BMO Financial Group Reports Net Income of $1.1 Billion for the Third Quarter of 2014

TORONTO, ONTARIO--(Marketwired - Aug 26, 2014) - BMO Financial Group (TSX: BMO)(NYSE: BMO) and Bank of Montreal -

Financial Results Highlights:

Third Quarter 2014 Compared with Third Quarter 2013:

-- Net income of $1,126 million; adjusted net income(1) of $1,162 million,

up 4%

-- EPS(2) of $1.67, up 1%; adjusted EPS(1,2) of $1.73, up 4%

-- ROE of 14.4%, compared with 15.5%; adjusted ROE(1) of 14.9%, compared

with 15.5%

-- Provisions for credit losses of $130 million, compared with $76 million;

adjusted provisions for credit losses(1) of $130 million, compared with

$12 million

-- Basel III Common Equity Tier 1 Ratio of 9.6%

Year-to-Date 2014 Compared with Year-to-Date 2013:

-- Net income of $3,263 million, up 5%; adjusted net income(1) of $3,342

million, up 7%

-- EPS(2) of $4.85, up 6%; adjusted EPS (1,2) of $4.97, up 8%

-- ROE of 14.3%, compared with 14.9%; adjusted ROE(1) of 14.7%, compared

with 15.0%

-- Provisions for credit losses of $391 million, compared with $398

million; adjusted provisions for credit losses(1) of $391 million,

compared with $217 million

For the third quarter ended July 31, 2014, BMO Financial Group reported net income of $1,126 million or $1.67 per share on a reported basis and net income of $1,162 million or $1.73 per share on an adjusted basis.

"BMO delivered very good results in the third quarter confirming continued momentum across our businesses," said Bill Downe, Chief Executive Officer, BMO Financial Group. "Adjusted net income was up 4% from particularly strong results a year ago and adjusted earnings per share have increased 8% year-to-date.

"Personal and Commercial Banking in Canada had continuing strong performance with operating leverage above 2% for the fourth consecutive quarter. Net income and pre-provision, pre-tax earnings growth in U.S. Personal and Commercial Banking was encouraging, with improved revenue trends despite the low interest rate environment. Traditional wealth posted adjusted net income growth of 27% reflecting good organic growth in client assets and the acquired F&C business. There were also very good results in BMO Capital Markets driven by strong revenue growth in Investment and Corporate Banking.

"Our success in growing both sides of the balance sheet is directly attributable to a strategy that emphasizes the delivery of an industry-leading customer experience and a brand promise that recognizes that money is personal - and a bank should be too. The Bank is very well positioned, and we remain confident in our momentum," concluded Mr. Downe.

(1) Results and measures in this document are presented on a GAAP basis.

They are also presented on an adjusted basis that excludes the impact

of certain items. Adjusted results and measures are non-GAAP and are

detailed in the Adjusted Net Income section, and (for all reported

periods) in the Non-GAAP Measures section, where such non-GAAP measures

and their closest GAAP counterparts are disclosed.

(2) All Earnings per Share (EPS) measures in this document refer to diluted

EPS unless specified otherwise. EPS is calculated using net income

after deductions for net income attributable to non-controlling

interest in subsidiaries and preferred share dividends.

Note: All ratios and percentage changes in this document are based on

unrounded numbers.

Concurrent with the release of results, BMO announced a fourth quarter 2014 dividend of $0.78 per common share, unchanged from the preceding quarter and up $0.04 per share or 5% from a year ago, equivalent to an annual dividend of $3.12 per common share.

Our complete Third Quarter 2014 Report to Shareholders, including our unaudited interim consolidated financial statements for the period ended July 31, 2014, is available online at www.bmo.com/investorrelations and at www.sedar.com.

Total Bank Overview

Net income was $1,126 million for the third quarter of 2014, relatively unchanged from a year ago. Adjusted net income was $1,162 million, up $40 million or 4% from a particularly strong third quarter a year ago, as the prior year's results benefited from very low credit losses and a positive impact of long-term rates on insurance.

Momentum continued with strong results in Canadian P&C and BMO Capital Markets, and improved results in U.S. P&C. Wealth Management had good results, excluding the impact of movements in long-term interest rates.

The Basel III Common Equity Tier 1 Ratio remains strong at 9.6% following the acquisition of F&C Asset Management plc (F&C).

Operating Segment Overview

Canadian P&C

Net income was $526 million, up $40 million or 8% from a year ago. Adjusted net income was $528 million, up $39 million or 8% from the prior year, driven by higher revenue. Revenue was up $96 million or 6% year over year primarily due to strong balance and fee volumes, partially offset by the impact of lower net interest margin. Year-over-year loan growth was 7% and deposit growth was 9%. Expenses increased $34 million or 4%. Operating leverage was 2.1% and above 2% for the fourth consecutive quarter.

In personal banking, good year-over-year loan and deposit growth continued at 7% and 10%, respectively. Our Spring Home Financing Campaign was successful and our recently launched Summer Everyday Banking Campaign is attracting new customers to BMO and increasing the number of products held. During the quarter we became the first Canadian bank to provide customers with the capability to transfer money between Canadian and U.S. dollar accounts via mobile banking.

In commercial banking, year-over-year loan and deposit growth was 9% and 7%, respectively. We continue to streamline our lending processes, enabling our salesforce to spend more time acquiring new customers and strengthening existing relationships. We remain second in Canadian business banking loan market share for small and medium-sized loans.

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

Net income of $147 million increased $3 million or 2% from a year ago. Adjusted net income of $158 million, increased $1 million or 1%, due to improving revenue.

