased or indemnified		204		116		452		319
Losses incurred		31		24		101		78

(a) Included $7.7 billion of loans sold, $56 million of loans repurchased or indemnified, and $11 million of losses incurred related to the First Franklin unit.

40

(b) Included $18.0 billion of loans sold, $164 million of loans repurchased or indemnified, and $40 million of losses incurred related to the First Franklin unit.

Loans indemnified that remain outstanding as of September 30, 2007, December 31, 2006, and September 30, 2006, totaled $457 million, $343 million, and $343 million, respectively. Loans sold which remain uninsured as of September 30, 2007 were $81 million. The volume and balance of uninsured government loans may be affected by processing or notification delays. Management believes the majority of the uninsured loans will become insured during the normal course of business. To the extent insurance is not obtained, the loans may be subject to repurchase. Uninsured government loans which were ultimately repurchased have been included in the repurchase totals above.

On December 30, 2006, the Corporation completed the sale of the First Franklin nonconforming mortgage origination and servicing platform. The proceeds received from this transaction were based on a preliminary statement of net assets sold. The purchase price is subject to adjustment based on the closing date values of net assets sold, as well as other negotiated matters. Accordingly, the Corporation may either pay or receive additional consideration depending on the final outcome of this matter. The amount of the purchase price adjustment, if any, will decrease or increase the gain recognized on the sale of this unit. On April 13, 2007, the Corporation received a dispute notice from Merrill Lynch Bank & Trust Co., FSB, the buyer of First Franklin, which asserted that the closing date net asset values and related purchase price were overstated by $67 million. National City management does not agree with that assertion. If the parties cannot reach agreement on this dispute, this matter would be subject to arbitration.

The Corporation has a wholly owned captive insurance subsidiary which provides reinsurance to third-party insurers who provide lender paid mortgage insurance on approximately $1.6 billion of the Corporation’s nonconforming second mortgage loans and lines. These arrangements are quota share reinsurance contracts whereby the Corporation’s captive insurance subsidiary is entitled to 50% of the primary policy premiums and assumes 50% of the risk of loss under the lender paid mortgage insurance primary policy which limits losses to 10% of the original insured risk per policy year. Loss reserves are provided for the estimated costs of settling reinsurance claims on defaulted loans. Loss reserves are established for reported claims as well as incurred but not reported claims. Management establishes loss reserves using historical experience and by making various assumptions and estimates of trends in loss severity, frequency, and other factors. The methods used to develop these reserves are subject to continual review and refinement, and any necessary adjustments to these reserves are reflected in operations in the period identified. Reinsurance loss reserves of $31 million were recognized within the allowance for loan losses as of September 30, 2007. The provision for reinsurance losses at September 30, 2007 of $33 million is presented within the provision for credit losses in the Consolidated Financial Statements. In segment reporting, the provision for reinsurance losses is presented within Retail Banking’s results as noninterest expense. As of September 30, 2007, Retail Banking’s remaining exposure to reinsurance claims is $17 million.

Red Mortgage Capital, a wholly owned subsidiary, is an approved Fannie Mae Delegated Underwriting and Servicing (DUS) mortgage lender. Under the Fannie Mae DUS program, Red Mortgage Capital underwrites, funds, and sells mortgage loans on multifamily rental projects. Red Mortgage Capital then services these mortgage loans on Fannie Mae’s behalf. Participation in the Fannie Mae DUS program requires Red Mortgage Capital to share the risk of loan losses with Fannie Mae. Under the loss sharing arrangement, Red Mortgage Capital and Fannie Mae split losses with one-third assumed by Red Mortgage Capital and two-thirds assumed by Fannie Mae. The Corporation provides a guarantee to Fannie Mae that it would fulfill all payments required of Red Mortgage Capital under the loss sharing arrangement if Red Mortgage Capital fails to meet its obligations. The maximum potential amount of undiscounted future payments that may be required under this program is equal to approximately one-third of the principal balance of the loans outstanding at September 30, 2007. If payment is required under this program, Red Mortgage Capital would have an interest in the collateral underlying the commercial mortgage loan on which the loss occurred. As of September 30, 2007, December 31, 2006, and September 30, 2006, Red Mortgage Capital serviced loans, subject to risk sharing under the DUS program, had outstanding principal balances aggregating $5.3 billion, $4.9 billion and $4.8 billion, respectively. This guarantee will continue until such time as the loss sharing agreement is amended or Red Mortgage Capital no longer shares the risk of losses with Fannie Mae. The fair value of the guarantee, in the form of reserves for losses under the Fannie Mae DUS program, is recorded in accrued expenses and other liabilities on the balance sheet and totaled $5 million, $5 million and $4 million at September 30, 2007, December 31, 2006, and September 30, 2006, respectively.

The guarantee liability for standby letters of credit was $31 million, $39 million and $42 million at September 30, 2007, December 31, 2006, and September 30, 2006, respectively. This liability was recorded in other liabilities on the balance sheet. See above for further discussion on standby letters of credit and their associated outstanding commitments.

The Corporation is subject to nonincome taxes in the various jurisdictions where it does business. The most significant of these taxes is franchise tax which is assessed by some states in lieu of or in addition to income taxes. The amount of tax due may be subject to different interpretations by the Corporation and the taxing authorities. In preparing the Corporation’s tax returns, management attempts to make reasonable interpretations of the tax laws; however, its positions may be subject to challenge upon audit. Management accrues for nonincome tax contingencies that are judged to be both probable and estimable. Management has also identified other unaccrued nonincome tax contingencies, which are considered reasonably possible but not probable, totaling approximately $38 million as of September 30, 2007.

41

The Corporation’s subsidiary, National City Bank, is a member of the Visa USA network. On October 3, 2007 the Visa organization of affiliated entities completed a series of restructuring transactions to combine its affiliated operating companies, including Visa USA, under a single holding company, Visa, Inc. Visa, Inc. intends to issue and sell a majority of its shares to the public via an initial public offering. Visa, Inc. plans to use the IPO proceeds to redeem Visa USA members’ interests and to fund the settlement of certain Visa USA related litigation.

As a result of Visa’s restructuring, National City’s membership interest in Visa USA was exchanged for approximately an 8% equity interest in Visa Inc. Class USA stock. The shares received are subject to a true-up allocation based upon Visa USA’s net income for the fiscal period ending September 30, 2008. Subsequent to the true-up process, the Corporation’s Class USA shares will be converted to Class B shares. The Class B shares will be subject to a lock up period during which the shares cannot be sold or transferred. The lock up period is the later of either three years after the closing of the Visa, Inc. IPO or the final resolution of the Visa USA related litigation.

The Corporation does not have any value recognized in its financial statements for its membership interest in Visa USA. The Visa restructuring and subsequent IPO, if completed as planned, will result in the Corporation realizing a gain upon the redemption, sale or release of transfer restrictions of its Class B shares. The amount of this potential gain, and the timing of its recognition, are undeterminable at this time.

Pursuant to the Visa USA bylaws, the Corporation is obligated upon demand by Visa, Inc. to indemnify Visa, Inc. for certain losses. On July 1, 2007, the Corporation entered into a Loss Sharing Agreement (LSA) which became effective upon the restructuring of the Visa organization on October 3, 2007 and which reaffirmed the Corporation’s obligation to indemnify Visa, Inc. for potential future settlement of certain antitrust suits. The Corporation’s indemnification obligation is limited to its proportionate membership share of Visa USA. On November 7, 2007, Visa, Inc. announced that it had reached a tentative agreement to settle one of the Visa USA related suits. Pursuant to any of the Visa USA bylaws or the LSA, Visa, Inc. may demand that the Corporation contribute up to, but not more than, its proportionate share of this settlement. As such, the Corporation has recognized a liability for this obligation of $157 million at September 30, 2007.

The accounting for the Corporation’s future rights and obligations associated with its Visa membership may not occur in the same reporting periods. As such, the Corporation may recognize a material gain or loss in a particular period. In the aggregate, management does not believe that its Visa membership will have a material adverse effect on its financial condition, results of operations or liquidity.

Litigation: National City and its subsidiaries are involved in a number of legal proceedings arising from the conduct of their business activities. These proceedings include claims brought against the Corporation and its subsidiaries where National City acted as depository bank, lender, underwriter, fiduciary, financial advisor, broker, or other business activities. Reserves are established for legal claims when losses associated with the claims are judged to be probable, and the loss can be reasonably estimated. In many lawsuits and arbitrations, including almost all of the class action lawsuits, it is not possible to determine whether a liability has been incurred or to estimate the ultimate or minimum amount of that liability until the case is close to resolution, in which case a reserve will not be recognized until that time.

On or about November 22, 2002, a claim was asserted in the Marion County Probate Court (Indiana) against National City Bank of Indiana, a subsidiary of the Corporation since merged into National City Bank, concerning management of investments held in a trust for the benefit of the Americans for the Arts and The Poetry Foundation. The claim alleged failure to adequately and timely diversify investments held in this trust, which resulted in investment losses. The beneficiaries were seeking damages of as much as $100 million. In December 2005, the court entered an order granting National City Bank of Indiana’s motion for summary judgment, and the beneficiaries filed an appeal. On October 19, 2006, the Indiana Court of Appeals, in a unanimous decision, affirmed the order granting National City Bank of Indiana’s motion for summary judgment. By order dated March 8, 2007, the Indiana Supreme Court unanimously denied the beneficiaries’ motion to transfer the appeal to the Indiana Supreme Court. The beneficiaries have no further appeals as a matter of right.

Beginning on June 22, 2005, a series of antitrust class action lawsuits were filed against Visa^®, MasterCard^®, and several major financial institutions, including eight cases naming the Corporation and its subsidiary, National City Bank of Kentucky, since merged into National City Bank. The plaintiffs, merchants operating commercial businesses throughout the U.S. and trade associations, claim that the interchange fees charged by card-issuing banks are unreasonable and seek injunctive relief and unspecified damages. The cases have been consolidated for pretrial proceedings in the United States District Court for the Eastern District of New York. On July 1, 2007, the Corporation and National City Bank entered into a Judgment Sharing Agreement (JSA) with respect to this litigation. This litigation is also subject to the Visa USA bylaws and the LSA discussed above. On September 7, 2007, the Magistrate Judge recommended to the District Court that all claims that predate January 1, 2004 should be dismissed. Given the preliminary stage of the remaining suits, it is not possible for management to assess the probability of a material adverse outcome or the range of possible damages, if any, of those suits.

42

On March 31, 2006, the Corporation and National City Bank were served with a patent infringement lawsuit filed in the United States District Court for the Eastern District of Texas. The plaintiff, Data Treasury Corporation, claims that the Corporation, as well as over 50 other financial institutions or check processors, are infringing on its patents involving check imaging, storage and transfer. The plaintiff seeks damages and injunctive relief. On January 6, 2006, the U.S. Patent and Trademark Office ordered a reexamination of two of the image patents involved in the litigation. The litigation regarding those two patents was stayed pending the reexamination. On June 29, 2007, the U.S. Patent and Trademark Office issued a “Final Office Action” rejecting certain claims and confirming other claims. This decision is subject to response by Data Treasury. At this stage of this lawsuit, it is not possible for management to assess the probability of a material adverse outcome, or the range of possible damages, if any.

On December 19, 2005, a class action suit was filed against National City Mortgage Co. in the U.S. District Court for the Southern District of Illinois. The lawsuit alleges that National City Mortgage loan originators were improperly designated as exempt employees and seeks monetary damages. On June 21, 2007, the court conditionally certified an opt-in class of loan originators. On November 6, 2007, a settlement in principle was reached to resolve all wage and hour claims of the loan originators employed during the class period who opt-in to the settlement class. The settlement is subject to court approval. The Corporation established a reserve of $25 million for this matter as of September 30, 2007.

Based on information currently available, advice of counsel, available insurance coverage and established reserves, management believes that the eventual outcome of all claims against the Corporation and its subsidiaries will not, individually or in the aggregate, have a material adverse effect on the Corporation’s consolidated financial position or results of operations. However, it is possible that the ultimate resolution of these matters, if unfavorable, may be material to the results of operations for a particular period.

Related Party Transactions: The Corporation has no material related party transactions which would require disclosure. In compliance with applicable banking regulations, the Corporation may extend credit to certain officers and directors of the Corporation and its banking subsidiaries in the ordinary course of business under substantially the same terms as comparable third-party lending arrangements.

22. Stock Options and Awards

Under the National City Corporation Long-Term Cash and Equity Incentive Plan (the Long-Term Incentive Plan) up to 45 million shares of National City common stock may be made the subject of option rights, stock appreciation rights, restricted awards, common stock awards, or restricted stock units, in the aggregate. In addition, no more than 13 million shares may be awarded in the form of restricted stock, restricted stock units, or common stock awards; and no more than 40 million shares may be awarded in the form of incentive stock options. As of September 30, 2007, stock options and restricted stock awards available for grant under the Long-Term Incentive Plan totaled 23 million and 7 million shares, respectively.

Stock Options: Stock options may be granted to officers and key employees to purchase shares of common stock at the market price of the common stock on the date of grant. These options generally become exercisable to the extent of 25% to 50% annually, beginning one year from the date of grant, and expire no later than 10 years from the date of grant. Prior to 2006, stock options were also granted that included the right to receive additional options if certain criteria are met. The exercise price of an additional option is equal to the market price of the common stock on the date the additional option is granted. Additional options vest six months from the date of grant and have a contractual term equal to the remaining term of the original option. During the three and nine months ended September 30, 2007, pretax compensation expense recognized for stock options totaled $5 million and $18 million, respectively, while pretax compensation expense recognized for stock options totaled $5 million and $16 million for the comparable periods of 2006, respectively. The tax benefit was $2 million and $5 million for the three and nine months ended September 30, 2007, respectively, and the same for the comparable periods in 2006.

The fair values of stock options granted were estimated at the date of grant using the Black-Scholes option pricing model. The Black-Scholes model was originally developed for use in estimating the fair value of traded options, which have different characteristics from the Corporation’s employee stock options. The model is sensitive to changes in assumptions which can materially affect the fair value estimate. The Corporation’s method of estimating expected volatility includes both historical volatility and implied volatility based upon National City options traded in the open market. The expected dividend yield is computed based on the current dividend rate. The expected term of the options is based on the Corporation’s historical exercise experience, and the risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term approximating the expected life of the options. The following assumptions were used to determine the fair value of options granted in the periods stated below.

43

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2007			2006			2007			2006
Expected volatility		20.1	%		20.1	%		19.8	%		19.9	%
Expected dividend yield		4.6			4.3			4.4			4.3
Risk-free interest rate		4.2			4.2			4.1			4.1
Expected term (in years)		5			5			5			6

The weighted-average grant date fair value per share of options granted during the three and nine months ended September 30, 2007 was $4.28 and $4.71, respectively. The weighted-average grant date fair value of options granted during the three and nine months ended September 30, 2006 was $4.95 and $5.12, respectively. The total intrinsic value of options exercised during the three and nine months ended September 30, 2007, was $6 million and $65 million, respectively. The total intrinsic value of options exercised during the three and nine months ended September 30, 2006, was $10 million and $65 million, respectively. As of September 30, 2007, there was $15 million of total unrecognized compensation cost related to nonvested stock option awards. This cost is expected to be recognized over a period of four years.

Upon the consummation of the Mid America acquisition, all outstanding options issued by Mid America became fully vested and were converted into equivalent National City options.

Cash received from the exercise of options for the three and nine months ended September 30, 2007 was $17 million and $154 million, respectively. Cash received from the exercise of options for the three and nine months ended September 30, 2006 was $31 million and $164 million, respectively. The tax benefit realized for the tax deductions from option exercises totaled $2 million and $21 million for the three and nine months ended September 30, 2007, respectively. The tax benefit realized for the tax deductions from option exercises totaled $3 million and $20 million for the three and nine months ended September 30, 2006, respectively. The Corporation generally uses treasury shares to satisfy stock option exercises.

Stock option activity follows:

				Weighted-		Weighted-
				Average		Average Remaining
				Exercise		Contractual Term		Aggregate Intrinsic Value
	Shares			Price		(in years)		(In thousands)
Outstanding at January 1, 2007		43,014,406		$	31.36
Acquisition		4,929,479			17.49
Granted		860,675			34.90
Exercised		(6,851,914	)		28.30
Forfeited or expired		(1,256,457	)		35.34
Outstanding at September 30, 2007		40,696,189		$	30.15		4.4	$	51,692
Exercisable at September 30, 2007		36,407,768		$	29.51		4.0	$	51,692
Outstanding at January 1, 2006		50,135,498		$	30.72
Granted		710,856			36.42
Exercised		(7,788,374	)		27.59
Forfeited or expired		(609,895	)		35.31
Outstanding at September 30, 2006		42,448,085		$	31.32		4.7	$	227,287
Exercisable at September 30, 2006		36,796,371		$	30.71		4.2	$	219,573

Restricted Shares: Restricted common shares may currently be awarded to officers, key employees, and outside directors. In general, restrictions on outside directors’ shares expire after nine months, and restrictions on shares granted to key employees and officers expire within a four-year period. The Corporation recognizes compensation expense over the restricted period. Pretax compensation expense recognized for restricted shares during the three and nine months ended September 30, 2007 totaled $11 million and $43 million, respectively. Pretax compensation expense recognized for restricted shares during the three and nine months ended September 30, 2006 totaled $11 million and $33 million, respectively. The tax benefit was $4 million and $16 million for the three and nine months ended September 30, 2007, respectively, while the tax benefit was $4 million and $12 million for the corresponding periods in 2006.

44

Restricted share activity follows:

	For the Nine Months Ended September 30
	2007					2006
				Weighted-					Weighted-
				Average					Average
				Grant Date					Grant Date
	Shares			Fair Value		Shares			Fair Value
Nonvested at January 1		7,344,918		$	34.96		6,452,193		$	33.76
Granted		424,251			36.16		175,478			34.67
Vested		(1,215,290	)		33.86		(845,861	)		31.44
Forfeited		(300,192	)		35.12		(308,849	)		34.14
Nonvested at September 30		6,253,687		$	35.26		5,472,961		$	34.10

As of September 30, 2007, there was $121 million of total unrecognized compensation cost related to restricted shares. This cost is expected to be recognized over a weighted-average period of 2.2 years. The total fair value of shares vested during the three and nine months ended September 30, 2007, was $29 million and $38 million, respectively. The total fair value of shares vested during the three and nine months ended September 30, 2006, was $9 million and $30 million, respectively.

23. Pension and Other Postretirement Benefit Plans

Defined Benefit Plans: National City has a qualified pension plan covering substantially all employees hired prior to April 1, 2006. Pension benefits are derived from a cash balance formula, whereby credits based on salary, age, and years of service are allocated to employee accounts. Actuarially determined pension costs are charged to benefits expense in the income statement. The Corporation’s funding policy is to contribute at least the minimum amount required by the Employee Retirement Income Security Act of 1974. National City does not anticipate making a contribution to this plan in 2007 as the plan is currently overfunded.

The Corporation maintains nonqualified supplemental retirement plans for certain key employees. All benefits provided under these plans are unfunded, and payments to plan participants are made by the Corporation.

In connection with the Harbor acquisition, the Corporation acquired a frozen multi-employer pension plan. This plan was terminated in June 2007 at a cost of $7 million. In connection with the Fidelity acquisition, the Corporation acquired a frozen qualified defined benefit pension plan. There were no contributions to this plan for the nine-month period ended September 30, 2007.

National City also has a benefit plan offering postretirement medical and life insurance benefits. The medical portion of the plan is contributory and the life insurance coverage is noncontributory to the participants. As of April 1, 2006, retiree life insurance was eliminated for active employees who were not yet participants in the plan. The Corporation has no plan assets attributable to the plan, and funds the benefits as claims arise. Benefit costs related to this plan are recognized in the periods employees provide service for such benefits. The Corporation reserves the right to terminate or make plan changes at any time.

Using an actuarial measurement date of October 31, components of net periodic cost for the three and nine months ended September 30 follow:

	Three Months Ended						Nine Months Ended
	September 30						September 30
(In Thousands)	2007			2006			2007			2006
Qualified Pension Plan
Service cost	$	14,888		$	14,532		$	44,665		$	43,595
Interest cost		24,430			22,359			73,289			67,077
Expected return on plan assets		(38,720	)		(34,682	)		(116,159	)		(104,046	)
Amortization of prior service cost		(1,188	)		(1,189	)		(3,566	)		(3,566	)
Recognized net actuarial loss		150			275			450			825
Net periodic (benefit) cost	$	(440	)	$	1,295		$	(1,321	)	$	3,885
Supplemental Pension Plans
Service cost	$	468		$	397		$	1,404		$	1,192
Interest cost		2,284			1,964			6,852			5,892
Amortization of prior service cost		244			333			733			998
Recognized net actuarial loss		3,494			837			5,080			2,512
Net periodic cost	$	6,490		$	3,531		$	14,069		$	10,594
Other Postretirement Benefits
Service cost	$	380		$	444		$	1,140		$	1,332

45

	Three Months Ended					Nine Months Ended
	September 30					September 30
(In Thousands)	2007		2006			2007		2006
Interest cost		2,086		2,131			6,260		6,393
Amortization of prior service cost		40		47			119		141
Transition obligation		202		227			606		681
Recognized net actuarial loss		69		143			207		429
Curtailment gain		—		(1,299	)		—		(3,896	)
Net periodic cost	$	2,777	$	1,693		$	8,332	$	5,080
Total net periodic cost	$	8,827	$	6,519		$	21,080	$	19,559

Defined Contribution Plans: Substantially all employees are eligible to contribute a portion of their pretax compensation to a defined contribution plan. The Corporation may make contributions to the plan for employees with one or more years of service in the form of National City common stock in varying amounts depending on participant contribution levels. In 2007 and 2006, the Corporation provided up to a 6.9% matching contribution. Matching contributions totaled $19 million and $66 million for the three and nine months ended September 30, 2007, and $19 million and $67 million for the three and nine months ended September 30, 2006, respectively. The Corporation also acquired Harbor’s leveraged employee stock ownership plan (ESOP) plan which covered all former Harbor employees age 21 and over. As shares are released to plan participants, the Corporation recognizes compensation equal to the current market price of the shares. Expense related to this plan was $3 million and $12 million for the three and nine months ended September 30, 2007, respectively.

24. Derivative Instruments and Hedging Activities

The Corporation uses derivative instruments primarily to protect against the risk of adverse price or interest-rate movements on the value of certain assets and liabilities and on future cash flows. It also executes derivative instruments with its commercial banking customers to facilitate their risk management strategies. Derivative instruments represent contracts between parties that usually require little or no initial net investment and result in one party delivering cash or another type of asset to the other party based on a notional amount and an underlying as specified in the contract. A notional amount represents the number of units of a specific item, such as currency units or shares. An underlying represents a variable, such as an interest rate, security price, or price index. The amount of cash or other asset delivered from one party to the other is determined based on the interaction of the notional amount of the contract with the underlying. Derivatives are also implicit in certain contracts and commitments, such as residential and commercial real estate loan commitments, which by definition qualify as derivative instruments under SFAS 133.

