SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1995 Commission File Number 0-5108
STATE STREET BOSTON CORPORATION
- - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Commonwealth of Massachusetts 04-2456637
- - -------------------------------------------------------------------------------
(State or other jurisdiction of incorporation) (I.R.S. Employer
Identification Number)
225 Franklin Street, Boston, Massachusetts 02110
- - -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (6l7) 786-3000.
Indicate by check mark whether the registrant (l) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the last 90 days.
YES X NO ___
Number of shares of registrant's common stock outstanding on October 31, 1995
was 82,540,197.
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 SEPTEMBER 30,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
1995 1994
-------- --------
INTEREST REVENUE
Deposits with banks $ 74,599 $ 51,279
Investment securities:
U.S. Treasury and Federal agencies 52,467 47,449
State and political subdivisions 12,958 9,873
Other investments 33,161 34,428
Loans 61,016 47,776
Securities purchased under resale agreements,
securities borrowed and Federal funds sold 100,815 47,064
Trading account assets 6,286 5,769
-------- --------
Total interest revenue 341,302 243,638
INTEREST EXPENSE
Deposits 104,287 73,379
Other borrowings 125,906 68,487
Long-term debt 2,127 2,151
-------- --------
Total interest expense 232,320 144,017
-------- --------
Net interest revenue 108,982 99,621
Provision for loan losses 2,001 3,159
-------- --------
Net interest revenue after
provision for loan losses 106,981 96,462
FEE REVENUE
Fiduciary compensation 214,415 185,011
Other 69,367 67,670
-------- --------
Total fee revenue 283,782 252,681
-------- --------
REVENUE BEFORE OPERATING EXPENSES 390,763 349,143
OPERATING EXPENSES
Salaries and employee benefits 164,966 148,459
Occupancy, net 21,145 19,353
Equipment 32,242 28,057
Other 82,333 68,749
-------- --------
Total operating expenses 300,686 264,618
-------- --------
Income before income taxes 90,077 84,525
Income taxes 25,441 29,372
-------- --------
NET INCOME $ 64,636 $ 55,153
======== ========
EARNINGS PER SHARE
Primary $.78 $.66
Fully diluted .77 .66
AVERAGE SHARES OUTSTANDING (in thousands)
Primary 83,172 82,958
Fully diluted 83,911 83,543
The accompanying notes are an integral part of these financial statements.
STATE STREET BOSTON CORPORATION
CONSOLIDATED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
1995 1994
---------- ----------
INTEREST REVENUE
Deposits with banks $ 210,469 $ 149,033
Investment securities:
U.S. Treasury and Federal agencies 194,954 117,425
State and political subdivisions 38,199 29,877
Other investments 102,978 101,273
Loans 177,393 131,412
Securities purchased under resale agreements,
securities borrowed and Federal funds sold 249,737 106,703
Trading account assets 16,454 16,475
---------- ----------
Total interest revenue 990,184 652,198
INTEREST EXPENSE
Deposits 307,005 192,876
Other borrowings 361,524 162,492
Long-term debt 6,403 6,479
---------- ----------
Total interest expense 674,932 361,847
---------- ----------
Net interest revenue 315,252 290,351
Provision for loan losses 6,001 9,511
---------- ----------
Net interest revenue after
provision for loan losses 309,251 280,840
FEE REVENUE
Fiduciary compensation 599,936 557,311
Other 222,305 204,071
---------- ----------
Total fee revenue 822,241 761,382
---------- ----------
REVENUE BEFORE OPERATING EXPENSES 1,131,492 1,042,222
OPERATING EXPENSES
Salaries and employee benefits 474,866 435,928
Occupancy, net 62,727 54,160
Equipment 93,057 84,412
Other 234,063 214,671
---------- ----------
Total operating expenses 864,713 789,171
---------- ----------
Income before income taxes 266,779 253,051
Income taxes 85,146 89,822
---------- ----------
NET INCOME $ 181,633 $ 163,229
========== ==========
EARNINGS PER SHARE
Primary $2.19 $1.97
Fully Diluted 2.17 1.96
AVERAGE SHARES OUTSTANDING (in thousands)
Primary 83,035 82,814
Fully Diluted 83,792 83,460
The accompanying notes are an integral part of these financial statements.