There were year-over-year and quarterly sequential increases in average current loans and acceptances, led by continued strong double-digit growth in the core commercial and industrial (C&I) loan portfolio. The core C&I portfolio increased by $4.1 billion or 18% from a year ago to $27.1 billion.

BMO Harris Bank received the 2014 Community Partner Award from Latinos Progresando, in recognition of our significant impact - culturally, economically, and educationally - on Chicago's Latino community. In addition, we received the Corporation of the Year award from the Hispanic Professionals of Greater Milwaukee. These awards represent our strong commitment to the Latino community we serve throughout our footprint.

Wealth Management

Net income of $190 million decreased $27 million from a year ago. Adjusted net income of $212 million decreased $12 million or 4%. Good organic growth increased adjusted net income by 19% year over year, excluding the impact of movements in long-term interest rates. Adjusted net income in traditional wealth was $164 million, up 27% or $33 million, with approximately 60% of the increase due to the contribution from the acquired F&C business and the remainder from strong growth in client assets. Adjusted net income in insurance was $48 million, down $45 million or 48% from a year ago primarily due to a $22 million after-tax charge from unfavourable movements in long-term interest rates in the current quarter relative to a $42 million after-tax benefit a year ago.

Assets under management and administration grew by $251 billion or 48% from a year ago to $776 billion, with the acquired F&C business contributing $153 billion to the increase. Excluding F&C, assets under management and administration grew by 19%, driven by market appreciation, the stronger U.S. dollar and growth in new client assets.

On May 7, 2014, we completed the acquisition of F&C. This acquisition strengthens BMO Global Asset Management's position as a globally significant money manager, enhancing its asset management platform capabilities and providing attractive opportunities to service wealth markets in the United Kingdom and the rest of Europe. F&C contributed approximately 10% to Wealth Management's revenue, adjusted expenses and adjusted net income for the quarter.

In May, Global Banking and Finance Review (GBFR) named BMO Best Wealth Management in Canada, 2014, based on our ability to provide comprehensive wealth management services; ongoing commitment to providing clients with personalized and innovative investment and financial solutions; and access to local expertise - with a global reach - that supports international wealth management needs.

BMO Capital Markets

Net income of $306 million increased $38 million or 14% from a year ago driven by good revenue performance across the businesses, particularly in Investment and Corporate Banking. Revenue increased 15% year over year with a solid contribution from our U.S business. Return on equity of 22.4% was strong, up from 18.2% in the prior year.

In the quarter, we were selected as a 2014 Greenwich Quality Leader in both Canadian Equity Sales and in Canadian Equity Research and Analyst Service for Portfolio Managers, as well as a Greenwich Share Leader in Canadian Equity Trading Share and Canadian Equity Research/Advisory Portfolio Managers Vote Share. These awards, coupled with our recognition as the Best Trade Bank in Canada for the fifth consecutive year by Trade Finance Magazine, reflects the success of our commitment to meeting our core clients' needs.

BMO Capital Markets participated in 419 new global issues in the quarter, comprised of 173 corporate debt deals, 150 government debt deals and 96 equity transactions, raising $765 billion.

Corporate Services

Corporate Services reported and adjusted net loss for the third quarter of 2014 was $55 million, compared with reported net income of $3 million and an adjusted net loss of $21 million a year ago. The decline was primarily due to lower recoveries on the purchased credit impaired loan portfolio partly offset by better revenue excluding the impact of the group taxable equivalent basis (teb) offset.

Adjusted Net Income

Adjusted net income was $1,162 million for the third quarter of 2014, up $40 million or 4% from a year ago. Adjusted earnings per share were $1.73, up 4% from $1.66 a year ago.

Management has designated certain amounts as adjusting items and has adjusted GAAP results so that we can discuss and present financial results without the effects of adjusting items to facilitate understanding of business performance and related trends. The items excluded from third quarter 2014 results in the determination of adjusted results were the amortization of acquisition-related intangible assets of $39 million ($29 million after tax; $0.05 per share) and acquisition integration costs of $9 million ($7 million after tax; $0.01 per share). Amounts excluded from adjusted results in prior years also included credit-related items in respect of the purchased performing loan portfolio, restructuring costs and run-off structured credit activities. Management assesses performance on a GAAP basis and on an adjusted basis and considers both to be useful in the assessment of underlying business performance. Presenting results on both bases provides readers with a better understanding of how management assesses results. Adjusted results and measures are non-GAAP and, together with items excluded in determining adjusted results, are disclosed in more detail in the Non-GAAP Measures section, along with comments on the uses and limitations of such measures. The impact of adjusting items for comparative periods is summarized in the Non-GAAP Measures section.

Adjusted results in these Total Bank Overview and Operating Segment Overview sections are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section.

Caution

The foregoing sections contain forward-looking statements. Please see the Caution Regarding Forward-Looking Statements.

Management's Discussion and Analysis

Management's Discussion and Analysis (MD&A) commentary is as of August 26, 2014. Unless otherwise indicated, all amounts are in Canadian dollars and have been derived from financial statements prepared in accordance with International Financial Reporting Standards (IFRS). References to GAAP mean IFRS. The MD&A should be read in conjunction with the unaudited interim consolidated financial statements for the period ended July 31, 2014, as well as the audited consolidated financial statements for the year ended October 31, 2013, and the MD&A for fiscal 2013 in BMO's 2013 Annual Report. The material that precedes this section comprises part of this MD&A.

The annual MD&A includes a comprehensive discussion of our businesses, strategies and objectives, and can be accessed on our website at www.bmo.com/investorrelations. Readers are also encouraged to visit the site to view other quarterly financial information.

Bank of Montreal's management, under the supervision of the CEO and CFO, has evaluated the effectiveness, as at July 31, 2014, of Bank of Montreal's disclosure controls and procedures (as defined in the rules of the Securities and Exchange Commission and the Canadian Securities Administrators) and has concluded that such disclosure controls and procedures are effective.

