Filed by The PNC Financial Services Group, Inc.

Pursuant to Rule 425 under the Securities Act of 1933 and

deemed filed pursuant to Rule 14a-12 of the Securities Exchange Act of 1934

Subject Company: Sterling Financial Corporation

Commission File No. 000-16276

On July 19, 2007, The PNC Financial Services Group, Inc. (“PNC”) issued a press release and held a conference call for investors regarding PNC’s earnings and business results for the three months ended June 30, 2007. PNC also provided supplementary financial information on its web site, including financial information disclosed in connection with its press release, and provided electronic presentation slides on its web site used in connection with the related investor conference call. Such supplementary financial information and electronic presentation slides consisted of the following:

THE PNC FINANCIAL SERVICES GROUP, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2007

(UNAUDITED)

---

THE PNC FINANCIAL SERVICES GROUP, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2007

(UNAUDITED)

 

		Page
Consolidated Income Statement		2
Adjusted Condensed Consolidated Income Statement		3
Consolidated Balance Sheet		4
Capital Ratios		4
Results of Businesses
Summary of Business Results and Period-end Employees		5
Retail Banking		6-8
Corporate & Institutional Banking		9
PFPC		10
Efficiency Ratios		11
Details of Net Interest Income, Net Interest Margin, and Trading Revenue		12
Average Consolidated Balance Sheet and Supplemental Average Balance Sheet Information		13-14
Details of Loans		15
Allowances for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit, and Net Unfunded Commitments		16
Details of Nonperforming Assets		17-18
Glossary of Terms		19-21
Business Segment Descriptions		22
Appendix—Adjusted Condensed Consolidated Income Statement Reconciliations		A1-A4

The information contained in this Financial Supplement is preliminary, unaudited and based on data available on July 19, 2007. We have reclassified certain prior period amounts included in this Financial Supplement to be consistent with the current period presentation. This information speaks only as of the particular date or dates included in the schedules. We do not undertake any obligation to, and disclaim any duty to, correct or update any of the information provided in this Financial Supplement. Our future financial performance is subject to risks and uncertainties as described in our United States Securities and Exchange Commission (“SEC”) filings.

Additional Information About the PNC/Sterling Financial Corporation Transaction

The PNC Financial Services Group, Inc. (“PNC”) and Sterling Financial Corporation (“Sterling Financial”) will be filing a proxy statement/prospectus and other relevant documents concerning the merger with the SEC. WE URGE INVESTORS TO READ THE PROXY STATEMENT/PROSPECTUS AND ANY OTHER DOCUMENTS TO BE FILED WITH THE SEC IN CONNECTION WITH THE MERGER OR INCORPORATED BY REFERENCE IN THE PROXY STATEMENT/PROSPECTUS BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.

Investors will be able to obtain these documents free of charge at the SEC’s web site (www.sec.gov). In addition, documents filed with the SEC by PNC will be available free of charge from Shareholder Relations at (800) 843-2206. Documents filed with the SEC by Sterling Financial will be available free of charge from Sterling Financial by contacting Shareholder Relations at (877) 248-6420.

The directors, executive officers, and certain other members of management and employees of Sterling Financial are participants in the solicitation of proxies in favor of the merger from the shareholders of Sterling Financial. Information about the directors and executive officers of Sterling Financial is included in the proxy statement for its May 8, 2007 annual meeting of shareholders, which was filed with the SEC on April 2, 2007. Additional information regarding the interests of such participants will be included in the proxy statement/prospectus and the other relevant documents filed with the SEC when they become available.

---

THE PNC FINANCIAL SERVICES GROUP, INC.

Additional Information About the PNC/Yardville National Bancorp Transaction

PNC and Yardville National Bancorp (“Yardville”) have filed with the SEC a Registration Statement on Form S-4 that includes a preliminary version of a proxy statement of Yardville that also constitutes a preliminary prospectus of PNC. The S-4 has not yet become effective. The parties will file other relevant documents concerning the proposed transaction with the SEC. Following the S-4 being declared effective by the SEC, Yardville intends to mail the final proxy statement to its shareholders. Such final documents, however, are not currently available. WE URGE INVESTORS TO READ THE FINAL PROXY STATEMENT/PROSPECTUS AND ANY OTHER DOCUMENTS TO BE FILED WITH THE SEC IN CONNECTION WITH THE MERGER OR INCORPORATED BY REFERENCE IN THE PROXY STATEMENT/PROSPECTUS, IF AND WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.

Investors may obtain these documents, if and when they become available, free of charge at the SEC’s web site (www.sec.gov). In addition, documents filed with the SEC by PNC will be available free of charge from Shareholder Relations at (800) 843-2206. Documents filed with the SEC by Yardville will be available free of charge from Yardville by contacting Howard N. Hall, Assistant Treasurer’s Office, 2465 Kuser Road, Hamilton, NJ 08690 or by calling (609) 631-6223.

The directors, executive officers, and certain other members of management and employees of Yardville are participants in the solicitation of proxies in favor of the merger from the shareholders of Yardville. Information about the directors and executive officers of Yardville is set forth in its Annual Report on Form 10-K filed on March 30, 2007 for the year ended December 31, 2006, as amended by the Form 10-K/A filed on May 10, 2007. Additional information regarding the interests of such participants will be included in the proxy statement/prospectus and the other relevant documents filed with the SEC if and when they become available.

Mercantile Acquisition

We completed our acquisition of Mercantile Bankshares Corporation (“Mercantile”) on March 2, 2007 and our financial results include Mercantile from that date. PNC issued approximately 53 million shares of common stock and paid approximately $2.1 billion in cash as consideration for the acquisition, and accounted for the transaction under the purchase method.

BlackRock/MLIM Transaction

As further described in our Annual Report on Form 10-K for the year ended December 31, 2006, on September 29, 2006, Merrill Lynch contributed its investment management business (“MLIM”) to BlackRock, Inc. (“BlackRock”), formerly a majority-owned subsidiary of PNC, in exchange for 65 million shares of newly issued BlackRock common and preferred stock.

For the quarters ended September 30, 2006 and June 30, 2006 and the six months ended June 30, 2006 presented in this Financial Supplement, our Consolidated Income Statement reflects our former majority ownership interest in BlackRock. However, our Consolidated Income Statement for the quarters ended June 30, 2007, March 31, 2007, and December 31, 2006 and the six months ended June 30, 2007 and our Consolidated Balance Sheet as of June 30, 2007, March 31, 2007, December 31, 2006 and September 30, 2006 reflect the September 29, 2006 deconsolidation of BlackRock’s balance sheet amounts and recognize our approximate 34% ownership interest in BlackRock as of those dates as an investment accounted for under the equity method.

We have also provided, for information purposes only, adjusted results in this document to reflect BlackRock as if it had been accounted for under the equity method for all periods presented.

 

Page 1

---

THE PNC FINANCIAL SERVICES GROUP, INC.

Consolidated Income Statement (Unaudited)

 

		For the six months ended								For the three months ended
In millions, except per share data		June 30 2007				June 30 2006				June 30 2007				March 31 2007				December 31 2006				September 30 2006				June 30 2006
Interest Income
Loans		$	1,980			$	1,544			$	1,084			$	896			$	821			$	838			$	797
Securities available for sale			665				498				355				310				280				271				255
Other			224				150				115				109				116				94				74
Total interest income			2,869				2,192				1,554				1,315				1,217				1,203				1,126
Interest Expense
Deposits			1,000				706				532				468				450				434				379
Borrowed funds			508				374				284				224				201				202				191
Total interest expense			1,508				1,080				816				692				651				636				570
Net interest income			1,361				1,112				738				623				566				567				556
Provision for credit losses			62				66				54				8				42				16				44
Net interest income less provision for credit losses			1,299				1,046				684				615				524				551				512
Noninterest Income
Asset management			355				890				190				165				149				381				429
Fund servicing			412				431				209				203				249				213				210
Service charges on deposits			169				153				92				77				79				81				80
Brokerage			138				122				72				66				63				61				63
Consumer services			198				183				107				91				93				89				94
Corporate services			335				292				176				159				177				157				157
Equity management gains			34				61				2				32				25				21				54
Net securities gains (losses)			(2	)			(12	)			1				(3	)							(195	)			(8	)
Trading			81				112				29				52				33				38				55
Net gains (losses) related to BlackRock			51								(1	)			52				(12	)			2,078
Other			195				183				98				97				113				19				96
Total noninterest income			1,966				2,415				975				991				969				2,943				1,230
Noninterest Expense
Compensation			888				1,113				470				418				442				573				558
Employee benefits			146				163				74				72				55				86				76
Net occupancy			168				162				81				87				69				79				83
Equipment			150				157				79				71				69				77				80
Marketing			50				42				29				21				23				39				22
Other			582				670				307				275				311				313				326
Total noninterest expense			1,984				2,307				1,040				944				969				1,167				1,145
Income before minority interest and income taxes			1,281				1,154				619				662				524				2,327				597
Minority interest in income of BlackRock							41																6				19
Income taxes			399				378				196				203				148				837				197
Net income		$	882			$	735			$	423			$	459			$	376			$	1,484			$	381
Earnings Per Common Share
Basic		$	2.71			$	2.51			$	1.24			$	1.49			$	1.29			$	5.09			$	1.30
Diluted		$	2.67			$	2.47			$	1.22			$	1.46			$	1.27			$	5.01			$	1.28
Average Common Shares Outstanding
Basic			325				292				342				308				291				291				293
Diluted			329				297				346				312				295				296				297
Efficiency			60	%			65	%			61	%			58	%			63	%			33	%			64	%
Noninterest income to total revenue			59	%			68	%			57	%			61	%			63	%			84	%			69	%
Effective tax rate (a)			31.1	%			32.8	%			31.7	%			30.7	%			28.2	%			36.0	%			33.0	%

---

(a)

The effective tax rates presented are on a GAAP basis. The lower effective tax rate for the first six months of 2007 compared with the first six months of 2006 was primarily due to the deconsolidation of BlackRock effective September 29, 2006. The effective tax rate increased for the second quarter of 2007 primarily as a result of a full-quarter impact of Mercantile. The lower rates for the first quarter of 2007 and the fourth quarter of 2006 reflect the impact of the deconsolidation of BlackRock and certain tax adjustments in both periods. The higher effective rate for the third quarter of 2006 was primarily due to the impact of the gain on the BlackRock/MLIM transaction and a $57 million cumulative adjustment to deferred taxes made in the same quarter in connection with that transaction.

