From the Chairman March 3, 2011

To Our Shareholders,

Two years after the greatest

financial crisis since the Great Depression,

PNC has emerged as one of the largest,

strongest banks in America.

We are poised to compete successfully in

a consolidating industry despite economic headwinds and significant regulatory change.

We see tremendous momentum for

growth in 2011 with the goal of

creating even greater value for

our shareholders. Outstanding Performance, Exceptional Achievements PNC delivered an outstanding performance in 2010, a year of exceptional achievements in a challenging environment. We produced record net income of $3.4 billion or $5.74 per diluted common share. We enhanced the quality of our capital throughout the year and reached a record Tier 1 common capital ratio of 9.8 percent at year end, providing PNC with significant flexibility for the future. We significantly increased the number of clients we serve and are well positioned for future growth.

Net Income We have a powerful banking franchise stretching across 14 states and Millions $3,397 the District of Columbia. Within that market resides one-third of the U.S. population and the corporate headquarters of half the Fortune $2,403 500. In addition, we have national capabilities to provide residential mortgages and credit to consumers. For our middle-market clients $918 throughout the U.S., we offer credit, liquidity, and capital markets products and services. 2008 2009 2010 We enhanced our scale through the successful conversion of National City, which we completed in 2010 ahead of our original schedule. It was one of the largest customer and branch integrations in banking history. We converted 1,300 branches and millions of customers and surpassed our initial customer retention goals. We also exceeded the original cost savings goal for the combined company by 50 percent, reaching $1.8 billion on an annualized basis by the end of 2010.

I am fond of saying that eventually all companies meet their balance sheet. In 2010 we continued to transition ours, and we are pleased with the results. We ended the year with $264 billion of assets. Common equity grew by $7.6 billion to $29.6 billion as of December 31, 2010. We originated loans and commitments of $149 billion during 2010, including $3.5 billion of small business loans. Our credit quality metrics improved during the year. With an improving economy, we expect greater loan demand in 2011.

Total deposits were $183 billion at December 31. We increased transaction deposits by $8.4 billion, or 7 percent, during 2010, a strong sign of our ability to grow our customer deposit franchise. At the same time we significantly reduced higher-cost retail certificates of deposit by $11.3 billion, or 23 percent, while retaining nearly 75 percent of our relationship accounts. These trends resulted in a loan-to-deposit ratio of 82 percent – a highly liquid We believe we stand as one of the clear balance sheet with a strong bank liquidity position to support growth. winners coming out of the financial crisis… We achieved these results by executing our proven business model. Our model is designed to produce diverse revenue streams through our commitment to a moderate risk philosophy, continuous improvement and a well-positioned balance sheet. Our accomplishments brought PNC unprecedented international recognition. In December we were selected “Bank of the Year in the U.S.” by The Banker magazine in London, a publication of the Financial Times Group and the industry’s longest running trade journal.

An Industry Perspective If I think back to the fall of 2008, it was difficult to know when or how the financial crisis would end. As a company, we view change as an opportunity for growth and greater success. In the wake of significant James E. Rohr uncertainty, we positioned the firm with a strong balance sheet and a proven Chairman and Chief Executive Officer management team which gave us the confidence to buy a bank larger than PNC. We had already developed innovative products, and we were focused on the needs of our customers, with thousands of dedicated employees ready to serve them.

Today, we believe we stand as one of the clear winners coming out of the financial crisis and are ready to exceed the expectations of our customers as their financial needs expand in an improving economy.

Delivering Value to Our Shareholders Given the economic uncertainty of the past two years, it has been prudent to build a larger level of capital. At December 31, 2008, our Tier 1 common capital ratio – a key current capital adequacy benchmark – was 4.8 percent. By raising capital, retaining earnings and selling a non-core business, at year end 2010, our Tier 1 common capital ratio had grown to 9.8 percent, one of the strongest levels in the industry. This should help us 9.8% shift from a strategy of capital building to one of capital optimization. Tier 1 Common Capital Ratio We recently submitted to our regulators a capital plan as part of a second round of “stress tests.” The result of this regulatory assessment will, in 6.0% part, determine whether and how much capital we may begin to return to 4.8% shareholders.

With the economy now more stable, our board of directors views increasing the dividend as a key priority along with repurchasing stock. Subject to approval from our regulators, I am optimistic that we would be able to 2008 2009 2010 increase our dividend in 2011.

We would also consider mergers and acquisitions at the right prices that offer opportunities to expand or augment existing markets and businesses and to generate greater shareholder value.

A further factor in determining how much capital we hold will be new international banking requirements coming out of the Basel Committee on Banking Supervision. Given current assumptions based on the rules as we understand them today, we anticipate our capital levels will exceed the expected benchmark even before the new rules go into effect. In the end, we believe our capital position, together with our earnings potential, gives us the [TIER 1 flexibility to comply with new regulatory capital requirements when finalized while still returning COMMON capital to our shareholders. CAPITAL RATIO CHART] The progress we made and our results in 2010 contributed to a 15 percent increase in PNC’s share price. Taking a longer view, we ranked third among our peers in total shareholder return on a five-year basis. For the same period, we outperformed the overall stock market index, the S&P 500 index, the S&P 500 bank index and our peer group average.*

Serving the Needs of Consumers and Small Business The combination of Retail Banking, Residential Mortgage Banking and our Asset Management Group accounted for nearly half of our 2010 revenue. We offer a broad array of products and services for individual consumers, small businesses, colleges and universities, and institutional clients.

Checking Relationships Retail Banking PNC has more than 5.4 million consumer and small Thousands 5,390 5,465 business checking relationships, which we see as a cornerstone product in our client acquisition strategy. We increased these relationships by 75,000 and grew average transaction deposits by more than $3 billion in 2010. 2,402 While we attract the majority of our new customers through our 2,500 branches, 38 percent of our total account acquisition in 2010 came

2008 2009 2010 through alternative channels. These channels play an important role in our client acquisition success.

For example, through our University Banking program, we currently have relationships with more than 200 colleges and universities, an increase of nearly 75 percent from 2009. This program gives us the opportunity to market PNC’s retail products to more than 300,000 incoming freshmen and approximately 1.9 million students overall. Once we have these customers in the door, our wide branch network and innovative products provide us with long-term retention opportunities.

In my tenure at PNC, few changes have been as notable as the decline of paper checks. Customers have been moving away from checks and toward electronic payments at an accelerating pace. At the same time, we are seeing tremendous growth in mobile banking.

At PNC, we recognize that changes in customer preferences along with financial reform will affect Retail Banking. We know that many of our peers have announced increased fees and the elimination of free checking, which we believe will result in significant market disruption.

* PNC’s 2010 peer group consists of BB&T Corporation, Bank of America Corporation, Capital One Financial, Inc., Comerica Inc., Fifth Third Bancorp, JPMorgan Chase, KeyCorp, M&T Bank, Regions Financial Corporation, SunTrust Banks, Inc., U.S. Bancorp, and Wells Fargo & Co. Our response differs. We are seeking to increase customers and deepen our relationships with them. As a result, we are offering new, integrated payment products that connect checking, credit, debit and rewards, and that leverage our highly successful Virtual Wallet bank account offering.

This approach reflects our extensive research, indicating customers want choice, transparency and value from their bank. We believe this is consistent with our brand promise to customers and employees and is aligned to our shareholders’ expectations. Assets Under Management Asset Management Group Our Asset Management Group had an Billions outstanding 2010, with full year earnings up 34 percent compared with $103 $108 2009. Asset flows improved through the year, picking up speed in the $57 second half. This sales momentum combined with a year-end lift in equity markets helped us reach $212 billion in assets under administration by 2008 2009 2010 year end. Assets under management totaled $108 billion.

Despite extreme market volatility in the last two years, Asset Management has consistently grown sales and acquired new clients. Referrals from other PNC business units, including Retail Banking and Corporate & Institutional Banking, enabled us to end 2010 with one of the strongest prospect pipelines we have ever had. In fact, total sales and referrals from PNC businesses increased 60 percent in comparison with 2009 and now make up 30 percent of overall sales. We believe these in-house referrals to be among the best in the industry, and we think we can do even better by spreading the practice to more PNC units.

A strong pipeline gives us the confidence to invest aggressively in Asset Management. Last year, we hired approximately 500 employees, placing many of them in higher-potential markets such as Chicago, Florida, Milwaukee and Washington, D.C. We are not finished. Over the next two years, we expect to add 400 more employees in this business.

We are investing in technology as well as people. Later this year, we will introduce a new tool specifically designed to give our high-net-worth clients a consolidated view of their assets in much the same way Virtual Wallet provides retail customers with a high-definition view of their money. This tool, called Wealth Insight, will provide our Asset Management customers with more information about their assets, and we believe it will give us a competitive advantage in the marketplace.

Residential Mortgage Banking Two years ago, PNC made the decision to return to the national residential mortgage business as it is a key consumer-banking product. We believe this strategy provides us with opportunities to deepen customer relationships while maintaining our focus on moderate risk. Our mortgage business accomplished a great deal this year. We have enhanced technology and realigned the sales and servicing aspects of this business so it better reflects our moderate risk philosophy and our relationship-based business approach.

High unemployment throughout the year made it difficult for many Americans to remain current on their mortgages. We responded by increasing our mortgage servicing staff and working to modify mortgage loans of qualified borrowers both through the government’s Home Affordable Modification Program and our own proprietary programs.

PNC is working to address foreclosure concerns that arose across In 2010, PNC spent more than the industry in 2010. We have strengthened senior management in $50 million across 15 states and the Residential Mortgage, reviewed our procedures, opened a second District of Columbia to encourage mortgage servicing facility and instituted new safeguards, including home ownership and economic development and to partner with community-based expanded training and additional supervision. organizations. We have also increased our production staff in Residential Mortgage. In spite of the difficulties in this market, we have written many new mortgages consistent with PNC’s traditionally moderate approach to risk management. Our mortgage offices in 32 states last year originated more than $10.5 billion of new loans, including a new jumbo mortgage product.

Serving the Needs of Large Businesses and Institutions One third of PNC’s revenue in 2010 came from serving large business, government and not-for-profit clients through our Corporate & Institutional Banking (C&IB) business. We have a broad array of products and services and financing capabilities.

Corporate & Institutional Banking We had record client growth in 2010, adding more than 1,100 primary clients in commercial banking and corporate and asset-based lending last year. This provides significant momentum going into 2011. If we can cross sell to these new clients at the same rate as we do to our existing clients, we would see as much $300 million in additional annual revenue in 2011 and beyond.

We are a top provider of investment banking solutions to the middle market. Based on transactions closed in 2010, we ranked fourth in the following categories: middle-market client bookrunner, real estate bookrunner and asset-based lending bookrunner. We are a leader in middle-market loan syndications of $100 million or less, ranking second in 2010. Our Harris Williams business is one of the nation’s largest merger and acquisition advisory firms focused on the middle market. PNC Treasury Management is ranked among the top 10 nationally, with revenues increasing by 8 percent in 2010 compared to the previous year, a very favorable outcome given that industry growth was projected to be in the range of 1-2 percent for the year. The business produces an excellent source of low-cost deposits and is our entry into attractive sectors, including government agencies and health care. We are among the largest financial firms in the health care market thanks to our innovative suite of Healthcare Advantage products, which helps to improve the exchange of funds among insurers and providers. Sales of these products have had a compound average growth rate of 19 percent over the Treasury Management Revenue Millions last five years. $1,225 $1,137 Our goal is to deliver all of PNC to our C&IB clients. We want relationships, not isolated transactions with our customers. For them, that means having $567 one bank to meet all their financial needs. For us, it means additional cross-selling opportunities. 2008 2009 2010

Given our focus on revenue growth in the wake of changing consumer preferences and regulatory requirements, in 2010 I asked Senior Vice Chairman Bill Demchak to lead all of our businesses. Bill did an exceptional job delivering the full value of C&IB products and services to our customers. I look for him to apply that same leadership across our expanded franchise.

Employees Drive Our Success Our success last year was largely due to our more than 50,000 employees. We win when our employees are engaged in their jobs and committed to the company and our clients. Our 2010 employee engagement results show an increase across the board despite starting from a level that was already very good. The world outside has noticed. Last year, Retail Banking won its second “Gallup Great Workplace Award,” making PNC the only U.S. bank to be so honored.

PNC is committed to being a great place to work. Our benefits program for full-time employees includes health care, life insurance, disability coverage, retirement benefits – including a company-funded pension – and many work/life benefits. These offerings are one reason PNC is a nine-time recipient of Working Mother magazine’s “100 Best Companies” award.

In 2010, we launched PNC Living Well, which is focused on helping employees better manage their health, money and work/life balance. We also expanded our commitment to diversity and inclusion, launching training for employees. Each PNC line of business has developed a customized “Diversity Action” plan focused on enhancing the recruitment, retention, development and promotion of employees within the various businesses. We are on the right track. In 2010, the National Association for Female Executives named PNC one of its “Top 50 Companies for Executive Women” for the third year in a row. Our Communities Matter PNC’s strength reflects the vitality of the communities where we do business, so we support important community development and philanthropic efforts. In 2010, PNC spent more than $50 million across 15 states and the District of Columbia to encourage home ownership and economic development and to partner with community-based organizations.

Our signature cause, PNC Grow Up Great, which prepares young children for success in school and life, enters its seventh year in 2011. Our employees have volunteered 170,000 hours to this effort. Building on our success, this year we will launch Financial Literacy for Preschool Children which focuses on the concept of sharing. Our partner in this program is Sesame Workshop, the nonprofit educational organization behind Sesame Street.

PNC advanced its leadership in green building in 2010 as well. The completion of our new Washington, D.C. regional headquarters, PNC Place, marked PNC’s 100th LEED certification from the U.S. Green Building Council and our first Platinum-level To be successful in the future, it will not be certification. To date, PNC has 116 certifications for leadership in enough to recognize or respond to change; energy and environmental design, and has more newly constructed, the leaders will be those companies that anticipate and embrace change and respond LEED-certified buildings than any company on Earth. with innovative products and services. Building a Great Company At PNC, we strive for excellence, I believe the people of PNC have those qualities and capabilities... and we know that we must prove ourselves every day. Over the past two years, we believe that we have delivered exceptional performance. Thanks to the hard work of our management team and our employees, we now have more opportunities than ever before.

To be successful in the future, it will not be enough to recognize or respond to change; the leaders will be those companies that anticipate and embrace change and respond with innovative products and services. I believe the people of PNC have those qualities and capabilities, and I look forward to working for you as we continue to build a great company.

Sincerely,

James E. Rohr Chairman and Chief Executive Officer

For more information regarding certain factors that could cause future results to differ, possibly materially, from historical performance or from those anticipated in forward-looking statements, see the Cautionary Statement in Item 7 of our 2010 Annual Report on Form 10-K, which accompanies this letter. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2010 Commission file number 001-09718 THE PNC FINANCIAL SERVICES GROUP, INC. (Exact name of registrant as specified in its charter) Pennsylvania 25-1435979 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) One PNC Plaza 249 Fifth Avenue Pittsburgh, Pennsylvania 15222-2707 (Address of principal executive offices, including zip code) Registrant’s telephone number, including area code - (412) 762-2000 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered Common Stock, par value $5.00 New York Stock Exchange Depositary Shares Each Representing 1/4000 Interest in a Share of 9.875% New York Stock Exchange Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series L, par value $1.00 12.000% Fixed-to-Floating Rate Normal Automatic Preferred Enhanced Capital New York Stock Exchange Securities (issued by National City Capital Trust I) 6.625% Trust Preferred Securities (issued by National City Capital Trust II) New York Stock Exchange 6.625% Trust Preferred Securities (issued by National City Capital Trust III) New York Stock Exchange 8.000% Trust Preferred Securities (issued by National City Capital Trust IV) New York Stock Exchange 6.125% Capital Securities (issued by PNC Capital Trust D) New York Stock Exchange 7 3⁄4% Trust Preferred Securities (issued by PNC Capital Trust E) New York Stock Exchange Warrants (expiring December 31, 2018) to purchase Common Stock New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: $1.80 Cumulative Convertible Preferred Stock - Series B, par value $1.00 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes X No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No X Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes X No Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer X Accelerated filer Non-accelerated filer Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No X The aggregate market value of the registrant’s outstanding voting common stock held by nonaffiliates on June 30, 2010, determined using the per share closing price on that date on the New York Stock Exchange of $56.50, was approximately $29.6 billion. There is no non-voting common equity of the registrant outstanding. Number of shares of registrant’s common stock outstanding at February 18, 2011: 525,508,324 DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive Proxy Statement of The PNC Financial Services Group, Inc. to be filed pursuant to Regulation 14A for the 2011 annual meeting of shareholders (Proxy Statement) are incorporated by reference into Part III of this Form 10-K. TABLE OF CONTENTS ITEM 1–BUSINESS

PART I Page BUSINESS OVERVIEW Headquartered in Pittsburgh, Item 1 Business. 2 Pennsylvania, we are one of the largest diversified financial Item 1A Risk Factors. 11 services companies in the United States. We have businesses Item 1B Unresolved Staff Comments. 19 engaged in retail banking, corporate and institutional banking, Item 2 Properties. 19 Item 3 Legal Proceedings. 19 asset management, and residential mortgage banking, Item 4 Reserved. 19 providing many of our products and services nationally and Executive Officers of the Registrant 19 others in our primary geographic markets located in Directors of the Registrant 20 Pennsylvania, Ohio, New Jersey, Michigan, Maryland, PART II Illinois, Indiana, Kentucky, Florida, Virginia, Missouri, Item 5 Market for Registrant’s Common Equity, Delaware, Washington, D.C., and Wisconsin. We also provide Related Stockholder Matters and Issuer certain products and services internationally. At December 31, Purchases of Equity Securities. 20 Common Stock Performance Graph 22 2010, our consolidated total assets, deposits and total Item 6 Selected Financial Data. 23 shareholders’ equity were $264.3 billion, $183.4 billion and Item 7 Management’s Discussion and Analysis $30.2 billion, respectively. of Financial Condition and Results of Operations 25 We were incorporated under the laws of the Commonwealth Item 7A Quantitative and Qualitative Disclosures About Market Risk. 93 of Pennsylvania in 1983 with the consolidation of Pittsburgh Item 8 Financial Statements and Supplementary National Corporation and Provident National Corporation. Data. 94 Since 1983, we have diversified our geographical presence, Item 9 Changes in and Disagreements With business mix and product capabilities through internal growth, Accountants on Accounting and strategic bank and non-bank acquisitions and equity Financial Disclosure. 192 Item 9A Controls and Procedures. 192 investments, and the formation of various non-banking Item 9B Other Information. 193 subsidiaries. PART III SALE OF PNC GLOBAL INVESTMENT SERVICING Item 10 Directors, Executive Officers and On July 1, 2010, we sold PNC Global Investment Servicing Corporate Governance. 193 Item 11 Executive Compensation. 193 Inc. (GIS), a leading provider of processing, technology and Item 12 Security Ownership of Certain Beneficial business intelligence services to asset managers, broker- Owners and Management and Related dealers and financial advisors worldwide, for $2.3 billion in Stockholder Matters. 193 cash pursuant to a definitive agreement entered into on Item 13 Certain Relationships and Related February 2, 2010. The pretax gain recorded in the third quarter Transactions, and Director Independence. 194 of 2010 related to this sale was $639 million, or $328 million Item 14 Principal Accounting Fees and Services. 194 after taxes. PART IV Item 15 Exhibits, Financial Statement Schedules. 194 Results of operations of GIS through June 30, 2010 and the SIGNATURES 195 related after-tax gain on sale in the third quarter of 2010 are EXHIBIT INDEX E-1 presented as income from discontinued operations, net of income taxes, on our Consolidated Income Statement for the PART I periods presented in this Report. Once we entered into the Forward-Looking Statements: From time to time, The PNC sales agreement, GIS was no longer a reportable business Financial Services Group, Inc. (PNC or the Corporation) has segment. Further information regarding the GIS sale is made and may continue to make written or oral forward- included in Note 2 Divestiture in Item 8 of this Report and looking statements regarding our outlook or expectations for here by reference. earnings, revenues, expenses, capital levels, liquidity levels, asset quality or other future financial or business ACQUISITION OF NATIONAL CITY CORPORATION performance, strategies or expectations, or the impact of On December 31, 2008, we acquired National City legal, regulatory or supervisory matters on our business Corporation (National City) for approximately $6.1 billion. operations or performance. This Annual Report on Form 10-K The total consideration included approximately $5.6 billion of (the Report or Form 10-K) also includes forward-looking PNC common stock, $150 million of preferred stock, and cash statements. With respect to all such forward-looking of $379 million paid to warrant holders by National City. statements, you should review our Risk Factors discussion in Following the closing, PNC received $7.6 billion from the Item 1A and our Risk Management, Critical Accounting United States Department of the Treasury (US Treasury) Policies and Judgments, and Cautionary Statement Regarding under the Emergency Economic Stabilization Act of 2008 Forward-Looking Information sections included in Item 7 of (EESA) in exchange for the issuance of preferred stock and a this Report. common stock warrant (the TARP Preferred Stock and TARP

2 Warrant). These proceeds were used to enhance National City Dividends of $89 million were paid on February 10, 2010 Bank’s regulatory capital position to well-capitalized in order when the Series N Preferred Stock was redeemed. PNC paid to continue serving the credit and deposit needs of existing total dividends of $421 million to the US Treasury while the and new customers. On a consolidated basis, these proceeds Series N preferred shares were outstanding. resulted in further improvement to our capital and liquidity positions. See Repurchase of Outstanding TARP Preferred The warrant issued to the US Treasury in connection with the Stock and Sale By US Treasury of TARP Warrant below for Series N Preferred Stock described above would have enabled additional information. the US Treasury to purchase up to approximately 16.9 million shares of PNC common stock at an exercise price of $67.33 In connection with obtaining regulatory approvals for the per share. After exchanging its TARP Warrant for 16,885,192 acquisition, PNC agreed to divest 61 of National City Bank’s warrants, each to purchase one share of PNC common stock, branches in Western Pennsylvania. This divestiture, which the US Treasury sold the warrants in a secondary public included $4.1 billion of deposits and $.8 billion of loans, was offering. The sale closed on May 5, 2010. These warrants completed during the third quarter of 2009. expire December 31, 2018.

REVIEW OF BUSINESS SEGMENTS In addition to the National City, based in Cleveland, Ohio, was one of the following information relating to our lines of business, we nation’s largest financial services companies. At incorporate information under the captions Business Segment December 31, 2008, prior to our acquisition, National City had Highlights, Product Revenue, and Business Segments Review total assets of approximately $153 billion and total deposits of in Item 7 of this Report here by reference. Also, we include approximately $101 billion. National City Corporation was financial and other information by business in Note 25 merged into PNC on the acquisition date, December 31, 2008. Segment Reporting in the Notes To Consolidated Financial National City Bank was merged into PNC Bank, National Statements in Item 8 of this Report here by reference. Association (PNC Bank, N.A.) on November 6, 2009. Assets, revenue and earnings attributable to foreign activities Our consolidated financial statements for 2009 and 2010 were not material in the periods presented. Business segment reflect the impact of National City. results for periods prior to 2010 have been reclassified to reflect current methodologies and current business and REPURCHASE OF OUTSTANDING TARP PREFERRED STOCK management structure and to present those periods on the AND SALE BY US TREASURY OF TARP WARRANT same basis. Business segment information for 2008 does not See Note 18 Equity in the Notes To Consolidated Financial include the impact of National City, which we acquired on Statements in Item 8 of this Report regarding our December 31, 2008. December 31, 2008 issuance of $7.6 billion of Fixed Rate Cumulative Perpetual Preferred Shares, Series N (Series N Retail Banking provides deposit, lending, brokerage, trust, Preferred Stock or TARP Preferred Stock), related issuance investment management, and cash management services to discount, and issuance of the related common stock warrant to consumer and small business customers within our primary the US Treasury (the TARP Warrant) under the US Treasury’s geographic markets. Our customers are serviced through our Troubled Asset Relief Program (TARP) Capital Purchase branch network, call centers and the internet. The branch Program. network is located primarily in Pennsylvania, Ohio, New Jersey, Michigan, Maryland, Illinois, Indiana, Kentucky, Florida, Virginia, Missouri, Delaware, Washington, D.C., and As approved by the Federal Reserve Board, US Treasury and Wisconsin. our other banking regulators, on February 10, 2010, we redeemed all 75,792 shares of our Series N Preferred Stock Our core strategy is to acquire and retain customers who held by the US Treasury. We used the net proceeds from the maintain their primary checking and transaction relationships common stock offering described in Note 18, senior notes with PNC. We also seek revenue growth by deepening our offerings and other funds to redeem the Series N Preferred share of our customers’ financial assets, including savings and Stock. We did not exercise our right to seek to repurchase the liquidity deposits, loans and investable assets. A key element related warrant at the time we redeemed the Series N of our strategy is to expand the use of alternative distribution Preferred Stock. channels while continuing to optimize the traditional branch network. In addition, we have a disciplined process to In connection with the redemption of the Series N Preferred continually improve the engagement of both our employees Stock, we accelerated the accretion of the remaining issuance and customers, which is a strong indicator for customer discount on the Series N Preferred Stock and recorded a growth, retention and relationship expansion. corresponding reduction in retained earnings of $250 million during the first quarter of 2010. This resulted in a one-time, Corporate & Institutional Banking provides lending, treasury noncash reduction in net income attributable to common management, and capital markets-related products and shareholders and related basic and diluted earnings per share. services to mid-sized corporations, government and

3 not-for-profit entities, and selectively to large corporations. one-to-four-family residential real estate. These loans are Lending products include secured and unsecured loans, letters typically underwritten to government agency and/or third of credit and equipment leases. Treasury management services party standards, and sold, servicing retained, to secondary include cash and investment management, receivables mortgage market conduits Federal National Mortgage management, disbursement services, funds transfer services, Association (FNMA), Federal Home Loan Mortgage information reporting, and global trade services. Capital Corporation (FHLMC), Federal Home Loan Banks and third- markets-related products and services include foreign party investors, or are securitized and issued under the exchange, derivatives, loan syndications, mergers and Government National Mortgage Association (GNMA) acquisitions advisory and related services to middle-market program, as described in more detail in Note 3 Loan Sale and companies, our multi-seller conduit, securities underwriting, Servicing Activities and Variable Interest Entities in Item 8 of and securities sales and trading. Corporate & Institutional this Report and included here by reference. The mortgage Banking also provides commercial loan servicing, real estate servicing operation performs all functions related to servicing advisory and technology solutions for the commercial real mortgage loans—primarily those in first lien position—for estate finance industry. Corporate & Institutional Banking various investors and for loans owned by PNC. Certain loans provides products and services generally within our primary originated through majority or minority owned affiliates are geographic markets, with certain products and services offered sold to others. nationally and internationally. Residential Mortgage Banking is focused on adding value to Corporate & Institutional Banking is focused on becoming a the PNC franchise by building stronger customer premier provider of financial services in each of the markets it relationships, providing quality investment loans, and serves. The value proposition to its customers is driven by delivering acceptable returns under a moderate risk profile. providing a broad range of competitive and high quality Our national distribution capability provides volume that products and services by a team fully committed to delivering drives economies of scale, risk dispersion, and cost-effective the comprehensive resources of PNC to help each client extension of the retail banking footprint for cross-selling succeed. Corporate & Institutional Banking’s primary goals opportunities. are to achieve market share growth and enhanced returns by means of expansion and retention of customer relationships BlackRock is the largest publicly traded investment and prudent risk and expense management. management firm in the world. BlackRock manages assets on behalf of institutional and individual investors worldwide Asset Management Group includes personal wealth through a variety of equity, fixed income, multi-asset class, management for high net worth and ultra high net worth alternative and cash management separate accounts and funds, clients and institutional asset management. Wealth including iShares®, the global product leader in exchange management products and services include financial planning, traded funds. In addition, BlackRock provides market risk customized investment management, private banking, tailored management, financial markets advisory and enterprise credit solutions and trust management and administration for investment system services globally to a broad base of clients. individuals and their families. Institutional asset management provides investment management, custody, and retirement We hold an equity investment in BlackRock. Our investment planning services. The institutional clients include in BlackRock is a key component of our diversified revenue corporations, unions, municipalities, non-profits, foundations strategy. The ability of BlackRock to grow assets under and endowments located primarily in our geographic management is the key driver of increases in its revenue, footprint. earnings and, ultimately, shareholder value. BlackRock’s strategies for growth in assets under management include a Asset Management Group is focused on being one of the focus on achieving client investment performance objectives premier bank-held wealth and institutional asset managers in in a manner consistent with their risk preferences and each of the markets it serves. The business seeks to deliver delivering excellent client service. The business dedicates high quality advice and investment management to our high significant resources to attracting and retaining talented net worth, ultra high net worth and institutional client sectors professionals and to the ongoing enhancement of its through a broad array of products and services. Asset investment technology and operating capabilities to deliver on Management Group’s primary goals are to service its clients, this strategy. grow its business and deliver solid financial performance with prudent risk and expense management. Distressed Assets Portfolio includes commercial residential development loans, cross-border leases, consumer brokered Residential Mortgage Banking directly originates primarily home equity loans, retail mortgages, non-prime mortgages, first lien residential mortgage loans on a nationwide basis with and residential construction loans. These loans require special a significant presence within the retail banking footprint, and servicing and management oversight given current market also originates loans through majority and minority owned conditions. We obtained the majority of these loans through affiliates. Mortgage loans represent loans collateralized by acquisitions of other companies.

4 The business activities of this segment are focused on SUPERVISION AND REGULATION maximizing the value of the assets while mitigating risk. OVERVIEW Business intent drives the inclusion of assets in this business PNC is a bank holding company registered under the Bank segment. Not all impaired loans are included in this business Holding Company Act of 1956, as amended (BHC Act) and a segment, nor are all of the loans included in this business financial holding company under the Gramm-Leach-Bliley segment considered impaired. The fair value marks taken Act (GLB Act). upon our acquisition of National City, the team we have in place and targeted asset resolution strategies help us to We are subject to numerous governmental regulations, some manage these assets. Additionally, our capital and liquidity of which are highlighted below. You should also read Note 21 positions provide us flexibility in a challenging environment Regulatory Matters in the Notes To Consolidated Financial to optimize returns on this portfolio for our shareholders. Statements in Item 8 of this Report, included here by reference, for additional information regarding our regulatory SUBSIDIARIES Our corporate legal structure at December 31, matters. Applicable laws and regulations restrict our 2010 consisted of one domestic subsidiary bank, including its permissible activities and investments and require compliance subsidiaries, and approximately 120 active non-bank with protections for loan, deposit, brokerage, fiduciary, mutual subsidiaries. Our bank subsidiary is PNC Bank, National fund and other customers, among other things. They also Association (PNC Bank, N.A.), headquartered in Pittsburgh, restrict our ability to repurchase stock or to receive dividends Pennsylvania. For additional information on our subsidiaries, from bank subsidiaries and impose capital adequacy see Exhibit 21 to this Report. requirements. The consequences of noncompliance can include substantial monetary and nonmonetary sanctions. STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES The following statistical information is included on the In addition, we are subject to comprehensive examination and indicated pages of this Report and is incorporated herein by supervision by, among other regulatory bodies, the Board of reference: Governors of the Federal Reserve System (Federal Reserve) Form 10-K page and the Office of the Comptroller of the Currency (OCC), which results in examination reports and ratings (which are Average Consolidated Balance Sheet not publicly available) that can impact the conduct and growth And Net Interest Analysis 189 of our businesses. These examinations consider not only Analysis Of Year-To-Year Changes compliance with applicable laws and regulations, but also In Net Interest Income 188 capital levels, asset quality and risk, management ability and Book Values Of Securities 37-40 and 127-132 performance, earnings, liquidity, and various other factors. Maturities And Weighted-Average The results of examination activity by any of our federal bank Yield Of Securities 132 regulators potentially can result in the imposition of Loan Types 34-36, 117-118 and 190 significant limitations on our activities and growth. These Selected Loan Maturities And regulatory agencies generally have broad discretion to impose Interest Sensitivity 192 restrictions and limitations on the operations of a regulated Nonaccrual, Past Due And entity where the agencies determine, among other things, that Restructured Loans And Other such operations are unsafe or unsound, fail to comply with Nonperforming Assets 69-75, 106-107, applicable law or are otherwise inconsistent with laws and 119 and 190 regulations or with the supervisory policies of these agencies. Potential Problem Loans And Loans This supervisory framework could materially impact the Held For Sale 41 and 69-76 conduct, growth and profitability of our operations. Summary Of Loan Loss Experience 75-76, 118-126 and 191 Assignment Of Allowance For Loan We are also subject to regulation by the Securities and And Lease Losses 75-76 and 191 Exchange Commission (SEC) by virtue of our status as a Average Amount And Average Rate public company and due to the nature of some of our Paid On Deposits 189 businesses. Time Deposits Of $100,000 Or More 146 and 192 Selected Consolidated Financial Data 23-24 As a regulated financial services firm, our relationships and Short-term borrowings – not included good standing with regulators are of fundamental importance as average balances during 2010, to the operation and growth of our businesses. The Federal 2009 and 2008 were less than 30% Reserve, OCC, SEC, and other domestic and foreign of total shareholders’ equity at the regulators have broad enforcement powers, and powers to end of each period. approve, deny, or refuse to act upon our applications or notices to conduct new activities, acquire or divest businesses or assets and deposits, or reconfigure existing operations.

5 We anticipate new legislative and regulatory initiatives over Legislative and regulatory developments to date, as well as the next several years, focused specifically on banking and those that come in the future, have had and are likely to other financial services in which we are engaged. These continue to have an impact on the conduct of our business. initiatives would be in addition to the actions already taken by The more detailed description of the significant regulations to Congress and the regulators, including EESA, the American which we are subject that follows is based on the current Recovery and Reinvestment Act of 2009 (Recovery Act), the regulatory environment and is subject to potentially material Credit Card Accountability Responsibility and Disclosure Act change. See also the additional information included in of 2009 (Credit CARD Act), the Secure and Fair Enforcement Item 1A of this Report under the risk factor discussing the for Mortgage Licensing Act (the SAFE Act), and the Dodd- impact of financial regulatory reform initiatives, including Frank Wall Street Reform and Consumer Protection Act Dodd-Frank and regulations promulgated to implement it, on (Dodd-Frank), as well as changes to the regulations the regulatory environment for the financial services industry. implementing the Real Estate Settlement Procedures Act, the Federal Truth in Lending Act, and the Electronic Fund On November 17, 2010, the Federal Reserve announced that, Transfer Act, including the new rules set forth in Regulation E together with the primary federal bank regulators, it would related to overdraft charges. undertake a supervisory assessment of the capital adequacy of the 19 bank holding companies (BHCs) that participate in the Dodd-Frank, which was signed into law on July 21, 2010, Supervisory Capital Assessment Program (SCAP). This comprehensively reforms the regulation of financial capital adequacy assessment will be based on a review of a institutions, products and services. Dodd-Frank requires comprehensive capital plan submitted by each SCAP BHC to various federal regulatory agencies to implement numerous the Federal Reserve and its primary federal bank regulator. rules and regulations. Because the federal agencies are granted Pursuant to this review, PNC filed its capital plan with the broad discretion in drafting these rules and regulations, many Federal Reserve on January 7, 2011. of the details and much of the impact of Dodd-Frank may not be known for many months or years. Among other things, The Federal Reserve will evaluate PNC’s capital plan based Dodd- Frank provides for new capital standards that eliminate on PNC’s risk profile and the strength of PNC’s internal the treatment of trust preferred securities as Tier 1 regulatory capital assessment process under the regulatory capital capital; requires that deposit insurance assessments be standards currently applicable and in accordance with PNC’s calculated based on an insured depository institution’s assets plans to address proposed revisions to the regulatory capital rather than its insured deposits and raises the minimum framework developed by the Basel Committee on Banking Designated Reserve Ratio (the balance in the Deposit Supervision (Basel III) and as set forth in relevant provisions Insurance Fund divided by estimated insured deposits) to of Dodd-Frank. The Federal Reserve’s evaluation will take 1.35%; places restrictions on a financial institution’s into consideration any capital distribution plans, such as plans derivatives activities; limits proprietary trading and owning or to increase common stock dividends or to reinstate or increase sponsoring hedge funds and private equity funds; places common stock repurchase programs. In accordance with the limitations on the interchange fees we can charge for debit Federal Reserve announcement of the SCAP evaluation, PNC card transactions; and establishes new minimum mortgage expects to receive its results from the Federal Reserve by the underwriting standards for residential mortgages. end of the first quarter 2011. Further, while the Basel III capital framework has yet to be finalized by the Federal Dodd-Frank also establishes, as an independent agency that is banking agencies, and is therefore subject to further change, organized as a bureau within the Federal Reserve, the Bureau management believes that, based on its current interpretation of Consumer Financial Protection (CFPB). Starting July 21, of the new framework, PNC will be Basel III compliant, on a 2011, the CFPB will have the authority to prescribe rules fully phased-in basis, during the first half of 2012. governing the provision of consumer financial products and services, and it is expected that the CFPB will issue new At least in part driven by the current economic and financial regulations, and amend existing regulations, regarding situation, there is an increased focus on fair lending and other consumer protection practices. Also on that date, the authority issues related to the mortgage industry. Ongoing mortgage- of the OCC to examine PNC Bank, N.A. for compliance with related regulatory reforms include measures aimed at reducing consumer protection laws, and to enforce such laws, will mortgage foreclosures. transfer to CFPB. Among other areas that have been receiving a high level of Additionally, new provisions concerning the applicability of regulatory focus over the last several years have been state consumer protection laws will become effective on compliance with anti-money laundering rules and regulations July 21, 2011. Questions may arise as to whether certain state and the protection of confidential customer information. consumer financial laws may be preempted after this date. We expect to experience an increase in regulation of our retail Additional legislation, changes in rules promulgated by the banking business and additional compliance obligations, Federal Reserve, the OCC, the FDIC, the CFPB, the SEC, other revenue impacts, and costs. federal and state regulatory authorities and self-regulatory

6 organizations, or changes in the interpretation or enforcement of not yet proposed or issued these standards, so we cannot predict existing laws and rules may directly affect the method of what the standards will be at this time. operation and profitability of our businesses. The profitability of our businesses could also be affected by rules and regulations Because of PNC’s voting ownership interest in BlackRock, that impact the business and financial communities in general, BlackRock is subject to the supervision and regulation of the including changes to the laws governing taxation, antitrust Federal Reserve. regulation and electronic commerce. Parent Company Liquidity and Dividends. The principal There are numerous rules governing the regulation of financial source of our liquidity at the parent company level is services institutions and their holding companies. dividends from PNC Bank, N.A. PNC Bank, N.A. is subject to Accordingly, the following discussion is general in nature and various federal restrictions on its ability to pay dividends to does not purport to be complete or to describe all of the laws PNC Bancorp, Inc., its direct parent. PNC Bank, N.A. is also and regulations that apply to us. To a substantial extent, the subject to federal laws limiting extensions of credit to its purpose of the regulation and supervision of financial services parent holding company and non-bank affiliates as discussed institutions and their holding companies is not to protect our in Note 21 Regulatory Matters in the Notes To Consolidated shareholders and our non-customer creditors, but rather to Financial Statements in Item 8 of this Report, which is protect our customers and the financial markets in general. incorporated herein by reference. Further information on bank level liquidity and parent company liquidity and on certain BANK REGULATION contractual restrictions is also available in “Liquidity Risk As a bank holding company and a financial holding company, Management” in the Risk Management section and “PNC we are subject to supervision and regular inspection by the Capital Trust E Trust Preferred Securities” and “Acquired Federal Reserve. PNC Bank, N.A. and its subsidiaries are Entity Trust Preferred Securities” in the Off-Balance Sheet subject to supervision and examination by applicable federal Arrangements and VIEs section of Item 7 of this Report, and banking agencies, principally the OCC. As a result of Dodd- in Note 13 Capital Securities of Subsidiary Trusts and Frank, subsidiaries of PNC Bank, N.A. will be subject to state Perpetual Trust Securities in the Notes To Consolidated law and regulation to the same extent as if they were not Financial Statements in Item 8 of this Report. subsidiaries of a national bank, such as PNC Bank, N.A. Additionally, based on Dodd-Frank, state authorities may Under Federal Reserve policy, a bank holding company is assert that certain state consumer financial laws that provide expected to serve as a source of financial strength to its different requirements or limitations than Federal law may subsidiary bank and to commit resources to support such apply to national banks, including PNC Bank, N.A. Such state bank. Consistent with the “source of strength” policy for laws may be preempted if they meet certain standards set forth subsidiary banks, the Federal Reserve has stated that, as a in Dodd-Frank. matter of prudent banking, a bank holding company generally should not maintain a rate of cash dividends unless its net Dodd-Frank established the 10-member inter-agency Financial income available to common shareholders has been sufficient Stability Oversight Council (FSOC), which is charged with to fully fund the dividends and the prospective rate of earnings identifying systemic risks and strengthening the regulation of retention appears to be consistent with the corporation’s financial holding companies and certain non-bank companies capital needs, asset quality and overall financial condition. deemed to be “systemically important” and could, in Further, in the November 17, 2010 announcement of its extraordinary cases, break up financial firms that are deemed to supervisory assessment of the capital adequacy of the bank be “too big to fail.” It also requires the Federal Reserve Board holding companies that participated in the Supervisory Capital to establish prudential standards for bank holding companies Assessment Program, discussed above, the Federal Reserve with total consolidated assets equal to or greater than $50 stated that it expects plans submitted in 2011 will reflect billion that are more stringent than the standards and conservative dividend payout ratios and net share repurchase requirements applicable to bank holding companies with assets programs, and that requests that imply dividend payout ratios below this threshold and that increase in stringency for bank above 30% of net income will receive particularly close holding companies that present heightened risk to the financial scrutiny. The Federal Reserve stated that it further expects that system, such as the extent of leverage and off-balance sheet plans will allow for significant accretion of capital after taking exposures. These heightened prudential standards may include into consideration all proposed capital actions. risk-based capital requirements, leverage limits, liquidity requirements, overall risk management requirements, resolution Additional Powers Under the GLB Act. The GLB Act permits plan and credit exposure requirements, and concentration limits. a qualifying bank holding company to become a “financial The FSOC also makes recommendations to the Federal Reserve holding company” and thereby to affiliate with financial Board concerning the establishment and refinement of these companies engaging in a broader range of activities than prudential standards and reporting and disclosure requirements. would otherwise be permitted for a bank holding company. These heightened standards will apply to PNC since we have Permitted affiliates include securities underwriters and more than $50 billion in assets. The Federal Reserve Board has dealers, insurance companies and companies engaged in other

7 activities that are determined by the Federal Reserve, in capitalized” depository institution may accept brokered consultation with the Secretary of the Treasury, to be deposits only with prior regulatory approval. At December 31, “financial in nature or incidental thereto” or are determined by 2010, PNC Bank, N.A. exceeded the required ratios for the Federal Reserve unilaterally to be “complementary” to classification as “well capitalized.” For additional discussion financial activities. We became a financial holding company of capital adequacy requirements, we refer you to “Funding as of March 13, 2000. and Capital Sources” in the Consolidated Balance Sheet Review section of Item 7 of this Report and to Note 21 The Federal Reserve is the “umbrella” regulator of a financial Regulatory Matters in the Notes To Consolidated Financial holding company, with its operating entities, such as its Statements in Item 8 of this Report. subsidiary broker-dealers, investment managers, investment companies, insurance companies and banks, also subject to the Laws and regulations limit the scope of our permitted jurisdiction of various federal and state “functional” regulators activities and investments. In addition to the activities that with normal regulatory responsibility for companies in their would be permitted to be conducted by a financial subsidiary, lines of business. national banks (such as PNC Bank, N.A.) and their operating subsidiaries may engage in any activities that are determined As subsidiaries of a financial holding company under the GLB by the OCC to be part of or incidental to the business of Act, our non-bank subsidiaries are generally allowed to banking. conduct new financial activities or acquire non-bank financial companies with after-the-fact notice to the Federal Reserve. In Moreover, examination ratings of “3” or lower, lower capital addition, our non-bank subsidiaries (and any financial ratios than peer group institutions, regulatory concerns subsidiaries of subsidiary banks) are now permitted to engage regarding management, controls, assets, operations or other in certain activities that were not permitted for banks and bank factors, can all potentially result in practical limitations on the holding companies prior to enactment of the GLB Act, and to ability of a bank or bank holding company to engage in new engage on less restrictive terms in certain activities that were activities, grow, acquire new businesses, repurchase its stock previously permitted. Among other activities, we currently or pay dividends, or to continue to conduct existing activities. rely on our status as a financial holding company to conduct merchant banking activities and securities underwriting and The Federal Reserve’s prior approval is required whenever we dealing activities. propose to acquire all or substantially all of the assets of any bank or thrift, to acquire direct or indirect ownership or In addition, the GLB Act permits national banks, such as PNC control of more than 5% of the voting shares of any bank or Bank, N.A., to engage in expanded activities through the thrift, or to merge or consolidate with any other bank holding formation of a “financial subsidiary.” PNC Bank, N.A. has company or thrift holding company. The BHC Act enumerates filed a financial subsidiary certification with the OCC and the factors the Federal Reserve Board must consider when currently engages in insurance agency activities through reviewing the merger of bank holding companies or the financial subsidiaries. PNC Bank, N.A. may also generally acquisition of banks. These factors include the competitive engage through a financial subsidiary in any activity that is effects of the proposal in the relevant geographic markets; the financial in nature or incidental to a financial activity. Certain financial and managerial resources and future prospects of the activities, however, are impermissible for a financial companies and banks involved in the transaction; the subsidiary of a national bank, including insurance under- convenience and needs of the communities to be served; and writing, insurance investments, real estate investment or the records of performance under the Community development, and merchant banking. Reinvestment Act of the insured depository institutions involved in the transaction. In cases involving interstate bank Other Federal Reserve and OCC Regulation. The federal acquisitions, the Board also must consider the concentration of banking agencies possess broad powers to take corrective deposits nationwide and in certain individual states. Our action as deemed appropriate for an insured depository ability to grow through acquisitions could be limited by these institution and its holding company. The extent of these approval requirements. powers depends upon whether the institution in question is considered “well capitalized,” “adequately capitalized,” At December 31, 2010, PNC Bank, N.A. was rated “undercapitalized,” “significantly undercapitalized” or “Outstanding” with respect to CRA. “critically undercapitalized.” Generally, the smaller an institution’s capital base in relation to its risk-weighted assets, FDIC Insurance. PNC Bank, N.A. is insured by the FDIC and the greater the scope and severity of the agencies’ powers, subject to premium assessments. Regulatory matters could ultimately permitting the agencies to appoint a receiver for the increase the cost of FDIC deposit insurance premiums to an institution. Business activities may also be influenced by an insured bank as FDIC deposit insurance premiums are “risk institution’s capital classification. For instance, only a “well based.” Therefore, higher fee percentages would be charged to capitalized” depository institution may accept brokered banks that have lower capital ratios or higher risk profiles. deposits without prior regulatory approval and an “adequately These risk profiles take into account weaknesses that are

8 found by the primary banking regulator through its applications for such approval, including internal controls, examination and supervision of the bank. A negative capital levels, management experience and quality, prior evaluation by the FDIC or a bank’s primary federal banking enforcement and disciplinary history and supervisory concerns. regulator could increase the costs to a bank and result in an aggregate cost of deposit funds higher than that of competing Our securities businesses with operations outside the United banks in a lower risk category. Also, the deposit insurance States, including BlackRock, are also subject to regulation by provisions of Dodd-Frank, as implemented by the FDIC, could appropriate authorities in the foreign jurisdictions in which increase the deposit insurance premiums for a bank such as they do business. PNC Bank, N.A. BlackRock has subsidiaries in securities and related SECURITIES AND RELATED REGULATION businesses subject to SEC and FINRA regulation, as described The SEC is the functional regulator of our registered broker- above, and a federally chartered nondepository trust company dealer and investment advisor subsidiaries. The registered subsidiary subject to the supervision and regulation of the broker-dealer subsidiaries are also subject to rules and OCC. For additional information about the regulation of regulations promulgated by the Financial Industry Regulatory BlackRock, we refer you to the discussion under the Authority (FINRA), among others. “Regulation” section of Item 1 Business in BlackRock’s most recent Annual Report on Form 10-K, which may be obtained Several of our subsidiaries are registered with the SEC as electronically at the SEC’s website at www.sec.gov. investment advisers and provide services to clients, other PNC affiliates and related entities, including registered investment In addition, Dodd-Frank subjects virtually all derivative companies. Under rules to be adopted under Dodd-Frank, we transactions (swaps) to regulation by either the Commodity expect to be required to register additional subsidiaries as Futures Trading Commission (CFTC) (in the case of non investment advisors to private equity funds. Broker-dealer security-based swaps) or the SEC (in the case of security- subsidiaries are subject to the requirements of the Securities based swaps). This section of Dodd-Frank was enacted to Exchange Act of 1934, as amended, and the regulations reduce systemic risk, increase transparency, and promote thereunder. Investment advisor subsidiaries are subject to the market integrity within the financial system by, among other requirements of the Investment Advisers Act of 1940, as things: (i) providing for the registration and comprehensive amended, and the regulations thereunder. An investment regulation of swap dealers (SDs) and major swap participants advisor to registered investment companies is also subject to (MSPs); (ii) imposing mandatory clearing and trade execution the requirements of the Investment Company Act of 1940, as requirements on all standardized swaps, with certain limited amended, and the regulations thereunder. exemptions; (iii) creating robust recordkeeping and real-time public data reporting regimes with respect to swaps; Our broker-dealer and investment advisory subsidiaries also (iv) imposing capital and margin requirements on SDs and may be subject to state securities laws and regulations. Over MSPs; (v) imposing business conduct requirements on SDs the past several years, the SEC and other governmental and MSPs in their dealings with counterparties; and agencies have been focused on the mutual fund, hedge fund (vi) enhancing the CFTC’s and SEC’s rulemaking and and broker-dealer industries. Congress and the SEC have enforcement authorities with respect to SDs and MSPs. Under adopted regulatory reforms and are continuing additional the rules anticipated under Dodd-Frank, we expect to register reforms that have increased, and are likely to continue to with the CFTC as an SD and accordingly be subject to all of increase, the extent of regulation of the mutual fund, hedge the new regulations and requirements imposed on an SD. fund and broker-dealer industries and impose additional compliance obligations and costs on our subsidiaries involved COMPETITION with those industries. We are subject to intense competition from various financial institutions and from non-bank entities that can offer a number Under provisions of the federal securities laws applicable to of similar products and services without being subject to bank broker-dealers, investment advisers and registered investment regulatory supervision and restrictions. companies and their service providers, a determination by a court or regulatory agency that certain violations have occurred In making loans, PNC Bank, N.A. competes with traditional at a company or its affiliates can result in fines, restitution, a banking institutions as well as consumer finance companies, limitation on permitted activities, disqualification to continue to leasing companies and other non-bank lenders, and conduct certain activities and an inability to rely on certain institutional investors including CLO managers, hedge funds, favorable exemptions. Certain types of infractions and mutual fund complexes and private equity firms. Loan pricing, violations can also affect a public company in its timing and structure and credit standards are extremely important in the ability to expeditiously issue new securities into the capital current environment as we seek to achieve appropriate risk- markets. In addition, certain changes in the activities of a adjusted returns. Traditional deposit-taking activities are also broker-dealer require approval from FINRA, and FINRA takes subject to pricing pressures and to customer migration as a into account a variety of considerations in acting upon result of intense competition for consumer investment dollars.

9 PNC Bank, N.A. competes for deposits with: about us at the offices of the New York Stock Exchange, 20 • Other commercial banks, Broad Street, New York, New York 10005. • Savings banks, • Savings and loan associations, We also make our Annual Report on Form 10-K, Quarterly • Credit unions, Reports on Form 10-Q, Current Reports on Form 8-K, and • Treasury management service companies, amendments to those reports filed or furnished to the SEC • Insurance companies, and pursuant to Section 13(a) or 15(d) of the Exchange Act • Issuers of commercial paper and other securities, available free of charge on or through our internet website as including mutual funds. soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. PNC’s corporate Our various non-bank businesses engaged in investment internet address is www.pnc.com and you can find this banking and private equity activities compete with: information at www.pnc.com/secfilings. Shareholders and • Commercial banks, bondholders may also obtain copies of these filings without • Investment banking firms, charge by contacting Shareholder Services at 800-982-7652 or • Merchant banks, via the online contact form at www.computershare.com/ • Insurance companies, contactus for copies without exhibits, or by contacting • Private equity firms, and Shareholder Relations at 800-843-2206 or via e-mail at • Other investment vehicles. [email protected] for copies of exhibits, including financial statement and schedule exhibits where applicable. In providing asset management services, our businesses The interactive data file (XBRL) exhibit is only available compete with: electronically. • Investment management firms, • Large banks and other financial institutions, Information about our Board of Directors and its committees • Brokerage firms, and corporate governance at PNC is available on PNC’s • Mutual fund complexes, and corporate website at www.pnc.com/corporategovernance. Our • Insurance companies. PNC Code of Business Conduct and Ethics is available on our corporate website at www.pnc.com/corporategovernance. In We include here by reference the additional information addition, any future amendments to, or waivers from, a regarding competition included in the Item 1A Risk Factors provision of the PNC Code of Business Conduct and Ethics section of this Report. that applies to our directors or executive officers (including the Chairman and Chief Executive Officer, the Chief Financial EMPLOYEES Employees totaled 50,769 at December 31, Officer and the Controller) will be posted at this internet 2010. This total includes 44,817 full-time and 5,952 part-time address. employees. Shareholders who would like to request printed copies of the SEC REPORTS AND CORPORATE GOVERNANCE PNC Code of Business Conduct and Ethics or our Corporate INFORMATION Governance Guidelines or the charters of our Board’s Audit, We are subject to the informational requirements of the Nominating and Governance, Personnel and Compensation, or Securities Exchange Act of 1934, as amended (Exchange Act), Risk Committees (all of which are posted on the PNC and, in accordance with the Exchange Act, we file annual, corporate website) may do so by sending their requests to quarterly and current reports, proxy statements, and other George P. Long, III, Chief Governance Counsel and Corporate information with the SEC. Our SEC File Number is Secretary, at corporate headquarters at One PNC Plaza, 249 001-09718. You may read and copy this information at the Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707. Copies SEC’s Public Reference Room located at 100 F Street NE, will be provided without charge to shareholders. Room 1580, Washington, D.C. 20549. You can obtain information on the operation of the Public Reference Room by Our common stock is listed on the New York Stock Exchange calling the SEC at 1-800-SEC-0330. (NYSE) under the symbol “PNC.”

You can also obtain copies of this information by mail from INTERNET INFORMATION the Public Reference Section of the SEC, 100 F Street NE, The PNC Financial Services Group, Inc.’s financial reports Washington, D.C. 20549, at prescribed rates. and information about its products and services are available on the internet at www.pnc.com. We provide information for The SEC also maintains an internet website that contains investors on our corporate website under “About PNC – reports, proxy and information statements, and other Investor Relations,” such as “Investor Events, Quarterly information about issuers, like us, who file electronically with Earnings, SEC Filings, Financial Information, Financial Press the SEC. The address of that site is www.sec.gov. You can Releases and Message from the Chairman. Under “Investor also inspect reports, proxy statements and other information Relations,” we will from time to time post information that we

10 believe may be important or useful to investors. We generally bringing PNC back into alignment with a moderate risk profile post the following shortly before or promptly following its and transitioning PNC’s balance sheet to more closely reflect first use or release: financially-related press releases our business model. We remain committed to returning to a (including earnings releases), various SEC filings, moderate risk profile characterized by disciplined credit presentation materials associated with earnings and other management, a stable operating risk environment, and more investor conference calls or events, and access to live and limited exposure to earnings volatility resulting from interest taped audio from such calls or events. When warranted, we rate fluctuations and the shape of the interest rate yield curve. will also use our website to expedite public access to time- We discuss our principal risk management processes and, in critical information regarding PNC in advance of distribution appropriate places, related historical performance in the Risk of a press release or a filing with the SEC disclosing the same Management section included in Item 7 of this Report. information. You can also find the SEC reports and corporate governance information described in the sections above in the The following are the key risk factors that affect us. Any one Investor Relations section of our website. or more of these risk factors could have a material adverse impact on our business, financial condition, results of Where we have included web addresses in this Report, such as operations or cash flows, in addition to presenting other our web address and web addresses of the SEC and of possible adverse consequences, which are described below. BlackRock, we have included those web addresses as inactive These risk factors and other risks are also discussed further in textual references only. Except as specifically incorporated by other sections of this Report. reference into this Report, information on those websites is not part hereof. The possibility of the moderate economic recovery returning to recessionary conditions or of turmoil or ITEM 1A – RISK FACTORS volatility in the financial markets would likely have an adverse effect on our business, financial position and We are subject to a number of risks potentially impacting our results of operations. business, financial condition, results of operations and cash flows. As a financial services organization, certain elements of The economy in the United States and globally began to risk are inherent in our transactions and are present in the recover from severe recessionary conditions in mid-2009 and business decisions we make. Thus, we encounter risk as part is currently in the midst of a moderate economic recovery. of the normal course of our business, and we design risk The sustainability of the moderate recovery is dependent on a management processes to help manage these risks. number of factors that are not within our control, such as a return to private sector job growth and investment, There are risks that are known to exist at the outset of a strengthening of housing sales and construction, continuation transaction. For example, every loan transaction presents of the economic recovery globally, and the timing of the exit credit risk (the risk that the borrower may not perform in from government credit easing policies. We continue to face accordance with contractual terms) and interest rate risk (a risks resulting from the aftermath of the severe recession potential loss in earnings or economic value due to adverse generally and the moderate pace of the current recovery. A movement in market interest rates or credit spreads), with the slowing or failure of the economic recovery could bring a nature and extent of these risks principally depending on the return to some or all of the adverse effects of the earlier financial profile of the borrower and overall economic recessionary conditions. conditions. We focus on lending that is within the boundaries of our risk framework, and manage these risks by adjusting Since the middle of 2007, there has been disruption and the terms and structure of the loans we make and through our turmoil in financial markets around the world. Throughout oversight of the borrower relationship, as well as through much of the United States, there have been dramatic declines management of our deposits and other funding sources. in the housing market, with falling home prices and increasing foreclosures, high levels of unemployment and Risk management is an important part of our business model. underemployment, and reduced earnings, or in some cases The success of our business is dependent on our ability to losses, for businesses across many industries, with reduced identify, understand and manage the risks presented by our investments in growth. business activities so that we can appropriately balance revenue generation and profitability. These risks include credit This overall environment resulted in significant stress for the risk, market risk, liquidity risk, operational risk, compliance financial services industry, and led to distress in credit and legal risk, and strategic and reputation risk. Our markets, reduced liquidity for many types of financial assets, shareholders have been well served by our focus on achieving including loans and securities, and concerns regarding the and maintaining a moderate risk profile. At December 31, financial strength and adequacy of the capitalization of 2008 with an economy in severe recession and with our then financial institutions. Some financial institutions around the recent acquisition of National City, our Consolidated Balance world have failed, some have needed significant additional Sheet did not reflect that desired risk profile. However, by capital, and others have been forced to seek acquisition December 31, 2010 we had made significant progress toward partners.

11 Reflecting concern about the stability of the financial markets provided to financial institutions could alter the generally and the strength of counterparties, as well as competitive landscape. concern about their own capital and liquidity positions, many • Increased regulation of compensation at financial lenders and institutional investors reduced or ceased providing services companies as part of government efforts to funding to borrowers. The resulting economic pressure on reform the industry may hinder our ability to attract, consumers and businesses and the lack of confidence in the retain and incentivize well-qualified individuals in financial markets exacerbated the state of economic distress key positions. and hampered, and to some extent continues to hamper, efforts • We may be required to pay significantly higher FDIC to bring about and sustain an economic recovery. deposit insurance premiums because the failure of many depository institutions during the financial These economic conditions have had an adverse effect on our crises significantly depleted the insurance fund of the business and financial performance. While the economy is FDIC and reduced the ratio of reserves to insured currently experiencing a moderate recovery, we expect these deposits, leading to regulatory reform efforts aimed conditions to continue to have an ongoing negative impact on at charging higher premiums in order to replenish us. A slowing or failure of the economic recovery would FDIC reserves. likely aggravate the adverse effects of these difficult economic • Investors in mortgage loans and other assets that we and market conditions on us and on others in the financial sell are more likely to seek indemnification from us services industry. against losses or otherwise seek to have us share in such losses or to request us to repurchase loans that In particular, we may face the following risks in connection they believe do not comply with applicable with the current economic and market environment: representations and warranties or other contractual • Investors may have less confidence in the equity provisions. markets in general and in financial services industry • We may be subject to additional fees and taxes as the stocks in particular, which could place downward government seeks to recover some of the costs of its pressure on PNC’s stock price and resulting market recovery efforts, in particular from the financial valuation. services industry. • Economic and market developments may further affect consumer and business confidence levels and The regulatory environment for the financial services may cause declines in credit usage and adverse industry is being significantly impacted by financial changes in payment patterns, causing increases in regulatory reform initiatives in the United States and delinquencies and default rates. elsewhere, including Dodd-Frank and regulations • Our ability to assess the creditworthiness of our promulgated to implement it. customers may be impaired if the models and approaches we use to select, manage, and underwrite The United States and other governments have undertaken our customers become less predictive of future major reform of the financial services industry, including new behaviors. efforts to protect consumers and investors from financial • The process we use to estimate losses in our credit abuse. We expect to face further increased regulation of our exposures requires difficult, subjective, and complex industry as a result of current and future initiatives intended to judgments, including with respect to economic provide economic stimulus, financial market stability and conditions and how economic conditions might enhanced regulation of financial services companies and to impair the ability of our borrowers to repay their enhance the liquidity and solvency of financial institutions and loans. At any point in time or for any length of time, markets. We also expect in many cases more aggressive such losses may no longer be capable of accurate enforcement of regulations on both the federal and state estimation, which may, in turn, adversely impact the levels. Compliance with regulations will increase our costs, reliability of the process for estimating losses and, reduce our revenue, and limit our ability to pursue certain therefore, the establishment of adequate reserves for business opportunities. those losses. • We could suffer decreases in customer desire to do Dodd-Frank mandates the most wide-ranging overhaul of business with us, whether as a result of a decreased financial industry regulation in decades. Dodd-Frank was demand for loans or other financial products and signed into law on July 21, 2010. Many parts of the law are services or decreased deposits or other investments in now in effect and others are now in the implementation stage, accounts with PNC. which is likely to continue for several years. The law requires • Competition in our industry could intensify as a that regulators, some of which are new regulatory bodies result of the increasing consolidation of financial created by Dodd-Frank, draft, review and approve more than services companies in connection with current market 200 implementing regulations and conduct numerous studies conditions, or otherwise. Governmental support that are likely to lead to more regulations.

12 Newly created regulatory bodies include the CFPB and the Our lending businesses and the value of the loans and debt FSOC. The CFPB has been given authority to regulate securities we hold may be adversely affected by economic consumer financial products and services sold by banks and conditions, including a reversal or slowing of the current non-bank companies and to supervise banks with assets of moderate recovery. Downward valuation of debt securities more than $25 billion for compliance with Federal could also negatively impact our capital position. consumer protection laws. The FSOC has been charged with identifying systemic risks and strengthening the regulation of Given the high percentage of our assets represented directly or financial holding companies and certain non-bank companies indirectly by loans, and the importance of lending to our deemed to be “systemically important” and could, in overall business, weak economic conditions are likely to have extraordinary cases, break up financial firms that are deemed a negative impact on our business and our results of to be “too big to fail.” operations. This could adversely impact loan utilization rates as well as delinquencies, defaults and customer ability to meet A number of reform provisions are likely to significantly obligations under the loans. This is particularly the case impact the ways in which banks and bank holding companies, during the period in which the aftermath of recessionary including PNC, do business. For example, Dodd-Frank conditions continues and the positive effects of economic prohibits banks from engaging in some types of proprietary recovery appear to be slow to materialize and unevenly spread trading, restricts the ability of banks to sponsor or invest in among our customers. private equity or hedge funds, and requires banks to move some derivatives businesses to separately capitalized Further, weak economic conditions would likely have a subsidiaries of holding companies. It also places limitations on negative impact on our business, our ability to serve our the interchange fees we can charge for debit transactions. customers, and our results of operations. Such conditions are While the exact impact of the preemption provisions of Dodd- likely to lead to increases in the number of borrowers who Frank is as yet unknown, state authorities may assert that become delinquent or default or otherwise demonstrate a certain state consumer financial laws that provide different decreased ability to meet their obligations under their loans. requirements or limitations than Federal law may apply to This would result in higher levels of non-performing loans, national banks, including PNC Bank, N.A. Such state laws net charge-offs, provision for credit losses and valuation may be preempted if they meet certain standards set forth in adjustments on loans held for sale. The value to us of other Dodd-Frank. Other provisions of Dodd-Frank will affect assets such as investment securities, most of which are debt regulatory oversight, holding company capital requirements, securities or other financial instruments supported by loans, risk retention for securitizations, and residential mortgage similarly would be negatively impacted by widespread products. decreases in credit quality resulting from a weakening of the economy. In addition, capital requirements imposed by Dodd-Frank, together with new standards under the so-called “Basel III” Our regional concentrations make us particularly at risk initiatives, will impose on banks and bank holding companies to adverse economic conditions in our primary retail the need to maintain more and higher quality capital than has banking footprint. historically been the case. Although many of our businesses are national in scope, our While much of how the Dodd-Frank and other financial retail banking business is concentrated within our retail branch industry reforms will change our current business operations network footprint, located primarily in Pennsylvania, Ohio, depends on the specific regulatory promulgations and New Jersey, Michigan, Maryland, Illinois, Indiana, Kentucky, interpretations, many of which have yet to be released or Florida, Virginia, Missouri, Delaware, Washington, D.C., and finalized, it is clear that the reforms, both under Dodd-Frank Wisconsin. Thus, we are particularly vulnerable to adverse and otherwise, will have a significant effect on our entire changes in economic conditions in these states or the industry. Although Dodd-Frank and other reforms will affect a Mid-Atlantic and Midwest regions more generally. number of the areas in which we do business, it is not clear at this time the full extent of the adjustments that will be Our business and performance are vulnerable to the required and the extent to which we will be able to adjust our impact of volatility in debt and equity markets. businesses in response to the requirements. Although it is difficult to predict the magnitude and extent of these effects at As most of our assets and liabilities are financial in nature, we this stage, we believe compliance with Dodd-Frank and its tend to be particularly sensitive to the performance of the implementing regulations and other initiatives will negatively financial markets. Turmoil and volatility in U.S. and global impact revenue and increase the cost of doing business, both financial markets, such as that experienced during the recent in terms of transition expenses and on an ongoing basis, and financial crisis, can be a major contributory factor to overall will also limit our ability to pursue certain business weak economic conditions, leading to some of the risks opportunities. discussed above, including the impaired ability of borrowers

13 and other counterparties to meet obligations to us. Financial • Such changes may decrease the demand for interest- market volatility also can have some of the following adverse rate based products and services, including loans and effects on PNC and our business and financial performance: deposit accounts. • It can affect the value or liquidity of our on-balance • Such changes can also affect our ability to hedge sheet and off-balance sheet financial instruments. various forms of market and interest rate risk and • It can affect the value of servicing rights, including may decrease the profitability or increase the risk those we carry at fair value. associated with such hedges. • It can affect our ability to access capital markets to • Movements in interest rates also affect mortgage raise funds necessary to support our businesses and prepayment speeds and could result in impairments maintain our overall liquidity position. Inability to of mortgage servicing assets or otherwise affect the access capital markets as needed, or at cost effective profitability of such assets. rates, could adversely affect our liquidity and results of operations. The monetary, tax and other policies of the government and its • It can affect the value of the assets that we manage or agencies, including the Federal Reserve, have a significant otherwise administer for others or the assets for which impact on interest rates and overall financial market we provide processing and information services. performance. These governmental policies can thus affect the Although we are not directly impacted by changes in activities and results of operations of banking companies such the value of such assets, decreases in the value of those as PNC. An important function of the Federal Reserve is to assets would affect related fee income and could result regulate the national supply of bank credit and certain interest in decreased demand for our services. rates. The actions of the Federal Reserve influence the rates of • It can affect the required funding of our pension interest that we charge on loans and that we pay on obligations to the extent that the value of the assets borrowings and interest-bearing deposits and can also affect supporting those obligations drops below minimum the value of our on-balance sheet and off-balance sheet levels. financial instruments. Both due to the impact on rates and by • In general, it can impact the nature, profitability or controlling access to direct funding from the Federal Reserve risk profile of the financial transactions in which we Banks, the Federal Reserve’s policies also influence, to a engage. significant extent, our cost of funding. We cannot predict the nature or timing of future changes in monetary, tax and other Volatility in the markets for real estate and other assets policies or the effect that they may have on our activities and commonly securing financial products has been and is likely financial results. to continue to be a significant contributor to overall volatility in financial markets. PNC faces increased risk arising out of its mortgage lending and servicing businesses. Our business and financial performance is impacted significantly by market interest rates and movements in Numerous federal and state governmental, legislative and those rates. The monetary, tax and other policies of regulatory authorities are investigating practices in the governmental agencies, including the Federal Reserve, mortgage lending and servicing industries. PNC has received have a significant impact on interest rates and overall inquiries from governmental, legislative and regulatory financial market performance over which we have no authorities on this topic and is cooperating with these control and which we may not be able to predict inquiries. These inquiries could lead to administrative, civil or adequately. criminal proceedings, possibly resulting in remedies including fines, penalties, restitution, or alterations in our business As a result of the high percentage of our assets and liabilities practices. that are in the form of interest-bearing or interest-related instruments, changes in interest rates, in the shape of the yield In addition to governmental or regulatory investigations, PNC, curve or in spreads between different market interest rates can like other companies with residential mortgage origination and have a material effect on our business, our profitability and the servicing operations, faces the risk of class actions, other value of our financial assets and liabilities. For example: litigation and claims from the owners of, investors in or • Changes in interest rates or interest rate spreads can purchasers of mortgages originated or serviced by PNC (or affect the difference between the interest that we earn securities backed by such mortgages); homeowners involved on assets and the interest that we pay on liabilities, in foreclosure proceedings; downstream purchasers of homes which impacts our overall net interest income and sold after foreclosure; title insurers; and other potential profitability. claimants. At this time PNC cannot predict the ultimate • Such changes can affect the ability of borrowers to overall cost to or effect upon PNC from governmental, meet obligations under variable or adjustable rate legislative or regulatory actions and private litigation or loans and other debt instruments, and can, in turn, claims arising out of residential mortgage lending and affect our loss rates on those assets. servicing practices, although such actions, litigation and

14 claims could, individually or in the aggregate, result in We grow our business in part by acquiring other financial significant expense. services companies from time to time, and these acquisitions present a number of risks and uncertainties PNC commenced a review of its residential mortgage related both to the acquisition transactions themselves and servicing procedures related to foreclosures after learning of to the integration of the acquired businesses into PNC the industry-wide servicing issues in late September 2010. after closing. After a review of the legal requirements in all fifty states and the District of Columbia, and of its own procedures, practices, Acquisitions of other financial services companies or financial information systems, and documentation, PNC has developed services assets present risks to PNC in addition to those enhanced procedures designed to ensure that the presented by the nature of the business acquired. In general, documentation accompanying the foreclosures it pursues acquisitions may be substantially more expensive to complete complies with all relevant law. The review, correction and than expected (including unanticipated costs incurred in refiling of foreclosure documentation in the various states is connection with the integration of the acquired company) and ongoing and could continue for a number of months, the anticipated benefits (including anticipated cost savings and depending upon federal, state, local and private judicial and strategic gains) may be significantly more difficult or take regulatory actions. longer to achieve than expected. In some cases, acquisitions involve our entry into new businesses or new geographic or Notwithstanding the actions that PNC has taken as described other markets, and these situations also present risks in in the preceding paragraph, PNC is one of the fourteen instances where we may be inexperienced in these new areas. federally regulated mortgage servicers subject to a publicly- disclosed interagency horizontal review of residential As a regulated financial institution, our ability to pursue or mortgage servicing operations. That review is expected to complete attractive acquisition opportunities could be result in formal enforcement actions against many or all of the negatively impacted by regulatory delays or other regulatory companies subject to review, which actions are expected to issues. In addition, regulatory and/or legal issues relating to incorporate remedial requirements, heightened mortgage the pre-acquisition operations of an acquired business may servicing standards and potential civil money penalties. PNC cause reputational harm to PNC following the acquisition and expects that it and PNC Bank will enter into consent orders integration of the acquired business into ours and may result with the Federal Reserve and the OCC, respectively, relating in additional future costs or regulatory limitations arising as a to the residential mortgage servicing operations of PNC Bank. result of those issues. The processes of integrating acquired See “Residential Mortgage Foreclosure Matters” in Item 7 of businesses, as well as the deconsolidation of divested this Report for additional information. PNC expects that these businesses, also pose many additional possible risks which consent orders, among other things, will describe certain could result in increased costs, liability or other adverse foreclosure-related practices and controls that the regulators consequences to PNC. Note 22 Legal Proceedings in the Notes found to be deficient and will require PNC and PNC Bank to, To Consolidated Financial Statements in Item 8 of this Report among other things, develop and implement plans and describes several legal proceedings related to pre-acquisition programs to enhance PNC’s servicing and foreclosure activities of companies we have acquired, in particular processes and take certain other remedial actions, and oversee National City. Other such legal proceedings may be compliance with the orders and the new plans and programs. commenced in the future. In addition, either or both of these agencies may seek civil money penalties. The soundness of other financial institutions could The issues described above may affect the value of our adversely affect us. ownership interests, direct or indirect, in property subject to foreclosure. In addition, possible delays in the schedule for Financial services institutions are interrelated as a result of processing foreclosures may result in an increase in trading, clearing, counterparty, or other relationships. We have nonperforming loans, additional servicing costs and possible exposure to many different industries and counterparties, and demands for contractual fees or penalties under servicing we routinely execute transactions with counterparties in the agreements. There is also an increased risk of incurring costs financial services industry, including brokers and dealers, related to further remedial and related efforts required by the commercial banks, investment banks, mutual and hedge funds, consent orders and related to repurchase requests arising out and other institutional clients. Many of these transactions of either the foreclosure process or origination issues. expose us to credit risk in the event of default of our Reputational damage arising out of this industry-wide inquiry counterparty or client. In addition, our credit risk may be could also have an adverse effect upon our existing mortgage exacerbated when the collateral held by us cannot be realized business and could reduce future business opportunities. upon or is liquidated at prices that are not sufficient to recover the full amount of the loan or derivative exposure due us. One or more of the foregoing could adversely affect PNC’s business, financial condition, results of operations or cash flows.

15 We operate in a highly competitive environment, in terms clients might diminish. Overall economic conditions may limit of the products and services we offer and the geographic the amount that customers are able or willing to invest. markets in which we conduct business, as well as in our labor markets where we compete for talented employees. The failure or negative performance of products of other Competition could adversely impact our customer financial institutions could lead to a loss of confidence in acquisition, growth and retention, as well as our credit similar products offered by us without regard to the spreads and product pricing, causing us to lose market performance of our products. Such a negative contagion could share and deposits and revenues. lead to withdrawals, redemptions and liquidity issues in such products and have a material adverse impact on our assets We are subject to intense competition from various financial under management and asset management revenues and institutions as well as from non-bank entities that engage in earnings. many similar activities without being subject to bank regulatory supervision and restrictions. This competition is As a regulated financial services firm, we are subject to described in Item 1 of this Report under “Competition.” numerous governmental regulations and to comprehensive examination and supervision by regulators, which affect In all, the principal bases for competition are pricing our business as well as our competitive position. (including the interest rates charged on loans or paid on interest-bearing deposits), product structure, the range of PNC is a bank and financial holding company and is subject to products and services offered, and the quality of customer numerous governmental regulations involving both its service (including convenience and responsiveness to business and organization. customer needs and concerns). The ability to access and use technology is an increasingly important competitive factor in Our businesses are subject to regulation by multiple bank the financial services industry, and it is a critically important regulatory bodies as well as multiple securities industry component to customer satisfaction as it affects our ability to regulators. Applicable laws and regulations restrict our ability deliver the right products and services. to repurchase stock or to receive dividends from subsidiaries that operate in the banking and securities businesses and Another increasingly competitive factor in the financial impose capital adequacy requirements. PNC’s ability to services industry is the competition to attract and retain service its obligations is dependent on the receipt of dividends talented employees across many of our business and support and advances from its subsidiaries. Applicable laws and areas. This competition leads to increased expenses in many regulations also restrict permissible activities and investments business areas and can also cause us to not pursue certain and require compliance with protections for loan, deposit, business opportunities. brokerage, fiduciary, mutual fund and other customers, and for the protection of customer information, among other things. A failure to adequately address the competitive pressures we The consequences of noncompliance can include substantial face could make it harder for us to attract and retain customers monetary and nonmonetary sanctions as well as damage to our across our businesses. On the other hand, meeting these reputation and businesses. competitive pressures could require us to incur significant additional expense or to accept risk beyond what we would In addition, we are subject to comprehensive examination and otherwise view as desirable under the circumstances. In supervision by banking and other regulatory bodies. addition, in our interest rate sensitive businesses, pressures to Examination reports and ratings (which often are not publicly increase rates on deposits or decrease rates on loans could available) and other aspects of this supervisory framework can reduce our net interest margin with a resulting negative impact materially impact the conduct, growth, and profitability of our on our net interest income. businesses.

The performance of our asset management businesses may Due to the current economic environment and issues facing be adversely affected by the relative performance of our the financial services industry, we anticipate that there will be products compared with offerings by competitors as well new legislative and regulatory initiatives over the next several as by overall economic and market conditions. years, including many focused specifically on banking and other financial services in which we are engaged. These Asset management revenue is primarily based on a percentage initiatives will be in addition to the actions already taken by of the value of the assets and thus is impacted by general Congress and the regulators, through enactment of EESA, the changes in market valuations, customer preferences and needs. Recovery Act, the Credit CARD Act, the SAFE Act, and In addition, investment performance is an important factor Dodd-Frank, as well as changes to the regulations influencing the level of assets. Poor investment performance implementing the Real Estate Settlement Procedures Act, the could impair revenue and growth as existing clients might Federal Truth in Lending Act, and the Electronic Fund withdraw funds in favor of better performing products. Transfer Act. Legislative and regulatory initiatives have had Additionally, the ability to attract funds from existing and new and are likely to continue to have an impact on the conduct of

16 our business. This impact could include rules and regulations The determination of the amount of loss allowances and that affect the nature and profitability of our business impairments taken on our assets is highly subjective and activities, how we use our capital, how we compensate and inaccurate estimates could materially impact our results of incent our employees, and other matters potentially having a operations or financial position. negative effect on our overall business results and prospects. The determination of the amount of loss allowances and asset Under the regulations of the Federal Reserve, a bank holding impairments varies by asset type and is based upon our company is expected to act as a source of financial strength periodic evaluation and assessment of known and inherent for its subsidiary banks. As a result, the Federal Reserve could risks associated with the respective asset class. Such require PNC to commit resources to PNC Bank, N.A. when evaluations and assessments are revised as conditions change doing so is not otherwise in the interests of PNC or its and new information becomes available. Management updates shareholders or creditors. its evaluations regularly and reflects changes in allowances and impairments in operations as such evaluations are revised. Our ability to pay dividends to shareholders is largely There can be no assurance that our management has dependent on dividends from our operating subsidiaries, accurately assessed the level of impairments taken and principally PNC Bank, N.A. Banks are subject to regulation allowances reflected in our financial statements. Furthermore, on the amount and circumstances of dividends they can pay to additional impairments may need to be taken or allowances their holding companies. provided for in the future. Historical trends may not be indicative of future impairments or allowances. We discuss these and other regulatory issues applicable to PNC, including some particular areas of current regulatory Our asset valuation may include methodologies, focus or concern, in the Supervision and Regulation section estimations and assumptions that are subject to differing included in Item 1 of this Report and in Note 21 Regulatory interpretations and this, along with market factors such as Matters in the Notes to Consolidated Financial Statements in volatility in one or more markets, could result in changes Item 8 of this Report and here by reference. to asset valuations that may materially adversely affect our results of operations or financial condition. A failure to have adequate policies and procedures to comply with regulatory requirements could expose us to damages, We must use estimates, assumptions, and judgments when fines and regulatory penalties and other regulatory actions, assets and liabilities are measured and reported at fair value. which could be significant, and could also injure our Assets and liabilities carried at fair value inherently result in a reputation with customers and others with whom we do higher degree of financial statement volatility. Fair values and business. the information used to record valuation adjustments for certain assets and liabilities are based on quoted market prices We must comply with generally accepted accounting and/or other observable inputs provided by independent third- principles established by the Financial Accounting Standards party sources, when available. When such third-party Board, accounting, disclosure and other rules set forth by the information is not available, we estimate fair value primarily SEC, income tax and other regulations established by the US by using cash flow and other financial modeling techniques Treasury and state and local taxing authorities, and revenue utilizing assumptions such as credit quality, liquidity, interest rulings and other guidance issued by the Internal Revenue rates and other relevant inputs. Changes in underlying factors Service, which affect our financial condition and results of or assumptions in any of the areas underlying our estimates operations. could materially impact our future financial condition and results of operations. Changes in accounting standards, or interpretations of those standards, can impact our revenue recognition and expense During periods of market disruption, including periods of policies and affect our estimation methods used to prepare the significantly rising or high interest rates, rapidly widening consolidated financial statements. Changes in income tax credit spreads or illiquidity, it may be more difficult to value regulations, revenue rulings, revenue procedures, and other certain of our assets if trading becomes less frequent and/or guidance can impact our tax liability and alter the timing of market data becomes less observable. There may be certain cash flows associated with tax deductions and payments. New asset classes that were historically in active markets with guidance often dictates how changes to standards and significant observable data that rapidly become illiquid due to regulations are to be presented in our consolidated financial market volatility, a loss in market confidence or other factors. statements, as either an adjustment to beginning retained In such cases, valuations in certain asset classes may require earnings for the period or as income or expense in current more subjectivity and management judgment; valuations may period earnings. In some cases, changes may be applied to include inputs and assumptions that are less observable or previously reported disclosures. require greater estimation. Further, rapidly changing and unprecedented market conditions in any particular market (e.g. credit, equity, fixed income, foreign exchange) could

17 materially impact the valuation of assets as reported within customer business, subject us to additional regulatory scrutiny, our consolidated financial statements, and the period-to-period or expose us to civil litigation and financial liability. changes in value could vary significantly. Our business and financial results could be impacted We are subject to operational risk. materially by adverse results in legal proceedings and governmental investigations and inquiries. Like all businesses, we are subject to operational risk, which represents the risk of loss resulting from human error, Many aspects of our business involve substantial risk of legal inadequate or failed internal processes and systems, and liability. We have been named or threatened to be named as external events. Operational risk also encompasses defendants in various legal proceedings arising from our compliance and legal risk, which is the risk of loss from business activities (and in some cases from the activities of violations of, or noncompliance with, laws, rules, regulations, companies we have acquired). In addition, we are regularly prescribed practices or ethical standards, as well as the risk of the subject of governmental investigations and other forms of our noncompliance with contractual and other obligations. We regulatory inquiry. We also are at risk when we have agreed to are also exposed to operational risk through our outsourcing indemnify others for legal proceedings and governmental arrangements, and the effect that changes in circumstances or investigations and inquiries they face, such as in connection capabilities of our outsourcing vendors can have on our ability with the sale of a business or assets by us. The results of these to continue to perform operational functions necessary to our legal proceedings and governmental investigations and business. Although we seek to mitigate operational risk inquiries could lead to significant monetary damages or through a system of internal controls which we review and penalties, restrictions on the way in which we conduct our update, no system of controls, however well designed and business, or reputational harm. maintained, is infallible. Control weaknesses or failures or other operational risks could result in charges, increased Although we establish accruals for legal proceedings when operational costs, harm to our reputation or foregone business information related to the loss contingencies represented by opportunities. those matters indicates both that a loss is probable and that the amount of loss can be reasonably estimated, we do not have We continually encounter technological change and we accruals for all legal proceedings where we face a risk of loss. could falter in our ability to remain competitive in this In addition, amounts accrued may not represent the ultimate arena. loss to us from the legal proceedings in question. Thus, our ultimate losses may be higher or lower, and possibly The financial services industry is continually undergoing rapid significantly so, than the amounts accrued for legal loss technological change with frequent introductions of new contingencies. technology-driven products and services. The effective use of technology increases efficiency and enables financial Our business and financial performance could be institutions to better serve customers and to reduce costs. Our adversely affected, directly or indirectly, by disasters, by continued success depends, in part, upon our ability to address terrorist activities or by international hostilities. the needs of our customers by using technology to provide products and services that satisfy customer demands and Neither the occurrence nor the potential impact of disasters, create efficiencies in our operations. We may not be able to terrorist activities and international hostilities can be effectively implement new technology-driven products and predicted. However, these occurrences could impact us services that allow us to remain competitive or be successful directly (for example, by causing significant damage to our in marketing these products and services to our customers. facilities or preventing us from conducting our business in the ordinary course), or indirectly as a result of their impact on Our information systems may experience interruptions or our borrowers, depositors, other customers, suppliers or other breaches in security. counterparties. We could also suffer adverse consequences to the extent that disasters, terrorist activities or international We also rely heavily on communications and information hostilities affect the financial markets or the economy in systems to conduct our business. Any failure, interruption or general or in any particular region. These types of impacts breach in security of these systems could result in disruptions could lead, for example, to an increase in delinquencies, to our accounting, deposit, loan and other systems, and bankruptcies or defaults that could result in our experiencing adversely affect our customer relationships. While we have higher levels of nonperforming assets, net charge-offs and policies and procedures designed to prevent or limit the effect provisions for credit losses. of these possible events, there can be no assurance that any such failure, interruption or security breach will not occur or, Our ability to mitigate the adverse consequences of such if any does occur, that it can be sufficiently remediated. The occurrences is in part dependent on the quality of our occurrence of any such failure, interruption or security breach resiliency planning, and our ability, if any, to anticipate the of our systems could damage our reputation, result in a loss of nature of any such event that occurs. The adverse impact of

18 disasters or terrorist activities or international hostilities also ITEM 4–RESERVED could be increased to the extent that there is a lack of preparedness on the part of national or regional emergency EXECUTIVE OFFICERS OF THE REGISTRANT responders or on the part of other organizations and businesses Information regarding each of our executive officers as of that we deal with, particularly those that we depend upon but February 18, 2011 is set forth below. Executive officers do not have no control over. have a stated term of office. Each executive officer has held the position or positions indicated or another executive ITEM 1B – UNRESOLVED STAFF COMMENTS position with the same entity or one of its affiliates for the past five years unless otherwise indicated below. There are no SEC staff comments regarding PNC’s periodic or current reports under the Exchange Act that are pending Year Name Age Position with PNC Employed (1) resolution. James E. Rohr 62 Chairman and Chief 1972 Executive Officer (2) ITEM 2–PROPERTIES Joseph C. Guyaux 60 President 1972 William S. Demchak 48 Senior Vice Chairman 2002 Thomas K. Whitford 54 Vice Chairman 1983 Our executive and primary administrative offices are located Enrico Dallavecchia 49 Executive Vice 2010 at One PNC Plaza, Pittsburgh, Pennsylvania. The 30-story President and Chief Risk Officer structure is owned by PNC Bank, N. A. Joan L. Gulley 63 Executive Vice 1986 President and Chief Human Resources We own or lease numerous other premises for use in Officer conducting business activities, including operations centers, Michael J. Hannon 54 Executive Vice 1982 offices, and branch and other facilities. We consider the President and Chief Credit Officer facilities owned or occupied under lease by our subsidiaries to Richard J. Johnson 54 Executive Vice 2002 be adequate. We include here by reference the additional President and Chief information regarding our properties in Note 10 Premises, Financial Officer E. William Parsley, III 45 Executive Vice 2003 Equipment and Leasehold Improvements in the Notes To President, Chief Consolidated Financial Statements in Item 8 of this Report. Investment Officer and Treasurer Helen P. Pudlin 61 Executive Vice 1989 ITEM 3–LEGAL PROCEEDINGS President and General Counsel Robert Q. Reilly 46 Executive Vice 1987 See the information set forth in Note 22 Legal Proceedings in President the Notes To Consolidated Financial Statements in Item 8 of Samuel R. Patterson 52 Senior Vice President 1986 this Report, which is incorporated here by reference. and Controller (1) Where applicable, refers to year employed by predecessor company. (2) Also serves as a director of PNC.

William S. Demchak has served as Senior Vice Chairman since February 2009. Since August 2005, he has had oversight responsibilities for the Corporation’s Corporate & Institutional Banking business, as well as PNC’s asset and liability management activities. Beginning in September 2010, he also assumed supervisory responsibility for all PNC businesses. He was appointed Vice Chairman in 2002.

Thomas K. Whitford has served as Vice Chairman since February 2009. He was appointed Chief Administrative Officer in May 2007. From April 2002 through May 2007 and then from November 2009 until April 2010, he served as Chief Risk Officer.

Enrico Dallavecchia has served as Executive Vice President and Chief Risk Officer since April 2010. Prior to joining PNC, he had been a risk management executive at FNMA and JPMorgan Chase & Co.

