EX-99.2 3 q42012-financialinformatio.htm EXHIBIT Q4 2012 - Financial Information Addendum




 
Exhibit 99.2
 
 
STATE STREET CORPORATION
Earnings Release Addendum
December 31, 2012
 
 
 
Table of Contents
 
 
GAAP-Basis Financial Information
Page
 
 
 
 
 
 
 
 
 
 
Operating-Basis Financial Information
 
 
 
 
 
 
 
Capital
 
 
 
 
 
 
 
 
 
This financial information should be read in conjunction with State Street's earnings news release dated January 18, 2013.





STATE STREET CORPORATION
Earnings Release Addendum
CONSOLIDATED FINANCIAL HIGHLIGHTS
 
 
 
Quarters Ended
 
% Change
(Dollars in millions, except per share amounts or where otherwise noted)
 
December 31, 2012
 
September 30, 2012
 
December 31, 2011
 
Q4 2012 vs. Q3 2012
 
Q4 2012 vs. Q4 2011
Revenue:
 
 
 
 
 
 
 
 
 
 
   Fee revenue
 
$
1,806

 
$
1,719

 
$
1,667

 
5
 %
 
8
%
   Net interest revenue(1)
 
622

 
619

 
606

 

 
3

   Net gains (losses) from sales of investment securities
 
26

 
24

 
59

 
 
 
 
   Net losses from other-than-temporary impairment
 
(5
)
 
(6
)
 
(17
)
 
 
 
 
Total revenue
 
2,449

 
2,356

 
2,315

 
4

 
6

 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
   Expenses from operations
 
1,714

 
1,664

 
1,636

 
3

 
5

Claims resolution(2)
 

 
(362
)
 

 
 
 
 
Provisions for litigation exposure and other costs(3)
 
11

 
85

 

 
 
 
 
   Acquisition and restructuring costs(4)
 
139

 
28

 
148

 
 
 
 
Total expenses
 
1,864

 
1,415

 
1,784

 
32

 
4

 
 
 
 
 
 
 
 
 
 
 
Net income
 
470

 
674

 
381

 
(30
)
 
23

Net income available to common shareholders
 
468

 
654

 
371

 
 
 
 
Diluted earnings per common share
 
1.00

 
1.36

 
.76

 
(26
)
 
32

Average diluted common shares outstanding (in thousands)
 
467,466

 
480,010

 
490,328

 
 
 
 
Cash dividends declared per common share
 
$
.24

 
$
.24

 
$
.18

 
 
 
 
Closing price per share of common stock (at quarter end)
 
47.01

 
41.96

 
40.31

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ratios:
 
 
 
 
 
 
 
 
 
 
   Return on average common equity
 
9.3
%
 
13.3
%
 
7.8
%
 
 
 
 
   Net interest margin, fully taxable-equivalent basis
 
1.48

 
1.53

 
1.55

 
 
 
 
   Tier 1 risk-based capital
 
19.1

 
19.8

 
18.8

 
 
 
 
   Total risk-based capital
 
20.6

 
21.3

 
20.5

 
 
 
 
   Tier 1 leverage
 
7.1

 
7.6

 
7.3

 
 
 
 
   Tier 1 common to risk-weighted assets(5)
 
17.1

 
17.8

 
16.8

 
 
 
 
   Tangible common equity to tangible assets(5)
 
7.2

 
7.6

 
7.2

 
 
 
 
At Quarter End:
 
 
 
 
 
 
 
 
 
 
Assets under custody and administration(6) (in trillions)
 
$
24.37

 
$
23.44

 
$
21.81

 
 
 
 
    Assets under management (in trillions)
 
2.09

 
2.07

 
1.85

 
 
 
 
 
 
 
 
 
(1) Included discount accretion related to former conduit securities of $52 million, $40 million and $61 million for the quarters ended December 31, 2012, September 30, 2012 and December 31, 2011, respectively.
(2) Reflected a benefit related to claims associated with the Lehman Brothers bankruptcy.
(3) Quarter ended September 30, 2012 reflected a provision of $60 million for exposure related to previously disclosed litigation associated with asset management and securities lending, and a special one-time additional charitable contribution of $25 million.
(4) Quarters ended December 31, 2012 and December 31, 2011 primarily reflected restructuring charges, composed mainly of severance and benefits costs for targeted staff reductions related to expense control measures; aggregate acquisition and restructuring costs were partly offset by $40 million and $55 million, respectively, of indemnification benefits for income tax claims related to a 2010 acquisition.
(5) Ratios are non-GAAP financial measures. Refer to accompanying reconciliations for additional information.
(6) Included assets under custody of $17.81 trillion, $17.29 trillion and $15.86 trillion, respectively.





