National City Corporation

National City Corporation was a Cleveland-based American bank holding company whose origins went back to the City Bank of Cleveland, established in 1845 under Ohio banking legislation. From a single local bank, it developed into a large regional financial institution through a combination of geographic expansion, acquisitions, mortgage lending, consumer finance, commercial banking, and asset management. At its height, National City operated a substantial branch network across Ohio, Illinois, Indiana, Kentucky, Michigan, Missouri, Pennsylvania, Florida, and Wisconsin, while also serving selected customers nationally. The company’s principal activities included retail and commercial banking, residential mortgage origination and servicing, consumer finance, investment banking, and asset management. Its mortgage operations became especially important after National City purchased First Franklin Financial in 1999, a major subprime mortgage lender. Rather than distributing all originated loans, the company retained a significant volume on its balance sheet to increase interest income. It also relied heavily on loans sourced through third-party mortgage brokers and expanded its home-equity lending. National City Mortgage was associated with an early mortgage in the United States, and mortgage finance ultimately became a major contributor to both the company’s growth and its losses. National City Corporation was formally created in 1973 as a holding company for National City Bank of Cleveland. The structure enabled expansion beyond Cuyahoga County and supported a long series of bank acquisitions. During the 1970s and 1980s, the company broadened its Ohio footprint, then entered Kentucky, Indiana, Pennsylvania, Michigan, Missouri, Florida, Illinois, and Wisconsin. In the 1990s it began consolidating acquired institutions under the National City name, creating a more unified consumer-facing identity. Its later acquisitions included Provident Financial Group, Allegiant Bancorp, Harbor Florida Bancshares, Fidelity Bankshares, and MAF Bancorp. The strategy increased National City’s scale, but it also left the company exposed to the collapse of the U.S. housing and subprime mortgage markets. The bank retained substantial residential mortgage exposure, expanded in Florida shortly before that market deteriorated, and repurchased approximately $3 billion of its own shares in early 2007, reducing capital at a vulnerable point in the cycle. Loan losses rose as housing conditions worsened. The company recorded a net loss in the third quarter of 2007 and a much larger loss in the second quarter of 2008. Federal regulators entered into memoranda of understanding with National City concerning capital levels, risk management, and other business practices in 2008. On October 24, 2008, PNC Financial Services announced an agreement to acquire National City in a stock transaction supported in part by U.S. Treasury funds. The transaction was approved by shareholders in December and completed on December 31, 2008. National City was merged into PNC, and its independent corporate identity ended. The National City name remained in some transition contexts but was ultimately retired on June 14, 2010. The acquisition significantly expanded PNC’s presence in the Midwest and added or strengthened operations in several states, including Florida.

National City began on May 17, 1845, when Cleveland businessmen organized the City Bank of Cleveland with $50,000 in pooled capital. It was the first bank opened under Ohio’s Bank Act of 1845 and initially operated from 52 Superior Street. The institution later became National City Bank of Cleveland and built its reputation as a commercial and community bank serving northeastern Ohio. The bank also participated in significant international finance. During the post-World War I Dawes Plan, National City was among the financial institutions involved in lending intended to support the reconstruction of Germany. Its participation included loans and securities-related commitments involving German industrial companies. This activity reflected the broader role played by major American banks in international stabilization and cross-border finance during the 1920s. In April 1973, National City Corporation was established as a holding company for National City Bank of Cleveland. The new structure allowed the organization to acquire banks outside Cuyahoga County. The company expanded throughout Ohio during the 1970s and 1980s, acquiring or assuming institutions including Northern Ohio Bank, Bank of Cleveland, First National Bank of Elyria, First National Bank of Dayton, Huron County Banking Company, Goodyear Bank, Ohio Citizens Bancorp, BancOhio Bancorp, offices of Broadview Savings and Loan, and Gem Savings Association. These transactions made National City a broader Ohio banking network rather than a solely Cleveland institution. The company then expanded into neighboring and Midwestern states. First Kentucky National Corporation gave it a significant Kentucky presence in 1988. Merchants National Corporation expanded its Indiana operations in 1992, while Integra Financial Corporation added a major Pittsburgh and western Pennsylvania platform in 1996. The acquisition of First of America Bank Corporation in 1998 extended National City into Michigan, Illinois, and Indiana, and Fort Wayne National Corporation further strengthened Indiana. In the early 1990s, management decided that acquired banks would gradually adopt the National City name. The rebranding initiative was intended to create a consistent identity, simplify advertising, and present the organization as a single regional banking franchise. Alongside its branch network, the company developed mortgage, consumer-finance, investment, and online banking channels. In the late 1990s, under chief executive David Daberko, management pursued higher asset yields and bought First Franklin Financial, a large subprime mortgage originator, in 1999. National City’s expansion accelerated from 2003 through 2007. It acquired Allegiant Bancorp to enter the St. Louis market, Provident Financial Group to strengthen southwestern Ohio and northern Kentucky, Wayne Bancorp, Harbor Florida Bancshares, Fidelity Bankshares, and MAF Bancorp, whose MidAmerica Bank operations provided a larger presence in the Chicago and Milwaukee areas. National City also sold its stake in National Processing Company to Bank of America and sold the First Franklin origination franchise and related servicing platform to Merrill Lynch in 2006, while retaining considerable exposure to loans previously originated through that business. The housing downturn exposed weaknesses in this model. National City had retained many mortgage assets, continued significant home-equity and broker-originated lending, and entered Florida shortly before the state’s property market declined sharply. The company also repurchased about $3 billion of its stock in early 2007, which reduced its capital cushion. As subprime and residential mortgage losses increased, National City reported a net loss of $19 million in the third quarter of 2007 and a net loss of $1.8 billion in the second quarter of 2008. In April and May 2008 it entered confidential memoranda of understanding with the Office of the Comptroller of the Currency concerning capital, risk management, and related matters; the arrangements became public in June. By October 2008, National City was seeking a buyer. PNC Financial Services announced a purchase agreement on October 24, and the transaction was completed on December 31 after shareholder approval. National City was merged into PNC, substantially enlarging PNC’s Midwestern and Florida presence. The National City brand was eventually retired on June 14, 2010.

