Bank of Montreal 1997 Annual Report Download - page 81

Bank of Montreal 180th Annual Report 1997 75
General Allowance
This allowance is recorded for loans, including those of an associated
corporation, joint ventures and securitization vehicles, recognizing that
not all of the impairment in the loan portfolio can be specifically iden-
tified on a loan by loan basis. The value of these loans totalled $123,931 as
at October 31, 1997 and $103,451 as at October 31, 1996. The general
allowance is based upon statistical analysis of past performance, the level
of allowance already in place and management’s judgement. The general
allowance would normally increase in a strong business/economic cycle
and decrease in a weak business/economic cycle as specific allowances
are determined for loans.
Country Risk Allowance
This allowance is recorded for loans to and securities of countries identi-
fied by the Superintendent of Financial Institutions Canada that have
restructured or experienced difficulties in servicing all or part of their
external debt to commercial banks. These loans and securities are
reviewed quarterly by our account managers, credit personnel and the
Risk Management Policy unit to assess the adequacy of the allowance
based on the current and expected political and economic conditions in
the respective countries.
The following table sets out our allocation of the allowance for credit losses:
Specific allowances General allowance Country risk allowance Total
1997 1996 1995 1997 1996 1995 1997 1996 1995 1997 1996 1995
Residential mortgages $ 9 $ 9 $ 6 $ – $ – $ – $ – $ – $ – $ 9 $ 9 $ 6
Consumer instalment and
other personal loans 11 15 17 –– – –– – 11 15 17
Credit card loans –– – –– – –– – –– –
Loans to businesses
and governments 345 526 540 –– – 58 7 350 534 547
Securities purchased
under resale agreements –– – –– – –– – –– –
Unallocated –– – 775 475 325 –– – 775 475 325
365 550 563 775 475 325 58 7 1,145 1,033 895
Securities of
designated countries –– – –– – 93 108 360 93 108 360
Loan substitute securities –– – –– – –– – –– –
Acceptances –– – –– – –– – –– –
365 550 563 775 475 325 98 116 367 1,238 1,141 1,255
Off-balance sheet items 12 – –– – –– – 12 –
Total $ 366 $ 552 $ 563 $ 775 $ 475 $ 325 $ 98 $ 116 $ 367 $ 1,239 $ 1,143 $ 1,255
Changes in the allowance for credit losses are:
Specific allowances General allowance Country risk allowance Total
1997 1996 1995 1997 1996 1995 1997 1996 1995 1997 1996 1995
Balance at
beginning of year $ 552 $ 563 $ 812 $ 475 $ 325 $ 200 $ 116 $ 367 $ 484 $ 1,143 $ 1,255 $ 1,496
Provision for credit losses 75 225 150 200 – 125 –– – 275 225 275
Transfer of allowance (100) – – 100 150 – –(150) – –– –
Recoveries 158 103 52 –– – –– – 158 103 52
Write-offs (334) (344) (450) –– – (23) (105) (115) (357) (449) (565)
Other, including foreign
exchange rate changes 15 5(1) –– – 54 (2) 20 9(3)
Balance at end of year $ 366 $ 552 $ 563 $ 775 $ 475 $ 325 $ 98 $ 116 $ 367 $ 1,239 $ 1,143 $ 1,255
We record all premises and equipment at cost. Buildings, computer
and other equipment, and leasehold improvements are amortized on
a
straight-line basis over the estimated useful life of the asset.
The
maximum estimated useful life we use to amortize our assets are:
•Buildings up to 40 years
•Computer and other equipment up to 10 years
•Leasehold improvements up to 15 years
For the years ended October 31, 1997, 1996 and 1995 amortiza-
tion expense amounted to $348 in 1997, $234 in 1996 and $215 in
1995. Included in land and buildings are the costs for Bank-
owned branches and other properties, located in Canada, the
United States and other countries, of which we owned 558
as at October 31, 1997 and 580 as at October 31, 1996.
1997 1996
Land $ 269 $ 265
Buildings 1,209 1,145
Computer and other equipment 1,679 1,337
Leasehold improvements 319 317
3,476 3,064
Accumulated amortization (1,418) (1,197)
Total $ 2,058 $ 1,867
Note 6 Premises and Equipment