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State Street Reports Second-Quarter Earnings Per Share of $0.87, Down from $0.99 in the First Quarter of 2010 Due Primarily to Second-Quarter Charge

Operating-Basis Earnings Per Share of $0.93 Increase 24% from $0.75in the First Quarter of 2010
Fee Revenue Increases 10% Compared to First Quarter of 2010 with Servicing Fees up 9% and Trading Services Fees up 35%

BOSTON, Jul 20, 2010 (BUSINESS WIRE) -- State Street Corporation today announced second-quarter 2010 earnings per common share of $0.87, an increase of 10% compared to $0.79 in the second quarter of 2009 before the conduit-related extraordinary loss. Revenue in the second quarter of 2010 was $2.304 billion, up 9% from $2.122 billion in the second quarter of 2009. Expenses of $1.944 billion in the second quarter increased from $1.364 billion in the second quarter of 2009 due primarily to a securities lending charge described below. Return on shareholders' equity was 11.0%, down from 13.0%, before the extraordinary loss, in the second quarter of 2009.

Compared to the first quarter of 2010, second quarter 2010 earnings per share were down 12% from $0.99 per share and revenue was up slightly from $2.296 billion. Expenses in the first quarter of 2010 were $1.579 billion. For the first quarter of 2010, return on shareholders' equity was 13.4%.

State Street's second-quarter 2010 GAAP-basis results included: a pre-tax charge of $414 million, or $251 million after-tax, separately announced on July 7, 2010, related to certain common and collective trust funds managed by State Street Global Advisors that engage in securities lending, and the agency lending program. GAAP-basis results for the period also included merger and integration costs of $41 million, primarily associated with the acquisitions of Intesa Sanpaolo's securities services business and Mourant International Finance Administration ("Mourant"); a tax of $21 million on bonus payments to employees in the United Kingdom; a one-time tax benefit of $180 million related to the restructuring of former non-U.S. conduit assets; and discount accretion of $172 million which resulted from the May 2009 consolidation of the asset-backed commercial paper conduits onto State Street's balance sheet.

State Street's second-quarter 2009 GAAP-basis results included an after-tax extraordinary loss of $3.684 billion related to the effect of the conduit consolidation. GAAP-basis results for that period also included a prepayment of preferred stock discount of $106 million related to our redemption of the U.S. Treasury's TARP CPP investment; discount accretion of $112 million resulting from the conduit consolidation; and merger and integration costs of $12 million associated with the 2007 acquisition of Investors Financial Services Corp.

First-quarter 2010 GAAP-basis results included discount accretion of $212 million and merger and integration costs of $13 million.

In addition to presenting State Street's financial results in conformity with U.S. generally accepted accounting principles (GAAP), management also presents results on an "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. Operating-basis results for the second quarter of 2010 and 2009 and for the first quarter of 2010 therefore exclude the items identified in the three paragraphs above. Reconciliations of GAAP-basis results to operating-basis results are provided in the addendum at the end of this news release. Also see "Additional Information." Operating-basis net interest revenue for all periods is presented on a fully taxable-equivalent basis and excludes discount accretion related to former conduit assets.

Operating-basis earnings per share in the second quarter of 2010 were $0.93 compared to $0.89 in the second quarter of 2009 and $0.75 in the first quarter of 2010. Operating-basis revenue in the second quarter of 2010 was $2.163 billion, up 6% from $2.041 billion in the second quarter of 2009. On an operating basis, return on equity of 11.8% in the second quarter of 2010 compared with 14.7% in the second quarter of 2009 and 10.0% in the first quarter of 2010.

Joseph L. Hooley, State Street's president and chief executive officer, said, "I am pleased with the clear signs that our business in the second quarter strengthened compared with the first quarter and overall confirmed our full-year outlook for 2010. The 10% increase in total fee revenue demonstrates momentum in our servicing fees as well as the strength in our trading businesses, including foreign exchange, electronic trading and transition management. In the quarter, we added $1.11 trillion in assets to be serviced, including $686 billion from Intesa Sanpaolo's Securities Services business and Mourant. Our capital levels remain strong and are well in excess of the regulatory "well capitalized" requirements. On an operating basis, we achieved 850 basis points of positive operating leverage compared to the first quarter of 2010 and continued to manage expenses very carefully."

Hooley continued, "We're progressing as planned through this transition year, taking advantage of opportunities in the markets through the Intesa acquisition in mid-May and the Mourant acquisition in early April, both of which are contributing to our results this year. With the strength of our fee revenue in the second quarter, including the contribution from these two acquisitions, we continue to expect that our operating-basis earnings per share, which exclude discount accretion, will be slightly higher than the operating-basis $3.32 per share reported last year."

Hooley concluded, "We are well positioned to take advantage of global growth opportunities and, as the economy normalizes, we are committed to our long-term financial goals for operating-basis revenue, earnings per share and return on equity."

The table below provides a summary of selected financial information and key ratios for the indicated periods, presented on an operating basis where noted. Unless otherwise specified, all capital ratios referenced in this news release refer to State Street Corporation and not State Street Bank and Trust Company. See "Additional Information" for a further description of these ratios and the addendum at the end of this news release for reconciliations applicable to the tier 1 common and TCE ratios.

Q2 2010

Q1 2010 Increase/(decrease) Q2 2009 Increase/(decrease)
(dollars in millions)
For the quarters ended:
Total revenue(1) $ 2,163 $ 2,116 $ 47 2.2% $ 2,041 $ 122 6.0%
Total expenses(1) 1,468 1,566 (98) (6.3)% 1,352 116 8.6%
Earnings per common share(1) $ 0.93 $ 0.75 $ 0.18 24.0% $ 0.89 $ 0.04 4.5%
Return on common equity(1) 11.8% 10.0% 180 bps 14.7% (290) bps
As of period end:
Total assets 162,075 153,971 8,104 5.3% 153,421 8,654 5.6%
Unrealized loss on investment portfolio, after-tax (994) (1,435) 441 30.7% (4,747) 3,753 79.1%
AUCM (dollars in billions)
Assets under custody and administration(2) $19,032 $19,041 (9) ---% $ 16,394 $ 2,638 16.1%
Assets under management 1,782 1,929 (147) (7.6)% 1,557 225 14.5%
Tier 1 capital ratio 15.1% 18.0% (290) bps 14.5% 60 bps
Tier 1 leverage ratio 7.7% 9.0% (130) bps 7.3% 40 bps
Tier 1 common ratio 13.2% 15.9% (270) bps 12.6% 60 bps
TCE ratio 6.3% 7.5% (120) bps 5.0% 130 bps
TCE/RWA ratio 11.9% 14.1% (220) bps 8.5% 340 bps

(1) Presented on an operating basis. Operating-basis results for the second quarter of 2009 presented in this news release have been adjusted to reflect the 2010 basis of presentation and therefore exclude discount accretion from the May 2009 consolidation of the former asset-backed commercial paper conduits. Consequently, these operating-basis results may differ from previously disclosed operating-basis results for the same period.

