EX-99.2 3 q12013-financialinformatio.htm EXHIBIT Q1 2013 - Financial Information Addendum




This financial information should be read in conjunction with State Street's earnings news release dated April 19, 2013.




STATE STREET CORPORATION
Earnings Release Addendum
CONSOLIDATED FINANCIAL HIGHLIGHTS
 
 
 
Quarters Ended
 
% Change
(Dollars in millions, except per share amounts or where otherwise noted)
 
March 31, 2013
 
December 31, 2012
 
March 31, 2012
 
Q1 2013 vs. Q4 2012
 
Q1 2013 vs. Q1 2012
Revenue:
 
 
 
 
 
 
 
 
 
 
   Fee revenue
 
$
1,857

 
$
1,806

 
$
1,785

 
3
 %
 
4
 %
   Net interest revenue(1)
 
576

 
622

 
625

 
(7
)
 
(8
)
   Net gains from sales of available-for-sale securities
 
5

 
26

 
19

 
 
 
 
   Net losses from other-than-temporary impairment
 
(3
)
 
(5
)
 
(8
)
 
 
 
 
Total revenue
 
2,435

 
2,449

 
2,421

 
(1
)
 
1

 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
   Expenses from operations
 
1,812

 
1,714

 
1,799

 
6

 
1

Provisions for litigation exposure and other costs
 
—

 
11

 
15

 
 
 
 
   Acquisition and restructuring costs(2)
 
14

 
139

 
21

 
 
 
 
Total expenses
 
1,826

 
1,864

 
1,835

 
(2
)
 
—

 
 
 
 
 
 
 
 
 
 
 
Net income
 
464

 
470

 
427

 
(1
)
 
9

Net income available to common shareholders
 
455

 
468

 
417

 
 
 
 
Diluted earnings per common share
 
.98

 
1.00

 
.85

 
(2
)
 
15

Average diluted common shares outstanding (in thousands)
 
462,751

 
467,466

 
490,454

 
 
 
 
Cash dividends declared per common share
 
$
.26

 
$
.24

 
$
.24

 
 
 
 
Closing price per share of common stock (at quarter end)
 
59.09

 
47.01

 
45.50

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ratios:
 
 
 
 
 
 
 
 
 
 
   Return on average common equity
 
9.1
%
 
9.3
%
 
8.8
%
 
 
 
 
   Net interest margin, fully taxable-equivalent basis
 
1.38

 
1.48

 
1.64

 
 
 
 
   Tier 1 risk-based capital
 
18.0

 
19.1

 
19.1

 
 
 
 
   Total risk-based capital
 
19.2

 
20.6

 
20.7

 
 
 
 
   Tier 1 leverage
 
6.9

 
7.1

 
7.8

 
 
 
 
   Tier 1 common to risk-weighted assets(3)
 
16.1

 
17.1

 
17.2

 
 
 
 
   Tangible common equity to tangible assets(3)
 
7.1

 
7.2

 
7.5

 
 
 
 
At Quarter End:
 
 
 
 
 
 
 
 
 
 
Assets under custody and administration(4) (in trillions)
 
$
25.42

 
$
24.37

 
$
23.21

 
 
 
 
    Assets under management (in trillions)
 
2.18

 
2.09

 
1.98

 
 
 
 
 
 
 
 
 
(1) Included discount accretion related to former conduit securities of $31 million, $52 million and $49 million for the quarters ended March 31, 2013, December 31, 2012 and March 31, 2012, respectively.
(2) Quarter ended December 31, 2012 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 for the quarter ended December 31, 2012 were partly offset by $40 million of indemnification benefits for the assumption of an income tax liability related to a 2010 acquisition.
(3) Ratios are non-GAAP financial measures. Refer to accompanying reconciliations for additional information.
(4) Included assets under custody of $18.59 trillion, $17.81 trillion and $16.91 trillion, respectively.








