PNC Bank 2008 Annual Report Download

Download and view the complete annual report

Please find the complete 2008 PNC Bank annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 184

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172
  • 173
  • 174
  • 175
  • 176
  • 177
  • 178
  • 179
  • 180
  • 181
  • 182
  • 183
  • 184

James E. Rohr
Chairman and Chief Executive Officer
March 12, 2009
To Our Shareholders:
The PNC Financial Services Group produced solid results in 2008, a year marked by global economic and
market challenges. Equally important, we completed a truly transformational acquisition that doubled our
asset size and significantly enhanced our distribution platform, positioning us for further growth when the
economy begins to recover.
Through the efforts of our dedicated employees, PNC earned net income of $882 million, or $2.46 per
diluted share, for the year and posted some of the strongest profitability ratios among our peers.*
Excluding acquisition-related conforming provisions for credit losses and other integration costs of
$422 million after tax, 2008 net income would have been $1.3 billion or $3.68 per diluted share. We were
able to increase loan loss reserve coverage, strengthen our liquidity and capital, and return a portion of
our earnings to shareholders. These results clearly differentiated us from many large banks.
Even so, the Board of Directors recently made the very difficult but prudent decision to reduce our
quarterly common stock dividend to 10 cents per share effective with the next dividend expected to be
declared in April. Due to rapid economic deterioration, we are taking this proactive step to build capital,
strengthen our balance sheet and serve customers. We expect to increase our dividend when appropriate
after conditions stabilize.
This same economic uncertainty has affected valuations of financial services companies, and we are
disappointed in the absolute recent performance of PNC’s stock price. While our relative performance has
been better than many large banks, we continue to believe the fluctuations in PNC’s common stock price
are not indicative of our sound fundamentals.
PNC is healthy, well capitalized and open for business. By adhering to our business model, we have
consistently made credit available to qualified customers. Since the second quarter of 2007 – when many
believe the credit crunch began – through the end of 2008, we grew average loans by 19 percent, well in
excess of many of our peers. Our efforts continued as we originated approximately $9 billion in loans and
commitments to lend in the fourth quarter.
In this challenging economy, we are pursuing responsible measures to assist homeowners experiencing
financial hardships. We are working with qualified customers to set up new repayment schedules and loan
modifications, and we will enhance this process throughout 2009. Additionally, we see President
Obama’s goal to reduce home foreclosures as a means of providing stability to the national housing
market and reducing this impact on our economy.
PNC completed the acquisition of National City Corporation on December 31, 2008, primarily by issuing
approximately 95 million shares of our common equity, making PNC the fifth largest U.S. bank by
deposits and doubling our assets to $291 billion. This combination provides long-term opportunities to
apply our business model and increase customers and revenue. I am pleased to welcome National City
employees, customers and shareholders to the PNC family.
We issued $7.6 billion of preferred stock and a common stock warrant to the U.S. Department of the
Treasury under the TARP Capital Purchase Program on December 31, 2008. These proceeds enhanced
our already strong regulatory capital, and we plan to redeem the Treasury Department’s investment as
soon as appropriate.
Since PNC’s 2008 performance was below expectations, our Board determined executive compensation
should reflect both this and the current regulatory environment. As a result, total pay to PNC executives
was lower this year.
*PNC’s 2008 peer group consisted of BB&T Corporation, Comerica Inc., Fifth Third Bancorp, KeyCorp, National City Corporation, Regions Financial
Corporation, SunTrust Banks Inc., U.S. Bancorp, Wachovia Corporation and Wells Fargo & Company.
The PNC Financial Services Group
One PNC Plaza 249 Fifth Avenue Pittsburgh Pennsylvania 15222-2707

Table of contents

  • Page 1
    ... U.S. bank by deposits and doubling our assets to $291 billion. This combination provides long-term opportunities to apply our business model and increase customers and revenue. I am pleased to welcome National City employees, customers and shareholders to the PNC family. We issued $7.6 billion...

  • Page 2
    ... position and full-year average deposits increased by 10 percent. Following the acquisition of National City, PNC remained a core-funded bank with a loan-to-deposit ratio of 91 percent. Our recent dividend reduction is expected to add approximately $1 billion annually to PNC's common equity position...

  • Page 3
    ... year-end, with more than 60 percent of them new to PNC. These accounts are designed to meet the banking needs of Gen Y consumers, and they have higher average balances and better retention rates than our traditional checking accounts. Offerings for small businesses include treasury management...

  • Page 4
    ... converting National City branch locations. While we believe 2009 will be a challenging year for the financial services industry, we remain focused on the importance of meeting our customers' needs so they will continue to have confidence in PNC. To do this, we will continue to prudently manage risk...

  • Page 5
    UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2008 Commission file number 001-09718 FORM 10-K THE PNC FINANCIAL SERVICES GROUP, INC. (Exact name of ...

  • Page 6
    ... markets located in Pennsylvania, New Jersey, Washington, DC, Maryland, Virginia, Ohio, Kentucky and Delaware. PNC also provided certain investment servicing internationally. National City's primary businesses prior to its acquisition by PNC included commercial and retail banking, mortgage financing...

  • Page 7
    ...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...

  • Page 8
    ... Mortgage Banking; PNC Asset Management Group; and Distressed Assets Portfolio. These new business segments reflect the impact of our December 31, 2008 acquisition of National City and are more fully described in Note 28 Subsequent Event included in the Notes To Consolidated Financial Statements...

  • Page 9
    .... Applicable laws and regulations restrict permissible activities and investments and require compliance with protections for loan, deposit, brokerage, fiduciary, mutual fund and other customers, among other things. They also restrict our ability to repurchase stock or to receive dividends from bank...

  • Page 10
    ... on dividends associated with our December 31, 2008 issuance of preferred stock to the US Department of the Treasury under the TARP Capital Purchase Program, as discussed in Note 19 Shareholders' Equity of the Notes To Consolidated Financial Statements under Item 8 of this Report. Additional...

  • Page 11
    ...record in meeting the credit needs of the communities it serves in accordance with the CRA. Our ability to grow through acquisitions could be limited by these approval requirements. At December 31, 2008, PNC Bank, N.A., National City Bank, and PNC Bank, Delaware were rated "outstanding" with respect...

  • Page 12
    ... loans, our subsidiary banks compete with traditional banking institutions as well as consumer finance companies, leasing companies and other non-bank lenders, and institutional investors including CLO managers, hedge funds, mutual fund complexes and private equity firms. Loan pricing, structure...

