SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1994 Commission File Number 0-5108
------------------ ------
STATE STREET BOSTON CORPORATION
(Exact name of registrant as specified in its charter)
Commonwealth of Massachusetts 04-2456637
(State or other jurisdiction of incorporation) (I.R.S. Employer
Identification Number)
225 Franklin Street, Boston, Massachusetts 02110
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (6l7) 786-3000.
Indicate by check mark whether the registrant (l) 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 last 90 days.
YES X NO
Number of shares of registrant's common stock outstanding on October 31, 1994
was 76,479,467.
STATE STREET BOSTON CORPORATION
Table of Contents
Page
Part I. Financial Information
Part I. Item 1. Financial Statements
Consolidated Statements of Income 1-2
Consolidated Statement of Condition 3
Consolidated Statement of Cash Flows 4
Consolidated Statement of Changes in Stockholders' Equity 5
Notes to Consolidated Financial Statements 6-10
Independent Accountants' Review Report 11
Part I. Item 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations 12-22
Part II. Other Information 23
Signatures 24
Exhibits 25-78
Part I. Item 1. Financial Statements
STATE STREET BOSTON CORPORATION
Consolidated Statement of Income
Three months ended September 30,
(Dollars in thousands, except per share data)
(Unaudited)
1994 1993
Interest Revenue
Deposits with banks $ 51,286 $ 49,137
Investment securities:
U.S. Treasury and Federal agencies 45,564 29,677
State and political subdivisions 9,675 6,159
Other investments 32,451 24,571
Loans 47,776 33,602
Federal funds sold and securities
purchased under resale agreements 43,353 30,127
Trading account assets 5,457 3,547
Total interest revenue 235,562 176,820
Interest Expense
Deposits 72,103 49,257
Other borrowings 68,318 42,250
Long-term debt 2,151 2,316
Total interest expense 142,572 93,823
Net interest revenue 92,990 82,997
Provision for loan losses 3,159 2,880
Net interest revenue after
provision for loan losses 89,831 80,117
Fee Revenue
Fiduciary compensation 176,985 158,360
Other 67,017 53,072
Total fee revenue 244,002 211,432
Revenue Before Operating Expenses 333,833 291,549
Operating Expenses
Salaries and employee benefits 144,139 122,064
Occupancy, net 19,058 16,011
Equipment 27,781 26,190
Other 63,352 54,160
Total operating expenses 254,330 218,425
Income before income taxes 79,503 73,124
Income taxes 27,687 26,851
Net Income $ 51,816 $ 46,273
Earnings Per Share
Primary $ .67 $ .61
Fully diluted .67 .60
Average Shares Outstanding (in thousands)
Primary 76,985 76,167
Fully diluted 77,571 77,141
Cash dividends declared per share $ .15 $ .13
The accompanying notes are an integral part of these financial statements.
STATE STREET BOSTON CORPORATION
Consolidated Statement of Income
Nine months ended September 30,
(Dollars in thousands, except per share data)
(Unaudited)
1994 1993
Interest Revenue
Deposits with banks $149,024 $152,438
Investment securities:
U.S. Treasury and Federal agencies 113,014 88,106
State and political subdivisions 28,970 16,545
Other investments 92,247 72,275
Loans 131,412 92,072
Federal funds sold and securities
purchased under resale agreements 100,281 82,043
Trading account assets 14,682 8,557
Total interest revenue 629,630 512,036
Interest Expense
Deposits 188,504 150,499
Other borrowings 161,357 119,486
Long-term debt 6,479 7,311
Total interest expense 356,340 277,296
Net interest revenue 273,290 234,740
Provision for loan losses 9,511 8,440
Net interest revenue after
provision for loan losses 263,779 226,300
Fee Revenue
Fiduciary compensation 532,660 454,460
Other 200,671 156,285
Total fee revenue 733,331 610,745
Revenue Before Operating Expenses 997,110 837,045
Operating Expenses
Salaries and employee benefits 422,655 349,117
Occupancy, net 53,320 46,242
Equipment 83,639 75,359
Other 198,280 162,435
Total operating expenses 757,894 633,153
Income before income taxes 239,216 203,892
Income taxes 85,069 71,747
Net Income $154,147 $132,145
Earnings Per Share
Primary $ 2.00 $ 1.74
Fully diluted 1.99 1.71
Average Shares Outstanding (in thousands)
Primary 76,841 76,130
Fully diluted 77,488 77,167
Cash dividends declared per share $ .44 $ .38
The accompanying notes are an integral part of these financial statements.
STATE STREET BOSTON CORPORATION
Consolidated Statement of Condition
(Dollars in thousands)
(Unaudited)
September 30, December 31,
1994 1993
Assets
Cash and due from banks $ 1,021,749 $ 1,469,395
Interest-bearing deposits with banks 5,381,227 5,148,249
Securities purchased under resale agreements 2,435,037 2,267,546
Federal funds sold 754,952 188,000
Trading account assets 313,986 159,446
Investment securities:
Held to maturity 5,022,953 4,484,104
Available for sale 2,869,563 1,217,095
Total investment securities 7,892,516 5,701,199
Loans 3,078,424 2,680,174
Allowance for loan losses (58,336) (54,316)
Net loans 3,020,088 2,625,858
Premises and equipment 473,050 445,109
Customers' acceptance liability 21,593 65,643
Accrued income receivable 321,600 280,976
Other assets 722,592 368,702
Total Assets $ 22,358,390 $ 18,720,123
Liabilities
Deposits:
Noninterest-bearing $ 4,204,598 $ 5,450,183
Interest-bearing:
Domestic 1,831,482 2,140,457
Foreign 8,002,509 5,427,231
Total deposits 14,038,589 13,017,871
Federal funds purchased 111,380 269,083
Securities sold under repurchase agreements 5,147,750 2,972,928
Other short-term borrowings 472,373 469,265
Notes payable 305,000 149,990
Acceptances outstanding 22,076 65,928
Accrued taxes and other expenses 403,497 373,152
Other liabilities 515,673 167,993
Long-term debt 127,753 128,939
Total Liabilities 21,144,091 17,615,149
Stockholders' Equity
Preferred stock, no par: authorized 3,500,000; issued none
Common stock, $1 par: authorized 112,000,000
issued 76,468,000 and 75,874,000 76,468 75,874
Surplus 30,266 19,253
Retained Earnings 1,107,565 1,009,847
Total Stockholders' Equity 1,214,299 1,104,974
Total Liabilities and Stockholders' Equity $ 22,358,390 $ 18,720,123
The accompanying notes are an interal part of these financial statements.