(2) Includes assets under custody of $13,999 billion, $14,058 billion, and $12,337 billion, respectively, as of period end Q2 2010, Q1 2010, and Q2 2009.

Total assets were $162 billion at June 30, 2010, compared with $154 billion at March 31, 2010 and $153 billion at June 30, 2009. Excluding $15 billion of excess deposits held at the Federal Reserve and other central banks at June 30, 2010, $19 billion at March 31, 2010, and $20 billion at June 30, 2009, the normalized balance sheet was $147 billion at June 30, 2010, compared to a normalized balance sheet of $135 billion at March 31, 2010 and $133 billion at June 30, 2009. State Street's regulatory capital ratios continue to be strong as of June 30, 2010, with the Company's tier 1 capital ratio at 15.1% and its leverage ratio at 7.7%. In addition, at that date, the Company's tier 1 common ratio was 13.2%, its TCE to risk-weighted assets ratio was 11.9%, and its TCE ratio was 6.3%. The change in ratios reflects the impact of the acquisitions completed in the second quarter, partially offset by internal generation of capital during the period.

At June 30, 2010, the after-tax, unrealized mark-to-market losses in the investment portfolio were $994 million, down 31% from $1.44 billion at March 31, 2010, and down about 79% from $4.75 billion as of June 30, 2009.

In the second quarter of 2010, discount accretion related to the former conduit assets of $172 million, or $0.21 per share, contributed to State Street's capital strength, and the Company expects a total of about $750 million of accretion in 2010, slightly reduced from our earlier expectation due primarily to lower prepayment speeds. As of June 30, 2010, the Company expects about $3.9 billion in total on a pre-tax basis to accrete into interest revenue over the remaining lives of the assets. These expectations are based on anticipated pre-payment speeds, credit quality, sales-to-date, and assuming the Company holds the securities to maturity.

The following tables provide the components of operating-basis revenue and operating-basis expenses for the noted periods:

Operating-Basis Revenue

(dollars in millions)

Q2 2010 Q1 2010

% Increase/
(decrease)

Q2 2009

% Increase/
(decrease)

Servicing fees $ 957 $ 880 8.8 % $ 795 20.4 %
Investment management fees 217 226 (4.0 ) 193 12.4
Trading services revenue 326 242 34.7 310 5.2
Securities finance revenue 109 72 51.4 201 (45.8 )
Processing fees and other revenue 87 120 (27.5 ) 17 411.8
Net interest revenue, fully-taxable equivalent basis(1) 517 481 7.5 499 3.6

Gains (losses) related to investment securities, net

(50 ) 95 (152.6 ) 26 (292.3 )
Total Operating-Basis Revenue $ 2,163 $ 2,116 2.2 % $ 2,041 6.0 %

(1) Operating-basis information for the second quarter of 2010, the first quarter of 2010, and the second quarter of 2009 included $31 million, $32 million, and $31 million, respectively, of tax-equivalent adjustments, and excluded $172 million, $212 million, and $112 million, respectively, of discount accretion. GAAP-basis net interest revenue for those periods was $658 million, $661 million and $580 million, respectively.

Operating-Basis Expenses

(dollars in millions)

Q2 2010 Q1 2010

% Increase/
(decrease)

Q2 2009

% Increase/
(decrease)

Salaries and employee benefits $ 828 $ 883 (6.2 )% $ 696 19.0 %
Information systems and communications

174

167

4.2

167

4.2

Transaction processing services 164 153 7.2 146 12.3
Occupancy 116 118 (1.7 ) 121 (4.1 )
Other 186 245 (24.1 ) 222 (16.2 )
Total Operating-Basis Expenses $ 1,468 $ 1,566 (6.3 )% $ 1,352 8.6 %

SECOND-QUARTER 2010 RESULTS VS. YEAR-AGO SECOND QUARTER

Servicing fees were up 20% to $957 million from $795 million in last year's second quarter. The increase was attributable primarily to new business, increases in daily average equity valuations, and the impact of the two acquisitions. Total assets under custody and administration were $19.03 trillion at June 30, 2010, up 16%, compared with $16.39 trillion at June 30, 2009. Daily average values for the S&P 500 Index were up 27% and the MSCI(R) EAFE IndexES increased approximately 18% from the second quarter of 2009.

Investment management fees, generated by State Street Global Advisors, were $217 million, up 12% from $193 million in the year-ago quarter. The increase in management fees was attributable primarily to increases in average month-end equity valuations and net new business. Average month-end equity valuations were up about 22% as measured by the S & P 500 and were up 12% as measured by the MSCI EAFE indexES. Total assets under management at June 30, 2010, were $1.78 trillion, up 14% compared to $1.56 trillion at June 30, 2009.

Trading services revenue, which includes foreign exchange trading revenue and brokerage and other fees, was $326 million for the second quarter of 2010, an increase of 5% from $310 million in the second quarter a year ago. Foreign exchange revenue decreased 3% primarily due to lower volatility, partially offset by higher volumes. Brokerage and other fees increased 18% due primarily to strength in electronic trading and transition management.

Securities finance revenue was $109 million in the quarter, down 46% from $201 million in the year-ago second quarter due primarily to compressed spreads, despite a slight increase in volumes. Processing fees and other revenue was $87 million compared to $17 million in the second quarter of 2009 due primarily to higher net revenue from structured products, tax-advantaged investments, and other fees in the second quarter of 2010.

Net interest revenue on a fully-taxable equivalent basis, which includes discount accretion, was $689 million. On an operating basis, which excludes discount accretion, net interest revenue was $517 million, an increase of 4% from $499 million in the year-ago second quarter due primarily to the impact of deposits from the Intesa acquisition as well as a modest decrease in funding costs. Net interest margin, including the discount accretion, was 221 basis points in the second quarter of 2010 compared to 193 basis points in the second quarter of 2009. Operating-basis net interest margin was 166 basis points in the second quarter of 2010.

In the quarter, we recorded $3million of net gains from sales of available-for-sale securities, offset by $(53)million of other-than-temporary impairment, resulting in $(50) million of net losses related to investment securities. In addition, we recorded a $10 million provision for loan losses related to commercial real estate exposures.

Operating-basis expenses of $1.468 billion in the second quarter of 2010 increased 9% compared to $1.352 billion in the year-ago quarter primarily due to increases in salaries and benefits expenses, offset partially by a lower level of other expenses. Salaries and benefits expenses increased 19% to $828 million, because in the second quarter of 2009, we did not accrue discretionary cash incentive compensation in order to support our TCE improvement plan. In addition, the Intesa and Mourant acquisitions in the second quarter of 2010 contributed to salaries and benefits expenses. Transaction processing services increased 12% to $164 million due to higher volumes in the investment servicing business including the impact of the two acquisitions. Other expenses decreased 16% to $186 million due to lower securities processing costs and an $11 million recovery associated with Lehman Brothers.