There were no changes in our internal control over financial reporting during the quarter ended July 31, 2014, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Because of inherent limitations, disclosure controls and procedures and internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements.

As in prior quarters, Bank of Montreal's Audit and Conduct Review Committee reviewed this document and Bank of Montreal's Board of Directors approved the document prior to its release.

Regulatory Filings

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

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 - Reported Table 1

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(Canadian $ in millions,

except as noted) Q3-2014 Q2-2014 Q3-2013 YTD-2014 YTD-2013

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Summary Income Statement

Net interest income 2,107 2,063 2,183 6,283 6,560

Non-interest revenue 2,108 1,978 1,817 6,095 5,365

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Revenue 4,215 4,041 4,000 12,378 11,925

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Specific provision for credit

losses 130 162 56 391 408

Collective provision for

(recovery of) credit losses - - 20 - (10)

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Total provision for credit

losses 130 162 76 391 398

Non-interest expense 2,756 2,594 2,526 8,034 7,646

Provision for income taxes 203 209 275 690 760

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Net income 1,126 1,076 1,123 3,263 3,121

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Attributable to bank

shareholders 1,110 1,062 1,107 3,220 3,069

Attributable to non-

controlling interest in

subsidiaries 16 14 16 43 52

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Net income 1,126 1,076 1,123 3,263 3,121

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Common Share Data ($ except

as noted)

Earnings per share 1.67 1.60 1.66 4.85 4.57

Earnings per share growth (%) 0.6 14.3 17.7 6.1 0.9

Dividends declared per share 0.78 0.76 0.74 2.30 2.20

Book value per share 46.69 45.94 41.96 46.69 41.96

Closing share price 81.27 75.55 63.87 81.27 63.87

Total market value of common

shares ($ billions) 52.5 48.7 41.3 52.5 41.3

Dividend yield (%) 3.8 4.0 4.6 3.8 4.6

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Financial Measures and Ratios

(%)

Return on equity 14.4 14.3 15.5 14.3 14.9

Net income growth 0.4 11.6 16.7 4.5 1.2

Revenue growth 5.3 3.7 4.6 3.8 1.1

Non-interest expense growth 9.0 1.8 2.8 5.1 2.6

Efficiency ratio 65.4 64.2 63.2 64.9 64.1

Efficiency ratio, excluding

PBCAE (1) 58.2 59.4 61.8 59.1 61.1

Operating leverage (3.7) 1.9 1.8 (1.3) (1.5)

Net interest margin on

average earning assets 1.58 1.59 1.78 1.60 1.82

Effective tax rate 15.3 16.2 19.7 17.5 19.6

Return on average assets 0.74 0.73 0.79 0.73 0.74

Provision for credit losses-

to-average loans and

acceptances (annualized) 0.18 0.22 0.11 0.18 0.20

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Value Measures (% except as

noted)

Average annual five-year

total shareholder return 13.7 19.4 11.7 13.7 11.7

Average annual three-year

total shareholder return 15.8 11.8 5.4 15.8 5.4

Twelve month total

shareholder return 32.6 24.8 16.5 32.6 16.5

Net economic profit ($

millions) (2) 322 297 372 908 946

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Balance Sheet (as at $

millions, except as noted)

Assets 586,832 582,045 548,712 586,832 548,712

Net loans and acceptances 295,441 294,704 272,557 295,441 272,557

Deposits 399,223 394,007 359,523 399,223 359,523

Common shareholders' equity 30,179 29,639 27,103 30,179 27,103

Cash and securities-to-total

assets ratio (%) 33.0 32.1 31.1 33.0 31.1

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Capital Ratios (%)

Common Equity Tier 1 Ratio 9.6 9.7 9.6 9.6 9.6

Tier 1 Capital Ratio 11.4 11.1 11.2 11.4 11.2

Total Capital Ratio 13.3 13.0 13.5 13.3 13.5

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Net Income by Operating Group

Canadian P&C 526 480 486 1,490 1,354

U.S. P&C 159 155 149 480 479

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Personal and Commercial

Banking 685 635 635 1,970 1,833

Wealth Management 190 194 217 559 519

BMO Capital Markets 306 305 268 888 827

Corporate Services, including

Technology and Operations

(T&O) (55) (58) 3 (154) (58)

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BMO Financial Group net

income 1,126 1,076 1,123 3,263 3,121

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(1) This ratio is calculated excluding insurance policyholder benefits,

claims and acquisition expenses (PBCAE).

(2) Net economic profit is a non-GAAP measure and is discussed in the Non-

GAAP Measures section.

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Summary Data - Adjusted Table 2

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(Canadian $ in millions,

except as noted) Q3-2014 Q2-2014 Q3-2013 YTD-2014 YTD-2013

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Adjusted Summary Income

Statement

Net interest income 2,107 2,063 2,030 6,283 6,020

Non-interest revenue 2,108 1,978 1,812 6,095 5,342

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Revenue 4,215 4,041 3,842 12,378 11,362

Provision for credit losses 130 162 12 391 217

Non-interest expense 2,708 2,566 2,442 7,927 7,270

Provision for income taxes 215 216 266 718 740

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Net income 1,162 1,097 1,122 3,342 3,135

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Attributable to bank

shareholders 1,146 1,083 1,106 3,299 3,083

Attributable to non-

controlling interest in

subsidiaries 16 14 16 43 52

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Net income 1,162 1,097 1,122 3,342 3,135

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Adjusted Common Share Data

Earnings per share ($) 1.73 1.63 1.66 4.97 4.59

Earnings per share growth (%) 4.2 13.2 12.9 8.3 6.5

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Adjusted Financial Measures

and Ratios (%)

