EXHIBIT 99.1

LOGO

THE PNC FINANCIAL SERVICES GROUP, INC.

FINANCIAL SUPPLEMENT

FOURTH QUARTER AND FULL YEAR 2007

(UNAUDITED)


THE PNC FINANCIAL SERVICES GROUP, INC.

FINANCIAL SUPPLEMENT

FOURTH QUARTER AND FULL YEAR 2007

(UNAUDITED)

 

     Page

Consolidated Income Statement

   2

Adjusted Condensed Consolidated Income Statement

   3

Consolidated Balance Sheet

   4

Capital Ratios

   4

Results of Businesses

  

Summary of Business Segment Results

   5

Period-end Employees

   5

Retail Banking

   6-8

Corporate & Institutional Banking

   9

PFPC

   10

Efficiency Ratio

   11

Details of Net Interest Income, Net Interest Margin, and Trading Revenue

   12

Average Consolidated Balance Sheet and Supplemental Average Balance Sheet Information

   13-14

Details of Loans

   15

Allowances for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit, and Net Unfunded Commitments

   16

Details of Nonperforming Assets

   17-18

Glossary of Terms

   19-21

Business Segment Products and Services

   22

Appendix - Adjusted Condensed Consolidated Income Statement Reconciliations

   A1-A5

The information contained in this Financial Supplement is preliminary, unaudited and based on data available on January 17, 2008. We have reclassified certain prior period amounts included in this Financial Supplement to be consistent with the current period presentation. This information speaks only as of the particular date or dates included in the schedules. We do not undertake any obligation to, and disclaim any duty to, correct or update any of the information provided in this Financial Supplement. Our future financial performance is subject to risks and uncertainties as described in our United States Securities and Exchange Commission (“SEC”) filings.

Additional Information About The PNC/Sterling Financial Corporation Transaction

The PNC Financial Services Group, Inc. and Sterling Financial Corporation will be filing a proxy statement/prospectus and other relevant documents concerning the merger with the United States Securities and Exchange Commission (the “SEC”). WE URGE INVESTORS TO READ THE PROXY STATEMENT/PROSPECTUS AND ANY OTHER DOCUMENTS TO BE FILED WITH THE SEC IN CONNECTION WITH THE MERGER OR INCORPORATED BY REFERENCE IN THE PROXY STATEMENT/PROSPECTUS BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.

Investors will be able to obtain these documents free of charge at the SEC’s web site at http://www.sec.gov. In addition, documents filed with the SEC by The PNC Financial Services Group, Inc. will be available free of charge from Shareholder Relations at (800) 843-2206. Documents filed with the SEC by Sterling Financial Corporation will be available free of charge from Sterling Financial Corporation by contacting Shareholder Relations at (877) 248-6420.

The directors, executive officers, and certain other members of management and employees of Sterling Financial Corporation are participants in the solicitation of proxies in favor of the merger from the shareholders of Sterling Financial Corporation. Information about the directors and executive officers of Sterling Financial Corporation is included in the proxy statement for its May 8, 2007 annual meeting of shareholders, which was filed with the SEC on April 2, 2007. Additional information regarding the interests of such participants will be included in the proxy statement/prospectus and the other relevant documents filed with the SEC when they become available.


THE PNC FINANCIAL SERVICES GROUP, INC.

Yardville National Bancorp Acquisition

We completed our acquisition of Yardville National Bancorp (“Yardville”) on October 26, 2007 and our financial results include Yardville from that date. PNC issued approximately 3.4 million shares of PNC common stock and paid approximately $156 million in cash as consideration for the acquisition, and accounted for the transaction under the purchase method.

Mercantile Acquisition

We completed our acquisition of Mercantile Bankshares Corporation (“Mercantile”) on March 2, 2007 and our financial results include Mercantile from that date. PNC issued approximately 53 million shares of PNC common stock and paid approximately $2.1 billion in cash as consideration for the acquisition, and accounted for the transaction under the purchase method. PNC converted the Mercantile banks’ data onto PNC’s financial and operational systems during September 2007.

BlackRock/MLIM Transaction

As further described in our Annual Report on Form 10-K for the year ended December 31, 2006, on September 29, 2006, Merrill Lynch contributed its investment management business (“MLIM”) to BlackRock, Inc. (“BlackRock”), formerly a majority-owned subsidiary of PNC, in exchange for 65 million shares of newly issued BlackRock common and preferred stock.

Our Consolidated Income Statement for the year ended December 31, 2006 reflects our former majority ownership interest in BlackRock for the first nine months of that year and our investment in BlackRock accounted for under the equity method for the fourth quarter of that year. Our Consolidated Income Statement for all other periods presented and our Consolidated Balance Sheet as of all dates included in this Financial Supplement reflect the September 29, 2006 deconsolidation of BlackRock’s balance sheet amounts and recognize our approximate 34% ownership interest in BlackRock for those periods and as of those dates as an investment accounted for under the equity method.

We have also provided, for information purposes only, adjusted results in this Financial Supplement to reflect BlackRock as if it had also been accounted for under the equity method for the full year 2006.

 

Page 1


THE PNC FINANCIAL SERVICES GROUP, INC.

Consolidated Income Statement (Unaudited)

 

     Year ended     Three months ended  

In millions, except per share data

   December 31
2007
    December 31
2006
    December 31
2007
    September 30
2007
    June 30
2007
    March 31
2007
    December 31
2006
 

Interest Income

              

Loans

   $ 4,232     $ 3,203     $ 1,123     $ 1,129     $ 1,084     $ 896     $ 821  

Securities available for sale

     1,429       1,049       398       366       355       310       280  

Other

     505       360       149       132       115       109       116  
                                                        

Total interest income

     6,166       4,612       1,670       1,627       1,554       1,315       1,217  
                                                        

Interest Expense

              

Deposits

     2,053       1,590       522       531       532       468       450  

Borrowed funds

     1,198       777       355       335       284       224       201  
                                                        

Total interest expense

     3,251       2,367       877       866       816       692       651  
                                                        

Net interest income

     2,915       2,245       793       761       738       623       566  

Provision for credit losses

     315       124       188       65       54       8       42  
                                                        

Net interest income less provision for credit losses

     2,600       2,121       605       696       684       615       524  
                                                        

Noninterest Income

              

Asset management

     784       1,420       225       204       190       165       149  

Fund servicing

     835       893       215       208       209       203       249  

Service charges on deposits

     348       313       90       89       92       77       79  

Brokerage

     278       246       69       71       72       66       63  

Consumer services

     414       365       110       106       107       91       93  

Corporate services

     713       626       180       198       176       159       177  

Equity management gains

     102       107       21       47       2       32       25  

Net securities gains (losses)

     (5 )     (207 )     (1 )     (2 )     1       (3 )  

Trading

     104       183       (10 )     33       29       52       33  

Net gains (losses) related to BlackRock

     (127 )     2,066       (128 )     (50 )     (1 )     52       (12 )

Other

     344       315       63       86       98       97       113  
                                                        

Total noninterest income

     3,790       6,327       834       990       975       991       969  
                                                        

Noninterest Expense

              

Compensation

     1,850       2,128       482       480       470       418       442  

Employee benefits

     290       304       71       73       74       72       55  

Net occupancy

     350       310       95       87       81       87       69  

Equipment

     311       303       84       77       79       71       69  

Marketing

     115       104       29       36       29       21       23  

Other

     1,380       1,294       452       346       307       275       311  
                                                        

Total noninterest expense

     4,296       4,443       1,213       1,099       1,040       944       969  
                                                        

Income before minority interest and income taxes

     2,094       4,005       226       587       619       662       524  

Minority interest in income of BlackRock

       47            

Income taxes

     627       1,363       48       180       196       203       148  
                                                        

Net income

   $ 1,467     $ 2,595     $ 178     $ 407     $ 423     $ 459     $ 376  
                                                        

Earnings Per Common Share

              

Basic

   $ 4.43     $ 8.89     $ .53     $ 1.21     $ 1.24     $ 1.49     $ 1.29  

Diluted

   $ 4.35     $ 8.73     $ .52     $ 1.19     $ 1.22     $ 1.46     $ 1.27  
                                                        

Average Common Shares Outstanding

              

Basic

     331       292       338       337       342       308       291  

Diluted

     335       297       341       340       346       312       295  
                                                        

Efficiency

     64 %     52 %     75 %     63 %     61 %     58 %     63 %

Noninterest income to total revenue

     57 %     74 %     51 %     57 %     57 %     61 %     63 %

Effective tax rate (a)

     29.9 %     34.0 %     21.2 %     30.7 %     31.7 %     30.7 %     28.2 %
                                                        

 

(a) The effective tax rates are presented on a GAAP basis. The lower effective tax rate for the fourth quarter of 2007 was primarily due to lower pretax income in relation to tax credits and earnings that are not subject to tax. The higher effective tax rate for full year 2006 was primarily due to the third quarter 2006 gain on the BlackRock/MLIM transaction and a related $57 million cumulative adjustment to deferred taxes recorded in that quarter. The lower effective tax rate in the fourth quarter of 2006 was primarily due to a reduction in tax reserves for interest.

 

Page 2


THE PNC FINANCIAL SERVICES GROUP, INC.

