Credit Risk b The provision for credit losses was $820 million or 56 basis points of average net loans and acceptances, down from  $880 million or 60 basis points in 2001. b The provision was above our 2002 target of 40 to 50 basis points but matched our updated guidance of April 25, 2002. b Our 2003 target is to maintain the provision at the 2002 level. Cash and Securities-to-Total Assets b Liquidity remains strong, supported by broad diversifi- cation of deposits. The liquidity ratio rose to 24.9% from 23.1% a year ago. b The ratio of core deposits-to-total deposits was stable at 59.6%, compared with 60.0% a year ago. Capital Adequacy b The Tier 1 Capital Ratio was 8.80%, up from 8.15% last year. The Total Capital Ratio was 12.23%, up from 12.12% in 2001. b The Tier 1 Capital Ratio remains above our minimum target level of 8.0%. Credit Rating b The credit rating represents a composite of Moody’s ¤ 2 and Standard & Poor’s ¤ 3 (S&P) debt ratings. b The composite credit rating remained unchanged at AA –, but with S&P and Moody’s maintaining a negative outlook. Impaired Loans b Gross impaired loans were 15.2% of equity and allowances for credit losses, compared with 14.2% a year ago. The increase in impaired loans was largely attributable to problems in the telecommunications sector.  b The level of impaired loans remains within acceptable parameters given the economic conditions.  * Adjustments to GAAP results to derive cash results and results excluding non-recurring items are outlined on page 18, along with comments on the use of these measures. Unless indicated otherwise, all amounts and ratios exclude non-recurring items. Our Performance * Peer Group Comparison * BMO Financial Group Canadian Peer Group Average North American Peer Group Average Further details are provided on pages 22 and 29. Further details are provided on page 29. Further details are provided on page 33. Further details are provided on page 35. Further details are provided on page 35. Provision for Credit Losses as a %  of Average Loans and Acceptances b BMOGLYPH<213>s provision for credit losses was 0.56% of average net loans and accep- tances. Our performance compares very favourably to the Canadian peer group average of 0.89% and the North Amer- ican peer group average of 1.41%. Gross Impaired Loans and Acceptances as a % of Equity and Allowances for Credit Losses b Our gross impaired loans and acceptances were 15.2% of equity and allowances for credit losses, just above the Canadian peer group average of 14.6% and above the North American peer group average of 10.0%. Cash and Securities-to-Total Assets (%) b Our liquidity ratio of 24.9% was below the Canadian average of 28.7% and the North American average of 38.2%. b BMOGLYPH<213>s ratio of individual deposits-to-total deposits, an indicator of lower liquidity risk, is the highest of both the Canadian and North American peer groups. Tier 1 Capital Ratio  (%) b Our Tier 1 Capital Ratio of 8.80% was below the Canadian peer group average of 9.07% but well above our target of 8%. b On a U.S. basis, our Tier 1 Capital Ratio of 8.32% was below the North American peer group average of 8.50%. Credit Rating b Our credit rating was comparable with both the Canadian and North American peer group averages. b Only two banks among our North Amer- ican peer group have higher ratings than BMO. 2002 2001 2000 1999 1998 0.56 0.60 0.28 0.22 0.09 2002 2001 2000 1999 1998 15.2 14.2 10.5 8.5 6.7 2002 2001 2000 1999 1998 24.9 23.1 27.8 29.2 28.4 2002 2001 2000 1999 1998 8.80 8.15 8.83 7.72 7. 26 AA— AA— AA— AA— AA— A+ A+ AA— AA— AA— 2002 2001 2000 1999 1998 See page 14 for further comments on peer group comparisons. BMO FINANCIAL GROUP ANNUAL REPORT 2002 13