EX-99 3 a4548255ex991.txt EXHIBIT 99.1 PRESS RELEASE Exhibit 99.1 State Street Corporation Announces Fourth-Quarter and Full-Year 2003 Results BOSTON--(BUSINESS WIRE)--Jan. 13, 2004--State Street Corporation announced today fourth-quarter earnings per share of $1.33, equivalent to net income of $447 million on revenue of $1.5 billion. For the full-year 2003, earnings per share were $2.15 and net income was $722 million on revenue of $4.7 billion. Results for the fourth quarter of 2003 include a gain on the sale of State Street's Private Asset Management business of $285 million or $0.56 in diluted earnings per share, the gain on the settlement of the residual escrow from the 2002 sale of Corporate Trust business of $60 million or $0.12 diluted earnings per share and merger, integration and divestiture costs of $29 million or $0.06 in diluted earnings per share. Results for the full year 2003 include the $345 million of gains from the sale of the Private Asset Management business and the Corporate Trust escrow settlement, or $0.68 in diluted earnings per share, restructuring costs related to an expense-reduction program of $296 million or $0.58 in diluted earnings per share, full year merger, integration and divestiture costs of $110 million, or $0.22 in diluted earnings per share, and the impact of a real estate loss and settlement of a state tax issue that combined for a $0.06 reduction in full year diluted earnings per share. For the fourth quarter of 2002, earnings per share were $1.46 equivalent to net income of $477 million on revenue of $1.5 billion. For the full-year 2002, earnings per share were $3.10 and net income was $1.0 billion on revenue of $4.4 billion. Results for the fourth quarter of 2002 and the full year 2002 include a gain of $495 million or $0.90 in diluted earnings per share from the December 31, 2002 sale of the Corporate Trust business. For 2003, return on stockholders equity was 13.9% compared to 24.1% for 2002. In reporting its financial results, State Street has prepared information in four categories: -- "Reported" results are in accordance with generally accepted accounting principles (GAAP). -- "Operating" results are "reported" results excluding restructuring and merger-related charges and any gains from divested businesses. They are presented on a taxable-equivalent basis. -- "GSS contribution" results are the revenue and expenses, including financing costs and amortization of intangibles and software, attributable to the GSS business acquired on January 31, 2003, as well as revenue and expenses from "out-of-scope" GSS business that are closely related to Deutsche Asset Management, but that were not part of the acquisition. Per-share amounts reflect the effect on outstanding shares due to the acquisition. -- "Baseline" results are "operating" results excluding "GSS contribution" and are presented on a taxable-equivalent basis. State Street believes that providing non-GAAP financial information assists investors and others by providing them with financial information in a format that provides comparable financial trends of ongoing business activities. Baseline earnings per share were $0.69, up 28% compared to baseline earnings per share of $0.54 for the fourth quarter of 2002, and up 6% from $0.65 in the third quarter of 2003. Fourth quarter of 2002 baseline results exclude $10 million of pre-tax income, or $0.02 per share, attributable to the Corporate Trust business divested at the end of 2002. Baseline revenue of $1.0 billion for Q4 2003 was up 6% from the fourth quarter of 2002, primarily due to increases in servicing and management fees, processing and other fees, and foreign exchange, partially offset by a loss on the sale of securities and lower net interest revenue. In the fourth quarter of 2003, the GSS business contributed $168 million in total revenue: $157 million of fee revenue, $9 million in "out-of-scope" fee revenue, and $7 million of interest revenue, offset by interest expense of $5 million attributable to the acquisition financing. Included in GSS revenue was $19 million in FX revenue due to a contract settlement negotiated with Deutsche Bank. The GSS business earned $0.02 in the fourth quarter on a per-share basis, including the "out-of-scope" results, the cost of financing and the impact of increased shares outstanding, but excluding merger and integration charges. Operating earnings per share in the fourth quarter 2003, which exclude the merger and integration charges and the gains related to the sale of the divested businesses, was $0.71, up 31% from $0.54 a year