8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

November 27, 2006

Date of Report (Date of earliest event reported)

THE PNC FINANCIAL SERVICES GROUP, INC.

(Exact name of registrant as specified in its charter)

Commission File Number 001-09718

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

One PNC Plaza

249 Fifth Avenue

Pittsburgh, Pennsylvania 15222-2707

(Address of principal executive offices, including zip code)

(412) 762-2000

(Registrant’s telephone number, including area code)

Not Applicable

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

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 7.01 Regulation FD Disclosure.

As previously reported, on October 8, 2006 The PNC Financial Services Group, Inc. (“PNC” or the “Corporation”) entered into a definitive agreement with Mercantile Bankshares Corporation (“Mercantile”) for the Corporation to acquire Mercantile for 52.5 million shares of PNC common stock and $2.13 billion in cash. Based on PNC’s common stock price on October 6, 2006, the consideration represents $6.0 billion in stock and cash or $47.24 per Mercantile share. The transaction is expected to close during the first quarter of 2007 and is subject to customary closing conditions, including regulatory approval and the approval of Mercantile’s shareholders.

Unaudited pro forma condensed combined financial statements for the Corporation and Mercantile are attached herewith as Exhibit 99.1. The unaudited pro forma condensed combined financial statements combine the historical consolidated financial statements of PNC and its subsidiaries and of Mercantile and its subsidiaries as an acquisition by PNC of Mercantile assuming that the merger is accounted for using the purchase method of accounting and giving effect to the related pro forma adjustments described in the accompanying notes. The unaudited pro forma condensed combined balance sheet gives effect to the merger as if it had occurred on September 30, 2006. The unaudited pro forma condensed combined income statements for the nine months ended September 30, 2006 and the year ended December 31, 2005 give effect to the merger as if the merger had become effective at the beginning of each period presented.

The pro forma data in the Exhibit represents a current estimate based on available information of the combined company’s results of operations. The pro forma financial adjustments record the assets and liabilities of Mercantile at their estimated fair values and are subject to adjustment as additional information becomes available and as additional analyses are performed. The information in the Exhibit is based on, and should be read together with, the historical financial information that PNC and Mercantile have presented in their prior filings with the Securities and Exchange Commission. We anticipate that the merger will provide the combined company with financial benefits that include reduced operating expenses and revenue enhancement opportunities. The pro forma information, while helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect the impact of possible revenue enhancements, expense efficiencies, asset dispositions and share repurchases, among other factors, that may result as a consequence of the merger and, accordingly, does not attempt to predict or suggest future results. It also does not necessarily reflect what the historical results of the combined company would have been had PNC and Mercantile been combined during these periods.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits. The exhibit listed on the Exhibit Index accompanying this Form 8-K is furnished herewith.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	THE PNC FINANCIAL SERVICES GROUP, INC.
	(Registrant)
Date: November 27, 2006	By:	/s/ Samuel R. Patterson
		Samuel R. Patterson
		Controller

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EXHIBIT INDEX

Number	Description	Method of Filing
99.1	Unaudited pro forma condensed combined financial statements for The PNC Financial Services Group, Inc. and Mercantile Bankshares Corporation	Furnished herewith

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EX-99.1

Exhibit 99.1

The PNC Financial Services Group, Inc.

Pro Forma

Condensed Combined Financial Statements

PRO FORMA FINANCIAL INFORMATION

THE PNC FINANCIAL SERVICES GROUP, INC. AND MERCANTILE BANKSHARES

CORPORATION

The following unaudited pro forma condensed combined financial statements combine the historical consolidated financial statements of PNC and its subsidiaries and of Mercantile and its subsidiaries, as an acquisition by PNC of Mercantile using the purchase method of accounting and giving effect to the related pro forma adjustments described in the accompanying notes. The unaudited pro forma condensed combined balance sheet gives effect to the merger as if it had occurred on September 30, 2006. The unaudited pro forma condensed combined income statements for the nine months ended September 30, 2006 and the year ended December 31, 2005, give effect to the merger as if the merger had become effective at the beginning of each period presented.

The unaudited pro forma condensed combined financial statements included herein are presented for informational purposes only. This information does not reflect the benefits of the expected cost savings or opportunities to earn additional revenue and includes various estimates and may not necessarily be indicative of the financial position or results of operations that would have occurred if the merger had been consummated on the date or at the beginning of the period indicated or which may be attained in the future. The unaudited pro forma condensed combined financial statements and accompanying notes should be read in conjunction with and are qualified in their entirety by reference to the historical consolidated financial statements and related notes thereto of PNC and its subsidiaries and of Mercantile and its subsidiaries, such information and notes thereto are incorporated by reference herein.

