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 June 30, 1995 Commission File Number 0-5108
STATE STREET BOSTON CORPORATION
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(Exact name of registrant as specified in its charter)
Commonwealth of Massachusetts 04-2456637
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(State or other jurisdiction of incorporation) (I.R.S. Employer
Identification Number)
225 Franklin Street, Boston, Massachusetts 02110
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(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 July 31, 1995 was
82,658,731.
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 12-20
and Results of Operations
Part II. Other Information
Part II. Item 1.
Legal Proceedings 21
Part II. Item 2.
Changes in Securities 21
Part II. Item 3.
Defaults Upon Senior Securities 21
Part II. Item 4.
Submission of Matters to a Vote of Security Holders 21
Part II. Item 5.
Other Information 21
Part II. Item 6.
Exhibits and Reports on Form 8-K 21
Signatures 22
Exhibits 23-24
PART I. ITEM 1. FINANCIAL STATEMENTS
STATE STREET BOSTON CORPORATION
CONSOLIDATED STATEMENT OF INCOME
Three months ended June 30,
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
1995 1994
------- -------
INTEREST REVENUE
Deposits with banks $ 71,930 $ 46,444
Investment securities:
U.S. Treasury and Federal agencies 69,331 36,598
State and political subdivisions 12,976 10,324
Other investments 34,144 34,001
Loans 59,270 46,019
Securities purchased under resale agreements,
securities borrowed and Federal funds sold 78,154 29,864
Trading account assets 4,323 6,173
------- -------
Total interest revenue 330,128 209,423
INTEREST EXPENSE
Deposits 99,982 62,757
Other borrowings 122,191 47,536
Long-term debt 2,136 2,158
------- -------
Total interest expense 224,309 112,451
------- -------
Net interest revenue 105,819 96,972
Provision for loan losses 2,000 3,182
------- -------
Net interest revenue after
provision for loan losses 103,819 93,790
FEE REVENUE
Fiduciary compensation 199,360 184,066
Other 77,364 65,600
------- -------
Total fee revenue 276,724 249,666
------- -------
REVENUE BEFORE OPERATING EXPENSES 380,543 343,456
OPERATING EXPENSES
Salaries and employee benefits 159,444 143,382
Occupancy, net 21,389 18,017
Equipment 31,295 28,045
Other 77,086 71,326
------- -------
Total operating expenses 289,214 260,770
------- -------
Income before income taxes 91,329 82,686
Income taxes 28,668 28,807
------- -------
NET INCOME $ 62,661 $ 53,879
======== ========
EARNINGS PER SHARE
Primary $ .75 $ .65
Fully diluted .75 .65
AVERAGE SHARES OUTSTANDING (In Thousands)
Primary 83,019 82,854
Fully diluted 83,697 83,512
The accompanying notes are an integral part of these financial statements.
STATE STREET BOSTON CORPORATION
CONSOLIDATED STATEMENT OF INCOME
Six months ended June 30,
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
1995 1994
------- -------
INTEREST REVENUE
Deposits with banks $135,870 $ 97,754
Investment securities:
U.S. Treasury and Federal agencies 142,487 69,976
State and political subdivisions 25,241 20,004
Other investments 69,817 66,845
Loans 116,377 83,636
Securities purchased under resale agreements,
securities borrowed and Federal funds sold 148,922 59,639
Trading account assets 10,168 10,706
------- -------
Total interest revenue 648,882 408,560
INTEREST EXPENSE
Deposits 202,718 119,497
Other borrowings 235,618 94,005
Long-term debt 4,276 4,328
------- -------
Total interest expense 442,612 217,830
------- -------
Net interest revenue 206,270 190,730
Provision for loan losses 4,000 6,352
------- -------
Net interest revenue after
provision for loan losses 202,270 184,378
FEE REVENUE
Fiduciary compensation 385,521 372,300
Other 152,938 136,401
------- -------
Total fee revenue 538,459 508,701
------- -------
REVENUE BEFORE OPERATING EXPENSES 740,729 693,079
OPERATING EXPENSES
Salaries and employee benefits 309,900 287,469
Occupancy, net 41,582 34,807
Equipment 60,815 56,355
Other 151,730 145,922
------- -------
Total operating expenses 564,027 524,553
------- -------
Income before income taxes 176,702 168,526
Income taxes 59,705 60,450
------- -------
NET INCOME $116,997 $108,076
======== ========
EARNINGS PER SHARE
Primary $ 1.41 $ 1.31
Fully diluted 1.40 1.30
AVERAGE SHARES OUTSTANDING (In Thousands)
Primary 82,958 82,745
Fully diluted 83,656 83,433
The accompanying notes are an integral part of these financial statements.
