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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NO. 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 NO.)
225 FRANKLIN STREET
BOSTON, MASSACHUSETTS 02110
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
617-786-3000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
----------------------
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES [X] NO [ ]
THE NUMBER OF SHARES OF THE REGISTRANT'S COMMON STOCK OUTSTANDING ON JULY
31, 1996 WAS 80,344,924.
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STATE STREET BOSTON CORPORATION
Table of Contents
Page
Part I. Financial Information
Part I. Item 1. Financial Statements
Consolidated Statement 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 6-11
Independent Accountants' Review Report 12
Part I. Item 2.
Management's Discussion and Analysis of Financial Condition 13-21
and Results of Operations
Part II. Other Information
Part II. Item 1.
Legal Proceedings 22
Part II. Item 2.
Changes in Securities 22
Part II. Item 3.
Defaults Upon Senior Securities 22
Part II. Item 4.
Submission of Matters to a Vote of Security Holders 22
Part II. Item 5.
Other Information 22
Part II. Item 6.
Exhibits and Reports on Form 8-K 22
Signatures 23
Exhibits 24-35
PART I. ITEM 1. FINANCIAL STATEMENTS
STATE STREET BOSTON CORPORATION
CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED JUNE 30,
(UNAUDITED)
- ---------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995
- ---------------------------------------------------------------------------------------------------------
INTEREST REVENUE
Deposits with banks $ 83,935 $ 71,930
Investment securities:
U.S. Treasury and Federal agencies 62,958 69,331
State and political subdivisions 18,311 12,976
Other investments 30,861 34,144
Loans 67,854 59,270
Securities purchased under resale agreements,
securities borrowed and Federal funds sold 74,095 78,154
Trading account assets 4,340 4,323
-------- --------
Total interest revenue 342,354 330,128
INTEREST EXPENSE
Deposits 103,983 99,982
Other borrowings 101,690 122,191
Long-term debt 2,387 2,136
-------- --------
Total interest expense 208,060 224,309
-------- --------
Net interest revenue 134,294 105,819
Provision for loan losses 2,001 2,000
-------- --------
Net interest revenue after
provision for loan losses 132,293 103,819
FEE REVENUE
Fiduciary compensation 255,709 199,360
Other 67,282 77,364
-------- --------
Total fee revenue 322,991 276,724
-------- --------
REVENUE BEFORE OPERATING EXPENSES 455,284 380,543
OPERATING EXPENSES
Salaries and employee benefits 189,040 159,444
Occupancy, net 24,895 21,389
Equipment 34,544 31,295
Other 96,361 77,086
-------- --------
Total operating expenses 344,840 289,214
-------- --------
Income before income taxes 110,444 91,329
Income taxes 38,935 28,668
-------- --------
NET INCOME $ 71,509 $ 62,661
======== ========
EARNINGS PER SHARE
Primary $ .87 $ .75
Fully diluted .87 .75
AVERAGE SHARES OUTSTANDING (in thousands)
Primary 81,559 83,019
Fully diluted 82,126 83,697
CASH DIVIDENDS DECLARED PER SHARE $ .19 $ .17
The accompanying notes are an integral part of these financial statements.
STATE STREET BOSTON CORPORATION
CONSOLIDATED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
- ---------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995
- ---------------------------------------------------------------------------------------------------------
INTEREST REVENUE
Deposits with banks $171,983 $135,870
Investment securities:
U.S. Treasury and Federal agencies 111,072 142,487
State and political subdivisions 32,078 25,241
Other investments 58,993 69,817
Loans 132,943 116,377
Securities purchased under resale agreements,
securities borrowed and Federal funds sold 173,674 148,922
Trading account assets 7,629 10,168
-------- --------
Total interest revenue 688,372 648,882
INTEREST EXPENSE
Deposits 214,554 202,718
Other borrowings 203,831 235,618
Long-term debt 4,504 4,276
-------- --------
Total interest expense 422,889 442,612
-------- --------
Net interest revenue 265,483 206,270
Provision for loan losses 4,001 4,000
-------- --------
Net interest revenue after
provision for loan losses 261,482 202,270
FEE REVENUE
Fiduciary compensation 489,625 385,521
Other 140,033 152,938
-------- --------
Total fee revenue 629,658 538,459
-------- --------
REVENUE BEFORE OPERATING EXPENSES 891,140 740,729
OPERATING EXPENSES
Salaries and employee benefits 369,994 309,900
Occupancy, net 49,857 41,582
Equipment 66,882 60,815
Other 185,975 151,730
-------- --------
Total operating expenses 672,708 564,027
-------- --------
Income before income taxes 218,432 176,702
Income taxes 77,174 59,705
-------- --------
NET INCOME $141,258 $116,997
======== ========
EARNINGS PER SHARE
Primary $1.72 $ 1.41
Fully diluted 1.71 1.40
AVERAGE SHARES OUTSTANDING (in thousands)
Primary 81,912 82,958
Fully diluted 82,518 83,656
CASH DIVIDENDS DECLARED PER SHARE $ .37 $ .33
The accompanying notes are an integral part of these financial statements.