STATE STREET CORPORATION
Earnings Release Addendum
CONSOLIDATED RESULTS OF OPERATIONS
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters ended
 
% Change
(Dollars in millions, except per share amounts)
 
March 31, 2013
 
December 31, 2012
 
March 31, 2012
 
Q1 2013 vs. Q4 2012
 
Q1 2013 vs. Q1 2012
Fee revenue:
 
 
 
 
 
 
 
 
 
 
Servicing fees
 
$
1,175

 
$
1,150

 
$
1,078

 
2
 %
 
9
 %
Management fees
 
263

 
260

 
236

 
1

 
11

Trading services
 
281

 
243

 
280

 
16

 
—

Securities finance
 
78

 
74

 
97

 
5

 
(20
)
Processing fees and other
 
60

 
79

 
94

 
(24
)
 
(36
)
Total fee revenue
 
1,857

 
1,806

 
1,785

 
3

 
4

Net interest revenue:
 
 
 
 
 
 
 
 
 
 
Interest revenue
 
687

 
733

 
765

 
(6
)
 
(10
)
Interest expense
 
111

 
111

 
140

 
—

 
(21
)
Net interest revenue
 
576

 
622

 
625

 
(7
)
 
(8
)
Gains (losses) related to investment securities, net:
 
 
 
 
 
 
 
 
 
 
Net gains from sales of available-for-sale securities
 
5

 
26

 
19

 
 
 
 
Losses from other-than-temporary impairment
 
—

 
(3
)
 
(25
)
 
 
 
 
Losses not related to credit
 
(3
)
 
(2
)
 
17

 
 
 
 
Gains (losses) related to investment securities, net
 
2

 
21

 
11

 
 
 
 
Total revenue
 
2,435

 
2,449

 
2,421

 
(1
)
 
1

Provision for loan losses
 
—

 
(2
)
 
—

 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
Compensation and employee benefits
 
1,035

 
915

 
1,064

 
13

 
(3
)
Information systems and communications
 
237

 
234

 
191

 
1

 
24

Transaction processing services
 
180

 
179

 
181

 
1

 
(1
)
Occupancy
 
116

 
121

 
119

 
(4
)
 
(3
)
Provisions for litigation exposure
 
—

 
(2
)
 
15

 
 
 
 
Acquisition and restructuring costs
 
14

 
139

 
21

 
(90
)
 
(33
)
Other
 
244

 
278

 
244

 
(12
)
 
—

Total expenses
 
1,826

 
1,864

 
1,835

 
(2
)
 
—

Income before income tax expense
 
609

 
587

 
586

 
4

 
4

Income tax expense
 
145

 
117

 
159

 
 
 
 
Net income
 
$
464

 
$
470

 
$
427

 
(1
)
 
9

Adjustments to net income:
 
 
 
 
 
 
 
 
 
 
Dividends on preferred stock
 
$
(7
)
 
$
—

 
$
(7
)
 
 
 
 
Earnings allocated to participating securities
 
(2
)
 
(2
)
 
(3
)
 
 
 
 
Net income available to common shareholders
 
$
455

 
$
468

 
$
417

 
 
 
 
Earnings per common share:
 
 
 
 
 
 
 
 
 
 
Basic
 
$
1.00

 
$
1.02

 
$
.86

 
(2
)
 
16

Diluted
 
.98

 
1.00

 
.85

 
(2
)
 
15

Average common shares outstanding (in thousands):
 
 
 
 
 
 
 
 
 
 
Basic
 
454,315

 
459,339

 
484,942

 
 
 
 
Diluted
 
462,751

 
467,466

 
490,454

 
 
 
 





STATE STREET CORPORATION
Earnings Release Addendum
CONSOLIDATED STATEMENT OF CONDITION
 
 
 
 
 
(Dollars in millions, except share amounts)
 
March 31, 2013
 
December 31, 2012
Assets
 
 
 
 
Cash and due from banks
 
$
4,708

 
$
2,590

Interest-bearing deposits with banks
 
39,224

 
50,763

Securities purchased under resale agreements
 
8,703

 
5,016

Trading account assets
 
654

 
637

Investment securities available for sale
 
103,836

 
109,682

Investment securities held to maturity
 
13,593

 
11,379

Loans and leases (less allowance for losses of $22 and $22)
 
13,963

 
12,285

Premises and equipment
 
1,756

 
1,728

Accrued income receivable
 
2,103

 
1,970

Goodwill
 
5,912

 
5,977

Other intangible assets
 
2,452

 
2,539

Other assets
 
21,285

 
18,016

Total assets
 
$
218,189

 
$
222,582

Liabilities
 
 
 
 
Deposits:
 
 
 
 
Noninterest-bearing
 
$
40,704

 
$
44,445

Interest-bearing -- U.S.
 
