BMO Financial Group reports first quarter results



    TORONTO, Mar. 1 /CNW/ - BMO Financial Group today reported financial
results for its first quarter ended January 31, 2007.

    
    Year-over-Year Operating Highlights:
    ------------------------------------

    -   Net income of $585 million, down $21 million or 3.4%. Excluding(1) a
        previously-announced $135 million ($88 million after tax)
        restructuring charge, net income was $673 million, up $67 million or
        11%
    -   EPS(2) of $1.13 and cash EPS(3) of $1.15, both down $0.04 or 3.4%.
        Excluding the $0.17 impact of the restructuring charge, EPS was $1.30
        and cash EPS was $1.32, both up $0.13 or 11%
    -   ROE of 15.7%, compared with 17.8% last year. Excluding the
        restructuring charge, ROE was 18.0%
    -   The restructuring charge included in results consisted of
        $117 million for severance-related costs in respect of the planned
        elimination of approximately 1,000 primarily non-customer-facing
        positions and $18 million of other non-employee-related costs
    -   Announced on March 1, 2007 a $0.03 per share dividend increase,
        raising quarterly common share dividends to $0.68 per share, up 4.6%
        from the first quarter and 28% from a year ago

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    (1) Results stated on a basis that excludes the restructuring charge are
        Non-GAAP measures. Please see the Non-GAAP Measures section.

    (2) All Earnings per Share (EPS) measures in this release refer to
        diluted EPS unless specified otherwise.

    (3) The adjustments that change results under generally accepted
        accounting principles (GAAP) to cash results and GAAP revenue and
        income taxes to a taxable equivalent basis (teb) are outlined in the
        Non-GAAP Measures section in the Financial Performance Review, where
        all non-GAAP measures and their closest GAAP counterparts are
        outlined. Revenues and income taxes in the financial statements are
        stated in accordance with GAAP. Otherwise, all revenues and income
        taxes and measures that include revenues or income taxes in this
        document are stated on a taxable equivalent basis.
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    (R) Registered trade-mark of Bank of Montreal.

    -------------------------------------------------------------------------
    Bank of Montreal uses a unified branding approach that links all of the
    organization's member companies. Bank of Montreal, together with its
    subsidiaries, is known as BMO Financial Group. As such, in this document,
    the names BMO and BMO Financial Group mean Bank of Montreal, together
    with its subsidiaries.
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    Tony Comper, on his last day as President and Chief Executive Officer of
BMO Financial Group, said, "This is my final report on results as BMO's CEO.
I'm pleased to report that net income increased appreciably from a year ago,
excluding the restructuring charge we announced at the end of January. I have
great faith that Bill Downe and his leadership team will build on this and
lead BMO forward to achieve our goals."
    The impact of solid broad-based volume growth in P&C Canada and Private
Client Group was partially offset by increased costs associated with the
front-line sales and service staff we added in the latter half of last year to
generate future sales growth. Investment Banking Group's earnings were good
but declined, as trading revenues were at record levels a year ago amid high
volatility in the energy sector. P&C U.S. again benefited from growth in
personal and commercial loans but continues to be affected by margin
pressures.
    Reported results declined from the fourth quarter of 2006 due to reduced
earnings in our Corporate Services group, in part due to the current quarter's
restructuring charge. Corporate Services' results in the fourth quarter
benefited from an unusually low tax rate and a reduction in the general
allowance for credit losses. However, earnings in each of our client operating
groups were stronger in the current quarter, bouncing back from soft results
in the fourth quarter.
    Bill Downe, BMO's incoming President and Chief Executive Officer,
remarked that, "I'm very pleased with our broad-based growth this quarter. We
had high-quality earnings in each of our operating groups. There was
favourable operating leverage as revenue growth exceeded expense growth, and
provisions for credit losses remain low and stable.
    "P&C Canada and Private Client Group performed well with revenue growth
in most product areas and P&C Canada generated increased market share in some
of our key segments. Results this quarter provide a great foundation for the
future and I'm focused on the opportunity to make this great company even
better."

    Operating Segment Overview
    --------------------------

    P&C Canada
    Net income increased $30 million or 12% from a year ago to $292 million,
as solid revenue growth was partially offset by higher expenses, in part
related to the increase in front-line sales and service staff in the latter
half of 2006 and higher depreciation from the prior year's investments.
Relative to the fourth quarter, net income increased $20 million or 7.1% due
to volume growth and effective expense management. Year-over-year revenue
growth outpaced expense growth by 2.3 percentage points and net interest
margin held firm relative to a year ago and the fourth quarter.
    In the personal banking business we have been focusing on volume growth
in high-spread products with strong linkage to customer relationships. This
has contributed to stable margins in the quarter and profitable volume growth
in personal loans and cards. Mortgage growth has slowed due to our decision to
favour relationship-focused, branch-originated mortgages over our third party
mortgage portfolio, which is declining. In December, we completed the
acquisition of bcpbank Canada, the first choice in financial services for the
Portuguese-Canadian community in the greater Toronto area. We enhanced our
distribution network and for 2007, we plan to open 15 branches, redevelop or
relocate another 30 and close five. In the current quarter, we redeveloped or
relocated five branches and closed one. We completed our initiative to replace
our entire network of ABMs; our new machines include new customer service
features that make banking from an ABM faster and simpler.
    In the commercial banking segment, there was strong year-over-year loan
growth of 6.8%. We continue to view this as an area of competitive strength as
BMO ranks second in Canadian business banking market share. P&C Canada has an
integrated client service approach and a broad spectrum of product offers to
be a market leader in this segment. The launch of a new loan product focused
on the less than $1 million category and the establishment of commercial
operating units in our three largest urban markets: Toronto, Montreal and
Vancouver, in 2006 are evidence of our focus on the commercial segment.

    P&C U.S.
    Net income was $29 million, a decline of $4 million or 14% from a year
ago, but up $5 million or 22% from the fourth quarter. Good personal and
commercial loan and deposit volume growth and a stronger U.S. dollar improved
revenues, although spread compression reduced this impact. Expenses grew
compared to a year ago, in support of business volume increases and due to
increased operating costs for our new branch technology platform. Expenses
were lower relative to the fourth quarter, contributing strongly to improved
performance.
    We generated good loan growth despite weaker housing markets in a slowing
economy, but the impact of this growth was offset by spread compression.
Spread compression was caused by competitive pressures on pricing and changes
in loan and deposit mix as customer preferences have shifted from high-spread
to lower-spread loan and deposit products. We made good progress on
controlling expenses, as net income increased 22% from the fourth quarter. We
anticipate reducing our staffing levels, as part of the restructuring charge
we announced. We also plan to slow our new branch openings and now anticipate
opening three to five new branches this year. We continue to optimize our
branch structure, closing one location and announcing an additional branch
closure in the quarter.
    In early January, we completed the acquisition of First National Bank &
Trust, a 32-branch community bank with locations in Indianapolis and
surrounding communities, the second-fastest growing market in the U.S.
Midwest. The acquisition increases the number of Harris locations to 233,
taking us closer to our goal of 350 to 400 locations across the U.S. Midwest.
Business Banking announced expansion to the Phoenix market during the quarter.
Harris has been a part of the Arizona market for more than 30 years through
its wealth management group, Harris Private Bank. Many of the Private Bank's
clients are also business owners, making this a natural extension of the
organization's services. Business Banking loan production offices are also
being established in Milwaukee and Indianapolis.

    Private Client Group
    Net income was $95 million, an increase of $4 million or 4.2% from a year
ago and $11 million or 13% from the fourth quarter. Growth across all lines of
business produced solid overall revenue growth. The benefits of this growth
were partially offset by increased expenses due to higher revenue-based costs
and continued investment in our sales force and U.S. investment management
business to drive future revenue growth.
    There were a number of customer service awards and initiatives in the
quarter. BMO Harris Private Banking was selected Best Local Private Bank in
Canada in Euromoney Magazine's Global Survey of private banking services, the
fourth consecutive year that the private bank has been recognized with one of
the magazine's most prestigious awards. BMO Mutual Funds was awarded the 2006
Mutual Fund Service Award by Dalbar, Inc., a leading financial services
research firm. We won top honours for best overall customer service in both
the English and French-language categories. BMO InvestorLine enhanced its
online investing service, providing research from the top-ranked equity
research group in Canada, BMO Capital Markets. BMO Term Investments launched
three new market-linked GIC's under the banner, BMO Progressive GICs. These
new products offer customers the ability to safely access potentially higher
returns through participation in equity markets while retaining the benefits
of principal protection.

    Investment Banking Group
    Net income decreased $3 million or 1.6% to $219 million, as trading
revenues declined from the all time highs of a year ago. Net income rose
$31 million or 17% from the fourth quarter, reflecting strong growth in
trading, equity underwriting and commission revenues. These factors offset the
impact of higher performance-based compensation costs in the current quarter
and a low effective tax rate in the fourth quarter.
    In our Investment and Corporate Banking business we continued to grow
corporate banking assets, with average loans and acceptances, excluding
securities purchased under resale agreements, increasing $5.7 billion or 35%
year-over-year. Much of this growth has taken place in the United States.
Undrawn credit commitment levels have continued to increase which should
provide continued momentum for growth in corporate loans. We were sole lead on
a $1 billion bridge loan for Borealis Infrastructure Management Inc. to
support its acquisition of MDS Diagnostic Services for $1.3 billion. Although
this loan was advanced in February, it is an example of the activities in the
quarter that contributed to our loan growth. Loan spreads continue to be
challenged in a competitive marketplace.
    During the quarter BMO Capital Markets continued to demonstrate its
Canadian leadership in high-return fee businesses, participating in 139 new
issues including 42 corporate debt deals, 7 issues of preferred shares, 71
common equity transactions and 19 government debt issues, raising a total of
$40.9 billion. We also acted as financial advisor on several significant M&A
transactions. We advised the special committee of Bema Gold Corporation on its
$3.1 billion sale to Kinross Gold Corporation and were the strategic advisor
to Goldcorp Inc. on its $9.9 billion acquisition of Glamis Gold Ltd., creating
one of the world's largest gold mining companies. We also advised Calpine
Power Income Fund on its restructuring and hostile takeover defence, which
resulted in an increased $875 million bid from Harbinger Capital.
    There was significant growth in our trading products businesses this
quarter, as evidenced by increases in securities purchased under resale
agreements and in investment and trading securities, as compared to both the
prior year and preceding quarter. This growth is consistent with our strategy
of expanding our trading activities in 2007. During the quarter, our
Structured Products team launched the three new principal protected structured
GICs that were developed in conjunction with Private Client Group and marketed
through the BMO Bank of Montreal branch network.

    
    Annual Targets for 2007(*)           Performance to January 31, 2007(*)


                                         (*) Excluding a restructuring charge
                                         of $135 million ($88 million after
    (*) Excluding restructuring charge   tax and $0.17 per share)
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    - 5% to 10% EPS growth from a base   -  EPS of $1.30, up 11% from $1.17
      of $5.11 (excluding changes in        a year ago
      the general allowance)
    - ROE of 18% to 20%                  -  ROE of 18.0% annualized
    - Specific provision for credit      -  Specific provision for credit
      losses of $400 million or less        losses of $52 million

      We now anticipate specific
      provisions of $325 million or
      less in fiscal 2007

    - Improve our cash productivity      -  Cash productivity ratio improved
      ratio by 100 to 150 basis points      72 basis points year-over-year
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    The above table contains forward-looking statements. Please see the
    Caution Regarding Forward-Looking Statements on page 7.
    



    FIRST QUARTER 2007 MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)
    --------------------------------------------------------------

    MD&A commentary is as of March 1, 2007. Unless otherwise indicated, all
amounts are in Canadian dollars and have been derived from financial
statements prepared in accordance with Canadian generally accepted accounting
principles (GAAP). The MD&A should be read in conjunction with the unaudited
consolidated financial statements for the period ended January 31, 2007,
included in this document, and the annual MD&A for the year ended October 31,
2006, included in BMO's 2006 Annual Report. The material that precedes this
section comprises part of this MD&A.


    
    Summary Data - As Reported

    (Canadian $ in millions,                    Increase/           Increase/
     except per share data                     (Decrease)          (Decrease)
     and as noted)           Q1-2007         vs. Q1-2006         vs. Q4-2006
    -------------------------------------------------------------------------

    Revenue per financial
     statements                2,575        94        4%       114        5%
    Taxable equivalent basis
     (teb) adjustment             39         8       26%         6       16%
    -------------------------------------------------------------------------
    Revenue (teb)(1)           2,614       102        4%       120        5%
    Specific provision for
     credit losses                52         -         -         1        2%
    Reduction of the
     general allowance             -         -         -        35     +100%
    -------------------------------------------------------------------------
    Total provision for
     credit losses                52         -         -        36     +100%
    Non-interest expense       1,625        45        3%        12        1%
    Restructuring charge         135       135     +100%       135     +100%
    -------------------------------------------------------------------------
    Total non-interest
     expense                   1,760       180       11%       147        9%
    Income taxes per
     financial statements        159       (65)     (29%)       42       35%
    Taxable equivalent
     basis adjustment             39         8       26%         6       16%
    -------------------------------------------------------------------------
    Income taxes (teb)(1)        198       (57)     (23%)       48       31%
    Non-controlling interest
     in subsidiaries              19         -         -         -         -
    Net income                   585       (21)      (4%)     (111)     (16%)

    Amortization of
     intangible assets
     (after tax)                   9         -         -         -         -
    Cash net income(1)           594       (21)      (3%)     (111)     (16%)
    Earnings per share -
     basic ($)                  1.15     (0.04)      (3%)    (0.22)     (16%)
    Earnings per share -
     diluted ($)                1.13     (0.04)      (3%)    (0.22)     (16%)
    Cash earnings per share -
     diluted ($)(1)             1.15     (0.04)      (3%)    (0.22)     (16%)
    Return on equity (ROE)     15.7%               (2.1%)              (3.7%)
    Cash ROE(1)                15.9%               (2.2%)              (3.7%)
    Productivity ratio         68.4%                4.7%                2.9%
    Productivity (teb)
     ratio(1)                  67.3%                4.4%                2.7%
    Cash productivity
     (teb) ratio(1)            66.9%                4.5%                2.7%
    Net interest margin
     on earning assets         1.64%              (0.22%)             (0.14%)
    Net interest margin on
     earning assets (teb)(1)   1.70%              (0.21%)             (0.13%)
    Effective tax rate        20.76%              (5.64%)              6.69%
    Effective tax rate
     (teb)(1)                 24.63%              (4.36%)              7.20%

    Net income:
    Personal and Commercial
     Banking                     321        26        9%        25        8%
      P&C Canada                 292        30       12%        20        7%
      P&C U.S.                    29        (4)     (14%)        5       22%
    Private Client Group          95         4        4%        11       13%
    Investment Banking Group     219        (3)      (2%)       31       17%
    Corporate Services,
     including Technology
     and Operations (T&O)        (50)      (48)   (+100%)     (178)   (+100%)
    -------------------------------------------------------------------------

    BMO Financial Group          585       (21)      (4%)     (111)     (16%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) These are non-GAAP amounts or non-GAAP measures. Please see footnotes
        1 and 3 to the preceding Operating Highlights and the Non-GAAP
        Measures section in the Financial Performance Review, which outline
        the use of non-GAAP measures in this document.



    Summary Data - Excluding Restructuring Charge(1)

    (Canadian $ in millions,                    Increase/           Increase/
     except per share data                     (Decrease)          (Decrease)
     and as noted)           Q1-2007         vs. Q1-2006         vs. Q4-2006
    -------------------------------------------------------------------------

    Revenue per financial
     statements                2,575        94        4%       114        5%
    Taxable equivalent basis
     (teb) adjustment             39         8       26%         6       16%
    -------------------------------------------------------------------------
    Revenue (teb)(2)           2,614       102        4%       120        5%
    Specific provision
     for credit losses            52         -         -         1        2%
    Reduction of the
     general allowance             -         -         -        35     +100%
    -------------------------------------------------------------------------
    Total provision for
     credit losses                52         -         -        36     +100%
    Non-interest expense       1,625        45        3%        12        1%
    Income taxes per
     financial statements -
     before restructuring
     charge(2)                   206       (18)      (8%)       89       76%
    Taxable equivalent
     basis adjustment             39         8       26%         6       16%
    -------------------------------------------------------------------------
    Income taxes (teb)(2)        245       (10)      (4%)       95       62%
    Non-controlling interest
     in subsidiaries              19         -         -         -         -
    Net income                   673        67       11%       (23)      (3%)

    Amortization of
     intangible assets
     (after tax)                   9         -         -         -         -
    Cash net income(2)           682        67       11%       (23)      (3%)
    Earnings per share -
     basic ($)(2)               1.33      0.14       12%     (0.04)      (3%)
    Earnings per share -
     diluted ($)(2)             1.30      0.13       11%     (0.05)      (4%)
    Cash earnings per share -
     diluted ($)(2)             1.32      0.13       11%     (0.05)      (4%)
    Return on equity (ROE)(2)  18.0%                0.2%               (1.4%)
    Cash ROE(2)                18.3%                0.2%               (1.3%)
    Productivity ratio(2)      63.1%               (0.6%)              (2.4%)
    Productivity (teb)
     ratio(2)                  62.1%               (0.8%)              (2.5%)
    Cash productivity
     (teb) ratio(2)            61.7%               (0.7%)              (2.5%)
    Net interest margin
     on earning assets         1.64%              (0.22%)             (0.14%)
    Net interest margin on
     earning assets (teb)(2)   1.70%              (0.21%)             (0.13%)
    Effective tax rate(2)     22.90%              (3.50%)              8.83%
    Effective tax rate
     (teb)(2)                 26.12%              (2.87%)              8.69%

    Net income:
    Personal and Commercial
     Banking                     321        26        9%        25        8%
      P&C Canada                 292        30       12%        20        7%
      P&C U.S.                    29        (4)     (14%)        5       22%
    Private Client Group          95         4        4%        11       13%
    Investment Banking Group     219        (3)      (2%)       31       17%
    Corporate Services,
     including Technology
     and Operations (T&O)(2)      38        40     +100%       (90)     (69%)
    -------------------------------------------------------------------------

    BMO Financial Group(2)       673        67       11%       (23)      (3%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

     (1) All data in the above table excludes the impact of the $135 million
         ($88 million after tax) restructuring charge in the first quarter of
         2007. All results that exclude the restructuring charge are non-GAAP
         items. The table that precedes the above table is prepared on an
         'as reported basis', including the restructuring charge.

     (2) These are non-GAAP amounts or non-GAAP measures. Please see
         footnotes 1 and 3 to the preceding Operating Highlights and the
         Non-GAAP Measures section in the Financial Performance Review, which
         outline the use of non-GAAP measures in this document.
    