 

Page 2

---

THE PNC FINANCIAL SERVICES GROUP, INC.

Adjusted Condensed Consolidated Income Statement (Unaudited) (a)

 

For the six months ended - in millions		June 30 2007			June 30 2006
Net Interest Income
Net interest income		$	1,361		$	1,105
Provision for credit losses			62			66
Net interest income less provision for credit losses			1,299			1,039
Noninterest Income
Asset management			358			257
Other			1,560			1,492
Total noninterest income			1,918			1,749
Noninterest Expense
Compensation and benefits			1,023			907
Other			935			839
Total noninterest expense			1,958			1,746
Income before income taxes			1,259			1,042
Income taxes			391			299
Net income		$	868		$	743

 

For the three months ended - in millions		June 30 2007			March 31 2007			December 31 2006			September 30 2006			June 30 2006
Net Interest Income
Net interest income		$	738		$	623		$	566		$	564		$	552
Provision for credit losses			54			8			42			16			44
Net interest income less provision for credit losses			684			615			524			548			508
Noninterest Income
Asset management			191			167			159			122			129
Other			786			774			832			710			789
Total noninterest income			977			941			991			832			918
Noninterest Expense
Compensation and benefits			535			488			497			461			457
Other			490			445			472			411			424
Total noninterest expense			1,025			933			969			872			881
Income before income taxes			636			623			546			508			545
Income taxes			202			189			155			128			159
Net income		$	434		$	434		$	391		$	380		$	386

---

(a)

This schedule is provided for informational purposes only and reflects historical consolidated financial information of PNC (1) with amounts adjusted for the impact of certain specified items and (2) as if we had recorded our investment in BlackRock on the equity method for all periods presented. See Appendix to Financial Supplement for reconciliations of these amounts to the corresponding GAAP amounts for each of the periods presented. We have provided these adjusted amounts and reconciliations so that investors, analysts, regulators and others will be better able to evaluate the impact of these items on our results for these periods, in addition to providing a basis of comparability for the impact of the BlackRock deconsolidation given the magnitude of the impact of deconsolidation on various components of our income statement. Adjusted information supplements our results as reported in accordance with GAAP and should not be viewed in isolation from, or as a substitute for, our GAAP results.

 

Page 3

---

THE PNC FINANCIAL SERVICES GROUP, INC.

Consolidated Balance Sheet (Unaudited)

 

In millions, except par value		June 30 2007				March 31 2007				December 31 2006				September 30 2006				June 30 2006
Assets
Cash and due from banks		$	3,177			$	3,234			$	3,523			$	3,018			$	3,438
Federal funds sold and resale agreements			1,824				1,604				1,763				2,818				675
Other short-term investments, including trading securities			3,667				3,041				3,130				2,718				2,005
Loans held for sale			2,562				2,382				2,366				4,317				2,165
Securities available for sale			25,903				26,475				23,191				19,512				21,724
Loans, net of unearned income of $1,004, $1,005, $795, $815, and $828			64,714				62,925				50,105				48,900				50,548
Allowance for loan and lease losses			(703	)			(690	)			(560	)			(566	)			(611	)
Net loans			64,011				62,235				49,545				48,334				49,937
Goodwill			7,745				7,739				3,402				3,418				3,636
Other intangible assets			913				929				641				590				862
Equity investments			5,584				5,408				5,330				5,130				1,461
Other			10,265				9,516				8,929				8,581				9,011
Total assets		$	125,651			$	122,563			$	101,820			$	98,436			$	94,914
Liabilities
Deposits
Noninterest-bearing		$	18,302			$	18,191			$	16,070			$	14,840			$	14,434
Interest-bearing			58,919				59,176				50,231				49,732				49,059
Total deposits			77,221				77,367				66,301				64,572				63,493
Borrowed funds
Federal funds purchased			7,212				5,638				2,711				3,475				3,320
Repurchase agreements			2,805				2,586				2,051				2,275				2,136
Bank notes and senior debt			7,537				4,551				3,633				2,177				3,503
Subordinated debt			4,226				4,628				3,962				4,436				4,329
Other			2,736				3,053				2,671				2,332				2,363
Total borrowed funds			24,516				20,456				15,028				14,695				15,651
Allowance for unfunded loan commitments and letters of credit			125				121				120				117				103
Accrued expenses			3,663				3,864				3,970				3,855				2,635
Other			4,252				4,649				4,728				4,031				3,573
Total liabilities			109,777				106,457				90,147				87,270				85,455
Minority and noncontrolling interests in consolidated entities			1,370				1,367				885				408				632
Shareholders’ Equity
Preferred stock (a)
Common stock—$5 par value
Authorized 800 shares, issued 353 shares			1,764				1,764				1,764				1,764				1,764
Capital surplus			2,606				2,520				1,651				1,628				1,325
Retained earnings			11,339				11,134				10,985				10,771				9,449
Accumulated other comprehensive loss			(439	)			(162	)			(235	)			(109	)			(510	)
Common stock held in treasury at cost: 11, 7, 60, 59, and 58 shares			(766	)			(517	)			(3,377	)			(3,296	)			(3,201	)
Total shareholders’ equity			14,504				14,739				10,788				10,758				8,827
Total liabilities, minority and noncontrolling interests, and shareholders’ equity		$	125,651			$	122,563			$	101,820			$	98,436			$	94,914
Capital Ratios
Tier 1 risk-based (b)			8.1	%			8.6	%			10.4	%			10.4	%			8.8	%
Total risk-based (b)			11.6				12.2				13.5				13.6				12.4
Leverage (b)			7.3				8.7				9.3				9.4				7.7
Tangible common equity			5.5				5.8				7.4				7.5				5.2
Common shareholders’ equity to assets			11.5				12.0				10.6				10.9				9.3

---

(a)	Less than $.5 million at each date.

(b)	The ratios for June 30, 2007 are estimated.

 

Page 4

---

THE PNC FINANCIAL SERVICES GROUP, INC.

Summary of Business Results and Period-end Employees (Unaudited)

 

Three months ended – in millions (a) (c) Earnings		June 30 2007			March 31 2007			December 31 2006			September 30 2006			June 30 2006
Retail Banking (b)		$	227		$	201		$	184		$	206		$	185
Corporate & Institutional Banking (b)			122			132			126			111			115
PFPC			32			31			31			40			26
Other, including BlackRock (b) (c)			42			95			35			1,127			55
Total consolidated net income		$	423		$	459		$	376		$	1,484		$	381
Revenue (d)
Retail Banking (b)		$	978		$	839		$	799		$	791		$	782
Corporate & Institutional Banking (b)			381			370			390			352			378
PFPC (e)			208			200			194			186			186
Other, including BlackRock (b) (c)			154			211			157			2,188			446
Total consolidated revenue		$	1,721		$	1,620		$	1,540		$	3,517		$	1,792

---

(a)

This summary also serves as a reconciliation of total earnings and revenue for all businesses to total consolidated net income and revenue. Our business information is presented based on our management accounting practices and our management structure. We refine our methodologies from time to time as our management accounting practices are enhanced and our businesses and management structure change.

(b)	Amounts for the second quarter of 2007 and the first quarter of 2007 subsequent to March 2, 2007 include the impact of Mercantile.

(c)	We consider BlackRock to be a separate reportable business segment but have combined its results with Other for this presentation. Our Quarterly Report on Form 10-Q for the second quarter of 2007 will provide additional business segment disclosures for BlackRock.

(d)

Business revenue is presented on a taxable-equivalent basis. The interest income earned on certain earning assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than a taxable investment. To provide more meaningful comparisons of yields and margins for all earning assets, we also provide revenue on a taxable-equivalent basis by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on other taxable investments. This adjustment is not permitted under GAAP on the Consolidated Income Statement. The following is a reconciliation of total consolidated revenue on a book (GAAP) basis to total consolidated revenue on a taxable-equivalent basis (in millions):

 

		June 30 2007			March 31 2007			December 31 2006			September 30 2006			June 30 2006
Total consolidated revenue, book (GAAP) basis		$	1,713		$	1,614		$	1,535		$	3,510		$	1,786
Taxable-equivalent adjustment			8			6			5			7			6
Total consolidated revenue, taxable-equivalent basis		$	1,721		$	1,620		$	1,540		$	3,517		$	1,792

---

(e)	PFPC revenue represents the sum of servicing revenue and nonoperating income (expense) less debt financing costs. Prior period servicing revenue amounts have been reclassified to conform with the current period presentation.