STATE STREET BOSTON CORPORATION
CONSOLIDATED STATEMENT OF CONDITION
(DOLLARS IN THOUSANDS)
(UNAUDITED)
September 30, December 31,
1995 1994
------------ ------------
ASSETS
Cash and due from banks $ 1,257,308 $ 1,097,563
Interest-bearing deposits with banks 6,001,796 4,847,069
Securities purchased under resale agreements
and securities borrowed 5,446,640 1,886,759
Federal funds sold 355,450 768,615
Trading account assets 437,782 527,550
Investment securities:
Held to maturity 4,703,266 5,187,270
Available for sale 1,466,512 3,482,309
------------ ------------
Total investment securities 6,169,778 8,669,579
Loans 3,671,446 3,233,221
Allowances for loan losses (62,540) (58,184)
------------ ------------
Net loans 3,608,906 3,175,037
Premises and equipment 479,341 476,319
Customers' acceptance liability 62,099 55,358
Accrued income receivable 376,849 363,585
Other assets 1,329,585 679,509
------------ ------------
TOTAL ASSETS $ 25,525,534 $ 22,546,943
============ ============
LIABILITIES
Deposits:
Noninterest-bearing $ 4,453,426 $ 4,781,917
Interest-bearing:
Domestic 1,794,277 1,895,209
Foreign 8,828,506 7,920,932
------------ ------------
Total deposits 15,076,209 14,598,058
Federal funds purchased 656,410 113,143
Securities sold under repurchase agreements 5,782,697 4,798,261
Other short-term borrowings 788,897 649,052
Notes payable 131,010
Acceptances outstanding 62,597 55,621
Accrued taxes and other expenses 503,592 418,840
Other Liabilities 858,431 449,283
Long-term debt 126,800 127,549
------------ ------------
TOTAL LIABILITIES 23,986,643 21,209,807
STOCKHOLDERS' EQUITY
Preferred stock, no par: authorized 3,500,000;
issued none
Common Stock, $1 par: authorized 112,000,000;
issued 82,694,000 and 82,447,000 82,694 82,447
Surplus 41,547 37,160
Retained earnings 1,416,137 1,273,369
Net unrealized gain(loss) on
available-for-sale securities 4,818 (55,840)
Treasury stock (at cost, 161,000 shares) (6,305)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 1,538,891 1,337,136
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,525,534 $ 22,546,943
============ ============
The accompanying notes are an integral part of these financial statements.
STATE STREET BOSTON CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30,
(DOLLARS IN THOUSANDS)
(UNAUDITED)
1995 1994
----------- -----------
OPERATING ACTIVITIES
Net income $ 181,633 $ 163,231
Noncash charges for depreciation, amortization, provision for
loan losses and foreclosed properties, and deferred income taxes 115,293 133,803
----------- -----------
Net income adjusted for noncash charges 296,926 297,034
Adjustments to reconcile to net cash provided (used) by operating activities:
Securities (gains)losses, net (5,903) (1,294)
Net change in:
Trading account assets 89,768 (52,990)
Accrued taxes and other expenses (4,578) 17,375
Accrued income receivable (13,264) (73,781)
Other, net (241,539) (10,927)
----------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 121,410 (197,271)
----------- -----------
INVESTING ACTIVITIES
Payments for purchases of:
Held-to maturity securities (1,446,552) (2,916,561)
Available-for-sale securities (1,194,902) (4,347,413)
Lease financing assets (438,105) (312,146)
Premises and equipment (80,492) (98,504)
Proceeds from:
Maturities of held-to-maturity securities 1,931,224 2,350,350
Sales of available-for-sale securities 3,252,304 1,688,260
Maturities of available-for-sale securities 82,743 1,256,204
Principal collected from lease financing 41,771 35,229
Net (payments for) proceeds from:
Interest-bearing deposits with banks (1,154,727) (232,978)
Federal funds sold, resale agreements and
securities borrowed (3,146,716) (1,074,433)
Loans (347,572) (330,266)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (2,501,024) (3,982,268)
----------- -----------
FINANCING ACTIVITIES
Proceeds from issuance of:
Notes payable 939,989
Nonrecourse debt for lease financing 349,832 237,540
Common stock 3,606 6,174
Payments for:
Maturities of notes payable (808,979)
Nonrecourse debt for lease financing (42,420) (35,156)
Long-term debt (639) (582)
Cash dividends (41,288) (33,595)
Purchase of treasury stock (6,676)
Net proceeds from (payments for):
Deposits 478,151 1,015,004
Short-term borrowings 1,667,783 2,149,791
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,539,359 3,339,176
----------- -----------
NET INCREASE (DECREASE) 159,745 (445,821)
Cash and due from banks at beginning of period 1,097,563 1,469,395
----------- -----------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 1,257,308 $ 1,023,574
=========== ===========
SUPPLEMENTAL DISCLOSURE
Interest paid $ 669,670 $ 363,864
Income taxes paid 48,968 42,279
The accompanying notes are an integral part of these financial statements.
