National City Corp.

This article is about the Cleveland bank. For the historic name of the predecessor to Citibank, see the article there
National City Corporation
Public (NYSE:NCC)[1]
Industry Super regional banks
Fate Acquired by PNC Financial Services
Founded 1845
Defunct 2008
Headquarters Cleveland, Ohio, United States
Products commercial and retail banking, mortgage financing and servicing, consumer finance and asset management

National City Corporation was a regional bank holding company based in Cleveland, Ohio, USA, founded in 1845; it was once one of the ten largest banks in America in terms of deposits, mortgages and home equity lines of credit. Subsidiary National City Mortgage is credited for doing the first mortgage in America. The company operated through an extensive banking network primarily in Ohio, Illinois, Indiana, Kentucky, Michigan, Missouri, Pennsylvania, Florida, and Wisconsin, and also served customers in selected markets nationally. Its core businesses included commercial and retail banking, mortgage financing and servicing, consumer finance, and asset management. The bank reached out to customers primarily through mass advertising and offered comprehensive banking services online. In its last years, the company was commonly known in the media by the abbreviated NatCity,[2][3] with its investment banking arm even bearing the official name NatCity Investments.[4]

In 2007, National City Corp. ranked number 188 on the Fortune 500 list, and 9th in terms of revenue in the U.S. commercial banking industry with total assets of about $140 billion.

PNC Financial Services announced October 24, 2008, its purchase of National City for about $5.2 billion in stock with funds from the U.S. Treasury. At the time of the acquisition, National City had been the 7th largest bank in the United States,[5] two spots ahead of acquirer PNC. The deal was finalized on December 31, 2008, and the National City name was retired on June 14, 2010.

Regulatory scrutiny

The Wall Street Journal reported on June 6, 2008, that National City Corp. had entered into a memorandum of understanding with federal regulators, effectively putting the bank on probation. Terms of the confidential agreement, entered into a month earlier with the Office of the Comptroller of the Currency (which regulates nationally chartered banks), were not known.[6]

On June 10, 2008, National City Corp. confirmed that it had reached agreements with regulators "regarding capital levels, risk-management practices and other aspects of its business." The company stated that there had been no material developments in these areas since these memorandums of understanding were signed in April and May 2008.[7]

History

National City branch in Springboro, Ohio.

National City Bank was founded on May 17, 1845, when a group of Cleveland businessmen pooled $50,000 to organize the City Bank of Cleveland, the first bank opened under the Ohio Bank Act of 1845 in a small town with no gas, electricity, public waterworks, or railroad.[8] Reuben Sheldon and Theodoric C. Severance, formerly of the Fireman's Insurance Company, organized The City Bank of Cleveland. The city's only bank at the time, opened its doors to the public at No. 52 Superior Street.[9]

Recent transactions

National City went on an acquisition spree from 2004 through 2008, headed by its $2.1 billion purchase of Cincinnati-based Provident Financial Group. Provident Financial Group's banking arm, Provident Bank, specialized in warehouse lending facilities whereby it extended commercial credit lines to mortgage banking firms so that the mortgage banking firms could make loans to their customers and either keep those loans or sell them in the secondary market to government-sponsored enterprises (GSEs) or other institutional investors. After the acquisition, National City renamed the division National City Warehouse Resources. The warehouse lending division was a profit center and did not contribute to the Bank's downfall. In addition, in 2005, National City acquired Allegiant Bancorp to secure a presence in the St. Louis, Missouri market. In 2006, they acquired Fidelity Bankshares Inc. for an estimated $1 billion deal that was half cash, half stock. The bank also acquired Harbor Florida Bancshares Inc. through a $1.1 billion stock deal, with both acquired banks located in Florida; these acquisitions gave National City $7.4 billion of assets and 94 branches in Florida.

On the other side of the ledger, National City sold to Bank of America its 83% stake in National Processing Company, which earns fees from processing merchant credit card transactions. The sale of San Jose, California based First Franklin origination franchise and related servicing platform to Merrill Lynch & Co. was completed on December 30, 2006 for $1.3 billion.

