PNC Reports First Quarter Net Income of $377 Million and $1.09 Diluted EPS

Capital levels strengthen; asset quality solid

PITTSBURGH, April 17 /PRNewswire-FirstCall/ -- The PNC Financial Services
Group, Inc. (NYSE: PNC) today reported net income of $377 million, or $1.09
per diluted share, for the first quarter of 2008 compared with net income of
$459 million, or $1.46 per diluted share, for the first quarter of 2007 and
net income of $178 million, or $.52 per diluted share, for the fourth quarter
of 2007.
"In an extremely difficult environment for the financial services
industry, PNC reported solid first quarter results," said James E. Rohr,
chairman and chief executive officer. "We continued to execute on our long-
term growth strategies and grew average loans, deposits and assets. Despite a
slower economy, we believe our diverse revenue mix, moderate risk profile and
disciplined expense control will continue to serve us well. This confidence is
reflected in our recently announced dividend increase to shareholders."
HIGHLIGHTS
-- PNC continued to grow revenue while controlling noninterest expense,
creating positive operating leverage. Revenue growth of 13 percent
exceeded noninterest expense growth of 10 percent in the year over year
comparison.

-- Net interest income on a taxable-equivalent basis grew 37 percent in
the first quarter of 2008 compared with the first quarter of 2007 and 8
percent compared with the linked quarter. The net interest margin
improved to 3.09 percent compared with 2.95 percent and 2.96 percent in
the first and fourth quarters of 2007, respectively.

-- Noninterest income increased 16 percent compared with the prior quarter
and declined by 2 percent compared with the first quarter of 2007.
First quarter 2008 noninterest income included several gains that were
mostly offset by loss items, as follows: gains related to the Visa
initial public offering, the sale of J.J.B. Hilliard, W.L. Lyons, LLC,
securities available for sale transactions and the mark to market of
our BlackRock long-term incentive plan (LTIP) shares obligation,
substantially offset by valuation losses on commercial mortgage loans
and commitments held for sale, net of hedges, and on trading positions
as a result of continued lack of liquidity and unprecedented volatility
in the capital markets.

-- Average loans for the first quarter increased 28 percent over first
quarter 2007 and 3 percent compared with the linked quarter. Average
deposits for the first quarter increased 17 percent and 1 percent
compared with the first and fourth quarters of 2007, respectively.

-- Overall asset quality remained strong despite the impact of the
challenging credit environment. The provision for credit losses was
$151 million compared with $188 million in the fourth quarter of 2007.
The allowance for loan and lease losses was 1.22 percent of total loans
at March 31, 2008 and 1.21 percent at December 31, 2007.

-- PNC maintained a strong liquidity position and continued to be well
capitalized, building the Tier 1 risk-based capital ratio to 7.7
percent at March 31, 2008 compared with 6.8 percent at December 31,
2007. In April, the company announced a modest five percent increase of
the cash dividend on common stock to 66 cents per share in recognition
of the current market environment and reflecting confidence in PNC's
ability to grow earnings.

-- PNC completed the sale of Hilliard Lyons on March 31, resulting in an
after-tax gain of $23 million. The acquisition of Sterling Financial
Corporation, based in Lancaster, Pa., closed on April 4 and the
Yardville National Bank systems integration and conversion to the PNC
brand was completed on March 7.

