TABLE OF CONTENTS

EX-10.17 National City Corporation Rentention Plan

EX-10.62 Amendment Number 6

EX-10.70 Appendixes AS, AT, AU, AV, and AW

EX-12.1 Computation of Ratio of Earnings to Fixed Charges

EX-21.1 Subsidiaries of Registrant

EX-23.1 Consent of E & Y

EX-24.1 Power of Attorney

EX-31.1 302 Certification CEO

EX-31.2 302 Certification CFO

EX-32.1 906 Certification CEO

EX-32.2 906 Certification CFO

FINANCIAL HIGHLIGHTS
(Dollars in Millions, Except Per Share Amounts)

For the Year	2005			2004*			2003
Revenue
Tax-Equivalent Net Interest Income	$	4,727		$	4,460		$	4,364
Noninterest Income		3,304			4,440			3,593
Total Revenue	$	8,031		$	8,900		$	7,957
Net Income	$	1,985		$	2,780		$	2,117
Net Income Per Common Share
Basic	$	3.13		$	4.37		$	3.46
Diluted		3.09			4.31			3.43
Dividends Paid Per Common Share		1.44			1.34			1.25
Average Shares — Basic		633,431,660			635,450,188			611,205,682
Average Shares — Diluted		641,600,969			645,510,514			616,410,043
At Year End
Assets	$	142,397		$	139,414		$	114,102
Portfolio Loans		106,039			100,271			79,344
Earning Assets		125,990			123,219			102,571
Core Deposits		68,408			67,297			58,922
Stockholders’ Equity		12,613			12,804			9,329
Book Value Per Common Share		20.51			19.80			15.39
Market Value Per Common Share		33.57			37.55			33.94
Equity to Assets Ratio		8.86	%		9.18	%		8.18	%
Common Shares Outstanding		615,047,663			646,749,650			605,996,120
Common Stockholders of Record		62,966			65,943			61,370
Full-Time Equivalent Employees		34,270			35,230			33,331

* 2004 results include a pre-tax gain of $714 million, equivalent to $.74 per diluted share after-tax, from the sale of National Processing, Inc.

ABOUT US

National City Corporation (NYSE: NCC), headquartered in Cleveland, Ohio, is one of the nation’s largest financial holding companies. We operate through an extensive banking network primarily in Ohio, Illinois, Indiana, Kentucky, Michigan, Missouri and Pennsylvania, and serve customers in selected markets nationally. Our core businesses include commercial and retail banking, mortgage financing and servicing, consumer finance and asset management.

CONTENTS

1	Financial Highlights
2	Chairman’s Letter
4	2005 In Focus
8	Board of Directors and Officers
9	Financial Review Consolidated Financial Statements and Notes Form 10-K Certifications of Chief Executive Officer and Chief Financial Officer

TO OUR STOCKHOLDERS:

Think it. Act it. Own it. Do it. On the surface, these phrases are quite simple. However, the implications they have for the future of our company are far reaching.

They define a cultural shift under way at National City — one in which we’re embracing the challenge of taking our historically good performance to the best-in-class levels that our customers and stockholders expect and deserve. Flawless execution of sustainable business strategies will drive our success. We will focus on capitalizing on growth opportunities that help offset the cyclical economic challenges inherent in our industry and our markets.

2005 was a positive year for National City, although earnings per share declined from the very high levels achieved in 2003 and 2004. As anticipated, our mortgage businesses were negatively affected by higher interest rates, which brought an end to the highly profitable refinancing boom of the past few years. However, our core banking businesses performed well. And we began implementation of our Best In Class initiative, which is designed to enhance long-term revenue growth and to achieve operational and organizational efficiencies.

The retail banking unit has begun to show the kind of growth we expected following sizeable investments in technology, people and delivery channels made in recent years. Our strategy is focused on achieving strong and steady growth in the number of households that choose National City as their bank. We posted an increase of 3.4% in this important metric during 2005, well above the growth rate for the market as a whole. Each household offers the opportunity to expand and deepen a customer relationship. Building on this customer base, we also saw a 3.2% increase in the number of products purchased per household. Based upon the high quality of our products, delivery channels and front-line staff, we see ample opportunity for growth in 2006 and beyond.

A broad, easily accessible branch system is a cornerstone of our retail and branding philosophy. During 2005, we added 29 new full-service branches, primarily in our newer markets of Cincinnati, Chicago and St. Louis. In December, we announced plans to acquire eight more branches in St. Louis. In Cincinnati, the successful integration of the former Provident Financial Corporation has enabled us to become a competitive force in Cincinnati and the northern Kentucky region. Approximately 40 new branch locations are planned in these and other locations around the footprint in 2006.

Our Wholesale Banking unit also delivered a strong performance, successfully carrying out a number of growth initiatives in both product and geography. While loan spreads narrowed somewhat, revenue growth was broad based. Credit quality remains excellent, and we continue to add new customer relationships across the franchise.

Solid activity in commercial leasing also contributed to Wholesale Banking’s growth. Total lease assets increased 43% during the year, with two small acquisitions contributing to the rise. Asset based lending delivered impressive results as well, with lending commitments rising 50%. Commercial real estate, one of the largest businesses within Wholesale Banking, achieved an 8.4% annual growth rate in loans. During the year, we further expanded the scope of these operations. In addition to opening new offices in Boston and Washington, D.C., we began underwriting mezzanine debt for certain developers and established real estate syndication capabilities to lead multibank transactions.

Our mortgage related businesses had mixed results for the year. The National Home Equity unit continued its robust growth. Originations rose 28% to $15.8 billion. Profits jumped 73%. This unit originates prime quality, variable and fixed rate home equity loans nationwide. Credit quality has been, and is expected to remain, outstanding. Demand should continue to be strong for this product in 2006.

National City Mortgage, our prime mortgage unit, saw its originations decline 10% as higher rates sharply curtailed the demand for refinancings. After-tax operating profits fell to $100 million from $201 million, and after-tax hedging gains of $184 million were down somewhat from 2004. Our hedging results have been among the best in the industry for several years in a row, with 2005 being perhaps the best relative performance of all. It is highly likely that mortgage originations will decline further in 2006 and that opportunities for hedging gains will be substantially reduced.

First Franklin, our non-prime mortgage company, had roughly flat originations. This unit focuses on home purchase activity, which remained fairly robust throughout the year. Unfortunately, margins came under increasing pressure as the year progressed, and by the fourth quarter, had fallen to the lowest level we have seen since we acquired this business in 1999. Net income for the unit declined 28% to $397 million.

As we enter 2006, it is clear that the mortgage businesses will be under margin and volume pressures. Accordingly, we are taking a number of aggressive steps to reduce costs and improve processes. We believe that mortgages are an essential core banking product, providing substantial opportunities for cross selling other products

2 ANNUAL REPORT 2005

and services. We plan to be well positioned when conditions in the mortgage markets improve, as they inevitably will.

Current financial performance aside, the most significant development of 2005 was the actual launch of Best In Class. Comprised of 33 projects, the initiative is designed to improve our financial and operating performance across the board, and foster the cultural changes required to sustain that performance. With a focus on ownership and accountability, the projects center around six major themes: enhancing sales effectiveness; deepening customer relationships; broadening our customer base; operating more effectively and efficiently; aligning the organization for success; and managing risk. Six Sigma methodology is being used in the implementation of these projects.

Best In Class will improve profits beginning in 2006. Ultimately, the initiative is projected to result in a $750 million improvement to annual pre-tax income following completion at the end of 2008. Approximately half of the benefit will be realized through incremental revenue growth and half from cost savings.

While early in the implementation phase, we’re already seeing tangible progress. For example, our strategic procurement program resulted in a $15 million pre-tax benefit in 2005 by streamlining sourcing processes across the organization. Savings are expected to increase to $60 million in 2006. A comprehensive study of management spans and layers was completed during the year, resulting in a meaningful reduction in management positions, and bringing decision making closer to customers. A project to streamline parts of the credit approval process is greatly increasing the number of Wholesale Banking loan approvals and the amount of time available for relationship managers to focus on sales.

While these are just a few examples, they signify changes occurring throughout National City, with an emphasis on organizational effectiveness and long-term performance improvement. In our company and industry, change is no longer the exception, but the rule. A disciplined and highly sophisticated approach to risk management will play a key role in our long-term success, as will the foresight to consistently capitalize on the right growth opportunities at the right time. As always, most important will be the contributions of our employees.

Best In Class performance demands customer focused, well trained and fully engaged employees who take pride and ownership in their jobs. To ensure they have the knowledge, tools and skills they need to achieve superior performance, we are investing significantly in enhanced, comprehensive training and development that meets the needs of our employees through all stages of their careers. We want a highly engaged work force, and to that end, we are dedicated to providing competitive pay, a flexible workplace, and opportunity for advancement.

We have built a solid track record of effectively deploying the capital entrusted to us by stockholders. 2005 certainly was no exception. The decline in the common stock price over the past year, while disappointing, provided attractive opportunities to repurchase shares. We did exactly that, buying back 43.5 million shares over the course of the year, while again increasing the dividend to an annual rate of $1.48 per share.

We also made the strategic decision to sell more loans originated by our National Consumer Finance business into the capital markets. Because these markets have become more efficient over the last several years, the advantage of carrying such loans on the balance sheet has narrowed or disappeared altogether. We have created a mortgage capital markets group to facilitate some of these sales and retain a portion of the fees otherwise paid to outside firms. The originate-and-sell model will free up significant capital, as will our demonstrated commitment to exit non-core businesses. In 2005, we exited the low-margin indirect auto business and have securitized that $2.2 billion portfolio.

We remain focused on deploying capital to the benefit of stockholders, and increasing the value of your investment in National City over time. Annual dividend increases and reinvestment in existing businesses are the highest priority, followed by targeted acquisitions and share repurchases.

In the following pages, we highlight other significant developments and events of 2005. We encourage you to review the entire report, as well as supplemental updates and periodic investor presentations posted on our Web site. We believe the quality, thoroughness and transparency of our financial and operating disclosures differentiate National City. And, as always, we welcome your comments and feedback.

Thank you for your continued support and investment.

David A. Daberko
Chairman and CEO

ANNUAL REPORT 2005 3

DOING WHAT’S RIGHT FOR OUR CUSTOMERS

In 2005, National City continued making banking simple for lives that aren’t. Driven by our brand promise to do what’s right for our customers, we delivered innovative and thoughtful products and services, and continued our strategic expansion in key markets. As we look to the future, we remain focused on taking our historically good performance to the Best In Class levels that our customers, communities and stockholders expect and deserve. The following pages touch on some notable 2005 accomplishments.

4 ANNUAL REPORT 2005

BECOMING BEST IN CLASS

We care about doing what’s right for our customers. It’s the National City brand promise, and we continue to deliver on it every day.

Executing that simple promise has helped us emerge as one of the nation’s leading financial services companies. It was a driving factor in the steady growth in 2005 of households served by our more than 1,200 branches. It was evident in the rollout of our Everyday Rewards credit card, which has been recognized as one of the best rewards cards in the country.

Helping drive the progress of our core banking businesses is a full suite of products and services that help make banking simple. These include innovative offerings like our Switch Service, through which one point of contact is all it takes for retail customers to transfer their checking accounts to

National City customer Lauren Wolf (R) and Small Business Banking Officer Elena Ray (L) were key contributors to the success of the Ohio Women’s Economic Development Outreach Tour.

National City celebrated its arrival in Greater Cincinnati by painting the town green – including this transit bus, making a stop at the city’s renowned Cincinnati Museum Center at Union Terminal.

National City. It also includes our comprehensive online process that enables retail and small-business customers, with one single application, to obtain multiple new accounts.

Our approach is delivering results in new and existing markets, including Cincinnati, where we’re proud to have a growing presence following the acquisition of Provident Financial. Our efforts also are driving growth for our customers. For example, through the successful Women’s Economic Development Outreach (WEDO^®) tours, we and a coalition of partners continue providing resources that help women-owned businesses tap opportunities for expansion. To help ensure they have the financial resources they need, National City has doubled its target loan fund to women business owners to $3.5 billion.

An American Red Cross volunteer colors with a young Hurricane Katrina survivor. In 2005, National City and its employees donated more than $1 million in aid to those affected by the disaster.

5   ANNUAL REPORT  2005

2 0 0 5 H I G H L I G H T S

1 . 2 0 . 0 5 National City Consumer 2 . 1 4 . 0 5 National City introduces 2 . 2 2 . 0 5 National City and the Loan Services Loss Mitigation Call            its Switch Service allowing retail            National Breast Cancer Foundation Center recognized as a “Center of            customers to easily end old banking            present $400,000 to six hospitals Excellence” by BenchmarkPortal, a            relationships and start fresh with            for education and research. prestigious distinction earned later            National City.

in 2005 by Home Loan Services and

Direct Banking call centers.

2 . 2 5 . 0 5 Together, National City 3 . 7 . 0 5 Conversion of Provident 3 . 2 8 . 0 5 National City opens and employees contribute more            Bank is complete, making National            Nashville Corporate Banking than $835,000 to aid Tsunami            City the largest bank in Ohio. office, providing Tennessee

victims in Southeast Asia. businesses greater access to a

full suite of banking solutions.

4 . 1 2 . 0 5 National City receives 5 . 1 7 . 0 5 National City celebrates

NACHA Quality Award for the 160 years of serving customers,

complete integration of paper- stockholders and the community.

based checking account and

electronic payment systems.

5 . 1 8 . 0 5 National City enhances 6 . 8 . 0 5 National City aligns

home ownership opportunities            Asset Management units under

for Latinos by offering new            the Allegiant name. Allegiant

“National Dream” product on            completes a series of strategic

MSN Latino Finanzas and in the            initiatives to enhance the asset

company’s markets. management business.

9 . 1 . 0 5 National City and its 9 . 1 . 0 5 National City launches 1 0 . 0 5 National City supports employees donate more than            a comprehensive online application            Breast Cancer Awareness Month $1 million to the American Red            allowing retail and small-business            through the launch of its Diamond Cross to support Hurricane            customers to securely apply for            Edition^® Visa^®CheckCard, local Katrina relief efforts. different products – lines of            community initiatives, and the credit, loans, even IRAs – on one “Real Men Wear Pink” campaign application at NationalCity.com. with its NFL partners.

1 1 . 1 . 0 5 National City is among 1 1 . 1 0 . 0 5 National City announces 1 2 . 2 2 . 0 5 National City the first banks to introduce a retail            receipt of Silver Award from the            announces agreement to expand Health Savings Account product for            The Brandon Hall Excellence in            in St. Louis through the acquisition individuals with high deductible            Learning Awards for outstanding            of Forbes First Financial, parent health plans. case study, “Customer Education: company of Pioneer Bank and A New Application of E-Learning.” Trust Company.

Simplify is a service mark of National City Corporation ^® .

ENGAGING OUR COMMUNITIES AND EMPLOYEES

Enlightened community engagement — whether through the arts, education, business or human services — is part of the National City heritage. Since opening our doors in 1845, we have proudly supported the communities in which we live and work.

Whether it is a team of employees volunteering with children in St. Louis to create artwork during the Children’s Arts Festival, or a $100,000 donation to the Armed Forces Relief Trust in tribute to National City employees, their families and our customers who serve in the U.S. Armed Forces, you will find community involvement at every level of the company.

For example, more than $1 million was raised through employee and corporate donations for Hurricane Katrina relief efforts of the American Red Cross. And, with the support of our customers and employees, we’ve donated more than $1 million to the National Breast Cancer Foundation through the sale of our Diamond Edition Visa products.

We have a compelling reason to support these and other causes. At National City, we believe our civic work is strategically significant to our business success. Community investment and revitalization are critical to support the social and economic health of our markets.

Embracing diversity at the inaugural National City Diversity Summit are, from left, Mike Price, CEO, Cincinnati-Northern Kentucky Market; Terri Hamilton Brown, SVP, Corporate Diversity; Alfonso Martinez, SVP, Human Resources, Sodexho USA.; and William E. MacDonald III, Vice Chairman.

To show its support for breast cancer research, prevention and education, National City illuminated its headquarters building pink throughout October, National Breast Cancer Awareness Month.

Just as critical to our success is the heart and soul of National City — our employees. Now more than ever, it is important for our employees to take ownership of their work and be accountable for their productivity. Best In Class performance demands highly capable, fully trained employees who take pride in what they do and stand behind the company. As we move toward becoming an employer of choice, we are implementing a comprehensive corporate training strategy that addresses the broad training and performance development needs of employees and leaders across our businesses.

National City is committed to be a diversity leader, creating a stronger inclusive environment that harnesses the inspired creativity and unique attributes of every employee — as well as our supplier community. To that end, we work with more than 290 women- and minority-owned business enterprises, and spend more than $52 million annually with these companies.

Our community outreach and work force development programs solidify our commitment to make a positive and real difference in the lives of our employees and the communities in which we operate, consistent with our primary objective of creating long-term value for our investors.

It’s just that simple.

BOARD            OF DIRECTORS

James S. Christopher M. David A. Jon E. Barfield            Broadhurst (1,4) Connor (2, 5) Daberko (3) (1,4) Chairman & Chairman & CEO            Chairman, President Chairman & CEO            President The            Eat’n Park S CEO The National City            Bartech Group, Hospitality Group, Sherwin-Williams Corporation            Inc. Inc. Company

Bernadine P. Healy, M.D. (2,5) S.Craig Lindner            Paul A. Orrnond Joseph T. Medical Columnist (1,4) Co-Cf O & (2,5) Chairman, Gorman (2,5) and Health Editor            Co-President            President & CEO Retired Chairman            U.S. News & World American Financial            Manor Care, TRW Inc. Report Group, Inc. Inc.

COMMITTEES:

(1) Audit

{2} Compensation

(3) Dividend

(4) Risk and Public

Policy

(5) Nominating

Robert A. Paul            Gerald L. Jerry Sue (1,3,4) Chairman & Shaheen (2,5) Croup Thornton, Ph.D. Morry Weiss CEO            President (1,3,4) President (1,3,4) Chairman Ampco-Pittsburgh            Caterpillar            Cuyahoga Community            American Greetings Corporation            Inc. College            Corporation

OFFICE OF THE CHAIRMAN

David A. Daberko	Jeffrey D. Kelly	William E. MacDonald III	Peter E. Raskind
Chairman and CEO	Vice Chairman and CFO	Vice Chairman	Vice Chairman

OFFICERS
EXECUTIVE VICE PRESIDENTS

James R. Bell III

Paul G. Clark

Daniel J. Frate

John D. Gellhausen

Paul D. Geraghty

Jon L. Gorney

Timothy J. Lathe

Ted M. Parker

Richard B. Payne, Jr.

Philip L. Rice

Shelley J. Seifert

Stephen A. Stitle

David L. Zoeller
General Counsel
and Secretary

SENIOR VICE PRESIDENTS

Paul E. Bibb, Jr.

E. Kennedy Carter, Jr.

Jon N. Couture

Robert B. Crowl
Comptroller

Richard J. DeKaser

J. Andrew Dunham

Kenneth M. Goetz

Mary H. Griffith

James P. Gulick
General Auditor

Gregory M. Jelinek

J. Michael Kearney

Clark H. Khayat

Janis E. Lyons

W. Robert Manning, Jr.

Joseph T. McCartin

Bruce A. McCrodden

Chameli Naraine

L. Andrew Pollock

Thomas A. Richlovsky
Treasurer

Karin L. Stone

Jeffrey J. Tengel

STATE CEOs

ILLINOIS

Joseph A. Gregoire

INDIANA

Stephen A. Stitle

KENTUCKY

Charles P. Denny

MICHIGAN

Ted M. Parker

MISSOURI

Shaun R. Hayes

OHIO

Philip L. Rice

PENNSYLVANIA

Todd C. Moules

8 ANNUAL REPORT 2005

FINANCIAL REVIEW

FINANCIAL REVIEW

ANNUAL REPORT 2005  9

This Annual Report contains forward-looking statements. See page 32 for further information on 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) for each of the past three years and should be read in conjunction with the accompanying consolidated financial statements and notes presented on pages 37 through 81.

Overview

The primary source of National City’s revenue is net interest income from loans and deposits, 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. The most significant market factors affecting 2005 results were the increasing interest rate environment, narrower loan spreads, and a slowdown in the mortgage industry.

Tax-equivalent net interest income in 2005 was up 6% over 2004 and 8% over 2003, reflecting strong growth in earning assets. Net interest margin was 3.74% for 2005, compared with 4.02% in 2004, and 4.08% in 2003. The lower net interest margin in 2005 reflects lower spreads on both portfolio loans and loans held for sale, due to the flattening of the yield curve and increased competition, and a lower balance of mortgages held for sale, partially offset by wider deposit spreads. Management does not expect much variability in net interest margin in the first half of 2006.

Average portfolio loans increased 18% over 2004. Strong growth was experienced in commercial, residential real estate and home equity. The Corporation sold $1.4 billion of home equity lines of credit and securitized $2.2 billion of indirect automobile loans in 2005. Management plans to sell or securitize most of its future production of home equity and nonconforming residential mortgage loans, subject to market conditions. Accordingly, portfolio loan growth is expected to slow in future periods.

Mortgage banking revenue decreased by 11% compared with 2004 due to lower gains on sales of nonconforming residential mortgage loans, lower net hedging gains on mortgage servicing rights, and lower mortgage originations. Compared with 2003, mortgage banking revenue decreased by 27% for similar reasons, with 2003 being a record year for mortgage production. A slowing housing market and overcapacity in the mortgage industry has resulted in lower mortgage production and a decline in the gain on sale recognized upon sale of these loans into the secondary markets. Management believes that the mortgage industry is cyclical and the low point of the cycle has arrived. However, it is not known when the overall mortgage environment will begin to show significant improvement.

Deposit service fees increased 10% over 2004 and 27% over 2003 which reflects good growth in personal deposit accounts, including the effects of 2004 acquisitions, and fee-generating transactions. Average core deposits grew 6% compared with the prior year reflecting an increase in consumer household relationships of 3.4%.

Noninterest expenses in 2005 included $65 million of costs and other charges related to the implementation of the Corporation’s Best In Class program for long-term performance improvement. See further discussion on page 31. Noninterest expenses in 2005 included $45 million of acquisition integration costs as described on pages 15-16.

Credit quality remained sound in 2005. Net charge-offs as a percentage of average portfolio loans were .36%, 3 basis points better than 2004 and 44 basis points better than 2003. Credit card charge-offs increased due to a record level of consumer bankruptcy filings precipitated by a change in these laws in October 2005. Improved credit quality in the commercial portfolio more than offset higher consumer losses. Management expects that commercial losses will increase in 2006 compared with the very low levels experienced in 2005.

During 2005, the Corporation initiated a plan to consolidate six of its subsidiary banks under a single national banking charter. This move, expected to be completed in July 2006, will improve operating efficiencies and facilitate customer transactions across National City’s banking footprint.

Comparisons of results to prior periods were affected by acquisitions and divestitures which occurred during 2005 and 2004. In January 2005, the Corporation completed the acquisition of Charter One Vendor Finance. In August 2005, the Corporation sold Madison Bank and Trust, a five branch bank. In November 2005, the Corporation announced the exit of its indirect retail automobile and motorsports lending business. In 2004, the Corporation completed the acquisition of three financial institutions: Allegiant Bancorp (Allegiant) in April 2004, Provident Financial Group (Provident) in July 2004, and Wayne Bancorp (Wayne) in October 2004. In addition, the Corporation sold its former subsidiary, National Processing, in October 2004, and sold its Corporate Bond Administration business in June 2004. The financial results of acquired companies are included in the consolidated financial results of the Corporation from their respective acquisition dates. The financial results of divested businesses are included up to their respective sale or exit dates.

10  ANNUAL REPORT 2005

________________________________________________________________________________

FINANCIAL REVIEW (Continued)

Consolidated Average Balance Sheets

					Daily Average Balance
(Dollars in Millions)					2005			2004			2003			2002			2001
Assets
	Earning Assets:
		Loans(a):
			Commercial		$	26,919		$	22,131		$	21,403		$	23,989		$	26,029
			Commercial construction			3,068			2,568			2,343			1,380			1,262
			Real estate – commercial			12,231			11,326			9,483			8,005			6,788
			Real estate – residential			42,684			40,889			45,972			29,615			21,796
			Home equity lines of credit(b)			21,122			14,743			9,293			7,014			5,222
			Credit card and other unsecured lines of credit			2,523			2,286			2,155			1,900			2,197
			Other consumer			7,818			7,659			8,059			11,384			12,318
				Total loans(b)		116,365			101,602			98,708			83,287			75,612
		Securities available for sale, at amortized cost:
			Taxable			7,134			7,033			6,195			7,675			7,619
			Tax-exempt			625			665			669			674			733
			Total securities available for sale			7,759			7,698			6,864			8,349			8,352
		Federal funds sold and security resale agreements, and other investments				2,100			1,621			1,326			1,333			880
				Total earning assets/total interest income/rate(b)		126,224			110,921			106,898			92,969			84,844
	Allowance for loan losses					(1,143	)		(1,101	)		(1,028	)		(951	)		(897	)
	Fair value appreciation of securities available for sale					72			150			257			255			167
	Nonearning assets					16,403			14,433			12,398			11,260			9,055
Total assets(b)					$	141,556		$	124,403		$	118,525		$	103,533		$	93,169
Liabilities and stockholders’ equity
	Interest bearing liabilities:
		NOW and money market			$	28,589		$	28,897		$	25,378		$	20,740		$	18,120
		Savings				2,361			2,583			2,423			2,561			2,713
		Consumer time deposits				18,662			14,875			13,729			15,064			15,332
		Other deposits				6,087			3,062			2,752			3,613			5,802
		Foreign deposits				8,787			8,946			7,002			6,302			4,319
		Federal funds borrowed				4,021			4,920			7,895			5,459			4,637
		Security repurchase agreements				3,317			2,918			3,013			3,327			3,887
		Borrowed funds				2,253			1,477			1,556			2,406			1,748
		Long-term debt				32,752			24,028			24,854			19,558			16,415
				Total interest bearing liabilities/total interest expense/rates		106,829			91,706			88,602			79,030			72,973
	Noninterest bearing deposits					18,257			17,763			17,203			13,685			11,622
	Accrued expenses and other liabilities(b)					3,705			3,618			3,748			2,845			1,600
Total liabilities(b)						128,791			113,087			109,553			95,560			86,195
Total stockholders’ equity						12,765			11,316			8,972			7,973			6,974
Total liabilities and stockholders’ equity(b)					$	141,556		$	124,403		$	118,525		$	103,533		$	93,169
Net interest income(b)
Interest spread(b)
Contribution of noninterest bearing sources of funds
Net interest margin(b)

^(a)  Includes both portfolio loans and loans held for sale or securitization.

^(b)  During 2005, the Corporation reclassified the amortization of certain deferred loan origination fees and costs associated with home equity lines of credit from noninterest income to interest income. The effect of this reclassification was to increase noninterest income and reduce net interest income with no effect on net income. In addition, net deferred origination costs were reclassified from other liabilities to home equity lines of credit. Prior period financial information has been updated to reflect this reclassification.

ANNUAL REPORT 2005  11

________________________________________________________________________________

					Interest										Average Rate
					2005		2004		2003		2002		2001		2005			2004			2003			2002			2001
Assets
	Earning Assets:
		Loans(a):
			Commercial		$	1,589	$	936	$	818	$	1,133	$	1,791		5.90	%		4.23	%		3.82	%		4.72	%		6.88	%
			Commercial construction			193		119		103		79		100		6.29			4.63			4.41			5.72			7.92
			Real estate – commercial			778		648		581		534		540		6.36			5.72			6.13			6.68			7.96
			Real estate – residential			2,757		2,591		2,964		2,119		1,712		6.46			6.34			6.45			7.15			7.85
			Home equity lines of credit(b)			1,194		581		355		336		390		5.65			3.94			3.81			4.79			7.46
			Credit card and other unsecured lines of credit			251		200		173		176		264		9.93			8.73			8.01			9.26			12.04
			Other consumer			493		496		569		953		1,072		6.31			6.48			7.07			8.38			8.70
				Total loans(b)		7,255		5,571		5,563		5,330		5,869		6.23			5.48			5.64			6.40			7.76
		Securities available for sale, at amortized cost:
			Taxable			352		345		322		483		454		4.93			4.90			5.19			6.29			5.96
			Tax-exempt			45		49		51		55		59		7.27			7.36			7.68			8.15			8.13
			Total securities available for sale			397		394		373		538		513		5.12			5.11			5.43			6.44			6.15
		Federal funds sold and security resale agreements, and other investments				111		88		58		63		59		5.28			5.46			4.35			4.72			6.66
				Total earning assets/total interest income/rate(b)	$	7,763	$	6,053	$	5,994	$	5,931	$	6,441		6.15	%		5.46	%		5.61	%		6.38	%		7.59	%
	Allowance for loan losses
	Fair value appreciation of securities available for sale
	Nonearning assets
Total assets(b)
Liabilities and stockholders’ equity
	Interest bearing liabilities:
		NOW and money market			$	488	$	252	$	257	$	301	$	503		1.71	%		.87	%		1.01	%		1.45	%		2.78	%
		Savings				10		9		11		21		36		.44			.35			.45			.82			1.33
		Consumer time deposits				642		467		506		646		843		3.44			3.14			3.69			4.28			5.50
		Other deposits				203		50		34		67		244		3.33			1.64			1.23			1.84			4.20
		Foreign deposits				261		118		84		114		152		2.97			1.32			1.20			1.81			3.53
		Federal funds borrowed				134		71		114		116		186		3.34			1.45			1.44			2.12			4.02
		Security repurchase agreements				76		23		19		35		111		2.28			.78			.63			1.04			2.86
		Borrowed funds				68		15		18		37		64		3.01			1.03			1.20			1.55			3.66
		Long-term debt				1,154		588		587		573		837		3.52			2.45			2.36			2.94			5.10
				Total interest bearing liabilities/total interest expense/rates	$	3,036	$	1,593	$	1,630	$	1,910	$	2,976		2.84	%		1.74	%		1.84	%		2.42	%		4.08	%
	Noninterest bearing deposits
	Accrued expenses and other liabilities(b)
Total liabilities(b)
Total stockholders’ equity
Total liabilities and stockholders’ equity(b)
Net interest income(b)					$	4,727	$	4,460	$	4,364	$	4,021	$	3,465
Interest spread(b)																3.31	%		3.72	%		3.77	%		3.96	%		3.51	%
Contribution of noninterest bearing sources of funds																.43			.30			.31			.37			.57
Net interest margin(b)																3.74	%		4.02	%		4.08	%		4.33	%		4.08	%

12  ANNUAL REPORT 2005

________________________________________________________________________________

FINANCIAL REVIEW (Continued)

Net Interest Income

Net interest income is the difference between interest income on earning assets, such as loans and securities, and the interest expense on liabilities used to fund those assets, including interest bearing deposits and other borrowings. The amount of net interest income is affected by both changes in the level of interest rates and the amount and composition of earning assets and interest bearing liabilities. Changes in net interest income are most often measured through two statistics – interest spread and net interest margin. The difference between the yields on earning assets and the rates paid on interest bearing liabilities represents the interest spread. The net interest margin is expressed as the percentage of net interest income to average earning assets. Because noninterest bearing sources of funds, or free funding, principally demand deposits and stockholders’ equity, also support earning assets, the net interest margin exceeds the interest spread.

To compare the tax-exempt asset yields to taxable yields, amounts are adjusted to the pretax-equivalent amounts based on the marginal corporate Federal tax rate of 35%. The tax-equivalent adjustments to net interest income for 2005, 2004, and 2003 were $31 million, $27 million, and $29 million, respectively. Average outstanding loan balances include nonperforming loans and loans held for sale or securitization. Average outstanding securities balances are computed based on amortized cost and exclude unrealized gains and losses on securities available for sale.

In order to manage exposure to changes in interest rates, the Corporation uses various types of derivative instruments. The effects of derivative instruments used to manage interest rate risk associated with earning assets and interest bearing liabilities are included in interest income or expense of the hedged item and consequently affect the yields on those assets and liabilities. Further discussion of the derivative instruments used to manage interest rate risk and the accounting for these instruments is included in Notes 1 and 24 to the consolidated financial statements. A discussion of the effects of changing interest rates is included in the Market Risk section beginning on page 25.

Net interest income and net interest margin are also affected by amortization of fair value premiums and discounts recognized on earning assets and interest bearing liabilities of acquired businesses. Refer to Note 3 to the consolidated financial statements for further discussion on acquisitions. These adjustments are amortized into interest income and expense based upon the estimated remaining lives of the assets and liabilities acquired.

The increase in net interest income in 2005 resulted from growth in earning assets which more than offset the increase in deposit and funding costs. The increase in net interest income in 2004 over 2003 was due to mortgage and home equity portfolio growth, higher levels of noninterest bearing core deposits, and the effects of acquisitions, partially offset by lower balances of mortgage loans held for sale.

The net interest margin decline in 2005 resulted from lower spreads on both portfolio loans and loans held for sale, due to the flattening of the yield curve and increased competition, and a lower balance of mortgages held for sale, partially offset by wider deposit spreads. The decline in the net interest margin for 2004 was related to the ongoing effects of a low interest rate environment, which resulted in reduced asset yields and narrower spreads on deposits.

Further discussion of trends in the loan and securities portfolios and detail on the mix of funding sources is included in the Financial Condition section beginning on page 18.

The following table shows changes in tax-equivalent interest income, interest expense, and tax-equivalent net interest income arising from volume and rate changes for major categories of earning assets and interest bearing liabilities. The change in interest not solely due to changes in volume or rates has been allocated in proportion to the absolute dollar amounts of the change in each.

		2005 vs 2004									2004 vs 2003
		Due to									Due to
		Change in									Change in
								Net									Net
(In Millions)		Volume			Rate			Change			Volume			Rate			Change
Increase (decrease) in tax-equivalent interest income –
Loans:
	Commercial	$	203		$	450		$	653		$	28		$	90		$	118
	Commercial construction		23			51			74			10			6			16
	Real estate – commercial		52			78			130			113			(46	)		67
	Real estate – residential		115			51			166			(328	)		(45	)		(373	)
	Home equity lines of credit		251			362			613			207			19			226
	Credit card and other unsecured lines of credit		21			30			51			10			17			27
	Other consumer		10			(13	)		(3	)		(28	)		(45	)		(73	)
Securities available for sale			2			1			3			47			(26	)		21
Federal funds sold, security resale agreements, and other investments			27			(4	)		23			13			17			30
Total		$	704		$	1,006		$	1,710		$	72		$	(13	)	$	59
Increase (decrease) in interest expense
Deposits:
	NOW and money market accounts	$	(3	)	$	239		$	236		$	45		$	(50	)	$	(5	)
	Savings accounts		(1	)		2			1			1			(3	)		(2	)
	Consumer time deposits		119			56			175			41			(80	)		(39	)
	Purchased deposits		40			256			296			28			22			50
Federal funds borrowed, security repurchase agreements, and borrowed funds			3			166			169			(53	)		11			(42	)
Long-term debt			215			351			566			(6	)		7			1
Total		$	373		$	1,070		$	1,443		$	56		$	(93	)	$	(37	)
Increase in tax-equivalent net interest income								$	267								$	96

ANNUAL REPORT 2005  13

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Noninterest Income

Details of noninterest income follow:

(In Millions)	2005		2004		2003
Mortgage banking revenue	$	1,054	$	1,190	$	1,447
Deposit service charges		722		656		568
Trust and investment management fees		296		301		291
Leasing revenue		267		180		37
Card-related fees		212		212		201
Brokerage revenue		159		145		122
Other service fees		125		113		106
Insurance revenue		103		91		73
Ineffective hedge and other derivative gains, net		64		73		100
Commercial real estate loan sales and servicing		59		33		—
Principal investment gains		57		69		7
Gain on sale of National Processing		—		714		—
Payment processing revenue		2		409		478
Other		157		235		116
Total fees and other income		3,277		4,421		3,546
Securities gains, net		27		19		47
Total noninterest income	$	3,304	$	4,440	$	3,593

Mortgage banking revenue includes mortgage loan servicing, hedging, origination and sales activity conducted through the National City Mortgage (NCM) business unit, nonconforming mortgage loan origination and sales activity conducted through the First Franklin business unit, and nonconforming mortgage loan servicing conducted through the National City Home Loan Services (NCHLS) business unit. Details of mortgage banking revenue follow:

(In Millions)		2005			2004			2003
NCM Servicing revenue:
	Net servicing fees	$	490		$	478		$	422
	Amortization of mortgage servicing rights		(492	)		(493	)		(514	)
	Mortgage servicing right impairment recovery (charge)		89			(105	)		195
	Mortgage servicing right ineffective hedge and other derivative gains, net		196			493			176
	Other		—			1			5
Net NCM servicing revenue			283			374			284
NCM origination and sales revenue			488			391			881
First Franklin origination and sales revenue			264			417			282
NCHLS mortgage banking revenue			19			—			—
Other mortgage banking revenue			—			8			—
Total mortgage banking revenue		$	1,054		$	1,190		$	1,447

Mortgage banking revenue declined in 2005 compared to the prior year due to lower gains on sale of both conforming and nonconforming loans, as well as lower net pretax hedging gains associated with mortgage servicing rights (MSRs). Gain on sale margins declined by 139 basis points at First Franklin and 22 basis points at NCM compared to the prior year. This decline in margin was due to overcapacity in the mortgage industry which has resulted in highly competitive pricing of loan sales into the secondary markets. Management expects gain on sale margins to continue to be under pressure for the first half of 2006. Pretax MSR net hedging gains, including impairment charges and recoveries, were $285 million in 2005 compared to $388 million in 2004. The lower gains in 2005 reflected a flatter yield curve.

Mortgage banking revenue declined by an even larger amount when comparing 2004 with 2003. This decline reflects cyclically lower mortgage origination and sales. Mortgage loan originations declined by 25% in 2004 compared to the record levels set in 2003. Conforming mortgage loan originations declined during 2004 as a result of higher interest rates, which decreased demand for refinancing. Nonconforming mortgage loan originations and sales increased during this same period due to the expansion of First Franklin’s market and product offerings. Mortgage banking revenue for 2004 also included a $36 million deferral of revenue related to the adoption of the SEC Staff Accounting Bulletin 105. Pretax MSR net hedging gains were comparable between 2004 and 2003.

The Corporation sells substantially all of its NCM loan production into the secondary market and retains the servicing rights. In late 2004, the Corporation began selling some First Franklin loans with servicing retained, and this activity continued in 2005. About 30% of the loans originated by First Franklin were retained in portfolio in 2005 and 2004 versus 50% in 2003. Management plans to sell most of its future production of First Franklin loans.

