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



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| |                                   
| | ----------------------------------
| |                                   
| |                                   
|
| | 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, 1999
|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:

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.X  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 February 29, 2000 was
 $54,785,189. The market value calculation was determined using
the closing sale price of the Registrants common stock on
February 29, 2000, as reported on the New York Stock
Exchange.

The number of shares outstanding of the Registrants Common
Stock as of February 29, 2000 was 50,786,986.

Documents Incorporated by Reference:

Portions of the Registrants Proxy Statement (to be dated
approximately March 28, 2000) 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                                     |    |      | 17 | 
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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 | 
|          
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|          
|Signatures |  |                                                                                        | 19 |     

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##### Table of Contents






PART I




Item 1.  Business

National Processing, Inc. (NPI, the
Company or Registrant), through its
wholly owned operating subsidiary National Processing Company
(NPC), operates three business segments 
Merchant Services, Corporate Services and Travel Services.
Merchant Services provides retailers and other merchants with
credit and debit card authorization, capture, settlement,
exception processing and other related services. Merchant
Services represented approximately 67% of the Companys
revenue in 1999 and provided services to over 470,000 merchant
locations throughout the United States, Canada, Puerto Rico,
Mexico and the Caribbean. Corporate Services revenue is derived
from corporate outsourcing, transaction processing and settlement
 services, as well as other customized processing solutions.
Corporate Services represented approximately 22% of the
Companys revenues in 1999. Travel Services principally
settles airline ticket purchases made through travel agents on
behalf of airlines and derives a substantial portion of its
revenues from an exclusive contract with the Airlines Reporting
Corporation (ARC). The Company is compensated on a
cost plus basis under this contract. Travel Services
represented approximately 11% of the Companys revenue in
1999. During the second quarter of 1999, the Company sold its
Check 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 sales of these businesses totaled
 $62.6 million.

The Companys Corporate Services and Travel Services
business segments have significant production operations in
several international locations. The Company established its
initial presence internationally with the opening of a processing
 facility in Juarez, Mexico in 1988. During 1997, the Company
acquired Caribbean Data Services, Ltd., a data processing company
 with operating facilities in Barbados and the Dominican
Republic, and MRS Jamaica, Inc., a healthcare form processing
company with operating facilities in Jamaica. As of
December 31, 1999, international operations employed
approximately 76% of the Companys employees.

NPI is an Ohio corporation that was formerly a wholly owned
subsidiary of National City Corporation, an Ohio-headquartered
bank holding company (National City or
NCC). On August 9, 1996, NPI sold 7,475,000
shares of its common stock in an initial public offering and
retained the net proceeds from the transaction to fund internal
business development. NCC currently owns 88% of NPIs
outstanding common stock. NPI maintains operations, employees and
 contracts substantially independent of NCCs other
operating subsidiaries. NPI and NCC are parties to agreements
pursuant to which NCC and its subsidiaries provide NPI, and NPI
provides NCC and its subsidiaries, certain administrative
support, operations, and processing services. NPI is also a party
 to a tax sharing agreement and a registration rights agreement
with NCC.

Industry Overview

The transaction processing industry has experienced strong volume
 growth in recent years, as acceptance and use of credit and
debit cards have grown, and corporations have increasingly
outsourced non-core administrative and financial functions in
order to reduce costs, capitalize upon advances in technology,
and enhance the quality and availability of management
information. This growth has created 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.

Merchant Services Segment

The merchant card processing industry provides retailers and
other merchants with credit card authorization, capture,
settlement, exception processing and other related services.
These same services are often provided to merchants for debit and
 other card related transactions. The industry has enjoyed
significant growth over the years due to wider merchant
acceptance of credit and debit cards and increased consumer usage
 of these cards.

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NPC is the second largest provider of merchant card processing
services in the United States. In 1999, NPC processed
approximately 2.7 billion transactions (including
approximately one out of every six Visa and MasterCard
transactions in the U.S.) and settled approximately
$116 billion in merchant card sales.

The merchant card processing market is generally characterized by
 two segments of merchants consisting of large national merchants
 and small regional merchants. In 1997, the Company strategically
 expanded its card processing business through the acquisition of
 the common stock of FA Holdings, Inc., the sole owner of
Financial Alliance Processing Services, Inc., an independent
sales organization that specialized in selling credit and debit
card processing services to regional merchants. In addition, on
December 31, 1999, the Company further increased its market
share of regional customers by acquiring a regional merchant
processing portfolio from Heartland Payment Systems LLC. These
acquisitions allowed NPC to diversify its customer base, enhance
its risk management systems and, most importantly, significantly
expand its distribution capabilities.

Through approximately 250 direct sales representatives and 150
third party distribution relationships, the Company expanded its
transaction volume and settlement volume by 29% and 21%,
respectively, in 1999. The Company is well positioned to
aggressively grow its national and regional customer portfolios
through continued expansion of direct and third party
distribution channels.

Merchant Services current customer base consists of
approximately 185,000 customers with over 470,000 locations, the
vast majority of which are based in the United States with others
 located in Canada, Puerto Rico, Mexico and the Caribbean. In
1999, approximately 56% of merchant card processing revenues were
 contributed by regional merchants. In 1999, 1998 and 1997,
merchant card processing represented approximately 92%, 78% and
71%, respectively, of total Merchant Services revenue.

In the second quarter of 1999, the Company divested the Check
business line so the Company could focus more closely on its core
 merchant card processing business. This business line comprised
8%, 22% and 29% of total Merchant Services revenue for 1999, 1998
 and 1997, respectively.

The Merchant Services 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. As a
result, the transaction processing industry will likely continue
to undergo consolidation.

Corporate Services Segment

The business process outsourcing industry provides a variety of
financial and administrative processing solutions to large
corporate customers. These solutions often include financial
settlement, image scanning, data capture, storage and retrieval,
call center and valued added customer reporting. Growth in this
industry has been driven by corporate Americas increased
focus on core competencies, low unemployment rates in the United
States and increased cost associated with U.S. based clerical
positions.

NPCs Corporate Services segment currently focuses on three
industries: Airlines, Financial Services and Healthcare Claim
Processing Services. NPC provides image-scanning, data capture,
and storage and retrieval services for major Airlines in the
United States. NPC services the Financial Services industry by
providing call center, application processing and other
informational services for major credit card issuers and
financial institutions. In addition, NPC provides various imaging
 and data capture services for other financial service companies,
 such as credit bureau agencies and brokerage firms. NPC also
provides image scanning, data capture, and storage and retrieval
for healthcare insurers as part of the Healthcare Claim
Processing Services.

In the second quarter of 1999, the Company divested the
Remittance, Payables and Freight business lines so the Company
could focus more closely on its core Outsourcing Services
business lines. Collectively, the three business lines divested
comprised 34%, 66% and 80% of total Corporate Services revenue
for 1999, 1998 and 1997, respectively. Revenues from the retained
 business lines increased $12.5 million, or 25%, from 1998
to 1999.

4



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In order to remain cost competitive, the Company and many of its
competitors have moved to international locations to reduce
operating expenses. The Company has four international locations
in the Caribbean and Mexico that serve the Corporate Services
segment.

Travel Services Segment

The Companys Travel Services segment derives the majority
of its revenue as the exclusive provider of transaction
processing and settlement services for all airline tickets sold
through travel agencies across the United States. Approximately
53%, 76% and 76% of its revenue in 1999, 1998 and 1997 was
derived from an exclusive long-term contract with the Airlines
Reporting Corporation (ARC). The Company is
compensated on a cost plus basis under the current
ARC contract which expires in December 2005. ARC revenue for
 1999 is lower as a percentage of total Travel Services revenue
due to the acquisition of JBH Travel Audit, Inc., which audits
commissions payable to travel agencies, and increased volumes in
other business lines. The Travel Services segment also derives
revenue from the processing of airline lift tickets and from
Commission Express, which consolidates and processes commission
payments to travel agencies from airlines, car rental companies,
cruise lines, tour operators and hotels.

Regulation

As a result of National Citys ownership in NPI and as long
as National City has a controlling interest, NPI is subject to
banking laws, regulations and orders (collectively, the
Banking Laws). For example, NPI is subject to the
supervision and examination of 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 NPI,
 and the FRBs written approval is required in order for NPI
 to consummate an acquisition. Pursuant to the Bank Holding Act,
NPI 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 NPI or any affiliate of NPI 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 NPI or any subsidiary
does not comply with the requirements of the Bank Holding Act,
NPI 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 NPI currently conducts, then NPI 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. NPI does not believe, however, that
either the Banking Laws or the Bank Holding Act will impede the
manner in which NPI intends to conduct 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.

Prior to the divestiture of the Check business line, the Company
engaged in check guarantee and collection services. As such, the
Company was subject to certain consumer collection laws, orders
and regulations (collectively, Consumer Laws) and the
 laws of the various states in which such activities were
conducted, which among other things: (i) required the
Company to obtain and maintain certain licenses and
qualifications; (ii) limited the fees and other charges the
Company was allowed to charge; and (iii) required specified
disclosures.

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, including the Consumer Laws.

Through National City Bank of Kentucky, 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 else risk suspension or termination of its designation and/or
status. There can be no assurance that

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Employees

As of December 31, 1999, the Company and its subsidiaries
had approximately 7,900 full-time and 200 part-time employees.

Seasonality

The Company experiences seasonality in its businesses,
particularly in its Merchant Services and Travel Services
segments. The Company typically realizes higher revenues in the
third and fourth calendar quarters and lower revenues in the
first calendar quarter, reflecting increased transaction volumes
and travel in the summer and holiday months and decreased
transaction volume during the quarter immediately following the
holiday season.

Financial Information About Segments and Geographic Areas

This data is presented in Note N of the Consolidated
Financial Statements.




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, a wholly owned subsidiary of
National City. (See Transactions with Affiliates, Note F to
Consolidated Financial Statements). The Companys lease for
the Louisville processing facility expires on February 28,
2019. The Companys Juarez operation owns and uses four
properties totaling 225,000 square feet. The Companys other
 processing facilities have varying lease expiration terms and
range in size from 3,900 square feet to 75,000 square feet and
are located throughout the United States, Barbados, Dominican
Republic, Jamaica, Mexico and Fiji. The Companys 28
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 space requirements to consolidate and
dispose of or sublet facilities which are no longer required in
connection with its businesses and to acquire new space to meet
the needs of its businesses.




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.

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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 common stock has been quoted
on the New York Stock Exchange since August 9, 1996, the
date of the initial public offering of the Companys common
stock. The quarterly high and low closing price and the final
days closing price of the Companys common stock for
each of the quarterly periods in 1999 and 1998 were:

|                             |  |      |        |     |  |       |       |  |  |   |        | 
|---------------------------- |  | ---- | ------ | --- |  | ----- | ----- |  |  | - | ------ | 
|                             |  | High |        | Low |  | Close
|                             |  |      |        |     |  |      
|Year Ended December 31, 1999 |  |      |        |     |  |       |       |  |  |   |        | 
|                            
|                            
|                            
|                            
|First Quarter                |  | $    | 6.625  |     |  | $     | 4.500 |  |  | $ | 4.500  | 
|                            
|                            
|                            
|                            
|Second Quarter               |  |      | 10.250 |     |  |       | 4.375 |  |  |   | 10.125 | 
|                            
|                            
|                            
|                            
|Third Quarter                |  |      | 10.563 |     |  |       | 8.375 |  |  |   | 9.000  | 
|                            
|                            
|                            
|                            
|Fourth Quarter               |  |      | 9.188  |     |  |       | 7.813 |  |  |   | 8.875  | 
|                            
|                            
|                            
|                            
|Year Ended December 31, 1998 |  |      |        |     |  |       |       |  |  |   |        | 
|                            
|                            
|                            
|                            
|First Quarter                |  | $    | 12.500 |     |  | $     | 9.750 |  |  | $ | 12.375 | 
|                            
|                            
|                            
|                            
|Second Quarter               |  |      | 12.938 |     |  |       | 9.500 |  |  |   | 10.688 | 
|                            
|                            
|                            
|                            
|Third Quarter                |  |      | 11.313 |     |  |       | 6.563 |  |  |   | 6.750  | 
|                            
|                            
|                            
|                            
|Fourth Quarter               |  |      | 7.063  |     |  |       | 5.438 |  |  |   | 5.500  | 

The number of holders of record of the Companys common
stock as of February 29, 2000 was 81. The Company believes
it has significantly more than 81 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, Corporate Trust
Operations, Department 5352, P.O. Box 92301, Cleveland, Ohio,
44193-0900 (1-800-622-6757).

