Bank of Montreal 1997 Annual Report Download - page 79

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Bank of Montreal 180th Annual Report 1997 73
Increases in investment securities are:
1997 1996
Purchases $ 45,803 $ 86,356
Proceeds from sales (26,161) (68,316)
Maturities, prepayments and calls (18,327) (20,738)
Net purchases (sales) of investment securities $ 1,315 $ (2,698)
All of our investment securities, other than our investment in
our associated corporation, are available for sale.
Interest income and gains and losses from securities are:
1997 1996 1995
Reported in:
Interest, dividend and fee income
Investment securities $ 1,118 $ 1,165 $ 1,368
Associated corporation 89 55 –
Trading securities 937 904 395
$ 2,144 $ 2,124 $ 1,763
Other Income
Investment securities,
net realized gains $52 $ 71 $ 46
Trading securities, net realized
and unrealized gains $169 $ 121 $ 81
Interest expense is not included in the amounts shown above.
Unrealized Gains and Losses 1997 1996
Gross Gross Gross Gross
Book unrealized unrealized Market Book unrealized unrealized Market
value gains losses value value gains losses value
Investment Securities
Issued or guaranteed by:
Canadian federal government $ 2,897 $ 42 $ 1 $ 2,938 $ 5,388 $ 95 $ – $ 5,483
Canadian provincial and
municipal governments 304 30 – 334 211 30 – 241
U.S. federal government 2,814 3 14 2,803 2,993 6 41 2,958
U.S. states, municipalities and agencies 3,711 31 1 3,741 2,730 19 4 2,745
Designated countries 49 43 – 92 70 91 – 161
Other governments 149 18 – 167 137 6 – 143
Mortgage-backed securities and
collateralized mortgage obligations 2,276 34 1 2,309 2,173 12 32 2,153
Corporate debt 4,674 96 6 4,764 2,240 32 7 2,265
Corporate equity
Associated corporation 537 118 – 655 436 132 – 568
Other 1,158 64 2 1,220 807 33 1 839
Total $ 18,569 $ 479 $ 25 $ 19,023 $ 17,185 $ 456 $ 85 $ 17,556
The market value of securities is based on the quoted market price at each year end. This price may not necessarily be what we would receive if we were to sell the security.
We use a variety of valuation techniques to estimate the market value when there is no readily available quoted market price for a particular security.
Loans
All loans are recorded at cost net of any unearned interest, unamortized
discounts and allowance for credit losses. Interest income is recorded on an
accrual basis except for impaired loans, the treatment of which is described
below. From time to time we will restructure a loan due to the poor financial
condition of the borrower. Interest on these restructured loans is recorded on
an accrual basis unless we consider the loan to be impaired.
Securities purchased under resale agreements represent the amounts
we will receive as a result of our commitment to resell securities that
we have purchased, back to the original sellers, on a specified date at a
specified price. We account for these instruments as loans.
Loan Fees
Loan fees are received for a variety of reasons. The accounting treatment for
these fees varies depending on the type of transaction. The unrecognized
portion of all loan fees is included in other liabilities in our Consolidated
Balance Sheet. Loan syndication fees are included in other income when
we complete the syndication. Loan origination, restructuring, renegotiation
and commitment fees are recognized as interest income over the term
of the loan unless we believe that the loan commitment we provide to our
customer will not be used. In this case, we recognize the loan commit-
ment fee over the commitment period.
Impaired Loans
We classify loans, except credit card and consumer instalment loans, as
impaired when:
•
we are unlikely to collect the principal or interest owed to us on a timely
basis; or
•the principal or interest payments are 90 days past due unless we are
actively trying to collect the loan and it is fully secured; or
•
fully secured loans become 180 days past due
; or
•
we consider it prudent or appropriate to cease accruing interest on the loan.
Credit card loans are immediately classified as impaired and written off
when principal or interest payments become 180 days past due. Consumer
instalment loans are immediately classified as impaired when the principal
or interest payments are 90 days past due and are written off when they
are past due by one year.
We do not accrue interest
when we
classify a loan as impaired and any
interest income
that is accrued and unpaid is reversed to interest income
.
Any payments received on a loan that has been classified as impaired
are recorded first to recover any previous write-offs or allowances
before income is recognized. Any payments which we receive on impaired
credit card loans, consumer instalment loans and loans to designated
countries are applied first to the outstanding interest and then to the
remaining principal amount.
Note 4 Loans