PNC Financial Services (PNC)

a contractual spread that is indexed to a market rate (i.e., a “hybrid ARM”), or interest rates that are fixed for the term of the loan.

Substantially all of the securities are senior tranches in the subordination structure and have credit protection in the form of credit enhancement, over-collateralization and/or excess spread accounts. At March 31, 2009, $2.4 billion, or 26%, of private-issuer securities were rated below “BBB” by at least one national rating agency or not rated. At December 31, 2008, $419 million, or 6%, of private-issuer securities were rated below “BBB” by at least one national rating agency or not rated.

For 39 non-agency residential mortgage-backed securities, we recorded OTTI charges of $118 million in the first quarter of 2009. Seven of these securities, with remaining fair value of $117 million, were rated investment grade (three AAA, three AA, and one BBB). Of the remaining securities for which we recorded OTTI, two were rated BB-equivalent (remaining fair value of $19 million), seven were rated B-equivalent (remaining fair value of $101 million), and 23 were rated lower than B-equivalent (remaining fair value $417 million). Prior to the first quarter of 2009, we recorded OTTI charges for eight securities. At March 31, 2009, one of these securities was rated B-equivalent (remaining fair value of $35 million) and seven of these securities were rated lower than B-equivalent (remaining fair value $155 million).

For the sub-investment grade securities for which we have not recorded an OTTI through March 31, 2009, the remaining fair value was $1.7 billion. The results of our security-level assessments indicate that we will recover the entire cost basis of these securities. Refer to Note 7 Investment Securities in the Notes To Consolidated Financial Statements of this Report for a further discussion of our process for assessing OTTI and the results of the most recent assessment.

non-conforming (i.e., original balances in excess of the amount qualifying for agency securities) and predominately have interest rates that are fixed for a period of time, after which the rate adjusts to a floating rate based upon a contractual spread that is indexed to a market rate (i.e., a “hybrid ARM”).

Substantially all of the securities are senior tranches in the subordination structure and have credit protection in the form of credit enhancement, over-collateralization and/or excess spread accounts. At December 31, 2008, $419 million, or 6%, of private-issuer securities were rated below “BBB” by at least one national rating agency or not rated.

For eight securities, we recorded other-than-temporary impairment charges of $151 million in 2008.

recognized rating agencies, including two securities totaling $30 million that were collateralized by residential mortgage loans considered by us to be of higher risk credit quality (i.e., FICO score equal to or less than 660).

Of the remaining private-issuer securities portfolio, six securities totaling $212 million, or 2%, were rated “BBB” equivalent or lower.

Impairments

During the third quarter 2008, we recorded other-than-temporary impairment charges totaling $49 million related to two of these securities: one rated “BB” and one rated “B” equivalent. The fair value of these two securities was approximately $82 million as of September 30, 2008.

collateralized by 1-4 family residential mortgages. The mortgage loans underlying the private-issuer securities are generally non-conforming (i.e., original balances in excess of the amount qualifying for agency securities) and predominately have interest rates that are fixed for a period of time, after which the rate adjusts to a floating rate based upon a contractual spread that is indexed to a market rate (i.e., a “hybrid ARM”).

Of the total private-issuer securities, we consider that, based on the underlying credit score of the borrower, less than 1% were higher risk (i.e., FICO scores of equal to or less than 660) credit quality. Substantially all of the securities are senior tranches in the subordination structure and have credit protection in the form of credit enhancement, over-collateralization and/or excess spread accounts. Of the total private-issuer securities, approximately 55% are vintage 2005 and earlier, approximately 24% are vintage 2006 and approximately 21% are vintage 2007 and 2008. At June 30, 2008, $10.9 billion, or 99%, of the private-issuer securities were rated “AAA” equivalents by at least two nationally recognized rating agencies. There were 11 private-issuer securities totaling $69 million fair value where at least one national rating agency rated the security either “AA” or “A” equivalent.

For one security, we recorded an other-than-temporary impairment charge of $7 million in the second quarter of 2008. Since June 30, 2008, no significant deterioration in the credit ratings assigned to the private-issuer securities has occurred.