UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2007

Commission File Number 1-10074

NATIONAL CITY CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Delaware	34-1111088
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
1900 East Ninth Street, Cleveland, Ohio	44114-3484
(Address of Principal Executive Offices)	(ZIP Code)

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

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

	Name of Each Exchange
Title of Class	on Which Registered
National City Corporation Common Stock, $4.00 Per Share		New York Stock Exchange
9.875% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series F		New York Stock Exchange
12.000% Fixed-to-Floating Rate Normal APEX		New York Stock Exchange
8.000% Trust Preferred Securities (issued by National City Capital Trust IV)		New York Stock Exchange
6.625% Trust Preferred Securities (issued by National City Capital Trust III)		New York Stock Exchange
6.625% Trust Preferred Securities (issued by National City Capital Trust II)		New York Stock Exchange

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 þ  NO o

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 o  NO þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES þ  NO o

Indicate by check mark 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.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  þ Accelerated filer  o Non-accelerated filer  o
(Do not check if a smaller reporting company) Smaller reporting company  o

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

The aggregate market value of the registrant’s outstanding voting common stock held by nonaffiliates on June 30, 2007, determined using a per share closing price on that date of $33.32, as quoted on the New York Stock Exchange, was $17,818,655,592.

The number of shares outstanding of each of the registrant’s classes of common stock, as of December 31, 2007:

Common Stock, $4.00 Per Share — 633,945,720

Documents Incorporated By Reference:

Portions of the registrant’s Proxy Statement (to be dated approximately March 7, 2008) are incorporated by reference into Item 10. Directors, Executive Officers and Corporate Governance; 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 Director Independence; and Item 14. Principal Accountant Fees and Services, of Part III.

PART I

Item 1. BUSINESS

Description of Business

National City Corporation (National City or the Corporation), successor to a banking business founded on May 17, 1845, is a $150 billion financial holding company headquartered in Cleveland, Ohio. National City operates through an extensive distribution network in Ohio, Florida, Illinois, Indiana, Kentucky, Michigan, Missouri, Pennsylvania, and Wisconsin, and also conducts selected lending and other financial services businesses on a nationwide basis. The primary source of National City’s revenue is net interest income from loans and deposits, revenue from loan sales and servicing, and fees from financial services provided to customers. Business volumes tend to be influenced by overall economic factors, including market interest rates, business spending, the housing market, consumer confidence, as well as competitive conditions within the marketplace. Operations are primarily conducted through more than 1,400 branch banking offices located within National City’s nine-state footprint. In addition, National City operates over 410 retail mortgage offices throughout the United States.

The Corporation’s businesses are organized by product and service offerings as well as the distribution channels through which these products and services are offered. The Corporation has organized its operations into five businesses: Retail Banking, Commercial Banking-Regional, Commercial Banking-National, Mortgage Banking, and Asset Management.

Retail Banking provides banking services to consumers and small businesses within National City’s nine-state footprint. In addition to deposit gathering and direct lending services provided through the retail bank branch network, call centers, and the Internet, Retail Banking’s activities also include small business banking services, education finance, retail brokerage, and lending-related insurance services. Consumer lending products include home equity, government or privately guaranteed student loans, and credit cards and other unsecured personal and small business lines of credit. Significant revenue sources include net interest income on loan and deposit accounts, deposit account service fees, debit and credit card interchange and service fees, and ATM surcharge and net interchange fees.

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

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

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

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

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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. The clients served include publicly traded corporations, charitable endowments and foundations, as well as unions, residing primarily in National City’s banking footprint and generally complementing its corporate banking relationships. Personal wealth management services are provided by two business units − Private Client Group and Sterling. Products and services include private banking services and tailored credit solutions, customized investment management services, brokerage, financial planning, as well as trust management and administration for individuals and families. Sterling offers financial management services for high-net-worth clients.

At December 31, 2007 National City and its subsidiaries had 32,064 full-time-equivalent employees. Additional information regarding the business segments is included in the Line of Business Results section of Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Note 27 to the Consolidated Financial Statements.

Competition

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

Recent Acquisitions and Divestitures

The Corporation has completed several acquisitions in the past three years. On September 1, 2007, the Corporation completed its acquisition of MAF Bancorp, Inc. (MAF), a banking company operating 82 branches throughout Chicago and Milwaukee and surrounding areas. On January 5, 2007, the Corporation completed its acquisition of Fidelity Bankshares, Inc. (Fidelity), a banking company operating 52 branches along Florida’s southeast coast through its subsidiary Fidelity Federal Bank & Trust. On December 1, 2006, the Corporation completed its acquisition of Harbor Florida Bancshares, Inc. (Harbor), a banking company operating 42 branches along the central east coast of Florida through its subsidiary Harbor Federal Savings Bank. On May 1, 2006, the Corporation completed its acquisition of Forbes First Financial Corporation (Pioneer), a privately held bank holding company operating eight branches in the St. Louis, Missouri, metropolitan area through its subsidiary Pioneer Bank.

On December 30, 2006, the Corporation completed the sale of its First Franklin nonprime mortgage origination and sale business and related servicing platform. In 2005, the Corporation sold Madison Bank & Trust, an Indiana state chartered bank, including six branches, and from time to time has sold individual branches or groups of branches deemed nonstrategic.

Additional information on acquisition and divestiture activities is included in Note 3 to the Consolidated Financial Statements.

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.

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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 nonpublic personal financial information of individual customers. National City and its subsidiaries are also subject to certain state laws that deal with the use and distribution of nonpublic personal information.

A substantial portion of the holding company’s cash is derived from dividends paid by National City Bank. These dividends are subject to various legal and regulatory restrictions as summarized in Note 18 to the Consolidated Financial Statements.

National City Bank is subject to the provisions of the National Bank Act, is under the supervision of, and is subject to periodic examination by, the Comptroller of the Currency (the OCC), is 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 Bank is also subject to certain laws of each state in which it is located. Such state laws may restrict branching of banks within the state.

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

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.

National City maintains strong corporate governance practices, and the board of directors reviews National City’s corporate governance practices on a continuing basis including National City’s Code of Ethics, Code of Ethics for Senior Financial Officers, Corporate Governance Guidelines and charters for the Audit, Compensation and Organization, Nominating and Board of Directors Governance, and Risk and Public Policy Committees. More information about National City’s corporate governance practices is available on the National City Website at: NationalCity.com.

Available Information

All reports, 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, filed or furnished pursuant to Section 13(a) and 15(d) of the

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Exchange Act by National City Corporation with the United States Securities and Exchange Commission (SEC), are accessible at no cost on the Corporation’s Web site at NationalCity.com as soon as reasonably practicable after the Corporation has electronically filed such material with, or furnished it to the SEC. These filings are also accessible on the SEC’s Web site at www.sec.gov. The public may read and copy any materials the Company files with the SEC at the SEC Public Reference Room at 100F Street, NE, Washington, DC 20549. The public may also obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

Item 1A. 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:

Weakness in the real estate market, including the secondary residential mortgage loan markets has adversely affected National City and may continue to do so.

Significant ongoing disruptions in the secondary market for residential mortgage loans have limited the market for and liquidity of most mortgage loans other than conforming Fannie Mae and Freddie Mac loans. At December 31, 2007, National City held approximately $1.0 billion of loans available for sale that were not eligible for purchase by these agencies. The effects of ongoing mortgage market challenges, combined with the ongoing correction in residential real estate market prices and reduced levels of home sales, could result in further price reductions in single family home values, adversely affecting the value of collateral securing mortgage loans held, mortgage loan originations and gains on sale of mortgage loans. Declining real estate prices and higher interest rates have caused higher delinquencies and losses on certain mortgage loans, particularly second lien mortgages and home equity lines of credit and especially those that have been sourced from brokers that are outside National City’s banking footprint. These trends could continue. These conditions have resulted in losses, write downs and impairment charges in the mortgage business, especially in the fourth quarter of 2007, and we have curtailed various product offerings and limited our mortgage originations generally to Fannie Mae and Freddie Mac eligible mortgages. Continued declines in real estate values, home sales volumes and financial stress on borrowers as a result of job losses, interest rate resets on adjustable rate mortgage loans or other factors could have further adverse effects on borrowers that result in higher delinquencies and greater charge-offs in future periods, which would adversely affect financial condition or results of operations. In the event the allowance for loan losses is insufficient to cover such losses, earnings, capital and parent company liquidity could be adversely affected.

National City’s real estate portfolios are exposed to weakness in the U.S. housing markets and the overall state of the economy.

The declines in home prices in many markets across the U.S., along with the reduced availability of mortgage credit, have resulted in sharp increases in delinquencies and losses in National City’s portfolios of broker-originated, out-of-footprint home equity lines and loans, nonprime mortgages, and loans related to residential real estate construction and development. Further declines in home prices coupled with an economic recession and associated rises in unemployment levels could drive losses beyond that which is provided for in the allowance for loan losses. In that event, National City’s earnings and capital could be adversely affected.

The residential mortgage loan market and business have adversely affected National City’s credit ratings.

On November 6, 2007, Fitch Ratings reduced National City’s long-term issuer default rating to A+ (outlook negative) from AA-, and the short-term issuer default rating to F-1 from F-1+, due to exposure to mortgage, home equity and construction lending. On January 8, 2008, Moody’s Investors Service, Inc., while affirming National City Bank’s top short-term rating of P-1, placed virtually all of the long-term debt and financial strength ratings of National City Corporation and its subsidiaries on review for possible downgrade pending the rating agency’s assessment as to the ability to absorb potential losses in the residential and commercial mortgage sectors. The decrease, and potential decreases, in credit ratings could limit access to the capital markets, increase the cost of debt and adversely affect liquidity and financial condition. Further downgrades of credit ratings could adversely affect the market value of the

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Depositary Shares and debt securities. Also, on November 12, 2007, Fitch Ratings reduced National City’s residential mortgage servicer rating one notch from RPS1- to RPS2+ with respect to prime and alt-a mortgages. This decrease in servicer rating is not expected to adversely affect the terms of future residential mortgage securitizations or National City’s continuing role as a mortgage servicer in existing transactions, but further decreases in the servicer rating could cause such an adverse effect on future securitizations and the loss of mortgage servicing rights.

The allowance for loan losses may prove inadequate or be negatively affected by credit risk exposures.

National City’s business depends on the creditworthiness of its customers. The Corporation periodically reviews the allowance for loan losses for adequacy considering economic conditions and trends, collateral values and credit quality indicators, including past charge-off experience and levels of past due loans and nonperforming assets. There is no certainty that the allowance for loan losses will be adequate over time to cover credit losses in the portfolio because of unanticipated adverse changes in the economy, market conditions or events adversely affecting specific customers, industries or markets. If the credit quality of the customer base materially decreases, if the risk profile of a market, industry or group of customers changes materially, or if the allowance for loan losses is not adequate, the business, financial condition, liquidity, capital, and results of operations could be materially adversely affected.

If Visa Inc. is unable to consummate its initial public offering on the terms currently contemplated, National City will not receive expected proceeds from such offering.

Visa Inc. (“Visa”) filed a registration statement with the Securities and Exchange Commission on November 9, 2007 to sell its common stock in an initial public offering. If Visa’s offering is successfully completed, management currently anticipate that National City, as a selling stockholder, will receive proceeds from the offering. However, there is no assurance that Visa will be able to complete an initial public offering on the terms currently contemplated by its registration statement or at all. If the number of shares or the price per share of Visa’s offering are less than Visa currently anticipates selling or if the Visa offering is not completed, National City may not realize proceeds sufficient to cover the indemnity liabilities accrued in 2007 in respect of Visa litigation matters.

National City could experience difficulties in managing growth and effectively integrating acquisitions.

National City regularly reviews potential acquisition opportunities. The Corporation acquired Harbor Florida Bancshares, Inc. and Fidelity Bankshares, Inc. in December 2006 and January 2007, respectively, and acquired MAF Bancorp in Clarendon Hills, Illinois in September 2007. There is no certainty that National City will be able to manage growth adequately and profitably or to integrate the operations of Harbor, Fidelity, MAF Bancorp or any other acquisition effectively. Risks commonly associated with acquisitions include, without limitation, potential exposure to liabilities of the acquired entity, the difficulty and expense of integrating the operations and personnel of the acquired entity, potential disruption to the business of the acquired entity, potential diversion of management time and attention from other matters and impairment of relationships with, and the possible loss of, key employees and customers of the acquired entity.

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

National City’s ability to compete and its profitability depend in part on the ability to provide a range of financial services through a variety of distribution channels to customers. Many competitors, with whom National City competes with to attract and retain customers for traditional banking services, offer one-stop financial services shopping, which includes securities dealers, brokers, mortgage bankers, investment advisors and finance and insurance companies. The increasingly competitive environment primarily is 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 future growth.

National City and subsidiaries are subject to extensive state and federal regulation, supervision and legislation that govern almost all aspects of operations of both the holding Company and subsidiaries. These laws may change from time to time and are, together with banking regulation and supervision, primarily intended for the protection of

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consumers, depositors and the deposit insurance funds. The effects of any changes to these laws may negatively affect the cost and manner of providing services and related profitability.

Changes in interest rates could reduce income and cash flows.

National City’s income and cash flows depend to a great extent on the difference between the interest rates earned on interest-earning assets such as loans and investment securities, and the interest rates paid on interest-bearing liabilities such as deposits and other borrowings. These rates are highly sensitive to many factors outside of National City’s control, including general economic conditions and the fiscal and monetary policies of various governmental agencies, in particular, the Federal Reserve. Changes in monetary policy and changes in interest rates will affect loan origination values, the values of investments and other assets, the volume of deposits and other borrowings and the rates received on loans and investment securities and the rates paid on deposits and other borrowings and the resulting margin. Fluctuations in these areas may have an adverse effect.

National City’s results of operations and ability to make distributions to securities holders depend upon the results of operations of subsidiaries.

National City Corporation is a holding company that is a separate and distinct entity from its subsidiaries. With limited exceptions, substantially all operations are conducted through National City Bank, the Corporation’s principal subsidiary bank, and other subsidiaries. Federal banking laws limit the amount of dividends that may be paid by national banks to the earnings of the current year and the last two years without prior regulatory approval. National City Bank and other subsidiaries must also meet applicable capital requirements. At December 31, 2007, National City Bank could pay the holding company an aggregate of approximately $106 million in dividends without prior regulatory approval, compared to $954 million at December 31, 2006 and $1.9 billion at December 31, 2005.

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

Additional factors could negatively affect the financial condition and results of operations, securities issued by National City and its common stock. Such factors include, without limitation, changes in general economic, financial and other market conditions, changes in securities analysts’ estimates of financial performance, volatility of securities market prices and volumes, rumors or erroneous information, changes in market valuations of similar companies, changes in interest rates, new developments or exceptions regarding the financial services banking industry, changes in quarterly or annual operating results or outlook, changes in competitive conditions, continuing consolidation in the financial services industry, new litigation or changes in existing litigation, regulatory actions and changes in rules or policies, changes in accounting policies and procedures, losses and customer bankruptcies, claims and assessments.

Item 1B. UNRESOLVED STAFF COMMENTS

None

Item 2. 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, Fort Pierce, Florida, and Kalamazoo and Royal Oak, Michigan. Certain of National City’s business units occupy 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.

Item 3. LEGAL PROCEEDINGS

National City and its subsidiaries are involved in a number of legal proceedings arising out of their businesses and regularly face various claims, including unasserted claims, which may ultimately result in litigation. For additional information on litigation, contingent liabilities, and guarantees, refer to Note 22 to the Consolidated Financial Statements in Item 8 of this Form 10-K.

