STT State Street Corporation

State Street Corporation announced today third-quarter earnings per share of $0.83, an increase of 11% from $0.75 earnings per share from continuing operations in the third quarter of 2005. The third-quarter 2006 results include a cumulative gain of $15 million, or $0.03 per share, in trading services revenue related to the Corporation�s tax-exempt investment programs. The comparative 2005 results included a $16 million, or $0.03 per share gain from the final settlement of the 2003 sale of the Corporation�s Private Asset Management business. Revenue of $1.5 billion in the third quarter of 2006 is up 9%, or $127 million, compared to $1.4 billion in the year-ago quarter. Total expenses in the third quarter of 2006 of $1.1 billion are up 8%, or $82 million, compared to $1.0 billion in the year-ago quarter. For the third quarter of 2006, return on shareholders� equity is 16.4%, compared to 15.9% from continuing operations in the third quarter of 2005. Ronald E. Logue, State Street's chairman and chief executive officer, said, �In the third quarter, we saw seasonal declines in securities finance and trading services revenue, down from the very strong second quarter. Our continuing efforts in managing expenses resulted in a significant decline in costs, partially offsetting the decline in revenue.� Logue continued, �Compared to a strong quarter a year ago, the third-quarter results demonstrated the continuing growth in our servicing and management fee revenue, increasing 10% and 27%, respectively. These results were fueled by new wins, solid cross-selling to existing customers, as well as ongoing product innovation. We achieved modest positive operating leverage compared to the year-ago quarter. For the nine months revenues were up 16% and expenses increased 12%, also resulting in significant positive operating leverage.� Looking forward, Logue concluded, �Through nine months we are performing above the high end of our ranges for revenue, earnings per share, and return on equity, all on an operating basis excluding the second-quarter tax charges. We expect that we will moderately exceed the high end of the ranges we established for the full year.� THIRD-QUARTER RESULTS VS. YEAR-AGO QUARTER Servicing fees are up 10%, to $685 million from $620 million in last year�s third quarter. The increase is attributable to new business from existing and new customers in 2006 and higher average equity market valuations. Total assets under custody are $11.3 trillion, up 15%, compared with $9.8 trillion in the year-ago quarter. Daily average values for the S&P 500 Index are up 5% from the third quarter of 2005; daily average values for the MSCI� EAFE IndexSM are up 19%. The average values for the NASDAQ are down slightly, less than 1%. Investment management fees, generated by State Street Global Advisors, are $238 million, up 27% from $188 million a year ago. Management fees reflect continued new business, increased performance fees, and an increase in average month-end equity valuations. Total assets under management are $1.6 trillion, up 16%, compared to $1.4 trillion the previous year. Trading services revenue, which includes foreign exchange trading revenue and brokerage and other fees is $171 million for the quarter, down 3% from $176 million in an unusually strong quarter a year ago. Excluding the cumulative gain, trading services revenue would be down 11%. The decrease is driven by weaker brokerage volumes, as well as lower FX volatility. Securities finance revenue is $87 million in the quarter, up 18% compared to $74 million in the year-ago quarter, reflecting an increase in volume and new business. Processing fees and other revenue are down 16%, or $12 million, at $65 million, compared to $77 million a year ago, primarily due to lower customer activity. Net interest revenue on a fully taxable-equivalent basis is $275 million, an increase of $30 million, or 12% from $245 million a year ago. The increase in net interest revenue is due to a favorable mix in non-US deposits, an increase in non-U.S. rates, as well as growth in the balance sheet due to customer activity levels. Net interest margin increased to 1.22% from 1.10% a year ago. Expenses increased from $1,008 million to $1,090 million, up $82 million, or 8%. Salaries and benefits expenses are up 13% to $639 million, primarily attributable to additions to headcount, incentive compensation due to improved year-to-date performance, and increases in benefits. The increase in expenses also includes higher transaction processing services, up 9% to $121 million, due to higher volumes. Expenses for information systems & communications increased $4 million, or 3%, to $121 million. Occupancy expense decreased 5%, or $5 million, to $91 million. Other expenses are flat at $118 million. The effective tax rate for the quarter is 34.6% compared with 34.0% in the third