EXHIBIT 13.4
STATE STREET BOSTON CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
CONSOLIDATED STATEMENT OF INCOME
STATE STREET BOSTON CORPORATION
-----------------------------------------------------------------------------------------
(Dollars in thousands, except per share data) 1994 1993 1992
-----------------------------------------------------------------------------------------
INTEREST REVENUE
Deposits with banks . . . . . . . . . . . . . . . $ 209,280 $ 201,455 $ 257,615
Investment securities:
U.S. Treasury and Federal agencies . . . . . . 177,790 119,495 115,745
State and political subdivisions
(exempt from Federal tax) . . . . . . . . . . 40,491 25,185 19,345
Other investments . . . . . . . . . . . . . . . 127,580 96,905 87,094
Loans . . . . . . . . . . . . . . . . . . . . . . 183,333 127,651 116,516
Securities purchased under resale agreements,
securities borrowed and Federal funds sold . . . 144,085 114,979 109,149
Trading account assets . . . . . . . . . . . . . 22,173 13,198 8,932
--------- --------- ---------
Total interest revenue . . . . . . . . . . . . 904,732 698,868 714,396
INTEREST EXPENSE
Deposits . . . . . . . . . . . . . . . . . . . . 275,300 202,810 248,851
Other borrowings . . . . . . . . . . . . . . . . 253,615 168,423 169,905
Long-term debt . . . . . . . . . . . . . . . . . 8,625 10,022 13,324
--------- --------- ---------
Total interest expense . . . . . . . . . . . . 537,540 381,255 432,080
--------- --------- ---------
Net interest revenue . . . . . . . . . . . . . 367,192 317,613 282,316
Provision for loan losses - Note D . . . . . . . 11,569 11,320 12,201
--------- --------- ---------
Net interest revenue after provision
for loan losses . . . . . . . . . . . . . . . 355,623 306,293 270,115
FEE REVENUE
Fiduciary compensation . . . . . . . . . . . . . 717,400 627,769 545,377
Other - Note K . . . . . . . . . . . . . . . . . 263,628 205,646 157,503
--------- --------- ---------
Total fee revenue . . . . . . . . . . . . . . . 981,028 833,415 702,880
REVENUE BEFORE OPERATING EXPENSES . . . . . . . 1,336,651 1,139,708 972,995
OPERATING EXPENSES
Salaries and employee benefits - Note N . . . . . 571,136 479,168 409,888
Occupancy, net . . . . . . . . . . . . . . . . . 71,765 60,643 53,259
Equipment . . . . . . . . . . . . . . . . . . . . 110,662 100,295 66,965
Other - Note L . . . . . . . . . . . . . . . . . 262,838 222,147 186,322
--------- --------- ---------
Total operating expenses . . . . . . . . . . . 1,016,401 862,253 716,434
--------- --------- ---------
Income before income taxes . . . . . . . . . . 320,250 277,455 256,561
Income taxes - Note O . . . . . . . . . . . . . . 112,837 97,626 96,118
NET INCOME . . . . . . . . . . . . . . . . . . $ 207,413 $ 179,829 $ 160,443
========= ========= =========
EARNINGS PER SHARE
Primary . . . . . . . . . . . . . . . . . . . . $2.70 $2.36 $2.10
Fully diluted . . . . . . . . . . . . . . . . . 2.68 2.33 2.07
AVERAGE SHARES OUTSTANDING (in thousands)
Primary . . . . . . . . . . . . . . . . . . . . 76,851 76,193 76,235
Fully diluted . . . . . . . . . . . . . . . . . 77,482 77,177 77,698
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CONDITION
STATE STREET BOSTON CORPORATION
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(Dollars in thousands) December 31, 1994 1993
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ASSETS
Cash and due from banks - Note Q . . . . . . . . $ 1,004,852 $ 1,469,395
Interest-bearing deposits with banks . . . . . . 4,847,069 5,148,249
Securities purchased under resale
agreements and securities borrowed - Note F. . 1,886,759 2,267,546
Federal funds sold . . . . . . . . . . . . . . . 353,615 188,000
Trading account assets . . . . . . . . . . . . . 527,550 159,446
Investment securities - Notes C and F:
Held to maturity . . . . . . . . . . . . . . . 5,187,270 4,484,104
Available for sale . . . . . . . . . . . . . . 3,226,687 1,217,095
----------- -----------
Total investment securities . . . . . . . . 8,413,957 5,701,199
Loans - Note D . . . . . . . . . . . . . . . . . 3,233,221 2,680,174
Allowance for loan losses . . . . . . . . . . . (58,184) (54,316)
----------- -----------
Net loans . . . . . . . . . . . . . . . . . . 3,175,037 2,625,858
Premises and equipment - Notes E and H . . . . . 474,683 445,109
Customers' acceptance liability . . . . . . . . 55,358 65,643
Accrued income receivable . . . . . . . . . . . 349,387 280,976
Other assets . . . . . . . . . . . . . . . . . . 641,228 368,702
----------- -----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . $21,729,495 $18,720,123
=========== ===========
LIABILITIES
Deposits:
Noninterest-bearing . . . . . . . . . . . . . $ 4,212,045 $ 5,450,183
Interest-bearing:
Domestic . . . . . . . . . . . . . . . . . . 1,769,698 2,140,457
Foreign . . . . . . . . . . . . . . . . . . 7,920,932 5,427,231
----------- -----------
Total deposits . . . . . . . . . . . . . . . . 13,902,675 13,017,871
Federal funds purchased . . . . . . . . . . . . 113,143 269,083
Securities sold under repurchase
agreements - Note F . . . . . . . . . . . . . . 4,798,261 2,972,928
Other short-term borrowings . . . . . . . . . . 649,052 469,265
Notes payable - Note G 149,990
Acceptances outstanding . . . . . . . . . . . . 55,621 65,928
Accrued taxes and other expenses - Note O . . . 406,086 373,152
Other liabilities . . . . . . . . . . . . . . . 445,818 167,993
Long-term debt - Note H . . . . . . . . . . . . 127,549 128,939
----------- -----------
TOTAL LIABILITIES . . . . . . . . . . . . . . 20,498,205 17,615,149
Commitments and contingent liabilities - Notes P and R
STOCKHOLDERS' EQUITY - NOTES H, I, J, AND Q
Preferred stock, no par: authorized 3,500,000; issued none
Common stock, $1 par: authorized 112,000,000;
issued 76,475,000 and 75,874,000 . . . . . . . 76,475 75,874
Surplus . . . . . . . . . . . . . . . . . . . . 30,468 19,253
Retained earnings . . . . . . . . . . . . . . . 1,176,915 1,009,847
Net unrealized loss on available-
for-sale securities . . . . . . . . . . . . . (52,568) --
----------- -----------
TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . 1,231,290 1,104,974
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . $21,729,495 $18,720,123
=========== ===========
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
STATE STREET BOSTON CORPORATION
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(Dollars in thousands) 1994 1993 1992
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OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . $ 207,413 $ 179,829 $ 160,443
Noncash charges for depreciation,
amortization, provision for
loan losses and foreclosed properties,
and deferred income taxes . . . . . . . . . . 175,851 163,858 117,924
---------- ---------- ----------
Net income adjusted for noncash charges . . . 383,264 343,687 278,367
Adjustments to reconcile to net cash provided
(used) by operating activities:
Securities (gains) losses, net . . . . . . . . 473 (15,375) (12,274)
Net change in:
Trading account assets . . . . . . . . . . . (368,104) 5,120 89,415
Accrued income receivable . . . . . . . . . . (68,411) (64,614) (9,947)
Accrued taxes and other expenses . . . . . . 26,800 21,286 12,187
Other, net . . . . . . . . . . . . . . . . . 15,512 (62,193) (16,032)
---------- ---------- ----------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES . . . . . . . . . . . . (10,466) 227,911 341,716
INVESTING ACTIVITIES
Payments for purchases of:
Held-to-maturity securities . . . . . . . . . (3,742,885) (3,673,561) (3,337,307)
Available-for-sale securities . . . . . . . . (3,633,707) (1,364,457) --
Lease financing assets . . . . . . . . . . . . (643,525) (426,313) (194,897)
Premises and equipment . . . . . . . . . . . . (124,599) (116,379) (152,070)
Proceeds from:
Maturities of held-to-maturity securities . . 3,009,057 2,318,776 1,966,823
Maturities of available-for-sale securities . 285,339 167,399 --
Sales of investment securities . . . . . . . . -- -- 522,012
Sales of available-for-sale securities . . . . 1,256,204 935,816 --
Principal collected from lease financing . . . 41,261 45,536 48,440
Net (payments for) proceeds from:
Interest-bearing deposits with banks . . . . . 301,180 (345,003) (972,443)
Federal funds sold, resale agreements
and securities borrowed . . . . . . . . . . . 215,172 800,174 772,084
Loans . . . . . . . . . . . . . . . . . . . . (435,355) (617,280) (84,044)
---------- ---------- ----------
NET CASH USED BY INVESTING ACTIVITIES . . (3,471,858) (2,275,292) (1,431,402)
---------- ---------- ----------
FINANCING ACTIVITIES
Proceeds from issuance of:
Long-term debt . . . . . . . . . . . . . . . . -- 99,025 --
Notes payable . . . . . . . . . . . . . . . . -- -- 149,868
Nonrecourse debt for lease financing . . . . . 513,585 347,042 146,424
Common stock . . . . . . . . . . . . . . . . . 6,228 6,035 5,810
Payments for:
Maturity of notes payable . . . . . . . . . . (150,000) -- (100,000)
Nonrecourse debt for lease financing . . . . . (39,378) (38,695) (39,572)
Long-term debt . . . . . . . . . . . . . . . . (785) (114,213) (650)
Cash dividends . . . . . . . . . . . . . . . . (45,831) (39,297) (33,293)
Net proceeds from (payments for):
Deposits . . . . . . . . . . . . . . . . . . . 884,804 1,957,804 2,328,706
Short-term borrowings . . . . . . . . . . . . 1,849,158 14,608 (1,099,901)
---------- ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES. . 3,017,781 2,232,309 1,357,392
---------- ---------- ----------
NET INCREASE (DECREASE) . . . . . . . . . . (464,543) 184,928 267,706
Cash and due from banks at beginning of period . 1,469,395 1,284,467 1,016,761
---------- ---------- ----------
CASH AND DUE FROM BANKS AT END OF PERIOD . . $1,004,852 $1,469,395 $1,284,467
========== ========== ==========
SUPPLEMENTAL DISCLOSURE
Interest paid . . . . . . . . . . . . . . . . $ 537,388 $ 382,310 $ 440,335
Income taxes paid . . . . . . . . . . . . . . 66,808 56,370 63,497
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