11,706

 
19,201

Interest-bearing -- Non-U.S.
 
102,365

 
100,535

Total deposits
 
154,775

 
164,181

Securities sold under repurchase agreements
 
11,538

 
8,006

Federal funds purchased
 
570

 
399

Other short-term borrowings
 
4,354

 
4,502

Accrued expenses and other liabilities
 
18,643

 
17,196

Long-term debt
 
7,440

 
7,429

Total liabilities
 
197,320

 
201,713

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

 
489

Common stock, $1 par: 750,000,000 shares authorized; 503,896,123 and 503,900,268 shares issued
 
504

 
504

Surplus
 
9,669

 
9,667

Retained earnings
 
12,090

 
11,751

Accumulated other comprehensive gain
 
251

 
360

Treasury stock, at cost (48,303,938 and 45,238,208 shares)
 
(2,134
)
 
(1,902
)
Total shareholders' equity
 
20,869

 
20,869

Total liabilities and shareholders' equity
 
$
218,189

 
$
222,582





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

 
As of
(In billions)
 
March 31, 2013
 
December 31, 2012
 
March 31, 2012
Assets Under Custody and Administration
 
 
 
 
 
 
By Product Classification:
 
 
 
 
 
 
   Mutual Funds
 
$
6,275

 
$
5,852

 
$
5,681

   Collective Funds
 
5,753

 
5,363

 
4,792

   Pension Products
 
5,331

 
5,339

 
5,116

   Insurance and Other Products
 
8,063

 
7,817

 
7,619

Total Assets Under Custody and Administration
 
$
25,422

 
$
24,371

 
$
23,208

By Servicing Location:
 
 
 
 
 
 
   U.S.
 
$
18,477

 
$
17,711

 
$
16,757

   Non-U.S.
 
6,945

 
6,660

 
6,451

Total Assets Under Custody and Administration
 
$
25,422

 
$
24,371

 
$
23,208

Assets Under Custody(1)
 
 
 
 
 
 
By Product Classification:
 
 
 
 
 
 
   Mutual Funds
 
$
6,015

 
$
5,662

 
$
5,457

   Collective Funds
 
4,338

 
4,045

 
3,730

   Pension Products
 
4,288

 
4,054

 
3,911

   Insurance and Other Products
 
3,947

 
4,045

 
3,814

Total Assets Under Custody
 
$
18,588

 
$
17,806

 
$
16,912

By Servicing Location:
 
 
 
 
 
 
   U.S.
 
$
13,750

 
$
13,103

 
$
12,538

   Non-U.S.
 
4,838

 
4,703

 
4,374

Total Assets Under Custody
 
$
18,588

 
$
17,806

 
$
16,912

Assets Under Management
 
 
 
 
 
 
Passive:
 
 
 
 
 
 
   Equities
 
$
813

 
$
755

 
$
725

   Fixed-Income
 
289

 
292

 
220

   Exchange-Traded Funds(2)
 
354

 
337

 
308

   Other(3)
 
221

 
211

 
203

     Total Passive
 
1,677

 
1,595

 
1,456

Active:
 
 
 
 
 
 
   Equities
 
53

 
52

 
56

   Fixed-Income
 
17

 
17

 
19

   Other
 
49

 
55

 
54

     Total Active
 
119

 
124

 
129

   Cash
 
380

 
367

 
395

Total Assets Under Management
 
$
2,176

 
$
2,086

 
$
1,980

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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)
 
March 31, 2013
 
December 31, 2012
 
March 31, 2012
 
Q1 2013 vs. Q4 2012
 
Q1 2013 vs. Q1 2012
Total Revenue:
 
 
 
 
 
 
 
 
 
 
Total revenue, GAAP basis
 
$
2,435

 
$
2,449

 
$
2,421

 
(0.6
)%
 
0.6
 %
 
Adjustment to net interest revenue (see below)
 
32

 
30

 
31

 
 
 
 
 
Adjustment to processing fees and other revenue (see below)
 
34

 
36

 
18

 
 
 
 
 
Adjustment to net interest revenue (see below)
 
(31
)
 
(52
)
 
(49
)
 
 
 
 
Total revenue, operating basis(1) (2) (3) (4) (5)
 
$
2,470

 
$
2,463

 
$
2,421

 
0.28

 
2.02

 
 
