PNC Financial Services (PNC)

responsible for litigation pending against Sterling and its subsidiaries at that time. We will also be responsible for future litigation arising out of the conduct of the business of Sterling and its subsidiaries before the acquisition.

All of the matters described below arise in connection with Sterling’s commercial finance subsidiary, Equipment Finance LLC, which we refer to as EFI. We provide additional information regarding the EFI situation in our Registration Statement on Form S-4 relating to the merger.

See also “Regulatory and Governmental Inquiries” for information regarding regulatory matters with respect to Sterling and the EFI situation.

Several class action lawsuits were filed in May, June and July 2007 in the United States District Courts for the Eastern District of Pennsylvania and the Southern District of New York related to the EFI situation. In October 2007, the lawsuits filed in New York were transferred to the Pennsylvania court for coordinated pretrial proceedings. In February 2008, the plaintiffs filed a consolidated amended complaint on behalf of those who purchased Sterling common stock during the period from April 27, 2004 through May 24, 2007. This complaint names Sterling, Bank of Lancaster County, N.A. (a predecessor to a bank subsidiary of Sterling), EFI, and members of their management as defendants. The plaintiffs allege violations of the federal securities laws, including allegations that Sterling’s public statements and filings fraudulently omitted information and included fraudulent misrepresentations about the improprieties at EFI as well as about their impact on Sterling’s earnings and related matters. The plaintiffs assert that the price for Sterling stock was fraudulently inflated during the class period due to the alleged omissions and misrepresentations, and seek unspecified damages, interest, attorneys’ fees and costs. (As a result of our acquisition of Sterling, we may be responsible for indemnifying individual defendants in connection with this lawsuit.) We have a tentative agreement to settle this lawsuit, which is subject to customary conditions, including court approval following notice to the class. The amount of this settlement would not be material to PNC.

In addition, a group of shareholders who received Sterling common shares as consideration in Sterling acquisition transactions have brought a separate lawsuit asserting claims similar to those in the consolidated amended complaint. Our motion to dismiss this complaint is pending. Other shareholders who received Sterling shares in acquisitions have also threatened to file similar lawsuits.

predecessor to a bank subsidiary of Sterling), EFI, and members of their management as defendants. The plaintiffs allege violations of the federal securities laws, including allegations that Sterling’s public statements and filings fraudulently omitted information and included fraudulent misrepresentations about the improprieties at EFI as well as about their impact on Sterling’s earnings and related matters. The plaintiffs assert that the price for Sterling stock was fraudulently inflated during the class period due to the alleged omissions and misrepresentations, and seek unspecified damages, interest, attorneys’ fees and costs. (As a result of our acquisition of Sterling, we may be responsible for indemnifying individual defendants in connection with this lawsuit.) We have filed a motion to dismiss this complaint. In addition, shareholders who received Sterling common

shares as consideration in Sterling acquisition transactions

are seeking to, or have threatened to, assert separate claims similar to those in the consolidated amended complaint.

Other Civil Litigation. Beginning in December 2007, five banks have filed lawsuits against Sterling and EFI in several Pennsylvania courts of common pleas, asserting various common law claims against Sterling, EFI or both arising out of the banks’ purchase of equipment loans from EFI. These banks seek recovery of the purchase price of the outstanding equipment loans that they purchased, plus, depending on the claim, punitive damages, interest, costs, and attorneys’ fees.

Governmental Investigations. The SEC is conducting a non-public investigation into the EFI situation. The United States Attorney’s Office for the Eastern District of Pennsylvania is also investigating the EFI situation. We are cooperating with both of these investigations and providing information in response to requests, as did Sterling before the merger.