STATE STREET BOSTON CORPORATION
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NET UNREALIZED
LOSS ON
COMMON RETAINED AVAILABLE-FOR-
(Dollars in thousands) STOCK SURPLUS EARNINGS SALE SECURITIES TOTAL
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1991 . . . . . . . . . . . . . . $37,220 $33,867 $ 745,482 $ - $ 816,569
Net income . . . . . . . . . . . . . . . . . . . . . . 160,443 160,443
Cash dividends declared - $.445 per share . . . . . . (33,293) (33,293)
Stock dividend, two-for-one split . . . . . . . . . . 37,318 (37,318)
Issuance of common stock - 523,346 net shares . . . . 523 11,452 11,975
Foreign currency translation . . . . . . . . . . . . . (2,559) (2,559)
------- ------- ---------- --------- ----------
BALANCE AT DECEMBER 31, 1992 . . . . . . . . . . . . . . 75,061 8,001 870,073 - 953,135
Net income . . . . . . . . . . . . . . . . . . . . . . 179,829 179,829
Cash dividends declared - $.52 per share (39,297) (39,297)
Issuance of common stock - 812,902 net shares . . . . 813 11,252 12,065
Foreign currency translation . . . . . . . . . . . . . (758) (758)
------- ------- ---------- --------- ----------
BALANCE AT DECEMBER 31, 1993 . . . . . . . . . . . . . . 75,874 19,253 1,009,847 - 1,104,974
Net income . . . . . . . . . . . . . . . . . . . . . . 207,413 207,413
Cash dividends declared - $.60 per share . . . . . . . (45,831) (45,831)
Issuance of common stock - 601,215 net shares . . . . 601 11,215 11,816
Foreign currency translation . . . . . . . . . . . . . 5,486 5,486
Net unrealized loss on available-for-sale
securities . . . . . . . . . . . . . . . . . . . . . (52,568) (52,568)
------- ------- ---------- -------- ---------
BALANCE AT DECEMBER 31, 1994 . . . . . . . . . . . . . . $76,475 $30,468 $1,176,915 $(52,568) $1,231,290
======= ======= ========== ========= ===========
The accompanying notes are an integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS
STATE STREET BOSTON CORPORATION
NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of State Street Boston Corporation
("State Street") and its subsidiaries conform to generally accepted accounting
principles. The significant policies are summarized below.
BASIS OF PRESENTATION: The consolidated financial statements include the
accounts of State Street Boston Corporation and its subsidiaries, including its
principal subsidiary, State Street Bank and Trust Company ("State Street Bank").
All significant intercompany balances and transactions have been eliminated upon
consolidation. The results of operations of businesses purchased are included
from the date of acquisition. Investments in 50%-owned affiliates are accounted
for by the equity method. Certain previously reported amounts have been
reclassified to conform to the current method of presentation. Where
appropriate, number of shares and per share amounts have been restated to
reflect a stock split in 1992 (see Note I). For the Consolidated Statement of
Cash Flows, State Street has defined cash equivalents as those amounts included
in the Consolidated Statement of Condition caption, "Cash and due from banks."
RESALE AND REPURCHASE AGREEMENTS; SECURITIES BORROWED: State Street enters
into purchases of U.S. Treasury and Federal agency securities ("U.S. Government
securities") under agreements to resell the securities, which are recorded as
securities purchased under resale agreements in the Consolidated Statement of
Condition. These securities can be used as collateral for repurchase agreements.
It is State Street's policy to take possession or control of the security
underlying the resale agreement. The securities are revalued daily to determine
if additional collat eral is necessary. State Street enters into sales of U.S.
Government securities under repurchase agreements, which are treated as
financings, and the obligations to repurchase such securities sold are reflected
as a liability in the Consolidated Statement of Condition. The dollar amount of
U.S. Government securities underlying the repurchase agreements remains in
investment securities. Securities borrowed are recorded at the amount of cash
collateral deposited with the lender. State Street monitors daily its market
exposure with respect to securities borrowed transactions and requests that
excess collateral be returned or that additional securities be provided.
SECURITIES: Debt securities are held in both the investment and trading
account portfolios. On January 1, 1994, State Street adopted Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." 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 fair value, with unrealized gains and losses net of taxes reported
in a separate component of stockholders' equity. In 1993, available-for-sale
securities were carried at the lower of amortized cost or market. Adoption of
SFAS No. 115 resulted in an increase of $3 million to stockholders' equity in
January 1994.
Securities classified as held to maturity are stated at cost, adjusted for
amortization of premiums and accretion of discounts. Gains or losses on sales of
available-for-sale securities are computed based on identified costs and
included in fee revenue. Trading account assets are held in anticipation of
short-term market movements and for resale to customers. Trading account assets
are carried at market value, and the resulting adjustment is reflected in fee
revenue.
LOANS AND LEASE FINANCING: Loans are placed on a non-accrual basis when
they become 60 days past due as to either principal or interest, or when in the
opinion of management, full collection of principal or interest is unlikely.
When the loan is placed on non-accrual, the accrual of interest is discontinued,
and previously recorded but unpaid interest is reversed and charged against
current earnings.
Subsidiaries of State Street provide asset-based financing to customers
through a variety of lease arrangements. Leveraged leases are carried net of
nonrecourse debt. Revenue on leveraged leases is recognized on a basis
calculated to achieve a constant rate of return on the outstanding investment in
the leases, net of related deferred tax liabilities, in the years in which the
net investment is positive. Gains and losses on residual values of leased
equipment sold are included in fee revenue.
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.
In 1993, Statement of Financial Accounting Standards No. 114, "Accounting
by Creditors for Impairment of a Loan," was issued. This statement addresses how
creditors should establish allowances for credit losses on individual loans
determined to be impaired. State Street will adopt this new statement in 1995,
and it is not expected to have a material impact.
PREMISES AND EQUIPMENT: Premises, equipment and leasehold improvements are
carried at cost less accumulated depreciation and amortization. Depreciation and
amortization charged to operating expenses are computed using the straight-line
method over the estimated useful life of the related asset or the remaining term
of the lease.
NOTES TO FINANCIAL STATEMENTS
STATE STREET BOSTON CORPORATION
NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OTHER REAL ESTATE OWNED: Properties acquired in satisfaction of debt are
carried at the lower of cost or fair market value and included in other assets.
Reductions in carrying value are recognized through charges to other operating
expenses. The costs of maintaining and operating foreclosed properties are
expensed as incurred.
REVALUATION GAINS AND LOSSES ON FINANCIAL CONTRACTS: 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. The
interpretation requires that the gross amount of unrealized gains and losses on
foreign exchange and interest rate contracts be reported separately as an asset
and a liability on the statement of condition. Prior to adoption, these amounts
were reported as a net asset or liability. The netting of unrealized gains and
losses with the same counterparty is permitted when a master netting agreement
has been executed. At December 31, 1994, other assets and other liabilities have
been increased $288 million as a result of adoption.
FOREIGN CURRENCY TRANSLATION: The assets and liabilities of foreign
operations are translated at month-end exchange rates, and revenue and expenses
are translated at average monthly exchange rates. Gains or losses from the
translation of the net assets of certain foreign subsidiaries, net of any
foreign currency hedges and related taxes, are credited or charged to retained
earnings. Gains or losses from other translations are included in fee revenue.
INTEREST-RATE AND FOREIGN EXCHANGE CONTRACTS: State Street uses
interest-rate contracts as part of its overall interest-rate risk management.
Gains and losses on interest-rate futures and option contracts that are
designated as hedges and effective as such are deferred and amortized over the
remaining life of the hedged assets or liabilities as an adjustment to interest
revenue or interest expense. Interest-rate swap contracts that are entered into
as part of interest-rate management are accounted for using the accrual method
as an adjustment to interest revenue or interest expense. Interest-rate
contracts related to trading activities are adjusted to market value with the
resulting gains or losses included in fee revenue.
Foreign exchange trading positions are valued daily at prevailing exchange
rates, and the resulting gain or loss is included in fee revenue.
INCOME TAXES: The provision for income taxes includes deferred income taxes
arising as a result of reporting some items of revenue and expense in different
years for tax and financial reporting purposes. In 1993, State Street adopted
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," which prescribes the liability method of accounting for income taxes.
Prior years, which were accounted for under the deferral method, were not
restated, and the impact of the adoption in 1993 was not material.