Further information on mortgage loan originations and sales follows:

(In Millions)			2005			2004			2003
NCM loan originations:
	Total loan originations		$	59,031		$	65,664		$	105,561
	Less: portfolio originations			(5,719	)		(5,121	)		(4,545	)
		Total NCM loans originated for sale		53,312			60,543			101,016
First Franklin loan originations:
	Total loan originations			29,560			29,151			20,138
	Less: portfolio loan originations			(8,192	)		(9,598	)		(10,233	)
		Total First Franklin loans originated for sale		21,368			19,553			9,905
Total mortgage loans originated for sale			$	74,680		$	80,096		$	110,921
NCM loan sales:
	Servicing retained		$	49,320		$	58,793		$	107,318
	Servicing released			1,997			1,514			1,196
		Total NCM loan sales		51,317			60,307			108,514
First Franklin loan sales:
	Servicing retained			16,403			1,919			—
	Servicing released			4,414			17,163			8,937
		Total First Franklin loan sales		20,817			19,082			8,937
Total mortgage loan sales			$	72,134		$	79,389		$	117,451

The Corporation typically retains the right to service the NCM mortgage loans it sells. Upon sale, the Corporation recognizes an MSR, which represents the present value of the estimated future net servicing cash flows to be realized over the estimated life of the underlying loan. The unpaid principal balance of loans serviced for third parties by NCM was $159.6 billion at December 31, 2005, up from $152.4 billion at December 31, 2004, and $141.1 billion at December 31, 2003. The carrying value of MSRs at NCM was $2.0 billion at December 31, 2005, up from $1.5 billion at December 31, 2004.

14  ANNUAL REPORT 2005

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FINANCIAL REVIEW (Continued)

In late 2004, the Corporation began selling certain First Franklin loans with servicing retained. In 2005, approximately 80% of First Franklin loans were sold with servicing retained versus only 10% in the prior year. These loans are serviced by the NCHLS business unit. At December 31, 2005 and 2004, the unpaid principal balance of loans serviced for third parties by NCHLS was $16.9 billion and $1.9 billion, respectively. The carrying value of MSRs at NCHLS was $108 million at December 31, 2005, up from $15 million at December 31, 2004.

The value of MSRs is sensitive to changes in interest rates. 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. The Corporation manages the risk associated with declines in the value of MSRs by using derivative instruments. Further detail on MSRs, including a sensitivity analysis of the effect changes in assumptions have on the estimated value of servicing assets, is included in Note 11 to the consolidated financial statements.

Deposit service charges increased 10% over 2004 and 27% over 2003 levels, reflective of higher debit and interchange fees and overdraft and nonsufficient funds (NSF) fees. Debit and interchange fees had an annual growth rate of approximately 20% due to a higher number of cardholders and increased usage of debit cards. Overdraft and NSF fees grew 23% in 2005 and 29% in 2004 reflecting growth in the number of deposit accounts and increased incidence rates.

Trust and investment management fees, which include both institutional and personal accounts, are based primarily on the market value of assets under administration. At December 31, 2005, 2004, and 2003, the Corporation had total assets under administration of $107.8 billion, $108.8 billion and $111.8 billion, respectively. The growth in trust and investment management fees in 2004 reflects business acquired with 2004 acquisitions.

Leasing revenue represents rental income and fees associated with portfolios of commercial equipment and automobile leases. Leasing revenue increased in 2005 due to a full year of revenue associated with acquisitions completed in 2004. The same reason accounted for the increase in leasing revenue in 2004. The Corporation is no longer originating automobile leases; therefore, revenues related to the automobile lease portfolio will continue to decline in future periods as these leases run off.

Brokerage revenue increased in 2005 and 2004 due to business acquired with the Provident and Allegiant acquisitions in 2004. Other service fees increased because of higher check and money order fees and higher letter of credit fees. Net ineffective hedge and other derivative gains declined in 2005 due to lower gains recognized on derivatives acquired to offset deferred compensation liabilities. Insurance revenue was higher in both 2005 and 2004 due to increased volumes of borrower paid private mortgage and title insurance. Commercial real estate loan sale and servicing income increased in both 2005 and 2004 due to business units acquired with the Provident acquisition in 2004. No commercial real estate servicing income was recognized in 2003.

Principal investments represent direct investments in private and public companies and indirect investments in private equity funds. These investments are carried at estimated fair value with gains and losses recognized in earnings each period for market value adjustments, realized gains and losses, and investment write-offs. Further detail on the principal investments portfolio is included in Notes 1 and 9 to the consolidated financial statements.

The Corporation recognized a pretax gain of $714 million on the sale of its former subsidiary, National Processing, in late 2004. Payment processing revenue substantially ceased with the sale of this subsidiary.

Other fee income included a number of unusual items in both 2005 and 2004. In 2005, the Corporation recognized a $16 million gain on the sale of Madison Bank & Trust, an $18 million gain on the sale of home equity lines of credit, and a $29 million loss on the securitization of indirect automobile loans. Other fee income for 2004 included a $62 million gain on the sale of the Corporate Trust Bond Administration business, a $14 million gain on the sale of seven branches located in the Upper Peninsula of Michigan, a $9 million gain on the securitization of indirect automobile loans, and $16 million of gains on the sale of student loans versus only $7 million of such gains in 2003.

Net securities gains are summarized as follows:

(In Millions,
Except Per Share Amounts)		2005		2004		2003
Net gains:
	Equity securities	$	13	$	3	$	40
	Debt securities		14		16		7
Net pretax gains			27		19		47
Tax provision			7		2		11
Effect on net income		$	20	$	17	$	36
Effect on diluted net income per share		$	.03	$	.03	$	.06

Net gains on debt securities are generated mainly from the investment portfolio maintained for asset/liability management purposes, while equity securities net gains are generated primarily from the Corporation’s bank stock fund, an internally managed equity portfolio of bank and thrift common stock investments. In late 2005, management made the decision to begin liquidating its bank stock fund holdings. An impairment loss of $11 million was recognized in 2005 on bank stock fund securities still held at year end and is included in the above table. Appreciation on bank stock fund securities donated to the Corporation’s charitable foundation accounted for $6 million and $15 million of the gains recognized in 2005 and 2003. No such securities were donated in 2004.

ANNUAL REPORT 2005  15

________________________________________________________________________________

Noninterest Expense

Details of noninterest expense follow:

(In Millions)	2005		2004		2003
Salaries, benefits, and other personnel	$	2,560	$	2,363	$	2,157
Third-party services		332		350		318
Net occupancy		316		254		233
Equipment		303		300		245
Leasing expense		179		126		52
Marketing and public relations		165		115		136
Postage and supplies		143		148		138
Impairment, fraud & other losses		108		71		72
Travel and entertainment		85		82		61
Telecommunications		82		85		84
State and local taxes		74		60		62
Intangible asset amortization		52		46		23
Card processing		21		190		218
Other		335		282		254
Total noninterest expense	$	4,755	$	4,472	$	4,053

Comparisons of 2005 to prior years are affected by acquisitions completed in 2004 which resulted in higher personnel costs, intangibles amortization and other acquisition integration costs, as well as other unusual items discussed below. Acquisition integration costs were $45 million in 2005 and $74 million in 2004, with no significant costs incurred in 2003.

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

	2005			2004			2003
(Dollars in Millions)
Salaries and wages	$	1,422		$	1,347		$	1,225
Incentive compensation		809			774			843
Deferred personnel costs		(457	)		(505	)		(570	)
Contract labor		199			149			110
Medical and other benefits		175			166			163
Payroll taxes		156			149			141
Retirement plans		82			81			51
Severance		61			37			75
Stock-based compensation		57			67			30
Deferred compensation		16			32			39
Other personnel costs		40			66			50
Total salaries, benefits, and other personnel	$	2,560		$	2,363		$	2,157
Full-time equivalent employees at year end		34,270			35,230			33,331

Salaries, benefits, and other personnel costs increased in 2005 compared to 2004 due to higher salaries and wages, incentive compensation, contract labor, and lower deferred personnel costs. The increase in salaries and wages reflects a larger number of full-time equivalent employees throughout 2005, resulting primarily from acquisitions completed in 2004, and normal salary increases. During the fourth quarter of 2005, the Corporation eliminated a number of management positions pursuant to its Best In Class initiative, resulting in a severance charge of $43 million. The Corporation has not yet realized any significant savings in ongoing expenses from these terminations due to their occurrence late in the year.

Incentive compensation increased in 2005 due to business growth, particularly in corporate and retail banking. The higher contract labor costs in 2005 were primarily due to contract programmers hired to develop a new mortgage loan origination system and temporary help engaged in acquisition integration activities. Deferred personnel costs decreased due to lower mortgage loan originations in 2005 compared to prior years, which more than offset an increase in capitalized labor for internally developed software. Deferred compensation costs, which represent market valuation adjustments on deferred compensation liabilities, decreased compared to 2004 due to a smaller increase in the investment indices to which the value of these obligations are tied. Medical and other benefits and payroll taxes, expressed as a percentage of salary and wages, are comparable to the prior year. Stock-based compensation was lower in 2005, as the prior year included $11 million of expense associated with the acceleration of vesting of National Processing’s stock options prior to its sale.

Salaries, benefits and other personnel costs increased in 2004 compared to 2003 primarily due to higher salaries and wages, stock-based compensation, contract labor and pension expense. Salaries and wages increased due to employees retained from acquisitions completed in 2004. Higher stock-based compensation expense reflects the phase in of expensing stock options, which began in 2003, and $11 million of expense for the acceleration of vesting of National Processing’s stock awards triggered by the sale of this business. Higher contract labor costs in 2004 compared to the preceding year reflected temporary help engaged in acquisition integration activities. Pension costs increased due to lowering the discount rate and expected long-term rate of return on plan assets. Partially offsetting these increases were lower incentive compensation and severance expense. The lower incentive compensation in 2004 was due to lower mortgage originations compared to 2003. Severance costs in 2004 consisted of severance incurred in the normal course of business as well as $19 million of incentives to retain employees of acquired companies. All severance costs for planned terminations of acquired employees were included in the purchase price allocations. Severance costs in 2003 included $77 million of costs associated with a voluntary early retirement program and position eliminations across all lines of business.

Third-party services decreased in 2005 compared to the prior year due to the completion of system integration activities for 2004 acquisitions. Partially offsetting this decrease were $6 million of consultants’ fees and $6 million of outplacement costs associated with Best In Class initiatives. Third-party services were higher in 2004 compared with 2003 due to system integration work for acquisitions mentioned above.

Net occupancy expense increased in 2005 due to higher depreciation expense and a $29 million one-time adjustment for lease accounting. Fixed asset additions, as well as property acquired with Provident in July 2004, contributed to the higher depreciation in 2005. Equipment costs increased in 2004 compared with the prior year due to higher depreciation expense for Customer Connections, the Corporation’s retail delivery system upgrade begun in 2003.

Leasing expense increased in both 2005 and 2004 due to the commercial equipment and automobile leasing businesses acquired with Provident in mid 2004. Higher depreciation expense was recognized in 2005 on a larger leased equipment portfolio. Partially offsetting this increase were net residual value recoveries of $28 million

16  ANNUAL REPORT 2005

________________________________________________________________________________

FINANCIAL REVIEW (Continued)

and $6 million in 2005 and 2004, respectively, compared with write-downs of $14 million in 2003, on the automobile lease portfolio. The net recoveries in 2005 included a $21 million insurance settlement, representing a partial recovery of previously incurred residual value losses.

Marketing and public relations for 2005 and 2003 contained contributions of appreciated securities to the Corporation’s charitable foundation in the amount of $30 million and $40 million, respectively, with no similar contribution in 2004. Advertising and promotional spending also increased in both 2005 and 2004 compared with prior years. In 2005, the Corporation increased spending on corporate sponsorships, direct mail marketing and promotional activities associated with free checking and home equity products. In 2004, higher advertising costs were incurred to introduce National City’s products and services to the St. Louis and Cincinnati markets.

Impairment, fraud and other losses increased in 2005 due to an $18 million impairment charge on several underutilized buildings offered for sale, $11 million of higher costs associated with the Corporation’s insurance subsidiary, and a $5 million charge for lease exit costs and asset impairments associated with the Best In Class program.

State and local taxes increased in 2005 compared to prior years due to acquisitions and lower tax credits. Intangible asset amortization increased in both 2005 and 2004 as a result of intangibles recognized in 2004 acquisitions. Card processing costs decreased in 2005 as these costs were primarily associated with the former National Processing subsidiary, which was sold in late 2004.

In 2005, other noninterest expense increased compared to the prior year due to $20 million of higher foreclosure losses, $10 million of higher losses on community development and civic partnerships, and $9 million of higher private mortgage insurance costs. The foreclosure provision increased in 2005 due to higher loss rates. The increase in insurance costs was primarily related to higher premiums for private mortgage insurance, coupled with an increase in the number of insured portfolio loans. The higher losses for community development and civic partnerships in 2005 reflects both new investments and accelerated amortization to match the expected timing of receipt of tax credits. In 2004, other noninterest expense increased compared to the prior year due to $14 million of higher losses on community development and civic partnerships, as well as $13 million of higher minority interest expense associated with subsidiaries acquired in 2004.

The efficiency ratio, equal to noninterest expense as a percentage of tax-equivalent net interest income and total fees and other income, was 59.41% in 2005, 50.35% in 2004, and 51.24% in 2003. The higher efficiency ratio in 2005 was reflective of higher noninterest expense driven by 2004 acquisitions, lower mortgage banking revenue, and the prior year gain on the sale of the former National Processing subsidiary. The lower efficiency ratio in 2004 when compared with 2003 was primarily the result of that gain. Management expects the implementation of the Best In Class program will ultimately drive the efficiency ratio toward 50%.

Income Taxes

The effective tax rates for 2005, 2004, and 2003 were 33.0%, 31.8%, and 34.6%, respectively. The tax provisions for 2005 and 2004 included $11 million and $67 million, respectively, of tax benefits related to return to provision true-ups, the favorable conclusion of tax examinations, and the regular reassessment of certain tax accruals. In addition, the effective tax rate for 2004 included a lower effective rate applied to the gain on the sale of National Processing. The effective tax rate in 2003 reflected higher state taxes associated with higher volumes of mortgage banking activities. A reconciliation of the effective tax rate to the statutory rate is included in Note 20 to the consolidated financial statements. Management forecasts the effective tax rate for 2006 to approximate 33%.

Line of Business Results

National City is functionally managed along five major business lines as discussed in Note 26 to the consolidated financial statements. National Processing, reported as a separate segment in prior periods, was sold in October 2004. Net income (loss) by line of business follows:

(In Millions)	2005			2004		2003
Wholesale Banking	$	770		$	662	$	329
Consumer and Small Business Financial Services		699			676		615
National Consumer Finance		559			639		419
National City Mortgage		284			442		939
Asset Management		80			133		93
National Processing		—			34		49
Parent and Other		(407	)		194		(327	)
Consolidated net income	$	1,985		$	2,780	$	2,117

Wholesale Banking: Net interest income grew 15% in 2005 and 19% in 2004, reflecting strong growth in commercial leasing, asset-based lending, and real estate loans, as well as acquisitions completed in 2004. Net interest margin was 3.28% in 2005, 3.53% in 2004, and 3.42% in 2003, reflecting narrowing loan spreads. Noninterest income increased by 20% in 2005 primarily due to strong commercial real estate servicing income, tax credit syndication fees, and leasing revenue associated with business units acquired in 2004. Noninterest income increased by more than 50% in 2004 due to higher treasury management and capital markets revenues. Principal investment gains were $57 million in 2005, $69 million in 2004, and $7 million in 2003. Noninterest expense increased in 2005, reflecting a larger number of employees and a leasing business acquired in the prior year. Incentive compensation grew in 2005 as a result of higher loan origination and fee-based revenues. The provision for credit losses recognized in 2005 was a reversal of previously recognized provision of $26 million, compared with a provision for credit losses of $51 million and $341 million in 2004 and 2003, respectively. Commercial credit quality has improved significantly over the last two years. Average loans outstanding increased 20% over 2004. Average commercial deposits for 2005 were 8% higher than the prior year.

ANNUAL REPORT 2005  17

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Consumer and Small Business Financial Services (CSB): Net interest income increased in both 2005 and 2004 on higher earning assets and wider deposit spreads. Deposit and other service fee income had strong growth in 2005 resulting from a higher number of accounts and fee-generating transactions. Noninterest income for 2005 included a $29 million loss on the securitization of indirect automobile loans, offset partially by a $16 million gain on the sale of Madison Bank & Trust. In the prior year, a $14 million gain on the sale of Upper Michigan branches was realized. Noninterest expense in 2005 benefited from a $21 million insurance settlement, representing the partial recovery of previously incurred residual value losses associated with CSB’s former automobile leasing business. Automobile lease residual value recoveries (write-downs) were $6 million in 2004 and $(14) million in 2003. The provision for credit losses increased in 2005 due to credit losses related to a record number of consumer bankruptcy filings. Average core deposits were $53 billion in 2005 versus $49 billion in 2004. Household acquisition trends remained strong as evidenced by 3.4% growth during 2005.

National Consumer Finance: Net income declined in 2005 due to lower earnings at First Franklin, partially offset by higher earnings at National Home Equity. First Franklin’s noninterest income fell sharply in 2005 on lower gains on sale of mortgages due to intensely competitive market conditions. Average margins realized on the sale of nonconforming mortgage loans decreased 139 basis points compared to 2004. First Franklin’s net interest income also declined in 2005 due to narrower loan spreads associated with a flattened yield curve. In contrast, First Franklin’s net income increased in 2004 compared with 2003 due to record origination volumes, which more than offset a decline in gain on sale margins. National Home Equity’s net interest income grew significantly in both 2005 and 2004 due to portfolio growth associated with strong production in both years. Noninterest income for 2005 included an $18 million gain on the sale of home equity lines of credit. The provision for credit losses increased to $21 million for 2005, compared with $4 million in 2004, and $8 million in 2003. The higher provision reflects the growth and continued seasoning of this portfolio. The First Franklin retained portfolio was $18.7 billion at December 31, 2005, up from $18.3 billion at December 31, 2004. Home equity lines and loans retained in portfolio grew to $14.6 billion at December 31, 2005, up from $11.9 billion at December 31, 2004. Management plans to sell or securitize most of its National Home Equity and First Franklin production in future periods.

National City Mortgage: Net interest income decreased in 2005 compared to the prior two years due to narrower spreads on mortgage loans held for sale, reflecting a flattened yield curve, and a lower average balance of mortgages held for sale, particularly compared with 2003. Mortgage banking revenue increased slightly compared to 2004 but dropped sharply versus 2003, due to cyclically lower volumes. Gain on sale margins decreased 22 basis points compared with 2004. Net MSR hedging gains were $285 million in 2005, down from $388 million in 2004 and $371 million in 2003. Noninterest expense increased in 2005 due to higher contract labor and consulting fees associated with a project to improve the efficiency of the origination function. Foreclosure losses were also higher in 2005 due to higher loss rates. Loans originated for sale were $53.3 billion in 2005 versus $60.5 billion in 2004 and $101 billion in 2003. The provision for credit losses was $37 million in 2005, $12 million in 2004, and $6 million in 2003.

Asset Management: Net income declined in 2005 as the prior year included a $62 million realized gain on the sale of the Corporate Bond Administration business. Net interest income increased in 2005 on loan growth and improved deposit spreads. Noninterest expense increased due to higher incentive compensation and trust system replacement costs. Assets under administration were $107.8 billion at December 31, 2005 and $108.8 billion at December 31, 2004. Investment management and personal trust assets increased in 2005 but were more than offset by declines in charitable endowment and corporate trust assets.

Parent and Other: This category includes the results of investment funding activities, unallocated corporate income and expense, and intersegment revenue and expense eliminations. Comparisons with prior periods are affected by derivatives gains, acquisition integration costs, and other unusual or infrequently occurring items. The single largest item affecting comparisons between years was a $714 million realized gain ($487 million after tax) on the sale of National Processing in 2004. Net interest expense was lower in 2005 compared to the prior two years due to maintaining a slightly more asset sensitive balance sheet. Severance and related costs were $68 million in 2005, $39 million in 2004, and $81 million in 2003. The higher severance costs in 2005 were related to the Best In Class initiative. Severance costs for 2004 included approximately $19 million of retention benefits to acquired employees. Severance costs for 2003 were associated with an early retirement and positions elimination program. Acquisition integration costs incurred in 2005 were $45 million, down from $74 million in 2004. Noninterest expense for 2005 included a $30 million contribution to the Corporation’s charitable foundation, compared with a $40 million contribution in 2003, with no similar contribution in 2004. Noninterest expense for 2005 also included an $18 million building impairment charge and a $29 million one-time adjustment for lease accounting. Net securities gains from the Corporation’s bank stock fund were $13 million, $3 million, and $40 million in 2005, 2004, and 2003, respectively. Tax benefits of $11 million and $67 million were recorded in 2005 and 2004, respectively, from the regular reassessment of tax accruals.

18  ANNUAL REPORT 2005

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FINANCIAL REVIEW (Continued)

Financial Condition

Portfolio Loans: End-of-period and average portfolio loan balances by category follow:

(In Millions)	2005		2004		2003		2002		2001
As of December 31:
Commercial	$	27,572	$	25,160	$	19,164	$	22,632	$	25,438
Commercial construction		3,367		2,923		2,289		2,090		1,314
Real estate – commercial		12,407		12,193		9,828		9,385		7,281
Real estate – residential		32,823		30,398		27,394		19,972		14,764
Home equity lines of credit		21,439		19,018		11,016		8,102		5,845
Credit card and other unsecured lines of credit		2,612		2,414		2,324		2,030		1,867
Other consumer		5,819		8,165		7,329		7,963		11,549
Total portfolio loans	$	106,039	$	100,271	$	79,344	$	72,174	$	68,058
Average:
Commercial	$	26,901	$	22,103	$	21,390	$	23,978	$	26,010
Commercial construction		3,068		2,568		2,343		1,380		1,262
Real estate – commercial		12,033		11,162		9,483		8,005		6,788
Real estate – residential		32,137		28,818		23,301		15,682		14,007
Home equity lines of credit		21,118		14,743		9,293		7,014		5,222
Credit card and other unsecured lines of credit		2,381		2,286		2,155		1,865		2,164
Other consumer		7,637		7,527		7,906		11,136		12,198
Total portfolio loans	$	105,275	$	89,207	$	75,871	$	69,060	$	67,651

National City’s commercial and commercial real estate portfolios represent a broad and diverse customer base comprising approximately 900 different standard industrial classifications. The customer base is geographically dispersed within National City’s seven-state footprint and in selected national accounts. The Corporation has no loans to borrowers in similar industries that exceed 10% of total loans. The following table as of December 31, 2005 summarizes the major industry categories and exposure to individual borrowers for commercial, commercial construction, and commercial real estate.

						Average		Largest
			%			Loan		Loan
	Outstanding		of			Balance		to a Single
	Balance		Total			Per Obligor		Obligor
(Dollars in Millions)
Real estate	$	13,410		31	%	$	.9	$	58
Consumer cyclical		6,763		16			1.0		115
Consumer noncyclical		5,594		13			.5		45
Industrial		5,322		12			1.1		71
Basic materials		3,297		8			1.5		40
Financial		3,170		7			1.7		103
Services		1,654		4			.4		47
Energy and utilities		827		2			1.3		24
Technology		355		1			2.3		30
Miscellaneous		2,954		6			.2		27
Total	$	43,346		100	%

Commercial: The commercial loan category includes loans to a wide variety of businesses across many industries and regions. Included in this category are loans directly originated by National City and syndicated transactions originated by other financial institutions. The Corporation’s commercial lending policy requires each loan, regardless of whether it is directly originated or purchased through syndication, to have viable repayment sources. The risks associated with loans in which National City participates as part of a syndicate of financial institutions are similar to those of directly originated commercial loans; however, additional risks may arise from National City’s limited ability to control actions of the syndicate.

Commercial loans are evaluated for the adequacy of repayment sources at the time of approval and are regularly reviewed for any possible deterioration in the ability of the borrower to repay the loan. In certain instances, collateral is required to provide an additional source of repayment in the event of default by a commercial borrower. The structure of the collateral package, including the type and amount of the collateral, varies from loan to loan depending on the financial strength of the borrower, the amount and terms of the loan, and the collateral available to be pledged by the borrower. Credit risk for commercial loans arises from borrowers lacking the ability or willingness to repay the loan, and in the case of secured loans, by a shortfall in the collateral value in relation to the outstanding loan balance in the event of a default and subsequent liquidation of collateral.

Commercial loan outstandings increased in 2005 due to new business generation. The commercial loan portfolio increased in 2004 primarily through acquisitions and to a lesser extent, an increase in overall borrowing activity reflective of an improved economy. Prior to 2004, commercial outstandings decreased for several years as the prolonged effect of a weak economy reduced loan demand and corporate borrowers remained cautious in their spending and investment decisions. In addition, in the fourth quarter of 2002, $1.5 billion of commercial loans and $400 million of loans secured by real estate collateral were reclassified from the commercial to the commercial real estate and commercial construction portfolios, respectively. These reclassifications were made for consistency with bank regulatory definitions.

The commercial lease portfolio, included in commercial loans, was $3.5 billion, $2.8 billion, and $1.4 billion at December 31, 2005, 2004, and 2003, respectively. The increase in the commercial lease portfolio in 2005 was due to new business generation and general economic conditions. The increase in the commercial lease portfolio in 2004 was due to the Provident acquisition. The lease portfolio represents a diversified customer base in energy, steel, automotive, manufacturing, transportation, and other capital-intensive industries, covering a broad range of equipment, including transportation, manufacturing, technology, aircraft, material handling, construction, office equipment, and other equipment types.

A distribution of total commercial loans by maturity and interest rate at December 31, 2005 follows:

	One Year		One to		Over
(In Millions)	or Less		Five Years		Five Years		Total
Variable-rate	$	5,305	$	13,267	$	2,277	$	20,849
Fixed-rate		806		3,726		2,191		6,723
Total	$	6,111	$	16,993	$	4,468	$	27,572

ANNUAL REPORT 2005  19

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Commercial Construction: The commercial construction loan category includes loans originated to developers of real estate to finance the construction of commercial properties. Commercial construction loans are transferred to the commercial real estate portfolio upon completion of the property under construction and satisfaction of all terms in the loan agreement. Commercial construction loans are governed by the same lending policies and are subject to the same credit risk as described for commercial loans. Growth in the commercial construction balances during 2005 resulted from new business generation and increased borrowings from existing customers. The increase in the commercial construction balances in 2004 was primarily due to acquisition-related activity.

A distribution of total commercial construction loans by maturity and interest rate at December 31, 2005 follows:

	One Year		One to		Over Five
(In Millions)	or Less		Five Years		Years		Total
Variable-rate	$	1,340	$	1,676	$	150	$	3,166
Fixed-rate		30		111		60		201
Total	$	1,370	$	1,787	$	210	$	3,367

Commercial Real Estate: The commercial real estate category includes mortgage loans to developers and owners of commercial real estate. Origination activities for commercial real estate loans are similar to those described above for the commercial construction portfolio. Lending and credit risk policies for commercial real estate loans are governed by the same policies as for the commercial portfolio. The balance of the commercial real estate portfolio for 2005 remained comparable to the 2004 balance. The 2004 increase in commercial real estate balances resulted from increased demand for credit and business development efforts, coupled with balances acquired through acquisition.

Residential real estate: The residential real estate category includes loans to consumers secured by residential real estate, including home equity installment loans. These loans are originated by the First Franklin, National Home Equity, and National City Mortgage business units. The Corporation’s residential real estate lending policies require all loans to have viable repayment sources. Residential real estate loans are evaluated for the adequacy of these repayment sources at the time of approval, using such factors as credit scores, debt-to-income ratios, and collateral values. Credit risk for residential real estate loans arises from borrowers lacking the ability or willingness to repay the loans, or by a shortfall in the value of the residential real estate in relation to the outstanding loan balance in the event of a default and subsequent liquidation of the real estate collateral.

Balances in the residential real estate portfolio have increased over the past several years primarily due to retention of loans originated by First Franklin, reflective of high levels of production aided by a favorable interest rate environment. Management plans to sell or securitize most of its future production of home equity and nonconforming residential mortgage loans, subject to market conditions. Accordingly, the portfolio is expected to grow more slowly or decline in future periods.

National City Mortgage’s residential real estate production is primarily originated in accordance with underwriting standards set forth by the government-sponsored entities (GSEs) of the Federal National Mortgage Association (FNMA), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the Government National Mortgage Association (GNMA). National City Mortgage production is sold in the secondary mortgage market primarily to the GSEs, the Federal Home Loan Banks (FHLB), and jumbo loan investors. These loans are generally collateralized by one-to-four family residential real estate, have loan-to-collateral value ratios of 80% or less, and are made to borrowers in good credit standing. National City Mortgage originates residential real estate loans through retail branch offices located throughout the United States, a wholesale network of brokers, and through National City banking offices located within the Corporation’s seven-state footprint. Over the last three years, substantially all residential real estate loans originated by National City Mortgage were sold in the secondary mortgage market. The right to service the loans and receive fee income is generally retained when these loans are sold.

Residential real estate loans originated by First Franklin are generally not readily saleable in the secondary market to the GSEs for inclusion in mortgage-backed securities due to the credit characteristics of the borrower, the underlying documentation, the loan-to-value ratio, or the size of the loan, among other factors. Mortgage loans originated by First Franklin are typically readily saleable to other secondary market investors, and the percentage of First Franklin loans sold versus retained varies based upon product mix, market conditions and management strategy. During 2005 and 2004, the Corporation sold 72% and 67%, respectively, of the origination volume to third parties. Historically, First Franklin loans were sold servicing released, however, since November 2004 most loans have been sold with servicing retained. During the past three years, $8.2 billion, $9.6 billion, and $10.2 billion, respectively, of First Franklin originated loans were added to the portfolio. At December 31, 2005 and 2004, the First Franklin residential real estate portfolio totaled $18.7 billion and $18.3 billion, respectively. First Franklin offers a variety of loan programs and documentation levels for borrowers. First Franklin uses third-party credit scores that are incorporated into the lending guidelines along with loan amount, loan-to-value, and loan purpose. These loans are originated principally through wholesale channels, including a national network of brokers and mortgage bankers. No single source represents more than 1% of total production. Loan production is primarily located on the West Coast (46% of volume, of which 33% is California); however, expansion continued in the East Coast (31% of volume) markets. Written agreements are in place with all brokers that require them to be knowledgeable of all consumer protection laws and regulations, and brokers are actively monitored for compliance.

The residential real estate portfolio also includes prime-quality home equity installment loans. These loans are originated in National City’s seven-state footprint through the retail branch network of the Consumer and Small Business Financial Services line of business and

20  ANNUAL REPORT 2005

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FINANCIAL REVIEW (Continued)

nationally through National Consumer Finance’s National Home Equity business unit. In December 2002, approximately $3.2 billion of home equity installment loans were reclassified from the other consumer portfolio to the residential real estate portfolio. This reclassification was made for consistency with bank regulatory definitions.

Offsetting the increases in the residential real estate portfolio over the past three years were sales of residential real estate loans originated by the former Altegra and Loan Zone business units. During 2004 and 2003, $237 million and $950 million, respectively, of these loans were sold. There were no such sales during 2005.

Home Equity Lines of Credit: The home equity category consists mainly of revolving lines of credit secured by residential real estate. Home equity lines of credit are generally governed by the same lending policies and subject to credit risk as described above for residential real estate loans. These loans are originated through brokers on a nationwide basis through the National Home Equity division, as well as directly through National City banking offices. The favorable interest rate environment, coupled with management’s focus on the national market, fueled strong home equity production and portfolio growth over the past several years. Going forward, management expects to sell or securitize most home equity production originated by National Home Equity, which will have the effect of reducing the future rate of growth in the portfolio. During 2005, the Corporation sold $1.4 billion of home equity lines of credit.

Credit Cards and Other Unsecured Lines of Credit: This category includes the outstanding balances on open-ended credit card accounts and unsecured personal and business lines of credit. Credit card loans are typically unsecured and are generally governed by similar lending policies and credit risk as described for residential real estate and consumer loans. The increase in credit cards and other unsecured lines of credit over the past two years was due to new products, marketing programs, and higher levels of consumer spending. During 2005, the Corporation securitized $600 million of credit card balances. Management expects to securitize additional credit card balances in the future, with $425 million of credit card loans held for securitization at December 31, 2005.

Other Consumer: Other consumer loans include installment loans, primarily originated through dealers, for the purchase of automobiles, boats, and recreational vehicles; automobile leases; and student loans. These consumer loans are generally governed by the same lending policies as described for residential real estate. Credit risk for consumer loans arises from borrowers lacking the ability or willingness to repay the loan, and in the case of secured loans, by a shortfall in the value of the collateral in relation to the outstanding loan balance in the event of a default and subsequent liquidation of collateral. The end-of-period balance of the other consumer portfolio decreased in 2005 due to the securitization of $2.2 billion of indirect automobile loans as a result of the decision to exit the indirect automobile and motorsports lending business. Also contributing to this decrease was the continued run-off of the automobile lease portfolio. The Corporation ceased the origination of automobile leases in December 2000; however, additional automobile leases were acquired in connection with the 2004 acquisition of Provident. No new automobile leases were originated since the acquisition date and these balances will run off over time. Automobile lease receivable balances at December 31, 2005 and 2004, totaled $411 million and $530 million, respectively. The average balance of the other consumer portfolio in the previous years was affected by the $3.2 billion loan reclassification described in the residential real estate discussion above, the continued run-off of the automobile lease portfolio, and the securitization of automobile loans, offset by the impact of acquisitions.

Loans Held for Sale or Securitization: End-of-period and average loans held for sale or securitization follow:

(In Millions)	2005		2004		2003		2002		2001
As of December 31:
Commercial	$	11	$	24	$	16	$	15	$	51
Real estate – commercial		35		546		—		—		—
Real estate – residential		9,192		11,860		14,497		24,486		15,553
Automobile		—		—		854		—		825
Credit card		425		—		—		—		402
Student loans		4		—		—		—		—
Total loans held for sale or securitization	$	9,667	$	12,430	$	15,367	$	24,501	$	16,831
Average:
Commercial	$	18	$	28	$	13	$	11	$	19
Real estate – commercial		198		164		—		—		—
Real estate – residential		10,547		12,071		22,671		13,933		7,789
Automobile		179		132		153		248		120
Credit card		142		—		—		35		33
Student loans		2		—		—		—		—
Home equity lines of credit		4		—		—		—		—
Total loans held for sale or securitization	$	11,090	$	12,395	$	22,837	$	14,227	$	7,961

The decrease in average loans held for sale or securitization in 2005 was primarily the result of lower volumes of mortgage production at National City Mortgage. Partially offsetting this decline were higher balances of First Franklin mortgage loans held for sale reflective of new product offerings and expansion of the production footprint. Going forward, management expects to sell or securitize more loan production, including home equity lines of credit, home equity loans, and First Franklin loans. The decrease in average loans held for sale or securitization in 2004 was primarily the result of lower volume of mortgage production at National City Mortgage, reflective of lower refinancing activity. Partially offsetting the lower National City Mortgage originations in 2004 were increases in mortgage production volume at First Franklin. The low interest rate environment in 2003, which fueled mortgage refinancings and home purchase activity, was the main driver behind the higher levels of loans held for sale or securitization. Refer to the Noninterest Income section of this Financial Review for a summary of National City Mortgage and First Franklin mortgage originations. Balances for commercial real estate loans held for sale represent loans originated by the Red Mortgage Capital and Capstone Realty subsidiaries acquired in connection with Provident.

ANNUAL REPORT 2005  21

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At December 31, 2005, $425 million of credit card receivables were classified as held for sale or securitization as management intends to securitize these balances in early 2006.

Securities: Securities balances at December 31 follow:

(In Millions)	2005		2004		2003		2002		2001
U.S. Treasury and Federal agency debentures	$	1,174	$	653	$	637	$	1,084	$	977
Mortgage-backed securities		5,437		6,309		3,928		4,553		6,447
Asset-backed and corporate debt securities		246		510		931		1,815		760
States and political subdivisions		608		705		672		651		703
Other securities		416		423		154		229		435
Total amortized cost	$	7,881	$	8,600	$	6,322	$	8,332	$	9,322
Total fair value	$	7,875	$	8,765	$	6,525	$	8,675	$	9,479

The securities portfolio decreased in 2005 due to sales and principal paydowns of mortgage-backed and asset-backed securities. The increase in the 2004 securities portfolio resulted primarily from security balances acquired with Provident. At December 31, 2005, the securities portfolio had net unrealized losses of $6 million. The weighted-average yield of debt securities included in the portfolio at December 31, 2005 and 2004 was 4.99% computed on a tax equivalent basis.

Funding: Detail of average deposit and borrowed funds balances follows:

(In Millions)		2005		2004		2003		2002		2001
Noninterest bearing		$	18,257	$	17,763	$	17,203	$	13,685	$	11,622
NOW and money market			28,589		28,897		25,378		20,740		18,120
Savings			2,361		2,583		2,423		2,561		2,713
Consumer time			18,662		14,875		13,729		15,064		15,332
	Core deposits		67,869		64,118		58,733		52,050		47,787
Other deposits			6,087		3,062		2,752		3,613		5,802
Foreign deposits			8,787		8,946		7,002		6,302		4,319
	Purchased deposits		14,874		12,008		9,754		9,915		10,121
Total deposits			82,743		76,126		68,487		61,965		57,908
Short-term borrowings			9,591		9,315		12,464		11,192		10,272
Long-term debt			32,752		24,028		24,854		19,558		16,415
Total deposits and borrowed funds		$	125,086	$	109,469	$	105,805	$	92,715	$	84,595

Average funding balances have increased to support the growth in portfolio loans, and in 2004 as a result of acquisitions.

The increase in core deposits in 2005 reflects an increase in consumer household relationships. The increase in core deposits in 2004 was further aided by balances acquired through acquisitions, primarily Provident. Excluding acquisitions, core deposit growth slowed in 2004 as the Corporation’s strategy shifted away from reliance on short-term promotional rates to longer-term household acquisition and retention. Growth in core deposits over the past several years reflects investments in technology, new product offerings, and improved customer service. Mortgage banking-related escrow deposits, which averaged $4.4 billion, $4.3 billion, and $5.1 billion for the years ended December 31, 2005, 2004, and 2003, respectively, have also influenced the trend in core deposit balances. The decrease in these balances from 2003 was the result of decreases in mortgage activity.

Excluding the impact of acquisitions, there has been a shift in mix within the core deposit categories over the past three years from administered-rate products, such as savings accounts, to market-indexed money market products, due in part to retail deposit migration initiatives which encouraged customers to upgrade to deposit products more suited to their needs in order to promote longer-term customer satisfaction and retention. Consumer time deposits consist primarily of certificates of deposit sold to retail banking customers. Balances grew in 2005 and 2004 due to higher interest rates, which made the product more attractive than had been the case in the previous low-interest rate environment.

Other deposits consist principally of deposits acquired through third-party brokers and other non-core certificates of deposit. Other certificates of deposit are issued primarily to commercial customers, including trusts and state and political subdivisions. These deposits increased in 2005 to support the growth in earning assets.

Certificates of deposit of $100,000 or more totaled $12.5 billion at December 31, 2005, of which $3.1 billion mature within three months, $2.1 billion mature between three and six months, $2.5 billion mature between six months and one year, and $4.8 billion mature beyond one year.

Foreign deposits primarily represent U.S. dollar deposits in the Corporation’s Grand Cayman branches from institutional money managers and corporate customers. A small portion of these balances also represents deposits denominated in Canadian dollars used to support lending activity in Canada.

Short-term borrowings are comprised mainly of Federal funds purchased, securities sold under agreements to repurchase, U.S. Treasury demand notes, commercial paper, and short-term senior bank notes. At December 31, 2005 and 2004, short-term borrowings included $1.8 billion and $1.0 billion, respectively, of U.S. Treasury demand notes. These notes are typically a lower-cost source of funding provided by the U.S. Treasury when excess funds are on hand. The amount of the notes held at any given time can fluctuate significantly depending on the U.S. Treasury’s cash needs. Replacement funding through other short-term channels is available in the event the notes are called.