STATE STREET BOSTON CORPORATION
CONSOLIDATED STATEMENT OF CONDITION
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------
June 30, December 31,
(DOLLARS IN THOUSANDS) 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 1,837,029 $ 1,421,941
Interest-bearing deposits with banks 7,758,948 5,975,178
Securities purchased under resale agreements
and securities borrowed 2,764,764 5,406,619
Federal funds sold 1,480,250 347,500
Trading account assets 256,325 503,839
Investment securities:
Held to maturity 839,765 824,399
Available for sale 7,591,957 5,535,364
------------ ------------
Total investment securities 8,431,722 6,359,763
Loans 4,268,471 3,986,142
Allowances for loan losses (70,088) (63,491)
------------ ------------
Net loans 4,198,383 3,922,651
Premises and equipment 458,870 467,588
Customers' acceptance liability 33,530 57,472
Accrued income receivable 463,516 392,074
Other assets 1,260,338 930,562
------------ ------------
TOTAL ASSETS $ 28,943,675 $ 25,785,187
============ ============
LIABILITIES
Deposits:
Noninterest-bearing $ 5,386,304 $ 5,082,064
Interest-bearing:
Domestic 2,142,249 2,150,697
Foreign 11,818,251 9,414,458
------------ ------------
Total deposits 19,346,804 16,647,219
Federal funds purchased 83,609 467,305
Securities sold under repurchase agreements 5,237,712 5,120,950
Other short-term borrowings 825,742 443,203
Notes payable 160,202 175,218
Acceptances outstanding 33,530 57,387
Accrued taxes and other expenses 561,449 562,304
Other liabilities 842,387 597,501
Long-term debt 276,101 126,576
------------ ------------
TOTAL LIABILITIES 27,367,536 24,197,663
STOCKHOLDERS' EQUITY
Preferred stock, no par: authorized 3,500,000; issued none
Common stock, $1 par: authorized 112,000,000; issued 82,693,000 and 82,695,000 82,693 82,695
Surplus 36,591 40,090
Retained earnings 1,575,006 1,465,007
Net unrealized gain(loss) on available-for-sale securities (16,011) 12,688
Treasury stock (at cost, 2,176,000 and 307,000 shares) (102,140) (12,956)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 1,576,139 1,587,524
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 28,943,675 $ 25,785,187
============ ============
The accompanying notes are an integral part of these financial statements.
STATE STREET BOSTON CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 141,258 $ 116,997
Noncash charges for depreciation, amortization, provision for
loan losses and foreclosed properties, and deferred income taxes 134,807 84,345
------------ ------------
Net income adjusted for noncash charges 276,065 201,342
Adjustments to reconcile to net cash provided (used) by operating activities:
Securities (gains)losses, net (3,784) (5,572)
Net change in:
Trading account assets 247,514 249,007
Accrued income receivable (71,442) (2,614)
Accrued income taxes and other expenses (35,710) 11,642
Other, net (90,257) (10,378)
------------ ------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 322,386 443,427
------------ ------------
INVESTING ACTIVITIES Payments for purchases of:
Held-to maturity securities (544,702) (1,133,526)
Available-for-sale securities (4,032,463) (701,426)
Lease financing assets (377,867) (276,711)
Premises and equipment (46,048) (62,255)
Proceeds from:
Maturities of held-to-maturity securities 529,299 1,418,296
Maturities of available-for-sale securities 1,719,553 79,720
Sales of available-for-sale securities 191,599 1,652,583
Principal collected from lease financing 42,464 39,176
Net (payments for) proceeds from:
Interest-bearing deposits with banks (1,783,770) (1,052,404)
Federal funds sold, resale agreements and securities borrowed 1,509,105 (3,042,405)
Loans (174,486) (252,732)
------------ ------------
NET CASH USED BY INVESTING ACTIVITIES (2,967,316) (3,331,684)
------------ ------------
FINANCING ACTIVITIES Proceeds from issuance of:
Notes payable 176,588 939,989
Nonrecourse debt for lease financing 281,429 216,143
Common and treasury stock 6,183 2,613
Long-term debt 150,000
Payments for:
Maturities of notes payable (187,936) (502,500)
Nonrecourse debt for lease financing (48,720) (30,036)
Long-term debt (464) (422)
Cash dividends (29,886) (27,253)
Purchase of common stock (102,451)
Net proceeds from (payments for):
Deposits 2,699,585 1,041,235
Short-term borrowings 115,690 1,157,872
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,060,018 2,797,641
------------ ------------
NET INCREASE (DECREASE) 415,088 (90,616)
Cash and due from banks at beginning of period 1,421,941 1,097,563
------------ ------------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 1,837,029 $ 1,006,947
============ ============
SUPPLEMENTAL DISCLOSURE
Interest paid $ 413,076 $ 427,077
Income taxes paid 56,064 36,008
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,
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
NET UNREALIZED
GAIN(LOSS) ON
COMMON RETAINED AVAILABLE-FOR- TREASURY
(DOLLARS IN THOUSANDS) STOCK SURPLUS EARNINGS SALE SECURITIES STOCK TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
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-
$.33 per share (27,253) (27,253)
