PNC Financial Services (PNC)

National City, and $164 million in the first quarter of 2008. Corporate services fees include treasury management fees, which continued to be a strong contributor to revenue.

Residential mortgage revenue totaled $431 million in the first quarter of 2009. Substantially all of this revenue is associated with National City’s business. Strong mortgage refinancing volumes and $202 million of net hedging gains of mortgage servicing rights occurred in the first quarter of 2009. It is unlikely that we will repeat this strong performance in future periods, particularly the servicing rights hedging gains.

Service charges on deposits totaled $224 million for the first three months of 2009, including $137 million related to National City, and $82 million for the first three months of 2008. Service charges on deposits increased despite declining customer transaction amounts and volumes.

Net gains on sales of securities totaled $56 million for the first quarter of 2009 and $41 million for the first quarter of 2008.

The net credit component of other-than-temporary impairments of securities recognized in earnings was a loss of $149 million in the first three months of 2009. The non-credit component of the fair value mark on these securities of $537 million, which related to market factors, was included in accumulated other comprehensive loss in shareholders’ equity at March 31, 2009. There were no other-than-temporary impairments recognized in the first three months of 2008.

Other noninterest income totaled $55 million for the first quarter of 2009 compared with $70 million for the first quarter of 2008. Other noninterest income for 2009 included gains of $103 million related to our equity investment in BlackRock and net losses on private equity and alternative investments of $122 million as referred to above.

Other noninterest income for 2008 included the $114 million gain from the sale of Hilliard Lyons, the $95 million gain from the redemption of a portion of our investment in Visa related to its March 2008 initial public offering, and gains of $40 million related to our equity investment in BlackRock as described above. The impact of these items was more than offset by losses related to our commercial mortgage loans held for sale, net of hedges, of $166 million, and trading losses of $76 million.

Other noninterest income typically fluctuates from period to period depending on the nature and magnitude of transactions completed. Further details regarding our trading activities are included in the Market Risk Management – Trading Risk portion of the Risk Management section of this Financial Review, further details regarding private equity and alternative investments are included in the Market Risk Management-Equity and Other Investment Risk section and further details regarding gains or losses related to our equity investment in BlackRock are included in the Business Segments Review section.

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

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

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

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

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

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

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

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

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

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

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

from commercial mortgage servicing including the impact of the ARCS acquisition, treasury management, third party consumer loan servicing activities and the Mercantile acquisition contributed to the increase in 2007 over the prior year.

Service charges on deposits increased $35 million, or 11%, to $348 million for 2007 compared with 2006. The increase was primarily due to the impact of Mercantile.

Net securities losses totaled $5 million in 2007 and $207 million in 2006. We took actions during the third quarter of 2006 that resulted in the sale of approximately $6 billion of investment securities at an aggregate pretax loss of $196 million during that quarter.

Other noninterest income decreased $170 million, to $423 million, in 2007 compared with 2006. Net losses of $127 million in 2007 representing the net of the mark-to-market adjustment on our LTIP obligation and gain recognized in connection with our transfer of shares to satisfy a portion of our LTIP obligation, compared with a net loss of $12 million on our LTIP shares obligation in 2006, where such obligation was applicable in the fourth quarter. Noninterest revenue from trading activities totaled $104 million in 2007 compared with $183 million in 2006. While customer trading income increased in comparison, total trading revenue declined in 2007 largely due to the lower economic hedging gains associated with commercial mortgage loan activity and economic hedging losses associated with structured resale agreements. Other noninterest income for 2006 included a $48 million loss incurred in the third quarter in connection with the rebalancing of our residential mortgage portfolio.

Noninterest income for 2006 also included the $2.078 billion gain on the BlackRock/MLIM transaction, whereas there was no similar transaction in 2007.

Global Investment Servicing provided fund accounting/ administration services for $907 billion of net fund investment assets and provided custody services for $415 billion of fund investment assets at September 30, 2008, compared with $922 billion and $497 billion, respectively, at September 30, 2007. The decrease in assets serviced was due to declines in asset values and fund outflows resulting primarily from market conditions in the third quarter of 2008.