STATE STREET BOSTON CORPORATION
Consolidated Statement of Cash Flows
Nine Months ended September 30,
(Dollars in thousands)
(Unaudited)
1994 1993
Operating Activities
Net income $ 154,147 $ 132,145
Noncash charges for depreciation, amortization, provision for
loan losses and foreclosed properties and deferred income taxes 135,354 112,087
Net income adjusted for noncash charges 289,501 244,232
Adjustments to reconcile to net cash provided (used)
by operating activities:
Securities (gains) losses, net 473 (15,375)
Net change in:
Accrued income receivable (40,624) (38,803)
Accrued taxes and other expenses 15,976 27,224
Trading account assets (154,540) (142,421)
Other, net 3,933 (143,709)
Net Cash Provided by Operating Activities 114,719 (68,852)
Investing Activities
Payments for purchases of:
Held to maturity securities (2,916,561) (2,617,204)
Available-for-sale securities (3,232,038) (901,331)
Lease financing assets (312,146) (333,554)
Premises and equipment (97,675) (91,161)
Proceeds from:
Maturities of held to maturity securities 2,350,350 1,580,843
Maturities of investment securities available for sale 281,435 89,798
Sales of investment securities available for sale 1,256,204 935,816
Principal collected from lease financing 35,229 32,489
Net (payments for) proceeds from:
Interest-bearing deposits with banks (232,978) 19,708
Federal funds sold and securities purchased
under resale agreements (734,443) (1,107,133)
Loans (330,266) (567,275)
Net Cash Used by Investing Activities (3,932,889) (2,959,004)
Financing Activities
Proceeds from issuance of:
Long-term debt 99,025
Nonrecourse debt for lease financing 237,540 279,294
Common stock 6,174 3,859
Payments for:
Nonrecourse debt for lease financing (35,156) (25,558)
Long-term debt (582) (39,029)
Cash dividends (33,595) (28,673)
Net proceeds from (payments for):
Deposits 1,020,718 839,627
Short-term borrowings 2,175,425 1,709,664
Net Cash Provided by Financing Activities 3,370,524 2,838,209
Net Increase (Decrease) in Cash and Due From Banks (447,646) (189,647)
Cash and due from banks at beginning of period 1,469,395 1,284,467
Cash and Due From Banks at End of Period $ 1,021,749 $ 1,094,820
Supplemental Disclosure
Interest paid $ 354,558 $ 267,118
Income taxes paid 37,343 39,138
The accompanying notes are an integral part of these financial statements.
STATE STREET BOSTON CORPORATION
Consolidated Statement of Changes in Stockholders' Equity
Nine months ended September 30,
(Dollars in thousands)
(Unaudited)
1994 1993
Beginning Balance $ 1,104,974 $ 953,135
Net Income 154,147 132,145
Cash dividends declared (33,595) (28,673)
Issuance of common stock 11,608 7,776
Foreign currency translation 6,383 (484)
Unrealized loss on available-for-sale securities,
net of taxes (29,218)
Ending Balance $ 1,214,299 $ 1,063,899
The accompanying notes are an integral part of these financial statements.
STATE STREET BOSTON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note A - Basis of Presentation
The consolidated financial statements include the accounts of State Street
Boston Corporation ("State Street") and its subsidiaries, including its
principal subsidiary, State Street Bank and Trust Company ("State Street Bank").
All significant intercompany transactions have been eliminated upon
consolidation. Certain previously reported amounts have been reclassified to
conform to the current method of presentation. State Street's investment in its
50%-owned affiliate, Boston Financial Data Services, Inc., is accounted for by
the equity method.
Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," was adopted by State Street
effective January 1, 1994. SFAS No. 115 requires that debt and equity securities
for which State Street does not have the positive intent or ability to hold to
maturity and that are not considered to be part of trading-related activities be
classified as available-for-sale securities and reported at their fair values,
with unrealized gains and losses reported on a net-of-tax basis as a separate
component of stockholders' equity. At September 30, 1994, the unrealized pre-tax
loss on available-for-sale securities was $51,393,000. Held to maturity
investments are stated at cost, adjusted for amortization of premiums and
accretion of discounts. Securities classified as available-for-sale are
purchased in connection with State Street's interest-rate risk management and
may be sold in response to changes in interest rates and other factors. Gains or
losses on securities sold are computed based on identified costs and included in
fee revenue.
Financial Accounting Standards Board Interpretation No. 39, "Offsetting of
Amounts Related to Certain Contracts" was adopted by State Street during the
first quarter of 1994. Interpretation No. 39 changes the reporting of unrealized
gains and losses on interest rate and foreign exchange contracts on the balance
sheet. The interpretation requires that gross unrealized gains be reported as
assets and gross unrealized losses be reported as liabilities. The amounts were
previously shown on a net basis on the balance sheet. The interpretation,
however, permits netting of such unrealized gains and losses with the same
counterparty when master netting agreements have been executed. At September 30,
1994, a total of $393,000,000 is included in other assets and other liabilities
for gross unrealized gains and gross unrealized losses, respectively.
For the Consolidated Statement of Cash Flows, State Street has defined cash
equivalents as those amounts included in the Statement of Condition caption,
"Cash and due from banks." For the nine months ended September 30, 1994 and
1993, long-term debt converted into common stock was $632,000 and $1,240,000,
respectively.