 
 
 
 
 
 
 
 
 
 
Processing Fees and Other Revenue:
 
 
 
 
 
 
 
 
 
 
Total processing fees and other revenue, GAAP basis
 
$
60

 
$
79

 
$
94

 
(24
)
 
(36
)
 
Tax-equivalent adjustment associated with tax-advantaged investments
 
34

 
36

 
18

 
 
 
 
Total processing fees and other revenue, operating basis
 
$
94

 
$
115

 
$
112

 
(18
)
 
(16
)
 
 
 
 
 
 
 
 
 
 
 
 
Net Interest Revenue:
 
 
 
 
 
 
 
 
 
 
Net interest revenue, GAAP basis
 
$
576

 
$
622

 
$
625

 
(7
)
 
(8
)
 
Tax-equivalent adjustment associated with tax-exempt investment securities
 
32

 
30

 
31

 
 
 
 
 
Discount accretion related to former conduit securities
 
(31
)
 
(52
)
 
(49
)
 
 
 
 
Net interest revenue, operating basis
 
$
577

 
$
600

 
$
607

 
(4
)
 
(5
)
 
 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
Total expenses, GAAP basis
 
$
1,826

 
$
1,864

 
$
1,835

 
(2.0
)
 
(0.5
)
 
Provisions for litigation exposure and other costs
 
—

 
(11
)
 
(15
)
 
 
 
 
 
Acquisition costs
 
(15
)
 
(25
)
 
(13
)
 
 
 
 
 
Indemnification benefit for the assumption of an income tax liability related to a 2010 acquisition
 
—

 
40

 
—

 
 
 
 
 
Restructuring charges
 
1

 
(154
)
 
(8
)
 
 
 
 
Total expenses, operating basis(1) (2)
 
$
1,812

 
$
1,714

 
$
1,799

 
5.72

 
0.72

 
 
 
 
 
 
 
 
 
 
 
(1) For the quarters ended March 31, 2013 and December 31, 2012, negative operating leverage in the quarter-over-quarter comparison was approximately 544 basis points, based on an increase in total operating-basis revenue of 0.28% and an increase in total operating-basis expenses of 5.72%. In the same comparison, if compensation and employee benefits expense of $118 million related to equity incentive compensation for retirement-eligible employees and payroll taxes were excluded from total expenses of $1.8 billion for the quarter ended March 31, 2013, positive operating leverage in the quarter-over-quarter comparison would have been approximately 145 basis points, based on an increase in total operating-basis revenue of 0.28% and a decrease in total operating-basis expenses of 1.17%.
(2) For the quarters ended March 31, 2013 and 2012, positive operating leverage in the year-over-year comparison was approximately 130 basis points, based on an increase in total operating-basis revenue of 2.02% and an increase in total operating-basis expenses of 0.72%.
(3) For the quarter ended March 31, 2013, compensation and employee benefits expense of $1.04 billion, as a percentage of total operating-basis revenue of $2.47 billion, was 41.9%. For the quarter ended March 31, 2013, pre-tax operating margin, defined as the percentage of operating-basis pre-tax income before income tax expense of $658 million to total operating-basis revenue of $2.47 billion, was 26.6%.
(4) 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%. For the quarter ended December 31, 2012, pre-tax operating margin, composed of operating-basis pre-tax income before income tax expense of $751 million as a percentage of total operating-basis revenue of $2.46 billion, was 30.5%.
(5) For the quarter ended March 31, 2012, compensation and employee benefits expense of $1.06 billion, as a percentage of total operating-basis revenue of $2.42 billion, was 43.9%. For the quarter ended March 31, 2012, pre-tax operating margin, composed of operating-basis pre-tax income before income tax expense of $622 million as a percentage of total operating-basis revenue of $2.42 billion, was 25.7%.