Adjusted Condensed Consolidated Income Statement (Unaudited) (a)

 

For the year ended - in millions

   December 31
2007
   December 31
2006

Net Interest Income

     

Net interest income

   $ 2,915    $ 2,235

Provision for credit losses

     270      124
             

Net interest income less provision for credit losses

     2,645      2,111
             

Noninterest Income

     

Asset management

     788      538

Other

     3,133      3,034
             

Total noninterest income

     3,921      3,572
             

Noninterest Expense

     

Compensation and benefits

     2,103      1,865

Other

     2,009      1,722
             

Total noninterest expense

     4,112      3,587
             

Income before income taxes

     2,454      2,096

Income taxes

     752      582
             

Net income

   $ 1,702    $ 1,514
             

 

For the three months ended - in millions

   December 31
2007
   September 30
2007
   June 30
2007
   March 31
2007
   December 31
2006

Net Interest Income

              

Net interest income

   $ 793    $ 761    $ 738    $ 623    $ 566

Provision for credit losses

     143      65      54      8      42
                                  

Net interest income less provision for credit losses

     650      696      684      615      524
                                  

Noninterest Income

              

Asset management

     224      206      191      167      159

Other

     737      836      786      774      832
                                  

Total noninterest income

     961      1,042      977      941      991
                                  

Noninterest Expense

              

Compensation and benefits

     543      537      535      488      497

Other

     553      521      490      445      472
                                  

Total noninterest expense

     1,096      1,058      1,025      933      969
                                  

Income before income taxes

     515      680      636      623      546

Income taxes

     150      211      202      189      155
                                  

Net income

   $ 365    $ 469    $ 434    $ 434    $ 391
                                  

 

(a) This schedule is provided for informational purposes only and reflects historical condensed consolidated financial information of PNC: (1) with amounts adjusted for the impact of certain specified items; (2) as if we had recorded our investment in BlackRock on the equity method for all periods presented; and (3) adjusted in each case, as appropriate, for the tax impact. See the Appendix to this Financial Supplement for reconciliations of these amounts to the corresponding GAAP amounts for each of the periods presented. We have provided these adjusted amounts and reconciliations so that investors, analysts, regulators and others will be better able to evaluate the impact of these items on our results for these periods, in addition to providing a basis of comparability for the impact of the BlackRock deconsolidation given the magnitude of the impact of the deconsolidation on various components of our income statement. Adjusted information supplements our results as reported in accordance with GAAP and should not be viewed in isolation from, or as a substitute for, our GAAP results.

 

Page 3


THE PNC FINANCIAL SERVICES GROUP, INC.

Consolidated Balance Sheet (Unaudited)

 

In millions, except par value

   December 31
2007
    September 30
2007
    June 30
2007
    March 31
2007
    December 31
2006
 

Assets

          

Cash and due from banks

   $ 3,567     $ 3,318     $ 3,177     $ 3,234     $ 3,523  

Federal funds sold and resale agreements

     2,729       2,360       1,824       1,604       1,763  

Other short-term investments, including trading securities

     4,129       3,944       3,667       3,041       3,130  

Loans held for sale

     3,927       3,004       2,562       2,382       2,366  

Securities available for sale

     30,225       28,430       25,903       26,475       23,191  

Loans, net of unearned income of $990, $986, $1,004, $1,005, and $795

     68,319       65,760       64,714       62,925       50,105  

Allowance for loan and lease losses

     (830 )     (717 )     (703 )     (690 )     (560 )
                                        

Net loans

     67,489       65,043       64,011       62,235       49,545  

Goodwill

     8,405       7,836       7,745       7,739       3,402  

Other intangible assets

     1,146       1,099       913       929       641  

Equity investments

     6,045       5,975       5,584       5,408       5,330  

Other

     11,258       10,357       10,265       9,516       8,929  
                                        

Total assets

   $ 138,920     $ 131,366     $ 125,651     $ 122,563     $ 101,820  
                                        

Liabilities

          

Deposits

          

Noninterest-bearing

   $ 19,440     $ 18,570     $ 18,302     $ 18,191     $ 16,070  

Interest-bearing

     63,256       59,839       58,919       59,176       50,231  
                                        

Total deposits

     82,696       78,409       77,221       77,367       66,301  

Borrowed funds

          

Federal funds purchased

     7,037       6,658       7,212       5,638       2,711  

Repurchase agreements

     2,737       1,990       2,805       2,586       2,051  

Federal Home Loan Bank borrowings

     7,065       4,772       104       111       42  

Bank notes and senior debt

     6,821       7,794       7,537       4,551       3,633  

Subordinated debt

     4,506       3,976       4,226       4,628       3,962  

Other

     2,765       2,263       2,632       2,942       2,629  
                                        

Total borrowed funds

     30,931       27,453       24,516       20,456       15,028  

Allowance for unfunded loan commitments and letters of credit

     134       127       125       121       120  

Accrued expenses

     4,330       4,077       3,663       3,864       3,970  

Other

     4,321       5,095       4,252       4,649       4,728  
                                        

Total liabilities

     122,412       115,161       109,777       106,457       90,147  
                                        

Minority and noncontrolling interests in consolidated entities

     1,654       1,666       1,370       1,367       885  

Shareholders’ Equity

          

Preferred stock (a)

          

Common stock - $5 par value

          

Authorized 800 shares, issued 353 shares

     1,764       1,764       1,764       1,764       1,764  

Capital surplus

     2,618       2,631       2,606       2,520       1,651  

Retained earnings

     11,497       11,531       11,339       11,134       10,985  

Accumulated other comprehensive loss

     (147 )     (255 )     (439 )     (162 )     (235 )

Common stock held in treasury at cost: 12, 16, 11, 7, and 60 shares

     (878 )     (1,132 )     (766 )     (517 )     (3,377 )
                                        

Total shareholders’ equity

     14,854       14,539       14,504       14,739       10,788  
                                        

Total liabilities, minority and noncontrolling interests, and shareholders’ equity

   $ 138,920     $ 131,366     $ 125,651     $ 122,563     $ 101,820  
                                        

Capital Ratios

          

Tier 1 risk-based (b)

     6.8 %     7.5 %     8.3 %     8.6 %     10.4 %

Total risk-based (b)

     10.3       10.9       11.8       12.2       13.5  

Leverage (b)

     6.2       6.8       7.3       8.7       9.3  

Tangible common equity

     4.7       5.2       5.5       5.8       7.4  

Common shareholders’ equity to assets

     10.7       11.1       11.5       12.0       10.6  
                                        

 

(a) Less than $.5 million at each date.
(b) The ratios as of December 31, 2007 are estimated.

 

Page 4


THE PNC FINANCIAL SERVICES GROUP, INC.

Summary of Business Segment Results (Unaudited)

 

     Year ended    Three months ended

In millions (a) (b)

  

December 31

2007

  

December 31

2006

  

December 31

2007

   

September 30

2007

  

June 30

2007

  

March 31

2007

  

December 31

2006

Earnings

                   

Retail Banking

   $ 893    $ 765    $ 215     $ 250    $ 227    $ 201    $ 184

Corporate & Institutional Banking

     432      454      91       87      122      132      126

PFPC

     128      124      32       33      32      31      31

Other, including BlackRock (b)

     14      1,252      (160 )     37      42      95      35
                                                 

Total consolidated net income

   $ 1,467    $ 2,595    $ 178     $ 407    $ 423    $ 459    $ 376
                                                 

Revenue (c)

                   

Retail Banking

   $ 3,801    $ 3,125    $ 999     $ 985    $ 978    $ 839    $ 799

Corporate & Institutional Banking

     1,538      1,455      399       388      381      370      390

PFPC (d)

     831      762      214       209      208      200      194

Other, including BlackRock (b)

     562      3,255      22       175      154      211      157
                                                 

Total consolidated revenue

   $ 6,732    $ 8,597    $ 1,634     $ 1,757    $ 1,721    $ 1,620    $ 1,540
                                                 

 

(a) Our business information is presented based on our management accounting practices and our management structure. We refine our methodologies from time to time as our management accounting practices are enhanced and our businesses and management structure change.
(b) We consider BlackRock to be a separate reportable business segment but have combined its results with Other for this presentation. Our Annual Report on Form 10-K for the year ended December 31, 2007 will provide additional business segment disclosures for BlackRock. Generally, PNC’s business segment earnings from BlackRock can be estimated by multiplying our approximately 33.5% ownership interest by BlackRock’s reported GAAP earnings, less the additional income taxes recorded by PNC on those earnings. The effective tax rate on those earnings is typically different than PNC’s consolidated effective tax rate due to the tax treatment of dividends received, if any, from BlackRock. PNC’s effective tax rate on its earnings from BlackRock for the fourth quarter of 2007 and full year 2007 was approximately 25%.
(c) Business revenue is presented on a taxable-equivalent basis. 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 a taxable investment. To provide more meaningful comparisons of yields and margins for all earning assets, we also provide revenue on a taxable-equivalent basis 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. The following is a reconciliation of total consolidated revenue on a book (GAAP) basis to total consolidated revenue on a taxable-equivalent basis (in millions):

 

     Year ended    Three months ended
     December 31
2007
   December 31
2006
   December 31
2007
   September 30
2007
   June 30
2007
   March 31
2007
   December 31
2006

Total consolidated revenue, book (GAAP) basis

   $ 6,705    $ 8,572    $ 1,627    $ 1,751    $ 1,713    $ 1,614    $ 1,535

Taxable-equivalent adjustment

     27      25      7      6      8      6      5
                                                

Total consolidated revenue, taxable-equivalent basis

   $ 6,732    $ 8,597    $ 1,634    $ 1,757    $ 1,721    $ 1,620    $ 1,540
                                                

 

(d) PFPC revenue represents the sum of servicing revenue and nonoperating income (expense) less debt financing costs. Prior period servicing revenue amounts have been reclassified to conform with the current period presentation.

 

     December 31
2007
   September 30
2007
   June 30
2007
   March 31
2007
   December 31
2006

Period-end Employees

              

Full-time employees:

              

Retail Banking

   12,036    11,753    11,804    11,838    9,549

Corporate & Institutional Banking

   2,290    2,267    2,084    2,038    1,936

PFPC

   4,784    4,504    4,522    4,400    4,381

Other

              

Operations & Technology

   4,379    4,243    4,501    4,493    3,909

Staff Services

   1,991    2,044    2,115    2,059    1,680
                        

Total Other

   6,370    6,287    6,616    6,552    5,589
                        

Total full-time employees

   25,480    24,811    25,026    24,828    21,455

Total part-time employees

   2,840    2,823    3,028    2,867    2,328
                        

Total employees

   28,320    27,634    28,054    27,695    23,783
                        

The period-end employee statistics disclosed for each business reflect staff directly employed by the respective business and exclude operations, technology and staff services employees. Yardville employees are included in the Retail Banking, Corporate & Institutional Banking, and Other businesses at December 31, 2007. Mercantile employees are included in the Retail Banking, Corporate & Institutional Banking, and Other businesses at December 31, 2007, September 30, 2007, June 30, 2007 and March 31, 2007. PFPC employee statistics are provided on a legal entity basis.

