BMO Financial Group Reports Good Third Quarter Results with Record Revenues



    
    Third Quarter 2009 Report to Shareholders

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    BMO Financial Group Reports Good Third Quarter Results with Record
    Revenues

    Momentum Continues in Personal and Commercial Banking Canada with Strong
    Growth in Revenue and Net Income

    Good Performance in BMO Capital Markets Businesses, Benefiting from
    Diversified Business Mix and Market Opportunities

    Tier 1 Capital Ratio Remains Strong, increasing to 11.71%
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    Financial Results Highlights:

    Third Quarter 2009 Compared with Third Quarter 2008:

    -   Net income of $557 million, up $36 million or 6.9% from a year ago

    -   EPS(1) of $0.97 and cash EPS(2) of $0.98, down $0.01 and $0.02,
        respectively, from a year ago

    -   Adjusted cash EPS(2)of $1.05 after excluding an increase in the
        general allowance of $39 million after tax ($0.07 per share)

    -   Provisions for credit losses of $417 million, comprised of $357
        million of specific provisions and a $60 million increase in the
        general allowance, compared with provisions of $484 million,
        comprised of $434 million of specific provisions and a $50 million
        increase in the general allowance

    -   BMO's Tier 1 Capital Ratio remains strong, increasing to 11.71%

    Year-to-Date 2009 Compared with a Year Ago:

    -   Net income of $1,140 million, compared with $1,418 million in 2008

    -   EPS of $1.97 compared with $2.70 and cash EPS of $2.01 compared with
        $2.75

    -   Adjusted cash EPS of $3.07 after excluding capital markets
        environment charges of $439 million after tax ($0.84 per share)from
        the first and second quarters, severance costs of $80 million after
        tax ($0.15 per share) from the second quarter and an increase in the
        general allowance of $39 million after tax ($0.07 per share)from the
        third quarter
    

    TORONTO, Aug. 25 /CNW/ - For the third quarter ended July 31, 2009, BMO
Financial Group reported net income of $557 million or $0.97 per common share.
Canadian personal and commercial banking reported strong results with net
income of $356 million, up $41 million or 13% from a year ago, and BMO Capital
Markets net income grew by $80 million or 30% to $343 million.
    Today, we announced a third-quarter dividend of $0.70 per common share,
unchanged from the preceding quarter and reflective of an annual dividend of
$2.80 per common share.
    "The elements we have put in place over the past three years to
strengthen our core businesses - and our focus on building a strong, distinct,
and clear presence in the marketplace - are yielding dividends and showing up
in the bottom line," said Bill Downe, President and Chief Executive Officer,
BMO Financial Group. "We're successfully executing on our strategy of
providing customers with a value proposition that helps them make sense of
their banking and investing.
    "P&C Canada had a very good quarter with $356 million in net income - up
13% from a year ago. Commercial banking was particularly strong with revenue
growth of 17% and increasing market share for loans to small and medium-sized
businesses that has now surpassed 20%. Our personal banking customer loyalty
scores continue to improve year over year and, most importantly, customers are
turning into advocates. And, in their recently announced Best Banking Awards
for 2009, global market research firm Synovate recognized BMO Bank of Montreal
as showing the most improvement among the Big 5 banks by winning three awards,
including the Branch Service Excellence award. BMO Capital Markets also had a
strong quarter as the low-interest rate environment - coupled with our strong
liquidity and capital positions - has allowed us to capitalize on market
opportunities. Trading revenues were up significantly from a year ago as was
corporate banking net interest income. The Private Client Group's results
increased from the second quarter as broker revenues and mutual fund assets
increased amid improving equity markets. Our U.S. retail banking franchise
customer loyalty scores remain strong while competitor loyalty scores
deteriorate. Our realized loan losses are below the peer group average and
retention of maturing deposits is high, reflecting our continued commitment to
providing the right products and services to our customers.
    "Overall, our businesses had a good quarter. We are seeing positive signs
that the economic environment is starting to turn from challenging to more
normal conditions and BMO is well-positioned for further growth as conditions
continue to improve," concluded Mr. Downe.

    
    (1) All earnings per share (EPS) measures in this document refer to
        diluted EPS unless specified otherwise.
    (2) The adjustments that change results under generally accepted
        accounting principles (GAAP) to cash results are outlined in the Non-
        GAAP Measures section at the end of Management's Discussion and
        Analysis (MD&A), where such non-GAAP measures and their closest GAAP
        counterparts are outlined. Adjusted cash EPS is also a non-GAAP
        measure; please see details in the Notable Items section and also the
        Non-GAAP Measures section.

    Segment Overview

    P&C Canada
    

    Net income was $356 million, up $41 million or 13% from a year ago.
Revenue increased across each of our personal, commercial and cards
businesses, led by volume growth across most products and an improved net
interest margin. We continue to achieve strong results in difficult market
conditions.
    We are maintaining our commitment to helping customers choose the best
solutions for them in the current economic environment. As a result, we
continue to narrow the gap to the industry leader on both personal and
commercial loyalty scores relative to a year ago.
    In personal banking, our focus on improving performance management,
investing in our branch network and new product offerings has led to improved
revenues and accelerating growth in deposit products. During the quarter we
introduced BMO SmartSteps to help customers save, borrow wisely and manage
their financial affairs in a few simple steps. Year to date, we have opened
eight new branches, redeveloped five and renovated three. We have also closed
88 in-store branches, reflecting our customers' preferences for the services
of a full-service bank offering professional advice and relationship
management capabilities, combined with the convenience of online banking
channels.
    In commercial banking, we are progressing toward our goal of becoming the
bank of choice for businesses across Canada. We rank second in Canadian
business banking market share. BMO continues to make credit available to our
small and medium-sized business clients. Although loan growth was relatively
flat, we increased our market share 21 basis points year over year and 13
basis points quarter over quarter to 20.1%.
    We are also growing our cards business while being prudently attentive to
the current credit environment. We simplified and enhanced our entire suite of
credit card products by eliminating annual fees for 400,000 customers and
doubling AIR MILES rewards for another 1.2 million customers. For the fourth
consecutive year, our group was awarded the Global Quality Standards Platinum
award from MasterCard Worldwide, an acknowledgement of superior performance in
the key areas that affect customer experience when making a purchase.
    Effective in the third quarter, the term investments business has moved
to P&C Canada where it is now better aligned with P&C's retail product
strategy. At the same time, all of BMO's insurance businesses now operate
within Private Client Group.

    P&C U.S. (all amounts in U.S. $)

    Net income was $23 million, down $5 million or 16% from a year ago. Cash
net income was $29 million, down $6 million or 15%. Results benefited from
improved loan spreads and deposit retention as well as increased gains on the
sale of mortgages.
    Cash net income has exceeded $40 million for the last five quarters and
was at its highest in the current quarter at $43 million, on a basis that
adjusts for the impact of impaired loans, integration costs and Visa gains and
charges.
    Net income increased $2 million or 16% from the second quarter as net
interest margin improved due to higher lending spreads.
    There are higher levels of impaired loans and the costs of managing this
portfolio have increased, reducing earnings in the current quarter by $13
million, compared with a $5 million reduction a year ago.
    Revenue decreased $1 million or 0.5% from a year ago. Revenue increased
$8 million or 3.3% excluding the impact of the impaired loan portfolio,
largely driven by mortgage sale gains. Net interest margin increased from last
year due to new deposit generation and pricing actions.
    We are maintaining our strong focus on new customer acquisition in both
the consumer and commercial businesses and continuing to make loans and
provide deposit services to our customers, while managing expenses. These
efforts should position us well as we come out of the current economic
downturn. Mortgage originations are strong, with the majority of loans
originated sold in the secondary market. We have eliminated high loan-to-value
products in home equity. We have enhanced our loan quality review for
underwriting groups, implemented an updated loan-to-value line management
strategy and enhanced our monitoring practices. On the deposit side, we are
seeing high retention rates of maturing deposits, reflecting our continued
commitment to provide the right products and services for our customers.
    The Harris Contact Center was recently certified as a Center of
Excellence by Purdue University's Center for Customer-Driven Quality (CCDQ).
This is a great accomplishment. The CCDQ is a recognized leader in
benchmarking and certifying contact centers with only 10% of applicants
earning the designation.
    Our Retail Net Promoter Score, a measure of the strength of customer
loyalty, remains strong and consistent, at a time when the scores of a number
of our competitors have deteriorated.

    Private Client Group

    Effective in the third quarter, all of BMO's insurance businesses now
operate within Private Client Group (PCG), better aligning our wealth
management strategy and bringing our insurance capabilities and skill-sets
together. At the same time, the term investments business has moved to P&C
Canada where it is now better aligned with P&C's retail product strategy.
    Net income for the quarter was $120 million, an increase of $42 million
or 54% from the second quarter. All of our lines of business achieved revenue
growth, as we remain focused on continuing to deliver the high level of
service and advice that our clients expect, especially in the current economic
environment.
    PCG net income excluding the insurance business was $53 million, up $6
million or 14% from the second quarter, as revenue grew by 8.3% amid improved
equity markets and a continued focus on attracting new client assets. Assets
under management and administration improved by $6 billion or 2.7% and by 6.5%
in source currency.
    Net income in the insurance business amounted to $67 million, including a
$23 million recovery of prior periods' income taxes. The BMO Life Assurance
acquisition increased net income by $3 million as the prior quarter only
included one month of its earnings.
    Private Client Group net income in the third quarter decreased $5 million
or 4.2% from the same quarter a year ago, reflective of challenging equity
markets and a low interest rate environment. Net income in the current quarter
benefited from the recovery of prior periods' income taxes and the BMO Life
Assurance acquisition.
    Private Client Group entered the exchange traded fund (ETF) market by
launching four new funds in the quarter to expand the investment options
available to our clients. This makes us the only major Canadian financial
institution to offer a family of these low-cost, easy-to-understand,
risk-diversifying investment products. Our initial suite offers investors the
primary building blocks of a clear and well-diversified investment portfolio
and consists of the BMO Canadian Government Bond Index ETF, BMO Dow Jones
Canada Titans 60 Index ETF, BMO U.S. Equity Index ETF and BMO Dow Jones
Diamonds SM Index ETF.

    BMO Capital Markets

    Net income for the quarter was $343 million, an increase of $80 million
or 30% from a year ago. No charges in respect of the capital markets
environment have been designated as notable items this quarter in light of the
relative insignificance of the amounts. Results a year ago were lowered by a
net $14 million that included charges in respect of the capital markets
environment of $134 million ($96 million after tax) as described in the
Notable Items section at the end of the MD&A, as well as an $82 million
recovery of prior periods' income taxes.
    The strong performance in the quarter compared to a year ago was driven
by significantly higher trading revenues as well as improved performance in
corporate banking. This quarter's results reflect the strength and resilience
of our core businesses and demonstrate the benefits of maintaining a dynamic
and diversified portfolio. The diversification of our business mix was
reflected in growth in debt underwriting fees in Canada and public finance in
the United States. We continue to expand our U.S. distribution channel in
terms of financial products and third-party distributors, resulting in
increased revenue.
    BMO Capital Markets was involved in 115 new issues in the quarter
including 33 corporate debt deals, 29 government debt deals, 48 common equity
transactions and five issues of preferred shares, raising $50.6 billion, up
$3.5 billion from last quarter.

    Corporate Services

    The net loss was $287 million in the quarter with approximately one-half
due to provisions for credit losses and the balance due primarily to low
revenue. The net loss decreased from the second quarter primarily due to the
severance charges recorded in that quarter. There was significant improvement
in net interest income due in part to management actions to lower the negative
carry on certain asset-liability interest rate and liquidity positions and to
more stable market conditions. Overall revenue fell slightly as non-interest
revenue decreased due in large part to lower securitization revenue and to
mark-to-market losses on certain hedging activities compared to gains in the
second quarter. The loan portfolio continues to be impacted by negative credit
risk migration as expected but the pace of negative migration is slowing in a
number of areas.
    BMO employs a methodology for segmented reporting purposes whereby
expected credit losses are charged to the operating groups quarterly based on
their share of expected credit losses over an economic cycle. The difference
between quarterly charges based on expected losses and required quarterly
provisions based on actual losses is charged (or credited) to Corporate
Services.
    The foregoing contains forward-looking statements. Please see the Caution
Regarding Forward-Looking Statements.

    
                     Management's Discussion and Analysis
    

    MD&A commentary is as of August 25, 2009. 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 July 31, 2009, included
in this document, and the annual MD&A for the year ended October 31, 2008,
included in BMO's 2008 Annual Report. The material that precedes this section
comprises part of this MD&A.


    
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    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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    Summary Data

    (Unaudited)
    (Canadian $ in                              Increase            Increase
     millions, except                          (Decrease)          (Decrease)
     as noted)               Q3-2009         vs. Q3-2008         vs. Q2-2009
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    Net interest income        1,466       184       14%       131       10%
    Non-interest revenue       1,512        48        3%       192       15%
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    Revenue                    2,978       232        8%       323       12%
    Specific provision for
     credit losses               357       (77)     (18%)      (15)      (4%)
    Increase in the general
     allowance                    60        10       20%        60      100%
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    Total provision for
     credit losses               417       (67)     (14%)       45       12%
    Non-interest expense       1,873        91        5%       (15)      (1%)
    Provision for (recovery
     of) income taxes            112       171     +100%        94     +100%
    Non-controlling interest
     in subsidiaries              19         1        2%         -         -
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    Net income                   557        36        7%       199       56%

    Amortization of
     acquisition-related
     intangible assets
     (after tax)(1)                9         -         -        (1)     (13%)
    Cash net income(2)           566        36        7%       198       54%
    Earnings per share -
     basic ($)                  0.97     (0.03)      (3%)     0.36       59%
    Earnings per share -
     diluted ($)                0.97     (0.01)      (1%)     0.36       59%
    Cash earnings per share
     - diluted ($)(2)           0.98     (0.02)      (2%)     0.35       56%
    Return on equity (ROE)     12.1%               (1.4%)               4.0%
    Cash ROE(2)                12.3%               (1.4%)               3.9%
    Productivity ratio         62.9%               (2.0%)              (8.2%)
    Cash productivity
     ratio(2)                  62.5%               (2.0%)              (8.2%)
    Operating leverage          3.3%                  nm                  nm
    Cash operating
     leverage(2)                3.2%                  nm                  nm
    Net interest margin
     on earning assets         1.74%               0.16%               0.19%
    Effective tax rate         16.4%               28.6%               12.0%

    Capital Ratios
      Tier 1 Capital Ratio    11.71%               1.81%               1.01%
      Total Capital Ratio     14.32%               2.03%               1.12%
    Net income:
    Personal and Commercial
     Banking                     381        38       11%        22        6%
      P&C Canada                 356        41       13%        22        6%
      P&C U.S.                    25        (3)      (8%)        -         -
    Private Client Group         120        (5)      (4%)       42       54%
    BMO Capital Markets          343        80       30%        94       38%
    Corporate Services,
     including Technology
     and Operations (T&O)       (287)      (77)     (36%)       41       12%
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    BMO Financial Group
     Net Income                  557        36        7%       199       56%
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    (Unaudited)
    (Canadian $ in                              Increase
     millions, except                          (Decrease)
     as noted)              YTD-2009        vs. YTD-2008
    -----------------------------------------------------
    Net interest income        4,128       465       13%
    Non-interest revenue       3,947       218        6%
    -----------------------------------------------------
    Revenue                    8,075       683        9%
    Specific provision for
     credit losses             1,157       402       53%
    Increase in the general
     allowance                    60       (50)     (45%)
    -----------------------------------------------------
    Total provision for
     credit losses             1,217       352       41%
    Non-interest expense       5,602       526       10%
    Provision for (recovery
     of) income taxes             59        81     +100%
    Non-controlling interest
     in subsidiaries              57         2        4%
    -----------------------------------------------------
    Net income                 1,140      (278)     (20%)

    Amortization of
     acquisition-related
     intangible assets
     (after tax)(1)               27         2       11%
    Cash net income(2)         1,167      (276)     (19%)
    Earnings per share -
     basic ($)                  1.97     (0.76)     (28%)
    Earnings per share -
     diluted ($)                1.97     (0.73)     (27%)
    Cash earnings per share
     - diluted ($)(2)           2.01     (0.74)     (27%)
    Return on equity (ROE)      8.5%               (4.2%)
    Cash ROE(2)                 8.7%               (4.2%)
    Productivity ratio         69.4%                0.7%
    Cash productivity
     ratio(2)                  69.0%                0.8%
    Operating leverage         (1.2%)                 nm
    Cash operating
     leverage(2)               (1.2%)                 nm
    Net interest margin
     on earning assets         1.60%               0.10%
    Effective tax rate          4.7%                6.2%

    Capital Ratios
      Tier 1 Capital Ratio    11.71%               1.81%
      Total Capital Ratio     14.32%               2.03%
    Net income:
    Personal and Commercial
     Banking                   1,082       113       12%
      P&C Canada                 998       113       13%
      P&C U.S.                    84         -         -
    Private Client Group         271       (97)     (26%)
    BMO Capital Markets          771       350       83%
    Corporate Services,
     including Technology
     and Operations (T&O)       (984)     (644)   (+100%)
    -----------------------------------------------------

    BMO Financial Group
     Net Income                1,140      (278)     (20%)
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    (1) The amortization of non-acquisition-related intangible assets is not
        added back in the determination of cash net income.
    (2) These are non-GAAP amounts or non-GAAP measures. Please see the Non-
        GAAP Measures section at the end of the MD&A, which outlines the use
        of non-GAAP measures in this document.
    nm - not meaningful.

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    Management's Responsibility for Financial Information
    

    BMO's CEO and CFO have signed certifications relating to the
appropriateness of the financial disclosures in our interim MD&A and unaudited
interim consolidated financial statements for the period ended July 31, 2009
and relating to the design of our disclosure controls and procedures and
internal control over financial reporting.
    BMO's internal control over financial reporting includes policies and
procedures that: pertain to the maintenance of records that in reasonable
detail accurately and fairly reflect the transactions and dispositions of the
assets of BMO; provide reasonable assurance that transactions are recorded as
necessary to permit preparation of the financial statements in accordance with
Canadian generally accepted accounting principles and the requirements of the
Securities and Exchange Commission in the United States, as applicable; ensure
receipts and expenditures of BMO are being made only in accordance with
authorizations of management and directors of BMO; and provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of BMO's assets that could have a material
effect on the financial statements.
    Because of its inherent limitations, internal control over financial
reporting can provide only reasonable assurance and may not prevent or detect
misstatements. Further, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
    There were no changes in our internal control over financial reporting
during the quarter ended July 31, 2009 that 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 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 2008 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.

    
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    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 harbour
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 2009 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 and
market 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 30 and 31 of the BMO 2008
Annual Report, which outlines in detail certain key factors that may affect
our 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, except as required by law. The forward-looking information
contained in this document is presented for the purpose of assisting our
shareholders in understanding our financial position as at and for the periods
ended on the dates presented and our strategic priorities and objectives, and
may not be appropriate for other purposes.
    Assumptions about the level of asset sales, expected asset sale prices,
net funding cost, credit quality and risk of default and losses on default of
the underlying assets of the structured investment vehicles were material
factors we considered when establishing our expectations regarding the
structured investment vehicles discussed in this document, including the
amount to be drawn under the BMO liquidity facilities and the expectation that
the first-loss protection provided by the subordinate capital notes will
exceed future losses. Key assumptions included that assets would continue to
be sold with a view to reducing the size of the structured investment
vehicles, under various asset price scenarios, and that the level of defaults
and losses will be consistent with the credit quality of the underlying assets
and our current expectations regarding challenging market conditions
continuing.
    Assumptions about the level of defaults and losses on defaults were
material factors we considered when establishing our expectation of the future
performance of the transactions that Apex Trust has entered into. Key
assumptions included that the level of defaults and losses on defaults would
be consistent with historical experience. Material factors that were taken
into account when establishing our expectations of the future risk of credit
losses in Apex Trust included industry diversification in the portfolio,
initial credit quality by portfolio and the first-loss protection incorporated
into the structure.
    Assumptions about the performance of the Canadian and U.S. economies as
well as overall market conditions and their combined effect on the bank's
business, including those described under the heading Economic Outlook, are
material factors we consider when determining our strategic priorities,
objectives and expectations for our business. 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.

    
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    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.

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    Economic Outlook
    

    After having contracted for three consecutive quarters, the Canadian
economy is expected to have resumed expanding this summer. Consumer spending
has turned moderately higher in response to record-low interest rates, and
housing markets have rebounded strongly due to improved affordability. Both
are expected to expand further in the second half of the year, supporting
growth in personal credit and residential mortgages. Business investment and
loan growth, however, are likely to lag the consumer recovery given low rates
of capacity utilization, the restructuring in the auto industry and softness
in exports due to the strong Canadian dollar. The slow pace of the initial
recovery could see unemployment rates rise above 9%, keeping inflation low and
encouraging the Bank of Canada to hold overnight interest rates near zero
until next summer. The Canadian dollar is expected to strengthen further,
achieving parity with the U.S. dollar in 2010, as commodity prices should
continue to strengthen in response to improved global demand.
    The U.S. economy is slowly emerging from a severe recession, with growth
likely to resume in the current quarter as a result of expansive monetary and
fiscal policies. Housing markets appear to have stabilized in response to
record affordability and tax credits available to first-time home buyers.
Consumer spending has also stabilized due to income tax cuts and the
government's motor vehicle incentive program, but will likely remain weak in
the second half of the year in the face of high unemployment and debt
repayment, keeping personal loan demand soft. Business investment and loan
growth are also expected to remain weak due to massive spare capacity. The
unemployment rate is projected to reach a 26-year high of more than 10% early
next year. To encourage a strong recovery, the Federal Reserve is expected to
hold overnight rates near zero until mid-2010. Capital market activities
should strengthen further as credit markets and the economy improve.
    This Economic Outlook section contains forward-looking statements. Please
see the Caution Regarding Forward-Looking Statements.

    Effects of the Capital Markets Environment on Third Quarter Results

    No charges in respect of the capital markets environment have been
designated as notable items this quarter in light of the relative
insignificance of the amounts. Credit valuation adjustments were favourable
this quarter but were more than offset by mark-to-market losses on credit
default swap positions that mitigate credit exposure in our loan portfolio.
There was a small net charge in respect of a Canadian credit protection
vehicle (Apex) this quarter including a charge in respect of a position that
hedges realized losses on one-half of our exposure to the senior funding
facility, net of a small mark-to-market gain on our investment in the Apex
notes that we hold.
    Further details are provided in the Financial Instruments in the
Difficult Credit Environment section and in the BMO Capital Markets section.

    Foreign Exchange

    The Canadian dollar equivalents of BMO's U.S. dollar-denominated net
income, revenues, expenses, provisions for credit losses and income taxes were
increased relative to the third quarter of 2008 by the strengthening of the
U.S. dollar in the past year, but lowered relative to the second quarter of
2009 by the weakening of the U.S. dollar in the third quarter. The average
Canadian/U.S. dollar exchange rate in the third quarter, expressed in terms of
the Canadian dollar cost of a U.S. dollar, rose by 10% from a year ago, but
fell by 11% from the average of the second quarter. The following table
indicates the relevant average Canadian/U.S. dollar exchange rates and the
impact of changes in the rates.


    
    Effects of U.S. Dollar Exchange Rate Fluctuations on BMO's Results

                                                       Q3-2009      YTD-2009
                                                     vs.       vs.       vs.
    (Canadian $ in millions, except as noted)    Q3-2008   Q2-2009  YTD-2008
    -------------------------------------------------------------------------
    Canadian/U.S. dollar exchange rate (average)
      Current period                              1.1102    1.1102    1.1925
      Prior period                                1.0122    1.2417    1.0057
    Increased (decreased) revenue                     75      (101)      383
    Decreased (increased) expense                    (40)       54      (228)
    Decreased (increased) provision for
     credit losses                                   (23)       31      (131)
    Decreased (increased) income taxes                 5        (7)       25
    -------------------------------------------------------------------------
    Increased (decreased) net income                  17       (23)       49
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    At the start of each quarter, BMO assesses whether to enter into hedging
transactions that are expected to partially offset the pre-tax effects of
exchange rate fluctuations in the quarter on our expected U.S.
dollar-denominated net income for that quarter. As such, the hedging
activities partially mitigate the impact of exchange rate fluctuations within
a single quarter; however, the hedging transactions are not designed to offset
the impact of year-over-year or quarter-over-quarter fluctuations in exchange
rates. The U.S. dollar strengthened in the first and second quarters. However,
it weakened quite markedly over the course of the current quarter, as the
exchange rate decreased from Cdn$1.1930 per U.S. dollar at April 30, 2009 to
an average of Cdn$1.1102. Hedging transactions had no impact on results for
the quarter and resulted in an after-tax loss of $1 million for the year to
date. 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.

    Other Value Measures

    Net economic profit was $79 million (see the Non-GAAP Measures section),
compared with $122 million in the third quarter of 2008 and negative $87
million in the second quarter.
    The total shareholder return (TSR) on an investment in BMO common shares
was 39.0% in the third quarter and 21.4% for the twelve months ended July 31,
2009. BMO's average annual TSR for the five-year period ended July 31, 2009
was 4.0%.

    Net Income

    Q3 2009 vs Q3 2008

    Net income was $557 million for the third quarter of 2009, up $36 million
or 6.9% from a year ago. Earnings per share were $0.97, compared with $0.98.
Net income was reduced by an increase in the general allowance for credit
losses of $60 million ($39 million after tax) and increased by a $23 million
recovery of prior periods' income taxes. Results a year ago included notable
items totalling $126 million after tax and a $95 million benefit from a
recovery of prior periods' income taxes. The prior year notable items were
comprised of capital markets environment charges of $134 million ($96 million
after tax) in BMO Capital Markets and a $50 million ($30 million after tax)
increase in the general allowance for credit losses.
    Specific provisions for credit losses were $357 million, down $77 million
from a year ago when provisions were elevated by $247 million of charges in
respect of two corporate accounts related to the U.S. housing market.
    P&C Canada net income increased a strong $41 million or 13% despite a
slow economy. There was volume growth across most products and improved net
interest margin.
    P&C U.S. net income decreased by Cdn$3 million (by US$5 million or 16%).
Higher levels of impaired loans and related costs of managing this portfolio
reduced net income in the quarter by US$13 million, compared with a US$5
million reduction a year ago.
    Private Client Group net income decreased $5 million or 4.2%, reflective
of challenging equity markets and a low interest rate environment. Net income
in the current quarter benefited from the previously-mentioned $23 million
recovery of prior periods' income taxes.
    BMO Capital Markets net income increased $80 million or 30%. Last year's
results included notable items, severance charges of $28 million ($19 million
after tax) and the group's $82 million share of the previously-mentioned $95
million recovery of prior periods' income taxes. Revenues rose $280 million or
37% due to significantly higher trading revenues, mainly interest rate
trading, and increased corporate banking revenues. Revenue growth also was
impacted by last year's charges in respect of the capital markets environment.
    Corporate Services had a net loss of $287 million in the quarter,
compared with a net loss of $210 million in the prior year. Provisions for
credit losses were better by $96 million as a result of lower provisions
charged to Corporate under BMO's application of the expected-loss-provisioning
methodology. Revenues were worse by $129 million mainly due to the impact of
credit card securitizations completed in 2008, the negative carry on certain
asset-liability interest rate positions as a result of changes in market
interest rates and the continued impact of funding activities that have
enhanced our strong liquidity position.

    Q3 2009 vs Q2 2009

    Net income increased $199 million or 56%. Results in the third quarter
were lowered by the $39 million after-tax increase in the general allowance
but benefited from the previously-mentioned $23 million prior periods' income
tax recovery. Results in the second quarter were lowered by $235 million ($160
million after tax and $0.30 per share) in respect of notable items. These were
comprised of capital markets environment charges of $117 million ($80 million
after tax) in BMO Capital Markets and severance costs of $118 million ($80
million after tax) recorded in Corporate Services. Notable items are
summarized at the end of the MD&A.
    In P&C Canada, net income increased $22 million or 6.4%. Revenue rose $82
million or 6.4%, driven by volume growth, an improved net interest margin,
higher activity fees, investment securities gains and three more calendar days
in the current quarter. Non-interest expense increased $44 million or 6.3% due
to higher performance-based compensation, three more days in the current
quarter and severance costs to simplify our management structure.
    P&C U.S. net income rose US$2 million or 16% largely due to improved net
interest margin, gains on mortgage sales and more calendar days in the current
quarter, partially offset by an increase in costs of managing the impaired
loan portfolio.
    Private Client Group net income increased $42 million or 54% due in part
to the $23 million income tax recovery. Revenues increased $54 million or 12%
due primarily to increases in revenue from the brokerage businesses and
fee-based revenue in mutual funds on higher client assets as well as the
acquisition of the BMO Life Assurance business. Non-interest expense increased
$29 million or 8.1% primarily due to higher revenue-based costs and expenses
associated with the BMO Life Assurance acquisition.
    BMO Capital Markets net income increased $94 million or 38%, due to a
$221 million or 27% increase in revenues. There were significantly higher
trading revenues, in part due to the large capital markets environment charges
in the previous quarter reflected in trading revenues, and higher debt
underwriting fees. These were partially offset by a reduction in net interest
income from reduced corporate banking assets and lower equity underwriting and
merger and acquisition fees.
    Corporate Services net loss improved $41 million from the second quarter
primarily due to lower expenses. There were $118 million ($80 million after
tax) of severance charges recorded in the second quarter. There was a $160
million improvement in net interest income due in part to management actions
to lower the negative carry on certain asset-liability interest rate and
liquidity positions and to more stable market conditions. Overall revenue fell
slightly as non-interest revenue decreased, largely due to lower
securitization revenues and mark-to-market losses on certain hedging
activities compared to gains in the second quarter. Provisions for credit
losses were higher due to a $60 million increase in the general provision for
credit losses.