Joan L. Gulley has served as Chief Human Resources Officer since April 2008. She was appointed Senior Vice President in

19 April 2008 and then Executive Vice President in February • James E. Rohr, 62, Chairman and Chief Executive 2009. She served as Chief Executive Officer for PNC’s wealth Officer of PNC (1990) management business from 2002 to 2006. From 2006 until • Donald J. Shepard, 64, Retired Chairman of the April 2008, she served as Executive Vice President of PNC Executive Board and Chief Executive Officer of Bank, N.A. and was responsible for product and segment AEGON U.S. Holding Corporation (insurance) management, as well as advertising and brand management (2007) for PNC. • Lorene K. Steffes, 65, Independent Business Advisor (technology and technical services) (2000) Michael J. Hannon served as Executive Vice President and • Dennis F. Strigl, 64, Retired President and Chief Chief Credit Officer since November 2009. From February Operating Officer of Verizon Communications Inc. 2009 to November 2009 he served as Executive Vice (telecommunications) (2001) President and Chief Risk Officer and was previously Senior • Stephen G. Thieke, 64, Retired Non-executive Vice President and Chief Credit Officer. Chairman of Risk Metrics Group, Inc.; Retired Chairman, Risk Management Committee of J.P. Richard J. Johnson has served as Chief Financial Officer since Morgan (financial and investment banking services) August 2005. He was appointed Executive Vice President in (2002) February 2009 and was previously Senior Vice President. • Thomas J. Usher, 68, Non-executive Chairman of Marathon Oil Corporation (oil and gas industry) E. William Parsley, III has served as Treasurer and Chief (1992) Investment Officer since January 2004. He was appointed • George H. Walls, Jr., 68, former Chief Deputy Executive Vice President of PNC in February 2009. Auditor for the State of North Carolina (2006) • Helge H. Wehmeier, 68, Retired Vice Chairman of Helen P. Pudlin has served as General Counsel since 1994. Bayer Corporation (healthcare, crop protection, and She was appointed Executive Vice President in February 2009 chemicals) (1992) and was previously Senior Vice President. PART II Robert Q. Reilly has served as the head of PNC’s Asset Management Group since 2005. Previously, he held numerous ITEM 5–MARKET FOR REGISTRANT’SCOMMON management roles in both Corporate Banking and Asset EQUITY, RELATED STOCKHOLDER MATTERS AND Management. He was appointed Executive Vice President in February 2009. ISSUER PURCHASES OF EQUITY SECURITIES (a) (1) Our common stock is listed on the New York Stock DIRECTORS OF THE REGISTRANT Exchange and is traded under the symbol “PNC.” At the close The name, age and principal occupation of each of our of business on February 18, 2011, there were 79,520 common directors as of February 18, 2011, and the year he or she first shareholders of record. became a director is set forth below: • Richard O. Berndt, 68, Managing Partner of Holders of PNC common stock are entitled to receive Gallagher, Evelius & Jones LLP (law firm) (2007) dividends when declared by the Board of Directors out of • Charles E. Bunch, 61, Chairman and Chief Executive funds legally available for this purpose. Our Board of Officer of PPG Industries, Inc. (coatings, sealants Directors may not pay or set apart dividends on the common and glass products) (2007) stock until dividends for all past dividend periods on any • Paul W. Chellgren, 68, Operating Partner, Snow series of outstanding preferred stock have been paid or Phipps Group, LLC (private equity) (1995) declared and set apart for payment. The Board presently • Kay Coles James, 61, President and Founder of The intends to continue the policy of paying quarterly cash Gloucester Institute (non-profit) (2006) dividends. The amount of any future dividends will depend on • Richard B. Kelson, 64, Chairman and Chief economic and market conditions, our financial condition and Executive Officer, ServCo, LLC (strategic sourcing, operating results, and other factors, including contractual supply chain management) (2002) restrictions and applicable government regulations and • Bruce C. Lindsay, 69, Chairman and Managing policies (such as those relating to the ability of bank and Member of 2117 Associates, LLC (business non-bank subsidiaries to pay dividends to the parent company consulting firm) (1995) and regulatory capital limitations). Our ability to increase our • Anthony A. Massaro, 66, Retired Chairman and dividend is currently subject to the results of the Federal Chief Executive Officer of Lincoln Electric Reserve’s supervisory assessment of capital adequacy Holdings, Inc. (manufacturer of welding and cutting described under “Supervision And Regulation” in Item 1 of products) (2002) this Report. • Jane G. Pepper, 65, Retired President of the Pennsylvania Horticultural Society (non-profit) (1997)

20 The Federal Reserve has the power to prohibit us from paying (c) Details of our repurchases of PNC common stock during dividends without its approval. For further information the fourth quarter of 2010 are included in the following concerning dividend restrictions and restrictions on loans, table: dividends or advances from bank subsidiaries to the parent In thousands, except per share data company, you may review “Supervision And Regulation” in Maximum Total shares number of Item 1 of this Report, “Funding and Capital Sources” in the purchased as shares that Consolidated Balance Sheet Review section, “Liquidity Risk Average part of may yet be Total shares price publicly purchased Management” in the Risk Management section, “PNC Capital purchased paid per announced under the Trust E Trust Preferred Securities” and “Acquired Entity Trust 2010 period (a) (b) share programs (c) programs (c) October 1 – Preferred Securities” in the Off-Balance Sheet Arrangements October 31 158 $53.31 24,710 and VIEs section of Item 7 of this Report, and Note 13 Capital November 1 – Securities of Subsidiary Trusts and Perpetual Trust Securities November 30 227 $55.53 24,710 and Note 21 Regulatory Matters in the Notes To Consolidated December 1 – Financial Statements in Item 8 of this Report, which we December 31 190 $59.26 24,710 include here by reference. Total 575 $56.16 (a) In addition to the repurchases of PNC common stock during the fourth quarter of 2010 included in the table above, PNC called its $1.60 Cumulative Convertible We include here by reference additional information relating Preferred Stock – Series C and its $1.80 Cumulative Convertible Preferred Stock – to PNC common stock under the caption “Common Stock Series D for redemption in accordance with their terms effective October 1, 2010. PNC redeemed 18,118 outstanding shares of the Series C preferred stock at the Prices/Dividends Declared” in the Statistical Information redemption price of $20.00 per share and 26,010 outstanding shares of the Series D (Unaudited) section of Item 8 of this Report. preferred stock at the redemption price of $20.00 per share. (b) Reflects PNC common stock purchased in connection with our various employee benefit plans. No shares were purchased under the program referred to in note (c) to We include here by reference the information regarding our this table during the fourth quarter of 2010. Effective January 2011, employer compensation plans under which PNC equity securities are matching contributions to the PNC Incentive Savings Plan will no longer be made in authorized for issuance as of December 31, 2010 in the table PNC common stock, but rather in cash. Note 14 Employee Benefit Plans in the Notes To Consolidated Financial Statements in Item 8 of this Report includes (with introductory paragraph and notes) that appears under the additional information regarding our employee benefit plans that use PNC common caption “Item 3 Approval of 2006 Incentive Award Plan stock. Terms” in our Proxy Statement to be filed for the 2011 annual (c) Our current stock repurchase program allows us to purchase up to 25 million shares on the open market or in privately negotiated transactions. This program was meeting of shareholders and is incorporated by reference authorized on October 4, 2007 and will remain in effect until fully utilized or until herein and in Item 12 of this Report. modified, superseded or terminated.

Our registrar, stock transfer agent, and dividend disbursing agent is: Computershare Trust Company, N.A. 250 Royall Street Canton, MA 02021 800-982-7652

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

(a) (2) None.

(b) Not applicable.

21 Common Stock Performance Graph The Peer Group for the preceding chart and table consists of This graph shows the cumulative total shareholder return (i.e., the following companies: BB&T Corporation; Bank of price change plus reinvestment of dividends) on our common America Corporation; Capital One Financial, Inc.; Comerica stock during the five-year period ended December 31, 2010, Inc.; Fifth Third Bancorp; JPMorgan Chase; KeyCorp; M&T as compared with: (1) a selected peer group of our Bank; The PNC Financial Services Group, Inc.; Regions competitors, called the “Peer Group;” (2) an overall stock Financial Corporation; SunTrust Banks, Inc.; U.S. Bancorp; market index, the S&P 500 Index; and (3) a published industry and Wells Fargo & Co. This Peer Group was approved by the index, the S&P 500 Banks. The yearly points marked on the Board’s Personnel and Compensation Committee (the horizontal axis of the graph correspond to December 31 of Committee) for 2010. The Committee has approved the same that year. The stock performance graph assumes that $100 was Peer Group for 2011. invested on January 1, 2006 for the five-year period and that any dividends were reinvested. The table below the graph Each yearly point for the Peer Group is determined by shows the resultant compound annual growth rate for the calculating the cumulative total shareholder return for each performance period. company in the Peer Group from December 31, 2005 to December 31 of that year (End of Month Dividend Comparison of Cumulative Five Year Total Return Reinvestment Assumed) and then using the median of these 200 returns as the yearly plot point.

150 In accordance with the rules of the SEC, this section, captioned “Common Stock Performance Graph,” shall not be incorporated by reference into any of our future filings made 100 under the Securities Exchange Act of 1934 or the Securities Dollars Act of 1933. The Common Stock Performance Graph, including its accompanying table and footnotes, is not deemed 50 to be soliciting material or to be filed under the Exchange Act or the Securities Act. PNC S&P 500 Index S&P 500 Banks Peer Group 0 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10

Assumes $100 investment at Close of 5-Year Market on December 31, 2005 Compound Base Total Return = Price change plus reinvestment Growth Period of dividends Rate Dec. 05 Dec. 06 Dec. 07 Dec. 08 Dec. 09 Dec. 10 PNC 100 123.60 113.35 88.22 97.27 112.64 2.41% S&P 500 Index 100 115.79 122.16 76.96 97.33 111.99 2.29% S&P 500 Banks 100 116.13 81.54 42.81 39.99 47.93 (13.68%) Peer Group 100 116.82 83.90 46.27 62.04 78.92 (4.62%)

22 ITEM 6–SELECTED FINANCIAL DATA

Year ended December 31 Dollars in millions, except per share data 2010 (a) 2009 (a) 2008 2007 2006

SUMMARY OF OPERATIONS Interest income $ 11,150 $ 12,086 $ 6,301 $ 6,144 $ 4,592 Interest expense 1,920 3,003 2,447 3,197 2,309 Net interest income 9,230 9,083 3,854 2,947 2,283 Noninterest income (b) 5,946 7,145 2,442 2,944 5,422 Total revenue 15,176 16,228 6,296 5,891 7,705 Provision for credit losses (c) 2,502 3,930 1,517 315 124 Noninterest expense 8,613 9,073 3,685 3,652 3,795 Income from continuing operations before income taxes and noncontrolling interests 4,061 3,225 1,094 1,924 3,786 Income taxes 1,037 867 298 561 1,311 Income from continuing operations before noncontrolling interests 3,024 2,358 796 1,363 2,475 Income from discontinued operations (net of income taxes of $338, $54, $63, $66 and $52) (d) 373 45 118 128 124 Net income 3,397 2,403 914 1,491 2,599 Less: Net income (loss) attributable to noncontrolling interests (15) (44) 32 24 4 Preferred stock dividends (e) 146 388 21 1 Preferred stock discount accretion and redemptions (e) 255 56 Net income attributable to common shareholders (e) $ 3,011 $ 2,003 $ 861 $ 1,467 $ 2,594

PER COMMON SHARE Basic earnings Continuing operations $ 5.08 $ 4.30 $ 2.15 $ 4.02 $ 8.39 Discontinued operations (d) .72 .10 .34 .38 .42 Net income $ 5.80 $ 4.40 $ 2.49 $ 4.40 $ 8.81 Diluted earnings Continuing operations $ 5.02 $ 4.26 $ 2.10 $ 3.94 $ 8.29 Discontinued operations (d) .72 .10 .34 .38 .42 Net income $ 5.74 $ 4.36 $ 2.44 $ 4.32 $ 8.71 Book value $ 56.29 $ 47.68 $ 39.44 $ 43.60 $ 36.80 Cash dividends declared $ .40 $ .96 $ 2.61 $ 2.44 $ 2.15 (a) Includes the impact of National City, which we acquired on December 31, 2008. (b) Amount for 2009 includes recognition of a $1.1 billion pretax gain on our portion of the increase in BlackRock’s equity resulting from the value of BlackRock shares issued in connection with BlackRock’s acquisition of Barclays Global Investors (BGI) on December 1, 2009. Amount for 2006 includes the impact of a pretax gain of $2.1 billion on the BlackRock/Merrill Lynch Investment Managers transaction. (c) Amount for 2008 includes the $504 million conforming provision for credit losses related to our National City acquisition. (d) Includes results of operations for GIS for all years presented and the related after-tax gain on sale. We sold GIS effective July 1, 2010, resulting in a pretax gain of $639 million, or $328 million after taxes, which was recognized during the third quarter of 2010. See Sale of PNC Global Investment Servicing in the Executive Summary section of Item 7 and Note 2 Divestiture in the Notes To Consolidated Financial Statements included in Item 8 of this Report for additional information. (e) We redeemed the Series N (TARP) Preferred Stock on February 10, 2010. In connection with the redemption, we accelerated the accretion of the remaining issuance discount on the Series N Preferred Stock and recorded a corresponding reduction in retained earnings of $250 million in the first quarter of 2010. This resulted in a one-time, noncash reduction in net income attributable to common shareholders and related basic and diluted earnings per share. The Series N Preferred Stock was issued on December 31, 2008.

Certain prior period amounts have been reclassified to conform with the current period presentation, which we believe is more meaningful to readers of our consolidated financial statements.

For information regarding certain business risks, see Item 1A Risk Factors and the Risk Management section of Item 7 of this Report. Also, see our Cautionary Statement Regarding Forward-Looking Information included in Item 7 of this Report for certain risks and uncertainties that could cause actual results to differ materially from those anticipated in forward-looking statements or from historical performance.

23 At or for the year ended December 31 Dollars in millions, except as noted 2010 (a) 2009 (a) 2008 (b) 2007 2006

BALANCE SHEET HIGHLIGHTS Assets $264,284 $269,863 $291,081 $138,920 $101,820 Loans 150,595 157,543 175,489 68,319 50,105 Allowance for loan and lease losses 4,887 5,072 3,917 830 560 Interest-earning deposits with banks 1,610 4,488 14,859 346 339 Investment securities 64,262 56,027 43,473 30,225 23,191 Loans held for sale 3,492 2,539 4,366 3,927 2,366 Goodwill and other intangible assets 10,753 12,909 11,688 9,551 4,043 Equity investments 9,220 10,254 8,554 6,045 5,330 Noninterest-bearing deposits 50,019 44,384 37,148 19,440 16,070 Interest-bearing deposits 133,371 142,538 155,717 63,256 50,231 Total deposits 183,390 186,922 192,865 82,696 66,301 Borrowed funds (c) 39,488 39,261 52,240 30,931 15,028 Total shareholders’ equity 30,242 29,942 25,422 14,854 10,788 Common shareholders’ equity 29,596 22,011 17,490 14,847 10,781

ASSETS UNDER ADMINISTRATION (billions) Discretionary assets under management $ 108 $ 103 $ 103 $ 74 $ 55 Nondiscretionary assets under management 104 102 125 112 85 Total assets under administration $ 212 $ 205 $ 228 $ 186 $ 140

SELECTED RATIOS From continuing operations Noninterest income to total revenue 39 44 39 50 70 Efficiency 57 56 59 62 49 From net income Net interest margin (d) 4.14% 3.82% 3.37% 3.00% 2.92% Return on Average common shareholders’ equity 10.88 9.78 6.52 10.70 28.01 Average assets 1.28 .87 .64 1.21 2.74 Loans to deposits 82 84 91 83 76 Dividend payout 6.8 21.4 104.6 55.0 24.4 Tier 1 common 9.8 6.0 4.8 5.4 8.7 Tier 1 risk-based 12.1 11.4 9.7 6.8 10.4 Common shareholders’ equity to total assets 11.2 8.2 6.0 10.7 10.6 Average common shareholders’ equity to average assets 10.4 7.2 9.6 11.3 9.8

SELECTED STATISTICS Employees 50,769 55,820 59,595 28,320 23,783 Retail Banking branches 2,470 2,513 2,581 1,102 848 ATMs 6,673 6,473 6,233 3,900 3,581 Residential mortgage servicing portfolio (billions) $ 139 $ 158 $ 187 Commercial mortgage servicing portfolio (billions) $ 266 $ 287 $ 270 $ 243 $ 200 (a) Includes the impact of National City, which we acquired on December 31, 2008. (b) Includes the impact of National City except for the following Selected Ratios: Noninterest income to total revenue, Efficiency, Net interest margin, Return on Average common shareholders’ equity, Return on Average assets, Dividend payout, and Average common shareholders’ equity to average assets. (c) Includes long-term borrowings of $24.8 billion, $26.3 billion, $33.6 billion, $12.6 billion and $6.6 billion for 2010, 2009, 2008, 2007 and 2006, respectively. Borrowings which mature more than one year after December 31, 2010 are considered to be long-term. (d) Calculated as taxable-equivalent net interest income divided by average earning assets. The interest income earned on certain earning assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments. To provide more meaningful comparisons of net interest margins for all earning assets, we use net interest income on a taxable- equivalent basis in calculating net interest margin by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments. This adjustment is not permitted under GAAP on the Consolidated Income Statement. The taxable-equivalent adjustments to net interest income for the years 2010, 2009, 2008, 2007 and 2006 were $81 million, $65 million, $36 million, $27 million and $25 million, respectively.

24 ITEM 7–MANAGEMENT’S DISCUSSION AND risk philosophy throughout our expanded franchise. Our ANALYSIS OF FINANCIAL CONDITION AND actions have created a well-positioned balance sheet, strong bank level liquidity and investment flexibility to adjust, where RESULTS OF OPERATIONS appropriate and permissible, to changing interest rates and market conditions. EXECUTIVE SUMMARY PNC is one of the largest diversified financial services We also expect to build capital via retained earnings while companies in the United States and is headquartered in having opportunities to return capital to shareholders during Pittsburgh, Pennsylvania. 2011subject to regulatory approvals. See the Funding and Capital Sources section of the Consolidated Balance Sheet PNC has businesses engaged in retail banking, corporate and Review section and the Liquidity Risk Management section of institutional banking, asset management, and residential this Item 7 and the Supervision and Regulation section in mortgage banking, providing many of its products and Item 1 of this Report. services nationally and others in PNC’s primary geographic markets located in Pennsylvania, Ohio, New Jersey, Michigan, SALE OF PNC GLOBAL INVESTMENT SERVICING Maryland, Illinois, Indiana, Kentucky, Florida, Virginia, On July 1, 2010, we sold PNC Global Investment Servicing Missouri, Delaware, Washington, D.C., and Wisconsin. PNC Inc. (GIS), a leading provider of processing, technology and also provides certain products and services internationally. business intelligence services to asset managers, broker- dealers and financial advisors worldwide, for $2.3 billion in On December 31, 2008, PNC acquired National City. Our cash pursuant to a definitive agreement entered into on consolidated financial statements for 2009 and 2010 reflect February 2, 2010. The pretax gain recorded in the third quarter the impact of National City. of 2010 related to this sale was $639 million, or $328 million after taxes. KEY STRATEGIC GOALS We manage our company for the long term and are focused on Results of operations of GIS through June 30, 2010 and the returning to a moderate risk profile while maintaining strong related after-tax gain on sale in the third quarter of 2010 are capital and liquidity positions, investing in our markets and presented as income from discontinued operations, net of products, and embracing our corporate responsibility to the income taxes, on our Consolidated Income Statement for the communities where we do business. periods presented in this Report. Once we entered into the sales agreement, GIS was no longer a reportable business Our strategy to enhance shareholder value centers on driving segment. Further information regarding the GIS sale is growth in pre-tax, pre-provision earnings by achieving growth included in Note 2 Divestiture in the Notes To Consolidated in revenue from our balance sheet and diverse business mix Financial Statements in Item 8 of this Report. that exceeds growth in expenses controlled through disciplined cost management. RECENT MARKET AND INDUSTRY DEVELOPMENTS The economic turmoil that began in the middle of 2007 and The primary drivers of revenue growth are the acquisition, continued through most of 2008 and 2009 has settled into a expansion and retention of customer relationships. We strive modest economic recovery. This has been accompanied by to expand our customer base by offering convenient banking dramatic changes in the competitive landscape. options and leading technology solutions, providing a broad range of fee-based and credit products and services, focusing Beginning in late 2008, efforts by the Federal government, on customer service, and through a significantly enhanced including the US Congress, the US Department of the branding initiative. This strategy is designed to give our Treasury, the Federal Reserve, the FDIC, and the Securities consumer customers choices based on their needs. Rather than and Exchange Commission, to stabilize and restore confidence striving to optimize fee revenue in the short term, our in the financial services industry have impacted and will likely approach is focused on effectively growing targeted market continue to impact PNC and our stakeholders. These efforts, share and “share of wallet.” We may also grow revenue which will continue to evolve, include the Emergency through appropriate and targeted acquisitions and, in certain Economic Stabilization Act of 2008, the American Recovery businesses, by expanding into new geographical markets. and Reinvestment Act of 2009, Dodd-Frank, in particular, and other legislative, administrative and regulatory initiatives, We are focused on our strategies for quality growth. We are including the new rules set forth in Regulation E related to committed to re-establishing a moderate risk profile overdraft charges. characterized by disciplined credit management and limited exposure to earnings volatility resulting from interest rate Dodd-Frank is extensive, complicated and comprehensive fluctuations and the shape of the interest rate yield curve. We legislation that impacts practically all aspects of a banking made substantial progress in transitioning our balance sheet organization. Dodd-Frank will negatively impact revenue and throughout 2009 and 2010, working to return to our moderate increase both the direct and indirect costs of doing business

25 for PNC. It includes provisions that could increase regulatory Dodd-Frank and its implementation, as well as other statutory fees and deposit insurance assessments and impose heightened and regulatory initiatives that will be ongoing, will introduce capital and prudential standards, while at the same time numerous regulatory changes over the next several years. impacting the nature and costs of PNC’s businesses, including While we believe that we are well positioned to navigate consumer lending, private equity investment, derivatives through this process, we cannot predict the ultimate impact of transactions, interchange fees on debit card transactions, and these actions on PNC’s business plans and strategies. asset securitizations. RESIDENTIAL MORTGAGE FORECLOSURE MATTERS Until such time as the regulatory agencies issue final Beginning in the third quarter of 2010, mortgage foreclosure regulations implementing all of the numerous provisions of documentation practices among US financial institutions Dodd-Frank, a process that will extend at least over the next received heightened attention by regulators and the media. year and might last several years, PNC will not be able to fully PNC’s US market share for residential servicing is less than assess the impact the legislation will have on its businesses. 2%. The vast majority of our servicing business is on behalf of However, we believe that the expected changes will be other investors, principally the Federal Home Loan Mortgage manageable for PNC and will have a smaller impact on us Corporation (FHLMC) and the Federal National Mortgage than on our larger peers. Association (FNMA). Following the initial reports regarding these practices, we conducted an internal review of our Included in these recent legislative and regulatory foreclosure procedures. Based upon our review, we believe developments are evolving regulatory capital standards for that PNC has systems designed to ensure that no foreclosure financial institutions. Dodd-Frank requires the Federal proceeds unless the loan is genuinely in default. On average, Reserve Board to establish capital requirements that would, our residential mortgage loans are delinquent approximately among other things, eliminate the Tier 1 treatment of trust six months before foreclosure proceedings are initiated. preferred securities following a phase-in period expected to begin in 2013. Evolving standards also include the so-called Similar to other banks, however, we identified issues “Basel III” initiatives that are part of the Basel II effort by regarding some of our foreclosure practices. Accordingly, we international banking supervisors to update the original delayed pursuing individual foreclosures and are moving international bank capital accord (Basel I), which has been in forward on such matters only when we are confident that any effect since 1988. The recent Basel III capital initiative, which pending documentation issues had been resolved. We are also has the support of US banking regulators, includes heightened proceeding with new foreclosures under enhanced procedures capital requirements for major banking institutions in terms of designed as part of this review to minimize the risk of errors both higher quality capital and higher regulatory capital ratios. related to the processing of documentation in foreclosure Basel III capital standards will require implementing cases. regulations by the banking regulators. These regulations will become effective under a phase-in period beginning January 1, In addition, the Federal Reserve and the OCC, together with 2013, and will become fully effective January 1, 2019. the FDIC and others, commenced a publicly-disclosed interagency horizontal review of residential mortgage Dodd-Frank also establishes, as an independent agency that is servicing operations at PNC and thirteen other federally organized as a bureau within the Federal Reserve, the Bureau regulated mortgage servicers. That review is expected to result of Consumer Financial Protection (CFPB). Starting July 21, in formal enforcement actions against many or all of the 2011, the CFPB will have the authority to prescribe rules companies subject to review, which actions are expected to governing the provision of consumer financial products and incorporate remedial requirements, heightened mortgage services, and it is expected that the CFPB will issue new servicing standards and potential civil money penalties. In regulations, and amend existing regulations, regarding particular, PNC expects that it will enter into a consent order consumer protection practices. Also on that date, the authority with the Federal Reserve and that PNC Bank will enter into a of the OCC to examine PNC Bank, N.A. for compliance with consent order with the OCC. PNC anticipates that the consent consumer protection laws, and to enforce such laws, will orders will require, among other things, that PNC undertake transfer to CFPB. certain actions described below. PNC expects that the orders will discuss certain purported deficiencies regarding, among Additionally, new provisions concerning the applicability of other things, the manner in which PNC Bank handled various state consumer protection laws will become effective on loan servicing activities relating to residential mortgage July 21, 2011. Questions may arise as to whether certain state foreclosures, the resources and controls for, and risk consumer financial laws that may have previously been management of, such servicing activities and oversight of preempted are no longer preempted after this date. Depending certain third-party providers. PNC further expects that the on how such questions are resolved, we may experience an orders will require commitments regarding a range of increase in regulation of our retail banking business and remedial actions, some of which we will already have additional compliance obligations, revenue impacts, and costs. undertaken as a result of our recent review of residential mortgage servicing procedures.

26 While the two consent orders have not been finalized, PNC PNC did not issue any securities under the TLGP-Debt expects the orders to cover a range of matters. Among other Guarantee Program during 2010. things, we expect the orders to require PNC and/or PNC Bank to develop and implement written plans and programs and In December 2008, PNC Funding Corp issued fixed and undertake other remedial actions with respect to various floating rate senior notes totaling $2.9 billion under the matters relating to loan servicing, loss mitigation and other FDIC’s TLGP-Debt Guarantee Program. In March 2009, PNC foreclosure activities and operations, including, among other Funding Corp issued floating rate senior notes totaling $1.0 things, enterprise risk management, risk assessment and billion under this program. Each of these series of senior notes management, compliance, internal audit, outsourcing of is guaranteed through maturity by the FDIC. foreclosure and related functions, management information systems, borrower communications, potential related financial From October 14, 2008 through December 31, 2009, PNC injuries, and activities with respect to the Mortgage Electronic Bank, National Association (PNC Bank, N.A.) participated in Registration System (a widely used electronic registry the TLGP-Transaction Account Guarantee Program. Under designed to track mortgage servicing rights and ownership of this program, all non-interest bearing transaction accounts U.S. residential mortgage loans). We also expect that the were fully guaranteed by the FDIC for the entire amount in the orders will require PNC, PNC Bank and their boards to take account. Coverage under this program is in addition to, and appropriate steps to ensure compliance with the orders and separate from, the coverage available under the FDIC’s with the plans and programs to be established under the general deposit insurance rules. orders. Beginning January 1, 2010, PNC Bank, N.A. ceased participating in this program. Dodd-Frank, however, extended For additional information, please see Risk Factors in Item 1A the program for all banks for two years, beginning of this Report and Note 22 Legal Proceedings and Note 23 December 31, 2010. Therefore, PNC Bank, N.A. is again Commitments and Guarantees in the Notes To Consolidated participating in the program, through December 31, 2012. Financial Statements in Item 8 of this Report. Home Affordable Modification Program (HAMP) PNC’S PARTICIPATION IN SELECT GOVERNMENT PROGRAMS As part of its effort to stabilize the US housing market, in TARP Capital Purchase Program March 2009 the Obama Administration published detailed We redeemed the Series N (TARP) Preferred Stock on guidelines implementing HAMP, and authorized servicers to February 10, 2010. In connection with the redemption, we begin loan modifications. PNC began participating in HAMP accelerated the accretion of the remaining issuance discount through its then subsidiary National City Bank in May 2009 on the Series N Preferred Stock and recorded a corresponding and directly through PNC Bank, N.A. in July 2009, and reduction in retained earnings of $250 million in the first entered into an agreement on October 1, 2010 to participate in quarter of 2010. This resulted in a one-time, noncash the Second Lien Program. HAMP is scheduled to terminate as reduction in net income attributable to common shareholders of December 31, 2012. and related basic and diluted earnings per share. See Repurchase of Outstanding TARP Preferred Stock and Sale by Home Affordable Refinance Program (HARP) US Treasury of TARP Warrant in Note 18 Equity in the Notes Another part of its efforts to stabilize the US housing market To Consolidated Financial Statements in Item 8 of this Report is the Obama Administration’s Home Affordable Refinance for additional information. Program (HARP), which provided a means for certain borrowers to refinance their mortgage loans. PNC began FDIC Temporary Liquidity Guarantee Program participating in HARP in May 2009. The program terminates The FDIC’s TLGP is designed to strengthen confidence and as of June 10, 2011. encourage liquidity in the banking system by: KEY FACTORS AFFECTING FINANCIAL PERFORMANCE • Guaranteeing newly issued senior unsecured debt of Our financial performance is substantially affected by several eligible institutions, including FDIC-insured banks external factors outside of our control including the following: and thrifts, as well as certain holding companies • General economic conditions, including the speed (TLGP-Debt Guarantee Program), and and stamina of the moderate economic recovery in • Providing full deposit insurance coverage for general and on our customers in particular, non-interest bearing transaction accounts in FDIC- • The level of, and direction, timing and magnitude of insured institutions, regardless of the dollar amount movement in, interest rates and the shape of the (TLGP-Transaction Account Guarantee Program). interest rate yield curve, • The functioning and other performance of, and availability of liquidity in, the capital and other financial markets, • Loan demand, utilization of credit commitments and standby letters of credit, and asset quality,

27 • Customer demand for other products and services, taxes, in the fourth quarter of 2009 related to this • Changes in the competitive and regulatory landscape transaction. Additional information regarding this and in counterparty creditworthiness and transaction is included within the BlackRock section performance as the financial services industry of our Business Segments Review section of this restructures in the current environment, Item 7. • The impact of the extensive reforms enacted in the • The provision for credit losses declined to $2.5 billion Dodd-Frank legislation and other legislative, in 2010 compared with $3.9 billion in 2009 as overall regulatory and administrative initiatives, including credit quality continued to improve and as we took those outlined above, and actions to reduce exposure levels during the year. • The impact of market credit spreads on asset • Noninterest expense for 2010 declined by 5% valuations. compared with 2009, to $8.6 billion. We were successful in achieving our acquisition cost savings In addition, our success will depend, among other things, goal of $1.8 billion on an annualized basis in the upon: fourth quarter of 2010, well ahead of the original • Further success in the acquisition, growth and target amount and schedule. We also continued to retention of customers, invest in customer growth and innovation initiatives. • Continued development of the geographic markets • Overall credit quality continued to improve during related to our recent acquisitions, including full 2010. Nonperforming assets declined $1.0 billion to deployment of our product offerings, $5.3 billion as of December 31, 2010 from • Revenue growth, December 31, 2009. Accruing loans past due • A sustained focus on expense management, and decreased $1.4 billion, or 42%, during 2010 to $1.9 creating positive pre-tax, pre-provision earnings, billion at year end. The allowance for loan and lease • Managing the distressed assets portfolio and other losses (ALLL) was $4.9 billion, or 3.25% of total impaired assets, loans and 109% of nonperforming loans, as of • Improving our overall asset quality and continuing to December 31, 2010. meet evolving regulatory capital standards, • We remain committed to responsible lending to • Continuing to maintain and grow our deposit base as support economic growth. Loans and commitments a low-cost funding source, originated and renewed totaled approximately $149 • Prudent risk and capital management related to our billion for 2010, including $3.5 billion of small efforts to return to our desired moderate risk profile, business loans. Total loans were $150.6 billion at and December 31, 2010, a decline of 4% from $157.5 • Actions we take within the capital and other financial billion at December 31, 2009. markets. • Total deposits were $183.4 billion at December 31, 2010 compared with $186.9 billion at the prior year SUMMARY FINANCIAL RESULTS end. Growth in transaction deposits (money market and demand) continued with an increase of $8.4 2010 2009 billion, or 7%, for the year. Higher cost retail $3,397 Net income (millions) $2,403 certificates of deposit were reduced by $11.3 billion, Diluted earnings per common share or 23%, during 2010. Continuing operations $ 5.02 $ 4.26 • Our transition to a higher quality balance sheet .72 Discontinued operations .10 during 2010 reflected core funding with a loan to Net income $ 5.74 $ 4.36 deposit ratio of 82% at year end and a strong bank Return from net income on: liquidity position to support growth. Average common shareholders’ equity 10.88% 9.78% • We sold 7.5 million BlackRock common shares for a Average assets 1.28% .87% pretax gain of $160 million as part of BlackRock’s secondary common stock offering in November 2010 Our performance in 2010 included the following: with the effect of reducing PNC’s economic interest • Net income for 2010 of $3.4 billion was a record, up in BlackRock to approximately 20% from 24% prior 41% from 2009. to the offering. • Net interest income of $9.2 billion for 2010 was up • We grew common equity by $7.6 billion during 2% from 2009, while the net interest margin rose to 2010. The Tier 1 common capital ratio was 9.8% at 4.14% in 2010 compared with 3.82% for 2009. December 31, 2010, up 380 basis points from • Noninterest income of $5.9 billion in 2010 declined December 31, 2009. $1.2 billion compared with 2009. On December 1, 2009, BlackRock acquired Barclays Global Investors Our Consolidated Income Statement Review section of this (BGI) from Barclays Bank PLC. PNC recognized a Item 7 describes in greater detail the various items that pretax gain of $1.1 billion, or $687 million after impacted our results for 2010 and 2009.

28 BALANCE SHEET HIGHLIGHTS Average securities held to maturity increased $3.0 billion, to Total assets were $264.3 billion at December 31, 2010 $7.2 billion, in 2010 compared with 2009. The increase compared with $269.9 billion at December 31, 2009. The reflected purchases of asset-backed and non-agency decline from year end 2009 resulted from a decline in loans, commercial mortgage-backed securities, the transfer of other assets and short-term investments and cash somewhat non-agency commercial mortgage-backed securities from the offset by an increase in investment securities. available for sale portfolio, and the impact of the Market Street Funding LLC (Market Street) consolidation effective Various seasonal and other factors impact our period-end January 1, 2010. balances whereas average balances are generally more indicative of underlying business trends apart from the impact Total investment securities comprised 26% of average of acquisitions, divestitures and consolidations of variable interest-earning assets for 2010 and 22% for 2009. interest entities. Average noninterest-earning assets totaled $40.2 billion in The Consolidated Balance Sheet Review section of this Item 7 2010 compared with $38.4 billion in the prior year period. provides information on changes in selected Consolidated Balance Sheet categories at December 31, 2010 compared Average total deposits were $181.9 billion for 2010 compared with December 31, 2009. with $189.9 billion for 2009. Average deposits declined from the prior year period primarily as a result of decreases in retail Total average assets were $264.9 billion for 2010 compared certificates of deposit and other time deposits, which were with $276.9 billion for 2009. partially offset by an increase in transaction deposits. Average transaction deposits were $128.4 billion for 2010 compared Average interest-earning assets were $224.7 billion for 2010, with $120.2 billion for 2009 reflecting our strategy to grow compared with $238.5 billion in 2009. Decreases of $11.9 demand and money market deposits. Total deposits at billion in loans and $6.5 billion in other interest-earning December 31, 2010 were $183.4 billion compared with $186.9 assets, partially offset by a $5.7 billion increase in investment billion at December 31, 2009 and are further discussed within securities, drove the decrease in this comparison. the Consolidated Balance Sheet Review section of this Report.

The decrease in average total loans reflected a decline in Average total deposits represented 69% of average total assets commercial loans of $6.8 billion, commercial real estate loans for both 2010 and 2009. of $4.3 billion and residential mortgage loans of $3.4 billion, partially offset by an increase of $2.6 billion in consumer Average borrowed funds were $40.2 billion for 2010 loans. Loans represented 68% of average interest-earning compared with $44.1 billion for 2009. A $6.2 billion decline assets for 2010 and 69% for 2009. in Federal Home Loan Bank borrowings drove the decline in the comparison, partially offset by higher average commercial Average securities available for sale increased $2.7 billion, to paper borrowings that reflected the consolidation of Market $50.8 billion, in 2010 compared with 2009. Average US Street. Treasury and government agencies securities increased $3.1 billion while agency residential mortgage-backed Total borrowed funds at December 31, 2010 were $39.5 securities increased $1.5 billion and other debt securities billion compared with $39.3 billion at December 31, 2009 and increased $1.5 billion in the comparison. These increases were are further discussed within the Consolidated Balance Sheet partially offset by a decline of $2.8 billion in average Review section of this Item 7. In addition, the Liquidity Risk non-agency residential mortgage-backed securities and a Management portion of the Risk Management section of this decline of $1.1 billion in commercial mortgage-backed Item 7 includes additional information regarding our sources securities. and uses of borrowed funds.

29 BUSINESS SEGMENT HIGHLIGHTS Asset Management Group Highlights of results for 2010 and 2009 are included below. Asset Management Group earned $141 million for 2010 As a result of its sale, GIS is no longer a reportable business compared with $105 million for 2009. The increase reflected a segment. lower provision for credit losses due to improved credit quality and increased noninterest income from higher equity We refer you to Item 1 of this Report under the captions markets and new client growth. These increases were partially Business Overview and Review of Business Segments for an offset by lower net interest income from lower loan yields. overview of our business segments and to the Business The business delivered strong performance in 2010 as it Segments Review section of this Item 7 for a Results Of remained focused on new client acquisition, client asset Businesses – Summary table and further analysis of business growth and expense discipline. segment results for 2010 and 2009, including presentation differences from Note 25 Segment Reporting in the Notes To Residential Mortgage Banking Consolidated Financial Statements in Item 8 of this Report. Residential Mortgage Banking earned $275 million in 2010 compared with $435 million in 2009. The decline in earnings We provide a reconciliation of total business segment earnings was driven by a decrease in loan sales revenue from lower to PNC consolidated income from continuing operations origination volumes and lower net hedging gains on mortgage before noncontrolling interests as reported on a GAAP basis in servicing rights. Note 25. BlackRock Retail Banking Our BlackRock business segment earned $351 million in 2010 Retail Banking earned $140 million for 2010 compared with and $207 million in 2009. The benefits of BlackRock’s $136 million in 2009. Earnings were primarily driven by a December 2009 acquisition of Barclays Global Investors decrease in the provision for credit losses due to improved (BGI) and improved capital markets conditions contributed to credit quality and lower noninterest expense from acquisition higher earnings at BlackRock. cost savings. These factors were partially offset by a decline in revenue related to the implementation of Regulation E rules Distressed Assets Portfolio related to overdraft fees and the impact of the low interest rate This business segment consists primarily of assets acquired environment. Retail Banking continued to maintain its focus through acquisitions and had a loss of $64 million for 2010 on growing customers and deposits, improving customer and compared with earnings of $84 million for 2009. The decrease employee satisfaction, investing in the business for future was primarily driven by a higher provision for credit losses. growth, and disciplined expense management during this period of market and economic uncertainty. Other “Other” reported earnings of $411 million for 2010 compared Corporate & Institutional Banking with $201 million for 2009. Results for 2009 included higher Corporate & Institutional Banking earned a record $1.8 billion other-than-temporary impairment (OTTI) charges and in 2010 compared with $1.2 billion 2009. The increase in integration costs compared with the 2010, alternative earnings primarily resulted from a decrease in the provision investment writedowns, a $133 million special FDIC for credit losses somewhat offset by lower net interest income assessment, and equity management losses. driven mainly by lower loan balances. We continued to focus on adding new clients and increased our cross selling to serve our clients needs, particularly in the western markets, and remained committed to strong expense discipline.

30 ONSOLIDATED NCOME We expect that our purchase accounting accretion will C I decrease by as much as $700 million in 2011. Excluding the STATEMENT REVIEW impact of this factor, we expect our net interest income to increase in 2011. Overall, we also expect that our net interest Net income for 2010 was $3.4 billion compared with margin will decline in 2011. $2.4 billion for 2009. Results for 2010 include the impact of a $328 million after-tax gain related to our sale of GIS. Results NONINTEREST INCOME for 2009 include the impact of a $687 million after-tax gain Summary resulting from BlackRock’s acquisition of BGI. Our Noninterest income was $5.9 billion in 2010, a decline of Consolidated Income Statement is presented in Item 8 of this $1.2 billion from $7.1 billion in 2009. Noninterest income for Report. 2009 included the $1.1 billion pretax gain recognized on our portion of the increase in BlackRock’s equity resulting from the value of BlackRock shares issued in connection with NET INTEREST INCOME AND NET INTEREST MARGIN BlackRock’s acquisition of BGI. Year ended December 31 Dollars in millions 2010 2009 Aside from the impact of the 2009 BlackRock/BGI gain, Net interest income $9,230 $9,083 lower noninterest income in 2010 reflected the impact of Net interest margin 4.14% 3.82% decreases in the following: residential mortgage loan sales revenue, the value of commercial mortgage servicing rights, net hedging gains on residential mortgage servicing rights, Changes in net interest income and margin result from the service charges on deposits including the negative impact of interaction of the volume and composition of interest-earning the new Regulation E rules, and net gains on sales of assets and related yields, interest-bearing liabilities and related securities. Partially offsetting these items were lower OTTI rates paid, and noninterest-bearing sources of funding. See the charges, higher asset management revenue, a fourth quarter Statistical Information (Unaudited) – Analysis Of 2010 gain on 7.5 million BlackRock common shares sold by Year-To-Year Changes In Net Interest Income and Average PNC as part of a BlackRock secondary common stock Consolidated Balance Sheet And Net Interest Analysis in offering and higher revenue from capital markets-related Item 8 of this Report for additional information. products and services including merger and acquisition advisory fees. The increase in net interest income for 2010 compared with 2009 resulted primarily from the impact of lower deposit and Additional Analysis borrowing costs somewhat offset by lower purchase Asset management revenue was $1.1 billion in 2010 compared accounting accretion, lower loan volume and lower revenue with $858 million in 2009. This increase reflected higher from our investment securities portfolio. Our deposit strategy equity earnings from our BlackRock investment, improved included the retention and repricing at lower rates of equity markets and client growth. Discretionary assets under relationship-based certificates of deposit and the planned run management at December 31, 2010 totaled $108 billion off of maturing non-relationship certificates of deposit and compared with $103 billion at December 31, 2009. brokered deposits. Consumer services fees totaled $1.3 billion in both 2010 and As further discussed in the Retail Banking section of the 2009. Consumer service fees for 2010 reflected higher Business Segments Review portion of this Item 7, the Credit volume-related transaction fees offset by lower brokerage fees CARD Act of 2009 negatively impacted 2010 revenues by and the impact of the consolidation of the securitized credit approximately $75 million, largely in net interest income. card portfolio. Corporate services revenue totaled $1.1 billion in 2010 and The net interest margin was 4.14% for 2010 and 3.82% for $1.0 billion in 2009. The increase was largely the result of 2009. The following factors impacted the comparison: higher merger and acquisition advisory and ancillary • A decrease in the rate accrued on interest-bearing commercial mortgage servicing fees partially offset by a liabilities of 49 basis points. The rate accrued on reduction in the value of commercial mortgage servicing interest-bearing deposits, the largest component, rights largely driven by lower interest rates. Corporate decreased 47 basis points. services fees include the noninterest component of treasury • A decrease in the yield on interest-earning assets of management fees, which continued to be a strong contributor 10 basis points. The yield on loans, the largest to revenue. portion of our interest-earning assets, increased only 1 basis point and was more than offset by the 102 Residential mortgage revenue totaled $699 million in 2010 basis point decline in yield on investment securities. compared with $990 million in 2009. The decline in 2010 • The benefit of noninterest-bearing sources of funding reflected reduced loan sales revenue following the strong loan decreased 7 basis points primarily due to the decline origination refinance volume in 2009 and lower net hedging in interest rates. gains on mortgage servicing rights.

31 Service charges on deposits totaled $705 million for 2010 and PRODUCT REVENUE $950 million for 2009. The decrease in 2010 was due to lower In addition to credit and deposit products for commercial overdraft charges and required branch divestitures in the third customers, Corporate & Institutional Banking offers other quarter of 2009. As further discussed in the Retail Banking services, including treasury management, commercial real section of the Business Segments Review portion of this estate, and capital markets-related products and services that Item 7, the new Regulation E rules related to overdraft charges are marketed by several businesses primarily to commercial negatively impacted our 2010 revenue by approximately customers. $145 million. Treasury management revenue, which includes fees as well as Net gains on sales of securities were $426 million for 2010 net interest income from customer deposit balances, totaled and $550 million for 2009. OTTI credit losses on securities $1.2 billion for 2010 and $1.1 billion for 2009. The increase recognized in earnings totaled $325 million in 2010 and $577 was primarily related to deposit growth and continued growth million in 2009. We expect the level of credit-related OTTI in purchasing cards and lockbox as well as services provided charges to decline in 2011 compared with 2010. to the Federal government and healthcare customers.

Gains on BlackRock related transactions included a fourth Revenue from capital markets-related products and services quarter 2010 pretax gain of $160 million from our sale of totaled $618 million in 2010 compared with $533 million in 7.5 million BlackRock common shares as part of a BlackRock 2009. The increase was due to higher merger and acquisition secondary common stock offering. During the fourth quarter advisory, underwriting and syndications fees, partially offset by of 2009, we recognized a $1.1 billion pretax gain on PNC’s lower gains on loan sales from portfolio management activities. portion of the increase in BlackRock’s equity resulting from the value of BlackRock shares issued by BlackRock in Commercial mortgage banking activities include revenue connection with its acquisition of BGI. derived from commercial mortgage servicing (including net interest income and noninterest income from loan servicing and ancillary services), and revenue derived from commercial Other noninterest income totaled $884 million for 2010 mortgage loans intended for sale and related hedges (including compared with $987 million for 2009. Other noninterest loan origination fees, net interest income, valuation income for 2009 included gains of $103 million primarily adjustments and gains or losses on sales). related to our BlackRock LTIP shares obligation. Other noninterest income for 2010 included net gains on private Commercial mortgage banking activities resulted in revenue equity and alternative investments of $258 million, compared of $262 million in 2010 compared with $485 million in 2009. with net losses on private equity and alternative investments This decline was primarily due to sales of servicing and a of $93 million in 2009. Gains on sales of loans were decrease in the net carrying amount of commercial mortgage $73 million in 2010 and $220 million in 2009. servicing rights. These decreases were partially offset by higher ancillary commercial mortgage servicing fees. Other noninterest income typically fluctuates from period to period depending on the nature and magnitude of transactions PROVISION FOR CREDIT LOSSES completed. Further details regarding our trading activities are The provision for credit losses totaled $2.5 billion for 2010 included in the Market Risk Management – Trading Risk compared with $3.9 billion for 2009. The lower provision in portion of the Risk Management section of this Item 7, further 2010 reflected credit exposure reductions and overall details regarding private equity and alternative investments are improved credit migration during 2010. included in the Market Risk Management-Equity And Other Investment Risk section, and further details regarding gains or We anticipate an overall improvement in credit migration in losses related to our equity investment in BlackRock are 2011 and a continued reduction in our nonperforming loans included in the Business Segments Review section. assuming modest GDP growth. As a result, we expect that our average quarterly provision for credit losses in 2011 to be less Looking to 2011, we see momentum in our fee-based revenues than the fourth quarter 2010 provision for credit losses of resulting from client growth and depth in our expanded $442 million, assuming budgeted loan growth projections. If franchise. At the same time, we will see the continued impact our expectations hold, this would result in our full year 2011 of ongoing regulatory reforms. Excluding the expected provision for credit losses to be at least $800 million less than incremental negative impact of two aspects of anticipated our full year 2010 provision for credit losses. regulatory changes on fees related to Regulation E and interchange rates of approximately $400 million in 2011 as The Credit Risk Management portion of the Risk Management further discussed in the Retail Banking section of Business section of this Item 7 includes additional information regarding Segments Review in this Item 7, we expect noninterest factors impacting the provision for credit losses. See also income in 2011 to increase in the low-to-mid single digits Item 1A Risk Factors and the Cautionary Statement Regarding compared with 2010. Forward-Looking Information section of Item 7 of this Report.

32 NONINTEREST EXPENSE operational and administrative redundancies. This amount Noninterest expense for 2010 declined 5%, to $8.6 billion, was higher than our original goal of $1.2 billion, and ahead compared with $9.1 billion for 2009. The impact of higher of schedule. During 2010, we completed the customer and cost savings related to the National City acquisition branch conversions to our technology platforms and integration and the reversal of certain accrued liabilities in integrated the businesses and operations of National City 2010, including $73 million associated with a franchise tax with those of PNC. settlement and $123 million associated with an indemnification liability for certain Visa litigation, were We expect that total noninterest expense in 2011 will be less reflected in the lower 2010 expenses. Lower expenses in the than total noninterest expense in 2010, with the magnitude of comparison also reflected a special FDIC assessment, the decline dependent upon the pace of our investment in intended to build the FDIC’s Deposit Insurance Fund, of business growth opportunities. $133 million in 2009. We also continued to invest in customer growth and innovation initiatives. EFFECTIVE TAX RATE The effective tax rate was 25.5% for 2010 compared with National City integration costs totaled $387 million in 2010 26.9% for 2009. The decrease in the effective tax rate was and $421 million in 2009. We achieved National City primarily due to a favorable IRS letter ruling in 2010 that acquisition cost savings of $1.8 billion on an annualized resolved a prior tax position and resulted in a tax benefit of basis in the fourth quarter of 2010 through the reduction of $89 million.

33 ONSOLIDATED ALANCE HEET Loans decreased $6.9 billion, or 4%, as of December 31, 2010 C B S compared with December 31, 2009. An increase in loans of REVIEW $3.5 billion from the initial consolidation of Market Street and the securitized credit card portfolio effective January 1, 2010 SUMMARIZED BALANCE SHEET DATA was more than offset by the impact of soft customer loan demand combined with loan repayments and payoffs in the Dec. 31 Dec. 31 distressed assets portfolio. In millions 2010 2009 Assets Loans represented 57% of total assets at December 31, 2010 Loans $150,595 $157,543 and 58% at December 31, 2009. Commercial lending Investment securities 64,262 56,027 represented 53% of the loan portfolio and consumer lending Cash and short-term investments 10,437 13,290 represented 47% at both December 31, 2010 and Loans held for sale 3,492 2,539 December 31, 2009. Goodwill and other intangible assets 10,753 12,909 Equity investments 9,220 10,254 Other, net 15,525 17,301 Commercial real estate loans represented 7% of total assets at December 31, 2010 and 9% of total assets at December 31, Total assets $264,284 $269,863 Liabilities 2009. Deposits $183,390 $186,922 Borrowed funds 39,488 39,261 Details Of Loans Other 8,568 11,113 Dec. 31 Dec. 31 Total liabilities 231,446 237,296 In millions 2010 2009 Total shareholders’ equity 30,242 29,942 Commercial Noncontrolling interests 2,596 2,625 Retail/wholesale $ 9,901 $ 9,515 Total equity 32,838 32,567 Manufacturing 9,334 9,880 Total liabilities and equity $264,284 $269,863 Service providers 8,866 8,256 Real estate related (a) 7,500 7,403 Financial services 4,573 3,874 The summarized balance sheet data above is based upon our Health care 3,481 2,970 Consolidated Balance Sheet in Item 8 of this Report. Other 11,522 12,920 Total commercial 55,177 54,818 The decline in total assets at December 31, 2010 compared Commercial real estate with December 31, 2009 was primarily due to decreases in Real estate projects 12,211 15,582 loans and cash and short-term investments, partially offset by Commercial mortgage 5,723 7,549 an increase in investment securities. Total commercial real estate 17,934 23,131 Equipment lease financing 6,393 6,202 Total assets and liabilities at December 31, 2010 included $5.2 TOTAL COMMERCIAL LENDING (b) 79,504 84,151 billion and $3.5 billion, respectively, related to Market Street Consumer and a credit card securitization trust as more fully described in Home equity the Off-Balance Sheet Arrangements And Variable Interest Lines of credit 23,473 24,236 Entities section of this Item 7 and Note 3 Loan Sale and Installment 10,753 11,711 Servicing Activities and Variable Interest Entities in the Notes Residential real estate To Consolidated Financial Statements in Item 8 of this Report. Residential mortgage 15,292 18,190 Residential construction 707 1,620 Credit card 3,920 2,569 An analysis of changes in selected balance sheet categories Education 9,196 7,468 follows. Automobile 2,983 2,013 Other 4,767 5,585 LOANS TOTAL CONSUMER LENDING 71,091 73,392 A summary of the major categories of loans outstanding Total loans $150,595 $157,543 follows. Outstanding loan balances reflect unearned income, (a) Includes loans to customers in the real estate and construction industries. unamortized discount and premium, and purchase discounts (b) Construction loans with interest reserves and A Note/B Note restructurings are not and premiums totaling $2.7 billion at December 31, 2010 and significant to PNC. $3.2 billion at December 31, 2009. The balances do not include future accretable net interest (i.e., the difference Total loans above include purchased impaired loans of between the undiscounted expected cash flows and the $7.8 billion, or 5% of total loans, at December 31, 2010, and recorded investment in the loan) on the purchased impaired $10.3 billion, or 7% of total loans, at December 31, 2009. loans.

34 We are committed to providing credit and liquidity to established specific and pooled reserves on the total qualified borrowers. Total loan originations and new commercial lending category of $2.6 billion at December 31, commitments and renewals totaled $149 billion for 2010. 2010. This commercial lending reserve included what we believe to be adequate and appropriate loss coverage on the Our loan portfolio continued to be diversified among higher risk commercial loans in the total commercial portfolio. numerous industries and types of businesses. The loans that The commercial lending reserve represented 53% of the total we hold are also concentrated in, and diversified across, our ALLL of $4.9 billion at that date. The remaining 47% of the principal geographic markets. ALLL pertained to the total consumer lending category. This category of loans is more homogenous in nature and has Commercial lending is the largest category and is the most certain characteristics that can be assessed at a total portfolio sensitive to changes in assumptions and judgments underlying level in terms of loans representing higher risk. We do not the determination of the ALLL. This estimate also considers consider government insured/government guaranteed loans to other relevant factors such as: be higher risk as we do not believe these loans will result in a • Actual versus estimated losses, significant loss because of their structure. Additional • Regional and national economic conditions, information regarding our higher risk loans is included in Note • Business segment and portfolio concentrations, 5 Asset Quality and Allowances for Loan and Lease Losses • Industry conditions, and Unfunded Loan Commitments and Letters of Credit in the • The impact of government regulations, and Notes To Consolidated Financial Statements included in • Risk of potential estimation or judgmental errors, Item 8 of this Report. including the accuracy of risk ratings. Information related to purchased impaired loans, purchase Higher Risk Loans accounting accretion and accretable net interest recognized Our loan portfolio includes certain loans deemed to be higher during 2010 and 2009 in connection with our acquisition of risk and therefore more likely to result in credit losses. We National City follows.

Valuation of Purchased Impaired Loans

December 31, 2008 December 31, 2009 December 31, 2010 Dollars in billions Balance Net Investment Balance Net Investment Balance Net Investment Commercial and commercial real estate loans: Unpaid principal balance $ 6.3 $ 3.5 $ 1.8 Purchased impaired mark (3.4) (1.3) (.4) Recorded investment 2.9 2.2 1.4 Allowance for loan losses (.2) (.3) Net investment 2.9 46% 2.0 57% 1.1 61% Consumer and residential mortgage loans: Unpaid principal balance 15.6 11.7 7.9 Purchased impaired mark (5.8) (3.6) (1.5) Recorded investment 9.8 8.1 6.4 Allowance for loan losses (.3) (.6) Net investment 9.8 63% 7.8 67% 5.8 73% Total purchased impaired loans: Unpaid principal balance 21.9 15.2 9.7 Purchased impaired mark (9.2) (4.9) (1.9) Recorded investment 12.7 10.3 7.8 Allowance for loan losses (.5) (.9)(a) Net investment $12.7 58% $ 9.8 64% $ 6.9 71% (a) Impairment reserves of $.9 billion at December 31, 2010 reflect impaired loans with further credit quality deterioration since acquisition. This deterioration was more than offset by the cash received to date in excess of recorded investment of $.7 billion and the net reclassification to accretable net interest, to be recognized over time, of $1.1 billion.

35 The unpaid principal balance of purchased impaired loans Accretable Net Interest – Purchased Impaired Loans declined from $15.2 billion at December 31, 2009 to $9.7 In billions billion at December 31, 2010 due to amounts determined to be uncollectible, payoffs and disposals. The remaining purchased January 1, 2009 $ 3.7 Accretion (including cash recoveries) (1.1) impaired mark at December 31, 2010 was $1.9 billion which Adjustments resulting from changes in purchase price was a decline from $4.9 billion at December 31, 2009. The net allocation .3 investment of $9.8 billion at December 31, 2009 declined 30% Net reclassifications to accretable from non-accretable .8 to $6.9 billion at December 31, 2010 primarily due to payoffs, Disposals (.2) disposals and further impairment partially offset by accretion December 31, 2009 $ 3.5 during 2010. At December 31, 2010, our largest individual Accretion (including cash recoveries) (1.4) purchased impaired loan had a recorded investment of Net reclassifications to accretable from non-accretable .3 $22 million. Disposals (.2) December 31, 2010 $ 2.2 We currently expect to collect total cash flows of $9.1 billion on purchased impaired loans, representing the $6.9 billion net Net unfunded credit commitments are comprised of the investment at December 31, 2010 and the accretable net following: interest of $2.2 billion shown in the Accretable Net Interest- Purchased Impaired Loans table that follows. Net Unfunded Credit Commitments Purchase Accounting Accretion Dec. 31 Dec. 31 In millions 2010 2009

Year ended December 31 Commercial / commercial real estate (a) $59,256 $ 60,143 In millions 2010 2009 Home equity lines of credit 19,172 20,367 Non-impaired loans $ 366 $ 773 Consumer credit card lines 14,725 17,558 Impaired loans 885 914 Other 2,652 2,727 Reversal of contractual interest on impaired Total $95,805 $100,795 loans (529) (752) (a) Less than 4% of these amounts at each date relate to commercial real estate. Net impaired loans 356 162 Securities 54 118 Commitments to extend credit represent arrangements to lend Deposits 545 996 Borrowings (155) (250) funds or provide liquidity subject to specified contractual Total $1,166 $1,799 conditions. Commercial commitments reported above exclude syndications, assignments and participations, primarily to financial institutions, totaling $16.7 billion at December 31, In addition to the amounts in the table above, cash received in 2010 and $13.2 billion at December 31, 2009. excess of recorded investment from sales or payoffs of impaired commercial loans (cash recoveries) totaled $483 Unfunded credit commitments related to the consolidation of million for 2010 and $204 million for 2009. We do not expect the Market Street commercial paper conduit (further described this level of cash recoveries to be sustainable. in the Off-Balance Sheet Arrangements and Variable Interest Entities section of this Item 7) totaled $3.1 billion at Remaining Purchase Accounting Accretion December 31, 2010 and are a component of PNC’s total unfunded credit commitments. These amounts are included in Dec. 31 Dec. 31 Dec. 31 the preceding table within the “Commercial / commercial real In billions 2008 2009 2010 estate” category. Non-impaired loans $ 2.4 $ 1.6 $ 1.2 Impaired loans 3.7 3.5 2.2 Unfunded liquidity facility commitments and standby bond Total loans (gross) 6.1 5.1 3.4 purchase agreements totaled $458 million at December 31, Securities .2 .1 .1 2010 and $6.2 billion at December 31, 2009 and are included Deposits 2.1 1.0 .5 in the preceding table primarily within the “Commercial / Borrowings (1.5) (1.2) (1.1) commercial real estate” category. Due to the consolidation of Total $ 6.9 $ 5.0 $ 2.9 Market Street, $5.7 billion of unfunded liquidity facility commitments were no longer included in the preceding table as of December 31, 2010.

In addition to credit commitments, our net outstanding standby letters of credit totaled $10.1 billion at December 31, 2010 and $10.0 billion at December 31, 2009. Standby letters of credit commit us to make payments on behalf of our customers if specified future events occur.

36 INVESTMENT SECURITIES We evaluate our portfolio of investment securities in light of changing market conditions and other factors and, where Details of Investment Securities appropriate, take steps intended to improve our overall positioning. We consider the portfolio to be well-diversified Amortized Fair In millions Cost Value and of high quality. US Treasury and government agencies, December 31, 2010 agency residential mortgage-backed securities and agency SECURITIES AVAILABLE FOR SALE commercial mortgage-backed securities collectively Debt securities represented 61% of the investment securities portfolio at US Treasury and government agencies $ 5,575 $ 5,710 December 31, 2010. Residential mortgage-backed Agency 31,697 31,720 In March 2010, we transferred $2.2 billion of available for Non-agency 8,193 7,233 sale commercial mortgage-backed non-agency securities to Commercial mortgage-backed the held to maturity portfolio. The transfer involved high Agency 1,763 1,797 quality securities where management’s intent to hold changed. Non-agency 1,794 1,856 Asset-backed 2,780 2,582 State and municipal 1,999 1,957 At December 31, 2010, the securities available for sale Other debt 3,992 4,077 portfolio included a net unrealized loss of $861 million, which Corporate stocks and other 378 378 represented the difference between fair value and amortized Total securities available for sale $58,171 $57,310 cost. The comparable amount at December 31, 2009 was a net unrealized loss of $2.3 billion. The fair value of investment SECURITIES HELD TO MATURITY securities is impacted by interest rates, credit spreads, market Debt securities volatility and liquidity conditions. The fair value of Commercial mortgage-backed (non- agency) $ 4,316 $ 4,490 investment securities generally decreases when interest rates Asset-backed 2,626 2,676 increase and vice versa. In addition, the fair value generally Other debt 10 11 decreases when credit spreads widen and vice versa. Total securities held to maturity $ 6,952 $ 7,177 The significant decline in the net unrealized loss from December 31, 2009 December 31, 2009 was primarily the result of lower market SECURITIES AVAILABLE FOR SALE interest rates and improving liquidity and credit spreads on Debt securities US Treasury and government agencies $ 7,548 $ 7,520 non-agency residential mortgage-backed and non-agency Residential mortgage-backed commercial mortgage-backed securities. Net unrealized gains Agency 24,076 24,438 and losses in the securities available for sale portfolio are Non-agency 10,419 8,302 included in shareholders’ equity as accumulated other Commercial mortgage-backed comprehensive income or loss from continuing operations, net Agency 1,299 1,297 of tax. Non-agency 4,028 3,848 Asset-backed 2,019 1,668 Unrealized gains and losses on available for sale securities do State and municipal 1,346 1,350 not impact liquidity or risk-based capital. However, reductions Other debt 1,984 2,015 in the credit ratings of these securities would have an impact Corporate stocks and other 360 360 on the determination of risk-weighted assets which could Total securities available for sale $53,079 $50,798 reduce our regulatory capital ratios. In addition, the amount SECURITIES HELD TO MATURITY representing the credit-related portion of OTTI on available Debt securities for sale securities would reduce our earnings and regulatory Commercial mortgage-backed (non- capital ratios. agency) $ 2,030 $ 2,225 Asset-backed 3,040 3,136 The expected weighted-average life of investment securities Other debt 159 160 (excluding corporate stocks and other) was 4.7 years at Total securities held to maturity $ 5,229 $ 5,521 December 31, 2010 and 4.1 years at December 31, 2009.

The carrying amount of investment securities totaled $64.3 We estimate that, at December 31, 2010, the effective duration billion at December 31, 2010, an increase of $8.3 billion, or of investment securities was 3.1 years for an immediate 50 15%, from $56.0 billion at December 31, 2009. The increase basis points parallel increase in interest rates and 2.9 years for in investment securities primarily reflected an increase in an immediate 50 basis points parallel decrease in interest securities available for sale as excess liquidity was invested in rates. Comparable amounts at December 31, 2009 were 2.9 short duration, high quality securities. Investment securities years and 2.5 years, respectively. represented 24% of total assets at December 31, 2010 and 21% at December 31, 2009.

37 The following table provides detail regarding the vintage, current credit rating, and FICO score of the underlying collateral at origination, where available, for residential mortgage-backed, commercial mortgage-backed and other asset-backed securities held in the available for sale and held to maturity portfolios:

December 31, 2010 Agency Non-agency Residential Commercial Residential Commercial Mortgage- Mortgage- Mortgage- Mortgage- Asset- Backed Backed Backed Backed Backed Dollars in millions Securities Securities Securities Securities Securities Fair Value – Available for Sale $31,720 $1,797 $7,233 $1,856 $2,582 Fair Value – Held to Maturity 4,490 2,676 Total Fair Value $31,720 $1,797 $7,233 $6,346 $5,258 % of Fair Value: By Vintage 2010 41% 37% 1% 7% 2009 20% 35% 3% 15% 2008 6% 5% 16% 2007 9% 3% 18% 10% 11% 2006 5% 5% 23% 30% 13% 2005 and earlier 19% 15% 59% 56% 14% Not Available 24% Total 100% 100% 100% 100% 100% By Credit Rating Agency 100% 100% AAA 7% 85% 78% AA 4% 6% 4% A 5% 5% BBB 5% 3% 1% BB 6% 1% B 15% 4% Lower than B 58% 11% No rating 2% Total 100% 100% 100% 100% 100% By FICO Score >720 56% 3% <720 and >660 34% 9% <660 1% 3% No FICO score 9% 85% Total 100% 100%

We conduct a comprehensive security-level impairment functional senior management team representing Asset & assessment quarterly on all securities in an unrealized loss Liability Management, Finance, and Market Risk position to determine whether the loss represents OTTI. Our Management. The senior management team considers the assessment considers the security structure, recent security results of the assessments, as well as other factors, in collateral performance metrics, external credit ratings, failure determining whether the impairment is other-than-temporary. of the issuer to make scheduled interest or principal payments, our judgment and expectations of future performance, and We recognize the credit portion of OTTI charges in current relevant independent industry research, analysis and forecasts. earnings for those debt securities where there is no intent to sell and it is not more likely than not that we would be We also consider the severity of the impairment and the length required to sell the security prior to expected recovery. The of time that the security has been impaired in our assessment. noncredit portion of OTTI is included in accumulated other Results of the periodic assessment are reviewed by a cross- comprehensive loss.

38 We recognized OTTI for 2010 and 2009 as follows: Other-Than-Temporary Impairments In millions 2010 2009 Credit portion of OTTI losses (a) Non-agency residential mortgage-backed $(242) $ (444) Non-agency commercial mortgage-backed (5) (6) Asset-backed (78) (111) Other debt (12) Marketable equity securities (4) Total credit portion of OTTI losses (325) (577) Noncredit portion of OTTI losses (b) (283) (1,358) Total OTTI losses $(608) $(1,935) (a) Reduction of noninterest income in our Consolidated Income Statement. (b) Included in accumulated other comprehensive loss, net of tax, on our Consolidated Balance Sheet.

The following table summarizes net unrealized gains and losses (including the credit and noncredit portions of OTTI) recorded on non-agency residential and commercial mortgage-backed and other asset-backed securities, which represent our most significant categories of securities not backed by the US government or its agencies. A summary of all OTTI credit losses recognized for 2010 by investment type is included in Note 7 Investment Securities in the Notes To Consolidated Financial Statements In Item 8 of this Report.

December 31, 2010 Commercial Residential Mortgage- Mortgage-Backed Asset-Backed In millions Backed Securities Securities Securities (a) AVAILABLE FOR SALE SECURITIES (NON-AGENCY) Net Net Net Unrealized Unrealized Unrealized Fair Gain Fair Gain Fair Gain Value (Loss) Value (Loss) Value (Loss) Credit Rating Analysis AAA $ 538 $ (15) $1,076 $ 34 $1,701 $ 8 Other Investment Grade (AA, A, BBB) 1,001 (46) 713 17 54 (9) Total Investment Grade 1,539 (61) 1,789 51 1,755 (1) BB 419 (27) 61 7 B 1,051 (117) 6 4 207 (39) Lower than B 4,224 (755) 587 (142) No Rating 29 (16) Total Sub-Investment Grade 5,694 (899) 67 11 823 (197) Total $7,233 $(960) $1,856 $ 62 $2,578 $(198) OTTI Analysis Investment Grade: OTTI has been recognized $ 69 $ (13) No OTTI recognized to date 1,470 (48) $1,789 $ 51 $1,755 $ (1) Total Investment Grade 1,539 (61) 1,789 51 1,755 (1) Sub-Investment Grade: OTTI has been recognized 3,701 (825) 22 6 627 (190) No OTTI recognized to date 1,993 (74) 45 5 196 (7) Total Sub-Investment Grade 5,694 (899) 67 11 823 (197) Total $7,233 $(960) $1,856 $ 62 $2,578 $(198) SECURITIES HELD TO MATURITY (NON-AGENCY) Credit Rating Analysis AAA $4,314 $175 $2,407 $ 47 Other Investment Grade (AA, A, BBB) 176 (1) 157 3 Total Investment Grade 4,490 174 2,564 50 BB B 9 Lower than B No Rating 92 Total Sub-Investment Grade 101 Total $4,490 $174 $2,665 $ 50

39 Residential Mortgage-Backed Securities OTTI credit losses on non-agency commercial mortgage- At December 31, 2010, our residential mortgage-backed backed securities during 2010 were not significant. In securities portfolio was comprised of $31.7 billion fair value addition, the noncredit portion of OTTI losses recorded in of US government agency-backed securities and $7.2 billion accumulated other comprehensive loss for these securities and fair value of non-agency (private issuer) securities. The the related fair value at December 31, 2010 were not agency securities are generally collateralized by 1-4 family, significant. The remaining fair value of securities for which conforming, fixed-rate residential mortgages. The non-agency OTTI has been recorded was $22 million. All of the credit- securities are also generally collateralized by 1-4 family impaired securities were rated below investment grade. residential mortgages. The mortgage loans underlying the non-agency securities are generally non-conforming (i.e., Asset-Backed Securities original balances in excess of the amount qualifying for The fair value of the asset-backed securities portfolio was $5.3 agency securities) and predominately have interest rates that billion at December 31, 2010 and consisted of fixed-rate and are fixed for a period of time, after which the rate adjusts to a floating-rate, private-issuer securities collateralized primarily floating rate based upon a contractual spread that is indexed to by various consumer credit products, including residential a market rate (i.e., a “hybrid ARM”), or interest rates that are mortgage loans, credit cards, and automobile loans. fixed for the term of the loan. Substantially all of the securities are senior tranches in the securitization structure and have credit protection in the form Substantially all of the non-agency securities are senior of credit enhancement, over-collateralization and/or excess tranches in the securitization structure and at origination had spread accounts. credit protection in the form of credit enhancement, over- collateralization and/or excess spread accounts. We recorded OTTI credit losses of $78 million on asset- backed securities during 2010. All of the securities were During 2010, we recorded OTTI credit losses of $242 million collateralized by first and second lien residential mortgage on non-agency residential mortgage-backed securities. As of loans and were rated below investment grade. As of December 31, 2010, $240 million of the credit losses related December 31, 2010, the noncredit portion of OTTI losses to securities rated below investment grade. As of recorded in accumulated other comprehensive loss for asset- December 31, 2010, the noncredit portion of OTTI losses backed securities totaled $190 million and the related recorded in accumulated other comprehensive loss for securities had a fair value of $627 million. non-agency residential mortgage-backed securities totaled $838 million and the related securities had a fair value of $3.8 For the sub-investment grade investment securities (available billion. for sale and held to maturity) for which we have not recorded an OTTI loss through December 31, 2010, the remaining fair The fair value of sub-investment grade investment securities value was $297 million, with unrealized net losses of $7 for which we have not recorded an OTTI credit loss as of million. The results of our security-level assessments indicate December 31, 2010 totaled $2.0 billion, with unrealized net that we will recover the entire cost basis of these securities. losses of $74 million. The results of our security-level Note 7 Investment Securities in the Notes To Consolidated assessments indicate that we will recover the entire cost basis Financial Statements in Item 8 of this Report provides further of these securities. Note 7 Investment Securities in the Notes detail regarding our process for assessing OTTI for these To Consolidated Financial Statements in Item 8 of this Report securities. provides further detail regarding our process for assessing OTTI for these securities. If current housing and economic conditions were to worsen, if market volatility and illiquidity were to worsen, or if market Commercial Mortgage-Backed Securities interest rates were to increase appreciably, the valuation of our The fair value of the non-agency commercial mortgage- investment securities portfolio could continue to be adversely backed securities portfolio was $6.3 billion at December 31, affected and we could incur additional OTTI credit losses that 2010 and consisted of fixed-rate, private-issuer securities would impact our Consolidated Income Statement. collateralized by non-residential properties, primarily retail properties, office buildings, and multi-family housing. The agency commercial mortgage-backed securities portfolio was $1.8 billion fair value at December 31, 2010 consisting of multi-family housing. Substantially all of the securities are the most senior tranches in the subordination structure.

40 LOANS HELD FOR SALE FUNDING AND CAPITAL SOURCES

Dec. 31 Dec. 31 Details Of Funding Sources In millions 2010 2009 Dec. 31 Dec. 31 Commercial mortgages at fair value $ 877 $1,050 In millions 2010 2009 Commercial mortgages at lower of cost or market 330 251 Deposits Money market $ 84,581 $ 85,838 Total commercial mortgages 1,207 1,301 Demand 50,069 40,406 Residential mortgages at fair value 1,878 1,012 Retail certificates of deposit 37,337 48,622 Residential mortgages at lower of cost or market 12 Savings 7,340 6,401 Total residential mortgages 1,890 1,012 Other time 549 1,088 Time deposits in foreign offices 3,514 4,567 Other 395 226 Total deposits 183,390 186,922 Total $3,492 $2,539 Borrowed funds Federal funds purchased and repurchase We stopped originating certain commercial mortgage loans agreements 4,144 3,998 designated as held for sale during the first quarter of 2008 and Federal Home Loan Bank borrowings 6,043 10,761 continue pursuing opportunities to reduce these positions at Bank notes and senior debt 12,904 12,362 appropriate prices. We sold $241 million of commercial Subordinated debt 9,842 9,907 mortgage loans held for sale carried at fair value in 2010 and Other 6,555 2,233 sold $272 million in 2009. Total borrowed funds 39,488 39,261 Total $222,878 $226,183 We recognized net losses of $18 million in 2010 on the valuation and sale of commercial mortgage loans held for sale, Total funding sources decreased $3.3 billion at December 31, net of hedges. Net gains of $107 million on the valuation and 2010 compared with December 31, 2009. sale of commercial mortgages loans held for sale, net of hedges, were recognized in 2009. Total deposits decreased $3.5 billion at December 31, 2010 compared with December 31, 2009. Deposits decreased in the Residential mortgage loan origination volume was $10.5 comparison primarily due to declines in retail certificates of billion in 2010. Substantially all such loans were originated deposit, time deposits in foreign offices and money market under agency or Federal Housing Administration (FHA) deposits, partially offset by an increase in demand deposits. standards. We sold $10.0 billion of loans and recognized related gains of $231 million during 2010. The comparable Interest-bearing deposits represented 73% of total deposits at amounts for 2009 were $19.8 billion and $435 million, December 31, 2010 compared with 76% at December 31, respectively. 2009. The increase in the Other category resulted from the transfer Total borrowed funds increased $.2 billion since of certain commercial loans and leases to held for sale in the December 31, 2009. Other borrowed funds increased in the fourth quarter of 2010. comparison primarily due to the consolidation of Market Street and a credit card securitization trust. Additionally, bank Interest income on loans held for sale was $263 million in notes and senior debt increased since December 31, 2009 due 2010 and $270 million in 2009 and is included in Other to net issuances. These increases were partially offset in the interest income on our Consolidated Income Statement. comparison by a decline of Federal Home Loan Bank borrowings. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill and other intangible assets totaled $10.8 billion at December 31, 2010 compared with $12.9 billion at December, PNC issued $3.25 billion of senior notes in 2010 as described 31, 2009. Goodwill declined $1.4 billion, to $8.1 billion, at further in the Liquidity Risk Management section of this December 31, 2010 compared with the December 31, 2009 Item 7, which also describes other actions we took in 2010 balance primarily due to the sale of GIS which reduced that impacted our borrowed funds balances. goodwill by $1.2 billion. The $.8 billion decline in other Capital intangible assets from December 31, 2009 included $.3 billion declines in both commercial and residential mortgage We manage our capital position by making adjustments to our servicing rights. Note 9 Goodwill and Other Intangible Assets balance sheet size and composition, issuing debt, equity or included in the Notes To Consolidated Financial Statements in hybrid instruments, executing treasury stock transactions, Item 8 of this Report provides further information on these managing dividend policies and retaining earnings. PNC items. increased common equity during 2010 as outlined below.

41 Total shareholders’ equity increased $.3 billion, to $30.2 Risk-Based Capital billion, at December 31, 2010 compared with December 31, Dec. 31 Dec. 31 2009 and included the impact of the following: Dollars in millions 2010 2009 • The first quarter 2010 issuance of 63.9 million shares Capital components of common stock in an underwritten offering at $54 Shareholders’ equity per share resulted in a $3.4 billion increase in total Common $ 29,596 $ 21,967 shareholders’ equity, Preferred 646 7,975 • An increase of $2.7 billion to retained earnings, and Trust preferred capital securities 2,907 2,996 • A $1.5 billion decline in accumulated other Noncontrolling interests 1,351 1,611 comprehensive loss largely due to decreases in net Goodwill and other intangible assets (9,053) (10,652) unrealized securities losses as more fully described in Eligible deferred income taxes on the Investment Securities portion of this Consolidated goodwill and other intangible Balance Sheet Review. assets 461 738 Pension, other postretirement benefit plan adjustments 380 542 The factors above were mostly offset by a decline of $7.3 Net unrealized securities losses, billion in capital surplus-preferred stock in connection with after-tax 550 1,575 our February 2010 redemption of the Series N (TARP) Net unrealized losses (gains) on cash Preferred Stock as explained further in Note 18 Equity in the flow hedge derivatives, after-tax (522) (166) Notes To Consolidated Financial Statements in Item 8 of this Other (224) (63) Report. Tier 1 risk-based capital 26,092 26,523 Subordinated debt 4,899 5,356 Common shares outstanding were 526 million at Eligible allowance for credit losses 2,733 2,934 December 31, 2010 and 462 million at December 31, 2009. Total risk-based capital $ 33,724 $ 34,813 Our first quarter 2010 common stock offering referred to Tier 1 common capital above drove this increase. Tier 1 risk-based capital $ 26,092 $ 26,523 Preferred equity (646) (7,975) Since our acquisition of National City on December 31, 2008, Trust preferred capital securities (2,907) (2,996) we have increased total common shareholders’ equity by Noncontrolling interests (1,351) (1,611) $12.1 billion, or 69%. We expect to continue to increase our Tier 1 common capital $ 21,188 $ 13,941 common equity as a proportion of total capital, primarily through growth in retained earnings. Further, we believe that Assets Risk-weighted assets, including off- we have ample capital capacity to support growth in our balance sheet instruments and market businesses and to consider increases in the amount of capital risk equivalent assets $216,283 $232,257 we return to our shareholders, subject to obtaining necessary Adjusted average total assets 254,693 263,103 regulatory approvals. Capital ratios Tier 1 common 9.8% 6.0% Our current common stock repurchase program permits us to Tier 1 risk-based 12.1 11.4 purchase up to 25 million shares of PNC common stock on the Total risk-based 15.6 15.0 open market or in privately negotiated transactions. This Leverage 10.2 10.1 program will remain in effect until fully utilized or until modified, superseded or terminated. The extent and timing of Federal banking regulators have stated that they expect all share repurchases under this program will depend on a number bank holding companies to have a level and composition of of factors including, among others, market and general Tier 1 capital well in excess of the 4% regulatory minimum, economic conditions, economic and regulatory capital and they have required the largest US bank holding considerations, alternative uses of capital, regulatory and companies, including PNC, to have a capital buffer sufficient contractual limitations, and the potential impact on our credit to withstand losses and allow them to meet credit needs of ratings. We did not purchase any shares in 2010 under this their customers through the economic downturn. They have program and were restricted from doing so under the TARP also stated their view that common equity should be the Capital Purchase Program prior to our February 2010 dominant form of Tier 1 capital. As a result, regulators are redemption of the Series N Preferred Stock. See “Supervision now emphasizing the Tier 1 common capital ratio in their And Regulation” in Item 1 of this Report for further evaluation of bank holding company capital levels, although information concerning restrictions on dividends and stock this metric is not provided for in the regulations. We seek to repurchases, including the impact of the Federal Reserve’s manage our capital consistent with these regulatory principles, current supervisory assessment of capital adequacy. and believe that our December 31, 2010 capital levels were aligned with them.

42 Dodd-Frank requires the Federal Reserve Board to establish FF ALANCE HEET capital requirements that would, among other things, eliminate O -B S the Tier 1 treatment of trust preferred securities following a ARRANGEMENTS AND phase-in period expected to begin in 2013. Accordingly, PNC ARIABLE NTEREST NTITIES will evaluate its alternatives, including the potential for early V I E redemption of some or all of its trust preferred securities, We engage in a variety of activities that involve based on such considerations it may consider relevant, unconsolidated entities or that are otherwise not reflected in including dividend rates, the specifics of the future capital our Consolidated Balance Sheet that are generally referred to requirements, capital market conditions and other factors. as “off-balance sheet arrangements.” Additional information PNC is also subject to replacement capital covenants with on these types of activities is included in the following respect to certain of its trust preferred securities as discussed sections of this Report: in Note 13 Capital Securities of Subsidiary Trusts and • Commitments, including contractual obligations and Perpetual Trust Securities in the Notes To Consolidated other commitments, included within the Risk Financial Statements in Item 8 of this Report. Management section of this Financial Review, • Note 3 Loan Sale and Servicing Activities and Our Tier 1 common capital ratio was 9.8% at December 31, Variable Interest Entities in the Notes To 2010, an increase of 380 basis points compared with 6.0% at Consolidated Financial Statements included in Item 8 December 31, 2009. Our Tier 1 risk-based capital ratio of this Report, increased 70 basis points to 12.1% at December 31, 2010 from • Note 13 Capital Securities of Subsidiary Trusts and 11.4% at December 31, 2009. Increases in both ratios were Perpetual Trust Securities in the Notes To attributable to retention of earnings in 2010, the first quarter Consolidated Financial Statements included in Item 8 2010 equity offering, the third quarter 2010 sale of GIS, and of this Report, and lower risk-weighted assets. The increases in the Tier 1 risk- • Note 23 Commitments and Guarantees in the Notes based capital ratio noted above were offset by the impact of To Consolidated Financial Statements included in the $7.6 billion first quarter 2010 redemption of the Series N Item 8 of this Report. (TARP) Preferred Stock. See Note 18 Equity in the Notes To Consolidated Financial Statements in Item 8 of this Report for On January 1, 2010, we adopted ASU 2009-17 – additional information regarding the Series N Preferred Stock Consolidations (Topic 810) – Improvements to Financial redemption. Reporting by Enterprises Involved with Variable Interest Entities. This guidance removes the scope exception for At December 31, 2010, PNC Bank, N.A., our domestic bank qualifying special-purpose entities, contains new criteria for subsidiary, was considered “well capitalized” based on US determining the primary beneficiary of a variable interest regulatory capital ratio requirements. To qualify as “well- entity (VIE) and increases the frequency of required capitalized”, regulators currently require banks to maintain reassessments to determine whether an entity is the primary capital ratios of at least 6% for tier 1 risk-based, 10% for total beneficiary of a VIE. VIEs are assessed for consolidation risk-based, and 5% for leverage. See the Supervision And under Topic 810 when we hold variable interests in these Regulation section of Item 1 of this Report and Note 21 entities. PNC consolidates VIEs when we are deemed to be Regulatory Matters in the Notes To Consolidated Financial the primary beneficiary. The primary beneficiary of a VIE is Statements in Item 8 of this Report for additional information. determined to be the party that meets both of the following We believe PNC Bank, N.A. will continue to meet these criteria: (1) has the power to make decisions that most requirements during 2011. significantly affect the economic performance of the VIE and (2) has the obligation to absorb losses or the right to receive The access to, and cost of, funding for new business initiatives benefits that in either case could potentially be significant to including acquisitions, the ability to engage in expanded the VIE. Effective January 1, 2010, we consolidated Market business activities, the ability to pay dividends, the level of Street, a credit card securitization trust, and certain Low deposit insurance costs, and the level and nature of regulatory Income Housing Tax Credit (LIHTC) investments. We oversight depend, in part, on a financial institution’s capital recorded consolidated assets of $4.2 billion, consolidated strength. liabilities of $4.2 billion, and an after-tax cumulative effect adjustment to retained earnings of $92 million upon adoption.

43 The following provides a summary of VIEs, including those that we have consolidated and those in which we hold variable interests but have not consolidated into our financial statements, as of December 31, 2010 and December 31, 2009, respectively.

Consolidated VIEs – Carrying Value (a)

December 31, 2010 Market Credit Card Tax Credit In millions Street Securitization Trust Investments (b) Total Assets Cash and due from banks $2 $2 Interest-earning deposits with banks $ 284 4 288 Investment securities $ 192 192 Loans 2,520 2,125 4,645 Allowance for loan and lease losses (183) (183) Equity investments 1,177 1,177 Other assets 271 9 396 676 Total assets $2,983 $2,235 $1,579 $6,797 Liabilities Other borrowed funds $2,715 $ 523 $ 116 $3,354 Accrued expenses 97988 Other liabilities 268 188 456 Total liabilities $2,983 $ 532 $ 383 $3,898 (a) Amounts represent carrying value on PNC’s Consolidated Balance Sheet. (b) Amounts reported primarily represent LIHTC investments.

Consolidated VIEs Aggregate assets and aggregate liabilities differ from the consolidated carrying value of assets and liabilities due to Aggregate Aggregate elimination of intercompany assets and liabilities held by the In millions Assets Liabilities consolidated VIE. December 31, 2010 Market Street $3,584 $3,588 Credit Card Securitization Trust 2,269 1,004 Tax Credit Investments (a) 1,590 420 December 31, 2009 Tax Credit Investments (a) $1,933 $ 808 Credit Risk Transfer Transaction 860 860 (a) Amounts reported primarily represent LIHTC investments.

Non-Consolidated VIEs

Carrying Carrying Aggregate Aggregate PNC Risk Value of Value of In millions Assets Liabilities of Loss Assets Liabilities December 31, 2010 Tax Credit Investments (a) $ 4,086 $ 2,258 $ 782 $ 782(c) $301(d) Commercial Mortgage-Backed Securitizations (b) 79,142 79,142 2,068 2,068(e) Residential Mortgage-Backed Securitizations (b) 42,986 42,986 2,203 2,199(e) 4 (d) Collateralized Debt Obligations 18 1 1(c) Total $126,232 $124,386 $5,054 $5,050 $305

Aggregate Aggregate PNC Risk In millions Assets Liabilities of Loss December 31, 2009 Market Street $ 3,698 $ 3,718 $6,155(f) Tax Credit Investments (a) 1,786 1,156 743 Collateralized Debt Obligations 23 2 Total $ 5,507 $ 4,874 $6,900 (a) Amounts reported primarily represent LIHTC investments. Aggregate assets and aggregate liabilities represent estimated balances due to limited availability of financial information associated with certain acquired partnerships. (b) Amounts reported reflect involvement with securitization SPEs where PNC transferred to and/or services loans for a SPE and we hold securities issued by that SPE. We also invest in other mortgage and asset-backed securities issued by third-party VIEs with which we have no continuing involvement. Further information on these securities is included in Note 7 Investment Securities in the Notes to Consolidated Financial Statements in Item 8 of this Report and values disclosed represent our maximum exposure to loss for those securities’ holdings.

44 (c) Included in Equity investments on our Consolidated Balance Sheet. (d) Included in Other liabilities on our Consolidated Balance Sheet. (e) Included in Trading securities, Investment securities, Other intangible assets, and Other assets on our Consolidated Balance Sheet. (f) PNC’s risk of loss consisted of off-balance sheet liquidity commitments to Market Street of $5.6 billion and other credit enhancements of $.6 billion at December 31, 2009.