Long-term debt includes senior and subordinated debt issued by the Corporation or its bank subsidiaries and debt obligations related to capital securities issued by the seven subsidiary trusts. A wholesale funding policy governs the funding activity of all subsidiary banks. The policy identifies eligible funding instruments and applicable constraints for gathering discretionary liabilities. This policy requires compliance with Section 301 of the FDIC Improvement Act of 1991 regarding the issuance of brokered deposits. The Corporation conducts its funding activities in compliance with the Bank Secrecy Act and other regulations relating to money laundering activity. Long-term debt balances increased during 2005 as attractive spreads in the capital markets favored the issuance of new senior bank notes. The decrease in long-term

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FINANCIAL REVIEW (Continued)

debt in 2004 was primarily the result of principal paydowns and maturities more than offsetting the increase in new debt issuances and balances acquired through acquisitions.

Capital

The Corporation has consistently maintained regulatory capital ratios at or above the “well-capitalized” standards. For further detail on capital and capital ratios, see Notes 17 and 18 to the consolidated financial statements. Information on stockholders’ equity at December 31 is presented in the following table.

(Dollars in Millions,
except per share)	2005			2004
Stockholders’ equity	$	12,613		$	12,804
Equity as a percentage of assets		8.86	%		9.18	%
Book value per common share	$	20.51		$	19.80

The following table summarizes share repurchase activity for the fourth quarter of 2005.

						Total Number		Maximum
						of Shares		Number of
						Purchased		Shares that
						Under Publicly		May Yet Be
		Total		Average		Announced		Purchased
		Number of		Price		Share		Under the Share
		Shares		Paid Per		Repurchase		Repurchase
Period		Purchased(a)		Share		Authorizations(b)		Authorizations(c)
Oct 1 to Oct 31			9,699,744	$	32.64		9,665,000		38,632,200
Nov 1 to Nov 30			4,633,400		32.71		4,598,500		34,033,700
Dec 1 to Dec 31			565,405		34.00		417,200		33,616,500
	Total		14,898,549	$	32.71		14,680,700

^(a)  Includes shares repurchased under the October 24, 2005 and December 21, 2004 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)].

^(c)  Shares available to be repurchased under the October 24, 2005 share repurchase authorization.

On October 24, 2005, 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 the previous share repurchase authorization approved by the Board of Directors on December 21, 2004, and completed on October 26, 2005. Shares repurchased are acquired in the open market and are held for reissue in connection with compensation plans and for general corporate purposes. During 2005, 2004, and 2003, the Corporation repurchased 43.5 million, 40.1 million, and 11.5 million shares, respectively. The Corporation’s businesses typically generate significant amounts of capital in excess of normal dividend and reinvestment requirements. Management intends to continue share repurchases during 2006, subject to market conditions, maintenance of targeted capital ratios, and applicable regulatory constraints.

National City paid dividends per common share of $1.44 in 2005 and $1.34 in 2004, and has paid dividends in every year since its founding except 1868, 1934 and 1935. The dividend payout ratio, representing dividends per share divided by earnings per share, was 46.6% and 31.1% for the years 2005 and 2004, 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 January 3, 2006, the Board of Directors declared a dividend of $.37 per common share payable on February 1, 2006.

At December 31, 2005, the Corporation’s market capitalization was $20.6 billion and there were 62,966 shareholders of record. National City common stock is traded on the New York Stock Exchange under the symbol “NCC.” Historical stock price information is presented in tabular form on the inside back cover of this report.

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. The following discussion addresses the three major risks facing National City: credit, market, and liquidity.

Credit Risk

The Corporation’s lending activities are subject to varying degrees of credit risk. Credit risk is mitigated through portfolio diversification, exposure limits to any single industry or customer, collateral protection, credit risk transfer strategies, and standard lending policies and underwriting criteria. Note 1 to the consolidated financial statements describes the accounting policies related to nonperforming loans and charge-offs and describes the methodologies used to develop the allowance for loan losses and lending-related commitments. The Corporation’s policies governing nonperforming loans and charge-offs are consistent with regulatory standards.

During 2005, credit quality remained strong in both the commercial and consumer portfolios. Net charge-offs, expressed as a percentage of portfolio loans, reached a 10-year low. Management projects that commercial charge-offs will likely increase somewhat in 2006, in part due to lower recoveries. On the consumer side, the change in consumer bankruptcy laws late in 2005 caused a record level of consumer bankruptcies to be filed in advance of that change, resulting in higher losses on credit card and other unsecured loans. The estimated effect of the elevated bankruptcy filings on secured consumer loans was provided for in the allowance for loan losses.

During 2005, the Corporation executed a credit risk transfer agreement on $5.0 billion of nonconforming (First Franklin) mortgage loans. In the event that cumulative net credit losses on these loans exceed certain

ANNUAL REPORT 2005  23

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thresholds, the counterparty to this arrangement would bear the risk of additional losses. As of December 31, 2005, the outstanding balance of nonconforming mortgages subject to this credit risk transfer agreement was $4.0 billion.

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

	2005			2004			2003			2002			2001
Commercial		26.0	%		25.1	%		24.2	%		31.3	%		37.4	%
Commercial construction and real estate – commercial		14.9			15.1			15.3			15.9			12.6
Real estate – residential		30.9			30.3			34.5			27.7			21.7
Home equity lines of credit and other consumer loans		25.7			27.1			23.1			22.3			25.6
Credit card and other unsecured lines of credit		2.5			2.4			2.9			2.8			2.7
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

The increase in commercial loans as a percentage of total portfolio loans in 2005 was due to growth in this portfolio, coupled with a decline in other consumer loans. During 2005, the Corporation sold $1.4 billion of home equity lines of credit and securitized $2.2 billion of indirect automobile loans. Further, management is moving to an originate-and-sell model for most of the future production of First Franklin residential real estate loans and home equity lines and loans originated by the National Home Equity business unit. Accordingly, in future periods, these categories of portfolio loans will likely decrease as a percentage of total portfolio loans.

Nonperforming Assets and Delinquent Loans: Detail of nonperforming assets at December 31 follows:

(Dollars in Millions)		2005			2004			2003			2002			2001
Commercial		$	181		$	161		$	257		$	408		$	350
Commercial construction			20			12			7			6			14
Real estate – commercial			114			102			67			60			64
Real estate – residential			175			188			219			228			166
Total nonperforming loans			490			463			550			702			594
Other real estate owned (OREO)			97			89			99			115			64
Mortgage loans held for sale			9			11			8			—			—
Total nonperforming assets		$	596		$	563		$	657		$	817		$	658
Nonperforming assets as a percentage of:
	Period-end portfolio loans and other nonperforming assets		.56	%		.56	%		.83	%		1.13	%		.97	%
	Period-end total assets		.42			.40			.58			.69			.62

Detail of loans 90 days past due accruing interest follows:

(In Millions)	2005		2004		2003		2002		2001
Commercial	$	36	$	44	$	20	$	41	$	52
Commercial construction		5		12		3		1		6
Real estate – commercial		9		29		32		26		30
Real estate – residential		510		467		428		450		442
Home equity lines of credit		23		10		15		16		17
Credit card and other unsecured lines of credit		20		21		18		8		12
Other consumer		17		13		12		19		28
Mortgage loans held for sale and other		16		25		37		14		26
Total loans 90 days past due accruing interest	$	636	$	621	$	565	$	575	$	613

The increase in commercial, commercial construction and commercial real estate nonperforming assets in 2005 reflects growth in these portfolios and the classification of certain passenger airline related credits to non-performing status. Residential real estate nonperforming assets have improved in comparison to the year-earlier period due to lower instances of fraud and repurchases of loans sold pursuant to indemnification agreements.

Delinquent commercial loans, including construction and real estate, have declined due to continued improvement in the credit quality of these portfolios. Delinquent residential real estate loans have increased due to the impact of the Gulf Coast hurricanes and the continued seasoning of this portfolio. Delinquent home equity and other consumer loans have increased due to the change in consumer bankruptcy laws late in 2005. Credit card balances and other unsecured consumer loans did not experience an increase in delinquencies as these balances are charged off within a month of notice of a consumer filing bankruptcy. However, collection efforts continue on secured consumer loans, and the account is not charged off until the balance becomes 120-150 days past due. Management considered these delinquencies in its assessment of the adequacy of the allowance for loan losses, which was increased by $20 million to address the estimated loss in the year-end portfolio. The lower level of delinquent loans in mortgage loans held for sale was primarily due to the decrease in the size of this portfolio.

The lower balance of commercial nonperforming assets in 2004 compared with 2003 resulted from improvements in credit quality, and, to a lesser extent, sales of nonperforming loans. The increase in nonperforming commercial construction and commercial real estate loans was primarily due to acquisitions completed in 2004.

Loans 90 days past due accruing interest increased in 2004 due to higher balances of delinquent commercial, commercial construction and residential real estate loans. The increase in delinquent commercial and commercial construction loans was also the result of acquisitions. Delinquent residential real estate loans increased due primarily to growth in the residential real estate portfolio and increased repurchases of delinquent loans sold pursuant to indemnification agreements. The lower level of delinquent loans in mortgage loans held for sale also reflects the decrease in mortgage activity compared to the year-earlier period.

At December 31, 2005, nonperforming assets included $77 million of passenger airline credits which were deemed impaired loans. The allowance for loan losses includes a $56 million reserve for these impaired credits. Other than passenger airlines, there were no particular industry or geographic concentrations in nonperforming or delinquent loans in either 2005 or 2004.

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 is based upon the size and current risk characteristics of the loan portfolio and includes an assessment of individual problem loans, actual loss experience, current economic events in specific industries and

24  ANNUAL REPORT 2005

________________________________________________________________________________

FINANCIAL REVIEW (Continued)

geographical areas, and other pertinent factors, including general economic conditions, unemployment levels, and regulatory guidance.

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

(Dollars in Millions)		2005			2004			2003			2002			2001
Balance at beginning of year		$	1,188		$	1,023		$	1,006		$	925		$	844
Provision for loan losses			300			339			628			661			618
Allowance related to loans acquired, sold or securitized			(14	)		172			(2	)		(4	)		(74	)
Charge-offs:
	Commercial		160			170			328			317			199
	Commercial construction		4			12			3			2			1
	Real estate – commercial		32			23			31			21			16
	Real estate – residential		134			126			152			86			60
	Home equity lines of credit		42			27			24			21			14
	Credit card and other unsecured lines of credit		130			109			98			83			98
	Other consumer		100			104			121			171			199
Total charge-offs			602			571			757			701			587
Recoveries:
	Commercial		97			101			44			32			17
	Commercial construction		2			1			—			—			—
	Real estate – commercial		10			13			5			5			6
	Real estate – residential		56			52			37			8			1
	Home equity lines of credit		8			10			7			5			3
	Credit card and other unsecured lines of credit		12			8			8			8			23
	Other consumer		37			40			47			67			74
Total recoveries			222			225			148			125			124
Net charge-offs			380			346			609			576			463
Balance at end of year		$	1,094		$	1,188		$	1,023		$	1,006		$	925
Portfolio loans outstanding at December 31		$	106,039		$	100,271		$	79,344		$	72,174		$	68,058
Allowance as a percentage of:
	Portfolio loans		1.03	%		1.19	%		1.29	%		1.39	%		1.36	%
	Nonperforming loans		223.1			256.9			186.1			143.3			155.9
	Net charge-offs		287.3			343.8			167.8			174.7			200.1

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

(Dollars in Millions)	2005			2004			2003		2002		2001
Balance at beginning of year	$	100		$	102		$	92	$	71	$	84
Net provision for losses on lending-related commitments		(16	)		(16	)		10		21		(13	)
Allowance related to commitments acquired		—			14			—		—		—
Balance at end of year	$	84		$	100		$	102	$	92	$	71
Total provision for credit losses	$	284		$	323		$	638	$	682	$	605

The overall decrease in the provision for credit losses in 2005 reflects continued improvement in the credit quality of the commercial portfolio. The provision for credit losses in 2005 included $20 million to address estimated consumer losses arising from the change in consumer bankruptcy laws in 2005, which are inherent in the portfolio at year end.

Net charge-offs as a percentage of average loans by portfolio type follow:

	2005			2004			2003			2002			2001
Commercial		.23	%		.31	%		1.33	%		1.19	%		.70	%
Commercial construction		.09			.41			.12			.07			.10
Real estate – commercial		.18			.09			.27			.20			.15
Real estate – residential		.25			.26			.49			.50			.42
Home equity lines of credit		.16			.11			.18			.24			.21
Credit card and other unsecured lines of credit		4.96			4.41			4.21			4.02			3.48
Other consumer		.83			.85			.94			.93			1.02
Total net charge-offs to average portfolio loans		.36	%		.39	%		.80	%		.83	%		.68	%

Net charge-offs decreased during 2005 due to strong commercial loan credit quality, aided by recoveries of previously recognized commercial losses. Net charge-offs associated with credit card and other unsecured consumer lines of credit increased due to a high volume of consumer bankruptcies triggered by the change in consumer bankruptcy laws in 2005. Credit card and other unsecured lines of credit are charged off within 30 days of notification of a consumer bankruptcy filing. Management does not believe that these charge offs are indicative of a future adverse trend in consumer losses. Net charge-offs for home equity lines of credit increased due to the continued growth and seasoning of this portfolio.

Net charge-offs also decreased during 2004 due primarily to lower losses and higher recoveries on commercial loans and residential real estate loans. The credit quality of the commercial portfolio improved in 2004 in comparison to the prior year due to general improvement in the financial condition of borrowers as the economy strengthened. Losses declined for residential real estate loans in 2004 due to a $17 million write-down prior to the sale of the former Altegra portfolio in 2003. Commercial construction charge-offs increased by a large percentage in 2004 due to a few specific problem loans and the relatively small size of this category. Credit card and other unsecured lines of credit charge-offs also increased due to seasoning of this portfolio and high levels of consumer bankruptcies.

An allocation of the ending allowance for loan losses and allowance for losses on lending-related commitments by portfolio type follows. The decreased allocation of the ending allowance for loan losses to the commercial and commercial real estate portfolio is due to improvement in these portfolios. In 2004, the Corporation refined its methodology for determining certain elements of the allowance for loan losses. This refinement resulted in allocation of the entire allowance to the specific loan portfolios. As a result, the allocation of the allowance in periods prior to 2004 is not directly comparable to the current presentation. In addition to the refinement of

ANNUAL REPORT 2005  25

the allocation, all loan categories were affected in 2004 by acquisitions.

(In Millions)		2005		2004		2003		2002		2001
Allowance for loan losses:
Commercial		$	494	$	572	$	283	$	360	$	340
Commercial construction and real estate – commercial			136		146		54		56		55
Real estate – residential			174		185		125		126		119
Home equity lines of credit and other consumer loans			131		127		94		124		142
Credit card and other unsecured lines of credit			159		158		129		101		83
Unallocated			—		—		338		239		186
Total		$	1,094	$	1,188	$	1,023	$	1,006	$	925
Allowance for losses on lending-related commitments:
	Commercial	$	84	$	100	$	102	$	92	$	71

Market Risk

Market risk is the risk of 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) meets monthly and 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 is also exposed to equity price risk through its bank stock fund, an internally managed portfolio of bank and thrift common stock investments. As of December 31, 2005, this portfolio had a cost basis and fair value of $135 million and $139 million, respectively. Price risk in the bank stock fund is mitigated by limiting the amount invested in any one company. The Corporation does not have any material foreign currency exchange rate risk exposure.

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 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: The Market Value of Equity (MVE) is defined as 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 11 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 and rate 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 +3.0% and -1.0%, respectively, as measured between +/-150 basis point instantaneous, parallel shifts in the yield curve.

The most recent market value model prepared estimated the current DOE at +0.7%. While the current DOE is below management’s long-term target of +1.0%, it is consistent with management’s current view of the interest rate outlook. DOE would rise to +1.6% given a parallel shift of the yield curve up 150 basis points and would be within the maximum constraint of +3.0%. DOE would fall to -0.6% 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 histor-

26  ANNUAL REPORT 2005

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FINANCIAL REVIEW (Continued)

ical 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.

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 non-parallel 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 prepared projects net income would be 1.0% lower 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 1.4% if rates were two standard deviations below the implied forward curve over the same period. Both of the earning simulation projections in net income were within the ALCO guideline of -4.0%.

The earnings simulation model excludes the potential effects on fee income and noninterest expense associated with changes in interest rates. Mortgage banking revenue in particular, which is generated from originating, selling, and servicing residential mortgage loans, is highly sensitive to changes in interest rates due to the direct effect changes in interest rates have on loan demand and the value of MSRs. In general, low or declining interest rates typically lead to increased origination and sales income but potentially lower servicing-related income 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 origination and sales income while servicing-related income 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.

Summary information about the interest-rate risk measures follows:

	2005			2004
One Year Net Income Simulation Projection
2 SD below implied forward curve		-1.4	%		-2.9	%
2 SD above implied forward curve		-1.0			1.9
Duration of Equity
-150 bp shock vs. stable rate		-.6	%		-2.0	%
+150 bp shock vs. stable rate		1.6			.6

At the end of 2005, the simulations continued to show assets repricing or maturing faster than liabilities. The yield curve flattened throughout the course of 2005 which contributed to slight compression in the net interest margin. Additional flattening of the yield curve would continue to put pressure on the margin, as exhibited by the two standard deviation down rate scenario; while a steepening of the curve would result in less pressure on the margin.

Trading Risk Management: Certain loans, securities, and derivative instruments are considered trading instruments when they are held primarily for the purpose of making short-term profits or are entered into to provide risk management products to customers. The risk of loss associated with these activities is monitored on a regular basis through the use of a statistically-based value-at-risk methodology (VAR). VAR is defined as the potential overnight dollar loss from adverse market movements, with 97.5% confidence, based on historical prices and market rates. During 2005, the average, high, and low VAR amounts were $3 million, $10 million, and $400 thousand, respectively, within the limit established by ALCO of $13 million. During 2004, the average, high, and low VAR amounts were $1 million, $2 million, and $400 thousand, respectively. Income from these activities, including interest income, totaled $20 million in 2005, $15 million in 2004, and $11 million in 2003.

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. The Corporation maintains 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 mar-

ANNUAL REPORT 2005  27

________________________________________________________________________________

kets, the Federal Home Loan Bank, the U.S. Treasury, and through the sale or securitization of various types of assets. Funding sources did not change significantly during 2005. Core deposits, which continue to be the most significant source of funding, comprised approximately 50% of funding at December 31, 2005 and 2004. Refer to the Financial Condition section of this Financial Review for further discussion on changes in funding sources. Asset securitization vehicles have also been used as a source of funding over the past several years. During 2005, the Corporation securitized $2.2 billion of indirect automobile loans and $600 million of credit card receivables. In 2004, the Corporation securitized $890 million of automobile 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. At December 31, 2005, the main sources of funding for the holding company include dividends and returns of investment from its subsidiaries, a line of credit with its bank subsidiaries, the commercial paper market, and access to the capital markets.

The primary source of funding for the holding company has been dividends and returns of investment from its bank and nonbank subsidiaries. As discussed in Note 17 to the consolidated financial statements, the Corporation’s bank subsidiaries are subject to regulation and, among other things, may be limited in their 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 40 may not represent cash immediately available to the holding company. The Corporation’s bank and nonbank subsidiaries declared and paid cash dividends totaling $1.2 billion, $2.2 billion, and $1.3 billion in 2005, 2004, and 2003, respectively. During 2005, the bank subsidiaries were granted regulatory approval to provide liquidity to the holding company in the form of returns of capital totaling $1.4 billion. Returns of capital paid to the holding company by nonbank subsidiaries totaled $28 million and $555 million in 2005 and 2003, respectively, with none in 2004. During 2004, the holding company received $1.2 billion in cash proceeds from the sale of National Processing.

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 December 31, 2005 and 2004, $1.1 billion and $415 million, respectively, of commercial paper borrowings were outstanding.

The holding company has a $500 million internal line of credit with its banking subsidiaries to provide additional liquidity support. There were no borrowings under this agreement at December 31, 2005 and 2004.

The Corporation also has in place a shelf registration with the Securities and Exchange Commission to allow for the sale, over time, of up to $1.5 billion in senior subordinated debt securities, preferred stock, depositary shares, and common stock issuable in connection with conversion of the aforementioned securities. During 2005 and 2004, the holding company issued $700 million and $200 million of senior notes under this shelf registration, leaving $600 million available for future issuance.

Contractual Obligations, Commitments, Contingent Liabilities, and Off-balance Sheet Arrangements

The Corporation has various financial obligations, including contractual obligations and commitments that may require future cash payments.

Contractual Obligations: The following table presents, as of December 31, 2005, significant fixed and determinable contractual obligations by payment date. 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 to		Three to		Over
	Note		One Year		Three		Five		Five
(In Millions)	Reference		or Less		Years		Years		Years		Total
Deposits without a stated maturity(a)			$	56,723	$	—	$	—	$	—	$	56,723
Consumer and brokered certificates of deposits(b)(c)				18,534		6,924		1,877		3,510		30,845
Federal funds borrowed and security repurchase agreements (b)		13		6,503		—		—		—		6,503
Borrowed funds(b)		14		3,212		—		—		—		3,212
Long-term debt(b)(c)		15, 16		12,788		11,397		6,077		5,555		35,817
Operating leases				146		251		178		449		1,024
Purchase obligations				172		179		32		21		404

(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 December 31, 2005. 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.
(c)	Excludes unamortized premiums or discounts, hedge basis adjustments, fair value adjustments, or other similar carrying value adjustments.

The operating lease obligations represent short- and long-term lease and rental payments for facilities, certain software, and data processing and other equipment. Purchase obligations represent obligations under 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 purchase obligation amounts presented above primarily relate to certain contractual payments for services provided for information technology, data processing, branch construction, and the outsourcing of certain operational activities.

The Corporation also has obligations under its postretirement plan as described in Note 23 to the consolidated financial statements. The postretirement benefit payments represent actuarially determined future benefit

28  ANNUAL REPORT 2005

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FINANCIAL REVIEW (Continued)

payments to eligible plan participants. The Corporation reserves the right to terminate the postretirement benefit plan at any time. The Corporation did not have any commitments or obligations to the defined benefit pension plan at December 31, 2005, due to the funded status of the plan.

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 daily 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 December 31, 2005, 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.

Commitments: The following table details the amounts and expected maturities of significant commitments as of December 31, 2005. Further discussion of these commitments is included in Note 21 to the consolidated financial statements.

				One to		Three to		Over
		One Year		Three		Five		Five
(In Millions)		or Less		Years		Years		Years		Total
Commitments to extend credit:
	Commercial	$	7,426	$	6,896	$	8,175	$	491	$	22,988
	Residential real estate		9,052		—		—		—		9,052
	Revolving home equity and credit card lines		34,072		5		3		—		34,080
	Other		647		—		—		—		647
Standby letters of credit			1,727		1,432		1,460		127		4,746
Commercial letters of credit			345		5		12		—		362
Net commitments to sell mortgage loans and mortgage-backed securities			1,495		—		—		—		1,495
Net commitments to sell commercial real estate loans			202		82		1		—		285
Commitments to fund principal investments			66		22		62		145		295
Commitments to fund civic and community investments			181		105		35		30		351
Commitments to purchase beneficial interests in securitized automobile loans			995		—		—		—		995

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 December 31, 2005. The timing of these payments could change due to extensions in the investment periods of the funds or by the rate 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 indirect automobile loans securitized 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 2006 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 certain 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 its 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. In addition, the Corporation acquired home equity securitizations as part of the acquisition of Provident. 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.

During 2005, the Series 2000-1 credit card securitization matured, and the Corporation completed the securitization of a new pool of credit card receivables, with an outstanding principal balance of $600 million. During the fourth quarter, cash collected on the Series 2001-1 credit card securitization was accumulated to be returned to investors in January 2006. As of December 31, 2005, credit card receivables held for sale or securitization were $425 million. It is management’s intent to complete another securitization of credit card receivables in early 2006.

Further discussion on the accounting for securitizations is included in Note 1 to the consolidated financial

ANNUAL REPORT 2005  29

statements and detail regarding securitization transactions and retained interests is included in Note 5.

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

Application of Critical Accounting Policies

National City’s consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles and follow general 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 are provided by other third-party sources, when available. When third-party information is not available, valuation adjustments are estimated by management primarily through the use of internal cash flow modeling techniques.

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 determination of the allowance for loan losses and allowance for losses on lending-related commitments, the valuation of mortgage servicing rights, the valuation of derivative instruments, and income taxes to be critical accounting policies.

Allowance for Loan Losses and Allowance for Losses on Lending-Related Commitments: Estimating the amount of the allowance for loan losses and allowance for losses on lending-related commitments requires significant judgment and the use of estimates related to the amount and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, and consideration of current economic trends and conditions, all of which may be susceptible to significant change.

Management’s assessment of the adequacy of the allowance for loan losses considers individual impaired loans, pools of homogeneous loans with similar risk characteristics, and other environmental risk factors. The allowance established for individual impaired loans reflects expected losses resulting from analyses developed through specific credit allocations for individual loans. The specific credit allocations are based on regular analyses of all loans over a fixed dollar amount where the internal credit rating is at or below a predetermined classification. These analyses involve a high degree of judgment in estimating the amount of loss associated with specific impaired loans, including estimating the amount and timing of future cash flows, current market value of the loan, and collateral values.

Pools of homogeneous loans with similar risk characteristics are also assessed for probable losses. A loss migration analysis is performed quarterly and loss factors are updated regularly based on actual experience. This analysis examines historical loss experience, the related internal gradings of loans charged off and considers inherent but undetected losses within the portfolio. Inherent but undetected losses may arise due to uncertainties in economic conditions, delays in obtaining information, including unfavorable information about a borrower’s financial condition, the difficulty in identifying triggering events that correlate perfectly to subsequent loss rates, and risk factors that have not yet manifested themselves in loss allocation factors. This component of the allowance also considers inherent imprecision in loan loss migration models. The Corporation has grown through acquisition, expanded the geographic footprint in which it operates, and changed its portfolio mix in recent years. As a result, historical loss experience data used to establish loss estimates may not precisely correspond to the current portfolio. Also, loss data representing a complete economic cycle is not available for all sectors. Uncertainty surrounding the strength and timing of economic cycles also affects estimates of loss. The historical loss experience used in the migration analysis may not be representative of actual unrealized losses inherent in the portfolio.

Management also evaluates the impact of environmental factors which pose additional risks that may not adequately be addressed in the analyses described above. Such environmental factors could include: levels of, and trends in, consumer bankruptcies, delinquencies, impaired loans, charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in lending policies and procedures including those for underwriting, collection, charge-off, and recovery; experience, ability, and depth of lending management and staff; national and local economic trends and conditions; industry and geographic conditions; concentrations of credit such as, but not limited to, local industries, their employees or suppliers; or any other common risk factor that might affect loss experience across one or more components of the portfolio. The determination of this component of

30  ANNUAL REPORT 2005

FINANCIAL REVIEW (Continued)

the allowance requires considerable management judgment.

There are many factors affecting the allowance for loan losses and allowance for losses on lending-related commitments; some are quantitative while others require qualitative judgment. Although management believes its process for determining the allowance adequately considers all of the potential factors that could potentially result in credit losses, the process includes subjective elements and may be susceptible to significant change. To the extent actual outcomes differ from management estimates, additional provision for credit losses could be required that could adversely affect earnings or financial position in future periods. The allowance for loan losses and allowance for losses on lending-related commitments are assigned to business lines based on the nature of the loan portfolio in each business line. The Wholesale Banking, Consumer and Small Business Financial Services, and National Consumer Finance business lines have been assigned the majority of the allowance, and accordingly, would be the business lines most affected by actual outcomes differing from management estimates.

The allowance for loans losses addresses credit losses inherent 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 credit losses inherent in commitments to lend and letters of credit and is presented in 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 reestablished in the allowance for loan losses.

The Credit Risk section of this financial review includes a discussion of the factors driving changes in the allowance for loan losses during the current period.

Mortgage Servicing Rights (MSRs): Servicing residential mortgage loans for third-party investors represents a significant business activity of the National City Mortgage (NCM) line of business. As of December 31, 2005 and 2004, NCM’s MSRs totaled $2.1 billion and $1.5 billion, respectively. 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 readily 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. The expected and actual rates of mortgage loan prepayments are the most significant factors driving the value of MSRs. Increases in mortgage loan prepayments reduce estimated future net servicing cash flows because the life of the underlying loan is reduced. In determining the fair value of the MSRs, mortgage interest rates, which are used to determine prepayment rates, and discount rates are held constant over the estimated life of the portfolio. Expected mortgage loan prepayment rates are derived from a third-party model and adjusted to reflect National City’s actual prepayment experience. MSRs are carried at the lower of the initial capitalized amount, net of accumulated amortization and hedge accounting adjustments, or fair value. Certain MSRs hedged with derivative instruments as part of SFAS 133 hedge relationships may be adjusted above their initial carrying value. Management compares its fair value estimates and assumptions to observable market data where available and to recent market activity and believes that the fair values and related assumptions are reasonable and comparable to those used by other market participants.

Note 11 to the consolidated financial statements includes a sensitivity analysis showing the effects immediate 10% and 20% adverse changes in the mortgage loan prepayment and discount rate assumptions used to estimate the fair value of MSRs would have on the fair value. Management mitigates risk associated with declines in the estimated fair value of its MSRs due to increases in mortgage loan prepayments through the use of derivative instruments that are expected to increase in value when interest rates decline. The effects of recognized changes in the values of the MSRs and the related derivative instruments are included in mortgage banking revenue on the income statement. Note 11 to the financial statements includes discussion of the impacts of valuation changes on current period income.

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. As of December 31, 2005, the recorded fair values of derivative assets and liabilities were $773 million and $738 million, respectively. All derivative instruments are carried at fair value on the balance sheet. The valuation of derivative instruments is considered critical because most are valued using discounted cash flow modeling techniques in the absence of market value quotes. Therefore, management must make estimates regarding the amount and timing of future cash flows, which are susceptible to significant change in future periods based on changes in interest rates. The cash flow projection models are acquired from third parties and the assumptions used by management are based on yield curves, forward yield curves, and implied volatilities observable in the cash and derivatives market. The pricing models are also regularly validated by testing through comparison with other third parties.

Because the majority of the derivative instruments are used to protect the value of other 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 value of those assets and liabilities. Changes in the fair values of derivative instruments associated with mortgage banking activities are included in mortgage banking revenue on the consolidated income statement and affect the results of the National City Mortgage line of business. Changes in the fair values of other derivatives are included in other noninterest income on the income statement and are primarily

ANNUAL REPORT 2005  31

generated from investment funding activities and are not allocated to the business lines. Notes 1 and 24 to the consolidated financial statements also 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.

On a quarterly basis, management assesses the reasonableness of its effective tax rate based upon its current best estimate of net income and the applicable taxes expected for the full year. Deferred tax assets and liabilities are reassessed on an annual basis, or sooner, if business events or circumstances warrant. Reserves for contingent tax liabilities are reviewed quarterly for adequacy based upon developments in tax law and the status of examinations or audits. For the years ended December 31, 2005 and 2004, net tax benefits of $11 million and $67 million, respectively, were recorded based on the regular reassessment of required tax accruals. No such tax benefits were recorded in 2003.

Recent Accounting Pronouncements and Developments

Note 2 to the consolidated financial statements discusses new accounting policies adopted by the Corporation during 2005 and the expected impact of accounting policies recently issued or proposed but 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.

The Financial Accounting Standard Board (FASB) has issued an exposure draft on accounting for servicing rights. Based on the guidance in the exposure draft and the FASB’s deliberations to date, if adopted, this standard will require all servicing rights to initially be measured at fair value. It will also permit an entity to elect to subsequently measure each class of servicing rights using one of two methods. Consistent with current practice, the value initially assigned to each class of servicing rights may be amortized in proportion to, and over, the servicing period, and the asset carried at the lower of amortized cost or fair value. Alternatively, a company may elect to measure classes of servicing rights at fair value.

The Corporation will be required to adopt this standard beginning January 1, 2007; however, early adoption is allowed if the Corporation has not previously issued interim financial statements. As such, if the FASB finalizes this statement in the first quarter of 2006, management plans to adopt this standard effective January 1, 2006, and intends to elect to subsequently measure NCM’s mortgage servicing rights at fair value. A cumulative-effect adjustment to retained earnings will be recorded on the date of adoption to reflect the difference between the fair value and carrying value of the then existing servicing rights that have been elected to be carried at fair value. As of December 31, 2005, the fair value of NCM’s mortgage servicing rights exceeded its carrying value by $26 million. After adoption of this standard, all changes in the fair value of NCM’s mortgage servicing rights will be recognized in earnings each period.

Best In Class

Best In Class is a program designed to drive long-term performance improvement and cultural change. It includes reengineering or replacement of business processes, incentive systems, and management structures. The overall objectives are sustainable revenue growth, a lower efficiency ratio, and a culture of high performance. Best In Class is currently estimated to improve pretax income by approximately $750 million per annum at its completion in 2008. Approximately 50-60% of the increase is expected to be derived from revenue enhancements, with the remainder to come from cost savings.

Best In Class includes six major areas of focus:

•  Focusing and equipping the salesforce

•  Deepening customer relationships

•  Broadening the customer base

•  Operating more effectively and efficiently

•  Managing risk

•  Aligning the organization for high performance

Thirty-three projects are currently launched and active. Completion will take approximately three years. For the 10 projects which are now completed or in implementation, projected benefits to pretax income are approximately $155 million in 2006, $240 million in 2007, and $300 million in 2008.

Best In Class costs incurred in 2005 were $65 million, including $53 million of severance and related costs, $7 million of external consultant fees, and $5 million of lease exit costs and asset impairments. External consultants were utilized to identify and prioritize projects, to estimate expected project benefits, and will be utilized in 2006 to design and implement a project aimed at reengineering core lending processes and infrastructures. All other project design and implementation work is being done internally. The costs identified above exclude any compensation and benefits of National City employees working on these projects. Substantially all costs incurred to date have been recorded in the Parent & Other segment.

Additional severance and other costs are likely to be incurred in 2006 as certain projects progress. At this time, such costs cannot be reasonably estimated. Severance costs recognized in 2005 are expected to be fully paid out by August 2008. Lease termination payments will continue through January 2010.

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FINANCIAL REVIEW (Continued)

Fourth Quarter Review

Unaudited quarterly results are presented on page 33.

Net income for the fourth quarter of 2005 was $398 million, or $.64 per diluted share, compared to $478 million, or $.74 per diluted share for the third quarter of 2005, and $960 million, or $1.46 per diluted share for the fourth quarter of 2004. Fourth quarter 2005 net income included after-tax charges totaling $75 million, or $.12 per diluted share, consisting of $37 million pertaining to the Best In Class program, a $19 million loss from the securitization of indirect automobile loans pursuant to the discontinuance of the business, and $19 million of contributions expense related to securities donated to the Corporation’s charitable foundation. Net income for the fourth quarter of 2004 included the after-tax gain of $477 million recognized on the sale of National Processing, inclusive of associated sale expenses, adding approximately $.74 to diluted earnings per share.

Net interest income for the fourth quarter of 2005 was $1.2 billion, consistent with the prior quarter and fourth quarter of 2004. Net interest margin was 3.74% for the fourth quarter of 2005, up slightly from 3.72% in the third quarter of 2005, and down from 4.01% in the fourth quarter of 2004. The lower margin reflects a flatter yield curve, a lower spread on mortgages held for sale, and the effects of narrower commercial and consumer loan spreads.

The provision for loan losses was $132 million for the fourth quarter of 2005, compared to $56 million for the third quarter of 2005 and $81 million for the fourth quarter of 2004. The linked quarter and year-over-year increase reflects higher commercial and consumer charge-offs, as well as a $20 million one-time provision for estimated consumer bankruptcy losses that have not yet been realized. See the Credit Risk section of the Financial Review for further discussion of the allowance for loan losses and credit quality.

Fees and other income were $768 million for the fourth quarter of 2005, compared to $748 million in the prior quarter and $1.4 billion in the fourth quarter of 2004. Excluding the $714 million pretax gain on the sale of National Processing, fees and other income for the fourth quarter of 2004 would have been $727 million. Fees and other income for the fourth quarter of 2005 included an $18 million pretax gain on the sale of home equity lines of credit and a $29 million pretax loss on the securitization of indirect automobile loans. Mortgage banking revenue increased on a year-over-year basis due to increased National City Mortgage production revenue and First Franklin mortgage loan sales. Fourth quarter 2005 mortgage banking revenue also included $15 million of net pretax hedging gains on MSRs, compared to a net pretax hedging loss of $10 million in the fourth quarter of 2004. Deposit service charges increased by 13% compared to the year ago quarter, reflecting growth in both the number of accounts and fee-generating transactions.

Noninterest expense was $1.3 billion for the fourth quarter of 2005, compared to $1.2 billion in both the prior quarter and in the fourth quarter of 2004. The fourth quarter of 2005 included pretax charges of $56 million relating to severance and other costs associated with the Best In Class initiative, and $30 million of contribution expense relating to securities donated to the Corporation’s charitable foundation.

The income tax provision for the fourth quarter of 2005 and 2004 included benefits of $25 million and $44 million, respectively, resulting from the regular reassessment of certain tax accruals.

Average total assets for the fourth quarter of 2005 were $143.0 billion, down from $145.0 billion in the third quarter of 2005 and up from $138.0 billion in the fourth quarter of 2004. The decrease in average assets on a linked quarter basis reflects the securitization of $2.2 billion of indirect automobile loans and the sale of $1.4 billion of home equity lines of credit during the fourth quarter. The growth in average assets on a year-over-year basis was mainly due to loan growth.

Forward-Looking Statements

This Annual 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, management’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. Management may elect to update forward-looking statements at some future point; however, it specifically disclaims any obligation to do so.