 

Period-end Employees		June 30 2007		March 31 2007		December 31 2006		September 30 2006		June 30 2006
Full-time employees:
Retail Banking		11,804		11,838		9,549		9,531		9,674
Corporate & Institutional Banking		2,084		2,038		1,936		1,925		1,899
PFPC		4,522		4,400		4,381		4,317		4,314
Other, including BlackRock
Operations & Technology		4,501		4,493		3,909		3,927		3,919
Staff Services		2,115		2,059		1,680		1,674		1,668
BlackRock										2,317
Total Other		6,616		6,552		5,589		5,601		7,904
Total full-time employees		25,026		24,828		21,455		21,374		23,791
Total part-time employees		3,028		2,867		2,328		2,165		2,241
Total employees		28,054		27,695		23,783		23,539		26,032

The period-end employee statistics disclosed for each business reflect staff directly employed by the respective business and exclude operations, technology and staff services employees. Employees are shown for BlackRock only at June 30, 2006, as we deconsolidated BlackRock effective September 29, 2006. Mercantile employees are included in the Retail Banking, Corporate & Institutional Banking, and Other businesses at June 30, 2007 and March 31, 2007, respectively. PFPC employee statistics are provided on a legal entity basis.

 

Page 5

---

THE PNC FINANCIAL SERVICES GROUP, INC.

Retail Banking (Unaudited)

 

Three months ended Taxable-equivalent basis (a) Dollars in millions		June 30 2007				March 31 2007				December 31 2006				September 30 2006				June 30 2006
INCOME STATEMENT
Net interest income		$	535			$	452			$	419			$	427			$	424
Noninterest income			443				387				380				364				358
Total revenue			978				839				799				791				782
Provision for credit losses			37				23				35				9				28
Noninterest expense			579				496				471				456				460
Pretax earnings			362				320				293				326				294
Income taxes			135				119				109				120				109
Earnings		$	227			$	201			$	184			$	206			$	185
AVERAGE BALANCE SHEET
Loans
Consumer
Home equity		$	14,237			$	13,881			$	13,807			$	13,849			$	13,816
Indirect			2,036				1,480				1,133				1,069				1,019
Other consumer			1,596				1,490				1,322				1,221				1,202
Total consumer			17,869				16,851				16,262				16,139				16,037
Commercial			13,678				8,201				5,907				5,821				5,715
Floor plan			1,037				952				853				854				964
Residential mortgage			2,038				1,781				1,031				1,509				1,577
Other			235				233				234				250				248
Total loans			34,857				28,018				24,287				24,573				24,541
Goodwill and other intangible assets			5,737				2,942				1,574				1,580				1,586
Loans held for sale			1,554				1,562				1,505				1,513				1,535
Other assets			2,626				1,927				1,671				1,640				1,621
Total assets		$	44,774			$	34,449			$	29,037			$	29,306			$	29,283
Deposits
Noninterest-bearing demand		$	11,065			$	8,871			$	7,834			$	7,848			$	7,908
Interest-bearing demand			9,097				8,354				7,865				7,787				7,950
Money market			17,100				15,669				14,822				14,832				14,697
Total transaction deposits			37,262				32,894				30,521				30,467				30,555
Savings			2,981				2,243				1,877				1,976				2,109
Certificates of deposit			17,531				15,738				14,694				14,053				13,560
Total deposits			57,774				50,875				47,092				46,496				46,224
Other liabilities			679				708				598				515				537
Capital			3,724				3,287				3,034				2,988				2,979
Total funds		$	62,177			$	54,870			$	50,724			$	49,999			$	49,740
PERFORMANCE RATIOS
Return on average capital			24	%			25	%			24	%			27	%			25	%
Noninterest income to total revenue			45				46				48				46				46
Efficiency			59				59				59				58				59

---

(a)	See notes (a), (b) and (d) on page 5.

 

Page 6

---

THE PNC FINANCIAL SERVICES GROUP, INC.

Retail Banking (Unaudited) (Continued)

 

Three months ended		June 30 2007				March 31 2007				December 31 2006				September 30 2006				June 30 2006
OTHER INFORMATION, INCLUDING MERCANTILE (a) (b)
Credit-related statistics:
Nonperforming assets		$	140			$	123			$	106			$	95			$	104
Net charge-offs		$	25			$	27			$	21			$	31			$	19
Annualized net charge-off ratio			.29	%			.39	%			.34	%			.50	%			.31	%
Other statistics:
Full-time employees			11,804				11,838				9,549				9,531				9,674
Part-time employees			2,360				2,224				1,829				1,660				1,526
ATMs			3,917				3,862				3,581				3,594				3,553
Branches (c)			1,084				1,077				852				848				846
ASSETS UNDER ADMINISTRATION (in billions) (d)
Assets under management
Personal		$	55			$	54			$	44			$	42			$	40
Institutional			22				22				10				10				10
Total		$	77			$	76			$	54			$	52			$	50
Asset Type
Equity		$	43			$	41			$	34			$	32			$	31
Fixed income			20				20				12				12				12
Liquidity/Other			14				15				8				8				7
Total		$	77			$	76			$	54			$	52			$	50
Nondiscretionary assets under administration
Personal		$	30			$	31			$	25			$	27			$	25
Institutional			81				80				61				62				60
Total		$	111			$	111			$	86			$	89			$	85
Asset Type
Equity		$	47			$	42			$	33			$	32			$	31
Fixed income			28				28				24				27				26
Liquidity/Other			36				41				29				30				28
Total		$	111			$	111			$	86			$	89			$	85

---

(a)	Presented as of period-end, except for net charge-offs and annualized net charge-off ratio.

(b)	Amounts subsequent to March 2, 2007 include the impact of Mercantile.

(c)	Excludes certain satellite branches that provide limited products and service hours.

(d)	Excludes brokerage account assets.

 

Page 7

---

THE PNC FINANCIAL SERVICES GROUP, INC.

Retail Banking (Unaudited) (Continued)

 

Three months ended Dollars in millions except as noted		June 30 2007				March 31 2007				December 31 2006				September 30 2006				June 30 2006
OTHER INFORMATION, EXCLUDING MERCANTILE (a) (b)
Home equity portfolio credit statistics:
% of first lien positions			42	%			43	%			43	%			44	%			45	%
Weighted average loan-to-value ratios			70	%			70	%			70	%			69	%			69	%
Weighted average FICO scores (c)			727				726				728				728				728
Loans 90 days past due			.26	%			.25	%			.24	%			.22	%			.21	%
Checking-related statistics:
Retail Banking checking relationships			1,967,000				1,962,000				1,954,000				1,958,000				1,956,000
Consumer DDA households using online banking			975,000				960,000				938,000				920,000				897,000
% of consumer DDA households using online banking			55	%			54	%			53	%			52	%			51	%
Consumer DDA households using online bill payment			505,000				450,000				404,000				361,000				305,000
% of consumer DDA households using online bill payment			29	%			25	%			23	%			20	%			17	%
Small business loans and managed deposits:
Small business loans		$	5,365			$	5,218			$	5,101			$	5,023			$	4,882
Managed deposits:
On-balance sheet
Noninterest-bearing demand		$	4,224			$	4,236			$	4,387			$	4,370			$	4,319
Interest-bearing demand			1,543				1,627				1,724				1,545				1,392
Money market			2,563				2,629				2,755				2,658				2,617
Certificates of deposit			647				746				802				647				574
Off-balance sheet (d)
Small business sweep checking			1,935				1,833				1,812				1,676				1,532
Total managed deposits		$	10,912			$	11,071			$	11,480			$	10,896			$	10,434
Brokerage statistics:
Margin loans		$	162			$	166			$	163			$	170			$	194
Financial consultants (e)			767				757				758				752				775
Full service brokerage offices			99				99				99				99				100
Brokerage account assets (billions)		$	47			$	46			$	46			$	44			$	43
Other statistics:
Gains on sales of education loans (f)		$	5			$	3			$	11			$	11			$	7

---

(a)	Presented as of period-end, except for gains on sales of education loans and small business loans and managed deposits, which are for the three months ended.

(b)	Amounts exclude the impact of Mercantile, which we acquired effective March 2, 2007.

(c)	Represents the most recent FICO scores we have on file.

(d)	Represents small business balances, a portion of which are calculated on a one-month lag. These balances are swept into liquidity products managed by other PNC business segments, the majority of which are off-balance sheet.

(e)	Financial consultants provide services in full service brokerage offices and PNC traditional branches.

(f)	Included in “Noninterest income” on page 6.

 

Page 8

---

THE PNC FINANCIAL SERVICES GROUP, INC.

