State Street Corporation today announced third-quarter 2009
earnings per common share of $1.04 on revenue of $2.236 billion
compared with $1.09 per share on revenue of $2.771 billion in the
third quarter of 2008. Expenses in the third quarter of 2009 are
$1.483 billion, compared with $1.925 billion in the third quarter
of 2008. For the third quarter of 2009, return on common
shareholders’ equity was 16.0%, up from 13.6% in the third quarter
of 2008.
Compared to the second quarter of 2009, third-quarter 2009
results improved from a loss of $(7.12) per share on revenue of
$2.122 billion. The second quarter of 2009 includes an after-tax
extraordinary loss of $(3.684) billion or $(7.91) per share related
to the effect of the consolidation of the State Street-administered
asset-backed commercial paper (ABCP) conduits onto the Company’s
balance sheet. Expenses in the second quarter of 2009 were $1.364
billion. For the second quarter of 2009, return on common
shareholders’ equity was 13.0% before the extraordinary loss.
In addition to presenting State Street’s financial results in
conformity with U.S. generally accepted accounting principles
(GAAP), management also presents results on an “operating basis” in
order to highlight comparable financial trends and other
characteristics with respect to State Street’s ongoing business
operations from period to period. A full reconciliation of
operating-basis results to GAAP results is included in the addendum
at the end of this press release. Also see “Additional
Information.”
Operating-basis results in the third quarter of 2009 of $1.05
per share exclude $(11) million in pre-tax merger and integration
costs associated with the Investors Financial Services Corp.
(“Investors Financial”) acquisition. Operating-basis results for
the third quarter of 2008 excluded a $350 million gain on the sale
of CitiStreet, $8 million of net interest revenue from acting as an
intermediary under the AMLF, a reduction of net interest revenue of
$(98) million to establish a reserve for the SILO transactions, a
charge of $(200) million for a reserve to address our estimated net
exposure on an indemnification obligation associated with
collateralized repurchase agreements with Lehman, and merger and
integration costs of $(30) million associated with the acquisition
of Investors Financial. Excluding the extraordinary loss,
operating-basis results for the second quarter of 2009 also exclude
$(106) million related to repayment of the U.S. Treasury’s TARP CPP
investment, and $(12) million in merger and integration costs
associated with the Investors Financial acquisition. Net interest
revenue on an operating basis for all periods is presented on a
fully taxable-equivalent basis.
The table below provides a summary of selected financial
information and key ratios for the indicated periods, presented on
an operating basis where noted. The tier 1 capital and tier 1
leverage ratios are capital ratios used regularly by bank
regulatory authorities to evaluate the Company’s capital status.
The tier 1 common ratio was used by the Federal Reserve in
connection with its Supervisory Capital Assessment Program, or
“SCAP.” The TCE and TCE/risk- weighted assets ratios are other
capital ratios management believes provide additional context for
understanding and assessing the Company’s capital status. See
“Additional Information” for a further description of these ratios
and the addendum at the end of this press release for
reconciliations applicable to the TCE ratios.
Q3 2009 Q2 2009
Increase/(Decrease) Q3 2008
Increase/(Decrease) Selected Financial
Information
and Key Ratios
(Dollars in millions) Total revenue(1) $ 2,267 $
2,153
$
114 5.3 % $ 2,536 $ (269 ) (10.6 %) Total expenses(1) 1,472 1,352
120 8.9 % 1,695 (223 ) (13.2 %) Total assets (2) 163,277 153,421
9,856 6.4 % 285,564 (122,287 ) (42.8 %) Unrealized loss on
investment
portfolio, after-tax(2)
(2,985 ) (4,747 ) 1,762 37.1 % (3,282 ) 297 9.0 % AUCM
(dollars in billions): Assets under custody and
Administration(2)(3)
$ 17,935 $ 16,394 $ 1,541 9.4 % $ 18,447 $ (512 ) (2.8 %) Assets
under management(2) 1,735 1,557 178 11.4 % 1,686 49 2.9 %
Earnings per common share(1) $ 1.05 $ 1.04 $ 0.01 1.0 % $ 1.24 $
(0.19 ) (15.3 %) Return on common equity(1) 16.2 % 17.0 % (80) bps
15.4 % 80 bps Tier 1 capital ratio(2) 15.6 % 14.5 % 110 bps 16.0 %
(40 ) bps Tier 1 leverage ratio(2) 8.2 % 7.3 % 90 bps 8.4 % (20)
bps Tier 1 common ratio(2) 13.6 % 12.6 % 100 bps 14.0 % (40) bps
TCE ratio(2) 5.7 % 5.0 % 70 bps 4.8 % 90 bps TCE/RWA ratio(2) 10.5
% 8.5 % 200 bps 9.6 % 90 bps (1) Presented on an operating
basis. (2) As of period end. (3) Includes assets under custody of
$13,260 billion, $12,337 billion and $14,045 billion, respectively.
Operating-basis earnings per common share in the third quarter
of 2009 are $1.05, down 15.3% from $1.24 per share in the third
quarter of 2008. Operating-basis revenue of $2.267 billion in the
third quarter of 2009 is down 10.6% from $2.536 billion in the
third quarter a year ago. Operating-basis expenses of $1.472
billion in the third quarter of 2009 are down 13.2% from $1.695
billion in the year-ago quarter. These third quarter 2009 revenue
and expense results represent 260 basis points of positive
operating leverage compared to the third quarter of 2008. For the
third quarter of 2009, operating-basis return on common
shareholders’ equity is 16.2%, up from 15.4% for the third quarter
of 2008.
Total assets are $163 billion at September 30, 2009, compared to
$153 billion at June 30, 2009. Excluding $22 billion in excess
deposits held at the Federal Reserve and other central banks at
September 30, 2009, compared with $20 billion at June 30, 2009, the
normalized balance sheet was $141 billion at September 30, 2009,
compared to a normalized balance sheet of $133 billion at June 30,
2009. Our regulatory capital ratios continue to be strong as of
September 30, 2009, with our tier 1 capital ratio at 15.6% and our
leverage ratio at 8.2%. In addition, our tier 1 common ratio is
13.6%, our TCE to risk-weighted assets ratio is 10.5%, and our TCE
ratio is 5.7%, well ahead of the pro forma ratio of 4.29% we
projected in February at our Investor and Analyst Forum due to
organic growth, the successful equity raise in May, and the
improvement in unrealized losses.
At September 30, 2009, the after-tax, unrealized mark-to-market
losses in the investment portfolio are $2.98 billion, down from
$4.75 billion after-tax at June 30, 2009 and down from $6.32
billion after-tax as of December 31, 2008.
Ronald E. Logue, State Street's chairman and chief executive
officer, said, "Although the economic environment appears to be
gradually recovering, the pace of the rebound is slow. Equity
markets have improved, providing some support to our servicing and
management fee revenue and as liquidity returns to the credit
markets, spreads have tightened, thus allowing further continued
declines in the unrealized loss in our investment portfolio. In
this environment we remain cautious and continue to build our
capital ratios, which today are among the strongest in our
industry.”
