PNC Bank 2007 Annual Report Download - page 95

Download and view the complete annual report

Please find page 95 of the 2007 PNC Bank annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 141

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141

N
OTE
7G
OODWILL AND
O
THER
I
NTANGIBLE
A
SSETS
A summary of the changes in goodwill by business segment
during 2007 follows:
Goodwill
In millions
Dec. 31
2006
Additions/
Adjustments
Dec. 31
2007
Retail Banking $1,466 $4,162 $5,628
Corporate & Institutional
Banking 938 553 1,491
PFPC 968 261 1,229
BlackRock 30 27 57
Total $3,402 $5,003 $8,405
Assets and liabilities of acquired entities are recorded at
estimated fair value as of the acquisition date and are subject
to refinement as information relative to the fair values at that
date becomes available. We are awaiting certain information
relating to pre-acquisition contingencies. Revisions would
likely result in subsequent adjustments to goodwill. The
goodwill and other intangible assets related to Mercantile and
Yardville are reported in the Retail Banking and Corporate &
Institutional Banking business segments.
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 2007 2006
Customer-related and other intangibles
Gross carrying amount $ 708 $ 342
Accumulated amortization (263) (178)
Net carrying amount $ 445 $ 164
Mortgage and other loan
servicing rights
Gross carrying amount $1,001 $ 689
Accumulated amortization (300) (212)
Net carrying amount $ 701 $ 477
Total $1,146 $ 641
While most of our other intangible assets have finite lives and
are amortized primarily on a straight-line basis, mortgage and
other loan servicing rights and certain core deposit intangibles
are amortized on an accelerated basis.
For customer-related intangibles, the estimated remaining
useful lives range from less than one year to 15 years, with a
weighted-average remaining useful life of approximately 9
years. Our mortgage and other loan servicing rights are
amortized primarily over a period of 5 to 10 years in
proportion to the estimated net servicing cash flows from the
related loans.
The changes in the carrying amount of goodwill and net other
intangible assets during 2007 follows:
Changes in Goodwill and Other Intangibles
In millions Goodwill
Customer-
Related
Servicing
Rights
December 31, 2006 $3,402 $164 $477
Additions/adjustments:
Mercantile acquisition 4,363 281 9
ARCS acquisition (a) 83 1 188
Yardville acquisition 273 28
Albridge and Coates Analytics
acquisitions 261 56
BlackRock 27
Mortgage and other loan servicing
rights 115
Other (4)
Amortization (85) (88)
December 31, 2007 $8,405 $445 $701
(a) ARCS goodwill is expected to be deductible for tax purposes over 15 years.
Our investment in BlackRock changes when BlackRock
repurchases its shares in the open market or issues shares for
an acquisition or pursuant to its employee compensation plans.
We record goodwill when BlackRock repurchases its shares at
an amount greater than book value per share and this results in
an increase in our percentage ownership interest.
Servicing revenue from both commercial and residential
mortgage servicing assets and liabilities generated
contractually specified servicing fees, net interest income
from servicing portfolio deposit balances and ancillary fees
totaling $192 million and $139 million for the years ended
December 31, 2007 and 2006, respectively. We also generate
servicing revenue from fee-based activities provided to others.
Amortization expense on intangible assets for 2007, 2006 and
2005 was $173 million, $99 million and $74 million,
respectively. Amortization expense on existing intangible
assets for 2008 through 2012 is estimated to be as follows:
• 2008: $193 million,
• 2009: $162 million,
• 2010: $141 million,
• 2011: $131 million, and
• 2012: $115 million.
We conduct a goodwill impairment test on our reporting units
at least annually or more frequently if any adverse triggering
events occur. Based on the results of our analysis, there were
no impairment charges related to goodwill recognized in 2007,
2006 or 2005. The fair value of our reporting units is
determined by using discounted cash flow and market
comparability methodologies.
90