  • Page 13
    ...: • Investment management firms, • Large banks and other financial institutions, • Brokerage firms, • Mutual fund complexes, and • Insurance companies. The fund servicing business is also highly competitive, with a relatively small number of providers. Merger, acquisition and consolidation...

  • Page 14
    ... the SEC reports and corporate governance information described in the section above in the Investor Relations section of our website. Where we have included web addresses in this Report, such as our web address and web addresses of the SEC and of BlackRock, we have included those web addresses as...

  • Page 15
    ... companies. Compliance with such regulation may increase our costs and limit our ability to pursue business opportunities. • Investors may have less confidence in the equity markets in general and in financial services industry stocks in particular, which could place downward pressure on PNC...

  • Page 16
    ... ability of borrowers to meet obligations under variable or adjustable rate debt instruments. • Such changes may decrease the demand for interestrate based products and services, including loans and deposit accounts. • Such changes can also affect our ability to hedge various forms of market and...

  • Page 17
    ...to Consolidated Financial Statements in Item 8 of this Report for additional information. Our issuance of securities to the US Department of the Treasury may limit our ability to return capital to our shareholders and is dilutive to our common shares. Also, the dividend rate increases substantially...

  • Page 18
    ... acquired businesses into PNC after closing. Acquisitions of other financial services companies in general present risks to PNC in addition to those presented by the nature of the business acquired. We describe some of the integration risks presented by our recent acquisition of National City above...

  • Page 19
    ... regulators. Applicable laws and regulations restrict our ability 15 to repurchase stock or to receive dividends from subsidiaries that operate in the banking and securities business and impose capital adequacy requirements. They also restrict permissible activities and investments and require...

  • Page 20
    ..., revenue rulings, revenue procedures, and other guidance can impact our tax liability and alter the timing of cash flows associated with tax deductions and payments. New guidance often dictates how changes to standards and regulations are to be presented in our consolidated financial statements, as...

  • Page 21
    ... include certain reportable transaction information in its 2004 federal income tax return related to a listed transaction. We expect to pay the penalty in 2009. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS A special meeting of shareholders of The PNC Financial Services Group, Inc...

  • Page 22
    ... products) (2007) • Paul W. Chellgren, 66, Operating Partner, SPG Partners, LLC, (private equity) (1995) • Robert N. Clay, 62, President and Chief Executive Officer of Clay Holding Company (investments) (1987) • George A. Davidson, Jr., 70, Retired Chairman of Dominion Resources, Inc. (public...

  • Page 23
    ... shares that may yet be purchased under the programs (c) PART II ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES (a) Our common stock is listed on the New York Stock Exchange and is traded under the symbol "PNC." At the close...

  • Page 24
    .... As of December 31, 2008, Wells Fargo & Co. acquired Wachovia Corporation and PNC acquired National City Corporation. Typically, the Committee reviews the makeup of the peer group annually. Due to the many changes in the financial industry generally, PNC's substantially increased size and scope at...

  • Page 25
    ... 2006 Consolidated Income Statement Review section of Item 7 of this Report describes certain items impacting 2006 results. (c) Amount for 2008 included $504 million conforming provision for credit losses related to our National City acquisition. (d) At December 31. (e) Calculated as annualized...

  • Page 26
    ...loan and lease losses Investment securities Loans held for sale Goodwill Equity investments (b) Deposits Borrowed funds (c) Shareholders' equity Common shareholders' equity ASSETS ADMINISTERED (in billions) Managed (d) Nondiscretionary FUND ASSETS SERVICED (in billions) Accounting/administration net...

  • Page 27
    ... markets located in Pennsylvania, New Jersey, Washington, DC, Maryland, Virginia, Ohio, Kentucky and Delaware. PNC also provided certain investment servicing internationally. National City's primary businesses prior to its acquisition by PNC included commercial and retail banking, mortgage financing...

  • Page 28
    ... closing date. Afterward, the annual dividend rate will increase, to 9% per year. PNC's intent is to redeem this preferred stock prior to the escalation of the dividend rate. Note 19 Shareholders' Equity included in our Notes to Consolidated Financial Statements within Item 8 of this Report includes...

  • Page 29
    ... gain on the sale of this business, from the Retail Banking business segment to "Other." Summary Financial Results In millions, except per share data Year ended December 31 2008 2007 Net income Diluted earnings per share Return on Average common shareholders' equity Average assets $ 882 $2.46 6.28...

  • Page 30
    ... on small businesses and corporations, promotions offered with special financing rates and responding to increased loan demand for first mortgages. We have reaffirmed and renewed loans and lines of credit, focused on early identification of loan modification candidates and are working closely where...

  • Page 31
    ... securities under the TARP Capital Purchase Program and the impact of National City. See the Consolidated Balance Sheet Review section of this Item 7 for additional information. LINE OF BUSINESS HIGHLIGHTS We refer you to Item 1 of this Report under the captions Business Overview and Review of Lines...

  • Page 32
    .... We created positive operating leverage in the year-to-date comparison as total noninterest expense increased 3% in the comparison. NET INTEREST INCOME AND NET INTEREST MARGIN Year ended December 31 Dollars in millions 2008 2007 alignment related to our National City acquisition. We also currently...

  • Page 33
    ... addition to credit and deposit products for commercial customers, Corporate & Institutional Banking offers other services, including treasury management and capital marketsrelated products and services and commercial mortgage loan servicing, that are marketed by several businesses to commercial and...

  • Page 34
    ...of National City, the higher provision in 2008 compared with the prior year was driven by general credit quality migration, including residential real estate development and commercial real estate exposure, an increase in net charge-offs, and growth in nonperforming loans. Growth in our total credit...

  • Page 35
    ... estate related (a) Financial services Health care Other Total commercial Commercial real estate Real estate projects Commercial mortgage Total commercial real estate Equipment lease financing TOTAL COMMERCIAL LENDING Consumer Home equity Lines of credit Installment Education Automobile Credit card...

  • Page 36
    ... from the National City acquisition, net of $2.8 billion of loan loss reserves, $1.1 billion of loans previously classified as held for sale by National City, and $.4 billion of other purchase accounting adjustments. Our home equity loan outstandings totaled $38.3 billion at December 31, 2008. In...

  • Page 37
    ... Investment Securities In millions Amortized Cost Fair Value Commercial Commercial real estate Real estate projects Commercial mortgage Total commercial real estate Equipment lease financing TOTAL COMMERCIAL LENDING Consumer Home equity Lines of credit Installment Total home equity Residential real...