The Consolidated Financial Highlights section of this release includes a
reconciliation of taxable-equivalent net interest income to net interest
income as reported under generally accepted accounting principles (GAAP).
CONSOLIDATED REVENUE REVIEW
Taxable-equivalent net interest income totaled $863 million for the
quarter, an increase of 37 percent compared with $629 million for the year-
earlier first quarter and an increase of 8 percent compared with $800 million
for the fourth quarter of 2007. The net interest margin in the first quarter
of 2008 was 3.09 percent compared with 2.95 percent in the first quarter of
2007 and 2.96 percent in the fourth quarter of 2007. The increase in net
interest income and the margin for both periods of comparison resulted from
the impact of declining interest rates on PNC's liability sensitive balance
sheet. Net interest income growth over the prior year first quarter was also
due to acquisitions and balance sheet growth.
Noninterest income totaled $967 million for the first quarter of 2008
compared with $991 million and $834 million for the first and fourth quarters
of 2007, respectively. The $133 million, or 16 percent, increase in
noninterest income compared with the linked quarter was primarily due to the
change in the mark-to-market adjustment on PNC's BlackRock LTIP shares
obligation, which was a $37 million gain in the first quarter of 2008 compared
with a $128 million loss in the fourth quarter, a gain of $114 million on the
sale of Hilliard Lyons, a gain of $95 million on the partial share redemption
of PNC's Visa ownership and net gains on available for sale securities
transactions of $41 million. These gains were partially offset by higher
valuation losses on commercial mortgage loans and commitments held for sale,
net of hedges, of $177 million in the first quarter of 2008 compared with $30
million in the fourth quarter and trading losses of $76 million in the first
quarter of 2008 compared with $10 million in the fourth quarter.
Noninterest income decreased $24 million, or 2 percent, compared with the
prior year first quarter primarily due to the valuation losses on commercial
mortgage loans and commitments held for sale, net of hedges, and lower trading
results substantially offset by the gains on the Hilliard Lyons sale, Visa
share redemption and available for sale securities transactions.
Asset management, fund servicing and consumer service fees grew in the
year over year comparison. In the linked quarter comparison asset management
revenue and corporate service fees declined while consumer service fees and
service charges on deposits were seasonally lower, somewhat offset by higher
fund servicing revenue.
CONSOLIDATED EXPENSE REVIEW
Noninterest expense for the first quarter of 2008 was $1.042 billion
compared with $944 million in the prior year first quarter and $1.213 billion
for the fourth quarter of 2007. Noninterest expense decreased compared with
the linked quarter primarily due to a reversal of $43 million of the $82
million charge for an indemnification obligation related to certain Visa
litigation recorded in the fourth quarter, lower integration costs and
continued focus on expense control. The 10 percent increase in noninterest
expense compared with the first quarter of 2007 was a result of the
acquisition of Mercantile and investments in growth initiatives partially
offset by disciplined expense management and the Visa indemnification
liability reversal.
CONSOLIDATED BALANCE SHEET REVIEW
Total assets were $140.0 billion at March 31, 2008 compared with $122.6
billion at March 31, 2007 and $138.9 billion at December 31, 2007. The
increase compared with March 31, 2007 was primarily due to growth in loans and
securities, the Yardville acquisition and an increase in trading assets. The
increase compared with the linked quarter end was attributable to higher loans
and trading assets somewhat offset by decreases in securities and loans held
for sale.
Average loans of $69.3 billion for the quarter increased $15.3 billion, or
28 percent, compared with the year-earlier first quarter and increased $2.2
billion, or 3 percent, compared with the fourth quarter of 2007. The increase
in average loans compared with the first quarter of 2007 was primarily a
result of acquisitions and higher commercial and residential mortgage loans.
The increase compared with the linked quarter was mainly the result of growth
