SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K/A

              _X_ Annual Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

                   For the fiscal year ended December 31, 1998

              ___ Transition Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                          Commission file number 0-9426

                          NATIONAL CITY BANCORPORATION
       ------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

              Iowa                                     42-0316731
---------------------------------      -----------------------------------------
 (State or other jurisdiction of        (I.R.S. Employer Identification Number)
 incorporation of organization)

        651 Nicollet Mall
      Minneapolis, Minnesota                          55402-1611
---------------------------------       ----------------------------------------
      (Address of principal                           (Zip Code)
       executive offices)

Registrant's telephone number (including area code): 612-904-8500

Securities registered pursuant to Section 12(g) of the Act:


                          $1.25 Par Value Common Stock
--------------------------------------------------------------------------------
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.

                             Yes __X__     No _____

As of February 22, 1999, the aggregate market value of 7,713,410 shares of
voting common stock, $1.25 par value, held by non-affiliates of the registrant
was approximately $169,695,020 based upon the reported closing price on the
NASDAQ Stock Market(SM). As of February 22, 1999, 8,781,899 shares of $1.25 par
value common stock of the registrant were outstanding.

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. [ ]


                                       1
<PAGE>


DOCUMENTS INCORPORATED BY REFERENCE

(1)  Portions of the definitive Proxy Statement of National City Bancorporation
     for the Annual Meeting of Stockholders held on April 21, 1999 are
     incorporated into Part III.

(2)  Form 10-Q for National City Bancorporation filed on November 15, 1999 is
     incorporated into Item 8.


                                       2
<PAGE>


NATIONAL CITY BANCORPORATION
FORM 10-K/A
YEAR ENDED DECEMBER 31, 1998
TABLE OF CONTENTS

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Part I
-------------------------------------------------------------- ------------------------
<S>                                                            <C>
Item 1 - Business                                              Pages 4 - 5
-------------------------------------------------------------- ------------------------
Item 2 - Properties                                            Pages 5 - 6
-------------------------------------------------------------- ------------------------
Item 3 - Legal Proceedings                                     Page 6
-------------------------------------------------------------- ------------------------
Item 4 - Submission of Matters to a vote of Security Holders   Page 6
-------------------------------------------------------------- ------------------------
Item 5 - Market for Registrant's Common Equity                 Page 6
-------------------------------------------------------------- ------------------------
Part II
-------------------------------------------------------------- ------------------------
Item 6 - Selected Financial Data                               Page 42
-------------------------------------------------------------- ------------------------
Item 7 - Management's Discussion and Analysis                  Page 28 - 36
-------------------------------------------------------------- ------------------------
Item 7A - Quantitative and Qualitative Disclosures             Page 31 - 32
-------------------------------------------------------------- ------------------------
Item 8 - Financial Statements and Supplementary Data           Pages 9 - 27 and 37 - 43
-------------------------------------------------------------- ------------------------
Item 9 - Changes in and Disagreements with Accountants         Page 7
-------------------------------------------------------------- ------------------------
Part III
-------------------------------------------------------------- ------------------------
Item 10 - Directors and Executive Officers                     Page 44
-------------------------------------------------------------- ------------------------
Item 11 - Executive Compensation                               Page 44
-------------------------------------------------------------- ------------------------
Item 12 - Security Ownership of Certain Beneficial Owners      Page 44
-------------------------------------------------------------- ------------------------
Item 13 - Certain Relationships and Related Transactions       Page 44
-------------------------------------------------------------- ------------------------
Part IV
-------------------------------------------------------------- ------------------------
Item 14 - Exhibits, Financial Statement Schedules, and
          Reports on Form 8-K                                  Pages 44 - 45
-------------------------------------------------------------- ------------------------
Signatures                                                     Page 46
-------------------------------------------------------------- ------------------------
</TABLE>


                                       3
<PAGE>


NATIONAL CITY BANCORPORATION
FORM 10-K/A
YEAR ENDED DECEMBER 31, 1998
--------------------------------------------------------------------------------

PART I

ITEM 1 - BUSINESS

         National City Bancorporation (NCBC) was incorporated in 1937 under the
         laws of the State of Iowa. NCBC is a bank holding company which owns
         99.9% of the capital stock of National City Bank of Minneapolis (NCB),
         which is a commercial bank. NCBC owns 100% of the capital stock of
         Diversified Business Credit, Inc. (DBCI), a commercial finance company.
         NCBC also owns 100% of the capital stock of National City Development &
         Realty, Inc., an inactive subsidiary.

         NCB has its main banking office in the business district of downtown
         Minneapolis and also serves customers from two detached facilities. One
         of these facilities provides a drive-up location in downtown
         Minneapolis, and the other is a full service branch location in Edina,
         Minnesota, a suburb of Minneapolis.

         NCBC provides its subsidiaries advice and specialized services in
         various fields of financial and banking policy. The responsibility for
         the management of each subsidiary remains with the Board of Directors
         and with the officers appointed by the Boards of Directors. NCB
         provides usual and customary banking services, including without
         limitation: business, personal and real estate loans; a full range of
         deposit services; correspondent banking and safe deposit facilities. In
         addition to the services generally provided by a full-service bank,
         NCBC's subsidiaries offer specialized services as described below:

         TRUST SERVICES - NCB offers clients a wide variety of fiduciary
         services ranging from the management of funds for individuals to the
         administration of estates and trusts. For corporations, governmental
         bodies, and public authorities, NCB acts as fiscal and paying agent,
         registrar, and trustee under corporate indentures and pension and
         profit sharing agreements. NCB also provides record keeping and
         reporting for 401-K retirement savings plans.

         INTERNATIONAL OPERATIONS - NCB provides a wide range of services in the
         area of international banking including trade service products, such as
         letters of credit, bankers acceptances, international collections and
         foreign exchange.

         ASSET-BASED FINANCING - DBCI specializes in providing working capital
         loans secured by accounts receivable, inventory, and other marketable
         assets. All loans are made on a full recourse basis to the borrower.
         Personal guarantees from the owners of the borrower are normally
         obtained. Loans are made on a demand basis with no fixed repayment
         schedule. Compared to equity-based loans made by banks and others,
         asset-based loans usually require closer monitoring which results in
         higher loan servicing costs. Typically, interest rates earned on these
         loans are higher than rates earned on equity-based loans.

         OTHER SERVICES - NCBC and subsidiaries do not have more than one line
         of business or class of service. All income is derived from commercial
         banking and bank-related services. It is not dependent on a single
         customer or a single industry for any material part of its business.

         COMPETITION - Banking in Minnesota, as elsewhere, is highly competitive
         and NCB competes with other banks, both independent and those
         affiliated with other bank holding companies. Additional competitors
         are able to enter the Minnesota market following the June, 1997 change
         in banking regulations (See Supervision & Regulation). In addition, in
         lending funds and obtaining deposits, NCB competes with other types of
         institutions, such as savings and loan associations, credit unions,
         insurance companies, finance companies, and various institutions
         offering money market and mutual funds.

         EMPLOYEES - NCBC and its subsidiaries have approximately 278 employees,
         none of whom are represented by a collective bargaining organization.


                                       4
<PAGE>


         GOVERNMENT POLICIES - The earnings of NCBC's various operating units,
         as lenders of money, are affected by state and federal legislative
         changes and by policies of various regulatory authorities, including
         those of the State of Minnesota and the United States and, to a lesser
         extent, by those of foreign governments, and international agencies.
         These policies include, for example, statutory maximum legal interest
         rates, domestic monetary policies of the Board of Governors of the
         Federal Reserve System, United States fiscal policy, international
         currency regulations and monetary policies, and capital adequacy and
         liquidity constraints imposed by bank regulatory agencies.

         SUPERVISION AND REGULATION - NCBC is a registered bank holding company
         under the Bank Holding Company Act of 1956 (the Act) and is subject to
         the supervision of and regulation by the Board of Governors of the
         Federal Reserve System (the Board).

         Under the Act, a bank holding company may engage in banking, managing
         or controlling banks, furnishing and performing services for banks
         which it controls, and activities which the Board has determined to be
         closely related to banking. NCBC must obtain approval of the Board
         before acquiring control of a bank or acquiring more than 5% of the
         outstanding voting shares of a company engaged in a bank-related
         business.

         In general, effective June 1, 1997, federal law permits the merger of
         insured banks within different home states, without regard to whether
         such transaction is prohibited under the law of any state.

         Under state law, a bank subsidiary of an out-of state bank holding
         company may establish branch offices in Minnesota if the bank
         subsidiary's principal place of business is within the state. An
         acquiring out-of-state bank may maintain and operate branches within
         Minnesota provided the in-state acquired bank has been in continuous
         operation for at least five years.

         NCBC's subsidiary bank is a national bank and is, accordingly, subject
         to the supervision of and examination by the Comptroller of the
         Currency and the Federal Reserve System. The subsidiary bank is a
         member of the Federal Deposit Insurance Corporation and, accordingly,
         is subject to examination thereby.

         Areas subject to regulation by federal and state authorities include
         deposit reserves, investments, loans, mergers, issuance of securities,
         payment of dividends, establishment of branches, and other aspects of
         operations.

         STATISTICAL DATA - Statistical data for the year ended December 31,
         1998 is presented on pages 37 through 43.

ITEM 2 - PROPERTIES

         NCB currently leases 95,200 square feet of space for its downtown main
         office under a lease which expires in 2006.

         NCB leases 3,380 square feet of record storage space at a downtown
         location under a lease that expires in the year 2000.

         NCB maintains a drive-up detached banking facility in downtown
         Minneapolis on leased land. The lease expires in the year 2000.

         NCB also owns an 8,500 square foot banking facility and land in Edina,
         Minnesota.

         DBCI leases 14,067 square feet of space in downtown Minneapolis. This
         lease expires in the year 2002.

         The aggregate net rentals for all of the above described facilities
         were approximately $2,332,000 in 1998. NCB's banking offices are
         located at Gaviidae Common at 651 Nicollet Mall. NCB entered into a ten
         year lease commencing March 16, 1996, to occupy approximately 95,200
         square feet at this location. The effective annual base rent per square
         foot is $4.98 for the first five years and $6.98 for the second five
         years of the lease term. These rents are based upon NCB advancing
         $3,346,608 to the landlord, which amount was used to pay for certain
         base building improvements, real estate commissions, design fees


                                       5
<PAGE>


         and reimbursement for moving expenses. The annual cost for the first
         five years will be approximately $1.7 million and for the last five
         years will be approximately $1.8 million per year. In addition, NCB
         paid for all its leasehold improvements, which cost approximately
         $2,000,000. NCB has two options of five years each to extend the lease
         term at the then current fair market rents for office and retail space.
         NCB has the right to terminate the lease in its entirety or to give
         back substantial portions of the leased premises on the sixth
         anniversary of the lease term. NCB has expansion rights on all space on
         the third and fourth levels of the premises, subject to the rights of
         existing tenants. Rent for expansion space taken on or before March 31,
         1999, would be $8.00 net per square foot. Rent for expansion space
         taken after March 31, 1999, would be at the lower of (i) $8.00 per
         square foot plus any increase in the Minneapolis CPI from March 16,
         1996, or (ii) the fair market value of the space. NCB will pay its pro
         rata share of taxes when due. NCB has the right to contest real estate
         taxes against the premises if the landlord fails to do so. NCB pays
         normal operating expenses which includes a cap on management fees and
         exclusions that are generally consistent with other large office tenant
         leases. The approximate cost per square foot related to real estate
         taxes and normal operating expenses is $13.85.

         DBCI is located in Dain Bosworth Plaza, at 60 South Sixth Street. DBCI
         entered into a five year lease commencing September, 1, 1997, to occupy
         14,067 square feet at this location. The effective annual base rent per
         square foot is $21.31 for the five years. The annual cost for the five
         years will be approximately $240,000 per year. In addition, DBCI paid
         all leasehold improvements which cost approximately $108,000. DBCI has
         two options of five years each to extend the lease term at the then
         current fair market rents for office space. DBCI will pay its pro rata
         share of taxes when due. DBCI will have the right to contest real
         estate taxes against the premises if the landlord fails to do so. DBCI
         will pay normal operating expenses which will include exclusions that
         are generally consistent with other office tenant leases. The
         approximate cost per square foot related to real estate taxes and
         normal operating expenses is $13.40.

ITEM 3 - LEGAL PROCEEDINGS

         NCBC is party to various legal proceedings incidental to its business.
         Certain claims, suits, and complaints arising in the ordinary course of
         business have been filed or are pending against NCBC. In the opinion of
         management, the resulting liability, if any, arising from all such
         actions will not have a material impact on NCBC's consolidated
         financial position, liquidity or results of operations.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted during the fourth quarter of the fiscal year
         covered by this report to a vote of security holders through the
         solicitation of proxies or otherwise.

ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

         The market for National City Bancorporation's common stock and related
         stockholder matters for the year ended December 31, 1998 is presented
         on pages 8 and 43.


                                       6
<PAGE>


PART II

ITEM 6 - SELECTED FINANCIAL DATA

         Selected financial data for the five year period ended December 31,
         1998 is presented on page 42.

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

         Management's discussion and analysis of financial condition and results
         of operations for the year ended December 31, 1998 is presented on
         pages 28 through 36.

ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Quantitative and qualitative disclosures about market risk for the year
         ended December 31, 1998 are presented in pages 31 and 32.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The consolidated financial statements and supplementary financial
         information (as amended) of National City Bancorporation and
         subsidiaries for the year ended December 31, 1998 are presented on
         pages 9 through 27 and 37 through 43.

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

         None.


                                       7
<PAGE>


================================================================================
                              FINANCIAL HIGHLIGHTS
================================================================================

(IN THOUSANDS EXCEPT PER SHARE)                         1998             1997
                                                     (RESTATED)       (RESTATED)
--------------------------------------------------------------------------------
For the Year
  Net interest income                               $    47,552      $    44,509
  Net earnings                                           15,664           13,722
  Basic earnings per share                                 1.77             1.54

At Year End
  Total assets                                      $ 1,025,682      $   935,172
  Loans                                                 766,109          670,594
  Deposits                                              517,494          478,650
  Stockholders' equity                                  147,288          132,927
  Book value per share                                    16.71            14.97

NATIONAL CITY BANCORPORATION

National City Bancorporation (NCBC) (the Company) is a bank holding company
headquartered in Minneapolis, Minnesota. NCBC owns National City Bank of
Minneapolis (the "Bank") which has three offices in metropolitan Minneapolis.
NCBC also owns Diversified Business Credit, Inc. (DBCI), a commercial finance
company.

STOCK TRANSFER AGENT AND REGISTRAR

National City Bank of Minneapolis, Gaviidae Common, 651 Nicollet Mall,
Minneapolis, Minnesota 55402-1611.

ANNUAL MEETING

The annual meeting of Stockholders was held in the Company's offices on the
fifth floor of Gaviidae Common, 651 Nicollet Mall, Minneapolis, Minnesota, on
Wednesday, April 21, 1999, at 11:00 a.m.

MARKET FOR COMMON STOCK

NCBC's common stock is traded on The NASDAQ Stock Market(SM) under the symbol
NCBM. There are currently approximately 2500 registered stockholders.