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

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

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

On March 31, 2006, the Corporation and National City Bank were served with a patent infringement lawsuit filed in the United States District Court for the Eastern District of Texas. The plaintiff, Data Treasury Corporation, claims that the Corporation, as well as over 50 other financial institutions or check processors, infringed on its patents involving check imaging, storage and transfer. The plaintiff seeks damages and injunctive relief. On January 6, 2006, the US Patent and Trademark Office (USPTO) ordered a re-examination of certain of the patents (the Ballard Patents) and the Court stayed the litigation as to those patents. Subsequently, the USPTO confirmed the patentability of all claims of the Ballard patents under re-examination and the Plaintiff has now indicated its intention to ask the court to lift the stay. On or about July 27, 2007, the USPTO granted re-examination of the other patents in suit (the Huntington Patents) and the Court stayed the litigation as to those patents. At this stage of this lawsuit, it is not possible for management to assess the probability of a material adverse outcome, or reasonably estimate the amount of potential loss.

On December 19, 2005, a class action suit was filed against National City Mortgage Co. in the U.S. District Court for the Southern District of Illinois. The lawsuit alleges that National City Mortgage loan originators were improperly designated as exempt employees and seeks monetary damages. On June 21, 2007, the court conditionally certified an opt-in class of loan originators. On November 6, 2007, a settlement in principle was reached to resolve all wage and hour claims of the loan originators employed during the class period that opt-in to the settlement class. This settlement is subject to court approval. At December 31, 2007, the Corporation has a $25 million reserve accrued for this matter.

On January 10 and January 17, 2008, two putative class action lawsuits were filed in the United States District Court for the Northern District of Ohio against National City Corporation, the Administrative Committee for the National City Savings and Investment Plan and certain current and former officers and directors of the Corporation. The complaints allege violations under of the Employee Retirement Income Security Act (ERISA) relating to the Corporation’s stock being offered as an investment alternative for participants in the Plan. The complaints seek unspecified money damages

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and equitable relief. At this stage of these lawsuits, it is not possible for management to assess the probability of a material adverse outcome, or reasonably estimate the amount of any potential loss.

On January 18 and January 28, 2008, two shareholder derivative complaints were filed in the United States District Court for the Northern District of Ohio against certain current and former officers and directors of the Corporation alleging breach of fiduciary duty, waste of corporate assets, unjust enrichment and violations of the Securities Exchange Act of 1934. On February 6, 2008, two shareholder derivative actions were filed in Chancery Court for the state of Delaware against certain current and former officers and directors of the Corporation alleging breach of fiduciary duty and unjust enrichment. On February 11, 2008, a shareholder derivative action was filed in Common Pleas Court in Cuyahoga County, Ohio against certain current and former officers and directors of the Corporation alleging breach of fiduciary duty and unjust enrichment. All of these shareholder derivative lawsuits make substantially identical allegations against substantially identical parties. The complaints seek unspecified money damages and equitable relief. At this stage of these lawsuits, it is not possible for management to assess the probability of a material adverse outcome, or reasonably estimate the amount of potential loss.

On January 24, 2008, a putative class action lawsuit was filed in the United States District Court for the Northern District of Ohio against National City Corporation and certain current and former officers and directors of the Corporation. The complaint alleges violations of federal securities laws and seeks unspecified damages and equitable relief on behalf of purchasers of the Corporation’s stock during the period April 30, 2007 to January 2, 2008. At this stage of the lawsuit, it is not possible for management to assess the probability of a material adverse outcome, or reasonably estimate the amount of any potential loss.

Based on information currently available, consultation with 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.

The Corporation and its subsidiaries are involved in other administrative and judicial proceedings brought by governmental or other regulatory agencies. The outcome of these proceedings could result in litigation, fines, penalties or sanctions against the Corporation or its subsidiaries. The most significant proceedings are described below.

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

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

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of shareholders during the quarter ended December 31, 2007.

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PART II

Item 5.  MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

National City common stock is traded on the New York Stock Exchange under the symbol “NCC.” At December 31, 2007, there were 63,841 shareholders of record. The following table is a summary of historical price information and dividends paid per common share for all quarters of 2007 and 2006.

	First		Second		Third		Fourth		Full
	Quarter		Quarter		Quarter		Quarter		Year
2007
Dividends paid	$	.39	$	.39	$	.41	$	.41	$	1.60
High		38.94		38.32		34.30		27.21		38.94
Low		34.82		33.08		24.88		15.76		15.76
Close		37.25		33.32		25.09		16.46		16.46
2006
Dividends paid	$	.37	$	.37	$	.39	$	.39	$	1.52
High		36.25		38.04		37.42		37.47		38.04
Low		33.26		34.38		34.50		35.29		33.26
Close		34.90		36.19		36.60		36.56		36.56

On January 2, 2008, the Board of Directors declared a dividend of $.21 per common share, payable on February 1, 2008, representing a 49% decrease from the preceding quarter. Quarterly share repurchase activity for the quarter ended December 31, 2007 is included in the “Capital” section of Item 7 of this Form 10-K, and incorporated herein by reference. Information regarding restrictions on dividends is included in the “Capital” section of Item 7 of this Form 10-K, and incorporated herein by reference. Securities authorized for issuance under equity compensation plans is included in Item 12 of this Form 10-K, and incorporated herein by reference.

There have been no recent sales of unregistered securities.

10

Stockholder Return Performance

Set forth below is a line graph comparing the five-year cumulative total return of National City common stock, based on an initial investment of $100 on December 31, 2002 and assuming reinvestment of dividends, with that of the Standard & Poor’s 500 Index (the “S&P 500”) and the KBW50 Index (the “KBW50”). The KBW50 is a market-capitalization weighted bank stock index developed and published by Keefe, Bruyette & Woods, Inc., a nationally recognized brokerage and investment banking firm specializing in bank stocks. The index is composed of 50 of the nation’s largest banking companies.

Five-Year Cumulative Total Return
12/2002-12/2007
National City vs. S&P 500 and KBW50 Index

	2002		2003		2004		2005		2006		2007
National City		100.00		129.42		148.40		138.44		157.23		75.38
S&P 500		100.00		128.63		142.58		149.57		173.14		182.63
KBW50 Index		100.00		134.03		147.50		149.23		178.18		137.16

11

Item 6. SELECTED FINANCIAL DATA

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

	For the Calendar Year
(In Millions, Except Per Share Amounts)	2007(b)			2006(c)			2005			2004(d)			2003			2002			2001			2000			1999			1998			1997
Statements of Income
Interest income:
Loans	$	8,570		$	8,352		$	7,239		$	5,560		$	5,553		$	5,319		$	5,857		$	5,793		$	4,938		$	4,812		$	4,487
Securities		419			414			382			377			355			519			492			715			895			861			825
Other		196			168			111			89			57			63			59			62			80			84			51
Total interest income		9,185			8,934			7,732			6,026			5,965			5,901			6,408			6,570			5,913			5,757			5,363
Interest expense:
Deposits		2,990			2,420			1,605			896			892			1,148			1,778			1,937			1,636			1,846			1,813
Borrowings and long-term debt		1,799			1,910			1,431			697			738			762			1,198			1,671			1,277			999			739
Total interest expense		4,789			4,330			3,036			1,593			1,630			1,910			2,976			3,608			2,913			2,845			2,552
Net interest income		4,396			4,604			4,696			4,433			4,335			3,991			3,432			2,962			3,000			2,912			2,811
Provision for loan losses		1,326			489			300			339			628			661			618			262			250			201			225
Net interest income after provision for loan losses		3,070			4,115			4,396			4,094			3,707			3,330			2,814			2,700			2,750			2,711			2,586
Noninterest income		2,606			4,019			3,304			4,440			3,593			2,548			2,685			2,481			2,381			2,314			1,847
Noninterest expense		5,305			4,711			4,735			4,456			4,063			3,709			3,332			3,209			2,983			3,377			2,793
Income before income taxes		371			3,423			2,965			4,078			3,237			2,169			2,167			1,972			2,148			1,648			1,640
Income taxes		57			1,123			980			1,298			1,120			722			779			670			743			577			518
Net income	$	314		$	2,300		$	1,985		$	2,780		$	2,117		$	1,447		$	1,388		$	1,302		$	1,405		$	1,071		$	1,122
Per Common Share
Diluted net income	$	.51		$	3.72		$	3.09		$	4.31		$	3.43		$	2.35		$	2.27		$	2.13		$	2.22		$	1.61		$	1.71
Dividends declared		1.60			1.52			1.44			1.34			1.25			1.20			1.16			.855			1.085			.97			.86
Dividends paid		1.60			1.52			1.44			1.34			1.25			1.20			1.16			1.14			1.06			.94			.84
Average diluted shares		612.24			617.67			641.60			645.51			616.41			616.17			611.94			612.63			632.45			665.72			655.47
Book value	$	21.15		$	23.06		$	20.51		$	19.80		$	15.39		$	13.35		$	12.15		$	11.06		$	9.39		$	10.69		$	9.75
Tangible book value		12.03			16.73			14.85			14.36			13.47			11.46			10.23			9.09			7.23			8.96			8.86
Market value (close)		16.46			36.56			33.57			37.55			33.94			27.32			29.24			28.75			23.69			36.25			32.88
Financial Ratios
Return on average common equity		2.36	%		17.98	%		15.54	%		24.56	%		23.60	%		18.14	%		19.94	%		21.29	%		22.64	%		15.40	%		18.20	%
Return on average total equity		2.38			18.00			15.55			24.57			23.60			18.14			19.90			21.21			22.56			15.37			18.20
Return on average assets		.22			1.66			1.40			2.23			1.79			1.40			1.49			1.52			1.67			1.34			1.56
Average stockholders’ equity to average assets		9.19			9.21			9.02			9.10			7.57			7.70			7.49			7.17			7.39			8.70			8.57
Dividend payout ratio		313.73			40.86			46.60			31.09			36.44			51.06			51.10			40.14			48.87			60.25			50.29
Net interest margin		3.49			3.75			3.74			4.02			4.08			4.33			4.08			3.85			3.99			4.11			4.37
Net charge-offs to average portfolio loans		.64			.44			.36			.39			.80			.83			.68			.46			.43			.37			.44
Efficiency ratio		75.46			54.45			58.95			50.06			51.07			56.46			54.17			58.60			55.06			64.13			59.42
At Year End
Assets	$	150,374		$	140,191		$	142,397		$	139,414		$	114,102		$	118,153		$	105,905		$	88,618		$	87,121		$	88,246		$	75,779
Portfolio loans		116,022			95,492			106,039			100,271			79,344			72,174			68,058			65,603			60,204			58,011			51,994
Loans held for sale or securitization		4,290			12,853			9,667			12,430			15,368			24,501			16,831			3,439			2,731			3,508			1,250
Securities		8,731			7,509			7,875			8,765			6,525			8,675			9,479			9,597			14,565			15,813			13,651
Deposits		97,555			87,234			83,986			85,955			63,930			65,119			63,130			55,256			50,066			58,247			52,617
Long-term debt		27,892			26,356			30,970			28,696			23,666			22,730			17,316			18,145			15,038			9,689			6,297
Total stockholders’ equity		13,408			14,581			12,613			12,804			9,329			8,161			7,381			6,770			5,728			7,013			6,158
Common shares outstanding		633.95			632.38			615.05			646.75			606.00			611.49			607.35			609.19			607.06			652.65			631.39

(a)	Years prior to 2000 reflect restatements, where applicable, for stock splits and pooling-of-interests business combinations.
(b)	Results for 2007 include the acquisitions of Fidelity Bankshares, Inc. and MAF Bancorp, Inc. Refer to Note 3 of the Consolidated Financial Statements for further details.
(c)	Results for 2006 include the acquisitions of Forbes First Financial Corporation and Harbor Florida Bancshares, Inc., and the sale of First Franklin. Refer to Note 3 of the Consolidated Financial Statements for further details.
(d)	Results for 2004 include the acquisitions of Allegiant Bancorp Inc., Provident Financial Group Inc., and Wayne Bancorp, and the sale of National Processing, Inc.

12

Item 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This 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 on pages 60 through 137.

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, including the stock market and residential and commercial real estate markets; changes in interest rates; the timing, pricing, and effects on National City of Visa’s initial public offering; 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.

Overview

Other than mortgage banking, the Corporation’s businesses — commercial banking, retail banking, and wealth management — performed well in 2007. Core deposit and loan growth were strong, as were most fee income categories. Mortgage results were adversely affected by market conditions as well as declining credit quality in residential real estate loan portfolios. Restructuring and other nonrecurring charges also affected 2007 results.

Declining real estate values put pressure on certain consumers with loans or lines of credit secured by residential real estate. Higher levels of delinquencies, nonperforming assets and charge-offs occurred in loans secured by residential real estate, particularly nonprime mortgage loans, broker-sourced home equity loans and residential construction loans. These factors led to higher actual and expected probable losses on these loans. The provision for loan losses was $1.3 billion in 2007 versus $489 million in 2006 and $300 million in 2005. Management believes the weakness in the housing market will likely persist into 2008. As such, these credit trends are expected to continue in the near term.

In the last half of 2007, the capital markets for sale of mortgage loans and lines of credit experienced severe disruption. As a result, the Corporation was unable to sell certain mortgage loans that had been originated for sale. Fair value write-downs occurred on these loans due to declines in market values, failed trades and trade fallout. As a result, a net loan sale loss of $(38) million was recognized in 2007 versus loan sale revenues of $766 million in 2006 and $808 million in 2005. In response to these conditions, management restructured its mortgage business, transferred nonsalable loans to its loan portfolio, and scaled back origination of certain products and staffing levels. Severance and other restructuring costs were incurred in 2007 to complete these actions. As a result, the mortgage business will be smaller, but likely more stable, in future periods.

National City, as a member of the Visa network, is obligated to indemnify Visa for certain litigation losses. In 2007, the Corporation recognized indemnity charges of approximately $289 million related to this obligation. Visa is preparing for an initial public offering (IPO) of its common stock in 2008. Upon the anticipated completion of the IPO in 2008, the Corporation expects to recognize gains on its interest in Visa which should more than exceed the charges taken in 2007.

The size of the Consolidated Balance Sheet grew in 2007, as loans originally intended for sale were transferred to portfolio. The larger balance sheet, combined with the losses in the mortgage business, restructuring and other unusual charges, reduced the capital position below management’s internal target ranges. Management has initiated a plan to increase liquidity and the Corporation’s capital levels in 2008. See further discussion in the Liquidity Risk section.