STATE STREET CORPORATION
Earnings Release Addendum
 
 
 
 
 
 
 
CONSOLIDATED FINANCIAL HIGHLIGHTS (Continued)
 
 
 
 
 
 
 
Years Ended
 
 % Change
(Dollars in millions, except per share amounts)
 
December 31, 2012
 
December 31, 2011
 
2012 vs. 2011
Revenue:
 
 
 
 
 
 
   Fee revenue
 
$
7,088

 
$
7,194

 
(1
)%
   Net interest revenue(1)
 
2,538

 
2,333

 
9

   Net gains from sales of investment securities(2)
 
55

 
140

 
 
   Losses from other-than-temporary impairment
 
(32
)
 
(73
)
 
 
Total revenue
 
9,649

 
9,594

 
1

 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
   Expenses from operations
 
6,905

 
6,789

 
2

Claims resolution(3)
 
(362
)
 

 
 
Provisions for litigation exposure and other costs(4)
 
118

 

 
 
   Acquisition and restructuring costs(5)
 
225

 
269

 
(16
)
Total expenses
 
6,886

 
7,058

 
(2
)
 
 
 
 
 
 
 
Net income
 
2,061

 
1,920

 
7

Net income available to common shareholders
 
2,019

 
1,882

 
 
Diluted earnings per common share
 
4.20

 
3.79

 
11

Average diluted common shares outstanding (in thousands)
 
481,129

 
496,072

 
 
Cash dividends declared per common share
 
$
.96

 
$
.72

 
 
Return on average common equity
 
10.3
%
 
10.0
%
 
 
Net interest margin, fully taxable-equivalent basis
 
1.59

 
1.67

 
 
 
 
 
 
 
(1) Years ended December 31, 2012 and 2011 included discount accretion related to former conduit securities of $215 million and $220 million, respectively.
(2) Year ended December 31, 2012 included loss from sale of Greek investment securities of $46 million.
(3) Reflected a benefit related to claims associated with the Lehman Brothers bankruptcy.
(4) Reflected a net provision of $80 million for exposure primarily related to previously disclosed litigation associated with asset management and securities lending, a special one-time additional charitable contribution of $25 million, and a loss of $13 million related to a Lehman Brothers-related OREO property.
(5) Years ended December 31, 2012 and 2011 primarily reflected restructuring charges, composed mainly of severance and benefits costs for targeted staff reductions related to expense control measures and costs associated with the business operations and information technology transformation program; aggregate acquisition and restructuring costs were partly offset by $40 million and $55 million, respectively, for indemnification benefits for income tax claims related to a 2010 acquisition.







STATE STREET CORPORATION
Earnings Release Addendum
CONSOLIDATED RESULTS OF OPERATIONS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters ended
 
Years Ended
(Dollars in millions, except per share amounts)
 
December 31, 2012
 
September 30, 2012
 
December 31, 2011
 
Q4 2012 vs. Q3 2012
 
Q4 2012 vs. Q4 2011
 
December 31, 2012
 
December 31, 2011
 
 % Change
Fee revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Servicing fees
 
$
1,150

 
$
1,100

 
$
1,057

 
5
 %
 
9
 %
 
$
4,414

 
$
4,382

 
1
 %
Management fees
 
260

 
251

 
202

 
4

 
29

 
993

 
917

 
8

Trading services
 
243

 
232

 
273

 
5

 
(11
)
 
1,010

 
1,220

 
(17
)
Securities finance
 
74

 
91

 
90

 
(19
)
 
(18
)
 
405

 
378

 
7

Processing fees and other
 
79

 
45

 
45

 
76

 
76

 
266

 
297

 
(10
)
Total fee revenue
 
1,806

 
1,719

 
1,667

 
5

 
8

 
7,088

 
7,194

 
(1
)
Net interest revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest revenue
 
733

 
730

 
765

 

 
(4
)
 
3,014

 
2,946

 
2

Interest expense
 
111

 
111

 
159

 

 
(30
)
 