                                       8
<PAGE>


================================================================================
                           CONSOLIDATED BALANCE SHEETS
================================================================================

<TABLE>
<CAPTION>
                                                                           DECEMBER 31,
                                                                  -----------------------------
(IN THOUSANDS)                                                        1998              1997
                                                                   (RESTATED)        (RESTATED)
-----------------------------------------------------------------------------------------------
<S>                                                               <C>               <C>
ASSETS
  Cash and due from banks                                         $    52,271       $    52,847
  Federal funds sold and resale agreements                              6,100             3,740
  Available-for-sale securities                                       133,897           141,325
  Held-to-maturity securities
   (market value: 1998--$41,569 and 1997--$37,861)                     41,255            37,402

  Loans                                                               766,109           670,594
     Less allowance for loan losses                                   (13,785)          (14,283)
                                                                  -----------       -----------
                                                                      752,324           656,311
  Bank premises and equipment                                          10,399            11,413
  Accrued interest receivable                                           7,499             7,260
  Customer acceptance liability                                           824               811
  Other assets                                                         21,113            24,063
                                                                  -----------       -----------
                                                                  $ 1,025,682       $   935,172
                                                                  ===========       ===========

-----------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
  Deposits:
    Non-interest bearing                                          $   165,598       $   149,624
    Interest bearing                                                  351,896           329,026
                                                                  -----------       -----------
                                                                      517,494           478,650
  Federal funds purchased and
    repurchase agreements                                              98,702           104,399
  Commercial paper                                                     99,396           119,081
  Other short-term borrowed funds                                      12,663            23,218
  Acceptances outstanding                                                 824               811
  Other liabilities                                                    10,315             9,086
  Long-term debt                                                      139,000            67,000
                                                                  -----------       -----------
         Total liabilities                                            878,394           802,245

  Stockholders' equity:
    Common stock, par value $1.25,
    Authorized shares: 1998--40,000,000; 1997--20,000,000
      Issued: 1998--8,861,944 shares; 1997--8,110,836 shares           11,077            10,139
    Additional paid-in capital                                        121,982            94,756
    Unrealized gains net of tax effect                                    913               424
    Retained earnings                                                  14,470            28,464
                                                                  -----------       -----------
                                                                      148,442           133,783
  Less common stock in treasury at cost:
   1998--45,030 shares; 1997--33,553 shares                            (1,154)             (856)
                                                                  -----------       -----------
         Total stockholders' equity                                   147,288           132,927
                                                                  -----------       -----------
                                                                  $ 1,025,682       $   935,172
                                                                  ===========       ===========
</TABLE>


                                       9
<PAGE>


================================================================================
                       CONSOLIDATED STATEMENTS OF EARNINGS
================================================================================

<TABLE>
<CAPTION>
                                                                            YEAR ENDED DECEMBER 31,
                                                                 -------------------------------------------
(IN THOUSANDS EXCEPT PER SHARE DATA)                                 1998            1997            1996
                                                                  (RESTATED)      (RESTATED)      (RESTATED)
------------------------------------------------------------------------------------------------------------
<S>                                                              <C>             <C>             <C>
INTEREST INCOME
   Interest and fees on loans                                    $    73,040     $    66,910     $    58,795
   Interest on federal funds sold and resale agreements                1,092           1,450             804
   Interest and dividends on securities:
     Taxable                                                          11,443          11,440          10,580
     Exempt from federal income taxes                                                                     20
                                                                 -----------     -----------     -----------
                                                                      11,443          11,440          10,600
                                                                 -----------     -----------     -----------
         Total interest income                                        85,575          79,800          70,199

------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
   Interest on deposits                                               16,393          16,281          14,980
   Interest on short-term borrowed funds                              15,275          15,069          11,908
   Interest on long-term debt                                          6,355           3,941           3,261
                                                                 -----------     -----------     -----------
         Total interest expense                                       38,023          35,291          30,149
                                                                 -----------     -----------     -----------
   Net interest income                                                47,552          44,509          40,050
   Provision for loan losses                                           2,890           4,819           3,148
                                                                 -----------     -----------     -----------
         Net interest income after provision for loan losses          44,662          39,690          36,902

------------------------------------------------------------------------------------------------------------
NON-INTEREST INCOME
   Service charges on deposit accounts                                 2,145           2,195           2,189
   Fees for other customer services                                    1,635           1,698           1,837
   Trust fees                                                          4,641           4,801           4,605
   State income tax refund                                                             1,369
   Gains on sale of securities                                                                           133
   Other income                                                          821           1,327           1,318
                                                                 -----------     -----------     -----------
                                                                       9,242          11,390          10,082

------------------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSE
   Salaries and employee benefits                                     15,238          15,110          14,965
   Net occupancy expense of bank premises                              3,062           3,194           2,750
   Equipment rentals, depreciation and maintenance                     3,512           3,648           2,731
   Other expense                                                       6,237           6,313           5,743
                                                                 -----------     -----------     -----------
                                                                      28,049          28,265          26,189
                                                                 -----------     -----------     -----------
   Earnings before income taxes                                       25,855          22,815          20,795
   Income taxes                                                       10,191           9,093           8,109
                                                                 -----------     -----------     -----------
   Net earnings                                                  $    15,664     $    13,722     $    12,686
                                                                 ===========     ===========     ===========

------------------------------------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE                                         $      1.77     $      1.54     $      1.42
                                                                 ===========     ===========     ===========
   Average common and common equivalent shares outstanding         8,855,348       8,901,415       8,915,473
</TABLE>

See Notes To Consolidated Financial Statements


                                       10
<PAGE>


================================================================================
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
================================================================================

<TABLE>
<CAPTION>
                                             COMMON STOCK                                               TREASURY STOCK
                                         --------------------    ADDITIONAL               UNREALIZED  ------------------
                                          NUMBER                  PAID-IN     RETAINED      GAINS      NUMBER
(IN THOUSANDS EXCEPT NUMBER OF SHARES)   OF SHARES    AMOUNT      CAPITAL     EARNINGS     (LOSSES)   OF SHARES   AMOUNT     TOTAL
                                                                             (RESTATED)                                   (RESTATED)
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>          <C>        <C>          <C>           <C>         <C>       <C>      <C>
Balance at January 1, 1996,
 as restated                             6,705,808    $ 8,382    $ 65,484     $ 33,145      $ 275          562    $   (10) $107,276
   Net earnings for the year                                                    12,686                                       12,686
   Ten percent stock dividend              669,352        837      13,721      (14,584)                                         (26)
   Unrealized securities (losses)
      net of tax effect                                                                      (680)                             (680)
   Cancellation of treasury stock             (640)        (1)         (6)          (4)                   (640)        11
   Purchase of treasury                                                                                     94         (1)       (1)
                                         ---------    -------    --------     --------      -----      -------    -------  --------
Balance at December 31, 1996,
as restated                              7,374,520      9,218      79,199       31,243       (405)          16          0   119,255
   Net earnings for the year                                                    13,722                                       13,722
   Ten percent stock dividend              736,374        921      15,558      (16,500)                                         (21)
   Unrealized securities gains
      net of tax effect                                                                       829                               829
   Cancellation of treasury stock              (58)                    (1)          (1)                    (58)         1        (1)
   Purchase of treasury stock                                                                           33,595       (857)     (857)
                                         ---------    -------    --------     --------      -----      -------    -------  --------
BALANCE AT DECEMBER 31, 1997,
AS RESTATED                              8,110,836     10,139      94,756       28,464        424       33,553       (856)  132,927
   NET EARNINGS FOR THE YEAR                                                    15,664                                       15,664
   TEN PERCENT STOCK DIVIDEND              804,574      1,005      27,961      (29,006)                                         (40)
   UNREALIZED SECURITIES GAINS
      NET OF TAX EFFECT                                                                       489                               489
   CANCELLATION OF TREASURY STOCK          (53,466)       (67)       (735)        (652)                (53,466)     1,454         0
   PURCHASE OF TREASURY STOCK                                                                           64,943     (1,752)   (1,752)
                                         ---------    -------    --------     --------      -----      -------    -------  --------
BALANCE AT DECEMBER 31, 1998             8,861,944    $11,077    $121,982     $ 14,470      $ 913       45,030    $(1,154) $147,288
                                         =========    =======    ========     ========      =====      =======    =======  ========
</TABLE>


================================================================================
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
================================================================================

<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31,
                                                           --------------------------------------
(IN THOUSANDS EXCEPT PER SHARE DATA)                          1998          1997          1996
                                                           (RESTATED)    (RESTATED)    (RESTATED)
-------------------------------------------------------------------------------------------------
<S>                                                         <C>           <C>           <C>
Total interest income                                       $  85,575     $  79,800     $  70,199
Total interest expense                                         38,023        35,291        30,149
                                                            ---------     ---------     ---------
   Net interest income                                         47,552        44,509        40,050
Provision for loan losses                                       2,890         4,819         3,148
                                                            ---------     ---------     ---------
   Net interest income after provision for loan losses         44,662        39,690        36,902
                                                            ---------     ---------     ---------
Total noninterest income                                        9,242        11,390        10,082
Total noninterest expense                                      28,049        28,265        26,189
                                                            ---------     ---------     ---------
Earnings from operations before taxes                          25,855        22,815        20,795
Applicable income taxes                                        10,191         9,093         8,109
                                                            ---------     ---------     ---------
   Net earnings                                                15,664        13,722        12,686
Other comprehensive income, before tax:
    Unrealized gain (loss) on investments in securities           821         1,393        (1,143)
   Applicable income tax                                          332           564          (463)
                                                            ---------     ---------     ---------
   Other comprehensive income, net of tax                         489           829          (680)
                                                            ---------     ---------     ---------

Comprehensive income                                        $  16,153     $  14,551     $  12,006
                                                            =========     =========     =========
-------------------------------------------------------------------------------------------------
</TABLE>

See Notes to Consolidated Financial Statements


                                       11
<PAGE>


================================================================================
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================

<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31,
                                                                 ----------------------------------------
(IN THOUSANDS)                                                      1998           1997           1996
                                                                 (RESTATED)     (RESTATED)     (RESTATED)
---------------------------------------------------------------------------------------------------------
<S>                                                               <C>            <C>            <C>
Cash flows from operating activities:
   Net earnings                                                   $  15,664      $  13,722      $  12,686
   Adjustments to reconcile net earnings to net cash
     from operating activities:
        Depreciation and amortization                                 2,927          3,245          2,169
        Amortization of securities premiums and discounts               579            469            426
        Provision for loan losses                                     2,890          4,819          3,148
        Deferred income taxes                                           318         (1,369)          (191)
        (Gain)  on sale of securities                                                                (133)
        (Increase) decrease in accrued interest receivable             (239)          (954)            29
        (Increase) decrease in other assets                           2,950         (3,567)          (138)
        Increase (decrease) in other liabilities                      1,229          1,421         (1,147)
        Other (increase)                                               (651)          (194)          (190)
                                                                  ---------      ---------      ---------
           Total operating adjustments                               10,003          3,870          3,973
                                                                  ---------      ---------      ---------
           Net cash from operating activities                        25,667         17,592         16,659

Cash flows from investing activities:
   Net (increase) in loans                                          (98,903)       (71,321)       (44,726)
   Net (increase) decrease in federal funds sold                     (2,360)        56,380        (35,120)
   Available-for-sale securities:
        Proceeds from maturities and principal repayments            64,810         27,274         50,740
        Proceeds from sale of securities                                                            4,688
        Purchases of securities                                     (57,114)       (34,476)       (68,114)
   Held-to-maturity securities:
        Proceeds from maturities and principal repayments            17,865          9,233         13,581
        Purchases of securities                                     (21,743)       (15,139)        (9,000)
   Purchase of premises and equipment                                (1,913)        (2,436)        (9,365)
   Payment of prepaid expenses                                                                     (1,739)
                                                                  ---------      ---------      ---------
           Net cash (used in) investing activities                  (99,358)       (30,485)       (99,055)
                                                                  ---------      ---------      ---------
Cash flows from financing activities:
   Net increase in non-interest bearing and savings deposits         31,333          2,151         26,326
   Net increase (decrease) in time deposits                           7,511        (43,132)        53,320
   Net increase (decrease) in federal funds purchased and
     repurchase agreements                                           (5,697)         7,759        (13,895)
   Net increase (decrease) in commercial paper                      (19,685)        20,974         18,121
   Net increase (decrease) in other short-term borrowed funds       (10,555)        11,852          4,679
   Net increase (decrease) in long-term debt                         72,000         19,080           (200)
   Purchase of treasury stock                                        (1,752)          (856)            (1)
   Payment for fractional shares on stock dividends                     (40)           (22)           (26)
                                                                  ---------      ---------      ---------
           Net cash from financing activities                        73,115         17,806         88,324
                                                                  ---------      ---------      ---------
   Net increase (decrease) in cash and due from banks                  (576)         4,913          5,928
   Cash and due from banks at beginning of year                      52,847         47,934         42,006
                                                                  ---------      ---------      ---------
   Cash and due from banks at end of year                         $  52,271      $  52,847      $  47,934
                                                                  =========      =========      =========
Supplemental disclosures
   Cash paid during the year for:
        Interest                                                  $  36,306      $  35,194      $  30,266
        Income taxes                                                 10,618         10,076          7,206
   Unrealized securities gains (losses) net of tax                      489            829           (680)
</TABLE>

See Notes to Consolidated Financial Statements


                                       12
<PAGE>


================================================================================
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS--The Company's principal business is a bank holding
company for National City Bank of Minneapolis which is a full service national
bank offering a variety of loans, deposit programs, trust and related banking
services. The Company's principal non-bank subsidiary is Diversified Business
Credit, Inc., a commercial finance company.

PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include the
accounts of the Company and its subsidiaries, after elimination of all material
intercompany transactions and balances. The preparation of the financial
statements in conformity with Generally Accepted Accounting Principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual experience could differ from those
estimates.

SECURITIES--Securities which the Company has the positive intent and ability to
hold to maturity are reported as held-to-maturity securities. Securities in this
category are stated at cost, adjusted for amortization of premiums and accretion
of discounts over their remaining lives. Securities not classified as
held-to-maturity securities are classified as available-for-sale securities and
are reported at fair value, with unrealized gains and losses, net of tax,
reported in a separate component of stockholders' equity. Realized gains and
losses on disposition of securities and declines in value judged to be other
than temporary are computed on a specific identification method, and included in
earnings.

LOANS--Most of the Company's loans are to customers within Minnesota. Interest
income on loans is accrued on the basis of unpaid principal. Loan and commitment
fees are generally deferred and recognized over the loan or commitment period as
a yield adjustment on a straight-line basis. In other circumstances fees are
recognized on a cash basis as a yield adjustment due to immateriality. Loans are
generally placed on nonaccrual status when the collection of interest or
principal has become 90 days past due or collection is otherwise considered
doubtful. When a loan is placed on nonaccrual status, interest previously
accrued and unpaid in the current year is reversed against current period
interest income. Interest payments received on nonaccrual loans are generally
applied against principal unless the loan is well secured or in the process of
collection.

ALLOWANCE FOR LOAN LOSSES--The provision for loan losses is based on
management's continuing evaluation of the loan portfolio, including estimates
and appraisals of collateral values, and current economic conditions. Changes in
the estimates, appraisals and evaluations might be required quickly in the event
of changing economic conditions and the economic prospects of borrowers. The
Company allocates the allowance for loan losses by identifying specific loans
that have a possibility of loss, and by applying a historical loss migration
analysis. The entire balance of the allowance is available to absorb losses on
loans that become uncollectible.

BANK PREMISES AND EQUIPMENT--Bank premises and equipment, including leasehold
improvements, are carried at cost less accumulated depreciation and
amortization. Depreciation and amortization are primarily computed on the
straight-line basis over the estimated useful life of the asset or lease term.

IMPAIRMENT OF LONG-LIVED ASSETS--The Company adopted in 1997 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". This standard
requires a reduction in the carrying amounts of certain impaired assets to their
estimated fair value, determined on the basis of estimated cash flows or net
realizable value. The impairments relate to assets not currently in use, assets
significantly underutilized, and assets with limited planned future use. The
Company had no impaired assets requiring adjustments in 1998.

TREASURY STOCK--The Company's board of directors has authorized the repurchase
of shares from stockholders who have 99 or fewer shares. The board also
authorized the repurchase of larger blocks of stock, from time to time.

INCOME TAXES--Deferred income taxes are provided on all significant temporary
differences between the tax basis of an asset or liability and its reported
amount in the financial statements at currently enacted tax rates.

INTEREST RATE SWAPS--The Company enters into interest rate swap transactions as
a tool to manage its interest rate risk. Income or expense on swaps designated
as hedges of assets or liabilities is recorded as an adjustment to interest
income or expense. If the hedged instrument is terminated prior to maturity, the
swap agreement is marked to market with any resulting gain or loss included in
the gain or loss from the disposition. If the interest rate swap is terminated,
the gain or loss is deferred and amortized over the


                                       13
<PAGE>


--------------------------------------------------------------------------------
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

remaining life of the specific asset or liability it was designated to hedge.

EARNINGS PER SHARE--In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Standards (SFAS) No. 128, "Earnings per Share".
The Company adopted SFAS No. 128 in the fourth quarter of 1997. This standard
requires dual presentation on basic and diluted earnings per share (EPS) in the
statement of earnings. Basic EPS excludes dilution, if any, and is computed by
dividing income available to common stockholders by the weighted average number
of common shares outstanding during the period. Diluted EPS recognizes all
potential common shares outstanding during the period, such as, outstanding
stock options. The Company had no dilutive options outstanding during 1998 and
at December 31, 1998. There was no impact on the Company's financial condition
or results of operation due to the adoption of SFAS No. 128.

CAPITAL STRUCTURE--SFAS No. 129, "Disclosures of Information about Capital
Structure" was issued in February 1997. The Company's current disclosures
regarding capital structure were not materially different under this standard.