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)
 
March 31, 2013
 
December 31, 2012
 
March 31, 2012
 
Q1 2013 vs. Q4 2012
 
Q1 2013 vs. Q1 2012
Other Expenses:
 
 
 
 
 
 
 
 
 
 
Total other expenses, GAAP basis
 
$
244

 
$
278

 
$
244

 
(12
)
 
—
 
Loss related to Lehman Brothers-related OREO property
 
—

 
(13
)
 
—

 
 
 
 
Total other expenses, operating basis
 
$
244

 
$
265

 
$
244

 
(8
)
 
—
 
 
 
 
 
 
 
 
 
 
 
Income Tax Expense:
 
 
 
 
 
 
 
 
 
 
Income tax expense, GAAP basis
 
$
145

 
$
117

 
$
159

 
 
 
 
 
Tax-equivalent adjustments
 
66

 
66

 
31

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

 
7

 
—

 
 
 
 
 
Net tax effect of non-operating adjustments
 
(5
)
 
37

 
(6
)
 
 
 
 
Income tax expense, operating basis
 
$
206

 
$
227

 
$
184

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income Available to Common Shareholders:
 
 
 
 
 
 
 
 
 
 
Net income available to common shareholders, GAAP basis
 
$
455

 
$
468

 
$
417

 
(3
)
 
9
Net after-tax effect of non-operating adjustments to net interest revenue, expenses and income tax expense
 
(12
)
 
53

 
(7
)
 
 
 
 
Net income available to common shareholders, operating basis
 
$
443

 
$
521

 
$
410

 
(15
)
 
8
 
 
 
 
 
 
 
 
 
 
 
 
Diluted Earnings per Common Share:
 
 
 
 
 
 
 
 
 
 
Diluted earnings per common share, GAAP basis
 
$
.98

 
$
1.00

 
$
.85

 
(2
)
 
15
 
Provisions for litigation exposure and other costs
 
—

 
.02

 
.02

 
 
 
 
 
Acquisition costs, net
 
.02

 
.03

 
.02

 
 
 
 
 
Restructuring charges
 
—

 
.21

 
.01

 
 
 
 
 
Effect on income tax rate of non-operating adjustments
 
—

 
.02

 
—

 
 
 
 
 
Discount accretion related to former conduit securities
 
(.04
)
 
(.07
)
 
(.06
)
 
 
 
 
 
Tax effect of audit settlement associated with a 2010 acquisition
 
—

 
(.10
)
 
—

 
 
 
 
Diluted earnings per common share, operating basis
 
$
.96

 
$
1.11

 
$
.84

 
(14
)
 
14
 
 
 
 
 
 
 
 
 
 
 
Return on Average Common Equity:
 
 
 
 
 
 
 
 
 
 
Return on average common equity, GAAP basis
 
9.1
 %
 
9.3
 %
 
8.8
 %
 
 
 
 
 
Provisions for litigation exposure and other costs
 
—

 
0.1

 
0.2

 
 
 
 
 
Acquisition costs, net
 
0.2

 
0.3

 
0.2

 
 
 
 
 
Restructuring charges
 
—

 
2.0

 
0.1

 
 
 
 
 
Effect on income tax rate of non-operating adjustments
 
—

 
0.1

 
—

 
 
 
 
 
Discount accretion related to former conduit securities
 
(0.4
)
 
(0.6
)
 
(0.7
)
 
 
 
 
 
Tax effect of audit settlement associated with a 2010 acquisition
 
—

 
(0.9
)
 
—

 
 
 
 
Return on average common equity, operating basis
 
8.9
 %
 
10.3
 %
 
8.6
 %
 
 
 
 




STATE STREET CORPORATION
Earnings Release Addendum
REGULATORY CAPITAL
 
 
 
 
 
 
 
