-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IFL4o/4v/JjxJpRGOxgUp87bFqMukVa2e9/0MN3EQnyQmojIRDhQd8ssVPds7mFL DukNuYT0W7PM7KluWAq5sw== 0001157523-05-000291.txt : 20050118 0001157523-05-000291.hdr.sgml : 20050117 20050118081533 ACCESSION NUMBER: 0001157523-05-000291 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050118 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050118 DATE AS OF CHANGE: 20050118 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STATE STREET CORP CENTRAL INDEX KEY: 0000093751 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 042456637 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07511 FILM NUMBER: 05532067 BUSINESS ADDRESS: STREET 1: 225 FRANKLIN ST CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6177863000 MAIL ADDRESS: STREET 1: 225 FRANKLIN STREET CITY: BOSTON STATE: MA ZIP: 02110 FORMER COMPANY: FORMER CONFORMED NAME: STATE STREET BOSTON FINANCIAL CORP DATE OF NAME CHANGE: 19780525 8-K 1 a4801158.txt STATE STREET CORPORATION 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: January 18, 2005 State Street Corporation ........................................................................... (Exact name of registrant as specified in its charter) Massachusetts 0-5108 04-2456637 ......................... .......................... .......................... (State of Incorporation) (Commission File Number) (IRS Employer Identifica- tion Number) One Lincoln Street, Boston, Massachusetts 02111 ..................................................... (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (617) 786-3000 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act Item 2.02. Results of Operations and Financial Condition. On January 18, 2005, State Street Corporation issued a news release announcing results of operations and related financial information for the fourth quarter and full year of 2004. The news release is furnished herewith as Exhibit 99.1, and is incorporated herein by reference. Item 9.01. Financial Statements and Exhibits. (c) State Street Corporation's news release, dated January 18, 2005 is furnished herewith as Exhibit 99.1. Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. STATE STREET CORPORATION By: /s/ Pamela D. Gormley ----------------------------------- Name: Pamela D. Gormley Title: Executive Vice President and Corporate Controller Date: January 18, 2005 EXHIBIT INDEX Exhibit - ------- 99.1 Form of news release dated January 18, 2005 EX-99.1 2 a4801158ex991.txt STATE STREET CORPORATION EXHIBIT 99.1 Exhibit 99.1 State Street Achieves Solid Growth in Revenues and Earnings Per Share in 2004 BOSTON--(BUSINESS WIRE)--Jan. 18, 2005-- Performance Driven by Strong New Business Growth, Improved Fee Revenue, and Expanded Geographic Reach State Street Corporation today announced 2004 fourth-quarter reported earnings per share of $0.55, or net income of $184 million on revenue of $1.27 billion. These results compare to earnings of $1.33 per share, or net income of $447 million on revenue of $1.51 billion in the fourth quarter of 2003. The 2003 fourth-quarter results included a $0.68 per share gain on the sale of certain businesses. This pretax gain of $345 million was reported in 2003 fourth-quarter revenue. For the fourth quarter of 2004, return on stockholders' equity on a reported basis was 11.9%. In the fourth quarter of 2004 operating earnings per share were $0.57, compared to $0.71 in the fourth quarter of 2003. Several items affected operating earnings per share in each period. In the fourth quarter of 2004, operating earnings were reduced by the cost of the reduction in force ($21 million or $0.04 per share) and a loss on a sub-tenant agreement ($16 million or $0.03 per share), and increased by a reduction in the loan loss provision ($18 million or $0.04 per share). These items resulted in an aggregate reduction of $0.03 per share. In the fourth quarter of 2003, the company's operating earnings of $0.71 included $0.04 per share gain from a FX contract settlement with Deutsche Bank ($18 million) and a $0.07 per share mark-to-market after- tax gain on SPACES(SM) ($23 million), aggregating an increase of $0.11 per share. Total operating revenue of $1.28 billion in the fourth quarter of 2004 was up 10% from the fourth quarter of 2003, principally due to strength in servicing and management fees, and included an $18 million reduction in the loan loss provision. The fourth quarter of 2004 was up 8% from $1.18 billion in the third quarter of 2004 due to a rebound in foreign exchange, brokerage, and securities lending revenue. Total expenses on an operating basis of $980 million in the fourth quarter of 2004, including the $21 million cost of the reduction in force and $16 million due to the loss on a sub-tenant arrangement, were up from $795 million in the fourth quarter of 2003 and up from $890 million in the third quarter of 2004. Return on stockholders' equity on an operating basis was 12.4% for the fourth quarter of 2004. Reported earnings for the full-year 2004 amounted to $2.35 per share, or net income of $798 million on revenue of $4.95 billion. This result compares to 2003 earnings per share of $2.15, or net income of $722 million on revenue of $4.73 billion. The 2004 results include $62 million for merger and integration costs or $0.12 per share; in 2003, merger, integration and divestiture costs, restructuring charges, and other charges total to $419 million, or $0.82 per share, plus a $0.04 reduction in earnings per share due to the settlement of a state tax issue; and 2003 results include a gain of $345 million, or $.68 per share, on