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

John McDonald - Banc of America Securities Gary Townsend - Friedman, Billings, Ramsey & Co. Matthew O'Connor - UBS Securities Edward Najarian - Merrill Lynch Jonathan Balkind - Sandler O'Neill & Partners Jason Funk - Ferris, Baker, Watts Nancy Bush - NAB Research Jennifer Thompson - Oppenheimer & Co. Michael Mayo - Deutsche Bank

Good morning. My name is Christy, and I will be your conference facilitator today. At this time, I would like to welcome everyone to The PNC Financial Services Group's Second Quarter 2007 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will a question-and-answer period. [Operator instructions]. As a reminder, this call is being recorded. I will now turn the call over to the Bill Callihan, the Director of Investor Relations. Sir, please go ahead. William H. Callihan - Senior Vice President and Director of Investor Relations: Thank you. Good morning and welcome to today's conference call for The PNC Financial Services Group. Participating in this call will be PNC's Chairman and Chief Executive Officer, Jim Rohr; and Rick Johnson, the company's Chief Financial Officer. In the following comments, we will refer to adjusted results for the second quarter and for year-to-date periods of 2007 and 2006, as well as various other periods. We believe these adjustments, taken together with our reported results, will provide a clear picture of PNC's results and trends, given the significant impact of our deconsolidation of BlackRock, and will help us to illustrate the impact of certain other items; the adjustment report to our investment in BlackRock, as well as those reported on the equity method of accounting prior to the Merrill Lynch investment business transaction, in order to put all periods on a comparable basis. We also adjust as applicable the following items, acquisition-integration cost, net effects of the BlackRock LTIP share obligations, our third quarter 2006 gains on BlackRock/ MLIM transactions, and cost of the securities and mortgage repositioning. We provide details of the adjustments and reconciliations we report... in these reported results and other GAAP non-financial measures that we may discuss today in our Consolidated Financial Highlights section, in today's earnings release, in the appendix of our presentation, in the slides for today's call, and in our financial supplement, Form 10-K and 10-Q and other documents available on our website, at www.pnc.com, in the above Investor Relations sections. Also as a reminder, the following statements contain forward-looking information. Actual results and future revs could differ possibly materially from those we have anticipated in our statements and from a historical performance due to a variety of factors, included... including those described in this call, today's earnings release, supplementary information in slides, and in our Form 10-K and our most recent Form 10-Q and other SEC reports. These statements speak only as of July 19, 2007 and PNC undertakes no obligation to update them. Please note that a slide presentation accompanies our remarks, and you can see that the slide presentation along with our second quarter 2000 [ph] earnings release and supplementary information on our website. I'd now like now turn the call over to Jim Rohr. James E. Rohr - Chairman and Chief Executive Officer: Thank you Bill, and good morning and thanks for joining us today. I'm pleased to report that once again we executed on our key strategies that we've outlined for you, and they continue to propel us on our journey to becoming a great company. Despite the difficult environment, I was pleased by a number of things. First of all, all of our primary businesses met or exceeded expectations this quarter, and they reported solid revenue growth and momentum. I was also pleased about our expenses being well contained and our risk positions are solid. And I am particularly pleased with our continuing strong asset quality. As you can see from our results this quarter, we are in $423 million or $1.22 per diluted share. Now, while I am disappointed that this is a little less than I had hoped, the shortfall is attributed to our private equity and trading areas, where the comparison to the first quarter was substantial, and the impact related to our cross-border leasing tax exposure. I am actually pleased that we are making progress and resolving that issue, and Rick will talk to you about that more in a moment. And not withstanding those items, I am pleased that our net income for the first 6 months of this year are up 20% versus the first half of last year and they're consistent with our expectations. But these successes we have had in the first half and the fact we are enjoying just revenue from Mercantile without the benefit of the cost saves, we expect to be seeing those cost saves in the fourth quarter. But we are on course to having another good year and we believe that this full year will be well within the range of expectation. Now, this quarter's results were again driven by our focus on attracting, acquiring, retaining and deepening client relationships; our progress on creating positive operating leverage; and our overall use...effective use of capital. In a minute, Rick will provide additional details. But first, I'd like to tell you about some of our successes that continue to drive our business results. Now let me start by saying that we have a track record of setting goals and meeting expectations on our journey to building a great company. In other words, when we identify an initiative on this journey, we are steadfastly committed to a successful execution. Today, as we are all aware, the biggest challenge in the industry is not only growing quality revenue but keeping it. Clearly, the opportunity for us to grow organically depends upon our ability to attract new customers and expand our existing customer relationships to gain a greater share level. Over the past year, we have made some significant investments in our retail distribution capabilities that will help us to expand our presence in the payment space. And we have also launched a very aggressive branding effort, one of the largest in our history. One of the key initiatives, to differentiate our brand, is further improving customer service and I am personally committed to our goal of differentiating PNC in this area. Recently, I told you that PNC was ranked highest in customer satisfaction with small business banking, according to the J.D Power study. And we have plans to capitalize on successes that brought us this recognition throughout our expanded footprint. This is just part of the reason we are so optimistic about our recently announced acquisitions. Now, on the consumer side, we were not as satisfied as we might have been. We began focusing our efforts over a year ago. If you recall, last quarter I told you about a Human Sigma program, which we developed in collaboration with the Gallup organization at the end of last year to improve our existing customer experience in all other channel. I'm pleased to report that our early results show improvements in our customer satisfaction scores in our branches and call centers, and even more improvements expected as the process evolves. One particular example would be that last of July, we designed pnc.com and I am pleased to report that our customer online experience has improved dramatically. According to a recent survey this year, we were well into the top ten of consumer banking sites in overall site performance measure. Since the site was relaunched, traffic has increased by 15% to 20% and sales within the channel, whether its users will apply for a loan or open an account online, have increased 35% to 40%. And in addition, the percentage of consumer DDA households going to utilize the online banking and online bill payment has increased year-over-year from 51.17% to 55.29% respectively. Now as a follow up to our conversation last quarter, our new checking