EX-99.2 3 q22013-financialinformatio.htm EXHIBIT Q2 2013 - Financial Information Addendum




 
Exhibit 99.2
 
 
STATE STREET CORPORATION
Earnings Release Addendum
June 30, 2013
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 July 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)
 
June 30, 2013
 
March 31, 2013
 
June 30, 2012
 
Q2 2013 vs. Q1 2013
 
Q2 2013 vs. Q2 2012
Revenue:
 
 
 
 
 
 
 
 
 
 
   Fee revenue
 
$
1,971

 
$
1,857

 
$
1,778

 
6
 %
 
11
 %
   Net interest revenue(1)
 
596

 
576

 
672

 
3

 
(11
)
   Net gains (losses) from sales of investment securities(2)
 
—

 
5

 
(14
)
 
 
 
 
   Net losses from other-than-temporary impairment
 
(7
)
 
(3
)
 
(13
)
 
 
 
 
Total revenue
 
2,560

 
2,435

 
2,423

 
5

 
6

Total expenses
 
1,798

 
1,826

 
1,772

 
(2
)
 
1

Net income
 
579

 
464

 
490

 
25

 
18

Net income available to common shareholders
 
571

 
455

 
480

 
 
 
 
Diluted earnings per common share
 
1.24

 
.98

 
.98

 
27

 
27

Average diluted common shares outstanding (in thousands)
 
461,040

 
462,751

 
488,518

 
 
 
 
Cash dividends declared per common share
 
$
.26

 
$
.26

 
$
.24

 
 
 
 
Closing price per share of common stock (at quarter-end)
 
65.21

 
59.09

 
44.64

 
 
 
 
Ratios:
 
 
 
 
 
 
 
 
 
 
   Return on average common equity
 
11.3
%
 
9.1
%
 
10.0
%
 
 
 
 
   Net interest margin, fully taxable-equivalent basis
 
1.42

 
1.38

 
1.72

 
 
 
 
   Tier 1 risk-based capital
 
16.6

 
18.0

 
19.9

 
 
 
 
   Total risk-based capital
 
19.1

 
19.2

 
21.5

 
 
 
 
   Tier 1 leverage
 
6.9

 
6.9

 
7.7

 
 
 
 
   Tier 1 common to risk-weighted assets(3)
 
14.9

 
16.1

 
17.9

 
 
 
 
   Tangible common equity to tangible assets(3)
 
6.5

 
7.1

 
7.2

 
 
 
 
At quarter-end:
 
 
 
 
 
 
 
 
 
 
Assets under custody and administration(4) (in trillions)
 
$
25.74

 
$
25.42

 
$
22.42

 
 
 
 
    Assets under management (in trillions)
 
2.15

 
2.18

 
1.91

 
 
 
 
 
 
 
 
 
(1) Included discount accretion related to former conduit securities of $47 million, $31 million and $74 million for the quarters ended June 30, 2013, March 31, 2013 and June 30, 2012, respectively.
(2) Quarter ended June 30, 2012 included loss from sale of Greek investment securities of $46 million.
(3) Ratios are non-GAAP financial measures. Refer to accompanying reconciliations for additional information.
(4) Included assets under custody of $18.88 trillion, $18.59 trillion and $16.39 trillion, respectively.






STATE STREET CORPORATION
Earnings Release Addendum
CONSOLIDATED FINANCIAL HIGHLIGHTS (Continued)
 
 
 
 
 
 
 
 
 
Six Months Ended
 
% Change
(Dollars in millions, except per share amounts)
 
June 30, 2013
 
June 30, 2012
 
2013 vs. 2012
Revenue:
 
 
 
 
 
 
   Fee revenue
 
$
3,828

 
$
3,563

 
7
 %
   Net interest revenue(1)
 
1,172

 
1,297

 
(10
)
   Net gains from sales of investment securities(2)
 
5

 
5

 

   Net losses from other-than-temporary impairment
 
(10
)
 
(21
)
 
 
Total revenue
 
4,995

 
4,844

 
3

Total expenses
 
3,624

 
3,607

 
—

Net income
 
1,043

 
917

 
14

Net income available to common shareholders
 
1,026

 
897

 
14

Diluted earnings per common share
 
2.22

 
1.83

 
21

Average diluted common shares outstanding (in thousands)
 
461,630

 
489,145

 
 
Cash dividends declared per common share
 
$
.52

 
$
.48

 
 
Return on average common equity
 
10.2
%
 
9.4
%
 
 
Net interest margin, fully taxable-equivalent basis
 
1.40
%
 
1.68
%
 
 
 
 
 
 
 
(1) Included discount accretion related to former conduit securities of $78 million and $123 million for the six months ended June 30, 2013 and June 30, 2012, respectively.
(2) Six months ended June 30, 2012 included loss from sale of Greek investment securities of $46 million.