Issuance of common stock-
178,092 shares 178 2,984 3,162
Foreign currency translation 5,067 5,067
Change in net 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
========== ======== ============ ============ ======== =============
BALANCE AT DECEMBER 31, 1995 $ 82,695 $ 40,090 $ 1,465,007 $ 12,688 (12,956) $ 1,587,524
Net income 141,258 141,258
Cash dividends declared-
$.37 per share (29,886) (29,886)
Issuance of common stock (2) (2)
Common stock acquired-
2,183,900 shares (102,451) (102,451)
Issuance of treasury stock-
314,739 shares (3,499) 13,267 9,768
Foreign currency translation (1,373) (1,373)
Change in net unrealized gain(loss)
on available-for-sale securities (28,699) (28,699)
---------- -------- ------------ ------------ ---------- -------------
BALANCE AT JUNE 30, 1996 $ 82,693 $ 36,591 $ 1,575,006 $ (16,011) $ (102,140) $ 1,576,139
========== ======== ============ ============ ========== =============
The accompanying notes are an integral part of these financial statements.
STATE STREET BOSTON CORPORATION
PART I. ITEM 1. FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
State Street Boston Corporation ("State Street") is a financial services
corporation and provides banking, trust, investment management and securities
processing services to both domestic and global customers. State Street's
primary focus is servicing and managing financial assets on a global scale.
State Street has three lines of business: financial asset services, investment
management and commercial lending. Financial asset services are primarily
accounting, custody, banking and other services for large pools of assets such
as mutual funds and pension plans, and corporate trusteeships. Financial asset
services is State Street's predominant line of business. Investment management
services manage financial assets worldwide, both institutional investment
management and personal trust services, and provide participant recordkeeping
for defined contribution plans. Commercial lending activities include regional
middle market, specialized and trade finance lending as well as asset-based
finance and leasing.
The consolidated financial statements include the accounts of State Street and
its subsidiaries, including its principal subsidiary, State Street Bank and
Trust Company. The preparation of financial statements requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates. All significant intercompany balances and transactions have been
eliminated upon consolidation. The results of operations of businesses purchased
are included from the date of acquisition. Investments in 50%-owned affiliates
are accounted for by the equity method. Certain previously reported amounts have
been reclassified to conform to the current method of presentation. 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, 1996 and 1995, long-term debt
converted into common stock was $30,000 and $60,000, respectively.
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" was
adopted by State Street effective January 1, 1996. SFAS No. 121 addresses how
long-lived assets and certain identifiable intangibles held and used should be
evaluated for impairment whenever events or changes in circumstances indicate
that the carrying amount of the asset may not be recoverable. The adoption of
SFAS No. 121 did not have a material impact on the financial statements of State
Street.
SFAS No. 122, "Accounting for Mortgage Servicing Rights" was adopted by State
Street effective January 1, 1996. SFAS No. 122 requires institutions to
recognize rights to service mortgage loans for others as separate assets,
regardless of how the servicing rights are acquired. In addition, SFAS No. 122
addresses how mortgage servicing rights are to be assessed for impairment based
on their fair value. Prior to January 1, 1996, mortgage servicing rights were
recorded at acquisition cost. The adoption of SFAS No. 122 did not have a
material impact on the financial statements of State Street.
In 1995, SFAS No. 123, "Accounting for Stock-Based Compensation" was issued.
This statement addresses financial accounting and reporting standards for
stock-based employee compensation plans. State Street plans to continue to
measure compensation cost for these plans using the intrinsic value based method
of accounting prescribed by APB opinion No. 25 and will adopt the new disclosure
requirements for the year ended December 31, 1996.
In June 1996, SFAS No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities" was issued. This statement provides
standards for transfers and servicing of financial assets and extinguishing
liabilities. This statement is effective for fiscal years beginning after
December 31, 1996. State Street will adopt this new statement in 1997.
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, 1996 and December 31, 1995, and its
cash flows for the six months ended June 30, 1996 and 1995, and the consolidated
results of its operations for the three months and six months ended June 30,
1996 and 1995 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.