     This earnings release addendum includes capital ratios in addition to, or adjusted from, those calculated in accordance with currently applicable regulatory requirements. These include capital ratios based on tangible common equity and tier 1 risk-based common capital, as well as capital ratios adjusted to reflect our estimate of the impact of the proposed Basel III capital requirements. These non-regulatory and adjusted capital measures are non-GAAP financial measures. Management currently evaluates the non-GAAP capital ratios presented in this earnings release addendum to aid in its understanding of State Street’s capital position under a variety of standards, including currently applicable and evolving regulatory requirements. Management believes that the use of the non-GAAP capital ratios described in this earnings release addendum similarly aids in an investor's understanding of State Street's capital position and therefore is of interest to investors.
     The total risk-based capital, tier 1 risk-based capital and tier 1 leverage ratios, as applicable, are each calculated in accordance with currently applicable regulatory requirements. The total risk-based capital, tier 1 risk-based capital and tier 1 leverage ratios are used regularly by bank regulatory authorities to evaluate State Street's capital adequacy. The tangible common equity, or TCE, ratio is an additional capital ratio that management believes provides additional context for understanding and assessing State Street's capital adequacy. The tier 1 risk-based common, or tier 1 common, ratio is used by the Federal Reserve in connection with its capital assessment and review programs.
     The 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, not as a substitute for or superior to, financial measures determined in accordance with GAAP. Reconciliations with respect to the calculation of the TCE ratios as of March 31, 2013, December 31, 2012 and March 31, 2012 are provided in this earnings release addendum.
     The tier 1 common ratio is calculated by dividing (a) tier 1 risk-based capital, which is calculated in accordance with currently applicable regulatory requirements, less non-common elements including qualifying perpetual preferred stock, qualifying minority interest in subsidiaries and qualifying trust preferred securities, by (b) total risk-weighted assets, which assets are calculated in accordance with currently applicable regulatory requirements. The tier 1 common ratio is not required by GAAP or by currently applicable regulatory capital rules. Management is currently monitoring this ratio, along with the other capital ratios described in this earnings release addendum, 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 the tier 1 common ratios as of March 31, 2013, December 31, 2012 and March 31, 2012 are provided in this earnings release addendum.
     The following table presents State Street's regulatory capital ratios and underlying components, calculated in accordance with currently applicable regulatory requirements.
 
 
 
 
 
 
 
(Dollars in millions)
 
March 31, 2013
 
December 31, 2012
 
March 31, 2012
RATIOS:
 
 
 
 
 
 
Tier 1 risk-based capital
 
18.0
%
 
19.1
%
 
19.1
%
Total risk-based capital
 
19.2
%
 
20.6

 
20.7

Tier 1 leverage
 
6.9

 
7.1

 
7.8

 
 
 
 
 
 
 
Supporting Calculations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Tier 1 risk-based capital
 
$
13,753

 
$
13,760

 
$
14,126

Total risk-weighted assets
 
76,265

 
71,912

 
73,789

Tier 1 risk-based capital ratio
 
18.0
%
 
19.1
%
 
19.1
%
 
 
 
 
 
 
 
Total risk-based capital
 
$
14,640

 
$
14,829

 
$
15,243

Total risk-weighted assets
 
76,265

 
71,912

 
73,789

Total risk-based capital ratio
 
19.2
%
 
20.6
%
 
20.7
%
 
 
 
 
 
 
 
Tier 1 risk-based capital
 
$
13,753

 
$
13,760

 
$
14,126

Adjusted quarterly average assets
 
199,155

 
192,817

 
180,538

Tier 1 leverage ratio
 
6.9
%
 
7.1
%
 
7.8
%





STATE STREET CORPORATION
Earnings Release Addendum
RECONCILIATIONS OF TANGIBLE COMMON EQUITY AND TIER 1 COMMON RATIOS
 
 
 
 
 
 
 
 
     The following table presents the calculations of State Street's ratios of tangible common equity to total tangible assets and its ratios of tier 1 common capital to total risk-weighted assets.
 
 
 
 
 
 
 
 
(Dollars in millions)
 
 
March 31, 2013
 
December 31, 2012
 
March 31, 2012
Consolidated Total Assets
 
 
$
218,189

 
$
222,582

 
$
187,956

Less:
 
 
 
 
 
 
 
Goodwill
 
 
5,912

 
5,977

 
5,700

Other intangible assets
 
 
2,452

 
2,539

 
2,443

Cash balances held at central banks in excess of required reserves
 
 
31,516

 
41,112

 
16,883

Adjusted assets
 
 
178,309

 
172,954

 
162,930

Plus deferred tax liabilities
 
 
677

 
699

 
731

Total tangible assets
A
 
$
178,986

 
$
173,653

 
$
163,661

Consolidated Total Common Shareholders' Equity
 
 
$
20,380

 
$
20,380

 
$
19,659

Less:
 
 
 
 
 
 
 
Goodwill
 
 
5,912

 
5,977

 
5,700

Other intangible assets
 
 
2,452

 
2,539

 
2,443

Adjusted equity
 
 
12,016

 
11,864

 
11,516

Plus deferred tax liabilities
 
 
677

 
699

 
731

Total tangible common equity
B
 
$
12,693

 
$
12,563

 
$
12,247

Tangible common equity ratio
B/A
 
7.1
%
 
7.2
%
 
7.5
%
Tier 1 Risk-based Capital
 
 
$
13,753

 
$
13,760

 
$
14,126

Less:
 
