Bank of Montreal 1997 Annual Report Download - page 87

Bank of Montreal 180th Annual Report 1997 81
The following table provides summaries of our pension plans’ estimated financial positions:
1997 1996 1995
Accumulated pension benefit obligation, including vested benefits
of $1,631 in 1997, $1,312 in 1996 and $1,274 in 1995 $ 1,670 $ 1,341 $ 1,303
Projected pension benefit obligation for employee service rendered to date $ 1,877 $ 1,746 $ 1,634
Pension plan assets at fair value 2,581 2,207 1,956
704 461 322
Unrecognized net (gain) from past experience different from that assumed
and effects of changes in actuarial assumptions (397) (174) (23)
Prior period employee service costs not yet recorded 56 57 60
Unrecognized transition amount (2) (11) (20)
Prepaid pension expense $ 361 $ 333 $ 339
As at October 31, 1997, the pension plan assets consisted of equities (60%),
fixed income investments (39%) and real estate and other investments (1%).
Annual Pension Expense
Net pension expense includes the following components:
Pension benefits earned by employees $ 61 $ 59 $ 57
Interest cost accrued on our projected pension benefit obligation 140 135 127
Actual investment return earned on pension plan assets (453) (344) (250)
Net amortization and deferral 283 180 103
Annual pension expense 31 30 37
Canada and Quebec pension plan contribution 26 22 21
Total annual pension expense $ 57 $ 52 $ 58
Actuarial Assumptions
Weighted average discount rate for projected benefit obligation 7.9% 7.9% 8.2%
Weighted average rate of compensation increase 3.9 4.3 5.4
Weighted average expected long-term rate of return on pension plan assets 8.2 8.4 8.4
The cost of post-retirement life insurance, health and dental care benefits reported in employee benefits expense was $11 in 1997,
$10 in 1996 and $8 in 1995.
Periodically we securitize portions of our assets by selling loans to
special-purpose vehicles or trusts of which we are not the beneficiaries.
We account for these transactions as sales when the significant risks
and rewards of the ownership of the loans have been transferred and we
can estimate the amount of cash to be received.
We record these sales based upon the market value of the loans sold.
Gains or losses are recorded in income upon completion of the sales.
The fees which we receive for continuing to service the loans sold are
recorded in income using the accrual method. The contracts may also pro-
vide for the payment to us of an additional fee when the sum of interest
and fees collected from customers exceeds the yield paid to investors on
the assets, credit losses and other costs. We record our entitlement to such
amounts in income when the servicing fee is legally payable by the special-
purpose vehicle.
The amounts of outstanding loans sold to special-purpose
vehicles are:
1997 1996
Securitized credit card receivables $ 2,000 $ –
The impact of securitization on the Consolidated Statement of
Income is:
1997 1996 1995
Net interest income $ (40) $ – $ –
Other income – card services $ 39 $ – $ –
Income before provision for
income taxes $ (1) $ – $ –
Note 16 Loans Sold
We provide banking services to our subsidiary companies
on the same terms that we offer to our customers. In addition,
we make loans to current and former directors, officers and
employees at various rates and terms. The interest earned on
these loans is recorded in interest, dividend and fee income
in the Consolidated Statement of Income.
The amounts outstanding under these loan agreements are :
1997 1996
Mortgage loans $ 835 $ 954
Personal loans 360 353
Total $ 1,195 $ 1,307
Note 17 Related Party Transactions