Corporate & Institutional Banking (Unaudited)

 

Three months ended Taxable-equivalent basis (a) Dollars in millions except as noted		June 30 2007				March 31 2007				December 31 2006				September 30 2006				June 30 2006
INCOME STATEMENT
Net interest income		$	194			$	183			$	186			$	178			$	169
Noninterest income
Corporate service fees			139				127				149				131				133
Other			48				60				55				43				76
Noninterest income			187				187				204				174				209
Total revenue			381				370				390				352				378
Provision for (recoveries of) credit losses			17				(16	)			6				7				17
Noninterest expense			192				193				199				181				191
Pretax earnings			172				193				185				164				170
Income taxes			50				61				59				53				55
Earnings		$	122			$	132			$	126			$	111			$	115
AVERAGE BALANCE SHEET
Loans
Corporate (b)		$	9,274			$	8,909			$	8,885			$	8,670			$	8,692
Commercial real estate			3,555				3,253				3,143				2,953				2,760
Commercial—real estate related			3,736				2,733				2,189				2,476				2,484
Asset-based lending			4,562				4,513				4,594				4,563				4,452
Total loans (b)			21,127				19,408				18,811				18,662				18,388
Goodwill and other intangible assets			1,837				1,544				1,399				1,366				1,328
Loans held for sale			982				1,302				965				865				875
Other assets			4,531				4,244				4,550				4,288				3,978
Total assets		$	28,477			$	26,498			$	25,725			$	25,181			$	24,569
Deposits
Noninterest-bearing demand		$	6,953			$	7,083			$	7,210			$	6,817			$	6,353
Money market			4,653				4,530				3,644				2,678				2,168
Other			1,113				926				921				995				933
Total deposits			12,719				12,539				11,775				10,490				9,454
Other liabilities			2,960				2,850				3,093				2,967				2,826
Capital			2,050				2,064				1,935				1,735				1,882
Total funds		$	17,729			$	17,453			$	16,803			$	15,192			$	14,162
PERFORMANCE RATIOS
Return on average capital			24	%			26	%			26	%			25	%			25	%
Noninterest income to total revenue			49				51				52				49				55
Efficiency			50				52				51				51				51
COMMERCIAL MORTGAGE
SERVICING PORTFOLIO (in billions)
Beginning of period		$	206			$	200			$	180			$	151			$	140
Acquisitions/additions			28				16				33				37				19
Repayments/transfers			(12	)			(10	)			(13	)			(8	)			(8	)
End of period		$	222			$	206			$	200			$	180			$	151
OTHER INFORMATION
Consolidated revenue from: (c)
Treasury Management		$	114			$	110			$	107			$	106			$	104
Capital Markets		$	76			$	67			$	79			$	64			$	76
Midland Loan Services		$	56			$	54			$	53			$	47			$	42
Total loans (d)		$	21,662			$	21,193			$	18,957			$	19,265			$	18,758
Nonperforming assets (d)		$	100			$	77			$	63			$	94			$	125
Net charge-offs		$	7			$	9			$	24			$	14			$	12
Full-time employees (d)			2,084				2,038				1,936				1,925				1,899
Net gains on commercial mortgage loan sales		$	9			$	15			$	18			$	12			$	18
Net carrying amount of commercial mortgage servicing rights (d)		$	493			$	487			$	471			$	414			$	385

---

(a)	See notes (a), (b) and (d) on page 5.

(b)	Includes lease financing.

(c)	Represents consolidated PNC amounts.

(d)	Presented as of period end.

 

Page 9

---

THE PNC FINANCIAL SERVICES GROUP, INC.

PFPC (Unaudited) (a)

 

Three months ended Dollars in millions except as noted		June 30 2007				March 31 2007				December 31 2006				September 30 2006				June 30 2006
INCOME STATEMENT
Servicing revenue (b)		$	216			$	208			$	203			$	196			$	196
Operating expense (b)			158				153				146				144				145
Operating income			58				55				57				52				51
Debt financing			9				10				10				11				11
Nonoperating income (c)			1				2				1				1				1
Pretax earnings			50				47				48				42				41
Income taxes (d)			18				16				17				2				15
Earnings		$	32			$	31			$	31			$	40			$	26
PERIOD-END BALANCE SHEET
Goodwill and other intangible assets		$	1,005			$	1,008			$	1,012			$	1,015			$	1,018
Other assets			1,395				1,370				1,192				1,038				1,398
Total assets		$	2,400			$	2,378			$	2,204			$	2,053			$	2,416
Debt financing		$	734			$	760			$	792			$	813			$	852
Other liabilities			1,109				1,091				917				772				1,137
Shareholder’s equity			557				527				495				468				427
Total funds		$	2,400			$	2,378			$	2,204			$	2,053			$	2,416
PERFORMANCE RATIOS
Return on average equity			24	%			25	%			26	%			35	%			25	%
Operating margin (e)			27				26				28				27				26
SERVICING STATISTICS (at period end)
Accounting/administration net fund assets (in billions)
Domestic		$	765			$	731			$	746			$	695			$	671
Offshore			103				91				91				79				72
Total		$	868			$	822			$	837			$	774			$	743
Asset type (in billions)
Money market		$	286			$	280			$	281			$	260			$	247
Equity			373				352				354				331				317
Fixed income			118				111				117				111				110
Other (f)			91				79				85				72				69
Total		$	868			$	822			$	837			$	774			$	743
Custody fund assets (in billions)		$	467			$	435			$	427			$	399			$	389
Shareholder accounts (in millions)
Transfer agency			20				18				18				18				18
Subaccounting			50				50				50				48				47
Total			70				68				68				66				65
OTHER INFORMATION
Period-end full-time employees			4,522				4,400				4,381				4,317				4,314

---

(a)	See note (a) on page 5.

(b)

Certain out-of-pocket expense items which are then client billable are included in both servicing revenue and operating expense above, but offset each other entirely and therefore have no net effect on operating income. Distribution revenue and expenses which relate to 12b-1 fees that PFPC receives from certain fund clients for the payment of marketing, sales and service expenses also entirely offset each other, but are netted for presentation purposes above. Prior period amounts have been reclassified to conform with the current period presentation.

(c)	Net of nonoperating expense.

(d)	Income taxes for the quarter ended September 30, 2006 included the benefit of a $13.5 million reversal of deferred taxes related to foreign subsidiary earnings.

(e)	Total operating income divided by total servicing revenue.

(f)	Includes alternative investment net assets serviced.

 

Page 10

---

THE PNC FINANCIAL SERVICES GROUP, INC.

Efficiency Ratios (Unaudited)

 

		Three months ended
		June 30 2007			March 31 2007			December 31 2006			September 30 2006			June 30 2006
Efficiency, as reported (a)		61	%		58	%		63	%		33	%		64	%
Efficiency, as adjusted (b)		60	%		60	%		62	%		62	%		60	%

---

(a)	Calculated as noninterest expense divided by the sum of net interest income and noninterest income on the Consolidated Income Statement.

(b)

Calculated as PNC’s efficiency ratio adjusted (1) for the impact of certain specified items, and (2) as if we had recorded our investment in BlackRock on the equity method for all periods presented. We have provided these adjusted amounts and reconciliations so that shareholders, investor analysts, regulators and others will be better able to evaluate the impact of these items on our “as reported” efficiency ratio for these periods, in addition to providing a basis of comparability for the impact of the BlackRock deconsolidation. Amounts used for these adjusted ratios are reconciled to amounts used in the PNC efficiency ratio as reported (GAAP basis).

 

		Three months ended
Dollars in millions		June 30 2007				March 31 2007				December 31 2006				September 30 2006				June 30 2006
Reconciliation of GAAP amounts with amounts used in the calculation of the adjusted efficiency ratio:
GAAP basis—net interest income		$	738			$	623			$	566			$	567			$	556
Adjustment to net interest income: BlackRock equity method (c)															(3	)			(4	)
Adjusted net interest income		$	738			$	623			$	566			$	564			$	552
GAAP basis—noninterest income		$	975			$	991			$	969			$	2,943			$	1,230
Adjustments:
Gain on BlackRock/MLIM transaction															(2,078	)
Securities portfolio rebalancing loss															196
Mortgage loan portfolio repositioning loss															48
Integration costs			1				2				10
BlackRock LTIP			1				(52	)			12
BlackRock equity method (c)															(277	)			(312	)
Adjusted noninterest income		$	977			$	941			$	991			$	832			$	918
Adjusted total revenue		$	1,715			$	1,564			$	1,557			$	1,396			$	1,470
GAAP basis—noninterest expense		$	1,040			$	944			$	969			$	1,167			$	1,145
Adjustments:
Integration costs			(15	)			(11	)							(72	)			(13	)
BlackRock equity method (c)															(223	)			(251	)
Adjusted noninterest expense		$	1,025			$	933			$	969			$	872			$	881
Adjusted efficiency ratio			60	%			60	%			62	%			62	%			60	%

---

(c)	See Appendix to Financial Supplement.

 

Page 11

---

THE PNC FINANCIAL SERVICES GROUP, INC.

