National City Corporation reported Tuesday net income of $842 million for the fourth quarter 2006, up from $398 million one year ago; full year 2006 net income was reported at $2.3 billion, up slightly from $2.0 billion in 2005. Profit during the fourth quarter was driven largely by the sale of National City’s First Franklin subprime mortgage franchise, which the company said led to a $622 million after-tax gain on sale. The gain was partially offset by after-tax charges of $172 million for credit losses on the First Franklin run-off portfolio, realized losses on sales of former First Franklin portfolio loans and fair-value writedowns on loans held for sale. “National City made the strategic decision more than a year ago to focus its efforts and resources primarily on core banking businesses where there is a direct relationship between the customer and the bank across a number of product categories,” said chairman and CEO David A. Daberko.

“Along the way, we have exited a number of indirect or broker-based businesses, culminating with the sale in the fourth quarter of First Franklin, our non-prime mortgage company,” Daberki said. “The fourth quarter benefited from the large gain on the sale of First Franklin, partially offset by losses incurred on the sale and writedown of certain loans associated with this unit. Approximately $7.3 billion of such loans remain on our balance sheet in run-off mode.” National City said nonperforming assets stood at $732 million at the end of 2006, up from $596 million a year ago, reflecting the addition of two large residential real estate developers, as well as an increase in real estate in foreclosure. Real estate in foreclosure included higher balances of nonconforming mortgages, as well as $60 million of GNMA insured loans which were not classified as nonperforming assets prior to 2006. The allowance for loan losses was $1.1 billion at the end of the year, representing 1.18 percent of portfolio loans. National City Corp. completed the $1.3 billion sale First Franklin and affiliates to Merrill Lynch & Co. in late December. First Franklin is an originator of nonprime residential mortgage loans through a nationwide wholesale network. First Franklin originates first and second lien mortgage loans and home equity lines of credit, usually for first-time and self-employed homebuyers and those with credit problems, and maintains roughly 2,000 employees and 34 branches serving more than 35,000 mortgage brokers.