Table	of	Contents

# UNITED	STATES

# SECURITIES	AND	EXCHANGE	COMMISSION

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

For	the	fiscal	year	ended	December	31,	2008

# THE	PNC	FINANCIAL	SERVICES	GROUP,	INC.

(Exact	name	of	registrant	as	specified	in	its	charter)

Pennsylvania

(State	or	other	jurisdiction	of	incorporation	or	organization)

(I.R.S.	Employer	Identification	No.)

One	PNC	Plaza

249	Fifth	Avenue

(Address	of	principal	executive	offices,	including	zip	code)

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

Title	of	Each	Class

Common	Stock,	par	value	$5.00

$1.60	Cumulative	Convertible	Preferred	Stock-Series	C,	par	value	$1.00

$1.80	Cumulative	Convertible	Preferred	Stock-Series	D,	par	value	$1.00

Depositary	Shares	Each	Representing	1/4000	Interest	in	a	Share	of	9.875%	Fixed-to-Floating

Rate	Non-Cumulative	Preferred	Stock,	Series	L,	par	value	$1.00

12.000%	Fixed-to-Floating	Rate	Normal	Automatic	Preferred	Enhanced	Capital	Securities

(issued	by	National	City	Capital	Trust	I)

6.625%	Trust	Preferred	Securities	(issued	by	National	City	Capital	Trust	II)

6.625%	Trust	Preferred	Securities	(issued	by	National	City	Capital	Trust	III)

8.000%	Trust	Preferred	Securities	(issued	by	National	City	Capital	Trust	IV)

		Name	of	Each	Exchange

				on	Which	Registered

	 New	York	Stock	Exchange

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

$1.80	Cumulative	Convertible	Preferred	Stock	-	Series	A,	par	value	$1.00

$1.80	Cumulative	Convertible	Preferred	Stock	-	Series	B,	par	value	$1.00

Indicate	by	check	mark	if	the	registrant	is	a	well-known	seasoned	issuer,	as	defined	in	Rule	405	of	the	Securities	Act.	Yes	X	No

Indicate	by	check	mark	if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	Section	15(d)	of	the	Act.	Yes						No	X

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

Indicate	by	check	mark	if	the	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.	X

Indicate	by	check	mark	whether	the	registrant	is	a	large	accelerated	filer,	an	accelerated	filer,	a	non-accelerated	filer,	or	a	smaller	reporting	company.	See	the	definitions of	"large	accelerated	filer",	"accelerated	filer"	and	"smaller	reporting	company"	in	Rule	12b-2	of	the	Exchange	Act.

Large	accelerated	filer	X

Accelerated	filer

	 Non-accelerated	filer

Smaller	reporting	company

Indicate	by	check	mark	whether	the	registrant	is	a	shell	company	(as	defined	in	Rule	12b-2	of	the	Act).	Yes						No	X

The	aggregate	market	value	of	the	registrant's	outstanding	voting	common	stock	held	by	nonaffiliates	on	June	30,	2008,	determined	using	the	per	share	closing	price	on that	date	on	the	New	York	Stock	Exchange	of	$57.10,	was	approximately	$19.7	billion.	There	is	no	non-voting	common	equity	of	the	registrant	outstanding.

# DOCUMENTS	INCORPORATED	BY	REFERENCE

Portions	of	the	definitive	Proxy	Statement	of	The	PNC	Financial	Services	Group,	Inc.	to	be	filed	pursuant	to	Regulation	14A	for	the	2009	annual	meeting	of shareholders	("Proxy	Statement")	are	incorporated	by	reference	into	Part	III	of	this	Form	10-K.

# PART	IV

# PART	I

Forward-Looking	Statements:	From	time	to	time,	The	PNC	Financial	Services Group,	Inc.	("PNC"	or	the	"Corporation")	has	made	and	may	continue	to	make written	or	oral	forward-looking	statements	regarding	our	outlook	or expectations	for	earnings,	revenues,	expenses,	capital	levels,	liquidity	levels, asset	quality	or	other	future	financial	or	business	performance,	strategies	or expectations,	or	the	impact	of	legal,	regulatory	or	supervisory	matters	on	our business	operations	or	performance.	This	Annual	Report	on	Form	10-K	(the "Report"	or	"Form	10-K")	also	includes	forward-looking	statements.	With respect	to	all	such	forward-	looking	statements,	you	should	review	our	Risk Factors	discussion	in	Item	1A	and	our	Risk	Management,	Critical	Accounting Policies	and	Judgments,	and	Cautionary	Statement	Regarding	Forward-Looking Information	sections	included	in	Item	7	of	this	Report.

# ITEM	1	–	BUSINESS

BUSINESS	OVERVIEW	We	are	one	of	the	largest	diversified	financial	services companies	in	the	United	States	and	are	headquartered	in	Pittsburgh,

Pennsylvania.	As	described	further	below	and	elsewhere	in	this	Report,	on December	31,	2008,	PNC	acquired	National	City	Corporation	("National	City"), nearly	doubling	our	assets	to	a	total	of	$291	billion	and	expanding	our	total consolidated	deposits	to	$193	billion.

We	were	incorporated	under	the	laws	of	the	Commonwealth	of	Pennsylvania	in 1983	with	the	consolidation	of	Pittsburgh	National	Corporation	and	Provident National	Corporation.	Since	1983,	we	have	diversified	our	geographical presence,	business	mix	and	product	capabilities	through	internal	growth, strategic	bank	and	non-bank	acquisitions	and	equity	investments,	and	the formation	of	various	non-banking	subsidiaries.

# ACQUISITION	OF	NATIONAL	CITY	CORPORATION

On	December	31,	2008,	we	acquired	National	City	for	approximately	$6.1 billion.	The	total	consideration	included	approximately	$5.6	billion	of	PNC common	stock,	$150	million	of	preferred	stock,	and	cash	paid	to	warrant	holders by	National	City.

We	completed	the	acquisition	primarily	by	issuing	approximately	95	million shares	of	PNC	common	stock.	In	accordance	with	purchase	accounting methodologies,	National	City	Bank's	balance	sheet	was	adjusted	to	fair	value	at which	time	the	bank	was	under-capitalized	from	a	regulatory	perspective. However,	PNC's	Consolidated	Balance	Sheet	remained	well-capitalized	and liquid.

Following	the	closing,	PNC	received	$7.6	billion	from	the	US	Department	of	the Treasury	under	the	Emergency	Economic	Stabilization	Act	of	2008	in	exchange for	the	issuance	of	preferred	stock	and	a	warrant.	These	proceeds	were	used	to enhance	National	City	Bank's	regulatory	capital	position	to

well-capitalized	in	order	to	continue	serving	the	credit	and	deposit	needs	of existing	and	new	customers.	On	a	consolidated	basis,	these	proceeds	resulted	in further	improvement	to	our	capital	and	liquidity	positions.

National	City,	based	in	Cleveland,	Ohio,	was	one	of	the	nation's	largest	financial services	companies.	In	connection	with	obtaining	regulatory	approvals	for	the acquisition,	PNC	has	agreed	to	divest	61	of	National	City	Bank's	branches	in Western	Pennsylvania	with	deposits	of	approximately	$3.9	billion	as	of December	31,	2008.	We	expect	to	merge	National	City	Bank	into	PNC	Bank, National	Association	("PNC	Bank,	N.A.")	in	the	fourth	quarter	of	2009.

Additional	information	regarding	our	acquisition	of	National	City	can	be	found in	the	following	disclosures:

•	The	Executive	Summary	portion	of	Item	7	of	this	Report, •	Note	2	Acquisitions	and	Divestitures	included	in	our	Notes	To Consolidated	Financial	Statements	within	Item	8	of	this	Report,	and •	Our	Current	Reports	on	Form	8-K	filed	October	24,	2008,	October	30, 2008,	December	23,	2008,	and	January	2,	2009.

# OTHER	ACQUISITION	AND	DIVESTITURE	ACTIVITY

On	April	4,	2008,	we	acquired	Lancaster,	Pennsylvania-based	Sterling	Financial Corporation	for	approximately	4.6	million	shares	of	PNC	common	stock	and $224	million	in	cash.	Sterling	was	a	banking	and	financial	services	company with	approximately	$3.2	billion	in	assets,	$2.7	billion	in	deposits,	and	65 branches	in	south-central	Pennsylvania,	northern	Maryland	and	northern Delaware.

On	March	31,	2008,	we	sold	J.J.B.	Hilliard,	W.L.	Lyons,	LLC,	a	Louisville, Kentucky-based	wholly-owned	subsidiary	of	PNC	and	a	full-service	brokerage and	financial	services	provider,	to	Houchens	Industries,	Inc.	We	recognized	an after-tax	gain	of	$23	million	in	the	first	quarter	of	2008	in	connection	with	this divestiture.

We	include	information	on	significant	acquisitions	and	divestitures	in	Note	2 Acquisitions	and	Divestitures	in	the	Notes	To	Consolidated	Financial	Statements in	Item	8	of	this	Report	and	here	by	reference.

REVIEW	OF	LINES	OF	BUSINESS	In	addition	to	the	following	information relating	to	our	lines	of	business,	we	incorporate	information	under	the	captions Line	of	Business	Highlights,	Product	Revenue,	and	Business	Segments	Review in	Item	7	of	this	Report	here	by	reference.	Also,	we	include	financial	and	other information	by	business	in	Note	27	Segment	Reporting	in	the	Notes	To Consolidated	Financial	Statements	in	Item	8	of	this	Report	here	by	reference.

We	have	four	major	businesses	engaged	in	providing	banking,	asset management	and	global	fund	processing	products	and	services:	Retail	Banking; Corporate	&	Institutional	Banking;	BlackRock;	and	Global	Investment Servicing.	Assets,	revenue

and	earnings	attributable	to	foreign	activities	were	not	material	in	the	periods presented.	The	business	segment	results	for	2008	and	prior	periods	do	not include	the	impact	of	National	City,	which	we	acquired	on	December	31,	2008.

# RETAIL	BANKING

Retail	Banking	provides	deposit,	lending,	brokerage,	trust,	investment management,	and	cash	management	services	to	over	6	million	consumer	and small	business	customers	within	our	primary	geographic	markets.	Our	customers are	serviced	through	2,589	offices	in	our	branch	network	as	of	December	31, 2008	(including	National	City	branches),	the	call	center	and	the	internet.	The branch	network	is	located	primarily	in	Pennsylvania,	New	Jersey,	Washington, DC,	Maryland,	Virginia,	Delaware,	Ohio,	Kentucky,	Indiana,	Illinois,	Michigan, Missouri,	Florida	and	Wisconsin.

Retail	Banking	also	serves	as	investment	manager	and	trustee	for	employee benefit	plans	and	charitable	and	endowment	assets	and	provides nondiscretionary	defined	contribution	plan	services.	These	services	are	provided to	individuals	and	corporations	primarily	within	our	primary	geographic markets.

Our	core	strategy	is	to	acquire	and	retain	customers	who	maintain	their	primary checking	and	transaction	relationships	with	PNC.	We	also	seek	revenue	growth by	deepening	our	share	of	our	customers'	financial	assets	and	needs,	including savings	and	liquidity	deposits,	loans	and	investable	assets.	A	key	element	of	our strategy	is	to	continue	to	optimize	our	physical	distribution	network	by	opening and	upgrading	stand-alone	and	in-store	branches	in	attractive	sites	while consolidating	or	selling	branches	with	less	opportunity	for	growth.

# CORPORATE	&	INSTITUTIONAL	BANKING

Corporate	&	Institutional	Banking	provides	lending,	treasury	management,	and capital	markets-related	products	and	services	to	mid-sized	corporations, government	entities,	and	selectively	to	large	corporations.	Lending	products include	secured	and	unsecured	loans,	letters	of	credit	and	equipment	leases. Treasury	management	services	include	cash	and	investment	management, receivables	management,	disbursement	services,	funds	transfer	services, information	reporting,	and	global	trade	services.	Capital	markets-related products	and	services	include	foreign	exchange,	derivatives,	loan	syndications, mergers	and	acquisitions	advisory	and	related	services	to	middle-market companies,	securities	underwriting,	and	securities	sales	and	trading.	Corporate	& Institutional	Banking	also	provides	commercial	loan	servicing,	and	real	estate advisory	and	technology	solutions	for	the	commercial	real	estate	finance industry.	Corporate	&	Institutional	Banking	provides	products	and	services generally	within	our	primary	geographic	markets	with	certain	products	and services	offered	nationally.

Corporate	&	Institutional	Banking	is	focused	on	becoming	a	premier	provider	of financial	services	in	each	of	the	markets	it

serves.	The	value	proposition	to	its	customers	is	driven	by	providing	a	broad range	of	competitive	and	high	quality	products	and	services	by	a	team	fully committed	to	delivering	the	comprehensive	resources	of	PNC	to	help	each	client succeed.	Corporate	&	Institutional	Banking's	primary	goals	are	to	achieve market	share	growth	and	enhanced	returns	by	means	of	expansion	and	retention of	customer	relationships	and	prudent	risk	and	expense	management.

# BLACKROCK

BlackRock	is	one	of	the	largest	publicly-traded	investment	management	firms	in the	United	States	with	$1.3	trillion	of	assets	under	management	at	December	31, 2008.	BlackRock	manages	assets	on	behalf	of	institutional	and	individual investors	worldwide	through	a	variety	of	fixed	income,	cash	management,	equity and	balanced	and	alternative	investment	separate	accounts	and	funds.	In addition,	BlackRock	provides	risk	management,	investment	system	outsourcing and	financial	advisory	services	globally	to	institutional	investors.

At	December	31,	2008,	our	equity	ownership	interest	in	BlackRock	was approximately	33%.	Our	investment	in	BlackRock	is	a	strategic	asset	of	PNC and	a	key	component	of	our	diversified	earnings	stream.	The	ability	of BlackRock	to	grow	assets	under	management	is	the	key	driver	of	increases	in	its revenue,	earnings	and,	ultimately,	shareholder	value.	BlackRock's	strategies	for growth	in	assets	under	management	include	a	focus	on	achieving	client investment	performance	objectives	in	a	manner	consistent	with	their	risk preferences	and	delivering	excellent	client	service.	The	business	dedicates significant	resources	to	attracting	and	retaining	talented	professionals	and	to	the ongoing	enhancement	of	its	investment	technology	and	operating	capabilities	to deliver	on	this	strategy.

# GLOBAL	INVESTMENT	SERVICING

Global	Investment	Servicing	(formerly	PFPC)	is	a	leading	provider	of processing,	technology	and	business	intelligence	services	to	asset	managers, broker-dealers,	and	financial	advisors	worldwide.	Securities	services	include custody,	securities	lending,	and	accounting	and	administration	for	funds registered	under	the	Investment	Company	Act	of	1940	and	alternative investments.	Investor	services	include	transfer	agency,	subaccounting,	banking transaction	services,	and	distribution.	Financial	advisor	services	include managed	accounts	and	information	management.	This	business	segment serviced	$2.0	trillion	in	total	assets	and	72	million	shareholder	accounts	as	of December	31,	2008,	both	domestically	and	internationally.	International locations	include	Ireland,	Poland	and	Luxembourg.

Global	Investment	Servicing	focuses	technological	resources	on	driving efficiency	through	streamlining	operations	and	developing	flexible	systems architecture	and	client-focused	servicing	solutions.	Global	Investment Servicing's	mission	is	to	help	enable	its	clients	to	expand	their	capabilities, maintain	a	technical	edge,	and	maximize	returns	on	their	internal	resources	by growing	revenue	and	staying	ahead	of

competitors.	During	the	past	year,	Global	Investment	Servicing	expanded	its capabilities	to	serve	its	clients	in	the	full	service	subaccounting	arena,	integrated its	recent	acquisitions	of	Albridge	Solutions	and	Coates	Analytics,	and	opened	a new	servicing	unit	in	Wroclaw,	Poland.

# BUSINESS	SEGMENT	CHANGES	IN	2009

In	addition	to	our	existing	business	segments,	PNC	will	have	three	additional business	segments	beginning	in	the	first	quarter	of	2009:	Residential	Mortgage Banking;	PNC	Asset	Management	Group;	and	Distressed	Assets	Portfolio. These	new	business	segments	reflect	the	impact	of	our	December	31,	2008 acquisition	of	National	City	and	are	more	fully	described	in	Note	28	Subsequent Event	included	in	the	Notes	To	Consolidated	Financial	Statements	included under	Item	8	of	this	Report.

SUBSIDIARIES	Our	corporate	legal	structure	at	December	31,	2008	consisted	of three	domestic	subsidiary	banks,	including	their	subsidiaries,	and	approximately 79	active	non-bank	subsidiaries.	PNC	Bank,	N.A.,	headquartered	in	Pittsburgh, Pennsylvania,	and	National	City	Bank,	headquartered	in	Cleveland,	Ohio,	are our	principal	bank	subsidiaries.	Our	other	bank	subsidiary	is	PNC	Bank, Delaware.	Our	non-bank	subsidiary,	Global	Investment	Servicing,	has	obtained	a banking	license	in	Ireland	and	a	branch	in	Luxembourg,	which	allow	Global Investment	Servicing	to	provide	depositary	services	as	part	of	its	business.	For additional	information	on	our	subsidiaries,	see	Exhibit	21	to	this	Report.

# STATISTICAL	DISCLOSURE	BY	BANK	HOLDING	COMPANIES	The	following

statistical	information	is	included	on	the	indicated	pages	of	this	Report	and	is incorporated	herein	by	reference:

# SUPERVISION	AND	REGULATION

# OVERVIEW

PNC	is	a	bank	holding	company	registered	under	the	Bank	Holding	Company Act	of	1956	as	amended	("BHC	Act")	and	a	financial	holding	company	under the	Gramm-Leach-Bliley	Act	("GLB	Act").

We	are	subject	to	numerous	governmental	regulations,	some	of	which	are highlighted	below.	You	should	also	read	Note	23	Regulatory	Matters	in	the Notes	To	Consolidated	Financial	Statements	in	Item	8	of	this	Report,	included here	by	reference,	for	additional	information	regarding	our	regulatory	matters. Applicable	laws	and	regulations	restrict	permissible	activities	and	investments and	require	compliance	with	protections	for	loan,	deposit,	brokerage,	fiduciary, mutual	fund	and	other	customers,	among	other	things.	They	also	restrict	our ability	to	repurchase	stock	or	to	receive	dividends	from	bank	subsidiaries	and impose	capital	adequacy	requirements.	The	consequences	of	noncompliance	can include	substantial	monetary	and	nonmonetary	sanctions.

In	addition,	we	are	subject	to	comprehensive	examination	and	supervision	by, among	other	regulatory	bodies,	the	Board	of	Governors	of	the	Federal	Reserve System	("Federal	Reserve")	and	the	Office	of	the	Comptroller	of	the	Currency ("OCC"),	which	results	in	examination	reports	and	ratings	(which	are	not publicly	available)	that	can	impact	the	conduct	and	growth	of	our	businesses. These	examinations	consider	not	only	compliance	with	applicable	laws	and regulations,	but	also	capital	levels,	asset	quality	and	risk,	management	ability and	performance,	earnings,	liquidity,	and	various	other	factors.	An	examination downgrade	by	any	of	our	federal	bank	regulators	potentially	can	result	in	the imposition	of	significant	limitations	on	our	activities	and	growth.	These regulatory	agencies	generally	have	broad	discretion	to	impose	restrictions	and limitations	on	the	operations	of	a	regulated	entity	where	the	agencies	determine, among	other	things,	that	such	operations	are	unsafe	or	unsound,	fail	to	comply with	applicable	law	or	are	otherwise	inconsistent	with	laws	and	regulations	or with	the	supervisory	policies	of	these	agencies.	This	supervisory	framework could	materially	impact	the	conduct,	growth	and	profitability	of	our	operations.

We	are	also	subject	to	regulation	by	the	Securities	and	Exchange	Commission ("SEC")	by	virtue	of	our	status	as	a	public	company	and	due	to	the	nature	of some	of	our	businesses.

As	a	regulated	financial	services	firm,	our	relationships	and	good	standing	with regulators	are	of	fundamental	importance	to	the	continuation	and	growth	of	our businesses.	The	Federal	Reserve,	OCC,	SEC,	and	other	domestic	and	foreign regulators	have	broad	enforcement	powers,	and	powers	to	approve,	deny,	or refuse	to	act	upon	our	applications	or	notices	to	conduct	new	activities,	acquire or	divest	businesses	or	assets	and	deposits,	or	reconfigure	existing	operations.

Due	to	the	current	economic	environment	and	issues	facing	the	financial	services industry,	as	well	as	the	effect	of	the	change	from	the	Bush	to	the	Obama administration,	we	anticipate	new	legislative	and	regulatory	initiatives	over	the next	several	years,	including	many	focused	specifically	on	banking	and	other financial	services	in	which	we	are	engaged.	These	initiatives	will	be	in	addition to	the	actions	already	taken	by	Congress	and	the	regulators,	including	the Emergency	Economic	Stabilization	Act	of	2008	("EESA")	and	the	American Recovery	and	Reinvestment	Act	of	2009	(the	"Recovery	Act").	Developments	to date,	as	well	as	those	that	come	in	the	future,	have	had	and	are	likely	to	continue to	have	an	impact	on	the	conduct	of	our	business.	The	more	detailed	description of	the	significant	regulations	to	which	we	are	subject	that	follows	is	based	on	the current	regulatory	environment	and	is	subject	to	potentially	material	change.

On	February	10,	2009,	the	US	Department	of	the	Treasury	announced	a	capital assistance	program	to	ensure	that	banking	institutions	are	appropriately capitalized,	with	high	quality	capital.	A	key	component	of	the	program	is	a	one- time	forward-looking	supervisory	assessment	of	the	capital	needs	of	the	19 largest	bank	holding	companies	(those	such	as	PNC	with	risk-weighted	assets	of $100	billion	or	more)	under	a	more	challenging	economic	environment	than currently	projected.

To	conduct	the	exercise,	these	bank	holding	companies	will	be	asked	to	analyze their	loans	and	securities	portfolios,	as	well	as	off-balance	sheet	commitments and	contingencies,	to	determine	expected	future	losses	under	"base	case"	and "more	adverse"	economic	scenarios.	They	will	also	be	asked	to	forecast	internal resources	available	to	absorb	losses,	including	pre-provision	revenue	and reserves.

Should	the	supervisory	agencies	determine	based	on	the	assessment	that	an additional	capital	buffer	is	warranted,	bank	holding	companies	will	be	given	a six	month	period	to	raise	the	additional	capital	from	private	sources.	Otherwise, bank	holding	companies	that	have	undergone	this	forward-looking	capital	test will	have	access	to	the	US	Department	of	the	Treasury	capital	in	the	form	of mandatorily	convertible	preferred	shares.

In	light	of	the	economic	downturn	and	the	actions	taken	by	Congress,	the	US Department	of	the	Treasury	and	other	regulatory	agencies	to	address	the	credit crisis,	there	is	an	increased	focus	by	regulators	on	lending	activities	by	banks	and the	relationship	between	those	activities	and	governmental	efforts	to	improve this	situation.	Also	at	least	in	part	driven	by	the	current	economic	and	financial situation,	there	is	an	increased	focus	on	fair	lending	and	other	issues	related	to the	mortgage	industry.	Ongoing	mortgage-related	regulatory	reforms	include measures	aimed	at	limiting	mortgage	foreclosures.

There	has	been	a	heightened	focus	recently	on	consumer	protection	issues generally,	including	those	related	to	the	protection	of	confidential	customer information.

Over	the	last	several	years,	there	has	been	an	increasing	regulatory	focus	on compliance	with	anti-money	laundering	laws	and	regulations,	resulting	in, among	other	things,	several	significant	publicly	announced	enforcement	actions.

There	are	numerous	rules	governing	the	regulation	of	financial	services institutions	and	their	holding	companies.	Accordingly,	the	following	discussion is	general	in	nature	and	does	not	purport	to	be	complete	or	to	describe	all	of	the laws	and	regulations	that	apply	to	us.

# BANK	REGULATION

As	a	bank	holding	company	and	a	financial	holding	company,	we	are	subject	to supervision	and	regular	inspection	by	the	Federal	Reserve.	Our	subsidiary	banks and	their	subsidiaries	are	subject	to	supervision	and	examination	by	applicable federal	and	state	banking	agencies,	principally	the	OCC	with	respect	to	PNC Bank,	N.A.	and	National	City	Bank,	and	the	Federal	Reserve	Bank	of	Cleveland and	the	Office	of	the	State	Bank	Commissioner	of	Delaware	with	respect	to	PNC Bank,	Delaware.

Because	of	PNC's	equity	ownership	interest	in	BlackRock,	BlackRock	is	subject to	the	supervision	and	regulation	of	the	Federal	Reserve.

Parent	Company	Liquidity	and	Dividends.		The	principal	source	of	our	liquidity at	the	parent	company	level	is	dividends	from	PNC	Bank,	N.A.	and	National City	Bank.	PNC	Bank,	N.A.	and	National	City	Bank	are	subject	to	various federal	and	state	restrictions	on	their	ability	to	pay	dividends	to	PNC	Bancorp, Inc.,	and	PNC,	respectively,	the	direct	parents	of	the	subsidiary	banks.	Our subsidiary	banks	are	also	subject	to	federal	laws	limiting	extensions	of	credit	to their	parent	holding	company	and	non-bank	affiliates	as	discussed	in	Note	23 Regulatory	Matters	included	in	the	Notes	To	Consolidated	Financial	Statements in	Item	8	of	this	Report,	which	is	incorporated	herein	by	reference.	Further information	on	bank	level	liquidity	and	parent	company	liquidity	and	on	certain contractual	restrictions	is	also	available	in	the	Liquidity	Risk	Management section	and	in	the	"Perpetual	Trust	Securities",	"PNC	Capital	Trust	E	Trust Preferred	Securities",	and	"Acquired	Entity	Trust	Preferred	Securities"	sections of	the	Off-Balance	Sheet	Arrangements	and	VIEs	section	of	Item	7	of	this Report.

Under	Federal	Reserve	policy,	a	bank	holding	company	is	expected	to	act	as	a source	of	financial	strength	to	each	of	its	subsidiary	banks	and	to	commit resources	to	support	each	such	bank.	Consistent	with	the	"source	of	strength" policy	for	subsidiary	banks,	the	Federal	Reserve	has	stated	that,	as	a	matter	of prudent	banking,	a	bank	holding	company	generally	should	not	maintain	a	rate of	cash	dividends	unless	its	net	income	available	to	common	shareholders	has been	sufficient	to	fully	fund	the	dividends	and	the	prospective	rate	of	earnings retention	appears	to	be	consistent	with	the	corporation's	capital	needs,	asset quality	and	overall	financial	condition.	Also,	there

are	restrictions	on	dividends	associated	with	our	December	31,	2008	issuance	of preferred	stock	to	the	US	Department	of	the	Treasury	under	the	TARP	Capital Purchase	Program,	as	discussed	in	Note	19	Shareholders'	Equity	of	the	Notes	To Consolidated	Financial	Statements	under	Item	8	of	this	Report.

Additional	Powers	Under	the	GLB	Act.		The	GLB	Act	permits	a	qualifying	bank holding	company	to	become	a	"financial	holding	company"	and	thereby	to affiliate	with	financial	companies	engaging	in	a	broader	range	of	activities	than would	otherwise	be	permitted	for	a	bank	holding	company.	Permitted	affiliates include	securities	underwriters	and	dealers,	insurance	companies	and	companies engaged	in	other	activities	that	are	determined	by	the	Federal	Reserve,	in consultation	with	the	Secretary	of	the	Treasury,	to	be	"financial	in	nature	or incidental	thereto"	or	are	determined	by	the	Federal	Reserve	unilaterally	to	be "complementary"	to	financial	activities.	We	became	a	financial	holding company	as	of	March	13,	2000.

The	Federal	Reserve	is	the	"umbrella"	regulator	of	a	financial	holding	company, with	its	operating	entities,	such	as	its	subsidiary	broker-dealers,	investment managers,	investment	companies,	insurance	companies	and	banks,	also	subject to	the	jurisdiction	of	various	federal	and	state	"functional"	regulators	with normal	regulatory	responsibility	for	companies	in	their	lines	of	business.

As	subsidiaries	of	a	financial	holding	company	under	the	GLB	Act,	our	non- bank	subsidiaries	are	allowed	to	conduct	new	financial	activities	or	acquire	non- bank	financial	companies	with	after-the-fact	notice	to	the	Federal	Reserve.	In addition,	our	non-bank	subsidiaries	(and	any	financial	subsidiaries	of	subsidiary banks)	are	now	permitted	to	engage	in	certain	activities	that	were	not	permitted for	banks	and	bank	holding	companies	prior	to	enactment	of	the	GLB	Act,	and to	engage	on	less	restrictive	terms	in	certain	activities	that	were	previously permitted.	Among	other	activities,	we	currently	rely	on	our	status	as	a	financial holding	company	to	conduct	mutual	fund	distribution	activities,	merchant banking	activities,	and	securities	underwriting	and	dealing	activities.

In	addition,	the	GLB	Act	permits	national	banks,	such	as	PNC	Bank,	N.A.	and National	City	Bank,	to	engage	in	expanded	activities	through	the	formation	of	a "financial	subsidiary."	In	order	to	qualify	to	establish	or	acquire	a	financial subsidiary,	PNC	Bank,	N.A.,	National	City	Bank	and	PNC	Bank,	Delaware must	be	"well	capitalized"	and	"well	managed"	and	may	not	have	a	less	than "satisfactory"	Community	Reinvestment	Act	("CRA")	rating.	A	national	bank that	is	one	of	the	largest	50	insured	banks	in	the	United	States,	such	as	PNC Bank,	N.A.	and	National	City	Bank,	must	also	have	issued	debt	(which,	for	this purpose,	may	include	the	uninsured	portion	of	a	national	bank's	long-term certificates	of	deposit)	with	certain	minimum	ratings.	PNC	Bank,	N.A.	and National	City	Bank	have	filed	financial	subsidiary	certifications	with	the	OCC and	currently	engage	in

insurance	agency	activities	through	financial	subsidiaries.	PNC	Bank,	N.A.	and National	City	Bank	may	also	generally	engage	through	a	financial	subsidiary	in any	activity	that	is	financial	in	nature	or	incidental	to	a	financial	activity.	Certain activities,	however,	are	impermissible	for	a	financial	subsidiary	of	a	national bank,	including	insurance	underwriting,	insurance	investments,	real	estate investment	or	development,	and	merchant	banking.

Because	of	issues	regarding	the	operations	of	National	City	Bank,	PNC	has entered	into	an	agreement	with	the	Federal	Reserve,	and	PNC	Bank,	N.A.	and National	City	Bank	have	entered	into	agreements	with	the	OCC,	pursuant	to which	we	are	providing	a	plan	for	National	City	Bank	to	address	these	issues.	If PNC	fails	to	satisfy	the	concerns	of	the	regulators	within	six-months	of	the acquisition	of	National	City	Bank	(that	is,	by	June	30,	2009),	and	no	extension of	the	time	period	is	granted,	the	Federal	Reserve	would	have	broad	authority	to limit	PNC's	activities,	including	a	requirement	that	we	conform	existing	non- banking	activities	to	activities	that	were	permissible	prior	to	the	enactment	of	the GLB	Act.	In	addition,	pursuant	to	the	agreements	with	the	OCC,	the	OCC	could limit	the	activities	of	PNC	Bank,	N.A.	and	National	City	Bank	if	the	concerns are	not	addressed	satisfactorily	by	June	30,	2009,	or	within	any	additional	time granted	by	the	OCC.	PNC	Bank,	N.A.	and	National	City	Bank	could	be	required to	conform	the	activities	of	their	financial	subsidiaries	to	activities	in	which	a national	bank	could	engage	directly.	The	potential	impact	of	these	consequences for	PNC	and	the	two	banks	is	primarily	on	the	conduct	of	existing	merchant banking,	securities	underwriting	and	dealing,	and	insurance	activities	that	in	part can	be	addressed	through	alternative	means	of	conducting	these	activities	and that	in	any	event	is	not	expected	to	be	material	to	PNC's	consolidated	business.

Other	Federal	Reserve	and	OCC	Regulation.		The	federal	banking	agencies possess	broad	powers	to	take	corrective	action	as	deemed	appropriate	for	an insured	depository	institution	and	its	holding	company.	The	extent	of	these powers	depends	upon	whether	the	institution	in	question	is	considered	"well capitalized,"	"adequately	capitalized,"	"undercapitalized,"	"significantly undercapitalized"	or	"critically	undercapitalized."	Generally,	the	smaller	an institution's	capital	base	in	relation	to	its	risk-weighted	assets,	the	greater	the scope	and	severity	of	the	agencies'	powers,	ultimately	permitting	the	agencies	to appoint	a	receiver	for	the	institution.	Business	activities	may	also	be	influenced by	an	institution's	capital	classification.	For	instance,	only	a	"well	capitalized" depository	institution	may	accept	brokered	deposits	without	prior	regulatory approval	and	an	"adequately	capitalized"	depository	institution	may	accept brokered	deposits	only	with	prior	regulatory	approval.	At	December	31,	2008, each	of	our	domestic	subsidiary	banks	exceeded	the	required	ratios	for classification	as	"well	capitalized."	For	additional	discussion	of	capital	adequacy requirements,	we	refer	you	to	"Funding	and	Capital	Sources"	in	the	Consolidated Balance	Sheet	Review	section	of	Item	7	of

this	Report	and	to	Note	23	Regulatory	Matters	included	in	the	Notes	To Consolidated	Financial	Statements	in	Item	8	of	this	Report.

Laws	and	regulations	limit	the	scope	of	our	permitted	activities	and	investments. In	addition	to	the	activities	that	would	be	permitted	to	be	conducted	by	a financial	subsidiary,	national	banks	(such	as	PNC	Bank,	N.A.	and	National	City Bank)	and	their	operating	subsidiaries	may	engage	in	any	activities	that	are determined	by	the	OCC	to	be	part	of	or	incidental	to	the	business	of	banking.

Moreover,	examination	ratings	of	"3"	or	lower,	lower	capital	ratios	than	peer group	institutions,	regulatory	concerns	regarding	management,	controls,	assets, operations	or	other	factors,	can	all	potentially	result	in	practical	limitations	on the	ability	of	a	bank	or	bank	holding	company	to	engage	in	new	activities,	grow, acquire	new	businesses,	repurchase	its	stock	or	pay	dividends,	or	to	continue	to conduct	existing	activities.

The	Federal	Reserve's	prior	approval	is	required	whenever	we	propose	to acquire	all	or	substantially	all	of	the	assets	of	any	bank	or	thrift,	to	acquire	direct or	indirect	ownership	or	control	of	more	than	5%	of	the	voting	shares	of	any bank	or	thrift,	or	to	merge	or	consolidate	with	any	other	bank	holding	company or	thrift	holding	company.	When	reviewing	bank	acquisition	applications	for approval,	the	Federal	Reserve	considers,	among	other	things,	each	subsidiary bank's	record	in	meeting	the	credit	needs	of	the	communities	it	serves	in accordance	with	the	CRA.	Our	ability	to	grow	through	acquisitions	could	be limited	by	these	approval	requirements.

At	December	31,	2008,	PNC	Bank,	N.A.,	National	City	Bank,	and	PNC	Bank, Delaware	were	rated	"outstanding"	with	respect	to	CRA.

FDIC	Insurance.	All	three	of	our	domestic	subsidiary	banks	are	insured	by	the FDIC	and	subject	to	premium	assessments.	Regulatory	matters	could	increase the	cost	of	FDIC	deposit	insurance	premiums	to	an	insured	bank	as	FDIC deposit	insurance	premiums	are	"risk	based."	Therefore,	higher	fee	percentages would	be	charged	to	banks	that	have	lower	capital	ratios	or	higher	risk	profiles. These	risk	profiles	take	into	account	weaknesses	that	are	found	by	the	primary banking	regulator	through	its	examination	and	supervision	of	the	bank.	A negative	evaluation	by	the	FDIC	or	a	bank's	primary	federal	banking	regulator could	increase	the	costs	to	a	bank	and	result	in	an	aggregate	cost	of	deposit	funds higher	than	that	of	competing	banks	in	a	lower	risk	category.

Our	subsidiary	banks	are	subject	to	"cross-guarantee"	provisions	under	federal law	that	provide	that	if	one	of	these	banks	fails	or	requires	FDIC	assistance,	the FDIC	may	assess	a	"commonly-controlled"	bank	for	the	estimated	losses suffered	by	the	FDIC.	Such	liability	could	have	a	material	adverse	effect	on	our financial	condition	or	that	of	the	assessed	bank.	While	the	FDIC's	claim	is	junior to	the	claims

of	depositors,	holders	of	secured	liabilities,	general	creditors	and	subordinated creditors,	it	is	superior	to	the	claims	of	the	bank's	shareholders	and	affiliates, including	PNC	and	intermediate	bank	holding	companies.

# SECURITIES	AND	RELATED	REGULATION

The	SEC,	together	with	either	the	OCC	or	the	Federal	Reserve,	regulates	our registered	broker-dealer	subsidiaries.	These	subsidiaries	are	also	subject	to	rules and	regulations	promulgated	by	the	Financial	Industry	Regulatory	Authority ("FINRA"),	among	others.

Several	of	our	subsidiaries	are	registered	with	the	SEC	as	investment	advisers and	provide	services	both	directly	to	clients	and	to	PNC	affiliates	and	related entities,	including	registered	investment	companies.	Our	investment	advisor subsidiaries	are	subject	to	the	requirements	of	the	Investment	Advisers	Act	of 1940,	as	amended,	and	the	SEC's	regulations	thereunder.	The	principal	purpose of	the	regulations	applicable	to	investment	advisers	is	the	protection	of	clients and	the	securities	markets,	rather	than	the	protection	of	creditors	and shareholders	of	investment	advisors.	The	regulations	applicable	to	investment advisers	cover	all	aspects	of	the	investment	advisory	business,	including limitations	on	the	ability	of	investment	advisers	to	charge	performance-based	or non-refundable	fees	to	clients;	record-keeping;	operational,	marketing	and reporting	requirements;	disclosure	requirements;	limitations	on	principal transactions	between	an	adviser	or	its	affiliates	and	advisory	clients;	as	well	as general	anti-fraud	prohibitions.	These	investment	advisory	subsidiaries	also	may be	subject	to	state	securities	laws	and	regulations.

In	addition,	our	investment	advisory	subsidiaries	that	are	investment	advisors	to registered	investment	companies	and	other	managed	accounts	are	subject	to	the requirements	of	the	Investment	Company	Act	of	1940,	as	amended,	and	the SEC's	regulations	thereunder,	including	Allegiant	Asset	Management	Company, a	wholly-owned	subsidiary	of	National	City	Bank	and	registered	investment advisor	that	serves	as	the	investment	advisor	for	the	Allegiant	mutual	funds. Global	Investment	Servicing	is	subject	to	regulation	by	the	SEC	as	a	service provider	to	registered	investment	companies.

Additional	legislation,	changes	in	rules	promulgated	by	the	SEC,	other	federal and	state	regulatory	authorities	and	self-regulatory	organizations,	or	changes	in the	interpretation	or	enforcement	of	existing	laws	and	rules	may	directly	affect the	method	of	operation	and	profitability	of	investment	advisers.	The	profitability of	investment	advisers	could	also	be	affected	by	rules	and	regulations	that impact	the	business	and	financial	communities	in	general,	including	changes	to the	laws	governing	taxation,	antitrust	regulation	and	electronic	commerce.

Over	the	past	several	years,	the	SEC	and	other	governmental	agencies	have	been investigating	the	mutual	fund	and	hedge

fund	industries,	including	Allegiant,	Global	Investment	Servicing	and	other industry	participants.	The	SEC	has	proposed	various	rules,	and	legislation	has been	introduced	in	Congress,	intended	to	reform	the	regulation	of	these industries.	The	effect	of	regulatory	reform	has,	and	is	likely	to	continue	to, increase	the	extent	of	regulation	of	the	mutual	fund	and	hedge	fund	industries and	impose	additional	compliance	obligations	and	costs	on	our	subsidiaries involved	with	those	industries.

Under	provisions	of	the	federal	securities	laws	applicable	to	broker-dealers, investment	advisers	and	registered	investment	companies	and	their	service providers,	a	determination	by	a	court	or	regulatory	agency	that	certain	violations have	occurred	at	a	company	or	its	affiliates	can	result	in	fines,	restitution,	a limitation	of	permitted	activities,	disqualification	to	continue	to	conduct	certain activities	and	an	inability	to	rely	on	certain	favorable	exemptions.	Certain	types of	infractions	and	violations	can	also	affect	a	public	company	in	its	timing	and ability	to	expeditiously	issue	new	securities	into	the	capital	markets.	In	addition, expansion	of	activities	of	a	broker-dealer	generally	requires	approval	of	FINRA and	regulators	may	take	into	account	a	variety	of	considerations	in	acting	upon such	applications,	including	internal	controls,	capital,	management	experience and	quality,	prior	enforcement	and	disciplinary	history	and	supervisory concerns.

Global	Investment	Servicing	and	BlackRock	are	also	subject	to	regulation	by appropriate	authorities	in	the	foreign	jurisdictions	in	which	they	do	business.

BlackRock	has	subsidiaries	in	securities	and	related	businesses	subject	to	SEC and	FINRA	regulation,	as	described	above.	For	additional	information	about	the regulation	of	BlackRock,	we	refer	you	to	the	discussion	under	the	"Regulation" section	of	Item	1	Business	in	BlackRock's	most	recent	Annual	Report	on	Form 10-K,	which	may	be	obtained	electronically	at	the	SEC's	website	at www.sec.gov.

# COMPETITION

We	are	subject	to	intense	competition	from	various	financial	institutions	and from	non-bank	entities	that	engage	in	similar	activities	without	being	subject	to bank	regulatory	supervision	and	restrictions.

In	making	loans,	our	subsidiary	banks	compete	with	traditional	banking institutions	as	well	as	consumer	finance	companies,	leasing	companies	and	other non-bank	lenders,	and	institutional	investors	including	CLO	managers,	hedge funds,	mutual	fund	complexes	and	private	equity	firms.	Loan	pricing,	structure and	credit	standards	are	extremely	important	in	the	current	environment	as	we seek	to	achieve	risk-adjusted	returns.	Traditional	deposit	activities	are	subject	to pricing	pressures	and	customer	migration	as	a	result	of	intense	competition	for consumer	investment	dollars.

Our	subsidiary	banks	compete	for	deposits	with	the	following: •	Other	commercial	banks, •	Savings	banks,

•	Savings	and	loan	associations, •	Credit	unions,

•	Treasury	management	service	companies,

•	Insurance	companies,	and

•	Issuers	of	commercial	paper	and	other	securities,	including	mutual	funds.

Our	various	non-bank	businesses	engaged	in	investment	banking	and	private equity	activities	compete	with	the	following: •	Commercial	banks, •	Investment	banking	firms, •	Merchant	banks, •	Insurance	companies,

•	Private	equity	firms,	and •	Other	investment	vehicles.

In	providing	asset	management	services,	our	businesses	compete	with	the following:

•	Investment	management	firms,

•	Large	banks	and	other	financial	institutions, •	Brokerage	firms,

•	Mutual	fund	complexes,	and •	Insurance	companies.

The	fund	servicing	business	is	also	highly	competitive,	with	a	relatively	small number	of	providers.	Merger,	acquisition	and	consolidation	activity	in	the financial	services	industry	has	also	impacted	the	number	of	existing	or	potential fund	servicing	clients	and	has	intensified	competition.

We	include	here	by	reference	the	additional	information	regarding	competition included	in	the	Item	1A	Risk	Factors	section	of	this	Report.

EMPLOYEES	Period-end	employees	totaled	59,595	at	December	31,	2008.	This total	includes	25,313	full-time	and	2,908	part-time	PNC	legacy	employees	and 27,112	full-time	and	4,262	part-time	National	City	employees.

# SEC	REPORTS	AND	CORPORATE	GOVERNANCE	INFORMATION

We	are	subject	to	the	informational	requirements	of	the	Securities	Exchange	Act of	1934,	as	amended	("Exchange	Act"),	and,	in	accordance	with	the	Exchange Act,	we	file	annual,	quarterly	and	current	reports,	proxy	statements,	and	other information	with	the	SEC.	Our	SEC	File	Number	is	001-09718.	You	may	read and	copy	this	information	at	the	SEC's	Public	Reference	Room	located	at	100	F Street	NE,	Room	1580,	Washington,	D.C.	20549.	You	can	obtain	information	on the	operation	of	the	Public	Reference	Room	by	calling	the	SEC	at	1-800-SEC- 0330.

You	can	also	obtain	copies	of	this	information	by	mail	from	the	Public	Reference Section	of	the	SEC,	100	F	Street,	NE,	Washington,	D.C.	20549,	at	prescribed rates.

The	SEC	also	maintains	an	internet	website	that	contains	reports,	proxy	and information	statements,	and	other	information	about	issuers,	like	us,	who	file electronically	with	the	SEC.	The	address	of	that	site	is	www.sec.gov.	You	can also	inspect	reports,	proxy	statements	and	other	information	about	us	at	the offices	of	the	New	York	Stock	Exchange,	20	Broad	Street,	New	York,	New York	10005.

We	also	make	our	Annual	Report	on	Form	10-K,	Quarterly	Reports	on	Form	10- Q,	Current	Reports	on	Form	8-K,	and	amendments	to	those	reports	filed	or furnished	to	the	SEC	pursuant	to	Section	13(a)	or	15(d)	of	the	Exchange	Act available	free	of	charge	on	or	through	our	internet	website	as	soon	as	reasonably practicable	after	we	electronically	file	such	material	with,	or	furnish	it	to,	the SEC.	PNC's	corporate	internet	address	is	www.pnc.com	and	you	can	find	this information	at	www.pnc.com/secfilings.	Shareholders	and	bondholders	may	also obtain	copies	of	these	filings	without	charge	by	contacting	Shareholder	Services at	800-982-7652	or	via	the	online	contact	form	at

www.computershare.com/contactus	for	copies	without	exhibits,	or	by	contacting Shareholder	Relations	at	800-	843-2206	or	via	e-mail	at investor.relations@pnc.com	for	copies	of	exhibits.

We	filed	the	certifications	of	our	Chairman	and	Chief	Executive	Officer	and	our Chief	Financial	Officer	required	pursuant	to	Section	302	of	the	Sarbanes-Oxley Act	of	2002	with	respect	to	our	Annual	Report	on	Form	10-K	for	2007	with	the SEC	as	exhibits	to	that	report	and	have	filed	the	CEO	and	CFO	certifications required	by	Section	302	of	that	Act	with	respect	to	this	Form	10-K	as	exhibits	to this	Report.

Information	about	our	Board	and	its	committees	and	corporate	governance	at PNC	is	available	on	PNC's	corporate	website	at www.pnc.com/corporategovernance.	Shareholders	who	would	like	to	request printed	copies	of	the	PNC	Code	of	Business	Conduct	and	Ethics	or	our Corporate	Governance	Guidelines	or	the	charters	of	our	Board's	Audit, Nominating	and	Governance,	or	Personnel	and	Compensation	Committees	(all	of which	are	posted	on	the	PNC	corporate	website)	may	do	so	by	sending	their requests	to	George	P.	Long,	III,	Corporate	Secretary,	at	corporate	headquarters at	One	PNC	Plaza,	249	Fifth	Avenue,	Pittsburgh,	Pennsylvania	15222-2707. Copies	will	be	provided	without	charge	to	shareholders.

Our	common	stock	is	listed	on	the	New	York	Stock	Exchange	("NYSE")	under the	symbol	"PNC."	Our	Chairman	and	Chief	Executive	Officer	submitted	the required	annual	CEO	Certification	regarding	the	NYSE's	corporate	governance listing	standards	(a	Section	12(a)	CEO	Certification)	to	the	NYSE	within	30	days after	our	2008	annual	shareholders	meeting.

# INTERNET	INFORMATION

The	PNC	Financial	Services	Group,	Inc.'s	financial	reports	and	information about	its	products	and	services	are	available	on	the	internet	at	www.pnc.com. We	provide	information	for

investors	in	portions	of	our	corporate	website,	such	as	the	Investor	Events	and Financial	Information	areas	that	you	can	find	under	"About	PNC	–	Investor Relations".	In	this	section,	we	will	from	time	to	time	post	information	that	we believe	may	be	important	or	useful	to	investors.	We	generally	post	the	following shortly	before	or	promptly	following	its	first	use	or	release:	financially-related press	releases	(including	earnings	releases),	various	SEC	filings,	presentation materials	associated	with	earnings	and	other	investor	conference	calls	or	events, and	access	to	live	and	taped	audio	from	such	calls	or	events.	When	warranted, we	will	also	use	our	website	to	expedite	public	access	to	time-critical information	regarding	PNC	in	advance	of	distribution	of	a	press	release	or	a filing	with	the	SEC	disclosing	the	same	information.	You	can	also	find	the	SEC reports	and	corporate	governance	information	described	in	the	section	above	in the	Investor	Relations	section	of	our	website.

Where	we	have	included	web	addresses	in	this	Report,	such	as	our	web	address and	web	addresses	of	the	SEC	and	of	BlackRock,	we	have	included	those	web addresses	as	inactive	textual	references	only.	Except	as	specifically	incorporated by	reference	into	this	Report,	information	on	those	websites	is	not	part	hereof.

# ITEM	1A	–	RISK	FACTORS

We	are	subject	to	a	number	of	risks	potentially	impacting	our	business,	financial condition,	results	of	operations	and	cash	flows.	Indeed,	as	a	financial	services organization,	certain	elements	of	risk	are	inherent	in	every	one	of	our transactions	and	are	present	in	every	business	decision	we	make.	Thus,	we encounter	risk	as	part	of	the	normal	course	of	our	business,	and	we	design	risk management	processes	to	help	manage	these	risks.

There	are	risks	that	are	known	to	exist	at	the	outset	of	a	transaction.	For example,	every	loan	transaction	presents	credit	risk	(the	risk	that	the	borrower may	not	perform	in	accordance	with	contractual	terms)	and	interest	rate	risk	(a potential	loss	in	earnings	or	economic	value	due	to	adverse	movement	in	market interest	rates	or	credit	spreads),	with	the	nature	and	extent	of	these	risks principally	depending	on	the	identity	of	the	borrower	and	overall	economic conditions.	These	risks	are	inherent	in	every	loan	transaction;	if	we	wish	to	make loans,	we	must	manage	these	risks	through	the	terms	and	structure	of	the	loans and	through	management	of	our	deposits	and	other	funding	sources.

Risk	management	is	an	important	part	of	our	business	model.	The	success	of	our business	is	dependent	on	our	ability	to	identify,	understand	and	manage	the	risks presented	by	our	business	activities	so	that	we	can	balance	appropriately	revenue generation	and	profitability	with	these	inherent	risks.	Our	shareholders	have been	well	served	by	our	focus	on	maintaining	a	moderate	risk	profile.	With	an economy	in	severe	recession	and	our	recent	acquisition	of	National	City,

our	Consolidated	Balance	Sheet	at	December	31,	2008	did	not	reflect	that desired	risk	profile.	However,	we	remain	committed	to	a	moderate	risk	profile and	we	are	working	hard	to	bring	our	risk	issues	back	into	alignment.	We	discuss our	principal	risk	management	processes	and,	in	appropriate	places,	related historical	performance	in	the	Risk	Management	section	included	in	Item	7	of	this Report.

The	following	are	the	key	risk	factors	that	affect	us.	These	risk	factors	and	other risks	are	also	discussed	further	in	other	parts	of	this	Report.

# Risks	related	to	current	economic	conditions

# The	continuation	or	worsening	of	current	recessionary	conditions,	as	well as	continued	turmoil	in	the	financial	markets,	would	likely	have	an	adverse effect	on	our	business,	financial	position	and	results	of	operations.

The	economy	in	the	United	States	and	globally	is	currently	in	the	midst	of	a severe	recession.	This	economic	situation	has	been	accompanied	by	disruption and	turmoil	in	financial	markets	around	the	world.	Throughout	much	of	the United	States,	the	past	two	years	have	seen	dramatic	declines	in	the	housing market,	with	falling	home	prices	and	increasing	foreclosures.	The	deepening recession	has	led	to	increased	unemployment	and	underemployment.	Businesses across	many	industries	are	showing	reduced	earnings	or	in	some	cases	losses, with	reduced	investments	in	growth.

For	the	financial	services	industry,	this	overall	environment	has	resulted	in significant	write-downs	of	asset	values,	initially	of	mortgage-backed	securities but	spreading	to	other	derivative	and	cash	securities.	Affected	institutions include	commercial	and	investment	banks	as	well	as	government-sponsored entities.	The	impact	of	this	situation	has	led	to	distress	in	credit	markets,	reduced liquidity	for	many	types	of	securities,	and	concerns	regarding	the	financial strength	and	adequacy	of	the	capitalization	of	financial	institutions.	Some financial	institutions	around	the	world	have	failed,	some	have	needed	significant additional	capital,	and	others	have	been	forced	to	seek	acquisition	partners.

Reflecting	concern	about	the	stability	of	the	financial	markets	generally	and	the strength	of	counterparties,	as	well	as	concern	about	their	own	capital	and liquidity	positions,	many	lenders	and	institutional	investors	have	reduced	or ceased	providing	funding	to	borrowers.	The	resulting	economic	pressure	on consumers	and	businesses	and	the	lack	of	confidence	in	the	financial	markets	has exacerbated	the	state	of	economic	distress	and	hampered	efforts	to	bring	about an	economic	recovery	and	restore	stability	to	financial	markets.

The	United	States	and	other	governments	have	taken	unprecedented	steps	to	try to	stabilize	the	financial	system,	including	making	significant	investments	in financial	institutions	and	guaranteeing	or	otherwise	supporting	troubled	assets held	by	financial	institutions.	The	new	Obama	administration	and	the	U.S. Congress	are	actively	seeking

ways	of	providing	economic	stimulus	and	financial	market	stability,	including the	recent	enactment	of	the	Recovery	Act.

These	economic	conditions	have	had	an	adverse	effect	on	our	business	and financial	performance.	We	do	not	expect	that	the	weakened	economy	or	difficult conditions	in	the	financial	markets	are	likely	to	improve	meaningfully	in	the	near future,	and	we	expect	those	conditions	to	have	an	ongoing	negative	impact	on	us. A	worsening	or	prolonged	continuation	of	these	conditions	would	likely aggravate	the	adverse	effects	of	these	difficult	economic	and	market	conditions on	us	and	on	others	in	the	financial	institutions	industry.

In	particular,	we	may	face	the	following	risks	in	connection	with	the	current economic	and	market	environment:

•	Proposals	to	permit	bankruptcy	courts	to	adjust	the	terms	of	home	mortgage obligations	of	people	in	proceedings	before	them	may	adversely	impact	the value	of	mortgages	and	mortgage-backed	securities	held	by	us,	including, in	the	case	of	securities,	by	affecting	the	protections	offered	by subordination	provisions.

•	We	expect	to	face	increased	regulation	of	our	industry,	including	as	a	result of	the	EESA,	the	Recovery	Act	and	other	current	or	future	initiatives	to provide	economic	stimulus,	financial	market	stability	and	enhanced regulation	of	financial	services	companies.	Compliance	with	such regulation	may	increase	our	costs	and	limit	our	ability	to	pursue	business opportunities.

•	Investors	may	have	less	confidence	in	the	equity	markets	in	general	and	in financial	services	industry	stocks	in	particular,	which	could	place downward	pressure	on	PNC's	stock	price	and	resulting	market	valuation. •	Market	developments	may	further	affect	consumer	and	business	confidence levels	and	may	cause	declines	in	credit	usage	and	adverse	changes	in payment	patterns,	causing	increases	in	delinquencies	and	default	rates. •	Our	ability	to	assess	the	creditworthiness	of	our	customers	may	be	impaired if	the	models	and	approaches	we	use	to	select,	manage,	and	underwrite	our customers	become	less	predictive	of	future	behaviors.

•	The	process	we	use	to	estimate	losses	inherent	in	our	credit	exposure requires	difficult,	subjective,	and	complex	judgments,	including	the	review of	economic	conditions	and	how	these	economic	conditions	might	impair the	ability	of	our	borrowers	to	repay	their	loans,	which	may	no	longer	be capable	of	accurate	estimation,	which	may,	in	turn,	impact	the	reliability	of the	process.

•	We	could	suffer	decreases	in	customer	desire	to	do	business	with	us, whether	as	a	result	of	a	decreased	demand	for	loans	or	other	financial products	and	services	or	decreased	deposits	or	other	investments	in accounts	with	PNC.

•	Competition	in	our	industry	could	intensify	as	a	result	of	the	increasing consolidation	of	financial	services	companies	in	connection	with	current market	conditions.	Governmental	support	provided	to	financial	institutions could	alter	the	competitive	landscape.

•	Increased	regulation	of	compensation	at	financial	services	companies	as part	of	government	efforts	to	reform	the	industry	may	hinder	our	ability	to attract	and	retain	well-qualified	individuals	in	key	positions. •	We	may	be	required	to	pay	significantly	higher	Federal	Deposit	Insurance Corporation	premiums	because	market	developments	have	significantly depleted	the	insurance	fund	of	the	FDIC	and	reduced	the	ratio	of	reserves	to insured	deposits.

Some	of	these	risks	are	discussed	in	more	detail	below.

# The	continuation	of	current	recessionary	conditions	would	likely	adversely affect	our	lending	businesses	and	the	value	of	the	loans	and	debt	securities we	hold.

Given	the	high	percentage	of	our	assets	represented,	directly	or	indirectly,	by loans	and	the	importance	of	lending	to	our	overall	business,	continued recessionary	conditions	are	likely	to	have	a	negative	impact	on	our	business,	our ability	to	serve	our	customers	and	our	results	of	operations.	Such	conditions	are likely	to	lead	to	increases	in	the	number	of	borrowers	who	become	delinquent	or default	or	otherwise	demonstrate	a	decreased	ability	to	meet	their	obligations under	their	loans.	This	would	result	in	higher	levels	of	non-performing	loans,	net charge-offs,	provision	for	credit	losses	and	valuation	adjustments	on	loans	held for	sale.	The	value	to	us	of	other	assets	such	as	investment	securities,	most	of which	are	debt	securities	or	represent	securitizations	of	loans,	similarly	would	be negatively	impacted	by	widespread	decreases	in	credit	quality	resulting	from	a weak	economy.

# Our	regional	concentration	makes	us	particularly	at	risk	for	economic conditions	in	our	primary	retail	banking	footprint.

Although	many	of	our	businesses	are	national	and	some	are	international	in scope,	our	retail	banking	business	is	concentrated	within	our	retail	branch network	footprint	(for	the	past	several	years,	Delaware,	Indiana,	Kentucky, Maryland,	New	Jersey,	Ohio,	Pennsylvania,	Virginia	and	Washington,	D.C., and,	with	our	recent	acquisition	of	National	City,	now	including	Florida,	Illinois, Michigan,	Missouri	and	Wisconsin).	Thus,	we	are	particularly	vulnerable	to adverse	changes	in	economic	conditions	in	these	states	or	the	Mid-Atlantic	and Midwest	regions	more	generally.

# Our	business	and	performance	are	vulnerable	to	the	impact	of	continued volatility	in	debt	and	equity	markets.

As	most	of	our	assets	and	liabilities	are	financial	in	nature,	we	tend	to	be particularly	sensitive	to	the	performance	of	the

financial	markets.	Starting	in	the	middle	of	2007,	there	has	been	significant turmoil	and	volatility	in	worldwide	financial	markets,	which	is,	at	present, ongoing.	This	turmoil	and	volatility	are	a	contributory	factor	to	overall	economic conditions,	leading	to	some	of	the	risks	discussed	above,	including	impairing	the ability	of	borrowers	and	other	counterparties	to	meet	obligations	to	us.	Financial market	volatility	also	can	have	some	of	the	following	adverse	effects	on	PNC and	our	business	and	financial	performance:

•	It	can	affect	the	value	or	liquidity	of	our	on-balance	sheet	and	off-balance sheet	financial	instruments.

•	It	can	affect	the	value	of	servicing	rights	that	we	acquire	and	carry	at	fair value,	such	as	the	residential	mortgage	servicing	rights	acquired	in	the National	City	transaction.

•	It	can	affect,	to	the	extent	we	access	capital	markets	to	raise	funds	to support	our	business	and	overall	liquidity	position,	the	cost	of	such	funds	or our	ability	to	raise	such	funds.	The	inability	to	access	capital	markets	at	a desirable	cost	could	affect	our	liquidity	or	results	of	operations. •	It	can	affect	the	value	of	the	assets	that	we	manage	or	otherwise	administer for	others	or	the	assets	for	which	we	provide	processing	and	information services.	Although	we	are	not	directly	impacted	by	changes	in	the	value	of assets	that	we	manage	or	administer	for	others	or	for	which	we	provide processing	and	information	services,	decreases	in	the	value	of	those	assets would	affect	our	fee	income	relating	to	those	assets	and	could	result	in decreased	demand	for	our	services.

•	It	can	affect	the	required	funding	of	our	pension	obligations	to	the	extent that	the	value	of	the	assets	supporting	those	obligations	drops	below minimum	levels.

•	In	general,	it	can	impact	the	nature,	profitability	or	risk	profile	of	the financial	transactions	in	which	we	engage.

Volatility	in	the	markets	for	real	estate	and	other	assets	commonly	securing financial	products	has	been	and	is	likely	to	continue	to	be	a	significant contributor	to	overall	volatility	in	financial	markets.

Our	business	and	financial	performance	is	impacted	significantly	by	market interest	rates	and	movements	in	those	rates.	The	monetary,	tax	and	other policies	of	governmental	agencies,	including	the	Federal	Reserve,	have	a significant	impact	on	interest	rates	and	overall	financial	market performance	over	which	we	have	no	control	and	which	we	may	not	be	able to	predict	adequately.

As	a	result	of	the	high	percentage	of	our	assets	and	liabilities	that	are	in	the	form of	interest-bearing	or	interest-related	instruments,	changes	in	interest	rates,	in	the shape	of	the	yield	curve	or	in	spreads	between	different	market	interest	rates	can

have	a	material	effect	on	our	business,	our	profitability	and	the	value	of	our financial	assets	and	liabilities.	For	example:

•	Movements	in	interest	rates	affect	mortgage	prepayment	speeds	and	could result	in	impairments	of	mortgage	servicing	assets.

•	Changes	in	interest	rates	or	interest	rate	spreads	can	affect	the	difference between	the	interest	that	we	earn	on	assets	and	the	interest	that	we	pay	on liabilities,	which	impacts	our	overall	net	interest	income.

•	Such	changes	can	affect	the	ability	of	borrowers	to	meet	obligations	under variable	or	adjustable	rate	debt	instruments.

•	Such	changes	may	decrease	the	demand	for	interest-rate	based	products	and services,	including	loans	and	deposit	accounts.

•	Such	changes	can	also	affect	our	ability	to	hedge	various	forms	of	market and	interest	rate	risk	and	may	decrease	the	profitability	or	increase	the	risk associated	with	such	hedges.

The	monetary,	tax	and	other	policies	of	the	government	and	its	agencies, including	the	Federal	Reserve,	have	a	significant	impact	on	interest	rates	and overall	financial	market	performance.	These	governmental	policies	can	thus affect	the	activities	and	results	of	operations	of	banking	companies	such	as	PNC. An	important	function	of	the	Federal	Reserve	is	to	regulate	the	national	supply of	bank	credit	and	market	interest	rates.	The	actions	of	the	Federal	Reserve influence	the	rates	of	interest	that	we	charge	on	loans	and	that	we	pay	on borrowings	and	interest-bearing	deposits	and	can	also	affect	the	value	of	our	on- balance	sheet	and	off-balance	sheet	financial	instruments.	Both	due	to	the impact	on	rates	and	by	controlling	access	to	direct	funding	from	the	Federal Reserve	Banks,	the	Federal	Reserve's	policies	also	influence,	to	a	significant extent,	our	cost	of	funding.	We	cannot	predict	the	nature	or	timing	of	future changes	in	monetary,	tax	and	other	policies	or	the	effect	that	they	may	have	on our	activities	and	results	of	operations.

# The	soundness	of	other	financial	institutions	could	adversely	affect	us.

Financial	services	institutions	are	interrelated	as	a	result	of	trading,	clearing, counterparty,	or	other	relationships.	We	have	exposure	to	many	different industries	and	counterparties,	and	we	routinely	execute	transactions	with counterparties	in	the	financial	services	industry,	including	brokers	and	dealers, commercial	banks,	investment	banks,	mutual	and	hedge	funds,	and	other institutional	clients.	Many	of	these	transactions	expose	us	to	credit	risk	in	the event	of	default	of	our	counterparty	or	client.	In	addition,	our	credit	risk	may	be exacerbated	when	the	collateral	held	by	us	cannot	be	realized	upon	or	is liquidated	at	prices	not	sufficient	to	recover	the	full	amount	of	the	loan	or derivative	exposure	due	us.	There	can	be	no	assurance	that	any	such	losses would	not	materially	and	adversely	affect	our	results	of	operations	or	earnings.

# Actions	taken	by	the	federal	government	to	stabilize	the	U.S.	financial system	and	provide	economic	stimulus	may	not	succeed.

Given	the	recent	financial	market	turmoil,	particularly	in	the	last	several	months, the	federal	government	has	taken	numerous	steps	to	stabilize	the	US	financial system,	both	through	legislative	and	regulatory	action.	The	steps	include	passage of	EESA	and	actions	taken	by	the	US	Department	of	the	Treasury	thereafter	to implement	EESA,	as	well	as	the	recent	enactment	of	the	Recovery	Act. Legislative	and	regulatory	initiatives	to	provide	economic	stimulus,	financial market	stability	and	financial	market	regulatory	reform	have	been	proposed	or are	pending	(including	some	that	have	modified	or	would	modify	EESA),	and more	are	anticipated	going	forward.	What	steps	the	government	will	take,	the manner	in	which	they	will	be	implemented	and	the	actual	impact	they	will	have on	the	economy	and	financial	markets	are	uncertain.	The	failure	of	these governmental	actions	to	help	stabilize	the	financial	markets	and	the	U.S. economy,	and	the	potential	impact	of	compliance	with	government	regulations undertaken	in	connection	with	such	actions	on	our	costs	and	our	ability	to	pursue business	opportunities,	could	materially	and	adversely	affect	our	business, financial	condition,	results	of	operations,	access	to	credit,	or	the	trading	price	of our	common	stock.

# Risks	resulting	from	recent	transactions

# Our	acquisition	of	National	City	presents	substantial	risks	and uncertainties,	which	could	limit	our	ability	to	realize	the	anticipated benefits	from	this	transaction.

On	December	31,	2008,	we	acquired	National	City	through	a	merger	in	which PNC	continued	as	the	surviving	entity.	We	provide	additional	information	about this	acquisition	in	Note	2	Acquisitions	and	Divestitures	included	in	the	Notes	To Consolidated	Financial	Statements	in	Item	8	of	this	Report.

This	acquisition	presents	the	following	risks	to	PNC: •	Like	PNC,	National	City	was	a	large	financial	institution	and	has	retail	and other	banking	operations	in	numerous	markets	in	which	PNC	had	little	or no	experience.	National	City	also	had	major	operations	in	areas	in	which PNC	did	not	have	a	significant	presence,	including	residential	mortgage lending,	residential	mortgage	servicing,	credit	card	lending	and	equipment leasing.	As	a	result	of	these	factors,	there	are	significant	integration-related risks,	which	are	greater	than	in	other	recent	acquisitions	by	PNC. •	Prior	to	completion	of	the	merger,	PNC	and	National	City	operated	as separate	independent	entities.	The	integration	process	may	result	in	the	loss of	key	employees,	the	disruption	of	either	company's	ongoing	businesses or	inconsistencies	in	standards,	controls,	procedures,	and	policies	that adversely	affect	our	ability	to	maintain	relationships	with	clients, customers,	depositors,	and	employees	or	to

achieve	the	anticipated	benefits	of	the	merger.	Integration	efforts	between the	two	companies	will	also	divert	management	attention	and	resources. Successful	integration	may	also	be	hampered	by	cultural	differences between	the	two	organizations.	Further,	PNC	agreed,	in	connection	with obtaining	regulatory	approvals	for	the	National	City	acquisition,	to	divest 61	of	National	City	Bank's	branches	in	Western	Pennsylvania	and	this process	is	also	underway.

•	In	recent	periods,	National	City's	results	had	been	impacted	negatively	by	a significant	amount	of	asset	impairments.	Our	results	following	the acquisition	will	depend	on	our	ability	to	manage	these	assets,	which	require special	servicing	and	management	oversight,	including	disposition	if appropriate.	As	the	integration	process	develops,	we	may	identify	other issues	with	respect	to	National	City's	asset	valuation	or	accounting procedures	that	may	lead	to	further	impairments	or	write-downs. •	National	City's	pre-acquisition	financial	performance	and	resulting	stock price	performance	and	other	pre-acquisition	activities	have	led	to	several lawsuits	and	governmental	investigations,	and	more	may	be	commenced	in the	future.	As	a	result	of	this	acquisition,	we	now	bear	the	risks	associated with	lawsuits	and	governmental	investigations	relating	to	National	City,	the full	extent	of	the	potential	adverse	impact	of	which	cannot	currently	be predicted	with	reasonable	certainty.	See	Note	24	Legal	Proceedings	in	the Notes	to	Consolidated	Financial	Statements	in	Item	8	of	this	Report	for additional	information.

Our	issuance	of	securities	to	the	US	Department	of	the	Treasury	may	limit our	ability	to	return	capital	to	our	shareholders	and	is	dilutive	to	our common	shares.	Also,	the	dividend	rate	increases	substantially	after	five years	if	we	are	unable	to	redeem	the	shares	by	that	time.

In	connection	with	our	sale	of	$7.6	billion	of	senior	preferred	stock	to	the	US Department	of	the	Treasury	on	December	31,	2008,	we	also	issued	the	US Department	of	the	Treasury	a	warrant	to	purchase	approximately	17	million shares	of	our	common	stock	at	$67.33	per	share.	The	terms	of	the	transaction with	the	Department	of	the	Treasury	result	in	limitations	on	our	ability	to	pay dividends	and	repurchase	our	shares.	For	three	years	after	issuance	or	until	the Department	of	the	Treasury	no	longer	holds	any	preferred	shares,	we	will	not	be able	to	increase	our	dividends	above	the	most	recent	level	prior	to	October	14, 2008	($.66	per	common	share	on	a	quarterly	basis)	nor	repurchase	any	of	our shares	without	the	Department	of	the	Treasury's	approval	with	limited exceptions,	most	significantly	purchases	in	connection	with	benefit	plans.	Also, we	will	not	be	able	to	pay	any	dividends	at	all	unless	we	are	current	on	our dividend	payments	on	the	preferred	shares.	These	restrictions,	as	well	as	the dilutive	impact	of	the	warrant,	may	have	an	adverse	effect	on	the	market	price	of our	common	stock.

Unless	we	are	able	to	redeem	the	preferred	stock	during	the	first	five	years,	the dividends	on	this	capital	will	increase	substantially	at	that	point,	from	5% (almost	$400	million	annually)	to	9%	(almost	$700	million	annually). Depending	on	market	conditions	and	our	financial	performance	at	the	time,	this increase	in	dividends	could	significantly	impact	our	capital	and	liquidity.

# The	US	Department	of	the	Treasury	has	the	unilateral	ability	to	change some	of	the	restrictions	imposed	on	us	by	virtue	of	our	sale	of	securities	to	it.

Our	agreement	with	the	US	Department	of	the	Treasury	under	which	it purchased	our	securities	imposes	restrictions	on	our	conduct	of	our	business, including	restrictions	related	to	our	payment	of	dividends	and	repurchase	of	our stock	and	related	to	our	executive	compensation	and	governance.	The	US Department	of	the	Treasury	has	the	right	under	this	agreement	to	unilaterally amend	it	to	the	extent	required	to	comply	with	any	future	changes	in	federal statutes.	The	Recovery	Act	amended	provisions	of	EESA	relating	to compensation	and	governance	as	they	affect	companies	such	as	PNC	that	have sold	securities	to	the	US	Department	of	the	Treasury.	In	some	cases,	these amendments	require	action	by	the	US	Department	of	the	Treasury	to	implement them.	These	amendments	could	have	an	adverse	impact	on	the	conduct	of	our business,	as	could	additional	amendments	in	the	future	that	impose	further requirements	or	amend	existing	requirements.

# Risks	related	to	the	ordinary	course	of	PNC's	business

We	operate	in	a	highly	competitive	environment,	both	in	terms	of	the products	and	services	we	offer,	the	geographic	markets	in	which	we	conduct business,	as	well	as	our	labor	markets	and	competition	for	talented employees.	Competition	could	adversely	impact	our	customer	acquisition, growth	and	retention,	as	well	as	our	credit	spreads	and	product	pricing, causing	us	to	lose	market	share	and	deposits	and	revenues.

We	are	subject	to	intense	competition	from	various	financial	institutions	as	well as	from	non-bank	entities	that	engage	in	similar	activities	without	being	subject to	bank	regulatory	supervision	and	restrictions.	This	competition	is	described	in Item	1	of	this	Report	under	"Competition."

In	all,	the	principal	bases	for	competition	are	pricing	(including	the	interest	rates charged	on	loans	or	paid	on	interest-bearing	deposits),	product	structure,	the range	of	products	and	services	offered,	and	the	quality	of	customer	service (including	convenience	and	responsiveness	to	customer	needs	and	concerns). The	ability	to	access	and	use	technology	is	an	increasingly	important competitive	factor	in	the	financial	services	industry.	Technology	is	important	not only	with	respect	to	delivery	of	financial	services	but	also	in	processing information.	Each	of	our	businesses	consistently	must	make	significant technological	investments	to	remain	competitive.

A	failure	to	address	adequately	the	competitive	pressures	we	face	could	make	it harder	for	us	to	attract	and	retain	customers	across	our	businesses.	On	the	other hand,	meeting	these	competitive	pressures	could	require	us	to	incur	significant additional	expenses	or	to	accept	risk	beyond	what	we	would	otherwise	view	as desirable	under	the	circumstances.	In	addition,	in	our	interest	sensitive businesses,	pressures	to	increase	rates	on	deposits	or	decrease	rates	on	loans could	reduce	our	net	interest	margin	with	a	resulting	negative	impact	on	our	net interest	income.	Any	of	these	results	would	likely	have	an	adverse	effect	on	our overall	financial	performance.

# We	grow	our	business	in	part	by	acquiring	from	time	to	time	other financial	services	companies,	and	these	acquisitions	present	us	with	a number	of	risks	and	uncertainties	related	both	to	the	acquisition transactions	themselves	and	to	the	integration	of	the	acquired	businesses into	PNC	after	closing.

Acquisitions	of	other	financial	services	companies	in	general	present	risks	to PNC	in	addition	to	those	presented	by	the	nature	of	the	business	acquired.	We describe	some	of	the	integration	risks	presented	by	our	recent	acquisition	of National	City	above.	Many	of	these	risks	are	common	to	some	extent	in acquisition	transactions.

In	general,	acquisitions	may	be	substantially	more	expensive	to	complete (including	as	a	result	of	costs	incurred	in	connection	with	the	integration	of	the acquired	company)	and	the	anticipated	benefits	(including	anticipated	cost savings	and	strategic	gains)	may	be	significantly	harder	or	take	longer	to	achieve than	expected.	In	some	cases,	acquisitions	involve	our	entry	into	new	businesses or	new	geographic	or	other	markets,	and	these	situations	also	present	risks resulting	from	our	inexperience	in	these	new	areas.	As	a	regulated	financial institution,	our	pursuit	of	attractive	acquisition	opportunities	could	be	negatively impacted	due	to	regulatory	delays	or	other	regulatory	issues.	Regulatory	and/or legal	issues	relating	to	the	pre-acquisition	operations	of	an	acquired	business may	cause	reputational	harm	to	PNC	following	the	acquisition	and	integration	of the	acquired	business	into	ours	and	may	result	in	additional	future	costs	or regulatory	limitations	arising	as	a	result	of	those	issues.

# The	performance	of	our	asset	management	businesses	may	be	adversely affected	by	the	relative	performance	of	our	products	compared	with alternative	investments	as	well	as	by	overall	economic	and	market conditions.

Asset	management	revenue	is	primarily	based	on	a	percentage	of	the	value	of assets	under	management	and,	in	some	cases,	performance	fees,	in	most	cases expressed	as	a	percentage	of	the	returns	realized	on	assets	under	management, and	thus	is	impacted	by	general	changes	in	capital	markets	valuations	as	well	as by	customer	preferences	and	needs.	In	addition,	investment	performance	is	an important	factor	influencing	the	level	of	assets	under	management.	Poor investment	performance	could	impair	revenue	and	growth	as	existing

clients	might	withdraw	funds	in	favor	of	better	performing	products.	Also, performance	fees	could	be	lower	or	nonexistent.	Additionally,	the	ability	to attract	funds	from	existing	and	new	clients	might	diminish.	Overall	economic conditions	may	limit	the	amount	that	customers	are	able	or	willing	to	invest.

The	failure	or	negative	performance	of	products	of	other	financial	institutions could	lead	to	a	loss	of	confidence	in	similar	products	offered	by	us	without regard	to	the	performance	of	our	products.	Such	a	negative	contagion	could	lead to	withdrawals,	redemptions	and	liquidity	issues	in	such	products	and	have	a material	adverse	impact	on	our	assets	under	management	and	asset	management revenues	and	earnings.

# The	performance	of	our	fund	servicing	business	may	be	adversely	affected by	changes	in	investor	preferences,	or	changes	in	existing	or	potential	fund servicing	clients	or	alternative	providers.

Fund	servicing	fees	are	primarily	derived	from	the	market	value	of	the	assets	and the	number	of	shareholder	accounts	that	we	administer	for	our	clients.	The performance	of	our	fund	processing	business	is	thus	partially	dependent	on	the underlying	performance	of	its	fund	clients	and,	in	particular,	their	ability	to attract	and	retain	customers.	Changes	in	interest	rates	or	a	sustained	weakness, weakening	or	volatility	in	the	debt	and	equity	markets	could	(in	addition	to affecting	directly	the	value	of	assets	administered	as	discussed	above)	influence an	investor's	decision	to	invest	or	maintain	an	investment	in	a	particular	mutual fund	or	other	pooled	investment	product.	Other	factors	beyond	our	control	may impact	the	ability	of	our	fund	clients	to	attract	or	retain	customers	or	customer funds,	including	changes	in	preferences	as	to	certain	investment	styles.	Further, to	the	extent	that	our	fund	clients'	businesses	are	adversely	affected	by	ongoing governmental	investigations	into	the	practices	of	the	mutual	and	hedge	fund industries,	our	fund	processing	business'	results	also	could	be	adversely impacted.	As	a	result	of	these	types	of	factors,	fluctuations	may	occur	in	the level	or	value	of	assets	for	which	we	provide	processing	services.	In	addition, this	regulatory	and	business	environment	is	likely	to	continue	to	result	in operating	margin	pressure	for	our	various	services.

# As	a	regulated	financial	services	firm,	we	are	subject	to	numerous governmental	regulations	and	to	comprehensive	examination	and supervision	by	regulators,	which	affects	our	business	as	well	as	our competitive	position.

PNC	is	a	bank	and	financial	holding	company	and	is	subject	to	numerous governmental	regulations	involving	both	its	business	and	organization.	PNC services	its	obligations	primarily	with	dividends	and	advances	that	it	receives from	its	subsidiaries.

Our	businesses	are	subject	to	regulation	by	multiple	bank	regulatory	bodies	as well	as	multiple	securities	industry	regulators.	Applicable	laws	and	regulations restrict	our	ability

to	repurchase	stock	or	to	receive	dividends	from	subsidiaries	that	operate	in	the banking	and	securities	business	and	impose	capital	adequacy	requirements.	They also	restrict	permissible	activities	and	investments	and	require	compliance	with protections	for	loan,	deposit,	brokerage,	fiduciary,	mutual	fund	and	other customers,	and	for	the	protection	of	customer	information,	among	other	things. The	consequences	of	noncompliance	can	include	substantial	monetary	and nonmonetary	sanctions	as	well	as	damage	to	our	reputation	and	businesses.

In	addition,	we	are	subject	to	comprehensive	examination	and	supervision	by banking	and	other	regulatory	bodies.	Examination	reports	and	ratings	(which often	are	not	publicly	available)	and	other	aspects	of	this	supervisory	framework can	materially	impact	the	conduct,	growth,	and	profitability	of	our	businesses.

Due	to	the	current	economic	environment	and	issues	facing	the	financial	services industry,	as	well	as	the	effect	of	the	change	from	the	Bush	to	the	Obama administration,	we	anticipate	new	legislative	and	regulatory	initiatives	over	the next	several	years,	including	many	focused	specifically	on	banking	and	other financial	services	in	which	we	are	engaged.	These	initiatives	will	be	in	addition to	the	actions	already	taken	by	Congress	and	the	regulators,	including	EESA	and the	Recovery	Act.	Developments	to	date,	as	well	as	those	that	come	in	the	future, have	had	and	are	likely	to	continue	to	have	an	impact	on	the	conduct	of	our business.	This	impact	could	include	rules	and	regulations	that	affect	the	nature and	profitability	of	our	business	activities,	how	we	use	our	capital,	how	we compensate	and	incent	our	employees	and	other	matters	potentially	having	a negative	effect	on	our	overall	business	results	and	prospects.

Under	the	regulations	of	the	Federal	Reserve,	a	bank	holding	company	is expected	to	act	as	a	source	of	financial	strength	for	its	subsidiary	banks.	As	a result	of	this	regulatory	policy,	the	Federal	Reserve	might	require	PNC	to commit	resources	to	its	subsidiary	banks	when	doing	so	is	not	otherwise	in	the interests	of	PNC	or	its	shareholders	or	creditors.

Our	ability	to	pay	dividends	to	shareholders	is	largely	dependent	on	dividends from	our	operating	subsidiaries,	principally	our	banking	subsidiaries.	Banks	are subject	to	regulation	on	the	amount	and	circumstances	of	dividends	they	can	pay to	their	holding	companies.	At	present,	National	City	Bank	does	not	have	any ability	to	pay	dividends,	so	we	are	primarily	relying	on	PNC	Bank,	N.A.'s dividend	capacity	to	support	our	external	dividends.

We	discuss	these	and	other	regulatory	issues	applicable	to	PNC	in	the Supervision	and	Regulation	section	included	in	Item	1	of	this	Report	and	in	Note 23	Regulatory	Matters	in	the	Notes	To	Consolidated	Financial	Statements	in Item	8	of	this	Report	and	here	by	reference.

Over	the	last	several	years,	there	has	been	an	increasing	regulatory	focus	on compliance	with	anti-money	laundering	laws	and	regulations,	resulting	in, among	other	things,	several	significant	publicly-announced	enforcement	actions. There	has	also	been	a	heightened	focus	recently,	by	customers	and	the	media	as well	as	by	regulators,	on	the	protection	of	confidential	customer	information.	A failure	to	have	adequate	procedures	to	comply	with	anti-money	laundering	laws and	regulations	or	to	protect	the	confidentiality	of	customer	information	could expose	us	to	damages,	fines	and	regulatory	penalties,	which	could	be	significant, and	could	also	injure	our	reputation	with	customers	and	others	with	whom	we	do business.

# We	must	comply	with	generally	accepted	accounting	principles	established by	the	Financial	Accounting	Standards	Board,	accounting,	disclosure	and other	rules	set	forth	by	the	SEC,	income	tax	and	other	regulations established	by	the	US	Department	of	the	Treasury,	and	revenue	rulings	and other	guidance	issued	by	the	Internal	Revenue	Service,	which	affect	our financial	condition	and	results	of	operations.

Changes	in	accounting	standards,	or	interpretations	of	those	standards,	can impact	our	revenue	recognition	and	expense	policies	and	affect	our	estimation methods	used	to	prepare	the	consolidated	financial	statements.	Changes	in income	tax	regulations,	revenue	rulings,	revenue	procedures,	and	other	guidance can	impact	our	tax	liability	and	alter	the	timing	of	cash	flows	associated	with	tax deductions	and	payments.	New	guidance	often	dictates	how	changes	to	standards and	regulations	are	to	be	presented	in	our	consolidated	financial	statements,	as either	an	adjustment	to	beginning	retained	earnings	for	the	period	or	as	income or	expense	in	current	period	earnings.	In	some	cases,	changes	may	be	applied	to previously	reported	disclosures.

# The	determination	of	the	amount	of	loss	allowances	and	impairments	taken on	our	assets	is	highly	subjective	and	could	materially	impact	our	results	of operations	or	financial	position.

The	determination	of	the	amount	of	loss	allowances	and	asset	impairments	varies by	asset	type	and	is	based	upon	our	periodic	evaluation	and	assessment	of known	and	inherent	risks	associated	with	the	respective	asset	class.	Such evaluations	and	assessments	are	revised	as	conditions	change	and	new information	becomes	available.	Management	updates	its	evaluations	regularly and	reflects	changes	in	allowances	and	impairments	in	operations	as	such evaluations	are	revised.	There	can	be	no	assurance	that	our	management	has accurately	assessed	the	level	of	impairments	taken	and	allowances	reflected	in our	financial	statements.	Furthermore,	additional	impairments	may	need	to	be taken	or	allowances	provided	for	in	the	future.	Historical	trends	may	not	be indicative	of	future	impairments	or	allowances.

# Our	asset	valuation	may	include	methodologies,	estimations	and assumptions	that	are	subject	to	differing	interpretations	and	could	result	in changes	to	asset	valuations	that	may	materially	adversely	affect	our	results of	operations	or	financial	condition.

We	must	use	estimates,	assumptions,	and	judgments	when	financial	assets	and liabilities	are	measured	and	reported	at	fair	value.	Assets	and	liabilities	carried	at fair	value	inherently	result	in	a	higher	degree	of	financial	statement	volatility. Fair	values	and	the	information	used	to	record	valuation	adjustments	for	certain assets	and	liabilities	are	based	on	quoted	market	prices	and/or	other	observable inputs	provided	by	independent	third-party	sources,	when	available.	When	such third-party	information	is	not	available,	we	estimate	fair	value	primarily	by	using cash	flows	and	other	financial	modeling	techniques	utilizing	assumptions	such	as credit	quality,	liquidity,	interest	rates	and	other	relevant	inputs.	Changes	in underlying	factors,	assumptions,	or	estimates	in	any	of	these	areas	could materially	impact	our	future	financial	condition	and	results	of	operations.

During	periods	of	market	disruption,	including	periods	of	significantly	rising	or high	interest	rates,	rapidly	widening	credit	spreads	or	illiquidity,	it	may	be difficult	to	value	certain	of	our	assets	if	trading	becomes	less	frequent	and/or market	data	becomes	less	observable.	There	may	be	certain	asset	classes	that were	in	active	markets	with	significant	observable	data	that	become	illiquid	due to	the	current	financial	environment.	In	such	cases,	certain	asset	valuations	may require	more	subjectivity	and	management	judgment.	As	such,	valuations	may include	inputs	and	assumptions	that	are	less	observable	or	require	greater estimation.	Further,	rapidly	changing	and	unprecedented	credit	and	equity market	conditions	could	materially	impact	the	valuation	of	assets	as	reported within	our	consolidated	financial	statements,	and	the	period-to-period	changes	in value	could	vary	significantly.	Decreases	in	value	may	have	a	material	adverse effect	on	our	results	of	operations	or	financial	condition.

# Our	business	and	financial	performance	could	be	adversely	affected, directly	or	indirectly,	by	natural	disasters,	by	terrorist	activities	or	by international	hostilities.

The	impact	of	natural	disasters,	terrorist	activities	and	international	hostilities cannot	be	predicted	with	respect	to	severity	or	duration.	However,	any	of	these could	impact	us	directly	(for	example,	by	causing	significant	damage	to	our facilities	or	preventing	us	from	conducting	our	business	in	the	ordinary	course), or	could	impact	us	indirectly	through	a	direct	impact	on	our	borrowers, depositors,	other	customers,	suppliers	or	other	counterparties.	We	could	also suffer	adverse	consequences	to	the	extent	that	natural	disasters,	terrorist	activities or	international	hostilities	affect	the	economy	and	capital	and	other	financial markets	generally.	These	types	of	impacts	could	lead,	for	example,	to	an increase	in	delinquencies,	bankruptcies	or	defaults	that	could	result	in	our experiencing	higher	levels	of	nonperforming	assets,	net	charge-offs	and provisions	for	credit	losses.

Our	ability	to	mitigate	the	adverse	consequences	of	such	occurrences	is	in	part dependent	on	the	quality	of	our	resiliency	planning,	including	our	ability	to anticipate	the	nature	of	any	such	event	that	occurs.	The	adverse	impact	of	natural disasters	or	terrorist	activities	or	international	hostilities	also	could	be	increased to	the	extent	that	there	is	a	lack	of	preparedness	on	the	part	of	national	or regional	emergency	responders	or	on	the	part	of	other	organizations	and businesses	that	we	deal	with,	particularly	those	that	we	depend	upon.

# ITEM	1B	–	UNRESOLVED	STAFF	COMMENTS

There	are	no	SEC	staff	comments	regarding	PNC's	periodic	or	current	reports under	the	Exchange	Act	that	are	pending	resolution.

# ITEM	2	–	PROPERTIES

Our	executive	and	administrative	offices	are	located	at	One	PNC	Plaza, Pittsburgh,	Pennsylvania.	The	thirty-story	structure	is	owned	by	PNC	Bank,	N. A.	We	occupy	the	entire	building.	In	addition,	PNC	Bank,	N.A.	owns	a	thirty- four	story	structure	adjacent	to	One	PNC	Plaza,	known	as	Two	PNC	Plaza,	that houses	additional	office	space.

We	own	or	lease	numerous	other	premises	for	use	in	conducting	business activities,	including	operations	centers,	offices,	and	branch	and	other	facilities. We	consider	the	facilities	owned	or	occupied	under	lease	by	our	subsidiaries	to be	adequate.	We	include	here	by	reference	the	additional	information	regarding our	properties	in	Note	11	Premises,	Equipment	and	Leasehold	Improvements	in the	Notes	To	Consolidated	Financial	Statements	in	Item	8	of	this	Report.

# ITEM	3	–	LEGAL	PROCEEDINGS

See	the	information	set	forth	in	Note	24	Legal	Proceedings	included	in	the	Notes to	Consolidated	Financial	Statements	in	Item	8	of	this	Report,	which	is incorporated	here	by	reference.

National	City	has	agreed	to	pay	a	penalty	of	$200,000	imposed	under	section 6707	A(b)(2)	of	the	Internal	Revenue	Code	for	failure	to	include	certain reportable	transaction	information	in	its	2004	federal	income	tax	return	related	to a	listed	transaction.	We	expect	to	pay	the	penalty	in	2009.

# ITEM	4	–	SUBMISSION	OF	MATTERS	TO	A	VOTE	OF	SECURITY HOLDERS

A	special	meeting	of	shareholders	of	The	PNC	Financial	Services	Group,	Inc. was	held	on	December	23,	2008	for	the	purpose	of	considering	and	acting	upon the	following	matters:	(1)	a	proposal	to	approve	the	issuance	of	shares	of	PNC common	stock	as	contemplated	by	the	Agreement	and	Plan	of	Merger,	dated	as of	October	24,	2008,	by	and	between	The	PNC	Financial	Services	Group,	Inc. and	National	City	Corporation,	as	such	agreement	may	be	amended	from	time	to time;	and	(2)	a	proposal	to	approve	the	adjournment	of	the

special	meeting,	if	necessary	or	appropriate,	to	solicit	additional	proxies,	in	the event	that	there	were	not	sufficient	votes	at	the	time	of	the	special	meeting	to approve	the	proposal	described	under	(1)	above.

Based	on	a	total	of	approximately	348.5	million	eligible	votes,	approximately 266	million	votes,	or	76%	of	the	total,	were	cast.	The	votes	cast	included	votes for	or	against	either	proposal,	as	well	as	abstentions.

The	proposal	to	approve	the	issuance	of	shares	of	PNC	common	stock	in connection	with	PNC's	acquisition	of	National	City	was	ratified	and	the aggregate	votes	cast	for	or	against	and	the	abstentions	were	as	follows:

The	proposal	to	approve	the	adjournment	of	the	special	meeting,	if	necessary, was	ratified	and	the	aggregate	votes	cast	for	or	against	and	the	abstentions	were as	follows	(there	were	also	1,550	non-votes):

With	respect	to	all	of	the	preceding	matters,	holders	of	our	common	and	voting preferred	stock	voted	together	as	a	single	class.	The	following	table	sets	forth,	as of	the	November	14,	2008	record	date,	the	number	of	shares	of	each	class	or series	of	stock	that	were	issued	and	outstanding	and	entitled	to	vote,	the	voting power	per	share,	and	the	aggregate	voting	power	of	each	class	or	series:

*Represents	greatest	number	of	votes	possible.	Actual	aggregate	voting	power	was	less	since	each	holder of	voting	preferred	stock	was	entitled	to	a	number	of	votes	equal	to	the	number	of	full	shares	of common	stock	into	which	such	holder's	preferred	stock	was	convertible.

# EXECUTIVE	OFFICERS	OF	THE	REGISTRANT	Information	regarding	each	of

our	executive	officers	as	of	February	17,	2009	is	set	forth	below.	Executive officers	do	not	have	a	stated	term	of	office.	Each	executive	officer	has	held	the position	or	positions	indicated	or	another	executive	position	with	the	same	entity or	one	of	its	affiliates	for	the	past	five	years	unless	otherwise	indicated	below.

| Name | Age | Position	with	PNC | Employed	(1) |
| :--- | :--- | :--- | :--- |
| James\tE.\tRohr | 60 | Chairman\tand\tChief | 1972 |
|  |  | Executive\tOfficer\t(2) |  |
| Joseph\tC.\tGuyaux | 58 | President | 1972 |
| William\tS.\tDemchak | 46 | Senior\tVice\tChairman | 2002 |
| Timothy\tG.\tShack | 58 | Vice\tChairman | 1976 |
| Thomas\tK.\tWhitford | 52 | Vice\tChairman | 1983 |
| Joan\tL.\tGulley | 61 | Executive\tVice\tPresident\tand | 1986 |
|  |  | Chief\tHuman\tResources |  |
|  |  | Officer |  |
| Michael\tJ.\tHannon | 52 | Executive\tVice\tPresident\tand | 1982 |
|  |  | Chief\tRisk\tOfficer |  |
| Richard\tJ.\tJohnson | 52 | Executive\tVice\tPresident\tand | 2002 |
|  |  | Chief\tFinancial\tOfficer |  |
| Helen\tP.\tPudlin | 59 | Executive\tVice\tPresident\tand | 1989 |
|  |  | General\tCounsel |  |
| Robert\tQ.\tReilly | 44 | Executive\tVice\tPresident | 1987 |
| Samuel\tR.\tPatterson | 50 | Senior\tVice\tPresident\tand | 1986 |
|  |  | Controller |  |
| John\tJ.\tWixted,\tJr. | 57 | Senior\tVice\tPresident | 2002 |

(1)Where	applicable,	refers	to	year	employed	by	predecessor	company. (2)Also	serves	as	a	director	of	PNC.

William	S.	Demchak	was	appointed	Senior	Vice	Chairman	in	February	2009.	He joined	PNC	as	Vice	Chairman	and	Chief	Financial	Officer	in	September	2002. Since	August	2005,	he	has	had	oversight	responsibilities	for	the	Corporation's Corporate	&	Institutional	Banking	business.	He	also	oversees	PNC's	asset	and liability	management	and	equity	management	activities.

Timothy	G.	Shack	was	appointed	Vice	Chairman	in	February	2009.	He	was Executive	Vice	President	from	July	1991	to	February	2009,	and	also	served	as Chief	Information	Officer	from	April	1998	to	May	2008.

Thomas	K.	Whitford	was	appointed	Vice	Chairman	in	February	2009.	He	was appointed	Chief	Administrative	Officer	in	May	2007.	From	April	2002	through May	2007,	he	served	as	Chief	Risk	Officer.

Joan	L.	Gulley	was	Chief	Executive	Officer	for	PNC's	wealth	management business	from	2002	to	2006.	In	2006	she	was	appointed	Executive	Vice President	of	PNC	Bank,	N.A.	and	was	responsible	for	product	and	segment management,	as	well	as	advertising	and	brand	management	for	PNC.	In	April 2008	she	was	appointed	Senior	Vice	President	and	Chief	Human	Resources Officer	for	PNC	and	in	February	2009	she	was	appointed	Executive	Vice President	of	PNC.

Michael	J.	Hannon	was	appointed	Executive	Vice	President	and	Chief	Risk Officer	in	February	2009	and	was	previously	Senior	Vice	President	and	Chief Credit	Officer.

Richard	J.	Johnson	joined	PNC	in	December	2002	and	served	as	Senior	Vice President	and	Director	of	Finance	until	his	appointment	as	Chief	Financial Officer	of	the	Corporation	effective	in	August	2005.	He	was	appointed Executive	Vice	President	in	February	2009.

Helen	P.	Pudlin	was	appointed	Executive	Vice	President	and	General	Counsel	in February	2009	and	was	previously	Senior	Vice	President	and	General	Counsel.

Robert	Q.	Reilly	joined	PNC	Bank,	N.A.	in	September	1987.	He	serves	as	the lead	of	PNC's	wealth	management	business,	and	in	February	2009	he	was appointed	Executive	Vice	President	of	PNC.

John	J.	Wixted,	Jr.	joined	PNC	as	Senior	Vice	President	and	Chief	Regulatory Officer	in	August	2002.	From	May	2007	until	February	2009,	he	also	served	as Chief	Risk	Officer.

DIRECTORS	OF	THE	REGISTRANT	The	name,	age	and	principal	occupation	of each	of	our	directors	as	of	February	17,	2009,	and	the	year	he	or	she	first became	a	director	is	set	forth	below:

•	Richard	O.	Berndt,	66,	Managing	Partner	of	Gallagher,	Evelius	&	Jones LLP	(law	firm)	(2007)

•	Charles	E.	Bunch,	59,	Chairman	and	Chief	Executive	Officer	of	PPG Industries,	Inc.	(coatings,	sealants	and	glass	products)	(2007)

•	Paul	W.	Chellgren,	66,	Operating	Partner,	SPG	Partners,	LLC,	(private equity)	(1995)

•	Robert	N.	Clay,	62,	President	and	Chief	Executive	Officer	of	Clay	Holding Company	(investments)	(1987)

•	George	A.	Davidson,	Jr.,	70,	Retired	Chairman	of	Dominion	Resources,

Inc.	(public	utility	holding	company)	(1988)

•	Kay	Coles	James,	59,	President	and	Founder	of	The	Gloucester	Institute

•	Richard	B.	Kelson,	62,	Operating	Advisor,	Pegasus	Capital	Advisors,	L.P.,

•	Bruce	C.	Lindsay,	67,	Chairman	and	Managing	Member	of	2117

Associates,	LLC	(advisory	company)	(1995)

•	Anthony	A.	Massaro,	64,	Retired	Chairman	and	Chief	Executive	Officer	of

Lincoln	Electric	Holdings,	Inc.	(manufacturer	of	welding	and	cutting products)	(2002)

•	Jane	G.	Pepper,	63,	President	of	Pennsylvania	Horticultural	Society	(non- profit)	(1997)

•	James	E.	Rohr,	60,	Chairman	and	Chief	Executive	Officer	of	PNC	(1990) •	Donald	J.	Shepard,	62,	Retired	Chairman	of	the	Executive	Board	and	Chief Executive	Officer,	AEGON	N.V.	(insurance)	(2007)

•	Lorene	K.	Steffes,	63,	Independent	Business	Advisor	(technology	and technical	services)	(2000)

•	Dennis	F.	Strigl,	62,	President	and	Chief	Operating	Officer	of	Verizon Communications	Inc.	(telecommunications)	(2001)

•	Stephen	G.	Thieke,	62,	Retired	Chairman,	Risk	Management	Committee	of JP	Morgan	Incorporated	(financial	and	investment	banking	services)	(2002) •	Thomas	J.	Usher,	66,	Chairman	of	Marathon	Oil	Corporation	(oil	and	gas industry)	(1992)

•	George	H.	Walls,	Jr.,	66,	former	Chief	Deputy	Auditor	of	the	State	of North	Carolina	(2006)

•	Helge	H.	Wehmeier,	66,	Retired	President	and	Chief	Executive	Officer	of Bayer	Corporation	(healthcare,	crop	protection,	and	chemicals)	(1992)

# PART	II

# ITEM	5	–	MARKET	FOR	REGISTRANT'S	COMMON	EQUITY, RELATED	STOCKHOLDER	MATTERS	AND	ISSUER	PURCHASES OF	EQUITY	SECURITIES

(a)	Our	common	stock	is	listed	on	the	New	York	Stock	Exchange	and	is	traded under	the	symbol	"PNC."	At	the	close	of	business	on	February	17,	2009,	there were	79,036	common	shareholders	of	record.

Holders	of	PNC	common	stock	are	entitled	to	receive	dividends	when	declared by	the	Board	of	Directors	out	of	funds	legally	available	for	this	purpose.	Our Board	of	Directors	may	not	pay	or	set	apart	dividends	on	the	common	stock until	dividends	for	all	past	dividend	periods	on	any	series	of	outstanding preferred	stock	have	been	paid	or	declared	and	set	apart	for	payment.	The	Board presently	intends	to	continue	the	policy	of	paying	quarterly	cash	dividends. However,	on	March	1,	2009,	the	Board	decided	to	reduce	PNC's	quarterly common	stock	dividend	from	$0.66	to	$0.10	per	share.	The	next	dividend	is expected	to	be	declared	in	early	April	2009.	The	amount	of	any	future	dividends will	depend	on	economic	and	market	conditions,	our	financial	condition	and operating	results,	and	other	factors,	including	contractual	restrictions	and applicable	government	regulations	and	policies	(such	as	those	relating	to	the ability	of	bank	and	non-bank	subsidiaries	to	pay	dividends	to	the	parent company).

The	Risk	Factors	section	of	Item	1A	of	this	Report	and	Note	19	Shareholders' Equity	in	the	Notes	To	Consolidated	Financial	Statements	in	Item	8	of	this Report,	which	we	include	here	by	reference,	describe	restrictions	on	dividends and	common	share	repurchases	associated	with	our	December	31,	2008	issuance of	preferred	stock	to	the	US	Department	of	the	Treasury	under	the	TARP	Capital Purchase	Program.	In	addition,	the	Federal	Reserve	has	the	power	to	prohibit	us from	paying	dividends	without	its	approval.	For	further	information	concerning dividend	restrictions	and	restrictions	on	loans,	dividends	or	advances	from	bank subsidiaries	to	the	parent	company,	you	may	review

"Supervision	and	Regulation"	in	Item	1	of	this	Report,	"Funding	and	Capital Sources"	in	the	Consolidated	Balance	Sheet	Review	section,	"Liquidity	Risk Management"	in	the	Risk	Management	section,	and	"Perpetual	Trust	Securities", "PNC	Capital	Trust	E	Trust	Preferred	Securities"	and	"Acquired	Entity	Trust Preferred	Securities"	in	the	Off-Balance	Sheet	Arrangements	and	VIEs	section of	Item	7	of	this	Report,	and	Note	23	Regulatory	Matters	in	the	Notes	To Consolidated	Financial	Statements	in	Item	8	of	this	Report,	which	we	include here	by	reference.

We	include	here	by	reference	additional	information	relating	to	PNC	common stock	under	the	caption	"Common	Stock	Prices/Dividends	Declared"	in	the Statistical	Information	(Unaudited)	section	of	Item	8	of	this	Report.

We	include	here	by	reference	the	information	regarding	our	compensation	plans under	which	PNC	equity	securities	are	authorized	for	issuance	as	of December	31,	2008	in	the	table	(with	introductory	paragraph	and	notes)	that appears	under	Item	12	of	this	Report.

Our	registrar,	stock	transfer	agent,	and	dividend	disbursing	agent	is: Computershare	Investor	Services,	LLC 250	Royall	Street Canton,	MA	02021 800-982-7652

We	include	here	by	reference	the	information	that	appears	under	the	caption "Common	Stock	Performance	Graph"	at	the	end	of	this	Item	5.

# (b)	Not	applicable.

(c)	Details	of	our	repurchases	of	PNC	common	stock	during	the	fourth	quarter	of 2008	are	included	in	the	following	table:

In	thousands,	except	per	share	data

|  |  |  |  | Maximum |
| :--- | :--- | :--- | :--- | :--- |
|  |  |  | Total\tshares | number\tof |
|  |  |  | purchased\tas | shares\tthat |
|  |  | Average | part\tof | may\tyet\tbe |
|  | Total\tshares | price | publicly | purchased |
|  | purchased | paid\tper | announced | under\tthe |
| 2008\tperiod | (a)\t(b) | share | programs\t(c) | programs\t(c) |
| October\t1\t– |  |  |  |  |
| October\t31 | 247 | $67.37 |  | 24,710 |
| November\t1\t–\nNovember\t30 | 186 | $62.13 |  | 24,710 |
| December\t1\t–\nDecember\t31 | 143 | $49.13 |  | 24,710 |
| Total | 576 | $61.16 |  |  |

(a)Under	the	US	Treasury's	TARP	Capital	Purchase	Program,	there	are	restrictions	on	dividends	and common	share	repurchases	associated	with	the	preferred	stock	that	we	issued	to	the	US	Treasury under	that	program	on	December	31,	2008.	As	is	typical	with	cumulative	preferred	stocks,	dividend payments	for	this	preferred	must	be	current	before	dividends	can	be	paid	on	junior	shares,	including our	common	stock,	or	junior	shares	can	be	repurchased	or	redeemed.	Also,	the	US	Treasury's	consent will	be	required	for	any	increase	in	common	dividends	per	share	above	the	most	recent	level	prior	to October	14,	2008	until	the	third	anniversary	of	the	preferred	issuance	unless	all	of	that	preferred	has been	redeemed	or	is	no	longer	held	by	the	US	Treasury.	Further,	during	that	same	period,	the	US Treasury's	consent	will	be

required,	unless	the	preferred	stock	is	no	longer	held	by	the	US	Treasury,	for	any	share	repurchases with	limited	exceptions,	most	significantly	purchases	of	common	shares	in	connection	with	any benefit	plan	in	the	ordinary	course	of	business	consistent	with	past	practice.