  • Page 38
    ... To Consolidated Financial Statements in Item 8 of this Report for additional information. Net unrealized gains and losses in the securities available for sale portfolio are included in shareholders' equity as accumulated other comprehensive income or loss, net of tax. The fair value of investment...

  • Page 39
    ... at fair value. PNC adopted SFAS 159 beginning January 1, 2008 and elected to account for certain commercial mortgage loans held for sale at fair value. The balance of these assets was $1.4 billion at December 31, 2008. We stopped originating these types of loans during the first quarter of 2008. We...

  • Page 40
    ..., issuing debt, equity or hybrid instruments, executing treasury stock transactions, managing dividend policies and retaining earnings. On March 1, 2009, we took a proactive step to build capital and further strengthen our balance sheet as the Board of Directors decided to reduce PNC's quarterly...

  • Page 41
    ... of National City on PNC's adjusted average total assets. PNC's tangible common equity ratio was 2.9% at December 31, 2008 compared with 4.7% at December 31, 2007. The decrease in the ratio from the prior year was the result of the decline in the value of the securities available for sale portfolio...

  • Page 42
    ... with an average of $27 million for the year ended December 31, 2007. PNC Capital Markets owned no Market Street commercial paper at December 31, 2008 and owned less than $1 million of such commercial paper at December 31, 2007. PNC Bank, National Association ("PNC Bank, N.A.") purchased overnight...

  • Page 43
    ..., development and operation of multi-family housing that is leased to qualifying residential tenants. Generally, these types of investments are funded through a combination of debt and equity. We typically invest in these partnerships as a limited partner. Also, we are a national syndicator...

  • Page 44
    ...Trust I Security is automatically exchangeable into a share of Series F Non-Cumulative Perpetual Preferred Stock of PNC Bank, N.A. ("PNC Bank Preferred Stock"), in each case under certain conditions relating to the capitalization or the financial condition of PNC Bank, N.A. and upon the direction of...

  • Page 45
    ... the applicable PNC REIT Corp. holders in exchange for a cash payment representing the market value of such in-kind dividend, and PNC has committed to contribute such in-kind dividend to PNC Bank, N.A. PNC Capital Trust E Trust Preferred Securities In February 2008, PNC Capital Trust E issued $450...

  • Page 46
    ... National City's Form 8-K filed on February 4, 2008. See Note 19 Shareholders' Equity in Item 8 of this Report. Fair Value Measurements - Summary December 31, 2008 In millions Level 1 Level 2 Level 3 Total Fair Value Assets Securities available for sale Financial derivatives (a) Trading securities...

  • Page 47
    ... as available for sale) and $7.4 billion fair value of private-issuer securities (all classified as available for sale). The agency securities are generally collateralized by 1-4 family, conforming, fixed-rate residential mortgages. The private-issuer securities are also generally collateralized...

  • Page 48
    ... considering expected rates of return for market participants for similar loans in the marketplace. Customer Resale Agreements Effective January 1, 2008, we elected to account for structured resale agreements at fair value, which are economically hedged using free-standing financial derivatives. The...

  • Page 49
    ...for these instruments. Other Level 3 assets include commercial mortgage loans held for sale, private equity investments and other assets. Total securities measured at fair value at December 31, 2008 included securities available for sale and trading securities consisting primarily of residential and...

  • Page 50
    ... & Institutional Banking in Note 27 Segment Reporting in the Notes To Consolidated Financial Statements included in Item 8 of this Report. (e) "Other" average assets are comprised primarily of investment securities and residential mortgage loans associated with asset and liability management...

  • Page 51
    ... Personal Institutional Total Asset Type Equity Fixed income Liquidity/other Total Home equity portfolio credit statistics: % of first lien positions Weighted average loan-to-value ratios (g) Weighted average FICO scores (h) Annualized net charge-off ratio Loans 90 days past due Checking-related...

  • Page 52
    ..., net new consumer and business checking relationships grew by 72,000 in 2008 compared with 32,000 a year earlier. • Average deposit balances increased $3.7 billion or 7% primarily as a result of strong money market deposit growth and the benefits of the acquisitions. • Our investment in...

  • Page 53
    ...Loans Held For Sale portion of the Consolidated Balance Sheet Review section of this Financial Review includes additional information related to this transfer. Average residential mortgage loans increased $370 million primarily due to the addition of loans from acquisitions. Assets under management...

  • Page 54
    ...$432 (a) Information for all periods presented excludes the impact of National City, which PNC acquired on December 31, 2008. (b) Includes lease financing. (c) Represents consolidated PNC amounts. (d) Includes valuations on commercial mortgage loans held for sale and related commitments, derivative...

  • Page 55
    ... Commercial Mortgage and Mercantile acquisitions, expenses associated with revenue-related activities, growth initiatives mainly in treasury management, higher passive losses associated with low income housing tax credit investments, and write-downs of other real estate owned. Average loan balances...

  • Page 56
    ... volatility associated with the quarterly marking-to-market of obligations related to PNC's delivery of BlackRock stock under the BlackRock LTIP. Also on December 26, 2008, BlackRock entered into an Exchange Agreement with Merrill Lynch in anticipation of the consummation of the merger of Bank of...

  • Page 57
    ...BlackRock common stock into an escrow account. The shares of BlackRock common stock will be held in the escrow account for up to three years and will be available to satisfy certain indemnification obligations of Quellos under the asset purchase agreement. In April 2008, 280,519 common stock shares...

  • Page 58
    ... PERIOD-END BALANCE SHEET Goodwill and other intangible assets Other assets Total assets Debt financing Other liabilities Shareholder's equity Total funds PERFORMANCE RATIOS Return on average equity Operating margin (c) SERVICING STATISTICS (at December 31) Accounting/administration net fund assets...

  • Page 59
    ...under SFAS 159, include available for sale and trading securities, financial derivatives, certain commercial and residential mortgage loans held for sale, customer resale agreements, private equity investments, and residential mortgage servicing rights. Fair values and the information used to record...

  • Page 60
    ... and letters of credit assuming we increased pool reserve loss rates for certain loan categories), and • Note 5 Asset Quality in the Notes To Consolidated Financial Statements in Item 8 of this Report, and Allocation Of Allowance For Loan And Lease Losses in the Statistical Information (Unaudited...

  • Page 61
    ...private equity activities, and • Securities and derivatives trading activities including foreign exchange. We also earn fees and commissions from issuing loan commitments, standby letters of credit and financial guarantees, selling various insurance products, providing treasury management services...