STATE STREET CORPORATION
Earnings Release Addendum
CONSOLIDATED RESULTS OF OPERATIONS
Quarters Ended June 30, 2013, March 31, 2013 and June 30, 2012 and Six Months Ended June 30, 2013 and 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters ended
 
Six Months Ended
(Dollars in millions, except per share amounts)
 
June 30, 2013
 
March 31, 2013
 
June 30, 2012
 
Q2 2013 vs. Q1 2013
 
Q2 2013 vs. Q2 2012
 
June 30, 2013
 
June 30, 2012
 
% Change
Fee revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Servicing fees
 
$
1,201

 
$
1,175

 
$
1,086

 
2
 %
 
11
 %
 
$
2,376

 
$
2,164

 
10
 %
Management fees
 
277

 
263

 
246

 
5

 
13

 
540

 
482

 
12

Trading services
 
296

 
281

 
255

 
5

 
16

 
577

 
535

 
8

Securities finance
 
131

 
78

 
143

 
68

 
(8
)
 
209

 
240

 
(13
)
Processing fees and other
 
66

 
60

 
48

 
10

 
38

 
126

 
142

 
(11
)
Total fee revenue
 
1,971

 
1,857

 
1,778

 
6

 
11

 
3,828

 
3,563

 
7

Net interest revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest revenue
 
700

 
687

 
786

 
2

 
(11
)
 
1,387

 
1,551

 
(11
)
Interest expense
 
104

 
111

 
114

 
(6
)
 
(9
)
 
215

 
254

 
(15
)
Net interest revenue
 
596

 
576

 
672

 
3

 
(11
)
 
1,172

 
1,297

 
(10
)
Gains (losses) related to investment securities, net:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net gains (losses) from sales of investment securities
 
—

 
5

 
(14
)
 

 

 
5

 
5

 

Losses from other-than-temporary impairment
 
—

 
—

 
(21
)
 

 

 
—

 
(46
)
 

Losses not related to credit
 
(7
)
 
(3
)
 
8

 

 

 
(10
)
 
25

 

Gains (losses) related to investment securities, net
 
(7
)
 
2

 
(27
)
 

 

 
(5
)
 
(16
)
 

Total revenue
 
2,560

 
2,435

 
2,423

 
5

 
6

 
4,995

 
4,844

 
3

Provision for loan losses
 
—

 
—

 
(1
)
 
 
 
 
 
—

 
(1
)
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and employee benefits
 
917

 
1,035

 
942

 
(11
)
 
(3
)
 
1,952

 
2,006

 
(3
)
Information systems and communications
 
235

 
237

 
208

 
(1
)
 
13

 
472

 
399

 
18

Transaction processing services
 
186

 
180

 
172

 
3

 
8

 
366

 
353

 
4

Occupancy
 
114

 
116

 
115

 
(2
)
 
(1
)
 
230

 
234

 
(2
)
Acquisition and restructuring costs
 
30

 
14

 
37

 
114

 
(19
)
 
44

 
58

 
(24
)
Other
 
316

 
244

 
298

 
30

 
6

 
560

 
557

 
1

Total expenses
 
1,798

 
1,826

 
1,772

 
(2
)
 
1

 
3,624

 
3,607

 
—

Income before income tax expense
 
762

 
609

 
652

 
25

 
17

 
1,371

 
1,238

 
11

Income tax expense
 
183

 
145

 
162

 
26

 
13

 
328

 
321

 
2

Net income
 
$
579

 
$
464

 
$
490

 
25

 
18

 
$
1,043

 
$
917

 
14

Adjustments to net income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends on preferred stock
 
$
(6
)
 
$
(7
)
 
$
(7
)
 
 
 
 
 
$
(13
)
 
$
(14
)
 
 
Earnings allocated to participating securities
 
(2
)
 
(2
)
 
(3
)
 
 
 
 
 
(4
)
 
(6
)
 
 
Net income available to common shareholders
 
$
571

 
$
455

 
$
480

 
 