Return on equity 14.9 14.6 15.5 14.7 15.0

Net income growth 3.7 11.2 11.6 6.6 6.5

Revenue growth 9.7 8.9 6.0 8.9 3.4

Non-interest expense growth 10.8 7.7 5.6 9.0 3.9

Efficiency ratio 64.2 63.5 63.6 64.0 64.0

Efficiency ratio, excluding

PBCAE (1) 57.2 58.8 62.2 58.4 60.9

Operating leverage (1.1) 1.2 0.4 (0.1) (0.5)

Net interest margin on

average earning assets 1.58 1.59 1.65 1.60 1.67

Effective tax rate 15.6 16.5 19.2 17.7 19.1

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Adjusted Net Income By

Operating Group

Canadian P&C 528 482 489 1,496 1,361

U.S. P&C 171 167 161 516 517

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Personal and Commercial

Banking 699 649 650 2,012 1,878

Wealth Management 212 200 224 595 539

BMO Capital Markets 306 306 269 889 829

Corporate Services, including

T&O (55) (58) (21) (154) (111)

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BMO Financial Group net

income 1,162 1,097 1,122 3,342 3,135

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(1) This ratio is calculated excluding insurance policyholder benefits,

claims and acquisition expenses (PBCAE).

The above results and statistics are presented on an adjusted basis. These

are non-GAAP amounts or non-GAAP measures. Please see the non-GAAP Measures

section.

Caution Regarding Forward-Looking Statements

Bank of Montreal's public communications often include written or oral forward-looking statements. Statements of this type are included in this document, and may be included in other filings with Canadian securities regulators or the U.S. Securities and Exchange Commission, or in other communications. All such statements are made pursuant to the "safe harbor" provisions of, and are intended to be forward-looking statements under, the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. Forward-looking statements may involve, but are not limited to, comments with respect to our objectives and priorities for 2014 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, U.S. and international 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; weak, volatile or illiquid capital and/or credit markets; interest rate and currency value fluctuations; changes in monetary, fiscal or economic policy; the degree of competition in the geographic and business areas in which we operate; changes in laws or in supervisory expectations or requirements, including capital, interest rate and liquidity requirements and guidance; 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, including obtaining regulatory approvals; critical accounting estimates and the effect of changes to accounting standards, rules and interpretations on these estimates; operational and infrastructure risks; changes to our credit ratings; general political conditions; global capital markets activities; the possible effects on our business of war or terrorist activities; disease or illness that affects local, national or international economies; natural disasters and disruptions to public infrastructure, such as transportation, communications, power or water supply; technological changes; and our ability to anticipate and effectively manage risks associated with all of the foregoing factors.

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 to 31 of BMO's 2013 Annual Report, which outlines in detail certain key factors that may affect Bank of Montreal's future results. When relying on forward-looking statements to make decisions with respect to Bank of Montreal, investors and others should carefully consider these factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements. Bank of Montreal does not undertake to update any forward-looking statements, 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, as well as our strategic priorities and objectives, and may not be appropriate for other purposes.

Assumptions about the level of default and losses on default were material factors we considered when establishing our expectations regarding the future performance of the transactions into which our credit protection vehicle has entered. Among the key assumptions were that the level of default and losses on default will be consistent with historical experience. Material factors that were taken into account when establishing our expectations regarding the future risk of credit losses in our credit protection vehicle and risk of loss to Bank of Montreal included industry diversification in the portfolio, initial credit quality by portfolio, the first-loss protection incorporated into the structure and the hedges into which Bank of Montreal has entered.

Assumptions about the performance of the Canadian and U.S. economies, as well as overall market conditions and their combined effect on our business, 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. See the Economic Review and Outlook section of this interim MD&A.

Economic Review and Outlook

After slowing early this year due to inclement weather, the Canadian economy has picked up moderately. Consumer spending has strengthened, home sales have firmed up and exports are starting to benefit from a weaker currency. Canadians are buying a record number of automobiles. However, job growth has slowed and business spending remains weak, restrained by uneven global demand. China's economy has strengthened in response to expansionary fiscal policies, but the Eurozone economy has stalled. Canadian GDP growth is expected to improve to 2.3% in 2014 from 2.0% in 2013, reducing the unemployment rate slightly. Consumer spending is projected to grow moderately, restrained by elevated household debt. Housing market activity should stabilize alongside moderate growth in residential mortgages. By contrast, business investment is expected to strengthen in response to firmer exports and elevated oil prices, supporting business loan growth. Despite an upturn in inflation, the Bank of Canada remains mindful of economic risks, and is expected to maintain a steady interest rate policy well into 2015. The Canadian dollar is projected to weaken further in response to the ongoing trade deficit and higher long-term interest rates in the U.S. than in Canada.

The U.S. economy contracted early this year, largely because of the severe winter weather, but rebounded strongly in the second quarter on improved motor vehicle sales and an upswing in business investment. While the poor start to the year means GDP growth will likely slow to 2.1% in 2014 from 2.2% in 2013, the outlook remains promising. Consumer spending is projected to strengthen in response to improved household finances, while housing market activity should pick up in response to recent declines in mortgage rates and steady gains in employment. Demand for residential mortgages and consumer loans should improve this year, while strong corporate balance sheets will support business spending and credit growth. While the Federal Reserve is expected to continue reducing its purchases of fixed-income securities, it is not expected to begin raising policy rates until the middle of 2015.

The U.S. Midwest region, which includes the six states in BMO's U.S. footprint, is expected to grow near the national average of 2.1% in 2014, with an improved performance expected in the second half of the year in response to strengthening exports, increased automotive production and less restrictive fiscal policies.