(b)Reflects	PNC	common	stock	purchased	in	connection	with	our	various	employee	benefit	plans.	No shares	were	purchased	under	the	program	referred	to	in	note	(c)	to	this	table	during	the	fourth	quarter of	2008.

(c)Our	current	stock	repurchase	program	allows	us	to	purchase	up	to	25	million	shares	on	the	open market	or	in	privately	negotiated	transactions.	This	program	was	authorized	on	October	4,	2007	and will	remain	in	effect	until	fully	utilized	or	until	modified,	superseded	or	terminated.

# Common	Stock	Performance	Graph

This	graph	shows	the	cumulative	total	shareholder	return	(i.e.,	price	change	plus reinvestment	of	dividends)	on	our	common	stock	during	the	five-year	period ended	December	31,	2008,	as	compared	with:	(1)	a	selected	peer	group	of	our competitors,	called	the	"Peer	Group;"	(2)	an	overall	stock	market	index,	the	S&P 500	Index;	and	(3)	a	published	industry	index,	the	S&P	500	Banks.	The	yearly points	marked	on	the	horizontal	axis	of	the	graph	correspond	to	December	31	of that	year.	The	stock	performance	graph	assumes	that	$100	was	invested	on January	1,	2004	for	the	five-year	period	and	that	any	dividends	were	reinvested. The	table	below	the	graph	shows	the	resultant	compound	annual	growth	rate	for the	performance	period.

|  | Dec	03 | Dec	04 | Dec	05 | Dec	06 | Dec	07 | Dec	08 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| PNC | $100 | 108.92 | 121.63 | 150.33 | 137.87 | 107.29 | 1.42% |
| S&P\t500\tIndex | $100 | 110.88 | 116.32 | 134.69 | 142.09 | 89.52 | (2.19)% |
| S&P\t500\tBanks | $100 | 114.44 | 112.80 | 130.99 | 91.98 | 48.29 | (13.55)% |
| Peer\tGroup | $100 | 112.86 | 113.85 | 133.00 | 94.06 | 45.03 | (14.75)% |

The	Peer	Group	for	the	preceding	chart	and	table	consists	of	the	following companies:	BB&T	Corporation;	Comerica	Inc.;	Fifth	Third	Bancorp;	KeyCorp; National	City	Corporation;	The	PNC	Financial	Services	Group,	Inc.;	SunTrust Banks,	Inc.;	U.S.	Bancorp.;	Wachovia	Corporation;	Regions	Financial Corporation;	and	Wells	Fargo	&	Co.	This	Peer	Group	was	approved	by	the Board's	Personnel	and	Compensation	Committee	(the	"Committee")	for	2008. As	of	December	31,	2008,	Wells	Fargo	&	Co.	acquired	Wachovia	Corporation and	PNC	acquired	National	City	Corporation.	Typically,	the	Committee	reviews the	makeup	of	the	peer	group	annually.	Due	to	the	many	changes	in	the	financial industry	generally,	PNC's	substantially	increased	size	and	scope	at	the	beginning of	2009,	and	a	significant	number	of	mergers	and	other	changes	with	respect	to PNC's	2008	peers	and	other	industry	leaders,	the	Committee	has	changed	the peer	group	for	2009	to	consist	of	the	following	companies:	BB&T	Corporation; Bank	of	America	Corporation;	Capital	One	Financial,	Inc.;	Comerica	Inc.;	Fifth Third	Bancorp;	JPMorgan	Chase;	KeyCorp;	M&T	Bank;	Regions	Financial Corporation;	SunTrust	Banks,	Inc.;	U.S.	Bancorp;	and	Wells	Fargo	&	Co.

Each	yearly	point	for	the	Peer	Group	is	determined	by	calculating	the	cumulative total	shareholder	return	for	each	company	in	the	Peer	Group	from	December	31, 2003	to	December	31	of	that	year	(End	of	Month	Dividend	Reinvestment Assumed)	and	then	using	the	median	of	these	returns	as	the	yearly	plot	point.

In	accordance	with	the	rules	of	the	SEC,	this	section,	captioned	"Common	Stock Performance	Graph,"	shall	not	be	incorporated	by	reference	into	any	of	our future	filings	made	under	the	Securities	Exchange	Act	of	1934	or	the	Securities Act	of	1933.	The	Common	Stock	Performance	Graph,	including	its accompanying	table	and	footnotes,	is	not	deemed	to	be	soliciting	material	or	to be	filed	under	the	Exchange	Act	or	the	Securities	Act.

# ITEM	6	–	SELECTED	FINANCIAL	DATA

|  |  | Year	ended	December	31 | Year	ended	December	31 |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Dollars\tin\tmillions,\texcept\tper\tshare\tdata | \t 2008\t(a) | 2007 | \t 2006\t(b) | 2005 | 2004 |
| SUMMARY\tOF\tOPERATIONS |  |  |  |  |  |
| Interest\tincome | $6,313 | $\t\t\t\t6,166 | $4,612 | $\t\t\t\t3,734 | $\t\t\t\t2,752 |
| Interest\texpense | 2,490 | 3,251 | 2,367 | 1,580 | 783 |
| Net\tinterest\tincome | 3,823 | 2,915 | 2,245 | 2,154 | 1,969 |
| Noninterest\tincome | 3,367 | 3,790 | 6,327 | 4,173 | 3,572 |
| Total\trevenue | 7,190 | 6,705 | 8,572 | 6,327 | 5,541 |
| Provision\tfor\tcredit\tlosses\t(c) | 1,517 | 315 | 124 | 21 | 52 |
| Noninterest\texpense | 4,430 | 4,296 | 4,443 | 4,306 | 3,712 |
| Income\tbefore\tminority\tinterests\tand\tincome\ttaxes | 1,243 | 2,094 | 4,005 | 2,000 | 1,777 |
| Minority\tinterest\tin\tincome\tof\tBlackRock |  |  | 47 | 71 | 42 |
| Income\ttaxes | 361 | 627 | 1,363 | 604 | 538 |
| Net\tincome | $882 | $1,467 | $2,595 | $1,325 | $1,197 |
| PER\tCOMMON\tSHARE |  |  |  |  |  |
| Basic\tearnings | $2.50 | $4.43 | $8.89 | $4.63 | $4.25 |
| Diluted\tearnings | $2.46 | $4.35 | $8.73 | $4.55 | $4.21 |
| Book\tvalue\t(d) | $39.44 | $43.60 | $36.80 | $29.21 | $26.41 |
| Cash\tdividends\tdeclared | $2.61 | $2.44 | $2.15 | $2.00 | $2.00 |
| SELECTED\tRATIOS |  |  |  |  |  |
| Net\tinterest\tmargin\t(e) | 3.37% | 3.00% | 2.92% | 3.00% | 3.22% |
| Noninterest\tincome\tto\ttotal\trevenue | 47 | 57 | 74 | 66 | 64 |
| Efficiency | 62 | 64 | 52 | 68 | 67 |
| Return\ton |  |  |  |  |  |
| Average\ttangible\tcommon\tshareholders'\tequity | 17.70 | 22.65 | 48.74 | 30.64 | 29.90 |
| Average\tcommon\tshareholders'\tequity | 6.28 | 10.53 | 27.97 | 16.58 | 16.82 |
| Average\tassets | .62 | 1.19 | 2.73 | 1.50 | 1.59 |
| Loans\tto\tdeposits\t(d) | 91 | 83 | 76 | 81 | 82 |
| Dividend\tpayout | 104.6 | 55.0 | 24.4 | 43.4 | 47.2 |
| Tier\t1\trisk-based\tcapital\t(d) | 9.7 | 6.8 | 10.4 | 8.3 | 9.0 |
| Common\tshareholders'\tequity\tto\ttotal\tassets\t(d) | 6.0 | 10.7 | 10.6 | 9.3 | 9.4 |
| Average\tcommon\tshareholders'\tequity\tto\taverage\tassets | 9.6 | 11.3 | 9.8 | 9.0 | 9.4 |
| (a) |  |  |  |  |  |

(a) The	2008	Consolidated	Income	Statement	does	not	include	operating	results	of	National	City.

(b) The	2007	Versus	2006	Consolidated	Income	Statement	Review	section	of	Item	7	of	this	Report	describes	certain	items	impacting	2006	results.

(c) Amount	for	2008	included	$504	million	conforming	provision	for	credit	losses	related	to	our	National	City	acquisition. (d) At	December	31.

(e) Calculated	as	annualized	taxable-equivalent	net	interest	income	divided	by	average	earning	assets.	The	interest	income	earned	on	certain	earning	assets	is completely	or	partially	exempt	from	federal	income	tax.	As	such,	these	tax-exempt	instruments	typically	yield	lower	returns	than	taxable	investments.	To	provide more	meaningful	comparisons	of	margins	for	all	earning	assets,	we	use	net	interest	income	on	a	taxable-equivalent	basis	in	calculating	net	interest	margin	by increasing	the	interest	income	earned	on	tax-exempt	assets	to	make	it	fully	equivalent	to	interest	income	earned	on	taxable	investments.	This	adjustment	is	not permitted	under	GAAP	in	the	Consolidated	Income	Statement.	The	taxable-equivalent	adjustments	to	net	interest	income	for	the	years	2008,	2007,	2006,	2005	and 2004	were	$36	million,	$27	million,	$25	million,	$33	million	and	$20	million,	respectively.

Certain	prior-period	amounts	have	been	reclassified	to	conform	with	the	current	period	presentation,	which	we	believe	is	more	meaningful	to	readers	of	our	consolidated financial	statements.	See	Note	2	Acquisitions	and	Divestitures	in	the	Notes	To	Consolidated	Financial	Statements	in	Item	8	of	this	Report	for	information	on	significant recent	business	acquisitions	and	divestitures,	including	our	December	31,	2008	acquisition	of	National	City	Corporation.	For	information	regarding	certain	business risks,	see	Item	1A	Risk	Factors	and	the	Risk	Management	section	of	Item	7	of	this	Report.	Also,	see	our	Cautionary	Statement	Regarding	Forward-Looking	Information included	in	Item	7	of	this	Report	for	certain	risks	and	uncertainties	that	could	cause	actual	results	to	differ	materially	from	those	anticipated	in	forward-looking statements	or	from	historical	performance.

| Dollars	in	millions,	except	as	noted | 2008	(a) | 2007 | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| BALANCE\tSHEET\tHIGHLIGHTS |  |  |  |  |  |
| Assets | $291,081 | $138,920 | $101,820 | $91,954 | $79,723 |
| Loans | 175,489 | 68,319 | 50,105 | \t 49,101 | \t 43,495 |
| Allowance\tfor\tloan\tand\tlease\tlosses | 3,917 | 830 | 560 | 596 | 607 |
| Investment\tsecurities | 43,473 | 30,225 | 23,191 | \t 20,710 | \t 16,761 |
| Loans\theld\tfor\tsale | 4,366 | 3,927 | 2,366 | 2,449 | 1,670 |
| Goodwill | 8,868 | 8,405 | 3,402 | 3,619 | 3,001 |
| Equity\tinvestments\t(b) | 8,554 | 6,045 | 5,330 | 1,323 | 1,058 |
| Deposits | 192,865 | 82,696 | 66,301 | \t 60,275 | \t 53,269 |
| Borrowed\tfunds\t(c) | 52,240 | 30,931 | 15,028 | \t 16,897 | \t 11,964 |
| Shareholders'\tequity | 25,422 | 14,854 | 10,788 | 8,563 | 7,473 |
| Common\tshareholders'\tequity | 17,490 | 14,847 | 10,781 | 8,555 | 7,465 |
| ASSETS\tADMINISTERED\t(in\tbillions) |  |  |  |  |  |
| Managed\t(d) | $110 | $74 | $55 | $495 | $383 |
| Nondiscretionary | 125 | 112 | 85 | 83 | 93 |
| FUND\tASSETS\tSERVICED\t(in\tbillions) |  |  |  |  |  |
| Accounting/administration\tnet\tassets | $839 | $990 | $837 | $835 | $721 |
| Custody\tassets | 379 | 500 | 427 | 476 | 451 |
| SELECTED\tSTATISTICS |  |  |  |  |  |
| Period-end\temployees | 59,595 | 28,320 | 23,783 | \t 25,348 | \t 24,218 |
| Branches | 2,589 | 1,109 | 852 | 839 | 776 |
| ATMs | 6,232 | 3,900 | 3,581 | 3,721 | 3,581 |
| Residential\tmortgage\tservicing\tportfolio\t(in\tbillions) | $187 |  |  |  |  |
| Commercial\tmortgage\tservicing\tportfolio\t(in\tbillions) | $286 | $243 | $200 | $136 | $98 |
| (a) |  |  |  |  |  |

(a) Information	at	December	31,	2008	includes	the	impact	of	National	City	Corporation,	which	we	acquired	as	of	that	date.

(d) Assets	under	management	at	December	31,	2008,	2007	and	2006	do	not	include	BlackRock's	assets	under	management	as	we	deconsolidated	BlackRock	effective September	29,	2006.

# ITEM	7	–	MANAGEMENT'S	DISCUSSION	AND	ANALYSIS	OF

# FINANCIAL	CONDITION	AND	RESULTS	OF	OPERATIONS

# EXECUTIVE	SUMMARY

PNC	is	one	of	the	largest	diversified	financial	services	companies	in	the	United States	based	on	assets	and	is	headquartered	in	Pittsburgh,	Pennsylvania.

As	described	further	below,	on	December	31,	2008,	PNC	acquired	National	City Corporation	("National	City"),	nearly	doubling	our	assets	to	a	total	of	$291 billion	and	expanding	our	total	consolidated	deposits	to	$193	billion.	Our Consolidated	Balance	Sheet	includes	the	impact	of	National	City	as	of December	31,	2008.

Prior	to	the	acquisition,	PNC	had	businesses	engaged	in	retail	banking,	corporate and	institutional	banking,	asset	management,	and	global	investment	servicing, providing	many	of	its	products	and	services	nationally	and	others	in	PNC's primary	geographic	markets	located	in	Pennsylvania,	New	Jersey,	Washington, DC,	Maryland,	Virginia,	Ohio,	Kentucky	and	Delaware.	PNC	also	provided certain	investment	servicing	internationally.

National	City's	primary	businesses	prior	to	its	acquisition	by	PNC	included commercial	and	retail	banking,	mortgage	financing	and	servicing,	consumer finance	and	asset	management,	operating	through	an	extensive	network	in	Ohio, Florida,	Illinois,	Indiana,	Kentucky,	Michigan,	Missouri,	Pennsylvania	and Wisconsin.	National	City	also	conducted	selected	consumer	lending	businesses and	other	financial	services	on	a	nationwide	basis.

PNC	is	now	in	the	process	of	integrating	the	business	and	operations	of	National City	with	those	of	PNC.

# KEY	STRATEGIC	GOALS

We	manage	our	company	for	the	long	term	and	are	focused	on	returning	to	a moderate	risk	profile	while	maintaining	strong	capital	and	liquidity	positions, investing	in	our	markets	and	products,	and	embracing	our	corporate responsibility	to	the	communities	where	we	do	business.

Our	strategy	to	enhance	shareholder	value	centers	on	driving	positive	operating leverage	by	achieving	growth	in	revenue	from	our	balance	sheet	and	diverse business	mix	that	exceeds	growth	in	expenses	controlled	through	disciplined	cost management.	In	each	of	our	current	business	segments,	the	primary	drivers	of revenue	growth	are	the	acquisition,	expansion	and	retention	of	customer relationships.	We	strive	to	expand	our	customer	base	by	offering	convenient banking	options	and	leading	technology	solutions,	providing	a	broad	range	of fee-based	and	credit	products	and	services,	focusing	on	customer	service,	and through	a	significantly	enhanced	branding	initiative.	We	may	also	grow	revenue through

appropriate	and	targeted	acquisitions	and,	in	certain	businesses,	by	expanding into	new	geographical	markets.

We	are	focused	on	our	strategies	for	quality	growth.	We	are	committed	to returning	to	a	moderate	risk	profile	characterized	by	disciplined	credit management	and	limited	exposure	to	earnings	volatility	resulting	from	interest rate	fluctuations	and	the	shape	of	the	interest	rate	yield	curve.	Our	actions	have created	a	well-positioned	and	strong	balance	sheet,	ample	liquidity	and investment	flexibility	to	adjust,	where	appropriate	and	permissible,	to	changing interest	rates	and	market	conditions.

We	continue	to	be	disciplined	in	investing	capital	in	our	businesses	while returning	a	portion	to	shareholders	through	dividends	and	share	repurchases when	appropriate	and	permissible.	See	the	Funding	and	Capital	Sources	section of	the	Consolidated	Balance	Sheet	Review	section	and	the	Liquidity	Risk Management	section	of	this	Financial	Review	regarding	certain	restrictions	on dividends	and	common	share	repurchases	resulting	from	PNC's	participation	in the	US	Treasury's	Troubled	Asset	Relief	Program	("TARP")	Capital	Purchase Program	and	dividend	capacity.

On	March	1,	2009,	the	Board	decided	to	reduce	PNC's	quarterly	common	stock dividend	from	$0.66	to	$0.10	per	share.	The	next	dividend	is	expected	to	be declared	in	early	April	2009.	Our	Board	recognizes	the	importance	of	the dividend	to	our	shareholders.	While	our	overall	capital	and	liquidity	positions	are strong,	extreme	economic	and	market	deterioration	and	the	changing	regulatory environment	drove	this	difficult	but	prudent	decision.	This	proactive	measure will	help	us	build	capital,	further	strengthen	our	balance	sheet	and	continue	to serve	our	customers.

Following	the	closing,	PNC	received	$7.6	billion	from	the	US	Department	of	the Treasury	under	the	Emergency	Economic	Stabilization	Act	of	2008	in	exchange for	the	issuance	of	preferred	stock	and	a	warrant.	These	proceeds	were	used	to enhance	National	City	Bank's	regulatory	capital	position	to	well-capitalized	in order	to	continue	serving	the	credit	and	deposit	needs	of	existing	and	new customers.	On	a	consolidated	basis,	these	proceeds	resulted	in	further improvement	to	our	capital	and	liquidity	positions.

National	City,	based	in	Cleveland,	Ohio,	was	one	of	the	nation's	largest commercial	banking	organizations	based	on	assets.	We	expect	to	incur	total merger	and	integration	costs	of	approximately	$1.2	billion	in	connection	with	the acquisition	of	National	City,	including	$575	million	recognized	in	the	fourth quarter	of	2008.	The	transaction	is	expected	to	result	in	the	reduction	of approximately	$1.2	billion	of	combined	company	annualized	noninterest expense	through	the	elimination	of	operational	and	administrative	redundancies.

Other	than	the	merger	and	integration	costs	discussed	above,	our	acquisition	of National	City	did	not	impact	our	2008	Consolidated	Income	Statement,	nor	did it	impact	our	2008	Average	Consolidated	Balance	Sheet.	Note	2	Acquisitions and	Divestitures	included	in	our	Notes	To	Consolidated	Financial	Statements within	Item	8	of	this	Report	and	our	Current	Reports	on	Form	8-K	filed October	24,	2008,	October	30,	2008,	December	23,	2008,	and	January	2,	2009 provide	additional	information	regarding	our	acquisition	of	National	City.

# RECENT	MARKET	AND	INDUSTRY	DEVELOPMENTS

Starting	in	the	middle	of	2007	and	with	a	heightened	level	of	activity	during	the second	half	of	2008	and	into	early	2009,	there	has	been	unprecedented	turmoil, volatility	and	illiquidity	in	worldwide	financial	markets,	accompanied	by uncertain	prospects	for	the	overall	national	economy,	which	is	currently	in	the midst	of	a	severe	recession.	In	addition,	there	have	been	dramatic	changes	in	the competitive	landscape	of	the	financial	services	industry	during	this	time.

Recent	efforts	by	the	Federal	government,	including	the	US	Department	of	the Treasury,	the	Federal	Reserve,	the	FDIC,	and	the	Securities	and	Exchange Commission,	to	stabilize	and	restore	confidence	in	the	financial	services	industry have	impacted	and	will	likely	continue	to	impact	PNC	and	our	stakeholders. These	efforts,	which	will	continue	to	evolve,	include	the	Emergency	Economic Stabilization	Act	of	2008,	the	American	Recovery	and	Reinvestment	Act	of 2009,	and	other	legislative,	administrative	and	regulatory	initiatives,	including the	US	Treasury's	TARP	and	TARP	Capital	Purchase	Program,	the	FDIC's Temporary	Liquidity	Guarantee	Program	("TLGP")	and	the	Federal	Reserve's Commercial	Paper	Funding	Facility	("CPFF").

Beginning	in	the	fourth	quarter	of	2008,	PNC	participated	in	several	of	these programs	as	further	described	below:

# TARP	CAPITAL	PURCHASE	PROGRAM

The	TARP	Capital	Purchase	Program	encourages	US	financial	institutions	to build	capital	through	the	sale	to	the	US	Treasury	of	senior	preferred	shares	of stock	to	increase	the	flow	of	financing	to	US	businesses	and	consumers	and	to support	the	US	economy.

On	December	31,	2008,	PNC	issued	to	the	US	Treasury	$7.6	billion	of	preferred stock	together	with	a	related	warrant	to	purchase	shares	of	common	stock	of PNC,	in	accordance	with

the	terms	of	the	TARP	Capital	Purchase	Program.	Funds	from	this	sale	count	as Tier	1	capital	and	the	warrant	qualifies	as	tangible	common	equity.

Holders	of	this	preferred	stock	are	entitled	to	a	cumulative	cash	dividend	at	the annual	rate	per	share	of	5%	of	the	liquidation	preference	per	year	for	the	first five	years	after	the	closing	date.	Afterward,	the	annual	dividend	rate	will increase,	to	9%	per	year.	PNC's	intent	is	to	redeem	this	preferred	stock	prior	to the	escalation	of	the	dividend	rate.

Note	19	Shareholders'	Equity	included	in	our	Notes	to	Consolidated	Financial Statements	within	Item	8	of	this	Report	includes	additional	information regarding	the	preferred	stock	and	the	related	warrant	that	we	issued	under	this program.

# FDIC	TEMPORARY	LIQUIDITY	GUARANTEE	PROGRAM

The	FDIC's	TLGP	is	designed	to	strengthen	confidence	and	encourage	liquidity in	the	banking	system	by:

•	Guaranteeing	newly	issued	senior	unsecured	debt	of	eligible	institutions, including	FDIC-insured	banks	and	thrifts,	as	well	as	certain	holding companies	("TLGP-Debt	Guarantee	Program"),	and •	Providing	full	deposit	insurance	coverage	for	non-interest	bearing transaction	accounts	in	FDIC-insured	institutions,	regardless	of	the	dollar amount	("TLGP	-Transaction	Account	Guarantee	Program").

In	December	2008,	PNC	Funding	Corp	issued	at	the	holding	company	level fixed	and	floating	rate	senior	notes	totaling	$2.9	billion	under	the	FDIC's	TLGP- Debt	Guarantee	Program	as	more	fully	described	within	the	Liquidity	Risk Management	section	of	this	Item	7.	Each	of	these	series	of	senior	notes	is guaranteed	by	the	FDIC	and	is	backed	by	the	full	faith	and	credit	of	the	United States	through	June	30,	2012.

As	of	October	14,	2008,	PNC	Bank,	N.A.	and	National	City	Bank	have	been participating	in	the	TLGP-Transaction	Account	Guarantee	Program.	Under	this program,	through	December	31,	2009,	all	non-interest	bearing	transaction accounts	are	fully	guaranteed	by	the	FDIC	for	the	entire	amount	in	the	account. Coverage	under	this	program	is	in	addition	to,	and	separate	from,	the	coverage available	under	the	FDIC's	general	deposit	insurance	rules.

# COMMERCIAL	PAPER	FUNDING	FACILITY

The	Federal	Reserve	established	the	CPFF	to	provide	a	liquidity	backstop	to	US issuers	of	commercial	paper	and	thereby	improve	liquidity	in	short-term	funding markets	and	thus	increase	the	availability	of	credit	for	businesses	and households.	Effective	October	28,	2008,	Market	Street	Funding	LLC	("Market Street")	was	approved	to	participate	in	the	Federal	Reserve's	CPFF.	The	CPFF commitment	to	purchase	up	to	$5.4	billion	of	three-month	Market	Street commercial	paper	expires	on	October	30,	2009.	As	of	December	31,	2008, Market	Street's	participation	in	this

program	totaled	$445	million.	These	trades	matured	at	the	end	of	January	2009 and	were	replaced	with	commercial	paper	sold	to	investors.

It	is	also	possible	that	the	US	Congress	and	federal	banking	agencies,	as	part	of their	efforts	to	provide	economic	stimulus	and	financial	market	stability,	to enhance	the	liquidity	and	solvency	of	financial	institutions	and	markets,	and	to enhance	the	regulation	of	financial	institutions	and	markets,	will	announce additional	legislation,	regulations	or	programs.	These	additional	actions	may take	the	form	of	changes	in	or	additions	to	the	statutes	or	regulations	related	to existing	programs,	including	those	described	above.	It	is	not	possible	at	this	time to	predict	the	ultimate	impact	of	these	actions	on	PNC's	business	plans	and strategies.

# KEY	FACTORS	AFFECTING	FINANCIAL	PERFORMANCE

Our	financial	performance	is	substantially	affected	by	several	external	factors outside	of	our	control	including	the	following,	some	of	which	may	be	affected by	legislative,	regulatory	and	administrative	initiatives	of	the	Federal government	outlined	above:

•	General	economic	conditions,	including	the	length	and	severity	of	the current	recession,

•	The	level	of,	and	direction,	timing	and	magnitude	of	movement	in	interest rates,	and	the	shape	of	the	interest	rate	yield	curve,

•	The	functioning	and	other	performance	of,	and	availability	of	liquidity	in, the	capital	and	other	financial	markets,

•	Loan	demand,	utilization	of	credit	commitments	and	standby	letters	of credit,	and	asset	quality,

•	Customer	demand	for	other	products	and	services,

•	Changes	in	the	competitive	landscape	and	in	counterparty	creditworthiness and	performance	as	the	financial	services	industry	restructures	in	the current	environment,

•	Movement	of	customer	deposits	from	lower	to	higher	rate	accounts	or	to investment	alternatives,	and

•	The	impact	of	market	credit	spreads	on	asset	valuations.

In	addition,	our	success	will	depend,	among	other	things,	upon:

•	Further	success	in	the	acquisition,	growth	and	retention	of	customers,

•	Progress	toward	integrating	the	National	City	acquisition,

•	Continued	development	of	the	markets	related	to	our	recent	acquisitions,

including	full	deployment	of	our	product	offerings,

•	Revenue	growth,

•	A	sustained	focus	on	expense	management,	including	achieving	our	cost savings	targets	associated	with	our	National	City	integration,	and	creating positive	operating	leverage,

•	Managing	the	distressed	assets	portfolio,

•	Maintaining	solid	overall	asset	quality,

•	Continuing	to	maintain	our	solid	deposit	base,

•	Prudent	risk	and	capital	management	leading	to	a	return	to	our	desired moderate	risk	profile,	and

•	Actions	we	take	within	the	capital	and	other	financial	markets.

See	also	Item	1A	Risk	Factors	and	the	Cautionary	Statement	Regarding Forward-Looking	Information	section	of	Item	7	of	this	Report.

# OTHER	2008	ACQUISITION	AND	DIVESTITURE	ACTIVITY

On	April	4,	2008,	we	acquired	Lancaster,	Pennsylvania-based	Sterling	Financial Corporation	("Sterling")	for	approximately	4.6	million	shares	of	PNC	common stock	and	$224	million	in	cash.	Sterling	was	a	banking	and	financial	services company	with	approximately	$3.2	billion	in	assets,	$2.7	billion	in	deposits,	and 65	branches	in	south-central	Pennsylvania,	northern	Maryland	and	northern Delaware.	The	Sterling	technology	systems	and	bank	charter	conversions	were completed	during	the	third	quarter	of	2008	and	we	realized	the	anticipated	cost savings	related	to	these	activities.

On	March	31,	2008,	we	sold	J.J.B.	Hilliard,	W.L.	Lyons,	LLC	("Hilliard Lyons"),	a	Louisville,	Kentucky-based	wholly-owned	subsidiary	of	PNC	and	a full-service	brokerage	and	financial	services	provider,	to	Houchens	Industries, Inc.	We	recognized	an	after-tax	gain	of	$23	million	in	the	first	quarter	of	2008	in connection	with	this	divestiture.	Business	segment	information	for	the	periods presented	in	this	Item	7	reflects	the	reclassification	of	results	for	Hilliard	Lyons, including	the	gain	on	the	sale	of	this	business,	from	the	Retail	Banking	business segment	to	"Other."

# Summary	Financial	Results

| per	share	data | 2008 | 2007 |
| :--- | :--- | :--- |
| Net\tincome | $882 | $1,467 |
| Diluted\tearnings\tper\tshare | $2.46 | $4.35 |
| Return\ton |  |  |
| Average\tcommon\tshareholders'\tequity | 6.28% | 10.53% |
| Average\tassets | .62% | 1.19% |

Our	earnings	and	related	per	share	amounts	for	2008	do	not	include	the	impact of	National	City,	which	we	acquired	effective	December	31,	2008,	other	than	a conforming	adjustment	to	our	provision	for	credit	losses	of	$504	million	and other	integration	costs	of	$71	million,	both	of	which	were	recognized	in	the fourth	quarter.

Our	performance	in	2008	included	the	following:

•	At	December	31,	2008	we	had	total	assets	of	$291	billion,	including	loans of	$175	billion,	and	total	deposits	of	$193	billion,	reflecting	the	acquisition of	National	City.

•	We	significantly	strengthened	capital.	The	Tier	1	risk-based	capital	ratio was	9.7%	at	December	31,

2008	compared	with	6.8%	at	December	31,	2007.	We	issued	$7.6	billion	of preferred	stock	and	a	common	stock	warrant	to	the	US	Department	of	the Treasury	under	the	TARP	Capital	Purchase	Program	on	December	31, 2008,	which	qualified	as	Tier	1	capital.

•	Our	tangible	common	equity	ratio	was	2.9%	at	December	31,	2008.	We expect	our	tangible	common	equity	ratio	to	be	less	sensitive	to	the	impact of	widening	credit	spreads	on	accumulated	other	comprehensive	loss	going forward	primarily	due	to	the	composition	of	the	securities	available	for	sale portfolio	acquired	from	National	City	and	a	substantially	higher	level	of tangible	common	equity	in	the	combined	company. •	We	maintained	a	strong	liquidity	position	and	continued	to	generate deposits.	The	loan	to	deposit	ratio	was	91%	at	December	31,	2008, reflecting	the	acquisition	of	National	City.	Average	deposits	for	2008 increased	10%	compared	with	2007.

•	Credit	quality	migration	reflected	a	rapidly	weakening	economy,	but remained	manageable	as	PNC	was	able	to	maintain	a	strong	capital	position and	generate	positive	operating	leverage.	The	allowance	for	loan	and	lease losses	increased	to	$3.9	billion	at	December	31,	2008	from	$830	million	at December	31,	2007	primarily	as	a	result	of	the	National	City	acquisition and	related	conforming	credit	adjustment.	The	ratio	of	allowance	for	loan and	lease	losses	to	total	loans	was	strengthened	to	2.23%	at	December	31, 2008	compared	with	1.21%	at	December	31,	2007.	This	ratio	excluding	the impact	of	the	National	City	acquisition	was	1.77%	at	December	31,	2008. We	provide	a	reconciliation	of	this	ratio	excluding	the	National	City impact	to	the	GAAP-basis	ratio	in	the	Statistical	Information	(Unaudited) section	in	Item	8	of	this	Report.

•	We	are	committed	to	supporting	the	objectives	of	the	Emergency	Economic Stabilization	Act	of	2008.	To	that	end,	we	are	continuing	to	make	credit available	to	qualified	borrowers	including	enhanced	calling	efforts	on	small businesses	and	corporations,	promotions	offered	with	special	financing rates	and	responding	to	increased	loan	demand	for	first	mortgages.	We have	reaffirmed	and	renewed	loans	and	lines	of	credit,	focused	on	early identification	of	loan	modification	candidates	and	are	working	closely where	appropriate	with	customers	who	are	experiencing	financial	hardship to	set	up	new	repayment	schedules,	loan	modifications	and	forbearance programs.	We	plan	to	enhance	these	efforts	over	time	to	improve	the effectiveness	of	our	broad-reaching	initiatives.

•	Investment	securities	were	$43.5	billion	at	December	31,	2008,	or	15%	of total	assets.	The	portfolio	was	primarily	comprised	of	well-diversified,	high quality	securities	with	US

government	agency	residential	mortgage-backed	securities	representing 53%	of	the	portfolio.	Of	the	remaining	portfolio,	approximately	80%	of	the securities	had	AAA-equivalent	ratings.

•	PNC	created	positive	operating	leverage	for	the	year	of	4%,	or	$351 million.	Total	revenue	for	2008	grew	7%	compared	with	2007,	driven	by growth	in	net	interest	income,	and	exceeded	year-over-year	noninterest expense	growth	of	3%.

•	With	the	acquisition	of	National	City,	our	retail	banks	now	serve	over 6	million	consumer	and	business	customers.	Comprehensive	two-year integration	plans	are	being	implemented	with	a	goal	of	eliminating	$1.2 billion	of	annualized	expenses,	including	the	reduction	of	approximately 5,800	positions	across	the	combined	59,595	employee	base	by	2011.	The first	regional	branch	conversion	is	planned	for	the	second	half	of	2009.

Our	Consolidated	Income	Statement	Review	section	of	this	Item	7	describes	in greater	detail	the	various	items	that	impacted	our	results	for	2008	and	2007.

# BALANCE	SHEET	HIGHLIGHTS

Total	assets	were	$291.1	billion	at	December	31,	2008	compared	with	$138.9 billion	at	December	31,	2007.	Total	assets	at	December	31,	2008	included $133.7	billion	related	to	National	City.	Our	acquisition	of	National	City	did	not impact	our	2008	Average	Consolidated	Balance	Sheet.

Total	average	assets	were	$142.0	billion	for	2008	compared	with	$123.4	billion for	2007.	This	increase	reflected	a	$16.5	billion	increase	in	average	interest- earning	assets	and	a	$2.1	billion	increase	in	average	noninterest-earning	assets. An	increase	of	$10.2	billion	in	loans	and	a	$6.2	billion	increase	in	investment securities	were	the	primary	factors	for	the	increase	in	average	interest-earning assets.

The	increase	in	average	noninterest-earning	assets	for	2008	reflected	an	increase in	average	goodwill	of	$1.6	billion	primarily	related	to	the	acquisition	of	Sterling on	April	4,	2008,	Yardville	National	Bancorp	("Yardville")	on	October	26,	2007 and	Mercantile	Bankshares	Corporation	("Mercantile")	on	March	2,	2007.

The	impact	of	the	Sterling,	Yardville	and	Mercantile	acquisitions	is	also reflected	in	our	year-over-year	increases	in	average	total	loans,	average	securities available	for	sale	and	average	total	deposits	as	described	further	below.

Average	total	loans	were	$72.7	billion	for	2008	and	$62.5	billion	for	2007.	The increase	in	average	total	loans	included	growth	in	commercial	loans	of	$5.5 billion,	consumer	loans	of	$2.8	billion,	commercial	real	estate	loans	of	$1.7 billion	and	residential	mortgage	loans	of	$.5	billion.	Loans	represented	64%	of average	interest-earning	assets	for	both	2008	and	2007.

Average	investment	securities	totaled	$32.7	billion	for	2008	and	$26.5	billion	for 2007.	Average	residential	and	commercial	mortgage-backed	securities	increased $4.5	billion	on	a	combined	basis	in	the	comparison.	Average	investment securities	for	2008	included	$.4	billion	of	held	to	maturity	securities	that	we transferred	from	available	for	sale	status	during	the	fourth	quarter	of	2008. Investment	securities	comprised	29%	of	average	interest-earning	assets	for	2008 and	27%	for	2007.

Average	total	deposits	were	$84.5	billion	for	2008,	an	increase	of	$7.7	billion over	2007.	Average	deposits	grew	from	the	prior	year	period	primarily	as	a result	of	increases	in	money	market	balances	and	other	time	deposits.

Average	total	deposits	represented	60%	of	average	total	assets	for	2008	and	62% for	2007.	Average	transaction	deposits	were	$55.7	billion	for	2008	compared with	$50.7	billion	for	2007.

Average	borrowed	funds	were	$31.3	billion	for	2008	and	$23.0	billion	for	2007. Increases	of	$7.1	billion	in	Federal	Home	Loan	Bank	borrowings	and	$1.4 billion	in	other	borrowed	funds	drove	the	increase	compared	with	2007.

Shareholders'	equity	totaled	$25.4	billion	at	December	31,	2008	compared	with $14.9	billion	at	December	31,	2007	and	reflected	the	issuance	of	securities	under the	TARP	Capital	Purchase	Program	and	the	impact	of	National	City.	See	the Consolidated	Balance	Sheet	Review	section	of	this	Item	7	for	additional information.

# LINE	OF	BUSINESS	HIGHLIGHTS

We	refer	you	to	Item	1	of	this	Report	under	the	captions	Business	Overview	and Review	of	Lines	of	Business	for	an	overview	of	our	business	segments	and	to the	Business	Segments	Review	section	of	this	Item	7	for	a	Results	Of	Businesses –	Summary	table	and	further	analysis	of	business	segment	results	for	2008	and 2007,	including	presentation	differences	from	Note	27	Segment	Reporting	in	the Notes	To	Consolidated	Financial	Statements	in	Item	8	of	this	Report.

Total	business	segment	earnings	were	$983	million	for	2008	and	$1.7	billion	for 2007.	We	provide	a	reconciliation	of	total	business	segment	earnings	to	total PNC	consolidated	net	income	as	reported	on	a	GAAP	basis	in	Note	27.

Retail	Banking's	earnings	were	$429	million	for	2008	compared	with	$876 million	for	2007.	The	decline	in	earnings	over	the	prior	year	was	primarily driven	by	increases	in	the	provision	for	credit	losses	and	noninterest	expense. The	2008	revenue	growth	was	negatively	impacted	by	a	lower	interest	credit attributed	to	deposits	in	the	declining	rate	environment	and	was	therefore	not reflective	of	the	solid	growth	in	customers	and	deposits.

Corporate	&	Institutional	Banking	earned	$225	million	in	2008	compared	with $432	million	in	2007.	The	48%	decline	in	earnings	over	2007	was	primarily driven	by	an	increase	in	the	provision	for	credit	losses	and	by	higher	valuation losses	on	commercial	mortgage	loans	held	for	sale,	net	of	hedges.

Our	BlackRock	business	segment	earned	$207	million	in	2008	and	$253	million in	2007.	These	results	reflect	our	approximately	33%	share	of	BlackRock's reported	GAAP	earnings	during	both	periods	and	the	additional	income	taxes	on these	earnings	incurred	by	PNC.

Global	Investment	Servicing	earned	$122	million	for	2008	and	$128	million	for 2007.	Results	for	2008	were	negatively	impacted	by	declines	in	asset	values	and fund	redemptions	as	a	result	of	severe	deterioration	of	the	financial	markets during	the	fourth	quarter.

# Other

"Other"	for	2008	included	the	impact	of	integration	costs,	including	the	National City	conforming	provision	for	credit	losses,	totaling	$422	million	after	taxes,	of which	$380	million	after	taxes	were	recognized	in	the	fourth	quarter	of	2008.	In addition,	net	securities	losses	in	2008	totaled	$134	million	after	taxes.	These factors	were	partially	offset	by	strong	growth	in	net	interest	income	related	to asset	and	liability	management	activities	in	2008,	and	the	after-tax	impact	of	the following:

•	After-tax	gains	totaling	$160	million	from	PNC's	remaining	BlackRock long-term	incentive	plan	programs	("LTIP")	shares	obligation,

•	The	$23	million	after-tax	gain	on	the	sale	of	Hilliard	Lyons	in	the	first quarter,

•	The	$40	million	after-tax	third	quarter	reversal	of	a	legal	contingency

reserve	established	in	connection	with	an	acquisition	due	to	a	settlement, and

•	The	$30	million	after-tax	partial	reversal	of	the	Visa	indemnification liability.

"Other"	for	2007	included	the	after-tax	impact	of	the	following:

•	Integration	costs	totaling	$99	million	after	taxes,

•	A	net	after-tax	charge	of	$83	million	representing	the	net	mark-to-market adjustment	on	our	remaining	BlackRock	LTIP	shares	obligation	partially offset	by	the	gain	recognized	in	connection	with	PNC's	first	quarter transfer	of	BlackRock	shares	to	satisfy	a	portion	of	our	BlackRock	LTIP shares	obligation,	and

•	A	$53	million	after-tax	charge	for	an	indemnification	obligation	related	to certain	Visa	litigation.

# CONSOLIDATED	INCOME	STATEMENT REVIEW

Our	Consolidated	Income	Statement	is	presented	in	Item	8	of	this	Report.	Net income	for	2008	was	$882	million	and	for	2007	was	$1.467	billion.	Total revenue	for	2008	increased	7%	compared	with	2007.	We	created	positive operating	leverage	in	the	year-to-date	comparison	as	total	noninterest	expense increased	3%	in	the	comparison.

# NET	INTEREST	INCOME	AND	NET	INTEREST	MARGIN

| Dollars	in	millions | 2008 | 2007 |
| :--- | :--- | :--- |
| Net\tinterest\tincome | $3,823 | $2,915 |
| Net\tinterest\tmargin | 3.37% | 3.00% |

Changes	in	net	interest	income	and	margin	result	from	the	interaction	of	the volume	and	composition	of	interest-earning	assets	and	related	yields,	interest- bearing	liabilities	and	related	rates	paid,	and	noninterest-bearing	sources	of funding.	See	Statistical	Information	–	Analysis	Of	Year-To-Year	Changes	In	Net Interest	(Unaudited)	Income	And	Average	Consolidated	Balance	Sheet	and	Net Interest	Analysis	in	Item	8	of	this	Report	for	additional	information.

The	31%	increase	in	net	interest	income	for	2008	compared	with	2007	was favorably	impacted	by	the	$16.5	billion,	or	17%,	increase	in	average	interest- earning	assets	and	a	decrease	in	funding	costs.	The	2008	net	interest	margin	was positively	affected	by	declining	rates	paid	on	deposits	and	borrowings	compared with	the	prior	year.	The	reasons	driving	the	higher	interest-earning	assets	in these	comparisons	are	further	discussed	in	the	Balance	Sheet	Highlights	portion of	the	Executive	Summary	section	of	this	Item	7.

The	net	interest	margin	was	3.37%	for	2008	and	3.00%	for	2007.	The	following factors	impacted	the	comparison:

•	A	decrease	in	the	rate	paid	on	interest-bearing	liabilities	of	140	basis points.	The	rate	paid	on	interest-bearing	deposits,	the	single	largest component,	decreased	123	basis	points.

•	These	factors	were	partially	offset	by	a	77	basis	point	decrease	in	the	yield on	interest-earning	assets.	The	yield	on	loans,	the	single	largest	component, decreased	109	basis	points.

•	In	addition,	the	impact	of	noninterest-bearing	sources	of	funding	decreased 26	basis	points	due	to	lower	interest	rates	and	a	lower	proportion	of noninterest-bearing	sources	of	funding	to	interest-earning	assets.

For	comparing	to	the	broader	market,	during	2008	the	average	federal	funds	rate was	1.94%	compared	with	5.03%	for	2007.

We	expect	our	full-year	2009	net	interest	income	to	benefit	from	the	impact	of interest	accretion	of	discounts	resulting	from	purchase	accounting	marks	and deposit	pricing

alignment	related	to	our	National	City	acquisition.	We	also	currently	expect	our 2009	net	interest	margin	to	improve	on	a	year-over-year	basis.

# NONINTEREST	INCOME

# Summary

Noninterest	income	for	2008	included	the	following: •	Gains	of	$246	million	related	to	the	mark-to-market	adjustment	on	our BlackRock	LTIP	shares	obligation,

•	Losses	related	to	our	commercial	mortgage	loans	held	for	sale	of	$197 million,	net	of	hedges,

•	Impairment	and	other	losses	related	to	alternative	investments	of	$179 million,

•	Income	from	Hilliard	Lyons	totaling	$164	million,	including	the	first

quarter	gain	of	$114	million	from	the	sale	of	this	business,

•	Net	securities	losses	of	$206	million,

•	A	first	quarter	gain	of	$95	million	related	to	the	redemption	of	a	portion	of our	Visa	Class	B	common	shares	related	to	Visa's	March	2008	initial public	offering,

•	A	third	quarter	$61	million	reversal	of	a	legal	contingency	reserve established	in	connection	with	an	acquisition	due	to	a	settlement, •	Trading	losses	of	$55	million,

•	A	$35	million	impairment	charge	on	commercial	mortgage	servicing	rights, and

•	Equity	management	losses	of	$24	million.

Noninterest	income	for	2007	included	the	following:

•	The	impact	of	$82	million	gain	recognized	in	connection	with	our	transfer of	BlackRock	shares	to	satisfy	a	portion	of	PNC's	LTIP	obligation	and	a $209	million	net	loss	on	our	LTIP	shares	obligation,

•	Income	from	Hilliard	Lyons	totaling	$227	million,

•	Trading	income	of	$104	million,

•	Equity	management	gains	of	$102	million,	and

•	Gains	related	to	our	commercial	mortgage	loans	held	for	sale	of	$3	million, net	of	hedges.

Apart	from	the	impact	of	these	items,	noninterest	income	increased	$16	million in	2008	compared	with	2007.

# Additional	analysis

Fund	servicing	fees	increased	$69	million	in	2008,	to	$904	million,	compared with	$835	million	in	2007.	The	impact	of	the	December	2007	acquisition	of Albridge	Solutions	Inc.	("Albridge	Solutions")	and	growth	in	Global	Investment Servicing's	offshore	operations	were	the	primary	drivers	of	this	increase.

Global	Investment	Servicing	provided	fund	accounting/	administration	services for	$839	billion	of	net	fund	investment	assets	and	provided	custody	services	for $379	billion	of	fund

investment	assets	at	December	31,	2008,	compared	with	$990	billion	and	$500 billion,	respectively,	at	December	31,	2007.	The	decrease	in	assets	serviced	was due	to	declines	in	asset	values	and	fund	outflows	resulting	primarily	from	market conditions	in	the	second	half	of	2008.

Asset	management	fees	totaled	$686	million	in	2008,	a	decline	of	$98	million compared	with	2007.	The	effect	on	fees	of	lower	equity	earnings	from BlackRock,	a	$12	billion	decrease	in	assets	managed	due	to	equity	values	related to	wealth	management,	and	the	Hilliard	Lyons	divestiture	were	reflected	in	the decline	compared	with	2007.	Excluding	$53	billion	of	assets	acquired	on December	31,	2008	resulting	from	our	acquisition	of	National	City,	assets managed	at	December	31,	2008	totaled	$57	billion	compared	with	$74	billion	at December	31,	2007.	The	Hilliard	Lyons	sale	and	the	impact	of	comparatively lower	equity	markets	in	2008	drove	the	decline	in	assets	managed.	The	Retail Banking	section	of	the	Business	Segments	Review	section	of	this	Item	7 includes	further	discussion	of	assets	under	management.

Consumer	services	fees	declined	$69	million,	to	$623	million,	for	2008 compared	with	2007.	The	sale	of	Hilliard	Lyons	more	than	offset	the	benefits	of increased	volume-related	fees,	including	debit	card,	credit	card,	bank	brokerage and	merchant	revenues.

Corporate	services	revenue	totaled	$704	million	in	2008	compared	with	$713 million	in	2007.	Higher	revenue	from	treasury	management	and	other	fees	were more	than	offset	by	lower	merger	and	acquisition	advisory	fees	and	commercial mortgage	servicing	fees,	net	of	amortization.

Service	charges	on	deposits	grew	$24	million,	to	$372	million,	in	2008	compared with	2007.	The	impact	of	our	expansion	into	new	markets	contributed	to	the increase	during	2008.

Net	securities	losses	totaled	$206	million	in	2008	compared	with	net	securities losses	of	$5	million	in	2007.	Losses	for	2008	included	other-than-temporary impairment	charges	of	$312	million,	including	$74	million	on	our	investment	in preferred	stock	of	FHLMC	and	FNMA	that	were	partially	offset	by	securities gains.

Other	noninterest	income	totaled	$284	million	for	2008	compared	with	$423 million	for	2007.	Other	noninterest	income	for	2008	included	gains	of	$246 million	related	to	our	BlackRock	LTIP	shares	adjustment,	the	$114	million	gain from	the	sale	of	Hilliard	Lyons,	the	$95	million	gain	from	the	redemption	of	a portion	of	our	investment	in	Visa	related	to	its	March	2008	initial	public offering,	and	the	$61	million	reversal	of	a	legal	contingency	reserve	referred	to above.	The	impact	of	these	items	was	partially	offset	by	losses	related	to	our commercial	mortgage	loans	held	for	sale	of	$197	million,	net	of	hedges,	trading losses	of	$55	million	and	equity	management	losses	of	$24	million.

Other	noninterest	income	for	2007	included	a	net	loss	related	to	our	BlackRock investment	of	$127	million	(the	net	of	the	two	items	described	within	the Summary	section	above),	trading	income	of	$104	million,	equity	management gains	of	$102	million	and	gains	related	to	our	commercial	mortgage	loans	held for	sale,	net	of	hedges,	of	$3	million.

See	the	BlackRock	portion	of	the	Business	Segments	Review	section	of	Item	7 of	this	Report	for	further	information	regarding	LTIP.	Additional	information regarding	our	transactions	related	to	Visa	is	included	in	Note	25	Commitments And	Guarantees	in	the	Notes	To	Consolidated	Financial	Statements	included	in Item	8	of	this	Report.	Further	details	regarding	our	trading	activities	are	included in	the	Market	Risk	Management	–	Trading	Risk	portion	of	the	Risk	Management section	of	this	Item	7	and	information	regarding	equity	management	are included	in	the	Market	Risk	Management-Equity	and	Other	Investment	Risk section.

Other	noninterest	income	typically	fluctuates	from	period	to	period	depending on	the	nature	and	magnitude	of	transactions	completed.

We	expect	noninterest	income	in	2009	to	reflect	customer	growth,	offset	by softening	consumer	fees	and	by	ongoing	volatility	of	the	more	market-related categories.

# PRODUCT	REVENUE

In	addition	to	credit	and	deposit	products	for	commercial	customers, Corporate	&	Institutional	Banking	offers	other	services,	including	treasury management	and	capital	markets-related	products	and	services	and	commercial mortgage	loan	servicing,	that	are	marketed	by	several	businesses	to	commercial and	retail	customers	across	PNC.

Treasury	management	revenue,	which	includes	fees	as	well	as	net	interest income	from	customer	deposit	balances,	increased	14%	to	$545	million	in	2008 compared	with	$476	million	in	2007.	The	increase	was	primarily	related	to	the impact	of	our	expansion	into	new	markets	and	strong	growth	in	commercial payment	card	services	and	in	cash	and	liquidity	management	products.

Revenue	from	capital	markets-related	products	and	services	totaled	$336	million in	2008	compared	with	$290	million	in	2007.	This	increase	was	primarily	driven by	strong	customer	interest	rate	derivative	and	foreign	exchange	activity partially	offset	by	a	decline	in	merger	and	acquisition	advisory	fees.

Commercial	mortgage	banking	activities	include	revenue	derived	from	loan originations,	commercial	mortgage	servicing	(including	net	interest	income	and noninterest	income	from	loan	servicing	and	ancillary	services),	gains	from	loan sales,	valuation	adjustments,	net	interest	income	on	loans	held	for	sale,	and related	commitments	and	hedges.

Commercial	mortgage	banking	activities	resulted	in	revenue	of	$65	million	in 2008	compared	with	$252	million	in	2007.	Revenue	for	2008	reflected	losses	of $197	million	on	commercial	mortgage	loans	held	for	sale,	net	of	hedges,	due	to the	impact	of	an	illiquid	market	during	most	of	2008.	The	comparable	amount for	2007	was	a	gain	of	$3	million.	Revenue	for	2007	also	reflected	significant securitization	activity.	In	addition,	commercial	mortgage	servicing	revenue declined	$53	million	primarily	due	to	a	$35	million	impairment	charge	on commercial	mortgage	servicing	rights	while	net	interest	income	from commercial	mortgage	loans	held	for	sale	increased	$61	million	in	2008 compared	with	2007	due	to	higher	loans	held	for	sale	balances.

# PROVISION	FOR	CREDIT	LOSSES

The	provision	for	credit	losses	totaled	$1.517	billion	for	2008	compared	with $315	million	for	2007.	Of	the	total	2008	provision,	$990	million	was	recorded	in the	fourth	quarter,	including	$504	million	of	additional	provision	recorded	on December	31,	2008	to	conform	the	National	City	loan	reserving	methodology with	ours.	The	differences	in	methodology	include	granularity	of	loss computations,	statistical	and	quantitative	factors	rather	than	qualitative assessment,	and	the	extent	of	current	appraisals	and	risk	assessments.

In	addition	to	the	impact	of	National	City,	the	higher	provision	in	2008	compared with	the	prior	year	was	driven	by	general	credit	quality	migration,	including residential	real	estate	development	and	commercial	real	estate	exposure,	an increase	in	net	charge-offs,	and	growth	in	nonperforming	loans.	Growth	in	our total	credit	exposure	also	contributed	to	the	higher	provision	amounts	in	both comparisons.

With	a	deteriorating	economy,	we	expect	credit	migration	will	continue throughout	2009	as	credit	quality	improvements	will	lag	any	economic turnaround.	The	Credit	Risk	Management	portion	of	the	Risk	Management section	of	this	Item	7	includes	additional	information	regarding	factors impacting	the	provision	for	credit	losses.

# NONINTEREST	EXPENSE

Total	noninterest	expense	was	$4.430	billion	for	2008	and	$4.296	billion	for 2007,	an	increase	of	$134	million,	or	3%.	Higher	noninterest	expense	in	2008 compared	with	2007	primarily	resulted	from	investments	in	growth	initiatives, including	acquisitions,	partially	offset	by	the	impact	of	the	sale	of	Hilliard	Lyons and	disciplined	expense	management.

Integration	costs	included	in	noninterest	expense	totaled	$122	million	for	2008, including	$81	million	in	the	fourth	quarter,	and	$102	million	for	2007. Integration	costs	for	the	fourth	quarter	of	2008	included	$71	million	related	to our	National	City	acquisition.

Noninterest	expense	for	2008	included	the	benefit	of	the	reversal	of	$46	million of	the	$82	million	Visa	indemnification	liability	that	we	established	in	the	fourth quarter	of	2007.	Additional	information	regarding	our	transactions	related	to Visa	is	included	in	Note	25	Commitments	And	Guarantees	in	the	Notes	To Consolidated	Financial	Statements	included	in	Item	8	of	this	Report.

Expense	management	will	be	a	key	driver	in	2009	as	we	intend	to	maintain	our focus	on	continuous	improvement	and	to	achieve	cost	savings	targets	associated with	our	National	City	integration.	We	currently	expect	FDIC	deposit	insurance costs	to	increase	significantly	in	2009.

# EFFECTIVE	TAX	RATE

# CONSOLIDATED	BALANCE	SHEET REVIEW

# SUMMARIZED	BALANCE	SHEET	DATA

| December	31	-	in	millions | 2008 | 2007 |
| :--- | :--- | :--- |
| Assets |  |  |
| Loans | $175,489 | $68,319 |
| Investment\tsecurities | 43,473 | 30,225 |
| Cash\tand\tshort-term\tinvestments | 23,936 | 10,425 |
| Loans\theld\tfor\tsale | 4,366 | 3,927 |
| Equity\tinvestments | 8,554 | 6,045 |
| Goodwill | 8,868 | 8,405 |
| Other\tintangible\tassets | 2,820 | 1,146 |
| Other | 23,575 | 10,428 |
| Total\tassets | $291,081 | $138,920 |
| Liabilities |  |  |
| Deposits | $192,865 | $82,696 |
| Borrowed\tfunds | 52,240 | 30,931 |
| Other | 18,328 | 8,785 |
| Total\tliabilities | \t 263,433 | \t 122,412 |
| Minority\tand\tnoncontrolling\tinterests\tin |  |  |
| consolidated\tentities | 2,226 | 1,654 |

The	summarized	balance	sheet	data	above	is	based	upon	our	Consolidated Balance	Sheet	in	Item	8	of	this	Report.

Our	Consolidated	Balance	Sheet	at	December	31,	2008	included	National	City's assets	and	liabilities	at	estimated	fair	value	as	of	that	date.	This	acquisition	added approximately	$134	billion	of	assets,	including	$99.7	billion	of	loans,	after giving	effect	to	purchase	accounting	adjustments,	eliminations	and reclassifications.

Various	seasonal	and	other	factors	impact	our	period-end	balances	whereas average	balances	(discussed	under	the	Balance	Sheet	Highlights	section	of	this Item	7	and	included	in	the	Statistical	Information	section	of	Item	8	of	this Report)	are	generally	more	indicative	of	underlying	business	trends	apart	from the	impact	of	recent	acquisitions.

An	analysis	of	changes	in	selected	balance	sheet	categories	follows.

# LOANS

A	summary	of	the	major	categories	of	loans	outstanding	is	shown	in	the following	table.	Outstanding	loan	balances	reflect	unearned	income, unamortized	discount	and	premium,	and	purchase	discounts	and	premiums totaling	$4.1	billion	and	$990	million	at	December	31,	2008	and	2007, respectively.

acquisition	added	$99.7	billion	of	loans,	including	$34.3	billion	of	commercial, $16.0	billion	of	commercial	real	estate,	$30.5	billion	of	consumer	and	$10.6 billion	of	residential	mortgage	loans.

In	February	2008,	we	transferred	the	education	loans	in	our	held	for	sale portfolio	to	the	loan	portfolio	as	further	described	in	the	Loans	Held	For	Sale section	of	this	Consolidated	Balance	Sheet	Review.

# Details	Of	Loans

| December	31	-	in	millions | 2008 | 2007 |
| :--- | :--- | :--- |
| Commercial |  |  |
| Retail/wholesale | $11,482 | $6,013 |
| Manufacturing | 13,263 | 4,814 |
| Other\tservice\tproviders | 9,038 | 3,639 |
| Real\testate\trelated\t(a) | 9,107 | 5,556 |
| Financial\tservices | 5,194 | 1,419 |
| Health\tcare | 3,201 | 1,464 |
| Other | 16,034 | 5,634 |
| Total\tcommercial | 67,319 | \t 28,539 |
| Commercial\treal\testate |  |  |
| Real\testate\tprojects | 17,176 | 6,111 |
| Commercial\tmortgage | 8,560 | 2,792 |
| Total\tcommercial\treal\testate | 25,736 | 8,903 |
| Equipment\tlease\tfinancing | 6,461 | 2,514 |
| TOTAL\tCOMMERCIAL\tLENDING | 99,516 | \t 39,956 |
| Consumer |  |  |
| Home\tequity |  |  |
| Lines\tof\tcredit | 24,024 | 6,811 |
| Installment | 14,252 | 7,636 |
| Education | 4,211 | 132 |
| Automobile | 1,667 | 1,513 |
| Credit\tcard\tand\tother\tunsecured\tlines\tof\tcredit | 3,163 | 462 |
| Other | 5,172 | 1,839 |
| Total\tconsumer | 52,489 | \t 18,393 |
| Residential\treal\testate |  |  |
| Residential\tmortgage | 18,783 | 9,046 |
| Residential\tconstruction | 2,800 | 511 |
| Total\tresidential\treal\testate | 21,583 | 9,557 |
| TOTAL\tCONSUMER\tLENDING | 74,072 | \t 27,950 |
| Other | 1,901 | 413 |
| Total\tloans | $175,489 | $68,319 |

(a)Includes	loans	to	customers	in	the	real	estate	and	construction	industries.

Our	loan	portfolio	continued	to	be	diversified	among	numerous	industries	and types	of	businesses.	The	loans	that	we	hold	are	also	concentrated	in,	and diversified	across,	our	principal	geographic	markets.	See	Note	4	Loans, Commitments	To	Extend	Credit	and	Concentrations	of	Credit	Risk	in	the	Notes To	Consolidated	Financial	Statements	in	Item	8	of	this	Report	for	additional information.

The	following	table	presents	the	valuation	adjustments	applied	against	National	City	loans	as	part	of	the	purchase	accounting	process	at	December	31,	2008.

# National	City	Loan	Portfolio	Assessment

|  |  |  |  | Valuation |
| :--- | :--- | :--- | :--- | :--- |
|  |  |  |  | Adjustment |
|  |  |  |  | as\t%\tof |
| Dollars\tin\tbillions | Principal\nBalance | Valuation\nAdjustment | Fair\nValue | Principal\nBalance |
| Valuation\tAdjustments\tBy\tLoan\tClassification |  |  |  |  |
| Commercial/Commercial\treal\testate | $56.5 | $4.7 | $51.8 | 8.3% |
| Consumer | 31.4 | 3.5 | 27.9 | 11.1% |
| Residential\treal\testate | 19.2 | 4.4 | 14.8 | 22.9% |
| Other | .9 |  | .9 |  |
| Total | $108.0 | $12.6 | $95.4(a) | 11.7% |
| Valuation\tAdjustments\tBy\tType |  |  |  |  |
| Impaired\tloans |  |  |  |  |
| Commercial/Commercial\treal\testate | $4.0 | $2.2 | $1.8 | 55.0% |
| Consumer | 5.8 | 1.9 | 3.9 | 32.8% |
| Residential\treal\testate | 9.5 | 3.3 | 6.2 | 34.7% |
| Total\timpaired\tloans | 19.3 | 7.4 | 11.9 | 38.3% |
| Performing\tloans | 88.7 | 5.2 | 83.5 | 5.9% |
| Total | $108.0 | $12.6 | $95.4(a) | 11.7% |

(a) Represents	total	adjusted	loans	of	$99.7	billion	from	the	National	City	acquisition,	net	of	$2.8	billion	of	loan	loss	reserves,	$1.1	billion	of	loans	previously	classified	as	held	for	sale	by	National	City,	and	$.4 billion	of	other	purchase	accounting	adjustments.

Our	home	equity	loan	outstandings	totaled	$38.3	billion	at	December	31,	2008. In	this	portfolio,	we	consider	the	higher	risk	loans	to	be	those	with	a	recent	FICO credit	score	of	less	than	or	equal	to	660	and	a	loan-to-value	ratio	greater	than	or equal	to	90%.	We	had	$1.2	billion	or	approximately	3%	of	the	total	portfolio	in this	grouping	at	December	31,	2008.	In	our	$18.8	billion	residential	mortgage portfolio,	loans	with	a	recent	FICO	credit	score	of	less	than	or	equal	to	660	and	a loan-to-value	ratio	greater	than	90%	totaled	$2.5	billion	and	comprised approximately	14%	of	this	portfolio	at	December	31,	2008.

Commercial	lending	outstandings	are	the	largest	category	and	are	the	most sensitive	to	changes	in	assumptions	and	judgments	underlying	the	determination of	the	allowance	for

loan	and	lease	losses.	We	have	allocated	$2.6	billion,	or	67%,	of	the	total allowance	for	loan	and	lease	losses	at	December	31,	2008	to	these	loans.	We allocated	$1.2	billion,	or	32%,	of	the	remaining	allowance	at	that	date	to consumer	lending	outstandings	and	$47	million,	or	1%,	to	all	other	loans.	This allocation	also	considers	other	relevant	factors	such	as:

•	Actual	versus	estimated	losses,

•	Regional	and	national	economic	conditions,

•	Business	segment	and	portfolio	concentrations, •	Industry	conditions,

•	The	impact	of	government	regulations,	and

•	Risk	of	potential	estimation	or	judgmental	errors,	including	the accuracy	of	risk	ratings.

Included	in	total	loans	at	December	31,	2008	were	$27.2	billion	of	distressed loans.	These	loans	include	residential	real	estate	development	loans,	cross- border	leases,	subprime	residential	mortgage	loans,	brokered	home	equity	loans and	certain	other	residential	real	estate	loans.	These	loans	require	special servicing	and	management	oversight	given	current	market	conditions	or,	in	the case	of	cross-border	leases,	are	tax	and	yield	challenged.	The	majority	of	the distressed	loans	were	from	acquisitions,	including	$24.6	billion	from	National City.	An	allowance	for	loan	and	lease	losses	of	$927	million	was	allocated	to	the distressed	loans	at	December	31,	2008.	A	total	of	$537	million	of	the	distressed loans	were	classified	as	nonperforming	at	that	date.	Details	of	distressed	loans follow:

# Details	of	Distressed	Loan	Portfolio

(a)Includes	impaired	loans	attributable	to	National	City	totaling	$10.3	billion,	net	of	valuation adjustments.	The	pre-adjusted	principal	balance	was	$15.3	billion	and	represented	the	majority	of	the total	$19.3	billion	principal	balance	of	total	impaired	loans	included	in	the	National	City	Loan Portfolio	Assessment	table	on	page	32.

Net	unfunded	credit	commitments	are	comprised	of	the	following:

# Net	Unfunded	Credit	Commitments

| December	31	-	in	millions | 2008	(a) | 2007 |
| :--- | :--- | :--- |
| Commercial\tand\tcommercial\treal\testate | $59,982 | $42,021 |
| Home\tequity\tlines\tof\tcredit | 23,195 | 8,680 |
| Consumer\tcredit\tcard\tlines | 19,028 | 969 |
| Other | 2,683 | 1,677 |
| Total | $104,888 | $53,347 |

(a)Includes	$53.9	billion	related	to	National	City.

Unfunded	commitments	are	concentrated	in	our	primary	geographic	markets. Commitments	to	extend	credit	represent	arrangements	to	lend	funds	or	provide liquidity	subject	to

specified	contractual	conditions.	Commercial	commitments	are	reported	net	of participations,	assignments	and	syndications,	primarily	to	financial	institutions, totaling	$8.6	billion	at	December	31,	2008	and	$8.9	billion	at	December	31, 2007.

Unfunded	liquidity	facility	commitments	and	standby	bond	purchase	agreements totaled	$7.0	billion	at	December	31,	2008	and	$9.4	billion	at	December	31,	2007 and	are	included	in	the	preceding	table	primarily	within	the	"Commercial"	and "Consumer"	categories.	The	decrease	from	December	31,	2007	was	due	to	a	$2.5 billion	decline	in	Market	Street	commitments.

In	addition	to	credit	commitments,	our	net	outstanding	standby	letters	of	credit totaled	$10.3	billion	at	December	31,	2008	and	$4.8	billion	at	December	31, 2007.	Standby	letters	of	credit	commit	us	to	make	payments	on	behalf	of	our customers	if	specified	future	events	occur.

# INVESTMENT	SECURITIES

# Details	Of	Investment	Securities

|  | Amortized | Fair |
| :--- | :--- | :--- |
| In\tmillions | Cost | Value |
| December\t31,\t2008 |  |  |
| SECURITIES\tAVAILABLE\tFOR\tSALE |  |  |
| Debt\tsecurities |  |  |
| Residential\tmortgage-backed |  |  |
| Agency | $22,744 | $23,106 |
| Nonagency | \t 13,205 | 8,831 |
| Commercial\tmortgage-backed | 4,305 | 3,446 |
| Asset-backed | 2,069 | 1,627 |
| US\tTreasury\tand\tgovernment\tagencies | 738 | 739 |
| State\tand\tmunicipal | 1,326 | 1,263 |
| Other\tdebt | 563 | 559 |
| Corporate\tstocks\tand\tother | 575 | 571 |
| Total\tsecurities\tavailable\tfor\tsale | $45,525 | $40,142 |
| SECURITIES\tHELD\tTO\tMATURITY |  |  |
| Debt\tsecurities |  |  |
| Commercial\tmortgage-backed | $1,945 | $1,896 |
| Asset-backed | 1,376 | 1,358 |
| Other\tdebt | 10 | 10 |
| Total\tsecurities\theld\tto\tmaturity | $3,331 | $3,264 |
| December\t31,\t2007 |  |  |
| SECURITIES\tAVAILABLE\tFOR\tSALE |  |  |
| Debt\tsecurities |  |  |
| Residential\tmortgage-backed |  |  |
| Agency | $9,218 | $9,314 |
| Nonagency | \t 11,929 | \t 11,638 |
| Commercial\tmortgage-backed | 5,227 | 5,264 |
| Asset-backed | 2,878 | 2,770 |
| U.S.\tTreasury\tand\tgovernment\tagencies | 151 | 155 |
| State\tand\tmunicipal | 340 | 336 |
| Other\tdebt | 85 | 84 |
| Corporate\tstocks\tand\tother | 662 | 664 |
| Total\tsecurities\tavailable\tfor\tsale | $30,490 | $30,225 |

Investment	securities	totaled	$43.5	billion	at	December	31,	2008,	including $13.3	billion	from	the	National	City	acquisition	that	were	primarily	US government	agency	residential	mortgage-backed	securities.	Securities represented	15%	of	total	assets	at	December	31,	2008	and	22%	of	total	assets	at December	31,	2007.

We	evaluate	our	portfolio	of	investment	securities	in	light	of	changing	market conditions	and	other	factors	and,	where	appropriate,	take	steps	intended	to improve	our	overall	positioning.	During	the	fourth	quarter	of	2008,	we transferred	$3.2	billion	of	securities	available	for	sale	to	securities	held	to maturity	status	and	transferred	$599	million	of	proprietary	trading	securities	to the	available	for	sale	portfolio.

The	transfer	of	available	for	sale	securities	to	held	to	maturity	involved	short- duration,	high	quality	securities	where	management's	intent	to	hold	changed.	In reassessing	the	classification	of	these	securities,	management	also	considered	the current	and	ongoing	illiquidity	in	the	capital	markets	and	that	securities	prices are	under	increasing	downward	pressure,	even	where	there	is	no	indication	of credit	impairment.

The	transfer	of	trading	securities	to	available	for	sale	occurred	against	the backdrop	of	events	occurring	in	the	market	that	management	determined	to	be unusual	and	highly	unlikely	to	recur	in	the	near	term.	As	a	result	of	these	events, which	included	the	unprecedented	market	illiquidity	and	related	volatility, PNC's	economic	hedges	associated	with	these	trading	positions	become increasingly	ineffective,	resulting	in	increasing	and	unexpected	earnings volatility.	Coincident	with	the	transfer	of	trading	securities	to	available	for	sale, all	hedging	instruments	were	terminated.

At	December	31,	2008,	the	investment	securities	balance	included	a	net unrealized	loss	of	$5.4	billion,	which	represented	the	difference	between	fair value	and	amortized	cost.	The	comparable	amount	at	December	31,	2007	was	a net	unrealized	loss	of	$265	million.	The	fair	value	of	investment	securities	is impacted	by	interest	rates,	credit	spreads,	and	market	volatility	and	illiquidity. We	believe	that	a	substantial	portion	of	the	decline	in	value	of	these	securities	is attributable	to	changes	in	market	credit	spreads	and	market	illiquidity	and	not from	deterioration	in	the	credit	quality	of	individual	securities	or	underlying collateral,	where	applicable.	The	net	unrealized	losses	at	December	31,	2008	did not	reflect	credit	quality	concerns	of	any	significance	with	the	underlying	assets, which	represented	an	overall	well-diversified,	high	quality	portfolio.	US government	agency	residential	mortgage-backed	securities	represented	53%	of the	investment	securities	portfolio	at	December	31,	2008.

During	2008,	we	recorded	other-than-temporary	impairment	charges	totaling $312	million,	of	which	$151	million	related	to	residential	mortgage-backed securities,	$87	million	related	to	asset-backed	securities	collateralized	by	first- and	second-lien	residential	mortgage	loans	and	$74	million	related	to	our investment	in	preferred	securities	of	FHLMC	and	FNMA.

At	least	quarterly	we	conduct	a	comprehensive	security-level	impairment assessment.	Our	process	and	methods	have	evolved	as	market	conditions	have deteriorated	and	as	more	research	and	other	analyses	have	become	available.	We expect	that	our	process	and	methods	will	continue	to	evolve.	Our	assessment considers	the	security	structure,	recent	security	collateral	performance	metrics, our	judgment	and	expectations	of	future	performance,	and	relevant	industry research	and	analysis.	We	also	consider	the	magnitude	of	the	impairment	and	the amount	of	time	that	the	security	has	been	impaired	in	our	assessment.	Results	of the	periodic	assessment	are	reviewed	by	a	cross-functional	senior	management team	representing	Asset	&	Liability	Management,	Finance,	Balance	Sheet	Risk Management,	and	Credit	Policy.	The	senior	management	team	considers	the results	of	the	assessments,	as	well	as	other	factors,	in	determining	whether	the impairment	is	other-than-temporary.

One	of	the	key	inputs	into	our	impairment	assessment	process	is	the	level	of delinquencies	(i.e.,	60	days	and	more)	for	any	given	security.	In	February	2009, we	received	updated	delinquency	information	through	January	31,	2009	for	our residential	mortgage-backed	and	asset-backed	securities	positions	collateralized by	first-	and	second-lien	residential	mortgage	loans.	Delinquencies	have generally	increased	in	the	January	2009	versus	December	2008	month-over- month	comparison	and,	based	upon	our	evaluation	of	these	updated	delinquency statistics,	we	currently	expect	that	we	will	record	additional	other-than-temporary impairment	charges	in	the	first	quarter	of	2009.	We	currently	do	not	expect	that these	charges	will	be	material	to	our	capital	position.

If	the	current	issues	affecting	the	US	housing	market	were	to	continue	for	the foreseeable	future	or	worsen,	or	if	market	volatility	and	illiquidity	were	to continue	or	worsen,	or	if	market	interest	rates	were	to	increase	appreciably,	the valuation	of	our	available	for	sale	securities	portfolio	could	continue	to	be adversely	affected.	See	Note	7	Investment	Securities	in	the	Notes	To Consolidated	Financial	Statements	in	Item	8	of	this	Report	for	additional information.

Net	unrealized	gains	and	losses	in	the	securities	available	for	sale	portfolio	are included	in	shareholders'	equity	as	accumulated	other	comprehensive	income	or loss,	net	of	tax.	The	fair	value	of	investment	securities	generally	decreases	when interest	rates	increase	and	vice	versa.	In	addition,	the	fair	value	generally decreases	when	credit	spreads	widen	and	vice	versa.

The	expected	weighted-average	life	of	investment	securities	(excluding	corporate stocks	and	other)	was	3	years	and	1	month	at	December	31,	2008	and	3	years and	6	months	at	December	31,	2007.

We	estimate	that	at	December	31,	2008	the	effective	duration	of	investment securities	was	3.7	years	for	an	immediate	50	basis	points	parallel	increase	in interest	rates	and	3.1	years	for

an	immediate	50	basis	points	parallel	decrease	in	interest	rates.	Comparable amounts	at	December	31,	2007	were	2.8	years	and	2.5	years,	respectively.

# Loans	Held	For	Sale

| December	31	-	in	millions | 2008 | 2007 |
| :--- | :--- | :--- |
| Commercial\tmortgage | $2,158 | $2,116 |
| Residential\tmortgage | \t 1,962 | 117 |
| Education |  | \t 1,525 |
| Other | 246 | 169 |
| Total | $4,366 | $3,927 |

The	acquisition	of	National	City	added	approximately	$2.2	billion	of	loans	held for	sale,	primarily	1-4	family	conforming	residential	mortgages.	The	residential mortgage	loans	held	for	sale	will	be	accounted	for	at	fair	value.

PNC	adopted	SFAS	159	beginning	January	1,	2008	and	elected	to	account	for certain	commercial	mortgage	loans	held	for	sale	at	fair	value.	The	balance	of these	assets	was	$1.4	billion	at	December	31,	2008.	We	stopped	originating these	types	of	loans	during	the	first	quarter	of	2008.	We	intend	to	continue pursuing	opportunities	to	reduce	our	commercial	mortgage	loans	held	for	sale position	at	appropriate	prices.	We	sold	and/or	securitized	$.6	billion	of commercial	mortgage	loans	held	for	sale	carried	at	fair	value	in	2008.	Losses	of $197	million	on	commercial	mortgage	loans	held	for	sale,	net	of	hedges,	were included	in	other	noninterest	income	for	2008	compared	with	gains	of	$3	million in	2007.	Net	interest	income	on	commercial	mortgage	loans	held	for	sale	was $76	million	in	2008	compared	with	$15	million	in	2007.	The	non-cash	losses reflected	illiquid	market	conditions	which	began	in	the	latter	part	of	2007.

We	previously	classified	substantially	all	of	our	education	loans	as	loans	held	for sale	as	we	sold	education	loans	to	issuers	of	asset-backed	paper	when	the	loans were	placed	into	repayment	status.	During	2008,	the	secondary	markets	for education	loans	have	been	impacted	by	liquidity	issues	similar	to	those	for	other asset	classes.	In	February	2008,	given	this	outlook	and	the	economic	and customer	relationship	value	inherent	in	this	product,	we	transferred	these	loans at	lower	of	cost	or	market	value	from	held	for	sale	to	the	loan	portfolio.	We	did not	sell	education	loans	during	the	remainder	of	2008	and	do	not	anticipate	sales of	these	transferred	loans	in	the	foreseeable	future.

# FUNDING	AND	CAPITAL	SOURCES

# Details	Of	Funding	Sources

| December	31	-	in	millions | 2008 | 2007 |
| :--- | :--- | :--- |
| Deposits |  |  |
| Money\tmarket | $67,678 | $32,785 |
| Demand | 43,212 | 20,861 |
| Retail\tcertificates\tof\tdeposit | 58,315 | 16,939 |
| Savings | 6,056 | 2,648 |
| Other\ttime | 13,620 | 2,088 |
| Time\tdeposits\tin\tforeign\toffices | 3,984 | 7,375 |
| Total\tdeposits | \t 192,865 | 82,696 |
| Borrowed\tfunds |  |  |
| Federal\tfunds\tpurchased\tand\trepurchase |  |  |
| agreements | 5,153 | 9,774 |
| Federal\tHome\tLoan\tBank\tborrowings | 18,126 | 7,065 |
| Bank\tnotes\tand\tsenior\tdebt | 13,664 | 6,821 |
| Subordinated\tdebt | 11,208 | 4,506 |
| Other | 4,089 | 2,765 |
| Total\tborrowed\tfunds | 52,240 | 30,931 |
| Total | $245,105 | $113,627 |

Total	funding	sources	increased	$131.5	billion	at	December	31,	2008	compared with	the	balance	at	December	31,	2007.

Deposits	totaled	$192.9	billion	at	December	31,	2008,	including	$104	billion from	the	National	City	acquisition,	compared	with	$82.7	billion	at	December	31, 2007.	Interest-bearing	deposits	represented	81%	of	total	deposits	at December	31,	2008	compared	with	76%	at	December	31,	2007.	The	change	in deposit	composition	reflected	the	higher	proportion	of	certificates	of	deposit	and other	interest-bearing	deposits	associated	with	National	City.	Borrowed	funds totaled	$52.2	billion	at	December	31,	2008	compared	with	$30.9	billion	at December	31,	2007.	Borrowed	funds	at	December	31,	2008	included	$18.2 billion	of	National	City	obligations	and	$2.9	billion	of	senior	notes	guaranteed under	the	FDIC's	TLGP-Debt	Guarantee	Program	that	PNC	issued	in	December 2008.

The	Liquidity	Risk	Management	section	of	this	Item	7	contains	further	details regarding	actions	we	have	taken	which	impacted	our	borrowed	funds	balances during	2008.

# Capital

We	manage	our	capital	position	by	making	adjustments	to	our	balance	sheet	size and	composition,	issuing	debt,	equity	or	hybrid	instruments,	executing	treasury stock	transactions,	managing	dividend	policies	and	retaining	earnings.	On March	1,	2009,	we	took	a	proactive	step	to	build	capital	and	further	strengthen our	balance	sheet	as	the	Board	of	Directors	decided	to	reduce	PNC's	quarterly common	stock	dividend	from	$0.66	to	$0.10	per	share.

Total	shareholders'	equity	increased	$10.6	billion,	to	$25.4	billion,	at December	31,	2008	compared	with	December	31,	2007	and	reflected	the following:

•	The	December	2008	issuance	of	$7.6	billion	of	preferred	stock	and	a common	stock	warrant	to	the	US	Department	of	Treasury	under	the	TARP Capital	Purchase	Program,

•	The	December	2008	issuance	of	$5.6	billion	of	common	stock	in connection	with	the	National	City	acquisition,

•	The	May	2008	issuance	of	$500	million	of	Series	K	preferred	stock, •	The	April	2008	issuance	of	$312	million	of	common	stock	in	connection with	the	Sterling	acquisition,	and •	The	December	2008	issuance	of	$150	million	of	Series	L	preferred	stock	in connection	with	the	National	City	acquisition.

These	factors	were	partially	offset	by	the	$3.8	billion	increase	from December	31,	2007	in	accumulated	other	comprehensive	loss	which	included $3.5	billion	of	net	unrealized	securities	losses.	The	Investment	Securities	section of	this	Consolidated	Balance	Sheet	Review	includes	additional	information regarding	these	unrealized	losses.

Common	shares	outstanding	were	443	million	at	December	31,	2008	and 341	million	at	December	31,	2007.	PNC	issued	approximately	95	million common	shares	in	December	2008	and	4.6	million	common	shares	in	April	2008 in	connection	with	the	closings	of	the	National	City	and	Sterling	acquisitions, respectively.

Our	current	common	stock	repurchase	program	permits	us	to	purchase	up	to 25	million	shares	of	PNC	common	stock	on	the	open	market	or	in	privately negotiated	transactions.	This	program	will	remain	in	effect	until	fully	utilized	or until	modified,	superseded	or	terminated.	The	extent	and	timing	of	share repurchases	under	this	program	will	depend	on	a	number	of	factors	including, among	others,	market	and	general	economic	conditions,	economic	and regulatory	capital	considerations,	alternative	uses	of	capital,	regulatory	and contractual	limitations,	and	the	potential	impact	on	our	credit	ratings.	We	did	not purchase	any	shares	during	2008	under	this	program.	During	2007,	we purchased	11	million	common	shares	under	our	current	and	prior	common	stock repurchase	programs	at	a	total	cost	of	approximately	$800	million.

Under	the	TARP	Capital	Purchase	Program,	there	are	restrictions	on	dividends and	common	share	repurchases	associated	with	the	preferred	stock	that	we issued	to	the	US	Treasury	in	accordance	with	that	program.	As	is	typical	with

cumulative	preferred	stock,	dividend	payments	for	this	preferred	stock	must	be current	before	dividends	can	be	paid	on	junior	shares,	including	our	common stock,	or	junior	shares	can	be	repurchased	or	redeemed.	Also,	the	US	Treasury's consent	will	be	required	for	any	increase	in	common	dividends	per	share	above the	most	recent	level	prior	to	October	14,	2008	until	the	third	anniversary	of	the preferred	stock	issuance	as	long	as	the	US	Treasury	continues	to	hold	any	of	the preferred	stock.	Further,	during	that	same	period,	the	US	Treasury's	consent	will be	required,	unless	the	preferred	stock	is	no	longer	held	by	the	US	Treasury,	for any	share	repurchases	with	limited	exceptions,	most	significantly	purchases	of common	shares	in	connection	with	any	benefit	plan	in	the	ordinary	course	of business	consistent	with	past	practice.

# Risk-Based	Capital

| December	31	-	dollars	in	millions | 2008 | 2007 |
| :--- | :--- | :--- |
| Capital\tcomponents |  |  |
| Shareholders'\tequity |  |  |
| Common | $17,490 | $14,847 |
| Preferred | 7,932 | 7 |
| Trust\tpreferred\tcapital\tsecurities | 2,898 | 572 |
| Minority\tinterest | 1,506 | 985 |
| Goodwill\tand\tother\tintangible\tassets | (9,800) | (8,853) |
| Eligible\tdeferred\tincome\ttaxes\ton |  |  |
| goodwill\tand\tother\tintangible\tassets | 594 | 119 |
| Pension,\tother\tpostretirement\tbenefit |  |  |
| plan\tadjustments | 666 | 177 |
| Net\tunrealized\tsecurities\tlosses,\tafter- |  |  |
| tax | 3,618 | 167 |
| Net\tunrealized\tlosses\t(gains)\ton\tcash |  |  |
| flow\thedge\tderivatives,\tafter-tax | (374) | (175) |
| Other | (243) | (31) |
| Tier\t1\trisk-based\tcapital | 24,287 | 7,815 |
| Subordinated\tdebt | 5,676 | 3,024 |
| Eligible\tallowance\tfor\tcredit\tlosses | 3,153 | 964 |
| Total\trisk-based\tcapital | $33,116 | $11,803 |
| Assets |  |  |
| Risk-weighted\tassets,\tincluding\toff- |  |  |
| balance\tsheet\tinstruments\tand |  |  |
| market\trisk\tequivalent\tassets | $251,106 | $115,132 |
| Adjusted\taverage\ttotal\tassets | \t 138,689 | \t 126,139 |
| Capital\tratios |  |  |
| Tier\t1\trisk-based | 9.7% | 6.8% |
| Total\trisk-based | 13.2 | 10.3 |
| Leverage | 17.5 | 6.2 |
| Tangible\tcommon\tequity |  |  |
| Common\tshareholders'\tequity | $17,490 | $14,847 |
| Goodwill\tand\tother\tintangible\tassets | (9,800) | (8,853) |
| Total\tdeferred\tincome\ttaxes\ton |  |  |
| goodwill\tand\tother\tintangible\tassets |  |  |
| (a) | 594 | 119 |
| Tangible\tcommon\tequity | $8,284 | $6,113 |
| Total\tassets\texcluding\tgoodwill\tand |  |  |
| other\tintangible\tassets,\tnet\tof |  |  |
| deferred\tincome\ttaxes | $281,874 | $130,185 |
| Tangible\tcommon\tequity\tratio | 2.9% | 4.7% |

(a)As	of	December	31,	2008,	deferred	taxes	on	taxable	combinations	were	added	to	eligible	deferred income	taxes	for	non-taxable	combinations	that	are	used	in	the	calculation	of	the	tangible	common equity	ratio.

PNC's	Tier	1	risk-based	capital	ratio	was	9.7%	at	December	31,	2008	compared with	6.8%	at	December	31,	2007.	The	increase	in	the	ratio	from	December	31, 2007	included	the	issuance	of	Tier	1	eligible	securities	during	the	first	half	of 2008	totaling	$1.3	billion,	including	REIT	preferred,	noncumulative	perpetual preferred,	and	trust	preferred	securities.	The	"Perpetual	Trust	Securities"	and "PNC	Capital	Trust	E	Trust	Preferred	Securities"	portions	of	the	Off-Balance Sheet	Arrangements	and	VIEs	section	of	this	Item	7	and	Note	19	Shareholders' Equity	in	Item	8	of	this	Report	have	additional	information	regarding	these securities.

In	addition,	$7.6	billion	of	preferred	stock	and	a	common	stock	warrant	was issued	to	the	US	Department	of	the	Treasury	under	the	TARP	Capital	Purchase Program	on	December	31,	2008.	Tier	1	risk-based	capital	further	increased	as	a result	of	$5.6	billion	of	common	stock	issued	in	the	National	City	acquisition and	PNC's	assumption	of	$2.6	billion	of	Tier	1	qualifying	capital	securities previously	issued	by	National	City.	These	increases	in	capital	were	partially offset	by	the	deduction	of	higher	acquisition-related	intangible	assets.	The positive	effect	on	the	Tier	1	ratio	of	the	net	increase	in	capital	was	somewhat offset	by	an	increase	in	risk-weighted	assets	primarily	related	to	acquisitions, including	National	City.

The	leverage	ratio	at	December	31,	2008	reflected	the	favorable	impact	on	Tier	1 risk-based	capital	from	the	issuance	of	securities	under	TARP	and	the	issuance of	PNC	common	stock	in	connection	with	the	National	City	acquisition,	both	of which	occurred	on	December	31,	2008.	In	addition,	the	ratio	as	of	that	date	did not	reflect	any	impact	of	National	City	on	PNC's	adjusted	average	total	assets.

PNC's	tangible	common	equity	ratio	was	2.9%	at	December	31,	2008	compared with	4.7%	at	December	31,	2007.	The	decrease	in	the	ratio	from	the	prior	year was	the	result	of	the	decline	in	the	value	of	the	securities	available	for	sale portfolio	and	the	value	of	assets	in	our	pension	plan.	We	expect	PNC's	tangible common	equity	ratio	to	be	less	sensitive	to	the	impact	of	widening	credit	spreads on	accumulated	other	comprehensive	loss	going	forward	primarily	due	to	the composition	of	the	securities	available	for	sale	portfolio	acquired	from	National City	and	a	substantially	higher	level	of	common	equity	in	the	combined company.

The	access	to,	and	cost	of,	funding	new	business	initiatives	including acquisitions,	the	ability	to	engage	in	expanded	business	activities,	the	ability	to pay	dividends,	the	level	of	deposit	insurance	costs,	and	the	level	and	nature	of regulatory	oversight	depend,	in	part,	on	a	financial	institution's	capital	strength.

At	December	31,	2008	and	December	31,	2007,	each	of	our	domestic	bank subsidiaries	was	considered	"well	capitalized"	based	on	US	regulatory	capital ratio	requirements.	See	the	Supervision	And	Regulation	section	of	Item	1	of	this Report

and	Note	23	Regulatory	Matters	in	the	Notes	To	Consolidated	Financial Statements	in	Item	8	of	this	Report	for	additional	information.	We	believe	our bank	subsidiaries	will	continue	to	meet	these	requirements	in	2009.

# OFF-BALANCE	SHEET	ARRANGEMENTS

# AND	VIES

We	engage	in	a	variety	of	activities	that	involve	unconsolidated	entities	or	that are	otherwise	not	reflected	in	our	Consolidated	Balance	Sheet	that	are	generally referred	to	as	"off-balance	sheet	arrangements."	The	following	sections	of	this Report	provide	further	information	on	these	types	of	activities: •	Commitments,	including	contractual	obligations	and	other	commitments, included	within	the	Risk	Management	section	of	this	Item	7,	and •	Note	10	Securitization	Activity	and	Note	25	Commitments	and	Guarantees in	the	Notes	To	Consolidated	Financial	Statements	included	in	Item	8	of this	Report.

The	following	provides	a	summary	of	variable	interest	entities	("VIEs"), including	those	that	we	have	consolidated	and	those	in	which	we	hold	a significant	variable	interest	but	have	not	consolidated	into	our	financial statements	as	of	December	31,	2008	and	December	31,	2007.

# Consolidated	VIEs	–	PNC	Is	Primary	Beneficiary

|  | Aggregate | Aggregate |
| :--- | :--- | :--- |
| In\tmillions | Assets | Liabilities |
| Partnership\tinterests\tin\tlow |  |  |
| income\thousing\tprojects\t(a) |  |  |
| December\t31,\t2008 | $1,499 | $1,455 |
| December\t31,\t2007 | $1,108 | $1,108 |
| Credit\tRisk\tTransfer\tTransaction\t(b) |  |  |
| December\t31,\t2008 | $1,070 | $1,070 |

(a)Amounts	for	December	31,	2008	include	National	City,	which	PNC	acquired	on	that	date. (b)National	City-related	transaction.

# Non-Consolidated	VIEs	–	Significant	Variable	Interests

|  | Aggregate | Aggregate | PNC	Risk |
| :--- | :--- | :--- | :--- |
| In\tmillions | Assets | Liabilities | of\tLoss |
| December\t31,\t2008 |  |  |  |
| Market\tStreet | $4,916 | $5,010 | $6,965(a) |
| Collateralized\tdebt\tobligations | 20 |  | 2 |
| Partnership\tinterests\tin\ttax |  |  |  |
| credit\tinvestments\t(b)\t(c)\t(d) | 1,095 | 652 | 920 |
| Total\t(c) | $6,031 | $5,662 | $7,887 |
| December\t31,\t2007 |  |  |  |
| Market\tStreet | $5,304 | $5,330 | $9,019(a) |
| Collateralized\tdebt\tobligations | 255 | 177 | 6 |
| Partnership\tinterests\tin\tlow |  |  |  |
| income\thousing\tprojects | 298 | 184 | 155 |
| Total | $5,857 | $5,691 | $9,180 |

(a)PNC's	risk	of	loss	consists	of	off-balance	sheet	liquidity	commitments	to	Market	Street	of	$6.4	billion and	other	credit	enhancements	of	$.6	billion	at	December	31,	2008.	The	comparable	amounts	were $8.8	billion	and	$.2	billion	at	December	31,	2007.	These	liquidity	commitments	are	included	in	the Net	Unfunded	Credit	Commitments	table	in	the	Consolidated	Balance	Sheet	Review	section	of	this Report.

(b)Amounts	reported	primarily	represent	low	income	housing	projects. (c)Amounts	include	the	impact	of	National	City.

(d)Aggregate	assets	and	aggregate	liabilities	at	December	31,	2008	represent	approximate	balances	due to	limited	availability	of	financial	information	associated	with	the	acquired	National	City	partnerships that	we	did	not	sponsor.

# Market	Street

Market	Street	Funding	LLC	("Market	Street")	is	a	multi-seller	asset-backed commercial	paper	conduit	that	is	owned	by	an	independent	third	party.	Market Street's	activities	primarily	involve	purchasing	assets	or	making	loans	secured by	interests	in	pools	of	receivables	from	US	corporations	that	desire	access	to	the commercial	paper	market.	Market	Street	funds	the	purchases	of	assets	or	loans by	issuing	commercial	paper	which	has	been	rated	A1/P1	by	Standard	&	Poor's and	Moody's,	respectively,	and	is	supported	by	pool-specific	credit enhancements,	liquidity	facilities	and	program-level	credit	enhancement. Generally,	Market	Street	mitigates	its	potential	interest	rate	risk	by	entering	into agreements	with	its	borrowers	that	reflect	interest	rates	based	upon	its	weighted average	commercial	paper	cost	of	funds.	During	2007	and	2008,	Market	Street met	all	of	its	funding	needs	through	the	issuance	of	commercial	paper.

Market	Street	commercial	paper	outstanding	was	$4.4	billion	at	December	31, 2008	and	$5.1	billion	at	December	31,	2007.	The	weighted	average	maturity	of the	commercial	paper	was	24	days	at	December	31,	2008	compared	with	32	days at	December	31,	2007.

Effective	October	28,	2008,	Market	Street	was	approved	to	participate	in	the Federal	Reserve's	CPFF	authorized	under	Section	13(3)	of	the	Federal	Reserve Act.	The	CPFF	commitment	to	purchase	up	to	$5.4	billion	of	three-month Market	Street	commercial	paper	expires	on	October	30,	2009.	As	of December	31,	2008,	Market	Street's	participation	in	this	program	totaled	$445 million.	These	trades	matured	at	the	end	of	January	2009	and	were	replaced	with commercial	paper	sold	to	investors.

In	the	ordinary	course	of	business	during	2008,	PNC	Capital	Markets,	acting	as	a placement	agent	for	Market	Street,	held	a	maximum	daily	position	in	Market Street	commercial	paper	of	$75	million	with	an	average	of	$12	million.	This compares	with	a	maximum	daily	position	of	$113	million	with	an	average	of	$27 million	for	the	year	ended	December	31,	2007.	PNC	Capital	Markets	owned	no Market	Street	commercial	paper	at	December	31,	2008	and	owned	less	than	$1 million	of	such	commercial	paper	at	December	31,	2007.	PNC	Bank,	National Association	("PNC	Bank,	N.A.")	purchased	overnight	maturities	of	Market Street	commercial	paper	on	two	days	during	September	2008	in	the	amounts	of $197	million	and	$531	million	and	one	day	during	October	2008	in

the	amount	of	$278	million	due	to	illiquidity	in	the	commercial	paper	market. We	considered	these	transactions	as	part	of	our	evaluation	of	Market	Street described	below	to	determine	that	we	are	not	the	primary	beneficiary.	PNC	made no	other	purchases	of	Market	Street	commercial	paper	during	2007	or	2008.

PNC	Bank,	N.A.	provides	certain	administrative	services,	the	program-level credit	enhancement	and	99%	of	liquidity	facilities	to	Market	Street	in	exchange for	fees	negotiated	based	on	market	rates.	PNC	recognized	program administrator	fees	and	commitment	fees	related	to	PNC's	portion	of	the	liquidity facilities	of	$21	million	and	$4	million,	respectively,	for	the	year	ended December	31,	2008.	The	comparable	amounts	were	$13	million	and	$4	million for	the	year	ended	December	31,	2007.

The	commercial	paper	obligations	at	December	31,	2008	and	December	31, 2007	were	effectively	collateralized	by	Market	Street's	assets.	While	PNC	may be	obligated	to	fund	under	the	$6.4	billion	of	liquidity	facilities	for	events	such as	commercial	paper	market	disruptions,	borrower	bankruptcies,	collateral deficiencies	or	covenant	violations,	our	credit	risk	under	the	liquidity	facilities	is secondary	to	the	risk	of	first	loss	provided	by	the	borrower	or	another	third	party in	the	form	of	deal-specific	credit	enhancement,	such	as	by	the	over collateralization	of	the	assets.	Deal-specific	credit	enhancement	that	supports	the commercial	paper	issued	by	Market	Street	is	generally	structured	to	cover	a multiple	of	expected	losses	for	the	pool	of	assets	and	is	sized	to	generally	meet rating	agency	standards	for	comparably	structured	transactions.	In	addition,	PNC would	be	required	to	fund	$1.0	billion	of	the	liquidity	facilities	if	the	underlying assets	are	in	default.	See	Note	25	Commitments	And	Guarantees	included	in	the Notes	To	Consolidated	Financial	Statements	of	this	Report	for	additional information.

PNC	provides	program-level	credit	enhancement	to	cover	net	losses	in	the amount	of	10%	of	commitments,	excluding	explicitly	rated	AAA/Aaa	facilities. PNC	provides	100%	of	the	enhancement	in	the	form	of	a	cash	collateral	account funded	by	a	loan	facility.	This	facility	expires	in	March	2013.	Until November	25,	2008,	PNC	provided	only	25%	of	the	enhancement	in	the	form	of a	cash	collateral	account	funded	by	a	loan	facility	and	provided	a	liquidity facility	for	the	remaining	75%	of	program-level	enhancement.

Market	Street	has	entered	into	a	Subordinated	Note	Purchase	Agreement ("Note")	with	an	unrelated	third	party.	The	Note	provides	first	loss	coverage whereby	the	investor	absorbs	losses	up	to	the	amount	of	the	Note,	which	was $6.6	million	as	of	December	31,	2008.	Proceeds	from	the	issuance	of	the	Note are	held	by	Market	Street	in	a	first	loss	reserve	account	that	will	be	used	to reimburse	any	losses	incurred	by	Market	Street,	PNC	Bank,	N.A.	or	other providers	under	the	liquidity	facilities	and	the	credit	enhancement	arrangements.

# Assets	of	Market	Street	Funding	LLC

(a)Market	Street	did	not	recognize	an	asset	impairment	charge	or	experience	any	material	rating downgrades	during	2007	or	2008.

# Market	Street	Commitments	by	Credit	Rating	(a)

|  | December	31,	2008 | December	31,	2007 |
| :--- | :--- | :--- |
| AAA/Aaa | 19% | 19% |
| AA/Aa | 6 | 6 |
| A/A | 72 | 72 |
| BBB/Baa | 3 | 3 |
| Total | 100% | 100% |

(a)The	majority	of	our	facilities	are	not	explicitly	rated	by	the	rating	agencies.	All	facilities	are	structured to	meet	rating	agency	standards	for	applicable	rating	levels.

We	evaluated	the	design	of	Market	Street,	its	capital	structure,	the	Note,	and relationships	among	the	variable	interest	holders	under	the	provisions	of	FASB Interpretation	No.	46,	(Revised	2003)	"Consolidation	of	Variable	Interest Entities"	("FIN	46R").	Based	on	this	analysis,	we	are	not	the	primary	beneficiary as	defined	by	FIN	46R	and	therefore	the	assets	and	liabilities	of	Market	Street are	not	reflected	in	our	Consolidated	Balance	Sheet.

We	would	consider	changes	to	the	variable	interest	holders	(such	as	new expected	loss	note	investors	and	changes	to	program-level	credit	enhancement providers),	terms	of	expected	loss	notes,	and	new	types	of	risks	related	to	Market Street	as	reconsideration	events.	We	review	the	activities	of	Market	Street	on	at least	a	quarterly	basis	to	determine	if	a	reconsideration	event	has	occurred.

Based	on	current	accounting	guidance,	we	are	not	required	to	consolidate	Market Street	into	our	consolidated	financial	statements.	However,	if	PNC	would	be determined	to	be	the	primary	beneficiary	under	FIN	46R,	we	would	consolidate the	commercial	paper	conduit	at	that	time.	Based	on	current	accounting guidance,	to	the	extent	that	the	par	value	of	the	assets	in	Market	Street	exceeded the	fair	value	of	the	assets	upon	consolidation,	the	difference	would	be recognized	by	PNC	as	a	loss	in	our	Consolidated	Income	Statement	in	that period.	Based	on	the	fair	value	of	the	assets	held	by	Market	Street	at December	31,	2008,	the	consolidation	of	Market	Street	would	not	have	had	a material	impact	on	our	risk-based	capital	ratios	or	debt	covenants.

# Low	Income	Housing	Projects

We	make	certain	equity	investments	in	various	limited	partnerships	that	sponsor affordable	housing	projects	utilizing	the	Low	Income	Housing	Tax	Credit ("LIHTC")	pursuant	to	Sections	42	and	47	of	the	Internal	Revenue	Code.	The purpose	of	these	investments	is	to	achieve	a	satisfactory	return	on	capital,	to facilitate	the	sale	of	additional	affordable	housing	product	offerings	and	to	assist us	in	achieving	goals	associated	with	the	Community	Reinvestment	Act.	The primary	activities	of	the	limited	partnerships	include	the	identification, development	and	operation	of	multi-family	housing	that	is	leased	to	qualifying residential	tenants.	Generally,	these	types	of	investments	are	funded	through	a combination	of	debt	and	equity.	We	typically	invest	in	these	partnerships	as	a limited	partner.

Also,	we	are	a	national	syndicator	of	affordable	housing	equity	(together	with	the investments	described	above,	the	"LIHTC	investments").	In	these	syndication transactions,	we	create	funds	in	which	our	subsidiaries	are	the	general	partner and	sell	limited	partnership	interests	to	third	parties,	and	in	some	cases	may	also purchase	a	limited	partnership	interest	in	the	fund.	The	purpose	of	this	business	is to	generate	income	from	the	syndication	of	these	funds	and	to	generate	servicing fees	by	managing	the	funds.	General	partner	activities	include	selecting, evaluating,	structuring,	negotiating,	and	closing	the	fund	investments	in operating	limited	partnerships,	as	well	as	oversight	of	the	ongoing	operations	of the	fund	portfolio.

We	evaluate	our	interests	and	third	party	interests	in	the	limited	partnerships	in determining	whether	we	are	the	primary	beneficiary.	The	primary	beneficiary determination	is	based	on	which	party	absorbs	a	majority	of	the	variability.	The primary	sources	of	variability	in	LIHTC	investments	are	the	tax	credits,	tax benefits	of	losses	on	the	investments	and	development	and	operating	cash	flows. We	have	consolidated	LIHTC	investments	in	which	we	absorb	a	majority	of	the variability	and	thus	are	considered	the	primary	beneficiary.	The	assets	are primarily	included	in	Equity	Investments	and	Other	Assets	on	our	Consolidated Balance	Sheet	with	the	liabilities	primarily	classified	in	Other	Liabilities	and Minority

Interest.	Neither	creditors	nor	equity	investors	in	the	LIHTC	investments	have any	recourse	to	our	general	credit.	The	consolidated	aggregate	assets	and liabilities	of	these	LIHTC	investments	are	provided	in	the	Consolidated	VIEs	– PNC	Is	Primary	Beneficiary	table	and	reflected	in	the	"Other"	business	segment.

We	also	have	LIHTC	investments	in	which	we	are	not	the	primary	beneficiary, but	are	considered	to	have	a	significant	variable	interest	based	on	our	interests	in the	partnership.	These	investments	are	disclosed	in	the	Non-Consolidated	VIEs	– Significant	Variable	Interests	table.	The	table	also	reflects	our	maximum exposure	to	loss.	Our	maximum	exposure	to	loss	is	equal	to	our	legally	binding equity	commitments	adjusted	for	recorded	impairment	and	partnership	results. We	use	the	equity	and	cost	methods	to	account	for	our	investment	in	these entities	with	the	investments	reflected	in	Equity	Investments	on	our Consolidated	Balance	Sheet.	In	addition,	we	increase	our	recognized	investments and	recognize	a	liability	for	all	legally	binding	unfunded	equity	commitments. These	liabilities	are	reflected	in	Other	Liabilities	on	our	Consolidated	Balance Sheet.