    Caution Regarding Forward-Looking Statements
    --------------------------------------------

    Bank of Montreal's public communications often include written or oral
forward-looking statements. Statements of this type are included in this
document, and may be included in other filings with Canadian securities
regulators or the U.S. Securities and Exchange Commission, or in other
communications. All such statements are made pursuant to the 'safe harbor'
provisions of, and are intended to be forward-looking statements under, the
United States Private Securities Litigation Reform Act of 1995 and any
applicable Canadian securities legislation. Forward-looking statements may
involve, but are not limited to, comments with respect to our objectives and
priorities for 2007 and beyond, our strategies or future actions, our targets,
expectations for our financial condition or share price, and the results of or
outlook for our operations or for the Canadian and U.S. economies.
    By their nature, forward-looking statements require us to make
assumptions and are subject to inherent risks and uncertainties. There is
significant risk that predictions, forecasts, conclusions or projections will
not prove to be accurate, that our assumptions may not be correct and that
actual results may differ materially from such predictions, forecasts,
conclusions or projections. We caution readers of this document not to place
undue reliance on our forward-looking statements as a number of factors could
cause actual future results, conditions, actions or events to differ
materially from the targets, expectations, estimates or intentions expressed
in the forward-looking statements.
    The future outcomes that relate to forward-looking statements may be
influenced by many factors, including but not limited to: general economic
conditions in the countries in which we operate; interest rate and currency
value fluctuations; changes in monetary policy; the degree of competition in
the geographic and business areas in which we operate; changes in laws;
judicial or regulatory proceedings; the accuracy and completeness of the
information we obtain with respect to our customers and counterparties; our
ability to execute our strategic plans and to complete and integrate
acquisitions; critical accounting estimates; operational and infrastructure
risks; general political conditions; global capital market activities; the
possible effects on our business of war or terrorist activities; disease or
illness that impacts on local, national or international economies;
disruptions to public infrastructure, such as transportation, communications,
power or water supply; and technological changes.
    We caution that the foregoing list is not exhaustive of all possible
factors. Other factors could adversely affect our results. For more
information, please see the discussion on pages 28 and 29 of BMO's 2006 Annual
Report, which outlines in detail certain key factors that may affect BMO's
future results. When relying on forward-looking statements to make decisions
with respect to Bank of Montreal, investors and others should carefully
consider these factors, as well as other uncertainties and potential events,
and the inherent uncertainty of forward-looking statements. Bank of Montreal
does not undertake to update any forward-looking statement, whether written or
oral, that may be made, from time to time, by the organization or on its
behalf.
    Assumptions about the performance of the Canadian and U.S. economies in
2007 and how that will affect our businesses were material factors we
considered when setting our strategic priorities and objectives and in
determining our financial targets, including provisions for credit losses. Key
assumptions included that the Canadian and U.S. economies would expand at a
moderate pace in 2007 and that inflation would remain low. We also assumed
that interest rates in 2007 would remain little changed in Canada but decline
in the United States and that the Canadian dollar would hold onto its value
relative to the U.S. dollar. Although the U.S. dollar strengthened relative to
the Canadian dollar in the first quarter, we believe that our other
assumptions are valid. We have continued to rely upon those assumptions and
the views outlined in the following Economic Outlook in considering our
ability to achieve our 2007 targets. In determining our expectations for
economic growth, both broadly and in the financial services sector, we
primarily consider historical economic data provided by the Canadian and U.S.
governments and their agencies. Tax laws in the countries in which we operate,
primarily Canada and the United States, are material factors we consider when
determining our sustainable effective tax rate.

    Management's Responsibility for Financial Information
    -----------------------------------------------------

    A rigorous and comprehensive financial governance framework is in place
at BMO and its subsidiaries at both the management and board levels. Each
year, BMO's Annual Report contains a statement signed by the President & Chief
Executive Officer (CEO) and the Chief Financial & Administrative Officer
(CFAO) outlining management's responsibility for financial information
contained in the report. BMO filed certifications, signed by the CEO and CFAO,
with the Canadian Securities Administrators and the SEC in the United States
in December 2006 when we filed our Annual Report and other annual disclosure
documents. In those filings, BMO's CEO and CFAO certify, as required in Canada
by Multilateral Instrument 52-109 (Certification of Disclosure in Issuers'
Annual and Interim Filings) and in the United States by the Securities and
Exchange Act of 1934, the appropriateness of the financial disclosures in our
annual filings and the effectiveness of our disclosure controls and
procedures.
    As part of our annual assessment process, BMO Financial Group's
management, including the CEO and CFAO, evaluated the effectiveness of our
internal control over financial reporting using the framework and criteria
established in Internal Control - Integrated Framework, issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on
this evaluation, management concluded that internal control over financial
reporting was effective as of October 31, 2006. BMO's CEO and CFAO certified
the foregoing, as required in the United States by the Securities and Exchange
Act of 1934.
    BMO's CEO and CFAO will certify the appropriateness of the financial
disclosures in our interim MD&A and unaudited interim consolidated financial
statements for the period ended January 31, 2007. They will also certify that
they are responsible for the design of disclosure controls and procedures and
internal control over financial reporting. There have been no changes in
internal control over financial reporting during the quarter ended January 31,
2007 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
    As in prior quarters, BMO's audit committee reviewed this document,
including the attached unaudited interim consolidated financial statements,
and BMO's Board of Directors approved the document prior to its release.
    A comprehensive discussion of our businesses, strategies and objectives
can be found in Management's Discussion and Analysis in BMO's 2006 Annual
Report, which can be accessed on our web site at
www.bmo.com/investorrelations. Readers are also encouraged to visit the site
to view other quarterly financial information.

    Regulatory Filings
    ------------------

    Our continuous disclosure materials, including our interim filings,
annual MD&A and audited consolidated financial statements, our Annual
Information Form and the Notice of Annual Meeting of Shareholders and Proxy
Circular are available on our web site at www.bmo.com/investorrelations, on
the Canadian Securities Administrators' web site at www.sedar.com and on the
EDGAR section of the SEC's web site at www.sec.gov.

    Economic Outlook
    ----------------

    We continue to anticipate that the Canadian economy will grow at a
moderate pace in 2007. Housing market activity is expected to continue slowing
as past increases in interest rates dampen sales and construction, tempering
growth in residential mortgages. In contrast, in response to healthy corporate
balance sheets, business investment should stay strong, supporting growth in
business loans. Although the manufacturing sector has been weak, manufacturers
and exporters should benefit from the recent softness in the Canadian dollar.
The currency is forecast to trade around 85 cents U.S. this year. Interest
rates are likely to remain fairly stable in an environment of low inflation
and moderate growth. Western Canada should continue to lead the nation's
performance due to elevated resource prices. However, Central and Atlantic
Canada should see some improvement in manufacturing activity.
    The U.S. economy is projected to grow moderately in 2007. Although the
correction in housing markets appears to be stabilizing, it will likely
continue to weigh on demand for residential mortgages this year. In contrast,
continued strength in business investment, supported by rising corporate
profits, should foster growth in business loans. Although the U.S. dollar
strengthened relative to the Canadian dollar in the first quarter, it weakened
relative to most major currencies. It is expected to continue to depreciate
against most major currencies in the near term as a result of the large U.S.
trade deficit and possible diversification of China's foreign exchange
reserves. The Midwest economy is anticipated to strengthen through the year as
manufacturing activity benefits from the weaker dollar.
    This Economic Outlook section contains forward looking statements. Please
see the Caution Regarding Forward Looking Statements on page 7.

    FINANCIAL PERFORMANCE REVIEW

    Non-GAAP Measures
    -----------------

    BMO uses both GAAP and certain non-GAAP measures to assess performance.
Securities regulators require that companies caution readers that earnings and
other measures adjusted to a basis other than GAAP do not have standardized
meanings under GAAP and are unlikely to be comparable to similar measures used
by other companies. The following table reconciles the non-GAAP measures,
which management regularly monitors, to their GAAP counterparts.
    Management discloses amounts on a basis that adjusts for the impact of a
restructuring charge recorded in the first quarter of 2007. The charge related
to severance costs for the planned elimination of approximately 1,000
primarily non-customer-facing positions and other non-employee-related costs.
Amounts and measures stated on this basis are considered useful as they are
more reflective of ongoing operating results.
    Cash earnings and cash productivity measures may enhance comparisons
between periods when there has been an acquisition, particularly because the
purchase decision may not consider the amortization of intangible assets to be
a relevant expense. Cash EPS measures are also disclosed because analysts
often focus on this measure, and cash EPS is used by Thomson First Call to
track third-party earnings estimates that are frequently reported in the
media. Cash measures add the after-tax amortization of intangible assets to
GAAP earnings to derive cash net income (and associated cash EPS) and deduct
the amortization of intangible assets from non-interest expense to derive cash
productivity measures.
    BMO, like many banks, analyzes revenue, and ratios computed using
revenue, on a taxable equivalent basis (teb). This basis includes an
adjustment that increases GAAP revenues and the GAAP provision for income
taxes by an amount that would raise revenues on certain tax-exempt securities
to a level equivalent to amounts that would incur tax at the statutory rate.
The effective income tax rate is also analyzed on a taxable equivalent basis
for consistency of approach. Analysis on a taxable equivalent basis
neutralizes the impact on ratios of investing in tax exempt or tax-advantaged
securities rather than fully-taxable securities with higher yields. It reduces
distortions in ratios between periods and between institutions related to the
choice of tax-advantaged and taxable investments. In this MD&A, all revenues
and tax amounts and related ratios are stated on a taxable equivalent basis,
unless indicated otherwise.
    BMO's corporate banking operations in the United States are concentrated
among mid-market corporate clients, which BMO manages and reports in its
Investment Banking Group operations because of the enhanced opportunities to
cross-sell products. BMO's North American peer group typically includes
similar businesses in their personal and commercial banking units. We provide
supplemental information that reflects the inclusion of this U.S.-based
mid-market business in P&C U.S. on a pro-forma basis.
    Net economic profit represents cash net income available to common
shareholders, less a charge for capital, and is considered an effective
measure of economic value added.


    
    GAAP and Related Non-GAAP Measures used in the MD&A

    (Canadian $ in millions,
     except as noted)                        Q1-2007     Q4-2006     Q1-2006
    -------------------------------------------------------------------------
    Net interest income per financial
     statements (a)                            1,196       1,215       1,182
    Non-interest revenue                       1,379       1,246       1,299
    -------------------------------------------------------------------------
    Revenue per financial statements (b)       2,575       2,461       2,481
    -------------------------------------------------------------------------

    Taxable equivalent basis (teb)
     adjustment (c)                               39          33          31
    -------------------------------------------------------------------------
    Net interest income (teb) (a+c) (d)(1)     1,235       1,248       1,213
    Non-interest revenue                       1,379       1,246       1,299
    -------------------------------------------------------------------------
    Revenue (teb) (e)(1)                       2,614       2,494       2,512
    -------------------------------------------------------------------------

    Provision for income taxes per
     financial statements (f)                    159         117         224
    Taxable equivalent basis adjustment           39          33          31
    -------------------------------------------------------------------------
    Provision for income taxes (teb) (g)(1)      198         150         255
    -------------------------------------------------------------------------

    Non-interest expense (h)                   1,625       1,613       1,580
    Restructuring charge (i)                     135           -           -
    -------------------------------------------------------------------------
    Total non-interest expense (j)             1,760       1,613       1,580
    Amortization of intangible assets            (11)        (11)        (11)
    -------------------------------------------------------------------------
    Cash-based expense (k)(1)                  1,749       1,602       1,569
    -------------------------------------------------------------------------

    Net income(l)                                585         696         606
    Amortization of intangible assets,
     net of income taxes                           9           9           9
    -------------------------------------------------------------------------
    Cash net income (m)(1)                       594         705         615
    Preferred share dividends                     (9)         (8)         (8)
    Charge for capital(1)                       (385)       (372)       (353)
    -------------------------------------------------------------------------
    Net economic profit(1)                       200         325         254
    -------------------------------------------------------------------------

    Productivity ratio (%) ((j/b) x 100)        68.4        65.5        63.7
    Productivity (teb) ratio(1) (%)
     ((j/e) x 100)                              67.3        64.6        62.9
    Cash productivity (teb) ratio(1) (%)
     ((k/e) x 100)                              66.9        64.2        62.4
    Net interest margin annualized (%)
     ((a/average earning assets) x 100)         1.64        1.78        1.86
    Net interest margin (teb) annualized(1)
     (%) ((d/average earning assets) x 100)     1.70        1.83        1.91
    EPS (uses net income) ($)                   1.13        1.35        1.17
    Cash EPS(1) (uses cash net income) ($)      1.15        1.37        1.19
    Effective tax rate (f/income before
     income taxes)                              20.8        14.1        26.4
    Effective tax rate (teb)(1)
     (g/income before income taxes)             24.6        17.4        29.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Restructuring charge (i)                     135           -           -
    Income taxes thereon                          47           -           -
    -------------------------------------------------------------------------
    Restructuring charge net of
     income taxes (n)                             88           -           -
    -------------------------------------------------------------------------

    Measures on a basis that excludes the
     restructuring charge(1)
    Cash-based expense (k-i)                   1,614       1,602       1,569
    Net income (l-n)                             673         696         606
    Cash net income (m-n)                        682         705         615
    Productivity ratio (teb) (%)
     (((j-i)/e) x 100)                          62.1        64.6        62.9
    Cash productivity ratio (teb) (%)
     (((k-i)/e) x 100)                          61.7        64.2        62.4
    EPS (uses net income excluding
     restructuring charge)                      1.30        1.35        1.17
    Cash EPS (uses cash net income
     excluding restructuring charge)            1.32        1.37        1.19
    ROE (%) (uses net income excluding
     restructuring charge)                      18.0        19.4        17.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) These are non-GAAP amounts or non-GAAP measures.
    


    Foreign Exchange
    ----------------

    The Canadian dollar equivalents of BMO's U.S.-dollar-denominated
revenues, expenses, provision for credit losses, income taxes and net income
in the first quarter of 2007 were increased relative to the comparable period
a year ago and to the fourth quarter by the strengthening of the U.S. dollar.
The following table indicates the relevant average Canadian/U.S. dollar
exchange rates and the impact of changes in the rates. At the start of each
quarter, BMO enters into hedging transactions that are expected to partially
offset the pre-tax effects of exchange rate fluctuations in the quarter on our
U.S. dollar net income for that quarter. As such, these activities partially
mitigate the impact of exchange rate fluctuations within a single quarter;
hedging transactions are not, however, designed to offset the impact of
year-over-year fluctuations in exchange rates.
    The gain or loss from hedging transactions in future periods will be
determined by both future currency fluctuations and the amount of underlying
future hedging transactions, since the transactions are entered into each
quarter in relation to expected U.S. dollar denominated net income for the
next three months. The effect of currency fluctuations on our investments in
foreign operations is discussed in the Income Taxes section.


    
    Effects of U.S. dollar exchange rate
     fluctuations on BMO's results                             Q1-2007
    -------------------------------------------------------------------------
                                                             vs.         vs.
    (Canadian $ millions, except as noted)               Q1-2006     Q4-2006
    -------------------------------------------------------------------------

    Canadian/U.S. dollar exchange rate (average)
      - Current period                                    1.1617      1.1617
      - Prior period                                      1.1562      1.1153

    Increased revenue                                          3          24
    Increased expense                                         (2)        (17)
    Increased provision for credit losses                      -           -
    Increased income taxes                                     -          (2)
    -------------------------------------------------------------------------
    Increased net income before hedging losses                 1           5
    Hedging losses                                            (7)         (7)
    Income taxes thereon                                       2           2
    -------------------------------------------------------------------------
    Decreased net income                                      (4)          -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Other Value Measures
    --------------------

    Net economic profit was $200 million (see the Non-GAAP Measures section),
compared with $254 million in the first quarter of 2006 and $325 million in
the fourth quarter. The changes were largely due to the restructuring charge
and a higher charge for our increased capital.
    The total shareholder return (TSR) on an investment in BMO common shares
was 1.7% in the first quarter and 6.0% for the twelve months ended January 31,
2007. BMO's average annual TSR for the five-year period ended January 31, 2007
was 17.8%, the 4th best of the banks and above the comparable S&P/TSX
Composite average annual total return of 13.4%.

    Net Income
    ----------

    Net income and variances in net income between periods were reviewed in
the preceding Operating Highlights and Operating Segment Overview. An analysis
of net income by major financial statement category follows. This is then
followed by a more detailed review by operating segment in the Review of
Operating Groups' Performance.
    Net income from U.S.-based businesses totalled US$83 million in the first
quarter of 2007, compared with US$111 million a year ago and US$89 million in
the fourth quarter. The decline from a year ago was due to high levels of
commodity derivatives trading revenues in the first quarter of 2006 and the
US$18 million (US$11 million after tax) (CDN$20 million and CDN$13 million,
respectively) restructuring charge recorded in our U.S. results in the current
quarter, partially offset by a lower effective tax rate in the current
quarter.

    Revenue
    -------

    As explained in the preceding Non-GAAP Measures section, BMO, like many
banks, analyzes revenue on a taxable equivalent basis (teb) and all revenues
and ratios computed using revenue in this MD&A are stated on that basis.
    Total revenue increased $102 million or 4.1% from a year ago, driven by
solid broad-based volume growth in P&C Canada and Private Client Group.
Investment Banking Group revenue fell, as trading revenues were at historic
highs in the first quarter of 2006. The U.S. dollar strengthened slightly from
a year ago but had minimal impact on revenue growth.
    Total revenue increased $120 million or 4.8% from the fourth quarter,
driven by growth in Private Client Group and Investment Banking Group. The
stronger U.S. dollar increased revenue growth by $24 million or 0.9 percentage
points. Total Corporate Services revenue was lower as the fourth quarter
included a $23 million credit card securitization gain.

    Net Interest Income
    Net interest income increased $22 million or 1.8% from a year ago, driven
by volume growth in the client operating groups. Average earning assets
increased $37 billion, due primarily to a $31 billion increase in Investment
Banking Group related to higher capital markets assets and increased corporate
banking assets, consistent with its strategy to expand trading activities and
the corporate banking portfolio. The balance of the increase was due to loan
growth in P&C Canada and P&C U.S.
    Relative to the fourth quarter, net interest income fell $13 million.
Average earning assets increased $19 billion, again due primarily to higher
trading assets in Investment Banking Group, where net interest income rose
strongly. The credit card loan securitization in the fourth quarter lowered
Corporate Services' net interest income in the current quarter; however, the
impact was largely offset by increased non-interest securitization revenue.


    
    Net Interest Margin (teb) (*)                   Increase        Increase
                                                   (Decrease)      (Decrease)
                                                         vs.             vs.
    (in basis points)                    Q1-2007     Q1-2006         Q4-2006
    -------------------------------------------------------------------------

    P&C Canada                               267           -               1
    P&C U.S.                                 340         (30)            (17)
    -------------------------------------------------------------------------
    Personal and Commercial Client Group     278          (5)             (2)
    Private Client Group                     975         (13)             (5)
    Investment Banking Group                  62          (8)              5
    Corporate Services, including
     Technology and Operations (T&O)          nm          nm              nm
    -------------------------------------------------------------------------
    Total BMO                                170         (21)            (13)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total Canadian Retail(xx)                302           1               1
    -------------------------------------------------------------------------
    nm - not meaningful

    (*)  Effective this quarter, net interest margin is disclosed and
         computed with reference to average earning assets, rather than total
         assets. This basis provides a more relevant measure of margins and
         changes in margins.

    (xx) Total Canadian retail margin represents the net interest margin of
         the combined Canadian business of P&C Canada and Private Client
         Group.
    