COMPREHENSIVE INCOME--SFAS No. 130, "Reporting Comprehensive Income" was issued
in June, 1997. SFAS 130 established standardsfor reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. The Company adopted SFAS 130 in 1998.

BUSINESS SEGMENTS--SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information", was issued in June, 1997, and is effective for annual
financial statements issued for fiscal years beginning after December 15, 1997.
This statement establishes new standards for the way that public business
enterprises report information about operating segments. The Company adopted
SFAS 131 in 1998.

PENSIONS AND OTHER POSTRETIREMENT BENEFITS--SFAS No. 132, "Pensions and Other
Postretirement Benefits", was issued by the Financial Accounting Standards Board
in February, 1998. The Company adopted SFAS 132 in 1998. The statement does not
change the recognition or measurement of pension or postretirement benefit
plans, but standardizes disclosure requirements for pensions and other
postretirement benefits.

ACCOUNTING FOR DERIVATIVES--The Financial Accounting Standards Board issued in
June, 1998 Statement No. 133 "Accounting for Derivative Instruments and Hedging
Activities", effective for years beginning after June 15, 1999. No. 133 provides
a comprehensive and consistent standard for the recognition and measurement of
derivatives and hedging activities. The Company intends to adopt Statement No.
133 in year 2000 and is not expected to have a material impact.

NOTE B. CORRECTION OF AN ERROR-ALLOWANCE FOR CREDIT LOSSES

During October 1999, management of National City Bancorporation (NCBC)
identified a "special reserve" maintained as a reduction of loans receivable on
the balance sheet of NCBC's commercial finance subsidiary, Diversified Business
Credit, Inc. (DBCI). In connection with this reserve account, DBCI management
improperly reported certain information that should have been addressed in the
determination of NCBC's consolidated allowance for credit losses. After
consideration of the balance of this account at each measurement date and the
nature of certain additional information previously available only to DBCI
management, NCBC management has determined that the financial statement,
described above, be adjusted to properly reflect the consolidated financial
statements for each of the annual periods from 1996 through 1998. The effects of
the restatement on the consolidated balance sheet at December 31, 1998 and 1997,
and the consolidated statements of operations and comprehensive income and
shareholders' equity for the years ended December 31, 1998, 1997, and 1996 are
as follows:

<TABLE>
<CAPTION>
                                                 1998                        1997                        1996
                                                 ----                        ----                        ----
                                      ORIGINALLY            AS    ORIGINALLY            AS    ORIGINALLY           AS
(IN THOUSANDS EXCEPT PER SHARE)         REPORTED      RESTATED      REPORTED      RESTATED      REPORTED     RESTATED
---------------------------------------------------------------------------------------------------------------------
<S>                                    <C>           <C>           <C>           <C>           <C>          <C>
Balance Sheet:
  Loans                                $ 762,747     $ 766,109     $ 666,382     $ 670,594
  Allowance for loan losses              (10,423)      (13,785)      (10,071)      (14,283)
Statement of Earnings:
  Interest and fees on loans              73,090        73,040        66,110        66,910        57,992       58,795
  Provision for  loan losses               2,940         2,890         2,134         4,819         2,345        3,148
  Net earnings                            15,664        15,664        14,964        13,722        12,686       12,686

  Basic earnings per share             $    1.77     $    1.77     $    1.68     $    1.54     $    1.42    $    1.42
</TABLE>


                                       14
<PAGE>


--------------------------------------------------------------------------------
NOTE B. CORRECTION OF AN ERROR-ALLOWANCE FOR CREDIT LOSSES (CONTINUED)

Additionally, the Statement of Stockholders' Equity reflects an increase in
consolidated retained earnings of $1.2 million as of January 1, 1996.

--------------------------------------------------------------------------------
NOTE C. ESTIMATED FAIR VALUE

The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of SFAS No. 107, "Disclosures about
Fair Value of Financial Instruments"

                                                  DECEMBER 31, 1998
                                                  -----------------
                                               CARRYING     ESTIMATED
(IN THOUSANDS)                                   AMOUNT    FAIR VALUE
--------------------------------------------------------------------------------
ASSETS:
  Cash and due from banks                     $  52,271     $  52,271
  Federal funds sold and resale
    agreements                                    6,100         6,100
  Available-for-sale securities                 133,897       133,897
  Held-to-maturity securities                    41,255        41,569
  Loans-net of allowance for
    loan losses                                 752,324       756,573
LIABILITIES:
  Deposits                                      517,494       518,331
  Federal funds purchased and
    repurchase agreements                        98,702        98,702
  Commercial paper and
    other short-term funds                      112,059       112,495
  Long-term debt                                139,000       144,581
OFF-BALANCE SHEET UNREALIZED GAINS:
 Interest rate swap agreements                                  5,071


                                                  DECEMBER 31, 1997
                                                  -----------------
                                               CARRYING     ESTIMATED
(IN THOUSANDS)                                   AMOUNT    FAIR VALUE
--------------------------------------------------------------------------------
ASSETS:
  Cash and due from banks                     $  52,847     $  52,847
  Federal funds sold and resale
    agreements                                    3,740         3,740
  Available-for-sale securities                 141,325       141,325
  Held-to-maturity securities                    37,402        37,861
  Loans-net of allowance for
    loan losses                                 656,311       660,971
LIABILITIES:
  Deposits                                      478,650       478,787
  Federal funds purchased and
    repurchase agreements                       104,399       104,412
  Commercial paper and
    other short-term funds                      142,299       142,331
  Long-term debt                                 67,000        69,203
OFF-BALANCE SHEET UNREALIZED GAINS:
 Interest rate swap agreements                                  2,013

The estimated fair value amounts have been determined by the Company using
available market information and appropriate valuation methodologies. However,
considerable judgement is necessarily required to interpret market data to
develop the estimates of fair value. Accordingly, the estimates presented herein
are not necessarily indicative of the amount the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair value
amounts. CASH AND DUE FROM BANKS--The carrying value of cash and due from banks
approximates estimated fair value.

FEDERAL FUNDS SOLD, RESALE AGREEMENTS, FEDERAL FUNDS PURCHASED, AND REPURCHASE
AGREEMENTS--The carrying value of these instruments approximates estimated fair
value.


                                       15
<PAGE>


--------------------------------------------------------------------------------
NOTE B. ESTIMATED FAIR VALUE (CONTINUED)

SECURITIES--Estimated fair values of securities are based primarily on quoted
market prices or dealer quotes. If quoted market price is not available, fair
value is estimated using quoted market prices for securities with similar
characteristics.

LOANS--Approximately 83% of the loans outstanding have variable rate pricing.
Management segregates all loans into appropriate risk categories. For that
portion of the portfolio for which there are no known credit concerns,
management believes that the risk factor embedded in the pricing of loans
results in a fair valuation of such loans at their carrying value. For that
portion of the portfolio with an element of credit concern, the level of credit
adjustment required in the marketplace approximates the valuation allowance for
loan losses.

DEPOSITS--The fair value of non-interest bearing deposits and savings accounts
is the amount payable on demand at the reporting date. The fair value of
fixed-maturity certificates of deposit is estimated using the rates currently
offered in the marketplace for deposits of similar remaining maturities.

COMMERCIAL PAPER AND OTHER BORROWED FUNDS--These short term borrowings generally
mature in less than 90 days and carrying value is a reasonable estimate of fair
value.

LONG-TERM DEBT--The fair value of long-term debt is estimated using the rates
currently available on debt with similar terms and similar remaining maturities.

INTEREST RATE SWAP AGREEMENTS--The fair value is the estimated amount that the
Company would receive or pay to execute a new agreement with terms identical to
those remaining on the current agreement, considering current interest rates.

--------------------------------------------------------------------------------
NOTE D. LOANS

The following loans were outstanding:

                                                            DECEMBER 31,
                                                    ---------------------------
(IN THOUSANDS)                                         1998             1997
                                                    (RESTATED)       (RESTATED)
-------------------------------------------------------------------------------
Commercial & Industrial                               $520,672         $442,328
Real estate:
   Construction                                         24,196           10,405
   Residential mortgage                                 40,074           43,295
   Non-residential mortgage                             92,769           88,448
Loans to individuals for
  personal expenditures                                 46,800           54,987
Other                                                   41,598           31,131
                                                      --------         --------
                                                      $766,109         $670,594
                                                      ========         ========

At December 31, 1998 and 1997, receivables from and standby letters of credit
issued on behalf of commercial real estate developers and investors were
approximately $95 million and $93 million, respectively. The credit risk
associated with these loans is subject to changes in real estate market values.
The properties held as collateral are primarily in the state of Minnesota.

An analysis of the allowance for loan losses is presented below:

                                             YEAR ENDED DECEMBER 31,
                                             -----------------------
(IN THOUSANDS)                         1998            1997             1996
                                    (RESTATED)      (RESTATED)       (RESTATED)
-------------------------------------------------------------------------------
Balance at beginning
  of period                           $ 14,283         $10,111           $8,602
Provision charged to
  operating expense                      2,890           4,819            3,148
Charge-offs                             (3,444)         (1,179)          (2,555)
Recoveries                                  56             532              916
                                       -------         -------         --------
Balance at end of period               $13,785         $14,283          $10,111
                                       =======         =======          =======

In the opinion of management, the allowance for loan losses is adequate to
provide for known and estimated exposures in the loan portfolio.


                                       16
<PAGE>


--------------------------------------------------------------------------------
NOTE D. LOANS (CONTINUED)

At December 31, 1998, the Company had seven impaired commercial loans totaling
$16,736,000 compared with four loans totaling $14,106,000 at December 31, 1997.
Management has allocated $7,027,000 and $5,161,000 for 1998 and 1997,
respectively, of the Allowance for Loan Losses to these loans. Impaired loans
averaged $14,132,000 and $11,985,000 during 1998 and 1997, respectively.
Interest payments received on impaired loans are generally applied against
principal unless the loan is well secured or in the process of collection.
Non-accrual, impaired, renegotiated and loans past due 90 days or more were
$17,671,000 and $15,129,000 at December 31, 1998 and 1997, respectively. Gross
interest income would have been increased by approximately $636,000, $95,000,
and $426,000 for the years ended December 31, 1998, 1997 and 1996, respectively,
had such loans been current and in accordance with original terms. Nonperforming
status is not necessarily an indication of probable loss.

Loans to principal officers and directors of the Company and its subsidiaries
aggregated approximately $8,266,000, $8,552,000, and 8,822,000 at December 31,
1998, 1997, and 1996 respectively. New loans and repayments during 1998 were
$8,180,000 and $8,466,000, respectively. In the opinion of management, all such
loans are made at normal interest rates and terms.


--------------------------------------------------------------------------------
NOTE E. BANK PREMISES AND EQUIPMENT

                                                                DECEMBER 31,
                                                         -----------------------
(IN THOUSANDS)                                            1998             1997
--------------------------------------------------------------------------------
Assets, at cost:
  Land                                                   $   183         $   183
  Buildings                                                1,229           1,222
  Leasehold improvements                                   2,622           2,613
  Equipment                                               17,280          16,419
                                                         -------         -------
                                                          21,314          20,437
Accumulated depreciation:
  Buildings                                                  585             528
  Leasehold improvements                                   1,060             829
  Equipment                                                9,270           7,667
                                                         -------         -------
                                                          10,915           9,024
                                                         -------         -------
                                                         $10,399         $11,413
                                                         =======         =======

--------------------------------------------------------------------------------
NOTE F. DEPOSITS

Approximately $112,897,000 and $93,975,000 of interest bearing time deposits
were in denominations of $100,000 or more at December 31, 1998 and 1997,
respectively. The scheduled maturities of time deposits at December 31, 1998 are
summarized as follows:

                                                      LESS THAN         $100,000
(IN THOUSANDS)                                         $100,000          OR MORE
--------------------------------------------------------------------------------
3 months or less                                        $18,350          $63,699
3 - 6 months                                             20,868           25,096
6 - 12 months                                            21,791            5,140
1 - 2 years                                              11,081           16,526
2 - 3 years                                               7,121              846
3 - 5 years                                               9,842            1,590
over 5 years                                                 91
                                                        -------         --------
                                                        $89,144         $112,897
                                                        =======         ========


                                       17
<PAGE>


--------------------------------------------------------------------------------
NOTE G. SHORT-TERM BORROWINGS

Short-term borrowings include federal funds purchased, securities sold under
agreements to repurchase, treasury tax and loan deposits, Federal Home Loan Bank
advances and commercial paper. Federal funds purchased generally mature the day
following the date of purchase, while securities sold under agreements to
repurchase generally mature within 30 days from the various dates of sale. The
Company had unsecured lines of credit available in the amount of $140,000,000 at
December 31, 1998, 1997 and 1996.

There were no borrowings under the lines on these dates. The lines contain
covenants which require the Company to maintain certain levels of capitalization
and maintain debt to capitalization ratios within prescribed limits. The
following information relates to aggregate short-term borrowings:

                                                         DECEMBER 31,
                                              ----------------------------------
(IN THOUSANDS)                                  1998         1997         1996
--------------------------------------------------------------------------------
Maximum amount outstanding at any month end:
   Federal funds & repurchase                 $163,128     $156,104     $137,883
   Commercial paper                            138,323      137,714      109,079
   Other                                        27,388       26,332       20,391
Daily average amount
 outstanding:
   Federal funds & repurchase                  145,095      133,366      116,973
   Commercial paper                            115,197      118,154       95,950
   Other                                        17,488       17,047        6,967
Weighted average interest rate for full year:
   Federal funds & repurchase                    4.91%        4.99%        4.83%
   Commercial paper                              6.26%        6.28%        6.09%
   Other                                         5.40%        5.82%        5.37%
Outstanding at year-end:
   Federal funds and repurchase                 98,702      104,399       96,640
   Commercial paper                             99,396      119,081       98,107
   Other                                        12,663       23,218       11,366
Weighted average interest rate
 on debt outstanding
 as of December 31:
   Federal funds & repurchase                    4.03%        5.43%        5.36%
   Commercial paper                              5.75%        6.04%        6.11%
   Other                                         5.11%        5.33%        5.11%

--------------------------------------------------------------------------------
NOTE H. LONG-TERM DEBT

                                                               DECEMBER 31,
                                                          ----------------------
(IN THOUSANDS)                                             1998           1997
--------------------------------------------------------------------------------
Diversified Business Credit, Inc.
  Senior Notes
    Series A, 8.18%, due 1999                             $23,000        $23,000
    Series B, 8.45%, due 2001                              24,000         24,000
    Series C, 7.84%, due 2007                              10,000         10,000
    Series D, 7.15%, due 2004                               5,000          5,000
    Series E, 7.22%, due 2007                               5,000          5,000
    Series F, 6.68%, due 2003                              51,000
    Series G, 6.79%, due 2005                              11,000
Federal Home Loan Bank
 Advance, 5.81%, due 2000                                  10,000
                                                         --------        -------
    Total                                                $139,000        $67,000
                                                         ========        =======

The Company has entered into interest rate swap agreements to effectively
convert the Senior Notes to floating rate instruments. At December 31, 1998, the
weighted average effective interest rate for the Senior Notes Series A and B,
including the effects of the related swap agreements is the one month LIBOR rate
plus 102 basis points, or 6.08%. The weighted average effective interest rate
for the Senior Notes Series C, D, E, F, and G including the effects of the
related swap agreements, is the three month LIBOR rate plus 80 basis points or
5.86%.

The Senior Notes are unsecured and are unconditionally guaranteed by the parent
company.

The Senior Notes include covenants which require Diversified Business Credit,
Inc. and the parent company to maintain certain levels of capitalization and
maintain debt to capitalization ratios within prescribed limits.


                                       18
<PAGE>


--------------------------------------------------------------------------------
NOTE I. INCOME TAXES

The components of income tax expense were:

                                       1998             1997             1996
(IN THOUSANDS)                      (RESTATED)       (RESTATED)       (RESTATED)
--------------------------------------------------------------------------------
Current:
  Federal                            $ 7,860            8,383            6,612
  State                                2,013            2,079            1,688
                                     -------          -------           ------
                                       9,873           10,462            8,300
Deferred:
  Federal                                239           (1,027)            (143)
  State                                   79             (342)             (48)
                                     -------          -------           ------
                                         318           (1,369)            (191)
                                     -------          -------           ------
                                     $10,191            9,093           $8,109
                                     =======          =======           ======

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows:

                                                            DECEMBER 31,
                                                   -----------------------------
                                                      1998               1997
(IN THOUSANDS)                                     (RESTATED)         (RESTATED)
--------------------------------------------------------------------------------
Deferred tax assets:
  Loan loss reserves                                 $5,579             $5,780
  Salary continuation plan                              994                866
  Loan fees                                              21                 60
  Nondeductible expenses                                 20                  5
                                                    -------            -------

      Total deferred tax assets                       6,614              6,711
Deferred tax liabilities:
  Retirement plan                                     1,256              1,143
  Prepaid expenses                                      111                101
  Tax over book depreciation                            482                396
  Security discounts                                     14                  2
  Unrealized gains on securities                        620                288
                                                    -------            -------

      Total deferred tax liabilities                  2,483              1,930
                                                    -------            -------

      Net deferred tax assets                        $4,131             $4,781
                                                    =======            =======

It is more likely than not that the Company will realize the benefit of the
deferred tax assets. Therefore, no valuation allowance has been recorded for any
of the periods reported.