Logue continued, “Compared to the second quarter, servicing fees
and management fees both increased, reflecting equity market
improvement as well as new business. The increases in servicing and
management fee revenue, however, were more than offset by seasonal
weakness in other areas of fee revenue, most notably securities
finance, which was also negatively affected by spread compression,
and trading revenue. Our net interest margin improved to 247 basis
points, up 54 basis points from the second quarter, but declined
one basis point to 156 basis points excluding the impact of $279
million of discount accretion associated with the consolidation of
the ABCP conduits in the second quarter. The low interest-rate
environment is not favorable to the yield on our investment
portfolio.”
Logue concluded, “Our revenue performance this quarter, combined
with our continued focus on expense control, resulted in 260 basis
points of positive operating leverage compared to the third quarter
of 2008. We expected our second half of 2009 to be stronger than it
now appears to be. Given the slow pace of the recovery, our outlook
for 2009 has changed slightly: we now expect operating revenue to
decline about 16 percent from the record level of 2008 and
operating earnings per share to be between $4.13 and $4.17. We
expect operating return on equity to be between 14 and 17 percent
in line with our long-term outlook.”
THIRD-QUARTER 2009 RESULTS VS.
YEAR-AGO THIRD QUARTER
Servicing fees are down 14% to $833 million from $966 million in
last year’s third quarter. The decrease is attributable primarily
to the impact of declining markets. Total assets under custody and
administration are $17.935 trillion at September 30, 2009, down
2.8%, compared with $18.447 trillion at September 30, 2008. Daily
average values for the S&P 500 Index and the MSCI® EAFE IndexSM
are each down approximately 20% from the third quarter of 2008.
Investment management fees, generated by State Street Global
Advisors, are $219 million, down 16% from $261 million in the
year-ago quarter. The decline in management fees is attributable
primarily to the approximately 16% decrease in average month-end
equity valuations, as well as a change in the composition of assets
under management from active to passive strategies. Total assets
under management at September 30, 2009, are $1.735 trillion, up
2.9% compared to $1.686 trillion at September 30, 2008.
Trading services revenue, which includes foreign exchange
trading revenue and brokerage and other fees, is $269 million for
the third quarter of 2009, down 26% from $363 million in the third
quarter a year-ago. A 41% decrease in foreign exchange revenue is
due to lower volatility as well as lower volumes. Brokerage and
other fees increased 11% due primarily to increases in electronic
trading.
Securities finance revenue is $105 million in the quarter, down
57% from $246 million in the year-ago third quarter due primarily
to compressed spreads as well as lower volumes.
Processing fees and other is $45 million, down 29% from $63
million in the third quarter of 2008. The decline is primarily due
to the consolidation of the ABCP conduits onto our balance sheet in
May 2009. As a result of the consolidation, the fees formerly
earned from conduit activities are reported as net interest
revenue.
Net interest revenue on an operating basis is $754 million, an
increase of 18% from $640 million in the year-ago third quarter.
The increase is due to the $279 million of discount accretion on
securities in the investment portfolio recorded following the
consolidation of the ABCP conduits. This increase is offset
partially by lower rates negatively affecting the yield on
floating-rate assets, and both lower volumes and spreads on
customer deposits. Net interest margin of 247 basis points
increased 25 basis points in the third quarter, compared to 222
basis points in the third quarter of 2008; excluding discount
accretion, the net interest margin would have been 156 basis
points.
In the quarter, due to the improving markets, we recorded $42
million in net gains related to investment securities—$141 million
in gains from sales of securities, partially offset by $99 million
in other-than-temporary impairment related to credit. In addition,
we recorded a $16 million provision for loan losses.
Operating-basis expenses decreased to $1.472 billion, down 13%
from $1.695 billion in the year-ago quarter, primarily as a result
of a 20% reduction in salaries and benefits expense due to the
effect of a reduction in force as well as a lower level of
incentive compensation.
The decrease in total expenses also includes lower transaction
processing services, down 10% to $148 million from $165 million in
the year-ago quarter, due to lower volumes in the investment
servicing business. Other expenses were down from $241 million to
$222 million due primarily to lower professional fees and lower
securities processing costs.
The effective tax rate in the third quarter of 2009 is 30.0%,
down from 43.7% on a GAAP basis and from 34.0% on an operating
basis in the third quarter of 2008. The decrease in the rate is due
to our decision in the first quarter to reinvest earnings in
certain of our non-U.S. subsidiaries overseas as well as lower
earnings from jurisdictions with higher tax rates. The tax rate is
expected to be between 29% and 30% for full-year
2009.
THIRD-QUARTER 2009 RESULTS VS.
SECOND QUARTER 2009
The following information is presented on an operating basis.
Earnings per common share in the third quarter of 2009 are $1.05,
an increase of 1.0% compared with the second quarter of 2009. Total
revenue in the third quarter is $2.267 billion, up 5.3% versus
$2.153 billion in the second quarter of 2009. Total expenses for
the third quarter of 2009 are $1.472 billion, up 8.9% compared to
$1.352 billion in the second quarter of 2009. In the second quarter
of 2009, to execute our TCE improvement plan, we had not accrued
for performance-based incentive compensation; however, in the third
quarter of 2009 we accrued about $100 million for this benefit.
Return on common shareholders’ equity of 16.2% in the third quarter
compares with 17.0% in the second quarter.
The table below provides the components of operating-basis
revenue:
Operating-Basis Revenue
Increase/(Decrease) (Dollars in millions)
Q3 2009
Q2 2009 $ % Servicing fees $ 833 $ 795
$ 38 4.8 % Investment management fees 219 193 26 13.5 Trading
services revenue 269 310 (41 ) (13.2 ) Securities finance revenue
105 201 (96 ) (47.8 ) Processing fees and other revenue 45 17 28
164.7 Net interest revenue, fully-taxable equivalent basis(1) 754
611 143 23.4 Gains related to investment securities, net 42
26 16 61.5
Total
Operating-Basis Revenue $ 2,267 $
2,153 $ 114 5.3 %
(1) Both amounts include a $31 million tax-equivalent
adjustment, which increased GAAP-basis net interest revenue of $723
million and $580 million, respectively, for the periods.
Servicing fees are $833 million, up 5% from $795 million in the
second quarter due primarily to the approximately 14% increase in
daily average equity valuations, as well as new business.
Management fees are $219 million, up 13% from $193 million
primarily due to the approximately 14% increase in the average
month-end equity valuations and net new business. Trading services
revenue is $269 million, down 13% from $310 million. Securities
finance revenue is $105 million, down 48% from the prior quarter
primarily due to compressed spreads. Processing fees and other
revenue increased from $17 million to $45 million. Net interest
revenue on a fully taxable-equivalent basis is $754 million, up 23%
from $611 million, due primarily to the higher level of discount
accretion ($279 million versus $112 million in the second quarter),
partially offset by the impact of the decline in Libor rates on the
investment portfolio.