in commercial loans and the transfer to the loan portfolio during first
quarter 2008 of approximately $1.8 billion, or $.7 billion average, education
loans previously held for sale.
Average securities available for sale for the first quarter of 2008 were
$30.0 billion, an increase of $6.6 billion, or 28 percent, compared with the
first quarter of 2007 and an increase of $.8 billion, or 3 percent, compared
with the fourth quarter of 2007. The increase in securities over the prior
year first quarter was primarily due to the addition of residential mortgage-
backed and commercial mortgage-backed securities as part of the company's
balance sheet management activities. The linked quarter increase was mainly
due to higher commercial mortgage-backed securities. Securities available for
sale decreased by $1.6 billion at March 31, 2008 compared with December 31,
2007 primarily due to the decline in fair value of the portfolio.
Average deposits of $81.6 billion grew $11.9 billion, or 17 percent,
compared with the first quarter of 2007 and $.8 billion, or 1 percent,
compared with the linked quarter. Average deposits increased from the prior
year first quarter as a result of acquisitions and growth in money market,
noninterest-bearing demand and time deposits. In the linked quarter
comparison, average deposits increased due to higher other time and money
market deposits somewhat offset by a decrease in demand and other
noninterest-bearing deposits.
Average borrowed funds for the first quarter of 2008 were $32.1 billion,
an increase of $15.2 billion compared with the first quarter of 2007 and an
increase of $3.5 billion compared with the fourth quarter of 2007. The
increases were due to new borrowings to fund earning asset growth and to
reduce overnight borrowings.
PNC's Tier 1 risk-based capital ratio was an estimated 7.7 percent at
March 31, 2008 compared with 8.6 percent at March 31, 2007 and 6.8 percent at
December 31, 2007. The decline in the ratio from March 31, 2007 was primarily
due to the impact of acquisitions, which increased risk-weighted assets and
goodwill, and organic balance sheet growth. The increase in the ratio from
December 31, 2007 resulted primarily from retained earnings and the issuances
of trust and REIT preferred securities during the first quarter of 2008. The
company did not actively engage in share repurchase activity during the first
quarter of 2008. In April 2008 the PNC board of directors approved an increase
of three cents to 66 cents a share for the second quarter common stock cash
dividend. PNC issued approximately 4.6 million shares of common stock and paid
approximately $224 million in cash to Sterling shareholders at closing of the
acquisition in April 2008.
ASSET QUALITY REVIEW
Overall asset quality at PNC performed as anticipated in the challenging
credit environment and the company remained focused on maintaining a moderate
risk profile. The provision for credit losses for the first quarter of 2008
was $151 million compared with $8 million in the first quarter of 2007 and
$188 million in the fourth quarter of 2007. The decrease in the provision
compared with the linked quarter was primarily attributable to a $45 million
provision-related pretax charge in the fourth quarter of 2007 associated with
the Yardville acquisition.
Net charge-offs for the first quarter of 2008 were $98 million, or .57
percent of average loans, compared with net charge-offs of $36 million, or .27
percent, for the first quarter of 2007 and net charge-offs of $83 million, or
.49 percent, for the fourth quarter of 2007. The increase in net charge-offs
compared with the linked quarter was mainly due to aligning small business and
consumer loan charge-off policies.
Nonperforming assets at March 31, 2008 were $587 million, or .83 percent
of total loans and foreclosed assets, compared with ratios of .32 percent at
March 31, 2007 and .70 percent at December 31, 2007. Nonperforming assets
increased $383 million compared with the balance a year ago and $109 million
compared with December 31, 2007. The increases over the prior quarters were
due to higher nonaccrual commercial real estate related loans and higher
nonaccrual residential real estate development loans partially offset by the
impact of aligning small business and consumer loan charge-off policies. The
allowance for loan and lease losses to nonperforming loans was 159 percent at
March 31, 2008, 388 percent at March 31, 2007 and 190 percent at December 31,
2007.

