Bank of Montreal 2004 Annual Report Download - page 107

BMO Financial Group Annual Report 2004 103
Notes
Lease Commitments
We have entered into a number of non-cancellable leases for
premises and equipment. Our total contractual rental commitments
as at October 31, 2004 were $1,183 million. The commitments for
each of the next five years and thereafter are $220 million for 2005,
$185 million for 2006, $137 million for 2007, $106 million for 2008,
$92 million for 2009 and $443 million thereafter. Included in these
amounts are the commitments related to 706 leased branch locations
as at October 31, 2004.
Net rent expense for premises and equipment reported in our
Consolidated Statement of Income was $227 million, $222 million
and $223 million for the years ended October 31, 2004, 2003 and
2002, respectively.
We account for acquisitions of businesses using the purchase
method. This involves allocating the purchase price paid for a
business to the assets acquired, including identifiable intangible
assets, and the liabilities assumed, based on their fair values at
the date of acquisition. Any excess is then recorded as goodwill.
We also account for acquisitions of assets at their fair value,
including identifiable intangible assets.
New Lenox State Bank
On June 1, 2004, we completed the acquisition of all outstanding
voting shares of New Lenox State Bank (“NLSB”), a full-service com -
munity bank in Will County, Illinois, for total cash consideration of
$ 314 million. The results of NLSB’s operations have been included in
our consolidated financial statements since that date. The acquisi-
tion of NLSB is part of our expansion in and around the Will County,
Illinois market. As part of this acquisition, we acquired a core deposit
intangible asset, which will be amortized on an accelerated basis
over 10 years. Goodwill related to this acquisition is deductible for
tax purposes. NLSB is part of our Retail and Commercial Banking
reporting unit within the Personal and Commercial Client Group.
Lakeland Community Bank
On March 1, 2004, we completed the acquisition of all outstanding
voting shares of Lakeland Community Bank (“LCB”), a full-service
community bank in Lake County, Illinois, for total cash consideration
of $49 million. The results of LCB’s operations have been included in
our consolidated financial statements since that date. The acquisition
of LCB is part of our further expansion in and around the Chicago,
Illinois market. As part of this acquisition, we acquired a core deposit
intangible asset, which will be amortized on an accelerated basis
over 10 years. Goodwill related to this acquisition is not deductible
for tax purposes. LCB is part of our Retail and Commercial Banking
reporting unit within the Personal and Commercial Client Group.
Gerard Klauer Mattison & Co., Inc.
On July 3, 2003, we completed the acquisition of all outstanding
voting shares of Gerard Klauer Mattison & Co., Inc. (“GKM”),
a New York-based mid-market investment banking firm. The results
of GKM’s operations have been included in our consolidated finan-
cial statements since that date. The acquisition establishes an equity
research, sales and trading platform with offices in New York,
Boston, Chicago, San Francisco and Los Angeles. The purchase price
of $40 million consisted of cash consideration of $18 million and
504,221 of our common shares valued at $22 million. The number
of common shares issued was determined pursuant to a formula in
the acquisition agreement. As part of this acquisition, we acquired
a customer relationship intangible asset, which will be amortized
on an accelerated basis over 10 years. Goodwill related to this
acquisition is not deductible for tax purposes. GKM is part of our
Investment Banking reporting unit within the Investment Banking
Group. In addition, we placed 130,330 of our common shares
valued at $5 million in escrow, to be paid to key employees of GKM
who have become employees of the Bank. This amount has been
recorded in other assets in our Consolidated Balance Sheet and will
be recorded as employee compensation expense over three years.
myCFO, Inc.
On November 1, 2002, we completed the acquisition of certain assets
of myCFO, Inc., a California-based provider of customized invest-
ment and wealth management services to high net worth individuals
and families, for total cash consideration of $61 million. The results
of myCFO, Inc.’s operations have been included in our consolidated
financial statements since that date. The acquisition of myCFO, Inc.
provides us with entry into key markets in California, Colorado and
Georgia. As part of this acquisition, we acquired a customer relation -
ship intangible asset, which will be amortized on a straight-line basis
over 14 years, a technology intangible asset valued at $6 million, which
will be amortized on a straight-line basis over five years, and a brand
intangible asset valued at $1 million, which has an indefinite life.
Goodwill related to this acquisition is deductible for tax purposes.
myCFO, Inc. is part of our Private Banking reporting unit within
the Private Client Group.
Note 11 Acquisitions
The estimated fair values of the assets acquired and the liabilities assumed at the dates of acquisition are as follows:
(Canadian $ in millions) 2004 2003
NLSB LCB Other GKM myCFO, Inc. Other
Cash resources $ 111 $ 13 $ – $ 1 $ – $ –
Securities 393 31 – 2 – –
Loans 774 181 ––––
Premises and equipment 32 3 – 771
Goodwill 193 28 14 15 43 15
Customer relationship intangible assets ––– 15 9 5
Core deposit intangible asset 30 2
–– – –
Other intangible assets – – 8 – 7 –
Other assets 48 2 – 41 5 2
Total assets 1,581 260 22 81 71 23
Deposits 1,225 209 – – – –
Other liabilities 42 2 – 41 10 1
Total liabilities 1,267 211 – 41 10 1
Purchase price $ 314 $ 49 $ 22 $ 40 $ 61 $ 22
The allocation of the purchase prices of NLSB and LCB continue to be subject to refinement as we complete the valuation of assets acquired and liabilities assumed.