8-K

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 8-K

                                 CURRENT REPORT
     PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934


                                  JUNE 2, 2003
                DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)



                     THE PNC FINANCIAL SERVICES GROUP, INC.
             (Exact name of registrant as specified in its charter)

                          COMMISSION FILE NUMBER 1-9718


               PENNSYLVANIA                                25-1435979
      (State or other jurisdiction of                    (I.R.S. Employer
      incorporation or organization)                   Identification No.)

                                  ONE PNC PLAZA
                                249 FIFTH AVENUE
                       PITTSBURGH, PENNSYLVANIA 15222-2707
          (Address of principal executive offices, including zip code)


                                 (412) 762-2000
              (Registrant's telephone number, including area code)

          (Former name or former address, if changed since last report)







ITEM 5.  OTHER EVENTS AND REGULATION FD DISCLOSURE

On June 2, 2003, PNC ICLC Corp. ("PNCICLC"), an indirect non-bank subsidiary of
The PNC Financial Services Group, Inc. ("PNC"), entered into a Deferred
Prosecution Agreement (the "Deferred Prosecution Agreement") with the United
States Department of Justice, Criminal Division, Fraud Section (the "Department
of Justice"). A copy of the Deferred Prosecution Agreement is attached hereto as
Exhibit 99.1, and is incorporated by reference herein. The description of the
Deferred Prosecution Agreement as set forth herein is qualified in its entirety
by reference to the actual text of the agreement. PNC has issued a press release
relating to the Deferred Prosecution Agreement which is attached hereto as
Exhibit 99.2 and incorporated herein by reference. PNC has also prepared a
Question and Answer sheet which is attached hereto as Exhibit 99.3 and
incorporated herein by reference.

Pursuant to the terms of the Deferred Prosecution Agreement, the United States
will file a complaint in the United States District Court for the Western
District of Pennsylvania charging PNCICLC with conspiracy to commit securities
fraud, in violation of Title 18, United States Code, Section 371. The Department
of Justice will recommend to the Court that the prosecution of PNCICLC be
deferred for a period of twelve (12) months in light of PNCICLC's exceptional
remedial actions to date and its willingness to acknowledge responsibility for
its behavior, continue its cooperation with the Department of Justice and other
governmental regulatory agencies, demonstrate its future good faith conduct and
full compliance with the securities laws and generally accepted accounting
principles and consent to the establishment of a restitution fund and the
assessment of a monetary penalty as further described below. The Department of
Justice has further agreed that if PNCICLC is in full compliance with all of its
obligations under the Deferred Prosecution Agreement, the Department of Justice
will seek dismissal with prejudice of the complaint within 30 days of the twelve
month anniversary of the agreement and at such time the agreement shall be
terminated.

Under the terms of the Deferred Prosecution Agreement, PNCICLC accepts and
acknowledges responsibility for its behavior in connection with the PAGIC
transactions and agrees to cooperate fully with the Department of Justice in its
ongoing investigation of others. PNCICLC has agreed to pay a total of $90
million to establish a fund for victim restitution, including for the settlement
of any pending shareholder securities litigation, payable within 30 days of the
date of the agreement. The fund will be administered by former Federal Judge
Arlin Adams. PNCICLC has also agreed to pay a monetary penalty of $25 million to
the United States Treasury within 10 days of the date of the agreement.

As previously disclosed, the PAGIC transactions were the subject of a July 2002
consent order entered into between PNC and the United States Securities and
Exchange Commission (the "SEC") and the subject of a separate written agreement
that was entered into between PNC and the Federal Reserve. The Deferred
Prosecution Agreement brings closure to the main governmental investigations
applicable to PNC and its affiliates stemming from the 2001 transactions, though
such investigations continue as to others, with respect to which PNC has
committed its full cooperation. The Deferred Prosecution Agreement was entered
into by the Department of Justice in light of PNCICLC's exceptional remedial
actions to date, and its willingness to acknowledge responsibility for its
behavior in connection with the PAGIC





                                       2


transactions through the undertakings set forth in the agreement and through its
continued cooperation with the government regarding these matters. The agreement
has also been designed to avoid the imposition of adverse collateral
consequences relating to PNC's important banking, brokerage, asset management,
fiduciary and processing businesses, which businesses had no improper
involvement in the conduct associated with PNCICLC and the PAGIC transactions.
While the Deferred Prosecution Agreement has been entered into by PNCICLC with
the objective of avoiding material adverse financial consequences for PNC or its
affiliates beyond the funding responsibilities related to the restitution fund
and the monetary penalty called for under the agreement, PNC may incur
additional expenses and collateral costs associated PNCICLC's entry into the
agreement, the impact of which can not be fully assessed at this time.

As previously disclosed, there is a putative class action lawsuit pending
against PNC relating to the PAGIC transactions. There can be no assurance as to
the impact or effect that PNCICLC's entry into the Deferred Prosecution
Agreement may have on the outcome of this lawsuit or related claims. PNC
believes that it has substantial defenses against such claims, including through
the assertion of claims against other third parties. The $90 million that
PNCICLC has committed to fund for victim restitution under the Deferred
Prosecution Agreement will be available to satisfy PNC shareholder claims,
including for the settlement of the pending shareholder securities law
litigation.

The Statement of Facts attached to the Deferred Prosecution Agreement sets forth
the government's factual predicate for the complaint that has been filed in
connection with the Deferred Prosecution Agreement. PNCICLC has acknowledged and
accepted responsibility for its behavior as set forth in the Statement of Facts
by entering into the Deferred Prosecution Agreement and by, among other things,
the extensive remedial actions that it has taken to date, its continuing
commitment of full cooperation with the Department of Justice and other
governmental agencies and its agreement to establish a restitution fund and the
other undertakings it has made in the Deferred Prosecution Agreement. PNCICLC
has agreed that if future criminal proceedings were to be brought in the event
of any breach by it of the Deferred Prosecution Agreement, PNCICLC would not
contest the admissibility of the Statement of Facts in any such proceedings.
Consistent with PNCICLC's obligations under the Deferred Prosecution Agreement,
PNCICLC is permitted to raise defenses and/or assert affirmative claims in civil
and regulatory proceedings relating to the matters set forth in the Statement of
Facts. In the Statement of Facts knowledge has been attributed to PNCICLC by the
government under corporate attribution and collective knowledge doctrines, and
subject to PNCICLC's obligations under the Deferred Prosecution Agreement,
PNCICLC may assert that knowledge referred to therein may have been limited to
only selected individuals associated with PNCICLC or to the collective knowledge
of selected individuals. Any such defenses, claims or limitations are by no
means meant to diminish PNCICLC's acknowledgement of responsibility relating to
such matters.

PNCICLC did not act alone in connection with the PAGIC transactions, and PNC has
agreed to cooperate fully with the government in connection with its ongoing
investigation of others. Such parties share a large part of the responsibility
for the actions taken in connection with the PAGIC transactions, and PNC has
preserved its rights to pursue claims relating to the PAGIC matters against
other third party actors. PNC strongly disapproves of any and all improper
conduct that



                                       3


occurred in connection with the PAGIC matters, and the PNC Board and management
team have made it clear that PNC will have zero tolerance for such conduct by
PNC related parties or others.

PNC does not anticipate that the entry by PNCICLC into the Deferred Prosecution
Agreement will have any impact on PNC's dividend policy.

PNC's previously announced stock repurchase program, under which it is
authorized to repurchase up to 35 million shares of common stock through
February 29, 2004, continues in effect. Under this program, PNC has purchased
4.4 million shares in 2003 to date at a total cost of $193 million. The extent
and timing of share repurchases during the remainder of the year will depend on
a number of factors including, among others, market and general economic
conditions, regulatory capital considerations, alternative uses of capital and
the potential impact on PNC's credit rating. Under applicable regulations, as
long as PNC remains subject to its written agreement with the Federal Reserve
Bank of Cleveland, it must obtain prior regulatory approval to repurchase its
common stock in amounts that exceed 10 percent of its consolidated net worth in
any 12-month period. A total of 4.7 million common shares have been repurchased
under this program from inception through the date hereof.