# Credit	Risk	Transfer	Transaction

National	City	Bank	("NCB")	sponsored	a	special	purpose	entity	("SPE")	trust and	concurrently	entered	into	a	credit	risk	transfer	agreement	with	an independent	third-party	to	mitigate	credit	losses	on	a	pool	of	nonconforming mortgage	loans	originated	by	its	former	First	Franklin	business	unit.	The	SPE was	formed	with	a	small	contribution	from	NCB	and	was	structured	as	a bankruptcy-remote	entity	so	that	its	creditors	have	no	recourse	to	NCB.	In exchange	for	a	perfected	security	interest	in	the	cash	flows	of	the	nonconforming mortgage	loans,	the	SPE	issued	to	NCB	asset-backed	securities	in	the	form	of senior,	mezzanine,	and	subordinated	equity	notes.	NCB	has	incurred	credit losses	equal	to	the	subordinated	equity	notes.	NCB	currently	holds	the	right	to put	the	mezzanine	notes	to	the	independent	third-party	at	par.	As	of December	31,	2008,	the	value	of	the	mezzanine	notes	was	$169	million.	NCB holds	the	senior	notes	and	will	be	responsible	for	credit	losses	in	excess	of	this amount.

The	SPE	was	deemed	to	be	a	VIE	as	its	equity	was	not	sufficient	to	finance	its activities.	NCB	was	determined	to	be	the	primary	beneficiary	of	the	SPE	as	it would	absorb	the	majority	of	the	expected	losses	of	the	SPE	through	its	holding of	all	of	the	asset-backed	securities.	Accordingly,	this	SPE	was	consolidated	and all	of	the	entity's	assets,	liabilities,	and	equity	are	intercompany	balances	and	are eliminated	in	consolidation.	Nonconforming	mortgage	loans,	including foreclosed	properties,	pledged	as	collateral	to	the	SPE	remain	on	the	balance sheet	and	totaled	$719	million	at	December	31,	2008	reflecting	the	impact	of	fair value	adjustments	recorded	by	PNC	in	conjunction	with	the	acquisition.

In	January	2009,	cumulative	credit	losses	in	the	mortgage	loan	pool	surpassed the	principal	balance	of	subordinated	equity	notes,	giving	PNC	the	right	to	put the	first	mezzanine	note	to	the	independent	third	party	in	accordance	with	the credit	risk	transfer	agreement.	In	February	2009,	PNC	exercised	its	put	option and	received	$16	million	for	the	mezzanine	note.	Prior	to	this	reconsideration event,	management	evaluated	what	impact	this	transaction	would	have	on determining	whether	we	would	remain	the	primary	beneficiary	of	the	SPE. Management	concluded,	through	reassessment	of	the	expected	losses	and residual	returns	of	the	SPE,	that	we	would	remain	the	primary	beneficiary	and accordingly	should	continue	to	consolidate	the	SPE.

# Perpetual	Trust	Securities

We	issue	certain	hybrid	capital	vehicles	that	qualify	as	capital	for	regulatory	and rating	agency	purposes.

In	February	2008,	PNC	Preferred	Funding	LLC	(the	"LLC"),	one	of	our	indirect subsidiaries,	sold	$375	million	of	8.700%	Fixed-to-Floating	Rate	Non- Cumulative	Exchangeable	Perpetual	Trust	Securities	of	PNC	Preferred	Funding Trust	III	("Trust	III")	to	third	parties	in	a	private	placement.	In	connection	with the	private	placement,	Trust	III	acquired	$375	million	of	Fixed-to-Floating	Rate Non-Cumulative	Perpetual	Preferred	Securities	of	the	LLC	(the	"LLC	Preferred Securities").	The	sale	was	similar	to	the	March	2007	private	placement	by	the LLC	of	$500	million	of	6.113%	Fixed-to-Floating	Rate	Non-Cumulative Exchangeable	Trust	Securities	(the	"Trust	II	Securities")	of	PNC	Preferred Funding	Trust	II	("Trust	II")	in	which	Trust	II	acquired	$500	million	of	LLC Preferred	Securities	and	to	the	December	2006	private	placement	by	PNC	REIT Corp.	of	$500	million	of	6.517%	Fixed-to-Floating	Rate	Non-Cumulative Exchangeable	Perpetual	Trust	Securities	(the	"Trust	I	Securities")	of	PNC Preferred	Funding	Trust	I	("Trust	I")	in	which	Trust	I	acquired	$500	million	of LLC	Preferred	Securities.

Each	Trust	III	Security	is	automatically	exchangeable	into	a	share	of	Series	J Non-Cumulative	Perpetual	Preferred	Stock	of	PNC,	each	Trust	II	Security	is automatically	exchangeable	into	a	share	of	Series	I	Non-Cumulative	Perpetual Preferred	Stock	of	PNC	("Series	I	Preferred	Stock"),	and	each	Trust	I	Security	is automatically	exchangeable	into	a	share	of	Series	F	Non-Cumulative	Perpetual Preferred	Stock	of	PNC	Bank,	N.A.	("PNC	Bank	Preferred	Stock"),	in	each	case under	certain	conditions	relating	to	the	capitalization	or	the	financial	condition	of PNC	Bank,	N.A.	and	upon	the	direction	of	the	Office	of	the	Comptroller	of	the Currency.

We	entered	into	a	replacement	capital	covenant	in	connection	with	the	closing	of the	Trust	I	Securities	sale	(the	"Trust	RCC")	whereby	we	agreed	that	neither	we nor	our	subsidiaries	(other	than	PNC	Bank,	N.A.	and	its	subsidiaries)	would

purchase	the	Trust	Securities,	the	LLC	Preferred	Securities	or	the	PNC	Bank Preferred	Stock	unless	such	repurchases	or	redemptions	are	made	from	the proceeds	of	the	issuance	of	certain	qualified	securities	and	pursuant	to	the	other terms	and	conditions	set	forth	in	the	replacement	capital	covenant	with	respect	to the	Trust	RCC.

We	also	entered	into	a	replacement	capital	covenant	in	connection	with	the closing	of	the	Trust	II	Securities	sale	(the	"Trust	II	RCC")	whereby	we	agreed until	March	29,	2017	that	neither	we	nor	our	subsidiaries	would	purchase	or redeem	the	Trust	II	Securities,	the	LLC	Preferred	Securities	or	the	Series	I Preferred	Stock	unless	such	repurchases	or	redemptions	are	made	from	the proceeds	of	the	issuance	of	certain	qualified	securities	and	pursuant	to	the	other terms	and	conditions	set	forth	in	the	replacement	capital	covenant	with	respect	to the	Trust	RCC.

As	of	December	31,	2008,	each	of	the	Trust	RCC	and	the	Trust	II	RCC	are	for the	benefit	of	holders	of	our	$200	million	of	Floating	Rate	Junior	Subordinated Notes	issued	in	June	1998.	We	filed	a	copy	of	each	of	the	Trust	RCC	and	the Trust	II	RCC	with	the	SEC	as	Exhibit	99.1	to	PNC's	Form	8-K	filed	on December	8,	2006	and	as	Exhibit	99.1	to	PNC's	Form	8-K	filed	on	March	30, 2007,	respectively.

PNC	has	contractually	committed	to	Trust	II	and	Trust	III	that	if	full	dividends are	not	paid	in	a	dividend	period	on	the	Trust	II	Securities	or	the	Trust	III Securities,	as	applicable,	or	the	LLC	Preferred	Securities	held	by	Trust	II	or Trust	III,	as	applicable,	PNC	will	not	declare	or	pay	dividends	with	respect	to,	or redeem,	purchase	or	acquire,	any	of	its	equity	capital	securities	during	the	next succeeding	dividend	period,	other	than:	(i)	purchases,	redemptions	or	other acquisitions	of	shares	of	capital	stock	of	PNC	in	connection	with	any employment	contract,	benefit	plan	or	other	similar	arrangement	with	or	for	the benefit	of	employees,	officers,	directors	or	consultants,	(ii)	purchases	of	shares of	common	stock	of	PNC	pursuant	to	a	contractually	binding	requirement	to	buy stock	existing	prior	to	the	commencement	of	the	extension	period,	including under	a	contractually	binding	stock	repurchase	plan,	(iii)	any	dividend	in connection	with	the	implementation	of	a	shareholders'	rights	plan,	or	the redemption	or	repurchase	of	any	rights	under	any	such	plan,	(iv)	as	a	result	of	an exchange	or	conversion	of	any	class	or	series	of	PNC's	capital	stock	for	any other	class	or	series	of	PNC's	capital	stock,	(v)	the	purchase	of	fractional interests	in	shares	of	PNC	capital	stock	pursuant	to	the	conversion	or	exchange provisions	of	such	stock	or	the	security	being	converted	or	exchanged	or	(vi)	any stock	dividends	paid	by	PNC	where	the	dividend	stock	is	the	same	stock	as	that on	which	the	dividend	is	being	paid.

PNC	Bank,	N.A.	has	contractually	committed	to	Trust	I	that	if	full	dividends	are not	paid	in	a	dividend	period	on	the	Trust	I	Securities,	LLC	Preferred	Securities or	any	other	parity	equity	securities	issued	by	the	LLC,	neither	PNC	Bank,	N.A. nor	its	subsidiaries	will	declare	or	pay	dividends	or	other

distributions	with	respect	to,	or	redeem,	purchase	or	acquire	or	make	a liquidation	payment	with	respect	to,	any	of	its	equity	capital	securities	during	the next	succeeding	period	(other	than	to	holders	of	the	LLC	Preferred	Securities and	any	parity	equity	securities	issued	by	the	LLC)	except:	(i)	in	the	case	of dividends	payable	to	subsidiaries	of	PNC	Bank,	N.A.,	to	PNC	Bank,	N.A.	or another	wholly-owned	subsidiary	of	PNC	Bank,	N.A.	or	(ii)	in	the	case	of dividends	payable	to	persons	that	are	not	subsidiaries	of	PNC	Bank,	N.A.,	to such	persons	only	if,	(A)	in	the	case	of	a	cash	dividend,	PNC	has	first irrevocably	committed	to	contribute	amounts	at	least	equal	to	such	cash	dividend or	(B)	in	the	case	of	in-kind	dividends	payable	by	PNC	REIT	Corp.,	PNC	has committed	to	purchase	such	in-kind	dividend	from	the	applicable	PNC	REIT Corp.	holders	in	exchange	for	a	cash	payment	representing	the	market	value	of such	in-kind	dividend,	and	PNC	has	committed	to	contribute	such	in-kind dividend	to	PNC	Bank,	N.A.

# PNC	Capital	Trust	E	Trust	Preferred	Securities

In	February	2008,	PNC	Capital	Trust	E	issued	$450	million	of	7.75%	Trust Preferred	Securities	due	March	15,	2068	(the	"Trust	E	Securities").	PNC	Capital Trust	E's	only	assets	are	$450	million	of	7.75%	Junior	Subordinated	Notes	due March	15,	2068	and	issued	by	PNC	(the	"JSNs").	The	Trust	E	Securities	are fully	and	unconditionally	guaranteed	by	PNC.	We	may,	at	our	option,	redeem the	JSNs	at	100%	of	their	principal	amount	on	or	after	March	15,	2013.

In	connection	with	the	closing	of	the	Trust	E	Securities	sale,	we	agreed	that,	if we	have	given	notice	of	our	election	to	defer	interest	payments	on	the	JSNs	or	a related	deferral	period	is	continuing,	then	PNC	would	be	subject	during	such period	to	restrictions	on	dividends	and	other	provisions	protecting	the	status	of the	JSN	debenture	holder	similar	to	or	in	some	ways	more	restrictive	than	those potentially	imposed	under	the	Exchange	Agreements	with	Trust	II	and	Trust	III, as	described	above.	PNC	Capital	Trusts	C	and	D	have	similar	protective provisions	with	respect	to	$500	million	in	principal	amount	of	junior subordinated	debentures.	Also,	in	connection	with	the	closing	of	the	Trust	E Securities	sale,	we	entered	into	a	replacement	capital	covenant,	a	copy	of	which was	attached	as	Exhibit	99.1	to	PNC's	Form	8-K	filed	on	February	13,	2008	and which	is	described	in	Note	14	Capital	Securities	of	Subsidiary	Trusts	in	Item	8 of	this	Report.

# Acquired	Entity	Trust	Preferred	Securities

As	a	result	of	the	National	City	acquisition,	we	assumed	obligations	with	respect to	$2.4	billion	in	principal	amount	of	junior	subordinated	debentures	issued	by the	acquired	entity.	As	a	result	of	the	Mercantile,	Yardville	and	Sterling acquisitions,	we	assumed	obligations	with	respect	to	$158	million	in	principal amount	of	junior	subordinated	debentures	issued	by	the	acquired	entities.	Under the	terms	of	these	debentures,	if	there	is	an	event	of	default	under	the	debentures or	PNC	exercises	its	right	to	defer	payments	on	the	related	trust	preferred securities	issued	by	the	statutory	trusts	or	there	is	a	default	under	PNC's guarantee	of	such	payment

obligations,	PNC	would	be	subject	during	the	period	of	such	default	or	deferral to	restrictions	on	dividends	and	other	provisions	protecting	the	status	of	the debenture	holders	similar	to	or	in	some	ways	more	restrictive	than	those potentially	imposed	under	the	Exchange	Agreements	with	Trust	II	and	Trust	III, as	described	above.

We	are	subject	to	replacement	capital	covenants	("RCCs")	with	respect	to	four tranches	of	junior	subordinated	debentures	inherited	from	National	City,	copies of	which	RCCs	were	attached,	respectively,	as	Exhibit	99.2	to	the	National	City Form	8-K	filed	on	February	4,	2008	and	Exhibit	99.1	to	the	National	City	Forms 8-K	filed	on	November	9,	2006,	May	25,	2007	and	August	30,	2007.	See	Note 14	Capital	Securities	of	Subsidiary	Trusts.	Similarly,	we	are	subject	to	a replacement	capital	covenant	with	respect	to	our	Series	L	Preferred	Stock,	a copy	of	which	was	attached	as	Exhibit	99.1	to	National	City's	Form	8-K	filed	on February	4,	2008.	See	Note	19	Shareholders'	Equity	in	Item	8	of	this	Report.

# FAIR	VALUE	MEASUREMENTS	AND	FAIR	VALUE	OPTION

We	adopted	SFAS	157,	"Fair	Value	Measurements"	("SFAS	157"),	and	SFAS 159,	"The	Fair	Value	Option	for	Financial	Assets	and	Financial	Liabilities	– Including	an	amendment	of	FASB	Statement	No.	115"	("SFAS	159"),	on January	1,	2008.	SFAS	157	defines	fair	value,	establishes	a	framework	for measuring	fair	value,	and	expands	disclosures	about	fair	value	measurements. SFAS	159	permits	entities	to	choose	to	measure	many	financial	instruments	and certain	other	items	at	fair	value.	Under	SFAS	159,	we	elected	to	fair	value certain	commercial	mortgage	loans	classified	as	held	for	sale	and	certain customer	resale	agreements	and	bank	notes	to	align	the	accounting	for	the changes	in	the	fair	value	of	these	financial	instruments	with	the	changes	in	the value	of	their	related	hedges.	See	Note	8	Fair	Value	in	the	Notes	To Consolidated	Financial	Statements	under	Item	8	of	this	Report	for	further information.

At	December	31,	2008,	fair	value	assets	represented	13%	of	total	assets	and	fair value	liabilities	represented	2%	of	total	liabilities.	Assets	and	liabilities measured	at	fair	value	on	a	recurring	basis,	including	instruments	for	which	PNC has	elected	the	fair	value	option,	are	summarized	below.	As	prescribed	by	SFAS 157,	the	assets	and	liabilities	of	National	City	acquired	in	a	purchase	business combination	on	December	31,	2008	were	excluded	from	the	table	below	and related	disclosures.

# Fair	Value	Measurements	–	Summary

|  | December	31,	2008 | December	31,	2008 | December	31,	2008 | December	31,	2008 |
| :--- | :--- | :--- | :--- | :--- |
| In\tmillions | Level\t1 | Level\t2 | Level\t3 | Total\tFair\nValue |
| Assets |  |  |  |  |
| Securities\tavailable\tfor\tsale | $ 347 | $21,633 | $4,837 | $26,817 |
| Financial\tderivatives\t(a) | 16 | 5,582 | 125 | 5,723 |
| Trading\tsecurities\t(b) | 89 | 529 | 73 | 691 |
| Commercial\tmortgage\tloans |  |  |  |  |
| held\tfor\tsale\t(c) |  |  | \t 1,400 | 1,400 |
| Customer\tresale\tagreements |  |  |  |  |
| (d) |  | 1,072 |  | 1,072 |
| Equity\tinvestments |  |  | 571 | 571 |
| Other\tassets |  | 144 | 6 | 150 |
| Total\tassets | $ 452 | $28,960 | $7,012 | $36,424 |
| Liabilities |  |  |  |  |
| Financial\tderivatives\t(e) | $2 | \t $4,387 | $22 | \t $4,411 |
| Trading\tsecurities\tsold\tshort |  |  |  |  |
| (f) | 182 | 207 |  | 389 |
| Other\tliabilities |  | 9 |  | 9 |
| Total\tliabilities | $ 184 | $4,603 | $22 | $4,809 |

(a)Included	in	other	assets	on	the	Consolidated	Balance	Sheet.

(b)Included	in	trading	securities	on	the	Consolidated	Balance	Sheet.	Fair	value	includes	net	unrealized losses	of	$27.5	million.

(c)Included	in	loans	held	for	sale	on	the	Consolidated	Balance	Sheet.	PNC	has	elected	the	fair	value option	under	SFAS	159	for	certain	commercial	mortgage	loans	held	for	sale.

(d)Included	in	federal	funds	sold	and	resale	agreements	on	the	Consolidated	Balance	Sheet.	PNC	has elected	the	fair	value	option	under	SFAS	159	for	this	item. (e)Included	in	other	liabilities	on	the	Consolidated	Balance	Sheet.

(f) Included	in	other	borrowed	funds	on	the	Consolidated	Balance	Sheet.

# Valuation	Hierarchy

The	following	is	an	outline	of	the	valuation	methodologies	used	for	measuring fair	value	under	SFAS	157	for	the	major	items	above.	SFAS	157	focuses	on	the exit	price	in	the	principal	or	most	advantageous	market	for	the	asset	or	liability	in an	orderly	transaction	between	willing	market	participants	and	establishes	a reporting	hierarchy	to	maximize	the	use	of	observable	inputs.	The	fair	value hierarchy	(i.e.,	Level	1,	Level	2,	and	Level	3)	is	described	in	detail	in	Note	8 Fair	Value	in	the	Notes	To	Consolidated	Financial	Statements	under	Item	8	of this	Report.

We	characterize	active	markets	as	those	where	transaction	volumes	are	sufficient to	provide	objective	pricing	information,	with	reasonably	narrow	bid/ask	spreads and	where	dealer	quotes	received	do	not	vary	widely.	Inactive	markets	are characterized	by	low	transaction	volumes,	price	quotations	which	vary substantially	among	market	participants,	or	in	which	minimal	information	is released	publicly.	We	also	consider	nonperformance	risks	including	credit	risk	as part	of	our	valuation	methodology	for	all	assets	measured	at	fair	value.	Any models	used	to	determine	fair	values	or	to	validate	dealer	quotes	based	on	the descriptions

below	are	subject	to	review	and	independent	testing	as	part	of	our	model validation	and	internal	control	testing	processes.	Significant	models	are	tested	by our	Model	Validation	Committee	on	at	least	an	annual	basis.	In	addition,	we have	teams,	independent	of	the	traders,	verify	marks	and	assumptions	used	for valuations	at	each	period	end.

# Securities

Securities	include	both	the	available	for	sale	and	trading	portfolios.	We	use prices	sourced	from	pricing	services,	dealer	quotes	or	recent	trades	to	determine the	fair	value	of	securities.	Approximately	75%	of	our	positions	are	valued	using pricing	services	provided	by	the	Lehman	Index	and	IDC.	Lehman	Index	prices are	set	with	reference	to	market	activity	for	highly	liquid	assets	such	as	agency mortgage-backed	securities,	and	matrix	priced	for	other	assets,	such	as	CMBS and	asset-backed	securities.	IDC	primarily	uses	matrix	pricing	for	the instruments	we	value	using	this	service,	such	as	agency	adjustable	rate	mortgage securities,	agency	CMOs	and	municipal	bonds.	Dealer	quotes	received	are typically	non-binding	and	corroborated	with	other	dealers'	quotes,	by	reviewing valuations	of	comparable	instruments,	or	by	comparison	to	internal	valuations. The	majority	of	our	securities	are	classified	as	Level	2	in	the	fair	value	hierarchy. In	circumstances	where	market	prices	are	limited	or	unavailable,	valuations	may require	significant	management	judgments	or	adjustments	to	determine	fair value.	In	these	cases,	the	securities	are	classified	as	Level	3.

The	primary	valuation	technique	for	securities	classified	as	Level	3	is	to	identify a	proxy	security,	market	transaction	or	index.	The	proxy	selected	generally	has similar	credit,	tenor,	duration,	pricing	and	structuring	attributes	to	the	PNC position.	The	price,	market	spread,	or	yield	on	the	proxy	is	then	used	to	calculate an	indicative	market	price	for	the	security.	Depending	on	the	nature	of	the	PNC position	and	its	attributes	relative	to	the	proxy,	management	may	make additional	adjustments	to	account	for	market	conditions,	liquidity,	and nonperformance	risk,	based	on	various	inputs	including	recent	trades	of	similar assets,	single	dealer	quotes,	and/or	other	observable	and	unobservable	inputs.

|  | December	31,	2008 | December	31,	2008 | December	31,	2008 | December	31,	2008 |
| :--- | :--- | :--- | :--- | :--- |
|  | Agency | Non-Agency | Non-Agency | Non-Agency |
| Dollars\tin\tmillions | Residential\nMortgage-\nBacked\nSecurities | Residential\nMortgage-\nBacked\nSecurities | Commercial\nMortgage-\nBacked\nSecurities | Other\nAsset-\nBack\nSecurities |
| Fair\tValue | $12,742 | $7,420 | $3,419 | $1,492 |
| %\tof\tFair\tValue: |  |  |  |  |
| By\tVintage |  |  |  |  |
| 2008 | 36% | 1% |  |  |
| 2007 | 24% | 15% | 10% | 15% |
| 2006 | 23% | 23% | 31% | 30% |
| 2005 | 5% | 35% | 12% | 31% |
| 2004\tand\tearlier | 12% | 26% | 47% | 24% |
| Total | 100% | 100% | 100% | 100% |
| By\tCredit\trating |  |  |  |  |
| Agency | 100% | 1% |  |  |
| AAA |  | 82% | 98% | 71% |
| AA |  | 4% | 1% | 7% |
| A |  | 5% |  | 2% |
| BBB |  | 2% |  | 8% |
| BB |  | 3% |  | 6% |
| B |  | 1% |  | 2% |
| Lower\tthan\tB |  | 2% |  | 4% |
| No\trating |  |  | 1% |  |
| Total | 100% | 100% | 100% | 100% |
| By\tFICO\tScore |  |  |  |  |
| >720 |  | 68% |  | 13% |
| <720\tor\t>660 |  | 30% |  | 47% |
| <660 |  |  |  | 1% |
| No\tFICO\tscore | 100% | 2% | 100% | 39% |
| Total | 100% | 100% | 100% | 100% |

# Residential	Mortgage-Backed	Securities

At	December	31,	2008,	our	residential	mortgage-backed	securities	portfolio	was comprised	of	$12.7	billion	fair	value	of	US	government	agency-backed	securities (substantially	all	classified	as	available	for	sale)	and	$7.4	billion	fair	value	of private-issuer	securities	(all	classified	as	available	for	sale).	The	agency securities	are	generally	collateralized	by	1-4	family,	conforming,	fixed-rate residential	mortgages.	The	private-issuer	securities	are	also	generally collateralized	by	1-4	family	residential	mortgages.	The	mortgage	loans underlying	the	private-issuer	securities	are	generally

non-conforming	(i.e.,	original	balances	in	excess	of	the	amount	qualifying	for agency	securities)	and	predominately	have	interest	rates	that	are	fixed	for	a period	of	time,	after	which	the	rate	adjusts	to	a	floating	rate	based	upon	a contractual	spread	that	is	indexed	to	a	market	rate	(i.e.,	a	"hybrid	ARM").

Substantially	all	of	the	securities	are	senior	tranches	in	the	subordination structure	and	have	credit	protection	in	the	form	of	credit	enhancement,	over- collateralization	and/or	excess	spread	accounts.	At	December	31,	2008,	$419 million,	or	6%,	of	private-issuer	securities	were	rated	below	"BBB"	by	at	least one	national	rating	agency	or	not	rated.

For	eight	securities,	we	recorded	other-than-temporary	impairment	charges	of $151	million	in	2008.

# Commercial	Mortgage-Backed	Securities

The	commercial	mortgage-backed	securities	portfolio	was	$3.4	billion	fair	value at	December	31,	2008	(all	classified	as	available	for	sale),	and	consisted	of	fixed- rate,	private-issuer	securities	collateralized	by	non-residential	properties, primarily	retail	properties,	office	buildings,	and	multi-family	housing. Substantially	all	of	the	securities	are	the	most	senior	tranches	in	the subordination	structure.

At	December	31,	2008,	$18	million,	or	1%,	of	the	commercial	mortgage-backed securities	were	not	rated.

We	recorded	no	other-than-temporary	impairment	charges	on	commercial mortgage-backed	securities	in	2008.

# Other	Asset-Backed	Securities

The	asset-backed	securities	portfolio	was	$1.5	billion	fair	value	at	December	31, 2008	(all	classified	as	available	for	sale),	and	consisted	of	fixed-rate	and floating-rate,	private-issuer	securities	collateralized	primarily	by	various consumer	credit	products,	including	first-lien	residential	mortgage	loans,	credit cards,	and	automobile	loans.	Substantially	all	of	the	securities	are	senior	tranches in	the	subordination	structure	and	have	credit	protection	in	the	form	of	credit enhancement,	over-collateralization	and/or	excess	spread	accounts.

At	December	31,	2008,	$184	million,	or	12%,	of	the	asset-backed	securities	were rated	below	"BBB"	by	at	least	one	national	rating	agency	or	not	rated.

For	seven	asset-backed	securities,	we	recorded	other-than-temporary	impairment charges	totaling	approximately	$87	million	in	2008.

# Financial	Derivatives

Exchange-traded	derivatives	are	valued	using	quoted	market	prices	and	are classified	as	Level	1.	However,	the	majority	of	derivatives	that	we	enter	into	are executed	over-the-counter	and	are	valued	using	internal	techniques.	Readily observable	market	inputs	to	these	models	can	be	validated	to	external

sources,	including	industry	pricing	services,	or	corroborated	through	recent trades,	dealer	quotes,	yield	curves,	implied	volatility	or	other	market	related	data. Certain	derivatives,	such	as	total	rate	of	return	swaps,	are	corroborated	to	the CMBX	index.	These	derivatives	are	classified	as	Level	2.	Derivatives	priced using	significant	management	judgment	or	assumptions	are	classified	as	Level	3. The	fair	values	of	our	derivatives	are	adjusted	for	nonperformance	risk	including credit	risk	as	appropriate.	Our	nonperformance	risk	adjustment	is	computed using	internal	assumptions	based	primarily	on	historical	default	and	recovery observations.	The	credit	risk	adjustment	is	not	currently	material	to	the	overall derivatives	valuation.

# Commercial	Mortgage	Loans	and	Commitments	Held	for	Sale

Effective	January	1,	2008,	we	elected	to	account	for	commercial	mortgage	loans classified	as	held	for	sale	and	intended	for	securitization	at	fair	value	under	the provisions	of	SFAS	159.	Based	on	the	significance	of	unobservable	inputs,	we classify	this	portfolio	as	Level	3.	As	such,	a	synthetic	securitization methodology	was	used	historically	to	value	the	loans	and	the	related	unfunded commitments	on	an	aggregate	basis	based	upon	current	commercial	mortgage- backed	securities	(CMBS)	market	structures	and	conditions.	The	election	of	the fair	value	option	aligns	the	accounting	for	the	commercial	mortgages	with	the related	hedges.	It	also	eliminates	the	requirements	of	hedge	accounting	under SFAS	133.	Due	to	the	inactivity	in	the	CMBS	securitization	market	in	2008,	we determined	the	fair	value	of	commercial	mortgage	loans	held	for	sale	by	using	a whole	loan	methodology.	Based	on	the	significance	of	unobservable	inputs,	we classify	this	portfolio	as	Level	3.	Valuation	assumptions	included	observable inputs	based	on	whole	loan	sales,	both	observed	in	the	market	and	actual	sales from	our	portfolio	and	new	loan	origination	spreads	during	the	quarter. Adjustments	were	made	to	the	assumptions	to	account	for	uncertainties, including	market	conditions,	and	liquidity.	Credit	risk	was	included	as	part	of our	valuation	process	for	these	loans	by	considering	expected	rates	of	return	for market	participants	for	similar	loans	in	the	marketplace.

# Customer	Resale	Agreements

Effective	January	1,	2008,	we	elected	to	account	for	structured	resale	agreements at	fair	value,	which	are	economically	hedged	using	free-standing	financial derivatives.	The	fair	value	for	structured	resale	agreements	is	determined	using	a model	which	includes	observable	market	data	as	inputs	such	as	interest	rates. Readily	observable	market	inputs	to	this	model	can	be	validated	to	external sources,	including	yield	curves,	implied	volatility	or	other	market	related	data.

# Equity	Investments

The	valuation	of	direct	and	indirect	private	equity	investments	requires significant	management	judgment	due	to	the	absence	of	quoted	market	prices, inherent	lack	of	liquidity	and	the	long-term	nature	of	such	investments.	The carrying	values	of

direct	and	affiliated	partnership	interests	reflect	the	expected	exit	price	and	are based	on	various	techniques	including	publicly	traded	price,	multiples	of adjusted	earnings	of	the	entity,	independent	appraisals,	anticipated	financing	and sale	transactions	with	third	parties,	or	the	pricing	used	to	value	the	entity	in	a recent	financing	transaction.	Indirect	investments	in	private	equity	funds	are valued	based	on	the	financial	statements	that	we	receive	from	their	managers. Due	to	the	time	lag	in	our	receipt	of	the	financial	information	and	based	on	a review	of	investments	and	valuation	techniques	applied,	adjustments	to	the manager	provided	value	are	made	when	available	recent	portfolio	company information	or	market	information	indicates	a	significant	change	in	value	from that	provided	by	the	manager	of	the	fund.	These	investments	are	classified	as Level	3.

# Level	3	Assets	and	Liabilities

Under	SFAS	157,	financial	instruments	are	considered	Level	3	when	their	values are	determined	using	pricing	models,	discounted	cash	flow	methodologies	or similar	techniques	and	at	least	one	significant	model	assumption	or	input	is unobservable.	At	December	31,	2008,	Level	3	fair	value	assets	of	$7.012	billion represented	19%	of	total	assets	at	fair	value	and	2%	of	total	assets.	Level	3	fair value	liabilities	of	$22	million	at	December	31,	2008	represented	less	than	1% of	total	liabilities	at	fair	value	and	less	than	1%	of	total	liabilities	at	that	date.

During	2008,	securities	transferred	into	Level	3	from	Level	2	exceeded securities	transferred	out	by	$4.3	billion.	These	primarily	related	to	private	issuer asset-backed	securities,	auction	rate	securities,	residential	mortgage-backed securities	and	corporate	bonds	and	occurred	due	to	reduced	volume	of	recently executed	transactions	and	the	lack	of	corroborating	market	price	quotations	for these	instruments.	Other	Level	3	assets	include	commercial	mortgage	loans	held for	sale,	private	equity	investments	and	other	assets.

Total	securities	measured	at	fair	value	at	December	31,	2008	included	securities available	for	sale	and	trading	securities	consisting	primarily	of	residential	and commercial	mortgage-backed	securities	and	other	asset-backed	securities. Unrealized	gains	and	losses	on	available	for	sale	securities	do	not	impact liquidity	or	risk-based	capital.	However,	reductions	in	the	credit	ratings	of	these securities	would	have	an	impact	on	the	determination	of	risk-weighted	assets which	could	reduce	our	regulatory	capital	ratios.	In	addition,	other-than- temporary	impairments	on	available	for	sale	securities	would	reduce	our regulatory	capital	ratios.

# BUSINESS	SEGMENTS	REVIEW

In	2008	and	2007,	we	had	four	major	businesses	engaged	in	providing	banking, asset	management	and	global	fund	processing	products	and	services.	Business segment	results,	including	inter-segment	revenues,	and	a	description	of	each business	are	included	in	Note	27	Segment	Reporting	included	in	the	Notes	To Consolidated	Financial	Statements	under	Item	8	of	this	Report.

Certain	revenue	and	expense	amounts	included	in	this	Business	Segments Review	differ	from	the	amounts	shown	in	Note	27	due	to	the	presentation	in	this Business	Segments	Review	of	business	revenue	on	a	taxable-equivalent	basis, income	statement	classification	differences	related	to	Global	Investment Servicing,	the	inclusion	of	the	results	of	Hilliard	Lyons,	including	the	March 2008	gain	on	sale,	in	the	"Other"	category,	and	the	inclusion	of	2008	Albridge Solutions	and	Coates	Analytics	and	2007	BlackRock/MLIM	transaction integration	costs	in	the	"Other"	category.

Results	of	individual	businesses	are	presented	based	on	our	management accounting	practices	and	management	structure.	There	is	no	comprehensive, authoritative	body	of	guidance	for	management	accounting	equivalent	to	GAAP; therefore,	the	financial	results	of	our	individual	businesses	are	not	necessarily comparable	with	similar	information	for	any	other	company.	We	refine	our methodologies	from	time	to	time	as	our	management	accounting	practices	are enhanced	and	our	businesses	and	management	structure	change.	Financial results	are	presented,	to	the	extent	practicable,	as	if	each	business	operated	on	a stand-alone	basis.	As	permitted	under	GAAP,	we	have	aggregated	the	business results	for	certain	similar	operating	segments	for	financial	reporting	purposes.

Assets	receive	a	funding	charge	and	liabilities	and	capital	receive	a	funding credit	based	on	a	transfer	pricing	methodology	that	incorporates	product maturities,	duration	and	other	factors.	Capital	is	intended	to	cover	unexpected losses	and	is	assigned	to	the	banking	and	servicing	businesses	using	our	risk- based	economic	capital	model.	We	have	assigned	capital	equal	to	6%	of	funds	to Retail	Banking	to	reflect	the	capital	required	for	well-capitalized	domestic	banks and	to	approximate	market	comparables	for	this	business.	The	capital	assigned for	Global	Investment	Servicing	reflects	its	legal	entity	shareholder's	equity.

We	have	allocated	the	allowances	for	loan	and	lease	losses	and	unfunded	loan commitments	and	letters	of	credit	based	on	our	assessment	of	risk	inherent	in	the business	segment	loan	portfolios.	Our	allocation	of	the	costs	incurred	by operations	and	other	shared	support	areas	not	directly	aligned	with	the businesses	is	primarily	based	on	the	use	of	services.

Total	business	segment	financial	results	differ	from	total	consolidated	results. The	impact	of	these	differences	is	reflected	in	the	"Other"	category.	"Other"	for purposes	of	this	Business	Segments	Review	and	the	Business	Segment Highlights	in	the	Executive	Summary	includes	residual	activities	that	do	not meet	the	criteria	for	disclosure	as	a	separate	reportable	business,	such	as	gains	or losses	related	to	BlackRock	transactions	including	LTIP	share	distributions	and obligations,	earnings	and	gains	or	losses	related	to	Hilliard	Lyons,	integration costs,	asset	and	liability	management	activities	including	net	securities	gains	or losses	and	certain	trading	activities,	equity	management	activities,	differences between	business	segment	performance	reporting	and	financial	statement reporting	(GAAP),	intercompany	eliminations,	and	most	corporate	overhead.

Employee	data	as	reported	by	each	business	segment	in	the	tables	that	follow reflect	PNC	legacy	staff	directly	employed	by	the	respective	businesses	and excludes	corporate	and	shared	services	employees.	National	City	legacy employees	totaling	31,374	at	December	31,	2008	are	not	included	in	any	of PNC's	business	segment	tables.

Beginning	in	the	first	quarter	of	2009,	PNC	expects	to	have	three	new	reportable business	segments	which	are	described	in	Note	28	Subsequent	Event	included	in the	Notes	To	Consolidated	Financial	Statements	under	Item	8	of	this	Report.

# Results	Of	Businesses	–	Summary

|  | Earnings | Earnings | Revenue | Revenue | Average	Assets	(a) | Average	Assets	(a) |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Year\tended\tDecember\t31\t-\tin\tmillions | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 |
| Retail\tBanking\t(b) | $429 | $876 | $3,608 | $3,580 | $46,578 | $41,943 |
| Corporate\t&\tInstitutional\tBanking | 225 | 432 | \t 1,531 | \t 1,538 | 36,994 | 29,052 |
| BlackRock | 207 | 253 | 261 | 338 | 4,240 | 4,259 |
| Global\tInvestment\tServicing\t(c) | 122 | 128 | 916 | 831 | 5,278 | 2,476 |
| Total\tbusiness\tsegments | 983 | \t 1,689 | \t 6,316 | \t 6,287 | 93,090 | 77,730 |
| Other\t(d)\t(e) | (101) | (222) | 874 | 418 | 48,930 | 45,688 |
| Total\tconsolidated | $882 | $1,467 | $7,190 | $6,705 | $142,020 | $123,418 |
| (a)\nPeriod-end\tbalances\tfor\tBlackRock\tand\tGlobal\tInvestment\tServicing. |  |  |  |  |  |  |

(a) Period-end	balances	for	BlackRock	and	Global	Investment	Servicing.

(b) Amounts	reflect	the	reclassification	of	results	for	Hilliard	Lyons,	which	we	sold	on	March	31,	2008,	and	the	related	gain	on	sale,	from	Retail	Banking	to	"Other."

(c) Global	Investment	Servicing	revenue	represents	the	sum	of	servicing	revenue	and	nonoperating	income	(expense)	less	debt	financing	costs.	Global	Investment	Servicing	income	classified	as	net	interest	income (expense)	in	Note	27	Segment	Reporting	in	the	Notes	To	Consolidated	Financial	Statements	included	in	Item	8	of	this	Report	represents	the	interest	components	of	nonoperating	income	(net	of	nonoperating expense)	and	debt	financing.

(d) "Other"	for	2008	includes	$422	million	of	after-tax	integration	costs,	including	conforming	provision	for	credit	losses,	primarily	related	to	National	City.	"Other"	for	the	2007	includes	$99	million	of	after-tax integration	costs	and	$53	million	of	after-tax	Visa	indemnification	costs.

"Other"	also	includes	results	related	to	our	cross-border	lease	portfolio	for	both	2008	and	2007.	However,	2006	results	for	this	item	are	included	in	Corporate	&	Institutional	Banking	in	Note	27	Segment	Reporting in	the	Notes	To	Consolidated	Financial	Statements	included	in	Item	8	of	this	Report.

(e) "Other"	average	assets	are	comprised	primarily	of	investment	securities	and	residential	mortgage	loans	associated	with	asset	and	liability	management	activities.

# RETAIL	BANKING	(a)

| Dollars	in	millions	except	as	noted | 2008 | 2007 |
| :--- | :--- | :--- |
| INCOME\tSTATEMENT |  |  |
| Net\tinterest\tincome\nNoninterest\tincome | $1,992 | $2,062 |
| Asset\tmanagement | 420 | 445 |
| Service\tcharges\ton\tdeposits | 362 | 339 |
| Brokerage | 153 | 134 |
| Consumer\tservices | 419 | 392 |
| Other | 262 | 208 |
| Total\tnoninterest\tincome | 1,616 | 1,518 |
| Total\trevenue | 3,608 | 3,580 |
| Provision\tfor\tcredit\tlosses | 612 | 138 |
| Noninterest\texpense | 2,284 | 2,045 |
| Pretax\tearnings | 712 | 1,397 |
| Income\ttaxes | 283 | 521 |
| Earnings | $429 | $876 |
| AVERAGE\tBALANCE\tSHEET |  |  |
| Loans |  |  |
| Consumer |  |  |
| Home\tequity | $14,678 | $14,209 |
| Indirect | 2,050 | 1,897 |
| Education | 2,012 | 110 |
| Other\tconsumer | 1,761 | 1,487 |
| Total\tconsumer | 20,501 | 17,703 |
| Commercial\tand\tcommercial\treal\testate | 14,677 | 12,534 |
| Floor\tplan | 997 | 978 |
| Residential\tmortgage | 2,362 | 1,992 |
| Other | 67 | 70 |
| Total\tloans | 38,604 | 33,277 |
| Goodwill\tand\tother\tintangible\tassets | 6,132 | 4,920 |
| Loans\theld\tfor\tsale | 329 | 1,564 |
| Other\tassets | 1,513 | 2,182 |
| Total\tassets | $46,578 | $41,943 |
| Deposits |  |  |
| Noninterest-bearing\tdemand | $10,860 | $10,513 |
| Interest-bearing\tdemand | 9,583 | 8,876 |
| Money\tmarket | 19,677 | 16,786 |
| Total\ttransaction\tdeposits | 40,120 | 36,175 |
| Savings | 2,701 | 2,678 |
| Certificates\tof\tdeposit | 16,397 | 16,637 |
| Total\tdeposits | 59,218 | 55,490 |
| Other\tliabilities | 329 | 417 |
| Capital | 3,773 | 3,481 |
| Total\tfunds | $63,320 | $59,388 |
| PERFORMANCE\tRATIOS |  |  |
| Return\ton\taverage\tcapital | 11% | 25% |
| Noninterest\tincome\tto\ttotal\trevenue | 45 | 42 |
| Efficiency | 63 | 57 |
| OTHER\tINFORMATION\t(b)\t(c) |  |  |
| Credit-related\tstatistics: |  |  |
| Commercial\tnonperforming\tassets | $540 | $187 |
| Consumer\tnonperforming\tassets | 79 | 38 |
| Total\tnonperforming\tassets\t(d) | $619 | $225 |
| Commercial\tnet\tcharge-offs | $239 | $71 |
| Consumer\tnet\tcharge-offs | 129 | 60 |
| Total\tnet\tcharge-offs | $368 | $131 |
| Commercial\tnet\tcharge-off\tratio | 1.52% | .52% |
| Consumer\tnet\tcharge-off\tratio | .56% | .30% |
| Total\tnet\tcharge-off\tratio | .95% | .39% |

| Dollars	in	millions	except	as	noted | 2008 | 2007 |
| :--- | :--- | :--- |
| OTHER\tINFORMATION\tCONTINUED\t(b)\t(c) |  |  |
| Other\tstatistics: |  |  |
| Full-time\temployees | 11,481 | 11,022 |
| Part-time\temployees | 2,363 | 2,298 |
| ATMs | 4,041 | 3,900 |
| Branches\t(e) | 1,148 | 1,109 |
| ASSETS\tUNDER\tADMINISTRATION |  |  |
| (in\tbillions)\t(f) |  |  |
| Assets\tunder\tmanagement |  |  |
| Personal | $38 | $49 |
| Institutional | 19 | 20 |
| Total | $57 | $69 |
| Asset\tType |  |  |
| Equity | $26 | $40 |
| Fixed\tincome | 19 | 17 |
| Liquidity/other | 12 | 12 |
| Total | $57 | $69 |
| Nondiscretionary\tassets\tunder\tadministration |  |  |
| Personal | $23 | $30 |
| Institutional | 64 | 82 |
| Total | $87 | $112 |
| Asset\tType |  |  |
| Equity | $34 | $49 |
| Fixed\tincome | 19 | 27 |
| Liquidity/other | 34 | 36 |
| Total | $87 | $112 |
| Home\tequity\tportfolio\tcredit\tstatistics: |  |  |
| %\tof\tfirst\tlien\tpositions | 38% | 39% |
| Weighted\taverage\tloan-to-value\tratios\t(g) | 73% | 73% |
| Weighted\taverage\tFICO\tscores\t(h) | 727 | 727 |
| Annualized\tnet\tcharge-off\tratio | .52% | .20% |
| Loans\t90\tdays\tpast\tdue | .58% | .37% |
| Checking-related\tstatistics: |  |  |
| Retail\tBanking\tchecking\trelationships | 2,432,000 | 2,272,000 |
| Consumer\tDDA\thouseholds\tusing\tonline\tbanking | 1,238,000 | 1,091,000 |
| %\tof\tconsumer\tDDA\thouseholds\tusing\tonline\tbanking | 57% | 54% |
| Consumer\tDDA\thouseholds\tusing\tonline\tbill\tpayment | 882,000 | 667,000 |
| %\tof\tconsumer\tDDA\thouseholds\tusing\tonline\tbill\tpayment | 41% | 33% |
| Small\tbusiness\tloans\tand\tmanaged\tdeposits : |  |  |
| Small\tbusiness\tloans | $13,483 | $13,049 |
| Managed\tdeposits: |  |  |
| On-balance\tsheet |  |  |
| Noninterest-bearing\tdemand\t(i) | $8,319 | $5,994 |
| Interest-bearing\tdemand | 2,157 | 1,873 |
| Money\tmarket | 3,638 | 3,152 |
| Certificates\tof\tdeposit | 880 | 1,068 |
| Off-balance\tsheet\t(j) |  |  |
| Small\tbusiness\tsweep\tchecking | 3,140 | 2,780 |
| Total\tmanaged\tdeposits | $18,134 | $14,867 |
| Brokerage\tstatistics: |  |  |
| Financial\tconsultants\t(k) | 414 | 364 |
| Full\tservice\tbrokerage\toffices | 23 | 24 |
| Brokerage\taccount\tassets\t(billions) | $15 | $19 |

(a)Information	for	all	periods	presented	excludes	the	impact	of	National	City,	which	PNC	acquired	on December	31,	2008,	and	Hilliard	Lyons,	which	was	sold	on	March	31,	2008,	and	whose	results	have been	reclassified	to	"Other."

(b)Presented	as	of	December	31	except	for	net	charge-offs	and	net	charge-off	ratio.

(c)Amounts	as	of	and	for	the	year	ended	December	31,	2008	include	the	impact	of	Yardville.	Amounts subsequent	to	April	4,	2008	include	the	impact	of	Sterling.

(e)Excludes	certain	satellite	branches	that	provide	limited	products	and	service	hours. (f) Excludes	brokerage	account	assets.

(g)Calculated	as	of	origination	date.

(h)Represents	the	most	recent	FICO	scores	that	we	have	on	file.

(i) The	increase	at	December	31,	2008	compared	with	December	31,	2007	reflected	large	customer deposit	activity	in	the	last	few	days	of	December	2008.

(j) Represents	small	business	balances.	These	balances	are	swept	into	liquidity	products	managed	by other	PNC	business	segments,	the	majority	of	which	are	off-balance	sheet.

(k)Financial	consultants	provide	services	in	full	service	brokerage	offices	and	PNC	traditional	branches.

The	acquisition	of	National	City	on	December	31,	2008	added	1,441	branches, including	61	branches	that	we	committed	to	divest,	and	2,191	ATMs	to	our distribution	network.	Including	the	impact	of	National	City,	our	network	grew	to 2,589	branches	and	6,232	ATM	machines,	giving	PNC	one	of	the	largest distribution	networks	among	US	banks.	The	acquisition	also	added	$53	billion	of assets	under	management	to	give	the	combined	company	$110	billion	in	assets under	management.

All	other	Retail	Banking	business	segment	disclosures	in	this	Item	7	exclude	any impact	of	National	City.

Highlights	of	Retail	Banking's	performance	during	2008	include	the	following: •	Retail	Banking	expanded	the	number	of	customers	it	serves	and	grew checking	relationships.	Total	checking	relationships	increased	by	a	net 160,000	since	December	31,	2007,	which	includes	both	the	conversion	of Yardville	and	Sterling	accounts	as	well	as	the	addition	of	new	relationships through	organic	growth.	Excluding	relationships	added	from	acquisitions, net	new	consumer	and	business	checking	relationships	grew	by	72,000	in 2008	compared	with	32,000	a	year	earlier.

•	Average	deposit	balances	increased	$3.7	billion	or	7%	primarily	as	a	result of	strong	money	market	deposit	growth	and	the	benefits	of	the	acquisitions. •	Our	investment	in	online	banking	capabilities	continued	to	pay	off.	Since December	31,	2007,	the	percentage	of	consumer	checking	households using	online	bill	payment	increased	from	33%	to	41%.	We	continue	to	seek customer	growth	by	expanding	our	use	of	technology,	such	as	the	recent launch	of	our	"Virtual	Wallet"	online	banking	product.	Recently,	Virtual Wallet	received	a	"Best	of	the	Web"	award	for	2008	from	Online	Banking Report.

•	Retail	Banking	continued	to	invest	in	the	branch	network.	During	2008,	we opened	19	new	branches,	consolidated	45	branches,	and	acquired	65 branches	for	a	total	of	1,148	branches	at	December	31,	2008.	We	continue to	work	to	optimize	our	network	by	opening	new	branches	in	high	growth areas,	relocating	branches	to	areas	of	higher	market	opportunity,	and consolidating	branches	in	areas	of	declining	opportunity.	We	relocated	8 branches	during	2008.

In	October	2008	we	announced	an	exclusive	agreement	under	which	we	will provide	banking	services	in	Giant	Food	LLC	supermarket	locations	across Virginia,	Maryland,	Delaware	and	the	District	of	Columbia.	In	2009,	we	expect to	open	approximately	40	new	in-store	branches	and	install	approximately	180 ATMs.	Additional	locations	are	expected	to	open	in	subsequent	years.

Total	revenue	for	2008	was	$3.608	billion,	a	1%	increase	compared	with	$3.580 billion	for	2007.	Net	interest	income	of	$1.992	billion	decreased	$70	million,	or 3%,	compared	with	2007.	This	decline	was	primarily	driven	by	a	lower	value attributed	to	deposits	in	the	declining	rate	environment	partially	offset	by benefits	from	earlier	acquisitions.

Noninterest	income	increased	$98	million,	or	6%,	compared	with	2007.	This growth	was	attributed	primarily	to	the	following:

•	A	gain	of	$95	million	from	the	redemption	of	a	portion	of	our	Visa	Class	B common	shares	related	to	Visa's	March	2008	initial	public	offering, •	The	Mercantile,	Yardville	and	Sterling	acquisitions,

•	Increased	volume-related	consumer	fees	including	debit	card,	credit	card,

and	merchant	revenue,	and

•	Increased	brokerage	account	activities.

These	increases	were	partially	offset	by	lower	asset	management	fees	as	a	result of	lower	equity	markets	and	by	other	business	gains	in	the	prior	year.

The	Market	Risk	Management	–	Equity	and	Other	Investment	Risk	section	of this	Financial	Review	includes	further	information	regarding	Visa.

The	provision	for	credit	losses	for	2008	was	$612	million	compared	to	$138 million	for	2007.	Net	charge-offs	were	$368	million	for	2008	and	$131	million in	2007.	Asset	quality	continued	to	migrate	at	an	accelerated	pace	in	the	very challenging	economic	and	credit	environment.	The	increases	in	provision	and	net charge-offs	were	primarily	a	result	of	the	following:

•	Downward	credit	migration	of	residential	real	estate	development	and related	sectors,	commercial	real	estate,	and	commercial	and	industrial	loan portfolios,	and

•	Increased	levels	of	consumer	and	commercial	charge-offs	given	the	current credit	environment.

Based	upon	the	current	environment	and	the	acquisition	of	National	City,	we believe	the	provision	and	nonperforming	assets	will	continue	to	increase	in	2009 versus	2008	levels.

Noninterest	expense	for	2008	totaled	$2.284	billion,	an	increase	of	$239	million compared	with	2007.	Approximately	76%	of	this	increase	was	attributable	to acquisitions	and	continued	investments	in	the	business	such	as	the	branch network	and	innovation.

Full-time	employees	at	December	31,	2008	totaled	11,481,	an	increase	of	459 over	the	prior	year.	Part-time	employees	have	increased	by	65	since December	31,	2007.	The	increase	in	full-time	and	part-time	employees	was primarily	the	result	of	the	Yardville	and	Sterling	acquisitions.

Growing	core	checking	deposits	as	a	lower-cost	funding	source	and	as	the cornerstone	product	to	build	customer	relationships	is	the	primary	objective	of our	deposit	strategy.	Furthermore,	core	checking	accounts	are	critical	to	our strategy	of	expanding	our	payments	business.	Average	total	deposits	increased $3.7	billion,	or	7%,	compared	with	2007.

•	Average	money	market	deposits	increased	$2.9	billion,	and	average certificates	of	deposits	declined	$.2	billion.	Money	market	deposits experienced	core	growth	and	both	deposit	categories	benefited	from	the acquisitions.	The	decline	in	certificates	of	deposits	was	a	result	of	a	focus on	relationship	customers	rather	than	pursuing	higher-rate	single	service customers.	The	deposit	strategy	of	Retail	Banking	is	to	remain	disciplined on	pricing,	target	specific	products	and	markets	for	growth,	and	focus	on the	retention	and	growth	of	balances	for	relationship	customers. •	Average	demand	deposit	growth	of	$1.1	billion,	or	5%,	was	primarily driven	by	acquisitions	as	organic	growth	was	impacted	by	current	economic conditions,	such	as	lower	average	balances	per	account.

Currently,	we	are	focused	on	a	relationship-based	lending	strategy	that	targets specific	customer	sectors	(homeowners,	students,	small	businesses	and	auto dealerships)	while	seeking	a	moderate	risk	profile	for	the	loans	that	we	originate. •	Average	commercial	and	commercial	real	estate	loans	grew	$2.1	billion,	or 17%,	compared	with	2007.	The	increase	was	primarily	attributable	to acquisitions.	Organic	loan	growth	reflecting	the

strength	of	increased	small	business	loan	demand	from	existing	customers and	the	acquisition	of	new	relationships	through	our	sales	efforts	was	also	a factor	in	the	increase.	At	December	31,	2008,	commercial	and	commercial real	estate	loans	totaled	$14.6	billion.	This	portfolio	included	$3.2	billion of	commercial	real	estate	loans,	of	which	approximately	$2.4	billion	were related	to	our	expansion	from	earlier	acquisitions	into	the	greater	Maryland and	Washington,	DC	markets.	Approximately	$.4	billion	of	the commercial	real	estate	loans	were	in	residential	real	estate	development. •	Average	home	equity	loans	grew	$469	million,	or	3%,	compared	with	2007 primarily	due	to	acquisitions.	Our	home	equity	loan	portfolio	is relationship	based,	with	93%	of	the	portfolio	attributable	to	borrowers	in our	primary	geographic	footprint.	We	monitor	this	portfolio	closely	and	the nonperforming	assets	and	charge-offs	that	we	have	experienced	are	within our	expectations	given	current	market	conditions.

•	Average	education	loans	grew	$1.9	billion	compared	with	2007.	The increase	was	primarily	the	result	of	the	transfer	of	approximately	$1.8 billion	of	education	loans	previously	held	for	sale	to	the	loan	portfolio during	the	first	quarter	of	2008.	The	Loans	Held	For	Sale	portion	of	the Consolidated	Balance	Sheet	Review	section	of	this	Financial	Review includes	additional	information	related	to	this	transfer. •	Average	residential	mortgage	loans	increased	$370	million	primarily	due	to the	addition	of	loans	from	acquisitions.

Assets	under	management	of	$57	billion	at	December	31,	2008	decreased	$12 billion	compared	with	the	balance	at	December	31,	2007.	The	decline	in	assets under	management	was	primarily	due	to	comparatively	lower	equity	markets partially	offset	by	the	Sterling	acquisition	and	positive	net	inflows.	New	business sales	efforts	and	new	client	acquisition	and	growth	were	ahead	of	our expectations.

Nondiscretionary	assets	under	administration	of	$87	billion	at	December	31, 2008	decreased	$25	billion	compared	with	the	balance	at	December	31,	2007. This	decline	was	primarily	driven	by	comparatively	lower	equity	markets	and net	outflows	resulting	from	the	reduction	in	several	significant	relationships.

# CORPORATE	&	INSTITUTIONAL	BANKING	(a)

| Dollars	in	millions	except	as	noted | 2008 | 2007 |
| :--- | :--- | :--- |
| INCOME\tSTATEMENT |  |  |
| Net\tinterest\tincome\nNoninterest\tincome | $1,037 | $818 |
| Corporate\tservice\tfees | 545 | 564 |
| Other | (51) | 156 |
| Noninterest\tincome | 494 | 720 |
| Total\trevenue | 1,531 | 1,538 |
| Provision\tfor\tcredit\tlosses | 366 | 125 |
| Noninterest\texpense | 882 | 818 |
| Pretax\tearnings | 283 | 595 |
| Income\ttaxes | 58 | 163 |
| Earnings | $225 | $432 |
| AVERAGE\tBALANCE\tSHEET |  |  |
| Loans |  |  |
| Corporate\t(b) | $12,485 | $9,930 |
| Commercial\treal\testate | 5,631 | 4,408 |
| Commercial\t–\treal\testate\trelated | 3,022 | 2,390 |
| Asset-based\tlending | 5,274 | 4,595 |
| Total\tloans\t(b) | 26,412 | 21,323 |
| Goodwill\tand\tother\tintangible\tassets | 2,247 | 1,919 |
| Loans\theld\tfor\tsale | 2,053 | 1,319 |
| Other\tassets | 6,282 | 4,491 |
| Total\tassets | $36,994 | $29,052 |
| Deposits |  |  |
| Noninterest-bearing\tdemand | $7,598 | $7,301 |
| Money\tmarket | 5,216 | 4,784 |
| Other | 2,286 | 1,325 |
| Total\tdeposits | 15,100 | 13,410 |
| Other\tliabilities | 5,479 | 3,347 |
| Capital | 2,616 | 2,152 |
| Total\tfunds | $23,195 | $18,909 |
| PERFORMANCE\tRATIOS |  |  |
| Return\ton\taverage\tcapital | 9% | 20% |
| Noninterest\tincome\tto\ttotal\trevenue | 32 | 47 |
| Efficiency | 58 | 53 |
| COMMERCIAL\tMORTGAGE\tSERVICING |  |  |
| PORTFOLIO\t(in\tbillions) |  |  |
| Beginning\tof\tperiod | $243 | $200 |
| Acquisitions/additions | 31 | 88 |
| Repayments/transfers | (25) | (45) |
| End\tof\tperiod | $249 | $243 |
| OTHER\tINFORMATION |  |  |
| Consolidated\trevenue\tfrom\t(c): |  |  |
| Treasury\tmanagement | $545 | $476 |
| Capital\tmarkets | $336 | $290 |
| Commercial\tmortgage\tloan\tsales\tand |  |  |
| valuations\t(d) | $(115) | $19 |
| Commercial\tmortgage\tloan\tservicing\t(e) | 180 | 233 |
| Commercial\tmortgage\tbanking\tactivities | $65 | $252 |
| Total\tloans\t(f) | $28,996 | $23,861 |
| Nonperforming\tassets\t(f)\t(g) | $749 | $243 |
| Net\tcharge-offs | $168 | $70 |
| Full-time\temployees\t(f) | 2,294 | 2,290 |
| Net\tcarrying\tamount\tof\tcommercial\tmortgage |  |  |
| servicing\trights\t(f) | $654 | $694 |

(a)Information	for	all	periods	presented	excludes	the	impact	of	National	City,	which	PNC	acquired	on December	31,	2008.

(b)Includes	lease	financing.

(c)Represents	consolidated	PNC	amounts.

(d)Includes	valuations	on	commercial	mortgage	loans	held	for	sale	and	related	commitments,	derivative

valuations,	origination	fees,	gains	on	sale	of	loans	held	for	sale	and	net	interest	income	on	loans	held for	sale.

(e)Includes	net	interest	income	and	noninterest	income	from	loan	servicing	and	ancillary	services. (f) At	December	31.

•	Net	interest	income	grew	$219	million,	or	27%,	in	2008	compared	with 2007.	The	increase	over	the	prior	year	was	primarily	a	result	of	an	increase in	commercial	mortgage	loans	held	for	sale,	organic	loan	growth	and acquisitions.

•	Corporate	service	fees	decreased	$19	million	compared	with	2007	to	$545 million.	The	fourth	quarter	of	2008	included	a	$35	million	impairment charge	on	commercial	mortgage	servicing	rights	due	to	the	effect	of	lower interest	rates.	Increases	in	treasury	management,	structured	finance	and syndication	fees	more	than	offset	declines	in	commercial	mortgage servicing	fees,	net	of	amortization,	and	merger	and	acquisition	advisory fees.

•	Other	noninterest	income	was	negative	$51	million	for	2008	compared	with income	of	$156	million	in	2007.	Losses	of	$197	million	on	commercial mortgage	loans	held	for	sale,	net	of	hedges,	were	included	in	other noninterest	income	for	2008	compared	with	gains	of	$3	million	in	2007. These	non-cash	valuation	losses	reflected	illiquid	market	conditions	which began	in	the	latter	part	of	2007.

•	PNC	adopted	SFAS	159	beginning	January	1,	2008	and	elected	to	account for	its	loans	held	for	sale	and	intended	for	securitization	at	fair	value.	We stopped	originating	these	loans	during	the	first	quarter	of	2008.	We	intend to	continue	pursuing	opportunities	to	reduce	our	loans	held	for	sale	position at	appropriate	prices.	We	sold	and/or	securitized	$.6	billion	of	commercial mortgage	loans	held	for	sale	carried	at	fair	value	in	2008	reducing	these	fair value	assets	to	$1.4	billion	at	December	31,	2008.

•	The	provision	for	credit	losses	was	$366	million	in	2008	compared	with $125	million	in	2007.	The	increase	in	the	provision	was	primarily	due	to credit	quality	migration	mainly	related	to	residential	real	estate development	and	related	sectors	along	with	growth	in	total	credit	exposure. Nonperforming

assets	increased	$506	million	in	the	comparison.	The	largest	component	of the	increase	was	in	commercial	real	estate	and	commercial	real	estate related	loans.	Based	upon	the	current	environment	and	the	acquisition	of National	City,	we	believe	the	provision	will	continue	to	increase	in	2009 versus	2008	levels.

•	Noninterest	expense	increased	$64	million,	or	8%,	compared	with	2007. The	increase	was	primarily	due	to	the	impact	of	the	2007	ARCS Commercial	Mortgage	and	Mercantile	acquisitions,	expenses	associated with	revenue-related	activities,	growth	initiatives	mainly	in	treasury management,	higher	passive	losses	associated	with	low	income	housing	tax credit	investments,	and	write-downs	of	other	real	estate	owned. •	Average	loan	balances	increased	$5.1	billion,	or	24%,	compared	with	2007. The	increase	in	corporate	and	commercial	real	estate	loans	resulted	from higher	utilization	of	credit	facilities,	organic	growth	from	new	and	existing clients,	and	the	impact	of	the	Mercantile	and	Yardville	acquisitions.

•	Average	deposit	balances	increased	$1.7	billion,	or	13%,	compared	with 2007.	The	increase	resulted	primarily	from	higher	time	deposits	and	the impact	of	acquisitions.

•	The	commercial	mortgage	servicing	portfolio	was	$249	billion	at December	31,	2008,	an	increase	of	$6	billion	from	December	31,	2007. Servicing	portfolio	additions	were	modest	during	2008	due	to	the	declining volumes	in	the	commercial	mortgage	securitization	market. •	Average	other	assets	and	other	liabilities	increased	$1.8	billion	and	$2.1 billion,	respectively.	These	increases	were	due	to	customer	driven	trading and	related	hedging	transactions.	In	addition,	an	increase	in	customer driven	money	management	activities	contributed	to	the	higher	other liabilities	balance.

See	the	additional	revenue	discussion	regarding	treasury	management,	capital markets-related	products	and	services,	and	commercial	mortgage	banking activities	on	pages	29	and	30.

Our	BlackRock	business	segment	earned	$207	million	in	2008	and	$253	million in	2007.	These	results	reflect	our	approximately	33%	share	of	BlackRock's reported	GAAP	earnings	and	the	additional	income	taxes	on	these	earnings incurred	by	PNC.

# BLACKROCK	LTIP	PROGRAMS	AND	EXCHANGE	AGREEMENTS

BlackRock	adopted	the	2002	LTIP	program	to	help	attract	and	retain	qualified professionals.	At	that	time,	PNC	agreed	to	transfer	up	to	four	million	of	the shares	of	BlackRock	common	stock	then	held	by	us	to	help	fund	the	2002	LTIP and	future	programs	approved	by	BlackRock's	board	of	directors,	subject	to certain	conditions	and	limitations.	Prior	to	2006,	BlackRock	granted	awards	of approximately	$233	million	under	the	2002	LTIP	program,	of	which approximately	$208	million	were	paid	on	January	30,	2007.	The	award	payments were	funded	by	17%	in	cash	from	BlackRock	and	approximately	one	million shares	of	BlackRock	common	stock	transferred	by	PNC	and	distributed	to	LTIP participants.	We	recognized	a	pretax	gain	of	$82	million	in	the	first	quarter	of 2007	from	the	transfer	of	BlackRock	shares.	The	gain	was	included	in	other noninterest	income	and	reflected	the	excess	of	market	value	over	book	value	of the	one	million	shares	transferred	in	January	2007.	Additional	BlackRock	shares were	distributed	to	LTIP	participants	during	the	first	quarter	of	2008,	resulting	in a	$3	million	pretax	gain	in	other	noninterest	income,	and	during	January	2009, resulting	in	a	$1	million	pretax	gain.

BlackRock	granted	awards	in	2007	under	an	additional	LTIP	program,	all	of which	are	subject	to	achieving	earnings	performance	goals	prior	to	the	vesting date	of	September	29,	2011.	Of	the	shares	of	BlackRock	common	stock	that	we have	agreed	to	transfer	to	fund	their	LTIP	programs,	approximately	1.6	million shares	have	been	committed	to	fund	the	awards	vesting	in	2011	and	the	amount remaining	would	then	be	available	for	future	awards.

PNC's	noninterest	income	for	2008	included	a	$243	million	pretax	gain	related to	our	commitment	to	fund	additional	BlackRock	LTIP	programs.	This	gain represented	the	mark-to-market	adjustment	related	to	our	remaining	BlackRock LTIP	common	shares	obligation	as	of	December	31,	2008	and	resulted	from	the decrease	in	the	market	value	of	BlackRock	common	shares	for	2008.	PNC's noninterest	income	for	2007	included	a	pretax	charge	of	$209	million	for	an increase	in	the	market	value	of	BlackRock	common	shares	for	that	period.

As	further	described	in	PNC's	Current	Report	on	Form	8-K	filed	December	30, 2008,	PNC	entered	into	an	Exchange	Agreement	with	BlackRock	on December	26,	2008.	The	transactions	contemplated	by	this	agreement	will restructure	PNC's	ownership	of	BlackRock	equity	without	altering,	to	any meaningful	extent,	PNC's	economic	interest	in	BlackRock.	PNC	will	continue	to be	subject	to	the	limitations	on	its	voting	rights	in	its	existing	agreements	with BlackRock.	These	transactions	will	also	allow	PNC	to	reduce	its	net	income volatility	associated	with	the	quarterly	marking-to-market	of	obligations	related to	PNC's	delivery	of	BlackRock	stock	under	the	BlackRock	LTIP.

Also	on	December	26,	2008,	BlackRock	entered	into	an	Exchange	Agreement with	Merrill	Lynch	in	anticipation	of	the	consummation	of	the	merger	of	Bank	of America	Corporation	and	Merrill	Lynch	which	was	completed	on	January	1, 2009.	The	PNC	and	Merrill	Lynch	Exchange	Agreements	restructured	PNC's and	Merrill	Lynch's	respective	ownership	of	BlackRock	common	and	preferred equity.	The	exchange	was	completed	on	February	27,	2009.

PNC	will	continue	to	account	for	its	investment	in	BlackRock	under	the	equity method	of	accounting,	with	its	share	of	BlackRock's	earnings	reduced	from approximately	33%	to	31%,	solely	as	a	result	of	the	exchange	of	2.9	million	of its	shares	of	BlackRock	common	stock	for	new	BlackRock	Series	C	Preferred Stock.	The	Series	C	Preferred	Stock	will	not	be	taken	into	consideration	in determining	PNC's	share	of	BlackRock	earnings	under	the	equity	method. PNC's	percentage	ownership	of	BlackRock	common	stock	is	expected	to increase	from	approximately	36.5%	to	46.5%.	The	increase	will	result	from	a substantial	exchange	of	Merrill	Lynch's	BlackRock	common	stock	for BlackRock	preferred	stock.	As	a	result	of	the	BlackRock	preferred	stock currently	held	by	Merrill	Lynch	and	the	new	BlackRock	preferred	stock	being issued	to	Merrill	Lynch	and	PNC	under	the	Exchange	Agreements,	PNC's	share of	BlackRock	common	stock	has	been,	and	will	continue	to	be,	higher	than	its overall	share	of	BlackRock's	equity	and	earnings.

On	February	27,	2009,	PNC's	obligation	to	deliver	BlackRock	common	shares was	replaced	with	an	obligation	to	deliver	shares	of	BlackRock's	new	Series	C Preferred	Stock.	PNC	will	account	for	these	preferred	shares	at	fair	value	as permitted	under	SFAS	159,	which	will	offset	the	impact	of	marking-to-market the	liability	to	deliver	these	shares	to	BlackRock.

The	transactions	related	to	the	Exchange	Agreements	will	not	affect	our	right	to receive	dividends	declared	by	BlackRock.

# QUELLOS	TRANSACTION

On	October	1,	2007,	BlackRock	acquired	the	fund	of	funds	business	of	Quellos Group,	LLC	("Quellos").	The	combined	fund	of	funds	platform	operates	under the	name	BlackRock	Alternative	Advisors	and	is	one	of	the	largest	fund	of	funds platforms	in	the	world.	In	connection	with	the	acquisition,	BlackRock	paid	$562 million	in	cash	to	Quellos	and	placed	1.2	million	shares	of	BlackRock	common stock	into	an	escrow	account.	The	shares	of	BlackRock	common	stock	will	be held	in	the	escrow	account	for	up	to	three	years	and	will	be

available	to	satisfy	certain	indemnification	obligations	of	Quellos	under	the	asset purchase	agreement.	In	April	2008,	280,519	common	stock	shares	were	released to	Quellos	in	accordance	with	the	Quellos	asset	purchase	agreement,	which resulted	in	an	adjustment	to	the	recognized	purchase	price.	In	addition,	Quellos may	be	entitled	to	receive	two	contingent	payments	upon	achieving	certain investment	advisory	base	and	performance	fee	measures	through	December	31, 2010,	totaling	up	to	an	additional	$969	million	in	a	combination	of	cash	and stock.

| Dollars	in	millions	except	as	noted | 2008 | 2007 |
| :--- | :--- | :--- |
| INCOME\tSTATEMENT |  |  |
| Servicing\trevenue\t(a) | $947 | $863 |
| Operating\texpense\t(a) | 728 | 637 |
| Operating\tincome | 219 | 226 |
| Debt\tfinancing | 34 | 38 |
| Nonoperating\tincome\t(b) | 3 | 6 |
| Pretax\tearnings | 188 | 194 |
| Income\ttaxes | 66 | 66 |
| Earnings | $122 | $128 |
| PERIOD-END\tBALANCE\tSHEET |  |  |
| Goodwill\tand\tother\tintangible\tassets | $1,301 | $1,315 |
| Other\tassets | 3,977 | 1,161 |
| Total\tassets | $5,278 | $2,476 |
| Debt\tfinancing | $850 | $989 |
| Other\tliabilities | 3,737 | 865 |
| Shareholder's\tequity | 691 | 622 |
| Total\tfunds | $5,278 | $2,476 |
| PERFORMANCE\tRATIOS |  |  |
| Return\ton\taverage\tequity | 18% | 23% |
| Operating\tmargin\t(c) | 23 | 26 |
| SERVICING\tSTATISTICS |  |  |
| (at\tDecember\t31) |  |  |
| Accounting/administration\tnet\tfund\tassets |  |  |
| (in\tbillions)\t(d) |  |  |
| Domestic | $764 | $869 |
| Offshore | 75 | 121 |
| Total | $839 | $990 |
| Asset\ttype\t(in\tbillions) |  |  |
| Money\tmarket | $431 | $373 |
| Equity | 227 | 390 |
| Fixed\tincome | 103 | 123 |
| Other | 78 | 104 |
| Total | $839 | $990 |
| Custody\tfund\tassets\t(in\tbillions) | $379 | $500 |
| Shareholder\taccounts\t(in\tmillions) |  |  |
| Transfer\tagency | 14 | 19 |
| Subaccounting | 58 | 53 |
| Total | 72 | 72 |
| OTHER\tINFORMATION |  |  |
| Full-time\temployees\t(at\tDecember\t31) | 4,934 | 4,784 |

(a)Certain	out-of-pocket	expense	items	which	are	then	client	billable	are	included	in	both	servicing revenue	and	operating	expense	above,	but	offset	each	other	entirely	and	therefore	have	no	effect	on operating	income.	Distribution	revenue	and	expenses	which	relate	to	12b-1	fees	that	are	received	from certain	fund	clients	for	payment	of	marketing,	sales	and	service	expenses	also	entirely	offset	each other,	but	are	netted	for	presentation	purposes	above.

(b)Net	of	nonoperating	expense.

(c)Total	operating	income	divided	by	total	servicing	revenue. (d)Includes	alternative	investment	net	assets	serviced.

Highlights	of	Global	Investment	Servicing's	performance	for	2008	included: •	Initiatives	in	the	offshore	arena	resulted	in	a	13%	increase	in	offshore servicing	revenue.	This	included	the	start	up	of	a	new	servicing	location	in Poland	which	employed	69	individuals	at	year	end.	Assets	serviced, however,	decreased	by	38%	as	a	direct	result	of	the	unsettled	global	equity markets	and	the	resultant	high	redemption	activity	in	the	latter	part	of	the year.

•	Subaccounting	shareholder	accounts	rose	by	5	million,	or	9%,	to 58	million,	as	existing	clients	continued	to	convert	additional	fund	families to	this	platform.	Global	Investment	Servicing	remains	a	leading	provider	of subaccounting	services.	A	prominent	new	client	was	won	during	2008	due to	the	combined	subaccounting	services	and	wealth	reporting	capabilities that	Global	Investment	Servicing	can	now	provide	as	a	result	of	its acquisition	of	Albridge	Solutions	in	December	2007.

•	Total	accounting/administration	funds	serviced	increased	7%	over	the	prior year.	However,	assets	serviced	decreased	15%	due	to	declines	in	asset values	and	fund	outflows	resulting	from	market	conditions,	primarily	in	the fourth	quarter	of	2008.

Servicing	revenue	for	2008	reached	$947	million,	an	increase	of	$84	million,	or 10%,	over	2007.	This	increase	resulted	primarily	from	the	acquisitions	of Albridge	Solutions	and	Coates	Analytics,	LP	in	December	2007,	growth	in offshore	operations,	and	increased	securities	lending	activities	afforded	by	the volatility	in	the	markets.

Operating	expense	increased	$91	million,	or	14%,	to	$728	million,	in	2008 compared	with	2007.	Investments	in	technology,	a	larger	employee	base	to support	business	growth,	and	costs	related	to	the	acquisitions	made	in	December 2007	drove	the	higher	expense	level.

Debt	financing	costs	and	nonoperating	income	were	both	lower	than	prior	year levels	due	to	the	much	lower	interest	rate	environment	and	principal	payments	on debt	during	the	year.

Global	Investment	Servicing's	balance	sheet	was	also	impacted	by	the	market turmoil	at	year	end	as	clients	chose	to	leave	cash	balances	uninvested.

Total	assets	serviced	by	Global	Investment	Servicing	totaled	$2.0	trillion	at December	31,	2008	compared	with	$2.5	trillion	at	December	31,	2007.	The decline	in	assets	serviced	was	a	direct	result	of	global	market	declines.

# CRITICAL	ACCOUNTING

# ESTIMATES	AND	JUDGMENTS

Our	consolidated	financial	statements	are	prepared	by	applying	certain accounting	policies.	Note	1	Accounting	Policies	in	the	Notes	To	Consolidated Financial	Statements	in	Item	8	of	this	Report	describes	the	most	significant accounting	policies	that	we	use.	Certain	of	these	policies	require	us	to	make estimates	and	strategic	or	economic	assumptions	that	may	prove	inaccurate	or	be subject	to	variations	that	may	significantly	affect	our	reported	results	and financial	position	for	the	period	or	in	future	periods.

# Fair	Value	Measurements

We	must	use	estimates,	assumptions,	and	judgments	when	assets	and	liabilities are	required	to	be	recorded	at,	or	adjusted	to	reflect,	fair	value.	This	includes	the initial	measurement	at	fair	value	of	the	assets	acquired	and	liabilities	assumed	in acquisitions	qualifying	as	business	combinations	under	SFAS	141	or	SFAS 141(R),	"Business	Combinations."	The	valuation	of	both	financial	and nonfinancial	assets	and	liabilities	in	these	transactions	require	numerous assumptions	and	estimates	and	the	use	of	third-party	sources	including appraisers	and	valuation	specialists.

Assets	and	liabilities	carried	at	fair	value	inherently	result	in	a	higher	degree	of financial	statement	volatility.	Assets	and	liabilities	measured	at	fair	value	on	a recurring	basis,	including	those	elected	under	SFAS	159,	include	available	for sale	and	trading	securities,	financial	derivatives,	certain	commercial	and residential	mortgage	loans	held	for	sale,	customer	resale	agreements,	private equity	investments,	and	residential	mortgage	servicing	rights.	Fair	values	and	the information	used	to	record	valuation	adjustments	for	certain	assets	and	liabilities are	based	on	either	quoted	market	prices	or	are	provided	by	other	independent third-party	sources,	when	available.	When	such	third-party	information	is	not available,	we	estimate	fair	value	primarily	by	using	cash	flow	and	other	financial modeling	techniques.	Changes	in	underlying	factors,	assumptions,	or	estimates in	any	of	these	areas	could	materially	impact	our	future	financial	condition	and results	of	operations.

Effective	January	1,	2008,	PNC	adopted	SFAS	157.	SFAS	157	defines	fair	value as	the	price	that	would	be	received	to	sell	a	financial	asset	or	paid	to	transfer	a financial	liability	in	an	orderly	transaction	between	market	participants	at	the measurement	date.	SFAS	157	established	a	three	level	hierarchy	for	disclosure	of assets	and	liabilities	recorded	at	fair	value.	The	classification	of	assets	and liabilities	within	the	hierarchy	is	based	on	whether	the	inputs	to	the	valuation methodology	used	in	the	measurement	are	observable	or	unobservable.

The	following	sections	of	this	Report	provide	further	information	on	this	type	of activity:

•	Fair	Value	Measurements	and	Fair	Value	Option	included	within	this Item	7,	and

•	Note	8	Fair	Value	included	in	Notes	to	Consolidated	Financial	Statements in	Item	8	of	this	Report.

# Allowances	For	Loan	And	Lease	Losses	And	Unfunded	Loan	Commitments And	Letters	Of	Credit

We	maintain	allowances	for	loan	and	lease	losses	and	unfunded	loan commitments	and	letters	of	credit	at	levels	that	we	believe	to	be	adequate	to absorb	estimated	probable	credit	losses	inherent	in	the	loan	portfolio.	We determine	the	adequacy	of	the	allowances	based	on	periodic	evaluations	of	the loan	and	lease	portfolios	and	other	relevant	factors.	However,	this	evaluation	is inherently	subjective	as	it	requires	material	estimates,	all	of	which	may	be susceptible	to	significant	change,	including,	among	others:

•	Probability	of	default,

•	Loss	given	default,

•	Exposure	at	date	of	default,

•	Amounts	and	timing	of	expected	future	cash	flows	on	impaired	loans,

•	Value	of	collateral,

•	Historical	loss	exposure,	and

•	Amounts	for	changes	in	economic	conditions	that	may	not	be	reflected	in historical	results.

In	determining	the	adequacy	of	the	allowance	for	loan	and	lease	losses,	we	make specific	allocations	to	impaired	loans,	allocations	to	pools	of	watchlist	and	non- watchlist	loans,	and	allocations	to	consumer	and	residential	mortgage	loans.	We also	allocate	reserves	to	provide	coverage	for	probable	losses	not	covered	in specific,	pool	and	consumer	reserve	methodologies	related	to	qualitative	factors. While	allocations	are	made	to	specific	loans	and	pools	of	loans,	the	total	reserve is	available	for	all	credit	losses.

Commercial	lending	is	the	largest	category	of	credits	and	is	the	most	sensitive	to changes	in	assumptions	and	judgments	underlying	the	determination	of	the allowance	for	loan	and	lease	losses.	We	have	allocated	approximately	$2.6 billion,	or	67%,	of	the	allowance	for	loan	and	lease	losses	at	December	31,	2008 to	the	commercial	lending	category.	Consumer	and	residential	mortgage	loan allocations	are	made	at	a	total	portfolio	level	based	on	historical	loss	experience adjusted	for	portfolio	activity.	Approximately	$1.2	billion,	or	32%,	of	the allowance	for	loan	and	lease	losses	at	December	31,	2008	have	been	allocated	to these	consumer	lending	categories.	The	remainder	of	the	allowance	is	allocated to	the	other	loans	category.

To	the	extent	actual	outcomes	differ	from	our	estimates,	additional	provision	for credit	losses	may	be	required	that	would	reduce	future	earnings.	See	the following	for	additional	information:

•	Allowances	For	Loan	And	Lease	Losses	And	Unfunded	Loan Commitments	And	Letters	Of	Credit	in	the	Credit	Risk	Management section	of	this	Item	7	(which	includes	an	illustration	of	the	estimated impact	on	the	aggregate	of	the	allowance	for	loan	and	lease	losses	and allowance	for	unfunded	loan	commitments	and	letters	of	credit	assuming we	increased	pool	reserve	loss	rates	for	certain	loan	categories),	and •	Note	5	Asset	Quality	in	the	Notes	To	Consolidated	Financial	Statements	in Item	8	of	this	Report,	and	Allocation	Of	Allowance	For	Loan	And	Lease Losses	in	the	Statistical	Information	(Unaudited)	section.

# Estimated	Cash	Flows	on	Impaired	Loans

AICPA	Statement	of	Position	03-3,	"Accounting	for	Certain	Loans	or	Debt Securities	Acquired	in	a	Transfer"	(SOP	03-3)	provides	guidance	for	accounting for	certain	loans	that	have	experienced	a	deterioration	of	credit	quality	at	the time	of	acquisition	for	which	it	is	probable	that	the	investor	will	be	unable	to collect	all	contractually	required	payments.	The	application	of	this	guidance requires	a	two-step	process:	the	determination	of	which	loans	qualify	due	to credit	quality	deterioration	and	the	determination	of	fair	value	and	undiscounted expected	cash	flows	for	the	loans	that	are	in	the	scope	of	SOP	03-3.	SOP	03-3 prohibits	"carrying	over"	or	creation	of	an	allowance	for	loan	losses	in	the	initial accounting	of	all	loans	in	scope.

In	our	assessment	of	credit	quality	deterioration,	we	must	make	numerous assumptions,	interpretations	and	judgments,	based	on	internal	and	third-party credit	quality	information	and	ultimately	determine	whether	we	believe	it	is probable	that	we	will	not	be	able	to	collect	all	amounts	due,	including	both principal	and	interest,	according	to	the	contractual	terms	of	the	loans.	This	is	a point	in	time	assessment	and	inherently	subjective	due	to	the	nature	of	the available	information	and	judgment	involved.

For	those	loans	that	qualify	under	SOP	03-3,	the	valuation	process	involves estimating	the	fair	value	of	each	loan	at	acquisition	and	determining	the undiscounted	expected	cash	flows	to	be	realized	from	the	loan	both	at	acquisition and	periodically	throughout	the	life	of	the	loan.	Measurement	of	the	fair	value	of the	loan	is	based	on	the	provisions	of	SFAS	157	as	discussed	above.

The	measurement	of	undiscounted	expected	cash	flows	involves	assumptions and	judgments	as	to	credit	risk,	interest	rate	risk,	prepayment	risk,	default	rates, loss	severity,	payment	speeds	and	collateral	values.	All	of	these	factors	are inherently	subjective	and	can	result	in	significant	changes	in	the	cash	flow estimates	over	the	life	of	the	loan.	Such	changes	increase

future	earnings	volatility	due	to	increases	or	decreases	in	the	accretable	yield (i.e.,	difference	between	the	undiscounted	expected	cash	flows	and	the	fair value)	recognized	on	the	loan	or	the	requirement	to	record	a	provision	for	credit losses	if	the	decline	in	expected	cash	flows	is	attributable	to	a	decline	in	credit quality.

# Goodwill

Goodwill	arising	from	business	acquisitions	represents	the	value	attributable	to unidentifiable	intangible	elements	in	the	business	acquired.	Most	of	our	goodwill relates	to	value	inherent	in	the	Retail	Banking,	Corporate	&	Institutional Banking	and	Global	Investment	Servicing	businesses.	The	value	of	this	goodwill is	dependent	upon	our	ability	to	provide	quality,	cost	effective	services	in	the face	of	competition	from	other	market	participants	on	a	national	and international	basis.	We	also	rely	upon	continuing	investments	in	processing systems,	the	development	of	value-added	service	features,	and	the	ease	of	access by	customers	to	our	services.

As	such,	the	value	of	goodwill	is	ultimately	supported	by	earnings,	which	is driven	by	transaction	volume	and,	for	certain	businesses,	the	market	value	of assets	under	administration	or	for	which	processing	services	are	provided.	Lower earnings	resulting	from	a	lack	of	growth	or	our	inability	to	deliver	cost-effective services	over	sustained	periods	can	lead	to	impairment	of	goodwill,	which	could result	in	a	current	period	charge	to	earnings.	At	least	annually,	management reviews	the	current	operating	environment	and	strategic	direction	of	each reporting	unit	taking	into	consideration	any	events	or	changes	in	circumstances that	may	have	an	effect	on	the	unit.	A	reporting	unit	is	defined	as	an	operating segment	or	one	level	below	an	operating	segment.	This	input	is	then	used	to calculate	the	fair	value	of	the	reporting	unit,	including	goodwill,	which	is compared	to	its	carrying	value.	If	the	fair	value	of	the	reporting	unit	exceeds	its carrying	amount,	then	the	goodwill	of	that	reporting	unit	is	not	considered impaired.	During	the	fourth	quarter	2008,	and	the	first	quarter	of	2009,	PNC considered	whether	the	decline	in	the	fair	value	of	our	market	capitalization	due to	market	conditions	is	an	indicator	of	declines	in	the	fair	value	of	the	reporting units.	Although	the	fair	values	of	the	reporting	units	decreased,	their	estimated fair	values	are	still	considered	to	be	in	excess	of	their	respective	carrying	values. Based	on	the	results	of	our	analysis,	there	have	been	no	impairment	charges related	to	goodwill.	See	Note	9	Goodwill	and	Other	Intangible	Assets	in	the Notes	To	Consolidated	Financial	Statements	in	Item	8	of	this	Report	for additional	information.

# Lease	Residuals

We	provide	financing	for	various	types	of	equipment,	aircraft,	energy	and	power systems,	and	rolling	stock	through	a	variety	of	lease	arrangements.	Direct financing	leases	are	carried	at	the	sum	of	lease	payments	and	the	estimated residual	value	of	the	leased	property,	less	unearned	income.	Residual	value insurance	or	guarantees	by	governmental	entities	provide	support	for	a significant	portion	of	the	residual	value.	Residual

values	are	subject	to	judgments	as	to	the	value	of	the	underlying	equipment	that can	be	affected	by	changes	in	economic	and	market	conditions	and	the	financial viability	of	the	residual	guarantors	and	insurers.	To	the	extent	not	guaranteed	or assumed	by	a	third	party,	or	otherwise	insured	against,	we	bear	the	risk	of ownership	of	the	leased	assets.	This	includes	the	risk	that	the	actual	value	of	the leased	assets	at	the	end	of	the	lease	term	will	be	less	than	the	residual	value, which	could	result	in	an	impairment	charge	and	reduce	earnings	in	the	future. Residual	values	are	reviewed	for	impairment	on	a	quarterly	basis.

# Revenue	Recognition

We	derive	net	interest	and	noninterest	income	from	various	sources,	including: •	Lending,

•	Securities	portfolio,

•	Asset	management	and	fund	servicing,

•	Customer	deposits,

•	Loan	servicing,

•	Brokerage	services,

•	Merger	and	acquisition	advisory	services,

•	Sale	of	loans	and	securities,

•	Certain	private	equity	activities,	and

•	Securities	and	derivatives	trading	activities	including	foreign	exchange.

We	also	earn	fees	and	commissions	from	issuing	loan	commitments,	standby letters	of	credit	and	financial	guarantees,	selling	various	insurance	products, providing	treasury	management	services	and	participating	in	certain	capital markets	transactions.	Revenue	earned	on	interest-earning	assets	including	the accretion	of	fair	value	adjustments	on	discounts	for	purchased	loans	is recognized	based	on	the	effective	yield	of	the	financial	instrument.

The	timing	and	amount	of	revenue	that	we	recognize	in	any	period	is	dependent on	estimates,	judgments,	assumptions,	and	interpretation	of	contractual	terms. Changes	in	these	factors	can	have	a	significant	impact	on	revenue	recognized	in any	period	due	to	changes	in	products,	market	conditions	or	industry	norms.

# Income	Taxes

In	the	normal	course	of	business,	we	and	our	subsidiaries	enter	into	transactions for	which	the	tax	treatment	is	unclear	or	subject	to	varying	interpretations.	In addition,	filing	requirements,	methods	of	filing	and	the	calculation	of	taxable income	in	various	state	and	local	jurisdictions	are	subject	to	differing interpretations.

We	evaluate	and	assess	the	relative	risks	and	merits	of	the	appropriate	tax treatment	of	transactions,	filing	positions,	filing	methods	and	taxable	income calculations	after	considering	statutes,	regulations,	judicial	precedent,	and	other

information,	and	maintain	tax	accruals	consistent	with	our	evaluation	of	these relative	risks	and	merits.	The	result	of	our	evaluation	and	assessment	is	by	its nature	an	estimate.	We	and	our	subsidiaries	are	routinely	subject	to	audit	and challenges	from	taxing	authorities.	In	the	event	we	resolve	a	challenge	for	an amount	different	than	amounts	previously	accrued,	we	will	account	for	the difference	in	the	period	in	which	we	resolve	the	matter.

# RECENT	ACCOUNTING

# PRONOUNCEMENTS

See	Note	1	Accounting	Policies	in	the	Notes	To	Consolidated	Financial Statements	in	Item	8	of	this	Report	for	additional	information	on	the	following recent	accounting	pronouncements	that	are	relevant	to	our	business,	including	a description	of	each	new	pronouncement,	the	required	date	of	adoption,	our planned	date	of	adoption,	and	the	expected	impact	on	our	consolidated	financial statements.

# The	following	were	issued	in	2008:

•	FSP	FAS	132(R)-1,	"Employers'	Disclosures	about	Postretirement	Benefit Plan	Assets"

(Enterprises)	about	Transfers	of	Financial	Assets	and	Interests	in	Variable Interest	Entities"

•	FSP	FAS	157-3,	"Determining	the	Fair	Value	of	a	Financial	Asset	When the	Market	for	That	Asset	Is	Not	Active"

•	FSP	FAS	133-1	and	FIN	45-4,	"Disclosures	about	Credit	Derivatives	and Certain	Guarantees:	An	Amendment	of	FASB	Statement	No.	133	and FASB	Interpretation	No.	45;	and	Clarification	of	the	Effective	Date	of FASB	Statement	No.	161"

•	FSP	EITF	03-6-1,	"Determining	Whether	Instruments	Granted	in	Share-

Based	Payment	Transactions	Are	Participating	Securities"

•	FSP	APB	14-1,	"Accounting	for	Convertible	Debt	Instruments	That	May Be	Settled	in	Cash	Upon	Conversion	(Including	Partial	Cash	Settlement)" •	SFAS	163,	"Accounting	for	Financial	Guarantee	Insurance	Contracts	an Interpretation	of	FASB	Statement	No.	60"

•	SFAS	162,	"The	Hierarchy	of	Generally	Accepted	Accounting	Principles" •	FSP	FAS	142-3,	"Determination	of	the	Useful	Life	of	Intangible	Assets" •	SFAS	161,	"Disclosures	about	Derivative	Instruments	and	Hedging Activities"

•	FSP	FAS	140-3,	"Accounting	for	Transfers	of	Financial	Assets	and Repurchase	Financing	Transactions"

•	SFAS	141(R),	"Business	Combinations"

•	SFAS	160,	"Accounting	and	Reporting	of	Noncontrolling	Interests	in Consolidated	Financial	Statements,	an	Amendment	of	ARB	No.	51" •	SEC	Staff	Accounting	Bulletin	No.	109

•	FIN	46(R)	7,	"Application	of	FASB	Interpretation	No.	46(R)	to	Investment Companies"

•	FSP	FIN	48-1,	"Definition	of	Settlement	in	FASB	Interpretation	("FIN") No.	48"

•	The	Emerging	Issues	Task	Force	("EITF")	of	the	FASB	issued	EITF	Issue 06-4,	"Accounting	for	Deferred	Compensation	and	Postretirement	Benefit Aspects	of	Endorsement	Split-Dollar	Life	Insurance	Arrangements"

# STATUS	OF	DEFINED	BENEFIT	PENSION PLAN

We	have	a	noncontributory,	qualified	defined	benefit	pension	plan	("plan"	or "pension	plan")	covering	eligible	employees.	Benefits	are	derived	from	a	cash balance	formula	based	on	compensation	levels,	age	and	length	of	service. Pension	contributions	are	based	on	an	actuarially	determined	amount	necessary to	fund	total	benefits	payable	to	plan	participants.	Consistent	with	our	investment strategy,	plan	assets	are	primarily	invested	in	equity	investments	and	fixed income	instruments.	Plan	fiduciaries	determine	and	review	the	plan's	investment policy.

We	calculate	the	expense	associated	with	the	pension	plan	in	accordance	with SFAS	87,	"Employers'	Accounting	for	Pensions,"	and	we	use	assumptions	and methods	that	are	compatible	with	the	requirements	of	SFAS	87,	including	a policy	of	reflecting	trust	assets	at	their	fair	market	value.	On	an	annual	basis,	we review	the	actuarial	assumptions	related	to	the	pension	plan,	including	the discount	rate,	the	rate	of	compensation	increase	and	the	expected	return	on	plan assets.

The	discount	rate	and	compensation	increase	assumptions	do	not	significantly affect	pension	expense.	However,	the	expected	long-term	return	on	assets assumption	does	significantly	affect	pension	expense.	The	expected	long-term return	on	plan	assets	for	determining	net	periodic	pension	cost	for	2008	was 8.25%,	unchanged	from	2007.	Under	current	accounting	rules,	the	difference between	expected	long-term	returns	and	actual	returns	is	accumulated	and amortized	to	pension	expense	over	future	periods.	Each	one	percentage	point difference	in	actual	return	compared	with	our	expected	return	causes	expense	in subsequent	years	to	change	by	up	to	$7	million	as	the	impact	is	amortized	into results	of	operations.

The	table	below	reflects	the	estimated	effects	on	pension	expense	of	certain changes	in	annual	assumptions,	using	2009	estimated	expense	as	a	baseline.

(a)De	minimis.

We	currently	estimate	a	pretax	pension	expense	of	$124	million	in	2009 compared	with	a	pretax	benefit	of	$32	million	in	2008.	The	2009	values	and sensitivities	shown	above	include	the	qualified	defined	benefit	plan	maintained by	National	City	that	we	merged	into	the	PNC	plan	as	of	December	31,	2008. The	expected	increase	in	pension	cost	is	attributable	not	only	to	the	National	City acquisition,	but	also	to	the	significant	variance	between	2008	actual	investment returns	and	long-term	expected	returns.

Our	pension	plan	contribution	requirements	are	not	particularly	sensitive	to actuarial	assumptions.	Investment	performance	has	the	most	impact	on contribution	requirements	and	will	drive	the	amount	of	permitted	contributions in	future	years.	Also,	current	law,	including	the	provisions	of	the	Pension Protection	Act	of	2006,	sets	limits	as	to	both	minimum	and	maximum contributions	to	the	plan.	We	expect	that	the	minimum	required	contributions under	the	law	will	be	zero	for	2009.

We	maintain	other	defined	benefit	plans	that	have	a	less	significant	effect	on financial	results,	including	various	nonqualified	supplemental	retirement	plans for	certain	employees.	See	Note	15	Employee	Benefit	Plans	in	the	Notes	To Consolidated	Financial	Statements	in	Item	8	of	this	Report	for	additional information.

# RISK	MANAGEMENT

We	encounter	risk	as	part	of	the	normal	course	of	our	business	and	we	design risk	management	processes	to	help	manage	these	risks.	This	Risk	Management section	first	provides	an	overview	of	the	risk	measurement,	control	strategies, and	monitoring	aspects	of	our	corporate-level	risk	management	processes. Following	that	discussion	is	an	analysis	of	the	risk	management	process	for	what we	view	as	our	primary	areas	of	risk:	credit,	operational,	liquidity,	and	market. The	discussion	of	market	risk	is	further	subdivided	into	interest	rate,	trading,	and equity	and	other	investment	risk	areas.	Our	use	of	financial	derivatives	as	part	of our	overall	asset	and	liability	risk	management	process	is	also	addressed	within the	Risk	Management	section	of	this	Item	7.	In	appropriate	places	within	this section,	historical	performance	is	also	addressed.

As	a	financial	services	organization,	we	take	a	certain	amount	of	risk	in	every business	decision.	For	example,	every	time	we	open	an	account	or	approve	a loan	for	a	customer,	process	a	payment,	hire	a	new	employee,	or	implement	a new	computer	system,	we	incur	a	certain	amount	of	risk.	As	an	organization,	we must	balance	revenue	generation	and	profitability	with	the	risks	associated	with our	business	activities.	Risk	management	is	not	about	eliminating	risks,	but about	identifying	and	accepting	risks	and	then	effectively	managing	them	so	as to	optimize	shareholder	value.

The	key	to	effective	risk	management	is	to	be	proactive	in	identifying, measuring,	evaluating,	and	monitoring	risk	on	an	ongoing	basis.	Risk management	practices	support	decision-making,	improve	the	success	rate	for new	initiatives,	and	strengthen	the	market's	confidence	in	an	organization.

We	manage	risk	toward	an	overall	moderate	risk	profile.	The	current	economic environment,	combined	with	our	acquisition	of	National	City,	has	increased	our risk	profile	above	that	desired	level.	We	remain	committed	to	a	moderate	risk profile	and	are	working	to	return	to	that	level	of	overall	risk.

# CORPORATE-LEVEL	RISK	MANAGEMENT	OVERVIEW

We	support	risk	management	through	a	governance	structure	involving	the Board,	senior	management	and	a	corporate	risk	management	organization.

Although	our	Board	as	a	whole	is	responsible	generally	for	oversight	of	risk management,	committees	of	the	Board	provide	oversight	to	specific	areas	of	risk with	respect	to	the	level	of	risk	and	risk	management	structure.

We	use	management	level	risk	committees	to	help	ensure	that	business	decisions are	executed	within	our	desired	risk	profile.	The	Executive	Committee	("EC"), consisting	of	senior	management	executives,	provides	oversight	for	the establishment	and	implementation	of	new	comprehensive	risk	management initiatives,	reviews	enterprise	level	risk	profiles	and	discusses	key	risk	issues.

The	corporate	risk	management	organization	has	the	following	key	roles: •	Facilitate	the	identification,	assessment	and	monitoring	of	risk	across	PNC, •	Provide	support	and	oversight	to	the	businesses,	and

•	Identify	and	implement	risk	management	best	practices,	as	appropriate.

# Risk	Measurement

We	conduct	risk	measurement	activities	specific	to	each	area	of	risk.	The primary	vehicle	for	aggregation	of	enterprise-wide	risk	is	a	comprehensive	risk management	methodology	that	is	based	on	economic	capital.	This	primary	risk aggregation	measure	is	supplemented	with	secondary	measures	of	risk	to	arrive at	an	estimate	of	enterprise-wide	risk.	The	economic

capital	framework	is	a	measure	of	potential	losses	above	and	beyond	expected losses.	Potential	one	year	losses	are	capitalized	to	a	level	commensurate	with	a financial	institution	with	an	A	rating	by	the	credit	rating	agencies.	Economic capital	incorporates	risk	associated	with	potential	credit	losses	(Credit	Risk), fluctuations	of	the	estimated	market	value	of	financial	instruments	(Market Risk),	failure	of	people,	processes	or	systems	(Operational	Risk),	and	income losses	associated	with	declining	volumes,	margins	and/or	fees,	and	the	fixed	cost structure	of	the	business	(Business	Risk).	We	estimate	credit	and	market	risks	at an	exposure	level	while	we	estimate	the	remaining	risk	types	at	an	institution	or business	segment	level.	We	routinely	compare	the	output	of	our	economic capital	model	with	industry	benchmarks.

# Risk	Control	Strategies

We	centrally	manage	policy	development	and	exception	oversight	through corporate-level	risk	management.	Corporate	risk	management	is	authorized	to take	action	to	either	prevent	or	mitigate	exceptions	to	policies	and	is	responsible for	monitoring	compliance	with	risk	management	policies.	The	Corporate	Audit function	performs	an	independent	assessment	of	the	internal	control environment.	Corporate	Audit	plays	a	critical	role	in	risk	management,	testing the	operation	of	the	internal	control	system	and	reporting	findings	to management	and	to	the	Audit	Committee	of	the	Board.

# Risk	Monitoring

Corporate	risk	management	reports	on	a	regular	basis	to	our	Board	regarding	the enterprise	risk	profile	of	the	Corporation.	These	reports	aggregate	and	present the	level	of	risk	by	type	of	risk	and	communicate	significant	risk	issues, including	performance	relative	to	risk	tolerance	limits.	Both	the	Board	and	the EC	provide	guidance	on	actions	to	address	key	risk	issues	as	identified	in	these reports.

# CREDIT	RISK	MANAGEMENT

Credit	risk	represents	the	possibility	that	a	customer,	counterparty	or	issuer	may not	perform	in	accordance	with	contractual	terms.	Credit	risk	is	inherent	in	the financial	services	business	and	results	from	extending	credit	to	customers, purchasing	securities,	and	entering	into	financial	derivative	transactions	and certain	guarantee	contracts.	Credit	risk	is	one	of	our	most	significant	risks.

Approved	risk	tolerances,	in	addition	to	credit	policies	and	procedures,	set portfolio	objectives	for	the	level	of	credit	risk.	We	have	established	guidelines for	problem	loans,	acceptable	levels	of	total	borrower	exposure,	and	other	credit measures.	We	seek	to	achieve	our	credit	portfolio	objectives	by	maintaining	a customer	base	that	is	diverse	in	borrower	exposure	and	industry	types.	We	use loan	participations	with	third	parties,	loan	sales	and	syndications,	and	the purchase	of	credit	derivatives	to	reduce	risk	concentrations.

The	credit	granting	businesses	maintain	direct	responsibility	for	monitoring credit	risk	within	PNC.	The	Corporate	Credit

Policy	area	provides	independent	oversight	to	the	measurement,	monitoring	and reporting	of	our	credit	risk	and	reports	to	the	Chief	Administrative	Officer. Corporate	Audit	also	provides	an	independent	assessment	of	the	effectiveness	of the	credit	risk	management	process.

# Nonperforming,	Past	Due	And	Potential	Problem	Assets

See	the	Nonperforming	Assets	And	Related	Information	table	in	the	Statistical Information	(Unaudited)	section	of	Item	8	of	this	Report	and	included	here	by reference	for	details	of	the	types	of	nonperforming	assets	that	we	held	at December	31	of	each	of	the	past	five	years.	In	addition,	certain	performing assets	have	interest	payments	that	are	past	due	or	have	the	potential	for	future repayment	problems.

Credit	quality	migration	reflected	a	rapidly	weakening	economy	during	2008, but	remained	manageable	as	we	were	able	to	maintain	a	strong	capital	position and	generate	positive	operating	leverage.	We	remained	focused	on	returning	to	a moderate	risk	profile.

# Nonperforming	Assets	by	Type

(a)Amounts	at	December	31,	2008	include	$722	million	of	nonperforming	assets	related	to	National City.	Nonperforming	assets	of	National	City	are	comprised	of	$250	million	of	nonperforming	loans, including	$154	million	related	to	commercial	lending	and	$96	million	related	to	consumer	lending, and	$472	million	of	foreclosed	and	other	assets.

(b)Includes	loans	related	to	customers	in	the	real	estate	and	construction	industries.

(c)We	have	adjusted	the	December	31,	2007	amounts	to	be	consistent	with	the	current	methodology	for recognizing	nonaccrual	residential	mortgage	loans	serviced	under	master	servicing	arrangements. (d)Excludes	equity	management	assets	carried	at	estimated	fair	value	of	$42	million	at	December	31, 2008	and	$4	million	at	December	31,	2007.

(e)Excludes	loans	held	for	sale	carried	at	lower	of	cost	or	market	value	of	$78	million	at	December	31, 2008	(amount	includes	troubled	debt	restructured	assets	of	$5	million)	and	$25	million	at December	31,	2007.

Nonperforming	loans	at	December	31,	2008	included	$537	million	related	to	the distressed	loan	portfolio,	of	which	$103	million	were	attributable	to	National City.	Details	of	these	nonperforming	loans	follow.