STATE STREET BOSTON CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30,
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Net Unrealized
Gain(Loss) on
Common Retained Available-For- Treasury
Stock Surplus Earnings Sales Securities Stock Total
--------- --------- ------------- ---------------- -------- -------------
BALANCE AT DECEMBER 31, 1993 $ 81,846 $ 25,945 $ 1,093,365 $ - $ - $ 1,201,156
Net Income 163,229 163,229
Cash dividends declared (33,595) (33,595)
Issuance of common stock 594 11,013 11,607
Foreign currency translation 6,386 6,386
Net unrealized gain(loss)
on available-for-sale securities (30,734) (30,734)
--------- --------- ------------- ----------- -------- -------------
BALANCE AT SEPTEMBER 30, 1994 $ 82,440 $ 36,958 $ 1,229,385 $ (30,734) $ - $ 1,318,049
========= ========= ============= =========== ======== =============
BALANCE AT DECEMBER 31, 1994 $ 82,447 $ 37,160 $ 1,273,369 $ (55,840) - $ 1,337,136
Net income 181,633 181,633
Cash dividends declared (41,288) (41,288)
Issuance of common stock 247 4,603 4,850
Common stock acquired (6,676) (6,676)
Issuance of treasury stock (216) 371 155
Foreign currency translation 2,423 2,423
Net unrealized gain(loss)
on available-for-sale securities 60,658 60,658
--------- --------- ------------- ----------- -------- -------------
BALANCE AT SEPTEMBER 30, 1995 $ 82,694 $ 41,547 $ 1,416,137 $ 4,818 $ (6,305) $ 1,538,891
========= ========= ============= =========== ======== =============
The accompanying notes are an integral part of these financial statements.
STATE STREET BOSTON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of State Street
Boston Corporation ("State Street") and its subsidiaries, including its
principal subsidiary, State Street Bank and Trust Company. 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 nine months ended September 30, 1995 and
1994, long-term debt converted into common stock was $138,000 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 September 30, 1995 and December 31, 1994,
and its cash flows for the nine months ended September 30, 1995 and 1994, and
the consolidated results of its operations for the three months and nine months
ended September 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 September 30, 1995:
Amortized Unrealized Fair
(Dollars in thousands) Cost Gains Losses Value
----------- -------- -------- ----------
Held to Maturity
U.S. Treasury and
Federal agencies $ 1,616,655 $ 6,841 $ 4,197 $1,619,299
State and political
subdivisions 1,176,699 6,265 3,585 1,179,379
Asset-backed securities 1,879,771 3,383 18,485 1,864,669
Other investments 30,141 74 58 30,157
----------- -------- -------- ----------
Total $ 4,703,266 $ 16,563 $ 26,325 $4,693,504
=========== ======== ======== ==========
Available for Sale
U.S. Treasury and
Federal agencies $ 1,248,039 $ 5,602 $ 7,340 $1,246,301
Other investments 210,306 10,151 246 220,211
----------- -------- -------- ----------
Total $ 1,458,345 $ 15,753 $ 7,586 $1,466,512
=========== ======== ======== ==========
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
Federal agencies $ 3,410,711 $ 496 $ 91,790 $3,319,417
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 nine months ended September 30, 1995, gains of $11,566,000 and losses
of $5,663,000 were realized on sales of available-for-sale securities of
$3,252,304,000. During the nine months ended September 30, 1994, gains of
$4,619,000 and losses of $3,325,000 were realized on sales of available-for-sale
securities of $1,688,260,000.