    BMO's overall net interest margin on earning assets for the first quarter
of 2007 was 1.70%, or 21 basis points lower than in the first quarter of the
prior year and 13 basis points lower than in the fourth quarter. The overall
margin decline was affected by asset growth in Investment Banking Group, which
has low net interest margin products, and by reduced net interest income in
Corporate Services. The year-over-year change in net interest margin continued
to be affected by loan growth exceeding deposit growth.
    Net interest margins held steady in P&C Canada. Relative to a year ago,
the positive impact of pricing actions in our premium-rate savings deposit
accounts was offset by the effect of loan growth outpacing deposit growth and
by lower mortgage refinancing fees. Relative to the fourth quarter, increased
volumes in higher-spread products were offset by the effect of competitive
pricing in our premium-rate savings deposit accounts. Margins declined in P&C
U.S. due to the continuing effects of competitive pressures and shifts in
customer preferences, as explained more fully in the Review of Operating
Groups' Performance section. Investment Banking Group margin fell from a year
ago but increased from the fourth quarter. The decline was attributable to
lower cash collections on previously impaired loans and lower spreads on
corporate loans, partially offset by higher trading net interest income. The
increase from the fourth quarter was due to increases in trading net interest
income and higher spreads on corporate loans.

    Non-Interest Revenue
    Non-interest revenue increased $80 million or 6.1% from a year ago. There
was broad-based growth in P&C Canada and strong growth in full-service
investing commissions and mutual fund fees in Private Client Group. Card fees
were lower, due to the $35 million impact of the credit card loan
securitization in the fourth quarter, but securitization revenues were higher.
When credit card loans are securitized, card fees on the securitized loans are
subsequently recognized in securitization revenue. Investment Banking Group's
non-interest revenue was down appreciably because of particularly high trading
revenues a year ago. Lending fees and investment securities gains were higher.
    Relative to the fourth quarter, non-interest revenue increased
$133 million or 11%. There was strong growth in Private Client Group's
brokerage fees revenue and further growth in mutual fund fees. Investment
Banking Group benefited from significantly higher equity and interest rate
trading revenues as a result of higher market volatility, which increased
client flows and trading opportunities. Equity underwriting, lending fees and
commissions were also higher. There were increased securitization revenues and
lower card fees, as discussed above.

    Non-Interest Expense
    --------------------

    Non-interest expense was $1,625 million. In addition, during the quarter,
BMO recorded a $135 million restructuring charge in Corporate Services. It
comprised $117 million for severance-related costs in respect of the planned
elimination of approximately 1,000 primarily non-customer-facing positions and
$18 million of other non-employee-related costs. Total non-interest expense
was $1,760 million. The $1,625 million of non-interest expense increased
$45 million or 2.8% from the first quarter of 2006. Expenses were lower in
Investment Banking Group but were higher in each of the other operating
groups. Employee costs were higher, in part due to increased staffing levels
in P&C Canada and Private Client Group associated with expansion of front-line
sales and service staff in the latter half of 2006. Performance-based
compensation costs were relatively unchanged as increased costs in Private
Client Group were offset by reduced expense in Investment Banking Group. There
were also increases in computer, promotion and communication costs. The
productivity ratio, which is computed with reference to total non-interest
expense, was 67.3% in the quarter (62.1% excluding the restructuring charge),
compared with 62.9% a year ago and 64.6% in the fourth quarter. The cash
productivity ratio was 61.7% excluding the restructuring charge, an
improvement of 72 basis points from a year ago and 249 basis points from the
fourth quarter.
    Non-interest expense of $1,625 million increased $12 million or 0.8% from
the fourth quarter. The stronger U.S. dollar increased expense growth by
$17 million or 1.1 percentage points. Increases in performance-based
compensation and benefits costs were largely offset by reductions in promotion
costs, professional fees, computer and other costs. Stock-based compensation
awards are granted in the first quarter and GAAP requires that the value of
grants to employees eligible to retire be expensed at the time of the grant.
As such, stock-based compensation costs, which are included in the operating
groups' performance-based compensation costs, include $42 million of expense
related to employees eligible to retire.

    
    Risk Management
    ---------------

    Provisions for Credit Losses (PCL)

    (Canadian $ in millions, except as noted)    Q1-2007   Q4-2006   Q1-2006
    -------------------------------------------------------------------------

    New specific provisions                           86        96        89
    Reversals of previously established
     allowances                                      (12)      (21)      (17)
    Recoveries of loans previously written-off       (22)      (24)      (20)
    -------------------------------------------------------------------------
    Specific provision for credit losses              52        51        52

    Reduction of the general allowance                 -       (35)        -
    -------------------------------------------------------------------------
    Provision for (recovery of) credit losses         52        16        52
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Specific PCL as a % of average net loans
     and acceptances (annualized)                  0.10%     0.11%     0.12%
    PCL as a % of average net loans and
     acceptances (annualized)                      0.10%     0.03%     0.12%


    Changes in Gross Impaired Loans and
     Acceptances (GIL)
    -------------------------------------------------------------------------

    GIL, Beginning of Period                         666       663       804
    Additions to impaired loans & acceptances        113        86        78
    Reductions in impaired loans & acceptances(1)     43         3       (66)
    Write-offs                                       (74)      (86)      (71)
    -------------------------------------------------------------------------
    GIL, End of Period                               748       666       745
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    GIL as a % of gross loans & acceptances        0.36%     0.35%     0.41%
    GIL as a % of equity and allowances
     for credit losses                             4.13%     3.81%     4.48%
    -------------------------------------------------------------------------
    (1) Includes impaired amounts returned to performing status, loan sales,
        repayments, the impact of foreign exchange fluctuations and offsets
        for consumer write-offs which have not been recognized as formations
        (Q1-07 $68MM; Q4-06 $69MM and Q1-06 $60MM).
    


    The provision for credit losses was $52 million, unchanged from a year
ago but up from $16 million in the fourth quarter, which benefited from a
$35 million reduction in the general allowance.
    Specific provisions represented 10 basis points of average net loans and
acceptances, including securities borrowed or purchased under resale
agreements, generally consistent with a year ago and the fourth quarter, but
well below the 23 basis points average of the past five fiscal years.
    New impaired loan formations totalled $113 million in the quarter, up
from the fourth quarter and a year ago. Formations are in line with
expectations at this stage of the economic cycle. There were no sales of
impaired loans in the quarter.
    Gross impaired loans and acceptances were up from the fourth quarter but
are consistent with the levels of a year ago, and remain at low levels.
Factors contributing to the changes are outlined in the preceding table.
    The total allowance for credit losses of $1,078 million at the end of the
quarter was comprised of a specific allowance of $156 million and a general
allowance of $922 million. There was no significant change in the specific
allowance from the fourth quarter or a year ago. The general allowance is
maintained to absorb impairment in the existing credit portfolio that cannot
yet be associated with specific credit assets. It is assessed on a quarterly
basis and increased $17 million from the end of the previous fiscal year due
to the change in the Canadian/U.S. dollar exchange rate. We believe the total
allowance for credit losses fully addresses impairment in BMO's credit
portfolio.
    BMO's loan book continues to be comprised largely of more stable consumer
and commercial portfolios, which, excluding securities borrowed or purchased
under resale agreements, represented 82.2% of the loan portfolio at the end of
the quarter, down from 85.6% a year ago and 83.1% at the end of the fourth
quarter.
    We continue to expect the credit environment to remain stable in the
early part of fiscal 2007, with potential weakness developing in the latter
part of the year as those sectors, namely industrials and manufacturing, which
are most affected by high input costs, a high Canadian dollar and the recent
slowdown in the U.S. economy, remain weak. Evidence of credit deterioration
tends to lag a slowing in the economy. We therefore foresee a potential
increase in new specific provisions in the latter part of fiscal 2007, while
we expect lower reversals and recoveries compared to fiscal 2006 levels due to
continuing low gross impaired loan balances. Given our favourable credit
performance in the first quarter and our outlook for the credit environment,
we now anticipate that specific provisions in fiscal 2007 will be $325 million
or less, down from the 2007 target of $400 million or less that was
established at the beginning of the year.
    BMO's market risk and liquidity and funding management practices and key
measures are outlined on pages 69 to 72 of the 2006 Annual Report. Trading and
Underwriting Market Value Exposure and Earnings Volatility have increased
quarter-over-quarter as a result of increased commodity risk associated with
higher volatility in natural gas markets, coupled with more U.S.-dollar-
denominated assets in money market accrual portfolios. Otherwise, there have
been no significant changes to levels of liquidity and funding risk or
structural market risk over the quarter. There were no significant changes to
market risk or liquidity and funding management practices during the quarter.
    This Risk Management section and the following Income Taxes section
contain forward-looking statements. Please see the Caution Regarding Forward-
Looking Statements on page 7.


    
    Aggregate Market Value Exposure and Earnings Volatility
    for Trading and Underwriting and Structural Positions ($ millions)(*)

                                                                    12-month
                                            Market value            earnings
    (After-tax Canadian equivalent)        exposure (MVE)         volatility
    -------------------------------------------------------------------------
                                       Jan. 31   Oct. 31   Jan. 31   Oct. 31
                                          2007      2006      2007      2006
    -------------------------------------------------------------------------
    Trading and Underwriting             (33.3)    (23.4)    (19.3)    (17.5)
    Structural                          (287.6)   (267.0)    (25.4)    (24.1)
    -------------------------------------------------------------------------
    Total                               (320.9)   (290.4)    (44.7)    (41.6)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) Measured at a 99% confidence interval
        Losses are in brackets



    Total Trading and Underwriting MVE Summary ($ millions)(*)
                                                                       As at
                                                                     October
                            For the quarter ended January 31, 2007  31, 2006
    (Pre-tax Canadian                                                Quarter-
     equivalent)         Quarter-end   Average      High       Low       end
    --------------------------------------------------------------- ---------
    Commodity Risk             (16.8)     (8.8)    (16.8)     (4.6)     (8.4)
    Equity Risk                 (8.6)     (7.5)    (10.8)     (5.1)     (9.8)
    Foreign exchange Risk       (1.0)     (2.7)     (5.6)     (0.8)     (3.3)
    Interest rate Risk
     (Mark-to-Market)           (7.6)     (5.3)    (10.2)     (2.7)     (7.1)
    Correlation                 11.1       8.7      11.9       5.1      10.4
    -------------------------------------------                     ---------
    Comprehensive Risk         (22.9)    (15.6)    (22.9)    (11.3)    (18.2)
    Interest rate Risk
     (accrual)                 (24.7)    (16.1)    (25.0)    (10.3)    (12.0)
    Issuer Risk                 (3.6)     (4.5)     (5.7)     (3.5)     (5.8)
    -------------------------------------------                     ---------
    Total MVE                  (51.2)    (36.2)    (51.2)    (28.1)    (36.0)
    --------------------------------------------------------------- ---------
    --------------------------------------------------------------- ---------
    (*) One-day measure using a 99% confidence interval
        Losses are in brackets and benefits are presented as positive numbers



    Structural Balance Sheet Earnings and Value Sensitivity to Changes in
    Interest Rates
    ($ millions)(*)
                                                                    Earnings
                                                Economic         sensitivity
                                                   value       over the next
    (After-tax Canadian equivalent)          sensitivity           12 months
    -------------------------------------------------------------------------
                                       Jan. 31   Oct. 31   Jan. 31   Oct. 31
                                          2007      2006      2007      2006
    -------------------------------------------------------------------------
    100 basis point increase            (268.3)   (237.4)     (5.2)     10.9
    100 basis point decrease             208.0     181.6       0.6     (10.5)

    200 basis point increase            (570.5)   (508.0)    (25.8)     12.1
    200 basis point decrease             368.4     318.3      18.7      (4.1)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) Losses are in brackets and benefits are presented as positive numbers
    


    Income Taxes
    ------------

    As explained in the Non-GAAP Measures section, BMO adjusts revenue to a
taxable equivalent basis for analysis in this MD&A, with an offsetting
adjustment to the provision for income taxes. As such, the provisions for
income taxes and associated rates are stated on a taxable equivalent basis in
the MD&A.
    The provision for income taxes fell $57 million from the first quarter a
year ago, but increased $48 million from the fourth quarter to $198 million.
The effective tax rate for the quarter was 24.6%, compared with 29.0% in the
first quarter a year ago and 17.4% in the fourth quarter. Excluding the effect
of the restructuring charge, the effective tax rate for the quarter was 26.1%.
The effective rate in the fourth quarter was lower primarily due to favourable
resolution of certain tax matters and a larger number of small initiatives all
generating a positive outcome. The benefits of the low rate were primarily
reflected in the results of Corporate Services and Investment Banking Group.
We continue to expect an effective tax rate of 25% to 28% in 2007 and consider
that rate to be sustainable.
    BMO hedges the foreign exchange risk arising from its investments in U.S.
operations by funding the investments in U.S. dollars. Under this program, the
gain or loss from hedging and the unrealized gain or loss from translation of
the investments in U.S. operations are charged or credited to shareholders'
equity. For income tax purposes, the gain or loss on the hedging activities
attracts an income tax charge or credit in the current period, which is
charged or credited to shareholders' equity, while the associated unrealized
gain or loss on the investments in U.S. operations does not attract income
taxes until the investments are liquidated. The income tax charge/benefit
arising from a hedging gain/loss is a function of the fluctuation in U.S.
rates from period to period. Hedging of the investments in U.S. operations has
given rise to an income tax recovery of $164 million in shareholders' equity
for the quarter. Refer to the Consolidated Statement of Changes in
Shareholders' Equity included in the unaudited interim consolidated financial
statements for further details.

    
    Summary Quarterly Results Trends
    - As Reported

    (Canadian $ in millions,                Q1        Q4        Q3        Q2
     except as noted)                     2007      2006      2006      2006
    -------------------------------------------------------------------------

    Total revenue (teb)                  2,614     2,494     2,603     2,503
    Provision for credit losses -
     specific                               52        51        42        66
    Provision for credit losses -
     general                                 -       (35)        -         -
    Non-interest expense                 1,625     1,613     1,600     1,560
    Restructuring charge                   135         -         -         -
    -------------------------------------------------------------------------
    Total non-interest expense           1,760     1,613     1,600     1,560
    Net income                             585       696       710       651
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic earnings per share ($)          1.15      1.37      1.41      1.28
    Diluted earnings per share ($)        1.13      1.35      1.38      1.25
    Net interest margin on earning
     assets                               1.70      1.83      1.89      1.82
    Effective income tax rate (teb)      24.63     17.43     24.07     23.62
    Canadian/U.S. dollar exchange
     rate (average)                       1.16      1.12      1.12      1.14

    Net income:
    -------------------------------------------------------------------------
    P&C Canada                             292       272       347       261
    P&C U.S.                                29        24        30        28
    -------------------------------------------------------------------------
    Personal and Commercial Banking        321       296       377       289
    Private Client Group                    95        84        83        97
    Investment Banking Group               219       188       203       247
    Corporate Services, including T&O      (50)      128        47        18
    -------------------------------------------------------------------------
    BMO Financial Group                    585       696       710       651
    -------------------------------------------------------------------------


    (Canadian $ in millions,                Q1        Q4        Q3        Q2
     except as noted)                     2006      2005      2005      2005
    -------------------------------------------------------------------------

    Total revenue (teb)                  2,512     2,650     2,441     2,428
    Provision for credit losses -
     specific                               52        57        73         6
    Provision for credit losses -
     general                                 -         -         -       (40)
    Non-interest expense                 1,580     1,626     1,569     1,570
    Restructuring charge                     -         -         -         -
    -------------------------------------------------------------------------
    Total non-interest expense           1,580     1,626     1,569     1,570
    Net income                             606       664       547       607
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic earnings per share ($)          1.19      1.31      1.08      1.20
    Diluted earnings per share ($)        1.17      1.28      1.07      1.17
    Net interest margin on earning
     assets                               1.91      1.95      1.96      2.04
    Effective income tax rate (teb)      28.99     29.75     29.61     27.26
    Canadian/U.S. dollar exchange
     rate (average)                       1.16      1.18      1.24      1.23

    Net income:
    -------------------------------------------------------------------------
    P&C Canada                             262       274       279       265
    P&C U.S.                                33        32        31        31
    -------------------------------------------------------------------------
    Personal and Commercial Banking        295       306       310       296
    Private Client Group                    91       106        61        78
    Investment Banking Group               222       226       185       208
    Corporate Services, including T&O       (2)       26        (9)       25
    -------------------------------------------------------------------------
    BMO Financial Group                    606       664       547       607
    -------------------------------------------------------------------------



    Summary Quarterly Results Trends
     - Excluding Restructuring Charge

    (Canadian $ in millions,                Q1        Q4        Q3        Q2
     except as noted)                     2007      2006      2006      2006
    -------------------------------------------------------------------------

    Total revenue (teb)                  2,614     2,494     2,603     2,503
    Provision for credit losses -
     specific                               52        51        42        66
    Provision for credit losses -
     general                                 -       (35)        -         -
    Non-interest expense                 1,625     1,613     1,600     1,560
    -------------------------------------------------------------------------
    Net income                             673       696       710       651
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic earnings per share ($)          1.33      1.37      1.41      1.28
    Diluted earnings per share ($)        1.30      1.35      1.38      1.25
    Net interest margin on earning
     assets                               1.70      1.83      1.89      1.82
    Effective income tax rate (teb)      26.12     17.43     24.07     23.62
    Canadian/U.S. dollar exchange
     rate (average)                       1.16      1.12      1.12      1.14

    Net income:
    -------------------------------------------------------------------------
    P&C Canada                             292       272       347       261
    P&C U.S.                                29        24        30        28
    -------------------------------------------------------------------------
    Personal and Commercial Banking        321       296       377       289
    Private Client Group                    95        84        83        97
    Investment Banking Group               219       188       203       247
    Corporate Services, including T&O       38       128        47        18
    -------------------------------------------------------------------------
    BMO Financial Group                    673       696       710       651
    -------------------------------------------------------------------------


    (Canadian $ in millions,                Q1        Q4        Q3        Q2
     except as noted)                     2006      2005      2005      2005
    -------------------------------------------------------------------------

    Total revenue (teb)                  2,512     2,650     2,441     2,428
    Provision for credit losses -
     specific                               52        57        73         6
    Provision for credit losses -
     general                                 -         -         -       (40)
    Non-interest expense                 1,580     1,626     1,569     1,570
    -------------------------------------------------------------------------
    Net income                             606       664       547       607
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic earnings per share ($)          1.19      1.31      1.08      1.20
    Diluted earnings per share ($)        1.17      1.28      1.07      1.17
    Net interest margin on earning
     assets                               1.91      1.95      1.96      2.04
    Effective income tax rate (teb)      28.99     29.75     29.61     27.26
    Canadian/U.S. dollar exchange
     rate (average)                       1.16      1.18      1.24      1.23

    Net income:
    -------------------------------------------------------------------------
    P&C Canada                             262       274       279       265
    P&C U.S.                                33        32        31        31
    -------------------------------------------------------------------------
    Personal and Commercial Banking        295       306       310       296
    Private Client Group                    91       106        61        78
    Investment Banking Group               222       226       185       208
    Corporate Services, including T&O       (2)       26        (9)       25
    -------------------------------------------------------------------------
    BMO Financial Group                    606       664       547       607
    -------------------------------------------------------------------------
    

    BMO's quarterly earning trends were reviewed in detail on pages 75 and 76
of the 2006 Annual Report. Readers are encouraged to refer to that review for
a more complete discussion of trends and factors affecting past quarterly
results. The above tables outline summary results for the second quarter of
fiscal 2005 through the first quarter of fiscal 2007.
    The most significant factor affecting results in the current quarter was
the $135 million ($88 million after tax and $0.17 per share) restructuring
charge recorded in Corporate Services. In the first quarter of 2007, the U.S.
dollar appreciated relative to the Canadian dollar, a favourable development
for the translated value of BMO's results, as the U.S. currency had generally
weakened over the course of the past three years. Investment Banking Group's
trading revenues were up from the fourth quarter, reflecting lower revenues
than in early 2006 but an increase from the particularly low levels of the
fourth quarter. P&C Canada and Private Client Group both benefited from volume
growth in the quarter while P&C Canada's net interest margin held firm. The
decline in BMO's net interest margin was largely due to strong asset growth in
Investment Banking Group, which has lower net interest margin than other
groups, and lower net interest income in Corporate Services. The effective
income tax rate increased from the unusually low rate in the fourth quarter.