THE PNC FINANCIAL SERVICES GROUP, INC.

Pro Forma Condensed Combined Income Statement

Year ended December 31, 2005

In millions, except per share data	PNC as Reported (a)			MRBK as Reported (b)		Pro Forma Adjustments (Unaudited)			Notes		Pro Forma Combined (Unaudited)
Net Interest Income
Loans	$	2,669		$	701	$	23		(A	)	$	3,393
Securities available for sale and held to maturity		822			113							935
Other		243			2							245
Total interest income		3,734			816		23					4,573
Interest Expense
Deposits		981			140		19		(D	)		1,140
Borrowed funds		599			59		122		(E	)		780
Total interest expense		1,580			199		141					1,920
Net interest income		2,154			617		(118	)				2,653
Provision for credit losses		21			1							22
Net interest income less provision for credit losses		2,133			616		(118	)				2,631
Noninterest Income
Asset management		1,443			96							1,539
Fund servicing		870										870
Service charges on deposits		273			44							317
Brokerage		225										225
Consumer services		293										293
Corporate services		485										485
Equity management gains		96										96
Net securities gains (losses)		(41	)									(41	)
Trading		157										157
Other		372			103							475
Total noninterest income		4,173			243							4,416
Noninterest Expense
Compensation		2,061			200							2,261
Employee benefits		332			46							378
Net occupancy		313			29							342
Equipment		296			32							328
Marketing		106										106
Other		1,236			114		47		(C	)		1,397
Total noninterest expense		4,344			421		47					4,812
Income before minority and noncontrolling interests and income taxes		1,962			438		(165	)				2,235
Minority and noncontrolling interests in income of consolidated entities		33										33
Income taxes		604			162		(62	)	(G	)		704
Net income	$	1,325		$	276	($	103	)			$	1,498
Earnings Per Common Share
Basic	$	4.63									$	4.42
Diluted (c)	$	4.55									$	4.36
Average Common Shares Outstanding
Basic		286					52		(E	)		338
Diluted		290					52		(E	)		342

(a) Amounts derived from PNC’s audited consolidated financial statements as of, and for the year ended, December 31, 2005.

(b) Amounts derived from Mercantile Bankshare’s audited consolidated financial statements as of, and for the year ended, December 31, 2005.

(c) Net income applicable to diluted EPS includes a ($7) million BlackRock adjustment for common stock equivalents.

See accompanying Notes to Pro Forma Condensed Combined Financial Statements.

THE PNC FINANCIAL SERVICES GROUP, INC.

Pro Forma Condensed Combined Income Statement

Nine months ended September 30, 2006

In millions, except per share data	PNC as Reported (a) (Unaudited)			MRBK as Reported (b) (Unaudited)		Pro Forma Adjustments (Unaudited)			Notes		Pro Forma Combined (Unaudited)
Interest Income
Loans	$	2,382		$	628	$	17		(A	)	$	3,027
Securities available for sale and held to maturity		769			98							867
Other		244			3							247
Total interest income		3,395			729		17					4,141
Interest Expense
Deposits		1,140			176		15		(D	)		1,331
Borrowed funds		576			67		92		(E	)		735
Total interest expense		1,716			243		107					2,066
Net interest income		1,679			486		(90	)				2,075
Provision for credit losses		82										82
Net interest income less provision for credit losses		1,597			486		(90	)				1,993
Noninterest Income
Asset management		1,271			83							1,354
Fund servicing		644										644
Service charges on deposits		234			34							268
Brokerage		183										183
Consumer services		272										272
Corporate services		449										449
Equity management gains		82										82
Net securities losses		(207	)									(207	)
Trading		150										150
Gain on BlackRock transaction		2,078										2,078
Other		202			68							270
Total noninterest income		5,358			185							5,543
Noninterest Expense
Compensation		1,686			148							1,834
Employee benefits		249			43							292
Net occupancy		241			24							265
Equipment		234			25							259
Marketing		81										81
Other		1,007			89		34		(C	)		1,130
Total noninterest expense		3,498			329		34					3,861
Income before minority and noncontrolling interests and income taxes		3,457			342		(124	)				3,675
Minority and noncontrolling interests in income of consolidated entities		23										23
Income taxes		1,215			127		(47	)	(G	)		1,295
Net income	$	2,219		$	215	($	77	)			$	2,357
Earnings Per Common Share
Basic	$	7.60									$	6.84
Diluted (c)	$	7.46									$	6.73
Average Common Shares Outstanding
Basic		292					52		(E	)		344
Diluted		297					52		(E	)		349

(a) Amounts derived from PNC’s unaudited interim consolidated financial statements as of, and for the nine months ended, September 30, 2006.

