424B3 1 y72384b3e424b3.htm FILED PURSUANT TO RULE 424(B)(3) 424B3
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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-155248
 
     
(PNC LOGO)   (NATIONAL CITY LOGO)
 
MERGER PROPOSED — YOUR VOTE IS VERY IMPORTANT
 
Dear Shareholder:
 
On October 24, 2008, The PNC Financial Services Group, Inc. and National City Corporation announced a strategic business combination in which National City will merge with and into PNC. If the merger is completed, holders of National City common stock will have a right to receive 0.0392 of a share of PNC common stock for each share of National City common stock held immediately prior to the merger. In connection with the merger, and based on the assumptions described in more detail in this document, PNC expects to issue approximately 93.0 million shares of PNC common stock and 1,500 shares of PNC preferred stock (the terms of which are described starting on page 91).
 
The number of shares of PNC common stock that National City stockholders will receive in the merger for each share of National City common stock is fixed. The dollar value of the consideration National City stockholders will receive in the merger will change depending on changes in the market price of PNC common stock and will not be known at the time you vote on the merger. The following table shows the closing sale prices of PNC common stock and National City common stock as reported on the New York Stock Exchange on October 23, 2008, the last trading day before public announcement of the merger, and on November 20, 2008, the last practicable trading day before the distribution of this document. This table also shows the implied value of the merger consideration proposed for each share of National City common stock, which we calculated by multiplying the closing price of PNC common stock on those dates by 0.0392, the exchange ratio.
 
                         
            Implied Value of One
    PNC
  National City
  Share of National City
    Common Stock   Common Stock   Common Stock
 
At October 23, 2008
  $ 56.88     $ 2.75     $ 2.23  
At November 20, 2008
  $ 44.77     $ 1.59     $ 1.75  
 
The merger is intended to be treated as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and holders of National City common stock are not expected to recognize any gain or loss for United States federal income tax purposes on the exchange of shares of National City common stock for shares of PNC common stock in the merger, except with respect to any cash received instead of fractional shares of PNC common stock.
 
The market prices of both PNC common stock and National City common stock will fluctuate before the merger. You should obtain current stock price quotations for PNC common stock and National City common stock before you vote. PNC common stock is quoted on the NYSE under the symbol “PNC.” National City common stock is quoted on the NYSE under the symbol “NCC.”
 
At a special meeting of PNC shareholders, PNC shareholders will be asked to vote on the issuance of PNC common stock in the merger and certain other matters. The stock issuance proposal requires the affirmative vote of a majority of the votes cast by all shareholders entitled to vote thereon in favor of such proposal.
 
At a special meeting of National City stockholders, holders of National City common stock will be asked to vote on the adoption of the merger agreement and certain other matters. Adoption of the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of National City common stock entitled to vote.
 
Holders of National City preferred stock and holders of depositary shares representing National City preferred stock are not entitled to and are not being requested to vote at the National City special meeting.
 
The PNC board of directors recommends that PNC shareholders vote FOR the proposal to issue shares of PNC common stock in the merger.
 
The National City board of directors recommends that National City common stockholders vote FOR adoption of the merger agreement.
 
This document describes the special meetings, the merger, the documents related to the merger and other related matters. Please carefully read this entire document, including “Risk Factors” beginning on page 14 for a discussion of the risks relating to the proposed merger and owning PNC common stock after the merger. You also can obtain information about our companies from documents that each of us has filed with the Securities and Exchange Commission.
 
     
-s- James E. Rohr   -s- Peter E. Raskind
JAMES E. ROHR
  PETER E. RASKIND
Chairman and Chief Executive Officer
  Chairman, President and Chief Executive Officer
The PNC Financial Services Group, Inc. 
  National City Corporation
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the PNC common stock or preferred stock to be issued under this document or determined if this document is accurate or adequate. Any representation to the contrary is a criminal offense.
 
The securities to be issued in the merger are not savings and deposit accounts and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.
 
The date of this document is November 21, 2008, and it is first being mailed or otherwise delivered to PNC shareholders and National City stockholders on or about November 24, 2008.


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(PNC LOGO)
 
November 21, 2008
 
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
 
to be held on December 23, 2008
 
The PNC Financial Services Group, Inc., or PNC, will hold a special meeting of shareholders in Pittsburgh, Pennsylvania on the 15th Floor of One PNC Plaza, 249 Fifth Avenue, at 9:30 a.m., local time, on December 23, 2008 to consider and vote upon the following matters:
 
  •  a proposal to approve the issuance of shares of PNC common stock as contemplated by the Agreement and Plan of Merger, dated as of October 24, 2008, by and between The PNC Financial Services Group, Inc. and National City Corporation, as such agreement may be amended from time to time;
 
  •  a proposal to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are not sufficient votes at the time of the special meeting to approve the foregoing proposal.
 
The PNC board of directors has fixed the close of business on November 14, 2008, as the record date for the special meeting. Only PNC shareholders of record at that time are entitled to notice of, and to vote at, the special meeting, or any adjournment or postponement of the special meeting. Holders of PNC common stock, $1.80 Cumulative Convertible Preferred Stock, Series A, referred to as Series A Preferred Stock, $1.80 Cumulative Convertible Preferred Stock, Series B, referred to as Series B Preferred Stock, $1.60 Cumulative Convertible Preferred Stock, Series C, referred to as Series C Preferred Stock, and $1.80 Cumulative Convertible Preferred Stock, Series D, referred to as Series D Preferred Stock, vote together without regard to class and will be entitled to vote at the special meeting. In this document, we refer to the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock collectively as the “Voting Preferred Stock”. Approval of the issuance of PNC common stock requires the affirmative vote of a majority of the votes cast by all shareholders entitled to vote thereon, assuming a quorum.
 
Whether or not you plan to attend the special meeting, please submit your proxy with voting instructions. Please vote as soon as possible by accessing the internet site listed on the PNC proxy card, by calling the toll-free number listed on the PNC proxy card, or by submitting your proxy card by mail. To submit your proxy by mail, please complete, sign, date and return the accompanying proxy card in the enclosed self-addressed, stamped envelope. This will not prevent you from voting in person, but it will help to secure a quorum and avoid added solicitation costs. Any holder of PNC common stock who is present at the special meeting may vote in person instead of by proxy, thereby canceling any previous proxy. In any event, a proxy may be revoked in writing at any time before the special meeting in the manner described in the accompanying document.
 
The PNC board of directors has approved the merger and the merger agreement and recommends that PNC shareholders vote “FOR” approval of the issuance of common stock in the merger and “FOR” the adjournment of the PNC special meeting if necessary or appropriate to permit further solicitation of proxies.
 
BY ORDER OF THE BOARD OF DIRECTORS,
-s- GEORGE P. LONG
George P. Long, III
Corporate Secretary
 
YOUR VOTE IS IMPORTANT. PLEASE VOTE YOUR SHARES PROMPTLY, REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE SPECIAL MEETING.
 


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(NATIONAL CITY LOGO)
 
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
 
National City Corporation, or National City, will hold a special meeting of stockholders at National City’s offices, 1900 East Ninth Street, Cleveland, Ohio 44114 at 10:00 a.m., Eastern time, on December 23, 2008 to consider and vote upon the following matters:
 
  •  a proposal to adopt the Agreement and Plan of Merger, dated as of October 24, 2008, by and between The PNC Financial Services Group, Inc. and National City Corporation, as such agreement may be amended from time to time, pursuant to which National City will merge with and into PNC, with PNC surviving the merger; and
 
  •  a proposal to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are not sufficient votes at the time of the special meeting to adopt the foregoing proposal.
 
If the merger is completed, holders of National City common stock will receive 0.0392 of a share of PNC common stock for each share of National City common stock held immediately prior to the merger. Upon completion of the merger, each share of National City preferred stock issued and outstanding immediately prior to completion of the merger will be automatically converted into a share of PNC preferred stock having terms substantially identical to the terms of the relevant series of National City preferred stock. A copy of the merger agreement is included as Appendix A to the enclosed document and incorporated therein by reference.
 
The National City board of directors has fixed the close of business on November 14, 2008 as the record date for the special meeting. Only National City common shareholders of record at that time are entitled to notice of, and to vote at, the special meeting, or any adjournment or postponement of the special meeting. In order for the merger to be approved, the holders of at least a majority of the National City common shares outstanding and entitled to vote thereon must vote in favor of adoption of the merger agreement.
 
Regardless of whether you plan to attend the special meeting, please submit your proxy with voting instructions. Please vote as soon as possible by accessing the internet site listed on the National City proxy card, by calling the toll-free number listed on the National City proxy card or by submitting your proxy card by mail. If you hold your stock in “street name” through a bank or broker, you must direct your bank or broker to vote in accordance with the instruction form included with these materials and forwarded to you by your bank or broker. This voting instruction form provides instructions on voting by mail, telephone or the internet at www.cesvote.com. This will not prevent you from voting in person, but it will help to secure a quorum and avoid added solicitation costs. Any holder of National City common stock who is present at the special meeting may vote in person instead of by proxy, thereby canceling any previous proxy. In any event, a proxy may be revoked in writing at any time before the special meeting in the manner described in the accompanying document.
 
Holders of National City preferred stock and holders of depositary shares representing National City preferred stock are not entitled to and are not being requested to vote at the special meeting.
 
The National City board of directors, at a meeting duly called, approved the merger and the merger agreement and recommends that National City common shareholders vote “FOR” adoption of the merger agreement and “FOR” the adjournment of the National City special meeting if necessary or appropriate to permit further solicitation of proxies.
 
Please do not send any stock certificates at this time.
 
BY ORDER OF THE BOARD OF DIRECTORS,
-s- David L. Zoeller
David L. Zoeller
Secretary
 
November 21, 2008
 
YOUR VOTE IS IMPORTANT. PLEASE VOTE YOUR SHARES PROMPTLY, REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE SPECIAL MEETING.


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REFERENCES TO ADDITIONAL INFORMATION
 
This document incorporates by reference important business and financial information about PNC and National City from documents that are not included in or delivered with this document. You can obtain documents incorporated by reference in this document, other than certain exhibits to those documents, free of charge through the Securities and Exchange Commission website (http://www.sec.gov) or by requesting them in writing or by telephone from the appropriate company at the following addresses:
 
     

The PNC Financial Services Group, Inc.
One PNC Plaza
249 Fifth Avenue
Pittsburgh, Pennsylvania 15222-2707
Attention: Investor Relations
(800) 843-2206
Email: investor.relations@pnc.com
  National City Corporation
1900 East Ninth Street, Locator 01-2229
Cleveland, Ohio 44114
Attention: Investor Relations
Telephone: (800) 622-4204
 
You will not be charged for any of these documents that you request. National City stockholders and PNC shareholders requesting documents should do so by December 16, 2008, in order to receive them before their respective special meetings.
 
You should rely only on the information contained or incorporated by reference into this document. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this document. This document is dated November 21, 2008, and you should assume that the information in this document is accurate only as of such date. You should assume that the information incorporated by reference into this document is accurate as of the date of such document. Neither the mailing of this document to National City stockholders or PNC shareholders nor the issuance by PNC of shares of PNC common stock in connection with the merger will create any implication to the contrary.
 
Information on the websites of PNC or National City, or any subsidiary of PNC or National City, is not part of this document. You should not rely on that information in deciding how to vote.
 
This document does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this document regarding National City has been provided by National City and information contained in this document regarding PNC has been provided by PNC.
 
See “Where You Can Find More Information” on page 110.


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APPENDICES
APPENDIX A  Agreement and Plan of Merger, dated as of October 24, 2008, by and between The PNC Financial Services Group, Inc. and National City Corporation
    A-1  
APPENDIX B  Stock Option Agreement, dated as of October 24, 2008, between National City Corporation and The PNC Financial Services Group, Inc. 
    B-1  
APPENDIX C  Opinion of Goldman, Sachs & Co. 
    C-1  
APPENDIX D  Opinion of Citigroup Global Markets Inc. 
    D-1  
APPENDIX E  Opinion of J.P. Morgan Securities Inc. 
    E-1  


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QUESTIONS AND ANSWERS
 
The following are answers to certain questions that you may have regarding the special meeting. We urge you to read carefully the remainder of this document because the information in this section may not provide all that might be important to you in determining how to vote. Additional important information is also contained in the appendices to, and the documents incorporated by reference in, this document.
 
Q: What are holders of National City common stock being asked to vote on?
 
A: Holders of National City common stock are being asked to vote on the adoption of the merger agreement and to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies in favor of adoption of the merger agreement.
 
Q: What are holders of PNC common stock being asked to vote on?
 
A: PNC shareholders are being asked to vote on the issuance of shares of PNC common stock in the merger and to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the issuance of shares of PNC common stock in the merger.
 
Q: What do holders of National City common stock need to do now?
 
A: After you have carefully read this document and have decided how you wish to vote your shares, please vote your shares promptly. Please vote as soon as possible by accessing the internet site listed on the National City proxy card, by calling the toll-free number listed on the National City proxy card or by mailing your proxy card. If you hold your stock in “street name” through a bank or broker, you must direct your bank or broker to vote in accordance with the instruction form included with these materials and forwarded to you by your bank or broker. This voting instruction form provides instructions on voting by mail, telephone or the internet at www.cesvote.com. Submitting your proxy by internet, telephone or mail or directing your bank or broker to vote your shares will ensure that your shares are represented and voted at the National City special meeting. If you would like to attend the National City special meeting, see “Can I attend the National City special meeting and vote my shares in person?
 
Q: What do PNC shareholders need to do now?
 
A: After you have carefully read this document and have decided how you wish to vote your shares, please vote promptly by accessing the internet site listed on your proxy card, by calling the toll-free number listed on your proxy card or by submitting your proxy card by mail. If you hold your stock in “street name” through a bank or broker, you must direct your bank or broker to vote in accordance with the instructions you have received from your bank or broker. Submitting your proxy by internet, telephone or mail or directing your bank or broker to vote your shares will ensure that your shares are represented and voted at the PNC special meeting; see “Can I attend the PNC special meeting and vote my shares in person?”
 
Q: Why is my vote as a holder of National City common stock important?
 
A: If you do not vote by proxy, telephone or internet or vote in person at the National City special meeting, it will be more difficult for National City to obtain the necessary quorum to hold its special meeting. In addition, your failure to vote, by proxy, telephone, internet or in person, will have the same effect as a vote against adoption of the merger agreement. The merger agreement must be adopted by the holders of a majority of the outstanding shares of National City common stock entitled to vote at the special meeting. The National City board of directors recommends that you vote to adopt the merger agreement.
 
Q: Why is my vote as a PNC shareholder important?
 
A: If you do not vote by proxy, telephone or internet or vote in person at the PNC special meeting, it will be more difficult for PNC to obtain the necessary quorum to hold its special meeting. In addition, the proposal to issue PNC common stock in the merger requires the affirmative vote of a majority of the votes cast by all shareholders entitled to vote thereon, assuming a quorum. The PNC board of directors recommends that you vote to approve the issuance of the common stock in the merger.


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Q: If my shares are held in street name by my broker, will my broker automatically vote my shares for me?
 
A: No. Your broker cannot vote your shares without instructions from you. You should instruct your broker as to how to vote your shares, following the directions your broker provides to you. Please check the voting form used by your broker. Without instructions, your shares will not be voted, which will have the effect described below.
 
Q: What if I abstain from voting or fail to instruct my broker?
 
A: If you are a holder of National City common stock and you abstain from voting or fail to instruct your broker to vote your shares and the broker submits an unvoted proxy, referred to as a broker non-vote, the abstention or broker non-vote will be counted toward a quorum at the National City special meeting, but it will have the same effect as a vote against adoption of the merger agreement. With respect to the proposal to adjourn the special meeting if necessary or appropriate in order to solicit additional proxies, an abstention will have the same effect as a vote against the proposal. If you fail to instruct your broker to vote your shares your broker may vote your shares in its discretion on this proposal.
 
If you are a PNC shareholder, an abstention or broker non-vote will be counted toward a quorum at the PNC special meeting. Abstentions from voting, as well as broker non-votes, are not treated as votes cast and, therefore, will have no effect on the proposal to approve the issuance of shares of PNC common stock in the merger, assuming a quorum.
 
Q: Can I attend the National City special meeting and vote my shares in person?
 
A: Yes. All holders of National City common stock, including stockholders of record and stockholders who hold their shares through banks, brokers, nominees or any other holder of record, are invited to attend the National City special meeting. Holders of record of National City common stock as of the record date can vote in person at the National City special meeting. If you are not a stockholder of record, you must obtain a proxy, executed in your favor, from the record holder of your shares, such as a broker, bank or other nominee, to be able to vote in person at the National City special meeting. If you plan to attend the National City special meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership and you must bring a form of personal photo identification with you in order to be admitted. National City reserves the right to refuse admittance to anyone without proper proof of share ownership or without proper photo identification.
 
Q: Can I attend the PNC special meeting and vote my shares in person?
 
A: Yes. All holders of PNC common stock, $1.80 Cumulative Convertible Preferred Stock, Series A, or Series A Preferred Stock, $1.80 Cumulative Convertible Preferred Stock, Series B, or Series B Preferred Stock, $1.60 Cumulative Convertible Preferred Stock, Series C, or Series C Preferred Stock, and $1.80 Cumulative Convertible Preferred Stock, Series D, or Series D Preferred Stock, the preferred stock known collectively in this document as the Voting Preferred Stock, including shareholders of record and shareholders who hold their shares through banks, brokers, nominees or any other holder of record, are invited to attend the PNC special meeting. Holders of PNC common stock and Voting Preferred Stock can vote in person at the PNC special meeting. Please detach the attached admission ticket from your proxy card and bring it to the special meeting. The ticket will admit you and one other person. If you hold your PNC shares in an account at a brokerage firm or bank, your name will not appear on our shareholder list. Please bring an account statement or a letter from your broker showing your PNC shareholdings. Please show this documentation at the meeting registration desk to attend the meeting. Everyone who attends the special meeting must abide by the rules for the conduct of the meeting. These rules will be printed on the meeting agenda.
 
Q: Will National City be required to submit the merger agreement to its stockholders even if the National City board of directors has withdrawn, modified or qualified its recommendation?
 
A: Yes. Unless the merger agreement is terminated before the National City special meeting, National City is required to submit the merger agreement to its stockholders even if the National City board of directors


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has withdrawn, modified or qualified its recommendation, consistent with the terms of the merger agreement.
 
Q: Will PNC be required to submit the proposal to issue shares of PNC common stock in the merger to its shareholders even if the PNC board of directors has withdrawn, modified or qualified its recommendation?
 
A: Yes. Unless the merger agreement is terminated before the PNC special meeting, PNC is required to submit the proposal to issue shares of PNC common stock in the merger to its shareholders even if the PNC board of directors has withdrawn, modified or qualified its recommendation, consistent with the terms of the merger agreement.
 
Q: Is the merger expected to be taxable to National City stockholders?
 
A: Generally, no. The merger is intended to be treated as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, which we refer to as the Code, and holders of National City common stock are not expected to recognize any gain or loss for United States federal income tax purposes on the exchange of shares of National City common stock for shares of PNC common stock in the merger, except with respect to cash received instead of fractional shares of PNC common stock. You should read “United States Federal Income Tax Consequences of the Merger” beginning on page 98 for a more complete discussion of the United States federal income tax consequences of the merger. Tax matters can be complicated and the tax consequences of the merger to you will depend on your particular tax situation. You should consult your tax advisor to determine the tax consequences of the merger to you.
 
Q: If I am a holder of National City common stock, can I change or revoke my vote?
 
A: Yes. Regardless of the method you used to cast your vote, if you are a holder of record, you may change your vote by signing and returning a new proxy card with a later date, by calling the toll-free number listed on the National City proxy card or by accessing the internet site listed on the National City proxy card by 6:00 a.m. Eastern time on December 23, 2008 or by attending the National City special meeting and voting by ballot at the special meeting.
 
If you are a National City stockholder of record and wish to revoke rather than change your vote, you must send written, signed revocation to National City’s Secretary, which must be received by 6:00 a.m. Eastern time on December 23, 2008. You must include your control number.
 
If you hold your shares in street name, and wish to change or revoke your vote, please refer to the information on the voting instruction form included with these materials and forwarded to you by your bank, broker or other holder of record to see your voting options.
 
Any holder of National City common stock entitled to vote in person at the National City special meeting may vote in person regardless of whether a proxy has been previously given, but the mere presence of a shareholder at the special meeting will not constitute revocation of a previously given proxy.
 
Q: If I am a PNC shareholder, can I change my vote?
 
A: Yes. You may revoke any proxy at any time before it is voted by signing and returning a proxy card with a later date, delivering a written revocation letter pursuant to the instructions below, or by attending the PNC special meeting in person, notifying the Corporate Secretary and voting by ballot at the special meeting. PNC shareholders may send their written revocation letter to The PNC Financial Services Group, Inc., Attention: Corporate Secretary, One PNC Plaza, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707. If you have voted your shares by telephone or through the internet, you may revoke your prior telephone or internet vote by recording a different vote using telephone or internet voting, or by signing and returning a proxy card dated as of a date that is later than your last telephone or internet vote.
 
Any shareholder entitled to vote in person at the PNC special meeting may vote in person regardless of whether a proxy has been previously given, but the mere presence (without notifying the Corporate


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Secretary of PNC) of a shareholder at the special meeting will not constitute revocation of a previously given proxy.
 
Q: If I am a holder of National City common stock with shares represented by stock certificates, should I send in my National City stock certificates now?
 
A: No. You should not send in your National City stock certificates at this time. After completion of the merger, PNC will send you instructions for exchanging National City stock certificates for the merger consideration. The shares of PNC stock National City stockholders receive in the merger will be issued in book-entry form. Please do not send in your stock certificates with your proxy card.
 
Q: What should I do if I hold my shares of National City common stock in book-entry form?
 
A You are not required to take any specific actions if your shares of National City common stock are held in book-entry form. After the completion of the merger, shares of National City common stock held in book-entry form will automatically be exchanged for shares of PNC common stock in book-entry form and cash to be paid instead of fractional shares of PNC common stock.
 
Q: When do you expect to complete the merger?
 
A We currently expect to complete the merger on December 31, 2008. However, we cannot assure you when or if the merger will occur. We must first obtain the approvals of National City stockholders and PNC shareholders at the special meetings and the required regulatory approvals described below in “Regulatory Approvals Required for the Merger.”
 
Q: Whom should I call with questions?
 
A: National City stockholders should call National City Investor Relations toll-free at (800) 622-4204 or Georgeson Inc., National City’s proxy solicitor, toll-free at (800) 903-4377 (Banks and Brokers call: (212) 440-9800) about the merger and related transactions. PNC shareholders should call D.F. King & Co., PNC’s proxy solicitor, toll-free at (888) 628-1041 or collect at (212) 269-5550.


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SUMMARY
 
This summary highlights the material information from this document. It may not contain all of the information that is important to you. We urge you to carefully read the entire document and the other documents to which we refer in order to fully understand the merger and the related transactions. See “Where You Can Find More Information” on page 110. Each item in this summary refers to the page of this document on which that subject is discussed in more detail. We have included page references parenthetically to direct you to a more complete description of the topics presented in this summary.
 
In the Merger, National City Stockholders Will Have a Right to Receive 0.0392 of a Share of PNC Common Stock per Share of National City Common Stock (page 76)
 
We are proposing the merger of National City with PNC. If the merger is completed, National City will merge into PNC, with PNC being the surviving company and National City common stock will no longer be publicly traded. Under the terms of the merger agreement, holders of National City common stock will have a right to receive 0.0392 of a share of PNC common stock for each share of National City common stock held immediately prior to the merger. PNC will not issue any fractional shares of PNC common stock in the merger. Instead, a holder of National City common stock who otherwise would have received a fraction of a share of PNC common stock will receive an amount in cash rounded to the nearest cent. This cash amount will be determined by multiplying the fraction of a share of PNC common stock to which the holder would otherwise be entitled by the average of the closing sale prices of PNC common stock on the New York Stock Exchange, or NYSE, for the five trading days immediately prior to the date on which the merger is completed.
 
Example:  If you hold 1,000 shares of National City common stock, you will have a right to receive 39 shares of PNC common stock and a cash payment instead of the 0.2 shares of PNC common stock that you otherwise would have received.
 
The merger agreement between PNC and National City governs the merger. The merger agreement is included in this document as Appendix A. Please read the merger agreement carefully. All descriptions in this summary and elsewhere in this document of the terms and conditions of the merger are qualified by reference to the merger agreement.
 
What Holders of National City Stock Options, Restricted Shares, Deferred Shares and Other Equity-Based Awards Will Receive (page 76)
 
At the effective time of the merger, each option to purchase National City common stock granted by National City that is then outstanding will vest and be converted automatically into an option for shares of PNC common stock, subject to, and in accordance with, the same terms and conditions that applied to the National City option before the effective time of the merger, except that the number of shares of PNC common stock subject to each such converted option will be equal to the product, rounded down to the nearest whole number of shares of PNC common stock, of (x) the number of shares of National City common stock subject to the corresponding National City stock option and (y) the exchange ratio of 0.0392. The exercise price for converted options will equal the applicable per share exercise price for the shares of National City common stock divided by the exchange ratio (rounded up to the nearest cent).
 
At the time of the merger, other stock-based awards of National City will be converted into a similar award of PNC with respect to PNC common stock generally on the same terms that applied to the National City award except the number of shares of PNC common stock subject to the new PNC award will equal the number of shares of National City common stock subject to the award multiplied by the exchange ratio, rounded up to the nearest whole share.
 
At the time of the merger, each outstanding restricted share of National City common stock will vest and become free of restrictions and be converted into the right to receive the merger consideration and each outstanding deferred share of National City common stock will vest and be converted into the right to receive the merger consideration.


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Treatment of National City Preferred Stock and Warrants in the Merger (page 77)
 
Upon completion of the merger, each share of National City preferred stock issued and outstanding immediately prior to completion of the merger will be automatically converted into a share of PNC preferred stock having terms substantially identical to the terms of the relevant series of National City preferred stock. We sometimes refer to the new PNC preferred stock to be issued or reserved for in the merger as the “New PNC Preferred Stock.”
 
Each outstanding share of National City 9.875% Fixed-To-Floating Rate Non-Cumulative Preferred Stock, Series F, is represented by depositary shares that are listed on the NYSE. Each depositary share represents a 1/4000th interest in a share of National City Series F Preferred Stock. Upon completion of the merger, PNC will assume the obligations of National City under the Deposit Agreement, dated as of January 30, 2008, between National City, Wilmington Trust Company as depositary, National City Bank as transfer agent and register and the holders from time to time of depositary shares. PNC will instruct Wilmington Trust Company as depositary under the deposit agreement referred to as the Series F Deposit Agreement, to treat the shares of New PNC Preferred Stock received by it in exchange for shares of National City Series F Preferred Stock as newly deposited securities under the Series F Deposit Agreement. In accordance with the terms of the Series F Deposit Agreement, the National City depositary shares will thereafter represent shares of PNC Preferred Stock. Such depositary shares will continue to be listed on the NYSE upon completion of the merger under a new name and traded under a new symbol.
 
Certain investors that acquired shares of National City common stock and warrants to purchase shares of National City common stock in a private placement in April 2008 will receive additional shares of National City common stock and cash payments in connection with the completion of the merger. Assuming the trading price per share of National City common stock on the trading day immediately prior to the completion of the merger is equal to or greater than $2.07, the closing price of National City common stock on October 24, 2008, these investors will be issued an aggregate of approximately 328 million additional shares of National City common stock immediately prior to the completion of the merger under the terms of their investment agreements, and will receive in exchange for their warrants an aggregate cash payment of approximately $384 million (assuming all warrant holders exercise their respective put rights), in each case contingent upon the completion of the merger. If the trading price per share of National City common stock on the trading day immediately prior to the completion of the merger is less than $2.07, these investors will receive additional shares of National City common stock under the terms of their investment agreements. Holders of National City warrants, as such, are not entitled to vote on the adoption of the merger agreement or otherwise at the special meeting. These investors will receive 0.0392 of a share of PNC common stock for each share of National City common stock held at the time of completion of the merger.
 