476

 
613

 
(22
)
Net interest revenue
 
622

 
619

 
606

 

 
3

 
2,538

 
2,333

 
9

Gains (losses) related to investment securities, net:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net gains (losses) from sales of investment securities
 
26

 
24

 
59

 
 
 
 
 
55

 
140

 
 
Losses from other-than-temporary impairment
 
(3
)
 
(4
)
 
(19
)
 
 
 
 
 
(53
)
 
(123
)
 
 
Losses not related to credit
 
(2
)
 
(2
)
 
2

 
 
 
 
 
21

 
50

 
 
Gains (losses) related to investment securities, net
 
21

 
18

 
42

 
 
 
 
 
23

 
67

 
 
Total revenue
 
2,449

 
2,356

 
2,315

 
4

 
6

 
9,649

 
9,594

 
1

Provision for loan losses
 
(2
)
 

 
(1
)
 
 
 
 
 
(3
)
 

 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and employee benefits
 
915

 
916

 
872

 

 
5

 
3,837

 
3,820

 

Information systems and communications
 
234

 
211

 
195

 
11

 
20

 
844

 
776

 
9

Transaction processing services
 
179

 
170

 
179

 
5

 

 
702

 
732

 
(4
)
Occupancy
 
121

 
115

 
116

 
5

 
4

 
470

 
455

 
3

Claims resolution
 

 
(362
)
 

 
 
 
 
 
(362
)
 

 
 
Provisions for litigation exposure
 
(2
)
 
60

 

 
 
 
 
 
80

 

 
 
Acquisition and restructuring costs
 
139

 
28

 
148

 
396

 
(6
)
 
225

 
269

 
(16
)
Other
 
278

 
277

 
274

 

 
1

 
1,090

 
1,006

 
8

Total expenses
 
1,864

 
1,415

 
1,784

 
32

 
4

 
6,886

 
7,058

 
(2
)
Income before income tax expense
 
587

 
941

 
532

 
(38
)
 
10

 
2,766

 
2,536

 
9

Income tax expense
 
117

 
267

 
151

 
 
 
 
 
705

 
616

 
 
Net income
 
$
470

 
$
674

 
$
381

 
(30
)
 
23

 
$
2,061

 
$
1,920

 
7

Adjustments to net income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends on preferred stock
 
$

 
$
(15
)
 
$
(7
)
 
 
 
 
 
$
(29
)
 
$
(20
)
 
 
Earnings allocated to participating securities
 
(2
)
 
(5
)
 
(3
)
 
 
 
 
 
(13
)
 
(18
)
 
 
Net income available to common shareholders
 
$
468

 
$
654

 
$
371

 
 
 
 
 
$
2,019

 
$
1,882

 
 
Earnings per common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
1.02

 
$
1.39

 
$
.77

 
(27
)
 
32

 
$
4.25

 
$
3.82

 
11

Diluted
 
1.00

 
1.36

 
.76

 
(26
)
 
32

 
4.20

 
3.79

 
11

Average common shares outstanding (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
459,339

 
472,355

 
485,424

 
 
 
 
 
474,458

 
492,598

 
 
Diluted
 
467,466

 
480,010

 
490,328

 
 
 
 
 
481,129

 
496,072

 
 






STATE STREET CORPORATION
Earnings Release Addendum
CONSOLIDATED STATEMENT OF CONDITION
 
 
 
 
 
As of December 31,
 
2012
 
2011
(Dollars in millions, except share amounts)
 
 
 
 
Assets
 
 
 
 
Cash and due from banks
 
$
2,590

 
$
2,193

Interest-bearing deposits with banks
 
50,763

 
58,886

Securities purchased under resale agreements
 
5,016

 
7,045

Trading account assets
 
637

 
707

Investment securities available for sale
 
109,682

 
99,832

Investment securities held to maturity
 
11,379

 
9,321

Loans and leases (less allowance for losses of $22 and $22)
 
12,285

 
10,031

Premises and equipment
 
1,728

 
1,747

Accrued income receivable
 
1,970

 
1,822

Goodwill
 
5,977

 
5,645

Other intangible assets
 
2,539

 
2,459

Other assets
 
18,016

 
17,139

Total assets
 
$
222,582

 
$
216,827

Liabilities
 
 
 
 
Deposits:
 
 
 
 
Noninterest-bearing
 
$
44,445

 
$
59,229

Interest-bearing -- U.S.
 