EARNINGS PER SHARE: The computation of primary earnings per share is based
on the weighted average number of shares of common stock and common stock
equivalents outstanding during each period. Stock option grants are included
only in periods when the results are dilutive. The computation of fully diluted
earnings per share additionally includes the assumption that the convertible
debt had been converted as of the beginning of each period, with the elimination
of related interest expense less the income tax benefit.
NOTE B-ACQUISITION OF INVESTORS FIDUCIARY TRUST COMPANY
In September 1994, State Street announced a definitive agreement to acquire
Investors Fiduciary Trust Company (IFTC) in a transaction that is intended to be
accounted for as a pooling of interests. IFTC was equally owned by DST Systems,
Inc. and Kemper Financial Services, Inc. The transaction closed on January 31,
1995. IFTC was acquired for 5,972,222 shares of State Street common stock.
IFTC provides custody and fund accounting services to mutual funds, unit
investment trusts, insurance portfolios and bank portfolios. At December 31,
1994, IFTC's total assets were $818 million and stockholders' equity was $106
million.
The following is a summary of unaudited pro forma financial information for
State Street and IFTC combined for the years ended December 31:
--------------------------------------------------------------------------------
(Dollars in thousands, except per share data) 1994 1993 1992
--------------------------------------------------------------------------------
Revenue before operating expenses ............. $1,397,857 $1,189,792 $1,037,069
Net income .................................... 220,347 189,386 170,113
Earnings per share
Primary ..................................... 2.66 2.30 2.07
Fully diluted ............................... 2.64 2.28 2.04
NOTES TO FINANCIAL STATEMENTS
STATE STREET BOSTON CORPORATION
NOTE C-INVESTMENT SECURITIES
State Street adopted Statement of Financial Accounting Standards (SFAS) No.
115, "Accounting for Certain Investments in Debt and Equity Securities," on
January 1, 1994. Under SFAS No. 115, debt securities for which State Street has
the intent and ability to hold to maturity may be classified as held-to-maturity
securities and reported at amortized cost. Securities that are not classified as
held to maturity are to be classified as available-for-sale securities and
reported at fair value. The excess of fair value over the amortized cost of
available-for-sale securities at date of adoption was $4,825,000.
Investment securities consisted of the following at December 31:
------------------------------------------------------------------------------------------------------------------------------
1994 1993
AMORTIZED UNREALIZED FAIR Amortized Unrealized Fair
(Dollars in thousands) COST GAINS LOSSES VALUE Cost Gains Losses Value
------------------------------------------------------------------------------------------------------------------------------
HELD TO MATURITY (at amortized cost)
U.S. Treasury and
Federal agencies ................ $1,668,987 $ 590 $ 35,836 $1,633,741 $1,272,370 $11,522 $1,673 $1,282,219
State and political
subdivisions .................... 1,130,197 317 19,210 1,111,304 1,083,879 7,006 494 1,090,391
Asset-backed
securities ...................... 2,346,931 1,104 75,823 2,272,212 2,028,099 9,800 4,345 2,033,554
Other investments ................. 41,155 84 155 41,084 99,756 1,398 70 101,084
---------- ------ -------- ---------- ---------- ------- ------ ----------
Total ........................... $5,187,270 $2,095 $131,024 $5,058,341 $4,484,104 $29,726 $6,582 $4,507,248
========== ====== ======== ========== ========== ======= ====== ==========
AVAILABLE FOR SALE (at fair value<F1>)
U.S. Treasuries ................... $3,238,933 $ $ 90,864 $3,148,069 $1,121,605 $ 9,000 $4,597 $1,126,008
Other investments ................. 80,217 5 1,604 78,618 95,490 423 95,913
---------- ------ -------- ---------- ---------- ------- ------ ----------
Total ........................... $3,319,150 $ 5 $ 92,468 $3,226,687 $1,217,095 $ 9,423 $4,597 $1,221,921
========== ====== ======== ========== ========== ======= ====== ==========
<FN>
<F1>In 1993, at lower of cost or market.
The amortized cost and fair value of available-for-sale and
held-to-maturity securities by maturity at December 31, 1994, were as follows:
--------------------------------------------------------------------------------
WITHIN AFTER ONE AFTER FIVE AFTER
ONE YEAR BUT WITHIN BUT WITHIN TEN
(Dollars in thousands) OR LESS FIVE YEARS TEN YEARS YEARS
--------------------------------------------------------------------------------
HELD TO MATURITY
Amortized cost . . . . . $2,615,683 $2,097,020 $333,115 $141,452
Fair value . . . . . . . 2,559,683 2,038,539 321,963 138,156
AVAILABLE FOR SALE
Amortized cost . . . . . 155,512 3,163,638
Fair value . . . . . . . 152,856 3,073,831
The maturity of asset-backed securities is based upon the expected
principal payments. Securities carried at $4,204,525,000 and $2,656,300,000 at
December 31, 1994 and 1993, respectively, were designated as security for public
and trust deposits, borrowed funds and for other purposes as provided by law.
During 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 1993, gains of
$15,426,000 and losses of $51,000 were realized on sales of available-for-sale
securities of $935,816,000. During 1992, gains of $14,201,000 and losses of
$1,927,000 were realized on sales of investment securities of $522,012,000.
NOTES TO FINANCIAL STATEMENTS
STATE STREET BOSTON CORPORATION
NOTE D-LOANS
The loan portfolio consisted of the following at December 31:
--------------------------------------------------------------------------------
(Dollars in thousands) 1994 1993
--------------------------------------------------------------------------------
Commercial and financial . . . . . . . . . . $2,070,146 $1,889,143
Real estate . . . . . . . . . . . . . . . . 100,549 94,073
Consumer . . . . . . . . . . . . . . . . . . 41,323 46,315
Foreign . . . . . . . . . . . . . . . . . . 569,508 325,142
Lease financing . . . . . . . . . . . . . . 451,695 325,501
---------- ----------
Total loans . . . . . . . . . . . . . . . $3,233,221 $2,680,174
========== ==========
Non-accrual loans . . . . . . . . . . . . . $23,043 $26,804
Interest revenue under original terms . . 2,245 2,796
Interest revenue recognized . . . . . . . 834 812
Changes in the allowance for loan losses for the years ended December 31
were as follows:
--------------------------------------------------------------------------------
(Dollars in thousands) 1994 1993 1992
--------------------------------------------------------------------------------
Balance at beginning of year . . . . . . $54,316 $57,931 $65,888
Provision for loan losses . . . . . . . 11,569 11,320 12,201
Loan charge-offs . . . . . . . . . . . . (10,477) (18,545) (23,514)
Recoveries . . . . . . . . . . . . . . . 2,776 2,205 3,356
Allowance of subsidiary purchased 1,405
------- ------- -------
Balance at end of year . . . . . . . . $58,184 $54,316 $57,931
======= ======= =======
A loan totaling $2,703,000 was restructured in 1994, is performing in
accordance with its new terms and is accruing at a market rate. During 1994 and
1993, loans totaling $191,000 and $1,387,000 were transferred to other real
estate owned.
NOTE E-PREMISES AND EQUIPMENT
Premises and equipment consisted of the following at December 31:
--------------------------------------------------------------------------------
(Dollars in thousands) 1994 1993
--------------------------------------------------------------------------------
Buildings and land . . . . . . . . . . . . . $268,162 $248,584
Leasehold improvements . . . . . . . . . . . 118,176 97,983
Equipment and furniture . . . . . . . . . . . 444,761 395,895
-------- --------
831,099 742,462
Accumulated depreciation and amortization . . (356,416) (297,353)
-------- --------
Total premises and equipment, net . . . . . $474,683 $445,109
======== ========
State Street has entered into noncancelable operating leases for premises
and equipment. At December 31, 1994, future minimum payments under noncancelable
operating leases with initial or remaining terms of one year or more totaled
$534,759,000. This consisted of $36,951,000, $40,013,000, $37,925,000,
$32,884,000 and $30,275,000 for the years 1995 to 1999, respectively, and
$356,711,000 thereafter. The minimum rental commitments have been reduced by
sublease rental commitments of $767,000. Substantially all leases include
renewal options.
Total rental expense amounted to $33,879,000, $25,641,000 and $23,194,000
in 1994, 1993 and 1992, respectively. Rental expense has been reduced by
sublease revenue of $1,083,000, $2,149,000 and $3,515,000 in 1994, 1993 and
1992, respectively.
NOTES TO FINANCIAL STATEMENTS
STATE STREET BOSTON CORPORATION
NOTE F-INVESTMENT SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
State Street enters into sales of U.S. Treasury and federal agency
securities ("U.S. Government securities") under repurchase agreements that are
treated as financings, and the obligations to repurchase such securities sold
are reflected as a liability in the Consolidated Statement of Condition. The
dollar amount of U.S. Government securities underlying the repurchase agreements
remains in investment securities.
Information on these U.S. Government securities, and the related repurchase
agreements including accrued interest, is shown in the table below. This table
excludes repurchase agreements that are secured by securities purchased under
resale agreements and securities borrowed.
