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 March 31, 1995 Commission File Number 0-5108
-------------- ------
STATE STREET BOSTON CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Commonwealth of Massachusetts 04-2456637
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(State or other jurisdiction of incorporation) (I.R.S. Employer
Identification Number)
225 Franklin Street, Boston, Massachusetts 02110
- -------------------------------------------------------------------------------
(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 April 30, 1995 was
82,582,494.
<PAGE>
STATE STREET BOSTON CORPORATION
Table of Contents
Page
----
Part I. Financial Information
- ------------------------------
Part I. Item 1. Financial Statements
- --------------------------------------
Consolidated Statement of Income 1
Consolidated Statement of Condition 2
Consolidated Statement of Cash Flows 3
Consolidated Statement of Changes in Stockholders' Equity 4
Notes to Consolidated Financial Statements 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 22
Part II. Item 6.
- ----------------
Exhibits and Reports on Form 8-K 22
Signatures 23
Exhibits 24-25
<PAGE>
Part I. Item 1. Financial Statements
STATE STREET BOSTON CORPORATION
CONSOLIDATED STATEMENT OF INCOME
Three months ended March 31,
(Dollars in thousands, except per share data)
(Unaudited)
1995 1994
-------- --------
INTEREST REVENUE
Deposits with banks $ 63,940 $ 51,310
Investment securities:
U.S. Treasury and Federal agencies 73,156 33,378
State and political subdivisions 12,265 9,680
Other investments 35,673 32,844
Loans 57,107 37,617
Securities purchased under resale agreements,
securities borrowed and Federal funds sold 70,768 29,775
Trading account assets 5,845 4,533
-------- --------
Total interest revenue 318,754 199,137
INTEREST EXPENSE
Deposits 102,736 56,740
Other borrowings 113,427 46,469
Long-term debt 2,140 2,170
-------- --------
Total interest expense 218,303 105,379
-------- --------
Net interest revenue 100,451 93,758
Provision for loan losses 2,000 3,170
-------- --------
Net interest revenue after
provision for loan losses 98,451 90,588
FEE REVENUE
Fiduciary compensation 186,161 188,234
Other 75,574 70,801
-------- --------
Total fee revenue 261,735 259,035
-------- --------
REVENUE BEFORE OPERATING EXPENSES 360,186 349,623
OPERATING EXPENSES
Salaries and employee benefits 150,456 144,087
Occupancy, net 20,193 16,790
Equipment 29,520 28,310
Other 74,644 74,596
-------- --------
Total operating expenses 274,813 263,783
-------- --------
Income before income taxes 85,373 85,840
Income taxes 31,037 31,643
-------- --------
NET INCOME $ 54,336 $ 54,197
======== ========
EARNINGS PER SHARE
Primary $ .66 $ .66
Fully diluted .65 .65
AVERAGE SHARES OUTSTANDING (in thousands)
Primary 82,890 82,649
Fully diluted 83,488 83,346
CASH DIVIDENDS DECLARED PER SHARE $ .16 $ .14
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATE STREET BOSTON CORPORATION
CONSOLIDATED STATEMENT OF CONDITION
(Dollars in thousands)
(Unaudited)
MARCH 31, DECEMBER 31,
1995 1994
----------- -----------
ASSETS
Cash and due from banks $ 1,380,326 $ 1,097,563
Interest-bearing deposits with banks 5,065,544 4,847,069
Securities purchased under resale agreements
and securities borrowed 2,685,697 1,886,759
Federal funds sold 296,000 768,615
Trading account assets 199,638 527,550
Investment securities:
Held to maturity 5,038,085 5,187,270
Available for sale 3,229,007 3,482,309
----------- -----------
Total investment securities 8,267,092 8,669,579
Loans 3,263,178 3,233,221
Allowance for loan losses (59,363) (58,184)
----------- -----------
Net loans 3,203,815 3,175,037
Premises and equipment 485,507 476,319
Customers' acceptance liability 65,894 55,358
Accrued income receivable 347,258 363,585
Other assets 1,545,324 679,509
----------- -----------
TOTAL ASSETS $23,542,095 $22,546,943
=========== ===========
LIABILITIES
Deposits:
Noninterest-bearing $ 4,221,073 $ 4,781,917
Interest-bearing:
Domestic 1,897,956 1,895,209
Foreign 8,048,054 7,920,932
----------- -----------
TOTAL DEPOSITS 14,167,083 14,598,058
Federal funds purchased 120,374 113,143
Securities sold under repurchase agreements 5,264,614 4,798,261
Other short-term borrowings 671,969 649,052
Notes payable 75,000
Acceptances outstanding 66,172 55,621
Accrued taxes and other expenses 456,730 418,840
Other liabilities 1,178,176 449,283
Long-term debt 127,335 127,549
----------- -----------
TOTAL LIABILITIES 22,127,453 21,209,807
STOCKHOLDERS' EQUITY
Preferred stock, no par: authorized 3,500,000;
issued none
Common stock, $1 par: authorized 112,000,000;
issued 82,546,000 and 82,447,000 82,546 82,447
Surplus 38,644 37,160
Retained Earnings 1,319,564 1,273,369
Net unrealized loss on available-for-sale
securities (26,112) (55,840)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 1,414,642 1,337,136
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $23,542,095 $22,546,943
=========== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATE STREET BOSTON CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months ended March 31,
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
---------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 54,336 $ 54,197
Noncash charges for depreciation, amortization, provision for
loan losses and foreclosed properties and deferred income taxes 49,524 53,806
---------- -----------
Net income adjusted for noncash charges 103,860 108,003
Adjustments to reconcile to net cash (used) provided
by operating activities:
Securities (gains) losses, net (3,546) 1,328
Net change in:
Accrued income receivable 16,327 (36,108)
Accrued taxes and other expenses (4,739) 4,179
Trading account assets 327,912 (548,239)
Other, net (134,913) (252,515)
---------- -----------
NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES 304,901 (723,352)