    Q3 YTD 2009 vs Q3 YTD 2008

    Net income decreased $278 million or 20% to $1,140 million. Net income
for the current period was lowered by a net $558 million after tax of notable
items, comprised of $645 million ($439 million after tax) of charges related
to the capital markets environment, $118 million ($80 million after tax) of
severance costs and a $60 million ($39 million after tax) increase in the
general allowance for credit losses. Net income in the comparable period of
2008 was lowered by notable items totalling $460 million after tax, comprised
of $580 million ($392 million after tax) of capital markets environment
charges and a $110 million ($68 million after tax) increase in the general
allowance for credit losses.
    In P&C Canada, net income increased $113 million or 13%. Revenue
increased $285 million or 8.0% driven by volume growth across most products,
an improved net interest margin and higher cards and payment service revenue,
partially offset by lower revenue from mutual fund products and investment
securities losses in softer equity markets. Expenses increased $112 million or
5.6% primarily due to increases in employee benefit costs, capital taxes,
performance-based compensation, occupancy and severance costs.
    P&C U.S. net income declined US$13 million or 15%. The impact of impaired
loans reduced net income by US$35 million in 2009 and by US$22 million in
2008. Revenue increased US$8 million or 1.1%; however, it improved US$39
million or 6.0% excluding the US$38 million Visa Inc. IPO gain of a year ago,
the US$29 million impact of the Wisconsin acquisitions and the US$22 million
incremental impact of higher levels of impaired loans. The increase was
largely due to higher loan and deposit volumes, improved net interest margin
and higher gains on mortgage sales. Expenses increased US$14 million or 2.6%
but were flat excluding changes in the Visa litigation accrual, a US$9 million
increase in the costs of managing our impaired loan portfolio and the US$28
million impact of the Wisconsin acquisitions.
    Private Client Group net income decreased $97 million or 26% from the
same period a year ago, reflective of challenging equity markets and a low
interest rate environment. Results in the first quarter of 2009 were lowered
by an $11 million after-tax charge in respect of the valuation of auction-rate
securities but benefited from a $23 million recovery of prior periods' income
taxes and the BMO Life Assurance acquisition.
    BMO Capital Markets net income increased $350 million. Results for the
current year to date were affected by charges of $428 million after tax
related to the capital markets environment. Results in the comparable period
of 2008 were affected by charges of $392 million after tax. Improved
performance was attributable to significantly increased trading revenues and
corporate banking revenues. Revenues from our interest-rate-sensitive
businesses also performed very well in the first two quarters, having
benefited from the unprecedented easing in the interest rate environment.
    Corporate Services net loss rose $644 million from a year ago, driven in
large part by lower revenues, higher provisions for credit losses due to our
expected loss provisioning methodology, and higher severance costs.

    Revenue

    BMO analyzes consolidated revenues on a GAAP basis. However, like many
banks, BMO analyzes revenue of its operating groups and associated 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 offset to the group teb adjustments is reflected in
Corporate Services revenues.
    Total revenue in the current quarter increased $232 million or 8.4% from
a year ago to a record $2.98 billion. There was strong growth in P&C Canada,
P&C U.S. and BMO Capital Markets with reductions in the Private Client Group
and in Corporate Services. Revenue increased $323 million or 12% from the
second quarter, in part due to the charges recorded in that period.
    The stronger U.S. dollar increased revenue growth by $75 million or 2.7
percentage points year over year. However, the weaker U.S. dollar decreased
revenue growth by $101 million or 3.7 percentage points from the second
quarter. Changes in net interest income and non-interest revenue are reviewed
in the sections that follow.

    Net Interest Income

    Net interest income increased $184 million or 14% from a year ago. BMO's
overall net interest margin improved 16 basis points, which reflected higher
contributions from every group except Private Client Group and Corporate
Services. Average earning assets increased $13 billion or 4% with increases in
all groups except P&C Canada which was affected by the securitization of
residential mortgages and the runoff of the mortgage broker portfolio as
planned.
    Relative to the second quarter, net interest income increased $131
million or 9.8%. This was a result of total bank margin improvement of 19
basis points due primarily to Corporate Services and P&C Canada, as well as
the impact of three more calendar days in the current quarter. Average earning
assets decreased $18 billion with declines in BMO Capital Markets and P&C U.S.
partly offset by growth in P&C Canada and Private Client Group. Approximately
$15 billion of the overall reduction was attributable to the weaker U.S.
dollar.
    Year to date, net interest income increased $465 million or 13%, driven
by the growth in earning assets and a 10 basis point increase in net interest
margin. There were higher margins in every group except Private Client Group
and Corporate Services. Average earning assets increased $19 billion or 5.9%
with increases in all groups except P&C Canada, which was lowered by the
residential mortgage securitization activities and the planned runoff of the
broker and third-party channel mortgage portfolio.
    BMO's overall net interest margin on earning assets for the third quarter
of 2009 was 1.74%, or 16 basis points higher than in the third quarter of the
prior year and 19 basis points higher than in the second quarter. The main
drivers of the change in total bank margin are the individual group margins,
the change in the magnitude of each operating group's assets and the level of
net interest income recorded in Corporate Services. The year-over-year
increase of 16 basis points was mainly due to higher volumes in more
profitable products, favourable prime rates relative to Bankers' Acceptances'
rates and actions taken to mitigate the impact of rising long-term funding
costs in P&C Canada as well as strong performance in corporate lending and
higher trading net interest income in BMO Capital Markets, partially offset by
reduced net interest income in Corporate Services. Private Client Group had a
slight margin decline due to the inclusion of BMO Life Assurance in 2009. This
is a relatively smaller group and its effect on the total bank margin change
was minimal.
    Relative to a year ago, net interest margin was higher by 33 basis points
in P&C Canada. Approximately one-half of the increase was attributable to
deposits growth outpacing loan growth, while approximately one-third was due
to the impact of having securitized low-margin mortgages. The remaining
increase was driven by favourable prime rates relative to BA rates, as well as
actions to mitigate the impact of rising long-term funding costs. P&C Canada
net interest margin also improved 3 basis points relative to the second
quarter, due to higher mortgage refinancing fees. In P&C U.S., net interest
margin improved by 2 basis points year over year due to new deposit generation
and our pricing actions. BMO Capital Markets net interest margin rose 33 basis
points from a year ago, driven by higher spreads in our corporate lending
business and higher trading net interest income. Corporate Services net
interest income improved appreciably relative to the second quarter, due in
part to actions to lower the negative carry on certain asset-liability
interest rate and liquidity management positions and more stable market
conditions. Relative to a year ago, Corporate Services net interest income
declined primarily due to the impact of credit card securitizations completed
in 2008, a negative carry on certain asset-liability interest rate positions
and the continued impact of funding activities to enhance our strong liquidity
position.
    Year to date, BMO's overall net interest margin rose 10 basis points due
to higher volumes in more profitable products in P&C Canada and higher spreads
in corporate lending and interest-rate-sensitive businesses as well as
increased trading net interest income in BMO Capital Markets, offset in large
part by reduced net interest income in Corporate Services.


    
    Net Interest Margin (teb)(*)

                                      Increase  Increase            Increase
                                     (Decrease)(Decrease)          (Decrease)
                                           vs.       vs.                 vs.
    (In basis points)        Q3-2009   Q3-2008   Q2-2009  YTD-2009  YTD-2008
    -------------------------------------------------------------------------
    P&C Canada                   317        33         3       310        28
    P&C U.S.                     313         2         8       308         7
    -------------------------------------------------------------------------
    Personal and Commercial
     Client Group                316        28         3       310        25
    Private Client Group         293      (193)      (68)      352      (126)
    BMO Capital Markets          102        33        (7)      106        42
    Corporate Services,
     including Technology and
     Operations (T&O)(xx)         nm        nm        nm        nm        nm
    -------------------------------------------------------------------------
    Total BMO                    174        16        19       160        10
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total Canadian Retail(xxx)   317        20        (2)      315        21
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*)    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. Operating group margins are stated on a teb basis while
           total BMO margin is stated on a GAAP basis.
    (xx)   Corporate Services net interest income is negative and lowers
           BMO's overall net interest margin to a greater degree in 2009 than
           in prior years.
    (xxx)  Total Canadian retail margin represents the net interest margin of
           the combined Canadian business of P&C Canada and Private Client
           Group.
    nm  -  not meaningful
    

    Non-Interest Revenue

    Non-interest revenue increased $48 million or 3.3% from a year ago.
Non-interest revenue in the third quarter of 2008 was affected by the $134
million of charges included in trading non-interest revenue as outlined in the
Notable Items section. Net of notable items, non-interest revenue decreased
due to reductions in securities commissions and fees, card services, mutual
fund revenues and foreign exchange revenues. Lending fees increased in BMO
Capital Markets and deposit and payment service charges also increased. There
were higher trading revenues, reduced investment securities losses and higher
securitization revenues, which increased $69 million from a year ago to $202
million, largely due to securitizing credit card loans. Revenues included
gains of $15 million on the sale of loans for new securitizations, down $26
million from a year ago, and gains of $149 million on sales of loans to
revolving securitization vehicles, up $77 million from a year ago.
Securitizations have resulted in the recognition of less interest income ($175
million less) in the quarter, as well as reduced credit card fees ($122
million less) and lower provisions for credit losses ($43 million less). The
combined impact of securitizing assets in the current and prior periods
decreased pre-tax income in the current quarter by $52 million. We securitize
loans primarily to obtain alternate sources of cost-effective funding. In the
quarter, we securitized $415 million of residential mortgage loans.
Securitizations are detailed in Note 4 to the unaudited consolidated financial
statements.
    Relative to the second quarter, non-interest revenue increased $192
million or 15%. The prior quarter was impacted by $117 million of capital
markets environment charges as set out in the Notable Items section that
follows at the end of this MD&A. There were increased non-interest revenues in
all of the operating groups except Corporate Services. P&C Canada revenues
increased primarily due to investment securities gains and higher activity
fees in the current quarter. Private Client Group non-interest revenue
increased due to higher revenue in the brokerage businesses, higher fee-based
revenue in mutual funds on higher client assets and higher insurance revenues
on the BMO Life Assurance acquisition. BMO Capital Markets non-interest
revenue rose significantly due to higher trading revenues and reduced
investment securities losses, partially offset by lower merger and acquisition
and equity underwriting fees. Corporate Services non-interest revenues fell
primarily due to lower securitization revenues and mark-to-market losses on
hedging activities compared with gains in the second quarter.
    Year to date, non-interest revenue increased $218 million or 5.8%. There
was growth in P&C Canada due to higher revenue from the cards and payment
services businesses, strong growth in BMO Capital Markets due to higher
trading revenues and growth in Corporate Services due to increased
securitization revenue. Private Client Group non-interest revenues decreased
as there were reductions in securities commissions and fees and mutual fund
revenues in the weaker equity market environment.

    Non-Interest Expense

    Non-interest expense increased $91 million or 5.1% from a year ago to
$1,873 million. There were increases in each of the groups except Private
Client Group. The stronger U.S. dollar increased expense growth by $40 million
or 2.2 percentage points and expenses were further raised by the $34 million
impact of acquired businesses. Increased expenses were reflected in higher
performance-based compensation, particularly in BMO Capital Markets in line
with improved revenues, in higher employee benefit costs and in FDIC deposit
insurance premiums included in other expenses.  There was a nominal $10
million reversal of the 2007 restructuring charge recorded in Corporate
Services in the quarter.
    Cash operating leverage was 3.2% in the current quarter.
    Non-interest expense decreased $15 million or 0.8% from the second
quarter. Expenses were lowered $54 million by the impact of the weaker U.S.
dollar while the second quarter included $118 million in severance costs.
Performance-based compensation increased $119 million as there were increases
in each of the operating groups, in line with improved performance. FDIC
deposit insurance premiums increased from $19 million to $32 million primarily
due to a special assessment. Expenses were also raised by the impact of the
BMO Life Assurance acquisition.
    Year to date, non-interest expense increased $526 million or 10% to
$5,602 million. Close to two-thirds of the increase was attributable to the
$228 million impact of the stronger U.S. dollar and the $104 million impact of
operating and integration costs of new acquisitions. Expense growth was
reflected in higher severance, salaries and benefits, premises and equipment,
and deposit insurance premiums that are included in other expenses.
    Cash operating leverage was -1.2% year to date.

    Risk Management

    Credit and equity markets turbulence moderated during the quarter as a
number of recent economic developments increased confidence that the deep
recession is unlikely to worsen and signs of a turning in the economy are
increasing. However, the anticipated sluggish recovery and continued weakness
in the labour market imply further pressure on personal and business credit
quality. This, along with risks to the economic outlook, will continue to
impact our businesses and portfolios. The loan portfolio continues to be
impacted by negative credit risk migration as expected but the pace of
migration is slowing in a number of areas. Commercial and Corporate portfolios
that are showing particular pressure include U.S. commercial real estate,
forest products and manufacturing. Consumer portfolios with higher loss
exposure include those tied to U.S. residential real estate and Canadian
credit cards.
    Provisions for credit losses for the quarter totalled $417 million.
Specific provisions for credit losses totalled $357 million, comprised of $144
million in Canada, $193 million in the United States and $20 million in other
countries. Specific provisions totalled $434 million in the third quarter of
2008 and $372 million in the second quarter of 2009. As previously disclosed,
provisions a year ago included $247 million in respect of two corporate
accounts related to the U.S. housing market, while provisions in the second
quarter of 2009 included a $41 million one-time increase related to a change
in provisioning for the consumer portfolio within P&C Canada. The $60 million
increase in the general allowance in the current quarter reflects the
continuing weak economic environment. There was no change in the general
allowance in the preceding quarter and a $50 million increase in the
comparable quarter a year ago.
    BMO employs a methodology for segmented reporting purposes whereby
expected credit losses are charged to the operating groups quarterly based on
their share of expected credit losses over an economic cycle. The difference
between quarterly charges based on expected losses and required quarterly
provisions based on actual losses is charged (or credited) to Corporate
Services. The following paragraph outlines provisions for credit losses based
on actual losses for the quarter.
    Based on actual credit losses, in the third quarter of 2009 BMO recorded
a $357 million specific provision for credit losses. It was comprised of $132
million in P&C Canada, $140 million in P&C U.S. and $85 million in BMO Capital
Markets. In the second quarter of 2009, BMO's $372 million specific provision
for credit losses was comprised of $124 million in P&C Canada (including the
$41 million one-time amount noted above), $143 million in P&C U.S. and $105
million in BMO Capital Markets. In the third quarter of 2008, BMO's $434
million specific provision for credit losses was comprised of $87 million in
P&C Canada, $37 million in P&C U.S. and $310 million in BMO Capital Markets.
    Specific provisions this quarter represented an annualized 81 basis
points of average net loans and acceptances, compared with 79 basis points in
the second quarter, 99 basis points a year ago and a 23 basis point average
over the past five fiscal years. Effective in the first quarter of 2009, we
began reporting credit statistics on a basis that excludes securities borrowed
or purchased under resale agreements from loans. All comparative figures have
been restated.
    Provisions for credit losses for the year to date totalled $1,217
million. Specific provisions for credit losses totalled $1,157 million and
there was a $60 million increase in the general allowance for credit losses.
In the comparable period of 2008, provisions for credit losses totalled $865
million, comprised of $755 million of specific provisions and a $110 million
increase in the general allowance. During fiscal 2008, general provisions
totalled $260 million.
    New impaired loan formations totalled $549 million in the quarter, down
from $694 million in the preceding quarter but up from $438 million in the
same quarter a year ago. The U.S.-related formations continued to account for
over half of BMO's total new formations. There were $40 million of impaired
loan sales in the current quarter, compared with $55 million of impaired loan
sales in the second quarter of 2009 and $5 million a year ago. Total gross
impaired loans were $2,913 million at the end of the current quarter, down
from $2,972 million at the end of the second quarter but up from $1,798
million at the end of the comparable quarter in 2008.
    The total allowance for credit losses was $1,798 million, compared with
$1,825 million in the preceding quarter, declining due to the impact of the
weaker U.S. dollar. Allowances were comprised of a specific allowance of $495
million and a general allowance of $1,303 million. The general allowance is
maintained to absorb impairment in the existing credit portfolio that cannot
yet be associated with specific credit assets and is assessed on a quarterly
basis. The general allowance decreased $11 million from the end of the
previous quarter due to the effect of a weaker U.S. dollar, partially offset
by the $60 million provision in the current quarter.
    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 78.7% of the loan portfolio at the end of
the quarter, up from 76.1% in the second quarter and 77.8% a year ago. The
variances were mainly due to a volume decrease in corporate loans.
Approximately 87.6% of the consumer portfolio is comprised of secured loans.
Excluding credit card loans, approximately 89.9% of consumer loans are
secured. In the United States, the consumer portfolio totals US$15.9 billion
and is primarily comprised of three main asset classes: residential first
mortgages (38%), home equity products (33%) and indirect automobile loans
(26%).
    BMO's market risk and liquidity and funding management practices and key
measures are outlined on pages 77 to 82 of BMO's 2008 Annual Report. As
described at the end of fiscal 2008, certain positions were transferred from
our trading portfolio to our available-for-sale portfolio in the fourth
quarter of 2008. These positions, however, remained in our Comprehensive VaR
and Issuer Risk measures throughout the fourth quarter. The removal of these
positions from our Comprehensive VaR and Issuer Risk measures in the first
quarter is the primary reason for the decrease in our Trading and Underwriting
Market Value Exposure (MVE) and Earnings Volatility. The interest rate risk
associated with these positions is captured in our Interest Rate Risk
(accrual) MVE measures. MVE and EV were little changed over the quarter. There
were no significant changes to our Trading and Underwriting market risk
management practices over the quarter.
    There was no significant change in our structural market risk management
practices during the quarter. Structural earnings risk arising from interest
rate and foreign exchange rate movements has increased from the year end and
from the prior quarter, as reflected in the 12-month earnings volatility
measure in the attached table. The increase from the year end is attributable
to the lower interest rate environment, as further reductions in interest
rates reduce yields on assets more than rates paid on deposits. The increase
from the prior quarter reflects a higher level of modelled interest rate
volatility.
    There have been no significant changes to the levels of liquidity and
funding risk over the quarter. We remain satisfied that our liquidity and
funding management framework provides us with a sound position, even in times
of stress.
    This Risk Management section and the following Income Taxes section
contain forward-looking statements. Please see the Caution Regarding
Forward-Looking Statements.


    
    Provisions for Credit Losses (PCL)

    (Canadian $ in millions,
     except as noted)        Q3-2009   Q2-2009   Q3-2008  YTD-2009  YTD-2008
    -------------------------------------------------------------------------
    New specific provisions      415       419       475     1,317       881
    Reversals of previously
     established allowances      (23)      (15)       (7)      (57)      (35)
    Recoveries of loans
     previously written-off      (35)      (32)      (34)     (103)      (91)
    -------------------------------------------------------------------------
    Specific provision for
     credit losses               357       372       434     1,157       755
    Increase in the general
     allowance                    60         -        50        60       110
    -------------------------------------------------------------------------
    Provision for credit
     losses                      417       372       484     1,217       865
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Specific PCL as a % of
     average net loans and
     acceptances (annualized)  0.81%     0.79%     0.99%     0.83%     0.59%
    PCL as a % of average net
     loans and acceptances
     (annualized)              0.94%     0.79%     1.10%     0.88%     0.67%


    Changes in Gross Impaired Loans and Acceptances (GIL)

    (Canadian $ in millions,
     except as noted)
    -------------------------------------------------------------------------
    GIL, Beginning of Period   2,972     2,666     1,820     2,387       720
    Additions to impaired
     loans & acceptances         549       694       438     1,955     1,700
    Reductions in impaired
     loans & acceptances(1)     (233)      (97)      (91)     (272)      (39)
    Write-offs                  (375)     (291)     (369)   (1,157)     (583)
    -------------------------------------------------------------------------
    GIL, End of Period         2,913     2,972     1,798     2,913     1,798
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    GIL as a % of gross
     loans & acceptances       1.66%     1.64%     1.01%     1.66%     1.01%
    GIL as a % of equity and
     allowances for credit
     losses                   12.75%    12.95%     9.09%    12.75%     9.09%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (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
        (03-09 $187MM; Q2-09 $150MM; and Q3-08 $106MM).


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

    (After-tax Canadian           Market value             12-month earnings
     equivalent)                 exposure (MVE)                   volatility
    -------------------------------------------------------------------------
                   July 31   Apr. 30   Oct. 31   July 31   Apr. 30   Oct. 31
                      2009      2009      2008      2009      2009      2008
    -------------------------------------------------------------------------
    Trading and
     Underwriting    (20.4)    (19.1)    (33.4)    (12.5)    (14.9)    (28.7)
    Structural      (330.7)   (295.8)   (267.9)    (73.3)    (61.3)    (30.2)
    -------------------------------------------------------------------------
    BMO Financial
     Group          (351.1)   (314.9)   (301.3)    (85.8)    (76.2)    (58.9)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) Measured at a 99% confidence interval. Losses are in brackets.


    Total Trading and Underwriting MVE Summary ($ millions)(*)

                                                             As at     As at
                                   For the quarter ended     April   October
    (Pre-tax                               July 31, 2009  30, 2009  31, 2008
     Canadian      Quarter-                                Quarter-  Quarter-
     equivalent)       end   Average      High       Low       end       end
    ----------------------------------------------------- --------- ---------
    Commodities
     Risk             (0.7)     (0.6)     (0.8)     (0.4)     (0.5)     (0.9)
    Equity Risk      (11.0)    (11.4)    (14.6)     (9.2)     (9.2)     (7.3)
    Foreign
     Exchange Risk    (1.8)     (3.7)     (5.9)     (1.2)     (3.8)     (1.4)
    Interest Rate
     Risk (Mark-to-
     Market)(1)      (11.1)    (13.8)    (21.3)     (9.2)    (13.0)    (30.6)
    Diversifica-
     tion(2)           9.0      11.4        nm        nm       8.2       6.4
    ----------------------------------------------------- --------- ---------
    Comprehensive
     Risk            (15.6)    (18.1)    (23.0)    (14.3)    (18.3)    (33.8)
    Interest Rate
     Risk (accrual)  (13.4)    (11.5)    (15.8)     (6.1)     (8.0)    (11.6)
    Issuer Risk       (2.4)     (2.3)     (3.1)     (2.0)     (3.1)     (6.1)
    ----------------------------------------------------- --------- ---------
    Total MVE        (31.4)    (31.9)    (39.2)    (24.2)    (29.4)    (51.5)
    ----------------------------------------------------- --------- ---------
    ----------------------------------------------------- --------- ---------
    nm - not meaningful
    (*)  One-day measure using a 99% confidence interval. Losses are in
         brackets and benefits are presented as positive numbers.
    (1)  In 2009, measures exclude securities transferred to the available-
         for-sale portfolio in the fourth quarter of 2008.
    (2)  Computation of a diversification effect for the high and low is not
         meaningful.


    Structural Balance Sheet Earnings and Value Sensitivity to Changes in
    Interest Rates ($ millions)(*)(xx)

    (After-tax Canadian         Economic value     Earnings sensitivity over
     equivalent)                   sensitivity            the next 12 months
    -------------------------------------------------------------------------
                   July 31   Apr. 30   Oct. 31   July 31   Apr. 30   Oct. 31
                      2009      2009      2008      2009      2009      2008
    -------------------------------------------------------------------------
    100 basis point
     increase       (231.8)   (223.3)   (220.8)     15.3      12.6      (4.4)
    100 basis point
     decrease        204.0     232.9     169.2     (71.8)    (59.6)    (21.0)

    200 basis point
     increase       (503.3)   (471.8)   (488.6)      6.3       3.7     (16.2)
    200 basis point
     decrease        411.2     380.8     328.4     (72.2)   (121.9)   (177.6)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*)  Losses are in brackets and benefits are presented as positive
         numbers.
    (xx) For the Bank's Insurance businesses including BMO Life Assurance
         (the acquired operations of AIG Life Insurance Company of Canada), a
         100 basis point increase in interest rates results in an increase in
         earnings of $58 million and an increase in economic value of $177
         million. A 100 basis point decrease in interest rates results in a
         decrease in earnings of $50 million and a decrease in economic value
         of $193 million. These after-tax impacts are not reflected in the
         table above.
    

    Income Taxes

    As explained in the Revenue section, management assesses BMO's
consolidated results and associated provisions for income taxes on a GAAP
basis. We assess the performance of the operating groups and associated income
taxes on a taxable equivalent basis and report accordingly.
    The provision for income taxes increased $171 million from the third
quarter of 2008 and increased $94 million from the second quarter of 2009, to
$112 million. The effective tax rate for the quarter was 16.4%, compared with
a recovery rate of 12.2% in the third quarter of 2008 and a tax expense rate
of 4.4% in the second quarter of 2009. The income tax provision for the year
to date increased $81 million from the comparable period in 2008 to $59
million, resulting in an effective tax rate of 4.7% year to date. This
compares to a tax recovery of $22 million resulting in a recovery rate of 1.5%
for the same period last year.
    Excluding the impact of the recovery of prior periods' income taxes and
increase in general allowance in the current and comparable periods and the
impact of capital markets environment charges in both comparable periods, the
adjusted effective tax rate for the quarter was 20.9%, compared with 14.8% in
the second quarter of 2009 and 14.2% in the third quarter of 2008. Results a
year ago benefited from a $95 million recovery of prior periods' income taxes
and results in the current quarter included a $23 million recovery. Changes in
the adjusted effective tax rate for the quarters were primarily due to a lower
proportion of income from lower-tax-rate jurisdictions.
    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 income tax charges in shareholders' equity of $356 million for
the quarter and $394 million for the year to date. Refer to the Consolidated
Statement of Changes in Shareholders' Equity included in the unaudited
consolidated financial statements for further details.