Asset management fees totaled $589 million in the first nine months of 2008, an increase of $30 million compared with the first nine months of 2007. Higher equity earnings from our BlackRock investment in 2008 and our March 2007 acquisition of Mercantile impacted the nine-month comparison. For the third quarter of 2008, asset management fees totaled $180 million compared with $204 million in the third quarter of 2007. The effect on fees of a $14 billion decrease in assets managed related to wealth management and the Hilliard Lyons divestiture and lower equity earnings from BlackRock were reflected in the decline during the third quarter of 2008 compared with the prior year third quarter. Assets managed at September 30, 2008 totaled $63 billion compared with $77 billion at September 30, 2007. The Hilliard Lyons sale and the impact of comparatively lower equity markets in the first nine months of 2008 drove the decline in assets managed.

Consumer services fees declined $41 million, to $472 million, for the first nine months of 2008 compared with the first nine months of 2007. For the third quarter of 2008, consumer services fees totaled $153 million compared with $177 million in the third quarter of 2007. In both comparisons, the sale of Hilliard Lyons more than offset the benefits of increased volume-related fees, including debit card, credit card, brokerage and merchant revenues.

Corporate services revenue totaled $547 million in the first nine months of 2008 compared with $533 million in the first nine months of 2007. Corporate services revenue totaled $198 million in both the third quarter of 2008 and 2007. Higher revenue from treasury management and other fees, partially offset by lower merger and acquisition advisory fees and mortgage servicing fees, net of amortization, were the primary factors in the year-to-date increase.

Service charges on deposits grew $13 million, to $271 million, in the first nine months of 2008 compared with the first nine months of 2007. Service charges on deposits totaled $97 million for the third quarter of 2008 and $89 million for the third quarter of 2007. The impact of our expansion into new markets contributed to the increase in both comparisons.

Net securities losses totaled $34 million for the first nine months of 2008 compared with net securities losses of $4 million in the first nine months of 2007. Net securities losses were $74 million for the third quarter of 2008 and $2 million for the third quarter of 2007. Losses for the third quarter of 2008 included other-than-temporary impairment charges of

$74 million on our investment in preferred stock of FHLMC and FNMA in addition to other-than-temporary impairments on other securities that were offset by securities gains.

Other noninterest income totaled $143 million for the first nine months of 2008 compared with $477 million for the first nine months of 2007.

Other noninterest income for the first nine months of 2008 included the $114 million gain from the sale of Hilliard Lyons, the $95 million gain from the redemption of a portion of our investment in Visa related to their March 2008 initial public offering, gains of $69 million related to our BlackRock LTIP shares adjustment and the $61 million reversal of a legal contingency reserve referred to above. The impact of these items was partially offset by valuation losses related to our commercial mortgage loans held for sale of $238 million, and trading losses of $77 million.

Trading income of $114 million and equity management gains of $81 million were included in other noninterest income for the first nine months of 2007.

For the third quarter of 2008, other noninterest income was a negative $133 million compared with $116 million for the third quarter of 2007.

Other noninterest income for the third quarter of 2008 included valuation losses related to our commercial mortgage loans held for sale of $82 million, trading losses of $54 million and equity management losses of $24 million. The impact of these items was partially offset by the $61 million reversal of a legal contingency reserve. Other noninterest income for the third quarter of 2007 included equity management gains of $47 million and trading income of $33 million.

Additional information regarding our transactions related to Visa is included in Note 15 Commitments And Guarantees in the Notes To Consolidated Financial Statements included in this Report. Further details regarding our trading activities are included in the Market Risk Management – Trading Risk portion of the Risk Management section of this Financial Review and further details regarding equity management are included in the Market Risk Management – Equity and Other Investment Risk section.

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

We expect that total revenue growth will exceed 10% for full year 2008 compared with full year 2007, assuming our current expectations for interest rates and economic conditions. We also expect to create positive operating leverage for full year 2008 with a percentage growth in total revenue relative to

2007 that will exceed the percentage growth in noninterest expense from 2007, excluding any potential impact on expenses of our planned acquisition of National City.

second quarter of 2007. Higher equity earnings from our BlackRock investment was reflected in both 2008 increases and our March 2007 acquisition of Mercantile impacted the six-month comparison. These factors more than offset the effect on fees of an $11 billion decrease in assets managed related to wealth management. Assets managed at June 30, 2008 totaled $66 billion compared with $77 billion at June 30, 2007. The decrease reflected the Hilliard Lyons sale and the impact of comparatively lower equity markets in the first six months of 2008.