BUSINESS SEGMENT RESULTS

Retail Banking
Retail Banking earned $221 million for the quarter compared with $201
million for the year-ago quarter and $215 million for the fourth quarter of
2007. Earnings increased 10 percent over the first quarter of 2007 and 3
percent over the linked quarter. The increase over the prior year first
quarter was driven by acquisitions and in both periods of comparison by a $62
million after-tax gain related to the Visa initial public offering and an
after-tax gain of $23 million on the sale of Hilliard Lyons in the first
quarter of 2008. These increases were partially offset by higher provision for
credit losses and, in the linked quarter comparison, lower net interest income
and seasonal declines in certain consumer fees.
Retail Banking overview:

-- Customer growth continued. Reported checking relationships increased by
a net 33,000 since December 31, 2007 comprised of growth in checking
relationships of approximately 12,000 and the impact of the Yardville
conversion.

-- Net interest income on a taxable-equivalent basis for the first quarter
of 2008 grew $47 million, or 10 percent, compared with the first
quarter of 2007 and declined $44 million or 8 percent compared with the
linked quarter. The growth in net interest income over the year-ago
quarter was driven by acquisitions. Both comparisons were negatively
impacted by a lower value attributed to deposits in the declining rate
environment.

-- Noninterest income for the quarter increased $235 million, or 61
percent, compared with the prior year first quarter and increased $166
million, or 36 percent, compared with the fourth quarter of 2007. The
growth in noninterest income from the first quarter of 2007 was
primarily due to gains related to the Visa initial public offering and
sale of Hilliard Lyons and the impact of acquisitions. The increase
compared with the linked quarter reflected these gains partially offset
by lower service charges on deposits and consumer service fees as a
result of seasonality.

-- Noninterest expense for the quarter increased $85 million, or 17
percent, compared with the prior year first quarter and declined
slightly from the fourth quarter of 2007. The increase from the year-
ago quarter resulted from acquisitions, expenses directly associated
with fee income-related businesses and investments in the branch
network.

-- Provision for credit losses was $104 million for the first quarter of
2008 compared with $70 million in the linked quarter. The increased
provision was mainly driven by commercial loan credit migration of
portfolios primarily in Maryland and Virginia related to residential
real estate development.

-- Average loan balances increased $8.9 billion, or 32 percent, over the
year-ago quarter and increased 3 percent compared with the fourth
quarter of 2007. The growth over the prior year first quarter primarily
resulted from acquisitions, continued growth in small business lending
and in both quarters of comparison the transfer of $1.8 billion, or $.7
billion average, education loans from held for sale to the loan
portfolio during the first quarter of 2008.

-- Average deposit balances increased $5.5 billion, or 11 percent, over
the previous year first quarter and declined slightly compared with the
linked quarter. The growth over the prior year first quarter was
primarily due to acquisitions. The deposit strategy of Retail Banking
is to remain disciplined on pricing while targeting specific products
and markets for growth.

-- Assets under management were $65 billion at March 31, 2008, a decline
of $11 billion compared with March 31, 2007 and $8 billion compared
with December 31, 2007. The decreases were mainly due to the effects of
divestitures and comparatively lower equity markets in the first
quarter of 2008.

-- PNC had 1,096 branches and an ATM network of 3,903 machines at March
31, 2008. PNC opened five new branches and consolidated 18 branches
during the first quarter.

Corporate & Institutional Banking
Corporate & Institutional Banking earned $2 million in the first quarter
of 2008 compared with $132 million and $91 million in the first and fourth
quarters of 2007, respectively. First quarter 2008 earnings were impacted by
pretax valuation losses of $177 million on commercial mortgage loans and
commitments held for sale, net of hedges. The decrease compared with the first
quarter of 2007 also resulted from higher provision for credit losses and
noninterest expense somewhat offset by higher net interest income. The linked
quarter decrease in earnings was impacted by the higher valuation losses
somewhat offset by a lower provision for credit losses.
Corporate & Institutional Banking overview:

-- Net interest income on a taxable-equivalent basis for the first quarter
of 2008 grew $58 million, or 32 percent, compared with the first
quarter of 2007 and $4 million, or 2 percent, compared with the fourth
quarter of 2007. The increase over the prior year first quarter was
primarily a result of acquisitions, an increase in commercial loans
held for sale and organic loan growth.

-- Corporate service fees were $123 million in the first quarter of 2008
compared with $127 million in the first quarter of 2007 and $137
million in the fourth quarter of 2007. The decrease compared with the
linked quarter was primarily due to seasonally lower affordable housing
revenue.

-- Other noninterest income was negative $122 million for the first
quarter of 2008 compared with income of $60 million in the prior year
first quarter and $25 million in the fourth quarter of 2007. First
quarter 2008 reflected valuation losses of $177 million on commercial
mortgage loans and commitments held for sale, net of hedges, compared
with valuation losses of $30 million in the linked quarter.

