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National City Reports Second Quarter 2008 Results
CLEVELAND, July 24 /PRNewswire-FirstCall/ --
-- Net Loss of $1.8 Billion Driven By Actions to Increase Loss Reserves on
Liquidating Loan Portfolios; Includes $1.1 Billion After-Tax Non-Cash
Goodwill Charge Related to Previous Acquisitions -- No Effect on
Regulatory Capital
-- Excluding Unusual and Non-Operating Items, Pre-Tax Pre-Provision
Operating Earnings Were $610 Million, Up 19%
-- Tier 1 Capital $7 Billion over Well Capitalized Minimum; 11.1 % Tier 1
Capital Ratio Highest of All Major U.S. Banks
-- Net Charge-Offs of $740 Million, Predominantly in Liquidating Loan
Portfolios Versus $1.6 Billion Provision for Loan Losses; Nonprime
Delinquencies Down
-- Solid Progress in Actively Managing Liquidating Loan Portfolios, Which
are Isolated, Contained, and Performing in Line with Expectations
-- Aggressively Re-Focusing on Core Businesses, Which Remain Profitable;
Deposits Continue Solid Growth Trend
-- Enhanced Leadership Team Intensely Focused on Managing Risk,
Controlling Expenses and Improving Profitability
National City Corporation (NYSE: NCC) reported a net loss for the second quarter of 2008 of $1.8 billion, compared to a net loss of $171 million in the first quarter of 2008, and net income of $347 million in the second quarter a year ago. The net loss was $1.9 billion for the first half of 2008 compared to net income of $666 million in the first half of 2007. (Logo: http://www.newscom.com/cgi-bin/prnh/20030428/NATIONALCITYLOGO ) The quarter and year-to-date loss was mainly driven by actions to increase loss reserves on liquidating mortgage loan portfolios and a non-cash goodwill impairment charge of $1.1 billion related to previous acquisitions. The second quarter provision for loan losses was $1.6 billion, of which $1.0 billion pertained to liquidating portfolios of brokered home equity, nonprime mortgage, and construction loans to individuals. The second quarter provision for loan losses included supplemental reserves of $478 million, specifically reflecting the difficult environment in the housing market. Excluding unusual and non-operating items, pre-tax pre-provision operating earnings were $610 million in the second quarter of 2008, up 19% from $512 million in the first quarter of 2008. Net charge-offs of $740 million were predominantly in the liquidating portfolios and were less than half of the second quarter provision, resulting in a significant increase in the allowance for loan losses to 3.03% of portfolio loans. While the goodwill charge increased the reported net loss for the period, it had no effect on tangible equity, regulatory capital, or liquidity. As of June 30, 2008, the Tier 1 risk-based capital ratio was approximately 11.08%, up from 6.67% at March 31, 2008 and significantly in excess of the well-capitalized minimum of 6%. Total risk-based capital was approximately 14.90% and tangible equity to assets was approximately 8.94% at June 30, 2008.
Summary Financial Highlights
Second First Second
($ in millions, except Quarter Quarter Quarter YTD YTD
per share data) 2008 2008 2007 2008 2007
Pre-tax pre-provision
operating earnings* $610 $512 $690 $1,122 $1,330
Consolidated net (loss)/income (1,756) (171) 347 (1,927) 666
Diluted earnings per share (2.45) (.27) .60 (2.86) 1.09
Tier 1 capital ratio 11.08% 6.67% 6.56%
Total risk-based capital 14.90% 10.31% 10.28%
Tangible equity to tangible
assets 8.94 % 5.00 % 5.43%
Annualized net charge-offs
as a percentage of
average portfolio loans:
Core portfolio .90% .71% .30% .80% .36%
Commercial construction 1.70% .83% .25% 1.27% .26%
All other .81% .69% .31% .75% .37%
Liquidating portfolio 10.99% 7.02% .66% 8.91% .89%
*See reconciliation to net (loss) income reported in accordance with GAAP in the following table. Reconciliation of Pre-Tax Pre-Provision Operating Earnings Management has presented pre-tax pre-provision operating earnings in this release for purposes of additional analysis of operating results. Pre-tax pre-provision operating earnings, as defined by management, represents net (loss) income excluding income tax (benefit) expense, the provision for loan and recourse losses, as well as other unusual, nonrecurring or nonoperating items shown below. The following table reconciles pre-tax pre-provision operating earnings to consolidated net (loss)/income presented in accordance with U.S. generally accepted accounting principles (GAAP).