STATE STREET BOSTON CORPORATION
Consolidated Statement of Condition
(Dollars in Thousands)
(Unaudited)
June 30, December 31,
1995 1994
------- --------
ASSETS
Cash and due from banks $ 1,006,947 $ 1,097,563
Interest-bearing deposits with banks 5,899,473 4,847,069
Securities purchased under resale agreements
and securities borrowed 4,759,779 1,886,759
Federal funds sold 938,000 768,615
Trading account assets 278,543 527,550
Investment securities:
Held to maturity 4,896,699 5,187,270
Available for sale 2,556,598 3,482,309
---------- ----------
Total investment securities 7,453,297 8,669,579
Loans 3,537,259 3,233,221
Allowance for loan losses (60,245) (58,184)
---------- ---------
Net loans 3,477,014 3,175,037
Premises and equipment 487,810 476,319
Customers' acceptance liability 67,173 55,358
Accrued income receivable 366,199 363,585
Other assets 836,042 679,509
---------- ---------
TOTAL ASSETS $25,570,277 $22,546,943
=========== ===========
LIABILITIES
Deposits:
Noninterest-bearing $ 6,089,166 $ 4,781,917
Interest-bearing:
Domestic 1,909,074 1,895,209
Foreign 7,641,053 7,920,932
---------- ---------
Total deposits 15,639,293 14,598,058
Federal funds purchased 317,937 113,143
Securities sold under repurchase agreements 5,641,433 4,798,261
Other short-term borrowings 758,950 649,052
Notes payable 437,489
Acceptances outstanding 67,444 55,621
Accrued taxes and other expenses 496,374 418,840
Other liabilities 592,739 449,283
Long-term debt 127,086 127,549
---------- ---------
TOTAL LIABILITIES 24,078,745 21,209,807
STOCKHOLDERS' EQUITY
Preferred stock, no par: authorized
3,500,000; issued none
Common stock, $1 par: authorized 112,000,000;
issued 82,625,000 and 82,447,000 82,625 82,447
Surplus 40,144 37,160
Retained earnings 1,368,180 1,273,369
Net unrealized gain (loss) on
available-for-sale securities 583 (55,840)
---------- ---------
TOTAL STOCKHOLDERS' EQUITY 1,491,532 1,337,136
---------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $25,570,277 $22,546,943
=========== ===========
The accompanying notes are an integral part of these financial statements
STREET BOSTON CORPORATION
Consolidated Statement of Cash Flows
Six Months ended June 30,
(Dollars in thousands)
(Unaudited)
1995 1994
-------- --------
OPERATING ACTIVITIES
Net income $ 116,997 $ 108,076
Noncash charges for depreciation, amortization,
provision for loan losses and foreclosed properties,
and deferred income taxes 84,345 94,909
---------- ----------
Net income adjusted for noncash charges 201,342 202,985
Adjustments to reconcile to net cash provided (used)
by operating activities:
Securities (gains) losses, net (5,572) 235
Net change in:
Trading account assets 249,007 (506,979)
Accrued taxes and other expenses 11,642 18,565
Accrued income receivable (2,614) (73,533)
Other, net (10,378) (37,505)
---------- ----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 443,427 (396,232)
---------- ----------
INVESTING ACTIVITIES
Payments for purchases of:
Held-to-maturity securities (1,133,526) (1,963,326)
Available-for-sale securities (701,426) (1,866,570)
Lease financing assets (276,711) (149,653)
Premises and equipment (62,255) (64,433)
Proceeds from:
Maturities of held-to-maturity securities 1,418,296 1,851,068
Sales of available-for-sale securities 1,652,583 1,413,820
Maturities of available-for-sale securities 79,720 160,010
Principal collected from lease financing 39,176 26,945
Net (payments for) proceeds from:
Interest-bearing deposits with banks (1,052,404) 567,189
Federal funds sold, resale agreements and
securities borrowed (3,042,405) (1,374,178)
Loans (252,732) (548,090)
---------- ----------
NET CASH USED BY INVESTING ACTIVITIES (3,331,684) (1,947,218)
---------- ----------
FINANCING ACTIVITIES
Proceeds from issuance of:
Notes payable 939,989
Nonrecourse debt for lease financing 216,143 110,147
Common stock 2,613 5,593
Payments for:
Maturities of notes payable (502,500)
Nonrecourse debt for lease financing (30,036) (26,080)
Long-term debt (422) (384)
Cash dividends (27,253) (22,125)
Net proceeds from (payments for):
Deposits 1,041,235 1,675,339
Short-term borrowings 1,157,872 613,284
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,797,641 2,355,774
---------- ----------
NET INCREASE (DECREASE) (90,616) 12,324
Cash and due from banks at beginning of period 1,097,563 1,469,395
---------- ----------
CASH AND DUE FROM BANKS AT END OF PERIOD $1,006,947 $1,481,719
========== ==========
SUPPLEMENTAL DISCLOSURE
Interest paid $ 427,077 $ 218,099
Income taxes paid 36,008 30,695
The accompanying notes are an integral part of these financial statements.
STATE STREET BOSTON CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30,
(Dollars in thousands)
(Unaudited)
NET UNREALIZED
GAIN (LOSS) ON
COMMON RETAINED AVAILABLE-FOR-
STOCK SURPLUS EARNINGS SALE SECURITIES TOTAL
------ ------- -------- --------------- -----
BALANCE AT DECEMBER 31, 1993 $81,846 $25,945 $1,093,365 $ - $1,201,156
Net Income 108,076 108,076
Cash dividends declared (22,125) (22,125)
Issuance of common stock 557 10,095 10,652
Foreign currency translation 4,949 4,949
Net change in unrealized gain (loss)
on available-for-sale securities (22,677) (22,677)
------- ------- ----------- --------- -----------
BALANCE AT JUNE 30, 1994 $82,403 $36,040 $1,184,265 $ (22,677) $1,280,031
======= ======= =========== ========= ===========
BALANCE AT DECEMBER 31, 1994 $82,447 $37,160 $1,273,369 $ (55,840) $1,337,136
Net Income 116,997 116,997
Cash dividends declared (27,253) (27,253)
Issuance of common stock 178 2,984 3,162
Foreign currency translation 5,067 5,067
Net change in unrealized gain (loss)
on available-for-sale securities 56,423 56,423
------- ------- ----------- --------- -----------
BALANCE AT JUNE 30, 1995 $82,625 $40,144 $1,368,180 $ 583 $1,491,532
======= ======= ========== ========= ==========
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. All significant
intercompany transactions have been eliminated upon consolidation. Certain
previously reported amounts have been reclassified to conform to the current
method of presentation. Investments in 50%-owned affiliates are accounted for by
the equity method.