The total effective tax rate for the years ended December 31, 1998, 1997 and
1996 is different than the federal income tax rate.

The reasons for the differences are as follows:

                                               1998          1997         1996
                                               ----          ----         ----
Federal income tax rate                        35.0%         35.0%        35.0%
Tax exempt income                              (0.2)         (0.1)        (0.2)
State income taxes, net of federal
  income tax benefit                            5.2           5.1          5.2
Cash value of life insurance                   (0.5)         (0.6)        (0.8)
Other items                                    (0.1)                      (0.2)
                                              -----         -----        -----
   Effective rate                              39.4%         39.4%        39.0%
                                              =====         =====        =====


                                       19
<PAGE>


--------------------------------------------------------------------------------
NOTE J. COMMITMENTS AND CONTINGENCIES

The Company had commitments outstanding in connection with standby letters of
credit aggregating approximately $21,714,000 and $19,164,000 at December 31,
1998 and 1997, respectively.

Commercial letters of credit were $2,980,000 and $3,187,000 at December 31,
1998and 1997 respectively. Acceptance participations acquired were $11,419,000
at December 31, 1998and $7,214,000 at December 31, 1997.

National City Bank has entered into a ten year lease which commenced March 16,
1996, for its headquarters in downtown Minneapolis. The annual cost for the
first five years will be approximately $1.7 million per year and for the last
five years will be approximately $1.8 million per year. The lease provides an
option to extend the term for two consecutive five-year periods at the then
current fair market rents. The Bank will have the right to terminate the lease
or give back substantial portions of the leased premises on the sixth
anniversary of the lease term. In addition, the Bank paid for all of its
leasehold improvements, which approximated $2.0 million.

Diversified Business Credit, Inc. has entered into a five year lease which
commenced September 1, 1997, for its headquarters in downtown Minneapolis. The
annual cost for the five years will be approximately $240,000. The lease
provides an option to extend the term for two consecutive five-year periods at
the then current fair market rents.

The Company was obligated under operating leases for premises and equipment with
terms of one year or more at December 31, 1998. The aggregate lease commitments
outstanding as of December 31, 1998 were $13,874,000 and for the next five years
are payable as follows:

(IN THOUSANDS)
--------------------------------------------------------------------------------
1999                                   2,410
2000                                   2,225
2001                                   2,210
2002                                   2,159
2003                                   1,998

Net rental expense for the years ended December 31, 1998, 1997, and 1996, was
$2,332,000, $2,478,000, and $2,170,000 respectively.

Dividends declared by national banks that exceed retained net earnings for the
current year plus the preceding two years must be approved by the Comptroller of
the Currency. Under this formula, approximately $12,957,000 of dividends may be
paid by the Company's bank subsidiary at December 31, 1998, without such
approval, subject to continued maintenance of regulatory capital requirements.

The Company is party to various legal proceedings incidental to its business.
Certain claims, suits and complaints arising in the ordinary course of business
have been filed or are pending against the Company. In the opinion of
management, the resulting liability, if any, arising from these actions will not
be material.

--------------------------------------------------------------------------------
NOTE K. RESTRICTIONS ON CASH BALANCES

Federal Reserve Board regulations require that the Bank maintain certain minimum
reserve balances on deposit with the Federal Reserve Bank. Cash balances
maintained to meet reserve requirements are not available for use by the
Company. During 1998, approximately $4,640,000 was maintained in required
reserves on a daily average basis.

--------------------------------------------------------------------------------
NOTE L. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

The Company is a party to certain financial instruments with off-balance-sheet
risk which are entered in the normal course of business to meet the financing
needs of its customers and to reduce the Company's exposure to fluctuations in
interest rates. These financial instruments include unfunded commitments to
extend credit and interest rate swaps. These instruments involve, to varying
degrees, amounts of credit and interest rate risk in excess of the amount
recognized in the consolidated balance sheet. The contract or "notional" amounts
of those instruments reflect the extent of involvement the Company has in
particular classes of financial instruments.

The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual amount of those
instruments. The Company uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments.


                                       20
<PAGE>


--------------------------------------------------------------------------------
NOTE L. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (CONTINUED)

A summary of the Company's contractual or notional amounts for off-balance-sheet
activities at December 31, 1998 and 1997, is as follows:

(IN THOUSANDS)                                             1998          1997
--------------------------------------------------------------------------------
Credit activities:
   Commitments to extend credit                          $315,391       $262,007
   Standby letters of credit                               21,714         19,164
   Commercial letters of credit                             2,980          3,187
   Acceptance participations acquired                      11,419          7,214
Other financial instrument activities:
   Interest rate swap agreements                         $129,000       $ 87,000

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and generally
require payment of a fee. Because many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral, obtained if
deemed necessary by the Company upon extension of credit, is based on
management's credit evaluation. Collateral held varies, but may include cash,
marketable securities, accounts receivable, inventory, property, plant and
equipment, and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by the Company to
assure the performance of a customer to a third-party. Those standby letters of
credit are primarily issued to support customers' international business
transactions, and public and private borrowing arrangements, including
commercial paper, bond financing, and similar transactions. Most standby letters
of credit expire within one year. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loan facilities to
customers. The Company holds collateral supporting those commitments for which
collateral is deemed necessary. In most cases where collateral is held, coverage
is 100%.

Interest rate swaps involve the contractual exchange of fixed and floating rate
interest payment obligations based on a notional principal amount. The Company
enters into interest rate swap contracts to hedge its balance sheet for risk
caused by fluctuations in interest rates. The risks associated with such swaps
are the exposure to movement in interest rates (market risk) and the ability of
counterparties to meet the terms of the contract (credit risk). The use of swaps
for interest rate risk management purposes is integrated into the Company's
overall asset/liability management process.

For interest rate swap transactions, the contract or notional amounts do not
represent exposure to credit loss. The Company estimates the credit risk for
interest rate swap contracts by calculating the cost to replace all outstanding
contracts in a gain position at current market rates. At December 31, 1998 and
1997, the gain position of these contracts was $5.1 million and $2.0 million,
respectively. If the counterparties failed to perform according to the terms of
the contracts, the Company could incur a loss in the amount of its current gain
position. The Company controls the credit risk associated with swap agreements
through credit approvals and monitoring procedures. Under the terms of certain
swaps, each party may be required to pledge certain assets if the market value
of the swap exceeds an amount set forth in the swap agreement or in the event of
a change in their credit rating.

At December 31, 1998 and 1997, interest rate swaps totaling $129 million and $67
million, respectively, hedged long-term debt. At December 31, 1997, swaps
totaling $20 million hedged interest bearing deposits. The Company is a receiver
of fixed rate interest and a payer of floating rate interest based on the one
month LIBOR rate on $47 million of these swaps and the three month LIBOR on $82
million. The notional balances and yields by maturity date for interest rate
swaps at December 31, 1998, are as follows:

                            WEIGHTED              WEIGHTED
                            NOTIONAL               AVERAGE            AVERAGE
                             AMOUNT             INTEREST RATE      INTEREST RATE
MATURITY DATE            (IN THOUSANDS)           RECEIVED             PAID
--------------------------------------------------------------------------------
1999                         $23,000                7.19%              5.75%
2001                          24,000                7.41%              5.75%
2003                          51,000                5.89%              5.73%
2004                           5,000                6.45%              5.71%
2005                          11,000                5.93%              5.73%
2007                          15,000                6.84%              5.76%
                            --------
Total                       $129,000                6.54%              5.74%


                                       21
<PAGE>


Swaps contributed to the Company's net interest income by reducing interest
expense for the years ended December 31, 1998, 1997 and 1996, by $971,000,
$995,000 and $799,000, respectively.

--------------------------------------------------------------------------------
NOTE M. EMPLOYEE BENEFIT PLANS

The Company has a defined benefit pension plan covering substantially all of its
full-time employees. The benefits are based on years of service and the
employee's compensation while employed with the Company. The Company's funding
policy is to contribute annually current service costs accrued and past service
costs amortized over a 30-year period. Contributions are intended to provide not
only for benefits attributed to service to date but also for those expected to
be earned in the future. Plan assets consist principally of equity securities
and U.S. Government and corporate bonds.

The following table sets forth the plan's funded status and amounts recognized
in the Company's financial statements:

<TABLE>
<CAPTION>
                                                                        DECEMBER 31,
                                                          ---------------------------------------
(IN THOUSANDS)                                               1998           1997          1996
-------------------------------------------------------------------------------------------------
<S>                                                       <C>            <C>            <C>
Projected benefit obligation:
   Balance at beginning of period                         $  10,541      $   9,457      $  10,051
   Service cost                                                 379            316            344
   Interest cost                                                745            718            716
   Actuarial (gain) or loss                                      (7)           758             10
   Benefits paid during period                                 (523)          (531)          (886)
                                                          ---------      ---------      ---------
   Projected benefit obligation at end of period             11,135         10,718         10,235
Plan assets at fair value:
   Balance at beginning of period                            14,579         13,204         12,730
   Actual return on plan assets during period                 1,635          1,906          1,360
   Benefits paid during period                                 (523)          (531)          (886)
                                                          ---------      ---------      ---------
   Fair value of plan assets at end of period                15,691         14,579         13,204
                                                          ---------      ---------      ---------
Plan assets in excess of projected benefit obligation         4,556          3,861          2,969
   Unrecognized prior service cost                              (98)          (107)          (116)
   Unrecognized net loss or (gain)                             (961)          (431)           325
   Unrecognized transition asset                               (261)          (323)          (385)
                                                          ---------      ---------      ---------
   Prepaid pension cost at end of period                  $   3,236      $   3,000      $   2,793
                                                          =========      =========      =========

Prepaid pension cost at beginning of period               $   3,000      $   2,793      $   2,651
   Pension cost (credit) for the period                        (236)          (207)          (142)
                                                          ---------      ---------      ---------
   Prepaid pension cost at end of period
                                                          $   3,236      $   3,000      $   2,793
                                                          =========      =========      =========
</TABLE>

For 1998, the discount rate and rate of increase in future compensation levels
used in determining the actuarial present value of the projected benefit
obligation were 7.5% and 4.5%, respectively. For 1997, the rates were 7.0% and
4.5%. For 1996, the rates were 7.5% and 4.5%. The expected long-term rate of
return on assets was 9.0% for all three years.

The Company maintains a retirement savings 401(k) plan. All employees of the
Company and its subsidiaries are eligible to participate in the plan after
completing twelve months of service during which they have worked at least one
thousand hours. Matching contributions are made at the discretion of management.
Company contributions charged to operations for the years ended December 31,
1998, 1997 and 1996, were $276,000, $271,000, and $263,000, respectively.

The Company and its subsidiaries have entered into agreements to provide salary
continuation supplemental payments at retirement to certain officers. The
benefits due under these agreements are being accrued currently.


                                       22
<PAGE>


--------------------------------------------------------------------------------
NOTE N. PARENT ONLY INFORMATION

The following financial information relates to National City Bancorporation
(parent only) operations:

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                           DECEMBER 31,
                                                                      ---------------------
(IN THOUSANDS)                                                          1998         1997
-------------------------------------------------------------------------------------------
<S>                                                                   <C>          <C>
ASSETS
  Cash                                                                $  4,396     $ 15,911
  Investment in bank subsidiary                                         64,371       58,980
  Investment in non-bank subsidiary                                     34,256       27,925
  Subordinated note receivable from affiliate                            8,000        8,000
  Other investments                                                        183          374
  Due from affiliates                                                  135,200      140,650
  Other assets                                                             355          337
                                                                      --------     --------
                                                                      $246,761     $252,177
                                                                      ========     ========
LIABILITIES AND STOCKHOLDERS' EQUITY
  Commercial paper                                                    $ 99,396     $119,081
  Other liabilities                                                         77          169
  Stockholders' equity                                                 147,288      132,927
                                                                      --------     --------
                                                                      $246,761     $252,177
                                                                      ========     ========
</TABLE>

                             STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                                         ----------------------------------
(IN THOUSANDS)                                             1998         1997         1996
                                                                     (RESTATED)
-------------------------------------------------------------------------------------------
<S>                                                      <C>          <C>          <C>
INCOME
  Dividends from bank subsidiary                         $  3,000     $  3,000     $  3,120
  Interest income                                          10,321        9,879        7,836
  Other income                                                 80          239          296
                                                         --------     --------     --------
                                                           13,401       13,118       11,252
EXPENSES
  Interest expense                                          7,290        7,507        5,909
  Other expenses                                              738          621          628
                                                         --------     --------     --------
                                                            8,028        8,128        6,537
                                                         --------     --------     --------
Earnings before taxes                                       5,373        4,990        4,715
Income taxes                                                  967          817          652
                                                         --------     --------     --------
                                                            4,406        4,173        4,063
Equity in undistributed net earnings of subsidiaries       11,258        9,549        8,623
                                                         --------     --------     --------
Net earnings                                             $ 15,664     $ 13,722     $ 12,686
                                                         ========     ========     ========
</TABLE>


                                       23
<PAGE>


--------------------------------------------------------------------------------
NOTE N. PARENT ONLY INFORMATION (CONTINUED)

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                                            ---------------------------------------
(IN THOUSANDS)                                                 1998           1997           1996
                                                                           (RESTATED)
---------------------------------------------------------------------------------------------------
<S>                                                         <C>            <C>            <C>
Cash flows from operating activities:
  Net earnings                                              $  15,664      $  13,722      $  12,686
  Adjustments to reconcile net earnings to net cash
   from operating activities:
     Equity in undistributed earnings of subsidiaries         (11,258)        (9,549)        (8,623)
     Decrease in other assets                                     198            726            550
     Increase (decrease) in other liabilities                     (92)           112            (92)
                                                            ---------      ---------      ---------
                                                              (11,152)        (8,711)        (8,165)
                                                            ---------      ---------      ---------
     Net cash from operating activities                         4,512          5,011          4,521

Cash flows from investing activities:
  (Advances to) payments from affiliates                        5,450        (13,300)       (23,195)
                                                            ---------      ---------      ---------
      Net cash (used for) investing activities                  5,450        (13,300)       (23,195)

Cash flows from financing activities:
  Net increase (decrease) in commercial paper                 (19,685)        20,974         18,121
  Payment for fractional shares on stock dividends                (40)           (22)           (26)
  Purchase of treasury stock                                   (1,752)          (856)            (1)
  Other                                                                                         (34)
                                                            ---------      ---------      ---------
      Net cash from financing activities                      (21,477)        20,096         18,060
                                                            ---------      ---------      ---------
Net increase (decrease) in cash                               (11,515)        11,807           (614)
Cash at beginning of year                                      15,911          4,104          4,718
                                                            ---------      ---------      ---------
Cash at end of year                                         $   4,396      $  15,911      $   4,104
                                                            =========      =========      =========

Supplemental disclosures
  Cash paid during the year for:
      Interest                                              $   7,290      $   7,504      $   5,465
      Income taxes                                              1,058            660            690
</TABLE>

--------------------------------------------------------------------------------
NOTE O. SECURITIES

Securities consist of the following:

<TABLE>
<CAPTION>
                                                                  DECEMBER 31, 1998
                                                 ----------------------------------------------------
                                                  COST OR                                 APPROXIMATE
                                                 AMORTIZED     UNREALIZED    UNREALIZED      MARKET
(IN THOUSANDS)                                     COST          GAINS         LOSSES        VALUE
-----------------------------------------------------------------------------------------------------
<S>                                              <C>           <C>           <C>           <C>
Available-for-sale
  U.S. Treasury                                  $   4,969     $     108                   $   5,077
  U.S. Government agencies                          17,057            84     $      52        17,089
  Federal agency mortgage-backed                   107,537         1,436            43       108,930
  Other securities                                   2,801                                     2,801
                                                 ---------     ---------     ---------     ---------
                                                 $ 132,363     $   1,628     $      95     $ 133,897
                                                 =========     =========     =========     =========

Held-to-maturity
  Collateralized mortgage obligations            $  41,255     $     314                   $  41,569
                                                 =========     =========                   =========
</TABLE>


                                       24
<PAGE>

--------------------------------------------------------------------------------
NOTE O. SECURITIES (CONTINUED)

<TABLE>
<CAPTION>
                                                          DECEMBER 31, 1997
                                          -----------------------------------------------------
                                           COST OR                                  APPROXIMATE
                                          AMORTIZED     UNREALIZED     UNREALIZED      MARKET
(IN THOUSANDS)                              COST           GAINS         LOSSES         VALUE
-----------------------------------------------------------------------------------------------
<S>                                       <C>             <C>            <C>           <C>
Available-for-sale
  U.S. Treasury                           $ 24,012        $    13        $   28        $ 23,997
  U.S. Government agencies                   9,816             28                         9,844
  Federal agency mortgage-backed           101,830          1,052           353         102,529
  Other securities                           4,955                                        4,955
                                          --------        -------         -----        --------
                                          $140,613        $ 1,093         $ 381        $141,325
                                          ========        =======         =====        ========

Held-to-maturity
  Collateralized mortgage obligations     $ 37,402          $ 459                      $ 37,861
                                          ========          =====                      ========
</TABLE>

Expected maturities may differ from contractual maturities because the issuers
of the securities may have the right to prepay obligations without prepayment
penalties.

