PNC Bank 2014 Annual Report Download - page 189

N OTE 8G OODWILL AND O THER I NTANGIBLE
A SSETS
Assets and liabilities of acquired entities are recorded at
estimated fair value as of the acquisition date.
Goodwill
Changes in goodwill by business segment during 2014 and
2013 follow:
Table 91: Changes in Goodwill by Business Segment (a)
In millions
Retail
Banking
Corporate &
Institutional
Banking
Asset
Management
Group Total
December 31, 2012 $5,794 $3,214 $64 $9,072
Other 1 1 2
December 31, 2013 $5,795 $3,215 $64 $9,074
Other 29 29
December 31, 2014 $5,795 $3,244 $64 $9,103
(a) The Residential Mortgage Banking and Non-Strategic Assets Portfolio business
segments did not have any goodwill allocated to them during 2014 and 2013.
We conduct a goodwill impairment test on our reporting units
at least annually, in the fourth quarter, or more frequently if
events occur or circumstances have changed significantly
from the annual test date. The fair value of our reporting units
is determined by using discounted cash flow and, when
applicable, market comparability methodologies. Based on the
results of our analysis, there were no impairment charges
related to goodwill in 2014 or 2013.
Other Intangible Assets
As of January 1, 2014, PNC made an irrevocable election to
measure all classes of commercial MSRs at fair value, which
precludes the recognition of valuation allowance or
accumulated amortization. Refer to the Mortgage Servicing
Rights section of this Note 8 for additional information
regarding commercial mortgage servicing rights.
The gross carrying amount, accumulated amortization and net
carrying amount of other intangible assets by major category
consisted of the following:
Table 92: Other Intangible Assets
In millions
December 31
2014
December 31
2013
Customer-related and other intangibles
Gross carrying amount (a) $ 1,502 $ 1,676
Accumulated amortization (a) (1,009) (1,096)
Net carrying amount $ 493 $ 580
Mortgage servicing rights (b)
Gross carrying amount $ 1,351 $ 2,620
Valuation allowance (88)
Accumulated amortization (896)
Net carrying amount $ 1,351 $ 1,636
Total $ 1,844 $ 2,216
(a) The decrease in the gross carrying amount and accumulated amortization from
December 31, 2013 was due to the removal of fully amortized assets.
(b) Upon the first quarter 2014 irrevocable election of fair value for commercial MSRs,
the gross carrying amount of MSRs as of December 31, 2014 represents the fair
value of commercial and residential MSRs.
Amortization expense on existing intangible assets follows:
Table 93: Amortization Expense on Existing Intangible
Assets
In millions
2012 (a) $310
2013 (a) 243
2014 128
2015 114
2016 97
2017 83
2018 72
2019 61
(a) Amounts include amortization expense related to commercial MSRs. As of
January 1, 2014, PNC made an irrevocable election to measure commercial MSRs at
fair value, and, accordingly, amortization expense for commercial MSRs is no
longer recorded.
Customer-Related and Other Intangible Assets
Our customer-related and other intangible assets have finite
lives. Core deposit intangibles are amortized on an accelerated
basis, whereas the remaining other intangible assets are
amortized on a straight-line basis. For customer-related and
other intangibles, the estimated remaining useful lives range
from less than 1 year to 10 years, with a weighted-average
remaining useful life of 7 years.
Changes in customer-related intangible assets during 2014 and
2013 follow:
Table 94: Summary of Changes in Customer-Related and
Other Intangible Assets
In millions
Customer-
Related
December 31, 2012 $ 726
Amortization (146)
December 31, 2013 $ 580
Additions 41
Amortization (128)
December 31, 2014 $ 493
Mortgage Servicing Rights
We recognize as an other intangible asset the right to service
mortgage loans for others. MSRs are purchased or originated
when loans are sold with servicing retained.
Commercial Mortgage Servicing Rights
As of January 1, 2014, PNC made an irrevocable election to
subsequently measure all classes of commercial MSRs at fair
value in order to eliminate any potential measurement
mismatch between our economic hedges and the commercial
MSRs. The impact of the cumulative-effect adjustment to
retained earnings was not material, and the valuation
allowance associated with the commercial MSRs was
The PNC Financial Services Group, Inc. – Form 10-K 171