Information at December 31, 1994 was as follows:
--------------------------------------------------------------------------------
U.S. GOVERNMENT REPURCHASE
SECURITIES SOLD AGREEMENTS
BOOK BOOK
(Dollars in thousands) AMOUNT MARKET AMOUNT RATE
--------------------------------------------------------------------------------
Maturity of repurchase agreements:
Overnight . . . . . . . . . . . . $2,526,248 $2,526,085 $2,489,352 5.10%
21 to 30 days . . . . . . . . . . 339,345 338,473 324,327 5.47
31 to 90 days . . . . . . . . . . 378,686 378,186 375,334 3.30
Over 90 days . . . . . . . . . . 119 119 119 4.25
---------- ---------- ----------
Total . . . . . . . . . . . . . . $3,244,398 $3,242,863 $3,189,132 4.93
========== ========== ==========
NOTE G-NOTES PAYABLE
State Street Bank issues Bank Notes from time to time, in an aggregate
amount not to exceed $750,000,000 and with original maturities ranging from 14
days to five years.
The Bank Notes, which are not subject to redemption, represent unsecured
debt obligations of State Street Bank. The Bank Notes are neither obligations of
or guaranteed by State Street and are recorded net of original issue discount.
At December 31, 1994, there were no Bank Notes outstanding.
NOTE H-LONG-TERM DEBT
Long-term debt, less unamortized original issue discount, consisted of the
following at December 31:
--------------------------------------------------------------------------------
(Dollars in thousands) 1994 1993
--------------------------------------------------------------------------------
5.95% Notes due 2003 . . . . . . . . . . . . . . . . . $ 99,672 $ 99,634
7.75% Convertible subordinated debentures due 2008 . . 3,358 3,922
9.50% Mortgage note due 2009 . . . . . . . . . . . . . 24,519 25,304
Other . . . . . . . . . . . . . . . . . . . . . . . . 79
-------- --------
Total long-term debt . . . . . . . . . . . . . . $127,549 $128,939
The 5.95% notes are unsecured obligations of State Street.
The 7.75% debentures are convertible to common stock at a price of $5.75
per share, subject to adjustment for certain events. The debentures are
redeemable, at State Street's option, at a price of approximately 102.1%,
declining annually to par by 1998. During 1994 and 1993, $563,000 and $2,422,000
of debentures were converted into 137,711 and 422,716 shares of common stock,
respectively. At December 31, 1994, 584,000 shares of authorized common stock
had been reserved for issuance upon conversion.
The 9.50% mortgage note was fully collaterized by property at December 31,
1994. The aggregate maturities of this mortgage note for the years 1995 through
1999 are $863,000, $948,000, $1,042,000, $1,146,000 and $1,260,000,
respectively.
In August 1993, a shelf registration statement became effective that allows
State Street to issue up to $250 million of unsecured debt securities. In
September 1993, State Street issued $100 million of 5.95% Notes due 2003, and
the remaining balance of $150 million at December 31, 1994, is available for
issuance.
NOTES TO FINANCIAL STATEMENTS
STATE STREET BOSTON CORPORATION
NOTE I-STOCKHOLDERS' EQUITY
In 1992, State Street distributed a two-for-one stock split in the form of
a 100% stock dividend to stockholders. The par value of these additional shares
was capitalized by a transfer from surplus to common stock.
In 1993, the Board of Directors authorized the repurchase of up to two
million shares of State Street's common stock. Shares purchased under the
authorization, if any, would be used for employee benefit plans. No purchases
were made through December 31, 1994.
State Street has a long-term incentive plan from which stock options, stock
appreciation rights (SARs) and performance units can be awarded. The exercise
price of non-qualified and incentive stock options may not be less than fair
value of such shares at date of grant and expire no longer than ten years from
date of grant. Performance units have been granted to officers at the
policy-making level. Performance units are earned over a performance period
based on achievement of goals. Payment for performance units is made in cash
equal to the fair market value of State Street's common stock after the
conclusion of each performance period. Compensation expense related to
performance units was $333,000, $2,126,000 and $8,124,000 for 1994, 1993 and
1992, respectively.
Under the 1994 Stock Option and Performance Unit Plan, options and SARs
covering 3,500,000 shares of common stock and 1,000,000 performance units may be
issued. State Street has stock options and performance shares outstanding from
previous plans under which no further grants can be made.
Option activity during 1994 and 1993 was as follows:
--------------------------------------------------------------------------------
OPTION PRICE
(In thousands, except per share amounts) SHARES PER SHARE TOTAL
--------------------------------------------------------------------------------
Outstanding, December 31, 1992 . . . . . . 2,660 $ 3.52-40.69 $48,693
Granted . . . . . . . . . . . . . . . . . . 160 32.38-45.31 7,057
Exercised . . . . . . . . . . . . . . . . . (393) 3.52-20.38 (6,273)
Canceled. . . . . . . . . . . . . . . . . . (31) 11.23-45.31 (701)
----- -------
Outstanding, December 31, 1993 . . . . . . 2,396 3.95-45.31 48,776
Granted . . . . . . . . . . . . . . . . . . 907 28.94-39.25 28,087
Exercised . . . . . . . . . . . . . . . . . (460) 3.95-32.25 (6,088)
Canceled . . . . . . . . . . . . . . . . . (41) 13.41-45.31 (1,056)
----- -------
Outstanding, December 31, 1994 . . . . . . 2,802 6.42-45.31 $69,719
===== =======
At December 31, 1994, 996,403 shares under options were exercisable and
2,810,000 shares under options and SARs were available for future grants. During
1992, 526,000 options were exercised at per share prices of $3.95 to $20.38.
NOTE J-SHAREHOLDERS' RIGHTS PLAN
In 1988, State Street declared a dividend of one preferred share purchase
right for each outstanding share of common stock. In 1992, State Street's common
stock was split two-for-one in the form of a 100% stock dividend to
stockholders. After giving effect to the split, under certain conditions, a
right may be exercised to purchase one two-hundredths share of a series of
participating preferred stock at an exercise price of $75, subject to
adjustment. The rights become exercisable if a party acquires or obtains the
right to acquire 20% or more of State Street's common stock or after
commencement or public announcement of an offer for 20% or more of State
Street's common stock. When exercisable, under certain conditions, each right
also entitles the holder thereof to purchase shares of common stock, of either
State Street or of the acquiror, having a market value of two times the then
current exercise price of that right.
The rights expire in 1998 and may be redeemed at a price of $.005 per right
at any time prior to expiration or the acquisition of 20% of State Street's
common stock. Also, under certain circumstances, the rights may be redeemed
after they become exercisable and may be subject to automatic redemption.
NOTES TO FINANCIAL STATEMENTS
STATE STREET BOSTON CORPORATION
NOTE K-FEE REVENUE-OTHER
The Other category of fee revenue consisted of the following for the years
ended December 31:
--------------------------------------------------------------------------------
(Dollars in thousands) 1994 1993 1992
--------------------------------------------------------------------------------
Foreign exchange trading . . . . . . . . $113,842 $ 82,705 $ 57,904
Processing service fees . . . . . . . . . 66,837 46,083 30,414
Service fees . . . . . . . . . . . . . . 47,210 40,038 31,281
Trading account profits . . . . . . . . . 34 3,740 2,714
Securities gains (losses), net . . . . . (473) 15,375 12,274
Other . . . . . . . . . . . . . . . . . . 36,178 17,705 22,916
-------- -------- --------
Total fee revenue-other . . . . . . $263,628 $205,646 $157,503
======== ======== ========
NOTE L-OPERATING EXPENSES-OTHER
The Other category of operating expenses consisted of the following for the
years ended December 31:
--------------------------------------------------------------------------------
(Dollars in thousands) 1994 1993 1992
--------------------------------------------------------------------------------
Contract services . . . . . . . . . . . . $ 87,830 $ 64,080 $ 45,364
Professional services . . . . . . . . . . 47,517 35,358 30,120
Advertising and sales promotion . . . . . 22,966 18,672 15,079
Telecommunications . . . . . . . . . . . 21,016 21,326 18,119
Postage, forms and supplies . . . . . . . 19,948 17,927 16,847
FDIC and other insurance . . . . . . . . 18,982 17,263 16,906
Operating and processing losses . . . . . 179 4,745 6,965
Other . . . . . . . . . . . . . . . . . . 44,400 42,776 36,922
-------- -------- --------
Total operating expenses-other . . . . . $262,838 $222,147 $186,322
======== ======== ========
NOTE M-QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a tabulation of the unaudited quarterly results of
operations:
--------------------------------------------------------------------------------------------------------------------------
(In thousands, except 1994 QUARTERS 1993 Quarters
per share data) FOURTH THIRD SECOND FIRST Fourth Third Second First
--------------------------------------------------------------------------------------------------------------------------
Interest revenue .......... $275,102 $235,562 $202,077 $191,992 $186,832 $176,820 $171,831 $163,385
Interest expense .......... 181,200 142,572 110,507 103,262 103,959 93,823 96,336 87,137
-------- -------- -------- -------- -------- -------- -------- --------
Net interest revenue .... 93,902 92,990 91,570 88,730 82,873 82,997 75,495 76,248
Provision for loan losses . 2,058 3,159 3,182 3,170 2,880 2,880 2,880 2,680
-------- -------- -------- -------- -------- -------- -------- --------
Net interest revenue
after provision for
loan losses ........... 91,844 89,831 88,388 85,560 79,993 80,117 72,615 73,568
Fee revenue ............... 247,697 244,002 240,609 248,720 222,670 211,432 205,306 194,007
-------- -------- -------- -------- -------- -------- -------- --------
Total revenue ........... 339,541 333,833 328,997 334,280 302,663 291,549 277,921 267,575
Operating expenses ........ 258,507 254,330 250,474 253,090 229,100 218,425 211,609 203,119
-------- -------- -------- -------- -------- -------- -------- --------
Income before
income taxes .......... 81,034 79,503 78,523 81,190 73,563 73,124 66,312 64,456
Income taxes .............. 27,768 27,687 27,482 29,900 25,879 26,851 23,095 21,801
-------- -------- -------- -------- -------- -------- -------- --------
Net Income .............. $ 53,266 $ 51,816 $ 51,041 $ 51,290 $ 47,684 $ 46,273 $ 43,217 $ 42,655
======== ======== ======== ======== ======== ======== ======== ========
Earnings Per Share:
Primary ................. $ .70 $ .67 $ .66 $ .67 $ .62 $ .61 $ .57 $ .56
Fully diluted ........... .69 .67 .66 .66 .62 .60 .56 .55
Average Shares Outstanding:
Primary ................. 76,879 76,985 76,882 76,677 76,399 76,167 76,046 76,749
Fully diluted ........... 77,464 77,571 77,540 77,374 77,224 77,141 77,120 77,851
NOTES TO FINANCIAL STATEMENTS
STATE STREET BOSTON CORPORATION
NOTE N - EMPLOYEE BENEFIT PLANS
State Street and its U.S. subsidiaries participate in a noncontributory
cash balance defined benefit plan covering employees based on age and service.