FORWARD-LOOKING STATEMENTS

This report contains, and other statements that PNC may make may contain,
forward-looking statements with respect to PNC 's outlook or expectations for
earnings, revenues, expenses, capital levels, asset quality or other future
financial or business performance, strategies or expectations, or the impact of
legal, regulatory or supervisory matters on PNC's business operations or
performance. Forward-looking statements are typically identified by words or
phrases such as "believe," "feel," "expect," "anticipate," "intend," "outlook,"
"estimate," "forecast," "project," "position," "target," "assume," "achievable,"
"potential," "strategy," "goal," "objective," "plan," "aspiration," "outcome,"
"continue," "remain," "maintain," "seek," "strive," "trend," and variations of
such words and similar expressions, or future or conditional verbs such as
"will," "would," "should," "could," "might," "can," "may," or similar
expressions.

PNC cautions that forward-looking statements are subject to numerous
assumptions, risks and uncertainties, which change over time. Forward-looking
statements speak only as of the date they are made, and the Corporation assumes
no duty and does not undertake to update forward-looking statements. Actual
results could differ materially from those anticipated in forward-looking
statements and future results could differ materially from historical
performance.

In addition to factors mentioned elsewhere in this report or previously
disclosed in PNC's SEC reports (accessible on PNC's website at www.pnc.com and
on the SEC's website at www.sec.gov), the following factors, among others, could
cause actual results to differ materially from those anticipated in
forward-looking statements or from historical performance:

(1) changes in political, economic or industry conditions, the interest rate
environment or financial and capital markets, which if adverse could result in:
a deterioration in credit quality, increased credit losses, and increased
funding of unfunded loan commitments and letters of



                                       4


credit; an adverse effect on the allowances for credit losses and unfunded loan
commitments and letters of credit; a reduction in demand for credit or fee-based
products and services; a reduction in net interest income, value of assets under
management and assets serviced, value of private equity investments and of other
debt and equity investments, value of loans held for sale or value of other
on-balance sheet and off-balance sheet assets; or changes in the availability
and terms of funding necessary to meet PNC's liquidity needs; (2) relative and
absolute investment performance of assets under management; (3) the
introduction, withdrawal, success and timing of business initiatives and
strategies, decisions regarding further reductions in balance sheet leverage,
the timing and pricing of any sales of loans held for sale, and PNC's inability
to realize cost savings or revenue enhancements, or to implement integration
plans relating to or resulting from mergers, acquisitions, restructurings and
divestitures; (4) customer borrowing, repayment, investment and deposit
practices and their acceptance of PNC's products and services; (5) the impact of
increased competition; (6) how PNC chooses to redeploy available capital,
including the extent and timing of any share repurchases and investments in PNC
businesses; (7) the inability to manage risks inherent in PNC's business; (8)
the unfavorable resolution of legal proceedings or government inquiries; the
impact of increased litigation risk from recent regulatory and other
governmental developments; and the impact of reputational risk created by recent
regulatory and other governmental developments on such matters as business
generation and retention, the ability to attract and retain management,
liquidity and funding, (9) the denial of insurance coverage for claims made by
PNC; (10) an increase in the number of customer or counterparty delinquencies,
bankruptcies or defaults that could result in, among other things, increased
credit and asset quality risk, a higher provision for credit losses and reduced
profitability; (11) the impact, extent and timing of technological changes, the
adequacy of intellectual property protection and costs associated with obtaining
rights in intellectual property claimed by others; (12) actions of the Federal
Reserve Board; (13) the impact of legislative and regulatory reforms and changes
in accounting policies and principles; (14) the impact of the regulatory
examination process, the Corporation's failure to satisfy the requirements of
written agreements with regulatory and other governmental agencies, and
regulators' future use of supervisory and enforcement tools; and (15) terrorist
activities and international hostilities, including the situations surrounding
Iraq and North Korea, which may adversely affect the general economy, financial
and capital markets, specific industries, and the Corporation.

ITEM 7.  FINANCIAL STATEMENTS AND EXHIBITS.

(c)      Exhibits.

The exhibits listed on the Exhibit Index on page 7 of this Form 8-K are filed
herewith.




                                       5



                                   SIGNATURES

         Pursuant to the requirements of the Exchange Act, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.

                                        THE PNC FINANCIAL SERVICES GROUP, INC.
                                        (Registrant)

Date:  June 2, 2003                     By:  /s/ William S. Demchak
                                            -----------------------------
                                            William S. Demchak
                                            Vice Chairman and
                                            Chief Financial Officer




                                       6




                                  EXHIBIT INDEX


99.1     Deferred Prosecution Agreement between PNC ICLC Corp.
         and the United States Department of Justice

99.2     Press Release dated June 2, 2003

99.3     Question and Answer Sheet



                                       7

EX-99.1

                                                                  EXHIBIT 99.1

                       IN THE UNITED STATES DISTRICT COURT
                    FOR THE WESTERN DISTRICT OF PENNSYLVANIA



UNITED STATES OF AMERICA,                   )
                                            )
                  Plaintiff,                )
                                            )    CRIMINAL NO.
vs.                                         )
                                            )    VIOLATION:
PNC ICLC CORP.,                             )    18 U.S.C. Sec. 371
a Delaware Corporation,                     )
                                            )    (Conspiracy to Commit
                  Defendant.                )    Securities Fraud)



                         DEFERRED PROSECUTION AGREEMENT

         Defendant PNC ICLC CORP. ("PNCICLC"), a Delaware Corporation, by its
undersigned attorneys, pursuant to authority granted by its Board of Directors,
and the United States Department of Justice, Criminal Division, Fraud Section
(the "Fraud Section"), enter into this Deferred Prosecution Agreement
("Agreement").

         1. PNCICLC accepts and acknowledges that the United States will file a
criminal complaint in the United States District Court for the Western District
of Pennsylvania charging PNCICLC with conspiracy to commit securities fraud, in
violation of Title 18, United States Code, Section 371.

         2. PNCICLC accepts and acknowledges responsibility for its behavior as
set forth in the Statement of Facts attached hereto as Annex A and incorporated
by reference herein by entering into this Agreement and by, among other things,
the extensive remedial actions that it has taken to date, its continuing
commitment of full cooperation with the Fraud Section and other governmental
agencies, and its agreement to establish a restitution fund and the other
undertakings it has made as set forth herein.

         3. PNCICLC expressly agrees that it shall not, through its present or
future attorneys, board of directors, agents, officers or employees, make any
public statement contradicting any statement of fact contained in the Statement
of Facts. Any such contradictory public statement by PNCICLC, its present or
future attorneys, board of directors, agents, officers or employees, shall
constitute a breach of this Agreement as governed by paragraph 12 of this
Agreement, and PNCICLC would thereafter be subject to prosecution pursuant to
the terms of this Agreement. The decision of whether any public statement by any
such person contradicting a fact contained in the Statement of Facts will be
imputed to PNCICLC for the purpose of determining whether PNCICLC has breached
this Agreement shall be at the sole discretion of the



                                       1


Fraud Section. Should the Fraud Section decide at its sole discretion to notify
PNCICLC of a public statement by any such person that in whole or in part
contradicts a statement of fact contained in the Statement of Facts, PNCICLC may
avoid breach of this Agreement by publicly repudiating such statement within 48
hours after such notification. PNCICLC agrees that in the event that future
criminal proceedings were to be brought in accordance with Paragraphs 12 and 14
of this Agreement PNCICLC will not contest the admissibility of the Statement of
Facts in any such proceedings. Consistent with PNCICLC's obligations as set
forth above, PNCICLC shall be permitted to raise defenses and/or assert
affirmative claims in civil and regulatory proceedings relating to the matters
set forth in the Statement of Facts.

         4. During the term of this Agreement, PNCICLC agrees to cooperate fully
with the Fraud Section, and with any other agency designated by the Fraud
Section, regarding any matter about which PNCICLC has knowledge.

         5. PNCICLC agrees that its cooperation, as agreed to in Paragraph 4
above, shall include, but is not limited to, the following: Completely and
truthfully disclosing all information with respect to the activities of PNCICLC
and its affiliates, and its present and former officers, agents, and employees,
concerning all matters inquired into by the Fraud Section as may be requested by
the Fraud Section; Assembling, organizing and providing on request from the
Fraud Section, all documents, records, or other tangible evidence in PNCICLC's
possession, custody, or control; Not asserting a claim of attorney-client or
work-product privilege as to any documents, information, or testimony requested
by the Fraud Section related to factual internal investigations or
contemporaneous advice given to PNCICLC concerning the conduct at issue. In
making production of any such documents, PNCICLC neither expressly nor
implicitly waives its right to assert any privilege with respect to the produced
documents or the subject matters thereof that is available under law against
non-parties to this Agreement. Using its best efforts to make available its
employees to provide information and/or testimony as requested by the Fraud
Section, including sworn testimony before a federal grand jury or in federal
trials, as well as interviews with federal law enforcement authorities.
Cooperation under this paragraph will include identification of witnesses who,
to PNCICLC's knowledge, may have material information regarding the matters
under investigation. Using its best efforts to make available for interviews, or
for testimony, present or former PNCICLC officers, directors, and employees as
requested by the Fraud Section. Providing testimony and other information deemed
necessary by the Fraud Section or a court to identify or establish the original
location, authenticity, or other evidentiary foundation necessary to admit into
evidence documents in any criminal or other proceeding as requested by the Fraud
Section. Remaining a viable institution during the duration of this agreement.