quarter of last year. THIRD-QUARTER RESULTS VS. SECOND QUARTER Third-quarter net income per share of $0.83 compares to net income per share from continuing operations of $0.68 per share which includes $.25 per share for tax charges in the second quarter. Net income in the third quarter of $0.83 per share would compare to $0.93, excluding these charges. Total revenue in the third quarter of $1.5 billion is down $136 million, or 8% versus $1.7 billion in the second quarter. Total expenses are $1.1 billion, down 7%, or $86 million, versus $1.2 billion in the second quarter. For the third quarter of 2006, return on shareholders� equity is 16.4% compared to 19.2% in the second quarter, excluding the tax charges. Servicing fees are flat at $685 million due to slightly improved average market valuations and new business, offset by lower transaction volumes. Management fees are up 3% to $238 million principally due to performance fees, new business and slightly higher month-end equity valuations. Trading services revenue declined 34% to $171 million due to seasonal weakness in foreign exchange and brokerage. Excluding the cumulative gain, trading services revenue would have been down 40%. Securities finance revenue decreased 32%, from $128 million to $87 million, due to seasonally high volumes in the second quarter. Processing fees and other declined 12% from $74 million to $65 million due to lower customer activity. Net interest revenue on a fully taxable-equivalent basis was flat at $275 million, compared to the second quarter. All expense categories declined compared to the second quarter. Salaries and employee benefits expense total $639 million, a decline of $45 million, or 7%, from $684 million, attributable primarily to reductions in incentive compensation. Transaction processing services expense decreased $13 million, or 10%, to $121 million due to reduction in volumes. Information systems and communication expense was down 6%, or $8 million, to $121 million and occupancy expense was down 4%, or $4 million, to $91 million. Other expenses are down $16 million, or 12%, from $134 million to $118 million due to continuing emphasis on cost containment. ADDITIONAL INFORMATION All per share amounts represent diluted earnings per share. The newly issued FAS 158, Employers� Defined Benefit Pension and Other Postretirement Plans requires that we account for differences between plan assets and projected benefit obligations as of December 31, 2006, on our balance sheet. In the fourth quarter we expect to record approximately $160 million to $170 million as an after-tax reduction to accumulated other comprehensive income in order to comply with FAS 158. This range assumes relative stability of capital markets in the fourth quarter. INVESTOR CONFERENCE CALL State Street will webcast an investor conference call today, Tuesday, October 17, 2006, at 9:30 a.m. EDT, available at www.statestreet.com/stockholder. The conference call will also be available via telephone, at +1 719/457-2617 (confirmation code 8294545). Recorded replays of the conference call will be available on the web site, and by telephone at +1 402/220-4230, beginning at 2:00 PM today. This press release and additional financial information is available on State Street�s website, at www.statestreet.com/stockholder, under �Financial Reports.� State Street Corporation (NYSE: STT) is the world's leading specialist in providing institutional investors with investment servicing, investment management and investment research and trading. With $11.3 trillion in assets under custody and $1.6 trillion in assets under management, State Street operates in 26 countries and more than 100 geographic markets worldwide and employs 21,500 worldwide. For more information, visit State Street�s web site at www.statestreet.com or call 877/639-7788 [NEWS STT] toll-free in the United States and Canada, or +1 202/266-3340 outside those countries. This news announcement contains forward-looking statements as defined by United States securities laws, including statements about the financial outlook and business environment. Those statements are based on current expectations and involve a number of risks and uncertainties, including those related to changes in interest rates, the value of global and regional financial markets, the extent of volatility in currency markets, the pace of cross-border investment activity, the pace at which State Street adds new clients or at which existing clients use additional services, State Street�s business mix, State Street�s success at integrating and converting acquisitions into its business, the pace of worldwide economic growth and rates of inflation, the dynamics of markets State Street serves, and consolidations among clients and competitors. Other important factors that could cause actual results to differ materially from those indicated by any forward-looking