Investors or analysts requiring further information should
contact either of the following:

|                                                                                                                  |  |                                                                                                         
|----------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------
|Thomas A. Richlovsky
	Investor Relations Department 2101
	P.O. Box 5756
	Cleveland, OH 44101-0756
	(216) 575-2126 |  | David E. Fountain
	Chief Financial Officer
	1231 Durrett Lane
	Louisville, KY 40213-2008
	(502) 315-3311

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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,             
|                                                        |  |                                     
|                                                        |  | 1999                                 |       | 1998 |  | 1997 |       | 1996 |  | 1995
|                                                        |  |                                      |       |      |  |      |       |      |  |     
|                                                        |  |                                     
|                                                        |  | (in millions, except per share data)
|                                                       
|                                                       
|                                                       
|                                                       
|Income Statement Data:(1)                               |  |                                      |       |      |  |      |       |      |  |      |       |  |  |   |       |  |  |   |       | 
|                                                       
|                                                       
|                                                       
|                                                       
|Revenue                                                 |  | $                                    | 431.0 |      |  | $    | 483.2 |      |  | $    | 405.7 |  |  | $ | 373.7 |  |  | $ | 339.3 | 
|                                                       
|                                                       
|                                                       
|                                                       
|Net Income (Loss) (2)                                   |  |                                      | (37.4 | )    |  |      | 15.3  |      |  |      | 21.1  |  |  |   | 31.4  |  |  |   | 25.8  | 
|                                                       
|                                                       
|                                                       
|                                                       
|Basic and Diluted Net Income (Loss) per Common Share(3) |  |                                      | (0.74 | )    |  |      | 0.30  |      |  |      | 0.42  |  |  |   | 0.68  |  |  |   | 0.60  | 
|                                                       
|                                                       
|                                                       
|                                                       
|Average Shares Outstanding-Diluted(3)                   |  |                                      | 50.7  |      |  |      | 50.7  |      |  |      | 50.7  |  |  |   | 46.1  |  |  |   | 43.1  | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                       
|Balance Sheet Data: (1)                                 |  |                                      |       |      |  |      |       |      |  |      |       |  |  |   |       |  |  |   |       | 
|                                                       
|                                                       
|                                                       
|                                                       
|Working Capital                                         |  | $                                    | 124.4 |      |  | $    | 72.4  |      |  | $    | 79.3  |  |  | $ | 178.8 |  |  | $ | 64.1  | 
|                                                       
|                                                       
|                                                       
|                                                       
|Goodwill                                                |  |                                      | 88.4  |      |  |      | 171.5 |      |  |      | 170.3 |  |  |   | 70.6  |  |  |   | 72.6  | 
|                                                       
|                                                       
|                                                       
|                                                       
|Total Assets                                            |  |                                      | 429.2 |      |  |      | 512.4 |      |  |      | 523.3 |  |  |   | 418.6 |  |  |   | 281.3 | 
|                                                       
|                                                       
|                                                       
|                                                       
|Long-Term Obligations                                   |  |                                      | 6.0   |      |  |      | 8.7   |      |  |      | 8.1   |  |  |   | 4.5   |  |  |   | 4.5   | 
|                                                       
|                                                       
|                                                       
|                                                       
|Total Liabilities                                       |  |                                      | 112.8 |      |  |      | 159.7 |      |  |      | 186.4 |  |  |   | 102.9 |  |  |   | 107.3 | 
|                                                       
|                                                       
|                                                       
|                                                       
|Shareholders Equity                                    |  |                                      | 316.4 |      |  |      | 352.7 |      |  |      | 336.8 |  |  |   | 315.7 |  |  |   | 174.0 | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | This information includes the impact of the following
	acquisitions during the periods presented: in December 1995,
	 the Company acquired the remittance processing business of First
	 Data Resources, Inc.; 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 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 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. 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 and Remittance business lines.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(2) | Included in net income are certain non-recurring items summarized
	 as follows: 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. There were no non-recurring items in
	1995.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(3) | Net income per share for 1995 has been calculated based on
	43.1 million shares outstanding which reflects the
	retroactive effect of the 57,465.67 to one stock split effective
	June 6, 1996.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

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 Services revenue is
primarily derived from fees paid by merchants for the
authorization and settlement of credit and debit card
transactions. Revenue is recorded net of interchange fees charged
 by the credit card associations as such costs are not controlled
 by the Company. Corporate Services revenue is derived from
corporate outsourcing, transaction processing and settlement
services, as well as other customized processing solutions.
Travel Services revenue is derived largely from an exclusive
long-term contract with ARC under which the Company is
compensated on a cost plus basis. Travel Services
revenue is also derived from processing of airline lift tickets,
consolidation and processing of commission payments, as well as
from auditing commissions payable to travel agencies. A small
portion of revenue is derived from earnings on cash balances,
which are maintained by customers pursuant to contract terms.
Revenue derived from services provided to affiliates is
immaterial.

Expenses.Operating expenses include all direct costs of
providing services to customers including wages and other
personnel expenses. The most significant components of operating
expenses are assessment fees, authorization fees, data processing
 expenses, wages and benefits, 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 for the comparison of 1999 to 1998 segregate the
operating performance for the remaining core business lines
versus those that were divested. The results of operations
information presented below for the comparison of 1998 to 1997
have not been restated to segregate the results of the divested
business units as the presentation for these results is
consistent with how management viewed the businesses at such
time. The segment profits for 1999, 1998 and 1997 as shown below
exclude certain non-recurring items.

The segment profits as presented herein differ from the operating
 profits presented in note N in the Consolidated Financial
Statements due to the segregation of non-recurring items and
divested businesses.

9



---



##### 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)
|                                            
|                                            
|                                            
|                                            
|Revenue:                                     |                                                |                        |                           |          |        |         |    |          |    |        |        |         |      |         |   |     |   |     |         |          |       |         |     |    
|                                            
|                                            
|                                            
|                                            
|                                             | Merchant Services                              |                        | $                         | 264,479  |        |         |    | 61       | %  |        | $      | 225,004 |      |         |   | 47  | % |     | $       | 39,475   |       |         |     | 18  | %  
|                                            
|                                            
|                                            
|                                            
|                                             | Corporate Services                             |                        |                           | 63,032   |        |         |    | 15       |    |        |        | 50,493  |      |         |   | 10  |   |     |         | 12,539   |       |         |     | 25  |    
|                                            
|                                            
|                                            
|                                            
|                                             | Travel Services                                |                        |                           | 46,138   |        |         |    | 11       |    |        |        | 49,222  |      |         |   | 10  |   |     |         | (3,084   | )     |         |     | (6  | )  
|                                             |                                                |                        |                           |          |        |         |    |          |    |        |        |         |      |         |   |     |   |     |         |          |       |         |     |    
|                                             |                                                |                        | 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 | )
|                                            
|                                            
|                                            
|                                            
|Operating Expenses:                          |                                                |                        |                           |          |        |         |    |          |    |        |        |         |      |         |   |     |   |     |         |          |       |         |     |    
|                                            
|                                            
|                                            
|                                            
|                                             | Merchant Services                              |                        |                           | 226,394  |        |         |    | 86       |    |        |        | 202,752 |      |         |   | 90  |   |     |         | 23,642   |       |         |     | 12  |    
|                                            
|                                            
|                                            
|                                            
|                                             | Corporate Services                             |                        |                           | 55,345   |        |         |    | 88       |    |        |        | 45,526  |      |         |   | 90  |   |     |         | 9,819    |       |         |     | 22  |    
|                                            
|                                            
|                                            
|                                            
|                                             | Travel Services                                |                        |                           | 35,948   |        |         |    | 78       |    |        |        | 39,340  |      |         |   | 80  |   |     |         | (3,392   | )     |         |     | (9  | )  
|                                             |                                                |                        |                           |          |        |         |    |          |    |        |        |         |      |         |   |     |   |     |         |          |       |         |     |    
|                                             |                                                |                        | Core Operating Expenses   |          |        | 317,687 |    |          |    | 85     |        |         |      | 287,618 |   |     |   | 89  |         |          |       | 30,069  |     |     |     | 10  |  
|                                            
|                                            
|                                            
|                                            
|                                             | Divested Business Lines                        |                        |                           | 57,576   |        |         |    | 100      |    |        |        | 165,065 |      |         |   | 104 |   |     |         | (107,489 | )     |         |     | (65 | )  
|                                             |                                                |                        |                           |          |        |         |    |          |    |        |        |         |      |         |   |     |   |     |         |          |       |         |     |    
|                                             |                                                |                        | Total Operating Expenses  |          |        | 375,263 |    |          |    | 87     |        |         |      | 452,683 |   |     |   | 94  |         |          |       | (77,420 | )   |     |     | (17 | )
|                                            
|                                            
|                                            
|                                            
|Segment Profit (Loss):                       |                                                |                        |                           |          |        |         |    |          |    |        |        |         |      |         |   |     |   |     |         |          |       |         |     |    
|                                            
|                                            
|                                            
|                                            
|                                             | Merchant Services                              |                        |                           | 38,085   |        |         |    | 14       |    |        |        | 22,252  |      |         |   | 10  |   |     |         | 15,833   |       |         |     | 71  |    
|                                            
|                                            
|                                            
|                                            
|                                             | Corporate Services                             |                        |                           | 7,687    |        |         |    | 12       |    |        |        | 4,967   |      |         |   | 10  |   |     |         | 2,720    |       |         |     | 55  |    
|                                            
|                                            
|                                            
|                                            
|                                             | Travel Services                                |                        |                           | 10,190   |        |         |    | 22       |    |        |        | 9,882   |      |         |   | 20  |   |     |         | 308      |       |         |     | 3   |    
|                                             |                                                |                        |                           |          |        |         |    |          |    |        |        |         |      |         |   |     |   |     |         |          |       |         |     |    
|                                             |                                                |                        | Total Core Segment Profit |          |        | 55,962  |    |          |    | 15     |        |         |      | 37,101  |   |     |   | 11  |         |          |       | 18,861  |     |     |     | 51  |  
|                                            
|                                            
|                                            
|                                            
|                                             | Divested Business Lines                        |                        |                           | (241     | )      |         |    |         |    |        |        | (6,591  | )    |         |   | (4  | ) |     |         | 6,350    |       |         |     | 96  |    
|                                             |                                                |                        |                           |          |        |         |    |          |    |        |        |         |      |         |   |     |   |     |         |          |       |         |     |    
|                                             |                                                |                        | Total Segment Profit      |          |        | 55,721  |    |          |    | 13     |        |         |      | 30,510  |   |     |   | 6   |         |          |       | 25,211  |     |     |     | 83  |  
|                                            
|                                            
|                                            
|                                            
|Other General and Administrative Expenses    |                                                |                        | 8,226                     |          |        |         | 2  |          |    |        | 7,746  |         |      |         | 2 |     |   |     | 480     |          |       |         | 6   |    
|                                            
|                                            
|                                            
|                                            
|                                             |                                                | Net Interest Income    |                           |          | (4,456 | )       |    |          | (1 | )      |        |         | (924 | )       |   |     |  |     |         |          | 3,532 |         |     |     | 382 |    
|                                             |                                                |                        |                           |          |        |         |    |          |    |        |        |         |      |         |   |     |   |     |         |          |       |         |     |    
|Income Before Taxes and Non- Recurring Items |                                                |                        | 51,951                    |          |        |         | 12 |          |    |        | 23,688 |         |      |         | 5 |     |   |     | 28,263  |          |       |         | 119 |    
|                                            
|                                            
|                                            
|                                            
|Non-Recurring Items:                         |                                                |                        |                           |          |        |         |    |          |    |        |        |         |      |         |   |     |   |     |         |          |       |         |     |    
|                                            
|                                            
|                                            
|                                            
|                                             | Impairment, Restructuring and Related Expenses |                        |                           | (71,691  | )      |         |    | (17      | )  |        |        |        |      |         |   |    |   |     |         | (71,691  | )     |         |     | NM  |    
|                                            
|                                            
|                                            
|                                            
|                                             | Gain on Customer Contract Termination, Net     |                        |                           |         |        |         |    |         |    |        |        | 1,400   |      |         |   |    |   |     |         | (1,400   | )     |         |     | NM  |    
|                                             |                                                |                        |                           |          |        |         |    |          |    |        |        |         |      |         |   |     |   |     |         |          |       |         |     |    
|Income (Loss) 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 (Loss)                            |                                                | $                      | (37,418                   | )        |        |         | (9 | )        |    | $      | 15,250 |         |      |         | 3 |     |   | $   | (52,668 | )        |       |         | NM  |    
|                                             |                                                |                        |                           |          |        |         |    |          |    |        |        |         |      |         |   |     |   |     |         |          |       |         |     |    

NM  Not meaningful

10



---



##### Table of Contents



|                               |                       |                                                  |   |         |         |        |  |     |     |        |   |        |        |  |  |     |    |  |   |         |         |   |  |     |     | 
|------------------------------ | --------------------- | ------------------------------------------------ | - | ------- | ------- | ------ |  | --- | --- | ------ | - | ------ | ------ |  |  | --- | -- |  | - | ------- | ------- | - |  | --- | --- | 
|                               |                       |                                                  |   |         |         |       
|                               |                       | 1999                                             |   | 1998    |         | Change
|                               |                       |                                                  |   |         |         |       
|                               |                       | Amount                                           |   | %       |         | Amount |  | %   |     | Amount |   | %     
|                               |                       |                                                  |   |         |         |        |  |     |     |        |   |       
|                               |                       |                                                 
|                               |                       | (Dollars in thousands, except per share amounts)
|                              
|                              
|                              
|                              
|Excluding Non-Recurring Items: |                       |                                                  |   |         |         |        |  |     |     |        |   |        |        |  |  |     |    |  |   |         |         |   |  |    
|                              
|                              
|                              
|                              
|                               | Pre-Tax Income        |                                                  | $ | 51,951  |         |        |  | 100 | %   |        | $ | 23,688 |        |  |  | 100 | %  |  | $ | 28,263  |         |   |  | 119 | %  
|                              
|                              
|                              
|                              
|                               | Taxes                 |                                                  |   | 17,622  |         |        |  | 34  |     |        |   | 9,280  |        |  |  | 39  |    |  |   | 8,342   |         |   |  | 90  |    
|                               |                       |                                                  |   |         |         |        |  |     |     |        |   |        |        |  |  |     |    |  |   |         |         |   |  |    
|                               |                       | Net Income                                       |   | $       | 34,329  |        |  |     | 66  |        |   | $      | 14,408 |  |  |     | 61 |  |   | $       | 19,921  |   |  |     | 138 | 
|                               |                       |                                                  |   |         |         |        |  |     |     |        |   |        |        |  |  |     |    |  |   |         |         |   |  |    
|                               |                       | Per Share  Diluted                              |   | $       | .68     |        |  |     |     |        |   | $      | .28    |  |  |     |    |  |   | $       | .40     |   |  |     | 138 | 
|                               |                       |                                                  |   |         |         |        |  |     |     |        |   |        |        |  |  |     |    |  |   |         |         |   |  |    
|Non-Recurring Items:           |                       |                                                  |   |         |         |        |  |     |     |        |   |        |        |  |  |     |    |  |   |         |         |   |  |    
|                              
|                              
|                              
|                              
|                               | Pre-Tax Income (Loss) |                                                  | $ | (71,691 | )       |        |  | 100 | %   |        | $ | 1,400  |        |  |  | 100 | %  |  | $ | (73,091 | )       |   |  | NM  |    
|                              
|                              
|                              
|                              
|                               | Taxes                 |                                                  |   | 56      |         |        |  |    |     |        |   | 558    |        |  |  | 40  |    |  |   | (502    | )       |   |  | NM  |    
|                               |                       |                                                  |   |         |         |        |  |     |     |        |   |        |        |  |  |     |    |  |   |         |         |   |  |    
|                               |                       | Net Income (Loss)                                |   | $       | (71,747 | )      |  |     | 100 |        |   | $      | 842    |  |  |     | 60 |  |   | $       | (72,589 | ) |  |     | NM  | 
|                               |                       |                                                  |   |         |         |        |  |     |     |        |   |        |        |  |  |     |    |  |   |         |         |   |  |    
|                               |                       | Per Share  Diluted                              |   | $       | (1.42   | )      |  |     |     |        |   | $      | .02    |  |  |     |    |  |   | $       | 1.44    |   |  |     | NM  | 
|                               |                       |                                                  |   |         |         |        |  |     |     |        |   |        |        |  |  |     |    |  |   |         |         |   |  |    
|Total:                         |                       |                                                  |   |         |         |        |  |     |     |        |   |        |        |  |  |     |    |  |   |         |         |   |  |    
|                              
|                              
|                              
|                              
|                               | Pre-Tax Income (Loss) |                                                  | $ | (19,740 | )       |        |  | NM  |     |        | $ | 25,088 |        |  |  | 100 | %  |  | $ | (44,828 | )       |   |  | NM  |    
|                              
|                              
|                              
|                              
|                               | Taxes                 |                                                  |   | 17,678  |         |        |  | NM  |     |        |   | 9,838  |        |  |  | 39  |    |  |   | (7,840  | )       |   |  | NM  |    
|                               |                       |                                                  |   |         |         |        |  |     |     |        |   |        |        |  |  |     |    |  |   |         |         |   |  |    
|                               |                       | Net Income (Loss)                                |   | $       | (37,418 | )      |  |     | NM  |        |   | $      | 15,250 |  |  |     | 61 |  |   | $       | (52,668 | ) |  |     | NM  | 
|                               |                       |                                                  |   |         |         |        |  |     |     |        |   |        |        |  |  |     |    |  |   |         |         |   |  |    
|                               |                       | Per Share  Diluted                              |   | $       | (.74    | )      |  |     |     |        |   | $      | .30    |  |  |     |    |  |   | $       | (1.04   | ) |  |     | NM  | 
|                               |                       |                                                  |   |         |         |        |  |     |     |        |   |        |        |  |  |     |    |  |   |         |         |   |  |    

