

Massachusetts		04-2456637
(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification No.)
One Lincoln Street Boston, Massachusetts		02111
(Address of principal executive office)		(Zip Code)
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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x

Accelerated filer ¨

Non-accelerated filer ¨

Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

The number of shares of the registrant’s common stock outstanding as of ~~October 31, 2015~~April 30, 2016 was ~~403,486,112.~~395,940,301.



ACRONYMS


2015 Form 10-K	State Street Corporation Annual Report on Form 10-K for the year ended December 31, 2015	FRBB	Federal Reserve Bank of Boston
ABS	Asset-backed securities	FSB	Financial Stability Board
AFS	Available-for-sale	FX	Foreign exchange
ALLL	Allowance for loan and lease losses	GAAP	Generally accepted accounting principals
AML	Anti-money laundering	G-SIB	Global systemically important banks
AOCI	Accumulated other comprehensive income (loss)	HQLA⁽¹⁾	High-quality liquid assets
ASU	Accounting Standards Update	HTM	Held-to-maturity
AUCA	Assets under custody and administration	LCR⁽¹⁾	Liquidity coverage ratio
AUM	Assets under management	MRAC	Management Risk and Capital Committee
BCBS	Basel Committee on Banking Supervision	NIR	Net interest revenue
CCAR	Comprehensive Capital Analysis and Review	OCI	Other comprehensive income (loss)
CD	Certificates of deposit	OFAC	Office of Foreign Assets Control
CET1⁽¹⁾	Common equity tier 1	OTC	Over-the-counter
CLO	Collateralized loan obligations	OTTI	Other-than-temporary-impairment
CRE	Commercial real estate	Parent Company	State Street Corporation
CVA	Credit valuation adjustment	PCA	Prompt corrective action
Dodd-Frank Act	Dodd-Frank Wall Street Reform and Consumer Protection Act	P&L	Profit-and-loss
ECB	European Central Bank	RWA⁽¹⁾	Risk-weighted assets
EPS	Earnings per share	SEC	Securities and Exchange Commission
ERISA	Employee Retirement Income Security Act	SERP	Supplemental executive retirement plans
ERM	Enterprise Risk Management	SIFI	Systemically important financial institutions
ETF	Exchange-Traded Fund	SLR⁽¹⁾	Supplementary leverage ratio
EVE	Economic value of equity	SSGA	State Street Global Advisors
FASB	Financial Accounting Standards Board	State Street Bank	State Street Bank and Trust Company
FCA	Financial Conduct Authority	TMRC	Trading and Markets Risk Committee
FDIC	Federal Deposit Insurance Corporation	VaR	Value-at-risk
Federal Reserve	Board of Governors of the Federal Reserve System	VIE	Variable interest entity
FHLB	Federal Home Loan Bank of Boston

⁽¹⁾ As defined by the applicable U.S. regulations.

We use acronyms and other defined terms for certain business terms and abbreviations, as defined on the acronyms list following the table of contents to this Form 10-Q.

Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

GENERAL

State Street Corporation, referred to as the parent company, is a financial holding company organized in 1969 under the laws of the Commonwealth of Massachusetts. Our executive offices are located at One Lincoln Street, Boston, Massachusetts 02111 (telephone (617) 786-3000). For purposes of this Form 10-Q, unless the context requires otherwise, references to “State Street,” “we,” “us,” “our” or similar terms mean State Street Corporation and its subsidiaries on a consolidated basis. The parent company is a source of financial and managerial ~~support~~strength to our subsidiaries. Through our subsidiaries, including our principal banking subsidiary, State Street Bank and Trust Company, referred to as State Street Bank, we provide a broad range of financial products and services to institutional investors ~~worldwide.~~worldwide, with $26.94 trillion of AUCA and $2.30 trillion of AUM as of March 31, 2016.

As of ~~September 30, 2015,~~March 31, 2016, we had consolidated total assets of ~~$247.27~~$243.69 billion,, consolidated total deposits of ~~$186.37~~$185.52 billion,, consolidated total shareholders' equity of ~~$21.50~~$21.50 billion and ~~31,860~~32,527 employees. We operate in more than 100 geographic markets worldwide, including in the U.S., Canada, Europe, the Middle East and Asia. We

Our operations are a leader in providing financial services and products to meet the needs of institutional investors worldwide, with $27.27 trillion of assets under custody and administration and $2.20 trillion of assets underorganized for management ~~as of September 30, 2015.~~

~~We have two~~reporting purposes into 2 lines of business: Investment Servicing and Investment Management, which are defined based on products and services provided.

Investment Servicing provides services for institutional clients, including mutual funds, collective investment funds and other investment pools, corporate and public retirement plans, insurance companies, foundations and endowments worldwide. Products include custody; product- and participant-level accounting; daily pricing and administration; master trust and master custody; record-keeping; cash management; foreign exchange, brokerage and other trading services; securities finance; deposit and short-term investment facilities; loans and lease financing; investment manager and alternative investment manager operations outsourcing; and performance, risk and compliance analytics to support institutional investors.

Investment Management, through ~~State Street Global Advisors, or~~ SSGA, provides a broad array of investment management, investment research and investment advisory services to corporations, public funds and other sophisticated investors. SSGA offers active and passive asset management strategies across equity, fixed-income and cash asset classes. Products are distributed directly and through intermediaries using a

~~intermediaries using a~~ variety of investment vehicles, including ~~exchange-traded funds, or~~ ETFs, such as the SPDR^® ETF brand.

For financial and other information about our lines of business, refer to “Line of Business Information” included in this Management's Discussion and Analysis and ~~note~~Note 17 to the consolidated financial statements included in this Form 10-Q.

This Management's Discussion and Analysis is part of our Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2015~~,March 31, 2016, and updates the Management's Discussion and Analysis in our ~~Annual Report on Form 10-K for the year ended December 31, 2014, which we refer to as the 2014~~2015 Form 10-K previously filed with the ~~Securities and Exchange Commission, or~~ SEC. You should read the financial information contained in this Management's Discussion and Analysis and elsewhere in this Form 10-Q in conjunction with the financial and other information contained in our ~~2014~~2015 Form 10-K. Certain previously reported amounts presented in this Form 10-Q have been reclassified to conform to current-period presentation.

We prepare our consolidated financial statements in conformity with ~~accounting principles generally accepted in the~~ U.S.~~, referred to as~~ GAAP. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions in its application of certain accounting policies that materially affect the reported amounts of assets, liabilities, equity, revenue and expenses.

The significant accounting policies that require us to make judgments, estimates and assumptions that are difficult, subjective or complex about matters that are uncertain and may change in subsequent periods include accounting for fair value measurements; other-than-temporary impairment of investment securities; impairment of goodwill and other intangible assets; and contingencies. These significant accounting policies require the most subjective or complex judgments, and underlying estimates and assumptions could be subject to revision as new information becomes available. Additional information about these significant accounting policies is included under “Significant Accounting Estimates” in Management's Discussion and Analysis in our ~~2014~~2015 Form 10-K. We did not change these significant accounting policies in the first ~~nine months~~quarter of ~~2015.~~2016.

Certain financial information provided in this Form 10-Q, including this Management's Discussion and Analysis, is prepared on both a U.S. GAAP, or reported basis, and a non-GAAP, or operating basis, including certain non-GAAP measures used in the

~~Table of Contents~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (Continued)~~

calculation of identified regulatory capital ratios. We measure and compare certain financial information on an operating basis, as we believe that this presentation supports meaningful comparisons from period to period and the analysis of comparable

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

financial trends with respect to ~~State Street's~~our normal ongoing business operations. We believe that operating-basis financial information, which reports non-taxable revenue, such as interest revenue associated with tax-exempt investment securities, on a fully taxable-equivalent basis, facilitates an investor's understanding and analysis of ~~State Street's~~our underlying financial performance and trends in addition to financial information prepared and reported in conformity with U.S. GAAP. We also believe that the use of certain non-GAAP measures in the calculation of identified regulatory capital ratios is useful in understanding ~~State Street's~~our capital position and is of interest to investors.

Operating-basis financial information should be considered in addition to, not as a substitute for or superior to, financial information prepared in conformity with U.S. GAAP. Any non-GAAP, or operating-basis, financial information presented in this Form 10-Q, including this Management’s Discussion and Analysis, is reconciled to its most directly comparable U.S. GAAP-basis measure.

We provide additional disclosures required by applicable bank regulatory standards, including supplemental qualitative and quantitative information with respect to regulatory capital (including market risk associated with our trading activities), summary results of semi-annual State Street-run stress tests which we conduct under ~~the Dodd-Frank Wall Street Reform and Consumer Protection Act, or~~ the Dodd-Frank Act, and resolution plan disclosures required under the Dodd-Frank Act. These additional disclosures are accessible on the “Investor Relations” section of our corporate website at www.statestreet.com.

We have included our website address in this report as an inactive textual reference only. Information on our website is not incorporated by reference into this Form 10-Q.

We use acronyms and other defined terms for certain business terms and abbreviations, as defined on the acronyms list following the table of contents to this Form 10-Q.

Forward-Looking Statements

This Form 10-Q, as well as other reports and proxy materials submitted by us under the Securities Exchange Act of 1934, registration statements filed by us under the Securities Act of 1933, our annual report to shareholders and other public statements we may make, contain statements (including statements in the Management's Discussion and Analysis) that are considered “forward-looking statements” within the meaning of U.S. securities laws, including statements about our goals and expectations regarding our business, financial and capital condition, results of

operations, strategies, financial portfolio performance, dividend and stock purchase programs, expected outcomes of legal proceedings, market growth, acquisitions, joint ventures and divestitures and new

technologies, services and opportunities, as well as regarding industry, regulatory, economic and market trends, initiatives and developments, the business environment and other ~~matters.~~matters that do not relate strictly to historical facts.

Terminology such as “plan,” “expect,” “intend,” “objective,” “forecast,” “outlook,” “believe,” "priority," “anticipate,” “estimate,” “seek,” “may,” “will,” “trend,” “target,” “strategy” and “goal,” or similar statements or variations of such terms, are intended to identify forward-looking statements, although not all forward-looking statements contain such terms.

Forward-looking statements are subject to various risks and uncertainties, which change over time, are based on management's expectations and assumptions at the time the statements are made, and are not guarantees of future results. Management's expectations and assumptions, and the continued validity of the forward-looking statements, are subject to change due to a broad range of factors affecting the national and global economies, regulatory environment and the equity, debt, currency and other financial markets, as well as factors specific to State Street and its subsidiaries, including State Street Bank. Factors that could cause changes in the expectations or assumptions on which forward-looking statements are based cannot be foreseen with certainty and include, but are not limited to:

the financial strength and continuing viability of the counterparties with which we or our clients do business and to which we have investment, credit or financial exposure, including, for example, the direct and indirect effects on counterparties of the sovereign-debt risks in the U.S., Europe and other regions;

increases in the volatility of, or declines in the level of, our net interest revenue, changes in the composition or valuation of the assets recorded in our consolidated statement of condition (and our ability to measure the fair value of investment securities) and the possibility that we may change the manner in which we fund those assets;

the liquidity of the U.S. and international securities markets, particularly the markets for fixed-income securities and inter-bank credits, and the liquidity requirements of our clients;

the level and volatility of interest rates, the valuation of the U.S. dollar relative to other currencies in which we record revenue or accrue expenses and the performance and volatility of securities, credit, currency and other markets in the U.S. and internationally;

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

~~accrue expenses and the performance and volatility of securities, credit, currency and other markets in the U.S. and internationally;~~

the credit quality, credit-agency ratings and fair values of the securities in our investment securities portfolio, a deterioration or downgrade of which could lead to other-than-temporary impairment of the respective securities and the recognition of an impairment loss in our consolidated statement of income;

our ability to attract deposits and other low-cost, short-term funding, our ability to manage levels of such deposits and the relative portion of our deposits that are determined to be operational under regulatory guidelines and our ability to deploy deposits in a profitable manner consistent with our liquidity requirements and risk profile;

the manner and timing with which the Federal Reserve and other U.S. and foreign regulators implement changes to the regulatory framework applicable to our operations, including implementation of the Dodd-Frank Act, the Basel III final rule and European legislation (such as the Alternative Investment Fund Managers Directive, Undertakings for Collective Investment in Transferable Securities Directives and Markets in Financial Instruments Directive II); among other consequences, these regulatory changes impact the levels of regulatory capital we must maintain, acceptable levels of credit exposure to third parties, margin requirements applicable to derivatives, and restrictions on banking and financial activities. In addition, our regulatory posture and related expenses have been and will continue to be affected by changes in regulatory expectations for global systemically important financial institutions applicable to, among other things, risk management, liquidity and capital planning and compliance programs, and changes in governmental enforcement approaches to perceived failures to comply with regulatory or legal obligations;

we may not successfully implement our plans to address the deficiencies jointly identified by the Federal Reserve and the FDIC in April 2016 with respect to our 2015 resolution plan, or those plans may not be considered to be sufficient by the Federal Reserve and the FDIC, due to a number of factors, including, but not limited to challenges we may experience in interpreting and addressing regulatory expectations, failure to implement remediation in a timely manner, the complexities of development of a

comprehensive plan to resolve a global custodial bank and related costs and dependencies. If we fail to meet regulatory expectations to the satisfaction of the Federal Reserve and the FDIC in our resolution plan submission due on October 1, 2016 or in any future submission, we could be subject to more stringent capital, leverage or liquidity requirements, or restrictions on our growth, activities or operations;

adverse changes in the regulatory ratios that we are required or will be required to meet, whether arising under the Dodd-Frank Act or the Basel III final rule, or due to changes in regulatory positions, practices or regulations in jurisdictions in which we engage in banking activities, including changes in internal or external data, formulae, models, assumptions or other advanced systems used in the

calculation of our capital ratios that cause changes in those ratios as they are measured from period to period;

increasing requirements to obtain the prior approval of the Federal Reserve or our other U.S. and non-U.S. regulators for the use, allocation or distribution of our capital or other specific capital actions or programs, including acquisitions, dividends and stock purchases, without which our growth plans, distributions to shareholders, share repurchase programs or other capital initiatives may be restricted;

changes in law or regulation, or the enforcement of law or regulation, that may adversely affect our business activities or those of our clients or our counterparties, and the products or services that we sell, including additional or increased taxes or assessments thereon, capital adequacy requirements, margin requirements and changes that expose us to risks related to the adequacy of our controls or compliance programs;

financial market disruptions or economic recession, whether in the U.S., Europe, Asia or other regions;

our ability to develop and execute State Street Beacon, our multi-year transformation program to create cost efficiencies and to fully digitize our business to support the development of new solutions and capabilities for our clients, any failure of which, in whole or in part, may among other things, reduce our competitive position, diminish the cost-effectiveness of our systems and processes or provide an

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

insufficient return on our associated investment;

our ability to promote a strong culture of risk management, operating controls, compliance oversight and governance that meet our expectations and those of our clients and our regulators;

the results of our review of our billing practices, including additional amounts we may be required to reimburse clients, as well as potential consequences of such review, including damage to our client relationships and adverse actions by governmental authorities;

the results of, and costs associated with, governmental or regulatory inquiries and investigations, litigation and similar claims, disputes, or ~~proceedings;~~

our ability to develop, finalize and execute our plan to accelerate the next phase of our program to create cost efficiencies through changes in our operational processes and to further digitize our processes and interfaces with our clients. The objectives of this plan are to enhance the value and delivery of our products and services to clients and to identify and implement significant reductions in our cost structure. Any failure in wholecivil or in part to achieve these objectives may, among other things, limit the attractiveness of our products or services to clients. This could reduce our competitive position, diminish the cost-effectiveness of our systems and processes or provide an insufficient return on our associated investment;criminal proceedings;

the potential for losses arising from our investments in sponsored investment funds;

the possibility that our clients will incur substantial losses in investment pools for

~~Table of Contents~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (Continued)~~

which we act as agent, and the possibility of significant reductions in the liquidity or valuation of assets underlying those pools;

our ability to anticipate and manage the level and timing of redemptions and withdrawals from our collateral pools and other collective investment products;

the credit agency ratings of our debt and ~~depository~~depositary obligations and investor and client perceptions of our financial strength;

adverse publicity, whether specific to State Street or regarding other industry participants or industry-wide factors, or other reputational harm;

our ability to control operational risks, data security breach risks and outsourcing risks, our ability to protect our intellectual property rights, the possibility of errors in the quantitative models we use to manage our business and the possibility that our controls will prove insufficient, fail or be circumvented;

our ability to expand our use of technology to enhance the efficiency, accuracy and reliability of our operations and our dependencies on information technology and our ability to control related risks, including cyber-crime and other threats to our information technology infrastructure and systems and their effective operation both independently and with external systems, and complexities and costs of protecting the security of our systems and data;

our ability to grow revenue, manage expenses, attract and retain highly skilled people and raise the capital necessary to achieve our business goals and comply with regulatory requirements and expectations;

changes or potential changes to the competitive environment, including changes due to regulatory and technological changes, the effects of industry consolidation and perceptions of State Street as a suitable service provider or counterparty;

changes or potential changes in the amount of compensation we receive from clients for our services, and the mix of services provided by us that clients choose;

our ability to complete acquisitions, joint ventures and divestitures, including the ability to obtain regulatory approvals, the ability to arrange financing as required and the ability to satisfy closing conditions;

the risks that our acquired businesses and joint ventures will not achieve their anticipated financial and operational benefits or will not be integrated successfully, or that

the integration will take longer than anticipated, that expected synergies will not be achieved or unexpected negative synergies or liabilities will be experienced, that client and deposit retention goals will not be met, that other regulatory or operational challenges will be experienced, and that disruptions from the transaction will harm our relationships with our clients, our employees or regulators;

our ability to recognize emerging needs of our clients and to develop products that are responsive to such trends and profitable to us, the performance of and demand for the products and services we offer, and the potential for new products and services to impose additional costs on us and expose us to increased operational risk;

changes in accounting standards and practices; and

changes in tax legislation and in the interpretation of existing tax laws by U.S. and non-U.S. tax authorities that affect the amount of taxes due.

Actual outcomes and results may differ materially from what is expressed in our forward-looking statements and from our historical financial results due to the factors discussed in this section and elsewhere in this Form 10-Q or disclosed in our other SEC filings, including the risk factors discussed in our ~~2014~~2015 Form 10-K. Forward-looking statements

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

in this Form 10-Q should not be relied on as representing our expectations or beliefs as of any date subsequent to the time this Form 10-Q is filed with the SEC. We undertake no obligation to revise our forward-looking statements after the time they are made. The factors discussed ~~above~~herein are not intended to be a complete statement of all risks and uncertainties that may affect our businesses. We cannot anticipate all developments that may adversely affect our business or operations or our consolidated results of operations, financial condition or cash flows.

Forward-looking statements should not be viewed as predictions, and should not be the primary basis on which investors evaluate State Street. Any investor in State Street should consider all risks and uncertainties disclosed in our SEC filings, including our filings under the Securities Exchange Act of 1934, in particular our annual reports on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K, or registration statements filed under the Securities Act of 1933, all of which are accessible on the SEC's website at www.sec.gov or on the “Investor Relations” section of our corporate website at www.statestreet.com.

~~Table of Contents~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~OVERVIEW OF FINANCIAL ~~CONDITION~~RESULTS

~~AND RESULTS OF OPERATIONS (Continued)~~

TABLE 1: OVERVIEW OF FINANCIAL RESULTS
Quarters Ended September 30,
(Dollars in millions, except per share amounts) 2015 2014 % Change
Total fee revenue $ 2,108
$ 2,012
5 %
Net interest revenue 513
570
(10 )
Gains (losses) related to investment securities, net (2 ) —
—
Total revenue 2,619
2,582
1
Provision for loan losses 5
2

Total expenses 1,962
1,892
4
Income before income tax expense 652
688
(5 )
Income tax expense 68
128
(47 )
Net income from non-controlling interest 1
—

Net income $ 585
$ 560
4
Adjustments to net income:
Dividends on preferred stock⁽¹⁾
(42 ) (18 ) 133
Net income available to common shareholders $ 543
$ 542
—
Earnings per common share:
Basic $ 1.34
$ 1.28
5
Diluted 1.32
1.26
5
Average common shares outstanding (in thousands):
Basic 406,612
421,974

Diluted 412,167
429,736

Cash dividends declared per common share $ .34
$ .30

Return on average common equity 11.3 % 10.6 %

Nine Months Ended September 30,
(Dollars in millions, except per share amounts) 2015 2014 % Change
Total fee revenue $ 6,250
$ 5,975
5 %
Net interest revenue 1,594
1,686
(5 )
Gains (losses) related to investment securities, net (6 ) 4
(250 )
Total revenue 7,838
7,665
2
Provision for loan losses 11
6
83
Total expenses 6,193
5,770
7
Income before income tax expense 1,634
1,889
(13 )
Income tax expense 219
344
(36 )
Net income from non-controlling interest 1
—

Net income $ 1,416
$ 1,545
(8 )
Adjustments to net income:
Dividends on preferred stock⁽¹⁾
(102 ) (43 ) 137
Earnings allocated to participating securities⁽²⁾
(1 ) (2 ) (50 )
Net income available to common shareholders $ 1,313
$ 1,500
(12 )
Earnings per common share:
Basic $ 3.20
$ 3.52
(9 )
Diluted 3.16
3.45
(8 )
Average common shares outstanding (in thousands):
Basic 409,816
426,775

Diluted 415,772
434,510

Cash dividends declared per common share $ .98
$ .86

Return on average common equity 9.2 % 10.0 %



TABLE 1: OVERVIEW OF FINANCIAL RESULTS
	Quarters Ended March 31,
(Dollars in millions, except per share amounts)	2016			2015			% Change
Total fee revenue	$	1,970		$	2,055		(4	)%
Net interest revenue	512			546			(6	)
Gains (losses) related to investment securities, net	2			(1		)	nm
Total revenue	2,484			2,600			(4	)
Provision for loan losses	4			4			—
Total expenses	2,050			2,097			(2	)
Income before income tax expense	430			499			(14	)
Income tax expense	62			94			(34	)
Net income	$	368		$	405		(9	)
Adjustments to net income:
Dividends on preferred stock⁽¹⁾	(49		)	(31		)	58
Earnings allocated to participating securities⁽²⁾	—			(1		)	nm
Net income available to common shareholders	$	319		$	373		(14	)
Earnings per common share:
Basic	$	.80		$	.90		(11	)
Diluted	.79			.89			(11	)
Average common shares outstanding (in thousands):
Basic	399,421			412,225
Diluted	403,615			418,750
Cash dividends declared per common share	$	.34		$	.30
Return on average common equity	6.8		%	7.9		%

⁽¹⁾Refer to ~~note 10 to~~Note 12 of the consolidated financial statements included in this Form 10-Q for additional information regarding our preferred stock dividends.

⁽²⁾Refer to ~~note~~Note 16 toof the consolidated financial statements included in this Form 10-Q.

^nm Not meaningful

The following “Highlights” and “Financial Results” sections provide information related to significant events, as well as highlights of our consolidated financial results for the ~~third~~ quarter ~~of 2015~~ended March 31, 2016 presented in Table 1: Overview of Financial Results. More detailed information about our consolidated financial results, including comparisons of our financial results for the ~~third~~ quarter ~~of 2015~~ended March 31, 2016 to those for the ~~third~~ quarter ~~of 2014 and for the nine months~~ ended ~~September 30,~~March 31, 2015, ~~to those for nine months ended September 30, 2014,~~ is provided under “Consolidated Results of Operations,” which follows these sections. In this Management’s Discussion and Analysis, where we describe the effects of changes in foreign exchange rates, those effects are determined by applying applicable weighted average foreign exchange rates from the relevant ~~2014~~2015 period to the relevant ~~2015~~2016 results.

Highlights

~~In October 2015, we announced a multi-year plan to accelerate~~We secured new asset servicing mandates of $263.9 billion in the next phase of our program to create cost efficiencies through changes in our operational processes and to further digitize our processes and interfaces with our clients. The objectives of this plan are to enhance the value and delivery of our products and services to our clients and to identify and implement significant reductions in our cost structure. We are targeting approximately $500 million in annualized savings from this plan, when fully implemented over approximately the next four to five years.

~~In the third~~first quarter of ~~2015, we recorded a $59 million reduction of an Italian deferred tax liability as a consequence of our European legal entity restructuring activities.~~

~~Asset servicing and asset management fees decreased 1% and 9%, respectively, in the third quarter of 2015 compared to the third quarter of 2014, primarily due the impact of the stronger U.S. dollar.~~

~~In the third quarter of 2015, we secured new business of an estimated $141 billion in assets to be serviced;~~2016; of that total, approximately ~~$101~~$79.3 billion was installed prior to ~~September 30, 2015~~,March 31, 2016, with the remaining balance expected to be installed in the remainder of ~~2015~~2016 or later.

~~In the third quarter~~Net inflows of ~~2015, we~~AUM totaled $13 billion, which does not include $8 billion of new asset management business which was awarded to SSGA but not installed as of March 31, 2016.

We declared ~~quarterly~~ common stock dividends of $0.34 per share, totaling approximately ~~$138~~$135 million ~~which were paid~~ in ~~October~~the first quarter of 2016.

In the first quarter of 2016, we purchased approximately 5.6 million shares of our common stock at an average per-share cost of $57.88 and an aggregate cost of approximately $325 million under our current program, approved by our Board in March 2015.

In the first quarter of 2016, we announced our agreement to acquire GE Asset Management in a cash transaction with a total purchase price of $435 million, subject to adjustments, with up to an additional $50 million tied to incremental opportunities with GE. Pending regulatory approvals and other customary closing conditions, the transaction is expected to be finalized early in the third quarter of 2016. As we integrate GE Asset Management into our business, we expect to incur merger and integration costs of approximately $70 million to $80 million through 2018.

In April 2016,


◦	We sold the WM/Reuters branded foreign exchange benchmark

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

~~Under~~business to Thomson Reuters. This sale will result in a purchase program approved by our Board of Directors in March 2015 which authorizes us to purchase up to $1.8 billion of our common stock through June 30, 2016, we purchased approximately 4.8 million shares of our common stock at an average per-share cost of $72.43 and an aggregate costgain of approximately ~~$350~~$53 million ~~during~~($40 million after-tax) in our results of operations for the ~~third~~second quarter of ~~2015.~~2016.

◦

We issued 20 million depositary shares, each representing 1/4,000th ownership interest in shares of State Street's fixed-to-floating rate non-cumulative perpetual preferred stock, Series G, without par value per share, with a liquidation preference of $100,000 per share (equivalent to $25 per depositary share), in a public offering. The aggregate proceeds from the offering, net of underwriting discounts, commissions and other issuance costs, were approximately $494 million.

Additional information with respect to our common stock purchase program and stock dividends is provided under "Financial Condition - Capital" in this Management's Discussion and Analysis.

Financial Results

Total revenue in the ~~third~~first quarter of ~~2015 increased 1%~~2016 decreased 4% compared to the ~~third~~first quarter of ~~2014,~~2015, primarily due to a ~~5% increase~~4% decrease in total fee revenue ~~partially offset by~~and a ~~decline~~6% decrease in net interest revenue.

~~Total~~Servicing fee revenue decreased 2% in the first quarter of 2016 compared to the first quarter of 2015, primarily due to lower global equity markets and the effect of the stronger U.S. dollar, partially offset by net new business.

Management fee revenue decreased 10% in the first quarter of 2016 compared to the first quarter of 2015, primarily due to lower global equity markets and decline in AUM, partially offset by lower money market fee waivers.

In the first quarter of 2016, we recorded restructuring charges of $97 million related to State Street Beacon, our multi-year transformation program to create cost efficiencies and to fully digitize our business to support the development of new solutions and capabilities for our clients. We are on track to generate at least $100 million in annualized pre-tax net run-rate savings in 2016, including the targeted staff reductions announced in the third quarter of 2015, includes an $83 million pre-tax gain related to the sale of commercial real estate acquired as a result of the Lehman Brothers bankruptcy. The increase in total revenue was largely offset by a decrease of $80 million related to the stronger U.S. dollar when compared to ~~the third quarter~~our full-year 2015 operating-basis expenses, all else being equal. The full effect of ~~2014.~~these savings will be felt in 2017.

Total expenses in the ~~third~~first quarter of 2016 decreased 2% compared to the first quarter of 2015, ~~increased 4% compared to the third quarter of 2014,~~ primarily driven by ~~$75 million of pre-tax severance~~a decrease in other expenses and a decrease in securities processing costs, ~~related to targeted staff reductions taken to better calibrate our expenses to the current environment,~~ partially offset by ~~a $9 million decrease~~an increase in ~~occupancy~~restructuring costs and ~~a $67 million dollar decrease in other expenses.~~

~~Total expenses in~~ the ~~third quarter~~effect of ~~2015 benefited from~~ the stronger U.S. ~~dollar by approximately $63 million compared to the third quarter of 2014.~~dollar.

Return on average common shareholders' equity decreased to 6.8% in the ~~third~~first quarter of ~~2015 increased~~2016 compared to ~~11.3%~~ ~~from~~ ~~10.6%~~7.9% in the ~~third~~first quarter of ~~2014.~~2015.

CONSOLIDATED RESULTS OF OPERATIONS

This section discusses our consolidated results of operations for the ~~third~~ quarter ~~and first nine months of 2015~~ended March 31, 2016 compared to the ~~same periods in 2014,~~quarter ended March 31, 2015, and should be read in conjunction with the consolidated financial statements and accompanying condensed notes to the consolidated financial statements included in this Form 10-Q.

~~Total Revenue~~TOTAL REVENUE

TABLE 2: TOTAL REVENUE
Quarters Ended September 30,
(Dollars in millions) 2015 2014 % Change
Fee revenue:
Servicing fees $ 1,294
$ 1,302
(1 )%
Management fees 287
316
(9 )
Trading services:
Foreign exchange trading 177
161
10
Brokerage and other trading services 117
117
—
Total trading services 294
278
6
Securities finance 113
99
14
Processing fees and other 120
17
606
Total fee revenue 2,108
2,012
5
Net interest revenue:
   Interest revenue 614
671
(8 )
   Interest expense 101
101
—
Net interest revenue 513
570
(10 )
Gains (losses) related to investment securities, net (2 ) —

Total revenue $ 2,619
$ 2,582
1

Nine Months Ended September 30,
(Dollars in millions) 2015 2014 % Change
Fee revenue:
Servicing fees $ 3,892
$ 3,828
2 %
Management fees 892
908
(2 )
Trading services:
Foreign exchange trading 547
439
25
Brokerage and other trading services 352
352
—
Total trading services 899
791
14
Securities finance 369
331
11
Processing fees and other 198
117
69
Total fee revenue 6,250
5,975
5
Net interest revenue:
   Interest revenue 1,885
1,976
(5 )
   Interest expense 291
290
—
Net interest revenue 1,594
1,686
(5 )
Gains (losses) related to investment securities, net (6 ) 4

Total revenue $ 7,838
$ 7,665
2



TABLE 2: TOTAL REVENUE
	Quarters Ended March 31,
(Dollars in millions)	2016		2015			% Change
Fee revenue:
Servicing fees	$	1,242	$	1,268		(2	)%
Management fees	270		301			(10	)
Trading services:
Foreign exchange trading	156		203			(23	)
Brokerage and other trading services	116		121			(4	)
Total trading services	272		324			(16	)
Securities finance	134		101			33
Processing fees and other	52		61			(15	)
Total fee revenue	1,970		2,055			(4	)
Net interest revenue:
Interest revenue	629		642			(2	)
Interest expense	117		96			22
Net interest revenue	512		546			(6	)
Gains (losses) related to investment securities, net	2		(1		)
Total revenue	$	2,484	$	2,600		(4	)

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

FEE REVENUE

Table 2: Total Revenue, provides the breakout of fee revenue for the quarters ended March 31, 2016 and 2015.

Servicing and management fees collectively ~~comprised~~made up approximately ~~75% and~~ 77%, of our total fee revenue in the ~~third~~first quarter ~~and first nine months~~ of ~~2015, respectively,~~2016 compared to approximately ~~80% and 79%,~~76% in the ~~third~~first quarter ~~and first nine months~~ of ~~2014, respectively.~~2015. The level of these fees is influenced by several factors, including the mix and volume of our assets under custody and administration and our assets under management, the value and type of securities positions held (with respect to assets under custody) and the volume of portfolio transactions, and the types of products and services used by our clients, and is generally affected by changes in worldwide equity and fixed-income security valuations and trends in market asset class preferences.

Generally, servicing fees are affected by changes in daily average valuations of assets under custody and administration. Additional factors, such as the relative mix of assets serviced, the level of transaction volumes, changes in service level, the nature of services provided, balance credits, client minimum balances, pricing concessions, the geographical location in which services are provided and other factors, may have a significant effect on our servicing fee revenue.

~~Generally, management~~Management fees are generally affected by changes in month-end valuations of assets under management. Management fees for certain components of managed assets, such as ETFs, are affected by daily average valuations of assets under management. Management fee revenue is more sensitive to market valuations than servicing fee revenue, as a higher proportion of the underlying services provided, and the associated management fees earned, are dependent on equity and fixed-income security valuations. Additional factors, such as the relative mix of assets managed, may have a significant effect on our management fee revenue. While certain management fees are directly determined by the values of assets under management and the investment strategies employed, management fees may reflect other factors as well, including performance fee

arrangements, ~~discussed later in this section,~~ as well as our relationship pricing for clients using multiple services.

Asset-based management fees for actively managed products are generally charged at a higher percentage of assets under management than for passive products. Actively managed products may also include performance fee arrangements which are recorded when the performance period is complete. Performance fees are generated when the performance of certain managed portfolios exceeds benchmarks specified in the management agreements. Generally, we experience more volatility with performance fees than with more traditional management fees.

In light of the above, we estimate, using relevant information as of ~~September 30, 2015~~March 31, 2016 and assuming that all other factors remain constant, that: ~~(1) a~~

A 10% increase or decrease in worldwide equity valuations, over the relevant periods for which our servicing and management fees are calculated, would result in a corresponding change in our total revenue of approximately 2%; and ~~(2) a~~

A 10% increase or decrease in worldwide fixed income security valuations, over the relevant periods for ~~or on~~ which our servicing and management fees are calculated, would result in a corresponding change in our total revenue of approximately 1%.

See Table 3: Daily, Month-end and ~~Year-end~~Quarter-end Indices, for selected equity market indices. While the specific indices presented are indicative of general market trends, the asset types and classes relevant to individual client portfolios can and do differ, and the performance of associated relevant indices can therefore differ from the performance of the indices presented.

Daily averages and the averages of month-end indices demonstrate worldwide changes in equity markets that affect our servicing and management fee revenue. Quarter-end indices affect the values of assets under custody and administration and assets under management as of those dates. The index names listed in the table are service marks of their respective owners.

Further discussion of fee revenue is provided under “Line of Business Information” in this Management's Discussion and Analysis.



TABLE 3: DAILY, MONTH-END AND QUARTER-END INDICES
	Daily Averages of Indices				Averages of Month-End Indices				Quarter-End Indices
	Quarters Ended March 31,				Quarters Ended March 31,				As of March 31,
	2016	2015	% Change		2016	2015	% Change		2016	2015	% Change
S&P 500^®	1,951	2,064	(5	)%	1,977	2,056	(4	)%	2,060	2,068	—	%
NASDAQ^®	4,614	4,825	(4	)	4,681	4,833	(3	)	4,870	4,901	(1	)
MSCI^® EAFE^®	1,594	1,817	(12	)	1,601	1,839	(13	)	1,652	1,849	(11	)
MSCI^® Emerging Markets	757	969	(22	)	773	975	(21	)	837	975	(14	)

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

TABLE 3: DAILY, MONTH-END AND YEAR-END INDICES
Daily Averages of Indices Averages of Month-End Indices Quarter-End Indices
Quarters Ended September 30, Quarters Ended September 30, As of September 30,
2015 2014 % Change 2015 2014 % Change 2015 2014 % Change
S&P 500^®
2,027
1,976
3 % 1,999
1,969
2 % 1,920
1,972
(3 )%
NASDAQ^®
4,924
4,483
10
4,842
4,481
8
4,620
4,493
3
MSCI EAFE^®
1,785
1,924
(7 ) 1,754
1,901
(8 ) 1,644
1,846
(11 )
MSCI Emerging 860
1,067
(19 ) 837
1,053
(21 ) 792
1,005
(21 )
Daily Averages of Indices Averages of Month-End Indices
Nine Months Ended September 30, Nine Months Ended September 30,
2015 2014 % Change 2015 2014 % Change
S&P 500^®
2,064
1,905
8 % 2,047
1,910
7 %
NASDAQ^®
4,928
4,298
15
4,891
4,313
13

MSCI EAFE^®
1,836
1,920
(4 ) 1,827
1,918
(5 )
MSCI Emerging 948
1,017
(7 ) 940
1,014
(7 )

NET INTEREST REVENUE

See Table 2: Total Revenue, ~~provides~~for the breakout of ~~fee~~interest revenue and interest expense for the ~~third quarter~~quarters ended March 31, 2016 and ~~first nine months~~2015.

Net interest revenue is defined as interest revenue earned on interest-earning assets less interest expense incurred on interest-bearing liabilities. Interest-earning assets, which principally consist of ~~2015~~investment securities, interest-bearing deposits with banks, repurchase agreements, loans and leases and other liquid assets, are financed primarily by client deposits, short-term borrowings

and long-term debt. Net interest margin represents the relationship between annualized fully taxable-equivalent net interest revenue and average total interest-earning assets for the period. It is calculated by dividing fully taxable-equivalent net interest revenue by average interest-earning assets. Revenue that is exempt from income taxes, mainly that earned from certain investment securities (state and political subdivisions), is adjusted to a fully taxable-equivalent basis using a federal statutory income tax rate of 35%, adjusted for applicable state income taxes, net of the related federal tax benefit.



TABLE 4: AVERAGE BALANCES AND INTEREST RATES - FULLY TAXABLE-EQUIVALENT BASIS
	Quarters Ended March 31,
	2016							2015
(Dollars in millions; fully taxable-equivalent basis)	Average Balance		Interest Revenue/ Expense			Rate		Average Balance		Interest Revenue/ Expense			Rate
Interest-bearing deposits with banks	$	48,545	$	43		.36	%	$	71,568	$	54		.30	%
Securities purchased under resale agreements⁽¹⁾	2,490		36			5.86		2,449		11			1.88
Trading account assets	860		—			—		1,117		—			—
Investment securities	100,899		488			1.94		112,656		544			1.93
Loans and leases	18,615		91			1.96		18,025		74			1.65
Other interest-earning assets	22,672		13			.22		20,544		3			.06
Average total interest-earning assets	$	194,081	$	671		1.39		$	226,359	$	686		1.23
Interest-bearing deposits:
U.S.	$	27,096	$	27		.40	%	$	30,174	$	10		.13	%
Non-U.S.	92,971		11			.05		103,831		16			.06
Securities sold under repurchase agreements	4,243		—			—		9,354		—			—
Federal funds purchased	15		—			—		24		—			—
Other short-term borrowings	1,688		—			—		4,448		1			.13
Long-term debt	11,027		61			2.20		9,707		62			2.55
Other interest-bearing liabilities	5,951		18			1.22		7,465		7			.41
Average total interest-bearing liabilities	$	142,991	$	117		.33		$	165,003	$	96		.24
Interest-rate spread						1.06	%						.99	%
Net interest revenue—fully taxable-equivalent basis			$	554						$	590
Net interest margin—fully taxable-equivalent basis						1.15	%						1.06	%
Tax-equivalent adjustment			(42		)					(44		)
Net interest revenue—GAAP basis			$	512						$	546

⁽¹⁾~~2014~~. Reflects the impact of balance sheet netting under enforceable netting agreements.

~~Servicing Fees~~

~~Servicing fees~~Net interest revenue decreased 6% on a fully taxable-equivalent basis in the ~~third~~first quarter of ~~2015 decreased 1%~~2016 compared to the ~~same period~~first quarter of 2015. The decrease was generally the result of management actions taken towards the end of 2015 to better balance our clients' cash management needs with our economic and regulatory objectives. These actions contributed to a reduction of interest and non-interest bearing clients deposits of $24 billion as of March 31, 2016 compared to March 31, 2015. The first quarter 2016 reduction in ~~2014, primarily due~~net interest revenue also reflects our efforts to manage the size and composition of our investment portfolio as we seek to optimize our capital and liquidity positions in light of the evolving regulatory environment. Benefits during the first quarter of 2016 from the U.S. rate hike in December

2015 were partially offset by lower global interest rates that affected our revenue from certain floating-rate assets, the rate at which payments from the maturity or prepayment on portfolio holdings could be reinvested, and the effect of the stronger U.S. dollar.

Changes in the components of interest-earning assets and interest-bearing liabilities are discussed in more detail below. Additional detail about the components of interest revenue and interest expense is provided in Note 14 to the consolidated financial statements included in this Form 10-Q.

Average total interest-earning assets were lower for the quarter ended March 31, 2016 compared to the quarter ended March 31, 2015 as a result of the previously described management actions taken towards the end of 2015 to better balance our clients'

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

cash management needs with our economic and regulatory obligations which also reduced interest-earning assets by $32 billion compared to the first quarter of 2015.

The lower level of investment in interest-bearing deposits with banks during the quarter ended March 31, 2016 compared to the quarter ended March 31, 2015 resulted from management actions to reduce client deposits as part of our balance sheet management actions towards the end of 2015, while the increase in average loans and leases resulted from growth in municipal loans and our continued investment in senior secured loans, offset by a reduction in mutual fund lending.

Even though we have seen reductions in the overall level of excess deposits during the past year, our clients have continued to place elevated levels of deposits with us, as central bank actions have resulted in high levels of liquidity and low global interest rates. We evaluate deposits as either inherent in our relationship with our custodial clients, which we generally invest in our investment portfolio, or transient, or excess deposits, which we generally deposit with central banks.Deposits with central banks generate low returns. Consequently, the elevated levels of these transient deposits have contributed to a reduction of our net interest margin relative to historical levels.

The deposits with central banks are also included in our total consolidated assets, and lower deposit levels impact our regulatory leverage ratios. If global interest rates increase, we would expect to see some additional decreases in client deposits. In general, we continue to anticipate higher levels of client deposits when compared to longer-term historical trends, irrespective of the interest rate environment, particularly during periods of market stress. If ECB monetary policy continues to pressure European interest rates downward and the U.S. dollar remains strong or strengthens, the negative effects on our net interest revenue may continue or worsen.

The effect of the stronger U.S. dollar relative to other currencies, also negatively impacted our net interest revenue particularly the Euro, as we maintain a portion of our investment portfolio in Euro denominated securities. The stronger U.S. dollar had the effect of reducing net interest revenue by approximately $4 million in the first quarter of 2016 compared to the first quarter of 2015.