statements, are set forth in State Street's 2005 Annual Report on Form 10-K, particularly in Item 1A, �Risk Factors,� and the Corporation�s subsequent SEC filings which should be read before making any investment decision. The forward-looking statements contained in this press release speak only as of the date hereof, October 17, 2006, and the Corporation will not undertake efforts to revise those forward-looking statements to reflect events after this date. � Press Release Addendum � Financial Highlights September 30, 2006 � � Quarters Ended � % Change� � September30,2006 June 30, 2006 September30,2005 Q3 vs. Q2 Q3 vs. Q3 (Dollars in millions, except per share information or where otherwise indicated) � � � � � � � Total Revenue $ 1,515� $ 1,651� $ 1,388� (8) % 9� % Total Expenses 1,090� 1,176� 1,008� (7) 8� Income Tax Expense 147� 248� 130� (41) 13� Income from Continuing Operations 278� 227� 250� 22� 11� Loss from Discontinued Operations -� -� (107) Net income 278� 227� 143� 22� 94� � Diluted Earnings Per Share: From Continuing Operations $ .83� $ .68� $ .75� 22� 11� From Discontinued Operations -� -� (.32) Net Income .83� .68� .43� 22� 93� � Closing Price Per Share of Common Stock $ 62.40� $ 58.09� $ 48.92� Cash Dividends Declared Per Share .20� .20� .18� � Return on Equity from Continuing Operations 16.4� % 14.0� % 15.9� % Return on Equity 16.4� 14.0� 9.1� � Assets Under Custody (AUC) (in trillions) $ 11.27� $ 10.86� $ 9.80� Assets Under Management (AUM) (in trillions) 1.63� 1.53� 1.41� Nine Months Ended � % Change� 2006vs.2005 September 30,2006 September30,2005 (Dollars in millions, except per share information) � � � � Total Revenue $ 4,689� $ 4,057� 16� % Total Expenses 3,362� 3,002� 12� Income Tax Expense 540� 359� 50� Income from Continuing Operations 787� 696� 13� Income (Loss) from Discontinued Operations 10� (107) Net Income 797� 589� � Diluted Earnings Per Share: From Continuing Operations $ 2.35� $ 2.08� 13� From Discontinued Operations .03� (.32) Net Income 2.38� 1.76� � Cash Dividends Declared Per Share $ .59� $ .53� 11� � Return on Equity from Continuing Operations 16.0� % 15.1� % Return on Equity 16.2� 12.8� STATE STREET CORPORATION Press Release Addendum � SELECTED FINANCIAL INFORMATION Periods ended September 30, 2006 and September 30, 2005 � Quarters Ended Nine Months Ended September 30, September 30, September 30, September 30, (Dollars in millions, except per share information) 2006� � 2005� % Change� 2006� 2005� % Change� � � Fee Revenue: Servicing fees $ 685� $ 620� 10� % $ 2,025� $ 1,837� 10� % Management fees 238� 188� 27� 690� 538� 28� Trading services 171� 176� (3) 659� 512� 29� Securities finance 87� 74� 18� 296� 257� 15� Processing fees and other � 65� � 77� (16) � 211� � 231� (9) Total fee revenue 1,246� 1,135� 10� 3,881� 3,375� 15� � Net Interest Revenue: Interest revenue 1,103� 773� 43� 3,098� 2,069� 50� Interest expense � 837� � 537� 56� � 2,304� � 1,404� 64� Net interest revenue (1) 266� 236� 13� 794� 665� 19� Provision for loan losses � -� � -� � -� � -� Net interest revenue after provision for loan losses 266� 236� 13� 794� 665� 19� � Gain on sales of available-for-sale investment securities, net 3� 1� 14� 1� Gain on the sale of the Private Asset Management business � -� � 16� � -� � 16� Total revenue 1,515� 1,388� 9� 4,689� 4,057� 16� � Operating Expenses: Salaries and employee benefits 639� 566� 13� 1,958� 1,642� 19� Information systems and communications 121� 117� 3� 382� 364� 5� Transaction processing services 121� 111� 9� 375� 331� 13� Occupancy 91� 96� (5) 279� 302� (8) Other � 118� � 118� -� � 368� � 363� 1� Total operating expenses � 1,090� � 1,008� 8� � 3,362� � 3,002� 12� Income from continuing operations before income tax expense 425� 380� 12� 1,327� 1,055� 26� Income tax expense from continuing operations � 147� � 130� � 540� � 359� Income from continuing operations 278� 250� 11� 787� 696� 13� � (Loss)�Income from discontinued operations before income tax expense -� (165) 16� (165) Income tax (benefit) expense from discontinued operations � -� � (58) � 6� � (58) (Loss) Income from discontinued operations � -� � (107) � 10� � (107) Net income $ 278� $ 143� $ 797� $ 589� � Earnings Per Share From Continuing Operations: Basic $ .84� $ .76� 11� $ 2.38� $ 2.11� 13� Diluted .83� .75� 11� 2.35� 2.08� 13� � Earnings Per Share From Discontinued Operations: Basic $ -� $ (.33) $ .03� $ (.33) Diluted -� (.32) .03� (.32) � Earnings Per Share: Basic $ .84� $ .43� $ 2.41� $ 1.78� Diluted .83� .43� 2.38� 1.76� � Average Shares Outstanding (in thousands): Basic 330,440� 329,097� 331,326� 330,251� Diluted 335,513� 334,103� 335,566� 333,999� � Consolidated Statement of Income prepared in accordance with accounting principles generally accepted in the United States. � (1) Net interest revenue on a fully taxable-equivalent basis was $275 million and $245 million for the three months ended