William H. Callihan - Director of IR James E. Rohr - Chairman and CEO Richard J. Johnson - CFO

Betsey Graseck - Morgan Stanley Michael Mayo - Deutsche Bank Matthew O' Connor - UBS Nancy Bush - NAB Research LLC David Hilder - Bear Stearns Gerard Cassidy - RBC Capital Markets Robert Hughes - Keefe, Bruyette & Woods Collyn Gilbert - Stifel Nicolaus & Company, Inc Matthew Schultheis - Ferris, Baker Watts, Inc

Good morning. My name is Lisa, and I will be your conference facilitator today. At this time I would like to welcome everyone to the PNC Financial Services Group First Quarter 2008 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. [Operator Instructions]. As a reminder, this call is being recorded. I will now turn the call over to the Director of Investor Relations, Mr. Bill Callihan. Sir, please go ahead. William H. Callihan - Director of Investor Relations: Thank you, and good morning. Welcome to today's conference call for the PNC Financial Services Group. Participating in this call will be PNC's Chairman and Chief Executive Officer, Jim Rohr; and Rick Johnson, the Company's Chief Financial Officer. The following statements contain forward-looking information. Actual results and future events could differ possibly materially from those that we anticipated in our statements and from those our historical performance, due to a variety of factors, including those described in today's conference call, in our earnings release and related material and in our 10-K and various other SEC reports available in our website. These statements speak only as of April 17, 2008, and PNC undertakes no obligation to update them. We also provide details of reconciliations to GAAP of... non-GAAP financial measures that we may discuss in today's conference call. Our earnings release, our financial supplement, and our presentation slides appendix for the call, and a various SEC reports and other documents. These are all available on our corporate website at pnc.com in the Investor Relations section. And now I would like to turn the call over to Jim Rohr. James E. Rohr - Chairman and Chief Executive Officer: Thank you, Bill. Good morning, everyone, and thank you for joining us today. This was a solid quarter for PNC as the fundamentals of our businesses performed very well. In an extremely difficult market, we remain focused on our strategies for growth. We grew average loans, deposits and assets. We saw a record in net interest income, strong free income, and our record... and our margin improved. Equally important, we grew our diverse revenue streams faster than expenses creating positive upward in leverage. We strengthen our Tier 1 capital position in the first quarter through successful hybrid [ph] issuances, and through retained earnings as well. In our strategic decision making continues to service well, while maintaining a moderate risk profile, our credit quality is solid and our loan portfolio is performing as expected. Most importantly we continue to deepen our customer relationships. As everyone said, we are disappointed with the impact to the capital market sat [ph] on our commercial real estate loan held for sale and our trading activities. We've spoken to you about our commercial real estate loans and we mark this high quality asset to market as we did and I want sell them on the first quarter and trade away our economic value. However, I am especially disappointed with the loss on our trading activities. Similar to our commercial real estate loans these assets were affected by market liquidity and a lot of volatility in the edging of these assets. We take significant actions and we've reduced our risk positions by over 50% in this area. Losses for commercial real estate loans held for sales and trading activities were largely offset by gains from several other unusual items. And most importantly our business fundamentals are sound and PNC is well positioned for growth. Given our business model and our ability to create positive operating leverage we believe that we will continue to do deliver solid results even in this challenging environment. Now Rick will discuss the details of our financial performance in a few minutes, but let me give you some highlights from our business segments. Our Retail Banking segment continued to see asset quality as more customers are coming to PNC from weaker institutions. We grew organic net new checking account relationships by more than 12,000 in the first quarter a 50% higher growth rate than the same period a year ago. Including the impact of acquisitions our average non-interest bearing deposits grew 18% year-over-year. And we are already seeing some excellent results from our investments in the Mercantile branches. In the first quarter consumer DDA new account production was up nearly 400% from the fourth quarter of 2007, and over 400% of our expectations as well. Merchant originated account increased more than 300% from the first quarter a year ago. And the demographics of Maryland and Virginia markets are as favorable as we expect them to be. In fact the average consumer money market account was twice the average balance of PNC's legacy accounts. Now [indiscernible] Corporate & Institutional Banking they posted a strong year-over-year net interest income growth to the loan and deposit growth. Treasury management and capital markets revenues, our relationship based activities was up 18% year-over-year. Another time when M&A activity is down nationally our Harris Williams subsidiary has a strong quarter posting $5 million increase in revenue compared with the fourth quarter of last year. Now in this difficult market an increasing number of business customers are using our liquidity management services and some small and medium size banks or accessing our balance sheet management activities as well. Nonetheless the [indiscernible] are performers with primarily offset by the valuation adjustment for commercial real estate loans held for sale which I mentioned earlier. The PFEC our global fund services provided a reported servicing revenue growth of 14% in the first quarter compared to the same period last year. The increase was driven primarily by acquisitions of Albridge and Coates and the continued growth in the offshore markets, as well as a robust sales pipeline. Regarding Albridge and Coates they continued to grow their client base, but the integration cost [ph] was on track and progressing well. PFEC continues to expand internationally as we are transforming this business segment from a domestic information provider to a cumulative our data provider to a cumulative information provider. Last year we also launched depository services in Luxembourg. We opened the sales office in London, and just recently established our processing center in Poland. All three of these initiatives are performing well. Total funds services by PFPC grew to $2.6 trillion in the first quarter from $2.2 trillion in the previous year. Now fourth segment BlackRock yesterday we reported another strong quarter of core earnings with assets under management now at $1.4 trillion. The strategic decisions to grow the distribution network, expand the product range, and their overall focus on investment performance in client service, should continue to benefit BlackRock and PNC. Now clearly there are challenges facing the financial services industry, both in terms with the credit environment, and the U.S economy. And as we have said before we are not immune to all of us forces. Now as we look at, there we see many more opportunities and obstacles. We raise capital in the first quarter. We strategically strengthened our capital position. We also announce that increase in our dividend reflecting our conference in the future. And all of our acquisitions were now in-house, we successfully integrated Yardville in March adding them to our industry leading technology platform, and we are delivering on the cost savings. Earlier this month we close the acquisition of Sterling. In this environment it is important our asset quality is solid and NPA migration is manageable, and from a balance sheet perspective we are benefiting significantly from the current yield curve. Well the diverse revenues makes we expect continued positive operating leverage to offset the impact of these increases in credit cards. Now the capital markets will continue to be vital, that were actively working to limit the impact of this volatility as I mentioned before. At PNC we remain focused and what we do best, growing our businesses, controlling expenses, managing risks, and taking products and services to new and existing markets. In summary, we believe we are well-positioned for a good 2008. Now Rick will provide you with more detail about the financial results and our strategies. Richard J. Johnson - Chief Financial Officer: Thank you, Jim, and good morning, everyone. The key takeaways from this quarter are, our overall business model continued to deliver solid results, as we reported $1.09 of earnings per share. With strong growth in net interest income and net interest margin resulted in strong revenue growth. Good expense control resulted in positive operating leverage. Asset quality performed as we expected, and we significantly improved our Tier 1 capital ratio. All of this has positioned us well for the current market environment. At slide 6 shows we continued to grow high quality diverse revenue streams. Our first quarter revenue grew 13% year-over-year and 12% compared to the linked quarter, a significant achievement in this environment. Net interest income represents 47% of total revenue, and net interest income grew 8% linked quarter, a 37% on a year-over-year basis, substantial increases compared to both periods of comparison. Our liability sensitive balance sheet positioning has served us well on a period of aggressive rate reduction by the Federal Reserve. Our margin has improved to 3.09% and we expect continued improvement next quarter. We also expect net interest income to grow next quarter as we pass this rate reduction through a deposit base and grow our balance sheet. For the year we still expect deposits and loan balances to organically grow in mid single-digits. With acquisitions we expect loan and deposit growth in mid-teens. As a result we expect year-over-year net interest income growth to exceed 20%. Now if you turn to slide 7, non-interest income represents 53% of total revenue, and decline 2% from the prior year, and increased 16% from the linked quarter. As you can see on the slide, overall growth in non-interest income in both periods of comparison is significantly affected by other non-interest income. So we thought slide 7 would be of more use and understanding the performance of our core fee categories. Fund servicing revenue grew 12% compared with the first quarter a year ago driven by our merging products, primarily offshore activities, and our acquisition of Albridge, compared to the fourth quarter revenues were up 6% primarily due to the acquisition of Albridge. Asset management revenue was up 28% compared to the same quarter last year, due to BlackRock and our wealth management businesses. On a linked quarter basis, revenues were down 6% due to comparatively lower equity markets in the first quarter for our wealth management business and lower results of BlackRock. Our consumer service fees and deposit service charge revenue were up 8% year-over-year, but down 6% from the fourth quarter due to