---------- -----------
INVESTING ACTIVITIES
Payments for purchases of:
Held to maturity securities (434,236) (1,115,655)
Available-for-sale securities (279,584) (1,111,309)
Lease financing assets (47,777) (79,129)
Premises and equipment (34,511) (24,931)
Proceeds from:
Maturities of held to maturity securities 581,087 860,446
Maturities of investment securities available for sale 109,154 723,219
Sales of investment securities available for sale 480,464 149,022
Principal collected from lease financing 12,862 15,443
Net (payments for) proceeds from:
Interest-bearing deposits with banks (218,475) (147,535)
Federal funds sold, resale agreements and securities borrowed
under resale agreements (326,323) (161,799)
Loans (98,523) (590 029)
---------- ------------
NET CASH USED BY INVESTING ACTIVITIES (255,862) (1,482,257)
---------- -----------
FINANCING ACTIVITIES
Proceeds from issuance of:
Notes payable 75,000 198,000
Nonrecourse debt for lease financing 121,467 58,670
Common stock 1,426 3,660
Payments for:
Maturity of notes payable
Nonrecourse debt for lease financing (16,295) (15,406)
Long-term debt (208) (190)
Cash dividends (13,207) (10,660)
Net proceeds from (payments for):
Deposits (430,975) 2,276,064
Short-term borrowings 496,516 550,481
---------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 233,724 3,060,619
---------- -----------
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS 282,763 855,010
Cash and due from banks at beginning of period 1,097,563 1,543,003
---------- -----------
CASH AND DUE FROM BANKS AT END OF PERIOD $1,380,326 $ 2,398,013
========== ===========
SUPPLEMENTAL DISCLOSURE
Interest paid $ 214,111 $ 100,341
Income taxes paid 7,495 14,358
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATE STREET BOSTON CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31,
(Dollars in thousands)
(Unaudited)
NET UNREALIZED
LOSS ON
COMMON RETAINED AVAILABLE-FOR-
STOCK SURPLUS EARNINGS SALE SECURITIES TOTAL
------- ------- ---------- --------------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993 $81,846 $25,945 $1,093,365 $ - $1,201,156
Net Income 54,197 54,197
Cash dividends declared (10,660) (10,660)
Issuance of common stock 265 5,380 5,645
Foreign currency translation 2,068 2,068
Net change in unrealized loss
on available-for-sale securities (9,847) (9,847)
------- ------- ---------- --------- ----------
BALANCE AT MARCH 31, 1994 $82,111 $31,325 $1,138,970 $ (9,847) $1,242,559
======= ======= ========== ========= ==========
BALANCE AT DECEMBER 31, 1994 $82,447 $37,160 $1,273,369 $ (55,840) $1,337,136
Net Income 54,336 54,336
Cash dividends declared (13,207) (13,207)
Issuance of common stock 99 1,484 1,583
Foreign currency translation 5,066 5,066
Net Change in unrealized loss
on available-for-sale securities 29,728 29,728
------- ------- ---------- --------- ----------
BALANCE AT MARCH 31, 1995 $82,546 $38,644 $1,319,564 $ (26,112) $1,414,642
======= ======= ========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATE STREET BOSTON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE A - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of State Street
Boston Corporation ("State Street") and its subsidiaries, including its
principal subsidiary, State Street Bank and Trust Company ("State Street Bank").
All significant intercompany transactions have been eliminated upon
consolidation. Certain previously reported amounts have been reclassified to
conform to the current method of presentation. 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 three months ended March 31, 1995 and 1994,
long-term debt converted into common stock was $15,000 and $119,000,
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 March 31, 1995 and December 31, 1994, and
its cash flows for the three months ended March 31, 1995 and 1994, and the
consolidated results of its operations for the three months ended March 31, 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.
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 5,972,22 shares of State Street
common stock.
<PAGE>
STATE STREET BOSTON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE C - INVESTMENT SECURITIES
<TABLE>
<CAPTION>
Investment securities consisted of the following at March 31, 1995:
Amortized Unrealized Fair
(Dollars in thousands) Cost Gains Losses Value
- ---------------------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Held to Maturity
(at amortized cost)
U.S. Treasury and
Federal agencies $1,679,301 $3,690 $ 16,596 $1,666,395
State and political
subdivisions 1,126,888 1,650 10,767 1,117,771
Asset-backed securities 2,193,145 1,970 45,400 2,149,715
Other investments 38,751 73 175 38,649
---------- ------ -------- ----------
Total $5,038,085 $7,383 $ 72,938 $4,972,530
========== ====== ======== ==========
Available for Sale
(at fair value)
U.S. Treasuries and
Federal Agencies $3,170,825 $1,803 $ 47,199 $3,125,429
Other investments 103,937 4,384 4,743 103,578
---------- ------ -------- ----------
Total $3,274,762 $6,187 $ 51,942 $3,229,007
========== ====== ======== ==========
Investment securities consisted of the following at December 31, 1994:
<CAPTION>
Amortized Unrealized Fair
(Dollars in thousands) Cost Gains Losses Value
- ---------------------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Held to Maturity
(at amortized cost)
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
(at fair value)
U.S. Treasuries and Federal Agencies $3,405,564 $ 496 $ 91,790 $3,314,706
Other investments 155,393 4,780 12,711 167,609
---------- ------ -------- ----------
Total $3,560,957 $5,276 $104,501 $3,482,309
========== ====== ======== ==========
</TABLE>
During the three months ended March 31, 1995, gains of $3,737,000 and losses of
$191,000 were realized on sales of available-for-sale securities of $47,296,000.