September 30, 2006 and 2005, respectively, and $827 million and $696 million for the nine months ended September 30, 2006 and 2005, respectively. STATE STREET CORPORATION Press Release Addendum � SELECTED FINANCIAL INFORMATION Quarters ended September 30, 2006 and June 30, 2006 � � Quarters Ended � � September 30, June 30, (Dollars in millions, except per share information) � 2006� � � 2006� % Change� � Fee Revenue: Servicing fees $ 685� $ 683� -� % Management fees 238� 232� 3� Trading services 171� 258� (34) Securities finance 87� 128� (32) Processing fees and other � 65� � 74� (12) Total fee revenue 1,246� 1,375� (9) � Net Interest Revenue: Interest revenue 1,103� 1,034� 7� Interest expense � 837� � 772� 8� Net interest revenue (1) 266� 262� 2� Provision for loan losses � -� � -� Net interest revenue after provision for loan losses 266� 262� 2� � Gain on sales of available-for-sale investment securities, net � 3� � 14� Total revenue 1,515� 1,651� (8) � Operating Expenses: Salaries and employee benefits 639� 684� (7) Information systems and communications 121� 129� (6) Transaction processing services 121� 134� (10) Occupancy 91� 95� (4) Other � 118� � 134� (12) Total operating expenses � 1,090� � 1,176� (7) Income before income tax expense 425� 475� (11) Income tax expense � 147� � 248� Net income $ 278� $ 227� 22� � Earnings Per Share: Basic $ .84� $ .69� 22� Diluted .83� .68� 22� � Average Shares Outstanding (in thousands): Basic 330,440� 330,804� Diluted 335,513� 335,879� � Consolidated Statement of Income prepared in accordance with accounting principles generally accepted in the United States. � (1) Net interest revenue on a fully taxable-equivalent basis was $275 million for the three months ended September 30, 2006 and June 30, 2006. STATE STREET CORPORATION Press Release Addendum � CONSOLIDATED STATEMENT OF CONDITION � � � � � � � � � � September 30, December 31, September 30, (Dollars in millions, except share information) 2006� � 2005� � 2005� � Assets Cash and due from banks $ 3,482� $ 2,684� $ 2,634� Interest-bearing deposits with banks 8,767� 11,275� 14,438� Securities purchased under resale agreements 13,910� 8,679� 12,474� Trading account assets 921� 764� 56� Investment securities available for sale 61,304� 54,979� 52,637� Investment securities held to maturity 4,645� 4,891� 5,040� Loans and leases (net of allowance of $18) 9,206� 6,464� 8,170� Premises and equipment 1,551� 1,453� 1,455� Accrued income receivable 1,544� 1,364� 1,215� Goodwill 1,370� 1,337� 1,346� Other intangible assets 458� 459� 451� Other assets � 5,152� � 3,619� � 4,087� Total assets $ 112,310� $ 97,968� $ 104,003� � Liabilities Deposits: Noninterest-bearing $ 8,042� $ 9,402� $ 9,787� Interest-bearing -- U.S. 2,185� 2,379� 2,230� Interest-bearing -- Non-U.S. � 53,225� � 47,865� � 51,437� Total deposits 63,452� 59,646� 63,454� � Securities sold under repurchase agreements 21,532� 20,895� 21,851� Federal funds purchased 8,040� 1,204� 1,668� Other short-term borrowings 2,658� 1,219� 1,618� Accrued taxes and other expenses 2,940� 2,632� 2,575� Other liabilities 4,053� 3,346� 4,294� Long-term debt � 2,620� � 2,659� � 2,439� Total liabilities 105,295� 91,601� 97,899� � Shareholders' Equity Preferred stock, no par: authorized 3,500,000; issued none Common stock, $1 par: authorized 500,000,000 shares; issued 337,126,000, 337,126,000 and 337,126,000 shares 337� 337� 337� Surplus 368� 266� 328� Retained earnings 6,791� 6,189� 6,003� Accumulated other comprehensive loss (113) (231) (144) Treasury stock (at cost 6,001,000, 3,501,000 and 9,080,000 shares) � (368) � (194) � (420) Total shareholders' equity � 7,015� � 6,367� � 6,104� Total liabilities and shareholders' equity $ 112,310� $ 97,968� $ 104,003� State Street Corporation announced today third-quarter earnings per share of $0.83, an increase of 11% from $0.75 earnings per share from continuing operations in the third quarter of 2005. The third-quarter 2006 results include a cumulative gain of $15 million, or $0.03 per share, in trading services revenue related to the Corporation's tax-exempt investment programs. The comparative 2005 results included a $16 million, or $0.03 per share gain from the final settlement of the 2003 sale of the Corporation's Private Asset Management business. Revenue of $1.5 billion in the third quarter of 2006 is up 9%, or $127 million, compared to $1.4 billion in the year-ago quarter. Total expenses in the third quarter of 2006 of $1.1 billion are up 8%, or $82 million, compared to $1.0 billion in the year-ago quarter. For the third quarter of 2006, return on shareholders' equity is 16.4%, compared to 15.9% from continuing operations in the third quarter of 2005. Ronald E. Logue, State Street's chairman and chief executive officer, said, "In the third quarter, we saw seasonal declines in securities finance and trading services revenue, down from the very strong second