Market risk is the risk of loss arising from an adverse change in interest rates, exchange rates, or equity prices. The Corporation’s primary market risk is interest-rate risk. Management uses derivative instruments to protect against the risk of interest-rate movements on the value of certain assets and liabilities and on future cash flows. These instruments include interest-rate swaps, interest-rate futures, interest-rate options, forward agreements, and interest-rate caps and floors with indices that relate to the pricing of specific assets and liabilities. The nature and volume of the derivative instruments used to manage interest-rate risk depend on the level and type of assets and liabilities on the balance sheet and the risk management strategies for the current and anticipated rate environments.

As with any financial instrument, derivative instruments have inherent risks, primarily market and credit risk. Market risk associated with changes in interest rates is managed in conjunction with the Corporation’s overall market risk monitoring process, as further discussed in the Market Risk section of the Financial Review.

Credit risk occurs when a counterparty to a derivative contract where the Corporation has an unrealized gain fails to perform according to the terms of the agreement. Credit risk is managed by limiting the aggregate amount of net unrealized gains in agreements outstanding, monitoring the size and the maturity structure of the derivative portfolio, applying uniform credit standards to all activities with credit risk, and collateralizing gains. The Corporation has established bilateral collateral agreements with its major derivative dealer counterparties that provide for exchanges of marketable securities or cash to collateralize either party’s net gains. At September 30, 2007, these collateral agreements covered 99.5% of the notional amount of the total derivative portfolio, excluding futures contracts that are cash settled daily with counterparties, certain forward commitments to sell or purchase mortgage loans or mortgage-backed securities, and customer derivative contracts. At September 30, 2007, the Corporation held cash, U.S. government, and U.S. government-sponsored agency securities with a fair value of $199 million to collateralize net gains with counterparties and had pledged or delivered to counterparties cash, U.S. government, and U.S. government-sponsored agency securities with a fair value of $161 million to collateralize net losses with counterparties. In certain instances, open forward commitments to sell or purchase mortgage loans or mortgage-backed securities are not covered by collateral agreements due to the fact these contracts usually mature within 90 days. The credit risk associated with derivative instruments executed with the Corporation’s commercial banking customers is essentially the same as that involved in extending loans and is subject to similar credit policies. Collateral may be obtained based on management’s assessment of the customer.

Derivative contracts are valued using observable market prices, when available. In the absence of observable market prices, the Corporation uses discounted cash flow models to estimate the fair value of its derivatives. The interest rates used in these cash flow models are based on forward yield curves that are observable in the current cash and derivatives markets, consistent with how derivatives are valued by market participants. Cash flow models used for valuing derivative instruments are regularly validated by testing through

46

comparison with other third parties. The estimated fair value of a mortgage banking loan commitment is based on the change in estimated fair value of the underlying mortgage loan and the probability that the mortgage loan will fund within the terms of the loan commitment. The change in fair value of the underlying mortgage loan is based on quoted mortgage-backed securities prices. The probability that the loan will fund is derived from the Corporation’s own historical empirical data. The change in value of the underlying mortgage loan is measured from the commitment date. At the time of issuance, the estimated fair value of the commitment is zero. The valuations presented in the following tables are based on yield curves, forward yield curves, and implied volatilities that were observable in the cash and derivatives markets on September 30, 2007, December 31, 2006, and September 30, 2006.

Fair Value Hedges: The Corporation primarily uses interest-rate swaps, interest-rate futures, interest-rate caps and floors, interest-rate options, interest-rate forwards, and forward purchase and sales commitments to hedge the fair values of residential mortgage and commercial real estate loans held for sale and certain fixed-rate commercial portfolio loans for changes in interest rates. The Corporation also uses receive-fixed interest-rate swaps to hedge the fair value of certain fixed-rate funding products against changes in interest rates. The funding products hedged include purchased certificates of deposit, long-term FHLB advances, senior and subordinated long-term debt, and senior bank notes.

For fair value hedges of fixed-rate debt, including purchased certificates of deposit, management uses a monthly dollar offset ratio to test retrospective effectiveness. For fair value hedges of portfolio loans and residential mortgage loans held for sale, a dollar offset ratio test is performed on a daily basis. Effectiveness testing for commercial real estate loans held for sale is measured monthly using a dollar offset ratio. There were no components of derivative instruments that were excluded from the assessment of hedge effectiveness.

For the three and nine months ended September 30, 2007, the Corporation recognized total net ineffective fair value hedge losses of $106 thousand and $9 million, respectively. For the three- and nine-month periods ended September 30, 2006, the Corporation recognized total net ineffective fair value hedge gains of $214 thousand and $3 million, respectively. Details of net ineffective hedge gains and losses by hedge strategy are presented in the table on page 49. Net ineffective hedge gains and losses on residential mortgage and commercial real estate loans held for sale are included in loan sale revenue on the income statement. Net ineffective hedge gains and losses related to hedging commercial portfolio loans and fixed-rate funding products are included in other noninterest income on the income statement.

Cash Flow Hedges: The Corporation hedges cash flow variability related to variable-rate commercial loans and funding products, specifically FHLB advances and senior bank notes. Interest-rate floors are used to hedge the cash flows associated with variable-rate commercial loans while interest-rate caps are used to hedge cash flows from the variable-rate funding products.

Retrospective hedge effectiveness for cash flow hedges of variable-rate funding products is determined using a dollar offset ratio applied on a monthly basis. Retrospective hedge effectiveness for variable-rate commercial loans is determined on a monthly basis using regression analysis. There were no components of derivative instruments that were excluded from the assessment of hedge effectiveness. For the nine-month periods ended September 30, 2007 and 2006, the Corporation recognized net ineffective cash flow hedge losses of $65 thousand and $34 thousand, respectively. There were no ineffective hedge gains or losses associated with cash flow hedges in the third quarters of 2007 or 2006. These losses are included in other noninterest income on the income statement.

Derivative gains and losses reclassified from accumulated other comprehensive income to current period earnings are included in the line item in which the hedged cash flows are recorded. At September 30, 2007, December 31, 2006, and September 30, 2006, accumulated other comprehensive income included a deferred after-tax net gain(loss) of $28 million, $(4) million and $(2) million, respectively, related to derivatives used to hedge loan and funding cash flows. See Note 18 for further detail of the amounts included in accumulated other comprehensive income. The net after-tax derivative gain included in accumulated other comprehensive income at September 30, 2007 is projected to be reclassified into net interest income in conjunction with the recognition of interest payments on loan and funding products through August 2013, with $2 million of after-tax net loss expected to be recognized in net interest income within the next year. There were no gains or losses reclassified into earnings in the first nine months of 2007 or 2006 arising from the determination that the original forecasted transaction would not occur.

47

The notional amounts of the derivatives portfolio used for interest-rate risk management purposes and designated as accounting hedges under SFAS 133 follows:

(In Millions)	September 30, 2007		December 31, 2006		September 30, 2006
Fair Value Hedges
Commercial loans
Receive-fixed interest rate swaps	$	112	$	112	$	112
Pay-fixed interest rate swaps		2,304		2,712		2,912
Pay-fixed interest rate swaptions sold		—		—		50
Interest rate caps sold		50		150		150
Interest rate floors sold		100		100		210
Interest rate collars purchased		5		5		5
Interest rate futures purchased		1,769		2,204		1,935
Interest rate futures sold		1,984		2,595		2,311
Total		6,324		7,878		7,685
Mortgage loans held for sale
Forward commitments to sell mortgage loans and mortgage-backed securities		8,516		1,855		870
Receive-fixed interest rate swaps		400		1,775		1,945
Receive-fixed interest rate swaptions purchased		600		—		—
Pay-fixed interest rate swaps		—		550		550
Pay-fixed interest rate swaptions purchased		200		—		—
Interest rate caps purchased		—		500		500
Interest rate floors purchased		—		500		—
Total		9,716		5,180		3,865
Commercial real estate loans held for sale
Forward commitments to sell commercial real estate loans		166		136		160
Interest rate futures purchased		9		—		—
Interest rate swaps		80		—		—
Total		255		136		160
Funding
Receive-fixed interest rate swaps		4,500		7,991		7,796
Callable receive-fixed interest rate swaps		3,199		2,706		2,421
Total		7,699		10,697		10,217
Total notional of derivatives used in fair value hedges		23,994		23,891		21,927
Cash Flow Hedges
Commercial loans
Interest rate floors purchased		13,200		—		—
Funding
Pay-fixed interest rate swaps		—		170		—
Interest rate caps purchased		300		300		300
Total		300		470		300
Total notional of derivatives used in cash flow hedges		13,500		470		300
Total notional of derivatives designated in SFAS 133 relationships	$	37,494	$	24,361	$	22,227

48

The fair value of derivative instruments used for interest-rate risk management purposes and designated as accounting hedges under SFAS 133 follows:

	September 30, 2007				December 31, 2006				September 30, 2006
(In Millions)	Asset		Liability		Asset		Liability		Asset		Liability
Fair Value Hedges
Commercial loans
Receive-fixed interest rate swaps	$	.7	$	—	$	1.0	$	.3	$	1.3	$	.3
Pay-fixed interest rate swaps		11.5		13.0		33.3		10.3		36.9		13.1
Pay-fixed interest rate swaptions sold		—		—		—		—		—		.1
Interest rate collars purchased		—		.2		—		.2		—		.2
Total		12.2		13.2		34.3		10.8		38.2		13.7
Mortgage loans held for sale
Forward commitments to sell mortgage loans and mortgage-backed securities		—		36.7		6.0		11.8		1.7		15.4
Receive-fixed interest rate swaps		—		1.1		12.0		27.7		12.8		27.2
Receive-fixed interest rate swaps purchased		9.8		—		—		—		—		—
Pay-fixed interest rate swaps		—		—		—		6.8		—		7.1
Pay-fixed interest rate swaptions purchased		4.1		—		—		—		—		—
Interest rate floors purchased		—		—		1.8		—		—		—
Total		13.9		37.8		19.8		46.3		14.5		49.7
Commercial real estate loans held for sale
Forward commitments to sell commercial real estate loans		.1		1.0		.2		1.3		—		2.7
Interest rate futures purchased		—		—		—		—		—		—
Interest rate swaps		1.4		2.4		—		—		—		—
Total		1.5		3.4		.2		1.3		—		2.7
Funding
Receive-fixed interest rate swaps		75.8		48.8		112.1		115.8		118.6		118.5
Callable receive-fixed interest rate swaps		—		123.4		—		87.5		—		87.8
Total		75.8		172.2		112.1		203.3		118.6		206.3
Total fair value hedges		103.4		226.6		166.4		261.7		171.3		272.4
Cash Flow Hedges
Commercial loans
Interest rate floors purchased		95.5		—		—		—		—		—
Funding
Pay-fixed interest rate swaps		—		—		—		.9		—		—
Interest rate caps purchased		—		1.0		.1		—		.1		—
Total		—		1.0		.1		.9		.1		—
Total cash flow hedges		95.5		1.0		.1		.9		.1		—
Fair value of derivatives designated in SFAS 133 relationships	$	198.9	$	227.6	$	166.5	$	262.6	$	171.4	$	272.4

Net ineffective hedge gains/(losses) recognized for each interest-rate risk SFAS 133 hedge strategy follows:

	Three Months Ended						Nine Months Ended
	September 30						September 30
(In Millions)	2007			2006			2007			2006
Fair Value Hedges
Commercial loans	$	(3.4	)	$	(2.2	)	$	(5.8	)	$	6.7
Mortgage loans held for sale		(.5	)		(1.4	)		2.7			(1.8	)
Commercial real estate loans held for sale		(.1	)		—			(.1	)		—
Funding		3.9			3.8			(5.8	)		(1.5	)
Total fair value hedge (loss)/gain		(.1	)		.2			(9.0	)		3.4
Cash Flow Hedges
Commercial loans		—			—			—			—
Funding		—			—			(.1	)		—
Total cash flow hedge loss		—			—			(.1	)		—
Net ineffective hedge (losses) gains on SFAS 133 hedge strategies	$	(.1	)	$	.2		$	(9.1	)	$	3.4

49

Other Derivative Activities: The derivative portfolio also includes derivative financial instruments not included in SFAS 133 hedge relationships. These derivatives primarily consist of interest-rate swaps, futures, options, caps, floors, and forwards used to hedge the risk of declines in the value of residential mortgage servicing rights accounted for at fair value.

The notional amounts of derivative instruments used for mortgage servicing rights (MSR) risk management, which are not designated in SFAS 133 hedge relationships, are presented in the following table:

(In Millions)	September 30, 2007		December 31, 2006		September 30, 2006
Net forward commitments to purchase mortgage loans and mortgage-backed securities	$	4,905	$	4,300	$	5,050
Basis swaps		179		—		—
Receive-fixed interest rate swaps		4,335		5,570		5,580
Receive-fixed interest rate swaptions purchased		6,250		7,300		9,000
Receive-fixed interest rate swaptions sold		650		3,000		3,700
Pay-fixed interest rate swaps		2,920		1,930		1,930
Pay-fixed interest rate swaptions purchased		2,250		2,550		4,100
Pay-fixed interest rate swaptions sold		650		2,000		1,400
Principal-only interest rate swaps		—		396		397
Interest rate caps purchased		2,500		2,500		4,850
Interest rate caps sold		—		—		2,000
Interest rate floors purchased		5,500		14,200		16,200
Interest rate futures purchased		—		1,410		1,080
Total derivative instruments used for MSR risk management	$	30,139	$	45,156	$	55,287

Assets and liabilities recognized for derivative instruments used for mortgage servicing rights risk management, which are not designated in SFAS 133 hedge relationships, are presented in the following table:

	September 30, 2007				December 31, 2006				September 30, 2006
(In Millions)	Asset		Liability		Asset		Liability		Asset		Liability
Net forward commitments to purchase mortgage loans and mortgage-backed securities	$	—	$	15.5	$	—	$	22.2	$	20.8	$	—
Basis swaps		—		1.3		—		—		—		—
Receive-fixed interest rate swaps		14.8		29.1		12.9		124.0		31.7		124.0
Receive-fixed interest rate swaptions purchased		124.8		—		58.9		—		93.0		—
Receive-fixed interest rate swaptions sold		—		23.3		—		43.9		—		38.4
Pay-fixed interest rate swaps		—		78.7		—		80.0		—		68.4
Pay-fixed interest rate swaptions purchased		56.0		—		31.9		—		19.8		—
Pay-fixed interest rate swaptions sold		—		21.5		—		39.1		—		30.9
Principal-only interest rate swaps		—		—		—		6.2		1.9		—
Interest rate caps purchased		6.7		—		—		—		20.5		—
Interest rate caps sold		—		—		—		—		—		—
Interest rate floors purchased		21.2		—		86.1		—		100.7		—
Total derivative instruments used for MSR risk management	$	223.5	$	169.4	$	189.8	$	315.4	$	288.4	$	261.7

Other derivatives held but not included in SFAS 133 hedge relationships include mortgage banking loan commitments, which are defined as derivative instruments under SFAS 133, forward commitments to sell mortgage loans and mortgage-backed securities which are used to hedge the loan commitments, certain instruments used to economically hedge interest-rate risk, and instruments held for trading purposes, which are entered into for the purpose of making short-term profits or for providing risk management products to commercial banking customers.

A summary of the fair value of derivative net assets/(liabilities) not designated in SFAS 133 hedge relationships, inclusive of those used to hedge mortgage servicing rights, follows:

(In Millions)	September 30, 2007			December 31, 2006			September 30, 2006
Loan sale and servicing risk management:
Mortgage servicing rights	$	54.1		$	(125.6	)	$	26.7
Mortgage and commercial real estate loans and loan commitments		12.3			17.0			13.1
Total loan sale and servicing		66.4			(108.6	)		39.8
Trading derivatives:
Customer risk management		32.3			29.6			30.8
Other		(7.5	)		(8.2	)		.5
Total trading		24.8			21.4			31.3

50

(In Millions)	September 30, 2007		December 31, 2006			September 30, 2006
Used for other risk management purposes		8.4		78.4			54.8
Net asset/(liability) on derivatives not designated in SFAS 133 hedge relationships	$	99.6	$	(8.8	)	$	125.9

Gains and losses on derivatives used to manage risk associated with mortgage servicing rights are included in loan servicing income, while gains and losses on mortgage and commercial real estate loan commitments and associated loan risk management instruments are included in loan sale revenue on the income statement. Gains and losses on derivative instruments held for trading or other risk management purposes are included in other noninterest income. Net gains/(losses) on derivatives instruments not designated in SFAS 133 hedge relationships are as follows:

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(In Millions)	2007			2006		2007			2006
Loan sale and servicing risk management:
Mortgage servicing rights	$	144.4		$	327.2	$	(143.0	)	$	(262.3	)
Mortgage and commercial real estate loans and loan commitments		(62.6	)		27.0		(129.4	)		1.6
Total loan sale and servicing related		81.8			354.2		(272.4	)		(260.7	)
Trading derivatives:
Customer risk management		5.0			3.3		12.9			12.7
Other		(7.9	)		1.0		(7.3	)		3.3
Total trading		(2.9	)		4.3		5.6			16.0
Used for other risk management purposes		(2.6	)		17.5		(28.6	)		(15.3	)
Net gain/(loss) on derivatives not designated in SFAS 133 relationships	$	76.3		$	376.0	$	295.4		$	(260.0	)

25. Line of Business Results

The Corporation manages its business by product and service offerings as well as the distribution channel through which these products and services are offered. Effective January 1, 2007, the Corporation implemented a reorganization of its management structure resulting in the following five reportable segments: Retail Banking, Commercial Banking — Regional, Commercial Banking - National, Mortgage Banking, and Asset Management. Each of these segments is further described below. All revenues and expenses not directly associated with or allocated to these segments are reported within Parent and Other. Prior periods’ results have been reclassified to conform with the current presentation.

Net income is the primary measure used by management to assess segment performance and allocate resources. Segment results are derived from the Corporation’s management reporting system. There is no comprehensive authoritative guidance on how to allocate revenues and expenses among business segments. The Corporation uses various methodologies to assign revenues, expenses and assets to its segments in an attempt to reflect the underlying economics of each business. These methodologies may differ from techniques applied by other financial institutions. The accounting policies of the segments are generally the same as the Corporation, except that certain transactions are presented differently within the segment results, as described below.

Net interest income is presented in the segment results on a tax-equivalent basis. Assets and liabilities within each business unit are match funded, and interest rate risk is centrally managed as part of investment funding activities. Net interest income of each segment also includes interest earned on securitized loans which, for management reporting purposes, continue to be reflected as owned by the business that manages those assets. Interest income and funding costs associated with securitized loans are eliminated within Parent & Other. The provision for credit losses is assigned to each segment based upon the required allowance for loan losses of each segment. Noninterest income, as well as certain operating expenses, can generally be directly identified with a specific business. Indirect expenses are allocated to each segment based on various methodologies to estimate usage. The income tax provision is assigned to each segment using a standard rate which considers federal, state and local income taxes as well as state franchise taxes. Adjustments to reconcile the segments’ income tax provision to the consolidated income tax provision are recorded within Parent and Other. Goodwill is assigned to each segment based on the fair value of each acquired business added to each segment in relation to the total acquisition cost. A risk-based methodology is used to allocate capital to the segments. Management periodically refines its methodologies to allocate revenues and expenses as well as assets, liabilities and capital to its various businesses.

Retail Banking provides banking services to consumers and small businesses within National City’s nine state footprint. In addition to deposit gathering and direct lending services provided through the retail bank branch network, call centers, and the Internet, Retail Banking’s activities also include small business banking services, education finance, retail brokerage, and lending-related insurance services. Consumer lending products include home equity, government or privately guaranteed student loans, and credit cards and other

51

unsecured personal and small business lines of credit. Significant revenue sources include net interest income on loan and deposit accounts, deposit account service fees, debit and credit card interchange and service fees, and ATM surcharge and net interchange fees. Major expenses are credit, personnel costs, and branch network support.

Commercial Banking-Regional provides products and services to large and medium-sized corporations within National City’s nine state footprint. Major products and services include: lines of credit, term loans, leases, investment real estate lending, asset-based lending, treasury management, stock transfer, international services and dealer floorplan financing. Significant revenue sources are net interest income on loan and deposit accounts, brokerage revenue, leasing revenue and other fee income. A major source of revenue is from companies with annual sales in the $5 million to $500 million range across a diverse group of industries. Major expenses are credit and personnel costs.

Commercial Banking-National provides products and services to select customers in certain industries or distribution channels, as well as customers outside of the National City’s footprint. Major products and services include: loan sales and securitization, structured finance, syndicated lending, commercial leasing, equity and mezzanine capital, derivatives, public finance, investment banking, mortgage warehouse lending, correspondent banking, multi-family real estate lending and commercial real estate lending in certain national markets. Significant revenue sources are loan sales revenue, principal investment gains and other fee income. Major expenses are primarily personnel costs.

Mortgage Banking originates residential mortgage, home equity lines and loans both within National City’s banking footprint and on a nationwide basis. Mortgage loans generally represent loans collateralized by one-to-four-family residential real estate and are made to borrowers in good credit standing. These loans are typically sold to primary mortgage market aggregators (Fannie Mae, Freddie Mac, Ginnie Mae, or the Federal Home Loan Banks) and jumbo loan investors. Mortgage Banking’s business activities also include servicing mortgage loans, home equity loans and lines of credit for third-party investors. Significant revenue streams include net interest income earned on portfolio loans and loans held for sale, as well as loan sale and servicing revenue. Major expenses include credit, personnel costs, branch office costs, loan servicing and insurance expense.

The Asset Management business includes both institutional asset and personal wealth management. Institutional asset management services are provided by two business units — Allegiant Asset Management Group and Allegiant Asset Management Company. These business units provide investment management, custody, retirement planning services, and other corporate trust services to institutional clients, and acts as the investment advisor for the Allegiant^® mutual funds. The clients served include publicly traded corporations, charitable endowments and foundations, as well as unions, residing primarily in National City’s banking footprint and generally complementing its corporate banking relationships. Personal wealth management services are provided by two business units — Private Client Group and Sterling. Products and services include private banking services and tailored credit solutions, customized investment management services, brokerage, financial planning, as well as trust management and administration for affluent individuals and families. Sterling offers financial management services for high net worth clients.

Parent and Other contains revenues and expenses not directly associated with or allocated to the above segments, as well as investment funding activities including the investment portfolio, short and long-term borrowings, derivatives used for interest-rate risk management, and asset securitizations. Revenues and expenses associated with discontinued or exited products, services or business units, including the former First Franklin loan origination and servicing platform, are recorded with Parent and Other. Adjustments to reconcile the segment results to the Consolidated Financial Statements are also recorded within Parent and Other.