the sale of two businesses and $23 million, or $0.04 per share, attributable to related operating results. Total reported expenses were $3.76 billion in 2004 compared to $3.62 billion in 2003. Total return on stockholders equity on a reported basis was 13.3% in 2004 and 13.9% in 2003. Operating earnings for the full-year 2004 amounted to $2.47 per share, or net operating income of $839 million. This result compares to 2003 operating earnings per share of $2.29, or net operating income of $768 million. Total operating revenue for the year ended December 31, 2004 was up 14%, from $4.39 billion to $5.00 billion, compared to the same period a year ago. Operating expenses for same period were $3.70 billion, an increase of 16% from $3.18 billion in the year-ago period. Return on equity on an operating basis for 2004 was 14.0% and 14.8% in 2003. Commenting on the performance, Ronald E. Logue, State Street's chairman and chief executive officer, said, "In 2004 State Street again demonstrated its ability to grow its operating revenue--up 14% from 2003, with strength across the company, particularly in servicing and management fees. We also saw strong business growth in both Europe and Asia Pacific fueled in part by the expanded footprint we gained from the successful GSS acquisition and increased customer demand in those regions for an integrated bundle of investment services. At the same time, operating earnings per share increased 8% year-over-year and, in the second half of the year, we made progress toward more efficiently managing expenses and allocating resources. " Logue concluded, "We will continue to balance our objectives for growth with delivering consistency in operating earnings per share in a slow growth environment. While we may not produce positive operating leverage every quarter, prudent expense management will be a continuing focus. Having announced our 2005 goals in November 2004, we expect operating earnings per share growth of 10-15%, operating revenue growth of 8-12%, and an operating return on equity of 14-17%. In 2005, we continue to expect to deliver at the lower end of this range based on the current environment." State Street purchased approximately 4 million shares of its common stock during the fourth quarter at an average price of $43.37 per share. The Company's remaining authorization to purchase shares is now approximately 4.3 million shares. FOURTH-QUARTER OPERATING RESULTS VS. YEAR-AGO QUARTER Total operating revenue of $1.28 billion in the fourth quarter of 2004, which includes $18 million for the reduction in the loan loss provision, was up from $1.17 billion or 10% from the fourth quarter of 2003 which included the $18 million FX contract settlement with Deutsche Bank and the $23 million mark-to-market after-tax gain on SPACES(SM) referenced above. Servicing fees were $570 million, up $45 million or 9%, from $525 million in the year-ago quarter. The increase was attributable to new business from existing and new clients and higher equity valuations in 2004. Total assets under custody were $9.5 trillion, a record level, up 1%, compared with $9.4 trillion in the year-ago quarter. Management fees, generated by State Street Global Advisors, were $167 million, up $34 million, or 26%, compared to $133 million in the year-ago quarter. The increase in management fees reflects new business from existing and new clients and higher equity valuations in 2004. Total assets under management were at a record level, $1.4 trillion, up 22%, compared to $1.1 trillion in the previous year. Average month-end values for the S&P 500 Index were up 9% from the fourth quarter of 2003; average month-end values for the MSCI(R) EAFE Index(SM) were up 18%. Securities lending revenue was $58 million in the quarter, compared to $53 million in the year-ago quarter, an increase of 9%. The increase reflects higher volumes of 16%, offset by reduced spreads. Foreign exchange trading revenue of $111 million in the quarter, declined 3%, or $4 million from $115 million in the year-ago quarter because the fourth quarter of 2003 included the $18 million FX contract settlement with Deutsche Bank. This decrease was partially offset by increased volumes and volatility in the fourth quarter of 2004. Brokerage fees were $43 million in the quarter, compared to $37 million in the year-ago quarter, up 16% due to increases in transition management. Net interest revenue was $229 million, up 3% from $222 million in last year's fourth quarter, due to balance sheet growth driven by a higher level of customer's deposits, offset by reduced spreads. Net interest revenue, after provision for loan losses, was $247 million, which included an $18 million reduction in the loan loss provision. Total expenses on an operating basis of $980 million in the fourth quarter of 2004, which included the impact of the loss on a sub-tenant agreement and cost of the reduction in force, were up 23% from the fourth quarter of 2003. Salaries and benefits expenses increased $75 million to $511 million, driven principally by the higher incentive compensation, option expenses, merit increases, and benefits costs. Expenses for transaction processing increased $21 million to $104 million due to increased volumes. Higher expenses also included a $33 million increase in occupancy, primarily due to the impact of the $16 million loss on a sub-tenant arrangement, and an increase of $45 million in other expense driven primarily by increased professional services expenses needed to support growth initiatives and compliance requirements. The effective tax rate was 34% in the fourth quarters of 