CONTRACTUAL MATURITIES AND MARKET VALUE

<TABLE>
<CAPTION>
                                                                             DECEMBER 31, 1998
                                          ----------------------------------------------------------------------------------------
                                                                     AFTER ONE             AFTER FIVE
                                               WITHIN               BUT WITHIN              BUT WITHIN              AFTER TEN
                                              ONE YEAR              FIVE YEARS              TEN YEARS                 YEARS
                                          ----------------      -----------------      ------------------       ------------------
(IN THOUSANDS)                            AMOUNT     YIELD       AMOUNT     YIELD       AMOUNT      YIELD       AMOUNT      YIELD
----------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>        <C>        <C>         <C>         <C>         <C>         <C>          <C>
Available-for-sale
    U.S. Treasury                                               $ 5,077     5.69%
    U.S. Government agencies              $ 5,077    6.17%       12,012     5.25%
    Federal agency mortgage-backed                                4,368     5.82%       $10,129     6.28%       $94,433      6.71%
    Other securities                                                                                              2,801      6.56%
                                          -------               -------                 -------                 -------
                                          $ 5,077    6.17%      $21,457     5.47%       $10.129     6.28%       $97,234      6.71%
                                          =======               =======                 =======                 =======
Held-to-maturity
    Collateralized mortgage obligations                                                 $ 2,271     7.25%       $38,984      6.60%
                                                                                        =======                 =======
Approximate market value                                                                $ 2,288                 $39,281
                                                                                        =======                 =======

<CAPTION>
                                                                             DECEMBER 31, 1997
                                          ----------------------------------------------------------------------------------------
                                                                     AFTER ONE             AFTER FIVE
                                               WITHIN               BUT WITHIN              BUT WITHIN              AFTER TEN
                                              ONE YEAR              FIVE YEARS              TEN YEARS                 YEARS
                                          ----------------      -----------------      ------------------       ------------------
(IN THOUSANDS)                            AMOUNT     YIELD       AMOUNT     YIELD       AMOUNT      YIELD       AMOUNT      YIELD
----------------------------------------------------------------------------------------------------------------------------------

Available-for-sale
    U.S. Treasury                         $23,997    5.26%
    U.S. Government agencies              $ 4,655    6.05%      $ 5,189     6.17%
    Federal agency
mortgage-backed                                                                         $13,700     5.83%       $88,829      7.05%
    Other securities                                                                                              4,955      6.85%
                                          -------               -------                 -------                 -------
                                          $28,652    5.39%      $ 5,189     6.17%       $13,700     5.83%       $93,784      7.04%
                                          =======               =======                 =======                 =======
Held-to-maturity
    Collateralized mortgage obligations                                                 $ 4,478     7.21%       $32,924      7.10%
                                                                                        =======                 =======
Approximate market value                                                                $ 4,526                 $33,335
                                                                                        =======                 =======
</TABLE>

Securities carried at $124,468,000 and $137,547,000 at December 31, 1998 and
1997, respectively, were pledged to secure government, public and trust
deposits, borrowings in the form of repurchase agreements and FHLB advances and
for other purposes as required by law. Average yields on available-for-sale
securities is based on amortized cost.

The Company retains possession of most securities sold under agreements to
repurchase. The Company takes possession of securities purchased under agreement
to resell.

The underlying collateral for collateralized mortgage obligations consists of
Federal agency mortgage-backed securities. The average life of Federal agency
mortgage-backed securities and collateralized mortgage obligations is expected
to be considerably less than the contractual maturities shown in the table
because of scheduled payments and prepayments. The estimated average lives for
these instruments depend on the level of interest rates. The estimated average
lives as of the reporting date are 3.2 years for agency mortgage-backed
securities and 2.8 years for collateralized mortgage obligations.

                                       25
<PAGE>


--------------------------------------------------------------------------------
NOTE P. BUSINESS SEGMENTS

The Company provides a wide range of banking and financial services and products
through its subsidiaries. The business segments are managed with a focus on
various performance objectives including net income, return on average equity,
and operating efficiency. The Company has two business segments: National City
Bank of Minneapolis (Bank) and Diversified Business Credit, Inc. (DBCI). The
Bank offers a full range of banking services to businesses and individuals
including loans, deposit services, trust services, cash management services, and
investment sales. DBCI is a commercial finance company offering asset-based
lending to businesses. The revenues, expenses, and assets of the business
segments are summarized below:

<TABLE>
<CAPTION>
                                                                             DECEMBER 31, 1998
                                                                             -----------------
                                                                        COMMERCIAL                   CONSOLIDATED
                                                         COMMERCIAL        FINANCE                        COMPANY
(IN THOUSANDS)                                              BANKING     (RESTATED)         OTHER*      (RESTATED)
-----------------------------------------------------------------------------------------------------------------
<S>                                                      <C>            <C>            <C>             <C>
INTEREST INCOME                                          $   52,737     $   32,932     $      (94)     $   85,575
INTEREST EXPENSE                                             24,967         16,203         (3,147)         38,023
                                                         ----------     ----------     ----------      ----------
NET INTEREST INCOME                                          27,770         16,729          3,053          47,552
NON-INTEREST INCOME                                           9,002            599           (359)          9,242
                                                         ----------     ----------     ----------      ----------
TOTAL REVENUE                                                36,772         17,328          2,694          56,794
LOAN LOSS PROVISION                                             640          2,250                          2,890
DEPRECIATION AND AMORTIZATION EXPENSE                         2,792            129              6           2,927
OTHER NON-INTEREST EXPENSE                                   20,383          4,330            409          25,122
                                                         ----------     ----------     ----------      ----------
INCOME TAXES                                                  5,031          4,287            873          10,191
NET INCOME                                               $    7,926     $    6,332     $    1,406      $   15,664
                                                         ==========     ==========     ==========      ==========
TOTAL LOANS                                              $  461,324     $  304,785                     $  766,109
TOTAL ASSETS                                                721,570        310,638     $   (6,526)      1,025,682

<CAPTION>
                                                                            DECEMBER 31, 1997
                                                                            -----------------
                                                                        COMMERCIAL                   CONSOLIDATED
                                                         COMMERCIAL        FINANCE                        COMPANY
                                                            BANKING     (RESTATED)         OTHER*      (RESTATED)
-----------------------------------------------------------------------------------------------------------------

Interest income                                          $   51,167     $   28,692     $      (59)     $   79,800
Interest expense                                             24,182         13,600         (2,491)         35,291
                                                         ----------     ----------     ----------      ----------
Net interest income                                          26,985         15,092          2,432          44,509
Non-interest income                                          10,729            749            (88)         11,390
                                                         ----------     ----------     ----------      ----------
Total revenue                                                37,714         15,841          2,344          55,899
Loan loss provision                                           1,607          3,212                          4,819
Depreciation and amortization expense                         3,159             82              4           3,245
Other non-interest expense                                   20,683          3,928            409          25,020
                                                         ----------     ----------     ----------      ----------
Income taxes                                                  4,738          3,597            758           9,093
Net income                                               $    7,527     $    5,022     $    1,173      $   13,722
                                                         ==========     ==========     ==========      ==========
Total loans                                              $  426,495     $  244,099                     $  670,594
Total assets                                                693,065        246,584     $   (4,477)        935,172

<CAPTION>
                                                                            DECEMBER 31, 1996
                                                                            -----------------
                                                                        COMMERCIAL                   CONSOLIDATED
                                                         COMMERCIAL        FINANCE                        COMPANY
                                                            BANKING     (RESTATED)         OTHER*      (RESTATED)
-----------------------------------------------------------------------------------------------------------------

Interest income                                          $   46,857     $   23,419            (77)     $   70,199
Interest expense                                             21,363         10,809         (2,023)         30,149
                                                         ----------     ----------     ----------      ----------
Net interest income                                          25,494         12,610          1,946          40,050
Non-interest income                                           9,630            533            (81)         10,082
                                                         ----------     ----------     ----------      ----------
Total revenue                                                35,124         13,143          1,865          50,132
Loan loss provision                                           1,820          1,328                          3,148
Depreciation and amortization expense                         2,084             78              7           2,169
Other non-interest expense                                   20,502          3,177            341          24,020
                                                         ----------     ----------     ----------      ----------
Income taxes                                                  4,094          3,441            574           8,109
Net income                                               $    6,624     $    5,119     $      943      $   12,686
                                                         ==========     ==========     ==========      ==========
Total loans                                              $  397,934     $  202,386                     $  600,320
Total assets                                                699,515        206,811     $   (6,197)        900,129
</TABLE>

     *Other includes parent only and consolidating eliminations


                                       26
<PAGE>


--------------------------------------------------------------------------------
The Bank has experienced increased net interest income related primarily to a
growth in loans, while containing growth in non-interest expense. The Bank
received a state tax refund in 1997 of $1,369,000 which was included in
non-interest income. DBCI has also experienced higher net interest income
related to loan growth.




REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
National City Bancorporation

We have audited the accompanying consolidated balance sheets of National City
Bancorporation and subsidiaries as of December 31, 1998 and 1997 (as restated),
and the related consolidated statements of income, shareholders' equity,
comprehensive income and cash flows for each of the three years in the period
ended December 31, 1998 (as restated). 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 generally accepted auditing
standards. 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 City
Bancorporation and subsidiaries at December 31, 1998 and 1997 (as restated), and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1998 (as restated), in
conformity with generally accepted accounting principles.


/s/ Ernst & Young LLP

Minneapolis, Minnesota
January 15, 1999


                                       27
<PAGE>


================================================================================
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
================================================================================

SUMMARY RESULTS

Net earnings for 1998 were $15,664,000 compared with $13,722,000 in 1997, up 14
percent. Basic earnings per share increased to $1.77 in 1998 compared with $1.54
in 1997. The net earnings for 1997 include a state income tax refund, related to
taxes paid in prior years, of $1,369,000 with a net earnings effect of
approximately $850,000. Without regard for the 1997 tax refund, earnings for
1998 increased 22 percent.

The major factors contributing to the earnings increase in 1998 was higher net
interest income resulting from growth in loans and a lower provision for loan
losses. We accomplished this growth while decreasing non-interest expenses.

The Company has issued stock dividends in each year beginning in 1981. The
Company has not paid cash dividends.

NET INTEREST INCOME

Net interest income, on a fully taxable equivalent basis, increased to $47.6
million up from $44.6 million in 1997 and $40.1 million in 1996. Fluctuations in
net interest income can result from changes in the volume of assets and
liabilities as well as changes in interest rates. These changes are presented in
the analysis on page 37. The average base rate decreased to 8.35 percent from
8.44 percent in 1998. Approximately 83 percent of the Company's loan portfolio
has floating interest rates that generate more income during periods of rising
rates. Net interest margin, the relationship between net interest income and
average earning assets, was 5.15 percent compared with 5.26 percent in 1997.
Average earning assets grew to $926 million in 1998, an increase of $78 million
or 9 percent. Average loans increased to $724 million in 1998 from $650 million
in 1997, an increase of 11 percent. Loans were 78.2 percent of total earning
assets in 1998, compared with 76.6 percent in 1997.

The general decrease in interest rates during 1998 had no effect on the cost of
interest bearing deposits and borrowed funds which remained constant at 5.33
percent. The lower cost of short-term funds was offset by a higher volume and
cost of long-term debt. Time deposits are slower to reprice because of their
longer maturities. While the average base rate decreased 9 basis points, the
average yield on earning assets, including fixed rate securities, decreased 17
basis points. As a result, interest rate spread declined to 3.92 percent from
4.09 percent in 1997. Interest bearing time deposits of $100,000 or more
decreased and averaged $59.5 million in 1998 compared with $51.8 million in
1997. Other interest bearing deposit accounts increased $4.8 million compared
with last year and comprise approximately 31 percent of interest bearing
sources. Brokered deposits averaged $59 million in 1998 compared with $66.9
million in 1997. While the Company's emphasis remains on increasing funding from
direct deposits, the brokered deposit market is an important funding option.
Commercial paper proceeds are used to fund the loans of the Company's commercial
finance subsidiary, Diversified Business Credit, Inc. (DBCI). Long-term debt is
issued by DBCI, and National City Bank (Bank) borrows from the Federal Home Loan
Bank. At December 31, 1998, long-term debt totaled $139 million. Detail
information about long-term debt is presented in Note H to the financial
statements. Non-interest bearing deposits increased from 1997 and averaged
$130.8 million in 1998.


                                       28
<PAGE>


The following table summarizes the changes in funding sources since 1996:

<TABLE>
<CAPTION>
                                                                 1998                          1997
                                                       -----------------------      ------------------------
                                                                      % CHANGE                      % CHANGE
(DAILY AVERAGES IN THOUSANDS)                           AMOUNT       FROM 1997        AMOUNT       FROM 1996
------------------------------------------------------------------------------------------------------------
<S>                                                    <C>              <C>         <C>              <C>
Interest bearing time deposits of $100,000 or more     $ 59,528          14.9%      $ 51,811         (19.7)%
Brokered deposits                                        58,987         (11.8)        66,865         (28.5)
Other interest bearing deposits                         221,779           2.2        217,028          39.0
Commercial paper                                        115,197          (3.4)       119,192          24.2
Other short-term borrowed funds                         162,583           8.8        149,375          20.5
Long-term debt                                           94,994          65.2         57,509          19.7
                                                       --------                     --------
Total interest bearing                                  713,068           7.8        661,780          13.7
Non-interest bearing deposits                           130,761          11.2        117,605           6.7
Other liabilities                                        10,118          11.6          9,069           6.3
Stockholders' equity                                    139,725          12.4        124,323          12.4
                                                       --------                     --------
                                                       $993,672           8.9%      $912,777          12.5%
                                                       ========                     ========
</TABLE>

CREDIT RISK MANAGEMENT

The responsibility for credit administration rests with the credit committees of
each subsidiary. The credit committees determine applicable policies and credit
approval authorities used in the Company. Management monitors compliance with
credit standards. Lending officers are responsible for applying credit standards
and the Company uses a rating system to assess and monitor the credit risk
associated with loans. Detecting negative trends at the earliest possible stage
is essential in managing risk of loan loss to the Company and assisting the
borrowing customer. A diligent follow-up process is used to monitor, communicate
and correct credit weaknesses that are revealed.

The Bank has established a risk management function that is responsible for
assessing credit risk associated with new loans and lines of credit as well as
monitoring credit risk factors on an ongoing basis. The Bank uses an independent
review procedure to monitor compliance with its credit granting process. The
review includes an assessment of credit policy application and the accuracy of
the loan rating system. The review of credit process covers all lending industry
segments on a schedule determined by assessment of risk. Management and the
Examining and Audit Committee of the Board of Directors are informed directly of
the results of the reviews. Additionally, DBCI monitors collateral values and
related credit risks through its staff of field auditors.