The plan provides individual account accumulations that are increased annually
based on salary, service and interest credits. State Street uses the projected
unit credit method as its actuarial valuation method. It is State Street's
funding policy to contribute annually the maximum amount that can be deducted
for Federal income tax purposes. Employees in non-U.S. offices participate in
local plans, and the cost of these plans is not material.
The following table sets forth the primary plan's funded status, actuarial
assumptions and amounts recognized in the consolidated financial statements as
of and for the years ended December 31:
--------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) 1994 1993 1992
--------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation:
Vested ..................................................................... $ 91,706 $ 91,186 $ 77,331
Nonvested .................................................................. 9,184 10,527 9,075
Additional benefits based on estimated future salary levels .................. 17,003 12,465 10,738
--------- --------- ---------
Projected benefit obligation ............................................. 117,893 114,178 97,144
Plan assets at fair value, primarily listed stocks and fixed income securities 156,769 162,690 148,102
--------- --------- ---------
Excess of plan assets over projected benefit obligation .................. 38,876 48,512 50,958
Unrecognized net asset at transition being amortized over 17.2 years ......... (17,844) (19,771) (21,699)
Unrecognized net (gain) loss ................................................. 2,937 (3,152) (4,291)
Unrecognized prior service cost .............................................. (3,499) (3,770) (4,042)
--------- --------- ---------
Total prepaid pension expense included in other assets ................... $ 20,470 $ 21,819 $ 20,926
========= ========= =========
Pension expense (income) included the following components:
Service cost-benefits earned during period ................................. 11,392 $ 10,030 $ 9,423
Interest cost on projected benefit obligation .............................. 8,253 6,142 6,812
Actual return on plan assets ............................................... (3,076) (22,874) (8,306)
Net amortization and deferral .............................................. (15,220) 5,809 (9,951)
--------- --------- ---------
Total pension expense (income) ........................................... $ 1,349 $ (893) $ (2,022)
========= ========= =========
Actuarial assumptions:
Discount rate used to determine benefit obligation ......................... 8.75% 7.50% 8.50%
Rate of increase in future compensation level .............................. 5.00% 5.00% 5.00%
Expected long-term rate of return on plan assets ........................... 10.25% 10.25% 10.25%
State Street has an unfunded, non-qualified supplemental retirement plan
that provides certain officers with defined pension benefits in excess of limits
imposed by Federal tax law. At December 31, 1994, 1993 and 1992, the projected
benefit obligation of this plan was $5,168,000, $2,790,000 and $2,174,000, and
the related pension expense was $436,000, $430,000 and $95,000, respectively.
Total pension expense for all plans was $4,546,000, $2,050,000 and $424,000
for 1994, 1993 and 1992, respectively.
Employees of State Street Bank and certain subsidiaries with one or more
years of service are eligible to contribute a portion of their pre-tax salary to
a 401(k) Salary Savings Plan. State Street matches a portion of these
contributions, and the related expenses were $6,442,000, $5,942,000 and
$4,796,000 for 1994, 1993 and 1992, respectively.
State Street Bank and certain subsidiaries provide health care and life
insurance benefits for retired employees. In 1993, Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other than Pension," was adopted. This statement requires that the costs
associated with providing postretirement benefits be accrued during the active
service periods of the employee, rather than expensing these costs as paid.
State Street has elected to amortize the accumulated postretirement benefit
obligation (APBO), which at the date of adoption was $22,100,000, over a 20-year
period. State Street continues to fund medical and life insurance benefit costs
on a pay-as-you go basis. In previous years, the cost of these benefits was
expensed as claims were paid and was not material.
NOTES TO FINANCIAL STATEMENTS
STATE STREET BOSTON CORPORATION
NOTE N - EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table sets forth the financial status of the plan and amounts
recognized in the consolidated financial statements as of and for the years
ended December 31:
--------------------------------------------------------------------------------
(Dollars in thousands) 1994 1993
--------------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees ........................................... $ 6,768 $ 5,553
Fully eligible active employees .................... 5,204 5,333
Other active employees ............................. 11,668 16,383
-------- --------
APBO ............................................. 23,640 27,269
Unrecognized transition obligation ................. (19,864) (20,968)
Unrecognized net gain (loss) ....................... 3,775 (2,969)
-------- --------
Accrued postretirement benefit cost .............. $ 7,551 $ 3,332
======== ========
Postretirement expense included the following components:
Service cost-benefits earned during the period ..... $ 1,887 $ 1,491
Interest cost on APBO .............................. 2,122 1,835
Net amortization and deferral ...................... 1,202 1,104
-------- --------
Total postretirement expense ..................... $ 5,211 $ 4,430
======== ========
The discount rate used in determining the APBO was 8.75% and 7.5 0% for
1994 and 1993, respectively. The assumed health care cost trend rate used in
measuring the APBO was 12% in 1995, declining to 6% by 2001, and remaining at 6%
thereafter. If the health care trend rate assumptions were increased by 1%, the
APBO, as of December 31, 1994, would have increased by 8%, and the aggregate of
service and interest cost for 1994 would have increased by 8%.
NOTE O - INCOME TAXES
The provision for income taxes includes deferred income taxes arising as a
result of reporting certain items of revenue and expense in different years for
tax and financial reporting purposes. In 1993, State Street adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," which
prescribes the liability method of accounting for income taxes. The impact of
the adoption in 1993 was not material.
The provision for income taxes included in the Consolidated Statement of
Income consisted of the following:
--------------------------------------------------------------------------------
(Dollars in thousands) 1994 1993 1992
--------------------------------------------------------------------------------
Current:
Federal ........................... $ 20,618 $21,060 $30,643
State ............................. 21,245 17,652 19,799
Foreign ........................... 24,945 16,456 10,893
-------- ------- -------
Total current ................... 66,808 55,168 61,335
-------- ------- -------
Deferred:
Federal ........................... 33,784 28,514 24,420
State ............................. 12,245 13,944 10,363
-------- ------- -------
Total deferred .................. 46,029 42,458 34,783
-------- ------- -------
Total income taxes .............. $112,837 $97,626 $96,118
======== ======= =======
Current and deferred taxes for 1993 and 1992 have been reclassified to
reflect the tax returns as actually filed. Income tax benefits of $4,949,000,
$3,603,000 and $5,570,000 in 1994, 1993 and 1992, respectively, related to
certain employee stock option exercises and $39,895,000 related to the
mark-to-market adjustment of the securities portfolio in 1994 were recorded
directly to stockholders' equity and are not included in the table above. Income
tax expense (benefit) related to net securities gains (losses) were $(204,000),
$6,634,000 and $5,118,000 for 1994, 1993 and 1992, respectively.
Pre-tax income attributable to operations located outside the United States
was $75,655,000, $51,823,000 and $34,723,000 in 1994, 1993 and 1992,
respectively.
NOTES TO FINANCIAL STATEMENTS
STATE STREET BOSTON CORPORATION
NOTE O - INCOME TAXES (CONTINUED)
Significant components of the deferred tax liabilities and assets at
December 31 were as follows:
--------------------------------------------------------------------------------
(Dollars in thousands) 1994 1993
--------------------------------------------------------------------------------
Deferred tax liabilities:
Lease financing transactions ................... $ 266,304 $ 211,027
Depreciation, net .............................. 6,672 7,270
Prepaid pension expense ........................ 8,109 9,110
Investment securities .......................... 8,486 9,454
Other .......................................... 7,778 7,321
-------- ---------
Total deferred tax liabilities ............... 297,349 244,182
-------- ---------
Deferred tax assets:
Operating expenses ............................. 30,355 29,220
Alternative minimum tax credit ................. 32,256 14,611
Allowance for loan losses ...................... 24,176 22,527
Other .......................................... 10,118 7,572
-------- ---------
Total deferred tax assets .................... 96,905 73,930
Valuation allowance for deferred tax assets ...... (4,429) (3,228)
-------- ---------
Net deferred tax assets ...................... 92,476 70,702
-------- ---------
Net deferred tax liabilities ................. $ 204,873 $ 173,480
======== =========
At December 31, 1994, State Street had non-U.S. carryforward tax losses of
$12,543,000 and U.S. tax credit carryforwards of $32,256,000. If not utilized,
$6,472,000 of the losses will expire in the years 1997-2000. The credits and the
remaining losses carry over indefinitely.
The provision for deferred income taxes for the year ended December 31,
1992 was $34,783,000, primarily relating to lease financing transactions.
