The PNC Financial Services Group to Acquire Mercantile Bankshares for $6 billion

The PNC Financial Services Group, Inc. and Mercantile Bankshares Corporation, today announced that they have signed a definitive agreement for PNC to acquire Mercantile for $47.24 per share, or approximately $6.0 billion in stock and cash.

Mercantile is a $17 billion asset banking company that provides banking and investment and wealth management services through 240 offices in Maryland, Virginia, the District of Columbia, Delaware and Southeastern Pennsylvania. The transaction enables PNC to significantly expand its presence in the Mid- Atlantic region, particularly the attractive Baltimore and Washington, D.C. markets.

“Mercantile is a storied franchise and a perfect fit for PNC,” said James E. Rohr, chairman and chief executive officer of The PNC Financial Services Group. “Its location, wealth management business and relationship-based banking model will add to PNC’s strengths and ability to grow profits.”

“This transaction is about the growth of two companies that fit together exceptionally well. Our strong performance over the last several years has resulted in an attractive premium for our shareholders,” said Mercantile Chairman, President and Chief Executive Officer Edward J. (Ned) Kelly III. “The combined company will have greater scale and scope to invest in the future and create even more opportunities for our employees and the communities we serve.”

PNC Bank Executive Vice President Joseph Rockey and Mercantile Chief Administrative Officer and Deputy General Counsel Michael Paese are expected to oversee the integration process. Rockey had day-to-day responsibility for PNC’s successful 2005 integration of Riggs National Corporation and 2004 integration of United National Bancorp. Paese executed all of Mercantile’s acquisitions since 2003, including the purchases of F&M Bancorp, Community Bank of Northern Virginia and James Monroe Bancorp, Inc.

PNC anticipates that the transaction will be accretive to earnings per share in 2008, and that it has an estimated internal rate of return of approximately 15 percent.

The acquisition of Mercantile is expected to make PNC a top-10 U.S. bank holding company by market capitalization and the 11th largest U.S. bank by deposits.

Under terms of the merger agreement, which has been approved by the Boards of Directors of both companies, Mercantile will merge into PNC. After closing, PNC intends to merge Mercantile’s banking affiliates into PNC Bank. Based on PNC’s closing NYSE stock price of $73.60 on October 6, 2006, the transaction values each share of Mercantile’s common stock at $47.24. The aggregate consideration is composed of a fixed number of approximately 52.5 million shares of PNC common stock and $2.13 billion in cash. Mercantile shareholders will be entitled to 0.4184 shares of PNC common stock and $16.45 in cash for each share of Mercantile.

Two Mercantile directors will join the board of the combined company. Kelly will be appointed a PNC vice chairman upon close of the transaction.

The transaction is expected to close during the first quarter of 2007. The merger is subject to customary closing conditions, including regulatory approval and the approval of Mercantile’s shareholders. After closing, Mercantile affiliate offices will assume the PNC Bank name.

The transaction is expected to result in the reduction of more than $100 million of operating expenses through the elimination of operational and administrative redundancies.

PNC will donate $25 million to a charitable foundation dedicated to addressing the needs of the greater Baltimore area. This first step underscores PNC’s commitment to strong and active involvement in Mercantile’s community.

Citigroup Corporate and Investment Banking and Goldman Sachs acted as financial advisers to PNC, and Wachtell, Lipton, Rosen & Katz acted as its legal adviser. Sandler O’Neill + Partners, L.P. acted as financial adviser to Mercantile and Davis Polk & Wardwell and Venable, LLP acted as its legal advisers.