National City (NCC) shares rose 7% Tuesday after the struggling Cleveland-based bank confirmed it had reached agreements with regulators regarding “issues of capital management, risk management, asset quality and liquidity management.” National City shares tumbled last week after The Wall Street Journal reported regulators at the Federal Reserve Bank of Cleveland and the Office of the Comptroller of the Currency had essentially put the bank on probation.

National City declined to publish the details of the agreements, citing legal requirements and its relationship with regulators. But the bank said the issues it discussed with regulators already existed back in April, when a group led by New York’s Corsair Capital agreed to put $7 billion into the bank at what was then the deep discount price of $5 a share. Since then, National City shares have fallen sharply, amid worries about the bank’s exposure to bad real estate loans. Still, the firm assured investors Tuesday that there have been “no material developments” since the capital raise, and CEO Peter Raskind says the firm will soon get back on track.

“National City has the highest Tier 1 capital ratio among large banks in the United States,” he said, referring to a measure of the bank’s cushion against possible losses. “Our debt ratings are solidly investment grade and stable. We stand ready to serve our customers and communities with confidence, and we are determined to rebuild value for our stockholders.” He has some building to do: National City shares recently traded at $4.82, down 86% from their 52-week high.

National City (NCC) got its capital infusion. The Cleveland-based bank raised $7 billion from investors led by New York private equity shop Corsair Capital, mostly through the sale of contingent convertible preferred stock. National City will sell 126 million common shares at $5 apiece, a 40% discount to Friday’s closing price, and issue $6.4 billion worth of preferred shares with a $5-a-share automatic conversion price. The steep price of the capital-raising deal sent National City shares down 22% in early trading Monday.

“We are pleased with the confidence that our investors have expressed in the value underlying National City’s franchise and the fundamental strengths of our business model that will help drive a return to profitability,” CEO Peter Raskind said. “Corsair Capital’s participation is particularly gratifying. It is a seasoned investor with a record of working productively with the boards and management teams of the companies in which it invests.”

National City agreed to the Corsair deal after numerous other banks and private equity firms took a look at the firm’s books and walked away, The Wall Street Journal reports. In-state rivals KeyCorp (KEY) and Fifth Third (FITB) both shied away from a National City deal because a purchase would have forced them to take steep markdowns on their own mortgage portfolios, the Journal reports.

National City also posted a first-quarter loss of $171 million, or 27 cents a share, reversing the year-ago profit of $319 million, or 50 cents a share. The first-quarter loss reflects a provision for loan losses of $1.4 billion, up from $122 million a year ago. The bank also slashed its dividend to a penny a share from the previous rate of 21 cents. National City was paying a 41-cent quarterly dividend as recently as the second half of 2007.

“Clearly, the U.S. housing and mortgage environment deteriorated significantly over the course of the first quarter,” Raskind said. “As a consequence, we have revised future loss expectations and significantly increased reserves across several portfolios, in particular the liquidating portfolios of nonprime mortgage and broker-sourced home equity loans.”

Suddenly everyone wants a piece of National City (NCC). The struggling Cleveland-based bank saw its shares rise 6% Thursday on news reports that cross-state rival Fifth Third (FITB) is considering a bid for National City. National City said earlier this week that it hired Goldman Sachs to help its board consider strategic alternatives, and a day later The Wall Street Journal reported that National City was talking with crosstown rival KeyCorp (KEY). The news comes as banks and private equity shops kick the tires at National City, which has seen its shares plunge in recent months as investors worry about its hefty exposure to the souring housing market. If a deal for National City comes together, the Journal reports Thursday afternoon, it is likely to do so in the next two weeks or so - before National City’s first-quarter earnings release.

National City’s (NCC) search for strategic alternatives seems to be moving right along. The Cleveland-based bank is considering a plan to sell itself to crosstown rival KeyCorp (KEY), The Wall Street Journal reports. The news comes just a day after National City said it had hired Goldman Sachs to help its board consider strategic alternatives, and two weeks after the Journal reported the bank was considering a sale.

The Journal notes that National City has a bigger balance sheet than Key and thus has long been seen as the buyer in any potential deal between the two. But the recent plunge in National City shares - the stock recently fetched $10 and change, down from $38 a year ago - means that Key is now the better-capitalized entity. And while both banks stand to be hurt by the economic difficulties in Ohio, investors worry that National City made an ill-timed foray into one of the real estate bubble states, Florida. As problems in the housing market intensify, the need for a partner to help recapitalize National City grows.

Update: National City (NCC) shares were flat Tuesday after the Cleveland-based lender hired Goldman Sachs to help it “review a range of strategic alternatives.” The announcement comes just two weeks after The Wall Street Journal reported National City was looking to sell itself - a bit of good news for shareholders that was promptly overshadowed by of Moody’s downgrade that the company’s hefty housing exposure and the news of Bear Stearns’ (BSC) near collapse. Since then, National City has been slowly regaining ground, but even now it’s down more than 70% from its levels of last year. “The review has no impact on National City’s day-to-day operations,” CEO Peter E. Raskind said Tuesday. “We remain focused on providing our customers with the high quality products and personal service that have long differentiated us in the marketplace.”

Update: An earlier version of this post contended that National City had confirmed it was looking for a buyer. National City, however, insists its strategic-alternatives press release ”said nothing of the sort.”

Wall Street will be watching National City (NCC) Friday. The Cleveland-based bank is looking for a buyer, The Wall Street Journal reports, but may be finding it tough to draw interest amid worries about declining home prices and rising loan losses. National City’s fix shows how the pain of the housing bust is being felt even by lenders that didn’t help fuel the boom in hot coastal markets earlier this decade. The Journal mentions in-state rivals KeyCorp (KEY) and Fifth Third (FITB) as possible buyers, but adds that strained balance sheets could make U.S. banks leery of taking on more obligations as the economy slows. Adding to worries at National City, Moody’s downgraded the bank’s debt rating Thursday afternoon, Bloomberg reports. Moody’s said the bank’s “sizable exposure” to housing could lead to “material losses.”

National City (NCC) keeps trying to dig its way out of the mortgage mess. The Cleveland-based bank announced another round of layoffs Wednesday and said it will cut its quarterly dividend in half. National City also said it will raise capital for the second time in six months as the bank seeks to build up its cushion for rising loan losses. Including Wednesday’s announced plan to cut 900 mortgage unit jobs, National City has reduced its workforce by 3,400 positions since Sept. 30 - an 11 percent cut, going by CNNMoney.com figures.

“Getting from where we started earlier this year to where we need to be by year end is not pleasant or fun, to be sure,” CEO Peter Raskind noted on a conference call back in October. That’s an understatement, but at least Raskind seems to be living in the same world as the rest of us.

The same couldn’t be said for his predecessor David Daberko, who told Reuters in April that “we would expect to be in the black in future quarters” in mortgage banking. Instead, National City’s mortgage operations have been losing money, leading to the hefty job cuts. Daberko was right in one respect about mortgage banking, though. While the business itself isn’t in the black, the outlook could hardly be darker.