NM  Not meaningful

Merchant Services

Revenue for the core business lines increased 18% to
$264.5 million from $225.0 million as a result of
increased volumes, new customer accounts and improved pricing in
the regional market. Operating expenses for the core business
lines increased 12% to $226.4 million from
$202.8 million primarily due to the customer base expansion
and increased volumes. Operating margins as a percentage of
revenue increased to 14% from 10% as a result of improved
efficiencies and substantial operating leverage. Segment profits
increased 71% to $38.1 million in 1999 from
$22.3 million in 1998.

Corporate Services

Revenue for the core business lines increased 25% to
$63.0 million from $50.5 million primarily as a result
of new customer relationships and strong volume growth in the
Healthcare Claim Processing Services business line. Operating
expenses for the core business lines increased 22% to
$55.3 million from $45.5 million due primarily to the
increase in new customer relationships. Operating expenses as a
percentage of revenue decreased to 88% from 90% 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 Claim Processing Services business
line. As a result, segment profit increased 55% to
$7.7 million in 1999 from $5.0 million in 1998.

Travel Services

Revenue decreased 6% to $46.1 million from
$49.2 million as a result of decreased volumes related to
the processing contract with ARC offset by increases in other
business lines. The decline in revenue was caused by the
continuing conversion from paper to electronic reporting which
decreased the need for the Companys data capture services.
The Company is compensated by ARC on a cost-plus basis. Operating
 expenses for the overall segment decreased 9% to
$35.9 million from $39.3 million. Segment profit
increased 3% to $10.2 million in 1999 from $9.9 million
 in 1998 due to the change in business mix and strong growth in
the Commission Express business line.

11



---



##### Table of Contents



Other General and Administrative Expense

Other general and administrative expenses are comprised of
corporate charges that are not included in the determination of
segment profit (loss) for the various business lines. These
expenses increased $0.5 million, or 6%, to $8.2 million
 in 1999 from $7.7 in 1998 due principally to increases in
information technology expenses as well as advisory and legal
fees associated with the offer by NCC to purchase all outstanding
 shares of NPI not owned by NCC. This offer later expired and no
shares were purchased. These increases were offset by reductions
in other corporate expenses as a result of cost reduction
efforts.

Divested Business Lines

Divested business lines are comprised of the Remittance,
Payables, Freight (all formerly part of the Corporate Services
segment) and Check (formerly part of the Merchant Services
segment) business lines that were sold by the Company in the
second quarter of 1999. Revenue and operating expenses for
divested business lines decreased 64% and 65%, respectively. The
decreases were due to the Company selling these business units
during 1999. Thus the results for these business lines were only
included for a portion of 1999 versus being included for the
entire year of 1998. Segment loss for the divested business lines
 was $0.2 million in 1999 versus $6.6 million in 1998.

Net Interest Income

Net interest income increased to $4.5 million from
$0.9 million 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 second
 quarter of 1999 as well as internal cash flow, primarily
generated from the Merchant Services segment.

Non-Recurring Items

During 1999, the Company recorded restructuring charges of
$2.2 million, including $1.9 for severance expense for
approximately 540 employees and $0.3 million for other costs.
These charges related to two of the Companys operating
facilities which have been or are in the process of being closed
and consolidated into the Companys other current
facilities. The charges decreased 1999 net income and earnings
per share by $1.8 million and $0.04, respectively. At
December 31, 1999, the remaining liability was
$0.9 million and related primarily to future severance
payments for approximately 200 remaining employees.

During 1999, the Company committed to a formal plan to dispose of
 its Freight, Payables, Remittance and Check Services business
lines and recorded pre-tax impairment losses and related 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
business lines for $44.3 million. At December 31, 1999,
 the Company had $3.9 million remaining related to the final
 obligations of these dispositions recorded in other accrued
liabilities. The remaining obligations are primarily for future
severance payments, future rent subsidies and future processing
subsidies. For 1999 and 1998, these divested business units had
revenue of $57.3 million and $158.5 million,
respectively. Segment profit (loss) for these business units
 were $(0.2) million and $(6.6) million in 1999 and 1998,
respectively.

The year ended December 31, 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
for the write-off of internally developed software and related
costs following the cancellation of a third-party customer
contract in the Freight business line. The net gain increased
1998 net income and earnings per share by $0.8 million and
$0.02, respectively.

12



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##### Table of Contents



Provision for Income Taxes

Excluding the impact of non-recurring items, the effective tax
rate was 34% for 1999 compared to 39% 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.

Year Ended December 31, 1998 Compared to Year Ended
December 31, 1997

|                                            |                                                |                          |        |          |         |        |   |          |     |        |        |         |         |  |    |    |     |   |         |         |         |   |     |      |     |  
|------------------------------------------- | ---------------------------------------------- | ------------------------ | ------ | -------- | ------- | ------ | - | -------- | --- | ------ | ------ | ------- | ------- |  | -- | -- | --- | - | ------- | ------- | ------- | - | --- | ---- | --- | -
|                                            |                                                |                          |        |          |         |       
|                                            |                                                | 1998                     |        | 1997     |         | Change
|                                            |                                                |                          |        |          |         |       
|                                            |                                                |                          |        | % of     |         |        |   | % of     |     |       
|                                            |                                                | Amount                   |        | Revenues |         | Amount |   | Revenues |     | Amount |        | %      
|                                            |                                                |                          |        |          |         |        |   |          |     |        |        |        
|                                            |                                                |                         
|                                            |                                                | (Dollars In thousands)  
|                                           
|                                           
|                                           
|                                           
|Revenue:                                    |                                                |                          |        |          |         |        |   |          |     |        |        |         |         |  |    |    |     |   |         |         |         |   |     |     
|                                           
|                                           
|                                           
|                                           
|                                            | Merchant Services                              |                          | $      | 287,394  |         |        |   | 60       | %   |        | $      | 233,550 |         |  |    | 58 | %   |   | $       | 53,844  |         |   |     | 23   |    
|                                           
|                                           
|                                           
|                                           
|                                            | Corporate Services                             |                          |        | 146,562  |         |        |   | 30       |     |        |        | 126,377 |         |  |    | 31 |     |   |         | 20,185  |         |   |     | 16   |    
|                                           
|                                           
|                                           
|                                           
|                                            | Travel Services                                |                          |        | 49,237   |         |        |   | 10       |     |        |        | 45,734  |         |  |    | 11 |     |   |         | 3,503   |         |   |     | 8    |    
|                                            |                                                |                          |        |          |         |        |   |          |     |        |        |         |         |  |    |    |     |   |         |         |         |   |     |     
|                                            |                                                | Total Revenue            |        |          | 483,193 |        |   |          | 100 |        |        |         | 405,661 |  |    |    | 100 |   |         |         | 77,532  |   |     |      | 19  |  
|                                           
|                                           
|                                           
|                                           
|Operating Expenses:                         |                                                |                          |        |          |         |        |   |          |     |        |        |         |         |  |    |    |     |   |         |         |         |   |     |     
|                                           
|                                           
|                                           
|                                           
|                                            | Merchant Services                              |                          |        | 261,952  |         |        |   | 91       |     |        |        | 207,118 |         |  |    | 89 |     |   |         | 54,834  |         |   |     | 26   |    
|                                           
|                                           
|                                           
|                                           
|                                            | Corporate Services                             |                          |        | 151,376  |         |        |   | 103      |     |        |        | 109,757 |         |  |    | 87 |     |   |         | 41,619  |         |   |     | 38   |    
|                                           
|                                           
|                                           
|                                           
|                                            | Travel Services                                |                          |        | 39,355   |         |        |   | 80       |     |        |        | 36,756  |         |  |    | 80 |     |   |         | 2,599   |         |   |     | 7    |    
|                                            |                                                |                          |        |          |         |        |   |          |     |        |        |         |         |  |    |    |     |   |         |         |         |   |     |     
|                                            |                                                | Total Operating Expenses |        |          | 452,683 |        |   |          | 94  |        |        |         | 353,631 |  |    |    | 87  |   |         |         | 99,052  |   |     |      | 28  |  
|                                           
|                                           
|                                           
|                                           
|Segment Profit (Loss):                      |                                                |                          |        |          |         |        |   |          |     |        |        |         |         |  |    |    |     |   |         |         |         |   |     |     
|                                           
|                                           
|                                           
|                                           
|                                            | Merchant Services                              |                          |        | 25,442   |         |        |   | 9        |     |        |        | 26,432  |         |  |    | 11 |     |   |         | (990    | )       |   |     | (4   | )  
|                                           
|                                           
|                                           
|                                           
|                                            | Corporate Services                             |                          |        | (4,814   | )       |        |   | (3       | )   |        |        | 16,620  |         |  |    | 13 |     |   |         | (21,434 | )       |   |     | (129 | )  
|                                           
|                                           
|                                           
|                                           
|                                            | Travel Services                                |                          |        | 9,882    |         |        |   | 20       |     |        |        | 8,978   |         |  |    | 20 |     |   |         | 904     |         |   |     | 10   |    
|                                            |                                                |                          |        |          |         |        |   |          |     |        |        |         |         |  |    |    |     |   |         |         |         |   |     |     
|                                            |                                                | Total Segment Profit     |        |          | 30,510  |        |   |          | 6   |        |        |         | 52,030  |  |    |    | 13  |   |         |         | (21,520 | ) |     |      | (41 | )
|                                           
|                                           
|                                           
|                                           
|Other General and Administrative Expenses   |                                                |                          | 7,746  |          |         |        | 2 |          |     |        | 9,870  |         |         |  | 2  |    |     |   | (2,124  | )       |         |   | (22 | )   
|                                           
|                                           
|                                           
|                                           
|Net Interest Income                         |                                                |                          | (924   | )        |         |        |  |          |     |        | (4,001 | )       |         |  | (1 | )  |     |   | (3,077  | )       |         |   | (77 | )   
|                                            |                                                |                          |        |          |         |        |   |          |     |        |        |         |         |  |    |    |     |   |         |         |         |   |     |     
|Income Before Taxes and Non-Recurring Items |                                                |                          | 23,688 |          |         |        | 5 |          |     |        | 46,161 |         |         |  | 11 |    |     |   | (22,473 | )       |         |   | (49 | )   
|                                           
|                                           
|                                           
|                                           
|Non-Recurring Items:                        |                                                |                          |        |          |         |        |   |          |     |        |        |         |         |  |    |    |     |   |         |         |         |   |     |     
|                                           
|                                           
|                                           
|                                           
|                                            | Impairment, Restructuring and Related Expenses |                          |        |         |         |        |   |         |     |        |        | (13,340 | )       |  |    | (3 | )   |   |         | 13,340  |         |   |     | NM   |    
|                                           
|                                           
|                                           
|                                           
|                                            | Gain on Customer Contract Termination, Net     |                          |        | 1,400    |         |        |   |         |     |        |        |        |         |  |    |   |     |   |         | 1,400   |         |   |     | NM   |    
|                                            |                                                |                          |        |          |         |        |   |          |     |        |        |         |         |  |    |    |     |   |         |         |         |   |     |     
|Income Before Taxes                         |                                                |                          | 25,088 |          |         |        | 5 |          |     |        | 32,821 |         |         |  | 8  |    |     |   | (7,733  | )       |         |   | (24 | )   
|                                           
|                                           
|                                           
|                                           
|Provision for Income Taxes                  |                                                |                          | 9,838  |          |         |        | 2 |          |     |        | 11,694 |         |         |  | 3  |    |     |   | (1,856  | )       |         |   | (16 | )   
|                                            |                                                |                          |        |          |         |        |   |          |     |        |        |         |         |  |    |    |     |   |         |         |         |   |     |     
|Net Income                                  |                                                | $                        | 15,250 |          |         |        | 3 |          |     | $      | 21,127 |         |         |  | 5  |    |     | $ | (5,877  | )       |         |   | (28 | )   
|                                            |                                                |                          |        |          |         |        |   |          |     |        |        |         |         |  |    |    |     |   |         |         |         |   |     |     