Details of Net Interest Income, Net Interest Margin, and Trading Revenue (Unaudited)

 

		Three months ended
Net Interest Income In millions		June 30 2007				March 31 2007				December 31 2006				September 30 2006				June 30 2006
Interest income, taxable equivalent basis
Loans		$	1,088			$	899			$	824			$	841			$	801
Securities available for sale			355				310				279				272				255
Other			119				112				119				97				76
Total interest income			1,562				1,321				1,222				1,210				1,132
Interest expense
Deposits			532				468				450				434				379
Borrowed funds			284				224				201				202				191
Total interest expense			816				692				651				636				570
Net interest income, taxable-equivalent basis			746				629				571				574				562
Less: Taxable-equivalent adjustment			8				6				5				7				6
Net interest income, GAAP basis		$	738			$	623			$	566			$	567			$	556
		Three months ended
Net Interest Margin		June 30 2007				March 31 2007				December 31 2006				September 30 2006				June 30 2006
Average yields/rates
Yield on interest-earning assets
Loans			6.81	%			6.68	%			6.63	%			6.59	%			6.38	%
Securities available for sale			5.37				5.31				5.27				5.01				4.76
Other			5.94				5.83				5.56				5.78				5.23
Total yield on interest-earning assets			6.35				6.23				6.15				6.09				5.84
Rate on interest-bearing liabilities
Deposits			3.52				3.52				3.54				3.43				3.11
Borrowed funds			5.28				5.33				5.39				5.40				5.06
Total rate on interest-bearing liabilities			3.98				3.95				3.97				3.88				3.56
Interest rate spread			2.37				2.28				2.18				2.21				2.28
Impact of noninterest-bearing sources			.66				.67				.70				.68				.62
Net interest margin			3.03	%			2.95	%			2.88	%			2.89	%			2.90	%
		Three months ended
Trading Revenue (a) In millions		June 30 2007				March 31 2007				December 31 2006				September 30 2006				June 30 2006
Net interest income (expense)		$	1							$	(2	)		$	(1	)		$	(3	)
Noninterest income			29			$	52				33				38				55
Total trading revenue		$	30			$	52			$	31			$	37			$	52
Securities underwriting and trading (b)		$	8			$	9			$	11			$	7			$	6
Foreign exchange			13				14				13				11				17
Financial derivatives			9				29				7				19				29
Total trading revenue		$	30			$	52			$	31			$	37			$	52

---

(a)	See pages 13-14 for disclosure of average trading assets and liabilities.

(b)	Includes changes in fair value for certain loans accounted for at fair value. See page 13 for disclosure of average loans at fair value.

 

Page 12

---

THE PNC FINANCIAL SERVICES GROUP, INC.

Average Consolidated Balance Sheet (Unaudited)

 

Three months ended - in millions		June 30 2007				March 31 2007				December 31 2006				September 30 2006				June 30 2006
Assets
Interest-earning assets:
Securities available for sale
Residential mortgage-backed		$	19,280			$	17,198			$	16,082			$	15,282			$	14,247
Commercial mortgage-backed			3,646				3,338				2,640				2,182				2,348
Asset-backed			2,531				1,876				1,561				1,457				1,170
U.S. Treasury and government agencies			344				394				441				2,285				3,181
State and municipal			203				162				140				144				152
Other debt			33				79				89				90				88
Corporate stocks and other			383				347				277				259				230
Total securities available for sale (a)			26,420				23,394				21,230				21,699				21,416
Loans, net of unearned income
Commercial			24,652				21,479				20,458				20,431				20,348
Commercial real estate			9,513				5,478				3,483				3,268				3,071
Lease financing			2,566				2,534				2,789				2,790				2,761
Consumer			17,886				16,865				16,272				16,150				16,049
Residential mortgage			8,527				7,173				5,606				7,332				7,353
Other			411				527				385				367				354
Total loans, net of unearned income			63,555				54,056				48,993				50,338				49,936
Loans held for sale			2,611				2,955				3,167				2,408				2,411
Federal funds sold and resale agreements			1,832				2,092				2,049				1,401				613
Other			3,606				2,735				3,198				2,805				2,795
Total interest-earning assets			98,024				85,232				78,637				78,651				77,171
Noninterest-earning assets:
Allowance for loan and lease losses			(692	)			(612	)			(557	)			(609	)			(600	)
Cash and due from banks			2,991				2,945				2,999				3,161				3,140
Other			22,997				19,857				17,969				14,142				13,736
Total assets		$	123,320			$	107,422			$	99,048			$	95,345			$	93,447
Supplemental Average Balance Sheet Information
Trading Assets
Securities (b)		$	2,144			$	1,569			$	2,111			$	1,460			$	1,477
Resale agreements (c)			1,247				820				1,247				537				378
Financial derivatives (d)			1,221				1,115				1,209				1,220				1,251
Loans at fair value (d)			161				193				172				168				170
Total trading assets		$	4,773			$	3,697			$	4,739			$	3,385			$	3,276

---

(a)	Average securities held to maturity totaled less than $.5 million for each of the periods presented and are included in the “Other debt” category above.

(b)	Included in “Interest-earning assets-Other” above.

(c)	Included in “Federal funds sold and resale agreements” above.

(d)	Included in “Noninterest-earning assets-Other” above.

 

Page 13

---

THE PNC FINANCIAL SERVICES GROUP, INC.

Average Consolidated Balance Sheet (Unaudited) (Continued)

 

Three months ended - in millions		June 30 2007			March 31 2007			December 31 2006			September 30 2006			June 30 2006
Liabilities, Minority and Noncontrolling Interests, and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing deposits
Money market		$	23,979		$	22,503		$	20,879		$	20,565		$	19,019
Demand			9,494			8,671			8,143			8,075			8,229
Savings			2,988			2,250			1,882			2,021			2,177
Retail certificates of deposit			17,426			15,691			14,837			14,209			13,686
Other time			2,297			1,623			1,355			1,467			1,323
Time deposits in foreign offices			4,220			3,129			3,068			3,712			4,276
Total interest-bearing deposits			60,404			53,867			50,164			50,049			48,710
Borrowed funds
Federal funds purchased			6,102			4,533			3,167			3,831			2,715
Repurchase agreements			2,507			1,858			2,264			2,027			2,226
Bank notes and senior debt			5,681			4,182			2,757			2,801			3,145
Subordinated debt			4,466			4,370			4,361			4,436			4,437
Other			2,565			1,877			2,161			1,627			2,504
Total borrowed funds			21,321			16,820			14,710			14,722			15,027
Total interest-bearing liabilities			81,725			70,687			64,874			64,771			63,737
Noninterest-bearing liabilities, minority and noncontrolling interests, and shareholders’ equity:
Demand and other noninterest-bearing deposits			17,824			15,807			14,827			14,549			13,926
Allowance for unfunded loan commitments and letters of credit			121			126			117			104			103
Accrued expenses and other liabilities			7,655			7,961			7,882			6,346			6,305
Minority and noncontrolling interests in consolidated entities			1,367			893			542			640			631
Shareholders’ equity			14,628			11,948			10,806			8,935			8,745
Total liabilities, minority and noncontrolling interests, and shareholders’ equity		$	123,320		$	107,422		$	99,048		$	95,345		$	93,447
Supplemental Average Balance Sheet Information
Deposits and Common Shareholders’ Equity
Interest-bearing deposits		$	60,404		$	53,867		$	50,164		$	50,049		$	48,710
Demand and other noninterest-bearing deposits			17,824			15,807			14,827			14,549			13,926
Total deposits		$	78,228		$	69,674		$	64,991		$	64,598		$	62,636
Transaction deposits		$	51,297		$	46,981		$	43,849		$	43,189		$	41,174
Common shareholders’ equity		$	14,621		$	11,941		$	10,799		$	8,928		$	8,738
Trading Liabilities
Securities sold short (a)		$	1,431		$	1,264		$	1,553		$	867		$	769
Repurchase agreements and other borrowings (b)			669			363			1,096			708			641
Financial derivatives (c)			1,230			1,126			1,156			1,151			1,200
Borrowings at fair value (c)			40			39			34			40			48
Total trading liabilities		$	3,370		$	2,792		$	3,839		$	2,766		$	2,658

---

(a)	Included in “Borrowed funds-Other” above.

(b)	Included in “Borrowed funds-Repurchase agreements” and “Borrowed funds-Other” above.

(c)	Included in “Accrued expenses and other liabilities” above.

 

Page 14

---

THE PNC FINANCIAL SERVICES GROUP, INC.

Details of Loans (Unaudited)

Loans

 

Period ended - in millions		June 30 2007				March 31 2007				December 31 2006				September 30 2006				June 30 2006
Commercial
Retail/wholesale		$	5,908			$	5,940			$	5,301			$	5,245			$	5,393
Manufacturing			4,371				4,419				4,189				4,318				4,164
Other service providers			2,963				2,879				2,186				2,155				2,179
Real estate related			4,443				4,364				2,825				3,000				2,903
Financial services			1,500				1,509				1,324				1,423				1,479
Health care			1,023				959				707				685				641
Other			4,538				4,456				4,052				3,858				3,805
Total commercial			24,746				24,526				20,584				20,684				20,564
Commercial real estate
Real estate projects			8,962				8,963				2,716				2,691				2,438
Mortgage			567				602				816				794				768
Total commercial real estate			9,529				9,565				3,532				3,485				3,206
Equipment lease financing			3,587				3,527				3,556				3,609				3,583
Total commercial lending			37,862				37,618				27,672				27,778				27,353
Consumer
Home equity			14,268				14,263				13,749				13,876				13,853
Automobile			1,962				1,956				1,135				1,061				1,008
Other			1,804				1,769				1,631				1,419				1,388
Total consumer			18,034				17,988				16,515				16,356				16,249
Residential mortgage			9,440				7,960				6,337				5,234				7,416
Other			382				364				376				347				358
Unearned income			(1,004	)			(1,005	)			(795	)			(815	)			(828	)
Total, net of unearned income		$	64,714			$	62,925			$	50,105			$	48,900			$	50,548

 

Page 15

---

THE PNC FINANCIAL SERVICES GROUP, INC.