The table below provides the components of operating-basis
expenses:
Operating-Basis Expenses
Increase/(Decrease) (Dollars in millions)
Q3 2009
Q2 2009 $ % Salaries and employee
benefits $ 819 $ 696 $ 123 17.7 Information systems and
communications 165 167 (2 ) (1.2 ) Transaction processing services
148 146 2 1.4 Occupancy 118 121 (3 ) (2.5 ) Other 222
222 -- --
Total Operating-Basis
Expenses $ 1,472 $ 1,352
$ 120 8.9 %
Salaries and employee benefits expense increased 18% to $819
million from $696 million primarily due to a $100 million accrual
for performance-based incentive compensation in the third quarter.
Expenses on all other lines were approximately flat on a
quarter-to-quarter basis.
ADDITIONAL INFORMATION
All per share amounts represent fully diluted earnings per
common share. Return on common shareholders’ equity is determined
by dividing annualized net income available to common shareholders
by average common shareholders’ equity for the period. Positive
operating leverage is defined as the excess rate of growth of total
revenue over the rate of growth of total expenses, each determined
on an operating basis.
This press release includes financial information presented on a
GAAP basis as well as on an operating basis. Management measures
and compares certain financial information on an operating basis,
as it believes that this presentation supports meaningful
comparisons from period to period and the analysis of comparable
financial trends with respect to State Street’s normal ongoing
business operations. Management believes that operating-basis
financial information, which reports revenue from non-taxable
sources on a fully taxable-equivalent basis and excludes the impact
of revenue and expenses outside of the normal course of business,
facilitates an investor’s understanding and analysis of State
Street’s underlying financial performance and trends in addition to
financial information prepared in accordance with GAAP. Non-GAAP
financial measures should be considered in addition to, not as a
substitute for or superior to, financial measures determined in
accordance with GAAP. A full reconciliation of operating-basis
results to GAAP results is included in the addendum at the end of
this press release.
Management believes that the use of other non-GAAP financial
measures in the calculation of identified capital ratios is useful
to understanding State Street’s capital position and of interest to
investors. Below is a description of, and other information with
respect to, the capital ratios referenced in this press
release.
- The tier 1 risk-based
capital, or tier 1 capital, and tier 1 leverage ratios, as
applicable, are each calculated in accordance with applicable bank
regulatory requirements and, as permitted, exclude the impact of
commercial paper purchased under the Federal Reserve Bank of
Boston’s AMLF.
- The tier 1 risk-based common,
or tier 1 common, ratio is calculated by dividing (a) tier 1
capital less non-common elements including qualifying perpetual
preferred stock, qualifying minority interest in subsidiaries and
qualifying trust preferred securities, by (b) risk-weighted assets,
which assets are calculated in accordance with applicable bank
regulatory requirements. The tier 1 common ratio is not required by
GAAP or on a recurring basis by bank regulations. However, this
ratio was used by the Federal Reserve in connection with its stress
test administered to the 19 largest U.S. bank holding companies
under the SCAP, the results of which were announced on May 7, 2009.
Although we understand that the Federal Reserve does not intend to
prospectively require calculation of the tier 1 common ratio, due
to the recent timing of the SCAP, management is currently
monitoring this ratio, along with the other capital ratios
described in this press release, in evaluating State Street’s
capital levels and believes that, at this time, the ratio may be of
interest to investors.
Reconciliations with respect to unaudited tier 1 common capital
as of September 30, 2009, June 30, 2009 and September 30, 2008 are
provided in the addendum at the end of this press release.
- The ratio of tangible common
equity to adjusted tangible assets, or TCE ratio, is calculated
by dividing total common shareholders’ equity by consolidated total
assets, after reducing both amounts by goodwill and other
intangible assets net of related deferred taxes. Total assets
reflected in the TCE ratio also exclude commercial paper purchased
under the AMLF and cash balances on deposit at the Federal Reserve
Bank and other central banks in excess of required reserves. The
TCE ratio is not required by GAAP or by bank regulations, but is a
metric used by management to evaluate the adequacy of State
Street’s capital levels. Since there is no authoritative
requirement to calculate the TCE ratio, our TCE ratio is not
necessarily comparable to similar capital measures disclosed or
used by other companies in the financial services industry.
Tangible common equity and adjusted tangible assets are non-GAAP
financial measures and should be considered in addition to, not as
a substitute for or superior to, financial measures determined in
accordance with GAAP. Reconciliations with respect to the
calculation of the unaudited TCE ratio as of September 30, 2009,
June 30, 2009 and September 30, 2008 are provided in the addendum
at the end of this press release.
- The ratio of tangible common
equity to risk-weighted assets, or TCE/RWA ratio, is calculated
by dividing total common shareholders’ equity (reduced by goodwill
and other intangible assets net of related deferred taxes) by
risk-weighted assets (determined in accordance with applicable bank
regulatory requirements). As permitted by bank regulations,
risk-weighted assets exclude commercial paper purchased under the
AMLF. The TCE/RWA ratio is not required by GAAP or by bank
regulations, but is a metric used by management to evaluate the
adequacy of State Street’s capital levels. Since there is no
authoritative requirement to calculate the TCE/RWA ratio, our
TCE/RWA ratio is not necessarily comparable to similar capital
measures disclosed or used by other companies in the financial
services industry. Tangible common equity is a non-GAAP financial
measure and should be considered in addition to, not as a
substitute for or superior to, financial measures determined in
accordance with GAAP. Reconciliations with respect to the
calculation of the unaudited TCE/RWA ratio as of September 30,
2009, June 30, 2009 and September 30, 2008 are included in the
addendum at the end of this press release
INVESTOR CONFERENCE
CALL
State Street will webcast an investor conference call today,
Tuesday, October 20, 2009, at 9:30 a.m. EDT, available at
www.statestreet.com/stockholder. The conference call will also be
available via telephone, at +1 706/679-5594 or +1 888/391-4233
(Conference ID #13444580). Recorded replays of the conference call
will be available on the web site, and by telephone at +1
706/645-9291 or +1 800/642-1687 (Conference ID#13444580) ,
beginning approximately two hours after the call’s completion. The
telephone replay will be available for two weeks following the
conference call. This press release, presentation materials
referred to on the conference call, and additional financial
information are available on State Street’s website, at
www.statestreet.com/stockholder under “Investor Information--Latest
News, Annual Reports and Financial Trends—Financial Trends,” and
“Investor Events and Presentations.”
State Street Corporation (NYSE: STT) is the world's leading
provider of financial services to institutional investors including
investment servicing, investment management and investment research
and trading. With $17.935 trillion in assets under custody and
administration and $1.735 trillion in assets under management at
September 30, 2009, State Street operates in 27 countries and more
than 100 geographic markets and employs 27,130 worldwide. For more
information, visit State Street’s web site at www.statestreet.com
or call +1 877/639-7788 [NEWS STT] toll-free in the United States
and Canada, or +1 678/999-4577 outside those countries.
FORWARD-LOOKING
STATEMENTS
This news announcement contains forward-looking statements as
defined by United States securities laws, including statements
about our goals and expectations regarding our business, financial
condition, results of operations and strategies, the financial and
market outlook, governmental and regulatory initiatives and
developments, and the business environment. These statements are
not guarantees of future performance, are inherently uncertain, are
based on current assumptions that are difficult to predict and
involve a number of risks and uncertainties. Therefore, actual
outcomes and results may differ materially from what is expressed
in those statements, and those statements should not be relied upon
as representing our expectations or beliefs as of any date
subsequent to the date of this release.