19,201

 
7,148

Interest-bearing -- Non-U.S.
 
100,535

 
90,910

Total deposits
 
164,181

 
157,287

Securities sold under repurchase agreements
 
8,006

 
8,572

Federal funds purchased
 
399

 
656

Other short-term borrowings
 
4,502

 
4,766

Accrued expenses and other liabilities
 
17,236

 
18,017

Long-term debt
 
7,389

 
8,131

Total liabilities
 
201,713

 
197,429

Shareholders' Equity
 
 
 
 
Preferred stock, no par, 3,500,000 shares authorized:
 
 
 
 
   Series C, 5,000 shares issued and outstanding
 
489

 

   Series A, 5,001 shares issued and outstanding
 

 
500

Common stock, $1 par: 750,000,000 shares authorized; 503,900,268 and 503,965,849 shares issued
 
504

 
504

Surplus
 
9,667

 
9,557

Retained earnings
 
11,751

 
10,176

Accumulated other comprehensive gain (loss)
 
360

 
(659
)
Treasury stock, at cost (45,238,208 and 16,541,985 shares)
 
(1,902
)
 
(680
)
Total shareholders' equity
 
20,869

 
19,398

Total liabilities and shareholders' equity
 
$
222,582

 
$
216,827






STATE STREET CORPORATION
Earnings Release Addendum
ASSETS UNDER CUSTODY AND ADMINISTRATION, ASSETS UNDER CUSTODY, AND ASSETS UNDER MANAGEMENT
 

 
As of
(In billions)
 
December 31, 2012
 
September 30, 2012
 
December 31, 2011
Assets Under Custody and Administration
 
 
 
 
 
 
By Product Classification:
 
 
 
 
 
 
   Mutual Funds
 
$
5,852

 
$
5,828

 
$
5,265

   Collective Funds
 
5,363

 
4,912

 
4,437

   Pension Products
 
5,339

 
5,258

 
4,837

   Insurance and Other Products
 
7,817

 
7,443

 
7,268

Total Assets Under Custody and Administration
 
$
24,371

 
$
23,441

 
$
21,807

By Servicing Location:
 
 
 
 
 
 
   U.S.
 
$
17,711

 
$
17,066

 
$
15,745

   Non-U.S.
 
6,660

 
6,375

 
6,062

Total Assets Under Custody and Administration
 
$
24,371

 
$
23,441

 
$
21,807

Assets Under Custody(1)
 
 
 
 
 
 
By Product Classification:
 
 
 
 
 
 
   Mutual Funds
 
$
5,662

 
$
5,619

 
$
5,097

   Collective Funds
 
4,045

 
3,853

 
3,430

   Pension Products
 
4,054

 
4,016

 
3,723

   Insurance and Other Products
 
4,045

 
3,799

 
3,613

Total Assets Under Custody
 
$
17,806

 
$
17,287

 
$
15,863

By Servicing Location:
 
 
 
 
 
 
   U.S.
 
$
13,103

 
$
12,919

 
$
11,796

   Non-U.S.
 
4,703

 
4,368

 
4,067

Total Assets Under Custody
 
$
17,806

 
$
17,287

 
$
15,863

Assets Under Management
 
 
 
 
 
 
Passive:
 
 
 
 
 
 
   Equities
 
$
755

 
$
727

 
$
638

   Fixed-Income
 
292

 
295

 
246

   Exchange-Traded Funds(2)
 
340

 
336

 
274

   Other(3)
 
211

 
199

 
195

     Total Passive
 
1,598

 
1,557

 
1,353

Active:
 
 
 
 
 
 
   Equities
 
52

 
51

 
50

   Fixed-Income
 
17

 
18

 
19

   Other
 
55

 
56

 
45

     Total Active
 
124

 
125

 
114

   Cash
 
367

 
383

 
378

Total Assets Under Management
 
$
2,089

 
$
2,065

 
$
1,845

 
 
 
 
 
 
 
(1)  Assets under custody are a component of assets under custody and administration presented above.
(2)  Includes SPDR® Gold Fund for which State Street is not the investment manager, but acts as distribution agent.
(3)  Includes currency, alternatives, assets passed to sub-advisors and multi-asset class solutions.