2004 and 2003. FOURTH-QUARTER RESULTS VS. THIRD QUARTER On a reported basis, fourth-quarter net income per share of $0.55, which included $12 million, or $0.02 per share of merger and integration charges, was up 6%, or $0.03, compared to third quarter net income per share of $0.52, which included $16 million, or $0.03 per share of merger and integration charges. Total revenue in the fourth quarter of $1.27 billion was up 8% versus $1.17 billion in the third quarter. Total expenses in the fourth quarter of $992 million were up 9%, or $86 million, compared to $906 million in the third quarter. On an operating basis, fourth-quarter net income per share was $0.57, compared to third-quarter net income per share of $0.55. Total operating revenue increased 8% from $1.18 billion in the third quarter to $1.28 billion, including the reduction in the loan loss provision. Total expenses on an operating basis increased 10% from $890 million to $980 million, which included the loss on a sub-tenant agreement and costs of the reduction in force. Market-driven revenue was particularly strong--with foreign exchange increasing 48% to $111 million, and brokerage increasing 39% to $43 million. Securities lending revenue also strengthened to $58 million, up from $48 million or 21%. Salaries and benefits were up 8% due to increased incentive compensation and transaction processing increased 9% due to volumes. GSS ACQUISITION UPDATE Fourth-quarter operating results for 2004 included $0.02 earnings per share, after finance charges, on revenue of $141 million and expenses of $118 million, which includes "out-of-scope" GSS business. For the twelve months ended December 31, 2004, operating earnings per share totaled $0.10 on revenue of $606 million. Merger and integration costs for the fourth quarter were $12 million and totaled $62 million in 2004. FINANCIAL INFORMATION In reporting its financial results, State Street has prepared information in two categories: -- "Reported" results are in accordance with generally accepted accounting principles (GAAP). -- "Operating" results are reported results for the three- and twelve-month periods in 2004 excluding merger and integration costs, and for the three- and twelve-month periods in 2003 excluding gains on the sale of divested businesses, merger, integration and divestiture costs, restructuring costs, and the operating results of a divested business, and for the twelve-month period in 2003, the loss on the sale of certain real estate and the settlement of a state tax legislation issue. Operating results are presented on a taxable-equivalent basis. State Street believes that non-GAAP financial information assists investors and others by providing them with financial information in a format that presents comparable financial trends of ongoing business activities. Please refer to the attached addendum for additional information. All per share amounts represent fully diluted earnings per share. INVESTOR CONFERENCE CALL State Street will webcast an investor conference call today, Tuesday, January 18, 2005, at 9:30 a.m. EST, available at www.statestreet.com/stockholder. The conference call will also be available via telephone, at +1 719/457-2617 (confirmation code 897986). Recorded replays of the conference call will be available on the web site, and by telephone at +1 402/220-4230 (confirmation code 897986), 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 $9.5 trillion in assets under custody and $1.4 trillion in assets under management at December 31, 2004, State Street operates in 25 countries and more than 100 markets worldwide and employs 19,600 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 2003 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 18, 2005, and the Corporation will not undertake efforts to revise those forward-looking statements to reflect events after this date. STATE STREET CORPORATION Press Release Addendum December 31, 2004 Table of Contents Page ---- Reported Earnings Review Summary of Reported Results 1 Selected Reported Financial Information Three months and year ended December 31, 2004 and 2003 2 Three months ended December 31, 2004 and September 30, 2004 3 Supplemental Financial Information Reconciliation of Reported Results to Operating Results Three months ended December 31, 2004 and 2003 4 Three months ended December 31, 2004 and September 30, 2004 5 Year ended December 31, 2004 and 2003 6 Reconciliation of Reported Financial Measures to Operating Financial Measures 7 Consolidated Operating Results Three months and year ended December 31, 2004 and 2003 8 Three months ended December 31, 2004 and September 30, 2004 9 Consolidated Statement of Condition 10 These financial schedules should be used in conjunction with State Street's quarterly earnings press release. State Street believes that non-GAAP supplemental financial information assists investors and others by providing them with financial information in a format that presents comparable financial trends of ongoing business activities. STATE STREET CORPORATION Press Release Addendum SUMMARY OF REPORTED RESULTS (1) (Dollars in millions, except per share data) Quarter ended ------------------------------ December 31, December 31, 2004 2003 --------------- ------------ Revenue $1,271 $1,506 Earnings 184 447 Diluted earnings per share .55 1.33 Quarter ended ---------------------------------- December 31, September 30, 2004 2004 --------------- ------------ Revenue $1,271 $1,174 Earnings 184 177 Diluted earnings per share .55 .52 Year ended ---------------------- December 31, December 31, 2004 2003 --------------- ------------ Revenue $4,951 $4,734 Earnings 798 722 Diluted earnings per share 2.35 2.15 - ------------------------------------------------------------------- (1) Information presented in accordance with accounting principles generally accepted in the United States STATE STREET CORPORATION Press Release Addendum SELECTED REPORTED FINANCIAL INFORMATION Three months and year ended December 31, 2004 and 2003 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 December December (Dollars in millions, except 31, 31, 31, 31, per share data) 2004 2003 2004 2003 - ------------------------------------------------ -------------------- Fee Revenue: Servicing fees $ 570 $ 525 $ 2,263 $ 1,950 Management fees 167 137 623 533 Securities lending 58 53 259 245 Foreign exchange trading 111 115 420 391 Brokerage fees 43 37 155 122 Processing fees and other 80 90 328 315 --------- --------- --------- --------- Total Fee Revenue 1,029 957 4,048 3,556 Net Interest Revenue: Interest revenue 532 377 1,787 1,539 Interest expense 315 167 928 729 --------- --------- --------- --------- Net interest revenue 217 210 859 810 Provision for loan losses (18) - (18) - --------- --------- --------- --------- Net interest revenue after provision for loan losses 235 210 877 810 Gains on the sales of available-for-sale investment securities, net 7 (6) 26 23 Gain on the sale of the Corporate Trust business, net of associated costs - 60 - 60 Gain on the sale of the Private Asset Management business, net of exit and other associated costs - 285 - 285 --------- --------- --------- --------- Total Revenue 1,271 1,506 4,951 4,734 Operating Expenses: Salaries and employee benefits 511 437 1,957 1,731 Information systems and communications 131 141 527 551 Transaction processing services 104 83 398 314 Occupancy 101 69 363 300 Merger, integration, and divestiture costs 12 29 62 110 Restructuring costs 21 1 21 296 Other 112 68 431 320 --------- --------- --------- --------- Total operating expenses 992 828 3,759 3,622 --------- --------- --------- --------- Income before income taxes 279 678 1,192 1,112 Income taxes 95 231 394 390 --------- --------- --------- --------- Net Income $ 184 $ 447 $ 798 $ 722 ========= ========= ========= ========= Earnings Per Share: Basic $ .55 $ 1.34 $ 2.38 $ 2.18 Diluted .55 1.33 2.35 2.15 Average Shares Outstanding (in thousands): Basic 333,238 333,579 334,606 331,692 Diluted 336,964 338,895 339,605 335,326 Return on equity 11.9 % 15.6 % 13.3 % 13.9 % Cash dividends declared per share $ .17 $ .15 $ .64 $ .56 OTHER SELECTED FINANCIAL INFORMATION As of (Dollars in millions, except -------------------------- per share data or where December 31, December 31, otherwise indicated) 2004 2003 - ---------------------------------------------------------------- Assets under custody (in billions) $ 9,497 $ 9,370 Assets under management (in billions) 1,354 1,106 Total assets $ 94,040 $ 87,534 Long-term debt 2,458 2,222 Stockholders' equity 6,159 5,747 Closing price per share of common stock $ 49.12 $ 52.08 STATE STREET CORPORATION Press Release Addendum SELECTED REPORTED FINANCIAL INFORMATION Three months ended December 31, 2004 and September 30, 2004 CONSOLIDATED STATEMENT OF INCOME PREPARED IN ACCORDANCE WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES Reported Results Quarter ended -------------------- (Dollars in millions, except per share December 31, September 30, data) 2004 2004 - ---------------------------------------------------------------------- Fee Revenue: Servicing fees $ 570 $ 568 Management fees 167 156 Securities lending 58 48 Foreign exchange trading 111 75 Brokerage fees 43 31 Processing fees and other 80 83 ------------- ------------- Total Fee Revenue 1,029 961 Net Interest Revenue: Interest revenue 532 463 Interest expense 315 250 ------------- ------------- Net interest revenue 217 213 Provision for loan losses (18) - ------------- ------------- Net interest revenue after provision for loan losses 235 213 Gains on the sales of available-for-sale investment securities, net 7 - ------------- ------------- Total Revenue 1,271 1,174 Operating Expenses: Salaries and employee benefits 511 474 Information systems and communications 131 127 Transaction processing services 104 95 Occupancy 101 88 Merger, integration, and divestiture costs 12 16 Restructuring costs 21 - Other 112 106 ------------- ------------- Total operating expenses 992 906 ------------- ------------- Income before income taxes 279 268 Income taxes 95 91 ------------- ------------- Net Income $ 184 $ 177 ============= ============= Earnings Per Share: Basic $ .55 $ .52 Diluted .55 .52 Average Shares Outstanding (in thousands): Basic 333,238 335,626 Diluted 336,964 339,348 Return on equity 11.9 % 11.7 % Cash dividends declared per share $ .17 $ .16 OTHER SELECTED FINANCIAL INFORMATION As of ----------------------------- December 31, September 30, (Dollars in millions, except per share data or where otherwise indicated) 2004 2004 - ---------------------------------------------------------------------- Assets under custody (in billions) $ 9,497 $ 9,000 Assets under management (in billions) 1,354 1,236 Total assets $ 94,040 $ 100,527 Long-term debt 2,458 2,436 Stockholders' equity 6,159 6,151 Closing price per share of common stock $ 49.12 $ 42.71 STATE STREET CORPORATION Press Release Addendum RECONCILIATION OF REPORTED RESULTS TO OPERATING RESULTS Three months ended December 31, 2004 and 2003 -------------------------------- (Dollars in millions) -------------------------------- Quarter ended December 31, 2004 -------------------------------- Reported Operating Results Other