In the opinion of management, all adjustments consisting of normal recurring
accruals which are necessary for a fair presentation of the financial position
of State Street and subsidiaries at September 30, 1994 and December 31, 1993,
and its cash flows for the nine months ended September 30, 1994 and 1993, and
the consolidated results of its operations for the three months and nine months
ended September 30, 1994 and 1993 have been made. These statements should be
read in conjunction with the financial statements, notes and other information
included in State Street's latest annual report on Form 10-K.
STATE STREET BOSTON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note B - Investment Securities
Investment securities consisted of the following:
(Dollars in thousands) September 30, 1994
Unrealized
Cost Gains Losses Market
Held to maturity
U.S. Treasury and
Federal agencies $ 1,464,346 $ 1,217 $ 19,411 $ 1,446,152
State and political
subdivisions 1,076,770 745 11,100 1,066,415
Asset-backed securities 2,297,187 1,525 54,295 2,244,417
Other investments 184,650 293 4,066 180,877
----------- ----------- ----------- -----------
Total 5,022,953 3,780 88,872 4,937,861
Available for sale
U.S. Treasuries 2,839,704 49,959 2,789,745
Other investments 81,252 32 1,466 79,818
----------- ----------- ----------- -----------
Total 2,920,956 32 51,425 2,869,563
----------- ----------- ----------- -----------
Total investment
securities $ 7,943,909 $ 3,812 $ 140,297 $ 7,807,424
=========== =========== =========== ===========
Investment securities consisted of the following:
(Dollars in thousands) December 31, 1993
Unrealized
Cost Gains Losses Market
Held to maturity
U.S. Treasury and
Federal agencies $ 1,272,370 $ 11,522 $ 1,673 $ 1,282,219
State and political
subdivisions 1,083,879 7,006 494 1,090,391
Asset-backed securities 2,028,099 9,800 4,345 2,033,554
Other investments 99,756 1,398 70 101,084
----------- ----------- ----------- -----------
Total 4,484,104 29,726 6,582 4,507,248
Available for sale
U.S. Treasuries 1,121,605 9,000 4,597 1,126,008
Other investments 95,490 423 95,913
----------- ----------- ----------- -----------
Total 1,217,095 9,423 4,597 1,221,921
----------- ----------- ----------- -----------
Total investment
securities $ 5,701,199 $ 39,149 $ 11,179 $ 5,729,169
=========== =========== =========== ===========
During the nine months ending September 30, 1994, gains of $2,852,000 and losses
of $3,325,000 were realized on sales of available-for-sale securities of
$1,256,204,000. During the nine months ending September 30, 1993, gains of
$15,426,000 and losses of $51,000 were realized on sales of available-for-sale
securities of $935,816,000.
STATE STREET BOSTON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note C - Allowance for Loan Losses
The adequacy of the allowance for loan losses is evaluated on a regular basis by
management. Factors considered in evaluating the adequacy of the allowance
include previous loss experience, current economic conditions and their effect
on borrowers, and the performance of individual credits in relation to contract
terms. The provision for loan losses charged to earnings is based upon
management's judgment of the amount necessary to maintain the allowance at a
level adequate to absorb probable losses.
Changes in the allowance for loan losses were as follows:
Three Months Ended Nine Months Ended
(Dollars in thousands) September 30, September 30,
-------------------- -----------------
1994 1993 1994 1993
------- ------- ------- ------
Balance at beginning of period $ 55,947 $ 55,734 $ 54,316 $ 57,931
Provision for loan losses 3,159 2,880 9,511 8,440
Loan charge-offs (1,130) (3,931) (7,014) (13,786)
Recoveries 360 498 1,523 1,191
Allowance of subsidiary
purchased 1,405
-------- -------- -------- --------
Balance at end of period $ 58,336 $ 55,181 $ 58,336 $ 55,181
======== ======== ======== ========
Note D - Income Taxes
The provision for income taxes included in the Consolidated Statement of Income
is comprised of the following:
Three Months Ended Nine Months Ended
(Dollars in thousands) September 30, September 30,
-------------------- -----------------
1994 1993 1994 1993
------- ------- ------- ------
Current $ 20,102 $ 15,788 $ 48,525 $ 45,996
Deferred 7,585 11,063 36,544 25,751
-------- -------- -------- --------
Total provision $ 27,687 $ 26,851 $ 85,069 $ 71,747
======== ======== ======== ========
The provision for income taxes is less than the combined U.S. corporate tax rate
of 35% for 1994 and 34% for 1993, and the applicable state tax rates in both
periods primarily because of tax exempt income and tax credits.
STATE STREET BOSTON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note E - Fee Revenue - Other
The following items are included in the other category of fee revenue:
Three Months Ended Nine Months Ended
(Dollars in thousands) September 30, September 30,
-------------------- -----------------
1994 1993 1994 1993
------- ------- ------- ------
Foreign exchange trading $ 25,696 $ 22,641 $ 88,863 $ 59,232
Processing service fees 18,917 12,104 48,685 33,751
Service fees 12,221 10,147 35,166 28,664
Securities gains (losses) net 1,810 3,690 (473) 15,375
Trading account profits (252) 1,332 596 4,058
Other 8,625 3,158 27,834 15,205
--------- --------- --------- ---------
Total fee revenue - other $ 67,017 $ 53,072 $ 200,671 $ 156,285
========= ========= ========= =========
Note F - Operating Expenses - Other
The following items are included in the other category of operating expenses:
Three Months Ended Nine Months Ended
(Dollars in thousands) September 30, September 30,
-------------------- -----------------
1994 1993 1994 1993
------- ------- ------- ------
Contract services $ 22,669 $ 16,322 $ 66,092 $ 45,692
Professional services 12,331 8,221 34,579 24,685
Advertising and sales promotion 5,995 4,493 18,315 13,953
Telecommunications 5,049 5,738 16,563 16,700
Postage, forms and supplies 4,598 4,570 15,482 14,859
FDIC and other insurance 3,867 4,073 14,277 12,829
Other 8,843 10,743 32,972 33,717
--------- --------- --------- ---------
Total operating
expenses - other $ 63,352 $ 54,160 $ 198,280 $ 162,435
========= ========= ========= =========
Note G - Commitments and Contingent Liabilities
State Street provides custody, accounting and information services to mutual
fund, master trust/master custody/global custody, corporate trust and defined
contribution plan customers; and investment management services to institutions
and individuals. Assets under custody and management, held by State Street in
fiduciary or custody capacity, are not included in the Consolidated Statement of
Condition since items are not assets of State Street. Management conducts
regular reviews of its responsibilities for these services and considers the
results in preparing its financial statements. In the opinion of management,
there are no contingent liabilities at September 30, 1994 that would have a
material adverse effect on State Street's financial position or results of
operations.