We recorded aggregate discount accretion in interest revenue of $14 million in the first quarter of 2016 related to the assets we consolidated onto our balance sheet in 2009 from our asset-backed commercial paper conduits. Subsequent to the commercial paper conduit consolidation in 2009, we

have recorded total discount accretion in interest revenue as follows:



TABLE 5: TOTAL DISCOUNT ACCRETION IN INTEREST REVENUE
	Discount Accretion in Interest Revenue
(In millions)	Discount Accretion in Interest Revenue
Twelve Months Ended December 31, 2009	$	621
Twelve Months Ended December 31, 2010	712
Twelve Months Ended December 31, 2011	220
Twelve Months Ended December 31, 2012	215
Twelve Months Ended December 31, 2013	137
Twelve Months Ended December 31, 2014	119
Twelve Months Ended December 31, 2015	98
Three Months Ended March 31, 2016	14
Total Discount Accretion	$	2,136

The timing and ultimate recognition of any applicable discount accretion depends, in part, on factors that are outside of our control, including anticipated prepayment speeds and credit quality. The impact of these factors is uncertain and can be significantly influenced by general economic and financial market conditions. The timing and recognition of any applicable discount accretion can also be influenced by our ongoing management of the risks and other characteristics associated with our investment securities portfolio, including sales of securities which would otherwise generate interest revenue through accretion.

Depending on the factors discussed above, among others, we anticipate that until the former conduit securities remaining in our investment portfolio mature or are sold, discount accretion will continue to contribute to our net interest revenue, though generally in declining amounts. Assuming that we hold them to maturity, all else being equal, we expect the remaining former conduit securities carried in our investment portfolio as of March 31, 2016 to generate aggregate discount accretion in future periods of approximately ~~$50~~$201 million over their remaining terms, with approximately half of this discount accretion to be recorded over the next four years.

Interest-bearing deposits with banks averaged $48.55 billion for the quarter ended March 31, 2016 compared to $71.57 billion for the quarter ended March 31, 2015 and ~~weaker international equity markets,~~reflect management’s effort to reduce elevated client deposit levels as a component of our balance sheet management actions. These deposits reflected our maintenance of cash balances at the Federal Reserve, the ECB and other non-U.S. central banks both to satisfy regulatory reserve requirements, and elevated levels of client deposits and our investment of the excess deposits with central banks.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

We expect to continue to invest deposits we deem as elevated in investment securities or short-term assets, including central bank deposits, depending on our assessment of the underlying characteristics of the deposits.



TABLE 6: U.S. AND NON-U.S. SHORT-DURATION ADVANCES
	Quarters Ended March 31,
(In millions)	2016			2015
Average U.S. short-duration advances	$	2,230		$	2,364
Average non-U.S. short-duration advances	1,264			1,520
Average total short-duration advances	$	3,494		$	3,884
Average short-duration advances to average loans and leases	19		%	22		%

The decline in the proportion of average daily short-duration advances to average loans and leases is primarily due to growth in the other segments of the loan and lease portfolio. Short-duration advances provide liquidity to clients in support of their investment activities.

Average other interest-earning assets increased to $22.67 billion for the quarter ended March 31, 2016 from $20.54 billion for the quarter ended March 31, 2015. Growth in our enhanced custody business, which is our principal securities financing business for our custody clients, contributed to this increase. Our average other interest-earning assets, largely associated with our enhanced custody business, comprised approximately 12% of our average total interest-earning assets for the quarter ended March 31, 2016 compared to approximately 9% for the quarter ended March 31, 2015. The enhanced custody business supports our overall profitability by generating securities finance revenue. The net interest earned on these transactions is generally lower than the interest earned on other alternative investments.

Aggregate average interest-bearing deposits decreased to $120.07 billion for the quarter ended March 31, 2016 from $134.01 billion for the quarter ended March 31, 2015. The lower levels in the first quarter of 2016 were primarily the result of managements actions to reduce both U.S. and non-U.S. transaction accounts, offset by increases in time deposits. Future deposit levels will be influenced by the underlying asset servicing business, client deposit behavior, as well as market conditions, including the general levels of U.S. and non-U.S. interest rates.

Average other short-term borrowings declined to $1.69 billion for the quarter ended March 31, 2016 from $4.45 billion for the quarter ended March 31, 2015. The decrease was the result of State Street phasing-out its commercial paper program during 2015, consistent with the objectives of its 2015 recovery and resolution plan developed pursuant to the requirements of the Dodd-Frank Act.

Average long-term debt increased to $11.03 billion for the quarter ended March 31, 2016 from $9.71 billion for the quarter ended March 31, 2015. The increase primarily reflected the issuance of $3.0 billion of senior debt issued in August 2015 which was offset by a $900 million extendible note called at the end of February 2015 and the maturities of $200 million of senior debt in December 2015, $400 million of senior debt in January 2016 and $1.0 billion of senior debt in March 2016.

Average other interest-bearing liabilities decreased to $5.95 billion for the quarter ended March 31, 2016 from $7.47 billion for the quarter ended March 31, 2015, primarily the result of higher levels of cash collateral received from clients in connection with our enhanced custody business, which is presented on a net basis in accordance with enforceable netting agreements.

Average loans and leases also include short-duration advances. Average short-duration advances remained relatively flat for the quarter ended March 31, 2016 compared to the quarter ended March 31, 2015.

Several factors could affect future levels of our net interest revenue and margin, including the volume and mix of client liabilities; actions of various central banks; changes in U.S. and non-U.S. interest rates; changes in the various yield curves around the world; revised or proposed regulatory capital or liquidity standards, or interpretations of those standards; the amount of discount accretion generated by the former conduit securities that remain in our investment securities portfolio; the yields earned on securities purchased compared to the yields earned on securities sold or matured; and changes in our enhanced custody business.

Based on market conditions and other factors, including regulatory requirements, we continue to reinvest the majority of the proceeds from pay-downs and maturities of investment securities in highly-rated securities, such as U.S. Treasury and agency securities, municipal securities, federal agency mortgage-backed securities and U.S. and non-U.S. mortgage- and asset-backed securities. The pace at which we continue to reinvest and the types of investment securities purchased will depend on the impact of market conditions, the implementation of regulatory standards, and other factors over time. We expect these factors and the levels of global interest rates to influence what effect our reinvestment program will have on future levels of our net interest revenue and net interest margin.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

EXPENSES



TABLE 7: EXPENSES
	Quarters Ended March 31,
(Dollars in millions)	2016		2015		% Change
Compensation and employee benefits	$	1,107	$	1,087	2	%
Information systems and communications	272		247		10
Transaction processing services	200		197		2
Occupancy	113		113		—
Acquisition costs	7		5		40
Restructuring charges, net	97		1		nm
Other:
Professional services	93		96		(3	)
Amortization of other intangible assets	49		50		(2	)
Securities processing costs	4		20		(80	)
Regulatory fees and assessments	20		34		(41	)
Other	88		247		(64	)
Total other	254		447		(43	)
Total expenses	$	2,050	$	2,097	(2	)
Number of employees at quarter-end	32,527		30,495

^nm Not meaningful

Compensation and employee benefits expenses increased 2% in the first quarter of 2016 compared to the first quarter of 2015. The increase in costs was primarily due to additional staffing to support regulatory initiatives and new business, partially offset by ~~net new business and higher transaction volumes. In~~ the nine months ended September 30, 2015, servicing fees increased 2% compared to the same period in 2014, primarily as a result of the positive revenue impact of net new business (revenue added from new servicing business installed less revenue lost from the removal of assets serviced) and stronger U.S. equity markets, offset by the impacteffect of the stronger U.S. dollar and ~~weaker international markets. In both~~decreases in incentive compensation and benefits.

Compensation and employee benefits expenses in the ~~third~~first quarter of 2016 and the first ~~nine months~~quarter of 2015 ~~servicing~~included approximately $122 million and $137 million, respectively, of seasonal deferred incentive compensation expense for retirement-eligible employees and payroll taxes.

Information systems and communications expenses increased 10% in the first quarter of 2016 compared to the first quarter of 2015. The increase was primarily related to new software and systems going into production for corporate and regulatory initiatives and maintenance and new business, as well as additional related depreciation costs supporting these investments.

Other expenses decreased 43% in the first quarter of 2016 compared to the first quarter of 2015. The decrease was primarily due to legal accruals of $150 million in the first quarter of 2015. No such costs related to legal proceedings were accrued in the first quarter of 2016. The decrease was also driven by lower levels of professional services and lower insurance expenses related to lower assessment fees from the FDIC. The legal accrual is further discussed under "Legal and Regulatory Matters" in Note 10 to the consolidated financial statements included in this Form 10-Q.

Our compliance obligations have increased due to new regulations in the U.S. and internationally that have been adopted or proposed in response to the financial crisis. As a systemically important financial institution, we are subject to enhanced supervision and prudential standards. Our status as a G-SIB has also resulted in heightened prudential and conduct expectations of our U.S. and international regulators with respect to our capital and liquidity management and our compliance and risk oversight programs. These heightened expectations have increased our regulatory compliance costs, including personnel and systems, as well as significant additional implementation and related costs to enhance our regulatory compliance programs. We anticipate that these evolving and increasing regulatory compliance requirements and expectations, including our efforts to address the deficiencies identified in our resolution plan submitted to the Federal Reserve and FDIC on July 1, 2015 as discussed within the Liquidity Risk Management section included within this Form 10-Q, will continue to affect our expenses. Our employee compensation and benefits, information systems and other expenses could increase, as we further adjust our operations in response to new or proposed requirements and heightened expectations.

Acquisition Costs

In the first quarter of 2016, we recorded acquisition costs of $7 million, compared to $5 million in the first quarter of 2015. These amounts related to previously announced acquisitions.

Restructuring Charges

In the first quarter of 2016, we announced State Street Beacon, our multi-year transformation program to create cost efficiencies and to fully digitize our business to support the development of new solutions and capabilities for our clients.

To implement State Street Beacon, we expect to incur aggregate future pre-tax restructuring charges of approximately $300 million to $400 million beginning in 2016 through December 31, 2020. We estimate those charges will include approximately $250 million to $300 million in severance and benefits costs associated with targeted staff reductions (a substantial portion of which will result in future cash expenditures) and approximately $50 million to $100 million in information technology application rationalization and real estate actions.

In the first quarter of 2016, we recorded net restructuring charges of $97 million compared to $1 million in the first quarter of 2015. Increases in costs were primarily due to State Street Beacon, consisting of approximately $86 million of employee-related expenses and approximately $11 million of other restructuring costs.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

INCOME TAX EXPENSE

Income tax expense was $62 million in the first quarter of 2016 compared to $94 million in the first quarter of 2015. Our effective tax rate in the first quarter of 2016 was 14.4% compared to 18.8% for the same period in 2015. The decrease in the tax rate is primarily due to additional alternative energy investments and foreign tax credits, as well as the effects of a non-deductible legal accrual in the first quarter of 2015.

LINE OF BUSINESS INFORMATION

Our operations are organized for management reporting purposes into two lines of business: Investment Servicing and Investment Management, which are defined based on products and services provided. The results of operations for these lines of business are not necessarily comparable with those of other companies, including companies in the financial services industry. For information about our two lines of business, as well as the revenues, expenses and capital allocation methodologies associated with them, refer to Note 24 to the consolidated financial statements included in our 2015 Form 10-K.

Investment Servicing



TABLE 8: INVESTMENT SERVICING LINE OF BUSINESS RESULTS
	Quarters Ended March 31,
(Dollars in millions, except where otherwise noted)	2016			2015			% Change
Servicing fees	$	1,242		$	1,268		(2	)%
Trading services	262			315			(17	)
Securities finance	134			101			33
Processing fees and other	45			59			(24	)
Total fee revenue	1,683			1,743			(3	)
Net interest revenue	511			545			(6	)
Gains (losses) related to investment securities, net	2			(1		)	nm
Total revenue	2,196			2,287			(4	)
Provision for loan losses	4			4			—
Total expenses	1,687			1,836			(8	)
Income before income tax expense	$	505		$	447		13
Pre-tax margin	23		%	20		%

^nm- Not meaningful

Total revenue in the first quarter of 2016 for our Investment Servicing line of business, presented in Table 8: Investment Servicing Line of Business Results, decreased 4% compared to the first quarter of 2015. Total fee revenue decreased 3% in the first quarter of 2016 compared to the first quarter of 2015.

Net interest revenue decreased 6% in the first quarter of 2016 compared to the first quarter of 2015. The decrease was generally the result of our efforts to optimize our capital position, lower yields on interest-earning assets, as well as lower global interest rates, which affect our revenue from floating-

rate assets, and the effect of the stronger U.S. dollar, partially offset by the benefit of higher levels of interest-earning assets. A discussion of net interest revenue is provided under “Net Interest Revenue” in “Total Revenue” in this Management's Discussion and Analysis.

Total expenses decreased 8% in the first quarter of 2016 compared to the first quarter of 2015. The decrease primarily resulted from expenses for a legal accrual recorded in first quarter of 2015 in connection with management's intention to seek to resolve some, but not all, of the outstanding and potential claims arising out of our indirect FX client activities recorded in the first quarter of 2015.

In December 2015, we announced a review of the manner in which we invoiced certain expenses to certain of our Investment Servicing clients, primarily in the United States, during a period going back to 1998. We have informed our clients that we will pay to them the expenses we concluded were incorrectly invoiced to them, plus interest. In conjunction with that review, we are evaluating other aspects of invoicing relating to billing our Investment Servicing clients, including calculation of asset-based fees. See Note 10 to the consolidated financial statements included in this Form 10-Q.

Servicing Fees

Servicing fees decreased 2% in the first quarter of 2016 compared to the first quarter of 2015, primarily due to lower global equity markets and the effect of the stronger U.S. dollar, partially offset by net new business.

Servicing fees generated outside the U.S. were approximately 41% of total servicing fees ~~compared to 42% for both~~in the ~~third quarter~~quarters ended March 31, 2016 and ~~first nine months~~2015.



TABLE 9: COMPONENTS OF ASSETS UNDER CUSTODY AND ADMINISTRATION
(In billions)	March 31, 2016		December 31, 2015		March 31, 2015
Mutual funds	$	6,728	$	6,768	$	7,073
Collective funds	7,000		7,088		7,113
Pension products	5,197		5,510		5,745
Insurance and other products	8,018		8,142		8,560
Total	$	26,943	$	27,508	$	28,491



TABLE 10: COMPOSITION OF ASSETS UNDER CUSTODY AND ADMINISTRATION
(In billions)	March 31, 2016		December 31, 2015		March 31, 2015
Equities	$	14,433	$	14,888	$	15,660
Fixed-income	9,199		9,264		9,157
Short-term and other investments	3,311		3,356		3,674
Total	$	26,943	$	27,508	$	28,491

Table of ~~2014.~~Contents

~~The decrease~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)



TABLE 11: GEORGRAPHIC MIX OF ASSETS UNDER CUSTODY AND ADMINISTRATION⁽¹⁾
(In billions)	March 31, 2016		December 31, 2015		March 31, 2015
North America	$	20,505	$	20,842	$	21,554
Europe/Middle East/Africa	5,159		5,387		5,590
Asia/Pacific	1,279		1,279		1,347
Total	$	26,943	$	27,508	$	28,491

⁽¹⁾Geographic mix is based on the location in ~~total~~which the assets under custody and administration as of September 30, 2015 compared to both December 31, 2014 and September 30, 2014 primarily resulted from weaker global equity markets, partially offset by net new business. are serviced.

Asset levels as of ~~September 30, 2015~~March 31, 2016 did not reflect the estimated ~~$141~~$401.8 billion of new business in assets to be serviced, which was awarded to us in the ~~third~~first quarter of ~~2015~~2016 and prior periods but not installed prior to ~~September 30, 2015.~~March 31, 2016. This new business will be reflected in assets under custody and administration in future periods after installation and will generate servicing fee revenue in subsequent periods.

With respect to these new assets, we will provide various services, including accounting, bank loan servicing, compliance reporting and monitoring, custody, depository banking services, foreign

exchange, fund administration, hedge fund servicing, middle-office outsourcing, performance and analytics, private equity administration, real estate administration, securities finance, transfer agency, and wealth management services.

The value of assets under custody and administration is a broad measure of the relative size of various markets served. Changes in the values of assets under custody and administration from period to period do not necessarily result in proportional changes in our servicing fee revenue.

TABLE 4: COMPONENTS OF ASSETS UNDER CUSTODY AND ADMINISTRATION
(Dollars in billions) September 30, 2015 December 31, 2014 September 30, 2014
Mutual funds $ 6,698
$ 6,992
$ 7,035
Collective funds 6,883
6,949
6,919
Pension products 5,497
5,746
5,780
Insurance and other products 8,187
8,501
8,731
Total $ 27,265
$ 28,188
$ 28,465

TABLE 5: COMPOSITION OF ASSETS UNDER CUSTODY AND ADMINISTRATION
(Dollars in billions) September 30, 2015 December 31, 2014 September 30, 2014
Equities $ 14,223
$ 15,876
$ 15,616
Fixed-income 9,470
8,739
9,298
Short-term and other investments 3,572
3,573
3,551
Total $ 27,265
$ 28,188
$ 28,465
Trading Services

TABLE 6: GEOGRAPHIC MIX OF ASSETS UNDER CUSTODY AND ADMINISTRATION⁽¹⁾
(Dollars in billions) September 30, 2015 December 31, 2014 September 30, 2014
North America $ 20,536
$ 21,217
$ 21,255
Europe/Middle East/Africa 5,452
5,633
5,869
Asia/Pacific 1,277
1,338
1,341
Total $ 27,265
$ 28,188
$ 28,465



TABLE 12: TRADING SERVICES REVENUE
	Quarters Ended March 31,
(Dollars in millions)	2016		2015		% Change
Foreign exchange trading:
Direct sales and trading	$	90	$	135	(33	)%
Indirect foreign exchange trading	66		68		(3	)
Total foreign exchange trading	156		203		(23	)
Brokerage and other trading services:
Electronic foreign exchange services	44		48		(8	)
Other trading, transition management and brokerage	62		64		(3	)
Total brokerage and other trading services	106		112		(5	)
Total trading services revenue	$	262	$	315	(17	)

Trading services revenue is composed of revenue generated by FX trading, as well as revenue generated by brokerage and other trading services. We primarily earn FX trading revenue by acting as a principal market-maker. We offer a range of FX products, services and execution models. Most of our FX products and execution services can be grouped into three broad categories, which are further

explained below: “direct sales and trading,” “indirect FX trading” and “electronic FX services.” With respect to electronic FX services, we provide an execution venue, but do not act as agent or principal.

We also offer a range of brokerage and other trading products tailored specifically to meet the needs of the global pension community, including transition management and commission recapture. In addition, we act as distribution agent for the SPDR^{(1) ®}~~Geographic~~ Gold ETF. These products and services are generally differentiated by our role as an agent of the institutional investor. Revenue earned from these services is recorded in other trading, transition management and brokerage revenue within brokerage and other trading services revenue.

Our FX trading revenue is influenced by multiple factors, including: the volume and type of client FX transactions and related spreads; currency volatility, reflecting market conditions; and our management of exchange rate, interest rate and other market risks associated with our foreign exchange activities. The relative impact of these factors on our total FX trading revenues often differs from period to period. For example, assuming all other factors remain constant, increases or decreases in volumes or spreads across product mix tend to result in increases or decreases, as the case may be, in client-related FX revenue. Revenue earned from direct sales and trading and indirect FX trading is ~~based on~~recorded in FX trading revenue.

Total FX trading revenue decreased 23% in the ~~location~~first quarter of 2016 compared to the first quarter of 2015, primarily due to lower volumes and volatility.

We enter into FX transactions with clients and investment managers that contact our trading desk directly. These trades are all executed at ~~which~~negotiated rates. We refer to this activity, and our principal market-making activities, as “direct sales and trading” and it includes many transactions for funds serviced by third party custodians or prime brokers, as well as those funds under custody at State Street. Direct sales and trading revenue represented 58% of total foreign exchange trading revenue in the ~~assets~~first quarter of 2016 compared to 67% in the first quarter of 2015.

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AND RESULTS OF OPERATIONS (Continued)

observed client volumes. Direct sales and trading revenue is all other FX trading revenue other than the revenue attributed to indirect FX trading.

Our clients that utilize indirect FX trading can, in addition to executing their FX transactions through dealers not affiliated with us, transition from indirect FX trading to either direct sales and trading execution, including our “Street FX” service, or to one of our electronic trading platforms. Street FX, in which we continue to act as a principal market-maker, enables our clients to define their FX execution strategy and automate the FX trade execution process, both for funds under custody with us as well as those under custody at another bank.

Our direct sales and trading revenue decreased 33% in the first quarter of 2016 as compared to the first quarter of 2015. The decrease primarily resulted from lower volumes and volatility. Our estimated indirect FX trading revenue decreased 3% in the first quarter of 2016 compared to the first quarter of 2015. The decrease mainly resulted from lower volume.

We continue to expect that some clients may choose, over time, to reduce their level of indirect FX trading transactions in favor of other execution methods, including either direct sales and trading transactions or electronic FX services which we provide. To the extent that clients shift to other execution methods that we provide, our FX trading revenue may decrease, even if volumes remain consistent.

Total brokerage and other trading services revenue decreased 5% in the first quarter of 2016 compared to the first quarter of 2015. The decrease was primarily due to a one-time gain recorded in the first quarter of 2015.

Our clients may choose to execute FX transactions through one of our electronic trading platforms. These transactions generate revenue through a “click” fee. Revenue from such electronic FX services decreased 8% in the first quarter of 2016 compared to the first quarter of 2015, mainly due to declines in client volumes.

Other trading, transition management and brokerage revenue decreased 3% in the first quarter of 2016 compared to the first quarter of 2015, primarily due to a decrease in transition management revenue, partially offset by an increase in other trading revenue.

In recent years, our transition management revenue was adversely affected by compliance issues in our U.K. business during 2010 and 2011. The reputational and regulatory impact of those compliance issues continues and may adversely affect our revenue in future periods. See Note 10 to the consolidated financial statements included in this Form 10-Q.

Securities Finance

Our securities finance business consists of three components: (1) an agency lending program for SSGA-managed investment funds with a broad range of investment objectives, which we refer to as the SSGA lending funds, (2) an agency lending program for third-party investment managers and asset owners, which we refer to as the agency lending funds and (3) security lending transactions which we enter into as principal, which we refer to as our enhanced custody business.

See Table 8: Investment Servicing Line of Business Results, for the comparison of securities finance revenue for the quarters ended March 31, 2016 and 2015.

Securities finance revenue earned from our agency lending activities, which is composed of our split of both the spreads related to cash collateral and the fees related to non-cash collateral, is principally a function of the volume of securities on loan, the interest-rate spreads and fees earned on the underlying collateral, and our share of the fee split.

As principal, our enhanced custody business borrows securities from the lending client and then lends such securities to the subsequent borrower, either a State Street client or a broker/dealer. We act as principal when the lending client is unable to, or elects not to, transact directly with the market and execute the transaction and furnish the securities. In our role as principal, we provide support to the transaction through our credit rating. While we source a significant proportion of the securities furnished by us in our role as principal from third parties, we have the ability to source securities through our assets under custody and administration from clients who have designated State Street as an eligible borrower.

Securities finance revenue increased 33% in the first quarter of 2016 compared to the first quarter of 2015. The increase was primarily the result of growth in our enhanced custody business and higher agency lending.

Market influences may continue to affect client demand for securities finance, and as a result our revenue from, and the profitability of, our securities lending activities in future periods. In addition, the constantly evolving regulatory environment may affect the volume of our securities lending activity and related revenue and profitability in future periods.

Processing Fees and Other

Processing fees and other revenue includes diverse types of fees and revenue, including fees from our structured products business, fees from software licensing and maintenance, equity income from our joint venture investments, gains and losses

Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

on sales of leased equipment and other assets, and amortization of our tax-advantaged investments.

Processing fees and other revenue, presented in Table 8: Investment Servicing Line of Business Results, decreased 24% in the first quarter of 2016 compared to the first quarter of 2015, primarily due to lower income from equity method investments.

Investment Management



TABLE 13: INVESTMENT MANAGEMENT LINE OF BUSINESS RESULTS
	Quarters Ended March 31,
(Dollars in millions, except where otherwise noted)	2016			2015			% Change
Management fees	$	270		$	301		(10	)%
Trading services	10			9			11
Processing fees and other	7			2			nm
Total fee revenue	287			312			(8	)
Net interest revenue	1			1			—
Total revenue	288			313			(8	)
Total expenses	256			256			—
Income before income tax expense	$	32		$	57		(44	)
Pre-tax margin	11		%	18		%

^nm Not meaningful

Total revenue for our Investment Management Line of Business, presented in Table 13: Investment Management Line of Business Results, decreased 8% in the first quarter of 2016 compared to the first quarter of 2015. Total fee revenue decreased 8% in the first quarter of 2016 compared to the first quarter of 2015.

Total expenses were flat in the first quarter of 2016 compared to the first quarter of 2015 resulting from increases in regulatory and compliance costs, offset by declines in other operating expenses.

~~Management Fees~~Trading Services

~~Management fees~~



TABLE 12: TRADING SERVICES REVENUE
	Quarters Ended March 31,
(Dollars in millions)	2016		2015		% Change
Foreign exchange trading:
Direct sales and trading	$	90	$	135	(33	)%
Indirect foreign exchange trading	66		68		(3	)
Total foreign exchange trading	156		203		(23	)
Brokerage and other trading services:
Electronic foreign exchange services	44		48		(8	)
Other trading, transition management and brokerage	62		64		(3	)
Total brokerage and other trading services	106		112		(5	)
Total trading services revenue	$	262	$	315	(17	)

We also offer a range of brokerage and other trading products tailored specifically to meet the needs of the global pension community, including transition management and commission recapture. In addition, we act as distribution agent for the SPDR^® Gold ETF. These products and services are generally differentiated by our role as an agent of the institutional investor. Revenue earned from these services is recorded in other trading, transition management and brokerage revenue within brokerage and other trading services revenue.

Total FX trading revenue decreased 23% in the ~~third~~first quarter ~~and first nine months~~ of ~~2015 decreased 9% and 2%, respectively,~~2016 compared to the ~~third~~first quarter ~~and first nine months~~ of ~~2014,~~2015, primarily due to ~~the effects~~lower volumes and volatility.

~~The stronger U.S. dollar had the effect of reducing management fees by approximately $11 million~~total foreign exchange trading revenue in the ~~third~~first quarter of ~~2015~~2016 compared to 67% in the ~~same period~~first quarter of 2015.

~~Management fees generated outside~~all cases, we are the ~~U.S. were approximately 34%~~funds' custodian. We execute indirect FX trades as a principal at rates disclosed to our clients. Estimated indirect sales and ~~35%, respectively,~~trading revenue represented 42% of total ~~management fees for~~foreign exchange trading revenue in the ~~third~~first quarter ~~and first nine months~~ of ~~2015,~~2016 as compared to ~~38% and 37%, respectively, for the same periods in 2014.~~

TABLE 7: ASSETS UNDER MANAGMENT BY ASSET CLASS AND INVESTMENT APPROACH
(Dollars in billions) September 30, 2015 December 31, 2014 September 30, 2014
Equity:
   Active $ 29
$ 39
$ 40
   Passive 1,237
1,436
1,371
Total Equity 1,266
1,475
1,411
Fixed-Income:
   Active 16
17
16
   Passive 300
302
322
Total Fixed-Income 316
319
338
Cash⁽¹⁾
380
399
410
Multi-Asset-Class Solutions:
   Active 26
30
34
   Passive 85
97
104
Total Multi-Asset-Class Solutions 111
127
138
Alternative Investments⁽²⁾:

   Active 17
17
17
   Passive 113
111
107
Total Alternative Investments 130
128
124
Total $ 2,203
$ 2,448
$ 2,421

⁽¹⁾~~Includes both floating- and constant-net-asset-value portfolios held in commingled structures or separate accounts.~~

⁽²⁾~~Includes real estate investment trusts, currency and commodities, including SPDR~~^®~~Gold Fund, for which State Street is not the investment manager, but acts as distribution agent.~~

TABLE 8: EXCHANGE-TRADED FUNDS BY ASSET CLASS⁽¹⁾
(Dollars in billions) September 30, 2015 December 31, 2014 September 30, 2014
Alternative Investments⁽²⁾
$ 35
$ 38
$ 40
Cash 3
1
1
Equity 323
388
338
Fixed-income 39
39
37
Total Exchange-Traded Funds $ 400
$ 466
$ 416

⁽¹⁾~~ETFs are a component of assets under management presented~~33% in the ~~preceding table.~~

⁽²⁾~~Includes SPDR~~^®~~Gold Fund,~~first quarter of 2015. We calculate revenue for ~~which State Street is not the investment manager, but acts as distribution agent.~~

TABLE 9: GEOGRAPHIC MIX OF ASSETS UNDER MANAGEMENT⁽¹⁾
(Dollars in billions) September 30, 2015 December 31, 2014 September 30, 2014
North America $ 1,409
$ 1,568
$ 1,502
Europe/Middle East/Africa 500
559
565
Asia/Pacific 294
321
354
Total $ 2,203
$ 2,448
$ 2,421

⁽¹⁾~~Geographic mix is based on client location or fund management location.~~

~~In asset management, we experienced net outflows of approximately $133 billion between December 31, 2014~~indirect FX trading using an attribution methodology. This methodology takes into consideration estimated mark-ups/downs and September 30, 2015 primarily composed of approximately $82 billion of net outflows from long-term institutional portfolios, approximately $33 billion of net outflows from ETFs and approximately $18 billion of outflows from cash products. The decrease in total assets under management at September 30, 2015 compared to December 31, 2014 resulted primarily from outflows from SPY, our S&P 500 ETF, outflows from institutional equity products driven by client re-balancing and cash needs, weaker global equity market levels and the impact of the strengthening U.S. dollar. The decrease in total assets under management as of September 30, 2015 compared to September 30, 2014 resulted from net outflows and the strengthening U.S. dollar, partially offset by stronger U.S. equity markets.

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AND RESULTS OF OPERATIONS (Continued)

TABLE 10: ACTIVITY IN ASSETS UNDER MANAGEMENT BY PRODUCT CATEGORY
(In billions) Equity Fixed-Income
Cash⁽²⁾
Multi-Asset-Class Solutions
Alternative Investments⁽³⁾
Total
Balance as of September 30, 2014 $ 1,411
$ 338
$ 410
$ 138
$ 124
$ 2,421
Long-term institutional inflows⁽¹⁾
85
20
—
7
4
116
Long-term institutional outflows⁽¹⁾
(80 ) (45 ) —
(9 ) (3 ) (137 )
Long-term institutional flows, net 5
(25 ) —
(2 ) 1
(21 )
ETF flows, net 37
2
1
—
(2 ) 38
Cash fund flows, net —
—
(10 ) —
—
(10 )
Total flows, net 42
(23 ) (9 ) (2 ) (1 ) 7
Market appreciation 39
14
—
(7 ) 9
55
Foreign exchange impact (17 ) (10 ) (2 ) (2 ) (4 ) (35 )
Total market/foreign exchange impact 22
4
(2 ) (9 ) 5
20
Balance as of December 31, 2014 1,475
319
399
127
128
2,448
Long-term institutional inflows⁽¹⁾
218
48
—
42
30
338
Long-term institutional outflows⁽¹⁾
(291 ) (48 ) —
(53 ) (28 ) (420 )
Long-term institutional flows, net (73 ) —
—
(11 ) 2
(82 )
ETF flows, net (38 ) 3
2
—
—
(33 )
Cash fund flows, net —
—
(18 ) —
—
(18 )
Total flows, net (111 ) 3
(16 ) (11 ) 2
(133 )
Market appreciation (79 ) —
—
(2 ) 9
(72 )
Foreign exchange impact (19 ) (6 ) (3 ) (3 ) (9 ) (40 )
Total market/foreign exchange impact (98 ) (6 ) (3 ) (5 ) —
(112 )
Balance as of September 30, 2015 $ 1,266
$ 316
$ 380
$ 111
$ 130
$ 2,203

observed client volumes. Direct sales and trading revenue is all other FX trading revenue other than the revenue attributed to indirect FX trading.

^{Our direct sales and trading revenue decreased 33% in the first quarter of 2016 as compared to the first quarter of 2015. The decrease primarily resulted from lower volumes and volatility. Our estimated indirect FX trading revenue decreased 3% in the first quarter of 2016 compared to the first quarter of 2015. The decrease mainly resulted from lower volume.
We continue to expect that some clients may choose, over time, to reduce their level of indirect FX trading transactions in favor of other execution methods, including either direct sales and trading transactions or electronic FX services which we provide. To the extent that clients shift to other execution methods that we provide, our FX trading revenue may decrease, even if volumes remain consistent.
Total brokerage and other trading services revenue decreased 5% in the first quarter of 2016 compared to the first quarter of 2015. The decrease was primarily due to a one-time gain recorded in the first quarter of 2015.
Our clients may choose to execute FX transactions through one of our electronic trading platforms. These transactions generate revenue through a “click” fee. Revenue from such electronic FX services decreased 8% in the first quarter of 2016 compared to the first quarter of 2015, mainly due to declines in client volumes.
Other trading, transition management and brokerage revenue decreased 3% in the first quarter of 2016 compared to the first quarter of 2015, primarily due to a decrease in transition management revenue, partially offset by an increase in other trading revenue.
In recent years, our transition management revenue was adversely affected by compliance issues in our U.K. business during 2010 and 2011. The reputational and regulatory impact of those compliance issues continues and may adversely affect our revenue in future periods. See Note 10 to the consolidated financial statements included in this Form 10-Q.}

Securities Finance

Our securities finance business consists of three components: (1) ~~Amounts represent long-term portfolios, excluding ETFs.~~an agency lending program for SSGA-managed investment funds with a broad range of investment objectives, which we refer to as the SSGA lending funds, (2) an agency lending program for third-party investment managers and asset owners, which we refer to as the agency lending funds and (3) security lending transactions which we enter into as principal, which we refer to as our enhanced custody business.

⁽²⁾~~Includes~~See Table 8: Investment Servicing Line of Business Results, for the comparison of securities finance revenue for the quarters ended March 31, 2016 and 2015.

Securities finance revenue earned from our agency lending activities, which is composed of our split of both ~~floating-~~the spreads related to cash collateral and ~~constant-net-asset-value portfolios held in commingled structures or separate accounts.~~the fees related to non-cash collateral, is principally a function of the volume of securities on loan, the interest-rate spreads and fees earned on the underlying collateral, and our share of the fee split.

⁽³⁾ ~~Includes real estate investment trusts, currency~~As principal, our enhanced custody business borrows securities from the lending client and ~~commodities, including SPDR~~^®~~Gold Fund, for which~~then lends such securities to the subsequent borrower, either a State Street client or a broker/dealer. We act as principal when the lending client is unable to, or elects not to, transact directly with the ~~investment manager, but acts~~market and execute the transaction and furnish the securities. In our role as ~~distribution agent.~~

~~The net outflows~~principal, we provide support to the transaction through our credit rating. While we source a significant proportion of ~~approximately $133 billion~~the securities furnished by us in our role as principal from third parties, we have the ability to source securities through our assets under ~~management between September 30, 2015~~custody and ~~December 31, 2014 presented~~administration from clients who have designated State Street as an eligible borrower.

Securities finance revenue increased 33% in the ~~preceding table did not include approximately $22 billion~~first quarter of ~~new asset management~~2016 compared to the first quarter of 2015. The increase was primarily the result of growth in our enhanced custody business ~~which was awarded~~and higher agency lending.

Market influences may continue to ~~SSGA but not installed~~affect client demand for securities finance, and as a result our revenue from, and the profitability of, ~~September 30, 2015. This new business will be reflected in assets under management~~our securities lending activities in future ~~periods after installation,~~periods. In addition, the constantly evolving regulatory environment may affect the volume of our securities lending activity and ~~will generate management fee~~related revenue ~~in subsequent periods. Net outflows in the third quarter reflect significant outflows from a single client. This client is anticipated to continue its reallocations during the remainder of 2015~~ and ~~into 2016. This reallocation will impact the AUM that we report~~profitability in future periods.

~~Total assets under management as~~

Processing Fees and Other

Processing fees and other revenue includes diverse types of ~~September 30, 2015 included managed assets lost but not yet liquidated. Lost~~fees and revenue, including fees from our structured products business, ~~occurs~~fees from ~~time to time~~software licensing and ~~it is difficult to predict the timing of client behavior in transitioning these assets. This timing can vary significantly.~~maintenance, equity income from our joint venture investments, gains and losses

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

on sales of leased equipment and other assets, and amortization of our tax-advantaged investments.

Investment Management



TABLE 13: INVESTMENT MANAGEMENT LINE OF BUSINESS RESULTS
	Quarters Ended March 31,
(Dollars in millions, except where otherwise noted)	2016			2015			% Change
Management fees	$	270		$	301		(10	)%
Trading services	10			9			11
Processing fees and other	7			2			nm
Total fee revenue	287			312			(8	)
Net interest revenue	1			1			—
Total revenue	288			313			(8	)
Total expenses	256			256			—
Income before income tax expense	$	32		$	57		(44	)
Pre-tax margin	11		%	18		%

^nm Not meaningful

Trading Services


TABLE 11: TRADING SERVICES REVENUE
TABLE 12: TRADING SERVICES REVENUE							TABLE 12: TRADING SERVICES REVENUE
	Quarters Ended September 30,						Quarters Ended March 31,
(Dollars in millions)	2015		2014		% Change		2016		2015		% Change
Foreign exchange trading:
Direct sales and trading	$	108	$	101	7	%	$	90	$	135	(33	)%
Indirect foreign exchange trading	69		60		15		66		68		(3	)
Total foreign exchange trading	177		161		10		156		203		(23	)
Brokerage and other trading services:
Electronic foreign exchange services	46		44		5		44		48		(8	)
Other trading, transition management and brokerage	71		73		(3	)	62		64		(3	)
Total brokerage and other trading services	117		117		—		106		112		(5	)
Total trading services revenue	$	294	$	278	6		$	262	$	315	(17	)

	Nine Months Ended September 30,
(Dollars in millions)	2015		2014		% Change
Foreign exchange trading:
Direct sales and trading	$	331	$	251	32	%
Indirect foreign exchange trading	216		188		15
Total foreign exchange trading	547		439		25
Brokerage and other trading services:
Electronic foreign exchange services	138		135		2
Other trading, transition management and brokerage	214		217		(1	)
Total brokerage and other trading services	352		352		—
Total trading services revenue	$	899	$	791	14

Trading services revenue is composed of revenue generated by ~~foreign exchange, or~~ FX trading, as well as revenue generated by brokerage and other trading services. We primarily earn FX trading revenue by acting as a principal ~~market maker.~~market-maker. We offer a range of FX products, services and execution models. Most of our FX products and execution services can be grouped into three broad categories, which are further

We also offer a range of brokerage and other trading products tailored specifically to meet the needs of the global pension community, including transition management and commission recapture. In addition, we act as distribution agent for the SPDR^® Gold ETF. These products and services are generally differentiated by our role as an agent of the institutional investor. Revenue earned from these services is recorded in other trading, transition management and brokerage revenue within brokerage and other trading services revenue.

Our FX trading revenue is influenced by multiple factors, including: the volume and type of client FX

transactions and related spreads; currency volatility, reflecting market conditions; and our management of exchange rate, interest rate and other market risks associated with our foreign exchange activities. The relative impact of these factors on our total FX trading revenues often differs from period to period. For example, assuming all other factors remain constant, increases or decreases in volumes or spreads across product mix tend to result in increases or decreases, as the case may be, in client-related FX revenue. Revenue earned from direct sales and trading and indirect FX trading is recorded in FX trading revenue.

Total FX trading revenue ~~increased 10% and 25%, for~~decreased 23% in the ~~third~~first quarter ~~and first nine months~~ of ~~2015, respectively,~~2016 compared to the ~~same periods in 2014,~~first quarter of 2015, primarily ~~the result of higher volatility, market making activities~~due to lower volumes and ~~client volumes.~~volatility.

We enter into FX transactions with clients and investment managers that contact our trading desk directly. These trades are all executed at negotiated rates. We refer to this activity, and our principal market-making activities, as “direct sales and trading” and it includes many transactions for funds serviced by third party custodians or prime brokers, as well as those funds under custody at State Street. Direct sales and trading revenue represented ~~61%~~58% of total foreign exchange trading revenue ~~for both~~in the ~~three and nine month periods ended September 30, 2015, respectively, as~~first quarter of 2016 compared to ~~63% and 57%~~67% in the ~~same periods in 2014.~~first quarter of 2015.

Alternatively, clients or their investment managers may elect to route FX transactions to our FX desk through our asset-servicing operation; we refer to this activity as “indirect FX ~~trading,”~~trading” and, in all cases, we are the ~~funds~~funds' custodian. We execute indirect FX trades as a principal at rates disclosed to our clients. Estimated indirect sales and trading revenue represented ~~39%~~42% of total foreign exchange trading revenue ~~for both~~in the ~~three and nine month periods ended September 30, 2015, respectively,~~first quarter of 2016 as compared to ~~37% and 43%~~33% in the ~~same periods in 2014.~~first quarter of 2015. We calculate revenue for indirect FX trading using an attribution methodology. This methodology takes into consideration estimated mark-ups/downs and

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AND RESULTS OF OPERATIONS (Continued)

observed client volumes. Direct sales and trading revenue is all other FX trading revenue other than the revenue attributed to indirect FX trading.

Our clients that utilize indirect FX trading can, in addition to executing their FX transactions through dealers not affiliated with us, transition from indirect FX trading to either direct sales and trading execution, including our “Street FX” service, or to one of our electronic trading platforms. Street FX, in which we continue to act as a principal ~~market maker,~~market-maker, enables our clients to define their FX execution strategy and automate the FX trade execution

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~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (Continued)~~

process, both for funds under custody with us as well as those under custody at another bank.

Our direct sales and trading revenue ~~increased 7% and 32%,~~decreased 33% in the ~~third~~first quarter ~~and first nine months~~ of ~~2015, respectively,~~2016 as compared to the ~~same periods~~first quarter of ~~2014.~~2015. The ~~increases~~decrease primarily resulted from ~~higher currency volatility, market making activities~~lower volumes and ~~client volumes.~~volatility. Our estimated indirect FX trading revenue ~~increased 15%~~decreased 3% in ~~both~~ the ~~third~~first quarter ~~and first nine months~~ of ~~2015, respectively,~~2016 compared to the ~~same periods~~first quarter of ~~2014.~~2015. The ~~increase~~decrease mainly resulted from ~~higher currency volatility, client volumes and spreads.~~lower volume.

Total brokerage and other trading services revenue ~~was flat~~decreased 5% in the ~~third~~first quarter ~~and first nine months~~ of ~~2015,~~2016 compared to the ~~same periods~~first quarter of ~~2014.~~ 2015. The decrease was primarily due to a one-time gain recorded in the first quarter of 2015.

Our clients may choose to execute FX transactions through one of our electronic trading platforms. These transactions generate revenue through a “click” fee. Revenue from such electronic FX services ~~increased 5%~~decreased 8% in the ~~third~~first quarter of 2016 compared to the first quarter of 2015, ~~and 2% for the first nine months of 2015 compared~~mainly due to ~~the same periods of 2014.~~declines in client volumes.

~~The 3% and 1% decrease in other~~Other trading, transition management and brokerage revenue ~~for~~decreased 3% in the ~~third~~first quarter ~~and first nine months~~ of ~~2015, respectively,~~2016 compared to the ~~same periods~~first quarter of ~~2014 was~~2015, primarily due to a decrease in transition management revenue, partially offset by an increase in other trading revenue.

In recent years, our transition management revenue was adversely affected by compliance issues in our U.K. business during 2010 and 2011. The reputational and regulatory impact of those compliance issues continues and may adversely affect our ~~transition management~~ revenue in future periods. See Note 10 to the consolidated financial statements included in this Form 10-Q.