ANNUAL REPORT 2005  33

________________________________________________________________________________

Quarterly Financial Information (unaudited)

(Dollars in Millions, Except Per Share Amounts)		First			Second			Third			Fourth			Full Year
2005
Condensed Income Statement
	Interest income(a)	$	1,744		$	1,857		$	2,027		$	2,104		$	7,732
	Interest expense		594			694			827			921			3,036
	Net interest income(a)		1,150			1,163			1,200			1,183			4,696
	Provision for credit losses		70			26			56			132			284
	Fees and other income(a)		785			976			748			768			3,277
	Net securities gains/(losses)		14			5			(1	)		9			27
	Noninterest expense		1,145			1,181			1,158			1,271			4,755
	Income before income tax expense		734			937			733			557			2,961
	Net income		484			625			478			398			1,985
Financial Ratios
	Return on average common equity		15.35	%		19.65	%		14.59	%		12.57	%		15.54	%
	Return on average assets(a)		1.42			1.80			1.31			1.10			1.40
	Net interest margin(a)		3.78			3.76			3.72			3.74			3.74
	Efficiency ratio(a)		58.94			55.03			59.25			64.85			59.41
Per Common Share
	Basic net income	$	.75		$	.98		$	.75		$	.65		$	3.13
	Diluted net income		.74			.97			.74			.64			3.09
	Dividends declared and paid		.35			.35			.37			.37			1.44
2004
Condensed Income Statement
	Interest income(a)	$	1,331		$	1,381		$	1,593		$	1,721		$	6,026
	Interest expense		325			335			424			509			1,593
	Net interest income(a)		1,006			1,046			1,169			1,212			4,433
	Provision for credit losses		83			61			98			81			323
	Fees and other income(a)		1,109			849			1,021			1,442			4,421
	Net securities gains		—			5			3			11			19
	Noninterest expense		965			1,049			1,211			1,247			4,472
	Income before income tax expense		1,067			790			884			1,337			4,078
	Net income		710			519			591			960			2,780
Financial Ratios
	Return on average common equity		29.58	%		20.13	%		19.00	%		29.71	%		24.56	%
	Return on average assets(a)		2.61			1.80			1.76			2.77			2.23
	Net interest margin(a)		4.11			4.03			3.97			4.01			4.02
	Efficiency ratio(a)		45.50			55.15			55.11			46.85			50.35
Per Common Share
	Basic net income	$	1.17		$	.84		$	.88		$	1.48		$	4.37
	Diluted net income		1.16			.83			.86			1.46			4.31
	Dividends declared and paid		.32			.32			.35			.35			1.34
2003
Condensed Income Statement
	Interest income(a)	$	1,513		$	1,514		$	1,538		$	1,400		$	5,965
	Interest expense		426			426			403			375			1,630
	Net interest income(a)		1,087			1,088			1,135			1,025			4,335
	Provision for credit losses		200			183			107			148			638
	Fees and other income(a)		1,101			982			484			979			3,546
	Net securities gains		—			32			5			10			47
	Noninterest expense		1,001			1,020			998			1,034			4,053
	Income before income tax expense		987			899			519			832			3,237
	Net income		643			586			344			544			2,117
Financial Ratios
	Return on average common equity		30.60	%		26.74	%		14.87	%		22.99	%		23.60	%
	Return on average assets(a)		2.24			1.97			1.10			1.88			1.79
	Net interest margin(a)		4.19			4.08			4.07			3.99			4.08
	Efficiency ratio(a)		45.57			49.13			61.38			51.42			51.24
Per Common Share
	Basic net income	$	1.05		$	.96		$	.56		$	.89		$	3.46
	Diluted net income		1.05			.94			.56			.88			3.43
	Dividends declared and paid		.305			.305			.32			.32			1.25

(a)  During 2005, the Corporation reclassified the amortization of certain deferred loan origination fees and costs associated with home equity lines of credit from noninterest income to interest income. The effect of this reclassification was to increase non-interest income and reduce net interest income with no effect on net income. In addition, net deferred origination costs were reclassified from other liabilities to home equity lines of credit. Prior period financial information has been updated to reflect this reclassification.

34  ANNUAL REPORT 2005

________________________________________________________________________________

STATISTICAL DATA

Consolidated Statements of Income and Selected Financial Data^(a)

				For the Calendar Year
(In Millions, Except Per Share Amounts)				2005			2004(b)			2003			2002			2001
Statements of Income
	Interest income:
		Loans(d)			$7,239		$	5,560		$	5,553		$	5,319		$	5,857
		Securities(e)			382			377			355			519			492
		Other(e)			111			89			57			63			59
			Total interest income		7,732			6,026			5,965			5,901			6,408
	Interest expense:
		Deposits			1,605			896			892			1,148			1,778
		Borrowings and long-term debt			1,431			697			738			762			1,198
			Total interest expense		3,036			1,593			1,630			1,910			2,976
	Net interest income				4,696			4,433			4,335			3,991			3,432
	Provision for credit losses				284			323			638			682			605
		Net interest income after provision for credit losses			4,412			4,110			3,697			3,309			2,827
	Fees and other income(c)/(d)				3,277			4,421			3,546			2,467			2,540
	Securities gains, net				27			19			47			81			145
			Total noninterest income		3,304			4,440			3,593			2,548			2,685
	Noninterest expense(c)				4,755			4,472			4,053			3,688			3,345
		Income before income taxes			2,961			4,078			3,237			2,169			2,167
	Income taxes				976			1,298			1,120			722			779
	Net income				$1,985		$	2,780		$	2,117		$	1,447		$	1,388
Per Common Share
	Diluted net income				$3.09		$	4.31		$	3.43		$	2.35		$	2.27
	Dividends declared				1.44			1.34			1.25			1.20			1.16
	Dividends paid				1.44			1.34			1.25			1.20			1.16
	Average diluted shares				641.60			645.51			616.41			616.17			611.94
	Book value				$20.51		$	19.80		$	15.39		$	13.35		$	12.15
	Market value (close)				33.57			37.55			33.94			27.32			29.24
Financial Ratios
	Return on average common equity				15.54	%		24.56	%		23.60	%		18.14	%		19.94	%
	Return on average total equity				15.55			24.57			23.60			18.14			19.90
	Return on average assets(d)				1.40			2.23			1.79			1.40			1.49
	Average stockholders’ equity to average assets(d)				9.02			9.10			7.57			7.70			7.49
	Dividend payout ratio				46.60			31.09			36.44			51.06			51.10
	Net interest margin(d)				3.74			4.02			4.08			4.33			4.08
	Net charge-offs to average portfolio loans(d)				.36			.39			.80			.83			.68
	Efficiency ratio(c)/(d)				59.41			50.35			51.24			56.85			55.70
At Year End
	Assets(d)				$142,397		$	139,414		$	114,102		$	118,153		$	105,905
	Portfolio loans(d)				106,039			100,271			79,344			72,174			68,058
	Loans held for sale or securitization				9,667			12,430			15,368			24,501			16,831
	Securities(e)				7,875			8,765			6,525			8,675			9,479
	Deposits				83,986			85,955			63,930			65,119			63,130
	Long-term debt				30,970			28,696			23,666			22,730			17,316
	Total stockholders’ equity				12,613			12,804			9,329			8,161			7,381
	Common shares outstanding				615.05			646.75			606.00			611.49			607.35

[Additional columns below]

[Continued from above table, first column(s) repeated]

				For the Calendar Year
(In Millions, Except Per Share Amounts)				2000			1999			1998			1997			1996			1995
Statements of Income
	Interest income:
		Loans(d)		$	5,793		$	4,938		$	4,812		$	4,487		$	4,425		$	4,383
		Securities(e)			715			895			861			825			844			960
		Other(e)			62			80			84			51			50			58
			Total interest income		6,570			5,913			5,757			5,363			5,319			5,401
	Interest expense:
		Deposits			1,937			1,636			1,846			1,813			1,862			1,975
		Borrowings and long-term debt			1,671			1,277			999			739			612			673
			Total interest expense		3,608			2,913			2,845			2,552			2,474			2,648
	Net interest income				2,962			3,000			2,912			2,811			2,845			2,753
	Provision for credit losses				287			250			201			225			240			205
		Net interest income after provision for credit losses			2,675			2,750			2,711			2,586			2,605			2,548
	Fees and other income(c)/(d)				2,424			2,243			2,180			1,766			1,528			1,332
	Securities gains, net				57			138			134			81			109			42
			Total noninterest income		2,481			2,381			2,314			1,847			1,637			1,374
	Noninterest expense(c)				3,184			2,983			3,377			2,793			2,800			2,714
		Income before income taxes			1,972			2,148			1,648			1,640			1,442			1,208
	Income taxes				670			743			577			518			448			380
	Net income			$	1,302		$	1,405		$	1,071		$	1,122		$	994		$	828
Per Common Share
	Diluted net income			$	2.13		$	2.22		$	1.61		$	1.71		$	1.48		$	1.22
	Dividends declared				.855			1.085			.97			.86			.94			.65
	Dividends paid				1.14			1.06			.94			.84			.74			.65
	Average diluted shares				612.63			632.45			665.72			655.47			673.10			676.48
	Book value			$	11.06		$	9.39		$	10.69		$	9.75		$	9.39		$	8.77
	Market value (close)				28.75			23.69			36.25			32.88			22.44			16.56
Financial Ratios
	Return on average common equity				21.29	%		22.64	%		15.40	%		18.20	%		16.69	%		15.44	%
	Return on average total equity				21.21			22.56			15.37			18.20			16.61			15.19
	Return on average assets(d)				1.52			1.67			1.34			1.56			1.40			1.15
	Average stockholders’ equity to average assets(d)				7.17			7.39			8.70			8.57			8.44			7.59
	Dividend payout ratio				40.14			48.87			60.25			50.29			63.51			53.28
	Net interest margin(d)				3.85			3.99			4.11			4.37			4.47			4.24
	Net charge-offs to average portfolio loans(d)				.46			.43			.37			.44			.46			.42
	Efficiency ratio(c)/(d)				58.75			56.49			65.81			60.45			63.47			65.85
At Year End
	Assets(d)			$	88,618		$	87,121		$	88,246		$	75,779		$	72,918		$	74,142
	Portfolio loans(d)				65,603			60,204			58,011			51,994			50,442			50,127
	Loans held for sale or securitization				3,439			2,731			3,508			1,250			444			416
	Securities(e)				9,597			14,565			15,813			13,651			13,245			15,315
	Deposits				55,256			50,066			58,247			52,617			53,619			54,923
	Long-term debt				18,145			15,038			9,689			6,297			3,516			3,515
	Total stockholders’ equity				6,770			5,728			7,013			6,158			6,216			5,892
	Common shares outstanding				609.19			607.06			652.65			631.39			661.72			650.96

(a)	Prior period data have been restated, where applicable, for stock splits and pooling-of-interests business combinations.
(b)	On a comparable basis, results for 2004 were affected by the acquisitions of Allegiant Bancorp Inc., Provident Financial Group Inc., and Wayne Bancorp, and the sale of National Processing, Inc. Refer to Note 3 of the Consolidated Financial Statements for further details.
(c)	The 2000-2004 periods reflect the reclassification of certain loan origination costs from third-party expenses and personnel expense to mortgage banking revenue, consistent with the 2005 presentation.
(d)	The 2000-2004 periods reflect the reclassification of the amortization of certain deferred loan origination fees and costs associated with home equity lines of credit from card-related fees in noninterest income to interest income, consistent with the 2005 presentation. Additionally, net deferred origination costs were reclassified from other liabilities to home equity lines of credit included within Portfolio loans.
(e)	The 1995-2004 periods reflect the reclassification of Federal Reserve Bank and Federal Home Loan Bank Stock from Securities, Available for Sale to Other Investments, consistent with the 2005 presentation.

ANNUAL REPORT 2005  35

________________________________________________________________________________

REPORT ON MANAGEMENT’S ASSESSMENT OF

INTERNAL CONTROL OVER FINANCIAL REPORTING

National City Corporation is responsible for the preparation, integrity, and fair presentation of the consolidated financial statements included in this annual report. The consolidated financial statements and notes included in this annual report have been prepared in conformity with United States generally accepted accounting principles and necessarily include some amounts that are based on management’s best estimates and judgments.

We, as management of National City Corporation, are responsible for establishing and maintaining effective internal control over financial reporting that is designed to produce reliable financial statements in conformity with United States generally accepted accounting principles. The system of internal control over financial reporting as it relates to the financial statements is evaluated for effectiveness by management and tested for reliability through a program of internal audits. Actions are taken to correct potential deficiencies as they are identified. Any system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur and not be detected. Also, because of changes in conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to financial statement preparation.

Management assessed the Corporation’s system of internal control over financial reporting as of December 31, 2005, in relation to criteria for effective internal control over financial reporting as described in “Internal Control – Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concludes that, as of December 31, 2005, its system of internal control over financial reporting is effective and meets the criteria of the “Internal Control – Integrated Framework”. Ernst & Young LLP, independent registered public accounting firm, has issued an attestation report on management’s assessment of the Corporation’s internal control over financial reporting.

David A. Daberko
Chairman and Chief
Executive Officer
Jeffrey D. Kelly
Vice Chairman and
Chief Financial Officer

Cleveland, Ohio

February 3, 2006

36  ANNUAL REPORT 2005

________________________________________________________________________________

REPORTS OF ERNST & YOUNG LLP,

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Report on Effectiveness of Internal Control Over Financial Reporting

Audit Committee of the Board of Directors and the Stockholders of National City Corporation

We have audited management’s assessment, included in the accompanying Report on Management’s Assessment of Internal Control Over Financial Reporting, that National City Corporation maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). National City Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment about the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Corporation’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that National City Corporation maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, National City Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of National City Corporation as of December 31, 2005 and 2004, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2005 and our report dated February 3, 2006, expressed an unqualified opinion thereon.

Cleveland, Ohio

February 3, 2006

Report on Consolidated Financial Statements

Audit Committee of the Board of Directors and the Stockholders of National City Corporation

We have audited the accompanying consolidated balance sheets of National City Corporation and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of National City Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of National City Corporation and subsidiaries at December 31, 2005 and 2004, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of National City Corporation’s internal control over financial reporting as of December 31, 2005, based on criteria established in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 3, 2006 expressed an unqualified opinion thereon.

Cleveland, Ohio

February 3, 2006

ANNUAL REPORT 2005  37

________________________________________________________________________________

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets

				December 31
				2005			2004
(Dollars in Thousands, Except Per Share Amounts)
Assets
	Cash and demand balances due from banks			$	3,707,665		$	3,832,040
	Federal funds sold and security resale agreements				301,260			302,534
	Securities available for sale, at fair value				7,874,628			8,764,956
	Other investments				2,108,622			1,450,197
	Loans held for sale or securitization:
		Commercial			10,784			24,534
		Commercial real estate			35,306			546,072
		Mortgage			9,192,282			11,859,715
		Credit card			425,000			—
		Student loans			3,758			—
			Total loans held for sale or securitization		9,667,130			12,430,321
	Portfolio loans:
		Commercial			27,571,913			25,160,464
		Commercial construction			3,366,774			2,922,921
		Real estate - commercial			12,407,576			12,193,394
		Real estate - residential			32,822,947			30,398,068
		Home equity lines of credit			21,438,690			19,018,449
		Credit card and other unsecured lines of credit			2,611,679			2,413,465
		Other consumer			5,819,144			8,164,633
			Total portfolio loans		106,038,723			100,271,394
		Allowance for loan losses			(1,094,047	)		(1,188,462	)
			Net portfolio loans		104,944,676			99,082,932
	Properties and equipment				1,328,903			1,268,688
	Equipment leased to others				696,327			1,050,787
	Other real estate owned				97,008			89,362
	Mortgage servicing rights				2,115,715			1,504,866
	Goodwill				3,313,109			3,302,413
	Other intangible assets				168,353			213,461
	Derivative assets				772,918			885,541
	Accrued income and other assets				5,300,800			5,235,838
Total Assets				$	142,397,114		$	139,413,936
Liabilities
	Deposits:
		Noninterest bearing		$	17,429,227		$	18,652,502
		NOW and money market			28,304,007			29,263,454
		Savings			2,147,022			2,552,990
		Consumer time			20,527,784			16,828,303
		Other			6,734,915			4,635,416
		Foreign			8,843,036			14,021,942
			Total deposits		83,985,991			85,954,607
	Federal funds borrowed and security repurchase agreements				6,499,254			5,892,428
	Borrowed funds				3,517,537			2,035,900
	Long-term debt				30,496,093			28,091,363
	Junior subordinated debentures owed to unconsolidated subsidiary trusts				473,523			604,629
	Derivative liabilities				738,343			596,822
	Accrued expenses and other liabilities				4,073,502			3,434,658
Total Liabilities				$	129,784,243		$	126,610,407
Stockholders’ Equity
	Preferred stock, no par value, $100 liquidation value per share, authorized 5,000,000 shares, 70,272 shares outstanding in 2005 and 2004			$	—		$	—
	Common stock, par value $4 per share, 1,400,000,000 shares authorized, 615,047,663 and 646,749,650 outstanding shares at December 31, 2005 and 2004, respectively				2,460,191			2,586,999
	Capital surplus				3,681,603			3,647,711
	Retained earnings				6,459,212			6,468,231
	Accumulated other comprehensive income				11,865			100,588
Total Stockholders’ Equity					12,612,871			12,803,529
Total Liabilities and Stockholders’ Equity				$	142,397,114		$	139,413,936

See Notes to Consolidated Financial Statements

38  ANNUAL REPORT 2005

________________________________________________________________________________

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Consolidated Statements of Income

				For the Calendar Year
(Dollars in Thousands, Except Per Share Amounts)				2005		2004		2003
Interest Income
	Loans			$	7,239,110	$	5,560,221	$	5,552,789
	Securities:
		Taxable			342,797		338,724		318,304
		Exempt from Federal income taxes			30,509		32,669		33,927
		Dividends			8,857		5,906		3,345
	Federal funds sold and security resale agreements				12,266		6,185		2,756
	Other investments				98,280		82,298		54,809
			Total interest income		7,731,819		6,026,003		5,965,930
Interest Expense
	Deposits				1,604,601		896,131		891,731
	Federal funds borrowed and security repurchase agreements				209,893		94,097		132,397
	Borrowed funds				67,896		15,237		18,672
	Long-term debt and capital securities				1,153,681		587,870		587,016
			Total interest expense		3,036,071		1,593,335		1,629,816
Net Interest Income					4,695,748		4,432,668		4,336,114
Provision for Credit Losses					283,594		323,272		638,418
			Net interest income after provision for credit losses		4,412,154		4,109,396		3,697,696
Noninterest Income
	Mortgage banking revenue				1,054,165		1,189,982		1,447,204
	Deposit service charges				721,973		655,655		568,067
	Payment processing revenue				1,571		408,617		477,888
	Trust and investment management fees				296,012		300,931		291,075
	Card-related fees				211,527		212,462		200,839
	Brokerage revenue				159,433		145,869		122,080
	Leasing revenue				267,315		180,407		37,097
	Gain on sale of National Processing				—		714,195		—
	Other				565,236		613,089		401,669
			Total fees and other income		3,277,232		4,421,207		3,545,919
	Securities gains, net				27,087		18,974		47,152
			Total noninterest income		3,304,319		4,440,181		3,593,071
Noninterest Expense
	Salaries, benefits, and other personnel				2,560,250		2,362,949		2,157,539
	Equipment				303,471		299,867		244,596
	Net occupancy				315,647		254,006		232,989
	Third-party services				332,391		350,298		318,673
	Card processing				21,096		190,396		218,093
	Marketing and public relations				164,533		115,403		135,569
	Leasing expense				178,969		125,685		52,118
	Other				878,953		773,033		693,724
			Total noninterest expense		4,755,310		4,471,637		4,053,301
Income before income tax expense					2,961,163		4,077,940		3,237,466
Income tax expense					975,934		1,298,006		1,120,402
Net Income					$1,985,229		$2,779,934		$2,117,064
Net Income Per Common Share
	Basic				$3.13		$4.37		$3.46
	Diluted				3.09		4.31		3.43
Average Common Shares Outstanding
	Basic				633,431,660		635,450,188		611,205,682
	Diluted				641,600,969		645,510,514		616,410,043
Dividend declared per common share					$1.44		$1.34		$1.25

See Notes to Consolidated Financial Statements

ANNUAL REPORT 2005  39

________________________________________________________________________________

Consolidated Statements of Changes in Stockholders’ Equity

				Preferred		Common			Capital
(Dollars in Thousands, Except  Per Share Amounts)				Stock		Stock			Surplus
Balance, December 31, 2002				$	—	$	2,445,966		$	989,346
	Comprehensive income:
		Net income
		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
			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
	Total comprehensive income
	Common dividends declared, $1.25 per share
	Issuance of 5,966,961 common shares under stock-based compensation plans, including related tax effects						23,868			146,609
	Repurchase of 11,462,200 common shares						(45,849	)		(19,676	)
Balance, December 31, 2003				$	—	$	2,423,985		$	1,116,279
	Comprehensive income:
		Net income
		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
			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
	Total comprehensive income
	Common dividends declared, $1.34 per share
	Preferred dividends declared, $11.17 per share
	Issuance of 9,926,163 common shares under stock-based compensation plans, including related tax effects						38,215			307,658
	Repurchase of 40,087,100 common shares						(160,348	)		(134,120	)
	Issuance of 71,286,645 common shares and 70,272 preferred shares pursuant to acquisition(1)						285,147			2,358,284
	Other									(390	)
Balance, December 31, 2004				$	—	$	2,586,999		$	3,647,711
	Comprehensive income:
		Net income
		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
			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
	Total comprehensive income
	Common dividends declared, $1.44 per share
	Preferred dividends declared, $23.00 per share
	Issuance of 5,283,451 common shares under stock-based compensation plans, including related tax effects						21,337			142,194
	Issuance of 6,444,223 common shares pursuant to exercise of PRIDES forward contracts						25,777			139,224
	Repurchase of 43,480,400 common shares						(173,922	)		(247,526	)
Balance, December 31, 2005				$	—	$	2,460,191		$	3,681,603

[Additional columns below]

[Continued from above table, first column(s) repeated]

							Accumulated
							Other
				Retained			Comprehensive
(Dollars in Thousands, Except  Per Share Amounts)				Earnings			Income (Loss)			Total
Balance, December 31, 2002				$	4,658,565		$	67,180		$	8,161,057
	Comprehensive income:
		Net income			2,117,064						2,117,064
		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					(90,755	)		(90,755	)
			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					88,262			88,262
	Total comprehensive income										2,114,571
	Common dividends declared, $1.25 per share				(764,817	)					(764,817	)
	Issuance of 5,966,961 common shares under stock-based compensation plans, including related tax effects										170,477
	Repurchase of 11,462,200 common shares				(287,092	)					(352,617	)
Balance, December 31, 2003				$	5,723,720		$	64,687		$	9,328,671
	Comprehensive income:
		Net income			2,779,934						2,779,934
		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					(25,125	)		(25,125	)
			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					61,026			61,026
	Total comprehensive income										2,815,835
	Common dividends declared, $1.34 per share				(860,354	)					(860,354	)
	Preferred dividends declared, $11.17 per share				(785	)					(785	)
	Issuance of 9,926,163 common shares under stock-based compensation plans, including related tax effects										345,873
	Repurchase of 40,087,100 common shares				(1,174,284	)					(1,468,752	)
	Issuance of 71,286,645 common shares and 70,272 preferred shares pursuant to acquisition(1)										2,643,431
	Other										(390	)
Balance, December 31, 2004				$	6,468,231		$	100,588		$	12,803,529
	Comprehensive income:
		Net income			1,985,229						1,985,229
		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					(111,211	)		(111,211	)
			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					22,488			22,488
	Total comprehensive income										1,896,506
	Common dividends declared, $1.44 per share				(922,377	)					(922,377	)
	Preferred dividends declared, $23.00 per share				(1,616	)					(1,616	)
	Issuance of 5,283,451 common shares under stock-based compensation plans, including related tax effects										163,531
	Issuance of 6,444,223 common shares pursuant to exercise of PRIDES forward contracts										165,001
	Repurchase of 43,480,400 common shares				(1,070,255	)					(1,491,703	)
Balance, December 31, 2005				$	6,459,212		$	11,865		$	12,612,871

⁽¹⁾  Includes adjustment for fair value of stock options exchanged and forward purchase contracts assumed of $86 million and $59 million, respectively.

See Notes to Consolidated Financial Statements

40  ANNUAL REPORT 2005

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CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Consolidated Statements of Cash Flows

			For the Calendar Year
(In Thousands)			2005			2004			2003
Operating Activities
	Net income		$	1,985,229		$	2,779,934		$	2,117,064
	Adjustments to reconcile net income to net cash provided by operating activities:
		Provision for credit losses		283,594			323,272			638,418
		Depreciation and amortization of properties and equipment and equipment leased to others		426,011			343,001			194,877
		Amortization of intangible assets and servicing assets		604,814			583,630			536,972
		Accretion of premiums and discounts on securities, loans, deposits, and debt obligations		(44,301	)		(61,562	)		(20,085	)
		Servicing asset (recoveries) impairment charges		(73,651	)		105,037			(194,277	)
		Ineffective hedge and other derivative gains, net		(319,095	)		(652,557	)		(251,549	)
		Gain on sale of National Processing		—			(714,195	)		—
		Securities gains, net		(27,087	)		(18,974	)		(47,152	)
		Gains on loans sold or securitized, net		(49,515	)		(3,379	)		(1,031,561	)
		Other losses (gains), net		141,315			(91,198	)		191,984
		Originations and purchases of loans held for sale or securitization		(74,928,227	)		(80,725,186	)		(111,133,636	)
		Principal payments on and proceeds from sales of loans held for sale or securitization		77,793,467			82,601,040			119,666,635
		Provision for deferred income taxes		348,411			(60,389	)		(107,880	)
		(Increase) decrease in accrued interest receivable		(83,639	)		(57,892	)		12,383
		Increase (decrease) in accrued interest payable		31,766			15,434			(19,479	)
		Other operating activities, net		374,414			655,226			2,269,746
Net cash provided by operating activities				6,463,506			5,021,242			12,822,460
Lending and Investing Activities
	Net (increase) decrease in federal funds sold, security resale agreements, and other investments			(801,305	)		4,247			208,145
	Purchases of available-for-sale securities			(2,738,209	)		(1,356,198	)		(3,945,699	)
	Proceeds from sales of available-for-sale securities			1,693,294			1,457,137			1,513,196
	Proceeds from maturities, calls, and prepayments of available-for-sale securities			1,817,125			2,376,281			4,488,063
	Net increase in loans			(10,868,840	)		(11,328,636	)		(10,984,291	)
	Proceeds from sales of loans			1,294,862			1,193,824			1,795,078
	Proceeds from securitizations of loans			2,730,822			811,185			40,269
	Net increase in properties and equipment and equipment leased to others			(189,505	)		(145,731	)		(296,887	)
	Net cash (paid) received for acquisitions			(322,273	)		172,526			(35,118	)
	Proceeds from the sale of National Processing, net of cash sold			—			1,085,320			—
	Proceeds from divestitures, net of cash sold			24,241			28,710			—
Net cash used in lending and investing activities				(7,359,788	)		(5,701,335	)		(7,217,244	)
Deposit and Financing Activities
	Net (decrease) increase in deposits			(1,663,242	)		9,710,994			(1,161,690	)
	Net increase (decrease) in federal funds borrowed and security repurchase agreements			606,826			(2,423,938	)		165,658
	Net increase (decrease) in borrowed funds			1,481,637			(5,016,503	)		(4,878,449	)
	Repayments of long-term debt			(9,736,627	)		(13,382,078	)		(10,317,328	)
	Proceeds from issuances of long-term debt, net			12,159,635			14,011,970			11,372,830
	Dividends paid			(923,993	)		(861,139	)		(764,817	)
	Issuances of common stock			339,374			345,873			170,477
	Repurchases of common stock			(1,491,703	)		(1,468,752	)		(352,617	)
Net cash provided by (used in) deposit and financing activities				771,907			916,427			(5,765,936	)
Net (decrease) increase in cash and demand balances due from banks				(124,375	)		236,334			(160,720	)
Cash and demand balances due from banks, January 1				3,832,040			3,595,706			3,756,426
Cash and Demand Balances Due from Banks, December 31			$	3,707,665		$	3,832,040		$	3,595,706
Supplemental Information
	Cash paid for:
		Interest	$	3,004,305		$	1,577,901		$	1,421,774
		Income taxes		835,635			1,181,574			1,177,170
	Noncash items:
		Transfers of loans to other real estate		194,878			322,963			228,731
		Transfers of loans to held for sale		3,634,206			668,237			1,553,222
		Common shares, preferred shares, and stock options issued for acquisitions		(10,842	)		2,643,431			—
		Carrying value of securities donated to the National City Charitable Foundation		24,179			422			25,007

See Notes to Consolidated Financial Statements

ANNUAL REPORT 2005  41

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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, Illinois, Indiana, Kentucky, Michigan, Missouri, and Pennsylvania, and also conducts selected consumer lending businesses and 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. The Corporation completed acquisitions of Allegiant Bancorp, Inc. (Allegiant), Provident Financial Group, Inc. (Provident), and Wayne Bancorp (Wayne) and Charter One Vendor Finance on April 9, 2004, July 1, 2004, October 5, 2004, and January 15, 2005, respectively. On October 15, 2004, the Corporation sold its former subsidiary, National Processing. The consolidated financial statements include the results of operations of these entities from their respective dates of acquisition and up to their disposition date. 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 the 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 (FIN 46), 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 46 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 entitles it 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 (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 non-qualifying 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 certain credit card receivables, automobile loans, and home equity loans and lines that were sold to various 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.

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

42  ANNUAL REPORT 2005

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 intends to hold for investment purposes are classified as portfolio loans. Portfolio loans are carried at the principal amount outstanding net of unearned income, unamortized premiums or discounts, deferred loan fees and costs and acquisition fair value adjustments, if any. Loans that the Corporation has committed to sell or securitize are classified as loans held for sale or securitization. Loans held for sale or securitization are carried at the lower of the carrying amount or fair value applied on an aggregate basis. 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.

Conforming residential mortgage loans are typically classified as held for sale upon origination based upon management’s intent to sell all the production of these loans. Other types of loans may either be held for investment purposes, sold or securitized. Loans originated for portfolio that are subsequently transferred to held for sale based on management’s decision to sell are transferred at the lower of cost or fair value. Write-downs of the loans’ carrying value attributable to credit quality are charged to the allowance for credit losses while write-downs attributable to interest rates are charged to noninterest income.

Interest income is recognized on an accrual basis. Loan origination fees, certain direct costs, and unearned discounts are deferred and amortized into interest income as an adjustment to the 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 lease payments and the guaranteed residual value 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. Residual values on leased assets are reviewed regularly for other-than-temporary impairment. When there is other-than-temporary impairment in the carrying value of the Corporation’s interest in the residual value of a leased asset, the carrying value is reduced to the estimated fair value, with the write-down generally recognized in other noninterest expense in the income statement.

Commercial loans and leases and 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 charged against interest income. Interest income during the period the loan is on nonperforming status is recorded on a cash basis 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. Loans secured by residential real estate are generally charged off to the extent principal and interest due exceed 90% of the current appraised value of the collateral and the loan becomes 180 days past due.

Commercial and commercial real estate loans exceeding $3 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.

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. Installment loans secured by home equity and

ANNUAL REPORT 2005  43

________________________________________________________________________________

classified as residential real estate are also subject to this charge-off policy. 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, through its National City Mortgage business unit, sells mortgage loans to the Government National Mortgage Association (GNMA) in the normal course of business and retains the servicing rights. The GNMA programs under which the loans are sold allow the Corporation to repurchase individual delinquent loans that meet certain criteria. At the Corporation’s option, and without GNMA’s prior authorization, the Corporation may repurchase the delinquent loan for an amount equal to 100 percent of the remaining principal balance of the loan. Under SFAS 140, once the Corporation has the unconditional ability to repurchase the delinquent loan, the Corporation is deemed to have regained effective control over the loan and is required to recognize the loan on its balance sheet and record an offsetting liability, regardless of the Corporation’s intent to repurchase the loan. At December 31, 2005 and 2004, residential real estate portfolio loans included $311 million and $233 million, respectively, of loans available for repurchase under the GNMA optional repurchase programs with the offsetting liability recorded within other borrowed funds.

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 losses inherent in 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, 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, 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 loans are identified for sale or securitization, the attributed loan loss allowance is reclassified as a reduction to the carrying value of the loans.

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.

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. OREO also includes 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 intent with regard to selling the security.

Securities purchased with the intention of realizing short-term profits are considered trading securities, carried at fair value, and included in other investments. Realized and unrealized gains and losses are included in securities gains or losses on the statement of income. Interest on trading account securities is recorded in interest income. As of December 31, 2005 and 2004, trading account securities totaled $409 million and $117 million, respectively.

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 included in other investments on the balance sheet and are carried at fair value, with gains and losses included in other noninterest income. At December 31, 2005 and 2004, trading loans totaled $527 million and $281 million, respectively, the majority of which represented the guaranteed portion of Small Business Administration loans.

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 December 31, 2005 or 2004.

Debt and marketable equity securities not classified as held to maturity or trading are classified as available for

44  ANNUAL REPORT 2005

________________________________________________________________________________

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

sale. Securities available for sale are carried at fair value with unrealized gains and unrealized losses not deemed other-than-temporary reported in 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 on 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, except for the Corporation’s internally managed equity portfolio comprised primarily of bank and thrift common stock investments (bank stock fund). The Corporation utilizes the average-cost method to determine realized gains and losses and other-than-temporary impairment charges on bank stock fund investments, consistent with the manner in which the investments in this fund are managed. 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. As of December 31, 2005, cost-method investments classified within other investments and other assets totaled $541 million and $292 thousand, respectively, compared to $516 million and $292 thousand, respectively, at December 31, 2004. The securities classified within other investments consisted solely of shares of Federal Home Loan Bank and Federal Reserve Bank stock. 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, sales restrictions, and regulation, when appropriate. Investments that are not publicly traded are initially valued 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 general partner’s valuation techniques and overall economic and market conditions. 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 on the statement of 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, are 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 discounted cash flow analyses based on internal financial forecasts or, if available, market-based valuation multiples for comparable businesses. No impairment was identified as a result of the testing performed during 2005 or 2004. Note 10 contains additional information regarding goodwill and the carrying values by major lines of business.

Intangible assets with finite lives include core deposits, credit card, operating lease, and other intangibles. 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 10 years. Operating lease intangibles are amortized based upon an accelerated amortization

ANNUAL REPORT 2005  45

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method over the remaining weighted average lease term. Other intangibles, which consist primarily of customer contracts and noncompete agreements, are amortized over the period benefited ranging from three to nine years. Amortization expense for core deposits and other intangibles is recognized in noninterest expense. Amortization expense for operating lease intangibles is recognized in noninterest income. Note 10 includes a summary of goodwill and other intangible assets.

Depreciable Assets: Properties and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the assets. 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, and leasehold improvements are amortized over the term of the respective lease plus the first optional renewal period, when renewal is reasonably assured. Maintenance and repairs are charged to expense as incurred, while improvements which extend the useful life are capitalized and depreciated over the estimated remaining life of the asset.

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 applicable, or a discounted cash flow analysis. Impairment losses are recorded in other noninterest expense on the income statement.

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 the leased equipment is impaired by comparing expected undiscounted cash flows from rental income to the equipment carrying value. An impairment loss is recognized if the carrying amount of the equipment exceeds the expected cash flows.

Asset Securitizations: National City uses the securitization of financial assets as a source of funding. Financial assets, including pools of credit card receivables 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 a bank subsidiary of the Corporation, legal isolation is accomplished through compliance with specific rules and regulations of the relevant regulatory authorities. In addition, National City purchases the guaranteed portion of Small Business Administration (SBA) loans from third-party lenders and then securitizes 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.

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 servicing rights. 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 for each credit card securitization has been obtained by the Bank. The opinion rendered in connection with the 2005 and 2002 credit card securitizations included in its conclusion 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 receivables. 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 receivables from the securitization trust or recharacterize the receivables 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 transactions. 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 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.

46  ANNUAL REPORT 2005

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 affiliate retains interests in the securitized assets, which may take the form of seller certificates, subordinated tranches, cash reserve balances, servicing assets, and 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 and for other obligations such as servicing fees.

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 retains 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 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 trading securities portfolio. Retained interests from the credit card, automobile loan, and home equity 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 other comprehensive income within stockholders’ equity or in other noninterest expense 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 and other-than-temporary adjustments to retained interests classified as trading securities are recorded in other noninterest income on the income statement. The Corporation 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 receivables, 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 and 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.

When the Corporation retains the right to service the loans and receives related fees that exceed the current market rate to service the receivables, a servicing asset is recorded and included in other assets on the balance sheet. A servicing asset is not recognized if the Corporation receives adequate compensation relative to current market servicing prices to service the receivables sold. Servicing assets created in a securitization are initially measured at their allocated carrying amount based upon relative fair values at the date of securitization and are subsequently carried at the lower of this initial carrying value, adjusted for amortization, or fair value. Impairment, if any, is recognized when and in the amount the carrying value exceeds its fair value as determined by calculating the present value of the expected future net servicing cash flows using the assumptions described previously. The amortization of servicing assets occurs in proportion to, and over the period of, the estimated net servicing income and is recorded in noninterest income.

For securitizations involving credit card receivables, the Corporation’s continuing involvement in the securitized assets includes maintaining an undivided, pro rata interest in all credit card receivables that are in the trust, referred to as seller’s interest. The seller’s interest ranks pari-passu with the investors’ interests in the trust. As the amount of the receivables 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 4% of the initial invested amount in each series to ensure receivables 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 receivables. Therefore, the principal dollar amount of the investor’s interest in the receivables 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.

The 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.

ANNUAL REPORT 2005  47

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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.

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 are defined as derivatives under GAAP.

Under the guidelines of SFAS 133, Accounting for Derivative Instruments and Hedging Activities, as amended, all derivative instruments are required to be carried at fair value on the balance sheet. SFAS 133 provides special hedge accounting provisions, which permit the 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 and the fair value related to the risk being hedged of the hedged asset or liability on the balance sheet with corresponding offsets recorded in the income statement. The adjustment to the hedged asset or liability is included in the basis of the hedged item, while the fair value of the derivative is recorded as a freestanding asset or liability. 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 other comprehensive income within stockholders’ equity, net of tax. Amounts are reclassified from 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. 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.

Mortgage Servicing Rights (MSRs): The Corporation sells mortgage loans in the secondary market and typically retains the right to service the loans sold. Upon sale, an MSR is established, which represents the compensation expected to be realized for performing the servicing activities in excess of current market rates. In addition, the Corporation may purchase the right to service mortgage loans originated by others. MSRs, when purchased, are initially recorded at fair value. MSRs are carried at the lower of the initial capitalized amount, net of accumulated amortization and hedge accounting adjustments, or fair value. Certain MSRs hedged with derivative instruments as part of SFAS 133 hedge relationships may be adjusted above their initial carrying value. Changes in fair value resulting from the application of hedge accounting become part of the carrying values of MSRs.

The fair value of MSRs is estimated by calculating 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 expected and actual rates of mortgage loan prepayments are the most significant factors driving the value of MSRs, particularly for residential mortgage loans. Increases in mortgage loan prepayments reduce estimated future net servicing cash flows because the life of the underlying loan is reduced. In determining the fair value of the MSRs, mortgage interest rates, which are used to determine prepayment rates, and discount rates are held constant over the estimated life of the portfolio. Expected mortgage loan prepayment rates are derived from a third-party model and adjusted to reflect National City’s actual prepayment experience. 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. Servicing fees, net of amortization, impairment, and related derivative gains and losses, are recorded in mortgage banking revenue on the income statement.

The carrying values of MSRs (initial capitalized amount, net of accumulated amortization and hedge accounting adjustments) are amortized in proportion to, and over the period of, estimated net servicing income.

MSRs are evaluated for impairment in accordance with SFAS 140. For purposes of determining impairment, the MSRs are stratified by certain risk characteristics, primarily loan type and note rate. If temporary impairment exists within a risk stratification tranche, a valuation allowance is established through a charge to income

48  ANNUAL REPORT 2005

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

equal to the amount by which the carrying value, including hedge accounting adjustments, exceeds the fair value. If it is later determined all or a portion of the temporary impairment no longer exists for a particular tranche, the valuation allowance is reduced through a recovery of income.

MSRs are also reviewed for other-than-temporary impairment. Other-than-temporary impairment exists when the recoverability of a recorded valuation allowance is determined to be remote, taking into consideration historical and projected interest rates and loan pay-off activity. When this situation occurs, the unrecoverable portion of the valuation allowance is applied as a direct write-down to the carrying value of the MSRs. Unlike a valuation allowance, a direct write-down permanently reduces the carrying value of the MSR and the valuation allowance, precluding subsequent recoveries.

