Turmoil forces National City sale

After a 17-year run in Indianapolis, National City’s trademark green signs are set to be replaced with the blue of Pittsburgh-based
PNC Financial. The $5.6 billion deal—hurriedly arranged at the government’s urging—likely won’t mean big changes for customers
and employees of the bank in Indianapolis.

But it did raise questions about the government’s growing involvement in banking and marked the end of an era for National
City Corp.—a bank founded in 1845 that survived the Great Depression and is credited with writing the first mortgage in the
United States.

"It’s just sad," said Randy Wilson, a retired banking attorney who helped orchestrate the sale of locally based Merchants
National Bank to National City in 1991. "It’s sad a proud bank like National City ended up in the situation they’re in."

The Cleveland-based bank was a gold standard for years, but fell into the trap of subprime mortgages. On Oct. 21, just three
days before National City revealed the deal with PNC, it reported a $789 million quarterly loss—the bank’s fifth consecutive
quarter of red ink—and announced plans to lay off more than 4,000 employees.

Many banking observers are uncomfortable with the way the U.S. government determined the fate of National City. It excluded
the bank from its $750 billion rescue
plan while offering large cash infusions to competitors, including money to finance PNC’s acquisition of National City. The
government kicked in $7.7 billion to PNC, helping to create what will be the nation’s fifth-largest bank by deposits and fourth-largest
by number of branches.

The bailout was never sold to the public as a means to pay for one bank to acquire another on the cheap, said John Jay, a
senior analyst at Boston-based research firm Aite Group. Rather, the government was pitched as an infusion of capital to help
banks restart lending.

The deal values National City at just $2.33 per share, a 19-percent discount to the previous day’s closing price.

"They’re just making a bigger, stronger bank more so," Jay said. "A bank without government help basically has a target on
their back. It definitely can be viewed as a strong-arm tactic."

The government program was designed to buy distressed assets, but is instead making strong banks stronger, helping them take
out weaker competitors, said Bob Jones, CEO of Evansville-based Old National Bancorp.

Jones is happy his bank made the government’s roster of strong banks. Old National said it would accept $100 million from
the program.