 

Page 5


THE PNC FINANCIAL SERVICES GROUP, INC.

Retail Banking (Unaudited)

 

     Year ended     Three months ended  

Taxable-equivalent basis (a)

Dollars in millions

   December 31
2007
    December 31
2006
    December 31
2007
    September 30
2007
    June 30
2007
    March 31
2007
    December 31
2006
 

INCOME STATEMENT

              

Net interest income

   $ 2,065     $ 1,678     $ 543     $ 535     $ 535     $ 452     $ 419  

Noninterest income

     1,736       1,447       456       450       443       387       380  
                                                        

Total revenue

     3,801       3,125       999       985       978       839       799  

Provision for credit losses

     138       81       70       8       37       23       35  

Noninterest expense

     2,239       1,827       587       577       579       496       471  
                                                        

Pretax earnings

     1,424       1,217       342       400       362       320       293  

Income taxes

     531       452       127       150       135       119       109  
                                                        

Earnings

   $ 893     $ 765     $ 215     $ 250     $ 227     $ 201     $ 184  
                                                        

AVERAGE BALANCE SHEET

              

Loans

              

Consumer

              

Home equity

   $ 14,209     $ 13,813     $ 14,417     $ 14,296     $ 14,237     $ 13,881     $ 13,807  

Indirect

     1,897       1,052       2,031       2,033       2,036       1,480       1,133  

Other consumer

     1,597       1,248       1,688       1,610       1,596       1,490       1,322  
                                                        

Total consumer

     17,703       16,113       18,136       17,939       17,869       16,851       16,262  

Commercial

     12,534       5,721       14,020       13,799       13,678       8,201       5,907  

Floor plan

     978       910       983       939       1,037       952       853  

Residential mortgage

     1,992       1,440       2,500       2,050       2,038       1,781       1,031  

Other

     230       242       225       230       235       233       234  
                                                        

Total loans

     33,437       24,426       35,864       34,957       34,857       28,018       24,287  

Goodwill and other intangible assets

     5,061       1,581       5,792       5,703       5,737       2,942       1,574  

Loans held for sale

     1,564       1,607       1,572       1,567       1,554       1,562       1,505  

Other assets

     2,362       1,634       2,487       2,848       2,626       1,927       1,671  
                                                        

Total assets

   $ 42,424     $ 29,248     $ 45,715     $ 45,075     $ 44,774     $ 34,449     $ 29,037  
                                                        

Deposits

              

Noninterest-bearing demand

   $ 10,513     $ 7,841     $ 10,967     $ 11,191     $ 11,065     $ 8,871     $ 7,834  

Interest-bearing demand

     8,876       7,906       9,173       8,869       9,097       8,354       7,865  

Money market

     16,786       14,750       17,328       17,020       17,100       15,669       14,822  
                                                        

Total transaction deposits

     36,175       30,497       37,468       37,080       37,262       32,894       30,521  

Savings

     2,678       2,035       2,651       2,831       2,981       2,243       1,877  

Certificates of deposit

     16,637       13,861       16,768       16,502       17,531       15,738       14,694  
                                                        

Total deposits

     55,490       46,393       56,887       56,413       57,774       50,875       47,092  

Other liabilities

     621       553       577       540       679       708       598  

Capital

     3,558       2,986       3,626       3,595       3,724       3,287       3,034  
                                                        

Total funds

   $ 59,669     $ 49,932     $ 61,090     $ 60,548     $ 62,177     $ 54,870     $ 50,724  
                                                        

PERFORMANCE RATIOS

              

Return on average capital

     25 %     26 %     24 %     28 %     24 %     25 %     24 %

Noninterest income to total revenue

     46       46       46       46       45       46       48  

Efficiency

     59       58       59       59       59       59       59  
                                                        

 

(a) See notes (a) and (c) on page 5.

 

Page 6


THE PNC FINANCIAL SERVICES GROUP, INC.

Retail Banking (Unaudited) (Continued)

 

     Year ended     Three months ended  

Dollars in millions except as noted

   December 31
2007
    December 31
2006
    December 31
2007
    September 30
2007
    June 30
2007
    March 31
2007
    December 31
2006
 

OTHER INFORMATION (a) (b)

              

Credit-related statistics:

              

Nonperforming assets

       $ 225     $ 137     $ 140     $ 123     $ 106  

Net charge-offs

   $ 131     $ 85     $ 45     $ 34     $ 25     $ 27     $ 21  

Annualized net charge-off ratio

     .39 %     .35 %     .50 %     .39 %     .29 %     .39 %     .34 %
                                                        

Other statistics:

              

Full-time employees

         12,036       11,753       11,804       11,838       9,549  

Part-time employees

         2,309       2,248       2,360       2,224       1,829  

ATMs

         3,900       3,870       3,917       3,862       3,581  

Branches (c)

         1,109       1,072       1,084       1,077       852  

Gains on sales of education loans (d)

   $ 24     $ 33     $ 4     $ 12     $ 5     $ 3     $ 11  
                                                        

ASSETS UNDER ADMINISTRATION (in billions) (e)

              

Assets under management

              

Personal

       $ 53     $ 57     $ 55     $ 54     $ 44  

Institutional

         20       20       22       22       10  
                                            

Total

       $ 73     $ 77     $ 77     $ 76     $ 54  
                                            

Asset Type

              

Equity

       $ 42     $ 44     $ 43     $ 41     $ 34  

Fixed income

         18       20       20       20       12  

Liquidity/Other

         13       13       14       15       8  
                                            

Total

       $ 73     $ 77     $ 77     $ 76     $ 54  
                                            

Nondiscretionary assets under administration

              

Personal

       $ 30     $ 31     $ 30     $ 31     $ 25  

Institutional

         83       81       81       80       61  
                                            

Total

       $ 113     $ 112     $ 111     $ 111     $ 86  
                                            

Asset Type

              

Equity

       $ 49     $ 50     $ 47     $ 42     $ 33  

Fixed income

         28       27       28       28       24  

Liquidity/Other

         36       35       36       41       29  
                                            

Total

       $ 113     $ 112     $ 111     $ 111     $ 86  
                                            

 

(a) Presented as of period-end, except for net charge-offs, annualized net charge-off ratio and gains on sales of education loans.
(b) Amounts subsequent to March 2, 2007 include the impact of Mercantile. Amounts subsequent to October 26, 2007 include the impact of Yardville.
(c) Excludes certain satellite branches that provide limited products and service hours.
(d) Included in “Noninterest income” on page 6.
(e) Excludes brokerage account assets.

 

Page 7


THE PNC FINANCIAL SERVICES GROUP, INC.

Retail Banking (Unaudited) (Continued)

 

Dollars in millions except as noted

   December 31
2007 (b)
    September 30
2007
   

June 30

2007 (b)

    March 31
2007 (b)
    December 31
2006
 

OTHER INFORMATION (a) (b)

          

Home equity portfolio credit statistics:

          

% of first lien positions (c)

     39 %     39 %     42 %     43 %     43 %

Weighted average loan-to-value ratios (c)

     73 %     72 %     70 %     70 %     70 %

Weighted average FICO scores (d)

     727       726       727       726       728  

Loans 90 days past due

     .37 %     .30 %     .26 %     .25 %     .24 %
                                        

Checking-related statistics:

          

Retail Banking checking relationships

     2,272,000       2,275,000       1,967,000       1,962,000       1,954,000  

Consumer DDA households using online banking

     1,091,000       1,050,000       975,000       960,000       938,000  

% of consumer DDA households using online banking

     54 %     52 %     55 %     54 %     53 %

Consumer DDA households using online bill payment

     667,000       604,000       505,000       450,000       404,000  

% of consumer DDA households using online bill payment

     33 %     30 %     29 %     25 %     23 %
                                        

Small business loans and managed deposits:

          

Small business loans

   $ 13,049     $ 13,157     $ 5,410     $ 5,284     $ 5,116  

Managed deposits:

          

On-balance sheet

          

Noninterest-bearing demand

   $ 5,994     $ 6,119     $ 4,250     $ 4,284     $ 4,383  

Interest-bearing demand

     1,873       2,027       1,505       1,517       1,649  

Money market

     3,152       3,389       2,595       2,635       2,592  

Certificates of deposit

     1,068       1,070       584       681       802  

Off-balance sheet (e)

          

Small business sweep checking

     2,780       2,823       1,933       1,827       1,733  
                                        

Total managed deposits

   $ 14,867     $ 15,428     $ 10,867     $ 10,944     $ 11,159  
                                        

Brokerage statistics:

          

Margin loans

   $ 151     $ 161     $ 162     $ 166     $ 163  

Financial consultants (f)

     769       765       767       757       758  

Full service brokerage offices

     100       100       99       99       99  

Brokerage account assets (billions)

   $ 48     $ 49     $ 47     $ 46     $ 46  
                                        

 

(a) Presented as of period-end.
(b) This information excludes the impact of acquisitions between PNC’s acquisition date and the date of conversion of the acquired companies’ data onto PNC’s financial and operational systems because such information was not available prior to the conversion date. Therefore, information presented above as of June 30, 2007 and March 31, 2007 excludes the impact of Mercantile, which PNC acquired effective March 2, 2007 and converted during September 2007. Similarly, information presented above as of December 31, 2007 (except “Brokerage statistics”) excludes the impact of Yardville, which PNC acquired effective October 26, 2007 and expects to convert during March 2008.
(c) Includes loans from acquired portfolios for which lien position and loan-to-value information was limited.
(d) Represents the most recent FICO scores we have on file.
(e) 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.
(f) Financial consultants provide services in full service brokerage offices and PNC traditional branches.