(b) Amounts derived from Mercantile Bankshare’s unaudited interim consolidated financial statements as of, and for the nine months ended, September 30, 2006.

(c) Net income applicable to diluted EPS includes a ($5) million BlackRock adjustment for common stock equivalents.

See accompanying Notes to Pro Forma Condensed Combined Financial Statements.

THE PNC FINANCIAL SERVICES GROUP, INC.

Pro Forma Condensed Combined Balance Sheet

At September 30, 2006

In millions, except par value	PNC as Reported (a) (Unaudited)			MRBK as Reported (b) (Unaudited)			Pro Forma Adjustments (Unaudited)			Notes		Pro Forma Combined (Unaudited)
Assets
Cash and due from banks	$	3,018		$	318							$	3,336
Federal funds sold and resale agreements		2,818			134								2,952
Other short-term investments, including trading securities		2,718											2,718
Loans held for sale		4,317			2								4,319
Securities available for sale and held to maturity		19,512			3,141								22,653
Loans, net of unearned income		48,900			12,534			($120	)	(A	)		61,314
Allowance for loan and lease losses		(566	)		(144	)							(710	)
Net loans		48,334			12,390			(120	)				60,604
Goodwill		3,418			760			3,420		(B	)		7,598
Other intangible assets		590			48			241		(C	)		879
Other		13,711			782								14,493
Total assets	$	98,436		$	17,575		$	3,541				$	119,552
Liabilities and Shareholders’ Equity
Deposits
Noninterest-bearing	$	14,840		$	3,302							$	18,142
Interest-bearing		49,732			9,473			(34	)	(D	)		59,171
Total deposits		64,572			12,775			(34	)				77,313
Borrowed funds
Federal funds purchased and repurchase agreements		5,750			1,559								7,309
Bank notes, senior debt and subordinated debt		6,613			660			2,126		(E	)		9,399
Other		2,332											2,332
Total borrowed funds		14,695			2,219			2,126					19,040
Allowance for unfunded loan commitments and letters of credit		117			17								134
Accrued expenses and other liabilities		7,886			171			77		(F	)		8,134
Total liabilities		87,270			15,182			2,169					104,621
Minority and noncontrolling interests in consolidated entities		408											408
Total shareholders’ equity		10,758			2,393			1,372		(E	)		14,523
Total liabilities, minority and noncontrolling interests, and shareholders’ equity	$	98,436		$	17,575		$	3,541				$	119,552

(a) Amounts derived from PNC’s unaudited interim consolidated financial statements as of, and for the nine months ended, September 30, 2006.

(b) Amounts derived from Mercantile Bankshare’s unaudited interim consolidated financial statements as of, and for the nine months ended, September 30, 2006.

See accompanying Notes to Pro Forma Condensed Combined Financial Statements.

The PNC Financial Services Group, Inc.

Notes to Pro Forma Condensed Combined Financial Statements

Note 1 – Pro Forma Financial Information:

The merger will be accounted for as an acquisition by PNC of Mercantile using the purchase method of accounting. Accordingly, the assets and liabilities of Mercantile will be recorded at their respective fair values on the date the merger is completed. The share value of PNC common stock issued to effect the merger has been estimated at $71.72 per share. This amount was determined by averaging the price of shares of PNC common stock for a period beginning two trading days before the announcement of the merger and ending two trading days after the merger agreement (which includes the day of announcement).

The pro forma financial information includes estimated adjustments to record certain assets and liabilities of Mercantile at their respective fair values. The pro forma adjustments included herein are subject to change depending on changes in interest rates and the components of assets and liabilities and as additional information becomes available and additional analyses are performed. Certain other assets and liabilities of Mercantile, including fixed assets and debt, will also be subject to adjustment at their respective fair values. Pending more detailed analyses, no pro forma adjustments are included herein for these assets and liabilities.

The final allocation of the purchase price will be determined after the merger is completed and additional analyses are performed to determine the fair values of Mercantile’s tangible and identifiable intangible assets and liabilities as of the date the merger is completed. Changes in the fair value of the net assets of Mercantile as of the date of the merger, further refinement of transaction costs, and changes in Mercantile’s stockholders’ equity, including net income and dividends, between September 30, 2006 and the date of the merger will change the amount of goodwill recorded. The final adjustments may be materially different from the unaudited pro forma adjustments presented herein.