 
 
 
 
 
 
Trust preferred securities
 
 
950

 
950

 
950

Preferred stock
 
 
489

 
489

 
500

Tier 1 common capital
C
 
$
12,314

 
$
12,321

 
$
12,676

Total risk-weighted assets
D
 
$
76,265

 
$
71,912

 
$
73,789

Ratio of tier 1 common capital to total risk-weighted assets
C/D
 
16.1
%
 
17.1
%
 
17.2
%




STATE STREET CORPORATION
Earnings Release Addendum
RECONCILIATION OF TIER 1 COMMON RATIO
 
 
 
 
 
 
 
The following tables reconcile State Street's tier 1 common ratio, calculated using currently applicable regulatory requirements under Basel I rules, to State Street's estimated pro forma tier 1 common ratio calculated in conformity with the U.S. Basel III Notices of Proposed Rulemaking, or NPRs, as State Street currently understands the impact of those proposed requirements.
As of March 31, 2013 (Dollars in millions)
 
Currently Applicable Regulatory Requirements (1)
 
Basel III NPRs with Impact of SSFA (2)
 
Basel III NPRs with SSFA and Run-Off/Reinvestment (3)
Tier 1 risk-based capital
 
$
13,753

 
$
13,318

 
$
13,318

Less:
 
 
 
 
 
 
Trust preferred securities
 
950

 
713

 
713

Preferred stock
 
489

 
489

 
489

Plus:
 
 
 
 
 
 
Other
 
—

 
52

 
52

Tier 1 common capital
 
12,314

A
12,168

 
12,168

 
 
 
 
 
 
 
Total risk-weighted assets
 
76,265

B
115,096

 
106,910

 
 
 
 
 
 
 
Tier 1 common ratio
 
16.1
%
A/B
10.6
%
 
11.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2012 (Dollars in millions)
 
Currently Applicable Regulatory Requirements (1)

 
Basel III NPRs with Impact of SSFA (4)

 
Basel III NPRs with SSFA and Run-Off/Reinvestment (5)

Tier 1 risk-based capital
 
$
13,760

 
$
13,252

 
$
13,252

Less:
 
 
 
 
 
 
Trust preferred securities
 
950

 
713

 
713

Preferred stock
 
489

 
489

 
489

Plus:
 
 
 
 
 
 
Other
 
—

 
60

 
60

Tier 1 common capital
 
12,321

C
12,110

 
12,110

 
 
 
 
 
 
 
Total risk-weighted assets
 
71,912

D
112,484

 
102,120

 
 
 
 
 
 
 
Tier 1 common ratio
 
17.1
%
C/D
10.8
%
 
11.9
%
 
 
 
 
 
 
 




(1) The tier 1 common ratio was calculated by dividing (a) tier 1 risk-based capital, calculated in accordance with currently applicable regulatory requirements, less non-common elements including qualifying perpetual preferred stock, qualifying minority interest in subsidiaries and qualifying trust preferred securities (tier 1 common capital) by (b) total risk-weighted assets, calculated in accordance with currently applicable regulatory requirements.
 
 
 
 
 
 
 
In June 2012, U.S. banking regulators issued three concurrent NPRs. These NPRs propose to revise the current U.S. regulatory capital framework and incorporate previous changes made by the Basel Committee on Banking Supervision to the Basel capital framework. The NPRs also propose to implement relevant provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act and restructure the U.S. capital rules into a harmonized, codified regulatory capital framework.
 
 
 
 
 
 
 
Footnotes (2) through (5) below describe State Street's estimated pro forma tier 1 common ratio as it would be affected by the NPRs, primarily the application of the Simplified Supervisory Formula Approach, or SSFA, as well as the estimated effect of anticipated run-off and reinvestment through December 2014, all as of the dates indicated. These estimates are subject to change based on regulatory clarifications, further analysis, the results of industry comment on the NPRs and other factors.
 