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 individual credits in relation to contract
terms and other relevant factors. The provision for loan losses charged to
earnings is based upon management's 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 Nine Months Ended
(Dollars in thousands) September 30, September 30,
---------------------- ------------------------
1995 1994 1995 1994
------- ------- -------- --------
Balance at beginning of period $60,245 $55,947 $58,184 $54,316
Provision for loan losses 2,001 3,159 6,001 9,511
Loan charge-offs (415) (1,130) (4,232) (7,014)
Recoveries 709 360 2,587 1,523
------- ------- ------- -------
Balance at end of period $62,540 $58,336 $62,540 $58,336
======= ======= ======= =======
NOTE E - INCOME TAXES
The provision for income taxes included in the Consolidated Statement of Income
is comprised of the following:
Three Months Ended Nine Months Ended
(Dollars in thousands) September 30, September 30,
---------------------- ------------------------
1995 1994 1995 1994
------- ------- -------- --------
Current $ 5,235 $21,824 $42,550 $53,276
Deferred 20,206 7,548 42,596 36,546
------- ------- ------- -------
Total provision $25,441 $29,372 $85,146 $89,822
======= ======= ======= =======
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 nine
month periods ended September 30, 1995 because of tax exempt income, tax
credits, settlement of prior years' state taxes in the second quarter and a
reduction of state taxes in the third quarter. Tax exempt income and applicable
tax credits reduced the provision for income taxes below the combined U.S.
Corporate and state statutory rates for the three and nine month periods ended
September 30, 1994.
For years beginning on or after January 1, 1995, the Commonwealth of
Massachusetts reduced the tax rate applicable to financial institutions. In
accordance with FAS 109, the change in tax rate resulted in a revaluation of the
deferred tax assets and liabilities which were in existence at the beginning of
1995. This revaluation and reduction of current year state tax expense reduced
the 1995 provision for state taxes. In accordance with FAS 109, the benefit was
recorded in the third quarter of 1995.
NOTE F - FEE REVENUE - OTHER
The following items are included in the other category of fee revenue:
Three Months Ended Nine Months Ended
(Dollars in thousands) September 30, September 30,
---------------------- ------------------------
1995 1994 1995 1994
------- ------- -------- --------
Foreign exchange trading $36,374 $25,696 $109,590 $ 88,863
Service fees 15,116 12,516 41,961 35,897
Processing service fees 10,978 18,917 43,613 48,685
Trading account profits(losses) 1,624 (252) 1,801 235
Securities gains,net 331 1,909 5,903 1,674
Other 4,944 8,884 19,437 28,717
------- ------- -------- --------
Total fee revenue - other $69,367 $67,670 $222,305 $204,071
======= ======= ======== ========
NOTE G - OPERATING EXPENSES - OTHER
The following items are included in the other category of operating expenses:
Three Months Ended Nine Months Ended
(Dollars in thousands) September 30, September 30,
---------------------- ------------------------
1995 1994 1995 1994
------- ------- -------- --------
Contract services $31,147 $26,982 $ 87,614 $ 78,624
Professional services 11,273 12,517 36,798 35,141
Advertising and sales promotion 6,942 6,101 19,600 18,736
Postage, forms and supplies 5,669 4,774 17,781 15,931
Telecommunications 5,536 5,180 17,667 16,925
Operating and processing losses 5,102 (164) 8,415 (91)
FDIC and other insurance 548 4,004 8,885 14,752
Other 16,116 9,355 37,303 34,653
------- ------- -------- --------
Total operating
expenses - other $82,333 $68,749 $234,063 $214,671
======= ======= ======== ========
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:
September 30, December 31,
(Dollars in millions) 1995 1994
------------ -----------
TRADING:
Interest rate contracts:
Swap agreements $ 353 $ 109
Options and caps purchased 15 13
Options and caps written 26 25
Futures sold 714 335
Options on futures written 200 225
Options on futures purchased 200 -
Foreign exchange contracts:
Forward, swap and spot 58,369 43,126
Options purchased 95 40
Options written 95 -
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:
September 30, December 31,
(Dollars in millions) 1995 1994
------------ -----------
Foreign exchange contracts:
Contracts in a receivable position $ 796 $ 298
Contracts in a payable position 702 288
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:
September 30, December 31,
(Dollars in millions) 1995 1994
------------ -----------
Loan commitments $ 3,022 $ 2,536
Standby letters of credit 1,116 926
Letters of credit 204 168
Indemnified securities lent 25,271 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 September 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 September 30, 1995, and the related consolidated
statements of income for the three month and nine month periods ended September
30, 1995 and 1994, and the consolidated statements of cash flows and changes in
stockholders' equity for the nine month periods ended September 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
(not presented herein), and in our report dated January 31, 1995, we expressed
an unqualified opinion on those consolidated financial statements.