NM  Not meaningful

13



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##### Table of Contents



|                               |                       |                                                  |   |        |        |        |  |     |    |        |   |         |        |   |  |     |    |  |   |         |         |   |  |     |     |  
|------------------------------ | --------------------- | ------------------------------------------------ | - | ------ | ------ | ------ |  | --- | -- | ------ | - | ------- | ------ | - |  | --- | -- |  | - | ------- | ------- | - |  | --- | --- | -
|                               |                       |                                                  |   |        |        |       
|                               |                       | 1998                                             |   | 1997   |        | Change
|                               |                       |                                                  |   |        |        |       
|                               |                       | Amount                                           |   | %      |        | Amount |  | %   |    | Amount |   | %      
|                               |                       |                                                  |   |        |        |        |  |     |    |        |   |        
|                               |                       |                                                 
|                               |                       | (Dollars in thousands, except per share amounts)
|                              
|                              
|                              
|                              
|Excluding Non-Recurring Items: |                       |                                                  |   |        |        |        |  |     |    |        |   |         |        |   |  |     |    |  |   |         |         |   |  |    
|                              
|                              
|                              
|                              
|                               | Pre-Tax Income        |                                                  | $ | 23,688 |        |        |  | 100 | %  |        | $ | 46,161  |        |   |  | 100 | %  |  | $ | (22,473 | )       |   |  | (49 | )% 
|                              
|                              
|                              
|                              
|                               | Taxes                 |                                                  |   | 9,280  |        |        |  | 39  |    |        |   | 16,894  |        |   |  | 37  |    |  |   | (7,614  | )       |   |  | (45 | )  
|                               |                       |                                                  |   |        |        |        |  |     |    |        |   |         |        |   |  |     |    |  |   |         |         |   |  |    
|                               |                       | Net Income                                       |   | $      | 14,408 |        |  |     | 61 |        |   | $       | 29,267 |   |  |     | 63 |  |   | $       | (14,859 | ) |  |     | (51 | )
|                               |                       |                                                  |   |        |        |        |  |     |    |        |   |         |        |   |  |     |    |  |   |         |         |   |  |    
|                               |                       | Per Share  Diluted                              |   | $      | .28    |        |  |     |    |        |   | $       | .58    |   |  |     |    |  |   | $       | (.30    | ) |  |     | 138 |  
|                               |                       |                                                  |   |        |        |        |  |     |    |        |   |         |        |   |  |     |    |  |   |         |         |   |  |    
|Non-Recurring Items:           |                       |                                                  |   |        |        |        |  |     |    |        |   |         |        |   |  |     |    |  |   |         |         |   |  |    
|                              
|                              
|                              
|                              
|                               | Pre-Tax Income (Loss) |                                                  | $ | 1,400  |        |        |  | 100 | %  |        | $ | (13,340 | )      |   |  | 100 | %  |  | $ | 14,740  |         |   |  | NM  |    
|                              
|                              
|                              
|                              
|                               | Taxes                 |                                                  |   | 558    |        |        |  | 40  |    |        |   | (5,200  | )      |   |  | 39  |    |  |   | 5,758   |         |   |  | NM  |    
|                               |                       |                                                  |   |        |        |        |  |     |    |        |   |         |        |   |  |     |    |  |   |         |         |   |  |    
|                               |                       | Net Income (Loss)                                |   | $      | 842    |        |  |     | 60 |        |   | $       | (8,140 | ) |  |     | 61 |  |   | $       | 8,982   |   |  |     | NM  |  
|                               |                       |                                                  |   |        |        |        |  |     |    |        |   |         |        |   |  |     |    |  |   |         |         |   |  |    
|                               |                       | Per Share  Diluted                              |   | $      | .02    |        |  |     |    |        |   | $       | (.16   | ) |  |     |    |  |   | $       | .18     |   |  |     | NM  |  
|                               |                       |                                                  |   |        |        |        |  |     |    |        |   |         |        |   |  |     |    |  |   |         |         |   |  |    
|Total:                         |                       |                                                  |   |        |        |        |  |     |    |        |   |         |        |   |  |     |    |  |   |         |         |   |  |    
|                              
|                              
|                              
|                              
|                               | Pre-Tax Income (Loss) |                                                  | $ | 25,088 |        |        |  | 100 | %  |        | $ | 32,821  |        |   |  | 100 | %  |  | $ | (7,733  | )       |   |  | (24 | )% 
|                              
|                              
|                              
|                              
|                               | Taxes                 |                                                  |   | 9,838  |        |        |  | 39  |    |        |   | 11,694  |        |   |  | 36  |    |  |   | (1,856  | )       |   |  | (16 | )  
|                               |                       |                                                  |   |        |        |        |  |     |    |        |   |         |        |   |  |     |    |  |   |         |         |   |  |    
|                               |                       | Net Income (Loss)                                |   | $      | 15,250 |        |  |     | 61 |        |   | $       | 21,127 |   |  |     | 64 |  |   | $       | (5,877  | ) |  |     | (28 | )
|                               |                       |                                                  |   |        |        |        |  |     |    |        |   |         |        |   |  |     |    |  |   |         |         |   |  |    
|                               |                       | Per Share  Diluted                              |   | $      | .30    |        |  |     |    |        |   | $       | .42    |   |  |     |    |  |   | $       | (.12    | ) |  |     | (28 | )
|                               |                       |                                                  |   |        |        |        |  |     |    |        |   |         |        |   |  |     |    |  |   |         |         |   |  |    

NM  Not meaningful

Merchant Services

Revenue increased $53.8 million or 23%, to
$287.4 million from $233.6 million. This increase was due to
 merchant card revenue increases of $37.7 million from the FA
Holdings acquisition and additional increases in existing
merchant card operations, partially offset by lower merchant
check revenue from the termination and re-pricing of certain
customer contracts. Operating expenses increased 26% to
$262.0 million from $207.1 million due primarily to
increased volumes and expanded sales distribution channels,
information technology costs and customer service costs.
Operating expenses as a percentage of revenue increased to 91%
from 89%. As a result, segment profit decreased by 4% to
$25.4 million from $26.4 million.

Corporate Services

Revenue increased by 16% to $146.6 million from
$126.4 million due primarily to the acquisitions made by the
 Company in 1997 and 1998. Operating expenses increased 38% to
$151.4 million from $109.8 million. Operating expenses
as a percentage of revenue increased to 103% from 87%. The
increases in operating expenses and operating expenses as a
percentage of revenue were a result of increased volumes and
increased operating expenses in the remittance operations due to
a $5.2 million charge for research adjustments and $2.4
million in additional expenses due to delays in converting to new
 imaging technology. As a result, segment profit (loss) was
($4.8) million in 1998 versus $16.6 million in 1997.

Travel Services

Revenue increased 8% to $49.2 million from
$45.7 million primarily due to the January 1998
acquisition of JBH Travel Audit, Inc. Operating expenses
increased 7% to $39.4 million from $36.8 million as a
result of this acquisition. Operating expenses as a percentage of
 revenue were 80% for both years. As a result, segment profit
increased 10% to $9.9 million from $9.0 million.

14



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##### Table of Contents



Other General and Administrative Expense

Other general and administrative expenses are comprised of
corporate charges that are not included in the determination of
segment profit for the various business lines. These expenses
decreased $2.1 million in 1998, or 22%, to $7.7 million
 from $9.9 million in 1997. This decrease resulted
principally from decreases in corporate overhead that were
achieved as a result of the December 1997 corporate
reorganization.

Net Interest Income

Net interest income decreased to $0.9 million from
$4.0 million. This decrease resulted from reduced investment
 balances reflecting the cash used for the 1997 and 1998
acquisitions.

Non-Recurring Items

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 for the write-off of
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.

In March 1997, the Company recorded expenses of
$6.3 million, including $5.1 million for severance
expense for approximately 79 employees, and $1.2 million for
other costs related to organizational restructuring. In December
1997, the Company recorded expenses of $7.0 million
following the acquisition of FA Holdings, Inc. The expenses
resulted principally from the write-off of certain fixed assets
(totaling $5.5 million) related to several of the
Companys facilities which were closed and consolidated into
 the Companys other current facilities. The charges
decreased 1997 net income and earnings per share by approximately
 $8.1 million and $0.16, respectively.

Provision for Income Taxes

The provision for income taxes for 1998 was $9.8 million
compared to $11.7 million in 1997. The decrease resulted from the
 decrease in income before taxes of $7.7 million to
$25.1 million. Additionally, the 1997 effective tax rate of
36% was lower than the 1998 rate of 39% due to a significant
increase in non-tax deductible goodwill amortization in 1998
resulting from 1997 and 1998 business acquisitions and due to
non-taxable interest income from investments in 1997.

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
computer systems hardware and software, scanning and other
document processing equipment, as well as buildings and leasehold
 improvements to the Juarez, Mexico and Louisville, Kentucky
operation facilities. During 1999, the Companys capital
expenditures totaled $16.9 million. Such expenditures were
principally financed from operating cash flow, which for 1999
totaled $60.6 million. Capital expenditures for 1998 were
$42.5 million. Operating cash flow for 1998 was
$44.6 million. The Company expects capital expenditures for
2000 to be approximately $14.0 million principally to
enhance merchant card processing capabilities.

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 its 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 shown on the
balance sheet as assets and equivalent offsetting liabilities.
These cash balances totaled $22.2 million and $91.5 million
as of December 31, 1999 and 1998, respectively. The decrease
 from 1998 to

15



---



##### Table of Contents





Year 2000

During 1999, management completed the process of preparing for
the Year 2000 date change. This process involved identifying and
remediating date recognition problems in computer systems,
software and other operating equipment, working with third
parties to address their Year 2000 issues, and developing
contingency plans to address potential risks in the event of Year
 2000 failures. To date, the Company has successfully managed the
 transition.

Although considered unlikely, unanticipated problems in the
Companys core business processes, including problems
associated with non-compliant third parties and disruptions to
the economy in general, could still occur. Management will
continue to monitor all business processes, including interaction
 with the Companys customers, vendors and other third
parties, throughout 2000 to address any issues and ensure all
processes continue to function properly.

Through 1999, the cost of the Year 2000 project totaled
approximately $9.0 million. Approximately 20% of these costs
related to internal personnel working on the project and certain
capitalizable costs related to replacing non-compliant hardware
and software. During 1999 costs associated with the project
totaled approximately $4.3 million. Final project costs of
approximately $0.1 million are expected to be incurred in
2000 for ongoing monitoring and support activities.

Forward Looking Statements

In Item 1, the sections entitled Industry Overview, Merchant
 Services Segment, Corporate Services Segment, Travel Services
Segment 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, the sections entitled Liquidity and
Capital Resources and Year 2000, 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). These
forward-looking statements involve risks and uncertainties,
including changes in general economic conditions, the
Companys ability to execute its business plans and the
ability of third parties to effectively address their Year 2000
issues. Although the Company believes the expectations reflected
in such forward-looking statements are reasonable, actual results
 may differ materially.




Item 7A.  Quantitative and Qualitative
Disclosure About Market Risk

Derivative Instruments

The Company does not use derivative instruments.

Market Risk of Financial Instruments

NPCs primary market risk exposure with regard to financial
instruments is to changes in interest rates, principally in the
United States. At December 31, 1999, the Company had cash,
short-term investments and restricted deposits on which interest
income is earned. At December 31, 1999, the Company did not
have any liabilities that were sensitive to interest rate
changes. Future changes in interest rates would impact the
Companys earnings; however, management does not believe the
 changes would 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.

16



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##### Table of Contents








PART III





Item 10.  Directors and Executive Officers of
the Registrant

Executive Officers

The Executive Officers of the Company as of February 29, 2000
were as follows:

|     |                    |     |  |          |    |  |  |                                                                 
|---- | ------------------ | --- |  | -------- | -- |  |  | ----------------------------------------------------------------
|Name |                    | Age |  | Position
|     |                    |     |  |         
|     | Thomas A. Wimsett  |     |  |          | 36 |  |  | President and Chief Executive Officer                           
|     | Mark D. Pyke       |     |  |          | 39 |  |  | Executive Vice President  Merchant Services                    
|     | Steven T. Pedersen |     |  |          | 43 |  |  | Executive Vice President  Corporate Outsourcing                
|     | Norman M. Martin   |     |  |          | 56 |  |  | Executive Vice President  Merchant Services Product
	Management
|     | David E. Fountain  |     |  |          | 39 |  |  | Senior Vice President  Chief Financial Officer                 

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

Mr. Wimsett was appointed as President and Chief Executive
Officer in September 1999. Prior to that time, he was an
Executive Vice President of NPCs Merchant Services Division
 from 1997 to 1999 and an Executive Vice President of NPCs
Check Services Division from 1995 to 1997.

Mr. Pyke was appointed as Executive Vice President 
Merchant Services in October 1999 and was a Senior Vice President
 of the Merchant Services Division since 1998. Mr. Pyke held
 a variety of management positions in NPCs Merchant
Services Division from 1996 to 1998. Prior to joining NPC,
Mr. Pyke was Vice President of Risk Management with NaBanco,
 a merchant credit card processing subsidiary of First Data
Corporation from 1995 to 1996.

Mr. Pedersen was appointed Executive Vice President 
Corporate Outsourcing in March 1999. Prior to that time, he was a
 Senior Vice President of the Imaging Services business since
1994.

Mr. Martin joined the Company in January 2000 as Executive Vice
President  Merchant Services Product Management. 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.

Mr. Fountain was appointed as Chief Financial Officer in October
1999. Mr. Fountain previously served as Senior Vice
President  Operations Accounting 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. Prior to joining NPC,
Mr. Fountain worked as a consultant in 1995. From 1983 to
1995, Mr. Fountain held various financial management
positions in the credit card industry.

The other information required by Item 10 is incorporated by
 reference from the Companys Definitive Proxy Statement to
be dated approximately March 28, 2000.




Item 11.  Executive Compensation

Incorporated by reference from the Companys Definitive
Proxy Statement to be dated approximately March 28, 2000.




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, 2000.




Item 13.  Certain Relationships and Related
Transactions

Incorporated by reference from the Companys Definitive
Proxy Statement to be dated approximately March 28, 2000.