On January 31, 1995, State Street acquired Investors Fiduciary Trust Company
(IFTC) in a transaction accounted for as a pooling of interests. Accordingly,
the financial information for prior periods has been restated to present the
combined financial condition and results of operations of both companies as if
the acquisition had taken place for all periods presented. See Note B -
Acquisition of Investors Fiduciary Trust Company.
Statement of Financial Accounting Standards (SFAS) No. 114, "Accounting by
Creditors for Impairment of a Loan" was adopted by State Street effective
January 1, 1995. SFAS No. 114 requires that the allowance for loan losses
related to loans identified for evaluation under SFAS No. 114 be evaluated based
on discounted cash flows using the loan's initial effective interest rate or the
fair value of the underlying collateral for certain collateral dependent loans.
Prior to January 1, 1995, the allowance for loan losses related to these loans
was based on undiscounted cash flows or the fair value of the collateral for
collateral dependent loans. The adoption of SFAS No. 114 did not have a material
effect on the financial statements of State Street.
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 six months ended June 30, 1995 and 1994,
long-term debt converted into common stock was $60,000 and $632,000,
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 June 30, 1995 and December 31, 1994, and its
cash flows for the six months ended June 30, 1995 and 1994, and the consolidated
results of its operations for the three months and six months ended June 30,
1995 and 1994 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, and the restated financial
statements, notes and other information included in State Street's Form 8-K
filed May 19, 1995.
NOTE B - ACQUISITION OF INVESTORS FIDUCIARY TRUST COMPANY
On January 31, 1995, State Street acquired IFTC in a transaction accounted for
as a pooling of interests. IFTC was acquired for 5,972,222 shares of State
Street common stock.
NOTE C - INVESTMENT SECURITIES
Investment securities consisted of the following at June 30, 1995:
Amortized Unrealized Fair
(Dollars in thousands) Cost Gains Losses Value
---------- ----- ------ -----
Held to Maturity
U.S. Treasury and
Federal agencies $1,686,001 $ 6,869 $ 5,870 $1,687,000
State and political
subdivisions 1,131,789 3,778 6,066 1,129,501
Asset-backed securities 2,035,464 4,103 22,286 2,017,281
Other investments 43,445 92 17 43,520
---------- ------- ------- ----------
Total $4,896,699 $14,842 $34,239 $4,877,302
========== ======= ======= ==========
Available for Sale
U.S. Treasury and
Federal agencies $2,460,477 $11,766 $18,495 $2,453,748
Other investments 95,421 9,722 2,293 102,850
---------- ------- ------- ----------
Total $2,555,898 $21,488 $20,788 $2,556,598
========== ======= ======= ==========
Investment securities consisted of the following at December 31, 1994:
Amortized Unrealized Fair
(Dollars in thousands) Cost Gains Losses Value
---------- ----- ------ -----
Held to Maturity
U.S. Treasury and
Federal agencies $1,668,987 $ 590 $ 35,836 $1,633,741
State and political
subdivisions 1,130,197 317 19,210 1,111,304
Asset-backed securities 2,346,931 1,104 75,823 2,272,212
Other investments 41,155 84 155 41,084
---------- ------- ------- ----------
Total $5,187,270 $2,095 $131,024 $5,058,341
========== ======= ======= ==========
Available for Sale
U.S. Treasury and $3,410,711 $ 496 $ 91,790 $3,319,417
Federal agencies
Other investments 170,823 4,780 12,711 162,892
---------- ------- ------- ----------
Total $3,581,534 $5,276 $104,501 $3,482,309
========== ======= ======= ==========
Held-to-maturity securities are reported at amortized cost and available-for-
sale securities are reported at fair value on the statement of condition.
During the six months ended June 30, 1995, gains of $6,879,000 and losses of
$1,307,000 were realized on sales of available-for-sale securities of
$1,652,583,000. During the six months ended June 30, 1994, gains of $3,042,000
and losses of $3,277,000 were realized on sales of available-for-sale securities
of $1,413,820,000.
NOTE D - ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level believed adequate by
management to absorb estimated probable credit losses. Management's periodic
evaluation of the adequacy of the allowance for loan losses is based on State
Street's past loan loss experience, known and inherent risks in the portfolio,
current economic conditions and adverse situations that may affect the borrowers
ability to repay, timing of future payments, estimated value of any underlying
collateral, and the performance of individiual credits in relation to contract
terms and other relevant factors. The provision for loan losses charged to
earnings is based upon managements judgement 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 Six Months Ended
(Dollars in thousands) June 30, June 30,
------------------- -----------------
1995 1994 1995 1994
---- ---- ---- ----
Balance at beginning of period $59,363 $54,987 $58,184 $54,316
Provision for loan losses 2,000 3,182 4,000 6,352
Loan charge-offs (2,822) (2,782) (3,817) (5,884)
Recoveries 1,704 560 1,878 1,163
------- ------- ------- -------
Balance at end of period $60,245 $55,947 $60,245 $55,947
======= ======= ======= =======
NOTE E - INCOME TAXES
The provision for income taxes included in the Consolidated Statement of Income
is comprised of the following:
Three Months Ended Six Months Ended
(Dollars in thousands) June 30, June 30,
------------------- -----------------
1995 1994 1995 1994
---- ---- ---- ----
Current $25,166 $19,642 $37,315 $31,470
Deferred 3,502 9,165 22,390 28,980
------- ------- ------- -------
Total provision $28,668 $28,807 $59,705 $60,450
======= ======= ======= =======
The provision for income taxes is less than the combined U.S. Corporate tax rate
of 35% for 1995 and the applicable state tax rates for both the three and six
month periods ended June 30, 1995 because of tax exempt income, tax credits, and
a settlement of prior year state taxes received in the second quarter. Tax
exempt income and applicable tax credits reduced the provision for income taxes
below the combined U.S. federal and state statutory rates for the three and six
month periods ended June 30, 1994.