Market Street Market Street Commitments by Credit Rating (a) Market Street is a multi-seller asset-backed commercial paper December 31, December 31, conduit that is owned by an independent third party. Market 2010 2009 Street’s activities primarily involve purchasing assets or AAA/Aaa 26% 14% making loans secured by interests in pools of receivables from AA/Aa 60 50 US corporations that desire access to the commercial paper A/A 13 34 market. Market Street funds the purchases of assets or loans BBB/Baa 1 2 by issuing commercial paper and is supported by pool-specific Total 100% 100% credit enhancements, liquidity facilities and program-level (a) All facilities are structured to meet rating agency standards for applicable rating credit enhancement. Generally, Market Street mitigates its levels, however, the majority of our facilities are not explicitly rated by the rating potential interest rate risk by entering into agreements with its agencies. borrowers that reflect interest rates based upon its weighted average commercial paper cost of funds. During 2009 and PNC Capital Trust E Trust Preferred Securities 2010, Market Street met all of its funding needs through the In February 2008, PNC Capital Trust E issued $450 million of issuance of commercial paper. 7.75% Trust Preferred Securities due March 15, 2068 (the Trust E Securities). PNC Capital Trust E’s only assets are Market Street commercial paper outstanding was $2.7 billion $450 million of 7.75% Junior Subordinated Notes due at December 31, 2010 and $3.1 billion at December 31, 2009. March 15, 2068 and issued by PNC (the JSNs). The Trust E The weighted average maturity of the commercial paper was Securities are fully and unconditionally guaranteed by PNC. 36 days at December 31, 2010 and December 31, 2009. We may, at our option, redeem the JSNs at 100% of their principal amount on or after March 15, 2013. During 2009, PNC Capital Markets LLC, acting as a placement agent for Market Street, held a maximum daily position in In connection with the closing of the Trust E Securities sale, Market Street commercial paper of $135 million with an we agreed that, if we have given notice of our election to defer average balance of $19 million. PNC Capital Markets LLC interest payments on the JSNs or a related deferral period is owned no Market Street commercial paper at December 31, continuing, then PNC would be subject during such period to 2010 and December 31, 2009. PNC Bank, N.A. made no restrictions on dividends and other provisions protecting the purchases of Market Street commercial paper during 2010. status of the JSN debenture holder similar to or in some ways more restrictive than those potentially imposed under the Assets of Market Street (a) Exchange Agreements with Trust II and Trust III, as described in Note 13 Capital Securities of Subsidiary Trusts and Weighted Average Perpetual Trust Securities in the Notes To Consolidated Remaining Financial Statements included in Item 8 of this Report. PNC Maturity In In millions Outstanding Commitments Years Capital Trusts C and D have similar protective provisions with December 31, 2009 respect to $500 million in principal amount of junior Trade receivables $1,551 $4,105 2.0 subordinated debentures. Also, in connection with the closing Automobile financing 480 480 4.2 of the Trust E Securities sale, we entered into a replacement Auto fleet leasing 412 543 .9 capital covenant, which is described in Note 13 Capital Collateralized loan Securities of Subsidiary Trusts and Perpetual Trust Securities obligations 126 150 .4 in the Notes To Consolidated Financial Statements in Item 8 Residential mortgage 13 13 26.0 of this Report. Other 534 567 1.7 Cash and miscellaneous receivables 582 Acquired Entity Trust Preferred Securities As a result of the National City acquisition, we assumed Total $3,698 $5,858 2.1 obligations with respect to $2.4 billion in principal amount of (a) Market Street did not recognize an asset impairment charge or experience any junior subordinated debentures issued by the acquired entity. material rating downgrades during 2009. As a result of the Mercantile, Yardville and Sterling acquisitions, we assumed obligations with respect to $158 million in principal amount of junior subordinated debentures issued by the acquired entities. As described in Note 13

45 Capital Securities of Subsidiary Trusts and Perpetual Trust The following table includes the assets and liabilities Securities in the Notes To Consolidated Financial Statements measured at fair value and the portion of such assets and in Item 8 of this Report, in September 2010 and October 2010 liabilities that are classified within Level 3 of the valuation we redeemed $71 million and $10 million, respectively, in hierarchy. principal amounts related to the junior subordinated debentures issued by the acquired entities. Under the terms of Dec. 31, 2010 Dec. 31, 2009 Total Fair Total Fair the outstanding debentures, if there is an event of default In millions Value Level 3 Value Level 3 under the debentures or PNC exercises its right to defer Assets payments on the related trust preferred securities issued by the Securities available statutory trusts or there is a default under PNC’s guarantee of for sale $57,310 $ 8,583 $50,798 $ 9,933 Financial such payment obligations, PNC would be subject during the derivatives 5,757 77 3,916 50 period of such default or deferral to restrictions on dividends Residential and other provisions protecting the status of the debenture mortgage loans held for sale 1,878 1,012 holders similar to or in some ways more restrictive than those Trading securities 1,826 69 2,124 89 potentially imposed under the Exchange Agreements with Residential Trust II and Trust III, as described in Note 13 Capital mortgage servicing rights 1,033 1,033 1,332 1,332 Securities of Subsidiary Trusts and Perpetual Trust Securities Commercial in the Notes To Consolidated Financial Statements included in mortgage loans Item 8 of this Report. held for sale 877 877 1,050 1,050 Equity investments 1,384 1,384 1,188 1,188 Customer resale As more fully described in our 2009 Form 10-K, we were agreements 866 990 subject to replacement capital covenants with respect to four Loans 116 2 107 Other assets 853 403 716 509 tranches of junior subordinated debentures inherited from Total assets $71,900 $12,428 $63,233 $14,151 National City as well as a replacement capital covenant with Level 3 assets as a respect to our Series L Preferred Stock. As a result of a percentage of total successful consent solicitation of the holders of our 6.875% assets at fair value 17% 22% Subordinated Notes due May 15, 2019, we terminated the Level 3 assets as a percentage of replacement capital covenants with respect to these four consolidated assets 5% 5% tranches of junior subordinated debentures and our Series L Liabilities Preferred Stock on November 5, 2010. Termination of the Financial replacement capital covenants allows PNC to call such junior derivatives $ 4,935 $ 460 $ 3,839 $ 506 Trading securities subordinated debt and the Series L Preferred Stock at our sold short 2,530 1,344 discretion, subject to any required regulatory approval. Other liabilities 6 6 Total liabilities $ 7,471 $ 460 $ 5,189 $ 506 AIR ALUE EASUREMENTS Level 3 liabilities as a F V M percentage of total In addition to the following, see Note 8 Fair Value in the liabilities at fair Notes To Consolidated Financial Statements in Item 8 of this value 6% 10% Report for further information regarding fair value. Level 3 liabilities as a percentage of consolidated Assets recorded at fair value represented 27% and 23% of liabilities <1% <1% total assets at December 31, 2010 and December 31, 2009, respectively. The increase in the percentage compared with The majority of Level 3 assets represent non-agency the prior year end was primarily due to increases in securities residential mortgage-backed and asset-backed securities in the available for sale and financial derivatives. Liabilities available for sale securities portfolio for which there was a recorded at fair value represented 3% and 2% of total lack of observable trading activity. liabilities at December 31, 2010 and December 31, 2009, respectively. During 2010, no significant transfers of assets or liabilities between the hierarchy levels occurred.

46 BUSINESS SEGMENTS REVIEW not directly aligned with the businesses is primarily based on We have six reportable business segments: the use of services. • Retail Banking • Corporate & Institutional Banking Total business segment financial results differ from total • Asset Management Group consolidated results from continuing operations before • Residential Mortgage Banking noncontrolling interests, which itself excludes the earnings • BlackRock and revenue attributable to GIS through June 30, 2010 and the • Distressed Assets Portfolio related after-tax gain on sale in third quarter 2010 that are reflected in discontinued operations. The impact of these Once we entered into an agreement to sell GIS, it was no differences is reflected in the “Other” category. “Other” for longer a reportable business segment. We sold GIS on July 1, purposes of this Business Segments Review and the Business 2010. Segment Highlights in the Executive Summary includes residual activities that do not meet the criteria for disclosure as Business segment results, including inter-segment revenues, a separate reportable business, such as gains or losses related and a description of each business are included in Note 25 to BlackRock transactions including LTIP share distributions Segment Reporting included in the Notes To Consolidated and obligations, integration costs, asset and liability Financial Statements of Item 8 this Report. Certain amounts management activities including net securities gains or losses included in this Item 7 differ from those amounts shown in and certain trading activities, exited businesses, equity Note 25 primarily due to the presentation in this Item 7 of management activities, alternative investments, intercompany business net interest revenue on a taxable-equivalent basis. eliminations, most corporate overhead, and differences between business segment performance reporting and Results of individual businesses are presented based on our financial statement reporting (GAAP), including the management accounting practices and management structure. presentation of net income attributable to noncontrolling There is no comprehensive, authoritative body of guidance for interests. management accounting equivalent to GAAP; therefore, the financial results of our individual businesses are not Period-end Employees necessarily comparable with similar information for any other Dec. 31 Dec. 31 company. We refine our methodologies from time to time as 2010 2009 our management accounting practices are enhanced and our Full-time employees businesses and management structure change. Certain prior Retail Banking 20,925 21,416 period amounts have been reclassified to reflect current Corporate & Institutional Banking 3,756 3,746 methodologies and our current business and management Asset Management Group 3,001 2,969 structure. Financial results are presented, to the extent Residential Mortgage Banking 3,539 3,267 practicable, as if each business operated on a stand-alone Distressed Assets Portfolio 167 175 basis. We have aggregated the business results for certain Other Operations & Technology 8,712 9,249 similar operating segments for financial reporting purposes. Staff Services and other (a) 4,717 8,939 Assets receive a funding charge and liabilities and capital Total Other 13,429 18,188 receive a funding credit based on a transfer pricing Total full-time employees 44,817 49,761 methodology that incorporates product maturities, duration Retail Banking part-time employees 4,965 4,737 and other factors. Capital is intended to cover unexpected Other part-time employees 987 1,322 losses and is assigned to the banking and servicing businesses Total part-time employees 5,952 6,059 using our risk-based economic capital model. We have Total 50,769 55,820 assigned capital equal to 6% of funds to Retail Banking to (a) Includes employees of GIS 4,450 at December 31, 2009. We sold GIS effective reflect the capital required for well-capitalized domestic banks July 1, 2010. and to approximate market comparables for this business. Employee data as reported by each business segment in the We have allocated the ALLL and unfunded loan commitments table above reflects staff directly employed by the respective and letters of credit based on our assessment of risk inherent businesses and excludes operations, technology and staff in the business segment loan portfolios. Our allocation of the services employees reported in the Other segment. Total costs incurred by operations and other shared support areas employees have decreased since December 31, 2009 primarily as a result of the sale of GIS.

47 Results Of Businesses – Summary (Unaudited)

Income (Loss) Revenue Average Assets (a) Year ended December 31- in millions 2010 2009 2010 2009 2010 2009 Retail Banking (b) $ 140 $ 136 $ 5,376 $ 5,721 $ 67,024 $ 65,320 Corporate & Institutional Banking 1,770 1,190 4,908 5,266 77,467 84,689 Asset Management Group 141 105 890 919 7,022 7,320 Residential Mortgage Banking 275 435 1,003 1,328 9,247 8,420 BlackRock 351 207 462 262 5,428 6,249 Distressed Assets Portfolio (64) 84 1,125 1,153 17,517 22,844 Total business segments 2,613 2,157 13,764 14,649 183,705 194,842 Other (b) (c) (d) 411 201 1,412 1,579 81,197 82,034 Income from continuing operations before noncontrolling interests (e) $3,024 $2,358 $15,176 $16,228 $264,902 $276,876 (a) Period-end balances for BlackRock. (b) Amounts for 2009 include the results of the 61 branches prior to their divestiture in early September 2009. (c) For our segment reporting presentation in this Financial Review, “Other” earnings and revenue for 2010 include a $102 million after-tax ($160 million pretax) gain related to our gain on the sale of a portion of our investment in BlackRock stock as part of a BlackRock secondary common stock offering in November 2010 and “Other” earnings for 2010 also includes $251 million of after-tax ($387 million pretax) integration costs primarily related to National City. “Other” earnings and revenue for 2009 include a $687 million after-tax ($1.076 billion pretax) gain related to the BlackRock/BGI transaction and “Other” earnings for 2009 also includes $274 million of after-tax ($421 million pretax) integration costs primarily related to National City. (d) “Other” average assets include investment securities associated with asset and liability management activities. (e) Amounts are presented on a continuing operations basis and therefore exclude the earnings, revenue, and assets of GIS, including the third quarter 2010 gain on sale of GIS.

48 At December 31 RETAIL BANKING Dollars in millions, except as noted 2010 (a) 2009(b) (Unaudited) OTHER INFORMATION (CONTINUED) (c) Commercial lending net charge-off Year ended December 31 Dollars in millions 2010 (a) 2009 (b) ratio 2.63% 3.06% Credit card net charge-off ratio 8.02% 9.33% INCOME STATEMENT Consumer lending (excluding credit Net interest income $ 3,433 $ 3,522 card) net charge-off ratio 1.00% .98% Noninterest income Total net charge-off ratio 1.82% 1.81% Service charges on deposits 681 930 Brokerage 212 245 Other statistics: Consumer services 912 886 ATMs 6,673 6,473 Other 138 138 Branches (f) 2,470 2,513 Total noninterest income 1,943 2,199 Home equity portfolio credit statistics: Total revenue 5,376 5,721 % of first lien positions (g) 36% 35% Provision for credit losses 1,103 1,330 Weighted average loan-to-value ratios Noninterest expense 4,054 4,169 (g) 73% 74% Pretax earnings 219 222 Weighted average FICO scores (h) 726 727 Income taxes 79 86 Net charge-off ratio .90% .75% Earnings $ 140 $ 136 Loans 30 – 59 days past due .49% .49% AVERAGE BALANCE SHEET Loans 60 – 89 days past due .30% .29% Loans Loans 90 days past due 1.02% .76% Consumer Home equity $ 26,450 $ 27,403 Customer-related statistics: Indirect 3,973 4,036 Retail Banking checking relationships Education 8,497 5,625 (i) 5,465,000 5,390,000 Credit cards 3,938 2,239 Retail online banking active Other consumer 1,804 1,791 customers 3,057,000 2,743,000 Total consumer 44,662 41,094 Commercial and commercial real Retail online bill payment active estate 11,208 12,306 customers 977,000 780,000 Floor plan 1,336 1,264 Brokerage statistics: Residential mortgage 1,599 2,064 Financial consultants (j) 694 704 Total loans 58,805 56,728 Full service brokerage offices 34 40 Goodwill and other intangible assets 5,861 5,842 Other assets 2,358 2,750 Brokerage account assets Total assets $ 67,024 $ 65,320 (billions) $33$32 Deposits (a) Information for 2010 reflects the impact of the consolidation in our financial Noninterest-bearing demand $ 17,223 $ 16,308 statements for the securitized credit card portfolio of approximately $1.6 billion of Interest-bearing demand 19,776 18,357 credit card loans as of January 1, 2010. Money market 40,125 39,394 (b) PNC completed the required divestiture of 61 branches in early September 2009. Amounts for periods prior to the divestitures include the impact of those branches. Total transaction deposits 77,124 74,059 (c) Presented as of December 31 except for net charge-offs and net charge-off ratios, Savings 6,938 6,610 which are for the year ended. Certificates of deposit 41,539 53,145 (d) Includes nonperforming loans of $694 million at December 31, 2010 and $597 Total deposits 125,601 133,814 million at December 31, 2009. Other liabilities and borrowings 1,477 51 (e) Recorded investment of purchased impaired loans related to acquisitions. Capital 8,132 8,497 (f) Excludes certain satellite branches that provide limited products and/or services. Total liabilities and equity $135,210 $142,362 (g) Includes loans from acquired portfolios for which lien position and loan-to-value information is not available. PERFORMANCE RATIOS (h) Represents the most recent FICO scores we have on file. Return on average capital 2% 2% (i) Retail checking relationships for prior periods have been adjusted to be consistent Return on average assets .21 .21 with the current period presentation. The prior amounts were refined subsequent to Noninterest income to total revenue 36 38 completion of application system conversion activities related to the National City Efficiency 75 73 acquisition. OTHER INFORMATION (C) (j) Financial consultants provide services in full service brokerage offices and PNC Credit-related statistics: traditional branches. Commercial nonperforming assets $ 297 $ 324 Consumer nonperforming assets 422 284 Total nonperforming assets (d) $ 719 $ 608 Retail Banking earned $140 million for 2010 compared with Impaired loans (e) $ 895 $ 1,056 $136 million in 2009. Earnings were primarily driven by a Commercial lending net charge-offs $ 330 $ 415 decrease in the provision for credit losses due to improved Credit card lending net charge-offs 316 209 credit quality and lower noninterest expense from acquisition Consumer lending (excluding credit cost savings. These factors were partially offset by a decline in card) net charge-offs 424 402 revenue related to the implementation of Regulation E rules Total net charge-offs $ 1,070 $ 1,026 related to overdraft fees and the impact of the low interest rate environment. Retail Banking continued to maintain its focus on growing customers and deposits, improving customer and

49 employee satisfaction, investing in the business for future continued to pay off as active online bill payment growth, and disciplined expense management during this customers grew by 25% in 2010. period of market and economic uncertainty. • PNC’s expansive branch footprint covers nearly one-third of the U.S. population with a network of Information for 2010 reflects the impact of the consolidation 2,470 branches and 6,673 ATM machines at in our financial statements of the securitized credit card December 31, 2010. We continued to invest in the portfolio of approximately $1.6 billion of credit card loans as branch network. In 2010, we opened 21 traditional of January 1, 2010. This consolidation impacted primarily the and 27 in-store branches, and consolidated 91 loan, borrowings, and other liabilities categories on the branches. The decrease in branches was primarily balance sheet and nearly all major categories of our income driven by acquisition-related branch consolidations. statement. Total revenue for 2010 was $5.4 billion compared with $5.7 billion in 2009. Net interest income of $3.4 billion declined In January 2011, PNC reached a definitive agreement to $89 million compared with 2009. Net interest income was acquire 19 branches and the associated deposits from negatively impacted by lower interest credits assigned to BankAtlantic Bancorp, Inc. located in the Tampa, Florida deposits, reflective of the rate environment, and benefited area. The transaction is expected to close in June 2011, subject from the consolidation of the securitized credit card portfolio, to regulatory approval and customary closing conditions. PNC higher transaction deposits, and increased education loans. will convert the branches and customer accounts to the PNC brand and systems at that time. This transaction is expected to Noninterest income for 2010 was $1.9 billion, a decline of provide Retail Banking with the opportunity to establish a $256 million over the prior year. The decrease was due to a foothold in the Tampa area and leverage those branches to decrease in service charges on deposits related to lower help grow other business activities, such as wealth overdraft fees, the negative impact of the consolidation of the management and corporate banking. securitized credit card portfolio, lower brokerage fees, and the impact of the required branch divestitures partially offset by, Highlights of Retail Banking’s performance for 2010 include higher transaction volume-related fees within consumer the following: services. • PNC successfully completed the conversion of customers at over 1,300 branches across nine states In 2010, Retail Banking revenues were negatively impacted from National City Bank to PNC, providing further by the implementation of new federal regulations. These growth opportunities throughout our expanded regulations include: 1) the new rules set forth in Regulation E footprint. related to overdraft fees, 2) the Credit CARD Act of 2009, and • Success in implementing Retail Banking’s deposit 3) the education lending portions of the Health Care and strategy resulted in growth in average demand Education Reconciliation Act of 2010 (HCERA). deposits of $2.3 billion, or 7%, over the prior year. Excluding approximately $0.7 billion of average The negative impact of Regulation E on revenue for 2010 was demand deposits from 2009 balances related to the 61 approximately $145 million. Additionally, the Credit CARD required branch divestitures completed in early Act had a negative impact on revenue of approximately $75 September 2009, average demand deposits increased million, largely in net interest income. These estimates do not $3.0 billion, or 9%, over the prior year. include additional impacts to revenue for other changes that • For the second consecutive year, the Retail Bank was were made in 2010 responding to market conditions, or other/ named a Gallup Great WorkPlace Award Winner. additional regulatory requirements, or any offsetting impact of PNC was the only U.S. Bank to be recognized. This changes to products and/or pricing. recognition reflects our commitment to having an engaged workforce and a unified culture. The education lending business was adversely impacted by • Implementing the business model in the acquired provisions of HCERA that went into effect on July 1, 2010. markets and building on strengths in the core The law essentially eliminates the Federal Family Education franchise resulted in the growth of 75,000 checking Loan Program (FFELP), the federally guaranteed portion of relationships in 2010, a solid gain considering the this business available to private lenders. We originated $2.6 first half of the year was dominated by the customer billion of federally guaranteed loans under FFELP in 2009 and conversion process and 2010 was a difficult $1.0 billion in 2010, the majority of which were originated in environment. The majority of this growth came in the the first half of the year. We plan to continue to provide second half of the year as strength in customer private education loans as another source of funding for retention from the converted markets was coupled students and families. with sales momentum in channels and products such as Workplace and University Banking and Virtual Additionally, in 2011 Retail Banking revenue is expected to Wallet. Our investment in online banking capabilities continue to be negatively impacted by the rules set forth in

50 Regulation E related to overdraft fees and to be negatively • Average money market deposits increased $731 impacted by the potential limits related to interchange rates on million, or 2%, from 2009. The increase was debit card transactions proposed in Dodd-Frank. The primarily due to core money market growth as incremental negative impact of these two aspects of regulatory customers generally prefer more liquid deposits in a reform on fees may be approximately $400 million in 2011 if low rate environment. limits to interchange rates are implemented consistent with • In 2010, average certificates of deposit decreased rules currently proposed by the Federal Reserve Board. $11.6 billion from last year. This decline is expected Changes in the proposed interchange rules could impact this to continue in 2011, although at a slower pace, due to estimate. Further, this estimate does not include any additional the continued run off of higher rate certificates of impact to revenue of other or additional regulatory deposit that were primarily obtained through the requirements. There could be other aspects of regulatory National City acquisition. reform that further impact these or other areas of our business as regulatory agencies, including the new CFPB, issue Currently, we plan to maintain our focus on a relationship- proposed and final regulations pursuant to Dodd-Frank and based lending strategy that targets specific customer sectors other legislation. See additional information regarding (mass consumers, homeowners, students, small businesses and legislative and regulatory developments in the Executive auto dealerships) and our moderate risk lending approach. In Summary section of this Item 7. 2010, average total loans were $58.8 billion, an increase of $2.1 billion, or 4%, over last year. The provision for credit losses was $1.1 billion in 2010 • Average education loans grew $2.9 billion compared compared with $1.3 billion in 2009. Net charge-offs were $1.1 with 2009 primarily due to increases in federal loan billion in 2010 and essentially flat when compared with the volumes as a result of non-bank competitors exiting same period last year. These comparisons both benefited from from the business, portfolio purchases, and the overall improved credit quality which was partially offset by impact of our current strategy of holding education the previously mentioned consolidation of $1.6 billion in loans on the balance sheet. As previously noted, the credit card loans as of January 1, 2010. Credit quality has federally guaranteed portion of this business was shown signs of stabilization during 2010 with a declining net essentially eliminated going forward beginning charge-off trend in each of the last four quarters. The July 1, 2010 due to HCERA. improvement in net charge-off trends was predominately • Average credit card balances increased $1.7 billion driven by the small business commercial lending and credit over 2009. The increase was primarily the result of card portfolios. The increase in non-performing assets over the the consolidation of the securitized credit card prior year was primarily due to an increase in modified loans portfolio effective January 1, 2010. reflecting continued efforts to work with borrowers • Average home equity loans declined $953 million experiencing financial difficulties. over 2009. Consumer loan demand remained soft in the current economic climate. The decline is driven by loan demand being outpaced by paydowns, Noninterest expense for the year declined $115 million from refinancings, and charge-offs. Retail Banking’s home the same period last year. Expenses were well-managed as equity loan portfolio is relationship based, with 96% continued investments in distribution channels were more than of the portfolio attributable to borrowers in our offset by acquisition cost savings and the required branch primary geographic footprint. The nonperforming divestitures. assets and charge-offs that we have experienced are within our expectations given current market Growing core checking deposits as a lower-cost funding conditions. source and as the cornerstone product to build customer • Average commercial and commercial real estate relationships is the primary objective of our deposit strategy. loans declined $1.1 billion compared with 2009. The Furthermore, core checking accounts are critical to our decline was primarily due to loan demand being strategy of expanding our payments business. The deposit outpaced by refinancings, paydowns, charge-offs and strategy of Retail Banking is to remain disciplined on pricing, the required branch divestitures (approximately $0.2 target specific products and markets for growth, and focus on billion of the decline on average). the retention and growth of balances for relationship customers.

In 2010, average total deposits decreased $8.2 billion, or 6%, compared with 2009. • Average demand deposits increased $2.3 billion, or 7%, over 2009. The increase was primarily driven by customer growth and customer preferences for liquidity.

51 Year ended December 31 CORPORATE &INSTITUTIONAL BANKING Dollars in millions except as noted 2010 (a) 2009 (Unaudited) PERFORMANCE RATIOS Return on average capital 23% 15% Year ended December 31 Dollars in millions except as noted 2010 (a) 2009 Return on average assets 2.28 1.41 Noninterest income to total revenue 28 27 INCOME STATEMENT Efficiency 37 34 Net interest income $ 3,545 $ 3,833 Noninterest income COMMERCIAL MORTGAGE SERVICING Corporate service fees 961 915 PORTFOLIO Other 402 518 (in billions) Beginning of period $ 287 $ 270 Noninterest income 1,363 1,433 Acquisitions/additions 35 50 Total revenue 4,908 5,266 Repayments/transfers (56) (33) Provision for credit losses 303 1,603 End of period $ 266 $ 287 Noninterest expense 1,817 1,800 OTHER INFORMATION Pretax earnings 2,788 1,863 Consolidated revenue from: (b) Income taxes 1,018 673 Treasury Management $ 1,225 $ 1,137 Earnings $ 1,770 $ 1,190 Capital Markets $ 618 $ 533 AVERAGE BALANCE SHEET Commercial mortgage loans held for Loans sale (c) $58$ 205 Commercial $32,717 $37,426 Commercial mortgage loan servicing (d) 204 280 Commercial real estate 16,466 19,195 Total commercial mortgage banking Commercial – real estate related 3,076 3,772 activities $ 262 $ 485 Asset-based lending 6,318 6,344 Total loans (e) $63,609 $66,206 Equipment lease financing 5,484 5,390 Net carrying amount of commercial Total loans 64,061 72,127 mortgage servicing rights (e) $ 665 $ 921 Goodwill and other intangible assets 3,613 3,583 Credit-related statistics: Loans held for sale 1,473 1,679 Nonperforming assets (e) (f) $ 2,594 $ 3,167 Other assets 8,320 7,300 Impaired loans (e) (g) $ 714 $ 1,075 Total assets $77,467 $84,689 Net charge-offs $ 1,074 $ 1,052 (a) Information as of year ended December 31, 2010 reflects the impact of the Deposits consolidation in our financial statements of Market Street effective January 1, 2010. Noninterest-bearing demand $24,713 $19,948 Includes $1.5 billion of loans, net of eliminations, and $2.6 billion of commercial Money market 12,153 9,697 paper borrowings included in Other liabilities. Other 6,980 7,911 (b) Represents consolidated PNC amounts. (c) Includes valuations on commercial mortgage loans held for sale and related Total deposits 43,846 37,556 commitments, derivative valuations, origination fees, gains on sale of loans held for Other liabilities 11,949 9,118 sale and net interest income on loans held for sale. Capital 7,598 7,837 (d) Includes net interest income and noninterest income from loan servicing and ancillary services and commercial mortgage servicing rights valuations. Total liabilities and equity $63,393 $54,511 (e) At December 31. (f) Includes nonperforming loans of $2.4 billion at December 31, 2010 and $3.0 billion at December 31, 2009. Corporate & Institutional Banking earned a record $1.8 billion (g) Recorded investment of purchased impaired loans related to acquisitions. in 2010 compared with $1.2 billion 2009. The increase in earnings primarily resulted from a decrease in the provision for credit losses somewhat offset by lower net interest income driven mainly by lower loan balances. We continued to focus on adding new clients and increased our cross selling to serve our clients needs, particularly in the western markets, and remained committed to strong expense discipline.

52 Highlights of Corporate & Institutional Banking performance • Harris Williams is one of the nation’s largest and during 2010 include: most successful mergers and acquisitions advisory • Achieved record client growth as new customers teams focused exclusively on the middle markets. were added at approximately twice the pace of any Revenues increased over $80 million in 2010 previous year. We added more than 1,100 new compared with 2009 on higher deal activity driven by clients. the improved financing environment. Harris Williams • Successfully completed the conversion of over established its first overseas operation in London 12,000 customers which resulted in a significant during 2010. increase in cross sales opportunities, particularly in the western markets. Other noninterest income was $402 million for 2010, a • Treasury Management delivered record decrease of $116 million from 2009 primarily due to a decline revenue for the year and grew favorably when in the income associated with commercial mortgage loans compared to the industry average. held for sale, net of hedges, and the sale of the duplicative • Some of the largest Capital Markets agency servicing operation in the second quarter of 2010. transactions in the history of PNC were recorded in 2010 which contributed to a record The provision for credit losses was $303 million in 2010 year in revenue earned for this business. compared with $1.6 billion in 2009. The decline reflected • Midland Loan Services, one of the leading improvements in portfolio credit quality along with lower loan third-party providers of servicing for the and commitment levels. Net charge-offs for 2010 of $1.1 commercial real estate industry, received the billion increased 2% compared with 2009. Nonperforming highest US servicer and special servicer ratings assets were $2.6 billion in 2010, down from $3.2 billion in from Fitch Ratings and Standard & Poor’s and 2009. is in its 11th consecutive year of achieving these ratings. Noninterest expense was $1.8 billion for both 2010 and 2009. • Midland was the number one servicer of Increases in compensation costs related to revenue and credit- FNMA and FHLMC loans and was the second related expenses were essentially offset by the impact of the leading servicer of commercial and multifamily sale of the duplicative agency servicing operation in the loans by volume as of December 31, 2010 second quarter of 2010. according to Mortgage Bankers Association. • Greenwich Associates awarded PNC the 2010 Average loans were $64 billion for 2010 compared with $72 Excellence Awards in Middle Market Banking billion in 2009. Excluding the impact of the 2010 Market for Financial Stability and in Treasury Street consolidation, which contributed $2 billion to average Management for Customer Service. loans in 2010, average loans decreased $10 billion or 13% compared with 2009. The decrease was due to exits of certain Net interest income for 2010 was $3.5 billion, a decrease of client relationships combined with continued soft new loan $288 million from 2009, due to a decrease in average loans originations and utilization rates. and lower interest credits assigned to deposits. • PNC Real Estate provides commercial real estate and real-estate related lending and is one of the industry’s Corporate service fees were $961 million for 2010, an largest providers of both conventional and affordable increase of $46 million over 2009 primarily due to higher multifamily financing. Commercial real estate loans merger and acquisition advisory and ancillary commercial declined in 2010 due to reduced demand, paydowns mortgage servicing fees. This increase was partially offset by and charge-offs. a reduction in the value of commercial mortgage servicing • Business Credit is one of the largest asset-based rights driven by lower interest rates. The major components of lenders in the country. It expanded its operations with corporate service fees are treasury management, corporate the acquisition of an asset-based lending group in the finance fees and commercial mortgage servicing revenue. United Kingdom which was completed in November • Our Treasury Management business, which is ranked 2010. Total loans acquired were approximately $300 in the top ten nationally, continued to invest in million. markets, products and infrastructure as well as major • PNC Equipment Finance is the 6th largest bank- initiatives such as healthcare. The healthcare affiliated leasing company with over $9 billion in initiative is designed to help provide our customers equipment finance assets. Average loans and leases opportunities to reduce operating costs. Healthcare- declined approximately $.2 billion for 2010 related revenues in 2010 increased over 25% from compared with 2009 due to runoff and sales of 2009. non-strategic portfolios more than offsetting portfolio acquisitions and improved origination volumes within our middle market customer base.

53 Year ended December 31 Average deposits were $43.8 billion for 2010, an increase of Dollars in millions except as noted 2010 2009 $6.3 billion, or 17%, compared with 2009. During 2010, ASSETS UNDER ADMINISTRATION customers continued to move balances to noninterest-bearing (in billions) (a) (d) demand deposits to maintain liquidity. Personal $99 $94 Institutional 113 111 The commercial mortgage servicing portfolio was $266 billion Total $212 $205 at December 31, 2010 compared with $287 billion at Asset Type December 31, 2009. The decrease was driven by the sale Equity $115 $100 during the second quarter of 2010 of a duplicative agency Fixed Income 63 58 servicing operation acquired with National City. Liquidity/Other 34 47 Total $212 $205 See the additional revenue discussion regarding treasury management, capital markets-related products and services, Discretionary assets under management Personal $69 $67 and commercial mortgage banking activities on page 32. Institutional 39 36 Total $108 $103 ASSET MANAGEMENT GROUP Asset Type (Unaudited) Equity $55 $49 Year ended December 31 Fixed Income 36 34 Dollars in millions except as noted 2010 2009 Liquidity/Other 17 20 INCOME STATEMENT Total $108 $103 Net interest income $ 263 $ 308 Nondiscretionary assets under administration Noninterest income 627 611 Personal $30 $27 Total revenue 890 919 Institutional 74 75 Provision for credit losses 20 97 Total $104 $102 Noninterest expense 647 654 Asset Type Pretax earnings 223 168 Equity $60 $51 Income taxes 82 63 Fixed Income 27 24 Earnings $ 141 $ 105 Liquidity/Other 17 27 AVERAGE BALANCE SHEET Total $104 $102 Loans (a) As of December 31. Consumer $4,026 $3,957 (b) Includes nonperforming loans of $82 million at December 31, 2010 and $149 Commercial and commercial real estate 1,501 1,639 million at December 31, 2009. Residential mortgage 850 1,078 (c) Recorded investment of purchased impaired loans related to acquisitions. (d) Excludes brokerage account assets. Total loans 6,377 6,674 Goodwill and other intangible assets 399 407 Asset Management Group earned $141 million for 2010 246 Other assets 239 compared with $105 million for 2009. The increase reflected a Total assets $7,022 $7,320 lower provision for credit losses due to improved credit Deposits quality and increased noninterest income from higher equity Noninterest-bearing demand $1,324 $1,091 markets and new client growth. These increases were partially Interest-bearing demand 1,835 1,582 offset by lower net interest income from lower loan yields. Money market 3,283 3,208 The business delivered strong performance in 2010 as it Total transaction deposits 6,442 5,881 remained focused on new client acquisition, client asset Certificates of deposit and other 748 1,076 growth and expense discipline. Total deposits 7,190 6,957 Other liabilities 89 104 Highlights of Asset Management Group’s performance during Capital 534 569 2010 include the following: Total liabilities and equity $7,813 $7,630 • Successfully executed its National City trust system PERFORMANCE RATIOS and banking conversions while maintaining high Return on average capital 26% 18% client satisfaction and retention, Return on average assets 2.01 1.43 • Achieved exceptional new sales and client Noninterest income to total revenue 70 66 acquisition levels for the Group, Efficiency 73 71 • Improved credit quality and performance, and OTHER INFORMATION • Exceeded expense management targets while Total nonperforming assets (a) (b) $90$ 155 investing in strategic growth initiatives. Impaired loans (a) (c) $ 146 $ 198 Total net charge-offs $42$63

54 Assets under administration of $212 billion at December 31, The provision for credit losses was $20 million for 2010 2010 increased $7 billion compared with the balance at compared with $97 million for 2009. Net charge-offs were December 31, 2009. Discretionary assets under management $42 million for 2010 and $63 million for the 2009. Credit of $108 billion at December 31, 2010 increased $5 billion or 5 quality showed signs of stabilization in 2010. percent compared with the balance at December 31, 2009 due to higher equity markets and strong sales performance. Noninterest expense of $647 million in 2010 decreased Nondiscretionary assets under administration of $104 billion slightly from 2009. The decline is attributable to disciplined increased $2 billion or 2 percent from 2009. expense management and integration-related initiatives partially offset by strategic investments in the business. Total revenue for 2010 was $890 million compared with $919 million for 2009. Net interest income for 2010 decreased $45 Total average deposits for 2010 increased $233 million, or million compared with 2009, primarily due to a reduction in 3%, from 2009 as a 10% increase in transaction deposits more higher yield loans. Noninterest income of $627 million for than offset the strategic exit of higher rate certificates of 2010 increased $16 million compared with 2009 as the deposit. Total average loans decreased $297 million, or 4%, impacts of strong sales results and the improved equity from 2009 as growth in consumer loans was more than offset markets were partially offset by the strategic exit of noncore by a decline in other loan categories. businesses.

55 RESIDENTIAL MORTGAGE BANKING Residential Mortgage Banking earned $275 million for 2010 (Unaudited) compared with $435 million in 2009. The decline in earnings was driven by a decrease in loan sales revenue from lower Year ended December 31 origination volumes and lower net hedging gains on mortgage Dollars in millions, except as noted 2010 2009 servicing rights. INCOME STATEMENT Net interest income $ 267 $ 332 Noninterest income Residential Mortgage Banking overview: Loan servicing revenue • Total loan originations were $10.5 billion for 2010 Servicing fees 242 222 Net MSR hedging gains 245 355 compared with $19.1 billion for 2009. Lower Loan sales revenue 231 435 mortgage rates in the first half of 2009 resulted in Other 18 (16) higher loan origination volumes. Loans continued to Total noninterest income 736 996 be primarily originated through direct channels under Total revenue 1,003 1,328 FNMA, FHLMC and FHA/Veterans’ Administration Provision for (recoveries of) credit losses 5 (4) (VA) agency guidelines. Noninterest expense 565 632 Pretax earnings 433 700 • Investors may request PNC to indemnify them Income taxes 158 265 against losses on certain loans or to repurchase loans Earnings $ 275 $ 435 that they believe do not comply with applicable representations. At December 31, 2010, the liability AVERAGE BALANCE SHEET Portfolio loans $2,649 $1,957 for estimated losses on loan indemnification and Loans held for sale 1,322 2,204 repurchase claims for the Residential Mortgage Mortgage servicing rights (MSR) 1,017 1,297 Banking business segment was $144 million Other assets 4,259 2,962 compared with $229 million at December 31, 2009. Total assets $9,247 $8,420 See the Recourse and Repurchase Obligations section Deposits $2,716 $4,135 of this Item 7 and Note 23 Commitments and Borrowings and other liabilities 2,823 2,924 Guarantees in the Notes To Consolidated Financial Capital 1,200 1,359 Statements included in Item 8 of this Report for Total liabilities and equity $6,739 $8,418 additional information. PERFORMANCE RATIOS Return on average capital 23% 32% • Residential mortgage loans serviced for others totaled Return on average assets 2.97 5.17 $125 billion at December 31, 2010 compared with Noninterest income to total revenue 73 75 $145 billion at December 31, 2009. Payoffs Efficiency 56 48 continued to outpace new direct loan origination RESIDENTIAL MORTGAGE volume during 2010. SERVICING PORTFOLIO (in billions) • Net interest income was $267 million for 2010 Beginning of period $ 145 $ 173 compared with $332 million for 2009. The decrease Acquisitions/additions 10 20 resulted from lower escrow deposit balances and Repayments/transfers (30) (40) Servicing sale (8) residential mortgage loans held for sale. End of period $ 125 $ 145 • Noninterest income was $736 million in 2010 Servicing portfolio statistics: (a) compared with $996 million in 2009. The decline Fixed rate 89% 88% was due to reduced loan sales revenue, net of Adjustable rate/balloon 11% 12% additional repurchase reserves, reflective of strong Weighted average interest rate 5.62% 5.82% MSR capitalized value (in billions) $ 1.0 $ 1.3 loan origination refinance volume in 2009, and lower MSR capitalization value (in basis points) 82 91 net hedging gains on mortgage servicing rights. Weighted average servicing fee (in basis points) 30 30 • Noninterest expense declined to $565 million in 2010 compared with $632 million in 2009 as lower loan OTHER INFORMATION Loan origination volume (in billions) $ 10.5 $ 19.1 origination volume drove a reduction in expense, Percentage of originations represented by: partially offset by higher foreclosure costs in 2010. Agency and government programs 99% 97% Refinance volume 74% 72% • The fair value of mortgage servicing rights was $1.0 Total nonperforming assets (a) (b) $ 349 $ 370 billion at December 31, 2010 compared with $1.3 Impaired loans (a) (c) $ 161 $ 369 billion at December 31, 2009. The decline in fair (a) As of December 31. value resulted from lower mortgage rates at (b) Includes nonperforming loans of $109 million at December 31, 2010 and $215 December 31, 2010 and a smaller servicing portfolio. million at December 31, 2009. (c) Recorded investment of purchased impaired loans related to acquisitions.

56 BLACKROCK and participating preferred stock. In connection with the BGI (Unaudited) transaction, BlackRock entered into a stock purchase agreement with PNC in which we purchased 3,556,188 shares Information related to our equity investment in BlackRock of BlackRock’s Series D Preferred Stock at a price of $140.60 follows: per share, or $500 million, to partially finance the transaction. On January 31, 2010, the Series D Preferred Stock was Year ended December 31 converted to Series B Preferred Stock. Dollars in millions 2010 2009 Business segment earnings (a) $351 $207 BLACKROCK LTIP AND EXCHANGE AGREEMENTS PNC’s economic interest in BlackRock (b) 20% 24% PNC’s noninterest income for 2009 included a pretax gain of (a) Includes PNC’s share of BlackRock’s reported GAAP earnings and additional income taxes on those earnings incurred by PNC. $98 million related to our BlackRock LTIP shares obligation. (b) At December 31. This gain represented the mark-to-market adjustment related to our remaining BlackRock LTIP common shares obligation Dec. 31 Dec. 31 In billions 2010 2009 and resulted from the decrease in the market value of BlackRock common shares in that period. Additional Carrying value of PNC’s investment in BlackRock (c) $5.1 $5.8 information regarding our BlackRock LTIP shares obligation Market value of PNC’s and the Exchange Agreements entered into on December 26, investment in BlackRock (d) 6.9 10.1 2008 is included in Note 15 Stock-Based Compensation Plans (c) The December 31, 2010 amount is comprised of our equity investment of $5.0 in the Notes To Consolidated Financial Statements in Item 8 billion and $.1 billion of goodwill and accumulated other comprehensive income of this Report. related to our BlackRock investment. The comparable amounts at December 31, 2009 were $5.7 billion and $.1 billion. PNC accounts for its investment in BlackRock under the equity method of accounting. The investment amounts above On February 27, 2009, PNC’s remaining obligation to deliver are exclusive of a related $1.8 billion deferred tax liability at December 31, 2010 BlackRock common shares was replaced with an obligation to and $1.9 billion deferred tax liability at December 31, 2009. deliver shares of BlackRock’s new Series C Preferred Stock. (d) Does not include liquidity discount. PNC acquired 2.9 million shares of Series C Preferred Stock from BlackRock in exchange for common shares on that same BLACKROCK SECONDARY COMMON STOCK OFFERING date. PNC accounts for its BlackRock Series C Preferred During November 2010, BlackRock completed a secondary Stock at fair value, which offsets the impact of offering of 58.7 million shares of its common stock at a price marking-to-market the obligation to deliver these shares to per share of $163.00. Of the shares offered, 51.2 million BlackRock. common shares were offered by another BlackRock shareholder and 7.5 million common shares were offered by The fair value amount of the BlackRock Series C Preferred PNC. The shares offered by PNC were common shares Stock is included on our Consolidated Balance Sheet in the issuable upon conversion of shares of BlackRock’s Series B caption Other assets. Additional information regarding the Preferred Stock. PNC recognized a pretax gain of $160 valuation of the BlackRock Series C Preferred Stock is million in noninterest income during the fourth quarter of included in Note 8 Fair Value in the Notes To Consolidated 2010 related to our sale of shares of BlackRock common stock Financial Statements in Item 8 of this Report. in this offering. Also in connection with this offering, PNC converted an additional 11.1 million shares of BlackRock’s PNC accounts for its remaining investment in BlackRock Series B Preferred Stock to common stock. Although we under the equity method of accounting. Our percentage elected to adjust our stake in BlackRock, we continue to ownership of BlackRock common stock (approximately 25% consider our investment in BlackRock a key component of our at December 31, 2010) is higher than our overall share of diversified revenue strategy. BlackRock’s equity and earnings. The transactions related to the Exchange Agreements do not affect our right to receive BLACKROCK/BARCLAYS GLOBAL INVESTORS TRANSACTION dividends declared by BlackRock. On December 1, 2009, BlackRock acquired BGI from Barclays Bank PLC in exchange for approximately $6.65 billion in cash and 37,566,771 shares of BlackRock common

57 DISTRESSED ASSETS PORTFOLIO This business segment consists primarily of assets acquired (Unaudited) through acquisitions and had a loss of $64 million for 2010 compared with earnings of $84 million for 2009. The decrease Year ended December 31 was primarily driven by a higher provision for credit losses. Dollars in millions, except as noted 2010 2009 INCOME STATEMENT Distressed Assets Portfolio overview: Net interest income $ 1,217 $ 1,079 • Average loans declined to $16.8 billion in 2010 Noninterest income (92) 74 compared with $21.1 billion in 2009. The decline Total revenue 1,125 1,153 was due to portfolio management activities including Provision for credit losses 976 771 loan sales, efforts to encourage customers to Noninterest expense 250 246 refinance or pay off loan balances, and charge-offs. Pretax earnings (loss) (101) 136 • Sales of residential mortgage loans and brokered Income taxes (benefit) (37) 52 home equity loans with unpaid principal balances of Earnings (loss) $ (64) $84 approximately $1.6 billion and carrying value of AVERAGE BALANCE SHEET $0.6 billion closed during the third quarter of 2010. COMMERCIAL LENDING: The sales were structured to minimize potential Commercial/Commercial real estate (a) $ 2,240 $ 3,384 repurchase risk, and we do not have any continuing Lease financing 781 818 servicing involvement. Total commercial lending 3,021 4,202 • Net interest income was $1.2 billion in 2010 CONSUMER LENDING: compared with $1.1 billion for 2009. The increase Consumer (b) 6,240 7,101 was driven by improved cash collection results on Residential real estate 7,585 9,813 impaired loans which more than offset the decline in Total consumer lending 13,825 16,914 average loans. Total portfolio loans 16,846 21,116 • Noninterest income was a loss of $92 million for Other assets 671 1,728 2010 compared with revenue of $74 million for 2009 Total assets $17,517 $22,844 due to an increase in repurchase liability for potential repurchases of brokered home equity loans sold Deposits $64 $39 during 2005-2007. Additionally, loan sale gains were Other liabilities 90 92 Capital 1,321 1,574 higher in 2009 than 2010. • The provision for credit losses was $976 million in Total liabilities and equity $ 1,475 $ 1,705 2010 compared with $771 million in 2009. The PERFORMANCE RATIOS provision for 2010 included $109 million recognized Return on average capital (5)% 5% on the third quarter sales of residential mortgage Return on average assets (.37) .37 loans and brokered home equity loans. OTHER INFORMATION • Noninterest expense for 2010 was $250 million, up Nonperforming assets (c) (d) $ 1,243 $ 1,787 slightly from $246 million in 2009. Impaired loans (c) (e) $ 5,879 $ 7,577 • Nonperforming loans decreased $.6 billion, to Net charge-offs (f) $ 677 $ 544 $.9 billion, at December 31, 2010 compared with Net charge-off ratio (f) 4.02% 2.58% December 31, 2009. The consumer lending portfolio LOANS (c) COMMERCIAL LENDING comprised 52% of the nonperforming loans at Commercial/Commercial real estate (a) $ 1,684 $ 2,561 December 31, 2010. Similar to other banks, PNC Lease financing 764 805 elected to delay foreclosures on residential Total commercial lending 2,448 3,366 mortgages. Nonperforming consumer loans decreased $.3 billion. CONSUMER LENDING Consumer (b) 5,769 6,673 • Net charge-offs were $677 million for 2010 and Residential real estate 6,564 8,467 $544 million for 2009. The increase was driven by $75 million of net charge-offs related to the Total consumer lending 12,333 15,140 residential mortgage loan sales in the third quarter Total loans $14,781 $18,506 and deterioration in the residential construction (a) Primarily commercial residential development loans. portfolio. (b) Primarily brokered home equity loans. (c) As of December 31. (d) Includes nonperforming loans of $.9 billion at December 31, 2010 and $1.5 billion Certain loans in this business segment may require special at December 31, 2009. servicing given current loan performance and market (e) Recorded investment of purchased impaired loans related to acquisitions. At December 31, 2010, this segment contained 76% of PNC’s purchased impaired conditions. Consequently, the business activities of this loans. segment are focused on maximizing the value of the portfolio (f) For the year ended December 31. assigned to it while mitigating risk. Business intent drives the inclusion of assets in this business segment. Not all impaired

58 loans are included in this business segment, nor are all of the we have initiated several voluntary and involuntary loans included in this business segment considered impaired. programs to reduce and/or block line availability on • The $14.8 billion of loans held in this portfolio at home equity lines of credit. December 31, 2010 are stated inclusive of a fair • When loans are sold, investors may request PNC to value adjustment on purchased impaired loans at indemnify them against losses or to repurchase loans acquisition. Taking the adjustment and the ALLL that they believe do not comply with applicable into account, the net carrying basis of this loan representations. From 2005 to 2007, home equity portfolio is 80% of customer outstandings. loans were sold with such representations. At • Commercial Lending within the Distressed Assets December 31, 2010, the liability for estimated losses Portfolio business segment is comprised of on repurchase and indemnification claims for the $1.7 billion in residential development assets (i.e. Distressed Assets Portfolio business segment was condominiums, townhomes, developed and $150 million. We recognized $47 million of undeveloped land) primarily acquired from National additional reserves in the fourth quarter of 2010. See City and $.8 billion of performing cross-border the Recourse and Repurchase Obligations section of leases. This commercial lending portfolio has this Item 7 and Note 23 Commitments and declined 27% since December 31, 2009. For the Guarantees in the Notes To Consolidated Financial residential development portfolio, a team of asset Statements included in Item 8 of this Report for managers actively deploy workout strategies on this additional information. portfolio through reducing unfunded loan exposure, refinancing, customer payoffs, foreclosures and loan RITICAL CCOUNTING STIMATES sales. The overall credit quality of this portfolio is C A E considered to be moderately better at December 31, AND JUDGMENTS 2010 compared with the beginning of 2010 based upon continuing dispositions of credits, improved Our consolidated financial statements are prepared by economic conditions and increased activity in several applying certain accounting policies. Note 1 Accounting markets. The cross-border portfolio continues to Policies in the Notes To Consolidated Financial Statements in demonstrate good credit quality. Item 8 of this Report describes the most significant accounting • The performance of the Consumer Lending portfolio policies that we use. Certain of these policies require us to is dependent upon economic growth, unemployment make estimates or economic assumptions that may prove rates, the housing market recovery and the interest inaccurate or be subject to variations that may significantly rate environment. The portfolio’s credit quality affect our reported results and financial position for the period performance has stabilized through actions taken by or in future periods. management over the last two years. Approximately 78% of customers have been current with principal Fair Value Measurements and interest payments for the past 12 months. We must use estimates, assumptions, and judgments when Currently, the portfolio yields over 7%. Consumer assets and liabilities are required to be recorded at, or adjusted Lending consists of residential real estate mortgages to reflect, fair value. and consumer or brokered home equity loans. • Residential real estate mortgages are primarily legacy Assets and liabilities carried at fair value inherently result in a National City originate-for-sale programs that have higher degree of financial statement volatility. Fair values and been discontinued and acquired portfolios. The the information used to record valuation adjustments for residential real estate mortgage portfolio is composed certain assets and liabilities are based on either quoted market of jumbo and ALT-A first lien mortgages, non-prime prices or are provided by independent third-party sources, first and second lien mortgages and to a lesser extent, including appraisers and valuation specialists, when available. residential construction loans. We have implemented When such third-party information is not available, we internal and external programs to proactively explore estimate fair value primarily by using cash flow and other refinancing opportunities that would allow the financial modeling techniques. Changes in underlying factors, borrower to qualify for a conforming mortgage loan assumptions, or estimates in any of these areas could which would be originated and sold by PNC or materially impact our future financial condition and results of originated by a third-party originator. Also, loss operations. mitigation programs have been developed to help manage risk and assist borrowers to maintain Effective January 1, 2008, PNC adopted Fair Value homeownership, when possible. Measurements and Disclosures (Topic 820). This guidance • Home equity loans include second liens and brokered defines fair value as the price that would be received to sell a home equity lines of credit. We have implemented financial asset or paid to transfer a financial liability in an several modification programs to assist the loss orderly transaction between market participants at the mitigation teams that manage this risk. Additionally, measurement date. This guidance established a three level

59 expected cash flows is attributable to a decline in credit economic and market conditions and the financial viability of quality. the residual guarantors and insurers. Residual values are derived from historical remarketing experience, secondary Goodwill market contacts, and industry publications. To the extent not Goodwill arising from business acquisitions represents the guaranteed or assumed by a third party, or otherwise insured value attributable to unidentifiable intangible elements in the against, we bear the risk of ownership of the leased assets. business acquired. Most of our goodwill relates to value This includes the risk that the actual value of the leased assets inherent in the Retail Banking and Corporate & Institutional at the end of the lease term will be less than the residual value, Banking businesses. The value of this goodwill is dependent which could result in an impairment charge and reduce upon our ability to provide quality, cost effective services in earnings in the future. Residual values are reviewed for the face of competition from other market participants on a impairment on a quarterly basis. national and, with respect to some products and services, an international basis. We also rely upon continuing investments Revenue Recognition in processing systems, the development of value-added We derive net interest and noninterest income from various service features, and the ease of access by customers to our sources, including: services. • Lending, • Securities portfolio, As such, the value of goodwill is ultimately supported by • Asset management and fund servicing, earnings, which is driven by transaction volume and, for • Customer deposits, certain businesses, the market value of assets under • Loan servicing, administration or for which processing services are provided. • Brokerage services, Lower earnings resulting from a lack of growth or our • Merger and acquisition advisory services, inability to deliver cost-effective services over sustained • Sale of loans and securities, periods can lead to impairment of goodwill, which could • Certain private equity activities, and result in a current period charge to earnings. At least annually, • Securities and derivatives trading activities including in the fourth quarter, management reviews the current foreign exchange. operating environment and strategic direction of each reporting unit taking into consideration any events or changes We also earn fees and commissions from issuing loan in circumstances that may have an effect on the unit. A commitments, standby letters of credit and financial reporting unit is defined as an operating segment or one level guarantees, selling various insurance products, providing below an operating segment. This input is then used to treasury management services and participating in certain calculate the fair value of the reporting unit, which is capital markets transactions. Revenue earned on interest- compared to its carrying value. If the fair value of the earning assets including the accretion of fair value reporting unit exceeds its carrying amount, the reporting unit adjustments on discounts for purchased loans is recognized is not considered impaired. However, if the fair value of the based on the effective yield of the financial instrument. reporting unit is less than its carrying amount, the reporting unit’s goodwill would be evaluated for impairment. The timing and amount of revenue that we recognize in any period is dependent on estimates, judgments, assumptions, and The fair values of our reporting units are determined using a interpretation of contractual terms. Changes in these factors discounted cash flow valuation model with assumptions based can have a significant impact on revenue recognized in any upon market comparables. Based on the results of our period due to changes in products, market conditions or analysis, there have been no impairment charges related to industry norms. goodwill in 2010, 2009 or 2008. See Note 9 Goodwill and Other Intangible Assets in the Notes To Consolidated Residential Mortgage Servicing Rights Financial Statements in Item 8 of this Report for additional In conjunction with the acquisition of National City, PNC information. acquired servicing rights for residential real estate loans. We have elected to measure these mortgage servicing rights Lease Residuals (MSRs) at fair value. MSRs are established and valued using We provide financing for various types of equipment, aircraft, discounted cash flow modeling techniques which require energy and power systems, and rolling stock through a variety management to make estimates regarding future net servicing of lease arrangements. Direct financing leases are carried at cash flows, taking into consideration actual and expected the sum of lease payments and the estimated residual value of mortgage loan prepayment rates, discount rates, servicing the leased property, less unearned income. Residual value costs, and numerous other factors. insurance or guarantees by governmental entities provide support for a significant portion of the residual value. Residual PNC employs a risk management strategy designed to protect values are subject to judgments as to the value of the the value of MSRs from changes in interest rates and related underlying equipment that can be affected by changes in market factors. MSR values are economically hedged with

61 securities and a portfolio of derivatives, including interest-rate Dec. 31, Dec. 31, Dollars in millions 2010 2009 swaps, options, and forward mortgage-backed and futures contracts. As interest rates change, these financial instruments Prepayment rate: are expected to have changes in fair value which are Decline in fair value from 10% adverse change $34 $56 Decline in fair value from 20% adverse change $65 $109 negatively correlated to the change in fair value of the hedged Spread over forward interest rate swap rates: MSR portfolio. The hedge relationships are actively managed Decline in fair value from 10% adverse change $43 $55 in response to changing market conditions over the life of the Decline in fair value from 20% adverse change $83 $106 MSR assets. Selecting appropriate financial instruments to hedge this risk requires significant management judgment to Income Taxes assess how mortgage rates and prepayment speeds could In the normal course of business, we and our subsidiaries enter affect the future values of MSRs. Hedging results can into transactions for which the tax treatment is unclear or frequently be volatile in the short term, but over longer subject to varying interpretations. In addition, filing periods of time are expected to protect the economic value of requirements, methods of filing and the calculation of taxable the MSR portfolio. income in various state and local jurisdictions are subject to differing interpretations. The fair value of residential MSRs and significant inputs to the valuation model as of December 31, 2010 are shown in the We evaluate and assess the relative risks and merits of the table below. The expected and actual rates of mortgage loan appropriate tax treatment of transactions, filing positions, prepayments are the most significant factors driving the fair filing methods and taxable income calculations after value. Management uses a third party model to estimate future considering statutes, regulations, judicial precedent, and other loan prepayments. This model has been refined based on information, and maintain tax accruals consistent with our historical performance of PNC’s managed portfolio, as evaluation of these relative risks and merits. The result of our adjusted for current market conditions. Future interest rates evaluation and assessment is by its nature an estimate. We and are another important factor in the valuation of MSRs. our subsidiaries are routinely subject to audit and challenges Management utilizes market implied forward interest rates to from taxing authorities. In the event we resolve a challenge for estimate the future direction of mortgage and discount rates. an amount different than amounts previously accrued, we will The forward rates utilized are derived from the current yield account for the difference in the period in which we resolve curve for U.S. dollar interest rate swaps and are consistent the matter. with pricing of capital markets instruments. Changes in the shape and slope of the forward curve in future periods may Proposed Accounting Standards result in volatility in the fair value estimate. The Financial Accounting Standards Board (FASB) issued

Dec. 31, Dec. 31 several Exposure Drafts for comment during 2010 as well as Dollars in millions 2010 2009 the beginning of 2011, including, in May 2010, the Proposed Fair value $1,033 $1,332 Accounting Standards Update—Accounting for Financial Weighted-average life (in years) (a) 5.8 4.5 Instruments and Revisions to the Accounting for Derivative Weighted-average constant prepayment Instruments and Hedging Activities—Financial Instruments rate (a) 12.61% 19.92% (Topic 825) and Derivatives and Hedging (Topic 815). Under Spread over forward interest rate swap rates 12.18% 12.16% the original proposal, most financial instruments (including (a) Changes in weighted-average life and weighted-average constant prepayment rate loans and securities) would be measured at fair value with reflect the cumulative impact of changes in rates, prepayment expectations and model changes. changes in fair value recognized in either net income or other comprehensive income. Additional aspects of this proposal A sensitivity analysis of the hypothetical effect on the fair included modifications for recognizing credit impairments, value of MSRs to adverse changes in key assumptions is changes to hedge accounting requirements, and disclosures of presented below. These sensitivities do not include the impact both fair value and amortized cost information on the face of of the related hedging activities. Changes in fair value the financial statements. At a recent FASB meeting, it was generally cannot be extrapolated because the relationship of tentatively decided that both the characteristics of the financial the change in the assumption to the change in fair value may asset and an entity’s business strategy should be used as not be linear. Also, the effect of a variation in a particular criteria in determining the classification and measurement of assumption on the fair value of the MSRs is calculated financial assets as follows: 1.) Fair value measurement with independently without changing any other assumption. In all changes in fair value recognized in net income; 2.) Fair reality, changes in one factor may result in changes in another value measurement with qualifying changes in fair value (for example, changes in mortgage interest rates, which drive recognized in other comprehensive income; and 3.) Amortized changes in prepayment rate estimates, could result in changes Cost. See the discussion below related to the Supplementary in the interest rate spread), which could either magnify or Document issued by the FASB for further updates to this counteract the sensitivities. Exposure Draft related to credit impairments.

62 In July 2010, the FASB issued Proposed Accounting repurchase or redeem financial assets before their maturity. Standards Update – Contingencies (Topic 450) – Disclosure of This proposed update would remove from the assessment of Certain Loss Contingencies. Under the proposal, additional effective control (1) the criterion requiring the transferor to disclosures would be required, including for remote loss have the ability to repurchase or redeem the financial assets on contingencies with a potentially severe impact and a tabular substantially the agreed terms, even in the event of default by reconciliation of accrued loss contingencies. Changes to the the transferee, and (2) implementation guidance related to the proposed ASU, are scheduled to be re-deliberated and a final criterion. standard is currently expected in the second half of 2011. In December 2010, the FASB issued Proposed Accounting In August 2010, the FASB issued Proposed Accounting Standards Update – Receivables (Topic 310-30) – Deferral of Standards Update – Leases (Topic 840). Under the proposal, the Effective Date of Disclosures about Troubled Debt lessees and lessors would apply a right-of-use model in Restructurings in Update No. 2010-20. Under the proposal, accounting for most leases, including subleases. A lessee the effective date requiring the additional disclosures about would recognize an asset representing its right to use the troubled debt restructurings in ASU 2010-20 would be leased asset for the lease term and a liability to make lease delayed indefinitely. This delay will allow the Board to payments and a lessor would recognize an asset representing complete deliberations on Proposed ASU – Receivables its right to receive lease payments and recognize a lease (Topic 310-30) – Clarifications to Accounting for Troubled liability while continuing to recognize the underlying asset or Debt Restructurings by Creditors. This proposal was finalized a residual asset representing its rights to the underlying asset and issued in January 2011 as Accounting Standards Update at the end of the lease term. The exposure draft also proposes 2011-01. disclosures about the amounts recognized in the financial statements arising from leases and the amount, timing and In January 2011, the FASB issued Proposed Accounting uncertainty of cash flows arising from those contracts. Standards Update – Balance Sheet – Offsetting. Under the proposal, balance sheet netting/offsetting would be required if: In October 2010, the FASB issued Proposed Accounting 1.) the right of set-off is enforceable at all times, including in Standards Update – Receivables (Topic 310-30) – default and bankruptcy; and 2.) the ability to exercise this Clarification to Accounting for Troubled Debt Restructurings right is unconditional; and 3.) the entities involved must by Creditors. The proposed ASU would preclude a creditor intend to settle the amounts due with a single payment, or from using only an effective rate test in its evaluation of simultaneously. whether a restructuring constitutes a troubled debt restructuring. Furthermore, guidance would be clarified to In January 2011, the FASB issued Supplementary Document – indicate 1) If a debtor does not otherwise have access to funds Accounting for Financial Instruments and Revisions to the at a market rate for debt with similar risk characteristics as the Accounting for Derivative Instruments and Hedging Activities restructured debt, the restructuring would be considered to be – Impairment. The Supplementary Document proposes that below a market rate and therefore should be considered a impairment would be measured based on expected credit troubled debt restructuring, 2) A restructuring that results in a losses for the life of the instrument. For specific instruments temporary or permanent increase in the contractual interest where collectability becomes so uncertain that the entity’s rate cannot be presumed to be at a rate that is at or above credit risk management objective changes from receiving market, 3) A borrower that is not currently in default may still regular principal and interest payments to recovery of the be considered to be experiencing financial difficulty when collateral, the financial asset will be classified in a “bad payment default is considered “probable in the foreseeable book.” For these instruments, impairment will be recognized future” and 4) A restructuring that results in an insignificant immediately. All other instruments will be classified by delay in contractual cash flows may still be considered a portfolio in a “good book.” For these instruments, impairment troubled debt restructuring. Under the proposal, additional will be recognized at the greater of (l) the expected credit disclosures (including comparative information) would be losses proportionally over the life of the portfolio or (2) the required. expected credit losses within the foreseeable future (but not less than 12 months). In November 2010, the FASB issued Proposed Accounting Standards Update – Transfers and Servicing (Topic 860) – Recent Accounting Pronouncements Reconsideration of Effective Control for Repurchase See Note 1 Accounting Policies in the Notes To Consolidated Agreements. The objective of this proposed ASU is to improve Financial Statements in Item 8 of this Report for information the accounting for repurchase agreements and other on new accounting pronouncements that were effective in agreements that both entitle and obligate a transferor to 2009, 2010 or became effective on January 1, 2011.

63 TATUS F UALIFIED EFINED To evaluate the continued reasonableness of our assumption, S O Q D we examine a variety of viewpoints and data. Various studies BENEFIT PENSION PLAN have shown that portfolios comprised primarily of US equity securities have returned approximately 10% annually over We have a noncontributory, qualified defined benefit pension long periods of time, while US debt securities have returned plan (plan or pension plan) covering eligible employees. approximately 6% annually over long periods. Application of Benefits are determined using a cash balance formula where these historical returns to the plan’s allocation ranges for earnings credits are a percentage of eligible compensation. equities and bonds produces a result between 7.25% and Pension contributions are based on an actuarially determined 8.75% and is one point of reference, among many other amount necessary to fund total benefits payable to plan factors, that is taken into consideration. We also examine the participants. Consistent with our investment strategy, plan plan’s actual historical returns over various periods. Recent assets are primarily invested in equity investments and fixed experience is considered in our evaluation with appropriate income instruments. Plan fiduciaries determine and review the consideration that, especially for short time periods, recent plan’s investment policy, which is described more fully in returns are not reliable indicators of future returns. While Note 14 Employee Benefit Plans in the Notes To Consolidated annual returns can vary significantly (rates of return for 2010, Financial Statements in Item 8 of this Report. 2009, and 2008 were +14.87%, +20.61%, and -32.91%, respectively), the selected assumption represents our estimated We calculate the expense associated with the pension plan and long-term average prospective returns. the assumptions and methods that we use include a policy of reflecting trust assets at their fair market value. On an annual Acknowledging the potentially wide range for this basis, we review the actuarial assumptions related to the assumption, we also annually examine the assumption used by pension plan. The primary assumptions used to measure other companies with similar pension investment strategies, so pension obligations and costs are the discount rate, that we can ascertain whether our determinations markedly compensation increase and expected long-term return on differ from others. In all cases, however, this data simply assets. Among these, the compensation increase assumption informs our process, which places the greatest emphasis on does not significantly affect pension expense. our qualitative judgment of future investment returns, given the conditions existing at each annual measurement date. The discount rate used to measure pension obligations is determined by comparing the expected future benefits that Taking into consideration all of these factors, the expected will be paid under the plan with yields available on high long-term return on plan assets for determining net periodic quality corporate bonds of similar duration. In lower interest pension cost for 2010 was 8.00%, down from 8.25% for 2009 rate environments, the sensitivity of pension expense to the to reflect a decrease during 2010 in the midpoint of the plan’s assumed discount rate increases. The impact on pension target allocation range for equities by approximately five expense of a 0.5% decrease in discount rate in the current percentage points. After considering the views of both internal environment is $19 million. In contrast, the sensitivity to the and external capital market advisors, particularly with regard same change in discount rate in a higher interest rate to the effects of the recent economic environment on long- environment is less significant. term prospective fixed income returns, we are reducing our expected long-term return on assets to 7.75% for determining The expected long-term return on assets assumption also has a pension cost for 2011, down from 8.00% in 2010. significant effect on pension expense. The expected return on plan assets is a long-term assumption established by Under current accounting rules, the difference between considering historical and anticipated returns of the asset expected long-term returns and actual returns is accumulated classes invested in by the pension plan and the asset allocation and amortized to pension expense over future periods. Each policy currently in place. For purposes of setting and one percentage point difference in actual return compared reviewing this assumption, “long term” refers to the period with our expected return causes expense in subsequent years over which the plan’s projected benefit obligations will be to change by up to $9 million as the impact is amortized into disbursed. We review this assumption at each measurement results of operations. date and adjust it if warranted. Our selection process references certain historical data and the current environment, but primarily utilizes qualitative judgment regarding future return expectations. Accordingly, we generally do not change the assumption unless we modify our investment strategy or identify events that would alter our expectations of future returns.

64 The table below reflects the estimated effects on pension Under these programs, we generally assume up to a one-third expense of certain changes in annual assumptions, using 2011 pari passu risk of loss on unpaid principal balances through a estimated expense as a baseline. loss share arrangement. At December 31, 2010 and 2009, the unpaid principal balance outstanding of loans sold under these Estimated programs was $13.2 billion and $19.7 billion, respectively. At Increase to 2011 Pension December 31, 2010 and 2009, the potential maximum Expense Change in Assumption (a) (In millions) exposure under the loss share arrangements was $4.0 billion and $6.0 billion, respectively. We maintain a reserve based .5% decrease in discount rate $19 upon these potential losses. The reserve for losses under these .5% decrease in expected long-term return on programs totaled $54 million and $71 million as of assets $19 December 31, 2010 and 2009, respectively, and is included in .5% increase in compensation rate $ 3 Other liabilities on our Consolidated Balance Sheet. If (a) The impact is the effect of changing the specified assumption while holding all other payment is required under these programs, we would not have assumptions constant. a contractual interest in the collateral underlying the mortgage loans on which losses occurred, although the value of the We currently estimate a pretax pension expense of $11 million collateral is taken into account in determining our share of in 2011 compared with pretax expense of $46 million in 2010. such losses. Our exposure and activity associated with these This year-over-year expected reduction is primarily due to the recourse obligations are reported in the Corporate & amortization impact of the favorable 2010 investment returns Institutional Banking segment. as compared with the expected long-term return assumption, which has been established by considering the time over Analysis of Commercial Mortgage Recourse Obligations which the Plan’s obligations are expected to be paid.

In millions 2010 2009 Our pension plan contribution requirements are not January 1 $71 $79 particularly sensitive to actuarial assumptions. Investment Reserve adjustments, net 9 (3) performance has the most impact on contribution requirements Losses – loan repurchases and settlements (2) (5) and will drive the amount of permitted contributions in future Loan sales (a) (24) years. Also, current law, including the provisions of the December 31 $ 54 $71 Pension Protection Act of 2006, sets limits as to both (a) Primarily due to the sale of a duplicative agency servicing operation. minimum and maximum contributions to the plan. We do not expect to be required by law to make any contributions to the Residential Mortgage Loan Repurchase Obligations plan during 2011. While residential mortgage loans are sold on a non-recourse basis, we assume certain loan repurchase obligations We maintain other defined benefit plans that have a less associated with mortgage loans we have sold to investors. significant effect on financial results, including various These loan repurchase obligations primarily relate to nonqualified supplemental retirement plans for certain situations where PNC is alleged to have breached certain employees. origination covenants and representations and warranties made to purchasers of the loans in the respective purchase and RECOURSE AND REPURCHASE sale agreements. Residential mortgage loans covered by these loan repurchase obligations include first and second-lien OBLIGATIONS mortgage loans we have sold through Agency securitizations, Non-Agency securitizations, and whole-loan sale transactions. As discussed in Note 3 Loan Sale and Servicing Activities and As discussed in Note 3 in the Notes To Consolidated Financial Variable Interest Entities in the Notes To Consolidated Statements in Item 8 of this Report, Agency securitizations Financial Statements in Item 8 of this Report, PNC has sold consist of mortgage loan sale transactions with FNMA, commercial mortgage and residential mortgage loans directly FHLMC, and GNMA, while Non-Agency securitizations and or indirectly in securitizations and whole-loan sale whole-loan sale transactions consist of mortgage loan sale transactions with continuing involvement. One form of transactions with private investors. Our exposure and activity continuing involvement includes certain recourse and loan associated with these loan repurchase obligations is reported repurchase obligations associated with the transferred assets in in the Residential Mortgage Banking segment. In addition, these transactions. PNC’s residential mortgage loan repurchase obligations include certain brokered home equity loans/lines that were Commercial Mortgage Recourse Obligations sold to private investors by National City prior to our We originate, close, and service certain commercial mortgage acquisition. PNC is no longer engaged in the business of loans which are sold to FNMA under FNMA’s Delegated originating and selling brokered home equity loans/lines, and Underwriting and Servicing (DUS) program. We have similar our exposure under these loan repurchase obligations is arrangements with FHLMC. reported in the Distressed Assets Portfolio segment.

65 Loan covenants and representations and warranties are payments or loan repurchases; however, on occasion we may established through loan sale agreements with various negotiate pooled settlements with investors. The table below investors to provide assurance that PNC has sold loans to details the unpaid principal balance of our unresolved investors of sufficient investment quality. Key aspects of such indemnification and repurchase claims at December 31, 2010 covenants and representations and warranties include the and 2009. loan’s compliance with any applicable loan criteria established by the investor, including underwriting standards, delivery of Analysis of Unresolved Asserted Indemnification and all required loan documents to the investor or its designated Repurchase Claims party, sufficient collateral valuation, and the validity of the lien securing the loan. As a result of alleged breaches of these As of December 31 – in millions 2010 2009 contractual obligations, investors may request PNC to Residential mortgages: indemnify them against losses on certain loans or to Agency securitizations $110 $76 repurchase loans. Indemnifications for loss or loan Private investors (a) 100 68 repurchases typically occur when, after review of the claim, Home equity loans/lines: we agree insufficient evidence exists to dispute the investor’s Private investors (b) 299 315 claim that a breach of a loan covenant and representation and warranty has occurred, such breach has not been cured, and Total unresolved claims $509 $459 the effect of such breach is deemed to have had a material and (a) Activity relates to loans sold through Non-Agency securitization and whole-loan sale transactions. adverse effect on the value of the transferred loan. Depending (b) Activity relates to brokered home equity loans/lines sold through whole-loan sale on the sale agreement and upon proper notice from the transactions which occurred during 2005-2007. investor, we typically respond to such indemnification and repurchase requests within 60 days, although final resolution To mitigate losses associated with indemnification and of the claim may take a longer period of time. With the repurchase claims, we have established quality assurance exception of the sales agreements associated with the Agency programs designed to ensure loans sold meet specific securitizations, most sale agreements do not provide for underwriting and origination criteria provided for in the penalties or other remedies if we do not respond timely to investor sale agreements. In addition, we investigate every investor indemnification or repurchase requests. investor claim on a loan by loan basis to ensure the existence of a legitimate claim, and that all other conditions for Investor indemnification or repurchase claims are typically indemnification or repurchase have been met prior to the settled on an individual loan basis through make-whole settlement with an investor.

The table below details our indemnification and repurchase claim settlement activity during 2010 and 2009. Any repurchased loan is appropriately considered in our nonperforming loan disclosures and statistics.

Analysis of Indemnification and Repurchase Claim Settlement Activity

2010 2009 Unpaid Fair Value of Unpaid Fair Value of Principal Losses Repurchased Principal Losses Repurchased Year ended December 31 – in millions Balance (a) Incurred (b) Loans (c) Balance (a) Incurred (b) Loans (c) Residential mortgages (d): Agency securitizations $358 $151 $150 $410 $182 $182 Private investors (e) 127 54 31 199 119 63 Home equity loans/lines: Private investors - Repurchases (f) (g) 28 25 3 56 47 9 Total indemnification and repurchase settlements $513 $230 $184 $665 $348 $254 (a) Represents unpaid principal balance of loans at the indemnification or repurchase date. (b) Represents both i) amounts paid for indemnification payments and ii) the difference between loan repurchase price and fair value of the loan at the repurchase date. These losses are charged to the indemnification and repurchase liability. (c) Represents fair value of loans repurchased only as we have no exposure to changes in the fair value of loans or underlying collateral when indemnification payments are made to investors. (d) Repurchase activity associated with insured loans, government-guaranteed loans, and loans repurchased through the exercise of our removal of account provision (ROAP) option are excluded from this table. Refer to Note 3 in the Notes To Consolidated Financial Statements in Item 8 of this Report for further discussion of ROAPs. (e) Activity relates to loans sold through Non-Agency securitizations and whole-loan sale transactions. (f) Activity relates to brokered home equity loans/lines sold through whole-loan sale transactions which occurred during 2005-2007. (g) Excludes payments of $10 million in 2010 and $4 million in 2009 associated with pooled brokered home equity loan indemnification settlements on future claims.

66 During 2010 and 2009, unresolved and settled investor assesses the need for indemnification and repurchase liabilities indemnification and repurchase claims were primarily related pursuant to the associated investor sale agreements. We to one of the following alleged breaches in representations and establish indemnification and repurchase liabilities for warranties: 1) misrepresentation of income, assets or estimated losses on sold first and second-lien mortgages and employment; 2) property evaluation or status issues (e.g., home equity loans/lines for which indemnification is expected appraisal, title, etc.); or 3) underwriting guideline violations. to be provided or for loans that are expected to be Additionally during these years, the frequency and timing of repurchased. For the first and second-lien mortgage sold unresolved and settled investor indemnification and portfolio, we have established an indemnification and repurchase claims increased as a result of higher loan repurchase liability pursuant to investor sale agreements based delinquencies which have been impacted by the deterioration on claims made and our estimate of future claims on a loan by in the overall economy and the prolonged weak residential loan basis. These relate primarily to loans originated during housing sector. The increased volume of claims was also 2006-2008. For the home equity loans/lines sold portfolio, we reflective of an industry trend where investors implemented have established indemnification and repurchase liabilities certain strategies to aggressively reduce their exposure to based upon this same methodology for loans sold during losses on purchased loans. 2005-2007.

For the first and second-lien mortgage balances of unresolved Indemnification and repurchase liabilities are initially and settled claims contained in the tables above, a significant recognized when loans are sold to investors and are amount of these claims were associated with sold loans subsequently evaluated for adequacy by management. Initial originated through correspondent lender and broker recognition and subsequent adjustments to the indemnification origination channels. For the home equity loans/lines sold and repurchase liability for the first and second-lien mortgage portfolio, all unresolved and settled claims relate to loans sold portfolio are recognized in Residential mortgage revenue originated through the broker origination channel. In certain on the Consolidated Income Statement. Since PNC is no instances when indemnification or repurchase claims are longer engaged in the brokered home equity lending business, settled for these types of sold loans, we have recourse back to only subsequent adjustments are recognized to the home the correspondent lenders, brokers and other third-parties equity loans/lines indemnification and repurchase liability. (e.g., contract underwriting companies, closing agents, These adjustments are recognized in other noninterest income appraisers, etc.). Depending on the underlying reason for the on the Consolidated Income Statement. investor claim, we determine our ability to pursue recourse with these parties and file claims with them accordingly. Our Management’s subsequent evaluation of these indemnification historical recourse recovery rate has been insignificant as our and repurchase liabilities is based upon trends in efforts have been impacted by the inability of such parties to indemnification and repurchase requests, actual loss reimburse us for their recourse obligations (e.g., their capital experience, known and inherent risks in the underlying availability or whether they remain in business) or contractual serviced loan portfolios, and current economic conditions. As limitations that limit our ability to pursue recourse with these part of its evaluation, management considers estimated loss parties (e.g., loss caps, statutes of limitations, etc.). All of projections over the life of the subject loan portfolio. At these factors are considered in the determination of our December 31, 2010 and 2009, the total indemnification and estimated indemnification and repurchase liability detailed repurchase liability for estimated losses on indemnification below. and repurchase claims totaled $294 million and $270 million, respectively, and was included in Other liabilities on the Origination and sale of residential mortgages is an ongoing Consolidated Balance Sheet. An analysis of the changes in this business activity and, accordingly, management continually liability during 2010 and 2009 follows:

Analysis of Indemnification and Repurchase Liability for Asserted and Unasserted Claims

2010 2009 Residential Home Equity Residential Home Equity In millions Mortgages (a) Loans/Lines (b) Total Mortgages (a) Loans/Lines (b) Total January 1 $ 229 $ 41 $ 270 $ 300 $101 $ 401 Reserve adjustments, net (c) 120 144 264 230 (9) 221 Losses – loan repurchases and settlements (205) (35) (240) (301) (51) (352) December 31 $ 144 $150 $ 294 $ 229 $ 41 $ 270 (a) Repurchase obligation associated with sold loan portfolios of $139.8 billion and $157.2 billion at December 31, 2010 and December 31, 2009, respectively. (b) Repurchase obligation associated with sold loan portfolios of $6.5 billion and $7.5 billion at December 31, 2010 and December 31, 2009, respectively. PNC is no longer in engaged in the brokered home equity business which was acquired with National City. (c) Includes $157 million in 2009 for residential mortgages related to the final purchase price allocation associated with the National City acquisition.

67 The decrease in the residential mortgages indemnification and Risk Management Principles repurchase liability in 2010 and 2009 was reflective of lower • Designed to only take risks consistent with our actual repurchase and indemnification losses driven primarily strategy and within our capability to manage, by higher claim rescission rates. This decrease resulted despite • Limit risk-taking by a set of boundaries, higher levels of investor indemnification and repurchase claim • Practice disciplined capital and liquidity activity as described above. The 2009 decrease in the home management, equity loans/lines indemnification and repurchase liability • Help ensure that risks and earnings volatility are resulted primarily from the reduction in loss exposure appropriately understood, measured and rewarded, associated with pooled settlement activity. Conversely, the • Avoid excessive concentrations, and 2010 increase in this liability was attributable to • Help support external stakeholder confidence in management’s estimate that higher anticipated losses will PNC. result from higher forecasted volumes of asserted and unasserted indemnification and repurchase claims. We support risk management through a governance structure involving the Board, senior management and a corporate risk We believe our indemnification and repurchase liabilities management organization. adequately reflect the estimated losses on anticipated investor indemnification and repurchase claims at December 31, 2010 Although our Board as a whole is responsible generally for and 2009. However, actual losses could be more or less than oversight of risk management, committees of the Board our established indemnification and repurchase liability. provide oversight to specific areas of risk with respect to the Factors that could affect our estimate include the timing and level of risk and risk management structure. frequency of investor claims driven by investor strategies and behavior, our ability to successfully negotiate claims with We use management level risk committees to help ensure that investors, the housing markets which drive the estimates made business decisions are executed within our desired risk profile. for loan indemnification and repurchase losses, and other The Executive Committee (EC), consisting of senior economic conditions. Accordingly, if we assumed an adverse management executives, provides oversight for the change of 10% for the indemnification and repurchase claims, establishment and implementation of new comprehensive risk claim rescission rates, and indemnification and repurchase management initiatives, reviews enterprise level risk profiles loss assumptions in our indemnification and repurchase and discusses key risk issues. liability model, this liability would increase to $334 million at December 31, 2010. Corporate-Level Risk Management Program The corporate risk management organization has the following RISK MANAGEMENT key roles: • Facilitate the identification, assessment and We encounter risk as part of the normal course of our business monitoring of risk across PNC, and we design risk management processes to help manage • Provide support and oversight to the businesses, these risks. This Risk Management section describes our risk • Help identify and implement risk management best management philosophy, principles, governance and various practices, as appropriate, and aspects of our corporate-level risk management program. We • Work with the lines of business to shape and define also provide an analysis of our primary areas of risk: credit, PNC’s business risk limits. operational, liquidity, and market. The discussion of market risk is further subdivided into interest rate, trading, and equity Risk Measurement and other investment risk areas. Our use of financial We conduct risk measurement activities specific to each area derivatives as part of our overall asset and liability risk of risk. The primary vehicle for aggregation of enterprise-wide management process is also addressed within the Risk risk is a comprehensive risk management methodology that is Management section of this Item 7. In appropriate places based on economic capital. This primary risk aggregation within this section, historical performance is also addressed. measure is supplemented with secondary measures of risk to arrive at an estimate of enterprise-wide risk. The economic Risk Management Philosophy capital framework is a measure of potential losses above and PNC’s risk management philosophy is to manage to an overall beyond expected losses. Potential one year losses are moderate level of risk to capture opportunities and optimize capitalized to a level commensurate with a financial institution shareholder value. We dynamically set our strategies and with an A rating by the credit rating agencies. Economic make distinct risk taking decisions with consideration for the capital incorporates risk associated with potential credit losses impact to our aggregate risk profile. While, due to the (Credit Risk), fluctuations of the estimated market value of National City acquisition and the overall state of the economy, financial instruments (Market Risk), failure of people, our enterprise risk profile does not currently meet our desired processes or systems (Operational Risk), and losses associated moderate risk level, we have made substantial progress in with declining volumes, margins and/or fees, and the fixed returning to that level in 2009 and 2010. cost structure of the business. We estimate credit and market

68 risks at pool and exposure levels while we estimate the The credit granting businesses maintain direct responsibility remaining risk types at an institution or business segment for monitoring credit risk within PNC. The Corporate Credit level. We routinely compare the output of our economic Policy area provides independent oversight to the capital model with industry benchmarks. measurement, monitoring and reporting of our credit risk and reports to the Chief Risk Officer. Corporate Audit also Risk Control Strategies provides an independent assessment of the effectiveness of the Risk management is not about eliminating risks, but about credit risk management process. We also manage credit risk in identifying and accepting risks and then working to effectively accordance with regulatory guidance. manage them so as to optimize shareholder value. NONPERFORMING ASSETS,TROUBLED DEBT We centrally manage policy development and exception RESTRUCTURINGS AND LOAN DELINQUENCIES approval and oversight through corporate-level risk Credit quality showed signs of improvement during 2010 and management. Some of these policies express our risk appetite delinquency measures improved compared with prior periods. through limits to the acceptable level of risk. We are in excess During 2010, we continued to see an improvement in credit of certain limits and are progressively managing to bring our migration for performing loans and a reduction in overall risks within policy. We are also reviewing and revising certain credit exposure. policies to better reflect our larger and more complex organization. Corporate risk management is authorized to take Nonperforming assets decreased $1.0 billion to $5.3 billion at action to either prevent or mitigate unapproved exceptions to December 31, 2010 compared with $6.3 billion at policies and is responsible for monitoring compliance with December 31, 2009. Nonperforming loans decreased risk management policies. The Corporate Audit function $1.2 billion to $4.5 billion since December 31, 2009 while performs an independent assessment of the internal control foreclosed and other assets increased $190 million to environment. Corporate Audit plays a critical role in risk $835 million. The decrease in nonperforming loans was management, testing the operation of the internal control primarily due to improvements in our commercial lending and system and reporting findings to management and to the Audit residential real estate portfolios, partially offset by increases Committee of the Board. in our consumer home equity portfolio. These consumer home equity nonperforming loan increases were largely due to Risk Monitoring increases in troubled debt restructurings (TDRs), as discussed Corporate Risk Management reports on a regular basis to our in more detail below. Our foreclosed and other assets levels Board regarding the enterprise risk profile of the Corporation. remained elevated as additions exceeded the ongoing high These reports aggregate and present the level of risk by type level of asset sales and other reductions. As of year-end, of risk and communicate significant risk issues, including approximately 58% of our foreclosed and other assets are performance relative to risk tolerance limits. Both the Board composed of single family residential properties. and the EC provide guidance on actions to address key risk Nonperforming assets fell to 3.50% of total loans and issues as identified in these reports. foreclosed and other assets at December 31, 2010 compared with 3.99% at December 31, 2009. Loans held for sale are CREDIT RISK MANAGEMENT excluded from nonperforming loans. Credit risk represents the possibility that a customer, counterparty or issuer may not perform in accordance with Nonperforming assets at December 31, 2010 declined in the contractual terms. Credit risk is inherent in the financial Corporate & Institutional Banking, Asset Management Group, services business and results from extending credit to Residential Mortgage Banking, and Distressed Assets customers, purchasing securities, and entering into financial Portfolio business segments compared with the balances at derivative transactions and certain guarantee contracts. Credit December 31, 2009 and increased 18% in the Retail Banking risk is one of our most significant risks. business segment. Increases in Retail Banking nonperforming assets largely reflect the addition of consumer TDRs. Approved risk tolerances, in addition to credit policies and procedures, set portfolio objectives for the level of credit risk. At December 31, 2010, our largest nonperforming asset was We have established guidelines for problem loans, acceptable $35 million in the Accommodation and Food Services levels of total borrower exposure, and other credit measures. Industry and our average nonperforming loan associated with We seek to achieve our credit portfolio objectives by commercial lending was approximately $1 million. maintaining a customer base that is diverse in borrower exposure and industry types. We use loan sales and Purchased impaired loans are excluded from nonperforming syndications and the purchase of credit derivatives to reduce loans. These loans are considered performing, even if risk concentrations. Corporate Credit personnel also contractually past due (or if we do not expect to receive participate in loan underwriting and approval processes to payment in full based on the original contractual terms), as we help ensure that newly approved loans meet policy and are currently accreting interest income over the expected life portfolio objectives. of the loans. The accretable yield represents the excess of the

69 expected cash flows on the loans at the measurement date over Nonperforming Assets By Type the recorded investment. Any decrease, other than for prepayments or interest rate decreases for variable rate notes, Dec. 31 Dec. 31 In millions 2010 2009 in the net present value of expected cash flows of individual commercial or pooled consumer purchased impaired loans Nonperforming loans Commercial would result in an impairment charge to the provision for loan Retail/wholesale $ 197 $ 231 losses in the period in which the change is deemed probable. Manufacturing 250 423 Any increase in the net present value of expected cash flows Real estate related (a) 263 419 of purchased impaired loans would first result in a recovery of Financial services 16 117 previously recorded allowance for loan losses, to the extent Health care 50 41 applicable, and then an increase to accretable yield for the Other 477 575 remaining life of the purchased impaired loans. See Note 6 Total commercial 1,253 1,806 Purchased Impaired Loans in the Notes To Consolidated Commercial real estate Financial Statements in Item 8 of this Report for additional Real estate projects 1,422 1,754 information. Commercial mortgage 413 386 Total commercial real estate 1,835 2,140 Additionally, most consumer loans and lines of credit, not Equipment lease financing 77 130 secured by residential real estate, are charged off after 120 to 180 days past due, are not placed on nonaccrual status, and are TOTAL COMMERCIAL LENDING 3,165 4,076 excluded from nonperforming loans. Consumer Home equity 448 356 The amount of nonperforming loans that was current as to Residential real estate remaining principal and interest was $1.0 billion at Residential mortgage 764 955 Residential construction 54 248 December 31, 2010 and $1.7 billion at December 31, 2009, or Other 35 36 22% and 30% of total nonperforming loans, respectively. TOTAL CONSUMER LENDING 1,301 1,595 The portion of the ALLL allocated to commercial lending Total nonperforming loans 4,466 5,671 nonperforming loans was 28% at December 31, 2010 and 29% Foreclosed and other assets at December 31, 2009. Approximately 76% of total Commercial lending 353 266 Consumer lending 482 379 nonperforming loans are secured by collateral that is expected to reduce credit losses and require less reserves in the event of Total foreclosed and other assets 835 645 default. Total nonperforming assets $5,301 $6,316 (a) Includes loans related to customers in the real estate and construction industries.

Change In Nonperforming Assets

In millions 2010 2009 January 1 $ 6,316 $ 2,181 Transferred from accrual 5,279 8,501 Charge-offs and valuation adjustments (2,071) (1,770) Principal activity including payoffs (1,316) (1,127) Asset sales and transfers to held for sale (1,446) (798) Returned to performing-TDRs (543) Returned to performing-Other (918) (671) December 31 $ 5,301 $ 6,316

Total nonperforming loans and nonperforming assets in the tables above are significantly lower than they would have been due to the accounting treatment for purchased impaired loans. This treatment also results in lower ratios of nonperforming loans to total loans and ALLL to nonperforming loans. We recorded purchased impaired loans at estimated fair value, including life of loan credit losses, of $12.7 billion at December 31, 2008. See Note 6 Purchased Impaired Loans in the Notes To Consolidated Financial Statements in Item 8 of this Report for additional information on those loans.