STATE STREET CORPORATION
Earnings Release Addendum
RECONCILIATIONS OF OPERATING-BASIS (NON-GAAP) FINANCIAL INFORMATION
 
     In addition to presenting State Street’s financial results in conformity with U.S. generally accepted accounting principles, referred to as GAAP, management also presents results on a non-GAAP, or "operating" basis, in order to highlight comparable financial trends and other characteristics with respect to State Street’s ongoing business operations from period to period. Management measures and compares certain financial information on an operating basis, as it believes that this presentation supports meaningful comparisons from period to period and the analysis of comparable financial trends with respect to State Street’s normal ongoing business operations.
     Management believes that operating-basis financial information, which reports revenue from non-taxable sources, such as interest revenue from tax-exempt investment securities and processing fees and other revenue associated with tax-advantaged investments, on a fully taxable-equivalent basis and excludes the impact of revenue and expenses outside of the normal course of business, facilitates an investor's understanding and analysis of State Street's underlying financial performance and trends in addition to financial information prepared and reported in accordance with GAAP.
     This earnings release addendum includes financial information presented on a GAAP as well as on an operating basis, and provides reconciliations of operating-basis financial measures. The following tables reconcile operating-basis financial information presented in the earnings release to financial information prepared and reported in conformity with GAAP.
 
 
 
Quarters Ended
 
% Change
(Dollars in millions, except per share amounts)
 
December 31, 2012
 
September 30, 2012
 
December 31, 2011
 
Q4 2012 vs. Q3 2012
 
Q4 2012 vs. Q4 2011
Total Revenue:
 
 
 
 
 
 
 
 
 
 
Total revenue, GAAP basis
 
$
2,449

 
$
2,356

 
$
2,315

 
3.9
 %
 
5.8
%
 
Net interest revenue adjustment (see below)
 
30

 
32

 
32

 
 
 
 
 
Tax-equivalent adjustment associated with tax-advantaged investments (see below)
 
36

 
39

 
15

 
 
 
 
 
Net interest revenue adjustment (see below)
 
(52
)
 
(40
)
 
(61
)
 
 
 
 
Total revenue, operating basis(1) (2) (3) (4) (5)
 
$
2,463

 
$
2,387

 
$
2,301

 
3.2

 
7.0

 
 
 
 
 
 
 
 
 
 
 
 
Processing Fees and Other Revenue:
 
 
 
 
 
 
 
 
 
 
Total processing fees and other revenue, GAAP basis
 
$
79

 
$
45

 
$
45

 
76

 
76

 
Tax-equivalent adjustment associated with tax-advantaged investments
 
36

 
39

 
15

 
 
 
 
Total processing fees and other revenue, operating basis
 
$
115

 
$
84

 
$
60

 
37

 
92

 
 
 
 
 
 
 
 
 
 
 
 
Net Interest Revenue:
 
 
 
 
 
 
 
 
 
 
Net interest revenue, GAAP basis
 
$
622

 
$
619

 
$
606

 

 
3

 
Tax-equivalent adjustment associated with tax-exempt investment securities
 
30

 
32

 
32

 
 
 
 
 
Discount accretion related to former conduit securities
 
(52
)
 
(40
)
 
(61
)
 
 
 
 
Net interest revenue, operating basis
 
$
600

 
$
611

 
$
577

 
(2
)
 
4

 
 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
Total expenses, GAAP basis
 
$
1,864

 
$
1,415

 
$
1,784

 
31.7

 
4.5

 
Benefit related to claims associated with Lehman bankruptcy
 

 
362

 

 
 
 
 
 
Provisions for litigation exposure and other costs
 
(11
)
 
(60
)
 

 
 
 
 
 
Special one-time additional charitable contribution
 

 
(25
)
 

 
 
 
 
 
Acquisition costs
 
(25
)
 
(13
)
 
(25
)
 
 
 
 
 
Indemnification benefits for income tax claims related to a 2010 acquisition
 
40

 

 
55

 
 
 
 
 
Restructuring charges
 
(154
)
 
(15
)
 
(178
)
 
 
 
 
Total expenses, operating basis(1) (2)
 
$
1,714

 
$
1,664

 
$
1,636

 
3.0

 
4.8

 
 
 
 
 
 
 
 
 
 
