PNC Bank 2005 Annual Report Download - page 90

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uncertain about the borrower’ s ability to comply with
existing repayment terms over the next six months totaled
$67 million and zero, respectively, at December 31, 2005,
compared with $65 million and zero, respectively, at
December 31, 2004. Approximately 89% of these loans are in
the Corporate & Institutional Banking portfolio.
NOTE 9 GOODWILL AND OTHER INTANGIBLE
ASSETS
A summary of the changes in goodwill by business during 2005
follows:
Goodwill
In millions
Dec. 31
2004
Additions/
Adjustments
Dec. 31
2005
Retail Banking $1,144 $327 $1,471
Corporate & Institutional
Banking 679 256 935
BlackRock 177 177
PFPC 945 23 968
Other 56 (1) 55
Total $3,001 $605 $3,606
We added $420 million of goodwill and $74 million of
customer-related intangible assets in connection with our May
2005 acquisition of Riggs. Goodwill arising from the Riggs
transaction is reflected in the Retail Banking and Corporate &
Institutional Banking business segments in the table above.
Substantially all of the other intangible assets recorded in
connection with the Riggs acquisition are included in the Retail
Banking segment.
BlackRock recorded $293 million of customer-related and $13
million of other intangible assets as described below in
connection with its January 2005 SSRM acquisition.
Our Harris Williams acquisition resulted in the addition of $144
million of goodwill and $32 million of other intangible assets in
2005, all of which are reflected in the Corporate & Institutional
Banking business segment.
Note 2 Acquisitions contains further information on the Riggs,
SSRM and Harris Williams transactions.
The increase in PFPC’ s goodwill during 2005 was primarily
due to an additional $24 million of goodwill and a
corresponding liability recognized in connection with the
achievement of the contingent consideration threshold related to
its 2003 ADVISORport acquisition. The additional
consideration is expected to be paid in 2006.
Our ownership of BlackRock continues to change primarily
when BlackRock repurchases its shares in the open market and
issues shares for an acquisition or pursuant to its employee
compensation plans. We recognize goodwill because
BlackRock repurchases its shares at an amount greater than
book value and this results in an increase in our percentage
ownership interest. The net impact of BlackRock’ s stock
activity during 2005, including the issuance of shares in the
SSRM acquisition, did not have a significant impact on
goodwill.
The gross carrying amount, accumulated amortization and net
carrying amount of other intangible assets by major category
consisted of the following:
Other Intangible Assets
December 31 - in millions 2005 2004
Customer-related and other intangibles
Gross carrying amount $659 $214
Accumulated amortization (143) (102)
Net carrying amount $516 $112
Mortgage and other loan
servicing rights
Gross carrying amount (a) $511 $408
Accumulated amortization (a) (167) (166)
Net carrying amount $344 $242
Total $860 $354
(a) Amounts for 2005 were reduced by retirements totaling $32
million, comprised of $25 million for Corporate & Institutional
Banking and $7 million for Retail Banking.
Most of our other intangible assets have finite lives and are
amortized primarily on a straight-line basis or, in the case of
mortgage and other loan servicing rights and certain core
deposit intangibles, on an accelerated basis. In connection with
the SSRM acquisition, BlackRock recorded $293 million of
management contracts during 2005, of which approximately
$229 million are considered to have indefinite lives.
For customer-related intangibles, the estimated remaining
useful lives range from approximately one year to 20 years,
with a weighted-average remaining useful life of
approximately 7 years. Our mortgage and other loan servicing
rights are amortized primarily over a period of seven to ten
years in proportion to the estimated net servicing income from
the related loans.
The changes in the carrying amount of goodwill and net other
intangible assets during 2005 follows:
Changes in Goodwill and Other Intangibles
In millions Goodwill
Customer-
Related
Servicing
Rights
Balance at December 31, 2004 $3,001 $112 $242
Additions/adjustments/retirements:
Riggs acquisition (a) 420 74
Harris Williams acquisition 144 32
PFPC 23
BlackRock acquisition of SSRM 306
Merchant Services (a) 20 33
Corporate & Institutional Banking (b) 110
Retail Banking (b) (7)
BlackRock stock activity (2)
Reduction of accumulated
amortization (b) 32
Amortization expense (41) (33)
Balance at December 31, 2005 $3,606 $516 $344
(a) Amounts for goodwill and customer-related intangibles reflect a transfer
of $9 million and $4 million, respectively, from “Riggs acquisition” to
“Merchant Services” in connection with our acquisition of an increased
ownership interest in Merchant Services during the fourth quarter of
2005.
(b) See note (a) under the “Other Intangible Assets” table above.