ago, and up 8% from $0.66 in the third quarter of 2003. Operating revenue increased 23%, or $221 million, to $1.2 billion from the fourth quarter of 2002 and was up $34 million, or 3% from the third quarter of 2003. Return on stockholders' equity on an operating basis was 17.2% for the quarter and 15.0% for the year. Operating earnings for the year 2003 were $2.33, compared to $2.16 in 2002. The following table summarizes State Street's baseline, GSS, operating, and reported results for the fourth quarters of 2002 and 2003. Detailed information is available in the Addendum Selected Financial Information tables included with this press release. Dollars in millions except per share data; shares in millions Three months ended December 31, 2003 December 31, 2002 Non-GAAP measures defined by State Street ------------------------------------- -------------------- Baseline(a)GSS(b)Operating(c)Reported Operating(c)Reported ------------------------------------- -------------------- Fee revenue $791 $166 $957 $957 $686 $706 All other revenue 214 2 216 549 266 750 ------------------------------------- -------------------- Total revenue 1,005 168 1,173 1,506 952 1,456 Total expenses 655 143 798 828 691 704 Taxes 127 9 136 231 87 275 ------------------------------------- -------------------- Net income $223 $16 $239 $447 $174 $477 ===================================== ==================== Diluted eps $0.69 $0.02 $0.71 $1.33 $0.54 $1.46 Diluted shares 325 339 339 326 326 (a) excludes GSS results; merger, integration and divesture costs; restructuring costs; and gains from the sales of divested businesses; presented on a taxable-equivalent basis (b) revenue and expenses, including financing costs and amortization of intangibles and software, attributable to the GSS business acquired January 31, 2003, as well as revenue and expenses from "out-of-scope" business which was not part of the transaction, but excluding merger and integration costs. Per-share amounts reflect the effect on outstanding shares due to the acquisition (c) excludes merger, integration and divestiture charges, restructuring charges and gains from the sales of divested businesses in 2003, and in 2002, the results of the divested Corporate Trust business; in 2002, baseline and operating results are identical; presented on a taxable-equivalent basis David A. Spina, State Street's chairman and chief executive officer, said, "2003 was a challenging yet very productive year for us. We won significant new business; we managed expenses aggressively; and we met or exceeded all the commitments we made for integration of the GSS business. We also continued to deliver superior service to our clients -- which is always our number one goal. "We expect 2004 to be another challenging year for our industry. Although economic conditions seem to be improving, the business environment is still extremely fragile and interest rates are at 50-year lows. Competition continues to be intense, especially in the pension markets, and sales cycles are longer than we've seen in the past. Costs related to compensation, technology, and occupancy will go up in 2004. Our goal is to balance our near-term profit objectives with strategic investments in State Street's future." FOURTH-QUARTER RESULTS VS. THIRD QUARTER On a reported basis, fourth quarter net income per share of $1.33 compares to a net income per share of $0.60 in the third quarter. Total revenue in the fourth quarter of $1.5 billion, which included $345 million in gains from the sales of divested businesses, is up 34% versus $1.1 billion in the third quarter. On a baseline basis, fourth-quarter net income of $0.69 per diluted share is up 6% from $0.65 per share. Revenue rose 3%, from $976 million to $1.0 billion, while expenses increased 1%, to $655 million, in line with the previously stated expense reduction target. FOURTH-QUARTER RESULTS VS. YEAR-AGO QUARTER On a reported basis, the fourth-quarter diluted earnings per share was $1.33, reflecting net income of $447 million, and total revenue of $1.5 billion, including the gains from the divested businesses. In the fourth quarter of 2002, State Street earned $477 million, or $1.46 per share, on $1.5 billion in revenue, including the gain from the divested business. On an operating basis, diluted earnings per share were $0.71. Net income was $239 million, and revenue was $1.2 billion. In the fourth quarter of 2002, net income was $174 million, or $0.54 per share, on revenue of $952 million. On a baseline basis, fourth-quarter diluted earnings per share were $0.69, net income was $223 