~~Securities Finance~~EXPENSES



TABLE 7: EXPENSES
	Quarters Ended March 31,
(Dollars in millions)	2016		2015		% Change
Compensation and employee benefits	$	1,107	$	1,087	2	%
Information systems and communications	272		247		10
Transaction processing services	200		197		2
Occupancy	113		113		—
Acquisition costs	7		5		40
Restructuring charges, net	97		1		nm
Other:
Professional services	93		96		(3	)
Amortization of other intangible assets	49		50		(2	)
Securities processing costs	4		20		(80	)
Regulatory fees and assessments	20		34		(41	)
Other	88		247		(64	)
Total other	254		447		(43	)
Total expenses	$	2,050	$	2,097	(2	)
Number of employees at quarter-end	32,527		30,495

~~enter into as principal, which we refer to as our enhanced custody business.~~

~~See Table 2: Total Revenue for the comparison of securities finance revenue for the third quarter~~

^nm Not meaningful

Compensation and ~~first nine months of 2015 and 2014.~~

As principal, our enhanced custody business borrows securities from the lending client and then lends such securities to the subsequent borrower, either a State Street client or a broker/dealer. We act as principal when the lending client is unable to, or elects not to, transact directly with the market and requires us to execute the transaction and furnish the securities. In our role as principal, we provide support to the transaction through our credit rating. While we source a significant proportion of the securities furnished by us in our role as principal from third parties, we have the ability to source securities through our assets under custody and administration, from clients who have designated State Street as an eligible borrower.

~~Securities finance revenue~~employee benefits expenses increased ~~14% and 11%,~~2% in the ~~third~~first quarter ~~and first nine months~~ of ~~2015, respectively,~~2016 compared to the ~~same periods~~first quarter of ~~2014.~~2015. The increase in costs was primarily due to additional staffing to support regulatory initiatives and new business, partially offset by the effect of the stronger U.S. dollar and decreases in incentive compensation and benefits.

Compensation and employee benefits expenses in the first quarter of 2016 and the first quarter of 2015 included approximately $122 million and $137 million, respectively, of seasonal deferred incentive compensation expense for retirement-eligible employees and payroll taxes.

Acquisition Costs

In the first quarter of 2016, we recorded acquisition costs of $7 million, compared to $5 million in the first quarter of 2015. These amounts related to previously announced acquisitions.

Restructuring Charges

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AND RESULTS OF OPERATIONS (Continued)

INCOME TAX EXPENSE

LINE OF BUSINESS INFORMATION

Investment Servicing



TABLE 8: INVESTMENT SERVICING LINE OF BUSINESS RESULTS
	Quarters Ended March 31,
(Dollars in millions, except where otherwise noted)	2016			2015			% Change
Servicing fees	$	1,242		$	1,268		(2	)%
Trading services	262			315			(17	)
Securities finance	134			101			33
Processing fees and other	45			59			(24	)
Total fee revenue	1,683			1,743			(3	)
Net interest revenue	511			545			(6	)
Gains (losses) related to investment securities, net	2			(1		)	nm
Total revenue	2,196			2,287			(4	)
Provision for loan losses	4			4			—
Total expenses	1,687			1,836			(8	)
Income before income tax expense	$	505		$	447		13
Pre-tax margin	23		%	20		%

^nm- Not meaningful

Net interest revenue decreased 6% in the first quarter of 2016 compared to the first quarter of 2015. The decrease was generally the result of ~~new business from~~ our ~~enhanced custody business.~~

~~Market influences may continue~~efforts to ~~affect client demand for securities finance, and~~optimize our capital position, lower yields on interest-earning assets, as ~~a result~~well as lower global interest rates, which affect our revenue from floating-

rate assets, and the ~~profitability~~effect of ~~our securities lending activities~~the stronger U.S. dollar, partially offset by the benefit of higher levels of interest-earning assets. A discussion of net interest revenue is provided under “Net Interest Revenue” in ~~future periods. In addition, recently effective regulatory changes may affect the volume of our securities lending activity~~“Total Revenue” in this Management's Discussion and ~~related revenue and profitability in future periods.~~

~~Processing Fees and Other~~Analysis.

~~Processing fees and other revenue increased 606% and 69%,~~Total expenses decreased 8% in the ~~third~~first quarter ~~and first nine months~~ of ~~2015, respectively,~~2016 compared to the ~~same periods~~first quarter of ~~2014, as shown~~2015. The decrease primarily resulted from expenses for a legal accrual recorded in ~~Table 2: Total Revenue. The increases~~first quarter of 2015 in connection with management's intention to seek to resolve some, but not all, of the outstanding and potential claims arising out of our indirect FX client activities recorded in the first quarter of 2015.

In December 2015, we announced a review of the manner in which we invoiced certain expenses to certain of our Investment Servicing clients, primarily in the United States, during a period going back to 1998. We have informed our clients that we will pay to them the expenses we concluded were ~~mainly~~incorrectly invoiced to them, plus interest. In conjunction with that review, we are evaluating other aspects of invoicing relating to billing our Investment Servicing clients, including calculation of asset-based fees. See Note 10 to the consolidated financial statements included in this Form 10-Q.

Servicing Fees

Servicing fees decreased 2% in the first quarter of 2016 compared to the first quarter of 2015, primarily due to lower global equity markets and the ~~impact~~effect of ~~an $83 million pre-tax gain related to~~ the ~~sale~~stronger U.S. dollar, partially offset by net new business.

Servicing fees generated outside the U.S. were approximately 41% of total servicing fees in the quarters ended March 31, 2016 and 2015.



TABLE 9: COMPONENTS OF ASSETS UNDER CUSTODY AND ADMINISTRATION
(In billions)	March 31, 2016		December 31, 2015		March 31, 2015
Mutual funds	$	6,728	$	6,768	$	7,073
Collective funds	7,000		7,088		7,113
Pension products	5,197		5,510		5,745
Insurance and other products	8,018		8,142		8,560
Total	$	26,943	$	27,508	$	28,491



TABLE 10: COMPOSITION OF ASSETS UNDER CUSTODY AND ADMINISTRATION
(In billions)	March 31, 2016		December 31, 2015		March 31, 2015
Equities	$	14,433	$	14,888	$	15,660
Fixed-income	9,199		9,264		9,157
Short-term and other investments	3,311		3,356		3,674
Total	$	26,943	$	27,508	$	28,491

1516

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AND RESULTS OF OPERATIONS (Continued)

~~commercial~~



TABLE 11: GEORGRAPHIC MIX OF ASSETS UNDER CUSTODY AND ADMINISTRATION⁽¹⁾
(In billions)	March 31, 2016		December 31, 2015		March 31, 2015
North America	$	20,505	$	20,842	$	21,554
Europe/Middle East/Africa	5,159		5,387		5,590
Asia/Pacific	1,279		1,279		1,347
Total	$	26,943	$	27,508	$	28,491

⁽¹⁾Geographic mix is based on the location in which the assets are serviced.

Asset levels as of March 31, 2016 did not reflect the estimated $401.8 billion of new business in assets to be serviced, which was awarded to us in the first quarter of 2016 and prior periods but not installed prior to March 31, 2016. This new business will be reflected in assets under custody and administration in future periods after installation and will generate servicing fee revenue in subsequent periods.

With respect to these new assets, we will provide various services, including accounting, bank loan servicing, compliance reporting and monitoring, custody, depository banking services, foreign exchange, fund administration, hedge fund servicing, middle-office outsourcing, performance and analytics, private equity administration, real estate ~~acquired~~administration, securities finance, transfer agency, and wealth management services.

Trading Services



TABLE 12: TRADING SERVICES REVENUE
	Quarters Ended March 31,
(Dollars in millions)	2016		2015		% Change
Foreign exchange trading:
Direct sales and trading	$	90	$	135	(33	)%
Indirect foreign exchange trading	66		68		(3	)
Total foreign exchange trading	156		203		(23	)
Brokerage and other trading services:
Electronic foreign exchange services	44		48		(8	)
Other trading, transition management and brokerage	62		64		(3	)
Total brokerage and other trading services	106		112		(5	)
Total trading services revenue	$	262	$	315	(17	)

Trading services revenue is composed of revenue generated by FX trading, as well as revenue generated by brokerage and other trading services. We primarily earn FX trading revenue by acting as a ~~result~~principal market-maker. We offer a range of ~~the Lehman Brothers bankruptcy.~~

~~NET INTEREST REVENUE~~

~~See Table 2: Total Revenue, for the breakout~~FX products, services and execution models. Most of ~~interest revenue~~our FX products and ~~interest expense for the quarters ended September 30, 2015 and 2014.~~

~~Net interest revenue is defined as interest revenue earned on interest-earning assets less interest expense incurred on interest-bearing liabilities. Interest-earning assets,~~execution services can be grouped into three broad categories, which ~~principally consist of investment securities, interest-bearing deposits with banks, repurchase agreements, loans and leases and other liquid assets,~~ are ~~financed~~further

~~primarily by client deposits, short-term borrowings~~explained below: “direct sales and ~~long-term debt. Net interest margin represents~~trading,” “indirect FX trading” and “electronic FX services.” With respect to electronic FX services, we provide an execution venue, but do not act as agent or principal.

We also offer a range of brokerage and other trading products tailored specifically to meet the ~~relationship between annualized fully taxable-equivalent net interest revenue~~needs of the global pension community, including transition management and ~~average total interest-earning assets~~commission recapture. In addition, we act as distribution agent for the ~~period. It is calculated~~SPDR^® Gold ETF. These products and services are generally differentiated by ~~dividing fully taxable-equivalent net interest revenue by average interest-earning assets.~~our role as an agent of the institutional investor. Revenue ~~that is exempt from income taxes, mainly that~~ earned from ~~certain investment securities (state~~these services is recorded in other trading, transition management and ~~political subdivisions),~~brokerage revenue within brokerage and other trading services revenue.

Our FX trading revenue is ~~adjusted~~influenced by multiple factors, including: the volume and type of client FX transactions and related spreads; currency volatility, reflecting market conditions; and our management of exchange rate, interest rate and other market risks associated with our foreign exchange activities. The relative impact of these factors on our total FX trading revenues often differs from period to ~~a fully taxable-equivalent basis using a federal statutory income tax rate of 35%, adjusted for applicable state income taxes, net of~~period. For example, assuming all other factors remain constant, increases or decreases in volumes or spreads across product mix tend to result in increases or decreases, as the ~~related federal tax benefit.~~

16case may be, in client-related FX revenue. Revenue earned from direct sales and trading and indirect FX trading is recorded in FX trading revenue.

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~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (Continued)~~

TABLE 12: AVERAGE BALANCES AND INTEREST RATES - FULLY TAXABLE-EQUIVALENT BASIS
Quarters Ended September 30,
2015 2014
(Dollars in millions; fully taxable-equivalent basis)
Average
Balance

Interest
Revenue/
Expense
Rate
Average
Balance

Interest
Revenue/
Expense
Rate
Interest-bearing deposits with banks $ 73,466
$ 53
.29 % $ 63,160
$ 53
.33 %
Securities purchased under resale agreements 4,838
18
1.51
3,249
9
1.05
Trading account assets 1,338
—
—
985
—
—
Investment securities 100,175
505
2.02
117,618
586
1.99
Loans and leases 17,606
79
1.77
16,002
64
1.59
Other interest-earning assets 24,001
2
.03
17,003
2
.05
Average total interest-earning assets $ 221,424
$ 657
1.18
$ 218,017
$ 714
1.30
Interest-bearing deposits:
U.S. $ 36,033
$ 15
.16 % $ 24,144
$ 7
.11 %
Non-U.S. 101,297
13
.05
114,756
26
.09
Securities sold under repurchase agreements 9,220
—
—
9,111
—
—
Federal funds purchased 17
—
—
18
—
—
Other short-term borrowings 3,791
1
.18
4,376
—
—
Long-term debt 10,530
62
2.35
9,020
60
2.64
Other interest-bearing liabilities 4,463
10
.88
7,386
8
.42
Average total interest-bearing liabilities $ 165,351
$ 101
.24
$ 168,811
$ 101
.24
Interest-rate spread .94 % 1.06 %
Net interest revenue—fully taxable-equivalent basis $ 556
$ 613

Net interest margin—fully taxable-equivalent basis 1.00 % 1.12 %
Tax-equivalent adjustment (43 ) (43 )
Net interest revenue—GAAP basis $ 513
$ 570

Nine Months Ended September 30,
2015 2014
(Dollars in millions; fully taxable-equivalent basis)
Average
Balance

Interest
Revenue/
Expense
Rate
Average
Balance

Interest
Revenue/
Expense
Rate
Interest-bearing deposits with banks $ 74,830
$ 161
.29 % $ 50,153
$ 138
.37 %
Securities purchased under resale agreements 3,325
45
1.79
4,717
27
.78
Trading account assets 1,234
—
—
947
1
.12
Investment securities 107,216
1,574
1.96
117,681
1,752
1.98
Loans and leases 17,711
229
1.73
15,227
183
1.61
Other interest-earning assets 22,731
7
.04
15,138
5
.04
Average total interest-earning assets $ 227,047
$ 2,016
1.19
$ 203,863
$ 2,106
1.38
Interest-bearing deposits:
U.S. $ 31,479
$ 34
.14 % $ 19,016
$ 12
.09 %
Non-U.S. 105,347
33
.04
108,492
54
.07
Securities sold under repurchase agreements 9,576
—
—
8,763
—
—
Federal funds purchased 21
—
—
19
—
—
Other short-term borrowings 4,211
5
.16
4,096
4
.12
Long-term debt 9,809
185
2.51
9,340
186
2.66
Other interest-bearing liabilities 6,835
34
.65
7,237
34
.62
Average total interest-bearing liabilities $ 167,278
$ 291
.23
$ 156,963
$ 290
.25
Interest-rate spread 0.96 % 1.13 %
Net interest revenue—fully taxable-equivalent basis $ 1,725
$ 1,816

Net interest margin—fully taxable-equivalent basis 1.02 % 1.19 %
Tax-equivalent adjustment (131 ) (130 )
Net interest revenue—GAAP basis $ 1,594
$ 1,686

~~Net interest~~Total FX trading revenue decreased ~~9% and 5%, on a fully taxable-equivalent basis~~23% in the ~~third~~first quarter ~~and first nine months~~ of ~~2015, respectively,~~2016 compared to the ~~same periods~~first quarter of ~~2014. The decrease was~~

2015, primarily due to lower volumes and volatility.

We enter into FX transactions with clients and investment managers that contact our trading desk directly. These trades are all executed at negotiated rates. We refer to this activity, and our principal market-making activities, as “direct sales and trading” and it includes many transactions for funds serviced by third party custodians or prime brokers, as well as those funds under custody at State Street. Direct sales and trading revenue represented 58% of total foreign exchange trading revenue in the first quarter of 2016 compared to 67% in the first quarter of 2015.

~~generally~~Alternatively, clients or their investment managers may elect to route FX transactions to our FX desk through our asset-servicing operation; we refer to this activity as “indirect FX trading” and, in all cases, we are the ~~result~~funds' custodian. We execute indirect FX trades as a principal at rates disclosed to our clients. Estimated indirect sales and trading revenue represented 42% of ~~lower yields on interest-earning assets,~~total foreign exchange trading revenue in the first quarter of 2016 as ~~lower global interest rates affected our~~compared to 33% in the first quarter of 2015. We calculate revenue ~~from floating-rate assets,~~for indirect FX trading using an attribution methodology. This methodology takes into consideration estimated mark-ups/downs and ~~the effects of the stronger U.S. dollar. The stronger U.S. dollar had the effect of reducing net interest revenue by~~

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

~~approximately $14 million~~observed client volumes. Direct sales and trading revenue is all other FX trading revenue other than the revenue attributed to indirect FX trading.

Our clients that utilize indirect FX trading can, in ~~the third quarter~~addition to executing their FX transactions through dealers not affiliated with us, transition from indirect FX trading to either direct sales and trading execution, including our “Street FX” service, or to one of ~~2015 compared~~our electronic trading platforms. Street FX, in which we continue to ~~the same period in 2014, partially offset by the benefit of higher levels of interest-earning assets and lower rates on interest paid.~~

Changes in the components of interest-earning assets and interest-bearing liabilities are discussed in more detail below. Additional detail about the components of interest revenue and interest expense is provided in note 14 ~~to the consolidated financial statements included in this Form 10-Q.~~

~~Average total interest-earning assets were higher for the third quarter and first nine months of 2015 compared to the same periods in 2014~~act as a result of elevated levels of client deposits invested in interest-bearing deposits with banks, higher average loans and leases and higher levels of cash collateral (included in other interest-earning assets in Table 12: Average Balances and Interest Rates - Fully Taxable-Equivalent Basis) provided in connection with our enhanced custody business.

The higher level of investment in interest-bearing deposits with banks resulted from higher levels of client deposits during the third quarter and first nine months of 2015 compared to the same periods in 2014, discussed further below, while the increase in average loans and leases resulted from growth in mutual fund lending and our continued investment in senior secured bank loans.

~~During the past year,~~principal market-maker, enables our clients ~~have continued~~ to ~~place elevated levels of deposits~~define their FX execution strategy and automate the FX trade execution process, both for funds under custody with us as ~~central bank actions have resulted in high levels of liquidity~~well as those under custody at another bank.

Our direct sales and low global interest rates. We evaluate deposits as either inherent in our relationship with our custodial clients, which we generally invest in our investment portfolio, or transient, or excess, deposits, which we generally deposit with central banks. Deposits with central banks generate low returns. Consequently, the elevated levels of these transient deposits have contributed to a reduction of our net interest margin relative to historical levels.

The deposits with central banks are also included in our total consolidated assets, and higher deposit levels impact our regulatory leverage ratios. We have been engaging in discussions with clients regarding deposit levels and during the third quarter of 2015 we took action to better balance our clients' cash management needs with our economic and regulatory objectives. These efforts resulted in a reduction in client deposits from June 30, 2015, mainly occurring toward the end of the third quarter of 2015. Client deposit levels at September 30, 2015 of $186 billiontrading revenue decreased $44 billion from $231 billion at June 30, 2015, and average third quarter 2015 client deposits of $137 billion decreased $2 billion from $139 billion at the second quarter of 2015. Were global interest rates to increase, we would expect to

see further decreases in client deposits; however, in general, we continue to anticipate higher levels of client deposits, irrespective of the interest rate environment, during periods of market stress.

The effects of the recent stronger U.S. dollar relative to other currencies, particularly the Euro, also negatively impacted our net interest revenue as we maintain a portion of our investment portfolio in Euro denominated securities. If European Central Bank, or ECB, monetary policy continues to pressure European interest rates downward and the U.S. dollar remains strong or strengthens, the negative effects on our net interest revenue may continue or worsen.

Negative interest rates on assets generate negative interest income. Conversely, negative interest rates on liabilities generate negative interest expense. These amounts are included within interest income and interest expense.

~~We recorded aggregate discount accretion in interest revenue of $75 million~~33% in the first nine months of 2015 related to the assets we consolidated onto our balance sheet in 2009 from our asset-backed commercial paper conduits. Subsequent to the commercial paper conduit consolidation in 2009, we have recorded total discount accretion in interest revenue of $2.10 billion (including $75 million in the first nine months of 2015, $119 million for the twelve months ended December 31, 2014, $137 million for the twelve months ended December 31, 2013, $215 million for the twelve months ended December 31, 2012, $220 million for the twelve months ended December 31, 2011, $712 million for the twelve months ended December 31, 2010 and $621 million for the twelve months ended December 31, 2009). The timing and ultimate recognition of any applicable discount accretion depends, in part, on factors that are outside of our control, including anticipated prepayment speeds and credit quality. The impact of these factors is uncertain and can be significantly influenced by general economic and financial market conditions. The timing and recognition of any applicable discount accretion can also be influenced by our ongoing management of the risks and other characteristics associated with our investment securities portfolio, including sales of securities which would otherwise generate interest revenue through accretion.

~~Table of Contents~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (Continued)~~

investment portfolio as of September 30, 2015 to generate discount accretion in future periods of approximately $233 million over their remaining terms, with approximately half of this discount accretion to be recorded over the next four years.

Interest-bearing deposits with banks averaged $73.47 billion and $74.83 billion, for the third quarter and first nine months of 2015, respectively, compared to $63.16 billion and $50.15 billion, respectively, for the same periods of 2014. These deposits reflected our maintenance of cash balances at the Federal Reserve, the ECB and other non-U.S. central banks both to satisfy regulatory reserve requirements, and due to the continued elevated levels of client deposits and our investment of the excess deposits with central banks.

~~While the actions taken in the third~~ quarter of 2015 have reduced levels of client deposits, we expect to continue to invest deposits we deem as elevated in investment securities or short-term assets, including central bank deposits, depending on our assessment of the underlying characteristics of the deposits.

Average investment securities decreased to $100.18 billion, and $107.22 billion, for the third quarter and first nine months of 2015, respectively, compared to $117.62 billion and $117.68 billion, for the same periods of 2014, as we continue to optimize our balance sheet in light of the evolving regulatory environment. Detail with respect to our investment securities portfolio as of ~~September 30, 2015~~ ~~and December 31, 2014 is provided in note~~ 3 ~~to the consolidated financial statements included in this Form 10-Q.~~

Average loans and leases increased to $17.61 billion and $17.71 billion, for the third quarter and first nine months of 2015, respectively, compared to $16.00 billion and $15.23 billion, for the same periods of 2014. The increase was mainly related to mutual fund lending and our continued investment in senior secured bank loans. Mutual fund lending and senior secured bank loans averaged approximately $12.63 billion and $12.73 billion, respectively, for the third quarter and first nine months of 2015, compared to $10.62 billion and $9.96 billion, for the same periods of 2014.

~~Average loans and leases also include short-duration advances.~~

TABLE 13: U.S. AND NON-U.S. SHORT-DURATION ADVANCES
Quarters Ended September 30,
(In millions) 2015 2014
Average U.S. short-duration advances $ 2,226
$ 2,372
Average non-U.S. short-duration advances 1,325
1,468
Average total short-duration advances $ 3,551
$ 3,840
Average short-duration advances to average loans and leases 20 % 24 %

Nine Months Ended September 30,
(In millions) 2015 2014
Average U.S. short-duration advances $ 2,284
$ 2,264
Average non-U.S. short-duration advances 1,432
1,463
Average total short-duration advances $ 3,716
$ 3,727
Average short-duration advances to average loans and leases 21 % 24 %

The decline in the proportion of the average daily short-duration advances to average loans and leases is primarily due to growth in the other segments of the loan and lease portfolio. Short-duration advances provide liquidity to clients in support of their investment activities.

Although average short-duration advances decreased for the third quarter of 2015 and remained relatively flat for the first nine months of 2015 compared to the third quarter and first nine months of 2014, respectively, such average short-duration advances provided by us remained low relative to historical levels, primarily the result of higher levels of liquidity, including excess deposits, held by our clients.

Average other interest-earning assets increased to $24.00 billion and $22.73 billion, for the third quarter and first nine months of 2015, respectively, from $17.00 billion and $15.14 billion, for the third quarter and first nine months of 2014, respectively. Our average other interest-earning assets, largely associated with our enhanced custody business, comprised approximately 11% of our average total interest-earning assets for both the third quarter and first nine months of 2015, compared to approximately 7% of our average total interest-earning assets for both the third quarter and first nine months of 2014, as this business continued to grow. While the enhanced custody business, our principal securities lending service for custody clients. supports our overall profitability by generating securities finance revenue, it puts downward pressure on our net interest margin, as interest income on the receivable associated with the cash collateral we provide is earned at a lower rate compared to our investment securities portfolio.

~~Table of Contents~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (Continued)~~

Aggregate average interest-bearing deposits decreased to $137.33 billion from $138.90 billion for the third quarter and increased to $136.83 billion from $127.51 billion in the first nine months of 2015,2016 as compared to the ~~same periods~~first quarter of ~~2014.~~2015. The ~~higher levels for the first nine months of 2015 were~~decrease primarily ~~the result of increases in both U.S.~~resulted from lower volumes and non-U.S. transaction accounts and time deposits. Future transaction account levels will be influenced by the underlying asset servicing business, client deposit behavior in reaction to management actions taken in the third quarter to reduce deposits, as well as market conditions, including the general levels of U.S. and non-U.S. interest rates.

~~Average other short-term borrowings~~volatility. Our estimated indirect FX trading revenue decreased ~~to $3.79 billion from $4.38 billion for the third quarter and increased to $4.21 billion from $4.10 billion~~3% in the first ~~nine months~~quarter of ~~2015 as~~2016 compared to the ~~same periods~~first quarter of ~~2014.~~2015. The ~~increase for~~decrease mainly resulted from lower volume.

Total brokerage and other trading services revenue decreased 5% in the first nine months of 2015 was the result of a higher level of client demand for our commercial paper. The third quarter decline is a result of State Street's plans to phase-out its commercial paper program by July 1, 2016, consistent with the objectives of its 2015 recovery and resolution plan developed pursuant to the requirements of the Dodd-Frank Act. In the third quarter of ~~2014 we had no interest expense on short-term borrowings as~~2016 compared to the ~~third~~first quarter of 2015. The decrease was primarily due to a one-time gain recorded in the first quarter of 2015.

Other trading, transition management and brokerage revenue decreased 3% in the first ~~nine months~~quarter of 2015 increased to 0.2% from 0.1% for the same period in 2014. The increase over both periods resulted from a reclassification of certain derivative contracts in 2014 that hedge our interest-rate risk on certain assets and liabilities.

Average long-term debt increased to $10.53 billion and $9.81 billion, for the third quarter and first nine months of 2015, respectively, from $9.02 billion and $9.34 billion, respectively, for the same periods of 2014. The increase primarily reflected the issuance of $1.0 billion of senior debt issued in December 2014 and $3.0 billion of senior debt issued in August 2015 which was offset by a $900 million extendible note called at the end of February 2015, the maturities of $500 million of senior debt in May 2014 and $250 million of senior debt in March 2014.

~~Average other interest-bearing liabilities decreased to $4.46 billion and $6.84 billion, for the~~

third quarter and first nine months of 2015, respectively, from $7.39 billion and $7.24 billion, respectively, for the same periods of 2014, primarily the result of higher levels of cash collateral received from clients in connection with our enhanced custody business.

Several factors could affect future levels of our net interest revenue and margin, including the mix of client liabilities; actions of various central banks; changes in U.S. and non-U.S. interest rates; changes in the various yield curves around the world; the effectiveness of our efforts to reduce excess client deposits; revised or proposed regulatory capital or liquidity standards, or interpretations of those standards; the amount of discount accretion generated by the former conduit securities that remain in our investment securities portfolio; the yields earned on securities purchased2016 compared to the ~~yields earned on securities sold or matured; and changes~~first quarter of 2015, primarily due to a decrease in transition management revenue, partially offset by an increase in other trading revenue.

In recent years, our transition management revenue was adversely affected by compliance issues in our ~~enhanced custody business.~~

~~Based on market conditions~~U.K. business during 2010 and ~~other factors, we continue to reinvest the majority of the proceeds from pay-downs~~2011. The reputational and maturities of investment securities in highly-rated securities, such as U.S. Treasury and agency securities, municipal securities, federal agency mortgage-backed securities and U.S. and non-U.S. mortgage- and asset-backed securities. The pace at which we continue to reinvest and the types of investment securities purchased will depend on theregulatory impact of ~~market conditions~~those compliance issues continues and ~~other factors over time. We expect these factors and the levels of global interest rates to influence what effect~~may adversely affect our ~~reinvestment program will have on~~revenue in future ~~levels of our net interest revenue and net interest margin.~~

~~Gains (Losses) Related to Investment Securities, Net~~

We regularly review our investment securities portfolio to identify other-than-temporary impairment of individual securities. Additional information about investment securities, the gross gains and losses that compose the net gains from sales of securities and other-than-temporary impairment is provided in note 3 ~~to the consolidated financial statements included in this Form 10-Q.~~

~~Table of Contents~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (Continued)~~

TABLE 14: INVESTMENT SECURITIES GAINS (LOSSES), NET
Quarters Ended September 30, Nine Months Ended September 30,
(In millions) 2015 2014 2015 2014
Net realized gains (losses) from sales of available-for-sale securities $ (2 ) $ —
$ (5 ) $ 15
Net impairment losses:
Gross losses from other-than-temporary impairment —
—
(1 ) (1 )
Losses reclassified (from) to other comprehensive income —
—
—
(10 )
Net impairment losses⁽¹⁾
—
—
(1 ) (11 )
Gains (losses) related to investment securities, net $ (2 ) $ —
$ (6 ) $ 4

⁽¹⁾ Net impairment losses, recognized in our consolidated statement of income, were composed of the following:

Impairment associated with expected credit losses $ —
$ —
$ —
$ (10 )
Impairment associated with management’s intent to sell impaired securities prior to recovery in value —
—
—
—
Impairment associated with adverse changes in timing of expected future cash flows —
—
(1 ) (1 )
Net impairment losses $ —
$ —
$ (1 ) $ (11 )

From time to time, in connection with our ongoing management of our investment securities portfolio, we sell available-for-sale securities to manage risk, to take advantage of favorable market conditions, to optimize our balance sheet for regulatory changes, or for other reasons. In the first nine months of 2015, we sold approximately $12.42 billion of such investment securities, compared to approximately $8.20 billion in the first nine months of 2014. We recorded $5 million of net realized losses and ~~$15 million~~ ~~of net realized gains in the first nine months of 2015 and 2014, respectively, as presented in the preceding table.~~

~~PROVISION FOR LOAN LOSSES~~

We recorded a provision for loan losses of $5 million and $11 million in the third quarter and first nine months of 2015, respectively, compared to $2 million and $6 million, in the same periods in 2014. The provisions in both periods of 2014 and 2015 were recorded as a result of our exposure to certain senior secured bank loans to non-investment grade borrowers, which we purchased in connection with our participation in loan syndications in the non-investment-grade lending market. Increases in the provisions in the year-to-date comparison reflected growth of our senior secured loan portfolio. Additional information about these senior secured bank loans is provided under “Financial Condition - Loans and Leases” in this Management's Discussion and Analysis and in note 4periods. See Note 10 to the consolidated financial statements included in this Form 10-Q.

~~Table of Contents~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (Continued)~~

EXPENSES


TABLE 15: EXPENSES
TABLE 7: EXPENSES
	Quarters Ended September 30,						Quarters Ended March 31,
(Dollars in millions)	2015		2014		% Change		2016		2015		% Change
Compensation and employee benefits	$	1,051	$	953	10	%	$	1,107	$	1,087	2	%
Information systems and communications	265		242		10		272		247		10
Transaction processing services	201		199		1		200		197		2
Occupancy	110		119		(8	)	113		113		—
Acquisition costs	7		12		(42	)	7		5		40
Restructuring charges, net	3		8		(63	)	97		1		nm
Other:
Professional services	136		97		40		93		96		(3	)
Amortization of other intangible assets	48		54		(11	)	49		50		(2	)
Securities processing costs	40		8		400		4		20		(80	)
Regulatory fees and assessments	31		17		82		20		34		(41	)
Other	70		183		(62	)	88		247		(64	)
Total other	325		359		(9	)	254		447		(43	)
Total expenses	$	1,962	$	1,892	4		$	2,050	$	2,097	(2	)
Number of employees at quarter-end	31,860		29,510				32,527		30,495

	Nine Months Ended September 30,
(Dollars in millions)	2015		2014		% Change
Compensation and employee benefits	$	3,122	$	3,088	1	%
Information systems and communications	761		730		4
Transaction processing services	599		583		3
Occupancy	332		348		(5	)
Acquisition costs	15		48		(69	)
Restructuring charges, net	4		33		(88	)
Other:
Professional services	368		318		16
Amortization of other intangible assets	147		162		(9	)
Securities processing costs	75		39		92
Regulatory fees and assessments	90		55		64
Other	680		366		86
Total other	1,360		940		45
Total expenses	$	6,193	$	5,770	7

Total expenses increased 4% and 7% in the third quarter and first nine months of 2015, respectively, compared to the same periods in 2014. Total expenses in the third quarter of 2015 and first nine months of 2015 benefited from the stronger U.S. dollar by approximately $63 million and $200 million respectively, compared to same periods in 2014.

^nm Not meaningful

Compensation and employee benefits expenses increased ~~by 10% and 1%~~2% in the ~~third~~first quarter ~~and first nine months~~ of ~~2015, respectively,~~2016 compared to the ~~same periods~~first quarter of 2015. The increase in ~~2014. These increases were~~costs was primarily ~~driven~~due to additional staffing to support regulatory initiatives and new business, partially offset by ~~$75 million~~the effect of ~~pre-tax severance costs~~the stronger U.S. dollar and decreases in incentive compensation and benefits.

Compensation and employee benefits expenses in the ~~third~~first quarter of 2016 and the first quarter of 2015 included approximately $122 million and $137 million, respectively, of seasonal deferred incentive compensation expense for retirement-eligible employees and payroll taxes.

Information systems and communications expenses increased 10% in the first quarter of 2016 compared to the first quarter of 2015. The increase was primarily related to ~~targeted staff reductions.~~new software and systems going into production for corporate and regulatory initiatives and maintenance and new business, as well as additional related depreciation costs supporting these investments.

Other expenses decreased ~~9% and increased 45%~~43% in the ~~third~~first quarter ~~and first nine months~~ of ~~2015,~~

~~respectively,~~2016 compared to the ~~same periods in 2014.~~first quarter of 2015. The ~~increase in the first nine months of 2015~~decrease was primarily due to ~~a first quarter 2015~~ legal ~~accrual~~accruals of $150 million ~~and a second~~in the first quarter ~~2015~~of 2015. No such costs related to legal ~~accrual~~proceedings were accrued in the first quarter of ~~$250 million, each in connection with our indirect foreign exchange business. In addition, higher~~2016. The decrease was also driven by lower levels of ~~regulatory fees~~professional services and ~~assessments also contributed to the increases. The decrease in the third quarter of 2015 was primarily due to a third-quarter 2015 gain of $41 million~~lower insurance expenses related to ~~a recovery~~lower assessment fees from ~~certain Lehman Brothers claims, as compared to~~ the ~~same period in 2014.~~FDIC. The legal accrual is further discussed under "Legal and Regulatory Matters" in ~~note 8~~Note 10 to the consolidated financial statements included in this Form 10-Q.

Our compliance obligations have increased ~~significantly~~ due to new regulations in the U.S. and internationally that have been adopted or proposed in response to the financial crisis. As a systemically important financial institution, we are subject to enhanced supervision and prudential standards. Our status as a ~~global systemically important bank, or~~ G-SIB has also resulted in heightened prudential and conduct expectations of our U.S. and international regulators with respect to our capital and liquidity management and our compliance and risk oversight programs. These heightened expectations have increased our regulatory compliance costs, including personnel and systems, as well as significant additional implementation and related costs to enhance our regulatory compliance programs. We anticipate that these evolving and increasing regulatory compliance requirements and expectations, including our efforts to address the deficiencies identified in our resolution plan submitted to the Federal Reserve and FDIC on July 1, 2015 as discussed within the Liquidity Risk Management section included within this Form 10-Q, will continue to affect our expenses. Our employee compensation and benefits, information systems and other expenses could increase, as we further adjust our operations in response to new or proposed requirements and heightened expectations.

Acquisition Costs

In the ~~third~~first quarter ~~and first nine months~~ of ~~2015,~~2016, we recorded acquisition costs of $7 million, ~~and $15 million, respectively,~~ compared to ~~$12 million and$48~~$5 million in the ~~same periods in 2014.~~first quarter of 2015. These amounts related to previously ~~disclosed~~announced acquisitions.

Restructuring Charges

In the ~~third~~first quarter of ~~2015,~~2016, we ~~recorded $3 million net~~announced State Street Beacon, our multi-year transformation program to create cost efficiencies and to fully digitize our business to support the development of new solutions and capabilities for our clients.

To implement State Street Beacon, we expect to incur aggregate future pre-tax restructuring charges ~~compared~~of approximately $300 million to $8$400 million beginning in 2016 through December 31, 2020. We estimate those charges will include approximately $250 million to $300 million in ~~the same period~~severance and benefits costs associated with targeted staff reductions (a substantial portion of ~~2014.~~ which will result in future cash expenditures) and approximately $50 million to $100 million in information technology application rationalization and real estate actions.

In the first ~~nine months~~quarter of ~~2015,~~2016, we recorded net restructuring charges of $4$97 million compared to ~~$33~~$1 million in the ~~same period in 2014. The amounts recorded in the third~~first quarter of ~~2015 mainly related~~2015. Increases in costs were primarily due to ~~our recently completed Business Operations~~State Street Beacon, consisting of approximately $86 million of employee-related expenses and ~~Information Technology Transformation program.~~approximately $11 million of other restructuring costs.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

~~Income Tax Expense~~INCOME TAX EXPENSE

Income tax expense was ~~$68~~$62 million in the ~~third~~first quarter of ~~2015~~2016 compared to ~~$128~~$94 million in the ~~third~~first quarter of 2014. In the first nine months of 2015 and 2014, income tax expense was $219 million and $344 million, respectively. The decrease in tax expense was primarily due to the effects of legal accruals of $400 million recorded in 2015. Our effective tax rate ~~for~~in the first ~~nine months~~quarter of ~~2015~~2016 was ~~13.4%~~14.4% compared to ~~18.2% in~~18.8% for the same period ~~of 2014.~~in 2015. The ~~first nine months of 2015 included~~decrease in the tax rate is primarily due to additional alternative energy investments and foreign tax credits, as well as the effects of a non-deductible legal accrual in the ~~approval~~first quarter of ~~a tax refund for prior years and the reduction of $59 million for an Italian deferred tax liability, partially offset by a change in New York tax law.~~2015.

LINE OF BUSINESS INFORMATION

~~We have~~Our operations are organized for management reporting purposes into two lines of business: Investment Servicing and Investment ~~Management.~~Management, which are defined based on products and services provided. The results of operations for these lines of business are not necessarily comparable with those of other companies, including companies in the financial services industry. ~~Information~~For information about our two lines of business, as well as the revenues, expenses and capital allocation methodologies associated with them, ~~is provided in note~~refer to Note 24 to the consolidated financial statements included in our ~~2014~~2015 Form 10-K.

Investment Servicing



TABLE 8: INVESTMENT SERVICING LINE OF BUSINESS RESULTS
	Quarters Ended March 31,
(Dollars in millions, except where otherwise noted)	2016			2015			% Change
Servicing fees	$	1,242		$	1,268		(2	)%
Trading services	262			315			(17	)
Securities finance	134			101			33
Processing fees and other	45			59			(24	)
Total fee revenue	1,683			1,743			(3	)
Net interest revenue	511			545			(6	)
Gains (losses) related to investment securities, net	2			(1		)	nm
Total revenue	2,196			2,287			(4	)
Provision for loan losses	4			4			—
Total expenses	1,687			1,836			(8	)
Income before income tax expense	$	505		$	447		13
Pre-tax margin	23		%	20		%

^nm- Not meaningful

Net interest revenue decreased 6% in the first quarter of 2016 compared to the first quarter of 2015. The ~~“Other” information presented below represents costs incurred that are not allocated~~decrease was generally the result of our efforts to optimize our ~~business lines, including certain severance and restructuring costs, acquisition costs and certain provisions for legal contingencies.~~capital position, lower yields on interest-earning assets, as well as lower global interest rates, which affect our revenue from floating-

~~“Other” for~~rate assets, and the ~~third quarter and first nine months of 2015 included net costs of $85 million and $93 million, respectively, composed~~effect of the ~~following -~~stronger U.S. dollar, partially offset by the benefit of higher levels of interest-earning assets. A discussion of net interest revenue is provided under “Net Interest Revenue” in “Total Revenue” in this Management's Discussion and Analysis.

~~Net acquisition and restructuring costs of $10 million and $19 million, respectively; and~~

~~Net severance costs of $75 million and $74 million, respectively.~~

~~“Other” for the third quarter and first nine months of 2014 included costs of $14 million and $157 million, respectively, composed of the following -~~

~~Severance costs credits of $2 million associated with prior accruals for staff reductions and net severance costs of $74 million associated with staff reductions, respectively;~~

~~Net acquisition and restructuring costs of $20 million and $81 million, respectively; and~~

~~Credits to provisions for litigation exposure and other cost of $4 million in the third quarter of 2014.~~

~~Provisions for legal contingencies of $2 million~~Total expenses decreased 8% in the first ~~nine months~~quarter of ~~2014.~~2016 compared to the first quarter of 2015. The decrease primarily resulted from expenses for a legal accrual recorded in first quarter of 2015 in connection with management's intention to seek to resolve some, but not all, of the outstanding and potential claims arising out of our indirect FX client activities recorded in the first quarter of 2015.

~~Prior reported results reflect reclassifications, for comparative purposes, related~~In December 2015, we announced a review of the manner in which we invoiced certain expenses to ~~management changes~~certain of our Investment Servicing clients, primarily in ~~methodologies associated~~the United States, during a period going back to 1998. We have informed our clients that we will pay to them the expenses we concluded were incorrectly invoiced to them, plus interest. In conjunction with ~~allocations~~that review, we are evaluating other aspects of ~~revenue~~invoicing relating to billing our Investment Servicing clients, including calculation of asset-based fees. See Note 10 to the consolidated financial statements included in this Form 10-Q.

Servicing Fees

Servicing fees decreased 2% in the first quarter of 2016 compared to the first quarter of 2015, primarily due to lower global equity markets and ~~expenses reflected~~the effect of the stronger U.S. dollar, partially offset by net new business.

Servicing fees generated outside the U.S. were approximately 41% of total servicing fees in ~~line-of-business results for~~ ~~2015~~.the quarters ended March 31, 2016 and 2015.



TABLE 9: COMPONENTS OF ASSETS UNDER CUSTODY AND ADMINISTRATION
(In billions)	March 31, 2016		December 31, 2015		March 31, 2015
Mutual funds	$	6,728	$	6,768	$	7,073
Collective funds	7,000		7,088		7,113
Pension products	5,197		5,510		5,745
Insurance and other products	8,018		8,142		8,560
Total	$	26,943	$	27,508	$	28,491



TABLE 10: COMPOSITION OF ASSETS UNDER CUSTODY AND ADMINISTRATION
(In billions)	March 31, 2016		December 31, 2015		March 31, 2015
Equities	$	14,433	$	14,888	$	15,660
Fixed-income	9,199		9,264		9,157
Short-term and other investments	3,311		3,356		3,674
Total	$	26,943	$	27,508	$	28,491

~~Investment Servicing~~

TABLE 16: INVESTMENT SERVICING LINE OF BUSINESS RESULTS
Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in millions, except where otherwise noted) 2015 2014 % Change 2015 2014 % Change
Servicing fees $ 1,294
$ 1,302
(1 )% $ 3,892
$ 3,828
2 %
Trading services 283
266
6
869
756
15
Securities finance 113
99
14
369
331
11
Processing fees and other 131
25
424
212
122
74
Total fee revenue 1,821
1,692
8
5,342
5,037
6
Net interest revenue 514
566
(9 ) 1,593
1,675
(5 )
Gains (losses) related to investment securities, net (2 ) —
—
(6 ) 4
(250 )
Total revenue 2,333
2,258
3
6,929
6,716
3
Provision for loan losses 5
2
150
11
6
83
Total expenses 1,673
1,642
2
5,389
4,907
10
Income before income tax expense $ 655
$ 614
7
$ 1,529
$ 1,803
(15 )
Pre-tax margin 28 % 27 % 22 % 27 %

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

~~Total~~



TABLE 11: GEORGRAPHIC MIX OF ASSETS UNDER CUSTODY AND ADMINISTRATION⁽¹⁾
(In billions)	March 31, 2016		December 31, 2015		March 31, 2015
North America	$	20,505	$	20,842	$	21,554
Europe/Middle East/Africa	5,159		5,387		5,590
Asia/Pacific	1,279		1,279		1,347
Total	$	26,943	$	27,508	$	28,491

⁽¹⁾Geographic mix is based on the location in which the assets are serviced.