# Nonperforming	Loans	-	Distressed	Loan	Portfolio

| In	millions | Dec.	31,	2008 |
| :--- | :--- |
| Commercial\treal\testate\t–\treal\testate\tprojects | $445 |
| Consumer\t–\thome\tequity | 29 |
| Residential\treal\testate |  |
| Residential\tmortgage | 50 |
| Residential\tconstruction | 13 |
| Total\tresidential\treal\testate | 63 |
| Total\tnonperforming\tloans\t–\tdistressed\tportfolio | $537 |

# Change	In	Nonperforming	Assets

| In	millions | 2008 | 2007 |
| :--- | :--- | :--- |
| January\t1 | $495 | $184 |
| National\tCity\tacquisition | 722 |  |
| Other\tacquisitions\t(a) | 9 | 37 |
| Transferred\tfrom\taccrual | \t 1,981 | 653 |
| Charge-offs\tand\tvaluation\tadjustments | (491) | (167) |
| Principal\tactivity\tincluding\tpayoffs | (381) | (179) |
| Returned\tto\tperforming | (127) | (23) |
| Asset\tsales | (43) | (10) |
| December\t31 | $2,165 | $495 |

Total	nonperforming	assets	at	December	31,	2008	increased	$1.670	billion,	to $2.165	billion,	from	the	balance	at	December	31,	2007.	Our	nonperforming assets	represented	.74%	of	total	assets	at	December	31,	2008	compared	with .36%	at	December	31,	2007.	The	increase	in	nonperforming	assets	reflected higher	nonaccrual	residential	real	estate	development	loans	and	loans	in	related sectors,	and	the	addition	of	$722	million	of	nonperforming	assets	related	to National	City.

Nonperforming	assets	added	with	the	National	City	acquisition	exclude	those loans	that	we	impaired	in	accordance	with	SOP	03-3.

We	recorded	such	loans	at	estimated	fair	value	and	considered	them	to	be performing,	even	if	contractually	past	due	(or	if	we	do	not	expect	to	receive payment	in	full	based	on	the	original	contractual	terms),	since	certain	purchase accounting	adjustments	will	be	accreted	to	interest	income	over	time.	The accretion	will	represent	the	discount	associated	with	the	difference	between	the expected	cash	flows	and	estimated	fair	value	of	the	loans.	This	accounting treatment	resulted	in	the	return	to	performing	status	of	$3.2	billion	of	loans previously	classified	as	nonperforming	by	National	City.	The	purchase accounting	adjustments	were	estimated	as	of	December	31,	2008	and	such estimates	may	be	refined	during	the	first	quarter	of	2009.

At	December	31,	2008,	our	largest	nonperforming	asset	was	approximately	$36 million	and	our	average	nonperforming	loan	associated	with	commercial	lending was	less	than	$1	million.

The	amount	of	nonperforming	loans	that	was	current	as	to	principal	and	interest was	$555	million	at	December	31,	2008	and	$178	million	at	December	31,	2007.

# Accruing	Loans	Past	Due	90	Days	Or	More-	Summary

|  |  |  | Percent	of	Total |  |
| :--- | :--- | :--- | :--- | :--- |
|  | Amount | Amount | Outstandings | Outstandings |
|  | Dec.\t31 | Dec.\t31 | Dec.\t31 | Dec.\t31 |
| Dollars\tin\tmillions | 2008\t(a) | 2007 | 2008\t(a) | 2007 |
| Commercial | $97 | $14 | .14% | .05% |
| Commercial\treal\testate | 723 | 18 | 2.81 | .20 |
| Equipment\tlease\tfinancing | 2 |  | .03 |  |
| Consumer | 419 | 49 | .80 | .27 |
| Residential\treal\testate | \t 2,011 | 43 | 9.32 | .45 |
| Other | 7 | 12 | .37 | 2.91 |
| Total | $3,259 | $136 | 1.86% | .20% |

(a)Amounts	include	the	impact	of	National	City.

Loans	that	are	not	included	in	nonperforming	or	past	due	categories	but	cause	us to	be	uncertain	about	the	borrower's	ability	to	comply	with	existing	repayment terms	over	the	next	six	months	totaled	$745	million	at	December	31,	2008, compared	with	$134	million	at	December	31,	2007.

We	maintain	an	allowance	for	loan	and	lease	losses	to	absorb	losses	from	the loan	portfolio.	We	determine	the	allowance	based	on	quarterly	assessments	of the	probable	estimated	losses	inherent	in	the	loan	portfolio.	While	we	make allocations	to	specific	loans	and	pools	of	loans,	the	total	reserve	is	available	for all	loan	and	lease	losses.

In	addition	to	the	allowance	for	loan	and	lease	losses,	we	maintain	an	allowance for	unfunded	loan	commitments	and	letters	of	credit.	We	report	this	allowance	as a	liability	on	our	Consolidated	Balance	Sheet.	We	determine	this	amount	using

estimates	of	the	probability	of	the	ultimate	funding	and	losses	related	to	those credit	exposures.	This	methodology	is	similar	to	the	one	we	use	for	determining the	adequacy	of	our	allowance	for	loan	and	lease	losses.

We	refer	you	to	Note	5	Asset	Quality	in	the	Notes	To	Consolidated	Financial Statements	in	Item	8	of	this	Report	regarding	changes	in	the	allowance	for	loan and	lease	losses	and	in	the	allowance	for	unfunded	loan	commitments	and	letters of	credit.	Also	see	the	Allocation	Of	Allowance	For	Loan	And	Lease	Losses table	in	the	Statistical	Information	(Unaudited)	section	of	Item	8	of	this	Report for	additional	information	included	herein	by	reference.

We	establish	specific	allowances	for	loans	considered	impaired	using	a	method prescribed	by	SFAS	114,	"Accounting	by	Creditors	for	Impairment	of	a	Loan." All	impaired	loans	except	leases	and	large	groups	of	smaller-balance homogeneous	loans	which	may	include	but	are	not	limited	to	credit	card, residential	mortgage,	and	consumer	installment	loans	are	subject	to	SFAS	114 analysis.	Specific	allowances	for	individual	loans	over	a	set	dollar	threshold	are determined	by	our	Special	Asset	Committee	based	on	an	analysis	of	the	present value	of	expected	future	cash	flows	from	the	loans	discounted	at	their	effective interest	rate,	observable	market	price,	or	the	fair	value	of	the	underlying collateral.	We	establish	specific	allowance	on	all	other	impaired	loans	based	on the	loss	given	default	credit	risk	rating.

Allocations	to	non-impaired	commercial	and	commercial	real	estate	loans	(pool reserve	allocations)	are	assigned	to	pools	of	loans	as	defined	by	our	business structure	and	are	based	on	internal	probability	of	default	and	loss	given	default credit	risk	ratings.

Key	elements	of	the	pool	reserve	methodology	include:

•	Probability	of	default	("PD"),	which	is	primarily	based	on	historical	default analyses	and	is	derived	from	the	borrower's	internal	PD	credit	risk	rating; •	Exposure	at	default	("EAD"),	which	is	derived	from	historical	default	data; and

•	Loss	given	default	("LGD"),	which	is	based	on	historical	loss	data, collateral	value	and	other	structural	factors	that	may	affect	our	ultimate ability	to	collect	on	the	loan	and	is	derived	from	the	loan's	internal	LGD credit	risk	rating.

Our	pool	reserve	methodology	is	sensitive	to	changes	in	key	risk	parameters such	as	PDs,	LGDs	and	EADs.	In	general,	a	given	change	in	any	of	the	major risk	parameters	will	have	a	corresponding	change	in	the	pool	reserve	allocations for	non-impaired	commercial	loans.	Our	commercial	loans	are	the	largest category	of	credits	and	are	most	sensitive	to	changes	in	the	key	risk	parameters and	pool	reserve	loss	rates.	To	illustrate,	if	we	increase	the	pool	reserve	loss	rates by	5%	for	all	categories	of	non-impaired	commercial	loans,	then	the

aggregate	of	the	allowance	for	loan	and	lease	losses	and	allowance	for	unfunded loan	commitments	and	letters	of	credit	would	increase	by	$128	million. Additionally,	other	factors	such	as	the	rate	of	migration	in	the	severity	of problem	loans	will	contribute	to	the	final	pool	reserve	allocations.

We	make	consumer	(including	residential	mortgage)	loan	allocations	at	a	total portfolio	level	by	consumer	product	line	based	on	historical	loss	experience.	We compute	a	four-quarter	average	loss	rate	from	net	charge-offs	for	the	prior	four quarters	as	a	percentage	of	the	average	loans	outstanding	in	those	quarters.	We apply	this	loss	rate	to	loans	outstanding	at	the	end	of	the	current	period	and	make certain	qualitative	adjustments	to	determine	the	consumer	loan	allocation.

The	provision	for	credit	losses	totaled	$1.517	billion	for	2008	compared	with $315	million	for	2007.	Of	the	total	2008	provision,	$990	million	was	recorded	in the	fourth	quarter,	including	$504	million	of	additional	provision	recorded	at December	31,	2008	to	conform	the	National	City	loan	reserving	methodology with	ours.	The	differences	in	methodology	include	granularity	of	loss computations,	statistical	and	quantitative	factors	rather	than	qualitative assessment,	and	the	extent	of	current	appraisals	and	risk	assessments.

In	addition,	the	provision	for	credit	losses	for	2008	and	the	evaluation	of	the allowances	for	loan	and	lease	losses	and	unfunded	loan	commitments	and	letters of	credit	as	of	December	31,	2008	reflected	loan	and	total	credit	exposure growth,	changes	in	loan	portfolio	composition,	and	other	changes	in	asset quality.	The	provision	includes	amounts	for	probable	losses	on	loans	and	credit exposure	related	to	unfunded	loan	commitments	and	letters	of	credit.

With	a	deteriorating	economy,	we	expect	credit	migration	will	continue throughout	2009	as	credit	quality	improvements	will	lag	any	economic turnaround.

The	allowance	as	a	percent	of	nonperforming	loans	was	236%	and	as	a	percent of	total	loans	was	2.23%	at	December	31,	2008.	These	percentages	excluding the	impact	of	the	National	City	acquisition	were	95%	and	1.77%,	respectively. We	provide	a	reconciliation	of	these	percentages	excluding	the	National	City impact	to	the	GAAP-basis	percentages	in	the	Statistical	Information	(Unaudited) section	in	Item	8	of	this	Report.	The	comparable	percentages	at	December	31, 2007	were	183%	and	1.21%.	We	expect	to	continue	to	increase	our	allowance	as a	percent	of	total	loans	as	the	market	and	our	credit	quality	migration	dictates.

# Charge-Offs	And	Recoveries

| Year	ended	December	31<br>Dollars	in	millions | Charge-<br>offs | Recoveries | Net<br>Charge-<br>offs | Percent	of<br>Average<br>Loans |
| :--- | :--- | :--- | :--- | :--- |
| 2008 |  |  |  |  |
| Commercial | $301 | $53 | $248 | .80% |
| Commercial\treal\testate | 165 | 10 | 155 | 1.65 |
| Equipment\tlease |  |  |  |  |
| financing | 3 | 1 | 2 | .08 |
| Consumer | 143 | 15 | 128 | .62 |
| Residential\treal\testate | 6 |  | 6 | .07 |
| Total | $618 | $79 | $539 | .74 |
| 2007 |  |  |  |  |
| Commercial | $156 | $30 | $126 | .49% |
| Commercial\treal\testate | 16 | 1 | 15 | .20 |
| Consumer | 73 | 14 | 59 | .33 |
| Total | $245 | $45 | $200 | .32 |

We	establish	reserves	to	provide	coverage	for	probable	losses	not	considered	in the	specific,	pool	and	consumer	reserve	methodologies,	such	as,	but	not	limited to,	the	following:

•	industry	concentrations	and	conditions,

•	credit	quality	trends,

•	recent	loss	experience	in	particular	sectors	of	the	portfolio,

•	ability	and	depth	of	lending	management,

•	changes	in	risk	selection	and	underwriting	standards,	and •	timing	of	available	information.

The	amount	of	reserves	for	these	qualitative	factors	is	assigned	to	loan	categories and	to	business	segments	primarily	based	on	the	relative	specific	and	pool allocation	amounts.	The	amount	of	reserve	allocated	for	qualitative	factors represented	1.76%	of	the	total	allowance	and	.04%	of	total	loans	at December	31,	2008.

# CREDIT	DEFAULT	SWAPS

From	a	credit	risk	management	perspective,	we	buy	and	sell	credit	loss protection	via	the	use	of	credit	derivatives.	When	we	buy	loss	protection	by purchasing	a	credit	default	swap	("CDS"),	we	pay	a	fee	to	the	seller,	or	CDS counterparty,	in	return	for	the	right	to	receive	a	payment	if	a	specified	credit event	occurs	for	a	particular	obligor	or	reference	entity.	We	purchase	CDSs	to mitigate	the	risk	of	economic	loss	on	a	portion	of	our	loan	exposures.

We	also	sell	loss	protection	to	mitigate	the	net	premium	cost	and	the	impact	of fair	value	accounting	on	the	CDS	in	cases	where	we	buy	protection	to	hedge	the loan	portfolio	and	for	trading	purposes.	These	activities	represent	additional	risk positions	rather	than	hedges	of	risk.

We	approve	counterparty	credit	lines	for	all	of	our	trading	activities,	including CDSs.	Counterparty	credit	lines	are	approved	based	on	a	review	of	credit	quality in	accordance	with	our	traditional	credit	quality	standards	and	credit	policies. The	credit	risk	of	our	counterparties	is	monitored	in	the	normal	course	of business.	In	addition,	all	counterparty	credit	lines	are	subject	to	collateral thresholds	and	exposures	above	these	thresholds	are	secured.

Credit	default	swaps	are	included	in	the	Free-Standing	Derivatives	table	in	the Financial	Derivatives	section	of	this	Risk	Management	discussion.	Net	gains from	credit	default	swaps	for	proprietary	trading	positions,	reflected	in	other noninterest	income	in	our	Consolidated	Income	Statement,	totaled	$45	million for	2008	and	$38	million	for	2007.

# OPERATIONAL	RISK	MANAGEMENT

Operational	risk	is	defined	as	the	risk	of	financial	loss	or	other	damage	to	us resulting	from	inadequate	or	failed	internal	processes	or	systems,	human	factors, or	from	external	events.	Operational	risk	may	occur	in	any	of	our	business activities	and	manifests	itself	in	various	ways,	including	but	not	limited	to	the following:

•	Errors	related	to	transaction	processing	and	systems, •	Breaches	of	the	system	of	internal	controls	and	compliance	requirements, and

•	Business	interruptions	and	execution	of	unauthorized	transactions	and fraud	by	employees	or	third	parties.

Operational	losses	may	arise	from	legal	actions	due	to	operating	deficiencies	or noncompliance	with	contracts,	laws	or	regulations.

To	monitor	and	control	operational	risk,	we	maintain	a	comprehensive framework	including	policies	and	a	system	of	internal	controls	that	is	designed	to manage	risk	and	to	provide	management	with	timely	and	accurate	information about	the	operations	of	PNC.	Management	at	each	business	unit	is	primarily responsible	for	its	operational	risk	management	program,	given	that	operational risk	management	is	integral	to	direct	business	management	and	most	easily effected	at	the	business	unit	level.	Corporate	Operational	Risk	Management oversees	day-to-day	operational	risk	management	activities.

# Technology	Risk

The	technology	risk	management	program	is	a	significant	component	of	the operational	risk	framework.	We	have	an	integrated	security	and	technology	risk management	framework	designed	to	help	ensure	a	secure,	sound,	and	compliant infrastructure	for	information	management.	The	technology	risk	management process	is	aligned	with	the	strategic	direction	of	the	businesses	and	is	integrated into	the	technology	management	culture,	structure	and	practices.	The	application of	this	framework	across	the	enterprise	helps	to	support	comprehensive	and reliable	internal	controls.

Our	business	resiliency	program	manages	the	organization's	capabilities	to provide	services	in	the	case	of	an	event	that	results	in	material	disruption	of business	activities.	Prioritization	of	investments	in	people,	processes,	technology and	facilities	is	based	on	different	types	of	events,	business	risk	and	criticality. Comprehensive	testing	validates	our	resiliency	capabilities	on	an	ongoing	basis, and	an	integrated	governance	model	is	designed	to	help	assure	transparent management	reporting.

# Insurance

As	a	component	of	our	risk	management	practices,	we	purchase	insurance designed	to	protect	us	against	accidental	loss	or	losses	which,	in	the	aggregate, may	significantly	affect	personnel,	property,	financial	objectives,	or	our	ability to	continue	to	meet	our	responsibilities	to	our	various	stakeholder	groups.

PNC,	through	subsidiary	companies,	Alpine	Indemnity	Limited	and	Advent Guaranty	Corporation,	provides	insurance	coverage	for	its	general	liability, automobile	liability,	management	liability,	fidelity,	employment	practices liability,	special	crime,	workers'	compensation,	property	and	terrorism programs.	PNC's	risks	associated	with	its	participation	as	an	insurer	for	these programs	are	mitigated	through	policy	limits	and	annual	aggregate	limits.	Risks in	excess	of	Alpine	and	Advent	policy	limits	and	annual	aggregates	are mitigated	through	the	purchase	of	direct	coverage	provided	by	various	insurers up	to	limits	established	by	PNC's	Corporate	Insurance	Committee.

# LIQUIDITY	RISK	MANAGEMENT

Liquidity	risk	is	the	risk	of	potential	loss	if	we	were	unable	to	meet	our	funding requirements	at	a	reasonable	cost.	We	manage	liquidity	risk	to	help	ensure	that we	can	obtain	cost-effective	funding	to	meet	current	and	future	obligations	under both	normal	"business	as	usual"	and	stressful	circumstances.

Our	largest	source	of	liquidity	on	a	consolidated	basis	is	the	deposit	base	that comes	from	our	retail	and	corporate	and	institutional	banking	activities.	Other borrowed	funds	come	from	a	diverse	mix	of	short	and	long-term	funding sources.	Liquid	assets	and	unused	borrowing	capacity	from	a	number	of	sources are	also	available	to	maintain	our	liquidity	position.

Liquid	assets	consist	of	short-term	investments	(federal	funds	sold,	resale agreements,	trading	securities,	interest-earning	deposits	with	banks,	and	other short-term	investments)	and	securities	available	for	sale.	At	December	31,	2008, our	liquid	assets	totaled	$59.6	billion,	with	$22.5	billion	pledged	as	collateral	for borrowings,	trust,	and	other	commitments.

# Bank	Level	Liquidity

PNC	Bank,	N.A.	and	National	City	Bank	can	borrow	from	the	Federal	Reserve Bank	of	Cleveland's	("Federal	Reserve	Bank")	discount	window	to	meet	short- term	liquidity	requirements.	These	borrowings	are	secured	by	securities	and

commercial	loans.	PNC	Bank,	N.A.	is	also	a	member	of	the	Federal	Home	Loan Bank	("FHLB")-Pittsburgh	and	as	such	has	access	to	advances	from	FHLB- Pittsburgh	secured	generally	by	residential	mortgage	and	other	mortgage-related loans.	At	December	31,	2008,	we	maintained	significant	unused	borrowing capacity	from	the	Federal	Reserve	Bank	discount	window	and	FHLB-Pittsburgh under	current	collateral	requirements.	In	addition,	National	City	Bank	is	a member	of	FHLB	–	Cincinnati.

Information	regarding	amounts	pledged,	for	the	ability	to	borrow	if	necessary, and	borrowings	related	to	the	Federal	Reserve	Bank,	FHLB	–	Pittsburgh	and FHLB	–	Cincinnati	are	as	follows:

| In	billions | Dec.	31,<br>2008 | Dec.	31,<br>2007 |
| :--- | :--- | :--- |
| Pledged\tto\tFederal\tReserve\tBank |  |  |
| Loans | $32.9 | $1.6 |
| Securities | $11.0 | $18.8 |
| Combined\tcollateral\tvalue | $35.4 | $18.2 |
| Pledged\tto\tFHLB-Pittsburgh |  |  |
| Loans | $27.1 | $33.5 |
| Securities | $5.3 | $4.3 |
| Combined\tcollateral\tvalue | $16.7 | $23.5 |
| Pledged\tto\tFHLB-Cincinnati |  |  |
| Loans | $22.3 |  |
| Securities | $1.1 |  |
| Combined\tcollateral\tvalue\nOutstanding\tborrowings | $6.5 |  |
| Federal\tReserve\tBank | $2.0 |  |
| FHLB\t–\tPittsburgh | $8.8 | $6.8 |
| FHLB\t–\tCincinnati | $6.5 |  |
| Total | $17.3 | $6.8 |
| Unused\tborrowing\tcapacity |  |  |
| Federal\tReserve\tBank | $33.4 | $18.2 |
| FHLB–\tPittsburgh | $7.9 | 16.7 |
| FHLB\t–\tCincinnati | — | — |
| Total | $41.3 | $34.9 |

Total	FHLB	borrowings	were	$18.1	billion	at	December	31,	2008	compared	with $7.1	billion	at	December	31,	2007.	We	increased	total	FHLB	borrowings	during 2008	which	provided	us	with	additional	liquidity	at	relatively	attractive	rates.

We	can	also	obtain	funding	through	traditional	forms	of	borrowing,	including federal	funds	purchased,	repurchase	agreements,	and	short	and	long-term	debt issuances.	PNC	Bank,	N.A.	has	the	ability	to	offer	up	to	$20	billion	in	senior	and subordinated	unsecured	debt	obligations	with	maturities	of	more	than	nine months.	Through	December	31,	2008,	PNC	Bank,	N.A.	had	issued	$6.9	billion of	debt	under	this	program.

PNC	Bank,	N.A.	also	has	the	ability	to	offer	up	to	$3.0	billion	of	its	commercial paper.	As	of	December	31,	2008,	$327	million	of	commercial	paper	was outstanding	under	this	program.

As	of	December	31,	2008,	there	were	$3.1	billion	of	PNC	Bank,	N.A.	and	$4.8 billion	of	National	City	Bank	short-	and	long-term	debt	issuances,	including commercial	paper,	with	maturities	of	less	than	one	year.

# Parent	Company	Liquidity

Our	parent	company's	routine	funding	needs	consist	primarily	of	dividends	to PNC	shareholders,	share	repurchases,	debt	service,	the	funding	of	non-bank affiliates,	and	acquisitions.

See	the	Funding	and	Capital	Sources	section	of	the	Consolidated	Balance	Sheet Review	section	of	this	Report	regarding	certain	restrictions	on	dividends	and common	share	repurchases	related	to	PNC's	participation	in	the	US	Treasury's TARP	Capital	Purchase	Program.

Parent	company	liquidity	guidelines	are	designed	to	help	ensure	that	sufficient liquidity	is	available	to	meet	these	requirements	over	the	succeeding	12-month period.	In	managing	parent	company	liquidity	we	consider	funding	sources,	such as	expected	dividends	to	be	received	from	our	subsidiaries	and	potential	debt issuance,	and	discretionary	funding	uses,	the	most	significant	of	which	is	the external	dividend	to	be	paid	on	PNC's	stock.	On	March	1,	2009,	the	Board decided	to	reduce	PNC's	quarterly	common	stock	dividend	from	$0.66	to	$0.10 per	share.	This	action	will	reduce	the	cash	requirement	for	annual	external dividends	by	approximately	$1.0	billion.

The	principal	source	of	parent	company	cash	flow	is	the	dividends	it	receives from	its	subsidiary	banks,	which	may	be	impacted	by	the	following: •	Capital	needs,

•	Laws	and	regulations,

•	Corporate	policies,

•	Contractual	restrictions,	and •	Other	factors.

Also,	there	are	statutory	and	regulatory	limitations	on	the	ability	of	national banks	to	pay	dividends	or	make	other	capital	distributions	or	to	extend	credit	to the	parent	company	or	its	non-bank	subsidiaries.	See	Note	23	Regulatory Matters	in	the	Notes	to	Consolidated	Financial	Statements	in	Item	8	of	this Report	for	a	further	discussion	of	these	limitations.	Dividends	may	also	be impacted	by	the	bank's	capital	needs	and	by	contractual	restrictions.	We	provide additional	information	on	certain	contractual	restrictions	under	the	"Perpetual Trust	Securities,"	"PNC	Capital	Trust	E	Trust	Preferred	Securities,"	and "Acquired	Entity	Trust	Preferred	Securities"	sections	of	the	Off-Balance	Sheet Arrangements	And	Variable	Interest	Entities	section	of	this	Financial	Review. The	amount	available	for	dividend	payments	to	the	parent	company	by	PNC Bank,	N.A.	without	prior	regulatory	approval	was	approximately	$351	million	at December	31,	2008.	National	City	Bank	had	no	statutory	dividend	capacity	as	of December	31,	2008.

In	addition	to	dividends	from	PNC	Bank,	N.A.,	other	sources	of	parent	company liquidity	include	cash	and	short-term	investments,	as	well	as	dividends	and	loan repayments	from	other	subsidiaries	and	dividends	or	distributions	from	equity investments.	As	of	December	31,	2008,	the	parent	company	had	approximately $4.2	billion	in	funds	available	from	its	cash	and	short-term	investments.

We	can	also	generate	liquidity	for	the	parent	company	and	PNC's	non-bank subsidiaries	through	the	issuance	of	securities	in	public	or	private	markets.

In	December	2008,	PNC	Funding	Corp	issued	the	following	securities	totaling $2.9	billion	under	the	FDIC's	Temporary	Liquidity	Guarantee	Program-Debt Guarantee	Program:

•	$2	billion	of	fixed	rate	senior	notes	due	June	2012.	These	notes	pay interest	semiannually	at	a	fixed	rate	of	2.3%.

•	$500	million	of	fixed	rate	senior	notes	due	June	2011.	These	notes	pay interest	semiannually	at	a	fixed	rate	of	1.875%.

•	$400	million	of	floating	rate	senior	notes	due	June	2011.	Interest	will be	reset	quarterly	to	3-month	LIBOR	plus	28	basis	points	and	interest will	be	paid	quarterly.

Each	of	these	series	of	senior	notes	is	guaranteed	by	the	parent	company	and	by the	FDIC	and	is	backed	by	the	full	faith	and	credit	of	the	United	States	through June	30,	2012.

See	the	Executive	Summary	section	of	this	Financial	Review	and	Note	19 Shareholders'	Equity	in	the	Notes	To	Consolidated	Financial	Statements	in Item	8	of	this	Report	for	information	regarding	PNC's	December	31,	2008 issuance	of	$7.6	billion	of	preferred	stock	and	related	common	stock	warrant	to the	US	Treasury	under	the	TARP	Capital	Purchase	Program.

PNC	Funding	Corp	has	the	ability	to	offer	up	to	$3.0	billion	of	commercial	paper to	provide	the	parent	company	with	additional	liquidity.	As	of	December	31, 2008,	$99	million	of	commercial	paper	was	outstanding	under	this	program.

We	have	effective	shelf	registration	statements	which	enable	us	to	issue additional	debt	and	equity	securities,	including	certain	hybrid	capital instruments.	As	of	December	31,	2008,	there	were	$1.4	billion	of	parent company	contractual	obligations,	including	commercial	paper,	with	maturities	of less	than	one	year.

We	also	provide	tables	showing	contractual	obligations	and	various	other commitments	representing	required	and	potential	cash	outflows	as	of December	31,	2008	under	the	heading	"Commitments"	below.

# Commitments

The	following	tables	set	forth	contractual	obligations	and	various	other	commitments	representing	required	and	potential	cash	outflows	as	of	December	31,	2008.

| Contractual	Obligations |  | Payment	Due	By	Period | Payment	Due	By	Period | Payment	Due	By	Period | Payment	Due	By	Period |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | Less\tthan | One\tto\tthree | Four\tto\tfive | After\tfive |
| December\t31,\t2008\t-\tin\tmillions | Total | one\tyear | years | years | years |
| Remaining\tcontractual\tmaturities\tof\ttime\tdeposits | $75,919 | $44,877 | $17,758 | $9,011 | $4,273 |
| Federal\tHome\tLoan\tBank\tborrowings | 18,126 | 5,058 | 7,887 | 4,694 | 487 |
| Other\tborrowed\tfunds | 34,114 | 13,533 | 6,730 | 4,129 | 9,722 |
| Minimum\tannual\trentals\ton\tnoncancellable\tleases | 2,615 | 329 | 579 | 459 | 1,248 |
| Nonqualified\tpension\tand\tpostretirement\tbenefits | 567 | 62 | 124 | 117 | 264 |
| Purchase\tobligations\t(a) | 1,145 | 398 | 472 | 215 | 60 |
| Total\tcontractual\tcash\tobligations | $132,486 | $64,257 | $33,550 | $18,625 | $16,054 |
| (a) |  |  |  |  |  |

(a) Includes	purchase	obligations	for	goods	and	services	covered	by	noncancellable	contracts	and	contracts	including	cancellation	fees.

| Other	Commitments	(a) |  | Amount	Of	Commitment	Expiration	By	Period | Amount	Of	Commitment	Expiration	By	Period | Amount	Of	Commitment	Expiration	By	Period | Amount	Of	Commitment	Expiration	By	Period |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | Total |  |  |  |  |
|  | Amounts | Less\tthan | One\tto\tthree | Four\tto\tfive | After\tfive |
| December\t31,\t2008\t-\tin\tmillions | Committed | one\tyear | years | years | years |
| Other\tunfunded\tloan\tcommitments | $62,665 | $27,260 | $22,317 | $12,358 | $730 |
| Home\tequity\tlines\tof\tcredit | 23,195 | 14,342 | 8,853 |  |  |
| Consumer\tcredit\tcard\tlines | 19,028 | 17,549 | 1,479 |  |  |
| Standby\tletters\tof\tcredit\t(b) | 10,317 | 3,855 | 3,916 | 2,352 | 194 |
| Other\tcommitments\t(c) | 1,408 | 595 | 390 | 302 | 121 |
| Total\tcommitments | $116,613 | $63,601 | $36,955 | $15,012 | $1,045 |
| (a) |  |  |  |  |  |

(a) Other	commitments	are	funding	commitments	that	could	potentially	require	performance	in	the	event	of	demands	by	third	parties	or	contingent	events.	Loan	commitments	are	reported	net	of	participations, assignments	and	syndications.

(b) Includes	$5.1	billion	of	standby	letters	of	credit	that	support	remarketing	programs	for	customers'	variable	rate	demand	notes.

(c) Includes	unfunded	commitments	related	to	private	equity	investments	of	$540	million	and	other	investments	of	$178	million	which	are	not	on	our	Consolidated	Balance	Sheet.	Also	includes	commitments	related to	tax	credit	investments	of	$690	million	which	are	included	in	other	liabilities	on	the	Consolidated	Balance	Sheet.

# MARKET	RISK	MANAGEMENT	OVERVIEW

Market	risk	is	the	risk	of	a	loss	in	earnings	or	economic	value	due	to	adverse movements	in	market	factors	such	as	interest	rates,	credit	spreads,	foreign exchange	rates,	and	equity	prices.	We	are	exposed	to	market	risk	primarily	by our	involvement	in	the	following	activities,	among	others: •	Traditional	banking	activities	of	taking	deposits	and	extending	loans, •	Private	equity	and	other	investments	and	activities	whose	economic	values are	directly	impacted	by	market	factors,	and •	Trading	in	fixed	income	products,	equities,	derivatives,	and	foreign exchange,	as	a	result	of	customer	activities,	underwriting,	and	proprietary trading.

We	have	established	enterprise-wide	policies	and	methodologies	to	identify, measure,	monitor,	and	report	market	risk.	Market	Risk	Management	provides independent	oversight	by	monitoring	compliance	with	these	limits	and guidelines,	and	reporting	significant	risks	in	the	business	to	the	Risk	Committee of	the	Board.

# MARKET	RISK	MANAGEMENT	–	INTEREST	RATE	RISK

Interest	rate	risk	results	primarily	from	our	traditional	banking	activities	of gathering	deposits	and	extending	loans.	Many	factors,	including	economic	and financial	conditions,	movements	in	interest	rates,	and	consumer	preferences, affect	the	difference	between	the	interest	that	we	earn	on	assets	and	the	interest that	we	pay	on	liabilities	and	the	level	of	our	noninterest-bearing	funding sources.	Due	to	the	repricing	term	mismatches	and	embedded	options	inherent	in certain	of	these	products,	changes	in	market	interest	rates	not	only	affect expected	near-term	earnings,	but	also	the	economic	values	of	these	assets	and liabilities.

Asset	and	Liability	Management	centrally	manages	interest	rate	risk	within limits	and	guidelines	set	forth	in	our	risk	management	policies	approved	by	the Asset	and	Liability	Committee	and	the	Risk	Committee	of	the	Board.

Sensitivity	results	and	market	interest	rate	benchmarks	for	the	fourth	quarters	of 2008	and	2007	follow:

# Interest	Sensitivity	Analysis

(a)NM	=	not	meaningful.	Given	the	inherent	limitations	in	certain	of	these	measurement	tools	and techniques,	results	become	less	meaningful	as	interest	rates	approach	zero.

In	addition	to	measuring	the	effect	on	net	interest	income	assuming	parallel changes	in	current	interest	rates,	we	routinely	simulate	the	effects	of	a	number	of nonparallel	interest	rate	environments.	The	following	Net	Interest	Income Sensitivity	To	Alternative	Rate	Scenarios	table	reflects	the	percentage	change	in net	interest	income	over	the	next	two	12-month	periods	assuming	(i)	the	PNC Economist's	most	likely	rate	forecast,	(ii)	implied	market	forward	rates,	and (iii)	a	Two-Ten	Inversion	(a	200	basis	point	inversion	between	two-year	and	ten- year	rates	superimposed	on	current	base	rates)	scenario.

# Net	Interest	Income	Sensitivity	To	Alternative	Rate	Scenarios	(Fourth	Quarter 2008)

| PNC<br>Economist | Market<br>Forward | Two-Ten<br>Inversion |
| :--- | :--- | :--- |
| 0.5% | (0.2)% | 2.3% |
| 4.9% | 2.4% | 2.3% |

All	changes	in	forecasted	net	interest	income	are	relative	to	results	in	a	base	rate scenario	where	current	market	rates	are	assumed	to	remain	unchanged	over	the forecast	horizon.

When	forecasting	net	interest	income,	we	make	assumptions	about	interest	rates and	the	shape	of	the	yield	curve,	the	volume	and	characteristics	of	new	business, and	the	behavior	of	existing	on-	and	off-balance	sheet	positions.	These assumptions	determine	the	future	level	of	simulated	net	interest	income	in	the base	interest	rate	scenario	and	the	other	interest	rate	scenarios	presented	in	the following	table.	These	simulations	assume	that	as	assets	and	liabilities	mature, they	are	replaced	or	repriced	at	market	rates.

The	graph	below	presents	the	yield	curves	for	the	base	rate	scenario	and	each	of the	alternate	scenarios	one	year	forward.

The	results	of	the	fourth	quarter	2008	interest	sensitivity	analyses	reflect	our current	best	estimates	of	the	impact	of	integrating	National	City's	balance	sheet, including	the	preliminary	effects	of	purchase	accounting,	balance	sheet repositioning,	and	deposit	pricing	strategies.	Going	forward	as	these	estimates and	strategies	are	finalized	or	revised,	the	results	of	our	analyses	may	change. The	fourth	quarter	2008	analyses	also	reflect	the	impact	of	the	rapid	decline	in market	interest	rates	that	occurred	during	that	quarter,	in	which	period-end	one- month	LIBOR	and	three-year	swap	rates	declined	349	basis	points	and	197	basis points,	respectively.

The	fourth	quarter	2008	interest	sensitivity	analyses	indicate	that	our Consolidated	Balance	Sheet	is	positioned	to	benefit	from	an	increase	in	interest rates.	We	believe	that	we	have	the	deposit	funding	base	and	balance	sheet flexibility	to	adjust,	where	appropriate	and	permissible,	to	changing	interest	rates and	market	conditions.

# MARKET	RISK	MANAGEMENT	–	TRADING	RISK

Our	trading	activities	include	customer-driven	trading	in	fixed	income	securities, equities,	derivatives,	and	foreign	exchange	contracts.	They	also	include	the underwriting	of	fixed	income	and	equity	securities	and	proprietary	trading.

We	use	value-at-risk	("VaR")	as	the	primary	means	to	measure	and	monitor market	risk	in	trading	activities.	The	Risk	Committee	of	the	Board	establishes	an enterprise-wide	VaR	limit	on	our	trading	activities.

During	2008,	our	VaR	ranged	between	$5.4	million	and	$18.4	million, averaging	$10.8	million.	During	2007,	our	VaR	ranged	between	$6.1	million and	$12.8	million,	averaging	$8.5	million.	The	increase	in	VaR	compared	with 2007	reflected	ongoing	market	volatility.

To	help	ensure	the	integrity	of	the	models	used	to	calculate	VaR	for	each portfolio	and	enterprise-wide,	we	use	a	process	known	as	backtesting.	The backtesting	process	consists	of	comparing	actual	observations	of	trading-related gains	or	losses	against	the	VaR	levels	that	were	calculated	at	the	close	of	the prior	day.	Under	typical	market	conditions,	we	would	expect	an	average	of	two to	three	instances	a	year	in	which	actual	losses	exceeded	the	prior	day	VaR measure	at	the	enterprise-wide	level.	As	a	result	of	increased	volatility	in	certain markets,	there	were	10	such	instances	during	2008	compared	with	two	such instances	in	2007.

The	following	graph	shows	a	comparison	of	enterprise-wide	trading-related gains	and	losses	against	prior	day	VaR	for	the	period.

Total	trading	revenue	for	the	past	three	years	was	as	follows:

| Year	end	December	31	–	in	millions | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Net\tinterest\tincome\t(expense) | $72 | $7 | $(6) |
| Noninterest\tincome | (55) | \t 104 | \t 183 |
| Total\ttrading\trevenue | $17 | $111 | $177 |
| Securities\tunderwriting\tand |  |  |  |
| trading\t(a) | $(17) | $41 | $38 |
| Foreign\texchange | 73 | 58 | 55 |
| Financial\tderivatives | (39) | 12 | 84 |
| Total\ttrading\trevenue | $17 | $111 | $177 |

(a)Includes	changes	in	fair	value	for	certain	loans	accounted	for	at	fair	value.

The	decline	in	total	trading	revenue	for	2008	primarily	related	to	losses	sustained in	our	proprietary	trading	activities.	These	decreases	reflected	the	negative impact	of	significant	widening	of	market	credit	spreads	in	extremely	illiquid markets.	We	took	the	following	steps	during	2008	to	reduce	our	proprietary trading	positions:

•	Sold	Hilliard	Lyons	on	March	31,	2008,	including	their	proprietary	trading positions;

•	Significantly	reduced	the	PNC	Capital	Markets	municipal	bond	arbitrage book	during	the	first	half	of	2008,	closing	it	completely	by	August	2008; •	Reduced	significantly	proprietary	risk	taking	within	the	customer-focused equity	derivatives	book	during	2008;

•	Reduced	convertible	arbitrage	book	positions	during	2008	from	close	to $225	million	face	value	of	bonds	to	close	to	$100	million; •	Terminated	all	derivative	positions	hedging	municipal	bond	exposure	in tender	option	bond	trusts,	terminated	the	trusts,	and	transferred	the remaining	long	municipal	bond	position	(approximately	$300	million	face value)	to	the	available	for	sale	portfolio.	This	transfer	occurred	in	the	fourth quarter	of	2008;

•	Sold	down	approximately	80%	of	the	positions	in	the	non-agency mortgage-backed	securities	and	commercial	mortgage-backed	securities proprietary	trading	books	during	2008.	The	remaining	positions	(market value	of	approximately	$300	million)	were	transferred	to	the	available	for sale	portfolio	after	terminating	swap	hedges.	This	transfer	occurred	in	the fourth	quarter	of	2008;	and

•	Significantly	reduced	all	other	proprietary	trading	positions	including interest	rate	swaps,	futures,	swap	options	and	credit	default	swaps.

Trading	securities	at	December	31,	2008	totaled	$1.7	billion,	including	$1	billion from	National	City,	compared	with	$3.6	billion	at	December	31,	2007	and reflected	our	risk	management	actions	outlined	above.

Average	trading	assets	and	liabilities	for	the	past	three	years	consisted	of	the following:

| Year	ended	-	in	millions | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Assets |  |  |  |
| Securities\t(a) | $2,387 | $2,708 | $1,712 |
| Resale\tagreements\t(b) | \t 1,794 | \t 1,133 | 623 |
| Financial\tderivatives\t(c) | \t 2,389 | \t 1,378 | \t 1,148 |
| Loans\tat\tfair\tvalue\t(c) | 83 | 166 | 128 |
| Total\tassets | $6,653 | $5,385 | $3,611 |
| Liabilities |  |  |  |
| Securities\tsold\tshort\t(d) | $1,294 | $1,657 | $965 |
| Repurchase\tagreements |  |  |  |
| and\tother\tborrowings\t(e) | 756 | 520 | 833 |
| Financial\tderivatives\t(f) | \t 2,423 | \t 1,384 | \t 1,103 |
| Borrowings\tat\tfair\tvalue\t(f) | 22 | 39 | 31 |
| Total\tliabilities | $4,495 | $3,600 | $2,932 |

(a)Included	in	Interest-earning	assets-Other	on	the	Average	Consolidated	Balance	Sheet	And	Net Interest	Analysis.

(b)Included	in	Federal	funds	sold	and	resale	agreements.

(c)Included	in	Noninterest-earning	assets-Other.

(d)Included	in	Other	borrowed	funds.

(e)Included	in	Repurchase	agreements	and	Other	borrowed	funds.

(f) Included	in	Accrued	expenses	and	other	liabilities.

# MARKET	RISK	MANAGEMENT	–	EQUITY	AND	OTHER	INVESTMENT	RISK

Equity	investment	risk	is	the	risk	of	potential	losses	associated	with	investing	in both	private	and	public	equity	markets.	In	addition	to	extending	credit,	taking deposits,	and	underwriting	and	trading	financial	instruments,	we	make	and manage	direct	investments	in	a	variety	of	transactions,	including	management buyouts,	recapitalizations,	and	later-stage	growth	financings	in	a	variety	of industries.	We	also	have	investments	in	affiliated	and	non-affiliated	funds	that make	similar	investments	in	private	equity	and	in	debt	and	equity-oriented	hedge funds.	The	economic	and/or	book	value	of	these	investments	and	other	assets such	as	loan	servicing	rights	are	directly	affected	by	changes	in	market	factors.

The	primary	risk	measurement	for	equity	and	other	investments	is	economic capital.	Economic	capital	is	a	common	measure	of	risk	for	credit,	market	and operational	risk.	It	is	an	estimate	of	the	worst-case	value	depreciation	over	one year	within	a	99.9%	confidence	level.	Given	the	illiquid	nature	of	many	of	these types	of	investments,	it	can	be	a	challenge	to	determine	their	fair	values.	Market Risk	Management	and	Finance	provide	independent	oversight	of	the	valuation process.

Various	PNC	business	units	manage	our	private	equity	and	other	investment activities.	Our	businesses	are	responsible	for	making	investment	decisions	within the	approved	policy	limits	and	associated	guidelines.

PNC	owns	approximately	43	million	shares	of	BlackRock	common	stock, accounted	for	under	the	equity	method.	Our	total	investment	in	BlackRock	was $4.2	billion	at	December	31,	2008	compared	with	$4.1	billion	at	December	31, 2007.	The	market	value	of	our	investment	in	BlackRock	was	$5.8	billion	at December	31,	2008.	The	primary	risk	measurement,	similar	to	other	equity investments,	is	economic	capital.

The	discussion	of	BlackRock	within	the	Business	Segments	Review	section	of this	Item	7	includes	information	about	changes	in	our	ownership	structure	of BlackRock	in	2009.

# Tax	Credit	Investments

Included	in	our	equity	investments	are	limited	partnerships	that	sponsor	tax credit	investments.	These	investments,	consisting	of	partnerships	as	well	as equity	investments	held	by	consolidated	partnerships,	totaled	$2.3	billion	at December	31,	2008.	Investments	accounted	for	under	the

equity	method	totaled	$1.7	billion	while	investments	accounted	for	under	the cost	method	totaled	$648	million	at	December	31,	2008.	These	investments totaled	$1.0	billion	at	December	31,	2007,	all	of	which	were	accounted	for	under the	equity	method.

At	December	31,	2008,	our	remaining	investment	in	Visa	Class	B	common shares	totaled	approximately	23.2	million	shares,	including	19.7	million	shares acquired	in	connection	with	our	National	City	acquisition.	The	Visa	B	shares owned	by	National	City	were	recorded	by	PNC	at	fair	value	(including	a liquidity	discount)	as	part	of	our	acquisition.	The	PNC-owned	Visa	B	shares	are recorded	at	zero	book	value.	Considering	the	expected	reduction	in	the	IPO conversion	ratio	due	to	settled	litigation	reported	by	Visa,	these	shares	would convert	to	approximately	14.6	million	of	the	publicly	traded	Visa	Class	A common	shares.	Based	on	the	December	31,	2008	closing	price	of	$52.45	for	the Visa	shares,	our	remaining	investment	had	an	unrecognized	pretax	value	of approximately	$312	million	at	that	date.	The	Visa	Class	B	common	shares	we own	generally	will	not	be	transferable	until	they	can	be	converted	into	shares	of the	publicly	traded	class	of	stock,	which	cannot	happen	until	the	later	of	three years	after	the	IPO	or	settlement	of	all	of	the	specified	litigation.	As	stated above,	it	is	expected	that	Visa	will	continue	to	adjust	the	conversion	ratio	of	Visa Class	B	to	Class	A	shares	in	connection	with	settlements	in	excess	of	any amounts	then	in	escrow	for	that	purpose	and	will	also	reduce	the	conversion	ratio to	the	extent	that	it	adds	any	funds	to	the	escrow	in	the	future.	Note	25 Commitments	and	Guarantees	in	our	Notes	To	Consolidated	Financial Statements	included	in	Item	8	of	this	Report	has	further	information	on	our	Visa indemnification	obligation.

# Private	Equity

The	private	equity	portfolio	is	comprised	of	equity	and	mezzanine	investments that	vary	by	industry,	stage	and	type	of	investment.	Private	equity	investments are	reported	at	fair	value.	Changes	in	the	values	of	private	equity	investments	are reflected	in	our	results	of	operations.	Due	to	the	nature	of	the	investments,	the valuations	incorporate	assumptions	as	to	future	performance,	financial	condition, liquidity,	availability	of	capital,	and	market	conditions,	among	other	factors,	to determine	the	estimated	fair	value	of	the	investments.	Market	conditions	and actual	performance	of	the	investments	could	differ	from	these	assumptions. Accordingly,	lower	valuations	may	occur	that	could	adversely	impact	earnings in	future	periods.	Also,	the	valuations	may	not	represent	amounts	that	will ultimately	be	realized	from	these	investments.	See	Note	1	Accounting	Policies in	Item	8	for	additional	information.

At	December	31,	2008,	private	equity	investments	carried	at	estimated	fair	value totaled	$1.2	billion	compared	with	$561	million	at	December	31,	2007.	As	of December	31,	2008,	$620	million	was	invested	directly	in	a	variety	of companies	and	$566	million	was	invested	indirectly	through	various

private	equity	funds.	Included	in	direct	investments	are	investment	activities	of two	private	equity	funds	that	are	consolidated	for	financial	reporting	purposes. The	minority	and	noncontrolling	interests	of	these	funds	totaled	$142	million	as of	December	31,	2008.	Our	unfunded	commitments	related	to	private	equity totaled	$540	million	at	December	31,	2008	compared	with	$270	million	at December	31,	2007.

# Other	Investments

We	also	make	investments	in	affiliated	and	non-affiliated	funds	with	both traditional	and	alternative	investment	strategies.	The	economic	values	could	be driven	by	either	the	fixed-income	market	or	the	equity	markets,	or	both.	At December	31,	2008,	other	investments	totaled	$853	million	compared	with	$384 million	at	December	31,	2007.	We	recognized	losses	related	to	these	investments of	$156	million	during	2008	including	$76	million	in	the	fourth	quarter.	Given the	nature	of	these	investments	and	if	current	market	conditions	affecting	their valuation	were	to	continue	or	worsen,	we	could	incur	future	losses.

Our	unfunded	commitments	related	to	other	investments	totaled	$178	million	at December	31,	2008	compared	with	$79	million	at	December	31,	2007.

# IMPACT	OF	INFLATION

Our	assets	and	liabilities	are	primarily	monetary	in	nature.	Accordingly,	future changes	in	prices	do	not	affect	the	obligations	to	pay	or	receive	fixed	and determinable	amounts	of	money.	During	periods	of	inflation,	monetary	assets lose	value	in	terms	of	purchasing	power	and	monetary	liabilities	have corresponding	purchasing	power	gains.	The	concept	of	purchasing	power, however,	is	not	an	adequate	indicator	of	the	effect	of	inflation	on	banks	because it	does	not	take	into	account	changes	in	interest	rates,	which	are	an	important determinant	of	our	earnings.

We	use	a	variety	of	financial	derivatives	as	part	of	the	overall	asset	and	liability risk	management	process	to	help	manage	interest	rate,	market	and	credit	risk inherent	in	our	business	activities.	Substantially	all	such	instruments	are	used	to manage	risk	related	to	changes	in	interest	rates.	Interest	rate	and	total	return swaps,	interest	rate	caps	and	floors	and	futures	contracts	are	the	primary instruments	we	use	for	interest	rate	risk	management.

Financial	derivatives	involve,	to	varying	degrees,	interest	rate,	market	and	credit risk.	For	interest	rate	swaps	and	total	return	swaps,	options	and	futures	contracts, only	periodic	cash	payments	and,	with	respect	to	options,	premiums	are exchanged.	Therefore,	cash	requirements	and	exposure	to	credit	risk	are significantly	less	than	the	notional	amount	on	these	instruments.	Further information	on	our	financial	derivatives	is	presented	in	Note	1	Accounting Policies	and	Note	17	Financial	Derivatives	in	the	Notes	To	Consolidated Financial	Statements	in	Item	8	of	this	Report.

Not	all	elements	of	interest	rate,	market	and	credit	risk	are	addressed	through	the	use	of	financial	or	other	derivatives,	and	such	instruments	may	be	ineffective	for	their intended	purposes	due	to	unanticipated	market	characteristics,	among	other	reasons.

The	following	tables	provide	the	notional	or	contractual	amounts	and	estimated	net	fair	value	of	financial	derivatives	used	for	risk	management	and	designated	as accounting	hedges	as	well	as	free-standing	derivatives	at	December	31,	2008	and	2007.	Weighted-average	interest	rates	presented	are	based	on	contractual	terms,	if fixed,	or	the	implied	forward	yield	curve	at	each	respective	date,	if	floating.

# Financial	Derivatives	–	2008

|  |  |  |  |  | Weighted- |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | Notional/ | Estimated | Weighted |  | Average\tInterest |
|  | Contractual | Net | Average |  | Rates |
| December\t31,\t2008\t-\tdollars\tin\tmillions | Amount | Fair\tValue | Maturity | Paid | Received |
| Accounting\tHedges |  |  |  |  |  |
| Interest\trate\trisk\tmanagement |  |  |  |  |  |
| Asset\trate\tconversion |  |  |  |  |  |
| Interest\trate\tswaps\t(a) |  |  |  |  |  |
| Receive\tfixed | $5,618 | $527 | 3\tyrs. | 2.18% | 4.76% |
| Liability\trate\tconversion |  |  |  |  |  |
| Interest\trate\tswaps\t(a) |  |  |  |  |  |
| Receive\tfixed | 9,888 | 888 | 3\tyrs.\t7\tmos. | 2.27% | 4.73% |
| Total\tinterest\trate\trisk\tmanagement | 15,506 | 1,415 |  |  |  |
| Total\taccounting\thedges\t(b) | $15,506 | $1,415 |  |  |  |
| Free-Standing\tDerivatives |  |  |  |  |  |
| Customer-related |  |  |  |  |  |
| Interest\trate |  |  |  |  |  |
| Swaps\t(c) | $97,337 | $(161) | 4\tyrs.\t9\tmos. | 3.08% | 3.07% |
| Caps/floors |  |  |  |  |  |
| Sold\t(c) | 3,878 | (12) | 4\tyrs.\t4\tmos. | NM | NM |
| Purchased | 2,410 | 8 | 2\tyrs.\t10\tmos. | NM | NM |
| Futures | 8,878 |  | 1\tyr.\t1\tmo. | NM | NM |
| Foreign\texchange\t(c) | 8,877 | (3) | 5\tmos. | NM | NM |
| Equity | 984 | (4) | 1\tyr. | NM | NM |
| Swaptions | 3,058 | 160 | 13\tyrs.\t2\tmos. | NM | NM |
| Other | 335 | 12 | 3\tyrs.\t3\tmos. | NM | NM |
| Total\tcustomer-related | \t 125,757 | — |  |  |  |
| Residential\tmortgage\tservicing\trights | 52,980 | 109 | 5\tyrs.\t10\tmos. | NM | NM |
| Other\trisk\tmanagement\tand\tproprietary |  |  |  |  |  |
| Interest\trate |  |  |  |  |  |
| Swaps\t(d) | 24,481 | 667 | 3\tyrs. | 3.93% | 2.70% |
| Caps/floors |  |  |  |  |  |
| Sold | 514 |  | 1\tyr.\t4\tmos. | NM | NM |
| Purchased | 280 | 1 | 4\tyrs.\t7\tmos. | NM | NM |
| Futures | 8,359 |  | 8\tmos. | NM | NM |
| Foreign\texchange | 95 |  | 4\tmos. | NM | NM |
| Credit\tderivatives | 2,937 | 205 | 13\tyrs.\t8\tmos. | NM | NM |
| Risk\tparticipation\tagreements | 3,290 |  | 3\tyrs.\t1\tmo. | NM | NM |
| Commitments\trelated\tto\tmortgage-related\tassets\t(c) | 18,853 | (12) | 1\tmo. | NM | NM |
| Options |  |  |  |  |  |
| Swaptions | 276 | 17 | 10\tyrs.\t11\tmos. | NM | NM |
| Other\t(e) | 438 | 44 | NM | NM | NM |
| Total\tother\trisk\tmanagement\tand\tproprietary | 59,523 | 922 |  |  |  |
| Total\tfree-standing\tderivatives | $238,260 | $1,031 |  |  |  |
| (a) |  |  |  |  |  |

(a) The	floating	rate	portion	of	interest	rate	contracts	is	based	on	money-market	indices.	As	a	percent	of	notional	amount,	55%	were	based	on	1-month	LIBOR	and	45%	on	3-month	LIBOR.

(b) Fair	value	amount	includes	net	accrued	interest	receivable	of	$147	million.

(c) The	increases	in	the	negative	fair	values	from	December	31,	2007	to	December	31,	2008	for	interest	rate	contracts,	foreign	exchange	and	commitments	related	to	mortgage-related	assets	were	due	to	the	changes	in fair	values	of	the	existing	contracts	along	with	new	contracts	entered	into	during	2008.

(d) Due	to	the	adoption	of	SFAS	159	as	of	January	1,	2008,	we	discontinued	hedge	accounting	for	our	commercial	mortgage	banking	pay-fixed	interest	rate	swaps;	therefore,	the	fair	value	of	these	are	now	reported	in this	category.

(e) Relates	to	PNC's	obligation	to	help	fund	certain	BlackRock	LTIP	programs.	Additional	information	regarding	the	BlackRock/MLIM	transaction	and	our	BlackRock	LTIP	shares	obligation	is	included	in	Note	2 Acquisitions	and	Divestitures	included	in	the	Notes	to	Consolidated	Financial	Statements	in	Item	8	of	this	Report.

NM Not	meaningful

|  | Notional/ | Estimated | Weighted | Weighted-Average | Weighted-Average |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | Contractual | Net | Average | Interest\tRates | Interest\tRates |
| December\t31,\t2007-\tdollars\tin\tmillions | Amount | Fair\tValue | Maturity | Paid | Received |
| Accounting\tHedges |  |  |  |  |  |
| Interest\trate\trisk\tmanagement |  |  |  |  |  |
| Asset\trate\tconversion |  |  |  |  |  |
| Interest\trate\tswaps\t(a) |  |  |  |  |  |
| Receive\tfixed | $7,856 | $325 | 4\tyrs.\t2\tmos. | 4.28% | 5.34% |
| Liability\trate\tconversion |  |  |  |  |  |
| Interest\trate\tswaps\t(a) |  |  |  |  |  |
| Receive\tfixed | 9,440 | 269 | 4\tyrs.\t10\tmos. | 4.12% | 5.09% |
| Total\tinterest\trate\trisk\tmanagement | 17,296 | 594 |  |  |  |
| Commercial\tmortgage\tbanking\trisk\tmanagement |  |  |  |  |  |
| Pay\tfixed\tinterest\trate\tswaps\t(a) | 1,128 | (79) | 8\tyrs.\t8\tmos. | 5.45% | 4.52% |
| Total\taccounting\thedges\t(b) | $18,424 | $515 |  |  |  |
| Free-Standing\tDerivatives |  |  |  |  |  |
| Customer-related |  |  |  |  |  |
| Interest\trate |  |  |  |  |  |
| Swaps | $61,768 | $(39) | 5\tyrs.\t4\tmos. | 4.46% | 4.49% |
| Caps/floors |  |  |  |  |  |
| Sold | 2,837 | (5) | 6\tyrs.\t5\tmos. | NM | NM |
| Purchased | 2,356 | 7 | 3\tyrs.\t7\tmos. | NM | NM |
| Futures | 5,564 |  | 8\tmos. | NM | NM |
| Foreign\texchange | 7,028 | 8 | 7\tmos. | NM | NM |
| Equity | 1,824 | (69) | 1\tyr.\t5\tmos. | NM | NM |
| Swaptions | 3,490 | 40 | 13\tyrs.\t10\tmos. | NM | NM |
| Other | 200 |  | 10\tyrs.\t6\tmos. | NM | NM |
| Total\tcustomer-related | 85,067 | (58) |  |  |  |
| Other\trisk\tmanagement\tand\tproprietary |  |  |  |  |  |
| Interest\trate |  |  |  |  |  |
| Swaps | 41,247 | 6 | 4\tyrs.\t5\tmos. | 4.44% | 4.47% |
| Caps/floors |  |  |  |  |  |
| Sold | 6,250 | (82) | 2\tyrs.\t1\tmo. | NM | NM |
| Purchased | 7,760 | 117 | 1\tyr.\t11\tmos. | NM | NM |
| Futures | 43,107 |  | 1\tyr.\t7\tmos. | NM | NM |
| Foreign\texchange | 8,713 | 5 | 6\tyrs.\t8\tmos. | NM | NM |
| Credit\tderivatives | 5,823 | 42 | 12\tyrs.\t1\tmo. | NM | NM |
| Risk\tparticipation\tagreements | 1,183 |  | 4\tyrs.\t6\tmos. | NM | NM |
| Commitments\trelated\tto\tmortgage-related\tassets | 3,190 | 10 | 4\tmos. | NM | NM |
| Options |  |  |  |  |  |
| Futures | 39,158 | (2) | 8\tmos. | NM | NM |
| Swaptions | 21,800 | 49 | 8\tyrs.\t1\tmo. | NM | NM |
| Other\t(c) | 442 | (201) | NM | NM | NM |
| Total\tother\trisk\tmanagement\tand\tproprietary | 178,673 | (56) |  |  |  |
| Total\tfree-standing\tderivatives | $263,740 | $(114) |  |  |  |
| (a) |  |  |  |  |  |

(a) The	floating	rate	portion	of	interest	rate	contracts	is	based	on	money-market	indices.	As	a	percent	of	a	notional	amount,	52%	were	based	on	1-month	LIBOR,	43%	on	3-month	LIBOR	and	5%	on	Prime	Rate.

(b) Fair	value	amounts	include	net	accrued	interest	receivable	of	$130	million.

# Summary	Results

Net	income	for	2006	included	the	after-tax	impact	of	the	following	items:

•	The	third	quarter	gain	on	the	BlackRock/MLIM	transaction	of	$1.3	billion, or	$4.36	per	diluted	share;

•	The	third	quarter	securities	portfolio	rebalancing	loss	of	$127	million,	or $.43	per	diluted	share;

•	BlackRock/MLIM	transaction	integration	costs	of	$47	million,	or	$.16	per

diluted	share,	and

•	The	third	quarter	mortgage	loan	portfolio	repositioning	loss	of	$31	million,

or	$.10	per	diluted	share.

The	aggregate	impact	of	these	items	increased	2006	net	income	by	$1.1	billion,

# Net	Interest	Income

The	provision	for	credit	losses	totaled	$315	million	for	2007	and	$124	million for	2006.	Of	the	total	2007	provision,	$188	million	was	recorded	in	the	fourth quarter,	including	approximately	$45	million	related	to	our	Yardville acquisition.	The	higher	provision	in	2007	was	also	impacted	by	an	increase	in our	real	estate	portfolio,	including	residential	real	estate	development	exposure, and	growth	in	total	credit	exposure.	Total	residential	real	estate	development outstandings	were	approximately	$2.1	billion	at	December	31,	2007.

Noninterest	income	was	$3.790	billion	for	2007	and	$6.327	billion	for	2006. Noninterest	income	for	2007	included	the	impact	of	an	$83	million	gain recognized	in	connection	with	our	transfer	of	BlackRock	shares	to	satisfy	a portion	of	PNC's	LTIP	obligation	and	a	$210	million	net	loss	representing	the mark-to-market	adjustment	on	our	LTIP	obligation.

Noninterest	income	for	2006	included	the	impact	of	the	following	items: •	The	gain	on	the	BlackRock/MLIM	transaction,	which	totaled	$2.078 billion,

•	The	effects	of	our	third	quarter	2006	balance	sheet	repositioning	activities that	resulted	in	charges	totaling	$244	million,	and •	PNC	consolidated	BlackRock	in	its	results	for	the	first	nine	months	of	2006 but	accounted	for	BlackRock	on	the	equity	method	for	the	fourth	quarter	of 2006	and	all	of	2007.	Had	our	BlackRock	investment	been	on	the	equity method	for	all	of	2006,	BlackRock's	noninterest	income	reported	by	us would	have	been	lower	by	$943	million	for	that	year.

Apart	from	the	impact	of	these	items,	noninterest	income	increased	$367 million,	or	10%,	in	2007	compared	with	2006	largely	as	a	result	of	the Mercantile	acquisition	and	growth	in	several	fee	income	categories.

Fund	servicing	fees	declined	$58	million	in	2007,	to	$835	million,	compared with	$893	million	in	the	prior	year.	Amounts	for	2006	included	$117	million	of distribution	fee	revenue	at	Global	Investment	Servicing.	Effective	January	1, 2007,	we	refined	our	accounting	and	reporting	of	Global	Investment	Servicing's distribution	fee	revenue	and	related	expense	amounts	and	present	these	amounts net	on	a	prospective	basis.	Prior	to	2007,	the	distribution	amounts	were	shown	on a	gross	basis	within	fund	servicing	fees	and	within	other	noninterest	expense	and offset	each	other	entirely	with	no	impact	on	earnings.

Apart	from	the	impact	of	the	distribution	fee	revenue	included	in	the	2006 amounts,	fund	servicing	fees	increased	$59	million	in	2007	compared	with	the prior	year.	Higher	revenue	from	offshore	operations,	transfer	agency,	managed accounts	and	alternative	investments	contributed	to	the	increase	in	2007, reflecting	net	new	business	and	growth	from	existing	clients.

Asset	management	fees	totaled	$784	million	for	2007	and	$1.420	billion	for 2006.	Our	equity	income	from	BlackRock	has	been	included	in	asset management	fees	beginning	with	the	fourth	quarter	of	2006.	Asset	management fees	were	higher	in	2006	as	the	first	nine	months	of	2006	reflected	the	impact	of BlackRock's	revenue	on	a	consolidated	basis.

Assets	managed	at	December	31,	2007	totaled	$74	billion	compared	with	$54 billion	at	December	31,	2006.	This	increase	resulted	primarily	from	the Mercantile	acquisition.

Consumer	services	fees	increased	$81	million,	or	13%,	to	$692	million	in	2007 compared	with	2006.	The	increase	reflected	the	impact	of	Mercantile,	higher brokerage	fees,	higher	debit	card	revenues	resulting	from	higher	transaction volumes,	and	fees	from	the	credit	card	business	that	began	in	the	latter	part	of 2006.

Corporate	services	revenue	was	$713	million	for	2007,	an	increase	of	$87 million,	or	14%,	over	2006.	Higher	revenue

from	commercial	mortgage	servicing	including	the	impact	of	the	ARCS acquisition,	treasury	management,	third	party	consumer	loan	servicing	activities and	the	Mercantile	acquisition	contributed	to	the	increase	in	2007	over	the	prior year.

Service	charges	on	deposits	increased	$35	million,	or	11%,	to	$348	million	for 2007	compared	with	2006.	The	increase	was	primarily	due	to	the	impact	of Mercantile.

Net	securities	losses	totaled	$5	million	in	2007	and	$207	million	in	2006.	We took	actions	during	the	third	quarter	of	2006	that	resulted	in	the	sale	of approximately	$6	billion	of	investment	securities	at	an	aggregate	pretax	loss	of $196	million	during	that	quarter.

Other	noninterest	income	decreased	$170	million,	to	$423	million,	in	2007 compared	with	2006.	Net	losses	of	$127	million	in	2007	representing	the	net	of the	mark-to-market	adjustment	on	our	LTIP	obligation	and	gain	recognized	in connection	with	our	transfer	of	shares	to	satisfy	a	portion	of	our	LTIP	obligation, compared	with	a	net	loss	of	$12	million	on	our	LTIP	shares	obligation	in	2006, where	such	obligation	was	applicable	in	the	fourth	quarter.	Noninterest	revenue from	trading	activities	totaled	$104	million	in	2007	compared	with	$183	million in	2006.	While	customer	trading	income	increased	in	comparison,	total	trading revenue	declined	in	2007	largely	due	to	the	lower	economic	hedging	gains associated	with	commercial	mortgage	loan	activity	and	economic	hedging	losses associated	with	structured	resale	agreements.	Other	noninterest	income	for	2006 included	a	$48	million	loss	incurred	in	the	third	quarter	in	connection	with	the rebalancing	of	our	residential	mortgage	portfolio.

Noninterest	income	for	2006	also	included	the	$2.078	billion	gain	on	the BlackRock/MLIM	transaction,	whereas	there	was	no	similar	transaction	in	2007.

Noninterest	expense	for	2007	included	the	following: •	Acquisition	integration	costs	of	$102	million,	and •	A	charge	of	$82	million	for	an	indemnification	obligation	related	to	certain Visa	litigation.

Noninterest	expense	for	2006	included	the	following: •	The	first	nine	months	of	2006	included	$765	million	of	expenses	related	to BlackRock,	which	was	still	consolidated	during	that	time,	and •	BlackRock/MLIM	transaction	integration	costs	totaling	$91	million.

Apart	from	the	impact	of	these	items,	noninterest	expense	increased	$525 million,	or	15%,	in	2007	compared	with	2006.

These	increases	were	largely	a	result	of	the	acquisition	of	Mercantile. Investments	in	growth	initiatives	were	mitigated	by	disciplined	expense management.

Our	effective	tax	rate	was	29.9%	for	2007	and	34%	for	2006.	The	lower effective	tax	rate	in	2007	compared	with	the	prior	year	reflected	the	impact	of the	following	matters:

•	An	increase	in	income	taxes	related	to	the	gain	from,	and	a	$57	million cumulative	adjustment	to	increase	deferred	income	taxes	in	connection with,	the	BlackRock/MLIM	transaction	in	2006,	and •	Lower	pretax	income	for	the	fourth	quarter	of	2007	had	the	impact	of reducing	the	effective	tax	rate	for	the	full	year.

Loans	increased	$18.2	billion,	or	36%,	as	of	December	31,	2007	compared	with December	31,	2006.	Our	Mercantile	acquisition	added	$12.4	billion	of	loans including	$4.9	billion	of	commercial,	$4.8	billion	of	commercial	real	estate,	$1.6 billion	of	consumer	and	$1.1	billion	of	residential	mortgage	loans.	Our	Yardville acquisition	added	$1.9	billion	of	loans.

Total	securities	at	December	31,	2007	were	$30.2	billion	compared	with	$23.2 billion	at	December	31,	2006.	Securities	represented	22%	of	total	assets	at December	31,	2007	and	23%	of	total	assets	at	December	31,	2006.	Our acquisition	of	Mercantile	included	approximately	$2	billion	of	securities classified	as	available	for	sale.	The	increase	in	total	securities	compared	with December	31,	2006	was	primarily	due	to	higher	balances	in	residential mortgage-backed,	commercial	mortgage-backed	and	asset-backed	securities.

At	December	31,	2007,	the	investment	securities	balance	included	a	net unrealized	loss	of	$265	million,	which	represented	the	difference	between	fair value	and	amortized	cost.	The	comparable	amount	at	December	31,	2006	was	a net	unrealized	loss	of	$142	million.	The	expected	weighted-average	life	of investment	securities	(excluding	corporate	stocks	and	other)	was	3	years	and	6 months	at	December	31,	2007	and	3	years	and	8	months	at	December	31,	2006.

Loans	held	for	sale	included	commercial	mortgage	loans	intended	for securitization	totaling	$2.1	billion	at	December	31,	2007	and	$.9	billion	at December	31,	2006.	The	balance	at	December	31,	2007	increased	as	market conditions	were	not	conducive	to	completing	securitization	transactions	during the	fourth	quarter	of	2007.

Loans	held	for	sale	also	included	education	loans	held	for	sale	of	$1.5	billion	at December	31,	2007	and	$1.3	billion	at	December	31,	2006.	Gains	on	sales	of education	loans	totaled	$24	million	in	2007	and	$33	million	for	2006.	These gains	are	reflected	in	the	other	noninterest	income	line	item	in	our	Consolidated Income	Statement	and	in	the	results	of	the	Retail	Banking	business	segment.

# Asset	Quality

Total	nonperforming	assets	at	December	31,	2007	increased	$311	million,	to $495	million,	compared	with	December	31,	2006.	Nonperforming	loans,	the largest	component	of	nonperforming	assets,	increased	$294	million,	to	$454 million,	at	December	31,	2007	compared	with	December	31,	2006.	Of	this increase	in	nonperforming	loans,	$192	million	occurred	during	the	fourth	quarter of	2007.	The	increase	was	primarily	due	to	higher	nonaccrual	commercial	real estate	loans	primarily	related	to	residential	real	estate	development	exposure.	At December	31,	2007,	our	largest	nonperforming	asset	was	approximately	$20 million	and	our	average	nonperforming	loan	associated	with	commercial	lending was	approximately	$0.5	million.

The	ratio	of	nonperforming	assets	to	total	assets	rose	to	.36%	at	December	31, 2007	compared	with	.18%	at	December	31,	2006.	The	allowance	for	loan	and lease	losses	was	$830	million	and	represented	1.21%	of	total	loans	and	183%	of nonperforming	loans	at	December	31,	2007.	The	comparable	amounts	were	$560 million,	1.12%	and	350%,	respectively,	at	December	31,	2006.

# Goodwill	and	Other	Intangible	Assets

The	sum	of	goodwill	and	other	intangible	assets	increased	$5.5	billion	at December	31,	2007	compared	with	the	prior	year	end,	to	$9.6	billion.	We	added $4.7	billion	of	goodwill	and	other	intangible	assets	in	connection	with	the Mercantile	acquisition.	In	addition,	our	acquisitions	of	ARCS,	Yardville	and Albridge	collectively	added	$.9	billion	of	goodwill	and	other	intangible	assets during	2007.

# Funding	Sources

Total	funding	sources	were	$113.6	billion	at	December	31,	2007	and	$81.3 billion	at	December	31,	2006.	Funding	sources	increased	$32.3	billion	in	the comparison	as	total	deposits	increased	$16.4	billion	and	total	borrowed	funds increased	$15.9	billion.	Our	acquisition	of	Mercantile	added	$12.5	billion	of deposits	and	$2.1	billion	of	borrowed	funds.	The	Yardville	acquisition	resulted	in $2.0	billion	of	deposits.

During	the	first	quarter	of	2007	we	issued	borrowings	to	fund	the	$2.1	billion cash	portion	of	the	Mercantile	acquisition.	The	remaining	increase	in	borrowed funds	was	the	result	of	growth	in	loans	and	securities	and	the	need	to	fund	other net	changes	in	our	balance	sheet.	During	the	second	half	of	2007	we	substantially increased	Federal	Home	Loan	Bank	borrowings,	which	provided	us	with additional	liquidity	at	relatively	attractive	rates.

# Shareholders'	Equity

Total	shareholders'	equity	increased	$4.1	billion,	to	$14.9	billion,	at December	31,	2007	compared	with	December	31,	2006.	In	addition	to	the	net impact	of	earnings	and	dividends	in	2007,	this	increase	reflected	a	$2.5	billion reduction	in	treasury	stock	and	a	$1.0	billion	increase	in	capital	surplus,	largely due	to	the	issuance	of	PNC	common	shares	for	the	Mercantile	and	Yardville acquisitions.

Regulatory	capital	ratios	at	December	31,	2007	were	6.2%	for	leverage,	6.8%	for Tier	1	risk-based	and	10.3%	for	total	risk-based	capital.	At	December	31,	2006, the	regulatory	capital	ratios	were	9.3%	for	leverage,	10.4%	for	Tier	1	risk-based and	13.5%	for	total	risk-based	capital.

# Glossary	of	Terms

Accounting/administration	net	fund	assets	-	Net	domestic	and	foreign	fund investment	assets	for	which	we	provide	accounting	and	administration	services. We	do	not	include	these	assets	on	our	Consolidated	Balance	Sheet.

Adjusted	average	total	assets	-	Primarily	comprised	of	total	average	quarterly	(or annual)	assets	plus	(less)	unrealized	losses	(gains)	on	investment	securities,	less goodwill	and	certain	other	intangible	assets	(net	of	eligible	deferred	taxes).

Annualized	-	Adjusted	to	reflect	a	full	year	of	activity.

Assets	under	management	-	Assets	over	which	we	have	sole	or	shared investment	authority	for	our	customers/clients.	We	do	not	include	these	assets	on our	Consolidated	Balance	Sheet.

Basis	point	-	One	hundredth	of	a	percentage	point.

Charge-off	-	Process	of	removing	a	loan	or	portion	of	a	loan	from	our	balance sheet	because	it	is	considered	uncollectible.	We	also	record	a	charge-off	when	a loan	is	transferred	to	held	for	sale	by	reducing	the	carrying	amount	by	the allowance	for	loan	losses	associated	with	such	loan	or,	if	the	market	value	is	less than	its	carrying	amount,	by	the	amount	of	that	difference.

Common	shareholders'	equity	to	total	assets	-	Common	shareholders'	equity divided	by	total	assets.	Common	shareholders'	equity	equals	total	shareholders' equity	less	the	liquidation	value	of	preferred	stock.

Credit	derivatives	-	Contractual	agreements,	primarily	credit	default	swaps,	that provide	protection	against	a	credit	event	of	one	or	more	referenced	credits.	The nature	of	a	credit	event	is	established	by	the	protection	buyer	and	protection seller	at	the	inception	of	a	transaction,	and	such	events	include	bankruptcy, insolvency	and	failure	to	meet	payment	obligations	when	due.	The	buyer	of	the credit	derivative	pays	a	periodic	fee	in	return	for	a	payment	by	the	protection seller	upon	the	occurrence,	if	any,	of	a	credit	event.

Credit	spread	-	The	difference	in	yield	between	debt	issues	of	similar	maturity. The	excess	of	yield	attributable	to	credit	spread	is	often	used	as	a	measure	of relative	creditworthiness,	with	a	reduction	in	the	credit	spread	reflecting	an improvement	in	the	borrower's	perceived	creditworthiness.

Custody	assets	-	Investment	assets	held	on	behalf	of	clients	under	safekeeping arrangements.	We	do	not	include	these	assets	on	our	Consolidated	Balance Sheet.	Investment	assets	held	in	custody	at	other	institutions	on	our	behalf	are included	in	the	appropriate	asset	categories	on	the	Consolidated	Balance	Sheet	as if	physically	held	by	us.

Derivatives	-	Financial	contracts	whose	value	is	derived	from	publicly	traded securities,	interest	rates,	currency	exchange	rates	or	market	indices.	Derivatives cover	a	wide	assortment	of	financial	contracts,	including	forward	contracts, futures,	options	and	swaps.

Distressed	loan	portfolio	-	Includes	residential	real	estate	development	loans, cross	border	leases,	subprime	residential	mortgage	loans,	brokered	home	equity loans	and	certain	other	residential	real	estate	loans.	These	loans	require	special servicing	and	management	oversight	given	current	market	conditions.	The majority	of	these	loans	are	from	acquisitions,	primarily	National	City.

Duration	of	equity	-	An	estimate	of	the	rate	sensitivity	of	our	economic	value	of equity.	A	negative	duration	of	equity	is	associated	with	asset	sensitivity	(i.e., positioned	for	rising	interest	rates),	while	a	positive	value	implies	liability sensitivity	(i.e.,	positioned	for	declining	interest	rates).	For	example,	if	the duration	of	equity	is	+1.5	years,	the	economic	value	of	equity	declines	by	1.5% for	each	100	basis	point	increase	in	interest	rates.

Earning	assets	-	Assets	that	generate	income,	which	include:	federal	funds	sold; resale	agreements;	trading	securities;	interest-earning	deposits	with	banks;	other short-term	investments;	loans	held	for	sale;	loans,	net	of	unearned	income; investment	securities;	and	certain	other	assets.

Economic	capital	-	Represents	the	amount	of	resources	that	a	business	segment should	hold	to	guard	against	potentially	large	losses	that	could	cause	insolvency. It	is	based	on	a	measurement	of	economic	risk,	as	opposed	to	risk	as	defined	by regulatory	bodies.	The	economic	capital	measurement	process	involves converting	a	risk	distribution	to	the	capital	that	is	required	to	support	the	risk, consistent	with	our	target	credit	rating.	As	such,	economic	risk	serves	as	a "common	currency"	of	risk	that	allows	us	to	compare	different	risks	on	a	similar basis.

Effective	duration	-	A	measurement,	expressed	in	years,	that,	when	multiplied by	a	change	in	interest	rates,	would	approximate	the	percentage	change	in	value of	on-	and	off-	balance	sheet	positions.

Efficiency	-	Noninterest	expense	divided	by	the	sum	of	net	interest	income (GAAP	basis)	and	noninterest	income.

Fair	value	-	The	price	that	would	be	received	to	sell	an	asset	or	the	price	that would	be	paid	to	transfer	a	liability	on	the	measurement	date	using	the	principal or	most	advantageous	market	for	the	asset	or	liability	in	an	orderly	transaction between	willing	market	participants.

Foreign	exchange	contracts	-	Contracts	that	provide	for	the	future	receipt	and delivery	of	foreign	currency	at	previously	agreed-upon	terms.

Funds	transfer	pricing	-	A	management	accounting	methodology	designed	to recognize	the	net	interest	income	effects	of	sources	and	uses	of	funds	provided by	the	assets	and	liabilities	of	a	business	segment.	We	assign	these	balances LIBOR-based	funding	rates	at	origination	that	represent	the	interest	cost	for	us	to raise/invest	funds	with	similar	maturity	and	repricing	structures.

Futures	and	forward	contracts	-	Contracts	in	which	the	buyer	agrees	to	purchase and	the	seller	agrees	to	deliver	a	specific	financial	instrument	at	a	predetermined price	or	yield.	May	be	settled	either	in	cash	or	by	delivery	of	the	underlying financial	instrument.

GAAP	-	Accounting	principles	generally	accepted	in	the	United	States	of America.

Impaired	loans	-	Acquired	loans	determined	to	be	credit	impaired	under	AICPA Statement	of	Position	03-3,	Accounting	for	Certain	Loans	or	Debt	Securities Acquired	in	a	Transfer.	Loans	are	determined	to	be	impaired	if	there	is	evidence of	credit	deterioration	since	origination	and	for	which	it	is	probable	that	all contractually	required	payments	will	not	be	collected.

Interest	rate	floors	and	caps	-	Interest	rate	protection	instruments	that	involve payment	from	the	protection	seller	to	the	protection	buyer	of	an	interest differential,	which	represents	the	difference	between	a	short-term	rate	(e.g., three-month	LIBOR)	and	an	agreed-upon	rate	(the	strike	rate)	applied	to	a notional	principal	amount.

Interest	rate	swap	contracts	-	Contracts	that	are	entered	into	primarily	as	an asset/liability	management	strategy	to	reduce	interest	rate	risk.	Interest	rate	swap contracts	are	exchanges	of	interest	rate	payments,	such	as	fixed-rate	payments	for floating-rate	payments,	based	on	notional	principal	amounts.

Intrinsic	value	-	The	amount	by	which	the	fair	value	of	an	underlying	stock exceeds	the	exercise	price	of	an	option	on	that	stock.

Investment	securities	-	Collectively,	securities	available	for	sale	and	securities held	to	maturity.

Leverage	ratio	-	Tier	1	risk-based	capital	divided	by	adjusted	average	total assets.

LIBOR	-	Acronym	for	London	InterBank	Offered	Rate.	LIBOR	is	the	average interest	rate	charged	when	banks	in	the	London	wholesale	money	market	(or interbank	market)	borrow	unsecured	funds	from	each	other.	LIBOR	rates	are used	as	a	benchmark	for	interest	rates	on	a	global	basis.

Net	interest	income	from	loans	and	deposits	-	A	management	accounting assessment,	using	funds	transfer	pricing	methodology,	of	the	net	interest contribution	from	loans	and	deposits.

Net	interest	margin	-	Annualized	taxable-equivalent	net	interest	income	divided by	average	earning	assets.

Nondiscretionary	assets	under	administration	-	Assets	we	hold	for	our customers/clients	in	a	non-discretionary,	custodial	capacity.	We	do	not	include these	assets	on	our	Consolidated	Balance	Sheet.

Noninterest	income	to	total	revenue	-	Noninterest	income	divided	by	the	sum	of net	interest	income	(GAAP	basis)	and	noninterest	income.

Nonperforming	assets	-	Nonperforming	assets	include	nonaccrual	loans, troubled	debt	restructured	loans,	foreclosed	assets	and	other	assets.	We	do	not accrue	interest	income	on	assets	classified	as	nonperforming.

Nonperforming	loans	-	Nonperforming	loans	include	loans	to	commercial, commercial	real	estate,	equipment	lease	financing,	consumer,	and	residential mortgage	customers	and	construction	customers	as	well	as	troubled	debt restructured	loans.	Nonperforming	loans	do	not	include	loans	held	for	sale	or foreclosed	and	other	assets.	We	do	not	accrue	interest	income	on	loans	classified as	nonperforming.

Notional	amount	-	A	number	of	currency	units,	shares,	or	other	units	specified	in a	derivatives	contract.

Operating	leverage	-	The	period	to	period	dollar	or	percentage	change	in	total revenue	(GAAP	basis)	less	the	dollar	or	percentage	change	in	noninterest expense.	A	positive	variance	indicates	that	revenue	growth	exceeded	expense growth	(i.e.,	positive	operating	leverage)	while	a	negative	variance	implies expense	growth	exceeded	revenue	growth	(i.e.,	negative	operating	leverage).

Options	-	Contracts	that	grant	the	purchaser,	for	a	premium	payment,	the	right, but	not	the	obligation,	to	either	purchase	or	sell	the	associated	financial instrument	at	a	set	price	during	a	specified	period	or	at	a	specified	date	in	the future.

Other-than-temporary	impairment	-	Impairment	occurs	when	the	fair	value	of	a security	is	less	than	its	cost.	The	impairment

is	considered	other-than-temporary	when	it	is	probable	that	the	holder	will	be unable	to	collect	all	amounts	due	according	to	contractual	terms	of	a	debt security	at	acquisition.	A	few	factors	that	are	considered	to	determine	whether	a decline	in	fair	value	is	other	than	temporary	may	include	a)	the	length	of	the time	and	the	extent	to	which	the	market	value	has	been	less	than	cost;	b)	the financial	condition	and	near-term	prospects	of	the	issuer,	including	any	specific events	which	may	influence	the	operations	of	the	issuer	such	as	changes	in technology	that	may	impair	the	earnings	potential	of	the	investment	or	the discontinuance	of	a	segment	of	the	business	that	may	affect	the	future	earnings potential;	or	c)	the	intent	and	ability	of	the	holder	to	retain	its	investment	in	the issuer	for	a	period	of	time	sufficient	to	allow	for	any	anticipated	recovery	in market	value.

Securities	determined	to	be	other-than-temporary-impaired	are	written	down	to fair	value	with	the	loss	recognized	in	income	during	the	period	in	which	the assessment	is	made.	The	fair	value	would	take	into	account	credit	and	liquidity risk.

Recovery	-	Cash	proceeds	received	on	a	loan	that	we	had	previously	charged	off. We	credit	the	amount	received	to	the	allowance	for	loan	and	lease	losses.

Return	on	average	assets	-	Annualized	net	income	divided	by	average	assets.

Return	on	average	capital	-	Annualized	net	income	divided	by	average	capital.

Return	on	average	common	shareholders'	equity	-	Annualized	net	income	less preferred	stock	dividends	divided	by	average	common	shareholders'	equity.

Return	on	average	tangible	common	shareholders'	equity	-	Annualized	net income	less	preferred	stock	dividends	divided	by	average	common	shareholders' equity	less	goodwill	and	other	intangible	assets	(net	of	deferred	taxes	for	both taxable	and	nontaxable	combinations),	and	excluding	mortgage	servicing	rights.

Risk-weighted	assets	-	Primarily	computed	by	the	assignment	of	specific	risk- weights	(as	defined	by	the	Board	of	Governors	of	the	Federal	Reserve	System)	to assets	and	off-balance	sheet	instruments.

Securitization	-	The	process	of	legally	transforming	financial	assets	into securities.

Servicing	rights	-	An	intangible	asset	or	liability	created	by	an	obligation	to service	assets	for	others.	Typical	servicing	rights	include	the	right	to	receive	a fee	for	collecting	and	forwarding	payments	on	loans	and	related	taxes	and insurance	premiums	held	in	escrow.

Swaptions	-	Contracts	that	grant	the	purchaser,	for	a	premium	payment,	the	right, but	not	the	obligation,	to	enter	into	an	interest	rate	swap	agreement	during	a specified	period	or	at	a	specified	date	in	the	future.

Tangible	common	equity	ratio	-	Period-end	common	shareholders'	equity	less goodwill	and	other	intangible	assets	(net	of	deferred	taxes),	and	excluding mortgage	servicing	rights,	divided	by	period-end	assets	less	goodwill	and	other intangible	assets	(net	of	deferred	taxes),	and	excluding	mortgage	servicing rights.

Taxable-equivalent	interest	-	The	interest	income	earned	on	certain	assets	is completely	or	partially	exempt	from	federal	income	tax.	As	such,	these	tax- exempt	instruments	typically	yield	lower	returns	than	taxable	investments.	To provide	more	meaningful	comparisons	of	yields	and	margins	for	all	interest- earning	assets,	we	use	interest	income	on	a	taxable-equivalent	basis	in calculating	average	yields	and	net	interest	margins	by	increasing	the	interest income	earned	on	tax-exempt	assets	to	make	it	fully	equivalent	to	interest	income earned	on	other	taxable	investments.	This	adjustment	is	not	permitted	under GAAP	on	the	Consolidated	Income	Statement.

Tier	1	risk-based	capital	-	Tier	1	risk-based	capital	equals:	total	shareholders' equity,	plus	trust	preferred	capital	securities,	plus	certain	minority	interests	that are	held	by	others;	less	goodwill	and	certain	other	intangible	assets	(net	of eligible	deferred	taxes	relating	to	taxable	and	nontaxable	combinations),	less equity	investments	in	nonfinancial	companies	less	ineligible	servicing	assets	and less	net	unrealized	holding	losses	on	available	for	sale	equity	securities.	Net unrealized	holding	gains	on	available	for	sale	equity	securities,	net	unrealized holding	gains	(losses)	on	available	for	sale	debt	securities	and	net	unrealized holding	gains	(losses)	on	cash	flow	hedge	derivatives	are	excluded	from	total shareholders'	equity	for	Tier	1	risk-based	capital	purposes.

Tier	1	risk-based	capital	ratio	-	Tier	1	risk-based	capital	divided	by	period-end risk-weighted	assets.

Total	fund	assets	serviced	-	Total	domestic	and	offshore	fund	investment	assets for	which	we	provide	related	processing	services.	We	do	not	include	these	assets on	our	Consolidated	Balance	Sheet.

Total	return	swap	-	A	non-traditional	swap	where	one	party	agrees	to	pay	the other	the	"total	return"	of	a	defined	underlying	asset	(e.g.,	a	loan),	usually	in return	for	receiving	a	stream	of	LIBOR-based	cash	flows.	The	total	returns	of	the asset,	including	interest	and	any	default	shortfall,	are	passed	through	to	the counterparty.	The	counterparty	is	therefore	assuming	the	credit	and	economic risk	of	the	underlying	asset.

Total	risk-based	capital	-	Tier	1	risk-based	capital	plus	qualifying	subordinated debt	and	trust	preferred	securities,	other	minority	interest	not	qualified	as	Tier	1, eligible	gains	on	available	for	sale	equity	securities	and	the	allowance	for	loan and	lease	losses,	subject	to	certain	limitations.

Total	risk-based	capital	ratio	-	Total	risk-based	capital	divided	by	period-end risk-weighted	assets.

Transaction	deposits	-	The	sum	of	money	market	and	interest-bearing	demand deposits	and	demand	and	other	noninterest-bearing	deposits.

Value-at-risk	("VaR")	-	A	statistically-based	measure	of	risk	which	describes the	amount	of	potential	loss	which	may	be	incurred	due	to	severe	and	adverse market	movements.	The	measure	is	of	the	maximum	loss	which	should	not	be exceeded	on	99	out	of	100	days.

Watchlist	-	A	list	of	criticized	loans,	credit	exposure	or	other	assets	compiled	for internal	monitoring	purposes.	We	define	criticized	exposure	for	this	purpose	as exposure	with	an

internal	risk	rating	of	other	assets	especially	mentioned,	substandard,	doubtful	or loss.

Yield	curve	-	A	graph	showing	the	relationship	between	the	yields	on	financial instruments	or	market	indices	of	the	same	credit	quality	with	different	maturities. For	example,	a	"normal"	or	"positive"	yield	curve	exists	when	long-term	bonds have	higher	yields	than	short-term	bonds.	A	"flat"	yield	curve	exists	when	yields are	the	same	for	short-term	and	long-term	bonds.	A	"steep"	yield	curve	exists when	yields	on	long-term	bonds	are	significantly	higher	than	on	short-term bonds.	An	"inverted"	or	"negative"	yield	curve	exists	when	short-term	bonds have	higher	yields	than	long-term	bonds.

# CAUTIONARY	STATEMENT	REGARDING FORWARD-LOOKING	INFORMATION

We	make	statements	in	this	Report,	and	we	may	from	time	to	time	make	other statements,	regarding	our	outlook	or	expectations	for	earnings,	revenues, expenses,	capital	levels,	liquidity	levels,	asset	quality	and/or	other	matters regarding	or	affecting	PNC	that	are	forward-looking	statements	within	the meaning	of	the	Private	Securities	Litigation	Reform	Act.	Forward-looking statements	are	typically	identified	by	words	such	as	"believe,"	"expect," "anticipate,"	"intend,"	"outlook,"	"estimate,"	"forecast,"	"will,"	"	project"	and other	similar	words	and	expressions.

Forward-looking	statements	are	subject	to	numerous	assumptions,	risks	and uncertainties,	which	change	over	time.	Forward-looking	statements	speak	only as	of	the	date	they	are	made.	We	do	not	assume	any	duty	and	do	not	undertake	to update	our	forward-looking	statements.	Actual	results	or	future	events	could differ,	possibly	materially,	from	those	that	we	anticipated	in	our	forward-looking statements,	and	future	results	could	differ	materially	from	our	historical performance.

Our	forward-looking	statements	are	subject	to	the	following	principal	risks	and uncertainties.	We	provide	greater	detail	regarding	some	of	these	factors elsewhere	in	this	Report,

including	in	the	Risk	Factors	and	Risk	Management	sections.	Our	forward- looking	statements	may	also	be	subject	to	other	risks	and	uncertainties,	including those	discussed	elsewhere	in	this	Report	or	in	our	other	filings	with	the	SEC. •	Our	businesses	and	financial	results	are	affected	by	business	and	economic conditions,	both	generally	and	specifically	in	the	principal	markets	in	which we	operate.	In	particular,	our	businesses	and	financial	results	may	be impacted	by:

– 	Changes	in	interest	rates	and	valuations	in	the	debt,	equity	and	other financial	markets.

– 	Disruptions	in	the	liquidity	and	other	functioning	of	financial	markets, including	such	disruptions	in	the	markets	for	real	estate	and	other	assets commonly	securing	financial	products.

– 	Actions	by	the	Federal	Reserve	and	other	government	agencies,	including those	that	impact	money	supply	and	market	interest	rates.

– 	Changes	in	our	customers',	suppliers'	and	other	counterparties' performance	in	general	and	their	creditworthiness	in	particular.

– 	Changes	in	customer	preferences	and	behavior,	whether	as	a	result	of changing	business	and	economic	conditions	or	other	factors. •	A	continuation	of	recent	turbulence	in	significant	portions	of	the	US	and global	financial	markets,	particularly	if	it	worsens,	could	impact	our performance,	both	directly	by	affecting	our	revenues	and	the	value	of	our assets	and	liabilities	and	indirectly	by	affecting	our	counterparties	and	the economy	generally.

•	Our	business	and	financial	performance	could	be	impacted	as	the	financial industry	restructures	in	the	current	environment,	both	by	changes	in	the creditworthiness	and	performance	of	our	counterparties	and	by	changes	in	the competitive	landscape.

•	Given	current	economic	and	financial	market	conditions,	our	forward- looking	financial	statements	are	subject	to	the	risk	that	these	conditions	will be	substantially	different	than	we	are	currently	expecting.	These	statements are	based	on	our	current	expectations	that	interest	rates	will	remain	low through	2009	with	continued	wide	market	credit	spreads,	and	our	view	that national	economic	trends	currently	point	to	a	continuation	of	severe recessionary	conditions	in	2009	followed	by	a	subdued	recovery. •	Legal	and	regulatory	developments	could	have	an	impact	on	our	ability	to operate	our	businesses	or	our	financial	condition	or	results	of	operations	or our	competitive	position	or	reputation.	Reputational	impacts,	in	turn,	could affect	matters	such	as	business	generation	and	retention,	our	ability	to	attract and	retain	management,	liquidity,	and	funding.	These	legal	and	regulatory developments	could	include:

– 	Changes	resulting	from	the	Emergency	Economic	Stabilization	Act	of 2008,	the	American	Recovery	and	Reinvestment	Act	of	2009,	and	other

developments	in	response	to	the	current	economic	and	financial	industry environment,	including	current	and	future	conditions	or	restrictions imposed	as	a	result	of	our	participation	in	the	TARP	Capital	Purchase Program.

– 	Legislative	and	regulatory	reforms	generally,	including	changes	to	laws and	regulations	involving	tax,	pension,	bankruptcy,	consumer	protection, and	other	aspects	of	the	financial	institution	industry.

– 	Increased	litigation	risk	from	recent	regulatory	and	other	governmental developments.

– 	Unfavorable	resolution	of	legal	proceedings	or	regulatory	and	other governmental	inquiries.

– 	The	results	of	the	regulatory	examination	and	supervision	process,

including	our	failure	to	satisfy	the	requirements	of	agreements	with governmental	agencies.

– 	Changes	in	accounting	policies	and	principles.

•	Our	issuance	of	securities	to	the	US	Department	of	the	Treasury	may	limit our	ability	to	return	capital	to	our	shareholders	and	is	dilutive	to	our	common shares.	If	we	are	unable	previously	to	redeem	the	shares,	the	dividend	rate increases	substantially	after	five	years.

•	Our	business	and	operating	results	are	affected	by	our	ability	to	identify	and effectively	manage	risks	inherent	in	our	businesses,	including,	where appropriate,	through	the	effective	use	of	third-party	insurance,	derivatives, and	capital	management	techniques.

•	The	adequacy	of	our	intellectual	property	protection,	and	the	extent	of	any costs	associated	with	obtaining	rights	in	intellectual	property	claimed	by others,	can	impact	our	business	and	operating	results.

•	Our	ability	to	anticipate	and	respond	to	technological	changes	can	have	an impact	on	our	ability	to	respond	to	customer	needs	and	to	meet	competitive demands.

•	Our	ability	to	implement	our	business	initiatives	and	strategies	could	affect our	financial	performance	over	the	next	several	years.

•	Competition	can	have	an	impact	on	customer	acquisition,	growth	and retention,	as	well	as	on	our	credit	spreads	and	product	pricing,	which	can affect	market	share,	deposits	and	revenues.

•	Our	business	and	operating	results	can	also	be	affected	by	widespread	natural disasters,	terrorist	activities	or	international	hostilities,	either	as	a	result	of	the impact	on	the	economy	and	capital	and	other	financial	markets	generally	or on	us	or	on	our	customers,	suppliers	or	other	counterparties	specifically. •	Also,	risks	and	uncertainties	that	could	affect	the	results	anticipated	in forward-looking	statements	or	from	historical	performance	relating	to	our equity	interest	in	BlackRock,	Inc.	are	discussed	in	more	detail	in	BlackRock's filings	with	the	SEC,	including	in	the	Risk	Factors	sections	of	BlackRock's reports.	BlackRock's	SEC	filings	are	accessible	on	the	SEC's	website	and	on or	through	BlackRock's	website	at	www.blackrock.com.

This	material	is	referenced	for	informational	purposes	only	and	should	not	be deemed	to	constitute	a	part	of	this	report.

In	addition,	our	recent	acquisition	of	National	City	Corporation	("National City")	presents	us	with	a	number	of	risks	and	uncertainties	related	both	to	the acquisition	transaction	itself	and	to	the	integration	of	the	acquired	businesses	into PNC.	These	risks	and	uncertainties	include	the	following: •	The	transaction	may	be	substantially	more	expensive	to	complete	(including the	required	divestitures	and	the	integration	of	National	City's	businesses) and	the	anticipated	benefits,	including	anticipated	cost	savings	and	strategic gains,	may	be	significantly	harder	or	take	longer	to	achieve	than	expected	or may	not	be	achieved	in	their	entirety	as	a	result	of	unexpected	factors	or events.

•	Our	ability	to	achieve	anticipated	results	from	this	transaction	is	dependent	on the	state	going	forward	of	the	economic	and	financial	markets,	which	have been	under	significant	stress	recently.	Specifically,	we	may	incur	more	credit losses	from	National	City's	loan	portfolio	than	expected.	Other	issues	related to	achieving	anticipated	financial	results	include	the	possibility	that	deposit attrition	or	attrition	in	key	client,	partner	and	other	relationships	may	be greater	than	expected.

•	Litigation	and	governmental	investigations	currently	pending	against	National City,	as	well	as	others	that	may	be	filed	or	commenced	relating	to	National City's	business	and	activities	before	the	acquisition	could	adversely	impact our	financial	results.

•	Our	ability	to	achieve	anticipated	results	is	also	dependent	on	our	ability	to bring	National	City's	systems,	operating	models,	and	controls	into	conformity with	ours	and	to	do	so	on	our	planned	time	schedule.	The	integration	of National	City's	business	and	operations	into	PNC,	which	will	include conversion	of	National	City's	different	systems	and	procedures,	may	take longer	than	anticipated	or	be	more	costly	than	anticipated	or	have unanticipated	adverse	results	relating	to	National	City's	or	PNC's	existing businesses.	PNC's	ability	to	integrate	National	City	successfully	may	be adversely	affected	by	the	fact	that	this	transaction	will	result	in	PNC	entering several	markets	where	PNC	did	not	previously	have	any	meaningful	retail presence.

In	addition	to	the	National	City	transaction,	we	grow	our	business	from	time	to time	by	acquiring	other	financial	services	companies.	Acquisitions	in	general present	us	with	risks,	in	addition	to	those	presented	by	the	nature	of	the	business acquired,	similar	to	some	or	all	of	those	described	above	relating	to	the	National City	acquisition.

# ITEM	7A	–	QUANTITATIVE	AND	QUALITATIVE	DISCLOSURES ABOUT	MARKET	RISK

This	information	is	set	forth	in	the	Risk	Management	section	of	Item	7	of	this Report.

# ITEM	8	–	FINANCIAL	STATEMENTS	AND	SUPPLEMENTARY DATA

Included	below	is	the	report	of	our	current	independent	registered	public accounting	firm.	The	report	of	our	previous	independent	registered	public accounting	firm	is	included	under	Item	15	of	this	Report.

# REPORT	OF	INDEPENDENT	REGISTERED	PUBLIC	ACCOUNTING	FIRM

To	the	Board	of	Directors	and	Shareholders	of	The	PNC	Financial	Services Group,	Inc.

In	our	opinion,	the	accompanying	consolidated	balance	sheets	and	the	related consolidated	statements	of	income,	shareholders'	equity,	and	cash	flows	present fairly,	in	all	material	respects,	the	financial	position	of	The	PNC	Financial Services	Group,	Inc.	and	its	subsidiaries	(the	"Company")	at	December	31,	2008 and	2007,	and	the	results	of	their	operations	and	their	cash	flows	for	the	years then	ended	in	conformity	with	accounting	principles	generally	accepted	in	the United	States	of	America.	Also	in	our	opinion,	the	Company	maintained,	in	all material	respects,	effective	internal	control	over	financial	reporting	as	of December	31,	2008,	based	on	criteria	established	in	Internal	Control	– Integrated	Framework	issued	by	the	Committee	of	Sponsoring	Organizations	of the	Treadway	Commission	(COSO).	The	Company's	management	is	responsible for	these	financial	statements,	for	maintaining	effective	internal	control	over financial	reporting	and	for	its	assessment	of	the	effectiveness	of	internal	control over	financial	reporting,	included	in	Management's	Report	on	Internal	Control over	Financial	Reporting	appearing	under	Item	9A.	Our	responsibility	is	to express	opinions	on	these	financial	statements	and	on	the	Company's	internal control	over	financial	reporting	based	on	our	integrated	audits.	We	conducted our	audits	in	accordance	with	the	standards	of	the	Public	Company	Accounting Oversight	Board	(United	States).	Those	standards	require	that	we	plan	and perform	the	audits	to	obtain	reasonable	assurance	about	whether	the	financial statements	are	free	of	material	misstatement	and	whether	effective	internal control	over	financial	reporting	was	maintained	in	all	material	respects.	Our audits	of	the	financial	statements	included	examining,	on	a	test	basis,	evidence supporting	the	amounts	and	disclosures	in	the	financial	statements,	assessing	the accounting	principles	used	and	significant	estimates	made	by	management,	and

evaluating	the	overall	financial	statement	presentation.	Our	audit	of	internal control	over	financial	reporting	included	obtaining	an	understanding	of	internal control	over	financial	reporting,	assessing	the	risk	that	a	material	weakness exists,	and	testing	and	evaluating	the	design	and	operating	effectiveness	of internal	control	based	on	the	assessed	risk.	Our	audits	also	included	performing such	other	procedures	as	we	considered	necessary	in	the	circumstances.	We believe	that	our	audits	provide	a	reasonable	basis	for	our	opinions.

A	company's	internal	control	over	financial	reporting	is	a	process	designed	to provide	reasonable	assurance	regarding	the	reliability	of	financial	reporting	and the	preparation	of	financial	statements	for	external	purposes	in	accordance	with generally	accepted	accounting	principles.	A	company's	internal	control	over financial	reporting	includes	those	policies	and	procedures	that	(i)	pertain	to	the maintenance	of	records	that,	in	reasonable	detail,	accurately	and	fairly	reflect	the transactions	and	dispositions	of	the	assets	of	the	company;	(ii)	provide reasonable	assurance	that	transactions	are	recorded	as	necessary	to	permit preparation	of	financial	statements	in	accordance	with	generally	accepted accounting	principles,	and	that	receipts	and	expenditures	of	the	company	are being	made	only	in	accordance	with	authorizations	of	management	and	directors of	the	company;	and	(iii)	provide	reasonable	assurance	regarding	prevention	or timely	detection

of	unauthorized	acquisition,	use,	or	disposition	of	the	company's	assets	that could	have	a	material	effect	on	the	financial	statements.

Because	of	its	inherent	limitations,	internal	control	over	financial	reporting	may not	prevent	or	detect	misstatements.	Also,	projections	of	any	evaluation	of effectiveness	to	future	periods	are	subject	to	the	risk	that	controls	may	become inadequate	because	of	changes	in	conditions,	or	that	the	degree	of	compliance with	the	policies	or	procedures	may	deteriorate.

As	described	in	Management's	Report	on	Internal	Control	over	Financial Reporting,	management	has	excluded	National	City	Corporation	from	its assessment	of	internal	control	over	financial	reporting	as	of	December	31,	2008 because	it	was	acquired	by	the	Company	in	a	purchase	business	combination	on December	31,	2008.	We	have	also	excluded	National	City	Corporation	from	our audit	of	internal	control	over	financial	reporting.	National	City	Corporation's total	assets	represented	$136	billion	of	the	related	consolidated	financial statement	amount	as	of	December	31,	2008.