13

Consolidated Average Balance Sheets

	Daily Average Balance
(Dollars in Millions)	2007			2006			2005			2004			2003
Assets
Earning Assets:
Loans(a):
Commercial	$	28,519		$	25,458		$	23,748		$	20,107		$	19,865
Commercial leases		4,168			3,566			3,171			2,024			1,538
Commercial construction		8,151			6,286			4,264			3,062			2,383
Commercial real estate		13,800			12,173			12,231			11,326			9,483
Residential real estate		34,877			37,491			41,488			40,395			45,932
Home equity lines of credit		17,533			19,533			21,122			14,743			9,293
Credit card and other unsecured lines of credit		3,376			2,750			2,523			2,286			2,155
Other consumer		4,908			5,680			7,818			7,659			8,059
Total loans		115,332			112,937			116,365			101,602			98,708
Securities available for sale, at amortized cost
Taxable		7,471			7,270			7,134			7,033			6,195
Tax-exempt		409			531			625			665			669
Total securities available for sale		7,880			7,801			7,759			7,698			6,864
Federal funds sold and security resale agreements, and other investments		3,397			2,803			2,100			1,621			1,326
Total earning assets/total interest income/rates		126,609			123,541			126,224			110,921			106,898
Allowance for loan losses		(1,192	)		(1,007	)		(1,143	)		(1,101	)		(1,028	)
Fair value (depreciation) appreciation of securities available for sale		(22	)		(68	)		72			150			257
Nonearning assets		18,164			16,212			16,403			14,433			12,398
Total Assets	$	143,559		$	138,678		$	141,556		$	124,403		$	118,525
Liabilities and stockholders’ equity
Interest bearing liabilities:
NOW and money market	$	34,769		$	28,900		$	28,589		$	28,897		$	25,378
Savings		2,540			1,970			2,361			2,583			2,423
Consumer time deposits		26,632			21,711			18,662			14,875			13,729
Other deposits		3,590			5,512			6,087			3,062			2,752
Foreign deposits		8,095			8,553			8,787			8,946			7,002
Federal funds borrowed		1,894			2,886			4,021			4,920			7,895
Security repurchase agreements		4,133			3,487			3,317			2,918			3,013
Borrowed funds		2,185			2,201			2,253			1,477			1,556
Long-term debt		25,657			30,013			32,752			24,028			24,854
Total interest bearing liabilities/total interest expense/rates		109,495			105,233			106,829			91,706			88,602
Noninterest bearing deposits		16,824			16,814			18,257			17,763			17,203
Accrued expenses and other liabilities		4,040			3,852			3,705			3,618			3,748
Total liabilities		130,359			125,899			128,791			113,087			109,553
Total stockholders’ equity		13,200			12,779			12,765			11,316			8,972
Total liabilities and stockholders’ equity	$	143,559		$	138,678		$	141,556		$	124,403		$	118,525
Net interest income
Interest spread
Contribution of noninterest bearing sources of funds
Net interest margin

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

14

Interest										Average Rate
2007		2006		2005		2004		2003		2007			2006			2005			2004			2003
$	2,151	$	1,927	$	1,388	$	809	$	733		7.54	%		7.57	%		5.84	%		4.02	%		3.69	%
	289		231		201		127		85		6.94			6.49			6.35			6.28			5.54
	617		490		272		141		107		7.56			7.79			6.38			4.62			4.50
	982		880		778		648		581		7.12			7.23			6.36			5.72			6.13
	2,493		2,699		2,678		2,569		2,960		7.15			7.20			6.45			6.36			6.44
	1,339		1,455		1,194		581		355		7.64			7.45			5.65			3.94			3.81
	381		308		251		200		173		11.28			11.19			9.93			8.73			8.01
	337		378		493		496		569		6.86			6.65			6.31			6.48			7.07
	8,589		8,368		7,255		5,571		5,563		7.45			7.41			6.23			5.48			5.64
	399		389		352		345		322		5.34			5.35			4.93			4.90			5.19
	29		37		45		49		51		7.07			7.07			7.27			7.36			7.68
	428		426		397		394		373		5.43			5.47			5.12			5.11			5.43
	197		170		111		88		58		5.79			6.05			5.28			5.46			4.35
$	9,214	$	8,964	$	7,763	$	6,053	$	5,994		7.28	%		7.26	%		6.15	%		5.46	%		5.61	%
$	1,092	$	798	$	488	$	252	$	257		3.14	%		2.76	%		1.71	%		.87	%		1.01	%
	32		11		10		9		11		1.26			.59			.44			.35			.45
	1,291		936		642		467		506		4.85			4.31			3.44			3.14			3.69
	189		276		203		50		34		5.26			5.00			3.33			1.64			1.23
	386		399		261		118		84		4.77			4.66			2.97			1.32			1.20
	98		147		134		71		114		5.18			5.08			3.34			1.45			1.44
	174		138		76		23		19		4.22			3.96			2.28			.78			.63
	109		103		68		15		18		4.97			4.67			3.01			1.03			1.20
	1,418		1,522		1,154		588		587		5.52			5.07			3.52			2.45			2.36
$	4,789	$	4,330	$	3,036	$	1,593	$	1,630		4.37	%		4.11	%		2.84	%		1.74	%		1.84	%
$	4,425	$	4,634	$	4,727	$	4,460	$	4,364
											2.91	%		3.15	%		3.31	%		3.72	%		3.77	%
											.58			.60			.43			.30			.31
											3.49	%		3.75	%		3.74	%		4.02	%		4.08	%

15

Net Interest Income

Net interest income is the difference between interest income on earning assets, such as loans and securities, and 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. Net interest income is evaluated 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 the percentage of net interest income to average earning assets. Because noninterest bearing sources of funds, 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 2007, 2006, and 2005 were $29 million, $30 million, and $31 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 derivative instruments is included in Notes 1 and 25 to the Consolidated Financial Statements. A discussion of the effects of changing interest rates is included in the Market Risk section beginning on page 42.

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 decrease in net interest income in 2007 compared to 2006 is a result of a lower margin partially offset by higher average earning assets. The lower margin in 2007 compared to 2006 reflects higher funding costs, primarily LIBOR-based funding, associated with a larger than expected balance sheet, narrower spreads on commercial and consumer loans, and lower levels of noninterest bearing funds. The decrease in net interest income in 2006 compared to 2005 resulted primarily from a decrease in average earning assets as a result of the decision to originate and sell out-of-footprint, broker-sourced nonprime mortgage loans and home equity lines and loans. The net interest margin in 2006 was relatively consistent with the prior year despite pressure on lending and deposit spreads due to a higher contribution from noninterest bearing sources of funds.

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.

16

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.

	2007 vs 2006									2006 vs 2005
(In Millions)	Volume			Rate			Net Change			Volume			Rate		Net Change
Increase (decrease) in tax-equivalent interest income
Loans:
Commercial	$	233		$	(9	)	$	224		$	100		$	439	$	539
Commercial leases		39			19			58			25			5		30
Commercial construction		146			(19	)		127			129			89		218
Commercial real estate		117			(15	)		102			(4	)		106		102
Residential real estate		(189	)		(17	)		(206	)		(236	)		257		21
Home equity lines of credit		(149	)		33			(116	)		(90	)		351		261
Credit card and other unsecured lines of credit		70			3			73			23			34		57
Other consumer		(51	)		10			(41	)		(134	)		19		(115	)
Securities available for sale		8			(6	)		2			2			27		29
Federal funds sold, security resale agreements, and other investments		36			(9	)		27			37			22		59
Total	$	260		$	(10	)	$	250		$	(148	)	$	1,349	$	1,201
Increase (decrease) in interest expense
Deposits:
NOW and money market accounts	$	162		$	132		$	294		$	5		$	305	$	310
Savings accounts		3			18			21			(2	)		3		1
Consumer time deposits		211			144			355			105			189		294
Purchased deposits		(114	)		14			(100	)		(25	)		236		211
Federal funds borrowed, security repurchase agreements, and borrowed funds		(19	)		12			(7	)		(29	)		139		110
Long-term debt		(217	)		113			(104	)		(96	)		464		368
Total	$	26		$	433		$	459		$	(42	)	$	1,336	$	1,294
Decrease in tax-equivalent net interest income							$	(209	)						$	(93	)

Noninterest Income

Details of noninterest income follow:

(In Millions)	2007			2006			2005
Deposit service charges and fees	$	905		$	818		$	740
Loan sale revenue		(38	)		766			808
Loan servicing revenue		402			91			399
Trust and investment management fees		318			301			296
Brokerage revenue		189			158			159
Leasing revenue		178			228			267
Other service fees		143			139			129
Insurance revenue		133			129			103
Card-related fees		125			109			105
Principal investment gains, net		96			118			57
Securities gains		22			—			27
Derivatives (losses)/gains		—			(7	)		64
Gain on divestitures		16			984			16
Other		117			185			134
Total noninterest income	$	2,606		$	4,019		$	3,304

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Deposit service revenue increased by $87 million, or 11%, compared to 2006 and by $165 million, or 22%, compared to 2005. The growth in deposit service revenue reflects growth in deposit accounts and fee-generating transactions including customer overdraft, nonsufficient funds, and debit card fees. Core deposits, excluding escrow funds, grew to $84.1 billion at December 31, 2007, up from $69.6 billion at December 31, 2006, and $64.8 billion at December 31, 2005. The increase reflects both internal growth and acquisitions.

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

(In Millions)	2007			2006		2005
Residential real estate	$	(85	)	$	590	$	752
Commercial loans		46			90		47
Other consumer loans		1			86		9
Total loan sale revenue	$	(38	)	$	766	$	808

During the last half of 2007, the markets for sale of many mortgage and home equity loans were disrupted. Potential buyers withdrew from the market given heightened concerns over credit quality of borrowers and continued deterioration in the housing markets. In response to these conditions, management curtailed the production of non-agency eligible mortgage and home equity products and transferred certain nonsalable loans to portfolio. Residential real estate loan production is now limited to agency-eligible mortgages.

Residential real estate loan sales produced a loss in 2007 due to net losses realized upon sale and fair value write-downs on loans held for sale. Profitability of residential real estate loan sales was adversely affected by a market imbalance between supply and demand for certain types of mortgage loans, higher trade fallout, and higher losses on scratch and dent sales. Margins realized on sales of prime mortgage loans were (.07)% in 2007 versus 1.01% in 2006 and .85% in 2005. Fair value write-downs recognized on mortgage loans held for sale were $216 million in 2007 and $67 million in 2006, with no such write-downs in 2005. Fair value was estimated based on market prices for recent sales of similar loans, along with pricing information received from potential third-party investors, taking into consideration loan specific delinquency and underwriting deficiencies, as well as other market observations. Residential real estate loans originated for sale decreased in 2007 due to the above factors, as well as the sale of the former First Franklin nonprime mortgage unit in late 2006. Loan sale revenue associated with First Franklin was $201 million in 2006 and $264 million in 2005, respectively.

Commercial loan sale revenue decreased in 2007 due to a lower volume of sales, as well as a $27 million nonrecurring gain on sale of certain commercial leases in the prior year.

Other consumer loan sales include home equity lines of credit, credit card, and student loans. Other consumer loan revenue decreased in 2007 compared to 2006 due to net losses on sales of home equity lines of credit. The markets for sale of home equity lines of credit were disrupted in 2007 as described above. As a result, the Corporation ceased production of home equity lines of credit through brokers. As of December 31, 2007, all home equity lines of credit that had been originated for sale had either been sold or transferred to portfolio. Prior to such transfer, fair value write-downs of $9 million were recognized to reduce the carrying value of these lines to their estimated market value. Other consumer loan revenue increased in 2006 compared to 2005 due to the decision made during 2005 to begin selling all new production of out-of-footprint, broker-originated home equity lines of credit. In addition, other consumer loan sale revenue for 2005 included a $29 million loss on the securitization of indirect automobile loans. The Corporation no longer originates indirect automobile loans.

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

(In Millions)	2007		2006			2005
Residential real estate	$	226	$	(73	)	$	302
Other consumer loans		164		154			86
Commercial		12		10			11
Total loan servicing revenue	$	402	$	91		$	399

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

(In Millions)	2007			2006			2005
Net contractual servicing fees	$	534		$	625		$	532
Servicing asset time decay and payoffs(a)		(344	)		(404	)		(505	)
MSR hedging gains (losses):
Servicing asset valuation changes		60			(2	)		472
Losses on hedging instruments		(24	)		(292	)		(197	)
Net MSR hedging gains (losses)		36			(294	)		275
Total residential real estate servicing revenue (loss)	$	226		$	(73	)	$	302

(a)  Prior to January 1, 2006, time decay and payoffs were characterized as amortization of servicing assets.

The Corporation typically retains the right to service the mortgage loans it sells. Upon sale, the Corporation recognizes a mortgage servicing right (MSR), which represents the present value of the estimated net servicing cash flows to be realized over the estimated life of the underlying loan. The carrying value of MSRs was $2.5 billion at December 31, 2007 and $2.1 billion at December 31, 2006, respectively. On December 30, 2006, the Corporation’s nonprime mortgage servicing platform, National City Home Loan Services (NCHLS) and associated servicing assets of $223 million were sold. Residential real estate servicing revenue included NCHLS servicing revenue of $64 million in 2006 and $19 million in 2005.

Net contractual servicing fees decreased in 2007 as the 2006 amount included $126 million of fees associated with the NCHLS servicing platform. Excluding fees associated with NCHLS, net contractual servicing fees increased as compared to 2006 due to growth in the mortgage loan portfolio serviced for others. The unpaid principal balance associated with National City Mortgage (NCM) loans serviced for others was $179.4 billion and $162.3 billion at December 31, 2007 and 2006, respectively. Servicing asset time decay and payoffs represent the decrease in the MSR value due to the passage of time from both payoffs and regularly scheduled loan principal payments. Payoffs slowed in 2007 compared to prior years due to rising interest rates.

Net MSR hedging gains were $36 million in 2007, compared to losses of $294 million in 2006, and gains of $275 million in 2005. In 2006, the Corporation implemented a new prepayment forecasting model, which increased net MSR hedging losses by $56 million. In prior periods, a third-party model was utilized to forecast loan prepayments. Both models utilize empirical data drawn from the historical performance of the Corporation’s managed portfolio. However, the new model considers more loan characteristics in estimating future prepayment rates. In 2005, changes in the MSR valuation model increased loan servicing income by $39 million. Net MSR hedging gains and losses associated with the NCHLS servicing assets were not significant.

The value of MSRs is sensitive to changes in interest rates. In a low rate environment, mortgage loan refinancings typically 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 typically 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 using derivative instruments and securities. Unrealized net gains associated with derivatives utilized to hedge MSRs were $146 million as of December 31, 2007. The ultimate realization of these gains can be affected by changes in interest rates, which may increase or decrease the ultimate cash settlement of these instruments.

Other consumer loans servicing revenue increased in 2007 compared to the prior two years due to growth in the serviced portfolio resulting primarily from recent loan sales and securitizations where the Corporation retained servicing rights. The Corporation began selling home equity lines of credit and home equity loans, on a servicing retained basis, in late 2005 and mid 2006, respectively. Servicing revenue was low in 2005 due to the effect of consumer bankruptcies on securitized credit cards.

Brokerage revenue increased compared to the prior two years due to higher commissions and lower trading losses. Leasing revenue declined in 2007 due to continued runoff of the leased automobile portfolio, which more than offset growth in the commercial leasing portfolio.

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Card-related fees for 2007 increased by 15% compared to 2006 and 19% compared to 2005, mainly due to interchange fees driven by higher transaction volumes.

Principal investments represent direct investments in private and public companies and indirect investments in private equity funds. Principal investment gains include both market value adjustments and realized gains from sales of these investments, and can vary from year to year due to changes in fair value and decisions to sell versus hold various investments. Principal investment gains were lower in 2007 compared to the prior year due to a decrease in performance and lower realized gains on sale. Principal investment gains were higher in 2006 than 2005 due to better performance and higher realized gains on sale.

Derivative gains/(losses) include certain ineffective hedge gains/(losses) on derivatives designated as SFAS 133 qualifying hedges, and fair value adjustments on derivatives not designated as SFAS 133 qualifying hedges. These derivatives are held for trading purposes, to hedge the fair value of certain recognized assets and liabilities, and to hedge certain forecasted cash flows. Derivatives used to hedge mortgage loans held for sale and MSRs are presented within loan sale revenue and loan servicing revenue, respectively. In 2007 net gains were recognized on derivatives held for trading purposes. These net gains were offset by net losses due to fair value write-downs recognized on derivatives held for interest-rate risk management purposes which are not designated as SFAS 133 qualifying hedges.

Gain on divestitures for 2007 reflects the sale of three branches located in western Illinois. In 2006, the Corporation sold its First Franklin nonprime mortgage origination and related servicing platform for a realized gain of $984 million. The 2005 amount reflects the sale of Madison Bank & Trust.

Net security gains/(losses) and their effect on diluted net income per share are shown in the following table:

(In Millions, Except Per Share Amounts)	2007			2006			2005
Net gains/(losses):
Equity securities	$	(4	)	$	5		$	13
Debt securities		26			(5	)		14
Net pretax gains		22			—			27
Tax provision		8			—			7
Effect on net income	$	14		$	—		$	20
Effect on diluted net income per share	$	.02		$	—		$	.03

In 2007, the loss on equity securities represents an other-than-temporary impairment on FNMA and FHLMC perpetual preferred securities. In prior years, equity securities gains were primarily associated with an internally managed portfolio of bank and thrift common stock investments. Debt securities gains/(losses) arise from the fixed income investment portfolio maintained for balance sheet management purposes. During 2007, certain fixed income investments used for balance sheet management purposes were sold, resulting in a realized gain.

There were no significant unusual items in other noninterest income in 2007 or 2005. Other noninterest income for 2006 included $36 million of income related to the release of a chargeback guarantee liability associated with a now-terminated credit card processing agreement.