70 Loan Modifications and Troubled Debt Restructurings Affordable Modification Program (HAMP) or PNC-developed We modify loans under government and PNC-developed HAMP-like modification programs. programs based upon our commitment to help eligible homeowners avoid foreclosure, where appropriate. Initially, a For consumer loan programs (e.g., residential mortgages, borrower is evaluated for a modification under a government home equity loans and lines, etc.), PNC will enter into a program. If a borrower does not qualify under a government temporary modification when the borrower has indicated a program, the borrower is evaluated under a PNC program. temporary hardship and a willingness to bring current the PNC programs utilize both temporary and permanent delinquent loan balance. Examples of this situation often modifications and typically reduce the interest rate, extend the include delinquency due to illness or death in the family, or a term and/or defer or forgive principal. Temporary and loss of employment. Permanent modifications are entered into permanent modifications under programs involving a when it is confirmed that the borrower does not possess the contractual change to loan terms are classified as TDRs, income necessary to continue making loan payments at the regardless of the period of time for which the modified terms current amount, but our expectation is that payments at lower apply, as discussed in more detail below. amounts can be made. A temporary modification, with a term between three and 60 months, involves a change in original loan terms for a period Home equity loans and lines have been modified with changes of time and reverts to original loan terms as of a specific date in contractual terms for up to 60 months, although the or the occurrence of an event, such as a failure to pay in majority involve periods of 3 to 24 months. The change to accordance with the terms of the modification. Typically, terms may include a reduced interest rate and/or an extension these modifications are for a period of up to 24 months after of the amortization period. Additionally, certain residential which the interest rate reverts to the original loan rate. A construction and non-prime loans have been modified by permanent modification, with a term greater than 60 months, changing payment terms from principal and interest to is one in which the terms of the original loan are changed, but interest-only for a period of up to two years before reverting could revert back to the original loan terms. Permanent back to the original terms. As of August 2010, such interest- modifications primarily include the government-created Home only modifications have been discontinued.

The following table provides the number and unpaid principal balance of modified consumer loans.

Active Bank-Owned Loss Mitigation Consumer Loan Modifications

December 31, 2010 December 31, 2009 Unpaid Unpaid Number of Principal Number of Principal Dollars in millions Accounts Balance Accounts Balance Conforming Mortgages Permanent Modifications 5,517 $1,137 1,517 $ 267 Non-Prime Mortgages Permanent Modifications 3,405 441 2,714 313 Residential Construction Permanent Modifications 470 235 30 20 Home Equity Temporary Modifications 12,643 1,151 4,340 421 Permanent Modifications 163 17 59 7 Total Home Equity 12,806 1,168 4,399 428 Total Active Bank-Owned Loss Mitigation Consumer Loan Modifications 22,198 $2,981 8,660 $1,028

We monitor the success rates/delinquency status of our modification programs to assess their effectiveness in serving our customers’ needs while mitigating credit losses. The following table provides the number and unpaid principal balance of modified loans that were 60 days or more past due as of six months, nine months and 12 months after the modification date.

71 Bank-Owned Consumer Residential Loan Modification Re-Default by Vintage

December 31, Six Months Nine Months 12 Months 2010 %of %of %of Unpaid Number of Vintage Number of Vintage Number of Vintage Principal Dollars in millions Accounts Modified Accounts Modified Accounts Modified Balance Permanent Conforming Mortgages Second Quarter 2010 354 23.9% $57 First Quarter 2010 312 23.3 468 35.0% 70 Fourth Quarter 2009 242 26.7 333 36.7 420 46.3% 62 Non-Prime Mortgages Second Quarter 2010 104 23.5 15 First Quarter 2010 68 20.0 80 23.5 11 Fourth Quarter 2009 133 19.7 205 30.3 216 32.0 22 Residential Construction (a) Second Quarter 2010 38 13.6 12 First Quarter 2010 5 12.5 6 15.0 4 Home Equity Second Quarter 2010 (b) 2 12.5 First Quarter 2010 (b) 1 2.3 5 11.6 Fourth Quarter 2009 (b) 1 9.1 3 27.3 Temporary Home Equity Second Quarter 2010 169 7.6% $14 First Quarter 2010 243 8.3 402 13.8% 30 Fourth Quarter 2009 199 8.7 334 14.5 432 18.8% 30 (a) No re-defaults for the fourth quarter of 2009. (b) Unpaid principal balance totals less than $1 million.

In addition to temporary modifications, PNC may make estimated fair value of the underlying collateral less costs to available to a borrower a payment plan or a HAMP trial sell. As of December 31, 2010 and 2009, 1,027 or $262 payment period. Under a payment plan or a HAMP trial million and 42 or $15 million, respectively, of residential real payment period, there is no change to the loan’s contractual estate loans have been modified under the HAMP and were terms so the borrower remains legally responsible for payment still outstanding on our balance sheet. of the loan under its original terms. A payment plan involves the borrower making payments that differ from the contractual Residential conforming and certain residential construction payment amount for a short period of time, generally three loans have been permanently modified under HAMP or, if months. PNC’s motivation is to allow for repayment of an they do not qualify for a HAMP modification, under PNC outstanding past due amount through payment of additional developed programs, which in some cases may operate similar amounts over the short period of time. These payment plans to HAMP. These programs require first, a reduction of the are generally for three months during which time a borrower interest rate, followed by an extension of term and, if is brought current. Due to the short term of the payment plan appropriate, deferral or forgiveness of principal payments. In and the expectation that all contractual principal and interest October 2010, we signed a Service Provider Agreement for will be collected, there is a minimal impact to the ALLL. the government-sponsored Second Lien Modification Program and have begun modifying loans under this program. PNC Under a HAMP trial payment period, we allow a borrower to does not re-modify a defaulted modified loan except for demonstrate successful payment performance before subsequent significant life events, as defined by the OCC in contractually establishing an alternative payment amount. Memorandum 2009-7. A re-modified loan continues to be Subsequent to successful borrower performance under a classified as a TDR for the remainder of its term regardless of HAMP trial payment period, we will change a loan’s subsequent payment performance. contractual terms and the loan would be classified as a TDR. Additionally, we note that a borrower often is already Loan modifications are evaluated and subject to classification delinquent at the time he/she begins participating in the as a troubled debt restructuring (TDR) if the borrower is HAMP trial payment period. As such, upon successful experiencing financial difficulty and we grant a concession to completion, there is not a significant increase in the ALLL. If the borrower. TDRs typically result from our loss mitigation the trial payment period is unsuccessful, the loan will be activities and could include rate reductions and/or principal charged-off, at the end of the trial payment period, to its forgiveness intended to minimize the economic loss and to avoid foreclosure or repossession of collateral. Total

72 nonperforming loans included TDRs of $784 million at Modifications of terms for commercial loans are based on December 31, 2010 and $440 million at December 31, 2009. individual facts and circumstances. Commercial loan Purchased impaired loans are excluded from TDRs. modifications may involve reduction of the interest rate, extension of the term of the loan and/or forgiveness of TDRs returned to performing (accrual) status totaled principal. Due to the nature of commercial loan relationships, $543 million at December 31, 2010 and are excluded from PNC had not utilized modification programs for commercial nonperforming loans. These loans have demonstrated a period loans prior to 2010. Beginning in 2010, PNC established of at least six months of performance under the modified select commercial loan modification programs for small terms. Approximately $25 million of TDRs previously business loans under $250,000, Small Business returned to performing status are no longer current under their Administration loans, and investment real estate loans. As of modified terms and are now reported as nonperforming. December 31, 2010, approximately $90 million in unpaid principal balance had been modified. In addition, credit cards and certain small business and consumer credit agreements whose terms have been modified Loan Delinquencies primarily through interest rate reductions totaling $331 million We regularly monitor the level of loan delinquencies and at December 31, 2010 are TDRs. However, these loans are believe these levels to be an indicator of loan portfolio credit excluded from nonperforming loans since our policy is to quality. Measurement of delinquency and past due status are exempt these loans from being placed on nonaccrual status as based on the contractual terms of each loan. Loans that are permitted by regulatory guidance. As such, generally under 30 days or more past due in terms of payment are considered modified terms, these loans are directly charged off in the delinquent. Loan delinquencies exclude loans held for sale, period that they become 120 to 180 days past due. At purchase impaired loans and loans that are government December 31, 2010 and 2009, remaining commitments to lend insured/guaranteed. additional funds to debtors whose terms have been modified in a commercial or consumer TDR were immaterial.

73 The following table displays the delinquency status of our loans at December 31, 2010 and 2009.

Age Analysis of Past Due Accruing Loans

Accruing 90 days or 30-59 days 60-89 days more past Total past Nonperforming In millions Current past due past due due due loans Total loans December 31, 2010 (a) Commercial $ 53,522 $ 251 $ 92 $ 59 $ 402 $1,253 $ 55,177 Commercial real estate 15,866 128 62 43 233 1,835 17,934 Equipment lease financing 6,276 37 2 1 40 77 6,393 Home equity 33,354 159 91 174 424 448 34,226 Residential real estate 14,688 226 107 160 493 818 15,999 Credit card 3,765 46 32 77 155 3,920 Other consumer 16,756 95 32 28 155 35 16,946 Total $144,227 $ 942 $418 $542 $1,902 $4,466 $150,595 December 31, 2009 (b) Commercial $ 52,141 $ 488 $195 $188 $ 871 $1,806 $ 54,818 Commercial real estate 20,176 461 204 150 815 2,140 23,131 Equipment lease financing 5,938 106 22 6 134 130 6,202 Home equity 35,243 149 82 117 348 356 35,947 Residential real estate 17,821 308 164 314 786 1,203 19,810 Credit card 2,450 40 28 51 119 2,569 Other consumer 14,830 94 48 58 200 36 15,066 Total $148,599 $1,646 $743 $884 $3,273 $5,671 $157,543

Accruing 90 days or 30-59 days past 60-89 days more past Total past Nonperforming Current due past due due due loans December 31, 2010 (a) Commercial 97.00% .45% .17% .11% .73% 2.27% Commercial real estate 88.47 .71 .35 .24 1.30 10.23 Equipment lease financing 98.17 .58 .03 .02 .63 1.20 Home equity 97.45 .47 .26 .51 1.24 1.31 Residential real estate 91.81 1.41 .67 1.00 3.08 5.11 Credit card 96.05 1.17 .82 1.96 3.95 Other consumer 98.88 .56 .19 .16 .91 .21 Total 95.77% .62% .28% .36% 1.26% 2.97% December 31, 2009 (b) Commercial 95.12% .89% .36% .34% 1.59% 3.29% Commercial real estate 87.23 1.99 .88 .65 3.52 9.25 Equipment lease financing 95.74 1.71 .35 .10 2.16 2.10 Home equity 98.04 .41 .23 .33 .97 .99 Residential real estate 89.96 1.55 .83 1.59 3.97 6.07 Credit card 95.37 1.56 1.09 1.98 4.63 Other consumer 98.43 .62 .32 .39 1.33 .24 Total 94.32% 1.05% .47% .56% 2.08% 3.60% (a) Past due loan amounts exclude government insured / guaranteed, primarily residential mortgages, totaling $2.6 billion at December 31, 2010. These loans are included in the ‘Current’ category. Past due loan amounts also exclude purchased impaired loans totaling $7.8 billion at December 31, 2010. These loans are excluded as they are considered performing loans due to accretion of interest income. These loans are also included in the ‘Current’ category. (b) Past due loan amounts exclude government insured / guaranteed, primarily residential mortgages, totaling $2.0 billion at December 31, 2009. These loans are included in the ‘Current’ category. Past due loan amounts also exclude purchased impaired loans totaling $10.3 billion at December 31, 2009. These loans are excluded as they are considered performing loans due to accretion of interest income. These loans are also included in the ‘Current’ category.

74 Commercial lending portfolio early stage delinquencies expected future cash flows from the loans discounted at their (accruing loans past due 30 to 89 days) decreased substantially effective interest rate, observable market price, or the fair from December 31, 2009 to December 31, 2010, generally due value of the underlying collateral. to the improved economic environment and active portfolio management. Consumer lending portfolio early stage Allocations to commercial loan classes (pool reserve delinquencies improved modestly from December 31, 2009 to methodology) are assigned to pools of loans as defined by our December 31, 2010, due to declines in residential real estate business structure and are based on internal probability of delinquencies. default and loss given default credit risk ratings.

Accruing loans past due 90 days or more are referred to as late Key elements of the pool reserve methodology include: stage delinquencies and totaled $542 million at December 31, • Probability of default (PD), which is primarily based 2010, compared to $884 million at December 31, 2009, on historical default analyses and is derived from the reflecting the same factors as early stage delinquencies noted borrower’s internal PD credit risk rating; above. These loans are not included in nonperforming loans • Exposure at default (EAD), which is derived from because they are well secured by collateral and in the process historical default data; and of collection. • Loss given default (LGD), which is based on historical loss data, collateral value and other Additional information regarding accruing loans past due is structural factors that may affect our ultimate ability included in Note 5 Asset Quality and Allowances for Loan to collect on the loan and is derived from the loan’s and Lease Losses and Unfunded Loan Commitments and internal LGD credit risk rating. Letters of Credit in the Notes To Consolidated Financial Statements in Item 8 of this Report. Our pool reserve methodology is sensitive to changes in key risk parameters such as PDs, LGDs and EADs. In general, a Our Special Asset Committee closely monitors loans that are given change in any of the major risk parameters will have a not included in nonperforming or past due categories and for corresponding change in the pool reserve allocations for which we are uncertain about the borrower’s ability to comply non-impaired commercial loans. Our commercial loans are the with existing repayment terms over the next six months. These largest category of credits and are most sensitive to changes in loans totaled $574 million at December 31, 2010 and $811 the key risk parameters and pool reserve loss rates. To million at December 31, 2009. illustrate, if we increase the pool reserve loss rates by 5% for all categories of non-impaired commercial loans, then the ALLOWANCES FOR LOAN AND LEASE LOSSES AND aggregate of the ALLL and allowance for unfunded loan UNFUNDED LOAN COMMITMENTS AND LETTERS OF commitments and letters of credit would increase by $69 CREDIT million. Additionally, other factors such as the rate of We maintain an ALLL to absorb losses from the loan portfolio migration in the severity of problem loans will contribute to and determine this allowance based on quarterly assessments the final pool reserve allocations. of the estimated probable credit losses incurred in the loan portfolio. While we make allocations to specific loans and The majority of the commercial portfolio is secured by pools of loans, the total reserve is available for all loan and collateral, including loans to asset-based lending customers lease losses. There were no significant changes during 2010 to that continue to show demonstrably lower loss given default. the process and procedures we follow to determine our ALLL. Further, the large investment grade or equivalent portion of the loan portfolio has performed well and has not been subject The ALLL was $4.9 billion at December 31, 2010 and $5.1 to significant deterioration. Additionally, guarantees on loans billion at December 31, 2009. The allowance as a percent of greater than $1 million and owner guarantees for small nonperforming loans was 109% at December 31, 2010 and business loans do not significantly impact our ALLL. 89% at December 31, 2009. The allowance as a percent of total loans was 3.25% at December 31, 2010 and 3.22% at Allocations to consumer loan classes are based upon a roll- December 31, 2009. rate model based on statistical relationships, calculated from historical data that estimate the movement of loan We establish specific allowances for loans considered outstandings through the various stages of delinquency and impaired using a method prescribed by GAAP. All impaired ultimately charge-off. In general, the estimated rates at which loans are subject to individual analysis, except leases and loan outstandings roll from one stage of delinquency to large groups of smaller-balance homogeneous loans which another are dependent on various factors such as FICO, LTV may include but are not limited to credit card, residential ratios, the current economic environment, and geography. mortgage, and consumer installment loans. Specific allowances for individual loans are determined by our Special The ALLL is significantly lower than it would have been Asset Committee based on an analysis of the present value of otherwise due to the accounting treatment for purchased

75 impaired loans. This treatment also results in a lower ratio of Charge-Offs And Recoveries ALLL to total loans. Loan loss reserves on the purchased impaired loans were not carried over on the date of Percent of Year ended December 31 Net Average acquisition. In addition, these loans were recorded net of $9.2 Dollars in millions Charge-offs Recoveries Charge-offs Loans billion of fair value adjustments as of December 31, 2008. As 2010 of December 31, 2010, we have reserves of $.9 billion for Commercial $1,227 $294 $ 933 1.72% purchased impaired loans. Commercial real estate 670 77 593 2.90 Excluding the allowance for purchased impaired loans and Equipment lease consumer loans and lines of credit, not secured by residential financing 120 56 64 1.02 real estate, which are excluded from nonperforming loans, of Consumer 1,069 110 959 1.74 $1.4 billion at December 31, 2010, the allowance as a percent Residential real 406 19 387 2.19 of nonperforming loans was 77% at that date. Comparable estate information at December 31, 2009 was $1.0 billion and 72%. Total $3,492 $556 $2,936 1.91 2009 A portion of the ALLL related to qualitative and measurement Commercial $1,276 $181 $1,095 1.79% Commercial real factors has been assigned to loan categories based on the estate 510 38 472 1.91 relative specific and pool allocation amounts to provide Equipment lease coverage for specific and pool reserve methodologies. These financing 149 27 122 1.97 factors include, but are not limited to, the following: Consumer 961 105 856 1.63 • industry concentrations and conditions Residential real • credit quality trends estate 259 93 166 .79 • recent loss experience in particular sectors of the Total $3,155 $444 $2,711 1.64 portfolio • changes in risk selection and underwriting standards Total net charge-offs are significantly lower than they would and have been otherwise due to the accounting treatment for • timing of available information. purchased impaired loans. This treatment also results in a lower ratio of net charge-offs to average loans. Customer In addition to the ALLL, we maintain an allowance for balances related to these purchased impaired loans were unfunded loan commitments and letters of credit. We report reduced by the fair value adjustments of $9.2 billion as of this allowance as a liability on our Consolidated Balance December 31, 2008. However, as a result of further credit Sheet. We determine this amount using estimates of the deterioration on purchased impaired commercial loans, we probability of the ultimate funding and losses related to those recorded $232 million of net charge-offs during 2010. Net credit exposures. This methodology is similar to the one we charge-offs were not recorded on purchased impaired use for determining the adequacy of our ALLL. consumer pools. We refer you to Note 5 Asset Quality and Allowances for Loan and Lease Losses and Unfunded Loan Commitments and CREDIT DEFAULT SWAPS Letters of Credit and Note 6 Purchased Impaired Loans in the From a credit risk management perspective, we buy and sell Notes To Consolidated Financial Statements in Item 8 of this credit loss protection via the use of credit derivatives. When Report regarding changes in the ALLL and in the allowance we buy loss protection by purchasing a credit default swap for unfunded loan commitments and letters of credit. Also see (CDS), we pay a fee to the seller, or CDS counterparty, in the Allocation Of Allowance For Loan And Lease Losses return for the right to receive a payment if a specified credit table in the Statistical Information (Unaudited) section of event occurs for a particular obligor or reference entity. We Item 8 of this Report for additional information included purchase CDSs to mitigate the risk of economic loss on a herein by reference. portion of our loan exposures.

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

We approve counterparty credit lines for all of our CDS activities. Counterparty credit lines are approved based on a review of credit quality in accordance with our traditional credit quality standards and credit policies. The credit risk of

76 our counterparties is monitored in the normal course of governance model is designed to help assure transparent business. In addition, all counterparty credit lines are subject management reporting. to collateral thresholds and exposures above these thresholds are secured. The operational risk in connection with the National City integration has been effectively managed. Our integration CDSs are included in the “Derivatives not designated as objectives have been successfully met and integration-related hedging instruments under GAAP” table in the Financial risk issues have been proactively identified, assessed and Derivatives section of this Risk Management discussion. mitigated. Post-integration, our operational risk management focus has shifted to continued stabilization, the increased OPERATIONAL RISK MANAGEMENT complexities driven by our size and several external Operational risk is defined as the risk of financial loss or other environmental factors impacting our business model. damage to us resulting from inadequate or failed internal processes or systems, human factors, or from external events. We will continue to execute our rigorous risk management Operational risk may occur in any of our business activities processes and evaluate the effectiveness of key processes, and manifests itself in various ways, including but not limited technologies and controls to help ensure performance at to the following: expected levels. We also view Basel II as an opportunity to • Errors related to transaction processing and systems, continue to enhance risk management practices, and we have • Breaches of the system of internal controls and dedicated a significant amount of resources to this initiative. compliance requirements, • Misuse of sensitive information, and • Business interruptions and execution of unauthorized In summary, we believe that our current operational risk level transactions and fraud by employees or third parties. is in line with a moderate risk profile. Insurance Operational losses may arise from legal actions due to As a component of our risk management practices, we operating deficiencies or noncompliance with contracts, laws purchase insurance designed to protect us against accidental or regulations. loss or losses which, in the aggregate, may significantly affect personnel, property, financial objectives, or our ability to To monitor and control operational risk, we maintain a continue to meet our responsibilities to our various comprehensive framework including policies and a system of stakeholder groups. internal controls that is designed to manage risk and to provide management with timely and accurate information PNC, through a subsidiary company, Alpine Indemnity about the operations of PNC. Management at each business Limited, provides insurance coverage for its general liability, unit is primarily responsible for its operational risk automobile liability, management liability, fidelity, workers’ management program, given that operational risk management compensation, property and terrorism programs. PNC’s risks is integral to direct business management and most easily associated with its participation as an insurer for these effected at the business unit level. Corporate Operational Risk programs are mitigated through policy limits and annual Management develops and oversees operational risk aggregate limits. Risks in excess of Alpine’s policy limits and management policies, standards and activities. annual aggregates are mitigated through the purchase of direct coverage provided by various insurers up to limits established The technology risk management program is a significant by PNC’s Corporate Insurance Committee. component of the operational risk framework. We have an integrated security and technology risk management LIQUIDITY RISK MANAGEMENT framework designed to help ensure a secure, sound, and Liquidity risk has two fundamental components. The first is compliant infrastructure for information management. The the potential loss if we were unable to meet our funding technology risk management process is aligned with the requirements at a reasonable cost. The second is the potential strategic direction of the businesses and is integrated into the inability to operate our businesses because adequate technology management culture, structure and practices. The contingent liquidity is not available in a stressed environment. application of this framework across the enterprise helps to We manage liquidity risk at the bank and parent company support comprehensive and reliable internal controls. levels to help ensure that we can obtain cost-effective funding to meet current and future obligations under both normal Our business resiliency program manages the organization’s “business as usual” and stressful circumstances and to help capabilities to provide services in the case of an event that ensure that we maintain an appropriate level of contingent results in material disruption of business activities. liquidity. Prioritization of investments in people, processes, technology and facilities is based on different types of events, business Spot and forward funding gap analyses are the primary risk and criticality. Comprehensive testing validates our metrics used to measure and monitor bank liquidity risk. resiliency capabilities on an ongoing basis, and an integrated Funding gaps represent the difference in projected sources of

77 liquidity available to offset projected uses. We calculate advances) and short-term borrowings (Federal funds funding gaps for the overnight, thirty-day, ninety-day, one purchased, securities sold under repurchase agreements, hundred eighty-day and one-year time intervals. Risk limits commercial paper issuances, and other short-term are established within our Liquidity Risk Policy. borrowings). Management’s Asset and Liability Committee regularly reviews compliance with the established limits. PNC Bank, N.A. has the ability to offer up to $20 billion in Parent company liquidity guidelines are designed to help senior and subordinated unsecured debt obligations with ensure that sufficient liquidity is available to meet our parent maturities of more than nine months. Through December 31, company obligations over the succeeding 24-month period. 2010, PNC Bank, N.A. had issued $6.9 billion of debt under Risk limits for parent company liquidity are established within this program. Total senior and subordinated debt declined to our Enterprise Capital Management Policy. The Board of $5.5 billion at December 31, 2010 from $7.4 billion at Directors’ Risk Committee regularly reviews compliance with December 31, 2009 due to maturities. the established limits. PNC Bank, N.A. is a member of the FHLB-Pittsburgh and as such has access to advances from FHLB-Pittsburgh secured Bank Level Liquidity – Uses generally by residential mortgage and other mortgage-related Obligations requiring the use of liquidity can generally be loans. At December 31, 2010, our unused secured borrowing characterized as either contractual or discretionary. At the capacity was $13.0 billion with FHLB-Pittsburgh. Total bank level, primary contractual obligations include funding FHLB borrowings declined to $6.0 billion at December 31, loan commitments, satisfying deposit withdrawal requests and 2010 from $10.8 billion at December 31, 2009 due to maturities and debt service related to bank borrowings. We maturities. also maintain adequate bank liquidity to meet future potential loan demand and provide for other business needs, as necessary. PNC Bank, N.A. has the ability to offer up to $3.0 billion of its commercial paper. As of December 31, 2010, there were no issuances outstanding under this program. Commercial paper As of December 31, 2010, there were approximately $5.3 included in Other borrowed funds on our Consolidated billion of bank borrowings with maturities of less than one Balance Sheet is issued by Market Street as described in year. Off-Balance Sheet Arrangements and Variable Interest Entities in this Financial Review. Bank Level Liquidity – Sources Our largest source of bank liquidity on a consolidated basis is PNC Bank, N.A. can also borrow from the Federal Reserve the deposit base that comes from our retail and commercial Bank of Cleveland’s (Federal Reserve Bank) discount window businesses. Liquid assets and unused borrowing capacity from to meet short-term liquidity requirements. The Federal a number of sources are also available to maintain our Reserve Bank, however, is not viewed as the primary means liquidity position. Borrowed funds come from a diverse mix of funding our routine business activities, but rather as a of short and long-term funding sources. potential source of liquidity in a stressed environment or during a market disruption. These potential borrowings are At December 31, 2010, our liquid assets consisted of short- secured by securities and commercial loans. At December 31, term investments (Federal funds sold, resale agreements, 2010, our unused secured borrowing capacity was $24.7 trading securities, and interest-earning deposits with banks) billion with the Federal Reserve Bank. totaling $7.1 billion and securities available for sale totaling $57.3 billion. Of our total liquid assets of $64.4 billion, we Parent Company Liquidity – Uses had $28.0 billion pledged as collateral for borrowings, trust, Obligations requiring the use of liquidity can generally be and other commitments. The level of liquid assets fluctuates characterized as either contractual or discretionary. The parent over time based on many factors, including market conditions, company’s contractual obligations consist primarily of debt loan and deposit growth and active balance sheet service related to parent company borrowings and funding management. non-bank affiliates. Additionally, the parent company maintains adequate liquidity to fund discretionary activities such as paying dividends to PNC shareholders, share In addition to the customer deposit base, which has repurchases, and acquisitions. historically provided the single largest source of relatively stable and low-cost funding and liquid assets, the bank also obtains liquidity through the issuance of traditional forms of As of December 31, 2010, there were approximately $2.3 funding including long-term debt (senior notes and billion of parent company borrowings with maturities of less subordinated debt and Federal Home Loan Bank (FHLB) than one year.

78 Parent Company Liquidity – Sources • $500 million of senior notes issued May 19, 2010 and The principal source of parent company liquidity is the due May 2014. Interest is paid semiannually at a dividends it receives from its subsidiary bank, which may be fixed rate of 3.00%, and impacted by the following: • $750 million of senior notes issued August 11, 2010 • Bank-level capital needs, and due August 2020. Interest is paid semiannually at • Laws and regulations, a fixed rate of 4.375%. • Corporate policies, The parent company, through its subsidiary PNC Funding • Contractual restrictions, and Corp, has the ability to offer up to $3.0 billion of commercial • Other factors. paper to provide additional liquidity. As of December 31, 2010, there were no issuances outstanding under this program. The amount available for dividend payments by PNC Bank, During the first quarter of 2010 we raised $3.4 billion in new N.A. to the parent company without prior regulatory approval common equity through the issuance of 63.9 million shares of was approximately $1.1 billion at December 31, 2010. There common stock in an underwritten offering of $54 per share. are statutory and regulatory limitations on the ability of national banks to pay dividends or make other capital As further described in the Business Segments Review section distributions or to extend credit to the parent company or its of this Item 7, BlackRock completed a secondary offering of non-bank subsidiaries. See Note 21 Regulatory Matters in the its common stock in November 2010, including 7.5 million Notes To Consolidated Financial Statements in Item 8 of this shares of its common stock offered by PNC at a per share Report for a further discussion of these limitations. Dividends price of $163.00. This transaction resulted in net proceeds to may also be impacted by the bank’s capital needs and by PNC of $1.2 billion and a pretax gain of $160 million during contractual restrictions. We provide additional information on the fourth quarter of 2010. certain contractual restrictions under the “PNC Capital Trust E Note 18 Equity in the Notes To Consolidated Financial Trust Preferred Securities” and “Acquired Entity Trust Statements in Item 8 of this Report describes the Preferred Securities” sections of the Off-Balance Sheet December 31, 2008 issuance of 75,792 shares of our Fixed Arrangements And Variable Interest Entities section of this Rate Cumulative Perpetual Preferred Shares, Series N (Series Financial Review and in Note 13 Capital Securities of N Preferred Stock), related issuance discount and the issuance Subsidiary Trusts and Perpetual Trust Securities in the Notes of a related common stock warrant to the US Treasury under To Consolidated Financial Statements in Item 8 of this Report. the TARP Capital Purchase Program. In addition, Note 18 describes our February 2010 redemption of the Series N In addition to dividends from PNC Bank, N.A., other sources Preferred Stock, the acceleration of the accretion of the of parent company liquidity include cash and short-term remaining issuance discount on the Series N Preferred Stock investments, as well as dividends and loan repayments from in the first quarter of 2010, and the exchange by the US other subsidiaries and dividends or distributions from equity Treasury of the TARP warrant into warrants sold by the US investments. As of December 31, 2010, the parent company Treasury in a secondary public offering. These common stock had approximately $7.2 billion in funds available from its cash warrants will expire December 31, 2018. and short-term investments. Status of Credit Ratings The cost and availability of short- and long-term funding, as We can also generate liquidity for the parent company and well as collateral requirements for certain derivative PNC’s non-bank subsidiaries through the issuance of debt instruments, is influenced by debt ratings. securities and equity securities, including certain capital In general, rating agencies base their ratings on many securities, in public or private markets and commercial paper. quantitative and qualitative factors, including capital adequacy, liquidity, asset quality, business mix, level and We have effective shelf registration statements pursuant to quality of earnings, and the current legislative and regulatory which we can issue additional debt and equity securities, environment, including implied government support. In including certain hybrid capital instruments. Total senior and addition, rating agencies themselves have been subject to subordinated debt and hybrid capital instruments increased to scrutiny arising from the financial crisis and could make or be $17.3 billion at December 31, 2010 from $14.9 billion at required to make substantial changes to their ratings policies December 31, 2009 due to net year-to-date issuances. and practices, particularly in response to legislative and regulatory changes, including as a result of provisions in PNC Funding Corp issued the following securities in 2010: Dodd-Frank. Potential changes in the legislative and • $1 billion of senior notes issued February 8, 2010 and regulatory environment and the timing of those changes could due February 2015. Interest is paid semiannually at a impact our ratings, which as noted above, could impact our fixed rate of 3.625%, liquidity and financial condition. A decrease, or potential • $1 billion of senior notes issued February 8, 2010 and decrease, in credit ratings could impact access to the capital due February 2020. Interest is paid semiannually at a markets and/or increase the cost of debt, and thereby fixed rate of 5.125%, adversely affect liquidity and financial condition.

79 Credit ratings as of December 31, 2010 for PNC and PNC entities. The ratings for these companies, which had been Bank, N.A. follow: placed on review for possible downgrade on July 27, 2010, had benefitted from Moody’s support assumptions since 2009. Standard Moody’s & Poor’s Fitch The reduction in the support assumption resulted in a The PNC Financial one-notch downgrade of PNC’s bank-level debt and long-term Services Group, Inc. deposits ratings. The ratings of PNC’s holding company were Senior debt A3 A A+ not on review and were affirmed. Moody’s indicated that the Subordinated debt Baa1 A- A firm continues to ascribe support in the case of PNC, but at a Preferred stock Baa3 BBB A reduced level. The ongoing assumption of support for PNC is PNC Bank, N.A. primarily due to our importance in the payment system and Subordinated debt A3 A A significant national deposit share. However, the assumed level Long-term deposits A2 A+ AA- of support does not provide any lift to the bank’s current Short-term deposits P-1 A-1 F1+ stand-alone ratings. At the same time, the ratings outlook on PNC was changed to positive from stable reflecting its On November 1, 2010, Moody’s announced that they had improving credit metrics and strengthened capital profile. The downgraded the ratings of 10 large US regional banks after ratings in the table above were the same on November 1 and reducing its government support assumptions for these December 31, 2010.

Commitments The following tables set forth contractual obligations and various other commitments as of December 31, 2010 representing required and potential cash outflows.

Contractual Obligations Payment Due By Period Four to Less than One to three five After five December 31, 2010 - in millions Total one year years years years Remaining contractual maturities of time deposits (a) $41,400 $27,868 $11,334 $1,533 $ 665 Borrowed funds (a) 39,488 14,680 8,750 5,360 10,698 Minimum annual rentals on noncancellable leases 2,400 325 567 410 1,098 Nonqualified pension and postretirement benefits 572 69 123 117 263 Purchase obligations (b) 698 270 273 147 8 Total contractual cash obligations $84,558 $43,212 $21,047 $7,567 $12,732 (a) Includes purchase accounting adjustments. (b) Includes purchased obligations for goods and services covered by noncancellable contracts and contracts including cancellation fees.

At December 31, 2010, the liability for uncertain tax positions, excluding associated interest and penalties, was $238 million. This liability represents an estimate of tax positions that we have taken in our tax returns which ultimately may not be sustained upon examination by taxing authorities. Since the ultimate amount and timing of any future cash settlements cannot be predicted with reasonable certainty, this estimated liability has been excluded from the contractual obligations table. See Note 20 Income Taxes in the Notes To Consolidated Financial Statements in Item 8 of this Report for additional information.

Our contractual obligations totaled $97.6 billion at December 31, 2009. The decline in the comparison is primarily attributable to the decrease of remaining contractual maturities of time deposits at December 31, 2010.

Other Commitments (a) Amount Of Commitment Expiration By Period Total Amounts Less than One to three Four to five After five December 31, 2010 - in millions Committed one year years years years Net unfunded credit commitments $ 95,805 $52,431 $35,611 $7,465 $ 298 Standby letters of credit (b) 10,143 4,500 5,290 264 89 Reinsurance agreements 4,543 832 119 72 3,520 Other commitments (c) 684 347 234 91 12 Total commitments $111,175 $58,110 $41,254 $7,892 $3,919 (a) Other commitments are funding commitments that could potentially require performance in the event of demands by third parties or contingent events. Loan commitments are reported net of participations, assignments and syndications. (b) Includes $6.8 billion of standby letters of credit that support remarketing programs for customers’ variable rate demand notes. (c) Includes unfunded commitments related to private equity investments of $319 million and other investments of $11 million which are not on our Consolidated Balance Sheet. Also includes commitments related to tax credit investments of $316 million and other direct equity investments of $38 million which are included in other liabilities on the Consolidated Balance Sheet.

80 MARKET RISK MANAGEMENT OVERVIEW Sensitivity results and market interest rate benchmarks for the Market risk is the risk of a loss in earnings or economic value fourth quarters of 2010 and 2009 follow: due to adverse movements in market factors such as interest rates, credit spreads, foreign exchange rates, and equity prices. Interest Sensitivity Analysis We are exposed to market risk primarily by our involvement Fourth Fourth Quarter Quarter in the following activities, among others: 2010 2009 • Traditional banking activities of taking deposits and Net Interest Income Sensitivity Simulation extending loans, Effect on net interest income in first year • Private equity and other investments and activities from gradual interest rate change over whose economic values are directly impacted by following 12 months of: market factors, and 100 basis point increase 1.4% 1.1% • Trading in fixed income products, equities, 100 basis point decrease (a) (1.4)% (2.0)% derivatives, and foreign exchange, as a result of Effect on net interest income in second year customer activities, underwriting, and proprietary from gradual interest rate change over the trading. preceding 12 months of: 100 basis point increase 4.1% 1.4% We have established enterprise-wide policies and 100 basis point decrease (a) (4.8)% (6.0)% Duration of Equity Model (a) methodologies to identify, measure, monitor, and report Base case duration of equity (in years): (.5) (1.2) market risk. Market Risk Management provides independent Key Period-End Interest Rates oversight by monitoring compliance with these limits and One-month LIBOR .26% .23% guidelines, and reporting significant risks in the business to Three-year swap 1.28% 2.06% the Risk Committee of the Board. (a) Given the inherent limitations in certain of these measurement tools and techniques, results become less meaningful as interest rates approach zero. MARKET RISK MANAGEMENT –INTEREST RATE RISK Interest rate risk results primarily from our traditional banking In addition to measuring the effect on net interest income activities of gathering deposits and extending loans. Many assuming parallel changes in current interest rates, we factors, including economic and financial conditions, routinely simulate the effects of a number of nonparallel movements in interest rates, and consumer preferences, affect interest rate environments. The following Net Interest Income the difference between the interest that we earn on assets and Sensitivity to Alternative Rate Scenarios table reflects the the interest that we pay on liabilities and the level of our percentage change in net interest income over the next two noninterest-bearing funding sources. Due to the repricing term 12-month periods assuming (i) the PNC Economist’s most mismatches and embedded options inherent in certain of these likely rate forecast, (ii) implied market forward rates, and products, changes in market interest rates not only affect (iii) a Two-Ten Slope decrease (a 200 basis point decrease expected near-term earnings, but also the economic values of between two-year and ten-year rates superimposed on current these assets and liabilities. base rates) scenario. Net Interest Income Sensitivity to Alternative Rate Scenarios Asset and Liability Management centrally manages interest (Fourth Quarter 2010) rate risk within limits and guidelines set forth in our risk PNC Market Two-Ten management policies approved by management’s Asset and Economist Forward Slope Liability Committee and the Risk Committee of the Board. First year sensitivity .4% .4% –% Second year sensitivity 3.1% 3.1% (1.0)%

All changes in forecasted net interest income are relative to results in a base rate scenario where current market rates are assumed to remain unchanged over the forecast horizon. When forecasting net interest income, we make assumptions about interest rates and the shape of the yield curve, the volume and characteristics of new business, and the behavior of existing on- and off-balance sheet positions. These assumptions determine the future level of simulated net interest income in the base interest rate scenario and the other interest rate scenarios presented in the above table. These simulations assume that as assets and liabilities mature, they are replaced or repriced at then current market rates. We also consider forward projections of purchase accounting accretion when forecasting net interest income.

81 The graph below presents the yield curves for the base rate The following graph shows a comparison of enterprise-wide scenario and each of the alternate scenarios one year forward. trading-related gains and losses against prior day VaR for the period. Alternate Interest Rate Scenarios One Year Forward Enterprise-Wide Trading-Related 5.0 Gains/Losses Versus Value at Risk 20 4.0 15 3.0 10 P&L 5 2.0 0 Millions 1.0 (5) (10) 0.0 (15) VaR 1M LIBOR 2Y Swap 3Y Swap 5Y Swap 10Y Swap (20) 12/31/09 1/31/10 2/28/10 3/31/10 4/30/10 5/31/10 6/30/10 7/31/10 8/31/10 9/30/10 10/31/10 11/30/10 12/31/10 Base Rates PNC Economist Market Forward Two-Ten Slope decrease

The fourth quarter 2010 interest sensitivity analyses indicate that our Consolidated Balance Sheet is positioned to benefit Total trading revenue was as follows: from an increase in interest rates. We believe that we have the deposit funding base and balance sheet flexibility to adjust, Trading Revenue where appropriate and permissible, to changing interest rates and market conditions. In millions 2010 2009 2008 Net interest income $55 $61 $72 MARKET RISK MANAGEMENT –TRADING RISK Noninterest income 183 170 (55) Our trading activities are primarily customer-driven trading in Total trading revenue $238 $231 $ 17 fixed income securities, equities, derivatives, and foreign Securities underwriting and trading (a) $94 $ 75 $(17) exchange contracts. They also include the underwriting of Foreign exchange 76 73 73 fixed income and equity securities. Proprietary trading Financial derivatives 68 83 (39) positions were essentially eliminated by the end of the second Total trading revenue (b) $238 $231 $ 17 quarter of 2010. (a) Includes changes in fair value for certain loans accounted for at fair value. (b) Product trading revenue includes related hedged activity. We use value-at-risk (VaR) as the primary means to measure and monitor market risk in trading activities. The Risk Trading revenue excludes the impact of economic hedging Committee of the Board establishes an enterprise-wide VaR activities, which relate primarily to residential mortgage limit on our trading activities. servicing rights, and residential and held-for-sale commercial real estate loans. During 2010, our VaR ranged between $2.3 million and $8.8 million, averaging $5.4 million. During 2009, our VaR ranged Trading revenue increased $7 million in 2010 compared with between $5.8 million and $10.4 million, averaging $7.7 2009 primarily due to higher underwriting and derivative client million. sales revenue, partially offset by reduced proprietary and customer related trading results. Proprietary trading positions To help ensure the integrity of the models used to calculate were essentially eliminated by the end of the second quarter of VaR for each portfolio and enterprise-wide, we use a process 2010. Lower trading revenue in 2008 was primarily related to known as backtesting. The backtesting process consists of our proprietary trading activities and reflected the negative comparing actual observations of trading-related gains or impact of a very illiquid market on the assets that we held in losses against the VaR levels that were calculated at the close early 2008. of the prior day. Over a typical business cycle, we would expect an average of two to three instances a year in which MARKET RISK MANAGEMENT –EQUITY AND OTHER actual losses exceeded the prior day VaR measure at the INVESTMENT RISK enterprise-wide level. There were no such instances during Equity investment risk is the risk of potential losses associated 2010 or 2009, as the trading markets have moved into a period with investing in both private and public equity markets. In of relatively low pricing volatility. addition to extending credit, taking deposits, and underwriting and trading financial instruments, we make and manage direct investments in a variety of transactions, including management

82 buyouts, recapitalizations, and growth financings in a variety of the nature of the investments, the valuations incorporate industries. We also have investments in affiliated and assumptions as to future performance, financial condition, non-affiliated funds that make similar investments in private liquidity, availability of capital, and market conditions, among equity and in debt and equity-oriented hedge funds. The other factors, to determine the estimated fair value of the economic and/or book value of these investments and other investments. Market conditions and actual performance of the assets such as loan servicing rights are directly affected by investments could differ from these assumptions. changes in market factors. Accordingly, lower valuations may occur that could adversely impact earnings in future periods. Also, the valuations may The primary risk measurement for equity and other not represent amounts that will ultimately be realized from investments is economic capital. Economic capital is a these investments. See Note 1 Accounting Policies and Note 8 common measure of risk for credit, market and operational Fair Value in the Notes To Consolidated Financial Statements risk. It is an estimate of the worst-case value depreciation over in Item 8 of this Report for additional information. a one year horizon to a level commensurate with a financial institution with an A rating by the credit rating agencies. Private equity investments carried at estimated fair value Given the illiquid nature of many of these types of totaled $1.4 billion at December 31, 2010 and $1.2 billion at investments, it can be a challenge to determine their fair December 31, 2009. As of December 31, 2010, $749 million values. Market Risk Management and Finance provide was invested directly in a variety of companies and $626 independent oversight of the valuation process. million was invested indirectly through various private equity funds. Included in direct investments are investment activities Various PNC business units manage our private equity and of two private equity funds that are consolidated for financial other investment activities. Our businesses are responsible for reporting purposes. The noncontrolling interests of these funds making investment decisions within the approved policy limits totaled $236 million as of December 31, 2010. The indirect and associated guidelines. private equity funds are not redeemable, but PNC receives distributions over the life of the partnership from liquidation A summary of our equity investments follows: of the underlying investments by the investee.

Dec. 31 Dec. 31 Our unfunded commitments related to private equity totaled In millions 2010 2009 $319 million at December 31, 2010 compared with $453 BlackRock $5,017 $5,736 million at December 31, 2009. Tax credit investments 2,054 2,510 Private equity 1,375 1,184 Visa Visa 456 456 Other 318 368 At December 31, 2010, our investment in Visa Class B common shares totaled approximately 23 million shares. In Total $9,220 $10,254 May 2010, Visa funded $500 million to their litigation escrow account and reduced the conversion ratio of Visa B to A BlackRock shares. We consequently recognized our estimated $47 million PNC owned approximately 36 million common stock share of the $500 million as a reduction of our previously equivalent shares of BlackRock equity at December 31, 2010, established indemnification liability and a reduction of accounted for under the equity method. The primary risk noninterest expense. In October 2010, Visa funded $800 measurement, similar to other equity investments, is economic million to their litigation escrow account and further reduced capital. The Business Segments Review section of this Item 7 the conversion ratio of Visa B to A shares. We consequently includes additional information about BlackRock. recognized our estimated $76 million share of the $800 million as an additional reduction of our previously Tax Credit Investments established indemnification liability and a reduction of Included in our equity investments are tax credit investments noninterest expense. Considering the adjustments to the which are mostly accounted for under the equity method. conversion ratio, the Class B shares would convert to approximately 11.9 million of publicly traded Visa Class A These investments, as well as equity investments held by common shares. consolidated partnerships, totaled $2.1 billion at December 31, 2010 and $2.5 billion at December 31, 2009. As of December 31, 2010, we had recognized $456 million of our Visa ownership, which we acquired with National City, on Private Equity our Consolidated Balance Sheet. Based on the December 31, The private equity portfolio is an illiquid portfolio comprised 2010 closing price of $70.38 for the Visa Class A shares, the of equity and mezzanine investments that vary by industry, market value of our investment was $837 million. The Visa stage and type of investment. Private equity investments are Class B common shares we own generally will not be reported at fair value. Changes in the values of private equity transferable, except under limited circumstances, until they investments are reflected in our results of operations. Due to can be converted into shares of the publicly traded class of

83 stock, which cannot happen until the later of March 25, 2011, value in terms of purchasing power and monetary liabilities or settlement of all of the specified litigation. It is expected have corresponding purchasing power gains. The concept of that Visa will continue to adjust the conversion ratio of Visa purchasing power, however, is not an adequate indicator of the Class B to Class A shares in connection with any settlements effect of inflation on banks because it does not take into in excess of any amounts then in escrow for that purpose and account changes in interest rates, which are an important will also reduce the conversion ratio to the extent that it adds determinant of our earnings. any funds to the escrow in the future. FINANCIAL DERIVATIVES Note 23 Commitments and Guarantees in the Notes To We use a variety of financial derivatives as part of the overall Consolidated Financial Statements in Item 8 of this Report has asset and liability risk management process to help manage further information on our Visa indemnification obligation. interest rate, market and credit risk inherent in our business activities. Substantially all such instruments are used to Other Investments manage risk related to changes in interest rates. Interest rate We also make investments in affiliated and non-affiliated and total return swaps, interest rate caps and floors, swaptions, funds with both traditional and alternative investment options, forwards and futures contracts are the primary strategies. The economic values could be driven by either the instruments we use for interest rate risk management. fixed-income market or the equity markets, or both. At December 31, 2010, other investments totaled $318 million Financial derivatives involve, to varying degrees, interest rate, compared with $368 million at December 31, 2009. We market and credit risk. For interest rate swaps and total return recognized net gains related to these investments of $43 swaps, options and futures contracts, only periodic cash million during 2010 compared with net losses of $43 million payments and, with respect to options, premiums are during 2009. exchanged. Therefore, cash requirements and exposure to credit risk are significantly less than the notional amount on Given the nature of these investments, if market conditions these instruments. affecting their valuation were to worsen, we could incur future losses. Further information on our financial derivatives is presented in Note 1 Accounting Policies and Note 16 Financial Our unfunded commitments related to other investments Derivatives in the Notes To Consolidated Financial totaled $11 million at December 31, 2010 and $66 million at Statements in Item 8 of this Report, which is incorporated here December 31, 2009. by reference.

IMPACT OF INFLATION Not all elements of interest rate, market and credit risk are Our assets and liabilities are primarily monetary in nature. addressed through the use of financial or other derivatives, Accordingly, future changes in prices do not affect the and such instruments may be ineffective for their intended obligations to pay or receive fixed and determinable amounts purposes due to unanticipated market changes, among other of money. During periods of inflation, monetary assets lose reasons.

84 The following table provides the notional or contractual amounts and estimated net fair value of financial derivatives at December 31, 2010 and December 31, 2009.

Financial Derivatives December 31, 2010 December 31, 2009 Notional/ Estimated Notional/ Estimated Contractual Net Fair Contractual Net Fair In millions Amount Value Amount Value Derivatives designated as hedging instruments under GAAP Interest rate contracts (a) Asset rate conversion Receive fixed swaps $ 14,452 $ 332 $ 13,055 $ (64) Pay fixed swaps 1,669 12 Liability rate conversion Receive fixed swaps 9,803 834 13,048 707 Forward purchase commitments 2,350 (8) 350 1 Total interest rate risk management 28,274 1,170 26,453 644 Total derivatives designated as hedging instruments (b) $ 28,274 $1,170 $ 26,453 $ 644 Derivatives not designated as hedging instruments under GAAP Derivatives used for residential mortgage banking activities: Interest rate contracts Swaps $ 83,421 $ 63 $ 38,596 $(152) Caps/floors – Purchased 5,200 50 Futures 51,699 41,609 Future options 31,250 21 18,580 28 Swaptions 11,040 28 24,145 (22) Commitments related to residential mortgage assets 16,652 47 9,565 6 Total residential mortgage banking activities $194,062 $ 159 $137,695 $ (90) Derivatives used for commercial mortgage banking activities: Interest rate contracts Swaps (c) $ 1,744 $ (41) $ 1,948 $ (15) Commitments related to commercial mortgage assets 1,966 5 1,733 8 Credit contracts Credit default swaps 210 8 460 52 Total commercial mortgage banking activities $ 3,920 $ (28) $ 4,141 $ 45 Derivatives used for customer-related activities: Interest rate contracts Swaps (c) $ 92,248 $ (104) $ 91,090 $ (54) Caps/floors Sold 3,207 (15) 3,457 (15) Purchased 2,528 14 2,115 14 Swaptions 2,165 13 1,996 11 Futures 2,793 2,271 Foreign exchange contracts 7,913 (6) 8,002 14 Equity contracts 334 (3) 351 Credit contracts Risk participation agreements 2,738 3 2,819 1 Total customer-related $113,926 $ (98) $112,101 $ (29) Derivatives used for other risk management activities: Interest rate contracts Swaps $ 3,021 $ 6 $ 4,667 $ 3 Swaptions 100 4 720 (9) Futures 298 145 Future options Commitments related to residential mortgage assets 1,100 1 50 Foreign exchange contracts (c) 32 (4) 41 1 Credit contracts Credit default swaps 551 8 1,128 (2) Other contracts (d) 209 (396) 211 (486) Total other risk management $ 5,311 $ (381) $ 6,962 $(493) Total derivatives not designated as hedging instruments $317,219 $ (348) $260,899 $(567) Total Gross Derivatives $345,493 $ 822 $287,352 $ 77 (a) The floating rate portion of interest rate contracts is based on money-market indices. As a percent of notional amount, 58% were based on 1-month LIBOR and 42% on 3-month LIBOR at December 31, 2010 compared with 57% and 43%, respectively, at December 31, 2009. (b) Fair value amount includes net accrued interest receivable of $132 million at December 31, 2010 and $162 million at December 31, 2009. (c) The increases in the negative fair values from December 31, 2009 to December 31, 2010 for interest rate contracts, foreign exchange, equity contracts and other contracts were due to the changes in fair values of the existing contracts along with new contracts entered into during 2010 and contracts terminated. (d) Includes PNC’s obligation to fund a portion of certain BlackRock LTIP programs.

85 ERSUS • Net gains on sales of securities of $106 million, and 2009 V 2008 • A gain of $95 million related to the redemption of a portion of our Visa Class B common shares related to On December 31, 2008, PNC acquired National City. This Visa’s March 2008 initial public offering. acquisition had a substantial impact on the comparison of 2009 to 2008. Apart from the impact of these items, noninterest income increased $3.1 billion in 2009 compared with 2008. CONSOLIDATED INCOME STATEMENT REVIEW Summary Results Additional analysis Net income for 2009 was $2.4 billion or $4.36 per diluted Asset management revenue increased $172 million to share and for 2008 was $.9 billion or $2.44 per diluted share. $858 million in 2009, compared with $686 million in 2008. This increase reflected improving equity markets, new Net Interest Income business generation and a shift in assets into higher yielding Net interest income was $9.1 billion for 2009 compared with equity investments during the second half of 2009. Assets $3.9 billion for 2008, an increase of $5.2 billion, or 136%. managed totaled $103 billion at both December 31, 2009 and Higher net interest income for 2009 compared with 2008 2008, including the impact of National City. reflected the increase in average interest-earning assets due to National City and the improvement in the net interest margin. Consumer services fees totaled $1.290 billion in 2009 compared with $623 million in 2008. Service charges on The net interest margin was 3.82% in 2009 and 3.37% for deposits totaled $950 million for 2009 and $372 million for 2008, an increase of 45 basis points. 2008. Both increases were primarily driven by the impact of the National City acquisition. Reduced consumer spending, Noninterest Income given economic conditions, hindered PNC legacy growth Summary during 2009 in both categories. Noninterest income was $7.1 billion for 2009 and $2.4 billion for 2008. Corporate services revenue totaled $1.021 billion in 2009 compared with $704 million in 2008. Corporate services fees Noninterest income for 2009 included the following: include treasury management fees which increased $221 • The gain on BlackRock/BGI transaction of million in 2009 compared with 2008. $1.076 billion, • Net credit-related other-than-temporary impairments Residential mortgage fees totaled $990 million in 2009. Fees (OTTI) on debt and equity securities of $577 million, from strong mortgage refinancing volumes, especially in the • Net gains on sales of securities of $550 million, first quarter, and $355 million of net hedging gains from • Gains on hedging of residential mortgage servicing mortgage servicing rights contributed to this total. rights of $355 million, • Valuation and sale income related to our commercial Other noninterest income totaled $987 million for 2009 mortgage loans held for sale, net of hedges, of compared with $263 million for 2008. Other noninterest $107 million, income for 2009 included trading income of $170 million, • Gains of $103 million related to our BlackRock LTIP valuation and sale income related to our commercial mortgage shares adjustment in the first quarter, and net losses loans held for sale, net of hedges, of $107 million, other gains on private equity and alternative investments of of $103 million related to our equity investment in BlackRock $93 million. and net losses on private equity and alternative investments of $93 million. Noninterest income for 2008 included the following: • Net OTTI on debt and equity securities of Other noninterest income for 2008 included the $114 million $312 million, gain from the sale of Hilliard Lyons, the $95 million Visa • Gains of $246 million related to the mark-to-market gain, gains of $246 million related to our equity investment in adjustment on our BlackRock LTIP shares BlackRock, and losses related to our commercial mortgage obligation, loans held for sale, net of hedges, of $197 million. • Valuation and sale losses related to our commercial mortgage loans held for sale, net of hedges, of Provision For Credit Losses $197 million, The provision for credit losses totaled $3.9 billion for 2009 • Impairment and other losses related to private equity compared with $1.5 billion for 2008. The provision for credit and alternative investments of $180 million, losses for 2009 was in excess of net charge-offs of $2.7 billion • Income from Hilliard Lyons totaling $164 million, primarily due to required increases to our ALLL reflecting including the first quarter gain of $114 million from continued deterioration in the credit markets and the resulting the sale of this business, increase in nonperforming loans.

86 Noninterest Expense other) was 4.1 years at December 31, 2009 and 3.1 years at Noninterest expense for 2009 was $9.1 billion compared with December 31, 2008. $3.7 billion in 2008. The increase was substantially related to National City. We also recorded a special FDIC assessment of Loans Held For Sale $133 million in the second quarter of 2009, which was Loans held for sale totaled $2.5 billion at December 31, 2009 intended to build the FDIC’s Deposit Insurance Fund. compared with $4.4 billion at December 31, 2008. We stopped originating commercial mortgage loans held for sale Integration costs included in noninterest expense totaled designated at fair value during the first quarter of 2008 and $421 million in 2009 compared with $122 million in 2008. intend to continue pursuing opportunities to reduce these positions at appropriate prices. For commercial mortgages Our quarterly run rate of acquisition cost savings related to held for sale carried at the lower of cost or market, strong National City increased to $300 million in the fourth quarter origination volumes partially offset sales to government of 2009, or $1.2 billion per year. Acquisition cost savings agencies during 2009. Residential mortgage loans held for sale totaled $800 million in 2009. decreased during 2009 despite strong refinancing volumes, especially in the first quarter. Effective Tax Rate Our effective tax rate was 26.9% for 2009 and 27.2% for Asset Quality 2008. Nonperforming assets increased $4.1 billion to $6.3 billion at December 31, 2009 compared with $2.2 billion at CONSOLIDATED BALANCE SHEET REVIEW December 31, 2008. The increase resulted from recessionary Loans conditions in the economy and reflected a $2.6 billion increase Loans decreased $17.9 billion, or 10%, as of December 31, in commercial lending nonperforming loans and a $1.4 billion 2009 compared with December 31, 2008. Loans represented increase in consumer lending nonperforming loans. The 58% of total assets at December 31, 2009 and 60% of total increase in nonperforming commercial lending was primarily assets at December 31, 2008. The decline in loans during 2009 from real estate, including residential real estate development was driven primarily by lower utilization levels for and commercial real estate exposure; manufacturing; and commercial lending among middle market and large corporate service providers. The increase in nonperforming consumer clients, although this trend in utilization rates appeared to have lending was mainly due to residential mortgage loans. While eased in the fourth quarter of 2009. nonperforming assets increased across all applicable business segments during 2009, the largest increases were $2.0 billion Commercial lending represented 53% of the loan portfolio and in Corporate & Institutional Banking and $854 million in consumer lending represented 47% at December 31, 2009. Distressed Assets Portfolio. Commercial lending declined 17% at December 31, 2009 compared with December 31, 2008. Commercial loans, which At December 31, 2009, our largest nonperforming asset was comprised 65% of total commercial lending, declined 21% approximately $49 million and our average nonperforming due to reduced demand for new loans, lower utilization levels loan associated with commercial lending was approximately and paydowns as clients continued to deleverage their balance $1 million. sheets. Total consumer lending decreased slightly at December 31, 2009 from December 31, 2008. Goodwill and Other Intangible Assets Goodwill increased $637 million and other intangible assets Investment Securities increased $584 million at December 31, 2009 compared with Total investment securities at December 31, 2009 were December 31, 2008. During 2009, adjustments were made to $56.0 billion compared with $43.5 billion at December 31, the estimated fair values of assets acquired and liabilities 2008. Securities represented 21% of total assets at assumed as part of the National City acquisition. This resulted December 31, 2009 compared with 15% of total assets at in the recognition of $451 million of core deposit and other December 31, 2008. The increase in securities of $12.6 billion relationship intangibles at December 31, 2009. In addition, the since December 31, 2008 primarily reflected the purchase of purchase price allocation for the National City acquisition was US Treasury and government agency securities as well as completed as of December 31, 2009 with goodwill of price appreciation in the available for sale portfolio, partially $647 million recognized. offset by maturities, prepayments and sales. Funding Sources At December 31, 2009, the securities available for sale Total funding sources were $226.2 billion at December 31, portfolio included a net unrealized loss of $2.3 billion, which 2009 and $245.1 billion at December 31, 2008. Funding represented the difference between fair value and amortized sources decreased $18.9 billion, driven by declines in other cost. The comparable amount at December 31, 2008 was a net time deposits, retail certificates of deposit and Federal Home unrealized loss of $5.4 billion. The expected weighted-average Loan Bank borrowings, partially offset by increases in money life of investment securities (excluding corporate stocks and market and demand deposits.

87 Total deposits decreased $5.9 billion at December 31, 2009 Annualized – Adjusted to reflect a full year of activity. compared with December 31, 2008. Relationship-growth driven increases in money market, demand and savings Assets under management – Assets over which we have sole deposits were more than offset by declines in other time or shared investment authority for our customers/clients. We deposits, reflecting a planned run-off of brokered certificates do not include these assets on our Consolidated Balance Sheet. of deposits, and non-relationship retail certificates of deposits. Basis point – One hundredth of a percentage point. The $13.0 billion decline in borrowed funds since December 31, 2008 primarily resulted from repayments of Cash recoveries – Cash recoveries used in the context of Federal Home Loan Bank borrowings along with decreases in purchased impaired loans represent cash payments from all other borrowed fund categories. customers that exceeded the recorded investment of the designated impaired loan.

In March 2009, PNC issued $1.0 billion of floating rate senior Charge-off – Process of removing a loan or portion of a loan notes guaranteed by the FDIC under the FDIC’s TLGP-Debt from our balance sheet because it is considered uncollectible. Guarantee Program (TLGP). In addition, PNC issued We also record a charge-off when a loan is transferred from $1.5 billion of senior notes during the second and third portfolio holdings to held for sale by reducing the loan quarters of 2009, which were not issued under the TLGP. carrying amount to the fair value of the loan, if fair value is less than carrying amount. Shareholders’ Equity Total shareholders’ equity increased $4.5 billion, to Common shareholders’ equity to total assets – Common $29.9 billion, at December 31, 2009 compared with shareholders’ equity divided by total assets. Common December 31, 2008 primarily due to the following: shareholders’ equity equals total shareholders’ equity less the • A decline of $2.0 billion in accumulated other liquidation value of preferred stock. comprehensive loss primarily as a result of decreases in net unrealized securities losses, Credit derivatives – Contractual agreements, primarily credit • An increase of $1.7 billion in retained earnings, and default swaps, that provide protection against a credit event of • An increase of $.6 billion in capital surplus-common one or more referenced credits. The nature of a credit event is stock and other, primarily due to the May 2009 established by the protection buyer and protection seller at the common stock issuance. inception of a transaction, and such events include bankruptcy, insolvency and failure to meet payment Regulatory capital ratios at December 31, 2009 were 10.1% obligations when due. The buyer of the credit derivative pays for leverage, 11.4% for Tier 1 risk-based and 15.0% for total a periodic fee in return for a payment by the protection seller risk-based capital. At December 31, 2008, the regulatory upon the occurrence, if any, of a credit event. capital ratios were 17.5% for leverage, 9.7% for Tier 1 risk- based and 13.2% for total risk-based capital. Credit spread – The difference in yield between debt issues of similar maturity. The excess of yield attributable to credit The leverage ratio at December 31, 2008 reflected the spread is often used as a measure of relative creditworthiness, favorable impact on Tier 1 risk-based capital from the with a reduction in the credit spread reflecting an issuance of securities under TARP and the issuance of PNC improvement in the borrower’s perceived creditworthiness. common stock in connection with the National City acquisition, both of which occurred on December 31, 2008. In Derivatives – Financial contracts whose value is derived from addition, the ratio as of that date did not reflect any impact of changes in publicly traded securities, interest rates, currency National City on PNC’s adjusted average total assets. exchange rates or market indices. Derivatives cover a wide assortment of financial contracts, including but not limited to forward contracts, futures, options and swaps. GLOSSARY OF TERMS Duration of equity – An estimate of the rate sensitivity of our Accretable net interest (Accretable yield) – The excess of cash economic value of equity. A negative duration of equity is flows expected to be collected on a purchased impaired loan associated with asset sensitivity (i.e., positioned for rising over the carrying value of the loan. The accretable net interest interest rates), while a positive value implies liability is recognized into interest income over the remaining life of sensitivity (i.e., positioned for declining interest rates). For the loan using the constant effective yield method. example, if the duration of equity is +1.5 years, the economic value of equity declines by 1.5% for each 100 basis point Adjusted average total assets – Primarily comprised of total increase in interest rates. average quarterly (or annual) assets plus (less) unrealized losses (gains) on investment securities, less goodwill and Earning assets – Assets that generate income, which include: certain other intangible assets (net of eligible deferred taxes). Federal funds sold; resale agreements; trading securities;

88 interest-earning deposits with banks; loans held for sale; the protection buyer of an interest differential, which loans; investment securities; and certain other assets. represents the difference between a short-term rate (e.g., three- month LIBOR) and an agreed-upon rate (the strike rate) Economic capital – Represents the amount of resources that a applied to a notional principal amount. business segment should hold to guard against potentially large losses that could cause insolvency. It is based on a Interest rate swap contracts – Contracts that are entered into measurement of economic risk, as opposed to risk as defined primarily as an asset/liability management strategy to reduce by regulatory bodies. The economic capital measurement interest rate risk. Interest rate swap contracts are exchanges of process involves converting a risk distribution to the capital interest rate payments, such as fixed-rate payments for that is required to support the risk, consistent with our target floating-rate payments, based on notional principal amounts. credit rating. As such, economic risk serves as a “common currency” of risk that allows us to compare different risks on a Intrinsic value – The amount by which the fair value of an similar basis. underlying stock exceeds the exercise price of an option on that stock. Effective duration – A measurement, expressed in years, that, when multiplied by a change in interest rates, would Investment securities – Collectively, securities available for approximate the percentage change in value of on- and off- sale and securities held to maturity. balance sheet positions. Leverage ratio – Tier 1 risk-based capital divided by adjusted Efficiency – Noninterest expense divided by total revenue. average total assets.

Fair value – The price that would be received to sell an asset LIBOR – Acronym for London InterBank Offered Rate. or paid to transfer a liability in an orderly transaction between LIBOR is the average interest rate charged when banks in the market participants at the measurement date. London wholesale money market (or interbank market) borrow unsecured funds from each other. LIBOR rates are FICO score – A credit bureau-based industry standard score used as a benchmark for interest rates on a global basis. created by Fair Isaac Co. which predicts the likelihood of borrower default. We use FICO scores both in underwriting Loan-to-value ratio (LTV) – A calculation of a loan’s and assessing credit risk in our consumer lending portfolio. collateral coverage that is used both in underwriting and Lower FICO scores indicate likely higher risk of default, assessing credit risk in our lending portfolio. LTV is the sum while higher FICO scores indicate likely lower risk of default. total of loan obligations secured by collateral divided by the FICO scores are updated on a periodic basis. market value of that same collateral. Market values of the collateral are based on an independent valuation of the Foreign exchange contracts – Contracts that provide for the collateral. For example, an LTV of less than 90% is better future receipt and delivery of foreign currency at previously secured and has less credit risk than an LTV of greater than or agreed-upon terms. equal to 90%. Our real estate market values are updated on an annual basis but may be updated more frequently for select Funds transfer pricing – A management accounting loans. methodology designed to recognize the net interest income effects of sources and uses of funds provided by the assets and Loss Given Default (LGD) – An estimate of recovery based liabilities of a business segment. We assign these balances on collateral type, collateral value, loan exposure, or the LIBOR-based funding rates at origination that represent the guarantor(s) quality and guaranty type (full or partial). Each interest cost for us to raise/invest funds with similar maturity loan has its own LGD. The LGD risk rating measures the and repricing structures. percentage of exposure of a specific credit obligation that we expect to lose if default occurs. LGD is net of recovery, Futures and forward contracts – Contracts in which the buyer through either liquidation of collateral or deficiency agrees to purchase and the seller agrees to deliver a specific judgments rendered from foreclosure or bankruptcy financial instrument at a predetermined price or yield. May be proceedings. The LGD rating is updated with the same settled either in cash or by delivery of the underlying financial frequency as the borrower’s PD rating, and should be done instrument. more frequently than the PD if the collateral values and amounts change often. GAAP – Accounting principles generally accepted in the United States of America. Net interest income from loans and deposits – A management accounting assessment, using funds transfer pricing Interest rate floors and caps – Interest rate protection methodology, of the net interest contribution from loans and instruments that involve payment from the protection seller to deposits.

89 Net interest margin – Annualized taxable-equivalent net occurred. However for debt securities, if we do not intend to interest income divided by average earning assets. sell the security and it is not more likely than not that we will be required to sell the security before its recovery, the other- Nonaccretable difference – Contractually required payments than-temporary loss is separated into (a) the amount receivable on a purchased impaired loan in excess of the cash representing the credit loss, and (b) the amount related to all flows expected to be collected. other factors. The other-than-temporary impairment related to credit losses is recognized in earnings while the amount Nondiscretionary assets under administration – Assets we hold related to all other factors is recognized in other for our customers/clients in a non-discretionary, custodial comprehensive income, net of tax. capacity. We do not include these assets on our Consolidated Balance Sheet. Pretax, pre-provision earnings from continuing operations – Total revenue less noninterest expense, both from continuing Nonperforming assets – Nonperforming assets include operations. nonaccrual loans, certain troubled debt restructured loans, foreclosed assets and other assets. We do not accrue interest Probability of Default (PD) – An internal risk rating that income on assets classified as nonperforming. indicates the likelihood that a credit obligor will enter into default status. Nonperforming loans – Loans for which we do not accrue interest income. Nonperforming loans include loans to Purchase accounting accretion – Accretion of the discounts commercial, commercial real estate, equipment lease and premiums on acquired assets and liabilities. The purchase financing, consumer, and residential mortgage customers and accounting accretion is recognized in net interest income over construction customers as well as certain troubled debt the weighted average life of the financial instruments using restructured loans. Nonperforming loans do not include loans the constant effective yield method. held for sale or foreclosed and other assets. Nonperforming loans do not include purchased impaired loans as we are Purchased impaired loans – Acquired loans determined to be currently accreting interest income over the expected life of credit impaired under FASB ASC 310-30 (AICPA SOP 03-3). the loans. Loans are determined to be impaired if there is evidence of credit deterioration since origination and for which it is Notional amount – A number of currency units, shares, or probable that all contractually required payments will not be other units specified in a derivative contract. collected.

Operating leverage – The period to period dollar or percentage Recorded investment – The initial investment of a purchased change in total revenue (GAAP basis) less the dollar or impaired loan plus interest accretion and less any cash percentage change in noninterest expense. A positive variance payments and writedowns to date. The recorded investment indicates that revenue growth exceeded expense growth (i.e., excludes any valuation allowance which is included in our positive operating leverage) while a negative variance implies allowance for loan and lease losses. expense growth exceeded revenue growth (i.e., negative operating leverage). Recovery – Cash proceeds received on a loan that we had previously charged off. We credit the amount received to the Options – Contracts that grant the purchaser, for a premium allowance for loan and lease losses. payment, the right, but not the obligation, to either purchase or sell the associated financial instrument at a set price during a Residential development loans – Project-specific loans to specified period or at a specified date in the future. commercial customers for the construction or development of residential real estate including land, single family homes, Other-than-temporary impairment (OTTI) – When the fair condominiums and other residential properties. This would value of a security is less than its amortized cost basis, an exclude loans to commercial customers where proceeds are assessment is performed to determine whether the impairment for general corporate purposes whether or not such facilities is other-than-temporary. If we intend to sell the security or are secured. more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period Residential mortgage servicing rights hedge gains / (losses), credit loss, an other-than-temporary impairment is considered net – We have elected to measure acquired or originated to have occurred. In such cases, an other-than-temporary residential mortgage servicing rights (MSRs) at fair value impairment is recognized in earnings equal to the entire under GAAP. We employ a risk management strategy difference between the investment’s amortized cost basis and designed to protect the economic value of MSRs from changes its fair value at the balance sheet date. Further, if we do not in interest rates. This strategy utilizes securities and a portfolio expect to recover the entire amortized cost of the security, an of derivative instruments to hedge changes in the fair value of other-than-temporary impairment is considered to have MSRs arising from changes in interest rates. These financial

90 instruments are expected to have changes in fair value which interests that are held by others; less goodwill and certain are negatively correlated to the change in fair value of the other intangible assets (net of eligible deferred taxes relating MSR portfolio. Net MSR hedge gains/ (losses) represent the to taxable and nontaxable combinations), less equity change in the fair value of MSRs, exclusive of changes due to investments in nonfinancial companies less ineligible time decay and payoffs, combined with the change in the fair servicing assets and less net unrealized holding losses on value of the associated securities and derivative instruments. available for sale equity securities. Net unrealized holding gains on available for sale equity securities, net unrealized Return on average assets – Annualized net income divided by holding gains (losses) on available for sale debt securities and average assets. net unrealized holding gains (losses) on cash flow hedge derivatives are excluded from total shareholders’ equity for Return on average capital – Annualized net income divided by Tier 1 risk-based capital purposes. average capital. Tier 1 risk-based capital ratio – Tier 1 risk-based capital Return on average common shareholders’ equity – Annualized divided by period-end risk-weighted assets. net income less preferred stock dividends, including preferred stock discount accretion and redemptions, divided by average Total equity – Total shareholders’ equity plus noncontrolling common shareholders’ equity. interests.

Risk-weighted assets – Computed by the assignment of Total return swap – A non-traditional swap where one party specific risk-weights (as defined by the Board of Governors of agrees to pay the other the “total return” of a defined the Federal Reserve System) to assets and off-balance sheet underlying asset (e.g., a loan), usually in return for receiving a instruments. stream of LIBOR-based cash flows. The total returns of the asset, including interest and any default shortfall, are passed Securitization – The process of legally transforming financial through to the counterparty. The counterparty is therefore assets into securities. assuming the credit and economic risk of the underlying asset.

Servicing rights – An intangible asset or liability created by an Total risk-based capital – Tier 1 risk-based capital plus obligation to service assets for others. Typical servicing rights qualifying subordinated debt and trust preferred securities, include the right to receive a fee for collecting and forwarding other noncontrolling interest not qualified as Tier 1, eligible payments on loans and related taxes and insurance premiums gains on available for sale equity securities and the allowance held in escrow. for loan and lease losses, subject to certain limitations.

Swaptions – Contracts that grant the purchaser, for a premium Total risk-based capital ratio – Total risk-based capital divided payment, the right, but not the obligation, to enter into an by period-end risk-weighted assets. interest rate swap agreement during a specified period or at a specified date in the future. Transaction deposits – The sum of interest-bearing money market deposits, interest-bearing demand deposits, and Taxable-equivalent interest – The interest income earned on noninterest-bearing deposits. certain assets is completely or partially exempt from Federal income tax. As such, these tax-exempt instruments typically Troubled debt restructuring – A restructuring of a loan yield lower returns than taxable investments. To provide more whereby the lender for economic or legal reasons related to meaningful comparisons of yields and margins for all interest- the borrower’s financial difficulties grants a concession to the earning assets, we use interest income on a taxable-equivalent borrower that the lender would not otherwise consider. basis in calculating average yields and net interest margins by increasing the interest income earned on tax-exempt assets to Value-at-risk (VaR) – A statistically-based measure of risk make it fully equivalent to interest income earned on other which describes the amount of potential loss which may be taxable investments. This adjustment is not permitted under incurred due to severe and adverse market movements. The GAAP on the Consolidated Income Statement. measure is of the maximum loss which should not be exceeded on 99 out of 100 days. Tier 1 common capital – Tier 1 risk-based capital, less preferred equity, less trust preferred capital securities, and less Watchlist – A list of criticized loans, credit exposure or other noncontrolling interests. assets compiled for internal monitoring purposes. We define criticized exposure for this purpose as exposure with an Tier 1 common capital ratio – Tier 1 common capital divided internal risk rating of other assets especially mentioned, by period-end risk-weighted assets. substandard, doubtful or loss.

Tier 1 risk-based capital – Total shareholders’ equity, plus Yield curve – A graph showing the relationship between the trust preferred capital securities, plus certain noncontrolling yields on financial instruments or market indices of the same

91 credit quality with different maturities. For example, a money supply and market interest rates. “normal” or “positive” yield curve exists when long-term – Changes in our customers’, suppliers’ and other bonds have higher yields than short-term bonds. A “flat” yield counterparties’ performance in general and their curve exists when yields are the same for short-term and long- creditworthiness in particular. term bonds. A “steep” yield curve exists when yields on long- – A slowing or failure of the moderate economic term bonds are significantly higher than on short-term bonds. recovery that began in mid-2009 and continued An “inverted” or “negative” yield curve exists when short- throughout 2010. term bonds have higher yields than long-term bonds. – Continued effects of the aftermath of recessionary conditions and the uneven spread of the positive impacts of the recovery on the economy in general CAUTIONARY STATEMENT and our customers in particular, including adverse REGARDING FORWARD-LOOKING impact on loan utilization rates as well as delinquencies, defaults and customer ability to meet INFORMATION credit obligations. – Changes in levels of unemployment. We make statements in this Report, and we may from time to – Changes in customer preferences and behavior, time make other statements, regarding our outlook or whether as a result of changing business and expectations for earnings, revenues, expenses, capital levels, economic conditions, climate-related physical liquidity levels, asset quality and/or other matters regarding or changes or legislative and regulatory initiatives, or affecting PNC that are forward-looking statements within the other factors. meaning of the Private Securities Litigation Reform Act. • Turbulence in significant portions of the US and global Forward-looking statements are typically identified by words financial markets could impact our performance, both such as “believe,” “plan,” “expect,” “anticipate,” “intend,” directly by affecting our revenues and the value of our “outlook,” “estimate,” “forecast,” “will,” “should,” “project,” assets and liabilities and indirectly by affecting our “goal” and other similar words and expressions. counterparties and the economy generally. • We will be impacted by the extensive reforms provided Forward-looking statements are subject to numerous for in Dodd-Frank and ongoing reforms impacting the assumptions, risks and uncertainties, which change over time. financial institutions industry generally. Further, as much Forward-looking statements speak only as of the date they are of that Act will require the adoption of implementing made. We do not assume any duty and do not undertake to regulations by a number of different regulatory bodies, update our forward-looking statements. Actual results or the precise nature, extent and timing of many of these future events could differ, possibly materially, from those that reforms and the impact on us is still uncertain. we anticipated in our forward-looking statements, and future • Financial industry restructuring in the current results could differ materially from our historical environment could also impact our business and financial performance. performance as a result of changes in the creditworthiness and performance of our counterparties Our forward-looking statements are subject to the following and by changes in the competitive and regulatory principal risks and uncertainties. We provide greater detail landscape. regarding some of these factors elsewhere in this Report, • Our results depend on our ability to manage current including in the Risk Factors and Risk Management sections. elevated levels of impaired assets. Our forward-looking statements may also be subject to other • Given current economic and financial market conditions, risks and uncertainties, including those discussed elsewhere in our forward-looking financial statements are subject to this Report or in our other filings with the SEC. the risk that these conditions will be substantially different than we are currently expecting. These • Our businesses and financial results are affected by statements are based on our current view that the business and economic conditions, both generally and moderate economic recovery that began in mid-2009 and specifically in the principal markets in which we operate. continued throughout 2010 will slowly gather enough In particular, our businesses and financial results may be momentum in 2011 to lower the unemployment rate impacted by: amidst continued low interest rates. – Changes in interest rates and valuations in the debt, • Legal and regulatory developments could have an impact equity and other financial markets. on our ability to operate our businesses or our financial – Disruptions in the liquidity and other functioning of condition or results of operations or our competitive financial markets, including such disruptions in the position or reputation. Reputational impacts, in turn, markets for real estate and other assets commonly could affect matters such as business generation and securing financial products. retention, our ability to attract and retain management, – Actions by the Federal Reserve and other government agencies, including those that impact

92 liquidity, and funding. These legal and regulatory generally or on us or on our customers, suppliers or other developments could include: counterparties specifically. – Changes resulting from legislative and regulatory • Also, risks and uncertainties that could affect the results responses to the current economic and financial anticipated in forward-looking statements or from industry environment. historical performance relating to our equity interest in – Other legislative and regulatory reforms, including BlackRock, Inc. are discussed in more detail in broad-based restructuring of financial industry BlackRock’s filings with the SEC, including in the Risk regulation (such as those under the Dodd-Frank Act) Factors sections of BlackRock’s reports. BlackRock’s SEC as well as changes to laws and regulations involving filings are accessible on the SEC’s website and on or tax, pension, bankruptcy, consumer protection, and through BlackRock’s website at www.blackrock.com. This other aspects of the financial institution industry. material is referenced for informational purposes only and – Unfavorable resolution of legal proceedings or other should not be deemed to constitute a part of this Report. claims and regulatory and other governmental investigations or other inquiries. In addition to We grow our business in part by acquiring from time to time matters relating to PNC’s business and activities, other financial services companies, financial services assets such matters may also include proceedings, claims, and related deposits. Acquisitions present us with risks in investigations, or inquiries relating to pre-acquisition addition to those presented by the nature of the business business and activities of acquired companies, such acquired. These include risks and uncertainties related both to as National City. the acquisition transactions themselves and to the integration – The results of the regulatory examination and of the acquired businesses into PNC after closing. supervision process, including our failure to satisfy the requirements of agreements with governmental Acquisitions may be substantially more expensive to complete agencies. (including unanticipated costs incurred in connection with the – Changes in accounting policies and principles. integration of the acquired company) and the anticipated – Changes resulting from legislative and regulatory benefits (including anticipated cost savings and strategic initiatives relating to climate change that have or may gains) may be significantly harder or take longer to achieve have a negative impact on our customers’ demand for than expected. Acquisitions may involve our entry into new or use of our products and services in general and businesses or new geographic or other markets, and these their creditworthiness in particular. situations also present risks resulting from our inexperience in – Changes to regulations governing bank capital, those new areas. including as a result of the Dodd-Frank Act and of the Basel III initiatives. As a regulated financial institution, our pursuit of attractive • Our business and operating results are affected by our acquisition opportunities could be negatively impacted due to ability to identify and effectively manage risks inherent regulatory delays or other regulatory issues. In addition, in our businesses, including, where appropriate, through regulatory and/or legal issues relating to the pre-acquisition the effective use of third-party insurance, derivatives, and operations of an acquired business may cause reputational capital management techniques, and by our ability to harm to PNC following the acquisition and integration of the meet evolving regulatory capital standards. acquired business into ours and may result in additional future • The adequacy of our intellectual property protection, and costs or regulatory limitations arising as a result of those the extent of any costs associated with obtaining rights in issues. intellectual property claimed by others, can impact our business and operating results. ITEM 7A – QUANTITATIVE AND QUALITATIVE • Our ability to anticipate and respond to technological DISCLOSURES ABOUT MARKET RISK changes can have an impact on our ability to respond to customer needs and to meet competitive demands. This information is set forth in the Risk Management section • Our ability to implement our business initiatives and of Item 7 of this Report. 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 disasters, terrorist activities or international hostilities, either as a result of the impact on the economy and capital and other financial markets

93 ITEM 8–FINANCIAL STATEMENTS AND A company’s internal control over financial reporting is a SUPPLEMENTARY DATA process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of REPORT OF INDEPENDENT REGISTERED PUBLIC financial statements for external purposes in accordance with ACCOUNTING FIRM generally accepted accounting principles. A company’s internal control over financial reporting includes those policies To the Board of Directors and Shareholders of The PNC and procedures that (i) pertain to the maintenance of records Financial Services Group, Inc. that, in reasonable detail, accurately and fairly reflect the In our opinion, the accompanying consolidated balance sheets transactions and dispositions of the assets of the company; and the related consolidated statements of income, changes in (ii) provide reasonable assurance that transactions are equity, and cash flows present fairly, in all material respects, recorded as necessary to permit preparation of financial the financial position of The PNC Financial Services Group, statements in accordance with generally accepted accounting Inc. and its subsidiaries (the “Company”) at December 31, principles, and that receipts and expenditures of the company 2010 and December 31, 2009, and the results of their are being made only in accordance with authorizations of operations and their cash flows for each of the three years in management and directors of the company; and (iii) provide the period ended December 31, 2010 in conformity with reasonable assurance regarding prevention or timely detection accounting principles generally accepted in the United States of unauthorized acquisition, use, or disposition of the of America. Also in our opinion, the Company maintained, in company’s assets that could have a material effect on the all material respects, effective internal control over financial financial statements. reporting as of December 31, 2010, based on criteria established in Internal Control—Integrated Framework issued Because of its inherent limitations, internal control over by the Committee of Sponsoring Organizations of the financial reporting may not prevent or detect misstatements. Treadway Commission (COSO). The Company’s management Also, projections of any evaluation of effectiveness to future is responsible for these financial statements, for maintaining periods are subject to the risk that controls may become effective internal control over financial reporting and for its inadequate because of changes in conditions, or that the assessment of the effectiveness of internal control over degree of compliance with the policies or procedures may financial reporting, included in Management’s Report on deteriorate. Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these /s/ PricewaterhouseCoopers LLP financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We Pittsburgh, Pennsylvania conducted our audits in accordance with the standards of the March 1, 2011 Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for other-than-temporary impairments on debt securities classified as either available for sale or held to maturity in 2009.

94 CONSOLIDATED INCOME STATEMENT THE PNC FINANCIAL SERVICES GROUP, INC.

Year ended December 31 In millions, except per share data 2010 2009 2008 Interest Income Loans $ 8,276 $ 8,919 $4,138 Investment securities 2,389 2,688 1,746 Other 485 479 417 Total interest income 11,150 12,086 6,301 Interest Expense Deposits 963 1,741 1,485 Borrowed funds 957 1,262 962 Total interest expense 1,920 3,003 2,447 Net interest income 9,230 9,083 3,854 Noninterest Income Asset management 1,054 858 686 Consumer services 1,261 1,290 623 Corporate services 1,082 1,021 704 Residential mortgage 699 990 Service charges on deposits 705 950 372 Net gains on sales of securities 426 550 106 Other-than-temporary impairments (608) (1,935) (312) Less: Noncredit portion of other-than-temporary impairments (a) (283) (1,358) Net other-than-temporary impairments (325) (577) (312) Gains on BlackRock transactions 160 1,076 Other 884 987 263 Total noninterest income 5,946 7,145 2,442 Total revenue 15,176 16,228 6,296 Provision For Credit Losses 2,502 3,930 1,517 Noninterest Expense Personnel 3,906 4,119 1,766 Occupancy 730 713 331 Equipment 668 695 280 Marketing 266 233 123 Other 3,043 3,313 1,185 Total noninterest expense 8,613 9,073 3,685 Income from continuing operations before income taxes and noncontrolling interests 4,061 3,225 1,094 Income taxes 1,037 867 298 Income from continuing operations before noncontrolling interests 3,024 2,358 796 Income from discontinued operations (net of income taxes of $338, $54 and $63) 373 45 118 Net income 3,397 2,403 914 Less: Net income (loss) attributable to noncontrolling interests (15) (44) 32 Preferred stock dividends 146 388 21 Preferred stock discount accretion and redemptions 255 56 Net income attributable to common shareholders $ 3,011 $ 2,003 $ 861 Earnings Per Common Share From continuing operations Basic $ 5.08 $ 4.30 $ 2.15 Diluted $ 5.02 $ 4.26 $ 2.10 From net income Basic $ 5.80 $ 4.40 $ 2.49 Diluted $ 5.74 $ 4.36 $ 2.44 Average Common Shares Outstanding Basic 517 454 344 Diluted 520 455 346 (a) Included in accumulated other comprehensive loss. See accompanying Notes To Consolidated Financial Statements.

95 CONSOLIDATED BALANCE SHEET THE PNC FINANCIAL SERVICES GROUP, INC.

December 31 December 31 In millions, except par value 2010 2009 Assets Cash and due from banks (December 31, 2010 includes $2 for VIEs) (a) $ 3,297 $ 4,288 Federal funds sold and resale agreements (includes $866 and $990 measured at fair value) (b) 3,704 2,390 Trading securities 1,826 2,124 Interest-earning deposits with banks (December 31, 2010 includes $288 for VIEs) (a) 1,610 4,488 Loans held for sale (includes $2,755 and $2,062 measured at fair value) (b) 3,492 2,539 Investment securities (December 31, 2010 includes $192 for VIEs) (a) 64,262 56,027 Loans (December 31, 2010 includes $4,645 for VIEs) (includes $116 and $88 measured at fair value) (a) (b) 150,595 157,543 Allowance for loan and lease losses (December 31, 2010 includes $(183) for VIEs) (a) (4,887) (5,072) Net loans 145,708 152,471 Goodwill 8,149 9,505 Other intangible assets 2,604 3,404 Equity investments (December 31, 2010 includes $1,177 for VIEs) (a) 9,220 10,254 Other (December 31, 2010 includes $676 for VIEs) (includes $396 and $486 measured at fair value) (a) (b) 20,412 22,373 Total assets $264,284 $269,863 Liabilities Deposits Noninterest-bearing $ 50,019 $ 44,384 Interest-bearing 133,371 142,538 Total deposits 183,390 186,922 Borrowed funds Federal funds purchased and repurchase agreements 4,144 3,998 Federal Home Loan Bank borrowings 6,043 10,761 Bank notes and senior debt 12,904 12,362 Subordinated debt 9,842 9,907 Other (December 31, 2010 includes $3,354 for VIEs) (a) 6,555 2,233 Total borrowed funds 39,488 39,261 Allowance for unfunded loan commitments and letters of credit 188 296 Accrued expenses (December 31, 2010 includes $88 for VIEs) (a) 3,188 3,590 Other (December 31, 2010 includes $456 for VIEs) (a) 5,192 7,227 Total liabilities 231,446 237,296 Equity Preferred stock (c) Common stock – $5 par value Authorized 800 shares, issued 536 and 471 shares 2,682 2,354 Capital surplus – preferred stock 647 7,974 Capital surplus – common stock and other 12,057 8,945 Retained earnings 15,859 13,144 Accumulated other comprehensive loss (431) (1,962) Common stock held in treasury at cost: 10 and 9 shares (572) (513) Total shareholders’ equity 30,242 29,942 Noncontrolling interests 2,596 2,625 Total equity 32,838 32,567 Total liabilities and equity $264,284 $269,863 (a) Amounts represent the assets or liabilities of consolidated variable interest entities (VIEs). (b) Amounts represent items for which the Corporation has elected the fair value option. (c) Par value less than $.5 million at each date. See accompanying Notes To Consolidated Financial Statements.

96 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY THE PNC FINANCIAL SERVICES GROUP, INC.