During the three months ended March 31, 1994, gains of $1,683,000 and losses of
$3,011,000 were realized on sales of available-for-sale securities of
$149,022,000.
<PAGE>
STATE STREET BOSTON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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
(Dollars in thousands) March 31,
------------------------
1995 1994
------- ------
Balance at beginning of period $58,184 $54,316
Provision for loan losses 2,000 3,170
Loan charge-offs (995) (3,102)
Recoveries 174 603
------- -------
Balance at end of period $59,363 $54,987
======= =======
NOTE E - INCOME TAXES
The provision for income taxes included in the Consolidated Statement of Income
is comprised of the following:
Three Months Ended
(Dollars in thousands) March 31,
------------------------
1995 1994
------- ------
Current $12,149 $11,856
Deferred 18,888 19,787
------- -------
Total provision $31,037 $31,643
======= =======
The provision for income taxes is less than the combined U.S. corporate tax rate
of 35% for 1995 and 1994, and the applicable state tax rates in both periods
primarily because of tax exempt revenue and tax credits.
NOTE F - FEE REVENUE - OTHER
The following items are included in the other category of fee revenue:
Three Months Ended
(Dollars in thousands) March 31,
------------------
1995 1994
------- ------
Foreign exchange trading $36,462 $34,087
Processing service fees 17,665 13,925
Service fees 12,437 11,416
Securities gains (losses), net 3,546 (1,328)
Trading account profits (losses) (384) 1,535
Other 5,848 11,166
------- -------
Total fee revenue - other $75,574 $70,801
======= =======
<PAGE>
STATE STREET BOSTON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE G - OPERATING EXPENSES - OTHER
The following items are included in the other category of operating expenses:
Three Months Ended
(Dollars in thousands) March 31,
------------------------
1995 1994
------- ------
Contract services $27,419 $25,714
Professional services 12,873 11,743
Telecommunications 6,094 5,991
Advertising and sales promotion 6,073 6,196
Postage, forms and supplies 5,978 5,740
FDIC and other insurance 3,921 5,660
Operating and processing losses 1,167 56
Other 11,119 13,496
------ ------
Total operating
expenses - other $74,644 $74,596
======= =======
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:
March 31, December 31,
(Dollars in millions) 1995 1994
--------- ------------
TRADING:
Interest rate contracts:
Swap agreements........................ $ 278 $ 109
Options and caps purchased............. 13 13
Options and caps written............... 25 25
Futures sold........................... 76 335
Options on futures written............. 480 225
Options on futures purchased........... 498
Foreign exchange contracts:
Forward, swap and spot................. 55,416 43,126
Options purchased...................... 59 40
BALANCE SHEET MANAGEMENT:
Interest rate contracts:
Swap agreements...................... 166 223
Futures sold......................... 745 165
Options and caps purchased........... -- 50
Foreign exchange contracts............. -- 83
<PAGE>
STATE STREET BOSTON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE H - OFF-BALANCE SHEET FINANCIAL INSTRUMENTS, INCLUDING DERIVATIVES
(CONTINUED)
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:
March 31, December 31,
(Dollars in millions) 1995 1994
-------- ------------
Foreign exchange contracts:
Contracts in a receivable position $1,095 $ 298
Contracts in a payable position 1,034 288
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:
March 31, December 31,
(Dollars in millions) 1995 1994
-------- ------------
Loan Commitments $ 3,686 $ 2,536
Standby letters of credit 960 926
Letters of credit 161 168
Indemnified securities lent 27,423 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 March 31, 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.
<PAGE>
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 March 31, 1995, and the related consolidated
statements of income, cash flows and changes in stockholders' equity for the
three-month periods ended March 31, 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,
prior to the restatement for pooling of interests and not presented herein, and
in our report dated January 11, 1995, except for Note B, as to which the date is
January 31, 1995, we expressed an unqualified opinion on those consolidated
financial statements.
ERNST & YOUNG LLP
Boston, Massachusetts
April 14, 1995
<PAGE>
STATE STREET BOSTON CORPORATION
PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
In January 1995, State Street acquired Investors Fiduciary Trust Company (IFTC)
in a transaction accounted for as a pooling of interests. All prior period
information has been restated to reflect the acquisition.
SUMMARY
Earnings per fully diluted share were $.65, the same as the first quarter of
1994. One-time transaction costs of $.03 per share associated with the
acquisition of IFTC were recorded in the first quarter. Excluding these costs,
earnings per share increased 5%. Revenue grew 3%, and there was a concurrent
reduction in the growth rate of expenses to 3%. The year-over-year results are
being compared to a very strong quarter a year ago. Net income from the quarter
was $54.3 million and return on stockholders' equity was 16.0%.
Condensed Income Statement
Taxable Equivalent Basis
(Dollars in million, except per share data)
Three Months Ended
March 31,
----------------------------------------
1995 1994 Change %
------- ------ ------ ---
Fee revenue $261.7 $259.0 $ 2.7 1
Interest revenue 326.7 205.5 121.2 59
Interest expense 218.3 105.4 112.9 107
------ ------ ------
Net interest revenue 108.4 100.1 8.3 8
Provision for loan losses 2.0 3.2 (1.2) (38)
------ ------ ------
Net interest revenue after
provision for loan losses 106.4 96.9 9.5 10
------ ------ ------
Total revenue 368.1 355.9 12.2 3
Operating expenses 274.8 263.8 11.0 4
------ ------ ------
Income before taxes 93.3 92.1 1.2 1
Income taxes 31.0 31.6 (0.6) (2)
Taxable equivalent adjustment 8.0 6.3 1.7 27
------ ------ ------
Net income $ 54.3 $ 54.2 $ .1 --
====== ====== ======
Earnings Per Share
Primary $ .66 $ .66 $ --
Fully diluted .65 .65 --
($ and % change based on dollars in thousands)
The first quarter's results reflected the expansion of existing customer
relationships and new customers, partially offset by the effect of reductions in
revenue and adverse conditions in a number of market and product segments. State
Street is adding to and retaining its customer base, which is critical to the
long-term success of its program of cross-selling and expanding relationships,
adding value to existing products, rapidly introducing new products and
services, and reducing unit costs.