Stock-Based Compensation: Effective January 1, 2003, the Corporation adopted the fair value method of recording stock awards under SFAS 123, Accounting for Stock-Based Compensation. Under the guidance of SFAS 148, Accounting for Stock-Based Compensation – Transition and Disclosure, the Corporation applied the recognition provisions of SFAS 123 to all awards granted to employees after January 1, 2003. Compensation expense for option awards granted subsequent to January 1, 2003 was determined based on the estimated fair value of the award at the date of grant and recognized ratably in the income statement over the option’s vesting period. Stock options granted prior to January 1, 2003, were accounted for under the recognition and measurement provisions of Accounting Principles Board Opinion 25 (APB 25), Accounting for Stock Issued to Employees. Under APB 25, compensation expense for employee stock options is generally not recognized if the exercise price of the option equaled or exceeded the market price of the stock on the date of grant. All stock options granted prior to January 1, 2003, which were accounted for under APB 25, became fully vested in 2004. Therefore, the cost related to stock-based employee compensation included in the determination of net income for 2005 reflects the fair value method for all unvested stock awards.

Compensation expense for restricted share awards is recognized ratably over the period of service, usually the restricted period, based upon the fair value of the stock on the date of grant. The adoption of the recognition provisions of SFAS 123 did not have a significant impact on the determination of compensation expense for restricted share awards.

The following table illustrates the effect on net income and earnings per share if the Corporation had applied the fair value recognition provisions of SFAS 123 to all stock option awards. Also included in the 2003 and 2004 pro forma net income and earnings per share is the after-tax expense, net of minority interest benefit, related to option awards granted by the Corporation’s former 83%-owned payment processing subsidiary, National Processing, Inc., on its common stock. Refer to Note 3 for discussion on the sale of this business in October 2004.

			For the Calendar Year
(In Thousands, Except			2005		2004		2003
Per Share Amounts)
Net income, as reported			$	1,985,229	$	2,779,934	$	2,117,064
Add: option expense included in reported net income, net of related tax effects
		National City common stock		13,693		17,324		8,548
		National Processing common stock		—		4,180		144
Less: total option expense determined under fair value method for all option awards, net of related tax effects
		National City common stock		(13,693)		(27,190)		(41,251)
		National Processing common stock		—		(6,684)		(5,378)
Pro forma net income			$	1,985,229	$	2,767,564	$	2,079,127
Pro forma net income per share:
	Basic – as reported			$3.13		$4.37		$3.46
	Basic – pro forma			3.13		4.35		3.40
	Diluted – as reported			3.09		4.31		3.43
	Diluted – pro forma			3.09		4.29		3.37

The fair values of stock options granted were estimated at the date of grant using the Black-Scholes option pricing model. The Black-Scholes option pricing 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 also sensitive to changes in assumptions, which can materially affect the fair value estimate. Historically, the Corporation placed exclusive reliance on historical volatility to determine the expected volatility assumption. During the fourth quarter of 2005, the Corporation refined its method of estimating expected volatility to include both historical volatility and implied volatility based upon National City options traded in the open market. The following weighted-average assumptions were used to determine fair value:

	For the Calendar Year
	2005			2004			2003
Risk-free interest rate		3.87	%		3.69	%		3.26	%
Expected dividend yield		4.17			3.93			4.14
Expected volatility		20.31			22.50			27.15
Expected option life (in years)		6			6			5
Weighted-average grant-date fair value of options	$	5.12		$	5.91		$	6.04

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 financial statements, rather than amounts reported on the Corporation’s 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

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a change in tax rates is recognized as income or expense in the period that includes the enactment date.

Stock Repurchases: Acquisitions of the Corporation’s common stock are recorded using the par value method, which requires the cash paid to be allocated to common stock, capital surplus, and retained earnings.

2.  Recent Accounting Pronouncements

Meaning of Other-Than-Temporary Impairment: In November 2005, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) 115-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. This FSP provides additional guidance on when an investment in a debt or equity security should be considered impaired and when that impairment should be considered other-than-temporary and recognized as a loss in earnings. Specifically, the guidance clarifies that an investor should recognize an impairment loss no later than when the impairment is deemed other-than-temporary, even if a decision to sell has not been made. The FSP also requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. Management applied the guidance in this FSP in 2005.

Accounting Changes and Error Corrections: In May 2005, the FASB issued SFAS 154, Accounting Changes and Error Corrections, which changes the accounting for and reporting of a change in accounting principle. This statement applies to all voluntary changes in accounting principle and changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. This statement requires retrospective application to prior period financial statements of changes in accounting principle, unless it is impractical to determine either the period-specific or cumulative effects of the change. SFAS 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005. The adoption of this standard is not expected to have a material effect on financial condition, results of operations, or liquidity.

Exchanges of Nonmonetary Assets: In December 2004, the FASB issued SFAS 153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions. This statement amends the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged and more broadly provides for exceptions regarding exchanges of nonmonetary assets that do not have commercial substance. This Statement is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The adoption of this standard is not expected to have a material impact on financial condition, results of operations, or liquidity.

Share-Based Payment: In December 2004, the FASB revised SFAS 123, Accounting for Stock-Based Compensation. SFAS 123R establishes accounting requirements for share-based compensation to employees and carries forward prior guidance on accounting for awards to non-employees. In 2005, the FASB issued further guidance on the classification and measurement of freestanding financial instruments originally issued for employee service and the application of grant date as defined in SFAS 123R. The Corporation will be required to adopt these statements on January 1, 2006. On January 1, 2003, the Corporation adopted the provisions of SFAS 123 and began recognizing compensation expense ratably in the income statement, based on the estimated fair value of all awards granted after this date. SFAS 123R will require the Corporation to change its method of accounting for share-based awards to include estimated forfeitures in the initial estimate of compensation expense and to accelerate the recognition of compensation expense for retiree-eligible employees. The adoption of these standards is not expected to have a material effect on financial condition, results of operations, or liquidity.

Accounting for Certain Loans or Debt Securities Acquired in a Transfer: In December 2003, the American Institute of Certified Public Accountants issued Statement of Position (SOP) 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer. SOP 03-3 requires acquired loans, including debt securities, to be recorded at the amount of the purchaser’s initial investment and prohibits carrying over valuation allowances from the seller for those individually evaluated loans that have evidence of deterioration in credit quality since origination, and it is probable all contractual cash flows on the loan will be unable to be collected. SOP 03-3 also requires the excess of all undiscounted cash flows expected to be collected at acquisition over the purchaser’s initial investment to be recognized as interest income on a level-yield basis over the life of the loan. Subsequent increases in cash flows expected to be collected are recognized prospectively through an adjustment of the loan’s yield over its remaining life, while subsequent decreases are recognized as impairment. Loans carried at fair value, mortgage loans held for sale, and loans to borrowers in good standing under revolving credit agreements are excluded from the scope of SOP 03-3. The Corporation adopted the provisions of SOP 03-03 effective January 1, 2005. The adoption of this standard did not have a material impact on financial condition, results of operations, or liquidity.

50  ANNUAL REPORT 2005

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.  Acquisitions and Divestitures

Acquisitions: On January 15, 2005, the Corporation completed its acquisition of Charter One Vendor Finance for a cash payment of $312 million. Charter One Vendor Finance has been renamed National City Vendor Finance (NCVF). NCVF serves major vendors, such as manufacturers, value-added resellers, and select specialized lessors, in middle-and large-ticket equipment and software markets, and finances equipment and real estate for franchises of selected, leading franchisors.

In December 2005, the Corporation signed a definitive agreement to acquire Forbes First Financial Corporation, the parent company of Pioneer Bank and Trust Company (Pioneer). As of December 31, 2005, Pioneer operated eight branches in the St. Louis, Missouri metropolitan area and had total assets and deposits of $530 million and $420 million, respectively. The cash transaction is expected to be completed in the second quarter of 2006, subject to shareholder and regulatory approval.

On April 9, 2004, National City Corporation completed its acquisition of Allegiant Bancorp, Inc. (Allegiant), a bank holding company operating 36 retail bank branch offices in the St. Louis, Missouri metropolitan area, for $493 million, primarily in stock. On July 1, 2004, the Corporation completed its acquisition of Provident Financial Group, Inc. (Provident), a bank holding company operating 65 branch banking offices in the Cincinnati and Dayton, Ohio metropolitan areas. The total cost of this all-stock transaction was $2.2 billion. On October 5, 2004, the Corporation completed its acquisition of Wayne Bancorp, Inc. (Wayne), a bank holding company operating 23 branches in several northeastern Ohio counties, for $182 million in cash.

The assets and liabilities of these acquired entities were recorded on the balance sheet at their estimated fair values as of their respective acquisition dates, and their results of operations have been included in the consolidated statement of income from those dates. Refer to Note 4 for discussion on severance and other restructuring costs incurred in connection with these acquisitions.

The following table shows the excess purchase price over carrying value of net assets acquired, purchase price allocations, and resulting goodwill for Wayne and NCVF whose purchase price allocations were recently finalized:

(In Thousands)		Wayne			NCVF
Purchase price			$181,764			$311,764
Carrying value of net assets acquired			(71,254	)		(306,260	)
	Excess of purchase price over carrying value of net assets acquired		110,510			5,504
Purchase accounting adjustments
	Securities		477			—
	Loans		(7,234	)		3,166
	Premises and equipment		3,275			—
	Other assets		1,013			—
	Deposits		654			—
	Borrowings		547			—
	Severance and exit costs		3,510			—
	Other liabilities		106			—
	Deferred taxes		4,767			—
	Subtotal		117,625			8,670
Core deposit intangibles			(20,589	)		—
Other identifiable intangible assets			(1,565	)		—
	Goodwill		$ 95,471			$ 8,670

The following table summarizes the estimated fair value of the net assets acquired related to these acquisitions:

(In Thousands)			Wayne		NCVF
Assets
	Cash and cash equivalents		$	27,966	$	201
	Securities			277,757		—
	Loans, net of allowance for loan losses			460,553		307,206
	Premises and other equipment			12,026		157
	Goodwill and other intangibles			117,625		8,670
	Other assets			7,969		23
		Total Assets		903,896		316,257
Liabilities
	Deposits			665,624		—
	Borrowings			43,070		—
	Other liabilities			13,438		4,493
		Total Liabilities		722,132		4,493
	Fair value of net assets acquired		$	181,764	$	311,764

The fair values of acquired assets, liabilities, and identified intangibles for all acquisitions have now been finalized. As of December 31, 2005, the balance of goodwill and intangible assets resulting from the Allegiant acquisition was $365 million and the balance from the Provident acquisition was $2.1 billion.

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The following unaudited pro forma consolidated financial information presents the combined results of operations of the Corporation as if the Allegiant, Provident and Wayne acquisitions had occurred as of January 1, 2004.

		For the Year Ended
(In Thousands)		December 31, 2004
Net interest income			$4,729,005
Provision for credit losses			414,197
	Net interest income after provision for credit losses		4,314,808
Noninterest income			4,764,687
Noninterest expense			5,065,869
Income before income tax expense			4,013,626
Income tax expense			1,272,272
Net Income			$2,741,354
Net Income Per Common Share
	Basic		$4.11
	Diluted		$4.03
Average Common Shares Outstanding
	Basic		667,524,590
	Diluted		680,564,323

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 period presented, nor are they necessarily indicative of future consolidated results.

Divestitures: On August 26, 2005, the Corporation completed the sale of its wholly owned subsidiary Madison Bank and Trust, a five-branch bank located in Madison, Indiana, with deposits and loans of $184 million and $56 million, respectively. A pretax gain of $16 million was recognized on the sale.

On October 15, 2004, the Corporation completed the sale of its 83%-owned payment processing subsidiary, National Processing, Inc. (NPI). In conjunction with the sale, the Corporation, through its subsidiary National City Bank of Kentucky, entered into a Service and Sponsorship Agreement with NPI. This agreement related to the United Airlines, Inc. card processing agreement, whereby the buyer, through NPI, made a one-time payment of $36 million to the Corporation in exchange for the Corporation’s agreement to release NPI from its obligation to indemnify the Corporation against any losses or claims arising from the United Airlines card processing agreement. As a result, the Corporation retained the contractual obligation to process card transactions for United Airlines through January 10, 2006. Refer to Note 21 for the related discussion on chargeback exposure.

On June 30, 2004, the Corporation sold its Corporate Trust Bond Administration business. Assets under administration transferred in this transaction were approximately $10.8 billion. On December 1, 2004, the Corporation completed the sale of Provident PCFS, a subprime lending and servicing business. Provident PCFS was part of the acquisition of Provident. A potential purchase price reduction could occur if Provident PCFS is replaced as servicer under any of the servicing agreements transferred to the buyer prior to December 1, 2009.

4.  Restructuring Charges

During 2005, the Corporation incurred restructuring charges related to the Best In Class program. Best In Class is a series of projects designed to achieve sustainable revenue growth, improve expense management and create a culture for high performance. Program initiatives include initial costs for employee severance, lease exits, contract terminations, asset impairment and other items. For the year ended December 31, 2005, Best In Class restructuring charges totaling $65 million were recognized. Of the total costs recognized, $47 million was recorded in salaries expense for severance benefits, $13 million was recorded to third-party service expense for outplacement and consulting services, and $5 million was recorded to other noninterest expense for lease exit and asset disposal charges.

In 2004, Corporation implemented restructuring plans related to the integrations of Allegiant, Provident, and Wayne. These plans were formulated prior to the acquisition of each entity. Costs incurred for employee terminations consist of severance, relocation, retention, and outplacement benefits. Costs associated with severance, relocation, and outplacement benefits were recognized in the allocation of the purchase price to acquired assets and liabilities. Retention benefits were recorded to salaries expense over the required service period. Exit and termination costs relating to the exit of Provident PCFS, facility leases, and other contract termination costs were also recognized in the allocation of the purchase price to acquired assets and liabilities.

A rollforward of the severance and restructuring liability for the years ended December 31, 2005 and 2004 is presented in the following table. The data below also includes severance expenses incurred in the normal course of business. Effective October 15, 2004, the Corporation sold its former subsidiary, National Processing, resulting in the transfer of all of its severance liabilities to the buyer. All severance and other termination expenses recognized in 2005 were recorded as

52  ANNUAL REPORT 2005

________________________________________________________________________________

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

unallocated corporate charges within the Parent and Other category.

		For the Year Ended
		December 31, 2005
					Best In			Acquisitions
(In Thousands)		Total			Class			and Other
Beginning balance		$	98,486		$	—		$	98,486
Severance and other employee related costs:
	Charged to expense		68,526			53,242			15,284
	Recognized in purchase price allocation		(2,716	)		—			(2,716	)
	Payments		(69,039	)		(9,899	)		(59,140	)
Exit costs, contract terminations and other:
	Charged to expense		12,470			12,470			—
	Recognized in purchase price allocation		(1,453	)		—			(1,453	)
	Payments		(18,421	)		(8,123	)		(10,298	)
Ending balance		$	87,853		$	47,690		$	40,163

		For the Year Ended
		December 31, 2004
					Best In		Acquisitions			National
(In Thousands)		Total			Class		and Other			Processing
Beginning balance		$	15,927		$	—	$	14,154		$	1,773
Severance and other employee related costs:
	Charged to expense		39,044			—		38,990			54
	Recognized in purchase price allocation		65,180			—		65,180			—
	Payments		(60,141	)		—		(59,098	)		(1,043	)
	Divestiture		(784	)		—		—			(784	)
Exit costs, contract terminations and other:
	Charged to expense		—			—		—			—
	Recognized in purchase price allocation		230,303			—		230,303			—
	Payments		(191,043	)		—		(191,043	)		—
Ending balance		$	98,486		$	—	$	98,486		$	—

During the years ended December 31, 2005 and 2004, the Corporation recorded severance and other employee-related termination expenses of $68 million and $39 million, respectively. The year ended December 31, 2005 included Best In Class severance and outplacement expenses of $53 million and acquisition-related retention benefits of $5 million. Severance expense for the year ended December 31, 2004, included acquisition-related retention benefits of $19 million. As of December 31, 2005, all acquisition-related retention benefits have been paid. Substantially all acquisition-related severance, exit, and other termination costs related to the Allegiant and Wayne restructuring plans had been paid as of December 31, 2005. Payments will continue to be made for Provident restructuring plan costs through January 2013, primarily related to lease obligations on vacated facilities.

The Best In Class restructuring liability and related expenses will be adjusted to reflect additional charges and revisions to initial cost estimates. Additional restructuring costs related to Best In Class initiatives are expected to be recorded through the targeted program completion in December 2008. The amounts and exact timing of additional charges have not yet been determined. Payments related to the December 31, 2005, Best In Class restructuring liability are scheduled to occur through August 2008 for severance benefits and through January 2010 for lease obligations on vacated facilities.

5. Securitization Activity

The Corporation periodically sells pools of credit card receivables and automobile loans through securitization transactions. Home equity securitizations were acquired with the Provident acquisition. Small Business Administration (SBA) loans are also purchased and then sold by the Corporation.

Credit Card: In 2005, the Series 2000-1 credit card securitizations matured and a $600 million pool of credit card receivables (Series 2005-1) was securitized. A pretax gain of $1 million was recorded on this transaction within other noninterest income. Retained interests in these loans of $37 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 $2 million were capitalized and are being amortized over the revolving period of this securitization of four years.

As of December 31, 2005, $425 million of credit card receivables were classified as held for sale or securitization based upon management’s intent to securitize another pool of credit card receivables in 2006. In January 2006, the Series 2001-1 credit card securitization matured.

Automobile: In 2005, the Corporation securitized $2.2 billion of fixed-rate, closed-end indirect automobile loans (Series 2005-A). A pretax loss of $29 million was recorded on this transaction within other noninterest income. Retained interests in the securitized loans were recognized upon sale consisting of a subordinated interest in the securitized loans and an interest-only strip. Retained interests were valued at the date of sale by allocating the previous carrying amount between the assets sold and the retained interests based on their relative fair values at the date of sale. The initial carrying value of the subordinated interest and interest-only security of $78 million was estimated at the date of sale by discounting projected future cash flows. The Corporation has also retained the right to service these loans, and a servicing asset of $20 million was recognized at

ANNUAL REPORT 2005  53

________________________________________________________________________________

the date of sale. Transaction costs associated with this fixed-term securitization were included as a component of the loss on sale.

In 2004, the Corporation securitized $890 million of fixed-rate, closed-end indirect automobile loans (Series 2004-A). A pretax gain of $9 million on this transaction was recorded in other noninterest income. Retained interests in the form of interest-only strips, subordinated tranches, and dealer rebate receivables were also recognized with initial carrying values of $32 million, $46 million, and $1 million, respectively. In addition, a servicing asset was established in the amount of $10 million.

Home Equity: In 2004, the Corporation acquired Provident, which had previously securitized home equity loans and lines of credit. Retained interests in the form of interest-only strips were recognized at their fair values as of the acquisition date of $3 million. In 2005, the Corporation exercised its options to call the 1998-A and 1999-A home equity securitization. Investors in the 1999-A home equity securitization received their final distributions in the amount of $16 million in September 2005. Investors in the 1998-A home equity securitization will receive their final distribution, estimated at $5 million, in February 2006. The Corporation also plans to exercise an early termination of the remaining 2000-A home equity securitization in 2006.

SBA: During 2005, 2004 and 2003, the Corporation securitized pools of SBA loans totaling $46 million, $9 million and $52 million, respectively. Retained interests in the form of interest-only strips were recognized with an initial carrying value of $3 million, $660 thousand, and $4 million in 2005, 2004 and 2003, respectively. The SBA loans securitized were sold servicing released and all transaction costs were expensed in conjunction with the sale. During 2004, the Corporation sold the interest-only strips associated with the 2004 SBA securitization.

A summary of the assumptions used to value the credit card retained interests and automobile retained interests and servicing asset at the time of each securitization 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:
	Series 2001-1		5.6		6.06	%		17.79	%		4.08	%		15.00	%		14.77	%
	Series 2002-1		5.7		2.06			17.41			5.34			15.00			11.99
	Series 2005-1		3.2		3.75			18.21			5.35			15.00			12.00

			Weighted-		Monthly
			Average		Prepayment			Expected			Annual			Weighted-
			Life		Speed			Cumulative			Discount			Average
			(in months)		(% ABS)			Credit Losses			Rate			Coupon
Automobile:
	Series 2002-A
		Interest-only strip		22.9		1.40	%		2.25	%		12.00	%		8.71	%
		Servicing asset		22.9		1.40			2.25			12.00			8.71
	Series 2004-A
		Interest-only strip		21.8		1.50	%		1.75	%		12.00	%		6.79	%
		Servicing asset		21.8		1.50			1.75			11.00			6.79
	Series 2005-A
		Interest-only strip		16.6		1.50	%		2.18	%		12.00	%		7.06	%
		Servicing asset		12.5		1.50			2.18			10.00			7.06

During 2004, actual credit losses for the automobile securitizations exceeded their initial projections developed at the time of the securitizations. As a result, the cumulative loss curve was increased to 2.25% in 2004.

A summary of the assumptions used to value the home equity retained interests at the time of the Provident acquisition follows:

Weighted-

Variable

Monthly

Expected

Average

Annual

Principal

Annual

Annual

Life

Coupon Rate

Repayment

Credit

Discount

(in months)

to Investors

Rate/CPR(a)

Losses(b)

Rate

Yield(c)

Home Equity:

Series 1998-A

14.1

1.95

%

4.42/33.00

%

1.25

%

6.25

%

4.87

%

Series 2000-A

16.4

1.74

5.74/33.00

2.40

6.25

5.92

^(a)  Monthly principal repayment rate assumption relates to home equity lines of credit and cumulative prepayment rate (CPR) relates to home equity installment loans.

(b)	The home equity securitizations are credit enhanced with cash collateral accounts that are maintained within the securitization vehicle. The cash collateral accounts absorb all credit losses with respect to the securitized loans.
(c)	Yield represents the weighted average of fixed-rate loan and variable-rate lines of credit.

54  ANNUAL REPORT 2005

________________________________________________________________________________

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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. The automobile loans consist of the managed portfolio of indirect prime automobile loans. The home equity loans consist of the managed portfolio of prime home equity lines of credit and prime home equity installment loans. The SBA loans consist of loans purchased and then securitized and sold by the Corporation. 

			As of December 31, 2005				For the Calendar Year 2005
			Principal		Loans Past Due		Average		Net Credit
(In Millions)			Balance		30 Days or More		Balances		Losses
Type of loan:
	Credit Card		$	2,482.9	$	98.6	$	2,379.8	$	155.7
	Automobile			2,954.3		67.8		3,362.9		42.3
	Home Equity			27,919.2		134.1		27,177.2		58.3
	SBA			43.8		4.4		30.7		—
		Total loans managed or securitized		33,400.2		304.9		32,950.6		256.3
Less:
	Loans securitized:
		Credit Card		1,026.1		37.4		1,307.0		76.0
		Automobile		2,602.2		30.8		860.8		12.0
		Home Equity		13.2		1.0		39.5		1.5
		SBA		43.8		4.4		30.7		—
	Loans held for sale or securitization:
		Credit Card		425.0		—		141.8		—
		Automobile		—		—		179.0		—
		Home Equity		—		—		3.9		—
		Loans held in portfolio	$	29,289.9	$	231.3	$	30,387.9	$	166.8

			As of December 31, 2004				For the Calendar Year 2004
			Principal		Loans Past Due		Average		Net Credit
(In Millions)			Balance		30 Days or More		Balances		Losses
Type of loan:
	Credit Card		$	2,520.2	$	91.0	$	2,469.6	$	147.2
	Automobile			3,783.3		68.9		3,965.2		45.5
	Home Equity			24,640.0		88.8		20,051.1		35.5
	SBA			8.7		.5		23.4		—
		Total loans managed or securitized		30,952.2		249.2		26,509.3		228.2
Less:
	Loans securitized:
		Credit Card		1,450.0		47.2		1,450.0		76.4
		Automobile		888.3		17.2		1,053.9		11.9
		Home Equity		60.7		1.4		37.8		.6
		SBA		8.7		.5		23.4		—
	Loans held for sale or securitization:
		Automobile		—		—		131.7		—
		Loans held in portfolio	$	28,544.5	$	182.9	$	23,812.5	$	139.3

Certain cash flows received from the securitization trusts follow:

	For the Calendar Year
	2005								2004
	Credit				Home				Credit				Home
(In Millions)	Card		Automobile		Equity		SBA		Card		Automobile		Equity		SBA
Proceeds from new securitizations	$	600.0	$	2,103.9		$—		$44.7	$	—	$	811.2		$—		$8.1
Proceeds from collections reinvested in previous securitizations		2,789.3		—		2.7		—		3,094.1		—		4.4		—
Servicing fees received		28.1		8.7		.3		—		29.0		10.6		.2		—
Other cash flows received on retained interests		70.8		15.7		.9		.7		90.9		18.7		1.1		3.2
Proceeds from sales of previously charged-off accounts		1.0		—		—		—		—		—		—		—
Purchases of delinquent or foreclosed assets		—		—		1.2		—		—		—		—		—

[Additional columns below]

[Continued from above table, first column(s) repeated]

	For the Calendar Year
	2003
	Credit
(In Millions)	Card		Automobile		SBA
Proceeds from new securitizations	$	—	$	—		$48.0
Proceeds from collections reinvested in previous securitizations		3,089.3		—		—
Servicing fees received		29.0		6.6		—
Other cash flows received on retained interests		89.6		15.0		.9
Proceeds from sales of previously charged-off accounts		1.1		—		—
Purchases of delinquent or foreclosed assets		—		—		—

ANNUAL REPORT 2005  55

________________________________________________________________________________

A summary of the fair values of the interest-only strips and servicing assets retained, key economic assumptions used to arrive at the fair values, and the sensitivity of the December 31, 2005 fair values to immediate 10% and 20% adverse changes in those assumptions follows. 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 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-					Monthly			Expected
						Average		Variable Annual			Principal			Annual
				Fair		Life		Coupon Rate			Repayment			Credit
(Dollars in Millions)				Value		(in months)(b)		to Investors(b)			Rate(b)			Losses(b)
Credit Card Loans
	Interest-only strips(a)			$	2.0		3.1		4.52	%		18.68	%		5.44	%
		As of December 31, 2005
			Decline in fair value of 10% adverse change					$	1.1		$	.2		$	1.4
			Decline in fair value of 20% adverse change						2.0			.3			2.0

[Additional columns below]

[Continued from above table, first column(s) repeated]

				Annual
				Discount
(Dollars in Millions)				Rate(b)			Yield(b)
Credit Card Loans
	Interest-only strips(a)				15.00	%		12.88	%
		As of December 31, 2005
			Decline in fair value of 10% adverse change	$	—		$	2.0
			Decline in fair value of 20% adverse change		—			2.0

^(a) Represents interest-only strips recognized in connection with the credit card securitization Series 2002-1, and 2005-1.

^(b) Represents weighted-average assumptions and aggregate declines in fair value for all credit card securitization series.

								Monthly			Expected
						Weighted-		Prepayment			Cumulative			Annual			Weighted-
				Fair		average Life		Speed			Credit			Discount			Average
(Dollars in Millions)				Value		(in months)(b)		(% ABS)(b)(c)			Losses(b)			Rate(b)			Coupon(b)
Automobile Loans
	Interest-only strip(a)			$	27.7		15.7		1.50	%		2.19	%		12.00	%		7.08	%
		As of December 31, 2005
			Decline in fair value of 10% adverse change					$	2.0		$	5.6		$	.4		$	6.1
			Decline in fair value of 20% adverse change						3.4			8.8			.8			9.3
	Servicing asset(d)			$	23.3		11.7		1.50	%		2.19	%		10.23	%		7.08	%
		As of December 31, 2005
			Decline in fair value of 10% adverse change					$	1.4		$	—		$	.2		$	.1
			Decline in fair value of 20% adverse change						2.9			—			.4			.1

(a)	Represents interest-only strips and servicing assets associated with the automobile securitization series 2005-A, 2004-A and 2002-A.
(b)	Represents weighted-average assumptions and aggregate declines in fair value for all automobile securitization series.
(c)	Absolute prepayment speed.
(d)	Carrying value of servicing assets at December 31, 2005 was $22.5 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 another 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, and airplanes, along with retail automobile lease financings. Commercial equipment lease financings are included in commercial loans, while automobile lease financings are included in other consumer loans. The Corporation ceased originating retail automobile leases in December 2000, however, additional automobile leases financings were acquired as part of the acquisition of Provident in July 2004. No new leases have been originated since the acquisition date, and this portfolio will run off over time as the leases expire and the automobiles are sold.

A summary of lease financings by type at December 31 follows:

(In Thousands)			2005		2004
Commercial
	Direct financings		$	3,237,722	$	2,508,415
	Leveraged leases			307,439		327,707
		Total commercial lease financings		3,545,161		2,836,122
Consumer
	Retail automobile lease financings			411,147		530,382
Total net investment in lease financings			$	3,956,308	$	3,366,504

56  ANNUAL REPORT 2005

________________________________________________________________________________

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The components of the net investment in lease financings by type at December 31 follow:

(In Thousands)		2005			2004
Commercial
	Lease payments receivable	$	3,559,471		$	2,753,551
	Estimated residual value of leased assets		482,049			541,809
	Gross investment in commercial lease financings		4,041,520			3,295,360
	Unearned income		(496,359	)		(459,238	)
Total net investment in commercial lease financings		$	3,545,161		$	2,836,122
Consumer
	Lease payments receivable	$	221,512		$	339,840
	Estimated residual value of leased assets		231,582			263,768
	Gross investment in consumer lease financings		453,094			603,608
	Unearned income		(41,947	)		(73,226	)
Total net investment in consumer lease financings		$	411,147		$	530,382

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

		For the Calendar Year
(In Thousands)		2005			2004
Commercial
	Beginning balance	$	541,809		$	487,007
	Additions		82,765			43,616
	Acquisitions(a)		1,519			126,080
	Runoff		(144,044	)		(102,324	)
	Write-downs		—			(12,570	)
Ending balance		$	482,049		$	541,809
Consumer
	Beginning balance	$	263,768		$	121,630
	Additions		—			—
	Acquisitions(a)		—			250,372
	Runoff		(32,186	)		(108,234	)
	Write-downs		—			—
Ending balance		$	231,582		$	263,768

^(a)  Associated with the acquisition of National City Vendor Finance and Provident. Refer to Note 3 for further details of these acquisitions.

During the third quarter of 2005, the Corporation received insurance proceeds totaling $21 million for automobile residual value losses recognized in previous periods and a $5 million recovery from a bankruptcy court settlement associated with a previously written-off commercial lease residual value.

At December 31, 2005, the minimum future lease payments to be received from lease financings by type were as follows:

											2011
											and
(In Millions)	2006		2007		2008		2009		2010		Beyond		Total
Commercial	$	1,251.3	$	818.0	$	557.8	$	355.7	$	200.8	$	375.9	$	3,559.5
Consumer		90.5		78.3		43.5		8.9		.3		—		221.5
Total	$	1,341.8	$	896.3	$	601.3	$	364.6	$	201.1	$	375.9	$	3,781.0

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, data processing, medical, and office equipment leased to commercial customers while consumer equipment consists of automobiles leased to retail customers. The majority of the balance of consumer leased equipment at December 31, 2005 was acquired with Provident in July 2004. As discussed above with regard to lease financings, National City ceased originating retail automobile leases in 2000 and plans to let the acquired automobile portfolio run off over time. 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 at December 31 follows:

(In Thousands)		2005			2004
Commercial
	Cost	$	455,462		$	341,164
	Accumulated depreciation		(104,373	)		(52,541	)
Net carrying value of commercial leased equipment			351,089			288,623
Consumer
	Cost		457,332			849,578
	Accumulated depreciation		(112,094	)		(87,414	)
Net carrying value of consumer leased equipment			345,238			762,164
Total net carrying value of equipment leased to others		$	696,327		$	1,050,787

Depreciation expense on equipment leased to others totaled $197 million in 2005, $124 million in 2004, and $17 million in 2003.

At December 31, 2005, the minimum future lease payments to be received from equipment leased to others by type were as follows:

											2011
											and
(In Millions)	2006		2007		2008		2009		2010		Beyond		Total
Commercial	$	98.8	$	73.4	$	48.1	$	26.2	$	9.1	$	13.2	$	268.8
Consumer		81.5		31.2		4.2		.2		—		—		117.1
Total	$	180.3	$	104.6	$	52.3	$	26.4	$	9.1	$	13.2	$	385.9

ANNUAL REPORT 2005  57

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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 $174 million and $195 million, at December 31, 2005 and 2004, respectively.

To provide for the risk of loss inherent in the process of extending credit, 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:

	For the Calendar Year
(In Thousands)	2005			2004			2003
Balance at beginning of period	$	1,188,462		$	1,022,720		$	1,006,451
Provision for loan losses		300,531			339,441			627,946
Allowance related to loans acquired, sold or securitized		(14,086	)		171,973			(2,253	)
Charge-offs		(602,902	)		(570,999	)		(757,176	)
Recoveries		222,042			225,327			147,752
Net charge-offs		(380,860	)		(345,672	)		(609,424	)
Balance at end of period	$	1,094,047		$	1,188,462		$	1,022,720

In 2005, the allowance related to loans acquired, sold or securitized primarily represents the allowance for loan losses allocated to automobile loans securitized during the year. In 2004, the allowance related to loans acquired, sold or securitized represents the allowance associated with the acquisitions of Allegiant, Provident, and Wayne. In 2003, the allowance related to loans acquired, sold or securitized represents the allowance for loan losses allocated to credit card and automobile loans securitized or held for securitization.

Net charge-offs increased during 2005 primarily as a result of a high volume of consumer bankruptcy filings in advance of changes in the consumer bankruptcy laws. Offsetting this increase was a decrease in commercial net charge-offs due to improved commercial loan credit quality and recoveries of previously recognized commercial losses. The reduction in net charge-offs in 2004 was primarily the result of improved credit quality in the commercial portfolios, partially offset by the net charge-offs associated with portfolios acquired through acquisitions.

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

	For the Calendar Year
(In Thousands)	2005			2004			2003
Balance at beginning of period	$	100,538		$	102,609		$	92,137
Net provision for losses on lending-related commitments		(16,937	)		(16,169	)		10,472
Allowance related to lending-related commitments acquired (a)		—			14,098			—
Balance at end of period	$	83,601		$	100,538		$	102,609

^(a)  The allowance related to lending-related commitments acquired was associated with the acquisitions of Allegiant, Provident, and Wayne.

Nonperforming loans totaled $490 million and $463 million as of December 31, 2005 and 2004, respectively. For loans classified as nonperforming at December 31, 2005, the contractual interest due and actual interest recognized on those loans during 2005 was $38 million and $10 million, respectively. Included in nonperforming loans were impaired loans, as defined under SFAS 114, aggregating $117 million and $133 million at December 31, 2005 and 2004, respectively. Average impaired loans for 2005, 2004, and 2003 totaled $108 million, $193 million, and $358 million, respectively. The majority of the loans deemed impaired were evaluated using the fair value of the collateral as the measurement method. The related allowance allocated to impaired loans as of December 31, 2005 and 2004 was $20 million and $5 million, respectively. At December 31, 2005, impaired loans with an associated allowance totaled $70 million, while impaired loans with no associated allowance totaled $47 million. At December 31, 2004, impaired loans with an associated allowance totaled $63 million, while $70 million of impaired loans had no related allowance. During 2005, 2004, and 2003, interest recognized on impaired loans while they were considered impaired was not material.

8. Securities

Securities available for sale follow:

	December 31, 2005
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
(In Thousands)
U.S. Treasury and Federal agency debentures	$	1,174,149	$	19,414	$	9,397	$	1,184,166
Mortgage-backed securities		5,437,449		27,849		69,929		5,395,369
Asset-backed and corporate debt securities		245,758		2,385		424		247,719
States and political subdivisions		607,499		14,537		1,211		620,825
Other		415,954		11,283		688		426,549
Total securities	$	7,880,809	$	75,468	$	81,649	$	7,874,628

	December 31, 2004
	Amortized		Unrealized		Unrealized		Fair
(In Thousands)	Cost		Gains		Losses		Value
U.S. Treasury and Federal agency debentures	$	652,521	$	32,621	$	2,131	$	683,011
Mortgage-backed securities		6,309,061		89,150		21,274		6,376,937
Asset-backed and corporate debt securities		510,358		3,437		626		513,169
States and political subdivisions		705,367		32,010		288		737,089
Other		422,737		32,971		958		454,750
Total securities	$	8,600,044	$	190,189	$	25,277	$	8,764,956

The other category includes the Corporation’s internally managed equity portfolio of bank and thrift common stock investments (bank stock fund). The bank stock fund had an amortized cost and fair value of $135 million and

58  ANNUAL REPORT 2005

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

$139 million, respectively, at December 31, 2005, compared to an amortized cost and fair value of $208 million and $236 million, respectively, at December 31, 2004.

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

	December 31, 2005
	Less Than 12 Months								Total
					12 Months or More
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(In Thousands)	Value		Losses		Value		Losses		Value		Losses
U.S. Treasury and Federal agency debentures	$	433,538	$	6,765	$	138,140	$	2,632	$	571,678	$	9,397
Mortgage-backed securities		2,949,622		38,420		1,000,332		31,509		3,949,954		69,929
Asset-backed securities and corporate debt securities		60,988		384		12,894		40		73,882		424
States and political subdivisions		62,233		528		38,416		683		100,649		1,211
Other		27,555		370		4,677		318		32,232		688
Total	$	3,533,936	$	46,467	$	1,194,459	$	35,182	$	4,728,395	$	81,649

	December 31, 2004
	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 and Federal agency debentures	$	255,109	$	2,131	$	—	$	—	$	255,109	$	2,131
Mortgage-backed securities		1,623,589		12,970		359,877		8,304		1,983,466		21,274
Asset-backed securities and corporate debt securities		16,976		170		131,127		456		148,103		626
States and political subdivisions		64,929		282		189		6		65,118		288
Other		29,130		956		6		2		29,136		958
Total	$	1,989,733	$	16,509	$	491,199	$	8,768	$	2,480,932	$	25,277

During 2005, the Corporation recognized an other-than-temporary impairment totaling $11 million on several of its bank stock fund securities. Management does not believe any other individual unrealized loss as of December 31, 2005 represents an other-than-temporary impairment. The unrealized losses reported for mortgage-backed securities relate primarily to securities issued by FNMA, FHLMC and private institutions. These unrealized losses are primarily attributable to changes in interest rates and individually were 7% or less of their respective amortized cost basis. The Corporation has both the intent and ability to hold these securities for the time necessary to recover the amortized cost.

The following table presents the amortized cost, fair value, and weighted-average yield of securities at December 31, 2005 by maturity:

																Weighted-
	Within			1 to 5			5 to 10			After 10						Average
(Dollars in  Thousands)	1 Year			Years			Years			Years			Total			Yield(a)
U.S. Treasury and Federal agency debentures	$	97,044		$	751,806		$	309,786		$	15,513		$	1,174,149			4.40
Mortgage-backed securities		24,244			3,478,789			1,475,729			458,687			5,437,449			4.99
Asset-backed securities and corporate debt securities		66,822			64,206			36,901			77,829			245,758			5.15
States and political subdivisions		62,093			348,706			173,437			23,263			607,499			5.07
Other		23,967			183,633			—			208,354			415,954			7.43
Amortized cost	$	274,170		$	4,827,140		$	1,995,853		$	783,646		$	7,880,809
Fair value	$	273,941		$	4,784,860		$	2,019,384		$	796,443		$	7,874,628
Weighted- average yield(a)		4.16	%		4.73	%		5.69	%		5.10	%		4.99	%

^(a)  Yield on debt securities only; equity securities and retained interests in securitizations are excluded.