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, 1999 and 1998                                                                    |  |             | F-2 | 
|                                                                                                                               
|                                                                                                                               
|                                                                                                                               
|                                                                                                                               
|Consolidated Statements of Operations for each of the three years
	 in the period ended December 31, 1999                       |  |             | F-4 | 
|                                                                                                                               
|                                                                                                                               
|                                                                                                                               
|                                                                                                                               
|Consolidated Statements of Changes in Shareholders Equity
	for each of the three years in the period ended December 
	31, 1999 |  |             | F-5 | 
|                                                                                                                               
|                                                                                                                               
|                                                                                                                               
|                                                                                                                               
|Consolidated Statements of Cash Flows for each of the three years
	 in the period ended December 31, 1999                       |  |             | F-6 | 
|                                                                                                                               
|                                                                                                                               
|                                                                                                                               
|                                                                                                                               
|Notes to Consolidated Financial Statements                                                                                      |  |             | F-7 | 

2.  Financial Statement Schedules

Omitted due to inapplicability or because the required
information is immaterial to the Companys consolidated
financial statements.

3.  Exhibits

The index of exhibits has been filed as separate pages of the
1999 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

None.

18



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##### 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 March 23, 2000.



| |                          
| | -------------------------
| | 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)              |  |      | March 23, 2000 |  
|/s/ DAVID E. FOUNTAINDavid E. Fountain   |  | Senior Vice President and Chief Financial Officer (Principal
	Accounting Officer) |  |      | March 23, 2000 |  
|/s/ JAMES R. BELL, IIIJames R. Bell, III |  | Director                                                                          |  |      | March 23, 2000 | *
|/s/ ROBERT G. SIEFERSRobert G. Siefers   |  | Director                                                                          |  |      | March 23, 2000 | *
|/s/ JEFFREY D. KELLYJeffrey D. Kelly     |  | Director                                                                          |  |      | March 23, 2000 | *
|Aureliano Gonzalez-Baz                   |  | Director                                                                          |  |      | March 23, 2000 |  
|Christos M. Cotsakos                     |  | Director                                                                          |  |      | March 23, 2000 |  
|Preston B. Heller, Jr.                   |  | Director                                                                          |  |      | March 23, 2000 |  
|/s/ JON L. GORNEYJon L. Gorney           |  | Director                                                                          |  |      | March 23, 2000 | *
|/s/ J. ARMANDO RAMIREZJ. Armando Ramirez |  | Director                                                                          |  |      | March 23, 2000 | *



|  |                                                                                                                                                                                                                                                                                                                 
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | The undersigned by signing his name hereto, does sign and execute
	 the Annual Report on Form 10-K for fiscal year 1999
	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



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##### 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,
1999 and 1998, 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,
 1999. These financial statements are the responsibility of the
Company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, 1999 and 1998, and the consolidated results
of their operations and their cash flows for each of the three
years in the period ended December 31, 1999, in conformity
with accounting principles generally accepted in the United
States.

Cleveland, Ohio





F-1



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##### Table of Contents



NATIONAL PROCESSING, INC.

Consolidated Balance Sheets

|                                                                              |                                           |                        |         |         |  |   |         |         | 
|----------------------------------------------------------------------------- | ----------------------------------------- | ---------------------- | ------- | ------- |  | - | ------- | ------- | 
|                                                                              |                                           |                       
|                                                                              |                                           | December 31,          
|                                                                              |                                           |                       
|                                                                              |                                           | 1999                   |         | 1998   
|                                                                              |                                           |                        |         |        
|                                                                              |                                           |                       
|                                                                              |                                           | (Dollars in thousands)
|Assets                                                                        |                                           |                        |         |         |  |   |         |        
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Current assets:                                                               |                                           |                        |         |         |  |   |         |        
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Cash and cash equivalents                 |                        | $       | 32,042  |  |   | $       | 7,254   | 
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Securities available for sale             |                        |         | 60,000  |  |   |         |        | 
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Accounts receivable-trade                 |                        |         | 104,486 |  |   |         | 104,759 | 
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Restricted deposits-customer funds        |                        |         | 22,177  |  |   |         | 91,484  | 
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Deferred tax assets                       |                        |         | 812     |  |   |         | 3,688   | 
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Other current assets                      |                        |         | 11,743  |  |   |         | 16,335  | 
|                                                                              |                                           |                        |         |         |  |   |         |        
|Total current assets                                                          |                                           |                        | 231,260 |         |  |   | 223,520 |        
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Property and equipment:                                                       |                                           |                        |         |         |  |   |         |        
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Furniture and equipment                   |                        |         | 81,439  |  |   |         | 116,420 | 
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Building and leasehold improvements       |                        |         | 21,006  |  |   |         | 23,843  | 
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Software                                  |                        |         | 18,027  |  |   |         | 23,537  | 
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Property leased from affiliate            |                        |         | 4,173   |  |   |         | 4,173   | 
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Land and improvements                     |                        |         | 2,851   |  |   |         | 2,828   | 
|                                                                              |                                           |                        |         |         |  |   |         |        
|                                                                              |                                           |                        | 127,496 |         |  |   | 170,801 |        
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Accumulated depreciation and amortization |                        |         | 62,408  |  |   |         | 82,680  | 
|                                                                              |                                           |                        |         |         |  |   |         |        
|                                                                              |                                           |                        | 65,088  |         |  |   | 88,121  |        
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Other assets:                                                                 |                                           |                        |         |         |  |   |         |        
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Goodwill, net of accumulated amortization of $5,040 in 1999,
	$14,202 in 1998 |                                           |                        | 88,431  |         |  |   | 171,489 |        
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Other intangible assets                                                       |                                           |                        | 30,998  |         |  |   | 18,255  |        
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Deferred tax assets                                                           |                                           |                        | 3,698   |         |  |   | 2,764   |        
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Other assets                                                                  |                                           |                        | 9,739   |         |  |   | 8,284   |        
|                                                                              |                                           |                        |         |         |  |   |         |        
|Total other assets                                                            |                                           |                        | 132,866 |         |  |   | 200,792 |        
|                                                                              |                                           |                        |         |         |  |   |         |        
|Total assets                                                                  |                                           | $                      | 429,214 |         |  | $ | 512,433 |        
|                                                                              |                                           |                        |         |         |  |   |         |        

See notes to consolidated financial statements.

F-2



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##### Table of Contents



NATIONAL PROCESSING, INC.

Consolidated Balance Sheets

|                                                |                                                                                                                                                         |                        |         |         |  |   |         |         | 
|----------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------- | ------- | ------- |  | - | ------- | ------- | 
|                                                |                                                                                                                                                         |                       
|                                                |                                                                                                                                                         | December 31,          
|                                                |                                                                                                                                                         |                       
|                                                |                                                                                                                                                         | 1999                   |         | 1998   
|                                                |                                                                                                                                                         |                        |         |        
|                                                |                                                                                                                                                         |                       
|                                                |                                                                                                                                                         | (Dollars in thousands)
|Liabilities and shareholders equity            |                                                                                                                                                         |                        |         |         |  |   |         |        
|                                               
|                                               
|                                               
|                                               
|Current liabilities:                            |                                                                                                                                                         |                        |         |         |  |   |         |        
|                                               
|                                               
|                                               
|                                               
|                                                | Restricted deposits-customer funds                                                                                                                      |                        | $       | 22,177  |  |   | $       | 91,484  | 
|                                               
|                                               
|                                               
|                                               
|                                                | Accounts payable-trade                                                                                                                                  |                        |         | 12,262  |  |   |         | 3,075   | 
|                                               
|                                               
|                                               
|                                               
|                                                | Accrued bankcard assessments                                                                                                                            |                        |         | 20,122  |  |   |         | 17,753  | 
|                                               
|                                               
|                                               
|                                               
|                                                | Income tax payable to NCC                                                                                                                               |                        |         | 16,318  |  |   |         | 4,376   | 
|                                               
|                                               
|                                               
|                                               
|                                                | Other accrued liabilities                                                                                                                               |                        |         | 35,963  |  |   |         | 34,419  | 
|                                                |                                                                                                                                                         |                        |         |         |  |   |         |        
|Total current liabilities                       |                                                                                                                                                         |                        | 106,842 |         |  |   | 151,107 |        
|                                               
|                                               
|                                               
|                                               
|Obligation under property leased from affiliate |                                                                                                                                                         |                        | 2,123   |         |  |   | 2,264   |        
|                                               
|                                               
|                                               
|                                               
|Other long-term liabilities                     |                                                                                                                                                         |                        | 796     |         |  |   | 796     |        
|                                               
|                                               
|                                               
|                                               
|Deferred tax liabilities                        |                                                                                                                                                         |                        | 3,047   |         |  |   | 5,607   |        
|                                                |                                                                                                                                                         |                        |         |         |  |   |         |        
|Total liabilities                               |                                                                                                                                                         |                        | 112,808 |         |  |   | 159,774 |        
|                                               
|                                               
|                                               
|                                               
|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;
	50,785,652 and 50,644,651 shares issued and outstanding in 1999
	and 1998, respectively |                        |         | 1       |  |   |         | 1       | 
|                                               
|                                               
|                                               
|                                               
|                                                | Contributed capital                                                                                                                                     |                        |         | 176,964 |  |   |         | 175,799 | 
|                                               
|                                               
|                                               
|                                               
|                                                | Retained earnings                                                                                                                                       |                        |         | 139,441 |  |   |         | 176,859 | 
|                                                |                                                                                                                                                         |                        |         |         |  |   |         |        
|Total shareholders equity                      |                                                                                                                                                         |                        | 316,406 |         |  |   | 352,659 |        
|                                                |                                                                                                                                                         |                        |         |         |  |   |         |        
|Total liabilities and shareholders equity      |                                                                                                                                                         | $                      | 429,214 |         |  | $ | 512,433 |        
|                                                |                                                                                                                                                         |                        |         |         |  |   |         |        

See notes to consolidated financial statements.

F-3



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##### Table of Contents



NATIONAL PROCESSING, INC.

Consolidated Statements of Operations

|                                                     |  |                                          |         |      |  |      |         |   |  |   |         | 
|---------------------------------------------------- |  | ---------------------------------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | 
|                                                     |  |                                         
|                                                     |  | Year Ended December 31,                 
|                                                     |  |                                         
|                                                     |  | 1999                                     |         | 1998 |  | 1997
|                                                     |  |                                          |         |      |  |     
|                                                     |  |                                         
|                                                     |  | (In thousands, except per share amounts)
|                                                    
|                                                    
|                                                    
|                                                    
|Revenue                                              |  | $                                        | 430,984 |      |  | $    | 483,193 |   |  | $ | 405,661 | 
|                                                    
|                                                    
|                                                    
|                                                    
|Operating expenses                                   |  |                                          | 216,641 |      |  |      | 241,078 |   |  |   | 193,352 | 
|                                                    
|                                                    
|                                                    
|                                                    
|Wages and other personnel expenses                   |  |                                          | 92,601  |      |  |      | 126,970 |   |  |   | 101,573 | 
|                                                    
|                                                    
|                                                    
|                                                    
|General and administrative expenses                  |  |                                          | 52,197  |      |  |      | 65,614  |   |  |   | 50,750  | 
|                                                    
|                                                    
|                                                    
|                                                    
|Depreciation and amortization                        |  |                                          | 22,050  |      |  |      | 26,767  |   |  |   | 17,826  | 
|                                                    
|                                                    
|                                                    
|                                                    
|Impairment, restructuring and related expenses       |  |                                          | 71,691  |      |  |      |        |   |  |   | 13,340  | 
|                                                    
|                                                    
|                                                    
|                                                    
|Gain on customer contract termination, net           |  |                                          |        |      |  |      | (1,400  | ) |  |   |        | 
|                                                     |  |                                          |         |      |  |      |         |   |  |   |         | 
|Operating profit (loss)                              |  |                                          | (24,196 | )    |  |      | 24,164  |   |  |   | 28,820  | 
|                                                    
|                                                    
|                                                    
|                                                    
|Net interest income                                  |  |                                          | 4,456   |      |  |      | 924     |   |  |   | 4,001   | 
|                                                     |  |                                          |         |      |  |      |         |   |  |   |         | 
|Income (loss) before provision for income taxes      |  |                                          | (19,740 | )    |  |      | 25,088  |   |  |   | 32,821  | 
|                                                    
|                                                    
|                                                    
|                                                    
|Provision for income taxes                           |  |                                          | 17,678  |      |  |      | 9,838   |   |  |   | 11,694  | 
|                                                     |  |                                          |         |      |  |      |         |   |  |   |         | 
|Net income (loss)                                    |  | $                                        | (37,418 | )    |  | $    | 15,250  |   |  | $ | 21,127  | 
|                                                     |  |                                          |         |      |  |      |         |   |  |   |         | 
|Basic and diluted net income (loss) per common share |  | $                                        | (0.74   | )    |  | $    | 0.30    |   |  | $ | 0.42    | 
|                                                     |  |                                          |         |      |  |      |         |   |  |   |         | 

See notes to consolidated financial statements.

F-4



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##### Table of Contents



NATIONAL PROCESSING, INC.

Consolidated Statements of Changes in Shareholders
Equity

|                             |  |                        |   |             |  |          |         |       |  |   |         |   |  |   |         |  
|---------------------------- |  | ---------------------- | - | ----------- |  | -------- | ------- | ----- |  | - | ------- | - |  | - | ------- | -
|                             |  | Common                 |   | Contributed |  | Retained |         |      
|                             |  | Stock                  |   | Capital     |  | Earnings |         | Total
|                             |  |                        |   |             |  |          |         |      
|                             |  |                       
|                             |  | (Dollars in thousands)
|                            
|                            
|                            
|                            
|Balance at January 1, 1997   |  | $                      | 1 |             |  | $        | 175,215 |       |  | $ | 140,482 |   |  | $ | 315,698 |  
|                            
|                            
|                            
|                            
|Net income                   |  |                        |  |             |  |          |        |       |  |   | 21,127  |   |  |   | 21,127  |  
|                             |  |                        |   |             |  |          |         |       |  |   |         |   |  |   |         |  
|Balance at December 31, 1997 |  |                        | 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 |  
|                             |  |                        |   |             |  |          |         |       |  |   |         |   |  |   |         |  

See notes to consolidated financial statements.

F-5



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##### Table of Contents



NATIONAL PROCESSING, INC.