<PAGE>
STATE STREET BOSTON CORPORATION
Part I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Market conditions impacted short-term results. In the first quarter, an interest
rate increase on February 1st and a flatter yield curve narrowed interest rate
spreads, effecting both net interest revenue and securities lending revenue. The
reduced rate of growth of both net new sales of mutual fund shares and the
creation of fewer new funds contributed to lower growth in mutual fund assets. A
slowdown in cross-border investing from the U.S. also lowered the revenue growth
rate. A fall-off in the issuance of new domestic debt issues, particularly
securitized residential mortgages, lowered revenue from corporate trust
services. On the other hand, volatile currency markets contributed to foreign
exchange revenue growth.
Investment spending continues to expand and improve infrastructure, support
geographic and product expansion, and add capacity. As a result of
reengineering, the benefits of some unit cost reductions are continuing to be
realized.
Assets under custody were $1.9 trillion, up $159 billion, or 9%, from a year
ago, which was restated to include IFTC. Assets under management were $180
billion, up $41 billion, or 30% from 1994.
TOTAL REVENUE
Total revenue in the quarter was $368.1 million, up $12.2 million from the first
quarter of 1994. The growth in revenue reflected expansion of existing customer
relationships and new business. Net interest revenue from deposits and other
balance sheet funding provided by customers increased, as did revenue from
securities lending and foreign exchange trading. Total revenue continues to grow
despite reductions in fiduciary compensation and numerous adverse factors in the
markets State Street serves.
FEE REVENUE
Fee revenue was $261.7 million, up $2.7 million from the first quarter of 1994.
The largest component of fee revenue is fiduciary compensation, which is derived
from accounting, custody, information services, recordkeeping, investment
management and trustee services. Fiduciary compensation was $186.2 million, down
$2.1 million due primarily to reductions in ongoing revenue. These revenue
reductions resulted from certain customers internalizing functions, pricing
adjustments to retain certain large customers who are using a broader array of
services, and customers no longer at State Street because of consolidations,
accounts which did not meet our profitability hurdles, and other reasons. If
these revenue reductions had not occurred, fiduciary compensation would have
increased 7%. As customers have increased their usage of a variety of State
Street services, an increasing percentage of their revenue is recorded elsewhere
on the income statement.
Revenue from mutual fund services, corporate trust, and investment management
declined. This was partially offset by growth in securities lending revenue,
additional business from servicing assets of new and existing customers outside
the United States, and the continued growth of the large defined contribution
plan servicing personal trust business.
<PAGE>
STATE STREET BOSTON CORPORATION
Part I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Mutual fund servicing revenue benefited from 348 funds added since March of 1994
and from new customers. State Street now services 2,922 mutual funds, including
412 at IFTC.
The decline in corporate trust revenue reflected substantially fewer
securitizations of residential mortgage-backed securities. The asset management
business added significant new customer relationships and new funding from
existing customers since a year ago, but the increased revenue from these
relationships was offset by other factors. In the first quarter of 1994, there
were unusually high one-time front-end fees in French mutual funds, which had
the effect of lowering the growth rate of fiduciary compensation by 1% in 1995.
Foreign exchange revenue was $36.5 million, up $2.4 million, or 7%, from a
previous record $34.1 million in the first quarter of last year. The 1995
revenue gain was due to increased market volatility across all currencies,
additional investment managers using foreign exchange services, broadened
relationships with existing customers, growth of currency risk management
services, and trading in more currencies.
Securities gains were $3.5 million, compared with losses of $1.3 million in the
same quarter a year ago. Processing service fees were $17.7 million, up $3.7
million, or 27%, due in part to growth in processing of unclaimed securities and
an increase in the volume of mortgage loans serviced.
NET INTEREST REVENUE
Taxable equivalent net interest revenue was $108.4 million, up $8.3 million, or
8%, over the same quarter a year ago, primarily reflecting balance sheet growth
to support customers' activities and the benefits of higher asset yields. These
benefits were partially offset by a narrower spread between interest rates
earned and paid due to rising rates.
Average interest-earning assets grew $2.5 billion, or 12%, to $22.2 billion,
funded primarily by an increase in securities sold under repurchase agreements
and foreign deposits. Securities sold under repurchase agreements were up $2.4
billion, or 52%, to $6.9 billion, reflecting additional short-term investments
by customers. Foreign deposits increased by $1.4 billion, including a $.5
billion increase in transaction account balances. Noninterest-bearing deposits
declined $1.0 billion to $4.2 billion due, in part, to lower balances from
mutual funds and corporate trust, which had particularly high balances in the
first quarter of 1994 due to a high level of bond redemptions. The spread
between interest rates earned and paid declined from 1.43% to 1.14%, as
short-term rates increased. The spread between the yield on our Treasury
portfolio and the funding costs of repurchase agreements narrowed by 190 basis
points. The net interest margin declined from 2.05% to 1.98%, reflecting
narrower spreads and a larger portion of funding from interest-bearing sources
of funds.