million, and revenue was $1.0 billion. In the fourth quarter of 2002, net income was $174 million, or $0.54 per share, on revenue of $952 million. The following review of specific revenue and expense lines uses baseline results to provide consistent comparable data to the year-earlier period. Servicing fees are derived from accounting, administration, custody, daily pricing, performance and analytics, compliance monitoring, and operations outsourcing for investment managers. Baseline servicing fees were up 16%, to $426 million from $369 million. The increase was attributable to higher equity market valuations and new business from existing and new clients. Daily average values for the S&P 500 Index were up 19% from the fourth quarter of 2002; daily average values for the MSCI(R) EAFE Index(SM) were up 27%. Total assets under custody were $9.4 trillion, including $2.1 trillion attributable to the GSS business. Baseline investment management fees, generated by State Street Global Advisors, were $133 million, up 14% compared to $116 million a year ago. Management fees reflected continued new business success and an increase in average month-end equity valuations. Total assets under management were $1.1 trillion, compared to $763 billion the previous year. Baseline foreign exchange trading revenue was $81 million for the quarter, compared to $62 million a year ago. The increase was attributable to improved volume and volatility, reflecting higher cross-border investment activities. Baseline processing fees and other increased $18 million to $70 million due to the mark-to-market gain on SPACES(SM) pursuant to FAS 150, improved performance of joint ventures and structured products' business, offset by recognition of other-than-temporary impairment charges on asset-backed investment securities. Baseline net interest revenue was $220 million, a decline of $16 million, or 6%, from a year ago. Lower yields on reinvested assets drove the decrease in net interest revenue. A loss of $6 million on sales of securities compared with a gain of $31 million from the year ago quarter. Baseline operating expenses were $655 million, down $36 million, or 5%, from $691 million a year ago. Lower salaries and benefits expenses and direct controllable expenses were due to the previously announced cost-reduction plans, partly offset by an increase in information systems and communications and transaction processing services. GSS ACQUISITION AND INTEGRATION UPDATE After eleven months of operation, the GSS business, including "out-of-scope" results and excluding one-time costs, reported a profit of $0.01 per share, exceeding our expectation of $0.01 to $0.03 dilution per share. With most GSS clients having selected STT as their service provider, we now expect to retain approximately 88% of the available client revenue acquired, which excludes "out-of-scope" revenue. To date, State Street has completed about 550 client conversions. The pretax merger and restructuring costs associated with the acquisition in 2003 totaled $103 million, within STT's estimated range $90-$110 million. Client conversion will continue and will be substantially complete by the end of 2004. The Company expects pretax merger and integration costs related to these conversions to be about an additional $50 to $60 million in 2004. INVESTOR CONFERENCE CALL State Street will webcast an investor conference call today, Tuesday, January 13, 2004, 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 498324). 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 sophisticated global investors with investment servicing and investment management. With $9.4 trillion in assets under custody and $1.1 trillion in assets under management, State Street is headquartered in Boston, Massachusetts and operates in 24 countries and over 100 markets worldwide and employees 19,800 people 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 the pace at which State Street adds new clients or at which existing clients use additional services, the value of global and regional financial markets, the pace of cross-border investment activity, changes in interest rates, the pace of worldwide economic growth and rates of inflation, the extent of volatility in currency markets, consolidations among clients and competitors, State Street's business mix, the dynamics of markets State Street serves, and State Street's success at integrating and converting acquisitions into its business. 