         6. PNCICLC shall continue to comply with any currently in force
agreements between PNCICLC and the Securities and Exchange Commission or any
other federal agency as long as any such agreements shall remain in effect; as
any such agreements may be amended or modified or terminated from time to time
by the respective parties to said agreements.

         7. PNCICLC agrees to pay a total of $90,000,000 dollars into a fund
established for victim restitution, including for the settlement of any pending
shareholder




                                       2


securities law litigation, payable within 30 days of execution of this
Agreement. The payment of this money into the fund shall not constitute an
adjudication of any individual claim asserted or to be asserted by any victim.
The fund will be administered by a third party administrator selected by PNCICLC
and acceptable to the Fraud Section, who shall, at six months intervals from the
execution of this agreement, and at the conclusion of the distribution of the
fund, provide to the Fraud Section and PNCICLC reports identifying the name and
address of each recipient of a portion of the fund and the amount of the fund
distributed to each recipient. None of the proceeds of the fund shall be payable
as attorney's fees. All costs of administering the victim fund are to be borne
by PNCICLC. To the extent that any money in the fund is not claimed by victims
within four (4) years, the remaining amount shall revert to the United States
Treasury.

         8. PNCICLC agrees to pay a monetary penalty of $25,000,000 dollars to
the United States Treasury, payable within 10 days of execution of this
Agreement.

         9. In light of PNCICLC's exceptional remedial actions to date and its
willingness to (i) acknowledge responsibility for its behavior; (ii) continue
its cooperation with the Fraud Section and other governmental regulatory
agencies; (iii) demonstrate its future good conduct and full compliance with the
securities laws and generally accepted accounting procedures; and (iv) consent
to payment into a restitution fund and the assessment of the monetary penalty as
set forth in paragraphs 7 and 8 above, the Fraud Section shall recommend to the
Court that prosecution of PNCICLC on the criminal complaint filed pursuant to
Paragraph 1 be deferred for a period of 12 months.

         10. The Fraud Section agrees that if PNCICLC is in full compliance with
all of its obligations under this Agreement, the Fraud Section, within thirty
(30) days of the expiration of 12 months from the date of this Agreement, will
seek dismissal with prejudice of the criminal complaint filed against PNCICLC
pursuant to Paragraph 1 and this Agreement shall expire.

         11. Should the Fraud Section determine during the term of this
Agreement that PNCICLC has committed any federal crime commenced subsequent to
the date of this Agreement, PNCICLC shall, in the sole discretion of the Fraud
Section, thereafter be subject to prosecution for any federal crimes of which
the Fraud Section has knowledge. Except in the event of a breach of this
Agreement, it is the intention of the parties to this Agreement that all
investigations relating to the matters set forth in the Statement of Facts that
have been, or could have been, conducted by the Fraud Section prior to the date
of this Agreement shall not be pursued further as to PNCICLC.

         12. Should the Fraud Section determine that PNCICLC has committed a
willful and knowingly material breach of any provision of this Agreement, the
Fraud Section shall provide written notice to PNCICLC of the alleged breach and
provide PNCICLC with a two-week period in which to make a presentation to the
Assistant Attorney General in charge of the Criminal Division to demonstrate
that no breach has occurred, or, to the extent applicable, that the breach is
not willful or knowingly material or has been cured. The parties hereto
expressly understand and agree that should PNCICLC fail to make a presentation
to the Assistant Attorney General in charge of the Criminal Division within a
two-week period, it shall be



                                       3


conclusively presumed that PNCICLC is in willful and material breach of this
Agreement. The parties further understand and agree that the Assistant Attorney
General's exercise of discretion under this paragraph is not subject to review
in any court or tribunal outside the Criminal Division of the Department of
Justice. In the event of a breach of this Agreement that results in a
prosecution of PNCICLC, such prosecution may be premised upon any information
provided by or on behalf of PNCICLC to the Fraud Section at any time, unless
otherwise agreed when the information was provided.

         13. PNCICLC shall expressly waive all rights to a speedy trial pursuant
to the Sixth Amendment of the United States Constitution, Title 18, United
States Code, Section 3161, Federal Rule of Criminal Procedure 48(b), and any
applicable Local Rules of the United States District Court for the Western
District of Pennsylvania for the period that this Agreement is in effect.

         14. In case of the willful and knowingly material breach of this
Agreement, any prosecution of PNCICLC relating to the PAGIC transactions that
are not time-barred by the applicable statute of limitations as of the date of
this Agreement may be commenced against PNCICLC notwithstanding the expiration
of any applicable statute of limitations during the deferred prosecution period
and up to the determination of any such willful and knowingly material breach.
PNCICLC's waiver of the statute of limitations is knowing and voluntary and in
express reliance on the advice of counsel.

         15. PNCICLC agrees that, if it sells or merges all or substantially all
of its business operations as they exist as of the date of this Agreement to or
into a single purchaser or group of affiliated purchasers during the term of
this Agreement, it shall include in any contract for sale or merger a provision
binding the purchaser/successor to the obligations described in this Agreement.

         16. It is understood that this Agreement is binding on PNCICLC, the
Fraud Section and the United States Attorneys Office for the Western District of
Pennsylvania, but specifically does not bind any other federal agencies, or any
state or local law enforcement or licensing authorities, although the Fraud
Section will bring the cooperation of PNCICLC and its compliance with its other
obligations under this Agreement to the attention of state and local law
enforcement or licensing authorities, if requested by PNCICLC or its attorneys.
This Agreement also excludes any natural persons.

         17. PNCICLC and the Fraud Section agree that, upon filing of the
criminal complaint in accordance with Paragraph 1, this Agreement shall be
publicly filed in the United States District Court for the Western District of
Pennsylvania.

         18. This Agreement sets forth all the terms of the Deferred Prosecution
Agreement between PNCICLC and the Fraud Section. No modifications or additions
to this Agreement shall be valid unless they are in writing and signed by the
Fraud Section, PNCICLC's attorneys, and a duly authorized representative of
PNCICLC.




                                       4


                                ON BEHALF OF THE GOVERNMENT
June 2, 2003                    /s/ Joshua R. Hochberg
- ------------                    ----------------------------------------------
DATE                            JOSHUA R. HOCHBERG
                                Acting United States Attorney
                                United States Attorneys Office
                                Western District of Pennsylvania

                                Chief, Fraud Section
                                Criminal Division
                                United States Department of Justice


June 2, 2003                    /s/ John D. Arterberry
- ------------                    ----------------------------------------------
DATE                            JOHN D. ARTERBERRY
                                Deputy Chief, Fraud Section
                                Criminal Division
                                United States Department of Justice


June 2, 2003                    /s/ Paul E. Pelletier
- ------------                    ----------------------------------------------
DATE                            PAUL E. PELLETIER
                                Special Counsel for Litigation, Fraud Section
                                Criminal Division
                                United States Department of Justice


June 2, 2003                    /s/ Michael K. Atkinson
- ------------                    ----------------------------------------------
DATE                            MICHAEL K. ATKINSON
                                Trial Attorney, Fraud Section
                                Criminal Division
                                United States Department of Justice

June 2, 2003                    /s/ Christine Lee
- ------------                    ----------------------------------------------
DATE                            CHRISTINE LEE
                                Trial Attorney
                                Antitrust Division
                                United States Department of Justice



                                       5




                                   APPENDIX A


                       IN THE UNITED STATES DISTRICT COURT
                    FOR THE WESTERN DISTRICT OF PENNSYLVANIA


UNITED STATES OF AMERICA,                )
                                         )
                  Plaintiff,             )
                                         )     CRIMINAL NO.
vs.                                      )
                                         )     VIOLATION:
PNC ICLC CORP.,                          )     18 U.S.C. Sec. 371
a Delaware Corporation,                  )
                                         )     (Conspiracy to Commit
                  Defendant.             )     Securities Fraud)

                               STATEMENT OF FACTS

1. Defendant PNC ICLC CORP. (hereinafter "PNCICLC"), is a wholly owned indirect
subsidiary of THE PNC FINANCIAL SERVICES GROUP, INC. (hereinafter "PNC"). PNC is
a bank holding company and is the holding company for PNC Bank, National
Association ("PNC Bank") and other bank and nonbank subsidiaries. PNC operates
community banking, corporate banking, real estate finance, asset-based lending,
wealth management, asset management and global fund services businesses. PNC's
primary geographic markets are in Pennsylvania, New Jersey, Delaware, Ohio and
Kentucky. Certain of PNC's securities are registered with the United States
Securities and Exchange Commission ("SEC") pursuant to Section 12(b) of the
Exchange Act and listed on the New York Stock Exchange. Federal banking and
securities laws and regulations required PNC to provide periodic regulatory and
financial reports concerning its operations and conditions.