NOTE B - INVESTMENT SECURITIES
Investment securities consisted of the following at June 30, 1996:
Amortized Unrealized Fair
(Dollars in thousands) Cost Gains Losses Value
----------- -------- -------- -----------
HELD TO MATURITY
U.S. Treasury and
Federal agencies $ 839,765 $ 1,607 $ 4,271 $ 837,101
=========== ======== ======== ===========
AVAILABLE FOR SALE
U.S. Treasury and
Federal agencies $ 3,797,322 $ 7,070 $ 16,857 $ 3,787,535
State and political
subdivisions 1,659,599 5,411 10,087 1,654,923
Asset-backed securities 1,797,691 1,766 17,735 1,781,722
Other investments 365,279 3,704 1,206 367,777
----------- -------- -------- -----------
Total $ 7,619,891 $ 17,951 $ 45,885 $ 7,591,957
=========== ======== ======== ===========
Investment securities consisted of the following at December 31, 1995:
Amortized Unrealized Fair
(Dollars in thousands) Cost Gains Losses Value
----------- -------- -------- -----------
HELD TO MATURITY
U.S. Treasury and
Federal agencies $ 824,399 $ 5,217 $ 483 $ 829,133
=========== -------- -------- -----------
AVAILABLE FOR SALE
U.S. Treasury and
Federal agencies $ 2,270,695 $ 17,579 $ 4,292 $ 2,283,982
State and political
subdivisions 1,299,720 10,411 3,898 1,306,233
Asset-backed securities 1,672,822 4,347 11,808 1,665,361
Other investments 271,028 10,050 1,290 279,788
----------- -------- -------- -----------
Total $ 5,514,265 $ 42,387 $ 21,288 $ 5,535,364
=========== ======== ======== ===========
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, 1996, gains of $6,388,000 and losses of
$2,604,000 were realized on sales of available-for-sale securities of
$191,599,000. 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.
NOTE C - 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 judgment of the amount necessary to maintain
the allowance at a level adequate to absorb probable losses.
Changes in the allowance for loan losses were as follows:
Three Months Ended Six Months Ended
(Dollars in thousands) June 30, June 30,
---------------------- ----------------------
1996 1995 1996 1995
-------- -------- -------- --------
Balance at beginning of period $ 65,716 $ 59,363 $ 63,491 $ 58,184
Provision for loan losses 2,001 2,000 4,001 4,000
Loan charge-offs (2,451) (2,822) (2,759) (3,817)
Recoveries 4,822 1,704 5,355 1,878
-------- -------- -------- --------
Balance at end of period $ 70,088 $ 60,245 $ 70,088 $ 60,245
======== ======== ======== ========
NOTE D - LONG-TERM DEBT
In April 1996, a shelf registration statement became effective that amends and
supplements a previous shelf registration that was effective in August 1993. The
amended shelf allows State Street to issue up to $500 million of unsecured debt
securities and/or shares of its preferred stock. In June 1996, State Street
issued $150 million of 7.35% Notes due 2026, redeemable at the option of the
holder in 2006. At June 30, 1996, $350 million of the shelf registration is
available for issuance.
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,
---------------------- ----------------------
1996 1995 1996 1995
-------- -------- -------- --------
Current $ 11,159 $ 25,166 $ 21,985 $ 37,315
Deferred 27,776 3,502 55,189 22,390
-------- -------- -------- --------
Total provision $ 38,935 $ 28,668 $ 77,174 $ 59,705
======== ======== ======== ========
The effective tax rate is less than the combined U.S. and applicable non-U.S.
and state tax rates for all periods reported because of tax exempt income and
tax credits. The effective rate for the periods ended June 30, 1995 was
significantly lower than that of the corresponding periods in 1996 as a result
of a settlement of a multi-year state tax dispute.
