TABLE OF CONTENTS




|              |                                                                                               |  |  |  |  |  |  | 
|------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I       
|              | Item 1. Business                                                                             
|              | Item 2. Properties                                                                           
|              | Item 3. Legal Proceedings                                                                    
|              | Item 4. Submission of Matters to a Vote of Security Holders                                  
|PART II      
|              | Item 5. Market for the Registrants Common Equity and Related Shareholder Matters            
|              | Item 6. Selected Financial Data                                                              
|              | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|              | Item 7A. Quantitative and Qualitative Disclosure About Market Risk                           
|              | Item 8. Financial Statements and Supplementary Data                                          
|              | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
|PART III     
|              | Item 10. Directors and Executive Officers of the Registrant                                  
|              | Item 11. Executive Compensation                                                              
|              | Item 12. Security Ownership of Certain Beneficial Owners and Management                      
|              | Item 13. Certain Relationships and Related Transactions                                      
|PART IV      
|              | Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K                     
|SIGNATURES   
|EXHIBIT INDEX
|Exhibit 10.32
|Exhibit 21.1 
|Exhibit 23.1 
|Exhibit 24.1 



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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


FORM 10-K

|                                            |  |                                                                                           |  | 
|------------------------------------------- |  | ----------------------------------------------------------------------------------------- |  | 
|                                           
|                                           
|                                           
|                                           
|[X]                                         |  | ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934     |  | 
|For the fiscal year ended December 31, 2000
|OR                                         
|[  ]                                        |  | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934 |  | 

For the transition period from
               to

Commission file number 1-11905


NATIONAL PROCESSING, INC.

(Exact name of Registrant as specified in its
charter)


|                                                                                  |  |                                                  
|--------------------------------------------------------------------------------- |  | -------------------------------------------------
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Ohio
	(State or other jurisdiction
	of incorporation or organization)             |  | 61-1303983
	(I.R.S. Employer
	Identification No.)
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|1231 Durrett Lane
	Louisville, Kentucky
	(Address of principal executive offices) |  | 40213-2008
	(Zip Code)                           

Registrants telephone number, including area code:
(502) 315-2000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE
ACT:

National Processing, Inc. Common Stock, No Par Value

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
  No

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.

The aggregate market value of the voting stock held by
non-affiliates of the Registrant as of January 31, 2001 was
$129,418,036. The market value calculation was determined using
the closing sale price of the Registrants common stock on
January 31, 2001, as reported on the New York Stock
Exchange.

The number of shares outstanding of the Registrants Common
Stock as of January 31, 2001 was 50,941,460.

Documents Incorporated by Reference:

Portions of the Registrants Proxy Statement (to be
dated approximately March 28, 2001) are incorporated by
reference into Item 10, Directors and Executive Officers of
the Registrant; Item 11, Executive Compensation;
Item 12, Security Ownership of Certain Beneficial Owners
and Management; and Item 13, Certain Relationships and
Related Transactions, of Part III.



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##### Table of Contents



TABLE OF CONTENTS

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|Part I     |  |                                                                                        |    |     
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|Item 1.    |  | Business                                                                               |    |      | 3  | 
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|Item 2.    |  | Properties                                                                             |    |      | 6  | 
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|Item 3.    |  | Legal Proceedings                                                                      |    |      | 6  | 
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|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                    |    |      | 6  | 
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|PART II    |  |                                                                                        |    |     
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|Item 5.    |  | Market for Registrants Common Equity and Related
	Shareholder Matters                 |    |      | 7  | 
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|Item 6.    |  | Selected Financial Data                                                                |    |      | 8  | 
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|Item 7.    |  | Managements Discussion and Analysis of Financial Condition
	and Results of Operations |    |      | 9  | 
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|Item 7A.   |  | Quantitative and Qualitative Disclosure About Market Risk                              |    |      | 16 | 
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|Item 8.    |  | Financial Statements and Supplementary Data                                            |    |      | 16 | 
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|Item 9.    |  | Changes in and Disagreements with Accountants on Accounting and
	Financial Disclosure  |    |      | 16 | 
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|PART III   |  |                                                                                        |    |     
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|Item 10.   |  | Directors and Executive Officers of the Registrant                                     |    |      | 16 | 
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|Item 11.   |  | Executive Compensation                                                                 |    |      | 17 | 
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|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management                         |    |      | 17 | 
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|Item 13.   |  | Certain Relationships and Related Transactions                                         |    |      | 17 | 
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|PART IV    |  |                                                                                        |    |     
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|Item 14.   |  | Exhibits, Financial Statement Schedules and Reports on
	Form  8-K                      |    |      | 18 | 
|          
|          
|          
|          
|Signatures |  |                                                                                        | 19 |     

2



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##### Table of Contents






PART I




Item 1.  Business

National Processing, Inc. (the Company or
Registrant), through its wholly-owned operating
subsidiaries which are collectively referred to as National
Processing Company (NPC), operates two business
segments  Merchant Card Services and Corporate
Outsourcing Solutions.

Merchant Card Services authorizes, processes and performs
financial settlement of card transactions including credit,
debit and electronic benefits transfer (EBT).
Merchant Card Services provides services to virtually every
industry that accepts cards for payment settlement and
represented approximately 74% of the Companys revenue in
2000. Merchant Card Services currently provides services to over
500,000 merchant locations primarily in the United States.

Corporate Outsourcing Solutions provides a variety of financial
and administrative processing solutions to large corporate
customers, primarily in three industries: travel, healthcare and
financial services. These solutions include financial
settlement, image scanning, data capture, storage and retrieval,
and value-added customer reporting. Corporate Outsourcing
Solutions represented approximately 26% of the Companys
revenue in 2000 and had processing locations in the United
States, Mexico and the Caribbean.

The Company is an Ohio corporation that is 87% owned by National
City Corporation, a financial holding company headquartered in
Cleveland, Ohio (National City). The Company
maintains operations, employees and contracts substantially
independent of National Citys other operating
subsidiaries. The Company and National City are parties to
agreements pursuant to which National City and its subsidiaries
provide the Company, and the Company provides National City and
its subsidiaries, certain administrative support, operations,
and processing services. The Company is also a party to a tax
sharing agreement and a registration rights agreement with
National City.

See Segment Reporting, Note M to the Consolidated Financial
Statements, for additional financial disclosures of the
Companys operating segments and foreign operations.

Industry Overview

Merchant Card Services

The merchant card processing industry provides retailers and
other merchants with card-based payment authorization, capture,
settlement, exception processing and other related services. The
industry has enjoyed significant growth over the last ten years
due to wider merchant acceptance of card-based settlement
products and increased consumer usage of card-based payment
services.

NPC provides a diversified product mix to meet a wide range of
customer needs, including:



| |   |                                             
| | - | --------------------------------------------
| |  | Processing of all credit card types         
|
| |  | Authorization and settlement                
|
| |  | Chargeback prevention and handling          
|
| |  | Point of Sale (POS) hardware and software   
|
| |  | On-line/off-line debit card acquiring       
|
| |  | Electronic Benefits Transfer (EBT)          
|
| |  | Customized reporting formats/data management
|
| |  | Call-center services                        
|
| |  | E-commerce solutions                        

NPC provides services to a wide array of customers in virtually
every industry, including retailers, supermarkets, restaurants,
petroleum and convenience stores, airlines, hospitality and
e-commerce. NPC is the second largest provider of merchant card
processing services in the United States. In 2000, NPC processed
2.8 billion transactions (including approximately one out
of every six Visa® and MasterCard® transactions in

3



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##### Table of Contents





The merchant card processing market is generally divided into
two markets: national and regional merchants including smaller
mom and pop merchants. Since 1997, NPC has deployed
a dual strategy focused on growing both markets. On
December 31, 1999, the Company increased its market share
of regional merchants by acquiring a merchant processing
portfolio from Heartland Payment Systems LLC. In 2000,
approximately 56% of merchant card processing revenue was from
regional merchants.

On January 8, 2001, the Company further expanded its market
share of regional merchants by acquiring the merchant services
business units from several National City affiliates.

Merchant Card Services revenue was $317.9 million which
represented approximately 74% of the Companys revenue in
2000. Total transaction volume increased by 26% to
2.8 billion in 2000. Total dollar settlement volume
increased by 22% to $127 billion in 2000.

Merchant Card Services uses various sales and marketing channels
for both its national and regional customers. The Company
employs approximately 300 sales representatives who focus on
direct marketing channels. In addition, the Company sells its
services through approximately 575 third-party relationships
such as independent sales offices and community banks.

The merchant card processing market is extremely competitive,
which results in pricing pressure and creates the need for
continuous improvement in technology both to satisfy customer
demands and to reduce operating costs. The costs to meet
merchant requirements for improved service and satisfy the
demand for additional technology-driven applications combined
with the scale-driven nature of the industry have made it
difficult for small-scale transaction processors to remain
competitive and has led to consolidation in the industry. NPC
competes in this industry by focusing on lowering the
merchants total cost of card acceptance, which
includes minimizing interchange and processing fees assessed by
third parties. NPC also focuses on providing superior products
and outstanding service.

According to published industry sources, the five largest card
processors handle over 70% of the transaction and dollar volume
in the United States. The remaining market is highly fragmented
among smaller merchant service providers. As a result, the
transaction processing industry will likely continue to undergo
consolidation.

Corporate Outsourcing Solutions

The business process outsourcing industry provides a variety of
financial and administrative processing solutions to large
corporate customers. These solutions include financial
settlement, image scanning, data capture, storage and retrieval,
and value-added customer reporting. Corporate Outsourcing
Solutions revenue was $109.4 million which represented
approximately 26% of the Companys revenue in 2000.
Corporate Outsourcing Solutions currently focuses on three
industries: travel, healthcare and financial services.

In the travel industry, the Company provides a variety of
outsourcing services to airlines, hotels, travel agents, cruise
lines and car rental companies. NPC performs image scanning and
data capture, storage and retrieval services for major airlines
in the United States. The Company, through an exclusive
long-term cost-plus contract with the Airlines
Reporting Corporation (ARC), provides payment
settlement services for all airline tickets sold by travel
agents in the United States. In addition, NPC provides an
industry-wide global payment system for consolidating and
processing business to business commission payments for all car
rental companies as well as for the hotel, cruise line and
airline industries. These services are provided primarily in the
Companys Mexico and United States locations.

In the healthcare industry, the Company provides image scanning
and data capture, storage and retrieval services for many of the
nations largest healthcare insurers. NPC uses high-speed
digital communication networks, image scanning technology, and
offshore data entry facilities to process healthcare claims for
these insurers. These services are provided primarily in the
Companys Caribbean locations.

4



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##### Table of Contents



NPC services the financial services industry by providing data
capture, application processing, mailroom and other services for
the largest credit card issuers and financial institutions in
the United States. These services are primarily performed in the
Companys Mexican and Caribbean locations.

During 2000, a non-cash pre-tax impairment charge of
$7.1 million was recorded for goodwill and fixed assets
related to a small product line within the Corporate Outsourcing
Solutions segment. In the fourth quarter of 2000, the Company
received a contract cancellation notice from its largest
customer for this product line. At that time, management decided
to divest or exit the product line and recorded impairment
charges of $6.7 million for goodwill and $0.4 million
for fixed assets. This charge totaled $4.6 million
after-tax or $0.09 per share. This product line contributed
$5.7 million of revenue and $2.0 million in operating
profit in 2000 and is expected to be exited in the first half of
2001.

The business process outsourcing industry experiences
considerable competition in the marketplace, which has resulted
in additional focus on economies of scale. In addition to
competition, the cost of advancing technology and customer
demand for a broad product line have caused consolidation among
transaction processing providers. NPC competes in this industry
by focusing on price, quality and customer service.

Regulation

As a result of National Citys ownership in the Company and
as long as National City has a controlling interest, the Company
is subject to banking laws, regulations and orders
(collectively, the Banking Laws). For example, the
Company is subject to the supervision and examination by the
Board of Governors of the Federal Reserve System
(FRB), one of the principal regulatory bodies having
jurisdiction over National City.

The FRB reviews acquisitions and new businesses to be engaged in
by the Company, and the FRBs written approval is required
for the Company to consummate an acquisition. Pursuant to the
Bank Holding Act, the Company shall not engage in any activity,
or own, control, or have the power to vote more than 5% of any
class of voting security of any company engaged in any activity
(i) for which the Bank Holding Act requires a bank holding
company to receive prior approval from the FRB without such
approval having been obtained, or (ii) that would cause the
Company or any affiliate of the Company to violate any
regulation, administrative order, or court order made pursuant
to the Bank Holding Act. If at any time it is determined that
any activity conducted by the Company or any subsidiary does not
comply with the requirements of the Bank Holding Act, the
Company is required to take all reasonable steps to cease such
activity, or to divest any ownership or control position. If
National City is unable to obtain the necessary consent or
approval for any business activity substantially different from
those business activities the Company currently conducts, then
the Company may not engage in any of those new business
activities or proceed with the contemplated acquisition of a
business that would engage in such new activities. The Company
does not believe, however, that either the Banking Laws or the
Bank Holding Act will impede the manner in which the Company
conducts its business or its product and service offerings,
although there can be no assurance that the Banking Laws or Bank
Holding Act will not have such an effect.

The Company is also subject to various other federal, state,
local and foreign laws, orders and regulations applicable to the
Companys operations in the jurisdictions where it conducts
business. Where applicable, regulators and other persons are
authorized to seek remedies against entities such as the Company
for violations of such laws.

Through National City Bank of Kentucky, (NCBK),
which serves as a member bank for the Company, the Company is
registered with VISA® and MasterCard® as a certified
processor and member service provider. As a result, the Company
must adhere to the standards of the VISA® and
MasterCard® credit card associations or risk suspension or
termination of its designation and/or status. There can be no
assurance that (i) VISA® and MasterCard® will
maintain the Companys registrations; (ii) the current
VISA® and MasterCard® rules allowing the Company and
other non-bank transaction processors to market and provide
transaction processing services will remain in effect; or
(iii) VISA® and MasterCard® will continue to
interpret their rules as they have done in the past, which may
have an impact on the Companys business operations. NCBK
is a wholly-owned subsidiary of National City.

5



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##### Table of Contents



Employees

As of December 31, 2000, the Company and its subsidiaries
had approximately 7,000 full-time and part-time employees.

Corporate Outsourcing Solutions has significant production
operations in international locations, including Juarez, Mexico,
the Dominican Republic, and Jamaica. As of December 31,
2000, international operations employed approximately 75% of the
Companys employees.

Seasonality

The Company experiences seasonality in certain businesses and
typically realizes higher revenue in the third and fourth
calendar quarters reflecting increased transaction volume in the
summer and holiday months.




Item 2.  Properties

The Company leases its processing facility in Louisville,
Kentucky, consisting of approximately 223,000 square feet, from
National City Bank of Kentucky. (See Transactions with
Affiliates, Note E to Consolidated Financial Statements). The
Companys lease for the Louisville processing facility
expires on February 28, 2019. The Companys Juarez
operation owns four properties totaling 225,000 square feet. The
Companys other processing facilities have varying lease
expiration terms and range in size from 10,000 square feet to
75,000 square feet and are located throughout the United States,
Dominican Republic, Jamaica, and Mexico. The Companys 33
marketing and sales offices have varying lease expiration terms
and range in size from 100 square feet to 4,400 square feet and
are located throughout the United States. All properties leased
and owned by the Company are in good repair and suitable
condition for the purposes for which they are used. The Company
periodically reviews its overall facility needs in order to add
or delete capacity based on the needs of its individual product
lines.




Item 3.  Legal Proceedings

Various legal actions arising in the ordinary course of business
are pending against the Company. None of the litigation pending
against the Company, individually or collectively, in the
opinion of management, is expected to have a material adverse
effect on the Companys financial condition, results of
operations or liquidity.




Item 4.  Submission of Matters to a Vote of
Security Holders

None.

6



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##### Table of Contents






PART II




Item 5.  Market for the Registrants
Common Equity and Related Shareholder Matters

The Companys common stock is traded on the New York Stock
Exchange under the symbol NAP. The quarterly high and low trade
price and the final days closing price of the
Companys common stock for each of the quarterly periods in
2000 and 1999 were:

|                             |  |      |        |     |  |       |        |  |  |   |        | 
|---------------------------- |  | ---- | ------ | --- |  | ----- | ------ |  |  | - | ------ | 
|                             |  | High |        | Low |  | Close
|                             |  |      |        |     |  |      
|Year Ended December 31, 2000 |  |      |        |     |  |       |        |  |  |   |        | 
|                            
|                            
|                            
|                            
|First Quarter                |  | $    | 10.375 |     |  | $     | 7.125  |  |  | $ | 9.500  | 
|                            
|                            
|                            
|                            
|Second Quarter               |  |      | 12.500 |     |  |       | 9.250  |  |  |   | 12.500 | 
|                            
|                            
|                            
|                            
|Third Quarter                |  |      | 14.375 |     |  |       | 10.750 |  |  |   | 13.938 | 
|                            
|                            
|                            
|                            
|Fourth Quarter               |  |      | 20.875 |     |  |       | 13.313 |  |  |   | 17.000 | 
|                            
|                            
|                            
|                            
|Year Ended December 31, 1999 |  |      |        |     |  |       |        |  |  |   |        | 
|                            
|                            
|                            
|                            
|First Quarter                |  | $    | 6.875  |     |  | $     | 4.500  |  |  | $ | 4.500  | 
|                            
|                            
|                            
|                            
|Second Quarter               |  |      | 10.375 |     |  |       | 4.000  |  |  |   | 10.125 | 
|                            
|                            
|                            
|                            
|Third Quarter                |  |      | 10.563 |     |  |       | 8.000  |  |  |   | 9.000  | 
|                            
|                            
|                            
|                            
|Fourth Quarter               |  |      | 9.250  |     |  |       | 7.813  |  |  |   | 8.875  | 

The number of holders of record of the Companys common
stock as of January 31, 2001 was 64. The Company believes
it has significantly more than 64 beneficial holders of its
common stock.