/s/	PricewaterhouseCoopers LLP Pittsburgh,	Pennsylvania March	2,	2009

# CONSOLIDATED	INCOME	STATEMENT

| In	millions,	except	per	share	data | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Interest\tIncome |  |  |  |
| Loans | $4,138 | $4,232 | $3,203 |
| Investment\tsecurities | \t 1,746 | \t 1,429 | \t 1,049 |
| Other | 429 | 505 | 360 |
| Total\tinterest\tincome | \t 6,313 | \t 6,166 | \t 4,612 |
| Interest\tExpense |  |  |  |
| Deposits | \t 1,485 | \t 2,053 | \t 1,590 |
| Borrowed\tfunds | \t 1,005 | \t 1,198 | 777 |
| Total\tinterest\texpense | \t 2,490 | \t 3,251 | \t 2,367 |
| Net\tinterest\tincome | \t 3,823 | \t 2,915 | \t 2,245 |
| Noninterest\tIncome |  |  |  |
| Fund\tservicing | 904 | 835 | 893 |
| Asset\tmanagement | 686 | 784 | \t 1,420 |
| Consumer\tservices | 623 | 692 | 611 |
| Corporate\tservices | 704 | 713 | 626 |
| Service\tcharges\ton\tdeposits | 372 | 348 | 313 |
| Net\tsecurities\tlosses | (206) | (5) | (207) |
| Gain\ton\tBlackRock/MLIM\ttransaction |  |  | \t 2,078 |
| Other | 284 | 423 | 593 |
| Total\tnoninterest\tincome | \t 3,367 | \t 3,790 | \t 6,327 |
| Total\trevenue | \t 7,190 | \t 6,705 | \t 8,572 |
| Provision\tfor\tcredit\tlosses | \t 1,517 | 315 | 124 |
| Noninterest\tExpense |  |  |  |
| Personnel | \t 2,154 | \t 2,140 | \t 2,432 |
| Occupancy | 368 | 350 | 310 |
| Equipment | 359 | 311 | 303 |
| Marketing | 125 | 115 | 104 |
| Other | \t 1,424 | \t 1,380 | \t 1,294 |
| Total\tnoninterest\texpense | \t 4,430 | \t 4,296 | \t 4,443 |
| Income\tbefore\tminority\tinterest\tand\tincome\ttaxes | \t 1,243 | \t 2,094 | \t 4,005 |
| Minority\tinterest\tin\tincome\tof\tBlackRock |  |  | 47 |
| Income\ttaxes | 361 | 627 | \t 1,363 |
| Net\tincome | $882 | $1,467 | $2,595 |
| Earnings\tPer\tCommon\tShare |  |  |  |
| Basic | $2.50 | $4.43 | $8.89 |
| Diluted | $2.46 | $4.35 | $8.73 |
| Average\tCommon\tShares\tOutstanding |  |  |  |
| Basic | 344 | 331 | 292 |
| Diluted | 347 | 335 | 297 |

See	accompanying	Notes	To	Consolidated	Financial	Statements.

# CONSOLIDATED	BALANCE	SHEET

| In	millions,	except	par	value | 2008 | 2007 |
| :--- | :--- | :--- |
| Assets |  |  |
| Cash\tand\tdue\tfrom\tbanks | $4,471 | $3,567 |
| Federal\tfunds\tsold\tand\tresale\tagreements\t(includes\t$1,072\tmeasured\tat\tfair\tvalue\tat\tDecember\t31,\t2008)\t(a) | 1,856 | 2,729 |
| Trading\tsecurities | 1,725 | 3,556 |
| Interest-earning\tdeposits\twith\tbanks | 14,859 | 346 |
| Other\tshort-term\tinvestments | 1,025 | 227 |
| Loans\theld\tfor\tsale\t(includes\t$1,400\tmeasured\tat\tfair\tvalue\tat\tDecember\t31,\t2008)\t(a) | 4,366 | 3,927 |
| Investment\tsecurities | 43,473 | 30,225 |
| Loans | \t 175,489 | 68,319 |
| Allowance\tfor\tloan\tand\tlease\tlosses | (3,917) | (830) |
| Net\tloans | \t 171,572 | 67,489 |
| Goodwill | 8,868 | 8,405 |
| Other\tintangible\tassets | 2,820 | 1,146 |
| Equity\tinvestments | 8,554 | 6,045 |
| Other | 27,492 | 11,258 |
| Total\tassets | $291,081 | $138,920 |
| Liabilities |  |  |
| Deposits |  |  |
| Noninterest-bearing | $37,148 | $19,440 |
| Interest-bearing | \t 155,717 | 63,256 |
| Total\tdeposits | \t 192,865 | 82,696 |
| Borrowed\tfunds |  |  |
| Federal\tfunds\tpurchased\tand\trepurchase\tagreements | 5,153 | 9,774 |
| Federal\tHome\tLoan\tBank\tborrowings | 18,126 | 7,065 |
| Bank\tnotes\tand\tsenior\tdebt | 13,664 | 6,821 |
| Subordinated\tdebt | 11,208 | 4,506 |
| Other | 4,089 | 2,765 |
| Total\tborrowed\tfunds | 52,240 | 30,931 |
| Allowance\tfor\tunfunded\tloan\tcommitments\tand\tletters\tof\tcredit | 344 | 134 |
| Accrued\texpenses | 3,949 | 4,330 |
| Other | 14,035 | 4,321 |
| Total\tliabilities | \t 263,433 | \t 122,412 |
| Minority\tand\tnoncontrolling\tinterests\tin\tconsolidated\tentities | 2,226 | 1,654 |
| Shareholders'\tEquity |  |  |
| Preferred\tstock\t(b) |  |  |
| Common\tstock\t–\t$5\tpar\tvalue |  |  |
| Authorized\t800\tshares,\tissued\t452\tand\t353\tshares | 2,261 | 1,764 |
| Capital\tsurplus\t–\tpreferred\tstock | 7,918 |  |
| Capital\tsurplus\t–\tcommon\tstock\tand\tother | 8,328 | 2,618 |
| Retained\tearnings | 11,461 | 11,497 |
| Accumulated\tother\tcomprehensive\tloss | (3,949) | (147) |
| Common\tstock\theld\tin\ttreasury\tat\tcost:\t9\tand\t12\tshares | (597) | (878) |
| Total\tshareholders'\tequity | 25,422 | 14,854 |
| Total\tliabilities,\tminority\tand\tnoncontrolling\tinterests, |  |  |
| and\tshareholders'\tequity | $291,081 | $138,920 |

(a)	Amounts	represent	items	for	which	the	Corporation	has	elected	the	fair	value	option	under	SFAS	159.

(b)	Par	value	less	than	$.5	million	at	each	date.

# CONSOLIDATED	STATEMENT	OF	SHAREHOLDERS'	EQUITY

|  |  |  | Capital | Surplus	- |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Shares\tOutstanding |  | Surplus\t- | Common |  | Accumulated\tOther |  |  |
|  | Common | Common | Preferred | Stock\tand | Retained | Comprehensive | Treasury |  |
| In\tmillions | Stock | Stock | Stock | Other | Earnings | Income\t(Loss) | Stock | Total |
| Balance\tat\tJanuary\t1,\t2006\t(a) | 293 | $1,764 |  | $1,299 | $9,023 | $(267) | $(3,256) | $8,563 |
| Net\tincome |  |  |  |  | 2,595 |  |  | 2,595 |
| Net\tunrealized\tsecurities\tlosses |  |  |  |  |  | 149 |  | 149 |
| Net\tunrealized\tlosses\ton\tcash\tflow\thedge\tderivatives |  |  |  |  |  | 13 |  | 13 |
| Additional\tminimum\tpension\tliability\tunder\tSFAS\t87 |  |  |  |  |  | (1) |  | (1) |
| Other |  |  |  |  |  | 3 |  | 3 |
| Comprehensive\tincome |  |  |  |  |  |  |  | 2,759 |
| Cash\tdividends\tdeclared |  |  |  |  |  |  |  |  |
| Common |  |  |  |  | (632) |  |  | (632) |
| Preferred |  |  |  |  | (1) |  |  | (1) |
| BlackRock/MLIM\ttransaction\t(b) |  |  |  | 262 |  |  |  | 262 |
| Treasury\tstock\tactivity\t(c) |  |  |  | (12) |  |  | (121) | (133) |
| Tax\tbenefit\tof\tstock\toption\tplans |  |  |  | 29 |  |  |  | 29 |
| Stock\toptions\tgranted |  |  |  | 31 |  |  |  | 31 |
| Effect\tof\tBlackRock\tequity\ttransactions |  |  |  | 27 |  |  |  | 27 |
| Restricted\tstock/unit\tand\tincentive/performance\tunit\tshare\ttransactions |  |  |  | 15 |  |  |  | 15 |
| Net\teffect\tof\tadopting\tSFAS\t158 |  |  |  |  |  | (132) |  | (132) |
| Balance\tat\tDecember\t31,\t2006\t(a) | 293 | $1,764 |  | $1,651 | $ 10,985 | $(235) | $(3,377) | $10,788 |
| Net\tincome |  |  |  |  | 1,467 |  |  | 1,467 |
| Net\tunrealized\tsecurities\tlosses |  |  |  |  |  | (76) |  | (76) |
| Net\tunrealized\tgains\ton\tcash\tflow\thedge\tderivatives |  |  |  |  |  | 188 |  | 188 |
| Pension,\tother\tpostretirement\tand\tpostemployment\tbenefit\tplan\tadjustments |  |  |  |  |  | (29) |  | (29) |
| Other |  |  |  |  |  | 5 |  | 5 |
| Comprehensive\tincome |  |  |  |  |  |  |  | 1,555 |
| Cash\tdividends\tdeclared\t–\tcommon |  |  |  |  | (806) |  |  | (806) |
| Net\teffect\tof\tadopting\tFSP\tFAS\t13-2 |  |  |  |  | (149) |  |  | (149) |
| Treasury\tstock\tissued\tfor\tacquisitions | 56 |  |  | 872 |  |  | 3,147 | 4,019 |
| Treasury\tstock\tactivity\t–\tall\tother | (8) |  |  | (17) |  |  | (648) | (665) |
| Tax\tbenefit\tof\tstock\toption\tplans |  |  |  | 18 |  |  |  | 18 |
| Stock\toptions\tgranted |  |  |  | 28 |  |  |  | 28 |
| Effect\tof\tBlackRock\tequity\ttransactions |  |  |  | 53 |  |  |  | 53 |
| Restricted\tstock/unit\tand\tincentive/performance\tunit\tshare\ttransactions |  |  |  | 13 |  |  |  | 13 |
| Balance\tat\tDecember\t31,\t2007\t(a) | 341 | $1,764 |  | $2,618 | $ 11,497 | $(147) | $(878) | $14,854 |
| Net\teffect\tof\tadopting\tEITF\t06-4 |  |  |  |  | (12) |  |  | (12) |
| Net\teffect\tof\tadopting\tSFAS\t157\tand\tSFAS\t159 |  |  |  |  | 17 |  |  | 17 |
| Balance\tat\tJanuary\t1,\t2008 | 341 | $1,764 |  | $2,618 | $ 11,502 | $(147) | $(878) | $14,859 |
| Net\tincome |  |  |  |  | 882 |  |  | 882 |
| Other\tcomprehensive\tincome\t(loss),\tnet\tof\ttax |  |  |  |  |  |  |  |  |
| Net\tunrealized\tsecurities\tlosses |  |  |  |  |  | (3,459) |  | (3,459) |
| Net\tunrealized\tgains\ton\tcash\tflow\thedge\tderivatives |  |  |  |  |  | 199 |  | 199 |
| Pension,\tother\tpostretirement\tand\tpostemployment\tbenefit\tplan\tadjustments |  |  |  |  |  | (490) |  | (490) |
| Other |  |  |  |  |  | (52) |  | (52) |
| Comprehensive\tincome\t(loss) |  |  |  |  |  |  |  | (2,920) |
| Cash\tdividends\tdeclared |  |  |  |  |  |  |  |  |
| Common |  |  |  |  | (902) |  |  | (902) |
| Preferred |  |  |  |  | (21) |  |  | (21) |
| Common\tstock\tactivity\t–\tacquisition | 99 | 497 |  | 5,419 |  |  |  | 5,916 |
| Treasury\tstock\tactivity | 3 |  |  | (110) |  |  | 281 | 171 |
| Preferred\tstock\tissuance\t–\tSeries\tK |  |  | 493 |  |  |  |  | 493 |
| Preferred\tstock\tissuance\t–\tSeries\tL |  |  | 150 |  |  |  |  | 150 |
| Preferred\tstock\tissuance\t–\tSeries\tN\t(d) |  |  | 7,275 |  |  |  |  | 7,275 |
| TARP\tWarrant\t(d) |  |  |  | 304 |  |  |  | 304 |
| Tax\tbenefit\tof\tstock\toption\tplans |  |  |  | 17 |  |  |  | 17 |
| Stock\toptions\tgranted |  |  |  | 22 |  |  |  | 22 |
| Effect\tof\tBlackRock\tequity\ttransactions |  |  |  | 43 |  |  |  | 43 |
| Restricted\tstock/unit\tand\tincentive/performance\tunit\tshare\ttransactions |  |  |  | 15 |  |  |  | 15 |
| Balance\tat\tDecember\t31,\t2008\t(a) | 443 | $2,261 | $7,918 | $8,328 | $ 11,461 | $(3,949) | $(597) | $25,422 |

(a) The	par	value	of	our	preferred	stock	outstanding	was	less	than	$.5	million	at	each	date	and,	therefore,	is	excluded	from	this	presentation.

(b) Represents	the	portion	of	our	gain	on	the	BlackRock/MLIM	transaction	that	was	credited	to	capital	surplus.

(c) Our	net	treasury	stock	activity	in	2006	was	less	than	.1	million	shares	issued.

(d) Issued	to	the	US	Department	of	Treasury	on	December	31,	2008	under	the	TARP	Capital	Purchase	Program.

# CONSOLIDATED	STATEMENT	OF	CASH	FLOWS

| In	millions | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Operating\tActivities |  |  |  |
| Net\tincome | $882 | $1,467 | $2,595 |
| Adjustments\tto\treconcile\tnet\tincome\tto\tnet\tcash\tprovided\tby\toperating\tactivities |  |  |  |
| Provision\tfor\tcredit\tlosses | 1,517 | 315 | 124 |
| Depreciation,\tamortization\tand\taccretion | 325 | 332 | 345 |
| Deferred\tincome\ttaxes\t(benefit) | (261) | 78 | 752 |
| Net\tsecurities\tlosses | 206 | 5 | 207 |
| Loan\trelated\tvaluation\tadjustments | 253 | 24 | 45 |
| Gain\ton\tBlackRock/MLIM\ttransaction |  |  | (2,078) |
| Net\tlosses\t(gains)\trelated\tto\tBlackRock\tLTIP\tshares\tadjustment | (246) | 127 | 12 |
| Undistributed\tearnings\tof\tBlackRock | (129) | (207) | (39) |
| Visa\tredemption\tgain | (95) |  |  |
| Reversal\tof\tlegal\tcontingency\treserve\testablished\tin\tconnection\twith\tan\tacquisition\tdue\tto\ta\tsettlement | (61) |  |  |
| Excess\ttax\tbenefits\tfrom\tshare-based\tpayment\tarrangements | (13) | (15) | (29) |
| Net\tchange\tin |  |  |  |
| Trading\tsecurities\tand\tother\tshort-term\tinvestments | 1,459 | (552) | 156 |
| Loans\theld\tfor\tsale | 50 | (1,465) | 435 |
| Other\tassets | (1,974) | 37 | 173 |
| Accrued\texpenses\tand\tother\tliabilities | 5,140 | (498) | 83 |
| Other | 361 | (64) | (622) |
| Net\tcash\tprovided\t(used)\tby\toperating\tactivities | 7,414 | (416) | 2,159 |
| Investing\tActivities |  |  |  |
| Repayment\tof\tinvestment\tsecurities | 4,246 | 4,374 | 3,667 |
| Sales |  |  |  |
| Investment\tsecurities | 10,283 | 6,056 | 11,102 |
| Visa\tshares | 95 |  |  |
| Loans | 76 | 329 | 1,110 |
| Purchases |  |  |  |
| Investment\tsecurities | (19,482) | (15,884) | (15,707) |
| Loans | (249) | (2,747) | (3,072) |
| Net\tchange\tin |  |  |  |
| Federal\tfunds\tsold\tand\tresale\tagreements | 1,301 | (1,147) | (1,413) |
| Loans | (4,595) | (2,160) | (278) |
| Net\tcash\treceived\tfrom\tdivestitures | 377 | 59 |  |
| Net\tcash\treceived\tfrom\t(paid\tfor)\tacquisitions | 2,384 | (2,602) | (58) |
| Purchases\tof\tcorporate\tand\tbank-owned\tlife\tinsurance | (350) | (117) | (425) |
| Interest-earning\tdeposits\twith\tFederal\tReserve | (6,234) |  |  |
| Other | (838) | (800) | (288) |
| Net\tcash\tused\tby\tinvesting\tactivities | (12,986) | (14,639) | (5,362) |
| Financing\tActivities |  |  |  |
| Net\tchange\tin |  |  |  |
| Noninterest-bearing\tdeposits | 1,719 | 230 | 968 |
| Interest-bearing\tdeposits | 2,065 | 1,769 | 4,940 |
| Federal\tfunds\tpurchased\tand\trepurchase\tagreements | (8,081) | 4,057 | (1,058) |
| Federal\tHome\tLoan\tBank\tshort-term\tborrowings | (2,000) | 2,000 |  |
| Other\tshort-term\tborrowed\tfunds | 840 | 514 | 239 |
| Sales/issuances |  |  |  |
| Federal\tHome\tLoan\tBank\tlong-term\tborrowings | 5,050 | 4,750 |  |
| Bank\tnotes\tand\tsenior\tdebt | 3,626 | 4,523 | 1,964 |
| Subordinated\tdebt | 759 | 943 |  |
| Other\tlong-term\tborrowed\tfunds | 96 | 250 | 279 |
| Perpetual\ttrust\tsecurities | 369 | 490 | 489 |
| Preferred\tstock\t–\tTARP | 7,275 |  |  |
| Preferred\tstock\t–\tOther | 492 |  |  |
| TARP\tWarrant | 304 |  |  |
| Treasury\tstock | 375 | 253 | 343 |
| Repayments/maturities |  |  |  |
| Federal\tHome\tLoan\tBank\tlong-term\tborrowings | (1,158) | (232) | (1,124) |
| Bank\tnotes\tand\tsenior\tdebt | (3,815) | (1,590) | (2,200) |
| Subordinated\tdebt | (140) | (887) | (471) |
| Other\tlong-term\tborrowed\tfunds | (156) | (217) | (26) |
| Excess\ttax\tbenefits\tfrom\tshare-based\tpayment\tarrangements | 13 | 15 | 29 |
| Acquisition\tof\ttreasury\tstock | (234) | (963) | (531) |
| Cash\tdividends\tpaid | (923) | (806) | (633) |
| Net\tcash\tprovided\tby\tfinancing\tactivities | 6,476 | 15,099 | 3,208 |
| Net\tIncrease\tIn\tCash\tAnd\tDue\tFrom\tBanks | 904 | 44 | 5 |
| Cash\tand\tdue\tfrom\tbanks\tat\tbeginning\tof\tperiod | 3,567 | 3,523 | 3,518 |
| Cash\tand\tdue\tfrom\tbanks\tat\tend\tof\tperiod | $4,471 | $3,567 | $3,523 |
| Cash\tPaid\tFor |  |  |  |
| Interest | $2,145 | $2,973 | $2,376 |
| Income\ttaxes | 706 | 659 | 471 |
| Non-cash\tItems |  |  |  |
| Issuance\tof\tcommon\tstock\tfor\tacquisitions | 5,916 | 4,019 |  |
| Issuance\tof\tpreferred\tstock\tfor\tNational\tCity\tacquisition | 150 |  |  |
| Net\tincrease\tin\tinvestment\tin\tBlackRock | 126 | 180 | 3,179 |
| Transfer\tfrom\t(to)\tloans\theld\tfor\tsale\tto\t(from)\tloans,\tnet | 1,763 | (288) | (2,280) |
| Transfer\tfrom\ttrading\tsecurities\tto\tinvestment\tsecurities | 599 |  |  |
| Impact\tof\tFSP\tFAS\t13-2,\t"Accounting\tfor\ta\tChange\tor\tProjected\tChange\tin\tthe\tTiming\tof\tCash\tFlows\tRelating\tto\tIncome\tTaxes\tGenerated\tby\ta\tLeveraged\tLease |  |  |  |
| Transaction" | 15 | 252 |  |

# NOTES	TO	CONSOLIDATED	FINANCIAL	STATEMENTS

# BUSINESS

PNC	is	one	of	the	largest	diversified	financial	services	companies	in	the	United States	and	is	headquartered	in	Pittsburgh,	Pennsylvania.

As	described	in	Note	2	Acquisitions	and	Divestitures,	on	December	31,	2008, PNC	acquired	National	City	Corporation	("National	City"),	which	increased	our assets	to	a	total	of	$291	billion	and	expanded	our	total	consolidated	deposits	to $193	billion.

# NOTE	1	ACCOUNTING	POLICIES

# BASIS	OF	FINANCIAL	STATEMENT	PRESENTATION

Our	consolidated	financial	statements	include	the	accounts	of	the	parent company	and	its	subsidiaries,	most	of	which	are	wholly	owned,	and	certain partnership	interests	and	variable	interest	entities.

On	December	31,	2008,	we	acquired	National	City.	Our	Consolidated	Balance Sheet	as	of	December	31,	2008	and	other	consolidated	information	presented	as of	that	date	in	the	Consolidated	Financial	Statements	includes	the	impact	of National	City.	See	Note	2	Acquisition	and	Divestitures	for	additional information.

We	prepared	these	consolidated	financial	statements	in	accordance	with accounting	principles	generally	accepted	in	the	United	States	of	America ("generally	accepted	accounting	principles"	or	"GAAP").	We	have	eliminated intercompany	accounts	and	transactions.	We	have	also	reclassified	certain	prior year	amounts	to	conform	with	the	2008	presentation.

These	reclassifications	did	not	have	a	material	impact	on	our	consolidated financial	condition	or	results	of	operations.

Subsequent	to	the	issuance	of	our	2006	Annual	Report	on	Form	10-K,	we determined	that	the	Consolidated	Statement	of	Cash	Flows	for	the	year	ended December	31,	2006	should	be	restated.	The	cash	flows	related	to	the	2006 issuance	of	perpetual	trust	securities	totaling	$489	million	had	previously	been classified	within	the	"Operating	Activities"	section	of	the	Consolidated Statement	of	Cash	Flows.	We	concluded	that	such	cash	flows	should	have	been classified	within	the	"Financing	Activities"	section	of	the	Consolidated Statement	of	Cash	Flows	and,	accordingly,	restated	these	amounts	in Amendment	No.	1	thereto	on	Form	10-K/A	dated	February	4,	2008.	The Consolidated	Statement	of	Cash	Flows	included	in	these	Consolidated	Financial Statements	reflects	this	restatement.

# USE	OF	ESTIMATES

We	prepare	the	consolidated	financial	statements	using	financial	information available	at	the	time,	which	requires	us	to	make	estimates	and	assumptions	that affect	the	amounts	reported.	Our	most	significant	estimates	pertain	to	our allowance	for	loan	and	lease	losses,	impaired	loans,	fair	value	measurements	and revenue	recognition.	Actual	results	may	differ	from	the	estimates	and	the differences	may	be	material	to	the	consolidated	financial	statements.

# BUSINESS	COMBINATIONS

We	record	the	net	assets	of	companies	that	we	acquire	at	their	estimated	fair value	at	the	date	of	acquisition	and	we	include	the	results	of	operations	of	the acquired	companies	in	our	consolidated	income	statement	from	the	date	of acquisition.	We	recognize	as	goodwill	the	excess	of	the	acquisition	price	over	the estimated	fair	value	of	the	net	assets	acquired.	The	excess	of	the	estimated	fair value	of	net	assets	acquired	over	the	acquisition	price	is	allocated	on	a	pro	rata basis	to	reduce	the	fair	value	of	intangibles	and	non-current	assets	acquired.

# SUBSIDIARY	STOCK	TRANSACTIONS

We	recognize	as	income,	when	appropriate,	any	gain	from	the	sale	or	issuance by	subsidiaries	of	their	stock	to	third	parties.	The	gain	is	the	difference	between our	basis	in	the	stock	and	the	increase	in	the	book	value	per	share	of	the subsidiaries'	equity	and	is	recorded	in	noninterest	income	in	the	Consolidated Income	Statement.	We	provide	applicable	taxes	on	the	gain.

# SPECIAL	PURPOSES	ENTITIES

Special	purpose	entities	("SPEs")	are	defined	as	legal	entities	structured	for	a particular	purpose.	We	use	special	purpose	entities	in	various	legal	forms	to conduct	normal	business	activities.	We	review	the	structure	and	activities	of special	purpose	entities	for	possible	consolidation	under	the	guidance

contained	in	Financial	Accounting	Standards	Board	("FASB")	Interpretation No.	46	(Revised	2003),	"Consolidation	of	Variable	Interest	Entities"	("FIN 46R")	and	Accounting	Research	Bulletin	No.	51,	"Consolidated	Financial Statements,"	as	appropriate.

A	variable	interest	entity	("VIE")	is	a	corporation,	partnership,	limited	liability company,	or	any	other	legal	structure	used	to	conduct	activities	or	hold	assets that	either:

•	Does	not	have	equity	investors	with	voting	rights	that	can	directly	or indirectly	make	decisions	about	the	entity's	activities	through	those	voting rights	or	similar	rights,	or

•	Has	equity	investors	that	do	not	provide	sufficient	equity	for	the	entity	to finance	its	activities	without	additional	subordinated	financial	support.

A	VIE	often	holds	financial	assets,	including	loans	or	receivables,	real	estate	or other	property.

Based	on	the	guidance	contained	in	FIN	46R,	we	consolidate	a	VIE	if	we	are considered	to	be	its	primary	beneficiary.	The	primary	beneficiary	will	absorb	the majority	of	the	expected	losses	from	the	VIE's	activities,	is	entitled	to	receive	a majority	of	the	entity's	residual	returns,	or	both.	Upon	consolidation	of	a	VIE, we	recognize	all	of	the	VIE's	assets,	liabilities	and	noncontrolling	interests	on our	Consolidated	Balance	Sheet.	See	Note	3	Variable	Interest	Entities	for information	about	VIEs	that	we	do	not	consolidate	but	in	which	we	hold	a significant	variable	interest.

We	earn	net	interest	and	noninterest	income	from	various	sources,	including: •	Lending,

•	Brokerage	services,	and

We	also	earn	revenue	from	selling	loans	and	securities,	and	we	recognize income	or	loss	from	certain	private	equity	activities.

We	earn	fees	and	commissions	from:

•	Issuing	loan	commitments,	standby	letters	of	credit	and	financial guarantees,

•	Selling	various	insurance	products,

•	Providing	treasury	management	services,

•	Providing	merger	and	acquisition	advisory	and	related	services,	and •	Participating	in	certain	capital	markets	transactions.

Revenue	earned	on	interest-earning	assets	including	net	unearned	income	and the	accretion	of	purchased	loans	is	recognized	based	on	the	constant	effective yield	of	the	financial	instrument.

Asset	management	fees	are	generally	based	on	a	percentage	of	the	fair	value	of the	assets	under	management	and	performance	fees	are	generally	based	on	a percentage	of	the	returns	on	such	assets.	Certain	performance	fees	are	earned upon	attaining	specified	investment	return	thresholds	and	are	recorded	as	earned. The	caption	asset	management	also	includes	our	share	of	the	earnings	of BlackRock	under	the	equity	method	of	accounting.

Fund	servicing	fees	are	primarily	based	on	a	percentage	of	the	fair	value	of	the fund	assets	and	the	number	of	shareholder	accounts	we	service.

Service	charges	on	deposit	accounts	are	recognized	when	earned.	Brokerage	fees and	gains	and	losses	on	the	sale	of	securities	and	certain	derivatives	are recognized	on	a	trade-date	basis.

We	record	private	equity	income	or	loss	based	on	changes	in	the	valuation	of	the underlying	investments	or	when	we	dispose	of	our	interest.	Dividend	income from	private	equity	investments	is	generally	recognized	when	received	and interest	income	from	subordinated	private	equity	debt	investments	is	recorded	on an	accrual	basis.

We	recognize	revenue	from	residential	and	commercial	mortgage	and	other consumer	loan	servicing;	securities	and	derivatives	and	foreign	exchange trading;	and	securities	underwriting	activities	as	they	are	earned	based	on contractual	terms,	as	transactions	occur	or	as	services	are	provided.	We recognize	any	gains	from	the	sale	of	loans	upon	cash	settlement	of	the transaction.

When	appropriate,	revenue	is	reported	net	of	associated	expenses	in	accordance with	GAAP.

# CASH	AND	CASH	EQUIVALENTS

Cash	and	due	from	banks	are	considered	"cash	and	cash	equivalents"	for financial	reporting	purposes.

# INVESTMENTS

We	have	interests	in	various	types	of	investments.	The	accounting	for	these investments	is	dependent	on	a	number	of	factors	including,	but	not	limited	to, items	such	as:

•	Ownership	interest,

•	Our	plans	for	the	investment,	and

•	The	nature	of	the	investment.

# Debt	Securities

Debt	securities	are	recorded	on	a	trade-date	basis.	We	classify	debt	securities	as held	to	maturity	and	carry	them	at	amortized	cost	if	we	have	the	positive	intent and	ability	to	hold	the	securities	to	maturity.	Debt	securities	that	we	purchase	for short-term	appreciation	or	other	trading	purposes	are	carried	at

fair	value	and	classified	as	trading	securities	and	other	short-term	investments	on our	Consolidated	Balance	Sheet.	Realized	and	unrealized	gains	and	losses	on trading	securities	are	included	in	other	noninterest	income.

Income	earned	from	trading	securities	totaled	$116	million	in	2008,	$116 million	in	2007,	and	$62	million	in	2006	and	is	included	in	Other	interest income	in	the	Consolidated	Income	Statement.

Debt	securities	not	classified	as	held	to	maturity	or	trading	are	designated	as securities	available	for	sale	and	carried	at	fair	value	with	unrealized	gains	and losses,	net	of	income	taxes,	reflected	in	accumulated	other	comprehensive income	(loss).

We	review	all	debt	securities	that	are	in	an	unrealized	loss	position	for	other- than-temporary	impairment.	We	evaluate	outstanding	available-for-sale	and held-to	maturity	securities	for	other-than-temporary	impairment	on	at	least	a quarterly	basis.	An	investment	security	is	deemed	impaired	if	the	fair	value	of	the investment	is	less	than	its	amortized	cost.	Amortized	cost	includes	adjustments (if	any)	made	to	the	cost	basis	of	an	investment	for	accretion,	amortization, previous	other-than-temporary	impairments	and	hedging.	After	an	investment security	is	determined	to	be	impaired,	we	evaluate	whether	the	decline	in	value is	other	than	temporary.	When	evaluating	whether	the	impairment	is	other-than- temporary,	we	take	into	consideration	whether	or	not	we	expect	to	receive	all	of the	contractual	cash	flows	from	the	investment	based	on	factors	that	include,	but are	not	limited	to:	the	creditworthiness	of	the	issuer	and,	in	the	case	of	non- agency	mortgage-backed	securities,	the	historical	and	projected	performance	of the	underlying	collateral;	the	length	of	time	and	extent	that	fair	value	has	been less	than	amortized	cost;	and	our	ability	and	intent	to	hold	the	investment	for	a sufficient	amount	of	time	to	recover	the	unrealized	losses.	In	addition,	we	may also	evaluate	the	business	and	financial	outlook	of	the	issuer,	as	well	as	broader industry	and	sector	performance	indicators.	Declines	in	the	fair	value	of available	for	sale	debt	securities	that	are	deemed	other	than	temporary	are recognized	on	our	Consolidated	Income	Statement	in	net	securities	gains	/ (losses)	in	the	period	in	which	the	determination	is	made.	Such	impairment charges	include	the	impact	of	declines	in	both	credit	quality	and	liquidity.

We	include	all	interest	on	debt	securities,	including	amortization	of	premiums and	accretion	of	discounts	in	net	interest	income	using	the	constant	effective yield	method.	We	compute	gains	and	losses	realized	on	the	sale	of	debt	securities available	for	sale	on	a	specific	security	basis	and	include	them	in	net	securities gains/(losses).

In	very	limited	situations,	due	to	market	conditions,	management	may	elect	to transfer	certain	debt	securities	from	the	securities	available	for	sale	to	the	held- to-maturity	classification.	In	such	cases,	any	unrealized	gain	or	loss	at	the	date	of transfer	included	in	accumulated	other	comprehensive

income	is	amortized	over	the	remaining	life	of	the	security	as	a	yield	adjustment. This	amortization	effectively	offsets	or	mitigates	the	effect	on	interest	income	of the	amortization	of	the	premium	or	discount	on	the	security	on	the	date	of transfer.

# Equity	Securities	and	Partnership	Interests

We	account	for	equity	securities	and	equity	investments	other	than	BlackRock and	private	equity	investments	under	one	of	the	following	methods: •	Marketable	equity	securities	are	recorded	on	a	trade-date	basis	and	are accounted	for	based	on	the	securities'	quoted	market	prices	from	a	national securities	exchange.	Dividend	income	on	these	securities	is	recognized	in net	interest	income.	Those	purchased	with	the	intention	of	recognizing short-term	profits	are	classified	as	trading	and	included	in	trading	securities and	other	short-term	investments	on	our	Consolidated	Balance	Sheet.	Both realized	and	unrealized	gains	and	losses	on	trading	securities	are	included in	noninterest	income.	Marketable	equity	securities	not	classified	as	trading are	designated	as	securities	available	for	sale	with	unrealized	gains	and losses,	net	of	income	taxes,	reflected	in	accumulated	other	comprehensive income	(loss).	Any	unrealized	losses	that	we	have	determined	to	be	other than	temporary	on	securities	classified	as	available	for	sale	are	recognized in	current	period	earnings.

•	For	investments	in	limited	partnerships,	limited	liability	companies	and other	investments	that	are	not	required	to	be	consolidated,	we	use	either	the cost	method	or	the	equity	method	of	accounting.	We	use	the	cost	method for	investments	in	which	we	are	not	considered	to	have	influence	over	the operations	of	the	investee	and	when	cost	appropriately	reflects	our economic	interest	in	the	underlying	investment.	Under	the	cost	method, there	is	no	change	to	the	cost	basis	unless	there	is	an	other	than	temporary decline	in	value.	If	the	decline	is	determined	to	be	other	than	temporary, we	write	down	the	cost	basis	of	the	investment	to	a	new	cost	basis	that represents	realizable	value.	The	amount	of	the	write-down	is	accounted	for as	a	loss	included	in	other	noninterest	income.	Distributions	received	from income	of	investee	on	cost	method	investments	are	included	in	interest income	or	noninterest	income	depending	on	the	type	of	investment.	We	use the	equity	method	for	all	other	general	and	limited	partner	ownership interests	and	limited	liability	company	investments.	Under	the	equity method,	we	record	our	equity	ownership	share	of	net	income	or	loss	of	the investee	in	noninterest	income.	Investments	described	above	are	included in	the	caption	Equity	investments	on	the	Consolidated	Balance	Sheet.

# Private	Equity	Investments

We	report	private	equity	investments,	which	include	direct	investments	in companies,	affiliated	partnership	interests	and	indirect	investments	in	private equity	funds,	at	estimated	fair	value.	These	estimates	are	based	on	available information	and	may	not	necessarily	represent	amounts	that	we	will	ultimately realize	through	distribution,	sale	or	liquidation	of	the	investments.	Fair	value	of publicly	traded	direct	investments	are	determined	using	quoted	market	prices and	are	subject	to	various	discount	factors	for	sales	restrictions,	when appropriate.	The	valuation	procedures	applied	to	direct	investments	in	private companies	include	techniques	such	as	multiples	of	adjusted	earnings	of	the entity,	independent	appraisals,	anticipated	financing	and	sale	transactions	with third	parties,	or	the	pricing	used	to	value	the	entity	in	a	recent	financing transaction.	We	value	affiliated	partnership	interests	based	on	the	underlying investments	of	the	partnership	using	procedures	consistent	with	those	applied	to direct	investments.	Indirect	investments	in	private	equity	funds	are	valued	based on	the	financial	statements	that	we	receive	from	their	managers.	Due	to	the	time lag	in	our	receipt	of	the	financial	information	and	based	on	a	review	of investments	and	valuation	techniques	applied,	adjustments	to	the	manager provided	value	are	made	when	available	recent	portfolio	company	information	or market	information	indicates	a	significant	change	in	value	from	that	provided	by the	manager	of	the	fund.	We	include	all	private	equity	investments	on	the Consolidated	Balance	Sheet	in	the	caption	Equity	investments.	Changes	in	the fair	value	of	private	equity	investments	are	recognized	in	noninterest	income.

We	consolidate	private	equity	investments	when	we	are	the	general	partner	in	a limited	partnership	and	have	determined	that	we	have	control	of	the	partnership. The	portion	we	do	not	own	is	reflected	in	the	caption	Minority	and noncontrolling	interests	in	consolidated	entities	on	the	Consolidated	Balance Sheet.

# Investment	in	BlackRock,	Inc.

We	deconsolidated	the	assets	and	liabilities	of	BlackRock,	Inc.	("BlackRock") from	our	Consolidated	Balance	Sheet	effective	September	29,	2006	and	now account	for	our	investment	in	BlackRock	under	the	equity	method	of	accounting. The	investment	in	BlackRock	is	reflected	on	our	Consolidated	Balance	Sheet	in the	caption	Equity	investments,	while	our	equity	in	earnings	of	BlackRock	is reported	on	our	Consolidated	Income	Statement	in	the	caption	Asset management.

We	mark	to	market	our	obligation	to	transfer	BlackRock	shares	related	to	certain BlackRock	long-term	incentive	plan	("LTIP")	programs.	This	obligation	is classified	as	a	free	standing	derivative	as	disclosed	in	Note	17	Financial Derivatives.	As	we	transfer	the	shares	for	payouts	under	such	LTIP	programs, we	recognize	a	gain	or	loss	on	those	shares.	The	impact	of	those	transactions	is shown	on	a	net	basis	on	our	Consolidated	Income	Statement	in	Other	noninterest

income.	Our	obligation	to	transfer	BlackRock	shares	related	to	the	LTIP programs	and	the	resulting	accounting	are	described	in	more	detail	in	Note	2 Acquisitions	and	Divestitures.

# LOANS	AND	LEASES

Loans	are	classified	as	held	for	investment	when	management	has	both	the	intent and	ability	to	hold	the	loan	for	the	foreseeable	future,	or	until	maturity	or	payoff. In	conjunction	with	the	acquisition	of	National	City,	management	designated	all acquired	loans	and	leases	as	either	held	for	investment	or	held	for	sale	based	on its	current	intent	and	view	of	the	foreseeable	future.	Management's	intent	and view	of	the	foreseeable	future	may	change	based	on	changes	in	business strategies,	the	economic	environment	and	market	conditions.

Except	as	described	below,	loans	held	for	investment	are	stated	at	the	principal amounts	outstanding,	net	of	unearned	income,	unamortized	deferred	fees	and costs	on	originated	loans,	and	premiums	or	discounts	on	loans	purchased. Interest	on	performing	loans	is	accrued	based	on	the	principal	amount outstanding	and	recorded	in	interest	income	as	earned	using	the	constant effective	yield	method.	Loan	origination	fees,	direct	loan	origination	costs,	and loan	premiums	and	discounts	are	deferred	and	accreted	or	amortized	into	net interest	income,	over	periods	not	exceeding	the	contractual	life	of	the	loan.

Certain	loans	are	accounted	for	at	fair	value	in	accordance	with	Statement	of Financial	Accounting	Standards	No.	("SFAS")	155,	"Accounting	for	Certain Hybrid	Financial	Instruments	–	an	amendment	of	FASB	Statements	No.	133	and 140,"	with	changes	in	the	fair	value	reported	in	other	noninterest	income.	The fair	value	of	these	loans	was	$43	million,	or	less	than	.5%	of	the	total	loan portfolio,	at	December	31,	2008.

In	addition	to	originating	loans,	we	also	acquire	loans	through	portfolio purchases	or	acquisitions	of	other	financial	services	companies.	For	certain acquired	loans	that	have	experienced	a	deterioration	of	credit	quality	at	the	time of	acquisition,	we	follow	the	guidance	contained	in	AICPA	Statement	of Position	03-3,	"Accounting	for	Certain	Loans	or	Debt	Securities	Acquired	in	a Transfer"	("SOP	03-3").	Under	SOP	03-3,	acquired	loans	are	to	be	recorded	at fair	value	absent	the	carry	over	of	any	existing	valuation	allowances.	Evidence	of credit	quality	deterioration	as	of	the	purchase	date	may	include	information	and statistics	such	as	bankruptcy	events,	FICO	scores,	past	due	status,	current borrower	credit	scores,	and	current	loan-to-value	(LTV).	We	review	the	loans acquired	for	evidence	of	credit	quality	deterioration	at	the	date	of	acquisition	and determine	if	it	is	probable	that	we	will	be	unable	to	collect	all	amounts	due, including	both	principal	and	interest,	according	to	the	loan's	contractual	terms. When	both	conditions	exist,	we	estimate	the	amount	and	timing	of	undiscounted expected	cash	flows	for	each	loan	either	individually	or	on	a	pool	basis.	We estimate	the	cash	flows	expected	to	be	collected	at	acquisition	using	internal	and third

party	models	that	incorporate	management's	best	estimate	of	current	key assumptions,	such	as	default	rates,	loss	severity	and	payment	speeds.	Collateral values	are	also	incorporated	into	cash	flow	estimates.	Late	fees,	which	are contractual	but	not	expected	to	be	collected,	are	excluded	from	expected	future cash	flows.	The	accretable	yield	is	calculated	based	upon	the	difference	between the	undiscounted	expected	future	cash	flows	of	the	loans	and	the	fair	value	of	the loan	as	determined	under	the	provisions	of	SFAS	157,	Fair	Value	Measurement. This	amount	is	accreted	into	income	over	the	life	of	the	loan	on	a	level	yield basis.	Subsequent	increases	in	expected	cash	flows	are	recognized	prospectively through	an	adjustment	of	the	loan's	or	pool's	yield	over	its	remaining	life. Subsequent	decreases	in	expected	cash	flows	that	are	attributable,	at	least	in	part, to	credit	quality	are	recognized	as	impairments	through	a	change	to	the	provision for	credit	losses	resulting	in	an	increase	in	the	allowance	for	loan	and	lease losses.

The	nonaccretable	yield	represents	the	difference	between	the	expected undiscounted	cash	flows	of	the	loans	and	the	total	contractual	cash	flows (including	the	principal	and	interest)	at	acquisition	and	throughout	the	remaining lives	of	the	loans.

We	also	provide	financing	for	various	types	of	equipment,	aircraft,	energy	and power	systems,	and	rolling	stock	and	automobiles	through	a	variety	of	lease arrangements.	Direct	financing	leases	are	carried	at	the	aggregate	of	lease payments	plus	estimated	residual	value	of	the	leased	property,	less	unearned income.	Leveraged	leases,	a	form	of	financing	lease,	are	carried	net	of nonrecourse	debt.	We	recognize	income	over	the	term	of	the	lease	using	the interest	method.	Lease	residual	values	are	reviewed	for	other	than	temporary impairment	on	a	quarterly	basis.	Gains	or	losses	on	the	sale	of	leased	assets	are included	in	other	noninterest	income	while	valuation	adjustments	on	lease residuals	are	included	in	other	noninterest	expense.

When	loans	are	redesignated	from	held	for	investment	to	held	for	sale,	specific reserves	and	allocated	pooled	reserves	included	in	the	allowance	for	loan	and lease	losses	are	charged-off	to	reduce	the	basis	of	the	loans	to	lower	of	cost	or market	value.

# LOAN	SALES,	LOAN	SECURITIZATIONS	AND	RETAINED	INTERESTS

We	recognize	the	sale	of	loans	or	other	financial	assets	when	the	transferred assets	are	legally	isolated	from	our	creditors	and	the	appropriate	accounting criteria	are	met.	We	also	sell	mortgage	and	other	loans	through	secondary	market securitizations.	Securitization	of	financial	assets	represents	a	source	of	funding. In	a	securitization,	financial	assets	are	transferred	into	trusts	or	to	special- purpose	entities	(SPEs)	in	transactions	which	are	effective	in	legally	isolating	the assets	from	PNC.	Pools	of	credit	card,	automobile,	and	mortgage	loans	have been	securitized.	Where	the	transferor	is	a	depository	institution,	legal	isolation is	accomplished	through

compliance	with	specific	rules	and	regulations	of	the	relevant	regulatory authorities.	Where	the	transferor	is	not	a	depository	institution,	legal	isolation	is accomplished	through	utilization	of	a	two-step	securitization	structure.

SFAS	140	"Accounting	for	Transfers	and	Servicing	of	Financial	Assets	and Extinguishments	of	Liabilities"	requires	a	true	sale	analysis	of	the	treatment	of the	transfer	under	state	law	as	if	the	transferring	equity	was	a	debtor	under	the bankruptcy	code.	A	true	sale	legal	analysis	includes	several	legally	relevant factors,	such	as	the	nature	and	level	of	recourse	to	the	transferor,	and	the	amount and	nature	of	retained	interests	in	the	loans	sold.	The	analytical	conclusion	as	to a	true	sale	is	never	absolute	and	unconditional,	but	contains	qualifications	based on	the	inherent	equitable	powers	of	a	bankruptcy	court,	as	well	as	the	unsettled state	of	the	common	law.	Once	the	legal	isolation	test	has	been	met	under SFAS	140,	other	factors	concerning	the	nature	and	extent	of	the	transferor's control	over	the	transferred	assets	are	taken	into	account	in	order	to	determine whether	derecognition	of	assets	is	warranted,	including	whether	the	SPE	has complied	with	rules	concerning	qualifying	special-purpose	entities.

In	a	securitization,	the	trusts	or	SPE	issues	beneficial	interests	in	the	form	of senior	and	subordinated	asset-backed	securities	backed	or	collateralized	by	the assets	sold	to	the	trust.	The	senior	classes	of	the	asset-backed	securities	typically receive	investment	grade	credit	ratings	at	the	time	of	issuance.	These	ratings	are generally	achieved	through	the	creation	of	lower-rated	subordinated	classes	of asset-backed	securities,	as	well	as	subordinated	interests.	In	certain	cases,	we may	retain	a	portion	or	all	of	the	securities	issued,	interest-only	strips,	one	or more	subordinated	tranches,	servicing	rights	and,	in	some	cases,	cash	reserve accounts.

For	credit	card	securitizations,	PNC's	continued	involvement	in	the	securitized assets	includes	maintaining	an	undivided,	pro	rata	interest	in	all	credit	card assets	that	are	in	the	trust,	referred	to	as	seller's	interest.	The	seller's	interest ranks	equally	with	the	investors'	interests	in	the	trust.	As	the	amount	of	the assets	in	the	securitized	pool	fluctuates	due	to	customer	payments,	purchases, cash	advances,	and	credit	losses,	the	carrying	amount	of	the	seller's	interest	will vary.	However,	PNC	is	required	to	maintain	its	seller's	interest	at	a	minimum level	of	5%	of	the	initial	invested	amount	in	each	series	to	ensure	sufficient assets	are	available	for	allocation	to	the	investors'	interests.

In	accordance	with	SFAS	140,	securitized	loans	are	removed	from	the	balance sheet	and	a	net	gain	or	loss	is	recognized	in	noninterest	income	at	the	time	of initial	sale,	and	each	subsequent	sale	for	revolving	securitization	structures. Gains	or	losses	recognized	on	the	sale	of	the	loans	depend	on	the	allocation	of carrying	value	between	the	loans	sold	and	the	retained	interests,	based	on	their relative	fair	market	values	at	the	date	of	sale.	We	generally	estimate	the	fair value	of	the	retained	interests	based	on	the	present	value	of	future	expected

cash	flows	using	assumptions	as	to	discount	rates,	interest	rates,	prepayment speeds,	credit	losses	and	servicing	costs,	if	applicable.

Our	loan	sales	and	securitizations	are	generally	structured	without	recourse	to	us and	with	no	restrictions	on	the	retained	interests	with	the	exception	of	loan	sales to	certain	US	government	chartered	entities.

When	we	are	obligated	for	loss-sharing	or	recourse	in	a	sale,	our	policy	is	to record	such	liabilities	at	fair	value	upon	closing	of	the	transaction	based	on	the guidance	contained	in	FIN	45,	"Guarantor's	Accounting	and	Disclosure Requirements	for	Guarantees,	Including	Indirect	Guarantees	of	Indebtedness	of Others,"	or	as	a	contingent	liability	recognized	at	inception	of	the	guarantee under	SFAS	5,	"Accounting	for	Contingencies."

We	originate,	sell	and	service	mortgage	loans	under	the	Federal	National Mortgage	Association	("FNMA")	Delegated	Underwriting	and	Servicing ("DUS")	program.	Under	the	provisions	of	the	DUS	program,	we	participate	in	a loss-sharing	arrangement	with	FNMA.	We	participate	in	a	similar	program	with the	Federal	Home	Loan	Mortgage	Corporation	("FHLMC").	Refer	to	Note	25 Commitments	and	Guarantees	for	more	information	about	our	obligations related	to	sales	of	loans	under	these	programs.

In	securitization	transactions,	we	classify	securities	retained	as	debt	securities available	for	sale	or	other	assets,	depending	on	the	form	of	the	retained	interest. Retained	interests	that	are	subject	to	prepayment	risk	are	reviewed	on	a	quarterly basis	for	impairment.	If	the	fair	value	of	the	retained	interests	is	below	its carrying	amount	and	the	decline	is	determined	to	be	other	than	temporary,	then the	decline	is	reflected	as	a	charge	in	other	noninterest	income.

We	designate	loans	and	related	unfunded	loan	commitments	as	held	for	sale when	we	have	a	positive	intent	to	sell	them.	We	transfer	loans	to	the	loans	held for	sale	category	at	the	lower	of	cost	or	fair	market	value.	At	the	time	of	transfer, write-downs	on	the	loans	and	related	unfunded	loan	commitments	are	recorded as	charge-offs	or	as	a	reduction	in	the	liability	for	unfunded	commitments.	We establish	a	new	cost	basis	upon	transfer	except	for	certain	residential	and commercial	mortgages	held	for	sale	discussed	below.	Any	subsequent	lower	of cost	or	market	adjustment	is	determined	on	an	individual	loan	and	unfunded	loan commitment	basis	and	is	recognized	as	a	valuation	allowance	with	any	charges included	in	other	noninterest	income.	Gains	or	losses	on	the	sale	of	these	loans and/or	related	unfunded	loan	commitments	are	included	in	other	noninterest income	when	realized.

Effective	January	1,	2008,	we	adopted	SFAS	159,	"The	Fair	Value	Option	for Financial	Assets	and	Financial	Liabilities	–	Including	an	amendment	of	FASB Statement	No.	115",	and

elected	to	fair	value	certain	commercial	mortgage	loans	held	for	sale.	Under SFAS	159,	changes	in	the	fair	value	of	these	loans	are	measured	and	recorded	in other	noninterest	income	each	period.	See	Note	8	Fair	Value	for	additional information.	Also,	we	elected	fair	value	for	residential	real	estate	loans	held	for sale	or	securitization	acquired	from	National	City.

Interest	income	with	respect	to	loans	held	for	sale	classified	as	performing	is accrued	based	on	the	principal	amount	outstanding	at	a	constant	effective	yield.

In	certain	circumstances,	loans	designated	as	held	for	sale	may	be	transferred	to the	loan	portfolio	based	on	a	change	in	strategy.	We	transfer	these	loans	to	the portfolio	at	the	lower	of	cost	or	fair	market	value;	however,	any	loans	designated under	SFAS	159	will	remain	at	fair	value.

# NONPERFORMING	ASSETS

Nonperforming	assets	include:

•	Nonaccrual	loans,

•	Troubled	debt	restructurings,	and •	Foreclosed	assets.

Measurement	of	delinquency	and	past	due	status	are	based	on	the	contractual terms	of	each	loan.

A	loan	acquired	and	accounted	for	under	SOP	03-3	is	reported	as	an	accruing loan	and	a	performing	asset	as	long	as	the	remaining	future	expected undiscounted	cash	flows	exceed	the	carrying	value	of	the	loan.

We	generally	classify	commercial	loans	as	nonaccrual	when	we	determine	that the	collection	of	interest	or	principal	is	doubtful	or	when	a	default	of	interest	or principal	has	existed	for	90	days	or	more	and	the	loans	are	not	well-secured	or	in the	process	of	collection.	When	the	accrual	of	interest	is	discontinued,	any accrued	but	uncollected	interest	previously	included	in	net	interest	income	is reversed.	We	charge	off	small	business	commercial	loans	less	than	$1	million	at 120	days	after	transfer	to	nonaccrual	status.	We	charge	off	other	nonaccrual loans	based	on	the	facts	and	circumstances	of	the	individual	loans.

Subprime	mortgage	loans	for	first	liens	with	a	loan	to	value	ratio	of	greater	than 90%	and	second	liens	are	classified	as	nonaccrual	at	90	days	past	due.

Most	consumer	loans	and	lines	of	credit,	not	secured	by	residential	real	estate, are	charged	off	after	120	to	180	days	past	due.	Generally,	they	are	not	placed	on non-accrual	status.

Home	equity	installment	loans	and	lines	of	credit,	as	well	as	residential mortgage	loans,	that	are	well	secured	by	residential	real	estate	are	classified	as nonaccrual	at	180	days	past	due	or	if	a	partial	write-down	has	occurred, consistent	with	regulatory	guidance.	These	loans	are	considered	well	secured	if the	fair	market	value	of	the	property,	less	15%	to	cover

potential	foreclosure	expenses,	is	greater	than	or	equal	to	the	recorded investment	in	the	loan	including	any	superior	liens.	A	fair	market	value assessment	of	the	property	is	initiated	when	the	loan	becomes	90	to	120	days past	due.

Home	equity	installment	loans	and	lines	of	credit	and	residential	real	estate loans	that	are	not	well	secured,	but	are	in	the	process	of	collection,	are	charged- off	at	180	days	past	due.	This	is	consistent	with	the	charge-off	policy	for	home equity	lines	of	credit.	These	loans	are	recorded	at	the	lower	of	cost	or	market value,	less	liquidation	costs,	and	the	unsecured	portion	of	these	loans	is	charged off	in	accordance	with	regulatory	guidelines.	The	remaining	portion	of	the	loan is	placed	on	nonaccrual	status.

Additionally,	residential	mortgage	loans	serviced	by	others	under	master servicing	arrangements	and	primary-serviced	residential	loans	not	in	process	of foreclosure	are	also	classified	as	nonaccrual	at	180	days	past	due	or	if	a	partial write-down	has	occurred.

A	loan	is	categorized	as	a	troubled	debt	restructuring	("TDR")	if	a	significant concession	is	granted	due	to	deterioration	in	the	financial	condition	of	the borrower.	TDRs	may	include	certain	modifications	of	terms	of	loans,	receipts	of assets	from	debtors	in	partial	or	full	satisfaction	of	loans,	or	a	combination	of both.	Restructured	loans	classified	as	TDRs	are	accounted	for	in	accordance	with SFAS	15,	"Accounting	by	Debtors	and	Creditors	for	Troubled	Debt Restructurings",	and	SFAS	114,	"Accounting	by	Creditors	for	Impairment	of	a Loan."

Nonperforming	loans	are	generally	not	returned	to	performing	status	until	the obligation	is	brought	current	and	the	borrower	has	performed	in	accordance	with the	contractual	terms	for	a	reasonable	period	of	time	and	collection	of	the contractual	principal	and	interest	is	no	longer	doubtful.	Nonaccrual	commercial and	commercial	real	estate	loans	and	troubled	debt	restructurings	are	designated as	impaired	loans	under	SFAS	114.

Foreclosed	assets	are	comprised	of	any	asset	seized	or	property	acquired	through a	foreclosure	proceeding	or	acceptance	of	a	deed-in-lieu	of	foreclosure.	Other real	estate	owned	(OREO)	is	comprised	principally	of	commercial	and residential	real	estate	properties	obtained	in	partial	or	total	satisfaction	of	loan obligations.	Depending	on	various	state	statutes,	legal	proceedings	are	initiated on	or	about	the	65th	day	of	delinquency.	If	no	other	remedies	arise	from	the	legal proceedings,	the	final	outcome	will	result	in	the	sheriff's	sale	of	the	property. When	we	acquire	the	deed,	the	transfer	of	loans	to	other	real	estate	owned	will be	completed.	Property	obtained	in	satisfaction	of	a	loan	is	recorded	at	the estimated	fair	value	less	anticipated	selling	costs.	We	estimate	market	values primarily	based	on	appraisals,	when	available,	or	quoted	market	prices	on	liquid assets.	Anticipated	recoveries	from	private	mortgage	insurance	and	government guarantees	are	also	considered	in	evaluating	the	potential	impairment	of	loans	at the	date	of	transfer.	When	the	anticipated	future	cash

flows	associated	with	a	loan	are	less	than	its	net	carrying	value,	a	charge-off	is recognized	against	the	allowance	for	loan	losses.

Subsequently,	foreclosed	assets	are	valued	at	the	lower	of	the	amount	recorded at	acquisition	date	or	the	current	market	value	less	estimated	disposition	costs. Valuation	adjustments	on	these	assets	and	gains	or	losses	realized	from disposition	of	such	property	are	reflected	in	noninterest	expense.

# ALLOWANCE	FOR	LOAN	AND	LEASE	LOSSES

We	maintain	the	allowance	for	loan	and	lease	losses	at	a	level	that	we	believe	to be	adequate	to	absorb	estimated	probable	credit	losses	inherent	in	the	loan portfolio	as	of	the	balance	sheet	date.	Our	determination	of	the	adequacy	of	the allowance	is	based	on	periodic	evaluations	of	the	loan	and	lease	portfolios	and other	relevant	factors.	This	evaluation	is	inherently	subjective	as	it	requires material	estimates,	all	of	which	may	be	susceptible	to	significant	change, including,	among	others:

In	determining	the	adequacy	of	the	allowance	for	loan	and	lease	losses,	we	make specific	allocations	to	impaired	loans,	allocations	to	pools	of	watchlist	and	non- watchlist	loans,	and	allocations	to	consumer	and	residential	mortgage	loans.	We also	allocate	reserves	to	provide	coverage	for	probable	losses	inherent	in	the portfolio	at	the	balance	sheet	date	based	upon	current	market	conditions,	which may	not	be	reflected	in	historical	loss	data.	While	allocations	are	made	to specific	loans	and	pools	of	loans,	the	total	reserve	is	available	for	all	credit losses.

Specific	allocations	are	made	to	significant	individual	impaired	loans	and	are determined	in	accordance	with	SFAS	114,	with	impairment	measured	based	on the	present	value	of	the	loan's	expected	cash	flows,	observable	market	price	of the	loan	or	the	fair	value	of	collateral.	We	establish	a	pooled	reserve	on	all	other impaired	loans	based	on	their	loss	given	default	credit	risk	ratings.

Allocations	to	loan	pools	are	developed	by	product	and	industry	with	estimated losses	based	on	probability	of	default	and	loss	given	default	credit	risk	ratings	by using	historical	loss	trends	and	our	judgment	concerning	those	trends	and	other relevant	factors.	These	factors	may	include,	among	others:

•	Regional	and	national	economic	conditions,	and •	Industry	and	portfolio	concentrations.

Loss	factors	are	based	on	industry	and/or	internal	experience	and	may	be adjusted	for	significant	factors	that,	based	on	our	judgment,	impact	the collectibility	of	the	portfolio	as	of	the	balance	sheet	date.	Consumer	and residential	mortgage	loan	allocations	are	made	at	a	total	portfolio	level	based	on historical	loss	experience	adjusted	for	current	risk	factors.

While	our	pool	reserve	methodologies	strive	to	reflect	all	risk	factors,	there continues	to	be	a	certain	element	of	uncertainty	associated	with,	but	not	limited to,	potential	imprecision	in	the	estimation	process	due	to	the	inherent	time	lag	of obtaining	information.	We	provide	additional	reserves	that	are	designed	to provide	coverage	for	losses	attributable	to	such	risks.	These	reserves	also	include factors	which	may	not	be	directly	measured	in	the	determination	of	specific	or pooled	reserves.	Such	factors	include: •	Credit	quality	trends,

•	Recent	loss	experience	in	particular	segments	of	the	portfolio, •	Ability	and	depth	of	lending	management,	and •	Changes	in	risk	selection	and	underwriting	standards.

# ALLOWANCE	FOR	UNFUNDED	LOAN	COMMITMENTS	AND	LETTERS	OF CREDIT

We	maintain	the	allowance	for	unfunded	loan	commitments	and	letters	of	credit at	a	level	we	believe	is	adequate	to	absorb	estimated	probable	losses	related	to these	unfunded	credit	facilities.	We	determine	the	adequacy	of	the	allowance based	on	periodic	evaluations	of	the	unfunded	credit	facilities	including	an assessment	of	the	probability	of	commitment	usage,	credit	risk	factors	for	loans outstanding	to	these	same	customers,	and	the	terms	and	expiration	dates	of	the unfunded	credit	facilities.	The	allowance	for	unfunded	loan	commitments	and letters	of	credit	is	recorded	as	a	liability	on	the	Consolidated	Balance	Sheet.	Net adjustments	to	the	allowance	for	unfunded	loan	commitments	and	letters	of credit	are	included	in	the	provision	for	credit	losses.

# MORTGAGE	AND	OTHER	SERVICING	RIGHTS

We	provide	servicing	under	various	loan	servicing	contracts	for	commercial, residential,	home	equity,	automobile	and	credit	card	loans.	These	contracts	are either	purchased	in	the	open	market	or	retained	as	part	of	a	loan	securitization	or loan	sale.	All	newly	acquired	or	originated	servicing	rights	are	initially	measured at	fair	value.	Fair	value	is	based	on	the	present	value	of	the	expected	future	cash flows,	including	assumptions	as	to:

•	Interest	rates	for	escrow	and	deposit	balance	earnings, •	Discount	rates,

•	Stated	note	rates,

•	Estimated	prepayment	speeds,	and •	Estimated	servicing	costs.

For	subsequent	measurements,	we	have	elected	to	account	for	our	commercial mortgage	loan	servicing	rights	as	a	class	of	assets	and	use	the	amortization method.	This	election	was	made	based	on	the	unique	characteristics	of	the commercial

mortgage	loans	underlying	these	servicing	rights	with	regard	to	market	inputs used	in	determining	fair	value	and	how	we	manage	the	risks	inherent	in	the commercial	mortgage	servicing	rights	assets.	Specific	risk	characteristics	of commercial	mortgages	include	loan	type,	currency	or	exchange	rate,	interest rates,	expected	cash	flows	and	changes	in	the	cost	of	servicing.	We	record	these servicing	assets	as	other	intangible	assets	and	amortize	them	over	their	estimated lives	based	on	estimated	net	servicing	income.	On	a	quarterly	basis,	we	test	the assets	for	impairment	by	categorizing	the	pools	of	assets	underlying	the	servicing rights	into	various	stratum.	If	the	estimated	fair	value	of	the	assets	is	less	than the	carrying	value,	an	impairment	loss	is	recognized	and	a	valuation	reserve	is established.	Subsequent	measurement	of	servicing	rights	for	home	equity	lines and	loans,	automobile	loans	and	credit	card	loans	also	follow	the	amortization method.

For	subsequent	measurement	of	servicing	rights	for	residential	real	estate	loans, the	fair	value	method	is	used.	This	election	was	made	to	be	consistent	with	our risk	management	strategy	to	hedge	the	fair	value	of	these	assets.	We	manage	this risk	by	hedging	the	fair	value	of	this	asset	with	derivatives	which	are	expected	to increase	in	value	when	the	value	of	the	servicing	right	declines.	The	fair	value	of these	servicing	rights	is	estimated	by	using	a	cash	flow	valuation	model	which calculates	the	present	value	of	estimated	future	net	servicing	cash	flows,	taking into	consideration	actual	and	expected	mortgage	loan	prepayment	rates,	discount rates,	servicing	costs,	and	other	economic	factors	which	are	determined	based	on current	market	conditions.	Expected	mortgage	loan	prepayment	assumptions	are derived	from	an	internal	proprietary	model	and	consider	empirical	data	drawn from	the	historical	performance	of	PNC's	managed	portfolio	and	adjusted	for current	market	conditions.	On	a	quarterly	basis,	management	obtains	market value	quotes	from	two	independent	brokers	that	reflect	current	conditions	in	the secondary	market	and	any	recently	executed	servicing	transactions.	Management compares	its	valuation	to	the	quoted	range	of	market	values	to	determine	if	its estimated	fair	value	is	reasonable	in	comparison	to	market	participant	valuations. If	the	estimated	fair	value	of	PNC's	residential	servicing	rights	is	outside	the range,	management	re-evaluates	its	model	inputs	and	assumptions	to	derive	a fair	value	which	falls	within	the	range	of	market	observed	values.

Servicing	fees	are	recognized	as	they	are	earned	and	are	reported	net	of amortization	expense	and	any	impairments	in	the	line	item	Corporate	services	on the	Consolidated	Income	Statement.

# FAIR	VALUE	OF	FINANCIAL	INSTRUMENTS

The	fair	value	of	financial	instruments	and	the	methods	and	assumptions	used	in estimating	fair	value	amounts	and	financial	assets	and	liabilities	for	which	fair value	was	elected	based	on	the	guidance	in	SFAS	159	are	detailed	in	Note	8	Fair Value.

We	test	goodwill	and	indefinite-lived	intangible	assets	for	impairment	at	least annually,	or	when	events	or	changes	in	circumstances	indicate	the	assets	might be	impaired.	Finite-lived	intangible	assets	are	amortized	to	expense	using accelerated	or	straight-line	methods	over	their	respective	estimated	useful	lives. We	review	finite-lived	intangible	assets	for	impairment	when	events	or	changes in	circumstances	indicate	that	the	asset's	carrying	amount	may	not	be recoverable	from	undiscounted	future	cash	flows	or	it	may	exceed	its	fair	value.

# DEPRECIATION	AND	AMORTIZATION

For	financial	reporting	purposes,	we	depreciate	premises	and	equipment,	net	of salvage	value,	principally	using	the	straight-line	method	over	their	estimated useful	lives.

We	use	estimated	useful	lives	for	furniture	and	equipment	ranging	from	one	to 10	years,	and	depreciate	buildings	over	an	estimated	useful	life	of	up	to	40	years. We	amortize	leasehold	improvements	over	their	estimated	useful	lives	of	up	to 15	years	or	the	respective	lease	terms,	whichever	is	shorter.

We	purchase,	as	well	as	internally	develop	and	customize,	certain	software	to enhance	or	perform	internal	business	functions.	Software	development	costs incurred	in	the	planning	and	post-development	project	stages	are	charged	to noninterest	expense.	Costs	associated	with	designing	software	configuration	and interfaces,	installation,	coding	programs	and	testing	systems	are	capitalized	and amortized	using	the	straight-line	method	over	periods	ranging	from	one	to	seven years.

# REPURCHASE	AND	RESALE	AGREEMENTS

Generally,	repurchase	and	resale	agreements	are	treated	as	collateralized financing	transactions	and	are	carried	at	the	amounts	at	which	the	securities	will be	subsequently	reacquired	or	resold,	including	accrued	interest,	as	specified	in the	respective	agreements.	Our	policy	is	to	take	possession	of	securities purchased	under	agreements	to	resell.	We	monitor	the	market	value	of	securities to	be	repurchased	and	resold	and	additional	collateral	may	be	obtained	where considered	appropriate	to	protect	against	credit	exposure.

Effective	January	1,	2008,	we	elected	to	account	for	structured	resale	agreements at	fair	value.	The	fair	value	for	structured	resale	agreements	is	determined	using a	model	which	includes	observable	market	data	as	inputs.

# OTHER	COMPREHENSIVE	INCOME

Other	comprehensive	income	consists,	on	an	after-tax	basis,	primarily	of unrealized	gains	or	losses	on	investment	securities	classified	as	available	for	sale and	derivatives	designated	as	cash	flow	hedges,	and	changes	in	pension,	other postretirement	and	postemployment	benefit	plan	liability	adjustments.	Details	of each	component	are	included	in	Note	20	Other	Comprehensive	Income.

# TREASURY	STOCK

We	record	common	stock	purchased	for	treasury	at	cost.	At	the	date	of subsequent	reissue,	the	treasury	stock	account	is	reduced	by	the	cost	of	such stock	on	the	first-in,	first-out	basis.

# DERIVATIVE	INSTRUMENTS	AND	HEDGING	ACTIVITIES

We	use	a	variety	of	financial	derivatives	as	part	of	our	overall	asset	and	liability risk	management	process	to	help	manage	interest	rate,	market	and	credit	risk inherent	in	our	business	activities.	Interest	rate	and	total	return	swaps,	interest rate	caps	and	floors	and	futures	contracts	are	the	primary	instruments	we	use	for interest	rate	risk	management.

Financial	derivatives	involve,	to	varying	degrees,	interest	rate,	market	and	credit risk.	We	manage	these	risks	as	part	of	our	asset	and	liability	management process	and	through	credit	policies	and	procedures.	We	seek	to	minimize counterparty	credit	risk	by	entering	into	transactions	with	only	high-quality institutions,	establishing	credit	limits,	and	generally	requiring	bilateral	netting and	collateral	agreements.

We	recognize	all	derivative	instruments	at	fair	value	as	either	other	assets	or other	liabilities	on	the	Consolidated	Balance	Sheet.	The	accounting	for	changes in	the	fair	value	of	a	derivative	instrument	depends	on	whether	it	has	been designated	and	qualifies	as	part	of	a	hedging	relationship.	For	derivatives	not designated	as	an	accounting	hedge,	the	gain	or	loss	is	recognized	in	noninterest income.

For	those	derivative	instruments	that	are	designated	and	qualify	as	accounting hedges,	we	must	designate	the	hedging	instrument,	based	on	the	exposure	being hedged,	as	a	fair	value	hedge	or	a	cash	flow	hedge.	We	have	no	derivatives	that hedge	the	net	investment	in	a	foreign	operation.

We	formally	document	the	relationship	between	the	hedging	instruments	and hedged	items,	as	well	as	the	risk	management	objective	and	strategy,	before undertaking	an	accounting	hedge.	To	qualify	for	hedge	accounting,	the derivatives	and	related	hedged	items	must	be	designated	as	a	hedge	at	inception of	the	hedge	relationship.	For	accounting	hedge	relationships,	we	formally assess,	both	at	the	inception	of	the	hedge	and	on	an	ongoing	basis,	if	the derivatives	are	highly	effective	in	offsetting	designated	changes	in	the	fair	value or	cash	flows	of	the	hedged	item.	If	it	is	determined	that	the	derivative instrument	is	not	highly	effective,	hedge	accounting	is	discontinued.

For	derivatives	that	are	designated	as	fair	value	hedges	(i.e.,	hedging	the exposure	to	changes	in	the	fair	value	of	an	asset	or	a	liability	attributable	to	a particular	risk),	changes	in	the	fair	value	of	the	hedging	instrument	are recognized	in	earnings	and	offset	by	recognizing	changes	in	the	fair	value	of	the hedged	item	attributable	to	the	hedged	risk.	To	the	extent	the	changes	in	fair value	of	the	derivative	does	not	offset	the	change	in	fair	value	of	the	hedged item,	the	difference	or

ineffectiveness	is	reflected	in	the	income	statement	in	the	same	financial statement	category	as	the	hedged	item.

For	derivatives	designated	as	cash	flow	hedges	(i.e.,	hedging	the	exposure	to variability	in	expected	future	cash	flows),	the	effective	portions	of	the	gain	or loss	on	derivatives	are	reported	as	a	component	of	accumulated	other comprehensive	income	(loss)	and	subsequently	reclassified	to	interest	income	in the	same	period	or	periods	during	which	the	hedged	transaction	affects	earnings. The	change	in	fair	value	of	any	ineffective	portion	of	the	hedging	derivative	is recognized	immediately	in	noninterest	income.

We	discontinue	hedge	accounting	when	it	is	determined	that	the	derivative	is	no longer	qualifying	as	an	effective	hedge;	the	derivative	expires	or	is	sold, terminated	or	exercised;	or	the	derivative	is	de-designated	as	a	fair	value	or	cash flow	hedge	or,	for	a	cash	flow	hedge,	it	is	no	longer	probable	that	the	forecasted transaction	will	occur	by	the	end	of	the	originally	specified	time	period.	If	we determine	that	the	derivative	no	longer	qualifies	as	a	fair	value	or	cash	flow hedge	and	hedge	accounting	is	discontinued,	the	derivative	will	continue	to	be recorded	on	the	balance	sheet	at	its	fair	value	with	changes	in	fair	value	included in	current	earnings.	For	a	discontinued	fair	value	hedge,	the	previously	hedged item	is	no	longer	adjusted	for	changes	in	fair	value.

When	hedge	accounting	is	discontinued	because	it	is	no	longer	probable	that	a forecasted	transaction	will	occur,	the	derivative	will	continue	to	be	recorded	on the	balance	sheet	at	its	fair	value	with	changes	in	fair	value	included	in	current earnings,	and	the	gains	and	losses	in	accumulated	other	comprehensive	income (loss)	will	be	recognized	immediately	into	earnings.	When	we	discontinue	hedge accounting	because	the	hedging	instrument	is	sold,	terminated	or	no	longer designated,	the	amount	reported	in	accumulated	other	comprehensive	income (loss)	up	to	the	date	of	sale,	termination	or	de-designation,	continues	to	be reported	in	other	comprehensive	income	or	loss	until	the	forecasted	transaction affects	earnings.	We	did	not	terminate	any	cash	flow	hedges	in	2008,	2007	or 2006	due	to	a	determination	that	a	forecasted	transaction	was	no	longer	probable of	occurring.

We	occasionally	purchase	or	originate	financial	instruments	that	contain	an embedded	derivative.	At	the	inception	of	the	transaction,	we	assess	if	the economic	characteristics	of	the	embedded	derivative	are	clearly	and	closely related	to	the	economic	characteristics	of	the	financial	instrument	(host	contract), whether	the	financial	instrument	that	embodied	both	the	embedded	derivative and	the	host	contract	are	measured	at	fair	value	with	changes	in	fair	value reported	in	earnings,	and	whether	a	separate	instrument	with	the	same	terms	as the	embedded	instrument	would	not	meet	the	definition	of	a	derivative.	If	the embedded	derivative	does	not	meet	these	three	conditions,	the	embedded derivative	would	qualify	as	a	derivative	and	be	recorded	apart	from	the	host contract	and	carried	at	fair	value	with	changes	recorded	in	current	earnings.

On	January	1,	2006,	we	adopted	SFAS	155,	which,	among	other	provisions, permits	a	fair	value	election	for	hybrid	financial	instruments	requiring bifurcation	on	an	instrument-by-instrument	basis.	Beginning	January	1,	2006,	we elected	to	account	for	certain	previously	bifurcated	hybrid	instruments	and certain	newly	acquired	hybrid	instruments	under	this	fair	value	election	on	an instrument-by-instrument	basis.	As	such,	certain	previously	reported	embedded derivatives	are	reported	with	their	host	contracts	at	fair	value	in	loans	or	other borrowed	funds.

We	enter	into	commitments	to	make	residential	real	estate	loans	and	loans whereby	the	interest	rate	on	the	loan	is	set	prior	to	funding	(interest	rate	lock commitments).	We	also	enter	into	commitments	to	purchase	or	sell	commercial mortgage	loans.	Loan	commitments	and	interest	rate	lock	commitments	for	loans to	be	classified	as	held	for	sale	and	commitments	to	buy	or	sell	mortgage	loans are	accounted	for	as	free-standing	derivatives	and	are	recorded	at	fair	value	in other	assets	or	other	liabilities	on	the	Consolidated	Balance	Sheet.	Any	gain	or loss	from	the	change	in	fair	value	after	the	inception	of	the	commitment	is recognized	in	noninterest	income.

We	account	for	income	taxes	under	the	asset	and	liability	method.	Deferred	tax assets	and	liabilities	are	determined	based	on	differences	between	the	financial reporting	and	tax	bases	of	assets	and	liabilities	and	are	measured	using	the enacted	tax	rates	and	laws	that	we	expect	will	apply	at	the	time	when	we	believe the	differences	will	reverse.	The	realization	of	deferred	tax	assets	requires	an assessment	to	determine	the	realization	of	such	assets.	Realization	refers	to	the incremental	benefit	achieved	through	the	reduction	in	future	taxes	payable	or refunds	receivable	from	the	deferred	tax	assets,	assuming	that	the	underlying deductible	differences	and	carryforwards	are	the	last	items	to	enter	into	the determination	of	future	taxable	income.	We	establish	a	valuation	allowance	for tax	assets	when	it	is	more	likely	than	not	that	they	will	not	be	realized,	based upon	all	available	positive	and	negative	evidence.

# EARNINGS	PER	COMMON	SHARE

We	calculate	basic	earnings	per	common	share	by	dividing	net	income	adjusted for	preferred	stock	dividends	declared	by	the	weighted-average	number	of	shares of	common	stock	outstanding.

Diluted	earnings	per	common	share	are	based	on	net	income	available	to common	stockholders.	We	increase	the	weighted-average	number	of	shares	of common	stock	outstanding	by	the	assumed	conversion	of	outstanding convertible	preferred	stock	and	debentures	from	the	beginning	of	the	year	or date	of	issuance,	if	later,	and	the	number	of	shares	of	common	stock	that	would be	issued	assuming	the	exercise	of	stock	options	and	warrants	and	the	issuance of	incentive	shares	using	the	treasury	stock	method.	These	adjustments	to	the weighted-average	number	of	shares	of	common	stock	outstanding	are

made	only	when	such	adjustments	will	dilute	earnings	per	common	share.

# STOCK-BASED	COMPENSATION

In	December	2004,	the	FASB	issued	SFAS	123R	"Share-Based	Payment," which	requires	compensation	cost	related	to	share-based	payments	to	employees to	be	recognized	in	the	financial	statements	based	on	their	fair	value.	We	adopted SFAS	123R	effective	January	1,	2006,	using	the	modified	prospective	method	of transition,	which	required	the	provisions	of	SFAS	123R	be	applied	to	new awards	and	awards	modified,	repurchased	or	cancelled	after	the	effective	date.	It also	required	changes	in	the	timing	of	expense	recognition	for	awards	granted	to retirement-eligible	employees	and	clarified	the	accounting	for	the	tax	effects	of stock	awards.	The	adoption	of	SFAS	123R	did	not	have	a	significant	impact	on our	consolidated	financial	statements.

See	Note	16	Stock-Based	Compensation	Plans	for	additional	information.

# RECENT	ACCOUNTING	PRONOUNCEMENTS

We	adopted	the	guidance	in	Staff	Accounting	Bulletin	No.	("SAB")	109	on January	1,	2008.	SAB	109	provides	the	SEC	staff's	view	that	the	expected	future cash	flows	related	to	servicing	should	be	included	in	the	fair	value	measurement of	all	written	loan	commitments	that	are	accounted	for	at	fair	value	through earnings.	The	impact	of	this	guidance	on	our	consolidated	financial	statements has	not	been	significant.

We	adopted	SFAS	157,	"Fair	Value	Measurements"	on	January	1,	2008.	SFAS 157	defines	fair	value,	establishes	a	framework	for	measuring	fair	value,	and expands	disclosures	about	fair	value	measurements.	The	FASB's	Financial	Staff Position	"FSP"	FAS	157-2,	"Effective	Date	of	FASB	Statement	No.	157",	defers until	January	1,	2009,	the	application	of	SFAS	157	to	nonfinancial	assets	and nonfinancial	liabilities	not	recognized	or	disclosed	at	least	annually	at	fair	value. This	includes	nonfinancial	assets	and	nonfinancial	liabilities	initially	measured at	fair	value	in	a	business	combination	or	other	new	basis	event,	but	not measured	at	fair	value	in	subsequent	periods.	See	Note	8	Fair	Value	for additional	information.

As	noted	above,	we	adopted	SFAS	159	on	January	1,	2008.	SFAS	159	permits entities	to	choose	to	measure	many	financial	instruments	and	certain	other	assets and	liabilities	at	fair	value.	We	elected	to	fair	value	certain	commercial	mortgage loans	classified	as	held	for	sale	and	certain	other	financial	instruments.	We	also elected	fair	value	for	residential	real	estate	loans	held	for	sale	or	securitization acquired	from	National	City.	See	Note	8	Fair	Value	for	additional	information.

As	required,	we	adopted	the	provisions	of	Emerging	Issues	Task	Force	Issue	No. ("EITF")	06-4,	"Accounting	for	Deferred	Compensation	and	Postretirement Benefit	Aspects	of

Endorsement	Split-Dollar	Life	Insurance	Arrangements,"	on	January	1,	2008. EITF	06-4	requires	the	recognition	of	a	liability	and	related	compensation	costs for	endorsement	split-dollar	life	insurance	arrangements	that	provide	a	benefit	to retired	employees.	The	adoption	of	the	guidance	resulted	in	a	reduction	of retained	earnings	at	January	1,	2008	of	approximately	$12	million	and	did	not have	a	material	effect	on	our	future	results	of	operations	or	financial	position.

In	February	2008,	the	FASB	issued	FSP	FAS	140-3,	"Accounting	for	Transfers of	Financial	Assets	and	Repurchase	Financing	Transactions."	This	FSP	provides guidance	on	how	the	transferor	and	transferee	should	separately	account	for	a transfer	of	a	financial	asset	and	a	related	repurchase	financing	if	certain	criteria are	met.	This	guidance	will	be	effective	January	1,	2009	for	PNC	and	will impact	our	accounting	for	structured	repurchase	agreements	entered	into	after that	date.

In	March	2008,	the	FASB	issued	SFAS	161,	"Disclosures	about	Derivative Instruments	and	Hedging	Activities."	This	standard	will	require	revisions	to	our derivative	disclosures	to	provide	greater	transparency	as	to	the	use	of	derivative instruments	and	hedging	activities.	This	guidance	will	be	effective	for	interim and	annual	financial	statements	beginning	with	the	first	quarter	2009	Form	10-Q.

In	April	2008,	the	FASB	issued	FSP	FAS	142-3,	"Determination	of	the	Useful Life	of	Intangible	Assets."	This	FSP	provides	guidance	as	to	factors	considered in	developing	renewal	or	extension	assumptions	used	to	determine	the	useful	life of	a	recognized	intangible	asset	under	SFAS	142,	"Goodwill	and	Other Intangible	Assets."	This	guidance	will	be	effective	January	1,	2009	for	PNC.	The adoption	is	not	expected	to	have	a	material	effect	on	our	results	of	operations	or financial	position.

In	May	2008,	the	FASB	issued	SFAS	162,	"The	Hierarchy	of	Generally Accepted	Accounting	Principles."	This	standard	formalizes	minor	changes	in prioritizing	accounting	principles	used	in	the	preparation	of	financial	statements that	are	presented	in	conformity	with	GAAP.

In	May	2008,	the	FASB	issued	SFAS	163,	"Accounting	for	Financial	Guarantee Insurance	Contracts	–	an	Interpretation	of	FASB	Statement	No.	60."	This standard	changes	the	current	practice	of	accounting	for	financial	guarantee insurance	contracts	by	insurance	companies	including	the	recognition	and measurement	of	premium	revenue,	claim	liabilities	and	enhances	related disclosure	requirements.	This	guidance	will	be	effective	for	interim	and	annual financial	statements	beginning	in	2009.	The	adoption	of	this	guidance	is	not expected	to	have	a	material	effect	on	our	results	of	operations	or	financial position.

In	May	2008,	the	FASB	issued	FSP	APB	14-1,	"Accounting	for	Convertible Debt	Instruments	That	May	Be	Settled	in	Cash	Upon	Conversion	(Including Partial	Cash	Settlement)."	This

FSP	clarifies	that	certain	convertible	debt	instruments	should	be	separately accounted	for	as	liability	and	equity	components.	This	guidance	will	be	effective beginning	with	our	first	quarter	2009	Form	10-Q.	We	do	not	expect	the	adoption of	this	guidance	to	have	a	material	effect	on	our	results	of	operations	or	financial position.

In	June	2008,	the	FASB	issued	FSP	EITF	03-6-1,	"Determining	Whether Instruments	Granted	in	Share-Based	Payment	Transactions	Are	Participating Securities."	This	FSP	clarifies	that	unvested	share-based	payment	awards	that contain	nonforfeitable	rights	to	dividends	or	dividend	equivalents	are	considered participating	securities	and	should	be	included	in	the	calculation	of	basic earnings	per	share	using	the	two-class	method	prescribed	by	SFAS	128, "Earnings	Per	Share."	This	guidance	will	be	effective	for	disclosure	beginning with	our	first	quarter	2009	Form	10-Q	with	retrospective	application	required. We	do	not	expect	the	adoption	of	this	guidance	to	have	a	material	effect	on	our earnings	per	share	disclosures.

In	September	2008,	the	FASB	issued	FSP	FAS	133-1	and	FIN	45-4, "Disclosures	about	Credit	Derivatives	and	Certain	Guarantees:	An	Amendment of	FASB	Statement	No.	133	and	FASB	Interpretation	No.	45;	and	Clarification of	the	Effective	Date	of	FASB	Statement	No.	161."	This	FSP	amends	FASB Statement	No.	133,	"Accounting	for	Derivative	Instruments	and	Hedging Activities,"	to	require	disclosures	by	sellers	of	credit	derivatives,	including	credit derivatives	embedded	in	a	hybrid	instrument.	This	FSP	also	amends	FASB Interpretation	No.	45,	"Guarantor's	Accounting	and	Disclosure	Requirements	for Guarantees,	Including	Indirect	Guarantees	of	Indebtedness	of	Others,"	to	require additional	disclosure	about	the	payment/performance	risk	of	a	guarantee.	This guidance	was	effective	December	31,	2008	for	PNC.	See	Note	25	Commitments and	Guarantees	for	additional	information.

In	September	2008,	the	FASB	issued	an	Exposure	Draft,	"Proposed	Statement, Amendments	to	FASB	Interpretation	No.	46(R)."	This	proposed	Statement would	amend	FIN	46R	and	require	ongoing	assessments	to	determine:	1) whether	an	entity	is	a	variable	interest	entity	and,	2)	whether	an	enterprise	is	the primary	beneficiary	of	a	variable	interest	entity.	The	primary	beneficiary determination	generally	would	be	based	on	a	qualitative	analysis	based	on	who has	power	over	the	activities	of	the	entity	and	the	rights	to	receive	benefits	or absorb	losses.	Enhanced	disclosures	would	also	be	required.	This	proposed guidance	would	be	effective	for	PNC	beginning	January	1,	2010.	The	guidance as	proposed	could	require	us	to	consolidate	certain	VIEs	or	securitization	trusts	if we	are	deemed	the	primary	beneficiary.

In	September	2008,	the	FASB	issued	an	Exposure	Draft,	"Proposed	Statement, Accounting	for	Transfers	of	Financial	Assets	–	an	amendment	of	FASB Statement	No.	140."	This	proposed	Statement,	a	revision	of	a	2005	FASB Exposure	Draft,	would	remove	(1)	the	concept	of	a	qualifying	SPE	from

FASB	Statement	No.	140,	"Accounting	for	Transfers	and	Servicing	of	Financial Assets	and	Extinguishments	of	Liabilities,"	and	(2)	the	exceptions	from applying	FIN	46R	to	qualifying	SPEs.	This	proposed	Statement	would	also revise	and	clarify	the	derecognition	requirements	for	transfers	of	financial	assets, establish	conditions	for	transfer	of	a	portion	of	a	financial	asset,	and	requiring the	initial	measurement	of	beneficial	interests	that	are	received	as	proceeds	in connection	with	transfers	of	financial	assets	at	fair	value.	This	proposed guidance	would	be	effective	for	PNC	beginning	January	1,	2010.

In	October	2008,	the	FASB	issued	FSP	FAS	157-3,	"Determining	the	Fair	Value of	a	Financial	Asset	When	the	Market	for	That	Asset	Is	Not	Active."	This	FSP clarifies	the	application	of	FASB	Statement	No.	157,	"Fair	Value Measurements,"	in	a	market	that	is	not	active	and	provides	an	example	to illustrate	key	considerations	in	determining	the	fair	value	of	a	financial	asset when	the	market	for	that	financial	asset	is	not	active.	This	guidance	was considered	in	determining	the	fair	value	of	financial	assets	beginning September	30,	2008.

In	December	2008,	the	FASB	issued	FSP	FAS	140-4	and	FIN	46(R)-8, "Disclosures	by	Public	Entities	(Enterprises)	about	Transfers	of	Financial	Assets and	Interests	in	Variable	Interest	Entities."	This	FSP	amends	FASB	Statement No.	140,	"Accounting	for	Transfers	and	Servicing	of	Financial	Assets	and Extinguishments	of	Liabilities,"	and	will	require	additional	disclosures	about transfers	of	financial	assets.	It	also	amends	FASB	Interpretation	No.	46	(revised December	2003),	"Consolidation	of	Variable	Interest	Entities,"	and	requires additional	disclosures	about	involvement	with	variable	interest	entities.	This guidance	was	effective	December	31,	2008	for	PNC.	See	Note	3	Variable Interest	Entities	for	additional	information.

In	December	2008,	the	FASB	issued	FSP	FAS	132(R)-1,	"Employers' Disclosures	about	Postretirement	Benefit	Plan	Assets."	This	FSP	amends	FASB Statement	No.	132	(revised	2003),	"Employers'	Disclosures	about	Pensions	and Other	Postretirement	Benefits,"	to	provide	guidance	on	an	employer's disclosures	about	plan	assets	of	a	defined	benefit	pension	or	other	postretirement plan.	This	guidance	will	be	effective	December	31,	2009	for	PNC.

In	January	2009,	the	FASB	issued	FSP	EITF	99-20-1,	"Amendments	to	the Impairment	Guidance	of	EITF	Issue	No.	99-20."	This	FSP	amends	the impairment	guidance	in	EITF	Issue	No.	99-20,	"Recognition	of	Interest	income and	Impairment	on	Purchased	Beneficial	Interests	and	Beneficial	Interest	That Continue	to	Be	Held	by	a	Transferor	in	Securitized	Financial	Assets."	The	FSP also	retains	and	emphasizes	the	objective	of	an	other-than-temporary	impairment assessment	and	the	related	disclosure	requirements	in	FASB	Statement	No.	115, "Accounting	for	Certain	Investments	in	Debt	and	Equity	Securities,"	and	other

related	guidance.	This	guidance	was	effective	December	31,	2008	for	PNC.	The adoption	of	this	guidance	did	not	have	a	material	effect	on	our	results	of operations	or	financial	position.

In	January	2009,	the	FASB	issued	proposed	FSP	FAS	107-b	and	APB	28-a, "Interim	Disclosures	about	Fair	Value	of	Financial	Instruments".	This	FSP would	amend	FASB	Statement	No.	107,	"Disclosures	about	Fair	Value	of Financial	Instruments,	to	require	disclosures	about	fair	value	of	financial instruments	in	interim	financial	statements	as	well	as	in	annual	financial statements.	This	FSP	also	would	amend	APB	Opinion	No.	28,	"Interim Financial	Reporting",	to	require	those	disclosures	in	all	interim	financial statements.	As	proposed,	the	disclosures	would	be	effective	for	the	quarter	ended March	31,	2009.

In	December	2007,	the	FASB	issued	SFAS	141(R),	"Business	Combinations." This	statement	will	require	all	businesses	acquired	to	be	measured	at	the	fair value	of	the	consideration	paid	as	opposed	to	the	cost-based	provisions	of	SFAS 141.	It	will	require	an	entity	to	recognize	the	assets	acquired,	the	liabilities assumed,	and	any	noncontrolling	interest	in	the	acquiree	at	the	acquisition	date, measured	at	their	fair	values	as	of	that	date.	SFAS	141(R)	requires	the	value	of consideration	paid	including	any	future	contingent	consideration	to	be	measured at	fair	value	at	the	closing	date	of	the	transaction.	Also,	restructuring	costs	and acquisition	costs	are	to	be	expensed	rather	than	included	in	the	cost	of	the acquisition.	This	guidance	is	effective	for	all	acquisitions	with	closing	dates	after January	1,	2009.

In	December	2007,	the	FASB	issued	SFAS	160,	"Accounting	and	Reporting	of Noncontrolling	Interests	in	Consolidated	Financial	Statements,	an	amendment	of ARB	No.	51."	This	statement	amends	ARB	No.	51	to	establish	accounting	and reporting	standards	for	the	noncontrolling	interest	in	a	subsidiary	and	for	the deconsolidation	of	a	subsidiary.	It	clarifies	that	a	noncontrolling	interest	should be	reported	as	equity	in	the	consolidated	financial	statements.	This	statement requires	expanded	disclosures	that	identify	and	distinguish	between	the	interests of	the	parent's	owners	and	the	interests	of	the	noncontrolling	owners	of	an entity.	This	guidance	is	effective	January	1,	2009.	We	do	not	expect	the	adoption to	have	a	material	impact	on	our	consolidated	financial	statements.

In	May	2007,	the	FASB	issued	FSP	FIN	48-1,	"Definition	of	Settlement	in FASB	Interpretation	("FIN")	No.	48."	This	FSP	amended	FIN	48,	"Accounting for	Uncertainty	in	Income	Taxes,"	to	provide	guidance	as	to	the	determination	of whether	a	tax	position	is	deemed	effectively	settled	for	purposes	of	recognizing previously	unrecognized	tax	benefits	under	FIN	48.	This	guidance	was	adopted effective	January	1,	2007	in	connection	with	our	adoption	of	FIN	48.	See	Note 21	Income	Taxes	for	additional	information.

During	2006,	the	FASB	issued	the	following:

•	SFAS	158,	"Employers'	Accounting	for	Defined	Benefit	Pension	and	Other Postretirement	Plans	–	an	amendment	of	FASB	Statements	No.	87,	88, 106,	and	132(R)."	This	statement	affects	the	accounting	and	reporting	for our	qualified	pension	plan,	our	nonqualified	retirement	plans,	our postretirement	welfare	benefit	plans	and	our	post	employment	benefit	plan. SFAS	158	required	recognition	on	the	balance	sheet	of	the	over-	or underfunded	position	of	these	plans	as	the	difference	between	the	fair	value of	plan	assets	and	the	related	benefit	obligations	previously	recognized	on the	balance	sheet.	The	difference,	net	of	tax,	was	recorded	as	part	of accumulated	other	comprehensive	income	or	loss	("AOCI")	within	the shareholders'	equity	section	of	the	balance	sheet.	This	guidance	also required	the	recognition	of	any	unrecognized	actuarial	gains	and	losses	and unrecognized	prior	service	costs	to	AOCI,	net	of	tax.	SFAS	158	was effective	for	PNC	as	of	December	31,	2006,	with	no	restatement	for	prior year-end	reporting	periods	permitted.	The	impact	of	adoption	of	SFAS	158 at	December	31,	2006	was	a	reduction	of	AOCI	of	$132	million	after	tax. •	FIN	48	"Accounting	for	Uncertainty	in	Income	Taxes	–	an	Interpretation	of FASB	Statement	No.	109,"	clarifies	the	accounting	for	uncertainty	in income	taxes	recognized	in	the	financial	statements	and	sets	forth recognition,	derecognition	and	measurement	criteria	for	tax	positions	taken or	expected	to	be	taken	in	a	tax	filing.	For	PNC,	this	guidance	was	effective for	all	tax	positions	taken	or	expected	to	be	taken	beginning	on	January	1, 2007.	See	Note	19	Income	Taxes	for	additional	information.

•	FSP	FAS	13-2,	"Accounting	for	a	Change	or	Projected	Change	in	the Timing	of	Cash	Flows	Relating	to	Income	Taxes	Generated	by	a	Leveraged Lease	Transaction,"	requires	a	recalculation	of	the	timing	of	income recognition	for	a	leveraged	lease	under	SFAS	13,	"Accounting	for	Leases," when	a	change	in	the	timing	of	income	tax	deductions	directly	related	to the	leveraged	lease	transaction	occurs	or	is	projected	to	occur.	Any	tax positions	taken	regarding	the	leveraged	lease	transaction	must	be recognized	and	measured	in	accordance	with	FIN	48	described	above.	This guidance	was	effective	for	PNC	beginning	January	1,	2007	with	the cumulative	effect	of	applying	the	provisions	of	this	FSP	being	recognized through	an	adjustment	to	opening	retained	earnings.	Any	immediate	or future	reductions	in	earnings	from	the	change	in	accounting	would	be recovered	in	subsequent	years.	Our	adoption	of	the	guidance	in	FSP	FAS 13-2	resulted	in	an	after-tax	charge	to	beginning	retained	earnings	at January	1,	2007	of	approximately	$149	million.

# NOTE	2	ACQUISITIONS	AND	DIVESTITURES

# NATIONAL	CITY	CORPORATION

On	December	31,	2008,	we	acquired	National	City	for	approximately	$6.1 billion.	The	total	consideration	included	approximately	$5.6	billion	of	common stock,	representing	approximately	95	million	shares,	$150	million	of	preferred stock	and	cash	of	$379	million	paid	to	warrant	holders	by	National	City.	The transaction	requires	no	future	contingent	consideration	payments.

National	City,	based	in	Cleveland,	Ohio,	was	one	of	the	nation's	largest	financial services	companies.	At	December	31,	2008,	prior	to	our	acquisition,	National City	had	total	assets	of	approximately	$153	billion	and	total	deposits	of approximately	$101	billion.	National	City	operates	through	an	extensive network	in	Ohio,	Florida,	Illinois,	Indiana,	Kentucky,	Michigan,	Missouri, Pennsylvania	and	Wisconsin	and	also	conducts	selected	consumer	lending businesses	and	other	financial	services	on	a	nationwide	basis.	Its	primary businesses	include	commercial	and	retail	banking,	mortgage	financing	and servicing,	consumer	finance	and	asset	management.	The	primary	reasons	for	the merger	with

National	City	were	to	enhance	shareholder	value,	to	improve	PNC's	competitive position	in	the	financial	services	industry	and	to	further	expand	PNC's	existing branch	network	in	states	where	it	currently	operates	as	well	as	expanding	into new	markets.

This	acquisition	was	accounted	for	under	the	purchase	method	of	accounting. The	purchase	price	was	allocated	to	the	National	City	assets	acquired	and liabilities	assumed	using	their	estimated	fair	values	as	of	the	acquisition	date, December	31,	2008.	Since	the	acquisition	occurred	at	year	end,	no	results	of operations	of	National	City	are	included	in	the	Consolidated	Income	Statement. The	summary	computation	of	the	purchase	price	and	the	allocation	of	the purchase	price	to	the	net	assets	of	National	City	are	presented	below.	The allocation	of	the	purchase	price	may	be	modified	through	2009	as	more information,	such	as	appraisals,	contracts,	reviews	of	legal	documentation,	and selected	key	borrower	data,	is	obtained	about	the	fair	value	of	assets	acquired and	liabilities	assumed	and	may	result	in	goodwill.	We	also	have	not	yet finalized	our	plans	to	exit	National	City	facilities	or	identified	employee terminations.	Completion	of	these	plans	will	likely	result	in	additional	liabilities in	future	periods.

(In	millions,	except	per	share	data)

(a) Amounts	include	premium,	discount	and	other	fair	value	adjustments.

(b) The	value	of	PNC	common	stock	was	determined	by	averaging	its	closing	price	for	five	trading	days,	including	the	announcement	date	of	October	24,	2008.

(c) The	fair	value	of	the	net	assets	of	National	City	exceeded	the	purchase	price.	In	accordance	with	SFAS	141	"Business	Combinations",	the	fair	value	allocated	to	premises,	equipment	and	leasehold	improvements and	other	intangibles	reduced	these	balances	by	$891	million	and	$446	million,	respectively.

# Condensed	Statement	of	National	City	Net	Assets	Acquired

The	following	condensed	statement	of	net	assets	reflects	the	preliminary	value assigned	to	National	City	net	assets	as	of	the	December	31,	2008	acquisition date.	The	values	are	net	of	the	reallocation	of	the	excess	value	of	net	assets acquired	over	the	purchase	price	($1.337	billion),	and	the	cash	paid	by	National City	to	its	warrant	holders	($379	million).

# (In	millions)

# Assets

| Trading	assets,	interest-earning	deposits	with	banks,	and	other |  |
| :--- | :--- |
| short-term\tinvestments | 9,249 |
| Loans\theld\tfor\tsale | 2,185 |
| Investment\tsecurities | 13,327 |
| Net\tloans | 97,435 |
| Other\tintangible\tassets | 1,797 |
| Equity\tinvestments | 2,060 |
| Other\tassets | 12,651 |
| Total\tassets | $148,183 |
| Liabilities |  |
| Deposits | $103,639 |
| Federal\tfunds\tpurchased\tand\trepurchase\tagreements | 3,501 |
| Other\tborrowed\tfunds | 21,919 |
| Other\tliabilities | 13,370 |
| Total\tliabilities | \t 142,429 |
| Net\tassets\tacquired | $5,754 |

Purchase	accounting	adjustments	include	discounts	and	premiums	on	interest- earning	assets	and	liabilities	as	follows:

•	Discounts	on	loans	of	$6.1	billion	will	be	accreted	to	net	interest income	using	the	constant	effective	yield	method	over	the	weighted average	life	of	the	loans,	estimated	to	be	between	two	and	three	years. The	weighted	average	lives	could	vary	depending	on	prepayments, revised	estimated	cash	flows	and	other	related	factors.	Of	the	$6.1 billion	of	discounts,	$3.7	billion	relates	to	loans	accounted	for	under SOP	03-3	and	$2.4	billion	relates	to	performing	loans.	A	total	of	$3.7 billion	of	the	fair	value	mark	on	impaired	loans	is	not	accretable. •	Premiums	on	interest-earning	time	deposits	of	$2.1	billion	will	be amortized	over	the	weighted	average	life	of	the	deposits	of approximately	one	year	using	the	constant	effective	yield	method. •	Discounts	on	borrowed	funds	of	$1.8	billion	will	be	accreted	over	the weighted	average	life	of	the	borrowings	of	approximately	seven	years using	the	constant	effective	yield	method.

Other	intangible	assets	acquired	consisted	of	the	following	(in	millions):

|  |  | Fair | Weighted | Amortization |
| :--- | :--- | :--- | :--- | :--- |
| Intangible\tAsset | Intangible\tAsset | Value | Life | Method |
| Residential\tmortgage\tservicing\trights | Residential\tmortgage\tservicing\trights | $1,003 | (a) | (a) |
| Core\tdeposit\t(b) | Core\tdeposit\t(b) | 351 | 12\tyrs | Accelerated |
| Commercial\tmortgage\tservicing\trights | Commercial\tmortgage\tservicing\trights | 210 | 13\tyrs | Accelerated |
| Wealth\tmanagement\tcustomer\trelationships\t(b) | Wealth\tmanagement\tcustomer\trelationships\t(b) | 203 | 12\tyrs | Straight\tline |
| National\tCity\tbrand\t(b) | National\tCity\tbrand\t(b) | 15 | 21\tmos | Straight\tline |
| Consumer\tloan\tservicing\trights | Consumer\tloan\tservicing\trights | 15 | 2\tyrs | Accelerated |
| Total | Total | $1,797 |  |  |
| (a) | Intangible\tasset\tcarried\tat\tfair\tvalue. |  |  |  |

(a) Intangible	asset	carried	at	fair	value.

(b) Fair	value	adjusted	for	the	allocation	of	the	excess	of	fair	value	of	net	assets	acquired	over	the	purchase	price.

See	Note	9	Goodwill	and	Other	Intangible	Assets	for	additional	information.

The	following	table	presents	the	unaudited	pro	forma	combined	results	of operations	of	PNC	and	National	City	as	if	the	acquisition	had	been	completed	as of	the	beginning	of	2008	or	2007.	The	unaudited	pro	forma	results	of	operations are	presented	solely	for	information	purposes	and	are	not	intended	to	represent	or be	indicative	of	the	consolidated	results	of	operations	that	PNC	would	have reported	had	this	transaction	been	completed	as	of	the	dates	and	for	the	periods presented,	nor	are	they	necessarily	indicative	of	future	results.

# Unaudited	Pro	Forma	Combined	Results

| (In	millions,	except	per	share	data) | 2008 | 2007 |
| :--- | :--- | :--- |
| Total\trevenue | $15,397 | $16,709 |
| Net\tincome\t(loss) | (3,742) | 3,695 |
| Per\tshare\tdata |  |  |
| Earnings\t(loss)\t–\tbasic | $(9.58) | $7.66 |
| Earnings\t(loss)\t–\tdiluted | (9.60) | 7.55 |
| Average\tcommon\tshares\toutstanding\t–\tbasic | 439 | 426 |
| Average\tcommon\tshares\toutstanding\t–\tdiluted | 439 | 431 |

The	unaudited	pro	forma	combined	results	of	operations	include	the	effect	of	the net	amortization/accretion	of	purchase	accounting	fair	value	adjustments	based on	asset	and	liability	valuations	as	of	the	acquisition	date.	They	also	reflect	the receipt	of	$7.6	billion	from	the	sale	of	preferred	securities	and	issuance	of	a warrant	to	purchase	16.9	million	shares	of	PNC	common	stock	under	the	TARP Capital	Purchase	Program	(See	Note	19	Shareholders'	Equity	for	additional information).	During	2008,	National	City	recorded	$2.4	billion	of	nonrecurring charges	for	goodwill	impairments	which	are	included	in	these	pro	forma	results. These	adjustments	have	been	consistently	applied	to	each	period	presented	in	the table	above.

# STERLING	FINANCIAL	CORPORATION

On	April	4,	2008,	we	acquired	Lancaster,	Pennsylvania-based	Sterling	Financial Corporation	("Sterling").	Sterling	shareholders	received	an	aggregate	of approximately	4.6	million	shares	of	PNC	common	stock	and	$224	million	of cash.

# J.J.B.	HILLIARD,	W.L.	LYONS,	LLC

On	March	31,	2008,	we	sold	J.J.B.	Hilliard,	W.L.	Lyons,	LLC	("Hilliard Lyons"),	a	Louisville,	Kentucky-based	wholly-owned	subsidiary	of	PNC	and	a full-service	brokerage	and	financial	services	provider,	to	Houchens	Industries, Inc.	We	recognized	an	after-tax	gain	of	$23	million	in	the	first	quarter	of	2008	in connection	with	this	divestiture.