Second First Second
Quarter Quarter Quarter YTD YTD
($ in millions) 2008 2008 2007 2008 2007
Consolidated net (loss)/income $(1,756) $(171) $347 $(1,927) $666
Income tax (benefit) expense (667) (35) 175 (702) 309
Provision for loan losses 1,592 1,393 145 2,985 267
Goodwill impairment 1,080 - - 1,080 -
Provision for recourse losses 215 38 33 253 49
Visa-related gains - (772) - (772) -
MSR hedging losses (gains) 146 59 (10) 205 39
Pre-tax pre-provision
operating earnings $610 $512 $690 $1,122 $1,330
Consolidated net (loss)/income, measured in accordance with GAAP, is the principal and most useful measure of earnings and provides comparability of earnings with other companies. However, management believes presenting pre-tax pre-provision operating earnings provides investors with the ability to understand the company's underlying operating trends. Chairman's Comments Chairman, President and CEO Peter E. Raskind commented, "In this very challenging environment, we have made significant progress during the quarter in strengthening our balance sheet, mitigating losses in our liquidating portfolios and positioning National City for long-term growth when the credit cycle turns. With the completion of our $7 billion capital raise, National City is by far the best capitalized bank among its peer group - and is the best capitalized of all major U.S. banks. We continue to generate strong pre- provision income, and we are confident that we have more than sufficient capital to ride out turbulent credit markets. We fully recognize that we need to improve performance. Our management team is aggressively executing on plans to manage risk, cut expenses, and improve profitability. We are sharpening our focus on our core businesses while continuing to serve customers as one of the leading banks in our region. We believe that the fundamental strengths of our business model will help drive a return to profitability. As we continue to work through the current credit market turbulence, we are building our core business through profitable relationship growth and expansion." Significant Actions to Strengthen Operations and Manage Risks National City has taken a number of other actions to re-focus its operations, cut costs, enhance risk management and strengthen its management team, including:
-- Restructuring the mortgage business under a new management team,
exiting all broker-based mortgage and home equity operations, closing
correspondent lending, reducing national home equity exposures, and
lowering mortgage headcount;
-- Sharpening focus of the core commercial banking business, including
curtailing out-of-footprint commercial real estate loans, reducing
credit-only or credit-heavy relationships, focusing on higher-return
relationships, and continuing to make significant investments in non-
credit capabilities such as treasury management services;
-- Continuing to build out and differentiate the retail franchise,
offering industry-leading products and services that are driving
household retention and expansion, while attracting new customer
relationships. This includes "Points from National City," the most
comprehensive banking rewards program in the industry; a checking
product line that waives ATM fees; and Work Perks, National City's
"bank at work" program;
-- Appointing new senior executives - including a chief risk officer and
new heads of the mortgage and corporate banking units - as well as a
new board member.
-- Initiating a search for a new CFO as well as for two new directors to
join the National City Board;
-- Ongoing review of potential troubled asset disposition opportunities to
the extent such transactions make economic sense; and
-- Making significant investments in risk management processes, talent and
technology.
"We believe we have clearly identified and segregated our portfolio of non-core assets and have much better visibility regarding loss estimates than we did earlier this year. As a result, we expect the provision for loan losses to decline in the second half of 2008. Our liquidating portfolios are isolated and contained, and are performing in line with expectations. More importantly, we are making progress in reducing the size of the liquidating portfolio and mitigating associated losses," continued Raskind. "National City was among the first in our peer group to raise capital and build reserves. Our strong capital position not only enables us to fully address the ongoing challenges in the credit and housing markets, but also allows us to continue investing in and growing our core businesses, which continue to be profitable."
Consolidated Income Statement Highlights
Second First Second
($ in millions, except per Quarter Quarter Quarter YTD YTD
share data) 2008 2008 2007 2008 2007
Tax-equivalent net interest
income $1,021 $1,069 $1,096 $2,090 $2,214
Provision for loan losses 1,592 1,393 145 2,985 267
Net interest (expense) income
after provision for loan losses (571) (324) 951 (895) 1,947
Noninterest income 431 1,138 764 1,569 1,385
Noninterest expense 2,277 1,012 1,186 3,289 2,342
(Loss) income before income
taxes (2,417) (198) 529 (2,615) 990
Income tax (benefit) provision
and tax equivalent adjustment (661) (27) 182 (688) 324
Net (loss) income $(1,756) $(171) $347 $(1,927) $666
Net (loss) income available to
common shareholders (1,771) (171) 346 (1,942) 665
Diluted earnings per common share (2.45) (.27) .60 (2.86) 1.09
Net Interest Income Tax-equivalent net interest income was $1.0 billion for the second quarter of 2008, down about 5% compared to the immediately preceding quarter, and down 7% compared to the second quarter a year ago due to lower net interest margin. Net interest margin was 2.97% in the second quarter of 2008, 3.18% in the first quarter of 2008, and 3.59% in the second quarter a year ago. The lower margin in the second quarter 2008 reflects higher levels of nonperforming loans, as well as lower interest rates, which moved loan yields more than funding costs. Average earning assets for the second quarter of 2008 were $137.8 billion, up 2% compared to the preceding quarter, and up 13% compared to the second quarter a year ago, largely due to an acquisition completed in the last half of 2007. Tax-equivalent net interest income was $2.1 billion for the first half of 2008, down 6% compared to the prior year. Net interest margin was 3.08% for the first half of 2008 compared to 3.64% in the first half of 2007. The lower margin in 2008 is attributable to the same factors previously described. Average earning assets were $136.2 billion in the first half of 2008, up 12% from the same period a year ago. Provision for Loan Losses The provision for loan losses was $1.6 billion in the second quarter of 2008, $1.4 billion in the first quarter of 2008, and $145 million in the second quarter of 2007. The larger provision for loan losses reflects additional loss reserves for loans secured by residential real estate, inclusive of a $478 million supplemental reserve on liquidating portfolios of construction loans to individuals and broker-sourced nonprime mortgage and home equity loans. On a year-to-date basis, the provision for loan losses was $3.0 billion in 2008 compared to $267 million in 2007. Net charge-offs were $740 million in the second quarter of 2008, $538 million in the first quarter of 2008, and $98 million in the second quarter of last year, with the increase mainly in the liquidating portfolios. Net charge-offs in the core portfolio were $213 million in the second quarter versus $166 million in the first quarter primarily due to increased losses in commercial construction; both commercial and branch home equity charge-offs were fairly stable. Net charge-offs for the liquidating portfolio were $527 million, up $155 million from first quarter 2008 due to higher write-offs of construction loans to individuals, reflecting higher loss severities. On a year-to-date basis, net charge-offs were $1.3 billion in 2008 and $245 million in 2007. The Corporation's liquidating loan portfolios are managed separately from the core portfolio. The core portfolio consists of commercial and consumer loans associated with ongoing businesses. The liquidating loan portfolios consist of consumer loans associated with products and/or origination channels that have been exited, specifically broker-sourced nonprime mortgage loans, broker-sourced home equity lines and loans, construction loans to individuals, and indirect automobile, marine and recreational vehicle loans. The following tables show the provision for loan losses and net charge-offs for the core portfolio separately from the liquidating portfolios.