The Company has never declared or paid cash dividends on its
common stock and has no plans to pay cash dividends in the
foreseeable future. The declaration and payment of cash
dividends on the Companys common stock is at the
discretion of the Companys Board of Directors, and any
decision to declare a dividend will be based on a number of
factors, including, but not limited to, earnings, financial
condition, borrowing covenants and other factors deemed relevant.

The name and address of the Companys common stock transfer
agent and registrar is National City Bank (a wholly-owned
subsidiary of National City), Corporate Trust Operations, P.O.
Box 92301, Locator 5352, Cleveland, Ohio, 44139-0900,
(800.622.6757).

Investors or analysts requiring further information should
contact:



| |                          
| | -------------------------
| | David E. Fountain        
| | Chief Financial Officer  
| | 1231 Durrett Lane        
| | Louisville, KY 40213-2008
| | (502.315.3311)           

7



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Item 6.  Selected Financial Data

The following data should be read in conjunction with the
Consolidated Financial Statements and related notes thereto and
Managements Discussion and Analysis of Financial Condition
and Results of Operations included in Item 7.

|                                                     |  |                                      |       |      |  |      |       |      |  |      |       |  |  |   |       |  |  |   |       | 
|---------------------------------------------------- |  | ------------------------------------ | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ----- |  |  | - | ----- |  |  | - | ----- | 
|                                                     |  |                                     
|                                                     |  | Year Ended December 31,             
|                                                     |  |                                     
|                                                     |  | 2000                                 |       | 1999 |  | 1998 |       | 1997 |  | 1996
|                                                     |  |                                      |       |      |  |      |       |      |  |     
|                                                     |  |                                     
|                                                     |  | (in millions, except per share data)
|                                                    
|                                                    
|                                                    
|                                                    
|Income Statement Data:(1)                            |  |                                      |       |      |  |      |       |      |  |      |       |  |  |   |       |  |  |   |       | 
|                                                    
|                                                    
|                                                    
|                                                    
|Revenue                                              |  | $                                    | 427.3 |      |  | $    | 431.0 |      |  | $    | 483.2 |  |  | $ | 405.7 |  |  | $ | 373.7 | 
|                                                    
|                                                    
|                                                    
|                                                    
|Net Income (Loss) (2)                                |  |                                      | 43.4  |      |  |      | (37.4 | )    |  |      | 15.3  |  |  |   | 21.1  |  |  |   | 31.4  | 
|                                                    
|                                                    
|                                                    
|                                                    
|Basic and Diluted Net Income (Loss) per Common Share |  |                                      | 0.85  |      |  |      | (0.74 | )    |  |      | 0.30  |  |  |   | 0.42  |  |  |   | 0.68  | 
|                                                    
|                                                    
|                                                    
|                                                    
|Average Shares Outstanding-Diluted                   |  |                                      | 51.0  |      |  |      | 50.7  |      |  |      | 50.7  |  |  |   | 50.7  |  |  |   | 46.1  | 
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|Balance Sheet Data:(1)                               |  |                                      |       |      |  |      |       |      |  |      |       |  |  |   |       |  |  |   |       | 
|                                                    
|                                                    
|                                                    
|                                                    
|Working Capital                                      |  | $                                    | 184.2 |      |  | $    | 124.4 |      |  | $    | 72.4  |  |  | $ | 79.3  |  |  | $ | 178.8 | 
|                                                    
|                                                    
|                                                    
|                                                    
|Goodwill                                             |  |                                      | 79.4  |      |  |      | 88.4  |      |  |      | 171.5 |  |  |   | 170.3 |  |  |   | 70.6  | 
|                                                    
|                                                    
|                                                    
|                                                    
|Total Assets                                         |  |                                      | 477.5 |      |  |      | 429.2 |      |  |      | 512.4 |  |  |   | 523.3 |  |  |   | 418.6 | 
|                                                    
|                                                    
|                                                    
|                                                    
|Long-Term Obligations                                |  |                                      | 3.2   |      |  |      | 6.0   |      |  |      | 8.7   |  |  |   | 8.1   |  |  |   | 4.5   | 
|                                                    
|                                                    
|                                                    
|                                                    
|Total Liabilities                                    |  |                                      | 115.9 |      |  |      | 112.8 |      |  |      | 159.7 |  |  |   | 186.4 |  |  |   | 102.9 | 
|                                                    
|                                                    
|                                                    
|                                                    
|Shareholders Equity                                 |  |                                      | 361.6 |      |  |      | 316.4 |      |  |      | 352.7 |  |  |   | 336.8 |  |  |   | 315.7 | 



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|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | This financial data includes the impact of the following
	acquisitions during the periods presented: on February 4,
	1997, the Company acquired NTA, Inc., a freight payment
	processing company; on June 18, 1997, the Company acquired
	the operating assets and liabilities of InTraCon, Inc., a
	freight payment processing company; on June 20, 1997, the
	Company acquired the operating assets and liabilities of MRS
	Jamaica, Inc., a healthcare claim form processing company; on
	September 30, 1997, the Company acquired Caribbean Data
	Services, Ltd., a data processing company; on October 24,
	1997, the Company acquired 79.6% of the outstanding shares of FA
	Holdings, Inc., a debit and credit card processor; (the Company
	acquired the remaining outstanding shares of FA Holdings, Inc.
	on January 2, 1998); on January 15, 1998, the Company
	acquired JBH Travel Audit Inc., a commission collections company
	which audits commissions payable to travel agencies; on
	December 31, 1999, the Company acquired a regional merchant
	processing portfolio from Heartland Payment Systems LLC. Each of
	these transactions were accounted for as purchases; accordingly,
	the results of operations are included in the consolidated
	statements of operations from the respective acquisition dates.

Effective April 1, 1999, the Company sold its Freight and
Payables business lines. Effective June 1, 1999, the
Company sold its Check Acceptance and Remittance business lines.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Included in net income (loss) are certain nonrecurring
	items summarized as follows: for 2000, $8.6 million
	($5.6 million after-tax) of impairment and site
	consolidation expenses; for 1999, $71.7 million (also
	$71.7 million after-tax) of impairment, restructuring and
	related expenses; for 1998, $1.4 million ($0.8 million
	after-tax) of net gains related to contract terminations; for
	1997, $13.3 million ($8.1 million after-tax) of
	impairment, restructuring and related expenses; for 1996,
	$3.9 million ($2.3 million after-tax) of gain related
	to a contract termination.

8



---



##### Table of Contents








|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
	Condition and Results of Operations

Components of Revenue and Expenses

Revenue.The Companys Merchant Card Services
revenue is primarily derived from fees paid by merchants for the
authorization, processing and settlement of credit and debit
card transactions. Fees are generated either on a per
transaction basis or on a discount basis which is a
percent of dollar volume processed. Revenue is recorded net of
interchange fees charged by the credit card associations as such
costs are not controlled by the Company.

Corporate Outsourcing Solutions revenue is generated from a
variety of financial and administrative processing solutions
provided to customers. These solutions include financial
settlement, image scanning, data capture, storage and retrieval,
and value-added customer reporting. A portion of Corporate
Outsourcing Solutions revenue is derived from an exclusive
long-term contract with Airlines Reporting Corporation under
which the Company is compensated on a cost-plus
basis.

A small portion of revenue is derived from earnings on customer
cash balances, which are maintained pursuant to contract terms.

Expenses.Expenses include costs of providing services to
customers including wages and personnel costs, assessment fees,
authorization fees, data processing costs, and general and
administrative expenses.

Results of Operations

The Companys operating results are presented below in the
manner in which they are viewed by management. The Company
divested certain business units during 1999 in order to focus on
its core business lines. Accordingly, the segment results
presented below segregate the operating performance for the
remaining core business lines, versus those that were divested.
The segment operating profits as shown below exclude certain
nonrecurring items. Certain prior year amounts have been
reclassified to conform with the 2000 presentation.

9



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##### Table of Contents



Year Ended December 31, 2000 Compared to Year Ended
December 31, 1999

|                                           |                                                |                                                  |                             |         |       |         |    |         |   |        |         |         |       |         |    |     |   |     |        |         |       |         |    |     |    |    |  
|------------------------------------------ | ---------------------------------------------- | ------------------------------------------------ | --------------------------- | ------- | ----- | ------- | -- | ------- | - | ------ | ------- | ------- | ----- | ------- | -- | --- | - | --- | ------ | ------- | ----- | ------- | -- | --- | -- | -- | -
|                                           |                                                |                                                  |                             |         |       |        
|                                           |                                                | 2000                                             |                             | 1999    |       | Change 
|                                           |                                                |                                                  |                             |         |       |        
|                                           |                                                |                                                  |                             | % of    |       |         |    | % of    |   |       
|                                           |                                                | Amount                                           |                             | Revenue |       | Amount  |    | Revenue |   | Amount |         | %      
|                                           |                                                |                                                  |                             |         |       |         |    |         |   |        |         |        
|                                           |                                                |                                                 
|                                           |                                                | (Dollars in thousands, except per share amounts)
|                                          
|                                          
|                                          
|                                          
|                                           |                                                |                                                  |                             |         |       |         |    |         |   |        |         |         |       |         |    |     |   |     |        |         |       |         |    |     |    |    |  
|Revenue:                                  
|                                          
|                                          
|                                          
|                                          
|                                           | Merchant Card Services                         |                                                  | $                           | 317,853 |       |         |    | 74      | % |        | $       | 264,479 |       |         |    | 61  | % |     | $      | 53,374  |       |         |    | 20% |   
|                                          
|                                          
|                                          
|                                          
|                                           | Corporate Outsourcing Solutions                |                                                  |                             | 109,408 |       |         |    | 26      |   |        |         | 109,170 |       |         |    | 26  |   |     |        | 238     |       |         |    |    |   
|                                           |                                                |                                                  |                             |         |       |         |    |         |   |        |         |         |       |         |    |     |   |     |        |         |       |         |    |    
|                                           |                                                |                                                  | Total Core Revenue          |         |       | 427,261 |    |         |   | 100    |         |         |       | 373,649 |    |     |   | 87  |        |         |       | 53,612  |    |     |    | 14 |  
|                                          
|                                          
|                                          
|                                          
|                                           | Divested Business Lines                        |                                                  |                             |        |       |         |    |         |   |        |         | 57,335  |       |         |    | 13  |   |     |        | (57,335 | )     |         |    | NM  |   
|                                           |                                                |                                                  |                             |         |       |         |    |         |   |        |         |         |       |         |    |     |   |     |        |         |       |         |    |    
|                                           |                                                |                                                  | Total Revenue               |         |       | 427,261 |    |         |   | 100    |         |         |       | 430,984 |    |     |   | 100 |        |         |       | (3,723  | )  |     |    | (1 | )
|                                          
|                                          
|                                          
|                                          
|Expenses:                                  |                                                |                                                  |                             |         |       |         |    |         |   |        |         |         |       |         |    |     |   |     |        |         |       |         |    |    
|                                          
|                                          
|                                          
|                                          
|                                           | Merchant Card Services                         |                                                  |                             | 263,485 |       |         |    | 83      |   |        |         | 231,660 |       |         |    | 88  |   |     |        | 31,825  |       |         |    | 14  |   
|                                          
|                                          
|                                          
|                                          
|                                           | Corporate Outsourcing Solutions                |                                                  |                             | 93,033  |       |         |    | 85      |   |        |         | 93,351  |       |         |    | 86  |   |     |        | (318    | )     |         |    |    |   
|                                           |                                                |                                                  |                             |         |       |         |    |         |   |        |         |         |       |         |    |     |   |     |        |         |       |         |    |    
|                                           |                                                |                                                  | Total Core Expenses         |         |       | 356,518 |    |         |   | 83     |         |         |       | 325,011 |    |     |   | 87  |        |         |       | 31,507  |    |     |    | 10 |  
|                                          
|                                          
|                                          
|                                          
|                                           | Divested Business Lines                        |                                                  |                             |        |       |         |    |         |   |        |         | 58,476  |       |         |    | 102 |   |     |        | (58,476 | )     |         |    | NM  |   
|                                           |                                                |                                                  |                             |         |       |         |    |         |   |        |         |         |       |         |    |     |   |     |        |         |       |         |    |    
|                                           |                                                |                                                  | Total Expenses              |         |       | 356,518 |    |         |   | 83     |         |         |       | 383,487 |    |     |   | 89  |        |         |       | (26,969 | )  |     |    | (7 | )
|                                          
|                                          
|                                          
|                                          
|Operating Profit (Loss):                   |                                                |                                                  |                             |         |       |         |    |         |   |        |         |         |       |         |    |     |   |     |        |         |       |         |    |    
|                                          
|                                          
|                                          
|                                          
|                                           | Merchant Card Services                         |                                                  |                             | 54,368  |       |         |    | 17      |   |        |         | 32,819  |       |         |    | 12  |   |     |        | 21,549  |       |         |    | 66  |   
|                                          
|                                          
|                                          
|                                          
|                                           | Corporate Outsourcing Solutions                |                                                  |                             | 16,375  |       |         |    | 15      |   |        |         | 15,819  |       |         |    | 14  |   |     |        | 556     |       |         |    | 4   |   
|                                           |                                                |                                                  |                             |         |       |         |    |         |   |        |         |         |       |         |    |     |   |     |        |         |       |         |    |    
|                                           |                                                |                                                  | Total Core Operating Profit |         |       | 70,743  |    |         |   | 17     |         |         |       | 48,638  |    |     |   | 13  |        |         |       | 22,105  |    |     |    | 45 |  
|                                          
|                                          
|                                          
|                                          
|                                           | Divested Business Lines                        |                                                  |                             |        |       |         |    |        |   |        |         | (1,141  | )     |         |    | (2  | ) |     |        | 1,141   |       |         |    | NM  |   
|                                           |                                                |                                                  |                             |         |       |         |    |         |   |        |         |         |       |         |    |     |   |     |        |         |       |         |    |    
|                                           |                                                |                                                  | Total Operating Profit      |         |       | 70,743  |    |         |   | 17     |         |         |       | 47,497  |    |     |   | 11  |        |         |       | 23,246  |    |     |    | 49 |  
|                                          
|                                          
|                                          
|                                          
|                                           |                                                | Net Interest Income                              |                             |         | 8,282 |         |    |         | 2 |        |         |         | 4,454 |         |    |     | 1 |     |        |         | 3,828 |         |    |     | 86 |   
|                                           |                                                |                                                  |                             |         |       |         |    |         |   |        |         |         |       |         |    |     |   |     |        |         |       |         |    |    
|Income Before Taxes and Nonrecurring Items |                                                |                                                  | 79,025                      |         |       |         | 18 |         |   |        | 51,951  |         |       |         | 12 |     |   |     | 27,074 |         |       |         | 52 |    
|                                          
|                                          
|                                          
|                                          
|Nonrecurring Items:                        |                                                |                                                  |                             |         |       |         |    |         |   |        |         |         |       |         |    |     |   |     |        |         |       |         |    |    
|                                          
|                                          
|                                          
|                                          
|                                           | Impairment, Restructuring and Related Expenses |                                                  |                             | (8,572  | )     |         |    | (2      | ) |        |         | (71,691 | )     |         |    | (17 | ) |     |        | 63,119  |       |         |    | NM  |   
|                                           |                                                |                                                  |                             |         |       |         |    |         |   |        |         |         |       |         |    |     |   |     |        |         |       |         |    |    
|Income (Loss) Before Taxes                 |                                                |                                                  | 70,453                      |         |       |         | 16 |         |   |        | (19,740 | )       |       |         | (5 | )   |   |     | 90,193 |         |       |         | NM |    
|                                          
|                                          
|                                          
|                                          
|Provision for Income Taxes                 |                                                |                                                  | 27,066                      |         |       |         | 6  |         |   |        | 17,678  |         |       |         | 4  |     |   |     | 9,388  |         |       |         | NM |    
|                                           |                                                |                                                  |                             |         |       |         |    |         |   |        |         |         |       |         |    |     |   |     |        |         |       |         |    |    
|Net Income (Loss)                          |                                                | $                                                | 43,387                      |         |       |         | 10 |         |   | $      | (37,418 | )       |       |         | (9 | )   |   | $   | 80,805 |         |       |         | NM |    
|                                           |                                                |                                                  |                             |         |       |         |    |         |   |        |         |         |       |         |    |     |   |     |        |         |       |         |    |    