  • Page 62
    ... with the requirements of SFAS 87, including a policy of reflecting trust assets at their fair market value. On an annual basis, we review the actuarial assumptions related to the pension plan, including the discount rate, the rate of compensation increase and the expected return on plan assets. The...

  • Page 63
    ...credit losses (Credit Risk), fluctuations of the estimated market value of financial instruments (Market Risk), failure of people, processes or systems (Operational Risk), and income losses associated with declining volumes, margins and/or fees, and the fixed cost structure of the business (Business...

  • Page 64
    ... service providers Real estate related (b) Financial services Health care Other Total commercial Commercial real estate Real estate projects Commercial mortgage Total commercial real estate Equipment lease financing TOTAL COMMERCIAL LENDING Consumer Home equity Other Total consumer Residential real...

  • Page 65
    ... changes in the key risk parameters and pool reserve loss rates. To illustrate, if we increase the pool reserve loss rates by 5% for all categories of non-impaired commercial loans, then the 61 Commercial Commercial real estate Equipment lease financing Consumer Residential real estate Other Total...

  • Page 66
    ...of National City, the higher provision in 2008 compared with the prior year was driven by general credit quality migration, including residential real estate development and commercial real estate exposure, an increase in net charge-offs, and growth in nonperforming loans. Growth in our total credit...

  • Page 67
    ... deposits with banks, and other short-term investments) and securities available for sale. At December 31, 2008, our liquid assets totaled $59.6 billion, with $22.5 billion pledged as collateral for borrowings, trust, and other commitments. Bank Level Liquidity PNC Bank, N.A. and National City Bank...

  • Page 68
    ... National City Bank short- and long-term debt issuances, including commercial paper, with maturities of less than one year. Parent Company Liquidity Our parent company's routine funding needs consist primarily of dividends to PNC shareholders, share repurchases, debt service, the funding of non-bank...

  • Page 69
    ... Statements in Item 8 of this Report for information regarding PNC's December 31, 2008 issuance of $7.6 billion of preferred stock and related common stock warrant to the US Treasury under the TARP Capital Purchase Program. PNC Funding Corp has the ability to offer up to $3.0 billion of commercial...

  • Page 70
    ...others: • Traditional banking activities of taking deposits and extending loans, • Private equity and other investments and activities whose economic values are directly impacted by market factors, and • Trading in fixed income products, equities, derivatives, and foreign exchange, as a result...

  • Page 71
    ... benefit from an increase in interest rates. We believe that we have the deposit funding base and balance sheet flexibility to adjust, where appropriate and permissible, to changing interest rates and market conditions. 67 VaR Total trading revenue for the past three years was as follows: Year end...

  • Page 72
    ... policy limits and associated guidelines. BlackRock PNC owns approximately 43 million shares of BlackRock common stock, accounted for under the equity method. Our total investment in BlackRock was $4.2 billion at December 31, 2008 compared with $4.1 billion at December 31, 2007. The market value...

  • Page 73
    ...1 Accounting Policies in Item 8 for additional information. At December 31, 2008, private equity investments carried at estimated fair value totaled $1.2 billion compared with $561 million at December 31, 2007. As of December 31, 2008, $620 million was invested directly in a variety of companies and...

  • Page 74
    ...2008, we discontinued hedge accounting for our commercial mortgage banking pay-fixed interest rate swaps; therefore, the fair value of these are now reported in this category. (e) Relates to PNC's obligation to help fund certain BlackRock LTIP programs. Additional information regarding the BlackRock...

  • Page 75
    ...fixed Total interest rate risk management Commercial mortgage banking risk management Pay fixed interest rate swaps (a) Total accounting hedges (b) Free-Standing Derivatives Customer-related Interest rate Swaps Caps/floors Sold Purchased Futures Foreign exchange Equity Swaptions Other Total customer...

  • Page 76
    ... in the 2006 amounts, fund servicing fees increased $59 million in 2007 compared with the prior year. Higher revenue from offshore operations, transfer agency, managed accounts and alternative investments contributed to the increase in 2007, reflecting net new business and growth from existing...

  • Page 77
    ... adjustment to increase deferred income taxes in connection with, the BlackRock/MLIM transaction in 2006, and • Lower pretax income for the fourth quarter of 2007 had the impact of reducing the effective tax rate for the full year. CONSOLIDATED BALANCE SHEET REVIEW Loans Loans increased $18...

  • Page 78
    ... in loans and securities and the need to fund other net changes in our balance sheet. During the second half of 2007 we substantially increased Federal Home Loan Bank borrowings, which provided us with additional liquidity at relatively attractive rates. 74 Shareholders' Equity Total shareholders...

  • Page 79
    ... border leases, subprime residential mortgage loans, brokered home equity loans and certain other residential real estate loans. These loans require special servicing and management oversight given current market conditions. The majority of these loans are from acquisitions, primarily National City...

  • Page 80
    ... Return on average tangible common shareholders' equity Annualized net income less preferred stock dividends divided by average common shareholders' equity less goodwill and other intangible assets (net of deferred taxes for both taxable and nontaxable combinations), and excluding mortgage servicing...

  • Page 81
    ... as Tier 1, eligible gains on available for sale equity securities and the allowance for loan and lease losses, subject to certain limitations. Total risk-based capital ratio - Total risk-based capital divided by period-end risk-weighted assets. 77 Transaction deposits - The sum of money market and...

  • Page 82
    ... strategies could affect our financial performance over the next several years. • Competition can have an impact on customer acquisition, growth and retention, as well as on our credit spreads and product pricing, which can affect market share, deposits and revenues. • Our business and operating...

  • Page 83
    ... accounting firm is included under Item 15 of this Report. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of The PNC Financial Services Group, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements...

  • Page 84
    ... the Company in a purchase business combination on December 31, 2008. We have also excluded National City Corporation from our audit of internal control over financial reporting. National City Corporation's total assets represented $136 billion of the related consolidated financial statement amount...

  • Page 85
    CONSOLIDATED INCOME STATEMENT THE PNC FINANCIAL SERVICES GROUP, INC. In millions, except per share data Year ended December 31 2008 2007 2006 Interest Income Loans Investment securities Other Total interest income Interest Expense Deposits Borrowed funds Total interest expense Net interest income ...

  • Page 86
    ...at fair value at December 31, 2008) (a) Investment securities Loans Allowance for loan and lease losses Net loans Goodwill Other intangible assets Equity investments Other Total assets Liabilities Deposits Noninterest-bearing Interest-bearing Total deposits Borrowed funds Federal funds purchased and...