Second First Second
Quarter Quarter Quarter YTD YTD
($ in millions) 2008 2008 2007 2008 2007
Provision for Loan Losses:
Core portfolio $565 $405 $86 $970 $102
Liquidating portfolios 1,027 988 59 2,015 165
Total $1,592 $1,393 $145 $2,985 $267
Second First Second
Quarter Quarter Quarter YTD YTD
($ in millions) 2008 2008 2007 2008 2007
Net charge-offs:
Core portfolio:
Commercial loans and leases $39 $24 $19 $63 $42
Commercial construction 39 19 5 58 10
Commercial real estate 22 7 (1) 29 1
Mortgage and other consumer 113 116 34 229 80
Total core 213 166 57 379 133
Liquidating portfolios 527 372 41 899 112
Total $740 $538 $98 $1,278 $245
Loans 90 days past due were $1.2 billion at June 30, 2008, down 12% from March 31, 2008 due primarily to lower levels of past due nonprime mortgage loans, as this portfolio continues to runoff. Nonperforming assets were approximately $3.1 billion at June 30, 2008, up 14% from the preceding quarter, with the growth primarily in mortgage- and broker-sourced home equity loans, as well as commercial construction loans to residential real estate developers. Commercial and industrial nonperforming loans were flat. The table shown below reports these measures for the core and liquidating loan portfolios.
June 30, March 31, June 30,
($ in millions) 2008 2008 2007
Loans 90 days past due
Core portfolio:
Commercial loans and leases $28 $72 $45
Commercial construction 44 84 66
Commercial real estate 102 76 38
Residential real estate 498 487 192
Other consumer 67 70 37
Total core 739 789 378
Liquidating portfolios 417 524 731
Total $1,156 $1,313 $1,109
June 30, March 31, June 30,
($ in millions) 2008 2008 2007
Nonperforming Assets
Core portfolio:
Commercial loans and leases $236 $231 $125
Commercial construction 626 387 108
Commercial real estate 294 239 138
Residential real estate 421 337 83
Total core 1,577 1,194 454
Liquidating portfolios 1,021 1,070 110
Other real estate owned 528 488 284
Total $3,126 $2,752 $848
Allowance for loan losses
Core portfolio $1,603 $1,252 $856
Liquidating portfolios 1,831 1,330 280
Total $3,434 $2,582 $1,136
Allowance for loan losses as a
percentage of portfolio loans
Core portfolio 1.71% 1.33% 1.09%
Liquidating portfolios 9.20 6.20 1.34
Total loan portfolio 3.03 2.23 1.14
Noninterest Income
Noninterest income was $431 million in the second quarter of 2008, $1.1
billion in the first quarter of 2008, and $764 million in the second quarter a
year ago. The decline in second quarter resulted from mortgage servicing
right (MSR) hedging losses of $146 million, a mortgage recourse provision of
$215 million, and a $532 million gain on the partial redemption of Visa shares
in the first quarter of 2008. On a year-to-date basis, noninterest income was
$1.6 billion in the first half of 2008 compared to $1.4 billion in the first
half of 2007.