Important factors that may affect future results and outcomes
include, but are not limited to:
- global financial market
disruptions and the current worldwide economic recession, and
monetary and other governmental actions designed to address such
disruptions and recession in the U.S. and internationally;
- increases in the potential
volatility of our net interest revenue, changes in the composition
of the assets on our consolidated balance sheet and the possibility
that we may be required to change the manner in which we fund those
assets, principally all as a result of the May 15, 2009
consolidation for financial reporting purposes of the ABCP conduits
that we administer;
- the financial strength and
continuing viability of the counterparties with which we or our
customers do business and with which we have investment, credit or
financial exposure;
- the liquidity of the U.S. and
international securities markets, particularly the markets for
fixed- income securities, and the liquidity requirements of our
customers;
- the credit quality, credit
agency ratings, and fair values of the securities in our investment
securities portfolio, a deterioration or downgrade of which could
lead to other-than-temporary impairment of the respective
securities and the recognition of an impairment loss;
- the maintenance of credit agency
ratings for our debt obligations as well as the level of
credibility of credit agency ratings;
- the possibility of our customers
incurring substantial losses in investment pools where we act as
agent, and the possibility of further general reductions in the
valuation of assets;
- our ability to attract deposits
and other low-cost, short-term funding;
- potential changes to the
competitive environment, including changes due to the effects of
consolidation, extensive and changing government regulation and
perceptions of State Street as a suitable service provider or
counterparty;
- the level and volatility of
interest rates and the performance and volatility of securities,
credit, currency and other markets in the U.S. and
internationally;
- our ability to measure the fair
value of the investment securities on our consolidated balance
sheet;
- the results of litigation,
government investigations and similar disputes and, in particular,
the effect of current or potential proceedings concerning State
Street Global Advisors’, or SSgA’s, active fixed-income strategies
and other investment products, including the potential for monetary
damages and negative consequences for our business and our
reputation arising from the previously reported “Wells” notice we
received from the SEC;
- the enactment of legislation and
changes in regulation and enforcement that impact us and our
customers;
- adverse publicity or other
reputational harm;
- our ability to pursue
acquisitions, strategic alliances and divestures, finance future
business acquisitions and obtain regulatory approvals and consents
for acquisitions;
- the performance and demand for
the products and services we offer, including the level and timing
of withdrawals from our collective investment products;
- our ability to continue to grow
revenue, attract highly skilled people, control expenses and
attract the capital necessary to achieve our business goals and
comply with regulatory requirements;
- our ability to control operating
risks, information technology systems risks and outsourcing risks,
the possibility of errors in the quantitative models we use to
manage our business and the possibility that our controls will fail
or be circumvented;
- the potential for new products
and services to impose additional costs on us and expose us to
increased operational risk, and our ability to protect our
intellectual property rights;
- changes in government regulation
or new legislation, which may increase our costs, expose us to risk
related to compliance or impact our customers;
- changes in accounting standards
and practices; and
- changes in tax legislation and
in the interpretation of existing tax laws by U.S. and non-U.S. tax
authorities that impact the amount of taxes due.
Other important factors that could cause actual results to
differ materially from those indicated by any forward-looking
statements are set forth in our 2008 Annual Report on Form 10-K,
our Current Report on Form 8-K dated May 18, 2009, and our
subsequent SEC filings. We encourage investors to read these
filings, particularly the sections on Risk Factors, for additional
information with respect to any forward-looking statements and
prior to making any investment decision. The forward-looking
statements contained in this press release speak only as of the
date hereof, October 20, 2009, and we do not undertake efforts to
revise those forward-looking statements to reflect events after
this date.
STATE STREET CORPORATION Earnings Press Release
Addendum Consolidated Financial Highlights
September 30, 2009 Quarters Ended % Change Q3
2009 Q3 2009 (Dollars in millions, except per share amounts
September 30, June 30, September 30, vs. vs. or where
otherwise noted)
2009 2009 2008 Q2 2009
Q3 2008 Revenue: Fee revenue
$ 1,471 $
1,516 $ 1,899 Net interest revenue
723 580 525 Net gains
from sales of available-for-sale securities
141 90 26 Losses
from other-than-temporary impairment related to credit
(99)
(64) (29) Total Revenue
2,236 2,122 2,771 5 % (19) %
Provision for Loan Losses
16 14 - Total Expenses: Expenses
from operations
1,472 1,352 1,895 9 (22) Merger and
integration costs
11 12 30 (8) (63) Net Income Before
Extraordinary Loss
516 502 477 3 8 Extraordinary Loss, Net
of Tax
- (3,684) - Net Income (Loss)
516 (3,182) 477
(116) 8 Net Income Before Extraordinary Loss Available to
Common Shareholders
516 370 477 39 8 Net Income (Loss)
Available to Common Shareholders
516 (3,314) 477 (116) 8
Diluted Earnings Per Common Share Before Extraordinary Loss
$ 1.04 $ .79 $ 1.09 32 (5) Diluted Earnings (Loss)
Per Common Share
1.04 (7.12) 1.09 (115) (5) Average
Diluted Common Shares Outstanding (in thousands)
498,290
465,814 435,030 Cash Dividends Declared Per Common Share
$ .01 $ .01 $ .24 Closing Price Per Share of Common
Stock (at quarter end)
52.60 47.20 56.88 Ratios:
Return on common equity before extraordinary loss
16.0
%
13.0
%
13.6
%
Net interest margin, fully taxable-equivalent basis
2.47
1.93 1.83 Tier 1 risk-based capital
15.6 14.5 16.0 Total
risk-based capital
16.8 15.9 17.2 Tier 1 leverage
8.2
7.3 8.4 Tier 1 common to risk-weighted assets (2)
13.6 12.6
14.0 Tangible common equity to tangible assets (2)
5.7 5.0
4.8 Tangible common equity to risk-weighted assets (2)
10.5
8.5 9.6 At Quarter End: Assets Under Custody and
Administration(1) (AUA) (in trillions)
$ 17.94 $
16.39 $ 18.45 Assets Under Management (AUM) (in trillions)
1.74 1.56 1.69 (1) Includes assets under custody of $13.26
trillion, $12.34 trillion, and $14.05 trillion, respectively. (2)
Refer to accompanying reconciliation for additional information.