|                              |                       |                     |                     |        |        |        |  |        |      |        |   |         |         |         |   |        |       |    |   |        |         |        |  |     |    |    | 
|----------------------------- | --------------------- | ------------------- | ------------------- | ------ | ------ | ------ |  | ------ | ---- | ------ | - | ------- | ------- | ------- | - | ------ | ----- | -- | - | ------ | ------- | ------ |  | --- | -- | -- | 
|                              |                       |                     |                     |        |        |       
|                              |                       | 2000                |                     | 1999   |        | Change
|                              |                       |                     |                     |        |        |       
|                              |                       | Amount              |                     | %      |        | Amount |  | %      |      | Amount |   | %      
|                              |                       |                     |                     |        |        |        |  |        |      |        |   |        
|Excluding Nonrecurring Items: |                       |                     |                     |        |        |        |  |        |      |        |   |         |         |         |   |        |       |    |   |        |         |        |  |    
|                             
|                             
|                             
|                             
|                              | Pre-Tax Income        |                     | $                   | 79,025 |        |        |  | 100.0% |      |        | $ | 51,951  |         |         |   | 100.0% |       |    | $ | 27,074 |         |        |  | 52% |   
|                             
|                             
|                             
|                             
|                              | Taxes                 |                     |                     | 30,066 |        |        |  | 38.0   |      |        |   | 17,622  |         |         |   | 33.9   |       |    |   | 12,444 |         |        |  | 71  |   
|                              |                       |                     |                     |        |        |        |  |        |      |        |   |         |         |         |   |        |       |    |   |        |         |        |  |    
|                              |                       | Net Income          |                     | $      | 48,959 |        |  |        | 62.0 |        |   | $       | 34,329  |         |   |        | 66.1  |    |   | $      | 14,630  |        |  |     | 43 |   
|                              |                       |                     |                     |        |        |        |  |        |      |        |   |         |         |         |   |        |       |    |   |        |         |        |  |    
|                              |                       | Per Share  Diluted |                     | $      | 0.96   |        |  |        |      |        |   | $       | 0.68    |         |   |        |       |    |   | $      | 0.28    |        |  |     | 41 |   
|                              |                       |                     |                     |        |        |        |  |        |      |        |   |         |         |         |   |        |       |    |   |        |         |        |  |    
|Nonrecurring Items:           |                       |                     |                     |        |        |        |  |        |      |        |   |         |         |         |   |        |       |    |   |        |         |        |  |    
|                             
|                             
|                             
|                             
|                              | Pre-Tax Income (Loss) |                     | $                   | (8,572 | )      |        |  | 100.0% |      |        | $ | (71,691 | )       |         |   | 100.0% |       |    | $ | 63,119 |         |        |  | NM  |   
|                             
|                             
|                             
|                             
|                              | Taxes                 |                     |                     | (3,000 | )      |        |  | 35.0   |      |        |   | 56      |         |         |   |       |       |    |   | (3,056 | )       |        |  | NM  |   
|                              |                       |                     |                     |        |        |        |  |        |      |        |   |         |         |         |   |        |       |    |   |        |         |        |  |    
|                              |                       | Net Income (Loss)   |                     | $      | (5,572 | )      |  |        | 65.0 |        |   | $       | (71,747 | )       |   |        | 100.0 |    |   | $      | (66,175 | )      |  |     | NM |   
|                              |                       |                     |                     |        |        |        |  |        |      |        |   |         |         |         |   |        |       |    |   |        |         |        |  |    
|                              |                       | Per Share  Diluted |                     | $      | (0.11  | )      |  |        |      |        |   | $       | (1.42   | )       |   |        |       |    |   | $      | 1.31    |        |  |     | NM |   
|                              |                       |                     |                     |        |        |        |  |        |      |        |   |         |         |         |   |        |       |    |   |        |         |        |  |    
|Total:                        |                       |                     |                     |        |        |        |  |        |      |        |   |         |         |         |   |        |       |    |   |        |         |        |  |    
|                             
|                             
|                             
|                             
|                              | Pre-Tax Income (Loss) |                     | $                   | 70,453 |        |        |  | 100.0% |      |        | $ | (19,740 | )       |         |   | NM     |       |    | $ | 90,193 |         |        |  | NM  |   
|                             
|                             
|                             
|                             
|                              | Taxes                 |                     |                     | 27,066 |        |        |  | 38.4   |      |        |   | 17,678  |         |         |   | NM     |       |    |   | 9,388  |         |        |  | NM  |   
|                              |                       |                     |                     |        |        |        |  |        |      |        |   |         |         |         |   |        |       |    |   |        |         |        |  |    
|                              |                       |                     | Net Income (Loss)   |        | $      | 43,387 |  |        |      | 61.6   |   |         | $       | (37,418 | ) |        |       | NM |   |        | $       | 80,805 |  |     |    | NM | 
|                              |                       |                     |                     |        |        |        |  |        |      |        |   |         |         |         |   |        |       |    |   |        |         |        |  |    
|                              |                       |                     | Per Share  Diluted |        | $      | 0.85   |  |        |      |        |   |         | $       | (0.74   | ) |        |       |    |   |        | $       | 1.59   |  |     |    | NM | 
|                              |                       |                     |                     |        |        |        |  |        |      |        |   |         |         |         |   |        |       |    |   |        |         |        |  |    

NM  Not meaningful

10



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##### Table of Contents



Merchant Card Services

Revenue for 2000 increased 20% to $317.9 million from
$264.5 million in 1999. Transaction volume processed
increased by 26% to 2.8 billion in 2000 from
2.2 billion in 1999. Dollar volume processed increased 22%
to $127 billion in 2000 from $104 billion in 1999.
Volume growth resulted from new customer accounts, including the
acquisition of a merchant processing portfolio from Heartland
Payment Systems LLC on December 31, 1999, and increased
volume from existing accounts.

Expenses increased 14% to $263.5 million in 2000 from
$231.7 million in 1999 primarily due to customer base
expansion and increased volumes. Operating margins as a
percentage of revenue increased to 17% in 2000 from 12% in 1999,
primarily due to increased revenue from higher-margin regional
merchants, economies of scale from increased volumes and cost
savings initiatives. In addition, 1999 contained testing and
remediation expenses for Year 2000 that did not recur in 2000.
Due primarily to the factors listed above, operating profits
increased 66% to $54.4 million in 2000 from
$32.8 million in 1999.

Corporate Outsourcing Solutions

Revenue was $109.4 million in 2000 compared to
$109.2 million in 1999. The Company generated additional
revenue due to volume growth in the healthcare product line and
price increases in certain of the travel product lines. However,
these revenue increases were mostly offset by anticipated volume
decreases in other product lines due primarily to continuing
conversion from paper to electronic ticketing and reporting in
the airline industry, which reduced the demand for the
Companys data capture services.

Operating expenses were $93.0 million in 2000 down slightly
from $93.4 million in 1999 due to cost savings initiatives
and product line mix changes. Operating margins as a percentage
of revenue increased to 15% in 2000 from 14% in 1999. Operating
profits increased 4% to $16.4 million in 2000 from
$15.8 million in 1999.

Divested Business Lines

Divested business lines are comprised of the Remittance,
Payables, Freight and Check Acceptance business lines that were
sold by the Company in the first half of 1999. Operating loss
for the divested business lines was $1.1 million for the
year ended December 31, 1999.

Net Interest Income

Net interest income increased to $8.3 million in 2000 from
$4.5 million in 1999 due to increased level of cash and
investments as well as rising interest rates during 2000
compared to 1999. The increased levels of cash and investments
were due primarily to the receipt of sale proceeds from the
business lines that were divested in the first half of 1999, as
well as cash flow from operations.

Nonrecurring Items

During 2000, a pre-tax charge of $1.5 million was recorded
for site consolidation initiatives. The charge totaled
$1.0 million after-tax, or $0.02 per share. At
December 31, 2000, the Company had $0.4 million
remaining relating primarily to future lease payments recorded
in other accrued liabilities.

During 2000, a non-cash pre-tax impairment charge of
$7.1 million was recorded for goodwill and fixed assets
related to a small product line within the Corporate Outsourcing
Solutions segment. In the fourth quarter of 2000, the Company
received a contract cancellation notice from its largest
customer for this product line. At that time, management decided
to divest or exit the product line and recorded impairment
charges of $6.7 million for goodwill and $0.4 million
for fixed assets. This charge totaled $4.6 million
after-tax or $0.09 per share. This product line contributed
$5.7 million of revenue and $2.0 million of operating
profit in 2000 and is expected to be exited in the first half of
2001.

During 1999, the Company recorded restructuring charges of
$2.2 million, including $1.9 million for severance
expense for approximately 540 employees and $0.3 million
for other costs. These charges related to

11



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##### Table of Contents





During 1999, the Company committed to a formal plan to dispose
of its Freight, Payables, Remittance and Check Acceptance
business lines and recorded pre-tax impairment losses and
associated expenses of $69.5 million related to the sale
and wind-down of these business lines. The charges decreased
1999 net income and earnings per share by $69.9 million and
$1.38, respectively. Effective April 1, 1999, the Company
sold its Freight and Payables business lines for
$18.3 million. Effective June 1, 1999, the Company
sold its Remittance and Check Acceptance business lines for
$44.3 million. At December 31, 2000, the Company had
$0.8 million remaining related to the final obligations of
these dispositions recorded in other accrued liabilities. The
remaining obligations are primarily for future severance
payments and legal matters.

Provision for Income Taxes

Excluding the impact of nonrecurring items, the effective tax
rate was 38.0% for 2000, compared to 33.9% for 1999. Pre-tax
income for 1999 included a larger percentage of foreign income
which was taxed at lower rates. In 2000, there was an increase
in U.S. income, versus foreign income, which is additionally
subject to state and local taxation. The increase in the
effective tax rate for 2000 was partially offset by
$1.1 million due to a reduction in the valuation allowance
for state net operating loss carryforwards.

The overall effective rate for 1999 included the effect of the
write-off of $65.7 million of nondeductible goodwill
related to the divested business lines.

12



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##### Table of Contents



Year Ended December 31, 1999 Compared to Year Ended
December 31, 1998

|                                           |                                                |                                                  |                             |          |       |         |    |          |   |        |        |         |     |         |   |     |   |     |         |          |       |         |     |     |     |     |  
|------------------------------------------ | ---------------------------------------------- | ------------------------------------------------ | --------------------------- | -------- | ----- | ------- | -- | -------- | - | ------ | ------ | ------- | --- | ------- | - | --- | - | --- | ------- | -------- | ----- | ------- | --- | --- | --- | --- | -
|                                           |                                                |                                                  |                             |          |       |        
|                                           |                                                | 1999                                             |                             | 1998     |       | Change 
|                                           |                                                |                                                  |                             |          |       |        
|                                           |                                                |                                                  |                             | % of     |       |         |    | % of     |   |       
|                                           |                                                | Amount                                           |                             | Revenues |       | Amount  |    | Revenues |   | Amount |        | %      
|                                           |                                                |                                                  |                             |          |       |         |    |          |   |        |        |        
|                                           |                                                |                                                 
|                                           |                                                | (Dollars in thousands, except per share amounts)
|                                          
|                                          
|                                          
|                                          
|Revenue:                                   |                                                |                                                  |                             |          |       |         |    |          |   |        |        |         |     |         |   |     |   |     |         |          |       |         |     |    
|                                          
|                                          
|                                          
|                                          
|                                           | Merchant Card Services                         |                                                  | $                           | 264,479  |       |         |    | 61       | % |        | $      | 225,004 |     |         |   | 47  | % |     | $       | 39,475   |       |         |     | 18  | %  
|                                          
|                                          
|                                          
|                                          
|                                           | Corporate Outsourcing Solutions                |                                                  |                             | 109,170  |       |         |    | 26       |   |        |        | 99,715  |     |         |   | 21  |   |     |         | 9,455    |       |         |     | 9   |    
|                                           |                                                |                                                  |                             |          |       |         |    |          |   |        |        |         |     |         |   |     |   |     |         |          |       |         |     |    
|                                           |                                                |                                                  | Total Core Revenue          |          |       | 373,649 |    |          |   | 87     |        |         |     | 324,719 |   |     |   | 67  |         |          |       | 48,930  |     |     |     | 15  |  
|                                          
|                                          
|                                          
|                                          
|                                           | Divested Business Lines                        |                                                  |                             | 57,335   |       |         |    | 13       |   |        |        | 158,474 |     |         |   | 33  |   |     |         | (101,139 | )     |         |     | (64 | )  
|                                           |                                                |                                                  |                             |          |       |         |    |          |   |        |        |         |     |         |   |     |   |     |         |          |       |         |     |    
|                                           |                                                |                                                  | Total Revenue               |          |       | 430,984 |    |          |   | 100    |        |         |     | 483,193 |   |     |   | 100 |         |          |       | (52,209 | )   |     |     | (11 | )
|                                          
|                                          
|                                          
|                                          
|Expenses:                                  |                                                |                                                  |                             |          |       |         |    |          |   |        |        |         |     |         |   |     |   |     |         |          |       |         |     |    
|                                          
|                                          
|                                          
|                                          
|                                           | Merchant Card Services                         |                                                  |                             | 231,660  |       |         |    | 88       |   |        |        | 206,422 |     |         |   | 92  |   |     |         | 25,238   |       |         |     | 12  |    
|                                          
|                                          
|                                          
|                                          
|                                           | Corporate Outsourcing Solutions                |                                                  |                             | 93,351   |       |         |    | 86       |   |        |        | 86,448  |     |         |   | 87  |   |     |         | 6,903    |       |         |     | 8   |    
|                                           |                                                |                                                  |                             |          |       |         |    |          |   |        |        |         |     |         |   |     |   |     |         |          |       |         |     |    
|                                           |                                                |                                                  | Total Core Expenses         |          |       | 325,011 |    |          |   | 87     |        |         |     | 292,870 |   |     |   | 90  |         |          |       | 32,141  |     |     |     | 11  |  
|                                          
|                                          
|                                          
|                                          
|                                           | Divested Business Lines                        |                                                  |                             | 58,476   |       |         |    | 102      |   |        |        | 167,559 |     |         |   | 106 |   |     |         | (109,083 | )     |         |     | (65 | )  
|                                           |                                                |                                                  |                             |          |       |         |    |          |   |        |        |         |     |         |   |     |   |     |         |          |       |         |     |    
|                                           |                                                |                                                  | Total Operating Expenses    |          |       | 383,487 |    |          |   | 89     |        |         |     | 460,429 |   |     |   | 95  |         |          |       | (76,942 | )   |     |     | (17 | )
|                                          
|                                          
|                                          
|                                          
|Operating Profit (Loss):                   |                                                |                                                  |                             |          |       |         |    |          |   |        |        |         |     |         |   |     |   |     |         |          |       |         |     |    
|                                          
|                                          
|                                          
|                                          
|                                           | Merchant Card Services                         |                                                  |                             | 32,819   |       |         |    | 12       |   |        |        | 18,582  |     |         |   | 8   |   |     |         | 14,237   |       |         |     | 77  |    
|                                          
|                                          
|                                          
|                                          
|                                           | Corporate Outsourcing Solutions                |                                                  |                             | 15,819   |       |         |    | 14       |   |        |        | 13,267  |     |         |   | 13  |   |     |         | 2,552    |       |         |     | 19  |    
|                                           |                                                |                                                  |                             |          |       |         |    |          |   |        |        |         |     |         |   |     |   |     |         |          |       |         |     |    
|                                           |                                                |                                                  | Total Core Operating Profit |          |       | 48,638  |    |          |   | 13     |        |         |     | 31,849  |   |     |   | 10  |         |          |       | 16,789  |     |     |     | 53  |  
|                                          
|                                          
|                                          
|                                          
|                                           | Divested Business Lines                        |                                                  |                             | (1,141   | )     |         |    | (2       | ) |        |        | (9,085  | )   |         |   | (6  | ) |     |         | 7,944    |       |         |     | 87  |    
|                                           |                                                |                                                  |                             |          |       |         |    |          |   |        |        |         |     |         |   |     |   |     |         |          |       |         |     |    
|                                           |                                                |                                                  | Total Operating Profit      |          |       | 47,497  |    |          |   | 11     |        |         |     | 22,764  |   |     |   | 5   |         |          |       | 24,733  |     |     |     | 109 |  
|                                           |                                                |                                                  |                             |          |       |         |    |          |   |        |        |         |     |         |   |     |   |     |         |          |       |         |     |    
|                                           |                                                | Net Interest Income                              |                             |          | 4,454 |         |    |          | 1 |        |        |         | 924 |         |   |     |  |     |         |          | 3,530 |         |     |     | 382 |    
|                                           |                                                |                                                  |                             |          |       |         |    |          |   |        |        |         |     |         |   |     |   |     |         |          |       |         |     |    
|Income Before Taxes and Nonrecurring Items |                                                |                                                  | 51,951                      |          |       |         | 12 |          |   |        | 23,688 |         |     |         | 5 |     |   |     | 28,263  |          |       |         | 119 |    
|                                          
|                                          
|                                          
|                                          
|Nonrecurring Items:                        |                                                |                                                  |                             |          |       |         |    |          |   |        |        |         |     |         |   |     |   |     |         |          |       |         |     |    
|                                          
|                                          
|                                          
|                                          
|                                           | Impairment, Restructuring and Related Expenses |                                                  |                             | (71,691  | )     |         |    | (17      | ) |        |        |        |     |         |   |    |   |     |         | (71,691  | )     |         |     | NM  |    
|                                          
|                                          
|                                          
|                                          
|                                           | Gain on Customer Contract Termination, Net     |                                                  |                             |         |       |         |    |          |   |        |        | 1,400   |     |         |   |    |   |     |         | (1,400   | )     |         |     | NM  |    
|                                           |                                                |                                                  |                             |          |       |         |    |          |   |        |        |         |     |         |   |     |   |     |         |          |       |         |     |    
|Income Before Taxes                        |                                                |                                                  | (19,740                     | )        |       |         | (5 | )        |   |        | 25,088 |         |     |         | 5 |     |   |     | (44,828 | )        |       |         | NM  |    
|                                          
|                                          
|                                          
|                                          
|Provision for Income Taxes                 |                                                |                                                  | 17,678                      |          |       |         | 4  |          |   |        | 9,838  |         |     |         | 2 |     |   |     | 7,840   |          |       |         | NM  |    
|                                           |                                                |                                                  |                             |          |       |         |    |          |   |        |        |         |     |         |   |     |   |     |         |          |       |         |     |    
|Net Income                                 |                                                | $                                                | (37,418                     | )        |       |         | (9 | )        |   | $      | 15,250 |         |     |         | 3 |     |   | $   | (52,668 | )        |       |         | NM  |    
|                                           |                                                |                                                  |                             |          |       |         |    |          |   |        |        |         |     |         |   |     |   |     |         |          |       |         |     |    