NOTE F - FEE REVENUE - OTHER
The Other category of fee revenue consisted of the following:
Three Months Ended Six Months Ended
(Dollars in thousands) June 30, June 30,
---------------------- ----------------------
1996 1995 1996 1995
-------- -------- -------- --------
Foreign exchange trading $ 29,859 $ 36,754 $ 63,481 $ 73,216
Service fees 17,689 14,409 35,231 26,845
Processing service fees 10,973 14,968 21,718 32,634
Securities gains, net 3,092 2,026 3,784 5,572
Trading account profits 97 561 1,546 177
Other 5,572 8,646 14,273 14,494
--------- -------- -------- --------
Total fee revenue - other $ 67,282 $ 77,364 $140,033 $152,938
========= ======== ======== ========
NOTE G - OPERATING EXPENSES - OTHER
The Other category of operating expenses consisted of the following:
Three Months Ended Six Months Ended
(Dollars in thousands) June 30, June 30,
---------------------- ----------------------
1996 1995 1996 1995
-------- -------- -------- --------
Contract services $ 36,188 $ 29,048 $ 71,212 $ 56,467
Professional services 14,836 12,653 27,450 25,526
Advertising and sales promotion 8,894 6,584 17,699 12,657
Postage, forms and supplies 6,468 6,134 13,124 12,112
Telecommunications 6,137 6,037 12,106 12,131
Other 23,838 16,630 44,384 32,837
-------- -------- -------- --------
Total operating
expenses - other $ 96,361 $ 77,086 $185,975 $151,730
======== ======== ======== ========
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) 1996 1995
---------- ------------
TRADING:
Interest rate contracts:
Swap agreements $ 828 $ 420
Options and caps purchased 23 25
Options and caps written 33 36
Futures sold 1,704 1,050
Options on futures written 277 800
Options on futures purchased 615 1,000
Foreign exchange contracts:
Forward, swap and spot 57,727 54,965
Options purchased 328 20
Options written 180 43
Futures sold 3
BALANCE SHEET MANAGEMENT:
Interest rate contracts:
Swap agreements 267 217
Options and caps purchased 50 50
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,
1996 1995
--------------------------- -------------------------------
(Dollars in millions) Average Average
FOREIGN EXCHANGE CONTRACTS: Fair Value Fair Value Fair Value Fair Value
---------- ---------- ---------- ----------
Contracts in a receivable position $624 $671 $539 $751
Contracts in a payable position 641 710 466 704
OTHER FINANCIAL INSTRUMENT CONTRACTS:
Contracts in a receivable position 6 6 4 2
Contracts in a payable position 5 5 3 3
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) 1996 1995
---------- ------------
Loan commitments $ 4,810 $ 3,626
Standby letters of credit 1,603 1,286
Letters of credit 222 179
Indemnified securities lent 38,398 28,949
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, 1996 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, 1996, and the related consolidated
statements of income for the three-month and six-month periods ended June 30,
1996 and 1995, and the consolidated statements of cash flows and changes in
stockholders' equity for the six-month periods ended June 30, 1996 and 1995.
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, 1995, 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 10, 1996 we expressed
an unqualified opinion on those consolidated financial statements.
ERNST & YOUNG LLP
Boston, Massachusetts
July 12, 1996
STATE STREET BOSTON CORPORATION
PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Summary
Earnings per fully diluted share were $.87, an increase of 16% from $.75 in the
second quarter of 1995. Net income was $72 million, up from $63 million a year
ago. Return on stockholders' equity was 18.3%, up from 17.2% in the second
quarter of 1995.
Condensed Income Statement
Taxable Equivalent Basis
(Dollars in millions, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------- -----------------------------------
1996 1995 Change % 1996 1995 Change %
------ ------ ------ --- ------- ------- ------ ---
Fee revenue $323.0 $276.7 $ 46.3 17 $ 629.7 $ 538.4 $ 91.3 17
Interest revenue 352.9 337.9 15.0 4 707.0 664.6 42.4 6
Interest expense 208.1 224.3 (16.2) (7) 422.9 442.6 (19.7) (4)
------ ------ ------ ------- ------- ------
Net interest revenue 144.8 113.6 31.2 27 284.1 222.0 62.1 28
Provision for loan losses 2.0 2.0 - - 4.0 4.0 - -
------ ------ ------ ------- ------- ------
Net interest revenue after
provision for loan losses 142.8 111.6 31.2 28 280.1 218.0 62.1 28
------ ------ ------ ------- ------- ------
Total revenue 465.8 388.3 77.5 20 909.8 756.4 153.4 20
Operating expenses 344.8 289.2 55.6 19 672.7 564.0 108.7 19
------ ------ ------ ------- ------- ------
Income before taxes 121.0 99.1 21.9 22 237.1 192.4 44.7 23
Income taxes 38.9 28.7 10.2 36 77.2 59.7 17.5 29
Taxable equivalent adjustment 10.6 7.7 2.9 38 18.6 15.7 2.9 18
------ ------ ------ ------- ------- ------
Net income $ 71.5 $ 62.7 $ 8.8 14 $ 141.3 $ 117.0 $ 24.3 21
====== ====== ====== ======= ======= ======
Earnings Per Share
Primary $ .87 $ .75 $ .12 16 $ 1.72 $ 1.41 $ .31 22
Fully diluted .87 .75 .12 16 1.71 1.40 .31 22
($ and % change based on dollars in thousands, except per share data)
For the first six months of 1996, earnings per share were $1.71, an increase of
22%, up from the $1.40 in the first half of 1995. Net income was $141 million,
up from $117 million a year ago, and return on stockholders' equity was 18.0%
as compared to 16.6% for 1995.
Total Revenue
Total revenue for the quarter was $466 million, up $78 million, or 20%, from a
year ago due to strong growth in both fiduciary compensation and net interest
revenue.
Year-to-date, total revenue was $910 million, up $153 million, or 20%, from
1995, due to strong growth in both fiduciary compensation and net interest
revenue.
Fee Revenue
Fee revenue, which comprised 69% of total revenue, was $323 million, up $46
million, or 17%, from the second quarter of 1995. Fiduciary compensation, the
largest component of fee revenue, is derived from accounting, custody,
recordkeeping information, investment management, and trustee services.