 

Page 8


THE PNC FINANCIAL SERVICES GROUP, INC.

Corporate & Institutional Banking (Unaudited)

 

     Year ended     Three months ended  

Taxable-equivalent basis (a)

Dollars in millions except as noted

   December 31
2007
    December 31
2006
    December 31
2007
    September 30
2007
   

June 30

2007

    March 31
2007
    December 31
2006
 

INCOME STATEMENT

              

Net interest income

   $ 818     $ 703     $ 237     $ 204     $ 194     $ 183     $ 186  

Noninterest income

              

Corporate service fees

     564       526       137       161       139       127       149  

Other (b)

     156       226       25       23       48       60       55  
                                                        

Noninterest income

     720       752       162       184       187       187       204  
                                                        

Total revenue

     1,538       1,455       399       388       381       370       390  

Provision for (recoveries of) credit losses

     125       42       69       55       17       (16 )     6  

Noninterest expense

     818       746       222       211       192       193       199  
                                                        

Pretax earnings

     595       667       108       122       172       193       185  

Income taxes

     163       213       17       35       50       61       59  
                                                        

Earnings

   $ 432     $ 454     $ 91     $ 87     $ 122     $ 132     $ 126  
                                                        

AVERAGE BALANCE SHEET

              

Loans

              

Corporate (c)

   $ 9,519     $ 8,633     $ 10,254     $ 9,625     $ 9,274     $ 8,909     $ 8,885  

Commercial real estate

     3,590       2,876       3,956       3,576       3,555       3,253       3,143  

Commercial - real estate related

     3,580       2,433       4,065       3,746       3,736       2,733       2,189  

Asset-based lending

     4,634       4,467       4,795       4,647       4,562       4,513       4,594  
                                                        

Total loans (c)

     21,323       18,409       23,070       21,594       21,127       19,408       18,811  

Goodwill and other intangible assets

     1,919       1,352       2,232       2,085       1,837       1,544       1,399  

Loans held for sale

     1,319       893       1,781       1,207       982       1,302       965  

Other assets

     4,491       4,168       4,641       4,544       4,531       4,244       4,550  
                                                        

Total assets

   $ 29,052     $ 24,822     $ 31,724     $ 29,430     $ 28,477     $ 26,498     $ 25,725  
                                                        

Deposits

              

Noninterest-bearing demand

   $ 7,301     $ 6,771     $ 7,851     $ 7,238     $ 6,953     $ 7,083     $ 7,210  

Money market

     4,784       2,654       4,995       4,960       4,653       4,530       3,644  

Other

     1,325       907       1,818       1,436       1,113       926       921  
                                                        

Total deposits

     13,410       10,332       14,664       13,634       12,719       12,539       11,775  

Other liabilities

     3,347       2,863       4,452       3,109       2,960       2,850       3,093  

Capital

     2,152       1,838       2,357       2,132       2,050       2,064       1,935  
                                                        

Total funds

   $ 18,909     $ 15,033     $ 21,473     $ 18,875     $ 17,729     $ 17,453     $ 16,803  
                                                        

PERFORMANCE RATIOS

              

Return on average capital

     20 %     25 %     15 %     16 %     24 %     26 %     26 %

Noninterest income to total revenue

     47       52       41       47       49       51       52  

Efficiency

     53       51       56       54       50       52       51  
                                                        

COMMERCIAL MORTGAGE

              

SERVICING PORTFOLIO (in billions)

              

Beginning of period

   $ 200     $ 136     $ 244     $ 222     $ 206     $ 200     $ 180  

Acquisitions/additions

     88       102       8       36       28       16       33  

Repayments/transfers

     (45 )     (38 )     (9 )     (14 )     (12 )     (10 )     (13 )
                                                        

End of period (d)

   $ 243     $ 200     $ 243     $ 244     $ 222     $ 206     $ 200  
                                                        

OTHER INFORMATION

              

Consolidated revenue from: (e)

              

Treasury Management

   $ 476     $ 418     $ 131     $ 121     $ 114     $ 110     $ 107  

Capital Markets

   $ 290     $ 283     $ 74     $ 73     $ 76     $ 67     $ 79  

Midland Loan Services

   $ 220     $ 184     $ 51     $ 59     $ 56     $ 54     $ 53  

Total loans (f)

       $ 23,861     $ 22,455     $ 21,662     $ 21,193     $ 18,957  

Nonperforming assets (f)

       $ 243     $ 141     $ 100     $ 77     $ 63  

Net charge-offs

   $ 70     $ 54     $ 39     $ 15     $ 7     $ 9     $ 24  

Full-time employees (f)

         2,290       2,267       2,084       2,038       1,936  

Net gains on commercial mortgage loan sales (d)

   $ 39     $ 55     $ 10     $ 5     $ 9     $ 15     $ 18  

Valuation adjustment on commercial mortgage loans held for sale

   $ (26 )     $ (26 )        

Net carrying amount of commercial mortgage servicing rights (d) (f)

       $ 694     $ 708     $ 493     $ 487     $ 471  
                                            

 

(a) See notes (a) and (c) on page 5.
(b) Amounts for fourth quarter and full year 2007 include a $26 million of negative valuation adjustment on our commercial mortgage loans held for sale.
(c) Includes lease financing.
(d) Amounts at December 31, 2007 and September 30, 2007 include the impact of the July 2, 2007 acquisition of ARCS Commercial Mortgage.
(e) Represents consolidated PNC amounts.
(f) Presented as of period end.

 

Page 9


THE PNC FINANCIAL SERVICES GROUP, INC.

PFPC (Unaudited) (a)

 

     Year ended     Three months ended  

Dollars in millions except as noted

   December 31
2007
    December 31
2006
    December 31
2007
    September 30
2007
    June 30
2007
    March 31
2007
    December 31
2006
 

INCOME STATEMENT

              

Servicing revenue (b)

   $ 863     $ 800     $ 223     $ 216     $ 216     $ 208     $ 203  

Operating expense (b)

     637       586       167       159       158       153       146  
                                                        

Operating income

     226       214       56       57       58       55       57  

Debt financing

     38       42       10       9       9       10       10  

Nonoperating income (c)

     6       4       1       2       1       2       1  
                                                        

Pretax earnings

     194       176       47       50       50       47       48  

Income taxes

     66       52       15       17       18       16       17  
                                                        

Earnings

   $ 128     $ 124     $ 32     $ 33     $ 32     $ 31     $ 31  
                                                        

PERIOD-END BALANCE SHEET

              

Goodwill and other intangible assets

       $ 1,315     $ 1,002     $ 1,005     $ 1,008     $ 1,012  

Other assets

         1,161       1,169       1,395       1,370       1,192  
                                            

Total assets

       $ 2,476     $ 2,171     $ 2,400     $ 2,378     $ 2,204  
                                            

Debt financing

       $ 989     $ 702     $ 734     $ 760     $ 792  

Other liabilities

         865       878       1,109       1,091       917  

Shareholder’s equity

         622       591       557       527       495  
                                            

Total funds

       $ 2,476     $ 2,171     $ 2,400     $ 2,378     $ 2,204  
                                            

PERFORMANCE RATIOS

              

Return on average equity

     23 %     29 %     21 %     23 %     24 %     25 %     26 %

Operating margin (d)

     26       27       25       26       27       26       28  
                                                        

SERVICING STATISTICS (at period end)

              

Accounting/administration net fund assets (in billions)(e)

              

Domestic

       $ 869     $ 806     $ 765     $ 731     $ 746  

Offshore

         121       116       103       91       91  
                                            

Total

       $ 990     $ 922     $ 868     $ 822     $ 837  
                                            

Asset type (in billions)(e)

              

Money market

       $ 373     $ 328     $ 286     $ 280     $ 281  

Equity

         390       377       373       352       354  

Fixed income

         123       117       118       111       117  

Other

         104       100       91       79       85  
                                            

Total

       $ 990     $ 922     $ 868     $ 822     $ 837  
                                            

Custody fund assets (in billions)

       $ 500     $ 497     $ 467     $ 435     $ 427  
                                            

Shareholder accounts (in millions)

              

Transfer agency

         19       19       20       18       18  

Subaccounting

         53       51       50       50       50  
                                            

Total

         72       70       70       68       68  
                                            

OTHER INFORMATION

              

Period-end full-time employees

         4,784       4,504       4,522       4,400       4,381  
                                            

 

(a) See note (a) on page 5.
(b) 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 net effect on operating income. Distribution revenue and expenses which relate to 12b-1 fees that PFPC receives from certain fund clients for the payment of marketing, sales and service expenses also entirely offset each other, but are netted for presentation purposes above. Amounts for 2006 periods have been reclassified to conform with the current period presentation.
(c) Net of nonoperating expense.
(d) Total operating income divided by servicing revenue.
(e) Includes alternative investment net assets serviced.

 

Page 10


THE PNC FINANCIAL SERVICES GROUP, INC.

Efficiency Ratio (Unaudited)

 

     Year ended     Three months ended  
     December 31
2007
    December 31
2006
    December 31
2007
    September 30
2007
    June 30
2007
    March 31
2007
    December 31
2006
 

Efficiency, as reported (a)

   64 %   52 %   75 %   63 %   61 %   58 %   63 %

Efficiency, as adjusted (b)

   60 %   62 %   62 %   59 %   60 %   60 %   62 %
                                          

 

(a) Calculated as noninterest expense divided by the sum of net interest income and noninterest income on the Consolidated Income Statement.
(b) Calculated as PNC’s efficiency ratio adjusted: (1) for the impact of certain specified items; (2) as if we had recorded our investment in BlackRock on the equity method for all periods presented; and (3) in each case, as appropriate, adjusted for the tax impact. We have provided these adjusted amounts and reconciliations so that shareholders, investor analysts, regulators and others will be better able to evaluate the impact of these items on our “as reported” efficiency ratio for these periods, in addition to providing a basis of comparability for the impact of the BlackRock deconsolidation. Amounts used for these adjusted ratios are reconciled to amounts used in the PNC efficiency ratio as reported (GAAP basis) below.