NOTE F - FEE REVENUE - OTHER
The following items are included in the other category of fee revenue:
Three Months Ended Six Months Ended
(Dollars in thousands) June 30, June 30,
------------------------ ------------------------
1995 1994 1995 1994
---- ---- ---- ----
Foreign exchange trading $36,754 $29,079 $73,216 $63,166
Processing service fees 14,968 15,844 32,634 29,768
Service fees 14,409 11,962 26,845 23,380
Securities gains (losses), net 1,955 732 5,572 (235)
Trading account profits (losses) 632 (687) 177 487
Other 8,646 8,670 14,494 19,835
------- ------- -------- -------
Total fee revenue - other $77,364 $65,600 $152,938 $136,401
======= ======= ======== ========
STATE STREET BOSTON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE G - OPERATING EXPENSES - OTHER
The following items are included in the other category of operating expenses:
Three Months Ended Six Months Ended
(Dollars in thousands) June 30, June 30,
------------------------ ------------------------
1995 1994 1995 1994
---- ---- ---- ----
Contract services $29,048 $25,928 $56,467 $51,642
Professional services 12,652 10,881 25,525 22,624
Telecommunications 6,584 6,440 12,657 12,635
Postage, forms and supplies 6,134 5,417 12,112 11,157
Advertising and sales promotion 6,037 5,756 12,131 11,746
FDIC and other insurance 4,416 5,088 8,337 10,748
Operating and processing losses 2,146 17 3,313 72
Other 10,069 11,799 21,188 25,298
------ ------ ------ ------
Total operating expenses - other $77,086 $71,326 $151,730 $145,922
======= ======= ======== ========
NOTE H - 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.
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. State Street
uses derivative financial instruments in trading and balance sheet management
activities.
The following table summarizes the contractual or notional amounts of
significant derivative financial instruments held or issued by State Street at:
June 30, December 31,
(Dollars in millions) 1995 1994
-------- ------------
TRADING:
Interest rate contracts:
Swap agreements .................... $ 222 $ 109
Options and caps purchased ......... 55 13
Options and caps written ........... 57 25
Futures sold ....................... 784 335
Options on futures written ......... 500 225
Options on futures purchased ....... 450 -
Foreign exchange contracts:
Forward, swap and spot ............. 49,806 43,126
Options purchased 244 40
Options written .................... 136 -
BALANCE SHEET MANAGEMENT:
Interest rate contracts:
Swap agreements .................. 211 223
Futures sold ..................... - 165
Options and caps purchased ....... 50 50
Foreign exchange contracts ......... - 83
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:
June 30, December 31,
(Dollars in millions) 1995 1994
-------- ------------
Foreign exchange contracts:
Contracts in a receivable position $ 490 $ 298
Contracts in a payable position 461 288
The above amounts have been reduced by offsetting balances with the counterparty
where a master netting agreement exists. Contracts in a receivable position are
shown in Other Assets on the balance sheet and Contracts in a payable position
are shown in Other Liabilities.
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:
June 30, December 31,
(Dollars in millions) 1995 1994
-------- ------------
Loan commitments $ 2,829 $ 2,536
Standby letters of credit 969 926
Letters of credit 202 168
Indemnified securities lent 22,822 22,300
NOTE I - 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 a
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 June 30, 1995 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.
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 June 30, 1995, and the related consolidated
statements of income for the three month and six month periods ended June 30,
1995 and 1994, and the consolidated statements of cash flows and changes in
stockholders' equity for the six-months periods ended June 30, 1995 and 1994.
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, 1994 and the related consolidated statements of
income, cash flows and changes in stockholders' equity for the year then ended,
and in our report dated January 31, 1995 we expressed an unqualified opinion on
those consolidated financial statements.
ERNST & YOUNG LLP
Boston, Massachusetts
July 14, 1995
STATE STREET BOSTON CORPORATION
Part I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
In January 1995, State Street acquired Investors Fiduciary Trust Company (IFTC)
in a transaction accounted for as a pooling of interests. All prior period
information has been restated to reflect the acquisition.
SUMMARY
In the second quarter, financial performance improved, and, in addition, the
business environment became more favorable.
Earnings per share were $.75 on a fully diluted basis, an increase of 15% from
$.65 in the second quarter of 1994. Net income was $62.7 million, up 16% from
$53.8 million a year ago. The increase in net income reflected revenue growth of
11%, operating expense growth of 11% and a tax settlement. Return on
stockholders equity was 17.2%.
