Bank of Montreal 1999 Annual Report Download - page 89

Bank of Montreal Group of Companies 1999 Annual Report 83
Changes in our allowance for credit losses are:
Specific allowances General allowance Country risk allowance Total
1999 1998 1997 1999 1998 1997 1999 1998 1997 1999 1998 1997
Balance at beginning of year $ 283 $ 366 $ 552 $ 885 $ 775 $ 475 $ 104 $ 98 $ 116 $ 1,272 $ 1,239 $ 1,143
Provision for credit losses 235 20 75 85 110 200
––– 320 130 275
Transfer of allowance
–– (100) –– 100 ––––––
Recoveries 47 64 158 –––––– 47 64 158
Write-offs (178) (192) (334)
––– (15) (3) (23) (193) (195) (357)
Other, including foreign
exchange rate changes (15) 25 15 ––– (4) 95(19) 34 20
Balance at end of year $ 372 $ 283 $ 366 $ 970 $ 885 $ 775 $ 85 $ 104 $ 98 $ 1,427 $ 1,272 $ 1,239
Note 6 Asset Securitization
Note 7 Premises and Equipment
Periodically we securitize portions of our assets by selling loans to
special-purpose vehicles or trusts of which we are not the beneficiary. 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.
The purchase and sale contracts provide for the payment to us of the
proceeds of sale when the sum of interest and fees collected from cus-
tomers exceeds the yield paid to investors on the assets, credit losses
and other costs. We record our entitlement to such proceeds in income
when the amount is legally payable by the special-purpose vehicle or
trust. The fees which we receive for continuing to service the loans sold
are recorded in income using the accrual method.
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 maxi-
mum estimated useful lives we use to amortize our assets are:
■Buildings 40 years
■Computer and other equipment 10 years
■Leasehold improvements 15 years
Amortization expense for the years ended October 31, 1999, 1998
and 1997 amounted to $412 in 1999, $318 in 1998 and $348 in
1997.IncludedinlandandbuildingsarethecostsofBank-owned
branches and other properties, located in Canada, the United
States and other countries, of which we owned 522 as at Octo-
ber 31, 1999 and 530 as at October 31, 1998.
1999 1998
Land $ 272 $ 280
Buildings 1,263 1,282
Computer and other equipment 2,064 2,037
Leasehold improvements 353 350
3,952 3,949
Accumulated amortization (1,724) (1,638)
Total $ 2,228 $ 2,311
The outstanding amounts of loans sold to special-purpose vehi-
cles or trusts are:
1999 1998
Securitized credit card receivables $ 2,500 $ 2,500
Securitized mortgage loans 5,542 5,061
Securitized corporate loans 4,102 4,089
The impact of securitization on our Consolidated Statement of
Income is:
1999 1998 1997
Net interest income $ (234) $ (128) $ (17)
Provision for credit losses 42 50
–
Other income – card services (89) (79) (14)
– securitization revenues 296 158 32
– other fees and
commissions (9) (11) (2)
Income (loss) before provision for
income taxes, non-controlling interest
in subsidiaries and goodwill $ 6 $ (10) $ (1)
Lease Commitments
We have entered into a number of non-cancellable leases for
premises and equipment. Our total contractual rental commit-
ments outstanding as at October 31, 1999 are $771. The commit-
ments for each of the next five years are $150 for 2000, $130 for
2001, $92 for 2002, $72 for 2003, $59 for 2004 and $268 there-
after. Included in these amounts are the commitments related
to 676 leased Bank branch locations as at October 31, 1999. Net
rent expense for premises and equipment reported in our
Consolidated Statement of Income was $175 for 1999, $168 for
1998 and $166 for 1997.