Consolidated Statements of Cash Flows

|                                                                     |                                                |                         |          |        |   |      |         |        |   |   |          |        |  
|-------------------------------------------------------------------- | ---------------------------------------------- | ----------------------- | -------- | ------ | - | ---- | ------- | ------ | - | - | -------- | ------ | -
|                                                                     |                                                |                        
|                                                                     |                                                | Year Ended December 31,
|                                                                     |                                                |                        
|                                                                     |                                                | 1999                    |          | 1998   |   | 1997
|                                                                     |                                                |                         |          |        |   |     
|                                                                     |                                                |                        
|                                                                     |                                                | (In thousands)         
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Operating activities                                                 |                                                |                         |          |        |   |      |         |        |   |   |          |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Net income (loss)                                                    |                                                | $                       | (37,418  | )      |   | $    | 15,250  |        |   | $ | 21,127   |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Items not requiring cash currently:                                  |                                                |                         |          |        |   |      |         |        |   |   |          |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Depreciation and amortization                  |                         |          | 22,050 |   |      |         | 26,767 |   |   |          | 17,826 |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Impairment, restructuring and related expenses |                         |          | 58,214 |   |      |         |       |   |   |          | 10,552 |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Deferred income taxes                          |                         |          | (618   | ) |      |         | 6,287  |   |   |          | (3,803 | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Loss on disposition of assets                  |                         |          | 740    |   |      |         | 2,430  |   |   |          |       |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Changes in current assets and liabilities:                           |                                                |                         |          |        |   |      |         |        |   |   |          |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Accounts receivable-trade                      |                         |          | (8,858 | ) |      |         | 629    |   |   |          | (4,590 | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Accounts payable-trade                         |                         |          | 9,187  |   |      |         | (2,245 | ) |   |          | (4,694 | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Accrued bankcard assessments                   |                         |          | 2,369  |   |      |         | (2,053 | ) |   |          | 2,588  |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Income taxes payable/receivable-NCC            |                         |          | 11,942 |   |      |         | (1,131 | ) |   |          | 3,597  |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Other current assets/liabilities               |                         |          | 2,788  |   |      |         | (2,323 | ) |   |          | (4,732 | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Other, net                                     |                         |          | 213    |   |      |         | 998    |   |   |          | (3,252 | )
|                                                                     |                                                |                         |          |        |   |      |         |        |   |   |          |       
|Net cash provided by operating activities                            |                                                |                         | 60,609   |        |   |      | 44,609  |        |   |   | 34,619   |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Investing activities                                                 |                                                |                         |          |        |   |      |         |        |   |   |          |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Capital expenditures                                                 |                                                |                         | (16,931  | )      |   |      | (42,469 | )      |   |   | (28,286  | )     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Proceeds from sales of fixed assets                                  |                                                |                         | 532      |        |   |      |        |        |   |   |         |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Purchases of securities available for sale                           |                                                |                         | (100,000 | )      |   |      |        |        |   |   | (444,422 | )     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Proceeds from sales and maturities of securities available for
	sale |                                                |                         | 40,000   |        |   |      |        |        |   |   | 566,859  |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Proceeds from sales of business lines                                |                                                |                         | 62,554   |        |   |      |        |        |   |   |         |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Other investing activities                                           |                                                |                         | (23,000  | )      |   |      | (34,118 | )      |   |   | (91,881  | )     
|                                                                     |                                                |                         |          |        |   |      |         |        |   |   |          |       
|Net cash provided by (used for) investing activities                 |                                                |                         | (36,845  | )      |   |      | (76,587 | )      |   |   | 2,270    |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Financing activities                                                 |                                                |                         |          |        |   |      |         |        |   |   |          |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Payment of note payable                                              |                                                |                         |         |        |   |      | (1,100  | )      |   |   |         |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Principal payments under property leased from affiliate              |                                                |                         | (141     | )      |   |      | (327    | )      |   |   | (144     | )     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Exercise of stock options                                            |                                                |                         | 1,165    |        |   |      | 584     |        |   |   |         |       
|                                                                     |                                                |                         |          |        |   |      |         |        |   |   |          |       
|Net cash provided by (used for) financing activities                 |                                                |                         | 1,024    |        |   |      | (843    | )      |   |   | (144     | )     
|                                                                     |                                                |                         |          |        |   |      |         |        |   |   |          |       
|Net increase (decrease) in cash and cash equivalents                 |                                                |                         | 24,788   |        |   |      | (32,821 | )      |   |   | 36,745   |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Cash and cash equivalents, beginning of period                       |                                                |                         | 7,254    |        |   |      | 40,075  |        |   |   | 3,330    |       
|                                                                     |                                                |                         |          |        |   |      |         |        |   |   |          |       
|Cash and cash equivalents, end of period                             |                                                | $                       | 32,042   |        |   | $    | 7,254   |        |   | $ | 40,075   |       
|                                                                     |                                                |                         |          |        |   |      |         |        |   |   |          |       
|Supplemental Cash Flow Information:                                  |                                                |                         |          |        |   |      |         |        |   |   |          |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Taxes paid to NCC                              |                         | $        | 5,057  |   |      | $       | 5,197  |   |   | $        | 14,358 |  

See notes to consolidated financial statements.

F-6



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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) (a majority owned subsidiary of National
City Corporation (NCC), a bank holding company
headquartered in Cleveland, Ohio) became the owner of all of the
outstanding shares of National Processing Company
(NPC) on June 5, 1996. In connection with its
organization, the Company issued 43,100,000 shares of common
stock (after giving retroactive effect to the 57,465.67 to 1
stock split which was effective June 6, 1996) to NCC, and
NCC contributed the common stock of NPC (then a wholly owned
subsidiary of NCC) to the Company. Since both the Company and NPC
 are subsidiaries of NCC, this transfer of assets was accounted
for on the basis of historical cost. The consolidated financial
statements include the accounts of the Company and its
wholly-owned subsidiaries. Intercompany transactions are
eliminated in consolidation.

In August 1996, the Company sold 7,475,000 shares of its
common stock in an initial public offering at a price of $16.50
per share. Following the initial public offering, NCC owned 85%
of the Companys outstanding common stock. In May 1997,
 NCC purchased 1,265,000 shares of the Companys common
stock in the open market and currently owns approximately 88% of
the Companys outstanding common stock.

The Company and NCC are parties to a Registration Rights
Agreement whereby NCC 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 NCC. NCC also has the right to participate, or
piggy-back, in equity offerings initiated by the
Company, subject to reduction of the size of the offering on the
advice of the managing underwriter.

Business

The Company operates three business segmentsMerchant
Services, Corporate Services and Travel Services. Merchant
Services authorizes, processes and settles credit and debit card
transactions for a variety of merchants. Merchant Services
represented approximately 67% of the Companys revenues in
1999 and provided services to over 470,000 merchant locations.
Revenue from Corporate Services is derived from corporate
outsourcing, transaction processing and settlement services, as
well as other customized processing solutions. Corporate Services
 represented approximately 22% of the Companys revenue in
1999. Travel Services principally settles airline ticket
purchases made through travel agents on behalf of airlines and
derives a substantial portion of its revenues from an exclusive
contract with the Airlines Reporting Corporation
(ARC). The Company is compensated on a cost
plus basis under this contract. Travel Services represented
 approximately 11% of the Companys revenue in 1999.

During the second quarter of 1999, the Company sold its Check
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 generally
accepted accounting principles necessitate the use of estimates
and assumptions by management that affect the reported amounts of
 revenues and expenses, assets and liabilities, and the
disclosure requirement for contingent assets and liabilities
during and at the date of the financial statements. Consequently,
 actual results could differ from those estimates.

F-7



---



##### Table of Contents



NATIONAL PROCESSING, INC.


Notes To Consolidated Financial
Statements  (Continued)





Revenue Recognition

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

Cash, Cash Equivalents and Securities
Available for Sale

Cash equivalents consist of highly liquid bank overnight
repurchase agreements, which are readily convertible to cash.
Securities available for sale are short-term marketable
securities which are stated at cost which approximates fair
value.

Financial Instruments

The Companys financial instruments consist of cash
equivalents, marketable securities, accounts receivable,
restricted deposits, accounts payable, merchants 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 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 5 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 $15.8 million, $18.3 million and $14.2
million in 1999, 1998 and 1997, respectively.

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, not
to

F-8



---



##### Table of Contents



NATIONAL PROCESSING, INC.


Notes To Consolidated Financial
Statements  (Continued)







Acquired Merchant Portfolios

Acquired merchant portfolios 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 and are included in other intangible assets in
the accompanying balance sheets.

Deferred Contract Costs

Other assets include $1.6 million and $2.1 million of
deferred contract costs at December 31, 1999 and 1998,
respectively. Deferred contract costs primarily represent costs
incurred to acquire or renew customer contracts.

These costs are amortized on a straight-line basis over the life
of the customer contract. Recoverability of these costs is
assessed on an ongoing basis and write-downs to net realizable
value are recorded as necessary.

Goodwill

Operations of companies acquired in purchase transactions are
included in the consolidated statements of operations from the
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

The liability to the MasterCard® and VISA®
organizations originating from the Companys agreements with
 these agencies, as an authorized processor, is 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 NCC. NCC allocates income taxes to its subsidiaries on
a separate return basis.

Comprehensive Income

The Financial Accounting Standards Board Statement No. 130,
Reporting Comprehensive Income, establishes standards for
reporting the components of comprehensive income. Comprehensive
income includes net income as well as certain items that are
reported directly within a separate component of
stockholders equity and bypass net income. Differences
between the Companys net income and its comprehensive
income in 1999, 1998 and 1997 are insignificant.

Reclassifications

Certain prior year amounts in the consolidated financial
statements and notes have been reclassified to conform with the
current year presentation.

F-9



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##### Table of Contents



NATIONAL PROCESSING, INC.


Notes To Consolidated Financial
Statements  (Continued)





C.  Recent Accounting Pronouncement

Internal Use Software

In March 1998, the Accounting Standards Executive Committee
issued Statement of Position (SOP) 98-1, Internal Use
Software. This statement requires the capitalization of costs
 to acquire or develop internal use software after certain
conditions are met. This statement was adopted by the Company on
January 1, 1999 and did not significantly impact the
financial position or results of operations of the Company.

D.  Acquisitions

Acquisition of F.A. Holdings, Inc.

On October 24, 1997, the Company acquired 79.6% of the
outstanding common stock of FA Holdings, Inc., the sole owner of
Financial Alliance Processing Services, Inc. (Financial
Alliance), for $67.2 million. Financial Alliance was
an independent sales organization specializing in selling credit
and debit card processing services to regional merchants. The
Company acquired the remaining 20.4% of the common stock for
$26.8 million in January 1998. The acquisition, which
was accounted for as a purchase, increased the Companys
goodwill by approximately $74 million which is being
amortized over 40 years. The results of operations of
Financial Alliance have been included in the consolidated
financial statements since the date of its acquisition.

The following unaudited pro forma information gives effect to the
 Financial Alliance acquisition as if it occurred January 1,
 1997 (in thousands, except per share amounts).

|                                              |  |             |         | 
|--------------------------------------------- |  | ----------- | ------- | 
|                                              |  | Year Ended 
|                                              |  | December 31
|                                              |  | 1997       
|                                              |  |            
|Revenues                                      |  | $           | 432,325 | 
|                                             
|                                             
|                                             
|                                             
|Income before income taxes                    |  |             | 32,733  | 
|                                             
|                                             
|                                             
|                                             
|Net income                                    |  |             | 19,364  | 
|                                             
|                                             
|                                             
|                                             
|Basic and diluted net income per common share |  | $           | 0.38    | 

The pro forma results include the effect of all material
adjustments related to the acquisition and have been prepared
using calculations based upon assumptions deemed reasonable by
the Company. The pro forma information is presented for
informational purposes only and is not necessarily indicative of
results that would have occurred had the acquisition taken place
on January 1, 1997, nor are they necessarily indicative of
future results.

Acquisition of NTA, InTraCon, MRS Jamaica and
Caribbean Data Services

On February 4, 1997, the Company acquired all of the
outstanding shares of NTA, Inc., a freight payment processing
company. On June 19, 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 form processing company. On September 30,
 1997, the Company acquired all of the outstanding shares of
Caribbean Data Services, Ltd., a data processing company. The
combined purchase price of these acquisitions was
$30.3 million in cash and $4.3 million in notes
payable. $2.1 million of the notes were paid in October
1997, $1.1 million were paid in June 1998 and
$1.1 million were paid in February 1999. The MRS
Jamaica, Inc. purchase price increased by $3.3 million in
1998 based upon the 1998 earnings of the acquired company. The
acquisitions, which have been accounted for as purchases,
increased the Companys goodwill by $32.3 million which
 is being amortized over 40 years. The results of operations
 of these acquired companies have been included in the
consolidated financial statements since their respective dates of
 acquisition.

F-10



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##### Table of Contents



NATIONAL PROCESSING, INC.


Notes To Consolidated Financial
Statements  (Continued)





The combined pro forma effect of these transactions was not
material to previously reported periods.

Supplemental cash flow information related to all 1997
acquisitions is as follows (in thousands):

|                                                |  |   |          |  
|----------------------------------------------- |  | - | -------- | -
|                                               
|                                               
|                                               
|                                               
|Net assets other than cash acquired             |  | $ | (19,672  | )
|                                               
|                                               
|                                               
|                                               
|Purchase price in excess of net assets acquired |  |   | (101,190 | )
|                                               
|                                               
|                                               
|                                               
|Notes and payables due                          |  |   | 28,981   |  
|                                                |  |   |          |  
|Net cash used for acquisitions                  |  | $ | (91,881  | )
|                                                |  |   |          |  

Acquisition of JBH Travel Audit Inc.

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, for
$6.3 million in cash. The purchase agreement also contained
provisions whereby the Company is required to pay an additional
amount of $2.0 million based on the 1999 earnings of the
acquired company. This amount has been recorded in the
accompanying balance sheet as of December 31, 1999 in goodwill
and other accrued liabilities.

The acquisition, which was accounted for as a purchase, increased
 the Companys goodwill by $7.1 million which is being
amortized over 40 years. The results of JBHs
operations are included in the Companys results of
operations from the date of acquisition. The pro forma effect of
the JBH transaction was not material to previously reported
periods.

Acquisition of Heartland Payment Systems Merchant
Accounts

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 will be amortized over 10 years.