  • Page 87
    ... that was credited to capital surplus. (c) Our net treasury stock activity in 2006 was less than .1 million shares issued. (d) Issued to the US Department of Treasury on December 31, 2008 under the TARP Capital Purchase Program. See accompanying Notes To Consolidated Financial Statements. 83

  • Page 88
    .../maturities Federal Home Loan Bank long-term borrowings Bank notes and senior debt Subordinated debt Other long-term borrowed funds Excess tax benefits from share-based payment arrangements Acquisition of treasury stock Cash dividends paid Net cash provided by financing activities Net Increase In...

  • Page 89
    ... markets located in Pennsylvania, New Jersey, Washington DC, Maryland, Virginia, Ohio, Kentucky and Delaware. PNC also provided certain investment servicing internationally. National City's primary businesses prior to its acquisition by PNC included commercial and retail banking, mortgage financing...

  • Page 90
    ... private equity activities. We earn fees and commissions from: • Issuing loan commitments, standby letters of credit and financial guarantees, • Selling various insurance products, • Providing treasury management services, • Providing merger and acquisition advisory and related services...

  • Page 91
    ... in trading securities and other short-term investments on our Consolidated Balance Sheet. Both realized and unrealized gains and losses on trading securities are included in noninterest income. Marketable equity securities not classified as trading are designated as securities available for sale...

  • Page 92
    ... using procedures consistent with those applied to direct investments. Indirect investments in private equity funds are valued based on the financial statements that we receive from their managers. Due to the time lag in our receipt of the financial information and based on a review of investments...

  • Page 93
    .... Leveraged leases, a form of financing lease, are carried net of nonrecourse debt. We recognize income over the term of the lease using the interest method. Lease residual values are reviewed for other than temporary impairment on a quarterly basis. Gains or losses on the sale of leased assets are...

  • Page 94
    ... to value ratio of greater than 90% and second liens are classified as nonaccrual at 90 days past due. Most consumer loans and lines of credit, not secured by residential real estate, are charged off after 120 to 180 days past due. Generally, they are not placed on non-accrual status. Home equity...

  • Page 95
    ... to the recorded investment in the loan including any superior liens. A fair market value assessment of the property is initiated when the loan becomes 90 to 120 days past due. Home equity installment loans and lines of credit and residential real estate loans that are not well secured, but are in...

  • Page 96
    ...credit losses. MORTGAGE AND OTHER SERVICING RIGHTS We provide servicing under various loan servicing contracts for commercial, residential, home equity, automobile and credit card loans. These contracts are either purchased in the open market or retained as part of a loan securitization or loan sale...

  • Page 97
    ...with only high-quality institutions, establishing credit limits, and generally requiring bilateral netting and collateral agreements. We recognize all derivative instruments at fair value as either other assets or other liabilities on the Consolidated Balance Sheet. The accounting for changes in the...

  • Page 98
    ... rate lock commitments for loans to be classified as held for sale and commitments to buy or sell mortgage loans are accounted for as free-standing derivatives and are recorded at fair value in other assets or other liabilities on the Consolidated Balance Sheet. Any gain or loss from the change...

  • Page 99
    ... residential real estate loans held for sale or securitization acquired from National City. See Note 8 Fair Value for additional information. As required, we adopted the provisions of Emerging Issues Task Force Issue No. ("EITF") 06-4, "Accounting for Deferred Compensation and Postretirement Benefit...

  • Page 100
    ... with our first quarter 2009 Form 10-Q. We do not expect the adoption of this guidance to have a material effect on our results of operations or financial position. In June 2008, the FASB issued FSP EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are...

  • Page 101
    ... of the balance sheet. This guidance also required the recognition of any unrecognized actuarial gains and losses and unrecognized prior service costs to AOCI, net of tax. SFAS 158 was effective for PNC as of December 31, 2006, with no restatement for prior year-end reporting periods permitted...

  • Page 102
    ... primary businesses include commercial and retail banking, mortgage financing and servicing, consumer finance and asset management. The primary reasons for the merger with (In millions, except per share data) National City were to enhance shareholder value, to improve PNC's competitive position in...

  • Page 103
    ... Commercial mortgage servicing rights Wealth management customer relationships (b) National City brand (b) Consumer loan servicing rights Total (a) Intangible asset carried at fair value. (b) Fair value adjusted for the allocation of the excess of fair value of net assets acquired over the purchase...

  • Page 104
    ... date. They also reflect the receipt of $7.6 billion from the sale of preferred securities and issuance of a warrant to purchase 16.9 million shares of PNC common stock under the TARP Capital Purchase Program (See Note 19 Shareholders' Equity for additional information). During 2008, National City...

  • Page 105
    ... and 2008, Market Street met all of its funding needs through the issuance of commercial paper. PNC Bank, N.A. provides certain administrative services, the program-level credit enhancement and 99% of liquidity facilities to Market Street in exchange for fees negotiated based on market rates. PNC...

  • Page 106
    ..., development and operation of multi-family housing that is leased to qualifying residential tenants. Generally, these types of investments are funded through a combination of debt and equity. We typically invest in these partnerships as a limited partner. Also, we are a national syndicator...

  • Page 107
    ... LLC Preferred Securities or any other parity equity securities issued by the LLC, neither PNC Bank, N.A. nor its subsidiaries will declare or pay dividends or other distributions with respect to, or redeem, purchase or acquire or make a liquidation payment with respect to, any of its equity capital...

  • Page 108
    ...to-value ratio loan 104 Commercial and commercial real estate Home equity lines of credit Consumer credit card lines Other Total $ 59,982 23,195 19,028 2,683 $104,888 $42,021 8,680 969 1,677 $53,347 (a) Amounts at December 31, 2008 include $53.9 billion of net unfunded credit commitments related...

  • Page 109
    ...assets and related information: December 31 - dollars in millions 2008 (a) 2007 Nonaccrual loans Commercial Commercial real estate Equipment lease financing TOTAL COMMERCIAL LENDING Consumer Home equity Other Total consumer Residential real estate Residential mortgage Residential construction Total...

  • Page 110
    ... and lease losses were as follows: In millions 2008 2007 2006 Changes in the allowance for unfunded loan commitments and letters of credit were as follows: In millions 2008 2007 2006 January 1 Charge-offs Recoveries Net charge-offs Provision for credit losses (a) Acquired allowance - National City...

  • Page 111
    ... for loans acquired in a transfer that are within the scope of this SOP. A total of $2.6 billion of National City allowance for loan losses was not carried over in purchase accounting. Excluded from the scope were leases, revolving credit arrangements and certain loans held for sale. The fair values...