|                              |                       |                     |   |         |         |        |  |       |       |        |   |        |        |  |  |       |      |  |   |         |         |   |  |     |     |  | 
|----------------------------- | --------------------- | ------------------- | - | ------- | ------- | ------ |  | ----- | ----- | ------ | - | ------ | ------ |  |  | ----- | ---- |  | - | ------- | ------- | - |  | --- | --- |  | 
|                              |                       |                     |   |         |         |       
|                              |                       | 1999                |   | 1998    |         | Change
|                              |                       |                     |   |         |         |       
|                              |                       | Amount              |   | %       |         | Amount |  | %     |       | Amount |   | %     
|                              |                       |                     |   |         |         |        |  |       |       |        |   |       
|Excluding Nonrecurring Items: |                       |                     |   |         |         |        |  |       |       |        |   |        |        |  |  |       |      |  |   |         |         |   |  |    
|                             
|                             
|                             
|                             
|                              | Pre-Tax Income        |                     | $ | 51,951  |         |        |  | 100.0 | %     |        | $ | 23,688 |        |  |  | 100.0 | %    |  | $ | 28,263  |         |   |  | 119 | %  
|                             
|                             
|                             
|                             
|                              | Taxes                 |                     |   | 17,622  |         |        |  | 33.9  |       |        |   | 9,280  |        |  |  | 39.2  |      |  |   | 8,342   |         |   |  | 90  |    
|                              |                       |                     |   |         |         |        |  |       |       |        |   |        |        |  |  |       |      |  |   |         |         |   |  |    
|                              |                       | Net Income          |   | $       | 34,329  |        |  |       | 66.1  |        |   | $      | 14,408 |  |  |       | 60.8 |  |   | $       | 19,921  |   |  |     | 138 | 
|                              |                       |                     |   |         |         |        |  |       |       |        |   |        |        |  |  |       |      |  |   |         |         |   |  |    
|                              |                       | Per Share  Diluted |   | $       | 0.68    |        |  |       |       |        |   | $      | 0.28   |  |  |       |      |  |   | $       | 0.40    |   |  |     | 138 | 
|                              |                       |                     |   |         |         |        |  |       |       |        |   |        |        |  |  |       |      |  |   |         |         |   |  |    
|Nonrecurring Items:           |                       |                     |   |         |         |        |  |       |       |        |   |        |        |  |  |       |      |  |   |         |         |   |  |    
|                             
|                             
|                             
|                             
|                              | Pre-Tax Income (Loss) |                     | $ | (71,691 | )       |        |  | 100.0 | %     |        | $ | 1,400  |        |  |  | 100.0 | %    |  | $ | (73,091 | )       |   |  | NM  |    
|                             
|                             
|                             
|                             
|                              | Taxes                 |                     |   | 56      |         |        |  |      |       |        |   | 558    |        |  |  | 39.9  |      |  |   | (502    | )       |   |  | NM  |    
|                              |                       |                     |   |         |         |        |  |       |       |        |   |        |        |  |  |       |      |  |   |         |         |   |  |    
|                              |                       | Net Income (Loss)   |   | $       | (71,747 | )      |  |       | 100.0 |        |   | $      | 842    |  |  |       | 60.1 |  |   | $       | (72,589 | ) |  |     | NM  | 
|                              |                       |                     |   |         |         |        |  |       |       |        |   |        |        |  |  |       |      |  |   |         |         |   |  |    
|                              |                       | Per Share  Diluted |   | $       | (1.42   | )      |  |       |       |        |   | $      | 0.02   |  |  |       |      |  |   | $       | 1.04    |   |  |     | NM  | 
|                              |                       |                     |   |         |         |        |  |       |       |        |   |        |        |  |  |       |      |  |   |         |         |   |  |    
|Total:                        |                       |                     |   |         |         |        |  |       |       |        |   |        |        |  |  |       |      |  |   |         |         |   |  |    
|                             
|                             
|                             
|                             
|                              | Pre-Tax Income (Loss) |                     | $ | (19,740 | )       |        |  | NM    |       |        | $ | 25,088 |        |  |  | 100.0 | %    |  | $ | (44,828 | )       |   |  | NM  |    
|                             
|                             
|                             
|                             
|                              | Taxes                 |                     |   | 17,678  |         |        |  | NM    |       |        |   | 9,838  |        |  |  | 39.2  |      |  |   | 7,840   |         |   |  | NM  |    
|                              |                       |                     |   |         |         |        |  |       |       |        |   |        |        |  |  |       |      |  |   |         |         |   |  |    
|                              |                       | Net Income (Loss)   |   | $       | (37,418 | )      |  |       | NM    |        |   | $      | 15,250 |  |  |       | 60.8 |  |   | $       | (52,668 | ) |  |     | NM  | 
|                              |                       |                     |   |         |         |        |  |       |       |        |   |        |        |  |  |       |      |  |   |         |         |   |  |    
|                              |                       | Per Share  Diluted |   | $       | (0.74   | )      |  |       |       |        |   | $      | 0.30   |  |  |       |      |  |   | $       | 1.04    |   |  |     | NM  | 
|                              |                       |                     |   |         |         |        |  |       |       |        |   |        |        |  |  |       |      |  |   |         |         |   |  |    

NM  Not meaningful

13



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##### Table of Contents



Merchant Card Services

Revenue for 1999 increased 18% to $264.5 million from
$225.0 million in 1998 as a result of increased volumes,
new customer accounts and improved pricing in the regional
market. Expenses increased 12% to $231.7 million in 1999
from $206.4 million in 1998 due primarily to the customer
base expansion and increased volumes. Operating margins as a
percentage of revenue increased to 12% in 1999 from 8% in 1998
as a result of improved efficiencies and operating leverage.
Operating profit increased 77% to $32.8 million in 1999
from $18.6 million in 1998.

Corporate Outsourcing Solutions

Revenue for 1999 increased 9% to $109.2 million from
$99.7 million primarily as a result of new customer
relationships and strong volume growth in the Healthcare product
line. These revenue increases were partially offset by
anticipated volume decreases in other product lines resulting
from the continuing conversion from paper to electronic
ticketing and reporting in the airline industry, which reduced
the demand for the Companys data capture services.
Expenses increased 8% to $93.4 million from
$86.4 million due primarily to the increase in volume.
Operating margins as a percentage of revenue increased to 14%
from 13% as a result of improved productivity and other cost
saving initiatives that were implemented in early 1999, combined
with improved operating leverage in the healthcare product line.
As a result, operating profit increased 19% to
$15.8 million in 1999 from $13.3 million in 1998.

Divested Business Lines

Divested business lines are comprised of the Remittance,
Payables, Freight and Check Acceptance business lines that were
sold by the Company in the first half of 1999. Operating loss
for the divested business lines was $1.1 million in 1999
versus $9.1 million in 1998.

Net Interest Income

Net interest income increased to $4.5 million in 1999 from
$0.9 million in 1998 due to the increased level of cash and
investments during 1999 compared to 1998. The increased levels
of cash and investments were due primarily to the receipt of
sale proceeds from the business lines that were divested in the
first half of 1999, as well as cash flow from operations.

Nonrecurring Items

During 1999, the Company recorded restructuring charges of
$2.2 million, including $1.9 million for severance
expense for approximately 540 employees and $0.3 million
for other costs. These charges related to the closure and
relocation of certain operating facilities. The charges
decreased 1999 net income and earnings per share by
$1.8 million and $0.04, respectively.

During 1999, the Company committed to a formal plan to dispose
of its Freight, Payables, Remittance and Check Acceptance
business lines and recorded pre-tax impairment losses and
associated expenses of $69.5 million related to the sale
and wind-down of these business lines. The charges decreased
1999 net income and earnings per share by $69.9 million and
$1.38, respectively.

Effective April 1, 1999, the Company sold its Freight and
Payables business lines for $18.3 million. Effective
June 1, 1999, the Company sold its Remittance and Check
Acceptance business lines for $44.3 million.

The year 1998 includes a net gain from contract terminations in
the amount of $1.4 million. This net gain is comprised of a
$4.0 million one-time settlement fee related to the
cancellation of a merchant card processing contract, partially
offset by a $2.6 million loss recorded to write-off
internally developed software and related costs following the
cancellation of a customer contract in the Freight business
line. This net gain increased 1998 net income and earnings per
share by $0.8 million and $0.02, respectively.

14



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##### Table of Contents



Provision for Income Taxes

Excluding the impact of nonrecurring items, the effective tax
rate was 33.9% for 1999 compared to 39.2% for 1998. The decrease
was due primarily to increases in foreign income in 1999, which
was taxed at lower rates. The overall effective tax rate,
inclusive of the restructuring charges and impairment loss, was
higher in 1999 due to the write-off of $65.7 million of
non-deductible goodwill related to the divested business lines.

Liquidity and Capital Resources

The Companys primary uses of capital resources include
capital expenditures, working capital and acquisitions. Future
business acquisitions may be funded through current liquidity,
borrowed funds, and/or issuances of common stock.

The Companys capital expenditures include amounts for
computers, external and internally developed software, scanning
and other document processing equipment, as well as improvements
to operating facilities. During 2000, the Companys capital
expenditures totaled $14.4 million. Such expenditures were
financed from operating cash flow, which for 2000 totaled
$47.0 million. Capital expenditures and operating cash flow
for 1999 were $16.9 million and $60.6 million,
respectively. Operating cash flow decreased in 2000 compared to
1999 due primarily to the timing of tax payments between the
Company and National City. Adjusting for the timing of tax
payments, operating cash flow was up 28% in 2000 compared to
1999. The Company expects capital expenditures for 2001 to be
comparable to 2000 and will be principally used to enhance
merchant card processing capabilities.

On January 8, 2001, the Company acquired the merchant
services business units from several National City affiliates.

As the Company does not carry significant amounts of inventory
and historically has experienced short collection periods for
its accounts receivable, it does not require substantial working
capital to support revenue growth. Working capital requirements
will vary depending upon future acquisition activity. Increases
in working capital needs are expected to be financed through
operating cash flow and current cash balances.

The Company maintains restricted cash balances held on behalf of
clients pending distribution to vendors that are recorded on the
balance sheet as assets and equivalent offsetting liabilities.
These cash balances totaled $31.5 million and
$22.2 million as of December 31, 2000 and 1999,
respectively.

Forward Looking Statements and Risk Factors

Item 1 (the sections entitled Industry Overview, Merchant
Card Services, Corporate Outsourcing Solutions, and Regulation),
Item 2 (entitled Properties), Item 3 (entitled Legal
Proceedings), Item 5 (entitled Market for the
Registrants Common Equity and Related Shareholder
Matters), Item 7 (entitled Liquidity and Capital
Resources), and Item 7A (entitled Quantitative and
Qualitative Disclosure About Market Risk), contain certain
forward-looking statements (as defined in the Private Securities
Litigation Reform Act of 1995). Although management believes the
expectations reflected in such forward-looking statements are
reasonable, actual results may differ materially. Risks and
uncertainties that could cause actual results to differ
materially include, but are not limited to the following: the
Companys ability to execute its business plans; changes in
general economic conditions in the United States and other
relevant economies; changes in consumer spending habits; changes
in the growth rate of the card processing industry from recent
years; ability to execute the Companys acquisition
strategy; successful integration of acquisitions; consolidation
in the banking, card processing or business outsourcing
industries; consolidation of major customers or industries
serviced; significant industry competition; renewal of major
customer relationships; changes in interest rates or certain
foreign currencies; governmental and economic stability in
foreign countries in which the Company operates; unanticipated
litigation or material changes in existing litigation, claims
and assessments; organizational changes or loss of key
management members; reliance on third party processing
relationships; changes in banking regulations; changes in credit
card association rules, regulations or operations; changes in
other laws or regulations that impact the Companys
business; changes in accounting policies and procedures as may
be required due to new accounting pronouncements of the Financial

15



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##### Table of Contents








Item 7A.  Quantitative and Qualitative
Disclosure About Market Risk

Derivative Instruments

The Company does not use derivative instruments.

Market Risk of Financial Instruments

The Companys primary market risk exposure with regard to
financial instruments is to changes in interest rates,
principally in the United States. At December 31, 2000, the
Company had cash, Eurodollar deposits and restricted deposits on
which interest income is earned. At December 31, 2000, the
Company did not have any liabilities that were sensitive to
interest rate changes. Future changes in interest rates will
impact the Companys earnings; however, management does not
believe the changes will be significant.




Item 8.  Financial Statements and
Supplementary Data

See Index to Consolidated Financial Statements at Item 14.




Item 9.  Changes in and Disagreements with Accountants on Accounting
        and Financial Disclosure

None.




PART III






Item 10.  Directors and Executive Officers of
the Registrant


The Executive Officers of the Company as of January 31,
2001 were as follows:

|     |                   |     |  |          |    |  |  |                                                                             
|---- | ----------------- | --- |  | -------- | -- |  |  | ----------------------------------------------------------------------------
|Name |                   | Age |  | Position
|     |                   |     |  |         
|     | Thomas A. Wimsett |     |  |          | 36 |  |  | President and Chief Executive Officer                                       
|     | Mark D. Pyke      |     |  |          | 40 |  |  | Executive Vice President  Merchant Card Services                           
|     | Norman M. Martin  |     |  |          | 57 |  |  | Executive Vice President  Merchant Card Services
        Product Management
|     | Robert C. Robins  |     |  |          | 59 |  |  | Executive Vice President  Business Development                             
|     | David E. Fountain |     |  |          | 40 |  |  | Senior Vice President  Chief Financial Officer                             

An executive officer will serve until his successor is chosen
and qualified. There is no family relationship between any of
the executive officers.

Mr. Wimsett was appointed President and Chief Executive
Officer in September 1999. Mr. Wimsett previously
served as Executive Vice President of NPCs Merchant Card
Services Division from 1997 to 1999 and as President of NPC
Check Services from 1995 to 1997. Mr. Wimsett has held
various management positions at NPC from 1983 to 1995.

Mr. Pyke was appointed Executive Vice President 
Merchant Card Services in October 1999 and was a Senior
Vice President of the Merchant Card Services Division since
1998. Mr. Pyke held a variety of management positions in
NPCs Merchant Card Services Division from 1996 to 1998.
Prior to joining NPC, Mr. Pyke spent four years with
NaBANCO, a merchant credit card processing subsidiary of First
Data Corporation.

Mr. Martin was appointed as Executive Vice
President  Merchant Card Services Product Management
in January 2000. Mr. Martin previously served as
President of Client Merchant Services for First Data Corporation
from 1997 to 1998 and was an Executive Vice President for First
Data Corporation from 1995 to 1997. Before working with First
Data Corporation, Mr. Martin served in various positions at
NPC for over 25 years.

16



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##### Table of Contents



Mr. Robins was appointed Executive Vice
President  Business Development in
November 2000. Mr. Robins was employed by Visa U.S.A.
since 1989 and served as Executive Vice President of Market
Development and Acceptance from 1996 to 2000.

Mr. Fountain was appointed Chief Financial Officer in
October 1999. Mr. Fountain previously served as Senior Vice
President  Chief Accounting Officer since 1998 prior
to being named interim Chief Financial Officer in
July 1999. Mr. Fountain held a variety of financial
management positions with NPC from 1996 to 1998. Before working
with NPC, from 1983 to 1995, Mr. Fountain held various
financial management positions in the credit card industry with
Total System Services, Inc., MBNA Corporation and Associates
First Capital.

The other information required by Item 10 is incorporated
by reference from the Companys Definitive Proxy Statement
to be dated approximately March 28, 2001.






Item 11.  Executive Compensation


Incorporated by reference from the Companys Definitive
Proxy Statement to be dated approximately March 28, 2001.






Item 12.  Security Ownership of Certain
Beneficial Owners and Management


Incorporated by reference from the Companys Definitive
Proxy Statement to be dated approximately March 28, 2001.






Item 13.  Certain Relationships and Related
Transactions


Incorporated by reference from the Companys Definitive
Proxy Statement to be dated approximately March 28, 2001.

17



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##### Table of Contents






PART IV




Item 14.  Exhibits, Financial Statement
Schedules and Reports on Form 8-K

(a) 1.  Financial Statements

|                                                                                                                                |  |             |     | 
|------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | --- | 
|                                                                                                                                |  | Page Number
|Description                                                                                                                     |  | in Report  
|                                                                                                                                |  |            
|Report of Ernst & Young LLP, Independent Auditors                                                                               |  |             | F-1 | 
|                                                                                                                               
|                                                                                                                               
|                                                                                                                               
|                                                                                                                               
|Consolidated Balance Sheets as of December 31, 2000 and 1999                                                                    |  |             | F-2 | 
|                                                                                                                               
|                                                                                                                               
|                                                                                                                               
|                                                                                                                               
|Consolidated Statements of Operations for each of the three
	years in the period ended December 31, 2000                        |  |             | F-3 | 
|                                                                                                                               
|                                                                                                                               
|                                                                                                                               
|                                                                                                                               
|Consolidated Statements of Changes in Shareholders Equity
	for each of the three years in the period ended December 
	31, 2000 |  |             | F-4 | 
|                                                                                                                               
|                                                                                                                               
|                                                                                                                               
|                                                                                                                               
|Consolidated Statements of Cash Flows for each of the three
	years in the period ended December 31, 2000                        |  |             | F-5 | 
|                                                                                                                               
|                                                                                                                               
|                                                                                                                               
|                                                                                                                               
|Notes to Consolidated Financial Statements                                                                                      |  |             | F-6 | 

2.  Financial Statement Schedules

Omitted due to inapplicability or because required information
is shown in the Companys consolidated financial statements
or notes thereto.

3.  Exhibits

The index of exhibits has been filed as separate pages of the
2000 Form 10-K and is available to shareholders on request
from the Secretary of the Company at the principal executive
offices. Copies of the exhibits may be obtained at a cost of
30 cents per page.

(b)  Reports on Form 8-K

October 16, 2000:The Registrant issued a press
release reporting earnings for the quarter and nine months ended
September 30, 2000.

October 20, 2000:The Registrant issued a press
release announcing that Paul Clark, executive vice president of
National Citys fee businesses, was elected Chairman of the
board of directors, succeeding Robert G. Siefers, vice
chairman of National City. The Registrant also announced that
James R. Bell, III, executive vice president of National
Citys newly-formed Capital Markets unit, has resigned as a
National Processing, Inc. board member.