2. Prior to and throughout 2001, PNC and PNCICLC reviewed various strategies to
manage the volatility and improve the quality of the assets on PNC's balance
sheet. During 2001, in furtherance of this strategy, PNC and PNCICLC entered
into three transactions (each a "PAGIC transaction") involving a total of $762
million in assets for the purpose of transferring certain loans and venture
capital assets from PNC's balance sheet to other entities (each a "PAGIC
entity"). PNC engaged in the PAGIC transactions through PNCICLC, which was the
owner of PNC's interests in each of the PAGIC entities. The PAGIC entities were
specifically created by PNCICLC for the purpose of the PAGIC transactions and
were intended to be treated by PNC and PNCICLC as off-balance sheet "special
purpose entities" or "SPEs" under applicable accounting principles commonly
referred to as "Generally Accepted Accounting Principles" or "GAAP." PNC's
ability under GAAP to account for the PAGIC entities as off-balance sheet SPEs,
i.e., as if PNC no longer owned the assets transferred to those entities,
depended upon whether or not the transactions complied with the GAAP
requirements for nonconsolidation. At the time PNCICLC entered into the PAGIC
transactions, there were three main GAAP requirements for nonconsolidation and
sales recognition by the sponsor or transferor to be appropriate: (1) the



                                       1


majority owner of the SPE must be an independent third party who has made a
substantive capital investment in the SPE, (2) the independent third party must
have control of the SPE, and (3) the majority owner must have substantive risks
and rewards of ownership of the SPE.

3. Each PAGIC transaction violated the GAAP requirements for nonconsolidation of
SPEs. Therefore, PNC's second and third quarter 2001 regulatory reports and
financial statements did not conform with GAAP for such off-balance sheet
treatment. PNC improperly treated the transfers of assets to the PAGIC entities
as sales qualifying for nonconsolidation, when it should have included the
assets of the PAGIC entities in PNC's regulatory reports and financial
statements, i.e., consolidated those assets into those statements and reports.
This failure to consolidate, combined with the requirement that the PAGIC assets
be characterized as "held for sale" assets when consolidated on PNC's balance
sheet, resulted, among other things, in (a) a material overstatement of PNC's
earnings per share for the third quarter of 2001 by 21.4%, (b) a material
understatement of PNC's fourth quarter 2001 loss per share of 25% in a January
3, 2002 and January 17, 2002 press release, (c) a material overstatement of 2001
earnings per share by 52% in a January 17, 2002 press release, (d) material
understatements of the amounts of PNC's nonperforming loans and nonperforming
assets, and (e) material overstatements of the amounts of reductions in loans
held for sale and overstatements in the amounts of securities available for
sale.

4. The PAGIC structure was designed and marketed by a large insurance company
(the "Insurance Company") and a national accounting firm (the "National
Accounting Firm") as an allegedly innovative structure for permitting
off-balance sheet treatment of troubled assets. It was originally designed by
such firms in this context to change the character of a pool of assets as
reflected on a company's books from loans to securities and to permit changes in
the valuation of those assets (either mark-to-market valuations, impairments or
additional reserves) to be reflected as an adjustment to equity in the balance
sheet (a "below-the-line" adjustment). This would have the effect of reducing
earnings volatility because the changes period-to-period in valuation of the
underlying assets would not flow through to the company's income statement. The
National Accounting Firm also served as both PNC's external and internal auditor
during the period in which the three PAGIC transactions were entered into.

5. Each PAGIC transaction involved the creation of two limited liability
companies, one of which sold a substantial ownership interest (97%) to PNCICLC
and the remaining interest (3%) to a subsidiary of the Insurance Company. With
funds received in exchange for its shares, each PAGIC entity purchased loans or
venture capital assets from PNC; some assets were acquired directly in exchange
for shares. Many of the loans and assets transferred by PNCICLC to the SPEs were
volatile, troubled, or nonperforming.

6. In each of the second, third and fourth quarters of 2001, PNCICLC entered
into a PAGIC transaction. The first PAGIC transaction ("PAGIC I") closed on June
28, 2001 (two days before the end of PNC's second quarter). The second PAGIC
transaction ("PAGIC II") closed on September 27, 2001 (three days before the end
of PNC's third quarter). The third PAGIC transaction ("PAGIC III") closed on
November 30, 2001. The PAGIC III transaction was entered into by PNC Venture
Corp. ("PNC Venture"), a separate indirect wholly owned subsidiary of PNC.
PNCICLC subsequently acquired from PNC Venture all of the assets and related
liabilities (including with respect to any conduct of PNC Venture in connection
with the PAGIC III




                                       2


transaction) associated with the PAGIC III transaction. All references to
PNCICLC herein include reference to PNCICLC as the successor in interest to PNC
Venture with respect to its conduct in connection with the PAGIC III
transaction. In its original regulatory and financial reports filed with the
Federal Reserve Board and the SEC, respectively, for the second and third
quarters of 2001, PNC treated the PAGIC entities as valid SPEs and applied the
accounting treatment that the National Accounting Firm had indicated would be
applicable to valid SPEs - i.e., a de-consolidation and reclassification of the
underlying PAGIC assets.

7. On January 29, 2002, PNC issued a press release announcing revisions to
second and third quarter 2001 financial statements to reflect consolidation of
the PAGIC transactions, with the underlying assets being treated as "held for
sale" in the consolidation. The press release disclosed that consolidation would
reduce 2001 net income by $155 million, equivalent to an overstatement of
earnings per share by 38%, from $1.91 per share to $1.38 per share. The press
release also disclosed that nonperforming assets would increase by approximately
$125 million to approximately $393 million. The price of PNC's shares dropped
9.4% that day from $61.87 per share to $56.08 per share.

         PAYMENT OF A DE FACTO STRUCTURING FEE OR BALANCE SHEET RENTAL FEE MEANT
         THE PAGIC TRANSACTIONS HAD TO BE CONSOLIDATED ON PNC'S FINANCIAL
         STATEMENTS AND REGULATORY REPORTS.

8. The PAGIC transactions failed to satisfy GAAP's requirement for
non-consolidation of SPEs that the independent third party, i.e., the Insurance
Company, make and retain a substantive capital investment in the SPEs and,
therefore, the SPEs should have been consolidated on PNC's financial statements
and regulatory reports. At the time of the PAGIC transactions, three percent was
the minimally acceptable level under GAAP to indicate a substantive capital
investment sufficient for nonconsolidation, though a greater investment may be
necessary depending on the facts and circumstances. The payment of a
"structuring" fee or any other payments such as a "balance sheet rental" fee
that reflected an implicit return of capital to the Insurance Company would need
to be netted against the capital investment that was being made by the Insurance
Company in the PAGIC entities. Because each PAGIC structure involved only a
minimum 3% investment by the Insurance Company, any such fees or payments
required consolidation of the SPEs under GAAP on PNC's financial statements and
regulatory reports.

9. PNCICLC and the Insurance Company agreed to have the SPEs pay fees to the
Insurance Company, characterizing those fees as "management fees," while PNCICLC
knew that the "management fees" included compensation related to matters beyond
the management services to be provided to the PAGIC entities by the Insurance
Company. PNCICLC knew that this de facto "structuring fee" or "balance sheet
rental fee" reduced the Insurance Company's capital investment below the
minimally acceptable level under GAAP needed to qualify as a substantive capital
investment for nonconsolidation. PNCICLC understood that what was characterized
as "management fees" included payments to the Insurance Company to compensate
the Insurance Company for, among other things, the costs and burdens associated
with the consolidation of assets on the Insurance Company's balance sheet.