 
(1) For the quarters ended December 31, 2012 and September 30, 2012, positive operating leverage in the quarter-over-quarter comparison was approximately 20 basis points, based on an increase in total operating-basis revenue of 3.2% and an increase in total operating-basis expenses of 3.0%.
(2) For the quarters ended December 31, 2012 and 2011, positive operating leverage in the year-over-year comparison was approximately 220 basis points, based on an increase in total operating-basis revenue of 7.0% and an increase in total operating-basis expenses of 4.8%.
(3) For the quarter ended December 31, 2012, compensation and employee benefits expense of $915 million, as a percentage of total operating-basis revenue of $2.46 billion, was 37.2%; excluding the tax-equivalent adjustment of $36 million associated with tax-advantaged investments, such expense as a percentage of adjusted total operating-basis revenue of $2.43 billion was 37.7%.
(4) For the quarter ended September 30, 2012, compensation and employee benefits expense of $916 million, as a percentage of total operating-basis revenue of $2.39 billion, was 38.4%; excluding the tax-equivalent adjustment of $39 million associated with tax-advantaged investments, such expense as a percentage of adjusted total operating-basis revenue of $2.35 billion was 39.0%.
(5) For the quarter ended December 31, 2011, compensation and employee benefits expense of $872 million, as a percentage of total operating-basis revenue of $2.30 billion, was 37.9%; excluding the tax-equivalent adjustment of $15 million associated with tax-advantaged investments, such expense as a percentage of adjusted total operating-basis revenue of $2.29 billion was 38.1%.





STATE STREET CORPORATION
Earnings Release Addendum
RECONCILIATIONS OF OPERATING-BASIS (NON-GAAP) FINANCIAL INFORMATION (Continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters Ended
 
% Change
(Dollars in millions, except per share amounts)
 
December 31, 2012
 
September 30, 2012
 
December 31, 2011
 
Q4 2012 vs. Q3 2012
 
Q4 2012 vs. Q4 2011
Other Expenses:
 
 
 
 
 
 
 
 
 
 
Total other expenses, GAAP basis
 
$
278

 
$
277

 
$
274

 

 
1

 
Special one-time additional charitable contribution
 

 
(25
)
 

 
 
 
 
 
Loss related to Lehman Brothers-related OREO property
 
(13
)
 

 

 
 
 
 
Total other expenses, operating basis
 
$
265

 
$
252

 
$
274

 
5

 
(3
)
 
 
 
 
 
 
 
 
 
 
 
Income Tax Expense:
 
 
 
 
 
 
 
 
 
 
Income tax expense, GAAP basis
 
$
117

 
$
267

 
$
151

 
 
 
 
 
Tax-equivalent adjustments
 
66

 
71

 
47

 
 
 
 
 
Net tax effect of audit settlements associated with a 2010 acquisition
 
7

 

 
(55
)
 
 
 
 
 
Net tax effect of non-operating adjustments
 
37

 
(107
)
 
58

 
 
 
 
Income tax expense, operating basis
 
$
227

 
$
231

 
$
201

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income Available to Common Shareholders:
 
 
 
 
 
 
 
 
 
 
Net income available to common shareholders, GAAP basis
 
$
468

 
$
654

 
$
371

 
(28
)
 
26

Net after-tax effect of non-operating adjustments to net interest revenue, expenses and income tax expense
 
53

 
(181
)
 
83

 
 
 
 
Net income available to common shareholders, operating basis
 
$
521

 
$
473

 
$
454

 
10

 
15

 
 
 
 
 
 
 
 
 
 
 
 
Diluted Earnings per Common Share:
 
 
 
 
 
 
 
 
 
 
Diluted earnings per common share, GAAP basis
 
$
1.00

 
$
1.36

 
$
.76

 
(26
)
 
32

 
Provisions for litigation exposure and other costs
 
.02

 
.08

 

 
 
 
 
 
Special one-time additional charitable contribution
 

 
.03

 

 
 
 
 
 
Acquisition costs, net
 
.03

 
.02

 
.04

 
 
 
 
 
Restructuring charges
 
.21

 
.02

 
.23

 
 
 
 
 
Benefit related to claims associated with Lehman bankruptcy
 

 
(.46
)
 

 
 
 
 
 
Effect on income tax rate of non-operating adjustments
 
.02

 
(.01
)
 

 
 
 
 
 
Discount accretion related to former conduit securities
 
(.07
)
 
(.05
)
 
(.08
)
 
 
 
 
 