quarter. Our continuing efforts in managing expenses resulted in a significant decline in costs, partially offsetting the decline in revenue." Logue continued, "Compared to a strong quarter a year ago, the third-quarter results demonstrated the continuing growth in our servicing and management fee revenue, increasing 10% and 27%, respectively. These results were fueled by new wins, solid cross-selling to existing customers, as well as ongoing product innovation. We achieved modest positive operating leverage compared to the year-ago quarter. For the nine months revenues were up 16% and expenses increased 12%, also resulting in significant positive operating leverage." Looking forward, Logue concluded, "Through nine months we are performing above the high end of our ranges for revenue, earnings per share, and return on equity, all on an operating basis excluding the second-quarter tax charges. We expect that we will moderately exceed the high end of the ranges we established for the full year." THIRD-QUARTER RESULTS VS. YEAR-AGO QUARTER Servicing fees are up 10%, to $685 million from $620 million in last year's third quarter. The increase is attributable to new business from existing and new customers in 2006 and higher average equity market valuations. Total assets under custody are $11.3 trillion, up 15%, compared with $9.8 trillion in the year-ago quarter. Daily average values for the S&P 500 Index are up 5% from the third quarter of 2005; daily average values for the MSCI(R) EAFE Index(SM) are up 19%. The average values for the NASDAQ are down slightly, less than 1%. Investment management fees, generated by State Street Global Advisors, are $238 million, up 27% from $188 million a year ago. Management fees reflect continued new business, increased performance fees, and an increase in average month-end equity valuations. Total assets under management are $1.6 trillion, up 16%, compared to $1.4 trillion the previous year. Trading services revenue, which includes foreign exchange trading revenue and brokerage and other fees is $171 million for the quarter, down 3% from $176 million in an unusually strong quarter a year ago. Excluding the cumulative gain, trading services revenue would be down 11%. The decrease is driven by weaker brokerage volumes, as well as lower FX volatility. Securities finance revenue is $87 million in the quarter, up 18% compared to $74 million in the year-ago quarter, reflecting an increase in volume and new business. Processing fees and other revenue are down 16%, or $12 million, at $65 million, compared to $77 million a year ago, primarily due to lower customer activity. Net interest revenue on a fully taxable-equivalent basis is $275 million, an increase of $30 million, or 12% from $245 million a year ago. The increase in net interest revenue is due to a favorable mix in non-US deposits, an increase in non-U.S. rates, as well as growth in the balance sheet due to customer activity levels. Net interest margin increased to 1.22% from 1.10% a year ago. Expenses increased from $1,008 million to $1,090 million, up $82 million, or 8%. Salaries and benefits expenses are up 13% to $639 million, primarily attributable to additions to headcount, incentive compensation due to improved year-to-date performance, and increases in benefits. The increase in expenses also includes higher transaction processing services, up 9% to $121 million, due to higher volumes. Expenses for information systems & communications increased $4 million, or 3%, to $121 million. Occupancy expense decreased 5%, or $5 million, to $91 million. Other expenses are flat at $118 million. The effective tax rate for the quarter is 34.6% compared with 34.0% in the third quarter of last year. THIRD-QUARTER RESULTS VS. SECOND QUARTER Third-quarter net income per share of $0.83 compares to net income per share from continuing operations of $0.68 per share which includes $.25 per share for tax charges in the second quarter. Net income in the third quarter of $0.83 per share would compare to $0.93, excluding these charges. Total revenue in the third quarter of $1.5 billion is down $136 million, or 8% versus $1.7 billion in the second quarter. Total expenses are $1.1 billion, down 7%, or $86 million, versus $1.2 billion in the second quarter. For the third quarter of 2006, return on shareholders' equity is 16.4% compared to 19.2% in the second quarter, excluding the tax charges. Servicing fees are flat at $685 million due to slightly improved average market valuations and new business, offset by lower transaction volumes. Management fees are up 3% to $238 million principally due to performance fees, new business and slightly higher month-end equity valuations. Trading services revenue declined 34% to $171 million due to seasonal weakness in foreign exchange and brokerage. Excluding the cumulative gain, trading services revenue would have been down 