Condensed Income Statement
Taxable Equivalent Basis
(Dollars in millions, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------------- --------------------------------------
1995 1994 Change % 1995 1994 Change %
---- ---- ------ --- ---- ---- ------ ---
Fee revenue $276.7 $249.7 $ 27.0 11 $538.4 $508.7 $ 29.7 6
Interest revenue 337.9 215.6 122.3 57 664.6 421.1 243.5 58
Interest expense 224.3 112.5 111.8 99 442.6 217.8 224.8 103
------ ------ ------ --- ------ ------ ------
Net interest revenue 113.6 103.1 10.5 10 222.0 203.3 18.7 9
Provision for loan losses 2.0 3.2 (1.2) (38) 4.0 6.4 (2.4) (38)
------ ------ ------ --- ------ ------ ------
Net interest revenue after
provision for loan losses 111.6 99.9 11.7 12 218.0 196.9 21.1 11
------ ------ ------
Total revenue 388.3 349.6 38.7 11 756.4 705.6 50.8 7
Operating expenses 289.2 260.8 28.4 11 564.0 524.6 39.4 8
------ ------ ------ --- ------ ------ ------
Income before taxes 99.1 88.8 10.3 12 192.4 181.0 11.4 6
Income taxes 28.7 28.8 (0.1) - 59.7 60.4 (0.7) (1)
Taxable equivalent adjustment 7.7 6.2 1.5 24 15.7 12.5 3.2 26
------ ------ ------ --- ------ ------ ------
Net income $ 62.7 $ 53.8 $ 8.9 16 $117.0 $108.1 $ 8.9 8
====== ====== ====== == ====== ====== ======
Earnings Per Share
Primary $ .75 $ .65 $ .10 15 $ 1.41 $ 1.31 $ .10 8
Fully diluted .75 .65 .10 15 1.40 1.30 .10 8
($ and % change based on dollars in thousands)
In the second quarter, several factors which drive long-term growth improved.
Non-U.S. assets and the number of transactions processed increased and U.S.
equity and bond market values continued to climb. Growth in the mutual fund
servicing and investment management businesses helped fuel a 7% consecutive
quarter increase in fiduciary compensation. Foreign deposits grew, and foreign
exchange trading revenue remained strong.
At June 30, assets under custody were $2.0 trillion, up $320 billion, or 19%,
from a year ago, which was restated to include recently acquired IFTC. About
half of the increase was due to market valuations with the other half from
additional assets from existing customers and new business. Assets under
management were $185 billion, up 33% from June 1994, due primarily to additional
assets from existing customers and net new business.
TOTAL REVENUE
Total revenue for the quarter was $388.3 million, up $38.7 million, or 11%, from
a year ago. Revenue grew from the comprehensive range of services provided to
customers and was reflected in fiduciary compensation, net interest revenue and
foreign exchange trading revenue.
Year-to-date, total revenue was $756.4 million, up $50.8 million, or 7%, from
1994.
FEE REVENUE
Fee revenue was $276.7 million, up $27.0 million, or 11%, from the second
quarter of 1994. The largest component of fee revenue is fiduciary compensation,
which is derived from accounting, custody, information services, recordkeeping,
investment management and trustee services. Fiduciary compensation was $199.4
million, up $15.3 million, or 8%, from a year ago. The increase in revenue came
in part from investment management services and services for pension plans. The
rate of growth of fiduciary compensation was restrained by reductions in ongoing
revenue as discussed in the first quarter, which continued to lower the growth
rate of fiduciary compensation by eight percentage points. These revenue
reductions resulted from certain customers internalizing functions, pricing
adjustments to retain certain large customers who are using a broader array of
services, and customers no longer at State Street for various other reasons.
Fiduciary compensation reflected revenue growth from managing international
assets, growth in actively managed domestic assets and personal trust. Revenue
from lending securities of pension plans, while down from the first quarter due
to the flatter yield curve, was up from a year ago. Mutual fund services revenue
benefited from 267 new funds and asset growth. The installation of customers
using 401(k) recordkeeping and investment services as well as additional
business outside the United States also contributed to the year-over-year
improvement. Fiduciary compensation from corporate trust services declined in
part because of the significant decline in new issuance of asset-backed
securities.
Foreign exchange revenue was $36.8 million, up $7.7 million, or 26%, from a year
ago. The underlying trends supporting long-term growth in foreign exchange
trading volume continued, particularly the management of currency risk by
investment managers who invest globally. Trading in emerging market currencies
returned to previous levels. Market volatility during the quarter also
contributed to increased trading activity.
Service fees were $14.4 million, up $2.4 million from a year ago due to expanded
use of currency management products, increased loan service fees and increased
use of brokerage services. Securities gains were $2.0 million, compared with $.7
million in the second quarter of 1994.
Other revenue of $9.2 million was up $1.2 million from a year ago. A
non-strategic business providing card replacement and other services for a bank
card association was sold, resulting in a gain of $2.7 million. Trading account
profits replaced losses a year ago, for an increase of $1.3 million. These
positive factors were partially offset by lower currency translation gains on
the foreign bond portfolio, which were a loss of $.1 million, down from a gain
of $3.8 million a year ago.
For the six-month period ending June 30, 1995, fee revenue was $538.4 million,
up $29.8 million, or 6%, over 1994. The increase resulted primarily from an
increase in fiduciary compensation, up $13.2 million, and higher foreign
exchange trading revenue, up $10.1 million.
NET INTEREST REVENUE
Taxable equivalent net interest revenue was $113.6 million, up $10.5 million, or
10%, over the same quarter a year ago, primarily reflecting balance sheet growth
to support customers' activities, and the benefits of higher asset yields. These
positive factors were partially offset by a narrower spread between interest
rates earned and paid due to rising interest rates and a flatter Treasury yield
curve.