account products now have 15% higher initial balances since the introduction of our free ATM offer. In addition, our more affluent customer prospects such as business travelers recognize the benefit of banking with PNC. Debit card usage growth continues, and our net growth in checking account relationships has also improved. That's the reason why the consumer bank did so well in the first... in the second quarter and in the first half. Now in the Corporate & Institutional business, our focus remains on a greater penetration of fee-based products, in part by accelerating our efforts to deliver the full power of PNC's offers... offerings to its clients. Accordingly, customer-related fees are up strongly and our belief to reach its corporate services, which grew nicely year-over-year. Despite the dislocation in some areas of the credit markets, our syndication pipeline is strong and we have no trouble finding buyers for the type of credit that we're originating given our approach to underwriting. And as you know, our Corporate & Institutional Bank is significantly fee-driven in the last quarter with 49% of total revenue as payment fees. So we don't have to take the credit risk driven by net interest income needs. Moving onto PFPC, our reported earnings growth of about 20% year-over-year maintains its stronghold as a full service provider to the global funds industry. And it continues to invest earnings from traditional products in the higher margin emerging products. In fact, revenue growth reflects in part to the successful conversion of two new significant plan wins during the quarter. And most notably, PFPC hit two major milestones during the quarter, when both the managed account services and offshore operations had $100 billion in assets under administration. We are also happy to say that the pipeline of the new class for PFPC is strong as well and we continue to remain optimistic about its prospects for growth. First but not least, yesterday BlackRock reported a very strong quarter as well as the agreement to acquire the fund-of-funds business with the Quellos Group. Here again I'm pleased with the results of the MLIM integration, the assets under management growth and the strategic decisions being made being made to expand distribution and product capabilities. Obviously, but the disappointing area has been private equity and trading. We weren't pleased with those. But all in all, I'm pleased with the results of our primary banking businesses, as well as PFPC and BlackRock. Our model and the success we have in executing our strategies result in the ongoing capital flexibility required to make fully disciplined capital deployment decisions. Now let me talk about the acquisitions briefly. Because of the Mercantile acquisition, our leadership is in place, the training sides have been prepared, the comprehensive customer communication initiative was launched, product specialists have been deployed, branch merchandizing plans were initiated and the final integration test for the systems conversions are on pace for September 15th. As a matter of fact, I can tell you today that I'm even more confident that based on our progress, we will deliver the returns that we announced to you, last fall. Two other acquisitions that I would like to comment on; last month, we announced the... an agreement to acquire the Yardville National Bancorp with 33 braches, mostly in North Central New Jersey, and this morning we announced an agreement to acquire Sterling, with 67 braches, mostly in our Central Pennsylvania region. These transactions are expected to continue our revenue growth momentum, and illustrate our strategy of expanding our in-foot credit distribution network, in growing affluent areas, where we can leverage our scale and deliver our expanded fee-based product set to their clients. In the case of Yardville, we expect the acquisition to result in PNC having the number one deposit share, in three of the nation wealthiest counties. In case of Sterling, it is expected to provide us with a meaningful presence and establish in the fastest counties growing in Pennsylvania and bridge the gaps nicely among our Harrisburg, Philadelphia and Baltimore markets. And also, both of these transactions reflect our strategy of disciplined and effective capital deployment, as evidenced by the expected full year... first full year accretion in an estimated 15% internal rate of return. We have got model and the confidence having... I have in our leadership team, the integrations of this size are not expected to distract us from Mercantile integrations activity. As I mentioned, Mercantile integration takes place in September with the smaller ones taking place next year. Now, Rick will provide you with more detail about our outlook, and how we are executing relative to our overall strategy. Rick? Richard J. Johnson - Chief Financial Officer: Thank you very much Tim, and good morning everyone. Now this was another solid quarter for PNC with earning of $1.22 per diluted share or $1.25 when adjusted for integration costs. I want to give you a couple of key takeaways for this quarter. First, a strong performance by our primary businesses was partially offset by week results in private equity and training activities, and a cross-border lease impact, which is why I believe PNC's adjust... PNC's core earnings were much higher than the $1.25 adjusted results reported above. Second, despite these softer items, we continue to create positive operating leverage with customer revenue growth and disciplined expense management. Third, our risk profile continues to be well positioned to deliver solid results in this challenging market environment. And finally, our fourth key takeaway, which is we remain confident in our ability to grow earnings, fund our investments, including Sterling and continue to commit to an $800 million share repurchase program for 2007. Now, let's take a look at slide five, and take a look at our revenues. First, the fee-based businesses, which account for a 58% of adjusted revenues, grew 10% in the first half of the year, compared with the first half of 2006. Second our low cost deposit franchise, which accounts for 20%... 6% of the adjusted revenues, grew 30% year-to-date. Third lending, the smallest contributor at 16% grew 13%. Of course, each of these growth percentages are impacted by market scale, but to a much greater extent in net interest income rather than fees due to the current business mix. Overall, we are differentiated by well balanced, higher quality, diverse revenue stream which requires a relatively less credit capital than our peers. Now digging deeper into non-interest income, our organic growth and Mercantile acquisition contributed to increases in most of our fee income categories. The most important is that each of our customer-driven fee income categories increased, both on the linked quarter and year-over-year basis, with or without Mercantile. For example, asset management revenues increased 14% on a linked quarter basis from a combination of client acquisition and market growth in our wealth management franchise, strong growth from BlackRock and of course the Mercantile acquisition. Brokerage revenues also increased 9% on a linked quarter basis. Fund servicing revenues increased 3% linked quarter, due to the successful conversion of two new significant client wins during the quarter, growth from existing clients and market appreciation. We saw high teen increases in consumer service fees and service charges on deposits versus the linked quarter, attributed to the success we've had in growing our customer base, deepening existing relationships and focusing on being a leader in the payment space. The Mercantile acquisition of course also added to this growth. In corporate, service fee revenue grew 11% over the last quarter due to growth in commercial mortgage servicing income, and higher treasury management fees, and M&A advisory services. On the other hand, private equity gains and