With respect to these new assets, we will provide various services, including accounting, bank loan servicing, compliance reporting and monitoring, custody, depository banking services, foreign exchange, fund administration, hedge fund servicing, middle-office outsourcing, performance and analytics, private equity administration, real estate administration, securities finance, transfer agency, and wealth management services.

The value of assets under custody and administration is a broad measure of the ~~third quarter and first nine months~~relative size of 2015 for our Investment Servicing line of business, presented in Table 16: Investment Servicing Line of Business Results, both increased 3% compared to the same periods in 2014. Total fee revenue increased 8% and 6%, respectively, compared to the same periods in 2014.

~~Servicing fees decreased 1%~~various markets served. Changes in the ~~third~~values of assets under custody and administration from period to period do not necessarily result in proportional changes in our servicing fee revenue.

Trading Services



TABLE 12: TRADING SERVICES REVENUE
	Quarters Ended March 31,
(Dollars in millions)	2016		2015		% Change
Foreign exchange trading:
Direct sales and trading	$	90	$	135	(33	)%
Indirect foreign exchange trading	66		68		(3	)
Total foreign exchange trading	156		203		(23	)
Brokerage and other trading services:
Electronic foreign exchange services	44		48		(8	)
Other trading, transition management and brokerage	62		64		(3	)
Total brokerage and other trading services	106		112		(5	)
Total trading services revenue	$	262	$	315	(17	)

We also offer a range of brokerage and other trading products tailored specifically to meet the needs of the global pension community, including transition management and commission recapture. In addition, we act as distribution agent for the SPDR^® Gold ETF. These products and services are generally differentiated by our role as an agent of the institutional investor. Revenue earned from these services is recorded in other trading, transition management and brokerage revenue within brokerage and other trading services revenue.

Total FX trading revenue decreased 23% in the first quarter of 2015 compared to the third quarter in 2014 due primarily to the impact of the stronger U.S. dollar partially offset by positive revenue impact of net new business (revenue added from new servicing business installed less revenue lost from the removal of assets serviced). Servicing fees for the first nine months of 2015 increased 2%2016 compared to the first ~~nine months in 2014 primarily from the positive revenue impact of net new business partially offset by the impact of the stronger U.S. dollar.~~

~~Trading services revenue increased 6% and 15%, respectively, in the third~~ quarter ~~and first nine months~~ of 2015, ~~compared~~primarily due to ~~the same periods in 2014~~. ~~The increases primarily resulted from a continued trend of strong client~~lower volumes and ~~higher market making revenues driven in part from higher~~volatility.

We enter into FX transactions with clients and investment managers that contact our trading desk directly. These trades are all executed at negotiated rates. We refer to this activity, and our principal market-making activities, as “direct sales and trading” and it includes many transactions for funds serviced by third party custodians or prime brokers, as well as those funds under custody at State Street. Direct sales and trading revenue represented 58% of total foreign exchange ~~volatility. The increase~~trading revenue in the first ~~nine months~~quarter of ~~2015~~2016 compared to ~~the first nine months of 2014 was also the result of higher volumes in the electronic FX platforms as FX volatility increased in 2015 from 2014.~~

~~Securities finance revenue increased 14% and 11%, respectively, in the third quarter and first nine months of 2015, compared to the same periods in 2014~~. ~~The increase in these periods primarily resulted from new business in our enhanced custody business.~~

Processing fees and other revenue increased 424% and 74%, respectively, in the third quarter and first nine months of 2015, compared to the same periods in 2014, primarily resulting from an $83 million pre-tax gain on the sale of commercial real estate acquired as a result of the Lehman Brothers bankruptcy.

Servicing fees, securities finance revenue and net gains (losses) related to investment securities for our Investment Servicing business line are consistent with the respective consolidated results. Refer to “Servicing Fees,” "Securities Finance" and “Gains (Losses) Related to Investment Securities, Net” under “Total Revenue” in this Management’s Discussion and Analysis for a more in-depth discussion. A discussion of trading services revenue and processing fees and other revenue is provided under “Trading Services” and “Processing Fees and Other” in “Total Revenue.”

Net interest revenue decreased 9% and 5%, respectively, in the third quarter and first nine months of 2015, compared to the same periods in 2014. The decrease was generally the result of lower yields on interest-earning assets, as lower global interest rates affected our revenue from floating-rate assets and lower translation of revenue to U.S. dollars from foreign assets due to changes in foreign exchange rates, partially offset by the benefit of higher levels of interest-earning assets and lower rates on interest paid. A discussion of net interest revenue is provided under “Net Interest Revenue” in “Total Revenue.”

Total expenses increased 2% and 10%, respectively, in the third quarter and first nine months of 2015, compared to the same periods in 2014. The increase in the third quarter of 2015 compared to the third quarter of 2014 resulted from higher regulatory and compliance costs and increases in compensation and employee benefits due to additional staffing to support new business and regulatory initiatives. The increase67% in the first ~~nine months~~quarter of ~~2015~~2015.

Alternatively, clients or their investment managers may elect to route FX transactions to our FX desk through our asset-servicing operation; we refer to this activity as “indirect FX trading” and, in all cases, we are the funds' custodian. We execute indirect FX trades as a principal at rates disclosed to our clients. Estimated indirect sales and trading revenue represented 42% of total foreign exchange trading revenue in the first quarter of 2016 as compared to 33% in the first ~~nine months~~quarter of ~~2014 primarily resulted from other expenses~~2015. We calculate revenue for ~~a legal accrual recorded in connection with our~~ indirect ~~foreign exchange client activities, higher regulatory~~FX trading using an attribution methodology. This methodology takes into consideration estimated mark-ups/downs and compliance costs, increases in compensation and employee benefits due to additional staffing to support new business and regulatory initiatives, and transaction processing services. Both comparisons were partially offset by the impact of the strong U.S. dollar.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

observed client volumes. Direct sales and trading revenue is all other FX trading revenue other than the revenue attributed to indirect FX trading.

Securities Finance

See Table 8: Investment Servicing Line of Business Results, for the comparison of securities finance revenue for the quarters ended March 31, 2016 and 2015.

Processing Fees and Other

Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

on sales of leased equipment and other assets, and amortization of our tax-advantaged investments.

Investment Management


TABLE 17: INVESTMENT MANAGEMENT LINE OF BUSINESS RESULTS
TABLE 13: INVESTMENT MANAGEMENT LINE OF BUSINESS RESULTS																	TABLE 13: INVESTMENT MANAGEMENT LINE OF BUSINESS RESULTS
	Three Months Ended September 30,								Nine Months Ended September 30,								Quarters Ended March 31,
(Dollars in millions, except where otherwise noted)	2015			2014			% Change		2015			2014			% Change		2016			2015			% Change
Management fees	$	287		$	316		(9	)%	$	892		$	908		(2	)%	$	270		$	301		(10	)%
Trading services	11			12			(8	)	30			35			(14	)	10			9			11
Processing fees and other	(11		)	(8		)	nm		(14		)	(5		)	nm		7			2			nm
Total fee revenue	287			320			(10	)	908			938			(3	)	287			312			(8	)
Net interest revenue	(1		)	4			(125	)	1			11			(91	)	1			1			—
Total revenue	286			324			(12	)	909			949			(4	)	288			313			(8	)
Total expenses	204			236			(14	)	711			706			1		256			256			—
Income before income tax expense	$	82		$	88		(7	)	$	198		$	243		(19	)	$	32		$	57		(44	)
Pre-tax margin	29		%	27		%			22		%	26		%			11		%	18		%

^{nm - not} Not meaningful

Total revenue for our Investment Management ~~line~~Line of ~~business,~~Business, presented in Table ~~17:~~13: Investment Management Line of Business Results, decreased ~~12% and 4%, respectively,~~8% in the ~~third~~first quarter ~~and first nine months~~ of ~~2015~~2016 compared to the ~~same periods in 2014.~~first quarter of 2015. Total fee revenue decreased ~~10% and 3%, respectively, compared to the same periods in 2014.~~

Management fees decreased 9% and 2%, respectively, in the third quarter and first nine months of 2015 compared to the same periods in 2014. The decrease in the third quarter of 2015 compared to the third quarter in 2014 resulted from weaker international equity markets, net outflows, lower performance fees and the impact of the stronger U.S. dollar. The decrease8% in the first ~~nine months~~quarter of ~~2015~~2016 compared to the first ~~nine months of 2014 resulted from the impact of the strong U.S. dollar and lower performance fees partially offset by net new business and stronger domestic equity markets.~~

Trading services revenue declined 8% and 14%, respectively, in the third quarter and first nine months of 2015 compared to the same periods in 2014. The decreases in both periods were mainly related to favorable mark to market on seed capital in the second quarter of ~~2014, as well as lower distribution fees associated with the SPDR® Gold ETF, which resulted from net outflows and a lower average gold price during the period.~~

Management fees for the Investment Management business line are consistent with the respective consolidated results. Refer to “Management Fees” in “Total Revenue” in this Management's Discussion and Analysis for a more in-depth discussion. A discussion of trading services revenue is provided under “Trading Services” in “Total Revenue.”2015.

Total expenses ~~decreased 14%~~were flat in the ~~third~~first quarter of ~~2015 compared to the third quarter of 2014~~

due primarily to recoveries associated with Lehman Brothers-related assets recorded in 2015 and impact of the strong U.S. dollar partially offset by higher regulatory and compliance costs. Total expenses increased 1% for the first nine months of 20152016 compared to the first ~~nine months in 2014~~quarter of 2015 resulting from ~~higher transaction processing services and~~ increases in regulatory and compliance costs, offset by declines in other operating expenses.

Management Fees

Through SSGA, we provide a broad range of investment management strategies, specialized investment management advisory services and other financial services for corporations, public funds, and other sophisticated investors. SSGA offers an array of investment management strategies, including passive and active, such as enhanced indexing, using quantitative and fundamental methods for both U.S. and global equity and fixed income securities. SSGA also offers ETFs, such as the SPDR^® ETF brand. While certain management fees are directly determined by the values of assets under management and the investment strategies employed, management fees reflect other factors as well, including our relationship pricing for clients who

use multiple services, and the benchmarks specified in the respective management agreements related to performance fees.

Management fees decreased $31 million, or 10%, in the first quarter of 2016 compared to the first quarter of 2015 primarily due to lower global equity markets and net outflows, partially offset by ~~recoveries associated with Lehman Brothers-related~~lower money market fee waivers.

Management fees generated outside the U.S. were approximately 36% of total management fees in the first quarter of 2016 compared to 34% in the first quarter of 2015.



TABLE 14: ASSETS UNDER MANAGEMENT BY ASSET CLASS AND INVESTMENT APPROACH⁽¹⁾
	March 31, 2016		December 31, 2015		March 31, 2015
(In billions)
Equity:
Active	$	32	$	32	$	38
Passive	1,295		1,294		1,434
Total Equity	1,327		1,326		1,472
Fixed-Income:
Active	17		18		17
Passive	310		294		306
Total Fixed-Income	327		312		323
Cash⁽¹⁾	381		368		393
Multi-Asset-Class Solutions:
Active	17		17		31
Passive	92		86		84
Total Multi-Asset-Class Solutions	109		103		115
Alternative Investments⁽²⁾:
Active	18		17		17
Passive	134		119		123
Total Alternative Investments	152		136		140
Total	$	2,296	$	2,245	$	2,443

⁽¹⁾Includes both floating- and constant-net-asset-value portfolios held in commingled structures or separate accounts.

⁽²⁾Includes real estate investment trusts, currency and commodities, including SPDR^®Gold Fund, for which State Street is not the investment manager, but acts as distribution agent.



TABLE 15: EXCHANGE - TRADED FUNDS BY ASSET CLASS⁽¹⁾⁽²⁾
	March 31, 2016		December 31, 2015		March 31, 2015
(In billions)
Alternative Investments⁽²⁾	$	45	$	34	$	40
Cash	3		3		1
Equity	349		350		356
Fixed-income	46		41		43
Total Exchange-Traded Funds	$	443	$	428	$	440

⁽¹⁾ETFs are a component of assets ~~recorded~~under management presented in ~~2015 and~~ the ~~impact of~~preceding table.

⁽²⁾Includes SPDR^®Gold Fund, for which State Street is not the ~~strong U.S. dollar.~~investment manager, but acts as distribution agent.

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AND RESULTS OF OPERATIONS (Continued)



TABLE 16: GEOGRAPHIC MIX OF ASSETS UNDER MANAGEMENT⁽¹⁾
	March 31, 2016		December 31, 2015		March 31, 2015
(In billions)
North America	$	1,491	$	1,452	$	1,549
Europe/Middle East/Africa	496		489		566
Asia/Pacific	309		304		328
Total	$	2,296	$	2,245	$	2,443

⁽¹⁾Geographic mix is based on client location or fund management location.



TABLE 17: ACTIVITY IN ASSETS UNDER MANAGEMENT BY PRODUCT CATEGORY
(In billions)	Equity			Fixed-Income			Cash⁽²⁾			Multi-Asset-Class Solutions			Alternative Investments⁽³⁾			Total
Balance as of March 31, 2015	$	1,472		$	323		$	393		$	115		$	140		$	2,443
Long-term institutional inflows⁽¹⁾	210			43			—			41			24			318
Long-term institutional outflows⁽¹⁾	(297		)	(52		)	—			(35		)	(27		)	(411		)
Long-term institutional flows, net	(87		)	(9		)	—			6			(3		)	(93		)
ETF flows, net	4			1			1			—			(3		)	3
Cash fund flows, net	—			—			(24		)	—			—			(24		)
Total flows, net	(83		)	(8		)	(23		)	6			(6		)	(114		)
Market appreciation⁽²⁾	(61		)	(2		)	(1		)	(18		)	5			(77		)
Foreign exchange impact⁽²⁾	(2		)	(1		)	(1		)	—			(3		)	(7		)
Total market/foreign exchange impact	(63		)	(3		)	(2		)	(18		)	2			(84		)
Balance as of December 31, 2015	1,326			312			368			103			136			2,245
Long-term institutional inflows⁽¹⁾	63			17			—			12			2			94
Long-term institutional outflows⁽¹⁾	(67		)	(20		)	—			(9		)	(3		)	(99		)
Long-term institutional flows, net	(4		)	(3		)	—			3			(1		)	(5		)
ETF flows, net	(4		)	4			—			—			7			7
Cash fund flows, net	—			—			11			—			—			11
Total flows, net	(8		)	1			11			3			6			13
Market appreciation	(1		)	9			—			2			7			17
Foreign exchange impact	10			5			2			1			3			21
Total market/foreign exchange impact	9			14			2			3			10			38
Balance as of March 31, 2016	$	1,327		$	327		$	381		$	109		$	152		$	2,296

⁽¹⁾Amounts represent long-term portfolios, excluding ETFs.

⁽²⁾Includes both floating- and constant-net-asset-value portfolios held in commingled structures or separate accounts.

⁽³⁾Includes real estate investment trusts, currency and commodities, including SPDR^®Gold Fund, for which State Street is not the investment manager, but acts as distribution agent.

The positive net flows of approximately $13 billion in AUM as of March 31, 2016 compared to December 31, 2015 presented in the preceding table did not include approximately $8 billion of new asset management business, which was awarded to SSGA but not installed as of March 31, 2016. This new business will be reflected in assets under management in future periods after installation, and will generate management fee revenue in subsequent periods.

Total AUM as of March 31, 2016 included managed assets lost but not yet liquidated. Lost business occurs from time to time and it is difficult to predict the timing of client behavior in transitioning these assets. This timing can vary significantly.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

FINANCIAL CONDITION

The structure of our consolidated statement of condition is primarily driven by the liabilities generated by our Investment Servicing and Investment Management lines of business. Our clients' needs and our operating objectives determine balance sheet volume, mix, and currency denomination. As our clients execute their worldwide cash management and investment activities, they utilize deposits and short-term investments that constitute the majority of our liabilities. These liabilities are generally in the form of interest-bearing transaction account deposits, which are denominated in a variety of currencies; non-interest-bearing demand deposits; and repurchase agreements, which generally serve as short-term investment alternatives for our clients.

Deposits and other liabilities resulting from client initiated transactions are invested in assets that generally have contractual maturities significantly longer than our liabilities; however, we evaluate the operational nature of our deposits and seek to maintain appropriate short-term liquidity of those liabilities that are not operational in nature and maintain longer-termed assets for our operational deposits. Our assets consist primarily of securities held in our available-for-sale or held-to-maturity

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~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (Continued)~~

portfolios and short-duration financial instruments, such as interest-bearing deposits with banks and securities purchased under resale agreements. The actual mix of assets is determined by the characteristics of the client liabilities and our desire to maintain a well-diversified portfolio of high-quality assets.

TABLE 18: AVERAGE STATEMENT OF CONDITION⁽¹⁾	TABLE 18: AVERAGE STATEMENT OF CONDITION⁽¹⁾				TABLE 18: AVERAGE STATEMENT OF CONDITION⁽¹⁾

Nine Months Ended September 30,	2015		2014
					Quarters Ended March 31,
					2016		2015
(In millions)	Average Balance		Average Balance		Average Balance		Average Balance
Assets:
Interest-bearing deposits with banks	$	74,830	$	50,153	$	48,545	$	71,568
Securities purchased under resale agreements	3,325		4,717		2,490		2,449
Trading account assets	1,234		947		860		1,117
Investment securities	107,216		117,681		100,899		112,656
Loans and leases	17,711		15,227		18,615		18,025
Other interest-earning assets	22,731		15,138		22,672		20,544
Average total interest-earning assets	227,047		203,863		194,081		226,359
Cash and due from banks	2,577		4,719		2,690		2,397
Other noninterest-earning assets	28,343		24,049		26,852		30,297
Average total assets	$	257,967	$	232,631	$	223,623	$	259,053
Liabilities and shareholders’ equity:
Interest-bearing deposits:
U.S.	$	31,479	$	19,016	$	27,096	$	30,174
Non-U.S.	105,347		108,492		92,971		103,831
Total interest-bearing deposits	136,826		127,508		120,067		134,005
Securities sold under repurchase agreements	9,576		8,763		4,243		9,354
Federal funds purchased	21		19		15		24
Other short-term borrowings	4,211		4,096		1,688		4,448
Long-term debt	9,809		9,340		11,027		9,707
Other interest-bearing liabilities	6,835		7,237		5,951		7,465
Average total interest-bearing liabilities	167,278		156,963		142,991		165,003
Noninterest-bearing deposits	54,153		42,387		45,001		55,066
Other noninterest-bearing liabilities	15,080		12,031		14,053		17,767
Preferred shareholders’ equity	2,322		1,065		2,703		1,961
Common shareholders’ equity	19,134		20,185		18,875		19,256
Average total liabilities and shareholders’ equity	$	257,967	$	232,631	$	223,623	$	259,053

⁽¹⁾Additional information about our average statement of condition, primarily our interest-earning assets and interest-bearing liabilities, is included under “Consolidated Results of Operations - Total Revenue - Net Interest Revenue” in this Management's Discussion and Analysis.

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Investment Securities

									TABLE 19: CARRYING VALUES OF INVESTMENT SECURITIES
(In millions)	September 30, 2015		December 31, 2014		March 31, 2016		December 31, 2015
Available for sale:
U.S. Treasury and federal agencies:
Direct obligations	$	13,354	$	10,655	$	6,342	$	5,718
Mortgage-backed securities	18,829		20,714		18,234		18,165
Asset-backed securities:
Student loans⁽¹⁾	7,644		12,460		6,817		7,176
Credit cards	1,504		3,053		1,368		1,341
Sub-prime	458		951		388		419
Other	1,955		4,145		1,813		1,764
Total asset-backed securities	11,561		20,609		10,386		10,700
Non-U.S. debt securities:
Mortgage-backed securities	7,916		9,606		7,612		7,071
Asset-backed securities	3,198		3,226		2,704		3,267
Government securities	3,711		3,909		5,070		4,355
Other	5,002		5,428		5,009		4,834
Total non-U.S. debt securities	19,827		22,169		20,395		19,527
State and political subdivisions	9,974		10,820		10,026		9,746
Collateralized mortgage obligations	3,299		5,339		2,938		2,987
Other U.S. debt securities	2,907		4,109		2,231		2,624
U.S. equity securities	37		39		40		39
Non-U.S. equity securities	3		2		3		3
U.S. money-market mutual funds	298		449		473		542
Non-U.S. money-market mutual funds	8		8		18		19
Total	$	80,097	$	94,913	$	71,086	$	70,070

Held to Maturity:
Held to maturity:
U.S. Treasury and federal agencies:
Direct obligations	$	7,931	$	5,114	$	22,603	$	20,878
Mortgage-backed securities	46		62		588		610
Asset-backed securities:
Student loans⁽¹⁾	1,642		1,814		1,544		1,592
Credit cards	897		897		897		897
Other	404		577		277		366
Total asset-backed securities	2,943		3,288		2,718		2,855
Non-U.S. debt securities:
Mortgage-backed securities	2,705		3,787		2,147		2,202
Asset-backed securities	1,747		2,868		1,109		1,415
Government securities	236		154		273		239
Other	67		72		217		65
Total non-U.S. debt securities	4,755		6,881		3,746		3,921
State and political subdivisions	2		9		—		1
Collateralized mortgage obligations	1,786		2,369		1,557		1,687
Total	$	17,463	$	17,723	$	31,212	$	29,952

⁽¹⁾Primarily composed of securities guaranteed by the federal government with respect to at least 97% of defaulted principal and accrued interest on the underlying loans.

Additional information about our investment securities portfolio is provided in ~~note~~Note 3 to the consolidated financial statements included in this Form 10-Q.

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~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (Continued)~~

We manage our investment securities portfolio to align with the interest-rate and duration characteristics of our client liabilities that we consider to be ~~core~~operational deposits and in the context of the overall structure of our consolidated statement of condition, in consideration of the global interest-rate environment. We consider a well-diversified, high-credit quality investment securities portfolio to be an important element in the management of our consolidated statement of condition.

Approximately ~~92%~~93% of the carrying value of the portfolio was rated “AAA” or “AA” as of ~~September 30, 2015~~March 31, 2016 and ~~90%~~92% as of December 31, ~~2014.~~2015.

									TABLE 20: INVESTMENT PORTFOLIO BY EXTERNAL CREDIT RATING
	September 30, 2015		December 31, 2014		March 31, 2016		December 31, 2015
AAA⁽¹⁾	79	%	73	%	80	%	80	%
AA	13		17		13		12
A	5		6		4		5
BBB	2		2		2		2
Below BBB	1		2		1		1
	100	%	100	%	100	%	100	%

(1)⁽¹⁾Includes U.S. Treasury and federal agency securities that are split-rated, “AAA” by Moody’s Investors Service and “AA+” by Standard & Poor’s.

As of ~~September 30, 2015,~~March 31, 2016, the investment portfolio of ~~14,316~~12,862 securities was diversified with respect to asset class. Approximately ~~55%~~49% of the aggregate carrying value of the portfolio as of ~~that date~~March 31, 2016 was composed of mortgage-backed and asset-backed securities, compared to ~~64%~~51% as of December 31, ~~2014.~~2015. The asset-backed securities portfolio, of which approximately ~~93% and 96%~~92% of the carrying value as of ~~September 30, 2015~~both March 31, 2016 and December 31, ~~2014, respectively,~~2015 was floating-rate, consisted primarily of student loan-backed and credit card-backed securities. Mortgage-backed securities were composed of securities issued by the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation, as well as U.S. and non-U.S. large-issuer collateralized mortgage obligations.

In December 2013, U.S. regulators issued final regulations to implement the Volcker rule. The Volcker rule will, over time, prohibit banking entities, including us and our affiliates, from engaging in certain prohibited proprietary trading activities, as defined in the final Volcker rule regulations, subject to exemptions for market making-related activities, risk-mitigating hedging, underwriting and certain other activities. The Volcker rule will also require banking entities to either restructure or divest certain ownership interests in, and relationships with, covered funds (as such terms are defined in the final Volcker rule regulations).

The Volcker rule became effective in July 2012, and the final implementing regulations became

~~In the absence~~22

Table of ~~an applicable extension of the Volcker rule’s general conformance period, we~~Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

effective in April 2014. We were required to bring our activities and investments into conformance with the Volcker rule and its final ~~Volcker rule~~ regulations onby July 21, 2015. In December 2014, the Federal Reserve issued an order, the 2016 conformance period extension, extending the Volcker rule’s general conformance period until July 21, 2016 for investments in and relationships with covered funds and certain foreign funds that were in place on or prior to December 31, 2013, referred to as legacy covered funds. Under the 2016 conformance period extension, all investments in and relationships ~~related to~~with investments in a covered fund made or entered into after ~~that date~~December 31, 2013 by a banking entity and its affiliates, and all proprietary trading activities of those entities, were required to be in conformance with the Volcker rule and its final implementing regulations by July 21, 2015. The Federal Reserve stated in the 2016 conformance period extension that it intends to grant a final one-year extension of the general conformance period, to July 21, 2017, for banking entities to conform ownership interests in and relationships with legacy covered funds.

Whether certain types of investment securities or structures such as ~~collateralized loan obligations, or~~ CLOs constitute covered funds, as defined in the final Volcker rule regulations, and do not benefit from the exemptions provided in the Volcker rule, and whether a banking organization's investments therein constitute ownership interests remain subject to (1) market, and ultimately regulatory, interpretation, and (2) the specific terms and other characteristics relevant to such investment securities and structures.

As of ~~September 30, 2015,~~March 31, 2016, we held approximately ~~$2.35~~$2.10 billion of investments in CLOs. As of the same date, these investments had an aggregate pre-tax net unrealized gain of approximately ~~$57~~$29 million, composed of gross unrealized gains of ~~$59~~$36 million and gross unrealized losses of $2$7 million. Comparatively, as of December 31, ~~2014,~~2015, we held approximately ~~$4.54~~$2.10 billion of investments in CLOs which had an aggregate pre-tax net unrealized gain of approximately ~~$97~~$43 million, composed of gross unrealized gains of ~~$105~~$46 million and gross unrealized losses of $8$3 million. In the event that we or our banking regulators conclude that such investments in CLOs, or other investments, are covered funds under the Volker rule, we may be required to divest of such investments. If other banking entities reach similar conclusions with respect to similar investments held by them, the prices of such investments could decline significantly, and we may be required to divest of such investments at a significant discount compared to the investments' book value. This could result in a material adverse

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~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (Continued)~~

effect on our consolidated results of operations or on our consolidated financial condition in the period in which such a divestiture ~~occurs or on our consolidated financial condition.~~occurs.

The final Volcker rule regulations also require banking entities to establish extensive programs designed to ensure compliance with the restrictions of the Volcker rule. We have established a compliance program which we believe complies with the final Volcker rule regulations as currently in effect. Such compliance program restricts our ability in the future to service certain types of funds, in particular covered funds for which SSGA acts as an advisor and certain types of trustee relationships. Consequently, Volcker rule compliance entails both the cost of a compliance program and loss of certain revenue and future opportunities.

Non-U.S. Debt Securities

Approximately ~~25%~~24% of the aggregate carrying value of our investment securities portfolio was ~~composed of~~ non-U.S. debt securities as of ~~September 30, 2015~~March 31, 2016 compared to approximately ~~26%~~23% as of December 31, ~~2014.~~2015.

									TABLE 21: NON-U.S. DEBT SECURITIES
(In millions)	September 30, 2015		December 31, 2014		March 31, 2016		December 31, 2015
Available for Sale:
Available for sale:
United Kingdom	$	6,129	$	6,925	$	5,664	$	5,754
Australia	2,335		3,401		3,473		3,316
Canada	2,480		2,711		2,612		2,400
Netherlands	2,254		3,219		1,877		1,839
Japan					1,445		1,348
South Korea					1,103		1,052
France	1,057		1,407		943		954
South Korea	846		920
Japan	859		860
Germany	1,006		810		892		990
Italy					592		389
Norway	555		438		582		524
Italy	384		464
Finland	281		513		305		319
Belgium					245		234
Sweden	126		103		222		123
Belgium	111		120
Hong Kong					123		—
Other⁽¹⁾	322		278		317		285
Total	$	18,745	$	22,169	$	20,395	$	19,527
Held to Maturity:
Held to maturity:
United Kingdom	$	1,383	$	1,779	$	973	$	1,067
Australia	1,037		1,712		900		917
Germany	1,034		1,651		730		832
Netherlands	818		1,128		691		684
Singapore	—		154		158		129
Spain	113		155		111		108
Italy	64		79		59		59
Ireland	60		68		11		10
Other⁽²⁾	122		155		113		115
Total	$	4,631	$	6,881	$	3,746	$	3,921

⁽¹⁾Included approximately ~~$222~~$272 million and ~~$66~~$205 million as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, respectively, related to Portugal, Ireland, Austria and Spain, all of which were related to mortgage-backed securities and auto loans.

⁽²⁾Included approximately $32 million and ~~$36~~$31 million as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, respectively, of securities related to Portugal, all of which were mortgage-backed securities.

Approximately ~~90%~~88% and ~~88%~~89% of the aggregate carrying value of these non-U.S. debt securities was rated “AAA” or “AA” as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, respectively. The majority of these securities ~~comprise~~comprised senior positions within the

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AND RESULTS OF OPERATIONS (Continued)

security structures; these positions have a level of protection provided through subordination and other forms of credit protection. As of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, approximately ~~72%~~69% and ~~74%~~70%, respectively, of the aggregate carrying value of these non-U.S. debt securities was floating-rate, and accordingly, we consider these securities to have minimal interest-rate risk.

As of ~~September 30, 2015, these~~March 31, 2016, our non-U.S. debt securities had an average market-to-book ratio of ~~100.8%~~100.6%, and an aggregate pre-tax net unrealized gain of approximately ~~$205~~$136 million, composed of gross unrealized gains of ~~$267~~$214 million and gross unrealized losses of ~~$62~~$78 million. These unrealized amounts included a pre-tax net unrealized gain of ~~$110~~$62 million, composed of gross unrealized gains of ~~$138~~$105 million and gross unrealized losses of ~~$28~~$43 million, associated with non-U.S. debt securities available for sale.

As of ~~September 30, 2015,~~March 31, 2016, the underlying collateral for non-U.S. mortgage- and asset-backed securities primarily included U.K. prime mortgages, Australian and Dutch mortgages and German automobile loans. The securities listed under “Canada” were composed of Canadian government securities and corporate debt and covered bonds. The securities listed under “France” were composed of automobile loans, prime mortgages, and corporate debt and covered bonds. The securities listed under “Japan” were substantially composed of Japanese government securities. The securities listed under “South Korea” were composed of South Korean government securities.

Additional information on our exposures relating to Spain, Italy, Ireland and Portugal as of ~~September 30, 2015~~March 31, 2016 is provided under "Financial Condition - Cross-Border Outstandings" in this Management's Discussion and Analysis.

~~Table of Contents~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (Continued)~~

Municipal Obligations

We carried approximately ~~$9.97~~$10.03 billion of municipal securities classified as state and political subdivisions in our investment securities portfolio as of ~~September 30, 2015~~March 31, 2016 as shown in Table 19: Carrying Values of Investment Securities. Substantially all of these securities were classified as ~~available for sale,~~AFS, with the remainder classified as ~~held to maturity.~~HTM. As of the same date, we also provided approximately ~~$8.66~~$8.79 billion of credit and liquidity facilities to municipal issuers.

TABLE 22: STATE AND MUNICIPAL OBLIGORS⁽¹⁾
(Dollars in millions)
Total Municipal
Securities

Credit and
Liquidity
Facilities⁽²⁾
Total
% of Total Municipal
Exposure
September 30, 2015
State of Issuer:
Texas $ 1,262
$ 1,723
$ 2,985
16 %
California 444
2,027
2,471
13
New York 816
1,147
1,963
11
Massachusetts 927
839
1,766
9
Illinois 324
551
875
5
Maryland 454
416
870
5
Total $ 4,227
$ 6,703
$ 10,930

December 31, 2014
State of Issuer:
Texas $ 1,326
$ 1,405
$ 2,731
15 %
California 458
1,837
2,295
12
New York 920
996
1,916
10
Massachusetts 989
847
1,836
10
Maryland 446
416
862
5
Total $ 4,139
$ 5,501
$ 9,640



TABLE 22: STATE AND MUNICIPAL OBLIGORS ⁽¹⁾
(Dollars in millions)	Total Municipal Securities		Credit and Liquidity Facilities⁽²⁾		Total		% of Total Municipal Exposure
March 31, 2016
State of Issuer:
Texas	$	1,342	$	1,743	$	3,085	16	%
California	487		2,241		2,728		15
New York	817		1,101		1,918		10
Massachusetts	934		900		1,834		10
Maryland	490		413		903		5
Total	$	4,070	$	6,398	$	10,468

December 31, 2015
State of Issuer:
Texas	$	1,250	$	1,962	$	3,212	17	%
California	444		2,220		2,664		14
New York	817		1,259		2,076		11
Massachusetts	927		731		1,658		9
Maryland	454		413		867		5
Total	$	3,892	$	6,585	$	10,477

⁽¹⁾⁽¹⁾Represented 5% or more of our aggregate municipal credit exposure of approximately ~~$18.64~~$18.81 billion and ~~$18.44~~$18.50 billion across our businesses as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, respectively.

⁽²⁾Includes municipal loans which are also presented within ~~table~~Table 24.

Our aggregate municipal securities exposure presented in Table 22: State and Municipal Obligors, was concentrated primarily with highly-rated counterparties, with approximately ~~88%~~91% of the obligors rated “AAA” or “AA” as of ~~September 30, 2015.~~March 31, 2016. As of that date, approximately ~~56%~~58% and ~~41%~~37% of our aggregate municipal securities exposure was associated with general obligation and revenue bonds, respectively. In addition, we had no exposures associated with industrial development or land development bonds. The portfolios are also diversified geographically, with the states that represent our largest exposures widely dispersed across the U.S.

Additional information with respect to our assessment of other-than-temporary impairment of our municipal securities is provided in note 3 to the consolidated financial statements included in this Form 10-Q.

Impairment

Impairment exists when the fair value of an individual security is below its amortized cost basis. Impairment of a security is further assessed to determine whether such impairment is other-than-temporary. When the impairment is deemed to be other-than-temporary, we record the loss in our consolidated statement of income. In addition, for AFS and HTM debt securities, ~~available for sale and held to maturity,~~ we record impairment in our consolidated statement of income when management intends to sell (or may be required to sell) the securities before they recover in value, or when management expects the present value of cash flows expected to be collected from the securities to be less than the amortized cost of the impaired security (a credit loss).

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

The ~~decrease~~increase in the net unrealized gain position as of ~~September 30, 2015 from~~March 31, 2016 as compared to December 31, ~~2014,~~2015, presented in Table 23: Amortized Cost, Fair Value and Net Unrealized Gains (Losses) of Investment Securities, was primarily attributable to ~~widening spreads.~~the decline in interest rates during the quarter.

Available for sale⁽¹⁾

Held to maturity⁽¹⁾

~~Table of Contents~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (Continued)~~

We conduct periodic reviews of individual securities to assess whether ~~other-than-temporary impairment~~OTTI exists. Our assessment of ~~other-than-temporary impairment~~OTTI involves an evaluation of economic and security-specific factors. Such factors are based on estimates, derived by management, which contemplate current market conditions and security-specific performance. To the extent that market conditions are worse than management's expectations ~~other-than-temporary impairment~~or due to idiosyncratic bond performance, OTTI could increase, in particular the credit-related component that would be recorded in our consolidated statement of income.

InWe had less than $1 million of OTTI in the ~~aggregate, we recorded net losses from other-than-temporary impairment~~first quarter of 2016 compared to $1 million in the first ~~nine months~~quarter of ~~2015 compared to losses of $11 million in the first nine months of 2014.~~2015. Management considers the aggregate decline in fair value of the remaining investment securities and the resulting gross unrealized losses of ~~$571~~$576 million as of ~~September 30, 2015~~March 31, 2016 to be temporary and not the result of any material changes in the credit characteristics of the securities. Additional information with respect to ~~other-than-temporary impairments,~~OTTI, net impairment losses and gross unrealized losses is provided in ~~note~~Note 3 to the consolidated financial statements included in this Form 10-Q.

Given our U.S. mortgage-backed securities exposure, our assessment of other-than-temporary impairment relies, in part, on our estimates of trends in the U.S. housing market in addition to trends in unemployment rates, interest rates and the timing of defaults. Overall, our evaluation of other-than-temporary impairment as of September 30, 2015 continued to include an expectation of a U.S. housing recovery characterized by relatively modest growth in national housing prices over the next few years. The potential for other-than-temporary impairment of our investment securities portfolio continues to be sensitive to our estimates of future cumulative losses. However, given our positive outlook for U.S. national housing prices, our sensitivity analysis indicated, as of September 30, 2015, that our investment securities portfolio was less exposed to the U.S. housing market outlook relative to other factors, including unemployment rates, interest rates and timing of default. The timing of default may affect, among other things, the timing of cash flows or the credit quality associated with the mortgages collateralizing certain of our residential mortgage-backed securities which, accordingly, could result in the recognition of additional other-than-temporary impairment in future periods.

Our evaluation of potential ~~other-than-temporary impairment~~OTTI of mortgage-backed securities with

collateral in Spain, Italy, Ireland, and Portugal takes into account slow economic growth, austerity measures, and government intervention in the corresponding mortgage markets and assumes a conservative baseline macroeconomic environment. Our baseline view assumes a recessionary period characterized by high unemployment and by additional declines in housing prices between 3% and ~~17%~~21%. Our evaluation of ~~other-than-temporary impairment~~OTTI in our base case does not assume a disorderly sovereign debt restructuring or a break-up of the Eurozone.

~~In addition, we perform stress testing~~

Management considers the aggregate decline in fair value of the remaining investment securities and ~~sensitivity analyses in order to assess~~ the ~~impact of more severe assumptions on potential other-than-temporary impairment. For example, based on our stress testing and sensitivity analyses, we estimate, using relevant information~~resulting gross unrealized losses as of ~~September 30, 2015~~March 31, 2016 to be temporary and ~~assuming that all other factors remain constant,~~ ~~that~~not the result of any material changes in ~~more stressful scenarios in which unemployment, gross domestic product and housing prices deteriorate over~~ the ~~relevant periods more than we expected for Spain, Italy, Ireland and Portugal as~~credit characteristics of ~~September 30, 2015, other-than-temporary impairment could increase by a range of approximately zero to $20 million. This sensitivity estimate is based on a number of factors. To~~ the ~~extent that such factors differ significantly from management's current expectations, resulting loss estimates may differ materially from those stated. For~~securities. Additional information about these gross unrealized losses is provided in Note 3 to the ~~review of securities for impairment, refer to pages 73 to 75~~consolidated financial statements included in ~~the 2014~~this Form ~~10-K.~~10-Q.

Loans and Leases

									TABLE 24: U.S. AND NON- U.S. LOANS AND LEASES
(In millions)	September 30, 2015		December 31, 2014		March 31, 2016		December 31, 2015
Institutional:
U.S.	$	15,639	$	14,908	$	15,809	$	16,237
Non-U.S.	3,377		3,263		3,351		2,534
Commercial real estate:
U.S.	51		28		27		28
Total loans and leases	$	19,067	$	18,199	$	19,187	$	18,799

The increase in loans in the institutional segment as of ~~September 30, 2015~~March 31, 2016 as compared to December 31, ~~2014~~2015 was primarily driven by higher levels of short-duration advances, partially offset by a decrease in other commercial and ~~increased investment in the non-investment-grade lending market through participations in loan syndications, specifically senior secured bank~~financial loans.

Short-duration advances to our clients included in the institutional segment were ~~$4.56~~$4.08 billion and ~~$3.54~~$2.62 billion as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, respectively. These short-duration advances provide liquidity to fund clients in support of their transaction flows associated with securities settlement activities.

As of March 31, 2016 and December 31, 2015, our investment in senior secured loans totaled approximately $3.27 billion and $3.14 billion, respectively. In addition, we had binding unfunded commitments as of March 31, 2016 and December 31, 2015 of $82 million and $186 million, respectively, to participate in such syndications.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

~~support of their transaction flows associated with securities settlement activities.~~

As of September 30, 2015 and December 31, 2014, our investment in senior secured bank loans totaled approximately $2.93 billion and $2.07 billion, respectively. In addition, we had binding unfunded commitments as of September 30, 2015 and December 31, 2014 of $178 million and $337 million, respectively, to participate in such syndications.

These senior secured ~~bank~~ loans, which ~~we have~~are primarily rated “speculative” under our internal risk-rating framework (refer to ~~note~~Note 4 to the consolidated financial statements included in this Form 10-Q), are externally rated “BBB,” “BB” or “B,” with approximately ~~94%~~93% of the loans rated “BB” or “B” as of ~~September 30, 2015, compared to 95% as of~~March 31, 2016 and December 31, ~~2014.~~2015. Our investment strategy involves limiting our investment to larger, more liquid credits underwritten by major global financial institutions, applying our internal credit analysis process to each potential investment, and diversifying our exposure by counterparty and industry segment. However, these loans have significant exposure to credit losses relative to higher-rated loans.

As of ~~September 30, 2015~~March 31, 2016 and December 31, 2014, our allowance for loan losses included approximately $37 million and $26 million, respectively, related to these senior secured bank loans. As this portfolio grows and becomes more seasoned, our allowance for loan losses related to these loans may increase through additional provisions for credit losses.

~~As of September 30,~~ 2015, ~~and December 31, 2014,~~ unearned income deducted from our investment in leveraged lease financing was ~~$103~~$100 million and ~~$109~~$102 million, respectively, for U.S. leases and ~~$238~~$209 million and ~~$261~~$231 million, respectively, for non-U.S. leases.

The ~~commercial real estate, or~~ CRE loans are composed of the loans acquired in 2008 pursuant to indemnified repurchase agreements with an affiliate of Lehman as a result of the Lehman Brothers bankruptcy. Additional information about all of our loan-and-lease segments, as well as underlying classes, is provided in ~~note~~Note 4 to the consolidated financial statements included in this Form 10-Q.

~~As of both September 30, 2015 and December 31, 2014 no~~No loans, including CRE ~~loans were modified in troubled debt restructurings. No~~ loans, were modified in troubled debt restructurings in ~~2015~~the first quarter of 2016 or ~~in 2014.~~2015.



TABLE 25: ALLOWANCE FOR LOAN LOSSES
	Quarters Ended March 31,
(In millions)	2016			2015
Allowance for loan losses:
Beginning balance	$	46		$	37
Provision for loan losses⁽¹⁾	4			4
Charge-offs⁽²⁾	(3		)	—
Recoveries	—			—
Ending balance	$	47		$	41

TABLE 25: ALLOWANCE FOR LOAN LOSSES
Nine Months Ended September 30,
2015 2014
(In millions)
Allowance for loan losses:
Beginning balance $ 37
$ 28
Provision for loan losses:
Institutional 11
6
Ending balance $ 48
$ 34

⁽¹⁾ Includes $4 million of provision related to institutional loans for the quarters ended March 31, 2016 and 2015, respectively.