Allowances for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit, and Net Unfunded Commitments (Unaudited)

Change in Allowance for Loan and Lease Losses

 

Three months ended - in millions		June 30 2007				March 31 2007				December 31 2006				September 30 2006				June 30 2006
Beginning balance		$	690			$	560			$	566			$	611			$	597
Charge-offs
Commercial			(27	)			(31	)			(23	)			(39	)			(30	)
Commercial real estate			(1	)							(1	)			(2	)
Equipment lease financing											(14	)
Consumer			(15	)			(17	)			(15	)			(13	)			(12	)
Residential mortgage											(1	)			(2	)
Total charge-offs			(43	)			(48	)			(54	)			(56	)			(42	)
Recoveries
Commercial			8				7				3				6				4
Commercial real estate			1								1
Equipment lease financing											1								4
Consumer			2				5				4				3				4
Total recoveries			11				12				9				9				12
Net recoveries (charge-offs)
Commercial			(19	)			(24	)			(20	)			(33	)			(26	)
Commercial real estate															(2	)
Equipment lease financing											(13	)							4
Consumer			(13	)			(12	)			(11	)			(10	)			(8	)
Residential mortgage											(1	)			(2	)
Total net charge-offs			(32	)			(36	)			(45	)			(47	)			(30	)
Provision for credit losses			54				8				42				16				44
Acquired allowance—Mercantile			(5	)			142
Net change in allowance for unfunded loan commitments and letters of credit			(4	)			16				(3	)			(14	)
Ending balance		$	703			$	690			$	560			$	566			$	611
Supplemental Information
Commercial lending net charge-offs (a)		$	(19	)		$	(24	)		$	(33	)		$	(35	)		$	(22	)
Consumer lending net charge-offs (b)			(13	)			(12	)			(12	)			(12	)			(8	)
Total net charge-offs		$	(32	)		$	(36	)		$	(45	)		$	(47	)		$	(30	)
Net charge-offs to average loans
Commercial lending			.21	%			.33	%			.49	%			.52	%			.34	%
Consumer lending			.19				.20				.22				.20				.14

---

(a)	Includes commercial, commercial real estate and equipment lease financing.

(b)	Includes consumer and residential mortgage.

Change in Allowance for Unfunded Loan Commitments and Letters of Credit

 

Three months ended - in millions		June 30 2007			March 31 2007				December 31 2006			September 30 2006			June 30 2006
Beginning balance		$	121		$	120			$	117		$	103		$	103
Acquired allowance - Mercantile						17
Net change in allowance for unfunded loan commitments and letters of credit			4			(16	)			3			14
Ending balance		$	125		$	121			$	120		$	117		$	103
Net Unfunded Commitments In millions		June 30 2007			March 31 2007				December 31 2006			September 30 2006			June 30 2006
Net unfunded commitments		$	50,680		$	49,263			$	44,835		$	43,804		$	40,904

 

Page 16

---

THE PNC FINANCIAL SERVICES GROUP, INC.

Details of Nonperforming Assets (Unaudited)

Nonperforming Assets by Type

 

Period ended - in millions		June 30 2007				March 31 2007				December 31 2006				September 30 2006				June 30 2006
Nonaccrual loans
Commercial		$	126			$	121			$	109			$	112			$	151
Commercial real estate			62				25				12				14				12
Equipment lease financing			2				2				1				14				16
Consumer			14				14				13				14				14
Residential mortgage			14				16				12				13				14
Total nonaccrual loans			218				178				147				167				207
Troubled debt restructured loan																			1
Total nonperforming loans			218				178				147				167				208
Foreclosed and other assets
Equipment lease financing			12				12				12				12				12
Residential mortgage			12				11				10				9				8
Other			4				3				2				3				3
Total foreclosed and other assets			28				26				24				24				23
Total nonperforming assets (a) (b) (c)		$	246			$	204			$	171			$	191			$	231
Nonperforming loans to total loans			.34	%			.28	%			.29	%			.34	%			.41	%
Nonperforming assets to total loans and foreclosed assets			.38				.32				.34				.39				.46
Nonperforming assets to total assets			.20				.17				.17				.19				.24
Net charge-offs to average loans (For the three months ended)			.20				.27				.36				.37				.24
Allowance for loan and lease losses to loans			1.09				1.10				1.12				1.16				1.21
Allowance for loan and lease losses to nonperforming loans			322				388				381				339				294
(a)    Excludes equity management assets carried at estimated fair value (amounts include troubled debt restructured assets of $4 million, $4 million, $4 million, $4 million, and $7 million, respectively):		$	13			$	15			$	11			$	12			$	18
(b)    Excludes loans held for sale carried at lower of cost or market value ($17 million at June 30, 2007 and $18 million at March 31, 2007).
(c)    Total nonperforming assets at June 30, 2007 of $246 million included $67 million related to Mercantile. Total nonperforming assets at March 31, 2007 of $204 million included $35 million related to Mercantile. Therefore, total nonperforming assets at June 30, 2007 and March 31, 2007 excluding Mercantile totaled $179 million and $169 million, respectively.
Change in Nonperforming Assets   In millions		Six months ended
January 1, 2007		$	171
Transferred from accrual			189
Acquisition - Mercantile			35
Asset sales			(4	)
Returned to performing			(4	)
Charge-offs and valuation adjustments			(51	)
Principal activity including payoffs			(90	)
June 30, 2007		$	246

 

Page 17

---

THE PNC FINANCIAL SERVICES GROUP, INC.

Details of Nonperforming Assets (Unaudited) (Continued)

Nonperforming Assets by Business

 

Period ended - in millions		June 30 2007			March 31 2007			December 31 2006			September 30 2006			June 30 2006
Retail Banking
Nonperforming loans		$	130		$	114		$	96		$	85		$	95
Foreclosed and other assets			10			9			10			10			9
Total		$	140		$	123		$	106		$	95		$	104
Corporate & Institutional Banking
Nonperforming loans		$	87		$	64		$	50		$	81		$	112
Foreclosed and other assets			13			13			13			13			13
Total		$	100		$	77		$	63		$	94		$	125
Other (a)
Nonperforming loans		$	1					$	1		$	1		$	1
Foreclosed and other assets			5		$	4			1			1			1
Total		$	6		$	4		$	2		$	2		$	2
Consolidated Totals
Nonperforming loans		$	218		$	178		$	147		$	167		$	208
Foreclosed and other assets			28			26			24			24			23
Total (b)		$	246		$	204		$	171		$	191		$	231

---

(a)	Amounts include residential mortgages related to PNC’s A&L management function.

Largest Individual Nonperforming Assets at June 30, 2007 - in millions (b)

 

Ranking		Outstandings				Industry
1		$	15			Wood Product Manufacturing
2			15			Real Estate
3			12			Air Transportation
4			8			Other Commercial Printing
5			7			Real Estate
6			6			Computer and Electronic Products Manufacturing
7			4			Plastics and Rubber Products Manufacturing
8			4			Food Services
9			4			Real Estate
10			4			Real Estate
Total		$	79
As a percent of total nonperforming assets
			32	%

---

(b)	Amounts shown are not net of related allowance for loan and lease losses, if applicable.

 

Page 18

---

Glossary of Terms

Accounting/administration net fund assets—Net domestic and foreign fund investment assets for which we provide accounting and administration services. We do not include these assets on our Consolidated Balance Sheet.

Adjusted average total assets—Primarily comprised of total average quarterly (or annual) assets plus (less) unrealized losses (gains) on available-for-sale debt securities, less goodwill and certain other intangible assets (net of eligible deferred taxes).

Annualized—Adjusted to reflect a full year of activity.

Assets under management—Assets over which we have sole or shared investment authority for our customers/clients. We do not include these assets on our Consolidated Balance Sheet.

Basis point—One hundredth of a percentage point.

Charge-off—Process of removing a loan or portion of a loan from our balance sheet because it is considered uncollectible. We also record a charge-off when a loan is transferred to held for sale by reducing the carrying amount by the allowance for loan losses associated with such loan or if the market value is less than its carrying amount.

Common shareholders’ equity to total assets—Common shareholders’ equity divided by total assets. Common shareholders’ equity equals total shareholders’ equity less the liquidation value of preferred stock.

Credit spread—The difference in yield between debt issues of similar maturity. The excess of yield attributable to credit spread is often used as a measure of relative creditworthiness, with a reduction in the credit spread reflecting an improvement in the borrower’s perceived creditworthiness.

Custody assets—Investment assets held on behalf of clients under safekeeping arrangements. We do not include these assets on our Consolidated Balance Sheet. Investment assets held in custody at other institutions on our behalf are included in the appropriate asset categories on the Consolidated Balance Sheet as if physically held by us.

Derivatives—Financial contracts whose value is derived from publicly traded securities, interest rates, currency exchange rates or market indices. Derivatives cover a wide assortment of financial contracts, including forward contracts, futures, options and swaps.

Duration of equity—An estimate of the rate sensitivity of our economic value of equity. A negative duration of equity is associated with asset sensitivity (i.e., positioned for rising interest rates), while a positive value implies liability sensitivity (i.e., positioned for declining interest rates). For example, if the duration of equity is +1.5 years, the economic value of equity declines by 1.5% for a 100 basis point increase in interest rates.