The effective tax rate on second-quarter 2010 GAAP-basis earnings was (23.4) %, compared to 32.6% in the second quarter of 2009. The reduction of the rate is primarily attributable to a one-time benefit from the restructuring of former non-US conduit assets. The effective tax rate on operating-basis earnings for the second quarter of 2010 was 29.1%, down from 31.5% on the same basis for the second quarter of 2009 due to a change in the geographic mix of earnings. The effective tax rate on operating-basis earnings for the full year 2010 is expected to be between 28% and 29%.

SECOND-QUARTER 2010 RESULTS VS. FIRST QUARTER 2010

The following information is presented on an operating basis. Earnings per common share in the second quarter of 2010 were $0.93, up 24% from $0.75 in the first quarter of 2010. Total revenue in the second quarter of $2.163 billion was up 2.2% compared with first-quarter revenue of $2.116 billion. Total expenses for the second quarter of 2010 were $1.468 billion, down 6.3% compared with $1.566 billion in the first quarter. As a result, we achieved 850 basis points of positive operating leverage comparing the results of the second quarter of 2010 with those of the first quarter of 2010. Return on common shareholders' equity of 11.8% compared with 10.0% in the first quarter of 2010.

Servicing fees were $957 million, up 9% from $880 million in the first quarter due primarily to the impact of the two acquisitions and new business. Management fees were $217 million, down 4% from $226 million, including lower equity market valuations. Trading services revenue was $326 million, up 35% compared to $242 million due to higher volatility and volumes in foreign exchange as well as stronger fees from transition management and electronic trading in brokerage and other fees. Securities finance revenue was $109 million, up 51% from $72 million in the prior quarter primarily due to higher spreads and volumes associated with the traditional second-quarter seasonality. Processing fees and other revenue decreased from $120 million to $87 million due primarily to the impact of a gain from an early buyout of a legacy leasing transaction in the first quarter of 2010. Fully taxable-equivalent net interest revenue in the second quarter of 2010 totaled $689 million, including discount accretion. On an operating basis, net interest revenue in the second quarter of 2010 was $517 million, up from $481 million in the first quarter of 2010 due to favorable yields in our investment portfolio as well as the impact of the Intesa acquisition.

Compared to the first quarter of 2010, salaries and employee benefits expense decreased 6% to $828 million from $883 million primarily due to lower incentive compensation costs as a result of the charge recorded in the quarter related to our securities lending program, partially offset by the impact of the acquisitions of Intesa and Mourant. Transaction processing expenses increased 7% to $164 million due to higher volumes in the investment servicing business including the impact of the two acquisitions.Other expenses drove overall lower operating-basis expenses, declining 24% to $186 million due to lower securities processing costs and an $11 million recovery associated with Lehman Brothers.

ADDITIONAL INFORMATION

All per share amounts represent fully diluted earnings per common share. Return on common shareholders' equity is determined by dividing annualized net income available to common shareholders by average common shareholders' equity for the period. Operating-basis return on common equity utilizes annualized operating-basis net income in the calculation. Positive operating leverage is defined as the excess rate of growth of total revenue over the rate of growth of total expenses, each determined on an operating basis.

This news release includes financial information presented on a GAAP basis as well as on an operating basis. 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 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 in accordance with GAAP. Non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. A full reconciliation of operating-basis results to GAAP results is included in the addendum at the end of this news release.

Management believes that the use of other non-GAAP financial measures in the calculation of capital ratios is useful to understanding State Street's capital position and of interest to investors. Below is a description of, and other information with respect to, the capital ratios referenced in this news release.

The tier 1 capital and tier 1 leverage ratios are capital ratios used regularly by bank regulatory authorities to evaluate the Company's capital adequacy. The tier 1 common ratio was used by the Federal Reserve in connection with its 2009 Supervisory Capital Assessment Program. The TCE and TCE/risk-weighted assets ratios are other capital ratios management believes provide additional context for understanding and assessing the Company's capital adequacy.

  • The tier 1 risk-based capital, or tier 1 capital, and tier 1 leverage ratios, as applicable, are each calculated in accordance with applicable bank regulatory requirements.
  • The tier 1 risk-based common, or tier 1 common, ratio is calculated by dividing (a) tier 1 capital less non-common elements including qualifying perpetual preferred stock, qualifying minority interest in subsidiaries and qualifying trust preferred securities, by (b) risk-weighted assets, which assets are calculated in accordance with applicable bank regulatory requirements. The tier 1 common ratio is not required by GAAP or on a recurring basis by bank regulations. Management is currently monitoring this ratio, along with the other capital ratios described in this news release, in evaluating State Street's capital levels and believes that, at this time, the ratio may be of interest to investors. Reconciliations with respect to unaudited tier 1 common capital as of June 30, 2010, March 31, 2010, and June 30, 2009 are provided in the addendum at the end of this news release.
  • The ratio of tangible common equity to adjusted tangible assets, or TCE ratio, is calculated by dividing consolidated total common shareholders' equity by consolidated total assets, after reducing both amounts by goodwill and other intangible assets net of related deferred taxes. Total assets reflected in the TCE ratio also exclude cash balances on deposit at the Federal Reserve Bank and other central banks in excess of required reserves. The TCE ratio is not required by GAAP or by bank regulations, but is a metric used by management to evaluate the adequacy of State Street's capital levels. Since there is no authoritative requirement to calculate the TCE ratio, our TCE ratio is not necessarily comparable to similar capital measures disclosed or used by other companies in the financial services industry. Tangible common equity and adjusted tangible assets are non-GAAP financial measures and should be considered in addition to, nor as a substitute for or superior to, financial measures determined in accordance with GAAP. Reconciliations with respect to the calculation of the unaudited TCE ratio as of June 30, 2010, March 31, 2010, and June 30, 2009 are provided in the addendum at the end of this news release.
  • The ratio of tangible common equity to risk-weighted assets, or TCE/RWA ratio, is calculated by dividing consolidated total common shareholders' equity (reduced by goodwill and other intangible assets net of related deferred taxes) by total risk-weighted assets (determined in accordance with applicable bank regulatory requirements). The TCE/RWA ratio is not required by GAAP or by bank regulations, but is a metric used by management to evaluate the adequacy of State Street's capital levels. Since there is no authoritative requirement to calculate the TCE/RWA ratio, our TCE/RWA ratio is not necessarily comparable to similar capital measures disclosed or used by other companies in the financial services industry. Tangible common equity is a non-GAAP financial measure and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. Reconciliations with respect to the calculation of the unaudited TCE/RWA ratio as of June 30, 2010, March 31, 2010, and June 30, 2009 are included in the addendum at the end of this news release.

INVESTOR CONFERENCE CALL

State Street will webcast an investor conference call today, Tuesday, July 20, 2010, at 9:30 a.m. EDT, available at http://www.statestreet.com/stockholder. The conference call will also be available via telephone, at +1 706/679-5594 or +1 888/391-4233 (Conference ID #62660494). Recorded replays of the conference call will be available on the web site, and by telephone at +1 706/645-9291 or +1 800/642-1687 (Conference ID#62660494), beginning approximately two hours after the call's completion. The telephone replay will be available for approximately two weeks following the conference call. This news release, presentation materials referred to on the conference call, and additional financial information are available on State Street's website, at http://www.statestreet.com/stockholder under "Investor Information--Latest News, Annual Reports and Financial Trends--Financial Trends," and "Investor Events and Presentations."