ERNST & YOUNG LLP
Boston, Massachusetts
October 16, 1995
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
Earnings per fully diluted share were $.77, an increase of 17% from $.66 in the
third quarter of 1994. Net income was $64.6 million, up from $55.2 million a
year ago. The increase reflected revenue growth of 13%, operating expense growth
of 14%, and a reduction in the Massachusetts income tax. Return on stockholders'
equity was 16.9%.
Condensed Income Statement
Taxable Equivalent Basis
(Dollars in millions, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------- ----------------------------------------
1995 1994 Change % 1995 1994 Change %
------ ------ ------ --- -------- -------- ------ ---
Fee revenue $283.8 $252.7 $ 31.1 12 $ 822.2 $ 761.4 $ 60.8 8
Interest revenue 352.6 249.6 103.0 41 1,017.2 670.6 346.6 52
Interest expense 232.3 144.0 88.3 61 674.9 361.8 313.1 87
------ ------ ------ -------- -------- ------
Net interest revenue 120.3 105.6 14.7 14 342.3 308.8 33.5 11
Provision for loan losses 2.0 3.2 (1.2) (38) 6.0 9.5 (3.5) (37)
------ ------ ------ -------- -------- ------
Net interest revenue after
provision for loan losses 118.3 102.4 15.9 16 336.3 299.3 37.0 12
------ ------ ------ -------- -------- ------
Total revenue 402.1 355.1 47.0 13 1,158.5 1,060.7 97.8 9
Operating expenses 300.7 264.6 36.1 14 864.7 789.1 75.6 10
------ ------ ------ -------- -------- ------
Income before taxes 101.4 90.5 10.9 12 293.8 271.6 22.2 8
Income taxes 25.4 29.4 (4.0) (14) 85.1 89.8 (4.7) (5)
Taxable equivalent adjustment 11.4 6.0 5.4 90 27.1 18.6 8.5 46
------ ------ ------ -------- -------- ------
Net income $ 64.6 $ 55.1 $ 9.5 17 $ 181.6 $ 163.2 $ 18.4 11
====== ====== ====== ======== ======== ======
Earnings Per Share
Primary $ .78 $ .66 $ .12 18 $ 2.19 $ 1.97 $ .22 11
Fully diluted .77 .66 .11 17 2.17 1.96 .21 11
($ and % change based on dollars in thousands)
State Street's businesses continued to gain momentum. The Corporation's
commitment to and investment in global capabilities has positioned it to take
full advantage of the ongoing growth of pension and mutual funds and the trend
toward increasing cross-border investment activity.
TOTAL REVENUE
Total revenue for the quarter was $402.1 million, up $47.0 million, or 13%, from
a year ago. Revenue grew from the comprehensive range of integrated services
provided to customers. The growth was primarily reflected in fiduciary
compensation, net interest revenue, and foreign exchange trading revenue.
Year-to-date, total revenue was $1,158.5 million, up $97.8 million, or 9%, from
1994.
FEE REVENUE
Fee revenue was $283.8 million, up $31.1 million, or 12%, from the third quarter
of 1994. The largest component of fee revenue is fiduciary compensation, which
is derived from accounting, custody, information, recordkeeping, investment
management, and trustee services. Fiduciary compensation was $214.4 million, up
$29.4 million, or 16%, from a year ago, reflecting growth in all businesses.
Fiduciary compensation from servicing mutual funds reflected new funds and
additional fund assets. Investment management revenue growth was driven by
additional assets from both existing customers and new customers investing both
within and outside the United States. Revenue from providing custody and
accounting for pension plans increased due to new customers and more trading
activity. Other areas of significant revenue growth were global custody services
for customers outside the United States and defined contribution plan
recordkeeping services.
The year-over-year growth rate in fiduciary compensation was lowered by 5
percentage points due to customer internalization of certain 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 reasons. This
compares with 7 percentage points in the first quarter and 8 percentage points
in the second quarter.
Foreign exchange trading revenue, another component of fee revenue, was $36.4
million, up $10.7 million, or 42%, from a year ago. Revenue continued to benefit
from the foreign exchange needs of investment managers investing cross-border.
The U.S. dollar's rapid rise against the yen and controversies surrounding the
plans for a single currency in Europe, which led to intra-Europe foreign
exchange volatility, both contributed to a higher volume of customer trading.
Trading in emerging market currencies also increased from a year ago.
For the quarter, service fees were $15.1 million, up $2.6 million from the third
quarter of 1994.