52

Selected financial information by line of business follows. For further discussion on the segments’ results see the Financial Review section.

				Commercial			Commercial
	Retail			Banking -			Banking -			Mortgage			Asset		Parent			Consolidated
(In Thousands)	Banking			Regional			National			Banking			Management		and Other			Total
Three months ended September 30, 2007
Net interest income (expense)(a)	$	578,581		$	272,368		$	118,501		$	165,279		$	33,447	$	(66,273	)	$	1,101,903
Provision for credit losses		69,674			29,174			45,504			189,284			7,544		20,364			361,544
Net interest income (expense) after provision		508,907			243,194			72,997			(24,005	)		25,903		(86,637	)		740,359
Noninterest income		288,759			58,652			97,652			44,452			92,704		41,990			624,209
Noninterest expense		509,963			137,322			101,309			289,646			87,506		277,771			1,403,517
Income (loss) before taxes		287,703			164,524			69,340			(269,199	)		31,101		(322,418	)		(38,949	)
Income tax expense (benefit)(a)		112,975			62,846			25,162			(101,771	)		11,756		(130,912	)		(19,944	)
Net income (loss)	$	174,728		$	101,678		$	44,178		$	(167,428	)	$	19,345	$	(191,506	)	$	(19,005	)
Intersegment revenue (expense)	$	(628	)	$	(533	)	$	7,674		$	1,152		$	1,934	$	(9,599	)	$	—
Average assets (in millions)		29,151			36,494			17,954			33,887			4,310		23,299			145,095
Three months ended September 30, 2006
Net interest income(a)	$	510,351		$	270,698		$	113,236		$	145,746		$	27,548	$	81,778		$	1,149,357
Provision (benefit) for credit losses		46,530			19,432			(12,137	)		38,396			1,526		(20,815	)		72,932
Net interest income after provision		463,821			251,266			125,373			107,350			26,022		102,593			1,076,425
Noninterest income		273,795			58,134			109,430			208,225			87,121		140,770			877,475
Noninterest expense		425,425			127,954			92,261			203,171			81,890		253,497			1,184,198
Income (loss) before taxes		312,191			181,446			142,542			112,404			31,253		(10,134	)		769,702
Income tax expense (benefit)(a)		120,284			69,324			42,042			42,475			11,813		(42,682	)		243,256
Net income	$	191,907		$	112,122		$	100,500		$	69,929		$	19,440	$	32,548		$	526,446
Intersegment revenue (expense)	$	(599	)	$	138		$	4,622		$	(1,164	)	$	1,726	$	(4,723	)	$	—
Average assets (in millions)		24,366			33,375			15,782			25,352			3,881		35,678			138,434

				Commercial			Commercial
	Retail			Banking -			Banking -			Mortgage			Asset			Parent			Consolidated
(In Thousands)	Banking			Regional			National			Banking			Management			and Other			Total
Nine months ended September 30, 2007
Net interest income (expense)(a)	$	1,674,692		$	826,192		$	351,839		$	505,229		$	101,100		$	(142,781	)	$	3,316,271
Provision for credit losses		191,322			69,357			8,480			237,010			9,836			95,506			611,511
Net interest income (expense) after provision		1,483,370			756,835			343,359			268,219			91,264			(238,287	)		2,704,760
Noninterest income		856,958			175,305			323,772			293,010			282,522			77,701			2,009,268
Noninterest expense		1,457,421			406,486			322,333			717,481			255,189			603,640			3,762,550
Income (loss) before taxes		882,907			525,654			344,798			(156,252	)		118,597			(764,226	)		951,478
Income tax expense (benefit)(a)		346,380			200,665			128,391			(59,105	)		44,830			(356,494	)		304,667
Net income (loss)	$	536,527		$	324,989		$	216,407		$	(97,147	)	$	73,767		$	(407,732	)	$	646,811
Intersegment revenue (expense)	$	(1,865	)	$	(1,505	)	$	27,041		$	(7,101	)	$	7,166		$	(23,736	)	$	—
Average assets (in millions)		28,302			35,852			17,193			30,580			4,218			24,379			140,524
Nine months ended September 30, 2006
Net interest income(a)	$	1,485,004		$	798,227		$	342,593		$	461,295		$	79,534		$	334,047		$	3,500,700
Provision (benefit) for credit losses		99,932			44,030			(12,040	)		53,043			(1,538	)		(23,535	)		159,892
Net interest income after provision		1,385,072			754,197			354,633			408,252			81,072			357,582			3,340,808
Noninterest income		789,394			168,555			379,672			232,232			265,215			482,135			2,317,203
Noninterest expense		1,245,070			389,592			284,684			608,811			241,906			736,585			3,506,648
Income before taxes		929,396			533,160			449,621			31,673			104,381			103,132			2,151,363
Income tax expense (benefit)(a)		357,987			203,817			154,385			11,933			39,456			(74,394	)		693,184
Net income	$	571,409		$	329,343		$	295,236		$	19,740		$	64,925		$	177,526		$	1,458,179
Intersegment revenue (expense)	$	(1,800	)	$	606		$	18,548		$	9,035		$	4,887		$	(31,276	)	$	—
Average assets (in millions)		24,635			32,687			15,318			26,209			3,777			36,654			139,280

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

53

26. Financial Holding Company

Condensed financial statements of the holding company, which include transactions with subsidiaries, follow:

Balance Sheets

	September 30		December 31		September 30
(In Thousands)	2007		2006		2006
Assets
Cash and demand balances due from banks	$	1,662,291	$	1,315,479	$	651,232
Loans to and receivables from subsidiaries		1,248,603		3,048,331		787,722
Securities		212,692		219,952		195,568
Other investments		5,602		192,398		207,741
Investments in:
Subsidiary banks		14,909,468		12,735,292		13,373,192
Nonbank subsidiaries		585,174		346,770		490,625
Goodwill		122,045		117,471		117,471
Derivative assets		52,900		67,632		70,607
Other assets		723,802		705,035		626,530
Total Assets	$	19,522,577	$	18,748,360	$	16,520,688
Liabilities and Stockholders’ Equity
Long-term debt	$	2,828,619	$	2,308,802	$	2,309,101
Borrowed funds from subsidiaries		1,880,017		948,705		341,617
Derivative liabilities		64,485		39,858		34,515
Accrued expenses and other liabilities		906,605		869,992		933,632
Total liabilities		5,679,726		4,167,357		3,618,865
Stockholders’ equity		13,842,851		14,581,003		12,901,823
Total Liabilities and Stockholders’ Equity	$	19,522,577	$	18,748,360	$	16,520,688

Securities and other investments totaling $97 million at September 30, 2007 were restricted for use in certain nonqualified benefit plans. The borrowed funds from subsidiaries balance include the junior subordinated debt securities payable to the wholly owned subsidiary trusts (the trusts). The holding company continues to guarantee the capital securities issued by the trusts, which totaled $1.9 billion at September 30, 2007. The holding company also guarantees commercial paper issued by its subsidiary National City Credit Corporation, which borrowings totaled $1.1 billion at September 30, 2007. Additionally, the holding company guarantees National City Bank’s financial obligation under its membership with Visa^® up to $600 million and MasterCard^® up to $400 million.

Statements of Income

	Three Months Ended						Nine Months Ended
	September 30						September 30
(In Thousands)	2007			2006			2007			2006
Income
Dividends from:
Subsidiary banks	$	—		$	—		$	950,000		$	425,000
Nonbank subsidiaries		45			194			45			468
Interest on loans to subsidiaries		32,954			14,595			88,780			46,617
Interest and dividends on securities		1,307			1,455			3,947			5,490
Securities gains, net		208			286			1,664			11,917
Derivative losses/gains, net		(4,803	)		6,244			(5,110	)		6,643
Other income		4,140			8,683			19,666			34,860
Total Income		33,851			31,457			1,058,992			530,995
Expense
Interest on debt and other borrowings		65,762			38,777			173,738			111,557
Other expense		30,684			31,753			104,337			92,435
Total Expense		96,446			70,530			278,075			203,992
(Loss)/income before taxes and equity in undistributed net income of subsidiaries		(62,595	)		(39,073	)		780,917			327,003
Income tax benefit		(28,287	)		(14,246	)		(49,122	)		(51,179	)
(Loss)/Income before equity in undistributed net income of subsidiaries		(34,308	)		(24,827	)		830,039			378,182
Equity in undistributed net income/(loss) of subsidiaries		15,303			551,273			(183,228	)		1,079,997
Net (Loss)/Income	$	(19,005	)	$	526,446		$	646,811		$	1,458,179

54

Statements of Cash Flows

	Nine Months Ended
	September 30
(In Thousands)	2007			2006
Operating Activities
Net income	$	646,811		$	1,458,179
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed net loss/(income) of subsidiaries		183,228			(1,079,997	)
Depreciation and amortization of properties and equipment		2,019			2,019
Decrease (increase) in receivables from subsidiaries		1,543,153			(48,930	)
Securities gains, net		(1,664	)		(11,917	)
Other losses (gains), net		10,623			(1,534	)
Amortization of premiums and discounts on securities and debt		(2,011	)		(6,960	)
(Decrease)/increase in accrued expenses and other liabilities		(4,832	)		78,307
Excess tax benefit for share based payments		(13,450	)		(17,428	)
Other, net		14,348			103,739
Net cash provided by operating activities		2,378,225			475,478
Investing Activities
Purchases of securities		(79,402	)		(101,761	)
Proceeds from sales and maturities of securities		91,628			252,133
Net change in other investments		190,499			30,914
Principal collected on loans to subsidiaries		699,720			327,000
Loans to subsidiaries		(446,000	)		(77,000	)
Investments in subsidiaries		(29,888	)		(103,672	)
Returns of investment from subsidiaries		508,024			700,000
Cash paid for acquisitions, net		(504,959	)		(80,497	)
Net cash provided by investing activities		429,622			947,117
Financing Activities
Issuance of debt		1,588,364			—
Repayment of debt		(348,876	)		(139,266	)
Excess tax benefit for share based payments		13,450			17,428
Dividends paid		(722,458	)		(696,599	)
Issuances of common stock		239,378			229,259
Repurchases of common stock		(3,230,893	)		(691,186	)
Net cash used in financing activities		(2,461,035	)		(1,280,364	)
Increase in cash and demand balances due from banks		346,812			142,231
Cash and demand balances due from banks, January 1		1,315,479			509,001
Cash and Demand Balances Due from Banks, September 30	$	1,662,291		$	651,232
Supplemental Information
Cash paid for interest	$	164,514		$	113,145
Common shares and stock options issued for acquisitions		2,336,353			(4,344	)

Retained earnings of the holding company included $8.8 billion, $8.0 billion, and $8.9 billion of equity in undistributed net income of subsidiaries at September 30, 2007, December 31, 2006, and September 30, 2006, respectively.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FINANCIAL REVIEW

This Quarterly Report contains forward-looking statements. See page 79 for a discussion of the risks and uncertainties associated with forward-looking statements. The Financial Review section discusses the financial condition and results of operations of National City Corporation (the Corporation or National City) as of September 30, 2007 and for the three and nine months ended September 30, 2007 and serves to update the 2006 Annual Report on Form 10-K (Form 10-K). The Financial Review should be read in conjunction with the accompanying Consolidated Financial Statements and notes presented on pages 4 through 55.

55

OVERVIEW

The primary source of National City’s revenue is net interest income from loans and deposits, revenue from loan sales and servicing, and fees from financial services provided to customers. Business volumes tend to be influenced by overall economic factors, including market interest rates, business spending, and consumer confidence, as well as competitive conditions within the marketplace.

Results for the third quarter of 2007 were affected by unprecedented disruption and weakness in the mortgage and housing markets. In response to these market conditions, management curtailed production of non-agency eligible mortgage loans, transferred certain unsalable held for sale mortgage loans to portfolio, and took action to restructure its mortgage business. In addition, during the third quarter of 2007, the Corporation recognized a liability of $157 million ($108 million after-tax) representing its obligation as a Visa member bank to share the cost of litigation recently settled by Visa. (See Note 21 for further details on the rights and obligations associated with the Corporation’s Visa membership.)

Tax-equivalent net interest income was $1.1 billion for the third quarter of 2007, about equal to the second quarter, but down 4% from the third quarter a year ago. Average earning assets increased 5% on a linked-quarter and 4% on a year-over-year basis. Net interest margin was 3.43%, down 16 basis points from the preceding quarter, and 30 basis points from the third quarter a year ago. The lower margin reflects higher funding costs, narrower spreads on both commercial and consumer loans, and lower levels of free funds.

Average portfolio loans were $104.4 billion for the third quarter of 2007, up from $99.7 billion in the second quarter of 2007, and $97.4 billion in the third quarter of 2006. The higher average portfolio balance reflects growth in commercial loans, recent acquisitions, and the transfer of held for sale home equity lines and loans to portfolio.

The provision for credit losses was $361 million in the third quarter, up from $143 million in the preceding quarter and $73 million in the third quarter a year ago. The higher provision for credit losses in the third quarter reflects recent adverse trends in delinquent loans and nonperforming assets, particularly among residential real estate and home equity loans, exacerbated by weakness in the housing market.

Noninterest income was $624 million in the third quarter of 2007, compared to $764 million in the second quarter of 2007, and $877 million in the third quarter a year ago. The net loss from loan sales was $74 million in the third quarter of 2007, compared to loan sale revenue of $110 million in the second quarter of 2007 and $215 million the third quarter of 2006. The net loss that occurred in the third quarter of 2007 was due to disruption in the markets for certain non-agency eligible mortgage loans. Loan servicing revenue increased on both a linked-quarter and year-over-year basis due primarily to more favorable MSR hedging results. Noninterest expense increased compared to the second quarter of 2007 and the third quarter a year ago due to the Corporation’s obligation to Visa described above, as well as asset impairments, severance and litigation costs associated with our mortgage business. Management expects that additional severance costs will be incurred in the fourth quarter of 2007 as the result of corporate-wide efforts to further reduce costs.

Comparisons of results to prior periods are affected by recently completed acquisitions and divestitures. On September 1, 2007, the Corporation completed its acquisition of MAF Bancorp. On January 5, 2007 and December 1, 2006 the Corporation completed its acquisitions of Fidelity Bankshares and Harbor Florida Bancshares, respectively. On December 30, 2006, the Corporation completed the sale of its First Franklin nonconforming mortgage origination and sale business and related servicing platform.

RESULTS OF OPERATIONS

Net Interest Income

This section should also be reviewed in conjunction with the daily average balances/net interest income/rates tables presented on pages 81-83 of this financial review.

Net interest income is discussed and presented in this financial review on a tax-equivalent basis, recognizing that interest on certain loans and securities is not taxable for federal income tax purposes. To compare the tax-exempt asset yields to taxable yields, interest amounts earned are adjusted to the pretax-equivalent amounts based on the marginal corporate Federal tax rate of 35%. The tax-equivalent adjustment to net interest income was $7 million and $22 million for the third quarter and first nine months of 2007, respectively, and $8 million and $22 million for the same periods of 2006, respectively.

Tax-equivalent net interest income was $1.1 billion and $3.3 billion for the third quarter and first nine months of 2007, respectively, down from $1.2 billion and $3.5 billion for the same periods in 2006. Tax-equivalent net interest income for the third quarter of 2007 was approximately equivalent to the preceding quarter. Net interest margin was 3.43% in the third quarter of 2007, down from 3.59% in the preceding quarter, and 3.73% in the third quarter of 2006. Net interest margin for the first nine months of 2007 was 3.57%, down from 3.76% for the same period a year ago.

56

The decrease in tax-equivalent net interest income compared to the third quarter of 2006 was the result of a lower margin offset somewhat by an increase in average earning assets. The lower margin for the third quarter of 2007 is reflective of higher funding costs associated with a larger than expected balance sheet, narrower spreads on both commercial and consumer loans, and lower levels of free funds. The larger balance sheet is a result of disruption in the mortgage markets, recent acquisitions, as well as growth in the commercial loan portfolio. The decrease in tax-equivalent net interest income compared to the nine months ended September 30, 2006 was the result of a lower margin as average earning assets were stable. The lower margin for the third quarter of 2007 was primarily the result of increased funding costs.

Further discussion of trends in the loan portfolio and detail on the mix of funding sources is included in the Financial Condition section beginning on page 64.

Noninterest Income

Details of noninterest income follow:

	Three Months Ended								Nine Months Ended
	September 30			June 30			September 30		September 30			September 30
(In Millions)	2007			2007			2006		2007			2006
Deposit service charges and fees	$	229		$	223		$	214	$	656		$	606
Loan sale revenue		(74	)		110			215		111			644
Loan servicing revenue		159			96			104		287			39
Trust and investment management fees		79			84			74		237			227
Leasing revenue		41			46			54		142			175
Brokerage revenue		41			54			35		135			99
Other service fees		34			33			34		102			103
Card-related fees		31			29			27		92			81
Insurance revenue		29			35			33		98			98
Principal investment gains, net		24			20			30		54			88
Securities (losses)/gains		—			(1	)		—		26			13
Derivatives (losses)/gains		(5	)		(7	)		23		(35	)		6
Other		36			42			34		104			138
Total noninterest income	$	624		$	764		$	877	$	2,009		$	2,317

Deposit service revenue increased on both a linked-quarter and year-over-year basis reflecting growth in customer overdraft, nonsufficient funds, and debit card fees. Core deposits, excluding escrow funds, grew to $83.1 billion at September 30, 2007, up from $75.3 billion at June 30, 2007, and $65.2 billion at September 30, 2006. The number of deposit accounts has grown and has been aided by recent acquisitions.

Loan sale revenue includes gains/(losses) realized upon loan sale or securitization, fair value write-downs on loans held for sale, and derivative gains/(losses) for hedges of mortgage loans and mortgage loan commitments. Revenue by loan type is shown below:

	Three Months Ended							Nine Months Ended
	September 30			June 30		September 30		September 30		September 30
(In Millions)	2007			2007		2006		2007		2006
Residential real estate	$	(78	)	$	94	$	179	$	63	$	505
Commercial loans		8			10		15		34		81
Other consumer loans		(4	)		6		21		14		58
Total loan sale revenue	$	(74	)	$	110	$	215	$	111	$	644

During the third quarter of 2007, the markets for sale of many mortgage and home equity loans were disrupted. Potential buyers withdrew from the market given heightened concerns over credit quality of borrowers and continued deterioration in the housing markets. In response to these conditions, management curtailed the production of non-agency eligible mortgage and home equity products and transferred certain unsalable loans to portfolio. Sales of residential real estate completed during the third quarter primarily represent agency-eligible mortgage loans as well as completion of previously committed transactions to sell non-agency eligible mortgages and home equity loans. Completion of other pre-existing sales commitments has been uncertain in the current market as buyers have delayed settlement of trades or have rejected a large number of loans. Given these factors, management expects that a lower volume of residential real estate and home equity sales will occur in the remainder of the year.

57

Residential real estate loan sales produced a loss in the third quarter of 2007 due to net losses realized upon sale and fair value write-downs on loans held for sale. Profitability of residential real estate loan sales was adversely affected by a market imbalance between supply and demand for certain types of mortgage loans, higher trade fallout, and higher losses on scratch and dent sales. Fair value write-downs recognized on mortgage loans held for sale were $43 million in the third quarter of 2007 and $66 million on a year-to-date basis in 2007, with no such write-downs in the comparable periods in 2006. Residential real estate loan sales decreased on a year-over-year basis due to the above factors as well as the sale of the Corporation’s former First Franklin nonconforming mortgage unit in late 2006. Loan sale revenue associated with First Franklin was $62 million and $235 million in the third quarter and the first nine months of 2006, respectively.

Commercial loan sale revenue decreased on a year-to-date basis due to a lower volume in 2007, as well as a nonrecurring $26 million gain on sale of certain commercial leases in the prior year.

Other consumer loan sales include home equity lines of credit, credit card, and student loans. Home equity lines of credit originated for sale were $1.7 billion in the third quarter of 2007, $2.9 billion in the second quarter of 2007, and $2.6 billion in the third quarter a year ago. Home equity lines sold were $684 million in the third quarter of 2007, $463 million in the second quarter of 2007 and $1.3 billion in the third quarter a year ago. Sales of home equity lines of credit were disrupted in the third quarter by the previously described adverse market conditions. The Corporation suspended production of home equity lines of credit through brokers in August.

Net student loan sale revenue was $1 million in the third quarter of 2007, $15 million in the second quarter of 2007, and $1 million in the third quarter of 2006. Student loan sales are seasonal with the highest volume of sales typically occurring in the second quarter.

The Corporation typically retains the right to service the mortgage loans it sells. Upon sale, the Corporation recognizes a mortgage servicing right (MSR), which represents the present value of the estimated net servicing cash flows to be realized over the estimated life of the underlying loan. The carrying value of MSRs was $2.5 billion at September 30, 2007 and June 30, 2007, up from $2.3 billion at September 30, 2006.

Loan servicing revenue includes net contractual servicing fees, late fees, ancillary fees, servicing asset valuation adjustments, and gains or losses on derivatives and securities utilized to hedge mortgage servicing assets. The components of loan servicing revenue by product type follow:

	Three Months Ended						Nine Months Ended
	September 30		June 30		September 30		September 30		September 30
(In Millions)	2007		2007		2006		2007		2006
Residential real estate	$	114	$	49	$	68	$	157	$	(77	)
Other consumer loans		42		44		33		120		108
Commercial real estate		3		3		3		10		8
Total loan servicing revenue	$	159	$	96	$	104	$	287	$	39

The components of residential real estate (mortgage) loan servicing revenue/(loss) are as follows:

	Three Months Ended									Nine Months Ended
	September 30			June 30			September 30			September 30			September 30
(In Millions)	2007			2007			2006			2007			2006
Net contractual servicing fees	$	134		$	128		$	158		$	391		$	459
Servicing asset time decay and payoffs		(84	)		(89	)		(99	)		(259	)		(302	)
MSR hedging gains/(losses):
Servicing asset valuation changes		(89	)		315			(318	)		171			28
Gains/(losses) on related derivatives		153			(305	)		327			(146	)		(262	)
Net MSR hedging gains/(losses)		64			10			9			25			(234	)
Total mortgage servicing revenue/(loss)	$	114		$	49		$	68		$	157		$	(77	)

Residential real estate servicing revenue increased in the third quarter of 2007 due to growth in the portfolio serviced for others and better MSR hedging results. Mortgage loans serviced for others grew to $173.7 billion at September 30, 2007, up from $167.4 billion at June 30, 2007, and $162.2 billion at September 30, 2006. The value of MSRs can fluctuate significantly. In a low rate environment, mortgage loan refinancings generally increase, causing actual and expected loan prepayments to increase, which drives down the value of existing MSRs. Conversely, as interest rates rise, mortgage loan refinancings generally decline, causing actual and expected loan prepayments to decrease, which drives up the value of MSRs.