<PAGE>
STATE STREET BOSTON CORPORATION
Part I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------------------------------------
1995 1994
------------------------------- ---------------------------
Average Average
(Dollars in millions) Balance Rate Balance Rate
------- ----- ------- -----
<S> <C> <C> <C> <C>
Interest earning assets $22,240 5.96% $19,781 4.21%
Interest bearing liabilities 18,366 4.82 15,398 2.78
Excess of rates earned
over rates paid 1.14% 1.43%
==== ====
Net Interest Margin 1.98% 2.05%
==== ====
</TABLE>
OPERATING EXPENSES
Operating expenses of $274.8 million were up $11.0 million, or 4%, from the
first quarter of 1994. The one-time transaction costs of acquiring IFTC were
$2.9 million. Salaries and employee benefits were $150.5 million, up $6.4
million, or 4%, due to an increase in staff. The expense of additional staff was
partially offset by lower incentive compensation and benefit costs. Occupancy
expense was $20.2 million, up $3.4 million, or 20%, due primarily to leasing an
additional 320,000 square feet worldwide.
CREDIT QUALITY
At March 31, 1995, total loans were $3.3 billion. Excluding securities
settlement advances and other loans to financial asset services customers and
loans to securities brokers, loans were $2.5 billion, or 10% of total assets.
The provision for loan losses charged against income was $2.0 million, down from
$3.2 million a year ago. During the quarter, the allowance for loan losses
increased from $58.2 million to $59.4 million, and the allowance for loan losses
as a percentage of ending loans increased to 1.82%.
Loan ratios 1995 1994
- ----------- ---- -------------------------------------
1Q 4Q 3Q 2Q 1Q
----- ----- ----- ----- -----
Allowance to ending loans 1.82% 1.80% 1.89% 1.72% 1.67%
Net charge-offs to average loans .10 .26 .10 .25 .30
Non-performing loans to
ending loans .72 .71 .74 .83 .70
During the first quarter, non-performing loans increased from $23.0 million to
$23.3 million. Charge-offs declined substantially. In the first quarter, net
charge-offs were $.8 million, down from $2.5 million in the first quarter of
1994.
TAXES
The effective tax rate in the first quarter was 36.4%, down slightly from 36.9%
in the first quarter of 1994 and was higher than the expected 35% tax rate for
full year 1995. This is due primarily to the one-time closing costs of the
acquisition, most of which are not tax deductible. The 35% tax rate is
comparable to the full-year tax rate for 1994.
<PAGE>
STATE STREET BOSTON CORPORATION
Part I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
LINES OF BUSINESS
State Street classifies its operations into three lines of business - Financial
Asset Services, Investment Management and Commercial Lending.
Financial Asset Services primarily offers custody-related services for large
pools of assets such as mutual funds and pension plans and corporate
trusteeship. Fiduciary compensation revenue is derived from services related to
State Street's $1.9 trillion of assets under custody and $209 billion of bonds
under trusteeship. In addition to fiduciary compensation, certain financial
asset services customers generate other types of fee revenue, particularly
foreign exchange trading revenue and net interest revenue. Noninterest-bearing
deposits from these customers comprise a significant amount of State Street's
total noninterest-bearing deposits available for investment. These customers
also invest substantial short term funds with State Street. Revenue from
investing these deposits and funds is reported as interest revenue.
Investment Management is comprised of the business components that manage $180
billion of institutional and personal financial assets worldwide. Fee revenue is
derived from a broad array of products that focus on quantitative equity
management both passive and active money market funds.
Commercial Lending services are provided to commercial and financial customers.
State Street activities are aimed at middle-market companies in the northeastern
United States, as well as specialized industries on a nationwide basis.
Corporate includes the impact of long term debt; investment of corporate cash;
tax credits from tax-advantaged financings, including writedowns of these
investments in fee revenue; operating expenses; and other corporate items.
Line-of-business information is based on management accounting practices that
conform to and support the strategic objectives and management structure of
State Street and are not necessarily comparable with similar information for any
other company. In the table below, Financial Asset Services information for 1994
has been restated to include the results of IFTC.
The following is a summary of line-of-business results for the three months
ended March 31:
<TABLE>
<CAPTION>
(Taxable equivalent basis, Financial Investment Commercial
dollars in millions) Asset Services Management Lending Corporate
- --------------------------- ----------------- --------------- -------------- -------------
1995 1994 1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fee revenue $214.7 $210.3 $38.5 $38.9 $ 8.4 $11.5 $ .2 $(1.7)
Net interest revenue 74.4 76.1 2.0 2.1 32.5 23.6 (.5) (1.7)
Provision for loan losses .1 .3 1.9 2.9
------ ------ ----- ----- ----- ----- ----- -----
Total revenue 289.0 286.1 40.5 41.0 39.0 32.2 (.3) (3.4)
Operating expenses 226.7 212.2 24.3 24.5 18.4 18.8 5.4 8.3
------ ------ ----- ----- ----- ----- ----- -----
Income before income taxes 62.3 73.9 16.2 16.5 20.6 13.4 (5.7) (11.7)
Income taxes 25.7 32.6 7.8 7.3 8.8 5.8 (3.2) (7.7)
------ ------ ----- ----- ----- ----- ----- -----
Net income $ 36.6 $ 41.3 $ 8.4 $ 9.2 $11.8 $ 7.6 $(2.5) $(4.0)
====== ====== ===== ===== ===== ===== ===== =====
Percentage contribution 68% 76% 15% 17% 22% 14% (5%) (7%)
Average assets $22,562 $20,165 $15 $14 $2,516 $2,269
</TABLE>
<PAGE>
STATE STREET BOSTON CORPORATION
Part I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
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 items applicable to the respective lines of business is
provided below as well as significant expense information where applicable.
Financial Asset Services contributed 68% of first quarter's net income in 1995.