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 2002 annual report and subsequent SEC filings. State Street encourages investors to read the Corporation's annual report, particularly the section on factors that may affect financial results, and its subsequent SEC filings 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, January 13, 2004, and the company will not undertake efforts to revise those forward-looking statements to reflect events after this date. STATE STREET CORPORATION Addendum Earnings Digest(a) (Dollars in millions, except per share data) Quarter ended December 31, --------------------------------------------- 2003 2002 % Change ------- ------- --------- Revenue $1,506 $1,456 3 Earnings 447 477 (6) Diluted earnings per share 1.33 1.46 (9) Year ended December 31, --------------------------------------------- 2003 2002 % Change ------- ------- --------- Revenue $4,734 $4,396 8 Earnings 722 1,015 (29) Diluted earnings per share 2.15 3.10 (31) ---------------------------------------------------------------------- (a) Information presented in accordance with accounting principles generally accepted in the United States STATE STREET CORPORATION Addendum Selected Financial Information I. CONSOLIDATED STATEMENT OF INCOME PREPARED IN ACCORDANCE WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES Reported Results Reported Results Quarter Ended Year Ended December December 31, 31, ---------------------------------------- (Dollars in millions, except per share data) 2003 2002 2003 2002 ------------------------------------------------------------------ Fee Revenue: Servicing fees $ 525 $ 388 $ 1,950 $ 1,531 Management fees 137 116 533 485 Global securities lending 53 49 245 226 Foreign exchange trading 115 62 391 300 Brokerage fees 37 38 122 124 Processing fees and other 90 53 315 184 --------- --------- --------- --------- Total Fee Revenue 957 706 3,556 2,850 Net Interest Revenue: Interest revenue 377 465 1,539 1,974 Interest expense 167 240 729 995 --------- --------- --------- --------- Net interest revenue 210 225 810 979 Provision for loan losses - 1 - 4 --------- --------- --------- --------- Net interest revenue after provision for loan losses 210 224 810 975 Gains/(losses) on sales of available-for-sale investment securities, net (6) 31 23 76 Gain on sale of Corporate Trust business, net of associated costs 60 495 60 495 Gain on sale of Private Asset Management business, net of exit and other associated costs 285 - 285 - ------------------------------------ --------- --------- --------- Total Revenue 1,506 1,456 4,734 4,396 Operating Expenses: Salaries and employee benefits 437 411 1,731 1,654 Information systems and communications 141 94 551 373 Transaction processing services 83 65 314 246 Occupancy 69 64 300 246 Merger, integration and divestiture costs 29 - 110 - Restructuring costs 1 - 296 20 Other 68 70 320 302 --------- --------- --------- --------- Total operating expenses 828 704 3,622 2,841 --------- --------- --------- --------- Income before income taxes 678 752 1,112 1,555 Income taxes 231 275 390 540 --------- --------- --------- --------- Net Income $ 447 $ 477 $ 722 $ 1,015 ========= ========= ========= ========= Earnings Per Share: Basic $ 1.34 $ 1.47 $ 2.18 $ 3.14 Diluted 1.33 1.46 2.15 3.10 Average Shares Outstanding (in thousands): Basic 333,579 323,520 331,692 323,520 Diluted 338,895 326,469 335,326 327,477 Return on equity 12.2 % 42.4 % 13.9 % 24.1 % Cash dividends declared per share $ .15 $ .13 $ .56 $ .48 II.OTHER SELECTED FINANCIAL INFORMATION Quarter ended December 31, -------------------- (Dollars in millions, except per share data or where otherwise indicated) 2003 2002 ---------------------------------------------- Assets under custody (in billions) $ 9,370 $ 6,171 Assets under management (in billions) 1,106 763 Total assets $ 87,534 $ 85,794 Long-term debt 2,222 1,270 Stockholders' equity 5,747 4,787 Closing price per share of common stock $ 52.08 $ 39.00 STATE STREET CORPORATION Addendum Selected Financial Information III. SUPPLEMENTAL INCOME STATEMENT INFORMATION - RECONCILIATION OF FOURTH QUARTER 2003 NON-GAAP MEASURES TO REPORTED RESULTS Reconciliation of Financial Results ---------------------------------------------------- (Dollars in millions) ---------------------------------------------------- Quarter Ended December 31, 2003 ---------------------------------------------------- Non-GAAP measures defined by State Street (1) -------------------------------------- Baseline GSS Operating Reported Results Results(a) Results Other Results(2) ----------------------------------------------------- Fee Revenue: Servicing fees $ 426 $ 99 $ 525 $ 525 Management fees 133 4 137 137 Global