                                       3


10. To obtain the off-balance-sheet treatment of the PAGIC entities, PNCICLC and
the Insurance Company did not disclose the existence of a de facto structuring
fee or a balance sheet rental fee, and executed documents in each of the PAGIC
transactions that characterized the fees as "management fees."

         PNC'S RETENTION OF THE SUBSTANTIVE RISKS AND REWARDS OF OWNERSHIP OF
         THE SPES MEANT THE PAGIC TRANSACTIONS HAD TO BE CONSOLIDATED ON PNC'S
         FINANCIAL STATEMENTS AND REGULATORY REPORTS.

11. The PAGIC transactions also did not comply with another GAAP requirement for
nonconsolidation, namely that the Insurance Company, as the majority owner of
the SPEs, have the substantive risks and rewards of ownership in the SPEs.
Therefore, the SPEs should have been consolidated on PNC's financial statements
and regulatory reports. Before entering into the PAGIC transactions, both the
Insurance Company and PNCICLC knew that the Insurance Company, as the majority
owner of the SPE, must have substantive risks and rewards of ownership of the
assets of the SPEs. PNCICLC and the Insurance Company, however, knew that the
PAGIC structures included financial terms that in substance resulted in PNC
retaining substantive risk and rewards of changes in the underlying values of
the assets held by the PAGIC entities.

12. PNCICLC contacted a New York law firm (the "New York Law Firm") regarding
the issuance of a "true sale" opinion for the first PAGIC transaction, but after
this firm expressed initial concerns about the firm's ability to deliver a "true
sale" opinion PNCICLC replaced the New York Law Firm as the requested author
with a Pittsburgh law firm (the "Pittsburgh Law Firm").

13. In PAGIC III, PNCICLC engaged a Washington, D.C. law firm (the "Washington,
D.C. Law Firm") to help structure the transaction as well as initially to
provide a "true sale" opinion for the transaction. The Washington, D.C. law firm
noted in a memorandum that a main objective of the transaction was to assure
that PNC derived the greatest portion of the economic value of the deal and the
Insurance Company's participation was primarily fee, not equity, driven. The
Pittsburgh Law Firm ultimately was retained to provide and did provide the true
sale opinion for PAGIC III.

14. PNCICLC knew that PNC, rather than the Insurance Company, retained the
substantial risks and rewards of ownership of the contributed assets. In
particular, PNCICLC knew that the Insurance Company had no substantive exposure
to declines in the values of the PAGIC entities because the Insurance Company's
investments in those entities were tied substantively to the performance of
highly-rated debt obligations or demand deposits and time deposits with
maturities of one month or less. PNCICLC also knew that PNC, rather than the
Insurance Company, would retain substantially all of the economic upside of its
investment in the assets transferred into the SPE by PNC through PNC's right to
convert its preferred interests into common stock.

15. Further, PNCICLC knew the so-called "management fees" effectively guaranteed
the Insurance Company against a risk of loss of principal in the SPEs because
the Insurance Company would receive fees in less than five years of closing the
PAGIC transactions that exceeded the Insurance Company's capital investment.



                                       4


         REGULATORY MATTERS.

16. The PAGIC transactions were reviewed by the Federal Reserve Bank of
Cleveland and the Federal Reserve Board (the "Federal Reserve") as part of the
Federal Reserve's regulatory oversight of PNC. The PAGIC transactions were also
reviewed by the Office of the Comptroller of the Currency ("OCC") to evaluate
the impact to the bank as part of the OCC's regulatory oversight of PNC's
principal subsidiary, PNC Bank. As part of those agencies' review of the PAGIC
transactions, PNC submitted closing binders on the PAGIC transactions to the
Federal Reserve and the OCC. Included in those closing binders were guidance
letters obtained from the National Accounting Firm opining that
non-consolidation of the PAGIC entities was appropriate under GAAP.

17. In PAGIC I, which closed on June 28, 2001, the National Accounting Firm
dated its guidance letter as June 21, 2001. Although PNC had a draft of the
guidance letter from the National Accounting Firm before PAGIC I closed, PNC did
not obtain a final, signed guidance letter from the National Accounting Firm
until on or around July 18, 2001. PNC submitted closing binders on PAGIC I to
the Federal Reserve and the OCC on or around September 7, 2001 and September 14,
2001, respectively. PNC and the National Accounting Firm did not disclose to the
Federal Reserve or the OCC that the guidance letter for PAGIC I had been
back-dated to reflect a date prior to the closing of that transaction.

18. In PAGIC II, which closed on September 27, 2001, the National Accounting
Firm back-dated its guidance letter to September 21, 2001. PNC did not obtain a
first draft of the guidance letter for PAGIC II from the National Accounting
Firm until several months after the closing of PAGIC II.

19. In PAGIC III, which closed on November 30, 2001, the National Accounting
Firm back-dated its guidance letter to November 29, 2001. The National
Accounting Firm did not finalize the guidance letter on PAGIC III until on or
around December 12, 2001.

20. On October 23, 2001, the Federal Reserve sent a letter to PNC expressing
concern about the accounting treatment of the PAGIC I and PAGIC II transactions
and requesting additional information from PNC on those transactions. On October
24, 2001, Examiners of the Federal Reserve met with PNC to discuss third quarter
financial results and regulatory matters. At that meeting, PNC committed to the
Federal Reserve to discuss the issues raised in the October 23, 2001 letter
before completing any additional PAGIC transactions. PNC, however, subsequently
failed to properly inform the Federal Reserve as to the status of a potential
third PAGIC transaction. PNC decided in mid-November 2001 to accelerate the
closing of PAGIC III from December 31, 2001 to November 30, 2001. PNC did not
provide the Federal Reserve with prior or contemporaneous notice of the closing
of PAGIC III, and did not inform the Federal Reserve until December 4, 2001 that
PAGIC III had closed.

21. In its October 23, 2001 letter, the Federal Reserve requested that PNC
"[p]rovide relevant cites in GAAP and other information (e.g., opinion letter
from external accountants, etc.) that are available to support PNC's proposed
accounting treatment." Drafts of PNC's proposed responses




                                       5


included references to the fact that PNC had not yet obtained guidance letters
from the National Accounting Firm for PAGIC II and PAGIC III. The final version
of PNC's response, however, stated only that the National Accounting Firm's
opinion on PAGIC II and PAGIC III was consistent with its opinion letter issued
in connection with PAGIC I.

22. After submitting its written response to the Federal Reserve's October 23,
2001 letter, PNC submitted closing binders to the Federal Reserve for both the
PAGIC II and PAGIC III transactions, including the back-dated guidance letters
from the National Accounting Firm for those transactions. PNC had previously
provided a copy of the Federal Reserve's October 23, 2001 letter to the National
Accounting Firm and the National Accounting Firm actively participated in the
review of PNC's response to the letter. The National Accounting Firm knew PNC
intended to submit the guidance letters on the PAGIC transactions to the Federal
Reserve as part of the Federal Reserve's investigation into the appropriate
accounting treatment for the PAGIC transactions. Neither PNC nor the National
Accounting Firm informed the Federal Reserve that the guidance letters for PAGIC
II and III had been back-dated.

         PNC'S JANUARY 17, 2002 PRESS RELEASE

23. On January 3, 2002, PNC pre-released its earnings for the fourth quarter of
2001. In that press release, PNC announced that it had completed the strategic
repositioning of its banking businesses that it had begun in 1998. The amount of
nonperforming loans announced by PNC on January 3, 2002 did not include $172
million in nonperforming loans transferred into the PAGIC entities. PNC also
announced on January 3, 2002 that it would release on January 17, 2002 its
earnings for the fourth quarter and full-year 2001.

24. On January 11, 2002, in order to provide PNC with sufficient time to
consolidate the PAGIC transactions on to PNC's financial statements before PNC's
scheduled earnings release on January 17, 2002, the Federal Reserve informed PNC
that the Federal Reserve had reached the conclusion that PNC's accounting
treatment for the PAGIC transactions was incorrect under GAAP and that PNC must
consolidate the PAGIC transactions in its regulatory reports for the second,
third, and fourth quarters of 2001. The Federal Reserve also informed PNC that
the Federal Reserve had discussed its decision to require consolidation with the
SEC, including the SEC's Office of Chief Accountant.

25. On January 13, 2002, the National Accounting Firm recommended to PNC that
PNC delay issuance of its earnings release scheduled for January 17, 2002 until
PNC had an opportunity to assess fully the impact of consolidation on PNC's
financial reports and to address the appropriate accounting treatment for the
PAGIC transactions with the SEC's Office of Chief Accountant.