This Economic Review and Outlook section contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements.

Other Value Measures

BMO's average annual total shareholder returns for the one-year, three-year and five-year periods ending July 31, 2014, were 32.6%, 15.8% and 13.7%, respectively.

Foreign Exchange

The Canadian dollar equivalents of BMO's U.S.-dollar-denominated net income, revenues, expenses, recovery of (provision for) credit losses and income taxes were increased relative to the third quarter of 2013 and the prior year to date due to the strengthening of the U.S. dollar, but decreased relative to the second quarter of 2014 due to the weakening of the U.S. dollar. The average Canadian/U.S. dollar exchange rate for the quarter, expressed in terms of the Canadian dollar cost of a U.S. dollar, increased by 4% from a year ago and decreased 2% from the second quarter. The average rate for the year to date increased by 7% from a year ago. BMO may execute hedging transactions to mitigate the impact of foreign exchange rate movements on net income. Table 3 indicates the relevant average Canadian/U.S. dollar exchange rates and the impact of changes in the rates.

This Foreign Exchange section contains forward-looking statements. Please see the Caution Regarding Forward Looking Statements.

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Effects of Changes in Exchange Rates on BMO's Reported and Table 3

Adjusted Results

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Q3-2014 YTD-2014

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(Canadian $ in millions, except as

noted) vs Q3-2013 vs Q2-2014 vs YTD-2013

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Canadian/U.S. dollar exchange rate

(average)

Current period 1.0807 1.0807 1.0877

Prior period 1.0385 1.1029 1.0172

Effects on reported results

Increased (decreased) net interest

income 27 (14) 138

Increased (decreased) non-interest

revenue 21 (11) 112

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Increased (decreased) revenues 48 (25) 250

Decreased (increased) expenses (38) 20 (188)

Increased provision for credit losses (1) - -

Decreased (increased) income taxes (2) 1 (14)

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Increased (decreased) reported net

income 7 (4) 48

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Effects on adjusted results

Increased (decreased) net interest

income 25 (14) 125

Increased (decreased) non-interest

revenue 21 (11) 112

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Increased (decreased) revenues 46 (25) 237

Decreased (increased) expenses (37) 20 (183)

Increased recovery of credit losses - - 5

Decreased (increased) income taxes (2) 1 (12)

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Increased (decreased) adjusted net

income 7 (4) 47

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Adjusted results in this section are non-GAAP amounts or non-GAAP Measures.

Please see the non-GAAP Measures section.

Net Income

Q3 2014 vs. Q3 2013

Net income was $1,126 million for the third quarter of 2014, up $3 million from the prior year. EPS was $1.67, up $0.01 or 1% from the prior year.

Adjusted net income was $1,162 million, up $40 million or 4% from a particularly strong third quarter a year ago, as the prior year's results benefited from very low credit losses and a positive impact of long-term rates on insurance.

Adjusted EPS was $1.73, up $0.07 or 4%. Adjusted results and items excluded in determining adjusted results are disclosed in detail in the preceding Adjusted Net Income section and in the Non-GAAP Measures section, together with comments on the uses and limitations of such measures.

On an adjusted basis, net income growth was driven by strong results in Canadian P&C and BMO Capital Markets. Canadian P&C results reflected strong balance and fee volumes, partially offset by the impact of lower net interest margin. Wealth Management continued to deliver good adjusted results, excluding the $64 million impact of movements in long-term interest rates that lowered insurance results compared to the prior year. Traditional wealth posted strong results with adjusted net income up 27% or $33 million, with approximately 60% of the increase due to the contribution from the acquired F&C business and the remainder from strong growth in client assets. BMO Capital Markets results were up driven by good revenue performance across the businesses, particularly in Investment and Corporate Banking. U.S. P&C net income was up modestly on a U.S. dollar basis due to improving revenue. Corporate Services adjusted results decreased primarily due to lower recoveries on the purchased credit impaired loan portfolio partly offset by better revenue excluding the impact of the group teb offset.

Q3 2014 vs Q2 2014

Net income increased $50 million or 5% and EPS increased $0.07 or 4%. Adjusted net income increased $65 million or 6% and adjusted EPS increased $0.10 or 6%.

Net income increased in Canadian P&C due to higher revenue as a result of higher balance and fee volumes across most products and three more days in the current quarter, partially offset by higher expenses. Adjusted net income increased in Wealth Management primarily due to the acquisition of F&C, as well as good organic growth, partially offset by lower insurance revenue due to unfavourable movements in long-term interest rates. BMO Capital Markets results were relatively unchanged from the previous quarter as higher revenue was offset by a less favourable tax rate and modestly higher expenses. U.S. P&C adjusted net income increased on a U.S. dollar basis due to improving revenue, as the benefits from three more days and commercial loan growth were partially offset by lower commercial lending fees, higher expenses and increased provisions for credit losses. Corporate Services adjusted results were comparable to the prior quarter.

Q3 YTD 2014 vs Q3 YTD 2013

Net income increased $142 million or 5% to $3,263 million. EPS was $4.85, up $0.28 or 6% from a year ago. Adjusted net income was $3,342 million, up $207 million or 7% from a year ago. Adjusted EPS was $4.97, up $0.38 or 8% from a year ago. On an adjusted basis, there was strong growth in Canadian P&C, Wealth Management and BMO Capital Markets. Adjusted net income in U.S. P&C on a U.S. dollar basis and Corporate Services was lower relative to the same period a year ago.

Adjusted results in this Net Income section are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section.

