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 March 31, 2003
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)
| MASSACHUSETTS |
04-2456637 | |
| (State or other jurisdiction |
(I.R.S. Employer | |
| 225 Franklin Street |
02110 | |
| Boston, Massachusetts |
(Zip Code) | |
| (Address of principal |
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 March 31, 2003 was 332,396,028.
STATE STREET CORPORATION
| Page | ||
| PART I. FINANCIAL INFORMATION |
||
| Item 1. Financial Statements |
||
| 1 | ||
| 2 | ||
| 3 | ||
| 4 | ||
| 5 | ||
| 16 | ||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 | |
| Item 3. Quantitative and Qualitative Disclosure About Market Risk |
33 | |
| Item 4. Controls and Procedures |
33 | |
| PART II. OTHER INFORMATION |
||
| 34 | ||
| 34 | ||
| Item 6. Exhibits and Reports on Form 8-K |
35 | |
| 36 | ||
| 37 | ||
| Exhibits |
PART I. ITEM 1.
FINANCIAL STATEMENTS
Consolidated Statement of Income—State Street Corporation (Unaudited)
| (Dollars in millions, except per share data) Three months ended March 31, |
|
2003 |
|
2002 | ||
| Fee Revenue: |
||||||
| Servicing fees |
$ |
438 |
$ |
369 | ||
| Management fees |
|
125 |
|
124 | ||
| Global securities lending |
|
55 |
|
64 | ||
| Foreign exchange trading |
|
72 |
|
68 | ||
| Brokerage fees |
|
30 |
|
23 | ||
| Processing fees and other |
|
70 |
|
49 | ||
| Total fee revenue |
|
790 |
|
697 | ||
| Net Interest Revenue: |
||||||
| Interest revenue |
|
397 |
|
524 | ||
| Interest expense |
|
193 |
|
243 | ||
| Net interest revenue |
|
204 |
|
281 | ||
| Provision for loan losses |
|
— |
|
1 | ||
| Net interest revenue after provision for loan losses |
|
204 |
|
280 | ||
| Gains on the sales of available-for-sale investment securities |
|
26 |
|
4 | ||
| Total Revenue |
|
1,020 |
|
981 | ||
| Operating Expenses: |
||||||
| Salaries and employee benefits |
|
443 |
|
421 | ||
| Information systems and communications |
|
130 |
|
96 | ||
| Transaction processing services |
|
72 |
|
59 | ||
| Occupancy |
|
71 |
|
60 | ||
| Merger and integration costs |
|
37 |
|
— | ||
| Other |
|
81 |
|
79 | ||
| Total operating expenses |
|
834 |
|
715 | ||
| Income before income taxes |
|
186 |
|
266 | ||
| Income taxes |
|
90 |
|
88 | ||
| Net Income |
$ |
96 |
$ |
178 | ||
| Earnings Per Share |
||||||
| Basic |
$ |
.29 |
$ |
.55 | ||
| Diluted |
|
.29 |
|
.54 | ||
| Average Shares Outstanding (in thousands) |
||||||
| Basic |
|
329,569 |
|
323,689 | ||
| Diluted |
|
332,054 |
|
328,999 | ||
| Cash Dividends Declared Per Share |
$ |
.13 |
$ |
.11 | ||
The accompanying notes are an integral part of these financial statements.
1
PART I. ITEM 1.
FINANCIAL STATEMENTS (continued)
Consolidated Statement of Condition—State Street Corporation
| (Dollars in millions, except per share data) |
|
March 31, |
|
|
December 31, |
| ||
| (Unaudited) |
(Note1) |
|||||||
| Assets |
||||||||
| Cash and due from banks |
$ |
1,581 |
|
$ |
1,361 |
| ||
| Interest-bearing deposits with banks |
|
21,007 |
|
|
28,143 |
| ||
| Securities purchased under resale agreements and securities borrowed |
|
14,221 |
|
|
17,215 |
| ||
| Federal funds sold |
|
1,450 |
|
|
— |
| ||
| Trading account assets |
|
1,316 |
|
|
984 |
| ||
| Investment securities (including securities pledged of $15,582 and $10,335) |
|
28,600 |
|
|
28,071 |
| ||
| Loans (less allowance of $61 and $61) |
|
4,639 |
|
|
4,113 |
| ||
| Premises and equipment |
|
948 |
|
|
887 |
| ||
| Accrued income receivable |
|
829 |
|
|
823 |
| ||
| Goodwill |
|
1,191 |
|
|
462 |
| ||
| Other intangible assets |
|
486 |
|
|
127 |
| ||
| Other assets |
|
2,841 |
|
|
3,608 |
| ||
| Total Assets |
$ |
79,109 |
|
$ |
85,794 |
| ||
| Liabilities |
||||||||
| Deposits: |
||||||||
| Noninterest-bearing |
$ |
7,026 |
|
$ |
7,279 |
| ||
| Interest-bearing—U.S. |
|
6,114 |
|
|
9,005 |
| ||
| Interest-bearing—Non-U.S. |
|
25,265 |
|
|
29,184 |
| ||
| Total deposits |
|
38,405 |
|
|
45,468 |
| ||
| Securities sold under repurchase agreements |
|
23,435 |
|
|
21,963 |
| ||
| Federal funds purchased |
|
4,690 |
|
|
3,895 |
| ||
| Other short-term borrowings |
|
2,004 |
|
|
3,440 |
| ||
| Accrued taxes and other expenses |
|
1,991 |
|
|
1,967 |
| ||
| Other liabilities |
|
1,917 |
|
|
3,004 |
| ||
| Long-term debt |
|
1,616 |
|
|
1,270 |
| ||
| Total Liabilities |
|
74,058 |
|
|
81,007 |
| ||
| Stockholders’ Equity |
||||||||
| Preferred stock, no par: authorized 3,500,000; issued none |
||||||||
| Common stock, $1 par: authorized 500,000,000, issued 337,145,000 and 329,992,000 |
|
337 |
|
|
330 |
| ||
| Surplus |
|
305 |
|
|
104 |
| ||
| Retained earnings |
|
4,525 |
|
|
4,472 |
| ||
| Accumulated other comprehensive income |
|
94 |
|
|
106 |
| ||
| Treasury stock, at cost (4,749,000 and 5,065,000 shares) |
|
(210 |
) |
|
(225 |
) | ||
| Total Stockholders’ Equity |
|
5,051 |
|
|
4,787 |
| ||
| Total Liabilities and Stockholders’ Equity |
$ |
79,109 |
|
$ |
85,794 |
| ||
The accompanying notes are an integral part of these financial statements.
2
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 |
Accumulated Other |
Treasury Stock |
Total |
|||||||||||||||||||||||
| Shares |
Amount |
Shares |
Amount |
||||||||||||||||||||||||||
| Balance at December 31, 2001 |
329,999 |
|
$ |
330 |
$ |
110 |
|
$ |
3,612 |
|
$ |
70 |
|
6,329 |
|
$ |
(277 |
) |
$ |
3,845 |
| ||||||||
| Comprehensive income: |
|||||||||||||||||||||||||||||
| Net income |
|
178 |
|
|
178 |
| |||||||||||||||||||||||
| Change in net unrealized gains/losses on available-for-sale securities, net of related taxes of $43 |
|
(59 |
) |
|
(59 |
) | |||||||||||||||||||||||
| Other, net of related tax expense of $2 |
|
2 |
|
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