58

The Corporation manages the risk associated with declines in the value of MSRs using derivative instruments and securities. As shown in the above table, net MSR hedging gains were $64 million in the third quarter of 2007, compared to $10 million in the second quarter of 2007 and $9 million in the third quarter a year ago. On a year-to-date basis, net MSR hedging gains were $25 million in 2007 versus a loss of $234 million in 2006. Unrealized net gains associated with derivatives utilized to hedge MSRs were $54 million as of September 30, 2007. The ultimate realization of these gains can be affected by changes in interest rates, which may increase or decrease the ultimate cash settlement of these instruments.

Comparisons of residential real estate servicing revenue to the prior year are affected by certain nonrecurring revenues and other unusual items recognized in 2006. The Corporation’s former nonconforming mortgage servicing platform contributed $12 million of servicing revenue in the third quarter of 2006 and $41 million in the first nine months of 2006. As this unit was sold in late 2006, there were no comparable revenues in 2007. In the first nine months of 2006, implementation of a new prepayment model resulted in a one-time decrease to the MSR valuation of $56 million.

Other consumer loans servicing revenue increased on a year-over-year basis due to growth in the portfolio of loans serviced for others. The Corporation began selling home equity lines on a servicing retained basis in late 2005 and home equity loans servicing retained in mid 2006.

Trust and investment management fees decreased on a linked-quarter basis due primarily to tax preparation services which are billed in the second quarter. On a year-over-year basis, more personal trust business contributed to higher revenues in 2007. Leasing revenue declined on both a linked-quarter and year-over-year basis due to continued run-off of the leased automobile portfolio. Brokerage revenue decreased on a linked-quarter basis due to a lower volume of advisory services. On a year-over-year basis, higher brokerage commissions and lower trading losses contributed to the higher revenues in 2007. Insurance revenue declined on both a linked-quarter and year-over-year basis due to lower volumes of forced placed hazard insurance.

Principal investments represent direct investments in private and public companies and indirect investments in private equity funds. Principal investment gains include both market value adjustments and realized gains from sales of these investments. Principal investment results can vary from period to period due to changes in fair value and decisions to sell versus hold various investments.

No significant security gains or losses occurred in the third quarter of 2007. Earlier in the year, certain fixed income investments used for balance sheet management purposes were sold, resulting in a realized gain. Security gains for the first nine months of 2006 included an $11 million gain on the liquidation of the Corporation’s former bank stock fund.

Derivative (losses)/gains include certain ineffective hedge gains and losses on derivatives designated as SFAS 133 qualifying hedges, and fair value adjustments on derivatives not designated as SFAS 133 qualifying hedges. These derivatives are held for trading purposes, to hedge the fair value of certain recognized assets and liabilities, and to hedge certain forecasted cash flows. Derivatives used to hedge mortgage loans held for sale and MSRs are presented within loan sale revenue and loan servicing revenue, respectively. Losses were recognized on derivatives held for trading and interest-rate risk management purposes in the third quarter of 2007 versus gains recognized on these positions in the third quarter of last year.

There were no significant unusual items in other noninterest income in the third quarter or the first nine months of 2007. Other noninterest income for 2006 included $36 million of income related to the release of a chargeback guarantee liability associated with a now-terminated credit card processing agreement.

Noninterest Expense

Details of noninterest expense follow:

	Three Months Ended						Nine Months Ended
	September 30		June 30		September 30		September 30		September 30
(In Millions)	2007		2007		2006		2007		2006
Salaries, benefits, and other personnel	$	642	$	642	$	649	$	1,917	$	1,926
Impairment, fraud, and other losses		265		16		22		302		54
Third-party services		81		89		87		256		257
Net occupancy		77		76		73		231		220
Equipment		76		85		74		244		232
Marketing and public relations		41		45		36		119		102
Postage and supplies		34		33		37		108		108
Leasing expense		28		33		38		95		123
Intangible asset amortization		20		19		13		56		34
Insurance		19		23		28		67		85
State and local taxes		19		23		20		62		60

59

	Three Months Ended						Nine Months Ended
	September 30		June 30		September 30		September 30		September 30
(In Millions)	2007		2007		2006		2007		2006
Travel and entertainment		18		21		18		57		56
Telecommunications		18		19		18		55		56
Other		65		64		71		193		194
Total noninterest expense	$	1,403	$	1,188	$	1,184	$	3,762	$	3,507

Included within noninterest expense were acquisition-related integration costs of $13 million for the third quarter of 2007, $20 million for the second quarter of 2007, and $3 million for the third quarter of 2006. On a year-to-date basis, acquisition-related integration costs were $49 million in 2007 and $5 million in 2006. The higher costs in 2007 reflect three recently completed acquisitions.

Details of salaries, benefits, and other personnel expense follow:

	Three Months Ended									Nine Months Ended
	September 30			June 30			September 30			September 30			September 30
(Dollars in Millions)	2007			2007			2006			2007			2006
Salaries and wages	$	366		$	354		$	355		$	1,070		$	1,061
Incentive compensation		165			190			218			514			593
Deferred personnel costs		(76	)		(88	)		(105	)		(239	)		(299	)
Medical and other benefits		49			46			43			142			137
Contract labor		41			35			38			108			116
Payroll taxes		35			36			35			120			127
Retirement plans		22			24			21			77			71
Stock-based compensation		15			22			16			60			49
Deferred compensation		(3	)		12			10			13			24
Severance and other		28			11			18			52			47
Total salaries, benefits, and other personnel	$	642		$	642		$	649		$	1,917		$	1,926
Full-time-equivalent employees		34,024			32,445			33,621

Salaries, benefits, and other personnel costs were flat compared to the second quarter of 2007. Salaries and wages increased compared to the second quarter of 2007 due to an increase in full-time equivalent employees due to a recent acquisition. Incentive compensation decreased due to lower loan originations in the third quarter of 2007 as well as lower anticipated payouts for corporate incentive plans. Deferred personnel costs decreased compared to the second quarter of 2007 due to lower levels of loan originations and a decrease in capitalized labor for internally developed software. Market value adjustments on deferred compensation liabilities decreased in the third quarter of 2007 due to a decrease in the investment indices used to value these obligations. Severance expense increased due to actions taken to restructure the mortgage business during the third quarter of 2007.

On a year-over-year basis, salaries, benefits and other personnel costs decreased slightly as lower incentive and deferred compensation expenses was partially offset by lower deferrals of personnel costs and increased severance costs. Incentive compensation and deferred personnel costs were lower during 2007 due to decreased mortgage loan originations as a result of the sale of the First Franklin nonconforming mortgage origination and servicing platform during the fourth quarter of 2006. Deferred compensation expense decreased and severance costs increased on a year-over-year basis for the same reasons previously described.

Impairment, fraud, and other losses increased from prior periods due to a $157 million charge recorded during the third quarter of 2007 to recognize the Corporation’s liability for its obligation as a Visa member bank to share in the cost of litigation recently settled by Visa. Also contributing to the increase was a $44 million asset impairment charge recorded as part of the mortgage business restructuring, certain legal losses, including a $25 million settlement in a class action lawsuit, and an increase in early debt termination penalties recorded during the third quarter of 2007. These items were partially offset by a decrease in the provision for losses on private mortgage insurance.

Net occupancy costs increased on a year-over-year basis due to an increase in depreciation expense, building operating costs. and maintenance expenses as a result of an increase in property and equipment due to recent acquisitions.

Equipment costs increased on a year-to-date basis due to higher technology and software costs.

Marketing and public relations increased on a year-over-year and year-to-date basis is due to increased marketing efforts in the newly acquired markets, particularly Florida.

Leasing expense decreased on a year-over-year and year-to-date basis due to a smaller portfolio of equipment leased to others.

Intangible asset amortization increased on a year-over-year and year-to-date basis due to amortization related to core deposits intangibles recorded for recent acquisitions.

60

Insurance costs decreased from prior periods due to lower mortgage insurance costs on run-off residential real estate and consumer loan portfolios.

Other noninterest expense was flat on a linked-quarter basis and decreased slightly on a year-over-year basis due to lower losses on community development and civic partnerships, lower third-party collection fees, partially offset by increased expenses related to other real estate owned (OREO).

The efficiency ratio, equal to noninterest expense as a percentage of tax-equivalent net interest income and noninterest income, was 81.31% in third quarter of 2007, compared to 63.83% in the second quarter of 2007, and 58.43% in the third quarter of 2006. The efficiency ratio was 70.65% and 60.27% for the first nine months of 2007 and 2006, respectively. The higher efficiency ratio on a linked-quarter basis reflected lower noninterest income, driven mainly by decreased loan sale revenue, along with increased noninterest expense due to asset impairment, severance charges, and other losses recorded during the third quarter of 2007. The higher efficiency ratio on a year-over-year comparison reflected both lower net interest income as a result of higher funding costs, in addition to lower noninterest income driven by lower loan sale revenue and higher noninterest expense as described previously.

Income Taxes

For the third quarter of 2007, an income tax benefit of $27 million was recognized on a pre-tax loss of $46 million, representing a 58.4% effective tax rate. The effective tax rate was 33.6% in the preceding quarter, and 30.9% in the third quarter a year ago. On a year-to-date basis, the effective tax rate was 30.4% in 2007 versus 31.5% in the prior year.

Line of Business Results

The Corporation’s businesses are organized by product and service offerings as well as the distribution channels through which these products and services are offered. Effective January 1, 2007, the Corporation implemented a reorganization of its management structure resulting in the following five reportable segments: Retail Banking, Commercial Banking-Regional, Commercial Banking-National, Mortgage Banking, and Asset Management. Further discussion of the activities of each of these businesses is presented in Note 25. All revenues and expenses not directly associated with or allocated to these segments are reported within Parent and Other. Parent and Other also includes revenues and expenses associated with discontinued products or services and exited businesses, including the former First Franklin origination and servicing platform and the remaining run-off portfolio.

Summary results of operations for each business, as well as management’s discussion of these results, follow. Comparisons of third quarter and year-to-date 2007 results to prior periods are affected by recent acquisition and divestiture activities, as well as unusual or nonrecurring transactions described further below.

Retail Banking: This business provides banking products and services to consumers and small businesses within National City’s nine state footprint.

	Three Months Ended						Nine Months Ended
	September 30		June 30		September 30		September 30		September 30
(In Millions)	2007		2007		2006		2007		2006
Tax-equivalent net interest income	$	579	$	553	$	510	$	1,675	$	1,485
Provision for credit losses		70		58		47		191		100
Noninterest income		289		301		274		857		789
Noninterest expense		510		480		425		1,457		1,245
Net income		175		193		192		537		571

Net interest income increased on both a linked-quarter and year-over-year basis due to growth in loans and deposits. Noninterest income decreased on a linked quarter basis primarily due to seasonally lower student loan sales and lower insurance revenues. Noninterest income increased compared to the third quarter last year due to more customer overdraft and nonsufficient funds transactions, as well as higher debit card fees. Average core deposits were $66.8 billion for the third quarter of 2007, $63.2 billion for the second quarter of 2007, and $55.5 billion for the third quarter a year ago. Noninterest expense increased on a linked-quarter basis due to higher incentive compensation and corporate allocated costs associated with higher business volumes. On a year-over-year basis, higher occupancy, technology and reinsurance costs also contributed to higher operating expenses in 2007.

On a year-to-date basis, net interest income increased in 2007 on higher average outstanding loans and deposits. The provision for credit losses was larger in 2007 due to growth in the loan portfolio. In addition, the 2006 provision for credit losses benefited from lower credit losses following the change in consumer bankruptcy laws in late 2005, as well as enhancements to the estimation of other consumer revolving credit losses. Noninterest income increased due to growth in deposit service fees associated with growth in the number of

61

deposit accounts and fee-generating transactions. Noninterest expense increased due to higher incentive compensation as well as higher insurance expense.

Commercial Banking — Regional: This business provides banking products and services to large and medium-sized companies within National City’s nine state footprint. During the third quarter of 2007, a change in management occurred for the Commercial Banking businesses. As a result, commercial leasing, derivatives, investment banking and public finance, which were previously reported within Commercial Banking — Regional, are now presented within Commercial Banking — National. Prior periods’ results have been reclassified to conform with the current presentation.

	Three Months Ended						Nine Months Ended
	September 30		June 30		September 30		September 30		September 30
(In Millions)	2007		2007		2006		2007		2006
Tax-equivalent net interest income	$	272	$	272	$	271	$	826	$	798
Provision for credit losses		29		37		19		69		44
Noninterest income		59		60		58		175		169
Noninterest expense		137		139		128		406		390
Net income		101		97		112		325		329

Net interest income was stable compared to the preceding quarter and the third quarter a year ago, as growth in loans and deposits offset the effects of lower loan spreads. Credit quality of the commercial loan portfolio has been relatively stable with the exception of certain areas of commercial real estate, mainly exposures to residential developers. Noninterest income for the third quarter of 2007 was stable compared to the preceding quarter and third quarter last year. Operating expenses were flat compared to the preceding quarter but increased compared to the third quarter a year ago due to higher business volumes. On a year-to-date basis, net interest income increased on higher loans and deposits. Noninterest income and noninterest expense were modestly higher in 2007.

Commercial Banking — National: This business provides banking products and services to targeted customer segments in selected industries or distribution channels, as well as to corporate customers outside of National City’s branch footprint. As discussed above, commercial leasing, derivatives, investment banking and public finance, which were previously reported within Commercial Banking — Regional, are now presented within Commercial Banking — National. Prior periods’ results have been reclassified to conform with the current presentation.

	Three Months Ended								Nine Months Ended
	September 30		June 30			September 30			September 30		September 30
(In Millions)	2007		2007			2006			2007		2006
Tax-equivalent net interest income	$	119	$	115		$	113		$	352	$	343
Provision/(benefit) for credit losses		46		(2	)		(12	)		8		(12	)
Noninterest income		98		114			109			324		380
Noninterest expense		101		108			92			322		285
Net income		44		77			100			216		295

Net interest income was modestly higher on both a linked-quarter and year-over-year basis. Loan growth offset the effects of narrower loan spreads. The larger provision for credit losses in the third quarter of 2007 reflects deteriorating credit quality of loans to national residential real estate developers. Noninterest income decreased compared to the preceding quarter primarily due to lower brokerage revenue. Compared to the third quarter a year ago, noninterest income decreased due to lower gains on loan sales and principal investments. Principal investments gains were $24 million in the third quarter of 2007, $20 million in the second quarter of 2007, and $30 million in the third quarter of 2006. Operating expenses decreased on a linked-quarter basis due to lower incentive compensation. Operating expenses increased compared to the third quarter a year ago due to new business.

On a year-to-date basis, net interest income was slightly higher than the prior year. Noninterest income decreased compared to the prior year primarily to lower principal investments gains and loan sales, partially offset by higher brokerage revenue. Principal investment gains were $54 million and $95 million for the first nine months of 2007 and 2006, respectively. The first nine months of 2006 included a $27 million gain on sale of commercial leases which did not reoccur in 2007. Noninterest expense increased compared to the prior year due to higher personnel costs and expenses associated with new business.

Mortgage Banking: This business originates residential mortgages, home equity loans, and home equity lines of credit within National City’s banking footprint and on a nationwide basis. During the third quarter of 2007, the mortgage markets experienced unprecedented disruption resulting in an inability to sell certain non-agency eligible mortgage and home equity products. As a result, management curtailed the production of broker-originated home equity lines and loans and transferred approximately $4.4 billion of unsalable home equity lines and loans to portfolio. Further, management curtailed the production of non-agency eligible first and second mortgages originated by both its retail and wholesale channels and significantly reduced residential construction lending. Management also merged

62

the former National Home Equity division into National City Mortgage. The Mortgage Banking segment reported a net loss in the third quarter of 2007 due to these adverse market conditions, the resulting restructuring initiatives and the settlement of certain litigation.

	Three Months Ended							Nine Months Ended
	September 30			June 30		September 30		September 30			September 30
(In Millions)	2007			2007		2006		2007			2006
Tax-equivalent net interest income	$	165		$	178	$	146	$	505		$	461
Provision for credit losses		189			19		38		237			53
Noninterest income		44			164		208		293			232
Noninterest expense		290			223		203		717			609
Net (loss)/income		(167	)		61		70		(97	)		20

Net interest income decreased on a linked-quarter basis due to lower loan spreads and higher nonperforming assets. Net interest income increased on a year-over-year basis due to higher average loans outstanding. The higher provision for credit losses in the third quarter of 2007 reflects worsening delinquency and charge-off trends, particularly among construction loans and home equity lines and loans originated in early 2007.

Noninterest income decreased on both linked-quarter and year-over-year basis due to a net loss on loan sales for the third quarter of 2007. Adverse market conditions resulted in lower gains on sale of loans, more failed trades, higher scratch and dent losses, and fair value write-downs on loans held for sale. Loan servicing revenue grew to $121 million in the third quarter of 2007, up from $71 million in the second quarter of 2007, and $61 million in the third quarter a year ago. The unpaid principal balance associated with loans serviced for others grew to $183.6 billion at September 30, 2007, up from $177.0 billion at June 30, 2007 and $167.4 billion at September 30, 2006. Net MSR hedging gains were $64 million in the third quarter of 2007, $10 million in the second quarter of 2007, and $9 million in the third quarter a year ago. Noninterest expense increased on both a linked-quarter and year-over-year basis due to asset impairment and severance costs of approximately $62 million, as well as litigation settlement for $25 million.

On a year-to-date basis, net interest income decreased due to lower spreads and higher nonperforming assets. Noninterest income increased in 2007 due to better MSR hedging results, which offset lower loan sale revenue. Net pretax MSR hedging gains were $25 million in the first nine months of 2007 versus net losses of $234 million in the first nine months of 2006, inclusive of a $56 million fair value write-down associated with implementing a new prepayment model. Loan sale revenue decreased, due to the market conditions described above, to $73 million for the first nine months of 2007 compared to $299 million in the comparable period last year. Noninterest expense increased compared to the prior year for the same reasons described above.

Asset Management: This segment includes both institutional asset management and personal wealth management services.

	Three Months Ended						Nine Months Ended
	September 30		June 30		September 30		September 30		September 30
(In Millions)	2007		2007		2006		2007		2006
Tax-equivalent net interest income	$	33	$	34	$	28	$	101	$	80
Provision/(benefit) for credit losses		8		2		2		10		(2	)
Noninterest income		93		101		87		283		265
Noninterest expense		88		87		82		255		242
Net income		20		28		19		74		65

Net interest income was stable compared to the second quarter of 2007 but increased compared to the third quarter of 2006 on higher average loans and deposits. Noninterest income decreased on a linked-quarter basis primarily due to seasonal tax preparation fees earned in the prior quarter. Noninterest income increased compared to third quarter a year ago due to higher volumes of trust and brokerage business. Operating expenses were flat compared to the second quarter but up compared to the third quarter a year ago due to higher incentive compensation. Assets under administration grew to $116.9 billion at September 30, 2007, from $112.2 billion at December 31, 2006, and $111.4 billion at September 30, 2006.

On a year-to-date basis, net interest income increased in 2007 on higher average loans and deposits. Noninterest income increased in 2007 on higher trust and investment management fees as well as higher brokerage revenues. Noninterest expense increased due to higher personnel and product support costs associated with higher business volumes.

Parent and Other: Parent and Other includes the results of investment funding activities, run-off portfolios associated with discontinued businesses, unallocated corporate income and expense, intersegment revenue and expense eliminations, and reclassifications. Parent and Other also includes the historical operating results of the former First Franklin nonconforming mortgage origination and servicing platform. Comparisons with prior periods are also affected by acquisition integration costs and other unusual or infrequently occurring items.

63

	Three Months Ended									Nine Months Ended
	September 30			June 30			September 30			September 30			September 30
(In Millions)	2007			2007			2006			2007			2006
Tax-equivalent net interest (expense)/income	$	(66	)	$	(55	)	$	82		$	(143	)	$	334
Provision/(benefit) for credit losses		20			30			(21	)		96			(24	)
Noninterest income		42			25			141			78			482
Noninterest expense		278			150			253			604			737
Net (loss)/income		(192	)		(109	)		33			(408	)		178

Net interest expense increased compared to both the preceding quarter and the third quarter of last year as the loan portfolios within Parent and Other are all in run off. Average loans outstanding were $9.1 billion in the third quarter of 2007, $10.1 billion in the preceding quarter, and $21.9 billion in the third quarter a year ago. In addition, funding costs increased in the third quarter of 2007 as the Corporation increased its purchased funding levels to support a larger balance sheet. The higher provision for credit losses in 2007 reflects deterioration in the credit quality of the First Franklin nonconforming mortgage loan run-off portfolio, partially offset by other adjustments.

Noninterest income increased on a linked-quarter basis but was down significantly from the third quarter a year ago. There were no unusual transactions in either the third or second quarters of 2007. In the third quarter of 2006, the First Franklin unit contributed $73 million to noninterest income. As this unit was sold in late 2006, there is no comparable revenue in 2007.

Noninterest expense increased on both a linked-quarter and year-over-year basis. Noninterest expense for the third quarter of 2007 included losses of $157 million representing the Corporation’s obligation as a Visa member bank to share the cost of certain litigation recently settled by Visa. Lower incentive compensation and acquisition integration costs were incurred in the third quarter of 2007 compared to the preceding quarter. Acquisition integration costs were $13 million in the third quarter of 2007, $20 million in the second quarter of 2007, and $3 million in the third quarter of 2006. Compared to a year ago, operating expenses have decreased primarily due to the sale of the First Franklin unit.

On a year-to-date basis, net interest expense increased due primarily to continued run-off of the loan portfolio. The higher provision for credit losses in 2007 reflects the deteriorating credit quality of the nonconforming mortgage portfolio. Noninterest income decreased as the prior year included $272 million of loan sale and servicing revenue associated with First Franklin. Noninterest income for the first nine months of 2007 included a $23 million fair value write-down on First Franklin loans which were transferred from held for sale to portfolio early in the first quarter of 2007. Noninterest income for 2006 also benefited from $36 million of income related to the release of a chargeback guarantee liability from a now-terminated credit card processing contract. Noninterest expense decreased in 2007 due to the sale of First Franklin in late 2006 and lower incentive compensation in 2007.

FINANCIAL CONDITION

This section should also be reviewed in conjunction with the average balance sheets presented on pages 80-83.