Results ------------ ------ ----------- Fee Revenue: Servicing fees $ 570 $ 570 Management fees 167 167 Securities lending 58 58 Foreign exchange trading 111 111 Brokerage fees 43 43 Processing fees and other 80 80 ------------ ---------- Total fee revenue 1,029 1,029 Net Interest Revenue: Net Interest Revenue 217 $ 12 (1) 229 Provision for loan losses (18) - (18) ------------ ------ ---------- Net interest revenue after provision for loan losses 235 12 247 Gains on the sales of available-for-sale investment securities, net 7 - 7 Gain on the sale of the Corporate Trust business, net of associated costs Gain on the sale of the Private Asset Management business, net of exit and other associated costs ------------ ------ ---------- Total Revenue 1,271 12 1,283 Operating Expenses: Salaries and employee benefits 511 - 511 Information systems and communications 131 - 131 Transaction processing services 104 - 104 Occupancy 101 - 101 Merger, integration and divestiture costs 12 (12)(2) - Restructuring 21 21 Other 112 - 112 ------------ ------ ---------- Total operating expenses 992 (12) 980 ------------ ------ ---------- Income before income taxes 279 24 303 Income taxes 95 4 (3) 99 Taxable-equivalent adjustment - 12 (1) 12 ------------ ------------------ Net Income $ 184 $ 8 $ 192 ============ ====== ========== Diluted Earnings Per Share $ .55 $ .02 $ .57 Average Diluted Shares (in thousands) 336,964 336,964 Return on equity 11.9 % 12.4 % --------------------------------------- (Dollars in millions) --------------------------------------- Quarter ended December 31, 2003 --------------------------------------- Reported Operating Results PAM(4) Other Results --------------------------------------- Fee Revenue: Servicing fees $ 525 $ 525 Management fees 137 $(4) 133 Securities lending 53 - 53 Foreign exchange trading 115 - 115 Brokerage fees 37 - 37 Processing fees and other 90 - 90 --------------- ------------ Total fee revenue 957 (4) 953 Net Interest Revenue: Net Interest Revenue 210 - $ 12 (1) 222 Provision for loan losses - - - - ----------------------------------- Net interest revenue after provision for loan losses 210 - 12 222 Gains on the sales of available-for-sale investment securities, net (6) - - (6) Gain on the sale of the Corporate Trust business, net of associated costs 60 - (60) - Gain on the sale of the Private Asset Management business, net of exit and other associated costs 285 - (285) - ----------------------------------- Total Revenue 1,506 (4) (333) 1,169 Operating Expenses: Salaries and employee benefits 437 (1) - 436 Information systems and communications 141 - - 141 Transaction processing services 83 - - 83 Occupancy 69 (1) - 68 Merger, integration and divestiture costs 29 - (29)(2) - Restructuring 1 (1) - Other 68 (1) - 67 ----------------------------------- Total operating expenses 828 (3) (30) 795 ----------------------------------- Income before income taxes 678 (1) (303) 374 Income taxes 231 (1) (107)(5) 123 Taxable-equivalent adjustment - - 12 (1) 12 ----------------------------------- Net Income $ 447 $ - $(208) $ 239 =================================== Diluted Earnings Per Share $ 1.33 $ - $(.62) $ .71 Average Diluted Shares (in thousands) 338,895 338,895 Return on equity 15.6 % 18.7 % Notes: Reported results agree with the Corporation's Consolidated Statement of Income. (1) Taxable-equivalent adjustment is not included in reported results. (2) Merger and integration costs associated with the acquisition of the GSS business. (3) Reflects the tax benefit associated with the merger and integration costs. (4) Results of the divested Private Asset Management business (5) Reflects the tax expense on gains on sales of divested businesses, net of the benefit associated with the merger, integration, divestiture and restructuring costs. STATE STREET CORPORATION Press Release Addendum RECONCILIATION OF REPORTED RESULTS TO OPERATING RESULTS Three months ended December 31, 2004 and September 30, 2004 ----------------------------- (Dollars in millions) ----------------------------- Quarter ended December 31, 2004 ----------------------------- Reported Operating Results Other Results --------- ------ ----------- Fee Revenue: Servicing fees $ 570 $ 570 Management fees 167 167 Securities lending 58 58 Foreign exchange trading 111 111 Brokerage fees 43 43 Processing fees and other 80 80 --------- ---------- Total fee revenue 1,029 1,029 Net Interest Revenue: Net Interest Revenue 217 $ 12 (1) 229 Provision for loan losses (18) - (18) --------- ------ ---------- Net interest revenue after provision for loan losses 235 12 247 Gains on the sales of available-for-sale investment securities, net 7 - 7 Gain on the sale of the Corporate Trust business, net of associated costs Gain on the sale of the Private Asset Management business, net of exit and other associated costs --------- ------ ---------- Total Revenue 1,271 12 1,283 Operating Expenses: Salaries and employee benefits 511 - 511 Information systems and communications 131 - 131 Transaction processing services 104 - 104 Occupancy 101 - 101 Merger, integration and divestiture costs 12 (12)(2) - Restructuring 21 21 Other 112 - 112 --------- ------ ---------- Total operating expenses 992 (12) 980 --------- ------ ---------- Income before income taxes 279 24 303 Income taxes 95 4 (3) 99 Taxable-equivalent adjustment - 12 (1) 12 --------- ------------------ Net Income $ 184 $ 8 $ 192 ========= ====== ========== Diluted Earnings Per Share $ .55 $ .02 $ .57 Average Diluted Shares (in thousands) 336,964 336,964 Return on equity 11.9 % 12.4 % ----------------------------- (Dollars in