    
    Summary Quarterly Results Trends

    (Canadian $ in millions,
     except as noted)                  Q3-2009   Q2-2009   Q1-2009   Q4-2008
    -------------------------------------------------------------------------
    Total revenue                        2,978     2,655     2,442     2,813
    Provision for credit losses
     - specific                            357       372       428       315
    Provision for credit losses
     - general                              60         -         -       150
    Non-interest expense                 1,873     1,888     1,841     1,818
    Net income                             557       358       225       560
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic earnings per share ($)          0.97      0.61      0.39      1.06
    Diluted earnings per share ($)        0.97      0.61      0.39      1.06
    Net interest margin on earning
     assets (%)                           1.74      1.55      1.51      1.71
    Effective income tax rate (%)         16.4       4.4     (41.0)     (9.2)
    Canadian/U.S. dollar exchange
     rate (average)                       1.11      1.24      1.23      1.11

    Net income:
      P&C Canada                           356       334       308       324
      P&C U.S.                              25        25        34        12
    -------------------------------------------------------------------------
    Personal and Commercial Banking        381       359       342       336
    Private Client Group                   120        78        73        84
    BMO Capital Markets                    343       249       179       290
    Corporate Services, including T&O     (287)     (328)     (369)     (150)
    -------------------------------------------------------------------------
    BMO Financial Group                    557       358       225       560
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (Canadian $ in millions,
     except as noted)                  Q3-2008   Q2-2008   Q1-2008   Q4-2007
    -------------------------------------------------------------------------
    Total revenue                        2,746     2,620     2,026     2,200
    Provision for credit losses
     - specific                            434       151       170       101
    Provision for credit losses
     - general                              50         -        60        50
    Non-interest expense                 1,782     1,680     1,614     1,655
    Net income                             521       642       255       452
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic earnings per share ($)          1.00      1.25      0.48      0.89
    Diluted earnings per share ($)        0.98      1.25      0.47      0.87
    Net interest margin on earning
     assets (%)                           1.58      1.47      1.45      1.47
    Effective income tax rate (%)        (12.2)     16.3     (50.3)    (19.3)
    Canadian/U.S. dollar exchange
     rate (average)                       1.01      1.01      1.00      1.00

    Net income:
      P&C Canada                           315       305       265       239
      P&C U.S.                              28        30        26        33
    -------------------------------------------------------------------------
    Personal and Commercial Banking        343       335       291       272
    Private Client Group                   125       121       122       156
    BMO Capital Markets                    263       187       (29)       46
    Corporate Services, including T&O     (210)       (1)     (129)      (22)
    -------------------------------------------------------------------------
    BMO Financial Group                    521       642       255       452
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    BMO's quarterly earning trends were reviewed in detail on pages 87 and 88
of the 2008 Annual Report. Readers are encouraged to refer to that review for
a more complete discussion of trends and factors affecting past quarterly
results including the modest impact of seasonal variations in results. The
above table outlines summary results for the fourth quarter of fiscal 2007
through the third quarter of fiscal 2009.
    Notable items have affected revenues. Results in the fourth quarter of
2007 reflected $275 million after tax in respect of charges related to
deterioration in capital markets, losses in our commodities business, an
increase in the general allowance and a restructuring charge. In BMO Capital
Markets, there were significantly smaller commodities losses in 2008 as the
size and risk of the portfolio was reduced. The fourth quarter of 2007 through
second quarter of 2009 reflected charges related to deterioration in capital
markets. The charges (credits) were largely reflected in BMO Capital Markets
and amounted to $318 million, $488 million, ($42 million), $134 million, $45
million, $528 million and $117 million, respectively. BMO Capital Markets core
businesses that were not affected by notable items performed very strongly
over the course of 2007 but market conditions were softer in 2008 with
improvement in the first through third quarters of 2009.
    P&C Canada has continued to benefit from strong volume growth over 2008
and into 2009, with favourable movements in market share in a number of key
businesses and improvements in personal loyalty scores.
    P&C U.S. has operated in a difficult business environment over the past
year and results in 2008 and 2009 have increasingly been impacted by the
effects of the credit environment, which lowers revenues and increases
expenses. The net income impact of this was US$22 million in fiscal 2008 and
US$35 million for the current year to date. P&C U.S. results in the fourth
quarter of 2008 were affected by the completion of the integration of the
Wisconsin acquisitions.
    Private Client Group results reflected stable earnings until the fourth
quarter of 2008 when revenue growth slowed on lower managed and administered
assets amid challenging market conditions. Asset levels remained low in the
first half of 2009 but recovered somewhat in the most recent quarter as equity
markets strengthened. Charges in respect of actions taken to support U.S.
clients in the weak capital markets environment lowered results in the fourth
quarter of 2008 and first quarter of 2009. Results in the most recent quarter
include the benefit of an income tax recovery of $23 million.
    Corporate Services results have weakened from the first half of 2008 due
to increased provisions for credit losses, reflecting BMO's allocation of
provisions on an expected loss basis. Provisions for credit losses are higher
as economic conditions have softened from the particularly favourable credit
environment of past years. Results in 2009 have also been affected by low
revenues as explained in the Corporate Services section and by severance costs
in the second quarter.
    The U.S. dollar has been volatile, strengthening late in 2008 and
especially in the first quarter of 2009 but weakened markedly in the most
recent quarter. A stronger U.S. dollar raises the translated values of BMO's
U.S.-dollar-denominated revenues and expenses.

    Balance Sheet

    Total assets of $415.4 billion decreased $0.7 billion from October 31,
2008. The weaker U.S. dollar decreased the translated value of
U.S.-dollar-denominated assets by $13.6 billion. The $0.7 billion decrease
primarily reflects lower loans and acceptances of $13.4 billion, lower cash
resources of $6.5 billion and lower derivative assets of $6.0 billion,
partially offset by higher securities borrowed or purchased under resale
agreements of $17.2 billion and higher securities balances of $10.0 billion.
    The $6.0 billion decrease in derivative financial assets was primarily in
foreign exchange, equity, credit and commodity contracts, partially offset by
increased values of interest rate contracts. Similar movements were observed
in derivative financial liabilities.
    The growth in securities borrowed or purchased under resale agreements of
$17.2 billion and the decline in cash resources of $6.5 billion are both
explained by increased client preference for securities sold under repurchase
agreements as an alternative to placing cash on deposit. Cash resources were
up slightly from the second quarter at $14.6 billion.
    The increase in securities of $10.0 billion from October 31, 2008
includes the impact of higher trading activity and the securities associated
with the acquisition of the BMO Life Assurance business, which closed during
the second quarter.
    The decrease in net loans and acceptances of $13.4 billion was due to
lower loans to businesses and governments as a result of corporate clients
accessing the bond market for longer term funding, thus reducing the loan
utilization rate. Overall loans were lowered $6.1 billion by the impact of the
weaker U.S. dollar. Residential mortgage loans were slightly lower than at
October 31, 2008 as the effect of loan growth in the period was offset by
having securitized $6 billion of loans in 2009.
    Liabilities and shareholders' equity decreased $0.7 billion from October
31, 2008. The weaker U.S. dollar decreased the translated value of liabilities
by $13.6 billion. The $0.7 billion decrease reflects lower deposits of $12.7
billion and lower securities sold but not yet purchased of $6.1 billion,
partly offset by higher securities lent or sold under repurchase agreements of
$16.3 billion and higher share capital of $2.2 billion.
    Deposits by businesses and governments, which account for 50% or $122.3
billion of total deposits, decreased $13.8 billion, driven by the impact of
the weaker U.S. dollar and increased client investments in securities sold
under repurchase agreements as noted above. Deposits by banks, which account
for 9% or $23.2 billion of total deposits, decreased $7.1 billion. Deposits
from individuals, which account for the remaining 41% or $99.5 billion of
total deposits, increased $8.3 billion, primarily in fixed-term and demand
deposits and were used to reduce deposits from businesses and banks.
Tax-sheltered deposits, including new Tax Free Savings Accounts for
individuals, have increased $1.8 billion. The proceeds of the net increase in
securities lent or sold under repurchase agreements and securities sold but
not yet purchased were used in trading activities.
    The increase in shareholders' equity of $1.8 billion reflects $1.0
billion raised by the issuance of 33.3 million common shares and the net
issuance of $0.8 billion in preferred shares.

    Capital Management

    At July 31, 2009, BMO's Tier 1 Capital Ratio was 11.71%, with Tier 1
capital of $20.1 billion and risk-weighted assets (RWA) of $171.6 billion. The
ratio remains strong, increasing 101 basis points from 10.70% at the end of
the second quarter and 194 basis points from 9.77% at October 31, 2008. The
increase from last year end was due to both growth in capital and lower RWA.
The increase from the second quarter was primarily due to lower RWA.
    Tier 1 capital increased from October 31, 2008 primarily due to capital
issuances in the first half of the year as well as the issuance of $400
million of 5.40% Preferred Shares Series 23 in the third quarter. The impact
of those issuances was partially offset by an increase in certain Basel II
deductions and the impact of a new Basel II requirement we adopted on November
1, 2008, whereby investments in non-consolidated entities and substantial
investments, excluding insurance subsidiaries held prior to January 1, 2007,
are deducted 50% from Tier 1 capital and 50% from Tier 2 capital. The bank's
incremental investment in its insurance subsidiary, to support the insurance
company acquisition completed in the second quarter, is also deducted 50% from
Tier 1 capital and 50% from Tier 2 capital. Previously these deductions were
taken from Tier 2 capital. Tier 1 capital increased relative to the second
quarter primarily due to the above noted preferred share issuance.
    RWA decreased $20.0 billion from October 31, 2008 primarily due to the
impact of a weaker U.S. dollar that decreased the translated value of U.S.
dollar-denominated RWA, lower market risk RWA and lower credit risk RWA from
lower loan volumes. The reductions were partially offset by credit migration
that affected loan and securitization credit risk RWA. Relative to the second
quarter, RWA decreased $13.0 billion primarily due to the impact of a weaker
U.S. dollar and lower loan volumes as noted above. Basel II credit risk RWA
will change with the underlying economic environment. We would anticipate
credit risk RWA to increase from current levels through the remainder of the
year and into fiscal 2010, given the current economic outlook. We also expect
RWA will increase in future years as a result of pending regulatory changes
expected to be implemented in 2010 and beyond.
    BMO's Total Capital Ratio was 14.32% at July 31, 2009. The ratio
increased 215 basis points from 12.17% at October 31, 2008 and 112 basis
points from 13.20% in the second quarter. BMO's Tangible Common Equity to RWA
Ratio was 8.71%, up from 7.47% last year end and 8.24% in the second quarter.
BMO's ratio is strong relative to our Canadian and international peer groups.
    During the quarter, 3,416,000 shares were issued due to the exercise of
stock options, share exchanges and the Dividend Reinvestment and Share
Purchase Plan. We did not repurchase any Bank of Montreal common shares under
our common share repurchase program during the quarter.
    On August 25, 2009, BMO's Board of Directors declared a quarterly
dividend payable to common shareholders of $0.70 per share, unchanged from a
year ago and from the preceding quarter. The dividend is payable November 26,
2009 to shareholders of record on November 6, 2009. Common shareholders who,
in lieu of cash, elect to have this dividend reinvested in additional common
shares under BMO's Shareholder Dividend Reinvestment and Share Purchase Plan,
will receive a two per cent discount from the average market price of the
common shares (as defined in the plan).


    
    Qualifying Regulatory Capital

    Basel II Regulatory Capital and Risk-Weighted Assets

    (Canadian $ in millions)                               Q3-2009   Q4-2008
    -------------------------------------------------------------------------
    Common shareholders' equity                             16,750    15,974
    Non-cumulative preferred shares                          2,571     1,996
    Innovative Tier 1 Capital Instruments                    2,901     2,486
    Non-controlling interest in subsidiaries                    27        39
    Goodwill and excess intangible assets                   (1,551)   (1,635)
    Accumulated net after-tax unrealized losses from
     available-for-sale equity securities                      (10)      (15)
    -------------------------------------------------------------------------
    Net Tier 1 Capital                                      20,688    18,845
    Securitization-related deductions                         (187)     (115)
    Expected loss in excess of allowance - AIRB approach       (59)        -
    Substantial investments                                   (352)        -
    Other deductions                                             -        (1)
    -------------------------------------------------------------------------
    Adjusted Tier 1 Capital                                 20,090    18,729
    -------------------------------------------------------------------------
    Subordinated debt                                        4,249     4,175
    Trust subordinated notes                                   800       800
    Accumulated net after-tax unrealized gain from
     available-for-sale equity securities                        -         -
    Eligible general allowance for credit losses               300       494
    -------------------------------------------------------------------------
    Total Tier 2 Capital                                     5,349     5,469
    Securitization-related deductions                          (15)       (6)
    Expected loss in excess of allowance - AIRB approach       (59)        -
    Substantial investments/investment in insurance
     subsidiaries                                             (805)     (871)
    Other deductions                                             -         -
    -------------------------------------------------------------------------
    Adjusted Tier 2 Capital                                  4,470     4,592
    -------------------------------------------------------------------------
    Total Capital                                           24,560    23,321
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Risk-Weighted Assets (RWA)

    (Canadian $ in millions)                               Q3-2009   Q4-2008
    -------------------------------------------------------------------------
    Credit risk                                            147,137   163,616
    Market risk                                              7,224    11,293
    Operational risk                                        17,197    16,699
    -------------------------------------------------------------------------
    Total risk-weighted assets                             171,558   191,608
    Regulatory floor                                             -         -
    -------------------------------------------------------------------------
    Total Transitional Risk-Weighted Assets                171,558   191,608
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Outstanding Shares and Securities Convertible into Common Shares

                                                         Number of shares or
    As of August 19, 2009                             Canadian dollar amount
    -------------------------------------------------------------------------
    Common shares                                                548,620,000
    Class B Preferred Shares
      Series 5                                                $  200,000,000
      Series 13                                               $  350,000,000
      Series 14                                               $  250,000,000
      Series 15                                               $  250,000,000
      Series 16                                               $  300,000,000
      Series 18                                               $  150,000,000
      Series 21                                               $  275,000,000
      Series 23                                               $  400,000,000
    Convertible into common shares:
    Class B Preferred Shares
      Series 10                                               $  396,000,000
    Stock options
      - vested                                                    12,601,000
      - non-vested                                                 7,023,000
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Details on share capital are outlined in Notes 21 and 23 to the audited
    financial statements on pages 135 to 138 and the table on page 62 in the
    Annual MD&A included in the 2008 Annual Report.
    

    Eligible Dividends Designation

    For the purposes of the Income Tax Act (Canada) and any similar
provincial and territorial legislation, BMO designates all dividends paid on
both its common and preferred shares after December 31, 2005, and all
dividends (including deemed dividends) paid thereafter, as "eligible
dividends" unless BMO indicates otherwise.

    Credit Rating

    BMO's senior debt credit ratings were unchanged in the quarter. All four
ratings are indicative of high-grade, high-quality issues. They remain: DBRS
(AA); Fitch (AA-); Moody's (Aa1); and Standard & Poor's (A+). During the
quarter, Moody's lowered its ratings outlook from stable to negative, citing
the potential for higher loan losses in the market environment. The ratings
outlook was lowered for the majority of Canada's major banks. The other three
ratings agencies continue to maintain their ratings with a stable outlook.

    Transactions with Related Parties

    In the ordinary course of business, we provide banking services to our
directors and executives and their affiliated entities, joint ventures and
equity-accounted investees on the same terms that we offer our customers. A
select suite of customer loan and mortgage products is offered to our
employees at rates normally accorded to our preferred customers. We also offer
employees a fee-based subsidy on annual credit card fees.
    Stock options and deferred share units granted to directors and preferred
rate loan agreements for executives, relating to transfers we initiate, are
both discussed in Note 28 of the audited consolidated financial statements on
page 146 of the 2008 Annual Report.

    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 are described on page 68
of the 2008 Annual Report and in Notes 5 and 7 to the unaudited consolidated
financial statements. See the Financial Instruments in the Difficult Credit
Environment section for changes to our off-balance-sheet arrangements during
the three months ended July 31, 2009.

    Accounting Policies and Critical Accounting Estimates

    The notes to BMO's October 31, 2008 audited consolidated financial
statements outline our significant accounting policies.
    Pages 69 to 71 of the 2008 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
2008 Annual Report to review that discussion.

    
    Accounting Changes

    Goodwill and Intangible Assets
    

    On November 1, 2008, BMO adopted the CICA's new accounting requirements
for goodwill and intangible assets. We have restated prior periods' financial
statements for this change. New rules required us to reclassify certain
computer software from premises and equipment to intangible assets. The impact
of implementation of this standard was not material to our results of
operations or financial position and had no impact on net income. See Note 2
to the unaudited consolidated financial statements.

    Future Changes in Accounting Standards

    On August 20, 2009, the CICA released new accounting requirements
relating to the classification and measurement of financial assets, which are
effective for the bank in the fourth quarter of 2009. The new standard
requires that we reclassify available-for-sale and trading debt securities to
loans and receivables when there is no active market and that certain loans
with an active market be reclassified to available-for-sale securities.
Impairment on the reclassified debt securities will be calculated in a manner
consistent with our loan portfolio, based on our assessment of the
recoverability of principal and interest. Reclassifications will be made as of
November 1, 2008 and as a result, other than temporary impairment charges that
do not reflect credit losses recorded in the nine months ended July 31, 2009
will be reversed. We do not expect the adoption of this accounting standard to
have a material impact on our results. This section contains forward-looking
statements. Please see the Caution Regarding Forward-Looking Statements.

    Transition to International Financial Reporting Standards

    Canadian public companies will be required to prepare their financial
statements in accordance with International Financial Reporting Standards
(IFRS), as issued by the International Accounting Standards Board, for
financial years beginning on or after January 1, 2011. Effective November 1,
2011, we will adopt IFRS as the basis for preparing our consolidated financial
statements.
    Due to anticipated changes in IFRS prior to transition, we are not in a
position to determine the impact on our financial results at this time.
    Our transition plan to meet the requirements of IFRS remains on track.
Page 71 of our 2008 Annual Report contains a discussion of the key elements of
our transition plan and readers are encouraged to refer to the 2008 Annual
Report to review that discussion.

    Financial Instruments in the Difficult Credit Environment

    Pages 62 to 67 of BMO's 2008 annual report provided enhanced disclosure
related to financial instruments that, effective in 2008, markets started to
consider to be carrying higher risk. Readers are encouraged to review that
disclosure to assist in understanding the nature of BMO's exposures at July
31, 2009 that are discussed in the sections that follow.

    Consumer Loans

    In Canada, our consumer portfolio totals $76.1 billion and is comprised
of three main asset classes: residential mortgages (52%), instalment and other
personal loans (45%) and credit card loans (3%).
    In the United States, our consumer portfolio totals US$15.9 billion and
is also primarily comprised of three asset classes: residential first
mortgages (38%), home equity products (33%) and indirect automobile loans
(26%). There were no outstanding credit card loans at July 31, 2009.
    The sections below discuss subprime mortgage loans, Alt-A mortgage loans
and home equity products, portfolios that are of increased investor interest
in today's environment.

    Subprime First Mortgage Loans

    In the United States, we have US$0.29 billion (US$0.25 billion at October
31, 2008) of first mortgage loans that had subprime characteristics at the
date of authorization. A small portion of the above is in respect of uninsured
loans with a loan-to-value ratio above 80% at issuance. A modest $13.2 million
or 4.49% ($5.4 million or 2.14% at October 31, 2008) of the portfolio was 90
days or more in arrears. This compares with a rate of 2.23% on BMO's total
U.S. first mortgage loan portfolio.
    BMO also has net exposure of US$116 million (US$159 million at October
31, 2008) to a business that purchased distressed mortgages (including
subprime mortgages) at a discounted price.
    In Canada, BMO does not have any subprime mortgage programs. BMO mortgage
lending decisions incorporate a full assessment of the customer and loan
structure. Credit score is only one component of the adjudication process and
consequently we do not categorize loans based upon credit scores alone.

    Alt-A First Mortgage Loans

    In the United States, Alt-A loans are generally considered to be loans
for which borrower qualifications are subject to limited verification. The
U.S. loan portfolio had two loan programs that met this definition - our Easy
Doc and No Doc programs. The programs were discontinued in the third quarter
of 2008. Loans under the No Doc program, which comprise most of the exposure
in this class, required strong minimum credit bureau scores of 660 and strong
maximum loan-to-value ratios of 80% (90% with private mortgage insurance). Due
to these lending requirements, the credit quality of our Alt-A portfolio is
sound and the loans have performed relatively well. In the United States, our
direct Alt-A loans totalled US$1.3 billion (US$1.6 billion at October 31,
2008). Of this, $58 million or 4.32% was 90 days or more in arrears at July
31, 2009 ($10 million or 0.62% at October 31, 2008).
    In Canada, we do not have a mortgage program that we consider Alt-A. In
the past, we may have chosen to not verify income or employment for certain
customers where there were other strong characteristics supporting the credit
worthiness of a loan as part of our credit adjudication process; however, this
approach is no longer in use. Our Newcomers to Canada/non-resident mortgage
program permits limited income verification but has other strong qualification
criteria. There was approximately $2.5 billion ($2.2 billion at October 31,
2008) outstanding under this program. Of this, only $16 million or 0.66% was
90 days or more in arrears ($11 million or 0.51% at October 31, 2008),
reflecting the strong credit quality of these loans.

    Home Equity Products

    In the United States, we have a US$5.2 billion home equity loan
portfolio, which amounted to 3.1% of BMO's total loan portfolio as of July 31,
2009. Of the total portfolio, loans of US$325 million (US$300 million at
October 31, 2008) were extended to customers with original credit bureau
scores of less than 620, and would be categorized as subprime loans (US$554
million authorized) if included in the mortgage portfolio. Of this amount,
only US$7 million or 2.29% was 90 days or more in arrears (US$2 million and
0.81% at October 31, 2008).
    BMO also offered loans under two limited documentation programs within
the home equity portfolio in the United States that would be categorized as
Alt-A if they were in the first mortgage loans portfolio. The amount
authorized under these programs was US$1.0 billion and US$0.6 billion was
outstanding, unchanged from October 31, 2008. Loans made under these programs
have the same strong credit score and loan-to-value requirements as the first
mortgage portfolio and, as such, the portfolio has performed well. As at July
31, 2009, US$6 million or 0.96% of the portfolio was greater than 90 days in
arrears, little changed from October 31, 2008. This compares with a rate of
1.01% (0.57% at October 31, 2008) for BMO's total U.S. home equity loan
portfolio. We discontinued offering these programs in the third quarter of
2008.
    We also consider home equity loans to customers with credit bureau scores
above 620 but below 660 to be a higher-risk component of the loan portfolio.
This component of the portfolio was US$0.3 billion and US$4 million or 1.32%
of these loans were greater than 90 days in arrears (US$3 million and 0.90% at
October 31, 2008).
    In Canada, we have a $15.8 billion ($13.8 billion at October 31, 2008)
home equity line of credit portfolio. Authorized amounts total $28.3 billion
($25.4 billion at October 31, 2008). Home equity loans very rarely exceed
loan-to-value ratios of 80% at issuance. The home equity line of credit
portfolio is high-quality, with only 0.11% of the loans in the portfolio in
arrears 90 days or more (0.08% at October 31, 2008). Of these lines of credit,
one product line is offered only in first mortgage position and represents
approximately 59% of the total portfolio. The others include a blend of first
mortgage and subordinate positions. We also have a $0.3 billion home equity
instalment loan portfolio on which $2 million of loans are in arrears 90 days
or more.

    Leveraged Finance

    Leveraged finance loans are defined by BMO as loans to private equity
businesses and mezzanine financings where our assessment indicates a higher
level of credit risk. BMO has limited exposure to leveraged finance loans,
representing less than 1% of our total assets, with $3.3 billion outstanding
as at July 31, 2009 ($5.2 billion authorized), compared with $3.6 billion
outstanding ($5.8 billion authorized) at October 31, 2008. Of this amount,
$201 million or 6.1% was considered impaired ($234 million and 6.5% at October
31, 2008).

    Monoline Insurers and Credit Derivative Product Companies

    BMO's direct exposure to companies that specialize in providing default
protection amounted to $343 million ($573 million at October 31, 2008) in
respect of the mark-to-market value of counterparty derivatives and $19
million ($19 million at October 31, 2008) in respect of the mark-to-market
value of traded credits. The cumulative adjustment for counterparty credit
risk recorded against these exposures was $32.4 million at July 31, 2009 ($91
million at April 30, 2009 and $60 million at October 31, 2008).
    Approximately 24% of the $343 million (88% of $573 million at October 31,
2008) gross exposure is related to counterparties rated AA or better by S&P.
Moody's credit ratings are lower. Approximately 25% of the $19 million gross
exposure to traded credits is related to counterparties rated BBB- or better.
The notional value of direct contracts involving monoline insurers and credit
derivative product companies was approximately $3.8 billion (approximately
$4.5 billion at October 31, 2008). Most contracts with these companies relate
to collateralized debt obligations and credit default swaps within our trading
portfolio and provide protection against losses arising from defaults. These
instruments have minimal subprime exposure. Certain Credit Derivative Product
counterparty exposures are discussed further in the following Exposures to
Other Select Financial Instruments section.
    BMO also held $932 million ($1,176 million at October 31, 2008) of
securities insured by monoline insurers, of which $641 million were municipal
bonds. Approximately 92% (approximately 79% at October 31, 2008) of the
municipal bond portfolio is rated investment grade, including the benefits of
the insurance guarantees. Approximately 77% (approximately 68% at October 31,
2008) of the municipal bond holdings have ratings exclusive of the insurance
guarantees and all of those are rated investment grade.

    BMO-Sponsored Canadian Securitization Vehicles

    BMO sponsors various Canadian securitization vehicles that fund assets
originated by either BMO or its customers. Of those that fund bank originated
assets, two hold Canadian residential mortgage loans transferred from BMO
while the third holds credit card loans transferred from BMO. BMO's investment
in the asset-backed commercial paper ("ABCP") of the two residential mortgage
vehicles totalled $32 million ($509 million at October 31, 2008). Market
conditions have improved significantly since October 31, 2008. BMO provides
$5.1 billion in liquidity facilities to these vehicles and no amounts have
been drawn on the facilities. The credit card securitization vehicle issues
only term asset-backed securities and does not issue ABCP. As a result, we do
not provide any liquidity facilities to this vehicle. We hold $269 million of
subordinated notes issued by the credit card securitization vehicle ($269
million at October 31, 2008). Notes issued pursuant to the mortgage programs
are rated R-1 (high) by DBRS and Prime-1 by Moody's. The senior notes issued
pursuant to the credit card programs are rated AAA by DBRS and Aaa by Moody's.
    We also sponsor customer securitization vehicles in Canada that provide
customers with financing. These vehicles hold assets transferred by our
customers. Some customer securitization vehicles are funded directly by BMO
and others are funded in the market. We directly fund customer securitization
vehicles holding $1,035 million of assets, including exposure to $46 million
of Canadian residential mortgage loans with subprime or Alt-A characteristics.
Subsequent to quarter end, the bank's direct funding of customer
securitization vehicles was reduced $220 million through the repayment of an
auto receivables program.
    Notes issued by the market funded customer securitization vehicles are
rated R-1 (high) by DBRS and Prime-1 by Moody's and account for $6.5 billion
($11.0 billion at October 31, 2008) of BMO's liquidity support facility, which
remains undrawn. The assets of each of these market funded customer
securitization vehicles consist primarily of diversified pools of Canadian
auto receivables and Canadian residential mortgages. These asset classes,
combined, account for 70% of the aggregate assets of these vehicles. Their
assets include $457 million of Canadian residential mortgage loans with
subprime or Alt-A characteristics. There are no collateralized debt
obligations (CDOs) and no exposure to monoline insurers in these vehicles.
    BMO's ABCP holdings of the market funded customer securitization vehicles
totalled $671 million at July 31, 2009 ($2.1 billion at October 31, 2008),
most of which reflects BMO's decision to invest a portion of its excess
structural liquidity in ABCP. No losses have been recorded on BMO's investment
in the ABCP of these vehicles.

    BMO-Sponsored U.S. Securitization Vehicle

    BMO provides committed liquidity support facilities of US$6.1 billion
(US$8.2 billion at October 31, 2008) to our U.S. multi-seller ABCP vehicle.
    Approximately 54% of the vehicle's commitments have been rated by Moody's
or S&P, and virtually all of these are rated investment grade. Approximately
US$950 million of the commitments are insured by monolines, primarily MBIA and
Ambac, the ratings of which were downgraded during the quarter. The downgrades
of the monoline insurers have no impact on the performance of the underlying
assets. The vehicle has US$4.8 billion of commercial paper outstanding (US$6.5
billion at October 31, 2008). The ABCP of the conduit is rated A1 by S&P and
P1 by Moody's. BMO has not invested in the conduit's ABCP. Outstanding
commercial paper has consistently been purchased by third-party investors,
notwithstanding market disruptions, and pricing levels are in line with those
of top-tier ABCP conduits in the United States.

    Credit Protection Vehicle

    We also sponsor Apex Trust (Apex), a Canadian special purpose vehicle.
There was a small net charge of $8 million in respect of Apex this quarter.
    Apex has exposure to approximately 450 corporate credits that are
diversified by geographic region and industry. There have been minimal changes
to the ratings of the corporate credits in the third quarter. Approximately
70% of the corporate credits are rated investment grade (24% rated higher than
BBB, 46% rated BBB and 30% rated below investment grade). A number of the
ratings on the underlying companies are on watch or under review for
downgrade.
    Apex has issued $2.2 billion of medium-term notes with terms of five and
eight years (the "Notes"), of which BMO's exposure at quarter end was $815
million. Another party has a $600 million exposure to the Notes through a
total return swap with BMO.
    A senior funding facility of $1.13 billion has been made available to
Apex, with BMO providing $1.03 billion of that facility. As of July 31, 2009,
$214 million ($632 million at April 30, 2009) had been advanced through BMO's
committed share of the senior facility to fund collateral calls arising from
changes in mark-to-market values of the underlying credit default swaps.
    During the quarter, we entered into a transaction that hedges up to the
first $515 million of losses on our committed exposure under the senior
funding facility. Subsequent to the quarter end we agreed to a transaction
that hedges our $815 million exposure to the Notes. We do not expect this
transaction to have a significant impact on fourth quarter results.
    There are $21.3 billion of net notional credit positions held by the
vehicle. BMO has entered into credit default swap contracts on the net
notional positions with the swap counterparties and into offsetting swaps with
Apex. As a result, BMO also has exposure if losses exceed the aggregate $3.3
billion value of the Notes and the senior facility.
    The net Apex charge in the quarter included a charge related to the hedge
of half our exposure to the senior funding facility net of a $16 million
mark-to-market gain on our investment in Notes that values the notes at $423
million, or 52 cents on the dollar.
    Realized credit losses on the Apex Notes will only be incurred should
losses on defaults in the underlying credits exceed the first-loss protection
on a tranche. A significant majority of Apex's positions benefit from
substantial first-loss protection and there has been minimal change in the
level of first loss protection in each of the tranches in the quarter.
    The lowest level of first-loss protection is an estimated 3.2% on a CCC
rated tranche (under review with negative implications) and the second lowest
level of first-loss protection is an estimated 10.4% on a BB (low) rated
tranche. If losses were realized on the full notional amounts of $1,217
million represented by these two tranches, BMO's pro-rata realized losses
would be $451 million (based on BMO's exposure to $815 million of the $2.2
billion of medium-term notes outstanding). BMO has currently recorded $392
million of charges against its exposure on the Notes. As noted above,
subsequent to the quarter end we agreed to a transaction that hedges our $815
million exposure to the Notes.
    Each of the other 10 tranches is rated from A (low) to AAA and has
significant first-loss protection, ranging from 13.0% to 29.4% with a weighted
average of 23.6%. Three tranches, representing approximately $12.1 billion of
net notional credits, have first loss protection of approximately 23.7% to
29.1%.