Shareholders’ Equity Capital Surplus - Shares Capital Common Accumulated Outstanding Surplus - Stock Other Common Common Preferred and Retained Comprehensive Treasury Noncontrolling Total In millions Stock Stock Stock Other Earnings Income (Loss) Stock Interests Equity Balance at December 31, 2007 (a) 341 $1,764 $2,618 $11,497 $ (147) $(878) $1,654 $16,508 Net effect of adopting FASB ASC 715-60 (12) (12) Net effect of adopting FASB ASC 820 and FASB ASC 825-10 17 17 Balance at January 1, 2008 341 $1,764 $2,618 $11,502 $ (147) $(878) $1,654 $16,513 Net income 882 32 914 Other comprehensive income (loss), net of tax Net unrealized securities losses (3,459) (3,459) Net unrealized gains on cash flow hedge derivatives 199 199 Pension, other postretirement and postemployment benefit plan adjustments (490) (490) Other (52) (52) Comprehensive income (loss) 32 (2,888) Cash dividends declared Common (902) (902) Preferred (21) (21) Common stock activity – acquisition 99 497 5,419 5,916 Treasury stock activity 3 (110) 281 171 Preferred stock issuance – Series K $ 493 493 Preferred stock issuance – Series L 150 150 Preferred stock issuance – Series N (b) 7,275 7,275 TARP Warrant (b) 304 304 Tax benefit of stock option plans 17 17 Stock options granted 22 22 Effect of BlackRock equity transactions 43 43 Restricted stock/unit and incentive/ performance unit share transactions 15 15 Other 540 540 Balance at December 31, 2008 (a) 443 $2,261 $7,918 $8,328 $11,461 $(3,949) $(597) $2,226 $27,648 Cumulative effect of adopting FASB ASC 320-10 (c) 110 (110) Balance at January 1, 2009 443 $2,261 $7,918 $8,328 $11,571 $(4,059) $(597) $2,226 $27,648 Net income (loss) 2,447 (44) 2,403 Other comprehensive income (loss), net of tax Net unrealized losses on other-than- temporary impaired debt securities (706) (706) Net unrealized securities gains 2,866 2,866 Net unrealized losses on cash flow hedge derivatives (208) (208) Pension, other postretirement and postemployment benefit plan adjustments 125 125 Other 20 20 Comprehensive income (loss) (44) 4,500 Cash dividends declared Common (430) (430) Preferred (388) (388) Preferred stock discount accretion 56 (56) Supervisory Capital Assessment Program issuance 15 75 549 624 Common stock activity 4 18 147 165 Treasury stock activity (d) (158) 84 (74) Other 79 443 522 Balance at December 31, 2009 (a) 462 $2,354 $7,974 $8,945 $13,144 $(1,962) $(513) $2,625 $32,567

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97 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY THE PNC FINANCIAL SERVICES GROUP, INC. (continued from previous page)

Shareholders’ Equity Capital Shares Capital Surplus - Accumulated Outstanding Surplus - Common Other Common Common Preferred Stock and Retained Comprehensive Treasury Noncontrolling Total In millions Stock Stock Stock Other Earnings Income (Loss) Stock Interests Equity Cumulative effect of adopting ASU 2009-17 (92) (13) (105) Balance at January 1, 2010 462 $2,354 $ 7,974 $ 8,945 $13,052 $(1,975) $(513) $2,625 $32,462 Net income 3,412 (15) 3,397 Other comprehensive income (loss), net of tax Net unrealized gains on other-than- temporary impaired debt securities 170 170 Net unrealized securities gains 868 868 Net unrealized gains on cash flow hedge derivatives 356 356 Pension, other postretirement and postemployment benefit plan adjustments 162 162 Other (12) (12) Comprehensive income (loss) (15) 4,941 Cash dividends declared Common (204) (204) Preferred (146) (146) Redemption of preferred stock and noncontrolling interest Series N (TARP) (7,579) (7,579) Preferred stock discount accretion 252 (252) Other (1) (3) (4) Common stock activity (e) 65 328 3,113 3,441 Treasury stock activity (1) (62) (59) (121) Other 62 (14) 48 Balance at December 31, 2010 (a) 526 $2,682 $ 647 $12,057 $15,859 $ (431) $(572) $2,596 $32,838 (a) The par value of our preferred stock outstanding was less than $.5 million at each date and, therefore, is excluded from this presentation. (b) Issued to the US Department of Treasury on December 31, 2008 under the TARP Capital Purchase Program. (c) Retained earnings at January 1, 2009 was increased $110 million representing the after-tax noncredit portion of other-than-temporary impairment losses recognized in net income during 2008 that has been reclassified to accumulated other comprehensive income (loss). (d) Net treasury stock activity totaled .5 million shares issued. (e) Includes 63.9 million common shares issuance, the net proceeds of which were used together with other available funds to redeem the Series N (TARP) Preferred Stock, for a $3.4 billion net increase in total equity. See accompanying Notes To Consolidated Financial Statements.

98 CONSOLIDATED STATEMENT OF CASH FLOWS THE PNC FINANCIAL SERVICES GROUP, INC.

Year ended December 31 In millions 2010 2009 2008 Operating Activities Net income $ 3,397 $ 2,403 $ 914 Adjustments to reconcile net income to net cash provided by operating activities Provision for credit losses 2,502 3,930 1,517 Depreciation and amortization 1,059 978 463 Deferred income taxes (benefit) 1,019 932 (261) Net gains on sales of securities (426) (550) (106) Net other-than-temporary impairments 325 577 312 Gain on sale of PNC Global Investment Servicing (639) Gains on BlackRock transactions (160) (1,076) Net gains related to BlackRock LTIP shares adjustment (103) (246) Undistributed earnings of BlackRock (291) (144) (129) Visa redemption gain (95) Excess tax benefits from share-based payment arrangements (1) (1) (13) Net change in Trading securities and other short-term investments 468 61 1,459 Loans held for sale (1,154) 1,110 303 Other assets 753 5,485 (1,974) Accrued expenses and other liabilities (1,571) (8,118) 5,140 Other (470) 269 130 Net cash provided by operating activities 4,811 5,753 7,414 Investing Activities Sales Securities available for sale 23,343 18,861 10,283 BlackRock stock via secondary common stock offering 1,198 Visa shares 95 Loans 1,868 644 76 Repayments/maturities Securities available for sale 7,730 7,291 4,225 Securities held to maturity 2,433 495 21 Purchases Securities available for sale (36,653) (34,078) (19,381) Securities held to maturity (1,296) (2,367) (101) Loans (4,275) (970) (249) Net change in Federal funds sold and resale agreements (1,313) (560) 1,301 Interest-earning deposits with banks 2,684 10,237 (6,302) Loans 7,855 13,863 (4,595) Net cash received from (paid for) acquisition and divestiture activity 2,202 (3,396) 2,761 Purchases of corporate and bank-owned life insurance (800) (350) Other (a) 753 (541) (770) Net cash provided (used) by investing activities 5,729 9,479 (12,986) (continued on following page)

99 CONSOLIDATED STATEMENT OF CASH FLOWS THE PNC FINANCIAL SERVICES GROUP, INC. (continued from previous page) Year ended December 31 In millions 2010 2009 2008 Financing Activities Net change in Noninterest-bearing deposits $ 5,872 $ 7,169 $ 1,719 Interest-bearing deposits (8,844) (9,849) 2,065 Federal funds purchased and repurchase agreements 152 (1,173) (8,081) Federal Home Loan Bank short-term borrowings (280) 280 (2,000) Other short-term borrowed funds 380 (1,726) 840 Sales/issuances Federal Home Loan Bank long-term borrowings 2,092 5,050 Bank notes and senior debt 3,230 2,461 3,626 Subordinated debt 759 Other long-term borrowed funds 4,820 234 96 Perpetual trust securities 369 Preferred stock – TARP 7,275 Preferred stock – Other 492 TARP Warrant 304 Supervisory Capital Assessment Program – common stock 624 Common and treasury stock 3,486 247 375 Repayments/maturities Federal Home Loan Bank long-term borrowings (4,373) (9,671) (1,158) Bank notes and senior debt (2,808) (3,887) (3,815) Subordinated debt (257) (1,000) (140) Other long-term borrowed funds (4,677) (211) (156) Preferred stock – TARP (7,579) Redemption of noncontrolling interest and other preferred stock (100) Excess tax benefits from share-based payment arrangements 1 113 Acquisition of treasury stock (204) (188) (234) Preferred stock cash dividends paid (146) (388) (21) Common stock cash dividends paid (204) (430) (902) Net cash provided (used) by financing activities (11,531) (15,415) 6,476 Net Increase (Decrease) In Cash And Due From Banks (991) (183) 904 Cash and due from banks at beginning of period 4,288 4,471 3,567 Cash and due from banks at end of period $ 3,297 $ 4,288 $ 4,471 Supplemental Disclosures Interest paid $ 1,871 $ 3,151 $ 2,145 Income taxes paid 752 66 797 Income taxes refunded 54 718 91 Non-cash Investing and Financing Items Issuance of stock for acquisitions 6,066 Transfer from (to) loans to (from) loans held for sale, net 890 (172) (1,763) Transfer from trading securities to investment securities 599 Transfer from loans to foreclosed assets 1,218 1,012 45 (a) Includes the impact of the consolidation of variable interest entities as of January 1, 2010. See accompanying Notes To Consolidated Financial Statements.

100 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THE PNC FINANCIAL SERVICES GROUP,INC.

BUSINESS INVESTMENT IN BLACKROCK,INC. PNC is one of the largest diversified financial services We account for our investment in the common stock and companies in the United States and is headquartered in Series B Preferred Stock of BlackRock (deemed to be Pittsburgh, Pennsylvania. in-substance common stock) under the equity method of accounting. On January 31, 2010, the Series D Preferred Stock PNC has businesses engaged in retail banking, corporate and was converted to Series B Preferred Stock. The investment in institutional banking, asset management, and residential BlackRock is reflected on our Consolidated Balance Sheet in mortgage banking, providing many of its products and Equity investments, while our equity in earnings of services nationally and others in PNC’s primary geographic BlackRock is reported on our Consolidated Income Statement markets located in Pennsylvania, Ohio, New Jersey, Michigan, in Asset management revenue. Maryland, Illinois, Indiana, Kentucky, Florida, Virginia, Missouri, Delaware, Washington, D.C., and Wisconsin. PNC On February 27, 2009, PNC’s obligation to deliver BlackRock also provides certain products and services internationally. common shares in connection with BlackRock’s long-term incentive plan programs was replaced with an obligation to NOTE 1ACCOUNTING POLICIES deliver shares of BlackRock’s new Series C Preferred Stock. The 2.9 million shares of Series C Preferred Stock were BASIS OF FINANCIAL STATEMENT PRESENTATION acquired from BlackRock in exchange for common shares on Our consolidated financial statements include the accounts of that same date. Since these preferred shares were not deemed the parent company and its subsidiaries, most of which are to be in substance common stock, we elected to account for wholly owned, and certain partnership interests and variable these preferred shares at fair value and the changes in fair interest entities. value will offset the impact of marking-to-market the obligation to deliver these shares to BlackRock. Our We prepared these consolidated financial statements in investment in the BlackRock Series C Preferred Stock is accordance with accounting principles generally accepted in included on our Consolidated Balance Sheet in Other assets. the United States of America (GAAP). We have eliminated intercompany accounts and transactions. We have also As noted above, we mark-to-market our obligation to transfer reclassified certain prior year amounts to conform with the BlackRock shares related to certain BlackRock long-term 2010 presentation. These reclassifications did not have a incentive plan (LTIP) programs. This obligation is classified material impact on our consolidated financial condition or as a derivative not designated as a hedging instrument under results of operations. GAAP as disclosed in Note 16 Financial Derivatives.

See Note 2 Divestiture regarding our July 1, 2010 sale of PNC BUSINESS COMBINATIONS Global Investment Servicing Inc. The Consolidated Income We record the net assets of companies that we acquire at their Statement for all periods presented and related Notes To estimated fair value at the date of acquisition and we include Consolidated Financial Statements reflect the global the results of operations of the acquired companies on our investment servicing business as discontinued operations. Consolidated Income Statement from the date of acquisition. We recognize, as goodwill, the excess of the acquisition price We have considered the impact on these consolidated over the estimated fair value of the net assets acquired. financial statements of subsequent events. SPECIAL PURPOSE ENTITIES USE OF ESTIMATES Special purpose entities (SPEs) are defined as legal entities We prepared these consolidated financial statements using structured for a particular purpose. We use special purpose financial information available at the time, which requires us entities in various legal forms to conduct normal business to make estimates and assumptions that affect the amounts activities. We review the structure and activities of special reported. Our most significant estimates pertain to our fair purpose entities for possible consolidation under the value measurements, allowances for loan and lease losses and applicable GAAP guidance. unfunded loan commitments and letters of credit, purchased impaired loans, revenue recognition and residential mortgage servicing rights. Actual results may differ from the estimates and the differences may be material to the consolidated financial statements.

101 A variable interest entity (VIE) is a corporation, partnership, • Selling various insurance products, limited liability company, or any other legal structure used to • Providing treasury management services, conduct activities or hold assets that either: • Providing merger and acquisition advisory and • Does not have equity investors with voting rights that related services, and can directly or indirectly make decisions about the • Participating in certain capital markets transactions. entity’s activities through those voting rights or similar rights, or Revenue earned on interest-earning assets including unearned • Has equity investors that do not provide sufficient income and the accretion of discounts recognized on acquired equity for the entity to finance its activities without or purchased loans is recognized based on the constant additional subordinated financial support. effective yield of the financial instrument.

A VIE often holds financial assets, including loans or Asset management fees are generally based on a percentage of receivables, real estate or other property. the fair value of the assets under management. This caption also includes any performance fees which are generally based We consolidate a VIE if we are its primary beneficiary. The on a percentage of the returns on such assets and are recorded primary beneficiary absorbs the majority of the expected as earned. The caption Asset Management also includes our losses from the VIE’s activities, is entitled to receive a share of the earnings of BlackRock recognized under the majority of the entity’s residual returns, or both. Upon equity method of accounting. consolidation of a VIE, we recognize all of the VIE’s assets, liabilities and noncontrolling interests on our Consolidated Service charges on deposit accounts are recognized when Balance Sheet. See Note 3 Loan Sale and Servicing Activities earned. Brokerage fees and gains and losses on the sale of and Variable Interest Entities for information about VIEs that securities and certain derivatives are recognized on a trade- we do not consolidate but in which we hold a significant date basis. variable interest. We record private equity income or loss based on changes in On January 1, 2010, we adopted Accounting Standard Update the valuation of the underlying investments or when we (ASU) 2009-17 – Consolidations (Topic 810) – Improvements dispose of our interest. to Financial Reporting by Enterprises Involved with Variable Interest Entities. This guidance amends current GAAP to We recognize gain/(loss) on changes in the fair value of require that an enterprise perform a qualitative analysis as certain financial instruments where we have elected the fair opposed to a quantitative analysis to determine if it is the value option. These financial instruments include certain primary beneficiary of a VIE. The qualitative analysis commercial and residential mortgage loans originated for sale, considers the purpose and the design of the VIE as well as the certain residential mortgage portfolio loans, structured resale risks that the VIE was designed to either create or pass agreements and our investment in BlackRock Series C through to variable interest holders. See Recent Accounting preferred stock. We also recognize gain/(loss) on changes in Pronouncements in this Note 1 for further details. the fair value of residential mortgage servicing rights, which are measured at fair value. REVENUE RECOGNITION We earn interest and noninterest income from various sources, We recognize revenue from servicing residential mortgages, including: commercial mortgages and other consumer loans as earned • Lending, based on the specific contractual terms. We recognize revenue • Securities portfolio, from securities, derivatives and foreign exchange trading as • Asset management, well as securities underwriting activities as these transactions • Customer deposits, occur or as services are provided. We recognize gains from • Loan sales and servicing, the sale of loans upon receipt of cash. • Brokerage services, and • Securities and derivatives trading activities, including When appropriate, revenue is reported net of associated foreign exchange. expenses in accordance with GAAP.

We also earn revenue from selling loans and securities, and CASH AND CASH EQUIVALENTS we recognize income or loss from certain private equity Cash and due from banks are considered “cash and cash activities. equivalents” for financial reporting purposes.

We earn fees and commissions from: • Issuing loan commitments, standby letters of credit and financial guarantees,

102 INVESTMENTS We include all interest on debt securities, including We hold interests in various types of investments. The amortization of premiums and accretion of discounts on accounting for these investments is dependent on a number of available for sale securities, in Net interest income using the factors including, but not limited to, items such as: constant effective yield method. We compute gains and losses • Ownership interest, realized on the sale of available for sale debt securities on a • Our plans for the investment, and specific security basis. These securities gains/ (losses) are • The nature of the investment. included in the caption Net gains on sales of securities on the Consolidated Income Statement. Debt Securities Debt securities are recorded on a trade-date basis. We classify In certain situations, management may elect to transfer certain debt securities as held to maturity and carry them at amortized debt securities from the securities available for sale to the held cost if we have the positive intent and ability to hold the to maturity classification. In such cases, any unrealized gain or securities to maturity. Debt securities that we purchase for loss at the date of transfer included in Accumulated other short-term appreciation or other trading purposes are carried at comprehensive income (loss) is amortized over the remaining fair value and classified as trading securities and other assets life of the security as a yield adjustment. This amortization on our Consolidated Balance Sheet. Realized and unrealized effectively offsets or mitigates the effect on interest income of gains and losses on trading securities are included in Other the amortization of the premium or accretion of the discount noninterest income. on the security.

Debt securities not classified as held to maturity or trading are Equity Securities and Partnership Interests designated as securities available for sale and carried at fair We account for equity securities and equity investments other value with unrealized gains and losses, net of income taxes, than BlackRock and private equity investments under one of reflected in Accumulated other comprehensive income (loss). the following methods: • Marketable equity securities are recorded on a trade- We review all debt securities that are in an unrealized loss date basis and are accounted for based on the position for other-than-temporary impairment (OTTI). We securities’ quoted market prices from a national evaluate outstanding available for sale and held to maturity securities exchange. Dividend income on these securities for other-than-temporary impairment on at least a securities is recognized in Net interest income. Those quarterly basis. An investment security is deemed impaired if purchased with the intention of recognizing short- the fair value of the investment is less than its amortized cost. term profits are classified as trading and included in Amortized cost includes adjustments (if any) made to the cost trading securities and other assets on our basis of an investment for accretion, amortization, previous Consolidated Balance Sheet. Both realized and other-than-temporary impairments and hedging gains and unrealized gains and losses on trading securities are losses. After an investment security is determined to be included in Noninterest income. Marketable equity impaired, we evaluate whether the decline in value is other- securities not classified as trading are designated as than-temporary. As part of this evaluation, we take into securities available for sale with unrealized gains and consideration whether we intend to sell the security or whether losses, net of income taxes, reflected in Accumulated it is more likely than not that we will be required to sell the other comprehensive income (loss). Any unrealized security before expected recovery of its amortized cost. We losses that we have determined to be other-than- also consider whether or not we expect to receive all of the temporary on securities classified as available for contractual cash flows from the investment based on factors sale are recognized in current period earnings. that include, but are not limited to: the creditworthiness of the issuer and, in the case of securities collateralized by consumer • For investments in limited partnerships, limited and commercial loan assets, the historical and projected liability companies and other investments that are not performance of the underlying collateral; and the length of required to be consolidated, we use either the cost time and extent that fair value has been less than amortized method or the equity method of accounting. We use cost. In addition, we may also evaluate the business and the cost method for investments in which we are not financial outlook of the issuer, as well as broader industry and considered to have significant influence over the sector performance indicators. Declines in the fair value of operations of the investee and when cost available for sale debt securities that are deemed other-than- appropriately reflects our economic interest in the temporary and are attributable to credit deterioration are underlying investment. Under the cost method, there recognized on our Consolidated Income Statement in the is no change to the cost basis unless there is an other- period in which the determination is made. Declines in fair than-temporary decline in value. If the decline is value which are deemed other-than-temporary and attributable determined to be other-than-temporary, we write to factors other than credit deterioration are recognized in down the cost basis of the investment to a new cost Accumulated other comprehensive income (loss) on our basis that represents realizable value. The amount of Consolidated Balance Sheet. the write-down is accounted for as a loss included in

103 Other noninterest income. Distributions received LOANS from the income of an investee on cost method Loans are classified as held for investment when management investments are included in interest income or has both the intent and ability to hold the loan for the noninterest income depending on the type of foreseeable future, or until maturity or payoff. Management’s investment. We use the equity method for all other intent and view of the foreseeable future may change based on general and limited partner ownership interests and changes in business strategies, the economic environment, limited liability company investments. Under the market conditions and the availability of government equity method, we record our equity ownership share programs. of net income or loss of the investee in noninterest income. Investments described above are included in Measurement of delinquency and past due status are based on the caption Equity investments on the Consolidated the contractual terms of each loan. Loans that are 30 days or Balance Sheet. more past due in terms of payment are considered delinquent.

Private Equity Investments Except as described below, loans held for investment are We report private equity investments, which include direct stated at the principal amounts outstanding, net of unearned investments in companies, affiliated partnership interests and income, unamortized deferred fees and costs on originated indirect investments in private equity funds, at estimated fair loans, and premiums or discounts on purchased loans. Interest value. These estimates are based on available information and on performing loans is accrued based on the principal amount may not necessarily represent amounts that we will ultimately outstanding and recorded in interest income as earned using realize through distribution, sale or liquidation of the the constant effective yield method. Loan origination fees, investments. Fair value of publicly traded direct investments direct loan origination costs, and loan premiums and discounts are determined using quoted market prices and are subject to are deferred and accreted or amortized into net interest various discount factors for legal or contractual sales income, over periods not exceeding the contractual life of the restrictions, when appropriate. The valuation procedures loan. applied to direct investments in private companies include techniques such as multiples of adjusted earnings of the entity, When loans are redesignated from held for investment to held independent appraisals, anticipated financing and sale for sale, specific reserves and allocated pooled reserves transactions with third parties, or the pricing used to value the included in the allowance for loan and lease losses (ALLL) are entity in a recent financing transaction. We value affiliated charged-off to reduce the basis of the loans to the lower of partnership interests based on the underlying investments of cost or estimated fair value less cost to sell. the partnership using procedures consistent with those applied to direct investments. In September 2009, the Financial In addition to originating loans, we also acquire loans through Accounting Standards Board (FASB) issued ASU 2009-12— portfolio purchases or acquisitions of other financial services Fair Value Measurements and Disclosures (Topic 820)— companies. For certain acquired loans that have experienced a Investments in Certain Entities That Calculate Net Asset deterioration of credit quality, we follow the guidance Value per Share (or Its Equivalent). Based on the guidance, contained in ASC Sub Topic 310-30 – Loans and Debt we value indirect investments in private equity funds based on Securities Acquired with Deteriorated Credit Quality. Under net asset value as provided in the financial statements that we this guidance, acquired purchased impaired loans are to be receive from their managers. Due to the time lag in our receipt recorded at fair value without the carryover of any existing of the financial information and based on a review of valuation allowances. Evidence of credit quality deterioration investments and valuation techniques applied, adjustments to may include information and statistics regarding bankruptcy the manager-provided value are made when available recent events, borrower credit scores, such as Fair Isaac Corporation portfolio company information or market information scores (FICO), past due status, and current loan-to-value indicates a significant change in value from that provided by (LTV) ratio. We review the loans acquired for evidence of the manager of the fund. We include all private equity credit quality deterioration and determine if it is probable that investments on the Consolidated Balance Sheet in the caption we will be unable to collect all contractual amounts due, Equity investments. Changes in the fair value of private equity including both principal and interest. When both conditions investments are recognized in noninterest income. exist, we estimate the amount and timing of undiscounted expected cash flows at acquisition for each loan either We consolidate private equity investments when we are the individually or on a pool basis. We estimate the cash flows general partner in a limited partnership and have determined expected to be collected using internal models that incorporate that we have control of the partnership or are the primary management’s best estimate of current key assumptions, such beneficiary of the VIE. The portion we do not own is reflected as default rates, loss severity and payment speeds. Collateral in the caption Noncontrolling interests on the Consolidated values are also incorporated into cash flow estimates. Late Balance Sheet. fees, which are contractual but not expected to be collected, are excluded from expected future cash flows.

104 The accretable yield is calculated based upon the difference and unconditional, but contains qualifications based on the between the undiscounted expected future cash flows of the inherent equitable powers of a bankruptcy court, as well as the loans and the recorded investment in the loans. This amount is unsettled state of the common law. Once the legal isolation accreted into income over the life of the loan or pool using the test has been met, other factors concerning the nature and constant effective yield method. Subsequent decreases in extent of the transferor’s control over the transferred assets are expected cash flows that are attributable, at least in part, to taken into account in order to determine whether credit quality are recognized as impairments through a charge derecognition of assets is warranted. to the provision for credit losses resulting in an increase in the ALLL. Subsequent increases in expected cash flows are In a securitization, the trust or SPE issues beneficial interests recognized as a recovery of previously recorded ALLL or in the form of senior and subordinated securities backed or prospectively through an adjustment of the loan’s or pool’s collateralized by the assets sold to the trust. The senior classes yield over its remaining life. of the asset-backed securities typically receive investment grade credit ratings at the time of issuance. These ratings are The nonaccretable yield represents the difference between the generally achieved through the creation of lower-rated expected undiscounted cash flows of the loans and the total subordinated classes of asset-backed securities, as well as contractual cash flows (including principal and future interest subordinated or residual interests. In certain cases, we may payments) at acquisition and throughout the remaining lives of retain a portion or all of the securities issued, interest-only the loans. strips, one or more subordinated tranches, servicing rights and, in some cases, cash reserve accounts. Securitized loans are removed from the balance sheet and a net gain or loss is LEASES recognized in noninterest income at the time of initial sale, We provide financing for various types of equipment, aircraft, and each subsequent sale for revolving securitization energy and power systems, and rolling stock and automobiles structures. Gains or losses recognized on the sale of the loans through a variety of lease arrangements. Direct financing depend on the allocation of carrying value between the loans leases are carried at the aggregate of lease payments plus sold and the retained interests, based on their relative fair estimated residual value of the leased property, less unearned market values at the date of sale. We generally estimate the income. Leveraged leases, a form of financing lease, are fair value of the retained interests based on the present value carried net of nonrecourse debt. We recognize income over of future expected cash flows using assumptions as to discount the term of the lease using the constant effective yield method. rates, interest rates, prepayment speeds, credit losses and Lease residual values are reviewed for other-than-temporary servicing costs, if applicable. impairment on a quarterly basis. Gains or losses on the sale of leased assets are included in Other noninterest income while Our loan sales and securitizations are generally structured valuation adjustments on lease residuals are included in Other without recourse to us and with no restrictions on the retained noninterest expense. interests with the exception of loan sales to certain US government chartered entities. LOAN SALES,LOAN SECURITIZATIONS AND RETAINED INTERESTS When we are obligated for loss-sharing or recourse in a sale, We recognize the sale of loans or other financial assets when our policy is to record such liabilities at fair value upon sale the transferred assets are legally isolated from our creditors based on the guidance contained in applicable GAAP. and the appropriate accounting criteria are met. We have sold mortgage, credit card and other loans through securitization We originate, sell and service mortgage loans under the transactions. In a securitization, financial assets are transferred Federal National Mortgage Association (FNMA) Delegated into trusts or to SPEs in transactions to effectively legally Underwriting and Servicing (DUS) program. Under the isolate the assets from PNC. Where the transferor is a provisions of the DUS program, we participate in a loss- depository institution, legal isolation is accomplished through sharing arrangement with FNMA. We participate in a similar compliance with specific rules and regulations of the relevant program with the Federal Home Loan Mortgage Corporation regulatory authorities. Where the transferor is not a depository (FHLMC). Refer to Note 23 Commitments and Guarantees for institution, legal isolation is accomplished through utilization more information about our obligations related to sales of of a two-step securitization structure. loans under these programs.

In December 2009, the FASB issued ASU 2009-16 – On January 1, 2010, we adopted ASU 2009-16 – Transfers Transfers and Servicing (Topic 860) – Accounting For and Servicing (Topic 860) – Accounting For Transfers of Transfers of Financial Assets which requires a true sale legal Financial Assets which is a codification of guidance issued in analysis to be obtained to address several relevant factors, June 2009. This revised guidance removes the concept of a such as the nature and level of recourse to the transferor, and qualifying special-purpose entity from existing GAAP and the amount and nature of retained interests in the loans sold. removes the exception from applying FASB ASC 810-10, The analytical conclusion as to a true sale is never absolute Consolidation, to qualifying special purpose entities. The

105 amended standard clarifies that an entity must consider all We generally classify Commercial Lending (Commercial, arrangements or agreements made contemporaneously with or Commercial Real Estate, and Equipment Lease Financing) in contemplation of a transfer even if not entered into at the loans as nonaccrual (and therefore nonperforming) when we time of the transfer when applying surrender of control determine that the collection of interest or principal is doubtful conditions. See Recent Accounting Pronouncements in this or when delinquency of interest or principal payments has Note 1 for further details. existed for 90 days or more and the loans are not well-secured and in the process of collection. A loan is considered well- LOANS HELD FOR SALE secured when the collateral in the form of liens on (or pledges We designate loans as held for sale when we have the intent to of) real or personal property, including marketable securities, sell them. We transfer loans to the Loans held for sale has a realizable value sufficient to discharge the debt in full, category at the lower of cost or estimated fair value less cost including accrued interest. Such factors that would lead to to sell. At the time of transfer, write-downs on the loans are nonperforming status and subject to an impairment test would recorded as charge-offs. We establish a new cost basis upon include, but are not limited to, the following: transfer. Any subsequent lower-of-cost-or-market adjustment • Deterioration in the financial position of the borrower is determined on an individual loan basis and is recognized as resulting in the loan moving from accrual to cash a valuation allowance with any charges included in Other basis, noninterest income. Gains or losses on the sale of these loans • The collection of principal or interest is 90 days or are included in Other noninterest income when realized. more past due unless the asset is both well-secured and in the process of collection, We have elected to account for certain commercial mortgage • Reasonable doubt exists as to the certainty of the loans held for sale at fair value. The changes in the fair value future debt service ability, whether 90 days have of these loans are measured and recorded in Other noninterest passed or not, income each period. See Note 8 Fair Value for additional • Customer has filed or will likely file for bankruptcy, information. Also, we elected to account for residential real • The bank advances additional funds to cover estate loans held for sale and securitizations acquired from principal or interest, National City, which were not purchased impaired loans, at • We are in the process of liquidation of a commercial fair value. borrower, or • We are pursuing remedies under a guaranty. Interest income with respect to loans held for sale classified as performing is accrued based on the principal amount We charge off commercial nonaccrual loans based on the facts outstanding using a constant effective yield method. and circumstances of the individual loans.

In certain circumstances, loans designated as held for sale may Additionally, in general, small business commercial term be transferred to held for investment based on a change in loans of less than $1 million and small business commercial strategy. We transfer these loans at the lower of cost or revolving loans are placed on nonaccrual status at 90 days past estimated fair value; however, any loans held for sale and due and charged off at 120 and 180 days past due, designated at fair value will remain at fair value for the life of respectively. the loan. Home equity installment loans and lines of credit, as well as NONPERFORMING ASSETS residential real estate loans, that are well secured are classified Nonperforming assets include: as nonaccrual at 180 days past due. A consumer loan is • Nonaccrual loans, considered well-secured when the collateral in the form of • Troubled debt restructurings, and liens on (or pledges of) real or personal property, including • Foreclosed assets. marketable securities, have a realizable value sufficient to discharge the debt in full, including accrued interest. Nonperforming loans are those loans that have deteriorated in credit quality to the extent that full collection of original Home equity installment loans and lines of credit and contractual principal and interest is doubtful. When a loan is residential real estate loans that are not well secured and/or are determined to be nonperforming (and as a result is impaired), in the process of collection are charged off at 180 days past the accrual of interest is ceased and the loan is classified as due to the estimated fair value of the collateral less cost to sell. nonaccrual. The current year accrued and uncollected interest The remaining portion of the loan is placed on nonaccrual is reversed out of net interest income. status.

A loan acquired and accounted for under ASC Sub-Topic 310-30 – Loans and Debt Securities Acquired with Deteriorated Credit Quality is reported as an accruing loan and a performing asset.

106 Subprime mortgage loans for first liens with a LTV ratio of the date of transfer. If the estimated fair value less cost to sell equal to or greater than 90% and second liens are classified as is less than the recorded investment, a charge-off is nonaccrual at 90 days past due. These loans are charged off as recognized against the ALLL. discussed above. Subsequently, foreclosed assets are valued at the lower of the Most consumer loans and lines of credit, not secured by amount recorded at acquisition date or estimated fair value residential real estate, are charged off after 120 to 180 days less cost to sell. Valuation adjustments on these assets and past due. Generally, they are not placed on nonaccrual status gains or losses realized from disposition of such property are as permitted by regulatory guidance. reflected in Other noninterest expense.

If payment is received on a nonperforming loan, the payment See Note 5 Asset Quality and Allowances for Loan and Lease is first applied to the past due principal; once this principal Losses and Unfunded Loan Commitments and Letters of obligation has been fulfilled, payments are applied to recover Credit for additional information. any partial charge-off related to the impaired loan that might ALLOWANCE FOR LOAN AND LEASE LOSSES exist. Finally, if both past due principal and any partial We maintain the ALLL at a level that we believe to be charge-off have been recovered, then the payment will result adequate to absorb estimated probable credit losses incurred in in the recognition and recording of interest income. This the loan portfolio as of the balance sheet date. Our process is followed for impaired loans with the exception of determination of the adequacy of the allowance is based on performing troubled debt restructurings (TDRs). Payments periodic evaluations of the loan and lease portfolios and other received on performing TDRs and other modified loans will relevant factors. This evaluation is inherently subjective as it be applied in accordance with the terms of the modified loan. requires material estimates, all of which may be susceptible to significant change, including, among others: A loan is categorized as a TDR if a concession is granted due • Probability of default (PD), to deterioration in the financial condition of the borrower. • Loss given default (LGD), TDRs may include certain modifications of terms of loans, • Exposure at date of default (EAD), receipts of assets from debtors in partial or full satisfaction of • Amounts and timing of expected future cash flows, loans, or a combination thereof. Modified loans classified as • Value of collateral, and TDRs are included in nonperforming loans until returned to • Qualitative factors such as changes in economic performing status through the fulfilling of contractual terms conditions that may not be reflected in historical for a reasonable period of time (generally 6 months). results.

See Note 5 Asset Quality and Allowances for Loan and Lease While our reserve methodologies strive to reflect all relevant Losses and Unfunded Loan Commitments and Letters of risk factors, there continues to be uncertainty associated with, Credit for additional TDR information. but not limited to, potential imprecision in the estimation process due to the inherent time lag of obtaining information Nonperforming loans are generally not returned to performing and normal variations between estimates and actual outcomes. status until the obligation is brought current and the borrower We provide additional reserves that are designed to provide has performed in accordance with the contractual terms for a coverage for losses attributable to such risks. The ALLL also reasonable period of time and collection of the contractual includes factors which may not be directly measured in the principal and interest is no longer in doubt. determination of specific or pooled reserves. Such qualitative factors include: Foreclosed assets are comprised of any asset seized or • Recent Credit quality trends, property acquired through a foreclosure proceeding or • Recent Loss experience in particular portfolios, acceptance of a deed-in-lieu of foreclosure. Other real estate • Recent Macro economic factors, and owned is comprised principally of commercial real estate and • Changes in risk selection and underwriting standards. residential real estate properties obtained in partial or total satisfaction of loan obligations. When legal proceedings are In determining the adequacy of the ALLL, we make specific initiated, and no remedies arise from the legal proceedings, the allocations to impaired loans and allocations to portfolios of property will be sold. When we acquire the deed, we transfer commercial and consumer loans. We also allocate reserves to the loan to other real estate owned included in Other assets on provide coverage for probable losses incurred in the portfolio our Consolidated Balance Sheet. Property obtained in at the balance sheet date based upon current market satisfaction of a loan is recorded at the lower of recorded conditions, which may not be reflected in historical loss data. investment or estimated fair value less cost to sell. We While allocations are made to specific loans and pools of estimate fair values primarily based on appraisals, when loans, the total reserve is available for all credit losses. available, or quoted market prices on liquid assets. Anticipated recoveries and government guarantees are also Nonperforming loans are considered impaired under ASC considered in evaluating the potential impairment of loans at 310-Receivables and are allocated a specific reserve.

107 Specific reserve allocations are determined as follows: estimated, the calculation of the allowance follows similar • For nonperforming loans greater than or equal to a methodologies to those employed for on-balance sheet defined dollar threshold and TDRs, specific reserves exposure. are based on an analysis of the present value of the loan’s expected future cash flows, the loan’s See Note 5 Asset Quality and Allowances for Loan and Lease observable market price or the fair value of the Losses and Unfunded Loan Commitments and Letters of collateral. Credit for additional information. • For nonperforming loans below the defined dollar threshold, the loans are aggregated for purposes of MORTGAGE AND OTHER SERVICING RIGHTS measuring specific reserve impairment using the We provide servicing under various loan servicing contracts applicable loan’s LGD percentage multiplied by the for commercial, residential and other consumer loans. These balance of the loans. contracts are either purchased in the open market or retained as part of a loan securitization or loan sale. All newly acquired When applicable, this process is applied across all the loan or originated servicing rights are initially measured at fair classes in a similar manner. However, as previously discussed, value. Fair value is based on the present value of the expected certain consumer loans and lines of credit, not secured by future cash flows, including assumptions as to: residential real estate, are charged off instead of being • Deposit balances and interest rates for escrow and classified as nonperforming. reserve earnings, • Discount rates, Our credit risk management policies, procedures and practices • Stated note rates, are designed to promote sound and fair lending standards • Estimated prepayment speeds, and while achieving prudent credit risk management. We have • Estimated servicing costs. policies, procedures and practices that address financial statement requirements, collateral review and appraisal For subsequent measurements of these assets, we have elected requirements, advance rates based upon collateral types, to utilize either the amortization method or fair value appropriate levels of exposure, cross-border risk, lending to measurement based upon the asset class and our risk specialized industries or borrower type, guarantor management strategy for managing these assets. For requirements, and regulatory compliance. commercial mortgage loan servicing rights, we use the amortization method. This election was made based on the See Note 5 Asset Quality and Allowances for Loan and Lease unique characteristics of the commercial mortgage loans Losses and Unfunded Loan Commitments and Letters of underlying these servicing rights with regard to market inputs Credit for additional information. used in determining fair value and how we manage the risks inherent in the commercial mortgage servicing rights assets. ALLOWANCE FOR UNFUNDED LOAN COMMITMENTS AND Specific risk characteristics of commercial mortgages include LETTERS OF CREDIT loan type, currency or exchange rate, interest rates, expected We maintain the allowance for unfunded loan commitments cash flows and changes in the cost of servicing. We record and letters of credit at a level we believe is adequate to absorb these servicing assets as Other intangible assets and amortize estimated probable losses related to these unfunded credit them over their estimated lives based on estimated net facilities. We determine the adequacy of the allowance based servicing income. On a quarterly basis, we test the assets for on periodic evaluations of the unfunded credit facilities, impairment by categorizing the pools of assets underlying the including an assessment of the probability of commitment servicing rights into various strata. If the estimated fair value usage, credit risk factors, and the terms and expiration dates of of the assets is less than the carrying value, an impairment loss the unfunded credit facilities. The allowance for unfunded is recognized and a valuation reserve is established. loan commitments and letters of credit is recorded as a liability on the Consolidated Balance Sheet. Net adjustments For servicing rights related to residential real estate loans, we to the allowance for unfunded loan commitments and letters of apply the fair value method. This election was made to be credit are included in the provision for credit losses. consistent with our risk management strategy to hedge changes in the fair value of these assets. We manage this risk The reserve for unfunded loan commitments is estimated in a by hedging the fair value of this asset with derivatives and manner similar to the methodology used for determining securities which are expected to increase in value when the reserves for similar funded exposures. However, there is one value of the servicing right declines. The fair value of these important distinction. This distinction lies in the estimation of servicing rights is estimated by using a cash flow valuation the amount of these unfunded commitments that will become model which calculates the present value of estimated future funded. This is determined using a cash conversion factor or net servicing cash flows, taking into consideration actual and loan equivalency factor, which is a statistical estimate of the expected mortgage loan prepayment rates, discount rates, amount of an unfunded commitment that will fund over a servicing costs, and other economic factors which are given period of time. Once the future funded amount is determined based on current market conditions. Expected

108 mortgage loan prepayment assumptions are derived from an REPURCHASE AND RESALE AGREEMENTS internal proprietary model and consider empirical data drawn Repurchase and resale agreements are treated as collateralized from the historical performance of our managed portfolio and financing transactions and are carried at the amounts at which adjusted for current market conditions. On a quarterly basis, the securities will be subsequently reacquired or resold, management obtains market value quotes from two including accrued interest, as specified in the respective independent brokers that reflect current conditions in the agreements. Our policy is to take possession of securities secondary market and any recently executed servicing purchased under agreements to resell. We monitor the market transactions. Management compares its valuation to the value of securities to be repurchased and resold and additional information received from independent brokers and other collateral may be obtained where considered appropriate to market data to determine if its estimated fair value is protect against credit exposure. We have elected to account reasonable in comparison to market participant valuations. for structured resale agreements at fair value.

Revenue from the various loan servicing contracts for OTHER COMPREHENSIVE INCOME commercial, residential and other consumer loans is reported Other comprehensive income consists, on an after-tax basis, on the Consolidated Income Statement in line items Consumer primarily of unrealized gains or losses, excluding OTTI services, Corporate services and Residential mortgage. attributable to credit deterioration, on investment securities classified as available for sale, derivatives designated as cash FAIR VALUE OF FINANCIAL INSTRUMENTS flow hedges, and changes in pension, other postretirement and The fair value of financial instruments and the methods and postemployment benefit plan liability adjustments. Details of assumptions used in estimating fair value amounts and each component are included in Note 19 Other financial assets and liabilities for which fair value was elected Comprehensive Income. based on the fair value guidance are detailed in Note 8 Fair Value. TREASURY STOCK We record common stock purchased for treasury at cost. At GOODWILL AND OTHER INTANGIBLE ASSETS the date of subsequent reissue, the treasury stock account is We assess goodwill for impairment at least annually, in the reduced by the cost of such stock on the first-in, first-out fourth quarter, or when events or changes in circumstances basis. indicate the assets might be impaired. Finite-lived intangible assets are amortized to expense using accelerated or straight- DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES line methods over their respective estimated useful lives. We We use a variety of financial derivatives as part of our overall review finite-lived intangible assets for impairment when asset and liability risk management process to help manage events or changes in circumstances indicate that the asset’s interest rate, market and credit risk inherent in our business carrying amount may not be recoverable from undiscounted activities. Interest rate and total return swaps, swaptions, future cash flows or that it may exceed its fair value. interest rate caps and floors and futures contracts are the primary instruments we use for interest rate risk management. DEPRECIATION AND AMORTIZATION For financial reporting purposes, we depreciate premises and Financial derivatives involve, to varying degrees, interest rate, equipment, net of salvage value, principally using the straight- market and credit risk. We manage these risks as part of our line method over their estimated useful lives. asset and liability management process and through credit policies and procedures. We seek to minimize counterparty We use estimated useful lives for furniture and equipment credit risk by entering into transactions with only high-quality ranging from one to 10 years, and depreciate buildings over an institutions, establishing credit limits, and generally requiring estimated useful life of up to 40 years. We amortize leasehold bilateral netting and collateral agreements. improvements over their estimated useful lives of up to 15 years or the respective lease terms, whichever is shorter. We recognize all derivative instruments at fair value as either Other assets or Other liabilities on the Consolidated Balance We purchase, as well as internally develop and customize, Sheet and the related cash flows in the Operating Activities certain software to enhance or perform internal business section of the Consolidated Statement of Cash Flows. functions. Software development costs incurred in the Adjustments for counterparty credit risk are included in the planning and post-development project stages are charged to determination of their fair value. The accounting for changes noninterest expense. Costs associated with designing software in the fair value of a derivative instrument depends on whether configuration and interfaces, installation, coding programs and it has been designated and qualifies as part of a hedging testing systems are capitalized and amortized using the relationship. For derivatives not designated as an accounting straight-line method over periods ranging from one to seven hedge, changes in fair value are recognized in noninterest years. income.

109 We utilize a net presentation for derivative instruments on the accounting is discontinued, the derivative will continue to be Consolidated Balance Sheet taking into consideration the recorded on the balance sheet at its fair value with changes in effects of legally enforceable master netting agreements. Cash fair value included in current earnings. For a discontinued fair collateral exchanged with counterparties is also netted against value hedge, the previously hedged item is no longer adjusted the applicable derivative exposures by offsetting obligations to for changes in fair value. return or rights to reclaim cash collateral against the fair values of the net derivatives being collateralized. When hedge accounting is discontinued because it is no longer probable that a forecasted transaction will occur, the For those derivative instruments that are designated and derivative will continue to be recorded on the balance sheet at qualify as accounting hedges, we designate the hedging its fair value with changes in fair value included in current instrument, based on the exposure being hedged, as either a earnings, and the gains and losses in Accumulated other fair value hedge or a cash flow hedge. We have no derivatives comprehensive income (loss) will be recognized immediately that hedge the net investment in a foreign operation. into earnings. When we discontinue hedge accounting because the hedging instrument is sold, terminated or no longer We formally document the relationship between the hedging designated, the amount reported in Accumulated other instruments and hedged items, as well as the risk management comprehensive income (loss) up to the date of sale, objective and strategy, before undertaking an accounting termination or de-designation continues to be reported in hedge. To qualify for hedge accounting, the derivatives and Other comprehensive income or loss until the forecasted related hedged items must be designated as a hedge at transaction affects earnings. We did not terminate any cash inception of the hedge relationship. For accounting hedge flow hedges in 2010, 2009 or 2008 due to a determination that relationships, we formally assess, both at the inception of the a forecasted transaction was no longer probable of occurring. hedge and on an ongoing basis, if the derivatives are highly effective in offsetting designated changes in the fair value or We occasionally purchase or originate financial instruments cash flows of the hedged item. If it is determined that the that contain an embedded derivative. At the inception of the derivative instrument is not highly effective, hedge accounting transaction, we assess if the economic characteristics of the is discontinued. embedded derivative are clearly and closely related to the economic characteristics of the host contract, whether the For derivatives that are designated as fair value hedges (i.e., hybrid financial instrument that embodied both the embedded hedging the exposure to changes in the fair value of an asset derivative and the host contract are measured at fair value or a liability attributable to a particular risk, such as changes with changes in fair value reported in earnings, and whether a in LIBOR), changes in the fair value of the hedging separate instrument with the same terms as the embedded instrument are recognized in earnings and offset by instrument would not meet the definition of a derivative. If the recognizing changes in the fair value of the hedged item embedded derivative does not meet these three conditions, the attributable to the hedged risk. To the extent the change in fair embedded derivative would qualify as a derivative and be value of the derivative does not offset the change in fair value recorded apart from the host contract and carried at fair value of the hedged item, the difference or ineffectiveness is with changes recorded in current earnings unless we elect to reflected in the Consolidated Income Statement in the same account for the hybrid financial instrument at fair value. financial statement category as the hedged item. We have elected fair value measurement for certain hybrid For derivatives designated as cash flow hedges (i.e., hedging financial instruments on an instrument-by-instrument basis. the exposure to variability in expected future cash flows), the effective portions of the gain or loss on derivatives are We enter into commitments to originate loans for sale. We reported as a component of Accumulated other comprehensive also enter into commitments to purchase or sell commercial income (loss) and subsequently reclassified to interest income and residential real estate loans. These commitments are in the same period or periods during which the hedged accounted for as free-standing derivatives which are recorded transaction affects earnings. The change in fair value of any at fair value in Other assets or Other liabilities on the ineffective portion of the hedging instrument is recognized Consolidated Balance Sheet. Any gain or loss from the change immediately in noninterest income. in fair value after the inception of the commitment is recognized in noninterest income. We discontinue hedge accounting when it is determined that the derivative no longer qualifies as an effective hedge; the INCOME TAXES derivative expires or is sold, terminated or exercised; or the We account for income taxes under the asset and liability derivative is de-designated as a fair value or cash flow hedge method. Deferred tax assets and liabilities are determined or, for a cash flow hedge, it is no longer probable that the based on differences between the financial reporting and tax forecasted transaction will occur by the end of the originally bases of assets and liabilities and are measured using the specified time period. If we determine that the derivative no enacted tax rates and laws that we expect will apply at the longer qualifies as a fair value or cash flow hedge and hedge time when we believe the differences will reverse. The

110 realization of deferred tax assets requires an assessment to analysis as opposed to a quantitative analysis to determine if it determine the realization of such assets. Realization refers to is the primary beneficiary of a VIE. The qualitative analysis the incremental benefit achieved through the reduction in considers the purpose and the design of the VIE as well as the future taxes payable or refunds receivable from the deferred risks that the VIE was designed to either create or pass tax assets, assuming that the underlying deductible differences through to variable interest holders. VIEs are assessed for and carryforwards are the last items to enter into the consolidation under Topic 810 when we hold variable interests determination of future taxable income. We establish a in these entities. A VIE is a corporation, partnership, limited valuation allowance for tax assets when it is more likely than liability company, or any other legal structure used to conduct not that they will not be realized, based upon all available activities or hold assets that either: (1) Does not have either positive and negative evidence. investors that have sufficient equity at risk for the legal entity to finance its activities without additional subordinated EARNINGS PER COMMON SHARE finance support, or (2) As a group, the holders of the equity Basic earnings per common share is calculated using the investment at risk lack any one of the following three two-class method to determine income attributable to common characteristics: a.) The power, through voting rights or similar shareholders. Unvested share-based payment awards that rights, to direct the activities of a legal entity that most contain nonforfeitable rights to dividends or dividend significantly impact the entity’s economic performance, b.) equivalents are considered participating securities under the The obligation to absorb the expected losses of the legal two-class method. Income attributable to common entity, or c.) The right to receive the expected residual returns shareholders is then divided by the weighted-average common of the legal entity. A VIE often holds financial assets, shares outstanding for the period. including loans or receivables, real estate or other property. PNC consolidates VIEs when we are deemed to be the Diluted earnings per common share is calculated under the primary beneficiary. The primary beneficiary of a VIE is more dilutive of either the treasury method or the two-class determined to be the party that meets both of the following method. For the diluted calculation, we increase the weighted- criteria: (1) has the power to make decisions that most average number of shares of common stock outstanding by the significantly affect the economic performance of the VIE and assumed conversion of outstanding convertible preferred stock (2) has the obligation to absorb losses or the right to receive and debentures from the beginning of the year or date of benefits that in either case could potentially be significant to issuance, if later, and the number of shares of common stock the VIE. Effective January 1, 2010, we consolidated Market that would be issued assuming the exercise of stock options Street Funding LLC (Market Street), a credit card and warrants and the issuance of incentive shares using the securitization trust, and certain Low Income Housing Tax treasury stock method. These adjustments to the weighted- Credit (LIHTC) investments. We recorded consolidated assets average number of shares of common stock outstanding are of $4.2 billion, consolidated liabilities of $4.2 billion, and an made only when such adjustments will dilute earnings per after-tax cumulative effect adjustment to retained earnings of common share. See Note 17 Earnings Per Share for additional $92 million upon adoption (see Note 3 Loan Sale and information. Servicing Activities and Variable Interest Entities).

RECENT ACCOUNTING PRONOUNCEMENTS In January 2010, the FASB issued ASU 2010-6, Fair Value On January 1, 2010, we adopted ASU 2009-16 – Transfers Measurements and Disclosures (Topic 820), Improving and Servicing (Topic 860) – Accounting For Transfers of Disclosures About Fair Value Measurements. This guidance Financial Assets which is a codification of guidance issued in requires new disclosures as follows: (1) transfers in and out of June 2009. This guidance removes the concept of a qualifying Levels 1 and 2 and the reasons for the transfers, (2) additional special-purpose entity. The guidance also establishes breakout of asset and liability categories and (3) purchases, conditions for accounting and reporting of a transfer of a sales, issuances and settlements to be reported separately in portion of a financial asset, modifies the asset sale/ the Level 3 rollforward. This guidance was effective for PNC derecognition criteria, and changes how retained interests are for first quarter 2010 reporting with the exception of item 3 initially measured. which is effective beginning with first quarter 2011 reporting.

On January 1, 2010, we adopted ASU 2009-17 – In April 2010, the FASB issued ASU 2010-18, Receivables Consolidations (Topic 810) – Improvements to Financial (Sub Topic 310-30), Effect of a Loan Modification When the Reporting by Enterprises Involved with Variable Interest Loan Is Part of a Pool That Is Accounted for as a Single Asset. Entities. This guidance removes the scope exception for This ASU amends the accounting guidance related to loans qualifying special-purpose entities, contains new criteria for that are accounted for within a pool under ASC 310-30. The determining the primary beneficiary of a variable interest new guidance clarifies that modifications of such loans do not entity (VIE) and increases the frequency of required result in the removal of those loans from the pool even if the reassessments to determine whether an entity is the primary modification of those loans would otherwise be considered a beneficiary of a VIE. This guidance also amends current troubled debt restructuring. The amended guidance continues GAAP to require that an enterprise perform a qualitative to require that an entity consider whether the pool of assets in

111 which the loan is included is impaired if expected cash flows Asset and liabilities of GIS at December 31, 2009 follow. for the pool change. No additional disclosures are required as a result of this ASU. ASU 2010-18 is effective for Investment in Discontinued Operations modifications of loans accounted for within pools under ASC 310-30 occurring in the first interim or annual period ending December 31, on or after July 15, 2010 with early adoption permitted. PNC In millions 2009 accounts for loans within pools consistent with the guidance in Interest-earning deposits with banks $ 255 this ASU. Goodwill 1,243 Other intangible assets 51 Other 359 In July 2010, the FASB issued ASU 2010-20 – Receivables (Topic 310) – Disclosures about the Credit Quality of Total assets $1,908 Financing Receivables and the Allowance for Credit Losses. Interest-bearing deposits $ 93 This ASU requires additional disclosures related to an entity’s Accrued expenses 266 allowance for credit losses and the credit quality of its Other 1,009 financing receivables (e.g., loans). Certain disclosures were Total liabilities $1,368 effective December 31, 2010 and others will be beginning in Net assets $ 540 the first quarter of 2011. See Note 5 Asset Quality and Allowances for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit for additional information. NOTE 3LOAN SALE AND SERVICING ACTIVITIES AND VARIABLE INTEREST ENTITIES

NOTE 2DIVESTITURE LOAN SALE AND SERVICING ACTIVITIES We have transferred residential and commercial mortgage SALE OF PNC GLOBAL INVESTMENT SERVICING On July 1, 2010, we sold PNC Global Investment Servicing loans in securitization or sales transactions in which we have Inc. (GIS), a leading provider of processing, technology and continuing involvement. These transfers have occurred business intelligence services to asset managers, broker- through Agency securitization, Non-Agency securitization, dealers and financial advisors worldwide, for $2.3 billion in and whole-loan sale transactions. Agency securitizations cash pursuant to a definitive agreement entered into on consist of securitization transactions with FNMA, FHLMC, February 2, 2010. This transaction resulted in a pretax gain of and Government National Mortgage Association (GNMA) $639 million, net of transaction costs. The after-tax amount of (collectively, the Agencies). FNMA and FHLMC generally the gain of $328 million is included within Income from securitize our transferred loans into mortgage-backed discontinued operations on our Consolidated Income securities for sale into the secondary market through SPEs Statement. they sponsor. We, as an authorized GNMA issuer/servicer, pool loans into mortgage-backed securities for sale into the Results of operations of GIS through June 30, 2010 are secondary market. In Non-Agency securitizations, we have presented as Income from discontinued operations, net of transferred loans into securitization SPEs. In other instances income taxes, on our Consolidated Income Statement for all third-party investors have purchased (in whole-loan sale periods presented. Income taxes related to discontinued transactions) and subsequently sold our loans into operations for 2009 include $18 million of deferred income securitization SPEs. Third-party investors have also purchased taxes provided on the difference in the stock investment and our loans in whole-loan sale transactions. Securitization SPEs, tax basis of GIS, previously a US subsidiary of PNC. which are legal entities that are utilized in the Agency and Non-Agency securitization transactions, are VIEs. As part of the sale agreement, PNC has agreed to provide certain transitional services on behalf of GIS until completion Our continuing involvement in the Agency securitizations, of related systems conversion activities, which may cover a Non-Agency securitizations, and whole-loan sale transactions period of up to three years from the date of sale. generally consists of servicing, repurchases of previously transferred loans and loss share arrangements, and, in limited circumstances, holding of mortgage-backed securities issued by the securitization SPEs.

Depending on the transaction, we may act as the master, primary, and/or special servicer to the securitization SPEs or third-party investors. Servicing responsibilities typically consist of collecting and remitting monthly borrower principal and interest payments, maintaining escrow deposits, performing loss mitigation and foreclosure activities, and, in certain instances, funding of servicing advances. Servicing

112 advances, which are reimbursable, are recognized in Other credit risk on its Agency mortgage-backed security positions assets at cost and are made for principal and interest and as FNMA, FHLMC, and the US Government (for GNMA) collateral protection. guarantee losses of principal and interest on the underlying mortgage loans. We generally hold a senior class of We earn servicing and other ancillary fees for our role as Non-Agency mortgage-backed securities. servicer and depending on the contractual terms of the servicing arrangement, we can be terminated as servicer with We also have involvement with certain Agency and or without cause. At the consummation date of each type of Non-Agency commercial securitization SPEs where we have loan transfer, we recognize a servicing asset at fair value. not transferred commercial mortgage loans. These SPEs were Servicing assets are recognized in Other intangible assets on sponsored by independent third-parties and the loans held by our Consolidated Balance Sheet and are classified within these entities were purchased exclusively from other third- Level 3 of the fair value hierarchy. See Note 8 Fair Value and parties. Generally, our involvement with these SPEs is as Note 9 Goodwill and Other Intangible Assets for further servicer with servicing activities consistent with those discussion of our residential and commercial servicing assets. described above. In certain instances, we can be terminated as servicer in these commercial securitization structures without Certain loans transferred to the Agencies contain removal of cause by the controlling class of mortgage-backed security account provisions (ROAPs). Under these ROAPs, we hold an holders of the SPE. option to repurchase at par individual delinquent loans that meet certain criteria. When we have the unilateral ability to We recognize a liability for our loss exposure associated with repurchase a delinquent loan, effective control over the loan contractual obligations to repurchase previously transferred has been regained and we recognize the loan and a loans due to breaches of representations and warranties and corresponding liability on the balance sheet regardless of our also for loss sharing arrangements (recourse obligations) with intent to repurchase the loan. At December 31, 2010 and the Agencies. Other than providing temporary liquidity under December 31, 2009, the balance of our ROAP asset and servicing advances and our loss exposure associated with our liability totaled $336 million and $577 million, respectively. repurchase and recourse obligations, we have not provided nor are we required to provide any type of credit support, We generally do not retain mortgage-backed securities issued guarantees, or commitments to the securitization SPEs or by the Agency and Non-Agency securitization SPEs at the third-party investors in these transactions. See Note 23 inception of the securitization transactions. Rather, our limited Commitments and Guarantees for further discussion of our holdings of these securities occur through subsequent repurchase and recourse obligations. purchases in the secondary market. PNC does not retain any

Certain Financial Information and Cash Flows Associated with Loan Sale and Servicing Activities

Home Equity Residential Commercial Loans/ In millions Mortgages Mortgages (a) Lines (b) FINANCIAL INFORMATION – December 31, 2010 Servicing portfolio (c) $125,806 $162,514 $6,041 Carrying value of servicing assets (d) 1,033 665 2 Servicing advances 533 415 21 Servicing deposits 2,661 3,537 61 Repurchase and recourse obligations (e) 144 54 150 Carrying value of mortgage-backed securities held (f) 2,171 1,875 FINANCIAL INFORMATION – December 31, 2009 Servicing portfolio (c) $146,050 $185,167 $6,796 Carrying value of servicing assets (d) 1,332 921 4 Servicing advances 599 383 23 Servicing deposits 3,118 3,774 61 Repurchase and recourse obligations (e) 229 71 41 Carrying value of mortgage-backed securities held (f) 2,011 1,905

Year Ended December 31, 2010 Home Equity Residential Commercial Loans/ In millions Mortgages Mortgages (a) Lines (b) CASH FLOWS Sales of loans (g) $9,951 $2,413 Repurchases of previously transferred loans (h) 2,283 $28 Contractual servicing fees received 413 224 26 Servicing advances recovered/(funded), net 66 (32) 2 Cash flows on mortgage-backed securities held (f) 588 510

113 (a) Represents financial and cash flow information associated with both commercial mortgage loan transfer and servicing activities. (b) These activities were part of an acquired brokered home equity business that PNC is no longer engaged in. See Note 23 Commitments and Guarantees for further information. (c) For our continuing involvement with residential mortgages and home equity loan/line transfers, amount represents outstanding balance of loans transferred and serviced. For commercial mortgages, amount represents the portion of the overall servicing portfolio in which loans have been transferred by us or third parties to VIEs. It does not include loans serviced by us that were originated by third parties and have not been transferred to a VIE. (d) See Note 8 Fair Value and Note 9 Goodwill and Other Intangible Assets for further information. (e) Represents liability for our loss exposure associated with loan repurchases for breaches of representations and warranties and our commercial mortgage loss share arrangements for our Residential Mortgage Banking, Corporate & Institutional Banking, and Distressed Assets Portfolio segments, respectively. See Note 23 Commitments and Guarantees for further information. (f) Represents securities held where PNC transferred to and/or serviced loans for a securitization SPE and we hold securities issued by that SPE. (g) There were no gains or losses recognized on the transaction date for sales of residential mortgage and certain commercial mortgage loans as these loans are recognized on the balance sheet at fair value. For transfers of commercial loans not recognized on the balance sheet at fair value, gains/losses recognized on sales of these loans were insignificant for 2010. (h) Includes repurchases of insured loans, government guaranteed loans, and loans repurchased through the exercise of our ROAP option.

VARIABLE INTEREST ENTITIES (VIEs) We are involved with various entities in the normal course of business that are deemed to be VIEs. We assess VIEs for consolidation based upon the accounting policies described in Note 1 and effective January 1, 2010, we consolidated Market Street, a credit card securitization trust, and certain Low Income Housing Tax Credit (LIHTC) investments as a result of adopting ASU 2009-17 – Consolidations (Topic 810).

The following provides a summary of VIEs, including those that we have consolidated and those in which we hold variable interests but have not consolidated into our financial statements as of December 31, 2010 and December 31, 2009, respectively.

Consolidated VIEs – Carrying Value (a)

December 31, 2010 Credit Card Tax Credit In millions Market Street Securitization Trust Investments (b) Total Assets Cash and due from banks $2$2 Interest-earning deposits with banks $ 284 4 288 Investment securities $ 192 192 Loans 2,520 2,125 4,645 Allowance for loan and lease losses (183) (183) Equity investments 1,177 1,177 Other assets 271 9 396 676 Total assets $2,983 $2,235 $1,579 $6,797 Liabilities Other borrowed funds $2,715 $ 523 $ 116 $3,354 Accrued expenses 97988 Other liabilities 268 188 456 Total liabilities $2,983 $ 532 $ 383 $3,898 (a) Amounts represent carrying value on PNC’s Consolidated Balance Sheet. (b) Amounts reported primarily represent LIHTC investments.

Consolidated VIEs

Aggregate Aggregate In millions Assets Liabilities December 31, 2010 Market Street $3,584 $3,588 Credit Card Securitization Trust 2,269 1,004 Tax Credit Investments (a) 1,590 420 December 31, 2009 Tax Credit Investments (a) $1,933 $ 808 Credit Risk Transfer Transaction 860 860 (a) Amounts reported primarily represent LIHTC investments.

Aggregate assets and aggregate liabilities differ from the consolidated carrying value of assets and liabilities due to elimination of intercompany assets and liabilities held by the consolidated VIE.

114 Non-Consolidated VIEs

PNC Carrying Carrying Aggregate Aggregate Risk Value of Value of In millions Assets Liabilities of Loss Assets Liabilities December 31, 2010 Tax Credit Investments (a) $ 4,086 $ 2,258 $ 782 $ 782(c) $301(d) Commercial Mortgage-Backed Securitizations (b) 79,142 79,142 2,068 2,068(e) Residential Mortgage-Backed Securitizations (b) 42,986 42,986 2,203 2,199(e) 4 (d) Collateralized Debt Obligations 18 1 1 (c) Total $126,232 $124,386 $5,054 $5,050 $305

Aggregate Aggregate PNC Risk In millions Assets Liabilities of Loss December 31, 2009 Market Street $3,698 $3,718 $6,155(f) Tax Credit Investments (a) 1,786 1,156 743 Collateralized Debt Obligations 23 2 Total $5,507 $4,874 $6,900 (a) Amounts reported primarily represent LIHTC investments. Aggregate assets and aggregate liabilities represent estimated balances due to limited availability of financial information associated with certain acquired partnerships. (b) Amounts reported reflect involvement with securitization SPEs where PNC transferred to and/or services loans for a SPE and we hold securities issued by that SPE. We also invest in other mortgage and asset-backed securities issued by third-party VIEs with which we have no continuing involvement. Further information on these securities is included in Note 7 Investment Securities and values disclosed represent our maximum exposure to loss for those securities’ holdings. (c) Included in Equity investments on our Consolidated Balance Sheet. (d) Included in Other liabilities on our Consolidated Balance Sheet. (e) Included in Trading securities, Investment securities, Other intangible assets, and Other assets on our Consolidated Balance Sheet. (f) PNC’s risk of loss consisted of off-balance sheet liquidity commitments to Market Street of $5.6 billion and other credit enhancements of $.6 billion at December 31, 2009.

MARKET STREET borrower such as by the over-collateralization of the assets or Market Street is a multi-seller asset-backed commercial paper by another third party in the form of deal-specific credit conduit that is owned by an independent third party. Market enhancement. Deal-specific credit enhancement that supports Street’s activities primarily involve purchasing assets or the commercial paper issued by Market Street is generally making loans secured by interests in pools of receivables from structured to cover a multiple of expected losses for the pool US corporations that desire access to the commercial paper of assets and is sized to generally meet rating agency market. Market Street funds the purchases of assets or loans standards for comparably structured transactions. In addition, by issuing commercial paper and is supported by pool-specific PNC would be required to fund $658 million of the liquidity credit enhancements, liquidity facilities and program-level facilities if the underlying assets are in default. Market Street credit enhancement. Generally, Market Street mitigates its creditors have no direct recourse to PNC. potential interest rate risk by entering into agreements with its borrowers that reflect interest rates based upon its weighted PNC provides program-level credit enhancement to cover net average commercial paper cost of funds. During 2010 and losses in the amount of 10% of commitments, excluding 2009, Market Street met all of its funding needs through the explicitly rated AAA/Aaa facilities. PNC provides 100% of issuance of commercial paper. the enhancement in the form of a cash collateral account funded by a loan facility. This facility expires in June 2015. At PNC Bank, N.A. provides certain administrative services, the December 31, 2010, $601 million was outstanding on this program-level credit enhancement and all of the liquidity facility. This amount was eliminated in PNC’s Consolidated facilities to Market Street in exchange for fees negotiated Balance Sheet as of December 31, 2010 due to the based on market rates. Through these arrangements, PNC has consolidation of Market Street. We are not required to nor the power to direct the activities of the SPE that most have we provided additional financial support to the SPE. significantly affect its economic performance and these arrangements expose PNC to expected losses or residual CREDIT CARD SECURITIZATION TRUST returns that are significant to Market Street. We are the sponsor of several credit card securitizations facilitated through a trust. This bankruptcy-remote SPE or The commercial paper obligations at December 31, 2010 and VIE was established to purchase credit card receivables from December 31, 2009 were supported by Market Street’s assets. the sponsor and to issue and sell asset-backed securities While PNC may be obligated to fund under the $5.7 billion of created by it to independent third-parties. The SPE was liquidity facilities for events such as commercial paper market financed primarily through the sale of these asset-backed disruptions, borrower bankruptcies, collateral deficiencies or securities. These transactions were originally structured as a covenant violations, our credit risk under the liquidity form of liquidity and to afford favorable capital treatment. At facilities is secondary to the risk of first loss provided by the December 31, 2010, Series 2006-1, 2007-1, and 2008-3 issued

115 by the SPE were outstanding. Series 2005-1 was paid off limited partnerships, as well as oversight of the ongoing during the third quarter of 2010. operations of the fund portfolio.

Our continuing involvement in these securitization Typically, the general partner or managing member will be the transactions consists primarily of holding certain retained party that has the right to make decisions that will most interests and acting as the primary servicer. For each significantly impact the economic performance of the entity. securitization series, our retained interests held are in the form However, certain partnership or LLC agreements provide the of a pro-rata undivided interest, or sellers’ interest, in the limited partner or non-managing member the ability to remove transferred receivables, subordinated tranches of asset-backed the general partner or managing member without cause. This securities, interest-only strips, discount receivables, and results in the limited partner or non-managing member being subordinated interests in accrued interest and fees in the party that has the right to make decisions that will most securitized receivables. We consolidated the SPE as of significantly impact the economic performance of the entity. January 1, 2010 as we are deemed the primary beneficiary of The primary sources of losses and benefits in LIHTC the entity based upon our level of continuing involvement. investments are the tax credits, tax benefits due to passive Our role as primary servicer gives us the power to direct the losses on the investments, and development and operating activities of the SPE that most significantly affect its cash flows. We have consolidated LIHTC investments in economic performance and our holding of retained interests which we are the general partner or managing member and gives us the obligation to absorb or receive expected losses or have a limited partnership interest or non-managing member residual returns that are significant to the SPE. Accordingly, interest that could potentially absorb losses or receive benefits all retained interests held in the credit card SPE are eliminated that are significant. The assets are primarily included in in consolidation. The underlying assets of the consolidated Equity investments and Other assets on our Consolidated SPE are restricted only for payment of the beneficial interest Balance Sheet with the liabilities classified in Other liabilities issued by the SPE. We are not required to nor have we and third party investors’ interests included in the Equity provided additional financial support to the SPE. Additionally, section as Noncontrolling interests. Neither creditors nor creditors of the SPE have no direct recourse to PNC. equity investors in the LIHTC investments have any recourse to our general credit. There are no terms or conditions that TAX CREDIT INVESTMENTS have required or could require us, as the primary beneficiary, We make certain equity investments in various limited to provide financial support. Also, we have not provided nor partnerships or limited liability companies (LLCs) that do we intend to provide financial or other support to the sponsor affordable housing projects utilizing the LIHTC limited partnership or LLC that we are not contractually pursuant to Sections 42 and 47 of the Internal Revenue Code. obligated to provide. The consolidated aggregate assets and The purpose of these investments is to achieve a satisfactory liabilities of these LIHTC investments are provided in the return on capital, to facilitate the sale of additional affordable Consolidated VIEs table and reflected in the “Other” business housing product offerings and to assist us in achieving goals segment. associated with the Community Reinvestment Act. The primary activities of the investments include the identification, For tax credit investments in which we do not have the right to development and operation of multi-family housing that is make decisions that will most significantly impact the leased to qualifying residential tenants. Generally, these types economic performance of the entity, we are not the primary of investments are funded through a combination of debt and beneficiary and thus they are not consolidated. These equity. We typically invest in these partnerships as a limited investments are disclosed in the Non-Consolidated VIEs table. partner or non-managing member. We make similar The table also reflects our maximum exposure to loss. Our investments in other types of tax credit investments. maximum exposure to loss is equal to our legally binding equity commitments adjusted for recorded impairment and Also, we are a national syndicator of affordable housing partnership results. We use the equity method to account for equity (together with the investments described above, the our investment in these entities with the investments reflected LIHTC investments). In these syndication transactions, we in Equity investments on our Consolidated Balance Sheet. In create funds in which our subsidiaries are the general partner addition, we increase our recognized investments and or managing member and sell limited partnership or recognize a liability for all legally binding unfunded equity non-managing member interests to third parties, and in some commitments. These liabilities are reflected in Other liabilities cases may also purchase a limited partnership or on our Consolidated Balance Sheet. non-managing member interest in the fund and/or provide mezzanine financing to the fund. The purpose of this business CREDIT RISK TRANSFER TRANSACTION is to generate income from the syndication of these funds, National City Bank (which merged into PNC Bank, N.A. in generate servicing fees by managing the funds, and earn tax November 2009) sponsored an SPE and concurrently entered credits to reduce our tax liability. General partner or managing into a credit risk transfer agreement with an independent third member activities include selecting, evaluating, structuring, party to mitigate credit losses on a pool of nonconforming negotiating, and closing the fund investments in operating residential mortgage loans originated by its former First

116 Franklin business unit. The SPE or VIE was formed with a Our first step in our assessment is to determine whether we small equity contribution and was structured as a bankruptcy- hold a variable interest in the securitization SPE. We hold a remote entity so that its creditors had no recourse to the variable interest in an Agency and Non-Agency securitization sponsor. In exchange for a perfected security interest in the SPE through our holding of mortgage-backed securities issued cash flows of the nonconforming mortgage loans, the SPE by the SPE and/or our repurchase and recourse obligations. issued asset-backed securities to the sponsor in the form of Each SPE in which we hold a variable interest is evaluated to senior, mezzanine, and subordinated equity notes. determine whether we are the primary beneficiary of the entity. For Agency securitization transactions, our contractual The SPE was deemed to be a VIE as its equity was not role as servicer does not give us the power to direct the sufficient to finance its activities. We were determined to be activities that most significantly affect the economic the primary beneficiary of the SPE as we would absorb the performance of the SPEs. Thus, we are not the primary majority of the expected losses of the SPE through our beneficiary of these entities. For Non-Agency securitization holding of the asset-backed securities. Accordingly, this SPE transactions, we would be the primary beneficiary to the was consolidated and all of the entity’s assets, liabilities, and extent our servicing activities give us the power to direct the equity associated with the note tranches held by us were activities that most significantly affect the economic intercompany balances and were eliminated in consolidation. performance of the SPE and we hold a more than insignificant In October 2010, the governing documents were amended to variable interest in the entity. At December 31, 2010, our level give us the option to unilaterally terminate the SPE. On of continuing involvement in Non-Agency securitization SPEs October 28, 2010, we exercised this option. The dissolution of did not result in PNC being deemed the primary beneficiary of the SPE did not have any impact on the statement of financial any of these entities. Details about the Agency and condition, liquidity, or cash flows of PNC. At December 31, Non-Agency securitization SPEs where we hold a variable 2009, nonconforming mortgage loans and foreclosed interest and are not the primary beneficiary are included in the properties associated with the consolidated SPE had a net table above. Our maximum exposure to loss as a result of our carrying value of $587 million. involvement with these SPEs is the carrying value of the mortgage-backed securities, servicing assets, servicing In connection with the credit risk transfer agreement, we held advances, and our liabilities associated with our repurchase the right to put the mezzanine notes to the independent third- and recourse obligations. Creditors of the securitization SPEs party once credit losses in the mortgage loan pool exceeded have no recourse to PNC’s assets or general credit. the principal balance of the subordinated equity notes. During 2009, cumulative credit losses in the mortgage loan pool surpassed the principal balance of the subordinated equity NOTE 4LOANS AND COMMITMENTS TO EXTEND notes which resulted in us exercising our put option on two of CREDIT the subordinate mezzanine notes. Cash proceeds received Loans outstanding were as follows: from the third party for the exercise of these put options totaled $36 million. In addition, during 2009 we entered into LOANS OUTSTANDING an agreement with the third party to terminate each party’s rights and obligations under the credit risk transfer agreement Dec. 31 Dec. 31 In millions 2010 2009 for the remaining mezzanine notes. We agreed to terminate our contractual right to put the remaining mezzanine notes to Commercial lending the third party for a cash payment of $126 million. A pretax Commercial $ 55,177 $ 54,818 Commercial real estate 17,934 23,131 gain of $10 million was recognized in noninterest income as a Equipment lease financing 6,393 6,202 result of these transactions. The foregoing events did not have any impact on our consolidation assessment of the SPE. TOTAL COMMERCIAL LENDING 79,504 84,151 Consumer lending Home equity 34,226 35,947 RESIDENTIAL AND COMMERCIAL MORTGAGE-BACKED Residential real estate 15,999 19,810 SECURITIZATIONS Credit card 3,920 2,569 In connection with each Agency and Non-Agency Other 16,946 15,066 securitization discussed above, we evaluate each SPE utilized in these transactions for consolidation. In performing these TOTAL CONSUMER LENDING 71,091 73,392 assessments, we evaluate our level of continuing involvement Total loans (a) (b) $150,595 $157,543 in these transactions as the magnitude of our involvement (a) Net of unearned income, net deferred loan fees, unamortized discounts and premiums, and purchase discounts and premiums totaling $2.7 billion and $3.2 ultimately determines whether or not we hold a variable billion at December 31, 2010 and December 31, 2009, respectively. interest and/or are the primary beneficiary of the SPE. Factors (b) Future accretable yield related to purchased impaired loans is not included in loans we consider in our consolidation assessment include the outstanding. significance of (1) our role as servicer, (2) our holdings of mortgage-backed securities issued by the securitization SPE, Concentrations of credit risk exist when changes in economic, and (3) the rights of third-party variable interest holders. industry or geographic factors similarly affect groups of

117 counterparties whose aggregate exposure is material in relation Net Unfunded Credit Commitments to our total credit exposure. At December 31, 2010, no specific December 31 December 31 industry concentration exceeded 6% of total commercial In millions 2010 2009 lending loans outstanding. Commercial and commercial real estate $59,256 $ 60,143 Home equity lines of credit 19,172 20,367 We originate interest-only loans to commercial borrowers. Consumer credit card lines 14,725 17,558 This is usually to match our borrowers’ asset conversion to Other 2,652 2,727 cash expectations (i.e., working capital lines, revolvers). These Total $95,805 $100,795 products are standard in the financial services industry and are considered during the underwriting process to mitigate the Commitments to extend credit represent arrangements to lend increased risk that may result in borrowers not being able to funds or provide liquidity subject to specified contractual make interest and principal payments when due. We do not conditions. At December 31, 2010, commercial commitments believe that these product features create a concentration of reported above exclude $16.7 billion of syndications, credit risk. assignments and participations, primarily to financial institutions. The comparable amount at December 31, 2009 In the normal course of business, we originate or purchase loan was $13.2 billion. products with contractual features, when concentrated, that may increase our exposure as a holder of those loan products. Commitments generally have fixed expiration dates, may Possible product features that may create a concentration of require payment of a fee, and contain termination clauses in credit risk would include a high LTV ratio, terms that may the event the customer’s credit quality deteriorates. Based on expose the borrower to future increases in repayments above our historical experience, most commitments expire unfunded, increases in market interest rates, below-market interest rates and therefore cash requirements are substantially less than the and interest-only loans, among others. We also originate home total commitment. equity loans and lines of credit that are concentrated in our primary geographic markets. NOTE 5ASSET QUALITY AND ALLOWANCES FOR LOAN AND LEASE LOSSES AND UNFUNDED LOAN At December 31, 2010, we pledged $12.6 billion of loans to COMMITMENTS AND LETTERS OF CREDIT the Federal Reserve Bank and $32.4 billion of loans to the Federal Home Loan Bank as collateral for the contingent ALLOWANCE FOR LOAN AND LEASE LOSSES ability to borrow, if necessary. The comparable amounts at We maintain the ALLL at a level that we believe to be December 31, 2009 were $18.8 billion and $32.6 billion, adequate to absorb estimated probable credit losses incurred in respectively. the loan portfolio as of the balance sheet date.

Certain loans are accounted for at fair value with changes in One of the key factors for determining the performing status of a the fair value reported in current period earnings. The fair loan is delinquency. The measurement of delinquency is based value of these loans was $116 million, or less than 1% of the on the contractual terms of each loan. Loans that are 30 days or total loan portfolio, at December 31, 2010 compared with more past due in terms of payment are considered delinquent. $107 million, or less than 1% of the total loan portfolio, at December 31, 2009. See Note 1 Accounting Policies – Nonperforming Assets for additional delinquency, nonaccrual, and charge-off information.

The following table displays the delinquency status of our loans at December 31, 2010.

Age Analysis of Past Due Accruing Loans

Accruing 30-59 days 60-89 days 90 days or Total past Nonperforming In millions Current past due past due more past due (b) due loans (c) Total loans December 31, 2010 (a) Commercial $ 53,522 $251 $ 92 $ 59 $ 402 $1,253 $ 55,177 Commercial real estate 15,866 128 62 43 233 1,835 17,934 Equipment lease financing 6,276 37 2 1 40 77 6,393 Home equity 33,354 159 91 174 424 448 34,226 Residential real estate 14,688 226 107 160 493 818 15,999 Credit card 3,765 46 32 77 155 3,920 Other consumer 16,756 95 32 28 155 35 16,946 Total $144,227 $942 $418 $542 $1,902 $4,466 $150,595

118 Accruing 30-59 days 60-89 days 90 days or Total past Nonperforming Current past due past due more past due (b) due loans (c) December 31, 2010 (a) Commercial 97.00% .45% .17% .11% .73% 2.27% Commercial real estate 88.47 .71 .35 .24 1.30 10.23 Equipment lease financing 98.17 .58 .03 .02 .63 1.20 Home equity 97.45 .47 .26 .51 1.24 1.31 Residential real estate 91.81 1.41 .67 1.00 3.08 5.11 Credit card 96.05 1.17 .82 1.96 3.95 Other consumer 98.88 .56 .19 .16 .91 .21 Total 95.77% .62% .28% .36% 1.26% 2.97% (a) Past due loan amounts exclude government insured / guaranteed, primarily residential mortgages, totaling $2.6 billion at December 31, 2010. These loans are included in the ‘Current’ category. Past due loan amounts also exclude purchased impaired loans totaling $7.8 billion at December 31, 2010. These loans are excluded as they are considered performing loans due to accretion of interest income. These loans are also included in the ‘Current’ category. (b) At December 31, 2009, accruing loans 90 days or more past due totaled $884 million. (c) At December 31, 2009, nonperforming loans totaled $5,671 million.

Nonperforming assets include nonaccrual loans, troubled debt restructurings, and foreclosed assets. See Note 1 Accounting Policies – Nonperforming Assets for additional information.

The following amounts exclude purchased impaired loans acquired in connection with the December 31, 2008 National City acquisition. See Note 6 Purchased Impaired Loans for further information.

Nonperforming Assets

December 31, December 31, Dollars in millions 2010 2009 Nonaccrual loans Commercial $1,253 $1,806 Commercial real estate 1,835 2,140 Equipment lease financing 77 130 TOTAL COMMERCIAL LENDING 3,165 4,076 Consumer (a) Home equity 448 356 Residential real estate 818 1,203 Other 35 36 TOTAL CONSUMER LENDING 1,301 1,595 Total nonperforming loans 4,466 5,671 Foreclosed and other assets Commercial lending 353 266 Consumer lending 482 379 Total foreclosed and other assets 835 645 Total nonperforming assets $5,301 $6,316 Nonperforming loans to total loans 2.97% 3.60% Nonperforming assets to total loans and foreclosed and other assets 3.50 3.99 Nonperforming assets to total assets 2.01 2.34 Interest on nonperforming loans Computed on original terms $ 329 $ 302 Recognized prior to nonperforming status 53 90 (a) Excludes most consumer loans and lines of credit, not secured by residential real estate, which are charged off after 120 to 180 days past due and are not placed on nonaccrual status.

Loans whose contractual terms have been restructured in a minimize the economic loss and to avoid foreclosure or manner which grants a concession to a borrower experiencing repossession of collateral. Total nonperforming loans in the financial difficulties are considered TDRs. See Note 1 table above include TDRs of $784 million at December 31, Accounting Policies – Nonperforming Assets for additional 2010 and $440 million at December 31, 2009. information. TDRs typically result from our loss mitigation activities and could include rate reductions, principal TDRs returned to performing (accrual) status totaled $543 forgiveness, forbearance and other actions intended to million at December 31, 2010 and are excluded from

119 nonperforming loans. These loans have demonstrated a period pertaining to specific borrowers that have proven to be of at least six months of performance under the modified statistically significant in the estimation of incurred losses. PD terms. is influenced by such factors as liquidity, industry, obligor financial structure, access to capital, and cash flow. LGD is In addition, credit cards and certain small business and influenced by collateral type, LTV, and guarantees by related consumer credit agreements whose terms have been modified parties. totaled $331 million at December 31, 2010 and are TDRs. However, since our policy is to exempt these loans from being Consumer Lending Quantitative Component placed on nonaccrual status as permitted by regulatory Quantitative estimates within the consumer lending portfolio guidance, these loans are excluded from nonperforming loans. segment are calculated using a roll-rate model based on As such, generally under the modified terms, these loans are statistical relationships, calculated from historical data that directly charged off in the period that they become 120 to 180 estimate the movement of loan outstandings through the days past due. various stages of delinquency and ultimately charge-off. In general, the estimated rates at which loan outstandings roll Portfolio Segments from one stage of delinquency to another are dependent on PNC develops and documents the Commercial Lending and various factors such as FICO, LTV ratios, the current Consumer Lending ALLL under separate methodologies as economic environment, and geography. Within the consumer further discussed below. lending portfolio segment, PNC Asset and Liability Management manages $3.9 billion of purchased mortgage Allowance for Loan and Lease Losses Components loans that are serviced by third parties. Asset and Liability For purchased non-impaired loans, the ALLL is the sum of Management uses a loan loss reserve methodology that uses three components: asset specific/individual impaired reserves, delinquent balances and a loss severity assumption to quantitative (formulaic or pooled) reserves, and qualitative calculate the level of pooled loan loss reserves to be held (judgmental) reserves. See Note 6 Purchased Impaired Loans against the portfolio. for additional ALLL information. There were no significant changes to our ALLL methodology during 2010. Qualitative Component Asset Specific Component While our quantitative reserve methodologies strive to reflect Nonperforming loans are considered impaired under ASC all risk factors, there continues to be a certain element of Topic 310-Receivables and are allocated a specific reserve. uncertainty associated with, but not limited to, potential See Note 1 Accounting Policies – Allowance for Loan and imprecision in the estimation process due to the inherent time Lease Losses for additional information. lag of obtaining information and normal variations between estimates and actual outcomes. We adjust the ALLL in Commercial Lending Quantitative Component consideration of these factors. The ALLL also includes factors The estimates of the quantitative component of ALLL for which may not be directly measured in the determination of exposure within the commercial lending portfolio segment is specific or pooled reserves. Such qualitative factors include: determined through a statistical loss model utilizing PD, LGD • Credit quality trends, and EAD. Based upon loan risk ratings we assign PDs and • Loss experience in particular portfolios, LGDs. Each of these statistical parameters is determined • Macro economic factors, and based on historical data and observable factors including those • Changes in risk selection and underwriting standards.

120 Rollforward of Allowance for Loan and Lease Losses and Other Loan Data – 2010 and 2009

Commercial Consumer In millions Lending Lending Total December 31, 2010 Allowance for Loan and Lease Losses January 1 $ 3,345 $ 1,727 $ 5,072 Charge-offs (2,017) (1,475) (3,492) Recoveries 427 129 556 Net charge-offs (1,590) (1,346) (2,936) Provision for credit losses 704 1,798 2,502 Adoption of ASU 2009-17, Consolidations 141 141 Net change in allowance for unfunded loan commitments and letters of credit 108 108 December 31 $ 2,567 $ 2,320 $ 4,887 Collectively evaluated for impairment $ 1,419 $ 1,227 $ 2,646 Individually evaluated for impairment 859 485 1,344 Purchased impaired loans 289 608 897 December 31 $ 2,567 $ 2,320 $ 4,887 Loans Collectively evaluated for impairment $75,014 $63,291 $138,305 Individually evaluated for impairment 3,088 1,422 4,510 Purchased impaired loans 1,402 6,378 7,780 December 31 $79,504 $71,091 $150,595 Ratio of the allowance for loan and lease losses to total Loans 3.23% 3.26% 3.25% December 31, 2009 Allowance for Loan and Lease Losses January 1 $ 2,680 $ 1,237 $ 3,917 Charge-offs (1,935) (1,220) (3,155) Recoveries 246 198 444 Net charge-offs (1,689) (1,022) (2,711) Provision for credit losses 2,418 1,512 3,930 Acquired allowance – National City (112) (112) Net change in allowance for unfunded loan commitments and letters of credit 48 48 December 31 $ 3,345 $ 1,727 $ 5,072 Collectively evaluated for impairment $ 1,973 $ 1,395 $ 3,368 Individually evaluated for impairment 1,148 1,148 Purchased impaired loans 224 332 556 December 31 $ 3,345 $ 1,727 $ 5,072 Loans Collectively evaluated for impairment $78,038 $65,272 $143,310 Individually evaluated for impairment 3,946 3,946 Purchased impaired loans 2,167 8,120 10,287 December 31 $84,151 $73,392 $157,543 Ratio of the allowance for loan and lease losses to total loans 3.97% 2.35% 3.22%

121 Rollforward of Allowance for Loan and Lease Losses and Other Loan Data –2008

In millions 2008 Allowance for Loan and Lease Losses January 1 $ 830 Charge-offs (618) Recoveries 79 Net charge-offs (539) Provision for credit losses 1,517 Acquired allowance – National City 2,224 Acquired allowance – other 20 Net change in allowance for unfunded loan commitments and letters of credit (135) December 31 $ 3,917 Loans Collectively evaluated for impairment $161,438 Individually evaluated for impairment 1,342 Purchased impaired loans 12,709 December 31 $175,489 Ratio of the allowance for loan and lease losses to total loans 3.23%

ORIGINATED IMPAIRED LOANS Originated impaired loans exclude leases and smaller balance homogeneous type loans as well as purchased impaired loans, but include acquired loans that are impaired subsequent to acquisition. We did not recognize any interest income on originated impaired loans, including TDRs that have not returned to performing status, while they were impaired in 2010, 2009 or 2008. The following table provides further detail on originated impaired loans individually evaluated for reserves and the associated ALLL:

Originated Impaired Loans (a)

December 31, 2010 Unpaid Average Principal Recorded Associated Recorded In millions Balance Investment Allowance (b)(c) Investment (d)(e) Impaired loans with an associated allowance Commercial $1,769 $1,178 $ 410 $1,533 Commercial real estate 1,927 1,446 449 1,732 Home equity 622 622 207 448 Residential real estate 521 465 122 309 Credit card 301 301 149 275 Other consumer 34 34 7 30 Total impaired loans with an associated allowance $5,174 $4,046 $1,344 $4,327 Impaired loans without an associated allowance Commercial $87$75 $90 Commercial real estate 525 389 320 Total impaired loans without an associated allowance $ 612 $ 464 $ 410 Total impaired loans (f) $5,786 $4,510 $1,344 $4,737

(a) Purchased impaired loans are excluded from this table and are discussed in Note 6 Purchased Impaired Loans. (b) Amounts include $509 million at December 31, 2010 for TDRs. (c) At December 31, 2009, the associated allowance for originated impaired loans was $1,148 million. (d) Average for year ended. (e) The average recorded investment for 2009 was $2,909 million and for 2008 was $674 million. (f) At December 31, 2009, the recorded investment was $3,946 million (including $3,475 million with an associated allowance and $471 million without an associated allowance).

122 Net interest income less the provision for credit losses was As with the commercial class, a quarterly overview is $6.7 billion for 2010 compared with $5.1 billion for 2009 and performed to assess geographic, product and loan type $2.3 billion for 2008. concentrations, in addition to industry risk and market and economic concerns. Often as a result of these overviews, more in-depth reviews and increased scrutiny is placed on areas of PORTFOLIO CLASSES higher risk, adverse changes in risk ratings, deteriorating Each PNC portfolio segment is comprised of one or more operating trends, and/or areas that concern management. The classes. Classes are characterized by similarities in initial goal of these reviews is to assess risk and take actions to measurement, risk attributes (credit quality indicators) and the mitigate our exposure to such risks. manner in which we monitor and assess credit risk.