Consumer services fees declined $17 million, to $319 million, for the first six months of 2008 compared with the first six months of 2007. For the second quarter of 2008, consumer services fees totaled $149 million compared with $179 million in the second quarter of 2007. In both comparisons, the sale of Hilliard Lyons more than offset the benefits of higher debit card and credit card revenues. The impact of expansion into new markets contributed to higher debit card revenue in the six-month comparison.

Corporate services revenue totaled $349 million in the first half of 2008 compared with $335 million in the first half of 2007. Corporate services revenue increased $9 million, to $185 million, in the second quarter of 2008 compared with the prior year quarter. Higher revenue from treasury management and third party consumer loan servicing activities, partially offset by lower revenue related to merger and acquisition advisory fees, were the primary factors in both increases.

Service charges on deposits grew $5 million, to $174 million, in the first six months of 2008 compared with the first six months of 2007, and reflected the impact of our expansion into new markets. Service charges on deposits totaled $92 million for the second quarter of both 2008 and 2007.

Net securities gains totaled $40 million for the first half of 2008 compared with net securities losses of $2 million in the first half of 2007.

Other noninterest income totaled $276 million for the first six months of 2008 compared with $361 million for the first six months of 2007.

Other noninterest income for the first six months of 2008 included the $114 million gain from the sale of Hilliard Lyons, the $95 million gain from the redemption of a portion of our investment in Visa related to their March 2008 initial public offering, and gains of $120 million related to our BlackRock LTIP shares adjustment. The impact of these items was partially offset by valuation losses related to our commercial mortgage loans and commitments held for sale, net of hedges, of $156 million, impairments relating to our equity investments of $26 million and trading losses of $23 million.

Trading income of $81 million and a net gain related to our BlackRock LTIP shares adjustment of $51 million were included in other noninterest income for the first six months of 2007.

For the second quarter of 2008, other noninterest income totaled $206 million compared with $128 million for the second quarter of 2007. The second quarter of 2008 included the $80 million gain related to our BlackRock LTIP shares adjustment.

Additional information regarding our transactions related to Visa is included in Note 15 Commitments And Guarantees in the Notes To Consolidated Financial Statements included in this Report. Further details regarding our trading activities are included in the Market Risk Management – Trading Risk portion of the Risk Management section of this Financial Review.

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

We expect that total revenue will increase by a mid-teens percentage for full year 2008 compared with full year 2007, assuming our current expectations for interest rates and economic conditions. We also expect to create positive operating leverage for full year 2008 with a percentage growth in total revenue relative to 2007 that will exceed the percentage growth in noninterest expense from 2007.

2007. This increase reflected the impact of Mercantile and higher debit card revenues resulting from higher transaction volumes.

Corporate services revenue totaled $164 million in the first three months of 2008 compared with $159 million in the first three months of 2007. Higher revenue from treasury management and third party consumer loan servicing activities, along with the full quarter impact of Mercantile, were the primary factors in the increase.

Service charges on deposits grew $5 million, to $82 million, in the first three months of 2008 compared with the first three months of 2007. The increase reflected the full quarter impact in 2008 of Mercantile.

Net securities gains totaled $41 million for the first quarter of 2008 compared with net securities losses of $3 million in the first quarter of 2007.

Other noninterest income totaled $70 million for the first three months of 2008 compared with $233 million for the first three months of 2007.

Other noninterest income for 2008 included the $114 million gain from the sale of Hilliard Lyons, the $95 million gain from the redemption of a portion of our investment in Visa related to their March 2008 initial public offering, and gains of $40 million related to our equity investment in BlackRock as described above. The impact of these items was more than offset by valuation losses related to our commercial mortgage loans and commitments held for sale, net of hedges, of $177 million, and trading losses of $76 million.

The net gain related to our equity investment in BlackRock of $52 million and trading income of $52 million were included in other noninterest income for the first quarter of 2007.

Additional information regarding our transactions related to Visa is included in Note 15 Commitments And Guarantees in the Notes To Consolidated Financial Statements included in this Report. Further details regarding our trading activities are included in the Market Risk Management – Trading Risk portion of the Risk Management section of this Financial Review.