The Merger Is Intended to Be Tax-Free to National City Stockholders as to the Shares of PNC Common Stock They Receive (page 98)
 
The merger is intended to be treated as a reorganization within the meaning of Section 368(a) of the Code, and it is a condition to our respective obligations to complete the merger that each of PNC and National City receive a legal opinion to that effect. Accordingly, the merger generally will be tax-free to you for United States federal income tax purposes as to the shares of PNC common stock you receive in the merger, except for any gain or loss that may result from the receipt of cash instead of fractional shares of PNC common stock that you would otherwise be entitled to receive.
 
The United States federal income tax consequences described above may not apply to all holders of National City common stock. Your tax consequences will depend on your individual situation. Accordingly, we strongly urge you to consult your tax advisor for a full understanding of the particular tax consequences of the merger to you.
 
Comparative Market Prices and Share Information (pages 13 and 107)
 
PNC common stock is quoted on the NYSE under the symbol “PNC.” National City common stock is quoted on the NYSE under the symbol “NCC.” The following table shows the closing sale prices of PNC common stock and National City common stock as reported on the NYSE on October 23, 2008, the last trading day before we announced the merger, and on November 20, 2008, the last practicable trading day


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before the distribution of this document. This table also shows the implied value of the merger consideration proposed for each share of National City common stock, which we calculated by multiplying the closing price of PNC common stock on those dates by the exchange ratio of 0.0392.
 
                         
            Implied Value of
        National City
  One Share of
    PNC
  Common
  National City
    Common Stock   Stock   Common Stock
 
At October 23, 2008
  $ 56.88     $ 2.75     $ 2.23  
At November 20, 2008
  $ 44.77     $ 1.59     $ 1.75  
 
The market price of PNC common stock and National City common stock will fluctuate prior to the merger. National City stockholders and PNC shareholders are urged to obtain current market quotations for the shares prior to making any decision with respect to the merger.
 
Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. Have Each Provided an Opinion to the PNC Board of Directors Regarding the Aggregate Consideration
 
Citigroup Global Markets Inc. (page 55)
 
Citigroup Global Markets rendered an opinion to the PNC board of directors on October 31, 2008 to the effect that, based upon and subject to the considerations and limitations set forth in the opinion, Citigroup Global Markets’ work described herein and other factors it deemed relevant, the aggregate consideration (consisting of the issuance of shares of PNC common stock at an exchange ratio of 0.0392 shares of PNC common stock for each outstanding share of National City common stock, plus the payment of a cash amount of approximately $384 million to certain National City warrant holders) to be paid by PNC in connection with the merger was fair as of October 24, 2008, from a financial point of view, to PNC. We have attached the full text of Citigroup Global Markets’ opinion to this document as Appendix D, which sets forth the assumptions made, general procedures followed, matters considered and limits on the review undertaken by Citigroup Global Markets in connection with its opinion. We urge you to read the opinion carefully and in its entirety. The opinion of Citigroup Global Markets is addressed to the PNC board of directors and is limited to the fairness as of October 24, 2008, from a financial point of view, to PNC of the aggregate consideration to be paid by PNC in connection with the merger and does not address the underlying business decision of PNC to effect the merger, the relative merits of the merger as compared to any alternative business strategies that might exist for PNC or the effect of any other transaction in which PNC might engage. The opinion of Citigroup Global Markets is not intended to be and does not constitute a recommendation to any shareholder as to how such shareholder should vote or act on any matters relating to the merger. Pursuant to a letter agreement between PNC and Citigroup Global Markets, PNC has paid $2.5 million in fees to Citigroup Global Markets and has agreed to pay Citigroup Global Markets an additional $7.5 million in fees upon the consummation of the merger.
 
J.P. Morgan Securities Inc. (page 63)
 
J.P. Morgan Securities Inc., referred to as JPMorgan, has provided its written opinion to the PNC board of directors, dated as of October 31, 2008, that, as of October 24, 2008 and based upon and subject to the factors and assumptions set forth in its opinion, the aggregate consideration (consisting of the issuance of shares of PNC common stock at an exchange ratio of 0.0392 shares of PNC common stock for each outstanding share of National City common stock, plus the payment of a cash amount of approximately $384 million in the aggregate to certain National City warrant holders) to be paid by PNC in connection with the merger with National City was fair, from a financial point of view, to PNC. We have attached the full text of JPMorgan’s opinion to this document as Appendix E, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by JPMorgan in connection with the opinion. We urge you to read the opinion carefully in its entirety. The opinion of JPMorgan is addressed to the PNC board of directors and is directed only to the aggregate consideration to be paid in connection with the merger and does not address the underlying decision by PNC to engage in the merger or constitute a recommendation to any stockholder of PNC as to how that stockholder should vote at the PNC special meeting or act on any matter relating to the merger. Pursuant to an


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engagement letter between PNC and JPMorgan, PNC has paid $2.5 million in fees to JPMorgan and has agreed to pay JPMorgan an additional $7.5 million in fees upon the consummation of the merger.
 
Goldman, Sachs & Co. Has Provided an Opinion to the National City Board of Directors Regarding the Exchange Ratio Pursuant to the Merger Agreement (page 50)
 
National City’s financial advisor, Goldman, Sachs & Co., referred to as Goldman Sachs, rendered an opinion dated October 24, 2008, to the National City board of directors, that, as of such date, and based upon and subject to the factors, limitations and assumptions set forth in its written opinion, as well as the extraordinary circumstances facing National City referred to in such written opinion, the exchange ratio of 0.0392 of a share of PNC common stock to be received in respect of each share of National City common stock pursuant to the merger agreement was fair from a financial point of view to the holders of National City common stock other than PNC and its affiliates.
 
The full text of the written opinion of Goldman Sachs, which sets forth the factors considered, assumptions made, procedures followed and limitations that apply in connection therewith, is attached to this document as Appendix C. The opinion of Goldman Sachs was provided for the information and assistance of the National City board of directors in connection with its consideration of the merger and does not constitute a recommendation as to how any holder of shares of National City common stock should vote or otherwise act with respect to the merger or any other matter.
 
Pursuant to an engagement letter dated September 30, 2008, Goldman Sachs is entitled to receive a transaction fee of $25 million for its services in connection with the merger, of which $22 million is contingent upon consummation of the merger.
 
The National City Board of Directors Recommends that Holders of National City Common Stock Vote “FOR” Adoption of the Merger Agreement (page 46)
 
The National City board of directors believes that the merger is in the best interests of National City and its stockholders and has approved the merger and the merger agreement. The National City board of directors recommends that holders of National City common stock vote “FOR” adoption of the merger agreement. For the factors considered by National City’s board in deciding to approve the merger agreement, see “The Merger — National City’s Reasons for the Merger; Recommendation of the National City Board of Directors” on page 46.
 
The PNC Board of Directors Recommends that PNC Shareholders Vote “FOR” the Approval of the Issuance of Shares of PNC Common Stock in the Merger (page 48)
 
The PNC board of directors believes that the merger is in the best interests of PNC and its shareholders and has approved the merger and the merger agreement. The PNC board of directors recommends that PNC shareholders vote “FOR” the proposal to issue shares of PNC common stock in the merger. For the factors considered by PNC’s board in deciding to approve the merger agreement, see “The Merger — PNC’s Reasons for the Merger; Recommendation of the PNC Board of Directors.
 
National City’s Directors and Executive Officers May Receive Additional Benefits from the Merger (page 73)
 
Certain of National City’s executive officers and directors have interests in the merger as individuals that are different from, or in addition to, the interests of National City stockholders generally.
 
National City’s stock incentive plans provide for the vesting of outstanding equity-based awards. Assuming that the merger is completed on December 31, 2008, and a PNC common stock price of $59.19 (the closing price of PNC common stock on November 17, 2008), the aggregate cash value of the stock-based awards (which amounts attribute no value to any unvested National City stock options, since all such stock options have exercise prices greater than the market price based on the November 17, 2008 closing price of PNC common stock, as adjusted by the exchange ratio) that are held by National City’s 14 executive officers, that would vest


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solely due to the completion of the merger, is approximately $2,665,533, as a group. In addition, certain executives have severance agreements with National City that provide for severance payments in connection with a qualifying termination of employment following a change in control. Assuming that the merger is completed on December 31, 2008 and all National City executive officers who have employment agreements experience a qualifying termination of employment immediately thereafter, the 14 executive officers as a group would be entitled to receive an aggregate cash amount of approximately $49.49 million, as severance payments.
 
National City’s executive officers and directors also have rights to indemnification and directors’ and officers’ liability insurance that will survive completion of the merger. Please see “The Merger — Interests of Certain National City Directors and Executive Officers in the Merger” on page 73 for further information on these interests.
 
Holders of National City Common Stock and Preferred Stock Do Not Have Appraisal Rights (page 71)
 
Appraisal rights are statutory rights that, if applicable under law, enable stockholders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to stockholders in connection with the extraordinary transaction. Appraisal rights are not available in all circumstances, and exceptions to these rights are provided under the Delaware General Corporation Law (referred to as the DGCL). As a result of one of these exceptions, the holders of National City common stock and preferred stock are not entitled to appraisal rights in the merger.
 
Conditions That Must Be Satisfied or Waived for the Merger to Occur (page 85)
 
Currently, we expect to complete the merger on December 31, 2008. As more fully described in this document and in the merger agreement, the completion of the merger depends on a number of conditions being satisfied or, where legally permissible, waived. These conditions include, among others, receipt of the requisite approvals of each company’s shareholders, the receipt of all required regulatory approvals (including approval by the Board of Governors of the Federal Reserve System), and the receipt of legal opinions by each company regarding the United States federal income tax treatment of the merger.
 
We cannot be certain when, or if, the conditions to the merger will be satisfied or waived, or that the merger will be completed.
 
Termination of the Merger Agreement (page 86)
 
National City and PNC may mutually agree to terminate the merger agreement before completing the merger, even after National City stockholders approval and/or PNC shareholder approval, as long as the termination is approved by each of the National City and PNC boards of directors.
 
In addition, either National City or PNC may decide to terminate the merger agreement, even after National City stockholder approval and/or PNC shareholder approval,
 
  •  if any of the required regulatory approvals are denied or completion of the merger has been prohibited or made illegal by a court or other governmental entity (and the denial or prohibition is final and nonappealable);
 
  •  if the merger has not been completed by October 24, 2009, unless the failure to complete the merger by that date is due to the terminating party’s failure to abide by the merger agreement;
 
  •  if there is a breach by the other party that would cause the failure of conditions to the terminating party’s obligation to close described above, unless the breach is capable of being, and is, cured within 60 days of notice of the breach (provided that the terminating party is not then in material breach of the merger agreement); or
 
  •  if the other party has failed to obtain the requisite vote of its shareholders required for the consummation of the transactions contemplated by this Agreement at a duly held meeting of its shareholders or at any adjournment or postponement thereof, and the terminating party’s board of directors determines in good faith by a majority vote that the other party has substantially engaged in


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  bad faith in breach of its obligation to use its reasonable best efforts to negotiate a restructuring of the merger and to resubmit the transaction to its shareholders for approval.
 
In addition, PNC may terminate the merger agreement if National City’s board of directors (1) submits the merger agreement to its stockholders without a recommendation for approval, or otherwise withdraws or materially and adversely modifies (or discloses its intention to withdraw or materially and adversely modify) its recommendation, or (2) recommends to its stockholders certain business combination proposals other than the merger with PNC as contemplated by the merger agreement.
 
The stock option agreement remains in effect if the merger agreement is terminated. For a description of the stock option agreement, please refer to “Stock Option Agreement,” beginning on page 88.
 
Stock Option Agreement (page 88)
 
To induce PNC to enter into the merger agreement, National City granted PNC an option to purchase up to 405,163,602 shares of National City common stock at a price per share of $2.75; however, in no case may PNC acquire more than 19.9% of the outstanding shares of National City common stock under this stock option agreement. PNC cannot exercise the option unless the merger is not completed and specified triggering events occur. These events generally relate to business combinations or acquisition transactions involving National City and a third party. We do not know of any event that has occurred as of the date of this document that would allow PNC to exercise the option. The option will expire upon completion of the merger.
 
The option could have the effect of discouraging a company from trying to acquire National City prior to completion of the merger or termination of the merger agreement. Upon the occurrence of certain triggering events, National City may be required to repurchase the option and any shares of National City common stock purchased under the option at a predetermined price, or PNC may choose to surrender the option to National City for a cash payment of $168,000,000. In no event will the total profit received by PNC with respect to this option exceed $224,000,000. The Stock Option Agreement is attached to this document as Appendix B.
 
Regulatory Approvals Required for the Merger (page 71)
 
National City and PNC have agreed to use their reasonable best efforts to obtain all regulatory approvals, including all antitrust clearances, required to complete the transactions contemplated by the merger agreement. These approvals include approval from or notices to the Board of Governors of the Federal Reserve System, or Federal Reserve, foreign and state securities authorities, various other federal, state and foreign antitrust and regulatory authorities and self-regulatory organizations, the Department of Justice, or DOJ, and the Federal Trade Commission, or FTC. PNC and National City have completed, or will complete promptly following the date of this document, the filing of applications and notifications to obtain the required regulatory approvals.
 
Although we do not know of any reason why we cannot obtain the remaining regulatory approvals in a timely manner, we cannot be certain when or if we will obtain them.
 
Litigation Related to the Merger (page 72)
 
Certain litigation is pending in connection with the merger. See “The Merger — Litigation Related to the Merger” beginning on page 72.
 
PNC Board of Directors following Completion of the Merger (page 70)
 
Upon completion of the merger, the PNC board of directors will consist of those directors serving immediately prior to the completion of the merger and one director from among the directors of National City immediately prior to the completion of the merger.
 
The Rights of National City Stockholders will Change as a Result of the Merger (page 100)
 
The rights of National City stockholders are governed by Delaware law, as well as National City’s restated certificate of incorporation, as amended, and bylaws. After completion of the merger, the rights of


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former National City stockholders who receive PNC common stock or preferred stock in the merger will be governed by Pennsylvania law and PNC’s amended and restated articles of incorporation and bylaws. This document contains descriptions of the material differences in shareholder rights beginning on page 100.
 
PNC will Hold its Special Meeting on December 23, 2008 (page 19)
 
The PNC special meeting will be held on December 23, 2008, at 9:30 a.m., local time, in Pittsburgh, Pennsylvania on the 15th Floor of One PNC Plaza, 249 Fifth Avenue. At the special meeting, PNC shareholders will be asked to:
 
  •  approve the issuance of PNC common stock to the stockholders of National City in the merger; and
 
  •  approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are not sufficient votes at the time of the special meeting to approve the foregoing proposal.
 
Record Date.  Only holders of record at the close of business on November 14, 2008 will be entitled to vote at the special meeting. Each share of PNC common stock is entitled to one vote. Each share of Voting Preferred Stock is entitled to the number of votes described under the heading “The PNC Special Meeting — Record Date” on page 20. Holders of common stock and Voting Preferred Stock vote together without regard to class. As of the record date of November 14, 2008, there were 347,960,466 shares of PNC common stock, 6,540 shares of Series A Preferred Stock, 1,137 shares of Series B Preferred Stock, 119,126 shares of Series C Preferred Stock and 170,761 shares of Series D Preferred Stock entitled to vote at the special meeting.
 
Required Vote.  Approval of the issuance of shares of PNC common stock in the merger requires the affirmative vote of a majority of the votes cast by all shareholders entitled to vote thereon, assuming a quorum. Because the required vote is based on the votes cast on such proposal, your failure to vote, a broker non-vote or an abstention will not be treated as a vote cast and, therefore, will have no effect on the proposal, assuming a quorum.
 
If there is a quorum, approval of any necessary or appropriate adjournment of the special meeting requires the affirmative vote of a majority of the votes cast by all shareholders entitled to vote thereon. In the absence of a quorum, the special meeting may be adjourned by the approval of the majority of the voting power of the outstanding shares present and entitled to vote at the special meeting.
 
As of the record date, directors and executive officers of PNC and their affiliates had the right to vote approximately 1,180,202 shares of PNC common stock and no shares of Voting Preferred Stock, or approximately 0.3% of the outstanding PNC shares entitled to be voted at the special meeting. We currently expect that each of these individuals will vote their shares of PNC common stock in favor of the proposals to be presented at the special meeting.
 
National City will Hold its Special Meeting on December 23, 2008 (page 22)
 
The National City special meeting will be held on December 23, 2008, at 10:00 a.m., Eastern time, at National City’s offices, 1900 East Ninth Street, Cleveland, Ohio 44114. At the special meeting, National City stockholders will be asked to:
 
  •  adopt the merger agreement; and
 
  •  approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are not sufficient votes at the time of the special meeting to approve the foregoing proposal.
 
Record Date.  Only holders of record at the close of business on November 14, 2008 will be entitled to vote at the special meeting. Each share of National City common stock is entitled to one vote. As of the record date, there were 2,043,425,441 shares of National City common stock entitled to vote at the special meeting.
 
Required Vote.  Adoption of the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of National City common stock entitled to vote. Because approval is based


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on the affirmative vote of a majority of shares outstanding, a National City stockholder’s failure to vote, a broker non-vote or an abstention will have the same effect as a vote against adoption of the merger agreement.
 
Approval of any necessary adjournment of the special meeting may be obtained by the affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the special meeting. Because approval of such adjournment is based on the affirmative vote of a majority of shares present or represented, abstentions will have the same effect as a vote against this proposal. If you are a registered holder, failure to vote by proxy or in person will have the same effect as a vote against this proposal. If you hold in street name, your broker may vote your shares in its discretion on this proposal.
 
As of the record date, directors and executive officers of National City had the right to vote 3,802,900 shares of National City common stock, or approximately 0.2% of the outstanding National City common stock entitled to be voted at the special meeting. We currently expect that each of these individuals will vote their shares of National City common stock in favor of the proposals to be presented at the special meeting.
 
Affiliates of Corsair Capital LLC, or Corsair, entered into a voting agreement with PNC in which Corsair agreed to vote or cause to be voted all shares of National City common stock it or its affiliates own and have the ability to direct the vote in favor of the merger and against any competing acquisition proposal.
 
Information about the Companies (page 25)
 
The PNC Financial Services Group, Inc.
 
The PNC Financial Services Group, Inc. is a Pennsylvania corporation, a bank holding company and a financial holding company under U.S. federal law. PNC is one of the largest diversified financial services companies in the United States based on assets, with businesses engaged in retail banking, corporate and institutional banking, asset management and global investment servicing. PNC provides many of its products and services nationally and others in PNC’s primary geographic markets located in Pennsylvania; New Jersey; Washington, DC; Maryland; Virginia; Ohio; Kentucky; and Delaware. PNC also provides certain investment servicing internationally. PNC stock is listed on the NYSE under the symbol “PNC.” As of September 30, 2008, PNC had total consolidated assets of approximately $145.6 billion, total consolidated deposits of approximately $85.0 billion and total consolidated shareholders’ equity of approximately $14.2 billion. The principal executive offices of PNC are located at One PNC Plaza, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707, and its telephone number is (412) 762-2000.
 
Additional information about PNC and its subsidiaries is included in documents incorporated by reference in this document. See “Where You Can Find More Information” on page 110.
 
National City Corporation
 
National City Corporation is a financial holding company headquartered in Cleveland, Ohio. National City operates through an extensive network in Ohio, Florida, Illinois, Indiana, Kentucky, Michigan, Missouri, Pennsylvania and Wisconsin and also conducts selected consumer lending businesses and other financial services on a nationwide basis. National City’s primary businesses include commercial and retail banking, mortgage financing and servicing, consumer finance and asset management. Operations are primarily conducted through more than 1,400 branch banking offices located within a nine-state footprint and over 350 retail mortgage offices located throughout the United States. As of September 30, 2008, National City’s consolidated total assets were approximately $143.7 billion and its total stockholders’ equity was approximately $15.8 billion. Based on asset size, National City is one of the largest commercial banking organizations in the United States. The principal executive offices of National City are located at 1900 East Ninth Street, Cleveland, Ohio 44114, and its telephone number is 216-222-2000.
 
Additional information about National City and its subsidiaries is included in documents incorporated by reference in this document. See “Where You Can Find More Information” on page 110.


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SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF PNC
 
Set forth below are highlights from PNC’s consolidated financial data as of and for the years ended December 31, 2003 through 2007 and as of and for the nine months ended September 30, 2007 and 2008. The results of operations for the nine months ended September 30, 2007 and 2008 are not necessarily indicative of the results of operations for the full year or any other interim period. PNC management prepared the unaudited information on the same basis as it prepared PNC’s audited consolidated financial statements. In the opinion of PNC management, this information reflects all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of this data for those dates. You should read this information in conjunction with PNC’s consolidated financial statements and related notes included in PNC’s Annual Report on Form 10-K for the year ended December 31, 2007 and PNC’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, which are incorporated by reference in this document and from which this information is derived. See “Where You Can Find More Information” on page 110.
 
PNC — Summary of Consolidated Financial Data
 
                                                         
    Nine Months
       
    Ended September 30,     Year Ended December 31,  
    2008     2007     2007     2006(a)     2005     2004     2003  
 
Earnings (in millions)
                                                       
Net interest income
  $ 2,831     $ 2,122     $ 2,915     $ 2,245     $ 2,154     $ 1,969     $ 1,996  
Noninterest income
    2,683       2,956       3,790       6,327       4,173       3,572       3,263  
                                                         
Total revenue
    5,514       5,078       6,705       8,572       6,327       5,541       5,259  
Provision for credit losses
    527       127       315       124       21       52       177  
Noninterest expense
    3,299       3,083       4,296       4,443       4,306       3,712       3,467  
                                                         
Income before minority interest and income taxes
    1,688       1,868       2,094       4,005       2,000       1,777       1,615  
Minority interest in income of BlackRock
                      47       71       42       47  
Income taxes
    558       579       627       1,363       604       538       539  
                                                         
Income from continuing operations
    1,130       1,289       1,467       2,595       1,325       1,197       1,029  
Cumulative effect of accounting change, net of tax
                                        (28 )
                                                         
Net income
  $ 1,130     $ 1,289     $ 1,467     $ 2,595     $ 1,325     $ 1,197     $ 1,001  
                                                         
Per common share data
                                                       
Basic earnings (loss)
                                                       
Continuing operations
  $ 3.30     $ 3.92     $ 4.43     $ 8.89     $ 4.63     $ 4.25     $ 3.68  
Cumulative effect of accounting change
                                        (0.10 )
                                                         
Net income
  $ 3.30     $ 3.92     $ 4.43     $ 8.89     $ 4.63     $ 4.25     $ 3.58  
                                                         
Diluted earnings (loss)
                                                       
Continuing operations
  $ 3.24     $ 3.85     $ 4.35     $ 8.73     $ 4.55     $ 4.21     $ 3.65  
Cumulative effect of accounting change
                                        (0.10 )
                                                         
Net income
  $ 3.24     $ 3.85     $ 4.35     $ 8.73     $ 4.55     $ 4.21     $ 3.55  
                                                         
Cash dividends declared
  $ 1.95     $ 1.81     $ 2.44     $ 2.15     $ 2.00     $ 2.00     $ 1.94  


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    Nine Months
       
    Ended September 30,     Year Ended December 31,  
    2008     2007     2007     2006(a)     2005     2004     2003  
 
Period end balances (in millions)
                                                       
Total assets
  $ 145,610     $ 131,366     $ 138,920     $ 101,820     $ 91,954     $ 79,723     $ 68,168  
Total deposits
    84,984       78,409       82,696       66,301       60,275       53,269       45,241  
Total borrowed funds
    32,139       27,453       30,931       15,028       16,897       11,964       11,453  
Total shareholders’ equity
    14,218       14,539       14,854       10,788       8,563       7,473       6,645  
 
 
(a) Noninterest income for 2006 included the pretax impact of the following: gain on BlackRock/Merrill Lynch Investment Managers (“MLIM”) transaction of $2.1 billion; securities portfolio rebalancing loss of $196 million; and mortgage loan portfolio repositioning loss of $48 million. Noninterest expense for 2006 included the pretax impact of BlackRock/MLIM transaction integration costs of $91 million. An additional $10 million of integration costs, recognized in the fourth quarter of 2006, were included in noninterest income as a negative component of the asset management line. The after-tax impact of these items was as follows: BlackRock/MLIM transaction gain — $1.3 billion; securities portfolio rebalancing loss — $127 million; mortgage loan portfolio repositioning loss - $31 million; and BlackRock/MLIM transaction integration costs — $47 million. Due to significant one-time items for PNC during 2006, the results for that year may not be typical.

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SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF NATIONAL CITY
 
Set forth below are highlights from National City’s consolidated financial data as of and for the years ended December 31, 2003 through 2007 and as of and for the nine months ended September 30, 2007 and 2008. The results of operations for the nine months ended September 30, 2007 and 2008 are not necessarily indicative of the results of operations for the full year or any other interim period. National City management prepared the unaudited information on the same basis as it prepared National City’s audited consolidated financial statements. In the opinion of National City management, this information reflects all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of this data for those dates. You should read this information in conjunction with National City’s consolidated financial statements and related notes included in National City’s Annual Report on Form 10-K for the year ended December 31, 2007 and National City’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, which are incorporated by reference in this document and from which this information is derived. See “Where You Can Find More Information” on page 110.
 
National City — Summary of Consolidated Financial Data
 
                                                         
    Nine Months
       
    Ended September 30,     Year Ended December 31,  
    2008     2007     2007(a)     2006(b)     2005     2004(c)     2003  
 
Earnings (in millions)
                                                       
Net interest income
  $ 3,088     $ 3,294     $ 4,396     $ 4,604     $ 4,696     $ 4,433     $ 4,335  
Noninterest income
    1,955       2,009       2,606       4,019       3,304       4,440       3,593  
                                                         
Total revenue
    5,043       5,303       7,002       8,623       8,000       8,873       7,928  
Provision for credit losses
    4,169       635       1,326       489       300       339       628  
Noninterest expense
    5,968       3,738       5,305       4,711       4,735       4,456       4,063  
                                                         
Income (loss) before income taxes
    (5,094 )     930       371       3,423       2,965       4,078       3,237  
Income (benefit) taxes
    (1,093 )     283       57       1,123       980       1,298       1,120  
                                                         
Net (loss) income
  $ (4,001 )   $ 647     $ 314     $ 2,300     $ 1,985     $ 2,780     $ 2,117  
                                                         
Per common share data
                                                       
Basic earnings (loss)
                                                       
Net (loss) income
  $ (11.32 )   $ 1.08     $ 0.51     $ 3.77     $ 3.13     $ 4.37     $ 3.46  
                                                         
Diluted earnings (loss)
                                                       
Net (loss) income
  $ (11.32 )   $ 1.07     $ 0.51     $ 3.72     $ 3.09     $ 4.31     $ 3.43  
                                                         
Cash dividends declared
  $ 0.23     $ 1.19     $ 1.60     $ 1.52     $ 1.44     $ 1.34     $ 1.25  
Period end balances (in millions)
                                                       
Total assets
  $ 143,691     $ 154,166     $ 149,852     $ 140,191     $ 142,397     $ 139,414     $ 114,102  
Total deposits
    95,582       98,249       97,310       87,234       83,986       85,955       63,930  
Total borrowed funds
    28,774       37,394       35,047       33,289       40,986       36,624       36,976  
Total shareholders’ equity
    15,838       13,843       13,408       14,581       12,613       12,804       9,329  
 
 
(a) Results for 2007 include the acquisitions of Fidelity Bancshares, Inc. and MAF Bancorp, Inc.
 
(b) Results for 2006 include the acquisitions of Forbes First Financial Corporation and Harbor Florida Bancshares, Inc. and the sale of First Franklin.
 
(c) Results for 2004 include the acquisitions of Allegiant Bancorp Inc., Provident Financial Group Inc. and Wayne Bancorp, and the sale of National Processing, Inc.


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UNAUDITED SELECTED PRO FORMA COMBINED FINANCIAL INFORMATION
 
The following table shows unaudited pro forma combined financial information about the financial condition and results of operations, including per share data and financial ratios, after giving effect to the merger and the planned issuance of $7.7 billion of preferred securities and warrants to purchase 17.2 million shares of PNC common stock to the United States Treasury, or Treasury Department, under the TARP Capital Purchase Program. The unaudited pro forma financial information assumes that the merger is accounted for under the purchase method of accounting with PNC treated as the acquirer. Under the purchase method of accounting, the assets and liabilities of National City will be recorded by PNC at their respective fair values as of the date the merger is completed. The unaudited pro forma condensed combined balance sheet gives effect to the transactions as if the transactions had occurred on September 30, 2008. The unaudited pro forma condensed combined income statements for the nine months ended September 30, 2008 and the year ended December 31, 2007, give effect to the transactions as if the transactions had become effective at January 1, 2007. The unaudited selected pro forma combined financial information has been derived from and should be read in conjunction with the consolidated financial statements and the related notes of both PNC and National City, which are incorporated in this document by reference and more detailed unaudited pro forma condensed combined financial information, including the notes thereto, appearing elsewhere in this document. See “Where You Can Find More Information” on page 110 and “Unaudited Pro Forma Condensed Combined Financial Information” on page 27.
 