trading, net expectations for the first half were down considerably in the second quarter versus a very strong first quarter. Although private equity results can be lumpy, we still expect full year private equity revenues to reach $60 million. And while our client trading activity was stable, our proprietary trading activity was down from the strong first quarter. We still believe we can expect to see an average of $45 million of trading revenue on a quarterly basis. So, all in all, we delivered double-digit non-interest income growth, despite the weaker results in private equity and trade. Our next largest contributor to revenue is our deposit franchise, where we again are differentiated by our ability, to get our low cost deposits through multiple channels. And we have been successful in growing on non-interest bearing deposits in each of our major channels, including consumer, business banking and Midland. Our smallest contributor to revenue is lending, where the market is still characterized by narrow spreads. However, we continue to see good origination volumes and we continue to sell credits that don't meet our risk/return criteria. Now regarding net interest margins, we performed as expected. On a year-to-date basis, our margin increased 7 basis points, primarily to the benefit of markets here. In summary, I'm pleased to our business mix, the 15% growth in year-to-date revenues, and the revenue growth momentum we have created. These trends demonstrate the strategic value of building a diverse revenue stream that when assembled can produce strong consistent growth and confidence in our outlook for the future. Our second key takeaway today is that while revenue growth is essential, the other important component of creating positive operating leverage is disciplined investing and expense management. This has been accomplished with 12% adjusted expense growth, only 3% of which is attributable to PNC without Mercantile. As you can see, this has produced strong positive operating leverage for the first six months. Relative to One PNC's initiative, I'm pleased to report, we delivered on the $400 million goal. We launched this initiative 2 years ago, not only as a heightened recognition to deliver better results for our shareholders, but also because we knew that the prevailing winds such as low credit cost will not be at our backs for long. This quarter is a great example. But the most important outcome of the One PNC initiative is the culture we have instilled with our continuous improvement program and how it is delivering positive operating leverage, while we continue to fund investments in our business, such as branch expansion, online banking, branding, new enhanced products in areas like credit card, similar to mortgages and emerging products in treasury management such as EL and PFPC's such as alternative investments. Going forward, we expect to see the cost saves related to the Mercantile transaction in the fourth quarter, following our September conversion, and we should recognize a pre-tax gain between $20 million to $30 million resulting from the BlackRock issuance of shares in the pending acquisition of Quellos Group. It all depends on where the BlackRock share price is at on closing day. Now despite the industry climate, our outlook for the year-over-year growth has not changed. We still expect that adjusted taxable equivalent net interest income will grow in the mid 20% range and adjusted non-interest income, to grow in the low teens. This will deliver total adjusted revenue growth in the high teens. On the other hand, adjusted non-interest expense growth is expected to grow in the low teens. Thus, we are still positioned to reach our goal creating positive operating leverage from 2006 to 2007, on an adjusted basis. And as we previously disclosed, we still expect further merger and integration costs to impact PNC's earnings in 2007. These one-time charges will be approximately $30 million after-tax in the third quarter and $8 million after-tax in the fourth quarter. We also expect to take a one-time after tax charge of $27 million related to the Yardville transaction in the fourth quarter of 2007, and we will continue to exclude gains or losses related to the mark-to-market of our BlackRock LTIP obligation from our adjusted earnings. Now let's turn to the third key takeaway for today's session. PNC is well positioned from a risk perspective. If you'll recall last quarter, we lowered our expectations on the full probabilities, resulting in a lower provision for credit loses than originally anticipated. This quarter, our provision as expected, returned to a more normal level of $54 million and our net charge-offs were $32 million. Now, unrelated to the provisioned increase, NPAs increased also, principally as a result of aligning Mercantile's credit exposure with PNC's risk rating criteria. Essentially the reserve levels of Mercantile's credit portfolio were adequate. Overall exposure to remain granular and FTA's total loans and our reserves total loans remain consistent with our disciplined approach to credit. Our exposure to sub-primes borrowers on and off our balance sheet continues to be relatively low and we will continue to expect minimal losses. The residential mortgage loans we've recently added to our balance sheet are of the highest quality. The bottom line is that, our asset quality remains very strong. Now turning to interest rate risk; our duration of equity at the end of the quarter was at approximately 3.2 years positive. The increase from the prior quarter was primarily driven by the increase in interest rates and the addition of the higher quality residential mortgage loans. We continue to believe we're well positioned for the current interest rate environment and an adequate balance sheet flexibility to change... to respond to changing market conditions. Our fourth and final key takeaway relates to our capital flexibility. We are in excellent position as it pertains to capital. We have created capital flexibility both from an economic and a regulatory standpoint. This flexibility allowed us to return $395 million of capital to our shareholders by buying back 5.4 million shares in the first half of 2007; increasing our second quarter common dividend by 15% and then at the same time we've been investing in our business, expanding our product capabilities through the acquisition of ARCS and preparing... then preparing to expand our distribution capabilities to the pending acquisitions of the Yardville and Sterling. As it relates to Sterling, this will be another effective use of our capital, and consistent with our strategy of in-footprint acquisitions with a 50% internal rate of return. Given our earnings momentum, our demonstrated ability to execute on our disciplined use of capital, we remain confident that we will have the capital flexibility necessary to complete the 800 million share repurchase program in 2007. So in summary, despite very challenging market conditions we are confidant we will continue to deliver solid results for the remainder of 2007. With that, I will turn it back to Jim. James E. Rohr - Chairman and Chief Executive Officer: Thank you Rick. And clearly it was a solid first quarter for our... solid quarter for our key businesses and the first half of the year was really an excellent first half in total. We will remain focused on the key strategies we'd have delivered these results in attracting, acquiring and retaining and deepening our customer relationships, and we have positioned ourselves to create positive operating leverage to grow in the business and through a disciplined expense management. As Rick said, we will maintain a focus on a moderate risk profile and adhere to our disciplined capital deployment strategies. And we believe that we will remain within the expectations of the market for the rest of the year. With that we will be happy to answer your questions. Operator, if you could give our participants the instructions please.

