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Acquisition and Divestiture Activity
 12 Months Ended
Dec. 31, 2022
Business Combinations [Abstract]  
Acquisition and Divestiture Activity ACQUISITION AND DIVESTITURE ACTIVITY
Acquisition of BBVA USA Bancshares, Inc.
On June 1, 2021, PNC acquired BBVA including its U.S. banking subsidiary, BBVA USA, for $11.5 billion in cash. PNC did not acquire the following entities as part of the acquisition: BBVA Securities, Inc., Propel Venture Partners Fund I, L.P. and BBVA Processing Services, Inc. This transaction has been accounted for as a business combination. Accordingly, the assets and liabilities from BBVA were recorded at fair value as of the acquisition date. The determination of fair value requires management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. Fair value estimates related to the assets and liabilities from BBVA were subject to adjustment for up to one year after the closing date of the acquisition as additional information became available. Valuations subject to adjustment included, but were not limited to, loans, certain deposits, certain other assets, customer relationships and the core deposit intangibles.
On October 12, 2021, PNC converted approximately 2.6 million customers, 9,000 employees and over 600 branches across seven states, merging BBVA USA into PNC Bank.
PNC incurred merger and integration costs of $55 million for the twelve months ended December 31, 2022, in connection with the transaction. These costs are recorded as contra-revenue and expense on the Consolidated Income Statement. The integration expenses are primarily related to retail services and realty expenses. Cumulative integration costs, excluding write-offs for capitalized items, were $860 million. Integration costs associated with write-offs for capitalized items were $120 million.
The following table includes the fair value of the identifiable tangible and intangible assets and liabilities from BBVA:
Table 39: Acquisition Consideration
June 1, 2021
In millionsFair Value
Fair value of acquisition consideration $11,480 
Assets
Cash and due from banks$969 
Interest-earning deposits with banks13,313 
Loans held for sale 463 
Investment securities – available for sale18,358 
Net loans 61,423 
Equity investments723 
Mortgage servicing rights35 
Core deposit intangibles and other intangible assets378 
Other3,527 
Total assets$99,189 
Liabilities
Deposits$85,562 
Borrowed funds2,449 
Accrued expenses and other liabilities1,275 
Total liabilities $89,286 
Noncontrolling interests22 
Less: Net assets$9,881 
Goodwill$1,599 

Goodwill of $1.6 billion recorded in connection with the transaction resulted from the reputation, operating model and expertise of BBVA. The amount of goodwill recorded reflected the increased market share and related synergies that resulted from the acquisition, and represents the excess purchase price over the estimated fair value of the net assets from BBVA. The goodwill was allocated to each of our three business segments and is not deductible for income tax purposes. See Note 6 Goodwill and Mortgage Servicing Rights for additional information on the allocation of goodwill to the segments.
The following table includes the fair value and unpaid principal balance of the loans from the BBVA acquisition:
Table 40: Fair Value and Unpaid Principal Balance of Loans from the BBVA Acquisition

June 1, 2021
In millionsUnpaid Principal Balance Fair Value
Loans
Commercial
Commercial and industrial $29,864 $29,381 
Commercial real estate10,632 10,313 
Equipment lease financing48 48 
Total commercial 40,544 39,742 
Consumer
Residential real estate12,871 12,961 
Home equity2,430 2,423 
Automobile3,916 3,910 
Credit card820 758 
Other consumer1,688 1,629 
Total consumer 21,725 21,681 
Total $62,269 $61,423 
Other intangible assets from the BBVA acquisition as of June 1, 2021 consisted of the following:

Table 41: Intangible Assets

In millions  Fair Value Weighted Life
(years)		 Amortization Method
Residential mortgage servicing rights$35 5.5(a)
Core deposits$262 10.0Accelerated
Other116 9.8Straight-line
Total core deposits and other$378 
(a) Intangible asset accounted for at fair value.

The following is a description of the methods used to determine the fair values of significant assets and liabilities.

Cash and Due from Banks and Interest-earning Deposits with Banks
The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.

Loans Held for Sale
Residential mortgage loans are valued based on quoted market prices, where available, prices for other traded mortgage loans with
similar characteristics, and purchase commitments and bid information received from market participants. The prices are adjusted as
necessary to include the embedded servicing value in the loans and to take into consideration the specific characteristics of certain similar loans.

Personal installment loans are pooled based on delinquency status, and fair value of individual loans is calculated based on traded
consumer unsecured loans, dealer research and loan level performance characteristics.

Available For Sale Securities
All investment securities from the BBVA acquisition were classified within the available for sale portfolio at acquisition. Fair value
estimates for available for sale securities were determined by third-party pricing vendors. The third-party vendors use a variety of
methods when pricing securities that incorporate relevant market data to arrive at an estimate of what a buyer in the marketplace
would pay for a security under current market conditions. These methods include the use of quoted prices for the identical or a similar
security, an alternative market-based approach or an income approach, such as a discounted cash flow pricing model.

Loans
Fair value for loans were based on a discounted cash flow methodology that considered credit loss and prepayment expectations, market interest rates and other market factors, such as liquidity, from the perspective of a market participant. Loan cash flows were generated on an individual loan basis. The PD, LGD, exposure at default and prepayment assumptions are the key factors driving credit losses which are embedded into the estimated cash flows.
Equity Investments
Equity investments primarily include LIHTC investments and preservation fund investments. The fair value of the LIHTC investments
was estimated based on LIHTC pricing observed for recent transactions in markets where the properties underlying the LIHTC
investments from the BBVA acquisition are located. The fair value of the preservation investments was estimated based on appraisals
and valuations of the properties in the investment portfolio using income and market projections.