• 2010

  National City brand is retired

  [1]National City Corp.en.wikipedia.org

  The acquired banking franchise is fully transitioned away from the National City name.

• 2008

  PNC acquisition is completed

  [1]National City Corp.en.wikipedia.org

  PNC completes its acquisition of National City on December 31, ending the company’s independent existence.

• 2007

  MAF Bancorp acquisition closes

  [1]National City Corp.en.wikipedia.org

  National City expands in the Chicago and Milwaukee markets through MidAmerica Bank.

• 2004

  Provident Financial Group acquisition closes

  [1]National City Corp.en.wikipedia.org

  The acquisition expands National City in southwestern Ohio and northern Kentucky and adds warehouse lending capabilities.

• 1999

  First Franklin Financial is acquired

  [1]National City Corp.en.wikipedia.org

  National City enters a major subprime mortgage platform, increasing its exposure to residential-credit risk.

• 1992

  Acquired banks begin unified National City branding

  [1]National City Corp.en.wikipedia.org

  The company announces that member banks will progressively adopt the National City name.

• 1973

  National City Corporation holding company is formed

  [1]National City Corp.en.wikipedia.org

  A holding-company structure is created to permit expansion beyond Cuyahoga County through bank acquisitions.

• 1845

  City Bank of Cleveland is founded

  [1]National City Corp.en.wikipedia.org

  The institution that became National City is established in Cleveland with $50,000 in capital under Ohio’s Bank Act of 1845.

A full-service regional banking platform combining consumer and commercial banking with mortgage finance, consumer credit, wealth and asset management, and investment-banking services.

• Retail and commercial banking

  National City Bank

  The core banking franchise provided deposit accounts, branch services, business banking, lending, cash-management services, and online banking. It operated through a multi-state network assembled from numerous acquired banks and was progressively standardized under the National City name.

• Mortgage finance

  National City Mortgage

  The mortgage business originated and serviced residential loans, including home-equity and other consumer real-estate products. Mortgage finance became one of the company’s largest businesses and left National City with substantial housing-market exposure during the 2007–2008 crisis.

• Mortgage warehouse lending · 2004

  National City Warehouse Resources

  Created from Provident Financial Group’s warehouse-lending operations, this division supplied commercial credit lines to mortgage companies so they could originate loans for retention or sale to government-sponsored enterprises and institutional investors.

• Investment banking and capital markets

  NatCity Investments

  National City’s investment-banking arm provided capital-markets and related financial services under the NatCity identity during the company’s final years.

• 2008

  Regulatory memoranda concerning capital and risk management

  National City entered agreements with federal banking regulators concerning capital levels, risk-management practices, and other business matters. The arrangements became public as the company faced mounting mortgage losses, although the available reference does not describe them as a fraud or criminal finding.

  Source

Read more

• 2008

  Sale to PNC Financial ServicesM&A

  Background

  Escalating mortgage losses, regulatory scrutiny, and the global financial crisis left National City seeking a buyer.

  Action taken

  PNC agreed to acquire National City in a stock transaction supported in part by U.S. Treasury funds; the transaction closed on December 31, 2008.

  Aftermath

  National City was merged into PNC, and its independent brand and corporate identity were eventually discontinued.

  Announced transaction value. Approximately $5.2 billion in stock (October 24, 2008 announcement)

  Source

• 2007

  Share repurchase during deteriorating housing conditionsStrategy

  Background

  National City was facing increasing housing and mortgage risk while its capital position was becoming more important to investors and regulators.

  Action taken

  The company repurchased approximately $3 billion of its own stock in early 2007.

  Aftermath

  The repurchase reduced capital before the full scale of mortgage losses became evident.

  Share repurchase. Approximately $3 billion repurchased (Early 2007)

  Source

• 1999

  Retain and expand mortgage exposure through First FranklinStrategy

  Background

  Management pursued higher asset yields and acquired a major subprime mortgage lender. National City retained many originated loans instead of distributing them immediately.

  Action taken

  The company expanded broker-sourced subprime and home-equity lending and carried substantial mortgage assets on its balance sheet.

  Aftermath

  The strategy increased earnings exposure to housing credit but contributed to severe losses when the subprime market deteriorated.

  Source

1. 1National City Corp.en.wikipedia.org