[Operator Instructions]. Your first question comes from the line of John McDonald with Banc of America. James E. Rohr - Chairman and Chief Executive Officer: Good morning John. John McDonald - Banc of America Securities: Hi, good morning. Just to clarify Jim's comments about expectations for the rest of the year. Jim that means, you are comfortable with the third and fourth quarter estimates. You said full year, right? I guess if we had takeout kind of mix this quarter. Is that right? James E. Rohr - Chairman and Chief Executive Officer: No. We are looking for the... we believe, we will be within the range of our expectations for the full year, including this quarter. John McDonald - Banc of America Securities: Including being $0.10 like in this quarter? James E. Rohr - Chairman and Chief Executive Officer: On the adjusted earnings. Yes. The adjusted earnings. John McDonald - Banc of America Securities: Okay. Okay. So that kind of implies that you do better in the third and fourth than what people were expecting? Richard J. Johnson - Chief Financial Officer: Not really John. Because I think if you look at the first quarter, we did a lot better on an adjusted basis in the first quarter. John McDonald - Banc of America Securities: Okay. Okay, so you are comfortable with the existing '07 consensus? James E. Rohr - Chairman and Chief Executive Officer: Yes. Richard J. Johnson - Chief Financial Officer: Yes. John McDonald - Banc of America Securities: Okay. The second thing is, I may have missed it; did you comment about further to have deal activities from here? I heard about kind of completing what you have on your plate and continuing to do the buybacks. Do you stay on hold out for deals for a while or would you still kind of wait for further deals? James E. Rohr - Chairman and Chief Executive Officer: Yes, I mean that's a very good question. Assets are... lease franchises are actually sold not bought. I you looked at the map two years ago, we could all look at the deal as if we were weak in those three rich counties; in New Jersey, you would have said, and even in the Yardville Bank was... would be a great acquisition to fit within there. But at that point in time frankly, the stock was too pricey and then it wasn't for sale. Two years later it was for sale and it was for sale at a more reasonable price, actually, less than market kind of equivalent. The sterling bank if you looked at the map also you would find our weakest position in Pennsylvania has always been in New York and Lancaster County areas where we have very little presence, and frankly that's the fastest growing part of Pennsylvania and it's highest together with the Baltimore, Philadelphia franchise that we have. And so, Sterling especially given a size of Sterling fits that price criterion just right. So they fit in like wonderful pieces to a puzzle and we were able to acquire them with the right internal rate returns. John McDonald - Banc of America Securities: Is your plate full now Jim? Do you have to take... integrate these before you are looking at further things or you start capacity? James E. Rohr - Chairman and Chief Executive Officer: Actually we are focused on integrating these right now. I am not currently talking about anybody seriously about doing anything else at the moment. But frankly, what happens is these things come up for sale and if the fit is good and the financials are good then you have to consider them. But, quite frankly, we didn't think either one of these things were about for sale; six months prior to the discussion. So you just never know. John McDonald - Banc of America Securities: Okay, and Rick could you give a little discussion around the impact for Sterling, just in terms of earnings, what you are assuming and in terms earnings impact on cost saves and kind of what the earnings outlook you have for them is? James E. Rohr - Chairman and Chief Executive Officer: Yes, we... at the moment we're expecting the close in the first quarter 2008. We won't be able to convert this probably until the third quarter of 2008. So you don't take in a lot of savings in 2008. So we will probably be the dilutive by about $0.06, we'll be down related to that. In terms of the ongoings and then obviously, we will be accretive, clearly in 2009 related to that transaction. The one-time charges related to deal are about $28 million after-tax. John McDonald - Banc of America Securities: And then any sense to the on accretion? Amount of accretion? James E. Rohr - Chairman and Chief Executive Officer: Yes. It will be about $0.03 in 2009, and then going up for that. John McDonald - Banc of America Securities: Okay. And do you know, what is your calculated tangible book value of Sterling? Richard J. Johnson - Chief Financial Officer: Well that's always a good question. Clearly, if the tangible book value of Sterling was about $236 million as of the end of last year. And as we look through this analysis, obviously, you are going to recognize that they are considering a charge within $145 million to $165 million. So we'd assume the higher end of that as the charts of that. But then, in all of our analysis, we assume that we had to bring them back to the well capitalized bank. And so we assume that we would have to inject a $ 125 million back into them and that was in our analysis as well. John McDonald - Banc of America Securities: Okay. Last question, what was weak about trading this quarter? James E. Rohr - Chairman and Chief Executive Officer: It's couple of two things. One is just a couple of relative arbitrage positions that went against us, some positions that... I'm sure that good resulting will return and respond. But the second thing is we often put on positions to hedge our portfolio and as you know, the portfolio doesn't get mark-to-market treatment but those hedges do. And it went against the hedge rather than going against the portfolio as a whole. So net-net, it's a real positive for us, but the fact is, while you earnings is weak, loss related to the hedge position. John McDonald - Banc of America Securities: And the positive comes to it, in what format? James E. Rohr - Chairman and Chief Executive Officer: Well, it comes through in inform of NII overtime? John McDonald - Banc of America Securities: Okay. And so this is more on the prop side than customer flow trading issue? James E. Rohr - Chairman and Chief Executive Officer: Absolutely, our customer revenue stream has been very stable. John McDonald - Banc of America Securities: Okay. Thanks. William H. Callihan - Senior Vice President and Director of Investor Relations: Next, question please.