40%. Securities finance revenue decreased 32%, from $128 million to $87 million, due to seasonally high volumes in the second quarter. Processing fees and other declined 12% from $74 million to $65 million due to lower customer activity. Net interest revenue on a fully taxable-equivalent basis was flat at $275 million, compared to the second quarter. All expense categories declined compared to the second quarter. Salaries and employee benefits expense total $639 million, a decline of $45 million, or 7%, from $684 million, attributable primarily to reductions in incentive compensation. Transaction processing services expense decreased $13 million, or 10%, to $121 million due to reduction in volumes. Information systems and communication expense was down 6%, or $8 million, to $121 million and occupancy expense was down 4%, or $4 million, to $91 million. Other expenses are down $16 million, or 12%, from $134 million to $118 million due to continuing emphasis on cost containment. ADDITIONAL INFORMATION All per share amounts represent diluted earnings per share. The newly issued FAS 158, Employers' Defined Benefit Pension and Other Postretirement Plans requires that we account for differences between plan assets and projected benefit obligations as of December 31, 2006, on our balance sheet. In the fourth quarter we expect to record approximately $160 million to $170 million as an after-tax reduction to accumulated other comprehensive income in order to comply with FAS 158. This range assumes relative stability of capital markets in the fourth quarter. INVESTOR CONFERENCE CALL State Street will webcast an investor conference call today, Tuesday, October 17, 2006, at 9:30 a.m. EDT, available at www.statestreet.com/stockholder. The conference call will also be available via telephone, at +1 719/457-2617 (confirmation code 8294545). Recorded replays of the conference call will be available on the web site, and by telephone at +1 402/220-4230, beginning at 2:00 PM today. This press release and additional financial information is available on State Street's website, at www.statestreet.com/stockholder, under "Financial Reports." State Street Corporation (NYSE: STT) is the world's leading specialist in providing institutional investors with investment servicing, investment management and investment research and trading. With $11.3 trillion in assets under custody and $1.6 trillion in assets under management, State Street operates in 26 countries and more than 100 geographic markets worldwide and employs 21,500 worldwide. For more information, visit State Street's web site at www.statestreet.com or call 877/639-7788 (NEWS STT) toll-free in the United States and Canada, or +1 202/266-3340 outside those countries. This news announcement contains forward-looking statements as defined by United States securities laws, including statements about the financial outlook and business environment. Those statements are based on current expectations and involve a number of risks and uncertainties, including those related to changes in interest rates, the value of global and regional financial markets, the extent of volatility in currency markets, the pace of cross-border investment activity, the pace at which State Street adds new clients or at which existing clients use additional services, State Street's business mix, State Street's success at integrating and converting acquisitions into its business, the pace of worldwide economic growth and rates of inflation, the dynamics of markets State Street serves, and consolidations among clients and competitors. Other important factors that could cause actual results to differ materially from those indicated by any forward-looking statements, are set forth in State Street's 2005 Annual Report on Form 10-K, particularly in Item 1A, "Risk Factors," and the Corporation's subsequent SEC filings which should be read before making any investment decision. The forward-looking statements contained in this press release speak only as of the date hereof, October 17, 2006, and the Corporation will not undertake efforts to revise those forward-looking statements to reflect events after this date. -0- *T Press Release Addendum Financial Highlights September 30, 2006 Quarters Ended % Change ----------------------------- ------------ (Dollars in millions, except per share September June September Q3 Q3 information or where 30, 30, 30, vs. vs. otherwise indicated) 2006 2006 2005 Q2 Q3 --------------------------- ---------- ------- ---------- ------ ----- Total Revenue $ 1,515 $1,651 $ 1,388 (8)% 9 % Total Expenses 1,090 1,176 1,008 (7) 8 Income Tax Expense 147 248 130 (41) 13 Income from Continuing Operations 278 227 250 22 11 Loss from Discontinued Operations - - (107) Net income 278 227 143 22 94 Diluted Earnings Per Share: From Continuing Operations $ .83 $ .68 $ .75 22 11 From Discontinued Operations - - (.32) Net