# ALBRIDGE	SOLUTIONS	INC.

On	December	7,	2007,	we	acquired	Albridge	Solutions	Inc.	("Albridge"),	a Lawrenceville,	New	Jersey-based	provider	of	portfolio	accounting	and	enterprise wealth	management

services.	Albridge	extends	PNC	Global	Investment	Servicing's	capabilities	into the	delivery	of	knowledge-based	information	services	through	its	relationships with	financial	institutions	and	financial	advisors.

# COATES	ANALYTICS,	LP

Also	on	December	7,	2007,	we	acquired	Coates	Analytics,	LP	("Coates Analytics"),	a	Chadds	Ford,	Pennsylvania-based	provider	of	web-based	analytic tools	that	help	asset	managers	identify	wholesaler	territories	and	financial advisor	targets,	promote	products	in	the	marketplace	and	strengthen	competitive intelligence.	Coates	Analytics	complements	PNC	Global	Investment	Servicing's business	strategy.

# YARDVILLE	NATIONAL	BANCORP

On	October	26,	2007	we	acquired	Hamilton,	New	Jersey-based	Yardville National	Bancorp	("Yardville").	Yardville	shareholders	received	an	aggregate	of approximately	3.4	million	shares	of	PNC	common	stock	and	$156	million	in cash.	Total	consideration	paid	was	approximately	$399	million	in	stock	and cash.

# ARCS	COMMERCIAL	MORTGAGE	CO.,	L.P.

On	July	2,	2007,	we	acquired	ARCS	Commercial	Mortgage	Co.,	L.P.	("ARCS"), a	Calabasas	Hills,	California-based	lender	with	10	origination	offices	in	the United	States.	ARCS	has	been	a	leading	originator	and	servicer	of	agency multifamily	loans	for	the	past	decade.

# MERCANTILE	BANKSHARES	CORPORATION

Effective	March	2,	2007,	we	acquired	Mercantile	Bankshares	Corporation ("Mercantile").	Mercantile	shareholders	received	an	aggregate	of	approximately 53	million	shares	of	PNC	common	stock	and	$2.1	billion	in	cash.	Total consideration	paid	was	approximately	$5.9	billion	in	stock	and	cash.

# BLACKROCK/MLIM	TRANSACTION

On	September	29,	2006,	Merrill	Lynch	contributed	its	investment	management business	("MLIM")	to	BlackRock	in	exchange	for	65	million	shares	of	newly issued	BlackRock	common	and	preferred	stock.	BlackRock	accounted	for	the MLIM	transaction	under	the	purchase	method	of	accounting.	Immediately following	the	closing,	PNC	continued	to	own	44	million	shares	of	BlackRock common	stock	representing	an	ownership	interest	of	34%	of	the	combined company	(as	compared	with	69%	immediately	prior	to	the	closing).

We	also	recorded	a	liability	at	September	30,	2006	for	deferred	taxes	of	$.9 billion,	related	to	the	excess	of	the	book	value	over	the	tax	basis	of	our investment	in	BlackRock,	and	a	liability	of	$.6	billion	related	to	our	obligation	to provide	shares	of	BlackRock	common	stock	to	help	fund	certain	BlackRock long-term	incentive	plan	("LTIP")	programs.

Beginning	with	fourth	quarter	2006,	we	recognize	gain	or	loss	each	quarter-end on	our	remaining	liability	to	provide	shares	of	BlackRock	common	stock	to	help fund	certain	BlackRock	LTIP	programs	as	that	liability	is	marked	to	market based	on	changes	in	BlackRock's	common	stock	price.	We	recognized	a	pretax gain	of	$82	million	in	the	first	quarter	of	2007	from	the	transfer	of	BlackRock shares	for	certain	payouts	under	one	of	these	programs.	Additional	BlackRock shares	were	distributed	to	LTIP	participants	in	the	first	quarter	of	2008,	resulting in	a	$3	million	pretax	gain.

The	overall	balance	sheet	impact	of	the	BlackRock/MLIM	transaction	was	an increase	to	our	shareholders'	equity	of	$1.6	billion.	The	increase	to	equity	was comprised	of	an	after-tax	gain	of	$1.3	billion,	net	of	the	expense	associated	with the	LTIP	liability	and	the	deferred	taxes,	and	an	after-tax	increase	to	capital surplus	of	$.3	billion.	The	recognition	of	the	gain	is	consistent	with	our	existing accounting	policy	for	the	sale	or	issuance	by	subsidiaries	of	their	stock	to	third parties.	The	gain	represents	the	difference	between	our	basis	in	BlackRock	stock prior	to	the	BlackRock/MLIM	transaction	and	the	new	book	value	per	share	and resulting	increase	in	value	of	our	investment	realized	from	the	transaction.	The direct	increase	to	capital	surplus	rather	than	inclusion	in	the	gain	resulted	from the	accounting	treatment	required	due	to	existing	BlackRock	repurchase commitments	or	programs.

For	the	nine	months	ended	September	30,	2006,	our	Consolidated	Income Statement	included	our	former	69%	–	71%	ownership	interest	in	BlackRock's net	income	through	the	closing	date.	However,	beginning	September	30,	2006, our	Consolidated	Balance	Sheet	no	longer	reflected	the	consolidation	of BlackRock's	balance	sheet	but	recognized	our	ownership	interest	in	BlackRock as	an	investment	accounted	for	under	the	equity	method.	Since	that	date,	our share	of	BlackRock's	net	income	is	reported	within	asset	management noninterest	income	in	PNC's	Consolidated	Income	Statement.

# NOTE	3	VARIABLE	INTEREST	ENTITIES

We	are	involved	with	various	entities	in	the	normal	course	of	business	that	were deemed	to	be	VIEs.	We	consolidated	certain	VIEs	as	of	December	31,	2008	and 2007	for	which	we	were	determined	to	be	the	primary	beneficiary.

| In	millions | Aggregate<br>Assets | Aggregate<br>Liabilities |
| :--- | :--- | :--- |
| Partnership\tinterests\tin\tlow\tincome\thousing |  |  |
| projects\t(a) |  |  |
| December\t31,\t2008 | $1,499 | $1,455 |
| December\t31,\t2007 | $1,108 | $1,108 |
| Credit\tRisk\tTransfer\tTransaction\t(b) |  |  |
| December\t31,\t2008 | $1,070 | $1,070 |

(a)Amounts	for	December	31,	2008	include	National	City,	which	PNC	acquired	on	that	date.

(b)National	City-related	transaction.

We	hold	significant	variable	interests	in	VIEs	that	have	not	been	consolidated because	we	are	not	considered	the	primary	beneficiary.	Information	on	these VIEs	follows:

(a)PNC's	risk	of	loss	consists	of	off-balance	sheet	liquidity	commitments	to	Market	Street	of	$6.4	billion and	other	credit	enhancements	of	$.6	billion	at	December	31,	2008.	The	comparable	amounts	were $8.8	billion	and	$.2	billion	at	December	31,	2007.

(b)Amounts	reported	primarily	represent	low	income	housing	projects.

(c)Amounts	include	the	impact	of	National	City.

The	commercial	paper	obligations	at	December	31,	2008	and	December	31, 2007	were	effectively	collateralized	by	Market	Street's	assets.	While	PNC	may be	obligated	to	fund	under	the	$6.4	billion	of	liquidity	facilities	for	events	such as	commercial	paper	market	disruptions,	borrower	bankruptcies,	collateral deficiencies	or	covenant	violations,	our	credit	risk	under	the	liquidity	facilities	is secondary	to	the	risk	of	first	loss	provided	by	the	borrower	or	another	third	party in	the	form	of	deal-specific	credit	enhancement,	such	as	by	the	over collateralization	of	the	assets.	Deal-specific	credit	enhancement	that	supports	the commercial	paper	issued	by	Market	Street	is	generally	structured	to	cover	a multiple	of	expected	losses	for	the	pool	of	assets	and	is	sized	to	generally	meet rating	agency	standards	for	comparably	structured	transactions.	In	addition,	PNC would	be	required	to	fund	$1.0	billion	of	the	liquidity	facilities	if	the	underlying assets	are	in	default.	See	Note	25	Commitments	and	Guarantees	for	additional information.

We	evaluated	the	design	of	Market	Street,	its	capital	structure,	the	Note	and relationships	among	the	variable	interest	holders	under	the	provisions	of	FIN 46R.	Based	on	this	analysis,	we	are	not	the	primary	beneficiary	as	defined	by FIN	46R	and	therefore	the	assets	and	liabilities	of	Market	Street	are	not	reflected in	our	Consolidated	Balance	Sheet.

PNC	considers	changes	to	the	variable	interest	holders	(such	as	new	expected loss	note	investors	and	changes	to	program-level	credit	enhancement	providers), changes	to	the	terms	of	expected	loss	notes,	and	new	types	of	risks	related	to Market	Street	as	reconsideration	events.	PNC	reviews	the	activities	of	Market Street	on	at	least	a	quarterly	basis	to	determine	if	a	reconsideration	event	has occurred.

We	make	certain	equity	investments	in	various	limited	partnerships	that	sponsor affordable	housing	projects	utilizing

the	Low	Income	Housing	Tax	Credit	("LIHTC")	pursuant	to	Sections	42	and	47 of	the	Internal	Revenue	Code.	The	purpose	of	these	investments	is	to	achieve	a satisfactory	return	on	capital,	to	facilitate	the	sale	of	additional	affordable housing	product	offerings	and	to	assist	us	in	achieving	goals	associated	with	the Community	Reinvestment	Act.	The	primary	activities	of	the	limited	partnerships include	the	identification,	development	and	operation	of	multi-family	housing that	is	leased	to	qualifying	residential	tenants.	Generally,	these	types	of investments	are	funded	through	a	combination	of	debt	and	equity.	We	typically invest	in	these	partnerships	as	a	limited	partner.

Also,	we	are	a	national	syndicator	of	affordable	housing	equity	(together	with	the investments	described	above,	the	"LIHTC	investments").	In	these	syndication transactions,	we	create	funds	in	which	our	subsidiaries	are	the	general	partner and	sell	limited	partnership	interests	to	third	parties,	and	in	some	cases	may	also purchase	a	limited	partnership	interest	in	the	fund	and/or	provide	mezzanine financing	to	the	fund.	The	purpose	of	this	business	is	to	generate	income	from the	syndication	of	these	funds	and	to	generate	servicing	fees	by	managing	the funds.	General	partner	activities	include	selecting,	evaluating,	structuring, negotiating,	and	closing	the	fund	investments	in	operating	limited	partnerships, as	well	as	oversight	of	the	ongoing	operations	of	the	fund	portfolio.

We	evaluate	our	interests	and	third	party	interests	in	the	limited	partnerships	in determining	whether	we	are	the	primary	beneficiary.	The	primary	beneficiary determination	is	based	on	which	party	absorbs	a	majority	of	the	variability.	The primary	sources	of	variability	in	LIHTC	investments	are	the	tax	credits,	tax benefits	of	losses	on	the	investments	and	development	and	operating	cash	flows. We	have	consolidated	LIHTC	investments	in	which	we	absorb	a	majority	of	the variability	and	thus	are	considered	the	primary	beneficiary.	The	assets	are primarily	included	in	Equity	Investments	and	Other	Assets	on	our	Consolidated Balance	Sheet	with	the	liabilities	primarily	classified	in	Other	Liabilities	and Minority	Interest.	Neither	creditors	nor	equity	investors	in	the	LIHTC investments	have	any	recourse	to	our	general	credit.	The	consolidated	aggregate assets	and	liabilities	of	these	LIHTC	investments	are	provided	in	the Consolidated	VIEs	–	PNC	Is	Primary	Beneficiary	table	and	reflected	in	the "Other"	business	segment.

We	also	have	LIHTC	investments	in	which	we	are	not	the	primary	beneficiary, but	are	considered	to	have	a	significant	variable	interest	based	on	our	interests	in the	partnership.	These	investments	are	disclosed	in	the	Non-Consolidated	VIEs	– Significant	Variable	Interests	table.	The	table	also	reflects	our	maximum exposure	to	loss.	Our	maximum	exposure	to	loss	is	equal	to	our	legally	binding equity	commitments	adjusted	for	recorded	impairment	and	partnership	results. We	use	the	equity	and	cost	methods	to	account	for	our	investment	in	these entities	with	the	investments	reflected	in	Equity	Investments	on	our

Consolidated	Balance	Sheet.	In	addition,	we	increase	our	recognized	investments and	recognize	a	liability	for	all	legally	binding	unfunded	equity	commitments. These	liabilities	are	reflected	in	Other	Liabilities	on	our	Consolidated	Balance Sheet.

National	City	Bank	("NCB")	sponsored	a	special	purpose	entity	("SPE")	trust and	concurrently	entered	into	a	credit	risk	transfer	agreement	with	an independent	third-party	to	mitigate	credit	losses	on	a	pool	of	nonconforming mortgage	loans	originated	by	its	former	First	Franklin	business	unit.	The	SPE was	formed	with	a	small	contribution	from	NCB	and	was	structured	as	a bankruptcy-remote	entity	so	that	its	creditors	have	no	recourse	to	NCB.	In exchange	for	a	perfected	security	interest	in	the	cash	flows	of	the	nonconforming mortgage	loans,	the	SPE	issued	to	NCB	asset-backed	securities	in	the	form	of senior,	mezzanine,	and	subordinated	equity	notes.	NCB	has	incurred	credit losses	equal	to	the	subordinated	equity	notes.	NCB	currently	holds	the	right	to put	the	mezzanine	notes	to	the	independent	third-party	at	par.	As	of	December 31,	2008,	the	value	of	the	mezzanine	notes	was	$169	million.	NCB	holds	the senior	notes	and	will	be	responsible	for	credit	losses	in	excess	of	this	amount. National	City	Bank	("NCB")	sponsored	a	special	purpose	entity	("SPE")	trust and	concurrently	entered	into	a	credit	risk	transfer	agreement	with	an independent	third	party	to	mitigate	credit	losses	on	a	pool	of	nonconforming mortgage	loans	originated	by	its	former	First	Franklin	business	unit.	The	SPE was	formed	with	a	small	contribution	from	NCB	and	was	structured	as	a bankruptcy-remote	entity	so	that	its	creditors	have	no	recourse	to	NCB.	In exchange	for	a	perfected	security	interest	in	the	cash	flows	of	the	nonconforming mortgage	loans,	the	SPE	issued	to	NCB	asset-backed	securities	in	the	form	of senior,	mezzanine,	and	subordinated	equity	notes.	NCB	has	incurred	credit losses	equal	to	the	subordinated	equity	notes.	NCB	currently	holds	the	right	to put	the	mezzanine	notes	to	the	independent	third-party	at	par.	As	of	December 31,	2008,	the	value	of	the	mezzanine	notes	was	$169	million.	NCB	holds	the senior	notes	and	will	be	responsible	for	credit	losses	in	excess	of	this	amount.

We	issue	certain	hybrid	capital	vehicles	that	qualify	as	capital	for	regulatory purposes.

In	February	2008,	PNC	Preferred	Funding	LLC	(the	"LLC"),	one	of	our	indirect subsidiaries,	sold	$375	million	of	8.700%	Fixed-to-Floating	Rate	Non- Cumulative	Exchangeable	Perpetual	Trust	Securities	of	PNC	Preferred	Funding Trust	III	("Trust	III")	to	third	parties	in	a	private	placement.	In	connection	with the	private	placement,	Trust	III	acquired	$375	million	of	Fixed-to-Floating	Rate Non-Cumulative	Perpetual	Preferred	Securities	of	the	LLC	(the	"LLC	Preferred Securities").	The	sale	was	similar	to	the	March	2007	private	placement	by	the LLC	of	$500	million	of	6.113%	Fixed-to-Floating	Rate	Non-Cumulative Exchangeable	Trust	Securities	(the	"Trust	II	Securities")	of	PNC	Preferred Funding	Trust	II	("Trust	II")	in	which	Trust	II	acquired	$500	million	of	LLC Preferred	Securities	and	to	the	December	2006

private	placement	by	PNC	REIT	Corp.	of	$500	million	of	6.517%	Fixed-to- Floating	Rate	Non-Cumulative	Exchangeable	Perpetual	Trust	Securities	(the "Trust	I	Securities")	of	PNC	Preferred	Funding	Trust	I	("Trust	I")	in	which Trust	I	acquired	$500	million	of	LLC	Preferred	Securities.	PNC	REIT	Corp. owns	100%	of	LLC's	common	voting	securities.	As	a	result,	LLC	is	an	indirect subsidiary	of	PNC	and	is	consolidated	on	our	Consolidated	Balance	Sheet.	Trust I,	II	and	III's	investment	in	LLC	Preferred	Securities	is	characterized	as	a minority	interest	on	our	Consolidated	Balance	Sheet	since	we	are	not	the	primary beneficiary	of	Trust	I,	Trust	II	and	Trust	III.	This	minority	interest	totaled approximately	$1.3	billion	at	December	31,	2008.

PNC	Bank,	N.A.	has	contractually	committed	to	Trust	I	that	if	full	dividends	are not	paid	in	a	dividend	period	on	the	Trust	I	Securities,	LLC	Preferred	Securities or	any	other	parity	equity	securities	issued	by	the	LLC,	neither	PNC	Bank,	N.A. nor	its	subsidiaries	will	declare	or	pay	dividends	or	other	distributions	with respect	to,	or	redeem,	purchase	or	acquire	or	make	a	liquidation	payment	with respect	to,	any	of	its	equity	capital	securities	during	the	next	succeeding	period (other	than	to	holders	of	the	LLC	Preferred	Securities	and	any	parity	equity securities	issued	by	the	LLC)	except:	(i)	in	the	case	of	dividends	payable	to subsidiaries	of	PNC	Bank,	N.A.,	to	PNC	Bank,	N.A.	or	another	wholly-owned subsidiary	of	PNC	Bank,	N.A.	or	(ii)	in	the	case	of	dividends	payable	to	persons that	are	not	subsidiaries	of	PNC	Bank,	N.A.,	to	such	persons	only	if,	(A)	in	the case	of	a	cash	dividend,	PNC	has	first	irrevocably	committed	to	contribute amounts	at	least	equal	to	such	cash	dividend	or	(B)	in	the	case	of	in-kind dividends	payable	by

PNC	REIT	Corp.,	PNC	has	committed	to	purchase	such	in-kind	dividend	from the	applicable	PNC	REIT	Corp.	holders	in	exchange	for	a	cash	payment representing	the	market	value	of	such	in-kind	dividend,	and	PNC	has	committed to	contribute	such	in-kind	dividend	to	PNC	Bank,	N.A.

# NOTE	4	LOANS,	COMMITMENTS	TO	EXTEND	CREDIT	AND CONCENTRATIONS	OF	CREDIT	RISK

Loans	outstanding	were	as	follows:

| December	31	-	in	millions | 2008	(a) | 2007 |
| :--- | :--- | :--- |
| Commercial | $67,319 | $28,539 |
| Commercial\treal\testate | 25,736 | 8,903 |
| Consumer | 52,489 | \t 18,393 |
| Residential\treal\testate | 21,583 | 9,557 |
| Equipment\tlease\tfinancing | 6,461 | 2,514 |
| Other | 1,901 | 413 |
| Total\tloans | $175,489 | $68,319 |

(a)Amounts	at	December	31,	2008	include	$99.7	billion	of	loans	related	to	National	City.

Loans	are	presented	net	of	unearned	income,	net	deferred	loan	fees,	unamortized discounts	and	premiums,	and	purchase	discounts	and	premiums	totaling	$4.1 billion	and	$990	million	at	December	31,	2008	and	2007,	respectively.

Concentrations	of	credit	risk	exist	when	changes	in	economic,	industry	or geographic	factors	similarly	affect	groups	of	counterparties	whose	aggregate exposure	is	material	in	relation	to	our	total	credit	exposure.	Loans	outstanding and	related	unfunded	commitments	are	concentrated	in	our	primary	geographic markets.	At	December	31,	2008,	no	specific	industry	concentration	exceeded	7% of	total	commercial	loans	outstanding.

In	the	normal	course	of	business,	we	originate	or	purchase	loan	products	whose contractual	features,	when	concentrated,	may	increase	our	exposure	as	a	holder and	servicer	of	those	loan	products.	Possible	product	terms	and	features	that	may create	a	concentration	of	credit	risk	would	include	loan	products	whose	terms permit	negative	amortization,	a	high	loan-to-value	ratio,	features	that	may	expose the	borrower	to	future	increases	in	repayments	above	increases	in	market	interest rates,	below-market	interest	rates	and	interest-only	loans,	among	others.

We	originate	interest-only	loans	to	commercial	borrowers.	These	products	are standard	in	the	financial	services	industry	and	the	features	of	these	products	are considered	during	the	underwriting	process	to	mitigate	the	increased	risk	of	this product	feature	that	may	result	in	borrowers	not	being	able	to	make	interest	and principal	payments	when	due.	We	do	not	believe	that	these	product	features create	a	concentration	of	credit	risk.

We	also	originate	home	equity	loans	and	lines	of	credit	that	result	in	a	credit concentration	of	high	loan-to-value	ratio	loan

products	at	the	time	of	origination.	In	addition,	these	loans	are	concentrated	in our	primary	geographic	markets	as	discussed	above.	At	December	31,	2008,	$6.8 billion	of	the	$38.3	billion	of	home	equity	loans	(included	in	"Consumer"	in	the table	above)	had	a	loan-to-value	ratio	greater	than	90%.	These	loans	are collateralized	primarily	by	1-4	family	residential	properties.	Included	in	the residential	real	estate	category	in	the	table	above,	at	December	31,	2008,	$5.6 billion	of	the	$18.8	billion	of	residential	mortgage	loans	were	interest-only	loans.

We	realized	a	net	loss	on	sales	of	commercial	mortgages	of	$6	million	in	2008, and	net	gains	of	$39	million	in	2007	and	$55	million	in	2006.	Loans	held	for sale	are	reported	separately	on	the	Consolidated	Balance	Sheet	and	are	not included	in	the	table	above.	Gains	on	sales	of	education	loans	totaled	$24 million	in	2007	and	$33	million	in	2006.	In	February	2008,	we	transferred education	loans	from	held	for	sale	to	the	loan	portfolio	and	did	not	recognize any	gains	on	sales	of	education	loans	during	2008.	Interest	income	from	total loans	held	for	sale	was	$166	million	for	2008,	$184	million	for	2007,	and	$157 million	for	2006	and	is	included	in	Other	interest	income	in	our	Consolidated Income	Statement.

(a)Amounts	at	December	31,	2008	include	$53.9	billion	of	net	unfunded	credit	commitments	related	to National	City.

Commitments	to	extend	credit	represent	arrangements	to	lend	funds	subject	to specified	contractual	conditions.	At	December	31,	2008,	commercial commitments	are	reported	net	of	$8.6	billion	of	participations,	assignments	and syndications,	primarily	to	financial	services	companies.	The	comparable	amount at	December	31,	2007	was	$8.9	billion.	Commitments	generally	have	fixed expiration	dates,	may	require	payment	of	a	fee,	and	contain	termination	clauses in	the	event	the	customer's	credit	quality	deteriorates.	Based	on	our	historical experience,	most	commitments	expire	unfunded,	and	therefore	cash requirements	are	substantially	less	than	the	total	commitment.	Consumer	home equity	lines	of	credit	accounted	for	55%	of	consumer	unfunded	credit commitments.

Unfunded	credit	commitments	related	to	Market	Street	totaled	$6.4	billion	at December	31,	2008	and	$8.8	billion	at	December	31,	2007	and	are	included	in the	preceding	table	primarily	within	the	"Commercial"	and	"Consumer" categories.

At	December	31,	2008,	we	pledged	$32.9	billion	of	loans	to	the	Federal	Reserve Bank	("FRB")	and	$50.0	billion	of	loans	to	the	Federal	Home	Loan	Bank ("FHLB")	as	collateral	for	the	contingent	ability	to	borrow,	if	necessary.

# NOTE	5	ASSET	QUALITY

The	following	table	sets	forth	nonperforming	assets	and	related	information:

| December	31	-	dollars	in	millions | 2008	(a) | 2007 |
| :--- | :--- | :--- |
| Nonaccrual\tloans |  |  |
| Commercial | $576 | $193 |
| Commercial\treal\testate | 766 | \t 212 |
| Equipment\tlease\tfinancing | 97 | 3 |
| TOTAL\tCOMMERCIAL\tLENDING | \t 1,439 | \t 408 |
| Consumer |  |  |
| Home\tequity | 66 | 16 |
| Other | 4 | 1 |
| Total\tconsumer | 70 | 17 |
| Residential\treal\testate |  |  |
| Residential\tmortgage | 139 | 26 |
| Residential\tconstruction | 14 | 1 |
| Total\tresidential\treal\testate | 153 | 27 |
| TOTAL\tCONSUMER\tLENDING | 223 | 44 |
| Total\tnonaccrual\tloans | \t 1,662 | \t 452 |
| Restructured\tloans |  | 2 |
| Total\tnonperforming\tloans | \t 1,662 | \t 454 |
| Foreclosed\tand\tother\tassets |  |  |
| Commercial\tlending | 34 | 23 |
| Consumer | 11 | 8 |
| Residential\treal\testate | 458 | 10 |
| Total\tforeclosed\tand\tother\tassets | 503 | 41 |
| Total\tnonperforming\tassets\t(b)\t(c) | $2,165 | $495 |
| Nonperforming\tloans\tto\ttotal\tloans | .95% | .66% |
| Nonperforming\tassets\tto\ttotal\tloans\tand\tforeclosed\tassets | 1.23 | .72 |
| Nonperforming\tassets\tto\ttotal\tassets | .74 | .36 |
| Interest\ton\tnonperforming\tloans |  |  |
| Computed\ton\toriginal\tterms | $115 | $51 |
| Recognized\tprior\tto\tnonperforming\tstatus | 60 | 32 |
| Past\tdue\tloans |  |  |
| Accruing\tloans\tpast\tdue\t90\tdays\tor\tmore | $3,259 | $136 |
| As\ta\tpercentage\tof\ttotal\tloans | 1.86% | .20% |
| (a) |  |  |

(a) Amounts	at	December	31,	2008	include	$722	million	of	nonperforming	assets	related	to	National	City.	Nonperforming	assets	of	National	City	are	comprised	of	$250	million	of	nonperforming	loans,	including $154	million	related	to	commercial	lending	and	$96	million	related	to	consumer	lending,	and	$472	million	of	foreclosed	and	other	assets.	Nonperforming	assets	added	with	the	National	City	acquisition	excluded those	loans	that	PNC	impaired	in	accordance	with	SOP	03-3.	See	Note	6	Certain	Loans	Acquired	in	a	Transfer	for	additional	information	regarding	SOP	03-3	loans.

(b) Excludes	equity	management	assets	carried	at	estimated	fair	value	of	$42	million	at	December	31,	2008	and	$4	million	at	December	31,	2007.

(c) Excludes	loans	held	for	sale	carried	at	lower	of	cost	or	market	value	of	$78	million	at	December	31,	2008	and	$25	million	at	December	31,	2007,	including	troubled	debt	restructured	assets	of	$5	million	at December	31,	2008.

Changes	in	the	allowance	for	loan	and	lease	losses	were	as	follows:

| In	millions | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| January\t1 | $830 | $560 | $596 |
| Charge-offs | (618) | (245) | (180) |
| Recoveries | 79 | 45 | 40 |
| Net\tcharge-offs | (539) | (200) | (140) |
| Provision\tfor\tcredit\tlosses\t(a) | \t 1,517 | 315 | 124 |
| Acquired\tallowance\t–\tNational\tCity | \t 2,224 |  |  |
| Acquired\tallowance\t–\tother\t(b) | 20 | 152 |  |
| Net\tchange\tin\tallowance\tfor\tunfunded |  |  |  |
| loan\tcommitments\tand\tletters\tof\tcredit | (135) | 3 | (20) |
| December\t31 | $3,917 | $830 | $560 |
| (a)\nAmount\tfor\t2008\tincludes\tconforming\tprovision\tadjustments\tof\t$504\tmillion\trelated\tto\tNational |  |  |  |

(a) Amount	for	2008	includes	conforming	provision	adjustments	of	$504	million	related	to	National City	and	$23	million	related	to	Sterling.	Amount	for	2007	includes	a	conforming	provision adjustment	of	$45	million	related	to	Yardville.

(b) Sterling	in	2008.	Amount	for	2007	includes	$137	million	related	to	Mercantile	and	$15	million related	to	Yardville.

Changes	in	the	allowance	for	unfunded	loan	commitments	and	letters	of	credit were	as	follows:

| In	millions | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Allowance\tat\tJanuary\t1 | $134 | $120 | $100 |
| Acquired\tallowance\t–\tNational\tCity | 74 |  |  |
| Acquired\tallowance\t–\tother\t(a) | 1 | 17 |  |
| Net\tchange\tin\tallowance\tfor\tunfunded\tloan |  |  |  |
| commitments\tand\tletters\tof\tcredit | \t 135 | (3) | 20 |
| December\t31 | $344 | $134 | $120 |
| (a)\nSterling\tin\t2008\tand\tMercantile\tin\t2007. |  |  |  |

Impaired	loans,	as	defined	under	SFAS	114,	exclude	leases	and	smaller homogenous	type	loans	as	well	as	National	City	impaired	loans	accounted	for pursuant	to	SOP	03-3.	We	did	not	recognize	any	interest	income	on	loans	while they	were	impaired	in	2008,	2007	or	2006.	The	following	table	provides	further detail	on	impaired	loans	and	the	associated	allowance	for	loan	losses:

SFAS	114	SUMMARY	OF	IMPAIRED	LOANS	(a)

| At	December	31<br>In	millions | 2008 | 2007 |
| :--- | :--- | :--- |
| Impaired\tloans\twith\tan\tassociated\treserve | $1,249 | $371 |
| Impaired\tloans\twithout\tan\tassociated\treserve | 93 | 36 |
| Total\timpaired\tloans | $1,342 | $407 |
| Specific\tallowance\tfor\tcredit\tlosses | $405 | $124 |
| Average\timpaired\tloan\tbalance | $674 | $200 |
| (a)\nExcludes\tresidential,\tleasing\tand\tconstruction\tloans. |  |  |

(a) Excludes	residential,	leasing	and	construction	loans.

# NOTE	6	ACCOUNTING	FOR	CERTAIN	LOANS	ACQUIRED	IN	A TRANSFER

Loans	acquired	with	evidence	of	credit	quality	deterioration	since	origination and	for	which	it	is	probable	at	purchase	that	PNC	will	be	unable	to	collect	all contractually	required	payments	are	accounted	for	under	SOP	03-3.	Evidence	of credit	quality	deterioration	as	of	the	purchase	date	includes	statistics	such	as	past due	status,	current	borrower	FICO	credit	scores,	geographic	concentration	and current	loan-to-value	(LTV),	some	of	which	are	not	immediately	available	as	of the	purchase	date.	We	will	continue	to	evaluate	this	information	and	other	credit related	information	as	it	becomes	available.	SOP	03-3	addresses	accounting	for differences	between	contractual	cash	flows	and	cash	flows	expected	to	be collected	from	our	initial	investment	in	loans	if	those	differences	are attributable,	at	least	in	part,	to	credit	quality.	SOP	03-3	requires	acquired impaired	loans	to	be	recorded	at	fair	value	and	prohibits	"carrying	over"	or	the creation	of	valuation	allowances	in	the	initial	accounting	for	loans	acquired	in	a transfer	that	are	within	the	scope	of	this	SOP.	A	total	of	$2.6	billion	of	National City	allowance	for	loan	losses	was	not	carried	over	in	purchase	accounting. Excluded	from	the	scope	were	leases,	revolving	credit	arrangements	and	certain loans	held	for	sale.

The	fair	values	for	loans	within	the	scope	of	SOP	03-3	are	determined	by discounting	both	principal	and	interest	cash	flows	expected	to	be	collected	using an	observable	discount	rate	for	similar	instruments	with	adjustments	that management	believes	a	market	participant	would	consider	in	determining	fair value.	We	estimate	the	cash	flows	expected	to	be	collected	at	acquisition	using internal	and	third	party	models	that	incorporate	management's	best	estimate	of current	key	assumptions,	such	as	default	rates,	loss	severity	and	payment	speeds.

As	of	December	31,	2008,	acquired	loans	within	the	scope	of	SOP	03-3	had	a carrying	value	of	$11.9	billion	and	an	unpaid	principal	balance	of	$19.3	billion as	detailed	below:

|  | December	31,	2008 |  |
| :--- | :--- | :--- |
| In\tmillions | Carrying\tValue | Outstanding\tBalance |
| Commercial | $493 | $1,180 |
| Commercial\treal\testate | 1,340 | 2,831 |
| Consumer | 3,924 | 5,785 |
| Residential\treal\testate | 6,154 | 9,482 |
| Other | 10 | 14 |
| Total | $11,921 | $19,292 |

# Acquired	Loan	Information

| In	millions | December	31,<br>2008 |
| :--- | :--- |
| Contractually\trequired\tpayments\tincluding\tinterest | $23,845 |
| Less:\tNonaccretable\tdifference | 8,256 |
| Cash\tflows\texpected\tto\tbe\tcollected | 15,589 |
| Less:\tAccretable\tyield | 3,668 |
| Fair\tvalue\tof\tloans\tacquired | $11,921 |

Under	SOP	03-3,	the	excess	of	cash	flows	expected	at	acquisition	over	the estimated	fair	value	is	referred	to	as	the	accretable	yield	and	is	recognized	in interest	income	over	the	remaining	life	of	the	loan	using	the	constant	effective yield	method.	The	difference	between	contractually	required	payments	at acquisition	and	the	cash	flows	expected	to	be	collected	at	acquisition	is	referred to	as	the	nonaccretable	difference.	Changes	in	the	expected	cash	flows	from	the date	of	acquisition	will	either	impact	the	accretable	yield	or	result	in	a	charge	to the	provision	for	credit	losses	in	the	period	in	which	the	changes	become probable.	Subsequent	decreases	to	the	expected	cash	flows	will	generally	result in	a	charge	to	the	provision	for	credit	losses	resulting	in	an	increase	to	the allowance	for	loan	and	lease	losses,	and	a	reclassification	from	accretable	yield to	nonaccretable	difference.	Subsequent	increases	in	cash	flows	will	result	in	a recovery	of	any	previously	recorded	allowance	for	loan	and	lease	losses,	to	the extent	applicable,	and	a	reclassification	from	nonaccretable	difference	to accretable	yield.	There	was	no	allowance	for	loan	and	lease	losses	related	to loans	acquired	within	the	scope	of	SOP	03-3	as	of	December	31,	2008.	Disposals of	loans,	which	may	include	sales	of	loans,	receipt	of	payments	in	full	by	the borrower,	foreclosure,	or	troubled	debt	restructurings	result	in	removal	of	the loan	from	the	SOP	03-3	portfolio	at	its	carrying	amount.

There	were	no	changes	in	the	accretable	yield	of	loans	during	2008	as	the majority	of	SOP	03-3	loans	were	acquired	in	connection	with	the	National	City acquisition	as	of	December	31,	2008.

# NOTE	7	INVESTMENT	SECURITIES

|  | Amortized | Unrealized | Unrealized | Fair |
| :--- | :--- | :--- | :--- | :--- |
| In\tmillions | Cost | Gains | Losses | Value |
| December\t31,\t2008 |  |  |  |  |
| SECURITIES\tAVAILABLE\tFOR\tSALE\t(a) |  |  |  |  |
| Debt\tsecurities |  |  |  |  |
| US\tTreasury\tand\tgovernment\tagencies | $738 | $1 |  | $739 |
| Residential\tmortgage-backed |  |  |  |  |
| Agency | \t 22,744 | \t 371 | $(9) | \t 23,106 |
| Nonagency | \t 13,205 |  | (4,374) | 8,831 |
| Commercial\tmortgage-backed | 4,305 |  | (859) | 3,446 |
| Asset-backed | 2,069 | 4 | (446) | 1,627 |
| State\tand\tmunicipal | 1,326 | 13 | (76) | 1,263 |
| Other\tdebt | 563 | 11 | (15) | 559 |
| Total\tdebt\tsecurities | \t 44,950 | \t 400 | (5,779) | \t 39,571 |
| Corporate\tstocks\tand\tother | 575 |  | (4) | 571 |
| Total\tsecurities\tavailable\tfor\tsale | $45,525 | $400 | $(5,783) | $40,142 |
| SECURITIES\tHELD\tTO\tMATURITY\t(b) |  |  |  |  |
| Debt\tsecurities |  |  |  |  |
| Commercial\tmortgage-backed | $1,945 | $10 | $(59) | $1,896 |
| Asset-backed | 1,376 | 7 | (25) | 1,358 |
| Other\tdebt | 10 |  |  | 10 |
| Total\tdebt\tsecurities | 3,331 | 17 | (84) | 3,264 |
| Total\tsecurities\theld\tto\tmaturity | $3,331 | 17 | (84) | $3,264 |
| December\t31,\t2007 |  |  |  |  |
| SECURITIES\tAVAILABLE\tFOR\tSALE |  |  |  |  |
| Debt\tsecurities |  |  |  |  |
| U.S.\tTreasury\tand\tgovernment\tagencies | $151 | $4 |  | $155 |
| Residential\tmortgage-backed |  |  |  |  |
| Agency | 9,218 | \t 112 | $(16) | 9,314 |
| Nonagency | \t 11,929 | 6 | (297) | \t 11,638 |
| Commercial\tmortgage-backed | 5,227 | 53 | (16) | 5,264 |
| Asset-backed | 2,878 | 4 | (112) | 2,770 |
| State\tand\tmunicipal | 340 | 1 | (5) | 336 |
| Other\tdebt | 85 |  | (1) | 84 |
| Total\tdebt\tsecurities | \t 29,828 | \t 180 | (447) | \t 29,561 |
| Corporate\tstocks\tand\tother | 662 | 2 |  | 664 |
| Total\tsecurities\tavailable\tfor\tsale | $30,490 | $182 | $(447) | $30,225 |
| December\t31,\t2006 |  |  |  |  |
| SECURITIES\tAVAILABLE\tFOR\tSALE |  |  |  |  |
| Debt\tsecurities |  |  |  |  |
| US\tTreasury\tand\tgovernment\tagencies | $611 |  | $(3) | $608 |
| Residential\tmortgage-backed |  |  |  |  |
| Agency | 4,351 | $13 | (33) | 4,331 |
| Nonagency | \t 12,974 | 26 | (123) | \t 12,877 |
| Commercial\tmortgage-backed | 3,231 | 13 | (25) | 3,219 |
| Asset-backed | 1,615 | 3 | (9) | 1,609 |
| State\tand\tmunicipal | 140 | 1 | (2) | 139 |
| Other\tdebt | 90 |  | (3) | 87 |
| Total\tdebt\tsecurities | \t 23,012 | 56 | (198) | \t 22,870 |
| Corporate\tstocks\tand\tother | 321 | 1 | (1) | 321 |
| Total\tsecurities\tavailable\tfor\tsale | $23,333 | $57 | $(199) | $23,191 |
| (a) |  |  |  |  |

(a) During	the	fourth	quarter	of	2008,	we	transferred	$.6	billion	of	trading	securities	to	the	available	for	sale	portfolio.

(b) During	the	fourth	quarter	of	2008,	we	transferred	$3.2	billion	of	securities	available	for	sale	to	the	securities	held	to	maturity	portfolio.	At	December	31,	2008,	the	balance	of	the	after-tax	unrealized	loss	related	to the	securities	transferred	was	$342	million.

The	fair	value	of	investment	securities	is	impacted	by	interest	rates,	credit	spreads,	market	volatility	and	illiquidity.	Net	unrealized	gains	and	losses	in	the	securities available	for	sale	portfolio	are	included	in	shareholders'	equity	as	accumulated	other	comprehensive	income	or	loss,	net	of	tax.

The	following	table	presents	unrealized	loss	and	fair	value	of	investment	securities	at	December	31,	2008	and	December	31,	2007	for	which	an	other-than-temporary impairment	has	not	been	recognized.	These	securities	are	segregated	between	investments	that	have	been	in	a	continuous	unrealized	loss	position	for	less	than	twelve months	and	twelve	months	or	more.

|  | Unrealized	loss | Unrealized	loss | Unrealized	loss | Unrealized	loss |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | position\tless\tthan | position\tless\tthan | position\t12\tmonths | position\t12\tmonths |  |  |
|  | 12\tmonths | 12\tmonths | or\tmore | or\tmore | Total | Total |
| In\tmillions | Unrealized\nLoss | Fair\nValue | Unrealized\nLoss | Fair\nValue | Unrealized\nLoss | Fair\nValue |
| December\t31,\t2008 |  |  |  |  |  |  |
| Securities\tavailable\tfor\tsale |  |  |  |  |  |  |
| Debt\tsecurities |  |  |  |  |  |  |
| Residential\tmortgage-backed | $ (1,775) | $3,619 | ($ |  | ($ |  |
|  |  |  | 2,608) | $3,871 | 4,383) | $7,490 |
| Commercial\tmortgage-backed | (482) | \t 2,207 | (377) | \t 1,184 | (859) | 3,391 |
| Asset-backed | (102) | 523 | (344) | 887 | (446) | 1,410 |
| State\tand\tmunicipal | (56) | 370 | (20) | 26 | (76) | 396 |
| Other\tdebt | (11) | 185 | (4) | 8 | (15) | 193 |
| Total | $ (2,426) | $6,904 | $(3,353) | $5,976 | $(5,779) | $12,880 |
| December\t31,\t2007 |  |  |  |  |  |  |
| Securities\tavailable\tfor\tsale |  |  |  |  |  |  |
| Debt\tsecurities |  |  |  |  |  |  |
| Residential\tmortgage-backed | $(157) | $6,994 | $(156) | $5,065 | $(313) | $12,059 |
| Commercial\tmortgage-backed | (3) | 365 | (13) | 769 | (16) | 1,134 |
| Asset-backed | (87) | \t 1,519 | (25) | 655 | (112) | 2,174 |
| State\tand\tmunicipal | (4) | 79 | (1) | 82 | (5) | 161 |
| Other\tdebt | (1) | 40 |  | 3 | (1) | 43 |
| Total | $(252) | $8,997 | $(195) | $6,574 | $(447) | $15,571 |

During	2008,	unprecedented	market	volatility	and	relative	illiquidity	in	certain asset	sectors	had	an	adverse	impact	on	the	valuation	of	certain	of	our	investment securities.	This	occurred	even	as	market	interest	rates	(i.e.,	interest	rate	swap rates)	declined	at	December	31,	2008	compared	with	December	31,	2007.	At December	31,	2008,	we	consider	the	gross	unrealized	loss	of	$5.8	billion	to	be temporary	as	we	had	the	positive	ability	and	intent	for	the	foreseeable	future	to hold	these	securities	until	recovery	of	fair	value.

Other-than-temporary	impairment	charges	are	reflected	in	net	securities	gains (losses)	on	our	Consolidated	Income	Statement.	These	charges	include	the impact	of	declines	in	both	credit	quality	and	liquidity.

# Impairments

During	2008,	we	recorded	other-than-temporary	impairment	charges	totaling $312	million.

•	We	recorded	charges	totaling	$151	million	related	to	eight	residential mortgage-backed	securities.	The	fair	value	of	these	eight	securities	was approximately	$184	million	as	of	December	31,	2008.

•	We	recorded	charges	totaling	$87	million	related	to	two	securities collateralized	by	first-lien	residential	mortgage	loans	and	five securities	collateralized	by	second-lien	residential	mortgage	loans.	The fair	value

of	these	seven	securities	was	$82	million	as	of	December	31,	2008. •	We	recorded	charges	totaling	$74	million	related	to	our	investment	in preferred	stock	of	FHLMC	and	FNMA.	The	fair	value	of	these securities	was	approximately	$2	million	as	of	December	31,	2008.

Information	relating	to	securities	gains	and	losses	is	set	forth	in	the	following table.

# Securities	Gains	and	Losses

| Year	ended |  |  |  | Net | Tax |
| :--- | :--- | :--- | :--- | :--- | :--- |
| December\t31 |  | Gross | Gross | Gains | Expense |
| In\tmillions | Proceeds | Gains | Losses\t(a) | (Losses) | (Benefit) |
| 2008 | $10,283 | $114 | $320 | $ (206) | $(72) |
| 2007 | 6,056 | 20 | 25 | (5) | (2) |
| 2006 | \t 11,102 | 2 | 209 | (207) | (72) |

(a) Includes	other-than-temporary	impairment	charges	of	$312	million	for	2008.

The	fair	value	of	securities	pledged	to	secure	public	and	trust	deposits	and repurchase	agreements	and	for	other	purposes	was	$22.5	billion	at	December	31, 2008	and	$24.2	billion	at	December	31,	2007.	The	pledged	securities	include positions	held	in	our	portfolio	of	investment	securities,	trading	securities,	and securities	accepted	as	collateral	from	others	that	we	are	permitted	by	contract	or custom	to	sell	or	repledge.

The	fair	value	of	securities	accepted	as	collateral	that	we	are	permitted	by contract	or	custom	to	sell	or	repledge	was	$1.6	billion	at	December	31,	2008	and $2.3	billion	at	December	31,	2007	and	is	a	component	of	federal	funds	sold	and resale

agreements	on	our	Consolidated	Balance	Sheet.	Of	the	permitted	amount,	$461 million	was	repledged	to	others	at	December	31,	2008	and	$1.5	billion	was repledged	to	others	at	December	31,	2007.

The	following	table	presents,	by	remaining	contractual	maturity,	the	amortized	cost,	fair	value	and	weighted-average	yield	of	debt	securities	at	December	31,	2008.

# Contractual	Maturity	Of	Debt	Securities

| December	31,	2008<br>Dollars	in	millions | 1	Year	or<br>Less | After	1	Year<br>through	5<br>Years | After	5	Years<br>through	10	Years | After	10<br>Years | Total |
| :--- | :--- | :--- | :--- | :--- | :--- |
| SECURITIES\tAVAILABLE\tFOR\tSALE |  |  |  |  |  |
| US\tTreasury\tand\tgovernment\tagencies | $83 | $84 | $552 | $19 | $738 |
| Residential\tmortgage-backed | 758 | 9,890 | 1,397 | \t 23,904 | \t 35,949 |
| Commercial\tmortgage-backed |  | 37 | 52 | 4,217 | 4,306 |
| Asset-backed | 22 | 92 | 488 | 1,467 | 2,069 |
| State\tand\tmunicipal | 100 | 226 | 186 | 813 | 1,325 |
| Other\tdebt | 7 | 464 | 59 | 33 | 563 |
| Total\tdebt\tsecurities\tavailable\tfor\tsale | $970 | $10,793 | $2,734 | $30,453 | $44,950 |
| Fair\tvalue | $971 | $10,789 | $2,702 | $25,109 | $39,571 |
| Weighted-average\tyield,\tGAAP\tbasis | 6.09% | 5.02% | 6.06% | 5.53% | 5.45% |
| SECURITIES\tHELD\tTO\tMATURITY |  |  |  |  |  |
| Commercial\tmortgage-backed |  | $130 | $66 | $1,749 | $1,945 |
| Asset-backed | $43 | 789 | 395 | 149 | 1,376 |
| Other\tdebt |  |  | 1 | 9 | 10 |
| Total\tdebt\tsecurities\theld\tto\tmaturity | $43 | $919 | $462 | $1,907 | $3,331 |
| Fair\tvalue | $42 | $907 | $455 | $1,860 | $3,264 |
| Weighted-average\tyield,\tGAAP\tbasis | 5.35% | 5.00% | 4.27% | 5.20% | 5.02% |

Based	on	current	interest	rates	and	expected	prepayment	speeds,	the	total	weighted-average	expected	maturity	of	mortgage-backed	securities	was	2	years	and	9	months, of	commercial	mortgage-backed	securities	was	4	years	and	5	months	and	of	asset-backed	securities	was	4	years	and	11	months	at	December	31,	2008.	Weighted- average	yields	are	based	on	historical	cost	with	effective	yields	weighted	for	the	contractual	maturity	of	each	security.	At	December	31,	2008,	there	were	no	securities	of a	single	issuer,	other	than	Fannie	Mae	and	Freddie	Mac,	which	exceeded	10%	of	total	shareholders'	equity.

# NOTE	8	FAIR	VALUE

# Fair	Value	Measurement

SFAS	157	defines	fair	value	as	the	price	that	would	be	received	to	sell	an	asset or	the	price	paid	to	transfer	a	liability	on	the	measurement	date.	The	standard focuses	on	the	exit	price	in	the	principal	or	most	advantageous	market	for	the asset	or	liability	in	an	orderly	transaction	between	willing	market	participants.

SFAS	157	establishes	a	fair	value	reporting	hierarchy	to	maximize	the	use	of observable	inputs	when	measuring	fair	value	and	defines	the	three	levels	of inputs	as	noted	below.	The	financial	instruments	in	Level	3	are	typically	less liquid.

# Level	1

Quoted	prices	in	active	markets	for	identical	assets	or	liabilities.	Level	1	assets and	liabilities	may	include	debt	securities,	equity	securities	and	listed	derivative contracts	that	are	traded	in	an	active	exchange	market	and	certain	US

Government	and	agency-backed	securities	that	are	actively	traded	in	over-the- counter	markets.

Observable	inputs	other	than	Level	1	such	as:	quoted	prices	for	similar	assets	or liabilities	in	active	markets,	quoted	prices	for	identical	or	similar	assets	or liabilities	in	markets	that	are	not	active,	or	other	inputs	that	are	observable	or	can be	corroborated	to	observable	market	data	for	substantially	the	full	term	of	the asset	or	liability.	Level	2	assets	and	liabilities	may	include	debt	securities, equity	securities	and	listed	derivative	contracts	with	quoted	prices	that	are	traded in	markets	that	are	not	active,	and	certain	debt	and	equity	securities	and	over- the-counter	derivative	contracts	whose	fair	value	is	determined	using	a	pricing model	without	significant	unobservable	inputs.	This	category	generally	includes certain	mortgage-backed	debt	securities,	private-issuer	securities,	other	asset- backed	securities,	corporate	debt	securities	and	derivative	contracts.

Unobservable	inputs	that	are	supported	by	minimal	or	no	market	activity	and that	are	significant	to	the	fair	value	of	the	assets	or	liabilities.	Level	3	assets	and liabilities	may	include	financial	instruments	whose	value	is	determined	using pricing	models	with	internally	developed	assumptions,	discounted	cash	flow methodologies,	or	similar	techniques,	as	well	as	instruments	for	which	the determination	of	fair	value	requires

significant	management	judgment	or	estimation.	This	category	generally includes	certain	commercial	mortgage	loans	held	for	sale,	private	equity investments,	certain	available	for	sale	securities,	certain	trading	securities	and certain	financial	derivative	contracts.	Nonrecurring	items,	primarily	certain nonaccrual	and	other	loans	held	for	sale	and	commercial	mortgage	servicing rights,	are	also	included	in	this	category.

Assets	and	liabilities	measured	at	fair	value	on	a	recurring	basis,	including	instruments	for	which	PNC	has	elected	the	fair	value	option,	are	summarized	below.	As prescribed	by	SFAS	157,	the	assets	and	liabilities	of	National	City	acquired	in	a	purchase	business	combination	on	December	31,	2008	were	excluded	from	the	table below	and	related	SFAS	157	and	SFAS	159	disclosures.

| In	millions | Level	1 | Level	2 | Level	3 | Total	Fair<br>Value |
| :--- | :--- | :--- | :--- | :--- |
| Assets |  |  |  |  |
| Securities\tavailable\tfor\tsale | $ 347 | $21,633 | $4,837 | $26,817 |
| Financial\tderivatives\t(a) | 16 | 5,582 | 125 | 5,723 |
| Trading\tsecurities\t(b) | 89 | 529 | 73 | 691 |
| Commercial\tmortgage\tloans\theld\tfor\tsale\t(c) |  |  | \t 1,400 | 1,400 |
| Customer\tresale\tagreements\t(d) |  | 1,072 |  | 1,072 |
| Equity\tinvestments |  |  | 571 | 571 |
| Other\tassets |  | 144 | 6 | 150 |
| Total\tassets | $ 452 | $28,960 | $7,012 | $36,424 |
| Liabilities |  |  |  |  |
| Financial\tderivatives\t(e) | $2 | $4,387 | $22 | $4,411 |
| Trading\tsecurities\tsold\tshort\t(f) | 182 | 207 |  | 389 |
| Other\tliabilities |  | 9 |  | 9 |
| Total\tliabilities | $ 184 | $4,603 | $22 | $4,809 |
| (a)\nIncluded\tin\tother\tassets\ton\tthe\tConsolidated\tBalance\tSheet. |  |  |  |  |

(d) Included	in	federal	funds	sold	and	resale	agreements	on	the	Consolidated	Balance	Sheet.	PNC	has	elected	the	fair	value	option	under	SFAS	159	for	this	item.

(e) Included	in	other	liabilities	on	the	Consolidated	Balance	Sheet.

The	table	below	presents	a	reconciliation	for	January	1,	2008	to	December	31,	2008	of	assets	and	liabilities	measured	at	fair	value	on	a	recurring	basis	using	Level	3 inputs.

| Level	3	Instruments	Only<br>In	millions | Securities<br>available<br>for	sale<br>(c) | Financial<br>derivatives<br>(c) | Trading<br>securities<br>(c) | Commercial<br>mortgage<br>loans	held<br>for	sale	(d) | Equity<br>investments<br>(c) | Other<br>assets<br>(c) | Total<br>Assets | Financial<br>derivatives<br>(c) | Total<br>Liabilities |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| December\t31,\t2007 | $285 | $130 |  | $2,018 | $568 | $4 | $3,005 | $326 | $326 |
| Impact\tof\tSFAS\t157\tand\tSFAS\t159\tadoption |  | 2 |  | 2 |  |  | 4 |  |  |
| Balance,\tJanuary\t1,\t2008 | 285 | 132 |  | 2,020 | 568 | 4 | \t 3,009 | 326 | 326 |
| Total\trealized/unrealized |  |  |  |  |  |  |  |  |  |
| gains\tor\tlosses\t(a): |  |  |  |  |  |  |  |  |  |
| Included\tin\tearnings\t(b) |  | (9) | $(4) | (251) | (30) | (2) | (296) | (297) | (297) |
| Included\tin\tother\tcomprehensive\tincome | (164) |  |  |  |  |  | (164) |  |  |
| Purchases,\tissuances,\tand\tsettlements,\tnet | 515 |  | 18 | (369) | 33 | 4 | 201 | (8) | (8) |
| Transfers\tinto\tLevel\t3,\tnet | 4,201 | 2 | 59 |  |  |  | \t 4,262 | 1 | 1 |
| December\t31,\t2008 | $ 4,837 | $125 | $73 | $1,400 | $571 | $6 | $7,012 | $22 | $22 |
| (a)\t\t\t\tLosses\tfor\tassets\tare\tbracketed\twhich\tlosses\tfor |  |  |  |  |  |  |  |  |  |
| liabilities\tare\tnot. |  |  |  |  |  |  |  |  |  |
| (b)\t\t\t\tAttributable\tto\tunrealized\tgains\tor\tlosses\trelated\tto |  |  |  |  |  |  |  |  |  |
| assets\tor\tliabilities\theld\tat\tDecember\t31,\t2008: |  | $16 | $1 | $(213) | $(50) |  | $(246) | $(37) | $(37) |
| (c) |  |  |  |  |  |  |  |  |  |

(c) Carried	at	fair	value	prior	to	our	adoption	of	SFAS	157.

(d) We	elected	the	fair	value	option	under	SFAS	159	for	this	item.

The	after-tax	adjustment	to	beginning	retained	earnings	from	the	adoption	of SFAS	157	and	SFAS	159	related	to	Level	3	fair	value	measurements	was approximately	$1	million	each.

Net	gains	(realized	and	unrealized)	relating	to	Level	3	assets	and	liabilities	were $1	million	for	2008.	This	amount	included	net	unrealized	losses	of	$209	million. These	amounts	were	included	in	other	noninterest	income	in	the	Consolidated Income	Statement.

# Nonrecurring	Fair	Value	Changes

We	may	be	required	to	measure	certain	other	financial	assets	at	fair	value	on	a nonrecurring	basis.	These	adjustments	to	fair	value	usually	result	from	the application	of	lower-of-cost-or-market	accounting	or	write-downs	of	individual assets	due	to	impairment.	The	amounts	below	for	nonaccrual	loans	and	loans held	for	sale	represent	the	carrying	value	of	loans	for	which	adjustments	are primarily	based	on	the	appraised	value	of	collateral	or	the	present	value	of expected	future	cash	flows,	which	often	results	in	significant	management assumptions	and	input	with	respect	to	the	determination	of	fair	value.	The	fair value	determination	of	the	equity	investment	resulting	in	an	impairment	loss included	below	was	based	on	observable	market	data	for	other	comparable entities	as	adjusted	for	internal	assumptions	and	unobservable	inputs.	The amounts	below	for	commercial	mortgage	servicing	rights	reflect	an	impairment of	certain	strata	of	these	assets.	The	fair	value	of	commercial	mortgage	servicing rights	is	estimated	by	using	an	internal	valuation	model.	The	model	calculates the	present	value	of	estimated	future	net	servicing	cash	flows	considering estimates	on	servicing	revenue	and	costs,	discount	rates	and	prepayment	speeds. Annually,	this	model	is	subject	to	an	internal	review	process	to	validate	controls and	model	results.

# Fair	Value	Measurements	–	Nonrecurring

|  |  | Total |
| :--- | :--- | :--- |
|  | December\t31, | losses\tfor |
|  | 2008 | year\tended |
|  | Total\tFair | December\t31, |
| In\tmillions | Value\t(a) | 2008 |
| Assets |  |  |
| Nonaccrual\tloans | $250 | $(99) |
| Loans\theld\tfor\tsale | 101 | (2) |
| Equity\tinvestment | 75 | (73) |
| Commercial\tmortgage\tservicing |  |  |
| rights | 560 | (35) |
| Total\tassets | $986 | $(209) |

# Fair	Value	Option

Commercial	Mortgage	Loans	Held	For	Sale

Effective	January	1,	2008,	we	elected	to	account	for	commercial	mortgage	loans classified	as	held	for	sale	and	intended	for	securitization	at	fair	value	under	the provisions	of	SFAS	159.	Based	on	the	significance	of	unobservable	inputs,	we classify	this	portfolio	as	Level	3.	As	such,	a	synthetic	securitization methodology	was	used	historically	to	value	the	loans	and	the	related	unfunded commitments	on	an	aggregate	basis	based	upon	current	commercial	mortgage- backed	securities	(CMBS)	market	structures	and	conditions.	The	election	of	the fair	value	option	aligns	the	accounting	for	the	commercial	mortgages	with	the related	hedges.	It	also	eliminates	the	requirements	of	hedge	accounting	under SFAS	133.	Due	to	the	inactivity	in	the	CMBS	securitization	market	in	2008,	we determined	the	fair	value	of	commercial	mortgage	loans	held	for	sale	by	using	a whole	loan	valuation	methodology.	Based	on	the	significance	of	unobservable inputs,	we	classified	this	portfolio	as	Level	3.	Valuation	assumptions	included observable	inputs	based	on	whole	loan	sales,	both	observed	in	the	market	and actual	sales	from	our	portfolio	and	new	loan	origination	spreads	during	the quarter.	Adjustments	were	made	to	the	assumptions	to	account	for	uncertainties, including	market	conditions,	and	liquidity.	Credit	risk	was	included	as	part	of our	valuation	process	for	these	loans	by	considering	expected	rates	of	return	for market	participants	for	similar	loans	in	the	marketplace.

PNC	has	not	elected	the	fair	value	option	for	the	remainder	of	our	loans	held	for sale	portfolio	as	the	amounts	are	not	significant	and	hedge	accounting	is	not	used for	these	loans.

At	December	31,	2008,	commercial	mortgage	loans	held	for	sale	for	which	the fair	value	option	had	been	elected	had	an	aggregate	fair	value	of	$1.4	billion	and an	aggregate	outstanding	principal	balance	of	$1.6	billion.

Interest	income	on	these	loans	is	recorded	as	earned	and	reported	in	the Consolidated	Income	Statement	in	the	caption	Interest	Income	–	Other.	Net losses	resulting	from	changes	in	fair	value	of	these	loans	of	$251	million	for 2008	were	recorded	in	other	noninterest	income.	The	impact	on	earnings	of offsetting	hedges	is	not	reflected	in	these	amounts.	Changes	in	fair	value	due	to instrument-specific	credit	risk	for	2008	were	not	material.	The	changes	in	fair value	of	these	loans	were	partially	offset	by	changes	in	the	fair	value	of	the related	financial	derivatives	that	economically	hedged	these	loans.

Customer	Resale	Agreements	and	Bank	Notes

Effective	January	1,	2008,	we	elected	to	account	for	structured	resale	agreements and	structured	bank	notes	at	fair	value,	which	are	economically	hedged	using free-standing	financial	derivatives.

The	fair	value	for	structured	resale	agreements	and	structured	bank	notes	is determined	using	a	model	which	includes	observable	market	data	as	inputs	such as	interest	rates.

Readily	observable	market	inputs	to	this	model	can	be	validated	to	external sources,	including	yield	curves,	implied	volatility	or	other	market	related	data. Changes	in	fair	value	due	to	instrument-specific	credit	risk	for	2008	were	not material.	At	December	31,	2008,	structured	resale	agreements	with	an	aggregate fair	value	of	$1.1	billion	were	included	in	federal	funds	sold	and	resale agreements	on	our	Consolidated	Balance	Sheet.	The	aggregate	outstanding principal	balance	was	$980	million.	Interest	income	on	structured	resale agreements	is	reported	in	the	Consolidated	Income	Statement	in	the	caption Interest	Income	–	Other.

The	following	table	summarizes	the	financial	instruments	for	which	we	elected the	fair	value	option	effective	January	1,	2008	and	the	related	cumulative-effect adjustment	to	retained	earnings.

# Fair	Value	Option	–	Adoption

(a)Includes	structured	resale	agreements	that	are	economically	hedged	with	derivatives.

The	following	table	summarizes	the	changes	in	fair	value	included	in	other noninterest	income	in	the	Consolidated	Income	Statement	for	items	for	which	we elected	the	fair	value	option.

# Fair	Value	Option	–	Changes	in	Fair	Value

|  | Total	gains	(losses) |
| :--- | :--- |
| In\tmillions | For\tthe\tyear\tended\nDecember\t31,\n2008 |
| Assets |  |
| Customer\tresale\tagreements\t(a) | $69 |
| Commercial\tmortgage\tloans\theld\tfor\tsale\t(a) | (251) |

(a)The	impact	on	earnings	of	offsetting	hedges	is	not	reflected	in	these	amounts.

The	following	table	provides	fair	values	and	aggregate	unpaid	principal	balances of	items	for	which	we	elected	the	fair	value	option.

# Fair	Value	Option	–	Fair	Value	and	Principal	Balances

|  |  | Aggregate	Unpaid |  |
| :--- | :--- | :--- | :--- |
|  | Fair\tValue | Principal\tBalance |  |
|  | December\t31, | December\t31, |  |
| In\tmillions | 2008 | 2008 | Difference |
| Customer\tresale |  |  |  |
| agreements | $1,072 | $980 | $92 |
| Commercial\tmortgage |  |  |  |
| loans\theld\tfor\tsale |  |  |  |
| Performing\tloans | 1,376 | 1,572 | (196) |
| Nonaccrual\tloans | 24 | 27 | (3) |
| Total | 1,400 | 1,599 | (199) |

# FAIR	VALUE	OF	FINANCIAL	INSTRUMENTS	(SFAS	107)

|  | 2008	(a) | 2008	(a) | 2007 | 2007 |
| :--- | :--- | :--- | :--- | :--- |
|  | Carrying | Fair | Carrying | Fair |
| December\t31\t–\tin\tmillions | Amount | Value | Amount | Value |
| Assets |  |  |  |  |
| Cash\tand\tshort-term\tassets | $23,171 | $23,171 | $7,456 | $7,456 |
| Trading\tsecurities | 1,725 | 1,725 | 3,556 | 3,556 |
| Investment\tsecurities | 43,473 | 43,406 | \t 30,225 | \t 30,225 |
| Loans\theld\tfor\tsale | 4,366 | 4,366 | 3,927 | 3,966 |
| Net\tloans\t(excludes\tleases) | \t 165,112 | \t 162,159 | \t 64,976 | \t 65,808 |
| Other\tassets | 4,282 | 4,282 | 1,328 | 1,328 |
| Mortgage\tand\tother\tloan\tservicing\trights | 1,890 | 1,899 | 701 | 780 |
| Financial\tderivatives |  |  |  |  |
| Fair\tvalue\thedges | 889 | 889 | 283 | 283 |
| Cash\tflow\thedges | 527 | 527 | 325 | 325 |
| Free-standing\tderivatives | 7,088 | 7,088 | 2,163 | 2,163 |
| Liabilities |  |  |  |  |
| Demand,\tsavings\tand\tmoney\tmarket\tdeposits | \t 116,946 | \t 116,946 | \t 56,294 | \t 56,294 |
| Time\tdeposits | 75,919 | 76,205 | \t 26,402 | \t 26,416 |
| Borrowed\tfunds | 52,872 | 53,063 | \t 31,254 | \t 31,608 |
| Financial\tderivatives |  |  |  |  |
| Fair\tvalue\thedges | 1 | 1 | 93 | 93 |
| Cash\tflow\thedges |  |  |  |  |
| Free-standing\tderivatives | 6,057 | 6,057 | 2,298 | 2,298 |
| Unfunded\tloan\tcommitments\tand\tletters\tof\tcredit | 338 | 338 | 129 | 129 |
| (a)\nAmounts\tinclude\tNational\tCity. |  |  |  |  |

(a) Amounts	include	National	City.

The	aggregate	fair	values	in	the	table	above	do	not	represent	the	underlying market	value	of	PNC	as	the	table	excludes	the	following:

•	real	and	personal	property,

•	lease	financing,

•	loan	customer	relationships,

•	deposit	customer	intangibles,

•	retail	branch	networks,

•	fee-based	businesses,	such	as	asset	management	and	brokerage,	and •	trademarks	and	brand	names.

Refer	to	Fair	Value	Measurement	section	of	this	Note	8	for	a	definition	of	fair value.

We	used	the	following	methods	and	assumptions	to	estimate	fair	value	amounts for	financial	instruments.

# GENERAL

For	short-term	financial	instruments	realizable	in	three	months	or	less,	the carrying	amount	reported	in	our	Consolidated	Balance	Sheet	approximates	fair value.	Unless	otherwise	stated,	the	rates	used	in	discounted	cash	flow	analyses are	based	on	market	yield	curves.

# CASH	AND	SHORT-TERM	ASSETS

The	carrying	amounts	reported	in	the	consolidated	balance	sheet	for	cash	and short-term	investments	approximate	fair	values	primarily	due	to	their	short-term nature.	For	purposes	of	this	disclosure	only,	short-term	assets	include	the following:

•	due	from	banks,

•	interest-earning	deposits	with	banks,

•	federal	funds	sold	and	resale	agreements,

•	cash	collateral,

•	customers'	acceptance	liability,	and

•	accrued	interest	receivable.

Securities	include	both	the	investment	securities	and	trading	portfolios.	We	use prices	sourced	from	pricing	services,	dealer	quotes	or	recent	trades	to	determine the	fair	value	of	securities.	Approximately	75%	of	our	positions	are	valued	using pricing	services	provided	by	the	Lehman	Index	and	IDC.	Lehman	Index	prices are	set	with	reference	to	market	activity	for	highly	liquid	assets	such	as	agency mortgage-backed	securities,	and	matrix	priced	for	other	assets,	such	as	CMBS and	asset-backed	securities.	IDC	primarily	uses	matrix	pricing	for	the instruments	we	value	using	this	service,	such	as	agency	adjustable	rate	mortgage securities,	agency	CMOs	and	municipal	bonds.	Dealer	quotes	received	are typically	non-binding	and	corroborated	with	other	dealers'	quotes,	by	reviewing valuations	of	comparable	instruments,	or	by	comparison	to	internal	valuations. The	majority	of	our	securities	are	classified	as	Level	2	in	the	fair	value	hierarchy. In	circumstances	where	market	prices	are	limited	or	unavailable,	valuations	may require	significant	management	judgments	or	adjustments	to	determine	fair value.	In	these	cases,	the	securities	are	classified	as	Level	3.

# NET	LOANS	AND	LOANS	HELD	FOR	SALE

Fair	values	are	estimated	based	on	the	discounted	value	of	expected	net	cash flows	incorporating	assumptions	about	prepayment	rates,	credit	losses,	servicing fees	and	costs.	For

revolving	home	equity	loans,	this	fair	value	does	not	include	any	amount	for	new loans	or	the	related	fees	that	will	be	generated	from	the	existing	customer relationships.	In	the	case	of	nonaccrual	loans,	scheduled	cash	flows	exclude interest	payments.	Refer	to	the	Fair	Value	Option	section	of	this	Note	8 regarding	the	fair	value	of	commercial	mortgage	loans	held	for	sale.	Residential mortgage	loans	are	valued	based	on	quoted	market	prices,	where	available, prices	for	other	traded	mortgage	loans	with	similar	characteristics,	and	purchase commitments	and	bid	information	received	from	market	participants.	These loans	are	regularly	traded	in	active	markets	and	observable	pricing	information	is available	from	market	participants.	The	prices	are	adjusted	as	necessary	to include	the	embedded	servicing	value	in	the	loans	and	to	take	into	consideration the	specific	characteristics	of	certain	loans	that	are	priced	based	on	the	pricing	of similar	loans.	These	adjustments	represent	unobservable	inputs	to	the	valuation but	are	not	considered	significant	to	the	fair	value	of	the	loans.	Loans	are presented	net	of	the	allowance	for	loan	and	lease	losses.

# OTHER	ASSETS

Other	assets	as	shown	in	the	accompanying	table	include	the	following: •	noncertificated	interest-only	strips,

•	FHLB	and	FRB	stock,

•	equity	investments	carried	at	cost	and	fair	value,	and •	private	equity	investments	carried	at	fair	value.

Investments	accounted	for	under	the	equity	method,	including	our	investment	in BlackRock,	are	not	included	in	the	accompanying	table.

The	carrying	amounts	of	private	equity	investments	are	recorded	at	fair	value. The	valuation	procedures	applied	to	direct	investments	include	techniques	such as	multiples	of	adjusted	earnings	of	the	entity,	independent	appraisals, anticipated	financing	and	sales	transactions	with	third	parties,	or	the	pricing	used to	value	the	entity	in	a	recent	financing	transaction.	We	value	indirect investments	in	private	equity	funds	based	on	the	financial	statements	that	we receive	from	their	managers.	Due	to	the	time	lag	in	our	receipt	of	the	financial information	and	based	on	a	review	of	investments	and	valuation	techniques applied,	adjustments	to	the	manager	provided	value	are	made	when	available recent	investment	portfolio	company	or	market	information	indicates	a significant	change	in	value	from	that	provided	by	the	general	partner.

Fair	value	of	the	noncertificated	interest-only	strips	is	estimated	based	on	the discounted	value	of	expected	net	cash	flows.	The	aggregate	carrying	value	of	our equity	investments	carried	at	cost	and	FHLB	and	FRB	stock	was	$3.1	billion	at December	31,	2008	and	$766	million	as	of	December	31,	2007,	both	of	which approximate	fair	value	at	each	date.

# MORTGAGE	AND	OTHER	LOAN	SERVICING	ASSETS

Fair	value	is	based	on	the	present	value	of	the	estimated	future	cash	flows, incorporating	assumptions	as	to	prepayment	speeds,	discount	rates,	escrow balances,	interest	rates,	cost	to	service	and	other	factors.	We	have	numerous controls	in	place	intended	to	ensure	that	our	fair	values	are	appropriate.	An independent	model	review	group	reviews	our	valuation	models	and	validates them	for	their	intended	use.

For	commercial	mortgage	loan	servicing	assets,	key	valuation	assumptions	at December	31,	2008	and	December	31,	2007	included	prepayment	rates	ranging from	4%	–	16%	and	10%	–	16%,	respectively,	and	discount	rates	ranging	from 8%	–	10%	for	both	periods,	which	resulted	in	an	estimated	fair	value	of	$873 million	and	$773	million,	respectively.

For	residential	mortgage	servicing	assets,	key	assumptions	at	December	31,	2008 were	a	weighted	average	constant	prepayment	rate	of	33%,	weighted	average life	of	2.3	years	and	a	discount	rate,	calculated	as	the	spread	over	forward interest	rate	swap	rates	of	6.37%,	resulting	in	a	fair	value	of	$1.0	billion.

# DEPOSITS

The	carrying	amounts	of	noninterest-bearing	demand	and	interest-bearing	money market	and	savings	deposits	approximate	fair	values.	For	time	deposits,	which include	foreign	deposits,	fair	values	are	estimated	based	on	the	discounted	value of	expected	net	cash	flows	assuming	current	interest	rates.

# BORROWED	FUNDS

The	carrying	amounts	of	federal	funds	purchased,	commercial	paper,	repurchase agreements,	proprietary	trading	short	positions,	cash	collateral,	other	short-term borrowings,	acceptances	outstanding	and	accrued	interest	payable	are	considered to	be	their	fair	value	because	of	their	short-term	nature.	For	all	other	borrowed funds,	fair	values	are	estimated	based	on	dealer	quotes.

# UNFUNDED	LOAN	COMMITMENTS	AND	LETTERS	OF	CREDIT

The	fair	value	of	unfunded	loan	commitments	and	letters	of	credit	is	our	estimate of	the	cost	to	terminate	them.	For	purposes	of	this	disclosure,	this	fair	value	is	the sum	of	the	deferred	fees	currently	recorded	by	us	on	these	facilities	and	the liability	established	on	these	facilities	related	to	their	creditworthiness.

For	exchange-traded	contracts,	fair	value	is	based	on	quoted	market	prices.	For nonexchange-traded	contracts,	fair	value	is	based	on	dealer	quotes,	pricing models	or	quoted	prices	for	instruments	with	similar	characteristics.

# NOTE	9	GOODWILL	AND	OTHER	INTANGIBLE	ASSETS

A	summary	of	the	changes	in	goodwill	by	business	segment	during	2008 follows:

|  | Dec.	31 | Additions/ | Dec.	31 |
| :--- | :--- | :--- | :--- |
| In\tmillions | 2007 | Adjustments | 2008 |
| Retail\tBanking | $5,628 | $354 | $5,982 |
| Corporate\t&amp;\tInstitutional |  |  |  |
| Banking | \t 1,491 | 118 | \t 1,609 |
| Global\tInvestment\tServicing | \t 1,229 | 4 | \t 1,233 |
| BlackRock | 57 | (13) | 44 |
| Total | $8,405 | $463 | $8,868 |

Assets	and	liabilities	of	acquired	entities	are	recorded	at	estimated	fair	value	as of	the	acquisition	date	and	are	subject	to	refinement	as	information	relative	to	the fair	values	at	that	date	becomes	available.	Revisions	would	likely	result	in subsequent	adjustments	to	goodwill.	The	goodwill	and	other	intangible	assets related	to	Sterling	are	reported	in	the	Retail	Banking	and	Corporate	& Institutional	Banking	business	segments.

At	December	31,	2008,	no	goodwill	was	recognized	in	connection	with	the National	City	acquisition	as	the	fair	value	of	net	assets	acquired	exceeded	the purchase	price.	The	allocation	of	the	purchase	price	may	be	modified	through 2009	as	more	information,	such	as	appraisals,	contracts,	reviews	of	legal documentation,	and	selected	key	borrower	data,	is	obtained	about	the	fair	value of	assets	acquired	and	liabilities	assumed	and	may	result	in	goodwill.

The	gross	carrying	amount,	accumulated	amortization	and	net	carrying	amount of	other	intangible	assets	by	major	category	consisted	of	the	following:

# Other	Intangible	Assets

| December	31	-	in	millions | 2008	(a) | 2007 |
| :--- | :--- | :--- |
| Customer-related\tand\tother\tintangibles |  |  |
| Gross\tcarrying\tamount | $1,291 | $708 |
| Accumulated\tamortization | (361) | (263) |
| Net\tcarrying\tamount | $930 | $445 |
| Mortgage\tand\tother\tloan\tservicing\trights |  |  |
| Gross\tcarrying\tamount | $2,286 | $1,001 |
| Impairment\tcharge | (35) |  |
| Accumulated\tamortization | (361) | (300) |
| Net\tcarrying\tamount | $1,890 | $701 |
| Total | $2,820 | $1,146 |

(a)Amounts	at	December	31,	2008	include	National	City.

Our	acquisition	of	National	City	resulted	in	the	addition	of	$569	million	of	core deposit	and	other	relationship	intangibles

at	December	31,	2008.	Core	deposits	include	noninterest	and	interest-bearing demand	accounts,	savings	and	money	market	accounts.	In	addition,	mortgage servicing	rights	increased	$1.2	billion	primarily	related	to	the	National	City acquisition.	The	intangibles	were	valued	utilizing	a	discounted	cash	flows	model.

While	certain	of	our	other	intangible	assets	have	finite	lives	and	are	amortized primarily	on	a	straight-line	basis,	commercial	mortgage	and	other	loan	servicing rights	and	certain	core	deposit	intangibles	are	amortized	on	an	accelerated	basis. Residential	mortgage	servicing	rights	are	carried	at	fair	value	and	not	amortized.

For	customer-related	intangibles,	the	estimated	remaining	useful	lives	range from	less	than	one	year	to	14	years,	with	a	weighted-average	remaining	useful life	of	approximately	10	years.	Our	commercial	mortgage	and	other	loan servicing	rights	are	amortized	primarily	over	a	period	of	2	to	13	years	in proportion	to	the	estimated	net	servicing	cash	flows	from	the	related	loans.

We	recognize	as	an	other	intangible	asset	the	right	to	service	mortgage	loans	for others.	Commercial	mortgage	servicing	rights	are	purchased	in	the	open	market and	originated	when	loans	are	sold	with	servicing	retained.	Commercial mortgage	servicing	rights	are	initially	recorded	at	fair	value.	These	rights	are subsequently	measured	using	the	amortization	method.	Accordingly,	the commercial	mortgage	servicing	rights	are	amortized	in	proportion	to	and	over	the period	of	estimated	net	servicing	income.

Residential	mortgage	servicing	rights	of	$1	billion	were	recognized	in	connection with	the	acquisition	of	National	City.	We	have	elected	to	subsequently	measure residential	mortgage	servicing	rights	at	fair	value	consistent	with	how	we manage	the	risk	of	these	assets.

Amortizable	commercial	mortgage	servicing	rights	are	periodically	evaluated	for impairment.	For	purposes	of	impairment,	the	commercial	mortgage	servicing rights	are	stratified	based	on	asset	type,	which	characterizes	the	predominant	risk of	the	underlying	financial	asset.	If	the	carrying	amount	of	any	individual stratum	exceeds	its	fair	value,	a	valuation	reserve	is	established	with	a corresponding	charge	to	Corporate	Services	on	our	Consolidated	Income Statement.

The	fair	value	of	commercial	and	residential	mortgage	servicing	rights	is estimated	by	using	an	internal	valuation	model.	The	model	calculates	the	present value	of	estimated	future	net	servicing	cash	flows	considering	estimates	on servicing	revenue	and	costs,	discount	rates	and	prepayment	speeds.

Changes	in	the	commercial	mortgage	servicing	rights	were	as	follows:

# Commercial	Mortgage	Servicing	Rights

| In	millions | 2008 | 2007 |
| :--- | :--- | :--- |
| Balance\tat\tJanuary\t1 | $694 | $471 |
| Additions\t(a) | \t 300 | \t 310 |
| Amortization\texpense | (95) | (87) |
| Balance\tat\tDecember\t31 | \t 899 | \t 694 |
| Impairment\tcharge | (35) |  |
| Net\tcarrying\tamount\tat\tDecember\t31 | $864 | $694 |

(a)Includes	$210	million	in	2008	as	part	of	the	National	City	acquisition.

Servicing	revenue	from	both	commercial	and	residential	mortgage	servicing assets	and	liabilities	generated	contractually	specified	servicing	fees,	net	interest income	from	servicing	portfolio	deposit	balances,	and	ancillary	fees	totaling $171	million	in	2008,	$192	million	in	2007	and	$139	million	in	2006.	We	also generate	servicing	revenue	from	fee-based	activities	provided	to	others.

Amortization	expense	on	intangible	assets	for	2008,	2007	and	2006	was	$228 million,	$173	million	and	$99	million,	respectively.	The	2008	amortization expense	includes	a	$35	million	impairment	charge	for	certain	mortgage servicing	rights	due	to	the	effect	of	lower	interest	rates.	Amortization	expense	on existing	intangible	assets	for	2009	through	2013	is	estimated	to	be	as	follows: •	2009:	$297	million,

The	changes	in	the	carrying	amount	of	goodwill	and	net	other	intangible	assets during	2008	follows:

# Changes	in	Goodwill	and	Other	Intangibles

Our	investment	in	BlackRock	changes	when	BlackRock	repurchases	its	shares	in the	open	market	or	issues	shares	for	an	acquisition	or	pursuant	to	its	employee compensation	plans.	We	adjust	goodwill	when	BlackRock	repurchases	its	shares at	an	amount	greater	(or	less)	than	book	value	per	share	and	this	results	in	an increase	(or	decrease)	in	our	percentage	ownership	interest.

We	conduct	a	goodwill	impairment	test	on	our	reporting	units	at	least	annually or	more	frequently	if	any	adverse	triggering	events	occur.	Based	on	the	results	of our	analysis,	there	were	no	impairment	charges	related	to	goodwill	recognized	in 2008,	2007	or	2006.	The	fair	value	of	our	reporting	units	is	determined	by	using discounted	cash	flow	and	market	comparability	methodologies.

# NOTE	10	SECURITIZATION	ACTIVITY

We	contributed	commercial	mortgage	loans	to	securitizations	with	servicing retained	of	$.4	billion	in	2008	and	$2.2	billion	in	2007	for	cash	in	loan	sales transactions.	All	loan	amounts	are	derecognized	from	our	Consolidated	Balance Sheet	at	the	time	of	transfer.	Mortgage	servicing	rights	continue	to	be	held	by	us as	transferor.

These	transactions	resulted	in	a	pretax	net	loss	including	valuation	adjustments of	$22	million	in	2008	and	a	pretax	net	gain	including	valuation	adjustments	of $20	million	in	2007.	We	continue	to	perform	servicing	and	recognized	servicing assets	of	$3	million	in	2008	and	$14	million	in	2007	at	the	time	of	sale.

In	securitizations,	loans	are	typically	transferred	to	a	qualifying	special	purpose entity	("QSPE")	that	is	demonstrably	distinct	from	the	transferor	to	transfer	the risks	from	our	Consolidated	Balance	Sheet.	A	QSPE	is	a	bankruptcy-remote trust	allowed	to	perform	only	certain	passive	activities.	In	addition,	these	entities are	self-liquidating	and	typically	structured	as	Real	Estate	Mortgage	Investment Conduits	("REMICs")	for	tax	purposes.	The	QSPEs	are	generally	financed	by issuing	certificates	for	various	levels	of	senior	and	subordinated	tranches.	QSPEs are	exempt	from	consolidation	under	the	provisions	of	FIN	46R.

These	sale	and	servicing	transactions	are	structured	without	recourse	to	us.	Our exposure	is	limited	to	standard	representations	and	warranties	as	seller	of	the loans	and	responsibilities	as	servicer	of	the	QSPE's	assets.	In	certain circumstances	as	a	servicer	for	these	entities,	we	advance	principal	and	interest payments	to	the	securitization	trust.	We	have	a	risk	of	loss	if	the	borrower	does not	ultimately	make	the	principal	and	interest	payment.	However,	the	advance	is senior	secured	above	the	highest	rated	tranche	in	the	securitization.

Also,	in	certain	situations,	we	are	named	as	special	servicing	asset	manager.	The overall	objective	of	the	special	servicer	is	to	restore	the	defaulted	loan	to performing	status	or	to	develop

a	disposition	strategy	that	results	in	the	highest	recovery	on	a	net	present	value basis,	thus	protecting	the	interests	of	the	trust	and	its	investors.

See	Note	9	Goodwill	and	Other	Intangible	Assets	for	additional	information regarding	servicing	assets.

With	our	acquisition	of	National	City	on	December	31,	2008,	we	acquired residual	and	other	interests	associated	with	National	City's	credit	card, automobile,	mortgage,	and	SBA	loans	securitizations.	In	addition,	we	also assumed	certain	continuing	involvement	activities	in	these	securitization transactions.

The	credit	card,	automobile,	and	mortgage	securitizations	were	transacted through	QSPEs	sponsored	by	National	City.	These	QSPEs	were	financed primarily	through	the	issuance	and	sale	of	beneficial	interests	to	independent third	parties	and	were	not	consolidated	on	National	City's	balance	sheet. Consolidation	of	these	QSPEs	could	be	considered	if	circumstances	or	events subsequent	to	the	securitization	transaction	dates	would	cause	the	entities	to	lose their	"qualified"	status.	No	such	events	have	occurred.	Qualitative	and quantitative	information	about	these	securitizations	follows.

The	following	summarizes	the	assets	and	liabilities	of	the	National	City- sponsored	securitization	QSPEs	at	December	31,	2008.

| (In	millions) | Credit	Card | Automobile | Mortgage |
| :--- | :--- | :--- | :--- |
| Assets\t(a) | $2,129 | $250 | $319 |
| Liabilities | 1,824 | 250 | 319 |

(a)Represents	period-end	outstanding	principal	balances	of	loans	transferred	to	the	securitization	QSPEs.

# Credit	Card	Loans

At	December	31,	2008,	National	City's	credit	card	securitization	series	2005-1, 2006-1,	2007-1,	2008-1,	2008-2,	and	2008-3	were	outstanding.	Our	continuing involvement	in	the	securitized	credit	cards	receivables	consists	primarily	of servicing	and	a	pro-rata	undivided	interest	in	all	credit	card	receivables,	or seller's	interest,	in	the	QSPE.	Servicing	fees	earned	approximate	current	market rates	for	servicing	fees;	therefore,	no	servicing	asset	or	liability	existed	at December	31,	2008.	We	hold	a	clean-up	call	repurchase	option	to	the	extent	a securitization	series	extends	past	its	scheduled	note	principal	payoff	date.	To	the extent	this	occurs,	the	clean-up	call	option	is	triggered	when	the	principal balance	of	the	asset-backed	notes	of	any	series	reaches	5%	of	the	initial	principal balance	of	the	asset-back	notes	issued	at	the	securitization	date.	Our	seller's interest	ranks	equally	with	the	investors'	interests	in	the	trust.	As	the	amount	of the	assets	in	the	securitized	pool	fluctuates	due	to	customer	payments,	purchases, cash	advances,	and	credit	losses,	the	carrying	amount	of	the	seller's	interest	will vary.	However,	we	are	required	to	maintain	seller's	interest	at	a	minimum	level of	5%

of	the	initial	invested	amount	in	each	series	to	ensure	sufficient	assets	are available	for	allocation	to	the	investors'	interests.	Seller's	interest,	which	is recognized	in	portfolio	loans	on	the	Consolidated	Balance	Sheet,	was	well	above the	minimum	level	at	December	31,	2008.

Retained	interests	acquired	consisted	of	seller's	interest,	an	interest-only	strip, and	asset-backed	securities	issued	by	the	credit	card	securitization	QSPE.	The initial	carrying	values	of	these	retained	interests	were	determined	based	upon their	fair	values	at	December	31,	2008.	Seller's	interest	is	recognized	in	portfolio loans	on	the	Consolidated	Balance	Sheet	and	totaled	approximately	$315	million at	December	31,	2008.	The	interest-only	strips	are	recognized	in	other	assets	on the	Consolidated	Balance	Sheet	and	totaled	approximately	$20	million	at December	31,	2008.	The	asset-backed	securities	are	recognized	in	investment securities	on	the	Consolidated	Balance	Sheet	and	totaled	approximately	$25 million	at	December	31,	2008.	These	retained	interests	represent	the	maximum exposure	to	loss	associated	with	our	involvement	in	this	securitization.

# Automobile	Loans

At	December	31,	2008,	National	City's	auto	securitization	2005-A	was outstanding.	Our	continuing	involvement	in	the	securitized	automobile	loans consists	primarily	of	servicing	and	limited	requirements	to	repurchase transferred	loans	for	breaches	of	representations	and	warranties.	As	servicer,	we hold	a	cleanup	call	on	the	serviced	loans	which	gives	us	an	option	to	repurchase the	transferred	loans	when	their	outstanding	principal	balances	reach	5%	of	the initial	outstanding	principal	balance	of	the	automobile	loans	securitized.

The	Class	A	notes	issued	by	National	City's	2005-A	auto	securitization	were purchased	by	a	third-party	commercial	paper	conduit.	National	City's	subsidiary, National	City	Bank,	along	with	other	financial	institutions,	agreed	to	provide backup	liquidity	to	the	conduit.	The	conduit	holds	various	third-party	assets including	beneficial	interests	in	the	cash	flows	of	trade	receivables,	credit	cards and	other	financial	assets.	The	conduit	has	no	interests	in	subprime	mortgage loans.	The	conduit	relies	upon	commercial	paper	for	its	funding.	In	the	event	of	a disruption	in	the	commercial	paper	markets,	the	conduit	could	experience	a liquidity	event.	At	such	time,	the	conduit	may	require	National	City	Bank	to purchase	a	49%	interest	in	a	note	representing	a	beneficial	interest	in	National City's	securitized	automobile	loans.	Another	financial	institution,	affiliated	with the	conduit,	has	committed	to	purchase	the	remaining	51%	interest	in	this	same note.	Upon	the	conduit's	request,	National	City	Bank	would	pay	cash	equal	to the	par	value	of	the	notes,	less	the	corresponding	portion	of	all	defaulted	loans, plus	accrued	interest.	In	return,	National	City	Bank	would	be	entitled	to undivided	interest	in	the	cash	flows	of	the	collateral	underlying	the	note. National	City	Bank	receives	an	annual	commitment	fee	of	7	basis	points	for providing	this	backup

liquidity.	As	of	December	31,	2008,	the	conduit	has	never	experienced	any difficulty	in	accessing	the	commercial	paper	markets.	Our	acquired	commitment declines	commensurate	with	the	unpaid	principal	balance	of	the	automobile loans	securitized	by	National	City.	The	commitment	amount,	which	totaled approximately	$115	million	at	December	31,	2008,	represents	our	maximum exposure	to	the	conduit.	This	commitment	expires	in	December	2009	but	may	be renewed	annually	for	an	additional	12	months	by	mutual	agreement	of	the parties.

Retained	interests	acquired	consisted	of	an	interest-only	strip	and	asset-backed securities	issued	by	the	automobile	securitization	QSPE.	The	interest-only	strip and	asset-backed	securities	are	recognized	in	other	assets	and	investment securities,	respectively,	on	the	Consolidated	Balance	Sheet	and	their	initial carrying	value	was	determined	based	upon	their	fair	value	at	the	date	of acquisition.	At	December	31,	2008,	the	fair	value	of	the	interest-only	strip	and retained	asset-backed	securities	totaled	approximately	$9	million	and	$15 million,	respectively.	These	retained	interests	represent	the	maximum	exposure to	loss	associated	with	our	involvement	in	this	securitization.

# Jumbo	Mortgages

At	December	31,	2008,	National	City's	jumbo	mortgage	securitization	series 2008-1	was	outstanding.	Our	continuing	involvement	in	the	securitized	mortgage loans	consists	primarily	of	servicing	and	limited	requirements	to	repurchase transferred	loans	for	breaches	of	representations	and	warranties.	As	servicer,	we hold	a	cleanup	call	repurchase	option	when	the	outstanding	principal	balances	of the	transferred	loans	reach	5%	of	the	initial	outstanding	principal	balance	of	the mortgage	loans	securitized.

# SBA	Loans

We	have	no	continuing	involvement	in	the	SBA	loans	securitized	by	National City.	The	SBA	loans	were	sold	servicing	released	and	National	City	was	not	the sponsor	of	the	securitization's	special	purpose	entity.

Retained	interests	acquired	consisted	solely	of	interest-only	strips.	These retained	interests	are	recognized	in	other	assets	on	the	Consolidated	Balance Sheet,	totaled	approximately	$3	million	at	December	31,	2008,	and	represent	the maximum	exposure	to	loss	associated	with	our	involvement	in	this	securitization. The	initial	carrying	value	of	these	retained	interests	was	determined	based	upon their	fair	value	at	the	date	of	acquisition.

The	following	is	a	summary	of	owned	and	securitized	loans,	which	are	managed on	a	combined	basis.

|  | December	31,	2008 | December	31,	2008 |
| :--- | :--- | :--- |
| In\tMillions | Principal\nBalance | Loans\tPast\tDue\t30\nDays\tor\tMore |
| Loans\tmanaged |  |  |
| Credit\tcard | $ 3,731 | $177 |
| Automobile | 289 | 13 |
| Jumbo\tmortgages | 866 | 78 |
| SBA | 118 | 8 |
| Total\tloans\tmanaged | $ 5,004 | $276 |
| Less:\tLoans\tsecuritized |  |  |
| Credit\tcard | $ 1,824 | $73 |
| Automobile | 250 | 9 |
| Jumbo\tmortgages | 319 | 5 |
| SBA | 118 | 8 |
| Total\tloans\tsecuritized | $ 2,511 | $95 |
| Less:\tLoans\theld\tfor\tsecuritization |  |  |
| Jumbo\tmortgages | $9 | $4 |
| Loans\theld\tin\tportfolio | $ 2,484 | $177 |

The	tables	below	present	the	weighted-average	assumptions	used	to	measure	the	fair	values	of	our	acquired	retained	interests	and	servicing	assets	as	of	December	31, 2008.	Fair	value	was	determined	by	discounting	the	future	cash	flows	of	these	assets.	The	sensitivity	of	these	fair	values	to	immediate	10%	and	20%	adverse	changes	in key	assumptions	is	also	shown.	These	sensitivities	are	hypothetical.	Changes	in	fair	value	based	on	a	10%	variation	in	assumptions	generally	cannot	be	extrapolated because	the	relationship	of	the	change	in	the	assumption	to	the	change	in	fair	value	may	not	be	linear.	Also,	the	effect	of	a	variation	in	a	particular	assumption	on	the	fair value	of	the	retained	interests	is	calculated	without	changing	any	other	assumption;	in	reality,	changes	in	one	factor	may	result	in	changes	in	another	(for	example, increases	in	market	interest	rates	may	result	in	lower	prepayments	and	increased	credit	losses),	which	might	magnify	or	counteract	the	sensitivities.

# NOTE	11	PREMISES,	EQUIPMENT	AND	LEASEHOLD IMPROVEMENTS

Premises,	equipment	and	leasehold	improvements,	stated	at	cost	less accumulated	depreciation	and	amortization,	were	as	follows:

| December	31	-	in	millions | 2008	(a) | 2007 |
| :--- | :--- | :--- |
| Land | $577 | $250 |
| Buildings | 1,215 | 1,053 |
| Equipment | 2,773 | 2,029 |
| Leasehold\timprovements | 531 | 433 |
| Total | 5,096 | 3,765 |
| Accumulated\tdepreciation\tand\tamortization | (1,867) | (1,764) |
| Net\tbook\tvalue | $3,229 | $2,001 |
| (a) |  |  |

(a) Amounts	at	December	31,	2008	included	$1.2	billion	related	to	National	City.

Depreciation	expense	on	premises,	equipment	and	leasehold	improvements totaled	$225	million	in	2008,	$178	million	in	2007	and	$180	million	in	2006. Amortization	expense,	primarily	for	capitalized	internally	developed	software, was

We	lease	certain	facilities	and	equipment	under	agreements	expiring	at	various dates	through	the	year	2067.	We	account	for	these	as	operating	leases.	Rental expense	on	such	leases	amounted	to	$202	million	in	2008,	$207	million	in	2007 and	$193	million	in	2006.

Required	minimum	annual	rentals	that	we	owe	on	noncancelable	leases	having initial	or	remaining	terms	in	excess	of	one	year	totaled	$2.6	billion	at December	31,	2008	and	$1.2	billion	at	December	31,	2007.	Minimum	annual rentals	for	the	years	2009	through	2014	and	thereafter	are	as	follows:

# NOTE	12	DEPOSITS

# NOTE	13	BORROWED	FUNDS

Bank	notes	at	December	31,	2008	totaling	$1.0	billion	have	interest	rates	ranging from	2.75%	to	5.70%	with	approximately	$500	million	maturing	in	2009.	Senior and	subordinated	notes	consisted	of	the	following:

| Dollars	in	millions | Outstanding | Stated	Rate | Maturity |
| :--- | :--- | :--- | :--- |
| Senior | $12,622 | .23\t–\t5.50% | 2009\t–\t2047 |
| Subordinated |  |  |  |
| Junior | 2,898 | 2.77\t–\t10.18% | 2028\t–\t2068 |
| All\tother | 8,310 | 2.35\t–\t9.65% | 2009\t–\t2019 |
| Total\tsubordinated | 11,208 |  |  |
| Total\tsenior\tand |  |  |  |
| subordinated | $23,830 |  |  |

Included	in	outstandings	for	the	senior	and	subordinated	notes	in	the	table	above are	basis	adjustment	increases	of	$81	million	and	$551	million,	respectively, related	to	fair	value	accounting	hedges	as	of	December	31,	2008.

In	December	2008,	we	issued	the	following	senior	notes	totaling	$2.9	billion under	the	FDIC's	Temporary	Liquidity	Guarantee	Program-Debt	Guarantee Program:

Each	of	these	series	of	senior	notes	is	guaranteed	by	the	FDIC	and	is	backed	by the	full	faith	and	credit	of	the	United	States	of	America	through	June	30,	2012.

Total	borrowed	funds	of	$52.2	billion	at	December	31,	2008	have	scheduled	or anticipated	repayments	for	the	years	2009	through	2014	and	thereafter	as follows:

Included	in	borrowed	funds	are	FHLB	borrowings	of	$18.1	billion	at December	31,	2008,	$9.0	billion	of	which	are	collateralized	by	a	blanket	lien	on residential	mortgage	and	other	real	estate-related	loans	and	mortgage-backed	and treasury	securities	and	$224	million	are	collateralized	by	pledged	mortgage- backed	and	treasury	securities.	The	remaining	$8.9	billion,	assumed	in	the National	City	acquisition,	are	collateralized	by	a	blanket	lien	on	residential mortgage	and	home	equity	loans	and	mortgage-backed	securities.	FHLB advances	of	$5.1	billion	have	scheduled	maturities	of	less	than	one	year.	The remainder	of	the	FHLB	borrowings	have	balances	that	will	mature	from	2010	– 2030,	with	interest	rates	ranging	from	0%	–	7.33%.

As	part	of	the	National	City	acquisition,	PNC	assumed	liability	for	the conversion	of	$1.4	billion	of	convertible	senior	notes.	Interest	on	these	notes	is payable	semiannually	at	a	fixed	rate	of	4.0%.	The	maturity	date	of	these	notes	is February	1,	2011.	PNC	may	not	redeem	these	notes	prior	to	their	maturity	date. Holders	may	convert	the	notes,	at	their	option,	prior	to	November	15,	2010 under	certain	circumstances,	including	(i)	if	the	trading	price	of	the	notes	is	less than	a	defined	threshold	measured	against	the	market	value	of	PNC	common stock,	(ii)	any	time	after	March	31,	2008,	if	the	market	price	of	PNC	common stock	exceeds	130%	of	the	conversion	price	of	the	notes	in	effect	on	the	last trading	day	of	the	immediately	preceding	calendar	quarter,	or	(iii)	upon	the occurrence	of	certain	specific	events.	After	November	15,	2010,	the	holders may	convert	their	notes	at	any	time	through	the	third	scheduled	trading	date preceding	the	maturity	date.	The	initial	conversion	rate	equals	2.0725	shares	per $1,000	face	value	of	notes.	The	conversion	rate	will	be	subject	to	adjustment	for stock	splits,	stock	dividends,	cash	dividends	in	excess	of	certain	thresholds, stock	repurchases	where	the	price	exceeds	market	values,	and	certain	other events.	Upon	conversion,	PNC	will	pay	cash	equal	to	the	principal	balance	of	the notes	and	may	issue	shares	of	its	common	stock	for	any	conversion	value, determined	over	a	40	day	observation	period,	that	exceeds	the	principal	balance of	the	notes	being	converted.	The	maximum	number	of	net	common	shares	that PNC	may	be	required	to	issue	is	3.6	million	shares,	subject	to	potential adjustment	in	the	case	of	certain	events,	make-whole	fundamental	changes,	or early	termination.

The	holders	of	the	convertible	senior	notes	may	elect:	i)	in	the	case	of	a	make- whole	fundamental	change,	to	convert	the	notes	prior	to	the	effective	time	of such	change,	in	which	case	the	conversion	rate	will	be	increased	as	provided	by	a formula	set	forth	in	the	indenture	supplement	governing	the	convertible	senior notes;	or	ii)	upon	the	effective	time	of	any	fundamental	change,	to	require	PNC to	repurchase	the	convertible	senior	notes	at	their	principal	amount	plus	accrued but	unpaid	interest.	Generally,	a	fundamental	change	includes	an	acquisition	of more	than	50%	of	PNC's	common	stock,	certain	mergers,	consolidations	or other	business

combinations,	if	PNC's	continuing	directors	are	less	than	the	majority	of	the Board	of	Directors,	a	liquidation	or	dissolution,	or	PNC's	common	stock	is	not listed	on	any	US	national	securities	exchange.	These	rights	may	discourage	a business	combination	or	other	transaction	that	is	otherwise	favored	by	certain shareholders.

The	$2.9	billion	of	junior	subordinated	debt	included	in	the	above	table represents	the	only	debt	redeemable	prior	to	maturity.	The	call	price	and	related premiums	are	discussed	in	Note	14	Capital	Securities	of	Subsidiary	Trusts.

# NOTE	14	CAPITAL	SECURITIES	OF	SUBSIDIARY	TRUSTS

At	December	31,	2008,	capital	securities	totaling	$3.5	billion	represented	non-voting	preferred	beneficial	interests	in	the	assets	of	the	following	(Trusts	acquired	with National	City	follow	in	a	separate	table):

* We	may	only	redeem	or	repurchase	the	trust	preferred	securities	of,	and	the	junior	subordinated	notes	payable	to,	PNC	Capital	Trust	E	prior	to	and	including	March	15,	2038	subject	to	having	received	proceeds	of the	issuance	of	certain	qualified	securities	and	subject	to	the	other	terms	and	conditions	set	forth	in	the	applicable	replacement	capital	covenant.	As	of	December	31,	2008,	the	beneficiaries	of	this	limitation	are	the holders	of	our	$300	million	of	6.125%	Junior	Subordinated	Notes	issued	in	December	2003.

Effective	December	31,	2008,	the	following	Trusts	were	added	as	part	of	the	National	City	acquisition.

** We	may	only	redeem	or	repurchase	the	trust	preferred	securities	of,	and	the	junior	subordinated	notes	payable	to,	National	City	Preferred	Capital	Trust	I	prior	to	December	10,	2016,	subject	to	having	received proceeds	from	the	issuance	of	certain	qualified	securities	and	subject	to	the	other	terms	and	conditions	set	forth	in	the	applicable	replacement	capital	covenant.	As	of	December	31,	2008,	the	beneficiaries	of	this limitation	are	the	holders	of	our	$700	million	of	6.875%	subordinated	notes	due	2019.	The	Trust	holds	$500	million	of	8.729%	junior	subordinated	notes	and	3.271%	Stock	Purchase	Contracts	issued	by	PNC.

*** We	may	only	redeem	or	repurchase	the	trust	preferred	securities	of,	and	our	junior	subordinated	notes	payable	to,	National	City	Capital	Trust	II,	III	and	IV	more	than	10	years	in	advance	of	their	legal	maturity dates,	subject	to	having	received	proceeds	from	the	issuance	of	certain	qualified	securities	and	subject	to	the	other	terms	and	conditions	set	forth	in	the	applicable	replacement	capital	covenant.	As	of	December	31, 2008,	the	beneficiaries	of	this	limitation	are	the	holders	of	our	$700	million	of	6.875%	subordinated	notes	due	2019.

All	of	these	Trusts	are	wholly	owned	finance	subsidiaries	of	PNC.	In	the	event of	certain	changes	or	amendments	to	regulatory	requirements	or	federal	tax rules,	the	capital	securities	are	redeemable	in	whole.	The	financial	statements	of the	Trusts	are	not	included	in	PNC's	consolidated	financial	statements	in accordance	with	GAAP.

At	December	31,	2008,	PNC's	junior	subordinated	debt	of	$2.9	billion,	net	of National	City–related	purchase	accounting	adjustments,	represented	debentures purchased	and	held	as	assets	by	the	Trusts.

The	obligations	of	the	respective	parent	of	each	Trust,	when	taken	collectively, are	the	equivalent	of	a	full	and	unconditional	guarantee	of	the	obligations	of	such Trust	under	the	terms	of	the	Capital	Securities.	Such	guarantee	is	subordinate	in right	of	payment	in	the	same	manner	as	other	junior	subordinated	debt.	There	are certain	restrictions	on	PNC's	overall	ability	to	obtain	funds	from	its	subsidiaries. For	additional	disclosure	on	these	funding	restrictions,	including	an	explanation of	dividend	and	intercompany	loan	limitations,	see	Note	23	Regulatory	Matters.

PNC	is	subject	to	restrictions	on	dividends	and	other	provisions	similar	to	or	in some	ways	more	restrictive	than	those	potentially	imposed	under	the	Exchange Agreements	with	Trust	II	and	Trust	III,	as	described	in	Note	3	Variable	Interest Entities.	PNC	is	also	subject	to	dividend	restrictions	as	a	result	of	our	issuance	of preferred	stock	to	the	US

Treasury	under	the	TARP	Capital	Purchase	Program	as	described	in	Note	19 Shareholders'	Equity.