seasonality. Corporate service revenue in the first quarter was up 3% year-over-year, despite challenging market conditions, but down 9% linked quarter primarily due to seasonally lower affordable housing revenue. So all-in-all our core fee income businesses continued to perform well. We also sell securities down the quarter generating $41 million gain. We replaced these securities with high quality securities at equivalent or better yield, so there is no negative impact to net interest income. Now wrapping up our discussion on non-interest income, we did have a number of items reported in other non-interest income. And most of these items are highlighted on page 6 of the financial supplement. As we have discussed before, we expected losses in our commercial mortgage origination business. And as you can see, we've reported losses of $177 million during the quarter due to portfolio valuation has spread widen from 86 basis points at year-end to almost 200 basis points at the end of the first quarter with unprecedented interim volatility. We continued to hold about $2.1 billion in held for sales loans. Our held for sale commercial mortgage loans are high quality assets that are performing is expected, in fact none of these loans were delinquent in the first quarter. This have strong fundamental such as loan-to-value debt service coverage, and loan term leases on properties that are diverse in terms of both property type and geography. We intended to reduce our inventory in the first quarter as we talk about, but we elected not to participate in the few deals that were in the marketplace. As we believe the fundamentals of these loans are better than what the market is offering today. While we did not expect spreads widen more than two times beyond were these were at the end of the fourth quarter, we are now building to forego the value we see in these assets. It's important to note that we have recognized the market valuation adjustment here, but we have not realized a loss. Our intense is to reduce our inventory, but only at the right price as such we could see more volatility, positive or negative in earnings going forward. The loss in our trading businesses resides in our proprietary books, and it's very similar to the commercial mortgage loans issue I just mentioned. These are high quality, low risk assets that were affected by very illiquid market. We believe that this location in the markets provided an excellent opportunity for loan-to-value, but spreads moved against us. In response to the first quarter volatility, they substantially reduce this positions and increased our hedges throughout the quarter. I given the strength of our client related trading activities in our reduced risk position and our propriety activity, we expect that to return the positive trading results next quarter. That being said these markets are very thick [ph] and continued to be very volatile, and we could see further earnings volatility in the future. We also generated the pre-tax gain of $114 million from the sale of Hilliard Lyons at quarter end. The tax rate on this was high and hence we had virtually no tax bases on this entity resulting in the $23 million after-tax gain, as a result our first quarter effective tax rate of 40% was much higher than what you normally expect of approximately 31%. So if any of you who are trying to adjust our earnings by taking the table on page 6 of our supplement and adjusting for tax rates, you probably off by about $50 million of taxes and it would be understating our earnings by about $0.15 per share. Going forward we expect the quarterly effective tax rate of around 31% through the remainder of the year. We also had two items related to our Visa relationship, one we reported the $95 million gain, related to a partial redemption by Visa of some of our stop fine new IPO, which was recorded in other non-interest income. And second of $43 million expenses reversal related to our share of Visa litigation exposure, which was recorded in other non-interest expense. We now hold $3.5 million Class B of shares, which currently would convert to $2.5 million Class A shares, and based on March 31 closing price is $62 per share, our ownership would be valued at $155 million. Finally another non-interest the quarterly BlackRock LTIP mark-to-market adjustment was $37 million gain as the price of BlackRock stock decline from $217 at the end of the fourth quarter to $204 at the end of the first quarter, thereby reducing the valuation of our share at other [ph] location. Now let me turn to slide 8, we continued to create positive operating leverage on a quarter-over-quarter basis, now that has been accomplish with the 13% growth in revenue and 10% growth in expenses. This reflects our success with borrowing revenue in new and existing markets while continuing to manage expenses through our continuous improvement program. In January, I said we expected four year total revenue growth to exceed 10% driven by strong net interest income growth and growth in non-interest income, given the aggressive fed fund rate cuts and our resulting expectations for non-interest growth, we are more confident and are expecting revenue growth in the low-teen on a year-over-year basis. We also aspect to continue creating positive operating leverage with non-interest expense growth expected in the mid single-digit numbers. This clearly benefits three percentage points from the Visa indemnification reversal. From a risk management perspective, PNC is well-positioned because of the strategic choices we've made and our operating discipline. Let start with asset quality, let see if I can put our loan portfolio context for you. Our loan book represents $71 billion of our $140 billion balance sheet so it's about half. Of our $71 billion in loans outstanding $29 billion is in consumer assets, which is primarily in high quality home equity and residential mortgages, with net charge-off levels less than half of industry averages, and $42 billion is in commercial lending with a high percentage of collateralization. Of the $42 billion in commercial $9 billion is in commercial real states of which only $2 billion is in residential real state development. On a strategic level we've made decisions then enable us to avoid subprime mortgages, high yield bridge loans, leverage finance loans, and limit our commercial real state exposures, products are continued to create challenges for the industry. On a daily basis we make credit decisions based on our assessment of risk adjusted returns. Our asset quality continues to be strong with non-performing assets representing 0.42% of total assets at quarter-end. We did see an increase in NPAs compared to the fourth quarter albeit at a slower phase than the prior quarter, which was primarily due to continued softening in residential real state development. Our exposure continues to be very granular. Our largest non-performing asset is $20 million, and our average non-performing commercial loan is less than $500,000. Our residential real estate development portfolio continues to be the primary source of stress. It is very granular and manageable as the average size of these exposures is about $1.4 million per month. These are primarily located in Maryland, Virginia, Delaware and New Jersey. As we've previously disclosed, we expected our first quarter provision would be modestly below the $188 million, we recorded in the fourth quarter which included a $45 million provision related to Yardville. The provision of $151 million in the first quarter is a little bit better than our expectations. In fact, if you back out the change in the charge-off policy as described in the release, the actual charges would have been $44 million less leading to a 31 basis point charge-off ratio versus the 57, we reported. So, we are not seeing a significant increase in charge-off levels. We see the full year provision to be around $600 million and this will include an additional $25 million reserve for Sterling when we complete... as we complete the closing here in April. And obviously, the $600 million is highly depend upon the strength and weaknesses of our economy as we move forward. The other major portion of our balance sheet is the securities portfolio. And as you can see it's declined by $1.6 billion on a linked quarter basis primarily due to liquidity driven valuation adjustments in the current market environment. However, the quality of the book remains very strong as we had no impairments during the quarter. Next is balance sheet management. Now, I have already spoken about our balance sheet positioning and benefits. So let me focus now on liquidity and capital. From a liquidity perspective PNC's loan to deposit ratio of 88% is amongst the lowest of the peers and in addition to this, I have mentioned above, we are very comfortable with our liquidity position given our ample unsecured borrowing capacity of $27 billion. On capital I said in January that we wanted to improve our capital ratios in 2008 and we are making good progress towards achieving that objective. Through a combination of successful, hybrid issuances, can retain earnings in the first quarter. We grew our Tier 1 capital ratio up to 7.7% up from 6.8% at year-end. We will continue to focus on enhancing our capital position to support our customers in this period of economic uncertainty. We will accomplish this through a combination of earnings growth, balance sheet management and accessing non-dilutive capital sources. In summary, let me say, we are pleased with our first quarter results. We had a strong growth in net interest income and net interest margin resulting in strong revenue growth. Our expenses were well managed resulting in positive operating leverage. Our assets performed as expected, reflecting our moderate risk profile. We raised capital and increased our dividend and we completed several strategic initiatives, we integrated Yardville, closed the sale of Hilliard Lyons and earlier this month we closed the acquisition of Sterling. These accomplishments reflect a solid performance in a difficult market environment. We believe that positions us well for the remainder of 2008. With that I will turn it over to Jim. James E. Rohr - Chairman and Chief Executive Officer: Thank you, Rick. Just in conclusion, I think we all know the industry is facing an extremely difficult time. It's unusual from the point of view that many sectors of the economy are performing extremely well. The two aspects are clearly not, there is a current capital markets liquidity prices that we are all experiencing and the residential housing industry is into depression. At PNC we are pleased that we have limited exposure to residential housing much less than many of our peers that are being affected by these difficulties. But the liquidity of capital markets has effected even our high quality assets. Going forward, we would continue to reduce the most volatile aspects of this balance sheet and manage them as aggressively as we can. As Rick told you, our credit quality is solid and our outlook for revenue growth is very strong. Even our diverse revenue mix and our moderate risk profile especially on the credit side and the way we're positioned for interest rates, we're very comfortable with the outlook for our performance for the rest of the year. And with that, we will be pleased to take your questions. Operator could you give our callers the instructions please. Question And Answer

