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Table of Contents
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
Form 10-Q
 
x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended September 30, 2002
or
¨    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From             to             
 
Commission File No. 0-5108
 
STATE STREET CORPORATION
(Exact name of registrant as specified in its charter)
 
COMMONWEALTH OF MASSACHUSETTS
  
04-2456637
(State or other jurisdiction
of incorporation)
  
(I.R.S. Employer
Identification No.)
225 Franklin Street
  
02110
Boston, Massachusetts
  
(Zip Code)
(Address of principal
executive office)
    
 
617-786-3000
(Registrant’s telephone number, including area code)
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
Yes  x        No  ¨
 
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
 
Yes  x        No  ¨
 
The number of shares of the Registrant’s Common Stock outstanding on October 31, 2002 was 324,368,969
 

Table of Contents
STATE STREET CORPORATION
 
Table of Contents
 
    
Page
PART I.    FINANCIAL INFORMATION
     
Item 1.    Financial Statements
     
  
1
  
3
  
4
  
5
  
6
  
16
  
17
  
29
  
29
PART II.    OTHER INFORMATION
     
  
29
  
31
  
32
Exhibits
   
35

Table of Contents
PART I.  ITEM 1.
FINANCIAL STATEMENTS
 
Consolidated Statement of Income—State Street Corporation (Unaudited)
 
(Dollars in millions, except per share data) Three months ended September 30,
   
 
2002
     
 
2001
Fee Revenue
                
Servicing fees
   
$
427
     
$
405
Management fees
   
 
124
     
 
125
Foreign exchange trading
   
 
79
     
 
87
Brokerage fees
   
 
32
     
 
21
Processing fees and other
   
 
40
     
 
63
    
    
Total fee revenue
   
 
702
     
 
701
Net Interest Revenue
                
Interest revenue
   
 
475
     
 
705
Interest expense
   
 
251
     
 
451
    
    
Net interest revenue
   
 
224
     
 
254
Provision for loan losses
   
 
1
     
 
3
    
    
Net interest revenue after provision for loan losses
   
 
223
     
 
251
Gains on the sales of available-for-sale investment securities
   
 
31
     
 
15
    
    
Total Revenue
   
 
956
     
 
967
Operating Expenses
                
Salaries and employee benefits
   
 
398
     
 
420
Information systems and communications
   
 
92
     
 
93
Transaction processing services
   
 
63
     
 
61
Occupancy
   
 
62
     
 
57
Other
   
 
69
     
 
89
    
    
Total operating expenses
   
 
684
     
 
720
    
    
Income before income taxes
   
 
272
     
 
247
Income taxes
   
 
90
     
 
77
    
    
Net Income
   
$
182
     
$
170
    
    
Earnings Per Share
                
Basic
   
$
.57
     
$
.52
Diluted
   
 
.56
     
 
.51
Average Shares Outstanding (in thousands)
                
Basic
   
 
323,023
     
 
326,731
Diluted
   
 
326,163
     
 
331,764
Cash Dividends Declared Per Share
   
 
$       .12
     
 
$       .10
 
The accompanying notes are an integral part of these financial statements.
 

1

Table of Contents
PART I.  ITEM 1.
FINANCIAL STATEMENTS (continued)
 
Consolidated Statement of Income—State Street Corporation (Unaudited)
 