The growth in fiduciary compensation, foreign exchange trading revenue, and
service fees was partially offset by lower processing service fees from
unclaimed securities processing and from the sale of a non-strategic business in
the second quarter. The year-over-year growth rate in fee revenue was also
affected by a gain on the sale of a foreclosed asset of $2.0 million in the
third quarter of 1994, a $1.6 million reduction in net securities gains, and
lower currency translation gains on the foreign bond portfolio.
Year-to-date 1995, fee revenue was $822.2 million, up $60.8 million, or
8%, from 1994. Growth of $42.6 million in fiduciary compensation and $20.7
million in foreign exchange trading revenue fueled the increase.
NET INTEREST REVENUE
Taxable equivalent net interest revenue was $120.3 million, up $14.7 million, or
14%, over the same quarter a year ago. The increase is attributable to balance
sheet growth to support customers' activities and to the benefits of higher
asset yields. A narrower spread between interest rates earned and paid, caused
in part by a flatter U.S. yield curve, partially offset these positive factors.
Average interest-earning assets grew $3.7 billion, or 19%, to $23.6 billion,
funded primarily by an increase in securities sold under repurchase agreements
and by foreign deposits. Securities sold under repurchase agreements were up
$2.2 billion, or 44%, to $7.3 billion, reflecting short-term investments by
customers. Foreign deposits increased by $.9 billion, including a $.5 billion
increase in transaction account balances. The spread between interest rates
earned and paid declined from 1.41% to 1.21%. Net interest margin declined from
2.10% to 2.02%, reflecting narrower spreads and a larger portion of funding from
interest-bearing sources of funds.
In the third quarter, the level of interest rates was relatively stable with a
slight decline, which is favorable. However, the U.S. yield curve has been flat
to slightly inverted, which reduces revenue.
Three Months Ended
September 30,
------------------------------------------
1995 1994
---------------- ----------------
Average Average
(Dollars in millions) Balance Rate Balance Rate
------- ---- ------- ----
Interest earning assets $23,586 5.93% $19,841 4.99%
Interest bearing liabilities 19,537 4.72 15,976 3.58
---- ----
Excess of rates earned
over rates paid 1.21% 1.41%
==== ====
Net Interest Margin 2.02% 2.10%
==== ====
For the nine months ended September 30, 1995, taxable equivalent net interest
revenue was $342.3 million, up 11% over the same period in 1994 due principly to
the same factors as discussed for the quarter.
OPERATING EXPENSES
Operating expenses of $300.7 million were up $36.1 million, or 14%, from the
third quarter of 1994, supporting business growth.
Salaries and employee benefits were $165.0 million, up $16.5 million, or 11%,
due to incentive compensation, salary increases, and employee benefit costs. All
other expenses were up $19.6 million, or 17%, due to increases in most major
categories of expense. Expenses related to operating and processing losses
increased by $5.3 million. Equipment expense was up $4.2 million, or 15%, for
additional mainframe computer and network capacity and related software and
maintenance. Occupancy expense was up $1.8 million, or 9%, due to the addition
of 190,000 square feet (primarily outside the U.S.), leasehold improvements, and
increased maintenance costs. Contract services expense was up $4.2 million, due
to higher cost of mutual fund shareholder reporting services and to higher fees
to banks in the subcustody network due to growth of non-U.S. assets. These
increases were partially offset by a $2.8 million reduction in F.D.I.C.
insurance expense due to a lower assessment rate.
For the nine months ended September 30, 1995, operating expenses were $864.7
million, up $75.6 million, or 10%, from the same period in 1994. Expense growth
was primarily attributable to $38.9 million in additional salary and employee
benefits costs, as well as higher costs for operating and processing losses,
equipment, and occupancy. FDIC insurance costs declined $3.2 million versus the
first nine months of 1994, due to the rate reduction.
CREDIT QUALITY
At September 30, 1995, total loans were $3.7 billion, 14% 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 $60.2 million to $62.5 million. At September 30, 1995, the
allowance for loan losses was 1.70% of ending loans.