26. On January 15, 2002, in a meeting between representatives of the Federal
Reserve and PNC, the Federal Reserve informed PNC, again, that PNC's accounting
treatment for the PAGIC transactions was incorrect under GAAP and that PNC
should consolidate the PAGIC transactions for financial reporting purposes. The
Federal Reserve informed PNC that, consistent with federal banking laws, both
regulatory accounting principles ("RAP") and GAAP required consolidation of the
PAGIC entities.



                                       6


27. On January 17, 2002, PNC issued a press release announcing its results for
the fourth quarter and year-end 200l. Notwithstanding the advice from the
National Accounting Firm to delay the release, PNC did not consolidate the PAGIC
transactions on its financial statements as reported in its press release issued
on January 17, 2002. Instead, PNC stated earnings per share for 2001 were $1.91,
and that its fourth quarter loss would be ($1.15) per share. PNC announced it
had reduced its institutional loan portfolio through, among other things, "sales
of institutional loans to subsidiaries of a third party financial institution."
PNC announced that "venture capital assets were reduced to $424 million through
a sale to a subsidiary of the same institution." The press release presented a
table setting forth PNC's nonperforming assets by type, including $268 million
in nonperforming assets as of December 31, 2001. In a footnote, PNC stated that
"excluded from the above table and reflected below are . . . certain assets sold
to subsidiaries of a third party financial institution. These assets will be
included in nonperforming assets in PNC's bank holding company regulatory
filings." None of the additional disclosures contained in the footnote or
elsewhere in the release relating to the regulatory filings received any
reported market or analyst attention in the period following the release and
prior to the January 29, 2002 press release.

28. PNC's January 17, 2002 press release did not disclose that the financial
information it set forth did not comply with GAAP, i.e., nonconsolidation and
off-balance sheet treatment of the PAGIC transactions was inappropriate under
GAAP because the Insurance Company did not maintain the minimum required capital
investment in the SPEs, and did not share in the substantive risks and rewards
of those SPEs.

29. The January 17, 2002 press release also implied that PNC could effectively
obtain off-balance sheet treatment of nonperforming assets for financial
reporting purposes (GAAP), but could not obtain off-balance sheet treatment of
those assets for regulatory reporting purposes (RAP). In fact, PNC knew there
was no distinction between RAP and GAAP. As a result, the January 17, 2002 press
release did not disclose that $172 million worth of troubled assets would have
to be incorporated back onto PNC's balance sheet upon consolidation. The release
also failed to acknowledge that the Federal Reserve had identified accounting
defects in the PAGIC transactions.

30. The release also did not disclose that consolidation of the SPEs as required
by GAAP might result in a material charge to PNC's year-end earnings for 2001.
As of January 17, 2002, PNC hoped to convince the SEC, in essence, to overrule
the Federal Reserve on the appropriate accounting treatment for the PAGIC
transactions and PNC had asked that the National Accounting Firm set up a
meeting among PNC, the National Accounting Firm and the SEC's Office of Chief
Accountant to discuss the accounting treatment. PNC also held what turned out to
be an incorrect view of the likely impact of consolidation (namely, that the
PAGIC assets would come back on PNC's books as portfolio assets rather than in a
"held for sale" category, which would not have a material impact on PNC's
financial statements). PNC, however, knew before it issued the January 17, 2002
press release that consolidation of the PAGIC entities on PNC's financial
statements could potentially result in a material charge to PNC's year-end
earnings for 2001 if the PAGIC assets came back on PNC's books in a "held for
sale" category.

31. There are other matters known to the parties that are not included in this
Statement of Facts.



                                       7

EX-99.2

                                                                  EXHIBIT 99.2

CONTACTS:

MEDIA:
- ------
Brian E. Goerke
(412) 762-4550
corporate.communications@pnc.com

INVESTORS:
- ----------
William H. Callihan
(412) 762-8257
investor.relations@pnc.com

 PNCICLC, A PNC NON-BANK SUBSIDIARY, SIGNS AGREEMENT WITH DEPARTMENT OF JUSTICE
            TO DEFER PROSECUTION RELATING TO 2001 PAGIC TRANSACTIONS

      AGREEMENT BRINGS CLOSURE TO GOVERNMENTAL INVESTIGATIONS AND INQUIRIES
   APPLICABLE TO PNC AND AFFILIATES STEMMING FROM THE 2001 PAGIC TRANSACTIONS

         PITTSBURGH, June 2, 2003 -- The PNC Financial Services Group, Inc.
(NYSE: PNC) today announced that one of its non-bank subsidiaries, PNC ICLC
Corp., has entered into a deferred prosecution agreement with the U.S.
Department of Justice relating to PNCICLC's actions in connection with the PAGIC
transactions that were entered into in 2001. As previously disclosed, the PAGIC
transactions were the subject of a July 2002 consent order entered into between
PNC and the United States Securities and Exchange Commission and the subject of
a separate written agreement that was entered into between PNC and the Federal
Reserve. The agreement brings closure to the main governmental investigations
and inquiries applicable to PNC and its affiliates stemming from the 2001
transactions. A copy of the agreement has been filed by PNC on a Current Report
on Form 8-K and is available on the Company's website at www.pnc.com and on the
SEC's website at www.sec.gov.

         Under the terms of the agreement entered into between PNCICLC and the
Department of Justice, PNCICLC has agreed to establish a $90 million restitution
fund to satisfy shareholder claims stemming from the PAGIC transactions. The
fund will be administered by former Federal Judge Arlin Adams. PNCICLC has also
agreed to pay a $25 million monetary penalty to the government.

         The agreement was entered into by the Department of Justice in light of
PNCICLC's exceptional remedial steps to date, and its willingness to acknowledge
responsibility for its actions in connection with the PAGIC transactions through
the undertakings set forth in the agreement and through its continued
cooperation with the government regarding these matters. The agreement has also
been designed to avoid the imposition of adverse collateral consequences
relating to PNC's important banking, brokerage, asset management, fiduciary and
processing businesses, which businesses had no improper involvement in any of
the conduct associated with PNCICLC and the PAGIC transactions.

         Under the agreement between PNCICLC and the Department of Justice, the
department will file a complaint against the subsidiary, but will seek dismissal
of that complaint after 12 months if PNCICLC complies with the agreement.





         "PNC regrets its involvement in the PAGIC transactions," stated James
E. Rohr, chairman and chief executive officer of PNC. "As described in the PNC
Statement of Principles issued in August 2002, the PNC Board and PNC management
are fully committed to maintaining the highest standards of conduct throughout
the PNC organization, and PNC will not tolerate close-to-the-line opinions in
accounting matters or otherwise. The PNC Board and management team have fully
cooperated with all governmental investigations with respect to PAGIC and we
have pledged our full continuing cooperation with the government in connection
with its ongoing investigation of others."

         "The agreement between PNCICLC and the Department of Justice brings an
important closure to PNC's involvement in the PAGIC transactions," added George
Davidson, a PNC director and chairman of the PNC Special Regulatory Affairs and
Oversight Committee. "We have made substantial progress in implementing improved
governance and risk management practices at PNC in the aftermath of PAGIC and in
changing the corporate culture. Our regulators have acknowledged this progress
and our Board remains united in its support of Mr. Rohr and his management team
and the exceptional efforts they have made in this regard."

         PNC will take a pre-tax charge to earnings of $120 million in the
second quarter of 2003 reflecting the agreement with the Department of Justice
and related legal expenses.

         The PNC Financial Services Group, Inc., headquartered in Pittsburgh, is
one of the nation's largest financial services organizations, providing regional
community banking; wholesale banking, including corporate banking, real estate
finance and asset-based lending; wealth management; asset management; and global
fund services.

FORWARD-LOOKING STATEMENTS

This news release contains, and other statements that the Corporation may make
may contain, forward-looking statements with respect to the Corporation's
outlook or expectations for earnings, revenues, expenses, capital levels, asset
quality or other future financial or business performance, strategies or
expectations, or the impact of legal, regulatory or supervisory matters on the
Corporation's business operations or performance. Forward-looking statements are
typically identified by words or phrases such as "believe," "feel," "expect,"
"anticipate," "intend," "outlook," "estimate," "forecast," "project,"
"position," "target," "assume," "achievable," "potential," "strategy," "goal,"
"objective," "plan," "aspiration," "outcome," "continue," "remain," "maintain,"
"seek," "strive," "trend," and variations of such words and similar expressions,
or future or conditional verbs such as "will," "would," "should," "could,"
"might," "can," "may," or similar expressions. The Corporation cautions that
forward-looking statements are subject to numerous assumptions, risks and
uncertainties, which change over time. Forward-looking statements speak only as
of the date they are made, and the Corporation assumes no duty and does not
undertake to update forward-looking statements. Actual results could differ
materially from those anticipated in forward-looking statements and future
results could differ materially from historical performance.