-- Noninterest expense increased $22 million, or 11 percent, compared with
the first quarter of 2007 and decreased $7 million, or 3 percent,
compared with the linked quarter. The increase over first quarter 2007
was primarily due to the impact of acquisitions of Mercantile and ARCS
Commercial Mortgage and expense associated with other growth
initiatives.

-- Provision for credit losses was $49 million in the first quarter of
2008 compared with a net recovery of $16 million in the first quarter
of 2007 and a provision of $69 million in the linked quarter. The
increase in the provision compared with the year-ago quarter was
primarily due to credit quality migration primarily related to
commercial real estate exposure and growth in total credit exposure.
The linked quarter decrease in the provision reflected a slowdown in
credit deterioration.

-- Average loan balances increased $4.9 billion, or 25 percent, from the
prior year first quarter and $1.3 billion, or 6 percent, compared with
the fourth quarter of 2007. The increases resulted from organic loan
growth in corporate and commercial real estate loans and in the
comparison with the first quarter of 2007 the Mercantile and Yardville
acquisitions.

-- Average deposit balances for the quarter increased $2.0 billion, or 16
percent, compared with the first quarter of 2007 and were essentially
unchanged linked quarter. The increase resulted primarily from higher
client time deposits and the impact of acquisitions.

-- The commercial mortgage servicing portfolio was $244 billion at March
31, 2008, an increase of 18 percent from March 31, 2007 and essentially
unchanged linked quarter. The increase over the prior year first
quarter relates in part to the ARCS acquisition in the third quarter of
2007, which added $13 billion of commercial mortgage servicing.