millions) ----------------------------- Quarter ended September 30, 2004 ----------------------------- Reported Operating Results Other Results --------- ------ ----------- Fee Revenue: Servicing fees $ 568 $ 568 Management fees 156 156 Securities lending 48 48 Foreign exchange trading 75 75 Brokerage fees 31 31 Processing fees and other 83 83 --------- ---------- Total fee revenue 961 961 Net Interest Revenue: Net Interest Revenue 213 $ 10 (1) 223 Provision for loan losses - - - --------- ------ ---------- Net interest revenue after provision for loan losses 213 10 223 Gains on the sales of available-for-sale investment securities, net - - - Gain on the sale of the Corporate Trust business, net of associated costs Gain on the sale of the Private Asset Management business, net of exit and other associated costs --------- ------ ---------- Total Revenue 1,174 10 1,184 Operating Expenses: Salaries and employee benefits 474 - 474 Information systems and communications 127 - 127 Transaction processing services 95 - 95 Occupancy 88 - 88 Merger, integration and divestiture costs 16 (16)(2) - Restructuring - - Other 106 - 106 --------- ------ ---------- Total operating expenses 906 (16) 890 --------- ------ ---------- Income before income taxes 268 26 294 Income taxes 91 5 (3) 96 Taxable-equivalent adjustment - 10 (1) 10 --------- ------------------ Net Income $ 177 $ 11 $ 188 ========= ====== ========== Diluted Earnings Per Share $ .52 $ .03 $ .55 Average Diluted Shares (in thousands) 339,348 339,348 Return on equity 11.7 % 12.3 % Notes: Reported results agree with the Corporation's Consolidated Statement of Income. (1) Taxable-equivalent adjustment is not included in reported results. (2) Merger and integration costs associated with the acquisition of the GSS business. (3) Reflects the tax benefit associated with the merger and integration costs. STATE STREET CORPORATION Press Release Addendum RECONCILIATION OF REPORTED RESULTS TO OPERATING RESULTS Year ended December 31, 2004 and 2003 ------------------------------ (Dollars in millions) ------------------------------ Year ended December 31, 2004 ------------------------------ Reported Operating Results Other Results --------- ------ ----------- Fee Revenue: Servicing fees $ 2,263 $ 2,263 Management fees 623 623 Securities lending 259 259 Foreign exchange trading 420 420 Brokerage fees 155 155 Processing fees and other 328 328 --------- ---------- Total fee revenue 4,048 4,048 Net Interest Revenue: Net Interest Revenue 859 $ 45 (1) 904 Provision for loan losses (18) - (18) --------- ------ ---------- Net interest revenue after provision for loan losses 877 45 922 Gains on the sales of available-for-sale investment securities, net 26 - 26 Gain on the sale of the Corporate Trust business, net of associated costs - - - Gain on the sale of the Private Asset Management business, net of exit and other associated costs - - - --------- ------ ---------- Total Revenue 4,951 45 4,996 Operating Expenses: Salaries and employee benefits 1,957 - 1,957 Information systems and communications 527 - 527 Transaction processing services 398 - 398 Occupancy 363 - 363 Merger and integration costs 62 (62)(2) - Restructuring 21 - 21 Other 431 - 431 --------- ------ ---------- Total operating expenses 3,759 (62) 3,697 --------- ------ ---------- Income before income taxes 1,192 107 1,299 Income taxes 394 21 (3) 415 Taxable-equivalent adjustment - 45 (1) 45 --------- ------ ---------- Net Income $ 798 $ 41 $ 839 ========= ====== ========== Diluted Earnings Per Share $ 2.35 $ .12 $ 2.47 Average Diluted Shares (in thousands) 339,605 339,605 Return on equity 13.3 % 14.0 % ------------------------------------- (Dollars in millions) ------------------------------------- Year ended December 31, 2003 ------------------------------------- Reported Operating Results PAM(4) Other Results --------- -------------- ----------- Fee Revenue: Servicing fees $ 1,950 $ 1,950 Management fees 533 $ (59) 474 Securities lending 245 - 245 Foreign exchange trading 391 - 391 Brokerage fees 122 - 122 Processing fees and other 315 (1) $ 13 327 --------- ------ ------ ---------- Total fee revenue 3,556 (60) 13 3,509 Net Interest Revenue: Net Interest Revenue 810 - 51 (1) 861 Provision for loan losses - - - - --------- ------ ------ ---------- Net interest revenue after provision for loan losses 810 - 51 861 Gains on the sales of available- for-sale investment securities, net 23 - - 23 Gain on the sale of the Corporate Trust business, net of associated costs 60 - (60) - Gain on the sale of the Private Asset Management business, net of exit and other associated costs 285 - (285) - --------- ------ ------ ---------- Total Revenue 4,734 (60) (281) 4,393 Operating Expenses: Salaries and employee benefits 1,731 (19) - 1,712 Information systems and communications 551 (1) - 550 Transaction processing services 314 (1) - 313 Occupancy 300 (5) - 295 Merger and integration costs 110 - (110)(2) - Restructuring 296 - (296) - Other 320 (11) - 309 --------- ------ ------ ---------- Total operating expenses 3,622 (37) (406) 3,179 --------- ------ ------ ---------- Income before income taxes 1,112 (23) 125 1,214 Income taxes 390 (8) 13 (5) 395 Taxable-equivalent adjustment - - 51 (1) 51 --------- ------ ------------------ Net Income $ 722 $ (15) $ 61 $ 768 ========= ====== ====== ========== Diluted Earnings Per Share $ 2.15 $(.04) $ .18 $ 2.29 Average Diluted Shares (in thousands) 335,326 335,326 Return on equity 13.9 % 14.8 % Notes: Reported results agree with the Corporation's Consolidated Statement of Income. (1) Taxable-equivalent adjustment is not included