Revenue

Q3 2014 vs Q3 2013

Total revenue of $4,215 million increased $215 million or 5% from the third quarter a year ago. Adjusted revenue increased $373 million or 10% to $4,215 million. Excluding the impact of the stronger U.S. dollar, adjusted revenue increased by $327 million or 8%. Canadian P&C had good revenue growth due to strong balance and fee volumes, partially offset by the impact of lower net interest margin. Wealth Management also had good revenue growth, with traditional wealth revenue up 25% due to the impact of the F&C acquisition and higher revenue across all businesses driven by strong growth in client assets and increased transaction volumes. Insurance revenue decreased due to the impact of movements in long-term interest rates. BMO Capital Markets revenue increased 15%, with good revenue performance particularly in Investment and Corporate Banking, including a solid contribution from our U.S. business. U.S. P&C revenue increased on a U.S. dollar basis, resulting from strong commercial loan growth, partially offset by lower net interest margin and reduced gains on sales of newly originated mortgages. Corporate Services adjusted revenue was lower primarily due to the impact of a higher group teb adjustment.

Net interest income decreased $76 million or 3% from a year ago to $2,107 million. Adjusted net interest income increased $77 million or 4% to $2,107 million, due to volume growth, revenue from the purchased performing loan portfolio and the impact of the stronger U.S. dollar, partially offset by lower net interest margin. BMO's overall net interest margin decreased on a reported basis by 20 basis points from a year ago to 1.58%. Adjusted net interest margin decreased by 7 basis points to 1.58%. Average earning assets increased $41.5 billion or 9% to $528.7 billion, including an $8.3 billion increase as a result of the stronger U.S. dollar.

Non-interest revenue increased $291 million or 16% from a year ago to $2,108 million. Adjusted non-interest revenue increased $296 million or 16% to $2,108 million, with significant increases in underwriting and advisory fees, as well as significantly higher investment management and custodial fees and mutual fund revenues as a result of the acquisition of F&C, offset in part by lower insurance income.

Q3 2014 vs Q2 2014

Total revenue and adjusted revenue increased $174 million or 4% from the second quarter. Excluding the impact of the weaker U.S. dollar, adjusted revenue increased by $199 million or 5%. Canadian P&C revenue increased primarily due to higher balance and fee volumes across most products and three more days in the current quarter. Revenue in Wealth Management increased, with revenue growth in traditional wealth driven by the impact from the F&C acquisition and growth in client assets. Insurance revenue decreased due to the impact of unfavourable movements in long-term interest rates. Revenue increased in BMO Capital Markets reflecting higher Investment and Corporate Banking revenue, with Trading Products revenue relatively unchanged. U.S. P&C had higher revenue on a U.S. dollar basis, as the benefits from three more days and commercial loan growth were partially offset by lower commercial lending fees. Corporate Services adjusted revenue decreased primarily due to lower credit-related revenue on the purchased performing loan portfolio and a higher group teb adjustment.

Reported and adjusted net interest income increased $44 million or 2%, in large part due to three more days in the current quarter. BMO's overall reported and adjusted net interest margin was relatively stable compared to the second quarter. BMO's overall reported and adjusted net interest margin (excluding trading) was unchanged from the second quarter. Average earning assets decreased $1.8 billion from the prior quarter, but increased $2.5 billion excluding the impact of the weaker U.S. dollar.

Reported and adjusted non-interest revenue increased $130 million or 7%, with significant increases in underwriting and advisory fees, as well as significantly higher investment management and custodial fees and mutual fund revenues as a result of the acquisition of F&C, offset in part by lower securities gains.

Q3 YTD 2014 vs Q3 YTD 2013

Year-to-date revenue increased $453 million or 4% and adjusted revenue increased $1,016 million or 9%. Excluding the impact of the stronger U.S. dollar, adjusted revenue increased $779 million or 7%.

Net interest income decreased $277 million or 4% year to date. Adjusted net interest income increased $263 million or 4%, mainly due to volume growth, revenue from the purchased performing loan portfolio and the impact of the stronger U.S. dollar, partially offset by lower net interest margin. BMO's overall net interest margin declined by 22 basis points to 1.60%. Adjusted net interest margin declined by 7 basis points to 1.60%. Average earning assets increased by $43.5 billion or 9%, including a $13.5 billion increase as a result of the stronger U.S. dollar.

Non-interest revenue increased $730 million or 14% year to date. Adjusted non-interest revenue increased $753 million or 14% with increases in all types of non-interest revenue except card fees, insurance income and foreign exchange, other than trading.

Net interest income and non-interest revenue are detailed in the unaudited interim consolidated financial statements.

Adjusted results in this Revenue section are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section.

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Adjusted Net Interest Margin on Average Earning Assets (teb)(i) Table 4

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(In basis points) Q3-2014 Q2-2014 Q3-2013 YTD-2014 YTD-2013

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Canadian P&C 259 258 264 259 266

U.S. P&C 373 376 392 377 404

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Personal and Commercial

Banking 289 290 295 290 301

Wealth Management 262 264 291 266 287

BMO Capital Markets 58 59 67 55 61

Corporate Services, including

T&O(ii) nm nm nm nm nm

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Total BMO adjusted net

interest margin 158 159 165 160 167

Total BMO adjusted net

interest margin (excluding

trading) 196 196 199 198 203

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Total BMO reported net

interest margin 158 159 178 160 182

Total BMO reported net

interest margin (excluding

trading) 196 196 215 198 221

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Total Canadian Retail

(reported and adjusted)(iii) 257 257 263 258 265

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(i) 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 taxable equivalent basis (teb) while

total BMO margin is stated on a GAAP basis.

(ii) Corporate Services adjusted net interest income is negative in all

periods and its variability affects changes in net interest margin.

(iii) Total Canadian retail margin represents the net interest margin of

the combined Canadian businesses of Canadian P&C and Wealth

Management.

This table contains adjusted results and measures, which are Non-GAAP.