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

We expect that total revenue will increase by a low teens percentage for full year 2008 compared with full year 2007, assuming our current expectations for interest rates and economic conditions. We also expect PNC to create positive operating leverage for full year 2008 with a percentage growth in total revenue relative to 2007 that will exceed the percentage growth in noninterest expense from 2007.

expansion of the branch network, including our expansion into the greater Washington, DC area that began in May 2005, and various pricing actions resulting from the One PNC initiative all contributed to the increase in 2006.

Brokerage fees increased $21 million, to $246 million, for 2006 compared with the prior year. The increase was primarily due to higher annuity income and mutual fund-related revenues, including favorable production from the fee-based fund advisory business.

Consumer services fees increased $72 million, to $365 million, in 2006 compared with 2005. Higher fees reflected the impact of consolidating our merchant services activities in the fourth quarter of 2005 as a result of our increased ownership interest in the merchant services business. The increase was also due to higher debit card revenues resulting from higher transaction volumes, our expansion into the greater Washington, DC area, and pricing actions related to the One PNC initiative. These factors were partially offset by lower ATM surcharge revenue in 2006 resulting from changing customer behavior and a strategic decision to reduce the out-of-footprint ATM network.

Corporate services revenue was $626 million for 2006, compared with $485 million in 2005. The increase in corporate services revenue compared with the prior year was primarily due to the full year benefit in 2006 of our October 2005 acquisition of Harris Williams.

Equity management (private equity) net gains on portfolio investments totaled $107 million in 2006 and $96 million for 2005. Based on the nature of private equity activities, net gains or losses may be volatile from period to period.

Net securities losses totaled $207 million in 2006 and $41 million in 2005. We took actions during the third quarter of 2006 that resulted in the sale of approximately $6 billion of securities available for sale at an aggregate pretax loss of $196 million during that quarter.

Noninterest revenue from trading activities, which is primarily customer-related, totaled $183 million in 2006 compared with $157 million for 2005. We provide additional information on our trading activities under Market Risk Management – Trading Risk in the Risk Management section of this Item 7.

Net gains related to our BlackRock investment were $2.066 billion in 2006, comprised of the $2.078 billion gain on the BlackRock/MLIM transaction partially offset by a fourth quarter mark-to-market adjustment of $12 million on our BlackRock LTIP obligation. See the BlackRock portion of the Business Segments Review section of this Item 7 for further information.

Other noninterest income decreased $57 million, to $315 million, in 2006 compared with 2005. Other noninterest

income for 2006 included the impact of a $48 million pretax loss incurred in the third quarter of 2006 in connection with the rebalancing of our residential mortgage portfolio.

Included in these amounts for the third quarter of 2006 was distribution fee revenue of $22 million at PFPC. Apart from the impact of the distribution fee revenue included in the prior year amounts, fund servicing fees increased $42 million for the first nine months of 2007 and $17 million for the third quarter compared with the corresponding 2006 periods. Both increases were largely due to higher transfer agency and offshore revenues reflecting net new business and growth from existing clients.

PFPC provided fund accounting/administration services for $922 billion of net fund investment assets and provided custody services for $497 billion of fund investment assets at September 30, 2007, compared with $774 billion and $399 billion, respectively, at September 30, 2006. These increases were the result of new business obtained, organic growth from current customers and market appreciation.

Service charges on deposits of $258 million for the first nine months of 2007 represented a $24 million increase compared with the first nine months of 2006. Service charges on deposits grew $8 million, to $89 million, in the third quarter of 2007 compared with the third quarter of 2006. The increases in both comparisons can be attributed primarily to the impact of Mercantile.

Brokerage fees increased $26 million, to $209 million, for the first nine months of 2007 compared with the first nine months of 2006. For the third quarter of 2007, brokerage fees totaled $71 million compared with $61 million in the third quarter of 2006. In both comparisons, the increases were primarily due to higher mutual fund-related revenues, including a favorable impact from products related to the fee-based fund advisory business and higher annuity income.

Consumer services fees grew $32 million, to $304 million, for the first nine months of 2007 compared with the first nine months of 2006. Of that increase, $17 million occurred in the third quarter of 2007, as consumer service fees totaled $106 million in that period. This increase reflected the impact of Mercantile, higher debit card revenues resulting from higher transaction volumes, and revenue from the credit card business that began in the latter part of 2006. These factors were partially offset by lower ATM surcharge revenue in 2007 compared with the prior year period as a result of changing customer behavior and a strategic decision to reduce the out-of-footprint ATM network.