PFPC
PFPC earned $30 million for the first quarter of 2008 compared with $31
million and $32 million for the first and fourth quarters of 2007,
respectively.
Revenue growth was driven by new business, acquisitions and organic growth
somewhat offset by equity market depreciation. Servicing revenue increased $30
million, or 14 percent, from the first quarter of 2007 and $15 million, or 7
percent, from the linked quarter. These increases resulted primarily from fee
income growth in offshore operations and from the acquisitions of Albridge
Solutions Inc. and Coates Analytics, LP in December 2007. Operating expense
increased $28 million, or 18 percent, from the year ago quarter and $14
million, or 8 percent, from the linked quarter as a result of investments in
technology, a larger employee base to support business growth and costs
related to the acquisitions. Income taxes increased in the first quarter of
2008 due to state tax adjustments in both prior quarters of comparison.
PFPC provided accounting/administration services for $1.0 trillion of net
fund assets and provided custody services for $476 billion of fund assets as
of March 31, 2008 compared with $822 billion and $435 billion, respectively,
on March 31, 2007 and $990 billion and $500 billion, respectively, at December
31, 2007. Total fund assets serviced by PFPC were $2.6 trillion at March 31,
2008 compared with asset servicing levels of $2.2 trillion at March 31, 2007
and $2.5 trillion at December 31, 2007.
Other, including BlackRock
The "Other, including BlackRock" category, for the purposes of this
release, includes the earnings and gains or losses related to PNC's equity
interest in BlackRock, integration costs, asset and liability management
activities including net securities gains or losses and certain trading
activities, equity management activities, differences between business segment
performance reporting and financial statement reporting under GAAP, corporate
overhead and intercompany eliminations.
PNC recorded earnings of $124 million in Other for the first quarter of
2008 compared with earnings of $95 million in the first quarter of 2007 and a
loss of $160 million in the fourth quarter of 2007. In the linked quarter
comparison the increase in Other earnings was primarily due to a net gain on
the mark to market of our BlackRock LTIP shares obligation compared with a
charge in the prior quarter, a partial reversal of the fourth quarter charge
for an indemnification obligation related to certain Visa litigation, lower
integration costs and higher net securities gains somewhat offset by higher
trading losses.
CONFERENCE CALL AND SUPPLEMENTAL FINANCIAL INFORMATION
PNC Chairman and Chief Executive Officer James E. Rohr and Chief Financial
Officer Richard J. Johnson will hold a conference call for investors today at
10:00 a.m. Eastern Time regarding the topics addressed in this news release
and the related financial supplement. Investors should call five to 10 minutes
before the start of the conference call at 800-990-2718 or 706-643-0187
(international). The related financial supplement and presentation slides to
accompany the conference call remarks may be found at
www.pnc.com/investorevents. A taped replay of the call will be available for
one week at 800-642-1687 or 706-645-9291 (international), conference ID
41428871.
In addition, Internet access to the call (listen only) and to PNC's first
quarter 2008 earnings release, supplemental financial information and
presentation slides will be available at www.pnc.com/investorevents. A replay
of the webcast will be available on PNC's Web site for 30 days.
The PNC Financial Services Group, Inc. (www.pnc.com) is one of the
nation's largest diversified financial services organizations providing retail
and business banking; specialized services for corporations and government
entities, including corporate banking, real estate finance and asset-based
lending; wealth management; asset management and global fund services.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
We make statements in this news release and in the conference call
regarding this news release, and we may from time to time make other
statements, regarding our outlook or expectations for earnings, revenues,
expenses and/or other matters regarding or affecting PNC that are forward-
looking statements within the meaning of the Private Securities Litigation
Reform Act. Forward-looking statements are typically identified by words such
as "believe," "expect," "anticipate," "intend," "outlook," "estimate,"
"forecast," "will," "project" and other similar words and expressions.
Forward-looking statements are subject to numerous assumptions, risks and
uncertainties, which change over time. Forward-looking statements speak only
as of the date they are made. We do not assume any duty and do not undertake
to update our forward-looking statements. Because forward-looking statements
are subject to assumptions and uncertainties, actual results or future events
could differ, possibly materially, from those that we anticipated in our
forward-looking statements, and future results could differ materially from
our historical performance.
Our forward-looking statements are subject to the following principal
risks and uncertainties. We provide greater detail regarding some of these
factors in our Form 10-K for the year ended December 31, 2007, including in
the Risk Factors and Risk Management sections of that report, and in our other
SEC reports. Our forward-looking statements may also be subject to other risks
and uncertainties, including those that we may discuss elsewhere in this news
release or in our filings with the SEC, accessible on the SEC's website at
www.sec.gov and on or through our corporate website at www.pnc.com/secfilings.
-- Our businesses and financial results are affected by business and
economic conditions, both generally and specifically in the principal
markets in which we operate. In particular, our businesses and
financial results may be impacted by:

-- Changes in interest rates and valuations in the debt, equity and
other financial markets.

-- Disruptions in the liquidity and other functioning of financial
markets, including such disruptions in the markets for real estate
and other assets commonly securing financial products.

-- Actions by the Federal Reserve and other government agencies,
including those that impact money supply and market interest rates.

-- Changes in our customers', suppliers' and other counterparties'
performance in general and their creditworthiness in particular.

-- Changes in customer preferences and behavior, whether as a result of
changing business and economic conditions or other factors.

-- A continuation of recent turbulence in significant portions of the
global financial markets could impact our performance, both directly
by affecting our revenues and the value of our assets and liabilities
and indirectly by affecting the economy generally.

-- Given current economic and financial market conditions, our forward-
looking financial statements are subject to the risk that these
conditions will be substantially different than we are currently
expecting. These statements are based on our current expectations that
interest rates will remain low through 2008 with continued wide market
credit spreads and that national economic conditions currently point
toward a mild recession.

-- Our operating results are affected by our liability to provide shares
of BlackRock common stock to help fund certain BlackRock long-term
incentive plan ("LTIP") programs, as our LTIP liability is adjusted
quarterly ("marked-to-market") based on changes in BlackRock's common
stock price and the number of remaining committed shares, and we
recognize gain or loss on such shares at such times as shares are
transferred for payouts under the LTIP programs.