(Dollars in millions, except per share data) Nine months ended September 30,
   
 
2002
     
 
2001
Fee Revenue
                
Servicing fees
   
$
1,289
     
$
1,227
Management fees
   
 
400
     
 
387
Foreign exchange trading
   
 
238
     
 
285
Brokerage fees
   
 
86
     
 
66
Processing fees and other
   
 
131
     
 
95
    
    
Total fee revenue
   
 
2,144
     
 
2,060
Net Interest Revenue
                
Interest revenue
   
 
1,509
     
 
2,292
Interest expense
   
 
755
     
 
1,552
    
    
Net interest revenue
   
 
754
     
 
740
Provision for loan losses
   
 
3
     
 
7
    
    
Net interest revenue after provision for loan losses
   
 
751
     
 
733
Gains on the sales of available-for-sale investment securities
   
 
45
     
 
36
    
    
Total Revenue
   
 
2,940
     
 
2,829
Operating Expenses
                
Salaries and employee benefits
   
 
1,259
     
 
1,228
Information systems and communications
   
 
279
     
 
270
Transaction processing services
   
 
181
     
 
185
Occupancy
   
 
182
     
 
166
Other
   
 
236
     
 
302
    
    
Total operating expenses
   
 
2,137
     
 
2,151
    
    
Income before income taxes
   
 
803
     
 
678
Income taxes
   
 
265
     
 
220
    
    
Net Income
   
$
538
     
$
458
    
    
Earnings Per Share
                
Basic
   
$
1.66
     
$
1.41
Diluted
   
 
1.64
     
 
1.38
Average Shares Outstanding (in thousands)
                
Basic
   
 
323,521
     
 
325,550
Diluted
   
 
327,713
     
 
330,813
Cash Dividends Declared Per Share
   
$
.35
     
$
.295
 
The accompanying notes are an integral part of these financial statements.

2

Table of Contents
PART I.  ITEM 1.
FINANCIAL STATEMENTS (continued)
 
Consolidated Statement of Condition—State Street Corporation
 
(Dollars in millions, except per share data)
   
 
 
September 30,
2002
 
 
     
 
 
December 31,
2001
 
 
    
(Unaudited)
       
(Note A)
  
Assets
                    
Cash and due from banks
   
$
1,628
 
     
$
1,651
 
Interest-bearing deposits with banks
   
 
24,176
 
     
 
20,317
 
Securities purchased under resale agreements and securities borrowed
   
 
20,144
 
     
 
16,680
 
Federal funds sold
   
 
300
 
           
Trading account assets
   
 
1,073
 
     
 
994
 
Investment securities (including securities pledged of $7,485 and $9,006)
   
 
20,789
 
     
 
20,781
 
Loans (less allowance of $61 and $58)
   
 
4,678
 
     
 
5,283
 
Premises and equipment
   
 
890
 
     
 
829
 
Accrued income receivable
   
 
792
 
     
 
880
 
Goodwill
   
 
523
 
     
 
470
 
Other intangible assets
   
 
151
 
     
 
142
 
Other assets
   
 
2,412
 
     
 
1,823
 
    
    
Total Assets
   
$
77,556
 
     
$
69,850
 
    
    
Liabilities
                    
Deposits:
                    
Interest-bearing—U.S.
   
$
10,464
 
     
$
2,753
 
Noninterest-bearing
   
 
7,952
 
     
 
9,390
 
Interest-bearing—Non-U.S.
   
 
24,768
 
     
 
26,416
 
    
    
Total deposits
   
 
43,184
 
     
 
38,559
 
Securities sold under repurchase agreements
   
 
22,085
 
     
 
19,006
 
Federal funds purchased
   
 
2,100
 
     
 
3,315
 
Other short-term borrowings
   
 
1,192
 
     
 
1,012
 
Accrued taxes and other expenses
   
 
1,700
 
     
 
1,582
 
Other liabilities
   
 
1,684
 
     
 
1,314
 
Long-term debt
   
 
1,262
 
     
 
1,217
 
    
    
Total Liabilities
   
 
73,207
 
     
 
66,005
 
Stockholders’ Equity
                    
Preferred stock, no par: authorized 3,500,000; issued none
                    
Common stock, $1 par: authorized 500,000,000; issued 329,992,000 and 329,999,000
   
 
330
 
     
 
330
 
Surplus
   
 
107
 
     
 
110
 
Retained earnings
   
 
4,037
 
     
 
3,612
 
Other unrealized comprehensive income
   
 
125
 
     
 
70
 
Treasury stock, at cost (5,652,000 and 6,329,000 shares)
   
 
(250
)
     
 
(277
)
    
    
Total Stockholders’ Equity
   
 
4,349
 
     
 
3,845
 
    
    
Total Liabilities and Stockholders’ Equity
   
$
77,556
 
     
$
69,850
 
    
    
 
The accompanying notes are an integral part of these financial statements.

3

Table of Contents
PART I.  ITEM 1.
FINANCIAL STATEMENTS (continued)
 
Consolidated Statement of Changes in Stockholders’ Equity—State Street Corporation (Unaudited)
 
(Dollars in millions, shares in thousands)
  
Common Stock
  
Surplus
    
Retained Earnings</