  • Page 112
    ... Gains Losses Fair Value December 31, 2008 SECURITIES AVAILABLE FOR SALE (a) Debt securities US Treasury and government agencies Residential mortgage-backed Agency Nonagency Commercial mortgage-backed Asset-backed State and municipal Other debt Total debt securities Corporate stocks and other Total...

  • Page 113
    ... Loss Value Unrealized loss position 12 months or more Unrealized Fair Loss Value In millions Total Unrealized Loss Fair Value December 31, 2008 Securities available for sale Debt securities Residential mortgage-backed Commercial mortgage-backed Asset-backed State and municipal Other debt Total...

  • Page 114
    ...equity securities and over-the-counter derivative contracts whose fair value is determined using a pricing model without significant unobservable inputs. This category generally includes certain mortgage-backed debt securities, private-issuer securities, other asset-backed securities, corporate debt...

  • Page 115
    ...fair value requires significant management judgment or estimation. This category generally includes certain commercial mortgage loans held for sale, private equity investments, certain available for sale securities, certain trading securities and certain financial derivative contracts. Nonrecurring...

  • Page 116
    .... Annually, this model is subject to an internal review process to validate controls and model results. Fair Value Measurements - Nonrecurring December 31, 2008 Total Fair Value (a) Total losses for year ended December 31, 2008 Fair Value Option Commercial Mortgage Loans Held For Sale Effective...

  • Page 117
    ... in the Consolidated Income Statement for items for which we elected the fair value option. Fair Value Option - Changes in Fair Value Total gains (losses) For the year ended December 31, 2008 In millions Assets Customer resale agreements (a) Commercial mortgage loans held for sale (a) $ 69 (251...

  • Page 118
    ... short-term assets Trading securities Investment securities Loans held for sale Net loans (excludes leases) Other assets Mortgage and other loan servicing rights Financial derivatives Fair value hedges Cash flow hedges Free-standing derivatives Liabilities Demand, savings and money market deposits...

  • Page 119
    ... in private equity funds based on the financial statements that we receive from their managers. Due to the time lag in our receipt of the financial information and based on a review of investments and valuation techniques applied, adjustments to the manager provided value are made when available...

  • Page 120
    ... intangible assets related to Sterling are reported in the Retail Banking and Corporate & Institutional Banking business segments. At December 31, 2008, no goodwill was recognized in connection with the National City acquisition as the fair value of net assets acquired exceeded the purchase price...

  • Page 121
    ... of the National City acquisition. Servicing revenue from both commercial and residential mortgage servicing assets and liabilities generated contractually specified servicing fees, net interest income from servicing portfolio deposit balances, and ancillary fees totaling $171 million in 2008, $192...

  • Page 122
    ... and Other Intangible Assets for additional information regarding servicing assets. With our acquisition of National City on December 31, 2008, we acquired residual and other interests associated with National City's credit card, automobile, mortgage, and SBA loans securitizations. In addition...

  • Page 123
    ...fair value at the date of acquisition. The following is a summary of owned and securitized loans, which are managed on a combined basis. December 31, 2008 Principal Loans Past Due 30 Balance Days or More In Millions Loans managed Credit card Automobile Jumbo mortgages SBA Total loans managed Less...

  • Page 124
    ..., increases in market interest rates may result in lower prepayments and increased credit losses), which might magnify or counteract the sensitivities. Credit Card Loans December 31, 2008 Dollars in millions Fair Value WeightedAverage Life (in months) Variable Annual Coupon Rate To Investors Monthly...

  • Page 125
    ... number of net common shares that PNC may be required to issue is 3.6 million shares, subject to potential adjustment in the case of certain events, make-whole fundamental changes, or early termination. NOTE 13 BORROWED FUNDS Bank notes at December 31, 2008 totaling $1.0 billion have interest rates...

  • Page 126
    ...of the Board of Directors, a liquidation or dissolution, or PNC's common stock is not listed on any US national securities exchange. These rights may discourage a business combination or other transaction that is otherwise favored by certain shareholders. The $2.9 billion of junior subordinated debt...

  • Page 127
    ...Trusts acquired with National City follow in a separate table): Trust Date Formed Description of Capital Securities Redeemable PNC Capital Trust C June 1998 $200 million due June 1, 2028, bearing interest at a floating rate per annum equal to 3-month LIBOR plus 57 basis points. The rate in effect...

  • Page 128
    ... notes and 3.271% Stock Purchase Contracts issued by PNC. *** We may only redeem or repurchase the trust preferred securities of, and our junior subordinated notes payable to, National City Capital Trust II, III and IV more than 10 years in advance of their legal maturity dates, subject to having...

  • Page 129
    ... rules, the capital securities are redeemable in whole. The financial statements of the Trusts are not included in PNC's consolidated financial statements in accordance with GAAP. At December 31, 2008, PNC's junior subordinated debt of $2.9 billion, net of National City-related purchase accounting...

  • Page 130
    ... of year National City acquisition Other acquisitions (a) Actual return on plan assets Employer contribution Participant contributions Federal Medicare subsidy on benefits paid Benefits paid Fair value of plan assets at end of year Funded status Net amount recognized on the balance sheet Amounts...

  • Page 131
    ... Statement. Other investment managers may invest in eligible securities outside of their assigned asset category to meet their investment objectives. The actual percentage of the fair value of total plan assets held as of December 31, 2008 for equity securities, fixed income securities, real estate...

  • Page 132
    ... to PNC Medicare Benefit Part D Payments Subsidy Asset Category Equity securities Fixed income securities Cash and cash equivalents Total 42% 9% 49% 100% The investment objective for the National City qualified pension plan is to maximize total return with tolerance for slightly above average risk...

  • Page 133
    ...year-end obligations for pension and postretirement benefits were as follows: At December 31 2008 2007 Prior service cost (credit) Net actuarial loss Total $ (2) 80 $78 - - - $ (5) - $ (5) Discount rate Qualified pension Nonqualified pension Postretirement benefits Rate of compensation increase...

  • Page 134
    .... Employeedirected contributions are invested in a number of investment options available under the plan, including a PNC common stock fund and several BlackRock mutual funds, at the direction of the employee. Employee benefits expense for this plan was $11 million in 2008, $10 million in...

  • Page 135
    ... value Year ended December 31, 2008 In thousands, except weighted-average data Shares As permitted under SFAS 123R, we recognized compensation expense for stock options on a straight-line basis over the pro rata vesting period. Total compensation expense recognized related to PNC stock options...