 
 
 
 
 
 
(2) As of March 31, 2013, for purposes of the calculations in accordance with the NPRs, capital and total risk-weighted assets were calculated using State Street’s estimates, based on the provisions of the NPRs expected to affect capital in 2013. The tier 1 common ratio was calculated by dividing (a) tier 1 common capital (as described in footnote (1)), but with tier 1 risk-based capital calculated in accordance with the NPRs, by (b) total risk-weighted assets, calculated in accordance with the NPRs. While U.S. banking regulators have issued the NPRs, there remains considerable uncertainty concerning the timing for finalization and implementation of Basel III in the U.S. When finalized, the proposed rules may reflect modifications or adjustments. Therefore, State Street’s current understanding of the NPRs, as reflected above, may differ from the ultimate application upon implementation of Basel III in the U.S.
 
 
 
 
 
 
 
• Tier 1 risk-based capital decreased by $435 million, as a result of applying the estimated effect of the NPRs to tier 1 risk-based capital of $13.753 billion as of March 31, 2013.
• Tier 1 common capital used in the calculation of the tier 1 common ratio was $12.168 billion, reflecting the adjustments to tier 1 risk-based capital described in the first bullet above. Tier 1 common capital used in the calculation was therefore calculated as adjusted tier 1 risk-based capital of $13.318 billion less non-common elements of capital, composed of trust preferred securities of $713 million, preferred stock of $489 million, and other adjustments of $52 million as of March 31, 2013, resulting in tier 1 common capital of 12.168 billion. As of March 31, 2013, there was no qualifying minority interest in subsidiaries.
• Total risk-weighted assets used in the calculation of the tier 1 common ratio increased by $38.831 billion as a result of applying the provisions of the NPRs, primarily the estimated impact of the SSFA, to total risk-weighted assets of $76.265 billion as of March 31, 2013.
 
 
 
 
 
 
 
(3) As of March 31, 2013, presents ratios calculated in accordance with the NPRs, as described in footnote (2), and incorporates the effect of anticipated run-off of investment securities as they mature or pay down and are replaced by subsequent reinvestment into new securities from April 2013 through December 2014. The net impact of run-off and subsequent reinvestment is estimated to reduce total risk-weighted assets by $8.186 billion, from $115.096 billion to $106.910 billion.
 
 
 
 
 
 
 
(4) As of December 31, 2012, for purposes of the calculations in accordance with the NPRs, capital and total risk-weighted assets were calculated using State Street’s estimates, based on the provisions of the NPRs expected to affect capital in 2013. The tier 1 common ratio was calculated by dividing (a) tier 1 common capital (as described in footnote (1)), but with tier 1 risk-based capital calculated in accordance with the NPRs, by (b) total risk-weighted assets, calculated in accordance with the NPRs. While U.S. banking regulators have issued the NPRs, there remains considerable uncertainty concerning the timing for finalization and implementation of Basel III in the U.S. When finalized, the proposed rules may reflect modifications or adjustments. Therefore, State Street’s current understanding of the NPRs, as reflected above, may differ from the ultimate application upon implementation of Basel III in the U.S.
 
 
 
 
 
 
 
• Tier 1 risk-based capital decreased by $508 million, as a result of applying the estimated effect of the NPRs to tier 1 risk-based capital of $13.760 billion as of December 31, 2012.
• Tier 1 common capital used in the calculation of the tier 1 common ratio was $12.110 billion, reflecting the adjustments to tier 1 risk-based capital described in the first bullet above. Tier 1 common capital used in the calculation was therefore calculated as adjusted tier 1 risk-based capital of $13.252 billion less non-common elements of capital, composed of trust preferred securities of $713 million, preferred stock of $489 million, and other adjustments of $60 million as of December 31, 2012, resulting in tier 1 common capital of $12.110 billion. As of December 31, 2012, there was no qualifying minority interest in subsidiaries.
• Total risk-weighted assets used in the calculation of the tier 1 common ratio increased by $40.572 billion as a result of applying the provisions of the NPRs, primarily the estimated impact of the SSFA, to total risk-weighted assets of $71.912 billion as of December 31, 2012.
 
 
 
 
 
 
 
(5) As of December 31, 2012, presents ratios calculated in accordance with the NPRs, as described in footnote (4), and incorporates the effect of anticipated run-off of investment securities as they mature or pay down and are replaced by subsequent reinvestment into new securities from January 2013 through December 2014. The net impact of run-off and subsequent reinvestment is estimated to reduce total risk-weighted assets by $10.364 billion, from $112.484 billion to $102.120 billion.