Nine Months Ended % Change 2009
September
30, September 30, vs. (Dollars in millions, except per share
amounts)
2009 2008 2008 Revenue: Fee revenue
$ 4,409 $ 5,866 Net interest revenue
1,867
1,807 Net gains from sales of available-for-sale securities
260 41 Losses from other-than-temporary impairment related
to credit
(176) (44) Total Revenue
6,360 8,020 (21)
%
Provision for Loan Losses
114 - Total Expenses: Expenses
from operations
4,111 5,452 (25) Merger and integration
costs
40 88 (55) Net Income Before Extraordinary Loss
1,494 1,555 (4) Extraordinary Loss, Net of Tax
(3,684) - Net Income (Loss)
(2,190) 1,555 (241)
Net Income Before Extraordinary Loss Available to Common
Shareholders
1,331 1,555 (14) Net Income (Loss) Available to
Common Shareholders
(2,353) 1,555 (251) Diluted
Earnings Per Common Share Before Extraordinary Loss
$
2.86 $ 3.78 (24) Diluted Earnings (Loss) Per Common Share
(5.05) 3.78 (234) Average Diluted Common Shares
Outstanding (in thousands):
466,234 411,204 Cash
Dividends Declared Per Common Share
$ .03 $ .71 (96)
Return on Common Equity Before Extraordinary Loss
15.0
%
16.8
%
Net interest margin, fully taxable-equivalent basis
2.14
2.12
STATE STREET CORPORATION Earnings Press Release
Addendum
SELECTED CONSOLIDATED FINANCIAL INFORMATION Quarters and
Nine Months Ended September 30, 2009 and September 30, 2008
Quarters Ended Nine Months Ended
September 30,
September 30,
September 30, September 30, (Dollars in
millions, except per share amounts)
2009 2008 %
Change
2009 2008 % Change
Fee Revenue:
Servicing fees
$ 833 $ 966 (14) %
$
2,394 $ 2,903 (18) % Management fees
219 261 (16)
593 819 (28) Trading services
269 363 (26)
824
1,049 (21) Securities finance
105 246 (57)
487 901
(46) Processing fees and other
45 63 (29)
111 194 (43) Total fee revenue
1,471
1,899 (23)
4,409 5,866 (25)
Net Interest
Revenue: Interest revenue
898 1,027 (13)
2,409
3,452 (30) Interest expense
175 502 (65)
542 1,645 (67) Net interest revenue (1)
723 525 38
1,867 1,807 3
Gains (Losses)
related to investment securities, net: Net gains from sales of
available-for-sale securities
141 26
260 41 Losses
from other-than-temporary impairment
(828) (29)
(1,008) (44) Losses not related to credit
729
-
832 - Gains (Losses) related to
investment securities, net
42 (3)
84 (3) Gain
from sale of CitiStreet interest, net of exit and other associated
costs - 350 - 350 Total revenue
2,236 2,771 (19.3)
6,360 8,020 (20.7)
Provision for loan losses
16 -
114 -
Expenses: Salaries and employee benefits
819 1,022
(20)
2,246 3,144 (29) Information systems and communications
165 151 9
493 470 5 Transaction processing services
148 165 (10)
425 499 (15) Occupancy
118 116 2
360 341 6 Merger and integration costs
11 30 (63)
40 88 (55) Other
222 441 (50)
587 998 (41) Total expenses
1,483
1,925 (23.0)
4,151 5,540 (25.1) Income
before income tax expense and extraordinary loss
737 846
(13)
2,095 2,480 (16) Income tax expense
221
369
601 925 Income before extraordinary
loss
516 477 8
1,494 1,555 (4) Extraordinary loss,
net of tax
- -
(3,684) -
Net income (loss) $ 516 $ 477 8
$
(2,190) $ 1,555 (241)
Adjustments to net income
(loss): Prepayment of preferred stock discount
$
- $ -
$ (106) $ - Dividend on
preferred stock
- -
(46) - Accretion of preferred
stock discount
- -
(11) -
- -
(163) -
Net income
before extraordinary loss available to common
shareholders $ 516 $ 477 8
$ 1,331
$ 1,555 (14)
Net income (loss) available to common
shareholders $ 516 $ 477 8
$
(2,353) $ 1,555 (251)
Earnings Per Common Share
Before Extraordinary Loss: Basic(2)
$ 1.05 $ 1.10
(5)
$ 2.89 $ 3.81 (24) Diluted
1.04 1.09 (5)
2.86 3.78 (24)
Earnings (Loss) Per Common
Share: Basic (3)
$ 1.05 $ 1.10 (5)
$
(5.06) $ 3.81 (233) Diluted
1.04 1.09 (5)
(5.05) 3.78 (234)
Average Common Shares
Outstanding (in thousands): Basic
493,453 430,872
462,900 407,186 Diluted
498,290 435,030
466,234 411,204 Selected consolidated financial information
presented above was prepared in accordance with accounting
principles generally accepted in the United States. (1) Net
interest revenue on a fully taxable-equivalent basis was $754
million and $550 million for the quarters ended September 30, 2009
and 2008, respectively, and $1.96 billion and $1.88 billion for the
nine months ended September 30, 2009 and 2008, respectively. These
amounts include taxable-equivalent adjustments of $31 million and
$25 million for the quarters ended September 30, 2009 and 2008,
respectively, and $94 million and $76 million for the nine months
ended September 30, 2009 and 2008 respectively. (2) Basic earnings
per common share before extraordinary loss on distributed earnings
were $.01 and $.24 for the quarters ended September 30, 2009 and
2008, respectively, and $.26 and $.70 for the nine months ended
September 30, 2009 and 2008, respectively. Basic earnings per
common share before extraordinary loss on undistributed earnings
were $1.04 and $.86 for the quarters ended September 30, 2009 and
2008, respectively, and $2.63 and $3.11 for the nine months ended
September 30, 2009 and 2008, respectively. (3) Basic earnings per
common share on distributed earnings were $.01 and $.24 for the
quarters ended September 30, 2009 and 2008, respectively, and $.26
and $.70 for the nine months ended September 30, 2009 and 2008,
respectively. Basic earnings per common share on undistributed
earnings were $1.04 and $.86 for the quarters ended September 30,
2009 and 2008, respectively, and $(5.32) and $3.11 for the nine
months ended September 30, 2009 and 2008, respectively.
STATE
STREET CORPORATION Earnings Press Release Addendum
SELECTED CONSOLIDATED FINANCIAL
INFORMATION Quarters Ended September 30, 2009 and June 30,
2009 Quarters Ended
September 30, June 30,
(Dollars in millions, except per share amounts)
2009
2009 % Change
Fee Revenue: Servicing
fees
$ 833 $ 795 5 % Management fees
219 193
13 Trading services
269 310 (13) Securities finance
105 201 (48) Processing fees and other
45
17 165 Total fee revenue
1,471 1,516 (3)
Net Interest Revenue: Interest revenue
898 773 16
Interest expense
175 193 (9) Net interest
revenue (1)
723 580 25
Gains (Losses) related to
investment securities, net: Net gains from sales of
available-for-sale securities
141 90 Losses from
other-than-temporary impairment
(828) (167) Losses not
related to credit
729 103 Gains (Losses)
related to investment securities, net
42 26 Total
revenue
2,236 2,122 5.4 Provision for loan losses
16 14
Expenses: Salaries and employee benefits
819 696 18 Information systems and communications
165
167 (1) Transaction processing services
148 146 1 Occupancy
118 121 (2) Merger and integration costs
11 12 (8)
Other
222 222 - Total expenses
1,483 1,364 8.7 Income before income tax expense and
extraordinary loss
737 744 (1) Income tax expense
221 242 Income before extraordinary loss
516
502 3 Extraordinary loss, net of tax
- (3,684)
Net income (loss) $ 516 $ (3,182) (116)
Adjustments to net income (loss): Prepayment of preferred
stock discount
$ - $ (106) Dividend on preferred
stock
- (21) Accretion of preferred stock discount
- (5)
- (132)
Net income
before extraordinary loss available to common
shareholders $ 516 $ 370 39
Net income
(loss) available to common shareholders $ 516 $
(3,314) (116)
Earnings Per Common Share Before
Extraordinary Loss: Basic (2)
$ 1.05 $ .80 31
Diluted
1.04 .79 32
Earnings (Loss) Per Common
Share: Basic (3)
$ 1.05 $ (7.16) (115) Diluted
1.04 (7.12) (115)
Average Common Shares
Outstanding (in thousands): Basic
493,453 462,399
Diluted
498,290 465,814 Selected consolidated financial
Information presented above was prepared in accordance with
accounting principles generally accepted in the United States.