⁽²⁾Includes $3 million in charge-offs related to institutional loans for the first quarter of 2016.

The provision of ~~$11~~$4 million and the charge-offs of $3 million recorded in the first ~~nine months~~quarter of ~~2015 was~~2016 were associated with our exposure to ~~certain~~ senior secured ~~bank~~ loans to non-investment grade borrowers, which wewere purchased in connection with our participation in ~~loan syndications in the non-investment-grade lending market.~~syndicated loans.

As of ~~September 30, 2015,~~March 31, 2016, approximately ~~$37~~$36 million of our allowance for loan losses was related to senior secured ~~bank~~ loans included in the institutional ~~segment; the~~segment. As this portfolio grows and matures, our allowance for

loan losses related to these loans may increase through additional provisions for credit losses. The remaining $11 million was related to other ~~commercial and financial loans in the~~ institutional ~~segment.~~segment loans.

Cross-Border Outstandings

Cross-border outstandings are amounts payable to us by non-U.S. counterparties which are denominated in U.S. dollars or other non-local currency, as well as non-U.S. local currency claims not funded by local currency liabilities. Our cross-border outstandings consist primarily of deposits with banks; loans and lease financing, including short-duration advances; investment securities; amounts related to foreign exchange and interest-rate contracts; and securities finance. In addition to credit risk, cross-border outstandings have the risk that, as a result of political or economic conditions in a country, borrowers may be unable to meet their contractual repayment obligations of principal and/or interest when due because of the unavailability of, or restrictions on, foreign exchange needed by borrowers to repay their obligations.

We place deposits with non-U.S. counterparties that have strong internal State Street risk ratings. Counterparties are approved and monitored by our Country Risk Committee. This process includes financial analysis of non-U.S. counterparties and the use of an internal risk-rating system. Each counterparty is reviewed at least annually and potentially more frequently based on deteriorating credit fundamentals or general market conditions. We also utilize risk mitigation and other facilities that may reduce our exposure through the use of cash collateral and/or balance sheet netting where we deem appropriate. In addition, the Country Risk Committee performs country-risk analyses and monitors limits on country exposure.

The total cross-border outstandings presented in Table 26: Cross-Border Outstandings, represented approximately 27% and 25% of our consolidated total assets as of March 31, 2016 and December 31, 2015, respectively.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

The total cross-border outstandings presented in Table 26: Cross-Border Outstandings represented approximately 20% and 17% of our consolidated total assets as of September 30, 2015 and December 31, 2014, respectively.


TABLE 26: CROSS-BORDER OUTSTANDINGS⁽¹⁾	TABLE 26: CROSS-BORDER OUTSTANDINGS⁽¹⁾						TABLE 26: CROSS-BORDER OUTSTANDINGS⁽¹⁾
(In millions)	Investment Securities and Other Assets		Derivatives and Securities on Loan		Total Cross-Border Outstandings		Investment Securities and Other Assets		Derivatives and Securities on Loan		Total Cross-Border Outstandings
September 30, 2015
March 31, 2016
United Kingdom	$	18,964	$	2,137	$	21,101	$	19,541	$	1,808	$	21,349
Germany	6,647		577		7,224		14,564		836		15,400
Japan	8,107		43		8,150		14,166		87		14,253
Canada							3,578		1,442		5,020
Luxembourg							3,367		523		3,890
Netherlands							2,754		320		3,074
Australia							2,252		415		2,667
December 31, 2015
United Kingdom							$	16,965	$	1,589	$	18,554
Japan							17,328		87		17,415
Germany							12,111		569		12,680
Australia	5,067		666		5,733		4,035		292		4,327
Canada	2,856		1,211		4,067		3,156		1,113		4,269
Netherlands	3,208		267		3,475
December 31, 2014
United Kingdom	$	15,288	$	1,769	$	17,057
Japan	9,465		644		10,109
Australia	5,981		1,039		7,020
Netherlands	4,425		330		4,755
Canada	3,227		974		4,201
Germany	3,075		792		3,867
Luxembourg							3,034		514		3,548

⁽¹⁾Cross-border outstandings included countries in which we do business, and which amounted to at least 1% of our consolidated total assets as of the dates indicated.

As of ~~September 30, 2015 and December~~March 31, ~~2014, we had no cross-border exposure to Greece and~~2016, there were no countries ~~with the exception of France,~~ whose aggregate cross-border outstandings amounted to between 0.75% and 1% of our consolidated assets. As of December 31, 2015, aggregate cross-border outstandings in countries which amounted to between 0.75% and 1% of our total ~~assets.~~consolidated assets totaled approximately $2.20 billion to Netherlands.

TABLE 27: CROSS-BORDER OUTSTANDINGS (SPAIN, ITALY, IRELAND AND PORTUGAL)
(In millions)
Investment
Securities and
Other Assets
Derivatives and Securities on Loan Total Cross-Border Outstandings
September 30, 2015
Ireland $ 376
$ 793
$ 1,169
Italy 721
1
722
Spain 280
41
321
Portugal 58
—
58
December 31, 2014

Ireland $ 510
$ 1,253
$ 1,763
Italy 907
11
918
Spain 155
71
226
Portugal 69
—
69

The aggregate cross-border exposures presented in Table 27: Cross-Border Outstandings (Spain, Italy, Ireland and Portugal), consisted primarily of interest-bearing deposits, investment securities, loans, including short-duration advances, and foreign exchange contracts. We did not record

~~any provisions for loan losses with respect to any of our exposure in these countries as of September 30, 2015 and December 31, 2014.~~

Our aggregate exposure to Spain, Italy, Ireland and Portugal as of September 30, 2015 did not include any direct sovereign debt exposure to any of these countries. Our indirect exposure to these countries totaled approximately $875 million of auto-loans, mortgage- and asset-backed securities composed of $280 million in Spain, $447 million in Italy, $89 million in Ireland and $59 million in Portugal as of September 30, 2015. These securities had an aggregate pre-tax net unrealized gain of approximately $80 million, composed of gross unrealized gains of $82 million and gross unrealized losses of $2 million as of September 30, 2015. We recorded no other-than-temporary impairment on these mortgage- and asset-backed securities in our consolidated statement of income in either the first nine months of 2015 or 2014.



TABLE 27: CROSS-BORDER OUTSTANDINGS (IRELAND, ITALY, SPAIN AND PORTUGAL)
(In millions)	Investment Securities and Other Assets		Derivatives and Securities on Loan		Total Cross-Border Outstandings
March 31, 2016
Ireland	$	437	$	547	$	984
Italy	811		—		811
Spain	250		41		291
Portugal	58		—		58
December 31, 2015
Ireland	$	326	$	678	$	1,004
Italy	460		—		460
Spain	150		12		162
Portugal	26		—		26

Throughout the sovereign debt crisis, the major independent credit rating agencies have downgraded U.S. and non-U.S. financial institutions and sovereign issuers which have been, and may in the future be, significant counterparties to us, or whose financial instruments serve as collateral on which we rely for credit risk mitigation purposes, and may do so again in the future. As a result, we may be exposed to increased counterparty risk, leading to negative ratings volatility.

Risk Management

In the normal course of our global business activities, we are exposed to a variety of risks, some inherent in the financial services industry, others more specific to our business activities. Our risk management framework focuses on material risks, which include the following:

credit and counterparty risk;

liquidity risk, funding and management;

operational risk;

information technology risk;

market risk associated with our trading activities;

market risk associated with our non-trading activities, which we refer to as asset-and-liability management, and which consists primarily of interest-rate risk;

strategic risk;

model risk; and

reputational, fiduciary and business conduct risk.

Many of these risks, as well as certain of the factors underlying each of these risks that could affect our businesses and our consolidated financial statements, are discussed in detail under Item 1A, “Risk Factors,” included in our ~~2014~~2015 Form 10-K.

~~The scope of our business requires that we balance these risks with a comprehensive and well-~~

~~Table of Contents~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (Continued)~~

integrated risk management function. The identification, assessment, monitoring, mitigation and reporting of risks are essential to our financial performance and successful management of our businesses. These risks, if not effectively managed, can result in losses to State Street as well as erosion of our capital and damage to our reputation. Our approach, including board and senior management oversight and a system of policies, procedures, limits, risk measurement and monitoring and internal controls, allows for an assessment of risks within a framework for evaluating opportunities for the prudent use of capital that appropriately balances risk and return. For additional information on our risk management, including our risk appetite framework and risk governance committee structure, refer to pages 7877 to 8382 in ~~the 2014~~our 2015 Form 10-K.

Credit Risk Management

We define credit risk as the risk of financial loss if a counterparty, borrower or obligor, collectively referred to as a counterparty, is either unable or unwilling to repay borrowings or settle a transaction in accordance with underlying contractual terms. We assume credit risk in our traditional non-trading lending activities, such as loans and contingent commitments, in our investment securities portfolio, where recourse to a counterparty exists, and in our direct and indirect trading activities, such as principal securities lending and foreign exchange and indemnified agency securities lending. We also assume credit risk in our day-to-day treasury and securitiesand other settlement operations, in the form of deposit placements and other cash balances, with central banks or private sector institutions.

For additional information on our credit risk management, including our core policies and principles, structure and organization, credit ratings, risk parameter estimates, credit risk mitigation, credit limits, reporting, monitoring, controls and reserve for credit losses, refer to pages 8382 to 8887 in ~~the 2014~~our 2015 Form 10-K.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Liquidity Risk Management

Our liquidity framework contemplates areas of potential risk based on our activities, size, and other appropriate risk-related factors. In managing liquidity risk we employ limits, maintain established metrics and early warning indicators, and perform routine stress testing to identify potential liquidity needs. This process involves the evaluation of a combination of internal and external scenarios which assist us in measuring our liquidity position and in identifying potential increases in cash needs or decreases in available sources of cash, as well as the potential impairment of our ability to access the global capital markets.

On October 30, 2015, the Federal Reserve released its proposed total loss-absorbing capacity (TLAC) and external long term debt (ELTD) requirements for U.S. domiciled G-SIBs, like State Street. If adopted as proposed, the rule would, among other things (1) require us to hold qualifying equity and long-term debt in the amount equal to the greater of 21.5% of total risk-weighted assets (using the capital conservation buffer of 2.5% and an estimated GSIB method 1 surcharge of 1%) and 9.5% of total leverage exposure, as defined by the supplementary leverage ratio, or SLR, final rule and (2) require that we hold qualifying external long-term debt equal to the greater of 7.5% of risk weighted assets (using an estimated GSIB method 2 surcharge of 1.5%) and 4.5% of total leverage exposure, as defined by the SLR final rule. The risk-based requirements, if adopted as proposed, will be phased-in starting in 2019 through 2022. The proposed leverage requirements would be effective in 2019.

We manage our liquidity on a global, consolidated basis. We also manage liquidity on a stand-alone basis at the parent company, as well as at certain branches and subsidiaries of State Street Bank. State Street Bank generally has access to markets and funding sources limited to banks, such as the federal funds market and the Federal Reserve's discount window. Our parent company is managed to a more conservative liquidity profile, reflecting narrower market access. Our parent company typically holds enough cash, primarily in the form of interest-bearing deposits or time deposits with its banking subsidiaries, to meet its current debt maturities and cash needs, as well as those projected over the next one-year period. As of ~~September 30, 2015,~~March 31, 2016, the value of our parent company's net liquid assets totaled ~~$6.75~~$4.51 billion, compared with ~~$6.03~~$5.73 billion as of December 31, ~~2014.~~2015. As of ~~September 30, 2015,~~March 31, 2016, our parent company and State Street Bank have ~~approximately $1.0 billion and $601 million, respectively, of~~no senior ~~and~~notes or subordinated notes outstanding that will mature in the next twelve months.

For additional information on our liquidity risk management, as well as liquidity risk metrics, refer to pages 87 to 88 ~~to 94~~ in ~~the 2014~~our 2015 Form 10-K.

~~Liquidity Coverage~~ For additional information on our liquidity ratios, including LCR and Net Stable Funding Ratio,

~~On September 3, 2014, U.S. banking regulators issued a final rule~~ refer to ~~implement the Basel Committee's liquidity coverage ratio, or LCR,~~page 9 in the U.S. The LCR is intended to promote the short-term resilience of internationally active banking organizations, like State Street, to improve the banking industry's ability to absorb shocks arising from idiosyncratic or market stress, and improve the measurement and management of liquidity risk.

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~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (Continued)~~

~~The LCR measures an institution’s high-quality liquid assets, or HQLA, against its net cash outflows. The LCR is being phased in, beginning on January 1,~~our 2015 ~~at 80%, with full implementation beginning on January 1, 2017.~~

Form 10-K. Beginning in ~~January~~July 2015, ~~State Street was~~we were required to report ~~its~~our LCR to the Federal ~~Reserve.~~Reserve on a daily basis. As of ~~September 30, 2015,~~March 31, 2016, our LCR was in excess of 100%.

Compliance with the LCR has required that we maintain an investment portfolio that contains an adequate amount of HQLA. In general, HQLA investments generate a lower investment return than other the types of investments, resulting in a negative impact on our net interest revenue and our net interest margin. In addition, the level of HQLA we are required to maintain under the LCR is dependent upon our client relationships and the nature of services we provide, which may change over time. For example, if the percentage of our operational deposits relative to deposits that are not maintained for operational purposes increases, we would expect to require less HQLA in order to maintain our LCR. Conversely, if the percentage of deposits that are not maintained for operational purposes increases relative to our operational deposits, we would expect to require additional HQLA in order to maintain our LCR.

~~Net Stable Funding Ratio~~

In October 2014, the Basel Committee issued final guidance with respect to the Net Stable Funding Ratio, or NSFR. The NSFR will require banking organizations to maintain a stable funding profile relative to the composition of their assets and off-balance sheet activities. The NSFR limits over-reliance on short-term wholesale funding, encourages better assessment of funding risk across all on- and off-balance sheet exposures, and promotes funding stability. The final guidance establishes a one-year liquidity standard representing the proportion of long-term assets funded by long-term stable funding, with the NSFR scheduled to become a minimum standard beginning on January 1, 2018.

U.S. banking regulators have not yet issued a proposal to implement the NSFR. We are reviewing the specifics of the final guidance and will evaluate the U.S. implementation of this standard to analyze the impact and develop strategies for compliance as rules are proposed.

Asset Liquidity

Central to the management of our liquidity is asset liquidity, which consists primarily of unencumbered highly liquid securities, cash and cash equivalents reported on our consolidated statement of condition. We restrict the eligibility of securities of

asset liquidity to U.S. Government and federal agency securities (including mortgage-backed securities), selected non-U.S. Government and supranational securities as well as certain other high- quality securities which generally are more liquid than other types of assets even in times of stress. Our

asset liquidity metric is similar to the HQLA under the U.S. LCR, and our HQLA, under the LCR final rule definition, ~~are~~were estimated to be ~~$104.84~~$102.62 billion and ~~$115.58~~$109.39 billion as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, respectively.

									TABLE 28: COMPONENTS OF HQLA BY TYPE OF ASSET
(In millions)	September 30, 2015		December 31, 2014		March 31, 2016		December 31, 2015
Excess Central Bank Balances	$	60,583	$	85,176	$	55,969	$	66,063
U.S. Treasuries	15,716		10,308		22,196		22,518
Other Investment securities	25,191		16,545		19,857		16,952
Foreign government	3,354		3,554		4,600		3,861
Total	$	104,844	$	115,583	$	102,622	$	109,394

Liquid securities carried in our asset liquidity include securities pledged without corresponding advances from the ~~Federal Reserve Bank of Boston, or FRB,~~FRBB, the ~~Federal Home Loan Bank of Boston, or~~ FHLB, and other non-U.S. central banks. State Street Bank is a member of the FHLB. This membership allows for advances of liquidity in varying terms against high-quality collateral, which helps facilitate asset-and-liability management.

Access to primary, intra-day and contingent liquidity provided by these utilities is an important source of contingent liquidity with utilization subject to underlying conditions. As of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, we had no outstanding primary credit borrowings from the ~~FRB~~FRBB discount window or any other central bank facility, and as of the same dates, no FHLB advances were outstanding.

In addition to the securities included in our asset liquidity, we have significant amounts of other unencumbered investment securities. The aggregate fair value of those securities was ~~$30.15~~$41.05 billion as of ~~September 30, 2015,~~March 31, 2016, compared to ~~$60.10~~$41.00 billion as of

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December 31, ~~2014.~~2015. These securities are available sources of liquidity, although not as rapidly deployed as those included in our asset liquidity.

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Uses of Liquidity

Significant uses of our liquidity could result from the following: withdrawals of client deposits; draw-downs of unfunded commitments to extend credit or to purchase securities, generally provided through lines of credit; and short-duration advance facilities. Such circumstances would generally arise under stress conditions including deterioration in credit ratings. We had unfunded commitments to extend credit with gross contractual amounts totaling ~~$22.28~~$23.57 billion and ~~$24.43~~$22.58 billion as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, respectively. These amounts do not reflect the value of any collateral. As of ~~September 30, 2015,~~March 31, 2016, approximately ~~76%~~75% of our unfunded commitments to extend credit expire within one year. Since many of our commitments are expected to expire or renew without being drawn upon, the gross contractual amounts do not necessarily represent our future cash requirements.

State Street Corporation, like other bank holding companies with total consolidated assets of $50 billion or more, periodically submits a plan for rapid and orderly resolution in the event of material financial distress or failure--commonly referred to as a resolution plan or a living will--to the Federal Reserve and the FDIC under Section 165(d) of the Dodd-Frank Act. ~~State Street submitted its 2015 resolution plan to the Federal Reserve and the FDIC on July 1, 2015.~~ Through resolution planning, ~~State Street seeks,~~we seek, in the event of the insolvency of State Street, to maintain State Street Bank’s role as a key infrastructure provider within the financial system, while minimizing risk to the financial system and maximizing value for the benefit of ~~State Street’s~~our stakeholders. ~~State Street has~~We have and will continue to focus management attention and resources to meet regulatory expectations with respect to resolution planning. As set out in ~~its~~our 2015 resolution plan, in the event of material financial distress or failure, ~~State Street’s~~our preferred resolution strategy, referred to as the single point of entry strategy, provides for the recapitalization of State Street Bank by the parent company (for example, by forgiving inter-company indebtedness of State Street Bank owed to the parent company) prior to the parent company’s entry into bankruptcy proceedings. The recapitalization is intended to enable State Street Bank and its material subsidiaries to continue operating. Under this single point of entry strategy, State Street Bank and its material entity subsidiaries would not themselves enter into resolution proceedings; they would instead be transferred to a newly organized holding company held by a reorganization trust for the benefit of the parent company’s claimants. In the event that such

recapitalization actions occur and were unsuccessful in stabilizing State Street Bank, the parent company's financial condition would be adversely impacted and equity and debt holders of the parent company, may

as a consequence, be in a worse position than if the recapitalization did not occur.

We submitted our 2015 resolution plan to the Federal Reserve and the FDIC on July 1, 2015. On April 13, 2016, the regulatory authorities announced the completion of their review of the resolution plan. While the Federal Reserve and the FDIC noted improvements in the plan over State Street’s prior resolution plans, the regulatory authorities jointly determined that the 2015 resolution plan is not credible or would not facilitate an orderly resolution. We are required to address the deficiencies jointly identified by the Federal Reserve and the FDIC by October 1, 2016. We may not successfully implement our plans to address the deficiencies jointly identified by the Federal Reserve and the FDIC with respect to our 2015 resolution plan or these plans may not be considered to be sufficient by the Federal Reserve and the FDIC, due to a number of factors, including, but not limited to challenges we may experience in interpreting and addressing regulatory expectations, failure to implement remediation in a timely manner, the complexities of development of a comprehensive plan to resolve a global custodial bank and related costs and dependencies. If we fail to meet regulatory expectations to the satisfaction of the Federal Reserve and the FDIC in our resolution plan submission due on October 1, 2016 or in any future submission, we could be subject to more stringent capital, leverage or liquidity requirements, or restrictions on our growth, activities or operations.

Funding

Deposits

We provide products and services including custody, accounting, administration, daily pricing, foreign exchange services, cash management, financial asset management, securities finance and investment advisory services. As a provider of these products and services, we generate client deposits, which have generally provided a stable, low-cost source of funds. As a global custodian, clients place deposits with State Street entities in various currencies. We invest these client deposits in a combination of investment securities and short-duration financial instruments whose mix is determined by the characteristics of the deposits.

For the past several years, we have frequently experienced higher client deposit inflows toward the end of each fiscal quarter or the end of the fiscal year. As a result, we believe average client deposit balances are more reflective of ongoing funding than period-end balances.

TABLE 29: CLIENT DEPOSITS
Average Balance
September 30, Quarters Ended September 30,
(In millions) 2015 2014 2015 2014
Client deposits⁽¹⁾
$ 168,757
$ 200,098
$ 178,313
$ 164,706
29

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TABLE 29: CLIENT DEPOSITS
					Average Balance
	March 31,				Quarters Ended March 31,
(In millions)	2016		2015		2016		2015
Client deposits⁽¹⁾	$	170,561	$	193,132	$	150,088	$	176,691

⁽¹⁾Balance as of ~~September 30,~~March 31, 2016 and March 31, 2015 ~~and September 30, 2014~~ excluded term wholesale ~~certificates of deposit, or~~ CDs of ~~$17.61~~$14.96 billion and ~~$7.87~~$11.22 billion, respectively; average balances for the ~~nine months~~years ended ~~September 30,~~March 31, 2016 and March 31, 2015 ~~and September 30, 2014~~ excluded average CDs of ~~$12.67~~$14.98 billion and ~~$5.19~~$12.38 billion, respectively.

Short-Term Funding

Our corporate commercial paper program, under which we can issue up to $3.0 billion of commercial paper with original maturities of up to 270 days from the date of issuance, had $1.06 billion and $2.48 billion of commercial paper outstanding as of September 30, 2015 and December 31, 2014, respectively. State Street ~~plans to phase-out~~phased out its commercial paper program ~~by July 1, 2016,~~prior to December 31, 2015, consistent with the objectives of its 2015 recovery and resolution plan developed pursuant to the requirements of the Dodd-Frank Act. Accordingly, we had no commercial paper outstanding at March 31, 2016 or December 31, 2015.

Our on-balance sheet liquid assets are also an integral component of our liquidity management

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strategy. These assets provide liquidity through maturities of the assets, but more importantly, they provide us with the ability to raise funds by pledging the securities as collateral for borrowings or through outright sales. In addition, our access to the global capital markets gives us the ability to source incremental funding at reasonable rates of interest from wholesale investors. As discussed earlier under “Asset Liquidity,” State Street Bank's membership in the FHLB allows for advances of liquidity with varying terms against high-quality collateral.

Short-term secured funding also comes in the form of securities lent or sold under agreements to repurchase. These transactions are short-term in nature, generally overnight, and are collateralized by high-quality investment securities. These balances were ~~$7.76~~$4.22 billion and ~~$8.93~~$4.50 billion as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, respectively.

State Street Bank currently maintains a line of credit with a financial institution of CAD ~~$800 million,~~1.40 billion, or approximately ~~$597 million~~$1.08 billion as of ~~September 30, 2015,~~March 31, 2016, to support its Canadian securities processing operations. The line of credit has no stated termination date and is cancelable by either party with prior notice. As of ~~September 30, 2015,~~March 31, 2016, there was no balance outstanding on this line of credit.

Long-Term Funding

As of ~~September 30, 2015,~~March 31, 2016, State Street Bank had ~~Board of Directors, or~~ Board authority to issue unsecured senior debt securities from time to time, provided that the aggregate principal amount of such unsecured senior debt outstanding at any one time does not exceed $5 billion. As of ~~September 30, 2015,~~March 31, 2016, $5 billion was available for issuance pursuant to this authority. As of ~~September 30, 2015,~~March 31, 2016, State Street Bank also had Board authority to issue an additional $500 million of subordinated debt.

State Street Corporation maintains an effective universal shelf registration that allows for the public offering and sale of debt securities, capital securities, common stock, depositary shares and preferred stock, and warrants to purchase such securities, including any shares into which the preferred stock and depositary shares may be convertible, or any combination thereof. We have issued in the past, and we may issue in the future, securities pursuant to our shelf registration. The issuance of debt or equity securities will depend on future market conditions, funding needs and other factors.

Agency Credit Ratings

Our ability to maintain consistent access to liquidity is fostered by the maintenance of high investment-grade ratings as measured by the major independent credit rating agencies. Factors essential

to maintaining high credit ratings include diverse and stable core earnings; relative market position; strong risk management; strong capital ratios; diverse liquidity sources, including the global capital markets and client deposits; strong liquidity monitoring procedures; and preparedness for current or future regulatory developments. High ratings limit borrowing costs and enhance our liquidity by providing assurance for unsecured funding and depositors, increasing the potential market for our debt and improving our ability to offer products, serve markets, and engage in transactions in which clients value high credit ratings. A downgrade or reduction of our credit ratings could have a material adverse effect on our liquidity by restricting our ability to access the capital markets, which could increase the related cost of funds. In turn, this could cause the sudden and large-scale withdrawal of unsecured deposits by our clients, which could lead to draw-downs of unfunded commitments to extend credit or trigger requirements under securities purchase commitments; or require additional collateral or force terminations of certain trading derivative contracts.

A majority of our derivative contracts have been entered into under bilateral agreements with counterparties who may require us to post collateral or terminate the transactions based on changes in our credit ratings. We assess the impact of these

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arrangements by determining the collateral or termination payments that would be required assuming a downgrade by all rating agencies. The additional collateral or termination payments related to our net derivative liabilities under these arrangements that could have been called ~~as of September 30, 2015 and December 31, 2014~~ by counterparties in the event of a ~~one-notch or two-notch~~ downgrade in our credit ratings ~~was $10 million and $19 million, respectively.~~below levels specified in the agreements is disclosed in Note 7 to the consolidated financial statements included in this Form 10-Q. Other funding sources, such as secured financing transactions and other margin requirements, for which there are no explicit triggers, could also be adversely affected.

On November 2, 2015, Standard & Poor's Rating Service (S&P) placed the long-term credit ratings for the parent company and the non-deferrable subordinated debt credit rating for State Street Bank on CreditWatch with negative implications. This action followed the Federal Reserve's October 30, 2015 release of its proposed TLAC and ELTD requirements for U.S. domiciled G-SIBs, like State Street, and took similar actions with respect to other U.S. domiciled G-SIBs.

S&P's credit ratings and related determinations are assessments by a third party rating agency and are noted in this Form 10-Q solely for purposes of disclosing changes in such third party ratings and related determinations. Such ratings and related

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determinations are based on factors that are not transparent to State Street and consequently, State Street cannot assess the accuracy or predicative quality of the assumptions or evaluate methods employed by S&P.

Operational Risk Management

Overview

We consider operational risk to be the risk of loss resulting from inadequate or failed internal processes and systems, human error, or from external events. Operational risk encompasses fiduciary risk and legal risk. Fiduciary risk is defined as the risk that State Street fails to properly exercise its fiduciary duties in its provision of products or services to clients. Such duties may require State Street, among other things, to place certain interests of its clients ahead of the interests of the company, to limit the manner in which State Street exercises discretion granted to it by clients, and to review and mitigate actual or perceived conflicts of interest. Legal risk is the risk of loss resulting from failure to comply with laws and contractual obligations as well as prudent ethical standards in business practices in addition to exposure to litigation from all aspects of State ~~Street's~~Street’s activities.

Operational risk is inherent in the performance of investment servicing and investment management activities on behalf of our clients. Whether it be fiduciary risk, risk associated with execution and processing or other types of operational risk, a consistent, transparent and effective operational risk framework is key to identifying, monitoring and managing operational risk.

~~We have established an operational risk framework that is based on three major goals:~~

•~~Strong, active governance;~~

•~~Ownership and accountability; and~~

•~~Consistency and transparency.~~

For additional information about our operational risk framework, ~~see~~refer to pages 9492 to 9795 in ~~the 2014~~our 2015 Form 10-K.

Market Risk Management

Market risk is defined by U.S. banking regulators as the risk of loss that could result from broad market movements, such as changes in the general level of interest rates, credit spreads, foreign exchange rates or commodity prices. We are exposed to market risk in both our trading and certain of our non-trading, or asset-and-liability management, activities. ~~For more information on our~~

Information about the market risk associated with our trading activities ~~market risk governance and covered positions, see pages 97 to 104 in the 2014 Form 10-K.~~

is provided below under “Trading Activities.” Information about the market risk associated with our non-trading activities, which consists primarily of interest-rate risk, is provided below under “Asset-and-Liability Management Activities.”

Trading Activities

In the conduct of our trading activities, we assume market risk, the level of which is a function of our overall risk appetite, business objectives and liquidity needs, our clients' requirements and market volatility, ~~as well as~~and our execution against those factors.

For additional information about the market risk associated with our trading activities, ~~see~~refer to pages 9795 to 9896 in ~~the 2014~~our 2015 Form 10-K.

As part of our trading activities, we assume positions in the foreign exchange and interest-rate markets by buying and selling cash instruments and entering into derivative instruments, including foreign exchange forward contracts, foreign exchange and interest-rate options and interest-rate swaps, interest-rate forward contracts, and interest-rate futures. As of ~~September 30, 2015,~~March 31, 2016, the notional amount of these derivative contracts was ~~$1.39~~$1.38 trillion, of which $1.36 trillion was composed of foreign exchange forward, swap and spot contracts. We seek to match positions closely with the objective of minimizing related currency and interest-rate risk. All foreign exchange contracts are valued daily at current market rates.

Value-at-Risk, Stress Testing and Stressed VaR

We use a variety of risk measurement tools and methodologies, including ~~Value-at-Risk, or~~ VaR, which is an estimate of potential loss for a given period within a stated statistical confidence interval. We use a risk measurement methodology to measure trading-related VaR daily. We have adopted standards for measuring trading-related VaR, and we maintain regulatory capital for market risk associated with our trading activities in conformity with currently applicable bank regulatory market risk requirements.

For additional information about our VaR measurement tools and methodologies, refer to pages 9897 to ~~99 of the 2014~~101 in our 2015 Form 10-K.

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Stress Testing and Stressed VaR

We have a corporate-wide ~~stress-testing~~stress testing program in place that incorporates an array of techniques to measure the potential loss we could suffer in a hypothetical scenario of adverse economic and financial conditions. We also monitor concentrations of risk such as concentration by branch, risk component, and currency pairs. We conduct stress testing on a daily basis based on selected historical stress events that are relevant to our positions in order to estimate the potential impact to our current portfolio should similar market conditions recur, and we also perform stress testing as part of the Federal Reserve's ~~Comprehensive Capital Analysis and Review, or~~ CCAR process. Stress testing is conducted, analyzed and reported at the corporate, trading desk, division and risk-factor level (for example, exchange risk, interest-rate risk and volatility risk).

We calculate a stressed VaR-based measure using the same model we use to calculate VaR, but with model inputs calibrated to historical data from a range of continuous twelve-month periods that reflect significant financial stress. The stressed VaR model identifies the second-worst outcome occurring in the

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worst continuous one-year rolling period since July 2007. This stressed VaR meets the regulatory requirement as the rolling ten-day period with an outcome that is worse than 99% of other outcomes during that twelve-month period of financial stress. For each portfolio, the stress period is determined algorithmically by seeking the one-year time horizon that produces the largest ten-business-day VaR from within the available historical data. This historical data set includes the financial crisis of 2008, the highly volatile period surrounding the Eurozone sovereign debt crisis and the Standard & Poor's downgrade of U.S. Treasury debt in August 2011. As the historical data set used to determine the stress period expands over time, future market stress events will be automatically incorporated.

~~Stress-testing~~Stress testing results and limits are actively monitored on a daily basis by ~~Enterprise Risk Management, or~~ ERM and reported to the ~~Trading and Markets Risk Committee, or~~ TMRC. Limit breaches are addressed by ERM risk managers in conjunction with the business units, escalated as appropriate, and reviewed by the TMRC if material. In addition, we have established several action

triggers that prompt immediate review by management and the implementation of a remediation plan.

Validation and Back-Testing

We perform frequent back-testing to assess the accuracy of our VaR-based model in estimating loss at the stated confidence level. This back-testing involves the comparison of estimated VaR model outputs to daily, actual ~~Profit-and-Loss,~~profit-and-loss outcomes, or P&L, ~~outcomes~~ observed from daily market movements. We back-test our VaR model using “clean” P&L, which excludes non-trading revenue such as fees, commissions and net interest revenue, as well as estimated revenue from intra-day trading. Our VaR definition of trading losses excludes items that are not specific to the price movement of the trading assets and liabilities themselves, such as fees, commissions, changes to reserves and gains or losses from intra-day activity.

We experienced one back-testing exception for the first nine months of 2015, which occurred in the third quarter. The trading P&L that day exceeded the VaR based on the prior days closing positions, following a large depreciation in the U.S. dollar against several major and emerging market currencies, which depreciation can be attributed to a decision and related statements by the Federal Reserve’s Federal Open Market Committee to hold interest rates at current levels. We experiencedhad no back-testing exceptions ~~for the full-year of 2014. For additional information on our validation and back-testing, see pages 99 to 101~~ in the ~~2014 Form 10-K.~~quarters ended March 31, 2016 and 2015.

The following tables present VaR and stressed VaR associated with our trading activities for covered positions held during the ~~first nine months~~quarters ended ~~September 30,~~March 31, 2016 and 2015, ~~and the first nine months ended September 30, 2014,~~ and as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, as measured by our VaR methodology. A covered position is generally defined by U.S. banking regulators as an on- or off-balance sheet position associated with the organization's trading activities that is free of any restrictions on its tradability, but does not include intangible assets, certain credit derivatives recognized as guarantees and certain equity positions not publicly traded. All FX and commodity positions are considered covered positions, regardless of the accounting treatment they receive.methodology:

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The ~~nine~~three month average of our stressed VaR-based measure was approximately ~~$65~~$35 million for the ~~period~~quarter ended ~~September 30, 2015,~~March 31, 2016, compared to a ~~nine~~three month average of approximately ~~$33~~$56 million for the ~~period~~quarter ended ~~September 30, 2014.~~March 31, 2015.

The ~~increase~~decrease in the ~~nine~~three month average of our VaR and stressed VaR-based ~~measure~~measures for the ~~period~~quarter ended ~~September 30, 2015,~~March 31, 2016, compared to the ~~period~~quarter ended ~~September 30, 2014,~~March 31, 2015, was primarily the result of ~~an extension~~a reduction of ~~the tenor of~~EUR/USD FX swaps ~~used~~ by Global ~~Treasury designed to improve our liquidity position.~~Treasury. Although the FX swaps are not considered part of our trading activity, all FX activity (trading or banking) generates market risk captured under ~~Basel rules. The tenor extension gives rise to additional market risk in our stressed~~ VaR ~~calculation.~~calculation methodologies.

The VaR-based measures presented in the preceding tables are primarily a reflection of the

overall level of market volatility and our appetite for trading market risk. Overall levels of volatility have been low both on an absolute basis and relative to the historical information observed at the beginning of the period used for the calculations. Both the ten-day VaR-based measures and the stressed VaR-based measures are based on historical changes observed during rolling ten-day periods for the portfolios as of the close of business each day over the past one-year period.

We may in the future modify and adjust our models and methodologies used to calculate VaR and stressed VaR, subject to regulatory review and approval, and these modifications and adjustments may result in changes in our VaR-based and stressed VaR-based measures.

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TABLE 33: TEN-DAY STRESSED VaR ASSOCIATED WITH TRADING ACTIVITIES BY RISK FACTOR⁽¹⁾

⁽¹⁾For purposes of risk attribution by component, in both Tables 32 and 33, foreign exchange ~~risk~~ refers only to the risk from market movements in period-end rates. Forwards, futures, options and swaps with maturities greater than period-end have embedded interest-rate risk that is captured by the measures used for interest-rate risk. Accordingly, the interest-rate risk embedded in these foreign exchange instruments is included in the interest-rate risk component.

The decline in the total 10-day VaR based measure at September 30, 2015, as compared to December 31, 2014, is the result of a small decline in exposure that arose from the tenor extension strategy initiated by Global Treasury late last year.

Asset-and-Liability Management Activities

The primary objective of asset-and-liability management is to provide sustainable ~~net interest revenue, or~~ NIR, under varying economic conditions, while protecting the economic value of the assets and liabilities carried in our consolidated statement of condition from the adverse effects of changes in ~~currency and~~ interest rates. While many market factors affect the level of NIR and the economic value of our assets and liabilities, one of the most significant factors is our exposure to movements in interest rates. Most of our NIR is earned from the investment of client deposits generated by our businesses. We invest these client deposits in assets that conform generally to the characteristics of our balance sheet liabilities, including the currency composition of our significant non-U.S. dollar denominated client liabilities.

We quantify NIR sensitivity using an earnings simulation model that includes our expectations for new business growth, changes in balance sheet mix and investment portfolio positioning. This measure compares our baseline view of NIR over a twelve-month horizon, based on our internal forecast of interest rates, to a wide range of instantaneous and gradual rate shocks. Economic value of equity sensitivity is a discounted cash flow model designed to estimate the fair value of assets and liabilities ~~but we manage our overall interest-rate risk position in the context~~under a series of ~~current and anticipated~~interest rate shocks over a long-term horizon. Each approach is routinely monitored as market conditions change and within internally-approved risk limits and guidelines.

For additional information on our Asset-and-Liability Management

Activities, ~~see~~refer to pages 101 to 104 ~~of the 2014~~in our 2015 Form 10-K.

~~To measure, monitor, and~~In the table below, we report ~~on our interest-rate risk position, we use NIR simulation, or NIR-at-risk, and Economic Value of Equity, or EVE, sensitivity. NIR-at-risk measures~~ the ~~impact on~~expected change in NIR over the next twelve months ~~to immediate, or “rate shock,”~~from +/-100 basis point instantaneous and gradual ~~or “rate ramp,”~~parallel rate shocks. Each scenario assumes no management action is taken to mitigate the adverse effects of interest rate changes on our financial performance. While investment securities balances can fluctuate due to prepayment assumptions in ~~market~~our rate shocks, our deposit balances are consistent with the baseline forecast.



TABLE 34: NIR EXPOSURE/BENEFIT
	Exposure and Benefit to Net Interest Revenue
(In millions)	March 31, 2016			December 31, 2015
Rate change:	Exposure/Benefit
+100 bps shock	$	437		$	471
–100 bps shock	(191		)	(181		)
+100 bps ramp	186			198
–100 bps ramp	(98		)	(96		)

As of March 31, 2016, NIR sensitivity remains positioned to benefit from rising interest rates. ~~EVE sensitivity is a total return view of interest-rate risk, which measures~~The benefit in the impact on the present value of all NIR-related principal and interest cash flows of an immediate change in interest rates. Although NIR-at-risk and EVE sensitivity measure interest-rate risk over different time horizons, both utilize consistent assumptions when modeling the positions currently held by State Street; however, NIR-at-risk also incorporates future actions planned by management over the time horizons being modeled. For additional information on our NIR-at-risk and EVE, refer to pages 103 to 104 of the 2014 Form 10-K.

~~The following table presents the estimated exposure of our NIR for the next twelve months, calculated as of the dates indicated,~~up 100 basis point instantaneous parallel shock declined due to ~~an immediate and gradual +/-100-basis-point shift~~investment portfolio purchase activity relative to ~~our internal forecast of global interest rates. We manage our NIR sensitivity to limit declines to 15% or less from baseline NIR. Estimated exposures presented~~December 31, 2015. The exposure in the down 100 basis point instantaneous parallel shock was relatively unchanged with impacts

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~~below~~from higher asset yields offsetting investment portfolio activity and changes in market rates. Gradual rate shocks have a similar positioning, but are ~~dependent on management's assumptions, and do not reflect any additional actions management may undertake in order~~less impactful due to ~~mitigate some~~the severity of the ~~adverse effects~~rate shift.

The following table highlights our economic value of ~~changes in interest rates on our financial performance.~~

TABLE 34: NIR ESTIMATED EXPOSURE

Estimated Exposure to
Net Interest Revenue
(Dollars in millions) September 30,
2015 December 31,
2014
Rate change: Exposure % of Base NIR Exposure % of Base NIR
+100 bps shock $ 574
26.9 % $ 384
16.6 %
–100 bps shock (211 ) (9.9 ) (328 ) (14.2 )
+100 bps ramp 263
12.3
149
6.5
–100 bps ramp (110 ) (5.2 ) (192 ) (8.3 )

As of September 30, 2015, NIR sensitivity to an upward-100-basis-point shock to our internal forecast of global interest rates increased compared to such sensitivity as of December 31, 2014, on a dollar exposure basis as well as a percentage of twelve-month forecasted base NIR, reflecting slower client deposit repricing expectations in the twelve-month forecast horizon beyond September 30, 2015. The benefit to NIR of an upward-100-basis-point ramp is less significant than a shock, since interest rates are assumed to increase gradually.

~~NIR~~equity sensitivity to a ~~downward-100-basis-point shock to our internal forecast of global interest rates as of September 30, 2015 decreased compared to such sensitivity as of December 31, 2014 on a dollar and percentage~~+/-200 basis primarily due to higher expected deposit charges when rates decline. September 30, 2015 NIR-at-risk sensitivities incorporate additional charges on deposits as rates decline to their floors compared to December 31, 2014 NIR-at-risk. A downward-100-basis-point shock in global interest rates places pressure on NIR due to declining deposit rates, providing little funding relief on the liability side, while many assets continue to re-price in the lower-rate environment. The adverse impact on projected NIR due to a downward-100-basis-point ramp is less significant than a shock since interest rates are assumed to decrease gradually, thereby reducing the level of projected spread compression experienced between assets and liabilities over a twelve-month horizon.

Our baseline NIR incorporates an expectation that short-term interest rates will begin to rise in anticipation of central bank tightening of current monetary policies. While this rise in rates benefits our baseline NIR, it is detrimental to our NIR sensitivity to a downward-100-basis-point shock, as rising short-term interest rates allow asset yields to re-price lower in a downward shock scenario than

~~previously, while deposits are still priced close to natural floors.~~

Other important factors which affect the levels of NIR are the size and mix of assets carried in our consolidated statement of condition; interest-rate spreads; the slope and interest-rate level of U.S. and non-U.S. dollar yield curves and the relationship between them; the pace of change in global market interest rates; and management actions taken in response to the preceding conditions.

~~Economic Value of Equity~~

~~EVE sensitivity measures changes in the market value of equity to quantify potential losses to shareholders due to an immediate +/-200-basis-point~~point instantaneous rate shock, ~~compared~~relative to ~~current interest-rate levels if the balance sheet were liquidated immediately.~~spot interest rates. Management compares the change in EVE sensitivity against State Street's aggregate tier 1 and tier 2 risk-based capital, calculated in conformity with current applicable regulatory ~~requirements, to evaluate whether the magnitude~~requirements. Economic value of ~~the exposure to interest rates~~equity sensitivity is acceptable. Generally, a change resulting from a +/-200-basis-point rate shock that is less than 20% of aggregate tier 1 and tier 2 capital is an exposure that management deems acceptable. To the extent that we manage changes in EVE sensitivity within the 20% threshold, we would seek to take action to remain below the threshold if the magnitude of our exposure to interest rates approached that limit.