    Structured Investment Vehicles

    We provide senior-ranked funding support through BMO liquidity facilities
for two BMO-managed Structured Investment Vehicles (SIVs), Links Finance
Corporation (Links) and Parkland Finance Corporation (Parkland).
    At July 31, 2009, amounts drawn on the facilities totalled US$6.4 billion
and (euro)622 million (US$5.6 billion and (euro)458 million at April 30,
2009). The liquidity facilities totalled US$6.6 billion for Links and
(euro)650 million for Parkland at July 31, 2009. Advances under the liquidity
facilities rank ahead of the SIVs' subordinated capital notes.
    Consistent with the strategy of selling assets in an orderly and
value-sensitive manner and as a result of weak market conditions, the pace of
asset sales remained slow during the quarter. We anticipate that the SIVs will
continue the strategy of selling assets in an orderly manner based upon market
conditions and anticipate that asset sales in the current quarter will be
limited. If there are no further asset sales and assets are repaid as we
anticipate given their terms, we expect that outstanding amounts under the
senior ranked funding facility will have peaked this month at US$6.4 billion
for Links and (euro)622 million for Parkland and will start to reduce. The
total amount drawn under the liquidity facilities is impacted by a number of
factors including the pace and price of asset sales, the maturity profile of
the senior notes and asset maturities. While the assets of the SIVs will
mature over time, a significant portion is expected to be repaid in the period
between 2010 and 2012.
    The SIVs' capital noteholders will continue to bear the economic risk
from actual losses up to the full amount of their investment. The book value
of the subordinated capital notes in Links and Parkland at July 31, 2009 was
US$935 million and (euro)154 million, respectively. The book value of the
assets held by Links and Parkland totalled US$7.8 billion and (euro)774
million, respectively, reduced from US$8.2 billion and (euro)794 million at
April 30, 2009. The market value of the assets held by Links and Parkland
totalled US$5.6 billion and (euro)598 million, respectively, up from US$5.2
billion and (euro)551 million at April 30, 2009 despite the maturity and
repayment of assets totalling US$252 million in Links and (euro)14 million in
Parkland. The market value of assets held by Links and Parkland totalled
US$6.8 billion and (euro)698 million, respectively, at October 31, 2008. While
the market value of Links and Parkland assets is currently lower than the
senior debt outstanding, BMO believes that the first-loss protection provided
by the subordinate capital notes exceeds future expected losses.
    The asset quality of Links remains high. Based on market value,
approximately 55% of debt securities are rated Aa3 or better by Moody's (58%
at April 30, 2009 and 84% at October 31, 2008) with 92% rated investment
grade. Approximately 49% are rated AA- or better by S&P (54% at April 30, 2009
and 73% at October 31, 2008) with 93% rated investment grade. Certain of the
debt security ratings are on credit watch, for downgrade. The senior notes of
the SIVs have ratings consistent with BMO's senior debt ratings of Aa1
(Moody's) and A+ (S&P). The SIVs hold no direct exposure to U.S. subprime
mortgages. They hold a diversified mix of debt securities and the mix of
securities is largely unchanged from October 31, 2008.

    Exposure to Major Financial Institutions

    Since October 31, 2008, governments in Europe and the United States have
continued to provide significant financial support to local financial
institutions. Trade flows between countries and regions were reduced, which
has put pressure on the economies and banking systems in many countries. In
view of the foregoing, BMO has continued to proactively manage its major
financial institution counterparty exposures.

    Caution

    Given the uncertainty in the capital markets environment, our capital
markets instruments could experience further valuation gains and losses due to
changes in market value.
    This Financial Instruments in the Difficult Credit Environment section
contains forward-looking statements. Please see the Caution Regarding
Forward-Looking Statements.

    The following table provides additional detail on select financial
instruments that are held in our trading and available-for-sale portfolios.
Most of our CDOs and CLOs are fully hedged with other large financial
institutions. Net CDO exposure is minimal at $16 million, and net CLO exposure
is also minimal, at $100 million, consisting of the $83 million carrying value
of unhedged and wrapped instruments and a $17 million net loss on hedged
instruments.
    BMO has invested only in senior and super-senior tranches of CDOs and
CLOs. Tranche ratings in the table use the lowest external rating available
provided by S&P, Moody's or Fitch. The difference between hedged investment
amounts and carrying value of hedged investments amounts reflect
mark-to-market adjustments, which are generally recoverable through total
return or credit default swaps. The underlying securities are a wide range of
corporate assets. Approximately 30% of hedged investment amounts have been
hedged through swaps with one financial institution counterparty rated A. The
value of BMO's interest in those hedges is supported by collateral held, with
the exception of relatively modest amounts as permitted under counterparty
agreements. Another 50% of hedged investment amounts relate to two AAA rated
counterparties for which we have recorded $170 million of hedge gains. The
remaining 20% relates to a CC rated counterparty for which we have recorded
$29 million of hedge gains.
    Amounts in the table below exclude credit default swap (CDS) protection
purchases from two credit derivative product company counterparties that have
a market value of US$220 million (before deduction of US$27 million of credit
valuation adjustments) and corresponding US$1.5 billion notional value of
CDOs' CDS protection provided to other financial institutions in our role as
intermediary. One of the counterparties' credit rating is Ba1 and the
subordinated notes of the other counterparty are rated Caa1. The underlying
security on the two exposures consists of three pools of broadly-diversified
single name corporate and sovereign credits. Each of the pools has from 95 to
138 credits of which 65% to 81% are investment grade with first-loss
protection that ranges from 8.2% to 19.2% with a weighted-average of 11.9%
based on notional value.


    
    Exposures to Other Select Financial Instruments ($ millions - Cdn)(1)

                    Carrying                   Cumul-
                       Value        Carrying   ative
                          of           Value Loss in         Net
                    Unhedged              of   Value  Cumul- Losses
    As at                  &  Hedged  Hedged      of  ative  on
    July             Wrapped  Invest- Invest- Hedged   Gain  Hedged
    31,      Tranche  Invest-   ment    ment  Invest-    on  Invest-
    2009      Rating   ments Amounts Amounts   ments Hedges  ments

    CDO's(2)   AAA       16                                       Sundry
                                                                   securities

               CCC or           257       57    (200)   200    -  Hedged with
                below                                              FI rated A
              ----------------------------------------------------
                         16     257       57    (200)   200    -
              ----------------------------------------------------
              ----------------------------------------------------

    CLO's      AAA       76                                       Mostly U.K.
                                                                   and
                                                                   European
                                                                   mid-size
                                                                   corporate
                                                                   loans

               AAA              265      186     (79)    78   (1) Hedged with
                                                                   FI rated A

               AAA            1,356    1,177    (179)   163  (16) Hedges with
                                                                   Monolines
                                                                   rated CC
                                                                   or better

               A- to      7                                       U.K. mid-
                AA+                                                sized
                                                                   enterprise
                                                                   loans
              ----------------------------------------------------
                         83   1,621    1,363    (258)   241  (17)
              ----------------------------------------------------
              ----------------------------------------------------

    Residential
    MBS(4)(5)

    No         AAA       33                                       Mostly U.K.
     subprime                                                      and
                                                                   Australian
                                                                   mortgages

    U.S.       A- to      2                                       Wrapped
     subprime   AA+                                                with
     - wrapped                                                     monoline
                                                                   rated
                                                                   AAA(3)

               CCC or    16                                       Wrapped
                below                                              with
                                                                   monoline
                                                                   rated CC
                                                                   or no
                                                                   longer
                                                                   rated

    U.S.       A- to             60       49     (11)    11    -  Hedges with
     subprime   AA+                                                FI's rated
                                                                   AA or
                                                                   better

               CCC or           109       64     (45)    45    -  Hedges with
                below                                              FI's rated
                                                                   AA or
                                                                   better
              ----------------------------------------------------
                         51     169      113     (56)    56    -
              ----------------------------------------------------
              ----------------------------------------------------

    Commercial AAA       25                                       European,
    MBS(5)                                                         U.K. and
                                                                   U.S.
                                                                   commercial
                                                                   real
                                                                   estate
                                                                   loans

               A- to     137                                      Mostly
                AA+                                                Canadian
                                                                   commercial
                                                                   and
                                                                   multi-use
                                                                   residen-
                                                                   tial loans
              ----------------------------------------------------
                         162
              ----------------------------------------------------
              ----------------------------------------------------

    Asset-     AAA       226                                      Mostly
    backed                                                         Canadian
    Secu-                                                          credit
    rities                                                         card re-
                                                                   ceivables
                                                                   and auto
                                                                   loans

               A- to     102                                      Mostly
                AA+                                                Canadian
                                                                   credit
                                                                   card re-
                                                                   ceivables
                                                                   and auto
                                                                   loans

               BBB- to    70                                      Collateral
                BBB+                                               notes on
                                                                   Canadian
                                                                   credit
                                                                   card re-
                                                                   ceivables
              ----------------------------------------------------
                         398
              ----------------------------------------------------
              ----------------------------------------------------

                                                                 FI's
                                                                 =
                                                                 Financial
                                                                 Institutions

    (1) Most of the unhedged and wrapped investments were transferred to the
        available-for-sale portfolio effective August 1, 2008.
    (2) CDOs include indirect exposure to approximately $49 million of U.S.
        subprime residential mortgages. As noted above, this exposure is
        hedged via total return swaps with a large non-monoline financial
        institution.
    (3) Certain ratings are under review.
    (4) Wrapped MBS have an insurance guarantee attached and are rated
        inclusive of the wrap protection. RMBS included in the hedged
        investment amounts of $169 million have exposure to an estimated
        $83 million of underlying U.S. subprime loans.
    (5) Amounts exclude BMO Life Assurance holdings of $33 million of
        residential MBS and $290 million of commercial MBS.


    Review of Operating Groups' Performance

    Operating Groups' Summary Income Statements and Statistics for Q3-2009

                                                  Q3-2009
                              -----------------------------------------------
    (Canadian $ in                                       Corporate
     millions, except                                    including     Total
     as noted)                   P&C       PCG    BMO CM       T&O       BMO
    -------------------------------------------------------------------------
    Net interest income
     (teb)(1)                  1,163        87       440      (224)    1,466
    Non-interest revenue         462       434       593        23     1,512
    -------------------------------------------------------------------------
    Total revenue (teb)(1)     1,625       521     1,033      (201)    2,978
    Provision for credit
     losses                      114         1        43       259       417
    Non-interest expense         952       392       516        13     1,873
    Income before income taxes
     and non-controlling
     interest in subsidiaries    559       128       474      (473)      688
    Income taxes (recovery)
     (teb)(1)                    178         8       131      (205)      112
    Non-controlling interest
     in subsidiaries               -         -         -        19        19
    -------------------------------------------------------------------------
    Net income Q3-2009           381       120       343      (287)      557
    -------------------------------------------------------------------------
    Net income Q2-2009           359        78       249      (328)      358
    -------------------------------------------------------------------------
    Net income Q3-2008           343       125       263      (210)      521
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Other statistics
    -------------------------------------------------------------------------
    Net economic profit          221        86       171      (399)       79
    Return on equity           24.7%     35.9%     21.8%        nm     12.1%
    Cash return on equity      25.3%     36.1%     21.8%        nm     12.3%
    Operating leverage          1.5%     (7.4%)    29.1%        nm      3.3%
    Cash operating leverage     1.5%     (7.3%)    29.1%        nm      3.2%
    Productivity ratio (teb)   58.5%     75.3%     50.0%        nm     62.9%
    Cash productivity
     ratio (teb)               57.9%     75.0%     49.9%        nm     62.5%
    Net interest margin
     on earning assets(1)      3.16%     2.93%     1.02%        nm     1.74%
    Average common equity      5,938     1,306     5,991     3,934    17,169
    Average earning assets
     ($ billions)              145.9      11.8     170.6       6.5     334.9
    Full-time equivalent
     staff                    19,926     4,706     2,384     9,578    36,594
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                 YTD-2009
                              -----------------------------------------------
    (Canadian $ in                                       Corporate
     millions, except                                    including     Total
     as noted)                   P&C       PCG    BMO CM       T&O       BMO
    -------------------------------------------------------------------------
    Net interest income
     (teb)(1)                  3,440       265     1,460    (1,037)    4,128
    Non-interest revenue       1,301     1,202     1,112       332     3,947
    -------------------------------------------------------------------------
    Total revenue (teb)(1)     4,741     1,467     2,572      (705)    8,075
    Provision for credit
     losses                      338         4       129       746     1,217
    Non-interest expense       2,814     1,140     1,440       208     5,602
    Income before income taxes
     and non-controlling
     interest in subsidiaries  1,589       323     1,003    (1,659)    1,256
    Income taxes (recovery)
     (teb)(1)                    507        52       232      (732)       59
    Non-controlling interest
     in subsidiaries               -         -         -        57        57
    -------------------------------------------------------------------------
    Net income Q3-2009         1,082       271       771      (984)    1,140
    -------------------------------------------------------------------------
    Net income Q2-2009
    -------------------------------------------------------------------------
    Net income Q3-2008           969       368       421      (340)    1,418
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Other statistics
    -------------------------------------------------------------------------
    Net economic profit          587       178       226    (1,218)     (227)
    Return on equity           22.7%     30.1%     15.3%        nm      8.5%
    Cash return on equity      23.2%     30.4%     15.3%        nm      8.7%
    Operating leverage          0.9%    (10.9%)    39.0%        nm     (1.2%)
    Cash operating leverage     0.9%    (10.9%)    39.0%        nm     (1.2%)
    Productivity ratio (teb)   59.3%     77.8%     56.0%        nm     69.4%
    Cash productivity
     ratio (teb)               58.7%     77.5%     56.0%        nm     69.0%
    Net interest margin
     on earning assets(1)      3.10%     3.52%     1.06%        nm     1.60%
    Average common equity      6,177     1,184     6,364     2,996    16,721
    Average earning assets
     ($ billions)              148.4      10.1     183.8       3.1     345.4
    Full-time equivalent
     staff
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    nm - not meaningful
    (1) Operating group revenues, income taxes and net interest margin are
        stated on a taxable equivalent basis (teb). The group teb adjustments
        are offset in Corporate, and Total BMO revenue, income taxes and net
        interest margin are stated on a GAAP basis. See the Non-GAAP Measures
        section.
    

    The following sections review the financial results of each of our
operating segments and operating groups for the third quarter of 2009.
    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. In the current quarter,
the results of our insurance business are now reported in Private Client Group
rather than in P&C Canada. In addition, results of our term investments
business are now reported in P&C Canada rather than in Private Client Group.
All comparative figures have been reclassified to reflect these transfers.
    Note 16 to the 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.


    
    Personal and Commercial Banking

    (Canadian $                                 Increase            Increase
     in millions,                              (Decrease)          (Decrease)
     except as                                       vs.                 vs.
     noted)                  Q3-2009             Q3-2008             Q2-2009
    -------------------------------------------------------------------------

    Net interest income (teb)  1,163        97        9%        34        3%
    Non-interest revenue         462        28        7%        28        7%
    -------------------------------------------------------------------------

    Total revenue (teb)        1,625       125        8%        62        4%
    Provision for credit
     losses                      114        15       16%         3        3%
    Non-interest expense         952        61        7%        25        3%
    -------------------------------------------------------------------------

    Income before income
     taxes and
     non-controlling
     interest in subsidiaries    559        49       10%        34        6%
    Income taxes (teb)           178        11        6%        12        7%
    Non-controlling interest
     in subsidiaries               -         -         -         -         -
    -------------------------------------------------------------------------

    Net income                   381        38       11%        22        6%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization of
     intangible assets
     (after tax)                   8         -         -        (1)     (12%)
    -------------------------------------------------------------------------

    Cash net income              389        38       11%        21        6%
    -------------------------------------------------------------------------

    Return on equity           24.7%                1.1%                2.1%
    Cash return on equity      25.3%                1.1%                2.1%
    Operating leverage          1.5%                  nm                  nm
    Cash operating leverage     1.5%                  nm                  nm
    Productivity ratio (teb)   58.5%               (0.9%)              (0.8%)
    Cash productivity
     ratio (teb)               57.9%               (0.8%)              (0.7%)
    Net interest margin on
     earning assets (teb)      3.16%               0.28%               0.03%
    Average earning assets   145,941    (1,284)      (1%)   (2,259)      (2%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (Canadian $                                 Increase
     in millions,                              (Decrease)
     except as                                       vs.
     noted)                 YTD-2009            YTD-2008
    -----------------------------------------------------

    Net interest income (teb)  3,440       363       12%
    Non-interest revenue       1,301        65        5%
    -----------------------------------------------------

    Total revenue (teb)        4,741       428       10%
    Provision for credit
     losses                      338        55       20%
    Non-interest expense       2,814       233        9%
    -----------------------------------------------------

    Income before income
     taxes and
     non-controlling
     interest in subsidiaries  1,589       140       10%
    Income taxes (teb)           507        27        6%
    Non-controlling interest
     in subsidiaries               -         -         -
    -----------------------------------------------------

    Net income                 1,082       113       12%
    -----------------------------------------------------
    -----------------------------------------------------

    Amortization of
     intangible assets
     (after tax)                  25         3       14%
    -----------------------------------------------------

    Cash net income            1,107       116       12%
    -----------------------------------------------------

    Return on equity           22.7%               (1.5%)
    Cash return on equity      23.2%               (1.6%)
    Operating leverage          0.9%                  nm
    Cash operating leverage     0.9%                  nm
    Productivity ratio (teb)   59.3%               (0.5%)
    Cash productivity
     ratio (teb)               58.7%               (0.5%)
    Net interest margin on
     earning assets (teb)      3.10%               0.25%
    Average earning assets   148,423     4,401        3%
    -----------------------------------------------------
    -----------------------------------------------------
    nm - not meaningful

    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 and Commercial Banking Canada (P&C Canada)

    (Canadian $                                 Increase            Increase
     in millions,                              (Decrease)          (Decrease)
     except as                                       vs.                 vs.
     noted)                  Q3-2009             Q3-2008             Q2-2009
    -------------------------------------------------------------------------

    Net interest income (teb)    953        84       10%        57        6%
    Non-interest revenue         400        17        5%        25        7%
    -------------------------------------------------------------------------

    Total revenue (teb)        1,353       101        8%        82        6%
    Provision for credit
     losses                       97        10       13%         4        6%
    Non-interest expense         737        40        6%        44        6%
    -------------------------------------------------------------------------

    Income before income
     taxes and
     non-controlling
     interest in subsidiaries    519        51       11%        34        7%
    Income taxes (teb)           163        10        7%        12        8%
    Non-controlling interest
     in subsidiaries               -         -         -         -         -
    -------------------------------------------------------------------------

    Net income                   356        41       13%        22        6%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization of
     intangible assets
     (after tax)                   -         1       97%        (1)     (10%)
    -------------------------------------------------------------------------

    Cash net income              356        42       13%        21        6%
    -------------------------------------------------------------------------

    Personal revenue             647        14        2%        41        6%
    Commercial revenue           390        56       17%        33       10%
    Cards revenue                316        31       11%         8        3%
    Operating leverage          2.4%                  nm                  nm
    Cash operating leverage     2.4%                  nm                  nm
    Productivity ratio (teb)   54.4%               (1.2%)              (0.1%)
    Cash productivity
     ratio (teb)               54.3%               (1.3%)              (0.1%)
    Net interest margin on
     earning assets (teb)      3.17%               0.33%               0.03%
    Average earning assets   119,052    (2,710)      (2%)    1,806        2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (Canadian $                                 Increase
     in millions,                              (Decrease)
     except as                                       vs.
     noted)                 YTD-2009            YTD-2008
    -----------------------------------------------------

    Net interest income (teb)  2,757       216        9%
    Non-interest revenue       1,121        69        7%
    -----------------------------------------------------

    Total revenue (teb)        3,878       285        8%
    Provision for credit
     losses                      285        33       13%
    Non-interest expense       2,134       112        6%
    -----------------------------------------------------

    Income before income
     taxes and
     non-controlling
     interest in subsidiaries  1,459       140       11%
    Income taxes (teb)           461        27        6%
    Non-controlling interest
     in subsidiaries               -         -         -
    -----------------------------------------------------

    Net income                   998       113       13%
    -----------------------------------------------------
    -----------------------------------------------------

    Amortization of
     intangible assets
     (after tax)                   3         1       41%
    -----------------------------------------------------

    Cash net income            1,001       114       13%
    -----------------------------------------------------

    Personal revenue           1,859        50        3%
    Commercial revenue         1,093        93        9%
    Cards revenue                926       142       18%
    Operating leverage          2.4%                  nm
    Cash operating leverage     2.5%                  nm
    Productivity ratio (teb)   55.0%               (1.3%)
    Cash productivity
     ratio (teb)               54.9%               (1.3%)
    Net interest margin on
     earning assets (teb)      3.10%               0.28%
    Average earning assets   118,734    (1,450)      (1%)
    -----------------------------------------------------
    -----------------------------------------------------
    nm - not meaningful
    

    Q3 2009 vs Q3 2008

    Net income was $356 million, up $41 million or 13% from a year ago,
despite a slower economy.
    Revenue rose $101 million or 8.2%, driven by volume growth across most
products, an improved net interest margin and net investment securities gains,
partially offset by lower securitization revenues. Net interest margin
increased by 33 basis points. Approximately one-half of the increase was
attributable to deposit growth outpacing loan growth, while one-third was due
to the impact of securitizing low-margin mortgages. The remaining increase was
driven by favourable prime rates relative to BA rates, as well as actions to
mitigate the impact of rising long-term funding costs.
    In the personal banking segment, revenue increased $14 million or 2.3%,
driven by volume growth in higher-spread loans and deposits and favourable
prime rates relative to BA rates, partially offset by reductions in mortgage
refinancing fees and securitization revenue. Homeowner Readiline growth drove
personal loan growth of 15% year over year. Market share increased 10 basis
points from the prior year but decreased 5 basis points from the second
quarter to 11.75%. Balance growth was dampened by management actions taken to
maintain the quality of the portfolio.
    In the weaker housing market, our mortgage loan balances declined from a
year ago, due to securitization and the runoff of our broker-channel and
third-party loans. Mortgage market share decreased 86 basis points from a year
ago and 30 basis points from the second quarter.
    Personal deposits increased 15% year over year. The combination of
improved performance management, investment in our branch network, simplified
product offerings and customers' preferences for bank deposits in uncertain
market conditions contributed to this growth. Market share decreased 13 basis
points relative to the second quarter in a highly competitive environment.
Market share increased 32 basis points year over year to 12.29% and we are
confident with the actions we are taking to generate future growth.
    In the commercial banking segment, revenue increased $56 million or 17%
due to growth in deposits. The increase also reflected net investment
securities gains, higher activity fees, actions to mitigate the impact of
rising long-term funding costs and favourable prime rates relative to BA
rates. While loan growth was flat from a year ago amid economic weakness and
continued competition, our market share increased by 21 basis points from the
prior year and 13 basis points from the second quarter. BMO ranks second in
Canadian business banking market share of small and mid-sized businesses at
20.1%. On the deposit side of the business, balances grew 10.2%, reflecting
our customers' attraction to the security of bank deposits in the current
environment and also our focus on meeting our customers' banking needs.
    Cards and Payment Services revenue increased $31 million or 11% year over
year due to balance growth, spread improvement and higher payment service
revenue.
    Non-interest expense increased $40 million or 5.8%, primarily due to
higher employee benefits costs, higher performance-based compensation and
severance costs related to simplifying our management structure. The group's
cash operating leverage was 2.4%. We continue to invest strategically to
improve our competitive position and, mindful of the current economic
environment, continue to tightly manage our operating expenses.
    Average loans and acceptances, including securitized loans, increased
$3.2 billion or 2.4% from a year ago and personal and commercial deposits grew
$10.9 billion or 13%.

    Q3 2009 vs Q2 2009

    Net income increased $22 million or 6.4%.
    Revenue increased $82 million or 6.4%, driven by volume growth, an
improved net interest margin, higher activity fees, investment securities
gains and three more calendar days in the current quarter. Net interest margin
improved by 3 basis points due to higher mortgage refinancing fees.
    Non-interest expense increased $44 million or 6.3% due to higher
performance-based compensation, three more calendar days in the current
quarter and severance costs.
    Average loans and acceptances including securitized loans increased $0.4
billion or 0.3% from the second quarter, personal and term deposits increased
$0.3 billion or 0.4% and commercial deposits increased $1.1 billion or 4.8%.

    Q3 YTD 2009 vs Q3 YTD 2008

    Net income increased $113 million or 13%. Revenue increased $285 million
or 8.0% driven by volume growth across most products, an improved net interest
margin and higher cards and payment service revenue, partially offset by lower
revenue from mutual funds products and investment securities losses in softer
equity markets. Net interest margin increased 28 basis points. Approximately
half of the increase was attributable to securitizing mortgages. The remainder
was due to deposit growth outpacing loan growth, favourable prime rates
relative to BA rates and actions to mitigate the impact of rising long-term
funding costs, partially offset by lower mortgage refinancing fees.
Non-interest expense increased $112 million or 5.6% primarily due to increases
in employee benefit costs, capital taxes, performance-based compensation,
occupancy and severance costs.


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

    (Canadian $                                 Increase            Increase
     in millions,                              (Decrease)          (Decrease)
     except as                                       vs.                 vs.
     noted)                  Q3-2009             Q3-2008             Q2-2009
    -------------------------------------------------------------------------
    Net interest income (teb)    210        13        7%       (23)     (10%)
    Non-interest revenue          62        11       19%         3        4%
    -------------------------------------------------------------------------

    Total revenue (teb)          272        24        9%       (20)      (7%)
    Provision for credit
     losses                       17         5       39%        (1)     (11%)
    Non-interest expense         215        21       11%       (19)      (8%)
    -------------------------------------------------------------------------

    Income before income
     taxes and
     non-controlling
     interest in subsidiaries     40        (2)      (6%)        -         -
    Income taxes (teb)            15         1        2%         -         -
    Non-controlling interest
     in subsidiaries               -         -         -         -         -
    -------------------------------------------------------------------------

    Net income                    25        (3)      (8%)        -         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization of
     intangible assets
     (after tax)                   8        (1)      (2%)        -         -
    -------------------------------------------------------------------------

    Cash net income               33        (4)      (7%)        -         -
    -------------------------------------------------------------------------

    Operating leverage         (1.5%)                 nm                  nm
    Cash operating leverage    (2.1%)                 nm                  nm
    Productivity ratio (teb)   79.2%                1.1%               (1.1%)
    Cash productivity
     ratio (teb)               76.0%                1.5%               (0.9%)
    Net interest margin on
     earning assets (teb)      3.13%               0.02%               0.08%
    Average earning assets    26,889     1,426        6%    (4,065)     (13%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
    Net interest income (teb)    190        (5)      (3%)        3        1%
    Non-interest revenue          55         4        9%         7       17%
    -------------------------------------------------------------------------

    Total revenue (teb)          245        (1)      (1%)       10        4%
    Non-interest expense         193         1        1%         4        3%
    Net income                    23        (5)     (16%)        2       16%
    Average earning assets    24,220      (936)      (4%)     (704)      (3%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (Canadian $                                 Increase
     in millions,                              (Decrease)
     except as                                       vs.
     noted)                 YTD-2009            YTD-2008
    -----------------------------------------------------
    Net interest income (teb)    683       147       27%
    Non-interest revenue         180        (4)      (3%)
    -----------------------------------------------------

    Total revenue (teb)          863       143       20%
    Provision for credit
     losses                       53        22       72%
    Non-interest expense         680       121       22%
    -----------------------------------------------------

    Income before income
     taxes and
     non-controlling
     interest in subsidiaries    130         -         -
    Income taxes (teb)            46         -         -
    Non-controlling interest
     in subsidiaries               -         -         -
    -----------------------------------------------------

    Net income                    84         -         -
    -----------------------------------------------------
    -----------------------------------------------------

    Amortization of
     intangible assets
     (after tax)                  22         2       11%
    -----------------------------------------------------

    Cash net income              106         2        2%
    -----------------------------------------------------

    Operating leverage         (1.8%)                 nm
    Cash operating leverage    (2.3%)                 nm
    Productivity ratio (teb)   78.8%                1.2%
    Cash productivity
     ratio (teb)               75.7%                1.4%
    Net interest margin on
     earning assets (teb)      3.08%               0.07%
    Average earning assets    29,689     5,851       25%
    -----------------------------------------------------
    -----------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)

    Net interest income (teb)    573        40        7%
    Non-interest revenue         151       (32)     (17%)
    -----------------------------------------------------

    Total revenue (teb)          724         8        1%
    Non-interest expense         570        14        3%
    Net income                    71       (13)     (15%)
    Average earning assets    24,874     1,177        5%
    -----------------------------------------------------
    -----------------------------------------------------
    nm - not meaningful
    

    Q3 2009 vs Q3 2008

    Net income decreased $3 million or 8.3% to $25 million. On a U.S. dollar
basis, net income decreased $5 million or 16% to $23 million.
    Higher levels of impaired loans and related costs of managing this
portfolio reduced net income in the quarter by US$13 million.
    Revenue decreased US$1 million or 0.5% but grew US$8 million or 3.3%
excluding the impact of higher levels of impaired loans relative to a year
ago. The revenue increase was largely driven by gains on the sale of
mortgages. Excluding the impact of acquisitions, deposits grew US$1.8 billion
or 10%.
    Non-interest expense increased US$1 million or 0.8%. They decreased $3
million or 1.3% excluding the increased costs of managing our impaired loan
portfolio, reflecting the success of focused expense management.