The factors discussed elsewhere in this news release and the following factors,
among others, could cause actual results to differ materially from those
anticipated in forward-looking statements or from historical performance: (1)
changes in political, economic or industry conditions, the interest rate






environment or financial and capital markets, which if adverse could result in:
a deterioration in credit quality, increased credit losses, and increased
funding of unfunded loan commitments and letters of credit; an adverse effect on
the allowances for credit losses and unfunded loan commitments and letters of
credit; a reduction in demand for credit or fee-based products and services; a
reduction in net interest income, value of assets under management and assets
serviced, value of private equity investments and of other debt and equity
investments, value of loans held for sale or value of other on-balance sheet and
off-balance sheet assets; or changes in the availability and terms of funding
necessary to meet PNC's liquidity needs; (2) relative and absolute investment
performance of assets under management; (3) the introduction, withdrawal,
success and timing of business initiatives and strategies, decisions regarding
further reductions in balance sheet leverage, the timing and pricing of any
sales of loans held for sale, and PNC's inability to realize cost savings or
revenue enhancements, or to implement integration plans relating to or resulting
from mergers, acquisitions, restructurings and divestitures; (4) customer
borrowing, repayment, investment and deposit practices and their acceptance of
PNC's products and services; (5) the impact of increased competition; (6) how
PNC chooses to redeploy available capital, including the extent and timing of
any share repurchases and investments in PNC businesses; (7) the inability to
manage risks inherent in PNC's business; (8) the unfavorable resolution of legal
proceedings or government inquiries; the impact of increased litigation risk
from recent regulatory and other governmental developments; and the impact of
reputational risk created by recent regulatory and other governmental
developments on such matters as business generation and retention, the ability
to attract and retain management, liquidity and funding, (9) the denial of
insurance coverage for claims made by PNC; (10) an increase in the number of
customer or counterparty delinquencies, bankruptcies or defaults that could
result in, among other things, increased credit and asset quality risk, a higher
provision for credit losses and reduced profitability; (11) the impact, extent
and timing of technological changes, the adequacy of intellectual property
protection and costs associated with obtaining rights in intellectual property
claimed by others; (12) actions of the Federal Reserve Board; (13) the impact of
legislative and regulatory reforms and changes in accounting policies and
principles; (14) the impact of the regulatory examination process, the
Corporation's failure to satisfy the requirements of written agreements with
regulatory and other governmental agencies, and regulators' future use of
supervisory and enforcement tools; and (15) terrorist activities and
international hostilities, including the situations surrounding Iraq and North
Korea, which may adversely affect the general economy, financial and capital
markets, specific industries, and the Corporation.

The Corporation's SEC reports, accessible on the SEC's website at www.sec.gov
and on PNC's website at www.pnc.com, contain additional information about the
foregoing factors and identify additional factors that can affect the results
anticipated in forward-looking statements.

EX-99.3

                                                                  EXHIBIT 99.3


          QUESTIONS AND ANSWERS RELATING TO PNC'S RECENT PRESS RELEASE
                  REGARDING THE DEFERRED PROSECUTION OF PNCICLC


WHAT IS PAGIC?

The PAGIC transactions were a series of transactions that PNC engaged in during
2001 in connection with its efforts to manage the volatility and improve the
quality of assets on its balance sheet. In three separate transactions executed
during the second, third and fourth quarters of 2001, respectively, PNC
transferred approximately $592 million in loan assets (in PAGIC I and II
collectively) and approximately $170 million in venture capital assets (in PAGIC
III) to newly formed special purpose entities that were created by a subsidiary
of PNC together with a large insurance company for the purpose of obtaining
off-balance sheet treatment for such assets.

WHERE DID THE IDEA FOR PAGIC ORIGINATE FROM?

The PAGIC structure was designed and marketed by a large insurance company and a
national accounting firm as an innovative structure for permitting off-balance
sheet treatment of troubled assets. The National Accounting Firm was also PNC's
external and internal auditor at the time.

WHO IS PNCICLC?

PNCICLC is an indirect wholly-owned non-bank subsidiary of PNC that engaged in
the structuring and execution of the PAGIC transactions together with the
Insurance Company. PNCICLC engaged directly in the PAGIC I and PAGIC II
transactions. The PAGIC III transaction was entered into by a separate indirect
wholly-owned non-bank subsidiary of PNC, which has subsequently transferred all
of its assets and liabilities relating to PAGIC III to PNCICLC. PNCICLC's assets
presently include PNC's remaining interests in the assets contributed to the
PAGIC entities, cash and cash equivalents and certain tax assets.

WHAT WAS THE BASIC CONCEPT OF THE PAGIC STRUCTURE?

The PAGIC structure was designed to facilitate special purpose entity (SPE)
treatment for a pool of assets, thus changing the character of such assets, in
the case of loans, from loans to securities on a company's books and permitting
changes in the valuation of such assets (either mark-to-market valuations,
impairments or additional reserves) to be reflected as an adjustment to equity
in the balance sheet (a "below-the-line" adjustment). This latter feature was
based on the inclusion of a 30-year zero-coupon U.S. Treasury security within
the pool of assets held by the special purpose entity.

The Insurance Company acquired securities representing a purported 3% interest
in the SPE and giving the Insurance Company certain control rights over the SPE.
The Insurance Company received a fixed annual fee for the first 5 years of
operation from the SPE, payable in advance on the first day of the year, and a
fee equal to 0.75% of assets thereafter, in PAGIC I, with similar fee structures
in PAGIC II and PAGIC III.





WHY DID THE PAGIC TRANSACTIONS FAIL TO SATISFY THE REQUIREMENTS FOR
DECONSOLIDATION UNDER GAAP?

At the time PNCICLC entered into the PAGIC transactions, there were three main
GAAP requirements for nonconsolidation and sales recognition by the sponsor or
transferor: (1) the majority owner of the SPE must be an independent third party
who has made a substantive capital investment in the SPE, (2) the independent
third party must have control of the SPE, and (3) the majority owner must have
substantive risk and rewards of ownership of the SPE.

As determined by the SEC in its July 2002 enforcement action, the PAGIC
transactions did not satisfy the requirement that the majority owner (namely,
the Insurance Company) make a substantive capital investment in the SPE. The SEC
determined that the structure of the fees paid to the Insurance Company under
the transaction documents had the substantive effect of making the Insurance
Company's investment less than the minimum 3% investment required under the then
applicable GAAP requirements. In addition, the Statement of Facts attached to
the deferred prosecution agreement states that PNCICLC knew that the existence
of a de facto "structuring fee" or "balance sheet rental fee" reduced the
Insurance Company's capital investment below the minimally accepted 3% level
under GAAP required for SPE treatment.

Also as determined by the SEC, the majority owner (namely, the Insurance
Company) did not have substantive risk and rewards of ownership of the PAGIC
SPEs. The SEC determined that the provisions of the agreements for the PAGIC
transactions provided that the Insurance Company's investment was substantially
protected from loss by investment grade assets purchased with proceeds of its
investments and that PNC and not the Insurance Company enjoyed the substantive
benefit of improvements in the value of the PAGIC assets through its right to
convert its preferred interests into common stock. In addition, the Statement of
Facts attached to the deferred prosecution agreement states that PNCICLC and the
Insurance Company knew that the PAGIC structures included financial terms that
in substance resulted in PNC retaining substantive risks and rewards of changes
in the underlying values of the assets held by the PAGIC entities.

WHAT ALLEGED WRONGS DID PNCICLC COMMIT?

The complaint filed by the United States in connection with the deferred
prosecution agreement charges PNCICLC with conspiracy to commit securities
fraud. The Statement of Facts attached to the deferred prosecution agreement
sets forth the government's factual predicate for the complaint. In the
Statement of Facts, the government has stated that PNCICLC had knowledge of
certain deficiencies in the structure of the PAGIC transactions and that PNCICLC
proceeded with the PAGIC transactions in concert with others despite such
knowledge. The Statement of Facts does not preclude a finding that others
outside of PNC had knowledge of these facts and share in a significant portion
of the responsibility for the PAGIC matters. PNCICLC did not act alone in
connection with the PAGIC transactions and PNC has agreed to cooperate fully
with the government in connection with its ongoing investigation of others.