State Street Corporation (NYSE: STT) is the world's leading provider of financial services to institutional investors including investment servicing, investment management and investment research and trading. With $19.03 trillion in assets under custody and administration and $1.78 trillion in assets under management at June 30, 2010, State Street operates in 25 countries and more than 100 geographic markets and employs 28,925 worldwide. For more information, visit State Street's web site at http://www.statestreet.com or call +1 877/639-7788 [NEWS STT] toll-free in the United States and Canada, or +1 678/999-4577 outside those countries.

FORWARD-LOOKING STATEMENTS

This news release contains forward-looking statements as defined by United States securities laws, including statements about our goals and expectations regarding our business, financial condition, results of operations and strategies, the financial and market outlook, governmental and regulatory initiatives and developments, and the business environment. Forward-looking statements are often, but not always, identified by such forward-looking terminology as "plan," "expect," "look," "believe," "anticipate," "estimate," "seek," "may," "will," "trend," "target" and "goal," or similar statements or variations of such terms. These statements are not guarantees of future performance, are inherently uncertain, are based on current assumptions that are difficult to predict and involve a number of risks and uncertainties. Therefore, actual outcomes and results may differ materially from what is expressed in those statements, and those statements should not be relied upon as representing our expectations or beliefs as of any date subsequent to the date of this news release.

Important factors that may affect future results and outcomes include, but are not limited to:

  • changes in law or regulation that may adversely affect our, our clients' or our counterparties' business activities and the products or services that we sell, including additional or increased taxes or assessments thereon, the requirement that additional capital be maintained and changes that expose us to risks related to compliance;
  • financial market disruptions and the economic recession, whether in the U.S. or internationally, and monetary and other governmental actions, including regulation, taxes and fees, designed to address or otherwise be responsive to such disruptions and recession, including actions taken in the U.S. and internationally to address the financial and economic disruptions that began in 2007;
  • increases in the volatility of, or declines in the levels of, our net interest revenue, changes in the composition of the assets on our consolidated balance sheet and the possibility that we may be required to change the manner in which we fund those assets;
  • the financial strength and continuing viability of the counterparties with which we or our clients do business and to which we have investment, credit or financial exposure;
  • the liquidity of the U.S. and international securities markets, particularly the markets for fixed-income securities, and the liquidity requirements of our clients;
  • the credit quality, credit agency ratings, and fair values of the securities in our investment securities portfolio, a deterioration or downgrade of which could lead to other-than-temporary impairment of the respective securities and the recognition of an impairment loss in our consolidated statement of income;
  • the maintenance of credit agency ratings for our debt and depository obligations as well as the level of credibility of credit agency ratings;
  • the performance and demand for the products and services we offer, including the level and timing of redemptions and withdrawals from our collateral pools and other collective investment products;
  • the risks that acquired businesses will not be integrated successfully, or that the integration will take longer than anticipated, that expected synergies will not be achieved or unexpected disynergies will be experienced, that client and deposit retention goals will not be met, that other regulatory or operational challenges will be experienced and that disruptions from the transaction will harm relationships with clients, employees or regulators;
  • the ability to complete acquisitions, divestitures and joint ventures, including the ability to obtain regulatory approvals, the ability to arrange financing as required, and the ability to satisfy other closing conditions;
  • the possibility of our clients incurring substantial losses in investment pools where we act as agent, and the possibility of further general reductions in the valuation of assets;
  • our ability to attract deposits and other low-cost, short-term funding;
  • potential changes to the competitive environment, including changes due to the effects of consolidation and perceptions of State Street as a suitable service provider or counterparty;
  • the level and volatility of interest rates and the performance and volatility of securities, credit, currency and other markets in the U.S. and internationally;
  • our ability to measure the fair value of the investment securities on our consolidated balance sheet;
  • the results of litigation, government investigations and similar disputes or proceedings;
  • adverse publicity or other reputational harm;
  • our ability to grow revenue, attract and/or retain and compensate highly skilled people, control expenses and attract the capital necessary to achieve our business goals and comply with regulatory requirements;
  • our ability to control operating risks, information technology systems risks and outsourcing risks, and our ability to protect our intellectual property rights, the possibility of errors in the quantitative models we use to manage our business and the possibility that our controls will fail or be circumvented;
  • the potential for new products and services to impose additional costs on us and expose us to increased operational risk;
  • changes in accounting standards and practices; and
  • changes in the interpretation of existing tax laws by U.S. and non-U.S. tax authorities that impact the amount of taxes due.

Other important factors that could cause actual results to differ materially from those indicated by any forward-looking statements are set forth in our 2009 Annual Report on Form 10-K, and our subsequent SEC filings. We encourage investors to read these filings, particularly the sections on Risk Factors, for additional information with respect to any forward-looking statements and prior to making any investment decision. The forward-looking statements contained in this news release speak only as of the date hereof, July 20, 2010, and we do not undertake efforts to revise those forward-looking statements to reflect events after this date.

STATE STREET CORPORATION
Earnings Release Addendum
CONSOLIDATED FINANCIAL HIGHLIGHTS
June 30, 2010
Quarters Ended % Change
Q2 2010 Q2 2010
(Dollars in millions, except per share amounts June 30, March 31, June 30, vs. vs.
or where otherwise noted) 2010 2010 2009 Q1 2010 Q2 2009
Revenue:
Fee revenue $ 1,696 $ 1,540 $ 1,516 10

%

12

%

Net interest revenue 658 661 580 - 13
Net gains from sales of available-for-sale securities 3 192 90
Losses from other-than-temporary impairment (53 ) (97 ) (64 )
Total Revenue 2,304 2,296 2,122 - 9
Provision for Loan Losses 10 15 14
Total Expenses:
Expenses from operations 1,468 1,566 1,352 (6 ) 9
Securities lending charge and U.K. bonus tax 435 - -
Merger and integration costs 41 13 12 215 242
Income tax expense (benefit) (1) (82 ) 207 242
Net Income Before Extraordinary Loss 432 495 502 (13 ) (14 )
Extraordinary Loss, Net of Tax - - (3,684 )
Net Income (Loss) 432 495 (3,182 ) (13 ) (114 )
Net Income Before Extraordinary Loss Available to Common Shareholders 432 495 370 (13 ) 17
Net Income (Loss) Available to Common Shareholders 432 495 (3,314 ) (13 ) (113 )
Diluted Earnings Per Common Share Before Extraordinary Loss $ .87 $ .99 $ .79 (12 ) 10
Diluted Earnings (Loss) Per Common Share .87 .99 (7.12 ) (12 ) (112 )
Average Diluted Common Shares Outstanding (in thousands) 498,886 498,056 465,814
Cash Dividends Declared Per Common Share $ .01 $ .01 $ .01
Closing Price Per Share of Common Stock (at quarter end) 33.82 45.14 47.20
Ratios:
Return on common equity before extraordinary loss 11.0