State Street is subject to pending and threatened legal actions that arise in
the normal course of business. In the opinion of management, after discussion
with counsel, these can be successfully defended or resolved without a material
adverse effect on State Street's financial position or results of operations.
STATE STREET BOSTON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note H - Earnings Per Common Share
The computation of earnings per common share is based on the weighted average
number of shares of common stock and common stock equivalents outstanding during
each period. The computation of fully diluted earnings per share is based on the
assumption that the convertible capital notes and debentures had been converted
as of the beginning of each year with the elimination of related interest
expense less income tax effect. The computation of earnings per share is as
follows:
(Dollars in thousands, Three Months Ended Nine Months Ended
except per share data) September 30, September 30,
1994 1993 1994 1993
---------- ---------- ---------- -------
Primary
Average shares outstanding 76,453,021 75,500,786 76,274,944 75,364,822
Common stock equivalents 532,409 666,219 566,500 764,951
---------- ---------- ---------- ----------
Primary shares outstanding 76,985,430 76,167,003 76,841,441 76,129,773
========== ========== ========== ==========
Net income $51,816 $46,273 $154,147 $132,145
======= ======= ======== ========
Earnings Per Share-primary $ .67 $ .61 $ 2.00 $ 1.74
======= ======= ======== ========
Fully Diluted
Average shares outstanding 76,453,021 75,500,784 76,274,944 75,364,822
Common stock equivalents 532,409 703,476 566,500 764,951
Assumed conversion of 7 3/4%
convertible subordinated
debentures 585,739 895,423 639,923 995,466
Assumed conversion of 5%
convertible notes - 41,323 6,562 41,323
---------- ---------- ---------- ----------
Fully diluted average
shares outstanding 77,571,169 77,141,006 77,487,929 77,166,562
========== ========== ========== ==========
Net income $51,816 $46,273 $154,147 $132,145
Elimination of interest on
7 3/4% convertible subordinated
debentures and 5% convertible
notes less related income tax
effect 37 50 119 180
------- ------- -------- --------
Fully diluted net income $51,853 $46,323 $154,266 $132,325
======= ======= ======== ========
Earnings Per Share-fully
diluted $ .67 $ .60 $ 1.99 $ 1.71
======= ======= ======== ========
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Stockholders and Board of Directors
State Street Boston Corporation
We have reviewed the accompanying consolidated statement of condition of State
Street Boston Corporation as of September 30, 1994, and the related consolidated
statements of income for the three month and nine month periods ended September
30, 1994 and 1993 and changes in stockholders' equity and cash flows for the
nine month periods ended September 30, 1994 and 1993. These financial statements
are the responsibility of the Corporation's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated statement of condition of State Street Boston
Corporation as of December 31, 1993 and the related consolidated statements of
income, cash flows and changes in stockholders' equity for the year then ended,
not presented herein, and in our report dated January 13, 1994, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated statement of
condition as of December 31, 1993, is fairly stated, in all materials respects,
in relation to the consolidated statement of condition from which it has been
derived.
ERNST & YOUNG LLP
Boston, Massachusetts
October 17, 1994
STATE STREET BOSTON CORPORATION
Part I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SUMMARY
Third quarter earnings per share were $.67 on a fully diluted basis, an increase
of 12% from $.60 per share in the third quarter of 1993. Net income in the
quarter was $51.8 million, up 12% from $46.3 million a year ago. Return on
stockholders' equity was 17.1%. The earnings per share gain reflected revenue
growth of 14%, partially offset by increased expenses to support growth and
continued investment spending.
Year-to-date, revenue increased 19%, earnings per share were up 16% and return
on stockholders' equity was 17.7%.
Condensed Income Statement
Taxable Equivalent Basis
(Dollars in millions, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 Change % 1994 1993 Change %
Fee revenue $244.0 $211.4 $ 32.6 15 $733.3 $610.7 $122.6 20
Interest revenue 241.3 183.2 58.1 32 647.0 526.7 120.3 23
Interest expense 142.6 93.8 48.8 52 356.3 277.3 79.0 28
------ ------ ----- ------ ------ ------ ------
Net interest revenue 98.7 89.4 9.3 10 290.7 249.4 41.3 17
Provision for loan losses 3.2 2.9 .3 10 9.5 8.5 1.0 12
------ ------ ------ ------ ------ ------ ------
Net interest revenue after
provision for loan losses 95.5 86.5 9.0 10 281.2 240.9 40.3 17
------ ------ ----- ------ ------ ------
Total revenue 339.5 297.9 41.6 14 1,014.5 851.6 162.9 19
Operating expenses 254.3 218.4 35.9 16 757.9 633.2 124.7 20
------ ------ ----- ------ ------ ------
Income before taxes 85.2 79.5 5.7 7 256.6 218.4 38.2 17
------ ------ ----- ------ ------ ------
Income taxes 27.7 26.9 .8 3 85.1 71.7 13.4 19
Taxable equivalent adjustment 5.7 6.3 (0.6) (10) 17.4 14.6 2.8 19
------ ------ ----- ------ ------ ------ ------
Net income $ 51.8 $ 46.3 $ 5.5 12 $154.1 $132.1 $ 22.0 17
====== ====== ===== ====== ====== ====== ======
Earnings Per Share
Primary $ .67 $ .61 $ .06 10 $ 2.00 $ 1.74 $ .26 15
Fully diluted .67 .60 .07 12 1.99 1.71 .28 16
($ and % change based on dollars in thousands)
STATE STREET BOSTON CORPORATION
Part I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
TOTAL REVENUE
Total revenue was $339.6 million, up $41.6 million, or 14%, from a year ago.