In May 2007, National City announced the purchase of MAF Bancorp Inc., the holding company for MidAmerica Bank. As of June 30, 2006, MidAmerica Bank had the 9th-ranked market share in the Chicago metropolitan area (Chicago-Joliet-Naperville) at 2.18%. Following the merger using the same dataset, the combined National City and MidAmerica Banks were expected to rank 4th in the Chicago market with a market share of 3.96% and deposits of more than $10 billion.[10]

Strategic changes and subsequent downfall

In the late 1990s, under former CEO David Daberko, National City began a strategy to increase the yields on it assets. In 1999, the company purchased First Franklin Financial Corp., a large subprime mortgage lender. Instead of selling the loans, as most mortgage companies do, National City retained many of the loans to enhance its net interest spreads. It also aggressively originated loans brought to the company by third-party mortgage brokers, as well as originating a large number of home equity loans. The amount of residential mortgage loans grew rapidly and came to exceed the level of commercial loans. By 2003, National City was the sixth-largest mortgage lender in the country. The company did sell its First Franklin Financial subsidiary in December 2006, but retained a large volume of loans that had been originated by the subsidiary. Management failed to recognize the extent of problems in the subprime market and did not take sufficient aggressive actions to reduce its real estate mortgage portfolio. National City subsequently made several other strategic mistakes, including buying back $3 billion of its stock in early 2007, thereby reducing its level of capital, and expanding into the Florida market in late 2006, just before the real estate market there went into a severe decline. As the subprime mortgage market began going into free fall in mid-2007 and continued into 2008, loan losses mounted. In the third quarter of 2007, the company suffered a net loss of $19 million. By the second quarter of 2008, the company had a net loss of $1.8 billion.[11][12]

Acquired by PNC

For more details on this topic, see National City acquisition by PNC.

On October 9, 2008, The Wall Street Journal ran an article citing unnamed sources indicating that National City was in talks with several other banks for a possible sale. The article named Pittsburgh-based PNC Financial Services, Toronto-based Scotiabank, and Minneapolis-based U.S. Bancorp as the leading contenders. A spokesperson for National City declined to comment on the report.[13][14] On October 24, 2008 PNC announced that it had finalized a purchase agreement for National City.

The acquisition was a stock purchase transaction to be completed before the end of 2008. National City would be merged into PNC, and the National City brand would be dissolved.[15][16] The deal was approved by shareholders of both banks on December 23, 2008.

The deal made PNC the largest bank in Pennsylvania, Ohio, and Kentucky, as well as the second largest bank in Maryland and Indiana. It greatly expanded PNC's presence in the Midwest, as well as entering PNC into the Florida market. Pittsburgh, Louisville, Kentucky, and Cincinnati were the only three markets before the acquisition in which both banks had a major presence.

In the case of Pittsburgh, the two banks had significant overlap, to the point that it would pose antitrust issues in Western Pennsylvania, since both banks had the top two market shares in that region.[17] As a result, the United States Department of Justice required PNC to sell off 50 National City branches in the Pittsburgh area and 11 more branches in and around Erie to competitors.[18] On April 7, 2009, PNC reached a deal with Buffalo-based First Niagara Bank to sell 57 of the branches;[19] First Niagara officially took over those branches on September 8, after the signs were changed over from National City during that year's Labor Day Weekend.[20] The branches not purchased by First Niagara were the four in Crawford County, Pennsylvania that PNC was still required to divest: one branch in Titusville was sold to The Farmer's National Bank of Emlenton,[21] with the other three (one in Conneaut Lake, and the other two in Meadville, including the branch inside Wal-Mart) were sold to Marquette Savings Bank.[22][23] Although employees at the branches being sold off were retained, there were still heavy layoffs at National City's headquarters in Cleveland. PNC originally stated that 5,800 employees would be laid off corporate-wide across the new organization. In actuality, over 15,000 employees were laid off, all of them from the previous National City, with PNC losing customer and deposit market share in the Cleveland area as a result. National City Bank had been the largest bank in the Cleveland market and held the largest deposit share of all of its competitors. After the PNC merger, Key Bank became the largest bank in Cleveland, gaining a significant share of deposits once held by National City.

The National City name lasted into 2010, since it would take PNC some time to integrate the two banks together.[24] Despite the branch closures and the sale of others to First Niagara and Emclaire, PNC still ended up with a 46% market share in Pittsburgh,[25] over three times the market share of second-place Citizens Financial Group, with 13%.[19] PNC began to convert the National City branches that were not sold off or closed on November 7, 2009,[26] starting with Pennsylvania (where the two had the most overlap), Florida, and the Youngstown & Steubenville, Ohio regions.[25] The conversion of National City to PNC was completed in June 2010, in the following phases:[27]

Combined PNC and National City Facts[34]

National City branch footprint prior to merger with PNC

Historical timeline[35]