 

     Year ended     Three months ended  

Dollars in millions

   December 31
2007
    December 31
2006
    December 31
2007
    September 30
2007
    June 30
2007
    March 31
2007
    December 31
2006
 

Reconciliation of GAAP amounts with amounts used in the calculation of the adjusted efficiency ratio:

              

GAAP basis—net interest income

   $ 2,915     $ 2,245     $ 793     $ 761     $ 738     $ 623     $ 566  

Adjustment to net interest income: BlackRock equity method (c)

       (10 )          
                                                        

Adjusted net interest income

   $ 2,915     $ 2,235     $ 793     $ 761     $ 738     $ 623     $ 566  
                                                        

GAAP basis—noninterest income

   $ 3,790     $ 6,327     $ 834     $ 990     $ 975     $ 991     $ 969  

Adjustments (c) :

              

Gain on BlackRock/MLIM transaction

       (2,078 )          

Securities portfolio rebalancing loss

       196            

Mortgage loan portfolio repositioning loss

       48            

Integration costs

     4       10       (1 )     2       1       2       10  

BlackRock LTIP

     127       12       128       50       1       (52 )     12  

BlackRock equity method

       (943 )          
                                                        

Adjusted noninterest income

   $ 3,921     $ 3,572     $ 961     $ 1,042     $ 977     $ 941     $ 991  
                                                        

Adjusted total revenue

   $ 6,836     $ 5,807     $ 1,754     $ 1,803     $ 1,715     $ 1,564     $ 1,557  
                                                        

GAAP basis—noninterest expense

   $ 4,296     $ 4,443     $ 1,213     $ 1,099     $ 1,040     $ 944     $ 969  

Adjustments (c):

              

Integration costs

     (102 )     (91 )     (35 )     (41 )     (15 )     (11 )  

Visa indemnification

     (82 )       (82 )        

BlackRock equity method

       (765 )          
                                                        

Adjusted noninterest expense

   $ 4,112     $ 3,587     $ 1,096     $ 1,058     $ 1,025     $ 933     $ 969  
                                                        

Adjusted efficiency ratio

     60 %     62 %     62 %     59 %     60 %     60 %     62 %

 

(c) See the Appendix to this Financial Supplement.

 

Page 11


THE PNC FINANCIAL SERVICES GROUP, INC.

Details of Net Interest Income, Net Interest Margin, and Trading Revenue (Unaudited)

 

     Year ended     Three months ended  

In millions

   December 31
2007
    December 31
2006
    December 31
2007
    September 30
2007
    June 30
2007
    March 31
2007
    December 31
2006
 

Net Interest Income

              

Interest income, taxable equivalent basis

              

Loans

   $ 4,248     $ 3,216     $ 1,127     $ 1,134     $ 1,088     $ 899     $ 824  

Securities available for sale

     1,431       1,050       398       368       355       310       279  

Other

     514       371       152       131       119       112       119  
                                                        

Total interest income

     6,193       4,637       1,677       1,633       1,562       1,321       1,222  
                                                        

Interest expense

              

Deposits

     2,053       1,590       522       531       532       468       450  

Borrowed funds

     1,198       777       355       335       284       224       201  
                                                        

Total interest expense

     3,251       2,367       877       866       816       692       651  
                                                        

Net interest income, taxable-equivalent basis

     2,942       2,270       800       767       746       629       571  

Less: Taxable-equivalent adjustment

     27       25       7       6       8       6       5  
                                                        

Net interest income, GAAP basis

   $ 2,915     $ 2,245     $ 793     $ 761     $ 738     $ 623     $ 566  
                                                        
     Year ended     Three months ended  
     December 31
2007
    December 31
2006
    December 31
2007
    September 30
2007
    June 30
2007
    March 31
2007
    December 31
2006
 

Net Interest Margin

              

Average yields/rates

              

Yield on interest-earning assets

              

Loans

     6.80 %     6.49 %     6.62 %     6.89 %     6.81 %     6.68 %     6.63 %

Securities available for sale

     5.39       4.93       5.46       5.42       5.37       5.31       5.27  

Other

     5.70       5.45       5.51       5.56       5.94       5.83       5.56  

Total yield on interest-earning assets

     6.32       5.97       6.19       6.37       6.35       6.23       6.15  

Rate on interest-bearing liabilities

              

Deposits

     3.47       3.25       3.31       3.49       3.52       3.52       3.54  

Borrowed funds

     5.20       5.17       4.88       5.22       5.28       5.33       5.39  

Total rate on interest-bearing liabilities

     3.95       3.70       3.81       3.99       3.98       3.95       3.97  
                                                        

Interest rate spread

     2.37       2.27       2.38       2.38       2.37       2.28       2.18  

Impact of noninterest-bearing sources

     .63       .65       .58       .62       .66       .67       .70  
                                                        

Net interest margin

     3.00 %     2.92 %     2.96 %     3.00 %     3.03 %     2.95 %     2.88 %
                                                        
     Year ended     Three months ended  

In millions

   December 31
2007
    December 31
2006
    December 31
2007
    September 30
2007
    June 30
2007
    March 31
2007
    December 31
2006
 

Trading Revenue (a)

              

Net interest income (expense)

   $ 7     $ (6 )   $ 7     $ (1 )   $ 1       $ (2 )

Noninterest income

     104       183       (10 )     33       29     $ 52       33  
                                                        

Total trading revenue

   $ 111     $ 177     $ (3 )   $ 32     $ 30     $ 52     $ 31  
                                                        

Securities underwriting and trading (b)

   $ 41     $ 38     $ 10     $ 14     $ 8     $ 9     $ 11  

Foreign exchange

     58       55       16       15       13       14       13  

Financial derivatives

     12       84       (29 )     3       9       29       7  
                                                        

Total trading revenue

   $ 111     $ 177     $ (3 )   $ 32     $ 30     $ 52     $ 31  
                                                        
(a) See pages 13-14 for disclosure of average trading assets and liabilities.
(b) Includes changes in fair value for certain loans accounted for at fair value. See page 13 for disclosure of average loans at fair value.

 

Page 12


THE PNC FINANCIAL SERVICES GROUP, INC.

Average Consolidated Balance Sheet (Unaudited)

 

     Year ended     Three months ended  

In millions

   December 31
2007
    December 31
2006
    December 31
2007
    September 30
2007
    June 30
2007
    March 31
2007
    December 31
2006
 

Assets

              

Interest-earning assets:

              

Securities available for sale

              

Residential mortgage-backed

   $ 19,163     $ 14,881     $ 20,592     $ 19,541     $ 19,280     $ 17,198     $ 16,082  

Commercial mortgage-backed

     4,025       2,305       4,921       4,177       3,646       3,338       2,640  

Asset-backed

     2,394       1,312       2,704       2,454       2,531       1,876       1,561  

U.S. Treasury and government agencies

     293       2,334       155       281       344       394       441  

State and municipal

     227       148       306       233       203       162       140  

Other debt

     47       89       52       25       33       79       89  

Corporate stocks and other

     392       246       458       381       383       347       277  
                                                        

Total securities available for sale

     26,541       21,315       29,188       27,092       26,420       23,394       21,230  

Loans, net of unearned income

              

Commercial

     25,509       20,201       27,528       26,352       25,845       21,479       20,458  

Commercial real estate

     7,671       3,212       8,919       8,272       8,320       5,478       3,483  

Lease financing

     2,559       2,777       2,552       2,581       2,566       2,534       2,789  

Consumer

     17,718       16,125       18,150       17,954       17,886       16,865       16,272  

Residential mortgage

     8,564       6,888       9,605       9,325       8,527       7,173       5,606  

Other

     432       363       400       393       411       527       385  
                                                        

Total loans, net of unearned income

     62,453       49,566       67,154       64,877       63,555       54,056       48,993  

Loans held for sale

     2,955       2,683       3,408       2,842       2,611       2,955       3,167  

Federal funds sold and resale agreements

     2,152       1,143       2,516       2,163       1,832       2,092       2,049  

Other

     3,909       2,985       4,926       4,342       3,606       2,735       3,198  
                                                        

Total interest-earning assets

     98,010       77,692       107,192       101,316       98,024       85,232       78,637  

Noninterest-earning assets:

              

Allowance for loan and lease losses

     (690 )     (591 )     (749 )     (708 )     (692 )     (612 )     (557 )

Cash and due from banks

     3,018       3,121       3,089       3,047       2,991       2,945       2,999  

Other

     23,080       14,790       25,418       23,977       22,997       19,857       17,969  
                                                        

Total assets

   $ 123,418     $ 95,012     $ 134,950     $ 127,632     $ 123,320     $ 107,422     $ 99,048  
                                                        

Supplemental Average Balance Sheet Information (Unaudited)

              

Trading Assets

              

Securities (a)

   $ 2,708     $ 1,712     $ 3,486     $ 3,293     $ 2,144     $ 1,569     $ 2,111  

Resale agreements (b)

     1,133       623       1,320       1,267       1,247       820       1,247  

Financial derivatives (c)

     1,378       1,148       1,785       1,389       1,221       1,115       1,209  

Loans at fair value (c)

     166       128       148       164       161       193       172  
                                                        

Total trading assets

   $ 5,385     $ 3,611     $ 6,739     $ 6,113     $ 4,773     $ 3,697     $ 4,739  
                                                        

 

(a) Included in “Interest-earning assets-Other” above.
(b) Included in “Federal funds sold and resale agreements” above.
(c) Included in “Noninterest-earning assets-Other” above.