Mortgage Servicing Rights
The fair value of mortgage servicing rights from the BBVA acquisition is estimated by using a discounted cash flow valuation model
which calculates the present value of estimated future net servicing cash flows, taking into consideration actual and expected mortgage
loan prepayment rates, discount rates, servicing costs and other factors which are determined based on current market conditions.

Core Deposit Intangible
This intangible asset represents the value of certain client deposit relationships. The fair value was estimated utilizing the cost method.
Appropriate consideration was given to deposit costs including servicing costs, client retention and alternative funding source costs at
the time of acquisition. The discount rate used was derived taking into account the estimated cost of equity, risk-free return rate and
risk premium for the market and specific risk related to the asset’s cash flows. The core deposit intangible is being amortized over 10 years using an accelerated amortization methodology.

Deposits
The fair values for time deposits were estimated by discounting contractual cash flows using current market rates for instruments with
similar maturities. For deposits with no defined maturity, carrying values approximate fair values.

Borrowed Funds
The fair values of long-term debt instruments were estimated based on quoted market prices.
The following table presents financial results of BBVA from the date of acquisition through September 30, 2021. BBVA information was fully integrated into PNC’s processes and systems during system conversion in the fourth quarter of 2021 and as a result standalone BBVA financial results were no longer available.

Table 42: BBVA Financial Results

In millions  Four months ended September 30, 2021
Net interest income $768 
Noninterest income$285 
Net income $378 
The following table presents unaudited pro forma results as if the acquisition of BBVA by PNC had occurred on January 1, 2020 and includes the impact of amortizing and accreting certain estimated purchase accounting adjustments such as intangible assets as well as fair value adjustments to loans, deposits and long-term debt. Merger and integration costs of $798 million that were incurred for the twelve months ended December 31, 2021 are included in the pro forma results. PNC’s financial results include the $4.3 billion divestiture of BlackRock recorded in net income for the year ended December 31, 2020. Additionally, BBVA’s financial results through the twelve months ended December 31, 2020 included a $2.2 billion goodwill impairment charge recorded in noninterest expense. The pro forma information does not necessarily reflect the results that would have occurred had PNC acquired BBVA on January 1, 2020.
Table 43: Unaudited Pro Forma Results
Year ended December 31
In millions20212020
Net interest income $11,662 $12,413 
Noninterest income$8,960 $7,866 
Net income $7,475 $4,928 
Under CECL, PNC is required to determine whether purchased loans held for investment have experienced more-than-insignificant deterioration in credit quality since origination. PNC considers a variety of factors in connection with the identification of more-than-insignificant deterioration in credit quality, including but not limited to nonperforming status, delinquency, risk ratings, TDR classification, FICO scores and other qualitative factors that indicate deterioration in credit quality since origination. PNC initially measures the amortized cost of a PCD loan by adding the acquisition date estimate of expected credit losses to the loan’s purchase price. The initial ACL for PCD loans of $1.1 billion was established through an adjustment to the BBVA loan balance and related purchase accounting mark. Non-PCD loans and PCD loans had a fair value of $52.1 billion and $9.4 billion at the acquisition date and unpaid principal balance of $52.0 billion and $10.3 billion, respectively. In accordance with U.S. GAAP, there was no carryover of the ACL that had been previously recorded by BBVA. Subsequent to acquisition, PNC recorded an ACL on non-PCD loans of $1.0 billion through an increase to the provision for credit losses.

Table 44: PCD Loan Activity
June 1, 2021
In millions
Principal balance $10,253 
ACL at acquisition (1,102)
Non-credit premium 219 
Purchase price $9,370 
Sale of Equity Investment in Blackrock, Inc.
In May 2020, PNC completed the sale of its 31.6 million shares of BlackRock, Inc., common and preferred stock through a registered secondary offering at a price of $420 per share. In addition, BlackRock repurchased 2.65 million shares from PNC at a price of $414.96 per share. The total proceeds from the sale were $14.2 billion in cash, net of $0.2 billion in expenses, and resulted in a gain on sale of $4.3 billion. Additionally, PNC contributed 500,000 BlackRock shares to the PNC Foundation.

Following the sale and donation, PNC has divested its entire investment in BlackRock and only holds shares of BlackRock stock in a fiduciary capacity for clients of PNC.

The following table summarizes the results from the discontinued operations of BlackRock included in the Consolidated Income Statement:

Table 45: Consolidated Income Statement - Discontinued Operations

Year ended December 31
In millions2020
Noninterest income$5,777 
Total revenue5,777 
Income from discontinued operations before income taxes5,777 
Income taxes1,222 
Net income from discontinued operations$4,555 
    
The following table summarizes the cash flows of discontinued operations of BlackRock included in the Consolidated Statement of Cash Flows:
Table 46: Consolidated Statement of Cash Flows - Discontinued Operations

Year ended December 31
In millions2020
Cash flows from discontinued operations
Net cash provided (used) by operating activities of discontinued operations$(2,683)
Net cash provided by investing activities of discontinued operations$14,225