    Q3 2009 vs Q2 2009

    Net income was consistent with the prior quarter. On a U.S. dollar basis,
net income increased $2 million or 16%.
    Revenue increased US$10 million or 4.0% primarily due to an improved net
interest margin, an increase in gains on mortgage sales and the impact of more
days in the current quarter.
    Non-interest expense increased US$4 million or 2.6%, largely due to
higher costs of managing our impaired loan portfolio.

    Q3 YTD 2009 vs Q3 YTD 2008

    Net income was consistent with the prior year. On a U.S. dollar basis,
net income decreased $13 million or 15%. The impact of impaired loans reduced
net income by US$35 million.
    Revenue increased US$8 million or 1.1% but improved US$39 million or 6.0%
excluding the US$38 million Visa Inc. IPO gain of a year ago, the US$29
million impact of the Wisconsin acquisitions and the US$22 million increase in
the impact of higher levels of impaired loans. The improvement was largely due
to higher gains on mortgage sales, an improved net interest margin and higher
loan and deposit volumes.
    Non-interest expense increased US$14 million or 2.6%. Expenses were flat
excluding changes in the Visa litigation accrual, a US$9 million increase in
costs of managing our impaired loan portfolio and the US$28 million impact of
the Wisconsin acquisitions.


    
    Private Client Group (PCG)

    (Canadian $                                 Increase            Increase
     in millions,                              (Decrease)          (Decrease)
     except as                                       vs.                 vs.
     noted)                  Q3-2009             Q3-2008             Q2-2009
    -------------------------------------------------------------------------
    Net interest income (teb)     87       (10)     (10%)        1        2%
    Non-interest revenue         434       (34)      (7%)       53       14%
    -------------------------------------------------------------------------
    Total revenue (teb)          521       (44)      (8%)       54       12%
    Provision for credit
     losses                        1         -         -        (1)      (1%)
    Non-interest expense         392        (2)        -        29        8%
    -------------------------------------------------------------------------
    Income before income
     taxes                       128       (42)     (25%)       26       24%
    Income taxes (teb)             8       (37)     (83%)      (16)     (68%)
    -------------------------------------------------------------------------
    Net income                   120        (5)      (4%)       42       54%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization of
     intangible assets
     (after tax)                   -         -         -        (1)     (22%)
    -------------------------------------------------------------------------
    Cash net income              120        (5)      (4%)       41       53%
    -------------------------------------------------------------------------

    Return on equity           35.9%               (7.5%)               8.2%
    Cash return on equity      36.1%               (7.6%)               8.1%
    Operating leverage         (7.4%)                 nm                  nm
    Cash operating leverage    (7.3%)                 nm                  nm
    Productivity ratio (teb)   75.3%                5.6%               (2.5%)
    Cash productivity ratio
     (teb)                     75.0%                5.5%               (2.4%)
    Net interest margin on
     earning assets (teb)      2.93%              (1.93%)             (0.68%)
    Average earning assets    11,803     3,919       50%     2,097       22%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
    Total revenue (teb)           57        (5)      (9%)        6       13%
    Non-interest expense          57        (1)      (3%)        6       11%
    Net income                     -        (3)     (95%)        1     +100%
    Cash net income                -        (3)     (87%)        -         -
    Average earning assets     2,255       121        6%       (23)      (1%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (Canadian $                                 Increase
     in millions,                              (Decrease)
     except as                                       vs.
     noted)                 YTD-2009            YTD-2008
    -----------------------------------------------------
    Net interest income (teb)    265       (10)      (4%)
    Non-interest revenue       1,202      (163)     (12%)
    -----------------------------------------------------
    Total revenue (teb)        1,467      (173)     (11%)
    Provision for credit
     losses                        4         1       42%
    Non-interest expense       1,140         3         -
    -----------------------------------------------------
    Income before income
     taxes                       323      (177)     (36%)
    Income taxes (teb)            52       (80)     (61%)
    -----------------------------------------------------
    Net income                   271       (97)     (26%)
    -----------------------------------------------------
    -----------------------------------------------------

    Amortization of
     intangible assets
     (after tax)                   2         -         -
    -----------------------------------------------------
    Cash net income              273       (97)     (26%)
    -----------------------------------------------------

    Return on equity           30.1%              (14.1%)
    Cash return on equity      30.4%              (14.1%)
    Operating leverage        (10.9%)                 nm
    Cash operating leverage   (10.9%)                 nm
    Productivity ratio (teb)   77.8%                8.5%
    Cash productivity ratio
     (teb)                     77.5%                8.4%
    Net interest margin on
     earning assets (teb)      3.52%              (1.26%)
    Average earning assets    10,068     2,393       31%
    -----------------------------------------------------
    -----------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
    Total revenue (teb)          148       (35)     (19%)
    Non-interest expense         161        (9)      (5%)
    Net income                    (9)      (18)   (+100%)
    Cash net income               (8)      (18)   (+100%)
    Average earning assets     2,267       148        7%
    -----------------------------------------------------
    -----------------------------------------------------
    nm - not meaningful
    

    Q3 2009 vs Q3 2008

    Net income of $120 million decreased $5 million or 4.2% from the same
quarter a year ago, reflective of challenging equity markets and a low
interest rate environment. Net income in the current quarter benefited from a
$23 million recovery of prior periods' income taxes. Results include a full
quarter of earnings from the BMO Life Assurance acquisition, which contributed
$5 million of net income in the quarter. As previously disclosed, all of BMO's
insurance businesses now operate within Private Client Group, better aligning
our wealth management strategy and bringing our insurance capabilities and
skill-sets together. The term investment business is now included within P&C
Canada. All comparative figures have been reclassified to reflect the
Insurance and Term Investment transfers. Net income was comprised of $67
million from Insurance and $53 million from PCG excluding insurance.
    Revenue decreased $44 million or 7.7% and was negatively impacted by
lower fee-based and commission revenue in Full-Service Investing and lower
revenue in our mutual fund businesses, reflecting the negative impact of
softer market conditions on the group's assets under management and
administration. Revenue in the brokerage businesses was lowered by deposit
spread compression. Revenue benefited from the $27 million impact of the BMO
Life Assurance acquisition. The stronger U.S. dollar increased revenue growth
by $6 million or 1.1 percentage points.
    Non-interest expense decreased by $2 million or 0.3% due to lower
revenue-based costs and active expense management that largely offset the
impact of the acquisition and foreign exchange. The BMO Life Assurance
acquisition increased expenses by $19 million in the quarter, including
integration costs of $3 million. The stronger U.S. dollar increased expenses
by $5 million or 1.4 percentage points.
    Assets under management and administration have been affected by softer
market conditions and decreased $14 billion or 5.7%, despite a $4 billion
benefit related to the stronger U.S. dollar.

    Q3 2009 vs Q2 2009

    Net income improved $42 million or 54% from the prior quarter, benefiting
from improved equity markets, a full quarter of earnings from BMO Life
Assurance and the $23 million recovery of prior periods' income taxes.
    The BMO Life Assurance acquisition increased revenue by $17 million,
expenses by $12 million and net income by $3 million as the prior quarter only
included one month of earnings.
    Revenue of $521 million improved $54 million from the second quarter due
primarily to higher revenue in the brokerage businesses, higher fee-based
revenue in mutual funds on increased client assets and increased BMO Life
Assurance revenues, partially offset by the impact of the weaker U.S. dollar.
Assets under management and administration improved by $6 billion or 2.7% and
by 6.5% in source currency.
    Non-interest expense increased $29 million from the previous quarter due
primarily to higher revenue-based costs and higher BMO Life Assurance
expenses, partially offset by the impact of the weaker U.S. dollar.

    Q3 YTD 2009 vs Q3 YTD 2008

    Net income decreased $97 million or 26% from the same period a year ago,
reflective of challenging equity markets and a low interest rate environment.
Results in the current year were lowered by an $11 million after-tax charge in
respect of the valuation of auction-rate securities and benefited from a $23
million recovery of prior periods' income taxes.
    The BMO Life Assurance acquisition has added $37 million of revenues, $26
million of expenses and $7 million of net income.
    Revenue decreased by $173 million or 11%. The decline was primarily due
to lower revenue in our brokerage businesses and lower fee-based revenue in
our mutual fund businesses, reflecting the negative impact of softer equity
market conditions on the group's assets under management and administration,
partially offset by higher insurance revenues. Lower net interest income was
primarily due to lower revenue in the brokerage businesses due to spread
compression on deposit balances. The stronger U.S. dollar increased revenue by
$29 million or 1.8 percentage points.
    Non-interest expense increased $3 million or 0.3%. The stronger U.S.
dollar increased expenses by $29 million or 2.5 percentage points. As well,
there were higher expenses from BMO Life Assurance which added $26 million of
expenses. These expense increases were partially offset by reductions in
incentive compensation and revenue-based costs, in line with lower revenue,
and the effects of active expense management.


    
    BMO Capital Markets (BMO CM)

    (Canadian $                                 Increase            Increase
     in millions,                              (Decrease)          (Decrease)
     except as                                       vs.                 vs.
     noted)                  Q3-2009             Q3-2008             Q2-2009
    -------------------------------------------------------------------------
    Net interest income (teb)    440       146       50%       (64)     (13%)
    Non-interest revenue         593       134       29%       285       92%
    -------------------------------------------------------------------------
    Total revenue (teb)        1,033       280       37%       221       27%
    Provision for credit
     losses                       43        14       47%        (1)      (2%)
    Non-interest expense         516        39        8%        65       14%
    -------------------------------------------------------------------------
    Income before income
     taxes                       474       227       93%       157       50%
    Income taxes (teb)           131       147     +100%        63       93%
    -------------------------------------------------------------------------
    Net income                   343        80       30%        94       38%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization of
     intangible assets
     (after tax)                   1         -         -         1      100%
    -------------------------------------------------------------------------
    Cash net income              344        80       30%        95       38%
    -------------------------------------------------------------------------

    Trading Products revenue     666       269       68%       177       36%
    Investment and Corporate
     Banking and Other
     revenue                     367        11        4%        44       14%
    Return on equity           21.8%                4.6%                7.1%
    Cash return on equity      21.8%                4.6%                7.0%
    Operating leverage         29.1%                  nm                  nm
    Cash operating leverage    29.1%                  nm                  nm
    Productivity ratio (teb)   50.0%              (13.4%)              (5.6%)
    Cash productivity ratio
     (teb)                     49.9%              (13.5%)              (5.7%)
    Net interest margin on
     earning assets (teb)      1.02%               0.33%              (0.07%)
    Average earning assets   170,628     1,218        1%   (19,394)     (10%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
    Total revenue (teb)          335        39       13%        (9)      (2%)
    Non-interest expense         176       (21)     (10%)       17       11%
    Net income                    88        30       52%       (20)     (18%)
    Average earning assets    63,775    (3,193)      (5%)   (2,346)      (4%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (Canadian $                                 Increase
     in millions,                              (Decrease)
     except as                                       vs.
     noted)                 YTD-2009            YTD-2008
    -----------------------------------------------------
    Net interest income (teb)  1,460      615        73%
    Non-interest revenue       1,112      239        27%
    -----------------------------------------------------
    Total revenue (teb)        2,572      854        50%
    Provision for credit
     losses                      129       42        49%
    Non-interest expense       1,440      140        11%
    -----------------------------------------------------
    Income before income
     taxes                     1,003      672      +100%
    Income taxes (teb)           232      322      +100%
    -----------------------------------------------------
    Net income                   771      350        83%
    -----------------------------------------------------
    -----------------------------------------------------

    Amortization of
     intangible assets
     (after tax)                   1        -          -
    -----------------------------------------------------
    Cash net income              772      350        83%
    -----------------------------------------------------

    Trading Products revenue   1,476      693        89%
    Investment and Corporate
     Banking and Other
     revenue                   1,096      161        17%
    Return on equity           15.3%                6.4%
    Cash return on equity      15.3%                6.3%
    Operating leverage         39.0%                  nm
    Cash operating leverage    39.0%                  nm
    Productivity ratio (teb)   56.0%              (19.7%)
    Cash productivity ratio
     (teb)                     56.0%              (19.7%)
    Net interest margin on
     earning assets (teb)      1.06%               0.42%
    Average earning assets   183,828    6,989         4%
    -----------------------------------------------------
    -----------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
    Total revenue (teb)         1,164      331       40%
    Non-interest expense          526      (30)      (5%)
    Net income                    394      220     +100%
    Average earning assets     66,264   (4,605)      (6%)
    -----------------------------------------------------
    -----------------------------------------------------
    nm - not meaningful
    

    Q3 2009 vs Q3 2008

    Net income was $343 million, up $80 million or 30% from a year ago.
Results a year ago included charges of $134 million ($96 million after tax) in
respect of the capital markets environment as described in the Notable Items
section at the end of this MD&A, as well as a recovery of prior periods'
income taxes of $82 million. Results this quarter included a modest net charge
after tax related to such items. Credit valuation adjustments were favourable
at $61 million this quarter but were more than offset by $74 million of
mark-to-market losses on credit default swaps that mitigate credit exposure on
our loan portfolio. There was a small net charge in respect of Apex this
quarter including a charge in respect of the hedge of up to the first $515
million of losses on our committed exposure under the senior funding facility,
net of a small mark-to-market gain on our investment in Apex notes.
    Revenue increased $280 million or 37% to $1,033 million. The stronger
U.S. dollar increased revenues by $40 million relative to a year ago. There
were significantly higher trading revenues and corporate banking revenues. The
group also benefited from a large reduction in securities losses.
    Trading Products revenue increased 68% from a year ago driven primarily
by increased trading revenues. Trading revenues increased in large part due to
the change in credit valuation adjustments as well as strong performance in
certain core trading businesses including fixed income, money market and
structured products trading.
    Investment and Corporate Banking and Other revenue increased by $11
million due to significantly higher corporate banking net interest income,
partially offset by mark-to-market losses on credit default swap positions
that mitigate the credit exposure in our loan portfolio. The large increase in
net interest income is due in part to pricing initiatives and a stronger U.S.
dollar. Lending fees and debt underwriting fees were also up from a year ago,
while cash management revenues declined due to lower client balances.
    Net interest income rose $146 million from a year ago due to increased
corporate banking net interest income as noted above, as well as significantly
higher trading net interest income. Trading net interest income consists of
interest earned on trading assets less the costs of funding the assets. Net
interest margin improved 33 basis points from the prior year, driven by higher
spreads in our corporate lending business and increased trading net interest
income.
    Non-interest expense increased $39 million or 8.3% as a result of
increased variable compensation, consistent with improved business
performance. The stronger U.S. dollar increased expenses by $15 million. The
group's cash operating leverage was 29.1%.

    Q3 2009 vs Q2 2009

    Net income increased $94 million or 38% from the previous quarter.
Results in the second quarter were affected by charges of $117 million ($80
million after tax) in respect of the capital markets environment, as described
in the Notable Items section.
    Revenue increased $221 million or 27%. The weaker U.S. dollar decreased
revenue by $54 million. The increase in overall revenue was driven mainly by
trading revenues, in part due to the large capital markets environment charges
in the previous quarter reflected in trading revenues. The increase in trading
revenues was partially offset by a decrease in corporate banking net interest
income as a result of reductions in the loan portfolio. Merger and acquisition
fees and equity underwriting fees also decreased.
    Trading Products revenue increased 36% from the previous quarter due to
higher trading revenues as noted above. Investment and Corporate Banking and
Other revenue rose 14% from the second quarter due to a large reduction in
securities losses in our merchant banking portfolio and lower trading losses
on credit default swaps used to hedge our loan portfolio. Debt underwriting
fees increased, but the increase was offset by declines in merger and
acquisition and equity underwriting activities. Corporate banking net interest
income also decreased as noted above.
    Non-interest expense was $65 million or 14% higher than in the second
quarter due to increased variable compensation, consistent with improved
performance. The weaker U.S. dollar reduced expenses by $20 million.

    Q3 YTD 2009 vs Q3 YTD 2008

    Net income increased $350 million to $771 million. Results in the first
half of 2009 were affected by charges of $628 million ($428 million after tax)
related to the capital markets environment as detailed in the Notable Items
section. Results in the third quarter reflected a modest net charge. Results
in 2008 were affected by charges of $580 million ($392 million after tax) as
reflected in the Notable Items section. They also included an $82 million
recovery of prior periods' income taxes.
    Revenue rose $854 million or 50% due to the strength of our underlying
core businesses. There were significantly improved trading revenues and
corporate banking revenues. Revenues from our interest-rate-sensitive
businesses also performed very well in the first two quarters, having
benefited from the unprecedented easing in the interest rate environment.
Securities losses have increased significantly over the same period in the
prior year. Commission revenues and merger and acquisition fees also declined.
The stronger U.S. dollar bolstered revenue from our U.S. businesses.
    Non-interest expense was $140 million higher than in the prior year in
large part due to increased variable compensation consistent with improved
revenue performance and, to a lesser extent, increased computer and allocated
costs.


    
    Corporate Services, Including Technology and Operations

    (Canadian $                                 Increase            Increase
     in millions,                              (Decrease)          (Decrease)
     except as                                       vs.                 vs.
     noted)                  Q3-2009             Q3-2008             Q2-2009
    -------------------------------------------------------------------------
    Net interest income (teb)   (224)      (49)     (29%)      160       42%
    Non-interest revenue          23       (80)     (78%)     (174)     (88%)
    -------------------------------------------------------------------------
    Total revenue (teb)         (201)     (129)   (+100%)      (14)      (8%)
    Provision for credit
     losses                      259       (96)     (27%)       44       20%
    Non-interest expense          13        (7)     (37%)     (134)     (91%)
    Loss before income taxes
     and non-controlling
     interest in
     subsidiaries                473        26        6%       (76)     (14%)
    Income tax recovery (teb)    205       (50)     (20%)      (35)     (16%)
    Non-controlling interest
     in subsidiaries              19         1        2%         -         -
    -------------------------------------------------------------------------
    Net loss                     287        77       36%       (41)     (12%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
    Total revenue (teb)          (37)       (3)      (9%)       38       50%
    Provision for credit
     losses                      181      (231)     (56%)       19       11%
    Non-interest expense          (2)       18       86%       (21)   (+100%)
    Income tax recovery (teb)     86       (65)     (45%)       (4)      (9%)
    Net loss                     135      (145)     (51%)      (35)     (20%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (Canadian $                                 Increase
     in millions,                              (Decrease)
     except as                                       vs.
     noted)                 YTD-2009            YTD-2008
    -----------------------------------------------------
    Net interest income
     (teb)                    (1,037)     (503)     (94%)
    Non-interest revenue         332        77       30%
    -----------------------------------------------------
    Total revenue (teb)         (705)     (426)   (+100%)
    Provision for credit
     losses                      746       254       51%
    Non-interest expense         208       150     +100%
    Loss before income taxes
     and non-controlling
     interest in
     subsidiaries              1,659       830      100%
    Income tax recovery (teb)    732       188       34%
    Non-controlling interest
     in subsidiaries              57         2        4%
    -----------------------------------------------------
    Net loss                     984       644     +100%
    -----------------------------------------------------
    -----------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
    Total revenue (teb)         (235)     (105)     (80%)
    Provision for credit
     losses                      567        (7)      (1%)
    Non-interest expense           3        48     +100%
    Income tax recovery (teb)    306        51       19%
    Net loss                     513        95       23%
    -----------------------------------------------------
    -----------------------------------------------------
    

    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, corporate marketing, 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
BMO's overall asset-liability management.
    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 BMO Capital Markets) and only relatively minor
amounts are retained within T&O. As such, results in this section largely
reflect the other corporate units outlined above.
    There was a net loss of $287 million in the quarter compared with a net
loss of $210 million in the prior year. Provisions for credit losses were
better by $96 million as a result of lower provisions charged to Corporate
under BMO's application of the expected-loss-provisioning methodology. Results
in the quarter included an increase in the general allowance for credit losses
of $60 million, compared with a $50 million increase a year ago and no
increase in the second quarter of 2009. Revenues were worse by $129 million
mainly due to the impact of credit card securitizations completed in 2008, the
negative carry on certain asset-liability interest rate positions as a result
of changes in market interest rates, the continued impact of funding
activities that have enhanced our strong liquidity position and mark-to-market
losses compared to gains in the prior year.  Expenses in the quarter reflected
a nominal $10 million reversal of the 2007 restructuring charge.
    The net loss decreased $41 million from the second quarter primarily due
to lower expenses. There were $118 million ($80 million after tax) of
severance charges recorded in the second quarter. Revenues were $14 million
worse. There was a $160 million improvement in net interest income due in part
to management actions to lower the negative carry on certain asset-liability
interest rate and liquidity positions and to more stable market conditions.
Overall revenue fell slightly as non-interest revenue decreased due in large
part to lower securitization revenue and mark-to-market losses on certain
hedging activities compared to gains in the second quarter.
    The net loss for the year to date rose $644 million from a year ago,
driven in large part by lower revenues, higher provisions for credit losses,
due to our expected loss provisioning methodology, and higher severance costs.
There was a $60 million increase in the general allowance for credit losses in
the current year to date and a $110 million increase in the comparable period
in 2008.


    
    Notable items

    (Canadian $ in millions,
     except as noted)          Q3-2009  Q2-2009  Q3-2008  YTD-2009  YTD-2008
    -------------------------------------------------------------------------

    Charges related to
     deterioration in capital
     markets environment             -      117      134       645       580
    Related income taxes             -       37       38       206       188
    -------------------------------------------------------------------------
    Net impact of charges
     related to deterioration
     in capital markets
     environment (a)                 -       80       96       439       392
    -------------------------------------------------------------------------

    Severance costs                  -      118        -       118         -
    Related income taxes             -       38        -        38         -
    -------------------------------------------------------------------------
    Net impact of severance (b)      -       80        -        80         -
    -------------------------------------------------------------------------

    Increase in general allowance   60        -       50        60       110
    Related income taxes            21        -       20        21        42
    -------------------------------------------------------------------------
    Net impact of increase in
     general allowance (c)          39        -       30        39        68
    -------------------------------------------------------------------------
    Net impact of notable items
     (a+b+c)                        39      160      126       558       460
    -------------------------------------------------------------------------
    

    Notable Items

    Q3 2009

    Net income was reduced by a $60 million ($39 million after tax and $0.07
per share) increase in the general allowance for credit losses recorded in
Corporate Services. No charges in respect of the capital markets environment
have been designated as notable items this quarter in light of the relative
insignificance of the amounts. There was a net benefit in the quarter in
respect of Credit Valuation Adjustment (CVA) benefits and a modest charge on
the Canadian credit protection vehicle, Apex. These were more than offset by
trading losses on CDS used to hedge our lending portfolio.

    Q3 2008

    BMO's results in the third quarter of 2008 were affected by capital
markets environment charges of $134 million ($96 million after tax and $0.19
per share) and a $50 million ($30 million after tax and $0.06 per share)
increase in the general allowance.
    The $134 million of charges outlined above reduced trading non-interest
revenue ($76 million), investment securities gains ($61 million) and increased
other revenue ($3 million).

    Q2 2009

    Results in the second quarter of 2009 were affected by Notable Items
totalling $235 million ($160 million after tax and $0.30 per share). BMO
Capital Markets recorded unrealized capital markets environment charges of
$117 million ($80 million after tax and $0.15 per share) that reduced trading
non-interest revenue. Results also included severance costs of $118 million
($80 million after tax and $0.15 per share) recorded in Corporate Services.

    YTD 2009

    Net income for the year-to-date 2009 was affected by Notable Items
totalling $823 million ($558 million after tax and $1.06 per share). BMO
Capital Markets recorded capital markets environment charges of $628 million
($428 million after tax) and PCG recorded charges of $17 million ($11 million
after tax) related to auction-rate securities in the first half of the year.
In Corporate Services, there were also severance costs of $118 million ($80
million after tax) and a $60 million ($39 million after tax) increase in the
general allowance for credit losses.
    Non-interest revenue for year-to-date 2009 was affected by the $645
million of capital markets environment charges outlined above. There were
reductions in trading non-interest revenue ($402 million), investment
securities gains ($226 million) and other revenue ($17 million).

    YTD 2008

    Net income for the year-to-date 2008 was reduced by $690 million ($460
million after tax and $0.91 per share) of Notable Items. They included $580
million ($392 million after tax) of charges in respect of the capital markets
environment recorded in BMO Capital Markets and a $110 million ($68 million
after tax) increase in the general allowance for credit losses recorded in
Corporate Services.
    Non-interest revenue for year-to-date 2008 was affected by the $580
million of charges outlined above. There were reductions in trading
non-interest revenue ($425 million), investment securities gains ($119
million) and other revenue ($36 million).


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

    (Canadian $ in millions,
     except as noted)          Q3-2009  Q2-2009  Q3-2008  YTD-2009  YTD-2008
    -------------------------------------------------------------------------

    Non-interest expense (a)     1,873    1,888    1,782     5,602     5,076
    Amortization of
     acquisition-related
     intangible assets (note 1)    (12)     (12)     (11)      (34)      (31)
    -------------------------------------------------------------------------
    Cash-based non-interest
     expense (b) (note 2)        1,861    1,876    1,771     5,568     5,045
    -------------------------------------------------------------------------

    Net income                     557      358      521     1,140     1,418
    Amortization of
     acquisition-related
     intangible assets,
     net of income taxes             9       10        9        27        25
    -------------------------------------------------------------------------
    Cash net income (note 2)       566      368      530     1,167     1,443
    Preferred share dividends      (33)     (26)     (19)      (82)      (48)
    Charge for capital (note 2)   (454)    (429)    (389)   (1,312)   (1,134)
    -------------------------------------------------------------------------
    Net economic profit (note 2)    79      (87)     122      (227)      261
    -------------------------------------------------------------------------

    Revenue (c)                  2,978    2,655    2,746     8,075     7,392
    Revenue growth (%) (d)         8.4      1.3      7.5       9.2       3.4
    Productivity ratio (%)
     ((a/c) x 100)                62.9     71.1     64.9      69.4      68.7
    Cash productivity ratio (%)
     ((b/c) x 100) (note 2)       62.5     70.7     64.5      69.0      68.2
    Non-interest expense
     growth (%) (e)                5.1     12.4      7.4      10.4       2.6
    Cash-based non-interest
     expense growth (%) (f)
     (note 2)                      5.2     12.3      7.5      10.4       2.7
    Operating leverage (%) (d-e)   3.3    (11.1)     0.1      (1.2)      0.8
    Cash operating leverage (%)
     (d-f) (note 2)                3.2    (11.0)       -      (1.2)      0.7
    EPS (uses net income) ($)     0.97     0.61     0.98      1.97      2.70
    Cash EPS (uses cash net
     income) ($)                  0.98     0.63     1.00      2.01      2.75
    -------------------------------------------------------------------------
    Note 1: The amortization of non-acquisition-related intangible assets is
            not added back in the determination of cash net income.
    Note 2: These are non-GAAP amounts or non-GAAP measures.
    

    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 above table reconciles the non-GAAP measures, which
management regularly monitors, to their GAAP counterparts.
    At times, we indicate certain measures excluding the effects of items but
generally do so in conjunction with disclosure of the nearest GAAP measure and
provide detail of the reconciling item. Amounts and measures stated on such a
basis are considered useful as they could be expected to be reflective of
ongoing operating results or assist readers' understanding of performance. To
assist readers, we have also provided a schedule that summarizes notable items
that have affected results in the reporting periods.
    Cash earnings, cash productivity and cash operating leverage measures may
enhance comparisons between periods when there has been an acquisition,
particularly because the purchase decision may not consider the amortization
of acquisition-related 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 acquisition-related intangible assets to GAAP earnings to
derive cash net income (and associated cash EPS) and deduct the amortization
of acquisition-related intangible assets from non-interest expense to derive
cash productivity and cash operating leverage measures.
    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.