Equipment Lease Financing Class Commercial Class Similar to the other classes of loans within Commercial We monitor the performance of the borrower in a disciplined Lending, loans within the equipment lease financing class and regular manner based upon the level of credit risk inherent undergo a rigorous underwriting process. During this process, in the loan. To evaluate the level of credit risk, we assign an a PD and LGD are assigned based on the credit risk. internal risk rating reflecting the borrower’s PD and LGD. This two-dimensional credit risk rating methodology provides Based upon the dollar amount of the lease and of the level of risk granularity in the monitoring process on an ongoing basis. credit risk, we follow a formal schedule of periodic review. We adjust our risk-rating process through updates based on Generally, this occurs on a quarterly basis, although we have actual experience. The combination of the PD and LGD established practices to review such credit risk more ratings assigned to a commercial loan, capturing both the frequently if appropriate. Our review process entails analysis combination of expectations of default and loss severity, thus of the following factors: equipment value/residual value, reflects the relative estimated likelihood of loss for that loan at exposure levels, jurisdiction risk, industry risk, guarantor the reporting date. Loans with low PD and LGD have the requirements, and regulatory compliance. lowest likelihood of loss. Conversely, loans with high PD and LGD have the highest likelihood of loss. Commercial Purchased Impaired Loans Class Based upon the amount of the lending arrangement and of the The credit impacts of purchased impaired loans are primarily credit risk described above, we follow a formal schedule of determined through the estimation of expected cash flows. periodic review. Generally, for higher risk loans this occurs on Commercial cash flow estimates are influenced by a number a quarterly basis, although we have established practices to of credit related items which include but are not limited to review such credit risk more frequently if appropriate. changes in estimated collateral value, receipt of additional collateral, secondary trading prices, circumstances of possible and/or ongoing liquidation, capital availability, business Commercial Real Estate Class operations and payment patterns. We manage credit risk associated with our commercial real estate projects and commercial mortgage activities. Similar to We attempt to proactively manage these factors by using the commercial class, we analyze PD and LGD. However, due various procedures that are customized to the risk of a given to the nature of the collateral, commercial real estate projects loan. Among these procedures are: review by PNC’s Special and commercial mortgages, the LGDs tend to be significantly Asset Committee (SAC), ongoing outreach, contact, and lower than those seen in the commercial class. Additionally, assessment of obligor financial conditions, collateral commercial real estate projects and commercial mortgage inspection and appraisal. activities risks tend to be correlated to the loan structure and collateral location, project progress and business environment. See Note 6 Purchased Impaired Loans for additional As a result, these attributes are also monitored and utilized in information. assessing credit risk.

123 Credit Quality Indicators – Commercial Lending

Special Total In millions Pass (a) Mention (b) Substandard (c) Doubtful (d) Loans December 31, 2010 Commercial $48,556 $1,926 $ 3,883 $ 563 $54,928 Commercial real estate 11,014 1,289 3,914 564 16,781 Equipment lease financing 6,121 64 162 46 6,393 Purchased impaired loans (e) 106 35 883 378 1,402 Total commercial lending $65,797 $3,314 $ 8,842 $1,551 $79,504 December 31, 2009 Commercial $44,591 $3,060 $ 5,711 $ 925 $54,287 Commercial real estate 13,834 1,782 5,113 766 21,495 Equipment lease financing 5,778 44 342 38 6,202 Purchased impaired loans (e) 283 28 857 999 2,167 Total commercial lending $64,486 $4,914 $12,023 $2,728 $84,151

(a) Assets in this category include loans not classified as “Special Mention”, “Substandard”, or “Doubtful.” (b) Assets in this category have a potential weakness that deserves management’s close attention. If left uncorrected these potential weaknesses may result in deterioration of repayment prospects at some future date. These assets do not expose PNC to sufficient risk to warrant adverse classification at this time. (c) Assets in this category have a well-defined weakness or weaknesses that jeopardize the collection or liquidation of debt. They are characterized by the distinct possibility that PNC will sustain some loss if the deficiencies are not corrected. (d) Assets in this category possess all the inherent weaknesses of a Substandard asset with the additional characteristics that the weakness makes collection or liquidation in full improbable due to existing facts, conditions, and values. (e) It is probable that these amounts will be collected.

Residential Real Estate and Home Equity Classes Geography: Geographic concentrations are monitored to We use several credit quality indicators, including credit evaluate and manage exposures. Loan purchase programs are scores, LTV ratios, delinquency rates, loan types and sensitive to, and focused within, certain regions to manage geography to monitor and manage credit risk within the geographic exposures and associated risks. residential real estate and home equity classes. We evaluate mortgage loan performance by source originators and loan The combination of FICO scores, LTV ratios and geographic servicers. A summary of credit quality indicators follows: location assigned to residential real estate and home equity loans are used to estimate the likelihood of loss for that loan at Credit Scores: We use a national third-party provider to the reporting date. Loans with high FICO scores and low update FICO credit scores for residential real estate and home LTVs tend to have the lower likelihood of loss. Conversely, equity loans on at least an annual basis. The updated scores loans with low FICO scores, high LTVs, and in certain are incorporated into a series of credit monitoring reports and geographic locations tend to have a higher likelihood of loss. the statistical models that estimate the individual loan risk values. At least annually, we obtain an updated property valuation on the real estate secured loans. For open credit lines secured by LTV: We regularly update the property values of real estate real estate or facilities in regions experiencing significant collateral and calculate a LTV ratio. This ratio updates our declines in property values, more frequent valuations may statistical models that estimate individual and class/segment occur. The property values are monitored to determine LTV level risk. The LTV ratio tends to indicate potential loss on a migration and those LTV migrations are stratified within given loan and the borrower’s likelihood to make payment various markets. Trends are analyzed to establish appropriate according to the contractual obligations. lending criteria to fit within our desired moderate risk profile.

Delinquency Rates: We monitor levels of delinquency rates for residential real estate and home equity loans.

124 Credit Quality Indicators – Consumer Real Estate Secured

Higher Risk Loans (a) All Other Loans Total Loans Loans with LTV > 100% % of Total % of Total % of Total In millions Amount Loans Amount Loans Amount Amount Loans December 31, 2010 Home equity (b) $1,203 4% $33,023 96% $34,226 $ 285 1% Residential real estate (c) 651 4% 15,348 96% 15,999 1,331 8% Total (d) $1,854 4% $48,371 96% $50,225 $1,616 3% December 31, 2009 Home equity (b) $1,198 3% $34,749 97% $35,947 $ 306 1% Residential real estate (c) 826 4% 18,984 96% 19,810 2,385 12% Total (d) $2,024 4% $53,733 96% $55,757 $2,691 5%

(a) Loans with a recent FICO credit score of less than or equal to 660 and a LTV ratio greater than or equal to 90% at December 31, 2010, and a LTV ratio greater than 90% at December 31, 2009. (b) Within the higher risk home equity class at December 31, 2010, approximately 10% were in some stage of delinquency and 6% were in late stage (90+ days) delinquency status. These higher risk loans were concentrated with 28% in Pennsylvania, 13% in Ohio, 11% in New Jersey, 7% in Illinois, 6% in Michigan and 5% in Kentucky, with the remaining loans dispersed across several other states. At December 31, 2009, approximately 10% were in some stage of delinquency and 5% were in late stage (90+ days) delinquency status. These higher risk loans were concentrated with 28% in Pennsylvania, 14% in Ohio, 11% in New Jersey, 7% in Illinois, 6% in Michigan and 5% in Kentucky, with the remaining loans dispersed across several other states. (c) Within the higher risk residential real estate class at December 31, 2010, approximately 48% were in some stage of delinquency and 36% were in late stage (90+ days) delinquency status. These higher risk loans were concentrated with 24% in California, 11% in Florida, 11% in Illinois, 8% in Maryland, 4% in Pennsylvania, 4% in New Jersey, and 4% in Ohio, with the remaining loans dispersed across several other states. At December 31, 2009, approximately 61% were in some stage of delinquency and 49% were in late stage (90+ days) delinquency status. These higher risk loans were concentrated with 22% in California, 13% in Florida, 10% in Illinois, 8% in Maryland, 5% in Pennsylvania, and 5% in New Jersey, with the remaining loans dispersed across several other states. (d) Includes purchased impaired loans of $5.9 billion at December 31, 2010 and $8.0 billion at December 31, 2009.

Credit Card and Other Consumer (Education, Automobile, (b) Credit card unscored refers to new accounts issued to borrowers with limited credit history, accounts for which we cannot get an updated FICO (e.g., recent profile and Other Secured and Unsecured Lines and Loans) Classes changes), cards issued with a business name, and/ or collateral secured cards for We monitor a variety of credit quality information in the which FICO scores were not available or required. Management proactively assesses management of the credit card and other consumer loan the risk and size of unscored loans and, when necessary, takes actions to mitigate credit risk. classes. Along with the trending of delinquencies and losses (c) Weighted average current FICO score excludes accounts with no score. for each class, FICO score updates are obtained at least annually, as well as a variety of credit bureau attributes. Consumer Purchased Impaired Loans Class The combination of FICO scores and delinquency status are Estimates of the expected cash flows primarily determine the used to estimate the likelihood of loss for consumer exposure credit impacts of consumer purchased impaired loans. at the reporting date. Loans with high FICO scores tend to Consumer cash flow estimates are influenced by a number of have a lower likelihood of loss. Conversely, loans with low credit related items which include, but are not limited to, FICO scores tend to have a higher likelihood of loss. estimated real estate values, payment patterns, FICO scores, economic environment, LTV ratios and time of origination. These key drivers are monitored regularly to help ensure that concentrations of risk are mitigated and cash flows are Credit Quality Indicators – Credit Card and Other Consumer maximized. Classes

Credit Other See Note 6 Purchased Impaired Loans for additional Current FICO Score Range Card (a) Consumer information. December 31, 2010 > 720 48% 58% 650 to 719 29 28 ALLOWANCE FOR UNFUNDED LOAN COMMITMENTS AND 620 to 649 54LETTERS OF CREDIT < 620 11 9 We maintain the allowance for unfunded loan commitments Unscored (b) 71and letters of credit at a level we believe is adequate to absorb Total loan balance 100% 100% estimated probable losses related to these unfunded credit Weighted average current FICO score (c) 709 713 facilities. (a) At December 31, 2010, PNC has $70 million of credit card loans that are high risk (i.e., loans with FICO scores less than 660 and greater than 90 day delinquency). See Note 1 Accounting Policies – Allowance For Unfunded Within the high risk credit card portfolio, 20% are located in Ohio, 14% in Michigan, 14% in Pennsylvania, 8% in Illinois and 7% in Indiana, with the Loan Commitments and Letters of Credit for additional remaining loans dispersed across several other states. information.

125 Rollforward of Allowance for Unfunded Loan loans using the constant effective yield method. The Commitments and Letters of Credit difference between contractually required payments and the undiscounted cash flows expected to be collected at In millions 2010 2009 2008 acquisition is referred to as the nonaccretable difference. January 1 $ 296 $344 $134 Changes in the actual or expected cash flows of individual Acquired allowance 75 commercial or pooled consumer purchased impaired loans Net change in allowance for unfunded loan from the date of acquisition will either impact the accretable commitments and letters of credit (108) (48) 135 yield or result in an impairment charge to the provision for December 31 $ 188 $296 $344 credit losses in the period in which the changes are deemed probable. Subsequent decreases to the net present value of expected cash flows will generally result in an impairment NOTE 6PURCHASED IMPAIRED LOANS charge to the provision for credit losses, resulting in an At December 31, 2008, we identified certain loans related to increase to the ALLL, and a reclassification from accretable the National City acquisition, for which there was evidence of yield to nonaccretable difference. Subsequent increases in the credit quality deterioration since origination and it was net present value of cash flows will result in a recovery of any probable that we would be unable to collect all contractually previously recorded ALLL, to the extent applicable, and a required principal and interest payments. Evidence of credit reclassification from nonaccretable difference to accretable quality deterioration included statistics such as past due status, yield, which is recognized prospectively over the remaining declines in current borrower FICO credit scores, geographic lives of the loans. concentration and increases in current LTV ratios. GAAP requires these loans to be recorded at fair value at acquisition Purchased impaired commercial and commercial real estate date and prohibits the “carrying over” or the creation of loans are charged off when the entire customer loan balance is valuation allowances in the initial accounting for such loans deemed uncollectible. As purchased impaired consumer and acquired in a transfer. residential real estate loans are accounted for in pools, uncollectible amounts on individual loans remain in the pools and are not reported as charge-offs. Any required charge-off GAAP allows purchasers to aggregate purchased impaired of a pool level recorded investment will occur at the end of the loans acquired in the same fiscal quarter into one or more life of the pool. Prepayments and interest rate decreases for pools, provided that the loans have common risk variable rate notes are treated as a reduction of cash flows characteristics. A pool is then accounted for as a single asset expected to be collected and a reduction of projections of with a single composite interest rate and an aggregate contractual cash flows such that the nonaccretable difference expectation of cash flows. With respect to the National City is not affected. Thus, for decreases in cash flows expected to acquisition, we aggregated homogeneous consumer and be collected resulting from prepayments and interest rate residential real estate loans into pools with common risk decreases for variable rate notes, the effect will be to reduce characteristics. We account for commercial and commercial the yield prospectively. Disposals of loans, which may include real estate loans individually. sales of loans or foreclosures, result in removal of the loan from the purchased impaired loan portfolio at its carrying Purchased Impaired Loans amount. During 2010, $573 million of provision and $232 million of December 31, 2010 December 31, 2009 Recorded Outstanding Recorded Outstanding charge-offs were recorded on purchased impaired loans. As of In millions Investment Balance Investment Balance December 31, 2010, decreases in the net present value of Commercial $ 249 $ 408 $ 531 $ 921 expected cash flows of purchased impaired loans resulted in Commercial real an ALLL of $897 million on $7.2 billion of the purchased estate 1,153 1,391 1,636 2,600 impaired loans while the remaining $.6 billion of purchased Consumer 3,024 4,121 3,457 5,097 impaired loans required no allowance as the net present value Residential real of expected cash flows improved or remained the same. estate 3,354 3,803 4,663 6,620 Total $7,780 $9,723 $10,287 $15,238 Activity for the accretable yield for 2010 follows.

Accretable Yield During 2010, the recorded investment of purchased impaired loans decreased by a net $2.5 billion as a result of payments In millions 2010 and other exit activities partially offset by accretion. January 1 $ 3,502 Accretion (including cash recoveries) (1,368) The excess of cash flows expected over the estimated fair Net reclassifications to accretable from non- accretable 285 value at acquisition is referred to as the accretable yield and is Disposals (234) recognized in interest income over the remaining life of the December 31 $ 2,185

126 NOTE 7INVESTMENT SECURITIES Investment Securities Summary

Amortized Unrealized Fair In millions Cost (a) Gains Losses Value December 31, 2010 SECURITIES AVAILABLE FOR SALE Debt securities US Treasury and government agencies $ 5,575 $ 157 $ (22) $ 5,710 Residential mortgage-backed Agency 31,697 443 (420) 31,720 Non-agency 8,193 230 (1,190) 7,233 Commercial mortgage-backed Agency 1,763 40 (6) 1,797 Non-agency 1,794 73 (11) 1,856 Asset-backed 2,780 40 (238) 2,582 State and municipal 1,999 30 (72) 1,957 Other debt 3,992 102 (17) 4,077 Total debt securities 57,793 1,115 (1,976) 56,932 Corporate stocks and other 378 378 Total securities available for sale $58,171 $1,115 $(1,976) $57,310 SECURITIES HELD TO MATURITY Debt securities Commercial mortgage-backed (non-agency) $ 4,316 $ 178 $ (4) $ 4,490 Asset-backed 2,626 51 (1) 2,676 Other debt 10 1 11 Total securities held to maturity $ 6,952 $ 230 $ (5) $ 7,177 December 31, 2009 SECURITIES AVAILABLE FOR SALE Debt securities US Treasury and government agencies $ 7,548 $ 20 $ (48) $ 7,520 Residential mortgage-backed Agency 24,076 439 (77) 24,438 Non-agency 10,419 236 (2,353) 8,302 Commercial mortgage-backed Agency 1,299 10 (12) 1,297 Non-agency 4,028 42 (222) 3,848 Asset-backed 2,019 30 (381) 1,668 State and municipal 1,346 58 (54) 1,350 Other debt 1,984 38 (7) 2,015 Total debt securities 52,719 873 (3,154) 50,438 Corporate stocks and other 360 360 Total securities available for sale $53,079 $ 873 $(3,154) $50,798

SECURITIES HELD TO MATURITY Debt securities Commercial mortgage-backed (non-agency) $ 2,030 $ 195 $ 2,225 Asset-backed 3,040 109 $ (13) 3,136 Other debt 159 1 160 Total securities held to maturity $ 5,229 $ 305 $ (13) $ 5,521

127 Amortized Unrealized Fair In millions Cost (a) Gains Losses Value December 31, 2008 SECURITIES AVAILABLE FOR SALE Debt securities US Treasury and government agencies $ 738 $ 1 $ 739 Residential mortgage-backed Agency 22,744 371 $ (9) 23,106 Non-agency 13,205 (4,374) 8,831 Commercial mortgage-backed (non-agency) 4,305 (859) 3,446 Asset-backed 2,069 4 (446) 1,627 State and municipal 1,326 13 (76) 1,263 Other debt 563 11 (15) 559 Total debt securities 44,950 400 (5,779) 39,571 Corporate stocks and other 575 (4) 571 Total securities available for sale $45,525 $400 $(5,783) $40,142

SECURITIES HELD TO MATURITY Debt securities Commercial mortgage-backed (non-agency) $ 1,945 $ 10 $ (59) $ 1,896 Asset-backed 1,376 7 (25) 1,358 Other debt 10 10 Total securities held to maturity $ 3,331 $ 17 $ (84) $ 3,264

(a) The amortized cost for debt securities for which an OTTI was recorded prior to January 1, 2009 was adjusted for the $110 million pretax cumulative effect adjustment recorded under new GAAP that we adopted as of that date.

The fair value of investment securities is impacted by interest rates, credit spreads, market volatility and liquidity conditions. 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, unless credit-related.

In March 2010, we transferred $2.2 billion of available for sale commercial mortgage-backed non-agency securities to the held to maturity portfolio. The reclassification was made at fair value at the date of transfer. Net pretax unrealized gains in accumulated other comprehensive loss totaled $92 million at the transfer date and will be accreted over the remaining life of the related securities as an adjustment of yield in a manner consistent with the amortization of the premium on the same transferred securities, resulting in no impact on net income.

The gross unrealized loss on debt securities held to maturity was $5 million at December 31, 2010 and $13 million at December 31, 2009 with $675 million and $388 million of positions in a continuous loss position for less than 12 months at December 31, 2010 and 2009, respectively.

The following table presents gross unrealized loss and fair value of securities available for sale at December 31, 2010 and December 31, 2009. The securities are segregated between investments that have been in a continuous unrealized loss position for less than twelve months and twelve months or more based on the point in time the fair value declined below the amortized cost basis. The table includes debt securities where a portion of OTTI has been recognized in accumulated other comprehensive loss.

128 Gross Unrealized Loss and Fair Value of Securities Available for Sale

Unrealized loss position Unrealized loss position In millions less than 12 months 12 months or more Total Unrealized Fair Unrealized Fair Unrealized Fair Loss Value Loss Value Loss Value December 31, 2010 Debt securities US Treasury and government agencies $ (22) $ 398 $ (22) $ 398 Residential mortgage-backed Agency (406) 17,040 $ (14) $ 186 (420) 17,226 Non-agency (17) 345 (1,173) 5,707 (1,190) 6,052 Commercial mortgage-backed Agency (6) 344 (6) 344 Non-agency (8) 184 (3) 84 (11) 268 Asset-backed (5) 441 (233) 776 (238) 1,217 State and municipal (22) 931 (50) 247 (72) 1,178 Other debt (14) 701 (3) 13 (17) 714 Total $(500) $20,384 $(1,476) $ 7,013 $(1,976) $27,397 December 31, 2009 Debt securities US Treasury and government agencies $ (48) $ 4,015 $ (48) $ 4,015 Residential mortgage-backed Agency (76) 6,960 $ (1) $ 56 (77) 7,016 Non-agency (7) 79 (2,346) 7,223 (2,353) 7,302 Commercial mortgage-backed Agency (12) 779 (12) 779 Non-agency (3) 380 (219) 1,353 (222) 1,733 Asset-backed (1) 142 (380) 1,153 (381) 1,295 State and municipal (1) 49 (53) 285 (54) 334 Other debt (3) 299 (4) 18 (7) 317 Total $(151) $12,703 $(3,003) $10,088 $(3,154) $22,791

EVALUATING INVESTMENTS FOR OTHER-THAN-TEMPORARY market or changes in market interest rates, is recorded in IMPAIRMENTS accumulated other comprehensive loss. For the securities in the above table, as of December 31, 2010 we do not intend to sell and have determined it is not more Equity securities are also evaluated to determine whether the likely than not we will be required to sell the securities prior unrealized loss is expected to be recoverable based on whether to recovery of the amortized cost basis. evidence exists to support a realizable value equal to or greater than the cost basis. If it is probable that we will not On at least a quarterly basis, we conduct a comprehensive recover the cost basis, taking into consideration the estimated security-level assessment on all securities in an unrealized loss recovery period and our ability to hold the equity security position to determine if OTTI exists. An unrealized loss exists until recovery, OTTI is recognized in earnings equal to the when the current fair value of an individual security is less difference between the fair value and the cost basis of the than its amortized cost basis. An OTTI loss must be security. recognized for a debt security in an unrealized loss position if we intend to sell the security or it is more likely than not we The security-level assessment is performed on each security, will be required to sell the security prior to recovery of its regardless of the classification of the security as available for amortized cost basis. In this situation, the amount of loss sale or held to maturity. Our assessment considers the security recognized in income is equal to the difference between the structure, recent security collateral performance metrics if fair value and the amortized cost basis of the security. Even if applicable, external credit ratings, failure of the issuer to make we do not expect to sell the security, we must evaluate the scheduled interest or principal payments, our judgment and expected cash flows to be received to determine if we believe expectations of future performance, and relevant independent a credit loss has occurred. In the event of a credit loss, only industry research, analysis and forecasts. We also consider the the amount of impairment associated with the credit loss is severity of the impairment and the length of time the security recognized in income. This credit loss amount is equal to the has been impaired in our assessment. Results of the periodic difference between the security’s amortized cost basis and the assessment are reviewed by a cross-functional senior present value of its expected future cash flows discounted at management team representing Asset & Liability the security’s effective yield. The portion of the unrealized Management, Finance, and Market Risk Management. The loss relating to other factors, such as liquidity conditions in the senior management team considers the results of the

129 assessments, as well as other factors, in determining whether Credit Impairment Assessment Assumptions – Non-Agency the impairment is other-than-temporary. Residential Mortgage-Backed and Asset-Backed Securities (a) For debt securities, a critical component of the evaluation for Weighted- OTTI is the identification of credit-impaired securities, where December 31, 2010 Range average (b) management does not expect to receive cash flows sufficient Long-term prepayment rate (annual CPR) to recover the entire amortized cost basis of the security. The Prime 7-20% 14% paragraphs below describe our process for identifying credit Alt-A 3-12 5 impairment for our most significant categories of securities Remaining collateral expected to default not backed by the US government or its agencies. Prime 0-51% 19% Alt-A 0-84 44 Non-Agency Residential Mortgage-Backed Securities and Loss severity Asset-Backed Securities Collateralized by First-Lien and Prime 15-63% 45% Alt-A 30-80 57 Second-Lien Residential Mortgage Loans (a) Collateralized by first and second-lien non-agency residential mortgage loans. To measure credit losses for these securities, we compile (b) Calculated by weighting the relevant assumption for each individual security by the relevant collateral details and performance statistics on a current outstanding cost basis of the security. security-by-security basis. The securities are then processed through a series of pre-established filters based upon ratings, Non-Agency Commercial Mortgage-Backed Securities collateral performance, projected losses, market prices and Credit losses on these securities are measured using property- judgment to identify bonds that have the potential to be credit level cash flow projections and forward-looking property impaired. valuations. Cash flows are allocated according to deal structure using a third-party model and are projected using a Securities not passing all of the filters are subjected to further detailed analysis of net operating income (NOI) by property analysis. Cash flows are projected for the underlying collateral type which, in turn, is based on the analysis of NOI and are applied to the securities according to the deal structure performance over the past several business cycles combined using a third-party cash flow allocation model. Collateral cash with PNC’s economic outlook for the current cycle. Loss flows are estimated using assumptions for prepayment rates, severities are based on property price projections, which are future defaults, and loss severity rates. The assumptions are calculated using capitalization rate projections. The security specific and are based on collateral characteristics, capitalization rate projections are based on a combination of historical performance, and future expected performance. historical capitalization rates and expected capitalization rates Based on the results of the cash flow analysis, we determine implied by current market activity, our outlook and relevant whether we will recover the amortized cost basis of our independent industry research, analysis and forecast. security. Securities exhibiting weaker performance within the model are subject to further analysis. This analysis is performed at the loan level, and includes assessing local market conditions, reserves, occupancy, rent rolls and master/special servicer details.

130 During 2010 and 2009, the OTTI credit losses recognized in noninterest income related to estimated credit losses on securities that we do not expect to sell were as follows:

Summary of OTTI Credit Losses Recognized in Earnings

In millions 2010 2009 Available for sale securities: Non-agency residential mortgage-backed $(242) $(444) Non-agency commercial mortgage-backed (5) (6) Asset-backed (78) (111) Other debt (12) Marketable equity securities (4) Total $(325) $(577)

Summary of OTTI Noncredit Losses Recognized in Accumulated Other Comprehensive Loss

In millions 2010 2009 Total $(283) $(1,358)

The following table presents a rollforward of the cumulative OTTI credit losses recognized in earnings for all debt securities for which a portion of an OTTI loss was recognized in accumulated other comprehensive loss:

Rollforward of Cumulative OTTI Credit Losses Recognized in Earnings

Non-agency Non-agency residential commercial Asset- Other In millions mortgage-backed mortgage-backed backed debt Total December 31, 2008 (a) $ (35) $ (34) $ (69) Loss where impairment was not previously recognized (223) $ (6) (59) $ (9) (297) Additional loss where credit impairment was previously recognized (221) (52) (3) (276) December 31, 2009 (a) (479) (6) (145) (12) (642) Loss where impairment was not previously recognized (44) (3) (17) (64) Additional loss where credit impairment was previously recognized (198) (2) (61) (261) Reduction due to credit impaired securities sold 12 12 December 31, 2010 $(709) $(11) $(223) $(12) $(955) (a) Excludes OTTI credit losses related to equity securities totaling $4 million.

Information relating to gross realized securities gains and losses from the sales of securities is set forth in the following table.

Gains (Losses) on Sales of Securities Available for Sale

Year ended December 31 Gross Gross Tax In millions Proceeds Gains Losses Net Gains Expense 2010 $23,783 $490 $64 $426 $149 2009 18,901 570 20 550 192 2008 10,283 114 8 106 37

131 The following table presents, by remaining contractual maturity, the amortized cost, fair value and weighted-average yield of debt securities at December 31, 2010.

Contractual Maturity of Debt Securities

After 1 Year December 31, 2010 1 Year or through 5 After 5 Years After 10 Dollars in millions Less Years through 10 Years Years Total SECURITIES AVAILABLE FOR SALE US Treasury and government agencies $2,328 $2,915 $ 332 $ 5,575 Residential mortgage-backed Agency 36 1,310 30,351 31,697 Non-agency 36 8,157 8,193 Commercial mortgage-backed Agency 599 1,063 101 1,763 Non-agency 52 1,742 1,794 Asset-backed $ 8 223 383 2,166 2,780 State and municipal 42 144 284 1,529 1,999 Other debt 23 2,680 810 479 3,992 Total debt securities available for sale $ 73 $6,062 $6,801 $44,857 $57,793 Fair value $ 73 $6,192 $6,983 $43,684 $56,932 Weighted-average yield, GAAP basis 2.75% 2.63% 3.53% 4.17% 3.93% SECURITIES HELD TO MATURITY Commercial mortgage-backed (non-agency) $ 144 $ 62 $ 73 $ 4,037 $ 4,316 Asset-backed 46 1,924 304 352 2,626 Other debt 16310 Total debt securities held to maturity $ 190 $1,987 $ 383 $ 4,392 $ 6,952 Fair value $ 200 $2,036 $ 390 $ 4,551 $ 7,177 Weighted-average yield, GAAP basis 4.72% 2.67% 2.37% 4.86% 4.10%

Based on market implied forward interest rates and expected prepayment speeds, the weighted-average expected maturities of mortgage and other asset-backed debt securities were as follows as of December 31, 2010:

Weighted-Average Expected Maturity of Mortgage and Other Asset-Backed Debt Securities

December 31, 2010 Agency mortgage-backed securities 4.8 years Non-agency mortgage-backed securities 5.0 years Agency commercial mortgage-backed securities 5.9 years Non-agency commercial mortgage-backed securities 3.5 years Asset-backed securities 3.3 years

Weighted-average yields are based on historical cost with effective yields weighted for the contractual maturity of each security. At December 31, 2010, there were no securities of a single issuer, other than FNMA and FHLMC, which exceeded 10% of total shareholders’ equity.

The following table presents the fair value of securities that have been either pledged to or accepted from others to collateralize outstanding borrowings.

Fair Value of Securities Pledged and Accepted as Collateral

December 31, December 31, In millions 2010 2009 Pledged to others $27,985 $23,368 Accepted from others: Permitted by contract or custom to sell or repledge 3,529 2,357 Permitted amount repledged to others 1,971 1,283

The securities pledged to others include positions held in our portfolio of investment securities, trading securities, and securities accepted as collateral from others that we are permitted by contract or custom to sell or repledge, and were used to secure public and trust deposits, repurchase agreements, and for other purposes. The securities accepted from others that we are permitted by contract or custom to sell or repledge are a component of Federal funds sold and resale agreements on our Consolidated Balance Sheet.

132 NOTE 8FAIR VALUE rights, equity investments and other assets are also included in this category. FAIR VALUE MEASUREMENT Fair value is defined in GAAP as the price that would be We characterize active markets as those where transaction received to sell an asset or the price paid to transfer a liability volumes are sufficient to provide objective pricing on the measurement date. The standard focuses on the exit information, with reasonably narrow bid/ask spreads and price in the principal or most advantageous market for the where dealer quotes received do not vary widely and are based asset or liability in an orderly transaction between market on current information. Inactive markets are typically participants. GAAP establishes a fair value reporting characterized by low transaction volumes, price quotations hierarchy to maximize the use of observable inputs when which vary substantially among market participants or are not measuring fair value and defines the three levels of inputs as based on current information, wide bid/ask spreads, a noted below. significant increase in implied liquidity risk premiums, yields, or performance indicators for observed transactions or quoted Level 1 prices compared to historical periods, a significant decline or Quoted prices in active markets for identical assets or absence of a market for new issuance, or any combination of liabilities. Level 1 assets and liabilities may include debt the above factors. We also consider nonperformance risks securities, equity securities and listed derivative contracts that including credit risk as part of our valuation methodology for are traded in an active exchange market and certain US all assets and liabilities measured at fair value. government agency securities that are actively traded in over-the-counter markets. Any models used to determine fair values or to validate dealer quotes based on the descriptions below are subject to review Level 2 and independent testing as part of our model validation and Observable inputs other than Level 1 such as: quoted prices internal control testing processes. Our Model Validation for similar assets or liabilities in active markets, quoted prices Committee tests significant models on at least an annual basis. for identical or similar assets or liabilities in markets that are In addition, we have teams, independent of the traders, verify not active, or other inputs that are observable or can be marks and assumptions used for valuations at each period end. corroborated to observable market data for substantially the full term of the asset or liability. Level 2 assets and liabilities Securities Available for Sale and Trading Securities may include debt securities, equity securities and listed Securities accounted for at fair value include both the derivative contracts with quoted prices that are traded in available for sale and trading portfolios. We use prices markets that are not active, and certain debt and equity obtained from pricing services, dealer quotes or recent trades securities and over-the-counter derivative contracts whose fair to determine the fair value of securities. For 59% of our value is determined using a pricing model without significant positions, we use prices obtained from pricing services unobservable inputs. This category generally includes agency provided by third party vendors. For an additional 9% of our residential and commercial mortgage-backed debt securities, positions, we use prices obtained from the pricing services as asset-backed securities, corporate debt securities, residential the primary input into the valuation process. One of the mortgage loans held for sale, and derivative contracts. vendors’ prices are set with reference to market activity for highly liquid assets such as agency mortgage-backed Level 3 securities, and matrix pricing for other assets, such as CMBS Unobservable inputs that are supported by minimal or no and asset-backed securities. Another vendor primarily uses market activity and that are significant to the fair value of the pricing models considering adjustments for ratings, spreads, assets or liabilities. Level 3 assets and liabilities may include matrix pricing and prepayments for the instruments we value financial instruments whose value is determined using pricing using this service, such as non-agency residential mortgage- models with internally developed assumptions, discounted backed securities, agency adjustable rate mortgage securities, cash flow methodologies, or similar techniques, as well as agency CMOs and municipal bonds. Management uses instruments for which the determination of fair value requires various methods and techniques to corroborate prices obtained significant management judgment or estimation. This category from pricing services and dealers, including reference to other generally includes certain available for sale and trading dealer or market quotes, by reviewing valuations of securities, commercial mortgage loans held for sale, private comparable instruments, or by comparison to internal equity investments, residential mortgage servicing rights, valuations. Dealer quotes received are typically non-binding. BlackRock Series C Preferred Stock and certain financial In circumstances where relevant market prices are limited or derivative contracts. The available for sale and trading unavailable, valuations may require significant management securities within Level 3 include non-agency residential judgments or adjustments to determine fair value. In these mortgage-backed securities, auction rate securities, certain cases, the securities are classified as Level 3. private-issuer asset-backed securities and corporate debt securities. Nonrecurring items, primarily certain nonaccrual The valuation techniques used for securities classified as and other loans held for sale, commercial mortgage servicing Level 3 include using a discounted cash flow approach or, in

133 certain instances, identifying a proxy security, market based on quoted market prices, where available, prices for transaction or index. For certain security types, primarily other traded mortgage loans with similar characteristics, and non-agency residential securities, the fair value methodology purchase commitments and bid information received from incorporates values obtained from a discounted cash flow market participants. These loans are regularly traded in active model. The modeling process incorporates assumptions markets and observable pricing information is available from management believes market participants would use to value market participants. The prices are adjusted as necessary to the security under current market conditions. The assumptions include the embedded servicing value in the loans and to take used include prepayment projections, credit loss assumptions, into consideration the specific characteristics of certain loans and discount rates, which include a risk premium due to that are priced based on the pricing of similar loans. These liquidity and uncertainty that are based on both observable and adjustments represent unobservable inputs to the valuation but unobservable inputs. We use the discounted cash flow are not considered significant to the fair value of the loans. analysis, in conjunction with other relevant pricing Accordingly, residential mortgage loans held for sale are information obtained from either pricing services or broker classified as Level 2. quotes to establish the fair value that management believes is representative under current market conditions. For purposes Residential Mortgage Servicing Rights of determining fair value at December 31, 2010 and Residential mortgage servicing rights (MSRs) are carried at December 31, 2009, the relevant pricing service information fair value on a recurring basis. Currently, these residential was the predominant input. MSRs do not trade in an active open market with readily observable prices. Although sales of servicing assets do occur, In the proxy approach, the proxy selected has similar credit, the precise terms and conditions typically would not be tenor, duration, pricing and structuring attributes to the PNC available. Accordingly, management determines the fair value position. The price, market spread, or yield on the proxy is of its residential MSRs using a discounted cash flow model then used to calculate an indicative market price for the incorporating assumptions about loan prepayment rates, security. Depending on the nature of the PNC position and its discount rates, servicing costs, and other economic factors. As attributes relative to the proxy, management may make part of the pricing process, management compares its fair additional adjustments to account for market conditions, value estimates to third-party valuations on a quarterly basis to liquidity, and nonperformance risk, based on various inputs assess the reasonableness of the fair values calculated by its including recent trades of similar securities, single dealer internal valuation models. Due to the nature of the valuation quotes, and/or other observable and unobservable inputs. inputs, residential MSRs are classified as Level 3.

Financial Derivatives Commercial Mortgage Loans Held for Sale Exchange-traded derivatives are valued using quoted market We account for certain commercial mortgage loans classified prices and are classified as Level 1. However, the majority of as held for sale at fair value. The election of the fair value derivatives that we enter into are executed over-the-counter option aligns the accounting for the commercial mortgages and are valued using internal models. Readily observable with the related hedges. At origination, these loans were market inputs to these models can be validated to external intended for securitization. sources, including industry pricing services, or corroborated through recent trades, dealer quotes, yield curves, implied We determine the fair value of commercial mortgage loans volatility or other market-related data. Certain derivatives, held for sale by using a whole loan methodology. Fair value is such as total rate of return swaps, are corroborated to the determined using sale valuation assumptions that management CMBX index. These derivatives are classified as Level 2. believes a market participant would use in pricing the loans. Derivatives priced using significant management judgment or When available, valuation assumptions included observable assumptions are classified as Level 3. inputs based on whole loan sales. Adjustments are made to these assumptions to account for situations when uncertainties The fair values of our derivatives are adjusted for exist, including market conditions and liquidity. Credit risk is nonperformance risk including credit risk as appropriate. Our included as part of our valuation process for these loans by nonperformance risk adjustment is computed using new loan considering expected rates of return for market participants for pricing and considers externally available bond spreads, in similar loans in the marketplace. Based on the significance of conjunction with internal historical recovery observations. The unobservable inputs, we classified this portfolio as Level 3. credit risk adjustment is not currently material to the overall derivatives valuation. Equity Investments The valuation of direct and indirect private equity investments Residential Mortgage Loans Held for Sale requires significant management judgment due to the absence We have elected to account for certain residential mortgage of quoted market prices, inherent lack of liquidity and the loans originated for sale on a recurring basis at fair value. At long-term nature of such investments. The carrying values of December 31, 2009, all residential mortgage loans held for direct and affiliated partnership interests reflect the expected sale were at fair value. Residential mortgage loans are valued exit price and are based on various techniques including

134 multiples of adjusted earnings of the entity, independent validated to external sources, including yield curves, implied appraisals, anticipated financing and sale transactions with volatility or other market-related data. These instruments are third parties, or the pricing used to value the entity in a recent classified as Level 2. financing transaction. We value indirect investments in private equity funds based on net asset value as provided in the BlackRock Series C Preferred Stock financial statements that we receive from their managers. Due We have elected to account for the 2.9 million shares of the to the time lag in our receipt of the financial information and BlackRock Series C Preferred Stock received in a stock based on a review of investments and valuation techniques exchange with BlackRock at fair value. The Series C Preferred applied, adjustments to the manager-provided value are made Stock economically hedges the BlackRock LTIP liability that when available recent portfolio company information or is accounted for as a derivative. The fair value of the Series C market information indicates a significant change in value Preferred Stock is determined using a third-party modeling from that provided by the manager of the fund. These approach, which includes both observable and unobservable investments are classified as Level 3. inputs. This approach considers expectations of a default/ liquidation event and the use of liquidity discounts based on Customer Resale Agreements our inability to sell the security at a fair, open market price in We have elected to account for structured resale agreements, a timely manner. Although dividends are equal to common which are economically hedged using free-standing financial shares and other preferred series, significant transfer derivatives, at fair value. The fair value for structured resale restrictions exist on our Series C shares for any purpose other agreements is determined using a model which includes than to satisfy the LTIP obligation. Due to the significance of observable market data such as interest rates as inputs. unobservable inputs, this security is classified as Level 3. Readily observable market inputs to this model can be

135 Assets and liabilities measured at fair value on a recurring basis, including instruments for which PNC has elected the fair value option, follow.

Fair Value Measurements—Summary

December 31, 2010 December 31, 2009 Total Fair Total Fair In millions Level 1 Level 2 Level 3 Value Level 1 Level 2 Level 3 Value Assets Securities available for sale US Treasury and government Agencies $5,289 $ 421 $ 5,710 $7,026 $ 494 $ 7,520 Residential mortgage-backed Agency 31,720 31,720 24,433 $ 5 24,438 Non-agency $ 7,233 7,233 8,302 8,302 Commercial mortgage-backed Agency 1,797 1,797 1,297 1,297 Non-agency 1,856 1,856 3,842 6 3,848 Asset-backed 1,537 1,045 2,582 414 1,254 1,668 State and municipal 1,729 228 1,957 1,084 266 1,350 Other debt 4,004 73 4,077 1,962 53 2,015 Total debt securities 5,289 43,064 8,579 56,932 7,026 33,526 9,886 50,438 Corporate stocks and other 307 67 4 378 230 83 47 360 Total securities available for sale 5,596 43,131 8,583 57,310 7,256 33,609 9,933 50,798 Financial derivatives (a) (b) Interest rate contracts 5,502 68 5,570 25 3,630 47 3,702 Other contracts 178 9 187 2 209 3 214 Total financial derivatives 5,680 77 5,757 27 3,839 50 3,916 Residential mortgage loans held for sale (c) 1,878 1,878 1,012 1,012 Trading securities (d) (e) Debt (f) 1,348 367 69 1,784 1,690 299 89 2,078 Equity 42 42 46 46 Total trading securities 1,390 367 69 1,826 1,736 299 89 2,124 Residential mortgage servicing rights (g) 1,033 1,033 1,332 1,332 Commercial mortgage loans held for sale (c) 877 877 1,050 1,050 Equity investments Direct investments 749 749 595 595 Indirect investments (h) 635 635 593 593 Total equity investments 1,384 1,384 1,188 1,188 Customer resale agreements (i) 866 866 990 990 Loans (j) 114 2 116 107 107 Other assets BlackRock Series C Preferred Stock (k) 396 396 486 486 Other 450 7 457 207 23 230 Total other assets 450 403 853 207 509 716 Total assets $6,986 $52,486 $12,428 $71,900 $9,019 $40,063 $14,151 $63,233 Liabilities Financial derivatives (b) (l) Interest rate contracts $ 4,302 $ 56 $ 4,358 $ 2 $ 3,185 $ 18 $ 3,205 BlackRock LTIP 396 396 486 486 Other contracts 173 8 181 146 2 148 Total financial derivatives 4,475 460 4,935 2 3,331 506 3,839 Trading securities sold short (m) Debt (f) $2,514 16 2,530 1,288 42 1,330 Equity 14 14 Total trading securities sold short 2,514 16 2,530 1,302 42 1,344 Other liabilities 6666 Total liabilities $2,514 $ 4,497 $ 460 $ 7,471 $1,304 $ 3,379 $ 506 $ 5,189 (a) Included in Other assets on our Consolidated Balance Sheet. (b) Amounts at December 31, 2010 and December 31, 2009 are presented gross and are not reduced by the impact of legally enforceable master netting agreements that allow PNC to net positive and negative positions and cash collateral held or placed with the same counterparty. At December 31, 2010 and December 31, 2009, respectively, the net asset amounts were $1.9 billion and $2.0 billion and the net liability amounts were $1.1 billion and $1.7 billion.

136 (c) Included in Loans held for sale on our Consolidated Balance Sheet. PNC has elected the fair value option for certain commercial and residential mortgage loans held for sale. (d) Fair value includes net unrealized losses of $17 million at December 31, 2010 and net unrealized gains of $9 million at December 31, 2009. (e) Interest income earned from trading securities totaled $40 million for 2010, $61 million for 2009, and $116 million for 2008. These amounts are included in other interest income on the Consolidated Income Statement. (f) Approximately 74% of these securities are US Treasury and government agencies securities at December 31, 2010. (g) Included in Other intangible assets on our Consolidated Balance Sheet. (h) The indirect equity funds are not redeemable, but PNC receives distributions over the life of the partnership from liquidation of the underlying investments by the investee. (i) Included in Federal funds sold and resale agreements on our Consolidated Balance Sheet. PNC has elected the fair value option for these items. (j) Included in Loans on our Consolidated Balance Sheet. (k) PNC has elected the fair value option for these shares. (l) Included in Other liabilities on our Consolidated Balance Sheet. (m) Included in Other borrowed funds on our Consolidated Balance Sheet.

Reconciliations of assets and liabilities measured at fair value on a recurring basis using Level 3 inputs for 2010 and 2009 follow.

Year Ended December 31, 2010

(*) Attributable to unrealized Total realized / unrealized gains or gains or losses (a) losses related Purchases, to assets and Included in issuances, liabilities other and Transfers Transfers held at Level 3 Instruments Only December 31, Included in comprehensive settlements, into out of December December 31, In millions 2009 earnings (*) income net Level 3 (b) Level 3 (b) 31, 2010 2010 Assets Securities available for sale Residential mortgage-backed agency $ 5 $ (5) Residential mortgage-backed non-agency 8,302 $(269) $1,218 (2,016) $ (2) $ 7,233 $(241) Commercial mortgage-backed non-agency 6 $ 2 (8) Asset-backed 1,254 (77) 180 (312) 1,045 (78) State and municipal 266 5 (24) (20) 1 228 Other debt 53 6 (15) 29 73 Corporate stocks and other 47 (1) (42) 4 Total securities available for sale 9,933 (341) 1,379 (2,410) 32 (10) 8,583 (319) Financial derivatives 50 36 (10) 1 77 43 Trading securities – Debt 89 (2) (18) 69 (4) Residential mortgage servicing rights 1,332 (209) (90) 1,033 (194) Commercial mortgage loans held for sale 1,050 16 (189) 877 20 Equity investments Direct investments 595 157 (3) 749 102 Indirect investments 593 92 (50) 635 74 Total equity investments 1,188 249 (53) 1,384 176 Loans 22 Other assets BlackRock Series C Preferred Stock 486 (86) (4) 396 (86) Other 23 (4) (12) 7 Total other assets 509 (86) (4) (16) 403 (86) Total assets $14,151 $(337) $1,375 $(2,784) $33 $(10) $12,428 $(364) Total liabilities (c) $ 506 $ (71) $ 23 $ 2 $ 460 $ (73)

137 Year Ended December 31, 2009

Total realized / unrealized gains or losses (a) (*) Attributable to unrealized gains or losses related Purchases, to assets and Included Included in issuances, Transfers liabilities National Balance, in other and into held at Level 3 Instruments Only Dec. 31, City January 1, earnings comprehensive settlements, Level 3, December December 31, In millions 2008 Acquisition 2009 (*) income net net (b) 31, 2009 2009 Assets Securities available for sale Residential mortgage- backed agency $ 7 $ 7 $ (2) $ 5 Residential mortgage- backed non-agency $3,304 899 4,203 $(444) 616 $ (713) $4,640 8,302 $(444) Commercial mortgage- backed non-agency 337 337 (6) 627 (253) (699) 6 (6) Asset-backed 833 59 892 (104) (22) (37) 525 1,254 (104) State and municipal 271 50 321 (2) (23) (30) 266 Other debt 34 48 82 (9) 4 (19) (5) 53 (9) Corporate stocks and Other 58 58 (6) (5) 47 Total securities available for sale 4,837 1,063 5,900 (563) 1,215 (1,050) 4,431 9,933 (563) Financial derivatives 125 35 160 116 (206) (20) 50 11 Trading securities Debt 56 26 82 (3) 8 2 89 Equity 17 6 23 1 (20) (4) Total trading securities 73 32 105 (2) (12) (2) 89 Residential mortgage servicing rights 6 1,019 1,025 384 (77) 1,332 351 Commercial mortgage loans held for sale 1,400 1 1,401 (68) (283) 1,050 (61) Equity investments Direct investments 322 287 609 (24) 10 595 (33) Indirect investments 249 323 572 (20) 41 593 (19) Total equity investments 571 610 1,181 (44) 51 1,188 (52) Other assets BlackRock Series C Preferred Stock 275 211 486 275 Other 40 40 (7) (12) 2 23 (7) Total other assets 40 40 268 (12) 213 509 268 Total assets $7,012 $2,800 $9,812 $ 91 $1,203 $(1,364) $4,409 $14,151 $ (46) Total liabilities (c) $ 22 $ 16 $ 38 $ 278 $ 190 $ 506 $ 276 (a) Losses for assets are bracketed while losses for liabilities are not. (b) PNC’s policy is to recognize transfers in and transfers out as of the end of the reporting period. (c) Financial derivatives.

Net losses (realized and unrealized) included in earnings During 2010, no significant transfers of assets or liabilities relating to Level 3 assets and liabilities were $266 million for between the hierarchy levels occurred. 2010 compared with $187 million for 2009. These amounts included net unrealized losses of $291 million and $322 During 2009, securities transferred into Level 3 from Level 2 million for 2010 and 2009, respectively. These amounts were exceeded securities transferred out by $4.4 billion. These included in noninterest income on the Consolidated Income primarily related to non-agency residential mortgage-backed Statement. securities where management determined that the volume and level of market activity for these assets had significantly

138 decreased. Other Level 3 assets include commercial mortgage fair value. If an appraisal is outdated due to changed project or loans held for sale, certain equity securities, auction rate market conditions, values based on the LGD recovery rates are securities, corporate debt securities, certain private-issuer used pending receipt of an updated appraisal. The amounts asset-backed securities, private equity investments, certain below for loans held for sale represent the carrying value of derivative instruments, residential mortgage servicing rights loans for which adjustments are based on the appraised value and other assets. of collateral which often results in significant management assumptions and input with respect to the determination of fair Nonrecurring Fair Value Changes value, or based on an observable market price. The fair value We may be required to measure certain other financial assets determination of the equity investment resulting in an at fair value on a nonrecurring basis. These adjustments to fair impairment loss included below was based on observable value usually result from the application of market data for other comparable entities as adjusted for lower-of-cost-or-fair value accounting or write-downs of internal assumptions and unobservable inputs. The amounts individual assets due to impairment. The amounts below for below for commercial mortgage servicing rights reflect an nonaccrual loans represent the carrying value of loans for impairment of three strata at December 31, 2010 while no which adjustments are primarily based on the appraised value strata were impaired at December 31, 2009. The fair value of of collateral or the net book value of the collateral from the commercial mortgage servicing rights is estimated by using an borrower’s most recent financial statements if no appraisal is internal valuation model. The model calculates the present available. If the net book value is utilized, loss given default value of estimated future net servicing cash flows considering (LGD) collateral recovery rates are employed, by collateral estimates of servicing revenue and costs, discount rates and type, in calculating disposition costs to arrive at an adjusted prepayment speeds.

Fair Value Measurements – Nonrecurring (a)

Gains (Losses) Fair Value Year ended December 31 December 31 December 31 December 31 In millions 2010 2009 2010 2009 Assets Nonaccrual loans $ 429 $ 939 $81 $(365) Loans held for sale 350 168 (93) 4 Equity investments (b) 3 154 (3) (64) Commercial mortgage servicing rights 644 (40) Other intangible assets 1 1 Foreclosed and other assets 245 108 (103) (41) Long-lived assets held for sale 25 30 (30) (9) Total assets $1,697 $1,400 $(188) $(475) (a) All Level 3 except $5 million in loans held for sale which were Level 2 at December 31, 2009. (b) Includes LIHTC and other equity investments.

FAIR VALUE OPTION fair value due to instrument-specific credit risk for 2010 and Refer to the Fair Value Measurement section of this Note 8 2009 were not material. regarding the fair value of commercial mortgage loans held for sale, residential mortgage loans held for sale, customer Residential Mortgage Loans Held for Sale resale agreements, and BlackRock Series C Preferred Stock. Interest income on these loans is recorded as earned and reported on the Consolidated Income Statement in other interest income. Throughout 2010 and 2009, certain Commercial Mortgage Loans Held for Sale residential mortgage loans for which we elected the fair value Interest income on these loans is recorded as earned and option were subsequently reclassified to portfolio loans. reported on the Consolidated Income Statement in other Changes in fair value due to instrument-specific credit risk for interest income. The impact on earnings of offsetting 2010 and 2009 were not material. These loans continue to be economic hedges is not reflected in these amounts. Changes in accounted for at fair value.

139 CUSTOMER RESALE AGREEMENTS Interest income on structured resale agreements is reported on the Consolidated Income Statement in other interest income. Changes in fair value due to instrument-specific credit risk for 2010 and 2009 were not material.

The changes in fair value included in noninterest income for items for which we elected the fair value option follow.

Fair Value Option – Changes in Fair Value (a)

Gains (Losses) In millions 2010 2009 2008 Assets Customer resale agreements $1$ (26) $ 69 Commercial mortgage loans held for sale 16 (68) (251) Residential mortgage loans held for sale 280 405 Residential mortgage loans – portfolio 1 BlackRock Series C Preferred Stock (86) 275 (a) The impact on earnings of offsetting hedged items or hedging instruments is not reflected in these amounts.

Fair values and aggregate unpaid principal balances of items for which we elected the fair value option follow.

Fair Value Option – Fair Value and Principal Balances

Aggregate Unpaid In millions Fair Value Principal Balance Difference December 31, 2010 Customer resale agreements $ 866 $ 806 $ 60 Residential mortgage loans held for sale Performing loans 1,844 1,839 5 Loans 90 days or more past due 33 41 (8) Nonaccrual loans 1 2 (1) Total 1,878 1,882 (4) Commercial mortgage loans held for sale (a) Performing loans 847 990 (143) Nonaccrual loans 30 49 (19) Total 877 1,039 (162) Residential mortgage loans – portfolio Performing loans 36 44 (8) Loans 90 days or more past due 64 67 (3) Nonaccrual loans 16 31 (15) Total $ 116 $ 142 $ (26) December 31, 2009 Customer resale agreements $ 990 $ 925 $ 65 Residential mortgage loans held for sale Performing loans 971 977 (6) Loans 90 days or more past due 40 50 (10) Nonaccrual loans 1 9 (8) Total 1,012 1,036 (24) Commercial mortgage loans held for sale (a) Performing loans 1,023 1,235 (212) Nonaccrual loans 27 41 (14) Total 1,050 1,276 (226) Residential mortgage loans – portfolio Performing loans 25 27 (2) Loans 90 days or more past due 51 54 (3) Nonaccrual loans 12 23 (11) Total $ 88 $ 104 $ (16) (a) There were no loans 90 days or more past due within this category at December 31, 2010 or December 31, 2009.

140 ADDITIONAL FAIR VALUE INFORMATION RELATED TO FINANCIAL INSTRUMENTS

December 31, 2010 December 31, 2009 Carrying Fair Carrying Fair In millions Amount Value Amount Value Assets Cash and short-term assets $ 9,711 $ 9,711 $ 12,248 $ 12,248 Trading securities 1,826 1,826 2,124 2,124 Investment securities 64,262 64,487 56,027 56,319 Loans held for sale 3,492 3,492 2,539 2,597 Net loans (excludes leases) 139,316 141,431 146,270 145,014 Other assets 4,664 4,664 4,883 4,883 Mortgage and other loan servicing rights 1,698 1,707 2,253 2,352 Financial derivatives Designated as hedging instruments under GAAP 1,255 1,255 739 739 Not designated as hedging instruments under GAAP 4,502 4,502 3,177 3,177 Liabilities Demand, savings and money market deposits 141,990 141,990 132,645 132,645 Time deposits 41,400 41,825 54,277 54,534 Borrowed funds 39,821 41,273 39,621 39,977 Financial derivatives Designated as hedging instruments under GAAP 85 85 95 95 Not designated as hedging instruments under GAAP 4,850 4,850 3,744 3,744 Unfunded loan commitments and letters of credit 173 173 290 290

The aggregate fair values in the table above do not represent • customers’ acceptances, and the total market value of PNC’s assets and liabilities as the • accrued interest receivable. table excludes the following: • real and personal property, SECURITIES • lease financing, Securities include both the investment securities (comprised of • loan customer relationships, available for sale and held to maturity securities) and trading • deposit customer intangibles, portfolios. We use prices obtained from pricing services, • retail branch networks, dealer quotes or recent trades to determine the fair value of • fee-based businesses, such as asset management and securities. For 60% of our positions, we use prices obtained brokerage, and from pricing services provided by third party vendors. For an • trademarks and brand names. additional 8% of our positions, we use prices obtained from the pricing services as the primary input into the valuation We used the following methods and assumptions to estimate process. One of the vendors’ prices are set with reference to fair value amounts for financial instruments. market activity for highly liquid assets such as agency mortgage-backed securities, and matrix pricing for other assets, such as CMBS and asset-backed securities. Another GENERAL vendor primarily uses pricing models considering adjustments For short-term financial instruments realizable in three months for ratings, spreads, matrix pricing and prepayments for the or less, the carrying amount reported on our Consolidated instruments we value using this service, such as non-agency Balance Sheet approximates fair value. Unless otherwise residential mortgage-backed securities, agency adjustable rate stated, the rates used in discounted cash flow analyses are mortgage securities, agency CMOs and municipal bonds. based on market yield curves. Management uses various methods and techniques to corroborate prices obtained from pricing services and dealers, CASH AND SHORT-TERM ASSETS including reference to other dealers’ quotes, by reviewing The carrying amounts reported on our Consolidated Balance valuations of comparable instruments, or by comparison to Sheet for cash and short-term investments approximate fair internal valuations. Dealer quotes received are typically non- values primarily due to their short-term nature. For purposes binding. of this disclosure only, short-term assets include the following: NET LOANS AND LOANS HELD FOR SALE • due from banks, Fair values are estimated based on the discounted value of • interest-earning deposits with banks, expected net cash flows incorporating assumptions about • federal funds sold and resale agreements, prepayment rates, net credit losses and servicing fees. For • cash collateral, purchased impaired loans, fair value is assumed to equal

141 PNC’s recorded investment, which represents the present December 31, 2009 are included in Note 9 Goodwill and value of expected future principal and interest cash flows, as Other Intangible Assets. adjusted for any ALLL recorded for these loans. See Note 6 Purchased Impaired Loans for additional information. For CUSTOMER RESALE AGREEMENTS revolving home equity loans and commercial credit lines, this Refer to the Fair Value Measurement section of this Note 8 fair value does not include any amount for new loans or the regarding the fair value of customer resale agreements. related fees that will be generated from the existing customer relationships. Non-accrual loans are valued at their estimated DEPOSITS recovery value. Also refer to the Fair Value Measurement and The carrying amounts of noninterest-bearing demand and Fair Value Option sections of this Note 8 regarding the fair interest-bearing money market and savings deposits value of commercial and residential mortgage loans held for approximate fair values. For time deposits, which include sale. Loans are presented net of the ALLL and do not include foreign deposits, fair values are estimated based on the future accretable discounts related to purchased impaired discounted value of expected net cash flows assuming current loans. interest rates.

OTHER ASSETS BORROWED FUNDS Other assets as shown in the accompanying table include the The carrying amounts of Federal funds purchased, commercial following: paper, repurchase agreements, proprietary trading short • FHLB and FRB stock, positions, cash collateral, other short-term borrowings, • equity investments carried at cost and fair value, and acceptances outstanding and accrued interest payable are • BlackRock Series C Preferred Stock. considered to be their fair value because of their short-term nature. For all other borrowed funds, fair values are estimated Investments accounted for under the equity method, including primarily based on dealer quotes or discounted cash flow our investment in BlackRock, are not included in the analysis. accompanying table.

See the Investment in BlackRock, Inc. and Private Equity UNFUNDED LOAN COMMITMENTS AND LETTERS OF CREDIT Investments sections of Note 1 – Accounting Policies for The fair value of unfunded loan commitments and letters of additional information. credit is determined from a market participant’s view including the impact of changes in interest rates, credit and Fair value of the noncertificated interest-only strips is other factors. Because the interest rate on substantially all estimated based on the discounted value of expected net cash unfunded loan commitments and letters of credit varies with flows. The aggregate carrying value of our investments that changes in market rates, these instruments are subject to little are carried at cost and FHLB and FRB stock was $2.4 billion fluctuation in fair value due to changes in interest rates. We at December 31, 2010 and $2.6 billion as of December 31, establish a liability on these facilities related to their 2009, both of which approximate fair value at each date. creditworthiness.

MORTGAGE AND OTHER LOAN SERVICING ASSETS FINANCIAL DERIVATIVES Fair value is based on the present value of the estimated future For exchange-traded contracts, fair value is based on quoted cash flows, incorporating assumptions as to prepayment market prices. For nonexchange-traded contracts, fair value is speeds, discount rates, escrow balances, interest rates, cost to based on dealer quotes, pricing models or quoted prices for service and other factors. instruments with similar characteristics.

The key valuation assumptions for commercial and residential Amounts for financial derivatives are presented on a gross mortgage loan servicing assets at December 31, 2010 and basis.

142 NOTE 9GOODWILL AND OTHER INTANGIBLE ASSETS Changes in goodwill by business segment during 2009 and 2010 follow: Changes in Goodwill by Business Segment (a)

Corporate & Asset Residential Retail Institutional Management Black- Mortgage In millions Banking Banking Group Rock Banking Other (b) Total December 31, 2008 $5,056 $2,521 $14 $ 44 $ 1,233 $ 8,868 Acquisition-related 313 235 54 $43 10 655 Other (c) (18) (18) December 31, 2009 5,369 2,756 68 26 43 1,243 9,505 Sale of GIS (1,232) (1,232) Other (c) (67) (28) (6) (12) (11) (124) December 31, 2010 $5,302 $2,728 $62 $ 14 $43 $ — $ 8,149 (a) The Distressed Assets Portfolio business segment does not have any goodwill allocated to it. (b) Includes goodwill related to GIS prior to the sale of GIS on July 1, 2010. (c) Includes BlackRock.

Changes in goodwill and other intangible assets during 2010 Our investment in BlackRock changes when BlackRock follow: repurchases its shares in the open market or issues shares for an acquisition or pursuant to its employee compensation plans. Summary of Changes in Goodwill and Other Intangible We adjust goodwill when BlackRock repurchases its shares at Assets an amount greater (or less) than book value per share which Customer- Servicing results in an increase (or decrease) in our percentage In millions Goodwill Related Rights ownership interest. December 31, 2009 $ 9,505 $1,145 $2,259 Additions/adjustments: The gross carrying amount, accumulated amortization and net Sale of GIS (1,232) (49) carrying amount of other intangible assets by major category Other (124) 4 consisted of the following: Mortgage and other loan servicing rights (216) Sale of servicing rights (192) Other Intangible Assets Impairment charge (40) Amortization (197) (110) December 31 December 31 In millions 2010 2009 December 31, 2010 $ 8,149 $ 903 $1,701 Customer-related and other intangibles Gross carrying amount $1,524 $1,742 See Note 2 Divestiture regarding our July 1, 2010 sale of GIS. Accumulated amortization (621) (597) Net carrying amount $ 903 $1,145 We conduct a goodwill impairment test on our reporting units Mortgage and other loan servicing rights at least annually or more frequently if any adverse triggering Gross carrying amount $2,293 $2,729 events occur. Based on the results of our analysis, there were Valuation allowance (40) no impairment charges related to goodwill recognized in 2010, Accumulated amortization (552) (470) 2009 or 2008. The fair value of our reporting units is Net carrying amount $1,701 $2,259 determined by using discounted cash flow and market Total $2,604 $3,404 comparability methodologies.

The purchase price allocation for the National City acquisition While certain of our other intangible assets have finite lives was completed as of December 31, 2009 with goodwill of and are amortized primarily on a straight-line basis, certain $647 million recognized. core deposit intangibles are amortized on an accelerated basis.

For customer-related and other intangibles, the estimated remaining useful lives range from less than one year to 10 years, with a weighted-average remaining useful life of 9 years.

143 Amortization expense on existing intangible assets, net of cash flows considering estimates on servicing revenue and impairment reversal (charge) follows: costs, discount rates and prepayment speeds.

Changes in the residential mortgage servicing rights follow: Amortization Expense on Existing Intangible Assets (a) Residential Mortgage Servicing Rights In millions 2008 $210 In millions 2010 2009 2009 296 January 1 $ 1,332 $ 1,008 2010 264 Additions: From loans sold with servicing retained 95 261 Estimated: Sales (74) 2011 256 Changes in fair value due to: 2012 218 Time and payoffs (a) (185) (264) 2013 205 Purchase accounting adjustments 17 2014 197 Other (b) (209) 384 2015 186 December 31 $ 1,033 $ 1,332 (a) Net of impairment reversal (charge). Unpaid principal balance of loans serviced for others at December 31 $125,806 $146,050 Changes in commercial mortgage servicing rights follow: (a) Represents decrease in mortgage servicing rights value due to passage of time, including the impact from both regularly scheduled loan principal payments and loans that paid down or paid off during the period. Commercial Mortgage Servicing Rights (b) Represents mortgage servicing rights value changes resulting primarily from market-driven changes in interest rates. In millions 2010 2009 January 1 $ 921 $ 864 We recognize mortgage servicing right assets on residential Additions (a) 83 121 real estate loans when we retain the obligation to service these Acquisition adjustment 1 loans upon sale and the servicing fee is more than adequate Sale of servicing rights (192) compensation. Residential mortgage servicing rights are Impairment (charge) reversal (40) 35 accounted for using the fair value method. Mortgage servicing Amortization expense (107) (100) rights are subject to declines in value principally from actual December 31 $ 665 $ 921 or expected prepayment of the underlying loans and defaults. (a) Additions for 2010 included $45 million from loans sold with servicing retained and We manage this risk by economically hedging the fair value $38 million from purchases of servicing rights from third parties. Comparable amounts for 2009 were $92 million and $29 million. of mortgage servicing rights with securities and derivative instruments which are expected to increase in value when the We recognize as an other intangible asset the right to service value of mortgage servicing rights declines. mortgage loans for others. Commercial mortgage servicing rights are purchased in the open market and originated when The fair value of residential mortgage servicing rights is loans are sold with servicing retained. Commercial mortgage estimated by using third party software with internal valuation servicing rights are initially recorded at fair value. These assumptions. The software calculates the present value of rights are subsequently accounted for using the amortization estimated future net servicing cash flows considering method. Accordingly, the commercial mortgage servicing estimates on servicing revenue and costs, discount rates, rights are substantially amortized in proportion to and over the prepayment speeds and future mortgage rates. period of estimated net servicing income over a period of 5 to 10 years. The fair value of residential and commercial MSRs and significant inputs to the valuation model as of December 31, Commercial mortgage servicing rights are periodically 2010 are shown in the tables below. The expected and actual evaluated for impairment. For purposes of impairment, the rates of mortgage loan prepayments are significant factors commercial mortgage servicing rights are stratified based on driving the fair value. Management uses a third party model to asset type, which characterizes the predominant risk of the estimate future residential mortgage loan prepayments and underlying financial asset. If the carrying amount of any internal proprietary models to estimate future commercial individual stratum exceeds its fair value, a valuation reserve is mortgage loan prepayments. These models have been refined established with a corresponding charge to Corporate services based on historical performance of PNC’s managed portfolio, on our Consolidated Income Statement. as adjusted for current market conditions. Future interest rates are another important factor in the valuation of MSRs. The fair value of commercial mortgage servicing rights is Management utilizes market implied forward interest rates to estimated by using an internal valuation model. The model estimate the future direction of mortgage and discount rates. calculates the present value of estimated future net servicing Changes in the shape and slope of the forward curve in future

144 periods may result in volatility in the fair value estimate. (a) Changes in weighted-average life and weighted-average constant prepayment rate reflect the cumulative impact of changes in rates, prepayment expectations and model changes. A sensitivity analysis of the hypothetical effect on the fair value of MSRs to adverse changes in key assumptions is Revenue from mortgage and other loan servicing comprised of presented below. These sensitivities do not include the impact contractually specified servicing fees, late fees, and ancillary of the related hedging activities. Changes in fair value fees follows: generally cannot be extrapolated because the relationship of the change in the assumption to the change in fair value may Revenue from Mortgage and Other Loan Servicing not be linear. Also, the effect of a variation in a particular assumption on the fair value of the MSRs is calculated In millions 2010 2009 2008 independently without changing any other assumption. In Revenue from mortgage and other loan reality, changes in one factor may result in changes in another servicing $692 $825 $148 (for example, changes in mortgage interest rates, which drive changes in prepayment rate estimates, could result in changes We also generate servicing revenue from fee-based activities in the interest rate spread), which could either magnify or provided to others. counteract the sensitivities. Revenue from commercial mortgage servicing rights, The following tables set forth the sensitivity analysis of the residential mortgage servicing rights and other loan servicing hypothetical effect on the fair value of MSRs to immediate are reported on our Consolidated Income Statement in the line adverse changes of 10% and 20% in those assumptions: items Corporate services, Residential mortgage, and Consumer services, respectively. Commercial Mortgage Loan Servicing Assets – Key Valuation Assumptions NOTE 10 PREMISES,EQUIPMENT AND LEASEHOLD IMPROVEMENTS Dec. 31, Dec. 31, Dollars in millions 2010 2009 Premises, equipment and leasehold improvements, stated at Fair value $674 $1,020 cost less accumulated depreciation and amortization, were as Weighted-average life (years) 6.3 7.8 follows: Weighted-average constant prepayment rate 10%-24% 6%-19% Premises, Equipment and Leasehold Improvements Decline in fair value from 10% adverse change in prepayment rate $8.3 $9.7 December 31 - in millions 2010 2009 Decline in fair value from 20% adverse Land $ 659 $ 733 change in prepayment rate $15.9 $18.8 Buildings 1,644 1,692 Spread over forward interest rate swap Equipment 3,335 3,423 rates 7%-9% 7%-9% Leasehold improvements 593 626 Decline in fair value from 10% adverse Total 6,231 6,474 change in interest rate $12.8 $24.6 Accumulated depreciation and amortization (2,172) (2,277) Decline in fair value from 20% adverse Net book value $ 4,059 $ 4,197 change in interest rate $25.6 $49.3

Depreciation expense on premises, equipment and leasehold Residential Mortgage Loan Servicing Assets – Key Valuation improvements and amortization expense, primarily for Assumptions capitalized internally developed software, was as follows: Dec. 31, Dec. 31, Dollars in millions 2010 2009 Depreciation and Amortization Expense Fair value $1,033 $1,332 Weighted-average life (years) (a) 5.8 4.5 Year ended December 31 in millions 2010 2009 2008 Weighted-average constant prepayment rate (a) 12.61% 19.92% Continuing operations: Decline in fair value from 10% adverse change Depreciation $455 $466 $194 in prepayment rate $34 $56 Amortization 45 79 19 Decline in fair value from 20% adverse change Discontinued operations: in prepayment rate $65 $109 Depreciation 12 29 31 Spread over forward interest rate swap rates 12.18% 12.16% Amortization 11 26 25 Decline in fair value from 10% adverse change in interest rate $43 $55 Decline in fair value from 20% adverse change in interest rate $83 $106

145 We lease certain facilities and equipment under agreements NOTE 12 BORROWED FUNDS expiring at various dates through the year 2067. We account Bank notes along with senior and subordinated notes consisted for these as operating leases. Rental expense on such leases of the following: was as follows: Bank Notes, Senior Debt and Subordinated Debt Lease Rental Expense December 31, 2010 Year ended December 31 Dollars in millions Outstanding Stated Rate Maturity in millions 2010 2009 2008 Bank notes $ 821 zero – 5.70% 2011-2043 Continuing operations $379 $372 $184 Senior debt 12,083 .43 – 6.70% 2011-2020 Discontinued operations 10 16 18 Bank notes and senior debt $12,904 Required minimum annual rentals that we owe on noncancelable leases having initial or remaining terms in Subordinated debt Junior $ 2,932 .87 – 10.18% 2028-2068 excess of one year totaled $2.4 billion at December 31, 2010. Other 6,910 .65 – 8.11% 2011-2019 Future minimum annual rentals are as follows: • 2011: $325 million, Subordinated debt $ 9,842 • 2012: $301 million, • 2013: $266 million, Included in outstandings for the senior and subordinated notes • 2014: $227 million, in the table above are basis adjustment of $176 million and • 2015: $183 million, and $368 million, respectively, related to fair value accounting • 2016 and thereafter: $1.1 billion. hedges as of December 31, 2010.

NOTE 11 TIME DEPOSITS Total borrowed funds of $39.5 billion at December 31, 2010 The aggregate amount of time deposits with a denomination of have scheduled or anticipated repayments, including related $100,000 or more was $15.5 billion at December 31, 2010 and purchase accounting adjustments, as follows: $20.4 billion at December 31, 2009. • 2011: $14.7 billion, • 2012: $5.3 billion, Total time deposits of $41.4 billion at December 31, 2010 • 2013: $3.4 billion, have future contractual maturities, including related purchase • 2014: $2.6 billion, accounting adjustments, as follows: • 2015: $2.8 billion, and • 2011: $27.9 billion, • 2016 and thereafter: $10.7 billion. • 2012: $9.3 billion, • 2013: $2.0 billion, Included in borrowed funds are FHLB borrowings of $6.0 • 2014: $0.7 billion, billion at December 31, 2010, which are collateralized by a • 2015: $0.8 billion, and blanket lien on residential mortgage and other real estate- • 2016 and thereafter: $0.7 billion. related loans. FHLB advances of $1.1 billion have scheduled maturities of less than one year. The remainder of the FHLB borrowings have balances that will mature from 2012 – 2030, with interest rates ranging from zero to 7.33%.

As part of the National City acquisition, PNC assumed a liability for the payment at maturity or earlier of $1.4 billion of convertible senior notes with a fixed interest rate of 4.0% payable semiannually. The notes matured and were paid off on February 1, 2011 except for notes that were converted prior to the maturity date. Prior to November 15, 2010, holders were entitled to convert the notes, at their option, under certain circumstances, none of which were satisfied. After November 15, 2010, the holders were entitled to convert their notes at any time through the third scheduled trading date preceding the maturity date, and certain holders did elect to convert a de minimis amount of notes. Upon conversion, PNC paid cash related to the principal amount of such notes. PNC was not required to issue any shares of its common stock for any conversion value.

146 The $2.9 billion of junior subordinated debt included in the above table represents debt redeemable prior to maturity. The call price and related premiums are discussed in Note 13 Capital Securities of Subsidiary Trusts and Perpetual Trust Securities.

NOTE 13 CAPITAL SECURITIES OF SUBSIDIARY TRUSTS AND PERPETUAL TRUST SECURITIES At December 31, 2010, capital securities totaling $3.4 billion represented non-voting preferred beneficial interests in the assets of the following Trusts:

Capital Securities of Subsidiary Trusts

Trust Date Formed Description of Capital Securities Redeemable PNC Capital Trust C June 1998 $200 million due June 1, 2028, bearing On or after June 1, 2008 at par. interest at a floating rate per annum equal to 3-month LIBOR plus 57 basis points. The rate in effect at December 31, 2010 was .866%. PNC Capital Trust D December 2003 $300 million of 6.125% capital securities On or after December 18, 2008 at par. due December 15, 2033. Fidelity Capital Trust II December 2003 $22 million due January 23, 2034 bearing an On or after January 23, 2009 at par. interest rate of 3-month LIBOR plus 285 basis points. The rate in effect at December 31, 2010 was 3.137%. Yardville Capital Trust VI June 2004 $15 million due July 23, 2034, bearing an On or after July 23, 2009 at par. interest rate equal to 3-month LIBOR plus 270 basis points. The rate in effect at December 31, 2010 was 2.988%. Fidelity Capital Trust III October 2004 $30 million due November 23, 2034 bearing On or after November 23, 2009 at par. an interest rate of 3-month LIBOR plus 197 basis points. The rate in effect at December 31, 2010 was 2.254%. Sterling Financial Statutory Trust III December 2004 $15 million due December 15, 2034 at a On or after December 15, 2009 at par. fixed rate of 6%. The fixed rate remained in effect until December 15, 2009 at which time the securities began paying a floating rate of 3-month LIBOR plus 189 basis points. The rate in effect at December 31, 2010 was 2.192%. Sterling Financial Statutory Trust IV February 2005 $15 million due March 15, 2035 at a fixed On or after March 15, 2010 at par. rate of 6.19%. The fixed rate remained in effect until March 15, 2010 at which time the securities began paying a floating rate of 3-month LIBOR plus 187 basis points. The rate in effect at December 31, 2010 was 2.172%. MAF Bancorp Capital Trust I April 2005 $30 million due June 15, 2035 bearing an On or after June 15, 2010 at par. interest rate of 3-month LIBOR plus 175 basis points. The rate in effect at December 31, 2010 was 2.052%. MAF Bancorp Capital Trust II August 2005 $35 million due September 15, 2035 bearing On or after September 15, 2010 at par. an interest rate of 3-month LIBOR plus 140 basis points. The rate in effect at December 31, 2010 was 1.702%. James Monroe Statutory Trust III September 2005 $8 million due December 15, 2035 at a On or after December 15, 2010. fixed rate of 6.253%. The fixed rate remained in effect until September 15, 2010 at which time the securities began paying a floating rate of LIBOR plus 155 basis points. The rate in effect at December 31, 2010 was 1.852%. Yardville Capital Trust III March 2001 $6 million of 10.18% capital securities due On or after June 8, 2011 at par plus a June 8, 2031. premium of up to 5.09%.

147 Trust Date Formed Description of Capital Securities Redeemable National City Capital Trust II November 2006 $750 million due November 15, 2066 at a On or after November 15, 2011 at par. fixed rate of 6.625%. The fixed rate remains in effect until November 15, 2036 at which time the securities pay a floating rate of one- month LIBOR plus 229 basis points. Sterling Financial Statutory Trust V March 2007 $20 million due March 15, 2037 at a fixed March 15, 2012 at par. rate of 7%. The fixed rate remained in effect until June 15, 2007 at which time the securities began paying a floating rate of 3- month LIBOR plus 165 basis points. The rate in effect at December 31, 2010 was 1.952%. National City Capital Trust III May 2007 $500 million due May 25, 2067 at a fixed On or after May 25, 2012 at par. rate of 6.625%. The fixed rate remains in effect until May 25, 2047 at which time the securities pay a floating rate of one-month LIBOR plus 212.63 basis points. National City Capital Trust IV August 2007 $518 million due August 30, 2067 at a fixed On or after August 30, 2012 at par. rate of 8.00%. The fixed rate remains in effect until September 15, 2047 at which time the securities pay a floating rate of one- month LIBOR plus 348.7 basis points. National City Preferred Capital Trust I January 2008 $500 million due December 10, 2043 at a On or after December 10, 2012 at par. fixed rate of 12.00%. The fixed rate remains in effect until December 10, 2012 at which time the interest rate resets to 3-month LIBOR plus 861 basis points. PNC Capital Trust E February 2008 $450 million of 7.75% capital securities due On or after March 15, 2013 at par.* March 15, 2068. * If we redeem or repurchase the trust preferred securities of, and the junior subordinated notes payable to, PNC Capital Trust E during the period from March 15, 2038 through March 15, 2048, we are subject to the terms of a replacement capital covenant requiring PNC to have received proceeds from the issuance of certain qualified securities prior to the redemption or repurchase, unless the replacement capital covenant has been terminated pursuant to its terms. As of December 31, 2010, the beneficiaries of this limitation are the holders of our $300 million of 6.125% Junior Subordinated Notes issued in December 2003.

All of these Trusts are wholly owned finance subsidiaries of In September 2010, we redeemed all of the underlying capital PNC. In the event of certain changes or amendments to securities of Sterling Financial Statutory Trust II, Yardville regulatory requirements or federal tax rules, the capital Capital Trusts II and IV, and James Monroe Statutory Trust II. securities are redeemable in whole. In accordance with GAAP, The capital securities redeemed totaled $71 million. In the financial statements of the Trusts are not included in October 2010, we redeemed all of the underlying capital PNC’s consolidated financial statements. securities of Yardville Capital Trust V. The capital securities redeemed totaled $10 million. At December 31, 2010, PNC’s junior subordinated debt of Perpetual Trust Securities $3.4 billion represented debentures purchased and held as We issue certain hybrid capital vehicles that currently qualify assets by the Trusts. as capital for regulatory purposes.

The obligations of the respective parent of each Trust, when In February 2008, PNC Preferred Funding LLC (the LLC), taken collectively, are the equivalent of a full and one of our indirect subsidiaries, sold $375 million of 8.700% unconditional guarantee of the obligations of such Trust under Fixed-to-Floating Rate Non-Cumulative Exchangeable the terms of the Capital Securities. Such guarantee is Perpetual Trust Securities of PNC Preferred Funding Trust III subordinate in right of payment in the same manner as other (Trust III) to third parties in a private placement. In junior subordinated debt. There are certain restrictions on connection with the private placement, Trust III acquired $375 PNC’s overall ability to obtain funds from its subsidiaries. For million of Fixed-to-Floating Rate Non-Cumulative Perpetual additional disclosure on these funding restrictions, including Preferred Securities of the LLC (the LLC Preferred an explanation of dividend and intercompany loan limitations, Securities). The sale was similar to the March 2007 private see Note 21 Regulatory Matters. PNC is also subject to placement by the LLC of $500 million of 6.113% restrictions on dividends and other provisions potentially Fixed-to-Floating Rate Non-Cumulative Exchangeable Trust imposed under the Exchange Agreements with Trust II and Securities (the Trust II Securities) of PNC Preferred Funding Trust III as described in the following Perpetual Trust Trust II (Trust II) in which Trust II acquired $500 million of Securities section and to other provisions similar to or in some LLC Preferred Securities and to the December 2006 private ways more restrictive than those potentially imposed under placement by PNC REIT Corp. of $500 million of 6.517% those agreements. Fixed-to-Floating Rate Non-Cumulative Exchangeable

148 Perpetual Trust Securities (the Trust I Securities) of PNC securities during the next succeeding dividend period, other Preferred Funding Trust I (Trust I) in which Trust I acquired than: (i) purchases, redemptions or other acquisitions of shares $500 million of LLC Preferred Securities. PNC REIT Corp. of capital stock of PNC in connection with any employment owns 100% of LLC’s common voting securities. As a result, contract, benefit plan or other similar arrangement with or for LLC is an indirect subsidiary of PNC and is consolidated on the benefit of employees, officers, directors or consultants, our Consolidated Balance Sheet. Trust I, II and III’s (ii) purchases of shares of common stock of PNC pursuant to a investment in LLC Preferred Securities is characterized as a contractually binding requirement to buy stock existing prior noncontrolling interest on our Consolidated Balance Sheet to the commencement of the extension period, including under since we are not the primary beneficiary of Trust I, Trust II a contractually binding stock repurchase plan, (iii) any and Trust III. This noncontrolling interest totaled dividend in connection with the implementation of a approximately $1.3 billion at December 31, 2010. shareholders’ rights plan, or the redemption or repurchase of any rights under any such plan, (iv) as a result of an exchange Each Trust III Security is automatically exchangeable into a or conversion of any class or series of PNC’s capital stock for share of Series J Non-Cumulative Perpetual Preferred Stock of any other class or series of PNC’s capital stock, (v) the PNC, each Trust II Security is automatically exchangeable purchase of fractional interests in shares of PNC capital stock into a share of Series I Non-Cumulative Perpetual Preferred pursuant to the conversion or exchange provisions of such Stock of PNC (Series I Preferred Stock), and each Trust I stock or the security being converted or exchanged or (vi) any Security is automatically exchangeable into a share of Series F stock dividends paid by PNC where the dividend stock is the Non-Cumulative Perpetual Preferred Stock of PNC Bank, same stock as that on which the dividend is being paid. N.A. (PNC Bank Preferred Stock), in each case under certain conditions relating to the capitalization or the financial PNC Bank, N.A. has contractually committed to Trust I that if condition of PNC Bank, N.A. and upon the direction of the full dividends are not paid in a dividend period on the Trust I Office of the Comptroller of the Currency. Securities, LLC Preferred Securities or any other parity equity securities issued by the LLC, neither PNC Bank, N.A. nor its We entered into a replacement capital covenant in connection subsidiaries will declare or pay dividends or other with the closing of the Trust I Securities sale (the Trust RCC) distributions with respect to, or redeem, purchase or acquire or whereby we agreed that neither we nor our subsidiaries (other make a liquidation payment with respect to, any of its equity than PNC Bank, N.A. and its subsidiaries) would purchase the capital securities during the next succeeding period (other than Trust Securities, the LLC Preferred Securities or the PNC to holders of the LLC Preferred Securities and any parity Bank Preferred Stock unless such repurchases or redemptions equity securities issued by the LLC) except: (i) in the case of are made from the proceeds of the issuance of certain dividends payable to subsidiaries of PNC Bank, N.A., to PNC qualified securities and pursuant to the other terms and Bank, N.A. or another wholly-owned subsidiary of PNC Bank, conditions set forth in the replacement capital covenant with N.A. or (ii) in the case of dividends payable to persons that are respect to the Trust RCC. not subsidiaries of PNC Bank, N.A., to such persons only if, (A) in the case of a cash dividend, PNC has first irrevocably We also entered into a replacement capital covenant in committed to contribute amounts at least equal to such cash connection with the closing of the Trust II Securities sale (the dividend or (B) in the case of in-kind dividends payable by Trust II RCC) whereby we agreed until March 29, 2017 that PNC REIT Corp., PNC has committed to purchase such neither we nor our subsidiaries would purchase or redeem the in-kind dividend from the applicable PNC REIT Corp. holders Trust II Securities, the LLC Preferred Securities or the Series I in exchange for a cash payment representing the market value Preferred Stock unless such repurchases or redemptions are of such in-kind dividend, and PNC has committed to made from the proceeds of the issuance of certain qualified contribute such in-kind dividend to PNC Bank, N.A. securities and pursuant to the other terms and conditions set forth in the replacement capital covenant with respect to the NOTE 14 EMPLOYEE BENEFIT PLANS Trust RCC. PENSION AND POSTRETIREMENT PLANS As of December 31, 2010, each of the Trust RCC and the We have a noncontributory, qualified defined benefit pension Trust II RCC are for the benefit of holders of our $200 million plan covering eligible employees. Benefits are determined of Floating Rate Junior Subordinated Notes issued in June using a cash balance formula where earnings credits are a 1998. percentage of eligible compensation. Earnings credit percentages for plan participants on December 31, 2009 are PNC has contractually committed to Trust II and Trust III that frozen at their level earned to that point. Earnings credits for if full dividends are not paid in a dividend period on the Trust all employees who become participants on or after January 1, II Securities or the Trust III Securities, as applicable, or the 2010 are a flat 3% of eligible compensation. Participants at LLC Preferred Securities held by Trust II or Trust III, as December 31, 2009 earn interest based on 30-year Treasury applicable, PNC will not declare or pay dividends with respect securities with a minimum rate, while new participants on or to, or redeem, purchase or acquire, any of its equity capital after January 1, 2010 are not subject to the minimum rate.

149 Pension contributions are based on an actuarially determined We use a measurement date of December 31 for plan assets amount necessary to fund total benefits payable to plan and benefit obligations. A reconciliation of the changes in the participants. projected benefit obligation for qualified pension, nonqualified pension and postretirement benefit plans as well We also maintain nonqualified supplemental retirement plans as the change in plan assets for the qualified pension plan for certain employees and provide certain health care and life follows: insurance benefits for qualifying retired employees (postretirement benefits) through various plans. The nonqualified pension and postretirement benefit plans are unfunded.

Reconciliation of Changes in Projected Benefit Obligation and Change in Plan Assets

Qualified Nonqualified Postretirement Pension Pension Benefits December 31 (Measurement Date) – in millions 2010 2009 2010 2009 2010 2009 Accumulated benefit obligation at end of year $3,619 $3,533 $ 286 $ 274 Projected benefit obligation at beginning of year $3,611 $3,617 $ 282 $ 263 $ 374 $ 359 National City acquisition (164) (7) Service cost 102 90 3 2 5 4 Interest cost 203 206 14 15 20 21 Amendments (43) 2 Actuarial losses and changes in assumptions 92 83 11 24 20 21 Participant contributions 14 14 Federal Medicare subsidy on benefits paid 2 2 Benefits paid (205) (178) (20) (24) (42) (40) Projected benefit obligation at end of year $3,803 $3,611 $ 290 $ 282 $ 393 $ 374 Fair value of plan assets at beginning of year $3,721 $3,292 Actual return on plan assets 475 607 Employer contribution $20 $24 $26 $24 Participant contributions 14 14 Federal Medicare subsidy on benefits paid 2 2 Benefits paid (205) (178) (20) (24) (42) (40) Fair value of plan assets at end of year $3,991 $3,721 Funded status $ 188 $ 110 $(290) $(282) $(393) $(374) Net amount recognized on the balance sheet $ 188 $ 110 $(290) $(282) $(393) $(374) Amounts recognized in accumulated other comprehensive income consist of: Prior service cost (credit) $ (46) $ (54) $2$2$ (14) $ (17) Net actuarial loss 526 658 61 53 55 35 Amount recognized in AOCI $ 480 $ 604 $63 $55 $41 $18

At December 31, 2010, the fair value of the qualified pension pursuant to section 501(a) of the Internal Revenue Code (the plan assets was greater than both the accumulated benefit Code). The Plan is qualified under section 401(a) of the Code. obligation and the projected benefit obligation. The Plan assets consist primarily of listed domestic and nonqualified pension plan is unfunded. Contributions from us international equity securities and US government, agency, and, in the case of postretirement benefit plans, participant and corporate debt securities and real estate investments. Plan contributions cover all benefits paid under the nonqualified assets as of December 31, 2010 and 2009 do include common pension plan and postretirement benefit plans. The stock of PNC. postretirement plan provides benefits to certain retirees that are at least actuarially equivalent to those provided by During 2009, the assets related to the pension plan Medicare Part D and accordingly, we receive a federal subsidy investments of the former National City qualified pension plan as shown in the table. were held in trust. The trustee was PNC Bank, N.A. During 2010, all remaining assets were transferred to the Trust and PNC PENSION PLAN ASSETS the former National City trust was dissolved. Assets related to our qualified pension plan (the Plan) are held in trust (the Trust). The trustee is PNC Bank, National The Pension Plan Administrative Committee (the Committee) Association, (PNC Bank, N.A). The Trust is exempt from tax adopted the current Pension Plan Investment Policy

150 Statement, including the updated target allocations and The asset strategy allocations for the Trust at the end of 2010 allowable ranges shown below, on August 13, 2008. On and 2009, and the target allocation range at the end of 2010, February 25, 2010, the Committee amended the investment by asset category, are as follows: policy to include a dynamic asset allocation approach and also updated target allocation ranges for certain asset categories. Asset Strategy Allocations

Percentage The long-term investment strategy for pension plan assets is of Plan Target Assets by to: Allocation Strategy at • Meet present and future benefit obligations to all Range December 31 participants and beneficiaries, PNC Pension Plan 2010 2009 • Cover reasonable expenses incurred to provide such Asset Category benefits, including expenses incurred in the Domestic Equity 32-38% 40% 39% administration of the Trust and the Plan, International Equity 17-23% 21% 18% • Provide sufficient liquidity to meet benefit and Private Equity 0-8% 2% 2% expense payment requirements on a timely basis, and Total Equity 40-70% 63% 59% • Provide a total return that, over the long term, Domestic Fixed Income 22-28% 24% 29% maximizes the ratio of trust assets to liabilities by High Yield Fixed Income 2-12% 10% 6% maximizing investment return, at an appropriate level Total Fixed Income 24-40% 34% 35% of risk. Real estate 0-8% 3% 5% Other 0-1% 0% 1% Under the dynamic asset allocation strategy, scenarios are Total 100% 100% outlined in which the Committee has the ability to make short to intermediate term asset allocation shifts based on factors The asset category represents the allocation of Plan assets in such as the Plan’s funded status, the Committee’s view of accordance with the investment objective of each of the Plan’s return on equities relative to long term expectations, the investment managers. Certain domestic equity investment Committee’s view on the direction of interest rates and credit managers utilize derivatives and fixed income securities as spreads, and other relevant financial or economic factors described in their Investment Management Agreements to which would be expected to impact the ability of the Trust to achieve their investment objective under the Investment meet its obligation to beneficiaries. Accordingly, the Policy Statement. Other investment managers may invest in allowable asset allocation ranges have been updated to eligible securities outside of their assigned asset category to incorporate the flexibility required by the dynamic allocation meet their investment objectives. The actual percentage of the policy. fair value of total plan assets held as of December 31, 2010 for equity securities, fixed income securities, real estate and all The Plan’s specific investment objective is to meet or exceed other assets are 56%, 36%, 3%, and 5%, respectively. the investment policy benchmark over the long term. The investment policy benchmark compares actual performance to We believe that, over the long term, asset allocation is the a weighted market index, and measures the contribution of single greatest determinant of risk. Asset allocation will active investment management and policy implementation. deviate from the target percentages due to market movement, This investment objective is expected to be achieved over the cash flows, investment manager performance and long term (one or more market cycles) and is measured over implementation of shifts under the dynamic allocation policy. rolling five-year periods. Total return calculations are time- Material deviations from the asset allocation targets can alter weighted and are net of investment-related fees and expenses. the expected return and risk of the Trust. On the other hand, frequent rebalancing to the asset allocation targets may result in significant transaction costs, which can impair the Trust’s ability to meet its investment objective. Accordingly, the Trust portfolio is periodically rebalanced to maintain asset allocation within the target ranges described above.