securities lending 44 9 53 53 Foreign exchange trading 81 34 115 115 Brokerage fees 37 - 37 37 Processing fees and other 70 20 90 90 --------- -------- --------- ---------- Total Fee Revenue 791 166 957 957 Net Interest Revenue 220 2(b) 222 $ (12)(e) 210 Provision for loan losses - - - - - --------- -------- --------- ------ ---------- Net interest revenue after provision for loan losses 220 2 222 (12) 210 Gains/(losses) on sales of available-for- sale investment securities, net (6) - (6) - (6) Gain on sale of Corporate Trust business, net of associated costs - - - 60 60 Gain on sale of Private Asset Management business, net of exit and other associated costs - - - 285 285 --------- -------- --------- ------ ---------- Total Revenue 1,005 168 1,173 333 1,506 Operating Expenses: Salaries and employee benefits 373 64 437 - 437 Information systems and communications 100 41 141 - 141 Transaction processing services 65 18 83 - 83 Occupancy 59 10 69 - 69 Merger, integration and divestiture costs - - - 29 29 Restructuring costs - - - 1 1 Other 58 10 68 - 68 --------- -------- --------- ------ ---------- Total operating expenses 655 143(c) 798 30 828 --------- -------- --------- ------ ---------- Income before income taxes 350 25 375 303 678 Income taxes 115 9 124 107 231 Taxable- equivalent adjustment 12 - 12 (12)(e) - --------- -------- --------- ------ ---------- Net Income $ 223 $ 16 $ 239 $ 208 $ 447 ========= ======== ========= ====== ========== Earnings Per Share $ .69 $ .02(d) $ .71 $ .62 $ 1.33 Average Diluted Shares (in thousands) 324,828 14,067 338,895 - 338,895 Return on equity 16.0 % 17.2 % 12.2 % Notes: (1) In order to provide information on a comparable basis from period to period and to assist stockholders, analysts, other external parties and management in analyzing the financial results and trends of ongoing businesses and operations, State Street also presents supplemental financial information on an operating results basis. State Street believes that such non-GAAP financial information assists investors and others by providing them with financial information in a format that provides comparable financial trends of ongoing business activities. (2) Reported results agree with the Corporation's Consolidated Statement of Income prepared in accordance with accounting principles generally accepted in the United States (a) Includes $9 million of revenue and $12 million of expenses related to out-of-scope client relationships (b) Includes $5 million of interests costs attributable to the GSS acquisition financing (c) Includes amortization of intangibles and software of $9 million (d) Includes ($.03) impact due to changes in shares outstanding attributable to the acquisition (e) Taxable-equivalent adjustment is not included in reported results STATE STREET CORPORATION Addendum Selected Financial Information IV. SUPPLEMENTAL INCOME STATEMENT INFORMATION - RECONCILIATION OF 2003 NON-GAAP MEASURES TO REPORTED RESULTS Reconciliation of Financial Results ---------------------------------------------------- (Dollars in millions) ---------------------------------------------------- Year Ended December 31, 2003 ---------------------------------------------------- Non-GAAP measures defined by State Street (1) -------------------------------------- Baseline GSS Operating Reported Results Results(a) Results Other Results(2) ---------------------------------------- ------------ Fee Revenue: Servicing fees $ 1,596 $ 354 $ 1,950 $ 1,950 Management fees 517 16 533 533 Global securities lending 194 51 245 245 Foreign exchange trading 330 61 391 391 Brokerage fees 122 - 122 122 Processing fees and other 230 98 328 $ (13)(e) 315 --------- -------- --------- ------ ---------- Total Fee Revenue 2,989 580 3,569 (13) 3,556 Net Interest Revenue 868 (7)(b) 861 (51)(f) 810 Provision for loan losses - - - - - --------- -------- --------- ------ ---------- Net interest revenue after provision for loan losses 868 (7) 861 (51) 810 Gains/(losses) on sales of available-for- sale investment securities, net 23 - 23 - 23 Gain on sale of Corporate Trust business, net of associated costs - - - 60 60 Gain on sale of Private Asset Management business, net of exit and other associated costs - - - 285 285 --------- -------- --------- ------ ---------- Total Revenue 3,880 573 4,453 281 4,734 Operating Expenses: Salaries and employee benefits 1,526 205 1,731 - 1,731 Information systems and communications 394 157 551 - 551 Transaction processing services 259 55 314 - 314 Occupancy 262 38 300 - 300 Merger, integration and divestiture costs - - - 110 110 Restructuring