~~Similar to NIR-at-risk measures,~~dependent on the timing of ~~cash flows affects EVE sensitivity, as changes in asset and liability values under different rate scenarios are dependent on when~~ interest and principal ~~payments are received. In contrast to NIR simulations, however, EVE sensitivity~~cash flows. Also, the measure only evaluates the spot balance sheet and does not incorporate assumptions regarding reinvestment of these cash flows. In addition, our ability to price client deposits has a much smaller impact on EVE sensitivity, as EVE sensitivity does not consider the ongoing benefit of investing client deposits.

~~Table of Contents~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (Continued)~~

~~The following table presents estimated EVE exposures, calculated as of the dates indicated, assuming an immediate and prolonged shift in global interest rates,~~include the impact of ~~which would be spread over a number of years.~~new business assumptions.


TABLE 35: ESTIMATED EVE EXPOSURES
TABLE 35: EVE EXPOSURE/BENEFIT											TABLE 35: EVE EXPOSURE/BENEFIT
	Estimated Sensitivity of Economic Value of Equity											Sensitivity of Economic Value of Equity
(Dollars in millions)	September 30, 2015					December 31, 2014
(In millions)												March 31, 2016			December 31, 2015
Rate change:	Exposure			% of Tier 1/Tier 2 Capital		Exposure			% of Tier 1/Tier 2 Capital			Exposure/Benefit
+200 bps shock	$	(1,996	)	(11.3	)%	$	(2,291	)	(12.8	)%		$	(2,136	)	$	(2,355	)
–200 bps shock	835			4.7		942			5.3			1,061			1,655

As of March 31, 2016, economic value of equity sensitivity remains exposed to upward shifts in interest rates. The ~~dollar measure of EVE sensitivity to an upward-200-basis-point~~exposure in the up 200 basis point instantaneous parallel shock ~~as of September 30, 2015 improved compared~~declined and the benefit in the down 200 basis point instantaneous parallel shock decreased relative to December 31, ~~2014; and the dollar measure of EVE sensitivity~~2015, primarily due to ~~a downward-200-basis-point shock as of September 30, 2015 declined compared to December 31, 2014, with the change in both EVE sensitivity measures driven~~lower long-term market rates partially offset by investment portfolio ~~actions.~~activity.

EVE sensitivity to an upward-200-basis-point shock as of September 30, 2015, as a percentage of the total of tier 1 and tier 2 regulatory capital, declined compared to December 31, 2014. EVE sensitivity to a downward-200-basis-point shock as of September 30, 2015, as a percentage of the total of tier 1 and tier 2 regulatory capital, declined compared to December 31, 2014. These declines were primarily due to the above changes in the dollar measures of EVE sensitivity.

Model Risk Management

The use of quantitative models is widespread throughout the financial services industry, with large and complex organizations relying on sophisticated models to support numerous aspects of their financial decision making. The models contemporaneously represent both a significant advancement in financial management and a new source of risk. In large banking organizations like ~~ours,~~State Street, model results influence business decisions, and model failure could have a harmful effect on our financial performance. As a result, we manage model risk within a model risk management framework.

~~Our model risk management program has three principal components:~~

~~overall degree of model risk across the corporation;~~

~~A model development process which focuses on sound design and computational accuracy, and includes activities designed to test for robustness, stability, and sensitivity to assumptions; and~~

~~A separate model validation function designed to verify that models are conceptually sound, computationally accurate, are performing as expected, and are in line with their design objectives.~~

~~Model Development and Usage~~

Models are developed under standards governing data sourcing, methodology selection and model integrity testing. Model development includes a statement of purpose to align development with intended use. It also includes a comparison of alternative approaches to promote a sound modeling approach.

~~Model developers conduct an assessment of data quality and relevance. The development teams conduct a variety of tests of the accuracy, robustness and stability of each model.~~

~~Model owners submit models to the Model Validation Group for validation on a regular basis, as per existing policy.~~

For additional information on our model risk management, including our governance and model validation, refer to pages 104 to 105 ~~to 106~~ in ~~the 2014~~our 2015 Form 10-K.

Capital

Managing our capital involves evaluating whether our actual and projected levels of capital are commensurate with our risk profile, are in compliance with all applicable regulatory requirements, and are sufficient to provide us with the financial flexibility to undertake future strategic business initiatives. We assess capital adequacy based on relevant regulatory capital requirements, as well as our own internal capital goals, targets and other relevant metrics.

We have a hierarchical structure supporting appropriate committee review of relevant risk and capital information. The ongoing responsibility for capital management rests with our Treasurer. The Capital Planning group within Global Treasury is responsible for the Capital Policy and guidelines, development of the Capital Plan, the management of global capital, capital optimization, and business unit capital management.

~~The Management Risk and Capital Committee, or~~ MRAC provides oversight of our capital management, our capital adequacy, our internal targets and the expectations of the major

~~Table of Contents~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (Continued)~~

independent credit rating agencies. In addition, MRAC approves our balance sheet strategy and related activities. The Board’s ~~Risk Committee, or~~ RC assists the Board in fulfilling its oversight responsibilities related to the assessment and management of risk and capital. Our Capital Policy is reviewed and approved annually by the Board's RC.

For additional information about our capital, refer to pages 105 to 115 in our 2015 Form 10-K.

Regulatory Capital

We and our depository institution subsidiaries are subject to ~~risk-based regulatory capital requirements issued by~~ the ~~Federal Reserve. With the adoption of the Basel III rules by U.S. regulators, we became subject to the~~current U.S. Basel III ~~final rule as of January 1, 2014.~~minimum risk-based capital and leverage ratio guidelines. The Basel III final rule incorporates several multi-year transition provisions for capital components and minimum ratio requirements for common equity tier 1 capital, tier 1 capital and total capital. The transition period started in January 2014 and iswill be completed by January 1, 2019 which is concurrent with the full implementation of the Basel III final rule in the U.S.

Among other things, the U.S. Basel III final rule ~~introduces~~introduced a minimum common equity tier 1 risk-based capital ratio of 4.5% and raises the minimum tier 1 risk-based capital ratio from 4% to 6%. In addition, for advanced approaches banking organizations such as State Street, the U.S. Basel III final rule imposes a minimum supplementary tier 1 leverage ratio of 3%, the numerator of which is tier 1 capital and the denominator of which includes both on-balance sheet assets and certain off-balance sheet ~~exposures, which are sometimes referred to collectively as total leverage~~ exposures. ~~The supplementary leverage ratio requirement was enhanced by the 2014 supplementary leverage ratio final rule which, upon implementation as~~

~~2015, the “well-capitalized” standard for our banking subsidiaries was revised to reflect the higher capital requirements in the U.S. Basel III final rule.~~

In addition to introducing new capital ratios and buffers, the U.S. Basel III final rule revises the eligibility criteria for regulatory capital instruments and provides for the phase-out of existing capital instruments that do not satisfy the new criteria. For example, existing trust preferred capital securities are being phased out from tier 1 capital over a two-year period beginning on January 1, 2014 and ending on January 1, 2016, and subsequently, the qualification of these securities as tier 2 capital will be phased out over a multi-year transition period beginning on January 1, 2016 and ending on January 1, 2022. We had trust preferred capital securities of $950 million outstanding as of September 30, 2015, $237 million included in tier 1 capital and the remaining $713 million included in tier 2 capital. For further information on our regulatory capital requirements, including the transitional provisions under the Basel III final rule, see pages 107 to 108 in the 2014 Form 10-K.

The U.S. Basel III final rule also implemented certain provisions of the Dodd-Frank Act. The Dodd-Frank Act applies a "capital floor" to advanced approaches banking organizations such as State Street and State Street Bank. Beginning on January 1, 2015, the Basel III standardized approach acts as that capital floor, and we are subject to the more stringent of the risk-based capital ratios calculated under the standardized approach and those calculated under the advanced approaches in the assessment of our capital adequacy under the prompt corrective action framework.

~~The U.S. Basel III final rule also introduces~~introduced a capital conservation buffer and a countercyclical capital buffer that add to the minimum risk-based capital ratios. Specifically, the final rule limits a banking organization’s ability to make capital distributions and discretionary bonus payments to executive officers if it fails to maintain a common equity tier 1 capital conservation buffer of more than 2.5% of total risk-weighted assets and, if deployed during periods of excessive credit growth, a common equity tier 1 countercyclical capital buffer of up to 2.5% of total risk-weighted assets, above each of the minimum common equity tier 1, and tier 1 and total risk-based capital ratios. Banking regulators have initially set the countercyclical capital buffer at zero.

To maintain the status of our parent company as a financial holding company, we and our insured depository institution subsidiaries are required to be “well-capitalized” by maintaining capital ratios above the minimum requirements. Effective on January 1, 2015, the “well-capitalized” standard for our banking subsidiaries was revised to reflect the higher capital requirements in the U.S. Basel III final rule.

In addition to introducing new capital ratios and buffers, the U.S. Basel III final rule revises the eligibility criteria for regulatory capital instruments and provides for the phase-out of existing capital instruments that do not satisfy the new criteria. For example, existing trust preferred capital securities were phased out from tier 1 capital over a two-year period that ended on January 1, 2016, and subsequently, the qualification of these securities as tier 2 capital will be phased out over a multi-year transition period beginning on January 1, 2016 and ending on January 1, 2022. As of March 31, 2016 trust preferred capital securities were fully phased-out of tier 1 capital and $890 million of these securities were included in tier 2 regulatory capital.

Under the U.S. Basel III final rule, certain new items are deducted from common equity tier 1 capital and certain regulatory capital deductions were modified as compared to the previously applicable capital regulations. Among other things, the final rule requires significant investments in the common stock of unconsolidated financial institutions, as defined, and certain deferred tax assets that exceed specified individual and aggregate thresholds to be deducted from common equity tier 1 capital. As an advanced approaches banking organization, after-tax unrealized gains and losses on AFS investment securities flow through to and affect State Street’s and State Street Bank's common equity tier 1 capital, subject to a phase-in schedule.

We are required to use the advanced approaches framework as provided in the Basel III final rule to determine our risk-based capital requirements. The Dodd-Frank Act applies a "capital floor" to advanced approaches banking organizations, such asState Street and State Street Bank. We are subject to the more stringent of the risk-based capital ratios calculated under the standardized approach and those calculated under the advanced approaches in the assessment of our capital adequacy under the PCA framework.

Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

The following table sets forth the transition to full implementation and the minimum risk-based capital ratio requirements under the Basel III final rule. This does not include the potential imposition of an additional countercyclical capital ~~buffer discussed above.~~buffer.

TABLE 36: BASEL III FINAL RULES TRANSITION ARRANGEMENTS AND MINIMUM RISK-BASED CAPITAL RATIOS^{(1), (2)}

TABLE 36: BASEL III FINAL RULES TRANSITION ARRANGEMENTS AND MINIMUM RISK-BASED CAPITAL RATIOS^(1),(2)

G-SIB surcharge (CET1)⁽¹⁾

Minimum common equity tier 1⁽³⁾

Minimum tier 1 capital⁽³⁾

Minimum total capital⁽³⁾

⁽¹⁾As part of the G-SIB Surcharge final rule, the Federal Reserve published estimated G-SIB surcharges for the eight U.S. G-SIBs based on relevant data from 2012-2014 and the estimated resulting G-SIB surcharge for State Street is 1.5%. Including the 1.5% surcharge, State Street's minimum risk-based capital ratio requirements, as of January 1, 2019 would be 8.5% for common equity tier 1, ~~10%~~10.0% for tier 1 capital and 12.0% for total capital.

⁽²⁾ Minimum ratios shown above do not reflect the countercyclical buffer, currently set at zero by U.S. banking regulators.

⁽³⁾ Minimum common equity tier 1 capital, minimum tier 1 capital and minimum total capital presented include the transitional capital conservation buffer as well as the estimated transitional G-SIB surcharge.

The specific calculation of State Street's and State Street Bank's risk-based capital ratios will change as the provisions of the Basel III final rule related to the numerator (capital) and denominator (risk-weighted assets) are phased in, and as our risk-weighted assets calculated using the advanced approaches change due to potential changes in methodology. These ongoing methodological changes will result in differences in our reported capital ratios from one reporting period to the next that are independent of applicable changes to our capital base, our asset composition, our off-balance sheet exposures or our risk profile.

Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

The following table presents the regulatory capital structure and related regulatory capital ratios for State Street and State Street Bank as of the dates indicated. As a result of changes in the methodologies used to calculate our regulatory capital ratios from period to period, as the provisions of the Basel III final rule are phased in, the ratios presented in the table for each period are not directly comparable. Refer to the footnotes following the table.

																																																									TABLE 37: REGULATORY CAPITAL STRUCTURE AND RELATED REGULATORY CAPITAL RATIOS
					State Street												State Street Bank																State Street												State Street Bank
(Dollars in millions)	(Dollars in millions)				Basel III Advanced Approaches September 30, 2015⁽¹⁾			Basel III Standardized Approach September 30, 2015⁽²⁾			Basel III Advanced Approaches December 31, 2014⁽¹⁾			Basel III Transitional Approach December 31, 2014⁽³⁾			Basel III Advanced Approaches September 30, 2015⁽¹⁾			Basel III Standardized Approach September 30, 2015⁽²⁾			Basel III Advanced Approaches December 31, 2014⁽¹⁾			Basel III Transitional Approach December 31, 2014⁽³⁾			(Dollars in millions)				Basel III Advanced Approaches March 31, 2016⁽¹⁾			Basel III Standardized Approach March 31, 2016⁽²⁾			Basel III Advanced Approaches December 31, 2015⁽¹⁾			Basel III Standardized Approach December 31, 2015⁽²⁾			Basel III Advanced Approaches March 31, 2016⁽¹⁾			Basel III Standardized Approach March 31, 2016⁽²⁾			Basel III Advanced Approaches December 31, 2015⁽¹⁾			Basel III Standardized Approach December 31, 2015⁽²⁾
Common shareholders' equity:	Common shareholders' equity:																												Common shareholders' equity:
Common stock and related surplus	Common stock and related surplus				$	10,246		$	10,246		$	10,295		$	10,295		$	10,924		$	10,924		$	10,867		$	10,867		Common stock and related surplus				$	10,243		$	10,243		$	10,250		$	10,250		$	10,941		$	10,941		$	10,938		$	10,938
Retained earnings	Retained earnings				15,795			15,795			14,882			14,882			10,886			10,886			9,416			9,416			Retained earnings				16,233			16,233			16,049			16,049			10,997			10,997			10,655			10,655
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)				(1,177		)	(1,177		)	(641		)	(641		)	(1,011		)	(1,011		)	(535		)	(535		)	Accumulated other comprehensive income (loss)				(1,020		)	(1,020		)	(1,422		)	(1,422		)	(841		)	(841		)	(1,230		)	(1,230		)
Treasury stock, at cost	Treasury stock, at cost				(6,143		)	(6,143		)	(5,158		)	(5,158		)	—			—			—			—			Treasury stock, at cost				(6,719		)	(6,719		)	(6,457		)	(6,457		)	—			—			—			—
Total					18,721			18,721			19,378			19,378			20,799			20,799			19,748			19,748							18,737			18,737			18,420			18,420			21,097			21,097			20,363			20,363
Regulatory capital adjustments:	Regulatory capital adjustments:																												Regulatory capital adjustments:
Goodwill and other intangible assets, net of associated deferred tax liabilities⁽⁴⁾					(5,987		)	(5,987		)	(5,869		)	(5,869		)	(5,687		)	(5,687		)	(5,577		)	(5,577		)
Goodwill and other intangible assets, net of associated deferred tax liabilities⁽³⁾																													Goodwill and other intangible assets, net of associated deferred tax liabilities⁽³⁾				(6,242		)	(6,242		)	(5,927		)	(5,927		)	(5,938		)	(5,938		)	(5,631		)	(5,631		)
Other adjustments	Other adjustments				(62		)	(62		)	(36		)	(36		)	(92		)	(92		)	(128		)	(128		)	Other adjustments				(91		)	(91		)	(60		)	(60		)	(88		)	(88		)	(85		)	(85		)
Common equity tier 1 capital	Common equity tier 1 capital				12,672			12,672			13,473			13,473			15,020			15,020			14,043			14,043			Common equity tier 1 capital				12,404			12,404			12,433			12,433			15,071			15,071			14,647			14,647
Preferred stock	Preferred stock				2,703			2,703			1,961			1,961			—			—			—			—			Preferred stock				2,703			2,703			2,703			2,703			—			—			—			—
Trust preferred capital securities subject to phase-out from tier 1 capital	Trust preferred capital securities subject to phase-out from tier 1 capital				237			237			475			475			—			—			—			—			Trust preferred capital securities subject to phase-out from tier 1 capital				—			—			237			237			—			—			—			—
Other adjustments	Other adjustments				(94		)	(94		)	(145		)	(145		)	—			—			—			—			Other adjustments				(75		)	(75		)	(109		)	(109		)	—			—			—			—
Tier 1 capital					15,518			15,518			15,764			15,764			15,020			15,020			14,043			14,043							15,032			15,032			15,264			15,264			15,071			15,071			14,647			14,647
Qualifying subordinated long-term debt	Qualifying subordinated long-term debt				1,438			1,438			1,618			1,618			1,452			1,452			1,634			1,634			Qualifying subordinated long-term debt				1,259			1,259			1,358			1,358			1,271			1,271			1,371			1,371
Trust preferred capital securities phased out of tier 1 capital	Trust preferred capital securities phased out of tier 1 capital				713			713			475			475			—			—			—			—			Trust preferred capital securities phased out of tier 1 capital				890			890			713			713			—			—			—			—
ALLL and other	ALLL and other				12			69			—			—			9			69			—			—			ALLL and other				9			66			12			66			5			66			8			66
Other adjustments	Other adjustments				2			2			4			4			—			—			—			—			Other adjustments				1			1			2			2			—			—			—			—
Total capital					$	17,683		$	17,740		$	17,861		$	17,861		$	16,481		$	16,541		$	15,677		$	15,677						$	17,191		$	17,248		$	17,349		$	17,403		$	16,347		$	16,408		$	16,026		$	16,084
Risk-weighted assets:	Risk-weighted assets:																												Risk-weighted assets:
Credit risk					$	55,914		$	103,004		$	66,874		$	87,502		$	50,936		$	97,803		$	59,836		$	84,433						$	52,865		$	98,133		$	51,733		$	93,515		$	48,489		$	93,520		$	47,677		$	89,164
Operational risk					44,014			NA			35,866			NA			43,413			NA			35,449			NA							44,231			NA			43,882			NA			43,663			NA			43,324			NA
Market risk⁽⁵⁾⁽⁴⁾					4,437			2,761			5,087			2,910			4,397			2,761			5,048			2,909							3,537			1,484			3,937			2,378			3,523			1,484			3,939			2,378
Total risk-weighted assets					$	104,365		$	105,765		$	107,827		$	90,412		$	98,746		$	100,564		$	100,333		$	87,342		Total risk-weighted assets				$	100,633		$	99,617		$	99,552		$	95,893		$	95,675		$	95,004		$	94,940		$	91,542
Adjusted quarterly average assets	Adjusted quarterly average assets				$	244,553		$	244,553		$	247,740		$	247,740		$	239,610		$	239,610		$	243,549		$	243,549		Adjusted quarterly average assets				$	217,029		$	217,029		$	221,880		$	221,880		$	212,843		$	212,843		$	217,358		$	217,358
Capital Ratios:	Minimum Requirements⁽⁶⁾2015		Minimum Requirements⁽⁷⁾2014																										Minimum Requirements Including Capital Conservation Buffer and G-SIB Surcharge(5) 2016		Minimum Requirements⁽⁶⁾
Common equity tier 1 capital	4.5	%	4.0	%	12.1		%	12.0		%	12.5		%	14.9		%	15.2		%	14.9		%	14.0		%	16.1		%	5.5	%	4.5	%	12.3		%	12.5		%	12.5		%	13.0		%	15.8		%	15.9		%	15.4		%	16.0		%
Tier 1 capital	6.0		5.5		14.9			14.7			14.6			17.4			15.2			14.9			14.0			16.1			7.0		6.0		14.9			15.1			15.3			15.9			15.8			15.9			15.4			16.0
Total capital	8.0		8.0		16.9			16.8			16.6			19.8			16.7			16.4			15.6			17.9			9.0		8.0		17.1			17.3			17.4			18.1			17.1			17.3			16.9			17.6
Tier 1 leverage	4.0		4.0		6.3			6.3			6.4			6.4			6.3			6.3			5.8			5.8			4.0		4.0		6.9			6.9			6.9			6.9			7.1			7.1			6.7			6.7

Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

The regulatory capital ratios for State Street and State Street Bank as of September 30, 2015, presented in Table 37: Regulatory Capital Structure and Related Regulatory Capital Ratios, differ from such ratios as of December 31, 2014. These differences are independent of applicable changes to our capital base, our asset composition, our off-balance sheet exposures or our risk profile, and resulted from changes in the methodologies, required by applicable regulatory requirements, used to calculate capital and total risk-weighted assets. As a result, the ratios presented in the table for each period are not directly comparable. As of January 1, 2015 we used the standardized provisions of the Basel III final rule in addition to the advanced approaches provisions which were previously implemented in the second quarter of 2014, and the lower of our regulatory capital ratios calculated under the advanced approaches and those ratios calculated under the standardized approach are applied in the assessment of our capital adequacy for regulatory capital purposes. Beginning in the second quarter of 2014, until January 1, 2015, we used the advanced approaches provisions in the Basel III final rule, and transitional provisions of the Basel III final rule, and the lower of our regulatory capital ratios calculated under the advanced approaches and those ratios calculated under the transitional provisions were applied in the assessment of our capital adequacy for regulatory capital purposes. ~~Prior to the second quarter of 2014, we used the provisions of Basel I to calculate our risk-weighted assets.~~

State Street's common equity tier 1 capital decreased ~~$801~~$29 million as of ~~September 30, 2015~~March 31, 2016 compared to December 31, ~~2014, the~~2015 as a result of purchases by us of our common stock of approximately ~~$1.17 billion, the strengthening U.S. dollar's impact on accumulated other comprehensive income,~~$325 million, declarations of common and preferred stock dividends of ~~$502~~$184 million and the impact of the phase-in provisions of the Basel III final rule related to other intangible assets, ~~mostly~~partially offset by net income and the positive effect of ~~year-to-date net~~foreign currency translation on accumulated other comprehensive income. Over the same period, State Street's tier 1 capital decreased ~~$246~~$232 million, ~~total~~as trust preferred capital securities were fully phased-out of tier 1 capital. Total capital decreased ~~$178~~$158 million under advanced approaches and total capital decreased ~~$121~~$155 million under standardized ~~approach. Our~~approach due to the changes to tier 1 capital, ~~and total capital decreased by less than the decrease to common equity tier 1 capital over the same period as the net decrease to common equity tier 1 capital was largely~~partially offset by the ~~positive effects on~~inclusion of trust preferred capital securities in tier ~~1 capital and total capital of the issuance of $750 million of preferred stock in the second quarter of 2015.~~2 capital. State Street Bank's tier 1 capital increased ~~$977~~$424 million, and total capital increased ~~$804~~$321 million and ~~$864~~$324 million under the advanced and standardized approaches, respectively, as of ~~September 30, 2015,~~March 31, 2016, compared to December 31, ~~2014,~~2015, the result of ~~year-~~

~~to-date~~year-to-date net income ~~partly offset by~~and the previously-described impact to accumulated other comprehensive income, ~~and~~partially offset by the phase-in provisions of the Basel III final rule related to other intangible assets.

The table below presents a roll-forward of common equity tier 1 capital, tier 1 capital and total capital for the ~~nine months~~quarter ended ~~September 30, 2015~~March 31, 2016 and for the ~~twelve months~~year ended December 31, ~~2014.~~2015.



TABLE 38: CAPITAL ROLL-FORWARD
	State Street
(In millions)	Basel III Advanced Approaches March 31, 2016			Basel III Standardized Approach March 31, 2016			Basel III Advanced Approaches December 31, 2015			Basel III Standardized Approach December 31, 2015
Common equity tier 1 capital:
Common equity tier 1 capital balance, beginning of period	$	12,433		$	12,433		$	13,327		$	13,327
Net income	368			368			1,980			1,980
Changes in treasury stock, at cost	(262		)	(262		)	(1,299		)	(1,299		)
Dividends declared	(184		)	(184		)	(666		)	(666		)
Goodwill and other intangible assets, net of associated deferred tax liabilities	(315		)	(315		)	(58		)	(58		)
Effect of certain items in accumulated other comprehensive income (loss)	402			402			(780		)	(780		)
Other adjustments	(38		)	(38		)	(71		)	(71		)
Changes in common equity tier 1 capital	(29		)	(29		)	(894		)	(894		)
Common equity tier 1 capital balance, end of period	12,404			12,404			12,433			12,433
Additional tier 1 capital:
Tier 1 capital balance, beginning of period	15,264			15,264			15,618			15,618
Change in common equity tier 1 capital	(29		)	(29		)	(894		)	(894		)
Net issuance of preferred stock	—			—			742			742
Trust preferred capital securities phased out of tier 1 capital	(237		)	(237		)	(238		)	(238		)
Other adjustments	34			34			36			36
Changes in tier 1 capital	(232		)	(232		)	(354		)	(354		)
Tier 1 capital balance, end of period	15,032			15,032			15,264			15,264
Tier 2 capital:
Tier 2 capital balance, beginning of period	2,085			2,139			2,097			2,097
Net issuance and changes in long-term debt qualifying as tier 2	(99		)	(99		)	(260		)	(260		)
Trust preferred capital securities phased into tier 2 capital	177			177			238			238
Changes in ALLL and other	(3		)	—			12			66
Change in other adjustments	(1		)	(1		)	(2		)	(2		)
Changes in tier 2 capital	74			77			(12		)	42
Tier 2 capital balance, end of period	2,159			2,216			2,085			2,139
Total capital:
Total capital balance, beginning of period	17,349			17,403			17,715			17,715
Changes in tier 1 capital	(232		)	(232		)	(354		)	(354		)
Changes in tier 2 capital	74			77			(12		)	42
Total capital balance, end of period	$	17,191		$	17,248		$	17,349		$	17,403

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

TABLE 38: CAPITAL ROLL-FORWARD
State Street
(Dollars in millions) Basel III Advanced Approach September 30, 2015 Basel III Standardized Approach September 30, 2015 Twelve Months Ended December 31, 2014
Common equity tier 1 capital:
Common equity tier 1 capital balance, beginning of period $ 13,473
$ 13,473
$ 12,454
Net income 1,416
1,416
2,037
Changes in treasury stock, at cost (985 ) (985 ) (1,465 )
Dividends declared (502 ) (502 ) (551 )
Goodwill and other intangible assets, net of associated deferred tax liabilities (118 ) (118 ) 1,874
Effect of certain items in accumulated other comprehensive income (loss) (536 ) (536 ) (857 )
Other adjustments (76 ) (76 ) (19 )
Changes in common equity tier 1 capital (801 ) (801 ) 1,019
Common equity tier 1 capital balance, end of period 12,672
12,672
13,473
Additional tier 1 capital:
Tier 1 capital balance, beginning of period 15,764
15,764
13,895
Change in common equity tier 1 capital (801 ) (801 ) 1,019
Net issuance of preferred stock 742
742
1,470
Trust preferred capital securities phased out of tier 1 capital (238 ) (238 ) (475 )
Other adjustments 51
51
(145 )
Changes in tier 1 capital (246 ) (246 ) 1,869
Tier 1 capital balance, end of period 15,518
15,518
15,764
Tier 2 capital:
Tier 2 capital balance, beginning of period 2,097
2,097
1,892
Net issuance and changes in long-term debt qualifying as tier 2 (180 ) (180 ) (300 )
Trust preferred capital securities phased into tier 2 capital 238
238
475
Changes in ALLL and other 12
69
—
Change in other adjustments (2 ) (2 ) 30
Changes in tier 2 capital 68
125
205
Tier 2 capital balance, end of period 2,165
2,222
2,097
Total capital:
Total capital balance, beginning of period 17,861
17,861
15,787
Changes in tier 1 capital (246 ) (246 ) 1,869
Changes in tier 2 capital 68
125
205
Total capital balance, end of period $ 17,683
$ 17,740
$ 17,861

The following table presents a roll-forward of the Basel III advanced approaches risk-weighted assets for the ~~nine months~~quarter ended ~~September 30, 2015~~March 31, 2016 and ~~six months~~for the year ended December 31, ~~2014.~~2015.

													TABLE 39: ADVANCED APPROACHES RWA ROLL-FORWARD
	State Street						State Street
(Dollars in millions)	Nine Months Ended September 30, 2015			Six Months Ended December 31, 2014
(In millions)							March 31, 2016			December 31, 2015
Total risk-weighted assets, beginning of period	$	107,827		$	111,015		$	99,552		$	107,827
Changes in credit risk-weighted assets
Changes in credit risk-weighted assets:
Net increase (decrease) in investment securities-wholesale	687			(1,082		)	220			597
Net increase (decrease) in loans and leases	(870		)	1,381			(15		)	(944		)
Net increase (decrease) in securitization exposures	(8,126		)	(5,949		)	(484		)	(9,569		)
Net increase (decrease) in repo-style transaction exposures							387			842
Net increase (decrease) in OTC derivatives exposures							1,390			(1,317		)
Net increase (decrease) in all other⁽¹⁾	(2,651		)	1,431			(366		)	(4,750		)
Net increase (decrease) in credit risk-weighted assets	(10,960		)	(4,219		)	1,132			(15,141		)
Net increase (decrease) in credit valuation adjustment	(501		)	(80		)	494			(618		)
Net increase (decrease) in market risk-weighted assets	(149		)	1,230			(894		)	(532		)
Net increase (decrease) in operational risk-weighted assets	8,148			(119		)	349			8,016
Total risk-weighted assets, end of period	$	104,365		$	107,827		$	100,633		$	99,552

⁽¹⁾ Includes assets not in a definable category, non-material portfolio, other wholesale, cash and due from, and interest-bearing deposits with banks, ~~securities financing exposures,~~ equity exposures, ~~over-the-counter derivatives,~~ and 6% credit risk supervisory charge.

As of ~~September 30,~~March 31, 2016, total advanced approaches risk-weighted assets increased $1.08 billion compared to December 31, 2015, primarily due to a $1.39 billion increase in credit risk for over-the-counter foreign exchange derivatives resulting from an increase in both volumes and market values and a corresponding increase in CVA of $494 million. Credit risk also reflected an increase in securities finance agency lending and purchases of HQLA securities, mostly offset by maturities and amortization of the securitized investment portfolio. The increase in credit risk was partially offset by a reduction in market risk resulting from a lower stressed VaR.

As of December 31, 2015, total advanced approaches risk-weighted assets decreased ~~$3.46~~$8.28 billion compared to December 31, 2014, primarily the result of a reduction in credit risk due to sales, maturities and ~~pay-downs~~amortization of the securitized investment portfolio and the subsequent reinvestment in ~~highly qualified liquid assets,~~HQLA, a decrease associated with the usage of the alternative modified look through approach for investments in investment funds, and a decline in ~~over the counter~~over-the-counter foreign exchange derivatives mainly due to a decrease in ~~market values.~~volumes and the addition of new netting agreements. The decreases ~~above~~ were ~~partly~~ partially

offset by an ~~$8.15~~$8.02 billion increase in operational risk, which reflects adjustments to the model inputs.

As of December 31, 2014, total risk-weighted assets decreased from June 30, 2014 balances primarily due to lower credit risk-weighted assets, partially offset by an increase in market risk-equivalent risk-weighted assets. The increase in market risk-equivalent risk weighted assets resulted from the increase in the sixty-day moving average of our stressed VaR-based measure. Our stressed VaR-based measure was impacted by the extension of the tenor of FX swaps by Global Treasury designed

~~Table of Contents~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (Continued)~~

to improve our liquidity position. The decrease in credit risk-weighted assets primarily related to sales, maturities and pay-downs of both wholesale and securitized investments, partially offset by an increase in loan activity.

The following table presents a roll-forward of the Basel III standardized approach risk-weighted assets for the ~~nine months~~quarter ended ~~September 30,~~March 31, 2016 and for the year ended December 31, 2015.

												TABLE 40: STANDARDIZED APPROACH RWA ROLL-FORWARD
	State Street				State Street
(Dollars in millions)		Nine Months Ended September 30, 2015
(In millions)						Quarter Ended March 31, 2016			Year Ended December 31, 2015
Total estimated risk-weighted assets, beginning of period ⁽¹⁾		$	125,011			$	95,893		$	125,011
Changes in credit risk-weighted assets:
Net increase (decrease) in investment securities- wholesale		(1,849		)		(235		)	(2,579		)
Net increase (decrease) in loans and leases		44				845			(539		)
Net increase (decrease) in securitization exposures		(8,126		)		(484		)	(9,569		)
Net increase (decrease) in repo-style transaction exposures						3,495			(7,535		)
Net increase (decrease) in OTC derivatives exposures						905			(4,007		)
Net increase (decrease) in all other⁽²⁾		(9,166		)		92			(4,357		)
Net increase (decrease) in credit risk-weighted assets		(19,097		)		4,618			(28,586		)
Net increase (decrease) in market risk-weighted assets		(149		)		(894		)	(532		)
Total risk-weighted assets, end of period		$	105,765			$	99,617		$	95,893

⁽¹⁾ Standardized approach risk-weighted assets as of ~~December 31, 2014~~the periods noted above were calculated using State Street’s estimates, based on our then current interpretation of the Basel III final rule.

⁽²⁾ Includes assets not in a definable category, cleared transactions, other wholesale, cash and due from, and interest-bearing deposits with banks ~~securities financing exposures,~~and equity ~~exposures and over-the-counter derivatives.~~exposures.

As of ~~September 30,~~March 31, 2016, total standardized approach risk-weighted assets increased $3.72 billion compared to December 31, 2015, primarily the result of an increase in securities finance agency lending, an increase in over-the-counter foreign exchange derivatives resulting from both higher volumes and market values and an increase in loans, partially offset by maturities and amortization of the securitized investment portfolio and a reduction in market risk resulting from a lower stressed VaR.

As of December 31, 2015, total standardized approach risk-weighted assets decreased ~~$19.25~~$29.12 billion compared to December 31, 2014, primarily the result of a reduction in credit risk due to sales, maturities and pay-downs of both securitized and wholesale investment portfolio and the subsequent reinvestment in ~~highly qualified liquid assets,~~HQLA, a decrease in securities financing exposure, a decrease associated with the usage of the alternative modified look through approach for investments in investment funds and a decline in ~~over the counter~~over-the-counter foreign exchange derivatives ~~mainly~~primarily due to a decrease in ~~market values,~~volumes and ~~a decrease in securities financing exposure.~~the addition of new netting agreements.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

The regulatory capital ratios as of ~~September 30, 2015,~~March 31, 2016, presented in Table 37: Regulatory Capital Structure and Related Regulatory Capital Ratios, are calculated under the standardized approach and advanced approaches in conformity with the Basel III final rule. The advanced approaches-based ratios (actual and estimated pro forma) reflect calculations and determinations with respect to our capital and related matters as of ~~September 30, 2015,~~March 31, 2016, based on State Street and external data, quantitative formulae, statistical

models, historical correlations and assumptions, collectively referred to as “advanced systems,” in effect and used by State Street for those purposes as of the time we first reported such ratios in a quarterly report on Form 10-Q. Significant components of these advanced systems involve the exercise of judgment by us and our regulators, and our advanced systems may not, individually or collectively, precisely represent or calculate the scenarios, circumstances, outputs or other results for which they are designed or intended.

Due to the influence of changes in these advanced systems, whether resulting from changes in data inputs, regulation or regulatory supervision or interpretation, State Street-specific or market activities or experiences or other updates or factors, we expect that our advanced systems and our capital ratios calculated in conformity with the Basel III final rule will change and may be volatile over time, and that those latter changes or volatility could be material as calculated and measured from period to period. Models implemented under the Basel III final rule, particularly those implementing the advanced approaches, remain subject to regulatory review and approval. The full effects of the Basel III final rule on State Street and State Street Bank are therefore subject to further evaluation and also to further regulatory guidance, action or rule-making.

Estimated Basel III Fully Phased-in Capital Ratios

Table 41: Regulatory Capital Structure and Related Regulatory Capital Ratios - State Street, and Table 42: Regulatory Capital Structure and Related Regulatory Capital Ratios - State Street Bank, present our capital ratios for State Street and State Street Bank as of ~~September 30, 2015,~~March 31, 2016, calculated in conformity with the advanced approaches provisions and standardized approach of the Basel III final rule on an estimated, pro forma basis under the fully phased-in provisions of the Basel III final rule. Pro forma fully phased-in capital ratios calculated in accordance with both approaches as of ~~September 30, 2015,~~March 31, 2016, are preliminary estimates, based on our present interpretations of the Basel III final rule as applied to our businesses and operations as of ~~September 30, 2015.~~March 31, 2016.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

																																											TABLE 41: REGULATORY CAPITAL STRUCTURE AND RELATED REGULATORY CAPITAL RATIOS - STATE STREET
September 30, 2015 (Dollars in millions)				Basel III Advanced Approaches			Phase-In Provisions			Basel III Advanced Approaches Fully Phased-In Pro-Forma Estimate⁽¹⁾			Basel III Standardized Approach			Phase-In Provisions			Basel III Standardized Approach Fully Phased-In Pro-Forma Estimate⁽¹⁾
March 31, 2016 (In millions)																									Basel III Advanced Approaches			Phase-In Provisions			Basel III Advanced Approaches Fully Phased-In Pro-Forma Estimate⁽¹⁾			Basel III Standardized Approach			Phase-In Provisions			Basel III Standardized Approach Fully Phased-In Pro-Forma Estimate⁽¹⁾
Total common shareholders' equity				$	18,721		$	77		$	18,798		$	18,721		$	77		$	18,798		Total common shareholders' equity			$	18,737		$	56		$	18,793		$	18,737		$	56		$	18,793
Regulatory capital adjustments:																						Regulatory capital adjustments:
Goodwill and other intangible assets, net of associated deferred tax liabilities				(5,987		)	(836		)	(6,823		)	(5,987		)	(836		)	(6,823		)	Goodwill and other intangible assets, net of associated deferred tax liabilities			(6,242		)	(542		)	(6,784		)	(6,242		)	(542		)	(6,784		)
Other adjustments				(62		)	(96		)	(158		)	(62		)	(96		)	(158		)	Other adjustments			(91		)	(61		)	(152		)	(91		)	(61		)	(152		)
Common equity tier 1 capital				12,672			(855		)	11,817			12,672			(855		)	11,817			Common equity tier 1 capital			12,404			(547		)	11,857			12,404			(547		)	11,857
Additional tier 1 capital:																						Additional tier 1 capital:
Preferred stock				2,703			—			2,703			2,703			—			2,703						2,703			—			2,703			2,703			—			2,703
Trust preferred capital securities				237			(237		)	—			237			(237		)	—			Trust preferred capital securities			—			—			—			—			—			—
Other adjustments				(94		)	94			—			(94		)	94			—						(75		)	61			(14		)	(75		)	61			(14		)
Additional tier 1 capital				2,846			(143		)	2,703			2,846			(143		)	2,703						2,628			61			2,689			2,628			61			2,689
Tier 1 capital				15,518			(998		)	14,520			15,518			(998		)	14,520						15,032			(486		)	14,546			15,032			(486		)	14,546
Tier 2 capital:
Qualifying subordinated long-term debt				1,438			—			1,438			1,438			—			1,438			Qualifying subordinated long-term debt			1,259			—			1,259			1,259			—			1,259
Trust preferred capital securities				713			132			845			713			132			845			Trust preferred capital securities			890			(45		)	845			890			(45		)	845
ALLL and other				12			—			12			69			—			69						9			—			9			66			—			66
Other				2			(2		)	—			2			(2		)	—						1			(1		)	—			1			(1		)	—
Tier 2 capital				2,165			130			2,295			2,222			130			2,352						2,159			(46		)	2,113			2,216			(46		)	2,170
Total capital				$	17,683		$	(868	)	$	16,815		$	17,740		$	(868	)	$	16,872					$	17,191		$	(532	)	$	16,659		$	17,248		$	(532	)	$	16,716
Risk weighted assets⁽²⁾				$	104,365		$	(478	)	$	103,887		$	105,765		$	(451	)	$	105,314					$	100,633		$	95		$	100,728		$	99,617		$	89		$	99,706
Adjusted average assets				244,553			(488		)	244,065			244,553			(488		)	244,065						217,029			(357		)	216,672			217,029			(357		)	216,672
Total assets for SLR				270,762			(488		)	270,274			270,762			(488		)	270,274						241,793			(357		)	241,436			241,793			(357		)	241,436
Capital ratios⁽³⁾:	Minimum Requirement 2015	Minimum Requirement 2019	Minimum Requirement Including Capital Conservation Buffer of 2.5% and GSIB 1.5% 2019
Capital ratios⁽²⁾:																						Minimum Requirement	Minimum Requirement Including Capital Conservation Buffer and G-SIB Surcharge 2016	Minimum Requirement Including Capital Conservation Buffer and G-SIB Surcharge 2019
Common equity tier 1 capital⁽⁴⁾⁽³⁾	4.5%		8.5%	12.1		%				11.4		%	12.0		%				11.2		%	4.5%	5.5%	8.5%	12.3		%				11.8		%	12.5		%				11.9		%
Tier 1 capital	6.0		10.0	14.9						14.0			14.7						13.8			6.0	7.0	10.0	14.9						14.4			15.1						14.6
Total capital	8.0		12.0	16.9						16.2			16.8						16.0			8.0	9.0	12.0	17.1						16.5			17.3						16.8
Tier 1 leverage	4.0		NA	6.3						5.9			6.3						5.9			4.0	NA		6.9						6.7			6.9						6.7
Supplementary leverage	NA	5.0	NA	5.7						5.4			5.7						5.4			5.0	NA		6.2						6.0			6.2						6.0

⁽¹⁾As of ~~September 30, 2015,~~March 31, 2016, represents State Street's estimates calculated in conformity with the fully phased-in provisions of the Basel III Final rule for both Basel III advanced and standardized approaches, based on our current interpretations of the Basel III final rule as applied to our businesses and operations as of ~~September 30, 2015.~~March 31, 2016.

⁽²⁾ As of September 30, 2015, State Street's risk-weighted assets calculated in conformity with the standardized approach of the Basel III final rule exceeded risk-weighted assets calculated in conformity with the advanced approaches provisions of the Basel III final rule by $1.4 billion ($105.8 billion minus $104.4 billion).

⁽³⁾ Common equity tier 1 ratio is calculated by dividing common equity tier 1 capital (numerator) by risk-weighted assets (denominator); tier 1 capital ratio is calculated by dividing tier 1 capital (numerator) by risk-weighted assets (denominator); total capital ratio is calculated by dividing total capital (numerator) by risk-weighted assets (denominator); tier 1 leverage ratio is calculated by dividing tier 1 capital (numerator) by adjusted average assets (denominator); and supplementary leverage ratio, or SLR, is calculated by dividing tier 1 capital (numerator) by total assets for SLR (denominator).

⁽⁴⁾⁽³⁾Common equity tier 1 ratios were calculated in conformity with the provisions of the Basel III final rule; refer to Table 37: Regulatory Capital Structure and Related Regulatory Capital Ratios.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Risk weighted assets⁽²⁾

Capital ratios⁽³⁾:

Capital ratios⁽²⁾:

Common equity tier 1 capital⁽⁴⁾⁽³⁾

⁽¹⁾As of ~~September 30, 2015,~~March 31, 2016, represents State Street Bank's estimates calculated in conformity with the fully phased-in provisions of the Basel III Final rule for both Basel III advanced and standardized approaches, based on our current interpretations of the Basel III final rule as applied to our businesses and operations as of ~~September 30, 2015.~~March 31, 2016.