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Noninterest Expense

Details of noninterest expense follow:

(In Millions)	2007		2006		2005
Salaries, benefits, and other personnel	$	2,580	$	2,604	$	2,560
Impairment, fraud & other losses		614		51		91
Third-party services		357		352		332
Equipment		335		326		303
Net occupancy		315		298		316
Marketing and public relations		157		148		165
Postage and supplies		146		140		143
Leasing expense		119		165		179
Insurance		89		112		60
Intangible asset amortization		81		47		52
State and local taxes		77		51		74
Travel and entertainment		77		77		85
Telecommunications		70		75		82
Card processing		32		28		21
Other		256		237		272
Total noninterest expense	$	5,305	$	4,711	$	4,735

Comparisons of 2007 to prior years are affected by acquisitions which resulted in higher personnel costs, intangibles amortization and integration costs, as well as other unusual items discussed below. Acquisition integration costs were $68 million in 2007, $12 million in 2006, and $45 million in 2005.

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

(Dollars in Millions)	2007			2006			2005
Salaries and wages	$	1,434		$	1,424		$	1,422
Incentive compensation		696			811			809
Deferred personnel costs		(302	)		(403	)		(457	)
Contract labor		157			172			199
Payroll taxes		150			161			156
Medical and other benefits		137			154			144
Retirement plans		116			110			113
Stock-based compensation		76			68			57
Deferred compensation		(1	)		42			16
Severance		83			30			61
Other personnel costs		34			35			40
Total salaries, benefits, and other personnel	$	2,580		$	2,604		$	2,560
Full-time-equivalent employees at year end		32,064			31,270			34,270

Salaries, benefits, and other personnel costs decreased slightly in 2007 compared to 2006. Incentive compensation decreased based on lower mortgage loan originations, primarily from the sale of the First Franklin nonprime mortgage origination unit at the end of 2006. Deferred personnel costs decreased for the same reasons. Deferred compensation costs, which represent market value adjustments on deferred compensation liabilities, decreased in 2007 due to a decrease in the investment indices used to value these obligations. Severance costs increased in 2007 as a result of mortgage restructuring actions and reductions in corporate staff units. Contract labor decreased in 2007 from 2006 as a result of reduced mortgage production and general cost cutting. Medical and other benefits decreased in 2007 compared to 2006 as a result of a reduction in claims processed due to reduced staffing and the introduction of high deductible plans.

Salaries, benefits, and other personnel costs were relatively flat in 2006 compared to 2005. Deferred personnel costs decreased as a result of lower mortgage loan originations, which more than offset the increase in capitalized labor for internally developed software. Contract labor costs were lower in 2006 versus 2005 as the prior year included expenses related to contract programmers hired to develop new systems and temporary help engaged in acquisition integration

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activities. Market valuation adjustments on deferred compensation liabilities increased compared to 2005 due to increases in the investment indices used to value these obligations. Severance costs were lower in 2006 as 2005 included a $43 million charge related to the elimination of a number of management positions.

Impairment, fraud, and other losses increased in 2007 compared to 2006 and 2005. The Corporation recorded $289 million in indemnification charges in 2007 for its obligation as a Visa member with respect to Visa’s third-party litigation. The restructuring and downsizing of the mortgage business led to a goodwill impairment charge of $181 million and asset impairment charges of $44 million in 2007. A litigation settlement for $25 million also contributed to higher losses in 2007. There were no unusual items recorded in 2006. Impairment, fraud and other losses for 2005 included an $18 million impairment charge on several underutilized buildings which were sold.

Equipment costs increased in 2007 compared to 2006 due to technology and software upgrades as well as costs associated with recent acquisitions. Equipment costs increased in 2006 compared to 2005 due to increases in maintenance contract costs, software license fees, and technology upgrade costs.

Net occupancy costs increased in 2007 compared to 2006 due to higher depreciation expense, building operating costs, and maintenance expenses as a result of recent acquisitions. Net occupancy expense decreased in 2006 compared to the prior year due to a $29 million one-time adjustment for lease accounting in 2005.

Marketing and public relations increased in 2007 compared to 2006 as a result of increased Internet advertising, as well as print, radio and outdoor advertisements in new markets, primarily Florida. Marketing and public relations decreased in 2006 as 2005 included contributions of appreciated securities to the Corporation’s charitable foundation in the amount of $30 million, with no similar contributions in either 2007 or 2006. Partially offsetting this decrease were higher advertising costs during 2006 associated with promoting loan and deposit products, along with the points from National City ^® rewards program. Leasing expense decreased in 2007 compared to 2006 and 2005 as a result of a lower portfolio of equipment leased to others. The leased automobile portfolio continues to liquidate.

Insurance expense decreased in 2007 compared to 2006 due to lower private mortgage insurance costs on liquidating residential real estate and consumer loan portfolios. Insurance expense increased in 2006 compared to 2005 due to an increased percentage of insured mortgage and consumer loans.

Intangible asset amortization increased in 2007 compared to 2006 and 2005 related to core deposits amortization related to recent acquisitions, primarily Fidelity and MAF. Intangible asset amortization decreased in 2006 compared to 2005 as certain intangible assets reached the end of their amortization period.

State and local nonincome tax expense was lower in 2006 than either 2007 or 2005 mainly to reversals of previously established reserves that were no longer required.

The increase in other noninterest expense in 2007 compared to 2006 was due to higher costs associated with foreclosure properties of $55 million due to fair value write-downs and losses on disposition as well as, increased foreclosure expenses. Other noninterest expense decreased in 2006 compared to the prior year due to $24 million of lower foreclosure losses and $9 million of lower minority ownership expenses.

The efficiency ratio, equal to noninterest expense as a percentage of tax-equivalent net interest income and total fees and other income, was 75.46% in 2007, 54.45% in 2006, and 58.95% in 2005. The higher efficiency ratio in 2007 compared to 2006 was the result of the large impairment and other losses mentioned above, combined with lower noninterest income, driven by lower loan sale revenues and lower gains on divestitures. The lower efficiency ratio in 2006 was primarily related to higher noninterest income which reflects higher loan sale revenue and the gain on sale of First Franklin.

Income Taxes

The effective tax rate was 15% in 2007 versus 33% in both 2006 and 2005. The lower tax rate in 2007 resulted from fixed amounts of favorable tax credits and other adjustments representing a larger percentage of income tax expense in

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2007 due to lower earnings. The tax provisions for 2007, 2006, and 2005 included net tax benefits of $5 million, $23 million and $7 million, respectively, related to the reorganization of certain subsidiaries, the resolution of certain tax contingencies as well as federal and state audit claims, and provision true-ups associated with the completion of the actual tax returns. A reconciliation of the effective tax rate to the statutory rate is included in Note 21.

Line of Business Results

The Corporation’s businesses are organized by product and service offerings as well as the distribution channels through which these products and services are offered. Effective January 1, 2007, the Corporation implemented a reorganization of its management structure resulting in the following five reportable segments: Retail Banking, Commercial Banking-Regional, Commercial Banking-National, Mortgage Banking, and Asset Management. Further discussion of the activities of each of these businesses is presented in Note 27. All revenues and expenses not directly associated with or allocated to these segments are reported within Parent and Other. Parent and Other also includes revenues and expenses associated with discontinued products or services and exited businesses, including the former First Franklin unit and the related liquidating portfolio.

Summary results of operations and related discussion for each business follows. Net interest income is presented on a tax-equivalent basis in the tables below. Comparisons of current year results to prior periods are affected by recent acquisition and divestiture activities, as well as unusual or nonrecurring transactions as described below.

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

(In Millions)	2007		2006		2005
Net interest income	$	2,304	$	1,996	$	1,906
Provision for loan losses		289		183		252
Noninterest income		1,189		1,060		955
Noninterest expense		2,020		1,733		1,607
Net income		716		700		616

Net interest income increased in 2007 due to growth in average outstanding loans and deposits, partially offset by lower loan spreads. Average loans outstanding were $25.1 billion in 2007, $21.9 billion in 2006 and $21.4 billion in 2005. Average core deposits were $65.9 billion for 2007, $55.2 billion for 2006, and $52.6 billion for 2005. Both loans and deposits grew from expansion of customer relationships, new customers, and acquisitions. Net interest margin was 3.23% in 2007, down compared to the prior two years due primarily to narrower spreads on loans. The provision for loan losses increased compared to 2006 due primarily to growth in the loan portfolio. In addition, 2006 benefited from lower credit losses following the change in consumer bankruptcy laws in late 2005, as well as enhancements to the process of estimating losses on other consumer revolving credit. Noninterest income increased in 2007 due to higher deposit and other service fees, as well as higher brokerage revenue. The growth in deposit service fees reflects a higher volume of fee-generating transactions due to household growth and acquisitions. The increase in brokerage revenue reflects higher business volumes. Noninterest income for 2007 included a $16 million gain realized on the sale of three branches. A similar gain was realized on branch sales in 2005. Noninterest expense increased in 2007 due to higher personnel and other operating expenses associated with increased business volumes.

Commercial Banking-Regional: This business provides banking products and services to large- and medium-sized companies within National City’s nine-state footprint.

(In Millions)	2007		2006		2005
Net interest income	$	1,099	$	1,076	$	1,034
Provision (benefit) for loan losses		134		68		(11	)
Noninterest income		234		222		216
Noninterest expense		547		513		474
Net income		402		443		486

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Net interest income increased compared to the prior two years due to growth in loans outstanding. Average loans outstanding were $33.2 billion in 2007, $29.9 billion in 2006, and $28.2 billion in 2005. Net interest margin was 3.02% in 2007, down from the prior two years due to narrower loan spreads. The provision for loan losses increased in 2007 primarily due to growth in the loan portfolio and higher probable credit losses associated with loans to regional residential real estate developers. Noninterest income increased compared to the prior two years due primarily to higher deposit and commercial card fees. Noninterest expense increased in 2007 compared to the prior two years primarily due to higher personnel costs and other expenses associated with higher business volumes.

Commercial Banking-National: This business provides banking products and services to targeted customer segments in selected industries or distribution channels, as well as to corporate customers outside of National City’s branch footprint.

(In Millions)	2007		2006		2005
Net interest income	$	474	$	456	$	452
Provision for loan losses		59		3		2
Noninterest income		472		525		385
Noninterest expense		432		406		330
Net income		286		372		316

Net interest income increased in 2007 on higher loans outstanding. Average loans outstanding were $15.4 billion in 2007, $13.0 billion in 2006 and $10.9 billion in 2005. Net interest margin was 2.68% in 2007, down compared to the prior two years due to narrower spreads on loans. The provision for loan losses increased in 2007 which largely reflects higher probable credit losses for national residential real estate developers, as well as growth in the portfolio. Noninterest income decreased in 2007 compared to 2006 due to lower loan sales and principal investment gains, partially offset by higher brokerage revenue. Loan sale revenue for 2006 included a $27 million gain on sale of commercial leases. Principal investments gains were $96 million in 2007 compared to $122 million in 2006. Noninterest income increased compared to 2005 due primarily to higher business volumes and the aforementioned principal investment gains. Noninterest expense increased in 2007 compared to the prior year due to higher personnel costs and operating expenses associated with new business.

Mortgage Banking: This business originates residential mortgages, home equity loans, and home equity lines of credit within National City’s banking footprint and on a nationwide basis. During 2007, unprecedented disruption occurred in the capital markets resulting in an inability to sell many nonagency eligible mortgage and home equity products. In response to these conditions, management ceased production of mortgage loans, home equity loans and home equity lines of credit originated by brokers. Nonsalable mortgage loans, previously held for sale, were transferred to portfolio. The Mortgage Banking segment reported a net loss in 2007 due to these adverse market conditions, restructuring activities, and the settlement of certain litigation.

(In Millions)	2007			2006		2005
Net interest income	$	663		$	607	$	720
Provision for loan losses		579			75		58
Noninterest income		211			365		833
Noninterest expense		1,086			805		843
Net (loss) income		(541	)		58		419

Net interest income increased in comparison to 2006 due to higher average loans outstanding, but decreased compared to 2005 due to lower loan spreads and higher nonperforming assets. Average loans outstanding were $28.1 billion in 2007, $22.6 billion in 2006 and $25.6 billion in 2005. Average loans outstanding grew in 2007 due to disruptions in the markets for certain mortgage products which resulted in the transfer of $7.2 billion of formerly held for sale loans to portfolio. Net interest margin was 2.10% in 2007, down compared to the prior two years due to narrower loan spreads. The higher provision for loan losses in 2007 reflects higher estimated probable credit losses, particularly for residential construction loans and broker-sourced home equity loans and lines of credit. Delinquencies, nonperforming assets and net charge-offs have all increased in comparison to prior years. Declining real estate values have adversely affected the ability of these borrowers to repay their loans.

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Noninterest income decreased in comparison to the prior two years due to adverse mortgage market conditions. Net loan sale losses were $(90) million in 2007, versus loan sale revenue of $441 million in 2006 and $551 million in 2005. Fair value write-downs of $197 million were recognized in 2007 on loans held for sale due to deteriorating market values, failed trades and trade fallout. Loan servicing revenue/(loss) was $276 million in 2007, compared to $(109) million in 2006, and $283 million in 2005. The unpaid principal balance associated with loans serviced for others grew to $189.4 billion at December 31, 2007, up from $169.4 billion at December 31, 2006 and $160.9 billion at December 31, 2005. Included within loan servicing revenue were net MSR hedging gains/(losses) of $36 million in 2007, $(276) million in 2006 and $286 million in 2005. Net MSR hedging results are affected by changes in the relationship between mortgage rates, which affect the value of MSRs, and swap rates, which affect the value of some of the derivatives used to hedge MSRs. During 2007, this spread widened in comparison to the prior year. In 2006, net MSR hedging losses for 2006 included a $56 million fair value write-down associated with implementing a new prepayment model. In 2005, changes in the MSR valuation model increased net MSR hedging gains by $39 million.

Noninterest expense increased in 2007 due to goodwill and other asset impairment charges of $224 million, severance costs of $36 million, and settlement of litigation for $25 million. In the last half of 2007, restructuring of this business reduced staffing to 5,859 employees down from 7,289 employees a year ago.

Effective January 1, 2006, the Corporation prospectively changed its internal methodology for assigning interest credit on mortgage escrow accounts from a short-term rate to a longer-term swap rate to better reflect the duration of these accounts. Had this same methodology been applied in 2005, net income would have been higher by approximately $16 million.

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

(In Millions)	2007		2006		2005
Net interest income	$	139	$	130	$	118
Provision for loan losses		12		3		8
Noninterest income		376		353		344
Noninterest expense		343		322		326
Net income		100		98		80

Net interest income increased compared to 2006 and 2005 due to higher average loans and deposits. Average outstanding loans were $3.8 billion in 2007, $3.4 billion in 2006, and $3.1 billion in 2005. Average core deposits were $2.8 billion in 2007, $2.0 billion in 2006, and $1.9 billion in 2005. Net interest margin was 3.36% for 2007, down compared to the prior two years due to narrower spreads on both loans and deposits. The provision for loan losses increased in 2007 due to a few problem accounts and higher loan balances. In addition, the 2006 provision for loan losses was low due to enhancements in the process of estimating credit losses on consumer revolving loans. Noninterest income increased in 2007 due to higher trust and investment management fees, and to a lesser extent, higher brokerage revenues. Noninterest expense increased in 2007 on higher personnel costs associated with increased business volumes. Assets under administration grew to $114.8 billion at December 31, 2007, up from $112.2 billion at December 31, 2006.

Parent and Other: Parent and Other includes the results of investment funding activities, liquidating portfolios associated with certain discontinued businesses, unallocated corporate income and expense, intersegment revenue and expense eliminations, and reclassifications. Parent and Other also includes the historical operating results of the former First Franklin nonprime mortgage origination and servicing platform, as well as acquisition integration costs and other unusual or infrequently occurring items.