Average Earning Assets

	Three Months Ended						Nine Months Ended
	September 30		June 30		September 30		September 30		September 30
(In Millions)	2007		2007		2006		2007		2006
Portfolio loans
Commercial	$	28,616	$	28,018	$	26,013	$	27,885	$	25,111
Commercial leases		4,235		4,061		3,532		4,093		3,494
Commercial construction		8,225		7,854		6,510		7,899		6,065
Commercial real estate		13,548		12,919		12,061		13,150		12,061
Residential real estate		26,546		24,384		25,701		24,892		28,546
Home equity lines of credit		15,609		14,010		15,629		14,680		17,880
Credit card and other unsecured lines of credit		3,356		3,099		2,654		3,159		2,566
Other consumer		4,304		5,344		5,304		5,040		5,778
Total portfolio loans		104,439		99,689		97,404		100,798		101,501
Loans held for sale or securitization		12,643		12,615		15,065		12,346		12,240
Securities (at amortized cost)		7,835		7,143		7,874		7,561		7,799
Other		3,332		2,897		2,783		3,365		2,692
Total earning assets	$	128,249	$	122,344	$	123,126	$	124,070	$	124,232

64

Average portfolio loans increased by 5% in the third quarter of 2007 from the previous quarter, and by 7% from the year ago quarter. The linked-quarter and year ago quarter increases were primarily due to strong commercial loan growth, loans acquired in recent acquisitions and the transfer of $4.4 billion of home equity loans and lines of credit from loans held for sale to portfolio loans. Compared to the year ago quarter, these increases were partially offset by the sale of $3.9 billion of nonconforming mortgage loans in late 2006.

Average portfolio loans decreased slightly during the first nine months of 2007 over the comparable period a year ago for the same reasons as described above. Management expects overall portfolio loan balances will increase slightly for the remainder of the year due to commercial loan growth and the potential transfer of more loans from held for sale.

Average loans held for sale or securitization were stable compared to the preceding quarter but decreased by 16% from the year ago quarter. The decrease from the year ago quarter was due to the sale of First Franklin in late 2006. Average loans held for sale or securitization for the first nine months of 2007 were comparable to the same period a year ago as increased mortgage and home equity production offset the decrease in First Franklin mortgage loans held for sale as described above.

The following table summarizes the period-end commercial, commercial leases, commercial construction and commercial real estate portfolios by major industry and exposure to individual borrowers as of September 30, 2007.

	Outstanding		% of			Average Loan		Largest Loan to a Single
(Dollars in Millions)	Balance		Total			Balance Per Obligor		Obligor
Real estate	$	18,622		33	%	$	1.0	$	93
Consumer cyclical		9,748		17			1.1		80
Industrial		7,373		13			1.4		103
Consumer noncyclical		6,562		11			.6		49
Basic materials		4,176		7			1.8		67
Financial		3,762		7			2.0		104
Services		2,082		4			.4		57
Energy and utilities		1,030		2			1.2		35
Technology		697		1			3.9		46
Miscellaneous		3,144		5			.3		43
Total	$	57,196		100	%

Average Interest Bearing Liabilities and Funding

	Three Months Ended						Nine Months Ended
	September 30		June 30		September 30		September 30		September 30
(In Millions)	2007		2007		2006		2007		2006
Noninterest bearing deposits	$	16,690	$	16,875	$	16,740	$	16,798	$	16,854
Interest bearing core deposits		64,794		61,089		52,679		61,811		52,096
Total core deposits		81,484		77,964		69,419		78,609		68,950
Purchased deposits		12,018		12,060		14,088		11,869		14,152
Short-term borrowings		8,769		9,433		8,801		8,179		8,354
Long-term debt		26,306		23,111		29,432		24,866		31,404
Total purchased funding		47,093		44,604		52,321		44,914		53,910
Stockholders’ equity		12,636		12,231		12,687		13,082		12,574
Total funding	$	141,213	$	134,799	$	134,427	$	136,605	$	135,434
Total interest bearing liabilities	$	111,887	$	105,693	$	105,000	$	106,725	$	106,006
Total core deposits, excluding mortgage escrow deposits and HELOC custodial balances	$	77,613	$	74,047	$	65,033	$	74,832	$	64,816

The percentage of each funding source to total funding follows:

	Three Months Ended									Nine Months Ended
	September 30			June 30			September 30			September 30			September 30
	2007			2007			2006			2007			2006
Noninterest bearing deposits		11.8	%		12.5	%		12.5	%		12.3	%		12.4	%
Interest bearing core deposits		45.9			45.3			39.2			45.2			38.5
Total core deposits		57.7			57.8			51.7			57.5			50.9
Purchased deposits		8.5			9.0			10.5			8.7			10.4
Short-term borrowings		6.2			7.0			6.5			6.0			6.2
Long-term debt		18.7			17.1			21.9			18.2			23.2
Total purchased funding		33.4			33.1			38.9			32.9			39.8
Stockholders’ equity		8.9			9.1			9.4			9.6			9.3
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

65

Interest bearing core deposits have increased as a percentage of total funding due to recent acquisitions and consumer preference for interest bearing products in a higher rate environment. Additionally, core deposits are a larger percentage of funding due to recent acquisitions and continued deposit growth which has reduced the need for purchased funds. Long-term debt increased on a linked quarter basis due to additional funding needed to support a larger balance sheet in the third quarter.

Capital

The Corporation has consistently maintained regulatory capital ratios at or above the “well-capitalized” standards. Further detail on capital and capital ratios is included in Notes 17 and 18 to the Consolidated Financial Statements. Information on stockholders’ equity is presented in the following table.

(Dollars in Millions, Except Per Share Amounts)	September 30, 2007			December 31, 2006			September 30, 2006
Stockholders’ equity	$	13,843		$	14,581		$	12,902
Equity as a percentage of assets		8.98	%		10.40	%		9.34	%
Book value per common share	$	21.86		$	23.06		$	21.44

The following table summarizes share repurchase activity for the third quarter of 2007.

					Total Number of		Maximum Number of
					Shares Purchased Under		Shares that May Yet Be
	Total Number		Average		Publicly Announced		Purchased Under the
	of Shares		Price Paid		Share Repurchase		Share Repurchase
Period	Purchased(a)		Per Share		Authorizations(b)		Authorizations
July 1 to July 31, 2007		68,378	$	32.52		—		38,724,400
August 1 to August 31, 2007		307,015		29.87		—		38,724,400
September 1 to September 30, 2007		1,006,185		25.77		1,000,000		37,724,400
Total		1,381,578	$	27.02		1,000,000

(a)

Includes shares repurchased under the April 24, 2007 share repurchase authorizations, and shares acquired under the Corporation’s Long-term Cash and Equity Compensation Plan (the Plan). Under the terms of the Plan, the Corporation accepts common shares from employees when they elect to surrender previously owned shares upon exercise of stock options or awards to cover the exercise price of the stock options or awards or to satisfy tax withholding obligations associated with the stock options or awards.

(b)

Included in total number of shares purchased [column (a)].

The Corporation’s Board of Directors has authorized the repurchase of up to 40 million shares of National City common stock subject to an aggregate purchase limit of $1.6 billion. This authorization, which has no expiration date, was incremental to previous authorizations. Repurchased shares are held for reissue in connection with compensation plans and for general corporate purposes. During the third quarter and first nine months of 2007, 1.0 million and 45.7 million shares of common stock were repurchased, respectively, compared to 4.3 million and 19.5 million shares for the comparable periods of 2006. Share repurchase activity will be limited during the remainder of 2007 to allow capital ratios to migrate towards the top of their target ranges.

On January 25, 2007, the Corporation’s Board of Directors authorized a modified “Dutch auction” tender offer to purchase up to 75 million shares of its outstanding common stock, at a price range not greater than $38.75 per share nor less than $35.00 per share, for a maximum aggregate repurchase price of $2.9 billion. The tender offer expired on February 28, 2007 and on March 7, 2007, the Corporation accepted for purchase 40.3 million shares of its common stock at $38.75 per share for an aggregate price of $1.6 billion. The share repurchase authorizations described above were unaffected by the tender offer.

National City declared and paid dividends per common share of $.41 during the third quarter of 2007, up two cents from the preceding quarter and the same quarter of 2006. The dividend payout ratio, representing dividends per share divided by earnings per share, was 111.2% and 47.9% for the first nine months of 2007 and 2006, respectively. The dividend payout ratio is continually reviewed by management and the Board of Directors, and the current intention is to pay out approximately 45% of earnings in dividends over time. On October 1, 2007, the Board of Directors declared a dividend of $.41 per common share, payable on November 1, 2007.

At September 30, 2007, the Corporation’s market capitalization was $15.9 billion. National City common stock is traded on the New York Stock Exchange under the symbol “NCC.” Historical stock price information is presented in the following table.

66

	2007						2006
	Third		Second		First		Fourth		Third
NYSE: NCC	Quarter		Quarter		Quarter		Quarter		Quarter
High	$	34.30	$	38.32	$	38.94	$	37.47	$	37.42
Low		24.88		33.08		34.82		35.29		34.50
Close		25.09		33.32		37.25		36.56		36.60

RISK MANAGEMENT

National City management, with the oversight of the Board of Directors, has in place enterprise-wide structures, processes, and controls for managing and mitigating risk, with particular emphasis on credit, market, and liquidity risk.

Credit Risk

The Corporation’s lending activities are subject to varying degrees of credit risk. Credit risk is mitigated through portfolio diversification, the management of industry and client exposure levels, collateral protection, credit risk transfer strategies, and credit policies and underwriting guidelines. Note 1 to the Consolidated Financial Statements describes the accounting policies related to nonperforming loans and charge-offs and the methodologies used to develop the allowance for loan losses and lending-related commitments. Policies governing nonperforming loans and charge-offs are consistent with regulatory standards.

As of September 30, 2007, a $1.6 billion pool of nonconforming mortgage loans is subject to a credit risk transfer agreement to provide protection against unexpected catastrophic credit losses. The Corporation bears the risk of credit losses on this pool up to the first loss position, estimated at 3.5% of the initial pool balance. The counterparty to this arrangement would bear the risk of additional credit losses up to $263 million, subject to adjustment as the portfolio pays down. As of September 30, 2007, credit losses on this portfolio have not exceeded the Corporation’s first loss position, nor are they expected to. Estimated probable credit losses are included in the determination of credit losses.

The Corporation has purchased mortgage insurance to reduce its exposure to credit losses on certain first and second lien nonconforming mortgages, as well as certain home equity loans and lines of credit. These policies provide varying levels of coverage, deductibles, and stop loss limits. As of September 30, 2007, the outstanding balance of insured first and second lien nonconforming mortgage loans subject to this insurance was $1.5 billion and $1.6 billion, respectively; and the outstanding balance of insured home equity lines and loans was approximately $800 million. Credit losses covered by third-party insurance arrangements are excluded from the determination of the allowance for loan losses to the extent an insurance recovery is deemed probable. Certain of these insurance arrangements are subject to reinsurance by a wholly-owned subsidiary of the Corporation. Expected reinsurance losses are included within the provision for credit losses and the related reinsurance reserves are included in the allowance for loan losses in the Consolidated Financial Statements. See Note 21 for further information on reinsurance arrangements.

Market Conditions: During the quarter ending September 30, 2007, devaluation in the housing markets contributed to a greater rate of delinquencies among residential real estate and home equity borrowers. Borrowers who had reached interest rate reset dates and planned to refinance their outstanding loans to more affordable mortgages were frequently unable to do so. The result has been an increase in nonperforming loans, charge-offs and foreclosures among residential real estate and home equity loans. Management expects that the current weakness in the housing markets will continue through 2008, implying continuation of higher losses on residential real estate loans over the next several quarters.

Nonperforming Assets: Detail of nonperforming assets follows:

	September 30			December 31			September 30
(Dollars in Millions)	2007			2006			2006
Commercial loans	$	142		$	92		$	107
Commercial leases		10			32			35
Commercial construction		234			109			72
Commercial real estate		181			111			97
Residential real estate		279			156			159
Home equity lines of credit		15			—			—
Total nonperforming loans		861			500			470
Other real estate owned (OREO)		324			229			197
Loans held for sale and other		26			3			22
Total nonperforming assets	$	1,211		$	732		$	689
Nonperforming assets as a percentage of:
Period-end portfolio loans and other nonperforming assets		1.08	%		.76	%		.74	%
Period-end total assets		.79			.52			.50

67

Nonperforming commercial loans increased due to a few large problem loans in diverse industries and regions. These included loans to a service company for $16 million involving fraud, a mortgage lender for $13 million, and a private client relationship for $10 million. Nonperforming commercial leases decreased compared to prior periods due to 2007 charge-offs of previously identified passenger airline leases. Nonperforming commercial construction and commercial real estate loans have increased due to systemic credit quality issues with residential real estate developers, particularly those operating in Florida and Michigan.

Nonperforming residential real estate loans increased due to loans transferred from held for sale and obtained in recent acquisitions, as well as more nonperforming construction loans in the Florida market. Certain home equity lines of credit are now classified as nonperforming due to a change in the charge-off policy in the second quarter of 2007. In prior periods, home equity lines of credit were charged-off in full at the time they would have otherwise reached nonperforming status. Home equity line of credit charge-offs now reflect only the principal and interest that exceed the estimated net realizable value of the collateral.

Other real estate owned (OREO) increased compared to year end and the third quarter a year ago due to higher foreclosure rates and slower home sales. These market conditions have resulted in more properties held in foreclosure for a longer period of time. Nonperforming mortgage loans held for sale at September 30, 2007 is primarily one loan to a single family housing developer.

As of September 30, 2007, loans to residential real estate developers represented approximately 20% of nonperforming loans. There were no other industry or geographic concentrations within nonperforming loans at September 30, 2007. At September 30, 2007, the Corporation had commitments to lend an additional $36 million to borrowers whose loans were classified as nonperforming.

Delinquent Loans: Detail of loans 90 days past due accruing interest follows:

	September 30		December 31		September 30
(In Millions)	2007		2006		2006
Commercial loans	$	42	$	31	$	70
Commercial leases		—		—		3
Commercial construction		66		13		29
Commercial real estate		57		18		16
Residential real estate		1,152		704		619
Home equity lines of credit		55		37		24
Credit card and other unsecured lines of credit		34		35		24
Other consumer		11		11		11
Loans held for sale and other		43		89		53
Total loans 90 days past due accruing interest	$	1,460	$	938	$	849

Commercial loan delinquencies increased compared to year end primarily due to growth in the portfolio. Commercial construction and commercial real estate delinquencies increased due to residential real estate developers in the Florida market and recent acquisitions. Residential real estate delinquencies increased due to borrowers unable to handle higher payment requirements due to interest rate resets. Higher delinquencies also occurred in residential construction loans due to weakness in the housing markets. Loans added to portfolio from recent acquisitions and transferred from held for sale also contributed to higher residential real estate and home equity lines of credit delinquencies at September 30, 2007. Delinquent credit card and other unsecured lines of credit increased compared to the third quarter a year ago as the prior year delinquency rate benefited from bankruptcy charge-offs which occurred early in 2006. Delinquent mortgage loans held for sale decreased compared to year end due to transfers of held for sale loans to portfolio.

Allowance for Loan Losses and Allowance for Losses on Lending-Related Commitments: To provide for the risk of loss inherent in extending credit, National City maintains an allowance for loan losses and an allowance for losses on lending-related commitments. The determination of the allowance for loan losses is based upon the size and risk characteristics of the loan portfolio and includes an assessment of individual impaired loans, historical loss experience on pools of homogeneous loans, specific environmental factors, and factors to account for estimated imprecision in forecasting losses. The allowance for losses on lending-related commitments is computed using a methodology similar to that used to determine the allowance for loan losses, modified to take into account the probability of drawdown on the commitment.

A summary of the changes in the allowance for loan losses follows:

	Three Months Ended				Nine Months Ended
	September 30		September 30		September 30		September 30
(Dollars in Millions)	2007		2006		2007		2006
Balance at beginning of period	$	1,136	$	989	$	1,131	$	1,094
Provision for loan losses		368		70		635		164
Charge-offs:

68

	Three Months Ended						Nine Months Ended
	September 30			September 30			September 30			September 30
(Dollars in Millions)	2007			2006			2007			2006
Commercial		17			31			43			56
Commercial leases		8			6			46			54
Commercial construction		10			2			20			5
Commercial real estate		7			2			13			14
Residential real estate		71			81			194			173
Home equity lines of credit		34			20			77			56
Credit card and other unsecured lines of credit		29			20			92			68
Other consumer		13			12			40			49
Total charge-offs		189			174			525			475
Recoveries:
Commercial		6			8			16			27
Commercial leases		3			7			15			14
Commercial construction		—			—			—			—
Commercial real estate		4			2			9			5
Residential real estate		20			23			47			54
Home equity lines of credit		7			5			21			14
Credit card and other unsecured lines of credit		3			3			12			13
Other consumer		5			9			19			34
Total recoveries		48			57			139			161
Net charge-offs		141			117			386			314
Other (a)		10			(10	)		(7	)		(12	)
Balance at end of period	$	1,373		$	932		$	1,373		$	932
Portfolio loans outstanding at period end	$	111,991		$	92,963		$	111,991		$	92,963
Allowance as a percentage of:
Portfolio loans		1.23	%		1.00	%		1.23	%		1.00	%
Nonperforming loans		159.4			198.3			159.4			198.3
Annualized net charge-offs		245.4			200.1			266.2			222.1

(a)  Other includes the allowance for loan losses associated with acquisitions, portfolio loans transferred to held for sale, and reinsurance claims paid to third parties.

A summary of the changes in the allowance for losses on lending-related commitments follows:

	Three Months Ended					Nine Months Ended
	September 30			September 30		September 30			September 30
(Dollars in Millions)	2007			2006		2007			2006
Balance at beginning of period	$	61		$	77	$	78		$	84
Net provision for losses on lending-related commitments		(7	)		3		(24	)		(4	)
Balance at end of period	$	54		$	80	$	54		$	80
Total provision for credit losses	$	361		$	73	$	611		$	160

Annualized net charge-offs as a percentage of average portfolio loans follow:

	Three Months Ended									Nine Months Ended
	September 30			June 30			September 30			September 30			September 30
	2007			2007			2006			2007			2006
Commercial loans		.17	%		.12	%		.37	%		.13	%		.16	%
Commercial leases		.49			.94			(.18	)		1.00			1.51
Commercial construction		.50			.25			.10			.35			.08
Commercial real estate		.08			(.06	)		(.02	)		.03			.09
Residential real estate		.76			.55			.90			.79			.56
Home equity lines of credit		.67			.36			.38			.51			.32
Credit card and other unsecured lines of credit		3.06			3.14			2.57			3.38			2.87
Other consumer		.67			.48			.26			.54			.35
Total net charge-offs to average portfolio loans (annualized)		.54	%		.39	%		.48	%		.51	%		.41	%

69

Commercial loans net charge-offs were relatively stable on a linked-quarter basis and decreased compared to the third quarter a year ago which reflects the stable credit quality of this portfolio. Net charge-offs for commercial leases improved on a linked-quarter basis due to passenger airline lease charge-offs in the prior period. Expressed as an annualized percentage of average portfolio loans, net charge-offs for commercial construction can vary considerably from period to period due to the relatively small size of this portfolio.

Residential real estate and home equity line of credit net charge-offs increased on a linked-quarter and year-over-year basis due to the runoff nonconforming mortgage and home equity portfolios that have been affected by deterioration in the housing markets. In addition, a change in the charge-off policy for home equity loans, included within residential real estate, and home equity lines of credit reduced net charge-offs for the second quarter of 2007 by $7 million and $3 million, respectively. Net charge-offs for the third quarter of 2006 included $10 million of fraud-related losses and $14 million of fair value write-downs, recognized as charge-offs, upon transfer of a pool of nonconforming mortgage loans to held for sale. On a year-to-date basis, a change in charge-off practices for insured mortgage loans, to assume no insurance recovery on disputed claims, also contributed to the higher level of residential real estate net charge-offs in 2007. A smaller portfolio balance in 2007 also drove up the annualized charge-offs expressed as a percentage of portfolio loans.

Credit card and other unsecured lines of credit net charge-offs decreased on a linked-quarter basis due to seasonally lower balances and delinquencies, as well as better credit quality of the customer base. Credit card net charge-offs increased on a year-to-date basis due to the 2005 bankruptcy law changes which accelerated losses that would have been recognized in 2006 into 2005. Other consumer net charge-offs increased compared to prior periods primarily due to the aging of the indirect automobile loan portfolio which is in run-off.

Portfolio Loans: The percentage of portfolio loans in each category to total portfolio loans at period end follows:

	September 30			December 31			September 30
	2007			2006			2006
Commercial loans and leases		30.2	%		32.5	%		32.1	%
Commercial construction and real estate		20.9			20.5			20.2
Residential real estate		26.1			23.0			22.5
Home equity lines of credit		15.6			15.3			16.5
Credit card and other consumer loans		7.2			8.7			8.7
Total		100.0	%		100.0	%		100.0	%

Allowance for Loan Losses and Lending-Related Commitments: An allocation of the allowance for loan losses and allowance for losses on lending-related commitments by portfolio type is shown below.

	September 30		December 31		September 30
(In Millions)	2007		2006		2006
Allowance for loan losses:
Commercial loans and leases	$	457	$	459	$	462
Commercial construction and commercial real estate		239		161		149
Residential real estate		342		259		85
Home equity lines of credit and other consumer loans		175		102		106
Credit card and other unsecured lines of credit		160		150		130
Total	$	1,373	$	1,131	$	932
Allowance for losses on lending-related commitments:
Commercial	$	54	$	78	$	80

The total allowance for loan losses increased compared to year end due to a higher loan portfolio and deterioration in commercial and consumer loans associated with residential real estate. Acquisitions increased the allowance for loan losses by $56 million in 2007 and by $21 million in the fourth quarter of 2006.

The allowance allocated to the commercial portfolio was relatively flat compared to prior periods, reflecting stable credit quality. Additionally, a refinement occurred in the method of applying commercial and commercial real estate loan recoveries in 2007 which lowered the overall required allowance. A higher allowance was allocated to the commercial construction and commercial real estate portfolios due to changes in portfolio mix inclusive of recent acquisitions.

The allowance allocated to both the residential real estate and home equity lines of credit portfolios increased compared to prior periods due to higher portfolio balances, combined with overall lower credit quality of these portfolios. Portfolio loan balances increased due to recent acquisitions, as well as the third quarter transfer of held for sale home equity product to portfolio. These transferred loans were of lower credit quality than portfolio loans, having been originated to capital market standards. Residential real estate delinquencies, charge-offs and foreclosures all continue to rise, particularly among nonconforming and home equity loans. Construction loans to borrowers in the states of California and Florida are also a specific area of concern.

70

The allowance allocated to credit card and other unsecured lines of credit was relatively flat compared to year end as credit quality of this portfolio has been stable. The higher allowance compared to the third quarter a year ago is due to low credit losses incurred in early 2006 following the change in the consumer bankruptcy laws in 2005.

The allowance for losses on commercial lending-related commitments declined due to the improved credit quality of this portfolio. Refer to the Application of Critical Accounting Policies section for further discussion of the allowance for loan losses.