  • Page 136
    ... stock at 95% of the fair market value on the last day of each six-month offering period. No charge to earnings is recorded with respect to the ESPP. Shares issued pursuant to the ESPP were as follows: Year ended December 31 Shares Price Per Share In the chart above, the weighted-average grant-date...

  • Page 137
    ... manage interest rate, market and credit risk and reduce the effects that changes in interest rates may have on net income, fair value of assets and liabilities, and cash flows. These instruments include interest rate swaps, interest rate caps and floors, futures contracts, and total return swaps...

  • Page 138
    ... risk related to residential mortgage servicing rights (MSRs), residential and commercial real estate loans held for sale, and interest rate lock commitments, all of which are carried at fair value consistent with the accounting for the derivatives. Derivative Counterparty Credit Risk By purchasing...

  • Page 139
    ... 283 325 608 $ 15,506 $ 1,416 Interest rate contracts Equity contracts Foreign exchange contracts Credit derivatives Options Risk participation agreements Residential mortgage servicing rights Commitments related to mortgage-related assets Other (a) Total $146,137 984 8,972 2,937 3,334 3,290 52...

  • Page 140
    NOTE 19 SHAREHOLDERS' EQUITY Preferred Stock Information related to preferred stock is as follows: Preferred Shares December 31 Shares in thousands Liquidation value per share 2008 2007 Series L is redeemable at PNC's option, subject to a replacement capital covenant for the first ten years after ...

  • Page 141
    ... stock plans and the conversion of certain debt and equity securities. Effective October 4, 2007, our Board of Directors terminated the 2005 stock repurchase program and approved a new stock repurchase program to purchase up to 25 million shares of PNC common stock on the open market or in privately...

  • Page 142
    ... the prior year-end date that were realized in the subsequent year when the related securities were sold. These amounts differ from net securities losses included in the Consolidated Income Statement primarily because they do not include gains or losses realized on securities that were purchased and...

  • Page 143
    ... - in millions 2008 2007 Deferred tax assets Allowance for loan and lease losses Net unrealized securities losses Compensation and benefits Unrealized losses on loans Other Total deferred tax assets Deferred tax liabilities Leasing Goodwill and Intangibles Mortgage servicing rights BlackRock basis...

  • Page 144
    ... 31, 2008 was $164 million. While the leasing related interest decreased with a payment to the IRS, the $73 million net increase primarily resulted from our acquisition of National City. NOTE 22 SUMMARIZED FINANCIAL INFORMATION OF BLACKROCK As required by SEC Regulation S-X, summarized consolidated...

  • Page 145
    ...Eastern District of New York. The plaintiffs, merchants operating commercial businesses throughout the U.S. and trade associations, allege that the defendants conspired to fix the prices for general purpose card network services, resulting in the payment of inflated interchange fees, in violation of...

  • Page 146
    ... National City Savings and Investment Plan (the "Plan"), National City Bank (as trustee), and some of National City's officers and directors. These cases have been consolidated in the United States District Court for the Northern District of Ohio, and the plaintiffs have filed a consolidated amended...

  • Page 147
    ... in the TARP Capital Purchase Program, and National City's capital position and financial stability in violation of the federal securities laws. This case was conditionally transferred to the United States District Court for the Northern District of Ohio. The plaintiffs have filed a motion to vacate...

  • Page 148
    ... securities of Adelphia and have been consolidated for pretrial purposes in the United States District Court for the Southern District of New York. The pending lawsuits arise out of lending and investment banking activities engaged in by PNC subsidiaries and many other financial services companies...

  • Page 149
    ... the acquisition. All of the matters described below arise in connection with Sterling's commercial finance subsidiary, Equipment Finance LLC, which we refer to as EFI. We provide additional information regarding the EFI situation in our Registration Statement on Form S-4 relating to the merger. See...

  • Page 150
    ... companies we have acquired, including National City. NOTE 25 COMMITMENTS AND GUARANTEES EQUITY FUNDING AND OTHER COMMITMENTS Our unfunded commitments at December 31, 2008 included private equity investments of $540 million and other investments of $178 million. STANDBY LETTERS OF CREDIT We issue...

  • Page 151
    ...insurance activities which require our employees to be bonded. We satisfy this bonding requirement by issuing letters of credit which were insignificant at December 31, 2008. In the ordinary course of business, we enter into contracts with third parties under which the third parties provide services...

  • Page 152
    ... in trading prices of the loaned securities. At December 31, 2008, the total maximum potential exposure as a result of these indemnity obligations was $7.9 billion, although the collateral at the time exceeded that amount. VISA INDEMNIFICATION Our payment services business issues and acquires credit...

  • Page 153
    National City sold residential mortgage loans and home equity lines of credit (collectively, loans) in the normal course of business. These agreements usually require certain representations concerning credit information, loan documentation, collateral, and insurability. On a regular basis, ...

  • Page 154
    ..., in connection with certain affiliates' commercial and residential mortgage servicing operations, the parent company has committed to maintain such affiliates' net worth above minimum requirements. The parent company received net income tax refunds of $92 million in 2008, $65 million in 2007 and...

  • Page 155
    ...investing activities FINANCING ACTIVITIES Borrowings from non-bank subsidiary Repayments on borrowings from non-bank subsidiary Other short-term borrowed funds Acquisition of treasury stock Cash dividends paid to shareholders TARP warrant Treasury stock Preferred stock-TARP Preferred stock-other Net...

  • Page 156
    ... 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...

  • Page 157
    ... Of Businesses Year ended December 31 In millions Retail Banking Corporate & Institutional Banking Global Investment Servicing Intercompany Eliminations BlackRock Other Consolidated 2008 INCOME STATEMENT Net interest income (expense) Noninterest income Total revenue Provision for credit losses...

  • Page 158
    ...-border leases, subprime residential mortgage loans, brokered home equity loans and certain other residential real estate loans. These loans require special servicing and management oversight given current market conditions. The majority of these loans are from acquisitions, primarily National City...

  • Page 159
    ...credit losses included a $504 million conforming provision for credit losses related to our acquisition of National City. (c) The sum of quarterly amounts for 2008 and 2007 does not equal the respective year's amount because the quarterly calculations are based on a changing number of average shares...

  • Page 160
    ...556 Loans Commercial Commercial real estate Equipment lease financing Consumer Residential mortgage Other Total loans Loans held for sale Federal funds sold and resale agreements Other Total interest-earning assets Interest-Bearing Liabilities $ (810) Interest-bearing deposits Money market Demand...