Our next question comes from the line of Gary Townsend, Friedman, Billings and Ramsey. James E. Rohr - Chairman and Chief Executive Officer: Good morning, Gary. Richard J. Johnson - Chief Financial Officer: Good morning. Gary Townsend - Friedman, Billings, Ramsey & Co.: Good morning. I'd like to talk more about the Sterling acquisition, if we could. Was this is a negotiated transaction? Was it an auction? James E. Rohr - Chairman and Chief Executive Officer: No, there were other bidders. Gary Townsend - Friedman, Billings, Ramsey & Co.: They were other bidders. And you are paying about 80% premium to the stock... to yesterday's close? Richard J. Johnson - Chief Financial Officer: Yes, I guess Gary. Gary Townsend - Friedman, Billings, Ramsey & Co.: What brings you to the conclusion that this is a good price here? Richard J. Johnson - Chief Financial Officer: We... when we look at... first of all when we look at the market price, this is pretty thinly traded stock and quite frankly there were so many uncertainties, given some irregularities had before that, we just don't feel that the current market price is the good indication. We focused much more on the deposit premium, where we believe that it's at 21% deposit premium. And, also we focused on last 12 months earnings which we obviously went back and adjusted for the business that had the irregularities and we felt that, that was about 22 times earnings. So, we felt very good on those basis that they... given the situation where the fits, and what kind of cost saves we can get, and given the fact that the core bank is actually a very good institution, we felt that this was a good deal. Gary Townsend - Friedman, Billings, Ramsey & Co.: I am not familiar with it, but the loan to deposit ratio with Sterling? Richard J. Johnson - Chief Financial Officer: Basically, it's at a 100% some around there; I didn't get the exact number for you. Gary Townsend - Friedman, Billings, Ramsey & Co.: The loan portfolio adds to leasing more because there's a very excellent credit quality. Richard J. Johnson - Chief Financial Officer: Yes. William H. Callihan - Senior Vice President and Director of Investor Relations: Alright, anything else Gary? Gary Townsend - Friedman, Billings, Ramsey & Co.: That's all. Thank you. William H. Callihan - Senior Vice President and Director of Investor Relations: Next question, please.

Your next question comes from the line of Matthew O'Connor with UBS. Matthew O'Connor - UBS Securities: Good morning. Richard J. Johnson - Chief Financial Officer: Good morning, Matt. Matthew O'Connor - UBS Securities: I'd like to just a follow-up on John's question regarding earnings in the back half of the year. If I have my math right, it seems like a pretty deep increase to the mid kind of 140s. I am just wondering if you can walk through what some of the drivers will be from the 125 right now, obviously to add back the $0.04 lease charge. So how do you get from the lastly 130 to 145 average for the back half of the year? James E. Rohr - Chairman and Chief Executive Officer: Well a big part of it and especially in the fourth quarter of the cost hails from Mercantile. We can... maybe in another words get you some detail, but not right now. Rick? Richard J. Johnson - Chief Financial Officer: Thank you Jim. I think, let me just make one thing clear. I mean we are very... as Jim said, we are very comfortable with the range of what's out there today, in terms of the full year and what we are going to see, is going to see obviously a good step up in the fourth quarter related to Mercantile cost. But, we're still seeing a really good fee income growth, particularly it relates to the customer activities. And we are still feeling very good about our ability to manage expense. And what we have had, the provision go up and we think quite a more normal level. We don't see that going up dramatically from this stage. So, I think taking that all together, we feel very comfortable. We can deliver improved results for the next couple of quarters. James E. Rohr - Chairman and Chief Executive Officer: Well I mean, if you take the business results that we had for the quarter and we have given you what we think a normalized numbers for trading and for private equity, which we don't have any reason to believe that those won't return and then I would not expect that we would have the same what we have... in terms that we wouldn't have same charge for the cross-border leasing, obviously. That gets you to a much higher number than we had for the quarter and then in the fourth quarter you have the cost saves that we have from Mercantile, and really it doesn't... it doesn't really stretch the imagination I think that it will be within the range. Matthew O'Connor - UBS Securities: Okay, and just be clear, I think the range is somewhere in the 540 to 560 range, 570 somewhere in that range? Richard J. Johnson - Chief Financial Officer: Yes, correct. Matthew O'Connor - UBS Securities: Okay. And then just separately, I look at the credit trends overall, I thought they are pretty good excluding some of the winding up of the two policies. I am real surprised of the reserve there was or things like that part of it attributed to the mix. I was just wondering if you could provide a little more color on that? Also the loans adds to one [ph] were flat that you might just providing for the growth? Richard J. Johnson - Chief Financial Officer: What we have done, we have charge-offs of about $32 million and I think on top of that we did have about a 3% increase in our overall credit exposure, and then natural piece of that increase as well beyond that. So, marginal movement in terms of the overall credit qualities of the book, so it was primarily loan growth that... and loan exposure growth which has actually driven the provision. Matthew O'Connor - UBS Securities: Okay. James E. Rohr - Chairman and Chief Executive Officer: And really it is going of the formula driven thing here based upon driven structure. If we take out the situation with Mercantile whether we stock them in alignment, our credit quality is extremely stable. Matthew O'Connor - UBS Securities: Okay. And, I just... very lastly -- James E. Rohr - Chairman and Chief Executive Officer: At a remarkably good level. Matthew O'Connor - UBS Securities: Okay. And just lastly here, lot of other banks are reporting strong venture capital and it tends to be a pretty lumpy at the banks and changed quarter-to-quarter, but any impact from the sub-primes DDR or stuff that we are reading about in papers, in terms of either your venture book or your trading portfolio? Richard J. Johnson - Chief Financial Officer: No. We have done an extensive review of all of our exposures related to sub-prime and we are extremely comfortable. First of all, they are very minimal and we expect the amount of loss associated with them to be very small. So, we're not worried about sub-prime at all. Matthew O'Connor - UBS Securities: Okay. Thank you very much. Richard J. Johnson - Chief Financial Officer: The other thing you point out that which does affect the lumpiness of the private equity, is we did add one private equity investment in there, which we ended up for writing off this quarter. If he hadn't written that off, we would have been consistent with what we've said in the past, $15 to $20 million range. So, one item made up that quarter. Matthew O'Connor - UBS Securities: Okay. Thank you. William H. Callihan - Senior Vice President and Director of Investor Relations: Alright. Next question please.