    INVESTOR AND MEDIA PRESENTATION

    Investor Presentation Materials

    Interested parties are invited to visit our website at
www.bmo.com/investorrelations to review this quarterly news release,
presentation materials and a supplementary financial information package
online.

    Quarterly Conference Call and Webcast Presentations

    Interested parties are also invited to listen to our quarterly conference
call on Tuesday, August 25, 2009 at 2:00 p.m. (EDT). 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 Monday,
November 23, 2009 by calling 416-695-5800 (from within Toronto) or
1-800-408-3053 (toll-free outside Toronto) and entering passcode 3278112.
    A live webcast of the call can be accessed on our website at
www.bmo.com/investorrelations. A replay can be accessed on the site until
Monday, November 23, 2009.

    
    -------------------------------------------------------------------------
    Annual Meeting 2010
    The next Annual Meeting of Shareholders will be held on
    Tuesday, March 23, 2010 in Winnipeg, Manitoba.
    -------------------------------------------------------------------------

    Media Relations Contacts

    Ralph Marranca, Toronto, ralph.marranca@bmo.com, 416-867-3996
    Ronald Monet, Montreal, ronald.monet@bmo.com, 514-877-1873

    Investor Relations Contacts

    Viki Lazaris, Senior Vice-President, viki.lazaris@bmo.com,
     416-867-6656
    Steven Bonin, Director, steven.bonin@bmo.com, 416-867-5452
    Andrew Chin, Senior Manager, andrew.chin@bmo.com, 416-867-7019

    Chief Financial Officer

    Russel Robertson, Chief Financial Officer
     russ.robertson@bmo.com, 416-867-7360

    Corporate Secretary

    Blair Morrison, Vice-President & Corporate Secretary
    corp.secretary@bmo.com, 416-867-6785

    -------------------------------------------------------------------------
    Shareholder Dividend Reinvestment  For other shareholder information,
     and Share Purchase Plan           please contact
    Average market price               Bank of Montreal
    May 2009 $ 42.26 ($41.41(*))       Shareholder Services
    June 2009 $ 47.82                  Corporate Secretary's Department
    July 2009 $ 52.14                  One First Canadian Place, 19th Floor
    (*) reflects 2% discount for       Toronto, Ontario M5X 1A1
        dividend reinvestment          Telephone: (416) 867-6785
                                       Fax: (416) 867-6793
    For dividend information, change   E-mail: corp.secretary@bmo.com
    in shareholder address or to
    advise of duplicate mailings,      For further information on this
    please contact                     report, please contact
    Computershare Trust Company of     Bank of Montreal Investor Relations
    Canada                             Department
    100 University Avenue, 9th Floor   P.O. Box 1, One First Canadian Place,
    Toronto, Ontario M5J 2Y1           18th Floor Toronto, Ontario M5X 1A1
    Telephone: 1-800-340-5021
    (Canada and the United States)     To review financial results online,
    Telephone: (514) 982-7800          please visit our website at
    (international)                    www.bmo.com
    Fax: 1-888-453-0330
    (Canada and the United States)
    Fax: (416) 263-9394
    (international)
    E-mail:
    service@computershare.com
    -------------------------------------------------------------------------

    (R) Registered trade-mark of Bank of Montreal



    Financial Highlights

    (Unaudited)
    (Canadian $
     in millions,
     except as
     noted)                      For the three months ended
    -------------------------------------------------------------------------
                                                                      Change
                                                                        from
                      July     April   January   October      July      July
                  31, 2009  30, 2009  31, 2009  31, 2008  31, 2008  31, 2008
    -------------------------------------------------------------------------
    Income Statement
     Highlights
    Total
     revenue     $   2,978 $   2,655 $   2,442 $   2,813 $   2,746       8.4%
    Provision for
     credit losses     417       372       428       465       484     (13.8)
    Non-interest
     expense         1,873     1,888     1,841     1,818     1,782       5.1
    Net income         557       358       225       560       521       6.9
    -------------------------------------------------------------------------
    Net Income
     by Operating
     Segment
    P&C Canada   $     356 $     334 $     308 $     324 $     315      13.0%
    P&C U.S.            25        25        34        12        28     (10.7)
    PCG                120        78        73        84       125      (4.0)
    BMO CM             343       249       179       290       263      30.4
    Corporate
     Services(a)      (287)     (328)     (369)     (150)     (210)    (36.7)
    -------------------------------------------------------------------------
    Common Share
     Data ($)
    Diluted
     earnings
     per share   $    0.97 $    0.61 $    0.39 $    1.06 $    0.98 $   (0.01)
    Diluted cash
     earnings per
     share(b)         0.98      0.63      0.40      1.08      1.00     (0.02)
    Dividends
     declared per
     share            0.70      0.70      0.70      0.70      0.70      0.00
    Book value
     per share       31.26     32.22     32.18     32.02     30.15      1.11
    Closing share
     price           54.02     39.50     33.25     43.02     47.94      6.08
    Total market
     value of
     common shares
     ($ billions)     29.6      21.5      17.9      21.7      24.2       5.4
    -------------------------------------------------------------------------

                                             As at
    -------------------------------------------------------------------------
                                                                      Change
                                                                        from
                      July     April   January   October      July      July
                  31, 2009  30, 2009  31, 2009  31, 2008  31, 2008  31, 2008
    -------------------------------------------------------------------------
    Balance Sheet
     Highlights
    Assets       $ 415,361 $ 432,245 $ 443,174 $ 416,050 $ 375,047      10.7%
    Net loans and
     acceptan-
     ces(c)        173,558   179,650   190,099   186,962   175,882      (1.3)
    Deposits       244,953   247,169   264,580   257,670   248,657      (1.5)
    Common
     shareholders'
     equity         17,144    17,561    17,371    16,158    15,207      12.7
    -------------------------------------------------------------------------

                             For the three months ended
    -------------------------------------------------------------------------

                      July     April   January   October      July
                  31, 2009  30, 2009  31, 2009  31, 2008  31, 2008
    -------------------------------------------------------------------------
    Financial
     Measures
     (%)(d)
    Average
     annual five
     year total
     shareholder
     return            4.0      (1.2)     (6.9)      0.9       5.1
    Diluted earnings
     per share
     growth           (1.0)    (51.2)    (17.0)     21.8     (23.4)
    Diluted cash
     earnings per
     share growth(b)  (2.0)    (50.0)    (18.4)     21.3     (23.1)
    Return on equity  12.1       8.1       4.9      14.0      13.5
    Cash return on
     equity(b)        12.3       8.4       5.2      14.3      13.7
    Net economic
     profit (NEP)
     growth(b)       (35.1)    (+100)    (71.8)     +100     (56.5)
    Operating
     leverage          3.3     (11.1)      6.4      18.0       0.1
    Cash operating
     leverage(b)       3.2     (11.0)      6.4      18.0       0.0
    Revenue growth     8.4       1.3      20.5      27.9       7.5
    Non-interest
     expense-to-
     revenue ratio    62.9      71.1      75.4      64.6      64.9
    Cash non-
     interest
     expense-to-
     revenue
     ratio(b)         62.5      70.7      75.0      64.2      64.5
    Provision for
     credit losses-
     to-average
     loans and
     acceptances
     (annualized)(c)  0.94      0.79      0.90      1.01      1.10
    Gross impaired
     loans and
     acceptances-
     to-equity and
     allowance for
     credit losses   12.75     12.95     11.91     11.34      9.09
    Cash and
     securities-
     to-total
     assets ratio     30.0      28.2      28.2      29.1      29.6
    Tier 1 capital
     ratio -
     Basel II        11.71     10.70     10.21      9.77      9.90
    Credit rating
      DBRS              AA        AA        AA        AA        AA
      Fitch            AA-       AA-       AA-       AA-       AA-
      Moody's          Aa1       Aa1       Aa1       Aa1       Aa1
      Standard &
       Poor's           A+        A+        A+        A+        A+
    -------------------------------------------------------------------------
    Financial Ratios
     (% except as
     noted)(d)
    Twelve month
     total
     shareholder
     return           21.4     (15.2)    (37.7)    (27.9)    (24.4)
    Dividend yield    5.18      7.09      8.42      6.51      5.84
    Price-to-earnings
     ratio (times)    17.8      13.0       9.0      11.4      13.4
    Market-to-book
     value (times)    1.73      1.23      1.03      1.34      1.59
    Net economic
     profit (loss)
     ($ millions)(b)    79       (87)     (219)      145       122
    Return on
     average assets   0.52      0.32      0.19      0.54      0.52
    Net interest
     margin on
     average
     earning assets   1.74      1.55      1.51      1.71      1.58
    Non-interest
     revenue-to-
     total revenue    50.8      49.7      45.6      49.9      53.3
    Non-interest
     expense growth    5.1      12.4      14.1       9.9       7.4
    Cash non-interest
     expense
     growth(b)         5.2      12.3      14.1       9.9       7.5
    Total capital
     ratio -
     Basel II        14.32     13.20     12.87     12.17     12.29
    Equity-to-
     assets ratio      4.7       4.6       4.3       4.3       4.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                    For the nine months ended
    -------------------------------------------
                                        Change
                                          from
                      July      July      July
                  31, 2009  31, 2008  31, 2008
    -------------------------------------------
    Income Statement
     Highlights
    Total
     revenue     $   8,075 $   7,392       9.2%
    Provision for
     credit losses   1,217       865      40.7
    Non-interest
     expense         5,602     5,076      10.4
    Net income       1,140     1,418     (19.6)
    -------------------------------------------
    Net Income
     by Operating
     Segment
    P&C Canada   $     998 $     885      12.8%
    P&C U.S.            84        84       0.0
    PCG                271       368     (26.4)
    BMO CM             771       421      83.1
    Corporate
     Services(a)      (984)     (340)    (-100)
    -------------------------------------------
    Common Share
     Data ($)
    Diluted
     earnings
     per share   $    1.97 $    2.70 $   (0.73)
    Diluted cash
     earnings per
     share(b)         2.01      2.75     (0.74)
    Dividends
     declared per
     share            2.10      2.10      0.00
    Book value
     per share       31.26     30.15      1.11
    Closing share
     price           54.02     47.94      6.08
    Total market
     value of
     common shares
     ($ billions)     29.6      24.2       5.4
    -------------------------------------------

                      For the nine
                      months ended
    -------------------------------------------
                      July      July
                  31, 2009  31, 2008
    -------------------------------------------
    Financial
     Measures
     (%)(d)
    Average
     annual five
     year total
     shareholder
     return            4.0       5.1
    Diluted earnings
     per share
     growth          (27.0)    (16.7)
    Diluted cash
     earnings per
     share growth(b) (26.9)    (16.4)
    Return on equity   8.5      12.7
    Cash return on
     equity(b)         8.7      12.9
    Net economic
     profit (NEP)
     growth(b)       (+100)    (51.0)
    Operating
     leverage         (1.2)      0.8
    Cash operating
     leverage(b)      (1.2)      0.7
    Revenue growth     9.2       3.4
    Non-interest
     expense-to-
     revenue ratio    69.4      68.7
    Cash non-
     interest
     expense-to-
     revenue
     ratio(b)         69.0      68.2
    Provision for
     credit losses-
     to-average
     loans and
     acceptances
     (annualized)(c)  0.88      0.67
    Gross impaired
     loans and
     acceptances-
     to-equity and
     allowance for
     credit losses   12.75      9.09
    Cash and
     securities-
     to-total
     assets ratio     30.0      29.6
    Tier 1 capital
     ratio -
     Basel II        11.71      9.90
    Credit rating
      DBRS              AA        AA
      Fitch            AA-       AA-
      Moody's          Aa1       Aa1
      Standard &
       Poor's           A+        A+
    -------------------------------------------
    Financial Ratios
     (% except as
     noted)(d)
    Twelve month
     total
     shareholder
     return           21.4     (24.4)
    Dividend yield    5.18      5.84
    Price-to-earnings
     ratio (times)    17.8      13.4
    Market-to-book
     value (times)    1.73      1.59
    Net economic
     profit (loss)
     ($ millions)(b)  (227)      261
    Return on
     average assets   0.34      0.48
    Net interest
     margin on
     average
     earning assets   1.60      1.50
    Non-interest
     revenue-to-
     total revenue    48.9      50.5
    Non-interest
     expense growth   10.4       2.6
    Cash non-interest
     expense
     growth(b)        10.4       2.7
    Total capital
     ratio -
     Basel II        14.32     12.29
    Equity-to-
     assets ratio      4.7       4.5
    -------------------------------------------
    -------------------------------------------
    All ratios in this report are based on unrounded numbers.
    (a) Corporate Services includes Technology and Operations.
    (b) Refer to the "Non-GAAP Measures" section of Management's Discussion
        and Analysis for an explanation of cash results 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.
    (c) Effective in the first quarter of 2009, securities borrowed or
        purchased under resale agreements are excluded from net loans and
        acceptances and credit statistics. All comparative figures have been
        restated.
    (d) For the period ended, or as at, as appropriate.



    Interim Consolidated Financial Statements

    Consolidated Statement of Income


    (Unaudited)
    (Canadian $ in millions,
     except as noted)                    For the three months ended
    -------------------------------------------------------------------------
                                July     April   January   October      July
                            31, 2009  30, 2009  31, 2009  31, 2008  31, 2008
    -------------------------------------------------------------------------
    Interest, Dividend
     and Fee Income
    Loans                  $   1,717 $   1,825 $   2,213 $   2,554 $   2,467
    Securities                   525       683       824       744       701
    Deposits with banks           23        48        96       182       203
    -------------------------------------------------------------------------
                               2,265     2,556     3,133     3,480     3,371
    -------------------------------------------------------------------------
    Interest Expense
    Deposits                     592       967     1,446     1,590     1,612
    Subordinated debt             58        56        60        61        61
    Capital trust securities
     and preferred shares         20        19        21        23        22
    Other liabilities            129       179       279       397       394
    -------------------------------------------------------------------------
                                 799     1,221     1,806     2,071     2,089
    -------------------------------------------------------------------------
    Net Interest Income        1,466     1,335     1,327     1,409     1,282
    Provision for credit
     losses (Note 3)             417       372       428       465       484
    -------------------------------------------------------------------------
    Net Interest Income
     After Provision for
     Credit Losses             1,049       963       899       944       798
    -------------------------------------------------------------------------
    Non-Interest Revenue
    Securities commissions
     and fees                    240       235       248       270       294
    Deposit and payment
     service charges             206       204       205       203       190
    Trading revenues             273        63       224       435       220
    Lending fees                 140       148       119       120       116
    Card fees                     35        33        24        58        88
    Investment management
     and custodial fees           85        84        88        87        86
    Mutual fund revenues         119       106       114       140       151
    Securitization revenues      202       262       264       167       133
    Underwriting and
     advisory fees               101       103        77        66        97
    Securities losses, other
     than trading                (12)      (42)     (314)     (252)      (75)
    Foreign exchange, other
     than trading                  1        25        13        (4)       25
    Insurance income              85        64        60        56        60
    Other                         37        35        (7)       58        79
    -------------------------------------------------------------------------
                               1,512     1,320     1,115     1,404     1,464
    -------------------------------------------------------------------------
    Net Interest Income and
     Non-Interest Revenue      2,561     2,283     2,014     2,348     2,262
    -------------------------------------------------------------------------
    Non-Interest Expense
    Employee compensation
     (Note 9)                  1,122     1,129     1,087     1,007     1,044
    Premises and equipment
     (Note 2)                    313       339       327       338       312
    Amortization of intangible
     assets (Note 2)              48        54        51        48        45
    Travel and business
     development                  73        73        82        95        87
    Communications                55        57        51        57        50
    Business and capital taxes    19        13        15        11        20
    Professional fees             91        82        92       113       102
    Other                        162       141       136       157       122
    -------------------------------------------------------------------------
                               1,883     1,888     1,841     1,826     1,782
    -------------------------------------------------------------------------
    Restructuring Reversal
     (Note 10)                   (10)        -         -        (8)        -
    -------------------------------------------------------------------------
    Income Before Provision
     for (Recovery of) Income
     Taxes and Non-Controlling
     Interest in Subsidiaries    688       395       173       530       480
    Income taxes                 112        18       (71)      (49)      (59)
    -------------------------------------------------------------------------
                                 576       377       244       579       539
    Non-controlling interest
     in subsidiaries              19        19        19        19        18
    -------------------------------------------------------------------------
    Net Income             $     557 $     358 $     225 $     560 $     521
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Preferred share
     dividends             $      33 $      26 $      23 $      25 $      19
    Net income available
     to common
     shareholders          $     524 $     332 $     202 $     535 $     502
    Average common shares
     (in thousands)          547,134   543,634   520,020   503,004   504,124
    Average diluted common
     shares (in thousands)   549,968   544,327   523,808   506,591   508,032
    -------------------------------------------------------------------------
    Earnings Per Share
     (Canadian $)
    Basic                  $    0.97 $    0.61 $    0.39 $    1.06 $    1.00
    Diluted                     0.97      0.61      0.39      1.06      0.98
    Dividends Declared
     Per Common Share           0.70      0.70      0.70      0.70      0.70
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                For the nine
                                months ended
    -------------------------------------------
                                July      July
                            31, 2009  31, 2008
    -------------------------------------------
    Interest, Dividend
     and Fee Income
    Loans                  $   5,755 $   8,060
    Securities                 2,032     2,447
    Deposits with banks          167       748
    -------------------------------------------
                               7,954    11,255
    -------------------------------------------
    Interest Expense
    Deposits                   3,005     5,751
    Subordinated debt            174       161
    Capital trust securities
     and preferred shares         60        68
    Other liabilities            587     1,612
    -------------------------------------------
                               3,826     7,592
    -------------------------------------------
    Net Interest Income        4,128     3,663
    Provision for credit
     losses (Note 3)           1,217       865
    -------------------------------------------
    Net Interest Income
     After Provision for
     Credit Losses             2,911     2,798
    -------------------------------------------
    Non-Interest Revenue
    Securities commissions
     and fees                    723       835
    Deposit and payment
     service charges             615       553
    Trading revenues             560       111
    Lending fees                 407       309
    Card fees                     92       233
    Investment management
     and custodial fees          257       252
    Mutual fund revenues         339       449
    Securitization revenues      728       346
    Underwriting and
     advisory fees               281       287
    Securities losses, other
     than trading               (368)      (63)
    Foreign exchange, other
     than trading                 39        84
    Insurance income             209       181
    Other                         65       152
    -------------------------------------------
                               3,947     3,729
    -------------------------------------------
    Net Interest Income and
     Non-Interest Revenue      6,858     6,527
    -------------------------------------------
    Non-Interest Expense
    Employee compensation
     (Note 9)                  3,338     2,969
    Premises and equipment
     (Note 2)                    979       903
    Amortization of intangible
     assets (Note 2)             153       135
    Travel and business
     development                 228       233
    Communications               163       145
    Business and capital taxes    47        31
    Professional fees            265       271
    Other                        439       389
    -------------------------------------------
                               5,612     5,076
    -------------------------------------------
    Restructuring Reversal
     (Note 10)                   (10)        -
    -------------------------------------------
    Income Before Provision
     for (Recovery of) Income
     Taxes and Non-Controlling
     Interest in Subsidiaries  1,256     1,451
    Income taxes                  59       (22)
    -------------------------------------------
                               1,197     1,473
    Non-controlling interest
     in subsidiaries              57        55
    -------------------------------------------
    Net Income             $   1,140 $   1,418
    -------------------------------------------
    -------------------------------------------

    Preferred share
     dividends             $      82 $      48
    Net income available
     to common
     shareholders          $   1,058 $   1,370
    Average common shares
     (in thousands)          536,855   501,746
    Average diluted common
     shares (in thousands)   538,332   506,732
    -------------------------------------------
    Earnings Per Share
     (Canadian $)
    Basic                  $    1.97 $    2.73
    Diluted                     1.97      2.70
    Dividends Declared
     Per Common Share           2.10      2.10
    -------------------------------------------
    -------------------------------------------
    The accompanying notes are an integral part of these interim consolidated
    financial statements.
    Certain comparative figures have been reclassified to conform with the
    current period's presentation.



    Interim Consolidated Financial Statements

    Consolidated Balance Sheet


    (Unaudited)
    (Canadian $ in millions)                      As at
    -------------------------------------------------------------------------
                                July     April   January   October      July
                            31, 2009  30, 2009  31, 2009  31, 2008  31, 2008
    -------------------------------------------------------------------------
    Assets
    Cash Resources         $  14,567 $  14,232 $  26,390 $  21,105 $  22,054
    -------------------------------------------------------------------------
    Securities
    Trading                   66,152    66,704    61,752    66,032    63,628
    Available-for-sale        42,559    39,295    35,189    32,115    23,426
    Other                      1,436     1,501     1,517     1,991     1,821
    -------------------------------------------------------------------------
                             110,147   107,500    98,458   100,138    88,875
    -------------------------------------------------------------------------
    Securities Borrowed
     or Purchased Under
     Resale Agreements        45,250    38,521    32,283    28,033    32,433
    -------------------------------------------------------------------------
    Loans
    Residential mortgages     48,760    48,052    50,107    49,343    51,757
    Consumer instalment
     and other personal       44,466    44,316    44,355    43,737    40,292
    Credit cards               2,383     2,100     2,105     2,120     3,532
    Businesses and
     governments              70,705    77,271    84,557    84,151    71,961
    -------------------------------------------------------------------------
                             166,314   171,739   181,124   179,351   167,542
    Customers' liability
     under acceptances         9,042     9,736    10,716     9,358     9,834
    Allowance for credit
     losses (Note 3)          (1,798)   (1,825)   (1,741)   (1,747)   (1,494)
    -------------------------------------------------------------------------
                             173,558   179,650   190,099   186,962   175,882
    -------------------------------------------------------------------------
    Other Assets
    Derivative instruments    59,580    77,473    81,985    65,586    43,167
    Premises and equipment
     (Note 2)                  1,642     1,684     1,709     1,721     1,582
    Goodwill                   1,551     1,670     1,706     1,635     1,449
    Intangible assets
     (Note 2)                    647       671       676       710       658
    Other                      8,419    10,844     9,868    10,160     8,947
    -------------------------------------------------------------------------
                              71,839    92,342    95,944    79,812    55,803
    -------------------------------------------------------------------------
    Total Assets           $ 415,361 $ 432,245 $ 443,174 $ 416,050 $ 375,047
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities and
     Shareholders' Equity
    Deposits
    Banks                  $  23,211 $  27,874 $  31,422 $  30,346 $  29,988
    Businesses and
     governments             122,269   118,205   133,388   136,111   131,748
    Individuals               99,473   101,090    99,770    91,213    86,921
    -------------------------------------------------------------------------
                             244,953   247,169   264,580   257,670   248,657
    -------------------------------------------------------------------------
    Other Liabilities
    Derivative instruments    58,570    75,070    77,764    60,048    36,786
    Acceptances                9,042     9,736    10,716     9,358     9,834
    Securities sold but
     not yet purchased        12,717    14,131    16,327    18,792    17,415
    Securities lent or
     sold under repurchase
     agreements               48,816    46,170    36,012    32,492    28,148
    Other                     16,149    14,708    12,969    14,071    11,650
    -------------------------------------------------------------------------
                             145,294   159,815   153,788   134,761   103,833
    -------------------------------------------------------------------------
    Subordinated Debt
     (Note 11)                 4,249     4,379     4,389     4,315     4,204
    -------------------------------------------------------------------------
    Capital Trust Securities   1,150     1,150     1,150     1,150     1,150
    -------------------------------------------------------------------------
    Preferred Share Liability
     (Note 12)                     -         -         -       250       250
    -------------------------------------------------------------------------
    Shareholders' Equity
    Share capital (Note 12)    8,626     8,099     7,676     6,454     6,458
    Contributed surplus           78        77        76        69        68
    Retained earnings         11,525    11,391    11,434    11,632    11,471
    Accumulated other
     comprehensive income
     (loss)                     (514)      165        81      (251)   (1,044)
    -------------------------------------------------------------------------
                              19,715    19,732    19,267    17,904    16,953
    -------------------------------------------------------------------------
    Total Liabilities and
     Shareholders' Equity  $ 415,361 $ 432,245 $ 443,174 $ 416,050 $ 375,047
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes are an integral part of these interim consolidated
    financial statements.
    Certain comparative figures have been reclassified to conform with the
    current period's presentation.



    Interim Consolidated Financial Statements

    Consolidated Statement of Comprehensive Income (Loss)


    (Unaudited)                       For the three          For the nine
    (Canadian $ in millions)           months ended          months ended
    -------------------------------------------------------------------------
                                    July 31,   July 31,   July 31,   July 31,
                                       2009       2008       2009       2008
    -------------------------------------------------------------------------
    Net income                    $     557  $     521  $   1,140  $   1,418
    Other Comprehensive Income
      Net change in unrealized
       gains (losses) on
       available-for-sale
       securities                       107        (51)       354         24
      Net change in unrealized
       gains (losses) on cash
       flow hedges                     (363)        50       (144)       194
      Net gain (loss) on
       translation of net foreign
       operations                      (423)        65       (473)       271
    -------------------------------------------------------------------------
    Total Comprehensive Income
     (Loss)                       $    (122) $     585  $     877  $   1,907
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statement of Changes in Shareholders' Equity


    (Unaudited)                       For the three          For the nine
    (Canadian $ in millions)           months ended          months ended
    -------------------------------------------------------------------------
                                    July 31,   July 31,   July 31,   July 31,
                                       2009       2008       2009       2008
    -------------------------------------------------------------------------
    Preferred Shares
    Balance at beginning of
     period                       $   2,171  $   1,446  $   1,746  $   1,196
    Issued during the period
     (Note 12)                          400        300        825        550
    -------------------------------------------------------------------------
    Balance at End of Period          2,571      1,746      2,571      1,746
    -------------------------------------------------------------------------
    Common Shares
    Balance at beginning of period    5,928      4,668      4,773      4,411
    Issued during the period
     (Note 12)                            -          -      1,000          -
    Issued under the Shareholder
     Dividend Reinvestment and
     Share Purchase Plan                 93         32        231         87
    Issued under the Stock
     Option Plan                         34         12         51         34
    Issued on the acquisition
     of a business                        -          -          -        180
    -------------------------------------------------------------------------
    Balance at End of Period          6,055      4,712      6,055      4,712
    -------------------------------------------------------------------------
    Contributed Surplus
    Balance at beginning of period       77         67         69         58
    Stock option expense/exercised        1          1          7         10
    Premium on treasury shares            -          -          2          -
    -------------------------------------------------------------------------
    Balance at End of Period             78         68         78         68
    -------------------------------------------------------------------------
    Retained Earnings
    Balance at beginning of period   11,391     11,327     11,632     11,166
    Net income                          557        521      1,140      1,418
    Dividends - Preferred shares        (33)       (19)       (82)       (48)
              - Common shares          (384)      (353)    (1,144)    (1,055)
    Share issue expense                  (6)        (5)       (32)       (10)
    Treasury shares                       -          -         11          -
    -------------------------------------------------------------------------
    Balance at End of Period         11,525     11,471     11,525     11,471
    -------------------------------------------------------------------------
    Accumulated Other
     Comprehensive Income on
     Available-for-Sale Securities
    Balance at beginning of period      173        110        (74)        35
    Unrealized gains (losses) on
     available-for-sale securities
     arising during the period
     (net of income tax (provision)
     recovery of $(43), $42,
     $(161) and $25)                    111        (89)       278        (54)
    Reclassification to earnings
     of (gains) losses in the
     period (net of income tax
     (provision) recovery of $2,
     $(18), $(31) and $(37))             (4)        38         76         78
    -------------------------------------------------------------------------
    Balance at End of Period            280         59        280         59
    -------------------------------------------------------------------------
    Accumulated Other
     Comprehensive Income
     on Cash Flow Hedges
    Balance at beginning of period      477        (22)       258       (166)
    Gains (losses) on cash flow
     hedges arising during the
     period (net of income tax
     (provision) recovery of $120,
     $(20), $25 and $(72))             (293)        37        (75)       141
    Reclassification to earnings
     of (gains) losses on cash
     flow hedges (net of income
     tax (provision) recovery of
     $33, $(6), $34 and $(25))          (70)        13        (69)        53
    -------------------------------------------------------------------------
    Balance at End of Period            114         28        114         28
    -------------------------------------------------------------------------
    Accumulated Other
     Comprehensive Loss on
     Translation of Net Foreign
     Operations
    Balance at beginning of period     (485)    (1,196)      (435)    (1,402)
    Unrealized gain (loss) on
     translation of net foreign
     operations                      (1,238)       182     (1,373)       800
    Impact of hedging unrealized
     gain (loss) on translation
     of net foreign operations
     (net of income tax (provision)
     recovery of $(356), $57,
     $(394) and $253)                   815       (117)       900       (529)
    -------------------------------------------------------------------------
    Balance at End of Period           (908)    (1,131)      (908)    (1,131)
    -------------------------------------------------------------------------
    Total Accumulated Other
     Comprehensive Loss                (514)    (1,044)      (514)    (1,044)
    -------------------------------------------------------------------------
    Total Shareholders' Equity    $  19,715  $  16,953  $  19,715  $  16,953
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes are an integral part of these interim consolidated
    financial statements.