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(In Millions)	2007			2006		2005
Net interest (expense) income	$	(254	)	$	369	$	496
Provision (benefit) for loan losses		252			156		(9	)
Noninterest income		124			1,494		571
Noninterest expense		878			933		1,154
Net (loss) income		(649	)		629		68

Net interest expense occurred in 2007 versus net interest income in the prior two years due to higher debt and funding costs exceeding the net interest income from liquidating portfolios. Average loans outstanding were $9.8 billion in 2007, $22.1 billion in the preceding year, and $27.3 billion two years ago. The provision for loan losses in this segment includes estimated probable credit losses on the nonprime mortgage loan portfolio, eliminations of provisions recognized in other segments on securitized loans, and the reclassification of the provision for reinsurance losses which is recorded in noninterest expense within the Retail Banking segment. The higher provision for credit losses in 2007 reflects continued deterioration in the credit quality of the nonprime mortgage loan portfolio.

Noninterest income for 2006 included a $984 million pretax gain on the sale of the Corporation’s former First Franklin unit. In addition, First Franklin contributed $264 million and $283 million to noninterest income in 2006 and 2005, respectively. There was no similar revenue in 2007 results as this unit was sold in late 2006. Fair value write-downs on nonprime mortgage loans held for sale were $23 million in 2007, $85 million in 2006, with no such losses in 2005. The release of a chargeback guarantee liability in 2006 benefited noninterest income by $36 million while the securitization of indirect automobile loans in 2005 reduced noninterest income by $29 million.

Noninterest expense in 2007 included $289 million of Visa indemnification losses. Otherwise, expenses were lower in 2007 due to the sale of First Franklin in late 2006 which accounted for $524 million and $444 million of noninterest expense in 2006 and 2005, respectively. Noninterest expense benefited from a $48 million and $79 million reclassification of Retail Banking’s reinsurance losses to the provision for credit losses in 2007 and 2006, respectively. Noninterest expense for 2005 included net nonrecurring charges of $55 million for charitable contributions, impairment charges and other matters. Severance costs were $62 million in 2007, $33 million in 2006, and $68 million in 2005. Net income tax benefits/(provision) were $5 million, $13 million, and $(6) million in 2007, 2006, and 2005, respectively, from return-to-provision true-ups, the reorganization of certain subsidiaries, as well as the resolution of tax contingencies.

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Financial Condition

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

(In Millions)	2007		2006		2005		2004		2003
As of December 31:
Commercial	$	30,914	$	26,969	$	24,026	$	22,324	$	17,737
Commercial leases		4,437		4,083		3,546		2,836		1,427
Commercial construction		9,051		7,160		5,344		3,483		2,766
Commercial real estate		14,883		12,436		12,407		12,193		9,828
Residential real estate		30,243		21,882		30,846		29,838		26,917
Home equity lines of credit		18,080		14,595		21,439		19,018		11,016
Credit card and other unsecured lines of credit		3,915		3,007		2,612		2,414		2,324
Other consumer		4,499		5,360		5,819		8,165		7,329
Total portfolio loans	$	116,022	$	95,492	$	106,039	$	100,271	$	79,344
Average:
Commercial	$	28,440	$	25,417	$	23,730	$	20,079	$	19,852
Commercial leases		4,168		3,566		3,171		2,024		1,538
Commercial construction		8,151		6,286		4,264		3,062		2,383
Commercial real estate		13,522		12,062		12,033		11,162		9,483
Residential real estate		26,035		26,632		30,941		28,324		23,261
Home equity lines of credit		15,488		17,128		21,118		14,743		9,293
Credit card and other unsecured lines of credit		3,285		2,626		2,381		2,286		2,155
Other consumer		4,907		5,673		7,637		7,527		7,906
Total portfolio loans	$	103,996	$	99,390	$	105,275	$	89,207	$	75,871

National City’s commercial and commercial real estate portfolios represent a broad and diverse customer base comprising over 900 different standard industrial classifications. The customer base is geographically dispersed within National City’s nine-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 summarizes the major industry categories and exposure to individual borrowers for commercial, commercial leases, commercial construction, and commercial real estate as of December 31, 2007.

	Outstanding		% of			Average Loan Balance		Largest Loan to a Single
(Dollars in Millions)	Balance		Total			Per Obligor		Obligor
Real estate	$	19,553		33	%	$	1.1	$	67
Consumer cyclical		9,604		16			1.1		96
Industrial		7,574		13			1.5		171
Consumer noncyclical		6,511		11			.6		46
Basic materials		4,108		7			1.8		67
Financial		4,154		7			2.3		150
Services		2,138		3			.5		56
Energy and utilities		1,103		2			1.4		35
Technology		575		1			3.6		45
Miscellaneous		3,965		7			.3		105
Total	$	59,285		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.

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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 loans increased over the past several years due to a favorable economy, continued growth in existing markets, acquisitions, and expansion into new markets.

A distribution of commercial loans by maturity and interest rate at December 31, 2007 follows:

	One Year		One to Five		Over Five
(In Millions)	or Less		Years		Years		Total
Variable-rate	$	7,833	$	15,350	$	3,261	$	26,444
Fixed-rate		1,087		2,362		1,021		4,470
Total	$	8,920	$	17,712	$	4,282	$	30,914

Commercial leases: 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. Commercial leases are governed by the same lending policies and are subject to the same credit risk as described for commercial loans. The commercial lease portfolio has increased over the last several years due to new business generation and general economic conditions, as well as acquisitions.

Commercial Construction: The commercial construction loan category includes loans originated to developers of real estate to finance the construction of commercial and residential real estate 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 2007 and 2006 resulted from favorable economic conditions which drive higher originations from new construction and higher borrowing levels from existing customers.

A distribution of commercial construction loans by maturity and interest rate at December 31, 2007 follows:

	One Year		One to Five		Over Five
(In Millions)	or Less		Years		Years		Total
Variable-rate	$	3,887	$	3,698	$	395	$	7,980
Fixed-rate		568		287		216		1,071
Total	$	4,455	$	3,985	$	611	$	9,051

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 increased in 2007 mainly due to acquisitions. Prior to 2007, the balance remained relatively stable.

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A distribution of commercial real estate loans by maturity and interest rate at December 31, 2007 follows:

	One Year		One to Five		Over Five
(In Millions)	or Less		Years		Years		Total
Variable-rate	$	1,747	$	4,004	$	2,249	$	8,000
Fixed-rate		719		4,048		2,116		6,883
Total	$	2,466	$	8,052	$	4,365	$	14,883

Residential Real Estate: The residential real estate category includes consumer loans secured by residential real estate, including home equity installment loans. 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. These loans were originated by National City Mortgage as well as the former National Home Equity and First Franklin units. Residential real estate loans are categorized as prime mortgages, nonprime mortgages, or home equity installment loans.

End-of-period and average residential real estate portfolio loan balances by category follow:

(In Millions)	2007		2006		2005
As of December 31:
Prime mortgages	$	15,349	$	7,963	$	5,646
Nonprime mortgages		6,012		7,486		18,688
Home equity installment		8,882		6,433		6,512
Total residential real estate portfolio loans	$	30,243	$	21,882	$	30,846
Average:
Prime mortgages	$	11,570	$	5,883	$	6,000
Nonprime mortgages		7,086		14,396		18,889
Home equity installment		7,379		6,353		6,052
Total residential real estate portfolio loans	$	26,035	$	26,632	$	30,941

Prime mortgage loans principally reflect mortgage loans 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). Prime mortgage production is generally sold in the secondary mortgage market primarily to the GSEs, the Federal Home Loan Banks (FHLB), and third-party 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. The Corporation originates prime loans through retail mortgage offices located throughout the United States and through National City Bank branches located within the Corporation’s nine-state footprint. In 2007, the Corporation terminated broker-based wholesale mortgage lending.

In the last half of 2007, certain prime mortgage loans, including jumbo mortgage loans and loans with nonstandard documentation, were not readily salable as concerns about the credit quality of subprime mortgages spread to other mortgage products. The increase in prime mortgage loans during 2007 reflects loans added with recent acquisitions and transfers of formerly held for sale mortgages of $1.8 billion to portfolio.

Nonprime mortgage loans, which include both first and second lien mortgages, were originated by the Corporation’s former First Franklin unit which was sold in late 2006. Nonprime mortgage loans were generally not readily salable 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. However, prior to 2007, these loans were generally salable to other third-party investors. Nonprime mortgage loans included interest-only loans and loans with various borrower documentation levels. The Corporation has never offered mortgages with negative amortization. Third-party credit scores were incorporated into the lending guidelines along with loan amount, loan-to-value, and loan purpose. These loans were originated principally through wholesale

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channels, including a national network of brokers and mortgage bankers. Loan production was primarily located in the West Coast and East Coast markets.

The decrease in the nonprime mortgage portfolio in 2007 resulted from ongoing pay downs and payoffs, partially offset by the transfer back to portfolio of approximately $1.6 billion of such loans previously held for sale. Management forecasts that the average runoff of this portfolio will approximate $150-200 million per month in 2008. As of December 31, 2007, interest-only and second-lien loans comprised 21% and 25% of the portfolio, respectively. The average FICO scores associated with first-lien and second-lien loans were 616 and 637, respectively, at December 31, 2007. Credit risk related to these loans is mitigated through the use of lender-paid mortgage insurance and a credit risk transfer agreement. As of December 31, 2007, approximately 70% of the remaining nonprime mortgage loan portfolio was covered by some form of credit protection. See Credit Risk discussion on page 35.

The residential real estate portfolio also includes prime-quality home equity installment loans. These loans were originated through the National City Bank branch network, and on a nationwide basis via mortgage offices and the former National Home Equity unit. The Corporation does not originate interest-only or pay-option ARM installment loans. Since late 2005, all originations of broker-sourced home equity loans were for sale. In late 2007, the Corporation halted originations of broker-sourced home equity loans and transferred $2.4 billion of such loans to portfolio. During both 2007 and 2006, $2.3 billion of broker-sourced home equity loans were sold. As of December 31, 2007, broker-sourced loans represented $3.7 billion of the home equity portfolio, with the top five states being: California (31%), Florida (7%), New York (6%), Washington (5%), and Arizona (5%). The average borrower FICO score of broker-sourced home equity loans was 725 at December 31, 2007. The home equity installment loan portion of the portfolio increased during 2007 as $2.4 billion of broker-sourced loans were transferred to portfolio from held for sale due to unfavorable market conditions in late 2007. Management forecasts that the average runoff of the remaining portfolio will approximate $100 million per month in 2008.

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 prime mortgage loans. These loans were originated directly through National City Bank branches, as well as on a nationwide basis through mortgage offices and by the former National Home Equity unit. As described above, originations of broker-sourced home equity lines of credit ceased in August 2007. Broker-sourced lines represented $7.5 billion of the home equity line of credit portfolio at December 31, 2007 with California (29%), New York (10%), Florida (6%), Maryland (5%), and Virginia (5%) representing the top five lending states. The average borrower FICO score for broker-sourced lines was 725 as of December 31, 2007. The portfolio of home equity lines of credit increased during 2007 as $3.0 billion of this product was transferred to portfolio from held for sale due to unfavorable market conditions in the last half of 2007. Management expects this portfolio to decrease in future periods as the broker-sourced portion of the portfolio runs off. The average run-off of this portfolio is expected to approximate $70-75 million per month in 2008. Prior to 2006, the home equity line of credit portfolio increased annually as substantially all production was originated for portfolio, and favorable interest rates spurred record production levels.

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 reflective of new products, targeted marketing through the branch network, and greater usage.

Other Consumer: Other consumer loans include indirect installment loans, automobile leases, and student loans. These 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 primary reason for the decline in other consumer loans in 2007 was the continued run-off of liquidating portfolios which include indirect automobile loans, automobile leases, and other recreational vehicle loans. The decline in other consumer loans in 2006 and 2005 was primarily the result of the securitization of automobile loans of $2.2 billion in late 2005 and $890 million in 2004.

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

(In Millions)	2007		2006		2005		2004		2003
As of December 31:
Commercial	$	41	$	34	$	11	$	24	$	16
Commercial real estate		508		177		35		546		—
Residential real estate		3,741		9,328		9,192		11,860		14,497
Automobile		—		—		—		—		854
Credit card		—		425		425		—		—
Student loans		—		1		4		—		—
Home equity lines of credit		—		2,888		—		—		—
Total loans held for sale or securitization	$	4,290	$	12,853	$	9,667	$	12,430	$	15,367
Average:
Commercial	$	79	$	41	$	18	$	28	$	13
Commercial real estate		278		111		198		164		—
Residential real estate		8,842		10,859		10,547		12,071		22,671
Automobile		—		—		179		132		153
Credit card		91		124		142		—		—
Student loans		1		7		2		—		—
Home equity lines of credit		2,045		2,405		4		—		—
Total loans held for sale or securitization	$	11,336	$	13,547	$	11,090	$	12,395	$	22,837

In the last half of 2007, the markets for sale of mortgage loans were severely disrupted. As a result, the Corporation was unable to sell certain nonagency-eligible mortgage loans and home equity loans and lines of credit that had been originated for sale, and these loans were transferred into portfolio. Substantially all originations of residential real estate mortgages other than agency-eligible products have been curtailed. During 2007, the Corporation transferred into portfolio $5.8 billion of residential real estate loans and $3.0 billion of home equity lines of credit. At December 31, 2007, $1.1 billion of nonagency-eligible mortgages loans remained in residential real estate loans held for sale and are deemed readily salable. The decrease in loans held for sale or securitization was also due to the sale of the First Franklin nonprime mortgage origination and sales platform during late 2006.

The Corporation has originated certain nontraditional interest-only and payment option adjustable-rate mortgage (ARM) loans, which allow borrowers to exchange lower payments during an initial period for higher payments later. The loans were made to prime borrowers and underwritten in accordance with bank regulatory guidelines, which include evaluating borrower repayment capacity based on the fully indexed rate and a fully amortizing repayment schedule. In 2007, originations of interest-only loans represented approximately 28% of total production, and payment-option ARMs less than one percent. All interest-only and payment option ARM production is sold into the secondary mortgage market.

As of December 31, 2006 and 2005, $425 million of credit card loans were classified as held for sale
awaiting securitization.

During 2007, 2006, and 2005, the Corporation sold $3.4 billion, $5.5 billion, and $1.4 billion, respectively, of broker-sourced home equity lines of credit. Prior to 2005, all such loans were originated for portfolio. The increase in average loans held for sale or securitization in 2006 was primarily due to the implementation of the originate-and-sell strategy for nonprime mortgage loans and home equity lines and loans. Also, in 2006, the Corporation made a strategic decision to sell a large pool of nonprime mortgage loans from portfolio. At December 31, 2006, $1.6 billion of these loans remained in held for sale pending the resolution of documentation defects identified during due diligence by potential purchasers. During early 2007, these loans were transferred back into portfolio due to poor market conditions.

The decrease in average loans held for sale or securitization in 2005 and 2004 was primarily the result of lower mortgage production.

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Securities: Securities balances at December 31 follow:

(In Millions)	2007		2006		2005		2004		2003
U.S. Treasury	$	1,056	$	1,051	$	993	$	410	$	625
Federal agency		262		250		181		243		12
Mortgage-backed securities		6,610		5,306		5,437		6,309		3,928
Asset-backed and corporate debt securities		204		175		246		510		931
States and political subdivisions		382		500		608		705		672
Other securities		194		221		416		423		154
Total amortized cost	$	8,708	$	7,503	$	7,881	$	8,600	$	6,322
Total fair value	$	8,731	$	7,509	$	7,875	$	8,765	$	6,525

The increase in the securities portfolio in 2007 resulted primarily from recent acquisitions. The decrease in the securities portfolio in 2006 and 2005 resulted from sales and principal pay downs of mortgage-backed securities, state and political subdivision securities, and asset-backed securities, partially offset by increases in U.S. Treasury securities. In 2006, $737 million of mortgage-backed securities were sold as part of a program to reduce interest-rate risk associated with optionality embedded in other balance sheet products, including securities, loans and deposits. At December 31, 2007, the securities portfolio had net unrealized gains of $23 million. The weighted-average yield of debt securities included in the portfolio at December 31, 2007 and 2006 was 5.31% and 5.11%, respectively, computed on a tax-equivalent basis.