Net income was $36.6 million, a decrease of $4.7 million or 11% from $41.3
million in 1994. Fiduciary compensation decreased $4.0 million. Foreign
exchange, securities gains and trading account profits increased $5.3 million.
Processing service fees increased $3.7 million, due in part to growth in
processing of unclaimed securities and an increase in the volume of mortgage
loans serviced. Operating expenses increased $14.5 million primarily due to
increased salaries and employee benefits costs.
Investment Management contributed 15% of first quarter's net income in 1995. Net
income was $8.4 million, a decrease of $.8 million or 9% from $9.2 million in
1994.
Commercial Lending contributed 22% of first quarter's net income in 1995. Net
income was $11.8 million, an increase of $4.2 or 55% over $7.6 million in 1994.
Net interest revenue increased $8.9 million due to higher loan volume and higher
interest rates which increased the value of noninterest-bearing deposits. Fee
revenue decreased $3.1, primarily due to $4.1 million leasing residual gain
recorded in 1994 compared to $.3 in 1995.
Corporate items reduced net income by $2.5 million compared to $4.0 in 1994. An
increase in fee revenue from tax-advantaged financings and a reduction in
operating expenses offset the one-time $2.9 million transaction costs of
acquiring IFTC.
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.
<PAGE>
STATE STREET BOSTON CORPORATION
Part I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
CAPITAL AND LIQUIDITY
State Street has a strong capital position to support current operations and
growth, and continues to generate capital internally at a high rate. In the
first quarter, the internal capital generation rate was 12.1%.
At March 31, 1995, State Street's capital and leverage ratios exceeded the
regulatory guidelines:
Minimum
State Regulatory
Street Guidelines
------ ----------
Risk-based capital ratios:
Tier 1 capital 13.4% 4.0%
Total capital 13.9 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 (leverage ratio of 5%). The corporation's
objective are to optimize the use of the balance sheet an to fully service
customers, with emphasis on those services which State Street is well positioned
to provide.
Liquidity is required to replace maturing liabilities, accommodate the
transaction and cash management requirements of State Street's customers, meet
loan commitments and accommodate other corporate needs. Liquidity is provided
from the ability to access global market sources of funding and gather
additional deposits, and from maturing short-term assets, sale of available for
sale securities and payment of loans.
State Street manages its assets and liabilities to maintain a high level of
liquidity. The Corporation has an extensive and diverse funding base inside and
outside the United States. A significant percentage of funding comes from
customers who have other relationships with State Street, particularly those
using financial asset services worldwide. Deposits are accessed through domestic
as well as international treasury centers, providing a cost-effective,
geographically diverse source of funding. Significant funding is also provided
from institutional customers' demand for repurchase agreements for their
short-term investment needs. State Street maintains other funding alternatives,
ensuring access to additional sources of funds if needed. Relationships are
maintained with a variety of investors, for a range of financial instruments, in
various markets and time zones.
<PAGE>
STATE STREET BOSTON CORPORATION
Part I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
State Street maintains a large portfolio of liquid assets. At March 31, 1995,
the portfolio included $5.1 billion of interest-bearing deposits with banks and
$2.7 billion of securities purchased under resale agreements. Although not
relied on for daily liquidity needs, the $3.2 billion available-for
sale-portfolio of marketable securities provides a significant secondary source
of liquidation.
State Street maintains strong liquidity ratios. When liquidity is measured by
the ratio of liquid assets to total assets, State Street ranks among the highest
of U.S. banking companies. Liquid assets consist of cash and due from banks,
interest-bearing deposits with banks, Federal funds sold, securities purchased
under resale agreements, trading account assets and investment securities. At
March 31, 1994, the Corporation's liquid assets were 76% of total assets.
FOREIGN EXCHANGE AND DERIVATIVE FINANCIAL INSTRUMENTS
State Street uses foreign exchange and a variety of financial derivative
instruments to support customers' needs, to conduct trading activities, and to
manage interest rate and currency risk. These activities either generate trading
revenue or enhance the stability of net interest revenue. In addition, State
Street provides services related to derivative instruments in its role as both a
manager and servicer of financial assets.
As a part of trading activities, State Street also assumes market positions in
both the foreign exchange and interest-rate markets using financial derivatives
- - primarily forward foreign exchange contracts, foreign exchange and
interest-rate options, and interest-rate swaps. State Street's positions are
based on market expectations and customers' needs. As of March 30, 1995, the
notional amount of these instruments was approximately $57 billion of which $55
billion was foreign exchange forward contracts.
Trading activities involving both foreign exchange and interest-rate derivatives
are managed using earnings at risk measures and trading limits as established by
risk-management policies. Interest-rate and foreign exchange derivatives that
are used as part of the asset- and liability-management process are subjected to
the same credit and interest-rate risk processes for financial instruments
carried on the balance sheet.
As a manager of financial assets for others, State Street uses derivative
financial instruments to hedge against market risk, adjust portfolio duration
and enable efficient portfolio construction. These activities are undertaken in
accordance with investment guidelines supplied by, or disclosed to, State
Street's customers. As a servicer of financial assets, State Street acts as
trustee, custodian and/or administrator for its customers' investment funds,
certain of which may use derivative instruments in their investment strategies.
These activities are part of the normal responsibilities of State Street as a
service provider and are discharged in accordance with customer service
contracts.
<PAGE>
STATE STREET BOSTON CORPORATION
Part I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
ACQUISITION
On January 31, State Street acquired Investors Fiduciary Trust Company, a
servicer of mutual funds with $115 billion of assets under custody based in
Kansas City, Missouri. IFTC was acquired and accounted for as a pooling of
interests from DST Systems, Inc. and Kemper Financial Services, Inc. The
acquisition strengthens State Street's market leadership, bringing additional
customers and different systems alternatives to service the mutual funds market.