Please see the Non-GAAP Measures section.

nm - not meaningful

Provisions for Credit Losses

Q3 2014 vs Q3 2013

The total provision for credit losses (PCL) was $130 million, an increase of $54 million from the prior year. Adjusted PCL increased by $118 million from the prior year primarily due to significantly lower recoveries. There was no net change to the collective allowance in the quarter.

Canadian P&C provisions increased by $9 million to $134 million, due to increased provisions in the consumer portfolio. U.S. P&C provisions of $52 million increased by $12 million due to higher provisions in the commercial portfolio, partially offset by lower provisions in the consumer portfolio. Corporate Services adjusted recoveries of $47 million declined by $107 million, primarily due to lower recoveries on the purchased credit impaired loan portfolio.

Q3 2014 vs Q2 2014

The reported and adjusted PCL decreased by $32 million from the prior quarter due to higher recoveries on the purchased performing loan and purchased credit impaired loan portfolios. There was no net change to the collective allowance in the quarter.

Canadian P&C provisions were consistent with the prior quarter. U.S. P&C provisions increased by $2 million due to higher provisions in the consumer portfolio, partially offset by lower provisions in the commercial portfolio. Corporate Services adjusted recoveries increased by $28 million mainly due to higher recoveries on the purchased performing loan and purchased credit impaired loan portfolios.

Adjusted results in this Provisions for Credit Losses section are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section.

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Provision for Credit Losses by Operating Group Table 5

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(Canadian $ in millions) Q3-2014 Q2-2014 Q3-2013 YTD-2014 YTD-2013

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Canadian P&C 134 133 125 408 406

U.S. P&C 52 50 40 121 127

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Personal and Commercial

Banking 186 183 165 529 533

Wealth Management (3) 2 (1) (2) 2

BMO Capital Markets (6) (4) 2 (11) (19)

Corporate Services, including

T&O (1) (2) (47) (19) (154) (125) (299)

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Adjusted provision for credit

losses 130 162 12 391 217

Purchased performing loans

(1) - - 44 - 191

Increase (decrease) in

collective allowance - - 20 - (10)

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Provision for credit losses 130 162 76 391 398

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(1) Effective Q1-2014, Corporate Services adjusted results include credit-

related items in respect of the purchased performing loan portfolio,

including $3 million of recoveries of specific provisions for credit

losses in the current period (specific provisions of $21 million in Q2-

2014).

(2) Corporate Services results include purchased credit impaired loan

recoveries of $57 million in Q3-2014 ($35 million after tax); $45

million in Q2-2014 ($28 million after tax); and $140 million in Q3-2013

($86 million after tax).

This table contains adjusted results and measures, which are Non-GAAP.

Please see the Non-GAAP Measures section.

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Changes to Provision for Credit Losses Table 6

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(Canadian $ in millions,

except as noted) Q3-2014 Q2-2014 Q3-2013 YTD-2014 YTD-2013

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New specific provisions 395 348 357 1,101 1,181

Reversals of previously

established allowances (83) (47) (72) (178) (203)

Recoveries of loans

previously written-off (182) (139) (229) (532) (570)

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Specific provision for credit

losses 130 162 56 391 408

Increase (decrease) in

collective allowance - - 20 - (10)

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Provision for credit losses 130 162 76 391 398

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PCL as a % of average net

loans and acceptances

(annualized) 0.18 0.22 0.11 0.18 0.20

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Impaired Loans

Total gross impaired loans (GIL) were $1,975 million at the end of the current quarter, down from $2,325 million in the second quarter of 2014 and down from $2,650 million a year ago.

Factors contributing to the change in GIL are outlined in Table 7 below. Loans classified as impaired during the quarter totalled $457 million, down from $509 million in the second quarter of 2014 and $610 million a year ago.

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Changes in Gross Impaired Loans (GIL) and Acceptances (1) Table 7

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(Canadian $ in millions,

except as noted) Q3-2014 Q2-2014 Q3-2013 YTD-2014 YTD-2013

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GIL, beginning of period 2,325 2,482 2,848 2,544 2,976

Classified as impaired during

the period 457 509 610 1,608 1,835

Transferred to not impaired

during the period (142) (244) (212) (540) (564)

Net repayments (269) (185) (290) (900) (811)

Amounts written-off (235) (149) (219) (587) (670)

Recoveries of loans and

advances previously written-

off - - - - -

Disposals of loans (155) (63) (146) (220) (233)

Foreign exchange and other

movements (6) (25) 59 70 117

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GIL, end of period 1,975 2,325 2,650 1,975 2,650

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GIL as a % of gross loans and

acceptances 0.67 0.79 0.97 0.67 0.97

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(1) GIL excludes purchased credit impaired loans.

For further discussion of risk management practices and key measures, see the Risk Management section.

Non-Interest Expense

Non-interest expense increased $230 million or 9% from the third quarter a year ago to $2,756 million. Adjusted non-interest expense increased $266 million or 11% to $2,708 million. Excluding the impact of the stronger U.S. dollar, adjusted non-interest expense increased by $229 million or 9% primarily due to higher employee-related expenses, including performance-based compensation, the impact of the F&C acquisition and increased technology and support costs related to a changing business and regulatory environment.

Non-interest expense increased $162 million or 6% relative to the second quarter. Adjusted non-interest expense increased $142 million or 5%. Excluding the impact of the weaker U.S. dollar, adjusted non-interest expense increased by $162 million or 6% primarily due to the impact of the F&C acquisition, higher employee-related expenses, increased technology and support costs related to a changing business and regulatory environment and three more days in the current quarter.