Loan ratios 1995 1994
- - ----------- ------------------- -------------------------
3Q 2Q 1Q 4Q 3Q 2Q 1Q
----- ----- ----- ----- ----- ----- ----
Allowance to ending loans 1.70% 1.70% 1.82% 1.80% 1.89% 1.72% 1.67%
Net recoveries (charge-offs)
to average loans .03 (.13) (.10) (.26) (.10) (.25) (.30)
Non-performing loans to
ending loans .62 .75 .69 .71 .74 .83 .70
During the third quarter, non-performing loans declined from $26.5 million to
$22.8 million. In the third quarter, net recoveries were $.3 million, up from
net charge-offs of $.8 million in the third quarter of 1994.
TAXES
The effective tax rate for the quarter was 28.2%, reflecting the retroactive
Massachusetts state income tax law. Without prior period adjustments, the
effective tax rate in the third quarter would have been 34.6%. For the year
1995, the tax rate is expected to be 33%, which is lower than normal. This is
due to various one-time events including a tax rebate in the second quarter and
the retroactive Massachusetts income tax change in the third quarter.
The third quarter provision for income taxes reflected a change in the
Massachusetts income tax for banks that was retroactive to January 1, 1995. The
new state tax law had two key components: Instituted apportionment, so banks
will only pay taxes on income earned in Massachusetts; and, Phased-in a tax rate
reduction from 12.54% in 1994 to 10.50% in 1999. The tax law change required the
recalculation of yields on the leveraged lease portfolio, which affects the
difference between taxable equivalent interest revenue and interest revenue as
reported on the income statement. In the third quarter, income taxes were
reduced by approximately $3 million, or $.03 per share, due to the reduction of
state taxes expensed in prior quarters.
LINES OF BUSINESS
State Street classifies its operations into three lines of business - Financial
Asset Services, Investment Management and Commercial Lending.
Financial Asset Services 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
Street's $2.1 trillion of assets under custody and $222 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 and
foreign deposits from these customers comprise a significant amount of State
Street's total 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 $199
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 focused on middle-market companies in the
northeastern United States, as well as specialized industries nationwide.
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, and other corporate expenses.
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
other companies. 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 nine months ended
September 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 $669.5 $621.4 $124.8 $112.7 $ 28.9 $ 31.2 $(1.0) $(3.9)
Net interest revenue 228.5 227.5 11.6 6.7 103.6 78.4 (1.5) (3.8)
Provision for loan losses 0.5 0.9 5.5 8.6
------ ------- ------ ------ ------ ------ ----- -----
Total revenue 897.5 848.0 136.4 119.4 127.0 101.0 (2.5) (7.7)
Operating expenses 704.4 644.2 83.4 70.7 54.8 55.7 22.1 18.6
------ ------- ------ ------ ------ ------ ----- -----
Income before income
taxes 193.1 203.8 53.0 48.7 72.2 45.3 (24.6) (26.3)
Income taxes 75.5 84.9 24.4 21.5 27.9 19.6 (17.7) (17.7)
------ ------- ------ ------ ------ ------ ----- -----
Net income $115.6 $ 118.9 $ 28.6 $ 27.2 $ 44.3 $ 25.7 $(6.9) $(8.6)
====== ======= ====== ====== ====== ====== ===== =====
Percentage Contribution 64% 73% 16% 17% 24% 16% (4)% (5)%
Average Assets $23,203 $20,079 $ 15 $ 16 $2,677 $2,267
State Street's 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 and operating expense items applicable to the respective
lines of business are provided below:
Financial Asset Services contributed 64% of net income for the first nine months
of 1995. Net income was $115.6 million, a decrease of $3.3 million, or 3%, from
$118.9 million in the same period a year ago. Fee revenue increased $48.1
million or 8% from the same period in 1994 primarily due to increased fiduciary
compensation and foreign exchange revenue. Net interest revenue increased $1
million inspite of a significantly flatter yield curve than a year ago, which
reduced substantially the spread between rates earned on the investment
securities portfolio and its funding costs. This negative factor was offset by
the benefits of continued growth of customer funds on the balance sheet.
Operating expenses increased $60.2 million, or 9% to support business growth,
primarily due to increases in salaries and employee benefit costs and higher
costs for operating and processing losses, equipment and occupancy costs.
Investment Management contributed 16% of net income for the first nine months of
1995. Net income was $28.6 million, an increase of $1.4 million, or 5%, from
$27.2 million for the same period a year ago.
Commercial Lending contributed 24% of net income for the first nine months of
1995. Net income rose $44.3 million, an increase of $18.6 million over $25.7
million for the same period in 1995, due to higher revenue, the favorable impact
of the Massachusetts income tax law change, and lower expenses. Net interest
revenue increased $25.2 million, or 32%, due to additional loan volume, up 19%,
and the increased value of deposits in a higher interest rate environment.