⁽²⁾As of September 30, 2015, State Street Bank's risk-weighted assets calculated in conformity with the standardized approach of the Basel III final rule exceeded risk-weighted assets calculated in conformity with the advanced approaches provisions of the Basel III final rule by $1.8 billion ($100.6 billion minus $98.7 billion).

~~Table of Contents~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (Continued)~~

Fully phased-in pro-forma estimates of common shareholders' equity include 100% of accumulated other comprehensive income, including accumulated other comprehensive income attributable to available-for-sale securities, cash flow hedges and defined benefit pension plans. Fully phased-in pro-forma estimates of common equity tier 1 capital reflect 100% of applicable deductions, including but not limited to, intangible assets net of deferred tax

liabilities. ~~For the third quarter of 2015, tier 1 capital includes 25% of trust preferred capital securities and the remaining 75% is included in tier 2 capital.~~ Fully phased-in tier 1 capital reflects the transition of trust preferred capital securities from tier 1 capital to tier 2 capital. For both Basel III advanced and standardized approaches, fully phased-in pro-forma estimates of risk-weighted assets reflect the exclusion of intangible assets, offset by additions related to non-significant equity exposures and deferred tax assets related to temporary differences.

Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

The Volcker rule, including the required capital deduction for investments in a covered fund, became effective on July 21, 2015, for investments in and relationships with a covered fund made after December 31, 2013. The Federal Reserve issued an order extending the Volcker rule's general conformance period until July 21, 2016 for legacy covered funds and announced its intention to grant banking entities an additional one-year extension of the conformance period until July 21, 2017. As a result, for legacy covered funds, the Volcker rule capital deduction will not become effective until July 21, 2017. For additional information on the Volcker rule, refer to pages 10 to 11 in our 2015 Form 10-K.

Global Systemically Important Bank

We are designated as a large bank holding company subject to enhanced supervision and prudential standards, commonly referred to as a “systemically important financial institution,” or SIFI, and we are one among a group of 30 institutions worldwide that have been identified by the ~~Financial Stability Board, or~~ FSB and the ~~Basel Committee on Banking Supervision, or~~ BCBS as G-SIBs. Our designation as a G-SIB will require us to maintain an additional capital buffer above the Basel III final rule minimum common equity tier 1 capital ratio of 4.5%, based on a number of factors, as evaluated by banking regulators.

In addition to the U.S. Basel III final rule, the Dodd-Frank Act requires the Federal Reserve to establish more stringent capital requirements for large bank holding companies, including State Street. On August 14, 2015, the Federal Reserve published a final rule on the implementation of capital requirements ~~for~~that impose a capital surcharge on U.S. G-SIBs. The surcharge requirements within the final rule ~~will be phased in beginning~~began to phase-in on January 1, 2016 and will be fully effective on January 1, 2019. The eight U.S. banks deemed to be G-SIBs, including State Street, are required to calculate the G-SIB surcharge according to two methods, and be bound by the higher of the two:

Method 1: Assesses systemic importance based upon five equally-weighted components: size, interconnectedness, complexity, cross-jurisdictional activity and substitutability

Method 2: Alters the calculation from Method 1 by factoring in a wholesale funding score in place of substitutability and applying a 2x multiplier to the sum of the five components

As part of the final rule, the Federal Reserve published estimated G-SIB surcharges for the eight U.S. G-SIBs based on relevant data from ~~2012-2014.~~

2012 to 2014. Method 2 is identified as the binding methodology for State Street and the ~~Federal Reserve estimated the resulting G-SIB~~applicable surcharge ~~to be 1.5%. The actual surcharge applicable~~ on January 1, 2016 ~~will depend on the application of the final rule utilizing relevant data from 2014~~is calculated to ~~2015 and may differ from the Federal Reserve's estimated charge of~~be 1.5%. Assuming completion of the phase-in period for the capital conservation buffer, and a countercyclical buffer of 0%, the minimum capital ratios as of January 1, 2019, including a capital conservation buffer of 2.5% and ~~an estimated~~ G-SIB ~~capital~~ surcharge of 1.5%, in 2019, would be 10.0% for tier 1 risk-based capital, 12.0% for total risk-based capital, and 8.5% for common equity tier 1 capital, in order for State Street to make capital distributions and discretionary bonus payments without limitation. Not all of our competitors have similarly been designated as systemically important, and therefore some of our competitors may not be subject to the same additional capital requirements.

Supplementary Leverage Ratio

In 2014, U.S. banking regulators issued final rules implementing ~~a supplementary leverage ratio, or~~an SLR, for certain bank holding companies, like State Street, and their insured depository institution subsidiaries, like State Street ~~Bank. We~~Bank, which we refer to ~~these final rules~~ as the SLR final rule. ~~Under~~Upon implementation, the SLR final rule ~~upon implementation~~requires that, as of January 1, 2018, (i) State Street Bank ~~must~~ maintain an SLR of at least 6% to be well capitalized under the U.S. banking regulators’ ~~Prompt Corrective Action~~PCA framework and (ii) if State Street ~~maintains~~maintain an SLR of at least 5%~~, it is not subject~~ to avoid limitations on ~~distribution~~capital distributions and discretionary bonus ~~payments under~~payments. In addition to the SLR, ~~final rule.~~State Street is subject to a minimum tier 1 leverage ratio of 4%, which differs from the SLR primarily in that the denominator of the tier 1 leverage ratio is only a quarterly average of on-balance sheet assets and does not include any off-balance sheet exposures. Beginning with reporting for September 30, 2015, State Street iswas required to include SLR disclosures, calculated on a transitional basis, with its other Basel disclosures.

Estimated pro forma fully phased-in supplementary leverage ratios as of ~~September 30, 2015~~March 31, 2016 are preliminary estimates by State Street, and are calculated based on our current interpretations of the SLR final rule and as applied to our businesses and operations as of ~~September 30, 2015.~~March 31, 2016.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

TABLE 43: SUPPLEMENTARY LEVERAGE RATIO
September 30, 2015 Transitional SLR Phase-In Provisions Fully Phased-in Pro Forma SLR Estimate
(Dollars in millions)
State Street:
Tier 1 capital $ 15,518
$ (998 ) $ 14,520
On- and off-balance sheet leverage exposure 276,673
—
276,673
Less: regulatory deductions (5,911 ) (488 ) (6,399 )
Total assets for SLR $ 270,762
$ (488 ) $ 270,274
Supplementary leverage ratio 5.7 % (0.3 )% 5.4 %

State Street Bank:
Tier 1 capital $ 15,020
$ (701 ) $ 14,319
On- and off-balance sheet leverage exposure 271,347
—
271,347
Less: regulatory deductions (5,550 ) (443 ) (5,993 )
Total assets for SLR $ 265,797
$ (443 ) $ 265,354
Supplementary leverage ratio 5.7 % (0.3 )% 5.4 %



TABLE 43: SUPPLEMENTARY LEVERAGE RATIO
March 31, 2016	Transitional SLR			Phase-In Provisions			Fully Phased-in Pro Forma SLR Estimate
(Dollars in millions)	Transitional SLR			Phase-In Provisions			Fully Phased-in Pro Forma SLR Estimate
State Street:
Tier 1 capital	$	15,032		$	(486	)	$	14,546
On- and off-balance sheet leverage exposure	247,923			—			247,923
Less: regulatory deductions	(6,130		)	(357		)	(6,487		)
Total assets for SLR	$	241,793		$	(357	)	$	241,436
Supplementary leverage ratio	6.2		%	(0.2		)%	6.0		%

State Street Bank:
Tier 1 capital	$	15,071		$	(443	)	$	14,628
On- and off-balance sheet leverage exposure	243,043			—			243,043
Less: regulatory deductions	(5,751		)	(322		)	(6,073		)
Total assets for SLR	$	237,292		$	(322	)	$	236,970
Supplementary leverage ratio	6.4		%	(0.2		)%	6.2		%

Capital Actions

Preferred Stock

The following table summarizes selected terms of each of the series of the preferred stock issued and outstanding as of March 31, 2016:



TABLE 44: PREFERRED STOCK ISSUED AND OUTSTANDING
	Issuance Date	Depositary Shares Issued	Ownership Interest per Depositary Share	Liquidation Preference Per Share		Liquidation Preference Per Depositary Share		Net Proceeds of Offering (in millions)		Redemption Date⁽¹⁾
Preferred Stock:⁽²⁾
Series C	August 2012	20,000,000	1/4,000th	$	100,000	$	25	$	488	September 15, 2017
Series D	February 2014	30,000,000	1/4,000th	100,000		25		742		March 15, 2024
Series E	November 2014	30,000,000	1/4,000th	100,000		25		728		December 15, 2019
Series F	May 2015	750,000	1/100th	100,000		1,000		742		September 15, 2020

⁽¹⁾On the redemption date, or any dividend declaration date thereafter, the preferred stock and corresponding depositary shares may be redeemed by us, in whole or in part, at the liquidation price per share and liquidation price per depositary share plus any declared and unpaid dividends, without accumulation of any undeclared dividends.

⁽²⁾The preferred stock and corresponding depositary shares may be redeemed at our option in whole, but not in part, prior to the redemption date upon the occurrence of a regulatory capital treatment event, as defined in the certificate of designation, at a redemption price equal to the liquidation price per share and liquidation price per depositary share plus any declared and unpaid dividends, without accumulation of any undeclared dividends.

The following table presents the dividends declared for each of the series of preferred stock issued and outstanding for the periods indicted:



TABLE 45: PREFERRED STOCK DIVIDENDS
	Quarters Ended March 31,
	2016						2015
	Dividends Declared		Dividends Declared per Depositary Share		Total (in millions)⁽¹⁾		Dividends Declared		Dividends Declared per Depositary Share		Total (in millions)
Preferred Stock:
Series C	$	1,313	$	0.33	$	7	$	1,313	$	0.33	$	6
Series D	1,475		0.37		11		1,475		0.37		11
Series E	1,500		0.38		11		1,833		0.46		14
Series F	2,625		26.25		20		—		—		—
Total					$	49					$	31

⁽¹⁾ Dividends were paid in March 2016.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

In ~~the second quarter of 2015,~~April 2016, we issued ~~750 thousand~~20 million depositary shares, each representing a 1/~~100th~~4,000th ownership interest in ~~a share~~shares of State ~~Street’s fixed-to-floating-rate~~Street's fixed-to-floating rate non-cumulative perpetual preferred stock, Series F,G, without par value per share, with a liquidation preference of $100,000 per share (equivalent to ~~$1,000~~$25 per depositary share), in a public offering. ~~The aggregate proceeds from the offering, net of underwriting discounts, commissions and other issuance costs, were approximately $742 million.~~

In the first nine months ended September 30, 2015, we declared dividends on our Series F preferred stock of $1,663 per share, or approximately $16.63 per depositary share, totaling approximately $12 million. We did not declare a dividend on the Series F preferred stock in the first six months of 2015.

In the third quarter of 2015, we declared dividends on our Series E preferred stock of $1,500 per share, or approximately $0.38 per depositary share, totaling approximately $11 million. In the first nine months ended September 30, 2015, we declared dividends on our Series E preferred stock of $4,833 per share, or approximately $1.22 per depositary share, totaling approximately $36 million.

In the third quarter of 2015, we declared aggregate dividends on our Series D preferred stock of $1,475 per share, or approximately $0.37 per depositary share, totaling approximately $11 million. In the first nine months ended September 30, 2015, we declared aggregate dividends on our Series D

~~preferred stock of $4,425 per share, or approximately $1.11 per depositary share, totaling approximately $33 million.~~

In the third quarter of 2015, we declared dividends on our Series C preferred stock of $1,313 per share, or approximately $0.33 per depositary share, totaling approximately $7 million. In the first nine months ended September 30, 2015, we declared aggregate dividends on our Series C preferred stock of $3,939 per share, or approximately $0.99 per depositary share, totaling approximately $20 million.

Common Stock

In ~~the third quarter of~~March 2015, ~~we declared aggregate quarterly~~our Board approved a common stock ~~dividends~~purchase program authorizing the purchase of ~~$0.34 per share, totaling approximately $138 million, which were paid in July 2015. In the nine months ended September 30, 2015, we declared aggregate~~up to $1.8 billion of our common stock through June 30, 2016 (the 2015 Program). The table below presents the activity under the 2015 program during the quarter ended March 31, 2016.



TABLE 46: SHARES REPURCHASED
	Quarter Ended March 31, 2016
	Shares Purchased (in millions)	Average Cost per Share		Total Purchased (in millions)
2015 Program	5.6	$	57.88	$	325

The table below presents the dividends ~~of $0.98 per share, totaling approximately $401 million, compared to aggregate~~declared on common stock ~~dividends of $0.86 per share, totaling approximately $366 million, declared in~~for the ~~first nine months of 2014.~~periods indicated:



TABLE 47: COMMON STOCK DIVIDENDS
	Quarters Ended March 31,
	Dividends Declared per Share		Total (in millions)		Dividends Declared per Share		Total (in millions)
	2016				2015
Common Stock	$	0.34	$	135	$	0.30	$	124

Federal and state banking regulations place certain restrictions on dividends paid by subsidiary banks to the parent holding company. In addition, banking regulators have the authority to prohibit bank holding companies from paying dividends. ~~Information~~For information concerning limitations on dividends from our subsidiary banks, ~~is provided in~~refer to “Related Stockholder Matters” included under Item 5, and in ~~note 13~~Note 15 to the consolidated financial statements ~~included in our 2014 Form 10-K.~~

In March 2015, we received the results of the Federal Reserve's review of our 2015 capital plan in connection with its annual CCAR 2015 process. The Federal Reserve did not object to the capital actions we proposed in our 2015 capital plan and, in March 2015, our Board approved a new common stock purchase program authorizing the purchase of up to $1.8 billion of our common stock through June 30, 2016. In the third quarter of 2015, we purchased approximately 4.8 million shares of our common stock at an average per-share cost of $72.43 and an aggregate cost of approximately $350 million under this program. In the nine months ended September 30, 2015, we purchased approximately 9.3 million shares of our common stock at an average per-share cost of $75.47 and an aggregate cost of approximately $700 million under this program.

In the first quarter of 2015, we completed the $1.7 billion common stock purchase program authorized by the Board in March 2014 with the purchase of approximately 6.3 million shares of our common stock at an average per-share cost of

~~Table of Contents~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (Continued)~~

~~$74.88 and an aggregate cost of approximately $470 million.~~

Under both programs, in the nine months ended September 30, 2015, we purchased in the aggregate approximately 15.6 million shares of our common stock at an average per-share cost of $75.23 and an aggregate cost of approximately $1,170 million. Shares acquired in connection with our common stock purchase programs which remained unissued as of September 30, 2015 were recorded as treasury stock in our consolidated statement of condition as of September 30, 2015.Form 10-K.

Stock purchases may be made using various types of mechanisms, including open market purchases or transactions off market, and may be made under Rule 10b5-1 trading programs. The timing of stock purchases, types of transactions and number of shares purchased will depend on several factors, including, market conditions and State Street’s capital positions, its financial performance and investment opportunities. The common stock purchase program does not have specific price targets and may be suspended at any time.

OFF-BALANCE SHEET ARRANGEMENTS

On behalf of clients enrolled in our securities lending program, we lend securities to banks, broker/dealers and other institutions. In most circumstances, we indemnify our clients for the fair market value of those securities against a failure of the borrower to return such securities. Though these transactions are collateralized, the substantial volume of these activities necessitates detailed credit-based underwriting and monitoring processes. The aggregate amount of indemnified securities on loan totaled ~~$330.82~~$337.94 billion as of ~~September 30, 2015,~~March 31, 2016, compared to ~~$349.77~~$320.44 billion as of December 31, ~~2014.~~2015. We require the borrower to provide collateral in an amount in excess of 100% of the fair market value of the securities borrowed. We hold the collateral received in connection with these securities lending services as agent, and the collateral is not recorded in our consolidated statement of condition. We revalue the securities on loan and the collateral daily to determine if additional collateral is necessary or if excess collateral is required to be returned to the borrower. We held, as agent, cash and securities totaling ~~$341.79~~$351.58 billion and ~~$364.41~~$335.42 billion as collateral for indemnified securities on loan as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, respectively.

The cash collateral held by us as agent is invested on behalf of our clients. In certain cases, the cash collateral is invested in third-party repurchase agreements, for which we indemnify the client against loss of the principal invested. We require the counterparty to the indemnified repurchase

agreement to provide collateral in an amount in excess of 100% of the amount of the repurchase agreement. In our role as agent, the indemnified repurchase agreements and the related collateral held by us are not recorded in our consolidated statement of condition. Of the collateral of ~~$341.79~~$351.58 billion and ~~$364.41~~$335.42 billion, referenced above, ~~$78.41~~$67.01 billion and ~~$85.31~~$63.06 billion was invested in indemnified repurchase agreements as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, respectively. We or our agents held ~~$82.58~~$70.74 billion and ~~$90.82~~$67.02 billion as collateral for indemnified investments in repurchase agreements as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, respectively.

Additional information about our securities finance activities and other off-balance sheet arrangements is provided in ~~notes~~Notes 7 and 129 to the consolidated financial statements included in this Form 10-Q.

Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

RECENT ACCOUNTING DEVELOPMENTS

Information with respect to recent accounting developments is provided in ~~note~~Note 1 to the consolidated financial statements included in this Form 10-Q.

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information provided under “Financial Condition - Market Risk Management” in Management’s Discussion and Analysis, included in this Form 10-Q, is incorporated by reference herein. For more information on our market risk associated with our trading activities, market risk governance, covered positions, VaR, stress testing and stressed VaR, ~~see~~refer to pages 9795 to ~~104~~101 in ~~the 2014~~our 2015 Form 10-K.

CONTROLS AND PROCEDURES

State Street has established and maintains disclosure controls and procedures that are designed to ensure that material information related to State Street and its subsidiaries on a consolidated basis required to be disclosed in its reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to State Street's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. For the quarter ended ~~September 30, 2015,~~March 31, 2016, State Street's management carried out an evaluation, with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of State Street's disclosure controls and procedures. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that State Street's disclosure controls and procedures were effective as of ~~September 30, 2015.~~March 31, 2016.

State Street has also established and maintains internal control over financial reporting as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in conformity with GAAP. In the ordinary course of business, State Street routinely enhances its internal controls and procedures for financial reporting by either upgrading its current systems or implementing new systems. Changes have been made and may be made to State Street's internal controls and procedures for financial reporting as a result of these efforts. During the quarter ended ~~September 30, 2015,~~March 31, 2016, no change occurred in State Street's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, State Street's internal control over financial reporting.

5447

STATE STREET CORPORATION

CONSOLIDATED STATEMENT OF INCOME

(UNAUDITED)


	Three Months Ended September 30,					Nine Months Ended September 30,
	2015			2014		2015			2014			Three Months Ended March 31,
(Dollars in millions, except per share amounts)												2016		2015
Fee revenue:
Servicing fees	$	1,294		$	1,302	$	3,892		$	3,828		$	1,242	$	1,268
Management fees	287			316		892			908			270		301
Trading services	294			278		899			791			272		324
Securities finance	113			99		369			331			134		101
Processing fees and other	120			17		198			117			52		61
Total fee revenue	2,108			2,012		6,250			5,975			1,970		2,055
Net interest revenue:
Interest revenue	614			671		1,885			1,976			629		642
Interest expense	101			101		291			290			117		96
Net interest revenue	513			570		1,594			1,686			512		546
Gains (losses) related to investment securities, net:
Net gains (losses) from sales of available-for-sale securities	(2		)	—		(5		)	15			2		—
Losses from other-than-temporary impairment	—			—		(1		)	(1		)	—		(1		)
Losses reclassified (from) to other comprehensive income	—			—		—			(10		)	—		—
Gains (losses) related to investment securities, net	(2		)	—		(6		)	4			2		(1		)
Total revenue	2,619			2,582		7,838			7,665			2,484		2,600
Provision for loan losses	5			2		11			6			4		4
Expenses:
Compensation and employee benefits	1,051			953		3,122			3,088			1,107		1,087
Information systems and communications	265			242		761			730			272		247
Transaction processing services	201			199		599			583			200		197
Occupancy	110			119		332			348			113		113
Acquisition and restructuring costs	10			20		19			81			104		6
Professional services	136			97		368			318			93		96
Amortization of other intangible assets	48			54		147			162			49		50
Other	141			208		845			460			112		301
Total expenses	1,962			1,892		6,193			5,770			2,050		2,097
Income before income tax expense	652			688		1,634			1,889			430		499
Income tax expense	68			128		219			344			62		94
Net income from non-controlling interest	1			—		1			—
Net income	$	585		$	560	$	1,416		$	1,545		$	368	$	405
Net income available to common shareholders	$	543		$	542	$	1,313		$	1,500		$	319	$	373
Earnings per common share:
Basic	$	1.34		$	1.28	$	3.20		$	3.52		$	.80	$	.90
Diluted	1.32			1.26		3.16			3.45			.79		.89
Average common shares outstanding (in thousands):
Basic	406,612			421,974		409,816			426,775			399,421		412,225
Diluted	412,167			429,736		415,772			434,510			403,615		418,750
Cash dividends declared per common share	$	.34		$	.30	$	.98		$	.86		$	.34	$	.30

The accompanying condensed notes are an integral part of these consolidated financial statements.

5548

STATE STREET CORPORATION

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(UNAUDITED)

Three Months Ended September 30,
(In millions) 2015 2014
Net income $ 585
$ 560
Other comprehensive income (loss), net of related taxes:
Foreign currency translation, net of related taxes of ($51) and ($75), respectively (145 ) (591 )
Net unrealized gains (losses) on available-for-sale securities, net of reclassification adjustment and net of related taxes of $27 and ($94), respectively 37
(140 )
Net unrealized gains (losses) on available-for-sale securities designated in fair value hedges, net of related taxes of ($10) and $10, respectively (16 ) 14
Other-than-temporary impairment on held-to-maturity securities related to factors other than credit, net of related taxes of $2 and $2, respectively 4
4
Net unrealized gains (losses) on cash flow hedges, net of related taxes of $17 and $37, respectively 26
117
Net unrealized gains (losses) on retirement plans, net of related taxes of $3 and $3, respectively 4
—
Other comprehensive income (loss) (90 ) (596 )
Total comprehensive income $ 495
$ (36 )



	Three Months Ended March 31,
(In millions)	2016			2015
Net income	$	368		$	405
Other comprehensive income (loss), net of related taxes:
Foreign currency translation, net of related taxes of $9 and ($64), respectively	306			(699		)
Net unrealized gains (losses) on available-for-sale securities, net of related taxes of $171 and $123, respectively	260			194
Net unrealized gains (losses) on available-for-sale securities designated in fair value hedges, net of related taxes of ($12) and ($10), respectively	(19		)	(15		)
Other-than-temporary impairment on held-to-maturity securities related to factors other than credit, net of related taxes of $1 and $3, respectively	1			4
Net unrealized gains (losses) on cash flow hedges, net of related taxes of ($45) and ($8), respectively	(68		)	12
Net unrealized gains (losses) on retirement plans, net of related taxes of $2 and $4, respectively	(2		)	5
Other comprehensive income (loss)	478			(499		)
Total comprehensive income (loss)	$	846		$	(94	)

Nine Months Ended September 30,
(In millions) 2015 2014
Net income $ 1,416
$ 1,545
Other comprehensive income (loss), net of related taxes:
Foreign currency translation, net of related taxes of ($76) and ($38), respectively (555 ) (518 )
Net unrealized gains (losses) on available-for-sale securities, net of reclassification adjustment and net of related taxes of ($48) and $261, respectively (106 ) 425
Net unrealized gains (losses) on available-for-sale securities designated in fair value hedges, net of related taxes of ($5) and ($5), respectively (9 ) (9 )
Other-than-temporary impairment on held-to-maturity securities related to factors other than credit, net of related taxes of $6 and $10, respectively 11
16
Net unrealized gains (losses) on cash flow hedges, net of related taxes of $39 and $34, respectively 46
56
Net unrealized gains on retirement plans, net of related taxes of $4 and ($2), respectively 19
18
Other comprehensive income (loss) (594 ) (12 )
Total comprehensive income $ 822
$ 1,533

The accompanying condensed notes are an integral part of these consolidated financial statements.

5649

STATE STREET CORPORATION

CONSOLIDATED STATEMENT OF CONDITION

(UNAUDITED)


	September 30, 2015			December 31, 2014			March 31, 2016			December 31, 2015
(Dollars in millions, except per share amounts)	(Unaudited)						(Unaudited)
Assets:
Cash and due from banks	$	3,660		$	1,855		$	3,735		$	1,207
Interest-bearing deposits with banks	68,361			93,523			65,032			75,338
Securities purchased under resale agreements	9,155			2,390			3,722			3,404
Trading account assets	1,223			924			873			849
Investment securities available for sale	80,097			94,913			71,086			70,070
Investment securities held to maturity (fair value of $17,536 and $17,842)	17,463			17,723
Loans and leases (less allowance for losses of $48 and $38)	19,019			18,161
Premises and equipment (net of accumulated depreciation of $4,768 and $4,599)	1,984			1,937
Investment securities held to maturity (fair value of $31,555 and $29,798)							31,212			29,952
Loans and leases (less allowance for losses of $47 and $46)							19,140			18,753
Premises and equipment (net of accumulated depreciation of $4,929 and $4,820)							1,949			1,894
Accrued interest and fees receivable	2,271			2,242			2,371			2,346
Goodwill	5,716			5,826			5,733			5,671
Other intangible assets	1,820			2,025			1,749			1,768
Other assets	36,505			32,600			37,083			33,903
Total assets	$	247,274		$	274,119		$	243,685		$	245,155
Liabilities:
Deposits:
Noninterest-bearing	$	58,426		$	70,490		$	54,248		$	65,800
Interest-bearing—U.S.	30,407			33,012			31,159			29,958
Interest-bearing—non-U.S.	97,534			105,538			100,109			95,869
Total deposits	186,367			209,040			185,516			191,627
Securities sold under repurchase agreements	7,760			8,925			4,224			4,499
Federal funds purchased	25			21			23			6
Other short-term borrowings	3,761			4,381			1,683			1,748
Accrued expenses and other liabilities	15,804			20,237			20,388			14,643
Long-term debt	12,025			10,042			10,323			11,497
Total liabilities	225,742			252,646			222,157			224,020
Commitments, guarantees and contingencies (notes 7 and 8)
Commitments, guarantees and contingencies (Notes 9 and 10)
Shareholders’ equity:
Preferred stock, no par, 3,500,000 shares authorized:
Series C, 5,000 shares issued and outstanding	491			491			491			491
Series D, 7,500 shares issued and outstanding	742			742			742			742
Series E, 7,500 shares issued and outstanding	728			728			728			728
Series F, 7,500 shares issued and outstanding	742			—			742			742
Common stock, $1 par, 750,000,000 shares authorized:
503,879,642 and 503,880,120 shares issued	504			504
503,879,642 and 503,879,642 shares issued							504			504
Surplus	9,742			9,791			9,739			9,746
Retained earnings	15,795			14,882			16,233			16,049
Accumulated other comprehensive income (loss)	(1,101		)	(507		)	(964		)	(1,442		)
Treasury stock, at cost (100,086,970 and 88,684,969 shares)	(6,143		)	(5,158		)
Treasury stock, at cost (108,316,401 and 104,227,647 shares)							(6,719		)	(6,457		)
Total shareholders’ equity	21,500			21,473			21,496			21,103
Non-controlling interest-equity	32			—			32			32
Total equity	21,532			21,473			21,528			21,135
Total liabilities and equity	$	247,274		$	274,119		$	243,685		$	245,155

The accompanying condensed notes are an integral part of these consolidated financial statements.

5750

STATE STREET CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

(UNAUDITED)


(Dollars in millions, except per share amounts, shares in thousands)	PREFERRED STOCK		COMMON STOCK				Surplus			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			TREASURY STOCK					Total			PREFERRED STOCK		COMMON STOCK			Surplus			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			TREASURY STOCK					Total
			Shares		Amount											Shares		Amount								Shares	Amount											Shares		Amount
Balance as of December 31, 2013	$	491	503,883		$	504	$	9,776		$	13,395		$	(95	)	69,754		$	(3,693	)	$	20,378
Net income										1,545											1,545
Other comprehensive income													(12		)						(12		)
Preferred stock issued	742																				742
Cash dividends declared:
Common stock - $.86 per share										(366		)									(366		)
Preferred stock										(43		)									(43		)
Common stock acquired																18,187		(1,240		)	(1,240		)
Common stock awards and options exercised, including income tax benefit of $54			(3	)			4									(3,984	)	148			152
Other																(8	)				—
Balance as of September 30, 2014	$	1,233	503,880		$	504	$	9,780		$	14,531		$	(107	)	83,949		$	(4,785	)	$	21,156
Balance as of December 31, 2014	$	1,961	503,880		$	504	$	9,791		$	14,882		$	(507	)	88,685		$	(5,158	)	$	21,473		$	1,961	503,880	$	504	$	9,791		$	14,737		$	(507	)	88,685		$	(5,158	)	$	21,328
Net income										1,416											1,416											405											405
Other comprehensive loss													(594		)						(594		)												(499		)						(499		)
Preferred stock issued	742																				742
Cash dividends declared:
Common stock - $.98 per share										(401		)									(401		)
Common stock - $.30 per share																																(124		)									(124		)
Preferred stock										(101		)									(101		)									(31		)									(31		)
Common stock acquired																15,552		(1,170		)	(1,170		)															6,277		(470		)	(470		)
Common stock awards and options exercised, including income tax benefit of $57							(45		)							(4,148	)	185			140
Common stock awards and options exercised, including income tax benefit of $34																													(47		)							(2,400	)	109			62
Other							(4		)	(1		)				(2	)				(5		)									(1		)				7					(1		)
Balance as of September 30, 2015	$	2,703	503,880		$	504	$	9,742		$	15,795		$	(1,101	)	100,087		$	(6,143	)	$	21,500
Balance as of March 31, 2015																								$	1,961	503,880	$	504	$	9,744		$	14,986		$	(1,006	)	92,569		$	(5,519	)	$	20,670
Balance as of December 31, 2015																								$	2,703	503,880	$	504	$	9,746		$	16,049		$	(1,442	)	104,228		$	(6,457	)	$	21,103
Net income																																368											368
Other comprehensive income																																			478								478
Cash dividends declared:
Common stock - $.34 per share																																(135		)									(135		)
Preferred stock																																(49		)									(49		)
Common stock acquired																																						5,615		(325		)	(325		)
Common stock awards and options exercised, including income tax benefit of $3																													(7		)							(1,542	)	64			57
Other																																						15		(1		)	(1		)
Balance as of March 31, 2016																								$	2,703	503,880	$	504	$	9,739		$	16,233		$	(964	)	108,316		$	(6,719	)	$	21,496

Table of Contents

STATE STREET CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

We use acronyms and other defined terms and abbreviations, as defined on the acronym list following the table of contents to this Form 10-Q.

Table of Contents

STATE STREET CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Summary of Significant Accounting Policies

Basis of Presentation:

The accounting and financial reporting policies of State Street Corporation conform to U.S. ~~generally accepted accounting principles, referred to as~~ GAAP. State Street Corporation, the parent company, is a financial holding company headquartered in Boston, Massachusetts. Unless otherwise indicated or unless the context requires otherwise, all references in these notes to consolidated financial statements to “State Street,” “we,” “us,” “our” or similar references mean State Street Corporation and its subsidiaries on a consolidated basis. Our principal banking subsidiary is State Street ~~Bank and Trust Company, or State Street~~ Bank.

The accompanying Consolidated Financial Statements should be read in conjunction with the financial and risk factor information included in our ~~2014 Annual Report on~~2015 Form 10-K, ~~(2014 Form 10-K),~~ which we previously filed with the ~~Securities and Exchange Commission, or~~ SEC.

The consolidated financial statements accompanying these condensed notes are unaudited. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the consolidated results of operations in these financial statements, have been made. Certain previously

reported amounts presented in this Form 10-Q have been reclassified to conform to current-period presentation. Events occurring subsequent to the date of our consolidated statement of condition were evaluated for potential recognition or disclosure in our consolidated financial statements through the date we filed this Form 10-Q with the SEC.

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions in the application of certain of our significant accounting policies that may materially affect the reported amounts of assets, liabilities, equity, revenue, and expenses. As a result of unanticipated events or circumstances, actual results could differ from those estimates. These accounting estimates reflect the best judgment of management, but actual results could differ.

Our consolidated statement of condition as of December 31, ~~2014~~2015 included in the accompanying consolidated financial statements was derived from the audited financial statements as of that date, but does not include all notes required by GAAP for a complete set of consolidated financial statements.

~~Recent Accounting Developments:~~

In September 2015, the Financial Accounting Standards Board, or the FASB, issued an amendment that requires an acquirer to recognize purchase price adjustments to provisional amounts in the reporting period in which the adjustments are determined, as opposed to being applied retrospectively at the acquisition date. The amendment, which allows for early adoption, is effective for State Street beginning on January 1, 2016. We do not have any significant acquisitions in 2015 that could have a material impact in our consolidated financial statements when this amendment becomes effective in 2016. We will assess its impact in conjunction with new transactions, as applicable.

In July 2015, the FASB issued an update to delay the effective date of the new revenue standard by one year. The deferral results in the new revenue standard being effective for State Street beginning on January 1, 2018.

In May 2015, the FASB issued an amendment, which makes certain technical corrections to the FASB Accounting Standards Codification that affect a wide variety of topics to clarify the codification, correct unintended application of the guidance, or make minor improvements that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to entities. The amendments that require transition guidance are effective for State Street beginning on January 1, 2016 and all other amendments are effective immediately. Our adoption of this amendment does not have a material impact on our consolidated financial statements.

In May 2015, the FASB issued an amendment to GAAP which removes from the fair value hierarchy, investments for which the practical expedient is used to measure fair value at net asset value (NAV). Instead, an entity is required to include those investments as a reconciling line item so that the total fair value amount of investments in the disclosure is consistent with the amount on the balance sheet. The amendment is effective for State Street beginning on January 1, 2016. Our adoption of this amendment is not expected to have a material effect on our consolidated financial statements

In April 2015, the FASB issued an amendment to GAAP which will assist entities in evaluating the accounting for fees paid by a customer in a cloud computing arrangement. The amendment, which allows for early adoption, is effective for State Street beginning on January 1, 2016. Our adoption of this amendment is not expected to have a material effect on our consolidated financial statements.

Table of Contents

STATE STREET CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Recent Accounting Developments:

~~In April 2015,~~Relevant standards that were adopted during the ~~FASB issued an amendment~~quarter ended March 31, 2016:

We adopted ASU 2015-02, Consolidation (Topic 810): Amendments to ~~GAAP that requires~~the Consolidation Analysis, effective January 1, 2016. The implementation of the new standard did not result in any changes to our previous consolidation conclusions.

We adopted ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, effective January 1, 2016 with retrospective application for all prior periods presented. The implementation of this standard resulted in debt issuance costs ~~to be presented in the consolidated balance sheet as a direct deduction from the carrying value~~ of ~~the associated debt liability, consistent with the presentation of a debt discount. This amendment, which allows for early adoption, is effective for State Street beginning on January 1, 2016.~~

~~Our debt issuance costs that are currently classified as deferred credits~~$36 million and ~~have a balance of approximately $39~~$37 million as of ~~September 30,~~March 31, 2016 and December 31, 2015, ~~will be reclassified as contra liabilities upon adoption.~~

~~In August 2015, the FASB issued a related amendment incorporating the SEC staff announcement~~respectively, being netted against long-term debt in the accounting standards codification to clarify that debt issuance costs relating to line of credit arrangements may still be presented as an asset, notwithstanding the April 2015 amendment that requires debt issuance costs relating to recognized debt liabilities to be recognized as contra liabilities. We do not have significant line of credit arrangements or related debt issuance costs and do not expect this amendment to be significant to our consolidated ~~financial statements.~~

In February 2015, the FASB issued an amendment to GAAP that updates the consolidation model used to evaluate whether a legal entity is required to be consolidated. The amendment, which allows for early adoption, is effective for State Street beginning on January 1, 2016, and may be applied retrospectively or via a modified retrospective approach. Based on our current assessmentstatement of ~~the amendment, we do not expect our adoption of this amendment to have a material effect on our consolidated financial statements.~~

In February 2015, the FASB issued an amendment to GAAP to remove the concept of "extraordinary items," which are defined as items that are unusual and infrequent in nature. The amendment, which allows for early adoption, is effective for State Street beginning on January 1, 2016. Our adoption of this amendment is not expected to have a material effect on our consolidated financial statements.

condition.

Note 2. Fair Value

Fair-Value Measurements:

We carry trading account assets, AFS investment securities ~~available for sale~~ and various types of derivative financial instruments at fair value in our consolidated statement of condition on a recurring basis. Changes in the fair values of these financial assets and liabilities are recorded either as components of our

consolidated statement of income or as components of ~~accumulated other comprehensive income, or~~ AOCI within shareholders' equity in our consolidated statement of condition.

We measure fair value for the above-described financial assets and liabilities in conformity with U.S. GAAP that governs the measurement of the fair value of financial instruments. Management believes that its valuation techniques and underlying assumptions used to measure fair value conform to the provisions of U.S. GAAP. We categorize the financial assets and liabilities that we carry at fair value based on a prescribed three-level valuation hierarchy. For information about our valuation techniques for financial assets and financial liabilities measured at fair value and the fair value hierarchy, refer to ~~note~~Note 2 to the consolidated financial statements on pages ~~130~~132 to ~~141~~142 of ~~the 2014~~our 2015 Form 10-K.

The following tables present information with respect to our financial assets and liabilities carried at fair value in our consolidated statement of condition on a recurring basis as of the dates indicated. No transfers of financial assets or liabilities between levels 1 and 2 occurred in the ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016 or the year ended December 31, ~~2014.~~2015.

Table of Contents

STATE STREET CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


	Fair-Value Measurements on a Recurring Basis											Fair-Value Measurements on a Recurring Basis
	as of September 30, 2015											as of March 31, 2016
(In millions)	Quoted Market Prices in Active Markets (Level 1)		Pricing Methods with Significant Observable Market Inputs (Level 2)		Pricing Methods with Significant Unobservable Market Inputs (Level 3)		Impact of Netting⁽¹⁾			Total Net Carrying Value in Consolidated Statement of Condition		Quoted Market Prices in Active Markets (Level 1)		Pricing Methods with Significant Observable Market Inputs (Level 2)		Pricing Methods with Significant Unobservable Market Inputs (Level 3)		Impact of Netting⁽¹⁾			Total Net Carrying Value in Consolidated Statement of Condition
Assets:
Trading account assets:
U.S. government securities	$	71	$	—	$	—				$	71	$	51	$	—	$	—				$	51
Non-U.S. government securities	666		—		—					666		486		—		—					486
Other	14		472		—					486		4		332							336
Total trading account assets	751		472		—					1,223		541		332		—					873
Investment securities available for sale:
AFS Investment securities:
U.S. Treasury and federal agencies:
Direct obligations	12,817		537		—					13,354		5,848		494		—					6,342
Mortgage-backed securities	—		18,829		—					18,829		—		17,934		300					18,234
Asset-backed securities:
Student loans	—		7,414		230					7,644		—		6,631		186					6,817
Credit cards	—		1,504		—					1,504		—		1,368		—					1,368
Sub-prime	—		458		—					458		—		388		—					388
Other⁽²⁾	—		12		1,943					1,955		—		—		1,813					1,813
Total asset-backed securities	—		9,388		2,173					11,561		—		8,387		1,999					10,386
Non-U.S. debt securities:
Mortgage-backed securities	—		7,916		—					7,916		—		7,612		—					7,612
Asset-backed securities	—		2,921		277					3,198		—		2,577		127					2,704
Government securities	—		3,711		—					3,711		—		5,070		—					5,070
Other⁽³⁾	—		4,739		263					5,002		—		4,714		295					5,009
Total non-U.S. debt securities	—		19,287		540					19,827		—		19,973		422					20,395
State and political subdivisions	—		9,939		35					9,974		—		9,994		32					10,026
Collateralized mortgage obligations	—		3,151		148					3,299		—		2,856		82					2,938
Other U.S. debt securities	—		2,898		9					2,907		—		2,231		—					2,231
U.S. equity securities	—		37		—					37		—		40		—					40
Non-U.S. equity securities	—		3		—					3		—		3		—					3
U.S. money-market mutual funds	—		298		—					298		—		473		—					473
Non-U.S. money-market mutual funds	—		8		—					8		—		18		—					18
Total investment securities available for sale	12,817		64,375		2,905					80,097		5,848		62,403		2,835					71,086
Other assets:
Derivative instruments:
Foreign exchange contracts	—		10,713		21		$	(5,364	)	5,370		—		16,300		—		$	(10,543	)	5,757
Interest-rate contracts	—		232		—		(217		)	15		—		371		—		(316		)	55
Other derivative contracts	—		5		—		(3		)	2		—		3		—		(2		)	1
Total derivative instruments	—		10,950		21		(5,584		)	5,387		—		16,674		—		(10,861		)	5,813
Other												114		—		—		—			114
Total assets carried at fair value	$	13,568	$	75,797	$	2,926	$	(5,584	)	$	86,707	$	6,503	$	79,409	$	2,835	$	(10,861	)	$	77,886
Liabilities:
Accrued expenses and other liabilities:
Trading account liabilities:
U.S. government securities												$	3	$	—	$	—	$	—		$	3
Non-U.S. government securities	$	94	$	—	$	—	$	—		$	94	94		—		—		—			94
Other	—		9		—		—			9		8		13		—		—			21
Derivative instruments:
Foreign exchange contracts	—		10,275		22		(6,451		)	3,846		—		15,786		—		(8,508		)	7,278
Interest-rate contracts	—		207		—		(39		)	168		—		206		—		(41		)	165
Other derivative contracts	—		105		—		(3		)	102		—		144		—		(2		)	142
Total derivative instruments	—		10,587		22		(6,493		)	4,116		—		16,136		—		(8,551		)	7,585
Other												114		—		—		—			114
Total liabilities carried at fair value	$	94	$	10,596	$	22	$	(6,493	)	$	4,219	$	219	$	16,149	$	—	$	(8,551	)	$	7,817

⁽¹⁾~~Represents~~Represents counterparty netting against ~~level-2~~level 2 financial assets and liabilities where a legally enforceable master netting agreement exists between State Street and the counterparty. Netting also reflects asset and liability reductions of ~~$842~~$3.17 billion and $856 million, ~~and $1.75 billion,~~ respectively, for cash collateral received from and provided to derivative counterparties.

⁽²⁾As of ~~September 30, 2015~~March 31, 2016, the fair value of other asset-backed securities was primarily composed of ~~$1.9~~$1.81 billion of collateralized loan ~~obligations and approximately $12 million of automobile loan securities.~~obligations.

⁽³⁾As of ~~September 30, 2015~~March 31, 2016, the fair value of other non-U.S. debt securities was primarily composed of ~~$3.3~~$3.38 billion of covered bonds and ~~$763~~$741 million of corporate bonds.