This growth reflected the increasingly comprehensive and complex range of
services provided to customers. Volumes of non-U.S. assets and trades continued
to grow, with both up approximately 40%. Multicurrency accounting, settlement,
and other complex services associated with non-U.S. securities result in higher
revenue per holding and trade than for U.S. securities.
Assets under custody were $1.6 trillion, up $132 billion, or 9%, from a year ago
due to both additions by existing customers and new customers. As reported
previously, a corporate trust customer with $47 billion of assets under custody
assumed custody of its own assets at the end of May, 1994. Assets under
management were $155 billion, up 11% from June and 16% from a year ago. In the
third quarter, short-term cash funds managed increased $10 billion from a
relatively low level in June.
Year-to-date, total revenue was $1.015 billion, an increase of $163 million,
or 19%, from 1993.
FEE REVENUE
Fee revenue was $244.0 million, up $32.6 million, or 15%, from the third quarter
of 1993. Fiduciary compensation, the largest component of fee revenue, was
$177.0 million, up $18.6 million, or 12%. Fiduciary compensation is derived from
accounting, custody, information services, recordkeeping, investment management
and trusteeship services provided from offices in the United States, Canada,
Grand Cayman, Netherland Antilles, United Kingdom, France, Belgium, Luxembourg,
Denmark, Germany, United Arab Emirates, Hong Kong, Taiwan, Japan, Australia and
New Zealand. In the third quarter, fiduciary compensation from non-U.S. offices
increased over 20% from a year ago. In the United States, fiduciary compensation
grew from servicing mutual funds and pension plans, and from managing assets.
Fiduciary compensation from servicing mutual funds grew due to increased use of
more complex services as well as additional mutual funds serviced, trades and
assets. The percentage of non-U.S. securities held by funds continued to
increase. The number of mutual funds serviced increased to 2,375, up 322 from a
year ago, and the number of trades processed increased 12%. Mutual fund
servicing is continuing to shift from primarily custody and portfolio accounting
services to multiple services. Additional funds offered multiple classes of
shares, and funds expanded the number of classes offered, each class with its
own accounting and pricing requirements. In the third quarter, fiduciary
compensation from servicing mutual funds grew faster than the related assets
under custody.
Fiduciary compensation also grew from securities lending, custody,accounting and
other services provided to corporate and public pension plan sponsors. Net new
pension plan customers and additional services for existing customers also
contributed to revenue growth. Corporate trust revenue was lower due to
substantially less active markets for the issuance of asset-backed securities,
and the reduction in services provided to one customer as mentioned above.
STATE STREET BOSTON CORPORATION
Part I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Revenue from asset management services benefitted from the increasing popularity
of investment in emerging markets and international asset allocation strategies.
Actively managed global portfolios increased by over $1 billion from a year ago.
Processing service fees were $18.9 million, up $6.8 million, or 56%, from a year
ago, due in part to growth in processing unclaimed securities, including an
acquisition in December, and an increase in the volume of mortgage loans
serviced. The year-over-year growth in fee revenue also benefitted from an
increase in foreign exchange trading revenue of $3.1 million; an increase in
service fees of $2.1 million; sale of a foreclosed asset of $2.0 million and a
net increase in currency translation of $.9 million on the foreign bond
portfolio. Growth in fee revenue was restrained by lower net securities gains,
down $1.9 million, and a small loss in trading account profits, down $1.6
million from a relatively high level in the third quarter of 1993.
For the nine-month period ending September 30, 1994, fee revenue was $733.3
million, up $122.6 million, or 20%, over 1993. The increase resulted primarily
from growth in fiduciary compensation, up $78.2 million, or 17%, and higher
foreign exchange revenue of $29.6 million.
NET INTEREST REVENUE
Taxable equivalent net interest revenue was $98.7 million, up $9.3 million, or
10%, over the same quarter a year ago, primarily reflecting balance sheet growth
to support customers' activities and the benefit of higher asset yields.
Average interest-earning assets grew $2.5 billion, or 15%, to $19.1 billion,
funded primarily by an increase in foreign deposits and securities sold under
repurchase agreements. Foreign deposits increased by $2.4 billion, or 47%, to
$7.6 billion, due in part to the conversion of customers' cash balances from
subcustodian banks to State Street accounts. Securities sold under repurchase
agreements were up $1.0 billion, or 25%, to $5.1 billion reflecting short-term
investments by customers. Noninterest-bearing deposits declined $158 million to
$3.8 billion due, in part, to lower corporate trust-related balances, which were
particularly high in 1993 due to an active market for securitizations.
Average loans of $3.3 billion were up $592 million, or 22%, over the same
quarter a year ago. Growth occurred in traditional commercial loans as well as
loans to financial asset services customers and securities brokers. Loans to
financial asset services customers are primarily domestic and foreign securities
settlement advances. These advances and loans to securities brokers are
primarily short term and backed by investment securities held at State Street.
Traditional loans comprised 10% of total average assets for the quarter.
Part I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
The spread between interest rates earned and paid declined from 1.54% to 1.42%
due to rising market interest rates, partially offsetting the benefits of
balance sheet growth and a higher level of interest rates. The net interest
margin declined from 2.14% in the third quarter of 1993 to 2.05%, reflecting
narrower spreads and a larger proportion of funding from interest-bearing
sources of funds.