E.  Impairment, Restructuring and Related Expenses

In March 1997, the Company recorded expenses of
$6.3 million, including $5.1 million for severance pay
for approximately 79 employees, and $1.2 million for other
costs, related to organizational restructuring. In
December 1997, the Company recorded expenses of
$7.0 million following the acquisition of FA Holdings, Inc.
The expenses resulted principally from the write-off of certain
fixed assets (totaling $5.5 million) related to several of
the Companys facilities which have been closed and
consolidated into the Companys other current facilities.
The charges decreased 1997 net income and earnings per share by
approximately $8.1 million and $0.16, respectively. At
December 1998, the remaining restructuring charge liability
was $1.9 million and was primarily for severance and lease
liabilities that were paid in 1999.

During 1999, the Company recorded restructuring charges of
$2.2 million, including $1.9 for severance pay for
approximately 540 employees and $0.3 million for other costs.
These charges related to two of the Companys operating
facilities which have been or are in the process of being closed
and consolidated into the Companys other current
facilities. The charges decreased 1999 net income and earnings
per share by approximately $1.8 million and $0.04,
respectively. At December 31, 1999, the remaining liability
was $0.9 million and related primarily to future severance
payments for approximately 200 remaining employees.

During 1999, the Company committed to a formal plan to dispose of
 its Freight, Payables, Remittance and Check Services business
lines and recorded impairment losses and related 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 business lines
for $44.3 million. At December 31, 1999, the Company
had $3.9 million

F-11



---



##### Table of Contents



NATIONAL PROCESSING, INC.


Notes To Consolidated Financial
Statements  (Continued)







F.  Transactions with Affiliates

The Company leases certain facilities from National City Bank of
Kentucky (NCBK), a wholly owned subsidiary of NCC,
under long-term agreements classified as Property Leased
From Affiliate in the accompanying balance sheets. Future
minimum payments under these leases, which expire between 2000
and 2019, are $3.9 million, including interest of
$1.7 million. Future minimum payments under these leases
(including interest) for the next five years are as follows:
$0.2 million for 2000 and 2001; $0.1 million for 2002,
2003 and 2004.

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, $3.6 million in 1998 and $5.5 million in 1997.

The Company receives certain administrative services, such as
internal audit and legal services, from NCC and its affiliates.
Charges for these services are included in general and
administrative expenses and totaled $1.6 million,
$2.1 million and $3.3 million, in 1999, 1998 and 1997,
respectively. As of December 31, 1999 and 1998, the Company
had recorded accounts payable to NCC in the amount of
$1.3 million and $0.7, respectively. These amounts are
recorded as accounts payable in the accompanying balance sheets.

G.  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 $2.2 million in
2000; $1.4 million in 2001, $0.9 million in 2002,
$0.9 million in 2003, $0.9 million in 2004 and
$8.4 million thereafter. Rent expense under operating leases
 was $4.8 million, $7.6 million and $7.0 million,
in 1999, 1998 and 1997, respectively.

H.  Income Taxes

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

|          |         |                         |        |        |   |      |       |       |   |   |        |        |  
|--------- | ------- | ----------------------- | ------ | ------ | - | ---- | ----- | ----- | - | - | ------ | ------ | -
|          |         |                        
|          |         | Year Ended December 31,
|          |         |                        
|          |         | 1999                    |        | 1998   |   | 1997
|          |         |                         |        |        |   |     
|Current:  |         |                         |        |        |   |      |       |       |   |   |        |       
|         
|         
|         
|         
|          | Federal |                         | $      | 13,320 |   |      | $     | 1,485 |   |   | $      | 14,354 |  
|         
|         
|         
|         
|          | State   |                         |        | 4,351  |   |      |       | 713   |   |   |        | 1,143  |  
|         
|         
|         
|         
|          | Foreign |                         |        | 628    |   |      |       | 1,353 |   |   |        |       |  
|         
|         
|         
|         
|Deferred: |         |                         |        |        |   |      |       |       |   |   |        |       
|         
|         
|         
|         
|          | Federal |                         |        | 464    |   |      |       | 6,781 |   |   |        | (3,803 | )
|         
|         
|         
|         
|          | State   |                         |        | (1,085 | ) |      |       | (494  | ) |   |        |       |  
|          |         |                         |        |        |   |      |       |       |   |   |        |       
|          |         | $                       | 17,678 |        |   | $    | 9,838 |       |   | $ | 11,694 |       
|          |         |                         |        |        |   |      |       |       |   |   |        |       

F-12



---



##### Table of Contents



NATIONAL PROCESSING, INC.


Notes To Consolidated Financial
Statements  (Continued)





The temporary differences that gave rise to deferred tax assets
and liabilities, which are included in the income tax receivable
from or payable to NCC, are as follows (in thousands):

|                                            |  |              |        |      |  |      |        |   |  |   |        |  
|------------------------------------------- |  | ------------ | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                            |  |             
|                                            |  | December 31,
|                                            |  |             
|                                            |  | 1999         |        | 1998 |  | 1997
|                                            |  |              |        |      |  |     
|Deferred tax assets:                        |  |              |        |      |  |      |        |   |  |   |        |  
|                                           
|                                           
|                                           
|                                           
|Accrued expenses                            |  | $            | 799    |      |  | $    | 1,572  |   |  | $ | 3,608  |  
|                                           
|                                           
|                                           
|                                           
|Pension, benefits and deferred Compensation |  |              | (35    | )    |  |      | 1,594  |   |  |   | 5,037  |  
|                                           
|                                           
|                                           
|                                           
|State operating losses                      |  |              | 5,694  |      |  |      | 4,681  |   |  |   | 1,245  |  
|                                           
|                                           
|                                           
|                                           
|Other                                       |  |              | 48     |      |  |      | 1,013  |   |  |   | 2,296  |  
|                                            |  |              |        |      |  |      |        |   |  |   |        |  
|                                            |  |              | 6,506  |      |  | $    | 8,860  |   |  | $ | 12,186 |  
|                                           
|                                           
|                                           
|                                           
|Valuation allowance                         |  |              | (1,996 | )    |  |      | (2,408 | ) |  |   |       |  
|                                            |  |              |        |      |  |      |        |   |  |   |        |  
|                                            |  |              | 4,510  |      |  |      | 6,452  |   |  |   | 12,186 |  
|                                           
|                                           
|                                           
|                                           
|Deferred tax liabilities:                   |  |              |        |      |  |      |        |   |  |   |        |  
|                                           
|                                           
|                                           
|                                           
|Depreciation and amortization               |  |              | (2,172 | )    |  |      | (2,998 | ) |  |   | 41     |  
|                                           
|                                           
|                                           
|                                           
|Purchase accounting adjustments             |  |              | (3,638 | )    |  |      | (3,597 | ) |  |   | (1,934 | )
|                                           
|                                           
|                                           
|                                           
|Other                                       |  |              | 2,763  |      |  |      | 988    |   |  |   | (981   | )
|                                            |  |              |        |      |  |      |        |   |  |   |        |  
|                                            |  |              | (3,047 | )    |  |      | (5,607 | ) |  |   | (2,874 | )
|                                            |  |              |        |      |  |      |        |   |  |   |        |  
|Net deferred tax assets                     |  | $            | 1,463  |      |  | $    | 845    |   |  | $ | 9,312  |  
|                                            |  |              |        |      |  |      |        |   |  |   |        |  

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,
|                                    |  |                        
|                                    |  | 1999                    |        | 1998 |  | 1997
|                                    |  |                         |        |      |  |     
|U.S. statutory rate                 |  | $                       | (6,909 | )    |  | $    | 8,781 |   |  | $ | 11,487 |  
|                                   
|                                   
|                                   
|                                   
|Non-deductible amortization         |  |                         | 811    |      |  |      | 1,380 |   |  |   | 853    |  
|                                   
|                                   
|                                   
|                                   
|Non-deductible goodwill write-offs  |  |                         | 22,994 |      |  |      |      |   |  |   |       |  
|                                   
|                                   
|                                   
|                                   
|State taxes, net of federal benefit |  |                         | 2,123  |      |  |      | 150   |   |  |   | 624    |  
|                                   
|                                   
|                                   
|                                   
|Tax exempt income                   |  |                         |       |      |  |      | (125  | ) |  |   | (1,411 | )
|                                   
|                                   
|                                   
|                                   
|Foreign tax benefit                 |  |                         | (1,432 | )    |  |      | (627  | ) |  |   |       |  
|                                   
|                                   
|                                   
|                                   
|Other                               |  |                         | 91     |      |  |      | 279   |   |  |   | 141    |  
|                                    |  |                         |        |      |  |      |       |   |  |   |        |  
|                                    |  | $                       | 17,678 |      |  | $    | 9,838 |   |  | $ | 11,694 |  
|                                    |  |                         |        |      |  |      |       |   |  |   |        |  

The Company has approximately $72.0 million of state net
operating loss carryforwards for income tax purposes available to
 offset future taxable income in the related states from 2000 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 $2.0 million in 1999 and
$2.4 million in 1998.

Income (loss) before income taxes from foreign and United
States operations was $6.8 million and $(26.5) million,
respectively, in 1999 and $4.3 million and
$20.8 million, respectively, in 1998. Income from foreign
operations was immaterial in 1997.

F-13



---



##### Table of Contents



NATIONAL PROCESSING, INC.


Notes To Consolidated Financial
Statements  (Continued)





I.  Employee Benefit Plans

An employee thrift plan offers all employees, who meet certain
age and eligibility requirements, a program of regular savings
and investment funded by their own contributions and
discretionary matching contributions of the Company. The Company
recorded $2.5 million, $2.6 million and
$2.8 million in matching contribution expense during 1999,
1998 and 1997, respectively.

J.  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,
|         |                                            |                        
|         |                                            | 1999                    |   | 1998    |   | 1997
|         |                                            |                         |   |         |   |     
|Basic:   |                                            |                         |   |         |   |      |   |        |  |  |   |       
|        
|        
|        
|        
|         | Net income (loss)                          |                         | $ | (37,418 | ) |      | $ | 15,250 |  |  | $ | 21,127 | 
|         |                                            |                         |   |         |   |      |   |        |  |  |   |       
|         | Average common share outstanding           |                         |   | 50,705  |   |      |   | 50,621 |  |  |   | 50,575 | 
|         |                                            |                         |   |         |   |      |   |        |  |  |   |       
|         | Net income (loss) per common share-basic   |                         | $ | (0.74   | ) |      | $ | .30    |  |  | $ | .42    | 
|         |                                            |                         |   |         |   |      |   |        |  |  |   |       
|Diluted: |                                            |                         |   |         |   |      |   |        |  |  |   |       
|        
|        
|        
|        
|         | Net income (loss)                          |                         | $ | (37,418 | ) |      | $ | 15,250 |  |  | $ | 21,127 | 
|         |                                            |                         |   |         |   |      |   |        |  |  |   |       
|         | Average common shares outstanding          |                         |   | 50,705  |   |      |   | 50,621 |  |  |   | 50,575 | 
|        
|        
|        
|        
|         | Stock option adjustment                    |                         |   |        |   |      |   | 92     |  |  |   | 139    | 
|         |                                            |                         |   |         |   |      |   |        |  |  |   |       
|         | Average common shares outstanding-diluted  |                         |   | 50,705  |   |      |   | 50,713 |  |  |   | 50,714 | 
|         |                                            |                         |   |         |   |      |   |        |  |  |   |       
|         | Net income (loss) per common share-diluted |                         | $ | (0.74   | ) |      | $ | .30    |  |  | $ | .42    | 
|         |                                            |                         |   |         |   |      |   |        |  |  |   |       

K.  Stock Options

The Company maintains two 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.

On June 5, 1996, the Company was authorized to grant up to
4,000,000 options under an employee stock option plan (the
Employee Plan) and up to 200,000 options under a
non-employee directors stock option plan (the Directors
Plan). These options are for the purchase of shares of
common stock at their market price at the date of grant. The
Employee Plan pertains to officers and key employees and the
Directors Plan pertains to certain directors. For both plans,
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-14



---



##### 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, 1997   |           |                     | 1,969,167 |                     |   |                  | 2,230,833 |            |   | $ | 16.68 |      
|                 
|                 
|                 
|                 
|                  | Granted   |                     |           | (1,483,000          | ) |                  |           | 1,483,000  |   |   |       | 9.33  | 
|                 
|                 
|                 
|                 
|                  | Canceled  |                     |           | 872,000             |   |                  |           | (872,000   | ) |   |       | 16.16 | 
|                  |           |                     |           |                     |   |                  |           |            |   |   |       |      
|December 31, 1997 |           |                     | 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 |      
|                  |           |                     |           |                     |   |                  |           |            |   |   |       |      

At December 31, 1999, 1998 and 1997, 725,003, 1,158,060 and
474,444 options, respectively, were exercisable under the
Companys option plans. The weighted average price per share
 of exercisable options was $16.86 at December 31, 1999. For
options outstanding at December 31, 1999, the option price
per share ranged from $5.50 to $20.50, the weighted average price
 per share of the options was $11.82, and the weighted-average
remaining contractual life of the options was 8.0 years.

For purposes of providing the pro forma disclosures required
under SFAS No. 123, the fair value of stock options granted
in 1999, 1998 and 1997 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 $(35.0) million and $(0.69) for 1999,
$12.2 million and $0.24 for 1998, and $18.4 million and
$0.36 for 1997, respectively. As a result of a partial
years vesting in 1999, 1998 and 1997 and possible changes
in assumptions used in the fair value calculation, the effects of
 applying SFAS No. 123 in 1999, 1998 and 1997 may not be
representative of the pro forma impact in future years.

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

|                                                  |  |      |         |      |  |      |         |   |  |   |         |  
|------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                  |  | 1999 |         | 1998 |  | 1997
|                                                  |  |      |         |      |  |     
|Risk Free Interest Rate                           |  |      | 6.4     | %    |  |      | 6.0     | % |  |   | 6.0     | %
|                                                 
|                                                 
|                                                 
|                                                 
|Expected Option Life                              |  |      | 7 years |      |  |      | 7 years |   |  |   | 7 years |  
|                                                 
|                                                 
|                                                 
|                                                 
|Expected Dividend Yield                           |  |      | 0       | %    |  |      | 0       | % |  |   | 0       | %
|                                                 
|                                                 
|                                                 
|                                                 
|Volatility Factor                                 |  |      | .744    |      |  |      | .492    |   |  |   | .441    |  
|                                                 
|                                                 
|                                                 
|                                                 
|Weighted Average Grant Date Fair Value of Options |  | $    | 6.30    |      |  | $    | 6.83    |   |  | $ | 5.16    |  

F-15



---



##### Table of Contents



NATIONAL PROCESSING, INC.