A reconciliation of the differences between the U.S. statutory income tax
rate and the effective tax rates based on income before taxes is as follows:
--------------------------------------------------------------------------------
1994 1993 1992
--------------------------------------------------------------------------------
U.S. Federal income tax rate .................. 35.0% 35.0% 34.0%
Changes from statutory rate resulting from:
State taxes, net of Federal benefit ......... 6.9 7.1 7.8
Tax-exempt interest revenue, net
of disallowed interest .................... (3.7) (3.6) (3.1)
Tax credits ................................. (2.5) (3.6) (1.6)
Other, net .................................. (.5) .3 .4
---- ---- ----
Effective tax rate ............................ 35.2% 35.2% 37.5%
==== ==== ====
NOTE P-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 a fiduciary or custody capacity, are not included in the Consolidated
Statement of Condition since such 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 December 31, 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.
NOTES TO FINANCIAL STATEMENTS
STATE STREET BOSTON CORPORATION
NOTE Q - CASH, DIVIDEND, LOAN AND OTHER RESTRICTIONS
During 1994, subsidiary banks of State Street were required by the Federal
Reserve Bank to maintain average reserve balances of $268,783,000.
State Street's principal source of funds for the payment of cash dividends
to stockholders is from dividends paid by State Street Bank. Federal and state
banking regulations place certain restrictions on dividends paid by subsidiary
banks to State Street. At December 31, 1994, State Street Bank had $426,554,000
of retained earnings available for distribution to State Street in the form of
dividends.
The Federal Reserve Act requires that extensions of credit by State Street
Bank to certain affiliates, including State Street, be secured by specific
collateral, that the extension of credit to any one affiliate be limited to 10%
of capital and surplus (as defined), and that extensions of credit to all such
affiliates be limited to 20% of capital and surplus.
At December 31, 1994, consolidated retained earnings included $8,784,000
representing undistributed earnings of 50%-owned affiliates.
State Street has a committed line of credit amounting to $50,000,000 to
support its commercial paper program.
NOTE R - OFF-BALANCE SHEET FINANCIAL INSTRUMENTS, INCLUDING DERIVATIVES
State Street uses various off-balance sheet financial instruments,
including derivatives, to satisfy the financing and risk management needs of
customers, to manage interest-rate and currency risk and to conduct trading
activities. In general terms, derivative instruments are contracts or agreements
whose value can be derived from interest rates, currency exchange rates and
financial indices. Derivative instruments include forwards, futures, swaps,
options and other instruments with similar characteristics. These instruments
generate fee, interest or trading revenue. Associated with these instruments are
market and credit risks that could expose State Street to potential losses.
Market risk relates to the possibility that financial instruments may
change in value due to future fluctuations in market prices. There may be
considerable day-to-day variation in market-risk exposure because of changing
expectations of future currency values or interest rates. State Street actively
manages its market-risk exposure.
Credit risk relates to the possibility that a loss may occur from the
failure of another party to perform according to the terms of a contract. The
credit risk associated with off-balance sheet financial instruments is managed
in conjunction with State Street's balance sheet activities. State Street
minimizes its credit risk by performing credit reviews of counterparties or by
conducting activities through organized exchanges. Historically, credit losses
with respect to these instruments have been immaterial.
State Street uses derivative financial instruments in trading and balance
sheet management activities. The objectives of trading activities are to act as
an intermediary in arranging transactions for customers and to assume positions
in interest rate or foreign currency markets based upon expectations of future
market movements. The objective of balance sheet management activities is to
utilize derivatives in minimizing the risk inherent in State Street's asset and
liability structure from interest rate and currency exchange movements.
The following table summarizes the contractual or notional amounts of
derivative financial instruments held or issued by State Street at December 31:
--------------------------------------------------------------------------------
(Dollars in millions) 1994 1993
--------------------------------------------------------------------------------
TRADING:
Interest rate contracts:
Swap agreements ............................ $ 109 $ 71
Options and caps purchased ................. 13 15
Options and caps written ................... 25 35
Futures sold ............................... 335 541
Options on futures written ................. 225
Foreign exchange contracts:
Forward, swap and spot ..................... 43,126 36,179
Options purchased .......................... 40 6
BALANCE SHEET MANAGEMENT:
Interest rate contracts:
Swap agreements ............................ 146 87
Futures sold ............................... 150
Foreign exchange contracts ................... 83 53
NOTES TO FINANCIAL STATEMENTS
STATE STREET BOSTON CORPORATION
NOTE R - OFF-BALANCE SHEET FINANCIAL INSTRUMENTS, INCLUDING DERIVATIVES
(CONTINUED)
Interest rate contracts involve an agreement with a counterparty to
exchange cash flows based on the movement of an underlying interest rate index.
A swap agreement involves the exchange of a series of interest payments, either
at a fixed or variable rate, based upon the notional amount without the exchange
of the underlying principal amount. An option contract provides the purchaser,
for a premium, the right but not the obligation to buy or sell the underlying
financial instrument at a set price at or during a specified period. A futures
contract is a commitment to buy or sell at a future date a financial instrument
at a contracted price and may be settled in cash or through the delivery of the
contracted instrument.
Foreign exchange contracts involve an agreement to exchange the currency of
one country for the currency of another country at an agreed upon rate and
settlement date. Foreign exchange contracts consist of swap agreements, and
forward and spot contracts.
State Street's exposure from these interest rate and foreign exchange
contracts results from the possibility that one party may default on its
contractual obligation or from movements in exchange or interest rates. Credit
risk is limited to the positive market value of the derivative financial
instrument, which is significantly less than the notional value. The notional
value provides the basis for determining the exchange of contractual cash flows.
The exposure to credit loss can be estimated by calculating the cost on a
present value basis to replace at current market rates all profitable contracts
at year-end. The estimated aggregate replacement cost of derivative financial
instruments in a net positive position was $413 million at December 31, 1994.
FINANCIAL INSTRUMENTS HELD OR ISSUED FOR TRADING
The following table represents the fair value of financial instruments held
or issued for trading purposes as of December 31, 1994 and the average fair
values of those instruments for the year ended December 31, 1994. The following
amounts have been reduced by offsetting balances with the same counterparty
where a master netting agreement exists:
--------------------------------------------------------------------------------
Average
(Dollars in millions) Fair value Fair value
--------------------------------------------------------------------------------
Foreign exchange contracts:
Contracts in a receivable position ................. $298 $376
Contracts in a payable position .................... 288 360
Other financial instrument contracts:
Contracts in a receivable position ................. 2 1
Contracts in a payable position .................... 2 1
State Street is an active participant in the global foreign exchange market
in support of a large institutional customer base engaged in international
investing. Trading is conducted through seven treasury centers located in major
financial centers throughout the world serving the needs of investment managers
and their customers in the region. State Street operates in the spot and forward
markets in over 30 currencies today as investors expand their horizons. State
Street is also active in the foreign exchange interbank market where it trades
with approximately 300 counterparty banks globally to facilitate customer
transactions.
State Street Bank uses interest rate futures and, to a lesser extent,
options on interest rate futures, to minimize the impact of the market valuation
of a portion of the bank's trading securities portfolio and to take positions on
interest rate movements.
Foreign exchange contracts and other contracts used in trading activities
are carried at fair value. The fair value of the instruments is recorded in the
balance sheet as part of other assets or other liabilities. Net trading gains
recognized in other fee revenue related to foreign exchange contracts totaled
$114 million and for other financial instrument contracts totaled $1 million in
1994. Future cash requirements, if any, related to foreign currency contracts
are represented by the gross amount of currencies to be exchanged under each
contract unless State Street and the counterparty have agreed to pay or receive
the net contractual settlement amount on the settlement date. Future cash
requirements on other financial instruments are limited to the net amounts
payable under the agreements.
FINANCIAL INSTRUMENTS HELD OR ISSUED FOR BALANCE SHEET MANAGEMENT
State Street enters into various interest rate and foreign exchange
contracts in managing its balance sheet risk. State Street utilizes interest
rate swaps to manage interest rate risk and foreign exchange contracts to
minimize currency translation risk. At December 31, 1994, interest rate
derivative contracts were being used to convert short-term floating rate
liabilities into longer term fixed rate liabilities corresponding to long-term
balance sheet assets. Income or expense on financial instruments used to manage
interest rate exposure is recorded on an accrual basis as an adjustment to the
yield of the related interest-earning asset or interest-bearing liability over
the period covered by the contracts.
Foreign exchange contracts at December 31, 1994, are utilized to minimize
the exposure to currency loss from balance sheet investments denominated in
foreign currencies. The foreign exchange contracts and the currency translation
of the investment are marked to market, and the unrealized gain or loss is
recorded in other fee revenue.
NOTES TO FINANCIAL STATEMENTS
STATE STREET BOSTON CORPORATION
NOTE R - OFF-BALANCE SHEET FINANCIAL INSTRUMENTS, INCLUDING DERIVATIVES
(CONTINUED)
CREDIT-RELATED FINANCIAL INSTRUMENTS
Credit-related financial instruments include commitments to extend credit,
standby letters of credit, letters of credit and indemnified securities lent.
The maximum credit risk associated with credit-related financial instruments is
measured by the contractual amounts of these instruments.