Weighted-average yields are based on amortized cost. Yields on tax-exempt securities are calculated on a tax-equivalent basis using the marginal Federal income tax rate of 35%. Mortgage-backed securities and retained interests in securitizations are assigned to maturity categories based on their estimated average lives. Equity securities are included in other securities in the After 10 Years category.

At December 31, 2005, 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 $6.6 billion.

At December 31, 2005, 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.

In 2005, 2004, and 2003, gross securities gains of $43 million, $25 million, and $52 million, respectively, were recognized, while gross securities losses were $16 million, $6 million, and $5 million, respectively.

ANNUAL REPORT 2005  59

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9.  Principal Investments

The principal investment portfolio is managed within the Wholesale Banking line of business. The direct portfolio primarily consists of investments in the consumer, retail, manufacturing, automotive, commercial services, health care, and building products industries with the largest industry constituting approximately 17% of the total principal investment portfolio. The indirect portfolio consists of investments in private equity funds managed by third parties. Each fund is diversified according to the terms of the fund’s agreement and the general partner’s direction. A rollforward of principal investments follows:

		For the Calendar Year
(In Thousands)		2005			2004
Direct Investments:
	Carrying value at beginning of period	$	323,028		$	300,077
	Acquisitions(a)		—			1,847
	Investments – new fundings		99,199			128,125
	Returns of capital and write-offs		(97,142	)		(101,283	)
	Fair value adjustments		(8,111	)		(5,738	)
	Carrying value at end of period	$	316,974		$	323,028
Indirect Investments:
	Carrying value at beginning of period	$	342,517		$	294,939
	Acquisitions(a)		—			27,436
	Investments – new fundings		78,912			89,110
	Returns of capital and write-offs		(74,596	)		(65,744	)
	Fair value adjustments		(2,969	)		(3,224	)
	Carrying value at end of period	$	343,864		$	342,517
Total Principal Investments:
	Carrying value at beginning of period	$	665,545		$	595,016
	Acquisitions(a)		—			29,283
	Investments – new fundings		178,111			217,235
	Returns of capital and write-offs		(171,738	)		(167,027	)
	Fair value adjustments		(11,080	)		(8,962	)
	Carrying value at end of period	$	660,838		$	665,545

	For the Calendar Year
(In Thousands)	2005		2004		2003
Principal investment revenue(b)	$	28,273	$	47,934	$	29,384
Net principal investment gains (losses)(c)	$	57,156	$	68,964	$	7,025

^(a)  Represents principal investments acquired with Provident

^(b)  Consists primarily of interest, dividends, and fee income

^(c)  Consists primarily of fair value adjustments and realized gains and losses on investments

Accounting policies for principal investments are included in Note 1. Commitments to fund principal investments are discussed in Note 21.

10.  Goodwill and Other Intangible Assets

A rollforward of goodwill by line of business for 2005 and 2004 follows:

	January 1,		Goodwill			Impairment		December 31,
(In Thousands)	2005		Adjustments(a)			Losses		2005
Consumer and Small Business Financial Services	$	1,027,598	$	(2,258	)	$	—	$	1,025,340
Wholesale Banking		1,633,441		13,477			—		1,646,918
National City Mortgage		62,432		(38	)		—		62,394
National Consumer Finance		348,019		(263	)		—		347,756
Asset Management		230,923		(222	)		—		230,701
Parent and Other		—		—			—		—
Total	$	3,302,413	$	10,696		$	—	$	3,313,109

	January 1,		Goodwill			Impairment		December 31,
(In Thousands)	2004		Adjustments(a)			Losses		2004
Consumer and Small Business Financial Services	$	513,281	$	514,317		$	—	$	1,027,598
Wholesale Banking		86,729		1,546,712			—		1,633,441
National City Mortgage		55,785		6,647			—		62,432
National Consumer Finance		206,032		141,987			—		348,019
Asset Management		126,207		104,716			—		230,923
National Processing		115,306		(115,306	)		—		—
Parent and Other		—		—			—		—
Total	$	1,103,340	$	2,199,073		$	—	$	3,302,413

^(a)  Represents goodwill associated with acquired businesses, sold businesses, and purchase accounting adjustments.

Goodwill sold in connection with the 2005 sale of Madison Bank & Trust totaled $1 million and is included in Consumer and Small Business Financial Services in the table above. Goodwill recognized in connection with the 2005 acquisition of National City Vendor Finance totaled $9 million and is included in Wholesale Banking in the above table. The goodwill acquired in 2004 for each line of business above relates to the acquisitions of Allegiant, Provident, Wayne, and other small acquisitions. For each acquisition, goodwill was allocated to the business segments above based upon the relative fair value of the assets and liabilities assigned to each business segment. Goodwill sold in 2004 relates to the sale of National Processing. Refer to Note 3 for further discussion on recent acquisitions and divestitures.

The Corporation has finite-lived intangible assets capitalized on its balance sheet in the form of core deposit, credit card, operating lease, and other intangibles. A

60  ANNUAL REPORT 2005

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

summary of these intangible assets at December 31 follows:

(In Thousands)		2005		2004
Core deposit intangibles
	Gross carrying amount	$	253,942	$	279,413
	Less: accumulated amortization		119,607		109,167
	Net carrying amount		134,335		170,246
Credit card intangibles
	Gross carrying amount		7,699		17,323
	Less: accumulated amortization		1,626		15,392
	Net carrying amount		6,073		1,931
Operating lease
	Gross carrying amount		47,205		47,205
	Less: accumulated amortization		43,901		20,298
	Net carrying amount		3,304		26,907
Other intangibles
	Gross carrying amount		47,690		21,644
	Less: accumulated amortization		23,049		7,267
	Net carrying amount		24,641		14,377
Total finite-lived intangibles
	Gross carrying amount		356,536		365,585
	Less: accumulated amortization		188,183		152,124
	Net carrying amount	$	168,353	$	213,461

Amortization expense on finite-lived intangible assets totaled $76 million, $67 million, and $23 million for 2005, 2004, and 2003, respectively. Amortization expense on finite-lived intangible assets is expected to total $45 million, $37 million, $24 million, $20 million, and $16 million for fiscal years 2006 through 2010, respectively.

11.  Servicing Assets

Mortgage Servicing Rights (MSRs): The Corporation recognizes MSRs on residential real estate loans sold servicing retained by the National City Mortgage (NCM) and First Franklin business units. First Franklin began selling certain nonconforming residential real estate loans with servicing retained during the fourth quarter of 2004. MSRs retained from First Franklin sales are transferred to the National City Home Loan Services (NCHLS) business unit at the time of sale. Changes in the carrying value of MSRs and the associated valuation allowance follow:

				For the Calendar Year
				2005									2004
				Conforming			Nonconforming						Conforming			Nonconforming
(In Thousands)				Mortgages			Mortgages			Total			Mortgages			Mortgages			Total
Mortgage servicing rights
		Balance at beginning of period		$	1,596,908		$	15,188		$	1,612,096		$	1,300,612		$	—		$	1,300,612
		Acquisition(a)			—			—			—			—			45,000			45,000
		Additions			529,430			121,783			651,213			608,316			15,119			623,435
		Amortization			(492,130	)		(13,672	)		(505,802	)		(493,372	)		(14,416	)		(507,788	)
		SFAS 133 hedge basis adjustments			393,595			—			393,595			189,171			—			189,171
		Sales			(1,851	)		—			(1,851	)		(7,819	)		(30,515	)		(38,334	)
Carrying value before valuation allowance at end of period					2,025,952			123,299			2,149,251			1,596,908			15,188			1,612,096
Valuation allowance
		Balance at beginning of period			(107,230	)		—			(107,230	)		(2,195	)		—			(2,195	)
			Impairment recoveries (charges)		89,054			(15,360	)		73,694			(105,035	)		—			(105,035	)
	Balance at end of period				(18,176	)		(15,360	)		(33,536	)		(107,230	)		—			(107,230	)
Net carrying value of MSRs at end of period				$	2,007,776		$	107,939		$	2,115,715		$	1,489,678		$	15,188		$	1,504,866
Fair value of MSRs at end of period				$	2,034,168		$	107,939		$	2,142,107		$	1,501,947		$	15,257		$	1,517,204
Unpaid principal balance of loans serviced for others (in millions)				$	159,580		$	16,909		$	176,489		$	152,367		$	1,913		$	154,280

^(a)  Relates to MSRs associated with nonconforming residential real estate loans that were acquired as part of the acquisition of Provident in 2004. These MSRs were sold later in 2004 as part of the sale of Provident PCFS.

MSRs are periodically evaluated for impairment, and a valuation allowance is established through a charge to income when the carrying value, including hedge accounting adjustments (if applicable), exceeds the fair value and is believed to be temporary. Other-than-temporary impairment is recognized when the recoverability of a recorded valuation allowance is determined to be remote, taking into consideration historical and projected interest rates and loan pay-off activity. When this situation occurs, the unrecoverable portion of the valuation allowance is applied as a direct write-down to the carrying value of the MSRs. Unlike a valuation allowance, a direct write-down permanently reduces the carrying value of the MSRs and the valuation allowance, precluding recognition of subsequent recoveries. There were no other-than-temporary write-downs recognized during 2005 or 2004.

The fair value of MSRs was estimated by calculating 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 expected and actual rates of mortgage loan prepayments are the

ANNUAL REPORT 2005  61

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most significant factors driving the valuation. Increases in mortgage loan prepayments reduce estimated future net servicing cash flows because the life of the underlying loan is reduced. In determining the fair value of the MSRs, mortgage interest rates, which are used to determine prepayment rates, and discount rates are held constant over the estimated life of the portfolio. Expected mortgage loan prepayment rates are derived from a third-party model and adjusted to reflect National City’s actual prepayment experience. At December 31, 2005, the fair value of MSRs exceeded the carrying value reported in the consolidated balance sheet by $26 million. This difference represents increases in the fair value of certain MSRs accounted for under SFAS 140 that were not permitted to be recorded above their cost basis, net of accumulated amortization and SFAS 133 adjustments.

The key economic assumptions used to estimate the value of the MSRs at December 31, 2005 and 2004 are presented in the table that follows. A sensitivity analysis of the current fair value to immediate 10% and 20% adverse changes in those assumptions as of December 31, 2005 is also presented. 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 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 discount rates), which might magnify or counteract the sensitivities.

		December 31
		2005						2004
		Conforming			Nonconforming			Conforming			Nonconforming
(Dollars in Millions)		Mortgages			Mortgages			Mortgages			Mortgages
Fair value		$	2,034.2		$	107.9		$	1,501.9		$	15.3
Weighted-average life (in years)			5.0			2.1			3.9			2.5
Weighted-average constant prepayment rate (CPR)			17.50	%		39.21	%		23.07	%		33.59	%
Weighted-average discount rate			9.74			13.56			9.52			12.75
Prepayment rate:
	Decline in fair value from 10% adverse change	$	102.5		$	19.4
	Decline in fair value from 20% adverse change		195.0			22.4
Discount rate:
	Decline in fair value from 10% adverse change		67.3			2.7
	Decline in fair value from 20% adverse change		130.3			4.7

The key economic assumptions used in determining the fair value of MSRs capitalized during 2005 and 2004 were as follows:

	2005						2004
	Conforming			Nonconforming			Conforming			Nonconforming
	Mortgages			Mortgages			Mortgages			Mortgages
Weighted-average life (in years)		4.5			2.5			4.3			2.6
Weighted-average CPR		21.55	%		34.15	%		22.29	%		33.30	%
Weighted-average discount rate		9.75			13.24			9.70			12.75

Risk associated with declines in the estimated fair value due to increases in mortgage loan prepayments is managed using derivative instruments that are expected to increase in value when interest rates decline. The Corporation typically strives to include the derivative instruments it uses to protect the value of the MSRs associated with conforming mortgages in SFAS 133 hedge relationships in order to record gains and losses on both the assets and the associated derivative instruments simultaneously in the income statement. MSRs not included in the SFAS 133 relationships may not be written up above their initial carrying value, adjusted for amortization, limiting the amount of gains that might otherwise be recognized to offset losses on the derivative instruments, which are always carried at fair value. Notes 1 and 24 provide further discussion on how derivative instruments are accounted for, the nature of the derivative instruments used, the risks associated with their use, and ineffective hedge and other gains and losses associated with derivative instruments during the current and prior year.

62  ANNUAL REPORT 2005

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other Servicing Rights: The Corporation also recognizes servicing assets on commercial real estate loans sold servicing retained through its Red Mortgage Capital and Capstone Realty business units. These businesses and their commercial real estate servicing rights were acquired with Provident in July 2004. Commercial real estate servicing assets are recorded in other assets on the consolidated balance sheet. Changes in the carrying value of the commercial real estate servicing assets and the associated valuation allowance follow:

		For the Calendar Year
(In Thousands)		2005			2004
Commercial real estate servicing assets
	Balance at beginning of period	$	125,778		$	—
	Acquisitions		—			122,694
	Additions		31,076			12,111
	Amortization		(17,849	)		(9,302	)
	Sales		(597	)		(272	)
	Other		—			547
	Carrying value before valuation allowance at end of period		138,408			125,778
	Valuation allowance
	Balance at beginning of period		(1,032	)		—
	Acquisitions		—			(1,030	)
	Impairment charges		(43	)		(2	)
	Balance at end of period		(1,075	)		(1,032	)
	Net carrying value of servicing assets at end of period	$	137,333		$	124,746
	Unpaid principal balance of loans serviced for others (in millions)	$	14,638		$	11,356

12.  Properties and Equipment

The composition of properties and equipment follows:

	December 31
(In Thousands)	2005		2004
Land	$	200,609	$	198,420
Buildings and leasehold improvements		1,194,934		1,112,513
Equipment		1,214,677		1,332,787
		2,610,220		2,643,720
Less accumulated depreciation and amortization		1,281,317		1,375,032
Net properties and equipment	$	1,328,903	$	1,268,688

Depreciation and amortization of properties and equipment, including assets recorded under capital leases, totaled $229 million in 2005, $219 million in 2004, and $178 million in 2003.

During 2005 and 2004, the Corporation recognized fixed asset impairment charges totaling $18 million and $3 million, respectively. These charges were recorded primarily within the Parent and Other segment. The impairment charges in 2005 relate to certain underutilized buildings offered for sale. The estimated fair values of these buildings were determined based on broker quotes, third-party bids, and real-estate appraisals.

13.  Federal Funds Borrowed and Security Repurchase Agreements

Detail of Federal funds borrowed and security repurchase agreements follows:

(Dollars in Thousands)		2005			2004			2003
Balance at December 31:
	Federal funds borrowed	$	3,101,648		$	2,669,386		$	3,915,870
	Security repurchase agreements		3,397,606			3,223,042			2,778,046
Maximum outstanding at any month end:
	Federal funds borrowed		6,887,983			6,314,532			9,801,158
	Security Repurchase Agreements		3,697,789			3,332,276			3,200,560
Daily average amount outstanding:
	Federal funds borrowed		4,021,248			4,925,738			7,895,213
	Security Repurchase Agreements		3,316,941			2,917,759			3,012,672
Weighted daily average interest rate:
	Federal funds borrowed		3.34	%		1.45	%		1.44	%
	Security Repurchase Agreements		2.28			.78			.63
Weighted daily interest rate for amounts outstanding at December 31:
	Federal funds borrowed		4.06	%		2.01	%		.85	%
	Security Repurchase Agreements		3.05			1.40			.50

Federal funds borrowed and security repurchase agreements have maturities of six months or less.

14. Borrowed Funds

Detail of borrowed funds follows:

	December 31
(In Thousands)	2005			2004
U.S. Treasury notes	$	1,753,807		$	1,024,477
Commercial paper		1,051,421			415,490
Federal Home Loan Bank advances		150,000			—
Senior bank notes		137,000			195,000
Other		425,309			400,933
Total borrowed funds	$	3,517,537		$	2,035,900
Weighted-average contractual rate		4.06	%		1.93	%

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 December 31, 2005, $854 million of U.S. Treasury notes were callable on demand by the U.S. Treasury and $900 million of the notes were term notes with stated maturities of less than one month.

Commercial paper is issued by the Corporation’s subsidiary, National City Credit Corporation, and is due in four

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months or less. The FHLB Advances represent short-term borrowings with maturities of two months or less at December 31, 2005.

The senior bank notes are issued by National City’s bank subsidiaries and have maturities of six months or less.

The other category at December 31, 2005 and 2004 included liabilities totaling $311 million and $233 million, respectively, related to mortgage loans available for repurchase under GNMA optional repurchase programs. See further discussion in Note 1.

15. Long-Term Debt

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

	December 31
(In Thousands)	2005		2004
7.20% fixed-rate subordinated note redeemed 2005	$	—	$	251,559
3.20% fixed-rate senior note due 2008		288,374		292,800
3.125% fixed-rate senior note due 2009		189,023		192,335
5.75% fixed-rate subordinated note due 2009		306,487		318,533
4.661% variable-rate senior note due 2010		299,880		—
4.90% fixed-rate senior note due 2015		390,848		—
6.875% fixed-rate subordinated note due 2019		782,748		783,528
8.375% fixed-rate senior note due 2032		73,059		74,312
Other		—		880
Total holding company		2,330,419		1,913,947
Senior bank notes		22,087,766		18,549,507
7.25% fixed-rate subordinated note due 2010		244,601		256,219
6.30% fixed-rate subordinated note due 2011		211,699		220,220
7.25% fixed-rate subordinated note due 2011		199,501		198,658
6.25% fixed-rate subordinated note due 2011		315,074		327,249
6.20% fixed-rate subordinated note due 2011		514,262		530,820
4.63% fixed-rate subordinated note due 2013		298,401		299,318
4.25% fixed-rate subordinated note due 2018		227,077		224,424
Federal Home Loan Bank advances		3,920,391		4,904,387
Secured debt financings		130,970		666,614
Other		15,932		—
Total bank subsidiaries		28,165,674		26,177,416
Total long-term debt	$	30,496,093	$	28,091,363

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, or 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 used to hedge cash flow variability by capping the interest payments associated with variable-rate debt issuances. Interest rate swaps and caps are based on the one- or three-month London Interbank Offering Rate (LIBOR) rate, the Federal Funds rate, or the Prime rate. Further discussion on derivative instruments is included in Notes 1 and 24.

The subordinated notes of the holding company and bank subsidiaries 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 December 31, 2005 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-			Weighted-
			Average			Average
			Contractual			Effective
(Dollars in Thousands)	Par Value		Rate			Rate
Senior bank notes	$	22,146,455		4.25	%		4.24	%
Subordinated notes		2,975,000		6.15			4.82
Senior notes		1,275,000		4.37			4.57
FHLB advances		3,880,752		4.50			3.96
Secured debt financings		130,776		7.10			6.04
Other		15,932		5.93			5.93
Total long-term debt	$	30,423,915		4.48	%		4.27	%

Senior bank notes are issued by National City’s bank subsidiaries. During 2005, senior bank notes with a par value of $11.5 billion were issued by the bank subsidiaries. At December 31, 2005, senior bank notes totaling $3.2 billion were contractually based on a fixed rate of interest and $18.9 billion were contractually based on a variable rate of interest. Senior bank notes have maturities ranging from 2006 to 2078.

All subordinated notes of the bank subsidiaries were issued at fixed rates, pay interest semi-annually and may not be redeemed prior to maturity. The 8.375% senior note of the holding company was acquired with Provident, is fixed-rate, pays interest quarterly, and is callable 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. During 2005, the holding company issued senior notes with a par value of $700 million.

At December 31, 2005, Federal Home Loan Bank (FHLB) advances consisted of $856 million of fixed-rate obligations and $3.0 billion of variable-rate obligations. The Corporation’s maximum borrowing limit with the FHLB was $7.1 billion at December 31, 2005. The Corporation pledged $23.9 billion in residential real estate loans, $44 million in commercial real estate loans, and $10.2 billion in home equity lines of credit as collateral against FHLB borrowings at December 31, 2005. FHLB advances have maturities ranging from 2006 to 2030.

Secured debt financings were obtained from acquisitions, primarily Provident. At December 31, 2005, secured debt financings relate to fixed obligations of $130 million and $1 million collateralized by automobile and equipment leases, respectively. The automobile lease secured debt financings pay interest monthly, may be redeemed prior

64  ANNUAL REPORT 2005

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

to maturity, and were collateralized by $237 million in automobile leases and $90 million in cash at December 31, 2005. The equipment lease secured debt financings outstanding at December 31, 2005 pay interest quarterly, may not be redeemed prior to maturity, and were collateralized by $1 million in equipment leases. Secured debt financings have contractual maturities ranging from 2006 to 2008. During 2005, the Corporation called obligations secured by automobile leases totaling $368 million.

At December 31, 2005, long-term debt maturities were as follows: $11.6 billion in 2006, $6.6 billion in 2007, $3.5 billion in 2008, $3.0 billion in 2009, $2.4 billion in 2010, and $3.3 billion thereafter. These amounts are based upon the par values of long-term debt.

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 December 31, 2005, National City sponsored six 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.

Distributions on the capital securities issued by First of America Capital Trust I, Fort Wayne Capital Trust I, and Provident Capital Trust I are payable semi-annually 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 Allegiant Capital Trust II, and Provident Capital Trust 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 Banc Services Corp. Statutory Trust I are payable quarterly at a variable rate equal to the three-month LIBOR rate plus 3.45 basis points, with a maximum interest rate of 11.95%. The interest rate associated with the Banc Services Corp. Statutory Trust capital securities was 7.97% at December 31, 2005.

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
Provident Capital Trust IV		March 30, 2006
Allegiant Capital Trust II		September 30, 2006
Provident Capital Trust I		December 1, 2006
First of America Capital Trust I		January 31, 2007
Fort Wayne Capital Trust I		April 15, 2007
Banc Services Corp. Statutory Trust I		June 26, 2007

In 2005 and 2004, the Corporation redeemed the capital securities of Provident Capital Trust III, Allegiant Capital Trust I, and Provident Capital Trust II, which had also been acquired as part of the Allegiant and Provident acquisitions.

The capital securities held by the trusts qualify as Tier 1 capital under Federal Reserve Board guidelines. On March 1, 2005, the Federal Reserve issued rules that retain Tier 1 capital treatment for trust preferred securities but with stricter limits. Under the final rules, after a five-year transition period, the aggregate amount of trust preferred securities and certain other capital elements will retain its current limit of 25% of Tier 1 capital elements, net of goodwill. The amount of trust preferred securities and certain other elements in excess of the limit could be included in Tier 2 capital, subject to restrictions. These new rules have no impact on the Corporation’s Tier 1 capital.

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 acquisition.

	December 31
(In Thousands)	2005		2004
8.12% junior subordinated debentures owed to First of America Capital Trust I due January 31, 2027	$	154,640	$	154,640
9.85% junior subordinated debentures owed to Fort Wayne Capital Trust I due April 15, 2027		30,928		30,928
9.00% junior subordinated debentures owed to Allegiant Capital Trust II due September 30, 2031		42,725		44,626
8.60% junior subordinated debentures owed to Provident Capital Trust I due December 1, 2026		109,373		115,988
10.25% junior subordinated debentures owed to Provident Capital Trust III redeemed December 30, 2005		—		120,477
9.45% junior subordinated debentures owed to Provident Capital Trust IV due March 30, 2031		128,339		130,251
Variable-rate junior subordinated debentures owed to Banc Services Corp. Statutory Trust I due June 26, 2032		7,518		7,719
Total junior subordinated debentures owed to unconsolidated subsidiary trusts	$	473,523	$	604,629

17.  Regulatory Restrictions and Capital Ratios

The Corporation and its banking subsidiaries are subject to various regulatory capital requirements of federal

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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 at December 31 follow:

	2005					2004
(Dollars in Thousands)	Amount		Ratio			Amount		Ratio
Total equity/assets	$	12,612,871		8.86	%	$	12,803,529		9.18	%
Total common equity/assets		12,612,871		8.86			12,803,529		9.18
Tangible common equity/tangible assets		9,131,409		6.57			9,287,655		6.83
Tier 1 capital		9,517,347		7.43			9,815,314		8.25
Total risk-based capital		13,499,489		10.53			14,023,018		11.79
Leverage		9,517,347		6.83			9,815,314		7.31

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.

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 based on preliminary data. Such ratios are above the required minimum levels of 4.00%, 8.00%, and 3.00%, respectively. The capital levels at all of National City’s subsidiary banks are maintained at or above the well-capitalized minimums of 6.00%, 10.00%, and 5.00% for the Tier 1 capital, total risk-based capital, and leverage ratios, respectively. As of the most recent notification from the Federal Deposit Insurance Corporation, which was December 15, 2005, each of the Corporation’s subsidiary banks was considered well-capitalized under the regulatory framework for prompt corrective action. There have been no conditions or events since these filings were made that management believes have changed any subsidiary bank’s capital category. As of December 31, 2005, each of the subsidiary banks was also categorized as well-capitalized.

As discussed in Note 16, the capital securities held by the First of America, Fort Wayne, Allegiant, Provident, and Banc Services Corp. subsidiary trusts qualify as Tier 1 capital under Federal Reserve Board guidelines. On March 1, 2005, the Federal Reserve issued rules that retain Tier 1 capital treatment for trust preferred securities but with stricter limits. Under these rules, after a five-year transition period, the aggregate amount of trust preferred securities and certain other capital elements will retain its current limit of 25% of Tier 1 capital elements, net of goodwill. The amount of trust preferred securities and certain other elements in excess of the limit could be included in Tier 2 capital, subject to restrictions. These new rules have no impact on the Corporation’s Tier 1 capital.

The Corporation’s subsidiary banks are required to maintain noninterest bearing reserve balances with the Federal Reserve Bank. The required reserve balance was $3.5 million at December 31, 2005.

Under current Federal Reserve regulations, the banking subsidiaries are limited in the amount they may loan to the parent company and its 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 subsidiary banks to nonbank affiliates, including the parent company, are also required to be collateralized.

Dividends paid by subsidiary banks to the parent company are also subject to certain legal and regulatory limitations. In 2006, the subsidiary banks may pay dividends of $1.0 billion, plus an additional amount equal to their net profits for 2006, as defined by statute, up to the date of any such dividend declaration, without prior regulatory approval.

The Corporation’s mortgage banking and broker/ dealer subsidiaries are also required to maintain minimum net worth capital requirements with various governmental agencies. The mortgage banking subsidiaries’ net worth requirements are governed by the Department of Housing and Urban Development and the Government National Mortgage Association. The broker/ dealer’s net worth requirements are governed by the United States Securities and Exchange Commission. As of December 31, 2005, these subsidiaries met their respective minimum net worth capital requirements.

18. Stockholders’ Equity

Stock Repurchases: On October 24, 2005, 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 new authorization was incremental to the previous share repurchase authorization approved by the Board of Directors on December 21, 2004. Repurchases under the December 21, 2004 authorization were completed during October 2005. Shares repurchased under these programs are held for reissue in connection with stock compensation plans and for general corporate purposes. During

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2005, 2004, and 2003, the Corporation repurchased 43.5 million, 40.1 million, and 11.5 million shares of its common stock, respectively. As of December 31, 2005, 33.6 million shares remain authorized for repurchase.

Preferred Stock: In connection with the acquisition of Provident on July 1, 2004, 70,272 shares of National City Series D convertible non-voting preferred stock were issued. 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 when 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.

Preferred Securities of Subsidiaries: As part of the acquisition of Provident, PFGI Capital Corporation (PFGI Capital) became a consolidated subsidiary of the Corporation. The purpose of PFGI Capital is to hold and manage commercial mortgage loan assets and other authorized investments acquired from the Corporation to generate net income for distribution to its stockholders. PFGI Capital has elected to be treated as a real estate investment trust (REIT) for federal income tax purposes. PFGI Capital issued 6.6 million equity units (PRIDES) to outside investors. Each PRIDES was comprised of two components – a three-year forward purchase contract (which expired August 17, 2005) and PFGI Capital Series A Preferred Stock. During 2005, all PRIDES holders exercised their Forward Purchase Contracts which entitled them to purchase 6,444,223 newly issued shares of National City common stock for $165 million. Additionally, in 2005, PFGI Capital repurchased 2.6 million shares of the Series A Preferred Stock in privately negotiated transactions with individual investors. The remaining ownership by outside investors is accounted for as a minority interest in the consolidated financial statements.

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

	For the Calendar Year
(In Thousands)	2005			2004			2003
Accumulated unrealized gains on securities available for sale at January 1, net of tax	$	107,193		$	132,318		$	223,073
Net unrealized losses for the period, net of tax benefit of $49,316 in 2005, $6,888 in 2004 and $29,523 in 2003		(91,586	)		(12,792	)		(54,828	)
Reclassification adjustment for gains included in net income, net of tax expense of $7,463 in 2005, $6,641 in 2004, and $11,225 in 2003		(19,625	)		(12,333	)		(35,927	)
Effect on other comprehensive income for the period		(111,211	)		(25,125	)		(90,755	)
Accumulated unrealized (losses) gains on securities available for sale at December 31, net of tax	$	(4,018	)	$	107,193		$	132,318
Accumulated unrealized losses on derivatives used in cash flow hedging relationships at January 1, net of tax	$	(6,605	)	$	(67,631	)	$	(155,893	)
Net unrealized gains (losses) for the period, net of tax expense (benefit) of $16,849 in 2005, $(13,295) in 2004, and $(18,633) in 2003		31,291			(24,691	)		(34,605	)
Reclassification adjustment for (gains) losses included in net income, net of tax expense (benefit) of $4,740 in 2005, $(46,156) in 2004, and $(66,159) in 2003		(8,803	)		85,717			122,867
Effect on other comprehensive income for the period		22,488			61,026			88,262
Accumulated unrealized gains (losses) on derivatives used in cash flow hedging relationships at December 31, net of tax	$	15,883		$	(6,605	)	$	(67,631	)
Accumulated other comprehensive income at January 1, net of tax	$	100,588		$	64,687		$	67,180
Other comprehensive (loss) income, net of tax		(88,723	)		35,901			(2,493	)
Accumulated other comprehensive income at December 31, net of tax	$	11,865		$	100,588		$	64,687

19.  Net Income per Common Share

Basic and diluted net income per common share calculations follow:

		For the Calendar Year
(Dollars in Thousands, Except Per Share Amounts)		2005		2004		2003
Basic
	Net income		$1,985,229		$2,779,934		$2,117,064
	Less preferred dividends		1,616		785		—
	Net income applicable to common stock		$1,983,613		$2,779,149		$2,117,064
	Average common shares outstanding		633,431,660		635,450,188		611,205,682
	Net income per common share – basic		$3.13		$4.37		$3.46
Diluted
	Net income		$1,985,229		$2,779,934		$2,117,064
	Average common shares outstanding		633,431,660		635,450,188		611,205,682
	Stock awards		6,679,651		8,477,996		5,204,361
	Convertible preferred stock		1,121,541		563,836		—
	Forward contracts		368,117		1,018,494		—
	Average common shares outstanding – diluted		641,600,969		645,510,514		616,410,043
	Net income per common share – diluted		$3.09		$4.31		$3.43

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 for the period.

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Diluted net income per common share takes into consideration the pro forma dilution of outstanding convertible preferred stock, commitments to issue additional shares pursuant to forward contracts, and certain unvested restricted stock and unexercised stock option awards. For the years ended December 31, 2005, 2004, and 2003, options to purchase 10.4 million, 2.3 million and 18.1 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 Tax Expense

The composition of income tax expense follows:

		For the Calendar Year
(In Thousands)		2005		2004			2003
Current:
	Federal	$	610,623	$	1,229,653		$	1,099,832
	State		16,900		128,742			128,450
	Total current		627,523		1,358,395			1,228,282
Deferred:
	Federal		341,551		(54,477	)		(116,239	)
	State		6,860		(5,912	)		8,359
	Total deferred		348,411		(60,389	)		(107,880	)
Income tax expense		$	975,934	$	1,298,006		$	1,120,402
Income tax expense applicable to securities transactions		$	7,463	$	2,492		$	11,225

The effective tax rate differs from the statutory Federal tax rate applicable to corporations as a result of permanent differences between accounting and taxable income as shown in the following table:

	For the Calendar Year
	2005			2004			2003
Statutory Federal tax rate		35.0	%		35.0	%		35.0	%
Life insurance		(0.9	)		(0.7	)		(0.8	)
Tax-exempt income		(0.7	)		(0.5	)		(0.6	)
State taxes		0.5			1.8			2.7
Tax credits		(1.7	)		(1.4	)		(1.1	)
Sale of National Processing		—			(0.7	)		—
Other		0.8			(1.7	)		(0.6	)
Effective tax rate		33.0	%		31.8	%		34.6	%

Significant components of deferred tax liabilities and assets as of December 31 follow:

(In Thousands)			2005		2004
Deferred tax liabilities:
	Mortgage servicing rights, net		$	566,118	$	334,048
	Leases and equipment leased to others			502,950		686,382
	Properties and equipment			65,956		49,638
	Deferred loan fees			39,792		42,562
	State income taxes			55,606		36,640
	Retained interests			—		35,005
	Intangibles			82,453		79,662
	Other, net			99,052		143,146
	Total deferred tax liabilities			1,411,927		1,407,083
Deferred tax assets:
	Allowance for loan losses			448,199		528,637
	Deferred compensation accrual			110,185		112,794
	Repurchase and indemnification reserve			96,093		88,399
	Federal benefit of state taxes			38,044		52,144
	Employee benefit accrual			41,948		42,446
	Unrealized losses on securities and loans held for sale			8,593		19,286
	Retained interests			11,243		—
	Net operating loss carryforward			—		28,417
	Other, net			136,356		272,265
		Total deferred tax assets		890,661		1,144,388
Net deferred tax liability			$	521,266	$	262,695

For the years ended 2005, 2004, and 2003, tax expense resulting from allocating the tax benefit associated with stock option exercises either directly to paid in capital or goodwill was $19 million, $45 million, and $27 million, respectively.

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

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

		December 31
(In Thousands)		2005		2004
Commitments to extend credit:
	Commercial	$	22,987,569	$	19,891,479
	Residential real estate		9,052,485		14,126,791
	Revolving home equity and credit card lines		34,080,110		32,095,788
	Other		646,576		416,751
Standby letters of credit			4,745,848		4,227,310
Commercial letters of credit			361,678		260,081
Net commitments to sell mortgage loans and mortgage-backed securities			1,495,089		6,314,013
Net commitments to sell commercial real estate loans			284,724		241,737
Commitments to fund principal investments			295,165		263,878
Commitments to fund civic and community investments			351,282		313,257
Commitments to purchase beneficial interests in securitized automobile loans			994,632		—

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

68  ANNUAL REPORT 2005

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

value of these commitments due to changes in interest rates are recorded on the balance sheet as either 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 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.

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 subsidiaries. As a limited partner in these unconsolidated projects, the Corporation is allocated tax credits and deductions associated with the underlying projects. 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 the automobile loans securitized 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 2006 but may be renewed annually for an additional twelve months by mutual agreement of the parties.

The Corporation and certain of its subsidiaries occupy certain facilities under long-term operating leases and, in addition, lease certain software and data processing and other equipment. The aggregate minimum annual rental commitments under these leases total approximately $146 million in 2006, $135 million in 2007, $116 million in 2008, $99 million in 2009, $79 million in 2010, and $449 million thereafter. The Corporation also subleases and receives rental income on certain leased properties. As of December 31, 2005, aggregate future minimum rentals to be received under noncancelable subleases totaled $32 million. Total operating lease expense, net of sublease income, recorded under all operating leases was $179 million, $137 million, and $131 million in 2005, 2004, and 2003, respectively.

Contingent Liabilities and Guarantees: The Corporation enters into residential mortgage loan sale agreements with investors in the normal course of business. These agreements usually require certain representations concerning credit information, loan documentation, collateral, and insurability. On occasion, investors have requested 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 certain 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. Total loans sold, including loans sold with servicing released, were $72.1 billion, $79.8 billion, and $117.5 billion for 2005, 2004, and 2003, respectively. Total loans repurchased or indemnified during 2005, 2004, and 2003 were $331 million, $454 million and $265 million, respectively. Loans indemnified that remained outstanding as of December 31, 2005 and 2004, totaled $341 million and $228 million, respectively. In addition, total loans sold of $118 million and $292 million remained uninsured as of December 31, 2005 and 2004, respectively. The volume and balance of uninsured government loans may be affected by processing or notification delays. Management believes the majority of the uninsured loans at December 31, 2005 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

ANNUAL REPORT 2005  69

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which were ultimately repurchased have been included in the repurchase totals above. Losses charged against the liability for estimated losses, including uninsured government loans, were $90 million, $118 million, and $65 million for 2005, 2004, and 2003, respectively. At December 31, 2005 and 2004, the liability for estimated losses on repurchase and indemnification was $233 million and $209 million, respectively, and was included in other liabilities on the balance sheet.

In connection with the acquisition of Provident in July 2004, the Corporation assumed a guarantee made to Fannie Mae on behalf of its acquired subsidiary Red Mortgage Capital, 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. As of December 31, 2005 and 2004, Red Mortgage Capital serviced loans, with risk sharing under the DUS program, had outstanding principal balances aggregating $4.4 billion and $4.1 billion. The 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 $7 million and $10 million at December 31, 2005 and 2004, respectively.

The guarantee liability for standby letters of credit was $50 million and $49 million at December 31, 2005 and 2004, 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, through various subsidiaries, has historically provided merchant card processing or sponsorship services. Under the rules of Visa^® and MasterCard ^® , when a merchant processor acquires card transactions, it has certain contingent liabilities for the transactions processed. This contingent liability arises in the event of a billing dispute between the merchant and a cardholder that is ultimately resolved in the cardholder’s favor. In such a case, the transaction is “charged back” to the merchant and the disputed amount is credited or otherwise refunded to the cardholder. If the Corporation is unable to collect this amount from the merchant’s account, and if the merchant refuses or is unable to reimburse the Corporation for the chargeback due to liquidation or other reasons, the Corporation will bear the loss for the amount of the refund paid to the cardholder.

Effective October 15, 2004, National Processing, Inc. was sold as described in Note 3. As a result of this sale, the Corporation has exited the merchant card processing business and has no continuing or future exposure to potential chargeback liabilities, except for the exposure to United Airlines as described in the following paragraph.

Under the terms of the National Processing sale agreement, the Corporation retained the contractual obligation to process card transactions for United Airlines, Inc., which had been operating under Chapter 11 protection. The Corporation was paid $36 million to retain this obligation. Pursuant to FASB Interpretation 45, regarding accounting for guarantees, this amount is deemed to be the fair value of this obligation and is included in accrued expenses and other liabilities. In the event of liquidation of United Airlines, the Corporation could become financially responsible for refunding tickets purchased through Visa^® and MasterCard ^® under the chargeback rules of those associations. At December 31, 2005, the estimated dollar value of tickets purchased, but as yet unflown, under the United Airlines merchant processing contract, was approximately $648 million. Based upon available information, this amount represents management’s best estimate of its maximum potential chargeback exposure related to United Airlines, Inc. As of December 31, 2005, the Corporation held no significant collateral under this contract. On October 21, 2005, the bankruptcy court entered an order permitting United Airlines to enter into a card processing agreement with a successor processor, and on January 11, 2006, the successor processor began processing United’s card transactions. As a consequence, the Corporation’s exposure to potential chargebacks will diminish over the remainder of 2006 as previously unflown tickets are utilized. Based on information currently available to the Corporation, management believes the risk of a material loss under the chargeback rules is unlikely.