Tax effect of audit settlement associated with a 2010 acquisition
 
(.10
)
 

 

 
 
 
 
 
Discrete tax benefit related to former conduit securities
 

 

 
(.02
)
 
 
 
 
Diluted earnings per common share, operating basis
 
$
1.11

 
$
.99

 
$
.93

 
12

 
19

 
 
 
 
 
 
 
 
 
 
 
Return on Average Common Equity:
 
 
 
 
 
 
 
 
 
 
Return on average common equity, GAAP basis
 
9.3
 %
 
13.3
 %
 
7.8
 %
 
 
 
 
 
Provisions for litigation exposure and other costs
 
0.1

 
0.7

 

 
 
 
 
 
Special one-time additional charitable contribution
 

 
0.3

 

 
 
 
 
 
Acquisition costs, net
 
0.3

 
0.2

 
0.4

 
 
 
 
 
Restructuring charges
 
2.0

 
0.2

 
2.3

 
 
 
 
 
Benefit related to claims associated with Lehman bankruptcy
 

 
(4.4
)
 

 
 
 
 
 
Effect on income tax rate of non-operating adjustments
 
0.1

 
(0.2
)
 

 
 
 
 
 
Discount accretion related to former conduit securities
 
(0.6
)
 
(0.5
)
 
(0.8
)
 
 
 
 
 
Tax effect of audit settlement associated with a 2010 acquisition
 
(0.9
)
 

 

 
 
 
 
 
Discrete tax benefit related to former conduit securities
 

 

 
(0.2
)
 
 
 
 
Return on average common equity, operating basis
 
10.3
 %
 
9.6
 %
 
9.5
 %
 
 
 
 





STATE STREET CORPORATION
Earnings Release Addendum
RECONCILIATIONS OF OPERATING-BASIS (NON-GAAP) FINANCIAL INFORMATION (Continued)
 
 
 
 
Years Ended
% Change
(Dollars in millions, except per share amounts)
 
December 31, 2012
 
December 31, 2011
 
2012 vs. 2011
Total Revenue:
 
 
 
 
 
 
Total revenue, GAAP basis
 
$
9,649

 
$
9,594

 
0.6
 %
 
Net interest revenue adjustment (see below)
 
124

 
128

 
 
 
Tax-equivalent adjustment associated with tax-advantaged investments (see below)
 
126

 
62

 
 
 
Loss on sale of Greek investment securities
 
46

 

 
 
 
Net interest revenue adjustment (see below)
 
(215
)
 
(220
)
 
 
Total revenue, operating basis(1) (2)
 
$
9,730

 
$
9,564

 
1.74

 
 
 
 
 
 
 
 
Processing Fees and Other Revenue:
 
 
 
 
 
 
Total processing fees and other revenue, GAAP basis
 
$
266

 
$
297

 
(10
)
 
Tax-equivalent adjustment associated with tax-advantaged investments
 
126

 
62

 
 
Total processing fees and other revenue, operating basis
 
$
392

 
$
359

 
9

 
 
 
 
 
 
 
 
Net Interest Revenue:
 
 
 
 
 
 
Net interest revenue, GAAP basis
 
$
2,538

 
$
2,333

 
9

 
Tax-equivalent adjustment associated with tax-exempt investment securities
 
124

 
128

 
 
 
Discount accretion related to former conduit securities
 
(215
)
 
(220
)
 
 
Net interest revenue, operating basis
 
$
2,447

 
$
2,241

 
9

 
 
 
 
 
 
 
 
Gains (Losses) Related to Investment Securities, net:
 
 
 
 
 
 
Gains (losses) related to investment securities, net, GAAP basis
 
$
23

 
$
67

 
 
 
Loss on sale of Greek investment securities
 
46

 

 
 
Gains (losses) related to investment securities, net, operating basis
 
$
69

 
$
67

 
3

 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
Total expenses, GAAP basis
 
$
6,886

 
$
7,058

 
(2.4
)
 
Benefit related to claims associated with Lehman bankruptcy
 
362

 

 
 
 
Provisions for litigation exposure and other costs
 
(93
)
 

 
 
 
Special one-time additional charitable contribution
 
(25
)
 

 
 
 
Acquisition costs
 
(66
)
 
(71
)
 
 
 
Indemnification benefits for income tax claims related to a 2010 acquisition
 
40

 
55

 
 
 
Restructuring charges
 
(199
)
 
(253
)
 
 
Total expenses, operating basis(1)
 
$
6,905

 
$
6,789

 
1.71

 
 
 
 
 
 
 
 

(1) For the year ended December 31, 2012 and 2011, operating leverage in the year-over-year comparison was approximately 3 basis points, based on an increase in total operating-basis revenue of 1.74% and an increase in total operating-basis expenses of 1.71%.
(2) For the year ended December 31, 2012, compensation and employee benefits expense of $3.84 billion, as a percentage of total operating-basis revenue of $9.73 billion, was 39.4%.