Income .83 .68 .43 22 93 Closing Price Per Share of Common Stock $ 62.40 $58.09 $ 48.92 Cash Dividends Declared Per Share .20 .20 .18 Return on Equity from Continuing Operations 16.4 % 14.0 % 15.9 % Return on Equity 16.4 14.0 9.1 Assets Under Custody (AUC) (in trillions) $ 11.27 $10.86 $ 9.80 Assets Under Management (AUM) (in trillions) 1.63 1.53 1.41 *T -0- *T Nine Months Ended % Change ------------------------------ September September 2006 (Dollars in millions, except per share 30, 30, vs. information) 2006 2005 2005 ------------------------------------------------- -------------------- Total Revenue $4,689 $ 4,057 16 % Total Expenses 3,362 3,002 12 Income Tax Expense 540 359 50 Income from Continuing Operations 787 696 13 Income (Loss) from Discontinued Operations 10 (107) Net Income 797 589 Diluted Earnings Per Share: From Continuing Operations $ 2.35 $ 2.08 13 From Discontinued Operations .03 (.32) Net Income 2.38 1.76 Cash Dividends Declared Per Share $ .59 $ .53 11 Return on Equity from Continuing Operations 16.0 % 15.1 % Return on Equity 16.2 12.8 *T -0- *T STATE STREET CORPORATION Press Release Addendum SELECTED FINANCIAL INFORMATION Periods ended September 30, 2006 and September 30, 2005 Quarters Ended ------------------------------ September September 30, 30, (Dollars in millions, except per share information) 2006 2005 % Change ---------------------------------------------------------------------- Fee Revenue: Servicing fees $ 685 $ 620 10 % Management fees 238 188 27 Trading services 171 176 (3) Securities finance 87 74 18 Processing fees and other 65 77 (16) -------------------- Total fee revenue 1,246 1,135 10 Net Interest Revenue: Interest revenue 1,103 773 43 Interest expense 837 537 56 -------------------- Net interest revenue (1) 266 236 13 Provision for loan losses - - -------------------- Net interest revenue after provision for loan losses 266 236 13 Gain on sales of available-for-sale investment securities, net 3 1 Gain on the sale of the Private Asset Management business - 16 ------------------------------------------------------------ Total revenue 1,515 1,388 9 Operating Expenses: Salaries and employee benefits 639 566 13 Information systems and communications 121 117 3 Transaction processing services 121 111 9 Occupancy 91 96 (5) Other 118 118 - -------------------- Total operating expenses 1,090 1,008 8 -------------------- Income from continuing operations before income tax expense 425 380 12 Income tax expense from continuing operations 147 130 ------------------------------------------------------------ Income from continuing operations 278 250 11 (Loss) Income from discontinued operations before income tax expense - (165) Income tax (benefit) expense from discontinued operations - (58) ------------------------------------------------------------ (Loss) Income from discontinued operations - (107) -------------------- Net income $ 278 $ 143 ==================== Earnings Per Share From Continuing Operations: Basic $ .84 $ .76 11 Diluted .83 .75 11 Earnings Per Share From Discontinued Operations: Basic $ - $ (.33) Diluted - (.32) Earnings Per Share: Basic $ .84 $ .43 Diluted .83 .43 Average Shares Outstanding (in thousands): Basic 330,440 329,097 Diluted 335,513 334,103 Nine Months Ended ------------------------------- September September 30, 30, (Dollars in millions, except per share information) 2006 2005 % Change ---------------------------------------------------------------------- Fee Revenue: Servicing fees $ 2,025 $ 1,837 10 % Management fees 690 538 28 Trading services 659 512 29 Securities finance 296 257 15 Processing fees and other 211 231 (9) -------------------- Total fee revenue 3,881 3,375 15 Net Interest Revenue: Interest revenue 3,098 2,069 50 Interest expense 2,304 1,404 64 -------------------- Net interest revenue (1) 794 665 19 Provision for loan losses - - -------------------- Net interest revenue after provision for loan losses 794 665 19 Gain on sales of available-for-sale investment securities, net 14 1 Gain on the sale of the Private Asset Management business - 16 ----------------------------------------------------------- Total revenue 4,689 4,057 16 Operating Expenses: Salaries and employee benefits 1,958 1,642 19 Information systems and communications 382 364 5 Transaction processing services 375 331 13 Occupancy 279 302 (8) Other 368 363 1 -------------------- Total operating expenses 3,362 3,002 12 -------------------- Income from continuing operations before income tax expense 1,327 1,055 26 Income tax expense from continuing operations 540 359 ----------------------------------------------------------- Income from continuing operations 787 696 13 (Loss) Income from discontinued operations before income tax expense 16 (165) Income tax (benefit) expense from discontinued operations 6 (58) ----------------------------------------------------------- (Loss) Income from