    Balance Sheet
    -------------

    Total assets of $355.7 billion increased $35.8 billion from October 31,
2006. The increase primarily reflects growth in cash resources ($3.3 billion),
securities ($10.7 billion), net loans and acceptances ($14.5 billion) and
derivative financial instruments ($7.2 billion).
    The $3.3 billion increase in cash resources was largely attributable to
higher inter-bank loans as a result of improving yields.
    The $10.7 billion increase in securities was attributable to higher
available-for-sale securities and trading securities in the Investment Banking
Group, consistent with its strategy to expand trading activities and improve
revenues, particularly in the United States.
    The $14.5 billion increase in net loans and acceptances was largely due
to a $10.4 billion increase in securities borrowed or purchased under resale
agreements due to greater customer demand and expanded trading activities. Net
loans to businesses and governments and related acceptances increased
$3.1 billion due to growth in the corporate loans portfolio, while consumer
instalment and other personal loans increased $1.0 billion, reflecting normal
business growth.
    The $7.2 billion increase in derivative financial assets was related to
the commodity derivatives business, as a result of growth in exchange-traded
options, and was consistent with related growth in derivative financial
liabilities.
    Liabilities and shareholders' equity increased $35.8 billion from
October 31, 2006. The increase primarily reflects growth in deposits
($13.3 billion), securities lent or sold under repurchase agreements
($9.0 billion), derivative financial liabilities ($7.1 billion) as discussed
above, securities sold but not yet purchased ($4.1 billion) and acceptances
($1.0 billion).
    Deposits by banks, which account for 16% of total deposits, increased
$7.2 billion and were used to fund the increases in cash resources and
securities. Deposits by businesses and governments, which account for 48% of
total deposits, increased $4.1 billion and were used to fund growth in
securities and loans. Deposits from individuals, which account for the
remaining 36% of total deposits, increased $1.9 billion and were used to fund
growth in loans.
    Increases in securities lent or sold under repurchase agreements and in
securities sold but not yet purchased were used in trading activities.
    Contractual obligations by year of maturity were outlined in Table 24 on
page 89 of BMO's 2006 Annual Report. There have been no material changes to
contractual obligations that are outside the ordinary course of our business.

    Capital Management
    ------------------

    BMO's Tier 1 capital ratio was 9.90%, down from 10.22% at the end of 2006
and 10.41% a year ago. The ratio remains well above our minimum target of
8.0%.
    BMO's total capital ratio was 11.34%, down from 11.76% at the end of 2006
and 11.89% a year ago.
    The decreases in the Tier 1 and total capital ratios were primarily
attributable to growth in risk-weighted assets and an increased goodwill
deduction as a result of the First National Bank acquisition, partially offset
by higher retained earnings and the preferred share issuance described below.
    On January 17, 2007, Bank of Montreal issued $350 million of 4.50% Non-
Cumulative Perpetual Class B Preferred Shares Series 13. The shares qualify as
Tier 1 capital and the proceeds from the offering will be used to increase
BMO's capital base and for general corporate purposes. The shares are
redeemable in whole or in part at a declining premium on or after February 25,
2012, subject to regulatory approval.
    During the quarter, we repurchased 1,194,900 Bank of Montreal common
shares under our common share repurchase program at an average cost of $69.08
per share, for a total cost of $82 million. There have been 1,660,700 common
shares repurchased under the current normal-course issuer bid that expires on
September 5, 2007 and pursuant to which BMO is permitted to repurchase for
cancellation up to 15 million common shares, representing approximately 3% of
BMO's public float. Our share repurchase program is primarily used to offset,
over time, the impact of dilution caused by issuing shares through the
exercise of stock options, our dividend reinvestment plan and convertible
shares.
    On March 1, 2007, BMO's Board of Directors declared a quarterly dividend
payable to common shareholders of $0.68 per share, representing a 4.6%
increase over the first quarter's dividend of $0.65 per share and a 28%
increase from $0.53 a year ago. The dividend increase reflects BMO's policy of
having a 45% to 55% dividend payout ratio over time.


    
    Outstanding Shares and Securities Convertible into Common Shares

                                                         Number of shares or
    As of February 21, 2007                           Canadian dollar amount
    -------------------------------------------------------------------------
    Common shares                                                500,519,000
    Class B Preferred Shares
      Series 5                                                  $200,000,000
      Series 13                                                 $350,000,000
    Convertible into common shares:
    Class B Preferred Shares
      Series 4                                                  $200,000,000
      Series 6                                                  $250,000,000
      Series 10                                                 $396,000,000
    Stock options
      - vested                                                    19,696,000
      - non-vested                                                 3,719,000
    -------------------------------------------------------------------------
    Notes 20 and 21 to the audited financial statements on pages 118 and 119
    and the table on page 59 in the Annual MD&A included in the 2006 Annual
    Report provide details on share capital.
    


    Credit Rating
    -------------

    BMO's credit rating, as measured by Standard & Poor's (S&P) senior debt
ratings, remains unchanged at AA- with a stable outlook, the best, together
with two of our competitors, of the six major Canadian banks. Our credit
rating, as measured by Moody's senior debt ratings, remains unchanged at Aa3
with a stable outlook, below only one of the six major Canadian banks. Both
credit ratings are indicative of high grade, high quality issues.

    Transactions with Related Parties
    ---------------------------------

    In the ordinary course of business, we provide banking services to our
joint venture and equity accounted investments on the same terms that we offer
our customers. A select suite of customer loan and mortgage products is
offered to employees at rates normally available only to preferred customers.
    Preferred rate loan agreements were discussed in Note 26 of the audited
consolidated financial statements on page 128 of the 2006 Annual Report. There
have been no amounts advanced under these preferred rate loan agreements in
fiscal 2007, except for mortgage loans related to staff transfers we
initiated.

    Off-Balance Sheet Arrangements
    ------------------------------

    BMO enters into a number of off-balance sheet arrangements in the normal
course of operations. The most significant off-balance sheet arrangements that
we enter into are credit instruments and VIEs, which were described on pages
60 and 61 of the 2006 Annual Report. There were no significant changes to
these off-balance sheet arrangements during the three months ended January 31,
2007.

    Accounting Policies and Critical Accounting Estimates
    -----------------------------------------------------

    The notes to BMO's October 31, 2006 audited consolidated financial
statements outline our significant accounting policies. Note 2 to the
unaudited interim consolidated financial statements for the period ended
January 31, 2007 describes changes to our accounting policies.
    Pages 62 to 64 of the 2006 Annual Report contain a discussion of certain
accounting estimates that are considered particularly important, as they
require management to make significant judgments, some of which relate to
matters that are inherently uncertain. Readers are encouraged to refer to the
Annual Report to review that discussion.

    Accounting Changes
    ------------------

    Financial Instruments, Hedges and Comprehensive Income
    On November 1, 2006, we adopted the CICA's new accounting requirements
for securities, hedging derivatives and certain other financial instruments.
Under these new rules we are required to measure certain securities and
hedging derivatives at fair value and include a new section in Shareholders'
Equity, called Other Comprehensive Income, to report unrealized gains or
losses related to: certain available-for-sale securities, cash flow hedges and
foreign exchange gains or losses on our net investment in foreign operations.
    Certain of our investment securities (referred to as available-for-sale
securities) are recorded at fair value under the new rules; however, the
requirements for recognizing gains or losses in net income are unchanged.
Unrealized gains or losses are deferred in Other Comprehensive Income until
the securities are sold or there is impairment that is other than temporary.
It is only at that time that any gain or loss is recorded in net income.
Securities whose sale is restricted or that are not traded in an active market
are also included in available-for-sale securities, but continue to be
recorded at cost.
    All of our hedging derivatives are recorded at fair value under the new
rules, but changes in fair value only impact net income to the extent that
they do not perfectly offset changes in the fair value of the item that we are
hedging, i.e. 'hedge ineffectiveness'. Any hedge ineffectiveness would be
recorded in net income. Our hedging programs are such that hedges should very
closely match the items that we hedge and, as a result, we would not expect a
significant amount of hedge ineffectiveness to arise.
    Unrealized gains and losses on equity securities included in Other
Comprehensive Income are now included in our Tier 1 and total capital ratios.
The impact was insignificant at January 31, 2007. Foreign exchange gains or
losses related to our net investment in foreign operations, which were
reported in Shareholders' Equity in prior periods as well, continue to be
included in the determination of our capital ratios.
    Accumulated Other Comprehensive Income is included in Shareholders'
Equity for purposes of calculating return on equity, resulting in an
insignificant increase in the return.
    For details of the specific accounting changes and related impacts, refer
to Note 2 in the unaudited interim consolidated financial statements.

    REVIEW OF OPERATING GROUPS' PERFORMANCE

    The following sections review the financial results of each of our
operating segments and operating groups for the first quarter of 2007.
    Periodically, certain business lines and units within the business lines
are transferred between client groups to more closely align BMO's
organizational structure and its strategic priorities. All comparative figures
are reclassified to reflect these transfers.
    Note 10 to the attached unaudited interim consolidated financial
statements outlines how income statement items requiring allocation are
distributed among the operating groups, including the allocation of the
provision for credit losses. Corporate Services is generally charged (or
credited) with differences between the periodic provisions for credit losses
charged to the client groups under our expected loss provisioning methodology
and the periodic provisions required under GAAP.

    
    Operating Groups' Summary Income Statements and Statistics for Q1-2007
    - As Reported
                                                          Corporate
    (Canadian $ in millions,                              including    Total
     except as noted)            P&C       PCG       IBG        T&O      BMO
    -------------------------------------------------------------------------

    Net interest income (teb)    946       151       232       (94)    1,235
    Non-interest revenue         448       355       484        92     1,379
    -------------------------------------------------------------------------
    Total revenue (teb)        1,394       506       716        (2)    2,614
    Provision for (recovery
     of) credit losses            89         1        20       (58)       52
    Non-interest expense         824       359       415        27     1,625
    Restructuring charge           -         -         -       135       135
    -------------------------------------------------------------------------
    Total non-interest expense   824       359       415       162     1,760
    Income before income taxes
     and non-controlling
     interest in subsidiaries    481       146       281      (106)      802
    Income taxes (teb)           160        51        62       (75)      198
    Non-controlling interest
     in subsidiaries               -         -         -        19        19
    -------------------------------------------------------------------------
    Net income Q1-2007           321        95       219       (50)      585
    -------------------------------------------------------------------------
    Net income Q4-2006           296        84       188       128       696
    -------------------------------------------------------------------------
    Net income Q1-2006           295        91       222        (2)      606
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Other statistics
    -------------------------------------------------------------------------

    Net economic profit          156        64        81      (101)      200
    Return on equity           19.9%     32.7%     17.0%        nm     15.7%
    Cash return on equity      20.5%     33.1%     17.0%        nm     15.9%
    Productivity ratio (teb)   59.1%     70.9%     58.0%        nm     67.3%
    Cash productivity ratio
     (teb)                     58.4%     70.6%     57.9%        nm     66.9%
    Net interest margin on
     earning assets (teb)      2.78%     9.75%     0.62%        nm     1.70%
    Average common equity      6,194     1,129     4,905     2,391    14,619
    Average earning assets
     ($ billions)              134.8       6.1     149.3      (1.0)    289.2
    Full-time equivalent
     staff                    19,624     4,244     2,236     9,219    35,323
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    nm - not meaningful



    Operating Groups' Summary Income Statements and Statistics for Q1-2007
    - Excluding Restructuring Charge

                                                          Corporate
    (Canadian $ in millions,                              including    Total
     except as noted)            P&C       PCG       IBG        T&O      BMO
    -------------------------------------------------------------------------

    Net interest income (teb)    946       151       232       (94)    1,235
    Non-interest revenue         448       355       484        92     1,379
    -------------------------------------------------------------------------
    Total revenue (teb)        1,394       506       716        (2)    2,614
    Provision for (recovery
     of) credit losses            89         1        20       (58)       52
    Non-interest expense         824       359       415        27     1,625
    Income before income taxes
     and non-controlling
     interest in subsidiaries    481       146       281        29       937
    Income taxes (teb)           160        51        62       (28)      245
    Non-controlling interest
     in subsidiaries               -         -         -        19        19
    -------------------------------------------------------------------------
    Net income Q1-2007           321        95       219        38       673
    -------------------------------------------------------------------------
    Net income Q4-2006           296        84       188       128       696
    -------------------------------------------------------------------------
    Net income Q1-2006           295        91       222        (2)      606
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Other statistics
    -------------------------------------------------------------------------

    Net economic profit          156        64        81       (13)      288
    Return on equity           19.9%     32.7%     17.0%        nm     18.0%
    Cash return on equity      20.5%     33.1%     17.0%        nm     18.3%
    Productivity ratio (teb)   59.1%     70.9%     58.0%        nm     62.1%
    Cash productivity ratio
     (teb)                     58.4%     70.6%     57.9%        nm     61.7%
    Net interest margin on
     earning assets (teb)      2.78%     9.75%     0.62%        nm     1.70%
    Average common equity      6,194     1,129     4,905     2,391    14,619
    Average earning assets
     ($ billions)              134.8       6.1     149.3      (1.0)    289.2
    Full-time equivalent
     staff                    19,624     4,244     2,236     9,219    35,323
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    nm - not meaningful



    PERSONAL AND COMMERCIAL BANKING
                                                Increase/           Increase/
    (Canadian $ in millions,                   (Decrease)          (Decrease)
     except as noted)        Q1-2007         vs. Q1-2006         vs. Q4-2006
    -------------------------------------------------------------------------

    Net interest income (teb)    946        35        4%         7        1%
    Non-interest revenue         448        38        9%         4        1%
    -------------------------------------------------------------------------
    Total revenue (teb)        1,394        73        6%        11        1%
    Provision for credit
     losses                       89         3        4%         3        4%
    Non-interest expense         824        39        5%       (29)      (3%)
    -------------------------------------------------------------------------
    Income before income taxes
     and non-controlling
     interest in subsidiaries    481        31        7%        37        8%
    Income taxes (teb)           160         5        3%        12        8%
    Non-controlling interest
     in subsidiaries               -         -         -         -         -
    -------------------------------------------------------------------------
    Net income                   321        26        9%        25        8%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization of intangible
     assets (after tax)            8         -         -         -         -
    -------------------------------------------------------------------------
    Cash net income              329        26        9%        25        8%
    -------------------------------------------------------------------------

    Return on equity           19.9%                0.8%                0.7%
    Cash return on equity      20.5%                0.9%                0.8%
    Productivity ratio (teb)   59.1%               (0.3%)              (2.6%)
    Cash productivity ratio
     (teb)                     58.4%               (0.3%)              (2.6%)
    Net interest margin on
     earning assets (teb)      2.78%              (0.05%)             (0.02%)
    Average earning assets   134,832     7,317        6%     2,013        2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Personal and Commercial Banking (P&C) represents the sum of our two retail
and business banking operating segments, Personal and Commercial Banking
Canada (P&C Canada) and Personal and Commercial Banking U.S. (P&C U.S.). These
operating segments are reviewed separately in the sections that follow.

    Personal & Commercial Banking Canada (P&C Canada)

                                                Increase/           Increase/
    (Canadian $ in millions,                   (Decrease)          (Decrease)
     except as noted)        Q1-2007         vs. Q1-2006         vs. Q4-2006
    -------------------------------------------------------------------------

    Net interest income (teb)    760        34        5%         5        1%
    Non-interest revenue         406        36       10%         3        1%
    -------------------------------------------------------------------------
    Total revenue (teb)        1,166        70        6%         8        1%
    Provision for credit
     losses                       80         2        3%         1        3%
    Non-interest expense         649        25        4%       (26)      (4%)
    -------------------------------------------------------------------------
    Income before income taxes
     and non-controlling
     interest in subsidiaries    437        43       11%        33        8%
    Income taxes (teb)           145        13        9%        13        9%
    Non-controlling interest
     in subsidiaries               -         -         -         -         -
    -------------------------------------------------------------------------
    Net income                   292        30       12%        20        7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization of intangible
     assets (after tax)            2         1     +100%        (1)     (33%)
    -------------------------------------------------------------------------
    Cash net income              294        31       12%        19        7%
    -------------------------------------------------------------------------

    Productivity ratio (teb)   55.7%               (1.2%)              (2.6%)
    Cash productivity ratio
     (teb)                     55.5%               (1.2%)              (2.6%)
    Net interest margin on
     earning assets (teb)      2.67%                   -               0.01%
    Average earning assets   113,154     5,502        5%       744        1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    Q1 2007 vs Q1 2006
    ------------------

    Net income increased $30 million or 12%, as revenue growth outpaced
expense growth by 2.3 percentage points.
    Revenue rose $70 million or 6.4%. There was volume growth in mortgages,
commercial deposits and personal and commercial loans, as well as increased
revenue from our cards business, securitization activity and the sale of term
investment products and mutual funds. Net interest margin was unchanged. The
positive impact of pricing actions in our premium-rate savings deposit
accounts was offset by the effect of loan growth outpacing deposit growth and
by lower mortgage refinancing fees. The acquisition of bcpbank Canada in the
quarter added $2 million of revenue and $3 million of expense, including
acquisition- related costs.
    Non-interest expense was up $25 million or 4.1% due to higher employee-
related costs resulting from an expansion of our front-line sales and service
staff in the latter half of 2006, higher depreciation costs associated with
last year's initiatives and higher advertising costs. The cash productivity
ratio improved 123 bps from the prior year.

    Q1 2007 vs Q4 2006
    ------------------

    Net income increased $20 million or 7.1%. The increase was attributable
to higher revenues and reduced expenses.
    Revenue increased $8 million or 0.7%, due to higher volumes in both
personal and commercial products. Net interest margin improved slightly, as
increased volumes in higher-spread products were largely offset by the impact
of competitive pricing in our premium-rate savings deposit accounts.
    Non-interest expense declined $26 million or 3.7% due to lower initiative
spending, which is typical in the first quarter of the year, and lower
advertising costs. The cash productivity ratio improved 259 basis points due
to revenues increasing while expenses declined.
    There was strong growth in average loans and acceptances which, including
securitized loans, increased $7.5 billion or 6.7% from the first quarter of
2006 and $1.2 billion or 1.0% from the fourth quarter. Personal and commercial
deposits grew $1.3 billion or 3.0% from a year ago but declined $1.4 billion
or 3.1% from the fourth quarter.
    In the personal banking segment, there was growth in most products,
particularly in higher-spread lending products such as personal loans and
cards. Personal loan growth was a strong 9.1% and we increased market share
9 bps from the prior year and 11 bps from the fourth quarter. Mortgage growth
has slowed due to our decision to favour relationship-focused, branch-
originated mortgages over our third party mortgage portfolio, which is
declining. As a result, mortgage market share has declined 16 bps from a year
ago and the fourth quarter. Personal deposits declined 3.7%, resulting in a
56 bps loss of market share from the prior year and a 10 bps loss from the
fourth quarter. Pricing decisions in certain deposit categories and mortgages
have resulted in a predictable loss of market share in favour of yield.
    Within the commercial banking segment, loans grew a strong 6.8% from the
first quarter of 2006. We continue to view this as an area of competitive
strength. BMO ranks second in Canadian business banking market share at
18.57%; our objective is to be the market leader. We increased market share by
5 bps from the prior year and 3 bps from the fourth quarter. Relative to the
preceding year, there was a decrease in volumes in the below $1 million
segment. In the $1 to $5 million segment, there was loan growth of 7.2% and
market share growth of 35 basis points from a year ago, with a 10 bps increase
from the fourth quarter.