The following is a summary of the contractual amount of State Street's
credit-related, off-balance sheet financial instruments at December 31:
--------------------------------------------------------------------------------
(Dollars in millions) 1994 1993
--------------------------------------------------------------------------------
Loan commitments ............................. $ 2,536 $ 2,356
Standby letters of credit .................... 929 799
Letters of credit ............................ 168 140
Indemnified securities lent .................. 22,300 12,432
In conjunction with its lending activities, State Street enters into
various commitments to extend credit and issues letters of credit. Loan
commitments (unfunded loans and unused lines of credit), standby letters of
credit and letters of credit are issued to accommodate the financing needs of
State Street's customers. Loan commitments are essentially agreements by State
Street to lend monies at a future date, so long as there are no violations of
any conditions established in the agreement. Standby letters of credit and
letters of credit commit State Street to make payments on behalf of customers
when certain specified events occur.
These loan and letter-of-credit commitments are subject to the same credit
policies and reviews as loans on the balance sheet. Collateral, both the amount
and nature, is obtained based upon management's assessment of the credit risk.
Approximately 70% of the loan commitments expire in one year or less from the
date of issue. Since many of the extensions of credit are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements.
On behalf of its customers, State Street lends their securities to
creditworthy brokers and other institutions. In certain circumstances, State
Street indemnifies its customers for the fair market value of those securities
against a failure of the borrower to return such securities. State Street
requires the borrowers to provide collateral in an amount equal to or in excess
of 102% of the fair market value of the securities borrowed. The borrowed
securities are revalued daily to determine if additional collateral is
necessary. State Street held as collateral, cash and U.S. Government securities
totaling $23.3 billion and $12.8 billion for indemnified securities at December
31, 1994 and 1993, respectively.
NOTE S-FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Accounting Standards No. 107 requires the calculation and
disclosure of the fair value of financial instruments. State Street uses the
following methods to estimate the fair value of financial instruments.
For financial instruments that have quoted market prices, those quotes were
used to determine fair value. Financial instruments that have no defined
maturity, have a remaining maturity of 180 days or less, or reprice frequently
to a market rate, are assumed to have a fair value that approximates reported
book value, after taking into consideration any applicable credit risk. If no
market quotes were available, financial instruments were valued by discounting
the expected cash flow(s) using an estimated current market interest rate for
the financial instrument. For off-balance sheet derivative instruments, fair
value is estimated as the amounts that State Street would receive or pay to
terminate the contracts at the reporting date, taking into account the current
unrealized gains or losses on open contracts.
The short maturity of State Street's assets and liabilities results in
having a significant number of financial instruments whose fair value equals or
closely approximates reported balance sheet value. Such financial instruments
are reported in the following balance sheet captions: Cash and due from banks;
Interest-bearing deposits with banks; Securities purchased under resale
agreements and securities borrowed; Federal funds sold; Deposits; Federal funds
purchased; Securities sold under repurchase agreements; and Other short-term
borrowings. Fair value of trading activities equals its balance sheet value. In
1994, the fair value of interest rate contracts used for balance sheet
management would be a receivable of $6 million; in 1993, the fair value of such
interest rate contracts would be a payable of $1 million. There is no cost for
loan commitments.
The reported value and fair value for other balance sheet captions at
December 31 are as follows:
--------------------------------------------------------------------------------
1994 1993
REPORTED FAIR Reported Fair
(Dollars in millions) VALUE VALUE Value Value
--------------------------------------------------------------------------------
Investment securities
Held to maturity ................. $5,187 $5,058 $4,484 $4,507
Available for sale ............... 3,227 3,227 1,217 1,222
Net loans (excluding leases) ....... 2,723 2,717 2,300 2,301
Notes payable ...................... 150 150
Long-term debt ..................... 128 113 129 133
NOTES TO FINANCIAL STATEMENTS
State Street Boston Corporation
NOTE T-FOREIGN ACTIVITIES
Foreign activities, as defined by the Securities and Exchange Commission,
are considered to be those revenue-producing assets and transactions that arise
from customers domiciled outside the United States.
Due to the nature of the Corporation's business, it is not possible to
segregate precisely domestic and foreign activities. The determination of
earnings attributable to foreign activities requires internal allocations for
resources common to foreign and domestic activities. Subjective judgments have
been used to arrive at these operating results for foreign activities. Interest
expense allocations are based on the average cost of short-term domestic
borrowed funds. Allocations for operating expenses and certain administrative
costs are based on services provided and received.
The following data relates to foreign activities, based on the domicile
location of customers, for the years ended and as of December 31:
--------------------------------------------------------------------------------
(Dollars in thousands) 1994 1993 1992
--------------------------------------------------------------------------------
Condensed Statement of Income:
Interest revenue ........................ $ 308,997 $ 226,213 $ 264,589
Interest expense ........................ 223,001 158,392 209,094
---------- ---------- ----------
Net interest revenue .................. 85,996 67,821 55,495
Provision for loan losses ............... 2,084 1,073 467
Fee revenue ............................. 180,851 129,942 107,350
---------- ---------- ----------
Total revenue ......................... 264,763 196,690 162,378
Operating expenses ...................... 187,409 140,492 117,887
---------- ---------- ----------
Net income before taxes ............... 77,354 56,198 44,491
Income taxes ............................ 31,819 22,171 20,380
---------- ---------- ----------
Net Income ............................ $ 45,535 $ 34,027 $ 24,111
========== ========== ==========
Assets:
Interest-bearing deposits with banks .... $4,847,019 $5,148,201 $4,803,196
Loans and other assets .................. 784,817 645,579 253,896
---------- ---------- ----------
Total Assets .......................... $5,631,836 $5,793,780 $5,057,092
========== ========== ==========
NOTE U-FINANCIAL STATEMENTS OF STATE STREET BOSTON CORPORATION (PARENT ONLY)
Statement of Income
--------------------------------------------------------------------------------
(Dollars in thousands) 1994 1993 1992
--------------------------------------------------------------------------------
Dividends from bank subsidiary .......... $ 37,500 $ 46,400 $ 28,500
Dividends and interest revenue .......... 6,793 4,228 5,208
Fee revenue ............................. 201
--------- --------- ---------
Total revenue ........................ 44,293 50,628 33,909
Interest on commercial paper ........... 3,458
Interest on long-term debt .............. 6,370 7,276 6,926
Other expenses .......................... 1,198 1,678 1,543
--------- --------- ---------
Total expenses ........................ 11,026 8,954 8,469
Income tax benefit ...................... (1,483) (1,873) (1,544)
--------- --------- ---------
Income before equity in undistributed
income of subsidiaries .............. 34,750 43,547 26,984
Equity in undistributed income of
subsidiaries and affiliate:
Consolidated bank ..................... 161,402 132,688 132,464
Consolidated nonbank .................. 6,776 1,528 791
Unconsolidated affiliate .............. 4,485 2,066 204
--------- --------- ---------
172,663 136,282 133,459
--------- --------- ---------
Net Income .......................... $ 207,413 $ 179,829 $ 160,443
========== ========= =========
NOTES TO FINANCIAL STATEMENTS
STATE STREET BOSTON CORPORATION
NOTE U-FINANCIAL STATEMENTS OF STATE STREET BOSTON CORPORATION (PARENT ONLY)
(CONTINUED)
Statement of Condition
--------------------------------------------------------------------------------
(Dollars in thousands) December 31, 1994 1993
--------------------------------------------------------------------------------
Assets
Cash and due from banks ............................ $ 328 $ 454
Interest-bearing deposits with bank subsidiary ..... 182,831
Securities purchased under resale agreements ....... 65,068
Available-for-sale securities ...................... 9,788 35,030
Investment in consolidated subsidiaries:
Bank ............................................. 1,208,913 1,067,080
Nonbank .......................................... 51,875 39,940
Investment in unconsolidated affiliate ............. 15,449 11,364
Capital notes of bank subsidiary ................... 18,211
Notes receivable from nonbank subsidiaries ......... 5,958 7,687
Other assets ....................................... 10,292 2,383
---------- ----------
Total Assets ................................... $1,485,434 $1,247,217
========== ==========
Liabilities
Commercial paper ................................... $ 135,411 $
Accrued taxes and other expenses ................... 3,467 27,985
Other liabilities .................................. 12,236 10,624
Long-term debt ..................................... 103,030 103,634
---------- ----------
Total Liabilities .............................. 254,144 142,243
Stockholders' Equity ............................... 1,231,290 1,104,974
---------- ----------
Total Liabilities and Stockholders' Equity ..... $1,485,434 $1,247,217
========== ==========
STATEMENT OF CASH FLOWS
--------------------------------------------------------------------------------
(Dollars in thousands) 1994 1993 1992
--------------------------------------------------------------------------------
Operating Activities
Net income .............................. $ 207,413 $ 179,829 $ 160,443
Equity in undistributed income of
subsidiaries and affiliate ............ (172,663) (136,282) (133,459)
Other, net .............................. (21,448) 5,403 8,273
--------- -------- --------
Net Cash Provided by Operating
Activities ........................... 13,302 48,950 35,257
Investing Activities
Net (payments for) proceeds from:
Investment in bank subsidiary ......... (4,289) (40,500)
Investment in nonbank subsidiary ...... (1,000) (1,000)
Securities purchased under resale
agreement ........................... 65,068 (36,491) 37,774
Purchase of available-for-sale
securities .......................... (9,985)
Maturity of available-for-sale
securities .......................... 35,000
Interest bearing deposits with banks .. (182,810) (5,135)
Notes receivable from nonbank
subsidiaries ........................ (2,342) (2,248) 500
Other, net ............................ 413 400 (548)
--------- -------- --------
Net Cash Used by Investing
Activities ........................ (99,945) (39,339) (7,909)
Financing Activities
Net proceeds from commercial paper ...... 135,805
Proceeds from issuance of long-term debt 99,025
Payment of long-term debt ............... (9,685) (75,000)
Proceeds from issuance of common stock .. 6,228 6,035 5,810
Payments for cash dividends ............. (45,831) (39,297) (33,293)
--------- -------- --------
Net Cash Provided (Used) by
Financing Activities ................. 86,517 (9,237) (27,483)
--------- -------- --------
Net Increase (Decrease) ............... (126) 374 (135)
--------- -------- --------
Cash and due from banks at
beginning of period ................. 454 80 215
--------- -------- --------
Cash and Due from Banks at End
of Period ........................... $ 328 $ 454 $ 80
========= ======== ========
REPORT OF INDEPENDENT AUDITORS
The Stockholders and Board of Directors
State Street Boston Corporation
We have audited the accompanying consolidated statements of condition of
State Street Boston Corporation as of December 31, 1994 and 1993, and the
related consolidated statements of income, cash flows and changes in
stockholders' equity for each of the three years in the period ended December
31, 1994. These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of State Street
Boston Corporation at December 31, 1994 and 1993, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles.