The largest loan category is commercial and industrial loans, which grew from
$442 million in 1997 to $521 million in 1998, an increase of 18 percent.
Management monitors loan concentrations by industry segment to develop a diverse
mix of credits. Industry Credit Exposure Guidelines are established and managed
based on the current and anticipated economic conditions and the perceived risk
profile of an industry. The Company's ability to manage the credit risk within
an industry is also considered. A high percentage of the commercial and
industrial loans originate from the Minneapolis/St. Paul metropolitan area.
Those industry sectors showing signs of weakness are targeted by management for
slow or no growth in credit facilities. Underwriting Guidelines including
profitability, cash flow, leverage, collateral, guarantee and monitoring
standards are applicable for the bulk of the commercial and industrial loans.
The Bank also purchases loans from correspondent banks. Purchased loans were
$66.5 million and $55.2 million at December 31, 1998, and 1997, respectively.

Loans secured by commercial real estate were approximately $117 million as of
December 31, 1998 and $99 million as of the previous year end. Included in this
total is approximately $24.2 million of construction financing. The Company
makes commercial real estate loans for owner occupied real estate (commercial
and industrial borrowers), as well as to commercial real estate developers and
investors. A diversification of property types is maintained within the
commercial real estate portfolio with apartment buildings being the largest
category at 19 percent. Commercial real estate lending activities are guided by
Credit Policies, Underwriting Guidelines, Operating Procedures, Collateral
Standards and Environmental Risk Procedures.

Loans secured by residential mortgages totaled $40 million at December 31, 1998,
compared with $43 million last year. This category includes $16 million secured
by first liens on 1-4 family housing, $16 million secured by junior liens on 1-4
family housing and $8 million revolving Executive Line loans that are secured by
either first or second mortgages. The


                                       29
<PAGE>


comparable 1997 amounts are $20 million first liens, $14 million junior liens
and $9 million revolving Executive Lines. Collateral standards for residential
real estate lending generally call for a maximum 80 percent loan-to-value ratio
for properties up to $300,000 and lesser advance rates for properties above
$300,000.

Loans to individuals were $47 million at December 31, 1998, compared with $55
million in 1997. These loans are from a variety of sources including loans to
higher net-worth individuals in which smaller loan amounts are typically
unsecured and where larger amounts are normally secured by marketable securities
or home equity. The Company has experienced a low level of loss in the
residential mortgage and loans to individuals categories. This resulted from a
combination of favorable economic conditions in the Twin Cities over the past
several years and the effective performance of credit risk management functions.

Other loans were $42 million on December 31, 1998, compared with $31 million in
1997. These loans are comprised primarily of loans to owners of community banks
and bank holding companies to finance the purchase and expansion of those banks.
The management of risks related to bank stock loans includes specific
underwriting guidelines, periodic reviews performed by experienced consultants
or bank staff, receipt and analysis of quarterly financial data and frequent
calls with bank ownership and management.

PROVISION FOR LOAN LOSSES

The provision for loan losses was $2.9 million in 1998 compared with $4.8
million in 1997. Management determines an appropriate provision based on its
evaluation of the adequacy of the allowance for loan losses in relationship to a
continuing review of problem loans, including estimates and appraisals of
collateral values, prior loss experience, and current economic conditions.
Changes in these estimates, appraisals and evaluations might be required quickly
in the event of changing economic conditions and the economic prospects of
borrowers. Management engages in a detailed review of loans showing weakness
based on established criteria. A system of risk grading is used to establish
monthly assessments of the portfolio and such assessments are the basis for a
quarterly review of the allowance for loan losses. The Summary of Loan Loss
Experience presented on page 41 shows the changes in the percentage from 1994 to
1998.

The allowance for loan losses was $13.8 million in 1998. At December 31, 1998,
the reserve was 1.80 percent of loans compared with 2.13 percent in 1997. Actual
net loan losses in 1998 were $3.4 million compared with $647,000 in 1997.
Charge-offs were $3.4 million in 1998, and recoveries were $56,000. The method
used and assumptions made in the determination of the provision and allowance
for loan losses is consistent for all periods presented in the Company's
financial statements.

The Company experienced a higher level of loss in 1998 than in the previous four
years as presented in the Summary of Loan Loss Experience on page 41. The losses
occurred in the commercial lending portfolio of DBCI and, accordingly, increased
the Company's percent of net loan charge-offs to average loans to .47 percent
compared with .10 percent in 1997. The remaining balance of the loans continues
to have a negative affect on income and are included in non-accrual loans. The
loans involved are being reduced through a process of collateral liquidation.
The allocation of the allowance for loan losses for 1998 presented on page 41
reflects a greater amount for commercial and industrial loans than in the
previous years presented.


NON-PERFORMING ASSETS

Non-performing assets were $17.7 million at December 31, 1998, compared with
15.1 million in 1997 and $11.0 million in 1996. At the current year-end,
non-performing assets consisted of loans on non-accrual status, impaired loans,
restructured loans, and loans past due 90 days or more.

In addition to non-accrual loans and accruing loans 90 days or more past due,
there were loans with an aggregate principal balance of $13.7 million
outstanding at December 31, 1998, to borrowers who are currently experiencing
financial difficulties. This compares with $15.1 million at December 31, 1997.
Although these loans are adequately


                                       30
<PAGE>


secured by commercial real estate or other assets, management has concerns
regarding the ability of such borrowers to continue meeting existing loan
repayment terms. Accordingly, these loans may be subject to future modifications
of their terms or may become non-performing. Management is monitoring the
performance and classification of such loans and the financial condition of
these borrowers and has considered the risk associated with these loans in
determining the adequacy of the allowance for loan losses.

Non-accrual loans are loans on which the accrual of interest ceases when the
collection of principal or interest is determined to be doubtful by management.
It is the Company's policy to cease the accrual of interest when principal or
interest payments are delinquent 90 days or more. Any unpaid amounts previously
accrued in the current year are reversed from income, and thereafter interest is
recognized only when payments are received. Restructured loans are loans on
which the Company, for economic or legal reasons related to a borrower's
financial difficulties, grants a concession to the borrower that it would not
otherwise consider. Nonperforming loans include loans on which principal
payments are contractually delinquent 90 days or more and interest is still
being accrued. These loans are well secured and in the process of collection.
The Company had no other real estate owned acquired in foreclosure at December
31, 1998 or 1997.


INTEREST RATE RISK MANAGEMENT

Because of the rate sensitivity of financial instruments, fluctuations in
interest rates expose the Company to potential gains and losses resulting from
changes in the fair value of the instruments. The objective of interest rate
risk management is to control exposure of net interest income to risks
associated with interest rate movements. The Company actively manages its
interest rate risk position. The tools used to measure interest rate risk
include gap analysis and a market valuation model that measures interest rate
risk from an economic perspective. Significant assumptions required in the use
of these tools include prepayment risks and the timing of changes in deposit
rates compared with changes in money market rates.

The market value of each asset and liability is calculated in the market
valuation model by computing the present value of all cash flows generated. In
each case, the cash flows are discounted by a market interest rate chosen to
reflect as closely as possible the characteristics of the given asset or
liability. As of the reporting date, this internal valuation model indicates
that a two percent shift in the absolute level of interest rates would change
the market value of equity by less than four percent. This represents a
relatively risk neutral position from an economic perspective. The following
table summarizes the Company's repricing gap for various time intervals at
December 31, 1998:

<TABLE>
<CAPTION>
                                               WITHIN     3 MONTHS      1 YEAR     MORE THAN
(IN MILLIONS)                                 3 MONTHS    TO 1 YEAR   TO 5 YEARS    5 YEARS
                                             (RESTATED)
--------------------------------------------------------------------------------------------
<S>                                            <C>         <C>          <C>          <C>
Loans                                          $ 589       $  57        $  84        $  36
Securities                                         9          32           94           40
Other assets                                       9                                    76
                                               -----       -----        -----        -----
                                                 607          89          178          152

Non-interest bearing deposits                     39          44           36           47
Interest bearing deposits                        187          88           77
Short-term borrowings                            197          14
Long-term debt                                    47                       21           71
Interest rate swaps                               82                      (11)         (71)
Other liabilities and stockholders' equity                                             158
                                               -----       -----        -----        -----
                                                 552         146          123          205
                                               -----       -----        -----        -----
Repricing gap                                  $  55       $ (57)       $  55        $ (53)
                                               -----       -----        -----        -----
Cumulative gap                                    55          (2)          53            0
Cumulative gap as a percent of assets              5%          0%           5%           0%
</TABLE>

As indicated by the Gap table, assets reprice slightly faster than liabilities
as of the reporting date. With this balance sheet position, which is typical for
the Company, interest margins are projected to increase slightly in an
environment of rising short-term rates and decline slightly in a declining rate
environment. A lower interest rate environment is


                                       31
<PAGE>


preferable for the Company from a credit perspective, however, as there is less
pressure on customers to meet variable rate debt servicing obligations.

The following table provides information about the Company's derivative
financial instruments and other financial instruments used for purposes other
than trading that are sensitive to changes in interest rates. For loans,
securities, and liabilities with contractual maturities, the table presents
principal cash flows and related weighted-average interest rates by contractual
maturities as well as the Company's historical experience of the impact of
interest rate fluctuations on the prepayment of residential and home equity
loans and mortgage-backed securities. For core deposits (e.g., non-interest
bearing checking, interest bearing checking and savings, savings and money
market deposits) that have no contractual maturity, the table presents principal
cash flows and, as applicable, related weighted-average interest rates based on
the Company's historical experience, management's judgment, and statistical
analysis, as applicable, concerning their most likely withdrawal behaviors. *Has
not been adjusted *

<TABLE>
<CAPTION>
                                                                                                                          FAIR VALUE
                                                                                                                            AS OF
                                          1999        2000       2001        2002        2003     THEREAFTER     TOTAL     12/31/98
(IN MILLIONS)                          (RESTATED)                                                             (RESTATED)  (RESTATED)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>         <C>        <C>         <C>         <C>         <C>          <C>          <C>
RATE SENSITIVE ASSETS:
  Fixed interest rate loans             $    23     $    15    $    20     $    16     $    16     $    42      $  132       $135
    Average interest rate                  7.81%       8.36%      8.87%       8.48%       8.48%       8.36%       8.37%
  Variable interest rate loans              550          20          7          14          14          29         634        636
    Average interest rate                  9.54%       7.50%      8.70%       7.68%       7.68%       8.15%       9.31%
  Fixed interest rate securities             33          32         26          20          18          40         169        170
    Average interest rate                  6.49%       6.36%      6.02%       6.55%       6.55%       6.53%       6.41%
  Variable interest rate securities           1           1          1           1           1           1           6          6
    Average interest rate                  5.74%       6.14%      6.74%       5.93%       5.93%      6.69%        6.27%
  Other interest bearing assets               6                                                                      6          6
    Average interest rate                  5.00%                                                                  5.00%
RATE SENSITIVE LIABILITIES:
  Non-interest bearing checking              82           9          9           9           9          47         165        165
  Interest bearing checking & savings       120           9          8           8           8                     153        153
    Average interest rate                  3.90%       1.22%      1.01%       1.01%       1.01%                   3.29%
  Time deposits                             151          28          8           6           6                     199        200
    Average interest rate                  5.36%       5.91%      5.85%       5.87%       5.87%                   5.48%
  Fixed interest rate borrowings            248          10                     11          10          71         350        356
    Average interest rate                  5.07%       5.81%                  5.64%       5.64%       6.04%       5.32%
RATE SENSITIVE DERIVATIVE FINANCIAL
  INSTRUMENTS:
   Interest rate swaps                       23                     24                      51          31         129          5
     Average pay rate                      5.75%                  5.75%                   5.73%       5.74%
     Average receive rate                  7.19%                  7.41%                   5.89%       6.45%
</TABLE>

NON-INTEREST INCOME

Total non-interest income was $9.2 million, compared with $11.4 million in 1997,
and $10.1 million in 1996. 1997 included a state income tax refund related to
taxes paid in prior years and interest earned to the date of the refund.. In
1997, the bank discontinued origination of mortgage loans from its own mortgage
banking unit, and instead, accommodates customers through a referral arrangement
with another lender. The decline in mortgage fee income is offset by a decline
in corresponding salary and other expense. The Bank realized no gains or losses
on the sale of investment securities in 1998 or 1997 compared with gains of
$133,000 in 1996.


                                       32
<PAGE>


The table below summarizes the major components of non-interest income:

<TABLE>
<CAPTION>

(IN THOUSANDS)                                              1998            1997            1996
-------------------------------------------------------------------------------------------------
<S>                                                       <C>             <C>             <C>
Trust income                                              $ 4,641         $ 4,801         $ 4,605
Service charges on deposit accounts                         2,145           2,195           2,189
Mortgage banking fees                                          50             204             514
Sale of financial services and investment products            306             292             383
State income tax refund                                                     1,369
Securities gains                                                                              133
Letter of credit commissions                                  609             558             374
Other                                                       1,491           1,971           1,884
                                                          -------         -------         -------

                                                          $ 9,242         $11,390         $10,082
                                                          =======         =======         =======
</TABLE>

NON-INTEREST EXPENSE

Non-interest expense totaled $28.0 million in 1998, compared with $28.3 million
in 1997 and $26.2 million in 1996. Several categories reflect decreases which
were offset by increases in other expense which includes various items such as
supplies, travel and entertainment, and delivery expense.

The table below summarizes the major components of non-interest expense:

<TABLE>
<CAPTION>

(IN THOUSANDS)                                             1998             1997            1996
-------------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>             <C>
Salaries and employee benefits                           $15,238          $15,110         $14,965
Net occupancy                                              3,062            3,194           2,750
Equipment                                                  3,512            3,648           2,731
Fees and assessments                                       1,374            1,539           1,102
Advertising and marketing                                    742              909             844
Other                                                      4,121            3,865           3,797
                                                         -------          -------         -------
                                                         $28,049          $28,265         $26,189
                                                         =======          =======         =======
</TABLE>

YEAR 2000

In 1997 the Company formed a project team, and with assistance of an outside
consulting firm, assessed the impact of Year 2000 on the Company's critical
hardware and software, on the embedded technology in its physical facilities and
automated equipment. The assessment also considered the potential impact on
customers, business partners and vendors. A Year 2000 plan was developed, which
included prioritized tasks, implementation, testing schedules, and contingency
plans. The Company has replaced or modified certain systems to ensure Year 2000
compliance. The Company has substantially completed the testing of remediated
systems related to Year 2000 compliance. The Company anticipates that the
testing of all critical systems will be completed and implementation will be
substantially completed by the end of the second quarter 1999. Any critical
application that does not test successfully by the end of the second quarter of
1999 will have an approved contingency plan implemented. The Company estimates
that the cost of its Year 2000 compliance program will approximate $1.1 million
of which the Company has incurred approximately $800,000 to date. Costs incurred
to modify internal use software will be expensed. A significant amount of the
total estimated cost represents enhancements and improvements, which will be
amortized over the estimated useful life of the enhancement or improvement. The
Company will fund the expenditures from operating earnings.

The potential impact of the Year 2000 issue will depend not only on the
corrective measures the Company undertakes, but also on the way in which the
Year 2000 issue is addressed by governmental agencies, businesses, and other
entities who provide data to, or receive data from the Company, or whose
financial condition or operational capability is important to the Company. The
Company continues to monitor the actions of these third parties to appropriately
address their own Year 2000 issues and to evaluate any likely effect on the
Company. There is no guarantee that the systems of other companies or entities
on which the Company relies will be remediated on a timely basis, or that a
remediation or conversion will be compatible with the Company's systems. If
these issues are not adequately resolved, the Company's future business
operations and, in turn, its financial position and results of operations, could
be negatively impacted. In addition, the Company's credit risk associated with
its borrowers may increase as a result of their individual Year 2000 issues.


                                       33
<PAGE>


Individual contingency plans have been established for mission critical business
systems to mitigate potential delays or other problems associated with new
system replacements, system remediation, or established vendor delivery dates.
The plans were developed using a standard methodology that includes trigger
dates, steps to follow, expected life of the plan and resources required.
Business continuation plans will be developed for critical business processes to
assure that service to customers will not be impaired. Federal banking
regulators have conducted special examinations of banks to determine whether
they are taking the necessary steps to prepare for Year 2000. They are closely
monitoring the progress being made by the banks to ensure that key steps are
fully completed as required by the individual bank plans.