Three Months Ended
September 30,
1994 1993
--------------------- ---------------------
Average Average
Balance Rate Balance Rate
(Dollars in millions)
Interest-earning assets $19,141 5.00% $16,604 4.38%
Interest-bearing liabilities 15,793 3.58 13,126 2.84
---- ----
Excess of rates earned
over rates paid 1.42% 1.54%
==== ====
Net interest margin 2.05% 2.14%
==== ====
For the nine-month period ending September 30, 1994, taxable equivalent net
interest revenue was $290.7 million, up 17% from 1993 due primarily to balance
sheet growth.
STATE STREET BOSTON CORPORATION
Part I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
OPERATING EXPENSES
Operating expenses of $254.3 million were up $35.9 million, or 16%, from the
third quarter of 1993, to accommodate growth and continuation of the investment
program. Salaries and employee benefits were $144.1 million, up $22.1 million,
or 18%, due in part to a 13% increase in staff. Other expenses of $63.4 million,
up $9.2 million, or 17%, reflected the increased volume of transactions
worldwide, as well as higher expenses for professional services and global
marketing.
We anticipate that investment spending, now running at about 10% of revenue,
will gradually return over the course of 1995 to more historical levels (around
8%). As we execute our investment program focused on application development,
improved processing infrastructure, and product and market development, we are
seeing benefits. We are providing a wider array of value-added service to our
customers, and our improved processing infrastructure is producing a higher
level of quality, timeliness and reliability in our daily servicing for
customers around the world.
For the nine-month period ending September 30, 1994, operating expenses were
$757.9 million, up $124.7 million, or 20%, over 1993 for similar reasons as
discussed for the quarter.
CREDIT QUALITY
At September 30, 1994, total loans were $3.1 billion. Excluding securities
settlement advances and other loans to financial asset services customers and
loans to securities brokers, loans were $2.2 billion, or 10% of total assets.
The provision for loan losses charged against income was $3.2 million, up from
$2.9 million a year ago. During the quarter, the allowance for loan losses
increased from $55.9 million to $58.3 million, and the allowance for loan losses
as a percentage of ending loans increased to 1.89%.
Loan ratios 1994 1993
- - ----------- -------------------------- ---------------------------------------
3Q 2Q 1Q 4Q 3Q 2Q 1Q
------ ------ ------ ------ ------ ------ ------
Allowance to ending loans 1.89% 1.72% 1.67% 2.03% 2.11% 2.31% 2.60%
Net charge-offs
to average loans .10 .25 .30 .50 .50 .63 .98
Non-performing loans to
ending loans .74 .83 .70 1.00 1.15 1.44 2.00
During the third quarter, non-performing loans decreased from $26.9 million to
$22.7 million. At quarter end, non-performing assets of $29.3 million were
carried at 37% of their original value. Charge-offs continued to decline. In the
third quarter, net charge-offs were $.8 million, down significantly from $3.4
million in the third quarter of 1993. Credit quality continues to improve.
Part I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Non-performing assets 1994 1993
- - --------------------- ----------------------------- --------------------------------------
3Q 2Q 1Q 4Q 3Q 2Q 1Q
------ ------ ------ ------ ------- ----- ----
Non-accrual loans:
Commercial and financial $ 19.6 $24.7 $20.7 $24.7 $27.7 $32.3 $34.2
Real estate 2.8 .9 1.0 .5 .7 .7 5.4
Other .3 1.3 1.3 1.6 1.6 1.7 2.8
----- ----- ----- ----- ----- ----- -----
Total non-accrual loans 22.7 26.9 23.0 26.8 30.0 34.7 42.4
Other real estate owned 6.6 6.8 6.8 11.1 11.8 13.1 11.1
----- ----- ----- ----- ----- ----- -----
Total non-performing
assets $29.3 $33.7 $29.8 $37.9 $41.8 $47.8 $53.5
===== ===== ===== ===== ===== ===== =====
TAXES
The effective tax rate in the third quarter was 34.8%, unchanged from the second
quarter. This was down from 36.7% in the third quarter of 1993, primarily due to
the adjustment booked in the third quarter of 1993 to reflect the increase in
the Federal corporate income tax rate enacted in August, effective retroactively
to January.
STATE STREET BOSTON CORPORATION
Part I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
LINES OF BUSINESS
The estimated results for State Street's lines of business are derived from
internal accounting systems, which are continually refined to reflect
organizational performance. These systems allocate to each business revenue and
expenses related to the business, as well as certain corporate overhead,
operations and systems development expenses. They also incorporate processes for
allocating assets and liabilities to each business, including the interest rates
appropriate to each allocation. Capital is allocated using the Federal
regulatory guidelines as a basis, coupled with management's judgement regarding
the operational risks inherent in the businesses. The capital allocations may
not be representative of the capital levels that would be required if these two
lines of business were independent business units.