Your next question comes from the line of Ed Najarian with Merrill Lynch. James E. Rohr - Chairman and Chief Executive Officer: Good morning, Ed. Richard J. Johnson - Chief Financial Officer: Good morning, Ed. Edward Najarian - Merrill Lynch: Good morning guys. I just want to follow-up one quick question, I just want to make sure if I heard you correctly. In terms of Sterling, you said that your expectation is that it would be about $0.06 dilutive to operating EPS in '08 and then $0.09... excuse me, $0.03 accretive in '09. Richard J. Johnson - Chief Financial Officer: That is correct, Ed. Edward Najarian - Merrill Lynch: Okay. Richard J. Johnson - Chief Financial Officer: That excludes the one-time charges, which we also mentioned. Edward Najarian - Merrill Lynch: And the one-time charges are obviously merger-related charges. But then for the recapitalization, will that be... will that some how impact the income statement? Or does that come through purchase accounting adjustments? How does that work from the accounting standpoint? Richard J. Johnson - Chief Financial Officer: Yes. It's just internal analysis to determine how much capital we'd have to put into make all the rest of the calculations seem reasonable. We couldn't look at this company without the proper amount of capital in it. So we put the 125 back in order to put through the IRR calculation. That was one of the cash flow items we would had in our analysis upfront. Edward Najarian - Merrill Lynch: That would a cash flow item, but not an item that would impact the income statement? Richard J. Johnson - Chief Financial Officer: That's correct. Edward Najarian - Merrill Lynch: Okay thanks. William H. Callihan - Senior Vice President and Director of Investor Relations: Next question please.

Our next question from the line of Jon Balkind with Sandler O'Neill Management. Richard J. Johnson - Chief Financial Officer: Good Morning Jon. Jonathan Balkind - Sandler O'Neill & Partners: Good morning, yes. Just a couple of clarifying questions, one on the Sterling deal; I just want to make sure, I've the numbers right. A $236 million of tangible book value and then they have and to take in incremental charge... I missed that number. Richard J. Johnson - Chief Financial Officer: That was a range announced of $145 million to a $165 million, and we have taken the charge of $165 million in our analysis. Jonathan Balkind - Sandler O'Neill & Partners: So it's the right way to think about it, that you've guys paid seven times tangible book value for this company? Richard J. Johnson - Chief Financial Officer: No, because we have to put back in the $125 million of the assumption we had around, how much more capital would you have to put back in the company. So what I would do, increase the consideration to a number like $690 million and increase tangible equity to $196 million and I get probably more around 350%. Jonathan Balkind - Sandler O'Neill & Partners: Okay. And then Jim for you, in this falls up on John McDonald's question. In terms of your capacity to do more deals. Are you telling us that you are not going to do more deals or that you are focused on this, but that if something comes up you will definitely consider it? James E. Rohr - Chairman and Chief Executive Officer: I think it's the latter. We are focused on doing these things. Mercantile is our number one priority. We have a lot of people down there right now working on the conversion, we have been putting. Incremental resources in the Mercantile product specialists and those things are really working well. And above the Yardville and Sterling are smaller transactions, the conversions won't take place.... I mean conversions won't take place until second and third quarter of next year. So good teams of people coming from a large Mercantile acquisition to be able to do work on that. We are really not out hunting, hunting, and so to speak on the acquisition front. But we weren't looking for these two either. But frankly, when they came up for sale both for different reasons; I mean the Yardville one that you had shareholder unrest there. And... which caused... which brought that opportunity up, and was certainly because we went over there with a big wallet to trade, you know, we had a premium on top. It was just the opposite and of course, the fraud situation with Sterling have changed... it changed the direction of that firm. So you just never know about these unusual items. So, who knows what will come up to down the road. That's why you can say never say never. But our focus really is getting this to work. Jonathan Balkind - Sandler O'Neill & Partners: Okay. And if some does come up, is there a size constraint or something that you will be willing to do? James E. Rohr - Chairman and Chief Executive Officer: I really can't comment on that, but the Yardvilles and the Sterlings I think have low execution risk, knock on wood, and have a high component of cost save, which generates more confidence at least from my point of view that the internal rate of return can be achieved. You never give us any credit. And so we're rather not giving ourselves any credit for revenue... new revenues, but frankly, we get them because the treasury management and the brokerage business, whatever that we put into the... we put into the small bank. So, I think the issue for us is the small ones have fit very nicely. Great thanks Jim William H. Callihan - Senior Vice President and Director of Investor Relations: Next question please

Our next question comes from the line of Matt Schultheis with Ferris, Baker Watts James E. Rohr - Chairman and Chief Executive Officer: Good morning Matt. Jason Funk - Ferris, Baker, Watts: Actually Jason Funk stepping in for Matt here. James E. Rohr - Chairman and Chief Executive Officer: Hi, Jason. Jason Funk - Ferris, Baker, Watts: Just a couple of questions. The $3.3 billion in total assets, how much of that was earning assets on, I am sorry, the Sterling deal? Richard J. Johnson - Chief Financial Officer: Well, you had $2.2 billion worth of loans in there. And then the portfolio was approximately about $0.5 billion. Jason Funk - Ferris, Baker, Watts: Right. Okay. What kind of goodwill is going to be generated from this deal? Richard J. Johnson - Chief Financial Officer: It will be pretty close to the purchase price. Jason Funk - Ferris, Baker, Watts: Okay. As far as cost saves, do you have guys have an estimate going forward? I may have missed it. Richard J. Johnson - Chief Financial Officer: Yes, we are looking at about 38% cost based on the Sterling deal. Jason Funk - Ferris, Baker, Watts: Alright, great. Thanks guys. William H. Callihan - Senior Vice President and Director of Investor Relations: Next question please?