Yes sir. [Operator Instructions]. Your first question comes from Betsey Graseck with Morgan Stanley. James E. Rohr - Chairman and Chief Executive Officer: Good morning, Betsy. Richard J. Johnson - Chief Financial Officer: Good morning. Betsey Graseck - Morgan Stanley: Good morning, couple of questions. One on the CMBS, I mean you went into some detail to the mark and I think well aware of the CMBS spreads having widened out in the quarter. I think you had been pretty close to some transactions that might have reduced the balances this quarter. Could you comment a little bit as to why did you not pursue the transactions and give us some color on where those transactions potentially stand at this stage? Richard J. Johnson - Chief Financial Officer: Yes, there were couple that actually got done in the quarter in the marketplace which we just didn't feel as comfortable with the asset quality in the pools or in terms of the pricing that was being afforded. So, we didn't, we decided not to participate in one, there are two other deals that we're very actively working with at the moment. Challenges for us right now is just that these are taking long time to find investors to participate in the market. So that could take some time and I'm not expecting them to be closed anytime in the near-term. Betsey Graseck - Morgan Stanley: Okay, all right. So and what's the best index that you would lead us, I mean it's a just a CMBS that you would look at with regard to where your marks are, as of today versus where they were at the end of the quarter? Richard J. Johnson - Chief Financial Officer: Well, I'll take a look at... we have to look at two, I think you got cash AAA index on the inventory positions, which you can take a look at. Then separately you have got CMBS hedges at AAA one. I think if you look at the two of those and kind of track along there you'll get a pretty good indication of our inventories pricing. The only piece we haven't disclosed to you is just how much we have or have not hedged. I will say that we have been hedging, we did hedge all new originations in the fourth quarter of last year and in the beginning of this quarter, but we have stopped originating at this point. Betsey Graseck - Morgan Stanley: Okay, but that doesn't mean that your entire exposure is hedged right? I mean that's a majority of your exposures is probably not hedged? Richard J. Johnson - Chief Financial Officer: Yes the challenge with hedging in this environment is there so much basis risk between how the underlying and how the hedge move. And you could see them actually moving in different directions. So, you have to be very careful when you are putting those hedges on otherwise you will actually cost yourself more money than you need to. Betsey Graseck - Morgan Stanley: And on the NII [ph] comment looking for 20% increase year-on-year is that is correct? Richard J. Johnson - Chief Financial Officer: At least 20, yes. Betsey Graseck - Morgan Stanley: Okay, so does that imply some slowdown in Q-on-Q increase? Richard J. Johnson - Chief Financial Officer: Well I didn't give any guidance, I specifically on how much Q1 to Q2 will be. But I will tell you, I have known the interest income will go up and I know that the margin will go up. There's just so many other factors involved really not in a position to pinpoint. I am pretty confident it will go up by as much as it did from fourth quarter to first quarter. Betsey Graseck - Morgan Stanley: In terms of dollar amount? Richard J. Johnson - Chief Financial Officer: And margin. Betsey Graseck - Morgan Stanley: Okay. And is there, could you just give us a sense as to that agreed of what you maybe yield curve swaps [ph] are driving that? Richard J. Johnson - Chief Financial Officer: No it's really... it's not yield curve swaps its more what the Fed has done with rates and our ability to past that through our deposit base. And the fact that at the time this happened, we were 2.2 years positive duration of equity. So, very liability sensitive in its result as rates came down, we are able to take advantage that by keeping our asset invested while re-pricing our liabilities. Betsey Graseck - Morgan Stanley: Okay. Richard J. Johnson - Chief Financial Officer: That should get even better too because I think if you look today LIBOR is way out like 80 basis points over Fed funds. I think if that comes down, we expect to benefit from those as well. Betsey Graseck - Morgan Stanley: Okay. And then lastly on the trading line I think there was a loss generated in the proprietary book is that right? James E. Rohr - Chairman and Chief Executive Officer: Yes. Betsey Graseck - Morgan Stanley: Could you comment a little bit on I mean your changes that you might be making to risk management or your leverage that you might be taking in that type of business going forward? James E. Rohr - Chairman and Chief Executive Officer: Well I think we very disappointed in the performance so the spreads have widened out to a point where our traders felt that it was an attractive asset down. They acquired the assets, obviously the spreads widened out plus they did with the CMBS most particularly in March. And then at the basis risk became even more of the problem as we began to hedge the portfolio. So it was a unique, it was clearly a unique market but that having been said, we are extraordinarily disappointed we've already reduced the risk profile by over 50% and we're doing a number of other things to curtail our risk taking in this environment. So surprised to say we're extraordinarily disappointed in the trading performance and we're taking actions to deal with it. The other thing is that net interest income is going to grow so rapidly that I mean quite frankly that the need to take a great deal of risk is just inappropriate. In the trading line. Richard J. Johnson - Chief Financial Officer: All right next question. Betsey Graseck - Morgan Stanley: Okay, thank you.