The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and does not indicate the financial results of the combined companies had the companies actually been combined at the beginning of each period presented, nor the impact of possible business model changes. The unaudited pro forma condensed combined financial information also does not consider any potential impacts of current market conditions on revenues, expense efficiencies, asset dispositions, and share repurchases, among other factors. In addition, as explained in more detail in the accompanying notes to the unaudited pro forma condensed combined financial information, the preliminary allocation of the pro forma purchase price reflected in the unaudited pro forma condensed combined financial information is subject to adjustment and may vary significantly from the actual purchase price allocation that will be recorded upon completion of the merger.
 
                 
    Nine Months Ended
    Twelve Months Ended
 
    September 30, 2008     December 31, 2007  
    (In millions)  
 
Income Statement
               
Net interest income
  $ 6,362     $ 8,039  
Noninterest income
    4,609       6,357  
                 
Total revenue
    10,971       14,396  
Provision for credit losses
    4,696       1,641  
Noninterest expense
    9,377       9,776  
                 
Income (loss) before income taxes
    (3,102 )     2,979  
Income taxes (benefit)
    (422 )     875  
                 
Net income (loss)
  $ (2,680 )   $ 2,104  
                 
Balance Sheet
               
Cash and due from banks
  $ 7,301       N/M  
Net loans
    169,617       N/M  
Total assets
    279,184       N/M  
Total deposits
    181,109       N/M  
Total borrowed funds
    52,016       N/M  
Total shareholders’ equity
    27,547       N/M  


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COMPARATIVE PER SHARE DATA
 
The following table sets forth for PNC common stock and National City common stock certain historical, pro forma and pro forma-equivalent per share financial information. The pro forma and pro forma-equivalent per share information gives effect to the merger and the planned issuance of $7.7 billion of preferred securities and warrants to purchase 17.2 million shares of PNC common stock to the Treasury Department under the TARP Capital Purchase Program as if the transactions had been effective on the dates presented, in the case of the book value data, and as if the transactions had become effective on January 1, 2007, in the case of the net income and dividends declared data. The unaudited pro forma data in the tables assume that the merger is accounted for using the purchase method of accounting and represents a current estimate based on available information of the combined company’s results of operations. The pro forma financial adjustments record the assets and liabilities of National City at their estimated fair values and are subject to adjustment as additional information becomes available and as additional analyses are performed. See “Unaudited Pro Forma Condensed Combined Financial Information” on page 27. The information in the following table is based on, and should be read together with, the historical financial information that we have presented in our prior filings with the SEC. See “Where You Can Find More Information” on page 110.
 
We anticipate that the merger will provide the combined company with financial benefits that include reduced operating expenses and revenue enhancement opportunities. The unaudited pro forma information, while helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect the impact of possible business model changes as a result of current market conditions which may impact revenues, expense efficiencies, asset dispositions, share repurchases and other factors. It also does not necessarily reflect what the historical results of the combined company would have been had our companies been combined during these periods nor is it indicative of the results of operations in future periods or the future financial position of the combined company. The Comparative Per Share Data Table for the nine months ended September 30, 2008 and the year ended December 31, 2007 combines the historical income per share data of PNC and subsidiaries and National City and subsidiaries giving effect to the transactions as if the merger, using the purchase method of accounting, and the planned capital issuance to the Treasury Department had become effective on January 1, 2007. The pro forma adjustments are based upon available information and certain assumptions that the PNC management believes are reasonable. Upon completion of the merger, the operating results of National City will be reflected in the consolidated financial statements of PNC on a prospective basis.
 
                                 
                      Per
 
                      Equivalent
 
    PNC
    National City
    Pro Forma
    National City
 
    Historical     Historical     Combined     Share(1)  
 
Income from continuing operations for the twelve months ended December 31, 2007:
                               
Basic
  $ 4.43     $ 0.51     $ 3.84     $ 0.15  
Diluted
    4.35       0.51       3.77       0.15  
Income (loss) from continuing operations for the nine months ended September 30, 2008:
                               
Basic
  $ 3.30     $ (11.32 )   $ (6.99 )   $ (0.27 )
Diluted
    3.24       (11.32 )     (7.00 )     (0.27 )
Dividends Paid:
                               
For the twelve months ended December 31, 2007
  $ 2.44     $ 1.60     $ 2.44     $ 0.10  
For the nine months ended September 30, 2008
    1.95       0.23       1.95       0.08  
Book Value:
                               
As of December 31, 2007
  $ 43.60     $ 21.15     $ 48.13     $ 1.89  
As of September 30, 2008
    39.44       7.71       44.77       1.75  
 
 
(1) Reflects National City shares at the exchange ratio of 0.0392.


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RISK FACTORS
 
In addition to the other information included and incorporated by reference in this document, shareholders should consider the matters described below in determining whether to adopt the merger agreement in the case of National City stockholders, and approve the issuance of PNC common stock in the merger in the case of PNC shareholders.
 
Because the market price of PNC common stock will fluctuate, National City stockholders cannot be sure of the market value of the merger consideration they will receive.
 
Upon completion of the merger, each share of National City common stock will be converted into merger consideration consisting of 0.0392 of a share of PNC common stock. The market value of the merger consideration may vary from the closing price of PNC common stock on the date we announced the merger, on the date that this document was mailed to National City stockholders, on the date of the special meeting of the National City stockholders and on the date we complete the merger and thereafter. Any change in the market price of PNC common stock prior to completion of the merger will affect the market value of the merger consideration that National City stockholders will receive upon completion of the merger. Accordingly, at the time of the special meeting, National City stockholders will not know or be able to calculate the market value of the merger consideration they would receive upon completion of the merger. Neither company is permitted to terminate the merger agreement or resolicit the vote of National City stockholders solely because of changes in the market prices of either company’s stock. There will be no adjustment to the merger consideration for changes in the market price of either shares of PNC common stock or shares of National City common stock. Stock price changes may result from a variety of factors, including general market and economic conditions, changes in our respective businesses, operations and prospects, and regulatory considerations. Many of these factors are beyond our control. You should obtain current market quotations for shares of PNC common stock and for shares of National City common stock before you vote.
 
We may fail to realize all of the anticipated benefits of the merger.
 
The success of the merger will depend, in part, on our ability to realize the anticipated benefits and cost savings from combining the businesses of PNC and National City. However, to realize these anticipated benefits and cost savings, we must successfully combine the businesses of PNC and National City. If we are not able to achieve these objectives, the anticipated benefits and cost savings of the merger may not be realized fully or at all or may take longer to realize than expected.
 
PNC and National City have operated and, until the completion of the merger, will continue to operate, independently. It is possible that the integration process could result in the loss of key employees, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits of the merger. Integration efforts between the two companies will also divert management attention and resources. These integration matters could have an adverse effect on each of National City and PNC during the pre-merger transition period and for an undetermined period after consummation of the merger.
 
The market price of PNC common stock after the merger may be affected by factors different from those affecting the shares of National City or PNC currently.
 
The businesses of PNC and National City differ in important respects and, accordingly, the results of operations of the combined company and the market price of the combined company’s shares of common stock may be affected by factors different from those currently affecting the independent results of operations of PNC and National City. For a discussion of the businesses of PNC and National City and of certain factors to consider in connection with those businesses, see the documents incorporated by reference in this document and referred to under “Where You Can Find More Information” beginning on page 110.


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National City stockholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management.
 
National City’s stockholders currently have the right to vote in the election of the National City board of directors and on other matters affecting National City. When the merger occurs, each National City stockholder that receives shares of PNC common stock will become a shareholder of PNC with a percentage ownership of the combined organization that is much smaller than the stockholder’s percentage ownership of National City. Because of this, National City’s stockholders will have less influence on the management and policies of PNC than they now have on the management and policies of National City.
 
Termination of the merger agreement could negatively impact National City.
 
If the merger agreement is terminated, there may be various consequences including:
 
  •  National City’s businesses may have been adversely impacted by the failure to pursue other beneficial opportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of completing the merger; and
 
  •  the market price of National City common stock might decline to the extent that the current market price reflects a market assumption that the merger will be completed.
 
If the merger agreement is terminated and National City’s board of directors seeks another merger or business combination, National City stockholders cannot be certain that National City will be able to find a party willing to pay an equivalent or more attractive price than the price PNC has agreed to pay in the merger.
 
The opinion of National City’s financial advisor will not reflect changes in circumstances between signing the merger agreement and the merger.
 
National City’s financial advisor, Goldman Sachs, rendered an opinion dated October 24, 2008, to the National City board of directors, that, as of such date, and based upon and subject to the factors, limitations and assumptions set forth in its written opinion, as well as the extraordinary circumstances facing National City referred to in such written opinion, the exchange ratio of 0.0392 of a share of PNC common stock to be received in respect of each share of National City common stock pursuant to the merger agreement was fair from a financial point of view to the holders of National City common stock other than PNC and its affiliates. The opinion of Goldman Sachs was based on economic, monetary, market and other conditions as in effect on, and the information made available to it as of, the date thereof, including the ongoing crisis in the capital markets, the condition of the mortgage market and the extraordinary financial and economic environment at the time and the related uncertainty regarding the extent and duration of those conditions. Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date thereof.
 
Changes in the operations and prospects of PNC or National City, general market and economic conditions and other factors on which National City’s financial advisor’s opinion was based, may significantly alter the value of PNC or National City or the prices of shares of PNC common stock or National City common stock by the time the merger is completed. The opinion does not speak as of the time the merger will be completed or as of any date other than the date of such opinion. The National City board of directors’ recommendation that holders of National City common stock vote “FOR” adoption of the merger agreement, however, is as of the date of this document. For a description of the opinion that National City received from its financial advisor, please refer to “The Merger — Opinion of National City’s Financial Advisor”. For a description of the other factors considered by National City’s board of directors in determining to approve the merger, please refer to “The Merger — National City’s Reasons for the Merger; Recommendation of the National City Board of Directors”.


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The merger agreement limits National City’s ability to pursue alternatives to the merger.
 
The merger agreement contains “no shop” provisions that, subject to limited exceptions, limit National City’s ability to discuss, facilitate or commit to competing third-party proposals to acquire all or a significant part of National City. In addition, National City has granted to PNC an option to acquire up to 405,163,602 shares of National City common stock, or an equivalent number of shares of the stock of any company that acquires National City, under the circumstances and for the payments described in the option agreement. These provisions might discourage a potential competing acquiror that might have an interest in acquiring all or a significant part of National City from considering or proposing that acquisition even if it were prepared to pay consideration with a higher per share market price than that proposed in the merger, or might result in a potential competing acquiror’s proposing to pay a lower per share price to acquire National City than it might otherwise have proposed to pay. National City can consider and participate in discussions and negotiations with respect to an alternative proposal so long as the National City board of directors determines in good faith (after consultation with legal counsel) that failure to do so would be reasonably likely to result in a violation of its fiduciary duties to National City stockholders under applicable law.
 
The merger is subject to the receipt of consents and approvals from government entities that may impose conditions that could have an adverse effect on the combined company following the merger.
 
Before the merger may be completed, various approvals or consents must be obtained from the Federal Reserve Board and various domestic and foreign bank regulatory, securities, antitrust, insurance and other authorities. These government entities, including the Federal Reserve Board, may impose conditions on the completion of the merger or require changes to the terms of the merger. Although PNC and National City do not currently expect that any such material conditions or changes would be imposed, there can be no assurance that they will not be, and such conditions or changes could have the effect of delaying completion of the merger or imposing additional costs on or limiting the revenues of PNC following the merger, any of which might have a material adverse effect on PNC following the merger.
 
The merger is subject to closing conditions, including shareholder approval, that, if not satisfied or waived, will result in the merger not being completed, which may result in material adverse consequences to National City’s business and operations.
 
The merger is subject to closing conditions, including the approval of National City stockholders and PNC shareholders that, if not satisfied, will prevent the merger from being completed. The closing condition that National City stockholders adopt the merger agreement, and the closing condition that PNC shareholders approve the issuance of PNC common stock in the merger, may not be waived under applicable law and must be satisfied for the merger to be completed. National City currently expects that all directors and executive officers of National City will vote their shares of National City common stock in favor of the proposals presented at the special meeting. PNC currently expects that all directors and officers of PNC will vote their shares of PNC common stock in favor of the proposals presented at the special meeting. If National City’s stockholders do not adopt the merger agreement or if PNC’s shareholders do not approve the issuance of PNC common stock in the merger and the merger is not completed, the resulting failure of the merger could have a material adverse impact on National City’s business and operations. In addition to the required approvals and consents from governmental entities and the approval of National City stockholders and PNC shareholders, the merger is subject to other conditions beyond PNC’s and National City’s control that may prevent, delay or otherwise materially adversely affect its completion. We cannot predict whether and when these other conditions will be satisfied. See “The Merger Agreement — Conditions to the Merger” beginning on page 85.
 
The shares of PNC common stock to be received by National City stockholders as a result of the merger will have different rights from the shares of National City common stock.
 
Upon completion of the merger, National City stockholders will become PNC shareholders and their rights as shareholders will be governed by the amended and restated articles of incorporation and bylaws of PNC. The rights associated with National City common stock are different from the rights associated with


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PNC common stock. Please see “Comparison of Shareholders’ Rights” beginning on page 100 for a discussion of the different rights associated with PNC common stock.
 
Current disruption and volatility in global financial markets might continue and governments may take measures to intervene.
 
Over the last year global financial markets have experienced extraordinary disruption and volatility following adverse changes in the global credit markets. Governments have taken highly significant measures in response to such events, including enactment of the Emergency Economic Stabilization Act of 2008 in the United States. Such dislocation and instability, and potential government responses thereto, may continue before and after completion of the merger and could negatively impact the operations of National City and PNC and the value of the PNC common stock National City stockholders receive in the merger.


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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 
This document contains or incorporates by reference a number of forward-looking statements, including statements about the financial conditions, results of operations, earnings outlook and prospects of PNC, National City and the potential combined company and may include statements for the period following the completion of the merger. You can find many of these statements by looking for words such as “plan,” “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” “potential,” “possible” or other similar expressions.
 
The forward-looking statements involve certain risks and uncertainties. The ability of either PNC or National City to predict results or the actual effects of its plans and strategies, or those of the combined company, is subject to inherent uncertainty. Factors that may cause actual results or earnings to differ materially from such forward-looking statements include those set forth on page 14 under “Risk Factors,” as well as, among others, the following:
 
  •  those discussed and identified in public filings with the SEC made by PNC or National City;
 
  •  completion of the merger is dependent on, among other things, receipt of shareholder and regulatory approvals, the timing of which cannot be predicted with precision and which may not be received at all. The impact of the completion of the transaction on PNC’s financial statements will be affected by the timing of the transaction, including in particular the ability to complete the acquisition in the fourth quarter of 2008;
 
  •  the extent and duration of continued economic and market disruptions and governmental regulatory proposals to address these disruptions;
 
  •  the incurrence of more credit losses from National City’s loan portfolio than expected and deposit attrition may be greater than expected;
 
  •  the merger may be more expensive to complete (including the integration of National City’s businesses) and the anticipated benefits, including anticipated cost savings and strategic gains, may be significantly harder or take longer to achieve than expected or may not be achieved in their entirety as a result of unexpected factors or events;
 
  •  the integration of National City’s business and operations with those of PNC, which will include conversion of National City’s different systems and procedures, may take longer than anticipated, may be more costly than anticipated and may have unanticipated adverse results relating to National City’s or PNC’s existing businesses. PNC’s ability to integrate National City successfully may be adversely affected by the fact that this transaction will result in PNC entering several markets where PNC does not currently have any meaningful presence;
 
  •  the anticipated cost savings and other synergies of the merger may take longer to be realized or may not be achieved in their entirety, and attrition in key client, partner and other relationships relating to the merger may be greater than expected;
 
  •  decisions to restructure, divest or eliminate business units or otherwise change the business mix of either company;
 
  •  the risk of new and changing regulation and/or regulatory actions in the U.S. and internationally; and
 
  •  the exposure to government investigations and litigation currently pending against National City, as well as others that may be filed or commenced as a result of the merger or otherwise, which could delay or impede the completion of the merger or impact the timing or realization of anticipated benefits to PNC or otherwise adversely impact PNC’s results.
 
Because these forward-looking statements are subject to assumptions and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. You are cautioned not to place undue reliance on these statements, which speak only as of the date of this document or the date of any document incorporated by reference in this document.
 
All subsequent written and oral forward-looking statements concerning the merger or other matters addressed in this document and attributable to PNC or National City or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this document. Except to the extent required by applicable law or regulation, PNC and National City undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events.


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THE PNC SPECIAL MEETING
 
This section contains information about the special meeting of PNC shareholders that has been called to consider and approve the issuance of shares of PNC common stock in the merger.
 
Together with this document, PNC is also sending you a notice of the special meeting and a form of proxy that is solicited by the PNC board of directors. The special meeting will be held on December 23, 2008, at 9:30 a.m., local time, in Pittsburgh, Pennsylvania on the 15th Floor of One PNC Plaza, 249 Fifth Avenue.
 
Matters to Be Considered
 
The purpose of the special meeting is to vote on:
 
  •  a proposal for approval of the issuance of shares of PNC common stock to the stockholders of National City in the merger; and
 
  •  a proposal to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are not sufficient votes at the time of the special meeting to approve the foregoing proposal.
 
Proxies
 
Each copy of this document mailed to holders of PNC common stock and Voting Preferred Stock is accompanied by a form of proxy with instructions for voting by mail, by telephone or through the internet. If you hold stock in your name as a shareholder of record and are voting by mail, you should complete and return the proxy card accompanying this document to ensure that your vote is counted at the special meeting, or at any adjournment or postponement of the special meeting, regardless of whether you plan to attend the special meeting. You may also vote your shares by telephone or through the internet. Information and applicable deadlines for voting by telephone or through the internet are set forth in the enclosed proxy card instructions.
 
If you hold your stock in “street name” through a bank or broker, you must direct your bank or broker to vote in accordance with the instructions you have received from your bank or broker.
 
If you hold stock in your name as a shareholder of record, you may revoke any proxy at any time before it is voted by signing and returning a proxy card with a later date, delivering a written revocation letter to PNC’s Corporate Secretary, or by attending the special meeting in person, notifying the Corporate Secretary, and voting by ballot at the special meeting. If you have voted your shares by telephone or through the internet, you may revoke your prior telephone or internet vote by recording a different vote, or by signing and returning a proxy card dated as of a date that is later than your last telephone or internet vote.
 
Any shareholder entitled to vote in person at the special meeting may vote in person regardless of whether a proxy has been previously given, but the mere presence (without notifying the Corporate Secretary) of a shareholder at the special meeting will not constitute revocation of a previously given proxy.
 
Written notices of revocation and other communications about revoking your proxy should be addressed to:
 
The PNC Financial Services Group, Inc.
One PNC Plaza
249 Fifth Avenue
Pittsburgh, Pennsylvania 15222-2707
  Attention:      George P. Long, III
Corporate Secretary
 
If your shares are held in “street name” by a bank or broker, you should follow the instructions of your bank or broker regarding the revocation of proxies.
 
All shares represented by valid proxies that we receive through this solicitation, and that are not revoked, will be voted in accordance with your instructions on the proxy card or as instructed via internet or telephone.


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If you make no specification on your proxy card as to how you want your shares voted before signing and returning it, your proxy will be voted “FOR” approval of the issuance of shares of PNC common stock in the merger and “FOR” approval of the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies. According to the PNC amended and restated bylaws, business to be conducted at a special meeting of shareholders may only be brought before the meeting by means of PNC’s notice of the meeting or otherwise properly brought before the meeting by the presiding officer or by or at the direction of a majority of the PNC board of directors. No matters other than the matters described in this document are anticipated to be presented for action at the special meeting or at any adjournment or postponement of the special meeting.
 
Solicitation of Proxies
 
PNC will bear the entire cost of soliciting proxies from its shareholders. In addition to solicitation of proxies by mail, PNC will request that banks, brokers, and other record holders send proxies and proxy material to the beneficial owners of PNC common stock and Voting Preferred Stock and secure their voting instructions. PNC will reimburse the record holders for their reasonable expenses in taking those actions. PNC has also made arrangements with D.F. King & Co. to assist it in soliciting proxies and has agreed to pay them $17,500, plus reasonable expenses for these services. If necessary, PNC may use several of its regular employees, who will not be specially compensated, to solicit proxies from PNC shareholders, either personally or by telephone, facsimile, letter or other electronic means.
 
Record Date
 
The close of business on November 14, 2008 has been fixed as the record date for determining the PNC shareholders entitled to receive notice of and to vote at the special meeting. This table shows the number of issued and outstanding shares of our common and preferred stock on the record date. The table also shows the number of votes for each share. (The number of votes shown for each share of Voting Preferred Stock equals the number of full shares of PNC common stock that can be acquired upon the conversion of a share of preferred stock.)
 
         
    Shares Issued
   
Class
  and Outstanding  
Votes per Share
 
Common
  347,960,466   1
Series A Preferred
  6,540   8
Series B Preferred
  1,137   8
Series C Preferred
  119,126   4 for each 2.4 shares
Series D Preferred
  170,761   4 for each 2.4 shares
 
Quorum
 
In order to conduct voting at the special meeting, there must be a quorum. A quorum is the number of shares that must be present at the meeting — either in person or by proxy. To have a quorum at the special meeting requires the presence of shareholders or their proxies who are entitled to cast at least a majority of the votes that all shareholders are entitled to cast. Abstentions and broker non-votes will be counted for the purpose of determining whether a quorum is present. At the meeting, holders of PNC common stock and Voting Preferred Stock will vote together as a single class.
 
Vote Required
 
Approval of the issuance of shares of PNC common stock in the merger requires the affirmative vote of a majority of the votes cast by all shareholders entitled to vote thereon, assuming a quorum. Because the required vote is based on the votes cast, your failure to vote, a broker non-vote or an abstention will not be treated as a vote cast and, therefore, will have no effect on these proposals, assuming a quorum.
 
If there is a quorum, approval of any necessary or appropriate adjournment of the special meeting requires the affirmative vote of a majority of the votes cast by all shareholders entitled to vote thereon. In the


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absence of a quorum, the special meeting may be adjourned by the approval of the majority of the voting power of the outstanding shares present and entitled to vote at the special meeting.
 
The PNC board of directors urges PNC shareholders to promptly vote by: accessing the internet site listed in the proxy card instructions if voting through the internet; calling the toll-free number listed in the proxy card instructions if voting by telephone; or completing, dating, and signing the accompanying proxy card and to return it promptly in the enclosed postage-paid envelope. If you hold your stock in “street name” through a bank or broker, please vote by following the voting instructions of your bank or broker.
 
Shareholders will vote at the meeting by ballot. Votes cast at the meeting, in person or by proxy, will be tallied by PNC’s Inspector of Election.
 
As of the record date, directors and executive officers of PNC had the right to vote approximately 1,180,202 shares of PNC common stock and no shares of Voting Preferred Stock, or approximately 0.3% of the outstanding PNC shares entitled to vote at the special meeting. We currently expect that each of these individuals will vote their shares of PNC common stock in favor of the proposals to be presented at the special meeting.
 
Participants in a PNC 401(k) Plan
 
Shares of PNC common stock held in a 401(k) plan sponsored by PNC, PNC Global Investment Servicing (U.S.) Inc. or any other affiliate will be voted solely by the Trustee of such plan pursuant to the terms of such plan and the instructions received by the Trustee (via PNC’s transfer agent, Computershare) from plan participants to vote shares credited to plan participants’ accounts. Active employees whose shares of PNC common stock are held exclusively in such a 401(k) plan will receive a separate correspondence from the transfer agent that will include separate voting instructions. Neither the Trustee nor Computershare will disclose the confidential voting instructions of any plan participant.
 
Recommendation of the PNC Board of Directors
 
The PNC board of directors has approved and adopted the merger agreement and the transactions it contemplates, including the merger. The PNC board of directors determined that the merger, merger agreement and the transactions contemplated by the merger agreement are advisable and in the best interests of PNC and its shareholders and recommends that you vote “FOR” approval of the issuance of shares of PNC common stock in the merger. See “The Merger — PNC’s Reasons for the Merger; Recommendation of the PNC Board of Directors” on page 48 for a more detailed discussion of the PNC board of directors’ recommendation.
 
Attending the Meeting
 
All holders of PNC common stock and Voting Preferred Stock, including shareholders of record and shareholders who hold their shares through banks, brokers, nominees or any other holder of record, are invited to attend the special meeting. Please detach the attached admission ticket from the proxy card and bring it to the special meeting. The ticket will admit you and one other person. If you hold your PNC shares in an account at a brokerage firm or bank, your name will not appear on our shareholder list. Please bring an account statement or a letter from your broker showing your PNC shareholdings. Please show this documentation at the meeting registration desk to attend the meeting. Everyone who attends the special meeting must abide by the rules for the conduct of the meeting. These rules will be printed on the meeting agenda.
 


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THE NATIONAL CITY SPECIAL MEETING
 
This section contains information about the special meeting of National City stockholders that has been called to consider and adopt the merger agreement.
 
Together with this document, National City is also sending you a notice of the special meeting and a form of proxy that is solicited by the National City board of directors. The special meeting will be held on December 23, 2008, at 10:00 a.m., Eastern time, at National City’s offices, 1900 East Ninth Street, Cleveland, Ohio 44114.
 
Matters to Be Considered
 
The purpose of the special meeting is to vote on:
 
  •  a proposal for adoption of the merger agreement; and
 
  •  a proposal to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are not sufficient votes at the time of the special meeting to approve the foregoing proposal.
 
Proxies
 
Each copy of this document mailed to holders of National City common stock is accompanied by a form of proxy with instructions for voting. If you hold stock in your name as a stockholder of record, you may complete, sign, date and mail your proxy card in the enclosed postage paid return envelope as soon as possible, vote by telephone by calling the toll-free number listed on the National City proxy card, vote by accessing the internet site listed on the National City proxy card or vote in person at the National City special meeting. If you hold your stock in “street name” through a bank or broker, you must direct your bank or broker to vote in accordance with the instruction form included with these materials and forwarded to you by your bank or broker. This voting instruction form provides instructions on voting by mail, telephone or the internet. To vote using the proxy card you must sign, date and return it in the enclosed postage-paid envelope. Instructions on how to vote by telephone or by the internet are included with your proxy card.
 
If you are a holder of record, to change your vote, you must:
 
  •  mail a new signed proxy card with a later date to National City Bank, P.O. Box 535600, Pittsburgh, Pennsylvania 15253-9931, which must be received by 6:00 a.m. Eastern time on December 23, 2008;
 
  •  Vote by calling the toll-free number listed on the National City proxy card or accessing the internet site listed on the National City proxy card by 6:00 a.m. Eastern time on December 23, 2008; or
 
  •  attend the special meeting and vote in person.
 
If you wish to revoke rather than change your vote, you must send written, signed revocation to National City Corporation, 1900 East Ninth Street, Cleveland, Ohio 44114, Attn: Secretary, which must be received by 6:00 a.m. Eastern time on December 23, 2008. You must include your control number.
 
If you hold shares in street name, and wish to change or revoke your vote, please refer to the information on the voting instruction form included with these materials and forwarded to you by your bank, broker or other holder of record to see your voting options.
 
All shares represented by valid proxies that we receive through this solicitation, and that are not revoked, will be voted in accordance with your instructions on the proxy card. If you make no specification on your proxy card as to how you want your shares voted before signing and returning it, your proxy will be voted “FOR” adoption of the merger agreement and “FOR” approval of the proposal to adjourn the special meeting, if necessary, to solicit additional proxies in the event that there are not sufficient votes at the time of the special meeting to adopt the merger agreement.
 