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

(In Millions)	2007		2006		2005		2004		2003
Noninterest bearing	$	16,824	$	16,814	$	18,257	$	17,763	$	17,203
NOW and money market		34,769		28,900		28,589		28,897		25,378
Savings		2,540		1,970		2,361		2,583		2,423
Consumer time		26,632		21,711		18,662		14,875		13,729
Core deposits		80,765		69,395		67,869		64,118		58,733
Other deposits		3,590		5,512		6,087		3,062		2,752
Foreign deposits		8,095		8,553		8,787		8,946		7,002
Purchased deposits		11,685		14,065		14,874		12,008		9,754
Total deposits		92,450		83,460		82,743		76,126		68,487
Short-term borrowings		8,212		8,574		9,591		9,315		12,464
Long-term debt		25,657		30,013		32,752		24,028		24,854
Total deposits and borrowed funds	$	126,319	$	122,047	$	125,086	$	109,469	$	105,805

Average funding balances increased in 2007 due to growth in the loan portfolio. In 2006, average funding balances decreased due to lower loan portfolio balances resulting from the originate-and-sell strategy.

Interest bearing core deposits, such as NOW and money market deposits and consumer time deposits, have increased as a percentage of total core deposits due to recent acquisitions and consumer preferences for interest bearing products in a higher rate environment. Consumer time deposits consist primarily of certificates of deposit sold to retail banking customers.

The growth in core deposits during 2007 and 2006 includes deposit balances from acquisitions. In addition, core deposit growth over the past few years reflects household growth and expansion of relationships per household. Mortgage banking-related escrow deposits averaged $3.7 billion, $4.1 billion, and $4.6 billion in 2007, 2006, and 2005, respectively.

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Other deposits consist principally of deposits acquired through third-party brokers and other noncore certificates of deposit. Other certificates of deposit are issued primarily to commercial customers, including trusts and state and political subdivisions. The need for brokered deposits decreased in 2007 and 2006 due to strong core deposit growth.

Certificates of deposit of $100,000 or more totaled $10.4 billion at December 31, 2007, of which $4.2 billion mature within three months, $2.5 billion mature between three and six months, $2.2 billion mature between six months and one year, and $1.5 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 associated with National City’s Canadian branch office.

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, 2007 and 2006, short-term borrowings included $1.2 billion and $812 million, respectively, of commercial paper. Commercial paper is issued by the Corporation’s subsidiary, National City Credit Corporation, to support short-term cash requirements of the holding company and nonbank subsidiaries. Short-term borrowings included $500 million and $434 million, respectively, of U.S. Treasury demand notes at December 31, 2007 and 2006. 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. Short-term borrowings have decreased due to growth in core deposits.

Long-term debt includes senior and subordinated debt issued by the Corporation or National City Bank and debt obligations related to capital securities issued by subsidiary trusts. A wholesale funding policy governs the funding activity of National City Bank. 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 decreased during 2007 due to strong core deposit growth resulting in a decreased need for other funding sources. The decrease in long-term debt balances during 2006 was reflective of strong deposit growth together with the reduced need for funding as a result of lower loan portfolio balances.

Capital

The Corporation maintains regulatory capital at or above regulatory standards for “well-capitalized” institutions. Further detail on capital and capital ratios is included in Notes 18 and 19 to the Consolidated Financial Statements. Information on stockholders’ equity is presented in the following table.

(Dollars in Millions, Except Per Share Amounts)	December 31, 2007			December 31, 2006
Stockholders’ equity	$	13,408		$	14,581
Equity as a percentage of assets		8.92	%		10.40	%
Book value per common share	$	21.15		$	23.06

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

					Total Number of		Maximum Number of
					Shares Purchased Under		Shares that May Yet Be
	Total Number		Average		Publicly Announced		Purchased Under the
	of Shares		Price Paid		Share Repurchase		Share Repurchase
Period	Purchased(a)		Per Share		Authorizations(b)		Authorizations
Oct 1 to Oct 31, 2007		128,001	$	26.21		100,000		37,624,400
Nov 1 to Nov 30, 2007		15,337		22.40		—		37,624,400
Dec 1 to Dec 31, 2007		47,287		16.67		—		37,624,400
Total		190,625	$	23.54		100,000

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(a)

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

(b)

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

The Corporation’s Board of Directors has authorized the repurchase of up to 40 million shares of National City common stock subject to an aggregate purchase limit of $1.6 billion. This authorization, which has no expiration date, was incremental to previous authorizations. Repurchased shares are held for reissue in connection with compensation plans and for general corporate purposes. During 2007, 2006, and 2005, 45.9 million, 20.1 million, and 43.5 million shares of common stock were repurchased, respectively. Share repurchase activity was curtailed during the fourth quarter of 2007, with no current plans to resume in 2008, to allow capital ratios to build toward the top of their target ranges.

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

Dividends per common share were $1.60 in 2007 and $1.52 in 2006. National City 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 313.7% and 40.9% for the years 2007 and 2006, respectively. The unusually high dividend payout ratio in 2007 reflects the Corporation’s lower earnings. 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. The decision to pay dividends considers the recent trends and current outlook for earnings, liquidity, and capital adequacy, as well as applicable regulatory guidance. Refer to the Liquidity Risk section for further discussion regarding the subsidiary bank’s dividend to the holding company. On January 2, 2008, the Board of Directors declared a dividend of $.21 per common share, payable on February 1, 2008, representing a 49% decrease from the preceding quarter.

At December 31, 2007, the Corporation’s market capitalization was $10 billion. National City common stock is traded on the New York Stock Exchange under the symbol “NCC.”

Enterprise Risk Management

Risk is an inherent part of National City’s business activities. The major risk types to which the Corporation is exposed include credit, market, liquidity, operational, legal, technology, regulatory, financial reporting, private equity, strategic, and reputation risk. The enterprise risk management function establishes a framework for identifying, measuring, controlling and monitoring the risks on an integrated basis in support of sustainable, profitable performance.

The Board of Directors is responsible for ensuring that the Corporation’s risks are managed in a sound manner and delegates oversight of the risk governance process to the Risk and Public Policy Committee and Audit Committee of the Board of Directors. The Board of Directors delegates the day-to-day management of risk to executive management.

There are four components of risk governance in the Corporation: the lines of business and functional units; an independent risk management function; internal audit; and risk committees.

The business and functional units are primarily accountable for the identification, quantification, mitigation and management of risk. Business unit management develops strategies and is expected to take action to manage and mitigate risks that arise from executing those strategies. Management processes, structure and policies help to comply with laws and regulations, and provide clear lines of sight for decision-making and accountability.

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The risk management organization provides objective oversight of risk-taking activities and sets specific risk limits. Risk management works with the business units and functional areas to establish appropriate standards and monitors business practices in relation to those standards. Also, risk management works with the businesses and senior management to focus on key risks and emerging trends that may change the Corporation’s risk profile.

The internal audit function, reporting directly to the Audit Committee of the Board of Directors, provides an objective assessment of the design and execution of the Corporation’s internal control system including the management systems, risk governance, and policies and procedures. Internal audit activities are designed to provide reasonable assurance that resources are safeguarded; that significant financial, managerial, and operating information is complete, accurate and reliable; and that employee actions comply with policies and applicable laws and regulations.

The risk committees provide a mechanism to bring together the perspectives of the management team to discuss emerging risk issues, monitor risk-taking activities and evaluate specific transactions and exposures. The Enterprise Risk Committee, comprised of executive management, reports to the Board’s Risk & Public Policy Committee and is charged with focused oversight of risk management at the executive level. The Enterprise Risk Committee directly oversees the activities of all key risk management committees, including but not limited to: Corporate Credit Policy and Strategy Committee, Asset and Liability Committee, Corporate Operational Risk Committee, and New Initiatives Review Committee.

Credit Risk

Credit risk is the risk to earnings or capital resulting from an obligor’s failure to meet the terms of any contract with the Corporation or other failure to perform as agreed. Credit risk is found in all activities where completion depends on counterparty, issuer, or borrower performance.

The Corporation manages credit risk through a risk management framework. Authority for oversight of credit policy and overall credit risk is delegated to the Corporate Credit Policy and Strategy Committee. The Chief Credit Officer is delegated the day-to-day management of credit risk activities. The lines of business, under the guidance of the credit risk framework, have direct and primary responsibility and accountability for identifying, controlling and monitoring credit risks embedded in their business activities. The Corporation’s internal loan review function reviews and assesses the credit risk within the loan portfolio.

In 2007, certain consumers began experiencing difficulty making timely payments on their mortgage or home equity loans. Borrowers facing interest-rate resets on their loans, have in many cases been unable to refinance their loans due to a range of factors including declining property values. As a result, the Corporation has experienced higher delinquencies, nonperforming assets and charge-offs in its residential real estate loan portfolios, as well as in commercial construction loans to residential real estate developers. It is not known when the housing market will stabilize. As additional mortgage loans reach interest-rate reset dates during 2008, management expects that recent trends in residential real estate delinquencies, nonperforming assets and charge-offs will persist.

Portfolio Loans: The composition of portfolio loans at December 31 for each of the last five years follows:

(In Millions)	2007		2006		2005		2004		2003
Commercial loans and leases	$	35,352	$	31,052	$	27,572	$	25,160	$	19,164
Commercial construction and real estate		23,934		19,596		17,751		15,676		12,594
Residential real estate		30,243		21,882		30,846		29,838		26,917
Home equity lines of credit		18,079		14,595		21,439		19,018		11,016
Credit card and other unsecured lines of credit		3,915		3,007		2,612		2,414		2,324
Other consumer loans		4,499		5,360		5,819		8,165		7,329
Total portfolio loans	$	116,022	$	95,492	$	106,039	$	100,271	$	79,344

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The following summarizes each product type as a percentage of the overall loan portfolio:

	2007			2006			2005			2004			2003
Commercial loans and leases		30.5	%		32.5	%		26.0	%		25.1	%		24.2	%
Commercial construction and real estate		20.6			20.5			16.7			15.6			15.9
Residential real estate		26.0			22.9			29.1			29.8			33.9
Home equity lines of credit		15.6			15.3			20.2			19.0			13.9
Credit card and other unsecured lines of credit		3.4			3.2			2.5			2.4			2.9
Other consumer loans		3.9			5.6			5.5			8.1			9.2
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

The overall loan portfolio balance has grown over the past five years with higher lending volumes and expansion of the banking footprint through acquisitions. Commercial loans and leases represent a smaller percentage of total portfolio loans compared to 2006, due to the larger residential real estate portfolio at December 31, 2007. All types of commercial loans, including construction and real estate, have grown due to higher business volumes and
recent acquisitions.

Residential real estate increased compared to 2006 due to the disruption in the mortgage markets in the last half of 2007. The Corporation was unable to sell certain nonagency eligible mortgage and home equity loans. As a result these nonsalable loans were transferred to portfolio, and management has no intent to sell them for the foreseeable future. Transfers of formerly held for sale loans to portfolio were $5.8 billion during 2007. The decrease in the residential real estate portfolio in 2006 compared to the prior two years principally reflects the decision to originate for sale all broker-sourced residential real estate. In prior periods, some of these loans were originated for portfolio.

Home equity lines of credit increased in 2007 compared to the prior year due to transfers of $3.0 billion of formerly held for sale lines to portfolio. Home equity lines of credit declined in 2006 compared to the prior years due to the same originate for sale strategy described above. Credit card and other unsecured lines increased in comparison to prior periods due to growth in the number of credit card customers. Other consumer loans declined in 2007 as the Corporation ceased originating indirect automobile loans in 2005.

Management considers certain segments of the loan portfolio to pose a higher risk of credit loss. These portfolios consist of construction loans to residential real estate developers and consumers, nonprime mortgage loans, and broker-sourced home equity loans and lines of credit. These borrowers have been adversely affected by the decline in the housing markets. The outstanding balance at December 31 for each of these portfolios follows.

(In Millions)	2007		2006
Commercial construction:
Residential real estate developers	$	4,491	$	3,915
Residential real estate:
Nonprime mortgage		6,012		7,480
Broker-sourced home equity loans		3,732		1,412
Residential construction		3,062		2,564
Home equity lines of credit:
Broker-sourced home equity lines		7,475		5,928
Total higher risk loan portfolios	$	24,772	$	21,299

Loans to residential real estate developers incurred higher losses in 2007 due to weakness in the housing markets, particularly in Florida and Michigan. Approximately 25% of the construction loans to residential developers are properties located in these states.

Nonprime mortgage loans, broker-sourced home equity loans and lines of credit are all liquidating portfolios. These loans were originated by the former First Franklin and National Home Equity business units. Performance of these liquidating portfolios is worse than the rest of the consumer portfolio due to a range of factors, including the decline in the housing market. Paydowns on the nonprime mortgage loans have reduced the outstanding balance of this portfolio

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in the past year. Broker-sourced home equity portfolios have increased compared to a year ago due to transfers of formerly held for sale loans and lines of credit to portfolio in 2007. With new production stopped in the latter part of 2007, management expects the portfolio to decline throughout 2008.

Residential construction loans exhibited higher risk in 2007 with some borrowers abandoning their construction plans and defaulting on their loans due to a range of factors including declining real estate values. Approximately 45% of the residential construction loans relate to properties located in either Florida or California. Management tightened underwriting standards for residential construction loans beginning in late 2006 which is expected to significantly reduce production volume in 2008.

Risk Mitigation Strategies: The Corporation’s lending activities are subject to varying degrees of credit risk. Credit risk is mitigated through credit policies and underwriting guidelines, collateral protection, portfolio diversification, management of industry and client exposure levels, and credit risk transfer strategies.

A credit risk transfer agreement has been executed on certain nonprime mortgage loans to provide protection against unexpected catastrophic credit losses. The Corporation bears the risk of credit losses on this pool up to the first loss position, estimated at 3.5% of the initial pool balance. The counterparty to this arrangement would bear the risk of additional credit losses up to $263 million, subject to adjustment as the portfolio pays down. As of December 31, 2007, credit losses on this portfolio have not and are not expected to exceed the Corporation’s first loss position. Estimated probable credit losses are included in the determination of credit losses.

The Corporation has also purchased mortgage insurance on certain nonprime mortgage loans, as well as certain home equity loans originated in the branch network. These policies provide varying levels of coverage, deductibles, and stop loss limits. Credit losses covered by third-party insurance arrangements are excluded from the determination of the allowance for loan losses to the extent an insurance recovery is deemed probable. Certain of these insurance arrangements are subject to reinsurance by a wholly owned subsidiary of the Corporation. Expected reinsurance losses are included within the provision for loan losses and the related reinsurance reserves are included in the allowance for loan losses in the Consolidated Financial Statements. The provision for credit losses includes estimated losses from claims disputed by third-party insurers. See Note 22 in the Consolidated Financial Statements for further information on reinsurance arrangements.

A summary of the credit risk transfer strategies in place at December 31 on the nonprime mortgage loan
portfolio follows:

(In Millions)	2007		2006
First lien mortgage loans:
Subject to credit risk transfer agreement	$	1,402	$	2,376
Subject to lender paid mortgage insurance		1,374		1,868
Uninsured		1,717		1,036
Second lien mortgage loans:
Subject to lender paid mortgage insurance		1,462		2,148
Uninsured		57		52
Total nonprime mortgage loans	$	6,012	$	7,480

Uninsured first lien mortgage loans increased in 2007 as $1.5 billion of formerly held for sale loans were transferred to the nonprime portfolio during the year. Uninsured second lien mortgage loans increased for the same reason. The second lien mortgages pose a higher risk of loss as the underlying collateral associated with these mortgages will be first applied to satisfy the first lien mortgage.