Year-over-year operating leverage on a reported basis was negative 3.7% and adjusted operating leverage was negative 1.1%. Excluding the impact of movements in long-term interest rates in the insurance business, year-over-year adjusted operating leverage was positive 1.3%. The adjusted efficiency ratio of 64.2% for the third quarter of 2014 increased 60 basis points from a year ago and 70 basis points from the prior quarter, primarily due to the impact of the F&C acquisition and movements in long-term interest rates in the insurance business. The adjusted efficiency ratio excluding PBCAE(1) was 57.2%.

Non-interest expense for the year to date increased $388 million or 5% to $8,034 million. Adjusted non-interest expense increased $657 million or 9% to $7,927 million, or 6% excluding the impact of the stronger U.S. dollar. The increase was primarily due to higher employee-related expenses, including performance-based compensation and severance, increased technology and support costs related to a changing business and regulatory environment and the impact of the F&C acquisition.

Non-interest expense is detailed in the unaudited interim consolidated financial statements.

Adjusted results in this Non-Interest Expense section are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section.

Income Taxes

The provision for income taxes of $203 million decreased $72 million from the third quarter of 2013 and decreased $6 million from the second quarter of 2014. The effective tax rate for the quarter was 15.3%, compared with 19.7% a year ago and 16.2% in the second quarter of 2014.

The adjusted provision for income taxes of $215 million decreased $51 million from a year ago and was relatively unchanged from the second quarter of 2014. The adjusted effective tax rate was 15.6% in the current quarter, compared with 19.2% a year ago and 16.5% in the second quarter of 2014. The lower adjusted tax rate in the current quarter relative to the third quarter of 2013 and the second quarter of 2014 was primarily due to higher tax-exempt income.

Adjusted results in this Income Taxes section are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section.

(1) This ratio is calculated excluding insurance policyholder benefits,

claims and acquisition expenses (PBCAE).

Capital Management

Third Quarter 2014 Regulatory Capital Review

BMO's Common Equity Tier 1 (CET1) Ratio was 9.6% at July 31, 2014.

The CET1 Ratio decreased by approximately 10 basis points from 9.7% at the end of the second quarter mainly due to the impact of the F&C acquisition which reduced the CET1 ratio by approximately 75 basis points, largely offset by lower risk-weighted assets (RWA) and increased retained earnings. The CET1 Ratio decreased by approximately 30 basis points from 9.9% at October 31, 2013, mainly due to the impact of the F&C acquisition and higher RWA, partly offset by increased retained earnings.

RWA of $226 billion at July 31, 2014, decreased by $9 billion from the second quarter largely due to actions taken to manage certain risk positions and changes in methodology and risk assessments. RWA increased $11 billion from October 31, 2013, primarily due to increased source currency RWA, newly-implemented Credit Valuation Adjustment (CVA) rules and the impact of a strengthening of the U.S. dollar during the first three quarters of the year as noted below.

During the first and second quarters of 2014, the RWA attributable to the CVA for CET1, (CET1 RWA), Tier 1 and Total Capital was 57% of the fully-implemented charge. During the third quarter, the CET1 RWA remained at 57% of the fully-implemented charge while the RWA attributable to the CVA for Tier 1 Capital and Total Capital increased to 65% and 77%, respectively. The CVA charge will remain at these levels during the fourth quarter. The phase-in of RWA for the CVA charge will continue until it reaches 100% by 2019.

CET1 Capital at July 31, 2014, was $21.6 billion, down $1.1 billion from the second quarter mainly due to increased capital deductions for goodwill and intangible assets associated with the F&C acquisition, partially offset by increased retained earnings. Since October 31, 2013, CET1 Capital has increased $0.4 billion, with retained earnings growth and the net impact of foreign exchange movements on U.S.-dollar-denominated investments in foreign operations and related hedges more than offsetting the increase in capital deductions during the third quarter.

The bank's Tier 1 and Total Capital Ratios were 11.4% and 13.3%, respectively, at July 31, 2014, compared with 11.1% and 13.0%, respectively, at April 30, 2014, and 11.4% and 13.7%, respectively, at October 31, 2013. These ratios changed from the prior quarter and from October 31, 2013, primarily due to the same factors that caused changes in the CET1 Ratio, described above, and due to the issuance of preferred shares, which was partially offset by preferred share redemptions, as described below.

BMO's Assets-to-Capital Multiple (ACM) was 17.0 at July 31, 2014, up from 16.8 at April 30, 2014, and from 15.6 at October 31, 2013, due to higher balance sheet assets. The Office of the Superintendent of Financial Institutions (OSFI) has announced that the ACM will be discontinued in 2015 and will be replaced by the Basel III Leverage Ratio. OSFI has established a 3% minimum Basel III Leverage Ratio. Disclosure of the Basel III Leverage Ratio will commence in the first quarter of fiscal 2015.

BMO's investments in foreign operations are primarily denominated in U.S. dollars. The foreign exchange impact of U.S.-dollar-denominated RWA and U.S.-dollar-denominated capital deductions may result in variability in the bank's capital ratios. BMO may enter into hedging arrangements to reduce the impact of foreign exchange movements on its capital ratios.

Pages 61 to 65 and pages 92 to 94 of BMO's 2013 Annual Report provide disclosure on Enterprise-Wide Capital Management and Liquidity and Funding Risk, including regulatory requirements impacting capital and liquidity.

Other Capital Developments

During the quarter, we redeemed all of our Non-cumulative Class B Preferred Shares Series 21, at a redemption price of $25.00 per share plus declared and unpaid dividends up to but excluding the date fixed for redemption.

On June 6, 2014, we completed our offering of Non-cumulative 5-Year Rate Reset Class B Preferred Shares Series 29. We issued 16 million shares for aggregate proceeds of $400 million.

On July 30, 2014, we complete