    
    Personal & Commercial Banking U.S. (P&C U.S.)

                                                Increase/           Increase/
    (Canadian $ in millions,                   (Decrease)          (Decrease)
     except as noted)        Q1-2007         vs. Q1-2006         vs. Q4-2006
    -------------------------------------------------------------------------

    Net interest income (teb)    186         1         -         2        1%
    Non-interest revenue          42         2        6%         1        2%
    -------------------------------------------------------------------------
    Total revenue (teb)          228         3        1%         3        1%
    Provision for credit
     losses                        9         1       14%         2       18%
    Non-interest expense         175        14        9%        (3)      (2%)
    -------------------------------------------------------------------------
    Income before income taxes
     and non-controlling
     interest in subsidiaries     44       (12)     (21%)        4       12%
    Income taxes (teb)            15        (8)     (32%)       (1)     (3%)
    Non-controlling interest
     in subsidiaries               -         -         -         -         -
    -------------------------------------------------------------------------
    Net income                    29        (4)     (14%)        5       22%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization of intangible
     assets (after tax)            6        (1)     (15%)        1       15%
    -------------------------------------------------------------------------
    Cash net income               35        (5)     (12%)        6       19%
    -------------------------------------------------------------------------

    Productivity ratio (teb)   76.8%                5.2%               (2.4%)
    Cash productivity ratio
     (teb)                     73.5%                5.2%               (2.4%)
    Net interest margin on
     earning assets (teb)      3.40%              (0.30%)             (0.17%)
    Average earning assets    21,678     1,815        9%     1,269        6%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    U.S. Select Financial Data
    --------------------------
     (US$ in millions)
     -----------------
    Net interest income (teb)    160         -         -        (4)      (3%)
    Non-interest revenue          36         2        6%         -         -
    -------------------------------------------------------------------------
    Total revenue (teb)          196         2        1%        (4)      (3%)
    Non-interest expense         150        11        8%       (10)      (6%)
    Net Income                    25        (3)     (15%)        4       17%
    Average assets            20,234     1,527        8%       400        2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    Q1 2007 vs Q1 2006
    ------------------

    Net income declined $4 million or 14%, as the impact of good volume
growth was offset by the effects of margin compression and increased costs.
    Revenue rose $3 million or 1.2%. Personal and commercial loans grew
US$1.8 billion or 10.7%, despite a slowing economy and a housing slowdown in
the U.S. Midwest. Deposits grew US$0.7 billion or 4.5% in a highly competitive
environment. The impact of volume growth was offset by a 30 basis point
decline in net interest margin due to competitive pressures on pricing and
customer preferences shifting from high-spread to lower-spread products in
both loans and deposits.
    Non-interest expense increased $14 million or 8.5%. The increase was
attributable to higher employee costs, operating costs for our new branch
technology platform and higher business volumes. As a result of the low
revenue growth environment and higher expenses, the cash productivity ratio
deteriorated 519 basis points.

    Q1 2007 vs Q4 2006
    ------------------

    Net income rose by $5 million or 22%, as expenses declined significantly.
    Revenue increased $3 million or 1.3%. The stronger U.S. dollar increased
revenue growth as revenue decreased US$4 million or 2.7% on a U.S. dollar
basis. Loan growth continued, increasing US$0.4 billion or 2.1%, while
deposits grew US$0.3 billion or 1.6%. The impact of a 17 basis point decline
in net interest margin, resulting from the same factors described above,
offset the benefits of increased volumes.
    Non-interest expense declined $3 million or 1.8%. The stronger U.S.
dollar increased expense growth, as costs decreased US$10 million or 5.6% on a
U.S. dollar basis. The decrease reflects lower acquisition integration and
marketing costs, the timing of property maintenance expenses, lower initiative
spending and strong expense management.
    Our Retail Net Promoter Score, a measure of the strength of customer
loyalty, increased to 40% from 39% at the end of last year.

    U.S. Mid-Market Banking Business
    P&C U.S. net income represented 8.9% of Personal and Commercial Banking
net income in the first quarter of 2007, compared with 11.4% in the prior year
and 7.9% in the fourth quarter. BMO's corporate banking operations in the
United States are concentrated among mid-market corporate clients, which BMO
manages and reports in its Investment Banking Group operations because of the
enhanced opportunities to cross-sell products. BMO's North American peer group
typically includes similar businesses in their personal and commercial banking
units. The following table shows the effect of including this U.S.-based mid-
market business in P&C U.S. on a pro-forma basis. The table reflects the
inclusion of $88 million of corporate mid-market revenue and $23 million of
net income in U.S. results for the quarter.
    If results of the U.S. mid-market banking unit were included in P&C
U.S.'s results, the productivity ratio for this quarter would be 69.6%,
compared with 76.8% as currently reported. On a similarly adjusted basis, net
income from U.S. operations would represent 15.0% of Personal and Commercial
Banking's earnings for the quarter, compared with 8.9% as currently reported,
and revenue from U.S. operations would represent 21.3% of the Group's revenue
for the quarter, compared with 16.3% as currently reported.

    
    P&C U.S. adjusted
    to include U.S.-based mid-market business(*)

                                                Increase/           Increase/
    (Canadian $ in millions,                   (Decrease)          (Decrease)
     except as noted)        Q1-2007         vs. Q1-2006         vs. Q4-2006
    -------------------------------------------------------------------------

    Revenue (teb)                316       (16)      (5%)      (17)      (5%)
    Net income                    52       (12)     (20%)       (5)      (8%)
    Productivity ratio         69.6%                6.8%                2.1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) The above disclosures are non-GAAP measures. Please refer to the
        Non-GAAP measures section on page 8.


    PRIVATE CLIENT GROUP (PCG)

                                                Increase/           Increase/
    (Canadian $ in millions,                   (Decrease)          (Decrease)
     except as noted)        Q1-2007         vs. Q1-2006         vs. Q4-2006
    -------------------------------------------------------------------------

    Net interest income
     (teb)                       151        13        9%         6        3%
    Non-interest revenue         355        29        9%        35       11%
    -------------------------------------------------------------------------
    Total revenue (teb)          506        42        9%        41        9%
    Provision for credit
     losses                        1         -         -         -         -
    Non-interest expense         359        32       10%        24        7%
    -------------------------------------------------------------------------
    Income before income
     taxes                       146        10        7%        17       13%
    Income taxes (teb)            51         6       13%         6       12%
    -------------------------------------------------------------------------
    Net income                    95         4        4%        11       13%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization of
     intangible assets
     (after tax)                   1         -         -         -         -
    -------------------------------------------------------------------------
    Cash net income               96         4        4%        11       13%
    -------------------------------------------------------------------------

    Return on equity           32.7%                1.7%                4.1%
    Cash return on equity      33.1%                1.7%                4.1%
    Productivity ratio (teb)   70.9%                0.5%               (1.1%)
    Cash productivity
     ratio (teb)               70.6%                0.5%               (1.0%)
    Net interest margin on
     earning assets (teb)      9.75%              (0.13%)             (0.05%)
    Average earning assets     6,128       579       10%       233        4%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
     ----------------------
    Total revenue                 59        (4)      (7%)        1        1%
    Non-interest expense          60         1         -         2        3%
    Net Income                     -        (4)   (+100%)        -         -
    Cash net income                -        (4)   (+100%)        -         -
    Average assets             2,047       (98)      (5%)      (12)      (1%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Q1 2007 vs Q1 2006
    ------------------

    Net income increased $4 million or 4.2%, as solid revenue growth was
partially offset by increased expenses.
    Revenue increased $42 million or 8.9% on growth across all lines of
business. Non-interest revenue increased due to higher fee-based and
commission revenue in full-service investing and higher managed asset levels
in our mutual fund businesses. Net interest income increased due primarily to
higher spread and deposit balances in term investment products.
    Non-interest expense increased $32 million or 9.7%. Expenses increased
primarily due to higher revenue-based costs and continued investment in our
sales force and U.S. investment management business to drive future revenue
growth. The cash productivity ratio deteriorated by 54 basis points due to the
increased investment spending.
    The Group's $297 billion of assets under management and administration,
including term deposits, increased $25 billion or 9% year-over-year, and by
10% excluding the effects of changes in the Canadian/U.S. dollar exchange rate
and the final transfer of assets related to the sale of Harrisdirect that was
completed in the second quarter of 2006.

    Q1 2007 vs Q4 2006
    ------------------

    Net income increased $11 million or 13%, as revenue growth outpaced
expense growth.
    Revenue increased $41 million or 8.6% with growth across all lines of
business. Non-interest revenue increased due primarily to higher fee-based and
commission revenue in full-service investing and higher client trade volumes
in direct investing. Net interest income increased primarily due to growth in
deposit balances and improved spread.
    Non-interest expense increased $24 million or 7.1%. The increase was
primarily due to higher revenue-based costs, including increased stock-based
compensation costs related to expensing in the current quarter the value of
grants to employees eligible to retire. The cash productivity ratio improved
by 99 basis points.

    
    INVESTMENT BANKING GROUP (IBG)

                                                Increase/           Increase/
    (Canadian $ in millions,                   (Decrease)          (Decrease)
     except as noted)        Q1-2007         vs. Q1-2006         vs. Q4-2006
    -------------------------------------------------------------------------

    Net interest income
     (teb)                       232        25       12%        41       21%
    Non-interest revenue         484       (52)     (10%)       42       10%
    -------------------------------------------------------------------------
    Total revenue (teb)          716       (27)      (4%)       83       13%
    Provision for credit
     losses                       20         -         -         1         -
    Non-interest expense         415        (5)      (1%)       24        6%
    -------------------------------------------------------------------------
    Income before income
     taxes                       281       (22)      (7%)       58       27%
    Income taxes (teb)            62       (19)     (22%)       27       81%
    -------------------------------------------------------------------------
    Net income                   219        (3)      (2%)       31       17%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Amortization of
     intangible assets
     (after tax)                   -        (1)   (+100%)        -         -
    -------------------------------------------------------------------------
    Cash net income              219        (4)      (2%)       31       17%
    -------------------------------------------------------------------------

    Return on equity           17.0%               (2.2%)               0.9%
    Cash return on equity      17.0%               (2.2%)               0.9%
    Productivity ratio (teb)   58.0%                1.5%               (3.8%)
    Cash productivity
     ratio (teb)               57.9%                1.4%               (3.9%)
    Net interest margin on
     earning assets (teb)      0.62%              (0.08%)              0.05%
    Average earning assets   149,253    30,981       26%    17,231       13%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
     ----------------------
    Revenue                      269       (42)     (13%)       14        5%
    Non-interest expense         169         1        1%        22       15%
    Net income                    67       (16)     (17%)       (3)      (3%)
    Average assets            66,409    16,487       33%     4,648        8%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Q1 2007 vs Q1 2006
    ------------------

    Net income decreased $3 million or 1.6%, driven by lower revenues.
    Revenue fell $27 million or 3.6% due to a significant decline in trading
revenues, largely related to lower commodity derivatives trading revenues
associated with lower volatility in the energy sector. Commodity derivatives
trading revenues were at an all time high in the first quarter of 2006.
Interest rate trading revenues were also lower but were partially offset by
improved equity trading results. Lower cash collections on previously impaired
loans, the run-off of non-core assets and reductions in mergers and
acquisitions fees and debt underwriting fees also contributed to the decline.
These factors were partially offset by a $19 million increase in investment
securities gains and higher loan fees, commission revenues and equity
underwriting. Corporate banking assets increased but the favourable impact was
partially offset by reduced spreads in the competitive environment.
    Net interest income improved from a year ago due to higher trading net
interest income and higher corporate banking assets, partially offset by lower
cash collections on previously impaired loans, the run-off of non-core assets
and reduced spreads on corporate loans in the competitive environment. Net
interest margin declined 8 basis points from the prior year. There was
significant growth in average assets driven by higher trading and investment
securities, reverse repos, and loans and acceptances, consistent with our
strategy to expand the corporate banking portfolio and trading activities.
    Non-interest expense decreased $5 million or 1.2%, as lower performance-
based compensation costs were partially offset by other cost increases
including computer costs. The Group's cash productivity ratio for the quarter
deteriorated by 143 basis points as the decline in revenue outpaced the cost
reduction.
    Net income from U.S. operations of US$67 million was US$16 million lower
than in the prior year, largely due to the high level of commodity derivative
trading revenues a year ago. Net income from U.S. operations represented 36%
of Group net income this quarter, compared with 42% a year ago.

    Q1 2007 vs Q4 2006
    ------------------

    Net income increased $31 million or 17%, as higher revenues were only
partially offset by increased costs and the impact of a lower effective tax
rate in the fourth quarter.
    Revenue increased $83 million or 13%, reflecting higher equity, interest
rate and commodity derivatives trading revenues. There was higher market
volatility, which increased client flows and trading opportunities. There were
also increases in equity underwriting, loan fees, and commission revenues.
These factors were partially offset by reductions in merger and acquisition
fees, debt underwriting revenues and net investment securities gains. The
stronger U.S. dollar increased revenue growth by $12 million.
    Non-interest expense was $24 million or 6.1% higher, largely due to
increased performance-based costs. Approximately half the increase was
attributable to expensing, in the quarter, the value of stock-based
compensation awards given to employees eligible to retire. The stronger U.S.
dollar increased expense growth by $7 million. The Group's cash productivity
ratio for the quarter improved 383 basis points from the fourth quarter to
57.9% as revenue growth outpaced expense growth.
    Net income from U.S. operations was US$3 million lower than in the fourth
quarter of 2006. Revenue growth was more than offset by expense growth.
Revenue growth was attributable to improved commodity derivatives and equity
trading revenues. Expense growth was largely due to increased compensation
costs, including performance-based compensation. Net income from U.S.
operations represented 36% of Group net income this quarter, compared with 42%
in the fourth quarter of 2006.

    Mid-Market Business
    -------------------

    Our U.S. investment banking operations are primarily directed at mid-
market corporations having revenues that range from US$50 million to
US$1 billion. In the quarter, the revenue from our mid-market portfolio
represented 12% of total Group revenue and 28% of our U.S. revenue. Often such
activities are included in personal and commercial banking units by our North
American peers. Pro-forma results reflecting our U.S.-based mid-market
business as part of P&C U.S. are included in that operating segment's section
of the MD&A.

    
    CORPORATE SERVICES, INCLUDING TECHNOLOGY AND OPERATIONS
    - As Reported

                                                Increase/           Increase/
    (Canadian $ in millions,                   (Decrease)          (Decrease)
     except as noted)        Q1-2007         vs. Q1-2006         vs. Q4-2006
    -------------------------------------------------------------------------

    Net interest income
     (teb)                       (94)      (51)   (+100%)      (67)   (+100%)
    Non-interest revenue          92        65     +100%        52      100%
    -------------------------------------------------------------------------
    Total Revenue (teb)           (2)       14       89%       (15)   (+100%)
    Provision for (recovery
     of) credit losses           (58)       (3)      (6%)       32       36%
    Non-interest expense          27       (21)     (44%)       (7)     (16%)
    Restructuring charge         135       135      100%       135      100%
    -------------------------------------------------------------------------
    Total non-interest
     expense                     162       114     +100%       128     +100%
    Income before taxes and
     non-controlling
     interest in subsidiaries   (106)      (97)   (+100%)     (175)   (+100%)
    Income taxes (recovery)
     (teb)                       (75)      (49)   (+100%)        3        2%
    Non-controlling interest
     in subsidiaries              19         -         -         -         -
    -------------------------------------------------------------------------
    Net income (loss)            (50)      (48)   (+100%)     (178)   (+100%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
     ----------------------
    Revenue                      (13)       14       49%        11       48%
    Provision for (recovery
     of) credit losses           (20)       (2)     (11%)        5       14%
    Non interest expense          (6)       (9)   (+100%)       (4)   (+100%)
    Restructuring charge          18        18      100%        18      100%
    -------------------------------------------------------------------------
    Total non-interest expense    12         9     +100%        14     +100%
    Income taxes (recovery)       (1)       12       88%        (2)   (+100%)
    Net income (loss)             (9)       (5)   (+100%)       (7)   (+100%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CORPORATE SERVICES, INCLUDING TECHNOLOGY AND OPERATIONS
    - Excluding Restructuring Charge

    (Canadian $ in millions,
     except as noted)        Q1-2007         vs. Q1-2006         vs. Q4-2006
    -------------------------------------------------------------------------

    Net interest income
     (teb)                       (94)      (51)   (+100%)      (67)   (+100%)
    Non-interest revenue          92        65     +100%        52      100%
    -------------------------------------------------------------------------
    Total Revenue (teb)           (2)       14       89%       (15)   (+100%)
    Provision for (recovery
     of) credit losses           (58)       (3)      (6%)       32       36%
    Non-interest expense          27       (21)     (44%)       (7)     (16%)
    Income before taxes and
     non-controlling
     interest in subsidiaries     29        38     +100%       (40)   (+100%)
    Income taxes (recovery)
     (teb)                       (28)       (2)      (8%)       50     +100%
    Non-controlling interest
     in subsidiaries              19         -         -         -         -
    -------------------------------------------------------------------------
    Net income (loss)             38        40     +100%       (90)     (69%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
     ----------------------
    Revenue                      (13)       14       49%        11       48%
    Provision for (recovery
     of) credit losses           (20)       (2)     (11%)        5       14%
    Non-interest expense          (6)       (9)   (+100%)       (4)   (+100%)
    Income taxes (recovery)        6        19     +100%         5     +100%
    Net income (loss)              2         6     +100%         4     +100%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Corporate Services
    ------------------

    Corporate Services includes the corporate units that provide expertise
and governance support to BMO Financial Group in areas such as strategic
planning, law, finance, internal audit, risk management, corporate
communications, economics, human resources and learning. Operating results
include revenues and expenses associated with certain securitization
activities, the hedging of foreign-source earnings, and activities related to
the management of certain balance sheet positions and BMO's overall asset-
liability structure.
    Corporate Services is generally charged (or credited) with differences
between the periodic provisions for credit losses charged to the client groups
under our expected loss provisioning methodology and the required periodic
provisions charged by the consolidated organization under GAAP.

    Technology and Operations
    -------------------------

    Technology and Operations (T&O) manages, maintains and provides
governance over information technology, operations services, real estate and
sourcing for BMO Financial Group. T&O focuses on enterprise-wide priorities
that improve service quality and efficiency to deliver an excellent customer
experience.