  • Page 161
    ...3 State and municipal 764 36 Other debt 220 12 Corporate stocks and other 412 12 Total securities available for sale 32,296 1,731 Securities held to maturity 402 23 Total investment securities 32,698 1,754 Loans Commercial 30,962 1,844 Commercial real estate 9,368 542 Equipment lease financing 2,566...

  • Page 162
    ...NONPERFORMING ASSETS AND RELATED INFORMATION December 31 - dollars in millions 2008 (a) 2007 2006 2005 2004 Nonaccrual loans Commercial Commercial real estate Equipment lease financing Consumer Residential real estate Total nonaccrual loans Troubled debt restructured loan Total nonperforming loans...

  • Page 163
    ... Commercial (a) Commercial real estate Equipment lease financing Consumer Residential real estate Total recoveries Net charge-offs (a) Provision for credit losses (b) Acquired allowance - National City Acquired allowance - other Net change in allowance for unfunded loan commitments and letters...

  • Page 164
    ...letters of credit PNC allowance for loan and lease losses, excluding the impact of National City PNC consolidated total loans (GAAP) Less: National City total loans PNC total loans, excluding the impact of National City $ 3,917 2,224 504 154 $ 1,343 $175,489 99,659 $ 75,830 PNC acquired National...

  • Page 165
    SHORT-TERM BORROWINGS Federal funds purchased include overnight borrowings and term federal funds, which are payable at maturity. 2008 Dollars in millions Amount Rate 2007 Amount Rate 2006 Amount Rate Federal funds purchased Year-end balance Average during year Maximum month-end balance during year...

  • Page 166
    ... did not include internal control over financial reporting related to these businesses, which PNC acquired on December 31, 2008. As a result of the National City Corporation acquisition on December 31, 2008, we will be evaluating changes to processes, information technology systems and other...

  • Page 167
    ... which PNC equity securities are authorized for issuance as of December 31, 2008 is included in the table which follows. Additional information regarding these plans is included in Note 16 Stock-Based Compensation Plans in the Notes To Consolidated Financial Statements in Item 8 of this Report. 163

  • Page 168
    ... Executive Incentive Award Plan Incentive Awards Employee Stock Purchase Plan (Note 6) 1992 Director Share Incentive Plan Total approved by security holders Equity compensation plans not approved by security holders (Note 7) Former National City Corporation Stock Option Plans Former National City...

  • Page 169
    ... limit the number of shares that may be issued for the plan. 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE ITEM REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of The PNC Financial Services Group, Inc. Pittsburgh...

  • Page 170
    ... statements, the Company no longer consolidates BlackRock, Inc. ("BlackRock"). Beginning September 30, 2006, the Company recognized its investment in BlackRock using the equity method of accounting. /s/ Deloitte & Touche LLP Pittsburgh, Pennsylvania March 1, 2007 (February 4, 2008 as to the effects...

  • Page 171
    ... (Registrant) By: /s/ Richard J. Johnson Richard J. Johnson Chief Financial Officer March 2, 2009 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of The PNC Financial Services Group, Inc. and in the capacities...

  • Page 172
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 173
    ... Agreement and Plan of Merger, dated as of October 24, 2008, by and between the Corporation and National City Corporation Method of Filing + Incorporated herein by reference to Exhibit 2.1 of the Corporation's Current Report on Form 8-K filed October 30, 2008 3.1 3.2 Articles of Incorporation of...

  • Page 174
    ...time to time of Receipts issued pursuant thereto Letter Agreement dated as of December 31, 2008 between the Corporation and Wilmington Trust Company Stock Purchase Contract between National City Corporation and National City Preferred Capital Trust I acting through the Bank of New York Trust Company...

  • Page 175
    ... 10.35 of the Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 ("3rd Quarter 2005 Form 10-Q")* 10.9 10.10 10.11 10.12 10.13 10.14 10.15 10.16 10.17 1992 Director Share Incentive Plan The Corporation's Directors Deferred Compensation Plan, as amended and...

  • Page 176
    ... Statement on Form S-8 filed by the Corporation on December 31, 2008 Incorporated herein by reference to Exhibit 10.30 of the Corporation's 3rd Quarter 2004 Form 10-Q* Incorporated herein by reference to Exhibit 10.28 of the Corporation's Annual Report on Form 10-K for the year ended December...

  • Page 177
    ..., Incorporated herein by reference to Exhibit 10.35 as amended and restated effective January 1, 2005 to National City Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 BlackRock, Inc. 2002 Long-Term Retention and Incentive Plan Incorporated herein by reference to the...

  • Page 178
    ... Report on Form 8-K of BlackRock, Inc. (Commission File No. 001-33099) filed December 29, 2008 Incorporated herein by reference to Exhibit 10.29 of the Corporation's 3rd Quarter 2004 Form 10-Q 10.54 10.55 PNC Bank, National Association US $20,000,000,000 Global Bank Note Program for the Issue...

  • Page 179
    ... 001-09718, to filings by National City Corporation are to SEC File No. 001-10074, to filings by BlackRock through its second quarter 2006 Form 10-Q are to BlackRock Holdco 2, Inc. SEC File No. 001-15305, and to filings by BlackRock, Inc. are to SEC File No. 001-33099. Denotes management contract or...

  • Page 180
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 181
    ... National City Corporation represented $136 billion of PNC's consolidated total assets at December 31, 2008. CERTIFICATION OF CHIEF EXECUTIVE OFFICER I, James E. Rohr, certify that: 1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2008 of The PNC Financial Services...

  • Page 182
    ...of the acquisition date. The total assets of National City Corporation represented $136 billion of PNC's consolidated total assets at December 31, 2008. CERTIFICATION OF CHIEF FINANCIAL OFFICER I, Richard J. Johnson, certify that: 1. I have reviewed this Annual Report on Form 10-K for the year ended...

  • Page 183
    ...with the Annual Report on Form 10-K for the year ended December 31, 2008 of The PNC Financial Services Group, Inc. (Corporation) as filed with the Securities and Exchange Commission on the date hereof (Report), I, James E. Rohr, Chairman and Chief Executive Officer of the Corporation, hereby certify...

  • Page 184
    ... with the Annual Report on Form 10-K for the year ended December 31, 2008 of The PNC Financial Services Group, Inc. (Corporation) as filed with the Securities and Exchange Commission on the date hereof (Report), I, Richard J. Johnson, Chief Financial Officer of the Corporation, hereby certify...