PNC Financial Services (PNC)

Compensation Decisions

In deciding compensation for 2008 and in making changes and other decisions for the 2009 program, the Committee used the processes and applied the considerations described in this CD&A. The Committee used the same general process to determine compensation for each of our named executive officers. The compensation paid to our named executive officers differs primarily due to the differences in duties and responsibilities, and the differences in the amount of compensation that our peers pay similarly situated executives. Some of the compensation amounts shown in the Summary Compensation Table, such as the changes in pension value, are also impacted by an officer’s tenure at PNC, and, in particular, how long that officer has been at a senior executive level.

As previously noted, each year, the principal decisions made by the Committee that impact the amount of compensation for each executive officer are the amount of salary for the upcoming year, the bonus to be paid for the prior year and the amounts of any equity-based grants. These decisions are ordinarily all made in the first quarter of each year. For the named executive officers, we believe it is useful to compare the Committee’s compensation decisions made in the first quarters of 2008 and 2009. Although most of this information is contained in the various compensation tables and related disclosure beginning on page 69, we believe that the following tables help you understand the Committee’s decision-making to show the cumulative impact of the decisions in a given year.

As a “snapshot” of the Committee’s decision-making at one point in time, the following tables depict compensation related to or received over several years. For example, any salary changes take effect in March, while the bonus paid in March is based on the previous year’s performance. Options or incentive performance units are generally granted early in the year, but will not be exercisable or payable, if at all, until a future date. The ultimate value of share-based compensation depends on the share price following vesting. For an understanding of the compensation treated as being received in a specific fiscal year, please see the Summary Compensation Table on page 69.

We do not intend these new tables to serve as a substitute for the information contained in the Summary Compensation Table or the other tables included in the Executive Compensation Tables. Those other compensation tables contain important information, and these tables should be reviewed in light of all of the compensation-related information that we disclose.

2007 Compensation Decisions

In making compensation decisions during 2007, the Committee used the processes and applied the considerations set forth above. The Committee used the same general process to determine compensation for each of our named executive officers. The compensation paid to our named executive officers differs primarily due to the differences in duties and responsibilities, and the differences in the amount of compensation that our peers pay similarly situated executives. Some of the compensation amounts shown in the Summary Compensation Table, such as the changes in pension value, are also impacted by an officer’s tenure at PNC, and, in particular, how long that officer has been at a senior executive level.

As previously noted, each year, the principal decisions made by the Committee that impact the amount of compensation for each executive officer are the amount of salary for the upcoming year, the bonus to be paid for the prior year and the number of options and incentive performance units to be granted. These decisions are ordinarily all made in the first quarter of each year. For the named

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executive officers, we believe it is useful to compare the Committee’s compensation decisions made in the first quarters of 2007 and 2008. Although most of this information is contained in the various compensation tables and related disclosure set forth in the Executive Compensation Tables, beginning on page 55, we believe that it would be helpful in understanding the Committee’s decision-making to show the impact of all of these decisions in the additional tables, which we set forth below. In each decision category, a major part of the compensation decisions reflects recent corporate performance.

As a “snapshot” of the committee’s decision-making at one point in time, the tables on page 43 depict compensation related to or received over several years. For example, any salary changes take effect in March, while the bonus paid in March is based on the previous year’s performance. The options and incentive performance units are granted early in the year, but will not be exercisable or payable, if at all, until a future date. For an understanding of the compensation treated as being received in a specific fiscal year, please see the Summary Compensation Table on page 56.

We do not intend these new tables to serve as a substitute for the information contained in the Summary Compensation Table or the other tables included in the Executive Compensation Tables. Those other compensation tables contain important additional information, and the tables on page 43 below should be reviewed in light of all of the compensation-related information that we disclose.

The tables below exclude amounts paid to Mr. Kelly in 2007 and 2008. Mr. Kelly was the former CEO of Mercantile Bankshares Corporation, which PNC acquired in March 2007. Mr. Kelly was a Vice Chairman of PNC from the acquisition date until June 29, 2007. The amounts he received, as shown in the Summary Compensation Table on page 56, were paid in connection with the terms of a letter agreement between PNC and Mr. Kelly that took effect at the acquisition closing. Mr. Kelly agreed to waive his rights under existing change in control agreements in place at Mercantile in exchange for the rights set forth in this letter agreement. As the amounts awarded under the letter agreement do not reflect the Committee’s ordinary decision-making process, they have been excluded from the tables.

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