Average interest-earning assets grew $4.0 billion, or 21%, to $22.7 billion,
funded primarily by an increase in securities sold under repurchase agreements
and foreign deposits. Securities sold under repurchase agreements were up $3.0
billion, or 73%, to $7.0 billion, reflecting short-term investments by
customers. Foreign deposits increased by $1.1 billion, including a $.9 billion
increase in transaction account balances. Noninterest-bearing deposits declined
$.9 billion to $4.0 billion due primarily to lower deposit balances from mutual
funds and corporate trust services. The spread between interest rates earned and
paid declined from 1.55% to 1.21%. The net interest margin declined from 2.21%
to 2.01%, reflecting narrower spreads and a larger portion of funding from
interest-bearing sources of funds.
Three Months Ended
June 30,
-------------------------------------------
1995 1994
----------------- --------------------
Average Average
(Dollars in millions) Balance Rate Balance Rate
------- ------ -------- ----
Interest earning assets $22,702 5.97% $18,715 4.62%
Interest bearing liabilities 18,894 4.76 14,701 3.07
------ ---- ------ ----
Excess of rates earned
over rates paid 1.21% 1.55%
==== ====
Net Interest Margin 2.01% 2.21%
==== ====
For the six month period ending June 30, 1995, taxable equivalent net interest
revenue was $222.0 million up 9% from 1994, for the same reasons as discussed
for the quarter.
OPERATING EXPENSES
Operating expenses of $289.2 million were up $28.4 million, or 11%, from the
second quarter of 1994 supporting business growth.
Salaries and employee benefits were $159.4 million, up $16.0 million, or 11%,
due to salary increases, a 4% increase in staff, incentive compensation and
employee benefit costs. Equipment expense was up $3.3 million reflecting
increased computer capacity and disk storage as well as additional workstations
and software related to reengineering. Occupancy expense was up $3.4 million as
a result of space added in 1994 in both U.S. and non-U.S. locations. Other
expenses were up $5.8 million due in part to higher operating and processing
loss expense and higher subcustodian expense, especially in the more expensive
emerging markets.
For the six-month period ending June 30, 1995, operating expenses were $564.0
million, up $39.4 million, or 8%, from 1994, due to salary increases and
additional staff, increased occupancy expense, higher equipment expense, higher
operating and processing loss expense, and other costs supporting business
growth.
CREDIT QUALITY
At June 30, 1995, total loans were $3.5 billion. Excluding securities settlement
advances and other loans to financial asset services customers and loans to
securities brokers, loans were $2.7 billion, or 10% of total assets.
The provision for loan losses charged against income was $2.0 million, down from
$3.2 million a year ago. During the quarter, the allowance for loan losses
increased from $59.4 million to $60.2 million. At June 30, 1995, the allowance
for loan losses was 1.70% of ending loans.
Loan ratios 1995 1994
------------------- -------------------
2Q 1Q 4Q 3Q 2Q 1Q
-- -- -- -- -- --
Allowance to ending loans 1.70% 1.82% 1.80% 1.89% 1.72% 1.67%
Net charge-offs
to average loans .13 .10 .26 .10 .25 .30
Non-performing loans to
ending loans .75 .69 .71 .74 .83 .70
During the second quarter, non-performing loans increased from $22.6 million to
$26.5 million. In the second quarter, net charge-offs were $1.1 million, down
from $2.2 million in the second quarter of 1994.
TAXES
A settlement of prior year's state taxes resulted in a net $3.6 million
reduction in taxes. The settlement resolves a claim over the taxability of
interest revenue on certain Massachusetts bonds on which State Street paid taxes
from 1977 to 1984.
The state tax settlement lowered the quarterly effective tax rate by four
percentage points to 31.4%. Excluding this settlement, the tax rate is
comparable to the 34.8% rate in the second quarter of 1994. Based on current
plans and projections, we estimate an effective tax rate of 34% for the full
year 1995, including the tax settlement.
LINES OF BUSINESS
State Street classifies its operations into three lines of business - Financial
Asset Services, Investment Management and Commercial Lending.
Financial Asset Services primarily offers custody-related services for large
pools of assets such as mutual funds and pension plans and corporate
trusteeship. Fiduciary compensation revenue is derived from services related to
State Streets $2.0 trillion of assets under custody and $206 billion of bonds
under trusteeship. In addition to fiduciary compensation, certain financial
asset services customers generate other types of fee revenue, particularly
foreign exchange trading revenue and net interest revenue. Noninterest-bearing
deposits from these customers comprise a significant amount of State Streets
total noninterest-bearing deposits available for investment. These customers
also invest substantial short term funds with State Street. Revenue from
investing these deposits and funds is reported as interest revenue.
Investment Management is comprised of the business components that manage $185
billion of institutional and personal financial assets worldwide. Fee revenue is
derived from a broad array of products that focus on quantitive equity
management both passive and active, and money market funds.
Commercial Lending services are provided to commercial and financial customers.
State Street activities are aimed at middle-market companies in the northeastern
United States, as well as specialized industries on a nationwide basis.
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.
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 company. In the table below, Financial Asset Services information for 1994
has been restated to include the results of IFTC.