Corporate services revenue increased $84 million, to $533 million, in the first nine months of 2007 compared with the first nine months of 2006. Corporate services revenue totaled $198 million in the third quarter of 2007 compared with $157 million in the third quarter of 2006. Higher revenue from mergers and acquisitions advisory and related services, treasury management, commercial mortgage servicing, and third party consumer loan servicing activities contributed to the increases in both comparisons.

Equity management (private equity) net gains on portfolio investments totaled $81 million for the first nine months of 2007 compared with $82 million for the first nine months of 2006. For the third quarter of 2007, such gains totaled $47 million compared with $21 million in the prior year third quarter. Based

on the nature of private equity activities, net gains or losses may fluctuate from period to period and the level of gains recognized during the third quarter of 2007 may not be sustainable in future quarters.

Net securities losses totaled $4 million for the first nine months of 2007 and $207 million for the first nine months of 2006. Third quarter 2007 net securities losses were $2 million while the prior year quarter net losses totaled $195 million. Note 3 Securities in the Notes To Consolidated Financial Statements of this Report has additional information regarding our third quarter 2006 securities portfolio rebalancing actions which resulted in a pretax loss of $196 million for that quarter.

Noninterest revenue from trading activities totaled $114 million in the first nine months of 2007 and $150 million in the first nine months of 2006. Noninterest revenue from trading activities was $33 million for the third quarter of 2007 compared with $38 million for the third quarter of 2006. Customer trading income increased in both comparisons. However, total trading revenue declined in 2007 largely due to the impact of derivatives related to commercial mortgage loan activity and lower non-customer trading activities. We provide additional information on our trading activities under Market Risk Management – Trading Risk in the Risk Management section of this Financial Review.

Other noninterest income of $281 million for the first nine months of 2007 represented a $79 million increase compared with the first nine months of 2006. Other noninterest income totaled $86 million for the third quarter of 2007, an increase of $67 million from the third quarter of 2006. The impact of the third quarter 2006 mortgage loan repositioning loss of $48 million was reflected in the increase in other noninterest income in both comparisons. Other noninterest income typically fluctuates from period to period depending on the nature and magnitude of transactions completed.

Due to the BlackRock/MLIM transaction, which resulted in a $2.1 billion pretax gain in the third quarter of 2006, we expect that total noninterest income will decline significantly for full year 2007 compared with full year 2006. Changes in noninterest income compared with the prior year also will be impacted by the deconsolidation of BlackRock and balance sheet repositioning actions in 2006, and by our BlackRock LTIP shares obligation. Apart from the comparative impact on noninterest income of these 2006 items, we expect that total revenue will increase by a high teens percentage for full year 2007 compared with 2006.

Brokerage fees increased $16 million, to $138 million, for the first six months of 2007 compared with the first six months of 2006. For the second quarter of 2007, brokerage fees totaled $72 million compared with $63 million in the second quarter of 2006. In both comparisons, the increases were primarily due to higher mutual fund-related revenues, including a favorable impact from products related to the fee-based fund advisory business and higher annuity income.

Consumer services fees grew $15 million, to $198 million, for the first half of 2007 compared with the first half of 2006. Of that increase, $13 million occurred in the second quarter of 2007, as consumer service fees totaled $107 million in that period. This increase reflected the impact of Mercantile, higher debit card revenues resulting from higher transaction volumes, and revenue from the credit card business that began in the latter part of 2006. These factors were partially offset by lower ATM surcharge revenue in 2007 compared with the prior year period as a result of changing customer behavior and a strategic decision to reduce the out-of-footprint ATM network.

Corporate services revenue increased $43 million, to $335 million, in the first half of 2007 compared with the first half of 2006. Corporate services revenue totaled $176 million in the second quarter of 2007 compared with $157 million in the second quarter of 2006. Higher revenue from various sources, including treasury management, commercial mortgage servicing, and third party consumer loan servicing activities contributed to the increases in both comparisons.