%

13.4 % 13.0

%

Net interest margin, fully taxable-equivalent basis 2.21 2.34 1.93
Tier 1 risk-based capital 15.1 18.0 14.5
Total risk-based capital 16.4 19.5 15.9
Tier 1 leverage 7.7 9.0 7.3
Tier 1 common to risk-weighted assets (2) 13.2 15.9 12.6
Tangible common equity to tangible assets (2) 6.3 7.5 5.0
Tangible common equity to risk-weighted assets (2) 11.9 14.1 8.5
At Quarter End:
Assets Under Custody and Administration (3) (in trillions) $ 19.03 $ 19.04 $ 16.39
Assets Under Management (in trillions) 1.78 1.93 1.56
Six Months Ended % Change
2010
June 30, June 30, vs.
(Dollars in millions, except per share amounts) 2010 2009 2009
Revenue:
Fee revenue $ 3,236 $ 2,938 10

%

Net interest revenue 1,319 1,144 15
Net gains from sales of available-for-sale securities 195 119
Losses from other-than-temporary impairment (150 ) (77 )
Total Revenue 4,600 4,124 12
Provision for Loan Losses 25 98
Total Expenses:
Expenses from operations 3,034 2,639 15
Securities lending charge and U.K. bonus tax 435 -
Merger and integration costs 54 29 86
Income tax expense(1) 125 380
Net Income Before Extraordinary Loss 927 978 (5 )
Extraordinary Loss, Net of Tax - (3,684 )
Net Income (Loss) 927 (2,706 ) (134 )
Net Income Before Extraordinary Loss Available to Common Shareholders 927 815 14
Net Income (Loss) Available to Common Shareholders 927 (2,869 ) (132 )
Diluted Earnings Per Common Share Before Extraordinary Loss $ 1.86 $ 1.81 3
Diluted Earnings (Loss) Per Common Share 1.86 (6.37 ) (129 )
Average Diluted Common Shares Outstanding (in thousands): 498,295 450,483
Cash Dividends Declared Per Common Share $ .02 $ .02
Return on Common Equity Before Extraordinary Loss 12.2