(1) Net interest revenue on a fully
taxable-equivalent basis was $754 million and $611 million for the
quarters ended September 30, 2009 and June 30, 2009, respectively.
These amounts include taxable-equivalent adjustments of $31 million
for each of the quarters ended September 30, 2009 and June 30,
2009, respectively. (2) Basic earnings per common share before
extraordinary loss on distributed earnings were $.01 and $.01 for
the quarters ended September 30, 2009 and June 30, 2009,
respectively, and on undistributed earnings were $1.04 and $.79 for
the quarters ended September 30, 2009 and June 30, 2009. (3) Basic
earnings per common share on distributed earnings were $.01 and
$.01 for the quarters ended September 30, 2009 and June 30, 2009,
respectively, and on undistributed earnings were $1.04 and $(7.17)
for the quarters ended September 30, 2009 and June 30, 2009,
respectively.
STATE STREET CORPORATION Earnings Press
Release Addendum SELECTED CONSOLIDATED
OPERATING-BASIS FINANCIAL INFORMATION Quarters and Nine
Months Ended September 30, 2009 and September 30, 2008
Quarters Ended (1) Nine Months Ended (1)
September 30,
September 30,
September 30, September 30, (Dollars in
millions, except per share amounts)
2009 2008 %
Change
2009 2008 % Change
Fee Revenue:
Servicing fees
$ 833 $ 966 (14) %
$
2,394 $ 2,903 (18) % Management fees
219 261 (16)
593 819 (28) Trading services
269 363 (26)
824
1,049 (21) Securities finance
105 246 (57)
487 901
(46) Processing fees and other
45 63 (29)
111 194 (43) Total fee revenue
1,471
1,899 (23)
4,409 5,866 (25)
Net Interest
Revenue: Interest revenue, operating basis
929 1,105
(16)
2,479 3,581 (31) Interest expense
175
465 (62)
525 1,608 (67) Net interest
revenue, operating basis
754 640 18
1,954 1,973 (1)
Gains (Losses) related to investment securities, net
42 (3)
84 (3) Total revenue,
operating basis (2)
2,267 2,536 (10.6)
6,447 7,836
(17.7) Provision for loan losses
16 -
114 -
Expenses: Salaries and employee benefits
819
1,022 (20)
2,246 3,144 (29) Information systems and
communications
165 151 9
493 470 5 Transaction
processing services
148 165 (10)
425 499 (15)
Occupancy
118 116 2
360 341 6 Other
222
241 (8)
587 798 (26) Total expenses,
operating basis (2)
1,472 1,695 (13.2)
4,111 5,252 (21.7) Income before income tax expense,
operating basis
779 841 (7)
2,222 2,584 (14) Income
tax expense, operating basis
225 278
614 853
Tax-equivalent adjustment
31 25
94 76
Net income, operating basis $
523 $ 538 (3)
$ 1,514 $ 1,655 (9)
Net income
available to common shareholders, operating basis $
523 $ 538 (3)
$ 1,457 $ 1,655 (12)
Diluted earnings per common share, operating basis
$ 1.05 $ 1.24 (15)
$ 3.13 $ 4.03 (22)
Average diluted common shares outstanding (in
thousands) 498,290 435,030
466,234 411,204
Return on common equity, operating basis 16.2
% 15.4 %
16.3 % 17.8 % (1) Refer to the
accompanying reconciliation of reported results to operating-basis
results. (2) For the quarter ended September 30, 2009, positive
operating leverage in the year-over-year comparison was 260 basis
points, based on a decline in total operating-basis revenue of
10.6% and a decline in total operating-basis expenses of 13.2%. For
the nine months ended September 30, 2009, positive operating
leverage in the year-over-year comparison was 400 basis points,
based on a decline in total operating-basis revenue of 17.7% and a
decline in total operating-basis expenses of 21.7%
STATE STREET
CORPORATION Earnings Press Release Addendum
SELECTED CONSOLIDATED OPERATING-BASIS FINANCIAL INFORMATION
Quarters Ended September 30, 2009 and June 30, 2009
Quarters Ended (1)
September 30, June 30, (Dollars in
millions, except per share amounts)
2009 2009
% Change
Fee Revenue: Servicing fees
$
833 $ 795 5 % Management fees
219 193 13 Trading
services
269 310 (13) Securities finance
105 201 (48)
Processing fees and other
45 17 165 Total fee
revenue
1,471 1,516 (3)
Net Interest Revenue:
Interest revenue, operating basis
929 804 16 Interest
expense
175 193 (9) Net interest revenue,
operating basis
754 611 23 Gains (Losses) related to
investment securities, net
42 26 Total
revenue, operating basis (2)
2,267 2,153 5.3
Provision for loan losses
16 14
Expenses:
Salaries and employee benefits
819 696 18 Information
systems and communications
165 167 (1) Transaction
processing services
148 146 1 Occupancy
118 121 (2)
Other
222 222 - Total expenses, operating
basis (2)
1,472 1,352 8.9 Income before income
tax expense, operating basis
779 787 (1) Income tax expense
225 247 Tax-equivalent adjustment
31 31
Net income, operating basis $ 523 $ 509 3
Net income available to common
shareholders, operating basis $ 523 $ 483 8
Diluted earnings per common share, operating
basis $ 1.05 $ 1.04 1
Average diluted
common shares outstanding (in thousands) 498,290 465,814
Return on common equity, operating basis 16.2
% 17.0 % (1) Refer to the accompanying reconciliation of
reported results to operating-basis results. (2) For the quarter
ended September 30, 2009, negative operating leverage in the
quarter-over-quarter comparison was 360 basis points, based on an
increase in total operating-basis revenue of 5.3% and an increase
in total operating-basis expenses of 8.9%.