Second First Second
Quarter Quarter Quarter YTD YTD
($ in millions) 2008 2008 2007 2008 2007
Deposit service charges $260 $230 $223 $490 $427
Loan sale and servicing
(loss) revenue* (141) 105 206 (36) 313
Security (losses) gains* (11) 515 (1) 504 26
All other 323 288 336 611 619
Total noninterest income $431 $1,138 $764 $1,569 $1,385
*MSR hedging losses and mortgage recourse provision included within loan sale and servicing. Gain on redemption of Visa shares included within security gains. Deposit service fees were $260 million in the second quarter of 2008, up 13% compared to the first quarter and 17% compared to the second quarter a year ago. On a year-to-date basis, deposit service fees were $490 million, up 15% from the same period last year. The growth compared to the preceding quarter reflects higher fee generating transaction volumes, as the first quarter of the year generally has seasonally lower volumes of overdraft and nonsufficient funds transactions. The growth in deposit service fees compared to a year ago reflects continued growth in the number of deposit accounts, including the effect of an acquisition completed in the last half of 2007. Loan sale (loss) revenue was $(94) million in the second quarter of 2008, $89 million in the first quarter of 2008, and $110 million in the second quarter a year ago. The loss from loan sales in the second quarter of 2008 resulted from a provision for potential recourse losses of $215 million related to mortgage and home equity loan repurchases. The mortgage recourse reserve increased to $364 million at June 30, 2008, up $168 million compared to March 31, 2008. On a year-to-date basis, loan sale (loss) revenue was $(5) million in 2008 and $185 million in 2007. On a year-over-year basis, loan sale revenue has declined due to lower originations as the Corporation has exited certain products and origination channels, as well as the larger provision for potential losses on mortgage loan repurchases. Loan servicing (loss) revenue was $(47) million in the second quarter of 2008, $16 million in the first quarter of 2008, and $96 million in the second quarter a year ago. This decrease primarily reflects net MSR hedging (losses)/gains of $(146) million in the second quarter of 2008, $(59) million in the first quarter of 2008, and $10 million in the second quarter a year ago. On a year-to-date basis, loan servicing losses were $(31) million in the first half of 2008, inclusive of $(205) million of net MSR hedging losses, compared to loan servicing revenue of $128 million in the first half of 2007, inclusive of $(39) million of net MSR hedging losses. Noninterest Expense Noninterest expense was $2.3 billion in the second quarter of 2008, $1.0 billion in the first quarter of 2008, and $1.2 billion in the second quarter a year ago. Noninterest expense was $3.3 billion for the first half of 2008 compared to $2.3 billion in the first half of 2007, with the increase due mainly to a goodwill impairment charge of $1.1 billion associated with previous acquisitions. Noninterest expense for the first quarter and first half of 2008 benefited from the release of $240 million of Visa indemnification liabilities.
Second First Second
Quarter Quarter Quarter YTD YTD
($ in millions) 2008 2008 2007 2008 2007
Salaries, benefits and other $619 $659 $642 $1,278 $1,275
personnel costs
Impairment, fraud and other
losses* 1,098 (197) 14 901 20
Foreclosure costs 61 49 13 110 23
All other 499 501 517 1,000 1,024
Total noninterest expense $2,277 $1,012 $1,186 $3,289 $2,342
*Goodwill impairment and Visa indemnification included within impairment, fraud and other losses. Personnel costs decreased about 6% compared to the preceding quarter, and 4% compared to the second quarter a year earlier, due to reductions in staffing and lower business volumes, particularly in the mortgage business. Full-time equivalent employees were 30,302 at June 30, 2008 versus 30,841 at March 31, 2008, and 32,445 at June 30, 2007. On a year-to-date basis, personnel costs were about the same for the first half of 2008 and 2007. Cost savings from reduced staffing levels in 2008 were offset by lower deferrals of loan origination costs resulting from the adoption of fair value for certain loans held for sale at the beginning of the year. Foreclosure costs increased to $61 million in the second quarter, up $12 million from the immediately preceding quarter, and $48 million versus the second quarter a year ago. On a year-to-date basis, foreclosure costs were $110 million in the first half of 2008, up $87 million from the first half of 2007. Foreclosure costs have increased significantly due to more loans proceeding to foreclosure, as well as higher losses realized upon sale of foreclosed properties as a result of declining property values. All other noninterest expenses were relatively stable between periods as management has worked to control costs.
Balance Sheet
Loans Average portfolio loans were $114.1 billion in the second quarter of 2008, $115.4 billion in the preceding quarter and $99.7 billion in the second quarter a year ago. The table shown below summarizes the average balances for both the core and liquidating portfolios, as well as loans held for sale.
Second First Second
Quarter Quarter Quarter
($ in millions) 2008 2008 2007
Core portfolio $94,880 $94,183 $74,870
Liquidating portfolios 19,185 21,196 24,819
Total portfolio loans 114,065 115,379 99,689
Loans held-for-sale 3,075 4,494 12,615
Continued runoff of the liquidating loan portfolio due to paydowns and charge-offs, as well as a credit card securitization of $374 million, resulted in a somewhat smaller average loan portfolio compared to the preceding quarter. Compared to second quarter a year ago, portfolio loan growth was driven by growth in commercial loans, a late 2007 acquisition, and transfers of formerly held for sale loans to portfolio. Average loans held-for-sale were $3.1 billion in the second quarter of 2008, down $1.4 billion compared to the preceding quarter, and down $9.5 billion compared to the second quarter a year ago. The lower levels of loans held-for-sale reflects the curtailment of certain mortgage and home equity products and origination channels. Deposits Average total deposits were $99.6 billion in the second quarter of 2008, up $2 billion compared to the preceding quarter, and up $9.5 billion compared to the second quarter a year ago. Average core deposits, excluding mortgage escrow and custodial balances, were $84.3 billion in the second quarter of 2008, up $1.1 billion compared to the first quarter of 2008, and up $10.3 billion compared to the second quarter a year ago. Core deposits have increased with continued household growth and expansion as well as a late 2007 acquisition. Capital Total stockholders' equity was $18.0 billion at June 30, 2008 and tangible stockholders' equity was $13.3 billion, up $5.9 billion compared to March 31, 2008. During the second quarter of 2008, the Corporation raised $7.0 billion of equity capital by issuing common and contingently convertible preferred shares. The contingently convertible preferred shares will automatically convert into common shares five business days after stockholder approval. The shareholder meeting is scheduled for September 15, 2008. Capital ratios are shown in the table below.