 

Page 13


THE PNC FINANCIAL SERVICES GROUP, INC.

Average Consolidated Balance Sheet (Unaudited) (Continued)

 

     Year ended    Three months ended

In millions

   December 31
2007
   December 31
2006
   December 31
2007
   September 30
2007
   June 30
2007
   March 31
2007
   December 31
2006

Liabilities, Minority and Noncontrolling Interests, and Shareholders’ Equity

                    

Interest-bearing liabilities:

                    

Interest-bearing deposits

                    

Money market

   $ 23,840    $ 19,745    $ 24,697    $ 24,151    $ 23,979    $ 22,503    $ 20,879

Demand

     9,259      8,187      9,587      9,275      9,494      8,671      8,143

Savings

     2,687      2,081      2,662      2,841      2,988      2,250      1,882

Retail certificates of deposit

     16,690      13,999      16,921      16,563      17,426      15,691      14,837

Other time

     2,119      1,364      1,948      2,748      2,297      1,623      1,355

Time deposits in foreign offices

     4,623      3,613      6,488      4,616      4,220      3,129      3,068
                                                

Total interest-bearing deposits

     59,218      48,989      62,303      60,194      60,404      53,867      50,164

Borrowed funds

                    

Federal funds purchased

     5,533      3,081      5,232      6,249      6,102      4,533      3,167

Repurchase agreements

     2,450      2,205      2,875      2,546      2,507      1,858      2,264

Federal Home Loan Bank borrowings

     2,168      623      6,339      2,097      106      64      44

Bank notes and senior debt

     6,282      3,128      7,676      7,537      5,681      4,182      2,757

Subordinated debt

     4,247      4,417      4,118      4,039      4,466      4,370      4,361

Other

     2,344      1,589      2,353      2,741      2,459      1,813      2,117
                                                

Total borrowed funds

     23,024      15,043      28,593      25,209      21,321      16,820      14,710
                                                

Total interest-bearing liabilities

     82,242      64,032      90,896      85,403      81,725      70,687      64,874

Noninterest-bearing liabilities, minority and noncontrolling interests, and shareholders’ equity:

                    

Demand and other noninterest-bearing deposits

     17,587      14,320      18,472      18,211      17,824      15,807      14,827

Allowance for unfunded loan commitments and letters of credit

     125      106      127      125      121      126      117

Accrued expenses and other liabilities

     8,195      6,672      9,035      8,117      7,655      7,961      7,882

Minority and noncontrolling interests in consolidated entities

     1,335      600      1,658      1,414      1,367      893      542

Shareholders’ equity

     13,934      9,282      14,762      14,362      14,628      11,948      10,806
                                                

Total liabilities, minority and noncontrolling interests, and shareholders’ equity

   $ 123,418    $ 95,012    $ 134,950    $ 127,632    $ 123,320    $ 107,422    $ 99,048
                                                

Supplemental Average Balance Sheet Information (Unaudited) (Continued)

                    

Deposits and Common Shareholders’ Equity

                    

Interest-bearing deposits

   $ 59,218    $ 48,989    $ 62,303    $ 60,194    $ 60,404    $ 53,867    $ 50,164

Demand and other noninterest-bearing deposits

     17,587      14,320      18,472      18,211      17,824      15,807      14,827
                                                

Total deposits

   $ 76,805    $ 63,309    $ 80,775    $ 78,405    $ 78,228    $ 69,674    $ 64,991

Transaction deposits

   $ 50,686    $ 42,252    $ 52,756    $ 51,637    $ 51,297    $ 46,981    $ 43,849

Common shareholders’ equity

   $ 13,927    $ 9,275    $ 14,755    $ 14,355    $ 14,621    $ 11,941    $ 10,799

Trading Liabilities

                    

Securities sold short (a)

   $ 1,657    $ 965    $ 1,748    $ 1,960    $ 1,431    $ 1,264    $ 1,553

Repurchase agreements and other borrowings (b)

     520      833      630      637      669      363      1,096

Financial derivatives (c)

     1,384      1,103      1,772      1,400      1,230      1,126      1,156

Borrowings at fair value (c)

     39      31      39      41      40      39      34
                                                

Total trading liabilities

   $ 3,600    $ 2,932    $ 4,189    $ 4,038    $ 3,370    $ 2,792    $ 3,839
                                                

 

(a) Included in “Borrowed funds-Other” above.
(b) Included in “Borrowed funds-Repurchase agreements” and “Borrowed funds-Other” above.
(c) Included in “Accrued expenses and other liabilities” above.

 

Page 14


THE PNC FINANCIAL SERVICES GROUP, INC.

Details of Loans (Unaudited)

 

Period ended - in millions

   December 31
2007
    September 30
2007
    June 30
2007
    March 31
2007
    December 31
2006
 

Commercial

          

Retail/wholesale

   $ 6,653     $ 6,181     $ 6,031     $ 6,075     $ 5,301  

Manufacturing

     4,563       4,472       4,439       4,490       4,189  

Other service providers

     3,014       3,292       3,212       3,113       2,186  

Real estate related (a)

     5,730       4,502       4,939       4,869       2,825  

Financial services

     1,226       1,861       1,545       1,560       1,324  

Health care

     1,260       1,075       1,097       1,028       707  

Other

     6,161       5,352       4,681       4,603       4,052  
                                        

Total commercial

     28,607       26,735       25,944       25,738       20,584  
                                        

Commercial real estate

          

Real estate projects

     6,114       5,807       5,767       5,756       2,716  

Mortgage

     2,792       2,507       2,564       2,597       816  
                                        

Total commercial real estate

     8,906       8,314       8,331       8,353       3,532  
                                        

Equipment lease financing

     3,500       3,539       3,587       3,527       3,556  
                                        

Total commercial lending

     41,013       38,588       37,862       37,618       27,672  
                                        

Consumer

          

Home equity

     14,447       14,366       14,268       14,263       13,749  

Automobile

     1,513       1,521       1,962       1,956       1,135  

Other

     2,366       2,270       1,804       1,769       1,631  
                                        

Total consumer

     18,326       18,157       18,034       17,988       16,515  
                                        

Residential mortgage

     9,557       9,605       9,440       7,960       6,337  

Other

     413       396       382       364       376  

Unearned income

     (990 )     (986 )     (1,004 )     (1,005 )     (795 )
                                        

Total, net of unearned income

   $ 68,319     $ 65,760     $ 64,714     $ 62,925     $ 50,105  
                                        

 

(a) Includes loans related to customers in the real estate, rental, leasing and construction industries.

 

Page 15


THE PNC FINANCIAL SERVICES GROUP, INC.

Allowances for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit, and Net Unfunded Commitments (Unaudited)

Change in Allowance for Loan and Lease Losses

 

Three months ended - in millions

   December 31
2007
    September 30
2007
    June 30
2007
    March 31
2007
    December 31
2006
 

Beginning balance

   $ 717     $ 703     $ 690     $ 560     $ 566  

Charge-offs

          

Commercial

     (60 )     (38 )     (27 )     (31 )     (23 )

Commercial real estate

     (12 )     (3 )     (1 )       (1 )

Equipment lease financing

             (14 )

Consumer

     (24 )     (17 )     (15 )     (17 )     (15 )

Residential mortgage

             (1 )
                                        

Total charge-offs

     (96 )     (58 )     (43 )     (48 )     (54 )

Recoveries

          

Commercial

     10       5       8       7       3  

Commercial real estate

         1         1  

Equipment lease financing

             1  

Consumer

     3       4       2       5       4  
                                        

Total recoveries

     13       9       11       12       9  

Net charge-offs

          

Commercial

     (50 )     (33 )     (19 )     (24 )     (20 )

Commercial real estate

     (12 )     (3 )      

Equipment lease financing

             (13 )

Consumer

     (21 )     (13 )     (13 )     (12 )     (11 )

Residential mortgage

             (1 )
                                        

Total net charge-offs

     (83 )     (49 )     (32 )     (36 )     (45 )

Provision for credit losses

     188       65       54       8       42  

Acquired allowance (a)

     15         (5 )     142    

Net change in allowance for unfunded loan commitments and letters of credit

     (7 )     (2 )     (4 )     16       (3 )
                                        

Ending balance

   $ 830     $ 717     $ 703     $ 690     $ 560  
                                        

(a)    Amount for the fourth quarter of 2007 related to Yardville and amounts for the first and second quarters of 2007 related to Mercantile.

       

Supplemental Information

          

Commercial lending net charge-offs (b)

   $ (62 )   $ (36 )   $ (19 )   $ (24 )   $ (33 )

Consumer lending net charge-offs (c)

     (21 )     (13 )     (13 )     (12 )     (12 )
                                        

Total net charge-offs

   $ (83 )   $ (49 )   $ (32 )   $ (36 )   $ (45 )

Net charge-offs to average loans

          

Commercial lending

     .63 %     .38 %     .21 %     .33 %     .49 %

Consumer lending

     .30       .19       .20       .20       .22  
                                        

 

(b) Includes commercial, commercial real estate and equipment lease financing.
(c) Includes consumer and residential mortgage.

Change in Allowance for Unfunded Loan Commitments and Letters of Credit

 

Three months ended - in millions

   December 31
2007
   September 30
2007
   June 30
2007
   March 31
2007
    December 31
2006

Beginning balance

   $ 127    $ 125    $ 121    $ 120     $ 117

Acquired allowance - Mercantile

              17    

Net change in allowance for unfunded loan commitments and letters of credit

     7      2      4      (16 )     3
                                   

Ending balance

   $ 134    $ 127    $ 125    $ 121     $ 120
                                   

In millions

   December 31
2007
   September 30
2007
   June 30
2007
   March 31
2007
    December 31
2006

Net Unfunded Commitments

             

Net unfunded commitments

   $ 53,365    $ 52,590    $ 50,678    $ 49,263     $ 44,835
                                   

 

Page 16


THE PNC FINANCIAL SERVICES GROUP, INC.