In addition to being diversified across asset classes, the Trust is diversified within each asset class. Secondary diversification provides a reasonable basis for the expectation that no single security or class of securities will have a disproportionate impact on the total risk and return of the Trust.

The Committee selects investment managers for the Trust based on the contributions that their respective investment

151 styles and processes are expected to make to the investment A description of the valuation methodologies used for assets performance of the overall portfolio. The managers’ measured at fair value follows. There have been no changes in Investment Objectives and Guidelines, which are a part of the methodologies used at December 31, 2010 compared with each manager’s Investment Management Agreement, those in place at December 31, 2009: document performance expectations and each manager’s role • Money market and mutual funds are valued at the net in the portfolio. The Committee uses the Investment asset value of the shares held by the pension plan at Objectives and Guidelines to establish, guide, control and year-end. measure the strategy and performance for each manager. • US government securities, corporate debt, common stock and preferred stock are valued at the closing The purpose of investment manager guidelines is to: price reported on the active market on which the • Establish the investment objective and performance individual securities are traded. If quoted market standards for each manager, prices are not available for the specific security, then fair values are estimated by using pricing models or • Provide the manager with the capability to evaluate quoted prices of securities with similar the risks of all financial instruments or other assets in characteristics. Such securities are generally which the manager’s account is invested, and classified within level 2 of the valuation hierarchy • Prevent the manager from exposing its account to but may be a level 3 depending on the level of excessive levels of risk, undesired or inappropriate liquidity and activity in the market for the security. risk, or disproportionate concentration of risk. • The collective trust fund investments are valued based upon the units of such collective trust fund The guidelines also indicate which investments and strategies held by the plan at year end multiplied by the the manager is permitted to use to achieve its performance respective unit value. The unit value of the collective objectives, and which investments and strategies it is trust fund is based upon significant observable inputs, prohibited from using. although it is not based upon quoted marked prices in an active market. The underlying investments of the Where public market investment strategies may include the collective trust funds consist primarily of equity use of derivatives and/or currency management, language is securities, debt obligations, short-term investments, incorporated in the managers’ guidelines to define allowable and other marketable securities. Due to the nature of and prohibited transactions and/or strategies. Derivatives are these securities, there are no unfunded commitments typically employed by investment managers to modify risk/ or redemption restrictions. return characteristics of their portfolio(s), implement asset • Limited partnerships are valued by investment allocation changes in a cost-effective manner, or reduce managers based on recent financial information used transaction costs. Under the managers’ investment guidelines, to estimate fair value. Other investments held by the derivatives may not be used solely for speculation or leverage. pension plan include derivative financial instruments Derivatives are used only in circumstances where they offer and real estate, which are recorded at estimated fair the most efficient economic means of improving the risk/ value as determined by third-party appraisals and reward profile of the portfolio. pricing models, and group annuity contracts which are measured at fair value by discounting the related BlackRock receives compensation for providing investment cash flows based on current yields of similar management services and the Asset Management Group instruments with comparable durations considering business segment receives compensation for providing trustee the credit-worthiness of the issuer. services for the majority of the Trust portfolio. Compensation for such services is paid by PNC and was not significant for These methods may result in fair value calculations that may 2010, 2009 or 2008. Non-affiliate service providers for the not be indicative of net realizable values or future fair values. Trust are compensated from plan assets. Furthermore, while the pension plan believes its valuation methods are appropriate and consistent with other market FAIR VALUE MEASUREMENTS participants, the use of different methodologies or As further described in Note 8 Fair Value, GAAP establishes assumptions to determine the fair value of certain financial the framework for measuring fair value, including a hierarchy instruments could result in a different fair value measurement used to classify the inputs used in measuring fair value. at the reporting date.

152 The following table sets forth by level, within the fair value hierarchy, the Plan’s assets at fair value as of December 31, 2010 and 2009:

Pension Plan Assets – Fair Value Hierarchy

Fair Value Measurements Using: Quoted Prices in Significant Active Markets Other Significant December For Identical Observable Unobservable 31, 2010 Assets Inputs Inputs In millions Fair Value (Level 1) (Level 2) (Level 3) Cash $5 $5 Money market funds 108 $ 108 US government securities 518 267 251 Corporate debt (a) 916 8 555 $353 Common and preferred stocks 1,195 652 543 Mutual funds 36 36 Interest in Collective Funds (b) 646 646 Limited partnerships 176 176 Other 391 14 77 300 Total $3,991 $946 $2,216 $829

Fair Value Measurements Using: Quoted Prices in Significant Active Markets Other Significant December For Identical Observable Unobservable 31, 2009 Assets Inputs Inputs In millions Fair Value (Level 1) (Level 2) (Level 3) Cash $2 $2 Money market funds 334 285 $ 49 US government securities 200 73 127 Corporate debt (a) 522 1 404 $117 Common and preferred stocks 498 198 300 Mutual funds 46 11 35 Interest in Collective Funds (b) 1,948 1,948 Limited partnerships 119 119 Other 52 8 44 Total $3,721 $578 $2,863 $280 (a) Corporate debt includes $175 million and $103 million of mortgage-backed securities as of December 31, 2010 and 2009, respectively. (b) The benefit plans own commingled funds that invest in equity and fixed income securities. The commingled funds that invest in equity securities seek to mirror the performance of the S&P 500 Index, Russell 3000 Index, Morgan Stanley Capital International ACWI X US Index, and the Dow Jones U.S. Select Real Estate Securities Index. The commingled fund that holds fixed income securities invests in domestic investment grade securities and seeks to mimic the performance of the Barclays Aggregate Bond Index.

153 The following summarizes changes in the fair value of the pension plan’s Level 3 assets during 2010 and 2009:

Rollforward of Pension Plan Level 3 Assets

Corporate Limited In millions debt partnerships Other January 1, 2010 $117 $119 $ 44 Net realized gain on sale of investments 37 6 4 Net unrealized gain/(loss) on assets held at end of year (48) 47 40 Purchases, sales, issuances, and settlements (net) 214 4 215 Transfers into (from) Level 3 33 (3) December 31, 2010 $353 $176 $300

Corporate Limited In millions debt partnerships Other January 1, 2009 $ 41 $ 55 $12 Net realized gain on sale of investments 2 Net unrealized gain/(loss) on assets held at end of year (23) (6) 9 Purchases, sales, issuances, and settlements (net) 29 11 9 Transfers into Level 3 68 59 14 December 31, 2009 $117 $119 $44

The following table provides information regarding our estimated future cash flows related to our various plans: Estimated Cash Flows

Postretirement Benefits Reduction in PNC Benefit Payments Qualified Nonqualified Gross PNC Due to Medicare In millions Pension Pension Benefit Payments Part D Subsidy Estimated 2011 employer contributions $ 34 $ 37 $2 Estimated future benefit payments 2011 $ 247 $ 34 $ 37 $2 2012 258 30 35 2 2013 267 27 35 2 2014 276 26 35 2 2015 284 25 35 2 2016 – 2020 1,541 105 166 8

The qualified pension plan contributions are deposited into the Trust, and the qualified pension plan benefit payments are paid from the Trust. For the other plans, total contributions and the benefit payments are the same and represent expected benefit amounts, which are paid from general assets. Postretirement benefits are net of participant contributions. Due to the plan’s funded status, PNC’s qualified pension contribution in 2011 is expected to be zero.

154 The components of net periodic benefit cost/ (income) and other amounts recognized in other comprehensive income were as follows.

Components of Net Periodic Benefit Cost

Qualified Pension Plan Nonqualified Pension Plan Postretirement Benefits Year ended December 31 – in millions 2010(a) 2009(a) 2008 2010(a) 2009(a) 2008 2010(a) 2009(a) 2008 Net periodic cost consists of: Service cost $ 102 $90$44 $3 $2 $2 $5 $4 $ 3 Interest cost 203 206 86 14 15 6 20 21 15 Expected return on plan assets (285) (260) (160) Amortization of prior service cost (8) (2) (2) (3) (5) (7) Amortization of actuarial losses (gains) 34 83 3 12 Net periodic cost 46 117 (32) 20 18 10 22 20 11 Other changes in plan assets and benefit obligations recognized in other comprehensive income: Current year prior service cost/(credit) (43) (17) 2 Amortization of prior service (cost)/credit 8 22 3 57 Current year actuarial loss/(gain) (99) (263) 807 11 24 2 21 21 (17) Amortization of actuarial (loss)/gain (34) (83) (3) (1) (2) Total recognized in OCI (125) (387) 792 8 25 24 26 (10) Total recognized in net periodic cost and OCI $ (79) $(270) $ 760 $28 $43 $10 $46 $46 $ 1 (a) Includes the impact of the National City plans which we acquired on December 31, 2008.

The weighted-average assumptions used (as of the beginning The weighted-average assumptions used (as of the end of each of each year) to determine net periodic costs shown above year) to determine year-end obligations for pension and were as follows: postretirement benefits were as follows:

Net Periodic Costs – Assumptions Other Pension Assumptions

Net Periodic Cost Determination At December 31 Year ended December 31 2010 2009 2008 2010 2009 Discount rate Discount rate Qualified pension 5.75% 6.05% 5.95% Qualified pension 5.20% 5.75% Nonqualified pension 5.15 5.90 5.75 Nonqualified pension 4.80 5.15 Postretirement benefits 5.40 5.95 5.95 Postretirement benefits 5.00 5.40 Rate of compensation increase (average) 4.00 4.00 4.00 Rate of compensation increase (average) 4.00 4.00 Assumed health care cost trend rate Assumed health care cost trend rate Initial trend 8.50 9.00 9.50 Initial trend 8.00 8.50 Ultimate trend 5.00 5.00 5.00 Ultimate trend 5.00 5.00 Year ultimate reached 2014 2014 2014 Year ultimate reached 2019 2014 Expected long-term return on plan assets 8.00 8.25 8.25 The discount rate assumptions were determined independently for each plan reflecting the duration of each plan’s obligations. Specifically, a yield curve was produced for a universe containing the majority of US-issued Aa grade corporate bonds, all of which were non-callable (or callable with make-whole provisions). Excluded from this yield curve were the 10% of the bonds with the highest yields and 40% with the lowest yields. For each plan, the discount rate was determined as the level equivalent rate that would produce the same present value obligation as that using spot rates aligned with the projected benefit payments.

The expected return on plan assets is a long-term assumption established by considering historical and anticipated returns of the asset classes invested in by the pension plan and the allocation strategy currently in place among those classes. We

155 review this assumption at each measurement date and adjust it frozen to future investments of such contributions effective if warranted. This assumption will be decreased from 8.00% January 1, 2010. All shares of PNC common stock held by the to 7.75% for determining 2011 net periodic cost. plan are part of the ESOP. Employee contributions to the plan for 2010, 2009, and 2008 were matched primarily by shares of The health care cost trend rate assumptions shown in the PNC common stock held in treasury or reserve, except in the preceding tables relate only to the postretirement benefit case of those participants who have exercised their plans. A one-percentage-point change in assumed health care diversification election rights to have their matching portion in cost trend rates would have the following effects: other investments available within the plan. Effective January 2011, employer matching contributions will no longer be Effect of One Percent Change in Assumed Health Care Cost made in PNC common stock, but rather made in cash.

Year ended December 31, 2010 In millions Increase Decrease Prior to July 1, 2010, PNC sponsored a separate qualified Effect on total service and interest cost $1 $(1) defined contribution plan that covered substantially all Effect on year-end benefit obligation $14 $(13) US-based GIS employees not covered by our plan. The plan was a 401(k) plan and included an ESOP feature. Under this Unamortized actuarial gains and losses and prior service costs plan, employee contributions of up to 6% of eligible and credits are recognized in AOCI each December 31, with compensation as defined by the plan were eligible to be amortization of these amounts through net periodic benefit matched annually based on GIS performance levels. Employee cost. The estimated amounts that will be amortized in 2011 are benefits expense for this plan was $6 million in 2010, $8 as follows: million in 2009, and $11 million in 2008. We measured employee benefits expense as the fair value of the shares and Estimated Amortization of Unamortized Actuarial Gains and cash contributed to the plan. As described in Note 2 Losses—2011 Divestiture, on July 1, 2010 we sold GIS. Plan assets of $239 million were transferred to The Bank of New York Mellon 2011 Estimate Corporation 401(k) Savings Plan on that date. Prior to July 1, Year ended December 31 Qualified Nonqualified Postretirement 2010, the Plan continued to operate under the provisions of the In millions Pension Pension Benefits original plan document, as amended. Prior service cost (credit) $ (8) $0 $(3) Net actuarial loss 16 4 2 Total $ 8 $4 $(1) We also maintain a nonqualified supplemental savings plan for certain employees, known as The PNC Supplemental DEFINED CONTRIBUTION PLANS Incentive Savings Plan. Effective January 1, 2010, the We have a qualified defined contribution plan that covers all employer match was discontinued in that plan. eligible PNC employees, which includes both legacy PNC and legacy National City employees. Effective December 31, 2009, the National City Savings and Investment Plan was NOTE 15 STOCK-BASED COMPENSATION PLANS merged into the PNC Incentive Savings Plan. In addition, We have long-term incentive award plans (Incentive Plans) effective January 1, 2010, the employer matching contribution that provide for the granting of incentive stock options, under the PNC Incentive Savings Plan was reduced from a nonqualified stock options, stock appreciation rights, incentive maximum of 6% to 4% of a participant’s eligible shares/performance units, restricted stock, restricted share compensation. Certain changes to the plan’s eligibility and units, other share-based awards and dollar-denominated vesting requirements also became effective January 1, 2010. awards to executives and, other than incentive stock options, Employee benefits expense related to defined contribution to non-employee directors. Certain Incentive Plan awards may plans was $90 million in 2010, $136 million in 2009 and $57 be paid in stock, cash or a combination of stock and cash. We million in 2008. We measure employee benefits expense as typically grant a substantial portion of our stock-based the fair value of the shares and cash contributed to the plan by compensation awards during the first quarter of the year. As of PNC. December 31, 2010, no stock appreciation rights were outstanding. Total compensation expense recognized related Under the PNC Incentive Savings Plan, employee to all share-based payment arrangements during 2010, 2009 contributions up to 4% of eligible compensation as defined by and 2008 was approximately $107 million, $93 million and the plan are matched 100%, subject to Code limitations. The $71 million, respectively. plan is a 401(k) Plan and includes a stock ownership (ESOP) feature. Employee contributions are invested in a number of NONQUALIFIED STOCK OPTIONS mutual fund investment options available under the plan at the Options are granted at exercise prices not less than the market direction of the employee. Although employees were also value of common stock on the grant date. Generally, options historically permitted to direct the investment of their become exercisable in installments after the grant date. No contributions into the PNC common stock fund, this fund was option may be exercisable after 10 years from its grant date.

156 Payment of the option exercise price may be in cash or shares We used the following assumptions in the option pricing of common stock at market value on the exercise date. The models to determine 2010, 2009 and 2008 option expense: exercise price may be paid in previously owned shares. • The risk-free interest rate is based on the US Treasury yield curve, • The dividend yield represents average yields over the Generally, options granted under the Incentive Plans vest previous three-year period, except for 2009 and 2010 ratably over a three-year period as long as the grantee remains where (starting with the grants made after the first an employee or, in certain cases, retires from PNC. For all quarter of 2009) we used a yield indicative of our options granted prior to the adoption of FASB ASC 718, Stock currently reduced dividend rate, Compensation, we recognized compensation expense over the • Volatility is measured using the fluctuation in three-year vesting period. If an employee retired prior to the month-end closing stock prices over a period which end of the three-year vesting period, we accelerated the corresponds with the average expected option life, expensing of all unrecognized compensation costs at the but in no case less than a five-year period, and retirement date. We recognize compensation expense for • The expected life assumption represents the period of options granted to retirement-eligible employees after time that options granted are expected to be January 1, 2006 during the first twelve months subsequent to outstanding and is based on a weighted average of the grant, in accordance with the service period provisions of historical option activity. the options. Option Pricing Assumptions Weighted-average for the year ended December 31 2010 2009 2008 OPTION PRICING ASSUMPTIONS For purposes of computing stock option expense, we Risk-free interest rate 2.9% 1.9% 3.1% estimated the fair value of stock options primarily by using the Dividend yield 0.7 3.5 3.3 Black-Scholes option-pricing model. Option pricing models Volatility 32.7 27.3 18.5 require the use of numerous assumptions, many of which are Expected life 6.0 yrs. 5.6 yrs. 5.7 yrs. very subjective. Grant date fair value $ 19.54 $ 5.73 $ 7.27

Stock Option Rollforward—2010

PNC Options Converted From PNC National City Total Weighted- Weighted- Weighted- Weighted- Average Average Average Average Remaining Aggregate Year ended December 31, 2010 Exercise Exercise Exercise Contractual Intrinsic In thousands, except weighted-average data Shares Price Shares Price Shares Price Life Value Outstanding, January 1 18,496 $56.10 1,522 $637.64 20,018 $100.32 Granted 2,786 56.77 2,786 56.77 Exercised (315) 46.04 (315) 46.04 Cancelled (1,142) 56.01 (308) 477.98 (1,450) 145.55 Outstanding, December 31 19,825 $56.36 1,214 $678.09 21,039 $ 92.25 5.3 years $164,971 Vested and expected to vest—December 31 (a) 19,492 $56.39 1,214 $678.09 20,706 $ 92.85 5.3 years $161,896 Exercisable, December 31 12,183 $62.40 1,214 $678.09 13,397 $118.21 3.6 years $ 51,122 (a) Adjusted for estimated forfeitures on unvested options.

To determine stock-based compensation expense, the grant- Cash received from option exercises under all Incentive Plans date fair value is applied to the options granted with a for 2010, 2009 and 2008 was approximately $15 million, $5 reduction made for estimated forfeitures. We recognized million and $167 million, respectively. The actual tax benefit compensation expense for stock options on a straight-line realized for tax deduction purposes from option exercises basis over the pro rata vesting period. under all Incentive Plans for 2010, 2009 and 2008 was approximately $5 million, $2 million and $58 million, At December 31, 2009 and 2008, options for 12,722,000 and respectively. 11,373,000 shares of common stock, respectively, were exercisable at a weighted-average price of $132.52 and There were no options granted in excess of market value in $151.03, respectively. The total intrinsic value of options 2010, 2009 or 2008. Shares of common stock available during exercised during 2010, 2009 and 2008 was $5 million, $1 the next year for the granting of options and other awards million and $59 million, respectively. under the Incentive Plans were 28,189,113 at December 31, 2010. Total shares of PNC common stock authorized for

157 future issuance under equity compensation plans totaled In the chart above, the unit shares and related weighted- 29,883,400 shares at December 31, 2010, which includes average grant-date fair value of the incentive/performance shares available for issuance under the Incentive Plans and the awards exclude the effect of dividends on the underlying Employee Stock Purchase Plan as described below. shares, as those dividends will be paid in cash.

During 2010, we issued approximately 312,000 shares from At December 31, 2010, there was $42 million of unrecognized treasury stock in connection with stock option exercise deferred compensation expense related to nonvested share- activity. As with past exercise activity, we currently intend to based compensation arrangements granted under the Incentive utilize treasury stock for any future stock option exercises. Plans. This cost is expected to be recognized as expense over a period of no longer than five years. The total fair value of incentive/performance unit share and restricted stock /unit Awards granted to non-employee directors in 2010, 2009 and awards vested during 2010, 2009 and 2008 was approximately 2008 include 29,040; 39,552; and 25,381 deferred stock units, $39 million, $47 million and $41 million, respectively. respectively, awarded under the Outside Directors Deferred Stock Unit Plan. A deferred stock unit is a phantom share of LIABILITY AWARDS our common stock, which requires liability accounting Beginning in 2008, we granted cash-payable restricted share treatment until such awards are paid to the participants as units to certain executives. The grants were made primarily as cash. As there are no vesting or service requirements on these part of an annual bonus incentive deferral plan. While there awards, total compensation expense is recognized in full on all are time-based and service-related vesting criteria, there are no awarded units on the date of grant. market or performance criteria associated with these awards. Compensation expense recognized related to these awards was INCENTIVE/PERFORMANCE UNIT SHARE AWARDS AND recorded in prior periods as part of annual cash bonus criteria. RESTRICTED STOCK/UNIT AWARDS As of December 31, 2010, there were 484,089 of these cash- The fair value of nonvested incentive/performance unit share payable restricted share units outstanding. awards and restricted stock/unit awards is initially determined based on prices not less than the market value of our common During the third quarter of 2009, we entered into an agreement stock price on the date of grant. Certain incentive/performance with certain of our executives regarding a portion of their unit share awards are subsequently valued subject to the salary to be payable in stock units. These units, which are achievement of one or more financial and other performance cash-payable, have no future service, market or performance goals over a three-year period. The Personnel and criteria and as such are fully expensed at grant date. These Compensation Committee of the Board of Directors approves units will be settled in cash on March 31, 2011. As of the final award payout with respect to certain incentive/ December 31, 2010, there were 280,174 of these units performance unit share awards. Restricted stock/unit awards outstanding. have vesting periods generally ranging from 36 months to 60 months. Nonvested Cash-Payable Restricted Share Unit— Rollforward

The weighted-average grant-date fair value of incentive/ Nonvested Cash- performance unit share awards and restricted stock/unit Payable Restricted Aggregate awards granted in 2010, 2009 and 2008 was $54.59, $41.16 Unit Intrinsic and $59.25 per share, respectively. We recognize In thousands Shares Value compensation expense for such awards ratably over the Outstanding at December 31, 2009 1,001 corresponding vesting and/or performance periods for each Granted 317 type of program. Vested and released (181) Forfeited (25) Outstanding at December 31, 2010 1,112 $67,531 Nonvested Incentive/Performance Unit Share Awards and Restricted Stock/Unit Awards – Rollforward The total of all share-based liability awards paid out during 2010 and 2009 were approximately $9 million and $2 million, Weighted- Nonvested Weighted- respectively. There were no share-based liability awards paid Nonvested Average Restricted Average out during 2008. Incentive/ Grant Stock/ Grant Performance Date Fair Unit Date Fair Shares in thousands Unit Shares Value Shares Value EMPLOYEE STOCK PURCHASE PLAN December 31, 2009 285 $66.45 2,213 $53.45 As of December 31, 2010, our ESPP has approximately Granted 211 54.03 685 54.76 1.7 million shares available for issuance. Full-time employees Vested (128) 74.96 (585) 68.88 with six months and part-time employees with 12 months of Forfeited (5) 55.56 (63) 49.59 continuous employment with a participating entity are eligible December 31, 2010 363 $56.40 2,250 $49.95 to participate in the ESPP at the commencement of the next

158 six-month offering period. Eligible participants may purchase The exchange contemplated by these agreements was our common stock at 95% of the fair market value on the last completed on February 27, 2009. On that date, PNC’s day of each six-month offering period. No charge to earnings obligation to deliver its BlackRock common shares to is recorded with respect to the ESPP. BlackRock was replaced with an obligation to deliver shares of BlackRock’s new Series C Preferred Stock. PNC acquired Employee Stock Purchase Plan – Summary 2.9 million shares of Series C Preferred Stock from BlackRock in exchange for common shares on that same date. PNC accounts for its BlackRock Series C Preferred Stock at Year ended December 31 Shares Issued Purchase Price Per Share fair value, which offsets the impact of marking-to-market the 2010 147,177 $53.68 and $57.68 obligation to deliver these shares to BlackRock. The fair value 2009 158,536 36.87 and 50.15 2008 133,563 54.25 and 46.55 of the BlackRock Series C Preferred Stock is included on our Consolidated Balance Sheet in the caption Other assets. Additional information regarding the valuation of the BLACKROCK LTIP AND EXCHANGE AGREEMENTS BlackRock Series C Preferred Stock is included in Note 8. BlackRock adopted the 2002 LTIP program to help attract and retain qualified professionals. At that time, PNC agreed to transfer up to four million of the shares of BlackRock NOTE 16 FINANCIAL DERIVATIVES common stock then held by us to help fund the 2002 LTIP and We use derivative financial instruments (derivatives) future programs approved by BlackRock’s board of directors, primarily to help manage exposure to interest rate, market and subject to certain conditions and limitations. As of credit risk and reduce the effects that changes in interest rates December 31, 2010, approximately 1.1 million shares of may have on net income, fair value of assets and liabilities, BlackRock common stock were transferred by PNC and and cash flows. We also enter into derivatives with customers distributed to LTIP participants. to facilitate their risk management activities.

BlackRock granted awards in 2007 under an additional LTIP Derivatives represent contracts between parties that usually program. Since BlackRock has achieved the earnings require little or no initial net investment and result in one party performance goals related to these awards, the awards will delivering cash or another type of asset to the other party vest on September 29, 2011, the end of the service condition. based on a notional amount and an underlying as specified in Of the shares of BlackRock common stock that we have the contract. Derivative transactions are often measured in agreed to transfer to fund their LTIP programs, approximately terms of notional amount, but this amount is generally not 1.6 million shares have been committed to fund the awards exchanged and it is not recorded on the balance sheet. The vesting in 2011 and the amount remaining would then be notional amount is the basis to which the underlying is applied available to fund future awards. to determine required payments under the derivative contract. The underlying is a referenced interest rate, commonly LIBOR, security price, credit spread or other index. Certain PNC’s noninterest income included pretax gains of $98 contracts and commitments, such as residential and million in 2009 and $243 million in 2008 related to our commercial real estate loan commitments associated with BlackRock LTIP shares obligation. These gains represented loans to be sold, also qualify as derivative instruments. the mark-to-market adjustment related to our remaining BlackRock LTIP common shares obligation and resulted from the decrease in the market value of BlackRock common shares All derivatives are carried on our Consolidated Balance Sheet in those periods. at fair value. Derivative balances are presented on a net basis taking into consideration the effects of legally enforceable master netting agreements. Cash collateral exchanged with As previously reported, PNC entered into an Exchange counterparties is also netted against the applicable derivative Agreement with BlackRock on December 26, 2008. The fair values. transactions that resulted from this agreement restructured PNC’s ownership of BlackRock equity without altering, to any meaningful extent, PNC’s economic interest in Further discussion on how derivatives are accounted for is BlackRock. PNC continues to be subject to the limitations on included in Note 1 Accounting Policies. its voting rights in its existing agreements with BlackRock. Also on December 26, 2008, BlackRock entered into an DERIVATIVES DESIGNATED IN HEDGE RELATIONSHIPS Exchange Agreement with Merrill Lynch in anticipation of the Certain derivatives used to manage interest rate risk as part of consummation of the merger of Bank of America Corporation our asset and liability risk management activities are and Merrill Lynch that occurred on January 1, 2009. The PNC designated as accounting hedges under GAAP. Derivatives and Merrill Lynch Exchange Agreements restructured PNC’s hedging the risks associated with changes in the fair value of and Merrill Lynch’s respective ownership of BlackRock assets or liabilities are considered fair value hedges, while common and preferred equity. derivatives hedging the variability of expected future cash

159 flows are considered cash flow hedges. Designating Fair Value Hedges derivatives as accounting hedges allows for gains and losses We enter into receive-fixed, pay-variable interest rate swaps to on those derivatives, to the extent effective, to be recognized hedge changes in the fair value of outstanding fixed-rate debt in the income statement in the same period the hedged items and borrowings caused by fluctuations in market interest rates. affect earnings. The specific products hedged include bank notes, Federal Home Loan Bank borrowings, and senior and subordinated Cash Flow Hedges debt. We also enter into pay-fixed, receive- variable interest We enter into receive-fixed, pay-variable interest rate swaps to rate swaps to hedge changes in the fair value of fixed rate modify the interest rate characteristics of designated investment securities caused by fluctuations in market interest commercial loans from variable to fixed in order to reduce the rates. The specific products hedged include US Treasury, impact of changes in future cash flows due to market interest government agency and other debt securities. For these hedge rate changes. For these cash flow hedges, any changes in the relationships, we use statistical regression analysis to assess fair value of the derivatives that are effective in offsetting hedge effectiveness at both the inception of the hedge changes in the forecasted interest cash flows are recorded in relationship and on an ongoing basis. There were no accumulated other comprehensive income and are reclassified components of derivative gains or losses excluded from the to interest income in conjunction with the recognition of assessment of hedge effectiveness. interest receipts on the loans. In the 12 months that follow December 31, 2010, we expect to reclassify from the amount Further detail regarding the notional amounts, fair values and currently reported in accumulated other comprehensive gains and losses recognized related to derivatives used in fair income net derivative gains of $340 million pretax, or $221 value and cash flow hedge strategies is presented in the tables million after-tax, in association with interest receipts on the that follow. hedged loans. This amount could differ from amounts actually recognized due to changes in interest rates, hedge The ineffective portion of the change in value of our fair value dedesignations, and the addition of other hedges subsequent to and cash flow hedge derivatives resulted in net losses of $31 December 31, 2010. The maximum length of time over which million for 2010 compared with a net loss of $45 million for forecasted loan cash flows are hedged is 10 years. We use 2009 and a net gain of $8 million for 2008. statistical regression analysis to assess the effectiveness of these hedge relationships at both the inception of the hedge DERIVATIVES NOT DESIGNATED IN HEDGE RELATIONSHIPS relationship and on an ongoing basis. We also enter into derivatives which are not designated as accounting hedges under GAAP. We also periodically enter into forward purchase and sale contracts to hedge the variability of the consideration that will be paid or received related to the purchase or sale of debt The majority of these derivatives is used to manage risk securities classified as available for sale. The forecasted related to residential and commercial mortgage banking purchase or sale is consummated upon gross settlement of the activities and are considered economic hedges. Although these forward contract itself. As a result, hedge ineffectiveness, if derivatives are used to hedge risk, they are not designated as any, is typically minimal. Gains and losses on these forward accounting hedges because the contracts they are hedging are contracts are recorded in accumulated other comprehensive typically also carried at fair value on the balance sheet, income and are recognized in earnings when the hedged cash resulting in symmetrical accounting treatment for both the flows affect earnings. In the 12 months that follow hedging instrument and the hedged item. December 31, 2010, we expect to reclassify from the amount currently reported in accumulated other comprehensive Our residential mortgage banking activities consist of income, net derivative gains of $28 million pretax, or $18 originating, selling and servicing mortgage loans. Residential million after-tax, as adjustments of yield on securities mortgage loans that will be sold in the secondary market, and available for sale. The maximum length of time we are the related loan commitments, which are considered hedging forecasted purchases is three months. There were no derivatives, are accounted for at fair value. Changes in the fair amounts in accumulated other comprehensive income related value of the loans and commitments due to interest rate risk to the forecasted sale of securities at December 31, 2010. are hedged with forward loan sale contracts and Treasury and Eurodollar futures and options. Gains and losses on the loans There were no components of derivative gains or losses and commitments held for sale and the derivatives used to excluded from the assessment of hedge effectiveness related economically hedge them are included in residential mortgage to either cash flow hedge strategy. noninterest income on the Consolidated Income Statement.

During 2010 and 2009, there were no gains or losses from We typically retain the servicing rights related to residential cash flow hedge derivatives reclassified to earnings because it mortgage loans that we sell. Residential mortgage servicing became probable that the original forecasted transaction would rights are accounted for at fair value with changes in fair value not occur. influenced primarily by changes in interest rates. Derivatives

160 used to hedge the fair value of residential mortgage servicing written caps and floors liability on our Consolidated Balance rights include interest rate futures, swaps and options, Sheet was $15 million. Our ultimate obligation under written including caps, floors, and swaptions, and forward contracts to options is based on future market conditions and is only purchase mortgage-backed securities. Gains and losses on quantifiable at settlement. residential mortgage servicing rights and the related derivatives used for hedging are included in residential Further detail regarding the derivatives not designated in mortgage noninterest income. hedging relationships is presented in the tables that follow.

Commercial mortgage loans are also sold into the secondary DERIVATIVE COUNTERPARTY CREDIT RISK market as part of our commercial mortgage banking activities By entering into derivative contracts we are exposed to credit and are accounted for at fair value. Commitments related to risk. We seek to minimize credit risk through internal credit loans that will be sold are considered derivatives and are also approvals, limits, monitoring procedures, executing master accounted for at fair value. Derivatives used to economically netting agreements and collateral requirements. We generally hedge these loans and commitments from changes in fair enter into transactions with counterparties that carry high value due to interest rate risk and credit risk include forward quality credit ratings. Nonperformance risk including credit loan sale contracts, interest rate swaps, and credit default risk is included in the determination of the estimated net fair swaps. Gains and losses on the commitments, loans and value. derivatives are included in other noninterest income. We generally have established agreements with our major The residential and commercial loan commitments associated derivative dealer counterparties that provide for exchanges of with loans to be sold which are accounted for as derivatives marketable securities or cash to collateralize either party’s are valued based on the estimated fair value of the underlying positions. At December 31, 2010, we held cash, US loan and the probability that the loan will fund within the government securities and mortgage-backed securities totaling terms of the commitment. The fair value also takes into $837 million under these agreements. We pledged cash and account the fair value of the embedded servicing right. mortgage-backed securities of $699 million under these agreements. To the extent not netted against derivative fair We offer derivatives to our customers in connection with their values under a master netting agreement, cash pledged is risk management needs. These derivatives primarily consist of included in Other assets and cash held is included in Other interest rate swaps, interest rate caps, floors, swaptions, and borrowed funds on our Consolidated Balance Sheet. foreign exchange and equity contracts. We primarily manage our market risk exposure from customer transactions by The credit risk associated with derivatives executed with entering into offsetting derivative transactions with third-party customers is essentially the same as that involved in extending dealers. Gains and losses on customer-related derivatives are loans and is subject to normal credit policies. We may obtain included in other noninterest income. collateral based on our assessment of the customer’s credit quality. The derivatives portfolio also includes derivatives used for other risk management activities. These derivatives are We periodically enter into risk participation agreements to entered into based on stated risk management objectives. share some of the credit exposure with other counterparties related to interest rate derivative contracts or to take on credit This segment of the portfolio includes credit default swaps exposure to generate revenue. We will make/receive payments (CDS) used to mitigate the risk of economic loss on a portion under these agreements if a customer defaults on its obligation of our loan exposure. We also sell loss protection to mitigate to perform under certain derivative swap contracts. Risk the net premium cost and the impact of mark-to-market participation agreements are included in the derivatives table accounting on CDS purchases to hedge the loan portfolio. The that follows. Our exposure related to risk participations where fair values of these derivatives typically are based on related we sold protection is discussed in the Credit Derivatives credit spreads. Gains and losses on the derivatives entered into section below. for other risk management are included in other noninterest income. CONTINGENT FEATURES Some of PNC’s derivative instruments contain provisions that Included in the customer, mortgage banking risk management, require PNC’s debt to maintain an investment grade credit and other risk management portfolios are written interest-rate rating from each of the major credit rating agencies. If PNC’s caps and floors entered into with customers and for risk debt ratings were to fall below investment grade, it would be management purposes. We receive an upfront premium from in violation of these provisions, and the counterparties to the the counterparty and are obligated to make payments to the derivative instruments could request immediate payment or counterparty if the underlying market interest rate rises above demand immediate and ongoing full overnight or falls below a certain level designated in the contract. At collateralization on derivative instruments in net liability both December 31, 2010 and 2009, the fair value of the positions.

161 The aggregate fair value of all derivative instruments with PNC would have been required to post if the credit-risk- credit-risk-related contingent features that were in a net related contingent features underlying these agreements had liability position on December 31, 2010 was $868 million for been triggered on December 31, 2010, would be an additional which PNC had posted collateral of $680 million in the $188 million. normal course of business. The maximum amount of collateral

Derivatives Total Notional or Contractual Amounts and Estimated Net Fair Values

Asset Derivatives Liability Derivatives December 31, 2010 December 31, 2009 December 31, 2010 December 31, 2009 Notional/ Notional/ Notional/ Notional/ Contract Fair Contract Fair Contract Fair Contract Fair In millions Amount Value (a) Amount Value (a) Amount Value (b) Amount Value (b) Derivatives designated as hedging instruments under GAAP Interest rate contracts: Cash flow hedges $ 13,635 $ 377 $ 6,394 $ 32 $ 3,167 $ 53 $ 7,011 $ 95 Fair value hedges 9,878 878 13,048 707 1,594 32 Total derivatives designated as hedging instruments $ 23,513 $1,255 $ 19,442 $ 739 $ 4,761 $ 85 $ 7,011 $ 95 Derivatives not designated as hedging instruments under GAAP Derivatives used for residential mortgage banking activities: Residential mortgage servicing Interest rate contracts $112,236 $1,490 $ 88,593 $ 651 $ 66,476 $1,419 $ 42,874 $ 766 Loan sales Interest rate contracts 11,765 119 4,251 39 3,585 31 1,977 14 Subtotal $124,001 $1,609 $ 92,844 $ 690 $ 70,061 $1,450 $ 44,851 $ 780 Derivatives used for commercial mortgage banking activities: Interest rate contracts $ 1,544 $ 78 $ 2,128 $ 67 $ 2,166 $ 114 $ 1,553 $ 74 Credit contracts: Credit default swaps 210 8 410 59 50 7 Subtotal $ 1,754 $ 86 $ 2,538 $ 126 $ 2,166 $ 114 $ 1,603 $ 81 Derivatives used for customer- related activities: Interest rate contracts $ 53,675 $2,608 $ 51,270 $2,193 $ 49,266 $2,700 $ 49,659 $2,237 Foreign exchange contracts 3,659 149 4,168 122 4,254 155 3,834 108 Equity contracts 195 16 195 16 139 19 156 16 Credit contracts: Risk participation agreements 1,371 5 1,091 3 1,367 2 1,728 2 Subtotal $ 58,900 $2,778 $ 56,724 $2,334 $ 55,026 $2,876 $ 55,377 $2,363 Derivatives used for other risk management activities: Interest rate contracts $ 3,420 $ 20 $ 3,222 $ 13 $ 1,099 $ 9 $ 2,360 $ 19 Foreign exchange contracts 39 1 32 4 2 Credit contracts: Credit default swaps 376 9 516 13 175 1 612 15 Other contracts (c) 209 396 211 486 Subtotal $ 3,796 $ 29 $ 3,777 $ 27 $ 1,515 $ 410 $ 3,185 $ 520 Total derivatives not designated as hedging instruments $188,451 $4,502 $155,883 $3,177 $128,768 $4,850 $105,016 $3,744 Total Gross Derivatives $211,964 $5,757 $175,325 $3,916 $133,529 $4,935 $112,027 $3,839 Less: Legally enforceable master netting agreements 3,203 1,600 3,203 1,600 Less: Cash collateral 659 269 674 506 Total Net Derivatives $1,895 $2,047 $1,058 $1,733 (a) Included in Other Assets on our Consolidated Balance Sheet. (b) Included in Other Liabilities on our Consolidated Balance Sheet. (c) Includes PNC’s obligation to fund a portion of certain BlackRock LTIP programs.

162 Gains (losses) on derivative instruments and related hedged items follow:

Derivatives Designated in GAAP Hedge Relationships – Fair Value Hedges

December 31, 2010 December 31, 2009 Gain (Loss) Gain (Loss) Gain (Loss) on Related Gain (Loss) on Related on Hedged on Hedged Derivatives Items Derivatives Items Recognized Recognized Recognized Recognized Year ended in Income in Income in Income in Income In millions Hedged Items Location Amount Amount Amount Amount Interest rate contracts US Treasury and Investment Government securities (interest Agencies income) Securities $ 9 $ (14) Interest rate contracts Other Debt Investment Securities securities (interest income) (1) (1) Interest rate contracts Federal Home Borrowed funds Loan Bank (interest expense) borrowings (66) 64 $(107) $109 Interest rate contracts Subordinated debt Borrowed funds (interest expense) 190 (218) (447) 398 Interest rate contracts Bank notes and Borrowed funds senior debt (interest expense) 146 (140) (24) 28 Total $278 $(309) $(578) $535

Derivatives Designated in GAAP Hedge Relationships – Cash Flow Hedges

Gain (Loss) on Derivatives Gain Reclassified from Gain (Loss) Recognized in Year ended Recognized in OCI Accumulated OCI into Income Income on Derivatives In millions (Effective Portion) (Effective Portion) (Ineffective Portion) Location Amount Location Amount December 31, 2010 Interest rate contracts $948 Interest income $339 Interest income Noninterest income 48 December 31, 2009 Interest rate contracts $ (12) Interest income $319 Interest income $(2)

163 Derivatives Not Designated as Hedging Instruments under GAAP

Year ended December 31 In millions 2010 2009 Derivatives used for residential mortgage banking activities: Residential mortgage servicing Interest rate contracts $440 $27 Loan sales Interest rate contracts (81) (80) Gains (losses) from residential mortgage banking activities (a) $359 $ (53) Derivatives used for commercial mortgage banking activities: Interest rate contracts $ (63) $88 Credit contracts (22) (35) Gains (losses) from commercial mortgage banking activities (b) $ (85) $53 Derivatives used for customer-related activities: Interest rate contracts $16 $29 Foreign exchange contracts 44 81 Equity contracts (2) 2 Credit contracts (1) Gains (losses) from customer-related activities (b) $58 $ 111 Derivatives used for other risk management activities: Interest rate contracts $ (9) $35 Foreign exchange contracts (6) (10) Credit contracts 4 (23) Other contracts (c) 86 (178) Gains (losses) from other risk management activities (b) $75 $(176) Total gains (losses) from derivatives not designated as hedging instruments $407 $ (65) (a) Included in residential mortgage noninterest income. (b) Included in other noninterest income. (c) Relates to BlackRock LTIP.

CREDIT DERIVATIVES The credit derivative underlying is based on the credit risk of a specific entity, entities, or an index. We enter into credit derivatives, specifically credit default swaps and risk participation agreements, as part of our commercial mortgage banking hedging activities and for customer and other risk management purposes. Details regarding credit default swaps and risk participations sold follows:

Credit Default Swaps

December 31, 2010 December 31, 2009 Estimated Weighted-Average Estimated Weighted-Average Notional Net Fair Remaining Notional Net Fair Remaining Dollars in millions Amount Value Maturity In Years Amount Value Maturity In Years Credit Default Swaps – Sold Single name $ 45 $ 4 2.8 $ 85 $ (4) 3.2 Index traded 189 2 2.0 457 6.1 Total $234 $ 6 2.2 $ 542 $ (4) 5.7 Credit Default Swaps – Purchased Single name $317 $ 2 2.6 $ 586 $ 1 3.7 Index traded 210 8 38.8 460 53 35.9 Total $527 $10 17.0 $1,046 $54 17.9 Total $761 $16 12.5 $1,588 $50 13.7

164 The notional amount of these credit default swaps by credit Risk Participation Agreements rating follows: We have sold risk participation agreements with terms ranging from less than one year to 21 years. We will be required to Credit Ratings of Credit Default Swaps make payments under these agreements if a customer defaults on its obligation to perform under certain derivative swap December 31, December 31, Dollars in millions 2010 2009 contracts with third parties. Credit Default Swaps – Sold Investment grade (a) $220 $ 496 Risk Participation Agreements Sold Subinvestment grade (b) 14 46 Estimated Weighted-Average Total $234 $ 542 Notional Net Fair Remaining Dollars in millions Amount Value Maturity In Years Credit Default Swaps – Purchased Investment grade (a) $385 $ 894 December 31, 2010 $1,367 $(2) 2.0 Subinvestment grade (b) 142 152 December 31, 2009 $1,728 $(2) 2.0 Total $527 $1,046 Total $761 $1,588 Based on our internal risk rating process of the underlying (a) Investment grade with a rating of BBB-/Baa3 or above based on published rating third parties to the swap contracts, the percentages of the agency information. exposure amount of risk participation agreements sold by (b) Subinvestment grade with a rating below BBB-/Baa3 based on published rating internal credit rating follow: agency information. Internal Credit Ratings of Risk Participation Agreements The referenced/underlying assets for these credit default Sold swaps follow: December 31, December 31, Referenced/Underlying Assets of Credit Default Swaps 2010 2009 Pass (a) 95% 96% Commercial Below pass (b) 5% 4% mortgage- Corporate backed (a) Indicates the expected risk of default is currently low. Debt securities Loans (b) Indicates a higher degree of risk of default. December 31, 2010 62% 28% 10% December 31, 2009 66% 29% 5% Assuming all underlying swap counterparties defaulted at December 31, 2010, the exposure from these agreements We enter into credit default swaps under which we buy loss would be $49 million based on the fair value of the underlying protection from or sell loss protection to a counterparty for the swaps, compared with $78 million at December 31, 2009. occurrence of a credit event related to a referenced entity or index. The maximum amount we would be required to pay under the credit default swaps in which we sold protection, assuming all referenced underlyings experience a credit event at a total loss, without recoveries, was $234 million at December 31, 2010 and $542 million at December 31, 2009.

165 NOTE 17 EARNINGS PER SHARE

BASIC AND DILUTED EARNINGS PER COMMON SHARE

In millions, except per share data 2010 2009 2008 Basic Net income from continuing operations $3,024 $2,358 $ 796 Less: Net income (loss) attributable to noncontrolling interests (15) (44) 32 Dividends distributed to common shareholders 203 428 896 Dividends distributed to preferred shareholders 146 388 21 Dividends distributed to nonvested restricted shares 1 15 Preferred stock discount accretion and redemptions 255 56 Undistributed net income from continuing operations $2,434 $1,529 $ (158) Undistributed net income from discontinued operations 373 45 118 Undistributed net income $2,807 $1,574 $ (40) Percentage of undistributed income allocated to common shares 99.64% 99.68% 99.51% Undistributed income from continuing operations allocated to common shares $2,425 $1,524 $ (158) Plus common dividends 203 428 896 Net income from continuing operations attributable to basic common shares $2,628 $1,952 $ 738 Undistributed income from discontinued operations allocated to common shares 372 45 118 Net income attributable to basic common shares $3,000 $1,997 $ 856 Basic weighted-average common shares outstanding 517 454 344 Basic earnings per common share from continuing operations $ 5.08 $ 4.30 $ 2.15 Basic earnings per common share from discontinued operations .72 .10 .34 Basic earnings per common share $ 5.80 $ 4.40 $ 2.49 Diluted Net income from continuing operations attributable to basic common shares $2,628 $1,952 $ 738 Less: BlackRock common stock equivalents 17 15 12 Net income from continuing operations attributable to diluted common shares $2,611 $1,937 $ 726 Net income from discontinued operations attributable to diluted common shares 372 45 118 Net income attributable to diluted common shares $2,983 $1,982 $ 844 Basic weighted-average common shares outstanding 517 454 344 Dilutive potential common shares (a) (b) 3 12 Diluted weighted-average common shares outstanding 520 455 346 Diluted earnings per common share from continuing operations $ 5.02 $ 4.26 $ 2.10 Diluted earnings per common share from discontinued operations .72 .10 .34 Diluted earnings per common share $ 5.74 $ 4.36 $ 2.44 (a) Excludes stock options considered to be anti-dilutive 11 15 9 (b) Excludes warrants considered to be anti-dilutive 22 22 19

166 NOTE 18 EQUITY total dividends of $421 million to the US Treasury while the Series N preferred shares were outstanding. COMMON STOCK On February 8, 2010, we raised $3.0 billion in new common As part of the National City transaction, we issued 9.875% equity through the issuance of 55.6 million shares of common Fixed-to-Floating Rate Non-Cumulative Preferred Stock, stock in an underwritten offering at $54 per share. The Series L in exchange for National City’s Fixed-to-Floating underwriters exercised their option to purchase an additional Rate Non-Cumulative Preferred Stock, Series F. Dividends on 8.3 million shares of common stock at the offering price of the Fixed-to-Floating Rate Non-Cumulative Preferred Stock, $54 per share, totaling approximately $450 million, to cover Series L are payable if and when declared each 1st of over-allotments. We completed this issuance on March 11, February, May, August and November. Dividends will be paid 2010. at a rate of 9.875% prior to February 1, 2013 and at a rate of three-month LIBOR plus 633 basis points beginning February 1, 2013. The Series L is redeemable at PNC’s PREFERRED STOCK option, subject to Federal Reserve approval, if then applicable, Information related to preferred stock is as follows: on or after February 1, 2013 at a redemption price per share Preferred Stock – Issued and Outstanding equal to the liquidation preference plus any declared but unpaid dividends.

Preferred Shares Liquidation Also as part of the National City transaction, we established December 31 value per Shares in thousands share 2010 2009 the PNC Non-Cumulative Perpetual Preferred Stock, Series M, which mirrors in all material respects the former National Authorized $1 par value 16,588 16,956 City Non-Cumulative Perpetual Preferred Stock, Series E. Issued and outstanding PNC has designated 5,751preferred shares, liquidation value Series A $ 40 6 $100,000 per share, for this series. No shares have yet been Series B 40 1 1 issued; however, National City issued stock purchase Series C 20 118 contracts for 5,001 shares of its Series E Preferred Stock (now Series D 20 168 replaced by the PNC Series M as part of the National City Series K 10,000 50 50 transaction) to the National City Preferred Capital Trust I in Series L 100,000 2 2 connection with the issuance by that Trust of $500 million of Series N 100,000 76 12.000% Fixed-to-Floating Rate Normal Automatic Preferred Total issued and outstanding 53 421 Enhanced Capital Securities (the Normal APEX Securities) in January 2008 by the Trust. It is expected that the Trust will On December 31, 2008, we issued $7.6 billion of Fixed Rate purchase 5,001 of the Series M preferred shares pursuant to Cumulative Perpetual Preferred Stock, Series N, to the US these stock purchase contracts on December 10, 2012 or on an Treasury under the US Treasury’s Troubled Asset Relief earlier date and possibly as late as December 10, 2013. The Program (TARP) Capital Purchase Program, together with a Trust has pledged the $500,100,000 principal amount of warrant to purchase shares of common stock of PNC National City 8.729% Junior Subordinated Notes due 2043 described below. held by the Trust and their proceeds to secure this purchase obligation. As approved by the Federal Reserve Board, US Treasury and our other banking regulators, on February 10, 2010, we If Series M shares are issued prior to December 10, 2012, any redeemed all 75,792 shares of our Series N Preferred Stock dividends on such shares will be calculated at a rate per held by the US Treasury. We used the net proceeds from the annum equal to 12.000% until December 10, 2012, and common stock offering described above, senior notes thereafter, at a rate per annum that will be reset quarterly and offerings and other funds to redeem the Series N Preferred will equal three-month LIBOR for the related dividend period Stock. plus 8.610%. Dividends will be payable if and when declared by the Board at the dividend rate so indicated applied to the In connection with the redemption of the Series N Preferred liquidation preference per share of the Series M Preferred Stock, we accelerated the accretion of the remaining issuance Stock. The Series M is redeemable at PNC’s option, subject to discount on the Series N Preferred Stock and recorded a Federal Reserve approval, if then applicable, on or after corresponding reduction in retained earnings of $250 million December 10, 2012 at a redemption price per share equal to during the first quarter of 2010. This resulted in a one-time, the liquidation preference plus any declared but unpaid noncash reduction in net income attributable to common dividends. shareholders and related basic and diluted earnings per share. As a result of the National City transaction, we assumed Dividends of $89 million were paid on February 10, 2010 National City’s obligations under replacement capital when the Series N Preferred Stock was redeemed. PNC paid covenants with respect to (i) the Normal APEX Securities and

167 our Series M shares and (ii) our 6,000,000 of Depositary TARP WARRANT Shares (each representing 1/4000th of an interest in a share of A warrant issued to the US Treasury in connection with the our 9.875% Fixed-to-Floating Rate Non-Cumulative Preferred Series N Preferred Stock described above would have enabled Stock, Series L), whereby we agreed not to cause the the US Treasury to purchase up to approximately 16.9 million redemption or repurchase of the applicable securities, unless shares of PNC common stock at an exercise price of $67.33 such repurchases or redemptions are made from the proceeds per share. After exchanging its TARP Warrant for 16,885,192 of the issuance of certain qualified securities and pursuant to warrants, each to purchase one share of PNC common stock, the other terms and conditions set forth in the replacement the US Treasury sold the warrants in a secondary public capital covenants. offering. The sale closed on May 5, 2010. These warrants expire December 31, 2018. As a result of a successful consent solicitation of the holders of our 6.875% Subordinated Notes due May 15, 2019, we NATIONAL CITY WARRANTS terminated these replacement capital covenants on As part of the National City transaction, warrants issued by November 5, 2010. National City converted into warrants to purchase PNC common stock. The holder has the option to exercise 28,022 In May 2008, we issued $500 million of Depositary Shares, warrants, on a daily basis, commencing June 15, 2011 and each representing a fractional interest in a share of PNC ending on July 15, 2011, and 28,023 warrants, on a daily Fixed-to-Floating Non-Cumulative Perpetual Preferred Stock, basis, commencing July 18, 2011 and ending on October 20, Series K. Dividends are payable if and when declared each 2011. The strike price of these warrants is $750 per share. May 21 and November 21 until May 21, 2013. After that date, Upon exercise, PNC will deliver common shares with a dividends will be payable each 21st of August, November, market value equal to the number of warrants exercised February and May. Dividends will be paid at a rate of 8.25% multiplied by the excess of the market price of PNC common prior to May 21, 2013 and at a rate of three-month LIBOR stock over the strike price. The maximum number of shares plus 422 basis points beginning May 21, 2013. that could be required to be issued is approximately 5.0 million, subject to adjustment in the case of certain events, Series A through D Preferred Stocks are cumulative and, make-whole fundamental changes or early termination. PNC except for Series B, are redeemable at our option. Annual has reserved 5.0 million shares for issuance pursuant to the dividends on Series A, B and D preferred stock total $1.80 per warrants and 3.6 million shares for issuance pursuant to the share and on Series C preferred stock total $1.60 per share. related convertible senior notes. Holders of Series A through D preferred stock are entitled to a number of votes equal to the number of full shares of common OTHER SHAREHOLDERS’EQUITY MATTERS stock into which such preferred stock is convertible. Series A We have a dividend reinvestment and stock purchase plan. through D preferred stock have the following conversion Holders of preferred stock and PNC common stock may privileges: (i) one share of Series A or Series B is convertible participate in the plan, which provides that additional shares into eight shares of PNC common stock; and (ii) 2.4 shares of of common stock may be purchased at market value with Series C or Series D are convertible into four shares of PNC reinvested dividends and voluntary cash payments. Common common stock. shares issued pursuant to this plan were: 149,088 shares in 2010, 534,515 shares in 2009 and 716,819 shares in 2008. During 2010, PNC called its Series A, C and D cumulative convertible preferred stock for redemption in accordance with At December 31, 2010, we had reserved approximately the terms of that stock. Effective September 10, 2010, PNC 126.1 million common shares to be issued in connection with redeemed 1,777 outstanding shares of Series A at a certain stock plans and the conversion of certain debt and redemption price of $40.00 per share. Effective October 1, equity securities. 2010, PNC redeemed 18,118 outstanding shares of Series C and 26,010 shares of Series D at a redemption price of $20.00 Effective October 4, 2007, our Board of Directors approved a per share. stock repurchase program to purchase up to 25 million shares of PNC common stock on the open market or in privately As described in Note 13 Capital Securities of Subsidiary negotiated transactions. This program will remain in effect Trusts and Perpetual Trust Securities, under the terms of two until fully utilized or until modified, superseded or terminated. of the hybrid capital vehicles we issued that currently qualify We did not repurchase any shares during 2010, 2009 or 2008 as capital for regulatory purposes (the Trust II Securities and under this program. the Trust III Securities), these Trust Securities are automatically exchangeable into shares of PNC preferred stock (Series I and Series J, respectively) in each case under certain conditions relating to the capitalization or the financial condition of PNC Bank, N.A. and upon the direction of the Office of the Comptroller of the Currency.

168 NOTE 19 OTHER COMPREHENSIVE INCOME Pretax Tax After-tax Net unrealized gains (losses) on cash Details of other comprehensive income (loss) are as follows flow hedge derivatives (in millions): Balance at December, 31, 2007 $ 175 2008 activity Pretax Tax After-tax Increase in net unrealized gains on cash Net unrealized securities gains (losses) flow hedge derivatives $ 467 $(172) 295 and net OTTI losses on debt Less: net gains realized in net income 152 (56) 96 securities Net unrealized gains on cash flow Balance at December 31, 2007 $ (167) hedge derivatives 315 (116) 199 2008 activity Balance at December 31, 2008 374 Increase in net unrealized losses for 2009 activity securities $(5,673) $ 2,084 (3,589) Decrease in net unrealized gains on Less: net losses realized in net income (206) 76 (130) cash flow hedge derivatives (12) 4 (8) Net unrealized securities losses (5,467) 2,008 (3,459) Less: net gains realized in net income 317 (117) 200 Balance at December 31, 2008 (3,626) Net unrealized losses on cash flow 2009 activity hedge derivatives (329) 121 (208) Decrease in net unrealized losses for Balance at December 31, 2009 166 non-OTTI securities 5,075 (1,863) 3,212 2010 activity Less: net gains realized in net income 550 (204) 346 Increase in net unrealized gains on cash Net unrealized gains on non-OTTI flow hedge derivatives 948 (347) 601 securities 4,525 (1,659) 2,866 Less: net gains realized in net income 387 (142) 245 Cumulative effect of adopting FASB Net unrealized gains on cash flow ASC 320-10 (174) 64 (110) hedge derivatives 561 (205) 356 Net increase in OTTI losses on debt Balance at December 31, 2010 $ 522 securities (1,699) 630 (1,069) Less: Net OTTI losses realized in net income (577) 214 (363) Net unrealized losses on OTTI securities (1,296) 480 (816) Balance at December 31, 2009 (1,576) 2010 activity Cumulative effect of adopting FASB ASU 2009-17, Consolidations (20) 7 (13) Decrease in net unrealized losses for non-OTTI securities 1,803 (665) 1,138 Less: net gains realized in net income 426 (156) 270 Net unrealized gains on non-OTTI securities 1,377 (509) 868 Net increase in OTTI losses on debt securities (50) 14 (36) Less: OTTI losses realized in net income (325) 119 (206) Net unrealized gains on OTTI securities 275 (105) 170 Balance at December 31, 2010 $ (551)

169 Pretax Tax After-tax NOTE 20 INCOME TAXES Pension, other postretirement and The components of income taxes from continuing operations postemployment benefit plan are as follows: adjustments Balance at December 31, 2007 $(177) Income Taxes from Continuing Operations 2008 Activity $(775) $285 (490) Balance at December 31, 2008 (667) Year ended December 31 In millions 2010 2009 2008 2009 Activity 198 (73) 125 Current Balance at December 31, 2009 (542) Federal $ (207) $(109) $ 473 2010 Activity 260 (98) 162 State 43 46 61 Balance at December 31, 2010 $(380) Total current (164) (63) 534 Other (a) Deferred Balance at December 31, 2007 $ 22 Federal 1,193 912 (211) 2008 Activity State 8 18 (25) Foreign currency translation adj. $(129) $ 46 (83) Total deferred 1,201 930 (236) BlackRock deferred tax adj. 31 31 Total $1,037 $ 867 $ 298 Total 2008 activity (129) 77 (52) Balance at December 31, 2008 (30) Significant components of deferred tax assets and liabilities 2009 Activity are as follows: Foreign currency translation adj. 48 (17) 31 BlackRock deferred tax adj. (13) (13) Deferred Tax Assets and Liabilities SBA I/O strip valuation adj. 3 (1) 2 December 31 - in millions 2010 2009 Total 2009 activity 51 (31) 20 Deferred tax assets Balance at December 31, 2009 (10) Allowance for loan and lease losses $1,912 $1,978 2010 Activity Net unrealized securities losses 320 922 Foreign currency translation adj. (18) 6 (12) Compensation and benefits 595 788 BlackRock deferred tax adj. 11 Unrealized losses on loans 402 1,349 SBA I/O strip valuation adj. (2) 1 (1) Loss and credit carryforward 145 816 Total 2010 activity (20) 8 (12) Other 1,422 1,287 Balance at December 31, 2010 $ (22) Total gross deferred tax assets 4,796 7,140 (a) Consists of foreign currency translation adjustments, deferred tax adjustments on Valuation allowance (21) (31) BlackRock’s other comprehensive income, and for 2010 and 2009, interest-only Total deferred tax assets 4,775 7,109 strip valuation adjustments. Deferred tax liabilities Leasing 1,153 1,191 The accumulated balances related to each component of other Goodwill and Intangibles 399 619 comprehensive income (loss) are as follows: Mortgage servicing rights 355 618 BlackRock basis difference 1,750 1,850 Accumulated Other Comprehensive Income (Loss) Other 1,277 1,124 Total deferred tax liabilities 4,934 5,402 December 31 – in millions 2010 2009 Net deferred asset / (liability) $ (159) $1,707 Net unrealized securities gains (losses) $95 $ (760) OTTI losses on debt securities (646) (816) Net unrealized gains on cash flow hedge A reconciliation between the statutory and effective tax rates derivatives 522 166 follows: Pension, other postretirement and post employment benefit plan adjustments (380) (542) Reconciliation of Statutory and Effective Tax Rates Other (22) (10) Year ended December 31 2010 2009 2008 Accumulated other comprehensive income (loss) $(431) $(1,962) Statutory tax rate 35.0% 35.0% 35.0% Increases (decreases) resulting from State taxes net of federal benefit 0.8 1.2 2.3 Tax-exempt interest (1.3) (1.2) (1.9) Life insurance (1.8) (1.9) (2.6) Dividend received deduction (1.4) (1.2) (3.5) Tax credits (4.3) (5.4) (4.8) IRS Letter ruling and settlements (2.5) Tax gain on sale of Hilliard Lyons 4.7 Other 1.0 .4 (2.0) Effective tax rate 25.5% 26.9% 27.2%

170 The net operating loss carryforwards and tax credit It is reasonably possible that the liability for uncertain tax carryforwards at December 31, 2010 and 2009 follow: positions could increase or decrease in the next twelve months due to completion of tax authorities’ exams or the expiration Net Operating Loss Carryforwards and Tax Credit of statutes of limitations. Management’s best estimate at this Carryforwards time is that the liability for uncertain tax positions will December 31, December 31, decrease by $2 million over the next 12 months. In millions 2010 2009 Net Operating Loss Carryforwards: PNC’s consolidated federal income tax returns through 2006 Federal $54 $1,200 have been audited by the IRS and we have resolved all matters State 1,600 2,000 through the IRS Appeals Division. The IRS began its Valuation allowance – State 21 31 Tax Credit Carryforwards: examination of PNC’s 2007 and 2008 consolidated federal Federal $ 254 income tax returns during the third quarter of 2010. State 4 The consolidated federal income tax returns of National City The federal net operating loss credit carryforwards expire through 2007 have been audited by the IRS. Certain from 2026 to 2027. The state net operating loss carryforwards adjustments remain under review by the IRS Appeals Division will expire from 2011 to 2031. for years 2003-2007. The IRS began its examination of National City’s 2008 consolidated federal income tax return At December 31, 2010, there were no undistributed earnings during the third quarter of 2010. Also, in July 2010, we of non-US subsidiaries for which deferred US income taxes received a favorable IRS letter ruling that resolved a prior had not been provided. At December 31, 2009, $62 million of uncertain tax position and resulted in a tax benefit of $89 undistributed earnings of non-US subsidiaries had no deferred million. US income taxes provided. The change in undistributed earnings was due to the sale of GIS. California, Delaware, District of Columbia, Florida, Illinois, Indiana, Maryland, Missouri, New Jersey, New York, and Retained earnings at December 31, 2010 and 2009 included New York City are principally where we are subject to state $117 million in allocations for bad debt deductions of former and local income tax. Audits currently in process for these thrift subsidiaries for which no income tax has been provided. states include: California (2001-2005), Illinois (2005-2008), Under current law, if certain subsidiaries use these bad debt Indiana (2005-2007), Missouri (2003-2009), New Jersey reserves for purposes other than to absorb bad debt losses, (2003-2005), and New York City (2005-2007). In the ordinary they will be subject to Federal income tax at the current course of business, we are routinely subject to audit by the corporate tax rate. taxing authorities of states and at any given time a number of As of December 31, 2010 and 2009, we had a liability for audits will be in process. uncertain tax positions excluding interest and penalties of $238 million and $227 million, respectively. At December 31, For all open audits, we believe adequate reserves have been 2010, the amount of unrecognized tax benefits that if provided for settlement on reasonable terms. recognized would impact the effective tax rate was $125 million. Our policy is to classify interest and penalties associated with income taxes as income tax expense. For 2010, we had A reconciliation of the beginning and ending balance of expense of $25 million of gross interest and penalties unrecognized tax benefits is as follows: increasing income tax expense. The total accrued interest and penalties at December 31, 2010 and December 31, 2009 was Changes in Unrecognized Tax Benefits $113 million and $144 million, respectively. In millions 2010 2009 2008 Balance of gross unrecognized tax benefits NOTE 21 REGULATORY MATTERS at January 1 $227 $257 $ 57 We are subject to the regulations of certain federal and state Increases: Positions taken during a prior period 76 22 203(a) agencies and undergo periodic examinations by such Positions taken during the current period 26 regulatory authorities. Decreases: Positions taken during a prior period (49) (39) (3) The access to and cost of funding new business initiatives Settlements with taxing authorities (13) (34) including acquisitions, the ability to pay dividends, the level Reductions resulting from lapse of of deposit insurance costs, and the level and nature of statute of limitations (3) (5) regulatory oversight depend, in large part, on a financial Balance of gross unrecognized tax benefits institution’s capital strength. The minimum US regulatory at December 31 $238 $227 $257 capital ratios under Basel I are 4% for tier 1 risk-based, 8% for (a) Includes $202 million acquired from National City. total risk-based and 4% for leverage. To qualify as “well

171 capitalized,” regulators require banks to maintain capital ratios NOTE 22 LEGAL PROCEEDINGS of at least 6% for tier 1 risk-based, 10% for total risk-based We establish accruals for legal proceedings when information and 5% for leverage. At December 31, 2010 and related to the loss contingencies represented by those matters December 31, 2009, PNC Bank, N.A. met the “well indicates both that a loss is probable and that the amount of capitalized” capital ratio requirements. loss can be reasonably estimated. Any such accruals are adjusted thereafter as appropriate to reflect changed The following table sets forth regulatory capital ratios for circumstances. We also determine estimates of possible losses PNC and its bank subsidiary, PNC Bank, N.A. or ranges of possible losses, whether in excess of any related accrued liability or where there is no accrued liability, for Regulatory Capital those matters disclosed in this Note 22 when we are able to do Amount Ratios so. For disclosed matters where we are able to estimate such December 31 Dollars in millions 2010 2009 2010 2009 possible losses or ranges of possible losses, we currently Risk-based capital estimate that it is reasonably possible that we could incur Tier 1 losses in an aggregate amount up to $400 million, with it also PNC $26,092 $26,523 12.1% 11.4% being reasonably possible that we could incur no such losses PNC Bank, N.A. 24,722 24,491 11.8 10.9 at all in these matters. The estimates included in this amount Total are based on our analysis of currently available information, PNC 33,724 34,813 15.6 15.0 and as new information is obtained we may change our PNC Bank, N.A. 31,662 32,481 15.1 14.4 estimates. Due to the inherent subjectivity of the assessments Leverage and unpredictability of outcomes of legal proceedings, any PNC NM NM 10.2 10.1 amounts accrued or included in this aggregate amount may not PNC Bank, N.A. NM NM 10.0 9.3 represent the ultimate loss to us from the legal proceedings in NM—Not meaningful. question. Thus, our exposure and ultimate losses may be higher or lower, and possibly significantly so, than the The principal source of parent company cash flow is the amounts accrued or this aggregate amount. dividends it receives from its subsidiary bank, which may be impacted by the following: The aggregate estimated amount provided above does not • Capital needs, include an estimate for every matter disclosed in this Note 22, • Laws and regulations, as we are unable, at this time, to estimate the losses that it is • Corporate policies, reasonably possible that we could incur or ranges of such • Contractual restrictions, and losses with respect to some of the matters disclosed for one or • Other factors. more of the following reasons. In our experience, legal proceedings are inherently unpredictable. In many legal Also, there are statutory and regulatory limitations on the proceedings, various factors exacerbate this inherent ability of national banks to pay dividends or make other unpredictability, including, among others, the following: the capital distributions. The amount available for dividend proceeding is in its early stages; the damages sought are payments to the parent company by PNC Bank, N.A. without unspecified, unsupported or uncertain; it is unclear whether a prior regulatory approval was approximately $1.1 billion at case brought as a class action will be allowed to proceed on December 31, 2010. that basis or, if permitted to proceed as a class action, how the Under federal law, a bank subsidiary generally may not extend class will be defined; the plaintiff is seeking relief other than credit to the parent company or its non-bank subsidiaries on compensatory damages; the matter presents meaningful legal terms and under circumstances that are not substantially the uncertainties, including novel issues of law; discovery has not same as comparable extensions of credit to nonaffiliates. No started or is not complete; there are significant facts in extension of credit may be made to the parent company or a dispute; and there are a large number of parties named as non-bank subsidiary which is in excess of 10% of the capital defendants (including where it is uncertain how liability, if stock and surplus of such bank subsidiary or in excess of 20% any, will be shared among multiple defendants). Generally, of the capital and surplus of such bank subsidiary as to the less progress that has been made in the proceedings or the aggregate extensions of credit to the parent company and its broader the range of potential results, the harder it is for us to non-bank subsidiaries. Such extensions of credit, with limited estimate losses or ranges of losses that it is reasonably exceptions, must be fully collateralized by certain specified possible we could incur. Therefore, as the estimated aggregate assets. In certain circumstances, federal regulatory authorities amount disclosed above does not include all of the matters may impose more restrictive limitations. disclosed below, the amount disclosed above does not represent our maximum reasonably possible loss exposure for Federal Reserve Board regulations require depository all of the matters disclosed in this Note 22. The estimated institutions to maintain cash reserves with the Federal Reserve aggregate amount also does not reflect any of our exposure to Bank (FRB). At December 31, 2010, the balance outstanding matters not so disclosed, as discussed below under “Other.” at the FRB was $983 million.

172 We include in some of the descriptions of individual matters National City alleging that National City’s directors below certain quantitative information related to the plaintiff’s breached their fiduciary duties by entering into this claim against us alleged in the plaintiff’s pleadings or capital infusion transaction. A motion to dismiss the otherwise publicly available. While information of this type case as originally filed has been denied. After the may provide insight into the potential magnitude of a matter, it initial filing, two additional plaintiffs were added. does not necessarily represent our estimate of reasonably The plaintiffs filed an amended complaint in possible loss or our judgment as to any currently appropriate December 2010. The amended complaint adds PNC accrual. as a defendant as successor in interest to National City. In the amended complaint, which included Some of our exposure in matters described below may be some additional allegations, the plaintiffs seek, offset by applicable insurance coverage. We do not consider among other things, unspecified actual and punitive the possible availability of insurance coverage in determining damages, a declaratory judgment that the investment the amounts of any accruals or any estimates of possible agreement for the capital infusion are void and/or losses or ranges of possible losses. voidable, and attorneys’ fees. • In August 2008, a lawsuit was filed in the Palm Securities and State Law Fiduciary Cases against National Beach County, Florida, Circuit Court against City National City and certain officers and directors of • In January 2008, a lawsuit (In re National City National City (Reagan v. National City Corp., et al., Corporation Securities, Derivative & ERISA MDL No. 2003, Case No: 1:08-nc-70015-SO). The Litigation (The Securities Case) (MDL No. 2003, lawsuit was brought as a class action on behalf of all Case No: 1:08-nc-70004-SO)) was filed in the United who acquired National City stock pursuant to and/or States District Court for the Northern District of Ohio traceable to the registration statement filed in against National City and certain officers and connection with National City’s acquisition of directors of National City. As amended, this lawsuit Fidelity Bankshares, Inc. The complaint alleged that was brought as a class action on behalf of purchasers the registration statement contained false and of National City’s stock during the period April 30, misleading statements and omissions in violation of 2007 to April 21, 2008 and also on behalf of the federal securities laws. This lawsuit was removed everyone who acquired National City stock pursuant to federal court in Florida and then transferred to the to a registration statement filed in connection with its United States District Court for the Northern District acquisition of MAF Bancorp in 2007. The amended of Ohio. The parties reached a settlement in March complaint alleges violations of federal securities laws 2010, which received final court approval in regarding public statements and disclosures relating December, 2010. We have paid the settlement, which to, among other things, the nature, quality, was not material to PNC. performance, and risks of National City’s non-prime, residential construction, and National Home Equity • In December 2008, a lawsuit was filed in the United portfolios, its loan loss reserves, its financial States District Court for the Northern District of Ohio condition, and related allegedly false and misleading against National City and some of its officers and financial statements. In the amended complaint, the directors (Argent Classic Convertible Arbitrage Fund plaintiffs seek, among other things, unspecified (Bermuda) Ltd. and Argent Classic Convertible damages and attorneys’ fees. A motion to dismiss the Arbitrage Fund L.P. v. National City Corp., et al. amended complaint is pending. A magistrate judge (MDL No. 2003, Case No: 1:08-nc-70016-SO). As has recommended dismissal of the lawsuit without amended in a second amended complaint, the lawsuit prejudice, with a right for the plaintiffs to file a was brought as a class action on behalf of all who further amended complaint within 30 days. The purchased National City’s 4.0% Convertible Senior magistrate’s recommendation is subject to adoption Notes Due 2011 pursuant to and/or traceable to the by the district court. The plaintiffs have filed registration statement and prospectus supplement objections to that recommendation. issued in connection with the January 2008 offering of these notes. The second amended complaint • In May 2008, a lawsuit (The Dispatch Printing alleged that the registration statement and prospectus Company, et al. v. National City Corporation, et al. supplement contained false and misleading (Case No. 08CVH-6506)) was filed on behalf of an statements and omissions in violation of the federal individual plaintiff in the Franklin County, Ohio, securities laws. In July 2010, the parties reached a Court of Common Pleas against National City, settlement, which received final court approval in certain directors of National City, and Corsair November 2010. We have paid the settlement, which Co-Invest, L.P. and unnamed other investors was not material to PNC. participating in the April 2008 capital infusion into

173 National City ERISA Cases general purpose card network services and otherwise imposed Commencing in January 2008, a series of substantially similar unreasonable restraints on trade, resulting in the payment of lawsuits were brought against National City, the inflated interchange fees, in violation of the antitrust laws. In Administrative Committee of the National City Savings and January 2009, the plaintiffs filed amended and supplemental Investment Plan (the Plan), National City Bank (as trustee), complaints adding, among other things, allegations that the and some of National City’s officers and directors. These restructuring of Visa and MasterCard, each of which included cases were consolidated in the United States District Court for an initial public offering, violated the antitrust laws. In their the Northern District of Ohio under the caption In re National complaints, the plaintiffs seek, among other things, injunctive City Corporation Securities, Derivative & ERISA Litigation relief, unspecified damages (tripled under the antitrust laws) (The ERISA Cases) (MDL 2003 Case No. 08-nc-70000-SO), and attorneys’ fees. In January 2008, the district court and the plaintiffs filed a consolidated amended complaint. The dismissed the plaintiffs’ claims for damages incurred prior to consolidated action was brought as a class action on behalf of January 1, 2004. In April 2009, the defendants filed a motion all participants in or beneficiaries of the Plan at any time to dismiss the amended and supplemental complaints. In May between September 5, 2006 and the present and whose Plan 2009, class plaintiffs filed a motion for class certification. accounts included investments in National City common Both of these motions were argued in November 2009 and are stock, as well as all participants in or beneficiaries of the Plan still pending. In February 2011, the defendants filed a motion and whose accounts were invested in Allegiant Funds from for summary judgment. National City and National City Bank March 25, 2002 to the present. The consolidated complaint entered into judgment and loss sharing agreements with Visa alleged breaches of fiduciary duty under the Employee and certain other banks with respect to all of the above Retirement Income Security Act of 1974 (ERISA) relating to, referenced litigation. All of the litigation against Visa is also among other things, National City stock being offered as an subject to the indemnification obligations described in Note investment alternative in the Plan, conflicts of interest, and 23 Commitments and Guarantees. PNC Bank, N.A. is not monitoring and disclosure obligations. The consolidated named a defendant in any of the Visa or MasterCard related complaint also alleged that the Administrative Committee antitrust litigation nor was it initially a party to the judgment defendants breached their fiduciary duties under ERISA, or loss sharing agreements, but it has been subject to these engaged in prohibited transactions by authorizing or causing indemnification obligations and became responsible for the Plan to invest in Allegiant Funds, and violated ERISA National City Bank’s position in the litigation and under the duties of loyalty by virtue of National City’s receipt of agreements upon completion of the merger of National City financial benefits in the forms of fees paid to Allegiant Asset Bank into PNC Bank, N.A. Management Company for managing the mutual funds. The complaint sought equitable relief (including a declaration that Adelphia defendants breached their ERISA fiduciary duties, an order Some of our subsidiaries were defendants (or had potential compelling the defendants to make good any losses to the Plan contractual contribution obligations to other defendants) in caused by their actions, the imposition of a constructive trust several lawsuits brought during late 2002 and 2003 arising out on any profits earned by the defendants from their actions and of the bankruptcy of Adelphia Communications Corporation restitution), unspecified damages and attorneys’ fees. In and its subsidiaries. February 2010, the parties reached a settlement, which received final court approval in November 2010. We have One of the lawsuits was brought on Adelphia’s behalf by the paid the settlement, which was not material to PNC. unsecured creditors’ committee and equity committee in Adelphia’s consolidated bankruptcy proceeding and was Visa removed to the United States District Court for the Southern Beginning in June 2005, a series of antitrust lawsuits were District of New York by order dated February 9, 2006 filed against Visa®, MasterCard®, and several major financial (Adelphia Recovery Trust v. Bank of America, N.A., et al. institutions, including cases naming National City (since (Case No. 05 Civ. 9050 (LMM))). Pursuant to Adelphia’s plan merged into PNC) and its subsidiary, National City Bank of of reorganization, this lawsuit was prosecuted by a contingent Kentucky (since merged into National City Bank which has value vehicle, known as the Adelphia Recovery Trust. In since merged into PNC Bank, N.A.). The cases have been October 2007, the Adelphia Recovery Trust filed an amended consolidated for pretrial proceedings in the United States complaint in this lawsuit, adding defendants and making District Court for the Eastern District of New York under the additional allegations. caption In re Payment Card Interchange Fee and Merchant- Discount Antitrust Litigation (Master File In June 2008, the district court granted in part the defendants’ No. 1:05-md-1720-JG-JO). Those cases naming National City motion to dismiss. The court dismissed the principal were brought as class actions on behalf of all persons or bankruptcy law claims that had not previously been dismissed business entities who have accepted Visa® or Master Card®. by the Bankruptcy Court, including claims alleging voidable The plaintiffs, merchants operating commercial businesses preference payments, fraudulent transfers, and equitable throughout the US and trade associations, allege, among other disallowance. The effect of this ruling was to dismiss from things, that the defendants conspired to fix the prices for this lawsuit all claims against most of the defendants, but

174 leave pending claims against PNC and other original members scheme of the Shumway/Bapst Organization (Shumway). The of Adelphia loan syndicates and then-affiliated investment plaintiffs allege that Shumway used CBNV and another bank banks. The district court’s ruling was affirmed on appeal. This as “fronts” to make high-interest, high-fee loans that would lawsuit arose out of lending and investment banking activities otherwise have been prohibited by state usury laws but for the engaged in by PNC subsidiaries and many other financial banks’ status as depository institutions. The plaintiffs further services companies. Collectively, with respect to some or all allege that, in the course of doing so, CBNV misrepresented of the defendants, the lawsuit alleged violations of federal the apportionment and distribution of settlement and title fees, banking laws, violations of common law duties, aiding and and that these fees included illegal “kickbacks” to Shumway abetting such violations, voidable preference payments, and that did not reflect the value of any settlement services fraudulent transfers, among other matters. The lawsuit sought actually performed. The plaintiffs claim violations of the Real damages (including in some cases punitive or tripled Estate Settlement Procedures Act (RESPA), the Racketeer damages), interest, attorneys’ fees and other expenses, and a Influenced and Corrupt Organizations Act (RICO), and certain return of the alleged voidable preference and fraudulent state laws. In their complaints, the plaintiffs in the lawsuits transfer payments, among other remedies. that are part of the MDL proceedings in Pennsylvania seek, among other things, unspecified damages (including tripled In September 2010, PNC and all but one other defendant in damages under RICO and RESPA), rescission of loans, this lawsuit reached a complete settlement of all remaining interest, and attorneys’ fees. The two plaintiffs in Bumpers claims, which received final court approval in November, have procured individual judgments totaling approximately 2010. We have paid our share of the settlement, which was not $11,000 each plus interest, and, as described below, they now material to PNC. seek to assert claims seeking similar damages on behalf of a class of North Carolina borrowers, which they claim consists There is one remaining Adelphia-related lawsuit (W. R. Huff of approximately 650 borrowers. Asset Management Co., L.L.C. v. Deloitte & Touche, L.L.P., et al. (03 MD 1529 (LMM), 03-CV-5752 (LMM)) alleging Status of MDL Proceedings in Pennsylvania. In August 2006, violations of the federal securities laws in which a PNC a proposed settlement agreement covering some of the subsidiary is a defendant, brought by holders of debt securities plaintiffs and class members (those who have second of Adelphia and consolidated for pretrial purposes in the mortgages that had been assigned to another defendant, United States District Court for the Southern District of New Residential Finance Corporation (RFC)) was submitted to the York. In the complaint, the plaintiff seeks, among other district court for its approval. In August 2008, the district things, unspecified damages, interest, and attorneys’ fees. court gave final approval to the settlement agreement. The class covered by this settlement and certified by the district court in its approval of the settlement consisted of CBNV Mortgage Litigation approximately 44,000 borrowers and is referred to as the Between 2001 and 2003, on behalf of either individual Kessler class. plaintiffs or proposed classes of plaintiffs, several separate lawsuits were filed in state and federal courts against Some objecting members of the Kessler class appealed the Community Bank of Northern Virginia (CBNV) and other final approval order to the United States Court of Appeals for defendants asserting claims arising from second mortgage the Third Circuit. In September 2010, the court of appeals loans made to the plaintiffs. CBNV was merged into one of vacated the district court’s class certification decision and Mercantile Bankshares Corporation’s banks before PNC approval of the class settlement and remanded the case to the acquired Mercantile in 2007. The state lawsuits were removed district court for further proceedings. In their appeal, the to federal court and, with the lawsuits that had been filed in objecting Kessler class members had asserted that CBNV’s federal court, were consolidated for pre-trial proceedings in a annual percentage rate disclosures violated the Truth in multidistrict litigation (MDL) proceeding in the United States Lending Act (TILA) and the Home Ownership and Equity District Court for the Western District of Pennsylvania under Protection Act (HOEPA), that those claims are very valuable, the caption In re: Community Bank of Northern Virginia and and that the settling plaintiffs should have asserted those Guaranty Bank Second Mortgage Litigation (No. 03-0425 claims. The settling plaintiffs advanced a number of reasons (W.D. Pa.), MDL No. 1674). In January 2008, the why they had not asserted TILA/HOEPA claims. The court of Pennsylvania district court issued an order sending back to the appeals decision focused on the district court’s finding that General Court of Justice, Superior Court Division, for Wake such claims were time-barred and for that reason not viable. County, North Carolina the claims of two proposed class members. This case, which was originally filed in 2001, is The court of appeals remanded the case to the district court for captioned Bumpers, et al. v. Community Bank of Northern consideration of certain aspects of its decision certifying the Virginia (01-CVS-011342). settlement class and approving the settlement. The court of appeals instructed the district court to consider (a) whether a The plaintiffs in the MDL proceedings and in the Bumpers sub-class should be created for class members whose lawsuit complain of an alleged illegal home equity lending transactions occurred within one year (the limitations period

175 for RESPA and TILA/HOEPA claims) of the date of filing of Southern District of Florida (Cowen, et al. v. PNC Bank, the earliest complaint in these actions, (b) whether class National Association (Case No. 10-CV-21869-JLK), counsel is adequate in light of counsel’s justifications for not Hernandez, et al. v. PNC Bank, National Association (Case bringing TILA/HOEPA claims, and (c) whether a sub-class of No. 10-CV-21868-JLK), and Matos v. National City Bank North Carolina borrowers should be created. No proceedings (Case No. 10-cv-21771-JLK). A consolidated amended have yet occurred in the district court on those issues. complaint was filed in December 2010 that consolidated all of the claims in these four cases. It seeks to certify national Other individuals, whose loans were not assigned to RFC, classes of customers for the common law claims described have continued to pursue, on behalf of themselves or alleged below, and subclasses of PNC Bank customers with accounts classes, claims similar to those asserted with respect to the in Pennsylvania, New Jersey and Illinois branches and of loans assigned to RFC and covered by the settlement. In one National City Bank customers with accounts in Illinois case, where the alleged class overlaps the Kessler class, the branches, with each subclass being asserted for purposes of plaintiffs have asserted that there are as many as 50,000 claims under those states’ consumer protection statutes. No borrowers in total represented in the MDL proceedings, class periods are stated in any of the complaints, other than for including both the borrowers in the Kessler class and those not the applicable statutes of limitations, which vary by state and covered by the Kessler class. cause of action. We have moved to dismiss the consolidated amended complaint. Status of North Carolina Proceedings. Following the remand to North Carolina state court, the plaintiffs in Bumpers sought In December 2010, an additional lawsuit (Henry v. PNC Bank, to represent a class of North Carolina borrowers in state court National Association (No. GD-10-022974)) was filed in the proceedings in North Carolina. The district court in Court of Common Pleas of Allegheny County, Pennsylvania Pennsylvania handling the MDL proceedings enjoined class on behalf of all current citizens of Pennsylvania who are proceedings in Bumpers in March 2008. In April 2008, the domiciled in Pennsylvania who had or have a PNC checking North Carolina superior court granted the Bumpers plaintiffs’ or debit account used primarily for personal, family or motion for summary judgment on their individual claims. household purposes and who incurred overdraft and related CBNV appealed the grant of the motion for summary fees on transactions resulting from the methodology of posting judgment, which appeal is now before the North Carolina transactions from December 8, 2004 through August 14, 2010. Court of Appeals.