State Street will bring its broad range of global products to these customers.
STOCK BUY BACK
In 1993, the Board of Directors authorized the repurchase of up to two million
shares of State Street's common stock. Shares purchased under the authorization,
if any, would be used for employee benefit plans. No purchases were made through
March 31, 1995. We do not intend to buy back our stock at this time.
OUTLOOK
While revenue growth rates declined during 1994, the business plan for 1995
assumed a continuation of revenue growth more in line with long-term trends.
This was based on management's assessment of future market conditions.
With the first quarter having revenue growth of 3% and earnings per share growth
of 5%, we will need to increase the rate of growth of revenue in the next nine
months to achieve double-digit earnings per share growth for 1995. We are taking
actions aimed at accomplishing this. We expect to achieve revenue growth, in
part, based upon additional revenue opportunities from our existing customers,
more revenue from the acquisition of IFTC, and further penetration of the
markets around the world, as well as our assumptions of increased activity in
the U.S. mutual funds business, a resumption of growth in global investing from
the U.S., and relative stability in short-term U.S. interest rates. At the same
time, we will continue to hold expenses below the level of our original plan.
Our primary financial objective remains sustainable real growth in earnings per
share. In support of that goal, we aim for superior long-term performance. For
us that translates to an ROE of 18%. This is an annual goal, not a goal for each
and every quarter. We also have a revenue goal, which is expressed in real
terms, or adjusted for inflation. In the 80's, real revenue grew at an annual
compound growth rate of 12.5% per year. We aim to repeat that record in the
90's.
Our target for 1995 remains double-digit earnings per share growth, which we
expect to reach. This expectation is based on the assumptions mentioned above:
specifically, more favorable market conditions and better performance over the
next nine months.
We believe that the outlook remains bright, with increasing demand for our
services. Our franchise as a market leader is well-positioned to retain and
augment our customer base. While short-term factors have inhibited our revenue
growth for the first quarter, we think that our strategy will produce value for
our stockholders in the long-term.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On April 18, 1995, State Street Bank and Trust Company, wholly-owned by State
Street Boston Corporation, was notified of a class action lawsuit filed in the
United States District Court for the Northern District of Illinois seeking
damages and an injunction. State Street Bank was sued in its capacity as Trustee
of the United Airlines Corporation employee ownership plans in connection with
the purchase of stock in UAL by the plans. The complaint alleges that State
Street violated certain provisions of ERISA in acting as trustee of the plans.
State Street has built its success in large part through its in depth expertise
in the markets in which it specializes and its strict adherence to high
professional standards. State Street believes the suit is without merit and
intends to vigorously defend its actions in this matter. State Street believes
this suit can be successfully defended or resolved without a material adverse
effect on State Streets' financial position or results of operations.
Reference is also made to Note I to the Consolidated Financial Statements on
Page 9.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
Registrant's annual meeting of stockholders was held on April 19, 1995. At the
Meeting the following nominees for Director were elected and the following
proposal was approved:
1. Election of Six Directors:
Number of Shares
For Withhold Authority
---------- ------------------
Joseph A. Baute 69,973,424 159,038
Lois D. Juliber 69,973,656 158,806
Charles R. LaMantia 69,961,656 170,806
Alfred Poe 69,900,112 232,349
David A. Spina 69,969,944 162,512
Robert E. Weissman 69,944,955 187,507
The following directors continue in office: Tenley E. Albright, M.D., Marshall
N. Carter, Nader F. Darehshori, Charles F. Kaye, John M. Kucharski Bernard W.
Reznicek, I. MacAllister Booth, James I. Cash, Jr., Truman S. Casner, David B.
Perini and Dennis J. Picard.
2. Proposal to approve the Senior Executives Annual Incentive Plan and the
performance goals under the Plan:
Number of Shares
----------------
For 64,812,669
Against 4,639,968
Abstain 677,823
<PAGE>
PART II - OTHER INFORMATION (CONTINUED)
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 24
15 Letter re: Unaudited interim financial information 25
27 Financial data schedule --
(b)Reports on Form 8-K
One Report on Form 8-K dated January 31, 1995, relating to the acquisition of
IFTC Holdings, Inc. was electronically filed during the quarter.
<PAGE>
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: May 12, 1995 By: /s/ David A. Spina
-------------------------------------
David A. Spina
Vice Chairman, Chief Financial
Officer and Treasurer
Date: May 12, 1995 By: /s/ Rex S. Schuette
------------------------------------
Rex S. Schuette
Senior Vice President and Comptroller
Exhibit 11
STATE STREET BOSTON CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(Dollars in thousands, Three Months Ended
except per share data) March 31,
------------------
1995 1994
---------- ----------
Primary
Average shares outstanding 82,499,807 82,020,578
Common stock equivalents 390,605 628,826
---------- ----------
Primary shares outstanding 82,890,412 82,649,404
========== ==========
Net income $54,336 $54,197
======= =======
Earnings Per Share-primary $ .66 $ .66
======= =======
Fully Diluted
Average shares outstanding 82,499,807 82,020,578
Common stock equivalents 406,731 628,826
Assumed conversion of 7 3/4%
convertible subordinated
debentures 581,391 697,022
-------- ----------
Fully diluted average
shares outstanding 83,487,929 83,346,426
========== ==========
Net income $54,336 $54,197
Elimination of interest on
7 3/4% convertible subordinated
debentures and 5% convertible
notes less related income tax
effect 37 43
------- -------
Fully diluted net income $54,373 $54,240
======= =======
Earnings Per Share-fully diluted $ .65 $ .65
======= =======
Exhibit 15
STATE STREET BOSTON CORPORATION
Independent Accountant's Acknowledgment Letter
The Stockholders and Board of Directors
State Street Boston Corporation
We are aware of the incorporation by reference in the Registration Statement
(Form S-8 Nos. 33-57359, 33-38672, 33-38671, 33-2882, 2-93157, 2-88641 and
2-68698) and the Post-Effective Amendment No. 2 to Registration Statement (Form
S-8 No. 2-68696) pertaining to various stock option and performance share plans,
and in the Registration Statement (Form S-3 No. 33-49885) pertaining to the
registration of debt securities of State Street Boston Corporation, of our
report dated April 14, 1995 relating to the unaudited consolidated interim
financial statements of State Street Boston Corporation which are included in
its Form 10-Q for the quarter ended March 31, 1995.