18



---



##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on February 21, 2001.



| |                          
| | -------------------------
| | NATIONAL PROCESSING, INC.



| |     |                      
| | --- | ---------------------
| | By: | /s/ DAVID E. FOUNTAIN

| |                                
| | -------------------------------
| | Senior Vice President and Chief
| | Financial Officer              

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons in
the capacities and on the dates indicated.

|                                                 |  |                                                                                  |  |      |                   |  
|------------------------------------------------ |  | -------------------------------------------------------------------------------- |  | ---- | ----------------- | -
|Signature                                        |  | Title                                                                            |  | Date
|                                                 |  |                                                                                  |  |     
|/s/ THOMAS A. WIMSETTThomas A. Wimsett           |  | President and Chief Executive Officer (Principal Executive
	Officer)             |  |      | February 21, 2001 |  
|                                                
|/s/ DAVID E. FOUNTAINDavid E. Fountain           |  | Senior Vice President and Chief Financial Officer (Principal
	Financial Officer) |  |      | February 21, 2001 |  
|                                                
|/s/ PAUL G. CLARKPaul G. Clark                   |  | Director                                                                         |  |      | February 21, 2001 | *
|                                                
|/s/ ROBERT G. SIEFERSRobert G. Siefers           |  | Director                                                                         |  |      | February 21, 2001 | *
|                                                
|/s/ JEFFREY D. KELLYJeffrey D. Kelly             |  | Director                                                                         |  |      | February 21, 2001 | *
|                                                
|Aureliano Gonzalez-Baz                           |  | Director                                                                         |  |      | February 21, 2001 |  
|                                                
|/s/ JEFFREY P. GOTSCHALLJeffrey P. Gotschall     |  | Director                                                                         |  |      | February 21, 2001 | *
|                                                
|/s/ PRESTON B. HELLER, JR.Preston B. Heller, Jr. |  | Director                                                                         |  |      | February 21, 2001 | *
|                                                
|/s/ JON L. GORNEYJon L. Gorney                   |  | Director                                                                         |  |      | February 21, 2001 | *
|                                                
|/s/ J. ARMANDO RAMIREZJ. Armando Ramirez         |  | Director                                                                         |  |      | February 21, 2001 | *



|  |                                                                                                                                                                                                                                                                                                                
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | The undersigned by signing his name hereto, does sign and
	execute the Annual Report on Form 10-K for fiscal year 2000
	pursuant to the Power of Attorney executed by the above named
	Directors of the Company and which have been filed with the
	Securities Exchange Commission on behalf of such directors.



|    |                       | 
|--- | --------------------- | 
|By: | /s/ CARLTON E. LANGER | 

|                    | 
|------------------- | 
|Carlton E. Langer   | 
|As Attorney-in-Fact | 

19



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##### Table of Contents





20



---



##### Table of Contents



REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Shareholders



We have audited the accompanying consolidated balance sheets of
National Processing, Inc. and subsidiaries (a majority owned
subsidiary of National City Corporation) as of December 31,
2000 and 1999, and the related consolidated statements of
operations, changes in shareholders equity, and cash flows
for each of the three years in the period ended
December 31, 2000. These financial statements are the
responsibility of National Processing, Inc.s management.
Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of National Processing, Inc. and subsidiaries
at December 31, 2000 and 1999, and the consolidated results
of their operations and their cash flows for each of the three
years in the period ended December 31, 2000, in conformity
with accounting principles generally accepted in the United
States.



| |                      
| | ---------------------
| | /s/ Ernst & Young LLP

Cleveland, Ohio



F-1



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##### Table of Contents



NATIONAL PROCESSING, INC.

Consolidated Balance Sheets

|                                                                             |                                                                                                                                                         |                        |         |         |  |   |         |         | 
|---------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------- | ------- | ------- |  | - | ------- | ------- | 
|                                                                             |                                                                                                                                                         |                       
|                                                                             |                                                                                                                                                         | December 31,          
|                                                                             |                                                                                                                                                         |                       
|                                                                             |                                                                                                                                                         | 2000                   |         | 1999   
|                                                                             |                                                                                                                                                         |                        |         |        
|                                                                             |                                                                                                                                                         |                       
|                                                                             |                                                                                                                                                         | (Dollars in thousands)
|Assets                                                                       |                                                                                                                                                         |                        |         |         |  |   |         |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Current assets:                                                              |                                                                                                                                                         |                        |         |         |  |   |         |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Cash and cash equivalents                                                                                                                               |                        | $       | 68,590  |  |   | $       | 32,042  | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Eurodollar deposits                                                                                                                                     |                        |         | 56,000  |  |   |         | 60,000  | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Accounts receivable-trade                                                                                                                               |                        |         | 128,627 |  |   |         | 104,486 | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Restricted deposits-customer funds                                                                                                                      |                        |         | 31,543  |  |   |         | 22,177  | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Deferred tax assets                                                                                                                                     |                        |         | 2,283   |  |   |         | 812     | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Other current assets                                                                                                                                    |                        |         | 9,901   |  |   |         | 11,743  | 
|                                                                             |                                                                                                                                                         |                        |         |         |  |   |         |        
|Total current assets                                                         |                                                                                                                                                         |                        | 296,944 |         |  |   | 231,260 |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Property and equipment:                                                      |                                                                                                                                                         |                        |         |         |  |   |         |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Furniture and equipment                                                                                                                                 |                        |         | 69,417  |  |   |         | 81,439  | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Building and leasehold improvements                                                                                                                     |                        |         | 19,231  |  |   |         | 21,006  | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Software                                                                                                                                                |                        |         | 24,418  |  |   |         | 18,027  | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Property leased from affiliate                                                                                                                          |                        |         | 4,173   |  |   |         | 4,173   | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Land and improvements                                                                                                                                   |                        |         | 2,390   |  |   |         | 2,851   | 
|                                                                             |                                                                                                                                                         |                        |         |         |  |   |         |        
|                                                                             |                                                                                                                                                         |                        | 119,629 |         |  |   | 127,496 |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Accumulated depreciation and amortization                                                                                                               |                        |         | 58,675  |  |   |         | 62,408  | 
|                                                                             |                                                                                                                                                         |                        |         |         |  |   |         |        
|                                                                             |                                                                                                                                                         |                        | 60,954  |         |  |   | 65,088  |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Other assets:                                                                |                                                                                                                                                         |                        |         |         |  |   |         |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Goodwill, net of accumulated amortization of $6,939 in 2000,
	$5,040 in 1999 |                                                                                                                                                         |                        | 79,399  |         |  |   | 88,431  |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Other intangible assets                                                      |                                                                                                                                                         |                        | 29,697  |         |  |   | 34,628  |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Deferred tax assets                                                          |                                                                                                                                                         |                        | 4,149   |         |  |   | 3,698   |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Other assets                                                                 |                                                                                                                                                         |                        | 6,328   |         |  |   | 6,109   |        
|                                                                             |                                                                                                                                                         |                        |         |         |  |   |         |        
|Total other assets                                                           |                                                                                                                                                         |                        | 119,573 |         |  |   | 132,866 |        
|                                                                             |                                                                                                                                                         |                        |         |         |  |   |         |        
|Total assets                                                                 |                                                                                                                                                         | $                      | 477,471 |         |  | $ | 429,214 |        
|                                                                             |                                                                                                                                                         |                        |         |         |  |   |         |        
|                                                                            
|Liabilities and shareholders equity                                         |                                                                                                                                                         |                        |         |         |  |   |         |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Current liabilities:                                                         |                                                                                                                                                         |                        |         |         |  |   |         |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Restricted deposits-customer funds                                                                                                                      |                        | $       | 31,543  |  |   | $       | 22,177  | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Accounts payable-trade                                                                                                                                  |                        |         | 15,243  |  |   |         | 12,262  | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Accrued bankcard assessments                                                                                                                            |                        |         | 24,458  |  |   |         | 20,122  | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Income tax payable                                                                                                                                      |                        |         | 7,865   |  |   |         | 16,318  | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Other accrued liabilities                                                                                                                               |                        |         | 33,630  |  |   |         | 35,963  | 
|                                                                             |                                                                                                                                                         |                        |         |         |  |   |         |        
|Total current liabilities                                                    |                                                                                                                                                         |                        | 112,739 |         |  |   | 106,842 |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Obligation under property leased from affiliate                              |                                                                                                                                                         |                        | 1,993   |         |  |   | 2,123   |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Deferred tax liabilities                                                     |                                                                                                                                                         |                        | 1,181   |         |  |   | 3,047   |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Other long-term liabilities                                                  |                                                                                                                                                         |                        |        |         |  |   | 796     |        
|                                                                             |                                                                                                                                                         |                        |         |         |  |   |         |        
|Total liabilities                                                            |                                                                                                                                                         |                        | 115,913 |         |  |   | 112,808 |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Shareholders equity:                                                        |                                                                                                                                                         |                        |         |         |  |   |         |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Preferred stock, without par value; 5,000,000 shares authorized;
	no shares issued or outstanding                                                       |                        |         |        |  |   |         |        | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Common stock, without par value; 95,000,000 shares authorized;
	50,935,460 and 50,785,652 shares issued and outstanding in 2000
	and 1999, respectively |                        |         | 1       |  |   |         | 1       | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Contributed capital                                                                                                                                     |                        |         | 178,729 |  |   |         | 176,964 | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Retained earnings                                                                                                                                       |                        |         | 182,828 |  |   |         | 139,441 | 
|                                                                             |                                                                                                                                                         |                        |         |         |  |   |         |        
|Total shareholders equity                                                   |                                                                                                                                                         |                        | 361,558 |         |  |   | 316,406 |        
|                                                                             |                                                                                                                                                         |                        |         |         |  |   |         |        
|Total liabilities and shareholders equity                                   |                                                                                                                                                         | $                      | 477,471 |         |  | $ | 429,214 |        
|                                                                             |                                                                                                                                                         |                        |         |         |  |   |         |        

See notes to consolidated financial statements.

F-2



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##### Table of Contents



NATIONAL PROCESSING, INC.

Consolidated Statements of Operations

|                                                     |  |                                          |         |      |  |      |         |   |  |   |         |  
|---------------------------------------------------- |  | ---------------------------------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                     |  |                                         
|                                                     |  | Year Ended December 31,                 
|                                                     |  |                                         
|                                                     |  | 2000                                     |         | 1999 |  | 1998
|                                                     |  |                                          |         |      |  |     
|                                                     |  |                                         
|                                                     |  | (In thousands, except per share amounts)
|                                                    
|                                                    
|                                                    
|                                                    
|Revenue                                              |  | $                                        | 427,261 |      |  | $    | 430,984 |   |  | $ | 483,193 |  
|                                                    
|                                                    
|                                                    
|                                                    
|Operating expenses                                   |  |                                          | 308,350 |      |  |      | 331,298 |   |  |   | 396,930 |  
|                                                    
|                                                    
|                                                    
|                                                    
|General and administrative expenses                  |  |                                          | 26,665  |      |  |      | 30,139  |   |  |   | 36,732  |  
|                                                    
|                                                    
|                                                    
|                                                    
|Depreciation and amortization                        |  |                                          | 21,503  |      |  |      | 22,050  |   |  |   | 26,767  |  
|                                                    
|                                                    
|                                                    
|                                                    
|Impairment, restructuring and related expenses       |  |                                          | 8,572   |      |  |      | 71,691  |   |  |   |        |  
|                                                    
|                                                    
|                                                    
|                                                    
|Gain on customer contract termination, net           |  |                                          |        |      |  |      |        |   |  |   | (1,400  | )
|                                                     |  |                                          |         |      |  |      |         |   |  |   |         |  
|Operating profit (loss)                              |  |                                          | 62,171  |      |  |      | (24,194 | ) |  |   | 24,164  |  
|                                                    
|                                                    
|                                                    
|                                                    
|Net interest income                                  |  |                                          | 8,282   |      |  |      | 4,454   |   |  |   | 924     |  
|                                                     |  |                                          |         |      |  |      |         |   |  |   |         |  
|Income (loss) before provision for income taxes      |  |                                          | 70,453  |      |  |      | (19,740 | ) |  |   | 25,088  |  
|                                                    
|                                                    
|                                                    
|                                                    
|Provision for income taxes                           |  |                                          | 27,066  |      |  |      | 17,678  |   |  |   | 9,838   |  
|                                                     |  |                                          |         |      |  |      |         |   |  |   |         |  
|Net income (loss)                                    |  | $                                        | 43,387  |      |  | $    | (37,418 | ) |  | $ | 15,250  |  
|                                                     |  |                                          |         |      |  |      |         |   |  |   |         |  
|Basic and diluted net income (loss) per common share |  | $                                        | 0.85    |      |  | $    | (0.74   | ) |  | $ | 0.30    |  
|                                                     |  |                                          |         |      |  |      |         |   |  |   |         |  

See notes to consolidated financial statements.

F-3



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##### Table of Contents



NATIONAL PROCESSING, INC.

Consolidated Statements of Changes in Shareholders
Equity

|                             |  |                        |   |        |  |             |   |          |  |       |         |  |  |   |         |   |  |   |         |  
|---------------------------- |  | ---------------------- | - | ------ |  | ----------- | - | -------- |  | ----- | ------- |  |  | - | ------- | - |  | - | ------- | -
|                             |  | Preferred              |   | Common |  | Contributed |   | Retained |  |      
|                             |  | Stock                  |   | Stock  |  | Capital     |   | Earnings |  | Total
|                             |  |                        |   |        |  |             |   |          |  |      
|                             |  |                       
|                             |  | (Dollars in thousands)
|                            
|                            
|                            
|                            
|Balance at January 1, 1998   |  | $                      |  |        |  | $           | 1 |          |  | $     | 175,215 |  |  | $ | 161,609 |   |  | $ | 336,825 |  
|                            
|                            
|                            
|                            
|Net income                   |  |                        |  |        |  |             |  |          |  |       |        |  |  |   | 15,250  |   |  |   | 15,250  |  
|                            
|                            
|                            
|                            
|Stock options exercised      |  |                        |  |        |  |             |  |          |  |       | 584     |  |  |   |        |   |  |   | 584     |  
|                             |  |                        |   |        |  |             |   |          |  |       |         |  |  |   |         |   |  |   |         |  
|Balance at December 31, 1998 |  |                        |  |        |  |             | 1 |          |  |       | 175,799 |  |  |   | 176,859 |   |  |   | 352,659 |  
|                            
|                            
|                            
|                            
|Net loss                     |  |                        |  |        |  |             |  |          |  |       |        |  |  |   | (37,418 | ) |  |   | (37,418 | )
|                            
|                            
|                            
|                            
|Stock options exercised      |  |                        |  |        |  |             |  |          |  |       | 1,165   |  |  |   |        |   |  |   | 1,165   |  
|                             |  |                        |   |        |  |             |   |          |  |       |         |  |  |   |         |   |  |   |         |  
|Balance at December 31, 1999 |  |                        |  |        |  |             | 1 |          |  |       | 176,964 |  |  |   | 139,441 |   |  |   | 316,406 |  
|                            
|                            
|                            
|                            
|Net income                   |  |                        |  |        |  |             |  |          |  |       |        |  |  |   | 43,387  |   |  |   | 43,387  |  
|                            
|                            
|                            
|                            
|Stock options exercised      |  |                        |  |        |  |             |  |          |  |       | 1,765   |  |  |   |        |   |  |   | 1,765   |  
|                             |  |                        |   |        |  |             |   |          |  |       |         |  |  |   |         |   |  |   |         |  
|Balance at December 31, 2000 |  | $                      |  |        |  | $           | 1 |          |  | $     | 178,729 |  |  | $ | 182,828 |   |  | $ | 361,558 |  
|                             |  |                        |   |        |  |             |   |          |  |       |         |  |  |   |         |   |  |   |         |  

See notes to consolidated financial statements.

F-4



---



##### Table of Contents



NATIONAL PROCESSING, INC.

Consolidated Statements of Cash Flows

|                                                        |                                                |                         |         |         |   |      |          |        |   |   |         |        |  
|------------------------------------------------------- | ---------------------------------------------- | ----------------------- | ------- | ------- | - | ---- | -------- | ------ | - | - | ------- | ------ | -
|                                                        |                                                |                        
|                                                        |                                                | Year Ended December 31,
|                                                        |                                                |                        
|                                                        |                                                | 2000                    |         | 1999    |   | 1998
|                                                        |                                                |                         |         |         |   |     
|                                                        |                                                |                        
|                                                        |                                                | (In thousands)         
|                                                       
|                                                       
|                                                       
|                                                       
|Operating activities                                    |                                                |                         |         |         |   |      |          |        |   |   |         |       
|                                                       
|                                                       
|                                                       
|                                                       
|Net income (loss)                                       |                                                | $                       | 43,387  |         |   | $    | (37,418  | )      |   | $ | 15,250  |       
|                                                       
|                                                       
|                                                       
|                                                       
|Non-cash items:                                         |                                                |                         |         |         |   |      |          |        |   |   |         |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Depreciation and amortization                  |                         |         | 21,503  |   |      |          | 22,050 |   |   |         | 26,767 |  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Impairment, restructuring and related expenses |                         |         | 8,521   |   |      |          | 58,214 |   |   |         |       |  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Deferred income taxes                          |                         |         | (3,788  | ) |      |          | (618   | ) |   |         | 6,287  |  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Loss on disposition of assets                  |                         |         | 715     |   |      |          | 740    |   |   |         | 2,430  |  
|                                                       
|                                                       
|                                                       
|                                                       
|Changes in current assets and liabilities:              |                                                |                         |         |         |   |      |          |        |   |   |         |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Accounts receivable-trade                      |                         |         | (24,141 | ) |      |          | (8,858 | ) |   |         | 629    |  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Accounts payable-trade                         |                         |         | 4,981   |   |      |          | 9,187  |   |   |         | (2,245 | )
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Accrued bankcard assessments                   |                         |         | 4,336   |   |      |          | 2,369  |   |   |         | (2,053 | )
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Income taxes payable/receivable                |                         |         | (8,453  | ) |      |          | 11,942 |   |   |         | (1,131 | )
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Other current assets/liabilities               |                         |         | 959     |   |      |          | 2,788  |   |   |         | (2,323 | )
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Other, net                                     |                         |         | (1,015  | ) |      |          | 213    |   |   |         | 998    |  
|                                                        |                                                |                         |         |         |   |      |          |        |   |   |         |       
|Net cash provided by operating activities               |                                                |                         | 47,005  |         |   |      | 60,609   |        |   |   | 44,609  |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                       
|Investing activities                                    |                                                |                         |         |         |   |      |          |        |   |   |         |       
|                                                       
|                                                       
|                                                       
|                                                       
|Capital expenditures                                    |                                                |                         | (14,406 | )       |   |      | (16,931  | )      |   |   | (42,469 | )     
|                                                       
|                                                       
|                                                       
|                                                       
|Proceeds from sales of fixed assets                     |                                                |                         | 314     |         |   |      | 532      |        |   |   |        |       
|                                                       
|                                                       
|                                                       
|                                                       
|Purchases of Eurodollar deposits                        |                                                |                         | (76,000 | )       |   |      | (100,000 | )      |   |   |        |       
|                                                       
|                                                       
|                                                       
|                                                       
|Proceeds from maturities of Eurodollar deposits         |                                                |                         | 80,000  |         |   |      | 40,000   |        |   |   |        |       
|                                                       
|                                                       
|                                                       
|                                                       
|Proceeds from sales of business lines                   |                                                |                         |        |         |   |      | 62,554   |        |   |   |        |       
|                                                       
|                                                       
|                                                       
|                                                       
|Other investing activities                              |                                                |                         | (2,000  | )       |   |      | (23,000  | )      |   |   | (34,118 | )     
|                                                        |                                                |                         |         |         |   |      |          |        |   |   |         |       
|Net cash used for investing activities                  |                                                |                         | (12,092 | )       |   |      | (36,845  | )      |   |   | (76,587 | )     
|                                                       
|                                                       
|                                                       
|                                                       
|                                                       
|Financing activities                                    |                                                |                         |         |         |   |      |          |        |   |   |         |       
|                                                       
|                                                       
|                                                       
|                                                       
|Payment of note payable                                 |                                                |                         |        |         |   |      |         |        |   |   | (1,100  | )     
|                                                       
|                                                       
|                                                       
|                                                       
|Principal payments under property leased from affiliate |                                                |                         | (130    | )       |   |      | (141     | )      |   |   | (327    | )     
|                                                       
|                                                       
|                                                       
|                                                       
|Exercise of stock options                               |                                                |                         | 1,765   |         |   |      | 1,165    |        |   |   | 584     |       
|                                                        |                                                |                         |         |         |   |      |          |        |   |   |         |       
|Net cash provided by (used for) financing activities    |                                                |                         | 1,635   |         |   |      | 1,024    |        |   |   | (843    | )     
|                                                        |                                                |                         |         |         |   |      |          |        |   |   |         |       
|Net increase (decrease) in cash and cash equivalents    |                                                |                         | 36,548  |         |   |      | 24,788   |        |   |   | (32,821 | )     
|                                                       
|                                                       
|                                                       
|                                                       
|Cash and cash equivalents, beginning of period          |                                                |                         | 32,042  |         |   |      | 7,254    |        |   |   | 40,075  |       
|                                                        |                                                |                         |         |         |   |      |          |        |   |   |         |       
|Cash and cash equivalents, end of period                |                                                | $                       | 68,590  |         |   | $    | 32,042   |        |   | $ | 7,254   |       
|                                                        |                                                |                         |         |         |   |      |          |        |   |   |         |       
|Supplemental Cash Flow Information:                     |                                                |                         |         |         |   |      |          |        |   |   |         |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Cash paid for income taxes                     |                         | $       | 37,342  |   |      | $        | 5,057  |   |   | $       | 5,197  |  