Equity management (private equity) net gains on portfolio investments totaled $34 million for the first six months of 2007 compared with $61 million for the first six months of 2006. For the second quarter of 2007, such gains totaled $2 million compared with $54 million in the prior year second quarter. Based on the nature of private equity activities, net gains or losses may be volatile from period to period; however, we expect net gains of approximately $60 million for full year 2007.

Noninterest revenue from trading activities totaled $81 million in the first half of 2007 and $112 million in the first half of 2006. Noninterest revenue from trading activities was $29 million for the second quarter of 2007 compared with $55 million for the second quarter of 2006. Lower trading revenue in 2007, largely related to proprietary trading and hedging activities, was the primary factor in the decline in both comparisons. We expect noninterest revenue from trading activities of approximately $45 million, on average, per quarter. We provide additional information on our trading activities under Market Risk Management – Trading Risk in the Risk Management section of this Financial Review.

Other noninterest income of $195 million for the first six months of 2007 represented a $12 million increase compared with the first six months of 2006. Other noninterest income totaled $98

million for the second quarter of 2007, an increase of $2 million from the second quarter of 2006. Other noninterest income typically fluctuates from period to period depending on the nature and magnitude of transactions completed.

Due to the BlackRock/MLIM transaction, which resulted in a $2.1 billion pretax gain in the third quarter of 2006, we expect that total noninterest income will decline significantly for full year 2007 compared with full year 2006. Changes in noninterest income compared with the prior year also will be impacted by the deconsolidation of BlackRock and balance sheet repositioning actions in 2006, and our BlackRock LTIP shares obligation. Our remaining noninterest income sources are expected to increase, in the aggregate, by a low teens percentage for full year 2007 compared with 2006 as a result of organic growth and acquisitions.

Apart from the comparative impact on noninterest income of the 2006 items described above, we expect that total revenue will increase by a high teens percentage for full year 2007 compared with 2006.

impact of Mercantile, higher debit card revenues resulting from higher transaction volumes, and revenue from the credit card business that began in the latter part of 2006. These factors were partially offset by lower ATM surcharge revenue in the 2007 period compared with the prior year period as a result of changing customer behavior and a strategic decision to reduce the out-of-footprint ATM network.

Corporate services revenue totaling $159 million in the first quarter of 2007 represented a $24 million increase over the first quarter of 2006. Higher revenue from various sources, including treasury management and mergers and acquisitions advisory and related services, contributed to this increase.

Equity management (private equity) net gains on portfolio investments totaled $32 million for the first three months of 2007 compared with $7 million for the first three months of 2006. Based on the nature of private equity activities, net gains or losses may be volatile from period to period.

Noninterest revenue from trading activities, more than one-half of which is customer-related, was $52 million for the first quarter of 2007 compared with $57 million for the first quarter of 2006. We provide additional information on our trading activities under Market Risk Management – Trading Risk in the Risk Management section of this Financial Review.

Other noninterest income of $97 million for the first three months of 2007 represented a $10 million increase compared with the first three months of 2006. Other noninterest income typically fluctuates from period to period depending on the nature and magnitude of transactions completed.

Due to the BlackRock/MLIM transaction, which resulted in a $2.1 billion pretax gain in 2006, we expect that total noninterest income will decline significantly for full year 2007 compared with full year 2006. Changes in noninterest income compared with the prior year also will be impacted by the deconsolidation of BlackRock and balance sheet repositioning actions in 2006, and our BlackRock LTIP obligation. Our remaining noninterest income sources are expected to increase, in aggregate, by a low teens percentage for full year 2007 compared with 2006 as a result of organic growth and the Mercantile acquisition.

Equity management (private equity) net gains on portfolio investments totaled $96 million for 2005 and $67 million for 2004.

Net securities losses amounted to $41 million for 2005 compared with net securities gains of $55 million in 2004. In late April and early May 2005 we sold $2.1 billion of securities available for sale and terminated $1.0 billion of resale agreements that were most sensitive to extension risk due to rising short-term interest rates. We also purchased $2.1 billion of securities with higher yields and lower extension risk. These transactions resulted in realized net securities and other losses of approximately $31 million.

Noninterest revenue from trading activities totaled $157 million for 2005 and $113 million for 2004. While customer activity represented the majority of trading revenue, the increase compared with 2004 was primarily the result of proprietary trading activities. We provide additional information on our trading activities under Market Risk Management – Trading Risk in the Risk Management section of this Item 7.