National City and its subsidiaries are involved in a number of legal proceedings arising from the conduct of their business activities. These legal 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.

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, concerning management of investments held in a trust for the benefit of the Americans for the Arts and The Poetry Foundation. The claim alleges failure to adequately and timely diversify investments held in this trust, which resulted in investment losses. The beneficiaries are 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 have filed an appeal. Management continues to believe that this claim does not have merit and that the risk of material loss is unlikely.

70  ANNUAL REPORT 2005

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Beginning on June 22, 2005, a series of antitrust class action lawsuits were filed against Visa^®, MasterCard ^® , and several major financial institutions, including seven cases naming the Corporation and its subsidiary, National City Bank of Kentucky. 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. Given the preliminary stage of these suits, it is not possible for management to assess the probability of a material adverse outcome, or the range of possible damages, if any.

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 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) no more than 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.

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 not later than 10 years from the date of grant. In addition, stock options may be granted that include 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.

On January 1, 2003, the Corporation prospectively adopted the fair value method of accounting for stock options under SFAS 123. Further discussion of the impact of this change is included in Note 1. During 2005, 2004, and 2003, compensation expense recognized related to stock options totaled $20 million, $25 million, and $12 million, respectively.

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. The weighted-average grant date fair value of restricted share awards granted during 2005, 2004, and 2003 were $34.79, $35.39, and $32.28, respectively. Compensation expense recognized for restricted share plans during 2005, 2004, and 2003 totaled $38 million, $30 million, and $18 million, respectively.

Option and Restricted Stock Award Activity: Stock option and restricted stock award activity follows:

								Weighted-
								Average
		Shares Outstanding						Exercise
								Price Per
		Awards			Options			Share
December 31, 2002			2,539,171			52,963,738		$	26.89
	Cancelled		(161,773	)		(851,853	)		30.06
	Exercised		(488,797	)		(8,200,758	)		22.01
	Granted		1,893,040			6,940,115			33.45
December 31, 2003			3,781,641			50,851,242			28.52
	Acquisitions		—			9,274,981			26.12
	Cancelled		(227,026	)		(368,668	)		30.12
	Exercised		(722,163	)		(12,554,038	)		25.38
	Granted		2,005,673			7,497,223			35.89
December 31, 2004			4,838,125			54,700,740			29.83
	Cancelled		(329,318	)		(927,087	)		33.48
	Exercised		(682,971	)		(6,553,014	)		24.95
	Granted		2,626,357			2,914,859			35.30
December 31, 2005			6,452,193			50,135,498		$	30.72

Upon consummation of the Allegiant and Provident acquisitions, all outstanding options issued by Allegiant and Provident were converted into equivalent National City options. Cancelled activity includes both forfeited and expired awards and options.

Information about stock options outstanding at December 31, 2005, follows:

					Weighted-
					Average
			Weighted-		Remaining				Weighted-
Range of			Average		Contractual				Average
Exercise			Exercise		Life				Exercise
Prices		Outstanding	Price		(in years)		Exercisable		Price
	$5.46 - 12.99	9,672	$	6.81		0.7		9,672	$	6.81
	13.00 - 19.99	3,952,655		18.18		4.1		3,952,655		18.18
	20.00 - 26.99	3,002,773		24.54		4.3		3,002,773		24.54
	27.00 - 33.99	31,392,377		30.88		4.8		29,049,939		30.65
	34.00 - 40.99	11,469,061		35.88		6.7		5,338,766		36.20
	41.00 - 47.99	308,960		43.73		2.1		308,960		43.73
Total		50,135,498	$	30.72		5.1		41,662,765	$	29.83

ANNUAL REPORT 2005  71

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At December 31, 2005, 2004, and 2003, options for 41,662,765, 44,503,822, and 40,448,964 shares of common stock, respectively, were exercisable. As of December 31, 2005, stock options and restricted stock awards available for grant under the Long-Term Incentive Plan totaled 25 million and 9 million shares, respectively.

Additional stock option and restricted award information as of December 31, 2005 follows, which includes plans assumed through various acquisitions. As of December 31, 2005, outstanding options related to these acquired plans totaled 5,776,295 shares with a weighted-average exercise price per share of $27.32.

			Weighted-
	Shares to		Average		Shares
	Be Issued		Option		Available
	Upon		Exercise		for Future
	Exercise		Price		Grants
Plans approved by stockholders		56,448,709	$	30.76		33,831,004
Plans not approved by stockholders(a)		238,342		25.83		—
Total		56,687,051	$	30.72		33,831,004

^(a)  Provident’s 2000 Employee Stock Option Plan provided for the grant of stock options to employees, other than executive officers. Options were granted at an exercise price of not less than 95% of market price at the time of the grant, for a term of up to 10 years. Options vested as determined by Provident’s Compensation Committee. The 83,366 remaining outstanding options at December 31, 2005 are all exercisable.

Provident’s 2002 Outside Directors Stock Option Plan provided for the grant of 2,000 options to each non-employee director upon election to its Board and upon each subsequent annual election. The options were granted at an exercise price equal to their market price, for a term of 10 years. Options vested as determined by Provident’s Compensation Committee. The 55,616 remaining outstanding options at December 31, 2005 are all exercisable.

The National City Corporation 2004 Deferred Compensation Plan provides eligible employees the opportunity to defer the receipt of cash compensation which would have otherwise been received as salary, as variable pay or as an incentive award. The plan provides participants with non-elective deferred compensation, and the deferred compensation is credited with gains or losses based upon investment options made available from time to time, and, as such, there is no weighted-average exercise price. The plan does not limit the number of shares that may be issued for the plan.

23.  Pension and Other Postretirement Benefit Plans

National City has a noncontributory defined benefit pension plan covering substantially all employees. Employees retained from the Allegiant, Provident, and Wayne acquisitions became eligible to participate in the Corporation’s defined benefit pension plan effective January 1, 2005. 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 noninterest expense in the income statement. The funding policy is to contribute at least the minimum amount required by the Employee Retirement Income Security Act of 1974.

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. 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, plan assets for each of the plans follows:

							Other
							Postretirement
	Pension Benefits						Benefits
(In Thousands)	2005			2004			2005			2004
Change in Fair Value of Plan Assets
Fair value at beginning of measurement period	$	1,675,345		$	1,601,150		$	—		$	—
Actual return on plan assets		125,572			150,531			—			—
Employer contribution		—			—			3,329			6,056
Participant contributions		—			—			18,119			17,717
Expenses paid		(4,619	)		(4,302	)		—			—
Benefits paid		(70,738	)		(72,034	)		(21,448	)		(23,773	)
Fair value at end of measurement period	$	1,725,560		$	1,675,345		$	—		$	—

The asset allocation for the defined benefit pension plan as of the measurement date, by asset category, is as follows:

		Percentage of
		Plan Assets
Asset Category		2005		2004
Equity securities			81%		81%
Debt securities			11		10
Cash and cash equivalents			8		9
	Total		100%		100%

The investment objective for the defined benefit pension plan is to maximize total return with tolerance for slightly above average risk. Asset allocation strongly favors equities, with a target allocation of approximately 80% equity securities, 15% fixed income securities, and 5% cash. Due to volatility in the market, the target allocation is not always desirable and asset allocations will fluctuate. A core equity position of large cap stocks will be maintained. However, more aggressive or volatile sectors will be meaningfully represented in the asset mix in pursuit of higher returns. Higher volatility investment strategies such as credit risk, structured finance, and international bonds will be appropriate strategies in conjunction with the core position.

It is management’s intent to give the investment managers flexibility within the overall guidelines with respect to investment decisions and their timing. However, certain investments require specific review and approval by management. Management is also informed of anticipated changes in nonproprietary investment managers, significant modifications of any previously approved investment, or anticipated use of derivatives to execute investment strategies.

72  ANNUAL REPORT 2005

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Equity securities include $163 million and $197 million of National City common stock at October 31, 2005 and 2004, respectively. The $163 million of National City Common stock included in plan assets at October 31, 2005 represented 5,048,833 shares of stock at a closing price of $32.23 as of that date. During 2005, dividends of $7 million were paid on the shares included in plan assets.

Using an actuarial measurement date of October 31, benefit obligation activity for each of the plans follow:

								Other
								Postretirement
		Pension Benefits						Benefits
(In Thousands)		2005			2004			2005			2004
Change in Benefit Obligation
Benefit obligation at beginning of measurement period		$	1,459,815		$	1,364,768		$	154,291		$	155,787
Service cost			59,540			55,388			3,384			3,371
Interest cost			85,171			82,726			8,931			9,216
Participant contributions			—			—			18,119			17,717
Plan amendments			—			—			1,385			—
Business acquisitions			—			—			—			6,380
Actuarial (gains)/losses			10,356			28,967			(5,430	)		(14,406	)
Benefits paid			(70,738	)		(72,034	)		(21,448	)		(23,774	)
Benefit obligation at end of measurement period		$	1,544,144		$	1,459,815		$	159,232		$	154,291
	Funded status	$	181,416		$	215,530		$	(159,232	)	$	(154,291	)
	Unrecognized prior service cost		(26,072	)		(30,827	)		1,826			537
	Unrecognized net actuarial loss		144,222			117,567			23,267			30,396
	Unrecognized net obligation		—			—			7,226			8,628
	Contributions/benefits paid subsequent to measurement date		—			—			1,762			1,042
Prepaid (accrued) benefit cost		$	299,566		$	302,270		($	125,151	)	$	(113,688	)

The accumulated benefit obligation for the defined benefit pension plan was $1.5 billion and $1.4 billion at October 31, 2005 and 2004, respectively.

The weighted-average assumptions used to determine benefit obligations at the measurement date were as follows:

					Other
					Postretirement
	Pension Benefits				Benefits
	2005		2004		2005		2004
Discount rate		6.00%		6.00%		6.00%		6.00%
Rate of compensation increase		2.75-7.50		2.75-7.50		2.75-7.50		2.75-7.50

At December 31, 2005, the projected benefit payments for the defined benefit pension plan and the postretirement benefit plan totaled $70 million and $10 million in 2006, $71 million and $10 million in 2007, $74 million and $10 million in 2008, $77 million and $11 million in 2009, $80 million and $11 million in 2010, and $482 million and $56 million in years 2011 through 2015, respectively. The projected payments were calculated using the same assumptions as those used to calculate the benefit obligations listed above.

Using an actuarial measurement date of October 31, components of net periodic benefit and net periodic cost follow:

(In Thousands)		2005			2004			2003
Pension Benefits
	Service cost	$	59,540		$	55,388		$	51,162
	Interest cost		85,171			82,726			80,084
	Expected return on plan assets		(137,991	)		(127,301	)		(143,443	)
	Amortization of prior service cost		(4,755	)		(4,755	)		(4,755	)
	Transition benefit		—			—			(207	)
	Recognized net actuarial loss		739			2,560			1,303
Net periodic cost (benefit)		$	2,704		$	8,618		$	(15,856	)
Other Postretirement Benefits
	Service cost	$	3,384		$	3,371		$	2,946
	Interest cost		8,931			9,216			9,342
	Amortization of prior service cost		95			95			133
	Transition obligation		1,402			1,402			1,402
	Recognized net actuarial loss		979			1,677			1,588
Net periodic cost		$	14,791		$	15,761		$	15,411

The weighted-average assumptions used to determine the net periodic cost (benefit) for the years ended December 31 were as follows:

					Postretirement
	Pension Benefits				Benefits
	2005		2004		2005		2004
Weighted-Average Assumptions
Discount rate		6.00%		6.25%		6.00%		6.25%
Rate of compensation increase		2.75-7.50		2.75-7.50		2.75-7.50		2.75-7.50
Expected long-term return on plan assets		8.50		8.50		—		—

The expected long-term rate of return was estimated using market benchmarks for equities and bonds applied to the plan’s target asset allocation. The expected return on equities was computed utilizing a valuation framework, which projected future returns based on current equity valuations rather than historical returns. Due to active management of the plan’s assets, the return on the plan’s equity investments historically has exceeded market averages. Management estimated the rate by which the plan assets would outperform the market in the future based on historical experience adjusted for changes in asset allocation and expectations for overall lower future returns on equities compared to past periods.

National City does not anticipate making a contribution to its defined benefit pension plan in 2006 as the plan is currently overfunded. The 2006 pension plan assumptions used to determine net periodic cost will be a discount rate of 6.00% and an expected long-term return on plan assets of 8.50%.

The assumed health care cost trend rate at the measurement date follows:

	2005		2004
Health care cost trend rate for next year (pre-65)		9%		9%
Health care cost trend rate for next year (post-65)		11%		9%
Rate to which the cost trend rate is assumed to decline (ultimate trend rate)		5%		5%
Year the rates reach the ultimate trend rate		2012		2009

ANNUAL REPORT 2005  73

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The health care trend rate assumption affects only those participants retired under the plan prior to April 1, 1989. Assumed health care cost trend rates affect the amounts reported for the health care plan. A one-percentage-point change in the assumed health care cost trend rate would have the following effect:

	1-Percentage		1-Percentage
(In Thousands)	Point Increase		Point Decrease
Effect on total of service and interest cost	$	246	$	(227)
Effect on postretirement benefit obligation		4,269		(3,933)

The Corporation also 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. At December 31, 2005 and 2004, obligations of $95 million and $90 million, respectively, were included in accrued expenses and other liabilities for these plans. Expenses related to these plans totaled $16 million, $13 million, and $21 million for 2005, 2004, and 2003, respectively.

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 2005 and 2004, the Corporation provided up to a 6.9% matching contribution. For 2005, 2004, and 2003, the expense related to the plan was $79 million, $72 million, and $64 million, 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 mortgage-banking 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.

SFAS 133 requires all derivative instruments to be carried at fair value on the balance sheet. SFAS 133 provides special hedge accounting provisions which permit the 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 fair value of the derivative. Note 1 provides further detail on how derivative instruments are accounted for in the financial statements. The Corporation usually designates derivative instruments used to manage interest rate risk into SFAS 133 hedge relationships with the specific assets, liabilities, or cash flows being hedged. Some derivative instruments used for interest rate risk management are not designated in an SFAS 133 hedge relationship. Such would be the case if the derivative instrument is being used to offset risk related to an asset or liability that is accounted for at fair value in the financial statements, if the derivative instrument has been moved out of an SFAS 133 relationship because the hedge was deemed not effective, or if operational or cost constraints make it prohibitive to apply hedge accounting.

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 by establishing and monitoring limits as to the degree of risk that may be undertaken as part of the Corporation’s overall market risk monitoring process carried out by the Asset/ Liability Management Committee. Further discussion of this process is contained 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 December 31, 2005, these collateral agreements covered 99.8% of the notional amount of the total derivative portfolio, excluding futures, forward commitments to sell or purchase mortgage loans or mortgage-backed securities, and customer derivative contracts. At December 31, 2005, the Corporation held cash, U.S. government, and U.S. government-sponsored agency securities with a fair value of $234 million to collateralize net gains with counterparties and had pledged or delivered to counterparties U.S. government and U.S. government-sponsored agency securities with a fair value of $167

74  ANNUAL REPORT 2005

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

million to collateralize net losses with counterparties. The Corporation typically does not have collateral agreements covering open forward commitments to sell or purchase mortgage loans or mortgage-backed securities due to the fact these contracts usually mature within 90 days. Open futures contracts are also not covered by collateral agreements because the contracts are cash settled with counterparties daily. 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 normal credit policies. Collateral may be obtained based on management’s assessment of the customer.

Derivative contracts are valued using observable market prices, if available, or cash flow projection models acquired from third parties. Pricing models used for valuing derivative instruments are regularly validated by testing through 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 December 31, 2005 and 2004.

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 mortgage and commercial real estate loans held for sale, mortgage servicing rights, and certain fixed-rate commercial loans for changes in interest rates.

The Corporation also uses receive-fixed interest rate swaps to hedge the fair values 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.

During 2005, 2004, and 2003, the Corporation recognized total net ineffective fair value hedge gains (losses) of $60 million, $(145) million, and $70 million, respectively. Detail of net ineffective hedge gains and losses by hedge strategy are presented in the tables on page 75. Net ineffective hedge gains and losses for mortgage servicing rights and mortgage loans held for sale are included in mortgage banking revenue on the income statement. Net ineffective hedge gains and losses related to hedging commercial loans, commercial real estate loans held for sale, and fixed-rate funding products are included in other noninterest income on the income statement. There were no components of derivative instruments that were excluded from the assessment of hedge effectiveness.

Cash Flow Hedges: The Corporation hedges cash flow variability related to variable-rate funding products, specifically FHLB advances, senior bank notes, and Federal funds borrowed, through the use of pay-fixed interest rate swaps and interest rate caps. The Corporation also uses forward starting pay-fixed interest rate swaps and caps to hedge forecasted cash flows associated with debt instruments anticipated to be issued in the future.

During 2005, 2004, and 2003, the Corporation recognized net ineffective cash flow hedge gains (losses) of $(300) thousand, $300 thousand, and $100 thousand, respectively. These gains (losses) are included in other noninterest income on the income statement. There were no components of derivative instruments that were excluded from the assessment of hedge effectiveness.

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 December 31, 2005 and 2004, accumulated other comprehensive income included a deferred after-tax net gain (loss) of $16 million and $(7) million, respectively, related to derivatives used to hedge 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 December 31, 2005 was projected to be reclassified into interest expense in conjunction with the recognition of interest payments on funding products through July 2008, with $24 million of after-tax net gain expected to be recognized in interest expense within the next year. During 2005, 2004, and 2003, pretax losses of $10 million, $128 million, and $189 million, respectively, were reclassified into interest expense as adjustments to interest payments on variable-rate funding products. In 2005, a pretax gain of $8 million was reclassified from other comprehensive income to other noninterest expense as a component of the net gain on the extinguishment of certain variable-rate secured debt financings collateralized by automobile leases. In 2004, a pretax loss of $4 million was reclassified from accumulated other comprehensive income into other noninterest income for cash flow hedges that were discontinued because the forecasted debt issuances originally contemplated were not probable of occurring. There were no gains or losses reclassified into earnings during 2003 arising from the determination that the original forecasted transaction would not occur.

ANNUAL REPORT 2005  75

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Summary information regarding the interest rate derivatives portfolio used for interest rate risk management purposes and designated as accounting hedges under SFAS 133 at December 31, 2005 and 2004 follows:

			December 31, 2005
									Net
					Derivative
									Ineffective
			Notional						Hedge Gains
(In Millions)			Amount		Asset		Liability		(Losses)(a)
Fair Value Hedges
	Loans
		Receive-fixed interest rate swaps	$	121	$	1.5	$	.1
		Receive-fixed interest rate swaptions sold		—		—		—
		Pay-fixed interest rate swaps		3,864		49.4		38.5
		Pay-fixed interest rate swaptions sold		50		—		.5
		Interest rate caps sold		210		—		.1
		Interest rate floors sold		260		—		.4
		Interest rate futures purchased		3,146		—		—
		Interest rate futures sold		3,614		—		—
Total				11,265		50.9		39.6	$	21.9
	Mortgage loans held for sale
		Forward commitments to sell mortgage loans and mortgage-backed securities		2,670		1.3		20.5
		Receive-fixed interest rate swaps		2,090		20.5		36.3
		Pay-fixed interest rate swaps		550		—		15.8
		Pay-fixed interest rate swaptions purchased		500		3.7		—
		Pay-fixed interest rate swaptions sold		—		—		—
		Interest rate caps purchased		2,000		7.3		—
		Interest rate futures purchased		75		—		—
Total				7,885		32.8		72.6		6.7
	Commercial real estate loans held for sale
		Forward commitments to sell commercial real estate loans		13		—		.4		—
	Mortgage servicing rights
		Forward commitments to purchase mortgage loans and mortgage-backed securities		6,965		44.0		—
		Receive-fixed interest rate swaps		11,810		79.9		217.4
		Receive-fixed interest rate swaptions purchased		4,050		40.2		—
		Receive-fixed interest rate swaptions sold		500		—		—
		Pay-fixed interest rate swaps		2,000		—		3.6
		Pay-fixed interest rate swaptions purchased		15,450		53.4		—
		Pay-fixed interest rate swaptions sold		265		—		1.7
		Principal-only interest rate swaps		864		5.5		—
		Options to purchase mortgage-backed securities		—		1.5		—
		Interest rate caps purchased		24,450		37.2		—
		Interest rate caps sold		3,000		—		—
		Interest rate floors purchased		500		4.6		—
		Interest rate futures purchased		720		—		—
Total				70,574		266.3		222.7		30.5
	Funding
		Receive-fixed interest rate swaps		8,069		160.3		118.4
		Callable receive-fixed interest rate swaps		2,780		1.2		85.1
Total				10,849		161.5		203.5		.5
Total derivatives used in fair value hedges				100,586		511.5		538.8		59.6
Cash Flow Hedges
	Funding
		Receive-fixed interest rate swaps		—		—		—
		Pay-fixed interest rate swaps		275		4.6		—
		Interest rate caps purchased		4,800		18.9		—
Total				5,075		23.5		—		(.3	)
Total derivatives used in cash flow hedges				5,075		23.5		—		(.3	)
Total derivatives used for interest rate risk management and designated in SFAS 133 relationships			$	105,661	$	535.0	$	538.8	$	59.3

[Additional columns below]

[Continued from above table, first column(s) repeated]

			December 31, 2004									2003
									Net			Net
									Ineffective			Ineffective
					Derivative
									Hedge			Hedge
			Notional						Gains			Gains
(In Millions)			Amount		Asset		Liability		(Losses)(a)			(Losses)(a)
Fair Value Hedges
	Loans
		Receive-fixed interest rate swaps	$	68	$	2.1	$	.1
		Receive-fixed interest rate swaptions sold		25		—		—
		Pay-fixed interest rate swaps		3,492		13.3		104.2
		Pay-fixed interest rate swaptions sold		175		—		3.5
		Interest rate caps sold		640		—		.3
		Interest rate floors sold		260		—		3.2
		Interest rate futures purchased		2,070		—		—
		Interest rate futures sold		3,306		—		—
Total				10,036		15.4		111.3	$	30.6		$	28.3
	Mortgage loans held for sale
		Forward commitments to sell mortgage loans and mortgage-backed securities		6,565		7.5		—
		Receive-fixed interest rate swaps		410		16.6		1.6
		Pay-fixed interest rate swaps		550		—		28.2
		Pay-fixed interest rate swaptions purchased		500		2.2		—
		Pay-fixed interest rate swaptions sold		250		—		4.6
		Interest rate caps purchased		5,000		19.5		—
		Interest rate futures purchased		1,335		—		—
Total				14,610		45.8		34.4		(50.5	)		—
	Commercial real estate loans held for sale
		Forward commitments to sell commercial real estate loans		—		—		—		—			—
	Mortgage servicing rights
		Forward commitments to purchase mortgage loans and mortgage-backed securities		8,157		—		18.7
		Receive-fixed interest rate swaps		7,755		187.0		77.0
		Receive-fixed interest rate swaptions purchased		1,492		14.5		—
		Receive-fixed interest rate swaptions sold		497		—		2.3
		Pay-fixed interest rate swaps		200		—		23.3
		Pay-fixed interest rate swaptions purchased		6,150		20.0		—
		Pay-fixed interest rate swaptions sold		635		—		8.5
		Principal-only interest rate swaps		903		—		15.3
		Options to purchase mortgage-backed securities		—		—		—
		Interest rate caps purchased		28,900		30.7		—
		Interest rate caps sold		2,984		—		1.9
		Interest rate floors purchased		1,492		1.4		—
		Interest rate futures purchased		—		—		—
Total				59,165		253.6		147.0		(125.7	)		41.6
	Funding
		Receive-fixed interest rate swaps		6,802		265.6		68.1
		Callable receive-fixed interest rate swaps		2,893		11.9		52.4
Total				9,695		277.5		120.5		.2			—
Total derivatives used in fair value hedges				93,506		592.3		413.2		(145.4	)		69.9
Cash Flow Hedges
	Funding
		Receive-fixed interest rate swaps		152		2.6		—
		Pay-fixed interest rate swaps		8,102		38.4		17.2
		Interest rate caps purchased		4,860		17.6		—
Total				13,114		58.6		17.2		.3			.1
Total derivatives used in cash flow hedges				13,114		58.6		17.2		.3			.1
Total derivatives used for interest rate risk management and designated in SFAS 133 relationships			$	106,620	$	650.9	$	430.4	$	(145.1	)	$	70.0

^(a)  Represents net ineffective hedge gains (losses) on hedging strategy for the year.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other Derivative Activities: The derivative portfolio also includes derivative financial instruments not included in SFAS 133 hedge relationships. Those derivatives include swaps, futures, options, and forwards used for interest rate and other risk management purposes, as well as mortgage banking loan commitments defined as derivatives under SFAS 133, and derivatives executed with commercial banking customers, primarily interest rate swaps and options, to facilitate their interest rate risk management strategies. Price risk associated with mortgage banking loan commitments is managed primarily through the use of other derivative instruments, such as forward sales of mortgage loans and mortgage-backed securities. Because mortgage banking loan commitments are defined as derivative instruments under SFAS 133, the associated derivative instruments used for risk management do not qualify for hedge accounting under SFAS 133. The Corporation generally does not enter into derivative transactions for purely speculative purposes. Gains and losses on mortgage banking-related derivative financial instruments are included in mortgage banking revenue on the income statement, while gains and losses on other derivative financial instruments are included in other noninterest income. A summary of derivative financial instruments not in SFAS 133 hedge relationships by type of activity follows:

			As of
			December 31					For the Calendar Year
			Net Derivative
			Asset
			(Liability)					Net Gains (Losses)
(In Millions)			2005			2004		2005		2004		2003
Other derivative instruments
	Mortgage banking-related:
		Mortgage servicing right risk management	$	(6.4	)	$	12.7	$	166.1	$	618.9	$	133.7
		Mortgage loan commitments and mortgage loan risk management		(9.0	)		4.5		51.4		136.9		(24.3	)
Total mortgage banking-related				(15.4	)		17.2		217.5		755.8		109.4
	Customer risk management			23.5			13.7		17.4		12.1		11.5
	Other			30.3			37.3		24.9		29.8		60.6
Total other				53.8			51.0		42.3		41.9		72.1
	Total other derivative instruments		$	38.4		$	68.2	$	259.8	$	797.7	$	181.5

25.  Fair Value of Financial Instruments

Fair value estimates are made as of a specific point in time based on the characteristics of the financial instruments and relevant market information. Where available, quoted market prices are used. In other cases, fair values are based on estimates using an option-adjusted discounted cash flow model or other valuation techniques. These techniques are significantly affected by the assumptions used, including discount rates, market volatility, and estimates of future cash flows. As such, the derived fair value estimates cannot be substantiated by comparison to independent markets and, further, may not be realizable in an immediate settlement of the instruments.

The following table presents the estimates of fair value of financial instruments at December 31, 2005 and 2004. Excluded are certain items not defined as financial instruments, including nonfinancial assets and intangibles, as well as certain liabilities such as obligations for pension and other postretirement benefits, deferred compensation arrangements, and leases. Accordingly, the aggregate fair value amounts presented do not purport to represent the fair value of the Corporation.

	2005						2004
	Carrying						Carrying			Fair
(In Millions)	Value			Fair Value			Value			Value
Financial Assets
Cash and cash equivalents	$	6,060		$	6,060		$	5,540		$	5,540
Loans held for sale or securitization		9,667			9,696			12,430			12,445
Loans, net of allowance for loan losses		104,945			105,722			99,083			103,315
Securities		7,875			7,875			8,765			8,765
Derivative assets		773			773			886			886
Other		1,212			1,212			1,184			1,184
Financial Liabilities
Deposits	$	(83,986	)	$	(79,449	)	$	(85,955	)	$	(81,547	)
Short-term borrowings		(10,017	)		(10,025	)		(7,928	)		(7,932	)
Long-term debt		(30,969	)		(31,244	)		(28,696	)		(28,875	)
Derivative liabilities		(738	)		(738	)		(597	)		(597	)
Other		(369	)		(369	)		(353	)		(353	)
Other Financial Instruments
Commitments to extend credit		(99	)		(99	)		(116	)		(116	)
Standby and commercial letters of credit		(45	)		(45	)		(49	)		(49	)

ANNUAL REPORT 2005  77

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The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Cash and Cash Equivalents: Due to their short-term nature, the carrying amounts reported in the balance sheet approximate fair value for these assets. For purposes of this disclosure only, cash equivalents include Federal funds sold, security resale agreements, accrued interest receivable, and other short-term investments.

Loans and Loans Held for Sale or Securitization: The fair values of portfolio loans, commercial, commercial real estate, and credit card loans held for sale or securitization are estimated using an option-adjusted discounted cash flow model that discounts future cash flows using recent market interest rates, market volatility, and credit spread assumptions. The fair values of mortgage loans held for sale are based either upon observable market prices or prices obtained from third parties.

Securities: The fair values of securities are based primarily upon quoted market prices.

Derivative Assets and Liabilities: Fair values for derivative instruments are based either on cash flow projection models acquired from third parties or observable market prices.

Deposits: The fair values disclosed for demand deposits (e.g., interest and noninterest bearing checking, savings, and certain types of money market accounts) are equal to the amounts payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts for variable-rate money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using an option-adjusted discounted cash flow model.

Short-Term Borrowings: The carrying amounts of Federal funds borrowed, security repurchase agreements, commercial paper, and other short-term borrowings approximate their fair values.

Long-Term Debt: The fair values of long-term borrowings are estimated using an option-adjusted discounted cash flow model that incorporates the Corporation’s current incremental borrowing rates for similar types of borrowing arrangements.

Other Financial Instruments: The amounts shown under carrying value represent the Corporation’s estimated obligations under these off-balance sheet financial instruments. These estimated obligations consist of deferred fees and expected loss contingencies associated with the financial instruments. The carrying value of these instruments approximates their fair values.

26. Line of Business Results

At December 31, 2005, National City operated five major lines of business: Consumer and Small Business Financial Services, Wholesale Banking, National City Mortgage, National Consumer Finance, and Asset Management. A sixth business line, National Processing, was sold in October 2004.

Consumer and Small Business Financial Services (CSB) provides banking services to consumers and small businesses within National City’s seven-state footprint. In addition to deposit gathering and direct lending services provided through the retail bank branch network, call centers, and the Internet, CSB’s activities also include small business banking services, dealer finance, education finance, retail brokerage, and lending-related insurance services. In late 2005, the Corporation announced its decision to exit the indirect automobile business. No new originations of indirect automobile loans will occur going forward. Consumer lending products include home equity, automobile floorplan, marine, and recreational vehicle installment loans, government or privately guaranteed student loans, and credit cards and other unsecured personal and small business lines of credit. Major 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. CSB’s expenses are mainly personnel and branch network support costs.

Wholesale Banking provides credit-related and treasury management services, as well as capital markets and international services, to large- and medium-sized corporations. Major products and services include: lines of credit, term loans, leases, investment real estate lending, asset-based lending, structured finance, syndicated lending, equity and mezzanine capital, treasury management, and international payment and clearing services. 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, generally within National City’s seven-state footprint. Expenses include personnel and support costs, in addition to credit costs.

National City Mortgage (NCM) primarily originates conventional residential mortgage and home equity loans both within National City’s banking footprint and nationally. NCM’s activities also include servicing mortgage loans for third-party investors. Mortgage loans originated by NCM 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. During 2005, approximately 44% of NCM mortgage loans were originated through wholesale and correspondent channels, while 56% were originated through retail mortgage branches operated by NCM nationally, or through CSB bank branches within National City’s banking footprint. During 2004, approximately 50% of NCM mortgage loans were originated through the wholesale and correspondent channels, with the remaining 50% being originated through the retail network. Significant revenue streams for NCM include net interest income on loans held for sale and fee income related to the origination, sale, and servicing of loans. Expenses include personnel costs, branch office costs, third-party outsourcing, and loan collection expenses.

National Consumer Finance (NCF) is comprised of four business units involved in the origination and servicing of home equity loans and nonconforming residential mortgage loans. Loans are originated nationally through

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

correspondent relationships and a network of brokers. Nonconforming mortgage loans are originated by First Franklin Financial Corporation (First Franklin), a business unit within NCF, principally through wholesale channels, including a national network of brokers and mortgage bankers. During 2005, 28% of First Franklin originated loans were retained in portfolio at NCF’s National City Home Loan Services (NCHLS) business unit compared to approximately 33% for 2004. During 2005, 79% of the First Franklin loans sold were sold with servicing retained versus 10% of loans sold servicing retained in 2004. The NCHLS unit also services loans for others. The percentage of loans sold versus retained in any given period will vary depending on product mix and market conditions. Nonconforming mortgages are generally not readily saleable to primary mortgage market aggregators due to the credit characteristics of the borrower, the underlying documentation, the loan-to-value ratio, or the size of the loan, among other factors. The National Home Equity business unit within NCF originates, primarily through brokers, prime-quality home equity loans outside National City’s banking footprint. Historically, all of these loans were held in portfolio, but in late 2005, some of these loans were sold. The National City Warehouse Resources business unit within NCF provides emerging mortgage bankers across the country with lines of credit for loan funding purposes. Significant revenue streams for NCF include net interest income on loans and fee income related to the origination, sale and servicing of loans. Expenses include personnel costs, branch office costs, and loan servicing and collection expenses.

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 act as the investment advisor for the Allegiant^® mutual funds (formerly the Armada^® 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, estate and tax planning, as well as trust management and administration for affluent individuals and families. Sterling offers financial management services and alternative investments for high net worth clients.

National Processing consisted of National Processing, Inc., National City’s former 83%-owned payment processing subsidiary. In October 2004, this business was sold. Refer to Note 3 for further discussion. National Processing’s business consisted of the authorization, processing, financial settlement, and reporting of debit and credit card transactions, and financial settlement and reporting solutions for large and mid-size corporate customers in the travel and health care industries.

The business units are identified by the product or services offered and the channel through which the product or service is delivered. The reported results attempt to reflect the underlying economics of the businesses. Expenses for centrally provided services are allocated based upon estimated usage of those services. The business units’ assets and liabilities are match-funded and interest rate risk is centrally managed as part of investment funding activities. Asset securitizations are also considered funding activities and the effects of such securitizations are generally included within the Parent and Other category. Loans sold through securitizations continue to be reflected as owned by the business unit that manages those assets. Asset sales and other transactions between business units are primarily conducted at fair value, resulting in gains or losses that are eliminated for reporting consolidated results of operations. Parent and Other is primarily comprised of the results of investment funding activities, intersegment revenue and expense eliminations, and unallocated corporate income and expense. The intersegment revenue and expense amounts presented in the tables relate to either services provided or asset sales between the operating segments. The amounts do not include reimbursements related to expense allocations and the effects of centrally managing interest rate risk. The accounting policies of the individual business units are the same as those of the Corporation. Prior period amounts have been restated to conform with the current period’s presentation.

ANNUAL REPORT 2005  79

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Operating results of the business units are discussed in the Line of Business Results section of the Financial Review. Selected financial information by line of business follows:

	Consumer and								National
	Small Business			Wholesale			National City		Consumer			Asset		National
(In Thousands)	Financial Services			Banking			Mortgage		Finance			Management		Processing
2005
Net interest income (expense)(a)	$	2,136,207		$	1,428,908		$	365,050	$	1,165,982		$	118,292	$	—
Provision (benefit) for credit losses		321,697			(26,038	)		37,435		27,138			7,635		—
Net interest income (expense) after provision		1,814,510			1,454,946			327,615		1,138,844			110,657		—
Noninterest income		1,108,664			603,223			866,718		303,504			343,984		—
Noninterest expense		1,784,239			818,763			758,884		542,861			326,398		—
Income (loss) before taxes		1,138,935			1,239,406			435,449		899,487			128,243		—
Income tax expense (benefit)(a)		439,755			469,222			151,449		340,006			48,476		—
Net income (loss)	$	699,180		$	770,184		$	284,000	$	559,481		$	79,767	$	—
Intersegment revenue (expense)	$	(3,332	)	$	29,214		$	57,466	$	(38,186	)	$	6,049	$	—
Average assets (in millions)		32,042			43,549			14,528		37,557			3,433		—
2004
Net interest income (expense)(a)	$	2,050,108		$	1,246,849		$	549,127	$	1,088,169		$	111,851	$	3,500
Provision (benefit) for credit losses		299,673			51,033			12,036		44,536			4,165		—
Net interest income (expense) after provision		1,750,435			1,195,816			537,091		1,043,633			107,686		3,500
Noninterest income		977,200			503,996			856,333		435,780			413,493		409,755
Noninterest expense		1,631,870			644,618			680,726		452,860			307,400		357,018
Income (loss) before taxes		1,095,765			1,055,194			712,698		1,026,553			213,779		56,237
Income tax expense (benefit)(a)		419,034			392,981			270,774		388,037			80,809		22,244
Net income (loss)	$	676,731		$	662,213		$	441,924	$	638,516		$	132,970	$	33,993
Intersegment revenue (expense)	$	(3,434	)	$	19,544		$	58,263	$	(27,322	)	$	4,850	$	4,840
Average assets (in millions)		29,450			35,326			16,009		28,954			3,088		569
2003
Net interest income (expense)(a)	$	1,953,439		$	1,048,640		$	1,096,617	$	754,805		$	102,859	$	3,251
Provision (benefit) for credit losses		307,327			340,716			5,764		60,867			7,635		—
Net interest income (expense) after provision		1,646,112			707,924			1,090,853		693,938			95,224		3,251
Noninterest income		707,884			331,549			1,247,988		286,838			341,246		479,875
Noninterest expense		1,365,731			513,245			779,543		306,880			286,209		402,044
Income (loss) before taxes		988,265			526,228			1,559,298		673,896			150,261		81,082
Income tax expense (benefit)(a)		373,564			197,188			620,179		254,733			56,798		32,321
Net income (loss)	$	614,701		$	329,040		$	939,119	$	419,163		$	93,463	$	48,761
Intersegment revenue (expense)	$	(3,664	)	$	20,542		$	48,136	$	(22,284	)	$	6,004	$	5,435
Average assets (in millions)		26,355			30,679			28,371		19,423			2,896		622

[Additional columns below]

[Continued from above table, first column(s) repeated]

	Parent
	and			Consolidated
(In Thousands)	Other(b)			Total
2005
Net interest income (expense)(a)	$	(487,965	)	$	4,726,474
Provision (benefit) for credit losses		(84,273	)		283,594
Net interest income (expense) after provision		(403,692	)		4,442,880
Noninterest income		78,226			3,304,319
Noninterest expense		524,165			4,755,310
Income (loss) before taxes		(849,631	)		2,991,889
Income tax expense (benefit)(a)		(442,248	)		1,006,660
Net income (loss)	$	(407,383	)	$	1,985,229
Intersegment revenue (expense)	$	(51,211	)	$	—
Average assets (in millions)		10,447			141,556
2004
Net interest income (expense)(a)	$	(589,277	)	$	4,460,327
Provision (benefit) for credit losses		(88,171	)		323,272
Net interest income (expense) after provision		(501,106	)		4,137,055
Noninterest income		843,624			4,440,181
Noninterest expense		397,145			4,471,637
Income (loss) before taxes		(54,627	)		4,105,599
Income tax expense (benefit)(a)		(248,214	)		1,325,665
Net income (loss)	$	193,587		$	2,779,934
Intersegment revenue (expense)	$	(56,741	)	$	—
Average assets (in millions)		11,007			124,403
2003
Net interest income (expense)(a)	$	(595,857	)	$	4,363,754
Provision (benefit) for credit losses		(83,891	)		638,418
Net interest income (expense) after provision		(511,966	)		3,725,336
Noninterest income		197,691			3,593,071
Noninterest expense		399,649			4,053,301
Income (loss) before taxes		(713,924	)		3,265,106
Income tax expense (benefit)(a)		(386,741	)		1,148,042
Net income (loss)	$	(327,183	)	$	2,117,064
Intersegment revenue (expense)	$	(54,169	)	$	—
Average assets (in millions)		10,179			118,525

(a)	Includes tax-equivalent adjustment for tax-exempt interest income.
(b)	Includes gain on sale of National Processing of $486,822 after tax in 2004.