in reported results. (2) Merger and integration costs associated with the acquisition of the GSS business. (3) Reflects the tax benefit associated with the merger and integration costs. (4) Results of the divested Private Asset Management business (5) Reflects the tax expense on gains on sales of divested businesses, net of the benefit associated with the merger, integration, divestiture and restructuring costs. STATE STREET CORPORATION Press Release Addendum RECONCILIATION OF REPORTED FINANCIAL MEASURES TO OPERATING FINANCIAL MEASURES (Dollars in Income Income millions, except Total Before Tax Earnings per share data) Total Operating Income Expense Net Per Revenue Expenses Taxes (Benefit) Income Share ------- --------- ------ --------- ------ -------- QUARTERLY RESULTS - ------------------ Three months ended December 31, 2004 Reported results - GAAP $1,271 $992 $279 $95 $184 $.55 Non-operating businsess activities: Merger and integration costs - (12) 12 4 8 .02 ------- --------- ------- --------- ------ -------- Total non- operating business activities - (12) 12 4 8 .02 Taxable-equivalent adjustment 12 - 12 12 - - ------- --------- ------- --------- ------ -------- Operating results $1,283 $980 $303 $111 $192 $.57 ======= ========= ======= ========= ====== ======== Three months ended September 30, 2004 Reported results - GAAP $1,174 $906 $268 $91 $177 $.52 Non-operating businsess activities: Merger and integration costs - (16) 16 5 11 .03 ------- --------- ------- --------- ------ -------- Total non- operating business activities - (16) 16 5 11 .03 Taxable-equivalent adjustment 10 - 10 10 - - ------- --------- ------- --------- ------ -------- Operating results $1,184 $890 $294 $106 $188 $.55 ======= ========= ======= ========= ====== ======== Three months ended December 31, 2003 Reported results - GAAP $1,506 $828 $678 $231 $447 $1.33 Results of the divested Private Asset Management business (4) (3) (1) (1) - - Non-operating business activities: Gain on the sale of the Corporate Trust business, net of associated costs (60) - (60) (20) (40) (.56) Gain on the sale of the Private Asset Management business, net of exit and other associated costs (285) - (285) (97) (188) (.12) Restructuring costs - (1) 1 - 1 - Merger, integration, and divestiture costs - (29) 29 10 19 .06 ------- --------- ------- --------- ------ -------- Total non- operating business activities (345) (30) (315) (107) (208) (.62) Taxable-equivalent adjustment 12 - 12 12 - - ------- --------- ------- --------- ------ -------- Operating results $1,169 $795 $374 $135 $239 $.71 ======= ========= ======= ========= ====== ======== YEAR-TO-DATE RESULTS - ------------------ Year ended December 31, 2004 Reported results - GAAP $4,951 $3,759 $1,192 $394 $798 $2.35 Non-operating businsess activities: Merger and integration costs - (62) 62 21 41 .12 ------- --------- ------- --------- ------ -------- Total non- operating business activities - (62) 62 21 41 .12 Taxable-equivalent adjustment 45 - 45 45 - - ------- --------- ------- --------- ------ -------- Operating results $4,996 $3,697 $1,299 $460 $839 $2.47 ======= ========= ======= ========= ====== ======== Year ended December 31, 2003 Reported results - GAAP $4,734 $3,622 $1,112 $390 $722 $2.15 Results of the divested Private Asset Management business (60) (37) (23) (8) (15) (.04) Non-operating business activities: Gain on the sale of the Private Asset Management business, net of exit and other associated costs (285) - (285) (97) (188) (.56) Gain on the sale of the Corporate Trust business, net of associated costs (60) - (60) (20) (40) (.12) Loss on the sale of certain real estate 13 - 13 5 8 .02 Restructuring costs - (296) 296 101 195 .58 Merger, integration, and divestiture costs - (110) 110 37 73 .22 Settlement of a Massachusetts tax matter - - - (13) 13 .04 ------- --------- ------- --------- ------ -------- Total non- operating business activities (332) (406) 74 13 61 .18 Taxable-equivalent adjustment 51 - 51 51 - - ------- --------- ------- --------- ------ -------- Operating results $4,393 $3,179 $1,214 $446 $768 $2.29 ======= ========= ======= ========= ====== ======== STATE STREET CORPORATION Press Release Addendum CONSOLIDATED OPERATING RESULTS Three months and year ended December 31, 2004 and 2003 Operating results are a non-GAAP measure defined by State Street as reported results presented on a taxable-equivalent basis, adjusted for significant non-operating items and the related tax effects; For 2004, operating results exclude merger and integration costs, and for 2003, exclude the results of a divested business, merger, integration and divestiture costs, restructuring costs, and for the twelve months ended December 31, 2003, settlement of a state tax matter and the loss on sale of certain real estate. Operating Results Quarter ended ----------------------- December December 31, 31, (Dollars in millions, except per share data) 2004 2003 % Change ------- ------ --------- Operating Fee Revenue: Servicing fees $570 $525 9% Management fees 167 133 26 Securities lending 58 53 9 Foreign exchange trading 111 115 (3) Brokerage fees 43 37 16 Processing fees and other 80 90 (11) ------- ------ Total Operating Fee Revenue 1,029 953 8 Operating Net Interest Revenue: Net interest revenue 229 222 3 Provision for loan losses (18) - ------- ------ Operating net interest revenue after provision for loan losses (taxable-equivalent basis) 247 222 11 Gains on the sales of available-for-sale investment securities, net 7 (6) (217) ------- ------ Total Operating Revenue 1,283 1,169 10 Expenses - Operating Results: Salaries and employee