See notes to consolidated financial statements.

F-5



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##### Table of Contents



NATIONAL PROCESSING, INC.

Notes to Consolidated Financial Statements

A.  Organization and Business

Organization

National Processing, Inc. and subsidiaries (the
Company) is 87% owned by National City Corporation
(National City), a financial holding company
headquartered in Cleveland, Ohio. The consolidated financial
statements include the accounts of the Company and its wholly
owned subsidiaries. All significant intercompany transactions
and balances have been eliminated in consolidation. Certain
prior period amounts have been reclassified to conform with the
current period presentation. The accounting and reporting
policies of the Company conform with accounting principles
generally accepted in the United States.

The Company and National City are parties to a registration
rights agreement whereby National City has the right to require
the Company to use its best efforts to register under the
Securities Act of 1933, as amended, all or a portion of the
issued and outstanding common stock held by National City.
National City also has the right to participate, or
piggy-back, in equity offerings initiated by the
Company, subject to a reduction of the size of the offering on
the advice of the managing underwriter.

Business

The Company operates two business segments  Merchant
Card Services and Corporate Outsourcing Solutions. Merchant Card
Services authorizes, processes and performs financial settlement
of card transactions including credit, debit and electronic
benefits transfer (EBT). Merchant Card Services
represented approximately 74% of the Companys revenue in
2000 and provides services to over 500,000 merchant locations
primarily in the United States.

Corporate Outsourcing Solutions provides a variety of financial
and administrative processing solutions to large corporate
customers. These solutions include financial settlement, image
scanning, data capture, storage and retrieval, and value-added
customer reporting. Corporate Outsourcing Solutions represented
approximately 26% of the Companys revenue in 2000.

During the first half of 1999, the Company sold its Check
Acceptance business line (formerly part of the Merchant Services
segment) and also sold its Remittance, Payables and Freight
business lines (all formerly part of the Corporate Services
segment). The proceeds from the sale of these businesses totaled
$62.6 million.

B.  Summary of Significant Accounting Policies

Use of Estimates

Financial statements prepared in accordance with accounting
principles generally accepted in the United States require the
use of estimates and assumptions by management that affect the
reported amounts of revenues and expenses, assets and
liabilities, and the disclosure requirements for contingent
assets and liabilities during and at the date of the financial
statements. Consequently, actual results could differ from those
estimates.

Revenue Recognition

The Company recognizes as revenue the amounts charged by its
various businesses for processing activities at the time
services are rendered. Revenue is recorded net of interchange
fees charged by the credit card associations as such costs are
not controlled by the Company.

Cash, Cash Equivalents and Eurodollar Deposits

Cash equivalents consist of highly liquid bank overnight
repurchase agreements, which are readily convertible to cash.
Eurodollar deposits are short-term deposits with maturities of
less than one year. These securities are stated at cost, which
approximates fair value.

F-6



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##### Table of Contents



NATIONAL PROCESSING, INC.


Notes To Consolidated Financial
Statements  (Continued)





Financial Instruments

The Companys financial instruments consist of cash
equivalents, Eurodollar deposits, accounts receivable,
restricted deposits, accounts payable and payables to
affiliates. The carrying values of these financial instruments
approximate their fair values.

Restricted Deposits  Customer Funds

The Company regularly receives funds, as part of the settlement
process, in advance of the related disbursement. Such monies are
set aside in restricted accounts and a liability is recorded for
an equal and offsetting amount. As such, customer funds are not
eligible for use by the Company in its operations other than to
pay related liabilities. Customer funds are invested in highly
liquid, investment grade interest bearing securities. Investment
of customer funds in equity securities is prohibited by the
Companys investment guidelines established by the Board of
Directors.

Property and Equipment

Property and equipment is stated at cost and depreciated on a
straight-line basis over the estimated useful life or term of
the lease, whichever is shorter. Maintenance and repairs are
expensed as incurred, while improvements that extend the useful
life of the related asset are capitalized and depreciated over
the remaining life of the related asset.

The Company capitalizes certain costs incurred to develop or
obtain internal-use software. For purposes of amortization and
impairment, capitalized costs are treated in the same manner as
other long-lived assets. To be considered as internal-use
software, the software is either acquired, internally developed,
or modified solely to meet the Companys internal needs
with no plans to market the software externally. Project costs
that are considered research and development costs are expensed
as incurred. Capitalized software development and purchased
software costs are reported at unamortized cost. Commencing the
month following project completion, these costs are amortized on
a straight-line basis over the estimated life of the software.

The ranges of estimated useful lives are as follows:

|                                    |  |               
|----------------------------------- |  | --------------
|                                   
|                                   
|                                   
|                                   
|Furniture and equipment             |  | 3 to 10  years
|                                   
|                                   
|                                   
|                                   
|Building and leasehold improvements |  | 5 to 40  years
|                                   
|                                   
|                                   
|                                   
|Software                            |  | 3 to 10  years
|                                   
|                                   
|                                   
|                                   
|Property leased from affiliates     |  | 35 years      
|                                   
|                                   
|                                   
|                                   
|Land improvements                   |  | 15 years      

Upon the sale or disposal of property or equipment, the cost and
accumulated depreciation accounts are adjusted accordingly and
any gain or loss is recognized in income. Depreciation expense,
including depreciation expense on property leased from
affiliates, was $14.2 million, $15.8 million and $18.3
million in 2000, 1999 and 1998, respectively.

Other Intangible Assets

Other intangible assets are composed primarily of acquired
merchant portfolios which represent costs allocated to customer
contracts acquired through acquisitions. These costs are
amortized on a straight-line basis over periods ranging from 7
to 10 years.

F-7



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##### Table of Contents



NATIONAL PROCESSING, INC.


Notes To Consolidated Financial
Statements  (Continued)





Goodwill

Operating results of companies acquired in purchase transactions
are included in the consolidated statements of operations from
their respective acquisition dates. The excess of the purchase
price over the net assets acquired (goodwill) is amortized
on a straight-line basis over 40 years.

Asset Impairment

Long-lived assets to be held and those to be disposed of and
certain intangibles are evaluated for impairment using the
guidance provided by Statement of Financial Accounting Standards
(SFAS) No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of.The provisions of this statement establish when an
impairment loss is recognized and how it is measured.

Accrued Bankcard Assessments

Liabilities to MasterCard® and VISA® originating from
the Companys agreements with these agencies, as an
authorized processor, are accrued and settled on a monthly and
quarterly basis, respectively. The Company recovers these
assessment charges through various contractual arrangements with
its customers.

Income Taxes

The Company is included in the consolidated federal income tax
return of National City. National City allocates income taxes to
its subsidiaries on a separate return basis. Deferred tax assets
and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized as
income or expense in the period that includes the enactment date.

C.  Acquisitions

On December 31, 1999, the Company acquired a merchant
processing portfolio from Heartland Payment Systems LLC. Amounts
paid were recorded as acquired merchant portfolios which is
included in other intangible assets in the accompanying balance
sheet and are being amortized over 10 years.

On January 15, 1998, the Company acquired all the
outstanding shares of JBH Travel Audit Inc. (JBH), a
company which audits commissions payable to travel agencies. The
purchase agreement also contained provisions whereby the Company
was required to pay an additional amount of $2.0 million
based on the 1999 earnings of the acquired company. This payment
was made in 2000.

D.  Impairment, Restructuring and Related Expenses

During 2000, a pre-tax charge of $1.5 million was recorded
for site consolidation initiatives. The charge totaled
$1.0 million after-tax, or $0.02 per share. At
December 31, 2000, the Company had $0.4 million
remaining relating primarily to future lease payments recorded
in other accrued liabilities.

During 2000, a non-cash pre-tax impairment charge of
$7.1 million was recorded for goodwill and fixed assets
related to a small product line within the Corporate Outsourcing
Solutions segment. In the fourth quarter of 2000, the Company
received a contract cancellation notice from its largest
customer for this product line. At that time, management decided
to divest or exit the product line and recorded impairment
charges of $6.7 million for goodwill and $0.4 million
for fixed assets. This charge totaled $4.6 million
after-tax or $0.09 per share. This product line contributed
$5.7 million of revenue and $2.0 million in operating
profit in 2000 and is expected to be exited in the first half of
2001.

F-8



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##### Table of Contents



NATIONAL PROCESSING, INC.


Notes To Consolidated Financial
Statements  (Continued)





During 1999, the Company recorded restructuring charges of
$2.2 million, including $1.9 million for severance pay
for approximately 540 employees and $0.3 million for other
costs. These charges related to the closure and relocation of
certain operating facilities. The charges decreased 1999 net
income and earnings per share by approximately $1.8 million
and $0.04, respectively. As of December 31, 2000, all
severance and other costs related to this charge have been paid.

During 1999, the Company committed to a formal plan to dispose
of its Freight, Payables, Remittance and Check Acceptance
business lines and recorded pre-tax impairment losses and
associated expenses of $69.5 million related to the sale
and wind-down of these business lines. The charges decreased
1999 net income and earnings per share by $69.9 million and
$1.38, respectively. Effective April 1, 1999, the Company
sold its Freight and Payables business lines for
$18.3 million. Effective June 1, 1999, the Company
sold its Remittance and Check Acceptance business lines for
$44.3 million. At December 31, 2000, the Company had
$0.8 million remaining related to the final obligations of
these dispositions recorded in other accrued liabilities. The
remaining obligations are primarily for severance payments and
legal matters. For 1999 and 1998, these divested business units
had revenues of $57.3 million and $158.5 million,
respectively.

E.  Transactions with Affiliates

The Company leases certain facilities from National City Bank of
Kentucky (NCBK), a wholly owned subsidiary of
National City, under long-term agreements classified as
Property Leased From Affiliate in the accompanying
balance sheets. Future minimum payments under these leases,
which expire between 2001 and 2019, are $3.4 million,
including interest of $1.4 million. Future minimum payments
under these leases, including interest, for the next five years
are as follows: $0.2 million 2001; $0.1 million for
each year from 2002 through 2005.

Substantially all of the Companys cash, Eurodollar
deposits and restricted deposits are held by NCBK. The majority
of interest income and earnings on customer balances included in
the Consolidated Statements of Operations is derived from NCBK
accounts.

Prior to the divestiture of the Remittance business line, the
Company used the proof and transit department of NCBK to provide
processing for remittances. The charges for these services,
which are included in operating expenses, were $1.6 million
in 1999 and $3.6 million in 1998.

The Company receives certain administrative services, such as
internal audit and legal services, from National City and its
affiliates. Charges for these services are included in general
and administrative expenses and totaled $1.8 million,
$1.6 million and $2.1 million in 2000, 1999 and 1998,
respectively. As of December 31, 1999, the Company had
recorded accounts payable to National City in the amount of
$1.3 million. As of December 31, 2000, no amount was
due to National City.

On January 8, 2001, the Company acquired the merchant
services business units from several National City affiliates
for $44 million which was paid in cash at closing.

F.  Operating Leases

The Company leases various offices, facilities, and equipment
under noncancellable lease agreements with expiration dates
through 2019. During the normal course of business, most of
these leases will be renewed or replaced by other leases. Future
minimum rental payments under these leases are $2.0 million in
2001, $1.3 million in 2002, $1.1 million in 2003,
$1.0 million in 2004, $1.0 million in 2005 and
$7.5 million thereafter. Rent expense under operating
leases was $3.7 million, $4.8 million and
$7.6 million in 2000, 1999 and 1998, respectively.

F-9



---



##### Table of Contents



NATIONAL PROCESSING, INC.


Notes To Consolidated Financial
Statements  (Continued)





G.  Income Taxes

The provision for income taxes consists of the following (in
thousands):

|          |         |                         |        |        |   |      |        |        |   |   |       |       |  
|--------- | ------- | ----------------------- | ------ | ------ | - | ---- | ------ | ------ | - | - | ----- | ----- | -
|          |         |                        
|          |         | Year Ended December 31,
|          |         |                        
|          |         | 2000                    |        | 1999   |   | 1998
|          |         |                         |        |        |   |     
|Current:  |         |                         |        |        |   |      |        |        |   |   |       |      
|         
|         
|         
|         
|          | Federal |                         | $      | 26,565 |   |      | $      | 13,320 |   |   | $     | 1,485 |  
|         
|         
|         
|         
|          | State   |                         |        | 3,638  |   |      |        | 4,351  |   |   |       | 713   |  
|         
|         
|         
|         
|          | Foreign |                         |        | 651    |   |      |        | 628    |   |   |       | 1,353 |  
|         
|         
|         
|         
|Deferred: |         |                         |        |        |   |      |        |        |   |   |       |      
|         
|         
|         
|         
|          | Federal |                         |        | (2,961 | ) |      |        | 464    |   |   |       | 6,781 |  
|         
|         
|         
|         
|          | State   |                         |        | (827   | ) |      |        | (1,085 | ) |   |       | (494  | )
|          |         |                         |        |        |   |      |        |        |   |   |       |      
|          |         | $                       | 27,066 |        |   | $    | 17,678 |        |   | $ | 9,838 |      
|          |         |                         |        |        |   |      |        |        |   |   |       |      

The temporary differences that gave rise to deferred tax assets
and liabilities are as follows (in thousands):

|                                            |  |              |        |      |  |      |        |   |  |   |        |  
|------------------------------------------- |  | ------------ | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                            |  |             
|                                            |  | December 31,
|                                            |  |             
|                                            |  | 2000         |        | 1999 |  | 1998
|                                            |  |              |        |      |  |     
|Deferred tax assets:                        |  |              |        |      |  |      |        |   |  |   |        |  
|                                           
|                                           
|                                           
|                                           
|Accrued expenses                            |  | $            | 980    |      |  | $    | 799    |   |  | $ | 1,572  |  
|                                           
|                                           
|                                           
|                                           
|Pension, benefits and deferred compensation |  |              | 1,289  |      |  |      | (35    | ) |  |   | 1,594  |  
|                                           
|                                           
|                                           
|                                           
|State operating losses                      |  |              | 4,433  |      |  |      | 5,694  |   |  |   | 4,681  |  
|                                           
|                                           
|                                           
|                                           
|Other                                       |  |              | 14     |      |  |      | 48     |   |  |   | 1,013  |  
|                                            |  |              |        |      |  |      |        |   |  |   |        |  
|                                            |  |              | 6,716  |      |  |      | 6,506  |   |  |   | 8,860  |  
|                                           
|                                           
|                                           
|                                           
|Valuation allowance                         |  |              | (284   | )    |  |      | (1,996 | ) |  |   | (2,408 | )
|                                            |  |              |        |      |  |      |        |   |  |   |        |  
|                                            |  |              | 6,432  |      |  |      | 4,510  |   |  |   | 6,452  |  
|                                           
|                                           
|                                           
|                                           
|Deferred tax liabilities:                   |  |              |        |      |  |      |        |   |  |   |        |  
|                                           
|                                           
|                                           
|                                           
|Depreciation and amortization               |  |              | (817   | )    |  |      | (2,172 | ) |  |   | (2,998 | )
|                                           
|                                           
|                                           
|                                           
|Purchase accounting adjustments             |  |              | (3,466 | )    |  |      | (3,638 | ) |  |   | (3,597 | )
|                                           
|                                           
|                                           
|                                           
|Other                                       |  |              | 3,102  |      |  |      | 2,763  |   |  |   | 988    |  
|                                            |  |              |        |      |  |      |        |   |  |   |        |  
|                                            |  |              | (1,181 | )    |  |      | (3,047 | ) |  |   | (5,607 | )
|                                            |  |              |        |      |  |      |        |   |  |   |        |  
|Net deferred tax assets                     |  | $            | 5,251  |      |  | $    | 1,463  |   |  | $ | 845    |  
|                                            |  |              |        |      |  |      |        |   |  |   |        |  

F-10



---



##### Table of Contents



NATIONAL PROCESSING, INC.