discontinued operations 10 (107) -------------------- Net income $ 797 $ 589 ==================== Earnings Per Share From Continuing Operations: Basic $ 2.38 $ 2.11 13 Diluted 2.35 2.08 13 Earnings Per Share From Discontinued Operations: Basic $ .03 $ (.33) Diluted .03 (.32) Earnings Per Share: Basic $ 2.41 $ 1.78 Diluted 2.38 1.76 Average Shares Outstanding (in thousands): Basic 331,326 330,251 Diluted 335,566 333,999 Consolidated Statement of Income prepared in accordance with accounting principles generally accepted in the United States. (1) Net interest revenue on a fully taxable-equivalent basis was $275 million and $245 million for the three months ended September 30, 2006 and 2005, respectively, and $827 million and $696 million for the nine months ended September 30, 2006 and 2005, respectively. *T -0- *T STATE STREET CORPORATION Press Release Addendum SELECTED FINANCIAL INFORMATION Quarters ended September 30, 2006 and June 30, 2006 Quarters Ended -------------------------------- September 30, June 30, (Dollars in millions, except per share 2006 2006 % Change information) ---------------------------------------------------------------------- Fee Revenue: Servicing fees $ 685 $ 683 - % Management fees 238 232 3 Trading services 171 258 (34) Securities finance 87 128 (32) Processing fees and other 65 74 (12) ------------- --------- Total fee revenue 1,246 1,375 (9) Net Interest Revenue: Interest revenue 1,103 1,034 7 Interest expense 837 772 8 ------------- --------- Net interest revenue (1) 266 262 2 Provision for loan losses - - ------------- --------- Net interest revenue after provision for loan losses 266 262 2 Gain on sales of available-for-sale investment securities, net 3 14 ------------- --------- Total revenue 1,515 1,651 (8) Operating Expenses: Salaries and employee benefits 639 684 (7) Information systems and communications 121 129 (6) Transaction processing services 121 134 (10) Occupancy 91 95 (4) Other 118 134 (12) ------------- --------- Total operating expenses 1,090 1,176 (7) ------------- --------- Income before income tax expense 425 475 (11) Income tax expense 147 248 ------------- --------- Net income $ 278 $ 227 22 ============= ========= Earnings Per Share: Basic $ .84 $ .69 22 Diluted .83 .68 22 Average Shares Outstanding (in thousands): Basic 330,440 330,804 Diluted 335,513 335,879 Consolidated Statement of Income prepared in accordance with accounting principles generally accepted in the United States. (1) Net interest revenue on a fully taxable-equivalent basis was $275 million for the three months ended September 30, 2006 and June 30, 2006. *T -0- *T STATE STREET CORPORATION Press Release Addendum CONSOLIDATED STATEMENT OF CONDITION ---------------------------------------------------------------------- September 30, December 31, September 30, (Dollars in millions, except share information) 2006 2005 2005 ---------------------------------------------------------------------- Assets Cash and due from banks $ 3,482 $ 2,684 $ 2,634 Interest-bearing deposits with banks 8,767 11,275 14,438 Securities purchased under resale agreements 13,910 8,679 12,474 Trading account assets 921 764 56 Investment securities available for sale 61,304 54,979 52,637 Investment securities held to maturity 4,645 4,891 5,040 Loans and leases (net of allowance of $18) 9,206 6,464 8,170 Premises and equipment 1,551 1,453 1,455 Accrued income receivable 1,544 1,364 1,215 Goodwill 1,370 1,337 1,346 Other intangible assets 458 459 451 Other assets 5,152 3,619 4,087 ------------- ------------ ------------- Total assets $ 112,310 $ 97,968 $ 104,003 ============= ============ ============= Liabilities Deposits: Noninterest-bearing $ 8,042 $ 9,402 $ 9,787 Interest-bearing -- U.S. 2,185 2,379 2,230 Interest-bearing -- Non-U.S. 53,225 47,865 51,437 ------------- ------------ ------------- Total deposits 63,452 59,646 63,454 Securities sold under repurchase agreements 21,532 20,895 21,851 Federal funds purchased 8,040 1,204 1,668 Other short-term borrowings 2,658 1,219 1,618 Accrued taxes and other expenses 2,940 2,632 2,575 Other liabilities 4,053 3,346 4,294 Long-term debt 2,620 2,659 2,439 ------------- ------------ ------------- Total liabilities 105,295 91,601 97,899 Shareholders' Equity Preferred stock, no par: authorized 3,500,000; issued none Common stock, $1 par: authorized 500,000,000 shares; issued 337,126,000, 337,126,000 and 337,126,000 shares 337 337 337 Surplus 368 266 328 Retained earnings 6,791 6,189 6,003 Accumulated other comprehensive loss (113) (231) (144) Treasury stock (at cost 6,001,000, 3,501,000 and 9,080,000 shares) (368) (194) (420) ------------------------------------------- ------------ ------------- Total shareholders' equity 7,015 6,367 6,104 ------------- ------------ ------------- Total liabilities and shareholders' equity $ 112,310 $ 97,968 $ 104,003 ============= ============ ============= *T