Earning assets—Assets that generate income, which include: federal funds sold; resale agreements; other short-term investments, including trading securities; loans held for sale; loans, net of unearned income; securities; and certain other assets.

Economic capital—Represents the amount of resources that a business segment should hold to guard against potentially large losses that could cause insolvency. It is based on a measurement of economic risk, as opposed to risk as defined by regulatory bodies. The economic capital measurement process involves converting a risk distribution to the capital that is required to support the risk, consistent with our target credit rating. As such, economic risk serves as a “common currency” of risk that allows us to compare different risks on a similar basis.

Economic value of equity (“EVE”)—The present value of the expected cash flows of our existing assets less the present value of the expected cash flows of our existing liabilities, plus the present value of the net cash flows of our existing off-balance sheet positions.

 

Page 19

---

Effective duration—A measurement, expressed in years, that, when multiplied by a change in interest rates, would approximate the percentage change in value of on- and off- balance sheet positions.

Efficiency—Noninterest expense divided by the sum of net interest income (GAAP basis) and noninterest income.

Funds transfer pricing—A management accounting methodology designed to recognize the net interest income effects of sources and uses of funds provided by the assets and liabilities of a business segment. We assign these balances LIBOR-based funding rates at origination that represent the interest cost for us to raise/invest funds with similar maturity and repricing structures.

Futures and forward contracts—Contracts in which the buyer agrees to purchase and the seller agrees to deliver a specific financial instrument at a predetermined price or yield. May be settled either in cash or by delivery of the underlying financial instrument.

GAAP—Accounting principles generally accepted in the United States of America.

Leverage ratio—Tier 1 risk-based capital divided by adjusted average total assets.

Net interest margin—Annualized taxable-equivalent net interest income divided by average earning assets.

Nondiscretionary assets under administration—Assets we hold for our customers/clients in a non-discretionary, custodial capacity. We do not include these assets on our Consolidated Balance Sheet.

Noninterest income to total revenue—Noninterest income divided by the sum of net interest income (GAAP basis) and noninterest income.

Nonperforming assets—Nonperforming assets include nonaccrual loans, troubled debt restructured loans, foreclosed assets and other assets. We do not accrue interest income on assets classified as nonperforming.

Nonperforming loans—Nonperforming loans include loans to commercial, commercial real estate, equipment lease financing, consumer, and residential mortgage customers as well as troubled debt restructured loans. Nonperforming loans do not include nonperforming loans held for sale or foreclosed and other assets. We do not accrue interest income on loans classified as nonperforming.

Notional amount— A number of currency units, shares, or other units specified in a derivatives contract.

Operating leverage—The period to period percentage change in total revenue (GAAP basis) less the percentage change in noninterest expense. A positive percentage indicates that revenue growth exceeded expense growth (i.e., positive operating leverage) while a negative percentage implies expense growth exceeded revenue growth (i.e., negative operating leverage).

Recovery—Cash proceeds received on a loan that we had previously charged off. We credit the amount received to the allowance for loan and lease losses.

Return on average capital—Annualized net income divided by average capital.

Return on average assets—Annualized net income divided by average assets.

Return on average common equity—Annualized net income divided by average common shareholders’ equity.

Risk-weighted assets—Primarily computed by the assignment of specific risk-weights (as defined by The Board of Governors of the Federal Reserve System) to assets and off-balance sheet instruments.

Securitization—The process of legally transforming financial assets into securities.

 

Page 20

---

Tangible common equity ratio—Period-end common shareholders’ equity less goodwill and other intangible assets (net of eligible deferred taxes), and excluding mortgage servicing rights, divided by period-end assets less goodwill and other intangible assets (net of eligible deferred taxes), and excluding mortgage servicing rights.

Taxable-equivalent interest—The interest income earned on certain assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments. To provide more meaningful comparisons of yields and margins for all interest-earning assets, we also provide revenue on a taxable-equivalent basis by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income on taxable investments. This adjustment is not permitted under GAAP on the Consolidated Income Statement.

Tier 1 risk-based capital—Tier 1 risk-based capital equals: total shareholders’ equity, plus trust preferred capital securities, plus certain minority interests that are held by others; less goodwill and certain other intangible assets (net of eligible deferred taxes), less equity investments in nonfinancial companies and less net unrealized holding losses on available-for-sale equity securities. Net unrealized holding gains on available-for-sale equity securities, net unrealized holding gains (losses) on available-for-sale debt securities and net unrealized holding gains (losses) on cash flow hedge derivatives are excluded from total shareholders’ equity for tier 1 risk-based capital purposes.

Tier 1 risk-based capital ratio—Tier 1 risk-based capital divided by period-end risk-weighted assets.

Total fund assets serviced—Total domestic and offshore fund investment assets for which we provide related processing services. We do not include these assets on our Consolidated Balance Sheet.

Total return swap—A non-traditional swap where one party agrees to pay the other the “total return” of a defined underlying asset (e.g., a loan), usually in return for receiving a stream of LIBOR-based cash flows. The total returns of the asset, including interest and any default shortfall, are passed through to the counterparty. The counterparty is therefore assuming the credit and economic risk of the underlying asset.

Total risk-based capital—Tier 1 risk-based capital plus qualifying subordinated debt and trust preferred securities, other minority interest not qualified as tier 1, and the allowance for loan and lease losses, subject to certain limitations.

Total risk-based capital ratio—Total risk-based capital divided by period-end risk-weighted assets.

Transaction deposits—The sum of money market and interest-bearing demand deposits and demand and other noninterest-bearing deposits.

Yield curve—A graph showing the relationship between the yields on financial instruments or market indices of the same credit quality with different maturities. For example, a “normal” or “positive” yield curve exists when long-term bonds have higher yields than short-term bonds. A “flat” yield curve exists when yields are the same for short-term and long-term bonds. A “steep” yield curve exists when yields on long-term bonds are significantly higher than on short-term bonds. An “inverted” or “negative” yield curve exists when short-term bonds have higher yields than long-term bonds.

 

Page 21

---

Business Segment Descriptions

Retail Banking provides deposit, lending, brokerage, trust, investment management, and cash management services to approximately 2.9 million consumer and small business customers within our primary geographic area. Our customers are serviced through 1,084 offices in our branch network, the call center located in Pittsburgh and the Internet – www.pncbank.com. The branch network is located primarily in Pennsylvania; New Jersey; Washington, D.C.; Maryland; Virginia; Ohio; Kentucky and Delaware. Brokerage services are provided through PNC Investments, LLC, and J.J.B. Hilliard, W.L. Lyons, Inc. Retail Banking also serves as investment manager and trustee for employee benefit plans and charitable and endowment assets and provides nondiscretionary defined contribution plan services and investment options through its Vested Interest^® product. These services are provided to individuals and corporations primarily within our primary geographic markets.

Corporate & Institutional Banking provides lending, treasury management, and capital markets-related products and services to mid-sized corporations, government entities, and selectively to large corporations. Lending products include secured and unsecured loans, letters of credit and equipment leases. Treasury management services include cash and investment management, receivables management, disbursement services, funds transfer services, information reporting, and global trade services. Capital markets-related products and services include foreign exchange, derivatives, loan syndications, mergers and acquisitions advisory and related services to middle-market companies, securities underwriting, and securities sales and trading. Corporate & Institutional Banking also provides commercial loan servicing, real estate advisory and technology solutions for the commercial real estate finance industry. Corporate & Institutional Banking provides products and services generally within our primary geographic markets, with certain products and services provided nationally.

BlackRock is one of the world’s largest publicly traded investment management firms. The firm manages assets on behalf of institutions and individuals worldwide through a variety of equity, fixed income, cash management and alternative investment products. In addition, BlackRock provides BlackRock Solutions^® investment system, risk management, and financial advisory services to a growing number of institutional investors. The firm has a major presence in key global markets, including the United States, Europe, Asia, Australia and the Middle East. At June 30, 2007, PNC’s ownership interest in BlackRock was 33.6%.

PFPC is a leading full service provider of processing, technology and business solutions for the global investment industry. Securities services include custody, securities lending, and accounting and administration for funds registered under the 1940 Act and alternative investments. Investor services include transfer agency, managed accounts, subaccounting, and distribution. PFPC serviced $2.4 trillion in total assets and 70 million shareholder accounts as of June 30, 2007 both domestically and internationally through its Ireland and Luxembourg operations.

 

Page 22

---

Appendix to Financial Supplement

The PNC Financial Services Group, Inc.