CAPITAL AND LIQUIDITY

Stockholders' equity was $147 million or 14.3 percent of total assets at
December 31, 1998, compared with $133 million and 14.2 percent in 1997. The
Company must meet specific capital guidelines that involve quantitative measures
of the Company's assets, liabilities and certain off-balance sheet items as
calculated under regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weighting and other factors. Failure to meet minimum capital
requirements can initiate certain mandatory, and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Company's financial statements. The Office of the
Comptroller of the Currency has categorized the Company as well capitalized
under existing regulatory guidelines for 1998 and 1997. The required risk based
ratio for capital adequacy purposes is eight percent and the required leverage
ratio is four percent. A well capitalized company under prompt corrective action
provisions must maintain a risk based ratio of ten percent and a leverage ratio
of five percent. The table below states the Company's capital ratios:

                                                   DECEMBER 31,
                                             ----------------------
                                                1998        1997
                                             (RESTATED)  (RESTATED)
               ----------------------------------------------------
               RISK CAPITAL RATIOS
                Tier I Capital                 16.33%      16.52%
                Total Capital                  17.58%      17.77%
               LEVERAGE RATIO                  14.27%      14.15%

Liquidity is the ability to raise funds in all market environments to meet the
commitments of the Company. Liquidity is available through the management of
liabilities and from various asset sources. It is the policy of the Company to
rely primarily on managed liabilities, but to recognize the potential need for
asset liquidity in meeting liquidity requirements. Liability sources include
large denomination certificates of deposit and borrowing as federal funds
purchased, repurchase agreements, and Federal Home Loan Bank advances in the
bank subsidiary. The sale of commercial paper as well as back up lines of credit
available to the parent Company provide additional sources of liquidity. The
Bank's holding of short-term money market investments such as federal funds sold
and securities purchased under agreements to resell enhances asset liquidity.

The Company issues commercial paper to finance the loans of DBCI. The Company's
commercial paper has an independent rating and is backed by supporting lines of
credit of $140 million. DBCI has original maturity five, seven, and ten-year
term notes in the amount of $129 million with an investment grade rating.

Available-for-sale securities provide liquidity through scheduled maturities and
the cash convertibility of these assets at market value. At December 31, 1998,
the market value of available-for-sale securities exceeded amortized cost by
$1.5 million. At December 31, 1997, the market value exceeded amortized cost by
$712,000. Held-to-maturity securities provide liquidity through scheduled
maturities. The majority of the securities are readily marketable. Management
has structured the loan portfolio to provide additional liquidity with at least
55 percent of total loans having scheduled maturities within one year.

Cash flows from operations and changes in the balance sheet also affect
liquidity. The Consolidated Statement of Cash Flows on page 12 shows the
component changes in the Company's cash position for the three years ending
December 31, 1998. In 1998, net cash provided from operating activities
increased to $26 million. Investing activities reflect loan originations and
principal repayments as well as activity in short-term money market investments,
the investment


                                       34
<PAGE>


portfolio and investment in premises and equipment. In 1998, net cash used in
investing activities increased by $69 million. The increase reflects increased
loan originations as compared with the prior year. Cash provided from financing
activities increased by $55 million in 1998. Increased funding sources included
non-interest bearing and savings deposits and long term debt, offset by
decreased commercial paper, federal funds purchased and repurchase agreements,
and other short-term borrowings.

The Company is not aware of any current recommendations by regulatory
authorities which if they were to be implemented would have a material effect on
liquidity, capital resources or operations.

1997 VERSUS 1996

The major factors contributing to the earnings increase were higher net interest
income and non-interest income, partially offset by higher non-interest expense.
Net interest income increased to $44.5 million, up 11 percent. The increase
resulted from a higher volume of earning assets offset by a decrease in net
interest margin. Excluding gains and losses on sale of securities, non-interest
income increased $1.3 million resulting from a state income tax refund.
Non-interest expense increased $2.1 million from 1996 reflecting higher
occupancy costs related to the relocation of the Company and its subsidiaries,
continued investment in technology and equipment by the Company, and increased
attorney and consulting fees.

BUSINESS SEGMENTS

The Company has two business segments, National City Bank of Minneapolis
(commercial bank) and Diversified Business Credit, Inc. (commercial finance).
The main offices of each segment are located in the business district of
downtown Minneapolis. In addition to the main office, the commercial bank has a
drive-up location in downtown Minneapolis and a full service bank in Edina,
Minnesota. The commercial finance segment has a office in Milwaukee, Wisconsin.

The commercial bank offers the usual banking services including business,
consumer, and real estate loans, deposit and cash management services,
correspondent banking, and safe deposit. In addition, the commercial bank also
offers trust services including management of funds for individuals, the
administration of estates and trusts, and for corporations, governmental bodies,
and public authorities, paying agent services, trustee under corporate
indenture, pension and profit sharing agreements, and record keeping and
reporting for 401-K savings plans. The commercial bank originates the majority
of its business in the Minneapolis/St. Paul area.

The net income of the commercial bank increased to $7.9 million in 1998 from
$7.5 million in 1997 and $6.6 million in 1996. The net earnings of 1997 included
a state income tax refund of $1,369,000 which increased net earnings
approximately $850,000. The bank has increased its net earnings through the
growth of its loan portfolio and the use of low-cost funding sources, primarily
deposits.

The following table summarizes the commercial bank's performance measures:

(IN THOUSANDS)                           1998            1997             1996
--------------------------------------------------------------------------------
Net interest income                   $  27,770       $  26,985        $  25,494
Net earnings                              7,926           7,527            6,624
Average assets                          720,504         684,609          606,265
Average loans                           446,950         418,270          386,501
Average deposits                        486,590         470,206          442,101

Return on average equity                 13.19%          13.16%           12.51%
Efficiency ratio                         63.03%          63.22%           64.55%

The commercial finance segment specializes in providing working capital loans
secured by accounts receivable, inventory, and other marketable assets. Loans
are made on a demand basis with no fixed repayment schedule. Compared to
equity-based loans made by commercial banks and others, asset-based loans
require closer monitoring and typically interest rates earned on these loans are
higher. The commercial finance segment funds its loans through the issuance of
long-term debt in the form of Senior Notes and borrowings from the parent
company. The commercial


                                       35
<PAGE>


finance segment originates the majority of its loans in Minnesota with
approximately 15 percent originated in its Wisconsin office.

The net earnings of the commercial finance segment were $6.3 million in 1998
compared with $5.0 million in 1997 and $5.1 million in 1996.

The following table summarizes the commercial finance segment's performance
measures:

                                         1998            1997            1996
(IN THOUSANDS)                        (RESTATED)      (RESTATED)      (RESTATED)
--------------------------------------------------------------------------------
Net interest income                   $  16,729       $  15,092       $  12,610
Net earnings                              6,332           5,022           5,119
Average assets                          278,737         233,260         188,825
Average loans                           277,162         231,370         185,458

Return on average equity                 20.59%          25.90%          27.44%
Efficiency ratio                         25.73%          25.31%          24.77%


PRIVATE SECURITIES LITIGATION REFORM ACT

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Certain information included in this annual
report to stockholders and other material filed or to be filed by the Company
with the Securities and Exchange Commission (as well as information included in
oral statements or other written statements made or to be made by the Company)
contains statements that are forward-looking, such as statements relating to
plans for future expansion and other business development activities as well as
other capital spending, financing sources and the effects of regulation and
competition. Such forward-looking information involves important risks and
uncertainties that could significantly affect actual results in the future and,
accordingly, such results may differ materially from those expressed in any
forward-looking statements made by or on behalf of the Company. These risks and
uncertainties include, but are not limited to, those relating to development and
construction activities, dependence on existing management, leverage and debt
service (including sensitivity to fluctuations in interest rates), domestic or
global economic conditions, changes in federal or state tax laws or the
administration of such laws, litigation or claims, as well as all other risks
and uncertainties described in the Company's filings.


                                       36
<PAGE>


================================================================================
                      CHANGE IN INTEREST INCOME AND EXPENSE
================================================================================

<TABLE>
<CAPTION>
                                                                               YEAR-ENDED DECEMBER 31,
                                                                               -----------------------
                                                            1998 OVER 1997 (RESTATED)          1997 OVER 1996 (RESTATED)
                                                            -------------------------          -------------------------
                                                                           CHANGES                            CHANGES
                                                                        RESULTING FROM                     RESULTING FROM
                                                                        --------------                     --------------
(IN THOUSANDS ON A FULLY TAXABLE EQUIVALENT BASIS)        TOTAL       RATES      VOLUME      TOTAL       RATES      VOLUME
--------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>         <C>         <C>         <C>         <C>         <C>
Earned on:
  Funds sold                                           $  (358)    $   (59)    $  (299)    $   646                 $   646
  Taxable securities                                         3        (577)        580         860     $   172         688
  Tax-exempt securities                                                                        (27)                    (27)
  Loans                                                  6,165      (1,512)      7,677       8,104         109       7,995
                                                       -------     -------     -------     -------     -------     -------
    Total earning assets                                 5,810      (2,148)      7,958       9,583         281       9,302
Interest Paid on:
  Savings deposits                                         573         186         387         364          66         298
  Time deposits                                             (1)       (143)        142        (436)        172        (608)
  Brokered deposits                                       (468)        (14)       (454)      1,345          63       1,282
  Other deposits                                             8           3           5          28           3          25
  Short-term funds borrowed                                206        (311)        517       3,161         525       2,636
  Long-term debt                                         2,414        (155)      2,569         680          38         642
                                                       -------     -------     -------     -------     -------     -------

    Total interest bearing liabilities                   2,732        (434)      3,166       5,142         867       4,275
                                                       -------     -------     -------     -------     -------     -------

Increase (decrease) in net interest income             $ 3,078     $(1,714)    $ 4,792     $ 4,441     $  (586)    $ 5,027
                                                       =======     =======     =======     =======     =======     =======
</TABLE>

In the above analysis, rate differences were computed as the change in the rate
between the current and prior period times the volume of the current year, while
the volume differences were computed as the change in volume between the current
and prior period times the prior year's rate.

================================================================================
                                   SECURITIES
================================================================================

<TABLE>
<CAPTION>
                                                            DECEMBER 31,
                                                            ------------
CARRYING VALUE OF SECURITIES
(IN THOUSANDS)                                    1998           1997           1996
--------------------------------------------------------------------------------------
<S>                                             <C>            <C>            <C>
Available-for-sale
   U.S. Treasury                                $  5,077       $ 23,997       $ 23,903
   U.S. Government agencies                       17,089          9,844          9,661
   Federal agency mortgage-backed                108,930        102,529         94,671
   Other securities                                2,801          4,955          4,955
                                                --------       --------       --------
                                                $133,897       $141,325       $133,190
                                                ========       ========       ========

Held-to-maturity
   Collateralized mortgage obligations          $ 41,255       $ 37,402       $ 31,254
  Other securities                                                                 251
                                                --------       --------       --------

                                                $ 41,255       $ 37,402       $ 31,505
                                                ========       ========       ========
</TABLE>


                                       37
<PAGE>


================================================================================
                       DISTRIBUTION OF ASSETS, LIABILITIES
                            AND STOCKHOLDERS' EQUITY
================================================================================

<TABLE>
<CAPTION>
                                                                                    1998 (RESTATED)
                                                                                    ---------------
                                                                                        INTEREST
                                                                            AVERAGE      INCOME/        AVERAGE
(DAILY AVERAGES IN THOUSANDS AND ON A FULLY TAXABLE EQUIVALENT BASIS)       BALANCE      EXPENSE          RATE
---------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>          <C>              <C>
ASSETS
Federal funds sold and resale agreements                                   $  20,844    $   1,092         5.24%
Securities:
  Taxable                                                                    180,705       11,443         6.33
  Tax-exempt
                                                                           ---------    ---------

    Total securities                                                         180,705       11,443         6.33
Loans                                                                        724,112       73,134        10.10
                                                                           ---------    ---------

    Total earning assets                                                     925,661       85,669         9.25
Cash and due from banks                                                       44,819
Other assets                                                                  23,192
                                                                           ---------
                                                                           $ 993,672
                                                                           =========

---------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing deposits:
  Savings                                                                  $ 101,964    $   4,283         4.20%
  Time                                                                       204,296       11,694         5.72
  Other                                                                       34,034          416         1.22
                                                                           ---------    ---------

    Total                                                                    340,294       16,393         4.82
Short-term borrowed funds                                                    277,780       15,275         5.50
Long-term debt                                                                94,994        6,355         6.69
                                                                           ---------    ---------

    Total interest bearing liabilities                                       713,068       38,023         5.33
Non-interest bearing deposits                                                130,761
Other liabilities                                                             10,118
Stockholders' equity                                                         139,725
                                                                           ---------

                                                                           $ 993,672
                                                                           =========


                                                                                        ---------
Net interest income and interest rate spread                                            $  47,646         3.92
                                                                                        =========

Net interest margin                                                                                       5.15
Fees on loans included above                                                            $   3,281
                                                                                        =========
</TABLE>

Average balance of non-accruing loans is included in the above analysis.

Interest income attributable to non-accruing loans has not been included in the
above analysis except as collected.


                                       38
<PAGE>



<TABLE>
<CAPTION>
            1997 (RESTATED)                                     1996 (RESTATED)
            ---------------                                     ---------------
                INTEREST                                            INTEREST
    AVERAGE      INCOME/       AVERAGE                  AVERAGE      INCOME/        AVERAGE
    BALANCE      EXPENSE         RATE                   BALANCE      EXPENSE          RATE
   -----------------------------------                 ------------------------------------
<S>             <C>             <C>                    <C>          <C>              <C>

   $  26,268    $   1,450        5.52%                 $  14,561    $     804         5.52%

     171,981       11,440        6.65                    161,473       10,580         6.55
                                                             170           27        15.88
   ---------    ---------                              ---------    ---------

     171,981       11,440        6.65                    161,643       10,607         6.56
     649,640       66,969       10.31                    571,959       58,865        10.29
   ---------    ---------                              ---------    ---------

     847,889       79,859        9.42                    748,163       70,276         9.39
      39,733                                              37,245
      25,155                                              26,012
   ---------                                           ---------

   $ 912,777                                           $ 811,420
   =========                                           =========

-------------------------------------------------------------------------------------------


   $  92,338    $   3,710        4.02%                 $  84,778    $   3,346         3.95%
     209,737       12,163        5.80                    197,808       11,254         5.69
      33,629          408        1.21                     31,540          380         1.20
   ---------    ---------                              ---------    ---------

     335,704       16,281        4.85                    314,126       14,980         4.77
     268,567       15,069        5.61                    219,890       11,908         5.42
      57,509        3,941        6.85                     48,054        3,261         6.79
   ---------    ---------                              ---------    ---------

     661,780       35,291        5.33                    582,070       30,149         5.18
     117,605                                             110,222
       9,069                                               8,533
     124,323                                             110,595
   ---------                                           ---------

   $ 912,777                                           $ 811,420
   =========                                           =========


                ---------                                           ---------
                $  44,568        4.09                               $  40,127         4.21
                =========                                           =========

                                 5.26                                                 5.36
                $   2,378                                           $   2,326
                =========                                           =========
</TABLE>


                                       39
<PAGE>


================================================================================
                             LOAN PORTFOLIO ANALYSIS
================================================================================

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                              ------------
TYPES OF LOANS
(IN THOUSANDS)                            1998         1997         1996         1995         1994
                                    (RESTATED)   (RESTATED)   (RESTATED)   (RESTATED)
--------------------------------------------------------------------------------------------------
<S>                                  <C>          <C>          <C>          <C>          <C>
Commercial and industrial            $ 520,672    $ 442,328    $ 393,534    $ 381,506    $ 304,913
Real estate:
  Construction                          24,196       10,405       10,444       16,089       16,582
  Residential mortgage                  40,074       43,295       40,323       32,125       25,828
  Non-residential mortgage              92,769       88,448       76,086       68,504       62,731
Loans to individuals for personal
    expenditures                        46,800       54,987       56,973       33,966       27,272
Other loans                             41,598       31,131       22,960       22,607       29,727
                                     ---------    ---------    ---------    ---------    ---------
                                     $ 766,109    $ 670,594    $ 600,320*   $ 554,797*   $ 467,053
                                     =========    =========    =========    =========    =========
</TABLE>

Maturities and sensitivity to changes in interest rates in the commercial and
industrial and real estate construction loan portfolio are summarized below as
of December 31, 1998 (as restated):

<TABLE>
<CAPTION>
                                                        AFTER ONE      AFTER
                                             WITHIN     BUT WITHIN     FIVE
                                            ONE YEAR    FIVE YEARS     YEARS        TOTAL
-------------------------------------------------------------------------------------------
<S>                                        <C>          <C>          <C>          <C>
Commercial and industrial                  $ 415,726    $  92,957    $  11,989    $ 520,672
Real estate construction                       6,509        1,338       16,349       24,196
                                           ---------    ---------    ---------    ---------
                                           $ 422,235    $  94,295    $  28,338    $ 544,868
                                           =========    =========    =========    =========

Loans with predetermined interest rates    $  12,354    $  45,495    $  13,068    $  70,917
Loans with floating interest rates           409,881       48,800       15,270      473,951
                                           ---------    ---------    ---------    ---------
                                           $ 422,235    $  94,295    $  28,338    $ 544,868
                                           =========    =========    =========    =========
</TABLE>

The following table summarizes nonperforming assets:

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                                   ------------
(IN THOUSANDS)                               1998          1997          1996          1995       1994
                                       (RESTATED)    (RESTATED)    (RESTATED)    (RESTATED)
------------------------------------------------------------------------------------------------------
<S>                                     <C>            <C>           <C>            <C>        <C>
Non-accrual loans                       $     696      $    320      $  1,329       $ 1,314    $ 6,193
Impaired loans                             16,736        14,106         8,814         2,585
Restructured loans                            235
Loans past due 90 days or more as to
 interest or principal                          4           703           871           135          8
                                         --------      --------      --------       -------    -------
Nonperforming loans                      $ 17,671      $ 15,129      $ 11,014       $ 4,034    $ 6,201
                                         ========      ========      ========       =======    =======
Percent of total loans                        2.3%          2.3%          1.8%          0.7%       1.3%
</TABLE>

The gross interest income that would have been recorded in 1998 had
nonperforming assets remained current and in accordance with original terms, is
approximately $667,000. The amount of interest included in income was $31,000.