Details of Nonperforming Assets (Unaudited)

Nonperforming Assets by Type

 

Period ended - in millions

   December 31
2007
    September 30
2007
    June 30
2007
    March 31
2007
    December 31
2006
 

Nonaccrual loans

          

Commercial

   $ 193     $ 144     $ 126     $ 121     $ 109  

Commercial real estate

     212       75       62       25       12  

Consumer

     17       15       14       14       13  

Residential mortgage

     10       10       14       16       12  

Equipment lease financing

     3       3       2       2       1  
                                        

Total nonaccrual loans

     435       247       218       178       147  

Restructured loans

     2          
                                        

Total nonperforming loans

     437       247       218       178       147  

Foreclosed and other assets

          

Residential mortgage

     16       16       12       11       10  

Equipment lease financing

     11       12       12       12       12  

Other

     14       11       4       3       2  
                                        

Total foreclosed and other assets

     41       39       28       26       24  
                                        

Total nonperforming assets (a) (b)

   $ 478     $ 286     $ 246     $ 204     $ 171  
                                        

Nonperforming loans to total loans

     .64 %     .38 %     .34 %     .28 %     .29 %

Nonperforming assets to total loans and foreclosed assets

     .70       .43       .38       .32       .34  

Nonperforming assets to total assets

     .34       .22       .20       .17       .17  

Net charge-offs to average loans (For the three months ended)

     .49       .30       .20       .27       .36  

Allowance for loan and lease losses to loans

     1.21       1.09       1.09       1.10       1.12  

Allowance for loan and lease losses to nonperforming loans

     190       290       322       388       381  
                                        

(a)    Excludes equity management assets carried at estimated fair value (amounts include troubled debt restructured assets of $4 million at September 30, 2007, June 30, 2007, March 31, 2007 and December 31, 2006):

   $ 4     $ 12     $ 13     $ 15     $ 11  

(b)    Excludes loans held for sale carried at lower of cost or market value, related to the Mercantile and Yardville acquisitions:

   $ 25     $ 7     $ 17     $ 18    

Change in Nonperforming Assets

 

In millions

   Year ended  

January 1, 2007

   $ 171  

Transferred in

     649  

Acquired - Mercantile and Yardville

     37  

Asset sales

     (10 )

Returned to performing

     (23 )

Charge-offs and valuation adjustments

     (167 )

Principal activity including payoffs

     (179 )
        

December 31, 2007

   $ 478  
        

 

Page 17


THE PNC FINANCIAL SERVICES GROUP, INC.

Details of Nonperforming Assets (Unaudited) (Continued)

Nonperforming Assets by Business

 

Period ended - in millions

   December 31
2007
   September 30
2007
   June 30
2007
   March 31
2007
   December 31
2006

Retail Banking

              

Nonperforming loans

   $ 215    $ 127    $ 130    $ 114    $ 96

Foreclosed and other assets

     10      10      10      9      10
                                  

Total

   $ 225    $ 137    $ 140    $ 123    $ 106
                                  

Corporate & Institutional Banking

              

Nonperforming loans

   $ 222    $ 119    $ 87    $ 64    $ 50

Foreclosed and other assets

     21      22      13      13      13
                                  

Total

   $ 243    $ 141    $ 100    $ 77    $ 63
                                  

Other (a)

              

Nonperforming loans

      $ 1    $ 1       $ 1

Foreclosed and other assets

   $ 10      7      5    $ 4      1
                                  

Total

   $ 10    $ 8    $ 6    $ 4    $ 2
                                  

Consolidated Totals

              

Nonperforming loans

   $ 437    $ 247    $ 218    $ 178    $ 147

Foreclosed and other assets

     41      39      28      26      24
                                  

Total (b)

   $ 478    $ 286    $ 246    $ 204    $ 171
                                  

 

(a) Amounts include residential mortgages related to PNC’s Asset & Liability management function.

Largest Individual Nonperforming Assets at December 31, 2007 - in millions (b)

 

Ranking

   Outstandings    

Industry

1    $ 20    

Specialty Trade Contractors

2      14    

Credit Intermediation And Related Activities

3      13    

Heavy And Civil Engineering Construction

4      13    

Heavy And Civil Engineering Construction

5      13    

Construction Of Buildings

6      12    

Construction Of Buildings

7      12    

Specialty Trade Contractors

8      12    

Construction Of Buildings

9      11    

Air Transportation

10      10    

Heavy And Civil Engineering Construction

          
Total    $ 130    
          

As a percent of total nonperforming assets

     27 %  

 

(b) Amounts shown are not net of related allowance for loan and lease losses, if applicable.

 

Page 18


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 available-for-sale debt 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.

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 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.

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; other short-term investments, including trading securities; loans held for sale; loans, net of unearned income; 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.

 

Page 19


Glossary of Terms (continued)

Efficiency—Noninterest expense divided by the sum of net interest income (GAAP basis) and noninterest income.

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.

Leverage ratio—Tier 1 risk-based capital divided by adjusted average total assets.

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 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 percentage change in total revenue (GAAP basis) less the percentage change in noninterest expense. A positive percentage indicates that revenue growth exceeded expense growth (i.e., positive operating leverage) while a negative percentage implies expense growth exceeded revenue growth (i.e., negative operating leverage).

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 capital—Annualized net income divided by average capital.

Return on average assets—Annualized net income divided by average assets.

Return on average common equity—Annualized net income divided by average common shareholders’ equity.

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.

 

Page 20


Glossary of Terms (continued)

Tangible common equity ratio—Period-end common shareholders’ equity less goodwill and other intangible assets (net of eligible deferred taxes), and excluding loan servicing rights, divided by period-end assets less goodwill and other intangible assets (net of eligible deferred taxes), and excluding loan 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 also provide revenue on a taxable-equivalent basis 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), less equity investments in nonfinancial companies 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, 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.

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.

 

Page 21


Business Segment Products and Services

Retail Banking provides deposit, lending, brokerage, trust, investment management, and cash management services to approximately 2.9 million consumer and small business customers within our primary geographic markets. Our customers are serviced through over 1,100 offices in our branch network, the call center located in Pittsburgh, and the Internet – www.pncbank.com. The branch network is located primarily in Pennsylvania, New Jersey, Washington, D.C., Maryland, Virginia, Ohio, Kentucky and Delaware. Brokerage services are provided through PNC Investments, LLC, and J.J.B. Hilliard, W.L. Lyons, Inc. (“Hilliard Lyons”). On November 15, 2007, PNC entered into a definitive agreement to sell Hilliard Lyons to Houchens Industries, Inc. The transaction is expected to result in an after-tax gain of approximately $50 million and be completed in the first half of 2008 subject to regulatory and certain other required approvals.

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.

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, 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 provided nationally.

BlackRock is one of the world’s largest publicly traded investment management firms. The firm manages assets on behalf of institutions and individuals worldwide through a variety of equity, fixed income, cash management and alternative investment products. In addition, BlackRock provides BlackRock Solutions® investment system, risk management, and financial advisory services to a growing number of institutional investors. The firm has a major presence in key global markets, including the United States, Europe, Asia, Australia and the Middle East. At December 31, 2007, PNC’s ownership interest in BlackRock was approximately 33.5%.

PFPC is a leading full service provider of processing, technology and business solutions for the global investment industry. Securities services include custody, securities lending, and accounting and administration for funds registered under the 1940 Act and alternative investments. Investor services include transfer agency, managed accounts, subaccounting, and distribution.

On December 7, 2007, PFPC acquired Lawrenceville, New Jersey-based Albridge Solutions Inc., a provider of portfolio accounting and enterprise wealth management services. Also on December 7, 2007, PFPC acquired Coates Analytics, LP, a provider of Web-based analytics tools that help asset managers identify wholesaler territories and financial advisor targets, promote products in the marketplace and strengthen competitive intelligence.

PFPC serviced $2.5 trillion in total assets and 72 million shareholder accounts as of December 31, 2007 both domestically and internationally through its Ireland and Luxembourg operations.

 

Page 22


Appendix to Financial Supplement

The PNC Financial Services Group, Inc.

Adjusted Condensed Consolidated Income Statement Reconciliations (Unaudited) (a)

 

For the year ended December 31, 2007    PNC          PNC

In millions

   As Reported    Adjustments (b)     As Adjusted

Net Interest Income

       

Net interest income

   $ 2,915      $ 2,915

Provision for credit losses

     315    $ (45 )     270
                     

Net interest income less provision for credit losses

     2,600      45       2,645
                     

Noninterest Income

       

Asset management

     784      4       788

Other

     3,006      127       3,133
                     

Total noninterest income

     3,790      131       3,921
                     

Noninterest Expense

       

Compensation and benefits

     2,140      (37 )     2,103

Other

     2,156      (147 )     2,009
                     

Total noninterest expense

     4,296      (184 )     4,112
                     

Income before income taxes

     2,094      360       2,454

Income taxes

     627      125       752
                     

Net income

   $ 1,467    $ 235     $ 1,702
                     

 

(a) These adjusted condensed consolidated income statement reconciliations are provided for informational purposes only and reflect historical condensed consolidated financial information of PNC (1) with amounts adjusted for the impact of certain specified items and (2) as if we had recorded our investment in BlackRock on the equity method for all periods presented, in each case, as appropriate, adjusted for the tax impact. These reconciliations are from the reported GAAP amounts shown on page 2 of the Financial Supplement to the corresponding adjusted amounts shown on page 3 of the Financial Supplement. We have provided these adjusted amounts and reconciliations so that investors, analysts, regulators and others will be better able to evaluate the impact of these items on our results for these periods, in addition to providing a basis of comparability for the impact of the BlackRock deconsolidation given the magnitude of the impact of the deconsolidation on various components of our income statement. We believe that information as adjusted for the impact of the specified items may be useful due to the extent to which these items are not indicative of our ongoing operations as the result of our management activities. Integration costs can vary significantly from period to period depending on whether or not we have any such transaction pending or in process and depending on the nature of the transaction. Our BlackRock LTIP shares obligation results from an agreement entered into in 2002 and predominantly reflects the market price of BlackRock stock at specified times. We have provided information adjusted for the impact of the third quarter 2006 gain on the BlackRock/MLIM transaction due to the magnitude of that transaction, and have provided information adjusted for the impact of the third quarter 2006 securities portfolio rebalancing and mortgage loan portfolio repositioning losses due to the nature of those transactions.