Your next question comes from Mike Mayo with Deutsche Bank. Michael Mayo - Deutsche Bank: Hi. James E. Rohr - Chairman and Chief Executive Officer: Hi, Mike. Richard J. Johnson - Chief Financial Officer: Good morning, Mike. Michael Mayo - Deutsche Bank: Good morning. I have three questions. First, as far as acquisitions, are you in the market for large acquisitions I mean you have a little bit in Ohio? James E. Rohr - Chairman and Chief Executive Officer: I think... well our plans for the rest of this year as far as I can see is to run our business. We are doing extraordinarily well. We are adding lots of new accounts in our Western markets as well as our Eastern markets. So, I think running the business in this environment is our number one opportunity [ph]. Michael Mayo - Deutsche Bank: The second question relates to your NPAs which were up I guess 23%, reserves to NPAs declined and you did not provide quite as much as maybe said in your regulatory release. Can you give us some thoughts around what NPAs might do in future quarters? Richard J. Johnson - Chief Financial Officer: Mike I expect they are going to continue to go up. What I am not saying yet is the significant increase in charge-offs. I think as we showed in the release, when you adjust for the change in the charge-offs methodology that we have. Charge-offs are still back at third quarter levels at 31 basis points. So, I think for the moment, we are very comfortable with how we're reserved, we do expect NPAs to go up. I think the question is really going to be what kind of non-performing asset that we are going to have. I think as you know, certainly we may see more in the residential development space, we may see a little bit more in the suppliers to that business. Most of our other businesses are doing fine. So we don't see increases there. But then we also have a very large asset base lending business is this credit and that business is kind of made on non-performing assets. So we expect them to be very active in this environment and they already have very large pipeline. So, that ratio for us is kind of a little bit misleading in terms of the expected loss that we may incur. Michael Mayo - Deutsche Bank: It looks like your linked quarter, the biggest increase was commercial real estate, real estate projects? Richard J. Johnson - Chief Financial Officer: Yes residential development projects, correct. Michael Mayo - Deutsche Bank: And then how much of that would be from Mercantile? Richard J. Johnson - Chief Financial Officer: Well I would just say that about half of all of our NPAs come out of that region. Michael Mayo - Deutsche Bank: Okay. James E. Rohr - Chairman and Chief Executive Officer: Also a lot of things, Mike as you know of the average real estate non-performing loans is less than $1.5 million. There are a number of personal guarantees which were more typical of the Mercantile lending capability. But that having mentioned, guarantees are not counted until cash is put up in terms of putting a credit on non-performing if you believe, that in our policy if we believe that the asset doesn't repay you, then you have to put it on non-performing. So even though there might be a strong guarantor, so that's one of the reasons why the risk profile of several of those loans might not be the same as tracked [ph] housing in Florida. Michael Mayo - Deutsche Bank: Okay and the third question relates to revenues, linked quarter, fourth quarter to first quarter revenue, I am getting actually being down or negative. So if you could help educate me, what I do is I take out these, take out BlackRock LTIPs, I take out the Hilliard Lyons gain and add back to trading losses and commercial mortgage valuation losses and I guess make kind of flat. Then if I take out something for Yardville, it would actually be down on a core basis revenues. So am I missing something or you kind of taking it about year-over-year that kind of momentum? Richard J. Johnson - Chief Financial Officer: Year-over-year because what you have it in particularly in the consumer space as well as in the affordable housing business that we have is, you kind of have [ph] revenues. So fourth quarter to first quarter is not typically a good comparison, I think if you look year-over-year, if they give you very comfortable with the revenue growth. Michael Mayo - Deutsche Bank: Okay, how much did Yardville add in spread revenues these expenses? Richard J. Johnson - Chief Financial Officer: I will have that for you in a minute Mike. James E. Rohr - Chairman and Chief Executive Officer: We'll just have, Mike I can just call you back with that. Michael Mayo - Deutsche Bank: No problem... or if you just you add on the call, you get it by then, just because I... if I look at core revenue growth stripping up deals, and I guess to add a little bit in the first quarter more in the second, so I want to... haircut revenues and give the credit on expenses. Richard J. Johnson - Chief Financial Officer: Yes, Mike Yardville's net interest income was about $16 million, and fee income was around $6 million. We are not talking about big numbers. Michael Mayo - Deutsche Bank: And expenses? Richard J. Johnson - Chief Financial Officer: $12 million. Michael Mayo - Deutsche Bank: Okay, thank you. Richard J. Johnson - Chief Financial Officer: You're welcome. James E. Rohr - Chairman and Chief Executive Officer: Next question?