According to the National City restated bylaws, business to be conducted at a special meeting of stockholders may only be brought before the meeting by means of National City’s notice of the meeting or


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otherwise properly brought before the meeting by the presiding officer or by or at the direction of a majority of the board of directors. No matters other than the matters described in this document are anticipated to be presented for action at the special meeting or at any adjournment or postponement of the special meeting.
 
National City stockholders with shares represented by stock certificates should not send National City stock certificates with their proxy cards. After the merger is completed, holders of National City common stock certificates will be mailed a transmittal form with instructions on how to exchange their National City stock certificates for the merger consideration. Shares of National City common stock held in book-entry form will automatically be exchanged for the merger consideration.
 
Solicitation of Proxies
 
National City will bear the entire cost of soliciting proxies from you. In addition to solicitation of proxies by mail, National City will request that banks, brokers, and other record holders send proxies and proxy material to the beneficial owners of National City common stock and secure their voting instructions. National City will reimburse the record holders for their reasonable expenses in taking those actions. National City has also made arrangements with Georgeson Inc. to assist it in soliciting proxies and has agreed to pay them approximately $20,000 plus reasonable expenses for these services. If necessary, National City may use several of its regular employees, who will not be specially compensated, to solicit proxies from National City stockholders, either personally or by telephone, facsimile, letter or other electronic means.
 
Record Date
 
The close of business on November 14, 2008 has been fixed as the record date for determining the National City stockholders entitled to receive notice of and to vote at the special meeting. At that time, 2,043,425,441 shares of National City common stock were outstanding, held by approximately 59,596 holders of record.
 
Voting Rights and Vote Required
 
The presence, in person or by proxy, of the holders of a majority of the outstanding shares of National City common stock entitled to vote is necessary to constitute a quorum at the special meeting. Abstentions will be counted for the purpose of determining whether a quorum is present.
 
Adoption of the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of National City common stock entitled to vote at the special meeting. You are entitled to one vote for each share of National City common stock you held as of the record date. Holders of shares of National City preferred stock and holders of depositary shares representing National City preferred stock are not entitled to vote on the adoption of the merger agreement or otherwise at the special meeting.
 
Because the affirmative vote of the holders of a majority of the outstanding shares of National City common stock entitled to vote at the special meeting is needed for us to proceed with the merger, the failure to vote by proxy or in person will have the same effect as a vote against the merger. Abstentions also will have the same effect as a vote against the merger. Accordingly, the National City board of directors urges National City stockholders to promptly vote by completing, dating, and signing the accompanying proxy card and to return it promptly in the enclosed postage-paid envelope, or, if you hold your stock in “street name” through a bank or broker, by following the voting instructions of your bank or broker. If you hold stock in your name as a stockholder of record, you may complete, sign, date and mail your proxy card in the enclosed postage paid return envelope as soon as possible, vote by calling the toll-free number listed on the National City proxy card, vote by accessing the internet site listed on the National City proxy card or vote in person at the National City special meeting. If you hold your stock in “street name” through a bank or broker, you must direct your bank or broker to vote in accordance with the instruction form included with these materials and forwarded to you by your bank or broker. This voting instruction form provides instructions on voting by mail, telephone or on the internet.


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Approval of the proposal to adjourn or postpone the meeting, if necessary or appropriate, for the purpose of soliciting additional proxies requires the affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the special meeting. Because approval of this proposal requires the affirmative vote of a majority of shares present or represented, abstentions will have the same effect as a vote against this proposal. If you are a registered holder, failure to vote by proxy or in person will have the same effect as a vote against this proposal. If you hold in street name, your broker may vote your shares in its discretion on this proposal.
 
Holders of National City common stock will vote at the meeting by ballot. Votes cast at the meeting, in person or by proxy, will be tallied by National City’s tabulator and certified by its inspector of election.
 
As of the record date, directors and executive officers of National City had the right to vote 3,802,900 shares of National City common stock, or approximately 0.2% of the outstanding National City common stock at that date. We currently expect that each of these individuals will vote their shares of National City common stock in favor of the proposals to be presented at the special meeting.
 
Affiliates of Corsair entered into a voting agreement with PNC in which Corsair agreed to vote or cause to be voted all shares of National City common stock it owns and has the ability to direct the vote in favor of the merger and against any competing acquisition proposal.
 
Participants in the National City Savings and Investment Plan
 
Shares of National City common stock held in the National City Corporation Stock Fund under the National City Savings and Investment Plan will be voted solely by the named fiduciary and investment manager of the National City Corporation Stock Fund pursuant to the terms of the Savings and Investment Plan and the instructions received by the named fiduciary and investment manager from plan participants. The named fiduciary and investment manager of the National City Corporation Stock Fund will not disclose the confidential voting directions of any individual participant or beneficiary to National City. If a portion of your Savings and Investment Plan account is invested in the National City Corporation Stock Fund, you will be receiving a separate letter from the named fiduciary and investment manager explaining the voting process with respect to your proportionate interest in the National City Corporation Stock Fund and you will be provided with separate voting instructions.
 
Recommendation of the National City Board of Directors
 
The National City board of directors has approved the merger agreement and the transactions it contemplates, including the merger. The National City board of directors determined that the merger, merger agreement and the transactions contemplated by the merger agreement are advisable and in the best interests of National City and its stockholders and recommends that you vote “FOR” adoption of the merger agreement. See “The Merger — National City’s Reasons for the Merger; Recommendation of the National City Board of Directors” on page 46 for a more detailed discussion of the National City board of directors’ recommendation.
 
Attending the Meeting
 
All holders of National City common stock, including holders of record and stockholders who hold their stock through banks, brokers, nominees or any other holder of record, are invited to attend the special meeting. Only stockholders of record on the record date can vote in person at the special meeting. If you are not a stockholder of record, you must obtain a proxy executed in your favor, from the record holder of your shares, such as a broker, bank or other nominee, to be able to vote in person at the special meeting. If you plan to attend the special meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership and you must bring a form of personal photo identification with you in order to be admitted. National City reserves the right to refuse admittance to anyone without proper proof of share ownership and without proper photo identification.
 


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INFORMATION ABOUT THE COMPANIES
 
The PNC Financial Services Group, Inc.
 
The PNC Financial Services Group, Inc. is a Pennsylvania corporation, a bank holding company and a financial holding company under U.S. federal law. PNC is one of the largest diversified financial services companies in the United States based on assets, with businesses engaged in retail banking, corporate and institutional banking, asset management and global investment servicing. PNC provides many of its products and services nationally and others in PNC’s primary geographic markets located in Pennsylvania; New Jersey; Washington, DC; Maryland; Virginia; Ohio; Kentucky; and Delaware. PNC also provides certain investment servicing internationally. PNC stock is listed on the NYSE under the symbol “PNC.” As of September 30, 2008, PNC had total consolidated assets of approximately $145.6 billion, total consolidated deposits of approximately $85.0 billion and total consolidated shareholders’ equity of approximately $14.2 billion. The principal executive offices of PNC are located at One PNC Plaza, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707, and its telephone number is (412) 762-2000.
 
Additional information about PNC and its subsidiaries is included in documents incorporated by reference in this document. See “Where You Can Find More Information” on page 110.
 
National City Corporation
 
National City is a financial holding company headquartered in Cleveland, Ohio. National City operates through an extensive network in Ohio, Florida, Illinois, Indiana, Kentucky, Michigan, Missouri, Pennsylvania and Wisconsin and also conducts selected consumer lending businesses and other financial services on a nationwide basis. National City’s primary businesses include commercial and retail banking, mortgage financing and servicing, consumer finance and asset management. Operations are primarily conducted through more than 1,400 branch banking offices located within a nine-state footprint and over 350 retail mortgage offices located throughout the United States. As of September 30, 2008, National City’s consolidated total assets were approximately $143.7 billion and its total stockholders’ equity was approximately $15.8 billion. Based on asset size, National City is one of the largest commercial banking organizations in the United States. The principal executive offices of National City are located at 1900 East Ninth Street, Cleveland, Ohio 44114, and its telephone number is 216-222-2000.
 
Additional information about National City and its subsidiaries is included in documents incorporated by reference in this document. See “Where You Can Find More Information” on page 110.


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RECENT DEVELOPMENTS
 
TARP Capital Purchase Program
 
The Emergency Economic Stabilization Act of 2008, or EESA, authorizes the Treasury Department to use appropriated funds to restore liquidity and stability to the U.S. financial system. On October 24, 2008, PNC announced that it plans to participate in the Treasury Department’s TARP Capital Purchase Program. PNC has received approval from the Treasury Department to issue to the Treasury Department $7.7 billion of preferred stock ($4.2 billion of which is to be issued upon completion of the merger) together with a related warrant to purchase approximately $1.1 billion of PNC common stock (calculated assuming the issuance of the $4.2 billion of preferred stock associated with the merger) subject to the standard terms and conditions of the TARP Capital Purchase Program. While as of the date of this document PNC has not entered into a definitive agreement with the Treasury Department, the terms of the transaction can be derived from the standard terms of the TARP Capital Purchase Program. The number of shares of PNC common stock issuable upon exercise of the warrant will be calculated based on a price per share equal to the average market price of PNC common stock for the 20 trading days preceding approval of the issuance on October 23, 2008 (which will also be the exercise price of the warrant). PNC plans to issue the preferred stock and warrants no later than the closing date of the merger. The preferred stock to be issued to the Treasury Department pursuant to the program will pay cumulative dividends at a rate of 5% per year for the first five years and thereafter at a rate of 9% per year. PNC will not be permitted to redeem the preferred stock during the first three years following the issuance except with the proceeds from a “qualified equity offering.” Three years after the issuance, PNC may, at its option, redeem the preferred stock at par value plus accrued and unpaid dividends. The preferred stock will have limited voting rights. During the first three years following the issuance date, unless PNC has redeemed all of the preferred stock or the Treasury has transferred all of the preferred stock to a party not affiliated with the Treasury Department, the consent of the Treasury will be required for PNC to increase its common stock dividend or repurchase shares of PNC common stock or other capital stock or equity securities, other than repurchases in connection with benefit plans consistent with past practice and certain other circumstances as may be specified in the securities purchase agreement relating to the issuance. One consequence of participating in the TARP Capital Purchase Program is that PNC will be limited in the tax deductibility of compensation it pays to certain executive management. The number of shares of PNC common stock issuable upon exercise of the warrant will be reduced by 50% if PNC receives $7.7 billion of proceeds from qualified equity offerings on or prior to December 31, 2009. PNC’s issuance of common stock in the merger will not constitute a qualified equity offering. The warrant will provide for the adjustment of the exercise price and the number of shares of PNC common stock issuable upon exercise pursuant to customary anti-dilution provisions, such as upon stock splits or distributions of securities or other assets to holders of PNC common stock, and upon certain issuances of PNC common stock at or below a specified price relative to the initial exercise price and will expire ten years from the issuance date. Both the preferred stock and the warrant will be accounted for as components of Tier 1 capital. The TARP Capital Purchase Program investment will be dilutive to PNC common stockholders because of the dilutive impact of the warrants in the weighted average dilutive share calculation and because the dividend rate and accretion are greater than the earnings rate assumed on the cash proceeds. The extent of the dilution will be dependent on the combined company earnings, the use of cash proceeds and the ongoing PNC average share price used in the treasury stock method to determine the number of dilutive shares associated with the warrants.


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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
 
The following unaudited pro forma condensed combined financial information combines the historical consolidated financial position and results of operations of PNC and its subsidiaries and of National City and its subsidiaries, as an acquisition by PNC of National City using the purchase method of accounting and giving effect to the related pro forma adjustments described in the accompanying notes. Under the purchase method of accounting, the assets and liabilities of National City will be recorded by PNC at their respective fair values as of the date the merger is completed. The unaudited condensed combined financial data also reflects the receipt of $7.7 billion from the planned sale of preferred securities and issuance of warrants to purchase 17.2 million shares of PNC common stock under the TARP Capital Purchase Program. The unaudited pro forma condensed combined balance sheet gives effect to the merger and the issuance of the preferred securities and warrants to purchase shares of PNC common stock to the Treasury Department as if the transactions had occurred on September 30, 2008. The unaudited pro forma condensed combined income statements for the nine months ended September 30, 2008 and the year ended December 31, 2007, give effect to the merger and the issuance of the preferred securities and warrants to purchase shares of PNC common stock to the Treasury Department as if the transactions had become effective at January 1, 2007.
 
The merger agreement was announced on October 24, 2008, and provides for each outstanding share of National City common stock other than shares beneficially owned by National City and PNC to be converted into the right to receive 0.0392 of a share of PNC common stock. Shares of National City preferred stock will be converted on a one-for-one basis into PNC preferred stock having the same terms (to the fullest extent possible) as the corresponding National City preferred stock. The unaudited pro forma condensed combined financial information has been derived from and should be read in conjunction with the historical consolidated combined financial statements and the related notes of both PNC and National City, which are incorporated in the document by reference. See “Where You Can Find More Information” on page 110.
 
The unaudited pro forma condensed combined financial statements included herein are presented for informational purposes only and do not necessarily reflect the financial results of the combined companies had the companies actually been combined at the beginning of each period presented. The adjustments included in these unaudited pro forma condensed financial statements are preliminary and may be revised. This information also does not reflect the benefits of the expected cost savings and expense efficiencies, opportunities to earn additional revenue, potential impacts of current market conditions on revenues, or asset dispositions, among other factors, and includes various preliminary estimates and may not necessarily be indicative of the financial position or results of operations that would have occurred if the merger had been consummated on the date or at the beginning of the period indicated or which may be attained in the future. The unaudited pro forma condensed combined financial statements and accompanying notes should be read in conjunction with and are qualified in their entirety by reference to the historical consolidated financial statements and related notes thereto of PNC and its subsidiaries and of National City and its subsidiaries, such information and notes thereto are incorporated by reference herein.


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THE PNC FINANCIAL SERVICES GROUP, INC.
 
Pro Forma Condensed Combined Balance Sheet
At September 30, 2008
 
                                                         
    PNC as
    NCC as
    Pro Forma
        Pro Forma
              Pro Forma
 
In millions
  Reported(a)     Reported(b)     Adjustments     Ref   Combined     TARP     Ref   with TARP  
Unaudited  
 
Assets
Cash and due from banks
  $ 3,060     $ 4,241                 $ 7,301                 $ 7,301  
Federal funds sold and resale agreements
    1,826       2,156                   3,982                   3,982  
Trading securities and other short-term investments
    2,866       1,736                   4,602                   4,602  
Loans held for sale
    1,922       3,246     $ (136 )   A     5,032                   5,032  
Securities available for sale
    31,031       8,826                   39,857                   39,857  
Loans, net of unearned income
    75,184       110,462       (13,379 )   A     172,267                   172,267  
Allowance for loan and lease losses
    (1,053 )     (3,752 )     2,155     B     (2,650 )                 (2,650 )
                                                         
Net loans
    74,131       106,710       (11,224 )         169,617                   169,617  
Goodwill
    8,829       3,000       (3,000 )   C     8,829                   8,829  
Other intangible assets
    1,092       2,593       1,537     D     5,222                   5,222  
Equity investments
    6,735       1,689                   8,424                   8,424  
Other
    14,118       9,494       2,706     E     26,318                   26,318  
                                                         
Total assets
  $ 145,610     $ 143,691     $ (10,117 )       $ 279,184                 $ 279,184  
                                                         
 
Liabilities
Deposits
                                                       
Noninterest-bearing
  $ 19,255     $ 15,251                 $ 34,506                 $ 34,506  
Interest-bearing
    65,729       80,331     $ 543     F     146,603                   146,603  
                                                         
Total deposits
    84,984       95,582       543           181,109                   181,109  
Borrowed funds
                                                       
Federal funds purchased and repurchase agreements
    7,448       3,248                   10,696     $ (7,700 )   J     2,996  
Other borrowings
    24,691       25,526       (1,197 )   G     49,020                   49,020  
                                                         
Total borrowed funds
    32,139       28,774       (1,197 )         59,716       (7,700 )         52,016  
Accrued expenses and other
    12,199       3,342       746     H     16,287                   16,287  
                                                         
Total liabilities
    129,322       127,698       92           257,112       (7,700 )         249,412  
                                                         
Minority and noncontrolling interests in consolidated entities
    2,070       155                   2,225                   2,225  
Shareholders’ Equity
                                                       
Total shareholders’ equity
    14,218       15,838       (10,209 )   I     19,847       7,700     J     27,547  
                                                         
Total liabilities, minority and noncontrolling interests, and shareholders’ equity
  $ 145,610     $ 143,691     $ (10,117 )       $ 279,184                 $ 279,184  
                                                         
 
 
(a) Amounts derived from PNC’s unaudited interim consolidated financial statements, as of, and for the nine months ended, September 30, 2008.
 
(b) Amounts derived from National City’s unaudited interim consolidated financial statements, as of, and for the nine months ended, September 30, 2008.
 
See accompanying Notes To Consolidated Financial Statements.


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THE PNC FINANCIAL SERVICES GROUP, INC.
 
Pro Forma Condensed Combined Income Statement
Nine months ended September 30, 2008
 
                                                         
    PNC as
    NCC as
    Pro Forma
        Pro Forma
              Pro Forma
 
In millions, except per share data
  Reported(a)     Reported(b)     Adjustments     Ref   Combined     TARP     Ref   with TARP  
Unaudited  
 
Interest Income
                                                       
Loans
  $ 3,145     $ 5,235     $ 389     K   $ 8,769                 $ 8,769  
Securities available for sale(c)
    1,270       363                   1,633                   1,633  
Other(d)
    355       247                   602                   602  
                                                         
Total interest income
    4,770       5,845       389           11,004       0           11,004  
                                                         
Interest Expense
                                                       
Deposits
    1,152       1,823       (123 )   L     2,852                   2,852  
Borrowed funds
    787       934       193     M     1,914       (124 )   R     1,790  
                                                         
Total interest expense
    1,939       2,757       70           4,766       (124 )         4,642  
                                                         
Net interest income
    2,831       3,088       319           6,238       124           6,362  
                                                         
Noninterest Income
                                                       
Fund servicing
    695                           695                   695  
Asset management(e)
    589       232                   821                   821  
Consumer services(f)
    472       417                   889                   889  
Corporate services(g)
    547       (106 )     (29 )   N     412                   412  
Service charges on deposits
    271       763                   1,034                   1,034  
Net securities gains (losses)
    (34 )     427                   393                   393  
Other(h)
    143       222                   365                   365  
                                                         
Total noninterest income
    2,683       1,955       (29 )         4,609       0           4,609  
                                                         
Total revenue
    5,514       5,043       290           10,847       124           10,971  
Provision for credit losses
    527       4,169                   4.696                   4,696  
Noninterest Expense
                                                       
Personnel
    1,660       1,841                   3,501                   3,501  
Occupancy
    274       255       (7 )   O     522                   522  
Equipment(i)
    267       306       (7 )   O     566                   566  
Marketing
    94       109                   203                   203  
Other(j)
    1,004       3,457       124     P     4,585                   4,585  
                                                         
Total noninterest expense
    3,299       5,968       110           9,377       0           9,377  
                                                         
Income (loss) before income taxes
    1,688       (5,094 )     180           (3,226 )     124           (3,102 )
Income tax expense (benefit)
    558       (1,093 )     67     Q     (468 )     46     Q     (422 )
                                                         
Net income (loss)
  $ 1,130     $ (4,001 )   $ 113         $ (2,758 )   $ 78         $ (2,680 )
                                                         
Earnings (Loss) Per Common Share
                                                       
Basic
  $ 3.30     $ (11.32 )               $ (6.33 )               $ (6.99 )
Diluted
  $ 3.24     $ (11.32 )               $ (6.35 )               $ (7.00 )
                                                         
Average Common Shares Outstanding
                                                       
Basic
    343       745       (652 )         436                   436  
Diluted
    346       745       (655 )         436                   436  
                                                         
 
(a) Amounts derived from PNC’s unaudited interim consolidated financial statements as of, and for the nine months ended, September 30, 2008
(b) Amounts from National City’s unaudited interim consolidated financial statements, as of, and for the nine months ended, September 30, 2008.
(c) Includes the following National City Interest Income from Securities line items: Taxable and Exempt from Federal income taxes.
(d) Includes National City’s Interest Income from Trading assets and Other.
(e) Includes National City’s Trust and Investment Management fees line item.
(f) Includes National City’s Insurance revenue, Card-related fees, Brokerage revenue, and Other service fees line items.
(g) Includes National City’s Loan servicing revenue line item.
(h) Includes National City’s Leasing revenue, Loan sale revenue, and Other line items.
(i) Includes National City’s Equipment line item and $70 million of leasing expense.
(j) Includes National City’s Impairment fraud and other losses, Foreclosure costs, Third party services, Supplies and postage and Other line items, less $70 million of leasing expense.
 
See accompanying Notes to Pro Forma Condensed Financial Statements.


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THE PNC FINANCIAL SERVICES GROUP, INC.
 
Pro Forma Condensed Combined Income Statement
Year Ended December 31, 2007
 
                                                                 
    PNC as
    NCC as
    Pro Forma
          Pro Forma
                Pro Forma
 
In millions, except per share data
  Reported(a)     Reported(b)     Adjustments     Ref     Combined     TARP     Ref     with TARP  
Unaudited  
 
Interest Income
                                                               
Loans
  $ 4,232     $ 8,570     $ 519       K     $ 13,321                     $ 13,321  
Securities available for sale(c)
    1,429       419                       1,848                       1,848  
Other(d)
    505       196                       701                       701  
                                                                 
Total interest income
    6,166       9,185       519               15,870       0               15,870  
                                                                 
Interest Expense
                                                               
Deposits
    2,053       2,991       (181 )     L       4,863                       4,863  
Borrowed funds
    1,198       1,798       338       M       3,334       (366 )     R       2,968  
                                                                 
Total interest expense
    3,251       4,789       157               8,197       (366 )             7,831  
                                                                 
Net interest income
    2,915       4,396       362               7,673       366               8,039  
                                                                 
Noninterest Income
                                                               
Fund servicing
    835                               835                       835  
Asset management(e)
    784       318                       1,102                       1,102  
Consumer services(f)
    692       590                       1,282                       1,282  
Corporate services(g)
    713       402       (39 )     N       1,076                       1,076  
Service charges on deposits
    348       905                       1,253                       1,253  
Net securities gains (losses)
    (5 )     22                       17                       17  
Other(h)
    423       369                       792                       792  
                                                                 
Total noninterest income
    3,790       2,606       (39 )             6,357       0               6,357  
                                                                 
Total revenue
    6,705       7,002       323               14,030       366               14,396  
Provision for credit losses
    315       1,326                       1,641                       1,641  
Noninterest Expense
                                                               
Personnel
    2,140       2,580                       4,720                       4,720  
Occupancy
    350       315       (10 )     O       655                       655  
Equipment(i)
    311       455       (9 )     O       757                       757  
Marketing
    115       157                       272                       272  
Other(j)
    1,380       1,798       194       P       3,372                       3,372  
                                                                 
Total noninterest expense
    4,296       5,305       175               9,776       0               9,776  
                                                                 
Income before income taxes
    2,094       371       148               2,613       366               2,979  
Income tax expense
    627       57       55       Q       739       136       Q       875  
                                                                 
Net income
  $ 1,467     $ 314     $ 93             $ 1,874     $ 230             $ 2,104  
                                                                 
Earnings Per Common Share
                                                               
Basic
  $ 4.43     $ .51                     $ 4.42                     $ 3.84  
Diluted
  $ 4.35     $ .51                     $ 4.36                     $ 3.77  
                                                                 
Average Common Shares Outstanding
                                                               
Basic
    331       606       (513 )             424                       424  
Diluted
    335       612       (519 )             428       1               429  
                                                                 
 
(a) Amounts derived from PNC’s audited consolidated financial statements as of, and for the year ended, December 31, 2007.
(b) Amounts derived from National City’s audited consolidated financial statements as of, and for the year ended, December 31, 2007.
(c) Includes National City’s Interest Income from Securities line items: Taxable, Exempt from Federal income taxes, and Dividends.
(d) Includes National City’s Interest Income from Federal funds sold and security resale agreements and Other investments.
(e) Includes National City’s Trust and Investment Management fee line item.
(f) Includes National City’s Insurance revenue, Card-related fees, Brokerage revenue, and Other service fees line items.
 
(g) Includes National City’s Loan servicing revenue line item.
 
(h) Includes National City’s Loan sale (loss) revenue, Leasing revenue, Gain on divestitures, and Other line items.
(i) Includes National City’s Equipment and Leasing expense line items.
(j) Includes National City’s Impairment fraud and other losses, Third party services and Other line items.
 
See accompanying Notes to Pro Forma Condensed Financial Statements.


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Note 1 — Basis of Presentation:
 
The unaudited pro forma condensed combined financial information has been prepared using the purchase method of accounting, giving effect to the merger involving PNC and National City and the issuance of the preferred securities and warrants to purchase shares of PNC common stock to the Treasury Department as if the transactions had occurred as of the beginning of the earliest period presented. The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and is not necessarily indicative of the results of operations or financial position had the merger and the issuance of the preferred securities and warrants to purchase shares of PNC common stock to the Treasury Department been consummated at January 1, 2007, nor is it necessarily indicative of the results of operations in future periods or the future financial position of the combined entities. Certain historical financial information has been reclassified to conform to the current presentation. The merger, which is currently expected to be completed on December 31, 2008, provides for the issuance of 0.0392 of a share of PNC common stock for each share of outstanding National City common stock, the issuance of an aggregate of approximately 328 million additional shares of National City common stock to certain investors immediately prior to the completion of the merger under the terms of their investment agreements (assuming the trading price per share of National City common stock on the trading day immediately prior to the completion of the merger is equal to or greater than $2.07, the closing price of National City common stock on October 24, 2008) and a payment of $384 million, payable in cash to certain National City warrant holders based on the terms, including the downside protection provisions, of the warrants (as described in more detail under “The Merger Agreement —  Treatment of National City Preferred Stock and Warrants” beginning on page 77), and is subject to shareholder approval. Each outstanding share of National City preferred stock will be converted into a share of a corresponding series of PNC preferred stock having terms substantially identical to that series of National City preferred stock. Each National City option will be converted into PNC options with the same terms and conditions, adjusted to reflect the exchange ratio.
 
The merger will be accounted for as an acquisition by PNC of National City using the purchase method of accounting. Accordingly, the assets and liabilities of National City will be recorded at their respective fair values on the date the merger is completed. The share value of PNC common stock issued to effect the merger has been estimated at $59.09 per share. This amount was determined by averaging the price of shares of PNC common stock for a period beginning two trading days before the announcement of the merger and ending two trading days after the merger agreement (which includes the day of announcement).
 
The pro forma financial information includes estimated adjustments to record assets and liabilities of National City at their respective fair values and represents management’s estimates based on available information. The pro forma adjustments included herein are subject to change depending on changes in interest rates and the components of assets and liabilities and as additional information becomes available and additional analyses are performed. The final allocation of the purchase price will be determined after the merger is completed and after completion of thorough analyses to determine the fair value of National City’s tangible and identifiable intangible assets and liabilities as of the date the merger is completed. Increases or decreases in the estimated fair values of the net assets, commitments, executory contracts and other items of National City as compared with the information shown in the unaudited pro forma condensed combined financial information may change the amount of the purchase price allocated to goodwill and other assets and liabilities and may impact the statement of income due to adjustments in yield and/or amortization of the adjusted assets or liabilities. Any changes to National City’s shareholders’ equity including results of operations from October 1, 2008 through the date the merger is completed will also change the purchase price allocation, which may include the recording of goodwill. The final adjustments may be materially different from the unaudited pro forma adjustments presented herein.
 
As described in “Recent Developments,” PNC has received approval from the Treasury Department to issue $7.7 billion of preferred securities and warrants to purchase 17.2 million shares of PNC common stock no later than the closing date, subject to standard closing requirements. The pro forma financial information gives effect to the planned issuance of the preferred securities and warrants to the Treasury Department. The estimated proceeds from the Treasury Department are allocated based on the relative fair value of the warrants as compared to the fair value of the preferred securities. The fair value of the warrants is determined using a


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Black Scholes model. The model includes assumptions regarding PNC’s common stock price, dividend yield, stock price volatility, as well as assumptions regarding the risk-free interest rate. The lower the value of the warrants, the less negative impact on net income and earnings per share available to common shareholders. The fair value of the preferred securities is determined based on assumptions regarding the discount rate (market rate) on the preferred securities (currently estimated at 13%). The lower the discount rate, the less negative impact on net income and earnings per share available to common shareholders. If the merger with National City is not completed, PNC would issue $3.5 billion of preferred securities and warrants to purchase 7.8 million shares of PNC common stock assuming a purchase price of $67.33 per share (trailing 20-day PNC average closing stock price as of October 22, 2008).
 