STATE STREET
CORPORATION Earnings Press Release Addendum
RECONCILIATION OF REPORTED RESULTS TO OPERATING-BASIS
RESULTS Quarter and Nine Months Ended September 30, 2009
(Dollars in millions, except per share amounts)
Quarter
Ended September 30, 2009 Nine Months Ended September 30,
2009 Reported Operating
Reported Operating Results Adjustments
Results Results Adjustments Results
Fee Revenue: Servicing fees
$ 833 $
833 $ 2,394 $ 2,394 Management
fees
219 219 593 593 Trading services
269 269 824 824 Securities finance
105 105 487 487 Processing fees and
other
45 45 111
111 Total fee revenue
1,471 1,471 4,409
4,409 Net Interest Revenue: Interest revenue
898 $ 31 (1) 929 2,409
$ 70 (6) 2,479 Interest expense
175 - 175 542
(17) (7) 525 Net interest revenue
723 31 754 1,867 87 1,954
Gains (Losses) related to investment securities, net:
42 - 42 84
- 84 Total revenue 2,236
31 2,267 6,360 87 6,447
Provision for loan losses
16 - 16 114
- 114 Expenses: Salaries and employee
benefits
819 - 819 2,246 -
2,246 Information systems and communications
165
- 165 493 - 493 Transaction
processing services
148 - 148 425
- 425 Occupancy
118 - 118
360 - 360 Merger and integration costs
11 (11) (2) - 40 (40)
(2) - Other
222 -
222 587 - 587
Total expenses
1,483 (11)
1,472 4,151 (40)
4,111 Income before income tax expense and extraordinary
loss
737 42 779 2,095 127
2,222 Income tax expense
221 4 (3)
225 601 13 (8) 614
Tax-equivalent adjustment
- 31
(1) 31 - 94 (1)
94 Income before extraordinary loss
516 7
523 1,494 20 1,514 Extraordinary loss,
net of tax
- - -
(3,684) 3,684 (4) - Net
income (loss) $ 516 $ 7 $
523 $ (2,190) $ 3,704 $
1,514 Adjustments to net income (loss):
Prepayment of preferred stock discount
$ - $
- $ - $ (106) $
106 (5)
$ - Dividend on preferred stock
- - - (46) - (46)
Accretion of preferred stock discount
-
- - (11) -
(11) - - -
(163) 106 (57) Net income
before extraordinary loss available to common
shareholders $ 516 $ 7 $
523 $ 1,331 $ 126 $
1,457 Net income (loss) available to common
shareholders $ 516 $ 7 $
523 $ (2,353) $ 3,810 $
1,457 Diluted earnings per common share before
extraordinary loss $ 1.04 $ .01
$ 1.05 $ 2.86 $ .27
$ 3.13 Diluted earnings (loss) per common
share 1.04 .01 1.05 (5.05)
8.18 3.13 Average diluted common shares
outstanding (in thousands) 498,290 498,290
498,290 466,234 466,234 466,234
Return on common equity before extraordinary loss
16.0 % 0.2 % 16.2 %
15.0 % 1.3 % 16.3 % (1)
Represents tax-equivalent adjustment of $31 million, which is not
included in reported results. (2) Represents merger and integration
costs recorded in connection with the acquisition of Investors
Financial. (3) Represents income tax benefit related to merger and
integration costs. (4) Represents extraordinary loss related to the
consolidation of the asset-backed commercial paper conduits on May
15, 2009 onto State Street's balance sheet. (5) Represents
prepayment of the preferred stock discount in connection with
repayment of the U.S.Treasury's preferred stock investment under
the TARP Capital Purchase Program. (6) Represents tax-equivalent
adjustment of $94 million, which is not included in reported
results, net of $24 million of revenue related to the Boston
Federal Reserve Bank's Asset-Backed Commercial Paper Money Market
Liquidity Facility (AMLF). (7) Represents interest expense related
to the AMLF. (8) Represents $3 million of income tax expense
related to the AMLF net of $16 million of income tax benefit
related to merger and integration costs.
STATE STREET
CORPORATION Earnings Press Release Addendum
RECONCILIATION OF REPORTED RESULTS TO OPERATING-BASIS
RESULTS Quarter and Nine Months Ended September 30, 2008
(Dollars in millions, except per share amounts)
Quarter
Ended September 30, 2008 Nine Months Ended September 30,
2008 Reported Operating
Reported Operating Results Adjustments
Results Results Adjustments Results
Fee Revenue: Servicing fees $ 966 $ 966 $ 2,903 $ 2,903
Management fees 261 261 819 819 Trading services 363 363 1,049
1,049 Securities finance 246 246 901 901 Processing fees and other
63 63 194 194 Total fee revenue 1,899
1,899 5,866 5,866
Net Interest Revenue: Interest
revenue 1,027 $ 78 (1) 1,105 3,452 $ 129 (1) 3,581 Interest expense
502 (37) (2) 465 1,645 (37) (2)
1,608 Net interest revenue 525 115 640 1,807 166 1,973 Gains
(Losses) related to investment securities, net: (3) - (3) (3) - (3)
Gain from sale of CitiStreet interest, net of exit and other
associated costs 350 (350) (3) - 350
(350) (3) -
Total revenue 2,771 (235) 2,536 8,020
(184) 7,836 Provision for loan losses - - - - - -
Expenses: Salaries and employee benefits 1,022 - 1,022 3,144
- 3,144 Information systems and communications 151 - 151 470 - 470
Transaction processing services 165 - 165 499 - 499 Occupancy 116 -
116 341 - 341 Merger and integration costs 30 (30) (4) - 88 (88)
(4) - Other 441 (200) (5) 241 998
(200) (5) 798 Total expenses 1,925 (230)
1,695 5,540 (288) 5,252 Income before income
taxes 846 (5) 841 2,480 104 2,584 Income tax expense 369 (91) (6)
278 925 (72) (7) 853 Tax-equivalent adjustment - 25
(8) 25 - 76 (8) 76
Net income $ 477 $
61 $ 538 $ 1,555 $ 100 $ 1,655
Net income
available to common shareholders $ 477 $ 61 $ 538 $ 1,555 $ 100
$ 1,655
Diluted earnings per common share $ 1.09 $
.15 $ 1.24 $ 3.78 $ .25 $ 4.03
Average diluted common
shares outstanding (in thousands) 435,030 435,030 435,030
411,204 411,204 411,204
Return on common equity 13.6
% 1.8 % 15.4 % 16.8 % 1.0 % 17.8 % Reported results reflect State
Street's Consolidated Statement of Income prepared in accordance
with accounting principles generally accepted in the United States.
(1) Represents tax-equivalent adjustments of $25 million for
the quarter ended September 30, 2008 and $76 million for the nine
months ended September 30, 2008, which are not included in reported
results, plus a $98 million charge associated with SILO leasing
transactions, net of $45 million of revenue related to the AMLF.
(2) Represents $37 million of interest expense related to the AMLF.
(3) Represents gain on the sale of CitiStreet interest, net of exit
and other associated costs, which State Street divested on July 1,
2008. (4) Represents merger and integration costs recorded in
connection with the acquisition of Investors Financial. (5)
Represents a charge to provide for estimated net exposure to
customers on an indemnification obligation associated with
collateralized repurchase agreements. (6) Represents $3 million of
income tax expense related to the AMLF, $39 million of income tax
expense related to the reserve for SILO's and $140 million of
income tax expense related to the gain from sale of CitiStreet
interest, net of $11 million of income tax benefit related to
merger and integration costs for the acquisition of Investors
Financial, and $80 million of income tax benefit related to the
provision for potential secured exposure associated with a
collateralized repurchase agreement. (7) Represents $3 million of
income tax expense related to the AMLF, $39 million of income tax
expense related to the reserve for SILO's and $140 million of
income tax expense related to the gain from sale of CitiStreet
interest, net of $30 million of income tax benefit related to
merger and integration costs for the acquisition of Investors
Financial, and $80 million of income tax benefit related to the
provision for potential secured exposure associated with a
collateralized repurchase agreement. (8) Represents tax-equivalent
adjustment, which is not included in reported results.