-- Legal and regulatory developments could have an impact on our ability
to operate our businesses or our financial condition or results of
operations or our competitive position or reputation. Reputational
impacts, in turn, could affect matters such as business generation and
retention, our ability to attract and retain management, liquidity and
funding. These legal and regulatory developments could include: (a)
the unfavorable resolution of legal proceedings or regulatory and other
governmental inquiries; (b) increased litigation risk from recent
regulatory and other governmental developments; (c) the results of the
regulatory examination process, our failure to satisfy the requirements
of agreements with governmental agencies, and regulators' future use of
supervisory and enforcement tools; (d) legislative and regulatory
reforms, including changes to laws and regulations involving tax,
pension, education lending, and the protection of confidential customer
information; and (e) changes in accounting policies and principles.

-- Our business and operating results are affected by our ability to
identify and effectively manage risks inherent in our businesses,
including, where appropriate, through the effective use of third-party
insurance, derivatives and capital management techniques.

-- The adequacy of our intellectual property protection, and the extent of
any costs associated with obtaining rights in intellectual property
claimed by others, can impact our business and operating results.

-- Our ability to anticipate and respond to technological changes can have
an impact on our ability to respond to customer needs and to meet
competitive demands.

-- Our ability to implement our business initiatives and strategies could
affect our financial performance over the next several years.

-- Competition can have an impact on customer acquisition, growth and
retention, as well as on our credit spreads and product pricing, which
can affect market share, deposits and revenues.

-- Our business and operating results can also be affected by widespread
natural disasters, terrorist activities or international hostilities,
either as a result of the impact on the economy and capital and other
financial markets generally or on us or on our customers, suppliers or
other counterparties specifically.

-- Also, risks and uncertainties that could affect the results anticipated
in forward-looking statements or from historical performance relating
to our equity interest in BlackRock, Inc. are discussed in more detail
in BlackRock's filings with the SEC, including in the Risk Factors
sections of BlackRock's reports. BlackRock's SEC filings are accessible
on the SEC's website and on or through BlackRock's website at
www.blackrock.com.

We grow our business from time to time by acquiring other financial
services companies. Acquisitions in general present us with risks in addition
to those presented by the nature of the business acquired. In particular,
acquisitions may be substantially more expensive to complete (including as a
result of costs incurred in connection with the integration of the acquired
company) and the anticipated benefits (including anticipated cost savings and
strategic gains) may be significantly harder or take longer to achieve than
expected. In some cases, acquisitions involve our entry into new businesses or
new geographic or other markets, and these situations also present risks
resulting from our inexperience in these new areas. As a regulated financial
institution, our pursuit of attractive acquisition opportunities could be
negatively impacted due to regulatory delays or other regulatory issues.
Regulatory and/or legal issues related to the pre-acquisition operations of an
acquired business may cause reputational harm to PNC following the acquisition
and integration of the acquired business into ours and may result in
additional future costs arising as a result of those issues. Our recent
acquisition of Sterling Financial Corporation ("Sterling") presents regulatory
and litigation risk, as a result of financial irregularities at Sterling's
commercial finance subsidiary, that may impact our financial results.

Consolidated Financial Highlights
The PNC Financial Services Group, Inc. (Unaudited)

Page 11

FINANCIAL PERFORMANCE
Dollars in millions, except per First Fourth First
share data Quarter Quarter Quarter
2008 2007 2007
Revenue
Net interest income (taxable-
equivalent basis) (a) $863 $800 $629
Noninterest income 967 834 991
Total revenue $1,830 $1,634 $1,620

Noninterest expense $1,042 $1,213 $944

Net income $377 $178 $459

Diluted earnings per common share $1.09 $.52 $1.46
Cash dividends declared per common
share $.63 $.63 $.55

SELECTED RATIOS
Net interest margin 3.09 % 2.96 % 2.95 %
Noninterest income to total revenue (b) 53 51 61
Efficiency ( c ) 57 75 58
Return on:
Average tangible common shareholders'
equity 25.98 % 11.06 % 26.63 %
Average common shareholders' equity 10.62 4.78 15.59
Average assets 1.08 .52 1.73

(a) Reconciliations of net interest income on a GAAP basis to
taxable-equivalent net interest income are provided below.