In September 2010, one of the Bumpers plaintiffs filed papers The sixth lawsuit (Trombley, et al. v. National City Bank in the superior court seeking permission to proceed with (Civil Action No. 10-00232 (JDB)) is pending against certification proceedings for a class of North Carolina National City Bank in the United States District Court for the borrowers. In January 2011, the superior court entered an District of Columbia. The class sought to be certified in this order stating that, if it had jurisdiction to rule on the plaintiff’s case is a national class of National City Bank customers with motion (which it does not while its summary judgment order subclasses of customers with accounts in Michigan and Ohio remains on appeal), it would be inclined to rule that it would branches for purposes of claims under those states’ consumer entertain motions for class certification and consider class protection statutes. In July 2010, the parties reached a relief at a future date. tentative settlement of this lawsuit. In August 2010, in light of this settlement, the Judicial Panel on Multidistrict Litigation Overdraft Litigation denied a motion to transfer this lawsuit to the MDL Court. A Beginning in October 2009, PNC Bank and National City member of the proposed settlement class, who is the named Bank have been named in six lawsuits brought as class actions plaintiff in another lawsuit filed in the MDL Court, filed relating to the manner in which they charged overdraft fees on objections to approval of this settlement. In January 2011, the ATM and debit transactions to customers. Three lawsuits court granted preliminary approval and set a hearing on final naming PNC Bank and one naming National City Bank, along approval for June 2011. The settlement remains subject to, with similar lawsuits against numerous other banks, have been among other things, notice to the proposed class and final consolidated for pre-trial proceedings in the United States court approval. The amount of the settlement is not material to District Court for the Southern District of Florida (the “MDL PNC and has been accrued. Court”) under the caption In re Checking Account Overdraft Litigation (MDL No. 2036, Case No. 1:09-MD-02036-JLK ). The complaints in each of these lawsuits allege that the banks The first of these cases (Casayuran, et al. v. PNC Bank, engaged in unlawful practices in assessing overdraft fees National Association (Case No. 10-cv-20496-JLK)) was arising from electronic point-of-sale and ATM debits. The originally filed against PNC Bank in October 2009 in the principal practice challenged in these lawsuits is the banks’ United States District Court for the District of New Jersey, purportedly common policy of posting debit transactions on a and an amended complaint was filed in June 2010 in the MDL daily basis from highest amount to lowest amount, thereby Court. The other cases that have been consolidated were filed allegedly inflating the number of overdraft fees assessed. in June 2010 in the United States District Court for the Other practices challenged include the failure to decline to

176 honor debit card transactions where the account has Group, Inc., as successor in interest to National City insufficient funds to cover the transactions. Corporation, and PNC Investments LLC, as successor in interest to NatCity Investments, Inc. In the consolidated amended complaint in the MDL Court, the (Federal Home Loan Bank of Chicago v. Bank of plaintiffs assert claims for breach of the covenant of good America Funding Corp., et al. (Case faith and fair dealing; unconscionability; conversion, unjust No. 10CH45033)). The complaint alleges that the enrichment; and violation of the consumer protection statutes defendants have liability to the Federal Home Loan of Pennsylvania, Illinois and New Jersey. In the Henry case, Bank of Chicago in a variety of capacities (in the the plaintiffs assert the same common law claims and a claim case of the National City entities, as underwriters) under the Pennsylvania consumer protection statute. The under Illinois state securities law and common law in action against National City pending in the District of connection with the alleged purchase of private-label Columbia adds claims under the Ohio and Michigan consumer mortgage-backed securities by the Federal Home protection statutes and the federal Electronic Funds Transfer Loan Bank. According to the complaint, the Federal Act. In their complaints, the plaintiffs seek, among other Home Loan Bank purchased approximately $3.3 things, restitution of overdraft fees paid, unspecified actual billion in mortgage-backed securities in total in and punitive damages, pre-judgment interest, attorneys’ fees, transactions addressed by the complaint, and declaratory relief finding the overdraft policies to be approximately $345 million of which was allegedly unfair and unconscionable. in transactions involving the National City entities. The complaint alleges misrepresentations and Fulton Financial omissions in connection with the sales of the In 2009, Fulton Financial Advisors, N.A. filed lawsuits against mortgage-backed securities in question. In its PNC Capital Markets, LLC and NatCity Investments, Inc. in complaint, the Federal Home Loan Bank seeks, the Court of Common Pleas of Lancaster County, among other things, rescission, unspecified damages, Pennsylvania arising out of Fulton’s purchase of auction rate interest, and attorneys’ fees. In November 2010 the certificates (ARCs) through PNC and NatCity. Each of the defendants removed the case to the United States lawsuits alleges violations of the Pennsylvania Securities Act, District Court for the Northern District of Illinois. In negligent misrepresentation, negligence, breach of fiduciary January 2011 the district court remanded the case to duty, common law fraud, and aiding and abetting common law the Circuit Court of Cook County. fraud in connection with the purchase of the ARCs by Fulton. • In October 2010, a lawsuit was filed in the U.S. Specifically, Fulton alleges that, as a result of the decline of District Court for the Northern District of Illinois, financial markets in 2007 and 2008, the market for ARCs against PNC Bank and numerous other financial became illiquid; that PNC and NatCity knew or should have institutions, mortgage servicing organizations, law known of the increasing threat of the ARC market becoming firms that handle foreclosures in Northern Illinois, illiquid; and that PNC and NatCity did not inform Fulton of and individuals employed by financial institutions, this increasing threat, but allowed Fulton to continue to mortgage servicers and law firms. As amended in purchase ARCs, to Fulton’s detriment. In its complaints, November 2010, the lawsuit (Stone, et al. v. Fulton alleges that it then held ARCs purchased through PNC Washington Mutual Bank, et al. (Case No. 10 C for a price of more than $123 million and purchased through 6410)) has been brought as a class action on behalf of NatCity for a price of more than $175 million. In each all present or former homeowners whose homes are complaint, Fulton seeks, among other things, unspecified being or have been the subject of foreclosure suits actual and punitive damages, rescission, and interest. involving either securitized mortgages, “bifurcated” mortgages, or broken chains of title, during the two In the case against PNC (Fulton Financial Advisors, N.A. v. years prior to the filing of the complaint. The PNC Capital Markets, LLC (CI 09-10838)), PNC filed plaintiffs allege that defendants conspired to preliminary objections to Fulton’s complaint, which were foreclose illegally on the properties of the named denied. NatCity removed the case against it to the United plaintiffs and the other alleged class members. States District Court for the Eastern District of Pennsylvania Among other things, the plaintiffs allege that the (Fulton Financial Advisors, N.A. v. NatCity Investments, Inc. defendant banks, law firms, and their employees (No. 5:09-cv-04855)), and filed a motion to dismiss the instituted foreclosure proceedings in the names of complaint, which is pending before the court. parties who did not actually own the mortgages, and used false or otherwise defective affidavits to Other Mortgage-Related Litigation prosecute the foreclosure actions. The plaintiffs assert claims under various federal criminal statutes, • In October 2010, the Federal Home Loan Bank of a federal civil rights statute, the Fair Debt Collection Chicago brought a lawsuit in the Circuit Court of Practices Act, RICO, and Illinois common law. In the Cook County, Illinois, against numerous financial amended complaint, the plaintiffs seek, among other companies, including The PNC Financial Services

177 things, unspecified actual, statutory and punitive number and range of authorities conducting the investigations damages (including tripled actual damages under and inquiries, as well as the nature of these types of RICO); accounting; disgorgement; preliminary and investigations and inquiries, among other factors, PNC cannot permanent injunctive relief against foreclosure of the at this time predict the ultimate overall cost to or effect on PNC affected mortgages; and attorneys’ fees. In January from potential governmental, legislative or regulatory actions 2011, all defendants, including PNC, filed motions to arising out of these investigations and inquiries. dismiss the complaint. These motions are still pending. PNC is one of the fourteen federally regulated mortgage servicers subject to a publicly-disclosed interagency • In February 2011, a lawsuit was filed in the Superior horizontal review of residential mortgage servicing operations. Court of the State of California for Orange County That review is expected to result in formal enforcement against PNC and numerous other financial institutions actions against many or all of the companies subject to review, and mortgage servicing organizations. The lawsuit which actions are expected to incorporate remedial (National Organization of Assistance for Homeowners requirements, heightened mortgage servicing standards and of California, et al. v. America’s Servicing Company, potential civil money penalties. PNC expects that it and PNC et al., (Case No. 30-2011-00447677-CU-OR-CXC)) Bank will enter into consent orders with the Federal Reserve has been brought as a class action by individual and the OCC, respectively, relating to the residential mortgage plaintiffs, who allege that they have obtained loans servicing operations of PNC Bank. PNC expects that these secured by deeds of trust on California real estate, and consent orders, among other things, will describe certain by a non-profit organization which purports, along foreclosure-related practices and controls that the regulators with the individual plaintiffs, to represent a class of found to be deficient and will require PNC and PNC Bank to, similarly situated individuals. The plaintiffs contend, among other things, develop and implement plans and among other things, that the defendants engaged in programs to enhance PNC’s servicing and foreclosure misrepresentations and fraudulent concealment in processes and take certain other remedial actions, and oversee connection with the mortgage loan origination process, compliance with the orders and the new plans and programs. engaged in wrongful foreclosure practices, caused In addition, either or both of these agencies may seek potential notices of default to be issued against the plaintiffs in a civil money penalties. Other governmental, legislative and manner not authorized by California law, made regulatory inquiries on this topic, referred to above, are on- inaccurate credit disclosures regarding the plaintiffs, going, and may result in additional actions or penalties. and disclosed the plaintiffs’ private information without their authorization. The plaintiffs allege The SEC previously commenced investigations of activities of violations, among other things, of various provisions National City prior to its acquisition by PNC. The SEC has of California statutory law, the right to privacy requested, and we have provided to the SEC, documents provisions of the California Constitution, the federal concerning, among other things, National City’s capital- Fair Credit Reporting Act and the Gramm-Leach raising activities, loan underwriting experience, allowance for Bliley Act. The plaintiffs seek, among other things, loan losses, marketing practices, dividends, bank regulatory unspecified actual and punitive damages, statutory matters and the sale of First Franklin Financial Corporation. civil penalties, restitution, injunctive relief, interest, and attorneys’ fees. The SEC has been conducting an investigation into events at Equipment Finance LLC (EFI), a subsidiary of Sterling Regulatory and Governmental Inquiries Financial Corporation, which PNC acquired in April 2008. As a result of the regulated nature of our business and that of a The United States Attorney’s Office for the Eastern District of number of our subsidiaries, particularly in the banking and Pennsylvania has also been investigating the EFI situation. securities areas, we and our subsidiaries are the subject of investigations, audits and other forms of regulatory inquiry, in Our practice is to cooperate fully with regulatory and some cases as part of regulatory reviews of specified activities governmental investigations, audits and other inquiries, at multiple industry participants, including those described including those described above. Such investigations, audits below. and other inquiries may lead to remedies including fines, penalties, restitution or alterations in our business practices. Numerous federal and state governmental, legislative and regulatory authorities are investigating practices in the Other mortgage lending and servicing industries. PNC has received In addition to the proceedings or other matters described inquiries from governmental, legislative and regulatory above, PNC and persons to whom we may have authorities on this topic and is cooperating with these inquiries. indemnification obligations, in the normal course of business, These inquiries may lead to administrative, civil or criminal are subject to various other pending and threatened legal proceedings, possibly resulting in remedies including fines, proceedings in which claims for monetary damages and other penalties, restitution, or alterations in our business practices and relief are asserted. We do not anticipate, at the present time, in additional expenses and collateral costs. As a result of the that the ultimate aggregate liability, if any, arising out of such

178 other legal proceedings will have a material adverse effect on As of December 31, 2010, assets of $2.2 billion secured our financial position. However, we cannot now determine certain specifically identified standby letters of credit. whether or not any claims asserted against us or others to Recourse provisions from third parties of $3.0 billion were whom we may have indemnification obligations, whether in also available for this purpose as of December 31, 2010. In the proceedings or other matters specifically described above addition, a portion of the remaining standby letters of credit or otherwise, will have a material adverse effect on our results and letter of credit risk participations issued on behalf of of operations in any future reporting period, which will specific customers is also secured by collateral or guarantees depend on, among other things, the amount of the loss that secure the customers’ other obligations to us. The resulting from the claim and the amount of income otherwise carrying amount of the liability for our obligations related to reported for the reporting period. standby letters of credit and risk participations in standby letters of credit and bankers’ acceptances was $250 million at See Note 23 Commitments and Guarantees for additional December 31, 2010. information regarding the Visa indemnification and our other obligations to provide indemnification, including to current STANDBY BOND PURCHASE AGREEMENTS AND OTHER and former officers, directors, employees and agents of PNC LIQUIDITY FACILITIES and companies we have acquired, including National City. We enter into standby bond purchase agreements to support municipal bond obligations. At December 31, 2010, the aggregate of our commitments under these facilities was NOTE 23 COMMITMENTS AND GUARANTEES $313 million. We also enter into certain other liquidity EQUITY FUNDING AND OTHER COMMITMENTS facilities to support individual pools of receivables acquired Our unfunded commitments at December 31, 2010 included by commercial paper conduits. At December 31, 2010 our private equity investments of $319 million and other total commitments under these facilities were $145 million. investments of $11 million. INDEMNIFICATIONS We are a party to numerous acquisition or divestiture STANDBY LETTERS OF CREDIT We issue standby letters of credit and have risk participations agreements under which we have purchased or sold, or agreed in standby letters of credit and bankers’ acceptances issued by to purchase or sell, various types of assets. These agreements other financial institutions, in each case to support obligations can cover the purchase or sale of: of our customers to third parties, such as remarketing • Entire businesses, programs for customers’ variable rate demand notes. Net • Loan portfolios, outstanding standby letters of credit and internal credit ratings • Branch banks, were as follows: • Partial interests in companies, or • Other types of assets.

Net Outstanding Standby Letters of Credit These agreements generally include indemnification provisions under which we indemnify the third parties to these December 31 December 31 Dollars in billions 2010 2009 agreements against a variety of risks to the indemnified parties Net outstanding standby letters of credit $10.1 $10.0 as a result of the transaction in question. When PNC is the Internal credit ratings (as percentage of seller, the indemnification provisions will generally also portfolio): provide the buyer with protection relating to the quality of the Pass (a) 90% 86% assets we are selling and the extent of any liabilities being Below pass (b) 10% 14% assumed by the buyer. Due to the nature of these (a) Indicates that expected risk of loss is currently low. indemnification provisions, we cannot quantify the total (b) Indicates a higher degree of risk of default. potential exposure to us resulting from them.

If the customer fails to meet its financial or performance We provide indemnification in connection with securities obligation to the third party under the terms of the contract or offering transactions in which we are involved. When we are there is a need to support a remarketing program, then upon the issuer of the securities, we provide indemnification to the the request of the guaranteed party, we would be obligated to underwriters or placement agents analogous to the make payment to them. The standby letters of credit and risk indemnification provided to the purchasers of businesses from participations in standby letters of credit and bankers’ us, as described above. When we are an underwriter or acceptances outstanding on December 31, 2010 had terms placement agent, we provide a limited indemnification to the ranging from less than 1 year to 8 years. The aggregate issuer related to our actions in connection with the offering maximum amount of future payments PNC could be required and, if there are other underwriters, indemnification to the to make under outstanding standby letters of credit and risk other underwriters intended to result in an appropriate sharing participations in standby letters of credit and bankers’ of the risk of participating in the offering. Due to the nature of acceptances was $13.1 billion at December 31, 2010, of which these indemnification provisions, we cannot quantify the total $6.8 billion support remarketing programs. potential exposure to us resulting from them.

179 In the ordinary course of business, we enter into certain In connection with the sale of GIS, PNC agreed to continue to types of agreements that include provisions for indemnifying act for the benefit of GIS as securities lending agent for certain third parties. We also enter into certain types of agreements, of GIS’s clients. In such role, we provide indemnification to including leases, assignments of leases, and subleases, in those clients against the failure of the borrowers to return the which we agree to indemnify third parties for acts by our securities. The market value of the securities lent is fully agents, assignees and/or sublessees, and employees. We secured on a daily basis; therefore, the exposure to us is limited also enter into contracts for the delivery of technology to temporary shortfalls in the collateral as a result of short-term service in which we indemnify the other party against claims fluctuations in trading prices of the loaned securities. At of patent and copyright infringement by third parties. Due December 31, 2010, the total maximum potential exposure as a to the nature of these indemnification provisions, we result of these indemnity obligations was $6.3 billion, although cannot calculate our aggregate potential exposure under the collateral at the time exceeded that amount. In addition, the them. purchaser of GIS, The Bank of New York Mellon Corporation, has entered into an agreement to indemnify PNC with respect to We engage in certain insurance activities which require our such exposure on the terms set forth in such indemnification employees to be bonded. We satisfy this bonding requirement agreement. Also in connection with the GIS divestiture, PNC by issuing letters of credit which were insignificant in amount has agreed to indemnify the buyer generally as described above. at December 31, 2010. VISA INDEMNIFICATION In the ordinary course of business, we enter into contracts with Our payment services business issues and acquires credit and third parties under which the third parties provide services on debit card transactions through Visa U.S.A. Inc. card behalf of PNC. In many of these contracts, we agree to association or its affiliates (Visa). indemnify the third party service provider under certain circumstances. The terms of the indemnity vary from contract In October 2007, Visa completed a restructuring and issued to contract and the amount of the indemnification liability, if shares of Visa Inc. common stock to its financial institution any, cannot be determined. members (Visa Reorganization) in contemplation of its initial public offering (IPO). As part of the Visa Reorganization, we We are a general or limited partner in certain asset received our proportionate share of a class of Visa Inc. management and investment limited partnerships, many of common stock allocated to the US members. Prior to the IPO, which contain indemnification provisions that would require the US members, which included PNC, were obligated to us to make payments in excess of our remaining funding indemnify Visa for judgments and settlements related to the commitments. While in certain of these partnerships the specified litigation. We continue to have an obligation to maximum liability to us is limited to the sum of our unfunded indemnify Visa for judgments and settlements for the commitments and partnership distributions received by us, in remaining specified litigation. the others the indemnification liability is unlimited. As a result, we cannot determine our aggregate potential exposure As a result of the acquisition of National City, we became for these indemnifications. party to judgment and loss sharing agreements with Visa and certain other banks. The judgment and loss sharing Pursuant to their bylaws, PNC and its subsidiaries provide agreements were designed to apportion financial indemnification to directors, officers and, in some cases, responsibilities arising from any potential adverse judgment or employees and agents against certain liabilities incurred as a negotiated settlements related to the specified litigation. result of their service on behalf of or at the request of PNC and its subsidiaries. PNC and its subsidiaries also advance In May 2010, Visa funded $500 million to their litigation on behalf of covered individuals costs incurred in connection escrow account and reduced the conversion ratio of Visa B to with certain claims or proceedings, subject to written A shares. We consequently recognized our estimated $47 undertakings by each such individual to repay all amounts million share of the $500 million as a reduction of our advanced if it is ultimately determined that the individual is previously established indemnification liability and a not entitled to indemnification. We generally are responsible reduction of noninterest expense. for similar indemnifications and advancement obligations that companies we acquire had to their officers, directors In October 2010, Visa funded $800 million to their litigation and sometimes employees and agents at the time of escrow account and reduced the conversion ratio of Visa B to acquisition. We advanced such costs on behalf of several A shares. We consequently recognized our estimated $76 such individuals with respect to pending litigation or million share of the $800 million as a reduction of our investigations during 2010. It is not possible for us to previously established indemnification liability and a determine the aggregate potential exposure resulting from reduction of noninterest expense. the obligation to provide this indemnity or to advance such costs. Our Visa indemnification liability included on our Consolidated Balance Sheet at December 31, 2010 totaled

180 $70 million as a result of the indemnification provision in made to purchasers of the loans in the respective purchase and Section 2.05j of the Visa By-Laws and/or the indemnification sale agreements. Residential mortgage loans covered by these provided through the judgment and loss sharing agreements loan repurchase obligations include first and second-lien which is considered appropriate at this time in consideration mortgage loans we have sold through Agency securitizations, of the Visa announcement. Any ultimate exposure to the Non-Agency securitizations, and whole-loan sale transactions. specified Visa litigation may be different than this amount. As discussed in Note 3, Agency securitizations consist of mortgage loans sale transactions with FNMA, FHLMC, and RECOURSE AND REPURCHASE OBLIGATIONS GNMA, while Non-Agency securitizations and whole-loan As discussed in Note 3 Loan Sale and Servicing Activities and sale transactions consist of mortgage loans sale transactions Variable Interest Entities, PNC has sold commercial mortgage with private investors. Our exposure and activity associated and residential mortgage loans directly or indirectly in with these loan repurchase obligations is reported in the securitizations and whole-loan sale transactions with Residential Mortgage Banking segment. In addition, PNC’s continuing involvement. One form of continuing involvement residential mortgage loan repurchase obligations include includes certain recourse and loan repurchase obligations certain brokered home equity loans/lines that were sold to associated with the transferred assets in these transactions. private investors by National City prior to our acquisition. PNC is no longer engaged in the brokered home equity COMMERCIAL MORTGAGE RECOURSE OBLIGATIONS lending business, and our exposure under these loan We originate, close and service commercial mortgage loans repurchase obligations is reported in the Distressed Assets which are sold to FNMA under FNMA’s DUS program. We Portfolio segment. have similar arrangements with FHLMC. Loan covenants and representations and warranties are Under these programs, we generally assume up to a one-third established through loan sale agreements with various pari passu risk of loss on unpaid principal balances through a investors to provide assurance that PNC has sold loans to loss share arrangement. At December 31, 2010 and 2009, the investors of sufficient investment quality. Key aspects of such unpaid principal balance outstanding of loans sold as a covenants and representations and warranties include the participant in these programs was $13.2 billion and $19.7 loan’s compliance with any applicable loan criteria established billion, respectively. At December 31, 2010 and 2009, the by the investor, including underwriting standards, delivery of potential maximum exposure under the loss share all required loan documents to the investor or its designated arrangements was $4.0 billion and $6.0 billion, respectively. party, sufficient collateral valuation, and the validity of the We maintain a reserve based upon these potential losses. The lien securing the loan. As a result of alleged breaches of these reserve for losses under these programs totaled $54 million contractual obligations, investors may request PNC to and $71 million as of December 31, 2010 and 2009, indemnify them against losses on certain loans or to respectively, and is included in Other liabilities on our repurchase loans. These investor indemnification or Consolidated Balance Sheet. If payment is required under repurchase claims are typically settled on an individual loan these programs, we would not have a contractual interest in basis through make-whole payments or loan repurchases; the collateral underlying the mortgage loans on which losses however, on occasion we may negotiate pooled settlements occurred, although the value of the collateral is taken into with investors. account in determining our share of such losses. Our exposure and activity associated with these recourse obligations are Indemnifications for loss or loan repurchases typically occur reported in the Corporate & Institutional Banking segment. when, after review of the claim, we agree insufficient evidence exists to dispute the investor’s claim that a breach of Analysis of Commercial Mortgage Recourse Obligations a loan covenant and representation and warranty has occurred, such breach has not been cured, and the effect of such breach In millions 2010 2009 is deemed to have had a material and adverse effect on the January 1 $71 $79 value of the transferred loan. Depending on the sale agreement Reserve adjustments, net 9 (3) and upon proper notice from the investor, we typically Losses – loan repurchases and settlements (2) (5) respond to such indemnification and repurchase requests Loan sales (24) within 60 days, although final resolution of the claim may take December 31 $54 $71 a longer period of time. With the exception of the sales agreements associated with the Agency securitizations, most RESIDENTIAL MORTGAGE LOAN REPURCHASE OBLIGATIONS sale agreements do not provide for penalties or other remedies While residential mortgage loans are sold on a non-recourse if we do not respond timely to investor indemnification or basis, we assume certain loan repurchase obligations repurchase requests. associated with mortgage loans we have sold to investors. These loan repurchase obligations primarily relate to Origination and sale of residential mortgages is an ongoing situations where PNC is alleged to have breached certain business activity and, accordingly, management continually origination covenants and representations and warranties assesses the need for indemnification and repurchase liabilities

181 pursuant to the associated investor sale agreements. We on the Consolidated Income Statement. Since PNC is no establish indemnification and repurchase liabilities for longer engaged in the brokered home equity lending business, estimated losses on sold first and second-lien mortgages and only subsequent adjustments are recognized to the home home equity loans/lines for which indemnification is expected equity loans/lines indemnification and repurchase liability. to be provided or for loans that are expected to be repurchased. These adjustments are recognized in Other noninterest income For the first and second-lien mortgage sold portfolio, we have on the Consolidated Income Statement. established an indemnification and repurchase liability pursuant to investor sale agreements based on claims made and our Management’s subsequent evaluation of these indemnification estimate of future claims on a loan by loan basis. These relate and repurchase liabilities is based upon trends in primarily to loans originated in years 2006-2008. For the home indemnification and repurchase requests, actual loss equity loans/lines sold portfolio, we have established experience, known and inherent risks in the underlying indemnification and repurchase liabilities based upon this same serviced loan portfolios, and current economic conditions. As methodology for loans sold from 2005-2007. part of its evaluation, management considers estimated loss projections over the life of the subject loan portfolio. At Indemnification and repurchase liabilities are initially December 31, 2010 and 2009, the total indemnification and recognized when loans are sold to investors and are repurchase liability for estimated losses on indemnification subsequently evaluated for adequacy by management. Initial and repurchase claims totaled $294 million and $270 million, recognition and subsequent adjustments to the indemnification respectively, and was included in Other liabilities on the and repurchase liability for the first and second-lien mortgage Consolidated Balance Sheet. An analysis of the changes in this sold portfolio are recognized in Residential mortgage revenue liability during 2010 and 2009 follows:

Analysis of Indemnification and Repurchase Liability for Asserted and Unasserted Claims

2010 2009 Residential Home Equity Residential Home Equity In millions Mortgages (a) Loans/Lines (b) Total Mortgages (a) Loans/Lines (b) Total January 1 $ 229 $ 41 $ 270 $ 300 $101 $ 401 Reserve adjustments, net (c) 120 144 264 230 (9) 221 Losses – loan repurchases and settlements (205) (35) (240) (301) (51) (352) December 31 $ 144 $150 $ 294 $ 229 $ 41 $ 270 (a) Repurchase obligation associated with sold loan portfolios of $139.8 billion and $157.2 billion at December 31, 2010 and December 31, 2009, respectively. (b) Repurchase obligation associated with sold loan portfolios of $6.5 billion and $7.5 billion at December 31, 2010 and December 31, 2009, respectively. PNC is no longer in engaged in the brokered home equity business which was acquired with National City. (c) Includes $157 million in 2009 for residential mortgages related to the final purchase price allocation associated with the National City acquisition.

REINSURANCE AGREEMENTS The comparable amount of reserves for probable losses as of We have two wholly-owned captive insurance subsidiaries December 31, 2009 was $220 million. which provide reinsurance to third-party insurers related to insurance sold to our customers. These subsidiaries enter into REPURCHASE AND RESALE AGREEMENTS various types of reinsurance agreements with third-party We enter into repurchase and resale agreements where we insurers where the subsidiary assumes the risk of loss through transfer investment securities to/from a third party with the either an excess of loss or quota share agreement up to 100% agreement to repurchase/resell those investment securities at a reinsurance. In excess of loss agreements, these subsidiaries future date for a specified price. These transactions are assume the risk of loss for an excess layer of coverage up to accounted for as collateralized borrowings/financings. specified limits, once a defined first loss percentage is met. In quota share agreements, the subsidiaries and third-party insurers share the responsibility for payment of all claims.

Reserves recognized for probable losses on these policies and the aggregate maximum exposure up to the specified limits for all reinsurance contracts were as follows:

Reinsurance Agreements

December 31, In millions except as noted 2010 Reserves for probable losses $150 Maximum exposure (billions) $ 4.5

182 NOTE 24 PARENT COMPANY unconditionally guaranteed by the parent company. In Summarized financial information of the parent company is as addition, in connection with certain affiliates’ commercial and follows: residential mortgage servicing operations, the parent company has committed to maintain such affiliates’ net worth above Income Statement minimum requirements.

Year ended December 31 - in millions 2010(a) 2009 (a) 2008 Parent Company – Income Tax Refunds and Interest Paid Operating Revenue Dividends from: Income Tax Interest Bank subsidiaries and bank holding Year ended December 31 (in millions) Refunds Paid company $2,180 $ 839 $1,012 2010 $342 $419 Non-bank subsidiaries 575 84 168 2009 137 427 Interest income 12 4 2008 92 147 Noninterest income 27 28 18 Total operating revenue 2,782 963 1,202 Statement Of Cash Flows OPERATING EXPENSE Interest expense 458 495 152 Year ended December 31 - in millions 2010 2009 2008 Other expense (61) 21 46 OPERATING ACTIVITIES Total operating expense 397 516 198 Net income $ 3,412 $ 2,447 $ 882 Income before income taxes and equity Adjustments to reconcile net income in undistributed net income of to net cash provided by operating subsidiaries 2,385 447 1,004 activities: Income tax benefits (253) (147) (50) Equity in undistributed net (earnings)/losses of Income before equity in subsidiaries (774) (1,853) 172 undistributed net income of Other (53) 2,687 156 subsidiaries 2,638 594 1,054 Equity in undistributed net income of Net cash provided by operating subsidiaries: activities 2,585 3,281 1,210 Bank subsidiaries and bank holding INVESTING ACTIVITIES company 677 1,736 (125) Net capital returned from Non-bank subsidiaries 97 117 (47) (contributed to) subsidiaries 1,766 (899) (8,298) Net income $3,412 $2,447 $ 882 Investment securities: Sales and maturities 267 (a) Includes the impact of National City. Purchases (228) Net cash received from acquisitions 5 1,431 Balance Sheet Other 1 (182) (104)

December 31 - in millions 2010 2009 Net cash provided by (used in) investing activities 1,767 (1,037) (6,971) ASSETS Cash and due from banks $ 401 $ 104 FINANCING ACTIVITIES Interest-earning deposits with banks 5 95 Borrowings from subsidiaries 7,580 3,420 2,100 Investments in: Repayments on borrowings from Bank subsidiaries and bank holding subsidiaries (6,596) (4,274) (3,633) company 34,049 32,966 Other borrowed funds (379) (1,166) Non-bank subsidiaries 1,951 2,650 Preferred stock – TARP (7,579) 7,275 Other assets 1,523 1,287 Preferred stock – Other (1) 492 Total assets $37,929 $37,102 TARP Warrant 304 Supervisory Capital Assessment LIABILITIES Program – common stock 624 Subordinated debt $ 3,804 $ 3,859 Common and treasury stock 3,474 247 375 Senior debt 1,799 2,018 Acquisition of treasury stock (204) (188) (234) Bank affiliate borrowings 112 92 Preferred stock cash dividends paid (146) (388) (21) Non-bank affiliate borrowings 964 Common stock cash dividends paid (204) (430) (902) Accrued expenses and other liabilities 1,008 1,191 Net cash provided by (used in) Total liabilities 7,687 7,160 financing activities (4,055) (2,155) 5,756 EQUITY Increase (decrease) in cash and due Shareholder’s equity 30,242 29,942 from banks 297 89 (5) Total liabilities and equity $37,929 $37,102 Cash and due from banks at beginning of year 104 15 20 Commercial paper and all other debt issued by PNC Funding Cash and due from banks at end Corp, a wholly owned finance subsidiary, is fully and of year $ 401 $ 104 $ 15

183 NOTE 25 SEGMENT REPORTING differences is reflected in the “Other” category in the business In the first quarter of 2009, we made changes to our business segment tables. “Other” includes residual activities that do not organization structure and management reporting in meet the criteria for disclosure as a separate reportable conjunction with the acquisition of National City. Business business, such as gains or losses related to BlackRock segment results for 2008 have been reclassified to reflect transactions including LTIP share distributions and current methodologies and current business and management obligations, integration costs, asset and liability management structure and to present those periods on the same basis as activities including net securities gains or losses and certain 2010 and 2009. trading activities, exited businesses, equity management activities, alternative investments, intercompany eliminations, We have six reportable business segments: most corporate overhead, and differences between business • Retail Banking segment performance reporting and financial statement • Corporate & Institutional Banking reporting (GAAP), including the presentation of net income • Asset Management Group attributable to noncontrolling interests. Assets, revenue and • Residential Mortgage Banking earnings attributable to foreign activities were not material in • BlackRock the periods presented for comparative purposes. • Distressed Assets Portfolio BUSINESS SEGMENT PRODUCTS AND SERVICES Results of individual businesses are presented based on our Retail Banking provides deposit, lending, brokerage, trust, management accounting practices and management structure. investment management, and cash management services to There is no comprehensive, authoritative body of guidance for consumer and small business customers within our primary management accounting equivalent to GAAP; therefore, the geographic markets. Our customers are serviced through our financial results of our individual businesses are not branch network, call centers and the internet. The branch necessarily comparable with similar information for any other network is located primarily in Pennsylvania, Ohio, New company. We refine our methodologies from time to time as Jersey, Michigan, Maryland, Illinois, Indiana, Kentucky, our management accounting practices are enhanced and our Florida, Virginia, Missouri, Delaware, Washington, D.C., and businesses and management structure change. As a result of Wisconsin. its sale, GIS is no longer a reportable business segment. Corporate & Institutional Banking provides lending, treasury management, and capital markets-related products and Financial results are presented, to the extent practicable, as if services to mid-sized corporations, government and each business operated on a stand-alone basis. As permitted not-for-profit entities, and selectively to large corporations. under GAAP, we have aggregated the business results for Lending products include secured and unsecured loans, letters certain similar operating segments for financial reporting of credit and equipment leases. Treasury management services purposes. include cash and investment management, receivables management, disbursement services, funds transfer services, Assets receive a funding charge and liabilities and capital information reporting, and global trade services. Capital receive a funding credit based on a transfer pricing markets-related products and services include foreign methodology that incorporates product maturities, duration exchange, derivatives, loan syndications, mergers and and other factors. Capital is intended to cover unexpected acquisitions advisory and related services to middle-market losses and is assigned to the banking and servicing businesses companies, our multi-seller conduit, securities underwriting, using our risk-based economic capital model. We have and securities sales and trading. Corporate & Institutional assigned capital to Retail Banking equal to 6% of funds to Banking also provides commercial loan servicing, real estate approximate market comparables for this business. advisory and technology solutions for the commercial real estate finance industry. Corporate & Institutional Banking We have allocated the allowances for loan and lease losses provides products and services generally within our primary and unfunded loan commitments and letters of credit based on geographic markets, with certain products and services offered our assessment of risk inherent in each business segment’s nationally and internationally. loan portfolio. Our allocation of the costs incurred by operations and other shared support areas not directly aligned Asset Management Group includes personal wealth with the businesses is primarily based on the use of services. management for high net worth and ultra high net worth clients and institutional asset management. Wealth Total business segment financial results differ from management products and services include financial planning, consolidated income from continuing operations before customized investment management, private banking, tailored noncontrolling interests, which itself excludes the earnings credit solutions and trust management and administration for and revenue attributable to GIS through June 30, 2010 and the individuals and their families. Institutional asset management related after-tax gain on sale in the third quarter of 2010 that provides investment management, custody, and retirement are reflected in discontinued operations. The impact of these planning services. The institutional clients include

184 corporations, unions, municipalities, non-profits, foundations BlackRock is the largest publicly traded investment and endowments located primarily in our geographic management firm in the world. BlackRock manages assets on footprint. behalf of institutional and individual investors worldwide through a variety of equity, fixed income, multi-asset class, Residential Mortgage Banking directly originates primarily alternative and cash management separate accounts and funds, first lien residential mortgage loans on a nationwide basis with including iShares®, the global product leader in exchange a significant presence within the retail banking footprint, and traded funds. In addition, BlackRock provides market risk also originates loans through majority and minority owned management, financial markets advisory and enterprise affiliates. Mortgage loans represent loans collateralized by investment system services globally to a broad base of clients. one-to-four-family residential real estate. These loans are At December 31, 2010, our economic interest in BlackRock typically underwritten to government agency and/or third was 20%. party standards, and sold, servicing retained, to secondary mortgage market conduits FNMA, FHLMC, Federal Home PNC received cash dividends from BlackRock of $178 million Loan Banks and third-party investors, or are securitized and during 2010, $134 million during 2009, and $135 million issued under the GNMA program. The mortgage servicing during 2008. operation performs all functions related to servicing mortgage loans – primarily those in first lien position – for various Distressed Assets Portfolio includes commercial residential investors and for loans owned by PNC. Certain loans development loans, cross-border leases, consumer brokered originated through majority or minority owned affiliates are home equity loans, retail mortgages, non-prime mortgages, sold to others. and residential construction loans. These loans require special servicing and management oversight given current market conditions. We obtained the majority of these loans through acquisitions of other companies.

185 Results Of Businesses

Corporate & Asset Residential Distressed Year ended December 31 Retail Institutional Management Mortgage Assets In millions Banking Banking Group Banking BlackRock Portfolio Other Consolidated 2010 Income Statement Net interest income $ 3,431 $ 3,493 $ 263 $ 267 $ 1,217 $ 559 $ 9,230 Noninterest income 1,943 1,363 627 736 $ 462 (92) 907 5,946 Total revenue 5,374 4,856 890 1,003 462 1,125 1,466 15,176 Provision for credit losses 1,103 303 20 5 976 95 2,502 Depreciation and amortization 218 148 41 3 287 697 Other noninterest expense 3,836 1,669 606 562 250 993 7,916 Income (loss) from continuing operations before income taxes and noncontrolling interests 217 2,736 223 433 462 (101) 91 4,061 Income taxes (benefit) 77 966 82 158 111 (37) (320) 1,037 Income (loss) from continuing operations before noncontrolling interests $ 140 $ 1,770 $ 141 $ 275 $ 351 $ (64) $ 411 $ 3,024 Inter-segment revenue $ 1 $ 21 $ 13 $ 12 $ 22 $ (12) $ (57) Average Assets (a) $67,024 $77,467 $7,022 $9,247 $5,428 $17,517 $81,197 $264,902 2009 Income Statement Net interest income $ 3,520 $ 3,801 $ 308 $ 332 $ 1,079 $ 43 $ 9,083 Noninterest income 2,199 1,433 611 996 $ 262 74 1,570 7,145 Total revenue 5,719 5,234 919 1,328 262 1,153 1,613 16,228 Provision for (recoveries of) credit losses 1,330 1,603 97 (4) 771 133 3,930 Depreciation and amortization 263 141 41 5 323 773 Other noninterest expense 3,906 1,659 613 627 246 1,249 8,300 Income (loss) from continuing operations before income taxes and noncontrolling interests 220 1,831 168 700 262 136 (92) 3,225 Income taxes (benefit) 84 641 63 265 55 52 (293) 867 Income from continuing operations before noncontrolling interests $ 136 $ 1,190 $ 105 $ 435 $ 207 $ 84 $ 201 $ 2,358 Inter-segment revenue $ (3) $ 11 $ 18 $ 6 $ 16 $ (17) $ (31) Average Assets (a) $65,320 $84,689 $7,320 $8,420 $6,249 $22,844 $82,034 $276,876 2008 Income Statement Net interest income $ 1,593 $ 1,302 $ 130 $ 829 $ 3,854 Noninterest income 1,137 536 429 $ 261 79 2,442 Total revenue 2,730 1,838 559 261 908 6,296 Provision for credit losses 388 575 6 548 1,517 Depreciation and amortization 125 22 7 149 303 Other noninterest expense 1,664 923 356 439 3,382 Income (loss) from continuing operations before income taxes and noncontrolling interests 553 318 190 261 (228) 1,094 Income taxes (benefit) 225 103 71 54 (155) 298 Income (loss) from continuing operations before noncontrolling interests $ 328 $ 215 $ 119 $ 207 $ (73) $ 796 Inter-segment revenue $ 2 $ 14 $ 15 $ 15 $ (46) Average Assets (a) $32,922 $47,049 $3,001 $4,240 $54,808 $142,020 (a) Period-end balances for BlackRock.

186 STATISTICAL INFORMATION (UNAUDITED) THE PNC FINANCIAL SERVICES GROUP, INC. Selected Quarterly Financial Data

2010 2009 Dollars in millions, except per share data Fourth Third Second First Fourth Third Second First Summary Of Operations Interest income $2,671 $2,701 $2,873 $2,905 $2,939 $2,888 $3,000 $3,259 Interest expense 470 486 438 526 593 664 807 939 Net interest income 2,201 2,215 2,435 2,379 2,346 2,224 2,193 2,320 Noninterest income (a) (b) 1,702 1,383 1,477 1,384 2,540 1,629 1,610 1,366 Total revenue 3,903 3,598 3,912 3,763 4,886 3,853 3,803 3,686 Provision for credit losses 442 486 823 751 1,049 914 1,087 880 Noninterest expense 2,340 2,158 2,002 2,113 2,209 2,214 2,492 2,158 Income from continuing operations before income taxes and noncontrolling interests 1,121 954 1,087 899 1,628 725 224 648 Income taxes 301 179 306 251 525 185 29 128 Income from continuing operations before noncontrolling interests 820 775 781 648 1,103 540 195 520 Income from discontinued operations, net of income taxes (c) 328 22 23 4191210 Net income 820 1,103 803 671 1,107 559 207 530 Less: Net income (loss) attributable to noncontrolling interests (3) 2 (9) (5) (37) (20) 9 4 Preferred stock dividends 2442593119 99 119 51 Preferred stock discount accretion and redemptions 13125014 13 14 15 Net income attributable to common shareholders $ 798 $1,094 $ 786 $ 333 $1,011 $ 467 $ 65 $ 460 Per Common Share Data Book value $56.29 $55.91 $52.77 $50.32 $47.68 $45.52 $42.00 $41.67 Basic earnings (d) Continuing operations 1.52 1.45 1.45 .62 2.18 .97 .11 1.02 Discontinued operations (c) .63 .04 .05 .01 .04 .03 .02 Net income 1.52 2.08 1.49 .67 2.19 1.01 .14 1.04 Diluted earnings (d) Continuing operations 1.50 1.45 1.43 .61 2.16 .96 .11 1.01 Discontinued operations (c) .62 .04 .05 .01 .04 .03 .02 Net income 1.50 2.07 1.47 .66 2.17 1.00 .14 1.03

(a) Fourth quarter 2009 included a $1.076 billion gain related to BlackRock’s acquisition of BGI on December 1, 2009. (b) Noninterest income included equity management gains/(losses) and net gains on sales of securities in each quarter as follows (in millions):

2010 2009 Fourth Third Second First Fourth Third Second First Equity management gains/(losses) $40$63$75$41 $ 35 $ 3 $ (13) $ (52) Net gains on sales of securities 68 121 147 90 144 168 182 56 (c) Includes results of operations for PNC Global Investment Servicing Inc. (GIS) and the related after-tax gain on sale. We sold GIS effective July 1, 2010, resulting in a pretax gain of $639 million, or $328 million after taxes, recognized during the third quarter of 2010. (d) The sum of quarterly amounts for 2010 and 2009 does not equal the respective year’s amount because the quarterly calculations are based on a changing number of average shares.

187 Analysis Of Year-To-Year Changes In Net Interest Income

2010/2009 2009/2008 Increase/(Decrease) in Income/ Increase/(Decrease) in Income/ Expense Due to Changes in: Expense Due to Changes in: Taxable-equivalent basis - in millions Volume Rate Total Volume Rate Total Interest-Earning Assets Investment securities Securities available for sale Residential mortgage-backed Agency $ 69 $(196) $ (127) $ 572 $ (79) $ 493 Non-agency (170) (52) (222) (3) 126 123 Commercial mortgage-backed (56) (17) (73) (51) 8 (43) Asset-backed 18 (80) (62) (71) 57 (14) US Treasury and government agencies 87 (13) 74 135 (1) 134 State and municipal 5531 7 38 Other debt 42 (9) 33 39 (5) 34 Corporate stocks and other (3) (3) (9) (9) Total securities available for sale 132 (507) (375) 819 (63) 756 Securities held to maturity Commercial mortgage-backed 97 (14) 83 108 108 Asset-backed 45 (49) (4) 86 (1) 85 Other (2) 2 66 Total securities held to maturity 135 (56) 79 200 (1) 199 Total investment securities 274 (570) (296) 1,016 (61) 955 Loans Commercial (363) (37) (400) 1,626 (200) 1,426 Commercial real estate (222) (25) (247) 809 (59) 750 Equipment lease financing 42327 159 58 217 Consumer 136 (16) 120 1,673 (63) 1,610 Residential mortgage (227) 100 (127) 763 37 800 Total loans (644) 17 (627) 5,032 (229) 4,803 Loans held for sale (87) 80 (7) 100 4 104 Federal funds sold and resale agreements 1 (6) (5) (15) (14) (29) Other (100) 111 11 217 (245) (28) Total interest-earning assets $(690) $(234) $ (924) $6,359 $ (554) $5,805 Interest-Bearing Liabilities Interest-bearing deposits Money market $ 27 $(314) $ (287) $ 375 $ (393) $ (18) Demand 4 (38) (34) 54 (55) (1) Savings 1 (2) (1) 8 (2) 6 Retail certificates of deposit (197) (218) (415) 834 (388) 446 Other time (75) 37 (38) 18 (107) (89) Time deposits in foreign offices (2) (1) (3) (21) (67) (88) Total interest-bearing deposits (128) (650) (778) 1,210 (954) 256 Borrowed funds Federal funds purchased and repurchase agreements (3) (3) (44) (96) (140) Federal Home Loan Bank borrowings (70) (59) (129) 122 (243) (121) Bank notes and senior debt (7) (116) (123) 236 10 246 Subordinated debt (31) (64) (95) 287 94 381 Other 32 (17) 15 (33) (44) (77) Total borrowed funds (110) (225) (335) 383 (94) 289 Total interest-bearing liabilities (231) (882) (1,113) 1,753 (1,208) 545 Change in net interest income $(543) $ 732 $ 189 $4,679 $ 581 $5,260

Changes attributable to rate/volume are prorated into rate and volume components.

188 Average Consolidated Balance Sheet And Net Interest Analysis 2010 2009 2008 Interest Average Interest Average Interest Average Taxable-equivalent basis Average Income/ Yields/ Average Income/ Yields/ Average Income/ Yields/ Dollars in millions Balances Expense Rates Balances Expense Rates Balances Expense Rates Assets Interest-earning assets: Investment securities Securities available for sale Residential mortgage-backed Agency $ 23,437 $ 911 3.89% $ 21,889 $ 1,038 4.74% $ 10,003 $ 545 5.45% Non-agency 9,240 558 6.04 11,993 780 6.50 12,055 657 5.45 Commercial mortgage-backed 3,679 191 5.19 4,748 264 5.56 5,666 307 5.42 Asset-backed 2,240 83 3.71 1,963 145 7.39 3,126 159 5.09 US Treasury and government agencies 7,549 211 2.80 4,477 137 3.06 50 3 6.00 State and municipal 1,445 79 5.47 1,354 74 5.47 764 36 4.71 Other debt 2,783 79 2.84 1,327 46 3.47 220 12 5.45 Corporate stocks and other 448 398 3 .75 412 12 2.91 Total securities available for sale 50,821 2,112 4.16 48,149 2,487 5.17 32,296 1,731 5.36 Securities held to maturity Commercial mortgage-backed 3,711 206 5.55 1,990 123 6.18 239 15 6.28 Asset-backed 3,409 89 2.61 2,085 93 4.46 162 8 4.94 Other 49 6 12.24 71 6 8.45 1 Total securities held to maturity 7,169 301 4.20 4,146 222 5.35 402 23 5.72 Total investment securities 57,990 2,413 4.16 52,295 2,709 5.18 32,698 1,754 5.36 Loans Commercial 54,339 2,888 5.31 61,183 3,288 5.37 31,267 1,862 5.96 Commercial real estate 20,435 1,045 5.11 24,775 1,292 5.21 9,368 542 5.79 Equipment lease financing 6,276 325 5.18 6,201 298 4.81 2,566 81 3.16 Consumer 55,015 2,865 5.21 52,368 2,745 5.24 20,526 1,135 5.53 Residential mortgage 17,709 1,209 6.83 21,116 1,336 6.33 9,017 536 5.94 Total loans 153,774 8,332 5.42 165,643 8,959 5.41 72,744 4,156 5.71 Loans held for sale 2,871 263 9.16 3,976 270 6.79 2,502 166 6.63 Federal funds sold and resale agreements 1,899 37 1.95 1,865 42 2.25 2,472 71 2.87 Other 8,215 185 2.25 14,708 174 1.18 4,068 202 4.97 Total interest-earning assets/interest income 224,749 11,230 5.00 238,487 12,154 5.10 114,484 6,349 5.55 Noninterest-earning assets: Allowance for loan and lease losses (5,144) (4,316) (962) Cash and due from banks 3,569 3,648 2,705 Other 41,728 39,057 25,793 Total assets $264,902 $276,876 $142,020 Liabilities and Equity Interest-bearing liabilities: Interest-bearing deposits Money market $ 58,264 261 .45 $ 55,326 548 .99 $ 27,625 566 2.05 Demand 25,025 33 .13 23,477 67 .29 9,947 68 .68 Savings 7,005 13 .19 6,495 14 .22 2,714 8 .29 Retail certificates of deposit 42,933 628 1.46 54,584 1,043 1.91 16,642 597 3.59 Other time 813 22 2.71 5,009 60 1.20 4,424 149 3.37 Time deposits in foreign offices 2,785 6 .22 3,637 9 .25 5,006 97 1.94 Total interest-bearing deposits 136,825 963 .70 148,528 1,741 1.17 66,358 1,485 2.24 Borrowed funds Federal funds purchased and repurchase agreements 4,309 13 .30 4,439 16 .36 7,228 156 2.16 Federal Home Loan Bank borrowings 7,996 71 .89 14,177 200 1.41 9,303 321 3.45 Bank notes and senior debt 12,790 320 2.50 12,981 443 3.41 6,064 197 3.25 Subordinated debt 9,647 505 5.23 10,191 600 5.89 4,990 219 4.39 Other 5,438 50 .92 2,345 35 1.49 3,737 112 3.00 Total borrowed funds 40,180 959 2.39 44,133 1,294 2.93 31,322 1,005 3.21 Total interest-bearing liabilities/interest expense 177,005 1,922 1.09 192,661 3,035 1.58 97,680 2,490 2.55 Noninterest-bearing liabilities and equity: Noninterest-bearing deposits 45,076 41,416 18,155 Allowance for unfunded loan commitments and letters of credit 239 328 134 Accrued expenses and other liabilities 11,015 12,179 10,033 Equity 31,567 30,292 16,018 Total liabilities and equity $264,902 $276,876 $142,020 Interest rate spread 3.91 3.52 3.00 Impact of noninterest-bearing sources .23 .30 .37 Net interest income/margin $ 9,308 4.14% $ 9,119 3.82% $3,859 3.37%

Nonaccrual loans are included in loans, net of unearned income. The impact of financial derivatives used in interest rate risk management is included in the interest income/expense and average yields/rates of the related assets and liabilities. Basis adjustments related to hedged items are included in noninterest-earning assets and noninterest-bearing liabilities. Average balances of securities are based on amortized historical cost (excluding adjustments to fair value which are included in other assets). Average balances for certain loans and borrowed funds accounted for at fair value, with changes in fair value recorded in trading noninterest income, are included in noninterest-earning assets and noninterest-bearing liabilities. The interest-earning deposits with the Federal Reserve are included in the ‘Other’ interest- earning assets category. Loan fees for the years ended December 31, 2010, 2009 and 2008 were $154 million, $162 million and $55 million, respectively. Interest income includes the effects of taxable-equivalent adjustments using a marginal federal income tax rate of 35% to increase tax-exempt interest income to a taxable-equivalent basis. The taxable- equivalent adjustments to interest income for the years ended December 31, 2010, 2009 and 2008 were $81 million, $65 million and $36 million, respectively.

189 LOANS OUTSTANDING

December 31 - in millions 2010 (a) 2009 (a) 2008 (a) 2007 2006 Commercial Commercial $ 55,177 $ 54,818 $ 69,220 $28,952 $20,883 Commercial real estate 17,934 23,131 25,736 8,903 3,527 Equipment lease financing 6,393 6,202 6,461 2,514 2,789 TOTAL COMMERCIAL LENDING 79,504 84,151 101,417 40,369 27,199 Consumer Home Equity 34,226 35,947 38,276 14,447 13,749 Residential real estate 15,999 19,810 21,583 9,557 6,337 Credit card 3,920 2,569 2,237 247 126 Other 16,946 15,066 11,976 3,699 2,694 TOTAL CONSUMER LENDING 71,091 73,392 74,072 27,950 22,906 Total loans $150,595 $157,543 $175,489 $68,319 $50,105 (a) Includes the impact of National City, which we acquired on December 31, 2008.

NONPERFORMING ASSETS AND RELATED INFORMATION

December 31 - dollars in millions 2010 (a) 2009 (a) 2008 (a) 2007 2006 Nonaccrual loans Commercial $1,253 $1,806 $ 576 $193 $109 Commercial real estate 1,835 2,140 766 214 12 Equipment lease financing 77 130 97 3 1 TOTAL COMMERCIAL LENDING 3,165 4,076 1,439 410 122 Consumer Home equity 448 356 66 16 11 Residential real estate 818 1,203 153 27 25 Other 35 36412 TOTAL CONSUMER LENDING 1,301 1,595 223 44 38 Total nonperforming loans (b) 4,466 5,671 1,662 454 160 Foreclosed and other assets Commercial lending 353 266 50 11 12 Consumer lending 482 379 469 30 12 Total foreclosed and other assets 835 645 519 41 24 Total nonperforming assets $5,301 $6,316 $2,181 $495 $184 Nonperforming loans to total loans 2.97% 3.60% .95% .66% .32% Nonperforming assets to total loans and foreclosed assets 3.50 3.99 1.24 .72 .37 Nonperforming assets to total assets 2.01 2.34 .75 .36 .18 Interest on nonperforming loans Computed on original terms $ 329 $ 302 $ 115 $ 51 $ 15 Recognized prior to nonperforming status 53 90 60 32 4 Past due loans (c) Accruing loans past due 90 days or more $ 542 $ 884 $ 395 $136 $ 55 As a percentage of total loans .36% .56% .22% .20% .11% Past due loans held for sale (c) Accruing loans held for sale past due 90 days or more $26 $ 45$ 40$8 $9 As a percentage of total loans held for sale .76% 1.77% .92% .20% .38% (a) Includes the impact of National City, which we acquired on December 31, 2008. (b) Includes TDRs of $784 million at December 31, 2010, $440 million at December 31, 2009 and $2 million at December 31, 2007. (c) Excludes loans that are government insured/guaranteed, primarily residential mortgages, and purchased impaired loans. Purchased impaired loans are excluded as they were recorded at estimated fair value when acquired and are currently considered performing loans due to the accretion of interest in purchase accounting.

190 SUMMARY OF LOAN LOSS EXPERIENCE

Year ended December 31 - dollars in millions 2010 2009 2008 2007 2006 Allowance for loan and lease losses – January 1 $ 5,072 $ 3,917 $ 830 $ 560 $ 596 Charge-offs Commercial (1,227) (1,276) (301) (156) (108) Commercial real estate (670) (510) (165) (16) (3) Equipment lease financing (120) (149) (3) (14) Consumer (a) (1,069) (961) (143) (73) (52) Residential real estate (406) (259) (6) (3) Total charge-offs (3,492) (3,155) (618) (245) (180) Recoveries Commercial 294 181 53 30 19 Commercial real estate 77 38 10 1 1 Equipment lease financing 56 27 1 5 Consumer (a) 110 105 15 14 15 Residential real estate 19 93 Total recoveries 556 444 79 45 40 Net charge-offs (2,936) (2,711) (539) (200) (140) Provision for credit losses (b) 2,502 3,930 1,517 315 124 Acquired allowance – National City (112) 2,224 Acquired allowance – other 20 152 Adoption of ASU 2009-17, Consolidations 141 Net change in allowance for unfunded loan commitments and letters of credit 108 48 (135) 3 (20) Allowance for loan and lease losses – December 31 $ 4,887 $ 5,072 $3,917 $ 830 $ 560 Allowance as a percent of December 31: Loans 3.25% 3.22% 2.23% 1.21% 1.12% Nonperforming loans 109 89 236 183 350 As a percent of average loans Net charge-offs 1.91 1.64 .74 .32 .28 Provision for credit losses 1.63 2.37 2.09 .50 .25 Allowance for loan and lease losses 3.18 3.06 5.38 1.33 1.13 Allowance as a multiple of net charge-offs 1.66x 1.87x 7.27x 4.15x 4.00x (a) Includes home equity, credit card and other consumer. (b) Amount for 2008 included a $504 million conforming provision for credit losses related to National City.

The following table presents the assignment of the allowance for loan and lease losses and the categories of loans as a percentage of total loans. Changes in the allocation over time reflect the changes in loan portfolio composition, risk profile and refinements to reserve methodologies. For purposes of this presentation, a portion of the allowance for loan and lease losses has been assigned to loan categories based on the relative specific and pool allocation amounts to provide coverage for probable losses not covered in specific, pool and consumer reserve methodologies related to qualitative and measurement factors. At December 31, 2010, the portion of the reserves for these factors was $42 million.

ALLOCATION OF ALLOWANCE FOR LOAN AND LEASE LOSSES

2010 2009 2008 2007 2006 December 31 Loans to Loans to Loans to Loans to Loans to Dollars in millions Allowance Total Loans Allowance Total Loans Allowance Total Loans Allowance Total Loans Allowance Total Loans Commercial $1,387 36.7% $1,869 34.8% $1,668 39.4% $564 42.4% $447 41.7% Commercial real estate 1,086 11.9 1,305 14.7 833 14.7 153 13.0 30 7.0 Equipment lease financing 94 4.2 171 3.9 179 3.7 36 3.7 48 5.6 Consumer (a) 1,227 36.6 957 34.0 929 29.9 68 26.9 28 33.1 Residential real estate 1,093 10.6 770 12.6 308 12.3 9 14.0 7 12.6 Total $4,887 100.0% $5,072 100.0% $3,917 100.0% $830 100.0% $560 100.0% (a) Includes home equity, credit card and other consumer.

191 SELECTED LOAN MATURITIES AND INTEREST SENSITIVITY ITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL December 31, 2010 1 Year 1 Through After 5 Gross In millions or Less 5 Years Years Loans DISCLOSURE Commercial $19,719 $30,620 $4,838 $55,177 Real estate projects 7,279 4,672 260 12,211 (a) None. Total $26,998 $35,292 $5,098 $67,388 (b) None. Loans with: Predetermined rate $ 5,221 $ 8,805 $2,185 $16,211 ITEM 9A – CONTROLS AND PROCEDURES Floating or adjustable rate 21,777 26,487 2,913 51,177 (a) MANAGEMENT’S REPORT ON INTERNAL Total $26,998 $35,292 $5,098 $67,388 CONTROL OVER FINANCIAL REPORTING The management of The PNC Financial Services Group, At December 31, 2010, we had no pay-fixed interest rate Inc. and subsidiaries (PNC) is responsible for swaps designated to commercial loans as part of fair value establishing and maintaining adequate internal control hedge strategies. At December 31, 2010, $14.5 billion notional over financial reporting, as such term is defined in the amount of receive-fixed interest rate swaps were designated as Exchange Act Rule 13a-15(f). part of cash flow hedging strategies that converted the floating rate (1 month and 3 month LIBOR) on the underlying Because of inherent limitations, internal control over commercial loans to a fixed rate as part of risk management financial reporting may not prevent or detect strategies. misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that TIME DEPOSITS OF $100,000 OR MORE Time deposits in foreign offices totaled $3.5 billion at controls may become inadequate because of changes in December 31, 2010, substantially all of which are in conditions, or that the degree of compliance with the denominations of $100,000 or more. policies or procedures may deteriorate.

The following table sets forth maturities of domestic time We performed an evaluation under the supervision and deposits of $100,000 or more: with the participation of our management, including the Chairman and Chief Executive Officer and the Executive Domestic Vice President and Chief Financial Officer, of the Certificates December 31, 2010 – in millions of Deposit effectiveness of PNC’s internal control over financial Three months or less $ 2,144 reporting as of December 31, 2010. This assessment was Over three through six months 1,437 based on criteria for effective internal control over Over six through twelve months 3,581 financial reporting described in Internal Control- Over twelve months 4,805 Integrated Framework issued by the Committee of Total $11,967 Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concludes that PNC maintained effective internal control over financial COMMON STOCK PRICES/DIVIDENDS DECLARED The table below sets forth by quarter the range of high and reporting as of December 31, 2010. low sale and quarter-end closing prices for our common stock and the cash dividends we declared per common share. PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited our consolidated Cash financial statements as of and for the year ended Dividends High Low Close Declared December 31, 2010 included in this Report, has also issued a report on the effectiveness of PNC’s internal 2010 Quarter First $61.80 $50.46 $59.70 $.10 control over financial reporting as of December 31, 2010. Second 70.45 56.30 56.50 .10 The report of PricewaterhouseCoopers LLP is included Third 62.99 49.43 51.91 .10 under Item 8 of this Annual Report on Form 10-K. Fourth 61.79 50.69 60.72 .10 Total $.40 (b) DISCLOSURE CONTROLS AND PROCEDURES 2009 Quarter AND CHANGES IN INTERNAL CONTROL OVER First $50.42 $16.20 $29.29 $.66 FINANCIAL REPORTING Second 53.22 27.50 38.81 .10 As of December 31, 2010, we performed an evaluation Third 48.78 33.06 48.59 .10 under the supervision and with the participation of our Fourth 57.86 43.37 52.79 .10 management, including the Chairman and Chief Total $.96 Executive Officer and the Executive Vice President and

192 Chief Financial Officer, of the effectiveness of the design Our PNC Code of Business Conduct and Ethics is available on and operation of our disclosure controls and procedures our corporate website at www.pnc.com/corporategovernance. and of changes in our internal control over financial In addition, any future amendments to, or waivers from, a reporting. provision of the PNC Code of Business Conduct and Ethics that applies to our directors or executive officers (including Based on that evaluation, our Chairman and Chief the Chairman and Chief Executive Officer, the Chief Financial Executive Officer and our Executive Vice President and Officer and the Controller) will be posted at this internet Chief Financial Officer concluded that our disclosure address. controls and procedures (as defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934, as ITEM 11 – EXECUTIVE COMPENSATION amended) were effective as of December 31, 2010, and that there has been no change in PNC’s internal control The information required by this item is included under the over financial reporting that occurred during the fourth captions “Corporate Governance at PNC – Board Committees quarter of 2010 that has materially affected, or is – Personnel and Compensation Committee – Compensation reasonably likely to materially affect, our internal control Committee Interlocks and Insider Participation,” “Corporate over financial reporting. Governance at PNC – Board Compensation in 2010,” “Compensation Discussion and Analysis,” “Compensation ITEM 9B – OTHER INFORMATION Committee Report,” “Compensation and Risk,” and “Compensation Tables” in our Proxy Statement to be filed for None. the 2011 annual meeting of shareholders and is incorporated herein by reference. In accordance with Item 407(e) (5) of PART III Regulation S-K, the information set forth under the caption “Compensation Committee Report” in such Proxy Statement ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND will be deemed to be furnished in this Report and will not be CORPORATE GOVERNANCE deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act as a result of Certain of the information regarding our directors (or furnishing the disclosure in this manner. nominees for director), executive officers and Audit Committee (and Audit Committee financial experts), required ITEM 12 – SECURITY OWNERSHIP OF CERTAIN by this item is included under the captions “Item 1 – Election BENEFICIAL OWNERS AND MANAGEMENT AND of Directors,” and “Corporate Governance at PNC – Board RELATED STOCKHOLDER MATTERS Committees – Audit Committee,” and “Director and Executive Officer Relationships – Family Relationships” in our Proxy The information required by this item regarding security Statement to be filed for the 2011 annual meeting of ownership of certain beneficial owners and management is shareholders and is incorporated herein by reference. included under the caption “Security Ownership of Directors and Executive Officers” in our Proxy Statement to be filed for Information regarding our compliance with Section 16(a) of the 2011 annual meeting of shareholders and is incorporated the Securities Exchange Act of 1934 is included under the herein by reference. caption “Director and Executive Officer Relationships – Section 16(a) Beneficial Ownership Reporting Compliance” in Information regarding our compensation plans under which our Proxy Statement to be filed for the 2011 annual meeting of PNC equity securities are authorized for issuance as of shareholders and is incorporated herein by reference. December 31, 2010 is included in a table (with introductory paragraph and notes) under the caption “Item 3 – Approval of Additional information regarding our executive officers and 2006 Incentive Award Plan Terms” in our Proxy Statement to our directors is included in Part I of this Report under the be filed for the 2011 annual meeting of shareholders and is captions “Executive Officers of the Registrant” and “Directors incorporated herein by reference. Included in the notes to that of the Registrant.” table, and incorporated herein by reference, is information regarding awards or portions of awards under our 2006 Incentive Award Plan that, by their terms, are payable only in cash. Additional information regarding these plans is included in Note 15 Stock-Based Compensation Plans in the Notes To Consolidated Financial Statements in Item 8 of this Report.

193 ITEM 13 – CERTAIN RELATIONSHIPS AND RELATED PART IV TRANSACTIONS, AND DIRECTOR INDEPENDENCE ITEM 15 – EXHIBITS, FINANCIAL STATEMENT The information required by this item is included under the SCHEDULES captions “Director and Executive Officer Relationships – Director Independence, – Transactions with Directors, – FINANCIAL STATEMENTS, FINANCIAL Indemnification and Advancement of Costs, and – Related STATEMENT SCHEDULES Person Transactions Policies and Procedures” in our Proxy Statement to be filed for the 2011 annual meeting of Our consolidated financial statements required in response to shareholders and is incorporated herein by reference. this Item are incorporated by reference from Item 8 of this Report. ITEM 14 – PRINCIPAL ACCOUNTING FEES AND SERVICES Audited consolidated financial statements of BlackRock, Inc. as of December 31, 2010 and 2009 and for each of the three The information required by this item is included under the years ended December 31, 2010 are filed with this Report as caption “Item 2 – Ratification of Independent Registered Exhibit 99.2 and incorporated herein by reference. Public Accounting Firm – Audit and Non-Audit Fees” in our Proxy Statement to be filed for the 2011 annual meeting of EXHIBITS shareholders and is incorporated herein by reference. Our exhibits listed on the Exhibit Index on pages E-1 through E-7 of this Form 10-K are filed with this Report or are incorporated herein by reference.

194 SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

THE PNC FINANCIAL SERVICES GROUP, INC. (Registrant)

By: /s/ Richard J. Johnson Richard J. Johnson Executive Vice President and Chief Financial Officer March 1, 2011

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of The PNC Financial Services Group, Inc. and in the capacities indicated on March 1, 2011.

Signature Capacities

/s/ James E. Rohr Chairman, Chief Executive Officer and Director James E. Rohr (Principal Executive Officer)

/s/ Richard J. Johnson Executive Vice President and Chief Financial Officer Richard J. Johnson (Principal Financial Officer)

/s/ Samuel R. Patterson Senior Vice President and Controller Samuel R. Patterson (Principal Accounting Officer)

* Richard O. Berndt; Charles E. Bunch; Paul W. Chellgren; Kay Directors Coles James; Richard B. Kelson; Bruce C. Lindsay; Anthony A. Massaro; Jane G. Pepper; Donald J. Shepard; Lorene K. Steffes; Dennis F. Strigl; Stephen G. Thieke; Thomas J. Usher; George H. Walls, Jr.; and Helge H. Wehmeier

*By: /s/ George P. Long, III George P. Long, III, Attorney-in-Fact, pursuant to Powers of Attorney filed herewith

195 EXHIBIT INDEX

Exhibit No. Description Method of Filing +

2.1 Agreement and Plan of Merger, dated as of October 24, 2008, by Incorporated herein by reference to Exhibit 2.1 of and between the Corporation and National City Corporation the Corporation’s Current Report on Form 8-K filed October 30, 2008 3.1 Articles of Incorporation of the Corporation, as amended Incorporated herein by reference to Exhibit 3.1 to effective as of January 2, 2009 the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2008 (2008 Form 10-K) 3.2 By-Laws of the Corporation, as amended and restated effective Incorporated herein by reference to Exhibit 3.2 of as of February 12, 2009 the Corporation’s Current Report on Form 8-K filed February 19, 2009 4.1 There are no instruments with respect to long-term debt of the Corporation and its subsidiaries that involve securities authorized under the instrument in an amount exceeding 10 percent of the total assets of the Corporation and its subsidiaries on a consolidated basis. The Corporation agrees to provide the SEC with a copy of instruments defining the rights of holders of long-term debt of the Corporation and its subsidiaries on request. 4.2 Terms of $1.80 Cumulative Convertible Preferred Stock, Incorporated herein by reference to Exhibit 3.1 of Series B the Corporation’s 2008 Form 10-K 4.3 Terms of 7.00% Non-Cumulative Preferred Stock, Series H Incorporated herein by reference to Exhibit 3.1 of the Corporation’s 2008 Form 10-K 4.4 Terms of Fixed-to-Floating Rate Non-Cumulative Perpetual Incorporated herein by reference to Exhibit 3.1 of Preferred Stock, Series I the Corporation’s 2008 Form 10-K 4.5 Terms of Fixed-to-Floating Rate Non-Cumulative Perpetual Incorporated herein by reference to Exhibit 3.1 of Preferred Stock, Series J the Corporation’s 2008 Form 10-K 4.6 Terms of Fixed-to-Floating Non-Cumulative Perpetual Preferred Incorporated herein by reference to Exhibit 3.1 of Stock, Series K the Corporation’s 2008 Form 10-K 4.7 Terms of 9.875% Fixed-to-Floating Rate Non-Cumulative Incorporated herein by reference to Exhibit 3.1 of Preferred Stock, Series L the Corporation’s 2008 Form 10-K 4.8 Terms of Non-Cumulative Perpetual Preferred Stock, Series M Incorporated herein by reference to Exhibit 3.1 of the Corporation’s 2008 Form 10-K 4.9 Warrants for Purchase of Shares of PNC Common Stock Incorporated herein by reference to Exhibit 4.2 (included as part of Exhibit 4.1) of the Corporation’s Form 8-A filed April 30, 2010 4.10 First Supplemental Indenture, dated as of January 29, 2008, Incorporated herein by reference to Exhibit 4.2 of between National City Corporation, as Issuer, and The Bank the Current Report on Form 8-K filed by of New York Trust Company, N.A., as Trustee, related to the National City Corporation (Commission File issuance of 4.0% Convertible Senior Notes due 2011 No. 001-10074) on February 4, 2008 4.11 Second Supplemental Indenture, dated as of December 31, 2008, Incorporated herein by reference to Exhibit 4.16 to between the Corporation and The Bank of New York the Corporation’s 2008 Form 10-K evidencing the succession of the Corporation to National City 4.12 Deposit Agreement dated January 30, 2008 by and among Incorporated herein by reference to Exhibit 4.2 of National City Corporation, Wilmington Trust Company, the Form 8-A filed by National City National City Bank as Transfer Agent and Registrar, and all Corporation on January 30, 2008 holders from time to time of Receipts issued pursuant thereto

E-1 4.13 Letter Agreement dated as of December 31, 2008 between the Incorporated herein by reference to Exhibit 4.4 of Corporation and Wilmington Trust Company the Corporation’s Form 8-A filed December 31, 2008 4.14 Stock Purchase Contract between National City Corporation and Incorporated herein by reference to Exhibit 4.7 of National City Preferred Capital Trust I acting through the the Form 8-A filed by National City Bank of New York Trust Company, N.A. as Property Trustee, Corporation (Commission File No. 001-10074) dated January 30, 2008 on January 30, 2008 4.15 Form of PNC Bank, National Association Global Bank Note for Incorporated herein by reference to Exhibit 4.9 of Fixed Rate Global Senior Bank Note with Maturity of more the Corporation’s Quarterly Report on than Nine Months from Date of Issuance Form 10-Q for the quarter ended September 30, 2004 (3rd Quarter 2004 Form 10-Q) 4.16 Form of PNC Bank, National Association Global Bank Note for Incorporated herein by reference to Exhibit 4.10 of Floating Rate Global Senior Bank Note with Maturity of more the Corporation’s 3rd Quarter 2004 Form 10-Q than Nine Months from Date of Issuance 4.17 Form of PNC Bank, National Association Global Bank Note for Incorporated herein by reference to Exhibit 4.11 of Fixed Rate Global Subordinated Bank Note with Maturity of the Corporation’s 3rd Quarter 2004 Form 10-Q more than Nine Months from Date of Issuance 4.18 Form of PNC Bank, National Association Global Bank Note for Incorporated herein by reference to Exhibit 4.12 of Floating Rate Global Subordinated Bank Note with Maturity the Corporation’s 3rd Quarter 2004 Form 10-Q of more than Nine Months from Date of Issuance 4.19 Exchange Agreement, dated as of March 29, 2007, by and Incorporated herein by reference to Exhibit 4.16 of among the Corporation, PNC Bank, National Association, and the Corporation’s Current Report on Form 8-K PNC Preferred Funding Trust II filed March 30, 2007 4.20 First Supplemental Indenture, dated as of February 13, 2008, Incorporated herein by reference to Exhibit 4.4 of between the Corporation and The Bank of New York the Corporation’s Current Report on Form 8-K filed February 13, 2008 4.21 Exchange Agreement, dated as of February 19, 2008, by and Incorporated herein by reference to Exhibit 99.1 of among the Corporation, PNC Bank, National Association, and the Corporation’s Current Report on Form 8-K PNC Preferred Funding Trust III filed February 19, 2008 10.1 The Corporation’s Supplemental Executive Retirement Plan, as Incorporated herein by reference to Exhibit 10.1 of amended and restated the Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 (2nd Quarter 2004 Form 10-Q)* 10.2 The Corporation’s Supplemental Executive Retirement Plan, as Incorporated herein by reference to Exhibit 10.2 to amended and restated effective January 1, 2009 the Corporation’s 2008 Form 10-K* 10.3 Amendment 2009-1 to the Corporation’s Supplemental Incorporated herein by reference to Exhibit 10.3 to Executive Retirement Plan as amended and restated as of the Corporation’s Annual Report on Form 10-K January 1, 2009 for the year ended December 31, 2009 (2009 Form 10-K)* 10.4 The Corporation’s ERISA Excess Pension Plan, as amended and Incorporated herein by reference to Exhibit 10.2 of restated the Corporation’s 2nd Quarter 2004 Form 10-Q* 10.5 Amendment to the Corporation’s ERISA Excess Pension Plan, Filed herewith* as amended and restated 10.6 The Corporation’s ERISA Excess Pension Plan, as amended and Incorporated herein by reference to Exhibit 10.4 to restated effective January 1, 2009 the Corporation’s 2008 Form 10-K* 10.7 Amendment 2009-1 to the Corporation’s ERISA Excess Plan as Incorporated herein by reference to Exhibit 10.6 to amended and restated as of January 1, 2009 the Corporation’s 2009 Form 10-K* 10.8 The Corporation’s Key Executive Equity Program, as amended Incorporated herein by reference to Exhibit 10.3 of and restated the Corporation’s 2nd Quarter 2004 Form 10-Q*

E-2 10.9 The Corporation’s Key Executive Equity Program, as amended Incorporated herein by reference to Exhibit 10.6 to and restated effective January 1, 2009 the Corporation’s 2008 Form 10-K* 10.10 Amendment 2009-1 to the Corporation’s Key Executive Equity Incorporated herein by reference to Exhibit 10.9 to Program as amended and restated as of January 1, 2009 the Corporation’s 2009 Form 10-K* 10.11 The Corporation’s Supplemental Incentive Savings Plan, as Incorporated herein by reference to Exhibit 10.4 of amended and restated the Corporation’s 2nd Quarter 2004 Form 10-Q* 10.12 The Corporation’s Supplemental Incentive Savings Plan, as Incorporated herein by reference to Exhibit 4.3 to amended and restated effective January 1, 2009 the Registration Statement on Form S-8 filed by the Corporation on January 22, 2009* 10.13 The Corporation’s Supplemental Incentive Savings Plan, as Incorporated herein by reference to Exhibit 10.61 amended and restated May 5, 2009 to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 (2nd Quarter 2009 Form 10-Q)* 10.14 Amendment 2009-1 to the Corporation’s Supplemental Incentive Incorporated herein by reference to Exhibit 10.13 Savings Plan, as amended and restated May 5, 2009 to the Corporation’s 2009 Form 10-K* 10.15 Second Amendment to the Corporation’s Supplemental Filed herewith* Incentive Savings Plan, as amended and restated May 5, 2009 10.16 The Corporation and Affiliates Deferred Compensation Plan, as Incorporated herein by reference to Exhibit 10.7 of amended and restated the Corporation’s 2nd Quarter 2004 Form 10-Q* 10.17 The Corporation and Affiliates Deferred Compensation Plan, as Incorporated herein by reference to Exhibit 4.5 to amended and restated effective January 1, 2009 the Registration Statement on Form S-8 filed by the Corporation on January 22, 2009* 10.18 The Corporation and Affiliates Deferred Compensation Plan, as Incorporated herein by reference to Exhibit 10.62 amended and restated May 5, 2009 to the Corporation’s 2nd Quarter 2009 Form 10-Q* 10.19 Amendment 2009-1 to the Corporation and Affiliates Deferred Incorporated herein by reference to Exhibit 10.17 Compensation Plan, as amended and restated May 5, 2009 to the Corporation’s 2009 Form 10-K* 10.20 Amendment 2010-1 to the Corporation and Affiliates Deferred Filed herewith* Compensation Plan, as amended and restated May 5, 2009 10.21 AJCA transition amendments to the Corporation’s Supplemental Incorporated herein by reference to Exhibit 10.8 of Incentive Savings Plan and the Corporation and Affiliates the Corporation’s Annual Report on Form 10-K Deferred Compensation Plan for the year ended December 31, 2005 (2005 Form 10-K)* 10.22 Further AJCA transition amendments to the Corporation and Incorporated herein by reference to Exhibit 10.12 Affiliates Deferred Compensation Plan to the Corporation’s 2008 Form 10-K* 10.23 The Corporation’s 2006 Incentive Award Plan, as amended and Incorporated herein by reference to Exhibit 10.53 restated of the Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008* 10.24 The Corporation’s 1997 Long-Term Incentive Award Plan, as Incorporated herein by reference to Exhibit 10.5 of amended and restated the Corporation’s 2nd Quarter 2004 Form 10-Q* 10.25 The Corporation’s 1996 Executive Incentive Award Plan, as Incorporated herein by reference to Exhibit 10.10 amended and restated effective as of January 1, 2007 of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2007 (2007 Form 10-K)* 10.26 The Corporation’s Directors Deferred Compensation Plan, as Incorporated herein by reference to Exhibit 10.12 amended and restated of the Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 (1st Quarter 2004 Form 10-Q)*

E-3 10.27 The Corporation’s Directors Deferred Compensation Plan, Incorporated herein by reference to Exhibit 10.14 effective as of January 1, 2008 of the Corporation’s 2007 Form 10-K* 10.28 The Corporation’s Outside Directors Deferred Stock Unit Plan, Incorporated herein by reference to Exhibit 10.13 as amended and restated of the Corporation’s 1st Quarter 2004 Form 10-Q* 10.29 The Corporation’s Outside Directors Deferred Stock Unit Plan, Incorporated herein by reference to Exhibit 10.15 effective as of January 1, 2008 of the Corporation’s 2007 Form 10-K* 10.30 Amended and Restated Trust Agreement between PNC Incorporated herein by reference to Exhibit 10.35 Investment Corp., as settlor, and Hershey Trust Company, as of the Corporation’s Quarterly Report on trustee Form 10-Q for the quarter ended September 30, 2005 (3rd Quarter 2005 Form 10-Q)* 10.31 Trust Agreement between PNC Investment Corp., as settlor, and Incorporated herein by reference to Exhibit 10.34 PNC Bank, National Association, as trustee of the Corporation’s 3rd Quarter 2005 Form 10-Q* 10.32 The Corporation’s Employee Stock Purchase Plan, as amended Incorporated herein by reference to Exhibit 99.1 to and restated as of January 1, 2009 the Registration Statement on Form S-8 filed by the Corporation on December 31, 2008 10.33 Forms of employee stock option, restricted stock, restricted Incorporated herein by reference to Exhibit 10.30 deferral, and incentive share agreements of the Corporation’s 3rd Quarter 2004 Form 10-Q* 10.34 2005 forms of employee stock option, restricted stock and Incorporated herein by reference to Exhibit 10.28 restricted deferral agreements of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004 (2004 Form 10-K)* 10.35 2006 forms of employee stock option, restricted stock and Incorporated herein by reference to Exhibit 10.17 restricted deferral agreements of the Corporation’s 2005 Form 10-K* 10.36 Forms of employee stock option and restricted stock agreements Incorporated by reference to Exhibit 10.40 of the under 2006 Incentive Award Plan Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006* 10.37 2006 forms of employee incentive performance unit and senior Incorporated herein by reference to Exhibit 10.20 officer change in control severance agreements of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2006 as filed on March 1, 2007 (2006 Form 10-K)* 10.38 2007 forms of employee stock option and restricted stock Incorporated herein by reference to Exhibit 10.21 agreements of the Corporation’s 2006 Form 10-K* 10.39 2006-2007 forms of employee incentive performance units Incorporated herein by reference to Exhibit 10.51 agreements of the Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 (2nd Quarter 2007 Form 10-Q)* 10.40 2008 forms of employee stock option and restricted stock/share Incorporated herein by reference to Exhibit 10.26 unit agreements of the Corporation’s 2007 Form 10-K* 10.41 2008 forms of employee performance units agreements Incorporated herein by reference to Exhibit 10.33 to the Corporation’s 2008 Form 10-K* 10.42 Form of employee stock option agreement with varied vesting Incorporated herein by reference to Exhibit 10.50 schedule or circumstances of the Corporation’s Current Report on Form 8-K filed April 18, 2008* 10.43 Form of employee restricted stock agreement with varied vesting Incorporated herein by reference to Exhibit 10.51 schedule or circumstances of the Corporation’s Current Report on Form 8-K filed April 18, 2008*

E-4 10.44 Form of employee stock option agreement with performance Incorporated herein by reference to Exhibit 10.54 vesting schedule of the Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008* 10.45 2009 forms of employee stock option, restricted stock, restricted Incorporated by reference to Exhibit 10.61 to the share unit and performance unit agreements Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009* 10.46 Form of agreement regarding portion of salary payable in stock Incorporated by reference to Exhibit 10.63 to the units Corporation’s Current Report on Form 8-K filed August 21, 2009* 10.47 Form of agreement for long-term restricted stock Incorporated by reference to Exhibit 10.64 to the Corporation’s Current Report on Form 8-K filed December 23, 2009* 10.48 Form of agreement for long-term stock Incorporated by reference to Exhibit 10.65 to the Corporation’s Current Report on Form 8-K filed December 23, 2009* 10.49 2010 forms of employee stock option, restricted stock, and Incorporated herein by reference to Exhibit 10.48 restricted share unit agreements to the Corporation’s 2009 Form 10-K* 10.50 2010 forms of employee performance units agreements Incorporated herein by reference to Exhibit 10.75 of the Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010* 10.51 Forms of director stock option and restricted stock agreements Incorporated herein by reference to Exhibit 10.32 of the Corporation’s 3rd Quarter 2004 Form 10-Q* 10.52 2005 form of director stock option agreement Incorporated herein by reference to Exhibit 10.33 of the Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005* 10.53 Form of time sharing agreements between the Corporation and Incorporated herein by reference to Exhibit 10.39 certain executives to the Corporation’s 2008 Form 10-K* 10.54 Form of Change in Control Employment Agreements Incorporated herein by reference to Exhibit 99.1 of the Corporation’s Current Report on Form 8-K filed September 12, 2008* 10.55 The National City Corporation 2004 Deferred Compensation Incorporated herein by reference to Exhibit 10.35 Plan, 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 10.56 Amendment to The National City Corporation 2004 Deferred Filed herewith Compensation Plan, as amended and restated effective January 1, 2005 10.57 BlackRock, Inc. 2002 Long-Term Retention and Incentive Plan Incorporated herein by reference to the Quarterly Report on Form 10-Q of BlackRock Holdco 2, Inc. (Commission File No. 001-15305) for the quarter ended September 30, 2002 (BlackRock Holdco 2 3rd Quarter 2002 Form 10-Q) 10.58 First Amendment to the BlackRock, Inc. 2002 Long-Term Incorporated herein by reference to the Quarterly Retention and Incentive Plan Report on Form 10-Q of BlackRock Holdco 2, Inc. (Commission File No. 001-15305) for the quarter ended March 31, 2004

E-5 10.59 Second Amendment to the BlackRock, Inc. 2002 Long-Term Incorporated herein by reference to the Annual Retention and Incentive Plan Report on Form 10-K of BlackRock Holdco 2, Inc. (Commission File No. 001-15305) for the year ended December 31, 2004 10.60 Share Surrender Agreement, dated October 10, 2002, among Incorporated herein by reference to the BlackRock BlackRock, Inc., PNC Asset Management, Inc., and the Holdco 2 3rd Quarter 2002 Form 10-Q Corporation 10.61 First Amendment, dated as of February 15, 2006, to the Share Incorporated herein by reference to the Current Surrender Agreement among BlackRock, Inc., PNC Bancorp, Report on Form 8-K of BlackRock Holdco 2, Inc. and the Corporation Inc. (Commission File No. 001-15305) filed February 22, 2006 (BlackRock Holdco 2 February 22, 2006 Form 8-K) 10.62 Second Amendment to Share Surrender Agreement made and Incorporated herein by reference to Exhibit 10.50 entered into as of June 11, 2007 by and between the of the Corporation’s Current Report on Corporation, BlackRock, Inc., and PNC Bancorp, Inc. Form 8-K filed June 14, 2007 10.63 Third Amendment to Share Surrender Agreement, dated as of Incorporated herein by reference to Exhibit 10.3 of February 27, 2009, between the Corporation and BlackRock, BlackRock, Inc.’s Current Report on Form 8-K Inc. filed February 27, 2009 10.64 Amended and Restated Implementation and Stockholder Incorporated herein by reference to Exhibit 10.2 of Agreement, dated as of February 27, 2009, between the BlackRock, Inc.’s Current Report on Form 8-K Corporation and BlackRock, Inc. filed February 27, 2009 10.65 Amendment No. 1, dated as of June 11, 2009, to the Amended Incorporated herein by reference to Exhibit 10.2 of and Restated Implementation and Stockholder Agreement BlackRock, Inc.’s Current Report on Form 8-K between the Corporation and BlackRock, Inc. filed June 17, 2009 10.66 PNC Bank, National Association US $20,000,000,000 Global Incorporated herein by reference to Exhibit 10.29 Bank Note Program for the Issue of Senior and Subordinated of the Corporation’s 3rd Quarter 2004 Bank Notes with Maturities of more than Nine Months from Form 10-Q Date of Issue Distribution Agreement dated July 30, 2004 10.67 Agreement and Plan of Merger dated as of October 24, 2008 by Incorporated herein by reference to Exhibit 2.1 of and between the Corporation and National City Corporation the Corporation’s Current Report on Form 8-K filed October 30, 2008 10.68 Letter Agreement dated December 31, 2008 by and between the Incorporated herein by reference to Exhibits 4.2 Corporation and the United States Department of the Treasury and 10.1 of the Corporation’s Current Report on Form 8-K filed January 2, 2009 10.69 Stock Purchase Agreement, dated as of February 1, 2010, by and Incorporated herein by reference to Exhibit 2.1 to between the Corporation and The Bank of New York Mellon the Corporation’s Current Report on Form 8-K Corporation filed February 3, 2010 12.1 Computation of Ratio of Earnings to Fixed Charges Filed herewith 12.2 Computation of Ratio of Earnings to Fixed Charges and Filed herewith Preferred Dividends 21 Schedule of Certain Subsidiaries of the Corporation Filed herewith 23.1 Consent of PricewaterhouseCoopers LLP, the Corporation’s Filed herewith Independent Registered Public Accounting Firm 23.2 Consent of Deloitte & Touche LLP, Independent Registered Filed herewith Public Accounting Firm of BlackRock, Inc. 24 Powers of Attorney Filed herewith 31.1 Certification of Chairman and Chief Executive Officer pursuant Filed herewith to Section 302 of the Sarbanes-Oxley Act of 2002

E-6 31.2 Certification of Chief Financial Officer pursuant to Section 302 Filed herewith of the Sarbanes-Oxley Act of 2002 32.1 Certification of Chairman and Chief Executive Officer pursuant Filed herewith to 18 U.S.C. Section 1350 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Filed herewith Section 1350 99.1 Form of Order of the Securities and Exchange Commission Incorporated herein by reference to Exhibit 99.3 of Instituting Public Administrative Procedures Pursuant to the Corporation’s Current Report on Form 8-K Section 8A of the Securities Act of 1933 and 21C of the dated and filed July 18, 2002 Securities Exchange Act of 1934, Making Findings and Imposing Cease-and-Desist Order 99.2 Audited consolidated financial statements of BlackRock, Inc. as Filed herewith of December 31, 2010 and 2009 and for each of the three years ended December 31, 2010 101 Interactive Data File (XBRL) Filed herewith

+ Incorporated document references to filings by the Corporation are to SEC File No. 001-09718, to filings by National City Corporation are to SEC File No. 001-10074, to filings by BlackRock through its second quarter 2006 Form 10-Q are to BlackRock Holdco 2, Inc. SEC File No. 001-15305, and to filings by BlackRock, Inc. are to SEC File No. 001-33099. * Denotes management contract or compensatory plan.

You can obtain copies of these Exhibits electronically at the SEC’s website at www.sec.gov or by mail from the Public Reference Section of the SEC, at 100 F Street, N.E., Washington, D.C. 20549 at prescribed rates. The Exhibits are also available as part of this Form 10-K on or through PNC’s corporate website at www.pnc.com/secfilings. Shareholders and bondholders may also obtain copies without charge by contacting Shareholder Relations at (800) 843-2206 or via e-mail at [email protected]. The Interactive Data File (XBRL) exhibit is only available electronically.

E-7 EXHIBIT 31.1

In accordance with Exchange Act Rules 13a-14(f) and 15d-14(f), this certification does not relate to Interactive Data Files as defined in Rule 11 of Regulation S-T.

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, 2010 of The PNC Financial Services Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 1, 2011

/s/ James E. Rohr James E. Rohr Chairman and Chief Executive Officer EXHIBIT 31.2

In accordance with Exchange Act Rules 13a-14(f) and 15d-14(f), this certification does not relate to Interactive Data Files as defined in Rule 11 of Regulation S-T.

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 December 31, 2010 of The PNC Financial Services Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 1, 2011

/s/ Richard J. Johnson Richard J. Johnson Executive Vice President and Chief Financial Officer EXHIBIT 32.1

In accordance with Exchange Act Rules 13a-14(f) and 15d-14(f), this certification does not relate to Interactive Data Files as defined in Rule 11 of Regulation S-T.

CERTIFICATION BY CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K for the year ended December 31, 2010 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, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that: (1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation for the dates and periods covered by the Report.

This certificate is being made for the exclusive purpose of compliance by the Chief Executive Officer of the Corporation with the requirements of Section 906 of the Sarbanes-Oxley Act of 2002, and may not be used by any person or for any reason other than as specifically required by law.

/s/ James E. Rohr James E. Rohr Chairman and Chief Executive Officer

March 1, 2011 EXHIBIT 32.2

In accordance with Exchange Act Rules 13a-14(f) and 15d-14(f), this certification does not relate to Interactive Data Files as defined in Rule 11 of Regulation S-T.

CERTIFICATION BY CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K for the year ended December 31, 2010 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, Executive Vice President and Chief Financial Officer of the Corporation, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that: (1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation for the dates and periods covered by the Report.

This certificate is being made for the exclusive purpose of compliance by the Chief Financial Officer of the Corporation with the requirements of Section 906 of the Sarbanes-Oxley Act of 2002, and may not be used by any person or for any reason other than as specifically required by law.

/s/ Richard J. Johnson Richard J. Johnson Executive Vice President and Chief Financial Officer

March 1, 2011