%

14.4

%

Net interest margin, fully taxable-equivalent basis 2.27 1.96
(1) Quarter ended June 30, 2010 reflects a one-time tax benefit of $180 million associated with the restructuring of former non-U.S. conduit assets.
(2) Refer to accompanying reconciliation for additional information.
(3) Includes assets under custody of $14.00 trillion, $14.06 trillion, and $12.34 trillion, respectively.
STATE STREET CORPORATION
Earnings Release Addendum
SELECTED CONSOLIDATED FINANCIAL INFORMATION
Quarters and Six Months Ended June 30, 2010 and June 30, 2009
Quarters Ended Six Months Ended
June 30, June 30, June 30, June 30,
(Dollars in millions, except per share amounts) 2010 2009 % Change 2010 2009 % Change
Fee Revenue:
Servicing fees $ 957 $ 795 20 % $ 1,837 $ 1,561 18 %
Management fees 217 193 12 443 374 18
Trading services 326 310 5 568 555 2
Securities finance 109 201 (46 ) 181 382 (53 )
Processing fees and other 87 17 412 207 66 214
Total fee revenue 1,696 1,516 12 3,236 2,938 10
Net Interest Revenue:
Interest revenue 846 773 9 1,724 1,511 14
Interest expense 188 193 (3 ) 405 367 10
Net interest revenue (1) 658 580 13 1,319 1,144 15
Gains (Losses) related to investment securities, net:
Net gains from sales of available-for-sale securities 3 90 195 119
Losses from other-than-temporary impairment (240 ) (167 ) (480 ) (180 )
Losses not related to credit 187 103 330 103
Gains (Losses) related to investment securities, net (50 ) 26 45 42
Total revenue 2,304 2,122 8.6 4,600 4,124 11.5
Provision for loan losses 10 14 25 98
Expenses:
Salaries and employee benefits 849 696 22 1,732 1,427 21
Information systems and communications 174 167 4 341 328 4
Transaction processing services 164 146 12 317 277 14
Occupancy 116 121 (4 ) 234 242 (3 )
Securities lending charge 414 - 414 -
Merger and integration costs 41 12 242 54 29 86
Other 186 222 (16 ) 431 365 18
Total expenses 1,944 1,364 42.5 3,523 2,668 32.0
Income before income tax expense and extraordinary loss 350 744 (53 ) 1,052 1,358 (23 )
Income tax expense (benefit) (82 ) 242 125 380
Income before extraordinary loss 432 502 (14 ) 927 978 (5 )
Extraordinary loss, net of tax - (3,684 ) - (3,684 )
Net income (loss) $ 432 $ (3,182 ) (114 ) $ 927 $ (2,706 ) (134 )
Adjustments to net income (loss):
Prepayment of preferred stock discount $ - $ (106 ) $ - $ (106 )
Dividend on preferred stock - (21 ) - (46 )
Accretion of preferred stock discount - (5 ) - (11 )
- (132 ) - (163 )
Net income before extraordinary loss available to
common shareholders $ 432 $ 370 17 $ 927 $ 815 14
Net income (loss) available to common shareholders $ 432 $ (3,314 ) (113 ) $ 927 $ (2,869 ) (132 )
Earnings Per Common Share Before Extraordinary Loss:
Basic(2) $ .86 $ .80 8 $ 1.85 $ 1.82 2
Diluted .87 .79 10 1.86 1.81 3
Earnings (Loss) Per Common Share:
Basic (3) $ .86 $ (7.16 ) (112 ) $ 1.85 $ (6.40 ) (129 )
Diluted .87 (7.12 ) (112 ) 1.86 (6.37 ) (129 )
Average Common Shares Outstanding (in thousands):
Basic 495,606 462,399 495,099 447,370
Diluted 498,886 465,814 498,295 450,483
Selected consolidated financial information presented above was prepared in accordance with accounting principles generally accepted in the United States.
(1) Net interest revenue on a fully taxable-equivalent basis was $689 million and $611 million for the quarters ended June 30, 2010 and 2009, respectively, and $1.38 billion and $1.21 billion for the six months ended June 30, 2010 and 2009, respectively. These amounts include taxable-equivalent adjustments of $31 million for the quarters ended June 30, 2010 and 2009 and $63 million for the six months ended June 30, 2010 and 2009.
(2) Basic earnings per common share before extraordinary loss on distributed earnings were $.01 for each of the quarters ended June 30, 2010 and 2009 and $.02 and $.25 for the six months ended June 30, 2010 and 2009, respectively. Basic earnings per common share before extraordinary loss on undistributed earnings were $.85 and $.79 for the quarters ended June 30, 2010 and 2009, respectively, and $1.83 and $1.57 for the six months ended June 30, 2010 and 2009, respectively.
(3) Basic earnings per common share on distributed earnings were $.01 for each of the quarters ended June 30, 2010 and 2009 and $.02 and $.25 for the six months ended June 30, 2010 and 2009, respectively. Basic earnings per common share on undistributed earnings were $.85 and $(7.17) for the quarters ended June 30, 2010 and 2009, respectively, and $1.83 and $(6.65) for the six months ended June 30, 2010 and 2009, respectively.
STATE STREET CORPORATION
Earnings Release Addendum
SELECTED CONSOLIDATED FINANCIAL INFORMATION
Quarters Ended June 30, 2010 and March 31, 2010
Quarters Ended
June 30, March 31,
(Dollars in millions, except per share amounts) 2010 2010 % Change
Fee Revenue:
Servicing fees $ 957 $ 880 9 %
Management fees 217 226 (4 )
Trading services 326 242 35
Securities finance 109 72 51
Processing fees and other 87 120 (28 )
Total fee revenue 1,696 1,540 10
Net Interest Revenue:
Interest revenue 846 878 (4 )
Interest expense 188 217 (13 )
Net interest revenue (1) 658 661 -
Gains (Losses) related to investment securities, net:
Net gains from sales of available-for-sale securities 3 192
Losses from other-than-temporary impairment (240 ) (240 )
Losses not related to credit 187 143
Gains (Losses) related to investment securities, net (50 ) 95
Total revenue 2,304 2,296 0.3
Provision for loan losses 10 15
Expenses:
Salaries and employee benefits 849 883 (4 )
Information systems and communications 174 167 4
Transaction processing services 164 153 7
Occupancy 116 118 (2 )
Securities lending charge 414 -
Merger and integration costs 41 13 215
Other 186 245 (24 )
Total expenses 1,944 1,579 23.1
Income before income tax expense 350 702 (50 )
Income tax expense (benefit) (82 ) 207
Net income $ 432 $ 495 (13 )
Earnings Per Common Share:
Basic (2) $ .86 $ .99 (13 )
Diluted .87 .99 (12 )
Average Common Shares Outstanding (in thousands):
Basic 495,606 494,588
Diluted 498,886 498,056
Selected consolidated financial Information presented above was prepared in accordance with accounting principles generally accepted in the United States.
(1) Net interest revenue on a fully taxable-equivalent basis was $689 million and $693 million for the quarters ended June 30, 2010 and March 31, 2010, respectively. These amounts include taxable-equivalent adjustments of $31 million and $32 million for the quarters ended June 30, 2010 and March 31, 2010, respectively.
(2) Basic earnings per common share on distributed earnings were $.01 for each of the quarters ended June 30, 2010 and March 31, 2010 and on undistributed earnings were $.85 and $.98 for the quarters ended June 30, 2010 and March 31, 2010, respectively.
STATE STREET CORPORATION
Earnings Release Addendum
SELECTED CONSOLIDATED OPERATING-BASIS FINANCIAL INFORMATION
Quarters and Six Months Ended June 30, 2010 and June 30, 2009
Quarters Ended (1) Six Months Ended (1)
June 30, June 30, June 30, June 30,
(Dollars in millions, except per share amounts) 2010 2009 % Change 2010 2009 % Change
Fee Revenue:
Servicing fees $ 957 $ 795 20 % $ 1,837 $ 1,561 18 %
Management fees 217 193 12 443 374 18
Trading services 326 310 5 568 555 2
Securities finance 109 201 (46 ) 181 382 (53 )
Processing fees and other 87 17 412 207 66 214
Total fee revenue 1,696 1,516 12 3,236 2,938 10
Net Interest Revenue:
Interest revenue, operating basis 705 692 2 1,403 1,438 (2 )
Interest expense 188 193 (3 ) 405 350 16
Net interest revenue, operating basis 517 499 4 998 1,088 (8 )
Gains (Losses) related to investment securities, net (50 ) 26 45 42
Total revenue, operating basis (2) 2,163 2,041 6.0 4,279 4,068 5.2
Provision for loan losses 10 14 25 98
Expenses:
Salaries and employee benefits 828 696 19 1,711 1,427 20
Information systems and communications 174 167 4 341 328 4
Transaction processing services 164 146 12 317 277 14
Occupancy 116 121 (4 ) 234 242 (3 )
Other 186 222 (16 ) 431 365 18
Total expenses, operating basis (2) 1,468 1,352 8.6 3,034 2,639 15.0
Income before income tax expense, operating basis 685 675 1 1,220 1,331 (8 )
Income tax expense, operating basis 190 203 322 345
Tax-equivalent adjustment 31 31 63 63
Net income, operating basis $ 464 $ 441 5 $ 835 $ 923 (10 )
Adjustments to net income (loss):
Dividend on preferred stock $ - $ (21 ) $ - $ (46 )
Accretion of preferred stock discount - (5 ) - (11 )
- (26 ) - (57 )
Net income available to common shareholders, operating basis $ 464 $ 415 12 $ 835 $ 866 (4 )
Diluted earnings per common share, operating basis $ .93 $ .89 4 $ 1.68 $ 1.92 (13 )
Average diluted common shares outstanding (in thousands) 498,886 465,814 498,295 450,483
Return on common equity, operating basis 11.8 % 14.7 % 11.0 % 15.3 %
(1) Refer to the accompanying reconciliation of reported results to operating-basis results.
(2) For the quarter ended June 30, 2010, negative operating leverage in the year-over-year comparison was 260 basis points, based on an increase in total operating-basis revenue of 6.0% and an increase in total operating-basis expenses of 8.6%. For the six months ended June 30, 2010, negative operating leverage in the year-over-year comparison was 980 basis points, based on an increase in total operating-basis revenue of 5.2% and an increase in total operating-basis expenses of 15.0%
STATE STREET CORPORATION
Earnings Release Addendum
SELECTED CONSOLIDATED OPERATING-BASIS FINANCIAL INFORMATION
Quarters Ended June 30, 2010 and March 31, 2010
Quarters Ended (1)
June 30, March 31,
(Dollars in millions, except per share amounts) 2010 2010 % Change
Fee Revenue:
Servicing fees $ 957 $ 880 9 %
Management fees 217 226 (4 )
Trading services 326 242 35
Securities finance 109 72 51
Processing fees and other 87 120 (28 )
Total fee revenue 1,696 1,540 10
Net Interest Revenue:
Interest revenue, operating basis 705 698 1
Interest expense 188 217 (13 )
Net interest revenue, operating basis 517 481 7
Gains (Losses) related to investment securities, net (50 ) 95
Total revenue, operating basis (2) 2,163 2,116 2.2
Provision for loan losses 10 15
Expenses:
Salaries and employee benefits 828 883 (6 )
Information systems and communications 174 167 4
Transaction processing services 164 153 7
Occupancy 116 118 (2 )
Other 186 245 (24 )
Total expenses, operating basis (2) 1,468 1,566 (6.3 )
Income before income tax expense, operating basis 685 535 28
Income tax expense 190 132
Tax-equivalent adjustment 31 32
Net income, operating basis $ 464 $ 371 25
Diluted earnings per common share, operating basis $ .93 $ .75 24
Average diluted common shares outstanding (in thousands) 498,886 498,056
Return on common equity, operating basis 11.8 % 10.0 %
(1) Refer to the accompanying reconciliation of reported results to operating-basis results.
(2) For the quarter ended June 30, 2010, positive operating leverage in the quarter-over-quarter comparison was 850 basis points, based on an increase in total operating-basis revenue of 2.2% and a decrease in total operating-basis expenses of 6.3%.
STATE STREET CORPORATION
Earnings Release Addendum
RECONCILIATION OF REPORTED RESULTS TO OPERATING-BASIS RESULTS
Quarter and Six Months Ended June 30, 2010
(Dollars in millions, except per share amounts) Quarter Ended June 30, 2010 Six Months Ended June 30, 2010
Reported Operating Reported Operating
Results Adjustments Results Results Adjustments Results
Fee Revenue:
Servicing fees $ 957 $ 957 $ 1,837 $ 1,837
Management fees 217 217 443 443
Trading services 326 326 568 568
Securities finance 109 109 181 181
Processing fees and other 87 87 207 207
Total fee revenue 1,696 1,696 3,236 3,236
Net Interest Revenue:
Interest revenue 846 $ (141 )