# NOTE	15	EMPLOYEE	BENEFIT	PLANS

# PENSION	AND	POSTRETIREMENT	PLANS

We	have	a	noncontributory,	qualified	defined	benefit	pension	plan	covering eligible	employees.	The	plan	derives	benefits	from	cash	balance	formulas	based on	compensation	levels,	age	and	length	of	service.	Pension	contributions	are based	on	an	actuarially	determined	amount	necessary	to	fund	total	benefits payable	to	plan	participants.	National	City	had	a	qualified	pension	plan	covering substantially	all	employees	hired	prior	to	April	1,	2006.	Pension	benefits	are derived	from	a	cash	balance	formula,	whereby	credits	based	on	salary,	age,	and years	of	service	are	allocated	to	employee	accounts.	The	National	City	plan	was merged	with	our	qualified	pension	plan	on	December	31,	2008.	As	of	the	plan merger	date,	no	changes	to	either	plan	design	or	benefits	occurred.

We	also	maintain	nonqualified	supplemental	retirement	plans	for	certain employees.	On	December	31,	2008,	the	participants	of	National	City's supplemental	executive	retirement	plans	became	100%	vested	due	to	the	change in	control.	We	also	provide	certain	health	care	and	life	insurance	benefits	for qualifying	retired	employees	("postretirement	benefits")	through	various	plans. The	nonqualified	pension	and	postretirement	benefit	plans	are	unfunded.	The Company	reserves	the	right	to	terminate	or	make	plan	changes	at	any	time.

We	use	a	measurement	date	of	December	31	for	plan	assets	and	benefit	obligations.	A	reconciliation	of	the	changes	in	the	projected	benefit	obligation	for	qualified pension,	nonqualified	pension	and	postretirement	benefit	plans	as	well	as	the	change	in	plan	assets	for	the	qualified	pension	plan	follows:

|  | Qualified<br>Pension | Qualified<br>Pension | Nonqualified<br>Pension | Nonqualified<br>Pension | Postretirement<br>Benefits | Postretirement<br>Benefits |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| December\t31\t(Measurement\tDate)\t–\tin\tmillions | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 |
| Accumulated\tbenefit\tobligation\tat\tend\tof\tyear | $3,493 | $1,436 | $253 | $109 |  |  |
| Projected\tbenefit\tobligation\tat\tbeginning\tof\tyear | $1,507 | $1,245 | $113 | $76 | $243 | $235 |
| National\tCity\tacquisition | \t 2,109 |  | 145 |  | 105 |  |
| Other\tacquisitions\t(a) |  | 247 | 5 | 34 | 3 | 18 |
| Service\tcost | 44 | 42 | 2 | 2 | 3 | 3 |
| Interest\tcost | 86 | 82 | 6 | 6 | 15 | 14 |
| Amendments | (17) |  |  |  |  | (5) |
| Actuarial\tlosses\t(gains)\tand\tchanges\tin\tassumptions | (18) | (11) | 2 | 4 | (17) | (2) |
| EITF\t06-4\tadoption |  |  |  |  | 29 |  |
| Participant\tcontributions |  |  |  |  | 9 | 8 |
| Federal\tMedicare\tsubsidy\ton\tbenefits\tpaid |  |  |  |  | 2 | 2 |
| Benefits\tpaid | (94) | (98) | (10) | (9) | (33) | (30) |
| Projected\tbenefit\tobligation\tat\tend\tof\tyear | $3,617 | $1,507 | $263 | $113 | $359 | $243 |
| Fair\tvalue\tof\tplan\tassets\tat\tbeginning\tof\tyear | $2,019 | $1,746 |  |  |  |  |
| National\tCity\tacquisition | \t 2,032 |  |  |  |  |  |
| Other\tacquisitions\t(a) |  | 242 |  |  |  |  |
| Actual\treturn\ton\tplan\tassets | (665) | 129 |  |  |  |  |
| Employer\tcontribution |  |  | $10 | $9 | $22 | $20 |
| Participant\tcontributions |  |  |  |  | 9 | 8 |
| Federal\tMedicare\tsubsidy\ton\tbenefits\tpaid |  |  |  |  | 2 | 2 |
| Benefits\tpaid | (94) | (98) | (10) | (9) | (33) | (30) |
| Fair\tvalue\tof\tplan\tassets\tat\tend\tof\tyear | $3,292 | $2,019 |  |  |  |  |
| Funded\tstatus | $(325) | $512 | $(263) | $(113) | $(359) | $(243) |
| Net\tamount\trecognized\ton\tthe\tbalance\tsheet | $(325) | $512 | $(263) | $(113) | $(359) | $(243) |
| Amounts\trecognized\tin\taccumulated\tother\tcomprehensive\tincome\tconsist\tof: |  |  |  |  |  |  |
| Prior\tservice\tcost\t(credit) | (12) | 2 |  |  | (22) | (29) |
| Net\tactuarial\tloss | \t 1,004 | 198 | 30 | 30 | 14 | 31 |
| Amount\trecognized\tin\tAOCI | $992 | $200 | $30 | $30 | $(8) | $2 |
| (a)\nSterling\tin\t2008;\tMercantile\tand\tYardville\tin\t2007. |  |  |  |  |  |  |

The	fair	value	of	the	qualified	pension	plan	assets	is	less	than	both	the accumulated	benefit	obligation	and	the	projected	benefit	obligation.	The nonqualified	pension	plan,	which	contains	several	individual	plans	that	are accounted	for	together,	is	unfunded.	Contributions	from	us	and,	in	the	case	of postretirement	benefit	plans,	participant	contributions	cover	all	benefits	paid under	the	nonqualified	pension	plan	and	postretirement	benefit	plans.	The postretirement	plan	provides	benefits	to	certain	retirees	that	are	at	least actuarially	equivalent	to	those	provided	by	Medicare	Part	D	and	accordingly,	we receive	a	federal	subsidy	as	shown	in	the	table.

# PNC	PENSION	PLAN	ASSETS

Assets	related	to	our	qualified	pension	plan	(the	"Plan")	are	held	in	trust	(the "Trust").	The	trustee	is	PNC	Bank,	N.A.	The	Trust	is	exempt	from	tax	pursuant to	section	501(a)	of	the	Internal	Revenue	Code	(the	"Code").	The	Plan	is qualified	under	section	401(a)	of	the	Code.	Plan	assets	consist	primarily	of	listed domestic	and	international	equity	securities	and	US	government,	agency,	and corporate	debt	securities	and	real

estate	investments.	Plan	assets	do	not	include	common	stock,	preferred	stock	or debt	of	PNC.

The	Pension	Plan	Administrative	Committee	(the	"Committee")	adopted	the current	Pension	Plan	Investment	Policy	Statement,	including	the	updated	target allocations	and	allowable	ranges	shown	below,	on	August	13,	2008.

The	long-term	investment	strategy	for	pension	plan	assets	is	to:

•	Meet	present	and	future	benefit	obligations	to	all	participants	and beneficiaries,

•	Cover	reasonable	expenses	incurred	to	provide	such	benefits,

including	expense	incurred	in	the	administration	of	the	Trust	and	the Plan,

•	Provide	sufficient	liquidity	to	meet	benefit	and	expense	payment requirements	on	a	timely	basis,	and

•	Provide	a	total	return	that,	over	the	long	term,	maximizes	the	ratio	of trust	assets	to	liabilities	by	maximizing	investment	return,	at	an appropriate	level	of	risk.

The	Plan's	specific	investment	objective	is	to	meet	or	exceed	the	investment policy	benchmark	over	the	long	term.	The	investment	policy	benchmark compares	actual	performance	to	a	weighted	market	index,	and	measures	the contribution	of	active	investment	management	and	policy	implementation.	This investment	objective	is	expected	to	be	achieved	over	the	long	term	(one	or	more market	cycles)	and	is	measured	over	rolling	five-year	periods.	Total	return calculations	are	time-weighted	and	are	net	of	investment-related	fees	and expenses.

The	asset	strategy	allocations	for	the	Trust	at	the	end	of	2008	and	2007,	and	the target	allocation	range,	by	asset	category,	are	as	follows:

|  | Target<br>Allocation<br>Range | Percentage	of	Plan	Assets<br>by	Strategy	at<br>December	31 | Percentage	of	Plan	Assets<br>by	Strategy	at<br>December	31 |
| :--- | :--- | :--- | :--- |
| PNC\tPension\tPlan |  | 2008 | 2007 |
| Asset\tCategory |  |  |  |
| Equity\tsecurities | 49-69% | 58% | 62% |
| Fixed\tincome\tsecurities | 32-39% | 39% | 34% |
| Real\testate | 4-6% | 3% | 4% |
| Other | 0-5% | — | — |
| Total |  | 100% | 100% |

The	asset	category	represents	the	allocation	of	Plan	assets	in	accordance	with	the investment	objective	of	each	of	the	Plan's	investment	managers.	Certain domestic	equity	investment	managers	utilize	derivatives	and	fixed	income securities	as	described	in	their	Investment	Management	Agreements	to	achieve their	investment	objective	under	the	Investment	Policy	Statement.	Other investment	managers	may	invest	in	eligible	securities	outside	of	their	assigned asset	category	to	meet	their	investment	objectives.	The	actual	percentage	of	the fair	value	of	total	plan	assets	held	as	of	December	31,	2008	for	equity	securities, fixed	income	securities,	real	estate	and	all	other	assets	are	32%,	55%,	0%,	and 13%,	respectively.

We	believe	that,	over	the	long	term,	asset	allocation	is	the	single	greatest determinant	of	risk.	Asset	allocation	will	deviate	from	the	target	percentages	due to	market	movement,	cash	flows,	and	investment	manager	performance.	Material deviations	from	the	asset	allocation	targets	can	alter	the	expected	return	and	risk of	the	Trust.	On	the	other	hand,	frequent	rebalancing	to	the	asset	allocation targets	may	result	in	significant	transaction	costs,	which	can	impair	the	Trust's ability	to	meet	its	investment	objective.	Accordingly,	the	Trust	portfolio	is periodically	rebalanced	to	maintain	asset	allocation	within	the	target	ranges described	above.

In	addition	to	being	diversified	across	asset	classes,	the	Trust	is	diversified within	each	asset	class.	Secondary	diversification	provides	a	reasonable	basis	for the	expectation	that	no	single	security	or	class	of	securities	will	have	a disproportionate	impact	on	the	total	risk	and	return	of	the	Trust.

The	Committee	selects	investment	managers	for	the	Trust	based	on	the contributions	that	their	respective	investment	styles	and	processes	are	expected to	make	to	the	investment	performance	of	the	overall	portfolio.	The	managers' Investment	Objectives	and	Guidelines,	which	are	a	part	of	each	manager's Investment	Management	Agreement,	document	performance	expectations	and each	manager's	role	in	the	portfolio.	The	Committee	uses	the	Investment Objectives	and	Guidelines	to	establish,	guide,	control	and	measure	the	strategy and	performance	for	each	manager.

The	purpose	of	investment	manager	guidelines	is	to:

•	Establish	the	investment	objective	and	performance	standards	for	each manager,

•	Provide	the	manager	with	the	capability	to	evaluate	the	risks	of	all	financial instruments	or	other	assets	in	which	the	manager's	account	is	invested,	and •	Prevent	the	manager	from	exposing	its	account	to	excessive	levels	of	risk, undesired	or	inappropriate	risk,	or	disproportionate	concentration	of	risk.

The	guidelines	also	indicate	which	investments	and	strategies	the	manager	is permitted	to	use	to	achieve	its	performance	objectives,	and	which	investments and	strategies	it	is	prohibited	from	using.

Where	public	market	investment	strategies	may	include	the	use	of	derivatives and/or	currency	management,	language	is	incorporated	in	the	managers' guidelines	to	define	allowable	and	prohibited	transactions	and/or	strategies. Derivatives	are	typically	employed	by	investment	managers	to	modify risk/return	characteristics	of	their	portfolio(s),	implement	asset	allocation changes	in	a	cost-effective	manner,	or	reduce	transaction	costs.	Under	the managers'	investment	guidelines,	derivatives	may	not	be	used	solely	for speculation	or	leverage.	Derivatives	are	used	only	in	circumstances	where	they offer	the	most	efficient	economic	means	of	improving	the	risk/reward	profile	of the	portfolio.

BlackRock,	Global	Investment	Servicing	and	our	Retail	Banking	business segments	receive	compensation	for	providing	investment	management,	trustee and	custodial	services	for	the	majority	of	the	Trust	portfolio.	Compensation	for such	services	is	paid	by	PNC.	Non-affiliate	service	providers	for	the	Trust	are compensated	from	plan	assets.

# NATIONAL	CITY	PENSION	PLAN	ASSETS

Assets	related	to	the	pension	plan	investments	of	the	former	National	City qualified	pension	plan	are	held	in	trust.	The	trustee	is	National	City	Bank.	The Trust	is	exempt	from	tax	pursuant	to	section	501(a)	of	the	Code.	The	plan	is qualified	under	section	401(a)	of	the	Code.	Plan	assets	consist	primarily	of	listed domestic	and	international	equity	securities	and	US	government,	agency,	and corporate	debt	securities	and	real	estate	investments.	Plan	assets	do	include common	stock	of	PNC	as	discussed	below.

The	asset	allocation	for	National	City's	defined	benefit	pension	plan	as	of	the measurement	date,	by	asset	category	is	as	follows:

|  | Percentage	of	Plan	Assets |
| :--- | :--- |
| National\tCity\tPension\tPlan | December\t31\t2008 |
| Asset\tCategory |  |
| Equity\tsecurities | 42% |
| Fixed\tincome\tsecurities | 9% |
| Cash\tand\tcash\tequivalents | 49% |
| Total | 100% |

The	investment	objective	for	the	National	City	qualified	pension	plan	is	to maximize	total	return	with	tolerance	for	slightly	above	average	risk.	Asset allocation	strongly	favors	equities,	with	a	target	allocation	of	approximately	80% equity	securities,	15%	fixed	income	securities,	and	5%	cash.	Due	to	volatility	in the	market,	the	target	allocation	is	not	always	desirable	as	asset	allocations	will fluctuate.	A	core	equity	position	of	large	cap	stocks	will	be	maintained. However,	more	aggressive	or	volatile	sectors	will	be	meaningfully	represented	in the	asset	mix	in	pursuit	of	higher	returns.	Higher	volatility	investment	strategies such	as	credit	risk,	structured	finance,	and	international	bonds	will	be appropriate	strategies	in	conjunction	with	the	core	position.	As	of	December	31, 2008,	the	plan	had	a	temporary	large	cash	and	cash	equivalents	balance	due	to	a contribution	of	$850	million	made	by	National	City	to	the	plan	on	December	30, 2008	which	had	not	yet	been	fully	invested.

with	PNC's	acquisition	of	National	City,	these	shares	were	exchanged	into 197,914	shares	of	PNC	common	stock.

The	following	table	provides	information	regarding	our	estimated	future	cash flows	related	to	our	various	plans,	including	the	impact	of	the	National	City plans:

# ESTIMATED	CASH	FLOWS

|  |  |  | Postretirement	Benefits | Postretirement	Benefits |
| :--- | :--- | :--- | :--- | :--- |
|  |  |  |  | Reduction |
|  |  |  |  | in\tPNC |
|  |  |  |  | Benefit |
|  |  |  |  | Payments |
|  |  |  | Gross | Due\tto |
|  |  |  | PNC | Medicare |
|  | Qualified | Nonqualified | Benefit | Part\tD |
| In\tmillions | Pension | Pension | Payments | Subsidy |
| Estimated\t2009 |  |  |  |  |
| employer |  |  |  |  |
| contributions | — | $29 | $35 | $2 |
| Estimated\tfuture |  |  |  |  |
| benefit |  |  |  |  |
| payments |  |  |  |  |
| 2009 | $247 | $29 | $35 | $2 |
| 2010 | 253 | 30 | 36 | 2 |
| 2011 | 262 | 28 | 34 | 2 |
| 2012 | 267 | 28 | 34 | 2 |
| 2013 | 277 | 25 | 34 | 2 |
| 2014\t–\t2018 | 1,499 | 109 | 164 | 9 |

The	qualified	pension	plan	contributions	are	deposited	into	the	Trust,	and	the qualified	pension	plan	benefit	payments	are	paid	from	the	Trust.	For	the	other plans,	total	contributions	and	the	benefit	payments	are	the	same	and	represent expected	benefit	amounts,	which	are	paid	from	general	assets.	Postretirement benefits	are	net	of	participant	contributions.

The	components	of	net	periodic	benefit	cost/	(income)	and	other	amounts	recognized	in	other	comprehensive	income	were	as	follows.	This	table	excludes	the	impact	of the	National	City	plans	which	we	acquired	on	December	31,	2008.

|  | Qualified	Pension	Plan | Qualified	Pension	Plan | Qualified	Pension	Plan | Nonqualified	Pension	Plan | Nonqualified	Pension	Plan | Nonqualified	Pension	Plan | Postretirement	Benefits | Postretirement	Benefits | Postretirement	Benefits |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Year\tended\tDecember\t31\t–\tin\tmillions | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 |
| Net\tperiodic\tcost\tconsists\tof: |  |  |  |  |  |  |  |  |  |
| Service\tcost | $44 | $42 | $34 | $2 | $2 | $1 | $3 | $3 | $2 |
| Interest\tcost | 86 | 82 | 68 | 6 | 6 | 4 | 15 | 14 | 13 |
| Expected\treturn\ton\tplan\tassets | (160) | (156) | (129) |  |  |  |  |  |  |
| Amortization\tof\tprior\tservice\tcost | (2) |  | (1) |  |  |  | (7) | (7) | (6) |
| Amortization\tof\tactuarial\tlosses |  | 2 | 16 | 2 | 2 | 3 |  |  | 1 |
| Net\tperiodic\tcost | $(32) | $(30) | $(12) | $10 | $10 | $8 | $11 | $10 | $10 |
| Other\tchanges\tin\tplan\tassets\tand\tbenefit\tobligations\trecognized\tin\tother |  |  |  |  |  |  |  |  |  |
| comprehensive\tincome: |  |  |  |  |  |  |  |  |  |
| Current\tyear\tprior\tservice\tcost/(credit) | $(17) |  |  |  |  |  |  | $(5) |  |
| Amortization\tof\tprior\tservice\t(cost)/credit | 2 |  |  |  |  |  | $7 | 7 |  |
| Current\tyear\tactuarial\tloss/(gain) | 807 | $16 |  | $2 | $4 |  | (17) | (2) |  |
| Amortization\tof\tactuarial\t(loss)/gain |  | (2) |  | (2) | (2) |  |  |  |  |
| Total\trecognized\tin\tOCI | 792 | 14 |  |  | 2 |  | (10) |  |  |
| Total\trecognized\tin\tnet\tperiodic\tcost\tand\tOCI | $760 | $(16) |  | $10 | $12 |  | $1 | $10 |  |

The	weighted-average	assumptions	used	(as	of	the	beginning	of	each	year)	to determine	net	periodic	costs	shown	above	were	as	follows:

The	weighted-average	assumptions	used	(as	of	the	end	of	each	year)	to	determine year-end	obligations	for	pension	and	postretirement	benefits	were	as	follows:

|  | 2008 | 2007 |
| :--- | :--- | :--- |
| Discount\trate |  |  |
| Qualified\tpension | 6.05% | 5.95% |
| Nonqualified\tpension | 5.90 | 5.75 |
| Postretirement\tbenefits | 5.95 | 5.95 |
| Rate\tof\tcompensation\tincrease\t(average) | 4.00 | 4.00 |
| Assumed\thealth\tcare\tcost\ttrend\trate |  |  |
| Initial\ttrend | 9.00 | 9.50 |
| Ultimate\ttrend | 5.00 | 5.00 |

The	discount	rate	assumptions	were	determined	independently	for	each	plan reflecting	the	duration	of	each	plan's	obligations.	Specifically,	a	yield	curve	was produced	for	a	universe	containing	the	majority	of	US-issued	Aa	grade	corporate bonds,	all	of	which	were	non-callable	(or	callable	with	make-whole	provisions). Excluded	from	this	yield	curve	were	the	10%	of	the	bonds	with	the	highest	yields and	the	10%	with	the	lowest	yields.	For	each	plan,	the	discount	rate	was determined	as	the	level	equivalent	rate	that	would	produce	the	same	present value	obligation	as	that	using	spot	rates	aligned	with	the	projected	benefit payments.

The	expected	return	on	plan	assets	is	a	long-term	assumption	established	by considering	historical	and	anticipated	returns	of	the	asset	classes	invested	in	by the	pension	plan	and	the	allocation	strategy	currently	in	place	among	those classes.	We	review	this	assumption	at	each	measurement	date	and	adjust	it	if warranted.

The	health	care	cost	trend	rate	assumptions	shown	in	the	preceding	tables	relate only	to	the	postretirement	benefit	plans.	A	one-percentage-point	change	in assumed	health	care	cost	trend	rates	would	have	the	following	effects:

Under	SFAS	158,	unamortized	actuarial	gains	and	losses	and	prior	service	costs and	credits	are	recognized	in	AOCI	each	December	31,	while	amortization	of these	amounts	through	net	periodic	benefit	cost	occurs	in	accordance	with	SFAS 87	and	SFAS	106.	The	estimated	amounts	that	will	be	amortized	in	2009	are	as follows:

|  |  | 2009	Estimate |  |
| :--- | :--- | :--- | :--- |
| Year\tended\tDecember\t31\nIn\tmillions | Qualified\nPension | Nonqualified\nPension | Postretirement\nBenefits |
| Prior\tservice\tcost\t(credit) | $(2) | — | $(5) |
| Net\tactuarial\tloss | 80 | — | — |
| Total | $78 | — | $(5) |

# DEFINED	CONTRIBUTION	PLANS

We	have	a	contributory,	qualified	defined	contribution	plan	that	covers substantially	all	employees	except	those	covered	by	other	plans	as	identified below.	Under	this	plan,	employee	contributions	up	to	6%	of	eligible compensation	as	defined	by	the	plan	are	matched	100%,	subject	to	Code limitations.	The	plan	is	a	401(k)	plan	and	includes	an	employee	stock	ownership ("ESOP")	feature.	Employee	contributions	are	invested	in	a	number	of investment	options	available	under	the	plan,	including	a	PNC	common	stock fund	and	several	BlackRock	mutual	funds,	at	the	direction	of	the	employee.	All shares	of	PNC	common	stock	held	by	the	plan	are	part	of	the	ESOP.	Employee contributions	to	the	plan	for	2008,	2007	and	2006	were	matched	primarily	by shares	of	PNC	common	stock	held	in	treasury,	except	in	the	case	of	those participants	who	have	exercised	their	diversification	election	rights	to	have	their matching	portion	in	other	investments	available	within	the	plan.	Employee benefits	expense	related	to	this	plan	was	$57	million	in	2008,	$52	million	in 2007	and	$52	million	in	2006.	We	measured	employee	benefits	expense	as	the fair	value	of	the	shares	and	cash	contributed	to	the	plan	by	PNC.

We	have	a	separate	qualified	defined	contribution	plan	that	covers	substantially all	US-based	Global	Investment	Servicing	employees	not	covered	by	our	plan. The	plan	is	a	401(k)	plan	and	includes	an	ESOP	feature.	Under	this	plan, employee	contributions	of	up	to	6%	of	eligible	compensation	as	defined

by	the	plan	may	be	matched	annually	based	on	Global	Investment	Servicing performance	levels.	Participants	must	be	employed	as	of	December	31	of	each year	to	receive	this	annual	contribution.	The	performance-based	employer matching	contribution	will	be	made	primarily	in	shares	of	PNC	common	stock held	in	treasury,	except	in	the	case	of	those	participants	who	have	exercised	their diversification	election	rights	to	have	their	matching	portion	in	other	investments available	within	the	plan.	Mandatory	employer	contributions	to	this	plan	are made	in	cash	and	include	employer	basic	and	transitional	contributions. Employee-directed	contributions	are	invested	in	a	number	of	investment	options available	under	the	plan,	including	a	PNC	common	stock	fund	and	several BlackRock	mutual	funds,	at	the	direction	of	the	employee.	Employee	benefits expense	for	this	plan	was	$11	million	in	2008,	$10	million	in	2007	and	$9 million	in	2006.	We	measured	employee	benefits	expense	as	the	fair	value	of	the shares	and	cash	contributed	to	the	plan.

We	also	maintain	a	nonqualified	supplemental	savings	plan	for	certain employees.

We	also	maintain	a	defined	contribution	plan	for	National	City	legacy employees.	Substantially	all	National	City	legacy	employees	are	eligible	to contribute	a	portion	of	their	pretax	compensation	to	the	plan.	PNC	may	make contributions	to	the	plan	for	employees	with	one	or	more	years	of	service	in	the form	of	company	common	stock	in	varying	amounts	depending	on	participant contribution	levels.	PNC	reserves	the	right	to	terminate	or	make	plan	changes	at any	time.

# NOTE	16	STOCK-BASED	COMPENSATION	PLANS

We	have	long-term	incentive	award	plans	("Incentive	Plans")	that	provide	for the	granting	of	incentive	stock	options,	nonqualified	stock	options,	stock appreciation	rights,	incentive	shares/performance	units,	restricted	stock, restricted	share	units,	other	share-based	awards	and	dollar-denominated	awards to	executives	and,	other	than	incentive	stock	options,	to	non-employee	directors. Certain	Incentive	Plan	awards	may	be	paid	in	stock,	cash	or	a	combination	of stock	and	cash.	We	grant	a	substantial	portion	of	our	stock-based	compensation awards	during	the	first	quarter	of	the	year.	As	of	December	31,	2008,	no	stock appreciation	rights	were	outstanding.

# NONQUALIFIED	STOCK	OPTIONS

Options	are	granted	at	exercise	prices	not	less	than	the	market	value	of	common stock	on	the	grant	date.	Generally,	options	granted	since	1999	become exercisable	in	installments	after	the	grant	date.	Options	granted	prior	to	1999	are mainly	exercisable	12	months	after	the	grant	date.	No	option	may	be	exercisable after	10	years	from	its	grant	date.	Payment	of	the	option	exercise	price	may	be	in cash	or	shares	of	common	stock	at	market	value	on	the	exercise	date.	The exercise	price	may	be	paid	in	previously	owned	shares.

Generally,	options	granted	under	the	Incentive	Plans	vest	ratably	over	a	three- year	period	as	long	as	the	grantee	remains	an	employee	or,	in	certain	cases, retires	from	PNC.	For	all	options	granted	prior	to	the	adoption	of	SFAS	123R, we	recognized	compensation	expense	over	the	three-year	vesting	period.	If	an employee	retired	prior	to	the	end	of	the	three-year	vesting	period,	we	accelerated the	expensing	of	all	unrecognized	compensation	costs	at	the	retirement	date.	As required	under	SFAS	123R,	we	recognize	compensation	expense	for	options granted	to	retirement-eligible	employees	after	January	1,	2006	during	the	first twelve	months	subsequent	to	the	grant,	in	accordance	with	the	service	period provisions	of	the	options.

During	the	third	quarter	of	2008,	we	granted	approximately	one	million	options to	certain	senior	executives.	While	these	options	generally	contain	the	same terms	and	conditions	as	previous	option	grants,	cliff	vesting	will	occur	on	or	after the	third	anniversary	from	the	grant	date	if	the	market	price	of	PNC	stock exceeds	the	grant	date	price	by	20%	or	more	over	a	specified	time	period.	These options	were	approved	by	the	Personnel	and	Compensation	Committee	of	the Board	of	Directors.	The	grant	date	fair	value	was	$6.59	per	option.

# OPTIONS	ISSUED	FOR	STERLING	ACQUISITION

On	April	4,	2008,	in	connection	with	the	closing	of	the	Sterling	acquisition,	we issued	325,489	PNC	stock	options	upon	conversion	of	all	outstanding	and unexercised	Sterling	options	at	that	date.	Of	the	total	options	issued,	159,676 were	issued	as	nonqualified	stock	options,	and	the	remaining	165,813	were issued	as	incentive	stock	options.	These	PNC	options	carry	generally	the	same terms	and	conditions	as	the	original	Sterling	options.	Per	the	merger	agreement, all	outstanding	options	were	deemed	fully	vested	at	the	acquisition	date. Accordingly,	no	ongoing	stock	option	expense	will	be	recognized	for	these options.	The	purchase	price	consideration	for	the	Sterling	acquisition	included approximately	$3.3	million	related	to	these	options.

# OPTIONS	ISSUED	FOR	NATIONAL	CITY	ACQUISITION

On	December	31,	2008,	in	connection	with	the	closing	of	the	National	City acquisition,	we	issued	approximately	1.7	million	PNC	stock	options	upon conversion	of	all	outstanding	and	unexercised	National	City	options	at	that	date. Of	the	total	options	issued,	approximately	1.4	million	were	issued	as nonqualified	stock	options,	and	the	remaining	0.3	million	were	issued	as incentive	stock	options.	These	PNC	options	carry	generally	the	same	terms	and conditions	as	the	original	National	City	options.	Per	the	merger	agreement,	all outstanding	options	were	deemed	fully	vested	at	the	acquisition	date. Accordingly,	no	ongoing	stock	option	expense	will	be	recognized	for	these options.	The	purchase	price	consideration	for	the	National	City	acquisition included	approximately	$2.0	million	related	to	these	options.

# A	summary	of	stock	option	activity	follows:

| Year	ended	December	31,	2008<br>In	thousands,	except<br>weighted-average	data | Shares | Weighted-<br>average<br>exercise<br>price | Weighted-<br>average<br>remaining<br>contractual<br>life | Aggregate<br>intrinsic<br>value |
| :--- | :--- | :--- | :--- | :--- |
| Outstanding,\tJanuary\t1 | 14,326 | $62.15 |  |  |
| Granted | 3,308 | 60.35 |  |  |
| Sterling\tacquisition | 325 | 63.94 |  |  |
| Exercised | (3,175) | 55.11 |  |  |
| Cancelled | (247) | 57.97 |  |  |
| Prior\tto\tNational\tCity\tacquisition | 14,537 | 63.39 |  |  |
| National\tCity\tacquisition | 1,744 | \t 636.31 |  |  |
| Outstanding,\tDecember\t31 | 16,281 | $124.75 | 5.6\tyears | $4,909 |
| Vested\tand\texpected\tto\tvest, |  |  |  |  |
| December\t31\t(a) | 15,971 | $125.90 | 5.6\tyears | $4,909 |
| Exercisable,\tDecember\t31 | 11,373 | $151.03 | 4.3\tyears | $4,909 |

(a)Adjusted	for	estimated	forfeitures	on	unvested	options.

The	weighted-average	grant-date	fair	value	of	options	granted	in	2008,	2007	and 2006	was	$7.27,	$11.37	and	$10.75	per	option,	respectively.	To	determine	stock- based	compensation	expense	under	SFAS	123R,	the	grant-date	fair	value	is applied	to	the	options	granted	with	a	reduction	made	for	estimated	forfeitures.

Cash	received	from	option	exercises	under	all	Incentive	Plans	for	2008,	2007 and	2006	was	approximately	$167	million,	$111	million	and	$233	million, respectively.	The	actual	tax	benefit	realized	for	tax	deduction	purposes	from option	exercises	under	all	Incentive	Plans	for	2008,	2007	and	2006	was approximately	$58	million,	$39	million	and	$82	million,	respectively.

There	were	no	options	granted	in	excess	of	market	value	in	2008,	2007	or	2006. Shares	of	common	stock	available	during	the	next	year	for	the	granting	of options	and	other	awards	under	the	Incentive	Plans	were	36,307,172	at December	31,	2008.	Total	shares	of	PNC	common	stock	authorized	for	future issuance	under	equity	compensation	plans	totaled	37,842,957	shares	at December	31,	2008,	which	includes	shares	available	for	issuance	under	the Incentive	Plans,	the	Employee	Stock	Purchase	Plan	as	described	below,	and	a director	plan.

During	2008,	we	issued	approximately	3.1	million	shares	from	treasury	stock	in connection	with	stock	option	exercise	activity.	As	with	past	exercise	activity,	we intend	to	utilize	treasury	stock	for	future	stock	option	exercises.

As	permitted	under	SFAS	123R,	we	recognized	compensation	expense	for	stock options	on	a	straight-line	basis	over	the	pro	rata	vesting	period.	Total compensation	expense	recognized	related	to	PNC	stock	options	in	2008	was	$22 million	compared	with	$29	million	in	2007	and	$31	million	in	2006.

Awards	granted	to	non-employee	directors	in	2008	and	2007	include	25,381	and 20,944	deferred	stock	units,	respectively,	awarded	under	the	Outside	Directors Deferred	Stock	Unit	Plan.	A	deferred	stock	unit	is	a	phantom	share	of	our common	stock,	which	requires	liability	accounting	treatment	under	SFAS	123R until	such	awards	are	paid	to	the	participants	as	cash.	As	there	are	no	vesting	or service	requirements	on	these	awards,	total	compensation	expense	is	recognized in	full	on	all	awarded	units	on	the	date	of	grant.

# OPTION	PRICING	ASSUMPTIONS

For	purposes	of	computing	stock	option	expense,	we	estimated	the	fair	value	of stock	options	primarily	by	using	the	Black-Scholes	option-pricing	model.	Option pricing	models	require	the	use	of	numerous	assumptions,	many	of	which	are very	subjective.

We	used	the	following	assumptions	in	the	option	pricing	models	to	determine 2008,	2007	and	2006	stock	option	expense:

•	The	risk-free	interest	rate	is	based	on	the	US	Treasury	yield	curve,

•	The	dividend	yield	represents	average	yields	over	the	previous	three-year period,

•	Volatility	is	measured	using	the	fluctuation	in	month-end	closing	stock prices	over	a	period	which	corresponds	with	the	average	expected	option life,	but	in	no	case	less	than	a	five-year	period,	and •	The	expected	life	assumption	represents	the	period	of	time	that	options granted	are	expected	to	be	outstanding	and	is	based	on	a	weighted	average of	historical	option	activity.

| December	31 | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Risk-free\tinterest\trate | 3.1% | 4.8% | 4.5% |
| Dividend\tyield | 3.3 | 3.4 | 3.7 |
| Volatility | 18.5 | 18.8 | 20.5 |
| Expected\tlife | 5.7\tyrs. | 4.3\tyrs. | 5.1\tyrs. |

# INCENTIVE/PERFORMANCE	UNIT	SHARE	AWARDS	AND	RESTRICTED STOCK/UNIT	AWARDS

The	fair	value	of	nonvested	incentive/performance	unit	share	awards	and restricted	stock/unit	awards	is	initially	determined	based	on	prices	not	less	than the	market	value	of	our	common	stock	price	on	the	date	of	grant.

Incentive/performance	unit	share	awards	are	subsequently	valued	subject	to	the achievement	of	one	or	more	financial	and	other	performance	goals	over	a	three- year	period.	The	Personnel	and	Compensation	Committee	of	the	Board	of Directors	approves

the	final	award	payout	with	respect	to	incentive/performance	unit	share	awards. Restricted	stock/unit	awards	have	various	vesting	periods	ranging	from	12 months	to	60	months.	There	are	no	financial	or	performance	goals	associated with	any	of	our	restricted	stock/unit	awards.

The	weighted-average	grant-date	fair	value	of	incentive/performance	unit	share awards	and	restricted	stock/unit	awards	granted	in	2008,	2007	and	2006	was $59.25,	$73.83	and	$67.36	per	share,	respectively.	We	recognize	compensation expense	for	such	awards	ratably	over	the	corresponding	vesting	and/or performance	periods	for	each	type	of	program.	Total	compensation	expense recognized	related	to	incentive/performance	unit	share	awards	and	restricted stock/unit	awards	during	2008	was	approximately	$51	million	compared	with $42	million	in	2007	and	$45	million	in	2006.

A	summary	of	nonvested	incentive/performance	unit	shares	and	restricted stock/unit	share	activity	follows:

|  |  | Weighted- | Nonvested | Weighted- |
| :--- | :--- | :--- | :--- | :--- |
|  | Nonvested | Average | Restricted | Average |
|  | Incentive/ | Grant | Stock/ | Grant |
|  | Performance | Date\tFair | Unit | Date\tFair |
| Shares\tin\tthousands | Unit\tShares | Value | Shares | Value |
| Dec.\t31,\t2007 | 316 | $66.28 | 1,869 | $60.20 |
| Granted | 176 | 53.27 | 548 | 55.20 |
| Vested |  |  | (652) | 50.92 |
| Forfeited |  |  | (30) | 62.75 |
| Dec.\t31,\t2008 | 492 | $61.63 | 1,735 | $62.07 |

In	the	chart	above,	the	weighted-average	grant-date	fair	value	of incentive/performance	unit	share	awards	and	restricted	stock/unit	awards	is measured	by	reducing	the	grant	date	price	by	the	present	value	of	dividends expected	to	be	paid	on	the	underlying	shares	and	for	estimated	forfeitures	on restricted	stock/unit	awards.

At	December	31,	2008,	there	was	$39	million	of	unrecognized	deferred compensation	expense	related	to	nonvested	share-based	compensation arrangements	granted	under	the	Incentive	Plans.	This	cost	is	expected	to	be recognized	as	expense	over	a	period	of	no	longer	than	five	years.	The	total	fair value	of	incentive/performance	unit	share	and	restricted	stock	/unit	awards vested	during	2008,	2007	and	2006	was	approximately	$41	million,	$79	million and	$63	million,	respectively.

# LIABILITY	AWARDS

In	2008,	2007	and	2006	we	granted	a	performance	unit	incentive	award	each year	to	a	senior	executive.	The	grant	is	share-denominated	with	an	initial specified	target	number	of	47,000	share	units	for	2008,	26,400	share	units	for 2007	and	30,000	share	units	for	2006.	The	potential	award	is	dependent	on	the achievement	of	certain	performance	criteria	over	a	three-year	period	ending December	31,	2008	for	the	2006	grant,	December	31,	2009	for	the	2007	grant, and	December	31,	2010	for	the	2008	grant.	Final	awarded	performance	units	will be	paid	only	in	cash.

Additionally,	beginning	in	2008,	we	granted	other	cash-payable	restricted	share units	to	certain	executives.	The	grants	were	made	primarily	as	part	of	an	annual bonus	incentive	deferral	plan.	While	there	are	time-based,	service-related	vesting criteria,	there	are	no	market	or	performance	criteria	associated	with	these	awards. Compensation	expense	recognized	related	to	these	awards	was	recorded	in	prior periods	as	part	of	annual	cash	bonus	criteria.	As	of	December	31,	2008,	there were	91,449	of	these	cash-payable	restricted	share	units	outstanding.

A	summary	of	all	nonvested,	cash-payable	restricted	share	unit	activity	follows:

(a)There	were	no	share	units	vested	and	received	or	forfeited	during	2008.

Total	compensation	expense	recognized	related	to	liability	awards,	including market	valuation	adjustments	recorded	during	2008	on	these	awards,	resulted	in a	net	reduction	to	expense	of	approximately	$1.1	million.	The	corresponding amounts	for	2007	and	2006	were	approximately	$1	million	of	net	expense recognized	in	each	year.

# EMPLOYEE	STOCK	PURCHASE	PLAN

As	of	December	31,	2008,	our	ESPP	has	approximately	1.2	million	shares available	for	issuance.	Full-time	employees	with	six	months	and	part-time employees	with	12	months	of	continuous	employment	with	us	are	eligible	to participate	in	the	ESPP	at	the	commencement	of	the	next	six-month	offering period.	Eligible	participants	may	purchase	our	common	stock	at	95%	of	the	fair market	value	on	the	last	day	of	each	six-month	offering	period.	No	charge	to earnings	is	recorded	with	respect	to	the	ESPP.

Shares	issued	pursuant	to	the	ESPP	were	as	follows:

| Year	ended	December	31 | Shares | Price	Per	Share |
| :--- | :--- | :--- |
| 2008 | 133,563 | $54.25\tand\t$46.55 |
| 2007 | 111,812 | 68.00\tand\t62.37 |
| 2006 | 105,041 | 66.66\tand\t70.34 |

# BLACKROCK	LTIP	PROGRAMS

BlackRock	adopted	the	2002	LTIP	program	to	help	attract	and	retain	qualified professionals.	At	that	time,	PNC	agreed	to	transfer	up	to	four	million	of	the shares	of	BlackRock	common	stock	then	held	by	us	to	help	fund	the	2002	LTIP and	future	programs	approved	by	BlackRock's	board	of	directors,	subject	to certain	conditions	and	limitations.	Prior	to	2006,	BlackRock	granted	awards	of approximately	$233	million	under	the	2002	LTIP	program,	of	which approximately	$208

million	were	paid	on	January	30,	2007.	The	award	payments	were	funded	by 17%	in	cash	from	BlackRock	and	approximately	one	million	shares	of BlackRock	common	stock	transferred	by	PNC	and	distributed	to	LTIP participants.	As	permitted	under	the	award	agreements,	employees	elected	to	put 95%	of	the	stock	portion	of	the	awards	back	to	BlackRock.	These	shares	were retained	by	BlackRock	as	treasury	stock.	We	recognized	a	pretax	gain	of	$82 million	in	the	first	quarter	of	2007	from	the	transfer	of	BlackRock	shares.	The gain	was	included	in	other	noninterest	income	and	reflected	the	excess	of	market value	over	book	value	of	the	one	million	shares	transferred	in	January	2007. Additional	BlackRock	shares	were	distributed	to	LTIP	participants	during	the first	quarter	of	2008,	resulting	in	a	$3	million	pretax	gain	in	other	noninterest income.

Noninterest	income	for	2008	included	a	$243	million	pretax	gain	related	to	our commitment	to	fund	additional	BlackRock	LTIP	programs.	This	gain represented	the	mark-to-market	adjustment	related	to	our	remaining	BlackRock LTIP	common	shares	obligation	as	of	December	31,	2008	and	resulted	from	the decrease	in	the	market	value	of	BlackRock	common	shares	for	2008.	Noninterest income	for	2007	and	2006	included	pretax	charges	totaling	$209	million	and	$12 million,	respectively,	related	to	an	increase	in	the	market	value	of	BlackRock common	shares	for	these	periods.

Additionally,	we	reported	noninterest	expense	of	$33	million	in	2006	related	to the	BlackRock	LTIP	awards.

# NOTE	17	FINANCIAL	DERIVATIVES

We	use	a	variety	of	derivative	financial	instruments	to	help	manage	interest	rate, market	and	credit	risk	and	reduce	the	effects	that	changes	in	interest	rates	may have	on	net	income,	fair	value	of	assets	and	liabilities,	and	cash	flows.	These instruments	include	interest	rate	swaps,	interest	rate	caps	and	floors,	futures contracts,	and	total	return	swaps.

# Fair	Value	Hedging	Strategies

We	enter	into	interest	rate	swaps,	caps,	floors	and	futures	derivative	contracts	to hedge	bank	notes,	Federal	Home	Loan	Bank	borrowings,	senior	debt	and subordinated	debt	for	changes	in	fair	value	primarily	due	to	changes	in	interest rates.

Adjustments	related	to	the	ineffective	portion	of	fair	value	hedging	instruments are	recorded	in	interest	expense	or	noninterest	income	depending	on	the	hedged item.

# Cash	Flow	Hedging	Strategies

We	enter	into	interest	rate	swap	contracts	to	modify	the	interest	rate characteristics	of	designated	commercial	loans	from	variable	to	fixed	in	order	to reduce	the	impact	of	changes	in	future	cash	flows	due	to	interest	rate	changes. We	hedged	our	exposure	to	the	variability	of	future	cash	flows	for	all	forecasted transactions	for	a	maximum	of	10	years	for	hedges	converting	floating-rate commercial	loans	to	fixed.	The	fair	value	of	these	derivatives	is	reported	in	other assets	or	other	liabilities	and	offset	in	accumulated	other	comprehensive	income (loss)	for	the	effective	portion	of	the	derivatives.	We	subsequently	reclassify	any unrealized	gains	or	losses	related	to	these	swap	contracts	from	accumulated other	comprehensive	income	(loss)	into	interest	income	in	the	same	period	or periods	during	which	the	hedged	forecasted	transaction	affects	earnings. Ineffectiveness	of	the	strategies,	if	any,	is	recognized	immediately	in	earnings.

During	the	next	twelve	months,	we	expect	to	reclassify	to	earnings	$230	million of	pretax	net	gains,	or	$149	million	after-tax,	on	cash	flow	hedge	derivatives currently	reported	in	accumulated	other	comprehensive	loss.	This	amount	could differ	from	amounts	actually	recognized	due	to	changes	in	interest	rates	and	the addition	of	other	hedges	subsequent	to	December	31,	2008.	These	net	gains	are anticipated	to	result	from	net	cash	flows	on	receive	fixed	interest	rate	swaps	that would	impact	interest	income	recognized	on	the	related	floating	rate	commercial loans.

As	of	December	31,	2008	we	have	determined	that	there	were	no	hedging positions	where	it	was	probable	that	certain	forecasted	transactions	may	not occur	within	the	originally	designated	time	period.

The	ineffective	portion	of	the	change	in	value	of	our	fair	value	and	cash	flow hedge	derivatives	resulted	in	a	net	gain	of	$8	million	for	2008,	a	net	loss	of	$1 million	for	2007,	and	a	net	loss	of	$4	million	in	2006.

# Free-Standing	Derivatives

To	accommodate	customer	needs,	we	also	enter	into	financial	derivative transactions	primarily	consisting	of	interest	rate	swaps,	interest	rate	caps	and floors,	futures,	swaptions,	and	foreign	exchange	and	equity	contracts.	We primarily	manage	our	market	risk	exposure	from	customer	positions	through transactions	with	third-party	dealers.	The	credit	risk	associated	with	derivatives executed	with	customers	is	essentially	the	same	as	that	involved	in	extending loans	and	is	subject	to	normal	credit	policies.	We	may	obtain	collateral	based	on our	assessment	of	the	customer.	For	derivatives	not	designated	as	an	accounting hedge,	the	gain	or	loss	is	recognized	in	noninterest	income.

Also	included	in	free-standing	derivatives	are	transactions	that	we	enter	into	for risk	management	and	proprietary	purposes	that	are	not	designated	as	accounting hedges,	primarily	interest	rate,	basis	and	total	rate	of	return	swaps,	interest	rate

caps,	floors	and	futures	contracts,	credit	default	swaps,	option	and	foreign exchange	contracts	and	certain	interest	rate-locked	loan	origination commitments	as	well	as	commitments	to	buy	or	sell	mortgage	loans.

Basis	swaps	are	agreements	involving	the	exchange	of	payments,	based	on notional	amounts,	of	two	floating	rate	financial	instruments	denominated	in	the same	currency,	one	tied	to	one	reference	rate	and	the	other	tied	to	a	second reference	rate	(e.g.,	swapping	payments	tied	to	one-month	LIBOR	for	payments tied	to	three-month	LIBOR).	We	use	these	contracts	to	mitigate	the	impact	on earnings	of	exposure	to	a	certain	referenced	interest	rate.

We	purchase	credit	default	swaps	("CDS")	to	mitigate	the	risk	of	economic	loss on	a	portion	of	our	loan	exposure.	We	also	sell	loss	protection	to	mitigate	the	net premium	cost	and	the	impact	of	mark-to-market	accounting	on	the	CDS	in	cases where	we	buy	protection	to	hedge	the	loan	portfolio	and	to	take	proprietary trading	positions.	The	fair	values	of	these	derivatives	typically	are	based	on	the change	in	value,	due	to	changing	credit	spreads.

Interest	rate	lock	commitments	for,	as	well	as	commitments	to	buy	or	sell, mortgage	loans	that	we	intend	to	sell	are	considered	free-standing	derivatives. Our	interest	rate	exposure	on	certain	commercial	and	residential	mortgage interest	rate	lock	commitments	as	well	as	commercial	and	residential	mortgage loans	held	for	sale	is	economically	hedged	with	total	rate	of	return	swaps,	pay- fixed	interest	rate	swaps,	credit	derivatives	and	forward	sales	agreements.	These contracts	mitigate	the	impact	on	earnings	of	exposure	to	a	certain	referenced rate.	The	fair	value	of	loan	commitments	is	based	on	the	estimated	fair	value	of the	underlying	loan	and	the	probability	that	the	loan	will	fund	within	the	terms	of the	commitment.	The	fair	value	of	the	loan	commitment	also	takes	into	account the	fair	value	of	the	embedded	servicing	right	pursuant	to	SAB	109.

Free-standing	derivatives	also	include	positions	we	take	based	on	market expectations	or	to	benefit	from	price	differentials	between	financial	instruments and	the	market	based	on	stated	risk	management	objectives.

# Derivatives	Used	to	Hedge	MSRs

The	derivative	portfolio	also	includes	derivative	financial	instruments	not included	in	SFAS	133	hedging	strategies.	The	majority	of	these	derivatives	are used	to	manage	interest	rate	and	prepayment	risk	related	to	residential	mortgage servicing	rights	(MSRs),	residential	and	commercial	real	estate	loans	held	for sale,	and	interest	rate	lock	commitments,	all	of	which	are	carried	at	fair	value consistent	with	the	accounting	for	the	derivatives.

# Derivative	Counterparty	Credit	Risk

By	purchasing	and	writing	derivative	contracts	we	are	exposed	to	credit	risk	if the	counterparties	fail	to	perform.	We	seek	to	minimize	credit	risk	through	credit approvals,	limits,	monitoring	procedures	and	collateral	requirements.	We generally	enter	into	transactions	with	counterparties	that	carry	high	quality	credit ratings.	Nonperformance	risk	including	credit	risk	is	included	in	the determination	of	the	estimated	net	fair	value.

We	enter	into	risk	participation	agreements	to	share	some	of	the	credit	exposure with	other	counterparties	related	to	interest	rate	derivative	contracts	or	to	take	on credit	exposure	to	generate	revenue.	We	will	make/receive	payments	under	these guarantees	if	a	customer	defaults	on	its	obligation	to	perform	under	certain	credit agreements.	Risk	participation	agreements	entered	into	prior	to	July	1,	2003	were considered	financial	guarantees	and	therefore	are	not	included	in	derivatives. Agreements	entered	into	subsequent	to	June	30,	2003	are	included	in	the derivatives	table	that	follows.	We	determine	that	we	meet	our	objective	of reducing	credit	risk	associated	with	certain	counterparties	to	derivative	contracts when	the	participation	agreements	share	in	their	proportional	credit	losses	of those	counterparties.

We	generally	have	established	agreements	with	our	major	derivative	dealer counterparties	that	provide	for	exchanges	of	marketable	securities	or	cash	to collateralize	either	party's	positions.	At	December	31,	2008,	we	held	cash,	which is	included	in	other	borrowed	funds	on	our	Consolidated	Balance	Sheet,	US government	securities	and	mortgage-backed	securities	with	a	total	fair	value	of $1.4	billion.	We	pledged	cash,	which	is	included	in	short-term	investments	on our	Consolidated	Balance	Sheet,	and	US	government	securities	of	$1.2	billion under	these	agreements.

The	total	notional	or	contractual	amounts,	estimated	net	fair	value	and	credit	risk	for	derivatives	were	as	follows:

|  | December	31,	2008 | December	31,	2008 | December	31,	2008 | December	31,	2007 | December	31,	2007 | December	31,	2007 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| In\tmillions | Notional/\nContractual\namount | Estimated\nnet\tfair\nvalue | Credit\nrisk\t(b) | Notional/\nContractual\namount | Estimated\nnet\tfair\nvalue | Credit\nrisk\t(b) |
| ACCOUNTING\tHEDGES |  |  |  |  |  |  |
| Fair\tvalue\thedges | $9,888 | $888 | $889 | $10,568 | $190 | $283 |
| Cash\tflow\thedges | 5,618 | 527 | 527 | 7,856 | 325 | 325 |
| Total | $15,506 | $1,415 | $1,416 | $18,424 | $515 | $608 |
| FREE-STANDING\tDERIVATIVES |  |  |  |  |  |  |
| Interest\trate\tcontracts | $146,137 | $503 | $4,828 | $170,889 | $4 | $1,224 |
| Equity\tcontracts | 984 | (4) | 72 | 1,824 | (69) | 144 |
| Foreign\texchange\tcontracts | 8,972 | (3) | 320 | 15,741 | 13 | 153 |
| Credit\tderivatives | 2,937 | 205 | 287 | 5,823 | 42 | 96 |
| Options | 3,334 | 177 | 315 | 64,448 | 87 | 496 |
| Risk\tparticipation\tagreements | 3,290 |  | 3 | 1,183 |  |  |
| Residential\tmortgage\tservicing\trights | 52,980 | 109 | \t 1,136 |  |  |  |
| Commitments\trelated\tto\tmortgage-related\tassets | 18,853 | (12) | 69 | 3,190 | 10 | 15 |
| Other\t(a) | 773 | 56 | 58 | 642 | (201) |  |
| Total | $238,260 | $1,031 | $7,088 | $263,740 | $(114) | $2,128 |
| (a) |  |  |  |  |  |  |

(a) Relates	to	PNC's	obligation	to	help	fund	certain	BlackRock	LTIP	programs	and	to	certain	customer-related	derivatives.

(b) Credit	risk	amounts	reflect	the	replacement	cost	for	contracts	in	a	gain	position	in	the	event	of	nonperformance	by	all	counterparties.

# NOTE	18	EARNINGS	PER	SHARE

The	following	table	sets	forth	basic	and	diluted	earnings	per	common	share	calculations:

| Year	ended	December	31	-	in	millions,	except	share	and	per	share	data | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| CALCULATION\tOF\tBASIC\tEARNINGS\tPER\tCOMMON\tSHARE |  |  |  |
| Net\tincome | $882 | $1,467 | $2,595 |
| Less:\tPreferred\tdividends\tdeclared | 21 |  | 1 |
| Net\tincome\tapplicable\tto\tbasic\tearnings\tper\tcommon\tshare | $861 | $1,467 | $2,594 |
| Basic\tweighted-average\tcommon\tshares\toutstanding\t(in\tthousands) | \t 343,980 | \t 331,300 | \t 291,758 |
| Basic\tearnings\tper\tcommon\tshare | $2.50 | $4.43 | $8.89 |
| CALCULATION\tOF\tDILUTED\tEARNINGS\tPER\tCOMMON\tSHARE\t(a)\t(b) |  |  |  |
| Net\tincome | $882 | $1,467 | $2,595 |
| Less:\tBlackRock\tadjustment\tfor\tcommon\tstock\tequivalents | 7 | 8 | 6 |
| Non-convertible\tpreferred\tdividends\tdeclared | 21 |  |  |
| Net\tincome\tapplicable\tto\tdiluted\tearnings\tper\tcommon\tshare | $854 | $1,459 | $2,589 |
| Basic\tweighted-average\tcommon\tshares\toutstanding\t(in\tthousands) | \t 343,980 | \t 331,300 | \t 291,758 |
| Weighted-average\tcommon\tshares\tto\tbe\tissued\tusing\taverage\tmarket\tprice\tand\tassuming: |  |  |  |
| Conversion\tof\tpreferred\tstock\tSeries\tA\tand\tB | 63 | 65 | 70 |
| Conversion\tof\tpreferred\tstock\tSeries\tC\tand\tD | 501 | 542 | 584 |
| Conversion\tof\tdebentures | 9 | 2 | 2 |
| Exercise\tof\tstock\toptions | 988 | 1,774 | 2,178 |
| Incentive/performance\tunit\tshare\tand\trestricted\tstock/unit\tawards | 1,525 | 1,474 | 1,930 |
| Diluted\tweighted-average\tcommon\tshares\toutstanding\t(in\tthousands) | \t 347,066 | \t 335,157 | \t 296,522 |
| Diluted\tearnings\tper\tcommon\tshare | $2.46 | $4.35 | $8.73 |
| (a)\t\t\t\tExcludes\tstock\toptions\tconsidered\tto\tbe\tanti-dilutive\t(in\tthousands) | 8,815 | 4,135 | 4,230 |
| (b)\t\t\tExcludes\twarrants\tconsidered\tto\tbe\tanti-dilutive\t(in\tthousands) | 19,410 |  |  |

# NOTE	19	SHAREHOLDERS'	EQUITY Preferred	Stock

Information	related	to	preferred	stock	is	as	follows:

On	December	31,	2008,	we	issued	$7.6	billion	of	Fixed	Rate	Cumulative Perpetual	Preferred	Stock,	Series	N,	to	the	US	Treasury	under	the	US	Treasury's Troubled	Asset	Relief	Program	("TARP")	Capital	Purchase	Program,	together with	a	warrant	to	purchase	shares	of	common	stock	of	PNC	described	below. Series	N	dividends	are	payable	on	the	15th	of	February,	May,	August	and November	beginning	February	15,	2009.	Dividends	will	be	paid	at	a	rate	of 5.00%	through	February	15,	2014	and	9.00%	thereafter.	This	preferred	stock	is redeemable	at	par	plus	accrued	and	unpaid	dividends	subject	to	the	approval	of our	primary	banking	regulators.

Under	the	TARP	Capital	Purchase	Program,	there	are	restrictions	on	common and	preferred	dividends	and	common	share	repurchases	associated	with	the preferred	stock	issued	to	the	US	Treasury.	As	is	typical	with	cumulative preferred	stock,	dividend	payments	for	this	preferred	stock	must	be	current before	dividends	can	be	paid	on	junior	shares,	including	our	common	stock,	or junior	shares	can	be	repurchased	or	redeemed.	Also,	the	US	Treasury's	consent is	required	for	any	increase	in	common	dividends	per	share	above	the	most recent	level	prior	to	October	14,	2008	until	the	third	anniversary	of	the	preferred stock	issuance	as	long	as	the	US	Treasury	continues	to	hold	any	of	the	preferred stock.	Further,	during	that	same	period,	the	US	Treasury's	consent	is	required, unless	the	preferred	stock	is	no	longer	held	by	the	US	Treasury,	for	any	share repurchases	with	limited	exceptions,	most	significantly	purchases	of	common shares	in	connection	with	any	benefit	plan	in	the	ordinary	course	of	business consistent	with	past	practice.

As	part	of	the	National	City	transaction,	we	issued	9.875%	Fixed-to-Floating Rate	Non-Cumulative	Preferred	Stock,	Series	L	in	exchange	for	National	City's Fixed-to-Floating	Rate	Non-Cumulative	Preferred	Stock,	Series	F.	Dividends	are payable	if	and	when	declared	each	1st	of	February,	May,	August	and	November. Dividends	will	be	paid	at	a	rate	of	9.875%	prior	to	February	1,	2013	and	at	a	rate of	three-month	LIBOR	plus	633	basis	points	beginning	February	1,	2013.	The

Series	L	is	redeemable	at	PNC's	option,	subject	to	a	replacement	capital covenant	for	the	first	ten	years	after	issuance	and	subject	to	Federal	Reserve approval,	if	then	applicable,	on	or	after	February	1,	2013	at	a	redemption	price per	share	equal	to	the	liquidation	preference	plus	any	declared	but	unpaid dividends.

Also	as	part	of	the	National	City	transaction,	we	established	the	PNC	Non- Cumulative	Perpetual	Preferred	Stock,	Series	M,	which	mirrors	in	all	material respects	the	former	National	City	Non-Cumulative	Perpetual	Preferred	Stock, Series	E.	PNC	has	designated	5,751preferred	shares,	liquidation	value	$100,000 per	share,	for	this	series.	No	shares	have	yet	been	issued;	however,	National	City issued	stock	purchase	contracts	for	5,001	shares	of	its	Series	E	Preferred	Stock (now	replaced	by	the	PNC	Series	M	as	part	of	the	National	City	transaction)	to the	National	City	Preferred	Capital	Trust	I	in	connection	with	the	issuance	by that	Trust	of	$500	million	of	12.000%	Fixed-to-Floating	Rate	Normal	Automatic Preferred	Enhanced	Capital	Securities	(the	"Normal	APEX	Securities")	in January	2008	by	the	Trust.	It	is	expected	that	the	Trust	will	purchase	5,001	of	the Series	M	preferred	shares	pursuant	to	these	stock	purchase	contracts	on December	10,	2012	or	on	an	earlier	date	and	possibly	as	late	as	December	10, 2013.	The	Trust	has	pledged	the	$500,100,000	principal	amount	of	National	City 8.729%	Junior	Subordinated	Notes	due	2043	held	by	the	Trust	and	their proceeds	to	secure	this	purchase	obligation.

If	Series	M	shares	are	issued	prior	to	December	10,	2012,	any	dividends	on	such shares	will	be	calculated	at	a	rate	per	annum	equal	to	12.000%	until December	10,	2012,	and	thereafter,	at	a	rate	per	annum	that	will	be	reset quarterly	and	will	equal	three-month	LIBOR	for	the	related	dividend	period	plus 8.610%.	Dividends	will	be	payable	if	and	when	declared	by	the	Board	at	the dividend	rate	so	indicated	applied	to	the	liquidation	preference	per	share	of	the Series	M	Preferred	Stock.	The	Series	M	is	redeemable	at	PNC's	option,	subject to	a	replacement	capital	covenant	for	the	first	ten	years	after	issuance	and	subject to	Federal	Reserve	approval,	if	then	applicable,	on	or	after	December	10,	2012	at a	redemption	price	per	share	equal	to	the	liquidation	preference	plus	any declared	but	unpaid	dividends.

As	a	result	of	the	National	City	transaction,	we	assumed	National	City's obligations	under	replacement	capital	covenants	with	respect	to	(i)	the	Normal APEX	Securities	and	our	Series	M	shares	and	(ii)	National	City's	6,000,000	of Depositary	Shares	(each	representing	1/4000th	of	an	interest	in	a	share	of	our 9.875%	Fixed-to-Floating	Rate	Non-Cumulative	Preferred	Stock,	Series	L), whereby	we	agreed	not	to	cause	the	redemption	or	repurchase	of	the	Normal APEX	or	Depositary	Shares,	as	applicable,	or	the	underlying	Preferred	Stock and/or	junior	subordinated	notes,	as	applicable,	unless	such	repurchases	or redemptions	are	made	from	the	proceeds	of	the	issuance	of	certain	qualified securities	and	pursuant	to	the	other	terms	and	conditions	set

forth	in	the	replacement	capital	covenant	with	respect	to	the	Normal	APEX	(the "APEX	RCC")	or	the	replacement	capital	covenant	with	respect	to	the Depositary	Shares	(the	"Depositary	Shares	RCC"),	as	applicable.

As	of	December	31,	2008,	each	of	the	APEX	RCC	and	the	Depositary	Shares RCC	are	for	the	benefit	of	holders	of	our	$700	million	of	6.875%	Subordinated Notes	Due	2019.

In	May	2008,	we	issued	$500	million	of	Depositary	Shares,	each	representing	a fractional	interest	in	a	share	of	PNC	Fixed-to-Floating	Non-Cumulative Perpetual	Preferred	Stock,	Series	K.	Dividends	are	payable	if	and	when	declared beginning	November	21,	2008	and	then	each	May	21	and	November	21	until May	21,	2013.	After	that	date,	dividends	will	be	payable	each	21st	of	August, November,	February	and	May.	Dividends	will	be	paid	at	a	rate	of	8.25%	prior	to May	21,	2013	and	at	a	rate	of	three-month	LIBOR	plus	422	basis	points beginning	May	21,	2013.

Series	A	through	D	are	cumulative	and,	except	for	Series	B,	are	redeemable	at our	option.	Annual	dividends	on	Series	A,	B	and	D	preferred	stock	total	$1.80 per	share	and	on	Series	C	preferred	stock	total	$1.60	per	share.	Holders	of	Series A	through	D	preferred	stock	are	entitled	to	a	number	of	votes	equal	to	the number	of	full	shares	of	common	stock	into	which	such	preferred	stock	is convertible.	Series	A	through	D	preferred	stock	have	the	following	conversion privileges:	(i)	one	share	of	Series	A	or	Series	B	is	convertible	into	eight	shares of	PNC	common	stock;	and	(ii)	2.4	shares	of	Series	C	or	Series	D	are convertible	into	four	shares	of	PNC	common	stock.

# TARP	Warrant

A	warrant	issued	to	the	US	Treasury	in	connection	with	the	preferred	stock described	above	enables	the	US	Treasury	to	purchase	up	to	approximately 16.9	million	shares	of	PNC	common	stock	at	an	exercise	price	of	$67.33	per share.	However,	if	PNC	receives	aggregate	gross	proceeds	of	at	least	$7.6	billion from	one	or	more	qualified	equity	offerings	on	or	before	December	31,	2009,	the number	of	shares	of	PNC	common	stock	underlying	the	warrant	then	held	by	the US	Treasury	will	be	reduced	by	50%	of	the	number	of	shares	originally underlying	the	warrant.

The	warrant	is	immediately	exercisable	in	full	or	in	part,	provided	that	the	US Treasury	may	not	transfer	or	exercise	a	portion	of	the	warrant	representing	in	the aggregate	more	than	50%	of	the	shares	underlying	the	warrant	prior	to	the	earlier of	(i)	December	31,	2009	and	(ii)	the	date	on	which	PNC	has	received	aggregate gross	proceeds	of	not	less	than	100%	of

the	$7.6	billion	preferred	stock	issue	price	from	one	or	more	qualified	equity offerings.	The	warrant	expires	on	December	31,	2018.

The	TARP	warrant	was	valued	at	$304	million	at	December	31,	2008	and	is included	in	Capital	surplus-common	stock	and	other	on	our	Consolidated Balance	Sheet.

# National	City	Warrants

As	part	of	the	National	City	transaction,	warrants	issued	by	National	City converted	into	warrants	to	purchase	PNC	common	stock.	The	holder	has	the option	to	exercise	28,022	warrants,	on	a	daily	basis,	commencing	June	15,	2011 and	ending	on	July	15,	2011,	and	28,023	warrants,	on	a	daily	basis,	commencing July	18,	2011	and	ending	on	October	20,	2011.	The	strike	price	of	these	warrants is	$750	per	share.	Upon	exercise,	PNC	will	deliver	common	shares	with	a market	value	equal	to	the	number	of	warrants	exercised	multiplied	by	the	excess of	the	market	price	of	PNC	common	stock	over	the	strike	price.	The	maximum number	of	shares	that	could	be	required	to	be	issued	is	approximately 5.0	million,	subject	to	adjustment	in	the	case	of	certain	events,	make-whole fundamental	changes	or	early	termination.	PNC	has	reserved	5.0	million	shares for	issuance	pursuant	to	the	warrants	and	3.6	million	shares	for	issuance	pursuant to	the	related	convertible	senior	notes.

# Other	Shareholders'	Equity	Matters

We	have	a	dividend	reinvestment	and	stock	purchase	plan.	Holders	of	preferred stock	and	PNC	common	stock	may	participate	in	the	plan,	which	provides	that additional	shares	of	common	stock	may	be	purchased	at	market	value	with reinvested	dividends	and	voluntary	cash	payments.	Common	shares	issued pursuant	to	this	plan	were:	716,819	shares	in	2008,	571,271	shares	in	2007	and 535,394	shares	in	2006.

At	December	31,	2008,	we	had	reserved	approximately	94.7	million	common shares	to	be	issued	in	connection	with	certain	stock	plans	and	the	conversion	of certain	debt	and	equity	securities.

Effective	October	4,	2007,	our	Board	of	Directors	terminated	the	2005	stock repurchase	program	and	approved	a	new	stock	repurchase	program	to	purchase up	to	25	million	shares	of	PNC	common	stock	on	the	open	market	or	in	privately negotiated	transactions.	The	2007	program	will	remain	in	effect	until	fully utilized	or	until	modified,	superseded	or	terminated.	We	did	not	repurchase	any shares	during	2008	under	the	2007	program.	During	2007,	we	purchased 11	million	common	shares	at	a	total	cost	of	approximately	$800	million	under the	2005	and	2007	programs.

|  | Pretax | Tax | After-<br>tax |
| :--- | :--- | :--- | :--- |
| Net\tunrealized\tgains\t(losses)\ton\tcash |  |  |  |
| flow\thedge\tderivatives |  |  |  |
| Balance\tat\tJanuary\t1,\t2006 |  |  | $ (26) |
| 2006\tactivity |  |  |  |
| Increase\tin\tnet\tunrealized\tgains\ton\tcash |  |  |  |
| flow\thedge\tderivatives | $13 | $(5) | 8 |
| Less:\tnet\tgains\trealized\tin\tnet\tincome | (7) | 2 | (5) |
| Net\tunrealized\tgains\ton\tcash\tflow\thedge |  |  |  |
| derivatives | 20 | (7) | 13 |
| Balance\tat\tDecember\t31,\t2006 |  |  | (13) |
| 2007\tactivity\nIncrease\tin\tnet\tunrealized\tgains\ton\tcash\nflow\thedge\tderivatives | 283 | (104) | \t 179 |
| Less:\tnet\tgains\trealized\tin\tnet\tincome | (14) | 5 | (9) |
| Net\tunrealized\tgains\ton\tcash |  |  |  |
| flow\thedge\tderivatives | 297 | (109) | \t 188 |
| Balance\tat\tDecember\t31,\t2007 |  |  | \t 175 |
| 2008\tactivity |  |  |  |
| Increase\tin\tnet\tunrealized\tgains\ton\tcash |  |  |  |
| flow\thedge\tderivatives | 344 | (127) | \t 217 |
| Less:\tnet\tgains\trealized\tin\tnet\tincome | 29 | (11) | 18 |
| Net\tunrealized\tgains\ton\tcash |  |  |  |
| flow\thedge\tderivatives |  |  |  |
|  | 315 | (116) | \t 199 |
| Balance\tat\tDecember\t31,\t2008 |  |  | $374 |

| December	31	–	in	millions | 2008 | 2007 |
| :--- | :--- | :--- |
| Net\tunrealized\tsecurities\tgains\t(losses) | $(3,626) | $(167) |
| Net\tunrealized\tgains\ton\tcash\tflow\thedge\tderivatives | 374 | 175 |
| Pension,\tother\tpostretirement\tand\tpost\temployment |  |  |
| benefit\tplan\tadjustments | (667) | (177) |
| Other | (30) | 22 |
| Accumulated\tother\tcomprehensive\t(loss) | $(3,949) | $(147) |

# NOTE	21	INCOME	TAXES

The	components	of	income	taxes	are	as	follows:

| In	millions | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Current |  |  |  |
| Federal | $553 | $491 | $565 |
| State | 69 | 58 | 46 |
| Total\tcurrent | 622 | \t 549 | 611 |
| Deferred |  |  |  |
| Federal | (235) | 61 | 752 |
| State | (26) | 17 |  |
| Total\tdeferred | (261) | 78 | 752 |
| Total | $361 | $627 | $1,363 |

Significant	components	of	deferred	tax	assets	and	liabilities	are	as	follows:

| December	31	-	in	millions | 2008 | 2007 |
| :--- | :--- | :--- |
| Deferred\ttax\tassets |  |  |
| Allowance\tfor\tloan\tand\tlease\tlosses | $1,564 | $370 |
| Net\tunrealized\tsecurities\tlosses | \t 2,121 | 90 |
| Compensation\tand\tbenefits | 813 | 322 |
| Unrealized\tlosses\ton\tloans | \t 1,825 |  |
| Other | \t 1,918 | 370 |
| Total\tdeferred\ttax\tassets | \t 8,241 | 1,152 |
| Deferred\ttax\tliabilities |  |  |
| Leasing | \t 1,292 | 1,011 |
| Goodwill\tand\tIntangibles | 636 | 255 |
| Mortgage\tservicing\trights | 332 |  |
| BlackRock\tbasis\tdifference | \t 1,265 | 1,234 |
| Other | 968 | 184 |
| Total\tdeferred\ttax\tliabilities | \t 4,493 | 2,684 |
| Net\tdeferred\tasset\t(liability) | $3,748 | $(1,532) |

A	reconciliation	between	the	statutory	and	effective	tax	rates	follows:

| Year	ended	December	31 | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Statutory\ttax\trate | 35.0% | 35.0% | 35.0% |
| Increases\t(decreases)\tresulting\tfrom |  |  |  |
| State\ttaxes | 2.4 | 2.3 | .8 |
| Tax-exempt\tinterest | (1.7) | (.8) | (.3) |
| Life\tinsurance | (2.3) | (1.7) | (.6) |
| Dividend\treceived\tdeduction | (3.1) | (1.6) | (.2) |
| Tax\tcredits | (4.2) | (2.9) | (.9) |
| Tax\tgain\ton\tsale\tof\tHilliard\tLyons | 4.1 |  |  |
| Other | (1.1) | (.4) | .2 |
| Effective\ttax\trate | 29.1% | 29.9% | 34.0% |

At	December	31,	2008	we	had	available	$124	million	of	federal	and	$1.7	billion of	state	income	tax	net	operating	loss	carryforward	originating	from	acquired companies	and	$33	million	in	other	state	net	operating	loss	carryforwards.	A	$23 million	valuation	allowance	is	recorded	against	the	deferred	tax	asset	associated with	the	$1.7	billion	of	state	income	tax	net	operating	losses.	The	net	operating loss	carryforwards	will	expire	from	2009	through	2028.

At	December	31,	2008	we	had	available	$119	million	of	federal	and	$4	million of	state	tax	credit	carryforwards	originating	from	acquired	companies.	The	tax credit	carryforwards	will	expire	from	2026	through	2028.

No	deferred	US	income	taxes	have	been	provided	on	certain	undistributed earnings	of	non-US	subsidiaries,	which	amounted	to	$59	million	at December	31,	2008.	As	of	December	31,	2008,	these	earnings	are	considered	to be	reinvested	for	an	indefinite	period	of	time.	It	is	not	practicable	to	determine the	deferred	tax	liability	on	these	earnings.

Retained	earnings	at	December	31,	2008	included	$117	million	in	allocations	for bad	debt	deductions	of	former	thrift

subsidiaries	for	which	no	income	tax	has	been	provided.	Under	current	law,	if certain	subsidiaries	use	these	bad	debt	reserves	for	purposes	other	than	to	absorb bad	debt	losses,	they	will	be	subject	to	Federal	income	tax	at	the	current corporate	tax	rate.

As	of	December	31,	2008	and	2007,	we	had	a	liability	for	uncertain	tax positions,	excluding	interest	and	penalties	of	$257	million	and	$57	million, respectively.	A	reconciliation	of	the	beginning	and	ending	balance	of unrecognized	tax	benefits	is	as	follows:

(a)Includes	$202	million	acquired	from	National	City.

(b)Includes	$42	million	acquired	from	Mercantile.

Unrecognized	tax	benefits	related	to:

Under	SFAS	141(R)	which	became	effective	January	1,	2009,	any	changes	after the	measurement	period	(a	maximum	of	twelve	months	from	date	of	acquisition) to	unrecognized	tax	benefits	of	acquired	companies	associated	with	permanent differences	would	result	in	an	adjustment	to	income	tax	expense.	If	all	the unrecognized	tax	benefits	were	recognized	after	the	measurement	period,	$133 million	would	affect	the	effective	tax	rate.	Certain	changes	within	the measurement	period	would	result	in	a	purchase	accounting	adjustment	associated with	the	particular	acquisition.

Any	changes	in	the	amounts	of	unrecognized	tax	benefits	related	to	temporary differences	would	result	in	a	reclassification	to	deferred	tax	liability;	any changes	in	the	amounts	of	unrecognized	tax	benefits	related	to	other	permanent differences	(per	above	table)	would	result	in	an	adjustment	to	income	tax expense	and	therefore	our	effective	tax	rate.	The	unrecognized	tax	benefits related	to	other	permanent	items	above	that	if	recognized	would	affect	the effective	tax	rate	is	$30	million.	This	is	less	than	the	total

amount	of	unrecognized	tax	benefit	related	to	permanent	differences	because	a portion	of	those	unrecognized	benefits	relate	to	state	tax	matters.

It	is	reasonably	possible	that	the	liability	for	uncertain	tax	positions	could increase	or	decrease	in	the	next	twelve	months	due	to	completion	of	tax authorities'	exams	or	the	expiration	of	statutes	of	limitations.	Management estimates	that	the	liability	for	uncertain	tax	positions	could	decrease	by	$5 million	within	the	next	twelve	months.

The	consolidated	federal	income	tax	returns	of	The	PNC	Financial	Services Group,	Inc.	and	subsidiaries	through	2003	have	been	audited	by	the	Internal Revenue	Service	and	we	have	resolved	all	disputed	matters	through	the	IRS appeals	division.	The	Internal	Revenue	Service	is	currently	examining	the	2004 through	2006	consolidated	federal	income	tax	returns	of	The	PNC	Financial Services	Group,	Inc.	and	subsidiaries.

The	consolidated	federal	income	tax	returns	of	National	City	Corporation	and subsidiaries	through	2004	have	been	audited	by	the	Internal	Revenue	Service and	we	have	reached	agreement	in	principle	on	resolution	of	all	disputed	matters through	the	IRS	appeals	division.	However,	because	the	agreement	is	still	subject to	execution	of	a	closing	agreement	we	have	not	treated	it	as	effectively	settled. The	Internal	Revenue	Service	is	currently	examining	the	2005	through	2007 consolidated	federal	income	tax	returns	of	National	City	Corporation	and subsidiaries,	and	we	expect	the	2008	federal	income	tax	return	to	begin	being audited	as	soon	as	it	is	filed.

New	York,	New	Jersey,	Maryland	and	New	York	City	are	principally	where	we were	subject	to	state	and	local	income	tax	prior	to	our	acquisition	of	National City.	The	state	of	New	York	is	currently	in	the	process	of	closing	the	2002	to 2004	audit	and	will	begin	auditing	the	years	2005	and	2006.	New	York	City	is currently	auditing	2004	and	2005.	However,	years	2002	and	2003	remain	subject to	examination	by	New	York	City	pending	completion	of	the	New	York	state audit.	Through	2006,	BlackRock	is	included	in	our	New	York	and	New	York City	combined	tax	filings	and	constituted	most	of	the	tax	liability.	Years subsequent	to	2004	remain	subject	to	examination	by	New	Jersey	and	years subsequent	to	2005	remain	subject	to	examination	by	Maryland.

National	City	was	principally	subject	to	state	and	local	income	tax	in	California, Florida,	Illinois,	Indiana,	and	Missouri.	Audits	currently	in	process	for	these states	include:	California	(2003-2004),	Illinois	(2004-2006)	and	Missouri	(2003- 2005).	We	will	now	also	be	principally	subject	to	tax	in	those	states.	In	the ordinary	course	of	business	we	are	routinely	subject	to	audit	by	the	taxing authorities	of	these	states	and	at	any	given	time	a	number	of	audits	will	be	in process.

Our	policy	is	to	classify	interest	and	penalties	associated	with	income	taxes	as income	taxes.	At	January	1,	2008,	we	had	accrued	$91	million	of	interest	related to	tax	positions,	most	of

which	related	to	our	cross-border	leasing	transactions.	The	total	accrued	interest and	penalties	at	December	31,	2008	was	$164	million.	While	the	leasing	related interest	decreased	with	a	payment	to	the	IRS,	the	$73	million	net	increase primarily	resulted	from	our	acquisition	of	National	City.

# NOTE	22	SUMMARIZED	FINANCIAL	INFORMATION	OF BLACKROCK

As	required	by	SEC	Regulation	S-X,	summarized	consolidated	financial information	of	BlackRock	follows	(in	millions).

# NOTE	23	REGULATORY	MATTERS

We	are	subject	to	the	regulations	of	certain	federal	and	state	agencies	and undergo	periodic	examinations	by	such	regulatory	authorities.

The	access	to	and	cost	of	funding	new	business	initiatives	including	acquisitions, the	ability	to	pay	dividends,	the	level	of	deposit	insurance	costs,	and	the	level and	nature	of	regulatory	oversight	depend,	in	large	part,	on	a	financial institution's	capital	strength.	The	minimum	US	regulatory	capital	ratios	are	4% for	tier	1	risk-based,	8%	for	total	risk-based	and	4%	for	leverage.	However, regulators	may	require	higher	capital	levels	when	particular	circumstances warrant.	To	qualify	as	"well	capitalized,"	regulators	require	banks	to	maintain capital	ratios	of	at	least	6%	for	tier	1	risk-based,	10%	for	total	risk-based	and	5% for	leverage.	At	December	31,	2008	and	December	31,	2007,	each	of	our domestic	bank	subsidiaries	met	the	"well	capitalized"	capital	ratio	requirements.

The	following	table	sets	forth	regulatory	capital	ratios	for	PNC	and	its significant	bank	subsidiaries,	PNC	Bank,	N.A.	and	National	City	Bank.

# Regulatory	Capital

|  | Amount | Amount | Ratios | Ratios |
| :--- | :--- | :--- | :--- | :--- |
| December\t31\tDollars\tin\tmillions | 2008 | 2007 | 2008 | 2007 |
| Risk-based\tcapital |  |  |  |  |
| Tier\t1 |  |  |  |  |
| PNC | $24,287 | $7,815 | 9.7% | 6.8% |
| PNC\tBank,\tN.A. | 8,338 | 7,851 | 7.1 | 7.6 |
| National\tCity\tBank\t(a) | \t 12,567 |  | 10.1 |  |
| Total |  |  |  |  |
| PNC | \t 33,116 | \t 11,803 | 13.2 | 10.3 |
| PNC\tBank,\tN.A. | \t 12,104 | \t 10,616 | 10.3 | 10.2 |
| National\tCity\tBank\t(a) | \t 17,208 |  | 13.8 |  |
| Leverage |  |  |  |  |
| PNC | NM | NM | 17.5 | 6.2 |
| PNC\tBank,\tN.A. | NM | NM | 6.3 | 6.8 |
| National\tCity\tBank\t(a) | NM |  | 8.8 |  |

(a)Acquired	on	December	31,	2008. NM—Not	meaningful.

Also,	there	are	statutory	and	regulatory	limitations	on	the	ability	of	national banks	to	pay	dividends	or	make	other	capital	distributions.	The	amount	available for	dividend	payments	to	the	parent	company	by	PNC	Bank,	N.A.	without	prior regulatory	approval	was	approximately	$351	million	at	December	31,	2008. National	City	Bank	had	no	statutory	dividend	capacity	as	of	December	31,	2008.

Under	federal	law,	bank	subsidiaries	generally	may	not	extend	credit	to	the parent	company	or	its	non-bank	subsidiaries	on	terms	and	under	circumstances that	are	not	substantially	the	same	as	comparable	extensions	of	credit	to nonaffiliates.	No	extension	of	credit	may	be	made	to	the	parent	company	or	a non-bank	subsidiary	which	is	in	excess	of	10%	of	the	capital	stock	and	surplus of	such	bank	subsidiary	or	in	excess	of	20%	of	the	capital	and	surplus	of	such bank	subsidiary	as	to	aggregate	extensions	of	credit	to	the	parent	company	and its	non-bank	subsidiaries.	Such	extensions	of	credit,	with	limited	exceptions, must	be	fully	collateralized	by	certain	specified	assets.	In	certain	circumstances, federal	regulatory	authorities	may	impose	more	restrictive	limitations.

Federal	Reserve	Board	regulations	require	depository	institutions	to	maintain cash	reserves	with	the	Federal	Reserve	Bank	("FRB").	At	December	31,	2008, the	balance	outstanding	at	the	FRB	was	$14	billion.

# NOTE	24	LEGAL	PROCEEDINGS

# National	City	Matters

In	December	2008,	we	completed	the	acquisition	of	National	City	through	the merger	of	National	City	into	The	PNC	Financial	Services	Group,	Inc.	As	a result,	we	are	now	responsible	for	litigation	pending	against	National	City	and	its subsidiaries	at	that	time.	We	will	also	be	responsible	for	future	litigation	arising out	of	the	conduct	of	the	business	of	National	City	and	its	subsidiaries	before	the acquisition.

The	lawsuits	and	other	matters	described	below	arise	from	National	City's business	prior	to	the	merger.	We	may	be	responsible	for	indemnifying	individual defendants	in	these	lawsuits	and	other	matters.

See	also	"National	City	Acquisition-Related	Litigation"	below	for	information regarding	litigation	filed	against	PNC	and	National	City	relating	to	the	merger and	"Regulatory	and	Governmental	Inquiries"	for	information	regarding regulatory	matters	with	respect	to	National	City.

Visa.	Beginning	in	June	2005,	a	series	of	antitrust	lawsuits	were	filed	against Visa®,	MasterCard®,	and	several	major	financial	institutions,	including	cases naming	National	City	(since	merged	into	PNC)	and	its	subsidiary,	National	City Bank	of	Kentucky,	since	merged	into	National	City	Bank.	The	cases,	which	were brought	as	class	actions	on	behalf	of	all	persons	or	business	entities	who	have accepted	Visa®	or	MasterCard®,	have	been	consolidated	for	pretrial	proceedings in	the	United	States	District	Court	for	the	Eastern	District	of	New	York.	The plaintiffs,	merchants	operating	commercial	businesses	throughout	the	U.S.	and trade	associations,	allege	that	the	defendants	conspired	to	fix	the	prices	for general	purpose	card	network	services,	resulting	in	the	payment	of	inflated interchange	fees,	in	violation	of	the	antitrust	laws.	In	January	2009,	the	plaintiffs filed	amended	and	supplemental	complaints	adding,	among	other	things, allegations	that	the	restructuring	of	Visa	and	MasterCard,	each	of	which included	an	initial	public	offering,	violated	the	antitrust	laws.	The	plaintiffs	seek injunctive	relief,	actual	and	treble	damages	and	attorneys'	fees.	National	City and	National	City	Bank	entered	into	judgment	and	loss	sharing	agreements	with Visa	and	other	financial	institutions	with	respect	to	this	litigation.	On	January	8, 2008,	the	district	court	dismissed	plaintiffs'	claims	for	damages	incurred	prior	to January	1,	2004.	This	litigation	is	also	subject	to	the	indemnification	obligations described	in	Note	25	Commitments	and	Guarantees.	PNC	Bank,	N.A.	is	not named	a	defendant	in	any	of	this	litigation	nor	is	it	a	party	to	the	judgment	or	loss sharing	agreements	but	is	subject	to	these	indemnification	obligations.

Merrill	Lynch.	In	December	2006,	National	City	Bank	completed	the	sale	of	its First	Franklin	nonprime	mortgage	origination	and	servicing	platform	to	Merrill Lynch	Bank	&	Trust	Co.,	FSB.	By	letters	dated	April	10,	2008	and	June	16, 2008,	Merrill	Lynch	notified	National	City	Bank	of	its	indemnification	claim pursuant	to	the	purchase	agreement.

Merrill	Lynch	alleges	that	National	City	Bank	breached	certain	representations or	warranties	contained	in	the	purchase	agreement	related	to	Merrill	Lynch's alleged	repurchases	of	mortgage	loans	originated	by	First	Franklin	prior	to	its sale	to	Merrill	Lynch	as	well	as	mortgage	loans	as	to	which	it	faces	repurchase demands.	Merrill	Lynch	also	asserts	that	National	City	Bank	is	responsible	for indemnifying	it	for	certain	settled	or	pending	lawsuits	against	First	Franklin.

ERISA	Cases.	Commencing	in	January	2008,	a	series	of	substantially	similar lawsuits	were	brought	against	National	City,	the	Administrative	Committee	of the	National	City	Savings	and	Investment	Plan	(the	"Plan"),	National	City	Bank (as	trustee),	and	some	of	National	City's	officers	and	directors.	These	cases	have been	consolidated	in	the	United	States	District	Court	for	the	Northern	District	of Ohio,	and	the	plaintiffs	have	filed	a	consolidated	amended	complaint.	The consolidated	action	is	brought	as	a	class	action	on	behalf	of	all	participants	in	or beneficiaries	of	the	Plan	at	any	time	between	September	5,	2006	and	the	present and	whose	Plan	accounts	included	investments	in	National	City	common	stock, as	well	as	all	participants	in	or	beneficiaries	of	the	Plan	and	whose	accounts	were invested	in	Allegiant	Funds	from	March	25,	2002	to	the	present.	The consolidated	complaint	alleges	breaches	of	fiduciary	duty	under	the	Employee Retirement	Income	Security	Act	of	1974	("ERISA")	relating	to,	among	other things,	National	City	stock	being	offered	as	an	investment	alternative	in	the Plan,	conflicts	of	interest,	and	monitoring	and	disclosure	obligations.	The consolidated	complaint	also	alleges	that	the	Administrative	Committee defendants	breached	their	fiduciary	duties	under	ERISA,	engaged	in	prohibited transactions	by	authorizing	or	causing	the	Plan	to	invest	in	Allegiant	Funds,	and violated	ERISA	duties	of	loyalty	by	virtue	of	National	City's	receipt	of	financial benefits	in	the	forms	of	fees	paid	to	Allegiant	for	managing	the	mutual	funds. The	complaint	seeks	equitable	relief	(including	a	declaration	that	defendants breached	their	ERISA	fiduciary	duties,	an	order	compelling	the	defendants	to make	good	any	losses	to	the	Plan	caused	by	their	actions,	the	imposition	of	a constructive	trust	on	any	profits	earned	by	the	defendants	from	their	actions	and restitution),	unspecified	money	damages	and	attorneys'	fees	and	costs.	A	motion to	dismiss	the	amended	consolidated	complaint	is	pending.

In	February	2009,	a	lawsuit	was	filed	in	the	United	States	District	Court	for	the Northern	District	of	Ohio	against	National	City,	National	City	Bank,	the Administrative	Committee	of	the	National	City	Savings	and	Investment	Plan, Harbor	Federal	Savings	Bank,	the	Harbor	Employees	Stock	Ownership	Plan Committee	and	certain	National	City	and	Harbor	directors	and	officers.	This lawsuit	was	brought	as	a	class	action	on	behalf	of	all	participants	in	or beneficiaries	of	the	Harbor	ESOP	between	December	1,	2006	and	the	present whose	account	in	the	Harbor	ESOP	held	National	City	stock	(including	National City	units),	and	who	continued	to	be	employed	by	National	City	through December	31,	2007.	The	complaint	alleges	breaches	of	fiduciary	duties	under ERISA

relating	to,	among	other	things,	National	City	stock	being	offered	as	an investment	alternative,	an	alleged	lock-up	of	National	City	stock,	failure	to	pay benefits,	conflicts	of	interest,	and	monitoring	and	disclosure	obligations.	The complaint	seeks	equitable	relief	(including	a	declaration	that	the	defendants breached	their	ERISA	fiduciary	duties,	an	injunction	prohibiting	further breaches,	an	order	compelling	the	defendants	to	make	good	any	losses	to	the Plan	caused	by	their	actions,	the	imposition	of	a	constructive	trust	on	any	profits earned	by	the	defendants	from	their	actions	and	restitution),	unspecified	money damages	and	attorneys'	fees	and	costs.

Derivative	Cases.	Commencing	in	January	2008,	a	series	of	shareholder derivative	complaints	were	filed	in	the	United	States	District	Court	for	the Northern	District	of	Ohio,	the	Chancery	Court	for	the	State	of	Delaware	and	the Cuyahoga	County,	Ohio,	Court	of	Common	Pleas	against	certain	officers	and directors	of	National	City.	Subsequently,	the	complaints	filed	in	Delaware	were voluntarily	dismissed	and	the	complaints	filed	in	Ohio	state	court	were consolidated	and	stayed	pending	resolution	of	the	federal	court	cases.	A consolidated	complaint	has	been	filed	in	the	federal	court,	and	there	is	a	pending motion	to	dismiss	that	case.	These	suits	make	substantially	similar	allegations against	certain	officers	and	directors	of	National	City	for,	among	other	things, breaches	of	fiduciary	duty,	waste	of	corporate	assets,	unjust	enrichment	and	(in the	federal	court	case)	violations	of	the	Securities	Exchange	Act	of	1934,	based on	claims,	among	others,	that	National	City	issued	inaccurate	information	to investors	about	the	status	of	its	business	and	prospects,	and	that	the	defendants caused	National	City	to	repurchase	shares	of	its	stock	at	artificially	inflated prices.	The	complaints	seek	unspecified	money	damages	and	equitable	relief (including	restitution	and	certain	corporate	governance	changes)	against	the individual	defendants	on	behalf	of	National	City,	as	well	as	attorneys'	fees	and costs.

Securities	and	State	Law	Fiduciary	Cases.	Several	lawsuits	have	been	filed against	National	City	and	its	officers	and	directors	alleging	misrepresentations and	omissions	in	violation	of	the	federal	securities	laws	in	connection	with statements	and	disclosures	relating	in	one	or	more	cases	to,	among	other	things, the	nature,	quality,	performance	and	risks	of	National	City's	non-prime, construction	and	home	equity	portfolios,	its	loan	loss	reserves,	its	financial condition,	and	related	allegedly	false	and	misleading	financial	statements.	Some of	the	lawsuits	allege	state	common	law	violations.	In	some	cases,	the	lawsuits were	brought	in	an	individual	capacity,	with	the	others	brought	as	class	actions. The	relief	sought	generally	includes	unspecified	damages,	attorneys'	fees	and expenses,	and,	where	indicated	below,	equitable	relief.	The	following	is	a summary	of	the	significant	lawsuits	in	this	category:

•	In	January	2008,	a	lawsuit	was	filed	in	the	United	States	District	Court	for the	Northern	District	of	Ohio	against	National	City	and	certain	officers	and

directors	of	National	City.	As	amended,	this	lawsuit	is	being	brought	as	a class	action	on	behalf	of	purchasers	of	National	City's	stock	during	the period	April	30,	2007	to	April	21,	2008	and	also	on	behalf	of	everyone	who acquired	National	City	stock	pursuant	to	a	registration	statement	filed	in connection	with	its	acquisition	of	MAF	Bancorp	in	2007.	The	complaint alleges	violations	of	federal	securities	laws	regarding	public	statements	and disclosures.	A	motion	to	dismiss	the	complaint	is	pending. •	In	April	2008,	a	lawsuit	was	filed	in	the	Cuyahoga	County,	Ohio,	Court	of Common	Pleas	against	National	City,	certain	officers	and	directors	of National	City,	and	its	auditor,	Ernst	&	Young,	LLP.	The	complaint	was brought	as	a	class	action	on	behalf	of	all	current	and	former	National	City employees	who	acquired	stock	pursuant	to	and/or	traceable	to	a December	1,	2006	registration	statement	filed	in	connection	with	the acquisition	of	Harbor	Federal	Savings	Bank	and	who	were	participants	in the	Harbor	Bank	Employees	Stock	Ownership	Plan	and	the	Harbor	Bank Stock	Incentive	Plan.	The	plaintiffs	allege	that	the	registration	statement contained	false	and	misleading	statements	and	omissions	in	violation	of	the federal	securities	laws.	Defendants	removed	the	case	to	the	United	States District	Court	for	the	Northern	District	of	Ohio	and	filed	a	motion	to dismiss	the	complaint.	The	federal	court	has	subsequently	remanded	the case	back	to	the	Ohio	state	court.

•	In	May	2008,	a	lawsuit	was	filed	on	behalf	of	an	individual	plaintiff	in	the Franklin	County,	Ohio,	Court	of	Common	Pleas	against	National	City, certain	directors	of	National	City,	and	Corsair	Co-Invest,	L.P.	and	unnamed other	investors	participating	in	the	April	2008	capital	infusion	into	National City	alleging	that	National	City's	directors	breached	their	fiduciary	duties by	entering	into	this	capital	infusion	transaction.	In	addition	to	monetary damages	and	attorneys'	fees	and	costs,	the	complaint	seeks	a	declaratory judgment	that	the	Corsair	transaction	is	void	and/or	voidable	and	injunctive relief	rescinding	the	Corsair	transaction.	A	motion	to	dismiss	the	case	is pending.

•	In	August	2008,	a	lawsuit	was	filed	in	the	Palm	Beach	County,	Florida, Circuit	Court	against	National	City	and	certain	officers	and	directors	of National	City.	The	lawsuit	was	brought	as	a	class	action	on	behalf	of	all who	acquired	National	City	stock	pursuant	to	and/or	traceable	to	the registration	statement	filed	in	connection	with	National	City's	acquisition of	Fidelity	Bankshares,	Inc.	The	complaint	alleges	that	the	registration statement	contained	false	and	misleading	statements	and	omissions	in violation	of	the	federal	securities	laws.	This	lawsuit	was	removed	to	federal court	in	Florida

and	then	transferred	to	the	United	States	District	Court	for	the	Northern District	of	Ohio.	A	motion	to	remand	to	state	court	is	pending. •	In	October	2008,	a	lawsuit	was	filed	in	the	United	States	District	Court	for the	Western	District	of	Pennsylvania	against	National	City.	In	December 2008,	the	complaint	was	amended	to	add	as	defendants	Corsair	Capital, LLC,	Corsair	NC	Co-Invest,	L.P.	and	unnamed	other	investors participating	in	the	April	2008	capital	infusion	into	National	City.	As amended,	the	lawsuit	is	brought	as	a	class	action	on	behalf	of	all shareholders	of	National	City	who	owned	shares	as	of	October	24,	2008. The	amended	complaint	alleges	breaches	of	fiduciary	duties	in	connection with	the	capital	infusion	and	misstatements	and	omissions	relating	to	the effect	of	the	capital	infusion,	National	City's	ability	to	participate	in	the TARP	Capital	Purchase	Program,	and	National	City's	capital	position	and financial	stability	in	violation	of	the	federal	securities	laws.	This	case	was conditionally	transferred	to	the	United	States	District	Court	for	the Northern	District	of	Ohio.	The	plaintiffs	have	filed	a	motion	to	vacate	this transfer.

•	In	December	2008,	a	lawsuit	was	filed	in	the	United	States	District	Court for	the	Northern	District	of	Ohio	against	National	City	and	some	of	its officers	and	directors.	The	plaintiff,	an	arbitrage	fund,	seeks	to	represent	a class	of	all	who	purchased	National	City's	4.0%	Convertible	Senior	Notes Due	2011	pursuant	to	and/or	traceable	to	the	registration	statement	and prospectus	supplement	issued	in	connection	with	the	January	2008	offering of	these	notes	and	all	who	purchased	these	notes	in	the	open	market between	January	23	and	September	30,	2008.	The	complaint	alleges	that the	registration	statement	and	prospectus	supplement	contained	false	and misleading	statements	and	omissions	in	violation	of	the	federal	securities laws.

# National	City	Acquisition-Related	Litigation

National	City	is	a	defendant	in	numerous	lawsuits	filed	in	and	after	October 2008	as	class	actions	on	behalf	of	National	City	stockholders.	These	lawsuits	are pending	in	the	Delaware	Chancery	Court	(all	of	which	were	consolidated	into	a single	lawsuit),	the	United	States	District	Court	for	the	Northern	District	of	Ohio and	the	Cuyahoga	County,	Ohio,	Court	of	Common	Pleas.	The	consolidated Delaware	case	and	most	of	the	Ohio	cases	include	PNC	as	a	defendant.	All	of these	lawsuits	also	name	as	defendants	National	City's	directors	and	one	of	the Ohio	federal	lawsuits	names	National	City	officers	as	defendants.

The	complaints	in	these	cases	allege	that	the	National	City	directors	breached their	fiduciary	duties	to	the	stockholders	of	National	City	in	connection	with	the proposed	transaction	with	PNC.	The	lawsuits	generally	allege	that	National	City

directors	breached	their	fiduciary	duties	by,	among	other	things,	causing National	City	to	enter	into	the	proposed	transaction	at	an	allegedly	inadequate and	unfair	price,	engaging	in	self-dealing	and	acting	with	divided	loyalties,	and failing	to	disclose	material	information	to	the	stockholders.	Some	lawsuits	allege violations	of	the	federal	securities	laws.	In	the	cases	naming	PNC	as	a	defendant, PNC	is	alleged	to	have	aided	and	abetted	the	other	defendants'	breaches	of fiduciary	duties.	The	various	complaints	seek,	among	other	remedies,	an accounting,	imposition	of	a	constructive	trust,	unspecified	damages,	rescission, costs	of	suit,	and	attorneys'	fees.

In	addition,	the	plaintiffs	in	one	of	the	pending	derivative	lawsuits	against	the National	City	directors	in	the	Cuyahoga	County	Court	of	Common	Pleas	and	in the	pending	derivative	lawsuit	in	federal	court	in	Ohio,	each	referred	to	above, have	moved	to	amend	their	complaints	to	add	merger-related	claims,	including claims	that	National	City's	directors	agreed	to	sell	National	City	in	order	to extinguish	their	own	personal	liability	in	derivative	litigation	pending	against them.	PNC	is	not	named	as	a	defendant	in	either	of	these	proposed	amended complaints.	In	December	2008,	the	Ohio	state	court	denied	the	plaintiffs'	motion to	lift	the	stay	and	to	conduct	expedited	discovery	in	support	of	the	proposed amended	complaint.

In	December	2008,	the	defendants	entered	into	a	memorandum	of	understanding with	the	plaintiffs	regarding	the	settlement	of	the	Delaware	lawsuit,	as	well	as one	of	the	cases	pending	in	the	Cuyahoga	County,	Ohio,	Court	of	Common Pleas	and	the	merger-related	claims	in	the	derivative	case	pending	in	the	Ohio state	court.	In	connection	with	the	settlement	contemplated	by	the	memorandum of	understanding,	National	City	made	additional	disclosures	related	to	the proposed	merger.	Following	completion	of	confirmatory	discovery	by	counsel	to the	plaintiffs,	the	parties	entered	into	a	stipulation	of	settlement	on	February	2, 2009.	The	stipulation	of	settlement	is	subject	to	customary	conditions,	including court	approval	following	notice	to	National	City's	stockholders.	In	February 2009,	the	Court	of	Chancery	preliminarily	approved	a	class	of	all	persons	who were	National	City	common	stockholders	during	the	period	from	the	close	of business	on	October	23,	2008	through	(and	including)	December	31,	2008.	The Court	of	Chancery	also	preliminarily	approved	the	settlement	and	has	scheduled a	hearing	in	May	2009	at	which	the	court	will	consider	the	fairness, reasonableness,	and	adequacy	of	the	settlement.	If	the	settlement	is	finally approved	by	the	court,	it	will	resolve	and	release	all	claims	in	all	actions	that were	or	could	have	been	brought	challenging	any	aspect	of	the	proposed	merger, the	merger	agreement,	and	any	disclosure	made	in	connection	therewith.	In addition,	in	connection	with	the	settlement,	the	parties	contemplate	that plaintiffs'	counsel	will	file	a	petition	in	the	Court	of	Chancery	for	an	award	of attorneys'	fees	and	expenses	to	be	paid	by	PNC.

# Adelphia

Some	of	our	subsidiaries	are	defendants	(or	have	potential	contractual contribution	obligations	to	other	defendants)	in	several	pending	lawsuits	brought during	late	2002	and	2003	arising	out	of	the	bankruptcy	of	Adelphia Communications	Corporation	and	its	subsidiaries.

One	of	the	lawsuits	was	brought	on	Adelphia's	behalf	by	the	unsecured creditors'	committee	and	equity	committee	in	Adelphia's	consolidated bankruptcy	proceeding	and	was	removed	to	the	United	States	District	Court	for the	Southern	District	of	New	York	by	order	dated	February	9,	2006.	Pursuant	to Adelphia's	plan	of	reorganization,	this	lawsuit	will	be	prosecuted	by	a contingent	value	vehicle,	known	as	the	Adelphia	Recovery	Trust.	In	October 2007,	the	Adelphia	Recovery	Trust	filed	an	amended	complaint	in	this	lawsuit, adding	defendants	and	making	additional	allegations.

In	June	2008,	the	district	court	granted	in	part	defendants'	motion	to	dismiss.	The court	dismissed	the	principal	bankruptcy	law	claims	that	had	not	previously	been dismissed	by	the	Bankruptcy	Court,	including	claims	alleging	voidable preference	payments,	fraudulent	transfers,	and	equitable	disallowance.	The	effect of	this	ruling	is	to	dismiss	from	this	lawsuit	all	claims	against	most	of	the defendants	but	leave	pending	against	PNC	and	other	original	members	of Adelphia	loan	syndicates	and	then-affiliated	investment	banks	the	other	claims. In	December	2008,	the	court	granted	a	motion	made	on	behalf	of	a	number	of defendants	to	enter	final	judgment	on	the	dismissed	claims	to	permit	immediate appellate	review	of	the	issues	resolved	by	the	district	court	in	June	2008	and	by the	bankruptcy	court	prior	to	the	filing	of	the	amended	complaint.	The	district court	has	scheduled	the	case	for	trial	in	February	2010.

The	other	lawsuits	were	brought	by	holders	of	debt	and	equity	securities	of Adelphia	and	have	been	consolidated	for	pretrial	purposes	in	the	United	States District	Court	for	the	Southern	District	of	New	York.

The	pending	lawsuits	arise	out	of	lending	and	investment	banking	activities engaged	in	by	PNC	subsidiaries	and	many	other	financial	services	companies. Collectively,	with	respect	to	some	or	all	of	the	defendants,	the	lawsuits	allege federal	law	claims	(including	violations	of	federal	securities	and	banking	laws), violations	of	common	law	duties,	aiding	and	abetting	such	violations,	voidable preference	payments,	and	fraudulent	transfers,	among	other	matters.	The lawsuits	seek	monetary	damages	(including	in	some	cases	punitive	or	treble damages),	interest,	attorneys'	fees	and	other	expenses,	and	a	return	of	the	alleged voidable	preference	and	fraudulent	transfer	payments,	among	other	remedies.

# Sterling	Financial	Corporation	Matters

In	April	2008,	we	completed	the	acquisition	of	Sterling	through	the	merger	of Sterling	Financial	Corporation	into	The	PNC	Financial	Services	Group,	Inc.	As a	result,	we	are	now

responsible	for	litigation	pending	against	Sterling	and	its	subsidiaries	at	that time.	We	will	also	be	responsible	for	future	litigation	arising	out	of	the	conduct of	the	business	of	Sterling	and	its	subsidiaries	before	the	acquisition.