benefits 511 436 17 Information systems and communications 131 141 (7) Transaction processing services 104 83 25 Occupancy 101 68 49 Restructuring Costs 21 - Other 112 67 67 ------- ------ Total Expenses - Operating Results 980 795 23 ------- ------ Operating Income before income taxes 303 374 (19) Income taxes 99 123 Taxable-equivalent adjustment 12 12 ------- ------ Net Operating Income $192 $239 (20) ======= ====== Diluted Operating Earnings Per Share $.57 $.71 (20) Return on equity 12.4% 18.7% Operating Results Year ended ----------------------------- December December (Dollars in millions, except 31, 31, per share data) 2004 2003 % Change --------- ------- --------- Operating Fee Revenue: Servicing fees $2,263 $1,950 16 % Management fees 623 474 31 Securities lending 259 245 6 Foreign exchange trading 420 391 7 Brokerage fees 155 122 27 Processing fees and other 328 327 - --------- ------- Total Operating Fee Revenue 4,048 3,509 15 Operating Net Interest Revenue: Net interest revenue 904 861 5 Provision for loan losses (18) - --------- ------- Operating net interest revenue after provision for loan losses 922 861 7 (taxable-equivalent basis) Gains on the sales of available-for- sale investment securities, net 26 23 13 --------- ------- Total Operating Revenue 4,996 4,393 14 Expenses - Operating Results: Salaries and employee benefits 1,957 1,712 14 Information systems and communications 527 550 (4) Transaction processing services 398 313 27 Occupancy 363 295 23 Restructuring Costs 21 - Other 431 309 39 --------- ------- Total Expenses - Operating Results 3,697 3,179 16 --------- ------- Operating Income before income taxes 1,299 1,214 7 Income taxes 415 395 Taxable-equivalent adjustment 45 51 --------- ------- Net Operating Income $839 $768 9 ========= ======= Diluted Operating Earnings Per Share $2.47 $2.29 8 Return on equity 14.0 % 14.8 % STATE STREET CORPORATION Press Release Addendum CONSOLIDATED OPERATING RESULTS Three months ended December 31, 2004 and September 30, 2004 Operating results are a non-GAAP measure defined by State Street as reported results presented on a taxable-equivalent basis, and in 2004, excluding merger and integration costs and the related tax effects of such costs. Operating Results Quarter ended ---------------------------------- December September (Dollars in millions, except per 31, 30, share data) 2004 2004 % Change ------------- ---------------------- Operating Fee Revenue: Servicing fees $570 $568 - % Management fees 167 156 7 Securities lending 58 48 21 Foreign exchange trading 111 75 48 Brokerage fees 43 31 39 Processing fees and other 80 83 (4) ------------- ----------- Total Operating Fee Revenue 1,029 961 7 Operating Net Interest Revenue: Net interest revenue 229 223 3 Provision for loan losses (18) - ------------- ----------- Operating net interest revenue after provision for loan losses 247 223 11 (taxable-equivalent basis) Gains on the sales of available- for-sale investment securities, net 7 - ------------- ----------- Total Operating Revenue 1,283 1,184 8 Expenses - Operating Results: Salaries and employee benefits 511 474 8 Information systems and communications 131 127 3 Transaction processing services 104 95 9 Occupancy 101 88 15 Restructuring 21 - Other 112 106 6 ------------- ----------- Total Expenses - Operating Results 980 890 10 ------------- ----------- Operating Income before income taxes 303 294 3 Income taxes 99 96 Taxable-equivalent adjustment 12 10 ------------- ----------- Net Operating Income $192 $188 2 ============= =========== Diluted Operating Earnings Per Share $.57 $.55 4 Return on equity 12.4 % 12.3 % STATE STREET CORPORATION Press Release Addendum CONSOLIDATED STATEMENT OF CONDITION - ---------------------------------------------------------------------- December 31, December 31, (Dollars in millions) 2004 2003 - ---------------------------------------------------------------------- Assets Cash and due from banks $ 2,035 $ 3,376 Interest-bearing deposits with banks 20,634 21,738 Securities purchased under resale agreements 12,878 9,447 Federal funds sold 5,450 104 Trading account assets 745 405 Investment securities 37,571 38,215 Loans (less allowance of $18 and $61) 4,611 4,960 Premises and equipment 1,444 1,212 Accrued income receivable 1,204 1,015 Goodwill 1,497 1,326 Other intangible assets 515 525 Other assets 5,456 5,211 ------------ ------------ Total Assets $94,040 $87,534 ============ ============ Liabilities Deposits: Noninterest-bearing $13,671 $ 7,893 Interest-bearing -- U.S. 2,843 5,062 Interest-bearing -- Non-U.S. 38,615 34,561 ------------ ------------ Total Deposits 55,129 47,516 Securities sold under repurchase agreements 21,881 22,806 Federal funds purchased 435 1,019 Other short-term borrowings 1,343 1,437 Accrued taxes and other expenses 2,603 2,424 Other liabilities 4,032 4,363 Long-term debt 2,458 2,222 ------------ ------------ Total Liabilities 87,881 81,787 Stockholders' Equity Preferred stock, no par: authorized 3,500,000; issued none Common stock, $1 par: authorized 500,000,000 shares; issued 337,126,000 and 337,132,000 337 337 Surplus 289 329 Retained earnings 5,590 5,007 Accumulated other comprehensive income 92 192 Treasury stock at cost (3,481,000 and 2,658,000 shares) (149) (118) ------------ ------------ Total Stockholders' Equity 6,159 5,747 ------------ ------------ Total Liabilities and Stockholders' Equity $94,040 $87,534 ============ ============ CONTACT: State Street Corporation Edward J. Resch, 617-664-1110 Investors: Kelley MacDonald, 617-664-3477 Media: Hannah Grove, 617-664-3377 -----END PRIVACY-ENHANCED MESSAGE-----