Other noninterest income decreased $1 million, to $372 million, in 2005 compared with 2004. Other noninterest income typically fluctuates from period to period depending on the nature and magnitude of transactions completed.

Other noninterest income for 2005 included the following pretax items:

The factors above offset the impact of the following pretax gains in 2004:

Brokerage fees totaled $183 million in the first nine months of 2006 and $168 million in the first nine months of 2005. Brokerage fees increased $5 million, to $61 million, for the third quarter of 2006 compared with the third quarter of 2005. These increases reflected higher annuity income and mutual fund-related revenues in 2006.

Consumer services fees grew $59 million, to $272 million, for the first nine months of 2006 compared with the first nine months of 2005. Consumer services fees increased $13 million, to $89 million, in the third quarter of 2006 compared with the third quarter of 2005. Higher fees reflected the impact of consolidating our merchant services activities in the fourth quarter of 2005 as a result of our increased ownership interest in the merchant services business. The increases in fees were also due to higher debit card revenues resulting from higher transaction volumes, our expansion into the greater Washington, DC area and pricing actions related to the One PNC initiative. These factors were partially offset by lower ATM surcharge revenue in the 2006 periods compared with the respective prior year periods as a result of changing customer behavior and a strategic decision to reduce the out-of-footprint ATM network.

Corporate services revenue totaling $449 million in the first nine months of 2006 represented a $107 million, or 31%, increase over the comparable prior year period. Corporate services revenue increased $36 million, or 30%, in the third quarter of 2006 compared with the third quarter of 2005. Both 2006 periods benefited from the impact of our October 2005 Harris Williams acquisition that resulted in higher revenues.

Equity management (private equity) net gains on portfolio investments totaled $82 million for the first nine months of 2006 compared with $80 million for the first nine months of 2005. For the third quarter of 2006, net gains on portfolio investments totaled $21 million compared with $36 million in the prior year quarter. Based on the nature of private equity activities, net gains or losses may be volatile from period to period.

Net securities losses amounted to $207 million for the first nine months of 2006 compared with net securities losses of $37 million in the first nine months of 2005. Net securities losses totaled $195 million in the third quarter of 2006 and $2 million in the third quarter of 2005. We refer you to the Securities portion of our Consolidated Balance Sheet Review section of this Report for further information regarding the actions we took during the third quarter of 2006 that resulted in the sale of approximately $6 billion of securities available for sale at an aggregate pretax loss of $196 million during that quarter.

Net securities losses for the first nine months of 2005 reflect actions taken during the second quarter of that year regarding our securities portfolio that resulted in realized net securities and other losses of approximately $31 million.

Noninterest revenue from trading activities, which is primarily customer-related, was $150 million for the first nine months of 2006 compared with $108 million for the first nine months of 2005. For the third quarter of 2006, noninterest revenue from trading activities was $38 million, compared with $47 million in the prior year third quarter. We provide additional information on our trading activities under Market Risk

Management – Trading Risk in the Risk Management section of this Financial Review.

Other noninterest income of $202 million for the first nine months of 2006 represented a $75 million decrease compared with the prior year first nine months. Other noninterest income totaled $19 million in the third quarter of 2006 compared with $127 million in the third quarter of 2005. Other noninterest income for both 2006 periods included the impact of the following:

Other noninterest income for the first nine months of 2006 included gains totaling $39 million, including $13 million recognized in the third quarter, related to our contributions of BlackRock stock to the PNC Foundation. The comparable 2005 amount was $16 million, recognized in the third quarter. These transactions also impacted noninterest expense in each of those periods.

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

periods compared with the respective prior year periods as a result of changing customer behavior and a strategic decision to reduce the out-of-footprint ATM network.

Corporate services revenue totaling $292 million in the first six months of 2006 represented a $71 million, or 32%, increase over the comparable prior year period. Corporate services revenue increased $44 million, or 39%, in the second quarter of 2006 compared with the second quarter of 2005. Both 2006 periods benefited from the impact of our October 2005 Harris Williams acquisition that resulted in higher revenues.