Second First Second
Quarter Quarter Quarter
2008 2008 2007
Capital Ratios
Tier 1 capital 11.08% 6.67% 6.56%
Total risk-based capital 14.90% 10.31% 10.28%
Tier 1 leverage 10.33% 6.49% 6.53%
Period end equity to assets 11.70% 8.53% 8.64%
Period end tangible equity to assets 8.94% 5.00% 5.43%
National City is by far the best-capitalized bank among its peer group and is the best-capitalized of all major U.S. banks. Conference Call Management of National City will host a conference call at 8:00 a.m. (ET) on Thursday, July 24, 2008 to discuss the second quarter 2008 results. Presentation slides to accompany the conference call remarks may be found at http://phx.corporate-ir.net/phoenix.zhtml?c=64242&p=irol-presentations . Interested parties may access the conference call by dialing 1-800-288-8961. Participants are encouraged to call in 15 minutes prior to the call in order to register for the event. The conference call will also be accessible via the Company's Web site, nationalcity.com/investorrelations. Questions for discussion at the conference call may be submitted any time prior to or during the call by sending an email to investor.relations@nationalcity.com. A replay of the conference call will be available from 1:00 p.m. (ET) on July 24, 2008, until midnight (ET) on July 31, 2008. The replay will be accessible by calling 1-800-475-6701 (domestic) or 320-365-3844 (international) using the pass code of 893754 or via the Company's Web site. National City Corporation (NYSE: NCC) , headquartered in Cleveland, Ohio, is one of the nation's largest financial holding companies. The company operates through an extensive banking network primarily in Ohio, Florida, Illinois, Indiana, Kentucky, Michigan, Missouri, Pennsylvania, and Wisconsin and also serves customers in selected markets nationally. Its core businesses include commercial and retail banking, mortgage financing and servicing, consumer finance and asset management. For more information about National City, visit the company's Web site at nationalcity.com. Forward-Looking Statements This document contains forward-looking statements. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance, nor should they be relied upon as representing management's views as of any subsequent date. The forward- looking statements are based on management's expectations and are subject to a number of risks and uncertainties. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include, without limitation, the Corporation's ability to effectively execute its business plans; changes in general economic and financial market conditions including the housing and residential mortgage markets; changes in interest rates; changes in the competitive environment; continuing consolidation in the financial services industry; new litigation or changes in existing litigation; losses, customer bankruptcies, claims and assessments; changes in banking regulations or other regulatory or legislative requirements affecting the Corporation's business; and changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies. Additional information concerning factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements is available in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2007, and subsequent filings with the United States Securities and Exchange Commission (SEC). Copies of these filings are available at no cost on the SEC's Web site at sec.gov or on the Corporation's Web site at nationalcity.com/investorrelations. Management may elect to update forward- looking statements at some future point; however, it specifically disclaims any obligation to do so.
Unaudited
National City Corporation
CONSOLIDATED FINANCIAL HIGHLIGHTS
(In millions, except per share data)
2008 2007
2nd Qtr 1st Qtr 4th Qtr
EARNINGS
Tax-equivalent interest income $1,886 $2,132 $2,381
Interest expense 865 1,063 1,272
Tax-equivalent net interest income 1,021 1,069 1,109
Provision for loan losses 1,592 1,393 691
Tax-equivalent (NIE) NII after
provision for loan losses (571) (324) 418
Noninterest income 431 1,138 597
Noninterest expense 2,277 1,012 1,567
(Loss) income before taxes and tax-
equivalent adjustment (2,417) (198) (552)
Income tax (benefit) expense (667) (35) (226)
Tax-equivalent adjustment 6 8 7
Net (loss) income ($1,756) ($171) ($333)
Effective tax rate (27.5)% (17.0)% (40.5)%
PER COMMON SHARE
Net (loss) income:
Basic ($2.45) ($.27) ($.53)