    Interim Consolidated Financial Statements

    Consolidated Statement of Cash Flows


    (Unaudited)                       For the three          For the nine
    (Canadian $ in millions)           months ended          months ended
    -------------------------------------------------------------------------
                                    July 31,   July 31,   July 31,   July 31,
                                       2009       2008       2009       2008
    -------------------------------------------------------------------------
    Cash Flows from Operating
     Activities
    Net income                    $     557  $     521  $   1,140  $   1,418
    Adjustments to determine
     net cash flows provided
     by (used in) operating
     activities
      Write-down of securities,
       other than trading                24         61        282        135
      Net loss (gain) on
       securities, other than
       trading                          (12)        14         86        (72)
      Net (increase) decrease in
       trading securities            (4,423)     1,158     (2,329)     9,510
      Provision for credit losses       417        484      1,217        865
      (Gain) on sale of
       securitized loans (Note 4)      (164)      (113)      (554)      (288)
      Change in derivative
       instruments
        - (Increase) decrease in
          derivative asset           14,656      1,918      2,233     (8,949)
        - Increase (decrease) in
          derivative liability      (11,643)    (4,096)     4,294      1,471
      Amortization of premises
       and equipment                     79         64        209        187
      Amortization of intangible
       assets                            48         45        153        135
      Net (increase) decrease
       in future income taxes           (73)       109       (161)       152
      Net (increase) decrease
       in current income taxes          317       (341)       507       (868)
      Change in accrued interest
       - Decrease in interest
         receivable                     239        104        537        433
       - (Decrease) in interest
         payable                       (237)      (111)      (421)      (373)
      Changes in other items and
       accruals, net                  1,544        532       (341)    (1,935)
      (Gain) on sale of land and
       buildings                         (1)       (13)        (6)       (13)
    -------------------------------------------------------------------------
    Net Cash Provided by
     Operating Activities             1,328        336      6,846      1,808
    -------------------------------------------------------------------------
    Cash Flows from Financing
     Activities
    Net increase (decrease)
     in deposits                      7,845      8,199     (1,599)     5,924
    Net (decrease) in securities
     sold but not yet purchased      (1,094)    (2,714)    (5,786)    (7,962)
    Net increase (decrease) in
     securities lent or sold
     under repurchase agreements      5,144     (2,083)    20,063     (4,886)
    Net increase (decrease) in
     liabilities of subsidiaries         (1)      (832)      (114)     2,054
    Repayment of subordinated
     debt (Note 11)                       -          -       (140)      (150)
    Proceeds from issuance of
     subordinated debt (Note 11)          -          -          -        900
    Redemption of preferred
     share liability (Note 12)            -          -       (250)         -
    Proceeds from issuance of
     preferred shares (Note 12)         400        300        825        550
    Proceeds from issuance of
     common shares (Note 12)             34         12      1,051         34
    Share issue expense                  (6)        (5)       (32)       (10)
    Cash dividends paid                (324)      (340)      (995)    (1,016)
    -------------------------------------------------------------------------
    Net Cash Provided by (Used in)
     Financing Activities            11,998      2,537     13,023     (4,562)
    -------------------------------------------------------------------------
    Cash Flows from Investing
     Activities
    Net (increase) decrease in
     interest bearing deposits
     with banks                        (129)       654      8,187      1,924
    Purchases of securities,
     other than trading              (6,337)    (3,933)   (30,664)   (16,867)
    Maturities of securities,
     other than trading               2,907      1,994      9,060     14,188
    Proceeds from sales of
     securities, other than trading   2,453      1,169     13,726      6,967
    Net (increase) in loans          (2,277)    (6,669)    (2,359)   (15,708)
    Proceeds from securitization
     of loans (Note 4)                  417      2,626      5,998      5,771
    Net (increase) decrease in
     securities borrowed or
     purchased under resale
     agreements                      (8,914)     1,492    (20,261)     6,332
    Proceeds from sales of land
     and buildings                        1         19         12         19
    Premises and equipment
     - net purchases                    (78)       (71)      (165)      (175)
    Purchased and developed
     software - net purchases           (52)       (48)      (140)      (107)
    Acquisitions (Note 8)                 -        (49)      (316)      (153)
    -------------------------------------------------------------------------
    Net Cash Provided By (Used in)
     Investing Activities           (12,009)    (2,816)   (16,922)     2,191
    -------------------------------------------------------------------------
    Effect of Exchange Rate
     Changes on Cash and Cash
     Equivalents                       (806)        39     (1,323)       157
    -------------------------------------------------------------------------
    Net Increase (Decrease) in
     Cash and Cash Equivalents          511         96      1,624       (406)
    Cash and Cash Equivalents at
     Beginning of Period             10,247      3,148      9,134      3,650
    -------------------------------------------------------------------------
    Cash and Cash Equivalents at
     End of Period                $  10,758  $   3,244  $  10,758  $   3,244
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Represented by:
    Cash and non-interest bearing
     deposits with Bank of Canada
     and other banks              $   9,541  $   1,747  $   9,541  $   1,747
    Cheques and other items in
     transit, net                     1,217      1,497      1,217      1,497
    -------------------------------------------------------------------------
                                  $  10,758  $   3,244  $  10,758  $   3,244
    -------------------------------------------------------------------------
    Supplemental Disclosure of
     Cash Flow Information
    Amount of interest paid
     in the period                $   1,054  $   2,193  $   4,261  $   7,899
    Amount of income taxes paid
     (refunded) in the period     $    (243) $     132  $    (249) $     740
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes are an integral part of these interim consolidated
    financial statements.
    Certain comparative figures have been reclassified to conform with the
    current period's presentation.



    Notes to Consolidated Financial Statements

    July 31, 2009 (Unaudited)
    -------------------------------------------------------------------------

    Note 1: Basis of Presentation

    These interim consolidated financial statements should be read in
    conjunction with the notes to our annual consolidated financial
    statements for the year ended October 31, 2008 as set out on pages 108 to
    151 of our 2008 Annual Report. These interim 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 annual
    consolidated financial statements for the year ended October 31, 2008,
    except as described in Note 2.

    Note 2: Change in Accounting Policy

    On November 1, 2008, we adopted the Canadian Institute of Chartered
    Accountants' ("CICA") new accounting requirements for goodwill and
    intangible assets. We have restated prior periods' financial statements
    for this change. The new rules required us to reclassify certain computer
    software from premises and equipment to intangible assets.

    The impact of this change in accounting policy on the current and prior
    periods is as follows:

    (Canadian $ in millions)
    -------------------------------------------------------------------------
                                July     April   January   October      July
                            31, 2009  30, 2009  31, 2009  31, 2008  31, 2008
    -------------------------------------------------------------------------
    Consolidated Balance
     Sheet
      (Decrease) in Premises
       and Equipment        $   (510) $   (510) $   (515) $   (506) $   (469)
      Increase in
       Intangible Assets         510       510       515       506       469
    -------------------------------------------------------------------------
    Consolidated Statement
     of Income
      (Decrease) in Premises
       and Equipment        $    (36) $    (42) $    (41) $    (37) $    (34)
      Increase in
       Amortization of
       Intangible Assets          36        42        41        37        34
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The following table outlines the restated software intangible assets for
    the current and prior periods:

    (Canadian $ in millions)
    -------------------------------------------------------------------------
                                July     April   January   October      July
                            31, 2009  30, 2009  31, 2009  31, 2008  31, 2008
    -------------------------------------------------------------------------
    Intangible Assets
      Purchased
       Software(1)          $  1,021  $  1,006  $  1,009  $  1,003  $    980
      Developed
       Software(1)(2)            771       774       743       696       614
    -------------------------------------------------------------------------
      Software Intangible
       Assets                  1,792     1,780     1,752     1,699     1,594
    -------------------------------------------------------------------------
      Accumulated
       Amortization           (1,282)   (1,270)   (1,237)   (1,193)   (1,125)
    -------------------------------------------------------------------------
      Carrying Value        $    510  $    510  $    515  $    506  $    469
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Amortized on a straight-line basis over its useful life up to a
        maximum of five years.
    (2) Includes $67 million as at July 31, 2009, $55 million as at April 30,
        2009, $58 million as at January 31, 2009, $55 million as at
        October 31, 2008, and $57 million as at July 31, 2008 of software in
        development which is not subject to amortization.


    Note 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 July 31, 2009, there was a $5 million ($nil as at
    July 31, 2008) 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)
    -------------------------------------------------------------------------
                                          Credit card,
                                      consumer instalment
                       Residential         and other          Business and
                        mortgages       personal loans      government loans
    -------------------------------------------------------------------------
    For the three     July      July      July      July      July      July
     months ended 31, 2009  31, 2008  31, 2009  31, 2008  31, 2009  31, 2008
    -------------------------------------------------------------------------
    Specific
     Allowance at
     beginning of
     period       $     21  $     12  $     43  $      1  $    447  $    312
    Provision for
     credit losses       8         3       163        82       186       349
    Recoveries           -         -        27        24         8        10
    Write-offs           -         -      (188)     (106)     (187)     (263)
    Foreign
     exchange
     and other           -         -         -         -       (28)        3
    -------------------------------------------------------------------------
    Specific
     Allowance at
     end of period      29        15        45         1       426       411
    -------------------------------------------------------------------------

    General
     Allowance at
     beginning of
     period             21         7       236       316     1,009       636
    Provision for
     credit losses      (2)        1        11        33        45        19
    Foreign
     exchange
     and other           -         -         -         -       (71)        6
    -------------------------------------------------------------------------
    General
     Allowance at
     end of period      19         8       247       349       983       661
    -------------------------------------------------------------------------
    Total
     Allowance    $     48  $     23  $    292  $    350  $  1,409  $  1,072
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Comprised of:
      Loans       $     48  $     23  $    292  $    350  $  1,404  $  1,072
      Other credit
       instruments       -         -         -         -         5         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -----------------------------------------------------
                       Customers'
                       liability
                   under acceptances          Total
    -----------------------------------------------------
    For the three     July      July      July      July
     months ended 31, 2009  31, 2008  31, 2009  31, 2008
    -----------------------------------------------------
    Specific
     Allowance at
     beginning of
     period       $      -  $      -  $    511  $    325
    Provision for
     credit losses       -         -       357       434
    Recoveries           -         -        35        34
    Write-offs           -         -      (375)     (369)
    Foreign
     exchange
     and other           -         -       (28)        3
    -----------------------------------------------------
    Specific
     Allowance at
     end of period       -         -       500       427
    -----------------------------------------------------

    General
     Allowance at
     beginning of
     period             48        52     1,314     1,011
    Provision for
     credit losses       6        (3)       60        50
    Foreign
     exchange
     and other           -         -       (71)        6
    -----------------------------------------------------
    General
     Allowance at
     end of period      54        49     1,303     1,067
    -----------------------------------------------------
    Total
     Allowance    $     54  $     49  $  1,803  $  1,494
    -----------------------------------------------------
    -----------------------------------------------------
    Comprised of:
      Loans       $     54  $     49  $  1,798  $  1,494
      Other credit
       instruments       -         -         5         -
    -----------------------------------------------------
    -----------------------------------------------------


    -------------------------------------------------------------------------
                                          Credit card,
                                      consumer instalment
                       Residential         and other          Business and
                        mortgages       personal loans      government loans
    -------------------------------------------------------------------------
    For the nine      July      July      July      July      July      July
     months ended 31, 2009  31, 2008  31, 2009  31, 2008  31, 2009  31, 2008
    -------------------------------------------------------------------------
    Specific
     Allowance at
     beginning of
     period       $     13  $     14  $      2  $      1  $    411  $    142
    Provision for
     credit losses      17         3       461       219       679       533
    Recoveries           -         -        77        70        26        21
    Write-offs          (1)       (2)     (495)     (289)     (661)     (292)
    Foreign
     exchange
     and other           -         -         -         -       (29)        7
    -------------------------------------------------------------------------
    Specific
     Allowance at
     end of period      29        15        45         1       426       411
    -------------------------------------------------------------------------

    General
     Allowance at
     beginning of
     period              8        11       242       327     1,030       517
    Provision for
     credit losses      11        (3)        5        22        31        85
    Foreign
     exchange
     and other           -         -         -         -       (78)       59
    -------------------------------------------------------------------------
    General
     Allowance at
     end of period      19         8       247       349       983       661
    -------------------------------------------------------------------------
    Total
     Allowance    $     48  $     23  $    292  $    350  $  1,409  $  1,072
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Comprised of:
      Loans       $     48  $     23  $    292  $    350  $  1,404  $  1,072
      Other credit
       instruments       -         -         -         -         5         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -----------------------------------------------------
                       Customers'
                       liability
                   under acceptances          Total
    -----------------------------------------------------
    For the nine      July      July      July      July
     months ended 31, 2009  31, 2008  31, 2009  31, 2008
    -----------------------------------------------------
    Specific
     Allowance at
     beginning of
     period       $      -  $      -  $    426  $    157
    Provision for
     credit losses       -         -     1,157       755
    Recoveries           -         -       103        91
    Write-offs           -         -    (1,157)     (583)
    Foreign
     exchange
     and other           -         -       (29)        7
    -----------------------------------------------------
    Specific
     Allowance at
     end of period       -         -       500       427
    -----------------------------------------------------

    General
     Allowance at
     beginning of
     period             41        43     1,321       898
    Provision for
     credit losses      13         6        60       110
    Foreign
     exchange
     and other           -         -       (78)       59
    -----------------------------------------------------
    General
     Allowance at
     end of period      54        49     1,303     1,067
    -----------------------------------------------------
    Total
     Allowance    $     54  $     49  $  1,803  $  1,494
    -----------------------------------------------------
    -----------------------------------------------------
    Comprised of:
      Loans       $     54  $     49  $  1,798  $  1,494
      Other credit
       instruments       -         -         5         -
    -----------------------------------------------------
    -----------------------------------------------------

    Note 4: Securitization

    The following tables summarize our securitization activity related to our
    assets and its impact on our Consolidated Statement of Income for the
    three and nine months ended July 31, 2009 and 2008.

    (Canadian $ in millions)
    -------------------------------------------------------------------------
                      Residential
                       mortgages       Credit card loans          Total
    -------------------------------------------------------------------------
    For the three     July      July      July      July      July      July
     months ended 31, 2009  31, 2008  31, 2009  31, 2008  31, 2009  31, 2008
    -------------------------------------------------------------------------
    Net cash
     proceeds(1)  $    417  $  1,622  $      -  $    999  $    417  $  2,621
    Investment in
     securitization
     vehicles(2)         -         -         -        47         -        47
    Deferred
     purchase price     14        59         -        25        14        84
    Servicing
     liability          (1)       (9)        -        (4)       (1)      (13)
    -------------------------------------------------------------------------
                       430     1,672         -     1,067       430     2,739
    Loans sold         415     1,651         -     1,047       415     2,698
    -------------------------------------------------------------------------
    Gain on sale
     of loans
     from new
     securiti-
     zations      $     15  $     21  $      -  $     20  $     15  $     41
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Gain on sale
     of loans sold
     to revolving
     securiti-
     zation
     vehicles     $     33  $     19  $    116  $     53  $    149  $     72
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                      Residential
                       mortgages       Credit card loans          Total
    -------------------------------------------------------------------------
    For the nine      July      July      July      July      July      July
     months ended 31, 2009  31, 2008  31, 2009  31, 2008  31, 2009  31, 2008
    -------------------------------------------------------------------------
    Net cash
     proceeds(1)  $  5,966  $  4,233  $      -  $  1,524  $  5,966  $  5,757
    Investment in
     securitization
     vehicles(2)         -         -         -        71         -        71
    Deferred
     purchase price    161       193         -        38       161       231
    Servicing
     liability         (25)      (28)        -        (6)      (25)      (34)
    -------------------------------------------------------------------------
                     6,102     4,398         -     1,627     6,102     6,025
    Loans sold       6,025     4,326         -     1,597     6,025     5,923
    -------------------------------------------------------------------------
    Gain on sale
     of loans
     from new
     securiti-
     zations      $     77  $     72  $      -  $     30  $     77  $    102
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Gain on sale
     of loans sold
     to revolving
     securiti-
     zation
     vehicles     $    124  $     54  $    353  $    132  $    477  $    186
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Net cash proceeds represent cash proceeds less issuance costs.
    (2) Includes credit card securities retained on-balance sheet by the
        Bank.

    The key weighted-average assumptions used to value the deferred purchase
    price for the new securitizations were as follows:

    -------------------------------------------------------------------------
                                         Residential
                                         mortgages(1)    Credit card loans(2)
    -------------------------------------------------------------------------
    For the three                         July      July      July      July
     months ended                     31, 2009  31, 2008  31, 2009  31, 2008
    -------------------------------------------------------------------------
    Weighted-average life (years)         1.53      3.70         -      0.49
    Prepayment rate (%)                  16.00     14.00         -     40.46
    Interest rate (%)                     5.03      5.22         -     21.25
    Expected credit losses                   -         -         -      2.41
    Discount rate (%)                     1.28      4.19         -     10.19
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                         Residential
                                         mortgages(1)   Credit card loans (2)
    -------------------------------------------------------------------------
    For the nine                          July      July      July      July
     months ended                     31, 2009  31, 2008  31, 2009  31, 2008
    -------------------------------------------------------------------------
    Weighted-average life (years)         3.12      4.15         -      0.45
    Prepayment rate (%)                  24.81     13.48         -     40.68
    Interest rate (%)                     4.31      5.42         -     21.26
    Expected credit losses                   -         -         -      2.41
    Discount rate (%)                     2.43      4.24         -     10.26
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) As the residential mortgages are fully insured, there are no expected
        credit losses.
    (2) There were no credit card securitization transactions in the three
        and nine months ended July 31, 2009.

    Note 5: Variable Interest Entities

    Canadian Customer Securitization Vehicles

    Customer securitization vehicles (also referred to as bank-sponsored
    multi-seller conduits) assist our customers with the securitization of
    their assets to provide them with alternate sources of funding.

    Assets held by our unconsolidated Canadian customer securitization
    vehicles amounted to $6,644 million as at July 31, 2009 ($11,106 million
    as at October 31, 2008). Our exposure to losses relates to our investment
    in commercial paper issued by the vehicles, derivative contracts we have
    entered into with the vehicles and the liquidity support we provide
    through backstop liquidity facilities. As at July 31, 2009, we had an
    exposure of $891 million from commercial paper held ($2,139 million as
    at October 31, 2008) classified as trading securities. The total undrawn
    backstop liquidity facilities were $6,808 million as at July 31, 2009
    ($11,040 million as at October 31, 2008). No amounts have been drawn
    against the facilities as at July 31, 2009 and October 31, 2008. The fair
    value of derivatives outstanding with these Variable Interest Entities
    ("VIEs") was recorded in our Consolidated Balance Sheet as a derivative
    asset of $55 million as at July 31, 2009 (derivative asset of $55 million
    as at October 31, 2008).

    Included in our Consolidated Balance Sheet as at July 31, 2009, were
    assets of $815 million classified as other assets ($265 million as at
    October 31, 2008) relating to three VIEs we consolidate as we absorb the
    majority of the expected losses.

    U.S. Customer Securitization Vehicle

    Assets held by our unconsolidated U.S. customer securitization vehicle
    amounted to $5,323 million (US$4,940 million) as at July 31, 2009
    ($7,993 million or US$6,636 million as at October 31, 2008). Our exposure
    to losses in our U.S. customer securitization vehicle relates to
    liquidity support we provide through liquidity facilities. As at July 31,
    2009, our exposure related to undrawn backstop liquidity facilities
    amounted to $6,606 million (US$6,131 million) ($10,015 million or
    US$8,315 million as at October 31, 2008). During the year ended
    October 31, 2008, we provided funding of US$851 million in
    accordance with the terms of these liquidity facilities. The amount
    outstanding related to this funding as at July 31, 2009 was $219 million
    (US$203 million) ($538 million or US$447 million as at October 31, 2008).
    The fair value of derivatives outstanding with this vehicle was recorded
    in our Consolidated Balance Sheet as a derivative asset of $5 million
    (US$4 million) as at July 31, 2009 (derivative asset of $1 million or
    US$1 million as at October 31, 2008). We are not required to consolidate
    our U.S. customer securitization vehicle.

    Bank Securitization Vehicles

    We use bank securitization vehicles to securitize our Canadian mortgage
    loans and Canadian credit card loans to obtain alternate sources of
    funding. Total assets held by these vehicles amounted to $9,662 million
    as at July 31, 2009 ($9,719 million as at October 31, 2008), all of which
    relate to assets in Canada. We are not required to consolidate our bank
    securitization vehicles. We also provide liquidity support to our
    Canadian mortgage bank securitization vehicles for the face value of the
    commercial paper outstanding. The total contract amount of the liquidity
    support was $5,100 million as at July 31, 2009 and October 31, 2008. No
    amounts were drawn as at July 31, 2009 and October 31, 2008. As at
    July 31, 2009, we held $32 million of the commercial paper issued by
    these vehicles ($509 million as at October 31, 2008) which was classified
    as trading securities.

    The fair value of derivatives we have outstanding with these vehicles was
    recorded in our Consolidated Balance Sheet as a derivative asset of
    $107 million as at July 31, 2009 (derivative asset of $121 million as at
    October 31, 2008).

    Credit Protection Vehicle

    We sponsor Apex Trust ("Apex"), a VIE that provides credit protection to
    investors on investments in corporate debt portfolios through credit
    default swaps. Assets held by Apex were $2,416 million as at July 31,
    2009 ($2,794 million as at October 31, 2008). A senior funding facility
    of $1,130 million is available to Apex, of which we provide
    $1,030 million. As at July 31, 2009, $214 million had been drawn against
    our facility ($553 million as at October 31, 2008). We have also
    authorized a senior demand facility for Apex of $1 billion. No amounts
    have been drawn against this facility. We have entered into credit
    default swaps with swap counterparties and offsetting swaps with Apex.

    As at July 31, 2009, our net exposure from mid-term notes ("MTNs") we
    hold was $423 million ($625 million as at October 31, 2008). A third
    party holds its exposure to Apex through a total return swap with us on
    $600 million of MTNs. We are not required to consolidate Apex.

    Structured Investment Vehicles

    Structured investment vehicles ("SIVs") provide investment opportunities
    in customized, diversified debt portfolios in a variety of asset and
    rating classes. We hold interests in two SIVs and act as asset manager.
    Assets held by these SIVs were US$5,624 million and (euro) 598 million as
    at July 31, 2009 (US$6,824 million and (euro) 698 million as at
    October 31, 2008).

    Our exposure to loss relates to our investments in these vehicles,
    derivative contracts we have entered into with the vehicles and senior
    funding we provide through a liquidity facility in order to fund the
    repayment of senior notes. Our investment in the capital notes of the
    SIVs is recorded in available-for-sale securities in our Consolidated
    Balance Sheet, and was written down to $nil as at July 31, 2009 and
    October 31, 2008. Amounts drawn on the liquidity facility provided to the
    SIVs were US$6,372 million and (euro) 622 million as at July 31, 2009
    (US$3,716 million and (euro) 477 million as at October 31, 2008).
    Liquidity facilities were US$6,611 million and (euro) 650 million as at
    July 31, 2009 (US$7,672 million and (euro) 672 million as at October 31,
    2008). The fair value of the derivative contracts we have outstanding
    with the SIVs was recorded in our Consolidated Balance Sheet as a
    derivative asset of $13 million as at July 31, 2009 (derivative asset of
    $57 million as at October 31, 2008). We are not required to consolidate
    these SIVs.

    Note 6: Financial Instruments

    Change in Accounting Policy

    On August 1, 2008, we elected to transfer securities from trading to
    available-for-sale for which we had a change in intent caused by current
    market circumstances to hold the securities for the foreseeable future
    rather than to exit or trade them in the short term.

    A continuity of the transferred securities is as follows:

                                                                     For the
                                         For the three           nine months
    (Canadian $ in millions)              months ended                 ended
    -------------------------------------------------------------------------
                                 July 31,   April 30, January 31,    July 31,
                                    2009        2009        2009        2009
    -------------------------------------------------------------------------
    Fair value of securities
     at beginning of period   $    1,732  $    1,737  $    1,955  $    1,955
    Net (sales/maturities)
     purchases                      (175)        (54)       (222)       (451)
    Fair value change
     recorded in Other
     Comprehensive Income             62          93          31         186
    Other than temporary
     impairment recorded
     in income                       (23)         (8)        (50)        (81)
    Impact of foreign exchange      (103)        (36)         23        (116)
    -------------------------------------------------------------------------
    Fair value of securities
     at end of period         $    1,493  $    1,732  $    1,737  $    1,493
    -------------------------------------------------------------------------

    Future Changes in Accounting Standards

    On August 20, 2009, the CICA released new accounting requirements
    relating to the classification and measurement of financial assets which
    are effective for the Bank in the fourth quarter of 2009. The new
    standard requires that we reclassify available-for-sale and trading debt
    securities to loans and receivables when there is no active market and
    that certain loans with an active market be reclassified to available-
    for-sale securities. Impairment on the reclassified debt securities will
    be calculated in a manner consistent with our loan portfolio, based on
    our assessment of the recoverability of principal and interest.
    Reclassifications will be made as of November 1, 2008 and as a result,
    other than temporary impairment charges that do not reflect credit losses
    recorded in the nine months ended July 31, 2009 will be reversed. We do
    not expect the adoption of this accounting standard to have a material
    impact on our results.

    Fair Value Measurement

    We use a fair value hierarchy to categorize the inputs we use in
    valuation techniques to measure fair value. The extent of our use of
    quoted market prices (Level 1), internal models using observable market
    information as inputs (Level 2) and internal models without observable
    market information (Level 3) in the valuation of securities, fair value
    liabilities, derivative assets and derivative liabilities were as
    follows:

    (Canadian $ in millions)
    -------------------------------------------------------------------------
                  Available-for-sale        Trading            Fair value
                      securities           securities          liabilities
    -------------------------------------------------------------------------
                      July   October      July   October      July   October
                  31, 2009  31, 2008  31, 2009  31, 2008  31, 2009  31, 2008
    -------------------------------------------------------------------------
    Valued using
     quoted market
     prices       $ 25,430  $  9,044  $ 62,911  $ 64,129  $ 12,717  $ 18,792
    Valued using
     internal
     models (with
     observable
     inputs)        14,927    20,873     2,005     1,441     2,459     2,493
    Valued using
     internal
     models
     (without
     observable
     inputs)         2,202     2,198     1,236       462         -         -
    -------------------------------------------------------------------------
    Total         $ 42,559  $ 32,115  $ 66,152  $ 66,032  $ 15,176  $ 21,285
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -----------------------------------------------------
                            Derivative Instruments
                  ---------------------------------------
                          Asset             Liability
    -----------------------------------------------------
                      July   October      July   October
                  31, 2009  31, 2008  31, 2009  31, 2008
    -----------------------------------------------------
    Valued using
     quoted market
     prices       $  2,651  $  6,170  $  1,667  $  2,096
    Valued using
     internal
     models (with
     observable
     inputs)        55,512    57,601    56,399    57,568
    Valued using
     internal
     models
     (without
     observable
     inputs)         1,417     1,815       504       384
    -----------------------------------------------------
    Total         $ 59,580  $ 65,586  $ 58,570  $ 60,048
    -----------------------------------------------------
    -----------------------------------------------------

    Sensitivity analysis for the most significant items valued using internal
    models without observable inputs is described below.

    Within trading securities as at July 31, 2009 was $423 million of Apex
    MTNs with a face value of $815 million (see Note 5). The valuation of
    these MTNs has been determined by management based on expected discounted
    cash flows. The determination of the discount rate used in the discounted
    cash flow model has the most significant impact on the valuation of the
    MTNs and is impacted by changes in credit spreads and the ratings of the
    underlying credit default swaps. The impact of assuming the discount rate
    increased or decreased by 50 basis points would result in a change in
    fair value of $(9) million and $9 million, respectively. The impact on
    income for the quarter ended July 31, 2009 related to changes in the fair
    value of our investment in Apex MTNs was income of $16 million before tax
    (charge of $202 million before tax for the nine months ended July 31,
    2009).

    Within trading securities as at July 31, 2009 was $145 million (face
    value $323 million) of notes related to the Montreal Accord. The
    valuation of these notes has been determined by management based on
    expected discounted cash flows. The determination of the discount rate
    used in the discounted cash flow model has the most significant impact on
    the valuation of the notes and is impacted by changes in credit spreads
    and the rating of the notes. The impact of assuming the discount rate
    increased or decreased by 50 basis points would result in a change in
    fair value of $(5) million and $5 million, respectively.