Fiduciary compensation was $256 million, up $56 million, or 28%, from a year ago
due to due to growth of 20% or more in all major businesses.
In financial asset services, additional mutual fund assets, particularly U.S.
equities and non-U.S. securities, and new mutual funds contributed importantly
to the growth in fiduciary compensation. State Street's offering of value-added
services, such as fund administration and offshore servicing, supports the
company's ability to expand existing relationships and develop new relationships
with mutual funds.
Fiduciary compensation from services for U.S. defined benefit pension plans
increased due to growth in domestic and global custody and accounting services,
reflecting both new business and growth in services provided to current
customers. Securities lending also contributed to the year-over-year revenue
growth. Outside the United States, revenue from global custody and accounting
services grew from the installation of record new business over the last year.
At quarter end, assets under custody for non-U.S. customers were $188 billion,
up 62% from a year ago.
In investment management, fiduciary compensation grew due to new business and
additional assets from current customers. Active and passive equity products
invested globally had particularly strong revenue growth. Revenue from
participant recordkeeping for defined contribution plans grew rapidly,
reflecting an acquisition, installation of new customers and major enhancements
to the plans of existing customers.
Service fees for the quarter were $17.7 million, up $3.3 million, or 23%, from
the same quarter a year ago due to strength in brokerage and financing fees.
Strength in fiduciary compensation and service fees was partially offset by
lower foreign exchange revenue and processing service fees. Foreign exchange
revenue was $30 million, down $7 million, or 19%, from the prior year due to
narrower trading spreads as a result of lower volatility in the currency
markets. Nevertheless, State Street's business continued to grow in its target
segment, foreign exchange services for investment managers, and executed an
increased number of trades for these customers. Processing service fees were $11
million, down $4 million. Nearly all of the decline was due to the loss of
revenue associated with the second quarter 1995 sale of a non-strategic credit
card replacement business.
Other fee revenue was down $4 million, from the same quarter a year ago, mainly
due to the gain on the sale of a non-strategic business in the second quarter of
1995, as stated above.
For the six month period ended June 30, 1996, fee revenue was $630 million, up
$91 million, or 17%, over the same period in 1995. The increase was primarily
attributable to the growth in fiduciary compensation revenue. Revenue from
foreign exchange decreased $10 million, as lower volatility resulted in narrower
trading spreads, and revenue from processing services fees decreased $11
million, largely due to the sale of the credit card replacement business in
1995's second quarter.
Net Interest Revenue
Taxable equivalent net interest revenue was $145 million, up $31 million, or
27%, from a year ago due to wider interest rate spreads, and a $3.3 billion, or
15% increase in average interest-earning assets. This balance sheet growth was
driven primarily by a $2.7 billion increase in foreign deposits from customers
in conjunction with their worldwide investment activities.
For the six-month period ended June 30, 1996, taxable equivalent net interest
revenue was $284 million, up $62 million, or 28%, from the same period in 1995
due to wider interest rate spreads and an increase in average interest-earning
assets. The growth in average interest-earning assets of $3.1 billion, or 14%,
was driven primarily by a $2.2 billion increase in foreign deposits.
Three Months Ended
June 30,
---------------------------------------------
1996 1995
------------------ -----------------
Average Average
(Dollars in millions) Balance Rate Balance Rate
------- ---- ------- ----
Interest-earning assets $26,043 5.45% $22,702 5.97%
Interest-bearing liabilities 21,692 3.86 18,894 4.76
---- ----
Excess of rates earned
over rates paid 1.59% 1.21%
==== ====
Net Interest Margin 2.24% 2.01%
==== ====
Operating Expenses
Operating expenses of $345 million were up $56 million, or 19%, from the second
quarter of 1995. Salaries and employee benefits were $189 million, up $30
million, or 19%, due to salary increases, additional staff, incentive
compensation and employee benefit costs. Other expenses were $96 million, up $19
million, or 25%, driven by volume-related expense such as fees from
subcustodians and other external service providers, higher transaction
processing costs associated with the securities industry change to same day
settlement of securities, and higher promotional expense. These negative factors
were partially offset by lower FDIC insurance expense.
For the six-month period ended June 30, 1996, operating expenses were up $109
million, or 19%, due to increased salaries and employee benefits costs and
volume-related expenses such as subcustodian fees and consulting services.
Credit Quality
At June 30, 1996, total loans were $4.3 billion, 15% of the balance sheet. In
the second quarter, the provision for loan losses charged against income was $2
million, the same as a year ago. During the quarter, the allowance for loan
losses increased from $66 million to $70 million.
Loan Ratios 1996 1995
- ----------- ----------------- -------------------------------------
2Q 1Q 4Q 3Q 2Q 1Q
------ ------ ------- ------ ------ ------
Allowance to ending loans 1.64% 1.56% 1.59% 1.70% 1.70% 1.82%
Net recoveries (charge-offs) to average loans .22 .02 (.11) .03 (.13) (.10)
Non-performing loans to ending loans .24 .33 .39 .62 .75 .69
During the second quarter, non-performing loans declined from $14 million to $10
million. Net recoveries were $2 million, versus net charge-offs of $1 million in
the year-earlier period.
