Impaired Loans
Total gross impaired loans, on a basis that excludes the purchased credit impaired loans, were $2,912 million at the end of the current quarter, down from $2,976 million in the fourth quarter of 2012 and up from $2,657 million a year ago. Included in the amount above at the end of the quarter, were $991 million of gross impaired loans related to acquired portfolios, of which $128 million is subject to a loss-sharing agreement that expires in 2015 for commercial loans and in 2020 for retail loans.
Impaired loan formations (excluding the M&I purchased performing loan portfolio) totalled $355 million in the current quarter, down from $428 million in the fourth quarter of 2012 and $392 million a year ago. Impaired loan formations related to the M&I purchased performing loan portfolio were $275 million in the current quarter, compared with $359 million in the fourth quarter of 2012 and $232 million a year ago.
----------------------------------------------------------------------------Changes in Gross Impaired Loans and Acceptances (GIL) (1) Table 7--------------------------------------------------------------------------------------------------------------------------------------------------------(Canadian $ in millions, except as noted) Q1-2013 Q4-2012 Q1-2012----------------------------------------------------------------------------GIL, beginning of period 2,976 2,867 2,685Additions to impaired loans and acceptances 630 787 624Reductions in impaired loans and acceptances (2) (459) (367) (379)Write-offs (3) (235) (311) (273)----------------------------------------------------------------------------GIL, end of period (1) 2,912 2,976 2,657--------------------------------------------------------------------------------------------------------------------------------------------------------GIL as a % of gross loans and acceptances (4) 1.12 1.17 1.10GIL as a % of gross loans and acceptances excluding purchased portfolios (4) (5) 0.80 0.84 1.02GIL as a % of equity and allowances for credit losses 8.98 9.30 8.74GIL as a % of equity and allowances for credit losses excluding purchased portfolios (5) 5.96 6.18 7.39--------------------------------------------------------------------------------------------------------------------------------------------------------(1) GIL excludes purchased credit impaired loans.(2) Includes impaired amounts returned to performing status, loan sales, repayments, the impact of foreign exchange fluctuations and effects for consumer write-offs which have not been recognized in formations.(3) Excludes certain loans that are written-off directly and not classified as new formations ($91 million in Q1-2013; $99 million in Q4-2012; and $104 million in Q1-2012).(4) Certain ratios for 2012 have been restated to conform to reclassified balance sheet presentation.(5) Ratio is presented excluding purchased portfolios, to provide for better historical comparisons.This table contains adjusted results and measures which are non-GAAP. Pleasesee the Non-GAAP Measures section.
Residential mortgage and home equity line of credit (Heloc) exposures are areas of interest in the current environment. BMO regularly performs stress testing on its mortgage and Heloc portfolios to evaluate the potential impact of tail events. These stress tests incorporate moderate to severe adverse scenarios. The resulting credit losses vary depending on the severity of the scenario and are considered to be manageable.