The unaudited pro forma condensed combined financial statements assume that the merger will close in the fourth quarter of 2008. However, if the merger is consummated on or after January 1, 2009, the merger will be accounted for under Statement of Financial Accounting Standards (revised 2007), Business Combinations (SFAS 141R). SFAS 141R would require that the purchase price be determined based on PNC’s closing stock price on the date the merger is consummated, that the loan portfolio consisting of both impaired loans, as defined, and nonimpaired loans, be recorded at fair value, with no carry-over of the allowance for credit losses, and that contingent assets and liabilities be recorded at fair value. Further SFAS 141R would require that merger related exit and termination charges be recorded to expense as incurred.
 
Note 2 — Accounting Policies and Financial Statement Classifications:
 
The accounting policies of both PNC and National City are in the process of being reviewed in detail. Upon completion of such review, conforming adjustments or financial statement reclassifications may be determined.
 
Note 3 — Merger and Integration Costs:
 
In connection with the merger, the plan to integrate PNC and National City’s operations is still being developed. Over the next several months, the specific details of these plans will continue to be refined. PNC and National City are currently in the process of assessing the two companies’ personnel, benefit plans, premises, equipment, computer systems, supply chain methodologies and service contracts to determine where they may take advantage of redundancies or where it will be beneficial or necessary to convert to one system. Certain decisions arising from these assessments may involve involuntary termination of National City’s employees, vacating National City’s leased premises, changing information systems, canceling contracts between National City and certain service providers and selling or otherwise disposing of certain premises, furniture and equipment owned by National City. Additionally, as part of our formulation of the integration plan, certain actions regarding existing PNC information systems, premises, equipment, benefit plans, supply chain methodologies, supplier contracts and involuntary termination of personnel may be taken. PNC also expects to incur merger-related expenses including system conversion costs, employee retention agreements, communications to customers and others. To the extent there are costs associated with these actions, the costs will be recorded based on the nature and timing of these integration actions. We expect that such decisions will be completed after the merger.
 
The estimated pretax costs associated with employee displacement, lease terminations and disposal of premises, furniture and equipment has been estimated at $0.5 billion and will be recorded as purchase accounting adjustments, which have the effect of increasing the amount of the purchase price allocable to goodwill. The pro forma condensed combined balance sheet does not include the preliminary estimate of these costs since the costs are not indicative of what the historical results of PNC would have been had PNC and National City actually been combined during the periods presented. See Note 6 footnote H for additional purchase accounting adjustments included in the pro forma condensed combined balance sheet.
 
The estimated merger-related integration costs total $0.5 billion. These costs include an estimated $228 million for branch and operational conversions, $63 million for personnel changes, $48 million for technology and $44 million for facilities. We also expect to record a conforming credit allowance adjustment reflecting PNC’s estimate, subject to the outcome of additional loan portfolio reviews and changes in


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economic conditions, of additional incurred loss reserves required at closing on the National City performing loan portfolio. This adjustment will take into account differences between PNC’s and National City’s reserve process and underlying model estimates and assumptions. These differences include (a) PNC’s loss given default factors based on collateral types with defined recovery values compared with National City’s based on borrower enterprise values, (b) PNC’s lower (more adverse) risk ratings for National City borrowers in industries demonstrating more stress in the current economic environment, and (c) PNC’s lower (more adverse) risk ratings for common credit exposures. The credit adjustment and certain integration costs will be provided for or expensed as incurred in PNC’s fourth quarter 2008 results of operations. The remaining integration costs will be expensed in the combined company results of operations in 2009 and 2010. Accordingly, these charges are not included in the pro forma condensed combined income statement.
 
Note 4 — Estimated Annual Cost Savings:
 
PNC expects to realize approximately $1.2 billion in pretax cost savings following the merger, which PNC expects to be phased in over a 26-month period. These cost savings are not reflected in the pro forma financial information. Although management anticipates such synergies and cost savings to occur, there can be no assurance these synergies and cost savings will be achieved.
 
Note 5 — Capital Issuance:
 
PNC places great emphasis on maintaining a strong capital base and continues to exceed regulatory capital requirements for well capitalized financial institutions. Management is committed to maintaining a capital level sufficient to assure shareholders, customers and regulators that PNC is financially sound.
 
As described in “Recent Developments,” PNC has received approval from the Treasury Department to issue preferred securities and warrants to purchase PNC common stock no later than the closing date, subject to the signing of definitive documents and certain closing requirements, as part of the Treasury Department’s TARP Capital Purchase Program. The securities issued to the Treasury Department consist of preferred securities and common stock warrants, all of which are classified as Tier 1 capital for regulatory purposes. The Treasury Department would receive warrants to purchase a number of shares of common stock having an aggregate market price equal to 15% of the proceeds on the date of issuance with a strike price equal to the trailing twenty day trading average leading up to the closing date.
 
The unaudited condensed combined balance sheet data and selected capital ratios are presented as of September 30, 2008 and the unaudited condensed combined income statements are presented for the year ended December 31, 2007 and the nine months ended September 30, 2008, reflecting the receipt of $7.7 billion from the planned sale of preferred securities and the issuance of warrants to purchase 17.2 million shares of PNC common stock assuming a purchase price of $67.33 per share (trailing 20-day PNC average closing stock price as of October 22, 2008). However, there is no guarantee that the estimated proceeds will ultimately be received. The pro forma financial data may change materially based on the actual proceeds received under the TARP Capital Purchase Program, the timing and utilization of the proceeds as well as certain other factors including the strike price of the warrants, any subsequent changes in PNC’s common stock price and the discount rate used to determine the fair value of the preferred securities.
 
Following are the pro forma capital ratios based on the merger and the TARP issuance:
 
                         
    September 30, 2008  
    PNC
    Pro Forma
    Pro Forma
 
    As Reported(a)     Combined     with TARP(b)  
 
Pro Forma Combined Capital Ratios:
                       
Tier 1 risk based
    8.2 %     6.0 %     9.2 %
Total risk based
    11.9 %     10.0 %     13.2 %
Leverage
    7.2 %     5.3 %     8.1 %
Tangible common equity ratio
    3.6 %     3.5 %     3.7 %
Common shareholders’ equity to assets
    9.4 %     6.9 %     7.1 %


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(a) Amounts derived from PNC’s unaudited interim consolidated financial statements as of, and for the nine months ended, September 30, 2008.
 
(b) Pro forma impact assuming proceeds from the planned issuance of preferred securities ($7.7 billion).
 
Note 6 — Pro Forma Adjustments:
 
The following pro forma adjustments have been reflected in the unaudited pro forma condensed combined financial information. All adjustments are based on current assumptions and valuations, which are subject to change.
 
  Loans and loans held for sale were adjusted by $13.5 billion, to recognize (i) $10.3 billion of credit losses related to loans within the scope of AICPA Statement of Position 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer (SOP 03-3), based on managements’ current estimate of expected cash flows, (ii) to adjust all loans by $3.2 billion to reflect current fair value based on current market interest rates and spreads, and (iii) reverse $23 million of prior purchase accounting adjustments recorded by National City. The SOP 03-3 loans were determined by management with consideration given to the segregated liquidating loan portfolio identified by National City totaling $19.0 billion as well as the commercial residential construction portfolio totaling $3.5 billion. The total SOP 03-3 loan portfolio is estimated at $22.5 billion. The estimated amount of accretable yield for loans under SOP 03-3 is $1.1 billion. The difference between the SOP 03-3 adjustment and the National City allowance for loan losses subject to SOP 03-3 reflects management’s assumption that the National City allowance for loan losses was calculated under the incurred loss to date methodology and not under an approach that estimates expected cash flows over the life of the loan portfolio, as well as, does not include interest rate market adjustments. The adjustment to reflect current interest rates and spreads gave consideration, by loan type, to the incremental required spread necessary in the current interest rate environment, the existing yield and duration/weighted average life of the loan portfolio. These adjustments result in the loans being recorded at fair value.
 
  Allowance for loan losses was adjusted by $2.2 billion, to reflect the reduction of National City’s existing allowance for loan losses for loans subject to SOP 03-3. The adjustment was based on National City’s allowance for loan losses allocation for each portfolio provided in its Credit Risk Reports. This adjustment has not been reflected in the pro forma income statement.
 
  Goodwill was adjusted by $3.0 billion to reflect the write-off of National City’s historical goodwill. Note: National City has recorded $2.4 billion of goodwill impairment charges in 2008. These charges would not have been recorded had the companies combined at the earliest period presented.
 
  Other intangibles were adjusted by $1.5 billion to reflect the write-off of National City’s historical other intangibles of $0.3 billion and establish identifiable intangibles (net of a pro rata reduction to eliminate excess net asset value over purchase price paid) of $1.4 billion for estimated core deposit and other relationship intangibles, including asset management, and to reflect fair market value adjustments on MSRs of $0.4 billion. Core deposits are defined as noninterest and interest bearing demand accounts, savings and money market accounts. The core deposit intangible (“CDI”) is amortized over 9 years using an accelerated method, other relationship intangibles are amortized over 10 years, and the fair market value adjustments on MSRs are amortized over 10 years.
 
  Other assets were adjusted to record deferred tax assets of $3.8 billion reflecting a 37% combined federal and state tax rate on balance sheet adjustments (See Note 7), including, but not limited to, identifiable intangibles recorded and loan, deposit and borrowing fair value adjustments and fair value adjustments to other assets totaling $0.1 billion offset by a $0.2 billion pro rata reduction of PP&E to eliminate excess net asset value over purchase price paid and reclassification of $1.0 billion of PNC and existing National City net deferred tax liabilities.
 
  Interest bearing time deposits were adjusted by $0.5 billion to reflect current interest rates and spreads and to reverse $48 million of prior purchase accounting adjustments recorded by National City. The


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  adjustment to reflect current interest rates and spreads on time deposits was based on discounted cash flows of contractual maturities assuming the forward LIBOR curve on the valuation date adjusted for a servicing spread. These adjustments result in the deposits being recorded at fair value.
 
  Borrowings were adjusted by $1.6 billion to reflect current interest rates and spreads and to reverse a $6 million prior purchase accounting adjustment recorded by National City. The adjustment to reflect the current interest rates and spreads on borrowings was based on secondary market prices for public debt based on PNC’s credit rating and discounted cash flows of contractual maturities/rates paid for FHLB borrowings assuming the forward LIBOR curve on the valuation date adjusted to reflect current pricing on similar borrowings. These adjustments result in the borrowings being recorded at fair value. Borrowings also include the cash payment to certain warrant holders of $384 million (financing costs assumed at 4.0% pretax) based on the terms, including the downside protection provisions, of the warrants (as described in more detail under “The Merger Agreement — Treatment of National City Preferred Stock and Warrants” beginning on page 77).
 
  Other liabilities were adjusted by $0.7 billion, to record reserves and employee benefit adjustments of $1.5 billion, change in control payouts of $0.2 billion, $55 million of transaction costs and for the reclassification of $1.0 billion of PNC and existing National City net deferred tax liabilities to other assets.
 
  (1) Historical shareholders’ equity of National City has been eliminated, (2) consolidated shareholders’ equity has been adjusted to reflect PNC’s capitalization of National City reflecting total consideration (See note 7) and (3) issuance of preferred securities and related warrants to the Treasury Department (See Note 5 and J below).
 
                                                                 
In millions
  PNC
    NCC
    Pro Forma
          Pro Forma
                Pro Forma
 
Unaudited
  As Reported     As Reported     Adjustments     Ref     Combined     TARP     Ref     with TARP  
 
Shareholders’ Equity
                                                               
Preferred stock
                                          $ 7,175       (3 )   $ 7,175  
Common stock
  $ 1,787     $ 8,144     $ (8,144 )     (1 )   $ 2,251                       2,251  
                    $ 464       (2 )                                
Capital surplus
    3,377       11,848       (11,848 )     (1 )     8,542       525       (3 )     9,067  
                      5,013       (2 )                                
                      2       (2 )                                
                      150       (2 )                                
Retained earnings (deficit)
    11,959       (4,170 )     4,170       (1 )     11,959                       11,959  
Accumulated other comprehensive (loss) income
    (2,230 )     16       (16 )     (1 )     (2,230 )                     (2,230 )
Common stock held in treasury at cost
    (675 )                             (675 )                     (675 )
                                                                 
Total shareholders’ equity
  $ 14,218     $ 15,838     $ (10,209 )           $ 19,847       7,700             $ 27,547  
                                                                 
 
  Reflects the estimated proceeds from Treasury Department are used to reduce short-term borrowings (federal funds and repurchase agreements). The estimated proceeds are allocated based on the relative fair value of the warrants as compared to the fair value of the preferred securities. The fair value of the warrants is determined using a Black Scholes model. The model includes assumptions regarding PNC’s common stock price, dividend yield, stock price volatility, as well as assumptions regarding the risk-free interest rate. The lower the value of the warrants, the less negative impact on net income and earnings per share available to common shareholders. The fair value of the preferred securities is determined based on assumptions regarding the discount rate (market rate) on the preferred securities (currently estimated at 13%). The lower the discount rate, the less negative impact on net income and earnings per share available to common shareholders.
 
  Interest income from loans has been adjusted to estimate the accretion of the purchase accounting adjustment related to current interest rates over the estimated remaining life of the loan portfolio of approximately 6 years.


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  Interest expense from deposits has been adjusted to estimate the amortization of the purchase accounting adjustment for time deposits related to current interest rates over the estimated life of the related time deposit liabilities of approximately 3 years.
 
  Interest expense from borrowings has been adjusted by $0.3 billion and $0.2 billion to estimate the accretion of the purchase accounting adjustment related to current interest rates over the estimated remaining term of the borrowings of approximately 4 years for the year ended December 31, 2007 and nine months ended September 30, 2008, respectively, and for the financing costs on the cash payment to National City warrant holders of $15 million and $12 million for the year ended December 31, 2007 and nine months ended September 30, 2008, respectively, assuming a rate of 4.0% pretax. The 4.0% reflects PNC’s historical borrowing cost on subordinated debt.
 
  Other adjustments to amortize the MSR purchase accounting adjustments over the estimated remaining lives of 10 years.
 
  Reduce depreciation expense for pro rata reduction in PP&E to eliminate net asset value in excess of purchase price paid.
 
  Intangible amortization expense has been adjusted to estimate the amortization of incremental identifiable intangible assets recognized (CDI amortized over 9 years using an accelerated method and other intangibles amortized over 10 years on a straight-line basis) and eliminate the historical amortization of National City.
 
  Income tax expense reflects the net tax on adjustments at a tax rate of 37% (35% federal statutory rate plus 2% state tax rate). The primary reasons for the difference between our consolidated effective tax rate and the statutory federal income tax rate are non-deductible goodwill charges, tax exempt interest, earnings on life insurance policies, and tax credits.
 
  Reflects the proceeds are used to reduce short-term borrowings (federal funds purchased and repurchase agreements). The reduction in interest expense is based on the average historical borrowing rates for federal funds purchased and repurchase agreements of 4.76% for the full year ended December 31, 2007, and 2.14% for the nine months ended September 30, 2008. The actual impact to net interest income may be different as management anticipates that the cash proceeds may be used to fund future loan growth. However, the net impact to fully diluted common shareholders’ will be dependent on the ultimate use of the proceeds, including the interest rate environment and timing of the use of the proceeds.
 
Note 7 — Preliminary Purchase Accounting Allocation:
 
The pro forma financial information reflects the right of each National City stockholder to receive a number of shares of PNC common stock equal to the product of 0.0392 times the number of shares of National City stock held on the record date, and the right of certain warrant holders to receive an amount of cash equal to $384 million based on the terms, including the downside protection provisions, of the warrants (as described in more detail under “The Merger Agreement — Treatment of National City Preferred Stock and Warrants” beginning on page 77). Each outstanding share of National City preferred stock will be converted into a share of a corresponding series of PNC preferred stock having terms substantially identical to that series of National City preferred stock. The preferred stock has a liquidation value of $150 million. Each option outstanding will be exchanged for PNC options. Because the exercise price of the converted options was higher than the market price, a value of $2 million was assigned to the options based on a Black Scholes Option Pricing Model. The merger will be accounted for using the purchase method of accounting; accordingly PNC’s cost to acquire National City will be allocated to the assets (including identifiable intangible assets) and liabilities of National City at their respective estimated fair values as of the merger date. Accordingly, the preliminary allocation of the purchase price to the net assets acquired at September 30, 2008,


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is summarized below and includes a pro rata reduction of PP&E and identifiable intangibles created to eliminate excess net asset value over purchase price paid:
 
                 
    As of
 
    September 30, 2008  
    (In millions, except per share data)  
 
Pro Forma Purchase Price
               
National City common shares outstanding
    2,036          
Incremental shares to be issued
    328          
                 
Total common shares for conversion
    2,364          
Exchange ratio
    0.0392          
                 
PNC common stock issued
    92.69          
Average PNC share price over days surrounding announcement
  $ 59.09          
                 
Purchase price per National City common shares outstanding
          $ 5,477  
National City preferred stock converted to PNC preferred stock
            150  
Value of National City options converted to PNC options
            2  
Cash payment to certain warrant holders
            384  
                 
Total Pro Forma Purchase Price
          $ 6,013  
                 
Preliminary Allocation of the Pro Forma Purchase Price
               
National City stockholders’ equity
  $ 15,838          
National City goodwill and other intangibles
    3,297       12,541  
                 
Estimated Adjustments to Reflect Fair Value of Net Assets Acquired
               
Loans
    (11,360 )        
Other assets
    (136 )        
Other intangibles
    1,834          
Deposits
    (543 )        
Debt
    1,581          
Accrued expenses and other
    (1,738 )        
                 
Subtotal
    (10,362 )        
Tax Rate
    37%          
                 
Deferred taxes
    3,834       (6,528 )
                 
Fair value of net assets acquired
          $ 6,013  
                 
Preliminary Pro Forma Goodwill Resulting From the Merger
          $  
                 


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Note 8 — Pro Forma Earnings Per Share:
 
The pro forma combined earnings and diluted earnings per share for the respective periods presented are based on the combined weighted average number of shares of common and diluted potential common shares of PNC and National City. The number of weighted average common shares, including all diluted potential common shares, reflects the exchange of 0.0392 of a share of PNC common stock for each share of National City common stock. Amounts used in the determination of the pro forma basic and diluted earnings per share are as follows:
 
                 
    Nine Months
    Year
 
    Ended
    Ended
 
(In millions, except per share amounts)
  09/30/08     12/31/07  
 
Calculation of Basic Earnings (Loss) per Common Share
               
Pro forma net income (loss)
  $ (2,758 )   $ 1,874  
Less: Preferred stock dividends(a)
    1       2  
                 
Net income (loss) applicable to basic earnings per common share
  $ (2,759 )   $ 1,872  
Plus: After tax earnings on TARP proceeds
    78       230  
Less: Preferred stock dividends on TARP(b)
  $ 362     $ 477  
                 
Net income (loss) applicable to basic earnings per common share — with TARP
  $ (3,043 )   $ 1,625  
                 
Basic weighted average common shares outstanding (000s)
    436       424  
                 
Basic earnings (loss) per common share
  $ (6.33 )   $ 4.42  
Basic earnings (loss) per common share — with TARP
  $ (6.99 )   $ 3.84  
                 
Calculation of Diluted Earnings (Loss) per Common Share
               
Pro forma net income (loss)
  $ (2,758 )   $ 1,874  
Less: Preferred stock dividends(a)
    1       2  
Less: BlackRock adjustment for common stock equivalents
    8       8  
                 
Net income (loss) applicable to basic earnings per common share
  $ (2,767 )   $ 1,864  
Plus: After tax earnings on TARP proceeds
    78       230  
Less: Preferred stock dividends on TARP(b)
  $ 362     $ 477  
                 
Net income (loss) applicable to basic earnings per common share — with TARP
  $ (3,051 )   $ 1,617  
                 
Basic weighted average common shares outstanding
    436       424  
Conversion shares
    (d)     4  
                 
Diluted weighted average common shares outstanding
    436       428  
Diluted shares from warrants(c)
          1  
                 
Diluted weighted average common shares outstanding — with TARP
    436       429  
                 
Diluted earnings (loss) per common share
  $ (6.35 )   $ 4.36  
Diluted earnings (loss) per common share — with TARP
  $ (7.00 )   $ 3.77  
 
Note: National City options converted to PNC options were not included in the calculation of diluted earnings per common share because the exercise price was higher than the market price (antidilutive).
 
(a) 2008 preferred dividends on National City Preferred Stock Series G, which was converted to common shares in September 2008, were excluded from this calculation as it has been assumed that the conversion to common shares was completed at the beginning of the period presented.


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(b) Consists of dividends on preferred securities at a 5% annual rate as well as accretion of discount on preferred securities upon issuance. The discount is determined based on the value that is allocated to the warrants upon issuance. The discount is accreted back to par value on a constant effective yield method (approximately 7%) over a five-year term, which is the expected life of the preferred securities upon issuance. The estimated accretion is based on a number of assumptions, which are subject to change. These assumptions include the discount (market rate at issuance) rate on the preferred securities, and assumptions underlying the value of the warrants. The estimated proceeds are allocated based on the relative fair value of the warrants as compared to the fair value of the preferred securities. The fair value of the warrants is determined using a Black Scholes model. The model includes assumptions regarding PNC’s common stock price, dividend yield, stock price volatility, as well as assumptions regarding the risk-free interest rate. The lower the value of the warrants, the less negative impact on net income and earnings per share available to common shareholders. The fair value of the preferred securities is determined based on assumptions regarding the discount rate (market rate) on the preferred securities (currently estimated at 13%). The lower the discount rate, the less negative impact on net income and earnings per share available to common shareholders.
 
(c) The pro forma adjustment shows the increase in diluted shares outstanding assuming that the warrants had been issued on January 1, 2007 at a strike price of $67.33 per share (based on the trailing 20-day PNC average closing stock price as of October 22, 2008) and remained outstanding for the entire period presented. The treasury stock method was utilized to determine the dilution of warrants for the periods presented. The strike price was compared to PNC’s average stock price. The warrants issued to the Treasury Department were not included in the calculation of diluted earnings per common share in 2008 because the warrants are antidilutive due to the net loss in the period.
 
(d) PNC historical diluted earnings per share calculation included 3 million common stock equivalents which were dilutive in the historical results. However, as a result of the combined net loss for purposes of this pro forma, these same common stock equivalents would be antidilutive and have been excluded for purposes of calculating the pro forma loss per share.


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THE MERGER
 
Background of the Merger
 
Beginning in 2007 and continuing into 2008, the markets for home equity loans and other residential real estate related loans experienced severe disruption, resulting in National City being forced to retain billions of dollars of such loans that it had originated with intent to sell. At the same time, housing prices began to deteriorate rapidly, and National City’s non-performing loans and credit losses relating to residential real estate increased sharply. For the fourth quarter of 2007, National City reported a net loss of $333 million, compared to net income of $842 million for the fourth quarter of 2006. In January 2008, in order to address the disruption in the housing and credit markets, National City announced the following actions, which were intended to bolster its capital and liquidity: a 49% cut in its quarterly dividend, a $650 million raise of capital and a $1.4 billion sale of convertible notes. In February 2008, the National City board of directors and management began to consider additional alternative strategies designed to enable National City to address its asset quality issues and liquidity challenges posed by these conditions. In mid-March, coincident with the failure of Bear Stearns, a review for a ratings downgrade by Moody’s, significant declines in the market price of National City stock, and associated media stories, National City experienced meaningful, albeit short-lived, deposit outflows and reductions of trading lines extended by financial counterparties.
 
Accordingly, National City and its financial advisor began exploring both possible strategic and capital raise transaction options, including by contacting a number of parties (both other financial institutions and private equity firms) to assess their interest in a potential strategic transaction with National City. Following these initial contacts, several interested parties, including PNC, commenced preliminary discussions with National City. PNC and other potential parties conducted extensive due diligence investigations of, and engaged in discussions with, National City. Ultimately, no viable strategic transaction options emerged with PNC or any other potential merger partner, and National City’s board of directors and management determined to proceed with a $7 billion capital infusion led by Corsair.
 
In late April and early May 2008, National City completed the Corsair-led capital infusion through the issuance of a combination of common stock, convertible preferred stock and warrants. As a condition to entering into the capital infusion transactions, Corsair and two other investors negotiated downside protection, similar to that present in then-recent transactions, whereby Corsair and the other two investors would be compensated in the event that National City issued common stock or consummated a merger transaction in which the price paid for shares in the issuance, or the implied price in the merger, was less than $5.00 per share — the per share price paid by such investors in the capital infusion — subject to certain exceptions and limitations. Other investors participating in the capital infusion transactions declined the downside protection and associated warrants in order to be free from, among other things, associated transfer restrictions on their shares of National City stock. On September 15, National City’s stockholders approved, among other things, the authorization of the shares necessary to enable the conversion of the preferred stock issued in the capital raise transactions into common stock. Upon the issuance of the common stock and preferred stock in the capital raise transactions, National City’s regulatory capital ratios were among the highest of large U.S. banks and its liquidity issues stabilized.
 
Throughout the second and third quarters of 2008, economic conditions in general, and the housing market in particular, continued to deteriorate. As a consequence of this deterioration on the performance of National City’s liquidating portfolio of home equity, nonprime mortgage, and construction loans, which drove a significant increase in the provision for loan losses, as well as goodwill impairments and other charges, National City reported a net loss in the second quarter of 2008 of approximately $1.8 billion, compared with net income of approximately $347 million in the second quarter of 2007, and reported a net loss in the third quarter of 2008 of approximately $729 million, revised to $2.1 billion subsequent to and due to the announcement of the merger, compared with a net loss of approximately $19 million in the third quarter of 2007.
 
During the second and third quarters of 2008, National City’s management conducted a review of its operations and determined to take steps to reduce its expense base, sell certain non-core assets and reduce its


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liquidating asset portfolios. National City engaged the services of several consultants, including Morgan Stanley, to assist it with asset dispositions. In addition, National City reduced its quarterly dividend to one cent per share starting in April. From time to time during this period, despite its high regulatory capital ratios, National City continued to face periodic liquidity challenges, generally associated with adverse industry developments such as the failure of IndyMac Bank, as well as negative publicity about National City. Throughout this period, National City’s management was in regular communication with National City’s regulators. In June, in response to a publicized information leak, National City confirmed publicly that it had previously entered into Memoranda of Understanding with each of the Office of the Comptroller of the Currency, or OCC, and the Federal Reserve Bank of Cleveland, or Federal Reserve, that addressed issues of capital management, risk management, asset quality and liquidity management.
 
In September 2008, the occurrence in rapid succession of a series of unprecedented events in the financial services industry increased the uncertainty and stress in the financial markets in general and liquidity pressures on National City in particular. These events included the conservatorships of Fannie Mae and Freddie Mac announced on September 7, 2008, the bankruptcy of Lehman Brothers Holdings and the pending acquisition of Merrill Lynch & Co. by Bank of America announced on September 15, 2008, along with growing concern about the viability of American International Group, which culminated in a transaction in which the Federal government acquired most of American International Group’s equity. On the evening of September 21, Morgan Stanley and Goldman Sachs announced that they had been approved to convert from independent investment banks to bank holding companies subject to regulation by the Federal Reserve. On September 25, 2008, Washington Mutual Bank — the principal subsidiary of Washington Mutual, Inc. and the country’s largest thrift institution and sixth largest depository institution at the time — was seized by the Office of Thrift Supervision, placed into receivership by the FDIC and sold to JPMorgan Chase in a transaction in which JPMorgan Chase did not assume any of the holding company’s liabilities or the subordinated or senior debt of Washington Mutual Bank. Washington Mutual filed for bankruptcy the next day, and it was reported that its shareholders and debtholders were unlikely to receive any payments or distributions in respect of their securities. In connection with these events, there was market speculation about the viability of Wachovia Corporation — the country’s fourth largest banking organization — and National City, followed by a series of events, temporarily involving a proposal for parts of Wachovia to be acquired in an FDIC-assisted transaction, that ultimately led to Wachovia agreeing to be acquired by Wells Fargo & Company on October 3. These developments and the circumstances surrounding them exacerbated the already significant pressures on National City and other United States banking institutions.
 