Diluted (2.45) (.27) (.53)
Dividends paid .01 .21 .41
Book value 15.07 20.61 21.15
Market value (close) 4.77 9.95 16.46
Average shares:
Basic 722.9 633.4 633.2
Diluted 722.9 633.4 633.2
PERFORMANCE RATIOS
Return on average common equity - - -
Return on average total equity - - -
Return on average assets - - -
Net interest margin 2.97% 3.18% 3.30%
Efficiency ratio 156.79 45.84 91.86
LINE OF BUSINESS (LOB) RESULTS
Net Income:
Retail Banking $151 $97 $174
Commercial Banking - Regional (1,103) 30 83
Commercial Banking - National (5) 62 68
Mortgage Banking (375) (295) (346)
Asset Management 20 19 24
Parent and Other (444) (84) (336)
Total Consolidated National City
Corporation ($1,756) ($171) ($333)
LOB Contribution to Diluted Earnings
Per Share:
Retail Banking $.21 $.15 $.28
Commercial Banking - Regional (1.53) .05 .14
Commercial Banking - National (.01) .10 .11
Mortgage Banking (.52) (.47) (.56)
Asset Management .03 .03 .04
Parent and Other (.63) (.13) (.54)
Total Consolidated National City
Corporation ($2.45) ($.27) ($.53)
2007
3rd Qtr 2nd Qtr 1st Qtr
EARNINGS
Tax-equivalent interest income $2,360 $2,255 $2,218
Interest expense 1,258 1,159 1,100
Tax-equivalent net interest income 1,102 1,096 1,118
Provision for loan losses 368 145 122
Tax-equivalent (NIE) NII after
provision for loan losses 734 951 996
Noninterest income 624 764 621
Noninterest expense 1,396 1,186 1,156
(Loss) income before taxes and tax-
equivalent adjustment (38) 529 461
Income tax (benefit) expense (26) 175 134
Tax-equivalent adjustment 7 7 8
Net (loss) income ($19) $347 $319
Effective tax rate (58.4)% 33.6% 29.5%
PER COMMON SHARE
Net (loss) income:
Basic ($.03) $.60 $.50
Diluted (.03) .60 .50
Dividends paid .41 .39 .39
Book value 21.86 21.45 22.12
Market value (close) 25.09 33.32 37.25
Average shares:
Basic 588.1 572.7 631.7
Diluted 588.1 580.4 640.5
PERFORMANCE RATIOS
Return on average common equity - 11.35% 8.98%
Return on average total equity - 11.37 8.99
Return on average assets - 1.00 .94
Net interest margin 3.43% 3.59 3.69
Efficiency ratio 80.89 63.76 66.50
LINE OF BUSINESS (LOB) RESULTS
Net Income:
Retail Banking $172 $193 $170
Commercial Banking - Regional 105 100 128
Commercial Banking - National 45 78 97
Mortgage Banking (125) 24 (26)
Asset Management 21 29 27
Parent and Other (237) (77) (77)
Total Consolidated National City
Corporation ($19) $347 $319
LOB Contribution to Diluted Earnings
Per Share:
Retail Banking $.29 $.33 $.27
Commercial Banking - Regional .17 .17 .20
Commercial Banking - National .07 .14 .15
Mortgage Banking (.21) .04 (.04)
Asset Management .03 .05 .04
Parent and Other (.38) (.13) (.12)
Total Consolidated National City
Corporation ($.03) $.60 $.50
2006
4th Qtr 3rd Qtr 2nd Qtr
EARNINGS
Tax-equivalent interest income $2,270 $2,298 $2,243
Interest expense 1,137 1,148 1,076
Tax-equivalent net interest income 1,133 1,150 1,167
Provision for loan losses 325 70 62
Tax-equivalent (NIE) NII after
provision for loan losses 808 1,080 1,105
Noninterest income 1,702 877 784
Noninterest expense 1,208 1,187 1,172
(Loss) income before taxes and tax-
equivalent adjustment 1,302 770 717
Income tax (benefit) expense 452 236 238
Tax-equivalent adjustment 8 8 6
Net (loss) income $842 $526 $473
Effective tax rate 34.9% 30.9% 33.5%
PER COMMON SHARE
Net (loss) income:
Basic $1.37 $.87 $.77
Diluted 1.36 .86 .77
Dividends paid .39 .39 .37
Book value 23.06 21.44 20.84
Market value (close) 36.56 36.60 36.19
Average shares:
Basic 611.9 603.8 609.7
Diluted 620.7 612.1 618.2
PERFORMANCE RATIOS
Return on average common equity 24.93% 16.45% 15.08%
Return on average total equity 24.94 16.46 15.10
Return on average assets 2.44 1.51 1.35
Net interest margin 3.73 3.73 3.73
Efficiency ratio 42.64 58.59 60.04
LINE OF BUSINESS (LOB) RESULTS
Net Income:
Retail Banking $129 $192 $208
Commercial Banking - Regional 114 113 106
Commercial Banking - National 77 101 99
Mortgage Banking (20) 34 (51)
Asset Management 23 23 30
Parent and Other 519 63 81
Total Consolidated National City
Corporation $842 $526 $473
LOB Contribution to Diluted Earnings
Per Share:
Retail Banking $.21 $.31 $.34
Commercial Banking - Regional .18 .19 .17
Commercial Banking - National .12 .17 .16
Mortgage Banking (.03) .06 (.08)
Asset Management .04 .03 .05
Parent and Other .84 .10 .13
Total Consolidated National City
Corporation $1.36 $.86 $.77
Six Months Ended
June 30,
2008 2007
EARNINGS
