Bank of Montreal 2014 Annual Report Download - page 151

Notes
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Our Common Equity Tier 1 Capital Ratio, Tier 1 Capital Ratio, Total
Capital Ratio and Assets-to-Capital Multiple are the primary regulatory
capital measures.
‰The Common Equity Tier 1 Capital Ratio is defined as common
shareholders’ equity, net of capital adjustments, divided by Common
Equity Tier 1 capital risk-weighted assets.
‰The Tier 1 Capital Ratio is defined as Tier 1 capital divided by Tier 1
capital risk-weighted assets.
‰The Total Capital Ratio is defined as Total capital divided by Total
capital risk-weighted assets.
‰The Assets-to-Capital Multiple is calculated by dividing total assets and
specified off-balance sheet items, net of other specified deductions,
by Total capital calculated on a Basel III transitional basis.
Regulatory Capital and Risk-Weighted Assets
(Canadian $ in millions, except as noted)
Basel III
2014
Basel III
2013
Common Equity Tier 1 Capital 22,421 21,227
Tier 1 Capital 26,602 24,599
Total Capital 31,927 29,500
Common Equity Tier 1 Capital Risk-Weighted
Assets 222,092 215,094
Tier 1 Capital Risk-Weighted Assets 222,428 215,094
Total Capital Risk-Weighted Assets 222,931 215,094
Common Equity Tier 1 Capital Ratio 10.1% 9.9%
Tier 1 Capital Ratio 12.0% 11.4%
Total Capital Ratio 14.3% 13.7%
Assets-to-Capital Multiple 16.1 15.6
All 2014 and 2013 balances above are on a Basel III “all-in” basis.
We have met OSFI’s stated minimum capital ratio requirements as at
October 31, 2014.
Note 23: Employee Compensation – Stock-Based Compensation
Stock Option Plan
We maintain a Stock Option Plan for designated officers and employees.
Options are granted at an exercise price equal to the closing price of our
common shares on the day before the grant date. Stock options granted
on or after December 2013 vest in equal tranches of 50% on the third
and fourth anniversaries of their grant date. Options granted prior to
December 2013 vest in tranches over a four-year period starting from
their grant date. Each tranche (i.e. the portion that vests each year) is
treated as a separate award with a different vesting period. A portion of
the options can only be exercised once certain performance targets are
met. All options expire 10 years from their grant date.
We determine the fair value of stock options on their grant date
and record this amount as compensation expense over the period that
the stock options vest, with a corresponding increase to contributed
surplus. When these stock options are exercised, we issue shares and
record the amount of proceeds, together with the amount recorded in
contributed surplus, in share capital. Amounts related to stock options
granted to employees eligible to retire are expensed at the date of
grant.
The following table summarizes information about our Stock Option Plan:
(Canadian $, except as noted) 2014 2013 2012
Number of
stock options
Weighted-
average
exercise price
Number of
stock options
Weighted-
average
exercise price
Number of
stock options
Weighted-
average
exercise price
Outstanding at beginning of year 14,968,711 78.17 15,801,966 79.96 16,989,499 84.28
Granted 1,618,223 68.60 2,003,446 60.11 2,526,345 56.00
Exercised 2,133,107 53.66 2,069,588 47.95 1,766,318 40.17
Forfeited/cancelled 88,965 79.77 5,558 56.35 54,565 40.77
Expired 1,027,097 139.34 761,555 150.78 1,892,995 126.62
Outstanding at end of year 13,337,765 76.21 14,968,711 78.17 15,801,966 79.96
Exercisable at end of year 6,607,237 90.85 7,283,321 98.79 7,900,710 103.87
Available for grant 4,222,722 5,201,062 6,879,964
Outstanding stock options as a percentage of
outstanding shares 2.06% 2.32% 2.43%
Employee compensation expense related to this plan for the years
ended October 31, 2014, 2013 and 2012 was $11 million, $14 million
and $17 million before tax, respectively ($11 million, $13 million and
$16 million after tax, respectively).
The intrinsic value of a stock option grant is the difference between
the current market price of our common shares and the strike price of
the option. The aggregate intrinsic value of stock options outstanding at
October 31, 2014, 2013 and 2012 was $279 million, $215 million and
$79 million, respectively. The aggregate intrinsic value of stock options
exercisable at October 31, 2014, 2013 and 2012 was $145 million,
$107 million and $47 million, respectively.
Options outstanding and exercisable at October 31, 2014 and 2013 by range of exercise price were as follows:
(Canadian $, except as noted) 2014 2013
Options outstanding Options exercisable Options outstanding Options exercisable
Range of exercise
prices
Number
of stock
options
Weighted-
average
remaining
contractual
life (years)
Weighted-
average
exercise
price
Number
of stock
options
Weighted-
average
remaining
contractual
life (years)
Weighted-
average
exercise
price
Number
of stock
options
Weighted-
average
remaining
contractual
life (years)
Weighted-
average
exercise
price
Number
of stock
options
Weighted-
average
remaining
contractual
life (years)
Weighted-
average
exercise
price
$30.01 to $40.00 718,299 4.1 34.13 718,299 4.1 34.13 1,044,175 5.1 34.12 1,044,175 5.1 34.12
$40.01 to $50.00 208,437 4.6 42.36 208,437 4.6 42.36 262,959 5.6 42.44 262,959 5.6 42.44
$50.01 to $60.00 5,087,750 5.7 56.05 3,000,262 6.0 55.73 6,934,041 6.0 55.78 2,845,945 6.1 55.57
$60.01 to $70.00 5,956,232 6.0 63.89 1,313,192 4.1 62.71 4,886,738 5.6 62.28 1,289,444 3.2 63.94
$70.01 and over (1) 1,367,047 2.6 232.14 1,367,047 2.6 232.14 1,840,798 3.1 234.78 1,840,798 3.1 234.78
(1) Issued as part of the acquisition of M&I.
164 BMO Financial Group 197th Annual Report 2014