On September 19, the Treasury Department announced the Troubled Asset Relief Program, or TARP, a $700 billion plan by which the Federal government would purchase certain assets and securities directly from financial institutions, and legislation was introduced in Congress to implement the TARP. National City’s management began analyzing National City’s potential participation in the TARP with Morgan Stanley. On September 29, the House of Representatives voted on but did not approve the Emergency Economic Stabilization Act of 2008, or EESA, and its provision for the TARP. The financial markets subsequently dropped precipitously and credit markets tightened even further.
 
These events created significant turmoil in the markets and for market participants, including National City. The losses suffered by securityholders and, in the case of Lehman, counterparties at other institutions, the degradation of the credit markets and increase in the costs of borrowing, the deteriorating condition of the United States economy and housing market, market perceptions and rating agency outlooks, together with the uncertainty and timing of the TARP, all led to further pressure on National City’s stock price, liquidity and relationships with counterparties. On September 29, National City’s common stock price closed at an all-time low of $1.36 per share, and closed at $1.75 per share on September 30. Counterparties began to demand that National City post collateral for or prepay ordinary course transactions, and in some cases refused to conduct business with National City. Deposit levels, particularly in business transaction accounts and other accounts in excess of the FDIC insurance limit, declined. In addition, on September 3, Standard & Poor’s had downgraded National City’s credit ratings and placed it on negative outlook. On September 30, National City was placed on review for downgrade by Moody’s, and on October 3 it was downgraded by Fitch. These factors led National City’s management, with the assistance of Goldman Sachs, to commence an analysis of potential


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strategic alternatives. Through much of this period, National City’s management had almost daily (and sometimes multiple times per day) conversations with senior officials from the OCC and Federal Reserve about National City’s financial condition and regulatory status. In addition, the FDIC began to gather information about National City Bank’s loan and deposit base.
 
At an October 2 meeting of the National City board of directors, there was extensive discussion of management’s review of strategic alternatives in light of risks facing National City. Management indicated that one of the alternatives was participation in the TARP, but that there was no assurance that the legislation would be enacted or implemented on a timely basis, that National City would be eligible or that the terms of participation would be consistent with National City’s objectives. Management also indicated that it had reviewed alternatives for a strategic transaction, and described its review and the potential strategic partners that had been identified by management and Goldman Sachs. The board of directors determined that management should pursue both the TARP alternative and, in light of the uncertainty of the TARP, strategic alternatives. The board also determined to engage formally Goldman Sachs for financial and strategic advice on National City’s alternatives.
 
On October 3, the Congress passed EESA and the President signed the legislation into law. On October 4, management, with the assistance of Morgan Stanley, submitted information to the Treasury Department concerning National City’s potential participation in the TARP. The information, among other things, contemplated the direct purchase by the Federal government of National City’s liquidating loan portfolio at a significant loss.
 
During the week of October 6, National City’s management continued to keep in close communication with the Federal Reserve and OCC, and had several conversations with the OCC about the potential for National City to participate in the TARP. Management also reached out to several financial institutions, including PNC, to gauge interest in a potential transaction with National City. PNC retained Wachtell, Lipton, Rosen & Katz to provide legal advice and sought financial advice from Citigroup Global Markets, JPMorgan and Sandler O’Neill & Partners, L.P. in connection with a possible transaction involving National City.
 
Some of the potential transaction partners contacted by National City, including PNC, had expressed a preliminary interest in engaging in a combination transaction with National City in March and April of 2008 and in most cases had conducted due diligence at that time. Each institution proceeded to update its due diligence throughout the week. Sullivan & Cromwell LLP and Jones Day, counsel to National City, prepared transaction documentation for delivery to certain of the interested parties. The board of directors began having update calls with management each weekday, which covered, among other things, National City’s liquidity position, discussions with regulators and potential strategic partners.
 
Beginning Sunday, October 5, and continuing over the next several days, PNC again commenced preliminary discussions with National City regarding a potential transaction. PNC and its advisors also conducted a due diligence investigation of National City, including by updating PNC’s findings from several months earlier. In light of general market conditions and the evolving regulatory situation in the financial services industry, and following discussion with its board of directors, PNC determined that it was not then prepared to pursue a strategic transaction with National City. By Sunday, October 12, one of the other potential transaction partners also terminated discussions. Although the remaining potential transaction partner had not formally terminated discussions, management believed that there was not a realistic prospect that it would proceed at that time.
 
At a Sunday, October 12, meeting of the National City board of directors, management reviewed the current situation, including the fact that none of the potential transaction partners appeared to remain interested in pursuing a strategic transaction with National City at that time. The board of directors discussed the continuing uncertainty of National City’s participation in the TARP and the terms and timing of the TARP generally, as well as the possibility and timing of private sales of high-risk real estate assets coupled with raising new capital and other deleveraging transactions, which we refer to as the stand-alone proposals. The board of directors instructed management to continue to pursue discussions with the Federal government about National City’s potential participation in the TARP and to explore the possibility of private asset sales. The


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board of directors also determined to engage the services of Cravath, Swaine & Moore LLP to act as counsel to the board of directors in evaluating National City’s strategic alternatives.
 
On Tuesday, October 14, the Treasury Department announced the Capital Purchase Program, or CPP, under the TARP. Under this program, the Treasury Department would, subject to certain terms and limits, make direct capital investments in selected financial institutions in the form of the issuance of Tier 1 nonvoting preferred stock and warrants exercisable for common stock. In addition, the FDIC announced two new programs, the first to insure, without limit, certain non-interest-bearing transaction accounts and the second to guarantee certain debt issuances by banking institutions. National City management promptly contacted Federal regulators to express interest in participating in the CPP and the liability guarantee program, and was advised by the regulators that National City’s access to the CPP and the FDIC liability guarantee with respect to senior holding company and bank debt was uncertain. Moreover, based on government focus on the CPP and taking into account discussions with the OCC, management believed that the period of time required to implement the TARP’s asset purchase program could be lengthy and that as a result National City was unlikely to be able to avail itself of that program, if at all, on a timely basis.
 
Following the discussions with the regulators, management contacted three of the potential partners it had contacted previously, including PNC, to reassess the possibility of a transaction in light of the CPP and also contacted a fourth institution to gauge initial interest in a transaction. PNC did not make a proposal at that time. Another financial institution submitted an offer, which was delivered on Thursday, October 16, and involved the acquisition of National City at a price below the price offered by PNC the following week. Over the subsequent two days representatives of National City, including both management and outside advisors, engaged in extensive diligence and discussion sessions with this potential acquiror. In addition, during that weekend management held discussions with another financial institution, which proposed a complex combination transaction that involved a spinoff of National City’s liquidating portfolio and other assets and required a significant amount of capital from the TARP. During this period, National City’s management had numerous discussions with the OCC and the Federal Reserve regarding National City’s possible participation in the CPP and FDIC liability guarantee program. The board of directors also continued its update calls with management each weekday.
 
On Sunday, October 19, management concluded that, taking into account the views of the Federal Reserve and OCC on National City’s financial condition and other factors, it was likely that National City would not be permitted to participate in the CPP, that full access to the liability guarantee program with respect to National City’s senior holding company and bank debt was uncertain, and that it must find a merger partner quickly in order to avoid further regulatory action against National City Bank. This conclusion was reviewed and discussed at length with the National City board of directors at a scheduled meeting in Cleveland the same day. Management reviewed the two strategic transaction options (the acquisition proposal and the combination proposal) and a standalone option with the board of directors. Goldman Sachs advised the board that it concurred with management’s view that management had contacted all reasonably practicable candidates for a potential strategic transaction. The board engaged in extensive discussion of the various alternatives and the consequences of regulatory action for National City’s stockholders. The board expressed serious concerns about not only the proposed pricing of the then current acquisition proposal, but also the execution and regulatory risks, capital requirements and potential timetable of the combination and stand-alone proposals. Taking into account advice from management, Goldman Sachs and legal counsel, the National City board of directors concluded that the acquisition proposal likely presented the least execution risk and highest probability of regulatory acceptance, and directed that management pursue a transaction with the potential acquiror subject to a meaningful improvement in price. The board also directed that management continue to explore with the potential combination partner whether the combination transaction could be accomplished on a timely basis with reasonable execution risk and whether such a transaction would satisfy the regulators.
 
On Monday, October 20, the potential acquiror revised its acquisition proposal and discussions continued, particularly about pricing and the form of consideration to be received by National City’s stockholders. Discussions with the potential combination partner were terminated because management determined that the combination proposal would require significant time and presented significant execution risks, including the concurrence and forbearance of banking regulators. National City management was in continuous


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communication with the OCC regarding the status of negotiations. The board of directors reconvened that evening and was updated on the status of each potential transaction and National City’s liquidity position as well as management’s discussions with the Federal regulators.
 
On Tuesday, October 21, discussions with the potential acquiror continued throughout the day, including with respect to price and structure. That evening, the board of directors reconvened and management reported on the status of negotiations. The board of directors and management also discussed the downside protection terms of the investment agreements and warrants that had been entered into by National City with Corsair Capital, National City’s largest stockholder, and two other investors in the capital infusion transactions in April and May, and the impact on National City stockholders (both those entitled to the downside protection and all other stockholders) of these agreements and warrants in the context of a merger transaction in which National City’s common stock would be priced below $5.00 per share. Following this discussion, Richard Thornburgh — a Corsair-nominated director — recused himself from the meeting, and the board of directors, management and its legal counsel discussed the investment agreements and warrants and possible alternative interpretations of some of the downside protection provisions in the warrants.
 
On Wednesday, October 22, counsel for the potential acquiror delivered a draft of the proposed transaction documentation to Sullivan & Cromwell. That evening, the board of directors reconvened and management reported on the status of negotiations and that the draft transaction documentation differed in a number of significant respects, particularly relating to greater conditionality, from certain other recent transactions. Management informed the board of directors that the potential acquiror had strongly urged that a transaction be announced prior to market-open on October 24, and that, in light of discussions with the OCC, management had concluded that meeting this schedule for announcement was critical. In particular, management understood from discussions with the OCC that the Treasury Department could be announcing new banks receiving capital in the very near future under the CPP, and management and the board were concerned about the market’s interpretation of the absence of National City from that announcement. After extensive discussion of the proposed transaction and schedule, including the possible consequences of failing to meet the proposed schedule, the board of directors agreed that management should proceed to attempt to negotiate definitive documentation on the proposed schedule. The parties began negotiating the documentation in earnest, which continued throughout the night and into the evening of the next day.
 
Despite having concluded that circumstances had not been right for it to submit an acquisition proposal earlier in the month, PNC had continued to consider the possibility of a transaction and continued to refine and evaluate its due diligence findings with respect to National City and consider the potential opportunities presented by a combination. In light of this and of ongoing legal and regulatory developments and market conditions in the financial services industry, on Thursday, October 23, PNC determined it should renew discussions with National City regarding a potential acquisition.
 
That afternoon, the PNC board of directors met with members of PNC’s senior management and its outside advisors to discuss a potential transaction with National City. PNC senior management reviewed with the PNC board of directors information regarding PNC, National City and the terms of the proposed transaction. PNC senior management presented the PNC board of directors with the findings of their due diligence investigations of National City and additional information, including financial information regarding the two companies and the proposed transaction. Citigroup Global Markets and JPMorgan discussed the potential combination with the PNC board of directors, including their respective views regarding the business and economic environment, potential opportunities and challenges presented by a combination with National City and other matters. Wachtell, Lipton discussed with the PNC board of directors the legal standards applicable to its decisions and actions with respect to the proposed transaction and reviewed the legal terms of the proposed merger. Following review and discussion among the members of the PNC board of directors, including consideration of the factors described under “— PNC’s Reasons for the Merger; Recommendation of the PNC Board of Directors,” the PNC board of directors determined that the transaction was in the best interests of PNC and its shareholders and authorized PNC management and PNC’s outside advisors to pursue a transaction with National City. Subsequent to the board meeting, Citigroup Global Markets and JPMorgan each delivered to the PNC board of directors its written opinion, dated October 31, that, as of October 24, 2008, and based upon and subject to the considerations and limitations set forth in their respective opinions


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and other matters as each of them considered relevant, the aggregate consideration to be paid by PNC in connection with the merger was fair, from a financial point of view, to PNC.
 
Also during the day on Thursday, October 23, PNC worked with Wachtell, Lipton and with its financial advisors at Citigroup Global Markets, JPMorgan and Sandler O’Neill to complete a combination proposal that it could deliver to National City. During the day PNC also engaged in discussions with its federal regulators regarding PNC’s view that — if it undertook a merger with National City — its potential CPP investment should be based on the risk-weighted assets of the combined company. During the course of those discussions PNC was advised that the federal regulators were inclined towards approving a CPP application on that basis, and late that night, PNC was informed that it was approved for a CPP investment based on the combined risk-weighted assets of PNC and National City conditioned upon completing the National City merger.
 
At approximately 6:00 p.m. on October 23, PNC contacted National City regarding its interest in a potential transaction at a price that was significantly higher than that offered by the other potential acquiror. Management informed PNC that active discussions with another party were underway, that a National City board meeting had been scheduled for later that evening and that if PNC wanted to pursue a transaction it would have to quickly present a proposal with satisfactory transaction documentation so that the board of directors could properly evaluate the proposal. Sullivan & Cromwell then contacted Wachtell, Lipton to discuss the form of transaction documentation and transaction protection and to discuss whether there were any significant legal impediments to the proposed transaction. Based on its understanding of PNC’s proposal, including the proposed terms of the proposed PNC merger agreement and transaction protection (in the form of a stock option agreement), management concluded that the PNC proposal was a bona fide proposal that presented better value, and terms that presented less closing risk, than the proposal from the other potential acquiror. Management then contacted the OCC to inform it of this development and then contacted the chief executive officer of the other potential acquiror to apprise him of the PNC proposal and provide an opportunity to improve its offer. The other potential acquiror immediately terminated negotiations and withdrew its pending offer.
 
Thereafter, Wachtell, Lipton, Sullivan & Cromwell and Cravath, Swaine & Moore began negotiating the terms of a merger agreement and stock option agreement. National City management had further discussions with PNC’s management about the price, terms and structure of the PNC proposal.
 
At approximately 9:30 p.m., the National City board of directors reconvened and was advised of the PNC proposal and the termination of discussions with the other potential acquiror. Management advised the board that the price being offered by PNC to National City stockholders was substantially higher than that proposed by the other potential acquiror. Cravath, Swaine & Moore reviewed the legal duties of the directors with respect to the PNC proposal, as well as other relevant considerations. Sullivan & Cromwell described the proposed transaction documentation, and advised that it was more favorable to National City in a number of respects, in particular, certainty of closing, than that proposed by the other potential acquiror, and that the transaction protection provisions were less onerous to National City than those proposed by the other potential acquiror. Goldman Sachs reviewed and discussed the financial terms of the proposed merger with PNC, discussed financial information concerning PNC, compared the PNC proposal to other recent transactions and discussed its analysis as to the fairness, from a financial point of view to the holders of National City common stock (other than PNC and its affiliates), of the exchange ratio pursuant to the proposed merger agreement. Goldman Sachs indicated that, based on the circumstances and subject to completion of due diligence, final financial analysis and review of definitive documentation, it expected that it would be able to render an opinion that the exchange ratio pursuant to the PNC proposal was fair, from a financial point of view, to the holders of National City common stock (other than PNC and its affiliates). Management reported to the board of directors its understanding that the Federal Reserve and the OCC had informed PNC that they did not object to PNC making its proposal and that PNC expected to raise Tier 1 capital under the CPP based on both its risk-weighted assets as well as National City’s risk-weighted assets. The board of directors also discussed the impact that the payments required to be made under the terms of the downside protection agreements with Corsair and certain other investors would have on the amounts to be received by National City stockholders (both those entitled to downside protection and all other stockholders). Following this discussion, Richard Thornburgh — a Corsair nominated director — recused himself from the meeting, and the board


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discussed further with management and its legal advisors the downside protection provisions of the investment agreements and warrants. The board and its advisors discussed the application of those provisions under the terms of the PNC proposal, including possible alternative interpretations of some of those provisions in the warrants and the impact of those interpretations on the downside protection payments to the investors entitled to such payments and to the common stockholders. In view of management’s understanding that PNC would require certainty regarding the appropriate calculation methodology under the downside protection provisions prior to signing the merger agreement, and in view of the possible alternative interpretations, including the interpretation advanced by Corsair (and likely to be advanced by the other investors), and the related uncertainties regarding those interpretations, the board determined to proceed in accordance with the interpretation advanced by Corsair (and likely to be advanced by the other investors). Following this discussion, Mr. Thornburgh rejoined the meeting, and the board of directors determined that management should seek to negotiate to improve the exchange ratio in the merger.
 
As a result of further discussions between National City management and PNC and consideration by PNC of National City’s request, PNC increased the value to be received by National City stockholders. The board meeting reconvened following those discussions, at which time the board of directors discussed the revised PNC proposal and determined that National City should attempt to negotiate definitive transaction documentation with PNC in time for announcement of a merger by early morning.
 
Management, Sullivan & Cromwell and Cravath, Swaine & Moore negotiated with PNC and Wachtell, Lipton through the night. In addition, National City management and Goldman Sachs conducted due diligence on PNC. Representatives of PNC also negotiated a support agreement with Corsair pursuant to which Corsair would agree to support and vote for the merger.
 
At approximately 6:00 a.m. on October 24, the National City board reconvened. At the meeting, National City’s management and counsel updated the board of directors on the status of the negotiations. Goldman Sachs further reviewed its due diligence findings with respect to PNC, and the expectations regarding the financial condition of PNC following completion of the merger. Sullivan & Cromwell described the terms of the PNC merger agreement, including the conditions to closing, and the stock option agreement and the support agreement to be entered into between PNC and Corsair. Goldman Sachs orally delivered its opinion that, as of that date, and based upon and subject to specified factors, limitations and assumptions described to the board, as well as the extraordinary circumstances facing National City, the exchange ratio pursuant to the PNC merger agreement was fair, from a financial point of view, to the holders of National City common stock (other than PNC and its affiliates), and discussed the financial analysis underlying its opinion. The board of directors engaged in extensive discussion with management and its advisors, focusing on the respective financial conditions of National City and PNC, the condition of the financial markets in general, the exhaustive search for other alternatives, management’s view that it was highly doubtful that National City would be permitted to participate in the CPP, management’s view that the TARP would not be implemented within a timeframe useful to National City, the substantial uncertainty of full access to the liability guarantee program with respect to National City’s senior holding company and bank debt, the communications from the Federal regulators with respect to the merger, National City’s prospects in the absence of announcing a transaction (including the potential for further regulatory action), and the fairness opinion rendered by Goldman Sachs. After consideration by the board of directors, on motion duly made and seconded, and with Richard Thornburgh — a director appointed by Corsair — indicating his full support for the merger but abstaining from the vote, the board resolved that the merger agreement is advisable, fair to and in the best interest of National City stockholders and voted to approve and adopt the merger agreement and the merger and recommend that National City stockholders adopt the merger agreement.
 
At approximately 8:45 a.m. on October 24, PNC and National City executed the merger agreement and stock option agreement, PNC and Corsair executed the support agreement, and the merger was announced.
 
National City’s Reasons for the Merger; Recommendation of the National City Board of Directors
 
After careful consideration, the National City board of directors determined that the merger agreement and the transactions contemplated by the merger agreement were advisable and in the best


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interests of National City and its stockholders and approved the merger agreement and the transactions contemplated by the merger agreement, including the merger. Accordingly, National City’s board recommends that National City stockholders vote “FOR” adoption of the merger agreement at the National City special meeting.
 
In reaching its decision, the board of directors, with advice from its financial and legal advisors, considered a number of factors, including the following:
 
  •  The limited strategic alternatives available to National City, notwithstanding the exhaustive search and evaluation of alternatives conducted by National City management with the assistance of its legal and financial advisors.
 
  •  The likely unavailability to National City of the CPP, the uncertain timeframe for implementation of the TARP and the substantial uncertainty of full access to the liability guarantee program with respect to National City’s senior holding company and bank debt, which could jeopardize National City’s viability as an independent institution going forward.
 
  •  The likelihood of regulatory action in the absence of a transaction and the consequences of such action to National City’s stockholders.
 
  •  National City’s and PNC’s respective businesses, operations, financial conditions, asset quality, earnings and prospects. In reviewing these factors, National City’s board concluded that PNC’s financial condition and asset quality appeared to be relatively sound, and that PNC’s earnings and prospects should result in the combined company having superior future earnings and prospects compared to National City’s earnings and prospects on a stand-alone basis.
 
  •  The current and prospective environment in which National City operates, which reflects challenging and uncertain banking industry conditions and risks that are likely to persist, including the volatile valuations and illiquidity of certain financial assets and exposures and generally uncertain economic conditions. The board also considered the effect these factors could have on National City’s liquidity position and funding capabilities.
 
  •  The likelihood that National City’s non-performing, classified and criticized loans would increase and the resulting impact of such increases on the views and actions of the regulators, rating agencies, liquidity sources and counterparties.
 
  •  The inability of major financial institutions such as National City to withstand a loss of confidence of their liquidity sources and the speed with which such a loss can cause regulators to declare a financial institution insolvent.
 
  •  The impact on stockholders, depositors, debtholders, employees and other constituencies if a depository institution experiences a loss of liquidity that leads to an FDIC receivership.
 
  •  The prior recent occasions on which National City had experienced significant deposit outflows (and the risk that National City could experience, and the potential impact on National City of, additional significant deposit outflows).
 
  •  The reputation and business practices and experience of PNC and its management as they might affect the business of National City and its subsidiaries.
 
  •  The “all stock” and fixed exchange ratio aspects of the merger consideration, which would allow National City stockholders to participate in a portion of the future performance of the combined National City and PNC businesses and synergies resulting from the merger, and the value to National City stockholders represented by that consideration. The board of directors also considered the adequacy of the merger consideration, not only in relation to the current market price of National City’s common stock, but also in relation to the historical, present and anticipated future operating results and financial position of National City and the value of National City in a liquidation scenario. The board of directors considered that PNC’s proposal was substantially more valuable to National City stockholders than the proposal from the other potential acquiror, that the other potential acquiror had


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  withdrawn its offer and terminated discussions, that no other potential transaction partners had emerged with a viable proposal, despite extensive efforts of management and National City’s financial advisor, and that other factors were consistent with approval of PNC’s proposal in relation to the other potential acquiror.
 
  •  Closing certainty, price certainty, and time to closing, along with management’s belief that National City’s regulators would view the transaction favorably.
 
  •  The terms of the merger agreement and stock option agreement, which were more favorable than those presented by the other potential acquiror.
 
  •  The opinion, analyses and presentations of Goldman Sachs, including the oral opinion of Goldman Sachs (which subsequently was confirmed in writing), as described above. For more information, see “— Opinion of National City’s Financial Advisor” beginning on page 50.
 
In addition, National City’s board of directors considered the following in connection with its decision to adopt the merger agreement:
 
  •  the fact that PNC’s shareholders would be required to vote on the issuance of shares in the merger;
 
  •  the requirement that National City enter into the stock option agreement granting PNC an option on 19.9% of National City’s common stock as transaction protection;
 
  •  the possibility that divestitures may be required by regulatory authorities in certain markets in which National City and PNC compete;
 
  •  that the exchange ratio represented a discount relative to the historic trading levels of National City common stock; and
 
  •  that the merger, because the implied value represents consideration to stockholders of less than $5.00 per share, would entitle certain stockholders to payments under the downside protection provisions of their investment agreements and warrants.
 
National City’s board concluded that the anticipated benefits of the merger would outweigh the preceding considerations.
 
The reasons set forth above are not intended to be exhaustive, but include material facts considered by the board of directors in approving the merger agreement. Although each member of National City’s board individually considered these and other factors, the board did not collectively assign any specific or relative weights to the factors considered and did not make any determination with respect to any individual factor. The board collectively made its determination with respect to the merger based on the conclusion reached by its members, in light of the factors that each of them considered appropriate, that the merger is in the best interests of National City and its stockholders.
 
National City’s board of directors realized there can be no assurance about future results, including results expected or considered in the factors listed above. However, the board concluded the potential positive factors outweighed the potential risks of completing the merger.
 
PNC’s Reasons for the Merger; Recommendation of the PNC Board of Directors
 
The PNC board of directors consulted with PNC management as well as legal and financial advisors and determined that the merger is in the best interests of PNC and PNC shareholders. In reaching its conclusion to approve the merger agreement, the PNC board considered a number of factors, including the following material factors:
 
  •  its knowledge of the current and prospective environment in which PNC and National City operate, including economic and market conditions;


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  •  its assessment of National City’s businesses, prospects, franchises, core earnings generation ability, assets and liabilities and its view of the attractive growth and demographic characteristics of National City’s existing markets and businesses;
 
  •  the review by the PNC board of directors with its advisors of the structure of the merger and the financial and other terms of the merger;
 
  •  its belief, based on management’s discussions with federal regulators, that PNC would be eligible for a CPP investment based on the combined risk-weighted assets of PNC and National City, which PNC believed would help it maintain its regulatory capital ratios at appropriate levels following completion of the merger;
 
  •  the fact that the combined company will have a deposit base of $180 billion, making PNC the fifth largest U.S. bank by deposits;
 
  •  the fact that the combined company will have greater scale and scope, enhancing service to customers and communities and providing greater opportunities for its employees;
 
  •  PNC’s view of the value inherent in National City’s banking and asset management businesses, including its strong customer service and community-oriented culture and the capabilities of its employees;
 
  •  the unique opportunity presented by the chance to acquire a franchise of National City’s quality, size and scope, its assessment of the pro forma capital position, financial condition and results of operations of the combined company, and the expectation that the transaction will be accretive to PNC’s earnings per common share in the second year following the closing of the merger;
 
  •  the potential expense saving opportunities, currently estimated by PNC’s management to be approximately $1.2 billion per year on a pre-tax basis when fully realized;
 
  •  the likelihood that the regulatory and shareholder approvals needed to complete the transaction will be obtained in a timely manner and that the regulatory approvals will be obtained without the imposition of adverse conditions;
 
  •  the historical and current market prices of PNC common stock and National City common stock;
 
  •  the respective views of Citigroup Global Markets and JPMorgan regarding the business and economic environment, potential opportunities and challenges presented by a combination with National City;
 
  •  PNC’s track record of integrating acquisitions of banks and its understanding of the opportunities and risks presented by an acquisition of a company with the size and other characteristics of National City.
 
The PNC board of directors considered all of these factors as a whole and, on balance, concluded that they supported a favorable determination to enter into the merger agreement.
 
The foregoing discussion of the information and factors considered by the PNC board of directors is not exhaustive, but includes all material factors considered by the PNC board of directors. In view of the wide variety of factors considered by the PNC board of directors in connection with its evaluation of the merger and the complexity of these matters, the PNC board of directors did not consider it practical to, nor did it attempt to, quantify, rank or otherwise assign relative weights to the specific factors that it considered in reaching its decision. The PNC board of directors evaluated the factors described above and reached a consensus that the merger was advisable and in the best interests of PNC and its shareholders. In considering the factors described above, individual members of the PNC board of directors may have given different weights to different factors.
 
The PNC board of directors determined that the transaction was in the best interests of PNC and its shareholders, and the board voted unanimously to approve the merger agreement and recommends that PNC shareholders vote “FOR” the issuance of PNC common stock in the merger.


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Opinion of National City’s Financial Advisor
 
On October 24, 2008, Goldman Sachs rendered its oral opinion to the National City board of directors that, as of that date, and based upon and subject to the factors, limitations and assumptions set forth in the written opinion of Goldman Sachs, as well as the extraordinary circumstances facing National City referred to in such written opinion, the exchange ratio of 0.0392 of a share of PNC common stock to be received in respect of each share of National City common stock pursuant to the merger agreement was fair from a financial point of view to the holders of National City common stock other than PNC and its affiliates.
 
The full text of the subsequently delivered written opinion of Goldman Sachs, dated October 24, 2008, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached to this document as Appendix C. The opinion of Goldman Sachs was provided for the information and assistance of the National City board of directors in connection with its consideration of the merger and does not constitute a recommendation as to how any holder of shares of National City common stock should vote or otherwise act with respect to the merger or any other matter.
 