Tax-equivalent interest income $4,018 $4,473
Interest expense 1,928 2,259
Tax-equivalent net interest income 2,090 2,214
Provision for loan losses 2,985 267
Tax-equivalent (NIE) NII after
provision for loan losses (895) 1,947
Noninterest income 1,569 1,385
Noninterest expense 3,289 2,342
(Loss) income before taxes and tax-
equivalent adjustment (2,615) 990
Income tax (benefit) expense (702) 309
Tax-equivalent adjustment 14 15
Net (loss) income ($1,927) $666
Effective tax rate (26.7)% 31.7%
PER COMMON SHARE
Net (loss) income:
Basic ($2.86) $1.10
Diluted (2.86) 1.09
Dividends paid .22 .78
Book value
Market value (close)
Average shares:
Basic 678.2 602.1
Diluted 678.2 610.3
PERFORMANCE RATIOS
Return on average common equity - 10.08%
Return on average total equity - 10.09
Return on average assets - .97
Net interest margin 3.08% 3.64
Efficiency ratio 89.86 65.08
LINE OF BUSINESS (LOB) RESULTS
Net Income:
Retail Banking $248 $363
Commercial Banking - Regional (1,073) 228
Commercial Banking - National 57 175
Mortgage Banking (670) (2)
Asset Management 39 56
Parent and Other (528) (154)
Total Consolidated National City
Corporation ($1,927) $666
LOB Contribution to Diluted Earnings
Per Share:
Retail Banking $.36 $.60
Commercial Banking - Regional (1.58) .37
Commercial Banking - National .08 .29
Mortgage Banking (.99) -
Asset Management .06 .09
Parent and Other (.79) (.26)
Total Consolidated National City
Corporation ($2.86) $1.09
Unaudited
National City Corporation
CONSOLIDATED FINANCIAL HIGHLIGHTS (continued)
($ in millions)
2008 2007
2nd Qtr 1st Qtr 4th Qtr
CREDIT QUALITY STATISTICS
Net charge-offs $740 $538 $275
Provision for loan losses 1,592 1,393 691
Loan loss allowance 3,434 2,582 1,762
Lending-related commitment allowance 75 67 65
Nonperforming assets 3,126 2,752 1,523
Annualized net charge-offs to average
portfolio loans 2.61% 1.88% .96%
Loan loss allowance to period-end
portfolio loans 3.03 2.23 1.52
Loan loss allowance to nonperforming
portfolio loans 132.59 114.25 161.55
Loan loss allowance (period-end) to
annualized net charge-offs 115.45 119.22 161.24
Nonperforming assets to period-end
portfolio loans and other
nonperforming assets 2.74 2.37 1.31
CAPITAL AND LIQUIDITY RATIOS
Tier 1 capital(1) 11.08% 6.67% 6.53%
Total risk-based capital(1) 14.90 10.31 10.27
Leverage(1) 10.33 6.49 6.39
Period-end equity to assets 11.70 8.53 8.95
Period-end tangible equity to assets(2) 8.94 5.00 5.29
Average equity to assets 11.35 8.76 8.88
Average equity to portfolio loans 15.30 11.62 11.94
Average portfolio loans to deposits 114.58 118.23 115.45
Average portfolio loans to core deposits 127.65 131.57 130.20
Average portfolio loans to earning assets 82.80 85.75 84.60
Average securities to earning assets 6.16 6.38 6.58
AVERAGE BALANCES
Assets $153,852 $153,032 $152,566
Portfolio loans 114,065 115,379 113,484
Loans held for sale or securitization 3,075 4,494 8,340
Securities (at cost) 8,491 8,588 8,826
Earning assets 137,755 134,552 134,142
Core deposits 89,357 87,691 87,164
Purchased deposits and funding 43,361 47,475 47,450
Total equity 17,455 13,411 13,554
PERIOD-END BALANCES
Assets $153,673 $155,038 $149,852
Portfolio loans 113,420 115,859 116,022
Loans held for sale or securitization 2,385 4,536 4,290
Securities (at fair value) 9,404 8,449 8,731
Core deposits 91,096 89,135 87,536
Purchased deposits and funding 40,603 48,733 44,822
Total equity 17,981 13,223 13,408
2007
3rd Qtr 2nd Qtr 1st Qtr
CREDIT QUALITY STATISTICS
Net charge-offs $141 $98 $147
Provision for loan losses 368 145 122
Loan loss allowance 1,373 1,136 1,104
Lending-related commitment allowance 54 61 63
Nonperforming assets 1,211 848 801
Annualized net charge-offs to average
portfolio loans .54% .39% .61%
Loan loss allowance to period-end
portfolio loans 1.23 1.14 1.11
Loan loss allowance to nonperforming
portfolio loans 159.42 202.16 206.08
Loan loss allowance (period-end) to
annualized net charge-offs 245.43 291.06 184.68
Nonperforming assets to period-end
portfolio loans and other
nonperforming assets 1.08 .85 .80
CAPITAL AND LIQUIDITY RATIOS
Tier 1 capital(1) 6.78% 6.56% 7.08%
Total risk-based capital(1) 10.37 10.28 10.13
Leverage(1) 6.96 6.53 6.92
Period-end equity to assets 8.98 8.64 9.51
Period-end tangible equity to assets (2) 5.29 5.43 6.26
Average equity to assets 8.71 8.83 10.45
Average equity to portfolio loans 12.10 12.27 14.66
Average portfolio loans to deposits 111.70 110.74 111.78