As discussed in Note A to the financial statements, in 1994 the Corporation
changed its method of accounting for certain investments in debt and equity
securities in accordance with Statement of Financial Accounting Standards No.
115.
Ernst & Young LLP
Boston, Massachusetts
January 11, 1995,
except for Note B, as to which the date is
January 31, 1995.
SUPPLEMENTAL FINANCIAL DATA
State Street Boston Corporation
------------------------------------------------------------------------------------------------------------------------------------
CONDENSED AVERAGE STATEMENT OF CONDITION WITH NET INTEREST REVENUE ANALYSIS
(TAXABLE EQUIVALENT BASIS) 1994 1993
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE AVERAGE Average Average
(Dollars in millions) BALANCE INTEREST RATE Balance Interest Rate
------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Interest-bearing deposits with banks ............... $5,182 $209.4 4.04% $5,022 $201.6 4.01%
Securities purchased under resale agreements and
securities borrowed .............................. 3,079 131.2 4.26 3,255 102.4 3.14
Federal funds sold ................................. 301 12.9 4.29 413 12.6 3.06
Trading account assets ............................. 480 24.3 5.06 369 15.6 4.21
Investment securities:
U.S. Treasury and Federal agencies ............... 3,287 177.8 5.41 2,077 119.5 5.75
State and political subdivisions ................. 1,088 55.4 5.09 683 37.8 5.54
Other investments ................................ 2,366 127.6 5.41 1,827 97.4 5.33
------ ------ ------ -----
Total investment securities .................... 6,741 360.8 5.35 4,587 254.7 5.55
Loans:
Commercial and financial ......................... 2,304 119.3 5.18 1,865 89.8 4.81
Real estate ...................................... 96 7.3 7.57 97 6.8 6.97
Consumer ......................................... 43 3.3 7.72 53 3.6 6.81
Foreign .......................................... 586 37.6 6.41 282 16.4 5.82
Lease financing .................................. 372 22.2 5.98 279 15.7 5.61
------ ------ ------ -----
Total loans .................................... 3,401 189.7 5.58 2,576 132.3 5.14
------ ------ ------ -----
TOTAL INTEREST-EARNING ASSETS .................. 19,184 928.3 4.84 16,222 719.2 4.43
Cash and due from banks ............................ 1,195 911
Allowance for loan losses .......................... (58) (58)
Premises and equipment ............................. 462 435
Customers' acceptance liability .................... 30 33
Other assets ....................................... 1,090 626
------ ------
TOTAL ASSETS ..................................... $21,903 $18,169
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Savings .......................................... $1,874 54.9 2.93 $2,167 52.2 2.41
Time ............................................. 119 4.2 3.52 157 4.5 2.88
Foreign .......................................... 7,392 215.8 2.92 4,954 146.1 2.95
------ ------ ------ -----
Total interest-bearing deposits ................ 9,385 274.9 2.93 7,278 202.8 2.79
Federal funds purchased ............................ 411 16.0 3.90 741 21.0 2.84
Securities sold under repurchase agreements ........ 4,927 201.0 4.08 4,134 119.4 2.89
Other short-term borrowings ........................ 563 24.8 4.40 216 8.2 3.78
Notes payable ...................................... 258 12.0 4.64 511 19.9 3.90
Long-term debt ..................................... 128 8.6 6.73 122 10.0 8.19
------ ------ ------ -----
TOTAL INTEREST-BEARING LIABILITIES ............. 15,672 537.3 3.43 13,002 381.3 2.93
------ ------ ----- ----
Noninterest-bearing deposits ....................... 4,155 3,623
Acceptances outstanding ............................ 30 34
Other liabilities .................................. 864 477
Stockholders' equity ............................... 1,182 1,033
------ ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..... $21,903 $18,169
====== ======
Net interest revenue ........................... $391.0 $337.9
====== ======
Excess of rate earned over rate paid ........... 1.41% 1.50%
===== =====
NET INTEREST MARGIN <F1> ....................... 2.04% 2.08%
===== =====
------------------------------------------------------------------------------------------------------------------------------------
CONDENSED AVERAGE STATEMENT OF CONDITION WITH NET INTEREST REVENUE ANALYSIS
(TAXABLE EQUIVALENT BASIS) 1992 1991 1990
------------------------------------------------------------------------------------------------------------------------------------
Average Average Average Average Average Average
(Dollars in millions) Balance Interest Rate Balance Interest Rate Balance Interest Rate
------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Interest-bearing deposits with banks ............ $5,102 $257.7 5.05% $3,646 $262.1 7.19% $2,733 $252.7 9.25%
Securities purchased under resale agreements
and securities borrowed ....................... 2,603 97.6 3.75 913 51.4 5.63 246 20.0 8.12
Federal funds sold .............................. 330 11.6 3.51 305 17.8 5.83 470 38.2 8.14
Trading account assets .......................... 226 10.1 4.45 152 11.9 7.80 129 12.5 9.60
Investment securities:
U.S. Treasury and Federal agencies ............ 1,703 115.7 6.80 1,417 115.6 8.16 1,634 138.4 8.47
State and political subdivisions .............. 376 29.0 7.72 378 34.4 9.09 338 32.1 9.51
Other investments ............................. 1,444 87.9 6.09 1,212 100.8 8.32 776 70.8 9.13
------ ------ ------ ------ ----- ------ -----
Total investment securities ................. 3,523 232.6 6.60 3,007 250.8 8.34 2,748 241.3 8.78
Loans:
Commercial and financial ...................... 1,556 87.7 5.64 1,583 124.7 7.88 1,590 152.0 9.56
Real estate ................................... 114 8.1 7.11 144 12.2 8.47 216 20.2 9.35
Consumer ...................................... 66 5.0 7.65 90 9.3 10.39 521 82.5 15.85
Foreign ....................................... 117 7.1 6.08 87 6.5 7.43 100 8.6 8.58
Lease financing ............................... 217 10.5 4.84 204 9.9 4.84 194 10.3 5.31
------ ------ ------ ------ ----- ------ -----
Total loans ................................. 2,070 118.4 5.72 2,108 162.6 7.72 2,621 273.6 10.44
------ ------ ------ ------ ----- ------ -----
TOTAL INTEREST-EARNING ASSETS ............... 13,854 728.0 5.26 10,131 756.6 7.47 8,947 838.3 9.37
Cash and due from banks ......................... 819 775 743
Allowance for loan losses ....................... (67) (64) (56)
Premises and equipment .......................... 359 269 198
Customers' acceptance liability ................. 52 61 33
Other assets .................................... 485 402 368
------ ------ -----
TOTAL ASSETS ................................ $15,502 $11,574 $10,233
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Savings ....................................... $2,154 68.0 3.16 $ 1,819 94.9 5.22 $ 1,370 96.8 7.05
Time .......................................... 162 6.3 3.86 307 18.5 6.00 347 28.1 8.10
Foreign ....................................... 3,955 174.6 4.42 2,648 173.4 6.55 2,223 189.3 8.52
------ ------ ---- ------ ----- ----- ------ -----
Total interest-bearing deposits ............. 6,271 248.9 3.97 4,774 286.8 6.01 3,940 314.2 7.97
Federal funds purchased ......................... 919 30.8 3.35 837 45.9 5.48 828 65.6 7.93
Securities sold under repurchase agreements ..... 3,290 112.4 3.42 1,766 89.8 5.08 1,703 128.4 7.54
Other short-term borrowings ..................... 194 8.3 4.27 156 8.3 5.29 125 9.1 7.28
Notes payable ................................... 389 18.4 4.74 234 20.3 8.69 200 19.4 9.72
Long-term debt .................................. 146 13.3 9.10 146 13.2 9.04 114 10.0 8.70
------ ------ ------ -----
TOTAL INTEREST-BEARING LIABILITIES 11,209 432.1 3.85 7,913 464.3 5.87 6,910 546.7 7.91
------ ---- ----- ---- ------ -----
Noninterest-bearing deposits .................... 2,952 2,460 2,301
Acceptances outstanding ......................... 52 61 33
Other liabilities ............................... 402 367 342
Stockholders' equity ............................ 887 773 647
------ ------ -----
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .. $15,502 $11,574 $10,233
====== ====== =====
Net interest revenue ........................ $295.9 $292.3 291.6
====== ====== =====
Excess of rate earned over rate paid ........ 1.41% 1.60% 1.46%
===== ===== =====
NET INTEREST MARGIN<F1> ..................... 2.14% 2.89% 3.26%
===== ===== =====
<FN>
<F1> Net interest margin is taxable equivalent net interest revenue divided by
average interest-earning assets.