The pro forma financial information for the merger is included only as of and for the nine months ended September 30, 2006 and for the year ended December 31, 2005. The unaudited pro forma information is not necessarily indicative of the results of operations of the combined financial position that would have resulted had the merger been completed at the beginning of the applicable periods presented, nor is it necessarily indicative of the results of operations in future periods or the future financial position of the combined company.

Note 2 – Purchase Price:

The pro forma financial information reflects the right of each Mercantile shareholder to receive (A) a number of shares of PNC common stock equal to the product of .4184 times the number of shares of Mercantile stock held on the record date, and (B) an amount of cash equal to the product of $16.45 times the number of Mercantile shares held on the record date. Each option outstanding will be exchanged for cash based on the total consideration ($16.45 in cash plus .4184 multiplied by PNC stock price) less the exercise price per share of option. The cash payment for the options is considered part of the purchase price. Based on these assumptions at September 30, 2006, the stock component will include the issuance of 52.5 million PNC shares and the cash component of the merger consideration is approximately $2.1 billion in the aggregate for stock and options.

The table below provides the calculation of the number of shares issued:

(In millions)	As of September 30, 2006
Mercantile Common Shares Outstanding		125.5
Exchange Ratio		0.4184
PNC Common Stock Issued				52.5
The table below provides the calculation of the aggregate consideration:
(In millions, except per share amounts)
Purchase Price:
Stock Consideration:
Mercantile Common Shares Outstanding		125.5
Exchange Ratio		0.4184
Average PNC Share Price over Days Surrounding Announcement	$	71.72
Purchase Price per Mercantile Common Shares Outstanding	$	30.01	$	3,765
Cash Consideration:
Mercantile Common Shares Outstanding		125.5
Cash Consideration per Share	$	16.45		2,064
Options Outstanding		3.3
Average Strike Price	$	27.46
Average Purchase Price per Mercantile Option	$	18.99
Estimated Purchase Price per Mercantile Options				62
Total Cash Consideration				2,126
Purchase Price			$	5,891

The pro forma financial information includes adjustments to stockholders’ equity to reflect the addition of 52.5 million shares of PNC stock with an aggregate value of $3.8 billion. The pro forma balance sheet adjustments include an increase to borrowings of $2.1 billion related to funding the cash component to be paid to each Mercantile shareholder and option holder.

The following table provides a summary of pro forma adjustments to stockholders’ equity:

(In millions, except per share amounts)	As of September 30, 2006
Equity Adjustment:
PNC Shares of Common Stock Issued		52.5
Average PNC Share Price over Days Surrounding Announcement	$	71.72		$	3,765
Less: Mercantile equity		2,393
Total				$	1,372
Note 3 – Pro Forma Adjustments:
The following table provides the calculation and allocation of the purchase price in the pro forma financial statements at September 30, 2006:
(In millions)
Purchase Price				$	5,891
Net Assets Acquired:
Mercantile Stockholders’ Equity	$	2,393
Mercantile Goodwill and Other Intangibles		808			1,585
Excess of Purchase Price Over Carrying Value of Net Assets Acquired					4,306
Estimated Adjustments to Reflect Fair Value of Net Assets Acquired
Loans		120	(A)
Estimated Core Deposit Intangible		(289	)(C)
Deposits		(34	)(D)
Deferred Income Taxes (included in accrued expenses and other liabilities)		77	(F)
Goodwill Resulting from Merger				$	4,180
Less: Mercantile Existing Goodwill		(760	)
Adjustment to Goodwill				$	3,420	(B)

The adjustments reflected in the pro forma condensed combined income statements are presented in the table below:

Increase/(Decrease) to Income (In millions)	Nine Months Ended 09/30/06			Year Ended 12/31/05
Accretion of Loan Purchase Accounting Adjustment	$	17	(A)	$	23	(A)
Amortization of Deposit Purchase Accounting Adjustment		(15	)(D)		(19	)(D)
Financing Costs on Cash Consideration		(92	)(E)		(122	)(E)
Amortization of CDI Established Through Purchase Accounting		(41	)(C)		(55	)(C)
Remove Amortization of Mercantile’s Intangibles		7	(C)		8	(C)
Reduction in Income Before Income Taxes		(124	)		(165	)
Income Tax Adjustment		(47	)(G)		(62	)(G)
Reduction in Net Income	$	(77	)	$	(103	)

(A) The fair value purchase accounting adjustment to loans is ($120) million. The adjustment will be recognized over the estimated remaining life of the related loan portfolio of approximately 6 years. The adjustment reflected is based upon preliminary valuations performed as of September 30, 2006. The preliminary impact of this adjustment will increase pretax interest income by $17 million and $23 million for the nine months ended September 30, 2006 and for the year ended December 31, 2005, respectively. The final adjustments may be significantly different.