This section of financial review presents performance results of State Street's
lines of business: financial asset services and commercial lending. The
following line-of-business information is based on management accounting
practices that conform to and support the strategic objectives and management
structure of State Street and are not necessarily comparable with similar
information for any other banking company:
Lines of Business
(Taxable equivalent basis, Financial Commercial
dollars in millions) Asset Services Lending Corporate
Three Months ending September 30, 1994 1993 1994 1993 1994 1993
- - --------------------------------- ---- ---- ----- ---- ------ ---------
Fee revenue $233.6 $204.8 $ 11.4 $ 8.3 $(1.0) $(1.7)
Net interest revenue 70.8 71.3 28.7 19.9 (.8) (1.9)
Provision for loan losses .4 .1 2.8 2.8 .- .-
------ ------ ------ ----- ----- -----
Total revenue 304.0 276.0 37.3 25.4 (1.8) (3.6)
Operating expenses 230.8 193.5 18.4 15.0 5.1 9.9
------ ------ ------ ------ ----- -----
Income before income taxes 73.2 82.5 18.9 10.4 (6.9) (13.5)
Income taxes 29.8 37.7 8.1 4.3 (4.5) (8.8)
------ ------ ------ ------ ----- -----
Net income $ 43.4 $ 44.8 $ 10.8 $ 6.1 $(2.4) $(4.7)
====== ====== ====== ====== ===== =====
Percentage contribution 84% 97% 21% 13% (5)% (10)%
Average assets $19,444 $16,480 $2,356 $2,107
Financial Asset Services. Financial asset services, which contributed 84% of
State Street's net income for the three months ending September 30, 1994 is
comprised of business components that service and manage financial assets
worldwide. These include services for mutual funds and pension plans, both
defined benefit and defined contribution; corporate trusteeships; and management
of institutional financial assets and personal trust. A broad array of banking
services is provided, including accounting, custody of securities, information
services and recordkeeping; taking short-term customer funds onto State Street's
balance sheet; investment management; foreign exchange trading; and cash
management. Revenue for these services is reflected in fee revenue and net
interest revenue.
In the third quarter of 1994, net income from financial asset services of $43.4
million decreased $1.4 million, or 3%, from the same quarter a year ago.
STATE STREET BOSTON CORPORATION
Part I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Fee revenue increased $28.8 million, or 14%, with fiduciary compensation up
$18.6 million, processing service fees up %6.8 million, and foreign exchange
revenue up $3.1 million. Growth in operating expenses reflected expenses
supporting growth and the ongoing investment spending program.
Commercial Lending. In the third quarter of 1994, commercial lending contributed
21% of net income. Net income increased $4.7 million, or 77%, due to higher fee
revenue and net interest revenue, partially offset by higher operating expenses.
Taxable equivalent net interest revenue increased $8.8 million, or 44%,
primarily due to growth in commercial and financial loans. Fee revenue increased
$3.1 million, or 37%, due to the gain on the sale of a foreclosed asset,
increased trade banking fees and increased service fees on loans. Operating
expenses increased $3.4 million, or 23%, due to increased expenses for other
real estate owned, expenses related to increased volumes, and increased salaries
and employee benefits expense due to growth
Corporate. Corporate includes the impact of long-term debt; investment of
corporate cash; tax credits from tax-advantaged financings, including writedowns
of these investments in fee revenue; operating expenses; and other corporate
items. In the third quarter of 1994, these corporate items reduced net income by
5%.
Lines of Business
(Taxable equivalent basis, Financial Commercial
dollars in millions) Asset Services Lending Corporate
Nine Months ending September 30, 1994 1993 1994 1993 1994 1993
- - -------------------------------- ---- ---- ----- ---- ---- ----
Fee revenue $706.4 $587.5 $ 31.1 $ 28.5 $(4.2) $ (5.3)
Net interest revenue 217.2 194.2 78.4 61.7 (4.9) (6.6)
Provision for loan losses 1.0 .3 8.6 8.2 .- .-
------ ------ ------ ------ ----- ------
Total revenue 922.6 781.4 100.9 82.0 (9.1) (11.9)
Operating expenses 683.5 562.5 55.6 47.0 18.8 23.5
------ ------ ------ ------ ----- ------
Income before income taxes 239.1 218.9 45.3 35.0 (27.9) (35.4)
Income taxes 105.5 96.7 19.6 14.7 (22.7) (25.0)
------ ------ ------ ------ ------ -------
Net income $133.6 $122.2 $ 25.7 $ 20.3 $(5.2) $(10.4)
====== ====== ====== ====== ====== =======
Percentage contribution 86% 93% 17% 15% (3)% (8)%
Average assets $19,151 $15,484 $2,297 $1,970
Financial Asset Services. For the nine months ending September 30, 1994,
net income from financial asset services contributed 86% of total net income.
Net income increased $11.4 million, or 9% from a year ago. Total revenue
increased $141.2 million, or 18% and operating expenses were up $121.0 million,
or 22%. Within the Financial Asset Services business, asset management services
- - -- institutional asset management and personal trust -- comprised 19% of net
income for 1994.
Commercial Lending. Year-to-date, net income increased $5.4 million, or 27% from
a year ago. Taxable equivalent net interest revenue increased $16.7 million, or
27%, primarily due to loan growth. Operating expenses increased $8.6 million for
the same reasons mentioned above.
Corporate. For the nine months ending September 30, 1994, corporate items
reduced net income by 3%. The net income reduction of $5.2 million compared with
a reduction of $10.4 million a year ago.
STATE STREET BOSTON CORPORATION
Part I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
ACCOUNTING CHANGES
In the first quarter of 1994, State Street adopted Financial Accounting
Standards Board Interpretation No. 39, "Offsetting of Amounts Related To Certain
Contracts." This new accounting requirement for all corporations mandated that
both unrealized gains and losses on certain off-balance sheet instruments be
included on the balance sheet. In the past, unrealized gains or losses were
shown net on the balance sheet. For State Street, the primary instrument
affected was forward foreign exchange contracts, due in part to the treasury
services provided to global financial asset services customers. Market risk of
these instruments is controlled under State Street's credit and counterparty
risk management system. Most of the contracts are for 90 days or less, which
results in a portfolio of relatively short maturity. At September 30,
approximately $393 million of unrealized gains and losses relating to
off-balance sheet instruments were added to both other assets and other
liabilities on the balance sheet. This reporting change did not affect the
risk-based capital ratios, which have always included these off-balance sheet
instruments.
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" was adopted on January 1, 1994. This
standard requires that available-for-sale securities be reported at fair value,
with any unrealized gains and losses, net of taxes, reflected as a separate
component of stockholders' equity. At January 1, 1994 the fair value of the
available-for-sale portfolio exceeded this aggregate amortized cost by $4.8
million. This will create variability in stockholders' equity.