Our next question comes from the line of Nancy Bush with NAB Research LLC. James E. Rohr - Chairman and Chief Executive Officer: Good morning Nancy. Richard J. Johnson - Chief Financial Officer: Good morning Nancy Bush - NAB Research: Guys, I hardly know where to start. In this ramp up of the earnings in the second half of the year from sort of 130 to the mid-140s or so [indiscernible] position where you were... that went against you this quarter? Does that have to correct and you get something back there for these numbers to be achieved? I mean, can you just kind of elaborate on that? Richard J. Johnson - Chief Financial Officer: Well, I guess the first thing I guess I'd like to comment on is, I mean, we had adjusted earnings of $138 million in the first quarter and adjusted earning of $125 million in the second quarter and I think if you take those two items we still feel comfortable with the range for the whole year. Just so you understand what numbers we are working in coming up with that. So we think our adjusted numbers will hit the range that you have today. Okay? Nancy Bush - NAB Research: Okay. Are you talking about this 540 to 570 or whatever the range is for the year? Richard J. Johnson - Chief Financial Officer: I believe it's 540 to 560. Nancy Bush - NAB Research: 560 okay, Richard J. Johnson - Chief Financial Officer: Yes. And I think no, it's not spending on just that one trading position. I think we've got a lot of other momentum and a lot of other revenue lines that just happens to be one piece of what people are looking at and from one day to the next people can unwind the position. Well, I think we'll let the traders to do what they do and I am sure as they have every other quarter, they will come up with improved results as we move forward. And I do believe on the private equity, as I said, that was a really unusual item to have such a large one item charged off in a quarter. Otherwise it would have been pretty solid performance. So I have got a lot of confidence there too Nancy Bush - NAB Research: Yes, that was going to be my other question. How did you manage to find the one private equity deal in the entire industry that got written off this quarter? James E. Rohr - Chairman and Chief Executive Officer: I have the same question, Nancy. Nancy Bush - NAB Research: I mean, was this an old deal that had been on the books for a long time? Richard J. Johnson - Chief Financial Officer: It was a very old deal and we just were at a stage where we just didn't want to put any more money in and so as a result, our position changed and we wrote it off Nancy Bush - NAB Research: And also for those of us who haven't looked at Sterling in about a million years and didn't even remember the name, frankly, can you tell us what happened there? What was the irregularity? James E. Rohr - Chairman and Chief Executive Officer: Well, they had a leasing company that they acquired, and they frankly allowed us to run rather autonomously to say the least. And they've generated a great deal of loans that evidently had... were fraudulently originated. And the 10-K, I believe, they've signed in mid-April or late April and them in May they came back and said that they were going to pay us to make a very large charge related to this entity. And so kind of really kind of changed the course of the company because it certainly wasn't interested in selling. Also, they are going to have to go back and restate the prior years as well because they really left the... I mean, from the outside looking in, we can't speak on their behalf, but the fact that they've restated their '04, '05, and '06 earnings, they have to do. That kind of tells you if they allow that leasing company to run very autonomously and there will be a lot of noise around that for a while. And quite frankly, the branches that they have in New York, Lancaster area, have won a number of awards from different magazines for how successful they've been. So that was the thing that was always interesting to us, not an out of market leasing company that we were not particularly enamored with in the first place and have really no need for. So it's the branches and the branch franchise that's always been of interest to us. Nancy Bush - NAB Research: Yes, that kind of harkens back to the good old days of Pennsylvania banking, doesn't it Jim? James E. Rohr - Chairman and Chief Executive Officer: Those were the good old days. Nancy Bush - NAB Research: How come -- James E. Rohr - Chairman and Chief Executive Officer: You go back too far with that. Nancy Bush - NAB Research: Yes, I know. James E. Rohr - Chairman and Chief Executive Officer: But we make a lot of money in Scranton right now, want to tell you that Nancy. Nancy Bush - NAB Research: Somebody's got to. You are going to close in the first quarter of '08, but not convert until the third quarter. That seems a bit long for you guys, is there some reason for that? James E. Rohr - Chairman and Chief Executive Officer: That's the assumption that we have right now. Nancy Bush - NAB Research: Okay. So you kind of don't know yet, really? James E. Rohr - Chairman and Chief Executive Officer: Well, we know we will do it by the third quarter, but we will have some other conversations throughout here when we might... if we might be able to move it up, but we know we will have it done by the third quarter. Richard J. Johnson - Chief Financial Officer: Yes, Nancy, the closing is going to be dependent upon them reassuring those financials and getting regulatory approvals and all that. So, we just will have to wait and see how that pans out. Nancy Bush - NAB Research: And I am assuming you are getting no management with Sterling? James E. Rohr - Chairman and Chief Executive Officer: Actually management team is coming along. It's kind of interesting. Not all of it, but a significant portion of it. The ones that run the branch franchise are people actually we've known and a couple of them we've tried the hire over the years, we really like them. The people that mange the leasing company, that's a whole another story. Nancy Bush - NAB Research: Okay thanks, guys. William H. Callihan - Senior Vice President and Director of Investor Relations: Alright, next question please.