(B) Adjustment to eliminate existing Mercantile goodwill and record the goodwill resulting from the merger.

(C) The purchase accounting adjustment to core deposit intangible assets is $241 million. The adjustment includes the establishment of a core deposit intangible asset of $289 million less Mercantile’s recorded other intangibles of $48 million. The $289 million was calculated by applying a premium of 3.6% to Mercantile’s core deposits. Core deposits are defined as all non-interest bearing deposits and interest-bearing transaction accounts excluding all time deposits. The amortization of the core deposit intangible in the pro forma income statements is assumed to be over a 9.5-year period using an accelerated method. The adjustment reflected is based upon preliminary valuations performed as of September 30, 2006. The preliminary net impact of this adjustment will increase pretax noninterest expenses by $34 million and $47 million for the nine months ended September 30, 2006 and for the year ended December 31, 2005, respectively. The final adjustments may be significantly different.

(D) The fair value purchase accounting adjustment to fixed-rate deposits is ($34) million. The adjustment will be recognized over the estimated remaining life of the related deposit liabilities of approximately 2.5 years. The adjustment reflected is based upon preliminary valuations performed as of September 30, 2006. The preliminary impact of this adjustment will increase pretax interest expense by $15 million and $19 million for the nine months ended September 30, 2006 and for the year ended December 31, 2005, respectively. The final adjustments may be significantly different.

(E) Adjustment to reflect stock and cash consideration for Mercantile outstanding shares and options. See Note 2 for further information. The financing costs on the cash consideration are based on an estimated current annual rate of 5.75%. The preliminary impact of the financing costs will increase pretax interest expense by $92 million and $122 million for the nine months ended September 30, 2006 and for the year ended December 31, 2005, respectively.

(F) Adjustment to accrued and other expenses represents additional net deferred tax liability of $77 million resulting from the pro forma adjustments, with the exception of goodwill. Deferred taxes were recorded based on an incremental tax rate (both federal and state taxes). (A deferred tax liability of $109 million relates to the CDI.)

(G) Adjustment to record the tax effect of the pro forma adjustments based on an incremental tax rate (both federal and state taxes).

Note 4 – Preliminary Plans of Consolidation:

In connection with the merger, PNC and Mercantile have begun to develop the preliminary plans to consolidate the operations of PNC and Mercantile. Over the next several months, the specific details of these plans will be refined. PNC and Mercantile are currently in the process of assessing the two companies’ personnel, benefit plans, premises, equipment, computer systems and service contracts to determine where they may take advantage of redundancies or where it will be beneficial or necessary to convert to one system. Certain decisions arising from these assessments may involve involuntary termination of Mercantile’s employees, vacating Mercantile’s leased premises, canceling contracts between Mercantile and certain service providers and selling or otherwise disposing of certain premises, furniture and equipment owned by Mercantile. The pretax costs associated with such decisions, which are currently estimated at $156 million, will be recorded as purchase accounting adjustments, which have the effect of increasing the amount of the purchase price allocable to goodwill. It is expected that all such costs will be identified and recorded within one year of completion of the merger and all such actions required to effect these decisions would be taken within one year after finalization of these plans. The pro forma condensed combined balance sheet does not include a preliminary estimate of such costs since these costs are not indicative of what the historical results of PNC would have been had PNC and Mercantile actually been combined during the periods presented.

PNC also expects to incur merger-related expenses including system conversion costs, employee retention arrangements and costs of incremental communications to customers and others. It is expected that the exit and disposal costs along with the merger-related costs will be incurred over a one-year period after completion of the merger. Preliminarily, we estimate these restructuring and merger-related pretax expenses will approximate $86 million. The estimate is not included in the pro forma income statements since these costs will be recorded in the combined results of operations as they are incurred after completion of the merger and are not indicative of what the historical results of PNC would have been had PNC and Mercantile actually been combined during the periods presented.

Additionally, PNC expects to realize approximately $108 million in pretax cost savings following the merger, which PNC expects to be phased in over a two-year period. These cost savings are not reflected in the pro forma financial information. PNC also expects to realize $27 million in pretax synergies and cost savings at PNC as a result of balance sheet repositioning and branch cost avoidance in the future.