MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANC IAL CONDITION Chicagoland Banking  Description and Strategy Small Business Banking Description and Strategy Overview of Performance Overview of Performance 2003 Focus 2003 Focus  Overview of Performance 2003 Focus  Description and Strategy Commercial Banking  Chicagoland Banking serves individuals, small businesses and lower middle-market commercial clients through a retail bank network of 145 branches. Our goal is to be the best and the biggest retail and small business bank in Chicagoland. We have a strong branch distribution network, a well-developed business model and an integrated multi-channel platform providing operating leverage for our U.S. retail growth strategy.  Small Business Banking provides a full range of banking services to more than 440,000 customers who can access products and services, including cash management and loans and deposits, through various channels. Small Business Banking’s goal is to become Canada’s number one bank for small business with leading market share growth and customer loyalty. We continued to rank second in small business lending and increased our market share by 61 bps over 12 months to 19.5%. Through independent third party research, we found customers’ assessment of our employee professionalism increased over the prior year, which widened our lead over the average score for our competition. These results reflect our ability to utilize our new customer knowledge analytical environment, which assists us in developing proactive customer solutions and enables us to reach more customers, more often, with the right solution. Our key financial performance measures continue to improve. By expanding our distribution, providing high-quality service, expanding our sales force and increasing its effectiveness, we have achieved strong organic loan, deposit and earnings growth and enhanced our customer experience. We now serve one house- hold in five in Chicagoland and more than a million customers. Commercial Banking provides mid-market clients with a suite of advisory services and products that includes senior debt, asset-based lending, mezzanine and private equity financing, cash management, treasury, mergers and acquisitions, and cross- border financing. Our highly experienced professional bankers provide clients with the advice and solutions they need to be successful in their business. During 2002, the implementation of strategies to accelerate growth helped solidify our competitive advantage. We also launched our mergers and acquisitions advisory services, ex- panded our subordinated-debt offering, and added staff to better support our corporate finance relationship group and our cash management specialist sales force. b Expand the sales force in selected business segments in which growth opportunities have been identified. b Pursue incremental growth through selective acquisitions of small commercial portfolios. b Improve the alignment of our branch and direct banking  sales and service resources to better meet the needs of our customers. b Continue our focus on customer retention, improve our cus- tomer loyalty scores and close the shortfall relative to the competition. b Continue to build BMO Bank of Montreal’s reputation as the bank for small business. b Grow our market share by expanding our distribution network through a combination of new branch openings and acquisitions. b Continue to target a US$1 billion increase in retail and small business loans. b Increase marketing to improve frequency and reach of brand and product promotional campaigns. b Migrate to a single deposit platform to simplify customer trans- action processing. b Enhance and fill in our product and service capabilities to ensure a fully competitive lineup.  40 BMO FINANCIAL GROUP ANNUAL REPORT 2002