Our next question comes from the line of Jennifer Thompson with Oppenheimer. Jennifer Thompson - Oppenheimer & Co.: Hi, good morning everyone. James E. Rohr - Chairman and Chief Executive Officer: Good morning, Jennifer. Richard J. Johnson - Chief Financial Officer: Good morning. Jennifer Thompson - Oppenheimer & Co.: I was wondering if just from your perspective, how you think about these two recent deals that you have done, Sterling and Yardville, where do each of them fall within the risk spectrum of versus each other and may be past deals that you have done, whether you want to talk about? I mean, both of them are probably low integration risk, but may be uncertainty of what might happen in... at the companies and their books etc. and how much due diligence did you do for Sterling versus Yardville? James E. Rohr - Chairman and Chief Executive Officer: We had a lot of due diligence in both cases. So, we went through many files and a number of other things. So we have had an opportunity to do a lot of due diligence in both and the one... and so, but when you look at Yardville, here you have a bank that's just right in the middle of our... right in the middle of an existing franchise that we have. We've looked at their customer base and I think really the execution risk there is all around integration, not really anything else. In terms of Sterling, there's two kinds of risk; one is the legal risk around the shareholders suits and I think we have got a good idea and a good handle on them... on how you mange that. We have done those kinds of things before with Riggs obviously being much more significant than this. And then the other part is really managing what's left of the leasing company portfolio. And after the big charge, there just isn't much left of that leasing company portfolio and we think we have got some people that know how to do that. We've got a nationwide secured lending business that has a lot of very talented people that can attach that, what would be a... what is a relatively small portfolio today. Right now I think it's on the books of $61 million and they have got some reserves against that. Then we have got some consideration in the deal for some flexibility in managing that as well. So, I think we are comfortable, there's different kinds of risks relative to the overall size of PNC, both small and I think things that are very manageable. Jennifer Thompson - Oppenheimer & Co.: Okay, great. And just in terms of the costs savings, I think you said you are estimating about 38%, which sounds on the high side of even an end market deal would, is there a lot of overlap or is it more back office or it just? Richard J. Johnson - Chief Financial Officer: Always we will take in a lot of back office, but we have got 16 branches overlap. So, we are really very comfortable with that 38%. We think that the placement here as we have said is a good expansion between Harrisburg, Philadelphia and Baltimore, and obviously between all of those, we have some overlaps there and just cost to be taken out there. Jennifer Thompson - Oppenheimer & Co.: Great. Thanks very much. William H. Callihan - Senior Vice President and Director of Investor Relations: Sure, alright. Next question please.

The next question comes from the line of Mike Mayo with Deutsche Bank. James E. Rohr - Chairman and Chief Executive Officer: Good morning Mike. How are you? Michael Mayo - Deutsche Bank: Good. Good morning. Last call you told us how much dilution to earnings there was from Mercantile, and so what was the last quarter gain compared that to this quarter? Richard J. Johnson - Chief Financial Officer: Last quarter, it was $0.02 and this quarter it's $0.02. You can probably expect the same in the third quarter and then, we will start to see some turnaround in the fourth because of the cost saves coming up. Michael Mayo - Deutsche Bank: And I am looking at the page 18 of the release, where you say impact of Mercantile acquisition, income statement data. So it's the chart of a bottom of page 18? Richard J. Johnson - Chief Financial Officer: Okay. Michael Mayo - Deutsche Bank: I am looking at the column PNC excluding Mercantile, and what I see in that column is that revenues are down $53 million linked quarter, and expenses are up $16 million linked quarter. And I am just wondering as you think about generating positive operating leverage kind of what's going on there? Richard J. Johnson - Chief Financial Officer: Yes. That's, exactly. That's the private equity and the trading numbers which were down on a quarter-to-quarter basis, and I think from the -- Michael Mayo - Deutsche Bank: More even if you would be add that back, revenues would then be zero, it would be flat and expenses will be up $16 million? Richard J. Johnson - Chief Financial Officer: Well. I will tell you why expenses are up $16 million. We basically had a step up in our branding investments. So, that was half of the increase and the other half of the increase was the fact that our brokerage business has actually had a very good quarter, and I think you can see that with the growth in brokerage revenue. Maybe the other item Mike, is probably affecting that overall is that commercial mortgage market and we do a number of transactions in terms of generating gains through the securitization of commercial mortgages and those revenues are all up. I think if you look at the bottom of the page on the Corporate & Institutional, you will see that those numbers are up about that $8 million as well. Michael Mayo - Deutsche Bank: And then a question I get a lot is, when you guys sell PFPC, how do you think about that decision, which businesses to keep and which to sell? James E. Rohr - Chairman and Chief Executive Officer: We have looked at that for a long period of time. As you see PFPC has done extraordinarily well and just had a great quarter again. So, we are really... we all can say that would sell PFPC if we thought that it could not perform in its current state because we think it obviously, why you now don't have enough scale. But one or two and every single product they have and now they are going global and have been going global and in the managed accounts, and in offshore it will be over a $100 million [ph] and it's just under management... under administration. So, quite frankly they have done extraordinarily well. So, I am not sure why are you'd sell it. Unless, we wanted to help fund the budget which would happen if we have to sell that. Michael Mayo - Deutsche Bank: And last question, I don't know Sterling at all but just based on what you said here, it's going to be... it's 3% of your size, but it's going to be one percent dilutive next year, and that there seems to be a lot of dilution for such a small acquisition? Richard J. Johnson - Chief Financial Officer: It is simply because of the timing of where it comes into the year and obviously, issue the shares early and takes the cost up into later in the year. I mean we are going to continue to look at the integration plans and to the best we can move that up. But that's what we're seeing there. Michael Mayo - Deutsche Bank: Alright. Thank you. William H. Callihan - Senior Vice President and Director of Investor Relations: Operator, any other final questions?

There are no further questions at this time. James E. Rohr - Chairman and Chief Executive Officer: Good. Thank you very much everyone for joining us. Richard J. Johnson - Chief Financial Officer: Take care. William H. Callihan - Senior Vice President and Director of Investor Relations: Good bye there.

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