From pioneer times to the Great Depression

Grows throughout much of Ohio

Becomes interstate bank

The final years: a banking conglomerate

Merger with PNC and last actions as independent bank

References

  1. Archived December 20, 2010, at the Wayback Machine.
  2. "Mentor: Neighbors try to help deer entangled in wire | Video". wkyc.com. Retrieved 2012-08-21.
  3. Archived November 14, 2006, at the Wayback Machine.
  4. Roger Mezger. "National City moves up to 7th largest U.S. bank | cleveland.com". Blog.cleveland.com. Retrieved 2012-08-21.
  5. National City under U.S. regulatory scrutiny: report, Rueters, June 6, 2008
  6. National City confirms agreements with regulators, MarketWatch.com, June 10, 2008
  7. National City 150th Celebration Book Team: National City – 150 Years, 1995
  8. "National City Corp.: Information from". Answers.com. Retrieved 2013-10-23.
  9. "FDIC: Summary of Deposits Disabled". .fdic.gov. 2011-05-20. Retrieved 2013-10-23.
  10. Mark Dodosh. "National City’s failed strategy threatens fate - Cleveland Business News - Northeast Ohio and Cleveland - Crain's Cleveland Business". Crainscleveland.com. Retrieved 2013-10-23. C1 control character in |title= at position 14 (help)
  11. "Ten ways National City could have avoided trouble | cleveland.com". Blog.cleveland.com. Retrieved 2012-08-21.
  12. Sabatini, Patricia (2008-10-09). "National City stock jumps on rumors of sale - Pittsburgh Post-Gazette". Post-gazette.com. Retrieved 2013-10-23.
  13. Chuck Crow/The Plain Dealer. "PNC-National City bank deal draws criticism | cleveland.com". Blog.cleveland.com. Retrieved 2012-08-21.
  14. Boselovic, Len (2008-10-24). "PNC acquiring National City - Pittsburgh Post-Gazette". Post-gazette.com. Retrieved 2013-10-23.
  15. Archived October 25, 2008, at the Wayback Machine.
  16. Fitzpatrick, Dan (September 9, 2007). "Smaller banks aiming to raise profiles locally - Pittsburgh Post-Gazette". Post-gazette.com. Retrieved 2012-08-21.
  17. "Attachement A : National Cikty branches to be Divested" (PDF). Usdoj.gov. Retrieved 2013-10-23.
  18. 1 2 http://kdka.com/business/PNC.First.Niagara.2.978660.html. Retrieved September 14, 2014. Missing or empty |title= (help)
  19. 1 2 3 Archived November 10, 2009, at the Wayback Machine.
  20. "Farmers National Bank of Emlenton Announces Completion of Acquisition of National City Branch Office in Titusville, Pennsylvania". 28 August 2009. Retrieved 9 October 2014.
  21. Shen, Linda (April 7, 2009). "PNC Sells Branches to First Niagara, Marquette (Update1)". Bloomberg. Retrieved 2012-08-21.
  22. "Marquette Savings Bank to Purchase 3 National City Bank Branches" (PDF). Marquettesavings.com. Retrieved 2013-10-23.
  23. Archived November 9, 2009, at the Wayback Machine.
  24. 1 2 Sabatini, Patricia (October 30, 2009). "National City brand to disappear - Pittsburgh Post-Gazette". Post-gazette.com. Retrieved 2012-08-21.
  25. Sabatini, Patricia (September 5, 2009). "First Niagara arrives in Western Pa. - Pittsburgh Post-Gazette". Post-gazette.com. Retrieved 2012-08-21.
  26. Archived February 3, 2010, at the Wayback Machine.
  27. Sloan, Scott (February 3, 2010). "National City signs are set to disappear | Business". Kentucky.com. Retrieved 2012-08-21.
  28. "National City name fading out". Dispatch.com. November 13, 2009. Retrieved 2012-08-21.
  29. Arielle Kass. "PNC Financial Services to convert National City branches in central, southern Ohio - Cleveland Business News - Northeast Ohio and Cleveland - Crain's Cleveland Business". Crainscleveland.com. Retrieved 2013-10-23.
  30. Arielle Kass. "PNC Financial Services to begin conversion of National City branches - Cleveland Business News - Northeast Ohio and Cleveland - Crain's Cleveland Business". Crainscleveland.com. Retrieved 2013-10-23.
  31. "PNC Completes First Half of National City Conversion". Jobmag.com. Retrieved 2012-08-21.
  32. Archived November 16, 2009, at the Wayback Machine.
  33. Archived March 26, 2009, at the Wayback Machine.
  34. Randy Roguski, The Plain Dealer. "National City through 163 years | cleveland.com". Blog.cleveland.com. Retrieved 2012-08-21.
  35. http://pittsburghlive.com/images/video//2008_pdfs/GX-pncTimeline-JL-10-28.pdf
  36. Gilpin, Kenneth N. (August 29, 1995). "A Cleveland Bank Is Buying in Pittsburgh - New York Times". Nytimes.com. Retrieved 2012-08-21.
  37. "National City Faces Shareholder Lawsuits - MarketMinute.com Stock News". Blogs.financialcontent.com. December 9, 2008. Retrieved 2012-08-21.
  38. "Three National City offices opening under Marquette's name on Monday, Aug. 31 » Local News". Meadville Tribune. Retrieved 2012-08-21.
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