costs - - - 296 296 Other 258 62 320 - 320 --------- -------- --------- ------ ---------- Total operating expenses 2,699 517(c) 3,216 406 3,622 --------- -------- --------- ------ ---------- Income before income taxes 1,181 56 1,237 (125) 1,112 Income taxes 384 19 403 (13) (g) 390 Taxable- equivalent adjustment 51 - 51 (51)(f) - --------- -------- --------- ------ ---------- Net Income $ 746 $ 37 $ 783 $ (61) $ 722 ========= ======== ========= ====== ========== Earnings Per Share $ 2.32 $ .01(d) $ 2.33 $(.18) $ 2.15 Average Diluted Shares (in thousands) 321,259 14,067 335,326 - 335,326 Return on equity 14.3 % 15.0 % 13.9 % Notes: (1) In order to provide information on a comparable basis from period to period and to assist stockholders, analysts, other external parties and management in analyzing the financial results and trends of ongoing businesses and operations, State Street also presents supplemental financial information on an operating results basis. State Street believes that such non-GAAP financial information assists investors and others by providing them with financial information in a format that provides comparable financial trends of ongoing business activities. (2) Reported results agree with the Corporation's Consolidated Statement of Income prepared in accordance with accounting principles generally accepted in the United States (a) Includes $24 million of revenue and $31 million of expenses related to out-of-scope client relationships (b) Includes $21 million of interests costs attributable to the GSS acquisition financing (c) Includes amortization of intangibles and software of $28 million (d) Includes ($.11) impact due to changes in shares outstanding attributable to the acquisition (e) Represents a valuation reserve on certain assets classified as available-for-sale (f) Taxable-equivalent adjustment is not included in reported results (g) Reflects the impact of a certain Massachusetts tax issue ($12 million tax expense) as well as the tax benefit applicable to the net of all other non-recurring gains and charges STATE STREET CORPORATION Addendum Selected Financial Information V. SUPPLEMENTAL INCOME STATEMENT INFORMATION - BASELINE RESULTS YEAR OVER YEAR COMPARISON Baseline results are a non-GAAP measure defined by State Street as reported results excluding GSS contribution, restructuring, merger, integration and divestiture costs, valuation reserves, state tax issue impact and results of a divested business and are presented on a taxable-equivalent basis. Baseline Baseline Results Results Quarter Ended December 31, Year Ended December 31, -------------------------- ------------------------- (Dollars in millions, except per share data) 2003 2002 (a)% Change 2003 2002 (b)% Change ------ ---------------- ------- ----------------- Baseline Fee Revenue: Servicing fees $426 $369 16% $1,596 $1,454 10 % Management fees 133 116 14 517 485 6 Global securities lending 44 49 (10) 194 226 (14) Foreign exchange trading 81 62 29 330 300 10 Brokerage fees 37 38 (2) 122 124 (1) Processing fees and other 70 52 34 230 180 28 ------ ------- ------- ------- Total Baseline Fee Revenue 791 686 15 2,989 2,769 8 Baseline Net Interest Revenue 220 236 868 1,027 Provision for loan losses - 1 - 4 ------ ------- ------- ------- Baseline net interest revenue after provision for loan losses 220 235 (6) 868 1,023 (15) (taxable- equivalent basis) Gains/(losses) on the sales of available- for-sale investment securities, net (6) 31 23 76 (69) ------ ------- ------- ------- Total Baseline Revenue 1,005 952 6 3,880 3,868 Baseline Operating Expenses: Salaries and employee benefits 373 404 (8) 1,526 1,622 (6) Information systems and communications 100 93 7 394 367 7 Transaction processing services 65 64 4 259 242 7 Occupancy 59 62 (4) 262 240 10 Other 58 68 (15) 258 293 (12) ------ ------- ------- ------- Total Baseline Operating Expenses 655 691 (5) 2,699 2,764 (2) ------ ------- ------- ------- Baseline Income Before Income Taxes 350 261 34 1,181 1,104 7 Income taxes 115 72 384 335 Taxable- equivalent adjustment 12 15 51 61 ------ ------- ------- ------- Baseline Net Income $223 $174 28 $746 $708 5 ====== ======= ======= ======= Diluted Baseline Earnings Per Share $.69 $.54 28 $2.32 $2.16 7 (a) Reflects restatement of originally issued financial results to exclude the results of operations of the divested Corporate Trust activities (b) Reflects restatement of originally issued financial results to exclude the results of operations of the divested Corporate Trust activities and the reclassification of certain restructuring costs