It is the Company's policy to consider loans for non-accrual when they are past
due 90 days or more, unless such loans are well secured and in the process of
collection. All such loans have been reviewed by management, and where so
determined are included in the non-accrual totals above.

* Amounts differ from those previously reported in Form 8-K filed November 15,
  1999.


                                       40
<PAGE>


================================================================================
                         SUMMARY OF LOAN LOSS EXPERIENCE
================================================================================

<TABLE>
<CAPTION>
                                                                             YEAR ENDED DECEMBER 31,
                                                                             -----------------------
(IN THOUSANDS)                                             1998          1997          1996           1995         1994
                                                     (RESTATED)    (RESTATED)    (RESTATED)     (RESTATED)
-----------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>           <C>           <C>           <C>           <C>
Beginning balance of allowance for losses             $  14,283     $  10,111     $   8,602     $   9,726*    $   8,006
Provision charged to operating expense                    2,890         4,819         3,148           452         1,150
Charge-offs:
 Commercial and industrial                                3,252           898         2,062         1,637           850
 Real estate (includes construction
  and real estate)                                          155           125           195
 Individuals for personal expenditures                       37           156           298            44           172
 Other                                                                                                              350
                                                      ---------     ---------     ---------     ---------     ---------
                                                          3,444         1,179         2,555         1,681         1,372
Recoveries:
  Commercial and industrial                                  37           267           829            45            41
  Real estate (includes construction
    and real estate)                                          1            12            31            36            32
  Individuals for personal expenditures                       4            47            17            24            89
  Foreign                                                                   8
  Other                                                      14           198            39
                                                      ---------     ---------     ---------     ---------     ---------
                                                             56           532           916           105           162
                                                      ---------     ---------     ---------     ---------     ---------
Charge-offs net of recoveries                             3,388           647         1,639         1,576         1,210
                                                      ---------     ---------     ---------     ---------     ---------
Ending balance of allowance for losses                $  13,785     $  14,283     $  10,111     $   8,602     $   7,946
                                                      =========     =========     =========     =========     =========
Average gross loans outstanding                       $ 724,112     $ 649,640     $ 571,959     $ 509,899     $ 435,684
  Percent of net loan charge-offs to average loans         0.47%         0.10%         0.29%         0.31%         0.28%
  Percent of allowance for losses to loans
    outstanding at end of period                           1.80%         2.13%         1.68%         1.55%         1.70%
</TABLE>

The provision for loan losses charged to operating expenses is based upon
several factors which are evaluated by management including prior loss
experience, current and anticipated economic conditions, regular examinations by
supervisory authorities and continuing review of problem loans. For purposes of
evaluating the adequacy of the reserve, management concentrates on the major
components of the loan portfolio which are commercial loans, real estate loans
and installment loans. Commercial and real estate-construction loans are
reviewed and graded in one of several categories describing their quality, and
problem loans are monitored by senior management. Real estate and installment
loans which are considered past due are reported to management on a monthly
basis. The following is management's allocation of the allowance for loan
losses:

<TABLE>
<CAPTION>
                                                                  INDIVIDUALS
                                  COMMERCIAL                     FOR PERSONAL
YEAR ENDED DECEMBER 31        AND INDUSTRIAL     REAL ESTATE     EXPENDITURES     UNALLOCATED       TOTAL
                                  (RESTATED)                                       (RESTATED)  (RESTATED)
---------------------------------------------------------------------------------------------------------
<S>                                <C>              <C>               <C>             <C>         <C>
1998
 Amount allocated                  $  12,628        $    100          $   300         $   757     $13,785
 Outstandings to total loans           67.96%          20.50%            6.11%
1997
 Amount allocated                      8,449             200              300           5,334      14,283
 Outstandings to total loans           65.96%          21.20%            8.20%
1996
 Amount allocated                      6,624             100              300           3,087      10,111
 Outstandings to total loans           65.55%          21.13%            9.49%
1995
 Amount allocated                      3,268             100              300           4,934       8,602
 Outstandings to total loans           68.76%          21.04%            6.12%
1994
 Amount allocated                      4,595             100              300           2,951       7,946
 Outstandings to total loans           65.28%          22.51%            5.84%
=========================================================================================================
</TABLE>

* The 1995 beginning balance reflects the cumulative effect of changes made to
  the Allowance for Loan Losses prior to January 1, 1995.


                                       41
<PAGE>


================================================================================
                             SELECTED FINANCIAL DATA
================================================================================

<TABLE>
<CAPTION>
                                                        1998        1997         1996         1995        1994
                                                  (RESTATED)  (RESTATED)   (RESTATED)   (RESTATED)
--------------------------------------------------------------------------------------------------------------
<S>                                                <C>         <C>          <C>          <C>         <C>
BALANCE SHEET ITEMS (IN MILLIONS)
  Securities                                       $     175   $     179    $     165    $     158   $     139
  Loans                                                  766         671          600          555         467
  All other assets                                        85          85          137           90          67
    Total assets                                       1,026         935          902          803         673
   Total deposits                                        517         479          520          440         368
  Short-term borrowed funds                              211         246          206          198         156
  Long-term debt                                         139          67           48           48          53
  All other liabilities                                   12          10            9           10           5
    Total liabilities                                    879         802          783          696         582
  Stockholders' equity                                   147         133          119          107          91

INCOME AND EXPENSE ITEMS (IN THOUSANDS)
  Interest and fees on loans                          73,040      66,910       58,795       55,972      41,046
  All other interest income                           12,535      12,890       11,404       10,417       9,179
    Total interest income                             85,575      79,800       70,199       66,389      50,225
  Interest expense on deposits                        16,393      16,281       14,980       12,950       8,490
  Interest expense on short-term borrowed funds       15,275      15,069       11,908       11,680       8,933
  Interest expense on long-term debt                   6,355       3,941        3,261        3,638       1,015
    Total interest expense                            38,023      35,291       30,149       28,268      18,438
  Net interest income                                 47,552      44,509       40,050       38,121      31,787
  Provision for loan losses                            2,890       4,819        3,148          452       1,150
  Trust fees                                           4,641       4,801        4,605        4,839       4,683
  State income tax refund                                          1,369
  Gains (losses) on sale of securities                                            133         (122)        (32)
  All other income                                     4,601       5,220        5,344        4,460       5,290
  All other expenses                                  28,049      28,265       26,189       26,053      26,284
      Net earnings                                    15,664      13,722       12,686       12,696       8,946

BASIC EARNINGS PER SHARE
    Net earnings                                        1.77        1.54         1.42         1.42        1.01
</TABLE>


                                       42
<PAGE>


================================================================================
                                 SELECTED RATIOS
================================================================================

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                                 -----------------------
                                                              1998          1997           1996
                                                        (RESTATED)    (RESTATED)     (RESTATED)
------------------------------------------------------------------------------------------------
<S>                                                           <C>           <C>            <C>
Net earnings to average assets                                1.58%         1.50%          1.56%
Net earnings to average stockholders' equity                 11.26         11.01          11.40
Average stockholders' equity to average total assets         14.00         13.61          13.71

Regulatory Capital Ratios:
 Tier 1 risk capital                                         16.33         16.52          16.06
 Total risk capital                                          17.58         17.77          17.31
 Leverage                                                    14.27         14.15          13.22
  (ratios calculated before unrealized gains or losses)
</TABLE>


================================================================================
                 SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA
================================================================================

<TABLE>
<CAPTION>
                                                               1998 (RESTATED)
                                                              ----------------
(UNAUDITED)                                      FIRST       SECOND         THIRD      FOURTH
(IN THOUSANDS EXCEPT PER SHARE DATA)           QUARTER      QUARTER       QUARTER       QUARTER
------------------------------------------------------------------------------------------------
<S>                                           <C>          <C>           <C>           <C>
Interest income                               $ 20,074     $ 20,881      $ 22,485      $ 22,135
Interest expense                                 8,875        9,127         9,959        10,062
Net interest income                             11,199       11,754        12,526        12,073
Provision for loan losses                          228           57           535         2,070
Other non-interest income                        2,409        2,678         2,177         1,978
Non-interest expense                             7,350        7,219         7,146         6,334
Income tax expense                               2,379        2,836         2,759         2,217
Net earnings                                     3,651        4,320         4,263         3,430
Basic earnings per share*                         0.41         0.49          0.48          0.39

<CAPTION>
                                                              1997* (RESTATED)
                                                              ----------------
(UNAUDITED)                                      FIRST       SECOND         THIRD        FOURTH
(IN THOUSANDS EXCEPT PER SHARE DATA)           QUARTER      QUARTER       QUARTER       QUARTER
------------------------------------------------------------------------------------------------

Interest income                               $ 18,632     $ 19,733      $ 20,788      $ 20,647
Interest expense                                 8,028        8,776         9,320         9,167
Net interest income                             10,604       10,957        11,468        11,480
Provision for loan losses                        1,015          792           727         2,285
Other non-interest income                        2,980        2,480         3,489         2,441
Non-interest expense                             7,126        6,900         7,149         7,090
Income tax expense                               2,150        2,274         2,770         1,899
Net earnings                                     3,293        3,471         4,311         2,647
Basic earnings per share*                         0.37         0.38          0.49          0.30
</TABLE>

<TABLE>
<CAPTION>
                                                      1998                        1997
                                                      ----                        ----
                                               LOW            HIGH         LOW           HIGH
                                               ---            ----         ---           ----
<S>                                          <C>            <C>          <C>           <C>
Stock Price Range*
 First quarter                               $23 3/8        $29 1/2      $16 5/8       $20 7/8
 Second quarter                               30             35 1/4       18            21 3/4
 Third quarter                                24             34 1/2       19 3/8        26 1/4
 Fourth quarter                               23 1/2         28           24 1/8        27 3/8
December 31 (Closing Price)                         $26 1/4                        $27
</TABLE>

----------------------
* Adjusted for stock dividends


                                       43
<PAGE>


PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The directors and executive officers of National City Bancorporation
         are presented on pages 3 through 5 of the Proxy Statement for the
         Annual Meeting of Stockholders held April 21, 1999, and said
         presentation is incorporated herein by reference.

         The executive officers referred to in this Item 10 are as follows:

                  Mr. David L. Andreas has been a director since 1980 and was
                  elected Chief Executive Officer effective November 1, 1987.
                  Mr. Andreas served as Chairman of the Board from 1987 to 1998.
                  Mr. Andreas had been a Vice President and Senior Vice
                  President of NCBC during the five years prior to being elected
                  Chairman. Mr. Andreas was elected President and Chief
                  Executive Officer of NCB in 1994.

                  Mr. Thomas J. Freed was elected Secretary and Controller of
                  NCBC effective January 1, 1982 and Secretary and Chief
                  Financial Officer effective July 16, 1997. Mr. Freed was
                  elected Senior Vice President and Chief Financial Officer of
                  NCB in 1986. Previous to 1986, Mr. Freed served as an officer
                  of NCB for seventeen years.

                  Mr. Robert L. Olson has been President, Chief Executive
                  Officer and director of Diversified Business Credit, Inc.
                  since 1985.

ITEM 11 - EXECUTIVE COMPENSATION

         Executive compensation is set forth on pages 6 through 9 of the Proxy
         Statement for the Annual Meeting of Stockholders held April 21, 1999
         and is incorporated herein by reference.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The security ownership of certain beneficial owners and management is
         presented on page 2 of the Proxy Statement for the Annual Meeting of
         Stockholders held April 21, 1999 and is incorporated herein by
         reference.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Certain relationships and related transactions are presented on pages 2
         through 5 of the Proxy Statement for the Annual Meeting of Stockholders
         held April 21, 1999 and is incorporated herein by reference.


PART IV

ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)      (1) Financial Statements

         See Item 8

         (2) Financial Statement Schedules

         All schedules are omitted because they are not applicable, not
         required, or the required information is included in the consolidated
         financial statements or notes thereto.

         (3) Exhibits


                                       44
<PAGE>


                  3(a) - Restated Articles of Incorporation (incorporated herein
                  by reference to Exhibit 3.01 of the Registrant's Registration
                  Statement on Form S-1, Registration No. 269057).

                  3(b) - Restated By-laws [incorporated herein by reference to
                  Exhibit 3(ii) to Registrant's Annual Report on Form 10-K for
                  the year ended December 31, 1985].

                  10(c) - Salary Continuation Agreement between NCB and Walter
                  E. Meadley, Jr. (incorporated herein by reference to Exhibit
                  10(c) to Registrant's Annual Report on Form 10-K for the year
                  ended December 31, 1990).

                  10(d) - Salary Continuation Agreement, as amended, between NCB
                  and Thomas J. Freed (incorporated herein by reference to
                  Exhibit 10(d) to the Registrant's Annual Report on Form 10-K
                  for the year ended December 31, 1994).

                  10(f) - Fourth Amendment to Executive Salary Continuation
                  Agreement by and between NCB and Thomas J. Freed dated
                  November 31, 1995. [Incorporated herein by reference to
                  Exhibit 10(f) to the 1995 Form 10-K.]

                  10(g) - Fourth Amendment to Executive Salary Continuation
                  Agreement by and between NCB and Walter E. Meadley, Jr. dated
                  November 31, 1995. [Incorporated herein by reference to
                  Exhibit 10(g) to the 1995 Form 10-K.]

                  10(h) - Fourth Amendment to Executive Salary Continuation
                  Agreement by and between NCB and David L. Andreas dated
                  December 31, 1995. [Incorporated herein by reference to
                  Exhibit 10(h) to the 1995 Form 10-K.]

                  10(i) - Change in Control Agreement by and between NCBC, NCB,
                  and Thomas J. Freed dated as of November 19, 1996.
                  [Incorporated herein by reference to Exhibit 10(i) to the 1996
                  Form 10-K.]

                  10(j) - Employment Agreement, dated December 4, 1997, by and
                  between DBCI and Robert L. Olson. [Incorporated herein by
                  reference to Exhibit 10(j) to the 1997 Form 10-K.]

                  11 - Computation of Basic Earnings Per Share.

                  13 - Annual Report to Stockholders (only those portions
                  incorporated herein by reference shall be deemed filed with
                  the Commission).

                  22 - Subsidiaries of Registrant are listed and described in
                  PART I, Item 1.

                  23 - Consent of Ernst & Young, LLP.

                  27 - Financial Data Schedule

                  Copies of the exhibits will be furnished upon request and
                  payment of registrant's reasonable expenses in furnishing the
                  exhibits.

(b)      Reports on Form 8-K

         No reports on Form 8-K were filed during the quarter ended December 31,
         1998.


                                       45
<PAGE>


SIGNATURES

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

                                       NATIONAL CITY BANCORPORATION

Date: December 15, 1999                 /s/ David L. Andreas
                                       -----------------------------------------
                                       David L. Andreas, Chief Executive Officer


                                       46
<PAGE>


NATIONAL CITY BANCORPORATION AND SUBSIDIARIES

INDEX TO EXHIBITS
--------------------------------------------------------------------------------

                                                                    SUBSEQUENTLY
   EXHIBIT                                                            NUMBERED
   NUMBER                    DESCRIPTION                                PAGE

     11        Computation of Basic Earnings Per Share.

     22        Subsidiaries of Registrant are listed and described
               in PART I, Item 1.

     23        Consent of Ernst & Young, LLP.

     27        Financial Data Schedule


                                       47