Bank of Montreal 2010 Annual Report Download - page 129

Notes
BMO Financial Group 193rd Annual Report 2010 127
Cash flows received from securitization vehicles for the years ended October 31, 2010, 2009 and 2008 were as follows:
(Canadian $ in millions) Residential mortgages Credit card loans Total
2010 2009 2008 2010 2009 2008 2010 2009 2008
Proceeds from new securitizations 4,279 6,796 8,423 – – 3,025 4,279 6,796 11,448
Proceeds from collections reinvested
in existing securitization vehicles 1,797 2,562 1,853 19,129 20,420 9,685 20,926 22,982 11,538
Servicing fees collected 52 51 29 – – – 52 51 29
Receipt of deferred purchase price 242 279 132 564 649 347 806 928 479
The impact of securitizations on our Consolidated Balance Sheet as at October 31, 2010 and 2009 was as follows:
(Canadian $ in mil lions) Residential mortgages Credit card loans Total
2010 2009 2010 2009 2010 2009
Retained interests
Investment in securitization vehicles – – 271 277 271 277
Deferred purchase price 526 616 107 111 633 727
Cash deposits with securitization vehicles 12 11 – – 12 11
Servicing liability 79 91 20 20 99 111
Credit Information
Principal amounts, impaired amounts and net credit losses for all loans reported and securitized were as follows:
(Canadian $ in millions) 2010 2009
Total Impaired Net Total Impaired Net
loans loans
(1) write-offs (2) loans loans (1) write-offs (2)
Residential mortgages 74,904 318 8 74,647 309 6
Consumer instalment and other personal loans 51,159 428 433 45,824 310 401
Credit card loans 7,777 29 377 7,293 32 346
Business and government loans 68,338 2,412 418 68,169 2,648 766
Total loans 202,178 3,187 1,236 195,933 3,299 1,519
Less mortgage-backed securities retained and
classified as available-for-sale securities 7,908 – – 9,284 – –
Less loans securitized:
Residential mortgages 18,281 39 – 19,839 40 –
Credit card loans 4,469 – 203 4,719 – 172
Total loans reported in the Consolidated Balance Sheet 171,520 3,148 1,033 162,091 3,259 1,347
Our credit exposure to securitized assets as at October 31, 2010 was
limited to our deferred purchase price of $633 million ($727 million in
2009), certain cash deposits of $12 million ($11 million in 2009) and
investments in securitization vehicles of $271 million ($277 million in 2009).
Static pool credit losses provide a measure of the credit risk in
our securitized assets. They are calculated by totalling actual and pro-
jected future credit losses and dividing the result by the original
balance of each pool of assets. Static pool credit losses for the years
ended October 31, 2010 and 2009 were as follows:
2010 2009
Residential mortgages na na
Credit card loans 4.54% 3.65%
na – Not applicable: residential mortgages are fully insured.
Sensitivity Analysis
The adjacent table outlines the key economic assumptions used in
measuring the deferred purchase price and servicing liability and the
sensitivity of these retained interests as at October 31, 2010 to immediate
10% and 20% adverse changes in those assumptions. The sensitivity
analysis should be used with caution as it is hypothetical and the impact
of changes in each key assumption may not be linear. The sensitivities
to changes in each key variable have been calculated independently
of the impact of changes in the other key variables. Actual experience
may result in simultaneous changes in a number of key assumptions.
Changes in one factor may result in changes in another, which could
amplify or reduce certain sensitivities.
Residential Credit card
(Canadian $ in millions, except as noted) mortgages loans
Fair value of deferred purchase price 526 107
Weighted-average life (years) 2.55 0.35
Weighted-average prepayment rate (%) 18.86 99.57
Impact of: 10% adverse change ($) 13.0 9.8
20% adverse change ($) 25.7 18.2
Interest spread (%) 1.46 10.50
Impact of: 10% adverse change ($) 79.8 11.0
20% adverse change ($) 159.4 22.1
Expected credit losses (%) 0–0.01 4.53
Impact of: 10% adverse change ($) 0.1 4.2
20% adverse change ($) 0.2 8.4
Weighted-average discount rate (%) 1.65 9.50
Impact of: 10% adverse change ($) 1.3 0.4
20% adverse change ($) 2.6 0.7
(1) Excludes impaired amounts for Customers’ liability under acceptances of $73 million
as at October 31, 2010 ($38 million in 2009).
(2) Net write-offs represent write-offs in the year net of recoveries on loans previously written off.
Certain comparative figures have been reclassified to conform with the current year’s presentation.