All	of	the	matters	described	below	arise	in	connection	with	Sterling's commercial	finance	subsidiary,	Equipment	Finance	LLC,	which	we	refer	to	as EFI.	We	provide	additional	information	regarding	the	EFI	situation	in	our Registration	Statement	on	Form	S-4	relating	to	the	merger.

See	also	"Regulatory	and	Governmental	Inquiries"	for	information	regarding regulatory	matters	with	respect	to	Sterling	and	the	EFI	situation.

Several	class	action	lawsuits	were	filed	in	May,	June	and	July	2007	in	the	United States	District	Courts	for	the	Eastern	District	of	Pennsylvania	and	the	Southern District	of	New	York	related	to	the	EFI	situation.	In	October	2007,	the	lawsuits filed	in	New	York	were	transferred	to	the	Pennsylvania	court	for	coordinated pretrial	proceedings.	In	February	2008,	the	plaintiffs	filed	a	consolidated amended	complaint	on	behalf	of	those	who	purchased	Sterling	common	stock during	the	period	from	April	27,	2004	through	May	24,	2007.	This	complaint names	Sterling,	Bank	of	Lancaster	County,	N.A.	(a	predecessor	to	a	bank subsidiary	of	Sterling),	EFI,	and	members	of	their	management	as	defendants. The	plaintiffs	allege	violations	of	the	federal	securities	laws,	including allegations	that	Sterling's	public	statements	and	filings	fraudulently	omitted information	and	included	fraudulent	misrepresentations	about	the	improprieties at	EFI	as	well	as	about	their	impact	on	Sterling's	earnings	and	related	matters. The	plaintiffs	assert	that	the	price	for	Sterling	stock	was	fraudulently	inflated during	the	class	period	due	to	the	alleged	omissions	and	misrepresentations,	and seek	unspecified	damages,	interest,	attorneys'	fees	and	costs.	(As	a	result	of	our acquisition	of	Sterling,	we	may	be	responsible	for	indemnifying	individual defendants	in	connection	with	this	lawsuit.)	We	have	a	tentative	agreement	to settle	this	lawsuit,	which	is	subject	to	customary	conditions,	including	court approval	following	notice	to	the	class.	The	amount	of	this	settlement	would	not be	material	to	PNC.

In	addition,	a	group	of	shareholders	who	received	Sterling	common	shares	as consideration	in	Sterling	acquisition	transactions	have	brought	a	separate	lawsuit asserting	claims	similar	to	those	in	the	consolidated	amended	complaint.	Our motion	to	dismiss	this	complaint	is	pending.	Other	shareholders	who	received Sterling	shares	in	acquisitions	have	also	threatened	to	file	similar	lawsuits.

# CBNV	Mortgage	Litigation

Between	2001	and	2003,	on	behalf	of	either	individual	plaintiffs	or	a	class	of plaintiffs,	several	separate	actions	were	filed	in	state	and	federal	courts	against Community	Bank	of	Northern	Virginia	("CBNV")	and	other	defendants challenging	the	validity	of	second	mortgage	loans	the

defendants	made	to	the	plaintiffs.	CBNV	was	merged	into	one	of	Mercantile's banks	prior	to	Mercantile's	acquisition	by	PNC.	These	cases	were	either	filed	in, or	removed	to,	the	United	States	District	Court	for	the	Western	District	of Pennsylvania.

In	August	2006,	a	proposed	settlement	agreement	covering	an	action	in	which the	plaintiffs	and	class	members	have	second	mortgages	that	were	assigned	to Residential	Finance	Corporation	("RFC")	was	submitted	to	the	district	court	for its	approval.	In	January	2008,	the	district	court	conditionally	certified	a	class	for settlement	purposes,	preliminarily	approved	the	proposed	settlement	agreement, and	directed	that	the	settlement	agreement	be	submitted	to	the	class	members	for their	consideration.	In	August	2008,	the	district	court	entered	an	order	giving final	approval	to	the	settlement	agreement.	Some	objecting	class	members	have appealed	that	order	to	the	Third	Circuit	Court	of	Appeals.	Separately,	other individuals,	whose	loans	were	not	acquired	by	RFC,	have	actions	pending	on behalf	of	themselves	or	a	class	alleging	claims	similar	to	those	asserted	in	the settled	action	with	respect	to	the	RFC	loans.	In	one	of	these	actions,	the	alleged class	overlaps	the	class	in	the	settled	action.	These	actions	remain	pending	in	the district	court.

In	January	2008,	the	district	court	also	issued	an	order	sending	back	to	state court	in	North	Carolina	the	claims	of	two	class	members.	These	two	plaintiffs then	sought	to	represent	a	class	of	North	Carolina	borrowers	in	state	court,	but the	federal	district	court	in	Pennsylvania	enjoined	class	proceedings	in	March 2008.	In	April	2008,	the	General	Court	of	Justice,	Superior	Court	Division,	for Wake	County,	North	Carolina	granted	these	two	plaintiffs'	motion	for	summary judgment	on	their	individual	claims	in	this	case.	We	have	appealed	this	order	to the	North	Carolina	Court	of	Appeals.

The	plaintiffs	in	all	of	these	lawsuits	seek	unquantified	monetary	damages, rescission	of	loans,	interest,	attorneys'	fees	and	other	expenses.

# BAE	Derivative	Litigation

In	September	2007,	a	derivative	lawsuit	was	filed	on	behalf	of	BAE	Systems	plc by	a	holder	of	its	American	Depositary	Receipts	against	current	and	former directors	and	officers	of	BAE,	Prince	Bandar	bin	Sultan,	PNC	(as	successor	to Riggs	National	Corporation	and	Riggs	Bank,	N.A.),	Joseph	L.	Allbritton,	Robert L.	Allbritton,	and	Barbara	Allbritton.	The	complaint	alleges	that	BAE	directors and	officers	breached	their	fiduciary	duties	by	making	or	permitting	to	be	made improper	or	illegal	bribes,	kickbacks	and	other	payments	with	respect	to	a military	contract	obtained	in	the	mid-1980s	from	the	Saudi	Arabian	Ministry	of Defense,	and	that	Prince	Bandar	was	the	primary	recipient	or	beneficiary	of these	payments.	The	complaint	also	alleges	that	Riggs,	together	with	the Allbrittons	(as	former	directors,	officers	and	controlling	persons	of	Riggs),	acted as	the	primary	intermediaries	through	which	the	payments	were	laundered	and actively	concealed,

and	aided	and	abetted	the	BAE	defendants'	breaches	of	fiduciary	duties.	In September	2008,	the	United	States	District	Court	for	the	District	of	Columbia granted	the	motions	of	all	defendants	to	dismiss	the	plaintiff's	complaint. Plaintiff	has	appealed	to	the	United	States	Court	of	Appeals	for	the	District	of Columbia	Circuit.	As	it	relates	to	PNC,	plaintiff	is	seeking	unquantified monetary	damages	(including	punitive	damages),	an	accounting,	interest, attorneys'	fees	and	other	expenses.	As	a	result	of	our	acquisition	of	Riggs,	PNC may	be	responsible	for	indemnifying	the	Allbrittons	in	connection	with	this lawsuit.

# Regulatory	and	Governmental	Inquiries

As	a	result	of	the	regulated	nature	of	our	business	and	that	of	a	number	of	our subsidiaries,	particularly	in	the	banking	and	securities	areas,	we	and	our subsidiaries	are	the	subject	of	investigations	and	other	forms	of	regulatory inquiry,	in	some	cases	as	part	of	regulatory	reviews	of	specified	activities	at multiple	industry	participants.	Among	the	areas	in	which	there	is	currently significant	regulatory	interest	are	practices	in	the	mutual	fund	and	mortgage lending	businesses.	Several	of	our	subsidiaries	have	received	requests	for information	and	other	inquiries	from	governmental	and	regulatory	authorities	in these	areas.

In	June	2008,	National	City	was	notified	that	the	Chicago	Regional	Office	of	the SEC	is	conducting	an	informal	investigation	of	National	City.	The	SEC	has requested	that	National	City	provide	the	SEC	with	documents	concerning, among	other	things,	its	loan	underwriting	experience,	allowance	for	loan	losses, marketing	practices,	dividends,	bank	regulatory	matters	and	the	sale	of	First Franklin	Financial	Corporation.

The	SEC	is	conducting	a	non-public	investigation	into	the	EFI	situation	at Sterling.	The	United	States	Attorney's	Office	for	the	Eastern	District	of Pennsylvania	is	also	investigating	the	EFI	situation.

Our	practice	is	to	cooperate	fully	with	regulatory	and	governmental investigations,	audits	and	other	inquiries,	including	those	described	above.	Such investigations,	audits	and	other	inquiries	may	lead	to	remedies	such	as	fines, restitution	or	alterations	in	our	business	practices.

In	addition	to	the	proceedings	or	other	matters	described	above,	PNC	and persons	to	whom	we	may	have	indemnification	obligations,	in	the	normal	course of	business,	are	subject	to	various	other	pending	and	threatened	legal proceedings	in	which	claims	for	monetary	damages	and	other	relief	are	asserted. We	do	not	anticipate,	at	the	present	time,	that	the	ultimate	aggregate	liability,	if any,	arising	out	of	such	other	legal	proceedings	will	have	a	material	adverse effect	on	our	financial	position.	However,	we	cannot	now	determine	whether	or not	any	claims	asserted	against	us	or	others	to	whom	we	may	have indemnification	obligations,	whether	in

the	proceedings	or	other	matters	specifically	described	above	or	otherwise,	will have	a	material	adverse	effect	on	our	results	of	operations	in	any	future	reporting period.

See	Note	25	Commitments	and	Guarantees	for	additional	information	regarding the	Visa	indemnification	and	our	obligation	to	provide	indemnification	to current	and	former	officers,	directors,	employees	and	agents	of	PNC	and companies	we	have	acquired,	including	National	City.

# NOTE	25	COMMITMENTS	AND	GUARANTEES

# EQUITY	FUNDING	AND	OTHER	COMMITMENTS

Our	unfunded	commitments	at	December	31,	2008	included	private	equity investments	of	$540	million	and	other	investments	of	$178	million.

# STANDBY	LETTERS	OF	CREDIT

We	issue	standby	letters	of	credit	and	have	risk	participations	in	standby	letters of	credit	and	bankers'	acceptances	issued	by	other	financial	institutions,	in	each case	to	support	obligations	of	our	customers	to	third	parties,	such	as	remarketing programs	for	customers'	variable	rate	demand	notes.	Net	outstanding	standby letters	of	credit	totaled	$10.3	billion	at	December	31,	2008.

If	the	customer	fails	to	meet	its	financial	or	performance	obligation	to	the	third party	under	the	terms	of	the	contract	or	there	is	a	need	to	support	a	remarketing program,	then	upon	the	request	of	the	guaranteed	party,	we	would	be	obligated to	make	payment	to	them.	The	standby	letters	of	credit	and	risk	participations	in standby	letters	of	credit	and	bankers'	acceptances	outstanding	on	December	31, 2008	had	terms	ranging	from	less	than	one	year	to	14	years.	The	aggregate maximum	amount	of	future	payments	PNC	could	be	required	to	make	under outstanding	standby	letters	of	credit	and	risk	participations	in	standby	letters	of credit	and	bankers'	acceptances	was	$13.7	billion	at	December	31,	2008,	of which	$5.1	billion	support	remarketing	programs.

Assets	valued	as	of	December	31,	2008	of	approximately	$.9	billion	secured certain	specifically	identified	standby	letters	of	credit.	Approximately	$3.4 billion	in	recourse	provisions	from	third	parties	was	also	available	for	this purpose	as	of	December	31,	2008.	In	addition,	a	portion	of	the	remaining standby	letters	of	credit	and	letter	of	credit	risk	participations	issued	on	behalf	of specific	customers	is	also	secured	by	collateral	or	guarantees	that	secure	the customers'	other	obligations	to	us.	The	carrying	amount	of	the	liability	for	our obligations	related	to	standby	letters	of	credit	and	risk	participations	in	standby letters	of	credit	and	bankers'	acceptances	was	$119	million	at	December	31, 2008.

# STANDBY	BOND	PURCHASE	AGREEMENTS	AND	OTHER	LIQUIDITY FACILITIES

We	enter	into	standby	bond	purchase	agreements	to	support	municipal	bond obligations.	At	December	31,	2008,	the

aggregate	of	our	commitments	under	these	facilities	was	$452	million.	We	also enter	into	certain	other	liquidity	facilities	to	support	individual	pools	of receivables	acquired	by	commercial	paper	conduits	including	Market	Street.	At December	31,	2008,	our	total	commitments	under	these	facilities	were	$6.6 billion,	of	which	$6.4	billion	was	related	to	Market	Street.

# INDEMNIFICATIONS

We	are	a	party	to	numerous	acquisition	or	divestiture	agreements	under	which we	have	purchased	or	sold,	or	agreed	to	purchase	or	sell,	various	types	of	assets. These	agreements	can	cover	the	purchase	or	sale	of: •	Entire	businesses,

•	Loan	portfolios,

•	Branch	banks,

•	Partial	interests	in	companies,	or •	Other	types	of	assets.

These	agreements	generally	include	indemnification	provisions	under	which	we indemnify	the	third	parties	to	these	agreements	against	a	variety	of	risks	to	the indemnified	parties	as	a	result	of	the	transaction	in	question.	When	PNC	is	the seller,	the	indemnification	provisions	will	generally	also	provide	the	buyer	with protection	relating	to	the	quality	of	the	assets	we	are	selling	and	the	extent	of	any liabilities	being	assumed	by	the	buyer.	Due	to	the	nature	of	these	indemnification provisions,	we	cannot	quantify	the	total	potential	exposure	to	us	resulting	from them.

We	provide	indemnification	in	connection	with	securities	offering	transactions	in which	we	are	involved.	When	we	are	the	issuer	of	the	securities,	we	provide indemnification	to	the	underwriters	or	placement	agents	analogous	to	the indemnification	provided	to	the	purchasers	of	businesses	from	us,	as	described above.	When	we	are	an	underwriter	or	placement	agent,	we	provide	a	limited indemnification	to	the	issuer	related	to	our	actions	in	connection	with	the offering	and,	if	there	are	other	underwriters,	indemnification	to	the	other underwriters	intended	to	result	in	an	appropriate	sharing	of	the	risk	of participating	in	the	offering.	Due	to	the	nature	of	these	indemnification provisions,	we	cannot	quantify	the	total	potential	exposure	to	us	resulting	from them.

We	enter	into	certain	types	of	agreements	that	include	provisions	for indemnifying	third	parties,	such	as:

•	Agreements	relating	to	providing	various	servicing	and	processing functions	to	third	parties,

•	Agreements	relating	to	the	creation	of	trusts	or	other	legal	entities	to facilitate	leasing	transactions,	commercial	and	residential	mortgage-backed securities	transactions	(loan	securitizations)	and	certain	other	off-balance sheet	transactions,

•	Confidentiality	agreements,

•	Syndicated	credit	agreements,	as	a	syndicate	member,

•	Sales	of	individual	loans	and	equipment	leases,

•	Arrangements	with	brokers	to	facilitate	the	hedging	of	derivative	and convertible	arbitrage	activities,	and

•	Litigation	settlement	agreements.

Due	to	the	nature	of	these	indemnification	provisions,	we	cannot	calculate	our aggregate	potential	exposure	under	them.

We	enter	into	certain	types	of	agreements,	including	leases,	assignments	of leases,	and	subleases,	in	which	we	agree	to	indemnify	third	parties	for	acts	by our	agents,	assignees	and/or	sublessees,	and	employees.	Due	to	the	nature	of these	indemnification	provisions,	we	cannot	calculate	our	aggregate	potential exposure	under	them.

We	enter	into	contracts	for	the	delivery	of	technology	service	in	which	we indemnify	the	other	party	against	claims	of	patent	and	copyright	infringement	by third	parties.	Due	to	the	nature	of	these	indemnification	provisions,	we	cannot calculate	our	aggregate	potential	exposure	under	this	type	of	indemnification.

We	engage	in	certain	insurance	activities	which	require	our	employees	to	be bonded.	We	satisfy	this	bonding	requirement	by	issuing	letters	of	credit	which were	insignificant	at	December	31,	2008.

In	the	ordinary	course	of	business,	we	enter	into	contracts	with	third	parties under	which	the	third	parties	provide	services	on	behalf	of	PNC.	In	many	of these	contracts,	we	agree	to	indemnify	the	third	party	service	provider	under certain	circumstances.	The	terms	of	the	indemnity	vary	from	contract	to	contract and	the	amount	of	the	indemnification	liability,	if	any,	cannot	be	determined.

We	are	a	general	or	limited	partner	in	certain	asset	management	and	investment limited	partnerships,	many	of	which	contain	indemnification	provisions	that would	require	us	to	make	payments	in	excess	of	our	remaining	funding commitments.	While	in	certain	of	these	partnerships	the	maximum	liability	to	us is	limited	to	the	sum	of	our	unfunded	commitments	and	partnership	distributions received	by	us,	in	the	others	the	indemnification	liability	is	unlimited.	As	a result,	we	cannot	determine	our	aggregate	potential	exposure	for	these indemnifications.

Pursuant	to	their	bylaws,	PNC	and	its	subsidiaries	provide	indemnification	to directors,	officers	and,	in	some	cases,	employees	and	agents	against	certain liabilities	incurred	as	a	result	of	their	service	on	behalf	of	or	at	the	request	of PNC	and	its	subsidiaries.	PNC	and	its	subsidiaries	also	advance	on	behalf	of covered	individuals	costs	incurred	in	connection	with	certain	claims	or proceedings,	subject	to	written	undertakings	by	each	such	individual	to	repay	all amounts	advanced	if	it	is	ultimately	determined	that	the	individual	is	not	entitled to	indemnification.	We	generally	are	responsible	for	similar	indemnifications and	advancement	obligations	that	companies	we	acquire	(including	Riggs, Sterling	and	National

City),	had	to	their	officers,	directors	and	sometimes	employees	and	agents	at	the time	of	acquisition.	We	advanced	such	costs	on	behalf	of	several	such individuals	(including	some	from	Riggs	and	Sterling)	with	respect	to	pending litigation	or	investigations	during	2008.	It	is	not	possible	for	us	to	determine	the aggregate	potential	exposure	resulting	from	the	obligation	to	provide	this indemnity	or	to	advance	such	costs.

In	connection	with	the	lending	of	securities	facilitated	by	Global	Investment Servicing	as	an	intermediary	on	behalf	of	certain	of	its	clients,	we	provide indemnification	to	those	clients	against	the	failure	of	the	borrowers	to	return	the securities.	The	market	value	of	the	securities	lent	is	fully	secured	on	a	daily basis;	therefore,	the	exposure	to	us	is	limited	to	temporary	shortfalls	in	the collateral	as	a	result	of	short-term	fluctuations	in	trading	prices	of	the	loaned securities.	At	December	31,	2008,	the	total	maximum	potential	exposure	as	a result	of	these	indemnity	obligations	was	$7.9	billion,	although	the	collateral	at the	time	exceeded	that	amount.

# VISA	INDEMNIFICATION

Our	payment	services	business	issues	and	acquires	credit	and	debit	card transactions	through	Visa	U.S.A.	Inc.	card	association	or	its	affiliates	("Visa").

In	October	2007	Visa	completed	a	restructuring	and	issued	shares	of	Visa	Inc. common	stock	to	its	financial	institution	members	("Visa	Reorganization")	in contemplation	of	its	initial	public	offering	("IPO").	As	part	of	the	Visa Reorganization,	we	received	our	proportionate	share	of	a	class	of	Visa	Inc. common	stock	allocated	to	the	US	members.	Prior	to	the	IPO,	the	US	members were	obligated	to	indemnify	Visa	for	judgments	and	settlements	related	to specified	litigation.	In	accordance	with	GAAP,	during	the	fourth	quarter	of	2007 we	recorded	a	liability	and	pretax	operating	expense	of	$82	million	representing our	estimate	of	the	fair	value	of	our	indemnification	obligation	for	potential losses	arising	from	this	litigation.

Visa's	IPO	occurred	in	March	2008.	Visa	redeemed	2.2	million	of	our investment	in	Visa	Class	B	common	shares	for	cash	out	of	the	proceeds	of	the IPO.	Accordingly,	we	recognized	a	pretax	gain	of	$95	million	during	the	first quarter	of	2008	in	other	noninterest	income	in	connection	with	this	redemption. In	addition,	Visa	set	aside	$3	billion	of	the	IPO	proceeds	in	an	escrow	account for	the	benefit	of	the	US	member	financial	institutions	to	fund	the	expenses	of the	litigation	as	well	as	the	members'	proportionate	share	of	any	judgments	or settlements	that	may	arise	out	of	the	litigation.	Therefore,	we	reduced	our indemnification	liability	proportionately	based	upon	the	escrowed	amount	via	a credit	to	noninterest	expense	of	$43	million	pretax	during	the	first	quarter	of 2008.

In	October	2008,	Visa	reached	a	settlement	with	Discover	Financial	Services related	to	another	of	the	specified	litigation.	As	a	result,	we	recorded	an incremental	indemnification	liability	of	$13	million.

Based	on	the	cumulative	impact	of	this	settlement	and	previous	settlements,	Visa determined	that	additional	escrow	funds	were	necessary	and	set	aside	an additional	$1.1	billion	in	cash	for	the	remaining	specified	litigation	cases	in	the fourth	quarter	2008.	In	connection	with	Visa's	cash	allocation	to	the	escrow fund,	Visa	reduced	the	Visa	B	common	share	to	Visa	A	common	share conversion	ratio	from	approximately	71%	to	63%.	We	determined	that	these actions	effectively	settled	a	proportionate	share	of	our	estimated	indemnification liability	for	the	remaining	specified	litigation.	As	a	result,	we	reduced	our indemnification	liability	by	$16	million	with	a	corresponding	credit	to noninterest	expense.

As	a	result	of	the	acquisition	of	National	City,	we	became	party	to	judgment	and loss	sharing	agreements	with	Visa	and	certain	other	banks.	The	judgment	and loss	sharing	agreements	were	designed	to	apportion	financial	responsibilities arising	from	any	potential	adverse	judgment	or	negotiated	settlements	related	to the	specified	litigation.	The	acquisition	of	National	City	resulted	in	the recognition	of	an	additional	indemnification	liability	of	$224	million.	As	a	result of	the	indemnification	provision	in	Section	2.05j	of	the	Visa	By-Laws	and/or	the indemnification	provided	through	the	judgment	and	loss	sharing	agreements, PNC's	Visa	indemnification	liability	at	December	31,	2008	totaled	$260	million.

# RECOURSE	AGREEMENTS

We	are	authorized	to	originate,	underwrite,	close	to	fund	and	service	commercial mortgage	loans	and	then	sell	them	to	FNMA	under	FNMA's	DUS	program.	We have	similar	arrangements	with	FHLMC.

Under	these	programs,	we	generally	assume	up	to	one-third	of	the	risk	of	loss	on unpaid	principal	balances	through	a	loss	share	arrangement.	At	December	31, 2008,	the	potential	exposure	to	loss	was	$5.7	billion.	Accordingly,	we	maintain	a reserve	for	such	potential	losses	which	approximates	the	fair	value	of	this exposure.	At	December	31,	2008,	the	unpaid	principal	balance	outstanding	of loans	sold	as	a	participant	in	these	programs	was	$18.6	billion.	The	fair	value	of the	loss	share	arrangement	in	the	form	of	reserves	for	losses	under	these programs,	totaled	$79	million	as	of	December	31,	2008	and	is	included	in	other liabilities	on	our	Consolidated	Balance	Sheet.	If	payment	is	required	under	these programs,	we	would	not	have	a	contractual	interest	in	the	collateral	underlying the	mortgage	loans	on	which	losses	occurred,	although	the	value	of	the	collateral is	taken	into	account	in	determining	our	share	of	such	losses.	The	serviced	loans are	not	included	on	our	Consolidated	Balance	Sheet.

National	City	sold	residential	mortgage	loans	and	home	equity	lines	of	credit (collectively,	loans)	in	the	normal	course	of	business.	These	agreements	usually require	certain	representations	concerning	credit	information,	loan documentation,	collateral,	and	insurability.	On	a	regular	basis,	investors	may request	PNC	to	indemnify	them	against	losses	on	certain	loans	or	to	repurchase loans	which	the	investors	believe	do	not	comply	with	applicable	representations. Upon	completion	of	its	own	investigation	as	to	the	validity	of	the	claim,	PNC will	repurchase	or	provide	indemnification	on	such	loans.	Indemnification requests	are	generally	received	within	two	years	subsequent	to	the	date	of	sale.

Management	maintains	a	liability	for	estimated	losses	on	loans	expected	to	be repurchased,	or	on	which	indemnification	is	expected	to	be	provided,	and regularly	evaluates	the	adequacy	of	this	recourse	liability	based	on	trends	in repurchase	and	indemnification	requests,	actual	loss	experience,	known	and inherent	risks	in	the	loans,	and	current	economic	conditions.	At	December	31, 2008	the	liability	for	estimated	losses	on	repurchase	and	indemnification	claims was	$406	million.

# OTHER	GUARANTEES

We	write	caps	and	floors	for	customers,	risk	management	and	proprietary trading	purposes.	At	December	31,	2008,	the	fair	value	of	the	written	caps	and floors	liability	on	our	Consolidated	Balance	Sheet	was	$12	million.	Our	ultimate obligation	under	written	options	is	based	on	future	market	conditions	and	is	only quantifiable	at	settlement.	We	manage	our	market	risk	exposure	from	customer positions	through	transactions	with	third-party	dealers.

| December	31,	2008<br>Dollars	in	millions | Notional<br>amount | Estimated<br>net	fair<br>value | Weighted-<br>Average<br>Remaining<br>Maturity<br>In	Years |
| :--- | :--- | :--- | :--- |
| Credit\tDefault\tSwaps\t–\tGuarantees |  |  |  |
| Single\tname | $278 | $(38) | 3.84 |
| Index\ttraded | 677 | (42) | 4.84 |
| Total\t(a) | $955 | $(80) | 4.54 |
| Credit\tDefault\tSwaps\t–\tBeneficiaries |  |  |  |
| Single\tname | $974 | $84 | 3.82 |
| Index\ttraded | \t 1,008 | 201 | 31.82 |
| Total\t(b) | $1,982 | $285 | 18.06 |
| Total\t(c) | $2,937 | $205 | 13.67 |

(a)Includes	$883	million	of	investment	grade	credit	default	swaps	with	a	rating	of	Baa3	or	above	and $72	million	of	subinvestment	grade	based	on	published	rating	agency	information.

(b)Includes	$1.7	billion	of	investment	grade	credit	default	swaps	with	a	rating	of	Baa3	or	above	and

$263	million	of	subinvestment	grade	based	on	published	rating	agency	information.

(c)The	referenced/underlying	assets	for	these	credit	default	swaps	is	approximately	70%	corporate	debt,

27%	commercial	mortgage	backed	securities	and	3%	related	to	loans.

We	enter	into	credit	default	swaps	under	which	we	buy	loss	protection	from	or sell	loss	protection	to	a	counterparty	for	the	occurrence	of	a	credit	event	of	a reference	entity.	The	fair	value	of	the	contracts	sold	on	our	Consolidated	Balance Sheet	was	a	net	liability	of	$80	million	at	December	31,	2008.	The	maximum amount	we	would	be	required	to	pay	under	the	credit	default	swaps	in	which	we sold	protection,	assuming	all	reference	obligations	experience	a	credit	event	at	a total	loss,	without	recoveries,	was	$955	million	at	December	31,	2008.

We	have	also	entered	into	various	contingent	performance	guarantees	through credit	risk	participation	arrangements	with	terms	ranging	from	less	than	one	year to	23	years.	As	of	December	31,	2008	the	notional	amount	of	risk	participations agreements	was	$1.9	billion	with	a	weighted-average	remaining	maturity	of	3 years.	The	fair	value	of	these	agreements	on	our	Consolidated	Balance	Sheet	was a	net	liability	of	$3	million.	Based	on	the	Corporation's	internal	risk	rating process,	98%	of	the	notional	amount	of	the	risk	participations	agreements outstanding	had	underlying	swap	counterparties	with	internal	credit	ratings	of pass,	indicating	the	expected	risk	of	loss	is	currently	low,	while	2%	had underlying	swap	counterparties	with	internal	risk	ratings	below	pass,	indicating	a higher	degree	of	risk	of	default.	We	will	be	required	to	make	payments	under these	guarantees	if	a	customer	defaults	on	its	obligation	to	perform	under	certain credit	agreements	with	third	parties.	Assuming	all	underlying	swap counterparties	defaulted,	the	maximum	potential	exposure	from	these agreements	as	of	December	31,	2008	would	be	$128	million	based	on	the	fair value	of	the	underlying	swaps.

# CONTINGENT	PAYMENTS	IN	CONNECTION	WITH	CERTAIN	ACQUISITIONS

A	number	of	the	acquisition	agreements	to	which	we	are	a	party	and	under	which we	have	purchased	various	types	of	assets,	including	the	purchase	of	entire businesses,	partial	interests	in	companies,	or	other	types	of	assets,	require	us	to make	additional	payments	in	future	years	if	certain	predetermined	goals	are achieved	or	not	achieved	within	a	specific	time	period.	Due	to	the	nature	of	the contract	provisions,	we	cannot	quantify	our	total	exposure	that	may	result	from these	agreements.

# NOTE	26	PARENT	COMPANY

Summarized	financial	information	of	the	parent	company	is	as	follows:

# Income	Statement

| Year	ended	December	31	-	in	millions | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| OPERATING\tREVENUE |  |  |  |
| Dividends\tfrom: |  |  |  |
| Bank\tsubsidiaries\tand\tbank\tholding |  |  |  |
| company | $1,012 | $1,078 | $710 |
| Non-bank\tsubsidiaries | 168 | 74 | 69 |
| Interest\tincome | 4 | 15 | 16 |
| Noninterest\tincome | 18 | 23 | 9 |
| Total\toperating\trevenue | \t 1,202 | \t 1,190 | 804 |
| OPERATING\tEXPENSE |  |  |  |
| Interest\texpense | 152 | 160 | 93 |
| Other\texpense | 46 | 84 | 46 |
| Total\toperating\texpense | 198 | 244 | 139 |
| Income\tbefore\tincome\ttaxes\tand\tequity\tin |  |  |  |
| undistributed\tnet\tincome\tof |  |  |  |
| subsidiaries | \t 1,004 | 946 | 665 |
| Income\ttax\tbenefits | (50) | (78) | (60) |
| Income\tbefore\tequity\tin\tundistributed |  |  |  |
| net\tincome\tof\tsubsidiaries | \t 1,054 | \t 1,024 | 725 |
| Equity\tin\tundistributed\tnet\tincome\tof |  |  |  |
| subsidiaries: |  |  |  |
| Bank\tsubsidiaries\tand\tbank\tholding |  |  |  |
| company | (125) | 229 | \t 1,653 |
| Non-bank\tsubsidiaries | (47) | 214 | 217 |
| Net\tincome | $882 | $1,467 | $2,595 |

# Balance	Sheet

| December	31	-	in	millions | 2008	(a) | 2007 |
| :--- | :--- | :--- |
| ASSETS |  |  |
| Cash\tand\tdue\tfrom\tbanks | $15 | $20 |
| Short-term\tinvestments | 140 | 58 |
| Investment\tsecurities | 164 |  |
| Loans\t(b) | 2,275 |  |
| Investments\tin: |  |  |
| Bank\tsubsidiaries\tand\tbank\tholding\tcompany | \t 27,960 | \t 15,776 |
| Non-bank\tsubsidiaries | 2,378 | 2,214 |
| Other\tassets | 1,821 | 614 |
| Total\tassets | $34,753 | $18,682 |
| LIABILITIES |  |  |
| Subordinated\tdebt | $4,122 | $968 |
| Senior\tdebt | 2,707 |  |
| Other\tborrowed\tfunds | 2 |  |
| Nonbank\taffiliate\tborrowings | 945 | 2,478 |
| Accrued\texpenses\tand\tother\tliabilities | 1,554 | 382 |
| Total\tliabilities | 9,330 | 3,828 |
| Minority\tand\tnoncontrolling\tinterests\tin |  |  |
| consolidated\tentities | 1 |  |
| SHAREHOLDERS'\tEQUITY | \t 25,422 | \t 14,854 |
| Total\tliabilities,\tminority\tand\tnoncontrolling |  |  |
| interests,\tand\tshareholders'\tequity | $34,753 | $18,682 |

(a)Includes	the	impact	of	National	City.

(b)Balance	represents	National	City	loans	with	subsidiaries.

Commercial	paper	and	all	other	debt	issued	by	PNC	Funding	Corp,	a	wholly owned	finance	subsidiary,	is	fully	and	unconditionally	guaranteed	by	the	parent company.	In	addition,	in	connection	with	certain	affiliates'	commercial	and residential	mortgage	servicing	operations,	the	parent	company	has	committed	to maintain	such	affiliates'	net	worth	above	minimum	requirements.

The	parent	company	received	net	income	tax	refunds	of	$92	million	in	2008, $65	million	in	2007	and	$35	million	in	2006.	Such	refunds	represent	the	parent company's	portion	of	consolidated	income	taxes.	The	parent	company	paid interest	of	$147	million	in	2008,	$146	million	in	2007	and	$113	million	in	2006.

# Statement	Of	Cash	Flows

| Year	ended	December	31	-	in	millions | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| OPERATING\tACTIVITIES |  |  |  |
| Net\tincome | $882 | $1,467 | $2,595 |
| Adjustments\tto\treconcile\tnet\tincome |  |  |  |
| to\tnet\tcash\tprovided\t(used)\tby |  |  |  |
| operating\tactivities: |  |  |  |
| Equity\tin\tundistributed\tnet |  |  |  |
| (earnings)\tof\tsubsidiaries | 172 | (443) | (1,870) |
| Other | 156 | 61 | 103 |
| Net\tcash\tprovided\tby\toperating |  |  |  |
| activities | 1,210 | 1,085 | 828 |
| INVESTING\tACTIVITIES |  |  |  |
| Net\tcapital\treturned\tfrom |  |  |  |
| (contributed\tto)\tsubsidiaries | (8,298) | (165) | 300 |
| Investment\tsecurities: |  |  |  |
| Sales\tand\tmaturities |  | 1,090 | 3,440 |
| Purchases |  | (800) | (3,437) |
| Net\tcash\treceived\tfrom\t(paid\tfor) |  |  |  |
| acquisitions | 1,431 | (2,231) |  |
| Other | (104) | (26) | (311) |
| Net\tcash\tused\tin\tinvesting |  |  |  |
| activities | (6,971) | (2,132) | (8) |
| FINANCING\tACTIVITIES |  |  |  |
| Borrowings\tfrom\tnon-bank |  |  |  |
| subsidiary | 2,100 | 3,910 | 210 |
| Repayments\ton\tborrowings\tfrom |  |  |  |
| non-bank\tsubsidiary | (3,633) | (1,432) | (210) |
| Other\tshort-term\tborrowed\tfunds |  | 103 |  |
| Acquisition\tof\ttreasury\tstock | (234) | (963) | (531) |
| Cash\tdividends\tpaid\tto\tshareholders | (923) | (806) | (633) |
| TARP\twarrant | 304 |  |  |
| Treasury\tstock | 375 | 253 | 343 |
| Preferred\tstock-TARP | 7,275 |  |  |
| Preferred\tstock-other | 492 |  |  |
| Net\tcash\tprovided\tby\t(used\tin) |  |  |  |
| financing\tactivities | 5,756 | 1,065 | (821) |
| Increase\t(decrease)\tin\tcash\tand\tdue |  |  |  |
| from\tbanks | (5) | 18 | (1) |
| Cash\tand\tdue\tfrom\tbanks\tat |  |  |  |
| beginning\tof\tyear | 20 | 2 | 3 |
| Cash\tand\tdue\tfrom\tbanks\tat\tend |  |  |  |
| of\tyear | $15 | $20 | $2 |

# NOTE	27	SEGMENT	REPORTING

We	have	four	major	businesses	engaged	in	providing	banking,	asset management	and	global	investment	servicing	products	and	services: •	Retail	Banking,

•	BlackRock,	and

Results	of	individual	businesses	are	presented	based	on	our	management accounting	practices	and	management	structure.	There	is	no	comprehensive, authoritative	body	of	guidance	for	management	accounting	equivalent	to	GAAP; therefore,	the	financial	results	of	our	individual	businesses	are	not	necessarily comparable	with	similar	information	for	any	other

company.	We	refine	our	methodologies	from	time	to	time	as	our	management accounting	practices	are	enhanced	and	our	businesses	and	management	structure change.	Financial	results	are	presented,	to	the	extent	practicable,	as	if	each business	operated	on	a	stand-alone	basis.	As	permitted	under	GAAP,	we	have aggregated	the	business	results	for	certain	similar	operating	segments	for financial	reporting	purposes.

The	business	segment	results	in	this	Note	27	do	not	include	the	impact	of National	City,	which	we	acquired	on	December	31,	2008.

Assets	receive	a	funding	charge	and	liabilities	and	capital	receive	a	funding credit	based	on	a	transfer	pricing	methodology	that	incorporates	product maturities,	duration	and	other	factors.	Capital	is	intended	to	cover	unexpected losses	and	is	assigned	to	the	banking	and	servicing	businesses	using	our	risk- based	economic	capital	model.	We	have	assigned	to	Retail	Banking	capital	equal to	6%	of	funds	to	reflect	the	capital	required	for	well-capitalized	domestic	banks and	to	approximate	market	comparables	for	this	business.	The	capital	assigned for	Global	Investment	Servicing	reflects	its	legal	entity	shareholder's	equity.

BlackRock	business	segment	results	for	the	first	nine	months	of	2006	reflected our	majority	ownership	in	BlackRock	during	that	period.	Subsequent	to	the September	29,	2006	BlackRock/MLIM	transaction	closing,	which	had	the	effect of	reducing	our	ownership	interest	at	that	time	to	approximately	34%,	our investment	in	BlackRock	has	been	accounted	for	under	the	equity	method	but continues	to	be	a	separate	reportable	business	segment	of	PNC.	The	fair	value	of our	investment	in	BlackRock	at	December	31,	2008	was	approximately	$5.8 billion.	Our	BlackRock	business	segment	information	for	the	first	nine	months of	2006	included	in	this	Note	27	was	not	restated.

Total	business	segment	financial	results	differ	from	total	consolidated	results. The	impact	of	these	differences	is	reflected	in	the	"Intercompany	Eliminations" and	"Other"	categories	in	the	business	segment	tables.	"Intercompany Eliminations"	reflects	activities	conducted	among	our	businesses	that	are eliminated	in	the	consolidated	results.	"Other"	includes	residual	activities	that	do not	meet	the	criteria	for	disclosure	as	a	separate	reportable	business,	such	as gains	or	losses	related	to	BlackRock	transactions	including	LTIP	share distributions	and	obligations,	earnings	and	gains	or	losses	related	to	Hilliard Lyons	for	2008,	integration	costs,	asset	and	liability	management	activities including	net	securities	gains	or	losses	and	certain	trading	activities,	equity

management	activities,	minority	interest	in	income	of	BlackRock	for	the	first nine	months	of	2006,	differences	between	business	segment	performance reporting	and	financial	statement	reporting	(GAAP),	and	most	corporate overhead.

Assets,	revenue	and	earnings	attributable	to	foreign	activities	were	not	material in	the	periods	presented	for	comparative	purposes.

See	Note	28	Subsequent	Event	regarding	changes	to	our	business	segments beginning	in	the	first	quarter	of	2009.

# BUSINESS	SEGMENT	PRODUCTS	AND	SERVICES

Retail	Banking	provides	deposit,	lending,	brokerage,	trust,	investment management,	and	cash	management	services	to	consumer	and	small	business customers	within	our	primary	geographic	markets.	Our	customers	are	serviced through	our	branch	network,	the	call	center	and	the	internet.	The	branch	network is	located	primarily	in	Pennsylvania,	New	Jersey,	Washington,	DC,	Maryland, Virginia,	Delaware,	Ohio,	Kentucky,	Indiana,	Illinois,	Michigan,	Missouri, Florida,	and	Wisconsin.

Corporate	&	Institutional	Banking	provides	lending,	treasury	management,	and capital	markets-related	products	and	services	to	mid-sized	corporations, government	entities,	and	selectively	to	large	corporations.	Lending	products include	secured	and	unsecured	loans,	letters	of	credit	and	equipment	leases. Treasury	management	services	include	cash	and	investment	management, receivables	management,

disbursement	services,	funds	transfer	services,	information	reporting,	and	global trade	services.	Capital	markets-related	products	and	services	include	foreign exchange,	derivatives,	loan	syndications,	mergers	and	acquisitions	advisory	and related	services	to	middle-market	companies,	securities	underwriting,	and securities	sales	and	trading.	Corporate	&	Institutional	Banking	also	provides commercial	loan	servicing,	and	real	estate	advisory	and	technology	solutions	for the	commercial	real	estate	finance	industry.	Corporate	&	Institutional	Banking provides	products	and	services	generally	within	PNC's	primary	geographic markets,	with	certain	products	and	services	offered	nationally.

BlackRock	is	one	of	the	largest	publicly	traded	investment	management	firms	in the	United	States.	BlackRock	manages	assets	on	behalf	of	institutional	and individual	investors	worldwide	through	a	variety	of	fixed	income,	cash management,	equity	and	balanced	and	alternative	investment	separate	accounts and	funds.	In	addition,	BlackRock	provides	risk	management,	investment	system outsourcing	and	financial	advisory	services	globally	to	institutional	investors.	At December	31,	2008,	PNC's	ownership	interest	in	BlackRock	was	approximately 33%.

Global	Investment	Servicing	is	a	leading	provider	of	processing,	technology	and business	intelligence	services	to	asset	managers,	broker-dealers,	and	financial advisors	worldwide.	Securities	services	include	custody,	securities	lending,	and accounting	and	administration	for	funds	registered	under	the	Investment Company	Act	of	1940	and	alternative	investments.	Investor	services	include transfer	agency,	subaccounting,	and	distribution.	Financial	advisor	services include	managed	accounts	and	information	management.	This	business	segment services	shareholder	accounts	both	domestically	and	internationally. International	locations	include	Ireland,	Poland	and	Luxembourg.

# Results	Of	Businesses

| Year	ended	December	31<br>In	millions | Retail<br>Banking | Corporate	&amp;<br>Institutional<br>Banking | BlackRock | Global<br>Investment<br>Servicing | Other | Intercompany<br>Eliminations | Consolidated |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| 2008 |  |  |  |  |  |  |  |
| INCOME\tSTATEMENT |  |  |  |  |  |  |  |
| Net\tinterest\tincome\t(expense) | $1,982 | $1,024 |  | $(31) | $848 |  | $3,823 |
| Noninterest\tincome | 1,616 | 494 | $261 | 947 | 103 | $(54) | 3,367 |
| Total\trevenue | 3,598 | 1,518 | 261 | 916 | 951 | (54) | 7,190 |
| Provision\tfor\tcredit\tlosses | 612 | 366 |  |  | 539 |  | 1,517 |
| Depreciation\tand\tamortization | 133 | 24 |  | 73 | 137 |  | 367 |
| Other\tnoninterest\texpense | 2,151 | 858 |  | 662 | 441 | (49) | 4,063 |
| Earnings\t(loss)\tbefore\tincome\ttaxes | 702 | 270 | 261 | 181 | (166) | (5) | 1,243 |
| Income\ttaxes\t(benefit) | 273 | 45 | 54 | 63 | (73) | (1) | 361 |
| Earnings\t(loss) | $429 | $225 | $207 | $118 | $(93) | $(4) | $882 |
| Inter-segment\trevenue | $17 | $14 | $15 | $22 | $(9) | $(59) |  |
| Average\tAssets\t(a) | $46,578 | $36,994 | $4,240 | $5,278 | $53,604 | $(4,674) | $142,020 |
| 2007 |  |  |  |  |  |  |  |
| INCOME\tSTATEMENT |  |  |  |  |  |  |  |
| Net\tinterest\tincome\t(expense) | $2,059 | $805 |  | $(32) | $83 |  | $2,915 |
| Noninterest\tincome | 1,736 | 720 | $334 | 863 | 175 | $(38) | 3,790 |
| Total\trevenue | 3,795 | 1,525 | 334 | 831 | 258 | (38) | 6,705 |
| Provision\tfor\tcredit\tlosses | 138 | 125 |  |  | 52 |  | 315 |
| Depreciation\tand\tamortization | 124 | 22 |  | 60 | 97 |  | 303 |
| Other\tnoninterest\texpense | 2,115 | 796 |  | 577 | 544 | (39) | 3,993 |
| Earnings\t(loss)\tbefore\tincome\ttaxes | 1,418 | 582 | 334 | 194 | (435) | 1 | 2,094 |
| Income\ttaxes\t(benefit) | 525 | 150 | 84 | 66 | (198) |  | 627 |
| Earnings\t(loss) | $893 | $432 | $250 | $128 | $(237) | $1 | $1,467 |
| Inter-segment\trevenue | $23 | $9 | $16 | $17 | $(27) | $(38) |  |
| Average\tAssets\t(a) | $42,424 | $29,052 | $4,259 | $2,476 | $48,885 | $(3,678) | $123,418 |
| 2006 |  |  |  |  |  |  |  |
| INCOME\tSTATEMENT |  |  |  |  |  |  |  |
| Net\tinterest\tincome\t(expense) | $1,673 | $711 | $20 | $(38) | $(121) |  | $2,245 |
| Noninterest\tincome | 1,447 | 752 | 1,135 | 917 | 2,137 | $(61) | 6,327 |
| Total\trevenue | 3,120 | 1,463 | 1,155 | 879 | 2,016 | (61) | 8,572 |
| Provision\tfor\tcredit\tlosses | 81 | 42 |  |  | 1 |  | 124 |
| Depreciation\tand\tamortization | 67 | 23 | 29 | 57 | 99 |  | 275 |
| Other\tnoninterest\texpense | 1,760 | 726 | 828 | 646 | 266 | (58) | 4,168 |
| Earnings\t(loss)\tbefore\tminority\tinterests\tin\tBlackRock\tand\tincome\ttaxes | 1,212 | 672 | 298 | 176 | 1,650 | (3) | 4,005 |
| Minority\tinterests\tin\tBlackRock |  |  |  |  | 47 |  | 47 |
| Income\ttaxes\t(benefit) | 447 | 209 | 104 | 52 | 552 | (1) | 1,363 |
| Earnings\t(loss) | $765 | $463 | $194 | $124 | $1,051 | $(2) | $2,595 |
| Inter-segment\trevenue | $13 | $9 | $28 | $12 | $(1) | $(61) |  |
| Average\tAssets\t(a) | $29,248 | $26,548 | $3,937 | $2,204 | $35,611 | $(2,536) | $95,012 |

# NOTE	28	SUBSEQUENT	EVENT

Beginning	in	the	first	quarter	of	2009,	PNC	will	have	three	new	reportable business	segments.	These	new	business	segments	reflect	the	impact	of	our December	31,	2008	acquisition	of	National	City	and	are	as	follows:

•	Residential	Mortgage	Banking	–	The	Residential	Mortgage	Banking business	segment	directly	originates	first	lien	residential	mortgage	loans	on a	nationwide	basis	with	a	significant	presence	within	the	retail	banking footprint	and	also	originates	loans	through	a	joint	venture	partner. Mortgage	loans	represent	loans	collateralized	by	one-to-four-family residential	real	estate	and	are	made	to	borrowers	in	good	credit	standing. These	loans	are	typically	underwritten	to	third	party	standards	and	sold	to primary	mortgage	market	aggregators	(Fannie	Mae,	Freddie	Mac,	Ginnie Mae,	Federal	Home	Loan	Banks	and	third-party	investors)	with	servicing retained.	The	mortgage	servicing	operation	performs	all	functions	related	to servicing	first	mortgage	loans	for	various	investors.	Loans	originated through	the	joint	venture	are	serviced	by	our	joint	venture	partner.

•	PNC	Asset	Management	Group	–	The	PNC	Asset	Management	Group business	segment	includes	institutional	asset	and	personal	wealth management.	Institutional	asset	management	provides	investment management,	custody,	retirement	planning	services,	and	other	corporate trust	services	to	institutional

clients.	The	clients	served	include	privately	held	corporations,	charitable endowments	and	foundations,	as	well	as	unions,	residing	primarily	in PNC's	geographic	footprint	and	generally	complementing	its	corporate banking	relationships.	Personal	wealth	management	products	and	services include	private	banking	services	and	tailored	credit	solutions,	customized investment	management	services,	financial	planning,	as	well	as	trust management	and	administration	for	affluent	individuals	and	families.	This segment	includes	the	wealth	management	business	acquired	with	National City	and	the	legacy	wealth	management	business	currently	included	in Retail	Banking.

•	Distressed	Assets	Portfolio	–	The	Distressed	Assets	Portfolio	business segment	includes	residential	real	estate	development	loans,	cross-border leases,	subprime	residential	mortgage	loans,	brokered	home	equity	loans and	certain	other	residential	real	estate	loans.	These	loans	require	special servicing	and	management	oversight	given	current	market	conditions.	The majority	of	these	loans	are	from	acquisitions,	primarily	National	City.

In	addition	to	these	new	segments,	we	will	continue	to	report	our	four	current business	segments:	Retail	Banking,	Corporate	&	Institutional	Banking, BlackRock	and	Global	Investment	Servicing.

# STATISTICAL	INFORMATION	(UNAUDITED)

| Dollars	in	millions, | 2008 | 2008 | 2008 | 2008 | 2007 | 2007 | 2007 | 2007 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| except\tper\tshare\tdata | Fourth | Third | Second | First | Fourth | Third | Second | First |
| Summary\tof\tOperations |  |  |  |  |  |  |  |  |
| Interest\tincome | $1,543 | $1,574 | $1,577 | $1,619 | $1,670 | $1,627 | $1,554 | $1,315 |
| Interest\texpense | 551 | 574 | 600 | 765 | 877 | 866 | 816 | 692 |
| Net\tinterest\tincome | 992 | \t 1,000 | 977 | 854 | 793 | 761 | 738 | 623 |
| Noninterest\tincome\t(a) | 684 | 654 | \t 1,062 | 967 | 834 | 990 | 975 | 991 |
| Total\trevenue | \t 1,676 | \t 1,654 | \t 2,039 | \t 1,821 | \t 1,627 | \t 1,751 | \t 1,713 | \t 1,614 |
| Provision\tfor\tcredit\tlosses\t(b) | 990 | 190 | 186 | 151 | 188 | 65 | 54 | 8 |
| Noninterest\texpense | \t 1,131 | \t 1,142 | \t 1,115 | \t 1,042 | \t 1,213 | \t 1,099 | \t 1,040 | 944 |
| Income\t(loss)\tbefore\tincome\ttaxes | (445) | 322 | 738 | 628 | 226 | 587 | 619 | 662 |
| Income\ttaxes\t(benefit) | (197) | 74 | 233 | 251 | 48 | 180 | 196 | 203 |
| Net\tincome\t(loss) | $(248) | $248 | $505 | $377 | $178 | $407 | $423 | $459 |
| Per\tCommon\tShare\tData |  |  |  |  |  |  |  |  |
| Book\tvalue | $39.44 | $39.44 | $42.17 | $42.26 | $43.60 | $43.12 | $42.36 | $42.63 |
| Basic\tearnings\t(c) | (.77) | .72 | 1.47 | 1.11 | .53 | 1.21 | 1.24 | 1.49 |
| Diluted\tearnings\t(c) | (.77) | .71 | 1.45 | 1.09 | .52 | 1.19 | 1.22 | 1.46 |

(a)				Noninterest	income	included	equity	management	gains	/(losses)	and	net	securities	gains/(losses)	in	each	quarter	as	follows	(in	millions):

|  | 2008 | 2008 | 2008 | 2008 | 2007 | 2007 | 2007 | 2007 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Fourth | Third | Second | First | Fourth | Third | Second | First |
| Equity\tmanagement\tgains/(losses) | $(16) | $(24) | $(7) | $23 | $21 | $47 | $2 | $32 |
| Net\tsecurities\tgains/(losses) | (172) | (74) | (1) | 41 | (1) | (2) | 1 | (3) |

(b) The	fourth	quarter	2008	provision	for	credit	losses	included	a	$504	million	conforming	provision	for	credit	losses	related	to	our	acquisition	of	National	City.

(c) The	sum	of	quarterly	amounts	for	2008	and	2007	does	not	equal	the	respective	year's	amount	because	the	quarterly	calculations	are	based	on	a	changing	number	of	average	shares.

# Analysis	Of	Year-To-Year	Changes	In	Net	Interest	Income

|  | 2008/2007 | 2008/2007 | 2008/2007 | 2007/2006 | 2007/2006 | 2007/2006 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Increase/(Decrease)\tin\tIncome/ | Increase/(Decrease)\tin\tIncome/ | Increase/(Decrease)\tin\tIncome/ | Increase/(Decrease)\tin\tIncome/ | Increase/(Decrease)\tin\tIncome/ | Increase/(Decrease)\tin\tIncome/ |
| Taxable-equivalent\tbasis\t-\tin\tmillions | Volume | Expense\tDue\tto\tChanges\tin:\nRate | Total | Volume | Expense\tDue\tto\tChanges\tin:\nRate | Total |
| Interest-Earning\tAssets |  |  |  |  |  |  |
| Investment\tsecurities |  |  |  |  |  |  |
| Securities\tavailable\tfor\tsale |  |  |  |  |  |  |
| Residential\tmortgage-backed | $157 | $4 | $161 | $228 | $73 | $301 |
| Commercial\tmortgage-backed | 89 | (4) | 85 | 93 | 19 | 112 |
| Asset-backed | 37 |  | 37 | 55 | (3) | 52 |
| U.S.\tTreasury\tand\tgovernment\tagencies | (14) | 4 | (10) | (91) | 2 | (89) |
| State\tand\tmunicipal | 25 |  | 25 | 4 | (1) | 3 |
| Other\tdebt | 9 | (1) | 8 | (4) | 2 | (2) |
| Corporate\tstocks\tand\tother | 1 | (7) | (6) | 7 | (3) | 4 |
| Total\tsecurities\tavailable\tfor\tsale | 308 | (8) | 300 | 276 | \t 105 | 381 |
| Securities\theld\tto\tmaturity | 23 |  | 23 |  |  |  |
| Total\tinvestment\tsecurities | 331 | (8) | 323 | 276 | \t 105 | 381 |
| Loans |  |  |  |  |  |  |
| Commercial | 358 | (373) | (15) | 386 | 22 | 408 |
| Commercial\treal\testate | 117 | (178) | (61) | 348 | 23 | 371 |
| Equipment\tlease\tfinancing |  | 5 | 5 | (9) | (38) | (47) |
| Consumer | 171 | (203) | (32) | 103 | 55 | 158 |
| Residential\tmortgage | 27 | (3) | 24 | 97 | 40 | 137 |
| Other | (8) | (5) | (13) | 5 |  | 5 |
| Total\tloans | 644 | (736) | (92) | 871 | \t 161 | \t 1,032 |
| Loans\theld\tfor\tsale | (29) | 11 | (18) | 17 | 10 | 27 |
| Federal\tfunds\tsold\tand\tresale\tagreements | 13 | (46) | (33) | 49 | (3) | 46 |
| Other | 9 | (33) | (24) | 53 | 17 | 70 |
| Total\tinterest-earning\tassets | $966 | $(810) | $156 | $1,271 | $285 | $1,556 |
| Interest-Bearing\tLiabilities |  |  |  |  |  |  |
| Interest-bearing\tdeposits |  |  |  |  |  |  |
| Money\tmarket | $116 | $(377) | $(261) | $141 | $23 | $164 |
| Demand | 8 | (43) | (35) | 12 | 3 | 15 |
| Savings |  | (4) | (4) | 3 | (1) | 2 |
| Retail\tcertificates\tof\tdeposit | (2) | (177) | (179) | 120 | 74 | 194 |
| Other\ttime | 88 | (49) | 39 | 39 | 5 | 44 |
| Time\tdeposits\tin\tforeign\toffices | 18 | (146) | (128) | 49 | (5) | 44 |
| Total\tinterest-bearing\tdeposits | 226 | (794) | (568) | 349 | \t 114 | 463 |
| Borrowed\tfunds |  |  |  |  |  |  |
| Federal\tfunds\tpurchased\tand\trepurchase\tagreements | (34) | (204) | (238) | 137 | (1) | 136 |
| Federal\tHome\tLoan\tBank\tborrowings | 256 | (44) | 212 | 77 | 7 | 84 |
| Bank\tnotes\tand\tsenior\tdebt | (12) | (128) | (140) | 169 | 9 | 178 |
| Subordinated\tdebt | 40 | (72) | (32) | (10) | (8) | (18) |
| Other | 50 | (45) | 5 | 33 | 8 | 41 |
| Total\tborrowed\tfunds | 351 | (544) | (193) | 416 | 5 | 421 |
| Total\tinterest-bearing\tliabilities | 534 | (1,295) | (761) | 714 | \t 170 | 884 |
| Change\tin\tnet\tinterest\tincome | $530 | $387 | $917 | $608 | $64 | $672 |

Changes	attributable	to	rate/volume	are	prorated	into	rate	and	volume	components.

# Average	Consolidated	Balance	Sheet	And	Net	Interest	Analysis

|  | 2008 | 2008 | 2008 |  | 2007 |  | 2006 | 2006 | 2006 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Taxable-equivalent\tbasis\nDollars\tin\tmillions | Average\nBalances | Interest\nIncome/\nExpense | Average\nYields/\nRates | Average\nBalances | Interest\nIncome/\nExpense | Average\nYields/\nRates | Average\nBalances | Interest\nIncome/\nExpense | Average\nYields/\nRates |
| Assets |  |  |  |  |  |  |  |  |  |
| Interest-earning\tassets |  |  |  |  |  |  |  |  |  |
| Investment\tsecurities |  |  |  |  |  |  |  |  |  |
| Securities\tavailable\tfor\tsale |  |  |  |  |  |  |  |  |  |
| Residential\tmortgage-backed | $22,058 | $1,202 | 5.45% | $19,163 | $1,041 | 5.43% | $ 14,881 | $740 | 4.97% |
| Commercial\tmortgage-backed | 5,666 | 307 | 5.42 | 4,025 | 222 | 5.52 | 2,305 | 110 | 4.77 |
| Asset-backed | 3,126 | 159 | 5.09 | 2,394 | 122 | 5.10 | 1,312 | 70 | 5.34 |
| U.S.\tTreasury\tand\tgovernment\tagencies | 50 | 3 | 6.00 | 293 | 13 | 4.44 | 2,334 | 102 | 4.37 |
| State\tand\tmunicipal | 764 | 36 | 4.71 | 227 | 11 | 4.85 | 148 | 8 | 5.41 |
| Other\tdebt | 220 | 12 | 5.45 | 47 | 4 | 8.51 | 89 | 6 | 6.74 |
| Corporate\tstocks\tand\tother | 412 | 12 | 2.91 | 392 | 18 | 4.59 | 246 | 14 | 5.69 |
| Total\tsecurities\tavailable\tfor\tsale | 32,296 | 1,731 | 5.36 | 26,541 | 1,431 | 5.39 | 21,315 | 1,050 | 4.93 |
| Securities\theld\tto\tmaturity | 402 | 23 | 5.72 |  |  |  |  |  |  |
| Total\tinvestment\tsecurities | 32,698 | 1,754 | 5.36 | 26,541 | 1,431 | 5.39 | 21,315 | 1,050 | 4.93 |
| Loans |  |  |  |  |  |  |  |  |  |
| Commercial | 30,962 | 1,844 | 5.96 | 25,509 | 1,859 | 7.29 | 20,201 | 1,451 | 7.18 |
| Commercial\treal\testate | 9,368 | 542 | 5.79 | 7,671 | 603 | 7.86 | 3,212 | 232 | 7.22 |
| Equipment\tlease\tfinancing | 2,566 | 81 | 3.16 | 2,559 | 76 | 2.97 | 2,777 | 123 | 4.43 |
| Consumer | 20,526 | 1,135 | 5.53 | 17,718 | 1,167 | 6.59 | 16,125 | 1,009 | 6.26 |
| Residential\tmortgage | 9,017 | 536 | 5.94 | 8,564 | 512 | 5.98 | 6,888 | 375 | 5.44 |
| Other | 305 | 18 | 5.90 | 432 | 31 | 7.18 | 363 | 26 | 7.16 |
| Total\tloans | 72,744 | 4,156 | 5.71 | 62,453 | 4,248 | 6.80 | 49,566 | 3,216 | 6.49 |
| Loans\theld\tfor\tsale | 2,502 | 166 | 6.63 | 2,955 | 184 | 6.23 | 2,683 | 157 | 5.85 |
| Federal\tfunds\tsold\tand\tresale\tagreements | 2,472 | 71 | 2.87 | 2,152 | 104 | 4.83 | 1,143 | 58 | 5.07 |
| Other | 4,068 | 202 | 4.97 | 3,909 | 226 | 5.78 | 2,985 | 156 | 5.23 |
| Total\tinterest-earning\tassets/interest\tincome | \t 114,484 | 6,349 | 5.55 | 98,010 | 6,193 | 6.32 | 77,692 | 4,637 | 5.97 |
| Noninterest-earning\tassets |  |  |  |  |  |  |  |  |  |
| Allowance\tfor\tloan\tand\tlease\tlosses | (962) |  |  | (690) |  |  | (591) |  |  |
| Cash\tand\tdue\tfrom\tbanks | 2,705 |  |  | 3,018 |  |  | 3,121 |  |  |
| Other | 25,793 |  |  | 23,080 |  |  | 14,790 |  |  |
| Total\tassets | $142,020 |  |  | $123,418 |  |  | $ 95,012 |  |  |
| Liabilities,\tMinority\tand\tNoncontrolling\tInterests,\tand\tShareholders'\tEquity |  |  |  |  |  |  |  |  |  |
| Interest-bearing\tliabilities |  |  |  |  |  |  |  |  |  |
| Interest-bearing\tdeposits |  |  |  |  |  |  |  |  |  |
| Money\tmarket | $27,625 | 566 | 2.05 | $23,840 | 827 | 3.47 | $ 19,745 | 663 | 3.36 |
| Demand | 9,947 | 68 | .68 | 9,259 | 103 | 1.11 | 8,187 | 88 | 1.07 |
| Savings | 2,714 | 8 | .29 | 2,687 | 12 | .45 | 2,081 | 10 | .48 |
| Retail\tcertificates\tof\tdeposit | 16,642 | 597 | 3.59 | 16,690 | 776 | 4.65 | 13,999 | 582 | 4.16 |
| Other\ttime | 4,424 | 149 | 3.37 | 2,119 | 110 | 5.19 | 1,364 | 66 | 4.84 |
| Time\tdeposits\tin\tforeign\toffices | 5,006 | 97 | 1.94 | 4,623 | 225 | 4.87 | 3,613 | 181 | 5.01 |
| Total\tinterest-bearing\tdeposits | 66,358 | 1,485 | 2.24 | 59,218 | 2,053 | 3.47 | 48,989 | 1,590 | 3.25 |
| Borrowed\tfunds |  |  |  |  |  |  |  |  |  |
| Federal\tfunds\tpurchased\tand\trepurchase\tagreements | 7,228 | 156 | 2.16 | 7,983 | 394 | 4.94 | 5,286 | 258 | 4.88 |
| Federal\tHome\tLoan\tBank\tborrowings | 9,303 | 321 | 3.45 | 2,168 | 109 | 5.03 | 623 | 25 | 4.01 |
| Bank\tnotes\tand\tsenior\tdebt | 6,064 | 197 | 3.25 | 6,282 | 337 | 5.36 | 3,128 | 159 | 5.08 |
| Subordinated\tdebt | 4,990 | 219 | 4.39 | 4,247 | 251 | 5.91 | 4,417 | 269 | 6.09 |
| Other | 3,737 | 112 | 3.00 | 2,344 | 107 | 4.56 | 1,589 | 66 | 4.15 |
| Total\tborrowed\tfunds | 31,322 | 1,005 | 3.21 | 23,024 | 1,198 | 5.20 | 15,043 | 777 | 5.17 |
| Total\tinterest-bearing\tliabilities/interest\texpense | 97,680 | 2,490 | 2.55 | 82,242 | 3,251 | 3.95 | 64,032 | 2,367 | 3.70 |
| Noninterest-bearing\tliabilities,\tminority\tand\tnoncontrolling\tinterests,\tand\tshareholders'\tequity |  |  |  |  |  |  |  |  |  |
| Demand\tand\tother\tnoninterest-bearing\tdeposits | 18,155 |  |  | 17,587 |  |  | 14,320 |  |  |
| Allowance\tfor\tunfunded\tloan\tcommitments\tand\tletters\tof\tcredit | 134 |  |  | 125 |  |  | 106 |  |  |
| Accrued\texpenses\tand\tother\tliabilities | 10,033 |  |  | 8,195 |  |  | 6,672 |  |  |
| Minority\tand\tnoncontrolling\tinterests\tin\tconsolidated\tentities | 1,981 |  |  | 1,335 |  |  | 600 |  |  |
| Shareholders'\tequity | 14,037 |  |  | 13,934 |  |  | 9,282 |  |  |
| Total\tliabilities,\tminority\tand\tnoncontrolling\tinterests,\tand\tshareholders'\tequity | $142,020 |  |  | $123,418 |  |  | $ 95,012 |  |  |
| Interest\trate\tspread |  |  | 3.00 |  |  | 2.37 |  |  | 2.27 |
| Impact\tof\tnoninterest-bearing\tsources |  |  | .37 |  |  | .63 |  |  | .65 |
| Net\tinterest\tincome/margin |  | $3,859 | 3.37% | $2,942 |  | 3.00% |  | $2,270 | 2.92% |

Nonaccrual	loans	are	included	in	loans,	net	of	unearned	income.	The	impact	of	financial	derivatives	used	in	interest	rate	risk	management	is	included	in	the	interest	income/expense	and	average	yields/rates	of	the	related assets	and	liabilities.	Basis	adjustments	related	to	hedged	items	are	included	in	noninterest-earning	assets	and	noninterest-bearing	liabilities.	Average	balances	of	securities	are	based	on	amortized	historical	cost (excluding	SFAS	115	adjustments	to	fair	value	which	are	included	in	other	assets).	Average	balances	for	certain	loans	and	borrowed	funds	accounted	for	at	fair	value,	with	changes	in	fair	value	recorded	in	trading noninterest	income,	are	included	in	noninterest-earning	assets	and	noninterest-bearing	liabilities.

Loan	fees	for	the	years	ended	December	31,	2008,	2007	and	2006	were	$55	million,	$39	million	and	$35	million,	respectively.	Interest	income	includes	the	effects	of	taxable-equivalent	adjustments	using	a	marginal federal	income	tax	rate	of	35%	to	increase	tax-exempt	interest	income	to	a	taxable-equivalent	basis.	The	taxable-equivalent	adjustments	to	interest	income	for	the	years	ended	December	31,	2008,	2007	and	2006	were $36	million,	$27	million	and	$25	million,	respectively.

# LOANS	OUTSTANDING

| December	31	-	in	millions | 2008	(a) | 2007 | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Commercial | $67,319 | $28,539 | $20,508 | $19,258 | $17,438 |
| Commercial\treal\testate | 25,736 | 8,903 | 3,527 | 3,157 | 1,980 |
| Equipment\tlease\tfinancing | 6,461 | 2,514 | 2,789 | 2,792 | 3,197 |
| TOTAL\tCOMMERCIAL\tLENDING | 99,516 | \t 39,956 | \t 26,824 | \t 25,207 | \t 22,615 |
| Consumer | 52,489 | \t 18,393 | \t 16,569 | \t 16,246 | \t 15,604 |
| Residential\treal\testate | 21,583 | 9,557 | 6,337 | 7,307 | 4,772 |
| TOTAL\tCONSUMER\tLENDING | 74,072 | \t 27,950 | \t 22,906 | \t 23,553 | \t 20,376 |
| Other | 1,901 | 413 | 375 | 341 | 504 |
| Total\tloans | $175,489 | $68,319 | $50,105 | $49,101 | $43,495 |
| (a)\nIncludes\t$99.7\tbillion\tof\tloans\trelated\tto\tNational\tCity. |  |  |  |  |  |

| December	31	-	dollars	in	millions | 2008	(a) | 2007 | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Nonaccrual\tloans |  |  |  |  |  |
| Commercial | $576 | $193 | $109 | $ 134 | $89 |
| Commercial\treal\testate | 766 | \t 212 | 12 | 14 | 14 |
| Equipment\tlease\tfinancing | 97 | 3 | 1 | 17 | 5 |
| Consumer | 70 | 17 | 13 | 10 | 11 |
| Residential\treal\testate | 153 | 27 | 25 | 24 | 28 |
| Total\tnonaccrual\tloans | $1,662 | $452 | $160 | $ 199 | $147 |
| Troubled\tdebt\trestructured\tloan |  | 2 |  |  | 3 |
| Total\tnonperforming\tloans | \t 1,662 | \t 454 | \t 160 | 199 | \t 150 |
| Foreclosed\tand\tother\tassets |  |  |  |  |  |
| Lease |  | 11 | 12 | 13 | 14 |
| Residential\treal\testate | 458 | 10 | 10 | 9 | 10 |
| Other | 45 | 20 | 2 | 3 | 5 |
| Total\tforeclosed\tand\tother\tassets | 503 | 41 | 24 | 25 | 29 |
| Total\tnonperforming\tassets\t(b)\t(c) | $2,165 | $495 | $184 | $ 224 | $179 |
| Nonperforming\tloans\tto\ttotal\tloans | .95% | .66% | .32% | .41% | .34% |
| Nonperforming\tassets\tto\ttotal\tloans\tand\tforeclosed\tassets | 1.23 | .72 | .37 | .46 | .41 |
| Nonperforming\tassets\tto\ttotal\tassets | .74 | .36 | .18 | .24 | .22 |
| Interest\ton\tnonperforming\tloans |  |  |  |  |  |
| Computed\ton\toriginal\tterms | $115 | $51 | $15 | $16 | $11 |
| Recognized\tprior\tto\tnonperforming\tstatus | 60 | 32 | 4 | 5 | 2 |
| Past\tdue\tloans |  |  |  |  |  |
| Accruing\tloans\tpast\tdue\t90\tdays\tor\tmore | $3,259 | $136 | $55 | $53 | $51 |
| As\ta\tpercentage\tof\ttotal\tloans | 1.86% | .20% | .11% | .11% | .12% |
| Past\tdue\tloans\theld\tfor\tsale |  |  |  |  |  |
| Accruing\tloans\theld\tfor\tsale\tpast\tdue\t90\tdays\tor\tmore | $40 | $8 | $9 | $47 | $9 |
| As\ta\tpercentage\tof\ttotal\tloans\theld\tfor\tsale | .92% | .20% | .38% | \t 1.92% | .54% |
| (a) |  |  |  |  |  |

(a) Amounts	at	December	31,	2008	include	$722	million	of	nonperforming	assets	related	to	National	City.

(c) Excludes	equity	management	assets	that	are	carried	at	estimated	fair	value	of	$42	million	at	December	31,	2008,	$4	million	at	December	31,	2007,	$11	million	(including	$4	million	of	troubled	debt	restructured assets)	at	December	31,	2006,	$25	million	(including	$7	million	of	troubled	debt	restructured	assets)	at	December	31,	2005,	and	$32	million	(including	$11	million	of	troubled	debt	restructured	assets)	at December	31,	2004.

# SUMMARY	OF	LOAN	LOSS	EXPERIENCE

| Year	ended	December	31	-	dollars	in	millions | 2008 | 2007 | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Allowance\tfor\tloan\tand\tlease\tlosses\t–\tJanuary\t1 | $830 | $560 | $596 | $607 | $632 |
| Charge-offs |  |  |  |  |  |
| Commercial | (301) | (156) | (108) | (52) | (113) |
| Commercial\treal\testate | (165) | (16) | (3) | (1) | (2) |
| Equipment\tlease\tfinancing | (3) |  | (14) | (29) | (2) |
| Consumer | (143) | (73) | (52) | (45) | (46) |
| Residential\treal\testate | (6) |  | (3) | (2) | (3) |
| Total\tcharge-offs | (618) | (245) | (180) | (129) | (166) |
| Recoveries |  |  |  |  |  |
| Commercial\t(a) | 53 | 30 | 19 | 82 | 31 |
| Commercial\treal\testate | 10 | 1 | 1 | 1 | 1 |
| Equipment\tlease\tfinancing | 1 |  | 5 | 1 | 5 |
| Consumer | 15 | 14 | 15 | 15 | 13 |
| Residential\treal\testate |  |  |  |  | 1 |
| Total\trecoveries | 79 | 45 | 40 | 99 | 51 |
| Net\tcharge-offs\t(a) | (539) | (200) | (140) | (30) | (115) |
| Provision\tfor\tcredit\tlosses\t(b) | \t 1,517 | 315 | 124 | 21 | 52 |
| Acquired\tallowance\t–\tNational\tCity | \t 2,224 |  |  |  |  |
| Acquired\tallowance\t–\tother | 20 | 152 |  | 23 | 22 |
| Net\tchange\tin\tallowance\tfor\tunfunded\tloan\tcommitments\tand\tletters\tof\tcredit | (135) | 3 | (20) | (25) | 16 |
| Allowance\tfor\tloan\tand\tlease\tlosses\t–\tDecember\t31 | $3,917 | $830 | $560 | $596 | $607 |
| Allowance\tas\ta\tpercent\tof\tDecember\t31: |  |  |  |  |  |
| Loans | 2.23% | 1.21% | 1.12% | 1.21% | 1.40% |
| Nonperforming\tloans | 236 | 183 | 350 | 299 | 405 |
| As\ta\tpercent\tof\taverage\tloans |  |  |  |  |  |
| Net\tcharge-offs\t(a) | .74 | .32 | .28 | .06 | .28 |
| Provision\tfor\tcredit\tlosses | 2.09 | .50 | .25 | .04 | .13 |
| Allowance\tfor\tloan\tand\tlease\tlosses | 5.38 | 1.33 | 1.13 | 1.26 | 1.48 |
| Allowance\tas\ta\tmultiple\tof\tnet\tcharge-offs\t(a) | \t 7.27x | \t 4.15x | \t 4.00x | \t 19.87x | \t 5.28x |

(a) Amounts	for	2005	reflect	the	impact	of	a	$53	million	loan	recovery	in	that	year.	Excluding	this	recovery,	net	charge-offs	would	have	been	.18%	of	average	loans	and	the	allowance	as	a	multiple	of	net	charge-offs would	have	been	7.18x.

(b) Amount	for	2008	included	a	$504	million	conforming	provision	for	credit	losses	related	to	National	City.

The	following	table	presents	the	assignment	of	the	allowance	for	loan	and	lease	losses	and	the	categories	of	loans	as	a	percentage	of	total	loans.	Changes	in	the allocation	over	time	reflect	the	changes	in	loan	portfolio	composition,	risk	profile	and	refinements	to	reserve	methodologies.	For	purposes	of	this	presentation,	a	portion of	the	allowance	for	loan	and	lease	losses	has	been	assigned	to	loan	categories	based	on	the	relative	specific	and	pool	allocation	amounts	to	provide	coverage	for probable	losses	not	covered	in	specific,	pool	and	consumer	reserve	methodologies	related	to	qualitative	and	measurement	factors.	At	December	31,	2008,	the	portion	of the	reserves	for	these	factors	was	$69	million.

# ALLOCATION	OF	ALLOWANCE	FOR	LOAN	AND	LEASE	LOSSES

|  | 2008 | 2008 | 2007 | 2007 | 2006 | 2006 | 2005 | 2005 | 2004 | 2004 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| December\t31 |  | Loans\tto |  | Loans\tto |  | Loans\tto |  | Loans\tto |  | Loans\tto |
| Dollars\tin\tmillions | Allowance | Total\tLoans | Allowance | Total\tLoans | Allowance | Total\tLoans | Allowance | Total\tLoans | Allowance | Total\tLoans |
| Commercial | $1,621 | 38.3% | $560 | 41.8% | $443 | 40.9% | $489 | 39.2% | $503 | 40.1% |
| Commercial\treal\testate | 833 | 14.7 | 153 | 13.0 | 30 | 7.0 | 32 | 6.4 | 26 | 4.5 |
| Consumer | 929 | 29.9 | 68 | 26.9 | 28 | 33.1 | 24 | 33.1 | 35 | 36.3 |
| Residential\treal\testate | 308 | 12.3 | 9 | 14.0 | 7 | 12.7 | 7 | 14.9 | 6 | 11.0 |
| Equipment\tlease\tfinancing | 179 | 3.7 | 36 | 3.7 | 48 | 5.6 | 41 | 5.7 | 33 | 6.9 |
| Other | 47 | 1.1 | 4 | .6 | 4 | .7 | 3 | .7 | 4 | 1.2 |
| Total | $3,917 | 100.0% | $830 | 100.0% | $560 | 100.0% | $596 | 100.0% | $607 | 100.0% |

# RECONCILIATIONS	OF	NON-GAAP	RATIOS	AT	DECEMBER	31,	2008

PNC	acquired	National	City	on	December	31,	2008.	We	believe	that	the	disclosure	of	these	ratios	excluding	the	impact	of	National	City	provides	additional	meaningful information	regarding	the	allowance	for	loan	and	lease	losses	at	that	date	and	the	impact	of	National	City	on	these	ratios.

# SHORT-TERM	BORROWINGS

Federal	funds	purchased	include	overnight	borrowings	and	term	federal	funds,	which	are	payable	at	maturity.

# SELECTED	LOAN	MATURITIES	AND	INTEREST	SENSITIVITY

| December	31,	2008<br>In	millions | 1	Year<br>or	Less | 1	Through<br>5	Years | After	5<br>Years | Gross<br>Loans |
| :--- | :--- | :--- | :--- | :--- |
| Commercial | $22,866 | $36,425 | $8,028 | $67,319 |
| Real\testate\tprojects | 9,134 | 7,048 | 994 | \t 17,176 |
| Total | $32,000 | $43,473 | $9,022 | $84,495 |
| Loans\twith\tPredetermined |  |  |  |  |
| rate | $3,408 | $7,077 | $3,315 | $13,800 |
| Floating\tor\tadjustable |  |  |  |  |
| rate | \t 28,592 | \t 36,396 | \t 5,707 | \t 70,695 |
| Total | $32,000 | $43,473 | $9,022 | $84,495 |

At	December	31,	2008,	we	had	no	pay-fixed	interest	rate	swaps	designated	to commercial	loans	as	part	of	fair	value	hedge	strategies.	At	December	31,	2008, $5.6	billion	notional	amount	of	receive-fixed	interest	rate	swaps	were	designated as	part	of	cash	flow	hedging	strategies	that	converted	the	floating	rate	(1	month LIBOR)	on	the	underlying	commercial	loans	to	a	fixed	rate	as	part	of	risk management	strategies.

Time	deposits	in	foreign	offices	totaled	$4.0	billion	at	December	31,	2008, substantially	all	of	which	are	in	denominations	of	$100,000	or	more.

The	following	table	sets	forth	maturities	of	domestic	time	deposits	of	$100,000 or	more:

|  | Certificates |
| :--- | :--- |
| December\t31,\t2008\t–\tin\tmillions | of\tDeposit |
| Three\tmonths\tor\tless | $6,177 |
| Over\tthree\tthrough\tsix\tmonths | 1,904 |
| Over\tsix\tthrough\ttwelve\tmonths | 6,146 |
| Over\ttwelve\tmonths | 8,629 |
| Total | $ 22,856 |

# COMMON	STOCK	PRICES/DIVIDENDS	DECLARED

The	table	below	sets	forth	by	quarter	the	range	of	high	and	low	sale	and	quarter- end	closing	prices	for	our	common	stock	and	the	cash	dividends	we	declared	per common	share.

|  | High | Low | Close | Cash<br>Dividends<br>Declared |
| :--- | :--- | :--- | :--- | :--- |
| 2008\tQuarter |  |  |  |  |
| First | $71.20 | $53.10 | $65.57 | $.63 |
| Second | \t 73.00 | \t 55.22 | \t 57.10 | .66 |
| Third | \t 87.99 | \t 49.01 | \t 74.70 | .66 |
| Fourth | \t 80.00 | \t 39.09 | \t 49.00 | .66 |
| Total |  |  |  | $2.61 |
| 2007\tQuarter |  |  |  |  |
| First | $76.41 | $68.60 | $71.97 | $.55 |
| Second | \t 76.15 | \t 70.31 | \t 71.58 | .63 |
| Third | \t 75.99 | \t 64.00 | \t 68.10 | .63 |
| Fourth | \t 74.56 | \t 63.54 | \t 65.65 | .63 |
| Total |  |  |  | $2.44 |

On	March	1,	2009,	the	Board	decided	to	reduce	PNC's	quarterly	common	stock dividend	from	$0.66	to	$0.10	per	share.	The	next	dividend	is	expected	to	be declared	in	early	April	2009.

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

# (a)Previously	reported.

# ITEM	9A	–	CONTROLS	AND	PROCEDURES

# (a)MANAGEMENT'S	REPORT	ON	INTERNAL	CONTROL	OVER FINANCIAL	REPORTING

The	management	of	The	PNC	Financial	Services	Group,	Inc.	and	subsidiaries ("PNC")	is	responsible	for	establishing	and	maintaining	adequate	internal control	over	financial	reporting,	as	such	term	is	defined	in	the	Exchange	Act Rule	13a-15(f).

Because	of	inherent	limitations,	internal	control	over	financial	reporting	may not	prevent	or	detect	misstatements.	Also,	projections	of	any	evaluation	of effectiveness	to	future	periods	are	subject	to	the	risk	that	controls	may become	inadequate	because	of	changes	in	conditions,	or	that	the	degree	of compliance	with	the	policies	or	procedures	may	deteriorate.

We	performed	an	evaluation	under	the	supervision	and	with	the	participation of	our	management,	including	the	Chairman	and	Chief	Executive	Officer	and the	Chief	Financial	Officer,	of	the	effectiveness	of	PNC's	internal	control over	financial	reporting	as	of	December	31,	2008.	This	assessment	was	based on	criteria	for	effective	internal	control	over	financial	reporting	described	in Internal	Control-Integrated	Framework	issued	by	the	Committee	of Sponsoring	Organizations	of	the	Treadway	Commission.	This	assessment	did not	include	internal	control	over	financial	reporting	related	to	National	City Corporation,	because	it	was	acquired	by	PNC	on	December	31,	2008	in	a purchase	business	combination.	The	total	assets	of	National	City	Corporation represented	$136	billion	of	PNC's	consolidated	total	assets	at	December	31, 2008.	Based	on	this	assessment,	management	concludes	that	PNC	maintained effective	internal	control	over	financial	reporting	as	of	December	31,	2008.

PricewaterhouseCoopers	LLP,	the	independent	registered	public	accounting firm	that	audited	our	consolidated	financial	statements	as	of	and	for	the	year ended	December	31,	2008	included	in	this	Report,	has	also	issued	a	report	on the	effectiveness	of	PNC's	internal	control	over	financial	reporting	as	of December	31,	2008.	The	report	of	PricewaterhouseCoopers	LLP	is	included under	Item	8	of	this	Annual	Report	on	Form	10-K.

# (b)DISCLOSURE	CONTROLS	AND	PROCEDURES	AND	CHANGES	IN INTERNAL	CONTROL	OVER	FINANCIAL	REPORTING

As	of	December	31,	2008,	we	performed	an	evaluation	under	the	supervision and	with	the	participation	of	our	management,	including	the	Chairman	and Chief	Executive	Officer	and	the	Chief	Financial	Officer,	of	the	effectiveness of	the	design	and	operation	of	our	disclosure	controls	and	procedures	and	of changes	in	our	internal	control	over	financial	reporting.	This	evaluation	did not	include	an	assessment	of	those	disclosure	controls	and	procedures	that	are subsumed	by,	and	did	not	include	an	assessment	of,	internal	control	over financial	reporting	as	it	relates	to	National	City	Corporation.

Based	on	that	evaluation,	our	Chairman	and	Chief	Executive	Officer	and	the Chief	Financial	Officer	concluded	that	our	disclosure	controls	and	procedures (as	defined	in	Rule	13a-15(e)	under	the	Securities	and	Exchange	Act	of	1934, as	amended)	were	effective	as	of	December	31,	2008,	and	that,	except	as described	below,	there	has	been	no	change	in	PNC's	internal	control	over financial	reporting	that	occurred	during	the	fourth	quarter	of	2008	that	has materially	affected,	or	is	reasonably	likely	to	materially	affect,	our	internal control	over	financial	reporting.

At	December	31,	2008,	the	businesses	formerly	operated	by	National	City Corporation	were	operating	under	pre-acquisition	systems	of	internal	controls over	financial	reporting.	PNC's	assessment	did	not	include	internal	control over	financial	reporting	related	to	these	businesses,	which	PNC	acquired	on December	31,	2008.	As	a	result	of	the	National	City	Corporation	acquisition on	December	31,	2008,	we	will	be	evaluating	changes	to	processes, information	technology	systems	and	other	components	of	internal	control over	financial	reporting	as	part	of	our	integration	activities.

# ITEM	9B	–	OTHER	INFORMATION

# None.

# PART	III

# ITEM	10	–	DIRECTORS,	EXECUTIVE	OFFICERS	AND	CORPORATE GOVERNANCE

Certain	of	the	information	regarding	our	directors	(or	nominees	for	director), executive	officers,	Audit	Committee	(and	Audit	Committee	financial	experts), and	shareholder	nomination	process	required	by	this	item	is	included	under	the captions	"Election	of	Directors	–	Information	Concerning	Nominees," "Transactions	Involving	Directors	And	Executive	Officers	–	Family Relationships,"	and	"Corporate	Governance	At	PNC	–	The	Audit	Committee,	– Our	Code	of	Business	Conduct	and	Ethics,	and	–	The	Nominating	and Governance

Committee"	and	"Requirements	for	Director	Nominations	and	Shareholder Proposals"	in	our	Proxy	Statement	to	be	filed	for	the	2009	annual	meeting	of shareholders	and	is	incorporated	herein	by	reference.	In	accordance	with Item	407(d)	(3)	of	Regulation	S-K,	the	information	set	forth	under	the	caption "Item	3	–	Ratification	of	the	Audit	Committee's	Selection	of PricewaterhouseCoopers	LLP	as	the	Independent	Registered	Public	Accounting Firm	for	2009	–	Report	of	the	Audit	Committee"	in	such	Proxy	Statement	will	be deemed	to	be	furnished	in	this	Report	and	will	not	be	deemed	to	be	incorporated by	reference	into	any	filing	under	the	Securities	Act	or	the	Exchange	Act	as	a result	of	furnishing	the	disclosure	in	this	manner.

Information	regarding	our	compliance	with	Section	16(a)	of	the	Securities Exchange	Act	of	1934	is	included	under	the	caption	"Section	16(a)	Beneficial Ownership	Reporting	Compliance"	in	our	Proxy	Statement	to	be	filed	for	the 2009	annual	meeting	of	shareholders	and	is	incorporated	herein	by	reference.

Additional	information	regarding	our	executive	officers	and	our	directors	is included	in	Part	I	of	this	Report	under	the	captions	"Executive	Officers	of	the Registrant"	and	"Directors	of	the	Registrant."

Our	PNC	Code	of	Business	Conduct	and	Ethics	is	available	on	our	corporate website	at	www.pnc.com/corporategovernance.	In	addition,	any	future amendments	to,	or	waivers	from,	a	provision	of	the	PNC	Code	of	Business Conduct	and	Ethics	that	applies	to	our	directors	or	executive	officers	(including the	Chairman	and	Chief	Executive	Officer,	the	Chief	Financial	Officer	and	the Controller)	will	be	posted	at	this	internet	address.

# ITEM	11	–	EXECUTIVE	COMPENSATION

The	information	required	by	this	item	is	included	under	the	captions	"Director Compensation	for	Fiscal	2008,"	"Corporate	Governance	at	PNC	–	Compensation Committee	Interlocks	and	Insider	Participation,"	and	"Executive	Compensation –	Compensation	Discussion	and	Analysis,	–	Compensation	Committee	Report,

and	–	Executive	Compensation	Tables"	in	our	Proxy	Statement	to	be	filed	for	the 2009	annual	meeting	of	shareholders	and	is	incorporated	herein	by	reference.	In accordance	with	Item	407(e)	(5)	of	Regulation	S-K,	the	information	set	forth under	the	caption	"Executive	Compensation	–	Compensation	Committee Report"	in	such	Proxy	Statement	will	be	deemed	to	be	furnished	in	this	Report and	will	not	be	deemed	to	be	incorporated	by	reference	into	any	filing	under	the Securities	Act	or	the	Exchange	Act	as	a	result	of	furnishing	the	disclosure	in	this manner.

# ITEM	12	–	SECURITY	OWNERSHIP	OF	CERTAIN	BENEFICIAL OWNERS	AND	MANAGEMENT	AND	RELATED	STOCKHOLDER MATTERS

The	information	required	by	this	item	regarding	security	ownership	of	certain beneficial	owners	and	management	is	included	under	the	caption	"Security Ownership	of	Directors,	Executive	Officers	and	Certain	Beneficial	Owners"	in our	Proxy	Statement	to	be	filed	for	the	2009	annual	meeting	of	shareholders	and is	incorporated	herein	by	reference.

Information	regarding	our	compensation	plans	under	which	PNC	equity securities	are	authorized	for	issuance	as	of	December	31,	2008	is	included	in	the table	which	follows.	Additional	information	regarding	these	plans	is	included	in Note	16	Stock-Based	Compensation	Plans	in	the	Notes	To	Consolidated Financial	Statements	in	Item	8	of	this	Report.

# Equity	Compensation	Plan	Information

|  | (a)<br>Number	of	securities	to<br>be	issued	upon	exercise<br>of	outstanding	options,<br>warrants	and	rights | (b)<br>Weighted-average<br>exercise	price	of<br>outstanding<br>options,	warrants<br>and	rights | (c)<br>Number	of	securities<br>remaining	available	for<br>future	issuance	under<br>equity	compensation	plans<br>(excluding	securities<br>reflected	in	column	(a)) |
| :--- | :--- | :--- | :--- |
| Equity\tcompensation\tplans\tapproved\tby\tsecurity\tholders |  |  |  |
| 1997\tLong-Term\tIncentive\tAward\tPlan\t(Note\t1) |  |  |  |
| Stock\tOptions | 9,538,041 | $62.87 |  |
| Incentive\tPerformance\tUnit\tAwards\t(Note\t2) | 173,500 | N/A |  |
| Subtotal | 9,711,541 |  | 1,945,317 |
| 2006\tIncentive\tAward\tPlan\t(Note\t3\tand\tNote\t4) |  |  |  |
| Stock\tOptions | 4,833,761 | $64.29 | 34,361,855 |
| Incentive\tPerformance\tUnit\tAwards\t(Note\t2) | 285,500 | N/A |  |
| 1996\tExecutive\tIncentive\tAward\tPlan\tIncentive\tAwards |  | N/A | (Note\t5) |
| Employee\tStock\tPurchase\tPlan\t(Note\t6) |  |  | 1,168,517 |
| 1992\tDirector\tShare\tIncentive\tPlan |  | N/A | 367,268 |
| Total\tapproved\tby\tsecurity\tholders | 14,830,802 |  | 37,842,957 |
| Equity\tcompensation\tplans\tnot\tapproved\tby\tsecurity\tholders\t(Note\t7) |  |  |  |
| Former\tNational\tCity\tCorporation\tStock\tOption\tPlans | 1,743,711 | $636.31 |  |
| Former\tNational\tCity\tCorporation\tDeferred\tCompensation\tPlan | 34,140 |  | (Note\t8) |
| Former\tNational\tCity\tCorporation\tRestricted\tStock\tUnits | 1,646 |  |  |
| Former\tSterling\tFinancial\tCorporation\tStock\tOption\tPlan | 165,357 | $66.83 |  |
| Total\tnot\tapproved\tby\tsecurity\tholders | 1,944,854 |  |  |
| Total | 16,775,656 |  | 37,842,957 |

N/A	–	not	applicable

Note	1	–	After	shareholder	approval	of	the	2006	Incentive	Award	Plan	at	the	2006	annual	meeting	of	PNC's	shareholders	on	April	25,	2006	(see	Note	3	below),	no	further	grants	were	permitted	under	the	1997	Long-

Term	Incentive	Award	Plan,	other	than	for	the	exercise	of	reload	or	performance	unit	rights.	As	of	December	31,	2008,	the	number	of	remaining	shares	reserved	under	this	plan	for	that	purpose	was	1,945,317.

Note	2	–	These	incentive	performance	unit	awards	provide	for	the	issuance	of	shares	of	common	stock	(up	to	a	target	number	of	shares)	based	on	the	degree	to	which	corporate	performance	goals	established	by	the Personnel	and	Compensation	Committee	("Committee")	have	been	achieved,	and,	if	a	premium	level	of	such	performance	is	achieved,	for	further	payment	in	cash.	The	numbers	in	column	(a)	of	this	table	for	these awards	reflect	the	maximum	number	of	shares	that	could	be	issued	pursuant	to	grants	outstanding	at	December	31,	2008	upon	achievement	of	the	performance	goals	and	other	conditions	of	the	grants.	Grants	under	the 1997	Long-Term	Incentive	Award	Plan	were	made	in	the	first	quarter	of	2006.	Grants	under	the	2006	Incentive	Award	Plan	were	made	in	the	first	quarter	of	2007	and	the	first	quarter	of	2008.

Note	3	–	The	2006	Incentive	Award	Plan	was	adopted	by	the	Board	on	February	15,	2006	and	approved	by	the	PNC	shareholders	at	the	2006	annual	meeting	on	April	25,	2006.	The	plan	initially	authorized	up	to 40,000,000	shares	of	common	stock	for	issuance	under	the	plan,	subject	to	adjustment	in	certain	circumstances.	If	and	to	the	extent	that	options	and	SARs	granted	under	the	plan,	or	granted	under	the	prior	plan	and outstanding	on	the	approval	date	of	the	plan,	terminate,	expire	or	are	cancelled,	forfeited,	exchanged	or	surrendered	after	the	effective	date	of	the	plan	without	being	exercised	or	if	any	share	awards,	share	units, dividend	equivalents	or	other	share-based	awards	are	forfeited	or	terminated,	or	otherwise	not	paid	in	full,	after	the	effective	date	of	the	plan,	the	shares	subject	to	such	grants	become	available	again	for	purposes	of	the plan.

Note	4	–	Under	the	2006	Incentive	Award	Plan,	awards	or	portions	of	awards	that,	by	their	terms,	are	payable	only	in	cash	do	not	reduce	the	number	of	shares	that	remain	available	for	issuance	under	the	plan	(the number	in	column	(c)).	During	2008,	a	total	of	371,302	cash-payable	share	units	plus	cash-payable	dividend	equivalents	with	respect	to	91,449	of	those	share	units	were	granted	under	the	plan.	This	number	includes the	cash-payable	portion	of	the	2008	incentive	performance	unit	award	grants	described	in	Note	2	above,	an	incremental	change	in	the	cash-payable	portion	of	the	2007	incentive	performance	unit	award	grants described	above,	a	separate	2008	incentive	performance	unit	award	grant	payable	solely	in	cash,	and	2008	grants	of	restricted	share	units	(some	of	which	include	rights	to	dividend	equivalents)	payable	solely	in	cash. Payments	are	subject	to	the	conditions	of	the	individual	grants,	including,	where	applicable,	the	achievement	of	any	performance	goals	established	for	such	grants.	The	comparable	amount	for	2007	was	189,581	cash- payable	share	units	plus	cash-payable	dividend	equivalents	with	respect	to	68,288	share-payable	restricted	share	units.

Note	5	–	The	1996	Executive	Incentive	Award	Plan	is	a	shareholder-approved	plan	that	enables	PNC	to	pay	annual	bonuses	to	its	senior	executive	officers	based	upon	the	achievement	of	specified	levels	of	performance. The	plan	as	amended	and	restated	as	of	January	1,	2007	was	adopted	by	the	Board	on	February	14,	2007	and	approved	by	the	PNC	shareholders	at	the	2007	annual	meeting	on	April	24,	2007.	The	plan	does	not	specify a	fixed	share	amount	for	awards	under	the	plan.	Rather,	it	provides	for	maximum	bonus	awards	for	a	given	period	(generally	a	year)	for	each	individual	plan	participant	of	0.2%	of	incentive	income	for	that	period. Incentive	income	is	based	on	PNC's	consolidated	pre-tax	net	income	as	further	adjusted	for	the	impact	of	changes	in	tax	law,	extraordinary	items,	discontinued	operations,	acquisition	and	merger	integration	costs,	and for	the	impact	of	PNC's	obligation	to	fund	certain	BlackRock	long-term	incentive	programs.	Although	the	size	of	awards	under	the	plan	is	dollar-denominated,	payment	may	be	made	in	cash,	in	stock,	or	in	a	combination of	cash	and	stock.

During	2008,	PNC	paid	a	portion	of	annual	bonuses	awarded	under	this	plan	for	2007	performance	in	the	form	of	restricted	stock.	PNC	has	reduced	the	number	of	shares	available	for	issuance	under	its	2006	Incentive Award	Plan	(as	reflected	in	the	number	under	column	(c)	for	that	plan)	for	this	restricted	stock.

Note	6	–	The	Employee	Stock	Purchase	Plan	became	effective	in	February	1997.	The	purchase	price	for	shares	sold	under	the	plan	represents	95%	of	the	fair	market	value	on	the	last	day	of	each	six-month	offering period.	The	number	under	column	(c)	for	the	plan	reflects	the	number	of	shares	remaining	unsold	under	the	1997	plan	after	completion	of	sales	for	the	last	six-month	offering	period	pursuant	to	that	plan	ending December	31,	2008.	The	1997	plan	was	replaced	by	an	amended	and	restated	plan	of	the	same	name	effective	for	offering	periods	beginning	on	or	after	January	1,	2009.	The	2009	plan	will	be	presented	to	the	PNC shareholders	for	approval	at	the	2009	annual	meeting.

Note	7	–	The	plans	in	this	section	of	the	table	reflect	awards	under	pre-acquisition	plans	of	National	City	Corporation	and	Sterling	Financial	Corporation,	respectively.	National	City	was	merged	into	PNC	on December	31,	2008	and	Sterling	was	merged	into	PNC	on	April	4,	2008.	Pursuant	to	the	respective	merger	agreements	for	these	acquisitions,	common	shares	of	National	City	or	Sterling,	as	the	case	may	be,	issuable upon	the	exercise	or	settlement	of	various	equity	awards	granted	under	the	National	City	or	Sterling	plans	were	converted	into	corresponding	awards	covering	PNC	common	stock.	Additional	information	regarding these	plans	is	included	in	Note	16	Stock-Based	Compensation	Plans	in	the	Notes	To	Consolidated	Financial	Statements	in	Item	8	of	this	Report.

Note	8	–	The	National	City	Corporation	2004	Deferred	Compensation	Plan	provided	eligible	employees	the	opportunity	to	defer	the	receipt	of	cash	compensation	which	would	have	otherwise	been	received	as	salary,	as variable	pay,	or	as	an	incentive	award	and	provided	participants	with	nonelective	deferred	compensation.	The	plan	was	frozen	as	to	new	deferral	elections	and	nonelective	deferred	compensation	in	December	2008. Deferred	compensation	already	in	the	plan	at	that	time,	or	contributed	to	the	plan	pursuant	to	previous	deferral	elections,	is	credited	with	gains	or	losses	based	upon	investment	options	made	available	from	time	to	time, and,	as	such,	there	is	no	weighted-average	exercise	price.	The	plan	does	not	limit	the	number	of	shares	that	may	be	issued	for	the	plan.

# ITEM	13	–	CERTAIN	RELATIONSHIPS	AND	RELATED TRANSACTIONS,	AND	DIRECTOR	INDEPENDENCE

The	information	required	by	this	item	is	included	under	the	captions "Transactions	with	Related	Persons,	Indemnification,	and	Advancement	of Costs"	and	"Corporate	Governance	At	PNC	–	Director	Independence"	in	our Proxy	Statement	to	be	filed	for	the	2009	annual	meeting	of	shareholders	and	is incorporated	herein	by	reference.

# ITEM	14	–	PRINCIPAL	ACCOUNTING	FEES	AND	SERVICES

The	information	required	by	this	item	is	included	under	the	caption	"Item	3	– Ratification	of	the	Audit	Committee's	Selection	of	PricewaterhouseCoopers	LLP as	the	Independent	Registered	Public	Accounting	Firm	for	2009"	in	our	Proxy Statement	to	be	filed	for	the	2009	annual	meeting	of	shareholders	and	is incorporated	herein	by	reference.

# ITEM	15	–	EXHIBITS,	FINANCIAL	STATEMENT	SCHEDULES

# FINANCIAL	STATEMENTS,	FINANCIAL	STATEMENT	SCHEDULES

Our	consolidated	financial	statements	required	in	response	to	this	Item	are incorporated	by	reference	from	Item	8	of	this	Report.

Audited	consolidated	financial	statements	of	BlackRock,	Inc.	("BlackRock")	as of	December	31,	2008	and	2007	and	for	each	of	the	three	years	ended December	31,	2008,	are	incorporated	herein	by	reference	to	Item	15	(a)	(1)	of BlackRock's	2008	Annual	Report	on	Form	10-K	(Commission	File	Number 001-33099).

The	report	of	our	former	independent	registered	public	accounting	firm	follows:

To	the	Board	of	Directors	and	Shareholders	of The	PNC	Financial	Services	Group,	Inc. Pittsburgh,	Pennsylvania

We	have	audited	the	accompanying	consolidated	statements	of	income, shareholders'	equity,	and	cash	flows	of	The	PNC	Financial	Services	Group,	Inc. and	subsidiaries	(the	"Company")	for	the	year	ended	December	31,	2006.	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 audit.

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

In	our	opinion,	such	consolidated	financial	statements	present	fairly,	in	all material	respects,	the	results	of	operations	and	cash	flows	of	The	PNC	Financial Services	Group,	Inc.	and	subsidiaries	for	the	year	ended	December	31,	2006,	in conformity	with	accounting	principles	generally	accepted	in	the	United	States	of America.

As	discussed	in	Note	1	to	the	consolidated	financial	statements,	the	Company adopted	Statement	of	Financial	Accounting	Standard	No.	158,	"Employers' Accounting	for	Defined	Benefit	Pension	and	Other	Postretirement	Plans	–	an amendment	of	FASB	Statements	No.	87,	88,	106,	and	132(R)"	as	of December	31,	2006.

As	discussed	in	Note	1	to	the	consolidated	financial	statements,	the accompanying	consolidated	statement	of	cash	flows	for	the	year	ended December	31,	2006	has	been	restated.

As	a	result	of	the	transaction	discussed	in	Note	2	to	the	consolidated	financial statements,	the	Company	no	longer	consolidates	BlackRock,	Inc.	("BlackRock"). Beginning	September	30,	2006,	the	Company	recognized	its	investment	in BlackRock	using	the	equity	method	of	accounting.

/s/	Deloitte	&	Touche	LLP

# Pittsburgh,	Pennsylvania

March	1,	2007	(February	4,	2008	as	to	the	effects	of	the	restatement	discussed	in Note	1)

# EXHIBITS

Our	exhibits	listed	on	the	Exhibit	Index	on	pages	E-1	through	E-7	of	this	Form 10-K	are	filed	with	this	Report	or	are	incorporated	herein	by	reference.

# SIGNATURES

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

# (Registrant)

	Richard	J.	Johnson

	Chief	Financial	Officer

Pursuant	to	the	requirements	of	the	Securities	Exchange	Act	of	1934,	this	report	has	been	signed	below	by	the	following	persons	on	behalf	of	The	PNC	Financial Services	Group,	Inc.	and	in	the	capacities	indicated	on	March	2,	2009.

*	Richard	O.	Berndt;	Charles	E.	Bunch;	Paul	W.	Chellgren;	Robert	N.	Clay;	George A.	Davidson,	Jr.;	Kay	Coles	James;	Richard	B.	Kelson;	Bruce	C.	Lindsay;	Anthony A.	Massaro;	Jane	G.	Pepper;	Donald	J.	Shepard;	Lorene	K.	Steffes;	Dennis	F.	Strigl; Stephen	G.	Thieke;	Thomas	J.	Usher;	George	H.	Walls,	Jr.;	and	Helge	H.	Wehmeier

Directors

George	P.	Long,	III,	Attorney-in-Fact,	pursuant	to Powers	of	Attorney	filed	herewith

# EXHIBIT	INDEX

+ Incorporated	document	references	to	filings	by	the	Corporation	are	to	SEC	File	No.	001-09718,	to	filings	by	National	City	Corporation	are	to	SEC	File	No.	001- 10074,	to	filings	by	BlackRock	through	its	second	quarter	2006	Form	10-Q	are	to	BlackRock	Holdco	2,	Inc.	SEC	File	No.	001-15305,	and	to	filings	by BlackRock,	Inc.	are	to	SEC	File	No.	001-33099.

* Denotes	management	contract	or	compensatory	plan.

You	can	obtain	copies	of	these	Exhibits	electronically	at	the	SEC's	website	at	www.sec.gov	or	by	mail	from	the	Public	Reference	Section	of	the	SEC,	at	100	F	Street, N.E.,	Washington,	D.C.	20549	at	prescribed	rates.	The	Exhibits	are	also	available	as	part	of	this	Form	10-K	on	or	through	PNC's	corporate	website	at www.pnc.com/secfilings	under	"Form	10-K."	Shareholders	and	bondholders	may	also	obtain	copies	without	charge	by	contacting	Shareholder	Relations	at	(800)	843- 2206	or	via	e-mail	at	investor.relations@pnc.com.



Question: for national city-sponsored securitization qspes at december 31 , 2008 , automobile was what percent of credit card assets?
Answer: 11.7%