    Financial Performance Review
    ----------------------------

    Technology and Operations operating results are included with Corporate
Services for reporting purposes. Costs of T&O's services are transferred to
the client groups (P&C, PCG and IBG) and only relatively minor variance
amounts are retained within T&O. As such, results in this section largely
reflect the other corporate units outlined above.

    Q1 2007 vs Q1 2006
    ------------------

    There was a net loss of $50 million in the quarter. Excluding the impact
of the $135 million restructuring charge ($88 million after tax), net income
was $38 million, compared with a net loss of $2 million in the first quarter a
year ago. The increase was attributable to better revenues, resulting from
mark to market gains on certain interest rate hedging derivatives included in
trading revenues, lower expenses and reduced income taxes.

    Q1 2007 vs Q4 2006
    ------------------

    Excluding the restructuring charge, net income declined $90 million from
the fourth quarter of 2006. Results in the fourth quarter benefited from
unusually low income taxes, securitization gains and reductions in the general
allowance for credit losses.

    INVESTOR AND MEDIA PRESENTATION
    -------------------------------

    Investor Presentation Materials
    Interested parties are invited to visit our web site at
www.bmo.com/investorrelations to review this quarterly news release,
presentation materials and a supplementary financial information package
online. Copies of these documents are also available at BMO Financial Group's
offices at 100 King Street West, 18th Floor, 1 First Canadian Place, Toronto,
Ontario, M5X 1A1.

    Quarterly Conference Call and Webcast Presentations
    Interested parties are also invited to listen to our quarterly conference
call on Thursday, March 1, 2007 at 3:00 p.m. (EST). At that time, senior BMO
executives will comment on results for the quarter and respond to questions
from the investor community. The call may be accessed by telephone at      
416-695-9753 (from within Toronto) or 1-888-789-0089 (toll-free outside
Toronto). A replay of the conference call can be accessed until Thursday,
March 15, 2007 by calling 416-641-2196 (from within Toronto) or 1-888-742-2491
(toll-free outside Toronto) and entering passcode 7567.
    A live webcast of the call can be accessed on our web site at
www.bmo.com/investorrelations. A replay can be accessed on the site until
Tuesday, May 22, 2007.


    
    BANK OF MONTREAL
    FINANCIAL HIGHLIGHTS

    (Unaudited)
    (Canadian $ in millions,
     except as noted)               For the three months ended
    -------------------------------------------------------------------------
                                                                      Change
                                                                        from
                   January   October      July     April   January   January
                        31,       31,       31,       30,       31,       31,
                      2007      2006      2006      2006      2006      2006
    -------------------------------------------------------------------------
    Income Statement
     Highlights
    Total revenue $  2,575  $  2,461  $  2,570  $  2,473  $  2,481       3.8%
    Total revenue
     (teb) (a)       2,614     2,494     2,603     2,503     2,512       4.1
    Provision for
     credit losses      52        16        42        66        52         0
    Non-interest
     expense         1,760     1,613     1,600     1,560     1,580      11.4
    Net income         585       696       710       651       606      (3.4)
    -------------------------------------------------------------------------
    Common Share
     Data ($)
    Diluted
     earnings
     per share    $   1.13  $   1.35  $   1.38  $   1.25  $   1.17  $  (0.04)
    Diluted cash
     earnings
     per share (a)    1.15      1.37      1.40      1.27      1.19     (0.04)
    Dividends
     declared
     per share        0.65      0.62      0.62      0.53      0.49      0.16
    Book value
     per share       29.37     28.89     28.21     27.47     26.95      2.42
    Closing
     share price     70.01     69.45     63.95     64.67     68.30      1.71
    Total market
     value of
     common shares
     ($ billions)     35.1      34.8      32.0      32.4      34.3       0.8
    -------------------------------------------------------------------------


                                          As at
    -------------------------------------------------------------------------
                                                                      Change
                                                                        from
                   January   October      July     April   January   January
                        31,       31,       31,       30,       31,       31,
                      2007      2006      2006      2006      2006      2006
    -------------------------------------------------------------------------
    Balance Sheet
     Highlights
    Assets        $355,745  $319,978  $311,609  $306,307  $299,223      18.9%
    Net loans and
     acceptances   205,472   190,994   189,893   187,561   178,582      15.1
    Deposits       217,114   203,848   202,094   194,488   193,259      12.3
    Common
     shareholders'
     equity         14,709    14,465    14,107    13,779    13,548       8.6
    -------------------------------------------------------------------------


                              For the three months ended
    -------------------------------------------------------------------------
                   January   October      July     April   January
                        31,       31,       31,       30,       31,
                      2007      2006      2006      2006      2006
    -------------------------------------------------------------------------
    Primary Financial
     Measures (%) (b)
    Average annual
     five year total
     shareholder
     return           17.8      19.1      12.8      16.4      14.2
    Diluted earnings
     per share
     growth           (3.4)      5.5      29.0       6.8       5.4
    Diluted cash
     earnings per
     share growth (a) (3.4)      3.8      27.3       5.0       3.5
    Return on equity  15.7      19.4      20.3      19.3      17.8
    Cash return on
     equity (a)       15.9      19.6      20.6      19.6      18.1
    Net economic
     profit (NEP)
     growth (a)      (21.4)     (1.0)     59.3       0.0      (4.5)
    Revenue growth     3.8      (6.1)      6.7       3.1       2.9
    Revenue growth
     (teb) (a)         4.1      (5.9)      6.7       3.0       3.0
    Non-interest
     expense-to-
     revenue ratio    68.4      65.5      62.3      63.1      63.7
    Non-interest
     expense-to-
     revenue ratio
     (teb) (a)        67.3      64.6      61.5      62.3      62.9
    Cash non-interest
     expense-to-
     revenue ratio
     (teb) (a)        66.9      64.2      61.1      61.9      62.4
    Provision for
     credit losses-
     to-average
     loans and
     acceptances
     (annualized)     0.10      0.03      0.09      0.14      0.12
    Gross impaired
     loans and
     acceptances-
     to-equity and
     allowance for
     credit losses    4.13      3.81      3.86      4.58      4.48
    Cash and
     securities-
     to-total
     assets ratio     28.4      27.2      25.2      25.0      26.8
    Tier 1
     capital ratio    9.90     10.22     10.07     10.20     10.41
    Credit rating
      Standard
       & Poor's        AA-       AA-       AA-       AA-       AA-
      Moody's          Aa3       Aa3       Aa3       Aa3       Aa3
    -------------------------------------------------------------------------
    Other Financial
     Ratios (% except
     as noted) (b)
    Twelve month
     total
     shareholder
     return            6.0      24.1       8.0      17.7      27.5
    Dividend yield    3.71      3.57      3.88      3.28      2.87
    Price-to-
     earnings ratio
     (times)          13.7      13.5      12.6      13.6      14.6
    Market-to-book
     value (times)    2.38      2.40      2.27      2.35      2.53
    Net economic
     profit ($
     millions) (a)     200       325       349       302       254
    Return on
     average assets   0.68      0.86      0.90      0.88      0.81
    Net interest
     margin           1.38      1.51      1.56      1.51      1.57
    Net interest
     margin
     (teb) (a)        1.43      1.55      1.60      1.55      1.61
    Non-interest
     revenue-to-
     total revenue    53.5      50.6      52.0      55.0      52.3
    Non-interest
     revenue-to-
     total revenue
     (teb) (a)        52.7      49.9      51.3      54.3      51.7
    Non-interest
     expense growth   11.4      (0.9)      2.0      (0.6)      0.8
    Total capital
     ratio           11.34     11.76     11.59     11.76     11.89
    Equity-to-
     assets ratio      4.4       4.7       4.7       4.7       4.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    All ratios in this report are based on unrounded numbers.
    (a) Refer to the "GAAP and Related Non-GAAP Measures used in the MD&A"
        section of the "Financial Performance Review" included in the
        Management's Discussion and Analysis for an explanation of cash
        results, reporting on a taxable equivalent basis (teb) and net
        economic profit. Securities regulators require that companies caution
        readers that earnings and other measures adjusted to a basis other
        than generally accepted accounting principles (GAAP) do not have
        standardized meanings under GAAP and are unlikely to be comparable to
        similar measures used by other companies.
    (b) For the period ended, or as at, as appropriate.



    BANK OF MONTREAL
    CONSOLIDATED STATEMENT OF INCOME

    (Unaudited)
    (Canadian $ in millions,
     except as noted)                   For the three months ended
    -------------------------------------------------------------------------
                             January   October      July     April   January
                                  31,       31,       31,       30,       31,
                                2007      2006      2006      2006      2006
    -------------------------------------------------------------------------
    Interest, Dividend
     and Fee Income
    Loans (Note 2)          $  2,812  $  2,739  $  2,664  $  2,340  $  2,242
    Securities                   726       589       587       473       509
    Deposits with banks          220       214       216       172       167
    -------------------------------------------------------------------------
                               3,758     3,542     3,467     2,985     2,918
    -------------------------------------------------------------------------
    Interest Expense
    Deposits                   1,776     1,686     1,536     1,308     1,213
    Subordinated debt             43        43        43        41        42
    Preferred shares and
     capital trust securities     25        25        24        25        25
    Other liabilities            718       573       630       498       456
    -------------------------------------------------------------------------
                               2,562     2,327     2,233     1,872     1,736
    -------------------------------------------------------------------------
    Net Interest Income        1,196     1,215     1,234     1,113     1,182
    Provision for credit
     losses (Note 3)              52        16        42        66        52
    -------------------------------------------------------------------------
    Net Interest Income
     After Provision for
     Credit Losses             1,144     1,199     1,192     1,047     1,130
    -------------------------------------------------------------------------
    Non-Interest Revenue
    Securities commissions
     and fees                    278       247       260       292       252
    Deposit and payment
     service charges             183       183       187       179       180
    Trading revenues
     (Note 2)                    136        69       163       180       221
    Lending fees                  99        90        92        77        78
    Card fees                     63       105       106        94        91
    Investment management
     and custodial fees           77        76        77        69        76
    Mutual fund revenues         137       130       128       126       115
    Securitization revenues       87        55        21         4        20
    Underwriting and
     advisory fees               106       104        92       113        98
    Securities gains, other
     than trading                 44        46        51        30        18
    Foreign exchange, other
     than trading                 42        48        47        49        43
    Insurance income              46        49        58        51        46
    Other (Note 2)                81        44        54        96        61
    -------------------------------------------------------------------------
                               1,379     1,246     1,336     1,360     1,299
    -------------------------------------------------------------------------
    Net Interest Income and
     Non-Interest Revenue      2,523     2,445     2,528     2,407     2,429
    -------------------------------------------------------------------------
    Non-Interest Expense
    Employee compensation
     (Note 6)                  1,018       934       958       932     1,000
    Premises and equipment       308       328       299       296       288
    Amortization of
     intangible assets            11        11        10        12        11
    Travel and business
     development                  59        76        64        63        50
    Communications                33        39        36        31        25
    Business and capital taxes    24        19        23        25        27
    Professional fees             64        92        65        72        58
    Other                        108       114       145       129       121
    -------------------------------------------------------------------------
                               1,625     1,613     1,600     1,560     1,580
    -------------------------------------------------------------------------
    Restructuring Charge
     (Note 7)                    135         -         -         -         -
    -------------------------------------------------------------------------
    Income Before Provision
     for Income Taxes and
     Non-Controlling Interest
     in Subsidiaries             763       832       928       847       849
    Income taxes (Note 2)        159       117       199       177       224
    -------------------------------------------------------------------------
                                 604       715       729       670       625
    Non-controlling interest
     in subsidiaries              19        19        19        19        19
    -------------------------------------------------------------------------
    Net Income              $    585  $    696  $    710  $    651  $    606
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Preferred share
     dividends              $      9  $      8  $      6  $      8  $      8
    Net income available
     to common shareholders $    576  $    688  $    704  $    643  $    598
    Average common shares
     (in thousands)          501,136   500,432   500,762   502,502   501,374
    Average diluted common
     shares (in thousands)   510,320   510,166   509,991   512,743   511,600
    -------------------------------------------------------------------------
    Earnings Per Share
     (Canadian $)
    Basic                   $   1.15  $   1.37  $   1.41  $   1.28  $   1.19
    Diluted                     1.13      1.35      1.38      1.25      1.17
    Dividends Declared
     Per Common Share           0.65      0.62      0.62      0.53      0.49
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes to consolidated financial statements are an
    integral part of these statements.



    BANK OF MONTREAL
    CONSOLIDATED BALANCE SHEET

    (Unaudited)
    (Canadian $ in millions)                       As at
    -------------------------------------------------------------------------
                             January   October      July     April   January
                                  31,       31,       31,       30,       31,
                                2007      2006      2006      2006      2006
    -------------------------------------------------------------------------
    Assets
    Cash Resources          $ 22,873  $ 19,608  $ 20,160  $ 19,560  $ 19,933
    -------------------------------------------------------------------------
    Securities
    Investment (Note 2)            -    14,166    11,359    11,642    10,599
    Available-for-sale
     (Note 2)                 18,235         -         -         -         -
    Other (Note 2)             1,465     1,414     1,425     1,433     1,433
    Trading (Note 2)          58,401    51,820    45,455    44,079    48,074
    Loan substitutes              11        11        11        11        11
    -------------------------------------------------------------------------
                              78,112    67,411    58,250    57,165    60,117
    -------------------------------------------------------------------------
    Loans (Note 2)
    Residential mortgages     63,109    63,321    63,591    63,055    62,652
    Consumer instalment
     and other personal       31,474    30,418    29,693    28,873    28,206
    Credit cards               3,764     3,631     5,049     4,874     4,709
    Businesses and
     governments              58,108    56,030    53,433    52,121    48,289
    Securities borrowed
     or purchased under
     resale agreements        41,843    31,429    31,865    33,116    29,853
    -------------------------------------------------------------------------
                             198,298   184,829   183,631   182,039   173,709
    Customers' liability
     under acceptances         8,252     7,223     7,369     6,639     5,988
    Allowance for credit
     losses (Note 3)          (1,078)   (1,058)   (1,107)   (1,117)   (1,115)
    -------------------------------------------------------------------------
                             205,472   190,994   189,893   187,561   178,582
    -------------------------------------------------------------------------
    Other Assets
    Derivative financial
     instruments (Note 2)     37,615    30,411    32,247    31,523    30,664
    Premises and equipment     2,057     2,047     1,942     1,841     1,818
    Goodwill                   1,306     1,098     1,104     1,098     1,109
    Intangible assets            207       152       163       172       186
    Other (Note 2)             8,103     8,257     7,850     7,387     6,814
    -------------------------------------------------------------------------
                              49,288    41,965    43,306    42,021    40,591
    -------------------------------------------------------------------------
    Total Assets            $355,745  $319,978  $311,609  $306,307  $299,223
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities and
     Shareholders' Equity

    Deposits (Note 2)
    Banks                   $ 33,811  $ 26,632  $ 26,362  $ 23,394  $ 25,940
    Businesses and
     governments             104,994   100,848    99,821    94,234    90,783
    Individuals               78,309    76,368    75,911    76,860    76,536
    -------------------------------------------------------------------------
                             217,114   203,848   202,094   194,488   193,259
    -------------------------------------------------------------------------
    Other Liabilities
    Derivative financial
     instruments (Note 2)     38,587    31,446    31,418    30,413    28,810
    Acceptances                8,252     7,223     7,369     6,639     5,988
    Securities sold but
     not yet purchased        19,472    15,398    14,271    15,653    14,161
    Securities lent or
     sold under repurchase
     agreements               40,965    31,918    28,148    31,467    31,005
    Other                     11,355    10,758     9,277     8,647     7,800
    -------------------------------------------------------------------------
                             118,631    96,743    90,483    92,819    87,764
    -------------------------------------------------------------------------
    Subordinated Debt
     (Note 2)                  2,745     2,726     2,729     3,025     2,456
    -------------------------------------------------------------------------
    Preferred Share
     Liability (Note 8)          450       450       450       450       450
    -------------------------------------------------------------------------
    Capital Trust Securities   1,150     1,150     1,150     1,150     1,150
    -------------------------------------------------------------------------
    Shareholders' Equity
    Share capital (Note 8)     5,225     4,827     4,765     4,741     4,716
    Contributed surplus           55        49        47        45        43
    Retained earnings
     (Note 2)                 11,073    10,974    10,653    10,395    10,125
    Accumulated other
     comprehensive loss
     (Note 2)                   (698)     (789)     (762)     (806)     (740)
    -------------------------------------------------------------------------
                              15,655    15,061    14,703    14,375    14,144
    -------------------------------------------------------------------------
    Total Liabilities and
     Shareholders' Equity   $355,745  $319,978  $311,609  $306,307  $299,223
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes to consolidated financial statements are an
    integral part of these statements.
    Certain comparative figures have been reclassified to conform with the
    current period's presentation.



    BANK OF MONTREAL
    CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

    (Unaudited)
    (Canadian $ in millions)                      For the three months ended
    -------------------------------------------------------------------------
                                                     January 31,  January 31,
                                                           2007         2006
    -------------------------------------------------------------------------
    Net income                                         $    585     $    606
    Other Comprehensive Income
      Net change in unrealized gains on
       available-for-sale securities                          2            -
      Net change in cash flow hedges                        (45)           -
      Net gain (loss) on translation of net
       foreign operations                                   182         (128)
    -------------------------------------------------------------------------
    Total Comprehensive Income                         $    724     $    478
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

    (Unaudited)
    (Canadian $ in millions)                      For the three months ended
    -------------------------------------------------------------------------
                                                     January 31,  January 31,
                                                           2007         2006
    -------------------------------------------------------------------------
                                                                    Restated
                                                                   ----------
    Preferred Shares
    Balance at beginning of period                     $    596     $    596
    Issued during the period                                350            -
    -------------------------------------------------------------------------
    Balance at End of Period                                946          596
    -------------------------------------------------------------------------
    Common Shares
    Balance at beginning of period                        4,231        4,022
    Issued under the Shareholder Dividend Reinvestment
     and Share Purchase Plan                                 28           19
    Issued under the Stock Option Plan                       29           83
    Issued on the exchange of shares of a subsidiary
     corporation                                              1            -
    Repurchased for cancellation (Note 8)                   (10)          (4)
    -------------------------------------------------------------------------
    Balance at End of Period                              4,279        4,120
    -------------------------------------------------------------------------
    Contributed Surplus
    Balance at beginning of period                           49           35
    Stock option expense                                      6            8
    -------------------------------------------------------------------------
    Balance at End of Period                                 55           43
    -------------------------------------------------------------------------
    Retained Earnings
    Balance at beginning of period                       10,974        9,801
    Cumulative impact of adopting new accounting
     requirements for financial instruments,
     net of income taxes of $39 (Note 2)                    (71)           -
    Net income                                              585          606
    Dividends - Preferred shares                             (9)          (8)
              - Common shares                              (325)        (246)
    Common shares repurchased for cancellation (Note 8)     (72)         (28)
    Share issue expense                                      (9)           -
    -------------------------------------------------------------------------
    Balance at End of Period                             11,073       10,125
    -------------------------------------------------------------------------
    Accumulated Other Comprehensive Income on
     Available-for-Sale Securities
    Balance at beginning of period                            -            -
    Impact of remeasuring available-for-sale
     securities to market value on November 1, 2006
     (net of income taxes of $1)                              3            -
    Unrealized gains on available-for-sale
     securities arising during the period
     (net of income taxes of $4)                              7            -
    Reclassification of realized losses to earnings
     in the period (net of income taxes of $3)               (5)           -
    -------------------------------------------------------------------------
    Balance at End of Period                                  5            -
    -------------------------------------------------------------------------
    Accumulated Other Comprehensive Loss on
     Cash Flow Hedges
    Balance at beginning of period                            -            -
    Impact of new cash flow hedge accounting rules on
     November 1, 2006 (net of income taxes of $28)          (51)           -
    Losses on cash flow hedges arising during the period
     (net of income taxes of $25)                           (48)           -
    Reclassification to earnings of losses on cash flow
     hedges (net of income taxes of $2)                       3            -
    -------------------------------------------------------------------------
    Balance at End of Period                                (96)           -
    -------------------------------------------------------------------------
    Accumulated Other Comprehensive Loss on Translation
     of Net Foreign Operations
    Balance at beginning of period                         (789)        (612)
    Unrealized gain (loss) on translation of net
     foreign operations                                     493         (347)
    Impact of hedging translation gains (losses)
     of net foreign operations (net of income taxes
     of $164 and $116)                                     (311)         219
    -------------------------------------------------------------------------
    Balance at End of Period                               (607)        (740)
    -------------------------------------------------------------------------
    Total Accumulated Other Comprehensive Loss             (698)        (740)
    -------------------------------------------------------------------------
    Total Shareholders' Equity                         $ 15,655     $ 14,144
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes to consolidated financial statements are an
    integral part of these statements.
    Certain comparative figures have been reclassified to conform with the
    current period's presentation. Amounts in the three months ended
    January 31, 2006 have been restated to reflect the changes in accounting
    policy described in Note 21 to our consolidated financial statements for
    the year ended October 31, 2006.