Your next question comes from Matthew O' Connor with UBS. Richard J. Johnson - Chief Financial Officer: Good morning Matt. Matthew O' Connor - UBS: Hey guys, couple of questions here. You have mentioned about half the NPAs are from Mercantile is the same true for charge-offs? Richard J. Johnson - Chief Financial Officer: No much lower, actually they are 20%. Matthew O' Connor - UBS: Okay. Secondly the delinquency trends just across your portfolio, can you give some comments on that? Richard J. Johnson - Chief Financial Officer: Well home equity has ticked up a little bit in terms of... but delinquencies have been ticked up at all, but charge-offs have gone from an average last year, of about 24 to 26 basis points to this quarter about 35 basis point. But quite frankly that's still half the industry average. So we are still feeling really good about that portfolio charge-offs in our residential mortgage portfolio which is really in asset and liability play, that's still in low single-digits, very low level, they are high quality assets. Matthew O' Connor - UBS: Okay. James E. Rohr - Chairman and Chief Executive Officer: And I will mention there's no delinquency at this point in our commercial mortgage book. But there is a good news about the commercial mortgage workers [ph] and we did originate a very, very high quality assets, which pricing in the liquidity is the difference here. Richard J. Johnson - Chief Financial Officer: And not that's difficult point Jim and that's the same in available for sale portfolio been very careful about the credit quality, we take into that book and as a result we have no valuation adjustments related to credit in the quarter. Matthew O' Connor - UBS: Okay so on the delinquency trends and we see the line items [ph] will be relatively stable or -- Richard J. Johnson - Chief Financial Officer: Should be. Yes. Matthew O' Connor - UBS: Okay, that's helpful. And then just third -- just like a curiosity the reserves for unfunded commitments went down a little bit, I think $18 million is that line reductions or line draw downs? Richard J. Johnson - Chief Financial Officer: Something from draw downs because we have seen... draw down sounds like great answers. We have seen utilization rates go up in our corporate space. Matthew O' Connor - UBS: Okay. Richard J. Johnson - Chief Financial Officer: Next question.