Notes To Consolidated Financial
Statements  (Continued)





The reconciliation of the Companys income tax provisions
and the amounts computed by applying the U.S. statutory income
tax rate to income before taxes is as follows (in thousands):

|                                    |  |                         |        |      |  |      |        |   |  |   |        |  
|----------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                    |  |                        
|                                    |  | Year Ended December 31,
|                                    |  |                        
|                                    |  | 2000                    |        | 1999 |  | 1998
|                                    |  |                         |        |      |  |     
|U.S. statutory rate                 |  | $                       | 24,659 |      |  | $    | (6,909 | ) |  | $ | 8,781  |  
|                                   
|                                   
|                                   
|                                   
|Nondeductible amortization          |  |                         | 630    |      |  |      | 811    |   |  |   | 1,380  |  
|                                   
|                                   
|                                   
|                                   
|Nondeductible goodwill write-offs   |  |                         |       |      |  |      | 22,994 |   |  |   |       |  
|                                   
|                                   
|                                   
|                                   
|State taxes, net of federal benefit |  |                         | 2,940  |      |  |      | 2,391  |   |  |   | (1,415 | )
|                                   
|                                   
|                                   
|                                   
|Change in valuation allowance       |  |                         | (1,113 | )    |  |      | (268   | ) |  |   | 1,565  |  
|                                   
|                                   
|                                   
|                                   
|Foreign tax benefit                 |  |                         |       |      |  |      | (1,432 | ) |  |   | (627   | )
|                                   
|                                   
|                                   
|                                   
|Other                               |  |                         | (50    | )    |  |      | 91     |   |  |   | 154    |  
|                                    |  |                         |        |      |  |      |        |   |  |   |        |  
|                                    |  | $                       | 27,066 |      |  | $    | 17,678 |   |  | $ | 9,838  |  
|                                    |  |                         |        |      |  |      |        |   |  |   |        |  

The Company has approximately $54.5 million of state net
operating loss carryforwards for income tax purposes available
to offset future taxable income in the related states from 2001
to 2014. The Company believes that it is more likely than not
that future taxable income will be generated in these states
sufficient to justify the deferred tax assets recorded, net of
the related valuation allowance of $0.3 million at
December 31, 2000 and $2.0 million at
December 31, 1999. The valuation allowance decreased in
2000 as the result of a change in the estimated realizability of
the related deferred tax asset due to improved operating results.

Income before income taxes from foreign operations was
$2.6 million, $6.8 million and $4.3 million,
respectively, in 2000, 1999 and 1998. Income (loss) before
income taxes from U.S. operations was $67.9 million,
$(26.5) million and $20.8 million, respectively, in
2000, 1999 and 1998.

H.  Employee Benefit Plans

The Company offers a 401 (K) savings plan to all employees
who meet certain age and eligibility requirements. The plan is
funded by employee contributions and discretionary matching
contributions of the Company. The Company recorded
$1.4 million, $2.5 million and $2.6 million in
matching contribution expense during 2000, 1999 and 1998,
respectively.

F-11



---



##### Table of Contents



NATIONAL PROCESSING, INC.


Notes To Consolidated Financial
Statements  (Continued)





I.  Net Income (Loss) Per Common Share

The calculation of net income (loss) per common share
follows (in thousands, except per share amounts):

|         |                                            |                         |   |        |  |      |   |         |   |  |   |        | 
|-------- | ------------------------------------------ | ----------------------- | - | ------ |  | ---- | - | ------- | - |  | - | ------ | 
|         |                                            |                        
|         |                                            | Year Ended December 31,
|         |                                            |                        
|         |                                            | 2000                    |   | 1999   |  | 1998
|         |                                            |                         |   |        |  |     
|Basic:   |                                            |                         |   |        |  |      |   |         |   |  |   |       
|        
|        
|        
|        
|         | Net income (loss)                          |                         | $ | 43,387 |  |      | $ | (37,418 | ) |  | $ | 15,250 | 
|         |                                            |                         |   |        |  |      |   |         |   |  |   |       
|         | Average common shares outstanding          |                         |   | 50,821 |  |      |   | 50,705  |   |  |   | 50,621 | 
|         |                                            |                         |   |        |  |      |   |         |   |  |   |       
|         | Net income (loss) per common share-basic   |                         | $ | 0.85   |  |      | $ | (0.74   | ) |  | $ | 0.30   | 
|         |                                            |                         |   |        |  |      |   |         |   |  |   |       
|Diluted: |                                            |                         |   |        |  |      |   |         |   |  |   |       
|        
|        
|        
|        
|         | Net income (loss)                          |                         | $ | 43,387 |  |      | $ | (37,418 | ) |  | $ | 15,250 | 
|         |                                            |                         |   |        |  |      |   |         |   |  |   |       
|         | Average common shares outstanding          |                         |   | 50,821 |  |      |   | 50,705  |   |  |   | 50,621 | 
|        
|        
|        
|        
|         | Stock option adjustment                    |                         |   | 228    |  |      |   |        |   |  |   | 92     | 
|         |                                            |                         |   |        |  |      |   |         |   |  |   |       
|         | Average common shares outstanding-diluted  |                         |   | 51,049 |  |      |   | 50,705  |   |  |   | 50,713 | 
|         |                                            |                         |   |        |  |      |   |         |   |  |   |       
|         | Net income (loss) per common share-diluted |                         | $ | 0.85   |  |      | $ | (0.74   | ) |  | $ | 0.30   | 
|         |                                            |                         |   |        |  |      |   |         |   |  |   |       

J.  Stock Options

The Company maintains various stock-based compensation plans
that allow for the granting of stock options to eligible
employees and directors. The Company has elected not to adopt
the recognition provisions of SFAS No. 123, Accounting
for Stock-Based Compensation, which requires a fair-value
based method of accounting for stock options and similar equity
awards, and continues to follow Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations to account for its
stock-based compensation plans.

The stock option plans originally authorized the issuance to
officers, directors and key employees of up to 9,200,000 options
to purchase shares of common stock at the fair market value of
the common stock on the date of grant. These options generally
become exercisable 33% annually beginning one year from the date
of grant and expire not later than ten years from the date of
grant.

F-12



---



##### Table of Contents



NATIONAL PROCESSING, INC.


Notes To Consolidated Financial
Statements  (Continued)





A summary of stock option activity follows:

|                  |            |                     |           |                     |   |                  |           |            |   |   |       |       | 
|----------------- | ---------- | ------------------- | --------- | ------------------- | - | ---------------- | --------- | ---------- | - | - | ----- | ----- | 
|                  |            | Option Shares       |           |                     |   | Weighted Average
|                  |            | Available for Grant |           | Options Outstanding |   | Price Per Share 
|                  |            |                     |           |                     |   |                 
|January 1, 1998   |            |                     | 1,358,167 |                     |   |                  | 2,841,833 |            |   | $ | 13.00 |      
|                 
|                 
|                 
|                 
|                  | Granted    |                     |           | (818,300            | ) |                  |           | 818,300    |   |   |       | 11.67 | 
|                 
|                 
|                 
|                 
|                  | Canceled   |                     |           | 646,601             |   |                  |           | (646,601   | ) |   |       | 12.66 | 
|                 
|                 
|                 
|                 
|                  | Exercised  |                     |           |                    |   |                  |           | (69,651    | ) |   |       | 10.39 | 
|                  |            |                     |           |                     |   |                  |           |            |   |   |       |      
|December 31, 1998 |            |                     | 1,186,468 |                     |   |                  | 2,943,881 |            |   |   | 12.77 |      
|                 
|                 
|                 
|                 
|                  | Granted    |                     |           | (628,000            | ) |                  |           | 628,000    |   |   |       | 8.64  | 
|                 
|                 
|                 
|                 
|                  | Canceled   |                     |           | 1,088,939           |   |                  |           | (1,088,939 | ) |   |       | 13.02 | 
|                 
|                 
|                 
|                 
|                  | Exercised  |                     |           |                    |   |                  |           | (141,001   | ) |   |       | 8.27  | 
|                  |            |                     |           |                     |   |                  |           |            |   |   |       |      
|December 31, 1999 |            |                     | 1,647,407 |                     |   |                  | 2,341,941 |            |   |   | 11.82 |      
|                 
|                 
|                 
|                 
|                  | Authorized |                     |           | 5,000,000           |   |                  |           |           |   |   |       |      | 
|                 
|                 
|                 
|                 
|                  | Granted    |                     |           | (1,080,500          | ) |                  |           | 1,080,500  |   |   |       | 11.41 | 
|                 
|                 
|                 
|                 
|                  | Canceled   |                     |           | 465,668             |   |                  |           | (465,668   | ) |   |       | 12.57 | 
|                 
|                 
|                 
|                 
|                  | Exercised  |                     |           |                    |   |                  |           | (149,808   | ) |   |       | 11.80 | 
|                  |            |                     |           |                     |   |                  |           |            |   |   |       |      
|December 31, 2000 |            |                     | 6,032,575 |                     |   |                  | 2,806,965 |            |   | $ | 11.54 |      
|                  |            |                     |           |                     |   |                  |           |            |   |   |       |      

At December 31, 2000, 1999 and 1998, 1,344,084, 725,003 and
1,158,060 options, respectively, were exercisable under the
Companys option plans. The weighted average price per
share of exercisable options was $12.32 at December 31, 2000.
For options outstanding at December 31, 2000, the option
prices per share ranged from $5.50 to $20.50, the weighted
average price per share of the options was $11.54, and the
weighted-average remaining contractual life of the options was
eight years.

For purposes of providing the pro forma disclosures required
under SFAS No. 123, the fair value of stock options granted
in 2000, 1999 and 1998 was estimated at the date of grant using
a Black-Scholes option pricing model. The Black-Scholes option
pricing model was originally developed for use in estimating the
fair value of traded options, which have different
characteristics than the Companys employee stock options.
The model is also sensitive to changes in the subjective
assumptions, which can materially affect the fair value
estimate. As a result, management believes the Black-Scholes
model may not necessarily provide a reliable single measure of
the fair value of employee stock options.

Had compensation cost for the Companys stock-based
compensation plans been determined consistent with SFAS
No. 123, net income (loss) and earnings
(loss) per share would have been $41.7 million and
$0.82 for 2000, $(35.0) million and $(0.69) for 1999, and
$12.2 million and $0.24 for 1998, respectively. As a result
of a partial years vesting in 2000, 1999 and 1998 and
possible changes in assumptions used in the fair value
calculation, the effects of applying SFAS No. 123 in 2000,
1999 and 1998 may not be representative of the pro forma impact
in future years.

The following weighted-average assumptions were used in the
option-pricing model:

|                                                  |  |      |         |      |  |      |         |   |  |   |         |  
|------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                  |  | 2000 |         | 1999 |  | 1998
|                                                  |  |      |         |      |  |     
|Risk Free Interest Rate                           |  |      | 5.0     | %    |  |      | 6.4     | % |  |   | 6.0     | %
|                                                 
|                                                 
|                                                 
|                                                 
|Expected Option Life                              |  |      | 7 years |      |  |      | 7 years |   |  |   | 7 years |  
|                                                 
|                                                 
|                                                 
|                                                 
|Expected Dividend Yield                           |  |      | 0       | %    |  |      | 0       | % |  |   | 0       | %
|                                                 
|                                                 
|                                                 
|                                                 
|Volatility Factor                                 |  |      | .479    |      |  |      | .744    |   |  |   | .492    |  
|                                                 
|                                                 
|                                                 
|                                                 
|Weighted Average Grant Date Fair Value of Options |  | $    | 6.36    |      |  | $    | 6.30    |   |  | $ | 6.83    |  

F-13



---



##### Table of Contents



NATIONAL PROCESSING, INC.


Notes To Consolidated Financial
Statements  (Continued)





K.  Commitments and Contingencies

In the normal course of business, the Company is involved in
litigation from time to time. In the opinion of management, the
ultimate liability, if any, arising from this litigation is not
expected to have a material adverse effect on the Companys
financial condition, results of operations, or liquidity.

Under the rules of VISA® and MasterCard®, the Company
has certain contingent liabilities for the transactions it
processes. This contingent liability arises in the event of a
billing dispute between the merchant and a cardholder that is
not ultimately resolved in favor of the merchant and the amount
is charged back to the merchant and the disputed amount is
refunded to the cardholder. If the Company is unable to collect
this amount from the merchants account and if the merchant
refuses or is unable due to bankruptcy or other reasons to
reimburse the Company for the chargebacks, the Company will bear
the loss for the amount of the refund to the cardholder. The
Company maintains merchant deposits from certain customers as an
offset to potential contingent liabilities that are the
responsibility of such customers. The Company evaluates its risk
and estimates its potential loss for chargebacks based on
historical experience.

L.  Quarterly Results of Operations: (Unaudited)

Selected quarterly data for 2000 and 1999 are as follows (in
thousands, except per share amounts):

|                                       |  |         |        |         |  |         |         |         |  |      |         |  |  |   |         |  |  |   |         | 
|-------------------------------------- |  | ------- | ------ | ------- |  | ------- | ------- | ------- |  | ---- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                       |  | First   |        | Second  |  | Third   |         | Fourth  |  |     
|                                       |  | Quarter |        | Quarter |  | Quarter |         | Quarter |  | Year
|                                       |  |         |        |         |  |         |         |         |  |     
|2000                                   |  |         |        |         |  |         |         |         |  |      |         |  |  |   |         |  |  |   |         | 
|                                      
|                                      
|                                      
|                                      
|Revenue                                |  | $       | 97,867 |         |  | $       | 104,513 |         |  | $    | 108,631 |  |  | $ | 116,250 |  |  | $ | 427,261 | 
|                                      
|                                      
|                                      
|                                      
|Operating profit                       |  |         | 13,631 |         |  |         | 15,356  |         |  |      | 18,926  |  |  |   | 14,258  |  |  |   | 62,171  | 
|                                      
|                                      
|                                      
|                                      
|Net income                             |  |         | 9,548  |         |  |         | 10,476  |         |  |      | 12,982  |  |  |   | 10,381  |  |  |   | 43,387  | 
|                                      
|                                      
|                                      
|                                      
|Diluted net income per common share    |  | $       | 0.19   |         |  | $       | 0.21    |         |  | $    | 0.25    |  |  | $ | 0.20    |  |  | $ | 0.85    | 
|                                      
|                                      
|                                      
|                                      
|Weighted average common shares-diluted |  |         | 50,844 |         |  |         | 50,965  |         |  |      | 51,083  |  |  |   | 51,415  |  |  |   | 51,049  | 

|                                           |  |         |         |         |  |         |         |         |  |      |        |  |  |   |         |  |  |   |         |  
|------------------------------------------ |  | ------- | ------- | ------- |  | ------- | ------- | ------- |  | ---- | ------ |  |  | - | ------- |  |  | - | ------- | -
|                                           |  | First   |         | Second  |  | Third   |         | Fourth  |  |     
|                                           |  | Quarter |         | Quarter |  | Quarter |         | Quarter |  | Year
|                                           |  |         |         |         |  |         |         |         |  |     
|1999                                       |  |         |         |         |  |         |         |         |  |      |        |  |  |   |         |  |  |   |         |  
|                                          
|                                          
|                                          
|                                          
|Revenue                                    |  | $       | 124,463 |         |  | $       | 109,813 |         |  | $    | 94,909 |  |  | $ | 101,799 |  |  | $ | 430,984 |  
|                                          
|                                          
|                                          
|                                          
|Operating (loss) profit                    |  |         | (67,189 | )       |  |         | 17,522  |         |  |      | 10,628 |  |  |   | 14,845  |  |  |   | (24,194 | )
|                                          
|                                          
|                                          
|                                          
|Net (loss) income                          |  |         | (68,185 | )       |  |         | 11,973  |         |  |      | 8,321  |  |  |   | 10,473  |  |  |   | (37,418 | )
|                                          
|                                          
|                                          
|                                          
|Diluted net income (loss) per common share |  | $       | (1.35   | )       |  | $       | 0.24    |         |  | $    | 0.16   |  |  | $ | 0.21    |  |  | $ | (0.74   | )
|                                          
|                                          
|                                          
|                                          
|Weighted average common shares-diluted     |  |         | 50,645  |         |  |         | 50,647  |         |  |      | 50,843 |  |  |   | 50,708  |  |  |   | 50,705  |  

The above financial data for 2000 includes a $1.5 million
charge in the second quarter ($1.0 million after-tax) for
site consolidation initiatives and a $7.1 million charge in
the fourth quarter ($4.6 million after-tax) for
nonrealizable goodwill and fixed assets related to the
Companys decision to divest one of its operating units
within its Corporate Outsourcing Solutions segment.

The above financial data for 1999 includes a charge of
$69.5 million ($69.9 million after-tax) for impairment
and related expenses related to the sale and wind-down of
several business lines. During the first quarter of 1999, the
Company recorded a charge of $73.9 million
($72.0 million after-tax) based on estimates of the
expected impairment loss and other expenses related to the
anticipated sale and wind-down of these business units. The
Company recorded a credit of $6.5 million
($3.7 million after-tax) in the second quarter and a charge
of $2.0 million ($1.6 million after-tax) in the fourth
quarter related to changes in estimates and post-closing
adjustments. Also included is a charge of $2.2 million
($1.8 million after-tax) in the first quarter of 1999
related to restructuring of the Companys operating
facilities.

F-14



---



##### Table of Contents



NATIONAL PROCESSING, INC.


