Bank of Montreal 2008 Annual Report Download - page 132

Notes
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
128 | BMO Financial Group 191st Annual Report 2008
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, 2008 were $1,410 million. The commitments for each of the
next five years and thereafter are $211 million for 2009, $185 million for
2010, $152 million for 2011, $127 million for 2012, $106 million for 2013
and $629 million thereafter. Included in these amounts are the commit-
ments related to 748 leased branch locations as at October 31, 2008.
Net rent expense for premises and equipment reported
in our Consolidated Statement of Income for the years ended
October 31, 2008, 2007 and 2006 was $326 million, $300 million and
$292 million, respectively.
Note 12: 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. The results of operations of
acquired businesses are included in our consolidated financial statements
beginning on the date of acquisition.
Griffin, Kubik, Stephens & Thompson, Inc.
On May 1, 2008, we completed the acquisition of Chicago-based
Griffin, Kubik, Stephens & Thompson, Inc. (“GKST”) for cash considera-
tion of $31 million, subject to a post-closing adjustment based on
net equity. The acquisition of GKST provides us with the opportunity
to significantly expand our presence in the U.S. municipal bond market.
Goodwill related to this acquisition is deductible for tax purposes.
GKST is part of our BMO Capital Markets reporting segment.
Merchants and Manufacturers Bancorporation, Inc.
On February 29, 2008, we completed the acquisition of Wisconsin-
based Merchants and Manufacturers Bancorporation, Inc. (“Merchants
and Manufacturers”) for total cash consideration of $135 million.
The acquisition of Merchants and Manufacturers provides us with the
opportunity to expand our banking network into Wisconsin. As part
of this acquisition, we acquired a core deposit intangible asset, which
is being amortized on an accelerated basis over a period not to
exceed 10 years. Goodwill related to this acquisition is not deductible
for tax purposes. Merchants and Manufacturers is part of our Personal
and Commercial Banking U.S. reporting segment.
Ozaukee Bank
On February 29, 2008, we completed the acquisition of Ozaukee Bank
(“Ozaukee”), a Wisconsin-based community bank, for 3,283,190 shares
of Bank of Montreal with a market value of $54.97 per share for total
consideration of $180 million. The acquisition of Ozaukee provides
us with the opportunity to expand our banking network into Wisconsin.
As part of this acquisition, we acquired a core deposit intangible asset,
which is being amortized on an accelerated basis over a period not
to exceed 10 years. Goodwill related to this acquisition is not deductible
for tax purposes. Ozaukee is part of our Personal and Commercial
Banking U.S. reporting segment.
Pyrford International plc
On December 14, 2007, we completed the acquisition of Pyrford
International plc (“Pyrford”), a London, U.K.-based asset manager, for
total cash consideration of $41 million, plus contingent consideration of
up to $10 million based on our retention of the assets under manage-
ment one year from the closing date. The acquisition of Pyrford provides
us with the opportunity to expand our investment management
capabilities outside of North America. As part of this acquisition,
we acquired a customer relationship intangible asset, which is being
amortized on a straight-line basis over a period not to exceed 15 years.
Goodwill related to this acquisition is not deductible for tax purposes.
Pyrford is part of our Private Client Group reporting segment.
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 million.
The acquisition of First National provides us with the opportunity
to expand our banking services into the Indianapolis, Indiana market.
As part of this acquisition, we acquired a core deposit intangible
asset, which is being 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 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 is being 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.
The estimated fair values of the assets acquired and the liabilities assumed at the dates of acquisition are as follows:
(Canadian $ in millions) 2008 2007
Merchants and First bcpbank
GKST Manufacturers Ozaukee Pyrford National Canada
Cash resources $ – $ 47 $ 54 $ 1 $ 110 $ 47
Securities 63 133 115 – 317 23
Loans – 1,013 517 – 1,009 293
Premises and equipment 13414 130 9
Goodwill 8 100 120 20 175 13
Core deposit/Customer relationship intangible asset –39241737 5
Other assets 24 16 11 4 52 2
Total assets 96 1,382 855 43 1,730 392
Deposits – 1,029 584 – 1,375 339
Other liabilities 65 218 91 2 10 12
Total liabilities 65 1,247 675 2 1,385 351
Purchase price $ 31 $ 135 $ 180 $ 41 $ 345 $ 41
The allocations of the purchase price for GKST, Merchants and Manufacturers, Ozaukee and Pyrford are subject to refinement as we complete the valuation of the assets acquired and liabilities assumed.