Notes To Consolidated Financial
Statements  (Continued)





L.  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.

M.  Quarterly Results of Operations: (Unaudited)

Selected quarterly data for 1999 and 1998 are as follows (in
thousands, except per share amounts):

|                                           |  |         |         |         |  |         |         |         |  |      |        |  |  |   |         |  |  |   |         |  
|------------------------------------------ |  | ------- | ------- | ------- |  | ------- | ------- | ------- |  | ---- | ------ |  |  | - | ------- |  |  | - | ------- | -
|                                           |  | First   |         | Second  |  | Third   |         | Fourth  |  |     
|                                           |  | Quarter |         | Quarter |  | Quarter |         | Quarter |  | Year
|                                           |  |         |         |         |  |         |         |         |  |     
|1999                                       |  |         |         |         |  |         |         |         |  |      |        |  |  |   |         |  |  |   |         |  
|                                          
|                                          
|                                          
|                                          
|Revenue                                    |  | $       | 124,463 |         |  | $       | 109,813 |         |  | $    | 94,909 |  |  | $ | 101,799 |  |  | $ | 430,984 |  
|                                          
|                                          
|                                          
|                                          
|Operating profit (loss)                    |  |         | (67,189 | )       |  |         | 17,522  |         |  |      | 10,626 |  |  |   | 14,845  |  |  |   | (24,196 | )
|                                          
|                                          
|                                          
|                                          
|Net income (loss)                          |  |         | (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             |  |         | 50,645  |         |  |         | 50,647  |         |  |      | 50,843 |  |  |   | 50,708  |  |  |   | 50,705  |  

|                                    |  |         |         |         |  |         |         |         |  |      |         |  |  |   |         |  |  |   |         | 
|----------------------------------- |  | ------- | ------- | ------- |  | ------- | ------- | ------- |  | ---- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                    |  | First   |         | Second  |  | Third   |         | Fourth  |  |     
|                                    |  | Quarter |         | Quarter |  | Quarter |         | Quarter |  | Year
|                                    |  |         |         |         |  |         |         |         |  |     
|1998                                |  |         |         |         |  |         |         |         |  |      |         |  |  |   |         |  |  |   |         | 
|                                   
|                                   
|                                   
|                                   
|Revenue                             |  | $       | 113,649 |         |  | $       | 119,177 |         |  | $    | 121,430 |  |  | $ | 128,937 |  |  | $ | 483,193 | 
|                                   
|                                   
|                                   
|                                   
|Operating profit                    |  |         | 8,243   |         |  |         | 2,292   |         |  |      | 5,333   |  |  |   | 8,296   |  |  |   | 24,164  | 
|                                   
|                                   
|                                   
|                                   
|Net income                          |  |         | 4,908   |         |  |         | 1,570   |         |  |      | 3,381   |  |  |   | 5,391   |  |  |   | 15,250  | 
|                                   
|                                   
|                                   
|                                   
|Diluted net income per common share |  | $       | .10     |         |  | $       | .03     |         |  | $    | .06     |  |  | $ | .11     |  |  | $ | .30     | 
|                                   
|                                   
|                                   
|                                   
|Weighted average common shares      |  |         | 50,833  |         |  |         | 50,950  |         |  |      | 50,691  |  |  |   | 50,644  |  |  |   | 50,713  | 

The above information 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.

The above information for 1999 also includes a charge of
$2.2 million ($1.8 million after tax) in the first
quarter related to restructuring of the Companys operating
facilities.

F-16



---



##### Table of Contents



NATIONAL PROCESSING, INC.


Notes To Consolidated Financial
Statements  (Continued)





The above information for 1998 includes a $2.6 million
($1.6 million after tax) loss in the second quarter of 1998
and a $4.0 million ($2.4 million after-tax) gain in the
 third quarter related to contract cancellations. Also included
for 1998 is a $5.2 million ($3.1 million after tax)
charge for remittance research adjustments in the third quarter.

N.  Segment Reporting

National Processing, Inc. operates three business
segmentsMerchant Services, Corporate Services and Travel
Services. Merchant Services authorizes, processes and settles
credit and debit card transactions for a variety of merchants.
Revenues from Corporate Services are derived from corporate
outsourcing, transaction processing and settlement services, as
well as other customized processing solutions. Travel Services
principally settles airline ticket purchases made through travel
agents on behalf of airlines and derives a substantial portion of
 its revenue from an exclusive contract with the Airlines
Reporting Corporation (ARC). The Company is
compensated on a cost plus basis under this contract.

During the second quarter of 1999, the Company sold its Check
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
business segments are identified by the services they offer. The
accounting policies of the reportable segments are the same as
those described in Note A.

The reported results reflect the underlying economics of the
segments. General and administrative expenses, other than direct
Corporate expenses, are allocated to the segments based upon
various methods determined by the nature of the expenses. There
are no intersegment revenues. The Company reflects the
restructuring charges taken in 1997 as Corporate expenses. The
1999 impairment, restructuring and related expenses are reflected
 in the business segments to which they relate. Depreciation
expense for corporate fixed assets is allocated to the three
segments. Corporate net operating assets are comprised primarily
of cash, securities available for sale and income tax balances.

F-17



---



##### Table of Contents



NATIONAL PROCESSING, INC.


Notes To Consolidated Financial
Statements  (Continued)





|                                               |  |                        |         |           |  |          |         |           |  |       |        |   |  |  |         |   |  |   |         |  
|---------------------------------------------- |  | ---------------------- | ------- | --------- |  | -------- | ------- | --------- |  | ----- | ------ | - |  |  | ------- | - |  | - | ------- | -
|                                               |  | Merchant               |         | Corporate |  | Travel   |         |           |  |      
|                                               |  | Services               |         | Services  |  | Services |         | Corporate |  | Total
|                                               |  |                        |         |           |  |          |         |           |  |      
|                                               |  |                       
|                                               |  | (Dollars in thousands)
|                                              
|                                              
|                                              
|                                              
|1999                                           |  |                        |         |           |  |          |         |           |  |       |        |   |  |  |         |   |  |   |         |  
|                                              
|                                              
|                                              
|                                              
|Revenues from external customers               |  | $                      | 288,772 |           |  | $        | 96,074  |           |  | $     | 46,138 |   |  |  |        |   |  | $ | 430,984 |  
|                                              
|                                              
|                                              
|                                              
|Impairment, restructuring and related expenses |  |                        | 25,293  |           |  |          | 46,398  |           |  |       |       |   |  |  |        |   |  |   | 71,691  |  
|                                              
|                                              
|                                              
|                                              
|Operating profit (loss)                        |  |                        | 13,318  |           |  |          | (39,478 | )         |  |       | 10,190 |   |  |  | (8,226  | ) |  |   | (24,196 | )
|                                              
|                                              
|                                              
|                                              
|Depreciation and amortization                  |  |                        | 7,082   |           |  |          | 13,440  |           |  |       | 1,528  |   |  |  |        |   |  |   | 22,050  |  
|                                              
|                                              
|                                              
|                                              
|Net interest income                            |  |                        | 3,163   |           |  |          | 469     |           |  |       | 824    |   |  |  |        |   |  |   | 4,456   |  
|                                              
|                                              
|                                              
|                                              
|Net operating assets                           |  |                        | 154,791 |           |  |          | 36,424  |           |  |       | 11,493 |   |  |  | 113,698 |   |  | $ | 316,406 |  
|                                              
|                                              
|                                              
|                                              
|Expenditures for long-lived assets             |  |                        | 1,210   |           |  |          | 5,702   |           |  |       | 993    |   |  |  | 9,026   |   |  |   | 16,931  |  
|                                              
|                                              
|                                              
|                                              
|                                              
|1998                                           |  |                        |         |           |  |          |         |           |  |       |        |   |  |  |         |   |  |   |         |  
|                                              
|                                              
|                                              
|                                              
|Revenues from external customers               |  | $                      | 287,394 |           |  | $        | 146,562 |           |  | $     | 49,237 |   |  |  |        |   |  | $ | 483,193 |  
|                                              
|                                              
|                                              
|                                              
|Operating profit (loss)                        |  |                        | 29,442  |           |  |          | (7,414  | )         |  |       | 9,882  |   |  |  | (7,746  | ) |  |   | 24,164  |  
|                                              
|                                              
|                                              
|                                              
|Depreciation and amortization                  |  |                        | 12,688  |           |  |          | 10,955  |           |  |       | 3,124  |   |  |  |        |   |  |   | 26,767  |  
|                                              
|                                              
|                                              
|                                              
|Net interest income (expense)                  |  |                        | 1,188   |           |  |          | 14      |           |  |       | (278   | ) |  |  |        |   |  |   | 924     |  
|                                              
|                                              
|                                              
|                                              
|Net operating assets                           |  |                        | 201,604 |           |  |          | 100,122 |           |  |       | 14,618 |   |  |  | 36,315  |   |  |   | 352,659 |  
|                                              
|                                              
|                                              
|                                              
|Expenditures for long-lived assets             |  |                        | 9,848   |           |  |          | 8,172   |           |  |       | 1,861  |   |  |  | 22,588  |   |  |   | 42,469  |  
|                                              
|                                              
|                                              
|                                              
|                                              
|1997                                           |  |                        |         |           |  |          |         |           |  |       |        |   |  |  |         |   |  |   |         |  
|                                              
|                                              
|                                              
|                                              
|Revenues from external customers               |  | $                      | 233,550 |           |  | $        | 126,377 |           |  | $     | 45,734 |   |  |  |        |   |  | $ | 405,661 |  
|                                              
|                                              
|                                              
|                                              
|Impairment, restructuring and related expenses |  |                        |        |           |  |          |        |           |  |       |       |   |  |  | 13,340  |   |  |   | 13,340  |  
|                                              
|                                              
|                                              
|                                              
|Operating profit (loss)                        |  |                        | 26,432  |           |  |          | 16,620  |           |  |       | 8,978  |   |  |  | (23,210 | ) |  |   | 28,820  |  
|                                              
|                                              
|                                              
|                                              
|Depreciation and amortization                  |  |                        | 8,698   |           |  |          | 6,836   |           |  |       | 2,292  |   |  |  |        |   |  |   | 17,826  |  
|                                              
|                                              
|                                              
|                                              
|Net interest income                            |  |                        | 2,049   |           |  |          | 1,258   |           |  |       | 694    |   |  |  |        |   |  |   | 4,001   |  
|                                              
|                                              
|                                              
|                                              
|Net operating assets                           |  |                        | 196,939 |           |  |          | 99,797  |           |  |       | 11,745 |   |  |  | 28,344  |   |  |   | 336,825 |  
|                                              
|                                              
|                                              
|                                              
|Expenditures for long-lived assets             |  |                        | 4,823   |           |  |          | 14,585  |           |  |       | 1,532  |   |  |  | 7,346   |   |  |   | 28,286  |  

Revenue from foreign operations in 1999 and 1998, primarily
Barbados, was approximately $63.9 million and
$50.7 million. Revenue from foreign operations was not
significant in 1997. The net book value of foreign long-lived
assets, primarily in Juarez, Mexico, was approximately $11.3
million and $12.1 million at December 31, 1999 and
1998, respectively.

F-18



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##### Table of Contents



NATIONAL PROCESSING, INC.

PART IV ITEM 14: 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)                                                                  





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##### Table of Contents



|               |  |                                                                                                                                                                                   
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT NUMBER |  | DESCRIPTION                                                                                                                                                                       
|               |  |                                                                                                                                                                                   
|              
|              
|              
|              
|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.
(filed as Exhibit 10.15)                                                                                      
|              
|              
|              
|              
|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. (filed as Exhibit 10.19)                                                                           
|              
|              
|              
|              
|10.20          |  | Employment Agreement between the Registrant and Steven T.
Pedersen dated October 21, 1999. (filed as Exhibit 10.20)                                                               
|              
|              
|              
|              
|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          |  | (Intentionally Omitted)                                                                                                                                                           
|              
|              
|              
|              
|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 Officers, effective February 9, 2000.
(filed as Exhibit 10.31) **                                      
|              
|              
|              
|              
|10.32          |  | NPCs Long-Term Incentive Compensation Plan for Senior
Officers, effective January 1, 1998. (filed as Exhibit 10.32)                                                              
|              
|              
|              
|              
|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)**                                                                             





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##### Table of Contents



|               |  |                                                                                                                                                                                                                                                                       
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT NUMBER |  | DESCRIPTION                                                                                                                                                                                                                                                           
|               |  |                                                                                                                                                                                                                                                                       
|              
|              
|              
|              
|10.37          |  | Form of Severance Agreement between the Registrant and
certain Senior Vice Presidents. (B)**                                                                                                                                                                          
|              
|              
|              
|              
|10.38          |  | (Intentionally Omitted)                                                                                                                                                                                                                                               
|              
|              
|              
|              
|10.39          |  | Employment Agreement and Undertaking of Confidentiality
between the Registrant and Robert E. Showalter, dated March
11, 1997. (Incorporated herein by reference to Exhibit
10.39 to the Registrants Annual Report on Form 10-K for the
year ended December 31, 1997)**
|              
|              
|              
|              
|10.40          |  | (Intentionally Omitted)                                                                                                                                                                                                                                               
|              
|              
|              
|              
|21.1           |  | Subsidiaries of the Registrant (filed as Exhibit 21.1).                                                                                                                                                                                                               
|              
|              
|              
|              
|23.1           |  | Consent of Ernst & Young LLP, Independent Auditors for
National Processing, Inc. (filed as Exhibit 23.1).                                                                                                                                                             
|              
|              
|              
|              
|24.1           |  | Directors of National Processing, Inc. Annual Report on Form 10-K Powers of Attorney.                                                                                                                                                                                 
|              
|              
|              
|              
|27.1           |  | Financial Data Schedule.                                                                                                                                                                                                                                              



---

|(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.