    BANK OF MONTREAL
    CONSOLIDATED STATEMENT OF CASH FLOWS


    (Unaudited)
    (Canadian $ in millions)                      For the three months ended
    -------------------------------------------------------------------------
                                                     January 31,  January 31,
                                                           2007         2006
    -------------------------------------------------------------------------
                                                                    Restated
                                                                   ----------
    Cash Flows from Operating Activities
    Net income                                         $    585     $    606
    Adjustments to determine net cash flows
     provided by (used in) operating activities
      Write-down of securities, other than trading            -            8
      Net gain on securities, other than trading            (44)         (26)
      Net (increase) in trading securities               (5,295)      (4,644)
      Provision for credit losses                            52           52
      Gain on sale of securitized loans (Note 4)            (60)         (14)
      Change in derivative financial instruments
        (Increase) decrease in derivative asset          (6,431)         971
        Increase (decrease) in derivative liability       6,229         (142)
      Amortization of premises and equipment                 92           88
      Amortization of intangible assets                      11           11
      Net increase (decrease) in future income taxes        (61)          32
      Net decrease in current income taxes                 (316)         (98)
      Change in accrued interest
        (Increase) decrease in interest receivable          206           (6)
        Decrease in interest payable                        (62)         (84)
      Changes in other items and accruals, net            2,155         (657)
    -------------------------------------------------------------------------
    Net Cash Used in Operating Activities                (2,939)      (3,903)
    -------------------------------------------------------------------------
    Cash Flows from Financing Activities
    Net increase in deposits                              7,080        2,001
    Net increase (decrease) in securities sold but
     not yet purchased                                    3,922       (1,951)
    Net increase in securities lent or sold under
     repurchase agreements                                8,135        8,868
    Net increase in liabilities of subsidiaries               3          328
    Proceeds from issuance of preferred shares              350            -
    Proceeds from issuance of common shares                  57          102
    Share issue expense                                      (9)           -
    Common shares repurchased for cancellation (Note 8)     (82)         (32)
    Dividends paid                                         (334)        (254)
    -------------------------------------------------------------------------
    Net Cash Provided by Financing Activities            19,122        9,062
    -------------------------------------------------------------------------
    Cash Flows from Investing Activities
    Net (increase) decrease in interest bearing
     deposits with banks                                 (2,153)         922
    Purchases of securities, other than trading         (11,461)      (2,172)
    Maturities of securities, other than trading          7,285        1,897
    Proceeds from sales of securities,
     other than trading                                   1,098          862
    Net (increase) in loans, customers' liability
     under acceptances and loan substitute securities    (1,652)      (4,264)
    Proceeds from securitization of loans (Note 4)          942          496
    Net (increase) in securities borrowed or
     purchased under resale agreements                   (9,752)      (2,010)
    Premises and equipment - net purchases                  (29)         (76)
    Acquisitions (Note 5)                                  (384)         (75)
    -------------------------------------------------------------------------
    Net Cash Used in Investing Activities               (16,106)      (4,420)
    -------------------------------------------------------------------------
    Effect of Exchange Rate Changes on Cash and
     Cash Equivalents                                        90          (94)
    -------------------------------------------------------------------------
    Net Increase in Cash and Cash Equivalents               167          645
    Cash and Cash Equivalents at Beginning of Period      2,458        2,412
    -------------------------------------------------------------------------
    Cash and Cash Equivalents at End of Period         $  2,625     $  3,057
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes to consolidated financial statements are an
    integral part of these statements.
    Certain comparative figures have been reclassified to conform with the
    current period's presentation. Amounts in the three months ended
    January 31, 2006 have been restated to reflect the changes in accounting
    policy described in Notes 3 and 21 to our consolidated financial
    statements for the year ended October 31, 2006.



    BANK OF MONTREAL
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For the three months ended January 31, 2007
    (Unaudited)
    -------------------------------------------------------------------------

    1.  Basis of Presentation
        These consolidated financial statements should be read in conjunction
        with the notes to our consolidated financial statements for the year
        ended October 31, 2006 as set out on pages 96 to 133 of our 2006
        Annual Report. These consolidated financial statements have been
        prepared in accordance with Canadian generally accepted accounting
        principles ("GAAP") using the same accounting policies and methods of
        computation as were used for our consolidated financial statements
        for the year ended October 31, 2006, except as described in Note 2.

    2.  Changes in Accounting Policy
        On November 1, 2006, we adopted the Canadian Institute of Chartered
        Accountants' accounting requirements for securities, hedging
        derivatives, other comprehensive income and certain other financial
        instruments. Prior periods have not been restated.

        On November 1, 2006, we made the following adjustments to our balance
        sheet to adopt the new requirements:

        (Canadian $ in millions)                                       As at
        ---------------------------------------------------------------------
                                                                  November 1,
                                                                        2006
        ---------------------------------------------------------------------
        Increase (decrease)

        Consolidated Balance Sheet
        Available-for-sale securities (a)                            $     4
        Loans (b)(ii),(d)                                                (87)
        Other assets                                                      51
        Derivative financial instruments - asset (b)                      70
        Deposits (b)(ii)                                                  38
        Derivative financial instruments - liability (b)                 110
        Subordinated debt (b)(ii)                                          9
        Retained earnings                                                (71)
        Accumulated other comprehensive income -
         available-for-sale securities (a)                                 3
        Accumulated other comprehensive loss -
         cash flow hedges (b)(i)                                         (51)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The impact of these changes on our Consolidated Statement of Income
        is as follows:

        (Canadian $ in millions)                  For the three months ended
        ---------------------------------------------------------------------
                                                                  January 31,
                                                                        2007
        ---------------------------------------------------------------------
        Increase (decrease) in net income

        Consolidated Statement of Income
        Interest, Dividend and Fee Income - Loans (d)                $    (2)
        Non-Interest Revenue - Trading revenues (c)                        3
        Non-Interest Revenue - Other (b)(i)(ii)                           (1)
        Income taxes                                                       -
        ---------------------------------------------------------------------
        Net Income                                                   $     -
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Other Comprehensive Income
        The new rules require that we present a new Consolidated Statement of
        Comprehensive Income, which is comprised of net income, changes in
        unrealized gains or losses related to available-for-sale securities,
        changes in unrealized gains or losses related to cash flow hedges and
        the net unrealized foreign exchange gain or loss for the period
        related to our net investment in foreign operations. This statement
        has been included above our Consolidated Statement of Changes in
        Shareholders' Equity.

        (a) Securities
        The new rules require that we reclassify certain of our securities
        previously classified as investment securities as either available-
        for-sale or held-to-maturity securities.

        Available-for-sale securities are measured at fair value with
        unrealized gains and losses recorded in other comprehensive income
        until the security is either sold, or if an unrealized loss is
        considered other than temporary, the unrealized loss is recorded in
        income. The criteria for other than temporary impairment remain
        unchanged. Available-for-sale securities where there is no quoted
        market price, including securities whose sale is restricted, will
        continue to be recorded at amortized cost. We have not classified any
        of our investment securities as held-to-maturity.

        The new rules do not impact accounting for our merchant banking
        investments or investments in corporate equity where we exert
        significant influence, but not control. These are recorded as other
        securities on our Consolidated Balance Sheet. Additional information
        on our policies related to securities, determining fair value and
        other than temporary impairment is included in Note 3 to our
        consolidated financial statements for the year ended October 31,
        2006.

        On November 1, 2006, we remeasured our available-for-sale securities
        at fair value, as appropriate. A net unrealized gain of $3 million
        was recorded in opening accumulated other comprehensive income.

        (b) Hedging Derivatives
        The new rules require us to record all of our hedging derivatives at
        fair value. Prior to November 1, 2006, we accounted for derivatives
        that qualified as accounting hedges on an accrual basis.

        The types of hedging relationships that qualify for hedge accounting
        have not changed under the new rules. We will continue to designate
        our hedges as either cash flow hedges or fair value hedges. A
        description of the items or transactions that we hedge and the risk
        management policy for each type of hedge is included in Note 9 to our
        consolidated financial statements for the year ended October 31,
        2006.

        (i) Cash Flow Hedges
        Cash flow hedges are used to manage the possible increase or decrease
        in interest income or expense related to variable rate assets and
        liabilities due to changes in interest rates.

        Under the new rules, we will continue to record interest receivable
        or payable on the derivative as an adjustment to interest, dividend
        and fee income in the Consolidated Statement of Income over the life
        of the hedge.

        To the extent that changes in the fair value of the derivative offset
        changes in the fair value of the hedged item, they are recorded in
        other comprehensive income. Any portion of the change in fair value
        of the derivative that does not offset changes in the fair value of
        the hedged item (the ineffectiveness of the hedge) is recorded
        directly in non-interest revenue, other in the Consolidated Statement
        of Income. The ineffective portion of our cash flow hedges totalled
        $1 million for the quarter ended January 31, 2007.

        For hedges that are discontinued before the end of the original hedge
        term, the unrealized gain or loss in other comprehensive income is
        amortized to interest, dividend and fee income in the Consolidated
        Statement of Income over the remaining term of the original hedge. If
        the hedged item is sold or settled, the entire unrealized gain or
        loss is recognized in interest, dividend and fee income in the
        Consolidated Statement of Income. The amount of other comprehensive
        loss that is expected to be reclassified to the Consolidated
        Statement of Income over the next 12 months is $15 million
        ($10 million after tax). This will be offset by increased net
        interest income on assets and liabilities that are hedged.

        On November 1, 2006, we remeasured our cash flow hedge derivatives at
        fair value. The portion of the fair value that offset the fair value
        of the hedged item totalled $8 million ($5 million after tax) and was
        recorded in opening accumulated other comprehensive income. The
        ineffective portion of cash flow hedges recorded in opening retained
        earnings totalled less than $1 million. We also reclassified
        $86 million ($56 million after tax) of deferred losses related to
        cash flow hedges that were discontinued prior to November 1, 2006
        from other assets to opening accumulated other comprehensive income.

        (ii) Fair Value Hedges
        Fair value hedges are used to manage possible changes in the value of
        our fixed rate assets and liabilities due to changes in interest
        rates. For fair value hedges, not only is the hedging derivative
        recorded at fair value but fixed rate assets and liabilities that are
        part of a hedging relationship are adjusted for the changes in value
        of the risk being hedged (quasi fair value). To the extent that the
        change in the fair value of the derivative does not offset changes in
        the quasi fair value adjustment to the hedged item (the
        ineffectiveness of the hedge), the net amount will be recorded
        directly in non-interest revenue, other in the Consolidated Statement
        of Income. The ineffective portion of our fair value hedges totalled
        less than $1 million for the quarter ended January 31, 2007.

        For fair value hedges that are discontinued, we cease adjusting the
        hedged item to quasi fair value. The quasi fair value adjustment on
        the hedged item will be recorded as an adjustment to the interest
        income/expense on the hedged item over its remaining term to
        maturity. If the hedged item is sold or settled, any remaining quasi
        fair value adjustment would be included in the determination of the
        gain or loss on sale or settlement.

        When we remeasured fair value hedging derivatives to fair value on
        November 1, 2006, we made a corresponding adjustment to the carrying
        value of the items that we hedge with those derivatives (quasi fair
        value adjustment). The difference between these two amounts was
        recorded in opening retained earnings and totalled less than
        $1 million. On November 1, 2006, we also reclassified deferred
        amounts related to fair value hedges that were discontinued prior to
        November 1, 2006 from other assets to adjust the carrying amount of
        the items that were previously hedged. Quasi fair value adjustments
        related to these two activities were comprised of an increase in
        loans of $3 million, an increase in deposits of $38 million, an
        increase in subordinated debt of $9 million and an increase in other
        assets of $6 million.

        (c) Fair Value Option
        The new rules allow management to elect to measure financial
        instruments that would not otherwise be accounted for at fair value
        as trading instruments with changes in fair value recorded in income
        provided they meet certain criteria. Financial instruments must be
        designated on November 1, 2006 when the new standard was adopted or
        when new financial instruments are acquired, and the designation is
        irrevocable.

        Structured notes issued by the Bank include embedded options. The
        Bank enters into derivatives which manage our exposure to changes in
        the structured note fair value caused by changes in interest rates.
        The structured notes are designated as trading under the fair value
        option which better aligns the accounting result with how the
        portfolio is managed. These notes are classified as other
        liabilities. The fair value and amount due at contractual maturity of
        these notes as at January 31, 2007 was $532 million and $526 million,
        respectively. The impact of recording these notes as trading was an
        increase in non-interest revenue, trading revenues of $3 million for
        the quarter ended January 31, 2007. The increase was offset by a loss
        on the derivatives.

        Securities in our insurance subsidiaries that support our insurance
        liabilities have been designated as trading under the fair value
        option. Since the actuarial calculation of insurance liabilities is
        based on the recorded value of the securities supporting them,
        recording the securities at fair value better aligns the accounting
        result with how the portfolio is managed. The fair value of these
        securities as at January 31, 2007 was $33 million. The impact of
        recording these securities as trading was an increase in non-interest
        revenue, insurance income of less than $1 million for the quarter
        ended January 31, 2007.

        On November 1, 2006, we remeasured the portfolio of structured notes
        and certain of our insurance subsidiary securities at fair value. The
        net unrealized loss of less than $1 million was recorded in opening
        retained earnings.

        (d) Effective Interest Method
        Loan origination costs are included in our loan balances and are
        recognized in interest, dividend and fee income, loans, over the life
        of the resulting loan. Prior to November 1, 2006, an equal amount of
        loan origination costs were recognized each period over the life of
        the resulting loan. The new rules require that we use the effective
        interest method to recognize loan origination costs whereby the
        amount recognized varies over the life of the loan based on principal
        outstanding.

        As at November 1, 2006, we adjusted our deferred loan origination
        costs to what the balance would have been had we always used the
        effective interest method to recognize loan origination costs. The
        impact was a decrease in loans, residential mortgages of $87 million,
        a decrease in future income tax liability of $30 million and a
        decrease in retained earnings of $57 million.

    3.  Allowance for Credit Losses
        The allowance for credit losses recorded in our Consolidated Balance
        Sheet is maintained at a level which we consider adequate to absorb
        credit-related losses on our loans, customers' liability under
        acceptances and other credit instruments. The portion related to
        other credit instruments is recorded in other liabilities in our
        Consolidated Balance Sheet. As at January 31, 2007 and January 31,
        2006 there was no allowance for credit losses related to other credit
        instruments included in other liabilities.

        A continuity of our allowance for credit losses is as follows:

        (Canadian $
         in millions)                 For the three months ended
        ---------------------------------------------------------------------
                             Specific         General
                            allowance        allowance           Total
        ---------------------------------------------------------------------
                        January  January  January  January  January  January
                             31,      31,      31,      31,      31,      31,
                           2007     2006     2007     2006     2007     2006
        ---------------------------------------------------------------------
        Balance at
         beginning of
         period         $   153  $   169  $   905  $   959  $ 1,058  $ 1,128
        Provision for
         credit losses       52       52        -        -       52       52
        Recoveries           22       20        -        -       22       20
        Write-offs          (74)     (71)       -        -      (74)     (71)
        Foreign exchange
         and other            3        -       17      (14)      20      (14)
        ---------------------------------------------------------------------
        Balance at end
         of period      $   156  $   170  $   922  $   945  $ 1,078  $ 1,115
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    4.  Securitization
        During the quarter ended January 31, 2007, we securitized residential
        mortgages totalling $948 million for total cash proceeds of
        $942 million. There were no expected credit losses as the mortgages
        are guaranteed by third parties. We retained responsibility for
        servicing these mortgages. We recorded $5 million of gains in non-
        interest revenue, securitization revenues, $37 million of deferred
        purchase price in available-for-sale securities and $8 million of
        servicing liability in other liabilities related to the
        securitization of those loans. The key weighted-average assumptions
        used to value the deferred purchase price for these securitizations
        was an average term of 4.7 years, a prepayment rate of 9.0%, an
        interest rate of 5.33% and a discount rate of 4.19%.

        In addition, gains on sales of loans sold to all revolving
        securitization vehicles were $55 million for the quarter ended
        January 31, 2007.

    5.  Acquisitions

        First National Bank & Trust
        On January 4, 2007, we completed the acquisition of First National
        Bank & Trust ("First National") for total cash consideration of
        $342 million. 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 related to this
        acquisition is 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
        $42 million. The results of bcpbank Canada's operations have been
        included in our consolidated financial statements since that date. 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 $75 million. The results of Villa
        Park's operations have been included in our consolidated financial
        statements 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.

        The estimated fair values of the assets acquired and the liabilities
        assumed at the date of acquisition are as follows:

                                                           January   January
                                                                31,       31,
        (Canadian $ in millions)                              2007      2006
        ---------------------------------------------------------------------
                                                           bcpbank     Villa
                                          First National    Canada      Park
        ---------------------------------------------------------------------
          Cash resources                         $    80   $    47   $    16
          Securities                                 348        23        56
          Loans                                    1,013       292       247
          Premises and equipment                      35         9         4
          Goodwill                                   168         8        43
          Core deposit intangible asset               48        12         7
          Other assets                                53         2         2
        ---------------------------------------------------------------------
          Total assets                             1,745       393       375
        ---------------------------------------------------------------------
          Deposits                                 1,377       339       296
          Other liabilities                           26        12         4
        ---------------------------------------------------------------------
          Total liabilities                        1,403       351       300
        ---------------------------------------------------------------------
          Purchase price                         $   342   $    42   $    75
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        The allocation of the purchase price for First National and bcpbank
        Canada is subject to refinement as we complete the valuation of the
        assets acquired and liabilities assumed.