Notes To Consolidated Financial
Statements  (Continued)





M.  Segment Reporting

The Company operates two business segments  Merchant
Card Services and Corporate Outsourcing Solutions. Merchant Card
Services authorizes, processes and settles credit and debit card
transactions. Corporate Outsourcing Solutions provides financial
settlement, image scanning, data capture, storage and retrieval,
and value-added customer reporting services.

The segment results reflect the underlying economics of the
segments and reportable segments are identified by the services
they offer. General and administrative expenses are allocated to
the segments based upon various methods determined by the nature
of the expenses. There is no intersegment revenue. Depreciation
expense for corporate fixed assets is allocated to the two
segments. Corporate net operating assets are comprised primarily
of cash, Eurodollar deposits and income tax balances. The
accounting policies of the reportable segments are the same as
those described in Note A. Certain amounts for 1999 and 1998
have been reclassified to conform to the 2000 presentation. The
segment results exclude divested business lines and nonrecurring
items.

|                              |  |                        |         |             |  |           |         |       |  |   |         |  |  |   |         |  
|----------------------------- |  | ---------------------- | ------- | ----------- |  | --------- | ------- | ----- |  | - | ------- |  |  | - | ------- | -
|                              |  | Merchant               |         | Corporate   |  |           |         |      
|                              |  | Card                   |         | Outsourcing |  |           |         |      
|                              |  | Services               |         | Solutions   |  | Corporate |         | Total
|                              |  |                        |         |             |  |           |         |      
|                              |  |                       
|                              |  | (Dollars in thousands)
|                             
|                             
|                             
|                             
|2000                          |  |                        |         |             |  |           |         |       |  |   |         |  |  |   |         |  
|                             
|                             
|                             
|                             
|Revenue                       |  | $                      | 317,853 |             |  | $         | 109,408 |       |  | $ |        |  |  | $ | 427,261 |  
|                             
|                             
|                             
|                             
|Operating profit              |  |                        | 54,368  |             |  |           | 16,375  |       |  |   |        |  |  |   | 70,743  |  
|                             
|                             
|                             
|                             
|Depreciation and amortization |  |                        | 13,705  |             |  |           | 7,798   |       |  |   |        |  |  |   | 21,503  |  
|                             
|                             
|                             
|                             
|Net interest income           |  |                        | 6,328   |             |  |           | 1,954   |       |  |   |        |  |  |   | 8,282   |  
|                             
|                             
|                             
|                             
|Net operating assets          |  |                        | 165,195 |             |  |           | 52,701  |       |  |   | 143,662 |  |  |   | 361,558 |  
|                             
|                             
|                             
|                             
|Capital expenditures          |  |                        | 9,669   |             |  |           | 3,143   |       |  |   | 1,594   |  |  |   | 14,406  |  
|                             
|                             
|                             
|                             
|                             
|1999                          |  |                        |         |             |  |           |         |       |  |   |         |  |  |   |         |  
|                             
|                             
|                             
|                             
|Revenue                       |  | $                      | 264,479 |             |  | $         | 109,170 |       |  | $ |        |  |  | $ | 373,649 |  
|                             
|                             
|                             
|                             
|Operating profit              |  |                        | 32,819  |             |  |           | 15,819  |       |  |   |        |  |  |   | 48,638  |  
|                             
|                             
|                             
|                             
|Depreciation and amortization |  |                        | 11,359  |             |  |           | 7,667   |       |  |   |        |  |  |   | 19,026  |  
|                             
|                             
|                             
|                             
|Net interest income           |  |                        | 3,165   |             |  |           | 1,332   |       |  |   |        |  |  |   | 4,497   |  
|                             
|                             
|                             
|                             
|Net operating assets          |  |                        | 154,791 |             |  |           | 47,917  |       |  |   | 113,698 |  |  |   | 316,406 |  
|                             
|                             
|                             
|                             
|Capital expenditures          |  |                        | 1,210   |             |  |           | 6,695   |       |  |   | 9,026   |  |  |   | 16,931  |  
|                             
|                             
|                             
|                             
|                             
|1998                          |  |                        |         |             |  |           |         |       |  |   |         |  |  |   |         |  
|                             
|                             
|                             
|                             
|Revenue                       |  | $                      | 225,004 |             |  | $         | 99,715  |       |  | $ |        |  |  | $ | 324,719 |  
|                             
|                             
|                             
|                             
|Operating profit              |  |                        | 18,582  |             |  |           | 13,267  |       |  |   |        |  |  |   | 31,849  |  
|                             
|                             
|                             
|                             
|Depreciation and amortization |  |                        | 9,563   |             |  |           | 7,879   |       |  |   |        |  |  |   | 17,442  |  
|                             
|                             
|                             
|                             
|Net interest income (expense) |  |                        | 108     |             |  |           | (253    | )     |  |   |        |  |  |   | (145    | )
|                             
|                             
|                             
|                             
|Net operating assets          |  |                        | 145,160 |             |  |           | 44,124  |       |  |   | 36,315  |  |  |   | 225,599 |  
|                             
|                             
|                             
|                             
|Capital expenditures          |  |                        | 8,770   |             |  |           | 2,676   |       |  |   | 20,249  |  |  |   | 31,695  |  

F-15



---



##### Table of Contents



NATIONAL PROCESSING, INC.


Notes To Consolidated Financial
Statements  (Continued)





Management excludes certain items from the results of its
reportable segments. These items include the operating results
of the Remittance, Payables, Freight and Check Acceptance
business lines, which were divested in 1999, as well as certain
nonrecurring items. A reconciliation of reported segment amounts
to consolidated amounts follows (in thousands):

|                               |                                                |      |   |         |   |      |   |         |   |  |   |         |  
|------------------------------ | ---------------------------------------------- | ---- | - | ------- | - | ---- | - | ------- | - |  | - | ------- | -
|                               |                                                | 2000 |   | 1999    |   | 1998
|                               |                                                |      |   |         |   |     
|Revenue:                       |                                                |      |   |         |   |      |   |         |   |  |   |        
|                              
|                              
|                              
|                              
|                               | Total reported segments                        |      | $ | 427,261 |   |      | $ | 373,649 |   |  | $ | 324,719 |  
|                              
|                              
|                              
|                              
|                               | Divested business lines                        |      |   |        |   |      |   | 57,335  |   |  |   | 158,474 |  
|                               |                                                |      |   |         |   |      |   |         |   |  |   |        
|                               | Consolidated                                   |      | $ | 427,261 |   |      | $ | 430,984 |   |  | $ | 483,193 |  
|                               |                                                |      |   |         |   |      |   |         |   |  |   |        
|Operating profit (loss):       |                                                |      |   |         |   |      |   |         |   |  |   |        
|                              
|                              
|                              
|                              
|                               | Total reported segments                        |      | $ | 70,743  |   |      | $ | 48,638  |   |  | $ | 31,849  |  
|                              
|                              
|                              
|                              
|                               | Divested business lines                        |      |   |        |   |      |   | (1,141  | ) |  |   | (9,085  | )
|                              
|                              
|                              
|                              
|                               | Impairment, restructuring and related expenses |      |   | (8,572  | ) |      |   | (71,691 | ) |  |   |        |  
|                              
|                              
|                              
|                              
|                               | Gain on customer contract termination, net     |      |   |        |   |      |   |        |   |  |   | 1,400   |  
|                               |                                                |      |   |         |   |      |   |         |   |  |   |        
|                               | Consolidated                                   |      | $ | 62,171  |   |      | $ | (24,194 | ) |  | $ | 24,164  |  
|                               |                                                |      |   |         |   |      |   |         |   |  |   |        
|Depreciation and amortization: |                                                |      |   |         |   |      |   |         |   |  |   |        
|                              
|                              
|                              
|                              
|                               | Total reported segments                        |      | $ | 21,503  |   |      | $ | 19,026  |   |  | $ | 17,442  |  
|                              
|                              
|                              
|                              
|                               | Divested business lines                        |      |   |        |   |      |   | 3,024   |   |  |   | 9,325   |  
|                               |                                                |      |   |         |   |      |   |         |   |  |   |        
|                               | Consolidated                                   |      | $ | 21,503  |   |      | $ | 22,050  |   |  | $ | 26,767  |  
|                               |                                                |      |   |         |   |      |   |         |   |  |   |        
|Net interest income (expense): |                                                |      |   |         |   |      |   |         |   |  |   |        
|                              
|                              
|                              
|                              
|                               | Total reported segments                        |      | $ | 8,282   |   |      | $ | 4,497   |   |  | $ | (145    | )
|                              
|                              
|                              
|                              
|                               | Divested business lines                        |      |   |        |   |      |   | (43     | ) |  |   | 1,069   |  
|                               |                                                |      |   |         |   |      |   |         |   |  |   |        
|                               | Consolidated                                   |      | $ | 8,282   |   |      | $ | 4,454   |   |  | $ | 924     |  
|                               |                                                |      |   |         |   |      |   |         |   |  |   |        
|Net operating assets:          |                                                |      |   |         |   |      |   |         |   |  |   |        
|                              
|                              
|                              
|                              
|                               | Total reported segments                        |      | $ | 361,558 |   |      | $ | 316,406 |   |  | $ | 225,599 |  
|                              
|                              
|                              
|                              
|                               | Divested business lines                        |      |   |        |   |      |   |        |   |  |   | 127,060 |  
|                               |                                                |      |   |         |   |      |   |         |   |  |   |        
|                               | Consolidated                                   |      | $ | 361,558 |   |      | $ | 316,406 |   |  | $ | 352,659 |  
|                               |                                                |      |   |         |   |      |   |         |   |  |   |        
|Capital expenditures:          |                                                |      |   |         |   |      |   |         |   |  |   |        
|                              
|                              
|                              
|                              
|                               | Total reported segments                        |      | $ | 14,406  |   |      | $ | 16,316  |   |  | $ | 31,695  |  
|                              
|                              
|                              
|                              
|                               | Divested business lines                        |      |   |        |   |      |   | 615     |   |  |   | 10,774  |  
|                               |                                                |      |   |         |   |      |   |         |   |  |   |        
|                               | Consolidated                                   |      | $ | 14,406  |   |      | $ | 16,931  |   |  | $ | 42,469  |  
|                               |                                                |      |   |         |   |      |   |         |   |  |   |        

Revenue from foreign operations in 2000, 1999 and 1998,
primarily from Barbados, was approximately $69.8 million,
$63.9 million and $50.7 million, respectively. The net
book value of foreign long-lived assets, primarily in Juarez,
Mexico, was approximately $16.6 million and
$13.7 million at December 31, 2000 and 1999, respectively.

F-16



---



##### Table of Contents






EXHIBIT INDEX

|        |       |             |  |                                                                                                                                                                                                                             
|------- | ----- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|Number  |       | Description
|        |       |            
|        | 3.1   | (i)         |  | Amended Articles of Incorporation of the Registrant.(A)                                                                                                                                                                     
|        | 3.1   | (ii)        |  | Code of Regulations of the Registrant.(A)                                                                                                                                                                                   
|        | 4.1   |             |  | Specimen Certificate for the Common Stock, without par value, of
	the Registrant.(B)                                                                                                                                        
|        | 4.2   |             |  | Registration Rights Agreement between the Registrant and
	National City Corporation, dated July 16, 1996.(B)                                                                                                                
|        | 10.1  |             |  | Absolute Net Ground Lease by and between Preston Manor, Inc. and
	Allied Stores Corporation, dated January 16, 1969.(A)                                                                                                     
|        | 10.2  |             |  | Second Amendment to Lease by and between William G. Earley,
	Plaza Centers, Inc. and First National Bank of Louisville, dated
	April 15, 1986.(A)                                                                           
|        | 10.3  |             |  | (Intentionally Omitted)                                                                                                                                                                                                     
|        | 10.4  |             |  | Sponsorship Agreement between NPC and National City Bank of
	Kentucky, dated June 30, 1996.(B)                                                                                                                              
|        | 10.5  |             |  | Administrative Services Agreement between NPC and National City
	Corporation, dated July 15, 1996.(B)                                                                                                                       
|        | 10.6  |             |  | (Intentionally Omitted)                                                                                                                                                                                                     
|        | 10.7  |             |  | (Intentionally Omitted)                                                                                                                                                                                                     
|        | 10.8  |             |  | Form of Card Services Agreement by and among NPC and its
	affiliated corporations and certain bank subsidiaries of
	National City Corporation .(B)                                                                          
|        | 10.9  |             |  | Tax Sharing Agreement between the Company and National City
	Corporation, dated July 17, 1996.(B)                                                                                                                           
|        | 10.10 |             |  | The Agreement between Airlines Reporting Corporation and First
	National Bank of Louisville and NPC for Area Settlement Plan
	Processing Services, dated October 16, 1986.(B)                                               
|        | 10.11 |             |  | First Amendment to Agreements between Airlines Reporting
	Corporation and First National Bank of Louisville and NPC, dated
	December 12, 1991.(A)                                                                           
|        | 10.12 |             |  | 1994 Amendment to Agreements between Airlines Reporting
	Corporation and NPC, dated December 31, 1994.(A)                                                                                                                   
|        | 10.13 |             |  | Supplemental Agreement by and between NPC and Airlines Reporting
	Corporation, dated February 24, 1995.(A)                                                                                                                  
|        | 10.14 |             |  | Amendment to Agreement between Airlines Reporting Corporation
	and National City Bank of Kentucky and NPC, for Area Settlement
	Plan Processing Services, dated August 19, 1995.(A)                                         
|        | 10.15 |             |  | December 1, 1998 Amendment to the ARC and NPC Processing
	Agreement. (Incorporated herein by reference to Exhibit 
	10.15 to the Registrants Annual Report on Form 10-K
	for the year ended December 31, 1999)             
|        | 10.16 |             |  | (Intentionally Omitted)                                                                                                                                                                                                     
|        | 10.17 |             |  | (Intentionally Omitted)                                                                                                                                                                                                     
|        | 10.18 |             |  | (Intentionally Omitted)                                                                                                                                                                                                     
|        | 10.19 |             |  | Employment Agreement between the Registrant and Mark Pyke dated
	March 4, 1996. (Incorporated herein by reference to
	Exhibit 10.19 to the Registrants Annual Report on
	Form  10-K for the year ended December 31, 1999)**
|        | 10.20 |             |  | (Intentionally Omitted)                                                                                                                                                                                                     



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##### Table of Contents



|        |       |             |  |                                                                                                                                                                                                                                                                 
|------- | ----- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|Number  |       | Description
|        |       |            
|        | 10.21 |             |  | Employment Agreement and Undertaking of Confidentiality between
	NPC and Thomas A. Wimsett dated May 23, 1995.(A)**                                                                                                                                             
|        | 10.22 |             |  | (Intentionally Omitted)                                                                                                                                                                                                                                         
|        | 10.23 |             |  | (Intentionally Omitted)                                                                                                                                                                                                                                         
|        | 10.24 |             |  | (Intentionally Omitted)                                                                                                                                                                                                                                         
|        | 10.25 |             |  | (Intentionally Omitted)                                                                                                                                                                                                                                         
|        | 10.26 |             |  | (Intentionally Omitted)                                                                                                                                                                                                                                         
|        | 10.27 |             |  | Severance Agreement between the Registrant and Thomas A.
	Wimsett, dated June 7, 1996.(B)**                                                                                                                                                                     
|        | 10.28 |             |  | National Processing, Inc. 2000 Stock Option Plan. (Incorporated
	herein by reference to Exhibit 10.28 to the
	Registrants Quarterly Report on Form 10-Q for the quarter
	ended June 30, 2000)**                                                                
|        | 10.29 |             |  | 1996 Stock Option Plan and Form of Stock Option Agreement.(B)**                                                                                                                                                                                                 
|        | 10.30 |             |  | Non-employee Directors Stock Option Plan and Form of Stock
	Option Agreement.(B)**                                                                                                                                                                              
|        | 10.31 |             |  | Amended and Restated NPC Short-Term Incentive Compensation Plan
	for Senior Executives, effective February 9, 2000.
	(Incorporated herein by reference to Exhibit 10.31 to the
	Registrants Annual Report on Form 10-K for the year
	ended December 31, 1999)**
|        | 10.32 |             |  | NPCs Long-Term Incentive Compensation Plan for Senior
	Officers, effective January 1, 1998.**                                                                                                                                                                  
|        | 10.33 |             |  | (Intentionally Omitted)                                                                                                                                                                                                                                         
|        | 10.34 |             |  | (Intentionally Omitted)                                                                                                                                                                                                                                         
|        | 10.35 |             |  | (Intentionally Omitted)                                                                                                                                                                                                                                         
|        | 10.36 |             |  | Amendment to Building Lease between National City Bank of
	Kentucky and NPC, dated July 3, 1996.(B)**                                                                                                                                                           
|        | 10.37 |             |  | Form of Severance Agreement between the Registrant and certain
	Senior Vice Presidents.(B)**                                                                                                                                                                    
|        | 10.38 |             |  | (Intentionally Omitted)                                                                                                                                                                                                                                         
|        | 10.39 |             |  | (Intentionally Omitted)                                                                                                                                                                                                                                         
|        | 10.40 |             |  | (Intentionally Omitted)                                                                                                                                                                                                                                         
|        | 21.1  |             |  | Subsidiaries of the Registrant.                                                                                                                                                                                                                                 
|        | 23.1  |             |  | Consent of Ernst & Young LLP, Independent Auditors for
	National Processing, Inc.                                                                                                                                                                               
|        | 24.1  |             |  | Directors of National Processing, Inc. Annual Report on
	Form 10-K Power of Attorney.                                                                                                                                                                           



---



|    |                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) | Exhibit is incorporated herein by reference to the applicable
	exhibit in the Registrants Registration Statement on
	Form S-1 (Registration No. 333-05507). (filed on
	June 7, 1996)



|    |                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(B) | Exhibit is incorporated herein by reference to the applicable
	exhibit in the Registrants Amendment No. 1 to
	Form S-1 Registration Statement (Registration
	No. 333-05507). (filed on July 18, 1996)



|   |                                                                                                              
|-- | -------------------------------------------------------------------------------------------------------------
|** | Represents a management contract or compensatory plan required
	to be filed pursuant to Item 14 of Form 10-K.