80  ANNUAL REPORT 2005

________________________________________________________________________________

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

27. Financial Holding Company

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

Balance Sheets

			December 31
(In Thousands)			2005		2004
Assets
	Cash and demand balances due from banks		$	509,001	$	91,495
	Loans to and receivables from subsidiaries			988,695		747,581
	Securities			337,882		409,503
	Other investments			238,655		77,027
	Investments in:
		Subsidiary banks		12,901,087		13,557,393
		Nonbank subsidiaries		394,523		369,184
	Goodwill			121,865		109,096
	Derivative assets			90,655		118,857
	Other assets			728,260		704,760
Total Assets			$	16,310,623	$	16,184,896
Liabilities and Stockholders’ Equity
	Long-term debt		$	2,330,416	$	1,913,946
	Borrowed funds from subsidiaries			473,522		604,629
	Derivative liabilities			34,540		16,933
	Accrued expenses and other liabilities			859,274		845,859
		Total liabilities		3,697,752		3,381,367
	Stockholders’ equity			12,612,871		12,803,529
Total Liabilities and Stockholders’ Equity			$	16,310,623	$	16,184,896

Securities and other investments totaling $109 million at December 31, 2005 were restricted for use in certain nonqualified benefit plans. The borrowed funds from subsidiaries balance includes 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 $452 million at December 31, 2005. The holding company also guarantees commercial paper issued by its subsidiary National City Credit Corporation, which borrowings totaled $1.05 billion at December 31, 2005. Additionally, the holding company guarantees National City Bank of Kentucky’s financial obligation under this subsidiary’s membership with Visa^® up to $600 million and MasterCard^® up to $400 million. Refer to Note 21 for further discussion of contingent liabilities and guarantees related to the Corporation’s former merchant card processing business.

Statements of Income

			For the Calendar Year
(In Thousands)			2005			2004		2003
Income
	Dividends from:
		Subsidiary banks	$	1,225,000		$	2,150,000	$	1,262,810
		Nonbank subsidiaries		11,411			6,061		10,000
	Interest on loans to subsidiaries			47,463			17,272		1,471
	Interest and dividends on securities			14,651			8,744		8,208
	Securities gains, net			20,481			3,609		40,575
	Gain on sale of National Processing			—			714,195		—
	Other income			51,542			27,616		33,272
Total Income				1,370,548			2,927,497		1,356,336
Expense
	Interest on debt and other borrowings			121,793			81,974		97,242
	Other expense			124,971			100,070		118,749
Total Expense				246,764			182,044		215,991
Income before taxes and equity in undistributed net income of subsidiaries				1,123,784			2,745,453		1,140,345
Income tax (benefit) expense				(32,964	)		92,316		(25,746	)
Income before equity in undistributed net income of subsidiaries				1,156,748			2,653,137		1,166,091
Equity in undistributed net income of subsidiaries				828,481			126,797		950,973
Net Income			$	1,985,229		$	2,779,934	$	2,117,064

ANNUAL REPORT 2005  81

________________________________________________________________________________

Statements of Cash Flows

			For the Calendar Year
			2005			2004			2003
(In Thousands)
Operating Activities
	Net income		$	1,985,229		$	2,779,934		$	2,117,064
	Adjustments to reconcile net income to net cash provided by operating activities:
		Equity in undistributed net income of subsidiaries		(828,481	)		(126,797	)		(950,973	)
		Gain on sale of operating units		(16,001	)		(714,195	)		—
		Depreciation and amortization of properties and equipment		2,691			2,288			1,263
		Decrease (increase) in receivables from subsidiaries		43,886			324,214			(351,238	)
		Securities gains, net		(20,481	)		(3,609	)		(40,575	)
		Other losses (gains), net		35,716			(3,273	)		20,614
		Amortization of premiums and discounts on securities and debt		(9,510	)		(6,738	)		(795	)
		(Decrease) increase in accrued expenses and other liabilities		(7,751	)		167,448			2,560
		Other, net		(2,291	)		(3,454	)		(33,573	)
Net cash provided by operating activities				1,183,007			2,415,818			764,347
Investing Activities
	Proceeds from sale of operating units			30,226			1,180,120			—
	Purchases of securities			(305,160	)		(363,917	)		(484,371	)
	Proceeds from sales and maturities of securities			339,822			159,245			569,726
	Net (increase) decrease in other investments			(161,628	)		455,935			76,729
	Principal collected on loans to subsidiaries			750,000			690,000			1,177,334
	Loans to subsidiaries			(1,035,000	)		(1,089,000	)		(606,000	)
	Investments in subsidiaries			(75,525	)		(969,547	)		(50,857	)
	Returns of investment from subsidiaries			1,436,071			259,454			300,000
	Net (increase) decrease in properties and equipment			—			(13,521	)		10,840
	Cash paid for acquisitions, net of cash acquired			—			(190,756	)		—
Net cash provided by investing activities				978,806			118,013			993,401
Financing Activities
	Net decrease in borrowed funds			—			(46,562	)		(1,020,000	)
	Issuance of debt			698,875			200,000			300,000
	Repayment of debt			(366,860	)		(749,558	)		(880	)
	Dividends paid			(923,993	)		(861,139	)		(764,817	)
	Issuances of common stock			339,374			345,873			170,477
	Repurchases of common stock			(1,491,703	)		(1,468,752	)		(352,617	)
Net cash used in financing activities				(1,744,307	)		(2,580,138	)		(1,667,837	)
Increase (decrease) in cash and demand balances due from banks				417,506			(46,307	)		89,911
Cash and demand balances due from banks, January 1				91,495			137,802			47,891
Cash and Demand Balances Due from Banks, December 31			$	509,001		$	91,495		$	137,802
Supplemental Information
	Cash paid for interest		$	118,555		$	101,442		$	92,916
	Noncash transactions:
		Carrying value of securities donated to National City Charitable Foundation		24,179			422			25,007
		Common shares, preferred shares, and stock options issued for acquisitions		(10,842	)		2,643,431			—

Retained earnings of the holding company included $7.8 billion and $7.0 billion of equity in undistributed net income of subsidiaries at December 31, 2005 and 2004, respectively.

82  ANNUAL REPORT 2005

________________________________________________________________________________

FORM 10-K

The Annual Report includes the materials required in Form 10-K filed with the United States Securities and Exchange Commission. The integration of the two documents gives stockholders and other interested parties timely, efficient, and comprehensive information on 2005 results. Portions of the Annual Report are not required by the Form 10-K report and are not filed as part of the Corporation’s Form 10-K. Only those portions of the Annual Report referenced in the cross-reference index are incorporated in the Form 10-K. The report has not been approved or disapproved by the United States Securities and Exchange Commission, nor has the Commission passed upon its accuracy or adequacy.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2005

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from        to       

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

(Address of Principal Executive Offices)

44114-3484

(ZIP Code)

Registrant’s telephone number, including area code: 216-222-2000

Securities registered pursuant to Section 12(b) of the Act:

National City Corporation

Common Stock, $4.00 Per Share

(Title of Class)

New York Stock Exchange

(Name of Each Exchange on Which Registered)

8.375% Senior Notes Due 2032

(Title of Class)

New York Stock Exchange

(Name of Each Exchange on Which Registered)

Securities registered pursuant to Section 12(g) of the Act: none

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act YES  ü     NO     

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES           NO  ü 

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  ü     NO     

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [  ]

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 Act).
Large accelerated filer  ü     Accelerated filer        Non-accelerated filer    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES           NO  ü 

The aggregate market value of the registrant’s outstanding voting common stock held by nonaffiliates on June 30, 2005, determined using a per share closing price on that date of $34.12, as quoted on the New York Stock Exchange, was $20,316,181,910.

The number of shares outstanding of each of the registrant’s classes of common stock, as of December 31, 2005:

    Common Stock, $4.00 Per Share – 615,047,663

Documents Incorporated By Reference:

Portions of the registrant’s Proxy Statement (to be dated approximately March 8, 2006) are incorporated by reference into Item 10. Directors and Executive Officers of the Registrant; Item 11. Executive Compensation; Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters; Item 13. Certain Relationships and Related Transactions; and Item 14. Principal Accounting Fees and Services, of Part III.

ANNUAL REPORT 2005  83

________________________________________________________________________________

Form 10-K Cross Reference Index

			Pages
Part I
	Item  1   –	Business
Description of Business				9, 41, 50-51, 84-85
Average Balance Sheets/Interest/Rates				10-12
Volume and Rate Variance Analysis				12
Securities				21, 57-58
Loans				18-21, 55-57
Risk Elements of Loan Portfolio				22-25, 55-57
Interest Bearing Liabilities				10-12,21-22,62-64
Line of Business Results				16-17, 77-79
Financial Ratios				34
	Item  1A –	Risk Factors		85
	Item  1B –	Unresolved Staff Comments - None
	Item  2 –	Properties		85
	Item  3 –	Legal Proceedings		67-70, 85
	Item  4 –	Submission of Matters to a Vote of Security Holders - None
Part II
	Item  5   –	Market for Registrant’s Common Equity, Related Stockholder
		Matters, and Issuer Purchases of		22, 26-27, 33, 70-71
		Equity Securities – Note (1)		inside back cover
	Item  6 –	Selected Financial Data		34
	Item  7 –	Management’s Discussion and Analysis of Financial Condition and Results of Operations		9-32
	Item  7A –	Quantitative and Qualitative
		Disclosures About Market Risk		25-26
	Item  8 –	Financial Statements and Supplementary Data		32-33, 35-81
	Item  9 –	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure - None
	Item  9A –	Controls and Procedures		35, 36, 86
	Item  9B –	Other Information – Note (2)
Part III
	Item 10 –	Directors and Executive Officers of the Registrant:
		Directors - Note (3)
		Executive Officers		85-86
		Audit Committee Financial Expert - Note (3)
		Identification of the Audit Committee - Note (3)
		Changes to Director Nominating Procedures - None
		Compliance with Section 16(a) of the Securities Exchange Act - Note (3)
		Code of Ethics - Note (3)
	Item 11 –	Executive Compensation - Note (3)
	Item 12 –	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters - Note (3)
		Equity Compensation Plan Table		71
	Item 13 –	Certain Relationships and Related Transactions - Note (3)
	Item 14 –	Principal Accounting Fees and Services - Note (3)
Part IV
	Item 15 –	Exhibits, Financial Statement Schedules		83
		Report on Consolidated Financial Statements of Ernst & Young LLP, Independent Registered Public Accounting Firm		36
		Consolidated Financial Statements		37-81
Signatures				87
Certifications of Chief Executive Officer				87
Certifications of Chief Financial Officer				88

The index of exhibits and any exhibits filed as part of the 2005 Form 10-K are accessible at no cost on the Corporation’s Web site at NationalCity.com or through the United States Securities and Exchange Commission’s Web site at www.sec.gov. Copies of exhibits may also be requested at a cost of 30 cents per page from National City’s investor relations department.

Financial Statement Schedules – Omitted due to inapplicability or because required information is shown in the consolidated financial statements or the notes thereto.

Note (1) –	Recent Sales of Unregistered Securities — A total of 75,758 common shares were issued in consideration of a settlement and release agreement entered into as of November 4, 2005 between National City Corporation and First Banks, Inc. These shares were valued at the closing price on October 17, 2005 of $33.00 per share. The shares are exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) of the 1933 Act and the provisions of Rule 506 of Regulation D under the 1933 Act and based on reliance of First Banks’ representation and warranty that it is an “accredited investor,” as that term is defined in Rule 501 of Regulation D, and other representations and warranties required under Regulation D.
Note (2) –	On February 6, 2006, the Corporation entered into an amended Severance Agreement, in the form of the agreement referenced in exhibit 10.10 to this Form 10-K, with Daniel J. Frate, an executive vice president of the Corporation. The agreement provides for certain benefits for senior executives in the event of a change in control and allows a senior executive to terminate employment with the Corporation or any subsidiary for any reason, or without reason, during the 30-day period immediately following the first anniversary of the first occurrence of a change in control with the right to the severance compensation provided for in the agreement.
Note (3) –	Incorporated by reference from the Corporation’s Proxy Statement to be dated approximately March 8, 2006.

84  ANNUAL REPORT 2005

________________________________________________________________________________

FORM 10-K (Continued)

Business

National City Corporation (National City or the Corporation), founded in 1845, is a $142.4 billion in assets financial holding company headquartered in Cleveland, Ohio. National City operates through an extensive distribution network in Ohio, Illinois, Indiana, Kentucky, Michigan, Missouri, and Pennsylvania, and also conducts selected consumer lending businesses and other financial services on a nationwide basis. Its primary businesses include commercial and retail banking, consumer finance, asset management, and mortgage financing and servicing. Operations are primarily conducted through more than 1,200 branch banking offices located within National City’s seven-state footprint and over 540 retail and wholesale mortgage offices located throughout the United States. National City and its subsidiaries had 34,270 full-time-equivalent employees at December 31, 2005.

Competition

The financial services business is highly competitive. The banking subsidiaries of National City compete actively with national and state banks, thrift institutions, securities dealers, mortgage bankers, finance companies, insurance companies, and other financial service entities.

Supervision and Regulation

National City is a financial holding company and, as such, is subject to regulation under the Bank Holding Company Act of 1956, as amended (the BHC Act). The BHC Act requires the prior approval of the Federal Reserve Board for a financial holding company to acquire or hold more than a 5% voting interest in any bank, and restricts interstate banking activities. The BHC Act allows interstate bank acquisitions anywhere in the country and interstate branching by acquisition and consolidation in those states that had not opted out by January 1, 1997.

The BHC Act restricts National City’s nonbanking activities to those which are determined by the Federal Reserve Board to be financial in nature, incidental to such financial activity, or complementary to a financial activity. The BHC Act does not place territorial restrictions on the activities of nonbank subsidiaries of financial holding companies. National City’s banking subsidiaries are subject to limitations with respect to transactions with affiliates.

The Sarbanes-Oxley Act of 2002 addresses, among other issues, corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporate information. The Corporation is also subject to New York Stock Exchange corporate governance rules.

As directed by Section 302(a) of Sarbanes-Oxley, National City’s chief executive officer and chief financial officer are each required to certify that National City’s Quarterly and Annual Reports do not contain any untrue statement of a material fact. The rules have several requirements, including having these officers certify that: they are responsible for establishing, maintaining, and regularly evaluating the effectiveness of National City’s internal controls; they have made certain disclosures to National City’s auditors and the audit committee of the Board of Directors about National City’s internal controls; and they have included information in National City’s Quarterly and Annual Reports about their evaluation and whether there have been significant changes in National City’s internal controls or in other factors that could significantly affect internal controls subsequent to the evaluation.

The Board of Directors of National City has approved a series of actions to strengthen and improve corporate governance practices including a new Code of Ethics, a Code of Ethics for Senior Financial Officers, Corporate Governance Guidelines and new charters for the Audit, Compensation, and Nominating and Board of Directors’ Governance Committees. More information on National City Corporation’s corporate governance practices is available on the National City Web site at NationalCity.com.

The enactment of the Graham-Leach-Bliley Act of 1999 (the GLB Act) removed large parts of a regulatory framework that had its origins in the Depression Era of the 1930s. Effective March 11, 2000, new opportunities became available for banks, other depository institutions, insurance companies, and securities firms to enter into combinations that permit a single financial services organization to offer customers a more complete array of financial products and services. The GLB Act provides a new regulatory framework for regulation through the financial holding company, which has as its umbrella regulator the Federal Reserve Board. Functional regulation of the financial holding company’s separately regulated subsidiaries is conducted by their primary functional regulator. The GLB Act requires “satisfactory” or higher Community Reinvestment Act compliance for insured depository institutions and their financial holding companies in order for them to engage in new financial activities. The GLB Act provides a federal right to privacy of non-public personal information of individual customers. National City and its subsidiaries are also subject to certain state laws that deal with the use and distribution of non-public personal information.

A substantial portion of the Corporation’s cash is derived from dividends paid by its subsidiary banks. These dividends are subject to various legal and regulatory restrictions as summarized in Note 17 to the Corporation’s consolidated financial statements.

The subsidiary banks are subject to the provisions of the National Bank Act, are under the supervision of, and are subject to periodic examination by, the Comptroller of the Currency (the OCC), are subject to the rules and regulations of the OCC, Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (FDIC).

National City’s subsidiary banks are also subject to certain laws of each state in which such bank is located. Such state laws may restrict branching of banks within the state and acquisition or merger involving banks located in other states. Ohio, Illinois, Indiana, Kentucky, Michigan, Missouri, and Pennsylvania have all adopted nationwide reciprocal interstate banking.

The Financial Reform, Recovery and Enforcement Act of 1989 (FIRREA) provided that a holding company’s con-

ANNUAL REPORT 2005  85

________________________________________________________________________________

trolled insured depository institutions are liable for any loss incurred by the FDIC in connection with the default of any FDIC-assisted transaction involving an affiliated insured bank or savings association.

The monetary policies of regulatory authorities, including the Federal Reserve Board and the FDIC, have a significant effect on the operating results of banks and holding companies. The nature of future monetary policies and the effect of such policies on the future business and earnings of National City and its subsidiaries cannot be predicted.

Risk Factors

Investments in National City common stock involve risk.

The market price of National City common stock may fluctuate significantly in response to a number of factors, including:

•  changes in securities analysts’ estimates of financial performance

•  volatility of stock market prices and volumes

•  rumors or erroneous information

•  changes in market valuations of similar companies

•  changes in interest rates

•  new developments in the banking industry

•  variations in quarterly or annual operating results

•  new litigation or changes in existing litigation

•  regulatory actions

•  changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies

If National City does not adjust to changes in the financial services industry, its financial performance may suffer.

National City’s ability to maintain its history of strong financial performance and return on investment to shareholders will depend in part on its ability to expand its scope of available financial services to its customers. In addition to other banks, competitors include securities dealers, brokers, mortgage bankers, investment advisors, and finance and insurance companies. The increasingly competitive environment is, in part, a result of changes in regulation, changes in technology and product delivery systems, and the accelerating pace of consolidation among financial service providers.

Future governmental regulation and legislation could limit growth.

National City and its subsidiaries are subject to extensive state and federal regulation, supervision and legislation that govern nearly every aspect of its operations. Changes to these laws could affect National City’s ability to deliver or expand its services and diminish the value of its business.

Changes in interest rates could reduce income and cash flow.

National City’s income and cash flow depends to a great extent on the difference between the interest earned on loans and investment securities, and the interest paid on deposits and other borrowings. Interest rates are beyond National City’s control, and they fluctuate in response to general economic conditions and the policies of various governmental and regulatory agencies, in particular, the Federal Reserve Board. Changes in monetary policy, including changes in interest rates, will influence the origination of loans, the purchase of investments, the generation of deposits and the rates received on loans and investment securities and paid on deposits.

Additional risks and uncertainties could have a negative effect on financial performance.

Additional factors could have a negative effect on the financial performance of National City and National City common stock. Some of these factors are general economic and financial market conditions, competition, continuing consolidation in the financial services industry, new litigation or changes in existing litigation, regulatory actions, and losses.

Properties

National City owns its corporate headquarters building, National City Center, located in Cleveland, Ohio. The Corporation also owns freestanding operations centers in Columbus, Cincinnati, and Cleveland, Ohio, and Kalamazoo and Royal Oak, Michigan. Certain of National City’s significant subsidiaries occupy their headquarters offices under long-term leases. The Corporation also leases operations centers in Cleveland and Miamisburg, Ohio, Pittsburgh, Pennsylvania, and Chicago, Illinois. Branch office locations are variously owned or leased.

Legal Proceedings

The information contained in Note 21 to the consolidated financial statements of this Annual Report is incorporated herein by reference.

Executive Officers

The Executive Officers of National City (as of February 3, 2006) are as follows:

Name	Age		Position
David A. Daberko		60	Chairman and Chief Executive Officer
Jeffrey D. Kelly		52	Vice Chairman and Chief Financial Officer
William E. MacDonald III		59	Vice Chairman
Peter E. Raskind		49	Vice Chairman
James R. Bell III		49	Executive Vice President
Daniel J. Frate		44	Executive Vice President
John D. Gellhausen		40	Executive Vice President
Paul D. Geraghty		52	Executive Vice President
Jon L. Gorney		55	Executive Vice President
Timothy J. Lathe		50	Executive Vice President
Ted M. Parker		45	Executive Vice President
Richard B. Payne, Jr.		57	Executive Vice President
Philip L. Rice		47	Executive Vice President
Shelley J. Seifert		51	Executive Vice President
David L. Zoeller		56	Executive Vice President, General Counsel, and Secretary
James P. Gulick		47	Senior Vice President and General Auditor
Robert B. Crowl		42	Senior Vice President and Comptroller
Thomas A. Richlovsky		54	Senior Vice President and Treasurer
Jon N. Couture		40	Senior Vice President
Clark H. Khayat		34	Senior Vice President

The term of office for executive officers is one year.

There is no family relationship between any of the executive officers.

Mr. Daberko has been chairman and chief executive officer since 1995.

86  ANNUAL REPORT 2005

________________________________________________________________________________

FORM 10-K (Continued)

Mr. Kelly has been vice chairman since December 2004 and chief financial officer since 2000. He was an executive vice president from 1994 to December 2004.

Mr. MacDonald III has been vice chairman since 2001. Prior to that time, he was a senior executive vice president from 1999 to 2001.

Mr. Raskind has been vice chairman since December 2004. He was an executive vice president from 2000 to December 2004.

Mr. Bell has been an executive vice president since 1996. He has been Chief Risk Officer since April of 2004. From 2000 to 2004, he was head of the Capital Markets Group.

Mr. Frate has been an executive vice president since November 2005. He had been a senior vice president since 2003. Prior to joining National City, he served as president and chief operating officer of Bank One Card Services and president of U.S. Bancorp’s Payment Systems.

Mr. Gellhausen has been an executive vice president since 2002. Prior to that time, he was president and chief operating officer of National City Mortgage Co. from 2000 to 2002.

Mr. Geraghty has been an executive vice president since April 2004. He had been a senior vice president since October 2002. He has been an executive vice president of National City Bank since August 1999.

Mr. Gorney has been an executive vice president since 1993.

Mr. Lathe has been an executive vice president since 2000. He has been chairman and chief executive officer of NatCity Investments, Inc. since August 2004 and chairman and chief executive officer of National City Bank of the Midwest since 2000.

Mr. Parker has been an executive vice president since 2001 and president and chief executive officer for the state of Michigan since December 2005. He was the head of Institutional Asset Management from May 2004 to December 2005 and the president and chief executive officer of National City Bank of Kentucky from 2001 to 2004.

Mr. Payne has been an executive vice president since April of 2004 and has been with National City since July of 2001. Prior to that, Mr. Payne was with First Union Corporation (now Wachovia Corporation) from July 1999 to June 2001.

Mr. Rice has been an executive vice president and president and chief executive officer of National City Bank since 2000.

Ms. Seifert has been an executive vice president since 2000.

Mr. Zoeller has been an executive vice president since 2000. Since 1992, he has been general counsel and secretary.

Mr. Gulick has been senior vice president and general auditor since 1995.

Mr. Crowl has been a senior vice president since October 2004 and has been comptroller since April 2004. He was the Asset/Liability and Securitization manager from November 1998 to April 2004.

Mr. Richlovsky has been senior vice president and treasurer since 1989.

Mr. Couture has been a senior vice president since November 2004 and director of corporate human resources for National City since September 2004. Mr. Couture joined National City in July 2004 and prior to that was senior vice president, human resources at Siemens Business Services Inc. from April 2000 to July 2004.

Mr. Khayat has been a senior vice president since November 2005 and is the head of Corporate Planning. He has been with National City since 2003 and, prior to rejoining National City, he was an engagement manager at McKinsey & Company. Prior to McKinsey and Company, Mr. Khayat was a vice president in NatCity Investments’ Corporate Finance Group.

Controls and Procedures

National City’s 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 December 31, 2005, 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 December 31, 2005 were effective in ensuring material information required to be disclosed in this Annual Report on Form 10-K 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 December 31, 2005 that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

Management’s responsibilities related to establishing and maintaining effective disclosure controls and procedures include maintaining effective internal controls over financial reporting that are designed to produce reliable financial statements in accordance with accounting principles generally accepted in the United States. As disclosed in the Report on Management’s Assessment of Internal Control Over Financial Reporting on page 35 of this Annual Report, management assessed the Corporation’s system of internal control over financial reporting as of December 31, 2005, in relation to criteria for effective internal control over financial reporting as described in “Internal Control – Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that, as of December 31, 2005, its system of internal control over financial reporting met those criteria and is effective.

There have been no significant changes in the Corporation’s internal controls or in other factors that could significantly affect internal controls subsequent to December 31, 2005.

ANNUAL REPORT 2005  87

________________________________________________________________________________

Signatures

Pursuant to the requirements of Section 13 or 15(d) 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, on February 6, 2006.

National City Corporation

David A. Daberko

Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated, on February 6, 2006.

David A. Daberko

Chairman and Chief Executive Officer

Jeffrey D. Kelly

Vice Chairman and Chief Financial Officer

William E. MacDonald III

Vice Chairman

Peter E. Raskind

Vice Chairman

Thomas A. Richlovsky

Senior Vice President and Treasurer

The Directors of National City Corporation executed a power of attorney appointing David L. Zoeller, Carlton E. Langer, and Thomas A. Richlovsky their attorneys-in-fact, empowering them to sign this report on their behalf.

By David L. Zoeller

Attorney-in-fact

Certifications of Chief Executive Officer Sarbanes-Oxley Act Section 302

I, David A. Daberko, certify that:

1. I have reviewed this annual report on Form 10-K of National City Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 6, 2006

By: 

David A. Daberko

Chairman and Chief Executive Officer

88  ANNUAL REPORT 2005

________________________________________________________________________________

FORM 10-K (Continued)

Sarbanes-Oxley Act Section 906

Pursuant to 18 U.S.C. section 1350, the undersigned officer of National City Corporation (the “Company”), hereby certifies, to such officer’s knowledge, that the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 6, 2006

By: 

David A. Daberko

Chairman and Chief Executive Officer

The signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

New York Stock Exchange

In accordance with the rules of the New York Stock Exchange, the chief executive officer of National City submitted the required annual Section 303A.12(a) chief executive officer certification to the New York Stock Exchange on May 18, 2005. National City’s Form 10-K for its fiscal year ended December 31, 2005, as filed with the Securities and Exchange Commission includes, as exhibits, the certifications of National City’s chief executive officer and chief financial officer required by Section 302 of the Sarbanes-Oxley Act of 2002.

Certifications of Chief Financial Officer

Sarbanes-Oxley Act Section 302

I, Jeffrey D. Kelly, certify that:

1. I have reviewed this annual report on Form 10-K of National City Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 6, 2006

By: 

Jeffrey D. Kelly

Vice Chairman and Chief Financial Officer

Sarbanes-Oxley Act Section 906

Pursuant to 18 U.S.C. section 1350, the undersigned officer of National City Corporation (the “Company”), hereby certifies, to such officer’s knowledge, that the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 6, 2006

By: 

Jeffrey D. Kelly

Vice Chairman and Chief Financial Officer

The signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

CORPORATE INFORMATION

Corporate Headquarters

National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3484
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 login assistance or other inquiries, call 800-622-6757.

Investor Information

Jennifer Hammarlund
Investor Relations
Department 2229
P.O. Box 5756
Cleveland, Ohio 44101-0756
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.

Corporate Governance

National City’s corporate governance practices are described in the following documents, which are available free of charge on the Corporation’s Web site at 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.

Annual Meeting

The Annual Meeting of Stockholders will be on Tuesday, April 25, 2006 at 10 a.m. Eastern time National City Corporation National City Center 1900 East Ninth Street Cleveland, Ohio 44114-3484

Dividend Reinvestment and Stock Purchase Plan

National City Corporation offers stockholders a convenient way to increase their investment through the National City Corporation 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 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 800-622-6757.

NAIC

National City is a proud sponsor of the National Association of Investors Corporation (NAIC) and participates in its Low-Cost Investment Plan. To receive more information on NAIC, call 248-583-NAIC(6242).

DEBT RATINGS

	Dominion		Moody’s
	Bond Rating	Fitch	Investors	Standard
	Service	Ratings	Service	& Poor’s
National City Corporation		A/B
Commercial Paper	R-1(mid)	F1+	P-1	A-1
Senior Debt	A(high)	AA-	A1	A
Subordinated debt		A+	A2	A-
Bank Subsidiaries		A/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)	AA-	Aa3	A+
Subordinated bank notes		A+	A1	A

COMMON STOCK INFORMATION

	First		Second		Third		Fourth		Full
	Quarter		Quarter		Quarter		Quarter		Year
2005
Dividends Paid	$	.35	$	.35	$	.37	$	.37	$	1.44
High		37.75		35.30		37.85		35.04		37.85
Low		32.85		32.08		33.37		29.80		29.80
Close		33.50		34.12		33.44		33.57		33.57
2004
Dividends Paid	$	.32	$	.32	$	.35	$	.35	$	1.34
High		37.10		36.10		39.35		39.66		39.66
Low		32.14		32.60		34.35		36.07		32.14
Close		35.58		35.01		38.62		37.55		37.55

1900 East Ninth Street
Cleveland, Ohio 44114-3484
NationalCity.com  
74-0549-00 (Rev. 02/06)

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 February 28, 2005) (filed as Exhibit 3(ii) to Registrant’s Current Report on Form 8-K filed on February 28, 2005, 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 February 28, 2005) (filed as Exhibit 3(ii) to Registrant’s Current Report on Form 8-K filed on February 28, 2005, 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 1989 Stock Option Plan (filed as Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, and incorporated herein by reference).
	10.2	National City Corporation’s 1993 Stock Option Plan (filed as Exhibit 10.5 to Registration Statement No. 33-49823 and incorporated herein by reference).
	10.3	National City Corporation 150th Anniversary Stock Option Plan (filed as Exhibit 4 to Registrant’s Form S-8 Registration Statement No. 33-58815 dated April 25, 1995, and incorporated herein by reference).
	10.4	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).
	10.5	National City Corporation Supplemental Executive Retirement Plan, as Amended and Restated July 1, 2002 (filed as Exhibit 10.7 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, and incorporated herein by reference).
	10.6	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).
	10.7	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).
	10.8	Central Indiana Bancorp Option Plan effective March 15, 1991 (filed as Exhibit 10.8 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, and incorporated herein by reference).
	10.9	Central Indiana Bancorp 1993 Option Plan effective October 12, 1993 (filed as Exhibit 10.9 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, and incorporated herein by reference).

Exhibit
Number		Exhibit Description
	10.10	Form of contracts with David A. Daberko, William E. MacDonald III, Jon L. Gorney, Jeffrey D. Kelly, David L. Zoeller, Thomas A. Richlovsky, James P. Gulick, John D. Gellhausen, James R. Bell III, Peter E. Raskind, Philip L. Rice, Timothy J. Lathe, Shelley J. Seifert, Daniel J. Frate, Ted M. Parker, Paul D. Geraghty, and Richard B. Payne, Jr. (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).
	10.11	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).
	10.12	Restated First of America Bank Corporation 1987 Stock Option Plan (filed as Exhibit 4.4 to Registrant’s Post-Effective Amendment No. 2 [on Form S-8] to Form S-4 Registration Statement No. 333-46571 dated March 19, 1998, and incorporated herein by reference).
	10.13	Amended and Restated First of America Bank Corporation Stock Compensation Plan (filed as Exhibit 4.5 to Registrant’s Post-Effective Amendment No. 2 [on Form S-8] to Form S-4 Registration Statement No. 333-46571 dated March 19, 1998, and incorporated herein by reference).
	10.14	First of America Bank Corporation Directors Stock Compensation Plan (filed as Exhibit 4.6 to Registrant’s Post-Effective Amendment No. 2 [on Form S-8] to Form S-4 Registration Statement No. 333-46571 dated March 19, 1998, and incorporated herein by reference).
	10.15	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).
	10.16	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).
	10.17	National City Corporation Retention Plan for Executive Officers, Amended and Restated effective January 1, 2005.
	10.18	Integra Financial Corporation Employee Stock Option Plan (filed as Exhibit 4.3 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).
	10.19	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).
	10.20	Integra Financial Corporation Non-Employee Directors Stock Option Plan (filed as Exhibit 4.5 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).
	10.21	National City Corporation Amended and Restated Long-Term Incentive Compensation Plan for Senior Officers as Amended and Restated effective January 1, 2001 (filed as Exhibit 10.32 to Registrant’s Quarterly Report on Form 10-Q for the quarter and nine months ended September 30, 2000, and incorporated herein by reference).
	10.22	The National City Corporation Management Incentive Plan for Senior Officers, as Amended and Restated effective February 23, 2004 (filed as Exhibit D to Registrant’s Proxy Statement dated March 11, 2004, and incorporated herein by reference).
	10.23	National City Corporation Supplemental Cash Balance Pension Plan as Amended and Restated effective November 1, 2001 (filed as Exhibit 10.25 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001, and incorporated herein by reference).
	10.24	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).
	10.25	[Reserved]
	10.26	[Reserved]
	10.27	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).

Exhibit
Number		Exhibit Description
	10.28	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).
	10.29	The National City Corporation Deferred Compensation Plan as Amended and Restated effective July 23, 2002 (filed as Exhibit 10.34 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, and incorporated herein by reference).
	10.30	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).
	10.31	Visa® U.S.A. Inc. limited guaranty between National City Corporation and Visa® U.S.A. Inc. dated August 6, 2002 (filed as Exhibit 10.36 to Registrant’s Quarterly Report on Form 10-Q for the quarter and nine months ended September 30, 2002, and incorporated herein by reference).
	10.32	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).
	10.33	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).
	10.34	[Reserved]
	10.35	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).
	10.36	[Reserved]
	10.37	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).
	10.38	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).
	10.39	MasterCard International Incorporated limited guaranty between National City Corporation and MasterCard International Incorporated dated April 30, 2003 (filed as Exhibit 10.39 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, and incorporated herein by reference).
	10.40	The National City Corporation Long-Term Cash and Equity Incentive Plan (filed as Exhibit 10.40 to the Registrant’s Quarterly Report on Form 10-Q for the quarter year ended September 30, 2005, and incorporated herein by reference).
	10.41	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).
	10.42	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).
	10.43	[Reserved]
	10.44	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).
	10.45	[Reserved]

Exhibit
Number		Exhibit Description
	10.46	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).
	10.47	Allegiant Bancorp, Inc. 2002 Stock Incentive Plan (filed as Appendix A to Allegiant Bancorp, Inc.’s Proxy Statement for its 2002 Annual Meeting, and incorporated herein by reference).
	10.48	Allegiant Bancorp, Inc. 2000 Stock Incentive Plan (filed as Annex A to Allegiant Bancorp, Inc.’s Proxy Statement for its 2000 Annual Meeting, and incorporated herein by reference).
	10.49	Provident Financial Group, Inc. 1988 Stock Option Plan (filed as Exhibit 10.18 to Provident Financial Group, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002, and incorporated herein by reference).
	10.50	Provident Financial Group, Inc. 1996 Non-Executive Officer Stock Option Plan (filed as Exhibit 10.19 to Provident Financial Group, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002, and incorporated herein by reference).
	10.51	Provident Financial Group, Inc. 1997 Stock Option Plan (filed as Exhibit 10.20 to Provident Financial Group, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002, and incorporated herein by reference).
	10.52	Provident Financial Group, Inc. 2000 Employee Stock Option Plan (filed as Exhibit 10.21 to Provident Financial Group, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002, and incorporated herein by reference).
	10.53	Provident Financial Group, Inc. 2002 Outside Directors Stock Option Plan (filed as Exhibit 10.23 to Provident Financial Group, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002, and incorporated herein by reference).
	10.54	Provident Financial Group, Inc. 1992 Outside Directors Stock Option Plan (filed with Provident Financial Group, Inc.’s Form S-8 Registration Statement No. 33-51230, and incorporated herein by reference).
	10.55	[Reserved]
	10.56	Provident Financial Group, Inc. Deferred Compensation Plan (filed as Exhibit 10.22 to Provident Financial Group, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002, and incorporated herein by reference).
	10.57	Provident Financial Group, Inc. Outside Directors Deferred Compensation Plan (filed as Exhibit 10.24 to Provident Financial Group, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002, and incorporated herein by reference).
	10.58	Provident Financial Group, Inc. Supplemental Executive Retirement Plan (filed as Exhibit 10.25 to Provident Financial Group, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002, and incorporated herein by reference).
	10.59	[Reserved]
	10.60	National City Corporation 2004 Deferred Compensation Plan (filed as Exhibit 10.60 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, and incorporated herein by reference).
	10.61	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).
	10.62	Amendment No. 6 to the National City Savings and Investment Plan, as Amended and Restated effective January 1, 2001.
	10.63	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).
	10.64	Form of Restricted Stock 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).

Exhibit
Number		Exhibit Description
	10.65	Form of Restricted Stock 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).
	10.66	Form of Incentive Stock Option 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).
	10.67	Form of Non-qualified Stock Option Agreement (filed as Exhibit 10.67 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, and incorporated herein by reference).
	10.68	Form of contracts with Robert B. Crowl 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).
	10.69	Release and Non-competition Agreement between National City Corporation and Jose Armando Ramirez (filed as Exhibit 10.69 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, and incorporated herein by reference).
	10.70	Appendices AS, AT, AU, AV, and AW to the National City Savings and Investment Plan, as Amended and Restated effective January 1, 2001
	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).
	21.1	Subsidiaries of Registrant.
	23.1	Consent of Ernst & Young, LLP, Independent Registered Public Accounting Firm for National City Corporation.
	24.1	Power of Attorney.
	31.1	Chief Executive Officer Sarbanes-Oxley Act 302 Certification dated February 6, 2006 for National City Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005.
	31.2	Chief Financial Officer Sarbanes-Oxley Act 302 Certification dated February 6, 2006 for National City Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005.
	32.1	Chief Executive Officer Sarbanes-Oxley Act 906 Certification dated February 6, 2006 for National City Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005.
	32.2	Chief Financial Officer Sarbanes-Oxley Act 906 Certification dated February 6, 2006 for National City Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005.