(1)

705 1,724 $ (321 )

(7)

1,403
Interest expense 188 - 188 405 - 405
Net interest revenue 658 (141 ) 517 1,319 (321 ) 998
Gains (Losses) related to investment securities, net: (50 ) - (50 ) 45 - 45
Total revenue 2,304 (141 ) 2,163 4,600 (321 ) 4,279
Provision for loan losses 10 - 10 25 - 25
Expenses:
Salaries and employee benefits 849 (21 )

(2)

828 1,732 (21 )

(2)

1,711
Information systems and communications 174 - 174 341 - 341
Transaction processing services 164 - 164 317 - 317
Occupancy 116 - 116 234 - 234
Securities lending charge 414 (414 )

(3)

- 414 (414 )

(3)

-
Merger and integration costs 41 (41 )

(4)

- 54 (54 )

(4)

-
Other 186 - 186 431 - 431
Total expenses 1,944 (476 ) 1,468 3,523 (489 ) 3,034
Income before income tax expense 350 335 685 1,052 168 1,220
Income tax expense (82 ) 272

(5)

190 125 197

(5)

322
Tax-equivalent adjustment - 31

(6)

31 - 63

(6)

63
Net income $ 432 $ 32 $ 464 $ 927 $ (92 ) $ 835
Diluted earnings per common share $ .87 $ .06 $ .93 $ 1.86 $ (.18 ) $ 1.68
Average diluted common shares outstanding (in thousands) 498,886 498,886 498,886 498,295 498,295 498,295
Return on common equity 11.0 % 0.8 % 11.8 % 12.2 % (1.2 ) % 11.0 %
(1) Represents tax-equivalent adjustment of $31 million, which is not included in reported results, net of $172 of discount accretion related to former conduit assets.
(2) Represents a $21 million accrual associated with a tax on bonus payments to employees in the U.K.
(3) Represents a cash contribution and related costs of $339 million to SSgA lending fund collateral pools and a $75 million charge to establish a reserve to address potential inconsistencies in the application of a redemption policy for agency lending collateral pools.
(4) Represents merger and integration costs.
(5) Represents a one-time tax benefit of $180 million associated with the restructuring of former non-U.S. conduit assets and the net tax effect of non-operating adjustments.
(6) Represents tax-equivalent adjustment, which is not included in reported results.
(7) Represents tax-equivalent adjustment of $63 million, which is not included in reported results, net of $384 of discount accretion related to former conduit assets.
STATE STREET CORPORATION
Earnings Release Addendum
RECONCILIATION OF REPORTED RESULTS TO OPERATING-BASIS RESULTS
Quarter and Six Months Ended June 30, 2009
(Dollars in millions, except per share amounts)

Quarter Ended June 30, 2009

Six Months Ended June 30, 2009

Reported Operating Reported Operating
Results Adjustments Results Results Adjustments Results
Fee Revenue:
Servicing fees $ 795 $ 795 $ 1,561 $ 1,561
Management fees 193 193 374 374
Trading services 310 310 555 555
Securities finance 201 201 382 382
Processing fees and other 17 17 66 66
Total fee revenue 1,516 1,516 2,938 2,938
Net Interest Revenue:
Interest revenue 773 $ (81 )

(1)

692 1,511 $ (73 )

(6)

1,438
Interest expense 193 - 193 367 (17 )

(7)

350
Net interest revenue 580 (81 ) 499 1,144 (56 ) 1,088
Gains (Losses) related to investment securities, net 26 - 26 42 - 42
Total revenue 2,122 (81 ) 2,041 4,124 (56 ) 4,068
Provision for loan losses 14 - 14 98 - 98
Expenses:
Salaries and employee benefits 696 - 696 1,427 - 1,427
Information systems and communications 167 - 167 328 - 328
Transaction processing services 146 - 146 277 - 277
Occupancy 121 - 121 242 - 242
Merger and integration costs 12 (12 )

(2)

- 29 (29 )

(2)

-
Other 222 - 222 365 - 365
Total expenses 1,364 (12 ) 1,352 2,668 (29 ) 2,639
Income before income tax expense and extraordinary loss 744 (69 ) 675 1,358 (27 ) 1,331
Income tax expense 242 (39 )

(3)

203 380 (35 )

(3)

345
Tax-equivalent adjustment - 31

(1)

31 - 63

(1)

63
Income before extraordinary loss 502 (61 )

441 978 (55 ) 923
Extraordinary loss, net of tax (3,684 ) 3,684

(4)

- (3,684 ) 3,684

(4)

-
Net income (loss) $ (3,182 ) $ 3,623 $ 441 $ (2,706 ) $ 3,629 $ 923
Adjustments to net income (loss):
Prepayment of preferred stock discount $ (106 ) $ 106

(5)

$ - $ (106 ) $ 106

(5)

$ -
Dividend on preferred stock (21 ) - (21 ) (46 ) - (46 )
Accretion of preferred stock discount (5 ) - (5 ) (11 ) - (11 )
(132 ) 106 (26 ) (163 ) 106 (57 )
Net income before extraordinary loss available to
common shareholders $ 370 $ 45 $ 415 $ 815 $ 51 $ 866
Net income (loss) available to common shareholders $ (3,314 ) $ 3,729 $ 415 $ (2,869 ) $ 3,735 $ 866
Diluted earnings per common share before extraordinary loss $ .79 $ .10 $ .89 $ 1.81 $ .11 $ 1.92
Diluted earnings (loss) per common share (7.12 ) 8.01 .89 (6.37 ) 8.29 1.92
Average diluted common shares outstanding (in thousands) 465,814 465,814 465,814 450,483 450,483 450,483
Return on common equity before extraordinary loss 13.0 % 1.7 % 14.7 % 14.4 % 0.9 % 15.3 %
(1) Represents tax-equivalent adjustment of $31 million, which is not included in reported results, net of $112 million of discount accretion related to former conduit assets.
(2) Represents merger and integration costs.
(3) Represents the net tax effect of non-operating adjustments.
(4) Represents extraordinary loss related to the May 2009 consolidation of the asset-backed commercial paper conduits onto State Street's balance sheet.