Your next question comes from Nancy Bush with NAB Research LLC. James E. Rohr - Chairman and Chief Executive Officer: Good morning. Richard J. Johnson - Chief Financial Officer: Good morning, Nancy. Nancy Bush - NAB Research LLC: Just a question about the... deal footprint, I mean that we're seeing certainly a number of residential issues residential real estate issues down there. Are you seeing any sort of slopping over into the commercial sector down there? You could just speak to sort of the economic trends outside what we're seeing in residential real estate? James E. Rohr - Chairman and Chief Executive Officer: No it is not, there is no change I don't think it will stop given the... into the commercial portfolio really at all. So, we're very, very pleased with the acquisition there. Some of the... we see residential real estate mostly on the Eastern Seaboard... being soft. It's all the more still pretty strong market. All those military jobs I mean the Baltimore that's going to be a good housing market for quite a while. So it's really little bit of the bank that they acquired in Virginia and some of the East Coast assets. Nancy Bush - NAB Research LLC: And Jim could you just repeat what you said at the first, I kind of missed it about demand deposits or about the retail banking environment down there being so much better than legacy footprint? James E. Rohr - Chairman and Chief Executive Officer: Well our average MMDA account down there is double the size of the average for PNC legacy. So, there is a lot of money on those sales. There are a lot of money on those as you know the Washington DC SMSA is the highest income for household in the United States and that SMSA is no larger than Philadelphia. So it is the highest education for household as well. So that's a very, very wealthy marketplace and it's growing nicely. Nancy Bush - NAB Research LLC: Thanks very much. Richard J. Johnson - Chief Financial Officer: The next question please.

The next question comes from David Hilder with Bear Stearns. James E. Rohr - Chairman and Chief Executive Officer: Good morning, David. David Hilder - Bear Stearns: Good morning. Two sort of unrelated questions. First in the... your table on page nine of the supplement that talks about non-accrual loans, could you distinguish between the real estate related under commercial and the real estate projects one. Basically are residential development loans in both of those categories or in just one? Richard J. Johnson - Chief Financial Officer: Residential development projects would be in the real estate projects category but which would also have a real estate related is we do have loans to national and regional home builders. And that would be about an outstandings of about $200 million we've managed that down pretty, pretty aggressively in terms of outstandings. So you might have some of that $63 million of non-performing loans could be related to that. David Hilder - Bear Stearns: And the real estate projects line at least in terms of non-accruals is primarily residential related. Is that correct? Richard J. Johnson - Chief Financial Officer: That is correct. David Hilder - Bear Stearns: And then secondly, Jim your language about reducing risk in the trading business. Does that also suggest perhaps a change in strategy in terms of management's view of that business and if so, will there also be personnel changes related to that? James E. Rohr - Chairman and Chief Executive Officer: I didn't say that, I don't expect a lot of personnel changes. I would, I would say that we are looking at the risk profile of our trading book. We do a lot of trading for our customers. So you can't get out of the trading business and we do lot hedging of our credit risk. We make on average about $30 million a quarter, just doing customer business. And so we have to be in the trading business just to have that activity The proprietary trading business helps us accomplish a number of those things as well as hedge our credit risk, hedge our interest rate risk and quite frankly if you look at how we position the balance sheet and the net interest income going forward is the same route. And so they've done quiet an extraordinary job positioning us net interest income wise going forward. That having being said this quarter we had a very disappointing experience in the proprietary trading book, which lost approximately $100 million. And if you look at how it was done, I mean quite frankly the spreads blew out to a very attractive rate. We added those assets other people may have added those assets in the AFS book and just enjoy the spread. We had them in the trading book when spreads blew out; we have a loss in the trading book. And those types of strategies, where I think we have to be much more thoughtful in terms of managing the volatility around our quarterly P&L [ph]. David Hilder - Bear Stearns: Okay, thanks very much. It's very helpful. Richard J. Johnson - Chief Financial Officer: Next question.

Your next question comes from Gerard Cassidy with RBC Capital Markets. James E. Rohr - Chairman and Chief Executive Officer: Hi, Gerard. Richard J. Johnson - Chief Financial Officer: Good morning. Gerard Cassidy - RBC Capital Markets: Good morning. On your comments about the provision for this year I think you guys mentioned that, do you think you might have a provision of $600 million granted that's obviously going to be impacted by what happens to the economy. What's your outlook for the economy to come up with about a $600 million number? Richard J. Johnson - Chief Financial Officer: We think today we are effectively in a moderate session, right, in terms of net something, we are expecting, we see ourselves in for at least for the first half of the year with a modest recovery from that through the end of the year. Gerard Cassidy - RBC Capital Markets: Okay. James E. Rohr - Chairman and Chief Executive Officer: If you at them, if you look at it we have a very unusual economy quite frankly with 5% unemployment which is a fabulous number historically. Here we have a number of our businesses doing extraordinarily well. You talk to technology people, aerospace people, commodities people, healthcare people, they don't know anything about recession. I mean life is good a guess. Then you obviously talk to somebody who is on a housing or a housing related business, they are not into recession. I mean we are in the worst housing market in the recorded history of the United States. If you talk to a supplier in that space and I learned [ph] here the world misery. So, we are just very glad that we are not in Florida, in California, Las Vegas and number of those places which have those depressions going on. So, I think our loss experience I think reflects some of that. Gerard Cassidy - RBC Capital Markets: In the listing of your top ten non-performing assets, that look like eight out of the ten were construction credits, construction loan credits of those eight, are they all residential development type construction project or are there any strip malls or other types of construction projects in there? Richard J. Johnson - Chief Financial Officer: No there could be other construction as some of them are asset based lending as well in the construction industry. But no, there wouldn't be anything, any strip malls or anything of that sort. Gerard Cassidy - RBC Capital Markets:: Thank you. James E. Rohr - Chairman and Chief Executive Officer: Next question please.