Market Risk

Market risk is the potential for loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates, currency exchange rates, or equity prices. Interest-rate risk is National City’s primary market risk and results from timing differences in the repricing of assets and liabilities, changes in relationships between rate indices, and the potential exercise of explicit or embedded options. The Asset/Liability Management Committee (ALCO) is responsible for reviewing the interest-rate-sensitivity position and establishing policies to monitor and limit exposure to interest-rate risk. The guidelines established by ALCO are reviewed by the Risk and Public Policy Committee of the Corporation’s Board of Directors. The Corporation does not currently have any material equity price risk or foreign currency exchange rate risk.

Asset/Liability Management: The primary goal of asset/liability management is to maximize the net present value of future cash flows and net interest income within authorized risk limits. Interest-rate risk is monitored primarily through modeling of the market value of equity and secondarily through earnings simulation. Both measures are highly assumption dependent and change regularly as the balance sheet and business mix evolve; however, taken together they represent a reasonably comprehensive view of the magnitude of interest-rate risk, 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. The key assumptions employed by these measures are analyzed regularly and reviewed by ALCO.

Interest-rate Risk Management: Financial instruments used to manage interest-rate risk include investment securities and interest-rate derivatives, which include interest-rate swaps, interest-rate caps and floors, interest-rate forwards, and exchange-traded futures and options contracts. Interest-rate derivatives have characteristics similar to securities but possess the advantages of customization of the risk-reward profile of the instrument, minimization of balance sheet leverage, and improvement of the liquidity position. Further discussion of the use of and the accounting for derivative instruments is included in Notes 1 and 24 to the Consolidated Financial Statements.

Market Value Modeling: Market Value of Equity (MVE) represents the discounted present value of net cash flows from all assets, liabilities, and off-balance sheet arrangements, other than MSRs and associated hedges. Market risk associated with MSRs is hedged through the use of derivative instruments. Refer to Note 12 to the Consolidated Financial Statements for further details on managing market risk for MSRs. Unlike the earnings simulation model described below, MVE analysis has no time horizon limitations. In addition, MVE analysis is performed as of a single point in time and does not include estimates of future business volumes. As with earnings simulations, assumptions driving timing and magnitude of cash flows are critical inputs to the model. Particularly important are assumptions driving loan and security prepayments and noncontractual deposit balance movements.

The sensitivity of MVE to changes in interest rates is an indication of the longer-term interest-rate risk embedded in the balance sheet. A primary measure of the sensitivity of MVE to movements in rates is defined as the Duration of Equity (DOE). DOE represents the estimated percentage change in MVE for a 1% instantaneous, parallel shift in the yield curve. Generally, the larger the absolute value of DOE, the more sensitive the value of the balance sheet is to movements in rates. A positive DOE indicates the MVE should increase as rates fall, or decrease as rates rise. A negative DOE indicates that MVE should increase as rates rise, or decrease as rates fall. Due to the embedded options in the balance sheet, DOE is not constant and can shift with movements in the level or shape of the yield curve. ALCO has set limits on the maximum and minimum acceptable DOE at +4.0% and -1.0%, respectively, as measured between +/-150 basis point instantaneous, parallel shifts in the yield curve.

The most recent market value model estimated the current DOE at +1.9%, above the long-term target of +1.5% but consistent with management’s view on interest rates. DOE would rise to +3.0% given a parallel shift of the yield curve up 150 basis points and would be within the maximum constraint of +4.0%. DOE would decline to +1.1% given a parallel shift of the yield curve down 150 basis points and would be within the minimum constraint of -1.0%.

Earnings Simulation Modeling: The earnings simulation model projects changes in net income caused by the effect of changes in interest rates on net interest income. The model requires management to make assumptions about how the balance sheet is likely to evolve through time in different interest-rate environments. Loan and deposit growth rate assumptions are derived from historical analysis and management’s outlook, as are the assumptions used to project yields and rates for new loans and deposits. Mortgage loan prepayment models are developed from industry median estimates of prepayment speeds in conjunction with the historical prepayment performance of the Corporation’s own loans. Noncontractual deposit growth rates and pricing are modeled on historical patterns.

71

Net interest income is affected by changes in the absolute level of interest rates and by changes in the shape of the yield curve. In general, a flattening of the yield curve would result in a decline in earnings due to the compression of earning asset yields and funding rates, while a steepening would result in increased earnings as investment margins widen. The earnings simulations are also affected by changes in spread relationships between certain rate indices, such as the prime rate and the London Interbank Offering Rate (LIBOR).

Market implied forward rates over the next 12 months are used as the base rate scenario in the earnings simulation model. High and low rate scenarios are also modeled and consist of statistically determined two-standard deviation moves above and below market implied forward rates over the next 12 months. These rate scenarios are nonparallel in nature and result in short- and long-term rates moving in different magnitudes. Resulting net incomes from the base, high, and low scenarios are compared and the percentage change from base net income is limited by ALCO policy to -4.0%.

The most recent earnings simulation model projects that net income would be 5.3% higher than base net income if rates were two standard deviations higher than the implied forward curve over the next 12 months. The model also projects a decrease in net income of 2.8% if rates were two standard deviations below the implied forward curve over the same period. Both of the earnings simulation projections of net income were within the ALCO guideline of -4.0%.

The earnings simulation model excludes the potential effects on noninterest income and noninterest expense associated with changes in interest rates. In particular, revenue generated from originating, selling, and servicing residential mortgage loans is highly sensitive to changes in interest rates due to the direct effect such changes have on loan demand and the value of MSRs. In general, low or declining interest rates typically lead to increased loan sales revenue but potentially lower loan servicing revenue due to the impact of higher loan prepayments on the value of MSRs. Conversely, high or rising interest rates typically reduce mortgage loan demand and hence loan sales revenue while loan servicing revenue may rise due to lower prepayments. In addition, net interest income earned on loans held for sale increases when the yield curve steepens and decreases when the yield curve flattens. Risk related to mortgage banking activities is also monitored by ALCO.

Liquidity Risk

Liquidity risk arises from the possibility the Corporation may not be able to satisfy current or future financial commitments, or may become unduly reliant on alternative funding sources. The objective of liquidity risk management is to ensure that the cash flow requirements of depositors and borrowers, as well as the operating cash needs of the Corporation, are met, taking into account all on- and off-balance sheet funding demands. Liquidity risk management also includes ensuring cash flow needs are met at a reasonable cost. Management adheres to a liquidity risk management policy which identifies the primary sources of liquidity, establishes procedures for monitoring and measuring liquidity, and establishes minimum liquidity requirements in compliance with regulatory guidance. The policy also includes a contingency funding plan to address liquidity needs in the event of an institution-specific or a systemic financial crisis. The liquidity position is continually monitored and reviewed by ALCO.

Funds are available from a number of sources, including the securities portfolio, core deposits, the capital markets, the Federal Reserve Bank, the Federal Home Loan Bank, the U.S. Treasury, and through the sale or securitization of various types of assets. Core deposits, which continue to be the most significant source of funding, comprised 58%, 54% and 52% of funding at September 30, 2007, December 31, 2006 and September 30, 2006, respectively. Refer to the Financial Condition section for further discussion on changes in funding sources. Asset securitizations have also been used as a source of funding over the past several years. During the first quarter of 2007, the Corporation securitized $425 million of credit card loans. Further discussion of securitization activities is included in Note 5 to the Consolidated Financial Statements.

At the holding company level, the Corporation uses cash to pay dividends to stockholders, repurchase common stock, make selected investments and acquisitions, and service debt. The main sources of funding for the holding company include dividends and returns of investment from its subsidiaries, the commercial paper market, and access to the capital markets. As discussed in Note 17 to the Consolidated Financial Statements, the Corporation’s bank subsidiary is subject to regulation and, among other things, may be limited in its ability to pay dividends or otherwise transfer funds to the holding company. Accordingly, consolidated cash flows as presented in the Consolidated Statements of Cash Flows on page 6 may not represent cash immediately available to the holding company. During the first nine months of 2007, the Corporation’s bank and nonbank subsidiaries declared and paid cash dividends totaling $950 million. Returns of capital paid to the holding company by bank and nonbank subsidiaries during the first nine months of 2007 totaled $500 million and $9 million, respectively.

Funds raised in the commercial paper market through the Corporation’s subsidiary, National City Credit Corporation, support the short-term cash needs of the holding company and nonbank subsidiaries. At September 30, 2007, December 31, 2006 and September 30, 2006, $1.1 billion, $812 million and $1.1 billion, respectively, of commercial paper borrowings were outstanding.

During the first quarter of 2007, the holding company issued $600 million of senior notes which completed its existing shelf registration. In April 2007, the Corporation’s Board authorized the holding company to issue up to $1.5 billion in senior debt securities or

72

subordinated debt securities in future periods. A new shelf registration will be filed with the Securities and Exchange Commission at the time of issuance of these securities. There were no issuances under this authorization during the third quarter of 2007.

The Corporation also has in place an additional shelf registration with the Securities and Exchange Commission, to allow for the sale over time of an unspecified amount of junior subordinated debt securities to subsidiary trusts, and an equal amount of capital securities of the trusts in the capital markets (trust preferred securities). During the first nine months of 2007, the Corporation issued $1.0 billion of trust preferred securities, including $518 million in the third quarter. Further discussion of junior subordinated debentures is included in Note 16 to the Consolidated Financial Statements.

CONTRACTUAL OBLIGATIONS, COMMITMENTS, CONTINGENT LIABILITIES, AND OFF-BALANCE SHEET ARRANGEMENTS

The Corporation’s financial obligations include contractual obligations and commitments that may require future cash payments.

Contractual Obligations: The following table presents significant fixed and determinable contractual obligations by payment date as of September 30, 2007. The payment amounts represent those amounts contractually due to the recipient and do not include unamortized premiums or discounts, hedge basis adjustments, fair value adjustments, or other similar carrying value adjustments. Further discussion of the nature of each obligation is included in the referenced note to the Consolidated Financial Statements.

			Payments Due In
			One		One to		Three to		Over
	Note		Year		Three		Five		Five
(In Millions)	Reference		or Less		Years		Years		Years		Total
Deposits without a stated maturity(a)			$	64,571	$	—	$	—	$	—	$	64,571
Consumer and brokered certificates of deposits(b)				30,816		3,733		1,189		2,539		38,277
Federal funds borrowed and security repurchase agreements(b)				6,258		—		—		—		6,258
Borrowed funds(b)		14		2,497		—		—		—		2,497
Long-term debt(b)		15,16		11,775		10,283		3,942		14,692		40,692
Operating leases				166		259		203		575		1,203
Purchase obligations				200		219		135		13		567

(a)	Excludes interest.
(b)	Includes interest on both fixed- and variable-rate obligations. The interest associated with variable-rate obligations is based upon interest rates in effect at September 30, 2007. The contractual amounts to be paid on variable-rate obligations are affected by changes in market interest rates. Future changes in market interest rates could materially affect the contractual amounts to be paid.

The operating lease obligations arise from short- and long-term leases for facilities, certain software, and data processing and other equipment. Purchase obligations arise from agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. The obligations are primarily associated with information technology, data processing, branch construction, and the outsourcing of certain operational activities.

As of September 30, 2007, the liability for uncertain tax positions, excluding associated interest and penalties, was $216 million pursuant to FASB Interpretation No. 48. This liability represents an estimate of tax positions that the Corporation has taken in its tax returns which may ultimately not be sustained upon examination by the tax authorities. Since the ultimate amount and timing of any future cash settlements cannot be predicted with reasonable certainty, this estimated liability has been excluded from the contractual obligations table.

The Corporation did not have any commitments or obligations to its qualified pension plan at September 30, 2007 due to the overfunded status of the plan. The Corporation also has obligations under its supplemental pension and postretirement plans as described in Note 23 to the Consolidated Financial Statements. These obligations represent actuarially determined future benefit payments to eligible plan participants. The Corporation reserves the right to terminate these plans at any time.

The Corporation also enters into derivative contracts under which it either receives cash from or pays cash to counterparties depending on changes in interest rates. Derivative contracts are carried at fair value on the Consolidated Balance Sheet, with the fair value representing the net present value of expected future cash receipts or payments based on market interest rates as of the balance sheet date. The fair value of the contracts change as market interest rates change. Certain contracts, such as interest-rate futures, are cash settled daily, while others, such as interest-rate swaps, involve monthly cash settlement. Because the derivative liabilities recorded on the balance sheet at September 30, 2007 do not represent the amounts that may ultimately be paid under these contracts, these liabilities are not included in the table of contractual obligations presented above. Further discussion of derivative instruments is included in Notes 1 and 24 to the Consolidated Financial Statements.

73

Commitments: The following table details the amounts and expected maturities of significant commitments as of September 30, 2007. Further discussion of these commitments is included in Note 21 to the Consolidated Financial Statements.

	One		One to		Three to		Over
	Year		Three		Five		Five
(In Millions)	or Less		Years		Years		Years		Total
Commitments to extend credit:
Commercial	$	9,876	$	8,774	$	7,742	$	578	$	26,970
Residential real estate		11,037		—		—		—		11,037
Revolving home equity and credit card lines		36,434		11		—		—		36,445
Other		614		—		—		—		614
Standby letters of credit		2,228		1,631		1,289		97		5,245
Commercial letters of credit		268		70		26		6		370
Net commitments to sell mortgage loans and mortgage-backed securities		9,354		—		—		—		9,354
Net commitments to sell commercial real estate loans		242		41		—		—		283
Commitments to fund principal investments		26		30		109		175		340
Commitments to fund civic and community investments		332		167		89		24		612
Commitments to purchase beneficial interests in securitized automobile loans		341		—		—		—		341

Commitments to extend credit, including loan commitments, standby letters of credit, and commercial letters of credit do not necessarily represent future cash requirements, in that these commitments often expire without being drawn upon.

The commitments to fund principal investments primarily relate to indirect investments in various private equity funds managed by third-party general and limited partners. These estimated commitments were based primarily on the expiration of each fund’s investment period at September 30, 2007. The timing of these payments could change due to extensions in the investment periods of the funds or by the rate at which the commitments are invested, as determined by the general or limited partners of the funds.

The commitments to fund civic and community investments pertain to the construction and development of properties for low-income housing, small business real estate, and historic tax credit projects. The timing and amounts of these commitments are projected based upon the financing arrangements provided in each project’s partnership or operating agreement, and could change due to variances in the construction schedule, project revisions, or the cancellation of the project.

National City Bank, a subsidiary of the Corporation, along with other financial institutions, has agreed to provide backup liquidity to an unrelated commercial paper conduit. The conduit holds various third-party assets including beneficial interests in the cash flows of trade receivables, credit cards and other financial assets, as well as automobile loans securitized by the Corporation in 2005. In the event of a disruption in the commercial paper markets, the conduit could experience a liquidity event. At such time, the conduit may require National City Bank, as well as another financial institution, to purchase an undivided interest in its note, representing a beneficial interest in the securitized automobile loans. This commitment expires in December 2007 but may be renewed annually for an additional 12 months by mutual agreement of the parties. This commitment does not necessarily represent a future cash requirement, and may expire without being drawn upon.

Contingent Liabilities: The Corporation may also incur liabilities under various contractual agreements contingent upon the occurrence of certain events. A discussion of significant contractual arrangements under which National City may be held contingently liable is included in Note 21 to the Consolidated Financial Statements.

Off-Balance Sheet Arrangements: Significant off-balance sheet arrangements include the use of special-purpose entities, generally securitization trusts, to diversify funding sources. During the past several years, National City has sold credit card receivables and automobile loans to securitization trusts which are considered qualifying special-purpose entities and, accordingly, are not included in the Consolidated Balance Sheet. The Corporation continues to service the loans sold to the trusts, for which it receives a servicing fee, and also has certain retained interests in the assets of the trusts.

In the first quarter of 2007, the Corporation securitized a $425 million pool of credit card receivables (Series 2007-1) following the January 2007 maturity of its Series 2002-1 credit card securitization. The initial carrying values of retained interests were determined by allocating the carrying value among the assets sold and retained based on their relative fair values at the date of sale. The fair value of the interest-only strip was estimated by discounting the projected future cash flows of this security. The Corporation retained the right to service these loans. Servicing fees to be received approximated the current market rate for servicing fees, therefore, no servicing asset or liability was recognized. Further discussion on the accounting for securitizations is included in Note 1 to the Consolidated Financial Statements, and detail regarding securitization transactions and retained interests is included in Note 5.

74

The Corporation also has obligations arising from contractual arrangements that meet the criteria of FASB Interpretation No. 45. These obligations are discussed in Note 21.

Application of Critical Accounting Policies and Estimates

National City’s financial statements are prepared in accordance with U.S. generally accepted accounting principles and follow general industry practices within the industries in which it operates. Application of these principles requires management to make estimates or judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates or judgments. Certain policies inherently have a greater reliance on the use of estimates, and as such have a greater possibility of producing results that could be materially different than originally reported. Estimates or judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment write-down or valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. The fair values and the information used to record valuation adjustments for certain assets and liabilities are based either on quoted market prices or other market inputs, when available. When such information is not available, fair value may be estimated by management primarily through the use of discounted cash flow models.

The most significant accounting policies followed by the Corporation are presented in Note 1 to the Consolidated Financial Statements. These policies, along with the disclosures presented in the other financial statement notes and in this Financial Review, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. Any material effect on the financial statements related to these critical accounting areas is also discussed in this Financial Review. Management views critical accounting policies to be those which are highly dependent on subjective or complex judgments, estimates and assumptions, and where changes in those estimates and assumptions could have a significant impact on the financial statements. Management currently views the valuation of mortgage loans held for sale, the allowance for loan losses and allowance for losses on lending-related commitments, mortgage servicing rights, derivative instruments, and income taxes to be critical accounting policies which contain significant estimates or judgments.

Mortgage Loans Held for Sale Valuation: Loans held for sale, principally residential real estate loans and home equity lines of credit, are reported at the lower of cost or fair value applied on an aggregate basis. The fair value of mortgage loans held for sale is generally based on observable market prices for similar loans or quoted prices for loans committed for sale. Management considers in its assessment the probability that investor commitments may not be honored in full. In the absence of observable market prices, fair value is based upon recent bids from potential buyers. Otherwise, fair value may be estimated using a discounted cash flow model incorporating inputs and assumptions consistent with market participants’ views.

During the third quarter of 2007, the Corporation utilized a discounted cash flow model to estimate fair value of home equity loans and lines of credit as there was no observable market for sale of these products. Key inputs to the valuation model were projected credit losses, prepayment speed, and discount rate. Projected credit losses were estimated based on a combination of historical credit losses for a static pool of similar loans, adjusted by a recent industry forecast of projected losses for similar types of loans. Prepayment speeds were based upon historical prepayments for a static pool of similar loans adjusted to reflect current market conditions. The discount rate was estimated based upon the rate utilized by market participants in prior transactions adjusted to reflect a higher risk premium in the current market.

A valuation allowance is recognized whenever the carrying value, including basis adjustments arising from fair value hedge relationships, exceeds the aggregate fair value of loans held for sale at the measurement date. This valuation allowance was $45 million at September 30, 2007, $65 million at December 31, 2006, and $16 million at September 30, 2006. The valuation allowance at September 30, 2007 reflects deterioration in market conditions for non-agency eligible mortgage and home equity loans. At December 31, 2006 and September 30, 2006, the valuation allowance represented fair value write-downs on nonconforming mortgage loans originated by the Corporation’s former First Franklin unit. This unit was sold in late 2006 and the related loans, which had been classified as held for sale loans at year end, were transferred to portfolio in early 2007. Valuation adjustments are recognized in the income statement within loan sale revenue.

The fair value of loans held for sale is a significant estimate which is sensitive to change based on market conditions, including market prices, liquidity of the markets, supply and demand for certain loan products, as well as changes in prepayment estimates or anticipated credit losses. Management expects to have a lower balance of nonagency-eligible mortgage and home equity loans held for sale at year end as production of these products has been curtailed.

Allowance for Loan Losses and Allowance for Losses on Lending-Related Commitments: Management’s assessment of the adequacy of the allowance for loan losses and allowance for lending-related commitments considers individual impaired loans, pools of homogenous

75

loans with similar risk characteristics, imprecision in estimating losses, and other environmental risk factors. As described below, an established methodology exists for estimating the risk of loss for each of these elements.

An allowance is established for probable credit losses on impaired loans. Nonperforming commercial loans and leases exceeding policy thresholds are regularly reviewed to identify impairment. A loan or lease is impaired when, based on current information and events, it is probable that the Corporation will not be able to collect all amounts contractually due. Measuring impairment of a loan requires judgment and estimates, and the eventual outcomes may differ from those estimates. Impairment is measured based upon the present value of expected future cash flows from the loan discounted at the loan’s effective rate, the loan’s observable market price or the fair value of collateral, if the loan is collateral dependent. When the selected measure is less than the recorded investment in the loan, an impairment has occurred. The allowance for impaired loans was $55 million at September 30, 2007 $60 million at December 31, 2006 and $55 million September 30, 2006. While this element of the allowance has been relatively flat in comparison to year end and the third quarter a year ago, the nature of the underlying impaired loans has changed. At September 30, 2007, the allowance for impaired loans was largely related to real estate developer loans while in prior periods it primarily related to passenger airline leases which have since been charged off.

Pools of homogeneous loans with similar risk and loss characteristics are also assessed for probable losses. These loan pools include all other loans and leases not individually evaluated for impairment as discussed above. For commercial loans, a loss migration analysis is performed which averages historic loss ratios. In 2007, management refined its method of applying commercial and commercial real estate loan recoveries within the loss migration analysis. In prior periods, commercial and commercial real estate recoveries were largely applied to the nonperforming loan category. In 2007, these recoveries have now been applied across all loan grades to produce what management believes is a more accurate estimate of the net loss ratio for each category. For consumer loans, average historical losses are utilized to estimate losses currently inherent in the portfolio. Consumer loans are pooled by probability of default within product segments. The probability of default is based on the historical performance of customer attributes, such as credit score, loan-to-value, origination date, collateral type, worst delinquency, and other relevant factors. Credit losses on certain consumer loans are covered by lender-paid mortgage insurance. These insurance policies have various levels of coverage, deductibles, and stop loss limits. Management considers probable third-party insurance recoveries in its assessment of estimated losses for pools of homogeneous loans. The allowance for pools of homogeneous loans was $875 million at September 30, 2007, $757 million at December 31, 2006, and $584 million at September 30, 2006. This element of the allowance increased compared to year end and third quarter a year ago primarily due to a higher expected probability of default rate assigned to residential real estate loans arising from adverse trends observed in delinquencies, charge-offs and foreclosures.

An allowance is also recognized for imprecision inherent in loan loss migration models and other estimates of loss. Imprecision occurs because historic loss patterns may not be representative of losses inherent in the current portfolio. Reasons for imprecision include expansion of the Corporation’s footprint, changes in economic conditions, and difficulty identifying triggering events, among other factors. Imprecision is estimated by comparing actual losses incurred to previously forecasted losses over several time periods. The volatility of this imprecision, as expressed in terms of the standard deviation of the difference between the actual and forecasted losses, is used to calculate an imprecision percentage that represents the probable forecast error. The imprecision percentage is applied to the current portfolio balance to determine the required allowance. The allowance established for imprecision was $472 million at September 30, 2007, $392 million at December 31, 2006, and $374 million at September 30, 2006. This element of the allowance increased compared to year end and the third quarter a year ago due to changes in the portfolio mix, including recent acquisitions.