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 third quarter, the internal capital generation rate was 13.2%.
At September 30, 1995, State Street's capital and leverage ratios exceeded the
regulatory guidelines:
Minimum
State Regulatory
Street Guidelines
Risk-based capital ratios: ------ ----------
Tier 1 capital 14.0% 4.0%
Total capital 14.5 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 September 30,
1995, the portfolio included $6.0 billion of interest-bearing deposits with
banks and $5.4 billion of securities purchased under resale agreements. Although
not relied on for daily liquidity needs, the $1.5 billion
available-for-sale-portfolio of marketable securities provides a significant
secondary source of liquidity.
State Street maintains strong liquidity ratios. When liquidity is measured by
the ratio of liquid assets to total assets, State Street ranks among the highest
of U.S. banking companies. Liquid assets consist of cash and due from banks,
interest-bearing deposits with banks, Federal funds sold, securities purchased
under resale agreements, trading account assets and investment securities. At
September 30, 1995, State Street's liquid assets were 77% of total assets.
FOREIGN EXCHANGE AND DERIVATIVE FINANCIAL INSTRUMENTS
State Street uses foreign exchange and other financial derivative instruments to
support customers' needs, conduct trading activities, and manage interest rate
and currency risks. 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 September 30, 1995, the
notional amount of these instruments was approximately $60 billion of which $58
billion was foreign exchange forward, swap and spot contracts which had an
average maturity of less than 60 days.
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 31,1995, 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
The State Street commitment to selected expansion worldwide continues. The
Taipei office has been approved for branch status, which enables expansion of
the trade banking services there. In the U. K., State Street continues to
develop a unit-trust servicing capability. The third quarter also saw the
formation of a jointly-owned corporate stock transfer business between Bank of
Boston and BFDS (State Street's 50% affiliate) completed, while the acquisition
of Bank of Boston's corporate trust business was completed in October.
STOCK REPURCHASE PROGRAM
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 principally be under a systematic repurchase
program implemented this quarter and would be used for employee benefit plans.
As of September 30, 1995, 171,200 treasury shares were purchased under the
program.
OUTLOOK
The third quarter was a strong new business quarter throughout the company,
which will have a positive effect on revenue as the new business is installed in
future periods.
Management innovations and technological improvements continue to reduce the
link between growth in portfolios serviced and growth in personnel. In the third
quarter, personnel declined slightly from a year ago after adjusting for the
sale of a business and the acquisition of IFTC, while transaction volume grew
substantially. For example, U.S. custody transactions were up 27% and non-U.S.
custody transactions 12%. Investment spending as a percentage of revenue
continues to taper to the rate of approximately 8% by year-end.
State Street continues to benefit from long-term favorable trends. Global
investing from the U.S. continues to grow, particularly in emerging markets.
Year-over-year, the volume of non-U.S. securities under custody increased 24%;
foreign deposits increased 15%. The cross-border trend also contributed to the
42% increase in foreign exchange trading revenue as well as to growth in the
global custody and investment management businesses.
U.S. equity and bond values continue to increase. While this has a positive
impact on revenue, the revenue impact is not proportional to the asset value
increases: revenue increases by less than 1% for each 10% market increase in
worldwide equities or bonds. Approximately 35% of State Street's assets under
custody are in fixed income; 35% in equities; and 30% in short-term instruments.
Net new sales of U.S. mutual funds continue strong, with much of the growth in
money market funds, which have lower profit margins. State Street serviced 253
more mutual funds than a year ago.
In the first quarter, management commented that it expected to reach its target
of double-digit earnings per share growth for 1995 based on certain assumptions.
The business environment continues to improve and management initiatives
achieved results during the second and third quarters. The target for 1995
remains double-digit earnings per share growth, and management expects to reach
that. This expectation is based on management's assumptions about a continued
favorable business environment.
State Street's powerful global franchise has provided a strong foundation for
its financial service business. State Street continues to build on it in order
to create 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
None
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 -
(b)Reports on Form 8-K
None
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
/s/David A. Spina
Date: November 8, 1995 By: ----------------------------------------
David A. Spina
Vice Chairman, Chief Financial Officer
and Treasurer
/s/Rex S. Schuette
Date: November 8, 1995 By: ----------------------------------------
Rex S. Schuette
Senior Vice President and Comptroller