Taxes
Taxes were $39 million, up from $29 million a year ago. In the second quarter of
1995, a settlement of prior years' state taxes resulted in a $4 million
reduction in taxes. The state tax settlement lowered the quarterly effective tax
rate for that quarter by four percentage points to 31.4%.
The effective tax rate for the second quarter of 1996 was 35.3%, commensurate
with the estimated tax rate for the full year.
Lines of Business
State Street reports three lines of business - Financial Asset Services,
Investment Management and Commercial Lending.
Financial Asset Services represents primarily custody-related services for large
pools of assets such as mutual funds and pension plans (both defined benefit and
defined contribution), and corporate trusteeship. Fiduciary compensation revenue
is derived from services related to State Street's $2.6 trillion of assets under
custody and $315 billion of bonds under trusteeship. In addition to fiduciary
compensation, certain financial asset services customers generate other types of
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 $271
billion of institutional and personal financial assets worldwide, and provide
participant recordkeeping services for defined contribution plans. Fee revenue
is derived from a broad array of products that focus on quantitative equity
management, both passive and active, and money market funds.
Commercial Lending services are provided to commercial and financial customers.
State Street's lending activities are focused on middle-market companies in the
northeastern United States, as well as specialized industries nationwide.
Line-of-business information is based on State Street's management accounting
practices and are not necessarily comparable with similar information for other
companies.
The following is a summary of line-of-business results for the six months ended
June 30, 1996 and 1995. Certain previously reported line-of-business information
has been reclassified to conform to the current method of presentation.
Financial Investment Commercial
(Taxable equivalent basis, Asset Services Management Lending
-------------------- -------------------- ------------------
dollars in millions) 1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
Fee revenue $ 461.8 $ 413.9 $ 145.4 $ 106.3 $ 22.5 $ 18.2
Net interest revenue 197.9 147.5 12.8 7.3 73.4 67.2
Provision for loan losses .4 .2 3.6 3.8
-------- -------- -------- -------- ------- -------
Total revenue 659.3 561.2 158.2 113.6 92.3 81.6
Operating expenses 505.4 441.2 125.4 85.4 41.9 37.4
-------- -------- -------- -------- ------- -------
Operating profit 153.9 120.0 32.8 28.2 50.4 44.2
======== ======== ======== ======== ======= =======
Average Assets $ 25,644 $ 22,943 $ 37 $ 20 $ 3,056 $ 2,562
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 $153.9 million to operating profit for the
first six months of 1996. This was an increase of $33.9 million, or 28% from the
same period a year ago, due to strong revenue growth--in both net interest
revenue and fee revenue. Total revenue increased $98.1 million, or 17%, to
$659.3 million. Net interest revenue increased $50.4 million, or 34%, due to
wider interest rate spreads and an increase in interest-earning assets. Fee
revenue increased $47.9 million, or 12%, due to fiduciary compensation growth of
20% or more in all businesses. Operating expenses increased $64.2 million, or
15%, from the same period a year ago due to both increased personnel and volume
related expenses.
Investment Management contributed $32.8 million to operating profit for the
first six months of 1996. This was an increase of $4.6 million, or 16% from the
same period a year ago. Revenue grew $44.6 million, or 39% due to significant
business growth and favorable securities markets, with substantial growth in
active and passive equity products investing both in the United States and
non-U.S. markets. Operating expenses increased $40.0 million, or 47% from the
same quarter a year ago primarily due to increased personnel costs.
Commercial Lending contributed $50.4 million to operating profit for the first
six months of 1996. This was an increase of $6.2 million, or 14% from the same
period a year ago reflecting loan growth in leases and traditional middle market
lending.
Accounting Changes
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" was
adopted by State Street effective January 1, 1996. SFAS No. 121 addresses how
long-lived assets and certain identifiable intangibles held and used should be
evaluated for impairment whenever events or changes in circumstances indicate
that the carrying amount of the asset may not be recoverable. The adoption of
SFAS No. 121 did not have a material impact on the financial statements of State
Street.
SFAS No. 122, "Accounting for Mortgage Servicing Rights" was adopted by State
Street effective January 1, 1996. SFAS 122 requires institutions to recognize
rights to service mortgage loans for others as separate assets, regardless of
how the servicing rights are acquired. In addition, SFAS No. 122 addresses how
mortgage servicing rights are to be assessed for impairment based on their fair
value. Prior to January 1, 1996, mortgage servicing rights were recorded at
acquisition cost. The adoption of SFAS No. 122 did not have a material impact on
the financial statements of State Street.
In 1995, SFAS No. 123, "Accounting for Stock-Based Compensation" was issued.
