Bank of Montreal 2007 Annual Report Download - page 118

We test premises and equipment for impairment when events
or changes in circumstances indicate that their carrying value may not
be recoverable. We write them down to fair value when the related
undiscounted cash flows are less than the carrying value. There were no
write-downs of premises and equipment due to impairment during the
years ended October 31, 2007, 2006 and 2005.
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, 2007 were $1,296 million. The commitments for
each of the next five years and thereafter are $199 million for 2008,
$172 million for 2009, $147 million for 2010, $120 million for 2011,
$101 million for 2012 and $557 million thereafter. Included in these
amounts are the commitments related to 724 leased branch locations
as at October 31, 2007.
Net rent expense for premises and equipment reported in
our Consolidated Statement of Income for the years ended October 31,
2007, 2006 and 2005 was $300 million, $292 million and $245 million,
respectively.
114 BMO Financial Group 190th Annual Report 2007
Notes to Consolidated Financial Statements
Notes
Note 11: Acquisitions
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.
First National Bank & Trust
On January 4, 2007, we completed the acquisition of First National
Bank & Trust (“First National”) for total cash consideration of $345 mil-
lion. The results of First National’s operations have been included in
our consolidated financial statements since that date. The acquisition of
First National provides us with the opportunity to expand our banking
services in the Indianapolis, Indiana market. As part of this acquisition,
we acquired a core deposit intangible asset, which will be amortized
on an accelerated basis over a period not to exceed 10 years. Goodwill
and other intangibles related to this acquisition are deductible for tax
purposes. First National is part of our Personal and Commercial Banking
U.S. reporting segment.
bcpbank Canada
On December 4, 2006, we completed the acquisition of bcpbank Canada,
a full-service chartered bank, for total cash consideration of $41 million.
The results of bcpbank Canada’s operations have been included in
our consolidated financial statements since that date. The acquisition
of bcpbank Canada expands our branch network and provides our
customers with greater access to banking services across the greater
Toronto area. 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. bcpbank Canada is part of our Personal and Commercial
Banking Canada reporting segment.
Villa Park Trust and Savings Bank
On December 1, 2005, we completed the acquisition of Chicago-based
Villa Park Trust and Savings Bank (“Villa Park”), a community bank,
for total cash consideration of $76 million. The results of Villa Park’s
operations have been included in our consolidated financial state-
ments since that date. The acquisition of Villa Park provides us with
the opportunity to expand our banking services in 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. Villa Park is part of our Personal and Commercial
Banking U.S. reporting segment.
Future Acquisitions
Pyrford International plc
On November 2, 2007, we announced that we had reached a definitive
agreement to purchase Pyrford International plc, a London, U.K.-based
asset manager, for total cash consideration of approximately $50 million.
The acquisition of Pyrford International plc will provide us with the
opportunity to expand our investment management capabilities outside
of North America. The acquisition of Pyrford International plc is subject
to regulatory approval. The acquisition of Pyrford International plc is
expected to close during the quarter ending January 31, 2008, at which
time it will be recorded in our consolidated financial statements as
the acquisition of a business. Pyrford International plc will be part of
our Private Client Group reporting segment.
Ozaukee Bank
On July 10, 2007, we announced that we had reached a definitive
agreement to purchase Ozaukee Bank. Under the agreement, Ozaukee
Bank shareholders will receive approximately 3 million shares of Bank
of Montreal. The exact number of shares will be determined based
on a formula prior to closing. The acquisition of Ozaukee Bank is subject
to regulatory approval and the approval of Ozaukee Bank shareholders.
The acquisition of Ozaukee Bank will provide us with the opportunity to
expand our banking locations into Wisconsin. The acquisition of Ozaukee
Bank is expected to close during the quarter ending January 31, 2008,
at which time it will be recorded in our consolidated financial statements
as the acquisition of a business. Ozaukee Bank will be part of our
Personal and Commercial Banking U.S. reporting segment.
Merchants and Manufacturers Bancorporation, Inc.
On July 10, 2007, we announced that we had reached a definitive
agreement to purchase Merchants and Manufacturers Bancorporation,
Inc. (“Merchants and Manufacturers”) for total cash consideration
of approximately $146 million. The acquisition of Merchants and
Manufacturers will provide us with the opportunity to expand our
banking locations into Wisconsin. The acquisition of Merchants
and Manufacturers is subject to regulatory approval and the approval
of Merchants and Manufacturers shareholders. The acquisition of
Merchants and Manufacturers is expected to close during the quarter
ending January 31, 2008, at which time it will be recorded in our
consolidated financial statements as the acquisition of a business.
Merchants and Manufacturers will be part of our Personal and
Commercial Banking U.S. reporting segment.
The estimated fair values of the assets acquired and the liabilities
assumed at the dates of acquisition are as follows:
(Canadian $ in millions) 2007 2006
bcpbank
First National Canada Villa Park
Cash resources $ 110 $ 47 $ 16
Securities 317 23 54
Loans 1,009 293 247
Premises and equipment 30 9 5
Goodwill 175 13 44
Core deposit intangible asset 37 5 7
Other assets 52 2 4
Total assets 1,730 392 377
Deposits 1,375 339 296
Other liabilities 10 12 5
Total liabilities 1,385 351 301
Purchase price $ 345 $ 41 $ 76
The allocations of the purchase price for First National and bcpbank Canada are subject to
refinement as we complete the valuation of the assets acquired and liabilities assumed.