The following is a summary of line-of-business results for the six months ended
June 30:
Financial Investment Commercial
Asset Services Management Lending Corporate
(Taxable equivalent basis, -------------- ---------- ---------- ---------
dollars in millions) 1995 1994 1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ---- ---- ----
Fee revenue $440.5 $415.3 $80.3 $76.7 $18.2 $19.7 $(0.4) $(3.1)
Net interest revenue 151.4 152.6 4.4 4.0 67.3 49.7 (1.2) (3.0)
Provision for loan losses .2 .6 3.8 5.8
------ ------ ----- ----- ----- ----- ------ ------
Total revenue 591.7 567.3 84.7 80.7 81.7 63.6 (1.6) (6.1)
Operating expenses 463.2 425.6 52.2 48.1 36.5 37.3 12.2 13.5
------ ------ ----- ----- ----- ----- ------ ------
Income before income
taxes 128.5 141.7 32.5 32.6 45.2 26.3 (13.8) (19.6)
Income taxes 52.2 60.3 15.5 14.3 19.3 11.5 (11.8) (13.2)
------ ------ ----- ----- ----- ----- ------ ------
Net income $ 76.3 $ 81.4 $17.0 $18.3 $25.9 $14.8 $(2.0) $(6.4)
====== ====== ===== ===== ===== ===== ===== =====
Percentage Contribution 65% 75% 14% 16% 22% 16% (2%) (6%)
Average Assets $22,950 $19,938 $14 $16 $2,562 $2,267
State Streets line-of-business activities have distinct revenue characteristics.
Further understanding of line-of-business results can be ascertained from
information on fee revenue, and net interest revenue, as discussed in earlier
sections describing the operations of State Street. The significant revenue
items applicable to the respective lines of business is provided below as well
as significant expense information where applicable.
Financial Asset Services contributed 65% of net income for the first six months
of 1995. Net income was $76.3 million, a decrease of $5.1 million, or 6%, from
$81.4 million in the same period a year ago. Fee revenue increased $25.2
million, or 6%, from the same period in 1994 due primarily to increased foreign
exchange revenue, fiduciary compensation and net securities gains. Net interest
revenue declined $1.2 million. A flatter Treasury yield curve resulted in
significantly lower spreads between interest rates earned and paid. This
negative factor was nearly offset by the benefits of continued growth of
customer funds on the balance sheet, particularly growth in securities sold
under repurchase agreements and foreign deposits. Operating expenses increased
$37.6 million, or 9%, primarily due to increased salaries and employee benefit
costs.
Investment Management contributed 14% of net income for the first six months of
1995. Net income was $17.0 million, a decrease of $1.3, million or 7%, from
$18.3 million for the same period a year ago.
Commercial Lending contributed 22% of net income for the first six months of
1995. Net income was $25.9 million, an increase of $11.1 million, or 75%, over
$14.8 million for the same period in 1994. Net interest revenue increased $17.6
million due to additional loan volume and a wider spread between interest earned
and paid. Operating expenses declined slightly from $37.3 million to $36.5
million.
Corporate items reduced net income by $2.0 million compared with a reduction in
net income of $6.4 million for the first six months of 1994. A net $3.6 million
reduction in taxes due to a state tax settlement increased corporate net income
in the first six months of 1995.
ACCOUNTING CHANGES
Statement of Financial Accounting Standards (SFAS) No. 114, "Accounting by
Creditors for Impairment of a Loan" was adopted by State Street effective
January 1, 1995. SFAS No. 114 requires that the allowance for loan losses
related to loans identified for evaluation under SFAS No. 114 be evaluated based
on discounted cash flows using the loan's initial effective interest rate or the
fair value of the underlying collateral for certain collateral dependent loans.
Prior to January 1, 1995, the allowance for loan losses related to these loans
was based on undiscounted cash flows or the fair value of the collateral for
collateral dependent loans. The adoption of SFAS No. 114 did not have a material
effect on the financial statements of State Street.
CAPITAL AND LIQUIDITY
State Street has a strong capital position with which to support current
operations and growth, and continues to generate capital internally at a high
rate. In the second quarter, the internal capital generation rate was 13.4%.
At June 30, 1995, State Streets capital and leverage ratios exceeded the
regulatory guidelines:
Minimum
State Regulatory
Street Guidelines
------ ----------
Risk-based capital ratios:
Tier 1 capital 14.6% 4.0%
Total capital 15.1 8.0
Leverage ratio 5.6 3.0
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, including a leverage ratio of 5% or more. 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. State Street 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 June 30, 1995, the
portfolio included $5.9 billion of interest-bearing deposits with banks and $4.8
billion of securities purchased under resale agreements. Although not relied on
for daily liquidity needs, the $2.6 billion available-for-sale-portfolio of
marketable securities provides a significant secondary source of liquidation.
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
June 30, 1995, State Street liquid assets were 80% of total assets.
FOREIGN EXCHANGE AND DERIVATIVE FINANCIAL INSTRUMENTS
State Street uses foreign exchange and a variety of financial derivative
instruments to support customers' needs, to conduct trading activities, and to
manage interest rate and currency risk. These activities either generate trading
revenue or enhance the stability of net interest revenue. In addition, State
Street provides services related to derivative instruments in its role as both a
manager and servicer of financial assets.
As a part of trading activities, State Street also assumes market positions in
both the foreign exchange and interest-rate markets using financial derivatives
- primarily forward foreign exchange contracts, foreign exchange and
interest-rate options, and interest-rate swaps. State Street's positions are
based on market expectations and customers' needs. As of June 30, 1995, the
notional amount of these instruments was approximately $52 billion of which $50
billion was foreign exchange forward, swap and spot contracts.
Trading activities involving both foreign exchange and interest-rate derivatives
are managed using earnings at risk measures and trading limits as established by
risk-management policies. Interest-rate and foreign exchange derivatives that
are used as part of the asset- and liability-management process are subjected to
the same credit and interest-rate risk processes for financial instruments
carried on the balance sheet.