WHY IS A DEFERRED PROSECUTION BEING BROUGHT AGAINST PNCICLC AT THIS TIME?

The deferred prosecution agreement brings closure to the main governmental
investigations and inquiries stemming from the 2001 PAGIC transactions. In July
2002, PNC entered into a consent





order with the SEC and separately entered into a written agreement with the
Federal Reserve relating to the PAGIC matters and with the Office of the
Comptroller of the Currency relating to certain supervisory matters involving
PNC Bank. PNC has cooperated fully with the SEC, Federal Reserve and OCC
pursuant to the terms of those agreements and has implemented extensive remedial
actions to address deficiencies which the regulators (and PNC itself) have
identified regarding PNC's regulatory relations, risk management, corporate
governance and culture in the context of the PAGIC transactions and otherwise.
The government has characterized PNC's remedial actions as "exceptional" and
PNC's banking regulators have acknowledged PNC's exceptional progress by
restoring PNC's well-managed status in near record time.

PNCICLC and the government have recognized that a further public acknowledgement
of PNCICLC's responsibility for its conduct was appropriate in the context of
the deferred prosecution agreement.

WHAT IS A DEFERRED PROSECUTION AGREEMENT?

Pursuant to the terms of the deferred prosecution agreement, the United States
will file a complaint in the United States District Court for the Western
District of Pennsylvania charging PNCICLC with conspiracy to commit securities
fraud, in violation of Title 18, United States Code, Section 371. However, the
Department of Justice will recommend to the Court that the prosecution of
PNCICLC be deferred for a period of twelve months in light of PNCICLC's
exceptional remedial actions to date and its willingness to acknowledge
responsibility for its behavior, continue its cooperation with the Department of
Justice and other governmental regulatory agencies, demonstrate its future good
faith conduct and full compliance with the securities laws and generally
accepted accounting principles and consent to the establishment of a restitution
fund and the assessment of a monetary penalty as further described below.

The Department of Justice has further agreed that if PNCICLC is in full
compliance with all of its obligations under the deferred prosecution agreement,
the Department of Justice will seek dismissal with prejudice of the complaint
within 30 days of the twelve month anniversary of the agreement and at such time
the agreement shall be terminated.

Absent a breach of the agreement by PNCICLC, there will be no adjudication of
wrongdoing against PNCICLC. The deferred prosecution agreement does not
constitute an acknowledgement of guilt, but does reflect a recognition of
responsibility by PNCICLC for its conduct and a commitment by PNCICLC to
undertake a variety of remedial steps, such as the payment of restitution and
monetary penalties, continued cooperation with the government in its ongoing
investigations of others and demonstrations of future good faith conduct and
full compliance with the securities laws and generally accepted accounting
principles.

WHAT ARE THE CONSEQUENCES OF THE DEFERRED PROSECUTION AGREEMENT FOR PNCICLC?

Under the terms of the deferred prosecution agreement, PNCICLC accepts and
acknowledges responsibility for its behavior in connection with the PAGIC
transactions and agrees to cooperate fully with the Department of Justice in its
ongoing investigation of others. PNCICLC has agreed to pay a total of $90
million to establish a fund for victim restitution, including for the settlement
of any pending shareholder securities litigation, payable within 30 days of the
date of the agreement. The fund will be administered by former Federal Judge
Arlin Adams. PNCICLC has also agreed to pay a




monetary penalty of $25 million to the United States Treasury within 10 days of
the date of the agreement.

Any breach of the deferred prosecution agreement by PNCICLC would have serious
consequences. PNCICLC intends to fully comply with all obligations under the
deferred prosecution agreement.

WHAT COLLATERAL CONSEQUENCES ARE THERE FOR PNC AND ITS OTHER AFFILIATES?

The deferred prosecution agreement has been designed to avoid the imposition of
adverse collateral consequences relating to PNC's important banking, brokerage,
asset management, fiduciary and processing businesses, which businesses had no
improper involvement in the conduct associated with PNCICLC and the PAGIC
transactions. While the deferred prosecution agreement has been entered into by
PNCICLC with the objective of avoiding material adverse financial consequences
for PNC or its affiliates beyond the funding responsibilities related to the
restitution fund and the monetary penalty called for under the agreement, PNC
may incur additional expenses and collateral costs associated with PNCICLC's
entry into the agreement, the impact of which can not be fully assessed at this
time.

In addition, as previously disclosed, there is a putative class action lawsuit
pending against PNC relating to the PAGIC transactions. There can be no
assurance as to the impact or effect that PNCICLC's entry into the deferred
prosecution agreement may have on the outcome of this lawsuit or related claims.
PNC believes that it has substantial defenses against such claims, including
through the assertion of claims against other third parties. The $90 million
that PNCICLC has committed to fund for victim restitution under the deferred
prosecution agreement will be available to satisfy PNC shareholder claims
including for the settlement of the pending shareholder securities law
litigation.

ARE OTHER PNC AFFILIATES EXPOSED TO ADDITIONAL GOVERNMENTAL ACTIONS?

Absent a breach by PNCICLC of its commitments and obligations under the deferred
prosecution agreement or by PNC of its related commitments of cooperation with
the government's ongoing investigations of others, the Department of Justice,
Criminal Division, Fraud Section has committed that it will not bring further
actions against PNC or its affiliates relating to the subject matters of its
ongoing investigations as to others. The SEC has also indicated that its ongoing
investigation continues as to others. While PNC and PNC Bank remain subject to
the regular ongoing supervision of their banking regulators and remain subject
to the current written agreements that exist with such regulators, PNC believes
that it has satisfied all material regulatory concerns relating to the PAGIC
matters in the course of its conduct to date under the written agreements and
does not expect there to be any additional supervisory actions brought by such
regulators against PNC relating to the PAGIC matters.

PNC and its affiliates are also subject to regulation and supervision by a broad
range of state and federal governmental agencies, and, while PNC is aware of no
additional pending investigations or inquiries relating to the PAGIC matters
before any such governmental bodies at the present time, other than the
Department of Labor investigation referenced in PNC's prior SEC filings, there
can be no assurances that such additional inquiries will not occur as a result
of the deferred prosecution agreement or otherwise. PNC does not expect,
however, that any such inquiries or investigations





would result in additional material adverse consequences for PNC or its
affiliates in light of the comprehensive remedial actions that PNC and PNCICLC
have already taken in response to the PAGIC matters.

WHAT IS EXPECTED IN CONNECTION WITH THE ONGOING INVESTIGATIONS OF OTHERS?

PNCICLC did not act alone in connection with the PAGIC transactions, and PNCICLC
and PNC have each agreed to cooperate fully with the government in connection
with its ongoing investigation of others. It is premature at this stage for PNC
to comment on what course the government's ongoing investigations of others may
take. The scope of PNCICLC's commitment is set forth in the deferred prosecution
agreement and PNC has made an equally broad commitment of ongoing cooperation.
PNC believes that certain non-PNC affiliated parties share a large part of the
responsibility for the actions taken in connection with the PAGIC transactions,
and PNC has preserved its rights to pursue claims relating to the PAGIC matters
against other third party actors. No determinations have yet been made
concerning what actions if any PNC might bring against such third party actors.

WHAT DOES THE DEFERRED PROSECUTION AGREEMENT MEAN BY ITS REFERENCE TO "EXTENSIVE
REMEDIAL ACTIONS"?

Over the last 18 months, the entire PNC organization has taken a number of steps
to enhance its corporate governance and risk management practices. Among the key
steps are the following:

o        PNC has added new board members who provide significant financial and
         industry expertise.

o        PNC has added a number of talented and experienced executives to our
         senior leadership team, including a new Vice Chairman and Chief
         Financial Officer, two other new Vice Chairmen, a new Chief Risk
         Officer, a new Chief Regulatory Officer and a new Chief Compliance
         Officer.

o        PNC has adopted a Statement of Principles and strengthened its Code of
         Ethics. All 24,000 employees have completed ethics training.

o        PNC has adopted comprehensive new policies and procedures in the areas
         of corporate governance, risk management and regulatory relations.

o        PNC has created management committees to address risks associated with
         significant transactions, products, services, and capital commitments.

Third parties have also recognized these efforts:

o        The Federal Reserve Bank and the Office of Comptroller of the Currency
         have returned PNC to "well-managed" status.

o        Institutional Shareholder Services, a leading advisory service for
         institutional stockholders, this spring ranked PNC as one of the top
         performing bank holding companies in the area of corporate governance
         and one of the most improved since the prior year.