    Within derivative assets and derivative liabilities as at July 31, 2009
    was $736 million and $87 million, respectively, related to the
    mark-to-market of credit default swaps and total return swaps on
    structured products. The valuation of these derivatives has been
    determined by management based on estimates of current market spreads for
    similar structured products. The impact of assuming a 10 basis point
    increase or decrease in that spread would result in a change in fair
    value of $(4) million and $4 million, respectively. The impact on income
    for the quarter ended July 31, 2009 related to changes in the fair value
    of these derivatives was income of $40 million before tax ($71 million
    before tax for the nine months ended July 31, 2009).

    Financial Liabilities Designated as Held for Trading

    A portion of our structured note liabilities have been designated as held
    for trading and are accounted for at fair value. The change in fair value
    of these structured notes was an increase in non-interest revenue,
    trading revenues of $23 million for the quarter ended July 31, 2009,
    including a charge of $76 million attributable to changes in our credit
    spread ($95 million and $142 million, respectively, for the nine months
    ended July 31, 2009). We recognized offsetting losses on derivatives and
    other financial instrument contracts that are held to hedge changes in
    the fair value of these structured notes.

    The change in fair value related to changes in our credit spread that
    has been recognized since they were designated as held for trading to
    July 31, 2009 was an unrealized loss of $27 million. In the first
    quarter of 2009, we hedged the exposure to changes in our credit spreads
    and have recorded $134 million of gains on these hedging instruments
    since inception.

    The fair value and amount due at contractual maturity of structured notes
    accounted for as held for trading as at July 31, 2009 were $2,459
    million and $2,745 million, respectively ($2,493 million and $2,982
    million, respectively, as at October 31, 2008).

    Note 7: Guarantees

    In the normal course of business we enter into a variety of guarantees.
    The most significant guarantees are as follows:

    Standby Letters of Credit and Guarantees

    Standby letters of credit and guarantees represent our obligation to make
    payments to third parties on behalf of another party if that party is
    unable to make the required payments or meet other contractual
    requirements. The maximum amount payable under standby letters of credit
    and guarantees totalled $12,000 million as at July 31, 2009 ($15,270
    million as at October 31, 2008). Collateral requirements for standby
    letters of credit and guarantees are consistent with our collateral
    requirements for loans.

    No amount was included in our Consolidated Balance Sheet as at July 31,
    2009 and October 31, 2008 related to these standby letters of credit and
    guarantees.

    Backstop and Other Liquidity Facilities

    Backstop liquidity facilities are provided to Asset-Backed Commercial
    Paper ("ABCP") programs administered either by us or third parties as an
    alternative source of financing in the event that such programs are
    unable to access ABCP markets or when predetermined performance measures
    of the financial assets owned by these programs are not met. The terms of
    the backstop liquidity facilities do not require us to advance money to
    these programs in the event of bankruptcy of the borrower. The
    facilities' terms are generally no longer than one year, but can be
    several years.

    The maximum amount payable under these backstop and other liquidity
    facilities totalled $20,503 million as at July 31, 2009 ($32,806 million
    as at October 31, 2008). As at July 31, 2009, $315 million was
    outstanding from facilities drawn in accordance with the terms of the
    backstop liquidity facilities ($656 million as at October 31, 2008), of
    which $219 million (US$203 million) ($538 million or US$447 million as at
    October 31, 2008) related to the U.S. customer securitization vehicle
    discussed in Note 5.

    Credit Enhancement Facilities

    Where warranted, we provide partial credit enhancement facilities to
    transactions within ABCP programs administered either by us or third
    parties. As at July 31, 2009, credit enhancement facilities of $7,581
    million ($6,243 million as at October 31, 2008) are included in backstop
    liquidity facilities. These facilities include amounts that relate to our
    U.S. customer securitization vehicle and bank securitization vehicles
    discussed in Note 5.

    Senior Funding Facilities

    We also provide senior funding support to our SIVs and our credit
    protection vehicle. The majority of these facilities support the
    repayment of senior note obligations of the SIVs. As at July 31, 2009,
    $8,035 million was drawn ($5,761 million as at October 31, 2008), in
    accordance with the terms of the funding facilities related to the SIVs
    and credit protection vehicle discussed in Note 5.

    In addition to our investment in the notes subject to the Montreal
    Accord, we have provided a senior loan facility of $300 million. No
    amounts were drawn as at July 31, 2009.

    Note 8: Acquisitions

    We account for acquisitions of businesses using the purchase method. This
    involves allocating the purchase price paid for a business to the assets
    acquired, including identifiable intangible assets, and the liabilities
    assumed, based on their fair values at the date of acquisition. Any
    excess is then recorded as goodwill. The results of operations of
    acquired businesses are included in our consolidated financial statements
    beginning on the date of acquisition.

    AIG Life Insurance Company of Canada

    On April 1, 2009, we completed the acquisition of AIG Life Insurance
    Company of Canada ("BMO Life Assurance"), for cash consideration of $330
    million, subject to a post-closing adjustment based on net assets. The
    acquisition of BMO Life Assurance will provide our clients with a wider
    range of investment, financial planning and insurance solutions. As part
    of this acquisition, we acquired a customer relationship intangible asset
    which is being amortized on a straight-line basis over five years, a non-
    compete agreement which is being amortized on a straight-line basis over
    two years, a computer software intangible asset which is being amortized
    on a straight-line basis over five years, and existing computer software
    intangible assets which are being amortized on a straight-line basis over
    five years. Goodwill related to this acquisition is not deductible for
    tax purposes. BMO Life Assurance is part of our Private Client Group
    reporting segment.

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

    (Canadian $ in millions)
    -------------------------------------------------------------------------
                                                                    BMO Life
                                                                   Assurance
    -------------------------------------------------------------------------
    Cash resources                                                  $    352
    Securities                                                         2,638
    Loans                                                                 54
    Premises and equipment                                                18
    Goodwill                                                               1
    Intangible assets                                                     15
    Other assets                                                         142
    -------------------------------------------------------------------------
    Total assets                                                       3,220
    -------------------------------------------------------------------------
    Other liabilities                                                  2,890
    -------------------------------------------------------------------------
    Total liabilities                                                  2,890
    -------------------------------------------------------------------------
    Purchase price                                                  $    330
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The allocation of the purchase price for BMO Life Assurance is subject to
    refinement as we complete the valuation of the assets acquired and
    liabilities assumed.

    Note 9: Employee Compensation

    Stock Options

    During the nine months ended July 31, 2009, we granted a total of
    2,220,027 stock options. The weighted-average fair value of options
    granted during the nine months ended July 31, 2009 was $5.57 per option.
    The following weighted-average assumptions were used to determine the
    fair value of options on the date of grant:

    For stock options granted during the nine months ended July 31, 2009
    -------------------------------------------------------------------------
    Expected dividend yield                                              5.9%
    Expected share price volatility                                     23.8%
    Risk-free rate of return                                             2.6%
    Expected period until exercise (in years)                            6.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Changes to the input assumptions can result in materially different fair
    value estimates.

    Pension and Other Employee Future Benefit Expenses

    Pension and other employee future benefit expenses are determined as
    follows:

    (Canadian $ in millions)
    -------------------------------------------------------------------------
                                        Pension            Other employee
                                      benefit plans     future benefit plans
    -------------------------------------------------------------------------
                                    July 31,   July 31,   July 31,   July 31,
    For the three months ended         2009       2008       2009       2008
    -------------------------------------------------------------------------
    Benefits earned by employees  $      29  $      34  $       3  $       4
    Interest cost on accrued
     benefit liability                   64         57         12         14
    Actuarial loss recognized
     in expense                          18          2          -          2
    Amortization of plan
     amendment costs                      4          3         (1)        (1)
    Expected return on plan assets      (60)       (73)        (1)        (1)
    -------------------------------------------------------------------------
    Benefits expense                     55         23         13         18
    Canada and Quebec
     pension plan expense                16         15          -          -
    Defined contribution expense          1          4          -          -
    -------------------------------------------------------------------------
    Total pension and other
     employee future
     benefit expenses             $      72  $      42  $      13  $      18
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                        Pension            Other employee
                                      benefit plans     future benefit plans
    -------------------------------------------------------------------------
                                    July 31,   July 31,   July 31,   July 31,
    For the nine months ended          2009       2008       2009       2008
    -------------------------------------------------------------------------
    Benefits earned by employees  $      97  $     114  $       9  $      14
    Interest cost on accrued
     benefit liability                  195        171         38         39
    Actuarial loss recognized
     in expense                          56          8          -          8
    Amortization of plan
     amendment costs                     10          8         (5)        (4)
    Expected return on plan assets     (183)      (218)        (4)        (4)
    -------------------------------------------------------------------------
    Benefits expense                    175         83         38         53
    Canada and Quebec
     pension plan expense                49         47          -          -
    Defined contribution expense          5         11          -          -
    -------------------------------------------------------------------------
    Total pension and other
     employee future
     benefit expenses             $     229  $     141  $      38  $      53
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 10: Restructuring Charge

    The continuity of our 2007 restructuring charge is as follows:


    (Canadian $ in millions)                       Severance related charges
    -------------------------------------------------------------------------
    Opening Balance as at November 1, 2007                         $      96
    Paid in the year ended October 31, 2008                              (45)
    Reversal in the year ended October 31, 2008                           (8)
    -------------------------------------------------------------------------
    Balance as at October 31, 2008                                        43
    Paid in the quarter ended January 31, 2009                           (13)
    -------------------------------------------------------------------------
    Balance as at January 31, 2009                                        30
    Paid in the quarter ended April 30, 2009                              (7)
    -------------------------------------------------------------------------
    Balance as at April 30, 2009                                          23
    Paid in the quarter ended July 31, 2009                               (5)
    Reversal in the quarter ended July 31, 2009                          (10)
    -------------------------------------------------------------------------
    Balance as at July 31, 2009                                    $       8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 11: Subordinated Debt

    During the quarter ended January 31, 2009, our $140 million 10.85%
    Debentures, Series 12 matured.

    During the quarter ended January 31, 2009, we issued $450 million of BMO
    Tier 1 Notes - Series A ("BMO T1Ns - Series A"), due December 31, 2107,
    through BMO Capital Trust II ("Trust II"). Trust II is a variable
    interest entity which we are not required to consolidate; therefore, the
    BMO T1Ns - Series A issued by Trust II are not reported in our
    Consolidated Balance Sheet. Refer to Note 11 in our First Quarter Report
    to Shareholders for additional information on BMO T1Ns - Series A.

    During the quarter ended April 30, 2008, we issued $900 million of
    subordinated debt under our Canadian Medium-Term Note Program. The issue,
    Series F Medium-Term Notes, First Tranche, is due March 2023. Interest on
    this issue is payable semi-annually at a fixed rate of 6.17% until March
    28, 2018, and at a floating rate equal to the rate on three month
    Bankers' Acceptances plus 2.50%, paid quarterly, thereafter to maturity.

    During the quarter ended April 30, 2008, we redeemed all of our 5.75%
    Series A Medium-Term Notes, Second Tranche, due 2013, totalling $150
    million. The notes were redeemed at a redemption price of 100 percent of
    the principal amount plus unpaid accrued interest to the redemption date.

    Note 12: Share Capital

    During the quarter ended July 31, 2009, we issued 16,000,000 5.4% Non-
    Cumulative 5-year Rate Reset Class B Preferred Shares, Series 23, at a
    price of $25.00 per share, representing an aggregate issue price of $400
    million.

    During the quarter ended April 30, 2009, we issued 11,000,000 6.5% Non-
    Cumulative 5-year Rate Reset Class B Preferred Shares, Series 21, at a
    price of $25.00 per share, representing an aggregate issue price of $275
    million.

    During the quarter ended January 31, 2009, we issued 33,340,000 common
    shares at a price of $30.00 per share, representing an aggregate issue
    price of approximately $1.0 billion.

    During the quarter ended January 31, 2009, we issued 6,000,000 6.5% Non-
    Cumulative 5-year Rate Reset Class B Preferred Shares, Series 18, at a
    price of $25.00 per share, representing an aggregate issue price of $150
    million.

    During the quarter ended January 31, 2009, we redeemed all of our
    10,000,000 Non-Cumulative Class B Preferred Shares, Series 6 that were
    classified as preferred share liabilities, at a price of $25.00 per
    share plus any declared and unpaid dividends to the date of redemption.
    This represents an aggregate redemption price of approximately $253
    million.

    During the quarter ended July 31, 2008, we issued 12,000,000 5.2% Non-
    Cumulative Rate Reset Class B Preferred Shares, Series 16, at a price of
    $25.00 per share, representing an aggregate issue price of $300 million.

    During the quarter ended April 30, 2008, we issued 10,000,000 5.8% Non-
    Cumulative Perpetual Class B Preferred Shares, Series 15, at a price of
    $25.00 per share, representing an aggregate issue price of $250 million.

    During the quarters ended July 31, 2009 and July 31, 2008, we did not
    repurchase any common shares.

    We have not repurchased any common shares under the existing normal
    course issuer bid that expires on September 7, 2009 and pursuant to which
    we are permitted to purchase up to 15,000,000 common shares.

    Treasury Shares

    When we purchase our common shares as part of our trading business, we
    record the cost of those shares as a reduction in shareholders' equity.
    If those shares are resold at a value higher than their cost, the premium
    is recorded as an increase in contributed surplus. If those shares are
    resold at a value below their cost, the discount is recorded as a
    reduction first to contributed surplus and then to retained earnings for
    any amounts in excess of total contributed surplus related to treasury
    shares.

    Share Capital Outstanding (a)

    (Canadian $ in millions,
     except as noted)                                          July 31, 2009
    -------------------------------------------------------------------------
                             Number of shares   Amount   Convertible into...
    -------------------------------------------------------------------------
    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   -
      Class B - Series 14          10,000,000      250   -
      Class B - Series 15          10,000,000      250   -
      Class B - Series 16          12,000,000      300   -
      Class B - Series 18           6,000,000      150   -
      Class B - Series 21          11,000,000      275   -
      Class B - Series 23          16,000,000      400   -
    -------------------------------------------------------------------------
                                                 2,571
    Common Shares                 548,462,203    6,055
    -------------------------------------------------------------------------
    Share Capital                              $ 8,626
    -------------------------------------------------------------------------
    Stock options issued under
     stock option plan                             n/a    19,789,710 common
                                                           shares
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (a) For additional information refer to Notes 21 and 23 to our
        consolidated financial statements for the year ended October 31, 2008
        on pages 135 to 138 of our 2008 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

    Note 13: Capital Management

    Our capital management framework is designed to maintain the level of
    capital that: meets our target regulatory capital ratios; meets our
    internal assessment of required economic capital; is consistent with our
    targeted credit ratings; underpins our operating groups' business
    strategies; and builds long-term shareholder value.

    We have met our capital targets as at July 31, 2009. Our capital position
    as at July 31, 2009 is detailed in the Capital Management section on page
    14 of Management's Discussion and Analysis of the Third Quarter Report to
    Shareholders.

    Note 14: Risk Management

    We have an enterprise-wide approach to the identification, measurement,
    monitoring and management of risks faced across the organization. The key
    financial instrument risks are classified as credit and counterparty,
    market, liquidity and funding risk.

    Credit and Counterparty Risk

    We are exposed to credit risk from the possibility that counterparties
    may default on their financial obligations to us. Credit risk arises
    predominantly with respect to loans, over-the-counter derivatives and
    other credit instruments. This is the most significant measurable risk
    that we face.

    Market Risk

    Market risk is the potential for a negative impact on the balance sheet
    and/or income statement resulting from adverse changes in the value of
    financial instruments as a result of changes in certain market variables.
    These variables include interest rates, foreign exchange rates, equity
    and commodity prices and their implied volatilities, as well as credit
    spreads, credit migration and default. We incur market risk in our
    trading and underwriting activities and structural banking activities.

    Liquidity and Funding Risk

    Liquidity and funding risk is the potential for loss if we are unable to
    meet financial commitments in a timely manner at reasonable prices as
    they fall due. It is our policy to ensure that sufficient liquid assets
    and funding capacity are available to meet financial commitments,
    including liabilities to depositors and suppliers, and lending,
    investment and pledging commitments, even in times of stress. Managing
    liquidity and funding risk is essential to maintaining both depositor
    confidence and stability in earnings.

    Key measures as at July 31, 2009 are outlined in the Risk Management
    section on pages 9 to 11 of Management's Discussion and Analysis of the
    Third Quarter Report to Shareholders.

    Note 15: United States Generally Accepted Accounting Principles

    Reporting under United States GAAP would have resulted in the following:


    (Canadian $ in millions,
     except earnings per share        For the three          For the nine
     figures)                          months ended          months ended
    -------------------------------------------------------------------------
                                    July 31,   July 31,   July 31,   July 31,
                                       2009       2008       2009       2008
    -------------------------------------------------------------------------
    Net Income - Canadian GAAP    $     557  $     521  $   1,140  $   1,418
    United States GAAP adjustments       16          5        128         23
    -------------------------------------------------------------------------
    Net Income - United States
     GAAP                         $     573  $     526  $   1,268  $   1,441
    -------------------------------------------------------------------------
    Earnings Per Share
      Basic - Canadian GAAP       $    0.97  $    1.00  $    1.97  $    2.73
      Basic - United States GAAP       1.00       1.01       2.21       2.78
      Diluted - Canadian GAAP          0.97       0.98       1.97       2.70
      Diluted - United States GAAP     0.99       1.00       2.20       2.75
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Other-than-Temporary Impairment

    During the quarter ended July 31, 2009, we adopted new United States
    guidance issued by the Financial Accounting Standards Board which amended
    the impairment assessment guidance and recognition principles of other-
    than-temporary impairment for debt securities and enhanced the
    presentation and disclosure requirements for debt and equity securities.
    Under the new guidance, if a debt security is determined to be other-
    than-temporarily impaired, the amount of the impairment equal to the
    credit loss will be recorded in income and the remaining impairment
    charge will be recorded in other comprehensive income. Under Canadian
    GAAP, all impairment is recorded in income.

    Note 16: Operating and Geographic Segmentation

    Operating Groups

    We conduct our business through operating groups, each of which has a
    distinct mandate. We determine our operating groups based on our
    management structure and therefore these 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, as well as cash
    operating leverage.

    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 consumer and business products and services, including: everyday
    banking, financing, investing and credit cards, as well as a full suite
    of commercial and capital market products and financial advisory
    services, through a network of branches, telephone banking, online
    banking, mortgage specialists and automated banking machines. Effective
    in the third quarter of 2009, the results of our term deposits business
    are reflected in P&C Canada rather than Private Client Group. Prior
    periods have been restated to reflect this reclassification.

    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 select U.S.
    Midwest markets 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 under the BMO brand in Canada and Harris in the
    United States, PCG serves a full range of client segments, from
    mainstream to ultra-high net worth, as well as select institutional
    market segments. We offer our clients a broad range of wealth management
    products and solutions, including full-service, online brokerage and
    insurance in Canada, and private banking and investment products in
    Canada and the United States. Effective in the third quarter of 2009, all
    of our insurance operations operate within PCG. Prior periods have been
    restated to reflect this reclassification.

    BMO Capital Markets

    BMO Capital Markets ("BMO CM") 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. BMO CM 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 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
    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.

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

    Operating results for T&O are included with Corporate Services for
    reporting purposes. However, costs of T&O services are transferred to the
    three operating groups. As such, results for Corporate Services largely
    reflect the activities outlined above.

    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") at
    the operating group level. 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. The operating groups'
    teb adjustments are eliminated in Corporate Services.

    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 we 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.

    Our results and average assets, grouped by operating segment, are as
    follows:

    (Canadian $ in millions)
    -------------------------------------------------------------------------
    For the three
     months ended                                        Corporate     Total
     July 31,          P&C      P&C                         Servi-     (GAAP
     2009(2)        Canada      U.S.       PCG    BMO CM     ces(1)    basis)
    -------------------------------------------------------------------------
    Net interest
     income       $    953  $    210  $     87  $    440  $   (224) $  1,466
    Non-interest
     revenue           400        62       434       593        23     1,512
    -------------------------------------------------------------------------
    Total Revenue    1,353       272       521     1,033      (201)    2,978
    Provision for
     credit losses      97        17         1        43       259       417
    Non-interest
     expense           737       215       392       516        13     1,873
    -------------------------------------------------------------------------
    Income before
     taxes and
     non-controlling
     interest in
     subsidiaries      519        40       128       474      (473)      688
    Income taxes       163        15         8       131      (205)      112
    Non-controlling
     interest in
     subsidiaries        -         -         -         -        19        19
    -------------------------------------------------------------------------
    Net Income    $    356  $     25  $    120  $    343  $   (287) $    557
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average
     Assets       $124,070  $ 29,081  $ 12,941  $240,889  $ 15,536  $422,517
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill
     (As At)      $    119  $    979  $    345  $    106  $      2  $  1,551
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    For the three
     months ended                                        Corporate     Total
     July 31,          P&C      P&C                         Servi-     (GAAP
     2008(2)        Canada      U.S.       PCG    BMO CM     ces(1)    basis)
    -------------------------------------------------------------------------
    Net interest
     income       $    869  $    197  $     97  $    294  $   (175) $  1,282
    Non-interest
     revenue           383        51       468       459       103     1,464
    -------------------------------------------------------------------------
    Total Revenue    1,252       248       565       753       (72)    2,746
    Provision for
     credit losses      87        12         1        29       355       484
    Non-interest
     expense           697       194       394       477        20     1,782
    -------------------------------------------------------------------------
    Income before
     taxes and
     non-controlling
     interest in
     subsidiaries      468        42       170       247      (447)      480
    Income taxes       153        14        45       (16)     (255)      (59)
    Non-controlling
     interest in
     subsidiaries        -         -         -         -        18        18
    -------------------------------------------------------------------------
    Net Income    $    315  $     28  $    125  $    263  $   (210) $    521
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average
     Assets       $126,242  $ 27,538  $  8,697  $231,265  $  2,131  $395,873
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill
     (As At)      $    104  $    903  $    338  $    102  $      2  $  1,449
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    For the nine
     months ended                                        Corporate     Total
     July 31,          P&C      P&C                         Servi-     (GAAP
     2009(2)        Canada      U.S.       PCG    BMO CM     ces(1)    basis)
    -------------------------------------------------------------------------
    Net interest
     income       $  2,757  $    683  $    265  $  1,460  $ (1,037) $  4,128
    Non-interest
     revenue         1,121       180     1,202     1,112       332     3,947
    -------------------------------------------------------------------------
    Total Revenue    3,878       863     1,467     2,572      (705)    8,075
    Provision for
     credit losses     285        53         4       129       746     1,217
    Non-interest
     expense         2,134       680     1,140     1,440       208     5,602
    -------------------------------------------------------------------------
    Income before
     taxes and
     non-controlling
     interest in
     subsidiaries    1,459       130       323     1,003    (1,659)    1,256
    Income taxes       461        46        52       232      (732)       59
    Non-controlling
     interest in
     subsidiaries        -         -         -         -        57        57
    -------------------------------------------------------------------------
    Net Income    $    998  $     84  $    271  $    771  $   (984) $  1,140
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average
     Assets       $123,804  $ 32,051  $ 11,057  $269,745  $ 11,922  $448,579
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill
     (As At)      $    119  $    979  $    345  $    106  $      2  $  1,551
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    For the nine
     months ended                                        Corporate     Total
     July 31,          P&C      P&C                         Servi-     (GAAP
     2008(2)        Canada      U.S.       PCG    BMO CM     ces(1)    basis)
    -------------------------------------------------------------------------
    Net interest
     income       $  2,541  $    536  $    275  $    845  $   (534) $  3,663
    Non-interest
     revenue         1,052       184     1,365       873       255     3,729
    -------------------------------------------------------------------------
    Total Revenue    3,593       720     1,640     1,718      (279)    7,392
    Provision for
     credit losses     252        31         3        87       492       865
    Non-interest
     expense         2,022       559     1,137     1,300        58     5,076
    -------------------------------------------------------------------------
    Income before
     taxes and
     non-controlling
     interest in
     subsidiaries    1,319       130       500       331      (829)    1,451
    Income taxes       434        46       132       (90)     (544)      (22)
    Non-controlling
     interest in
     subsidiaries        -         -         -         -        55        55
    -------------------------------------------------------------------------
    Net Income    $    885  $     84  $    368  $    421  $   (340) $  1,418
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average
     Assets       $124,499  $ 25,744  $  8,469  $232,024  $  3,029  $393,765
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill
     (As At)      $    104  $    903  $    338  $    102  $      2  $  1,449
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Corporate Services includes Technology and Operations.
    (2) Operating groups report on a taxable equivalent basis - see Basis of
        Presentation section.
    Prior periods have been restated to give effect to the current period's
    organizational structure and presentation changes.

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

    (Canadian $ in millions)
    -------------------------------------------------------------------------
                                                             Other
    For the three months ended                    United   countr-
     July 31, 2009                      Canada    States       ies     Total
    -------------------------------------------------------------------------
    Net interest income               $  1,020  $    380  $     66  $  1,466
    Non-interest revenue                 1,083       287       142     1,512
    -------------------------------------------------------------------------
    Total Revenue                        2,103       667       208     2,978
    Provision for credit losses            154       243        20       417
    Non-interest expense                 1,361       471        41     1,873
    -------------------------------------------------------------------------
    Income before taxes and
     non-controlling interest in
     subsidiaries                          588       (47)      147       688
    Income taxes                           135       (26)        3       112
    Non-controlling interest
     in subsidiaries                        13         6         -        19
    -------------------------------------------------------------------------
    Net Income                        $    440  $    (27) $    144  $    557
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average Assets                    $262,875  $130,315  $ 29,327  $422,517
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill (As At)                  $    436  $  1,091  $     24  $  1,551
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                             Other
    For the three months ended                    United   countr-
     July 31, 2008                      Canada    States       ies     Total
    -------------------------------------------------------------------------
    Net interest income               $    934  $    285  $     63  $  1,282
    Non-interest revenue                 1,154       293        17     1,464
    -------------------------------------------------------------------------
    Total Revenue                        2,088       578        80     2,746
    Provision for credit losses             32       452         -       484
    Non-interest expense                 1,303       433        46     1,782
    -------------------------------------------------------------------------
    Income before taxes and
     non-controlling interest in
     subsidiaries                          753      (307)       34       480
    Income taxes                            50      (116)        7       (59)
    Non-controlling interest
     in subsidiaries                        13         5         -        18
    -------------------------------------------------------------------------
    Net Income                        $    690  $   (196) $     27  $    521
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average Assets                    $232,104  $131,972  $ 31,797  $395,873
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill (As At)                  $    422  $  1,007  $     20  $  1,449
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                             Other
    For the nine months ended                     United   countr-
     July 31, 2009                      Canada    States       ies     Total
    -------------------------------------------------------------------------
    Net interest income               $  2,636  $  1,230  $    262  $  4,128
    Non-interest revenue                 2,896       919       132     3,947
    -------------------------------------------------------------------------
    Total Revenue                        5,532     2,149       394     8,075
    Provision for credit losses            392       805        20     1,217
    Non-interest expense                 3,977     1,504       121     5,602
    -------------------------------------------------------------------------
    Income before taxes and
     non-controlling interest in
     subsidiaries                        1,163      (160)      253     1,256
    Income taxes                           174      (112)       (3)       59
    Non-controlling interest
     in subsidiaries                        40        17         -        57
    -------------------------------------------------------------------------
    Net Income                        $    949  $    (65) $    256  $  1,140
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average Assets                    $269,085  $149,384  $ 30,110  $448,579
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill (As At)                  $    436  $  1,091  $     24  $  1,551
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                             Other
    For the nine months ended                     United   countr-
     July 31, 2008                      Canada    States       ies     Total
    -------------------------------------------------------------------------
    Net interest income               $  2,691  $    745  $    227  $  3,663
    Non-interest revenue                 2,901       869       (41)    3,729
    -------------------------------------------------------------------------
    Total Revenue                        5,592     1,614       186     7,392
    Provision for credit losses            185       673         7       865
    Non-interest expense                 3,694     1,244       138     5,076
    -------------------------------------------------------------------------
    Income before taxes and
     non-controlling interest in
     subsidiaries                        1,713      (303)       41     1,451
    Income taxes                           193      (163)      (52)      (22)
    Non-controlling interest in
     subsidiaries                           41        14         -        55
    -------------------------------------------------------------------------
    Net Income                        $  1,479  $   (154) $     93  $  1,418
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average Assets                    $234,065  $127,656  $ 32,044  $393,765
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill (As At)                  $    422  $  1,007  $     20  $  1,449
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Prior periods have been restated to give effect to the current period's
    organizational structure and presentation changes.
    





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) 877-1873; Investor Relations Contacts: Viki
Lazaris, Senior Vice-President, viki.lazaris@bmo.com, (416) 867-6656, Steven
Bonin, Director, steven.bonin@bmo.com, (416) 867-5452; Andrew Chin, Senior
Manager, andrew.chin@bmo.com, (416) 867-7019; Chief Financial Officer, Russel
Robertson, Chief Financial Officer, russ.robertson@bmo.com, (416) 867-7360;
Corporate Secretary, Blair Morrison, Vice-President & Corporate Secretary,
corp.secretary@bmo.com, (416) 867-6785


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