In order to minimize credit losses, management monitors mortgage loans which are approaching an interest-rate reset date. Borrowers are contacted in advance of reset dates to identify whether they have the ability to meet their payment obligations after the interest rate reset. For borrowers who are experiencing financial difficulty, management assesses whether the loan’s interest rate or repayment terms should be modified, in order to maximize collectibility. Most of these initial rate resets for the nonprime mortgage loans will have occurred by May 2008.

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Troubled debt restructurings, where management has granted a concession to a borrower experiencing financial difficulty, were $497 thousand as of December 31, 2007. The Corporation has no commitments to lend additional funds to borrowers with restructured loans.

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

(In Millions)	2007		2006		2005		2004		2003
Commercial	$	38	$	31	$	35	$	43	$	20
Commercial leases		—		—		1		1		—
Commercial construction		87		13		12		12		3
Commercial real estate		51		18		9		29		32
Residential real estate:
Nonprime		808		567		392		298		288
Construction		302		4		—		—		—
Other		446		133		111		169		140
Home equity lines of credit		102		37		23		10		15
Credit card and other unsecured lines of credit		46		35		20		21		18
Other consumer		17		11		17		13		12
Mortgage loans held for sale and other		16		89		16		25		37
Total loans 90 days past due accruing interest	$	1,913	$	938	$	636	$	621	$	565

The above table excludes loans which are insured by GNMA as these loans are deemed to be fully collectible. Loans 90 days past due which are insured totaled $646 million in 2007, $593 million in 2006, $404 million in 2005, $465 million in 2004 and $487 million in 2003.

Commercial loan credit risk was stable in 2007. The higher delinquencies compared to 2006 were principally due to growth in the portfolio. Sectors displaying increasing risk trends include residential real estate related areas such as home building products and mortgage banking. Commercial construction and commercial real estate delinquencies increased in 2007 due primarily to delinquent accounts added with recent acquisitions, as well as defaults among residential real estate developers.

Residential real estate delinquencies have increased significantly as many borrowers have been unable to make their payments due to a range of factors including interest-rate resets or declining home values. Residential construction loans, nonprime mortgage loans, and broker-sourced home equity loans have experienced the largest growth in delinquencies. Higher delinquencies were also driven by the deteriorating performance of accounts added with recent acquisitions and loans transferred from held for sale to portfolio, and higher volumes of repurchased loans partially offset by the decline in delinquent mortgage loans held for sale.

Home equity line of credit delinquencies have also increased principally due to the deteriorating performance of formerly held for sale lines transferred to portfolio. Delinquent credit card and other unsecured lines of credit increased compared to a year ago as fewer defaults occurred in these consumer loans immediately following the change in consumer bankruptcy laws in late 2005.

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Nonperforming Assets: Note 1 to the Consolidated Financial Statements describes the Corporation’s policies for classifying a loan as nonperforming and recognizing charge-offs. The Corporation’s policies are consistent with regulatory standards. A summary of nonperforming assets as of December 31 follows:

(Dollars in Millions)	2007			2006			2005			2004			2003
Commercial	$	149		$	92		$	96		$	117		$	242
Commercial leases		6			32			85			44			15
Commercial construction		301			109			29			12			7
Commercial real estate		189			111			114			102			67
Residential real estate
Nonprime		119			65			52			54			101
Construction		145			6			8			1			—
Other		162			85			106			133			118
Home equity lines of credit		19			—			—			—			—
Total nonperforming loans		1,090			500			490			463			550
Other real estate owned (OREO):
Secured by GNMA		58			60			—			—			—
Nonprime		242			116			58			47			54
Other		124			53			39			42			45
Mortgage loans held for sale and other		9			3			9			11			8
Total nonperforming assets	$	1,523		$	732		$	596		$	563		$	657
Nonperforming assets as a percentage of:
Period-end portfolio loans and other nonperforming assets		1.31	%		.76	%		.56	%		.56	%		.83	%
Period-end total assets		1.01			.52			.42			.40			.58

Nonperforming commercial loans increased compared to the prior two years due to growth in the portfolio, as well as a few larger problem loans in diverse industries and regions. Nonperforming commercial leases decreased compared to 2006 due to charge-offs of passenger airline leases. Nonperforming commercial construction and commercial real estate loans have increased due to deteriorating credit quality of residential real estate developers as a result of weakness in the housing markets.

Nonperforming residential real estate loans have increased due to a larger portfolio balance and more delinquent loans being placed on nonaccrual status. Residential construction loans in particular have been adversely affected by weakness in the housing markets. Borrowers with nonprime mortgages have also been adversely affected by a range of factors including interest-rate resets.

Certain home equity lines of credit are now classified as nonperforming due to a change in the charge-off policy during 2007. In prior years, home equity lines of credit were fully charged off at the date that they reached nonaccrual status. In 2007, charge-offs are only recognized to the extent the outstanding loan balance exceeds the estimated net realizable value of the collateral. The remaining collateralized loan balance is now classified as a nonperforming loan.

Other real estate owned (OREO) increased due to more nonperforming loans progressing to foreclosure and a longer time period to sell properties due to the weak housing market. OREO associated with mortgage loans secured by GNMA are deemed fully collectible as any loss on foreclosure will be reimbursable from either the FHA or the Department of Veterans Affairs. Prior to January 1, 2006, OREO mortgage loans secured by GNMA were not classified as nonperforming loans.

At December 31, 2007, the Corporation had commitments to lend an additional $67 million to borrowers whose loans were classified as nonperforming. None of these individual commitments exceed $10 million.

Allowance for Loan Losses and Allowance for Losses on Lending-Related Commitments: To provide for the risk of loss inherent in extending credit, National City maintains an allowance for loan losses and an allowance for losses on lending-related commitments. The determination of the allowance for loan losses is based upon the size and risk characteristics of the loan portfolio and includes an assessment of individual impaired loans, historical loss experience

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on pools of homogeneous loans, specific environmental factors, and factors to account for estimated imprecision in forecasting losses. The allowance for losses on lending-related commitments is computed using a methodology similar to that used to determine the allowance for loan losses, modified to take into account the probability of drawdown on the commitment.

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

(Dollars in Millions)	2007			2006			2005			2004			2003
Balance at beginning of year	$	1,131		$	1,094		$	1,188		$	1,023		$	1,006
Provision for loan losses		1,326			489			300			339			628
Charge-offs:
Commercial		86			93			104			136			306
Commercial leases		58			57			56			34			22
Commercial construction		38			18			6			12			3
Commercial real estate		32			20			32			23			31
Residential real estate		316			220			132			126			152
Home equity lines of credit		121			79			42			27			24
Credit card and other unsecured lines of credit		128			94			130			109			98
Other consumer		65			64			100			104			121
Total charge-offs		844			645			602			571			757
Recoveries:
Commercial		23			36			75			92			40
Commercial leases		19			18			22			9			4
Commercial construction		—			1			4			2			—
Commercial real estate		10			8			10			13			5
Residential real estate		61			67			54			51			37
Home equity lines of credit		28			18			8			10			7
Credit card and other unsecured lines of credit		16			16			12			8			8
Other consumer		26			39			37			40			47
Total recoveries		183			203			222			225			148
Net charge-offs		661			442			380			346			609
Other(a)		(34	)		(10	)		(14	)		172			(2	)
Balance at end of year	$	1,762		$	1,131		$	1,094		$	1,188		$	1,023
Allowance as a percentage of:
Portfolio loans		1.52	%		1.18	%		1.03	%		1.19	%		1.29	%
Nonperforming loans		161.6			226.1			223.1			256.9			186.1
Net charge-offs		266.5			256.2			287.3			343.8			167.8

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

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

(In Millions)	2007			2006			2005			2004			2003
Balance at beginning of year	$	78		$	84		$	100		$	102		$	92
Net provision for losses on lending-related commitments		(13	)		(6	)		(16	)		(16	)		10
Allowance related to commitments acquired		—			—			—			14			—
Balance at end of year	$	65		$	78		$	84		$	100		$	102

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

	2007			2006			2005			2004			2003
Commercial		.22	%		.22	%		.12	%		.22	%		1.35	%
Commercial leases		.93			1.12			1.07			1.24			1.14
Commercial construction		.47			.26			.05			.33			.11
Commercial real estate		.16			.11			.18			.09			.27
Residential real estate		.98			.57			.25			.26			.49
Home equity lines of credit		.60			.36			.16			.11			.18
Credit card and other unsecured lines of credit		3.42			2.96			4.96			4.41			4.21
Other consumer		.81			.44			.83			.85			.94
Total net charge-offs to average portfolio loans		.64	%		.44	%		.36	%		.39	%		.80	%

The net charge-off ratio for commercial loans was unchanged from 2006 as the credit quality of this portfolio has been stable. The net charge-off ratio for commercial leases improved in 2007 as prior years included larger charge-offs for passenger airline leases. The net charge-off ratio for commercial construction increased in 2007 due to higher losses on residential real estate developer loans.

The net charge-off ratio for residential real estate and home equity lines of credit increased in 2007 compared to prior years due to more borrowers being unable to make their payments in the current environment. In 2007, charge-offs increased by $109 million in liquidating portfolios and $33 million in the construction loan portfolio versus a year earlier. In addition, a change in charge-off practices for insured mortgage loans, which assumes no insurance recovery on disputed claims, contributed to higher charge-offs in 2007. Collection efforts on disputed claims continues, and subsequent insurance recoveries are recognized in the period they are received.

The net charge-off ratio for credit card, other unsecured lines of credit, and other consumer loans increased compared to 2006. Net charge-offs for these products were unusually low in 2006 due to the large number of consumers who filed bankruptcy in 2005.

An allocation of the allowance for loan losses and allowance for losses on lending-related commitments by portfolio type is shown below.

(In Millions)	2007		2006		2005		2004		2003
Allowance for loan losses:
Commercial loans and leases	$	461	$	459	$	494	$	572	$	283
Commercial construction and real estate		263		161		141		147		57
Residential real estate		597		259		169		184		122
Home equity lines of credit and other consumer loans		278		102		131		127		94
Credit card and other unsecured lines of credit		163		150		159		158		129
Unallocated		—		—		—		—		338
Total	$	1,762	$	1,131	$	1,094	$	1,188	$	1,023
Allowance for losses on lending-related commitments:
Commercial	$	65	$	78	$	84	$	100	$	102

The total allowance for loan losses increased compared to a year ago primarily due to higher probable credit losses for loans secured by residential real estate. Recent acquisitions also increased the allowance for loan losses in 2007. In 2004, the Corporation refined its allocation methodology which enabled the allowance for loan losses to be fully allocated to loan portfolios. Accordingly, the allocation of the allowance for 2003 is not directly comparable to subsequent periods.

The allowance allocated to commercial loans and leases was flat compared to 2006 which reflects the stable credit quality of this portfolio. The allowance allocated to commercial loans and leases is lower than 2005 and 2004, despite a larger loan portfolio, due to relatively stronger credit quality of the portfolio. The allowance allocated to commercial construction and commercial real estate has increased significantly compared to prior periods due to higher probable

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credit losses on construction loans to residential real estate developers. The portfolio has also grown with recent acquisitions.

The allowance allocated to both the residential real estate and home equity lines of credit portfolios increased compared to prior periods due to higher portfolio balances, combined with deteriorating credit quality of these portfolios. Portfolio loan balances increased due to recent acquisitions, as well as transfers of formerly held for sale mortgage and home equity loans and lines of credit to portfolio in 2007. Performance of these transferred loans has generally been worse than for loans originated within our branch network for portfolio. Deteriorating credit trends have also occurred principally in the higher-risk portfolios previously described. The allowance allocated to credit card and other unsecured lines of credit increased compared to 2006 due to growth in the portfolio. The credit quality of this portfolio has been stable.

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

Market Risk

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

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

Interest-rate Risk Management: Financial instruments used to manage interest-rate risk include investment securities and interest-rate derivatives, which include interest-rate swaps, interest-rate caps and floors, interest-rate forwards, and exchange-traded futures and options contracts. Interest-rate derivatives have characteristics similar to securities but possess the advantages of customization of the risk-reward profile of the instrument, minimization of balance sheet leverage, and improvement of the liquidity position. Further discussion of the use of and the accounting for derivative instruments is included in Notes 1 and 25 to the Consolidated Financial Statements.

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

The sensitivity of MVE to changes in interest rates is an indication of the longer-term interest-rate risk embedded in the balance sheet. A primary measure of the sensitivity of MVE to movements in rates is defined as the Duration of Equity (DOE). DOE represents the estimated percentage change in MVE for a 1% instantaneous, parallel shift in the yield curve. Generally, the larger the absolute value of DOE, the more sensitive the value of the balance sheet is to

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movements in rates. A positive DOE indicates the MVE should increase as rates fall, or decrease as rates rise. A negative DOE indicates that MVE should increase as rates rise, or decrease as rates fall. Due to the embedded options in the balance sheet, DOE is not constant and can shift with movements in the level or shape of the yield curve. ALCO has set limits on the maximum and minimum acceptable DOE at +4.0% and -1.0%, respectively, as measured between +/-150 basis point instantaneous, parallel shifts in the yield curve.

The most recent market value model estimated the current DOE at +1.9%, above the long-term target of +1.5% but consistent with management’s view on interest rates. DOE would rise to +2.7% given a parallel shift of the yield curve up 150 basis points and would be within the maximum constraint of +4.0%. DOE would decline to +1.5% given a parallel shift of the yield curve down 150 basis points and would be within the minimum constraint of -1.0%.

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

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

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

The most recent earnings simulation model projects that net income would be 2.0% higher than base net income if rates were two standard deviations (SD) higher than the implied forward curve over the next 12 months. The model also projects an increase in net income of 2.7% if rates were two SD below the implied forward curve over the same period. In the past, the company has reported a loss of income when rates are lower than the implied forwards by two SD. However, at the current low level of short-term interest rates, net interest income benefits from an interest-rate floor position that hedges variable-rate commercial loans. Both of the earnings simulation projections of net income were within the ALCO guideline of -4.0%.

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

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Summary information about the interest-rate risk measures follows:

	2007			2006
One Year Net Income Simulation Projection
2 SD below implied forward curve		2.7	%		-1.3	%
2 SD above implied forward curve		2.0			1.2
Duration of Equity
-150 bp Shock vs. Stable rate		1.5	%		.5	%
+150 bp Shock vs. Stable rate		2.7			2.2

Trading Risk Management: Securities, loans, and derivative instruments are classified as trading when they are entered into for the purpose of making short-term profits or to provide risk management products to customers. 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 estimated maximum dollar loss from adverse market movements, with 99% confidence, based on historical market-rate and price changes for a 10-day holding period. During 2007, the average, high, and low VAR amounts were $5 million, $9 million, and $3 million, respectively, which were within the limit, established by ALCO of $19 million. During 2006, the average, high, and low VAR amounts were $2 million, $6 million, and $500 thousand, respectively. VAR estimates are monitored regularly by ALCO. Further discussion of trading activities is included in Note 9 to the Consolidated Financial Statements.

Liquidity Risk

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

The Corporation’s operating activities represented a net use of cash in 2007. The primary reason for the negative cash flows from operations was the disruption in the mortgage markets in 2007. The Corporation was unable to sell certain mortgage loans that had been originated for sale. As a result, cash used to originate mortgage loans exceeded cash received from sale or securitization of mortgage loans in 2007. Management has discontinued the origination of certain mortgage loans which are not salable in the current market.

The Corporation’s most significant contractual obligations and commitments are presented within the discussion which follows on Contractual Obligations, Commitments, Contingent Liabilities and Off-Balance Sheet Arrangements. At the holding company level, the Corporation uses cash to pay dividends to stockholders, repurchase common stock, complete acquisitions, service debt and pay various operating expenses.

In 2007, 2006 and 2005, the Corporation paid dividends of $985 million, $934 million, and $924 million, respectively, to its common and preferred stockholders. In January 2008, the Board declared dividends of $135 million to be paid in the first quarter of 2008. Dividend payments are expected to be lower in 2008 than in the prior three years. Repurchases of common stock were $3.2 billion in 2007, $.7 billion in 2006 and $1.5 billion in 2005. No repurchases of common stock are planned in 2008 as management intends to build capital.