As a manager of financial assets for others, State Street uses derivative
financial instruments to hedge against market risk, adjust portfolio duration
and enable efficient portfolio construction. These activities are undertaken in
accordance with investment guidelines supplied by, or disclosed to, State
Street's customers. As a servicer of financial assets, State Street acts as
trustee, custodian and/or administrator for its customers' investment funds,
certain of which may use derivative instruments in their investment strategies.
These activities are part of the normal responsibilities of State Street as a
service provider and are discharged in accordance with customer service
contracts.
ACQUISITION
On January 31, State Street acquired Investors Fiduciary Trust Company, a
servicer of mutual funds with $115 billion of assets under custody based in
Kansas City, Missouri. IFTC was acquired and accounted for as a pooling of
interests from DST Systems, Inc. and Kemper Financial Services, Inc. The
acquisition strengthens State Street's market leadership, bringing additional
customers and different systems alternatives to service the mutual funds market.
State Street will bring its broad range of global products to these customers.
RECENT ANNOUNCEMENTS
State Street considers acquisitions that introduce new capabilities into our
product line, expand our geographic reach or increase market share. During the
second quarter, State Street announced two acquisitions in the corporate trust
business which will increase our market share, and two joint ventures which will
increase our market share of stock transfer business and extend our capabilities
outside the United States.
In May, State Street acquired BayBanks' corporate trust business serving 269
corporate accounts with $4.4 billion in assets under trusteeship. In June, State
Street announced an agreement in principle to acquire Bank of Boston's corporate
trust business, which comprises more than 1,400 corporate accounts, providing
trusteeship, paying and escrow agent services for $60 billion in assets. Taken
together, these acquisitions represent nearly a 30% increase in State Street's
current corporate trust business and will bring assets under trusteeship to over
$270 billion.
State Street also announced a 50-50 joint venture between our Boston Financial
Data Services affiliate and the Bank of Boston Corporation. Subject to
regulatory approval, the new entity, BancBoston State Street Investor Services,
will combine the corporate stock transfer operations of both companies into the
third-largest stock transfer agent in the United States with more than 10
million accounts and 1,000 corporate customers worldwide.
State Street signed a memorandum of understanding with Unit Trust of India,
India's leading provider of investment services, to form a new company that will
offer fund accounting services to India's $33 billion mutual fund market. Unit
Trust of India provides State Street with a valuable partner which enjoys a
dominant, 80% share in the Indian mutual fund sector, with $25 billion in assets
in 58 different funds. The Indian mutual fund market already has 59 million
investor accounts and is expected to grow past $100 billion in assets by the
year 2000.
STOCK BUY BACK
In June, 1995, the Board of Directors reaffirmed its authorization to repurchase
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 June 30.
OUTLOOK
State Street is executing a strategy of selective expansion, in cases where it
does not substantially alter its business mix. State Street is also carefully
managing expenses, in part by keeping the staff level constant and by tapering
the level of investment spending as a percentage of revenue to a more normal
rate of approximately 8% by the end of 1995.
State Street is benefiting from the capabilities of its operating infrastructure
which can process substantially higher volumes of non-US activity. State Street
continues to build and enhance its custody system which processes both
international and domestic securities. New products, including the defined
contribution plan recordkeeping system and currency risk management products,
are contributing to revenue growth. State Street's development of non-U.S.
locations is resulting in additional opportunities.
State Street's target for 1995 remains double-digit earnings per share growth
and management expects to reach that target. This expectation is based on
anticipated favorable market conditions and continued improvement in performance
during the second half of 1995.
State Street continues to believe long-term trends that are creating a strong
demand for our services have a long way to run. And, State Street continues to
build upon its powerful global franchise in order to convert that demand into
increased value for its stockholders.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Note I to the Consolidated Financial Statements on Page 10.
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
On June 15, 1995 Registrant announced that its Board of Directors reaffirmed its
authorization to purchase up to 2 million shares of the Corporation's Common
Stock. A copy of Registrant's press release is filed as an exhibit hereto.
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibit Index
Exhibit Number Page of this Report
11 Statements re computations of per share earnings 23
15 Letter re: Unaudited interim financial information 24
27 Financial data schedule -
99 Press Release dated June 15, 1995 re: Stock Repurchase 26
(b)Reports on Form 8-K
Registrant filed two Form 8-K's during the quarter ending June 30, 1995:
A report on form 8-K dated May 19, 1995, that included as exhibits, the
Registrant's restated year ended December 31, 1994 and prior years financial
information. Financial information previously filed with the Securities and
Exchange Commission was restated to include the results of operations of
Investors Fiduciary Trust Company, acquired on January 31, 1995 and accounted
for as a pooling of interests.
A report on Form 8-K dated June 22, 1995, that included as an exhibit, a copy of
the Underwriting Agreement dated as of June 21, 1995 among Registrant, Goldman
Sachs & Co. and Kemper Financial Services, Inc. (the "Selling Stockholder")
relating to the sale by the Selling Stockholder of 2,986,111 shares of
Registrant's common stock pursuant to Registrant's Registration Statement on
Form S-3 (no. 33-59505).
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: August 11, 1995 By:
--------------------------------------
David A. Spina
Vice Chairman, Chief Financial Officer
and Treasurer
Date: August 11, 1995 By:
--------------------------------------
Rex S. Schuette
Senior Vice President and Comptroller