STATE STREET CORPORATION
Earnings Release Addendum
RECONCILIATIONS OF OPERATING-BASIS (NON-GAAP) FINANCIAL INFORMATION (Continued)
 
 
 
 
Years Ended
% Change
(Dollars in millions, except per share amounts)
 
December 31, 2012
 
December 31, 2011
 
2012 vs. 2011
Other Expenses:
 
 
 
 
 
 
Total other expenses, GAAP basis
 
$
1,090

 
$
1,006

 
8
 
Special one-time additional charitable contribution
 
(25
)
 

 
 
 
Loss related to Lehman Brothers-related OREO property
 
(13
)
 

 
 
Total other expenses, operating basis
 
$
1,052

 
$
1,006

 
5
 
 
 
 
 
 
 
Income Tax Expense:
 
 
 
 
 
 
Income tax expense, GAAP basis
 
$
705

 
$
616

 
 
 
Tax-equivalent adjustments
 
250

 
190

 
 
 
Net tax effect of audit settlements associated with a 2010 acquisition
 
7

 
(55
)
 
 
 
Net tax effect of non-operating adjustments
 
(74
)
 
134

 
 
Income tax expense, operating basis
 
$
888

 
$
885

 
 
 
 
 
 
 
 
 
 
Net Income Available to Common Shareholders:
 
 
 
 
 
 
Net income available to common shareholders, GAAP basis
 
$
2,019

 
$
1,882

 
7
Net after-tax effect of non-operating adjustments to net interest revenue, net gains (losses) related to investment securities, expenses and income tax expense
 
(121
)
 
(30
)
 
 
Net income available to common shareholders, operating basis
 
$
1,898

 
$
1,852

 
2
 
 
 
 
 
 
 
 
Diluted Earnings per Common Share:
 
 
 
 
 
 
Diluted earnings per common share, GAAP basis
 
$
4.20

 
$
3.79

 
11
Add:
Loss on sale of Greek investment securities
 
.06

 

 
 
 
Provisions for litigation exposure and other costs
 
.12

 

 
 
 
Special one-time additional charitable contribution
 
.04

 

 
 
 
Acquisition costs, net
 
.09

 
.10

 
 
 
Restructuring charges
 
.27

 
.32

 
 
Less:
Benefit related to claims associated with Lehman bankruptcy
 
(.46
)
 

 
 
 
Discount accretion related to former conduit securities
 
(.27
)
 
(.27
)
 
 
 
Tax effect of audit settlement associated with a 2010 acquisition
 
(.10
)
 

 
 
 
Discrete tax benefit related to former conduit securities
 

 
(.21
)
 
 
Diluted earnings per common share, operating basis
 
$
3.95

 
$
3.73

 
6
 
 
 
 
 
 
 
 
Return on Average Common Equity:
 
 
 
 
 
 
Return on average common equity, GAAP basis
 
10.3
 %
 
10.0
 %
 
 
Add:
Loss on sale of Greek investment securities
 
0.1

 

 
 
 
Provisions for litigation exposure and other costs
 
0.3

 

 
 
 
Special one-time additional charitable contribution
 
0.1

 

 
 
 
Acquisition costs, net
 
0.2

 
0.3

 
 
 
Restructuring charges
 
0.7

 
0.8

 
 
Less:
Benefit related to claims associated with Lehman bankruptcy
 
(1.1
)
 

 
 
 
Discount accretion related to former conduit securities
 
(0.7
)
 
(0.7
)
 
 
 
Tax effect of audit settlement associated with a 2010 acquisition
 
(0.2
)
 

 
 
 
Discrete tax benefit related to former conduit securities
 

 
(0.5
)
 
 
Return on average common equity, operating basis
 
9.7
 %
 
9.9
 %