In connection with rendering the opinion described above and performing its financial analysis, Goldman Sachs reviewed, among other things:
 
  1.  the merger agreement;
 
  2.  annual reports to stockholders and annual reports on Form 10-K of National City and PNC for the five fiscal years ended December 31, 2007;
 
  3.  certain interim reports to stockholders and quarterly reports on Form 10-Q of National City and PNC;
 
  4.  certain other communications from National City and PNC to their respective stockholders;
 
  5.  certain publicly available research analyst reports for National City and PNC;
 
  6.  certain internal financial analyses and forecasts for National City prepared by National City’s management, and for PNC prepared by PNC’s management, and approved by the National City board of directors for Goldman Sachs’ use in connection with rendering the opinion;
 
  7.  estimates by National City’s management as to National City’s liquidity, as well as certain analyses prepared by National City’s management with respect to National City’s leverage and capital adequacy;
 
  8.  a liquidation analysis (prepared by National City’s management and approved by its board of directors for use in connection with the rendering of the opinion) as to the value, if any, that holders of National City common stock would be expected to receive with respect to the shares of common stock in a liquidation of National City; and
 
  9.  publicly announced credit ratings of National City and of certain other institutions that Goldman Sachs believed to be generally relevant.
 
Goldman Sachs also held discussions with members of the senior managements of National City and PNC regarding their assessment of the rationale for the merger, the past and current business operations, financial condition and future prospects of their respective companies, and with the senior management of National City regarding their assessment of the fair market value of certain key asset categories of National City. In addition, Goldman Sachs reviewed the reported price and trading activity for shares of National City common stock, certain publicly traded debt instruments of National City and shares of PNC common stock, compared certain financial and stock market information for National City and PNC with similar information for certain other companies the securities of which are publicly traded and performed such other studies and analyses, and considered such other factors, as it considered appropriate.
 
National City advised Goldman Sachs that National City had considerable exposure to risks related to the deteriorating credit performance and declining values of a significant portion of the loan and mortgage portfolios and related assets of National City and its subsidiaries, and that the business and prospects of National City were severely and negatively affected as a result thereof, as well as due to the crisis in the


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capital markets, the extraordinary economic, financial and regulatory environment then prevailing and the deteriorating financial condition of National City.
 
In particular, National City informed Goldman Sachs that:
 
  •  National City and its principal operating subsidiaries had limited liquidity and unencumbered assets available as collateral for financings from the capital markets that National City may have sought to obtain on an immediate basis;
 
  •  Based on communications National City had with United States banking regulators, National City did not expect to have, on a standalone basis, access to federal liquidity and funding arrangements necessary to address its short and long term liquidity needs. National City also did not expect to be able to raise funding through the capital markets in amounts sufficient to meet such liquidity needs, and absent a definitive transaction such as the merger, National City expected that its liquidity position would become severely strained due to a decline in customer and counterparty confidence and consequently, shortly thereafter, National City would have insufficient unrestricted cash on hand to meet such liquidity needs; and
 
  •  In light of the foregoing, absent entering into a definitive transaction (such as the merger) that would allow National City access to ongoing liquidity and funding or relieve National City of the need for such liquidity and funding, National City expected that it and its subsidiaries would face additional regulatory actions, including intervention by the United States federal banking regulators, and/or be required to seek protection under applicable bankruptcy laws in the very near future.
 
The National City board of directors advised Goldman Sachs that, as a result of the foregoing, National City and its board of directors were faced with a narrow set of alternatives, which, at the time, were limited to a transaction such as the merger or intervention by United States banking regulators and eventual liquidation of National City. Accordingly, Goldman Sachs also considered recent instances where concerns regarding the liquidity of a bank or financial institution triggered a rapid deterioration of the institution’s financial condition, necessitating government intervention or bankruptcy protection, and as a result of which the common equity holders of the institution were likely to receive substantially diminished value, if any at all, for their equity. In light of the facts and circumstances, and in reliance on the liquidation analysis described above, Goldman Sachs assumed that if National City’s banking assets were taken over by the United States federal banking regulators and National City’s non-banking assets liquidated under applicable bankruptcy laws, holders of National City common stock would likely receive no material value for their shares of National City common stock.
 
For purposes of rendering its opinion, Goldman Sachs relied upon and assumed, without assuming any responsibility for independent verification, the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by it. At the direction of the National City board of directors, Goldman Sachs (i) did not rely upon any financial forecasts relating to National City (except for the liquidation analysis described above) and (ii) did not perform certain analyses that it customarily would have prepared for National City in connection with a fairness opinion, because of the determination of National City that such forecasts and analyses were not meaningful as a result of the extraordinary circumstances of National City described in the opinion and herein. Goldman Sachs assumed with the consent of the National City board of directors that the forecasts for PNC, prepared by PNC’s management and approved by the National City board of directors for Goldman Sachs’ use in connection with rendering its opinion, had been reasonably prepared and reflected the best currently available estimates and judgments of the management of National City. Goldman Sachs also assumed that the merger would be consummated in accordance with the terms set forth in the merger agreement without any waiver or amendment of, or delay in the fulfillment of, any terms or conditions set forth in the merger agreement or any subsequent development related to the merger, that would have an adverse effect on National City or PNC or on the expected benefits of the merger in any way meaningful to its analysis. Goldman Sachs’ opinion does not address any legal, regulatory, tax or accounting matters, as to which matters it understood that National City received such advice as it deemed necessary from qualified professionals. Goldman Sachs is not an expert in the evaluation of loan and mortgage portfolios or in assessing the adequacy of allowances for losses with respect thereto, and accordingly, it did not evaluate the same with respect to National City or PNC and


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assumed, with National City’s consent, that PNC’s allowances for such losses were adequate to cover all such losses. In addition, Goldman Sachs did not review individual credit files nor did it make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or off-balance-sheet assets and liabilities) of National City or PNC or any of their respective subsidiaries, and it was not furnished with any such evaluation or appraisal (other than the liquidation analysis described above). In addition, Goldman Sachs did not evaluate the solvency or fair value of any party to the merger agreement under any state or federal laws relating to bankruptcy, insolvency or similar matters. Goldman Sachs did not express any opinion as to the value of any asset of National City, whether at current market prices or in the future. It noted however, that under the ownership of a company with adequate liquidity and capital, such as PNC, the value of National City and its subsidiaries could substantially improve, resulting in significant returns to PNC if the merger is consummated.
 
The opinion of Goldman Sachs did not address the underlying business decision of National City to engage in the merger, or the relative merits of the merger as compared to any strategic alternatives that may have been available to National City. The opinion of Goldman Sachs addressed only the fairness from a financial point of view to the holders of National City common stock (other than PNC and its affiliates), as of the date thereof, of the exchange ratio pursuant to the merger agreement. Goldman Sachs did not express any view on, and its opinion did not address, any other term or aspect of the merger agreement or the transaction contemplated thereby, including, without limitation, (i) the Option Agreement (as defined in the merger agreement), (ii) the rights of certain investors under the Investment Agreements (as defined in the merger agreement) and the Warrants (as defined in the merger agreement) issued pursuant to the Investment Agreements, (iii) the fairness of the transaction to, or any consideration received in connection therewith by, the holders of any class of securities, creditors, or other constituencies of National City or PNC other than holders of National City common stock (other than PNC and its affiliates) or (iv) the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of National City or PNC, or class of such persons in connection with the merger, whether relative to the 0.0392 of a share of PNC common stock to be paid for each share of National City common stock pursuant to the merger agreement or otherwise. Goldman Sachs did not express any opinion as to the prices at which shares of National City common stock or shares of PNC common stock would trade at any time. The opinion of Goldman Sachs was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to it as of, the date thereof, including the ongoing crisis in the capital markets, the condition of the mortgage market and the extraordinary financial and economic environment at the time and the related uncertainty regarding the extent and duration of those conditions. Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date thereof. The opinion of Goldman Sachs was approved by a fairness committee of Goldman Sachs.
 
The following is a summary of the material financial analyses conducted by Goldman Sachs in connection with rendering its opinion. The following summary does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of the analyses described herein represent relative importance or weight given them. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and alone are not a complete description of the financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before October 24, 2008, and is not necessarily indicative of current market conditions.
 
In view of National City’s determination that traditional financial analyses were not meaningful with respect to National City under the extraordinary circumstances described above, Goldman Sachs considered the liquidation analyses described below, in addition to certain other analyses summarized below, but did not rely on the traditional analyses that it would customarily have performed in preparing a fairness opinion.
 
Liquidation Analysis.  Goldman Sachs considered the liquidation analysis, prepared by National City’s management and approved by the National City board of directors for use by Goldman Sachs in connection with the rendering of its opinion, in assessing the value, if any, that holders of National City common stock would be expected to receive in respect of such stock in the event that National City’s banking assets were


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taken over by United States federal banking regulators and its non-banking assets liquidated under applicable bankruptcy laws. Goldman Sachs determined that such liquidation analysis was relevant with respect to National City in view of the extraordinary circumstances of National City described above. The liquidation analysis illustrated (i) the implied proceeds from a liquidation of National City’s assets under two possible scenarios and (ii) the application of such proceeds first in satisfaction of National City’s material outstanding obligations and liabilities in each scenario, thereby illustrating the implied proceeds that would be available to holders of National City common stock in each scenario. The illustrative liquidation proceeds were estimated by National City’s management, in Case 1, assuming an immediate liquidation, and in Case 2, assuming a liquidation over a moderate (non-immediate) time frame.
 
Illustrative Proceeds:(1)
 
                         
    Balance
    Implied Proceeds  
    at 09/30/08     Case 1     Case 2  
    (In billions)  
 
Portfolio Loans
  $ 110     $ 73     $ 89  
Other Assets
    35       27       29  
                         
Total Assets
  $ 145     $ 99     $ 118  
                         
Deposit Franchise
    96       2       5  
                         
Total Implied Proceeds
          $ 102     $ 123  
                         
 
 
(1) Source: National City management.
 
Illustrative Application of Proceeds:(1)
 
                         
    Balance
    Proceeds Received  
    At 09/30/2008     Case 1     Case 2  
    (In billions, except per share values)  
 
Total Implied Proceeds
            102       123  
                         
Secured Borrowings
    10       (10 )     (10 )
Deposits
    96       (92 )     (96 )
Other Liabilities
    23       (0 )     (18 )
                         
Liabilities
  $ 128     $ (102 )   $ (123 )
                         
Remaining Proceeds
            0       0  
Common Stock
    17       0       0  
                         
Implied Equity Value per Share of National City Common Stock
          $ 0     $ 0  
                         
 
 
(1) Source: National City management.
 
Goldman Sachs compared the illustrative liquidation proceeds per share of National City common stock, as implied by the foregoing liquidation analysis with the $2.23 value per share of National City common stock implied by the exchange ratio on the basis of the closing price of PNC common stock on October 23, 2008.
 
Discounted Cash Flow Analysis of PNC.  Goldman Sachs conducted an illustrative discounted cash flow analysis with respect to PNC (on a stand-alone basis, using estimates for earnings per share derived from publicly available equity research) and compared the implied value per share of PNC common stock with the closing price of PNC common stock on October 23, 2008. Goldman Sachs used discount rates ranging from 8%-12%, forecasts for PNC earnings per share based on median IBES estimates for the second half of 2008, 2009 and 2010, grown at the median IBES long-term growth rate of 7.3% thereafter, a Tier 1 capital ratio ranging from of 8% to 9% and terminal forward earnings multiples in the range of 11x to 13x applied to estimated earnings for the period from July 1, 2013 to June 30, 2014. This analysis resulted in an implied present value per share of PNC common stock in the range of $55.90 to $74.93, compared to the $56.88 closing price of PNC common stock on October 23, 2008.


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Comparative Analysis of PNC Trading Multiples.  Goldman Sachs also reviewed certain historical trading multiples of PNC common stock in relation to the corresponding median trading multiples for selected national banks and regional banks:
 
                                 
    Median Multiple of Price to Next 12 Months Earnings Estimates Over Period Ending on October 23, 2008  
    YTD 2008     1 Year     3 Years     5 Years  
 
PNC
    12.2 x     11.9 x     12.7 x       12.5 x
National Banks(1) Median
    11.1       10.5       11.4       11.3  
Regional Banks(2) Median
    11.1       10.7       12.2       12.5  
 
                         
    Median Multiple of Price to Tangible Book Value Over Period Ending on
 
    October 23, 2008  
    1 Year     3 Years     5 Years  
 
PNC
    4.2 x     4.1 x     4.0 x
National Banks(1) Median
    2.5       3.2       3.2  
Regional Banks(2) Median
    1.8       2.6       2.6  
 
 
(1) National Banks include Bank of America, JPMorgan Chase, Citigroup and Wells Fargo.
 
(2) Regional Banks include US Bancorp, BB&T, SunTrust, M&T Bank, Fifth Third, Regions, KeyCorp and Comerica.
 
The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole and the circumstances described above, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the circumstances described above and the results of all of its relevant analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering such circumstances and the results of all of its relevant analyses. No company or transaction used in Goldman Sachs’ analyses is directly comparable to National City, PNC or the merger.
 
As described above, the opinion of Goldman Sachs to the National City board of directors was one of many factors taken into consideration by the National City board of directors in making its determination to approve the merger agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with its fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Appendix C to this proxy statement/prospectus.
 
National City selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience relevant to the merger. Pursuant to an engagement letter dated September 30, 2008, National City retained Goldman Sachs to act as financial advisor in connection with the possible sale of all or a portion of National City. Pursuant to the terms of the engagement letter, National City has agreed to pay Goldman Sachs a transaction fee of $25 million for its services in connection with the merger, of which $22 million is contingent upon consummation of the merger, to reimburse Goldman Sachs’ expenses incurred in connection with its engagement and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.
 
Goldman, Sachs and its affiliates are engaged in investment banking and financial advisory services, securities trading, investment management, principal investment, financial planning, benefits counseling, risk management, hedging, financing, brokerage activities and other financial and non-financial activities and services for various persons and entities. In the ordinary course of these activities and services, Goldman Sachs and its affiliates may at any time make or hold long or short positions and investments, as well as actively trade or effect transactions, in the equity, debt and other securities (or related derivative securities)


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and financial instruments (including bank loans and other obligations) of National City, PNC and any of their respective affiliates or any currency or commodity that may be involved in the transaction contemplated by the merger agreement for their own account and for the accounts of their customers. Goldman Sachs has acted as financial advisor to National City in connection with, and has participated in certain of the negotiations leading to the merger agreement. In addition, Goldman Sachs has provided certain investment banking and other financial services to National City and its affiliates from time to time, including having acted as counterparty to a derivative transaction entered into by National City in December 2006; as financial advisor to National City in connection with the sale of the First Franklin mortgage origination franchise and related servicing platform in December 2006; as sole bookrunner in a convertible bond offering by National City (aggregate principal amount of approximately $1.4 billion) in January 2008 and hedging party and calculating agent for certain derivative transactions contemporaneous with such bond offering; as sole bookrunner in a multi-tranche preferred stock offering by National City in January 2008; as joint bookrunner, manager, co-manager and/or selling group member with respect to various investment grade debt issuances by National City and certain of its affiliates from 2005 to 2008; and as financial advisor to National City with respect to an approximately $7 billion equity issuance by National City in April 2008. From October 1, 2006 through November 15, 2008, Goldman Sachs received aggregate fees of approximately $228 million from National City and its affiliates for investment banking and other financial services unrelated to the merger. Goldman Sachs also has provided certain investment banking and other financial services to PNC and its affiliates from time to time, including having acted as lead manager, sole bookrunner and/or joint bookrunner with respect to investment grade debt issuances by PNC and/or its affiliates in an aggregate principal amount of approximately $3.3 billion from 2005 to 2008; as lead manager, sole manager and/or joint bookrunner with respect to issuances of preferred securities by PNC and/or its affiliates in an aggregate amount of approximately $1.75 billion from 2006 to 2008; provided individual asset management services to an affiliate of PNC in 2006; and acted as financial advisor to PNC with respect to the acquisition of Mercantile Bankshares Corporation in March 2007. Goldman Sachs also may provide investment banking and other financial services to National City, PNC and their respective affiliates in the future. In connection with the above-described services Goldman Sachs has received, and may receive, compensation.
 
Opinion of PNC’s Financial Advisors to the PNC Board of Directors
 
Citigroup Global Markets
 
Citigroup Global Markets was retained to act as financial advisor to PNC in connection with a merger transaction with National City. Pursuant to Citigroup Global Markets’ letter agreement with PNC, dated October 23, 2008, Citigroup Global Markets delivered a written opinion to the PNC board of directors on October 31, 2008 to the effect that, based upon and subject to the considerations and limitations set forth in the opinion, Citigroup Global Markets’ work described below and other factors it deemed relevant, the aggregate consideration to be paid by PNC in connection with the merger was fair as of October 24, 2008, from a financial point of view, to PNC. As more fully described below, the aggregate consideration to be paid by PNC in connection with the merger consists of (i) the issuance of 0.0392 of a share of PNC common stock, par value $5.00 per share, for each outstanding share (with certain exceptions) of National City common stock, par value $4.00 per share and (ii) a payment to certain National City warrant holders of an amount in cash equal to approximately $384 million.
 
In connection with rendering its opinion, Citigroup Global Markets delivered a presentation to the PNC board of directors on October 31, 2008 with respect to the material analyses performed by Citigroup Global Markets in evaluating the fairness of the aggregate consideration to be paid by PNC in connection with the merger. Citigroup Global Markets noted that from a PNC shareholder perspective, the aggregate consideration to be paid in the transaction equates to a purchase price of $2.39 per share of National City common stock. In calculating the purchase price of $2.39 per share of National City common stock, Citigroup Global Markets noted that the total value of the aggregate consideration included an amount of approximately $5.3 billion payable in PNC common stock (determined by (A) multiplying the transaction exchange ratio of 0.0392x by PNC’s closing price per common share as of October 23, 2008 of $56.88, and then (B) multiplying the resulting amount from (A) by the adjusted number of shares of National City common stock outstanding of


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2,364 million shares) plus a cash amount of approximately $384 million payable to certain National City warrant holders, totaling an aggregate transaction value of approximately $5.7 billion. The aggregate transaction value of approximately $5.7 billion divided by 2,364 million adjusted shares of National City adjusted common stock outstanding equates to a per share price of National City common stock of $2.39.
 
The full text of Citigroup Global Markets’ opinion, which sets forth the assumptions made, general procedures followed, matters considered and limits on the review undertaken, is included as Appendix D to this document. The summary of Citigroup Global Markets’ opinion set forth below is qualified in its entirety by reference to the full text of the opinion. You are urged to read Citigroup Global Markets’ opinion carefully and in its entirety.
 
In arriving at its opinion, Citigroup Global Markets reviewed the merger agreement and held discussions with certain senior officers, directors and other representatives and advisors of PNC and certain senior officers and other representatives and advisors of National City concerning, among other things, the business, operations and prospects of National City and PNC and the effects of the merger on the financial condition and future prospects of PNC. Citigroup Global Markets examined certain publicly available business and financial information relating to National City and PNC as well as certain financial forecasts and other information and data relating to National City and PNC which were provided to or discussed with it by the respective managements of National City and PNC, including information relating to the potential strategic implications and operational benefits (including the amount, timing and achievability thereof) anticipated by the management of PNC to result from the merger. Citigroup Global Markets reviewed the financial terms of the merger as set forth in the merger agreement in relation to, among other things: current and historical market prices and trading volumes of National City common stock and PNC common stock; the historical and projected earnings and other operating data of National City and PNC; and the capitalization and financial condition of National City and PNC.
 
Citigroup Global Markets considered, to the extent publicly available, the financial terms of certain other transactions effected which Citigroup Global Markets considered relevant in evaluating the merger and analyzed certain financial, stock market and other publicly available information relating to the businesses of other companies whose operations Citigroup Global Markets considered relevant in evaluating those of National City and PNC. Citigroup Global Markets also analyzed certain internal forecasts provided by PNC and National City and evaluated certain potential pro forma financial effects of the merger on PNC. In addition to the foregoing, Citigroup Global Markets conducted such other analyses and examinations and considered such other information and financial, economic and market criteria as Citigroup Global Markets deemed appropriate in arriving at its opinion. The issuance of Citigroup Global Markets’ opinion was authorized by its fairness opinion committee.
 
In rendering its opinion, Citigroup Global Markets assumed and relied upon, without independent verification, the accuracy and completeness of all financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with it and upon the assurances of the management of PNC that they were not aware of any relevant information that had been omitted or that remained undisclosed to Citigroup Global Markets. With respect to financial forecasts and other information and data provided to or otherwise reviewed by or discussed with Citigroup Global Markets relating to PNC and National City and, in the case of certain potential pro forma financial effects of, and strategic implications and operation benefits resulting from, the merger, Citigroup Global Markets was advised by the management of PNC that such forecasts and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of PNC as to the future financial performance of National City and PNC, such strategic implications and operational benefits (including amount, timing and achievability thereof) anticipated to result from the merger and the other matters covered thereby, and have assumed, with the consent of PNC, that the financial results (including the potential strategic implications and operational benefits anticipated to result from the merger) reflected in such forecasts and other information and data will be realized in the amounts and at the times projected.
 
Citigroup Global Markets assumed, with the consent of PNC, that the merger will be consummated in accordance with its terms, without waiver, modification or amendment of any material term, condition or


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agreement and that, in the course of obtaining the necessary regulatory or third party approvals, consents and releases for the merger, no delay, limitation, restriction or condition will be imposed that would have an adverse effect on National City, PNC or the contemplated benefits of the merger. Citigroup Global Markets also assumed, with the consent of PNC, that the merger will be treated as a tax-free reorganization for federal income tax purposes and that the representations and warranties made by PNC and National City in the merger agreement were and will be true and correct in all respects material to its analysis. Citigroup Global Markets did not consider any potential deposit divestitures that may be required from a regulatory perspective in connection with the merger nor did it express any opinion as to whether any such deposit divestitures may or will be required. Finally, with the consent of PNC, Citigroup Global Markets relied upon the advice PNC received from its legal, regulatory, accounting and tax advisors as to all legal, regulatory, accounting and tax matters relating to the merger and the other transactions contemplated by the merger agreement.
 
In addition, Citigroup Global Markets did not review individual loan or credit files, nor did it make or was it provided with an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of PNC or National City or any of their respective subsidiaries, nor did it make any physical inspection of the properties or assets of PNC or National City. Citigroup Global Markets is not an expert in the evaluation of loan and lease portfolios for purposes of assessing the adequacy of allowances for losses with respect thereto and, accordingly, Citigroup Global Markets assumed, with the consent of PNC, that such allowances for PNC and National City losses on a combined basis are adequate to cover all such losses.
 
Citigroup Global Markets’ opinion was necessarily based upon information available to it, and financial, stock market and other conditions existing, as of October 24, 2008. Citigroup Global Markets informed the PNC board of directors that subsequent developments may affect its opinion and that Citigroup Global Markets did not have any obligation to update, revise or reaffirm its opinion. Citigroup Global Markets’ opinion is limited to the fairness as of October 24, 2008, from a financial point of view, to PNC of the aggregate consideration to be paid by PNC in connection with the merger and Citigroup Global Markets did not express any opinion as to what the value of PNC common stock will be when issued pursuant to the merger or the price at which PNC common stock will trade at any time. Furthermore, Citigroup Global Markets expressed no view as to, and its opinion did not address, the underlying business decision of PNC to effect the merger, the relative merits of the merger as compared to any alternative business strategies that might exist for PNC or the effect of any other transaction in which PNC might engage. Citigroup Global Markets also expressed no view as to, and its opinion did not address, the fairness (financial or otherwise) of the amount or nature or any other aspect of any compensation to any officers, directors or employees of any parties to the merger, or any class of such persons, relative to the aggregate consideration.
 
Citigroup Global Markets’ advisory services and opinion were provided for the information of the PNC board of directors, and its opinion was not intended to be and does not constitute a recommendation to any shareholder as to how such shareholder should vote or act on any matters relating to the merger.
 
The following is a summary of the presentation Citigroup Global Markets delivered to the PNC board of directors on October 31, 2008 with respect to the material analyses performed by Citigroup Global Markets in evaluating the fairness of the aggregate consideration to be paid by PNC in connection with the merger. Unless otherwise noted, the analyses were based on the aggregate consideration of $2.39 per National City share, as calculated above. The summary includes information presented in tabular format. In order to understand fully the financial analyses used by Citigroup Global Markets, these tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. The following quantitative information, to the extent it is based on market data, is, except as otherwise indicated, based on market data as it existed on or prior to October 23, 2008, and is not necessarily indicative of current or future market conditions.
 
Historical Trading Analysis.  Citigroup Global Markets reviewed the trading prices of PNC common stock and National City common stock for the period from October 24, 2003 through October 23, 2008. For each trading day in that period, Citigroup Global Markets derived the implied historical exchange ratio by dividing the closing price of National City common stock by the closing price of PNC common stock.


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Citigroup Global Markets noted that the implied historical exchange ratio as of October 23, 2008, the last trading day prior to the announcement of the merger, was 0.0483x. The following table sets forth the average implied historical exchange ratios for the specified periods ended October 23, 2008 and the premium represented by each such ratio as compared to the exchange ratio implied by closing trading prices on October 23, 2008.
 
                 
          Implied Premium to Market
 
Period
  Implied Exchange Ratio     (October 23, 2008 Exchange Ratio)  
 
One-Year Average
    0.1564 x     224 %
Three-Year Average
    0.3818 x     690 %
Five-Year Average
    0.4899 x     914 %
 
Among other things, Citigroup Global Markets noted that the exchange ratio in the merger of 0.0392x per share of PNC common stock for each outstanding share of National City common stock was less than the one-year, three-year and five-year average implied historical exchange ratios.
 
Comparable Companies Analysis.  Citigroup Global Markets compared financial and stock market data and forecasted financial information for PNC and National City with similar information for selected publicly traded super regional banks. The selected super regional banks considered by Citigroup Global Markets were divided into two reference groups, and consisted of the following:
 
Reference Group 1
 
  •  BB&T Corporation
 
  •  Comerica Incorporated
 
  •  Fifth Third Bancorp
 
  •  KeyCorp
 
  •  M&T Bank Corporation
 
  •  Regions Financial Corporation
 
  •  SunTrust Banks, Inc.
 
  •  U.S. Bancorp
 
Reference Group 2
 
  •  Wachovia Corporation
 
The financial information used by Citigroup Global Markets for all super regional banks in Reference Group 1 above in the course of this analysis was based on historical financial information as of September 30, 2008, market data as of October 23, 2008 and forecasted information published by Thomson Reuters Corporation (“Reuters”). Reuters is a data service that publishes compilations of earnings estimates by selected research analysts, among other things.
 
For each of the selected comparable super regional banks in Reference Group 1 above, Citigroup Global Markets derived and compared, among other things:
 
  •  the ratio of the company’s closing price per common share on October 23, 2008, to its estimated earnings per share (“EPS”) for each of calendar years 2009 and 2010;
 
  •  the ratio of the company’s closing price per common share on October 23, 2008, to its reported book value per share and tangible book value per share; and
 
  •  the implied core deposit premium represented by the company’s closing price per common share on October 23, 2008 (determined by taking the excess of the company’s market capitalization over tangible book value and dividing it by the company’s core deposits, calculated as total deposits less certificates of deposits).
 
As for Reference Group 2, Citigroup Global Markets derived Wachovia Corporation’s hypothetical adjusted closing price per common share as of October 23, 2008 by multiplying Wachovia Corporation’s closing price per common share as of September 26, 2008 (which was the day prior to the announcement of


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the proposed acquisition of Wachovia Corporation by Citigroup, Inc.) of $10.00 per share by the median share price performance of the super regional banks in Reference Group 1 above, including PNC and National City (collectively referred to as the “Super Regional Bank Index”), for the period of September 26, 2008 through October 23, 2008. Citigroup Global Markets noted that the median share price performance of the Super Regional Bank Index for the period of September 26, 2008 through October 23, 2008 was a decrease of 25.6%. Citigroup Global Markets applied this 25.6% decrease to Wachovia Corporation’s closing price per common share as of September 26, 2008 of $10.00 per share to derive a hypothetical adjusted closing price of $7.44 per share of Wachovia Corporation’s common stock as of October 23, 2008.
 