(5) Represents prepayment of the preferred stock discount in connection with redemption of the U.S. Treasury's preferred stock investment under the TARP Capital Purchase Program.

(6) Represents $63 million tax-equivalent adjustment, which is not included in reported results, net of $24 million of revenue related to the AMLF and $112 of discount accretion related to former conduit assets.

(7) Represents interest expense related to the AMLF.

STATE STREET CORPORATION
Earnings Release Addendum
RECONCILIATION OF REPORTED RESULTS TO OPERATING-BASIS RESULTS
Quarter Ended March 31, 2010
(Dollars in millions, except per share amounts) Quarter Ended March 31, 2010
Reported Operating
Results Adjustments Results
Fee Revenue:
Servicing fees $ 880 $ 880
Management fees 226 226
Trading services 242 242
Securities finance 72 72
Processing fees and other 120 120
Total fee revenue 1,540 1,540
Net Interest Revenue:
Interest revenue 878 $ (180 )

(1)

698
Interest expense 217 - 217
Net interest revenue 661 (180 ) 481
Gains related to investment securities, net 95 - 95
Total revenue 2,296 (180 ) 2,116
Provision for loan losses 15 - 15
Expenses:
Salaries and employee benefits 883 - 883
Information systems and communications 167 - 167
Transaction processing services 153 - 153
Occupancy 118 - 118
Merger and integration costs 13 (13 )

(2)

-
Other 245 - 245
Total expenses 1,579 (13 ) 1,566
Income before income tax expense 702 (167 ) 535
Income tax expense 207 (75 )

(3)

132
Tax-equivalent adjustment - 32

(4)

32
Net income $ 495 $ (124 ) $ 371
Net income available to common shareholders $ 495 $ (124 ) $ 371
Diluted earnings per common share $ .99 $ (.24 ) $ .75
Average diluted common shares outstanding (in thousands) 498,056 498,056 498,056
Return on common equity 13.4 % (3.4 ) % 10.0 %
(1) Represents tax-equivalent adjustment of $32 million, which is not included in reported results, net of $212 million of discount accretion related to former conduit assets.
(2) Represents merger and integration costs.
(3) Represents the net tax effect of non-operating adjustments.
(4) Represents tax-equivalent adjustment, which is not included in reported results.
STATE STREET CORPORATION
Earnings Release Addendum
TANGIBLE COMMON EQUITY AND TIER 1 COMMON RATIOS
As of Period End

The table set forth below presents the calculations of State Street's ratios of tangible common equity to total tangible
assets and to total risk-weighted assets, and its ratios of tier 1 common capital to total risk-weighted assets.

For the periods ended
June 30, March 31, June 30,
(Dollars in millions) 2010 2010 2009
Consolidated Total Assets $ 162,075 $ 153,971 $ 153,421
Less:
Goodwill 5,380 4,515 4,547
Other intangible assets 2,731 1,768 1,790
AMLF investment securities - - 300
Excess reserves held at central banks 14,768 19,235 20,449
Adjusted assets 139,196 128,453 126,335
Plus:
Deferred tax liability 807 515 532
Total tangible assets A $ 140,003 $ 128,968 $ 126,867
Consolidated Total Common Shareholders' Equity $ 16,059 $ 15,410 $ 12,103
Less:
Goodwill 5,380 4,515 4,547
Intangible assets 2,731 1,768 1,790
Adjusted equity 7,948 9,127 5,766
Plus deferred tax liability 807 515 532
Total tangible common equity B $ 8,755 $ 9,642 $ 6,298
Tangible common equity ratio B/A 6.3 % 7.5 % 5.0 %
Ratio of tangible common equity to total risk-weighted assets B/D 11.9 % 14.1 % 8.5 %
Tier 1 capital $ 11,127 $ 12,335 $ 10,740
Less:

Trust preferred securities 1,450 1,450 1,450
Tier 1 common capital C $ 9,677 10,885 $ 9,290
Total risk-weighted assets D 73,550 68,338 73,918
Ratio of tier 1 common capital to total risk-weighted assets C/D 13.2 % 15.9 % 12.6 %
STATE STREET CORPORATION
Earnings Release Addendum
CONSOLIDATED STATEMENT OF CONDITION
June 30, December 31, June 30,
(Dollars in millions, except per share amounts) 2010 2009 2009
Assets
Cash and due from banks $ 5,312 $ 2,641 $ 4,044
Interest-bearing deposits with banks 20,298 26,632 26,346
Securities purchased under resale agreements 2,750 2,387 5,277
Trading account assets 203 148 127
Investment securities available for sale 79,936 72,699 58,308
Investment securities held to maturity purchased under money
market liquidity facility - - 300
Investment securities held to maturity 18,166 20,877 22,093
Loans and leases (net of allowance of $102, $79 and $108) 11,687 10,729 12,554
Premises and equipment 1,839 1,953 2,114
Accrued income receivable 1,727 1,497 1,549
Goodwill 5,380 4,550 4,547
Other intangible assets 2,731 1,810 1,790
Other assets 12,046 12,023 14,372
Total assets $ 162,075 $ 157,946 $ 153,421
Liabilities
Deposits:
Noninterest-bearing $ 11,704 $ 11,969 $ 14,539
Interest-bearing -- U.S. 10,226 5,956 6,323
Interest-bearing -- Non-U.S. 73,813 72,137 64,715
Total deposits 95,743 90,062 85,577
Securities sold under repurchase agreements 9,058 10,542 12,899
Federal funds purchased 5,447 4,532 4,032
Short-term borrowings under money market liquidity facility - - 300
Other short-term borrowings 15,749 20,200 19,935
Accrued taxes and other liabilities 11,473 9,281 9,595
Long-term debt 8,546 8,838 8,980
Total liabilities 146,016 143,455 141,318
Shareholders' Equity
Preferred stock, no par: authorized 3,500,000; none
issued - - -
Common stock, $1 par: authorized 750,000,000 shares;
501,860,956, 495,365,571 and 494,434,216 shares issued 502 495 494
Surplus 9,266 9,180 9,202
Retained earnings 8,015 7,071 6,255
Accumulated other comprehensive loss (1,707 ) (2,238 ) (3,828 )
Treasury stock (at cost 433,556, 431,832 and 462,514 shares) (17 ) (17 ) (20 )
Total shareholders' equity 16,059 14,491 12,103
Total liabilities and shareholders' equity $ 162,075 $ 157,946 $ 153,421

SOURCE: State Street Corporation

State Street Corporation
Edward J. Resch, +1 617-664-1110
or
Investors:
Kelley MacDonald, +1 617-664-3477
or
Media:
Hannah Grove, +1 617-664-3377