This statement addresses financial accounting and reporting standards for
stock-based employee compensation plans. State Street plans to continue to
measure compensation cost for these plans using the intrinsic value based method
of accounting prescribed by APB opinion No. 25 and will adopt the new disclosure
requirements for the year ended December 31, 1996.
In June 1996, SFAS No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities" was issued. This statement provides
standards for transfers and servicing of financial assets and extinguishing
liabilities. This statement is effective for fiscal years beginning after
December 31, 1996. State Street will adopt this new statement in 1997.
Capital and Liquidity
State Street maintains strong capital levels and continues to generate capital
internally. In the second quarter, the internal capital generation rate was
14.4%. State Street's capital and leverage ratios exceeded the regulatory
guidelines as follows:
Minimum
June 30, December 31, Regulatory
(Dollars in millions) 1996 1995 Guidelines
---------- ----------- ----------
Risk-based capital ratios:
Tier 1 capital 12.0% 14.0% 4.0%
Total capital 12.5 14.5 8.0
Leverage ratio 5.2 5.6 3.0
Tier 1 capital $ 1,518 $ 1,507
Total capital 1,575 1,563
Risk-adjusted assets:
On-balance sheet assets $ 9,891 $ 8,409
Off-balance sheet assets 2,709 2,339
-------- --------
Total risk-adjusted assets $ 12,600 $ 10,748
======== ========
State Street intends to maintain 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 maximizing return within risk parameters, and to meet the needs of its
customers, with emphasis on those services which State Street is well positioned
to provide.
The primary objective of State Street's liquidity management is to ensure that
State Street has sufficient funds to repay maturing liabilities, accommodate the
transaction and cash management requirements of its customers, meet loan
commitments, and accommodate other corporate needs. Liquidity is provided by
State Street's access to global market sources of funding and its ability to
gather additional deposits, maturing short-term assets, the sale of
available-for-sale securities and payments of loans.
State Street manages its assets and liabilities to maintain a high level of
liquidity. It has an extensive and diverse funding base inside and outside the
United States. Nearly all of its funding comes from customers who have other
relationships with State Street, particularly those using custody services
worldwide. Deposits are available through both domestic and international
treasury centers, providing a cost-effective, multicurrency,
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, 1996, the
portfolio included $7.8 billion of interest-bearing deposits with banks, $2.8
billion of securities purchased under resale agreements and securities borrowed,
and $1.5 billion of Federal funds sold. Of the total $12.1 billion in liquid
assets, $5.9 billion mature within one week , and nearly all mature within six
months. Although not relied on for daily liquidity needs, the $7.6 billion
available-for-sale-portfolio of investment 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, and securities borrowed, trading account assets and
investment securities. At June 30, 1996, State Street's liquid assets were 78%
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 manages trading 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, 1996, the notional amount of
these instruments was approximately $61.7 billion of which $57.7 billion was
foreign exchange forward, swap and spot contracts.
Trading activities involving foreign exchange and/or 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.
Stock Repurchase Program
During the quarter, the Corporation purchased 600,000 shares of its stock. At
quarter end, a total of 2.6 million shares had been purchased under the current
share purchase program, which was recently expanded to 6 million shares by the
Board of Directors as announced on June 20, 1996.
Outlook
For the second quarter, State Street exceeded its financial goals of revenue and
earnings per share growth. The Corporation achieved a near-record level of new
business bookings, based on projected revenue. Existing customers continued to
expand their relationships with State Street, adding assets and purchasing
additional services, and we attracted new customers.
Management will continue to focus on improving operating margin, while
maintaining a primary objective of long-term earnings per share growth, a goal
State Street has achieved consistently since 1977.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Information concerning legal proceedings appears in Note I to the Consolidated
Financial Statements on Page 11 of this report, and such information is
incorporated herein by reference.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security-Holders
The information required by this item appears in State Street's Report on Form
10-Q for the period ended March 31, 1996, filed with the Securities and Exchange
Commission on May 14, 1996.
Item 5. Other Information
On June 20, 1996, Registrant announced that its Board of Directors increased to
six million shares the authorization to purchase 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
- -------------- -------------------
4 Global Note 24
10 Amendment No. 2 dated as of June 20, 1996, to 1994 30
Stock Option and Performance Unit Plan
11 Statement re computation of per share earnings 31
12 Ratio of Earnings to Fixed Charges 32
15 Letter re: unaudited interim financial information 33
27 Financial data schedule 34
99 Press Release dated June 20, 1996 re: Expanded 35
Stock Purchase Program
(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
Date: August 12, 1996 By: /s/ Ronald L. O'Kelley
----------------------------------------------------
Ronald L. O'Kelley
Executive Vice President and Chief Financial Officer
Date: August 12, 1996 By: /s/ Rex S. Schuette
----------------------------------------------------
Rex S. Schuette
Senior Vice President and Comptroller