Pursuant to Rule 436(C) of the Securities Act of 1933, our report is not a part
of the registration statements prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
ERNST & YOUNG LLP
Boston, Massachusetts
April 14, 1995
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND INCOME STATEMENT AND FROM THE MANAGEMENT DISCUSSION AND ANALYSIS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND
MANAGEMENT DISCUSSION. THIS FINANCIAL DATA SCHEDULE HAS BEEN RESTATED AS A
RESULT OF POOLING OF INTERESTS (IFTC).
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,380,326
<INT-BEARING-DEPOSITS> 5,065,544
<FED-FUNDS-SOLD> 2,981,697
<TRADING-ASSETS> 199,638
<INVESTMENTS-HELD-FOR-SALE> 3,229,007
<INVESTMENTS-CARRYING> 5,038,085
<INVESTMENTS-MARKET> 4,972,530
<LOANS> 3,263,178
<ALLOWANCE> 59,363
<TOTAL-ASSETS> 23,542,095
<DEPOSITS> 14,167,083
<SHORT-TERM> 6,131,957
<LIABILITIES-OTHER> 1,701,078
<LONG-TERM> 127,335
<COMMON> 82,546
0
0
<OTHER-SE> 1,332,096
<TOTAL-LIABILITIES-AND-EQUITY> 23,542,095
<INTEREST-LOAN> 57,107
<INTEREST-INVEST> 121,094
<INTEREST-OTHER> 140,553
<INTEREST-TOTAL> 318,754
<INTEREST-DEPOSIT> 102,736
<INTEREST-EXPENSE> 218,303
<INTEREST-INCOME-NET> 100,451
<LOAN-LOSSES> 2,000
<SECURITIES-GAINS> 3,546
<EXPENSE-OTHER> 74,644
<INCOME-PRETAX> 85,373
<INCOME-PRE-EXTRAORDINARY> 85,373
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,336
<EPS-PRIMARY> 0.66
<EPS-DILUTED> 0.65
<YIELD-ACTUAL> 5.96
<LOANS-NON> 22,593
<LOANS-PAST> 2,306
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 58,184
<CHARGE-OFFS> 995
<RECOVERIES> 174
<ALLOWANCE-CLOSE> 59,363
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND INCOME STATEMENT AND FROM THE MANAGEMENT DISCUSSION AND ANALYSIS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND
MANAGEMENT DISCUSSION. THIS FINANCIAL DATA SCHEDULE HAS BEEN RESTATED AS A
RESULT OF POOLING OF INTERESTS (IFTC).
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR-END 9-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1994
<PERIOD-END> DEC-31-1994 SEP-30-1994
<CASH> 1,097,563 1,097,182
<INT-BEARING-DEPOSITS> 4,847,069 5,381,227
<FED-FUNDS-SOLD> 2,655,374 3,599,989
<TRADING-ASSETS> 527,550 316,984
<INVESTMENTS-HELD-FOR-SALE> 3,482,309 3,146,839
<INVESTMENTS-CARRYING> 5,187,270 5,022,953
<INVESTMENTS-MARKET> 5,058,341 4,937,861
<LOANS> 3,233,221 3,078,424
<ALLOWANCE> 58,184 58,336
<TOTAL-ASSETS> 22,546,943 23,163,587
<DEPOSITS> 14,598,058 14,704,543
<SHORT-TERM> 5,560,456 6,050,439
<LIABILITIES-OTHER> 923,744 962,803
<LONG-TERM> 127,549 127,753
<COMMON> 82,447 82,440
0 0
0 0
<OTHER-SE> 1,254,689 1,235,609
<TOTAL-LIABILITIES-AND-EQUITY> 22,546,943 23,163,587
<INTEREST-LOAN> 183,333 47,776
<INTEREST-INVEST> 363,650 91,750
<INTEREST-OTHER> 389,261 104,112
<INTEREST-TOTAL> 936,244 243,638
<INTEREST-DEPOSIT> 280,687 73,379
<INTEREST-EXPENSE> 544,092 144,017
<INTEREST-INCOME-NET> 392,152 99,621
<LOAN-LOSSES> 11,569 3,159
<SECURITIES-GAINS> 1,345 1,909
<EXPENSE-OTHER> 285,459 68,749
<INCOME-PRETAX> 340,134 84,525
<INCOME-PRE-EXTRAORDINARY> 340,134 84,525
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 220,343 55,153
<EPS-PRIMARY> 2.66 0.66
<EPS-DILUTED> 2.64 0.66
<YIELD-ACTUAL> 4.82 4.99
<LOANS-NON> 23,043 22,680
<LOANS-PAST> 41 14
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 54,316 55,947
<CHARGE-OFFS> 10,477 1,135
<RECOVERIES> 2,776 334
<ALLOWANCE-CLOSE> 58,184 58,336
<ALLOWANCE-DOMESTIC> 52,424 0
<ALLOWANCE-FOREIGN> 5,760 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