STATE
STREET CORPORATION Earnings Press Release Addendum
RECONCILIATION OF REPORTED RESULTS TO OPERATING-BASIS
RESULTS Quarter Ended June 30, 2009
(Dollars in
millions, except per share amounts)
Quarter Ended June 30,
2009 Reported Operating
Results Adjustments Results Fee
Revenue: Servicing fees $ 795 $ 795 Management fees 193 193
Trading services 310 310 Securities finance 201 201 Processing fees
and other 17 17 Total fee revenue 1,516 1,516
Net Interest Revenue: Interest revenue 773 $ 31 (1) 804
Interest expense 193 - 193 Net interest
revenue 580 31 611 Gains (Losses) related to investment
securities, net: 26 - 26
Total revenue
2,122 31 2,153 Provision for loan losses 14 - 14
Expenses: Salaries and employee benefits 696 - 696
Information systems and communications 167 - 167 Transaction
processing services 146 - 146 Occupancy 121 - 121 Merger and
integration costs 12 (12) (2) - Other 222 -
222 Total expenses 1,364 (12) 1,352 Income
before income tax expense and extraordinary loss 744 43 787 Income
tax expense 242 5 (3) 247 Tax-equivalent adjustment -
31 (1) 31 Income before extraordinary loss 502 7
509 Extraordinary loss, net of tax (3,684) 3,684 (4)
-
Net income (loss) $ (3,182) $ 3,691 $ 509
Adjustments to net income (loss): Prepayment of preferred
stock discount $ (106) $ 106 (5) $ - Dividend on preferred stock
(21) - (21) Accretion of preferred stock discount (5)
- (5) (132) 106 (26)
Net income
before extraordinary loss available to common
shareholders $ 370 $ 113 $ 483
Net income (loss)
available to common shareholders $ (3,314) $ 3,797 $ 483
Diluted earnings per common share before extraordinary loss
$ 0.79 $ .25 $ 1.04
Diluted earnings (loss) per common
share (7.12) 8.16 1.04
Average diluted common shares
outstanding (in thousands) 465,814 465,814 465,814
Return on common equity before extraordinary loss 13.0 % 4.0
% 17.0 % (1) Represents tax-equivalent adjustment of $31 million,
which is not included in reported results. (2) Represents merger
and integration costs recorded in connection with the acquisition
of Investors Financial. (3) Represents income tax benefit related
to merger and integration costs. (4) Represents extraordinary loss
related to the consolidation of the asset-backed commercial paper
conduits on May 15, 2009 onto State Street's balance sheet.
(5) Represents prepayment of the
preferred stock discount in connection with repayment of the U.S.
Treasury's preferred stock investment under the TARP Capital
Purchase Program.
STATE STREET CORPORATION Tangible Common Equity and Tier
1 Common Ratios As of Period End
The table set forth below presents the calculations of State
Street's ratios of tangible common equity to total tangible assets
and to total risk-weighted assets, and its ratios of tier 1 common
capital to total risk-weighted assets. For the periods ended
September 30, June 30, September 30, (Dollars in millions)
2009 2009 2008
Consolidated Total Assets
$ 163,277 $ 153,421 $ 285,564 Less: Goodwill
4,554 4,547 4,516 Other intangible assets
1,845 1,790
1,890 AMLF investment securities
- 300 76,660 Excess
reserves held at central banks
22,125
20,449 53,820 Adjusted assets
134,753
126,335 148,678 Plus: Deferred tax liability
524
532 509 Total tangible assets
A $ 135,277 $ 126,867 $ 149,187
Consolidated Total Common Shareholders'
Equity $ 13,629 $ 12,103 $ 13,064 Less: Goodwill
4,554 4,547 4,516 Intangible assets
1,845
1,790 1,890 Adjusted equity
7,230 5,766 6,658 Plus deferred tax liability
524 532 509 Total
tangible common equity
B $ 7,754 $
6,298 $ 7,167 Tangible common equity ratio
B/A 5.73 % 4.96 % 4.80 % Ratio of
tangible common equity to total risk-weighted assets
B/D
10.52 % 8.52 % 9.55 %
Tier 1 capital
$ 11,461 $ 10,740 $ 11,968
Less trust preferred
securities
1,450 1,450 1,450
Tier 1 common capital
C $ 10,011
$
9,290 $ 10,518
Total risk-weighted
assets D
$
73,716
$
73,918
$
75,033 Ratio of tier 1 common capital to total risk-weighted
assets
C/D 13.58 % 12.57 % 14.02 %
STATE
STREET CORPORATION Press Release Addendum
CONSOLIDATED STATEMENT OF CONDITION
September 30, December 31, September 30, (Dollars in
millions, except per share amounts)
2009 2008
2008
Assets Cash and due from banks
$
5,027 $ 3,181 $ 58,263 Interest-bearing deposits with banks
27,479 55,733 18,430 Securities purchased under resale
agreements
1,579 1,635 9,598 Federal funds sold
- -
1,500 Trading account assets
150 815 6,332 Investment
securities available for sale
71,675 54,163 68,881
Investment securities held to maturity purchased under money market
liquidity facility
- 6,087 76,660 Investment securities held
to maturity
21,267 15,767 3,945 Loans and leases (net of
allowance of $53, $18 and $18)
11,406 9,113 17,430 Premises
and equipment
1,947 2,011 1,987 Accrued income receivable
1,618 1,738 1,915 Goodwill
4,554 4,527 4,516 Other
intangible assets
1,845 1,851 1,890 Other assets
14,730 17,010 14,217 Total assets
$
163,277 $ 173,631 $ 285,564
Liabilities
Deposits: Noninterest-bearing
$ 13,572 $ 32,785 $
70,033 Interest-bearing -- U.S.
5,327 4,558 9,988
Interest-bearing -- Non-U.S.
72,869 74,882
70,848 Total deposits
91,768 112,225 150,869
Securities sold under repurchase agreements
11,890 11,154
17,274 Federal funds purchased
4,949 1,082 1,984 Short-term
borrowings under money market liquidity facility
- 6,042
76,627 Other short-term borrowings
20,724 11,555 4,289
Accrued taxes and other liabilities
11,472 14,380 17,351
Long-term debt
8,845 4,419 4,106 Total
liabilities
149,648 160,857 272,500
Shareholders'
Equity Preferred stock, no par: authorized 3,500,000; 20,000
shares issued and outstanding
- 1,883 - Common stock, $1
par: authorized 750,000,000 shares; 494,652,372, 431,976,032 and
431,950,903 shares issued
495 432 432 Surplus
9,159
6,992 6,793 Retained earnings
6,768 9,135 9,002 Accumulated
other comprehensive loss
(2,776) (5,650) (3,146) Treasury
stock (at cost 429,499, 418,354 and 404,943 shares)
(17) (18) (17) Total shareholders' equity
13,629 12,774 13,064 Total liabilities
and shareholders' equity
$ 163,277 $ 173,631 $
285,564
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