Net funds (used in)/received from acquisitions were $(249) million in 2007, $157 million in 2006, and $(322) million in 2005. Net funds (transferred)/received in conjunction with divestitures were $(126) million in 2007, $(74) million in 2006, and $24 million in 2005. The Corporation does not currently have any pending acquisitions or divestitures. Cash used to repay debt was $8.5 billion in 2007, $13.4 billion in 2006 and $9.7 billion in 2005. Cash paid for interest on deposits and purchased funding was $4.8 billion in 2007, $4.3 billion in 2006, and $3.0 billion 2005. Cash used to

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service debt in 2008 is expected to be higher than 2007 due to higher purchased funding levels and higher interest rates. Future maturities of long-term debt are estimated to be $9.5 billion in 2008, $5.7 billion in 2009, $3.5 billion in 2010, $1.4 billion in 2011, $1.2 billion in 2012, and $4.6 billion thereafter.

The main sources of funding for the holding company include dividends and other distributions from its subsidiaries, the commercial paper market, and access to the capital markets. The main sources of funding for National City Bank are operating cash flows from banking activities, deposits gathered through the branch system, and purchased funds. As discussed in Note 18 to the Consolidated Financial Statements, National City Bank is subject to regulation and, among other things, may be limited in its ability to pay dividends or otherwise transfer funds to the holding company. Accordingly, consolidated cash flows as presented in the Consolidated Statements of Cash Flows may not represent cash immediately available to the holding company. During 2007, the Corporation’s bank and nonbank subsidiaries declared and paid cash dividends totaling $950 million. Returns of capital paid to the holding company by bank and nonbank subsidiaries during 2007 totaled $500 million and $9 million, respectively. During 2008, the Corporation’s bank subsidiaries may not pay dividends to the holding company beyond their net profits for 2008, up to the date of such dividend declaration, without prior regulatory approval. 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. Commercial paper borrowings of $1.2 billion and $812 million were outstanding at December 31, 2007 and 2006, respectively. In 2008, the financial markets for short-term funding are expected to be less liquid as investors have heightened concerns about credit quality. The holding company has adequate funds to meet all forecasted 2008 cash needs without reliance on the short-term markets.

Core deposits continue to be the most significant source of National City Bank’s funding. At December 31, 2007 and 2006, core deposits comprised 60% and 54% of total funding, respectively. Core deposits increased as a source of funds in 2007 from growth in the number of deposit accounts and recent acquisitions. Federal Home Loan Bank advances also increased as a source of funds in 2007. At December 31, 2007, National City Bank’s unused available borrowing capacity with the Federal Home Loan Bank was $3.1 billion. Refer to the Financial Condition section for further discussion on funding sources.

Proceeds from loan sales or securitizations were $49.2 billion in 2007, $65.5 billion in 2006, and $75.8 billion in 2005. Loan sales and securitizations are expected to be a lower source of funding in 2008 as management has curtailed the production of certain mortgage products. In 2008, the Corporation may have the option to exercise an early call on a pool of securitized automobile loans. As of December 31, 2007, the remaining principal balance of these securitized loans was approximately $85 million.

In April 2007, the Corporation’s Board authorized the holding company to issue up to $1.5 billion in senior debt securities or subordinated debt securities in future periods. A new shelf registration will be filed with the Securities and Exchange Commission at the time of issuance of these securities. There were no issuances under this authorization during 2007. Prior to this authorization, the Corporation had in place a shelf registration with the Securities and Exchange Commission which allowed 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 securities. During 2007, the holding company issued $600 million of senior notes which completed the issuances under this shelf registration.

The Corporation had a shelf registration filed with the Securities and Exchange Commission, to allow for the sale over time of junior subordinated debt securities to three subsidiary trusts, along with an equal amount of the trusts’ equity securities in the capital markets. In 2007, the Corporation completed its issuance under this shelf by issuing $1.0 billion of capital securities. In 2006, $750 million of capital securities were issued under this shelf registration statement. Further discussion of junior subordinated debentures is included in Note 17 to the Consolidated Financial Statements.

In November 2007, the Corporation filed a new shelf registration with the Securities and Exchange Commission to allow for the sale over time of an unlimited amount of junior subordinated debt to six subsidiary trusts, along with an equal amount of capital securities of the trusts in the capital markets.

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In January 2008, the Corporation filed another shelf registration with the Securities and Exchange Commission, to allow for the sale over time of an unlimited amount of senior or subordinated debt, junior subordinated debt, common or preferred stock, purchase contracts, units and warrants or, in one or more offerings by either the Corporation, or one of six subsidiary trusts. In January 2008, the Corporation issued $1.4 billion of senior convertible debt notes and issued $650 million of capital securities under this shelf registration statement. A portion of the proceeds will be used to repay $300 million of long-term debt maturing in April 2008.

The cost and availability of short- and long-term funding is influenced by debt ratings. During 2007, Fitch Ratings reduced the Corporation’s long-term issuer rating to A+ (outlook negative) from AA-, and the Corporation’s short-term issuer rating to F-1 from F-1+, citing National City’s exposure to mortgage, home equity and construction lending. In January 2008, Moody’s Investors’ Service, while affirming National City Bank’s top short-term rating of P-1, placed all of the long-term debt and financial strength ratings of the Corporation and its subsidiaries on review for possible downgrade. A decrease, or potential decrease, in credit ratings could limit access to the capital markets and increase the cost of debt, and thereby adversely affect liquidity and financial condition.

The Corporation has an equity interest of approximately 8% in Visa USA. Visa Inc., the parent company of Visa USA, intends to conduct an initial public offering (IPO) in 2008. Visa Inc. plans to use the proceeds to fund an escrow account to be used for settlement of litigation and to redeem a portion of Visa USA members’ shares. Accordingly, National City expects to record a gain for partial redemption of its equity interest, following the completion of the IPO. The realization and amount of this gain are dependent upon the occurrence of Visa’s IPO and the amount of funds set aside by Visa for litigation matters.

Operational Risk Management

Operational risk is the risk of loss incidental to day-to-day activities, including, but not limited to, the risk of fraud by employees or persons outside the Corporation, the execution of unauthorized transactions by employees, errors relating to transaction processing and technology, breaches of the internal control system and compliance requirements and business disruption and system failures. This risk of loss also includes the potential legal actions that could arise as a result of an operational deficiency or as a result of noncompliance with applicable regulatory standards.

Operational risk is inherent in all business activities, and the management of this risk is important to the achievement of the Corporation’s objectives. In the event of a breakdown in the internal control system, improper operation of systems or improper employees’ actions, the Corporation could suffer financial loss, face regulatory action or suffer damage to its reputation.

The Corporation manages operational risk through a risk management framework and its internal control processes. Within this framework, the Corporate Operational Risk Committee provides oversight and assesses the most significant operational risks. Under the guidance of this committee, risk management personnel establish policies and interact with business lines to monitor significant operating risks on a regular basis. Business lines have direct and primary responsibility and accountability for identifying, controlling and monitoring operational risks embedded in their business. Business managers maintain a system of controls with the objective of providing proper transaction authorization and execution, proper system operations, safeguarding of assets from misuse or theft, and ensuring the reliability of financial and other data. Business managers ensure that the controls are appropriate and are implemented as designed. The Corporation’s internal audit function validates the system of internal controls through regular and ongoing audit procedures and reports on the effectiveness of internal controls to executive management and the Audit Committee of the Board of Directors.

While the Corporation believes that it has designed effective methods to minimize operational risks, there is no absolute assurance that business disruption or operational losses will not occur. On an ongoing basis, management makes process changes and investments to enhance its systems of internal controls and business continuity and disaster recovery plans.

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

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

Contractual Obligations: The following table presents significant fixed and determinable contractual obligations by payment date as of December 31, 2007. The payment amounts represent those amounts contractually due to the recipient and do not include unamortized premiums or discounts, hedge basis adjustments, fair value adjustments, or other similar carrying value adjustments. Further discussion of the nature of each obligation is included in the referenced note to the Consolidated Financial Statements.

			Payments Due In
			One		One to		Three to		Over
	Note		Year		Three		Five		Five
(In Millions)	Reference		or Less		Years		Years		Years		Total
Deposits without a stated maturity(a)			$	65,012	$	—	$	—	$	—	$	65,012
Consumer and brokered certificates of deposits(b)				28,228		3,688		2,511		2,447		36,874
Federal funds borrowed and security repurchase agreements(b)		14		5,102		—		—		—		5,102
Borrowed funds(b)		15		2,044		—		—		—		2,044
Long-term debt(b)		16,17		10,811		10,404		3,550		14,574		39,339
Operating leases				174		266		211		603		1,254
Purchase obligations				197		247		131		34		609

(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, 2007. The contractual amounts to be paid on variable-rate obligations are affected by changes in market interest rates. Future changes in market interest rates could materially affect the contractual amounts to be paid.

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

As of December 31, 2007, the liability for uncertain tax positions, excluding associated interest and penalties, was $209 million pursuant to FASB Interpretation No. 48. This liability represents an estimate of tax positions that the Corporation has taken in its tax returns which may ultimately not be sustained upon examination by the tax authorities. Since the ultimate amount and timing of any future cash settlements cannot be predicted with reasonable certainty, this estimated liability has been excluded from the contractual obligations table.

The Corporation did not have any commitments or obligations to its qualified pension plan at December 31, 2007 due to the overfunded status of the plan. The Corporation also has obligations under its supplemental pension and postretirement plans as described in Note 24 to the Consolidated Financial Statements. These obligations represent actuarially determined future benefit payments to eligible plan participants. The Corporation reserves the right to terminate these plans at any time.

The Corporation also enters into derivative contracts under which it either receives cash from or pays cash to counterparties depending on changes in interest rates. Derivative contracts are carried at fair value on the Consolidated Balance Sheet, with the fair value representing the net present value of expected future cash receipts or payments based on market interest rates as of the balance sheet date. The fair value of the contracts change as market interest

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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 Consolidated Balance Sheet at December 31, 2007 do not represent the amounts that may ultimately be paid under these contracts, these liabilities are not included in the table of contractual obligations presented above. Further discussion of derivative instruments is included in Notes 1 and 25 to the Consolidated Financial Statements.

Commitments: The following table details the amounts and expected maturities of significant commitments as of December 31, 2007. Further discussion of these commitments is included in Note 22 to the Consolidated
Financial Statements.

	One		One to		Three to		Over
	Year		Three		Five		Five
(In Millions)	or Less		Years		Years		Years		Total
Commitments to extend credit:
Revolving home equity and credit card lines	$	35,792	$	11	$	—	$	—	$	35,803
Commercial		8,923		10,009		8,447		853		28,232
Residential real estate		7,218		—		—		—		7,218
Other		607		—		—		—		607
Standby letters of credit		1,963		1,861		1,436		112		5,372
Commercial letters of credit		236		64		20		7		327
Net commitments to sell mortgage loans and mortgage-backed securities		2,500		—		—		—		2,500
Net commitments to sell commercial real estate loans		535		91		—		—		626
Commitments to fund civic and community investments		359		236		100		22		717
Commitments to fund principal investments		28		35		111		183		357
Commitments to purchase beneficial interests in securitized automobile loans		283		—		—		—		283

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, 2007. The timing of these payments could change due to extensions in the investment periods of the funds or by the rate at which the commitments are invested, as determined by the general or limited partners of the funds.

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

National City Bank, a subsidiary of the Corporation, along with other financial institutions, has agreed to provide backup liquidity to a third-party commercial paper conduit. The conduit holds various third-party assets including beneficial interests in the cash flows of trade receivables, credit cards and other financial assets, as well as automobile loans securitized by the Corporation. The conduit has no interests in subprime mortgage loans. The Corporation has retained interests in the securitized automobile loans in the form of Class A notes, Class B notes and an interest-only strip. As of December 31, 2007, the fair value of these retained interests was $28 million. The conduit relies upon commercial paper for its funding. 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 to purchase a 49% interest in a note representing a beneficial interest in the Corporation’s securitized automobile loans. Another financial institution, affiliated with the conduit, has committed to purchase the remaining 51% interest in this same note. Upon the conduit’s request, National City Bank would pay cash equal to the par value of the notes, less the corresponding

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portion of all defaulted loans, plus accrued interest. In return, National City Bank would be entitled to undivided interest in the cash flows of the collateral underlying the note. The Corporation receives an annual commitment fee of 7 basis points for providing this backup liquidity. To date, the conduit has not experienced any difficulty in accessing the commercial paper markets. The Corporation’s commitment declines commensurate with the unpaid principal balance of the automobile loans securitized by the Corporation. As of December 31, 2007, the Corporation’s maximum commitment was $283 million. This commitment expires in December 2008 but may be renewed annually for an additional 12 months by mutual agreement of the parties.

Contingent Liabilities: The Corporation may also incur liabilities under various contractual agreements contingent upon the occurrence of certain events. A discussion of significant contractual arrangements under which National City may be held contingently liable is included in Note 22 to the Consolidated Financial Statements.

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

During both 2007 and 2006, the Corporation securitized $425 million of credit card receivables following the maturity of its Series 2002-1 and 2001-1 credit card securitizations. In 2005, the Corporation securitized $600 million of credit card receivables following the maturity of its Series 2000-1 securitization. In 2005, the Corporation securitized $2.2 billion of fixed-rate closed end indirect automobile loans. Further discussion on the accounting for securitizations is included in Note 1 to the Consolidated Financial Statements, and detail regarding securitization transactions and retained interests is included in Note 5.

The Corporation’s securitization transactions are monitored regularly by management. The securitization structures are reviewed primarily to ensure the trust in the structure continues to be a qualified special-purpose entity, the securitization transaction itself continues to be accounted for as a sale, and the economics of the structure performs in accordance with securitization governing documents. Amendments to the securitization governing documents, changes in bankruptcy or sale laws or changes in authoritative accounting literature could result in the securitization trust not qualifying as a special-purpose entity or the securitization transaction to not qualify for sale accounting. Any such change could result in the consolidation of the assets and liabilities of the securitization trust on the Corporation’s balance sheet which would lead to the subsequent accounting for the transaction as a secured borrowing. Additionally, the economics of a securitization structure could change the timing of when the Corporation repurchases loans from the securitization trust through its exercise of a contractual cleanup call.

The Corporation also has obligations arising from contractual arrangements that meet the criteria of FASB Interpretation No. 45. These obligations are discussed in Note 22 to the Consolidated Financial Statements.

Application of Critical Accounting Policies and Estimates

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

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such information is not available, fair value may be estimated by management primarily through the use of discounted cash flow models.

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

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

During 2007, the Corporation used a discounted cash flow model to estimate the fair value of nonprime mortgage loans and home equity loans and lines of credit transferred from held for sale to portfolio as there was no observable market for sale of these products. Key inputs to the valuation models were projected credit losses, prepayment speeds, and the discount rate. Projected credit losses were estimated based on a combination of historical credit losses for static pools of similar loans, adjusted by recent industry data of projected losses for similar types of loans. Prepayment speeds were based on historical prepayments for static pools of similar loans adjusted to reflect market conditions at the time of the valuations. The discount rates were estimated based upon the rate utilized by market participants in prior transactions adjusted to reflect a higher risk premium in the current market.

A valuation allowance is recognized whenever the carrying value, including basis adjustments arising from fair value hedge relationships, exceeds the aggregate fair value of loans held for sale at the measurement date. Valuation adjustments may also be recognized when loans are transferred from held for sale to portfolio as these loans are required to be transferred at the lower-of-cost or fair value. As of December 31, 2007 and 2006, the valuation allowance related to mortgage loans held for sale was $.6 million and $65 million, respectively. At December 31, 2007, mortgage loans held for-sale consisted primarily of agency-eligible first lien mortgage loans. The December 31, 2007 valuation allowance related to loans repurchased from investors that were held for resale. At December 31, 2006, the valuation allowance repres