    6.  Employee Compensation

        Stock Options
        During the quarter ended January 31, 2007, we granted a total of
        1,219,500 stock options. The weighted-average fair value of these
        options was $7.54 per option and was determined using a trinomial
        option pricing model, based on the following weighted-average
        assumptions:

        For stock options granted during the three months ended
        January 31, 2007
        ------------------------------------------------------
          Expected dividend yield                        3.8%
          Expected share price volatility               15.6%
          Risk-free rate of return                       4.0%
          Expected period until exercise            7.4 years
        ------------------------------------------------------
        ------------------------------------------------------

        Pension and Other Employee Future Benefit Expenses
        We recorded pension and other employee future benefit expenses as
        follows:
                                                             Other employee
        (Canadian $                     Pension benefit      future benefit
         in millions)                        plans                plans
        ---------------------------------------------------------------------
                                         For the three       For the three
                                          months ended        months ended
        ---------------------------------------------------------------------
                                       January   January   January   January
                                            31,       31,       31,       31,
                                          2007      2006      2007      2006
        ---------------------------------------------------------------------
          Benefits earned by
           employees                   $    40   $    34   $     5   $     5
          Interest cost on accrued
           benefit liability                55        52        12        11
          Actuarial loss recognized
           in expense                       16        21         4         4
          Amortization of plan
           amendment costs                   2         1        (1)       (2)
          Expected return on plan
           assets                          (69)      (62)       (1)       (1)
        ---------------------------------------------------------------------
          Benefits expense                  44        46        19        17
          Canada and Quebec pension
           plan expense                     13        13         -         -
          Defined contribution expense       4         3         -         -
        ---------------------------------------------------------------------
          Total pension and other
           employee future benefit
           expenses                    $    61   $    62   $    19   $    17
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    7.  Restructuring Charge
        On January 31, 2007, we recorded a restructuring charge of
        $135 million in the Consolidated Statement of Income. The objectives
        of the restructuring are to enhance customer service by directing
        spending and resources on front-line sales and service improvements;
        creating more efficient processes and systems across the company and
        continuing accelerating the pace of the company's growth.

        The charge relates to the elimination of approximately 1,000
        positions in primarily non-customer-facing areas of the company
        across all support functions and business groups. Of the charge,
        $117 million relates to severance-related costs, $11 million is
        associated with premises-related charges and $7 million relates to
        other costs.

        Premises-related charges include lease cancellation payments for
        those locations where we have legally extinguished our lease
        obligation as well as the carrying value of abandoned assets.

        We engaged a professional services firm to provide us with strategic
        and organizational advice with respect to the restructuring
        initiatives. A charge of $7 million for these services has been
        included in the restructuring charge.

        At January 31, 2007, we have recorded $121 million in other
        liabilities, other on the Consolidated Balance Sheet related to
        amounts to be paid in future periods.

    8.  Share Capital
        During the quarter ended January 31, 2007, we issued 14,000,000 4.5%
        Non-Cumulative Perpetual Class B Preferred Shares, Series 13, at a
        price of $25.00 per share, representing an aggregate issue price of
        $350 million.

        During the quarter ended January 31, 2007, we repurchased 1,194,900
        common shares at an average cost of $69.08 per share, totalling
        $82 million. During the quarter ended January 31, 2006, we
        repurchased 538,200 common shares at an average cost of $60.33 per
        share, totalling $32 million. There have been 1,660,700 common shares
        repurchased under the existing normal course issuer bid that expires
        on September 5, 2007 and pursuant to which we are permitted to
        repurchase up to 15,000,000 common shares.

        Share Capital Outstanding (a)
        ---------------------------------------------------------------------
        (Canadian $ in millions,
         except as noted)                    January 31, 2007
        ---------------------------------------------------------------------
                                   Number
                                 of shares      Amount   Convertible into...
        ---------------------------------------------------------------------
        Preferred Shares -
         Classified as
         Liabilities
          Class B - Series 4     8,000,000     $   200      common shares (b)
          Class B - Series 6    10,000,000         250      common shares (b)
        ---------------------------------------------------------------------
                                                   450
        ---------------------------------------------------------------------
        Preferred Shares -
         Classified as Equity
          Class B - Series 5     8,000,000         200      -
          Class B -
           Series 10 (c)        12,000,000         396      common shares (b)
          Class B - Series 13   14,000,000         350      -
        ---------------------------------------------------------------------
                                                   946
        Common Shares          500,834,764       4,279      -
        ---------------------------------------------------------------------
        Share Capital                          $ 5,225
        ---------------------------------------------------------------------
        Stock options issued                                23,584,878
         under stock option plan                   n/a      common shares
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        (a) For additional information refer to Notes 20 and 21 to our
            consolidated financial statements for the year ended October 31,
            2006 on pages 118 to 121 of our 2006 Annual Report.
        (b) The number of shares issuable on conversion is not determinable
            until the date of conversion.
        (c) Face value is US$300 million.
        n/a - not applicable

    9.  United States Generally Accepted Accounting Principles
        Reporting under United States GAAP would have resulted in the
        following:

        (Canadian $ in millions,
         except earnings per share figures)       For the three months ended
        ---------------------------------------------------------------------
                                                           January   January
                                                                31,       31,
                                                              2007    2006(1)
        ---------------------------------------------------------------------
        Net Income - Canadian GAAP                         $   585   $   606
        United States GAAP adjustments                         (12)      (37)
        ---------------------------------------------------------------------
        Net Income - United States GAAP                    $   573   $   569
        ---------------------------------------------------------------------
        Earnings Per Share
          Basic - Canadian GAAP                            $  1.15   $  1.19
          Basic - United States GAAP                          1.13      1.12
          Diluted - Canadian GAAP                             1.13      1.17
          Diluted - United States GAAP                        1.11      1.10
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        (1) Amounts in the above table have been restated to reflect the
            changes in accounting policy described in Note 21 to our
            consolidated financial statements for the year ended October 31,
            2006.

        Hybrid Financial Instruments
        During the quarter ended January 31, 2007, we adopted the new United
        States accounting standard on hybrid financial instruments. The new
        rules allow us to elect to measure certain hybrid financial
        instruments at fair value in their entirety, with any changes in fair
        value recognized in earnings. Under the previous rules, only the
        embedded derivative in the hybrid financial instrument was recorded
        at fair value. We did not elect to measure any hybrid financial
        instruments at fair value. The new standard did not have any impact
        on our consolidated financial statements.

        Pensions and Other Employee Future Benefits
        During the quarter ended January 31, 2007, we adopted the new United
        States accounting standard on pensions and other employee future
        benefit plans. The new rules will require us to recognize in our
        Consolidated Balance Sheet the funded status of the pension benefit
        and other employee future benefit plans, with a corresponding
        adjustment to accumulated other comprehensive income, net of tax.
        There will be no change in the calculation of the pension and other
        employee future benefits expense.

        Financial Instruments
        During the quarter ended January 31, 2007, we adopted new Canadian
        accounting requirements for financial instruments, hedges and other
        comprehensive income, which are harmonized with the United States
        accounting standards (see Note 2).

    10. Operating and Geographic Segmentation

        Operating Groups
        We conduct our business through operating groups, each of which has a
        distinct mandate. We determine operating groups based on our
        management structure and therefore our groups, and results attributed
        to them, may not be comparable with those of other financial services
        companies. We evaluate the performance of our groups using measures
        such as net income, revenue growth, return on equity, net economic
        profit and non-interest expense-to-revenue (productivity) ratio.

        Personal and Commercial Banking
        Personal and Commercial Banking ("P&C") is comprised of two operating
        segments: Personal and Commercial Banking Canada and Personal and
        Commercial Banking U.S.

        Personal and Commercial Banking Canada
        Personal and Commercial Banking Canada ("P&C Canada") offers a full
        range of products and services to personal and business clients in
        Canada through branches and direct banking channels such as telephone
        banking, online banking and a network of automated banking machines.

        Personal and Commercial Banking U.S.
        Personal and Commercial Banking U.S. ("P&C U.S.") offers a full range
        of products and services to personal and business clients in the
        United States, primarily in the Chicago area and Indiana, through
        branches and direct banking channels such as telephone banking,
        online banking and a network of automated banking machines.

        Private Client Group
        Private Client Group ("PCG") brings together all of our wealth
        management businesses. Operating primarily in Canada and the United
        States, PCG serves a full range of North American client segments,
        from mainstream to ultra-high net worth, as well as select
        institutional market segments. PCG offers clients a broad range of
        wealth management products and services, including full-service and
        direct investing, private banking and investment products, providing
        the tools they need to accumulate, protect and grow their financial
        assets.

        Investment Banking Group
        Investment Banking Group ("IBG"), operating under the BMO Capital
        Markets brand, combines all of our businesses serving corporate,
        institutional and government clients. In Canada and the United
        States, its clients span a broad range of industry sectors. IBG also
        serves clients in the United Kingdom, Europe, Asia and Australia. It
        offers clients complete financial solutions, including equity and
        debt underwriting, corporate lending and project financing, mergers
        and acquisitions, advisory services, merchant banking,
        securitization, treasury and market risk management, debt and equity
        research and institutional sales and trading.

        Corporate Services
        Corporate Services includes Technology and Operations ("T&O") and the
        Corporate units that provide expertise and governance support in
        areas such as strategic planning, law, finance, internal audit, risk
        management, corporate communications, economics, corporate marketing,
        human resources and learning. Operating results for Corporate
        Services include revenues and expenses associated with certain
        securitization activities, the hedging of foreign-source earnings
        and activities related to the management of certain balance sheet
        positions and our overall asset liability structure.

        T&O manages, maintains and provides governance over information
        technology, real estate, operations services and sourcing for the
        Bank. The unit focuses on enterprise-wide priorities that improve
        quality and efficiency.

        Operating results for T&O are included with Corporate Services for
        reporting purposes. However, costs of T&O services are transferred to
        P&C, PCG, and IBG and only minor amounts are retained in T&O's
        results. As such, results for Corporate Services largely reflect
        operating results of Corporate units.

        Corporate Services also includes residual revenues and expenses
        representing the differences between actual amounts earned or
        incurred and the amounts allocated to operating groups.

        Basis of Presentation
        The results of these operating segments are based on our internal
        financial reporting systems. The accounting policies used in these
        segments are generally consistent with those followed in the
        preparation of our consolidated financial statements as disclosed in
        Notes 1 and 2. Notable accounting measurement differences are the
        taxable equivalent basis adjustment and the provision for credit
        losses, as described below.

        Taxable Equivalent Basis
        We analyze net interest income on a taxable equivalent basis ("teb").
        This basis includes an adjustment which increases GAAP revenues and
        the GAAP provision for income taxes by an amount that would raise
        revenues on certain tax-exempt securities to a level that would incur
        tax at the statutory rate.

        Analysis on a teb basis neutralizes the impact of investing in tax-
        exempt or tax-advantaged securities rather than fully taxable
        securities with higher yields. It reduces distortions in net interest
        income related to the choice of tax-advantaged and taxable
        investments.

        Provisions for Credit Losses
        Provisions for credit losses are generally allocated to each group
        based on expected losses for that group over an economic cycle.
        Differences between expected loss provisions and provisions required
        under GAAP are included in Corporate Services.

        Inter-Group Allocations
        Various estimates and allocation methodologies are used in the
        preparation of the operating groups' financial information. We
        allocate expenses directly related to earning revenue to the groups
        that earned the related revenue. Expenses not directly related to
        earning revenue, such as overhead expenses, are allocated to
        operating groups using allocation formulas applied on a consistent
        basis. Operating group net interest income reflects internal funding
        charges and credits on the groups' assets, liabilities and capital,
        at market rates, taking into account relevant terms and currency
        considerations. The offset of the net impact of these charges and
        credits is reflected in Corporate Services.

        Geographic Information
        We operate primarily in Canada and the United States but also have
        operations in the United Kingdom, Europe, the Caribbean and Asia,
        which are grouped in Other countries. We allocate our results by
        geographic region based on the location of the unit responsible for
        managing the related assets, liabilities, revenues and expenses,
        except for the consolidated provision for credit losses, which is
        allocated based upon the country of ultimate risk.

        Prior periods have been restated to give effect to the current
        period's organization structure and presentation changes.

        Our results and average assets, allocated by operating segment and
        geographic region, are as follows:

        (Canadian $ in millions)
        ---------------------------------------------------------------------
        For the three
         months ended                P&C        P&C
         January 31, 2007         Canada        U.S.         PCG         IBG
        ---------------------------------------------------------------------
        Net interest income   $      760  $      186  $      151  $      232
        Non-interest revenue         406          42         355         484
        ---------------------------------------------------------------------
        Total Revenue              1,166         228         506         716
        Provision for credit
         losses                       80           9           1          20
        Non-interest expense         649         175         359         415
        ---------------------------------------------------------------------
        Income before taxes
         and non-controlling
         interest in
         subsidiaries                437          44         146         281
        Income taxes                 145          15          51          62
        Non-controlling
         interest in
         subsidiaries                  -           -           -           -
        ---------------------------------------------------------------------
        Net Income            $      292  $       29  $       95  $      219
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Average Assets        $  117,128  $   23,509  $    6,960  $  192,774
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Goodwill (As At)      $      101  $      778  $      327  $       98
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        (Canadian $ in millions)
        ---------------------------------------------------------------------
        For the three                          Total         Teb       Total
         months ended          Corporate  (teb basis)     adjust       (GAAP
         January 31, 2007     Services(1)         (2)     -ments       basis)
        ---------------------------------------------------------------------
        Net interest income   $      (94) $    1,235  $      (39) $    1,196
        Non-interest revenue          92       1,379           -       1,379
        ---------------------------------------------------------------------
        Total Revenue                 (2)      2,614         (39)      2,575
        Provision for credit
         losses                      (58)         52           -          52
        Non-interest expense         162       1,760           -       1,760
        ---------------------------------------------------------------------
        Income before taxes
         and non-controlling
         interest in
         subsidiaries               (106)        802         (39)        763
        Income taxes                 (75)        198         (39)        159
        Non-controlling
         interest in
         subsidiaries                 19          19           -          19
        ---------------------------------------------------------------------
        Net Income            $      (50) $      585  $        -  $      585
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Average Assets        $    3,067  $  343,438  $        -  $  343,438
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Goodwill (As At)      $        2  $    1,306  $        -  $    1,306
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        ---------------------------------------------------------------------
        For the three
         months ended                P&C        P&C
         January 31, 2006(3)      Canada        U.S.         PCG         IBG
        ---------------------------------------------------------------------
        Net interest income   $      726  $      185  $      138  $      207
        Non-interest revenue         370          40         326         536
        ---------------------------------------------------------------------
        Total Revenue              1,096         225         464         743
        Provision for credit
         losses                       78           8           1          20
        Non-interest expense         624         161         327         420
        ---------------------------------------------------------------------
        Income before taxes
         and non-controlling
         interest in
         subsidiaries                394          56         136         303
        Income taxes                 132          23          45          81
        Non-controlling
         interest in
         subsidiaries                  -           -           -           -
        ---------------------------------------------------------------------
        Net Income            $      262  $       33  $       91  $      222
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Average Assets        $  111,467  $   21,625  $    6,428  $  154,745
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Goodwill (As At)      $       93  $      591  $      325  $       98
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        ---------------------------------------------------------------------
        For the three                          Total         Teb       Total
         months ended          Corporate  (teb basis)     adjust       (GAAP
         January 31, 2006(3)  Services(1)         (2)     -ments       basis)
        ---------------------------------------------------------------------
        Net interest income   $      (43) $    1,213  $      (31) $    1,182
        Non-interest revenue          27       1,299           -       1,299
        ---------------------------------------------------------------------
        Total Revenue                (16)      2,512         (31)      2,481
        Provision for credit
         losses                      (55)         52           -          52
        Non-interest expense          48       1,580           -       1,580
        ---------------------------------------------------------------------
        Income before taxes
         and non-controlling
         interest in
         subsidiaries                 (9)        880         (31)        849
        Income taxes                 (26)        255         (31)        224
        Non-controlling
         interest in
         subsidiaries                 19          19           -          19
        ---------------------------------------------------------------------
        Net Income            $       (2) $      606  $        -  $      606
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Average Assets        $    4,533  $  298,798  $        -  $  298,798
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Goodwill (As At)      $        2  $    1,109  $        -  $    1,109
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        ---------------------------------------------------------------------
        For the three
         months ended                         United       Other
         January 31, 2007         Canada      States   countries     Total(2)
        ---------------------------------------------------------------------
        Net interest income   $      913  $      245  $       77  $    1,235
        Non-interest revenue         999         348          32       1,379
        ---------------------------------------------------------------------
        Total Revenue              1,912         593         109       2,614
        Provision for credit
         losses                       51           1           -          52
        Non-interest expense       1,263         455          42       1,760
        ---------------------------------------------------------------------
        Income before taxes
         and non-controlling
         interest in
         subsidiaries                598         137          67         802
        Income taxes                 147          36          15         198
        Non-controlling
         interest in
         subsidiaries                 14           5           -          19
        ---------------------------------------------------------------------
        Net Income            $      437  $       96  $       52 $       585
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Average Assets        $  203,317  $  107,922  $   32,199 $   343,438
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Goodwill (As At)      $      419  $      887  $        - $     1,306
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        ---------------------------------------------------------------------
        For the three
         months ended                         United       Other
         January 31, 2006(3)      Canada      States   countries     Total(2)
        ---------------------------------------------------------------------
        Net interest income   $      902  $      273  $       38  $    1,213
        Non-interest revenue         900         353          46       1,299
        ---------------------------------------------------------------------
        Total Revenue              1,802         626          84       2,512
        Provision for credit
         losses                       49           3           -          52
        Non-interest expense       1,121         426          33       1,580
        ---------------------------------------------------------------------
        Income before taxes
         and non-controlling
         interest in
         subsidiaries                632         197          51         880
        Income taxes                 190          63           2         255
        Non-controlling
         interest in
         subsidiaries                 14           5           -          19
        ---------------------------------------------------------------------
        Net Income            $      428  $      129  $       49  $      606
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Average Assets        $  185,877  $   87,015  $   25,906  $  298,798
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Goodwill (As At)      $      410  $      699  $        -  $    1,109
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        (1) Corporate Services includes Technology and Operations.
        (2) Taxable equivalent basis - see Basis of Presentation section.
        (3) Amounts in the above tables have been restated to reflect the
            changes in accounting policy described in Note 21 to our
            consolidated financial statements for the year ended October 31,
            2006.
    





For further information:

For further information: Media Relations Contacts: Ralph Marranca,
Toronto, ralph.marranca@bmo.com, (416) 867-3996; Ronald Monet, Montreal,
ronald.monet@bmo.com, (514) 877-1101; Investor Relations Contacts: Viki
Lazaris, Senior Vice-President, Investor Relations, viki.lazaris@bmo.com,
(416) 867-6656; Steven Bonin, Director, Investor Relations,
steven.bonin@bmo.com, (416) 867-5452; Krista White, Senior Manager, Investor
Relations, krista.white@bmo.com, (416) 867-7019; Chief Financial Officer:
Karen Maidment, Chief Financial and Administrative Officer,
karen.maidment@bmo.com, (416) 867-6776; Corporate Secretary: Sharon Sandall,
Acting Secretary, Corporate and Legal Affairs, corp.secretary@bmo.com, (416)
867-6785


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