Equity management (private equity) net gains on portfolio investments totaled $61 million for the first half of 2006 compared with $44 million for the first half of 2005. For the second quarter of 2006, net gains on portfolio investments totaled $54 million compared with $12 million in the prior year quarter. Based on the nature of private equity activities, net gains or losses may be volatile from period to period.

Net securities losses amounted to $12 million for the first six months of 2006 compared with net securities losses of $35 million in the first six months of 2005. Net securities losses totaled $8 million in the second quarter of 2006 and $26 million in the second quarter of 2005. Amounts for both 2005 periods reflect actions taken during the second quarter of that year regarding our securities portfolio that resulted in realized net securities and other losses of approximately $31 million.

Noninterest revenue from trading activities, which is primarily customer-related, was $112 million for the first half of 2006 compared with $61 million for the first half of 2005. For the second quarter of 2006, noninterest revenue from trading activities was $55 million, compared with $11 million in the prior year second quarter. We provide additional information on our trading activities under Market Risk Management – Trading Risk in the Risk Management section of this Financial Review.

Other noninterest income of $183 million for the first six months of 2006 represented a $33 million increase compared with the prior year first half. Other noninterest income increased $27 million, to $96 million, in the second quarter of 2006 compared with the second quarter of 2005. Other noninterest income typically fluctuates from period to period depending on the nature and magnitude of transactions completed.

Other noninterest income for the first half of 2006 included gains totaling $26 million, including $13 million recognized in the second quarter, related to our contributions of BlackRock stock to the PNC Foundation. These transactions also impacted noninterest expense in each of those periods.

PRODUCT REVENUE

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

Treasury management revenue, which includes fees as well as net interest income from customer deposit balances, totaled $208 million for first six months of 2006 and $200 million for first six months of 2005. For the second quarter of 2006,

revenue totaled $106 million compared with $103 million for the second quarter of 2005. The higher revenue in both comparisons reflected continued expansion and client utilization of commercial payment card services, strong revenue growth in various electronic payment and information services, and a steady increase in business-to-business processing volumes.

Revenue from capital markets products and services was $140 million for the first half of 2006, compared with $71 million in the first half of 2005. Consolidated revenue from capital markets products and services, including mergers and acquisitions advisory activities, for the second quarter of 2006 totaled $76 million compared with $29 million for the second quarter of 2005. The acquisition of Harris Williams together with improved customer and proprietary trading activities drove the increase in capital markets revenue in both comparisons.

Midland Loan Services offers servicing, real estate advisory and technology solutions for the commercial real estate finance industry. Midland’s revenue, which includes fees and net interest income from servicing portfolio deposit balances, totaled $84 million for first six months of 2006 and $64 million for first six months of 2005. Second quarter 2006 revenue totaled $42 million compared with $32 million for the second quarter of 2005. Revenue growth in both comparisons was primarily driven by growth in the commercial mortgage servicing portfolio and related services.

Revenue from equipment leasing products was $38 million for the first half of 2006 and $36 million for the first half of 2005. Second quarter 2006 revenue from equipment leasing products totaled $20 million compared with $18 million for the second quarter of 2005. The impact of the interest cost of funding the potential tax exposure on the cross-border leasing portfolio had, and is expected to continue to have, a negative impact on leasing revenue in 2006. See Cross-Border Leases and Related Tax and Accounting Matters within the Consolidated Balance Sheet Review section of this Financial Review for further information.

As a component of our advisory services to clients, we provide a select set of insurance products to fulfill specific customer financial needs. Primary insurance offerings include:

Client segments served by these insurance solutions include those in Retail Banking and Corporate & Institutional Banking. Insurance products are sold by licensed PNC insurance agents and through licensed third-party arrangements. Revenue from these products was $35 million in the first six months of 2006 and $31 million in first six months of 2005. Revenue for the second quarter of 2006 totaled $18 million compared with $17 million for the second quarter of 2005. The increases resulted from higher annuity fee revenue.

PNC, through subsidiary companies Alpine Indemnity Limited and PNC Insurance Corp., participates as a reinsurer for its general liability, automobile liability and workers’

compensation programs and as a direct writer for its property and terrorism programs.

In the normal course of business, Alpine Indemnity Limited and PNC Insurance Corp. maintain insurance reserves for reported claims and for claims incurred but not reported based on actuarial assessments. We believe these reserves were adequate at June 30, 2006.