Finally, the allowance considers specific environmental factors which pose additional risks that may not have been adequately captured in the elements described above. For each environmental risk, a range of expected losses is calculated based on observable data. Management applies judgment to determine the most likely amount of loss within the range. When an allowance is established for environmental risks, conditions for its release are also established. During the third quarter of 2007, management established a $25 million environmental reserve for home equity lines and loans. Continued weakness in the housing markets, particularly in California and Florida, has resulted in a significant increase in delinquency rates for home equity lines and loans related to held for sale loans that were transferred to portfolio. This adverse trend in delinquencies is expected to result in higher charge-offs as these loans migrate to charge-off thresholds. The estimated loss model, which uses historical loss data, does not adequately capture this recent adverse trend in its loss factors. Management estimated the environmental reserve by applying a loss rate to the home equity portfolio that was 20% higher than the estimated loss model. This component of the allowance will be relieved as actual losses are incurred or the historical loss data utilized in the migration model begins to reflect this adverse trend. The environmental allowance is also subject to change in future periods as the housing market either improves or weakens. There was no allowance for environmental risks recorded at either December 31, 2006 or September 30, 2006.

There are many factors affecting the allowance for loan losses and allowance for lending-related commitments; some are quantitative while others require qualitative judgment. Although management believes its methodology for determining the allowance adequately considers all of the potential factors to identify and quantify probable losses in the portfolio, the process includes subjective elements and is therefore susceptible to change. To the extent that actual outcomes differ from management’s estimates, additional provision for credit losses could be required, or a previously recognized provision could be reversed, either of which could have a material impact on earnings

76

in future periods. In addition, a higher allowance for loan losses may be required in future periods if the weakness in the housing markets deteriorates further, or continues for a prolonged period.

The allowance for loan losses addresses incurred credit losses in the loan and lease portfolio and is presented as a reserve against portfolio loans on the balance sheet. The allowance for losses on lending-related commitments addresses incurred credit losses in commitments to lend and letters of credit and is presented in accrued expenses and other liabilities on the balance sheet. The allowance for losses on lending-related commitments is computed using a methodology similar to that used in determining the allowance for loan losses, modified to take into account the probability of funding these commitments. When a commitment is funded, any previously established allowance for losses on lending-related commitments is reversed and re-established in the allowance for loan losses.

The allowance for loan losses and the allowance for losses on lending-related commitments are assigned to business lines based on the nature of the loan portfolio in each business line. Commercial Banking-Regional, Commercial Banking – National, Retail Banking, and Mortgage Banking have been assigned most of the allowance, and accordingly, would be the business lines most affected by actual outcomes differing from prior estimates.

Valuation of Mortgage Servicing Rights (MSRs): The Corporation employs a risk management strategy designed to protect the value of MSRs from changes in interest rates. MSR values are hedged with securities and a portfolio of derivatives, primarily interest-rate swaps, options, mortgage-backed forwards, and futures contracts. As interest rates change, these financial instruments are expected to have changes in fair value which are negatively correlated to the change in fair value of the hedged MSR portfolio. The hedge relationships are actively managed in response to changing market risks over the life of the MSR assets. Selecting appropriate financial instruments to hedge this risk requires significant management judgment to assess how mortgage rates and prepayment speeds could affect the future values of MSRs.

Management has elected fair value as its measurement method for MSRs. Management measures net MSR hedging gains or losses as the change in the fair value of mortgage servicing rights, exclusive of changes associated with time decay and payoffs, compared to the change in the fair value of the associated financial instruments. Hedging results are frequently volatile in the short term, but over longer periods of time the hedging strategies have been largely successful in protecting the economic value of the MSR portfolio.

MSRs do not trade in an active open market with readily observable market prices. Although sales of MSRs do occur, the exact terms and conditions may not be available. As a result, MSRs are established and valued using discounted cash flow modeling techniques which require management to make estimates regarding future net servicing cash flows, taking into consideration actual and expected mortgage loan prepayment rates, discount rates, servicing costs, and numerous other factors. Management regularly updates its model inputs to reflect current market conditions. In addition, the reasonableness of the model is periodically validated by obtaining third-party broker estimates of the market value of the MSR portfolio.

The expected and actual rates of mortgage loan prepayments are the most significant factors driving the value of MSRs. During the third quarter of 2007, weakness in the housing markets caused prepayments to slow as fewer borrowers refinanced their mortgages. The Corporation uses an internal proprietary model to estimate future loan prepayments. This model uses empirical data drawn from the historical performance of the Corporation’s managed portfolio. The implementation of this model resulted in a one-time decrease in the fair value of MSRs of $56 million during the second quarter of 2006.

Future interest rates are another significant factor in the valuation of MSRs.  In 2007, the Corporation refined its MSR valuation model to incorporate market implied forward interest rates to estimate the future direction of mortgage and discount rates. The forward rates utilized are derived from the current yield curve for U.S. dollar interest rate swaps and are consistent with pricing of capital markets instruments. In prior periods, the MSR valuation model held interest rates constant at the current market rate. This change in model inputs had a negligible impact on the MSR valuation as the forward curve was relatively flat at the date of adoption.  However, changes in the shape and slope of the forward curve could introduce additional volatility to the fair value of MSRs in the future.

The fair value of MSRs and significant inputs to the valuation model are shown below.

	September 30,			December 31,			September 30,
	2007			2006			2006
(Dollars in Millions)	NCM			NCM			NCM			NCHLS(a)
Fair value	$	2,503		$	2,094		$	2,099		$	165
Weighted-average life (in years)		6.1			5.0			5.2			2.0
Weighted-average constant prepayment rate (CPR)		13.49	%		17.66	%		17.15	%		40.97	%
Spread over forward interest rate swap rates		5.61			—			—			—
Weighted-average discount rate		—			9.77			9.82			13.83

(a) National City Home Loan Services (NCHLS) was sold in late 2006.

77

A sensitivity analysis of the hypothetical effect on the fair value of MSRs to adverse changes in key assumptions is presented below. Changes in fair value generally cannot be extrapolated because the relationship of the change in the assumption to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of the MSRs is calculated independently without changing any other assumption. In reality, changes in one factor may result in changes in another (for example, changes in mortgage interest rates, which drive changes in prepayment rate estimates, could result in changes in the interest rate), which could either magnify or counteract the sensitivities.

	September 30,
(Dollars in Millions)	2007
Fair value	$	2,503
Prepayment rate:
Decline in fair value from 10% adverse change		109
Decline in fair value from 20% adverse change		209
Spread over forward interest rate swap rates (a):
Decline in fair value from 10% adverse change		52
Decline in fair value from 20% adverse change		102

(a) Used to discount MSR cash flows.

Derivative Instruments: The Corporation regularly uses derivative instruments as part of its risk management activities to protect the value of certain assets and liabilities and future cash flows against adverse price or interest-rate movements. The Corporation also has residential and commercial mortgage loan commitments, which are defined as derivatives under SFAS 133, and enters into derivatives for trading purposes.

All derivative instruments are carried at fair value on the balance sheet. Management values derivative instruments using observable market prices, when available. In the absence of observable market prices, management uses discounted cash flow models to estimate the fair value of derivatives. The interest rates used in these cash flow models are based on forward yield curves observable in the current cash and derivatives markets, consistent with how derivatives are valued by most market participants. As of September 30, 2007, the recorded fair values of derivative assets and liabilities were $627 million and $556 million, respectively.

Certain derivative instruments are formally designated in SFAS 133 hedge relationships as a hedge of one of the following: the fair value of a recognized asset or liability, the expected future cash flows of a recognized asset or liability, or the expected future cash flows of a forecasted transaction. For these derivatives, both at the inception of the hedge and on an ongoing basis, management assesses the effectiveness of the hedge instrument in achieving offsetting changes in fair value or cash flows compared to the hedged item.

At the inception of each SFAS 133 hedge relationship, management performs a prospective test of the effectiveness of the hedge. For hedges of funding products and commercial real estate loans originated for sale, management reviews the terms of the hedge instrument compared to the terms of the hedged item to assess whether the hedge relationship is expected to be highly effective. For all other SFAS 133 hedge relationships, a quantitative prospective test is performed at the inception of the hedge to assess the effectiveness of the hedge.

For each SFAS 133 hedge relationship, a quantitative retrospective test is performed to determine if the hedge was highly effective. The methods utilized to retrospectively test hedge effectiveness, as well as the frequency of testing, vary based on the hedged item and the designated hedge period. For fair value hedges of fixed-rate debt, including certificates of deposit, management utilizes a dollar offset ratio to test hedge effectiveness on a monthly basis. For fair value hedges of portfolio loans and residential mortgage loans held for sale, a dollar offset ratio test is performed on a daily basis. Effectiveness testing for commercial real estate loans originated for sale is measured using a dollar offset ratio test applied on either a monthly or quarterly basis. For cash flow hedges of funding products, a dollar offset ratio test is applied on a monthly basis. For cash flow hedges of commercial loans, a monthly regression analysis is performed. There are no known sources of variability between the hedge instrument and the hedged item that are excluded from the effectiveness test.

When a retrospective hedge effectiveness test fails, the change in the derivative’s fair value is recognized in earnings without a corresponding offset for the hedged item. A quantitative prospective test is then employed to determine whether the hedge relationship is expected to be highly effective in future periods under various interest-rate shock scenarios. The method used for these prospective tests is the same method used for retrospective testing.

Because the majority of the derivative instruments are used to protect the value of recognized assets and liabilities on the balance sheet, changes in the value of the derivative instruments are typically offset by changes in the value of the assets and liabilities being hedged, although income statement volatility can still occur if the derivative instruments are not effective in hedging changes in the fair value of those assets and liabilities. Changes in the fair values of derivative instruments associated with mortgage banking activities are included in either loan sale revenue or loan servicing revenue on the income statement and affect the results of the Mortgage Banking line of business. Changes in the fair values of other derivatives are included in other noninterest income on the income statement and are

78

primarily generated from investment funding activities that are not allocated to the business lines. Notes 1 and 24 to the Consolidated Financial Statements provide further discussion on the accounting and use of derivative instruments.

Income Taxes: The Corporation is subject to the income tax laws of the U.S., its states and other jurisdictions where it conducts business. These laws are complex and subject to different interpretations by the taxpayer and the various taxing authorities. In determining the provision for income taxes, management must make judgments and estimates about the application of these inherently complex laws, related regulations, and case law. In the process of preparing the Corporation’s tax returns, management attempts to make reasonable interpretations of the tax laws. These interpretations are subject to challenge by the tax authorities upon audit or to reinterpretation based on management’s ongoing assessment of facts and evolving case law. The Internal Revenue Service (IRS) has completed their examinations of the Corporation’s income tax returns for years prior to 2002. Their examination of tax years 2002-2004 is currently in process. At this time, the IRS has not proposed any significant adjustments to the tax positions claimed on these returns that are not currently reflected in the Corporation’s income tax reserves.

The Corporation adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007. As a result of the adoption of this new accounting standard, the Corporation recognized a $31 million increase in its estimated liability for uncertain tax positions ($24 million net of tax), which was recorded as the cumulative effect of an accounting change, reducing the opening balance of retained earnings. As of September 30, 2007, the estimated liability for uncertain tax positions was $216 million, excluding accrued interest and penalties of $56 million. Approximately $112 million of that liability pertains to tax positions where a change in the actual or estimated outcome would increase or decrease the provision for income taxes.

It is reasonably possible that the liability for uncertain tax positions could increase or decrease in the next 12 months due to the completion of tax authorities’ exams or the expiration of the statute of limitations. Management estimates that the liability for uncertain tax positions could decrease by $12 million within the next 12 months.

For the three and nine months ended September 30, 2007, the provision for interest and penalties was $4 million and $19 million, respectively. For the three and nine months ended September 30, 2006, the provision/(reversal) for interest and penalties was $3 million and $(1) million, respectively. The Corporation recognizes interest and penalties associated with uncertain tax positions within income tax expense.

Recent Accounting Pronouncements and Developments

Note 2 to the Consolidated Financial Statements discusses accounting standards recently adopted by the Corporation and the expected impact of recently issued accounting standards that are not yet required to be adopted. To the extent the adoption of new accounting standards materially affects financial condition, results of operations, or liquidity, the impacts are discussed in the applicable section(s) of this Financial Review and Notes to the Consolidated Financial Statements.

FORWARD LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance, nor should they be relied upon as representing management’s views as of any subsequent date. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include, without limitation, the Corporation’s ability to effectively execute its business plans; changes in general economic and financial market conditions; changes in interest rates; changes in the competitive environment; continuing consolidation in the financial services industry; new litigation or changes in existing litigation; losses, customer bankruptcy, claims and assessments; changes in banking regulations or other regulatory or legislative requirements affecting the Corporation’s business; and changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies. Additional information concerning factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements is available in the Corporation’s annual report on Form 10-K for the year ended December 31, 2006, and subsequent filings with the United States Securities and Exchange Commission (SEC). Copies of these filings are available at no cost on the SEC’s Web site at www.sec.gov or on the Corporation’s Web site at nationalcity.com. Management may elect to update forward-looking statements at some future point; however, it specifically disclaims any obligation to do so.

79

CONSOLIDATED AVERAGE BALANCE SHEETS

	Three Months Ended						Nine Months Ended
	September 30			September 30			September 30			September 30
(In Millions)	2007			2006			2007			2006
Assets
Earning Assets:
Portfolio loans:
Commercial	$	28,616		$	26,013		$	27,885		$	25,111
Commercial leases		4,235			3,532			4,093			3,494
Commercial construction		8,225			6,510			7,899			6,065
Commercial real estate		13,548			12,061			13,150			12,061
Residential real estate		26,546			25,701			24,892			28,546
Home equity lines of credit		15,609			15,629			14,680			17,880
Credit card and other unsecured lines of credit		3,356			2,654			3,159			2,566
Other consumer		4,304			5,304			5,040			5,778
Total portfolio loans		104,439			97,404			100,798			101,501
Loans held for sale or securitization:
Commercial		79			49			52			43
Commercial real estate		385			116			262			115
Residential real estate		10,070			11,904			9,362			9,670
Home equity lines of credit		2,108			2,981			2,548			2,267
Student		1			15			1			8
Credit card		—			—			121			137
Total loans held for sale or securitization		12,643			15,065			12,346			12,240
Securities available for sale, at cost		7,835			7,874			7,561			7,799
Federal funds sold and security resale agreements		1,212			654			1,357			507
Other investments		2,120			2,129			2,008			2,185
Total earning assets		128,249			123,126			124,070			124,232
Allowance for loan losses		(1,142	)		(988	)		(1,134	)		(1,029	)
Fair value depreciation of securities available for sale		(73	)		(120	)		(40	)		(90	)
Cash and demand balances due from banks		2,714			3,075			2,808			3,215
Properties and equipment		1,571			1,311			1,520			1,307
Equipment leased to others		431			617			488			670
Other real estate owned		304			186			271			150
Mortgage servicing rights		2,493			2,465			2,301			2,366
Goodwill		4,896			3,346			4,641			3,328
Other intangible assets		281			156			263			157
Derivative assets		310			153			267			92
Accrued income and other assets		5,061			5,107			5,069			4,882
Total Assets	$	145,095		$	138,434		$	140,524		$	139,280
Liabilities
Deposits:
Noninterest bearing	$	16,690		$	16,740		$	16,798		$	16,854
NOW and money market		35,099			28,810			33,795			28,685
Savings		2,457			1,903			2,412			2,016
Consumer time		27,238			21,966			25,604			21,395
Brokered retail CDs		2,297			4,161			2,588			4,846
Other		1,112			1,049			981			1,017
Foreign		8,609			8,878			8,300			8,289
Total deposits		93,502			83,507			90,478			83,102
Federal funds borrowed and security repurchase agreements		6,176			6,876			5,941			6,064
Borrowed funds		2,593			1,925			2,238			2,290
Long-term debt		26,306			29,432			24,866			31,404
Derivative liabilities		377			431			388			268
Accrued expenses and other liabilities		3,505			3,576			3,531			3,578
Total Liabilities		132,459			125,747			127,442			126,706
Total Stockholders’ Equity		12,636			12,687			13,082			12,574
Total Liabilities and Stockholders’ Equity	$	145,095		$	138,434		$	140,524		$	139,280

80

DAILY AVERAGE BALANCES/NET INTEREST INCOME/RATES

	Daily Average Balances
	2007									2006
	Third			Second			First			Fourth			Third
(Dollar in Millions)	Quarter			Quarter			Quarter			Quarter			Quarter
Assets
Earning Assets:
Loans(a):
Commercial	$	28,695		$	28,055		$	27,042		$	26,360		$	26,062
Commercial leases		4,235			4,061			3,981			3,781			3,532
Commercial construction		8,225			7,854			7,611			6,943			6,510
Commercial real estate		13,933			13,145			13,150			12,167			12,177
Residential real estate		36,616			33,862			32,235			35,337			37,605
Home equity lines of credit		17,717			16,883			17,078			17,711			18,610
Credit card and other unsecured lines of credit		3,356			3,099			3,387			2,888			2,654
Other consumer		4,305			5,345			5,483			5,362			5,319
Total loans		117,082			112,304			109,967			110,549			112,469
Securities available for sale, at cost:
Taxable		7,447			6,734			7,257			7,313			7,351
Tax-exempt		388			409			447			493			523
Total securities available for sale		7,835			7,143			7,704			7,806			7,874
Federal funds sold, security resale agreements and other investments		3,332			2,897			3,872			3,133			2,783
Total earning assets/total interest income/rates		128,249			122,344			121,543			121,488			123,126
Allowance for loan losses		(1,142	)		(1,107	)		(1,154	)		(941	)		(988	)
Fair value depreciation of securities available for sale		(73	)		(34	)		(11	)		(4	)		(120	)
Nonearning assets		18,061			17,384			17,432			16,350			16,416
Total assets	$	145,095		$	138,587		$	137,810		$	136,893		$	138,434
Liabilities and stockholders’ equity
Interest bearing liabilities:
NOW and money market accounts	$	35,099		$	33,675		$	32,582		$	29,538		$	28,810
Savings accounts		2,457			2,345			2,433			1,834			1,903
Consumer time deposits		27,238			25,069			24,476			22,650			21,966
Other deposits		3,409			3,383			3,923			4,471			5,210
Foreign deposits		8,609			8,677			7,602			9,334			8,878
Federal funds borrowed		1,984			2,508			1,237			3,675			3,286
Security repurchase agreements		4,192			4,058			3,835			3,614			3,590
Borrowed funds		2,593			2,867			1,240			1,937			1,925
Long-term debt		26,306			23,111			25,164			25,886			29,432
Total interest bearing liabilities/ total interest expense/rates		111,887			105,693			102,492			102,939			105,000
Noninterest bearing deposits		16,690			16,875			16,831			16,695			16,740
Accrued expenses and other liabilities		3,882			3,788			4,089			3,871			4,007
Total liabilities		132,459			126,356			123,412			123,505			125,747
Total stockholders’ equity		12,636			12,231			14,398			13,388			12,687
Total liabilities and stockholders’ equity	$	145,095		$	138,587		$	137,810		$	136,893		$	138,434
Tax-equivalent net interest income
Interest spread
Contribution of noninterest bearing sources of funds
Net interest margin

^(a) Includes loans held for sale or securitization

81

	Quarterly Interest
	2007						2006
	Third		Second		First		Fourth		Third
(Dollars in Millions)	Quarter		Quarter		Quarter		Quarter		Quarter
Assets
Earning Assets:
Loans(a):
Commercial	$	552	$	534	$	513	$	516	$	515
Commercial leases		72		69		69		61		57
Commercial construction		161		154		140		138		131
Commercial real estate		251		236		237		229		224
Residential real estate		654		620		576		649		692
Home equity lines of credit		343		332		336		349		363
Credit card and other unsecured lines of credit		96		86		96		81		75
Other consumer		78		88		94		89		90
Total loans		2,207		2,119		2,061		2,112		2,147
Securities available for sale, at cost:
Taxable		99		87		97		101		99
Tax-exempt		6		8		8		8		9
Total securities available for sale		105		95		105		109		108
Federal funds sold, security resale agreements and other investments		48		41		52		49		43
Total earning assets/total interest income/rates	$	2,360	$	2,255	$	2,218	$	2,270	$	2,298
Allowance for loan losses
Fair value appreciation of securities available for sale
Nonearning assets
Total assets
Liabilities and stockholders’ equity
Interest bearing liabilities:
NOW and money market accounts	$	286	$	265	$	249	$	221	$	211
Savings accounts		8		8		8		2		3
Consumer time deposits		337		302		287		265		245
Other deposits		46		45		51		60		68
Foreign deposits		107		108		91		115		112
Federal funds borrowed		27		33		16		50		44
Security repurchase agreements		46		45		41		40		38
Borrowed funds		34		36		16		25		23
Long-term debt		367		317		341		359		404
Total interest bearing liabilities/ total interest expense/rates	$	1,258	$	1,159	$	1,100	$	1,137	$	1,148
Noninterest bearing deposits Accrued expenses and other liabilities
Total liabilities
Total stockholders’ equity
Total liabilities and stockholders’ equity
Tax-equivalent net interest income	$	1,102	$	1,096	$	1,118	$	1,133	$	1,150
Interest spread
Contribution of noninterest bearing sources of funds
Net interest margin

^(a) Includes loans held for sale or securitization

82

	Average Annualized Rate
	2007									2006
	Third			Second			First			Fourth			Third
	Quarter			Quarter			Quarter			Quarter			Quarter
Assets
Earning Assets:
Loans(a):
Commercial		7.63	%		7.63	%		7.70	%		7.77	%		7.82	%
Commercial leases		6.82			6.82			6.94			6.47			6.50
Commercial construction		7.74			7.86			7.47			7.88			8.00
Commercial real estate		7.15			7.19			7.31			7.44			7.31
Residential real estate		7.13			7.32			7.17			7.34			7.35
Home equity lines of credit		7.74			7.86			7.87			7.87			7.82
Credit card and other unsecured lines of credit		11.34			11.13			11.47			11.12			11.24
Other consumer		7.18			6.64			6.91			6.56			6.70
Total loans		7.50			7.56			7.55			7.61			7.61
Securities available for sale, at cost:
Taxable		5.29			5.16			5.39			5.53			5.37
Tax-exempt		6.78			7.77			7.03			7.03			6.98
Total securities available for sale		5.37			5.31			5.48			5.62			5.48
Federal funds sold, security resale agreements and other investments		5.70			5.75			5.41			6.20			6.00
Total earning assets/total interest income/rates		7.33	%		7.38	%		7.36	%		7.44	%		7.43	%
Allowance for loan losses
Fair value appreciation of securities available for sale
Nonearning assets
Total assets
Liabilities and stockholders’ equity
Interest bearing liabilities:
NOW and money market accounts		3.23	%		3.16	%		3.09	%		2.97	%		2.89	%
Savings accounts		1.26			1.36			1.34			.65			.64
Consumer time deposits		4.91			4.83			4.76			4.65			4.43
Other deposits		5.36			5.26			5.31			5.30			5.19
Foreign deposits		4.92			5.01			4.84			4.86			5.00
Federal funds borrowed		5.24			5.31			5.32			5.31			5.33
Security repurchase agreements		4.37			4.38			4.35			4.33			4.25
Borrowed funds		5.15			5.04			5.30			5.14			4.82
Long-term debt		5.57			5.51			5.47			5.52			5.45
Total interest bearing liabilities/ total interest expense/rates		4.46	%		4.40	%		4.35	%		4.39	%		4.34	%
Noninterest bearing deposits
Accrued expenses and other liabilities
Total liabilities
Total stockholders’ equity
Total liabilities and stockholders’ equity
Tax-equivalent net interest income
Interest spread		2.87	%		2.98	%		3.01	%		3.05	%		3.09	%
Contribution of noninterest bearing sources of funds		.56			.61			.68			.68			.64
Net interest margin		3.43	%		3.59	%		3.69	%		3.73	%		3.73	%

^(a) Includes loans held for sale or securitization

83

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The disclosures contained in the Market Risk Management section of the Management Discussion and Analysis of Financial Condition and Results of Operations on pages 71-72 of this report are incorporated herein by reference.