Your next question comes from Bob Hughes with KBW. Richard J. Johnson - Chief Financial Officer: Hello, Bob. Robert Hughes - Keefe, Bruyette & Woods: Good morning guys. I guess, first question just a low one, under your loan balances I noticed that the real estate projects, I think balance was up over $300 million quarter-to-quarter. I'm wondering if that has anything to do with funding what drawback growth... and is there any incremental funding of interest reserves reflected in there? Richard J. Johnson - Chief Financial Officer: No that's just utilization growth. Robert Hughes - Keefe, Bruyette & Woods: Okay. Richard J. Johnson - Chief Financial Officer: And existing commitments. Robert Hughes - Keefe, Bruyette & Woods: Okay and Rick and you previously I think you guys had suggested that based on your prior expectation for loan loss provisions over the course of the year that you thought provisioning in the second half could be lower than that of the first half. Have you changed your views on the trajectory? Richard J. Johnson - Chief Financial Officer: Well I think it might be slightly higher than where we are this quarter simply because we are going to take on Sterling in the quarter and that would be probably somewhat between to $20 million and $25 million at additional reserve to get their serve levels consistent with ours. Robert Hughes - Keefe, Bruyette & Woods: Okay. Richard J. Johnson - Chief Financial Officer: And then I think yes, based on that I assume the rest of the year will tell [ph] off low. Robert Hughes - Keefe, Bruyette & Woods: Okay that makes sense. Is there are anything to update on this with to respect the market street? Richard J. Johnson - Chief Financial Officer: No. Robert Hughes - Keefe, Bruyette & Woods: Has there been any draw downs on liquidity commitments as the market streets saw functionally rolling paper without too much difficulty? Richard J. Johnson - Chief Financial Officer: We are having no issues with market street in the moment in terms of funding. It's actually a lot better, lot better a situation today than we were at the end of the year. So lots of another. Robert Hughes - Keefe, Bruyette & Woods: Okay great and then one final question, in your discussion on the margin outlook Rick, you mentioned that, you mentioned the LIBOR over fed fund spread, and if that spread were too tighten that would provide some incremental benefits to you. I think interesting topic of discussion, I am sure this is some articles out yesterday, there is something that's been talk about for few weeks, but that the quoted LIBOR rates depending a much rosier picture then actually exist in the marketplace over there and we've seen LIBOR gap up a little bit this morning to the extent that LIBOR were just continue, or the LIBOR fund spread were to continue to gap out, could you maybe talk about how that would impact you? Richard J. Johnson - Chief Financial Officer: I am very comfortable with the full year growth rate of over 20% taking them into consideration as well. One other thing is, it's a really bigger factor in our forecast, so I am very comfortable that even if LIBOR doesn't come in we should be able to still achieve 20% plus. And the bigger factor is the question right now market-by-market is how much do you cut rates into optimize the portfolio, how much do you increase rates take market share in this environment? We are seeing potentially great opportunity to take market share, which will benefit us in the years to come. Robert Hughes - Keefe, Bruyette & Woods: Okay. Thanks, guys. William H. Callihan - Director of Investor Relations: Next question please?

Your next question comes from Collyn Gilbert with Stifel Nicolaus. William H. Callihan - Director of Investor Relations: Hi, Collyn. Collyn Gilbert - Stifel Nicolaus & Company, Inc: Thanks. Good morning. Most of my questions has been asked, but just a follow-up I think Rick, something you have said when you talked about, well we may see material increases in NPA that won't translate into net charge-off, is that function of the equity in the sense somebody deal [ph] or just a more aggressive work our policy or what would you live you to say that net charge-off may not materialize to the level as the NPA pass? Richard J. Johnson - Chief Financial Officer: It's ladder I think when you looked at the residential development space and average loans of 1.4 million, we just going to take some time or we've been the patience to work through them and just I've heard and believing that the actual ultimate charge-offs will we meet those levels. Collyn Gilbert - Stifel Nicolaus & Company, Inc: Okay. Richard J. Johnson - Chief Financial Officer: As well as the fact at the asset-based lending business. Collyn Gilbert - Stifel Nicolaus & Company, Inc: Okay. James E. Rohr - Chairman and Chief Executive Officer: They enroll loss given above [ph] ratios in the asset-based lending business. Collyn Gilbert - Stifel Nicolaus & Company, Inc: Okay. So you're speaking us to what's on... what's in the portfolio today, not necessarily identifying trends that maybe in the pipeline, but in terms of what's on the portfolio today, that would migrate to net charge-offs that would be fairly minimal? Richard J. Johnson - Chief Financial Officer: WellI wouldn't say minimal... Collyn Gilbert - Stifel Nicolaus & Company, Inc: Well, that's why I am worried about that. Richard J. Johnson - Chief Financial Officer: I would say wouldn't go to directly from non-performing loans straight to charge-offs, so I think we will have obviously good recoveries in the number of spots there. Collyn Gilbert - Stifel Nicolaus & Company, Inc: Okay, great. That was all. Thank you. William H. Callihan - Director of Investor Relations: Next question please?

Your next question comes from Matt Schultheis with Ferris, Baker Watts. William H. Callihan - Director of Investor Relations: Hello, Matt. Matthew Schultheis - Ferris, Baker Watts, Inc: Good morning. How are you guys? James E. Rohr - Chairman and Chief Executive Officer: Good. How are you? Matthew Schultheis - Ferris, Baker Watts, Inc: I have a quick question that has a very little bearing on PNC, but has some bearing some of our counter parties. When Sterling Financial were selling EFI loans, there were two types of frauds discovered, that I am aware of vapor loans, which were loans with absolutely no backing, and then fraud loans that actually had somebody down in the Carolinas, who was sort of playing along with the fraud. Towards the end Sterling was walking... was buying back the ting back the vapor loans, but they were walking away from the loans that had any body backing them and saying, well it was legitimate loan we have made even if it was fraudulent and than we are not going to buyback, you're going to have collect against them, and I was wondering what your intention is as far as repurchasing those backing? James E. Rohr - Chairman and Chief Executive Officer: I think, each and everyone of those loans is a unique situation, and frankly we really couldn't comment on what's Sterling was doing, and what we might do in the future, I think that's a customer relationship loan-by-loan and you know, we really wouldn't have a comment on how that, how that would be done. Matthew Schultheis - Ferris, Baker Watts, Inc: Okay. Thank you. William H. Callihan - Director of Investor Relations: Next question please?