Table of Contents

STATE STREET CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Impact of Netting⁽¹⁾

⁽¹⁾Represents counterparty netting against ~~level-2~~level 2 financial assets and liabilities where a legally enforceable master netting agreement exists between State Street and the counterparty. Netting also reflects asset and liability reductions of ~~$983~~$776 million and ~~$2.63~~$1.118 billion, respectively, for cash collateral received from and provided to derivative counterparties.

⁽²⁾As of December 31, ~~2014,~~2015, the fair value of other asset-backed securities was primarily composed of ~~$3.8~~$1.76 billion of collateralized loan ~~obligations and approximately $315 million of automobile loan securities.~~obligations.

⁽³⁾As of December 31, ~~2014,~~2015, the fair value of other non-U.S. debt securities was primarily composed of ~~$3.3~~$3.18 billion of covered bonds and ~~$1.2 billion~~$613 million of corporate bonds.

Table of Contents

STATE STREET CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The following tables present activity related to our level-3 financial assets and liabilities during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015, ~~and 2014,~~ respectively. Transfers into and out of level 3 are reported as of the beginning of the period presented. InDuring the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015, ~~and 2014,~~ transfers out of level 3 were mainly related to certain mortgage- and asset-backed securities, including non-U.S. debt securities, for which fair value was measured using prices for which observable market information became available.

Fair Value as of
March 31, 2016⁽¹⁾

⁽¹⁾There were no transfers of assets into level 3 during the three months ended ~~September 30, 2015.~~March 31, 2016.

⁽²⁾There were no transfers of liabilities into or out of level 3 during the three months ended ~~September 30, 2015.~~March 31, 2016.

Table of Contents

STATE STREET CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

⁽¹⁾~~There were no transfers of liabilities into or out of level 3 during the nine months ended September 30, 2015.~~

~~Table of Contents~~

~~STATE STREET CORPORATION~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(UNAUDITED)~~

Fair-Value Measurements Using Significant Unobservable Inputs
Three Months Ended September 30, 2014
Fair Value as of June 30,
2014 Total Realized and
Unrealized Gains (Losses) Purchases Sales Settlements Transfers
into
Level 3 Transfers
out of
Level 3 Fair Value as of
September 30, 2014 Change in
Unrealized
Gains
(Losses)
Related to
Financial
Instruments
Held as of
September 30,
2014
(In millions)
Recorded
in
Revenue

Recorded
in Other
Comprehensive
Income

Assets:
Investment securities available for sale:
U.S. Treasury and federal agencies, mortgage-backed securities $ 96
$ —
$ —
$ 168
$ —
$ (4 ) $ —
$ —
$ 260

Asset-backed securities:
Student loans 322

(1 ) 24
(74 ) (5 ) —
—
266

Other 4,061
18
(8 ) 275
—
(402 ) —
—
3,944

Total asset-backed securities 4,383
18
(9 ) 299
(74 ) (407 ) —
—
4,210

Non-U.S. debt securities:
Asset-backed securities 506
2
(1 ) —
—
(99 ) 76
(60 ) 424

Other 515
—
—
—
—
(25 ) —
(192 ) 298

Total non-U.S. debt securities 1,021
2
(1 ) —
—
(124 ) 76
(252 ) 722

State and political subdivisions 41
—
—
—
—
—
—
—
41

Collateralized mortgage obligations 196
—
—
125
—
(7 ) —
(80 ) 234

Other U.S. debt securities 9
—
—
—
—
(1 ) —
—
8

Total investment securities available for sale 5,746
20
(10 ) 592
(74 ) (543 ) 76
(332 ) 5,475

Other assets:
Derivative instruments:
Derivative instruments, Foreign exchange contracts 10
44
—
22
—
(8 ) —
—
68
$ 40
Total derivative instruments 10
44
—
22
—
(8 ) —
—
68
40
Total assets carried at fair value $ 5,756
$ 64
$ (10 ) $ 614
$ (74 ) $ (551 ) $ 76
$ (332 ) $ 5,543
$ 40

⁽¹⁾There were no transfers of assets into level 3 during the three months ended March 31, 2015.




PART I. FINANCIAL INFORMATION
Table of Contents for Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Management’s Discussion and Analysis of Financial Condition and Results of Operations	45
Quantitative and Qualitative Disclosures About Market Risk	5447
Controls and Procedures	5447
Consolidated Statement of Income (Unaudited) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015 ~~and 2014~~	5548
Consolidated Statement of Comprehensive Income (Unaudited) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015 ~~and 2014~~	5649
Consolidated Statement of Condition as of ~~September 30, 2015~~March 31, 2016 (Unaudited) and December 31, ~~2014~~2015	5750
Consolidated Statement of Changes in Shareholders' Equity (Unaudited) for the ~~nine~~three months ended ~~September 30,~~March 31, 2016 and 2015 ~~and 2014~~	5851
Consolidated Statement of Cash Flows (Unaudited) for the ~~nine~~three months ended ~~September 30,~~March 31, 2016 and 2015 ~~and 2014~~	5952
Condensed Notes to Consolidated Financial Statements (Unaudited)	6053
Review Report of Independent Registered Public Accounting Firm	~~103~~90
PART II. OTHER INFORMATION
Unregistered Sales of Equity Securities and Use of Proceeds	~~104~~91
Exhibits	~~104~~91
Signatures	~~105~~92
Exhibit Index	~~106~~93



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





General	4
~~Forward-Looking Statements~~	5
Overview of Financial Results	89
Consolidated Results of Operations	910
Total Revenue	910
Fee Revenue	1011
Net Interest Revenue	16
~~Gains (Losses) Related to Investment Securities, Net~~	20
~~Provision for Loan Losses~~	2112
Expenses	2215
Income Tax Expense	2316
Line of Business Information	2316
Financial Condition	2521
Investment Securities	2622
Loans and Leases	3025
Cross-Border Outstandings	3126
Risk Management	3227
Credit Risk Management	3327
Liquidity Risk Management	3328
Operational Risk Management	3731
Market Risk Management	3731
Model Risk Management	4234
Capital	4234
Off-Balance Sheet Arrangements	5345
Recent Accounting Developments	5346



TABLE 4: COMPONENTS OF ASSETS UNDER CUSTODY AND ADMINISTRATION
(Dollars in billions)	September 30, 2015		December 31, 2014		September 30, 2014
Mutual funds	$	6,698	$	6,992	$	7,035
Collective funds	6,883		6,949		6,919
Pension products	5,497		5,746		5,780
Insurance and other products	8,187		8,501		8,731
Total	$	27,265	$	28,188	$	28,465

																										TABLE 23: AMORTIZED COST, FAIR VALUE AND NET UNREALIZED GAINS (LOSSES) OF INVESTMENT SECURITIES
	September 30, 2015						December 31, 2014						March 31, 2016						December 31, 2015
(In millions)	Amortized Cost		Net Unrealized Gains(Losses)		Fair Value		Amortized Cost		Net Unrealized Gains(Losses)		Fair Value		Amortized Cost		Net Unrealized Gains(Losses)		Fair Value		Amortized Cost		Net Unrealized Gains(Losses)			Fair Value
Available for sale⁽¹⁾	$	79,415	$	682	$	80,097	$	94,108	$	805	$	94,913	$	70,581	$	505	$	71,086	$	69,843	$	227		$	70,070
Held to maturity⁽¹⁾	17,463		73		17,536		17,723		119		17,842		31,212		343		31,555		29,952		(154		)	29,798
Total investment securities	$	96,878	$	755	$	97,633	$	111,831	$	924	$	112,755	$	101,793	$	848	$	102,641	$	99,795	$	73		$	99,868
Net after-tax unrealized gain (loss)			$	453					$	554					$	509					$	44



TABLE 29: CLIENT DEPOSITS
					Average Balance
	September 30,				Quarters Ended September 30,
(In millions)	2015		2014		2015		2014
Client deposits⁽¹⁾	$	168,757	$	200,098	$	178,313	$	164,706

																																	TABLE 30: TEN-DAY VaR ASSOCIATED WITH TRADING ACTIVITIES FOR COVERED POSITIONS
	Nine Months Ended September 30, 2015						Nine Months Ended September 30, 2014						As of September 30, 2015		As of December 31, 2014		Quarter Ended March 31, 2016						Quarter Ended March 31, 2015						As of March 31, 2016		As of December 31, 2015
(In thousands)	Average		Maximum		Minimum		Average		Maximum		Minimum		VaR		VaR		Average		Maximum		Minimum		Average		Maximum		Minimum		VaR		VaR
Global Markets	$	5,439	$	17,649	$	3,245	$	6,475	$	12,327	$	2,273	$	3,864	$	4,566	$	4,788	$	7,453	$	2,969	$	5,935	$	17,649	$	3,245	$	5,315	$	4,269
Global Treasury	1,789		5,273		842		47		62		12		857		4,759		434		866		159		2,833		5,273		991		637		368
Total VaR	$	6,056	$	16,700	$	3,531	$	6,455	$	12,283	$	2,262	$	3,676	$	8,281	$	4,693	$	7,728	$	2,877	$	7,022	$	16,700	$	4,369	$	5,312	$	4,052

																																	TABLE 31: TEN-DAY STRESSED VaR ASSOCIATED WITH TRADING ACTIVITIES FOR COVERED POSITIONS
	Nine Months Ended September 30, 2015						Nine Months Ended September 30, 2014						As of September 30, 2015		As of December 31, 2014		Quarter Ended March 31, 2016						Quarter Ended March 31, 2015						As of March 31, 2016		As of December 31, 2015
(In thousands)	Average		Maximum		Minimum		Average		Maximum		Minimum		Stressed VaR		Stressed VaR		Average		Maximum		Minimum		Average		Maximum		Minimum		Stressed VaR		Stressed VaR
Global Markets	$	38,224	$	65,860	$	20,601	$	33,168	$	64,510	$	15,625	$	41,468	$	30,255	$	29,955	$	58,883	$	17,255	$	30,752	$	45,386	$	20,601	$	31,880	$	36,757
Global Treasury	30,518		47,929		20,711		162		572		41		20,711		39,050		12,808		18,831		6,612		31,844		47,929		22,188		13,387		8,080
Total Stressed VaR	$	64,714	$	95,692	$	36,956	$	33,112	$	64,409	$	15,495	$	61,981	$	58,945	$	35,071	$	58,987	$	20,996	$	56,003	$	71,567	$	36,956	$	35,454	$	43,293


TABLE 32: TEN-DAY VaR ASSOCIATED WITH TRADING ACTIVITIES BY RISK FACTOR⁽¹⁾	TABLE 32: TEN-DAY VaR ASSOCIATED WITH TRADING ACTIVITIES BY RISK FACTOR⁽¹⁾												TABLE 32: TEN-DAY VaR ASSOCIATED WITH TRADING ACTIVITIES BY RISK FACTOR⁽¹⁾
	As of September 30, 2015						As of December 31, 2014						As of March 31, 2016						As of December 31, 2015
(In thousands)	Foreign Exchange Risk		Interest Rate Risk		Volatility Risk		Foreign Exchange Risk		Interest Rate Risk		Volatility Risk		Foreign Exchange Risk		Interest Rate Risk		Volatility Risk		Foreign Exchange Risk		Interest Rate Risk		Volatility Risk
By component:
Global Markets	$	2,894	$	3,474	$	74	$	5,584	$	3,230	$	349	$	3,610	$	4,117	$	—	$	2,817	$	3,582	$	4
Global Treasury	323		927		—		—		4,759		—		170		635		—		148		345		—
Total VaR	$	2,885	$	2,959	$	74	$	5,584	$	5,892	$	349	$	3,762	$	4,058	$	—	$	2,831	$	3,472	$	4



TABLE 34: NIR ESTIMATED EXPOSURE
	Estimated Exposure to Net Interest Revenue
(Dollars in millions)	September 30, 2015					December 31, 2014
Rate change:	Exposure			% of Base NIR		Exposure			% of Base NIR
+100 bps shock	$	574		26.9	%	$	384		16.6	%
–100 bps shock	(211		)	(9.9	)	(328		)	(14.2	)
+100 bps ramp	263			12.3		149			6.5
–100 bps ramp	(110		)	(5.2	)	(192		)	(8.3	)

																																												TABLE 42: REGULATORY CAPITAL STRUCTURE AND RELATED REGULATORY CAPITAL RATIOS - STATE STREET BANK
September 30, 2015 (Dollars in millions)				Basel III Advanced Approaches			Phase-In Provisions			Basel III Advanced Approaches Fully Phased-In Pro-Forma Estimate⁽¹⁾			Basel III Standardized Approach			Phase-In Provisions			Basel III Standardized Approach Fully Phased-In Pro-Forma Estimate⁽¹⁾
March 31, 2016 (In millions)																									Basel III Advanced Approaches			Phase-In Provisions				Basel III Advanced Approaches Fully Phased-In Pro-Forma Estimate⁽¹⁾			Basel III Standardized Approach			Phase-In Provisions			Basel III Standardized Approach Fully Phased-In Pro-Forma Estimate⁽¹⁾
Total common shareholders' equity				$	20,799		$	87		$	20,886		$	20,799		$	87		$	20,886		Total common shareholders' equity			$	21,097		$	63			$	21,160		$	21,097		$	63		$	21,160
Regulatory capital adjustments:																						Regulatory capital adjustments:
Goodwill and other intangible assets, net of associated deferred tax liabilities				(5,687		)	(788		)	(6,475		)	(5,687		)	(788		)	(6,475		)	Goodwill and other intangible assets, net of associated deferred tax liabilities			(5,938		)	(506		)		(6,444		)	(5,938		)	(506		)	(6,444		)
Other adjustments				(92		)	—			(92		)	(92		)	—			(92		)				(88		)	—				(88		)	(88		)	—			(88		)
Common equity tier 1 capital				15,020			(701		)	14,319			15,020			(701		)	14,319			Common equity tier 1 capital			15,071			(443		)		14,628			15,071			(443		)	14,628
Additional tier 1 capital:
Preferred stock				—			—			—			—			—			—						—			—				—			—			—			—
Trust preferred capital securities				—			—			—			—			—			—						—			—				—			—			—			—
Other adjustments				—			—			—			—			—			—						—			—				—			—			—			—
Additional tier 1 capital				—			—			—			—			—			—						—			—				—			—			—			—
Tier 1 capital				15,020			(701		)	14,319			15,020			(701		)	14,319						15,071			(443		)		14,628			15,071			(443		)	14,628
Tier 2 capital:
Qualifying subordinated long-term debt				1,452			—			1,452			1,452			—			1,452			Qualifying subordinated long-term debt			1,271			—				1,271			1,271			—			1,271
Trust preferred capital securities				—			—			—			—			—			—			Trust preferred capital securities			—			—				—			—			—			—
ALLL and other				9			—			9			69			—			69						5			—				5			66			—			66
Other				—			—			—			—			—			—						—			—				—			—			—			—
Tier 2 capital				1,461			—			1,461			1,521			—			1,521						1,276			—			��	1,276			1,337			—			1,337
Total capital				$	16,481		$	(701	)	$	15,780		$	16,541		$	(701	)	$	15,840					$	16,347		$	(443	)		$	15,904		$	16,408		$	(443	)	$	15,965
Risk weighted assets⁽²⁾				$	98,746		$	(915	)	$	97,831		$	100,564		$	(863	)	$	99,701					$	95,675		$	(437	)		$	95,238		$	95,004		$	(412	)	$	94,592
Adjusted average assets				239,610			(443		)	239,167			239,610			(443		)	239,167						212,843			(322		)		212,521			212,843			(322		)	212,521
Total assets for SLR				265,797			(443		)	265,354			265,797			(443		)	265,354						237,292			(322		)		236,970			237,292			(322		)	236,970
Capital ratios⁽³⁾:	Minimum Requirement 2015	Minimum Requirement 2019	Minimum Requirement Including Capital Conservation Buffer of 2.5% and GSIB 1.5% 2019
Capital ratios⁽²⁾:																						Minimum Requirement	Minimum Requirement Including Capital Conservation Buffer and G-SIB Surcharge 2016	Minimum Requirement Including Capital Conservation Buffer and G-SIB Surcharge 2019
Common equity tier 1 capital⁽⁴⁾⁽³⁾	4.5%		8.5%	15.2		%				14.6		%	14.9		%				14.4		%	4.5%	5.5%	8.5%	15.8		%					15.4		%	15.9		%				15.5		%
Tier 1 capital	6.0		10.0	15.2						14.6			14.9						14.4			6.0	7.0	10.0	15.8							15.4			15.9						15.5
Total capital	8.0		12.0	16.7						16.1			16.4						15.9			8.0	9.0	12.0	17.1							16.7			17.3						16.9
Tier 1 leverage	4.0		NA	6.3						6.0			6.3						6.0			4.0	NA		7.1							6.9			7.1						6.9
Supplementary leverage	NA	5.0	NA	5.7						5.4			5.7						5.4			6.0	NA		6.4							6.2			6.4						6.2



Note 1. Summary of Significant Accounting Policies	54

Note 2. Fair Value	55

Note 3. Investment Securities	63

Note 4. Loans and Leases	68

Note 5. Goodwill and Other Intangible Assets	71

Note 6. Other Assets	72

Note 7. Derivative Financial Instruments	72

Note 8. Offsetting Arrangements	76

Note 9. Commitments and Guarantees	79

Note 10. Contingencies	80

Note 11. Variable Interest Entities	82

Note 12. Shareholders’ Equity	84

Note 13. Regulatory Capital	86

Note 14. Net Interest Revenue	88

Note 15. Expenses	88

Note 16. Earnings Per Common Share	88

Note 17. Line of Business Information	89

Note 18. Non-U.S. Activities	89



Relevant standards that were recently issued but not yet adopted
Standard	Description	Date of Adoption	Effects on the financial statements or other significant matters
ASU 2014-09, Revenue from Contracts with Customers (Topic 606)	The standard, and its related amendments, will replace existing revenue recognition standards and significantly expand the disclosure requirements for revenue arrangements with customers. It may be adopted either retrospectively or on a modified retrospective basis to new contracts and existing contracts with remaining performance obligations as of the effective date.	January 1, 2018	We are currently assessing the impact of the standard and its amendments on our consolidated financial statements and evaluating the alternative methods of adoption.
ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities	The standard makes limited amendments to the guidance on the classification and measurement of financial instruments. Under the new standard, all equity securities will be measured at fair value through earnings with certain exceptions, including investments accounted for under the equity method of accounting. In addition, the FASB clarified the guidance related to valuation allowance assessments when recognizing deferred tax assets on unrealized losses on available-for-sale debt securities. This standard must be applied on a retrospective basis.	January 1, 2018	We are currently assessing the impact of the standard on our consolidated financial statements.
ASU 2016-02, Leases (Topic 842)	The standard represents a wholesale change to lease accounting and requires all leases, other than short-term leases, to be reported on balance sheet through recognition of a right-of-use asset and a corresponding liability for future lease obligations. The standard also requires extensive disclosures for assets, expenses, and cash flows associated with leases, as well as a maturity analysis of lease liabilities.	January 1, 2019	We are currently assessing the impact of the standard on our consolidated financial statements, but we anticipate an increase in assets and liabilities due to the recognition of the required right-of-use asset and corresponding liability for all lease obligations that are currently classified as operating leases.
ASU 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships (a consensus of the Emerging Issues Task Force)	The standard clarifies that a change in the counterparty to a derivative instrument that is designated as a hedging instrument would result in dedesignation of the hedging relationship. This may be applied on a prospective or modified retrospective basis.	January 1, 2017	Our adoption of the standard will not have a material impact on our consolidated financial statements.
ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting	The standard simplifies the guidance related to stock compensation, including the accounting for income taxes by eliminating the windfall pool and requiring recognition of all excess tax benefits and deficiencies within the statement of income, as well as changes in the accounting for forfeitures, classification in the statement of cash flows and tax withholding requirements.	January 1, 2017	We are currently assessing the impact of the standard on our consolidated financial statements, but we anticipate increased income statement volatility due to the recognition of all excess tax benefits and deficiencies within the statement of income.


	Fair-Value Measurements Using Significant Unobservable Inputs																							Fair Value Measurements Using Significant Unobservable Inputs
	Three Months Ended September 30, 2015																							Three Months Ended March 31, 2016
	Fair Value as of June 30, 2015		Total Realized and Unrealized Gains (Losses)						Purchases		Sales			Settlements			Transfers out of Level 3			Fair Value as of September 30, 2015 ⁽¹⁾		Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of September 30, 2015		Fair Value as of December 31, 2015		Total Realized and Unrealized Gains (Losses)					Purchases		Settlements			Transfers out of Level 3			Fair Value as of March 31, 2016⁽¹⁾		Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of March 31, 2016
(In millions)			Recorded in Revenue			Recorded in Other Comprehensive Income																				Recorded in Revenue		Recorded in Other Comprehensive Income
Assets:
Investment securities available for sale:
AFS Investment securities:
U.S. Treasury and federal agencies, mortgage-backed securities																								$	—	$	—	$	—		$	300	$	—		$	—		$	300
Asset-backed securities:
Student loans	$	234	$	—		$	(3	)	$	—	$	—		$	(1	)	$	—		$	230			189		—		(3		)	—		—			—			186
Other	2,933		22			(19		)	—		(686		)	(307		)	—			1,943				1,764		7		(11		)	113		(60		)	—			1,813
Total asset-backed securities	3,167		22			(22		)	—		(686		)	(308		)	—			2,173				1,953		7		(14		)	113		(60		)	—			1,999
Non-U.S. debt securities:
Mortgage-backed securities	97		—			—			—		—			—			(97		)	—
Asset-backed securities	193		—			(1		)	168		—			(83		)	—			277				174		—		—			53		(18		)	(82		)	127
Other	264		—			(1		)	—		—			—			—			263				255		—		(2		)	29		13			—			295
Total Non-U.S. equity securities	554		—			(2		)	168		—			(83		)	(97		)	540
Total non-U.S. debt securities																								429		—		(2		)	82		(5		)	(82		)	422
State and political subdivisions	36		—			(1		)	—		—			—			—			35				33		—		—			—		(1		)	—			33
Collateralized mortgage obligations	215		—			(1		)	—		—			(17		)	(49		)	148				39		—		—			50		(7		)	—			82
Other U.S. debt securities	9		—			—			—		—			—			—			9				10		—		—			—		(10		)	—			—
Total investment securities available for sale	3,981		22			(26		)	168		(686		)	(408		)	(146		)	2,905				2,464		7		(16		)	545		(83		)	(82		)	2,835
Other assets:
Derivative instruments:
Foreign exchange contracts	60		(5		)	—			1		—			(35		)	—			21		$	—
Derivative instruments, foreign exchange contracts																								5		3		—			—		(8		)	—			—		$	—
Total derivative instruments	60		(5		)	—			1		—			(35		)	—			21		—		5		3		—			—		(8		)	—			—		—
Other	—		—			—			—		—			—			—			—		—
Total assets carried at fair value	$	4,041	$	17		$	(26	)	$	169	$	(686	)	$	(443	)	$	(146	)	$	2,926	$	—	$	2,469	$	10	$	(16	)	$	545	$	(91	)	$	(82	)	$	2,835	$	—



	Fair Value Measurements Using Significant Unobservable Inputs
	Nine Months Ended September 30, 2015
	Fair Value as of December 31, 2014		Total Realized and Unrealized Gains (Losses)					Purchases		Sales			Settlements			Transfers into Level 3		Transfers out of Level 3			Fair Value as of September 30, 2015		Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of September 30, 2015
(In millions)			Recorded in Revenue		Recorded in Other Comprehensive Income
Assets:
Investment securities available for sale:
Asset-backed securities:
Student loans	$	259	$	—	$	(2	)	$	—	—			$	(6	)	$	—	$	(21	)	$	230
Other	3,780		47		(37		)	—		(1,106		)	(741		)	—		—			1,943
Total asset-backed securities	4,039		47		(39		)	—		(1,106		)	(747		)	—		(21		)	2,173
Non-U.S. debt securities:
Mortgage-backed securities	—		—		—			43		—			—			97		(140		)	—
Asset-backed securities	295		1		(1		)	168		—			(169		)	—		(17		)	277
Other	371		—		—			111		—			(32		)	—		(187		)	263
Total non-U.S. debt securities	666		1		(1		)	322		—			(201		)	97		(344		)	540
State and political subdivisions	38		—		(2		)	—		—			(1		)	—		—			35
Collateralized mortgage obligations	614		—		(2		)	293		(88		)	(82		)	—		(587		)	148
Other U.S. debt securities	9		—		—			—		—			—			—		—			9
Total investment securities available for sale	5,366		48		(44		)	615		(1,194		)	(1,031		)	97		(952		)	2,905
Other assets:
Derivative instruments:
Derivative instruments, Foreign exchange contracts	81		49		—			17		—			(126		)	—		—			21		$	—
Total derivative instruments	81		49		—			17		—			(126		)	—		—			21		—
Total assets carried at fair value	$	5,447	$	97	$	(44	)	$	632	$	(1,194	)	$	(1,157	)	$	97	$	(952	)	$	2,926	$	—



	Fair-Value Measurements Using Significant Unobservable Inputs
	Three Months Ended September 30, 2014
	Fair Value as of June 30, 2014		Total Realized and Unrealized Gains (Losses)					Purchases		Sales			Settlements			Transfers into Level 3		Transfers out of Level 3			Fair Value as of September 30, 2014		Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of September 30, 2014
(In millions)			Recorded in Revenue		Recorded in Other Comprehensive Income
Assets:
Investment securities available for sale:
U.S. Treasury and federal agencies, mortgage-backed securities	$	96	$	—	$	—		$	168	$	—		$	(4	)	$	—	$	—		$	260
Asset-backed securities:
Student loans	322				(1		)	24		(74		)	(5		)	—		—			266
Other	4,061		18		(8		)	275		—			(402		)	—		—			3,944
Total asset-backed securities	4,383		18		(9		)	299		(74		)	(407		)	—		—			4,210
Non-U.S. debt securities:
Asset-backed securities	506		2		(1		)	—		—			(99		)	76		(60		)	424
Other	515		—		—			—		—			(25		)	—		(192		)	298
Total non-U.S. debt securities	1,021		2		(1		)	—		—			(124		)	76		(252		)	722
State and political subdivisions	41		—		—			—		—			—			—		—			41
Collateralized mortgage obligations	196		—		—			125		—			(7		)	—		(80		)	234
Other U.S. debt securities	9		—		—			—		—			(1		)	—		—			8
Total investment securities available for sale	5,746		20		(10		)	592		(74		)	(543		)	76		(332		)	5,475
Other assets:
Derivative instruments:
Derivative instruments, Foreign exchange contracts	10		44		—			22		—			(8		)	—		—			68		$	40
Total derivative instruments	10		44		—			22		—			(8		)	—		—			68		40
Total assets carried at fair value	$	5,756	$	64	$	(10	)	$	614	$	(74	)	$	(551	)	$	76	$	(332	)	$	5,543	$	40



	Fair-Value Measurements Using Significant Unobservable Inputs
	Nine Months Ended September 30, 2014
	Fair Value as of December 31, 2013		Total Realized and Unrealized Gains (Losses)					Purchases		Issuances		Sales			Settlements			Transfers into Level 3		Transfers out of Level 3			Fair Value as of September 30, 2014		Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of September 30, 2014
(In millions)			Recorded in Revenue		Recorded in Other Comprehensive Income
Assets:
Investment securities available for sale:
U.S. Treasury and federal agencies, mortgage-backed securities	$	716	$	—	$	—		$	168	$	—	$	—		$	(14	)	$	—	$	(610	)	$	260
Asset-backed securities:
Student loans	423		1		2			24		—		(74		)	(31		)	—		(79		)	266
Credit cards	24		—		—			—		—		—			(24		)	—		—			—
Other	4,532		46		(14		)	282		—		—			(902		)	—		—			3,944
Total asset-backed securities	4,979		47		(12		)	306		—		(74		)	(957		)	—		(79		)	4,210
Non-U.S. debt securities:
Mortgage-backed securities	375		—		—			—		—		—			—			—		(375		)	—
Asset-backed securities	798		5		—			—		—		—			(219		)	76		(236		)	424
Other	464		—		—			55		—		(1		)	(28		)	—		(192		)	298
Total non-U.S. debt securities	1,637		5		—			55		—		(1		)	(247		)	76		(803		)	722
State and political subdivisions	43		1		(1		)	—		—		—			(2		)	—		—			41
Collateralized mortgage obligations	162		—		1			205		—		(6		)	(20		)	—		(108		)	234
Other U.S. debt securities	8		—		—			—		—		—			—			—		—			8
Total investment securities available for sale	7,545		53		(12		)	734		—		(81		)	(1,240		)	76		(1,600		)	5,475
Other assets:
Derivative instruments:
Derivative instruments, Foreign exchange contracts	19		26		—			32		—		—			(9		)	—		—			68		$	35
Total derivative instruments	19		26		—			32		—		—			(9		)	—		—			68		35
Total assets carried at fair value	$	7,564	$	79	$	(12	)	$	766	$	—	$	(81	)	$	(1,249	)	$	76	$	(1,600	)	$	5,543	$	35


	Quantitative Information about Level-3 Fair-Value Measurements										Quantitative Information about Level-3 Fair-Value Measurements
	Fair Value						Weighted-Average				Fair Value						Weighted-Average
(Dollars in millions)	As of September 30, 2015		As of December 31, 2014		Valuation Technique	Significant Unobservable Input⁽¹⁾	As of September 30, 2015		As of December 31, 2014		As of March 31, 2016		As of December 31, 2015		Valuation Technique	Significant Unobservable Input⁽¹⁾	As of March 31, 2016		As of December 31, 2015
Significant unobservable inputs readily available to State Street:
Assets:
Asset-backed securities, other	$	38	$	59	Discounted cash flows	Credit spread	0.1	%	0.2	%	$	24	$	28	Discounted cash flows	Credit spread	(0.2	)%	(0.1	)%
State and political subdivisions	35		38		Discounted cash flows	Credit spread	2.3		2.1		32		33		Discounted cash flows	Credit spread	2.2		2.2
Derivative instruments, foreign exchange contracts	21		81		Option model	Volatility	10.9		9.1		—		5		Option model	Volatility	—		9.3
Total	$	94	$	178							$	56	$	66
Liabilities:
Derivative instruments, foreign exchange contracts	$	22	$	74	Option model	Volatility	11.8		9.0		$	—	$	5	Option model	Volatility	—		9.2
Derivative instruments, other⁽²⁾	—		9		Discounted cash flows	Participant redemptions	—		5.2
Total	$	22	$	83							$	—	$	5


September 30, 2015	Significant Unobservable Inputs Readily Available to State Street⁽¹⁾		Significant Unobservable Inputs Not Developed by State Street and Not Readily Available⁽²⁾		Total Assets and Liabilities with Significant Unobservable Inputs
March 31, 2016							Significant Unobservable Inputs Readily Available to State Street⁽¹⁾		Significant Unobservable Inputs Not Developed by State Street and Not Readily Available⁽²⁾		Total Assets and Liabilities with Significant Unobservable Inputs
(In millions)
Assets:
U.S. Treasury and federal agencies, mortgage-backed securities							$	—	$	300	$	300
Asset-backed securities, student loans	$	—	$	230	$	230	—		186		186
Asset-backed securities, other	38		1,905		1,943		24		1,789		1,813
Non-U.S. debt securities, mortgage-backed securities	—		—		—
Non-U.S. debt securities, asset-backed securities	—		277		277		—		127		127
Non-U.S. debt securities, other	—		263		263		—		295		295
State and political subdivisions	35		—		35		32		—		32
Collateralized mortgage obligations	—		148		148		—		82		82
Other U.S. debt securities	—		9		9
Derivative instruments, foreign exchange contracts	21		—		21
Total	$	94	$	2,832	$	2,926	$	56	$	2,779	$	2,835
Liabilities:
Derivative instruments, foreign exchange contracts	$	22	$	—	$	22
Total	$	22	$	—	$	22


					Fair-Value Hierarchy										Fair-Value Hierarchy
September 30, 2015	Reported Amount		Estimated Fair Value		Quoted Market Prices in Active Markets (Level 1)		Pricing Methods with Significant Observable Market Inputs (Level 2)		Pricing Methods with Significant Unobservable Market Inputs (Level 3)
March 31, 2016											Reported Amount		Estimated Fair Value		Quoted Market Prices in Active Markets (Level 1)		Pricing Methods with Significant Observable Market Inputs (Level 2)		Pricing Methods with Significant Unobservable Market Inputs (Level 3)
(In millions)
Financial Assets:
Cash and due from banks	$	3,660	$	3,660	$	3,660	$	—	$	—	$	3,735	$	3,735	$	3,735	$	—	$	—
Interest-bearing deposits with banks	68,361		68,361		—		68,361		—		65,032		65,032		—		65,032		—
Securities purchased under resale agreements	9,155		9,155		—		9,155		—		3,722		3,722		—		3,722		—
Investment securities held to maturity	17,463		17,536		—		17,536		—		31,212		31,555		—		31,555		—
Net loans (excluding leases)	18,108		18,081		—		17,925		156		18,242		18,211		—		18,100		111
Financial Liabilities:
Deposits:
Noninterest-bearing	$	58,426	$	58,426	$	—	$	58,426	$	—	$	54,248	$	54,248	$	—	$	54,248	$	—
Interest-bearing - U.S.	30,407		30,407		—		30,407		—		31,159		31,159		—		31,159		—
Interest-bearing - non-U.S.	97,534		97,534		—		97,534		—		100,109		100,109		—		100,109		—
Securities sold under repurchase agreements	7,760		7,760		—		7,760		—		4,224		4,224		—		4,224		—
Federal funds purchased	25		25		—		25		—		23		23		—		23		—
Other short-term borrowings	3,761		3,761		—		3,761		—		1,683		1,683		—		1,683		—
Long-term debt	12,025		11,998		—		11,448		550		10,323		10,285		—		9,905		380


	Less than 12 months					12 months or longer						Total							Less than 12 months						12 months or longer						Total
September 30, 2015	Fair Value		Gross Unrealized Losses			Fair Value			Gross Unrealized Losses			Fair Value				Gross Unrealized Losses
March 31, 2016								Fair Value							Gross Unrealized Losses					Fair Value			Gross Unrealized Losses			Fair Value			Gross Unrealized Losses
(In millions)	Fair Value				Gross Unrealized Losses						Fair Value			Gross Unrealized Losses					Fair Value						Gross Unrealized Losses
Available for sale:
U.S. Treasury and federal agencies:
Direct obligations	$	—	$	—		$	125		$	1		$	125					$		1	$	106		$	1		$	116		$	1		$	222		$	2
Mortgage-backed securities	1,411		9			3,331			52			4,742				61			1,127			3			3,630			34			4,757			37
Asset-backed securities:
Student loans	3,372		64			2,762			128			6,134				192			2,886			70			3,154			174			6,040			244
Credit cards	—		—			498			27			498				27			50			—			500			31			550			31
Sub-prime	—		—			419			29			419				29			1			—			365			34			366			34
Other	—		—			91			1			91				1			1,165			5			45			1			1,210			6
Total asset-backed securities	3,372		64			3,770			185			7,142				249			4,102			75			4,064			240			8,166			315
Non-U.S. debt securities:
Mortgage-backed securities	2,030		9			197			3			2,227				12			2,265			13			809			13			3,074			26
Asset-backed securities	2,016		5			—			—			2,016				5			1,656			6			250			1			1,906			7
Government securities																			657			—			—			—			657			—
Other	1,208		7			514			3			1,722				10			1,499			5			401			5			1,900			10
Total non-U.S. debt securities	5,254		21			711			6			5,965				27			6,077			24			1,460			19			7,537			43
State and political subdivisions	818		7			824			39			1,642				46			186			1			640			30			826			31
Collateralized mortgage obligations	667		5			188			6			855				11			343			2			282			7			625			9
Other U.S. debt securities	255		3			155			9			410				12			103			5			159			11			262			16
U.S. equity securities	5		2			—			—			5				2			1			—			5			3			6			3
Non-U.S. equity securities																			1			—			—			—			1			—
Total	$	11,782	$	111		$	9,104		$	298		$	20,886			$	409		$	12,046		$	111		$	10,356		$	345		$	22,402		$	456
Held to maturity:
U.S. Treasury and federal agencies:
Direct obligations	$	1,990	$	14		$	3,048		$	57		$	5,038			$	71		$	781		$	3		$	613		$	3		$	1,394		$	6
Mortgage-backed securities																			267			—			—			—			267			—
Asset-backed securities:
Student loans	1,204		27			385			9			1,589				36			967			33			521			23			1,488			56
Credit cards																			307			—			—			—			307			—
Other	—		—			34			1			34				1			161			1			30			—			191			1
Total asset-backed securities	1,204		27			419			10			1,623				37			1,435			34			551			23			1,986			57
Non-U.S. mortgage-backed securities:
Mortgage-backed securities	613		3			480			28			1,093				31			249			7			626			24			875			31
Asset-backed securities	1,142		3			—			—			1,142				3			814			3			60			1			874			4
Government securities																			158			—			—			—			158			—
Total non-U.S. debt securities	1,755		6			480			28			2,235				34			1,221			10			686			25			1,907			35
Collateralized mortgage obligations	452		5			547			15			999				20			776			11			360			11			1,136			22
Total	$	5,401	$	52		$	4,494		$	110		$	9,895			$	162		$	4,480		$	58		$	2,210		$	62		$	6,690		$	120


									Under 1 Year		1 to 5 Years		6 to 10 Years		Over 10 Years		Total
(In millions)	Under 1 Year		1 to 5 Years		6 to 10 Years		Over 10 Years
Available for sale:
U.S. Treasury and federal agencies:
Direct obligations	$	1,403	$	9,228	$	2,245	$	478	$	2,002	$	3,654	$	246	$	440	$	6,342
Mortgage-backed securities	135		2,268		3,784		12,642		117		2,240		4,323		11,554		18,234
Asset-backed securities:
Student loans	335		3,858		2,271		1,180		465		3,851		1,455		1,046		6,817
Credit cards	144		262		1,098		—		6		259		1,103		—		1,368
Sub-prime	6		5		4		443		1		4		2		381		388
Other	29		292		758		876		6		219		1,439		149		1,813
Total asset-backed securities	514		4,417		4,131		2,499		478		4,333		3,999		1,576		10,386
Non-U.S. debt securities:
Mortgage-backed securities	1,554		3,134		657		2,571		1,202		3,707		896		1,807		7,612
Asset-backed securities	391		2,475		136		196		177		2,140		234		153		2,704
Government securities	2,647		1,064		—		—		3,233		1,691		146		—		5,070
Other	1,407		2,927		668		—		1,653		2,692		664		—		5,009
Total non-U.S. debt securities	5,999		9,600		1,461		2,767		6,265		10,230		1,940		1,960		20,395
State and political subdivisions	616		2,372		5,075		1,911		447		2,389		5,267		1,923		10,026
Collateralized mortgage obligations	333		215		490		2,261		282		47		528		2,081		2,938
Other U.S. debt securities	983		1,716		174		34		837		1,224		139		31		2,231
Total	$	9,983	$	29,816	$	17,360	$	22,592	$	10,428	$	24,117	$	16,442	$	19,565	$	70,552
Held to maturity:
U.S. Treasury and federal agencies:
Direct obligations	$	—	$	1,625	$	6,197	$	109	$	—	$	11,887	$	10,633	$	83	$	22,603
Mortgage-backed securities	2		6		7		31		—		11		—		577		588
Asset-backed securities:
Student loans	—		193		313		1,136		50		142		244		1,108		1,544
Credit cards	—		630		267		—		39		641		217		—		897
Other	60		232		109		3		72		134		68		3		277
Total asset-backed securities	60		1,055		689		1,139		161		917		529		1,111		2,718
Non-U.S. debt securities:
Mortgage-backed securities	362		815		100		1,428		376		520		91		1,160		2,147
Asset-backed securities	276		1,320		151		—		116		993		—		—		1,109
Government securities	123		—		113		—		158		115		—		—		273
Other	23		44		—		—		98		119		—		—		217
Total non-U.S. debt securities	784		2,179		364		1,428		748		1,747		91		1,160		3,746
State and political subdivisions	2		—		—		—
Collateralized mortgage obligations	350		143		494		799		196		70		302		989		1,557
Total	$	1,198	$	5,008	$	7,751	$	3,506	$	1,105	$	14,632	$	11,555	$	3,920	$	31,212


	Institutional											Commercial Real Estate									Institutional
September 30, 2015	Investment Funds		Commercial and Financial			Purchased Receivables			Lease Financing			Property Development			Other				Total Loans and Leases
March 31, 2016					Investment Funds													Commercial and Financial				Purchased Receivables				Lease Financing				Commercial Real Estate				Total Loans and Leases
(In millions)	Investment Funds							Commercial and Financial			Purchased Receivables			Lease Financing			Property Development																				Other		Total Loans and Leases
Investment grade⁽¹⁾					$	13,563										$				904			$	86			$	870			$	27			$	15,450
Speculative⁽²⁾	336		2,955			—			27			23			—				3,341		365				3,329				—				28				—		3,722
Special mention⁽³⁾	—		25			—			—			—			—				25		—				—				—				—				—		—
Substandard⁽⁴⁾																					—				15				—				—				—		15
Total	$	14,019	$	3,981		$	99		$	917		$	23		$	28			$	19,067	$	13,928			$	4,248			$	86			$	898			$	27	$	19,187



March 31, 2016	Maturity	Paid Fixed Interest Rate
Senior Notes
	2018	1.35%
	2020	2.55%
	2021	4.38%
	2023	3.70%
	2024	3.30%
	2025	3.55%
Subordinated Notes
	2018	4.96%
	2023	3.10%



	March 31, 2016⁽¹⁾
(In millions)	Fair Value Hedges
Investment securities available for sale	$	1,666
Long-term debt⁽²⁾	7,250
Total	$	8,916



	December 31, 2015⁽¹⁾
(In millions)	Fair Value Hedges
Investment securities available for sale	$	1,698
Long-term debt⁽²⁾	7,700
Total	$	9,398



⁽¹⁾	~~Includes other real estate owned of approximatelyzero and $62 million as of September 30, 2015 and December 31, 2014, respectively.~~



Derivative Assets⁽¹⁾
	Fair Value
(In millions)	March 31, 2016		December 31, 2015
Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	15,799	$	10,799
Interest-rate contracts	1		2
Other derivative contracts	3		5
Total	$	15,803	$	10,806
Derivatives designated as hedging instruments:
Foreign exchange contracts	$	501	$	517
Interest-rate contracts	370		133
Total	$	871	$	650



Derivative Liabilities⁽¹⁾
	Fair Value
(In millions)	March 31, 2016		December 31, 2015
Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	15,705	$	10,795
Other derivative contracts	144		103
Interest-rate contracts	1		2
Total	$	15,850	$	10,900
Derivatives designated as hedging instruments:
Interest-rate contracts	$	205	$	180
Foreign exchange contracts	81		73
Total	$	286	$	253



	Location of Gain (Loss) on Derivative in Consolidated Statement of Income	Amount of Gain (Loss) on Derivative Recognized in Consolidated Statement of Income
			Three Months Ended March 31,
(In millions)			2016			2015
Derivatives not designated as hedging instruments:
Foreign exchange contracts	Trading services revenue		$	154		$	204
Interest-rate contracts	Processing fees and other revenue		2			1
Interest-rate contracts	Trading services revenue		(2		)	—
Credit derivative contracts	Trading services revenue		(1		)	—
Other derivative contracts	Trading services revenue		1			2
Total			$	154		$	207