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 in contemplation of its initial public offering (“IPO”) currently anticipated in the first quarter of 2008 (the “Visa Reorganization”). As part of the Visa Reorganization, we received our proportionate share of a class of Visa Inc. common stock allocated to the U.S. members. Visa expects that a portion of these shares will be redeemed for cash out of the proceeds of the IPO. The U.S. members are obligated to indemnify Visa for judgments and settlements related to specified litigation. Visa will set aside a portion of the proceeds from the IPO in an escrow account for the benefit of the U.S. 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. In accordance with GAAP, we recorded a liability and operating expense totaling $82 million before taxes in the fourth quarter of 2007 representing our estimate of the fair value of our indemnification obligation for potential losses arising from this litigation. Our estimate is based on publicly available information and other information made available to all of the affected Visa members and does not reflect any direct knowledge of the relative strengths and weaknesses of the litigation still pending or the status of any on-going settlement discussions. We believe that the IPO will be completed and cash will be available through the escrow to satisfy litigation settlements. In addition, based on estimates provided by Visa regarding its planned IPO, we believe that our ownership interest in Visa has a value significantly in excess of our indemnification liability. Our Visa shares will not generally 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.

Adjusted information supplements our results as reported in accordance with GAAP and should not be viewed in isolation from, or as a substitute for, our GAAP results. Our 2006 Form 10-K includes additional information regarding our accounting for the BlackRock/MLIM transaction and the BlackRock LTIP shares obligation. Our 2007 Form 10-Qs provide additional information regarding integration costs. The absence of other adjustments is not intended to imply that there could not have been other similar types of adjustments, but any such adjustments would not have been similar in magnitude to the amount of the adjustments shown.

(b) Includes the impact of the following items on a pretax basis: $151 million of acquisition integration costs, $127 million net loss related to our BlackRock LTIP shares obligation, and $82 million of Visa indemnification costs.

 

Page A1


Appendix to Financial Supplement (Continued)

The PNC Financial Services Group, Inc.

Adjusted Condensed Consolidated Income Statement Reconciliations (Unaudited) (a)

 

                BlackRock           
For the year ended December 31, 2006    PNC          Deconsolidation and     BlackRock    PNC

In millions

   As Reported    Adjustments (b)     Other Adjustments     Equity Method (c)    As Adjusted

Net Interest Income

            

Net interest income

   $ 2,245      $ (10 )      $ 2,235

Provision for credit losses

     124             124
                          

Net interest income less provision for credit losses

     2,121        (10 )        2,111
                          

Noninterest Income

            

Asset management

     1,420    $ 10       (1,036 )   $ 144      538

Other

     4,907      (1,822 )     (51 )        3,034
                                    

Total noninterest income

     6,327      (1,812 )     (1,087 )     144      3,572
                                    

Noninterest Expense

            

Compensation and benefits

     2,432      (44 )     (523 )        1,865

Other

     2,011      (47 )     (242 )        1,722
                                

Total noninterest expense

     4,443      (91 )     (765 )        3,587
                                    

Income before minority interest and income taxes

     4,005      (1,721 )     (332 )     144      2,096

Minority interest in income of BlackRock

     47      18       (65 )     

Income taxes

     1,363      (658 )     (130 )     7      582
                                    

Net income

   $ 2,595    $ (1,081 )   $ (137 )   $ 137    $ 1,514
                                    

 

(a) See note (a) on page A1.
(b) Includes the impact of the following items, all on a pretax basis: $2,078 million gain on BlackRock/MLIM transaction, $196 million securities portfolio rebalancing loss, $101 million of BlackRock/MLIM transaction integration costs, $48 million mortgage loan portfolio repositioning loss, and $12 million net loss related to our BlackRock LTIP shares obligation.
(c) BlackRock investment revenue represents PNC’s ownership interest in earnings of BlackRock excluding pretax BlackRock/MLIM transaction integration costs totaling $101 million. The income taxes amount represents additional income taxes recorded by PNC related to BlackRock earnings.

 

Page A2


Appendix to Financial Supplement (Continued)

The PNC Financial Services Group, Inc.

Adjusted Condensed Consolidated Income Statement Reconciliations (Unaudited) (a)

 

For the three months ended December 31, 2007    PNC          PNC

In millions

   As Reported    Adjustments (b)     As Adjusted

Net Interest Income

       

Net interest income

   $ 793      $ 793

Provision for credit losses

     188    $ (45 )     143
                     

Net interest income less provision for credit losses

     605      45       650
                     

Noninterest Income

       

Asset management

     225      (1 )     224

Other

     609      128       737
                     

Total noninterest income

     834      127       961
                     

Noninterest Expense

       

Compensation and benefits

     553      (10 )     543

Other

     660      (107 )     553
                     

Total noninterest expense

     1,213      (117 )     1,096
                     

Income before income taxes

     226      289       515

Income taxes

     48      102       150
                     

Net income

   $ 178    $ 187     $ 365
                     
For the three months ended September 30, 2007    PNC          PNC

In millions

   As Reported    Adjustments (c)     As Adjusted

Net Interest Income

       

Net interest income

   $ 761      $ 761

Provision for credit losses

     65        65
               

Net interest income less provision for credit losses

     696        696
               

Noninterest Income

       

Asset management

     204    $ 2       206

Other

     786      50       836
                     

Total noninterest income

     990      52       1,042
                     

Noninterest Expense

       

Compensation and benefits

     553      (16 )     537

Other

     546      (25 )     521
                     

Total noninterest expense

     1,099      (41 )     1,058
                     

Income before income taxes

     587      93       680

Income taxes

     180      31       211
                     

Net income

   $ 407    $ 62     $ 469
                     

 

(a) See note (a) on page A1.
(b) Includes the impact of the following items on a pretax basis: $128 million net loss related to our BlackRock LTIP shares obligation, $82 million of Visa indemnification costs, and $79 million of acquisition integration costs.
(c) Includes the impact of the following items on a pretax basis: $50 million net loss related to our BlackRock LTIP shares obligation and $43 million of acquisition integration costs.

 

Page A3


Appendix to Financial Supplement (Continued)

The PNC Financial Services Group, Inc.

Adjusted Condensed Consolidated Income Statement Reconciliations (Unaudited) (a)

 

For the three months ended June 30, 2007    PNC          PNC

In millions

   As Reported    Adjustments (b)     As Adjusted

Net Interest Income

       

Net interest income

   $ 738      $ 738

Provision for credit losses

     54        54
               

Net interest income less provision for credit losses

     684        684
               

Noninterest Income

       

Asset management

     190    $ 1       191

Other

     785      1       786
                     

Total noninterest income

     975      2       977
                     

Noninterest Expense

       

Compensation and benefits

     544      (9 )     535

Other

     496      (6 )     490
                     

Total noninterest expense

     1,040      (15 )     1,025
                     

Income before income taxes

     619      17       636

Income taxes

     196      6       202
                     

Net income

   $ 423    $ 11     $ 434
                     
For the three months ended March 31, 2007    PNC          PNC

In millions

   As Reported    Adjustments (c)     As Adjusted

Net Interest Income

       

Net interest income

   $ 623      $ 623

Provision for credit losses

     8        8
               

Net interest income less provision for credit losses

     615        615
               

Noninterest Income

       

Asset management

     165    $ 2       167

Other

     826      (52 )     774
                     

Total noninterest income

     991      (50 )     941
                     

Noninterest Expense

       

Compensation and benefits

     490      (2 )     488

Other

     454      (9 )     445
                     

Total noninterest expense

     944      (11 )     933
                     

Income before income taxes

     662      (39 )     623

Income taxes

     203      (14 )     189
                     

Net income

   $ 459    $ (25 )   $ 434
                     

 

(a) See note (a) on page A1.
(b) Includes the impact of the following items on a pretax basis: $16 million of acquisition integration costs and $1 million net loss related to our BlackRock LTIP shares obligation.
(c) Includes the impact of the following items on a pretax basis: $52 million net gain related to our BlackRock LTIP shares obligation and $13 million of acquisition integration costs.

 

Page A4


Appendix to Financial Supplement (Continued)

The PNC Financial Services Group, Inc.

Adjusted Condensed Consolidated Income Statement Reconciliations (Unaudited) (a)

 

For the three months ended December 31, 2006    PNC         PNC

In millions

   As Reported    Adjustments (b)    As Adjusted

Net Interest Income

        

Net interest income

   $ 566       $ 566

Provision for credit losses

     42         42
                

Net interest income less provision for credit losses

     524         524
                

Noninterest Income

        

Asset management

     149    $ 10      159

Other

     820      12      832
                    

Total noninterest income

     969      22      991
                    

Noninterest Expense

        

Compensation and benefits

     497         497

Other

     472         472
                

Total noninterest expense

     969         969
                    

Income before income taxes

     524      22      546

Income taxes

     148      7      155
                    

Net income

   $ 376    $ 15    $ 391
                    

 

(a) See note (a) on page A1.
(b) Includes the impact of the following items on a pretax basis: $12 million net loss related to our BlackRock LTIP shares obligation and $10 million of BlackRock/MLIM transaction integration costs.

 

Page A5