CAPITAL AND LIQUIDITY
State Street has a strong capital position to support current operations and
growth, and continues to generate capital internally at a high rate. In the
third quarter, the internal capital generation rate was 13.3%.
At September 30, 1994, State Street's capital and leverage ratios exceeded the
regulatory guidelines:
Minimum
State Regulatory
Street Guidelines
Risk-based capital ratios:
Tier 1 capital 12.4% 4.0%
Total capital 13.0 8.0
Leverage ratio 5.5 3.0
STATE STREET BOSTON CORPORATION
Part I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
State Street expects to grow the balance sheet commensurate with growth in
equity, maintaining capital ratios at State Street Bank which qualify for the
"well-capitalized" designation. The corporation's objectives are to optimize the
use of the balance sheet and to fully service customers, with emphasis on those
services which State Street is well positioned to provide.
Liquidity is required to replace maturing liabilities, accommodate the
transaction and cash management requirements of State Street's customers, meet
loan commitments and accommodate other corporate needs. Liquidity is provided
from the ability to access global market sources of funding and gather
additional deposits, and from maturing short-term assets, sale of available for
sale securities and payment of loans.
State Street manages its assets and liabilities to maintain a high level of
liquidity. The Corporation has an extensive and diverse funding base inside and
outside the United States. A significant percentage of funding comes from
customers who have other relationships with State Street, particularly those
using financial asset services worldwide. Deposits are accessed through domestic
as well as international treasury centers, providing a cost-effective,
geographically diverse source of funding. Significant funding is also provided
from institutional customers' demand for repurchase agreements for their
short-term investment needs. State Street maintains other funding alternatives,
ensuring access to additional sources of funds if needed. Relationships are
maintained with a variety of investors, for a range of financial instruments, in
various markets and time zones.
State Street maintains a large portfolio of liquid assets. At September 30,
1994, the portfolio included $5.4 billion of interest-bearing deposits with
banks and $2.4 billion of securities purchased under resale agreements. Although
not relied on for daily liquidity needs, the $2.9 billion available-for-sale
portfolio of marketable securities provides a significant secondary source of
liquidity.
State Street maintains strong liquidity ratios. When liquidity is measured by
the ratio of liquid assets to total assets, State Street ranks among the highest
of U.S. banking companies. Liquid assets consist of cash and due from banks,
interest-bearing deposits with banks, Federal funds sold, securities purchased
under resale agreements, trading account assets and investment securities. At
September 30, 1994, the Corporation's liquid assets were 80% of total assets.
STATE STREET BOSTON CORPORATION
Part I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
ENVIRONMENTAL FACTORS
As explained in the first and second quarters, when revenue was up 25% and
19%, respectively, there are factors in our environment that influence
short-term earnings performance. In the third quarter, several of these factors
restrained our growth. Fewer customer foreign exchange trades lowered our
foreign exchange trading revenue from the second quarter. Lackluster securities
markets gave no boost to our asset-based fees. The interest rates in the United
States continued to rise, compressing our net interest spreads. Year-to-date
through August, industry-wide, net new mutual fund sales were off 38% from a
year ago. Last year was a very active period for residential mortgages and
municipal bonds, with payoffs and refinancings at high levels, and our corporate
trust business benefitted substantially. This year, the issuance of residential
mortgage-backed securities is running about 30% less than in 1993.
BUSINESS UPDATE
As previously announced, State Street signed a definitive agreement to acquire
Investors Fiduciary Trust Company (IFTC), of Kansas City, Missouri, from its
joint owners, DST Systems, Inc. and Kemper Financial Services. The purchase
price, to be paid in State Street common stock, was approximately $225 million
when the stock was at $40 per share. If the stock is at $36 per share or below
then State Street will issue 6% more shares than State Street would have if the
price had remained at $40. State Street intends to account for the transaction
as a pooling. At September 30, 1994, IFTC had total balance sheet assets of $807
million and stockholders' equity of $103 million.
GOALS
State Street has a primary financial goal and supporting goals. The primary
financial goal continues to be sustainable real growth in earnings per share. In
support of that goal, State Street aims for superior long-term performance. For
State Street, that translates to an ROE of 18%. This is an annual goal, not a
goal for each and every quarter.
State Street also has a revenue goal, which is expressed in real terms, or
adjusted for inflation. In the 80's, real revenue grew at an annual compound
growth rate of 12.5% per year. State Street aims to repeat that record in the
90's and is on track in doing so.
State Street has a strong franchise in place. Secular trends continue to fuel
our optimism about the future. We continue to benefit from increased
cross-border investment, the growth of retirement assets around the world, and
the increased scope and complexity of our customers' information needs. Based on
our current assessment, we expect double digit earnings per share growth in the
next few years.
Part II - Other Information
Item 1. Legal Proceedings
Reference is made to Note G to the Consolidated Financial Statements on Page 9.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibit Index
Exhibit Number Page(s) of this Report
2 Acquisition agreement among State Street 25 - 74
Boston Corporation, dated September 27, 1994,
Kemper Financial Services, Inc. and DST
Systems, Inc. pertaining to the acquisition
of IFTC Holdings, Inc.
10 Material Contracts: Compensation Agreement 75 - 76
with J.R.Towers dated September 30, 1994.
15 Letter re: Unaudited interim 77
financial information
27 Financial Data Schedule 78
(b)Reports on Form 8-K
Two reports on Form 8-K dated July 19, 1994 and September 27, 1994,
respectively, relating to the acquisition of IFTC Holdings, Inc. were
electronically filed during the quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of l934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
STATE STREET BOSTON CORPORATION
Date: November 10, 1994 By: /s/ George J. Fesus
-------------------------------------
George J. Fesus
Executive Vice President, Chief Financial
Officer and Treasurer
Date: November 10, 1994 By: /s/ Rex S. Schuette
-------------------------------------
Rex S. Schuette
Senior Vice President and Comptroller