With regard to Wachovia Corporation, Citigroup Global Markets derived and compared, among other things:
 
  •  the ratio of Wachovia Corporation’s hypothetical adjusted closing price per common share on October 23, 2008 of $7.44 per share, to its estimated EPS for each of calendar years 2009 and 2010;
 
  •  the ratio of Wachovia Corporation’s hypothetical adjusted closing price per common share on October 23, 2008 of $7.44 per share, to its reported book value per share and tangible book value per share; and
 
  •  the implied core deposit premium represented by Wachovia Corporation’s hypothetical adjusted closing price per common share on October 23, 2008 of $7.44 per share (determined by taking the excess of the company’s market capitalization over tangible book value and dividing it by the company’s core deposits).
 
The following tables set forth the results of these analyses:
 
Reference Group 1
 
                 
Common Share Price as Multiple of:
  Range     Median  
 
Estimated EPS for 2009
    10.3x-15.6 x     12.9 x
Estimated EPS for 2010
    5.6x-10.8 x     8.1 x
Book Value
    0.34x-2.49 x     0.75 x
Tangible Book Value
    0.79x-4.63 x     1.19 x
 
             
Implied Premium/(Discount) of Common Share Price to:
  Range   Median  
 
Core Deposits
  (3.9)%-36.5%     2.5 %
 
Reference Group 2
 
         
Hypothetical Adjusted Common Share Price as Multiple of:
  Value  
 
Estimated EPS for 2009
     5.3x  
Estimated EPS for 2010
    3.3x  
Book Value
    0.40x  
Tangible Book Value
    0.81x  
 
       
Implied Premium/(Discount) of Hypothetical Adjusted Common Share Price to:
  Value
 
Core Deposits
    (1.0)%
 
Based on the information for the super regional banks in Reference Group 1 above, Citigroup Global Markets derived a reference range for the implied equity value per share of National City common stock of $3.72 to $6.87. Based on the information for Wachovia Corporation in Reference Group 2 above, Citigroup Global Markets derived a reference range for the implied equity value per share of National City common stock of $3.80 to $4.64. Citigroup Global Markets noted that the aggregate consideration of $2.39 per National City share to be paid by PNC in connection with the merger was below each of the reference ranges of the implied equity value per share of National City common stock derived by Citigroup Global Markets in its comparable companies analysis.


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Precedent Transactions Analysis.  Citigroup Global Markets reviewed publicly available information for merger or acquisition transactions involving banks that it deemed relevant to its analysis of the merger. The transactions reviewed by Citigroup Global Markets were limited to (i) those transactions with a transaction value in excess of $500 million in which the target had a return on average assets over the 12 months prior to the announcement date of the acquisition of less than 0.5% and had a ratio of non-performing assets to total assets greater than 3% for the most recent quarter available preceding the announcement date of the acquisition and (ii) three other recent transactions deemed relevant by Citigroup Global Markets. The group of transactions consisted of the following:
 
     
Buyer Name
 
Target Name
 
Banco Santander S.A.    Sovereign Bancorp, Inc.
Wells Fargo & Company    Wachovia Corporation
Bank of America Corporation    Countrywide Financial Corporation
MacAndrews and Forbes   First Nationwide Federal Savings Bank
NationsBank Corporation    MNC Financial, Inc.
Washington Mutual, Inc.    Pacific First Federal Savings Bank
First Union Corporation    Dominion Bankshares
Bank One Corporation    Valley National Corporation
Society Corporation    Ameritrust Corporation
BankAmerica Corporation    Security Pacific Corporation
Chemical Banking Corporation   Manufacturers Hanover Corporation
 
For each precedent transaction above, Citigroup Global Markets derived and compared, among other things:
 
  •  the ratio of the price per common share paid for the acquired company to the EPS of the acquired company for the latest twelve months (“LTM”) based on the latest publicly available financial statements of the acquired company prior to the announcement of the acquisition;
 
  •  the ratio of the price per common share paid for the acquired company to the EPS of the acquired company for either the calendar year of, or the calendar year following, the announcement of the acquisition (“Estimated Forward EPS”);
 
  •  the ratio of the price per common share paid for the acquired company to book value per share and tangible book value per share of the acquired company based on the latest publicly available financial statements of the acquired company prior to the announcement of the acquisition; and
 
  •  the implied premium/(discount) represented by the price per common share paid for the acquired company to the acquired company’s deposits (determined by taking the excess of the acquisition consideration over tangible book value and dividing it by the acquired company’s deposits).
 
The following tables set forth the results of these analyses of the precedent transactions above:
 
             
Transaction Price as Multiple of:
  Range   Median  
 
LTM EPS
  13.3x-39.9x     24.2 x
Estimated Forward EPS
  NM     NM  
Book Value
  0.23x-2.27x     0.96 x
Tangible Book Value
  0.32x-2.41x     1.16 x
 
             
Implied Premium/(Discount) of Transaction Price to:
  Range   Median  
 
Deposits
  (16.0)%-8.3%     1.2 %
 
Based on the information derived for each of the precedent transactions above, Citigroup Global Markets derived a reference range for the implied equity value per share of National City common stock of $5.13 to $6.68. Citigroup Global Markets noted that the aggregate consideration of $2.39 per National City share to be paid by PNC in connection with the merger was below the reference range for the implied equity value of National City common stock derived by Citigroup Global Markets in its precedent transactions analysis as set forth above.


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In addition, Citigroup Global Markets noted the following data with respect to the median implied multiples and premium for all bank merger or acquisition transactions since January 1, 2004 with a transaction value in excess of $1 billion, totaling 44 transactions:
 
         
Transaction Price as Multiple of:
  Median  
 
LTM EPS
    19.9 x
Estimated Forward EPS
    17.3 x
Book Value
    2.50 x
Tangible Book Value
    3.43 x
 
         
Implied Premium/(Discount) of Transaction Price to:
  Median  
 
Deposits
    23.4 %
 
With respect to the financial information for the companies involved in the precedent transactions analysis, Citigroup Global Markets relied upon information from public filings and company press releases, as well as information published by SNL Financial (“SNL”). Among other things, SNL compiles financial information regarding companies and merger and acquisition transactions in the banking and financial services sectors.
 
Discounted Cash Flow Analysis.  Citigroup Global Markets performed a discounted cash flow analysis to estimate a range for the implied equity value per share of National City common stock as of October 23, 2008, including certain potential expenses and cost savings forecasted by PNC management to result from the merger. In this analysis, Citigroup Global Markets assumed a range for cost of equity of 9% to 12%, and used it to derive the present value of (1) National City’s estimated free cash flows available to stockholders from 2009 to 2013, plus (2) National City’s terminal value at the end of 2013. Terminal value for National City was calculated based on a range of 10.0x to 12.0x estimated 2014 net income. In performing this analysis, Citigroup Global Markets used earnings estimates provided by PNC management as of October 23, 2008 for National City and an estimated long-term annual growth rate for National City’s EPS (based on estimates obtained from FactSet Research Systems Inc.) of 7.0%. Net income and balance sheet data were adjusted to account for certain restructuring charges anticipated by PNC management to result from the merger, including but not limited to credit and interest rate mark adjustments to National City’s loan portfolio based on PNC management’s estimates and PNC management’s assumptions of cost savings resulting from the merger of approximately 10% of PNC and National City’s combined pre-tax controllable expenses. In determining cash flows available to stockholders, Citigroup Global Markets assumed the maintenance of a constant Tier 1 risk-based capital ratio of 8.5% and a target ratio of tangible common equity as a percentage of total Tier 1 risk-based capital of 65%. Citigroup Global Markets forecasted the growth of National City’s assets based on PNC management’s estimates.
 
Based on these assumptions, Citigroup Global Markets derived a reference range for the implied equity value per share of National City common stock of $2.71 to $3.93. Citigroup Global Markets noted that the aggregate consideration of $2.39 per National City share to be paid by PNC in connection with the merger was below the reference range for the implied equity value per share of National City common stock derived by Citigroup Global Markets in its discounted cash flow analysis. Citigroup Global Markets also noted that the internal rate of return implied by the aggregate consideration of $2.39 per National City share to be paid by PNC in connection with the merger was above PNC’s cost of equity.
 
Forecasted Pro Forma Financial Analysis.  Citigroup Global Markets analyzed the estimated financial impact of the merger on PNC’s 2009 through 2013 estimated GAAP EPS and 2009 through 2013 estimated cash EPS (“CEPS”). CEPS is determined by adding per share amortization of existing intangible assets and acquisition-related intangible assets to GAAP EPS. In the course of this analysis, Citigroup Global Markets used estimates from PNC management of GAAP EPS for 2009 through 2013 and assumed, based on management forecasts, that the merger will result in cost savings equal to approximately 10% of PNC and National City’s combined pre-tax controllable expenses. Based on its analysis, Citigroup Global Markets determined that the merger would be dilutive to PNC’s estimated GAAP EPS and estimated CEPS for 2009 and accretive to PNC’s estimated GAAP EPS and estimated CEPS for 2010 through 2013 and noted that the


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Tier 1 risk-based capital ratio would remain above PNC’s historical target range for each year during that period. Citigroup Global Markets also noted that PNC plans to issue to the Treasury Department $7.7 billion of preferred stock and related warrants under the TARP Capital Purchase Program, subject to standard closing requirements, and such issuance is included in its financial analyses.
 
*          *          *
 
The preceding discussion is a summary of the material financial analyses furnished by Citigroup Global Markets Inc. to the PNC board of directors, but it does not purport to be a complete description of the analyses performed by Citigroup Global Markets or of the presentation it delivered to the PNC board of directors. The preparation of financial analyses and fairness opinions is a complex process involving subjective judgments and is not necessarily susceptible to partial analysis or summary description. Citigroup Global Markets made no attempt to assign specific weights to particular analyses or factors considered, but rather made qualitative judgments as to the significance and relevance of all the analyses and factors considered and determined to give its fairness opinion as described above. Accordingly, Citigroup Global Markets believes that its analyses, and the summary set forth above, must be considered as a whole, and that selecting portions of the analyses and of the factors considered by Citigroup Global Markets, without considering all of the analyses and factors, could create a misleading or incomplete view of the processes underlying the analyses conducted by Citigroup Global Markets and its opinion. With regard to the comparable companies and precedent transaction analyses summarized above, Citigroup Global Markets selected comparable public companies and precedent transactions on the basis of various factors, including size and similarity of the line of business of the relevant entities; however, no company utilized in these analyses is identical to PNC or National City and no precedent transaction is identical to the merger. As a result, these analyses are not purely mathematical, but also take into account differences in financial and operating characteristics of the subject companies and other factors that could affect the transaction or public trading value of the subject companies to which PNC and National City are being compared.
 
In its analyses, Citigroup Global Markets made numerous assumptions with respect to PNC, National City, industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of PNC and National City. Any estimates contained in Citigroup Global Markets’ analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by these analyses. Estimates of values of companies do not purport to be appraisals or to necessarily reflect the prices at which companies may actually be sold. Because these estimates are inherently subject to uncertainty, none of PNC, National City, the PNC board of directors, the National City board of directors, Citigroup Global Markets or any other person assumes responsibility if future results or actual values differ materially from the estimates.
 
Citigroup Global Markets’ analyses were prepared solely as part of Citigroup Global Markets’ analysis of the fairness of the aggregate consideration to be paid by PNC in connection with the merger and were provided to the PNC board of directors in that connection.
 
Citigroup Global Markets is an internationally recognized investment banking firm engaged in, among other things, the valuation of businesses and their securities in connection with mergers and acquisitions, restructurings, leveraged buyouts, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. PNC selected Citigroup Global Markets to act as its financial advisor on the basis of Citigroup Global Markets’ international reputation and Citigroup Global Markets’ familiarity with PNC. Citigroup Global Markets and its affiliates in the past have provided, and currently provide, services to PNC and its affiliates unrelated to the merger, for which services Citigroup Global Markets and its affiliates have received and expect to receive compensation, including, without limitation, acting as financial advisor to PNC in connection with the acquisition of Yardville National Bancorp, acting as financial advisor to PNC in connection with the acquisition of Mercantile Bankshares Corporation and acting as the lead manager or lead underwriter of various PNC debt offerings. In the last two years, Citigroup Global Markets and its affiliates have received fees from PNC and its affiliates of approximately $56 million for investment banking and other financial services unrelated to the merger, of which approximately $45 million is for processing, treasury and cash


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management services. In addition, Citigroup Global Markets and its affiliates in the past have provided services to National City and its affiliates unrelated to the merger, for which services Citigroup Global Markets and its affiliates have received compensation, including, without limitation, acting as the lead manager or lead underwriter of various National City debt offerings. In the ordinary course of its business, Citigroup Global Markets and its affiliates may actively trade or hold the securities of PNC or National City for its own account or for the account of customers and, accordingly, may at any time hold a long or short position in such securities. In addition, Citigroup Global Markets and its affiliates, including Citigroup Inc. and its affiliates, may maintain relationships with PNC, National City and their respective affiliates.
 
Pursuant to its letter agreement with Citigroup Global Markets, PNC has paid Citigroup $2.5 million in fees in connection with the merger, and an additional $7.5 million will become payable upon consummation of the merger. PNC has also agreed to reimburse Citigroup Global Markets for its reasonable travel and other out-of-pocket expenses incurred in connection with its engagement, including the reasonable fees and expenses of its counsel, and to indemnify Citigroup Global Markets against specific liabilities and expenses relating to or arising out of its engagement, including liabilities under the federal securities laws.
 
JPMorgan
 
On October 31, 2008 JPMorgan rendered its written opinion to the PNC board of directors that, as of October 24, 2008 and based upon and subject to the factors and assumptions set forth in its opinion, the aggregate consideration (consisting of the issuance of shares of PNC common stock at an exchange ratio of 0.0392 shares of PNC common stock for each outstanding share of National City common stock, plus the payment of a cash amount of approximately $384 million in the aggregate to certain National City warrant holders) to be paid by PNC in connection with the merger with National City was fair, from a financial point of view, to PNC. The issuance of JPMorgan’s opinion was approved by a fairness opinion committee of JPMorgan on October 24, 2008.
 
The full text of the written opinion of JPMorgan, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by JPMorgan in connection with the opinion, is attached to this document as Appendix E and is incorporated in this document by reference. JPMorgan provided its advisory services and opinion for the information of the PNC board of directors in connection with its consideration of the merger. The description of the JPMorgan opinion is qualified in its entirety by reference to the full text of the opinion set forth in Appendix E. Holders of PNC common stock should read this opinion carefully and in its entirety.
 
JPMorgan’s opinion is directed to the PNC board of directors and addresses only the fairness, from a financial point of view, to PNC of the aggregate consideration to be paid in connection with the merger. JPMorgan’s opinion does not address the underlying decision by PNC to engage in the merger. Moreover, JPMorgan has expressed no opinion as to the price at which PNC’s common stock will trade at any future time. JPMorgan was not asked to, and did not, recommend the specific aggregate consideration payable in the merger, which consideration was determined through negotiations between PNC and National City. JPMorgan’s opinion does not constitute a recommendation as to how any holder of PNC common stock should vote with respect to the merger or any other matter.
 
In arriving at its opinion, JPMorgan, among other things:
 
  •  reviewed the merger agreement;
 
  •  reviewed certain publicly available business and financial information concerning National City and PNC and the industries in which they operate;
 
  •  compared the proposed financial terms of the merger with the publicly available financial terms of certain transactions involving companies JPMorgan deemed relevant and the consideration paid to holders of equity of such companies;
 
  •  compared the financial and operating performance of National City and PNC with publicly available information concerning certain other companies JPMorgan deemed relevant and reviewed the current


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  and historical market prices of National City common stock and PNC common stock and certain publicly traded securities of such other companies;
 
  •  reviewed certain internal financial analyses and forecasts prepared by the management of PNC relating to the respective businesses of National City and PNC, as well as the estimated amount and timing of cost savings, including tax benefits, and related expenses and synergies expected to result from the merger (referred to in this section as the “Synergies”); and
 
  •  performed such other financial studies and analyses and considered such other information as JPMorgan deemed appropriate for the purposes of its opinion.
 
In addition, JPMorgan held discussions with certain members of the management of PNC and National City with respect to certain aspects of the merger, the past and current business operations of National City and PNC, the financial condition and future prospects and operations of National City and PNC, the effects of the merger on the financial condition and future prospects of PNC, and certain other matters that JPMorgan believed necessary or appropriate to its inquiry.
 
In giving its opinion, JPMorgan relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with JPMorgan by PNC and National City or otherwise reviewed by or for JPMorgan, and JPMorgan did not independently verify (nor did JPMorgan assume responsibility or liability for independently verifying) any such information or its accuracy or completeness. JPMorgan did not review individual credit files and it did not conduct, nor was it provided with, any independent valuation or appraisal of any assets or liabilities (including any derivative or off-balance sheet assets or liabilities), nor did it evaluate the solvency of National City or PNC under any state or federal laws relating to bankruptcy, insolvency or similar matters. In addition, JPMorgan is not an expert in the evaluation of loan and lease portfolios for purposes of assessing the adequacy of the allowances for losses with respect thereto and, accordingly, JPMorgan assumed, with the consent of the PNC board of directors, that such allowances for losses are in the aggregate adequate to cover such losses. In relying on financial analyses and forecasts provided to it or derived therefrom, including the Synergies, JPMorgan assumed, with the consent of the PNC board of directors, that they have been reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management of PNC as to the expected future results of operations, financial conditions and access to capital and associated capital levels of National City and PNC to which such analyses or forecasts relate. JPMorgan expressed no view as to the foregoing analyses or forecasts (including the Synergies) or the assumptions on which they were based. JPMorgan also assumed that the merger will constitute a tax-free reorganization for United States tax purposes and that the other transactions contemplated by the merger agreement will be consummated as described in the merger agreement. JPMorgan further assumed that the representations and warranties made by PNC and National City in the merger agreement are and will be true and correct, and that the conditions in the merger agreement to PNC’s obligation to consummate the merger will be satisfied (and not waived), in each case in all respects material to JPMorgan’s analysis. JPMorgan is not a legal, accounting, regulatory or tax expert and relied on the assessments made by the advisors to PNC with respect to such issues. JPMorgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the merger will be obtained without any adverse effect on National City or PNC or on the contemplated benefits of the merger.
 
JPMorgan necessarily based its opinions on economic, market and other conditions as in effect on, and the information made available to JPMorgan as of, October 24, 2008. Subsequent developments may affect its opinion, and JPMorgan does not have any obligation to update, revise or reaffirm its opinion. JPMorgan’s opinion is limited to the fairness, from a financial point of view, to PNC of the aggregate consideration to be paid by PNC in connection with the merger and JPMorgan expressed no opinion as to the fairness of the merger to the holders of any class of securities, creditors or other constituencies of PNC or as to the underlying decision by PNC or National City to engage in the merger. Furthermore, JPMorgan expressed no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the merger, or any class of such persons relative to the aggregate consideration to be paid in connection with the merger or with respect to the fairness of any such compensation.


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In accordance with customary investment banking practice, JPMorgan employed generally accepted valuation methods in reaching its opinion. The following is a summary of the presentation JPMorgan delivered to the PNC board of directors with JPMorgan’s written opinion with respect to the material financial analyses that JPMorgan used in providing its opinion and does not purport to be a complete description of the analyses underlying JPMorgan’s opinion. Some of the summaries of financial analyses are presented in tabular format. In order to understand the financial analyses used by JPMorgan more fully, you should read the tables together with the text of each summary. The tables alone do not constitute a complete description of JPMorgan’s financial analyses, including the methodologies and assumptions underlying the analyses, and if viewed in isolation could create a misleading or incomplete view of the financial analyses performed by JPMorgan.
 
Implied Value and Multiple Analysis.  Based upon the consideration to be received by National City stockholders and certain holders of National City warrants and the $56.88 closing market price of PNC common stock on October 23, 2008, JPMorgan calculated that the implied value of the aggregate consideration was $2.39 per share of National City common stock. This implied value represents approximately a 13% discount to $2.75 (the closing price per share of National City common stock on October 23, 2008) and approximately a 20% discount to $3.00 (the closing price per share of National City common stock on October 17, 2008).
 
JPMorgan also determined based on I/B/E/S median estimates and PNC management estimates the multiples of the implied offer price to: estimated 2009 GAAP earnings per share (EPS) of National City (both before and after giving effect to the pre-tax Synergies, estimated by PNC management to be $1.2 billion); the tangible book value per share of National City common stock as of September 30, 2008 (both before and after giving effect to approximately $6.7 billion of after-tax mark-to-market adjustments to National City’s assets and liabilities as estimated by PNC management); and the premium to core deposits (comprising domestic deposits excluding CDs with a principal amount of greater than $100,000) as of September 30, 2008 (based on publicly available information regarding the mix of domestic core deposits as a percentage of total domestic deposits as of June 30, 2008). I/B/E/S is a database owned and operated by Thomson Financial, which contains estimated and actual earnings, cash flows, dividends and other data for U.S. and foreign markets. The results of this analysis are summarized as follows:
 
                                 
    I/B/E/S Median Estimates     PNC Management Case  
    Metric     Multiple     Metric     Multiple  
 
Price to 2009 GAAP EPS
  $ (0.15 )     NM     $ (0.06 )     NM  
Price to 2009 GAAP EPS (with Synergies)
  $ 0.20       11.8 x   $ 0.30       8.1 x
Price to tangible book value per share
  $ 6.08       0.4 x   $ 6.08       0.4 x
Price to tangible book value per share (on a mark-to-market basis)
  $ 2.81       0.9 x   $ 2.81       0.9 x
Core deposits (in billions)
  $ 75.4       NM     $ 75.4       NM  
 
Comparable Transactions.   Using publicly available information, JPMorgan examined the following post January 2006 transactions involving a U.S. bank or thrift as a target company with transaction values greater than $1.5 billion:
 
         
Announcement Date
 
Acquiror
 
Target
 
October 2008
  Santander Bancorp   Sovereign Bancorp, Inc.
October 2008
  Wells Fargo & Company   Wachovia Corporation
August 2008
  Mitsubishi UFJ Financial Group, Inc.   UnionBanCal Corporation
October 2007
  TD Banknorth Inc.   Commerce Bancorp, Inc.
April 2007
  Bank of America Corporation   LaSalle Bank Corporation
February 2007
  Banco Bilbao Vizcaya Argentaria, S.A.   Compass Bancshares, Inc.
October 2006
  PNC Financial Services Group, Inc.   Mercantile Bankshares Corporation
May 2006
  Wachovia Corporation   Golden West Financial Corporation
March 2006
  Capital One Financial Corporation   North Fork Bancorporation, Inc.


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For each of these transactions, JPMorgan examined the premium to the target company’s market price five days prior to announcement, the transaction P/E ratio as a percentage of acquirer P/E ratio, the price as a multiple of estimated twelve-month forward projected GAAP EPS, cash EPS and tangible book value and the premium to core deposits based on information it obtained from SNL Financial and FactSet and from filings with the Securities and Exchange Commission. Set forth below are the observations that result from the comparison of the data related to the comparable transactions described above, based on information available as of October 23, 2008:
 
             
    Low/High Range   Median  
 
Premium to target company’s market price five days prior to announcement
  (32)%-30%     17 %
Transaction P/E ratio as a % of acquirer P/E ratio
  119%-210%     140 %
Price to 12-month forward GAAP EPS
  14.5x-23.4x     18.6 x
Price to 12-month forward cash EPS
  14.5x-23.3x     18.3 x
Price to tangible book value
  0.6x-4.9x     3.0 x
Core deposit premium
  13.5%-40.0%     26.7 %
 
National City Historical Trading Analysis.  JPMorgan reviewed the share price trading history of the National City common stock for the one-year period beginning on October 23, 2007 and ending on October 23, 2008. During this period, JPMorgan noted that the National City common stock traded as low as $1.25 per share and as high as $24.83 per share, as compared to the closing price of the National City common stock on October 23, 2008 of $2.75 per share and the implied value of the merger consideration of $2.39 per share.
 
National City Comparable Companies Analysis.  Using publicly available information, JPMorgan compared selected financial and market data of National City with similar data for the following companies:
 
 
Selected Companies
 
BB&T Corporation
Comerica Incorporated
Fifth Third Bancorp
KeyCorp
M&T Bank Corporation
Regions Financial Corporation
SunTrust Banks, Inc.
U.S. Bancorp
 
JPMorgan calculated and compared various financial multiples and ratios based on publicly available financial data as of September 30, 2008 and market data as of October 23, 2008. The multiples and ratios of National City were calculated using the closing price of National City common stock and PNC common stock as of October 23, 2008. The multiples and ratios for each of the selected companies were based on the most recent publicly available information. With respect to the selected companies, JPMorgan presented:
 
  •  price as a percentage of the selected company’s 52-week high;
 
  •  multiple of price to 2009 I/B/E/S median estimated GAAP EPS;
 
  •  multiple of price to stated book value and tangible book value per share;
 
  •  price as a percentage premium to core deposits; and
 
  •  I/B/E/S consensus estimated long-term growth rate of GAAP EPS.


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Set forth below are the observations that result from the comparison of the data related to the comparable companies described above:
 
                         
    Selected
             
    Companies
             
    Median     National City     PNC  
 
% of 52-week high
    48.6 %     11.1 %     64.6 %
Price to 2009 GAAP EPS
    12.8 x     NM       11.6 x
Price to book value
    0.75 x     0.33 x     1.46 x
Price to tangible book value
    1.20 x     0.45 x     4.46 x
Core deposit premium (%)
    13.0 %     NM       18.6 %
Consensus long-term growth (%)
    5.5 %     8.0 %     7.3 %
 
National City Dividend Discount Analysis with Synergies.  JPMorgan calculated a range of values for the National City common stock implied by discounting to present values PNC management’s estimates of National City’s future dividend stream and taking into account PNC management’s estimate of the Synergies. In performing its analysis, JPMorgan utilized the following assumptions, among others:
 
  •  net income from 2009 to 2013 based on PNC management’s estimates;
 
  •  target capitalization to achieve a minimum 8.5% Tier 1 ratio, of which 65% would be tangible common equity; excess capital above target tangible common equity available for dividends, per PNC management;
 
  •  pre-tax Synergies of $1.2 billion, phased in 50% in 2009, 75% in 2010, and 100% in 2011;
 
  •  after-tax purchase accounting mark-to-market adjustments of $6.7 billion, after-tax restructuring charge of $1.7 billion and after-tax conforming loan loss provision of $1.2 billion, per PNC management;
 
  •  a terminal value of National City common stock at the end of 2013 based on a price to earnings multiple range of 8.0x to 14.0x 2014 projected earnings;
 
  •  discount rates from 11.0% to 15.0% to calculate present value of the dividend stream and terminal values;
 
  •  a 33% marginal tax rate, and
 
  •  a pre-tax cost of excess equity of 5%.
 
The calculations resulted in a range of fully diluted equity values of $2.05 to $4.22 per share of National City common stock, on a pro forma basis, as illustrated by the following table:
 
                                 
    Terminal Multiple  
Discount Rate
  8.0x     10.0x     12.0x     14.0x  
 
11.0%
  $ 2.55     $ 3.11     $ 3.66     $ 4.22  
13.0%
  $ 2.29     $ 2.79     $ 3.30     $ 3.81  
15.0%
  $ 2.05     $ 2.51     $ 2.97     $ 3.44  
 
PNC Historical Trading Analysis.  JPMorgan reviewed the share price trading history of the PNC common stock for the one-year period beginning on October 23, 2007 and ending on October 23, 2008. During this period, JPMorgan noted that the PNC common stock traded as low as $49.01 per share and as high as $87.99 per share, as compared to the closing price of the PNC common stock on October 23, 2008 of $56.88 per share.


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PNC Comparable Companies Analysis.  Using publicly available information, JPMorgan compared selected financial and market data of PNC with similar data for the following companies:
 
 
Selected Companies
 
BB&T Corporation
Comerica Incorporated
Fifth Third Bancorp
KeyCorp
M&T Bank Corporation
Regions Financial Corporation
SunTrust Banks, Inc.
U.S. Bancorp
 
JPMorgan calculated and compared various financial multiples and ratios based on publicly available financial data as of September 30, 2008 and market data as of October 23, 2008. The multiples and ratios of PNC were calculated using the closing price of PNC common stock as of October 23, 2008. The multiples and ratios for each of the selected companies were based on the most recent publicly available information. With