Your next question comes from Mike Mayo with Deutsche Bank. Michael Mayo - Deutsche Bank: Follow-up, on one part of the call, are you said you had $100 million trading loss and then the release is $76 million, I don't know if this simply lining [ph] up or something else there, and then I... James E. Rohr - Chairman and Chief Executive Officer: It's net of our customer business. Michael Mayo - Deutsche Bank: I am sorry. James E. Rohr - Chairman and Chief Executive Officer: The proprietary trading was $100 million, the trading loss was 76, there was net of our... the profitability of the customer business. Michael Mayo - Deutsche Bank: Okay. And then so $100 million was proprietary related, and I am just... you pride [ph] yourself in a low risk profile. You have done better than the industry, here we have a regional bank with $100 million proprietary trading loss that's not client related. I am just try to reconcile those, so if you could help me? James E. Rohr - Chairman and Chief Executive Officer: We worried [ph] I mean quite frankly it was not very big, so we are very, very displeased about it, quite frankly and we would take an action to reduce that position to make sure that the moderate risk profile of what we believe that we should maintain and what we have in our credit side, this maintain in the trading side as well. Michael Mayo - Deutsche Bank: Is this group... where is this group located? Can you say that and are you back in a way from proprietary trading generally, I don't know? James E. Rohr - Chairman and Chief Executive Officer: We have significantly reduced our proprietary trading obviously. Michael Mayo - Deutsche Bank: All right. Thank you. Richard J. Johnson - Chief Financial Officer: And Mike one thing that shouldn't minimize the situation at all, but there is a significant amount of carry on this positions and net interest income, probably $20 million to $25 million that you are not seeing in the trading one. Michael Mayo - Deutsche Bank: All right. Thanks. Richard J. Johnson - Chief Financial Officer: Okay. James E. Rohr - Chairman and Chief Executive Officer: Well I don't think we should minimize the... Richard J. Johnson - Chief Financial Officer: Yes. James E. Rohr - Chairman and Chief Executive Officer: Unique quarter either or the unique month of... the unique March, I think usually, those group as I mentioned before has done a extraordinary job on our balance sheet positioning and the number of other things in our credit hedging and other thing, so they have done extraordinary job in most cases, quite frankly, this quarter which shows remarkable volatility, and I'll show the... in reverse volatility and the ability to hedge, the hedge risk I think it shows just that this is just not a due diligence [ph] not a place where we should be explaining lot of time trading assets. William H. Callihan - Director of Investor Relations: Operator, we have time for one more question.

Your next question comes from Bob Hughes of KBW. William H. Callihan - Director of Investor Relations: Hello, Bob. Robert Hughes - Keefe, Bruyette & Woods: Hey, guys I just have one follow-up after digesting our prior answer Rick, the... If the LIBOR fund spread widen I know you are comfortable with the guidance for net interest income. Does that have any meaningful implementations for other areas of he bank perhaps trading positions or anything else that you'd be able to discuss? Richard J. Johnson - Chief Financial Officer: Well of course if the credit spreads just continued to widen from there already extraordinary wide levels today then there is always risk that as I mentioned in CMBS portfolio trading positions although we reduce the risk dramatically you still could have further impacts there, you could have further impacts and are available for sale portfolio if spreads widen, but again I think those overall... those are illiquid valuation adjustments as opposed to real credit losses. Robert Hughes - Keefe, Bruyette & Woods: Sure, sure. Richard J. Johnson - Chief Financial Officer: So we are comfortable with that. Robert Hughes - Keefe, Bruyette & Woods: You know, I was talking more specific about the LIBOR fed fund spread, not credit spreads in general. James E. Rohr - Chairman and Chief Executive Officer: I think it's important to know when we look at credit spreads the way that we haven't seen in 20 years, and show the ability to had assets in those market and fund them at a very, very profitable spread with an excellent return and economic capital is unique to this, so I know... I know we talk a lot about the difficulties we've had in the mark-to-market because spreads are widen. But, quite frankly on the other side of the balance and loan portfolios and we talked about how margin has increase this quarter, it will increase next quarter, net interest income was growing a lot these wider spreads are benefited us to a great extent in lot of our assets, so high quality assets and the asset side of what this is, the bad news we talk about the mark-to-market, but there is good news in lots of other parts of the balance sheet. Robert Hughes - Keefe, Bruyette & Woods: True. And we've got some discussion about this in the past, but... James E. Rohr - Chairman and Chief Executive Officer: Are you there, Bob? Richard J. Johnson - Chief Financial Officer: Bob? James E. Rohr - Chairman and Chief Executive Officer: Bob? William H. Callihan - Director of Investor Relations: Operator?

Yes, sir, just one moment. James E. Rohr - Chairman and Chief Executive Officer: Hello? William H. Callihan - Director of Investor Relations: Operator?

Okay, sir. Please proceed. William H. Callihan - Director of Investor Relations: Bob are you still there? James E. Rohr - Chairman and Chief Executive Officer: Hello, Bob? William H. Callihan - Director of Investor Relations: Well I think we just need to go ahead and wrap up, gentlemen. James E. Rohr - Chairman and Chief Executive Officer: Okay. Thank you very much for joining us this morning, and please feel free to call Bill or any of us if you have any further question. Richard J. Johnson - Chief Financial Officer: Thank you.

Thank you for participating on today's PNC Financial Services Group earnings conference call. You may now disconnect.