ITEM 4. CONTROLS AND PROCEDURES

National City management is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. As of September 30, 2007, an evaluation was performed under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures. Based on that evaluation, management concluded that disclosure controls and procedures as of September 30, 2007, were effective in ensuring material information required to be disclosed in this Quarterly Report on Form 10-Q was recorded, processed, summarized, and reported on a timely basis. Additionally, there were no changes in the Corporation’s internal control over financial reporting that occurred during the quarter ended September 30, 2007 that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

National City and its subsidiaries are 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. For additional information on litigation, contingent liabilities, and guarantees, refer to Note 21 to the Consolidated Financial Statements.

On October 11, 2006, Allegiant Asset Management Company (Allegiant), a registered investment adviser and an indirect subsidiary of National City Corporation, was notified that the Pacific Regional Office of the Securities and Exchange Commission (SEC) was conducting an examination concerning marketing arrangements Allegiant may have with entities that provide administrative services to the Allegiant Funds. The Corporation and Allegiant are cooperating fully with the SEC. Allegiant submitted a written response to the SEC’s inquiries on January 12, 2007 and subsequently provided follow-up written responses. On November 9, 2007, the Corporation was notified by the SEC that they have completed their investigation of this matter.

On August 23, 2005, the Office of Inspector General issued its final audit concerning late submitted requests to the Department of Housing and Urban Development for FHA insurance made between May 1, 2002 and April 30, 2004 by National City Mortgage Co., a subsidiary of National City Bank. One of the recommendations contained in the final audit was for a determination to be made as to the legal sufficiency of possible remedies under the Program Fraud Civil Remedies Act. In late 2006, the Department of Housing and Urban Development referred the matter to the Department of Justice’s Civil Division to determine if possible civil claims exist under the Program Fraud Civil Remedies Act and the False Claims Act. The Company is cooperating with the Department of Justice in its civil claims investigation. The nature and amount of any liabilities that might arise from this investigation are not determinable at this time.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors as previously disclosed in the Corporation’s 2006 10-K except for the following addition:

Disruptions in the secondary residential mortgage loan markets and in the real estate markets as well as interest rate resets could adversely affect National City.

Recent significant disruptions in the secondary market for residential mortgage loans have limited the market for and liquidity of most mortgage loans other than conforming Fannie Mae and Freddie Mac loans. The effects of recent mortgage market challenges, combined with the ongoing correction in residential real estate market prices, could result in further price reductions in single family home values, adversely affecting the value of collateral securing mortgage loans that we hold, as well as mortgage loan originations and gains on sale of mortgage loans. In addition, future rate resets on adjustable rate loans could drive increases in delinquencies and ultimately losses on these loans beyond that which has been provided for in the allowance for possible loan losses. In the event the allowance for loan losses is insufficient to cover such losses, National City’s earnings and capital could be adversely affected.

84

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The share repurchase disclosures contained in the Financial Condition section of the Management Discussion and Analysis of Financial Condition and Results of Operations on page 66 of this report are incorporated herein by reference.

ITEM 6. EXHIBITS

Exhibits

Any exhibits within exhibit numbers 3, 4, 10 or 14 documented in this index as being filed with the United States Securities and Exchange Commission (SEC) as part of the September 30, 2007 Form 10-Q have been filed separately with the SEC and are available on request from the Secretary of the Corporation at the principal executive offices or through the SEC at www.sec.gov.

Exhibit Index

Exhibit
Number	Exhibit Description
3.1	Amended and Restated Certificate of Incorporation of National City Corporation dated April 13, 1999 (filed as Exhibit 3.2 to Registrant’s Quarterly Report on Form 10-Q for the quarter and nine months ended September 30, 2000, and incorporated herein by reference).
3.2	National City Corporation First Restatement of By-laws adopted April 27, 1987 (as Amended through October 22, 2007) (filed as Exhibit 3(ii) to Registrant’s Current Report on Form 8-K filed on October 26, 2007, and incorporated herein by reference).
3.3	Certificate of Designation Rights and Preferences of the Series D Non-voting Convertible Preferred Stock Without Par Value of National City Corporation (filed as Exhibit 3.3 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, and incorporated herein by reference).
4.1	Amended and restated Certificate of Incorporation of National City Corporation dated April 13, 1999 (filed as Exhibit 3.2 to Registrant’s Quarterly Report on Form 10-Q for the quarter and nine months ended September 30, 2000, and incorporated herein by reference) related to capital stock of National City Corporation.
4.2	National City Corporation First Restatement of By-laws adopted April 27, 1987 (as Amended through October 22, 2007) (filed as Exhibit 3(ii) to Registrant’s Current Report on Form 8-K filed on October 26, 2007, and incorporated herein by reference) related to stockholder rights.
4.3	Certificate of Designation Rights and Preferences of the Series D Non-voting Convertible Preferred Stock Without Par Value of National City Corporation (filed as Exhibit 3.3 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, and incorporated herein by reference).
4.4	National City agrees to furnish upon request to the Commission a copy of each instrument defining the rights of holders of Senior and Subordinated debt of National City.
10.1	National City Corporation’s 1993 Stock Option Plan (filed as Exhibit 10.5 to Registration Statement No. 33-49823 and incorporated herein by reference).
10.2	National City Corporation Plan for Deferred Payment of Directors’ Fees, as Amended (filed as Exhibit 10.5 to Registration Statement No. 2-914334 and incorporated herein by reference).
10.3	National City Corporation Supplemental Executive Retirement Plan, as Amended and Restated effective January 1, 2005 (filed as Exhibit 10.4 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, and incorporated herein by reference).
10.4	National City Corporation Amended and Second Restated 1991 Restricted Stock Plan (filed as Exhibit 10.9 to Registration Statement No. 33-49823 and incorporated herein by reference).
10.5	Form of grant made under National City Corporation 1991 Restricted Stock Plan in connection with National City Corporation Supplemental Executive Retirement Plan as Amended (filed as Exhibit 10.7 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, and incorporated herein by reference).

85

Exhibit
Number	Exhibit Description
10.6	Form of contracts with Jon L. Gorney, Jeffrey D. Kelly, David L. Zoeller, Thomas A. Richlovsky, James P. Gulick, James R. Bell III, Peter E. Raskind, Philip L. Rice, Timothy J. Lathe, Shelley J. Seifert and Daniel J. Frate (filed as Exhibit 10.29 to Registrant’s Form S-4 Registration Statement No. 333-45609 dated February 4, 1998, and incorporated herein by reference).
10.7	Split Dollar Insurance Agreement effective January 1, 1994, between National City Corporation and certain key employees (filed as Exhibit 10.11 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, and incorporated herein by reference).
10.8	National City Corporation 1997 Stock Option Plan as Amended and Restated effective October 22, 2001 (filed as Exhibit 10.17 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001, and incorporated herein by reference).
10.9	National City Corporation 1997 Restricted Stock Plan as Amended and Restated effective October 31, 2001 (filed as Exhibit 10.18 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001, and incorporated herein by reference).
10.10	National City Corporation Retention Plan for Executive Officers, Amended and Restated effective January 1, 2005 (filed as Exhibit 10.17 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005, and incorporated herein by reference).
10.11	Integra Financial Corporation Management Incentive Plan (filed as Exhibit 4.4 to Registrant’s Post-Effective Amendment No. 1 on Form S-8 to Form S-4 Registration Statement No. 333-01697, dated April 30, 1996, and incorporated herein by reference).
10.12	National City Corporation Management Incentive Plan for Senior Officers, as Amended and Restated effective January 1, 2005 (filed as Exhibit 10.12 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, and incorporated herein by reference).
10.13	National City Corporation Supplemental Cash Balance Pension Plan, as Amended and Restated effective January 1, 2005 (filed as Exhibit 10.14 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, and incorporated herein by reference).
10.14	The National City Corporation 2001 Stock Option Plan as Amended and Restated effective October 22, 2001 (filed as Exhibit 10.27 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001, and incorporated herein by reference).
10.15	National City Corporation 2002 Restricted Stock Plan (filed as Exhibit A to Registrant’s Proxy Statement dated March 8, 2002, and incorporated herein by reference).
10.16	The National City Corporation Long-Term Deferred Share Compensation Plan effective April 22, 2002 (filed as Exhibit 10.33 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, and incorporated herein by reference).
10.17	The National City Corporation Deferred Compensation Plan, as Amended and Restated effective January 1, 2005 (filed as Exhibit 10.18 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, and incorporated herein by reference).
10.18	Form of Agreement Not To Compete with David A. Daberko and William E. MacDonald III (filed as Exhibit 10.35 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, and incorporated herein by reference).
10.19	Summary of Non-employee Directors’ Compensation (filed as Exhibit 99.3 to Registrant’s Current Report on Form 8-K filed on July 25, 2007, and incorporated herein by reference).
10.20	The National City Corporation Executive Savings Plan, as Amended and Restated effective January 1, 2003 (filed as Exhibit 10.32 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002, and incorporated herein by reference).
10.21	The National City Corporation Savings and Investment Plan, as Amended and Restated effective January 1, 2001 (filed as Exhibit 10.33 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002, and incorporated herein by reference).
10.22	Amendment No. 1 to the National City Savings and Investment Plan, as Amended and Restated effective January 1, 2001 (filed as Exhibit 10.35 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002, and incorporated herein by reference).
10.23	Amendment No. 1 to the Split Dollar Insurance Agreement effective January 1, 2003 (filed as Exhibit 10.37 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002, and incorporated herein by reference).

86

Exhibit
Number	Exhibit Description
10.24	Credit Agreement dated as of April 12, 2001, by and between National City and the banks named therein (filed as Exhibit 4.2 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001, and incorporated herein by reference) and the Assumption Agreement dated June 11, 2002 (filed as Exhibit 4.2 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, and incorporated herein by reference).
10.25	Agreement to Terminate Change in Control Benefits between National City Corporation and David A. Daberko (filed as exhibit 10.25 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006, and incorporated herein by reference).
10.26	The National City Corporation Long-Term Cash and Equity Incentive Plan Effective January 1, 2005 (filed as Exhibit 10.26 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, and incorporated herein by reference).
10.27	National City Executive Long-Term Disability Plan (filed as Exhibit 10.41 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, and incorporated herein by reference).
10.28	Amendment No. 2 to the National City Savings and Investment Plan, as Amended and Restated effective January 1, 2001 (filed as Exhibit 10.42 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).
10.29	Amendment No. 3 to the National City Savings and Investment Plan, as Amended and Restated effective January 1, 2001 (filed as Exhibit 10.1 to the Registrant’s Post-Effective Amendment No. 3 to Form S-8 Registration Statement No. 333-61712 dated April 19, 2004, and incorporated herein by reference).
10.30	Amendment No. 4 to the National City Savings and Investment Plan, as Amended and Restated effective January 1, 2001 (filed as Exhibit 10.3 to the Registrant’s Post-Effective Amendment No. 3 to Form S-8 Registration Statement No. 333-61712 dated April 19, 2004, and incorporated herein by reference).
10.31	The National City Corporation 2004 Deferred Compensation Plan, as Amended and Restated effective January 1, 2005 (filed as Exhibit 10.35 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, and incorporated herein by reference).
10.32	Amendment No. 5 to the National City Savings and Investment Plan, as Amended and Restated effective January 1, 2001 (filed as Exhibit 10.61 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, and incorporated herein by reference).
10.33	Amendment No. 6 to the National City Savings and Investment Plan, as Amended and Restated effective January 1, 2001 (filed as Exhibit 10.62 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005, and incorporated herein by reference).
10.34	Appendices AO, AP, AQ, and AR to the National City Savings and Investment Plan, as Amended and Restated effective January 1, 2001 (filed as Exhibit 10.63 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, and incorporated herein by reference).
10.35	Form of Restricted Stock Award Agreement (filed as Exhibit 10.64 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, and incorporated herein by reference).
10.36	Form of Restricted Stock Award Agreement used in connection with National City Corporation Management Incentive Plan for Senior Officers (filed as Exhibit 10.65 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, and incorporated herein by reference).
10.37	Form of Incentive Stock Option Award Agreement (filed as Exhibit 10.66 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, and incorporated herein by reference).
10.38	Form of Non-qualified Stock Option Award Agreement (filed as Exhibit 10.41 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, and incorporated herein by reference).
10.39	Form of contracts with Robert B. Crowl, Jeffrey J. Tengel and Jon N. Couture (filed as Exhibit 10.68 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, and incorporated herein by reference).
10.40	Appendices AS, AT, AU, AV, and AW to the National City Savings and Investment Plan, as Amended and Restated effective January 1, 2001 (filed as Exhibit 10.70 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005, and incorporated herein by reference).
10.41	Form of Restricted Stock Unit Award Agreement (filed as Exhibit 10.45 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, and incorporated herein by reference).
10.42	National City Corporation Management Severance Plan, as Amended and Restated effective January 1, 2005 (filed as Exhibit 10.46 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, and incorporated herein by reference).

87

Exhibit
Number	Exhibit Description
10.43	Form of Amendment to Agreement Not to Compete with David A. Daberko and William E. MacDonald III (filed as Exhibit 10.48 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, and incorporated herein by reference).
10.44	Form of Non-Elective Deferred Compensation Award Statement (filed as Exhibit 10.48 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, and incorporated herein by reference).
10.45	Form of Non-Elective Deferred Compensation Award Statement (filed as exhibit 99.2 to Registrant’s Current Report on Form 8-K filed on May 1, 2006, and incorporated herein by reference).
10.46	Deferred Compensation Plan for Daniel J. Frate (filed as exhibit 10.51 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, and incorporated herein by reference).
10.47	Release and Separation Agreement between National City Corporation and John D. Gellhausen (filed as exhibit 10.51 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, and incorporated herein by reference).
10.48	Form of Restricted Stock Unit Agreement (Retention/Non-compete) between National City Corporation and each of Jeffrey D. Kelly and Peter E. Raskind (filed as exhibit 10.52 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, and incorporated herein by reference).
10.49	Form of Restricted Stock Unit Agreement (Performance) between National City Corporation and each of Jeffrey D. Kelly , Peter E. Raskind and Daniel J. Frate (filed as exhibit 10.53 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, and incorporated herein by reference).
10.50	Form of Restricted Stock Award Agreement (filed as exhibit 99.1 to Registrant’s Current Report on Form 8-K filed on October 23, 2006, and incorporated herein by reference).
10.51	Form of Restricted Stock Unit Award Agreement (filed as exhibit 99.2 to Registrant’s Current Report on Form 8-K filed on October 23, 2006, and incorporated herein by reference).
10.52	Form of Restricted Stock Unit Award Agreement (filed as exhibit 99.3 to Registrant’s Current Report on Form 8-K filed on October 23, 2006, and incorporated herein by reference).
10.53	Aircraft Time Sharing Agreement between National City Credit Corporation and David A. Daberko (filed as exhibit 99.1 to Registrant’s Current Report on Form 8-K filed on October 23, 2006, and incorporated herein by reference).
10.54	Aircraft Time Sharing Agreement between National City Credit Corporation and David A. Daberko (filed as exhibit 99.2 to Registrant’s Current Report on Form 8-K filed on October 23, 2006, and incorporated herein by reference).
10.55	Severance Agreement Termination between National City Corporation and David A. Daberko (filed as exhibit 99.4 to Registrant’s Current Report on Form 8-K filed on October 23, 2006, and incorporated herein by reference).
10.56	Amendment to National City Corporation Amended and Second Restated 1991 Restricted Stock Plan (filed as exhibit 10.61 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, and incorporated herein by reference).
10.57	Amendment to National City Corporation Amended and Restated 1993 Stock Option Plan (filed as exhibit 10.62 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, and incorporated herein by reference).
10.58	Amendment to National City Corporation 1997 Restricted Stock Plan, Amended and Restated Effective October 31, 2001 (filed as exhibit 10.63 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, and incorporated herein by reference).
10.59	Amendment to National City Corporation 1997 Stock Option Plan as Amended and Restated Effective October 22, 2001 (filed as exhibit 10.64 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, and incorporated herein by reference).
10.60	Amendment to National City Corporation 2001 Stock Option Plan as Amended and Restated Effective October 22, 2001 (filed as exhibit 10.65 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, and incorporated herein by reference).
10.61	Amendment to National City Corporation 2002 Restricted Stock Plan (filed as exhibit 10.66 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, and incorporated herein by reference).

88

Exhibit
Number	Exhibit Description
10.62	National City Corporation CEO Post-Retirement Office Plan (filed as Exhibit 99.2 to Registrant’s Current Report on Form 8-K filed on July 25, 2007, and incorporated herein by reference).
10.63	2007 Executive Bonus Plan (filed as Exhibit 99 to Registrant’s Current Report on Form 8-K filed on October 26, 2007, and incorporated herein by reference).
11.0	Statement re computation of per share earnings incorporated by reference to Note 19 of the Notes to the Consolidated Financial Statements of this report.
12.1	Computation of Ratio of Earnings to Fixed Charges.
14.1	Code of Ethics (filed as Exhibit 14.1 to Registrant’s Current Report on Form 8-K filed on April 26, 2005, and incorporated herein by reference).
14.2	Code of Ethics for Senior Financial Officers (filed as Exhibit 14.2 to Registrant’s Current Report on Form 8-K filed on April 26, 2005, and incorporated herein by reference).
31.1	Chief Executive Officer Sarbanes-Oxley Act 302 Certification dated November 13, 2007 for National City Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.
31.2	Chief Financial Officer Sarbanes-Oxley Act 302 Certification dated November 13, 2007 for National City Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.
32.1	Chief Executive Officer Sarbanes-Oxley Act 906 Certification dated November 13, 2007 for National City Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.
32.2	Chief Financial Officer Sarbanes-Oxley Act 906 Certification dated November 13, 2007 for National City Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.

89

CORPORATE INFORMATION

Corporate Headquarters

National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3484
1-216-222-2000
NationalCity.com

Transfer Agent and Registrar

National City Bank
Corporate Trust Operations
Department 5352
P.O. Box 92301
Cleveland, Ohio 44193-0900
Web site: nationalcitystocktransfer.com
E-mail: shareholder.inquiries@nationalcity.com

Stockholders of record may access their accounts via the Internet to review account holdings and transaction history through National City’s StockAccess at ncstockaccess.com. For log-in assistance or other inquiries, call 1-800-622-6757.

Investor Information

Jill Hennessey
Investor Relations
Department 2229
P.O. Box 5756
Cleveland, Ohio 44101-0756
1-800-622-4204
E-mail: investor.relations@nationalcity.com

Web Site Access to United States Securities and Exchange Commission Filings

All reports filed electronically by National City Corporation with the United States Securities and Exchange Commission (SEC), including the Annual Report on Form 10-K, quarterly reports on Form 10-Q, and current event reports on Form 8-K, as well as any amendments to those reports, are accessible at no cost on the Corporation’s Web site at NationalCity.com. These filings are also accessible on the SEC’s Web site at www.sec.gov.

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.

Trust Preferred Securities Listing

National City sponsors three capital trusts which have issued corporation-obligated mandatorily redeemable capital securities that are traded on the New York Stock Exchange under the symbols NCCPRA, NCCPRB, NCCPRC.

Dividend Reinvestment and Stock Purchase Plan

National City Corporation offers stockholders a convenient way to increase their investment through the National City Amended and Restated Dividend Reinvestment and Stock Purchase Plan (the Plan). Under the Plan, investors can elect to acquire National City shares in the open market by reinvesting dividends and through optional cash payments. National City absorbs the fees and brokerage commissions on shares acquired through the Plan. To obtain a Plan prospectus and authorization card, please call 1-800-622-6757. The Plan prospectus is also available at NationalCity.com.

Direct Deposit of Dividends

The direct deposit program provides for free automatic deposit of quarterly dividends directly to a checking or savings account. For information regarding this program, call 1-800-622-6757.

Corporate Governance

National City’s corporate governance practices are described in the following documents, available free of charge on NationalCity.com or in print form through the Investor Relations department: Corporate Governance Guidelines, Code of Ethics, Code of Ethics for Senior Financial Officers, Audit Committee Charter, Nominating and Board of Directors Governance Committee Charter, Compensation Committee Charter, and Risk and Public Policy Committee Charter.

			Fitch		Moody’s		Standard
Debt Ratings	DBRS		Ratings		Investors Service		& Poor’s
National City Corporation				B
Commercial Paper	R-1 (mid)			F1	P	-1		A-1
Senior Debt	A (high)			A+		A1		A
Subordinated debt		A		A		A2		A-
National City Bank				B
Short-term certificates of deposit	R-1 (mid)			F1+	P	-1		A-1
Long-term certificates of deposit	AA (low)		AA-		Aa3			A+
Senior bank notes	AA (low)			A+	Aa3			A+
Subordinated bank notes	A (high)			A		A1		A

90

FORM 10-Q — SEPTEMBER 30, 2007

SIGNATURES

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 (Registrant)
Date: November 13, 2007
	/s/ PETER E. RASKIND
	Peter E. Raskind
	President and Chief Executive Officer
	/s/ JEFFREY D. KELLY
	Jeffrey D. Kelly
	Vice Chairman and Chief Financial Officer

91

National City Center
1900 east Ninth Street
Clevelend, Ohio 44114-3484