now shown as a component of reported results rather than baseline results STATE STREET CORPORATION Addendum Selected Financial Information VI. SUPPLEMENTAL INCOME STATEMENT INFORMATION - OPERATING RESULTS YEAR OVER YEAR COMPARISON Operating results are a non-GAAP measure defined by State Street as reported results excluding restructuring, merger, divestiture and integration costs, valuation reserves, state tax issue impact and results of a divested business and are presented on a taxable- equivalent basis. Operating Operating Results Results Quarter Ended December 31, Year Ended December 31, ---------------------------------------------------- (Dollars in millions, except per share data) 2003 2002 (a)% Change 2003 2002 (b)% Change ------ ---------------- ------- ----------------- Operating Fee Revenue: Servicing fees $525 $369 42% $1,950 $1,454 34 % Management fees 137 116 18 533 485 10 Global securities lending 53 49 8 245 226 8 Foreign exchange trading 115 62 84 391 300 30 Brokerage fees 37 38 (2) 122 124 (1) Processing fees and other 90 52 71 328 180 82 ------ ------- ------- ------- Total Operating Fee Revenue 957 686 39 3,569 2,769 29 Operating Net Interest Revenue 222 236 861 1,027 Provision for loan losses - 1 - 4 ------ ------- ------- ------- Operating net interest revenue after provision for loan losses 222 235 (5) 861 1,023 (16) (taxable- equivalent basis) Gains/(losses) on the sales of available- for-sale investment securities, net (6) 31 23 76 (69) ------ ------- ------- ------- Total Operating Revenue 1,173 952 23 4,453 3,868 15 Expenses - Operating Results: Salaries and employee benefits 437 404 8 1,731 1,622 7 Information systems and communications 141 93 51 551 367 50 Transaction processing services 83 64 32 314 242 30 Occupancy 69 62 10 300 240 25 Other 68 68 320 293 9 ------ ------- ------- ------- Total Expenses - Operating Results 798 691 16 3,216 2,764 16 ------ ------- ------- ------- Operating Income before income taxes 375 261 43 1,237 1,104 12 Income taxes 124 72 403 335 Taxable- equivalent adjustment 12 15 51 61 ------ ------- ------- ------- Net Operating Income $239 $174 37 $783 $708 10 ====== ======= ======= ======= Diluted Operating Earnings Per Share $.71 $.54 31 $2.33 $2.16 8 (a) Reflects restatement of originally issued financial results to exclude the results of operations of the divested Corporate Trust activities (b) Reflects restatement of originally issued financial results to exclude the results of operations of the divested Corporate Trust activities and the reclassification of certain restructuring costs now shown as a component of reported results rather than operating results STATE STREET CORPORATION Addendum Consolidated Statement of Condition ---------------------------------------------------------------------- December 31, December 31, (Dollars in millions) 2003 2002 ---------------------------------------------------------------------- Assets Cash and due from banks $ 3,376 $ 1,361 Interest-bearing deposits with banks 21,738 28,143 Securities purchased under resale agreements and securities borrowed 9,447 17,215 Federal funds sold 104 - Trading account assets 405 984 Investment securities 38,215 28,071 Loans (less allowance of $61 and $61) 4,960 4,113 Premises and equipment 1,212 887 Accrued income receivable 1,015 823 Goodwill 1,326 462 Other intangible assets 525 127 Other assets 5,211 3,608 ------------ ------------ Total Assets $87,534 $85,794 ============ ============ Liabilities Deposits: Noninterest-bearing $ 7,893 $ 7,279 Interest-bearing -- U.S. 5,062 9,005 Interest-bearing -- Non-U.S. 34,561 29,184 ------- ------- Total Deposits 47,516 45,468 Securities sold under repurchase agreements 22,806 21,963 Federal funds purchased 1,019 3,895 Other short-term borrowings 1,437 3,440 Accrued taxes and other expenses 2,424 1,967 Other liabilities 4,363 3,004 Long-term debt 2,222 1,270 ------------ ------- Total Liabilities 81,787 81,007 Stockholders' Equity Preferred stock, no par: authorized 3,500,000; issued none Common stock, $1 par: authorized 500,000,000; issued 337,132,000 and 329,992,000 337 330 Surplus 329 104 Retained earnings 5,007 4,472 Accumulated other comprehensive income 192 106 Treasury stock at cost (2,658,000 and 5,065,000 shares) (118) (225) ------------ ------------ Total Stockholders' Equity 5,747 4,787 ------------ ------------ Total Liabilities and Stockholders' Equity $87,534 $85,794 ============ ============ CONTACT: State Street Corporation Edward J. Resch, 617-664-1110 Investors: Kelley MacDonald, 617-664-3477 Media: Hannah Grove, 617-664-3377