Adjusted Condensed Consolidated Income Statement Reconciliations (Unaudited) (a)

For the six months ended June 30, 2007

 

In millions		PNC As Reported			Adjustments (b)				PNC As Adjusted
Net Interest Income
Net interest income		$	1,361						$	1,361
Provision for credit losses			62							62
Net interest income less provision for credit losses			1,299							1,299
Noninterest Income
Asset management			355		$	3				358
Other			1,611			(51	)			1,560
Total noninterest income			1,966			(48	)			1,918
Noninterest Expense
Compensation and benefits			1,034			(11	)			1,023
Other			950			(15	)			935
Total noninterest expense			1,984			(26	)			1,958
Income before income taxes			1,281			(22	)			1,259
Income taxes			399			(8	)			391
Net income		$	882		$	(14	)		$	868

For the six months ended June 30, 2006

 

In millions		PNC As Reported			BlackRock/MLIM Transaction Integration Costs				BlackRock Deconsolidation and Other Adjustments				BlackRock Equity Method (c)			PNC As Adjusted
Net Interest Income
Net interest income		$	1,112						$	(7	)					$	1,105
Provision for credit losses			66														66
Net interest income less provision for credit losses			1,046							(7	)						1,039
Noninterest Income
Asset management			890							(734	)		$	101			257
Other			1,525							(33	)						1,492
Total noninterest income			2,415							(767	)			101			1,749
Noninterest Expense
Compensation and benefits			1,276							(369	)						907
Other			1,031		$	(19	)			(173	)						839
Total noninterest expense			2,307			(19	)			(542	)						1,746
Income before minority interest and income taxes			1,154			19				(232	)			101			1,042
Minority interest in income of BlackRock			41			4				(45	)
Income taxes			378			7				(92	)			6			299
Net income		$	735		$	8			$	(95	)		$	95		$	743

---

(a)

This adjusted condensed consolidated income statement reconciliation is provided for informational purposes only and reflects historical consolidated financial information of PNC (1) with amounts adjusted for the impact of certain specified items and (2) as if we had recorded our investment in BlackRock on the equity method for all periods presented. This reconciliation is from the reported GAAP amounts shown on page 2 of the Financial Supplement to the corresponding adjusted amounts shown on page 3 of the Financial Supplement. We have provided these adjusted amounts and reconciliations so that investors, analysts, regulators and others will be better able to evaluate the impact of these items on our results for these periods, in addition to providing a basis of comparability for the impact of the BlackRock deconsolidation given the magnitude of the impact of the deconsolidation on various components of our income statement. We believe that information as adjusted for the impact of the specified items may be useful due to the extent to which these items are not indicative of our ongoing operations as the result of our management activities on those operations, as a result of the following attributes. Acquisition integration costs can vary significantly from period to period depending on whether or not we have any such transaction pending or in process and depending on the nature of the transaction. Our BlackRock LTIP shares obligation results from an agreement entered into in 2002 and predominantly reflects the market price of BlackRock stock at specified times. We have provided information adjusted for the impact of the third quarter 2006 gain on the BlackRock/MLIM transaction due to the magnitude of that transaction, and have provided information adjusted for the impact of the third quarter 2006 securities portfolio rebalancing and mortgage loan portfolio repositioning losses due to the nature of those transactions. Adjusted information supplements our results as reported in accordance with GAAP and should not be viewed in isolation from, or as a substitute for, our GAAP results. Our 2006 Form 10-K includes additional information regarding our accounting for the BlackRock/MLIM transaction and the BlackRock LTIP shares obligation. The absence of other adjustments is not intended to imply that there could not have been other similar types of adjustments, but any such adjustments would not have been similar in magnitude to the amount of the adjustments shown.

(b)	Includes the impact of the following items on a pretax basis: $51 million net gain related to BlackRock LTIP and $29 million of Mercantile acquisition and BlackRock/MLIM transaction integration costs.

(c)

BlackRock investment revenue represents PNC’s approximately 69% ownership interest in earnings of BlackRock for the six months ended June 30, 2006, excluding pretax BlackRock/MLIM transaction integration costs totaling $19 million. The income taxes amount represents additional income taxes recorded by PNC related to BlackRock earnings.

 

Page A1

---

Appendix to Financial Supplement (continued)

The PNC Financial Services Group, Inc.

Adjusted Condensed Consolidated Income Statement Reconciliations (Unaudited) (a)

For the three months ended June 30, 2007

 

In millions		PNC As Reported			Adjustments (b)				PNC As Adjusted
Net Interest Income
Net interest income		$	738						$	738
Provision for credit losses			54							54
Net interest income less provision for credit losses			684							684
Noninterest Income
Asset management			190		$	1				191
Other			785			1				786
Total noninterest income			975			2				977
Noninterest Expense
Compensation and benefits			544			(9	)			535
Other			496			(6	)			490
Total noninterest expense			1,040			(15	)			1,025
Income before income taxes			619			17				636
Income taxes			196			6				202
Net income		$	423		$	11			$	434

For the three months ended March 31, 2007

 

In millions		PNC As Reported			Adjustments (c)				PNC As Adjusted
Net Interest Income
Net interest income		$	623						$	623
Provision for credit losses			8							8
Net interest income less provision for credit losses			615							615
Noninterest Income
Asset management			165		$	2				167
Other			826			(52	)			774
Total noninterest income			991			(50	)			941
Noninterest Expense
Compensation and benefits			490			(2	)			488
Other			454			(9	)			445
Total noninterest expense			944			(11	)			933
Income before income taxes			662			(39	)			623
Income taxes			203			(14	)			189
Net income		$	459		$	(25	)		$	434

---

(a)	See note (a) on page A1.

(b)	Includes the impact of the following items on a pretax basis: $16 million of Mercantile acquisition and BlackRock/MLIM transaction integration costs and $1 million net loss related to BlackRock LTIP.

(c)	Includes the impact of the following items on a pretax basis: $52 million net gain related to BlackRock LTIP and $13 million of Mercantile acquisition and BlackRock/MLIM transaction integration costs.

 

Page A2

---

Appendix to Financial Supplement (continued)

The PNC Financial Services Group, Inc.

Adjusted Condensed Consolidated Income Statement Reconciliations (Unaudited) (a)

For the three months ended December 31, 2006

 

In millions		PNC As Reported			Adjustments (b)			PNC As Adjusted
Net Interest Income
Net interest income		$	566					$	566
Provision for credit losses			42						42
Net interest income less provision for credit losses			524						524
Noninterest Income
Asset management			149		$	10			159
Other			820			12			832
Total noninterest income			969			22			991
Noninterest Expense
Compensation and benefits			497						497
Other			472						472
Total noninterest expense			969						969
Income before income taxes			524			22			546
Income taxes			148			7			155
Net income		$	376		$	15		$	391

For the three months ended September 30, 2006

 

In millions		PNC As Reported			Adjustments (c)				BlackRock Deconsolidation and Other Adjustments				BlackRock Equity Method (d)			PNC As Adjusted
Net Interest Income
Net interest income		$	567						$	(3	)					$	564
Provision for credit losses			16														16
Net interest income less provision for credit losses			551							(3	)						548
Noninterest Income
Asset management			381							(302	)		$	43			122
Other			2,562		$	(1,834	)			(18	)						710
Total noninterest income			2,943			(1,834	)			(320	)			43			832
Noninterest Expense
Compensation and benefits			659			(44	)			(154	)						461
Other			508			(28	)			(69	)						411
Total noninterest expense			1,167			(72	)			(223	)						872
Income before minority interest and income taxes			2,327			(1,762	)			(100	)			43			508
Minority interest in income of BlackRock			6			14				(20	)
Income taxes			837			(672	)			(38	)			1			128
Net income		$	1,484		$	(1,104	)		$	(42	)		$	42		$	380

---

(a)	See note (a) on page A1.

(b)	Includes the impact of the following items on a pretax basis: $12 million net loss related to BlackRock LTIP and $10 million of BlackRock/MLIM transaction integration costs.

(c)	Includes the impact of the following items, all on a pretax basis: $2,078 million gain on BlackRock/MLIM transaction, $196 million securities portfolio rebalancing loss, $72 million of BlackRock/MLIM transaction integration costs, and $48 million mortgage loan portfolio repositioning loss.

(d)

BlackRock investment revenue represents PNC’s approximately 69% ownership interest in earnings of BlackRock for the third quarter of 2006, excluding pretax BlackRock/MLIM transaction integration costs totaling $72 million. The income taxes amount represents additional income taxes recorded by PNC related to BlackRock earnings.

 

Page A3

---

Appendix to Financial Supplement (continued)

The PNC Financial Services Group, Inc.

Adjusted Condensed Consolidated Income Statement Reconciliation (Unaudited) (a)

 

For the three months ended June 30, 2006
In millions		PNC As Reported			BlackRock/MLIM Transaction Integration Costs				BlackRock Deconsolidation and Other Adjustments				BlackRock Equity Method (b)			PNC As Adjusted
Net Interest Income
Net interest income		$	556						$	(4	)					$	552
Provision for credit losses			44														44
Net interest income less provision for credit losses			512							(4	)						508
Noninterest Income
Asset management			429							(349	)		$	49			129
Other			801							(12	)						789
Total noninterest income			1,230							(361	)			49			918
Noninterest Expense
Compensation and benefits			634		$	3				(180	)						457
Other			511			(16	)			(71	)						424
Total noninterest expense			1,145			(13	)			(251	)						881
Income before minority interest and income taxes			597			13				(114	)			49			545
Minority interest in income of BlackRock			19			3				(22	)
Income taxes			197			5				(46	)			3			159
Net income		$	381		$	5			$	(46	)		$	46		$	386

---

(a)	See note (a) on page A1.

(b)

BlackRock investment revenue represents PNC’s approximately 69% ownership interest in earnings of BlackRock for second quarter of 2006, excluding pretax BlackRock/MLIM transaction integration costs totaling $13 million. The income taxes amount represents additional income taxes recorded by PNC related to BlackRock earnings.

 

Page A4

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---