(b) Calculated as noninterest income divided by the sum of net interest
income (GAAP basis) and noninterest income.

( c ) Calculated as noninterest expense divided by the sum of net interest
income (GAAP basis) and noninterest income.

TAXABLE-EQUIVALENT NET INTEREST INCOME
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 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 taxable investments. This adjustment is not permitted under
GAAP in the Consolidated Income Statement.

The following is a reconciliation of net interest income as reported in
the Consolidated Income Statement to net interest income on a taxable-
equivalent basis:

First Fourth First
Quarter Quarter Quarter
In millions 2008 2007 2007
Net interest income, GAAP basis $854 $793 $623
Taxable-equivalent adjustment 9 7 6
Net interest income, taxable-
equivalent basis $863 $800 $629

BUSINESS EARNINGS SUMMARY (a) (b)
In millions First Fourth First
Quarter Quarter Quarter
2008 2007 2007
Retail Banking $221 $215 $201
Corporate & Institutional Banking 2 91 132
PFPC 30 32 31
Other, including BlackRock (b) 124 (160) 95
Total consolidated net income $377 $178 $459

(a) Our business segment information is presented based on our management
accounting practices and 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 first
quarter 2008 report on Form 10-Q will provide additional business
segment disclosures for BlackRock.

Consolidated Financial Highlights
The PNC Financial Services Group, Inc. (Unaudited)

Page 12

March 31 December 31 March 31
2008 2007 2007

BALANCE SHEET DATA
Dollars in millions, except per
share data
Assets $139,991 $138,920 $122,563
Loans, net of unearned income 70,802 68,319 62,925
Allowance for loan and lease losses 865 830 690
Securities available for sale 28,581 30,225 26,475
Loans held for sale 2,516 3,927 2,382
Goodwill and other intangibles 9,349 9,551 8,668
Equity investments 6,187 6,045 5,408
Deposits 80,410 82,696 77,367
Borrowed funds 32,779 30,931 20,456
Shareholders' equity 14,423 14,854 14,739
Common shareholders' equity 14,416 14,847 14,732
Book value per common share 42.26 43.60 42.63
Common shares outstanding
(millions) 341 341 346
Loans to deposits 88 % 83 % 81 %

ASSETS ADMINISTERED (billions)
Managed $65 $73 $76
Nondiscretionary 111 113 111

FUND ASSETS SERVICED (billions)
Accounting/administration net assets $1,000 $990 $822
Custody assets 476 500 435

CAPITAL RATIOS
Tier 1 risk-based (a) 7.7 % 6.8 % 8.6 %
Total risk-based (a) 11.4 10.3 12.2
Leverage (a) 6.8 6.2 8.7
Tangible common equity (b) 4.7 4.7 5.8
Common shareholders' equity to assets 10.3 10.7 12.0

ASSET QUALITY RATIOS
Nonperforming loans to total loans .77 % .64 % .28 %
Nonperforming assets to total
loans and foreclosed assets .83 .70 .32
Nonperforming assets to total assets .42 .34 .17
Net charge-offs to average loans
(for the three months ended) .57 .49 .27
Allowance for loan and lease losses
to loans 1.22 1.21 1.10
Allowance for loan and lease losses
to nonperforming loans 159 190 388

(a) The ratios as of March 31, 2008 are estimated.

(b) Common shareholders' equity less goodwill and other intangible assets
net of deferred taxes (excluding mortgage servicing rights) divided by
assets less goodwill and other intangible assets net of deferred taxes
(excluding mortgage servicing rights).

SOURCE The PNC Financial Services Group, Inc.

MEDIA: Brian E. Goerke, +1-412-762-4550, corporate.communications@pnc.com, or
INVESTORS: William H. Callihan +1-412-762-8257, investor.relations@pnc.com,
both of The PNC Financial Services Group, Inc.