Average portfolio loans to core
deposits 128.17 127.87 128.66
Average portfolio loans to earning
assets 81.43 81.48 80.79
Average securities to earning assets 6.11 5.84 6.34
AVERAGE BALANCES
Assets $145,095 $138,587 $137,810
Portfolio loans 104,439 99,689 98,198
Loans held for sale or securitization 12,643 12,615 11,769
Securities (at cost) 7,835 7,143 7,704
Earning assets 128,249 122,344 121,543
Core deposits 81,484 77,964 76,322
Purchased deposits and funding 47,093 44,604 43,001
Total equity 12,636 12,231 14,398
PERIOD-END BALANCES
Assets $154,166 $140,636 $138,559
Portfolio loans 111,991 99,683 99,566
Loans held for sale or securitization 11,987 14,421 10,693
Securities (at fair value) 8,977 7,024 7,208
Core deposits 86,450 79,043 77,884
Purchased deposits and funding 49,193 45,036 42,897
Total equity 13,843 12,147 13,170
2006
4th Qtr 3rd Qtr 2nd Qtr
CREDIT QUALITY STATISTICS
Net charge-offs $128 $117 $76
Provision for loan losses 325 70 62
Loan loss allowance 1,131 932 989
Lending-related commitment allowance 78 80 77
Nonperforming assets 732 689 667
Annualized net charge-offs to average
portfolio loans .54% .48% .30%
Loan loss allowance to period-end
portfolio loans 1.18 1.00 .98
Loan loss allowance to nonperforming
portfolio loans 226.13 198.25 202.14
Loan loss allowance (period-end) to
annualized net charge-offs 223.38 200.10 326.17
Nonperforming assets to period-end
portfolio loans and other
nonperforming assets .76 .74 .66
CAPITAL AND LIQUIDITY RATIOS
Tier 1 capital(1) 8.93% 7.48% 7.31%
Total risk-based capital(1) 12.16 10.30 10.20
Leverage(1) 8.56 7.13 6.89
Period-end equity to assets 10.40 9.34 8.91
Period-end tangible equity to assets (2) 7.77 6.99 6.60
Average equity to assets 9.78 9.16 8.97
Average equity to portfolio loans 14.38 13.03 12.35
Average portfolio loans to deposits 110.18 116.64 122.88
Average portfolio loans to core deposits 131.69 140.31 146.55
Average portfolio loans to earning assets 76.65 79.11 81.32
Average securities to earning assets 6.43 6.40 6.24
AVERAGE BALANCES
Assets $136,893 $138,434 $140,019
Portfolio loans 93,124 97,404 101,757
Loans held for sale or securitization 17,425 15,065 12,760
Securities (at cost) 7,806 7,874 7,802
Earning assets 121,488 123,126 125,127
Core deposits 70,717 69,419 69,434
Purchased deposits and funding 48,917 52,321 54,338
Total equity 13,388 12,687 12,565
PERIOD-END BALANCES
Assets $140,191 $138,123 $141,486
Portfolio loans 95,492 92,963 100,973
Loans held for sale or securitization 12,853 19,505 12,964
Securities (at fair value) 7,509 7,906 7,726
Core deposits 73,375 68,788 69,744
Purchased deposits and funding 47,147 51,987 54,069
Total equity 14,581 12,902 12,610
Six Months Ended
June 30,
2008 2007
CREDIT QUALITY STATISTICS
Net charge-offs $1,278 $245
Provision for loan losses 2,985 267
Loan loss allowance
Lending-related commitment allowance
Nonperforming assets
Annualized net charge-offs to average
portfolio loans 2.24% .50%
Loan loss allowance to period-end
portfolio loans
Loan loss allowance to nonperforming
portfolio loans
Loan loss allowance (period-end) to
annualized net charge-offs 133.63 230.17
Nonperforming assets to period-end
portfolio loans and other
nonperforming assets
CAPITAL AND LIQUIDITY RATIOS
Tier 1 capital(1)
Total risk-based capital(1)
Leverage(1)
Period-end equity to assets
Period-end tangible equity to assets (2)
Average equity to assets 10.06% 9.63%
Average equity to portfolio loans 13.45 13.45
Average portfolio loans to deposits 116.39 111.25
Average portfolio loans to core deposits 129.59 128.26
Average portfolio loans to earning assets 84.26 81.14
Average securities to earning assets 6.27 6.09
AVERAGE BALANCES
Assets $153,442 $138,201
Portfolio loans 114,722 98,947
Loans held for sale or securitization 3,785 12,194
Securities (at cost) 8,539 7,422
Earning assets 136,153 121,946
Core deposits 88,524 77,147
Purchased deposits and funding 45,419 43,808
Total equity 15,433 13,308
PERIOD-END BALANCES
Assets
Portfolio loans
Loans held for sale or securitization
Securities (at fair value)
Core deposits
Purchased deposits and funding
Total equity
(1) Second quarter 2008 regulatory capital ratios are based upon
preliminary data
(2) Excludes goodwill and other intangible assets
Supplemental financial information available at:
http://media.corporate-ir.net/media_files/irol/64/64242/sup/2Q08.pdf
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