MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANC IAL CONDITION Other Liabilities Net Loans and Acceptances Subordinated Debt ShareholdersGLYPH<213> Equity Net Loans and Acceptances  ($ millions) Deposits  24 BMO FINANCIAL GROUP ANNUAL REPORT 2002 Deposits ($ millions) Net loans and acceptances increased $4.8 billion to $149.6 bil- lion. Loans to businesses and governments declined $3.3 billion, reflecting credit concerns and lower demand due to reduced corporate capital spending. Residential mortgages rose $5.6 bil- lion due to robust housing sales. Credit cards and consumer instalment and other personal loans also increased strongly. The portfolio remains well diversified, with a higher proportion of Canadian loans due to the growth in residential mortgages in Canada in 2002.  Table 10 on page 58 provides a comparative summary of loans by geographic location and product. Table 12 on page 59 provides a comparative summary of net loans by province and industry. The portfolio reflects only minimal change in the geographic breakdown from last year-end, as loan growth was concentrated in the relatively strong Ontario region. Loan quality is discussed in the credit risk section on page 29 and further details on loans are provided in Notes 4, 5 and 6 to the financial statements, starting on page 74.  Deposits increased $7.5 billion from a year ago to $161.8 billion. Deposits from businesses and governments, which account  for 44% of total deposits, increased $5.3 billion. Deposits by banks, which tend to be somewhat variable, decreased $5.3 bil- lion. Deposits from individuals, which account for 46% of total deposits, tend to be more stable and increased $7.5 billion. Further details on the composition of deposits are provided in Note 12 on page 79 of the financial statements and in the liquid- ity and funding risk section on page 33. Other liabilities increased $5.6 billion to $75.3 billion. The  growth was attributable to an increase in securities sold under repurchase agreements, which are a major funding source for  trading positions.  Subordinated debt decreased $0.9 billion to $3.8 billion. The decline reflected the redemption of debentures and medium term notes as a result of the high yield relative to prevailing market rates. Note 14 on page 80 of the financial statements  provides details on the attributes of the debt, issues and retire- ments, and future maturities by year.  Shareholders’ equity increased $1.2 billion or 11% to $11.9 billion, from $10.7 billion in 2001. BMO’s Consolidated Statement  of Changes in Shareholders’ Equity on page 70 provides an  easy-to-read summary of items that increase or reduce share- holders’ equity, while Note 15 on page 80 provides details on  the components of and changes in share capital. The change  in shareholders’ equity was largely related to higher retained  earnings, due to earnings retained in the business, and pre- ferred share issues. Details of our Enterprise-Wide Capital Management processes and strategies can be found on page 35. *Includes loan substitute securities classified as securities in 1998 and 1999. As at October 31 2002 2001 2000 1999 1998 Residential mortgages 47,569  41,941 39,485 38,189 35,847 Consumer instalment  and other personal  21,168  19,107 18,038 16,912 16,095 Credit cards 2,280 1,527 1,407 1,160 797 Businesses and  governments* 57,963 61,249 60,176 58,027 51,001 Acceptances 6,901 7,936 8,630 6,753 6,944 Securities purchased under  resale agreements 15,664 14,954 16,308 25,090 27,520 Gross loans and  acceptances 151,545 146,714 144,044 146,131 138,204 Allowance for  credit losses (1,949) (1,949) (1,597) (1,348) (1,166) Net loans and  acceptances 149,596 144,765 142,447 144,783 137,038 As at October 31 2002 2001 2000 1999 1998 Banks 15,273 20,539 23,385 30,398 26,256 Businesses and  governments 71,411 66,132 69,454 65,459 58,064 Individuals 75,154 67,619 63,858 61,017 59,663 Total 161,838 154,290 156,697 156,874 143,983 Deposits from IndividualsGLYPH<CR> ($ billions) 59.7 61.0 63.9 67.6 75.2 2002 2001 2000 1999 1998 ShareholdersGLYPH<213> Equity GLYPH<CR> ($ billions) 10.6 11.0 11.9 10.7 11.9 2002 2001 2000 1999 1998 Net Loans — Excluding GLYPH<CR> Securities Purchased under GLYPH<CR> Resale Agreements GLYPH<CR> ($ billions) 102.6 112.9 117.5 121.9 127.0 2002 2001 2000 1999 1998 Portfolio Diversification —GLYPH<CR> Gross Loans and AcceptancesGLYPH<CR> Commercial 24% Corporate 26% Consumer 18% Commercial loans are managed by P&C. GLYPH<CR> Corporate loans, which are usually larger, GLYPH<CR> are managed by IBG. ResidentialGLYPH<CR> mortgages 32%