 
 
 
$
1,026

 
$
897

 
 
Earnings per common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
1.26

 
$
1.00

 
$
1.00

 
26

 
26

 
$
2.26

 
$
1.86

 
22

Diluted
 
1.24

 
.98

 
.98

 
27

 
27

 
2.22

 
1.83

 
21

Average common shares outstanding (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
452,176

 
454,315

 
481,404

 
 
 
 
 
453,240

 
483,165

 
 
Diluted
 
461,040

 
462,751

 
488,518

 
 
 
 
 
461,630

 
489,145

 
 





STATE STREET CORPORATION
Earnings Release Addendum
CONSOLIDATED STATEMENT OF CONDITION
 
 
 
 
 
(Dollars in millions, except per share amounts)
 
June 30, 2013
 
December 31, 2012
Assets
 
 
 
 
Cash and due from banks
 
$
5,479

 
$
2,590

Interest-bearing deposits with banks
 
44,783

 
50,763

Securities purchased under resale agreements
 
5,569

 
5,016

Trading account assets
 
653

 
637

Investment securities available for sale
 
100,180

 
109,682

Investment securities held to maturity
 
15,468

 
11,379

Loans and leases (less allowance for losses of $22 and $22)
 
16,409

 
12,285

Premises and equipment
 
1,772

 
1,728

Accrued income receivable
 
2,055

 
1,970

Goodwill
 
5,924

 
5,977

Other intangible assets
 
2,406

 
2,539

Other assets
 
26,602

 
18,016

Total assets
 
$
227,300

 
$
222,582

Liabilities
 
 
 
 
Deposits:
 
 
 
 
Noninterest-bearing
 
$
49,922

 
$
44,445

Interest-bearing -- U.S.
 
7,684

 
19,201

Interest-bearing -- Non-U.S.
 
108,914

 
100,535

Total deposits
 
166,520

 
164,181

Securities sold under repurchase agreements
 
9,154

 
8,006

Federal funds purchased
 
98

 
399

Other short-term borrowings
 
3,277

 
4,502

Accrued expenses and other liabilities
 
19,329

 
17,196

Long-term debt
 
8,841

 
7,429

Total liabilities
 
207,219

 
201,713

Shareholders' Equity
 
 
 
 
Preferred stock, Series C, no par: 3,500,000 shares authorized; 5,000 shares issued and outstanding
 
490

 
489

Common stock, $1 par: 750,000,000 shares authorized; 503,890,772 and 503,900,268 shares issued
 
504

 
504

Surplus
 
9,713

 
9,667

Retained earnings
 
12,545

 
11,751

Accumulated other comprehensive gain (loss)
 
(523
)
 
360

Treasury stock, at cost (55,495,952 and 45,238,208 shares)
 
(2,648
)
 
(1,902
)
Total shareholders' equity
 
20,081

 
20,869

Total liabilities and shareholders' equity
 
$
227,300

 
$
222,582





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

 
As of
(In billions)
 
June 30, 2013
 
March 31, 2013
 
June 30, 2012
Assets Under Custody and Administration
 
 
 
 
 
 
By Product Classification:
 
 
 
 
 
 
   Mutual Funds
 
$
6,278

 
$
6,275

 
$
5,572

   Collective Funds
 
5,826

 
5,753

 
4,597

   Pension Products
 
5,447

 
5,331

 
4,955

   Insurance and Other Products
 
8,191

 
8,063

 
7,299

Total Assets Under Custody and Administration
 
$
25,742

 
$
25,422

 
$
22,423

By Servicing Location:
 
 
 
 
 
 
   U.S.
 
$
18,622

 
$
18,477

 
$
16,335

   Non-U.S.
 
7,120

 
6,945

 
6,088

Total Assets Under Custody and Administration
 
$
25,742

 
$
25,422

 
$
22,423

Assets Under Custody(1)
 
 
 
 
 
 
By Product Classification:
 
 
 
 
 
 
   Mutual Funds
 
$
6,008

 
$
6,015

 
$
5,366

   Collective Funds
 
4,379

 
4,338

 
3,562

   Pension Products
 
4,377

 
4,288

 
3,774

   Insurance and Other Products
 
4,117

 
3,947

 
3,685

Total Assets Under Custody
 
$
18,881

 
$
18,588

 
$
16,387

By Servicing Location:
 
 
 
 
 
 
   U.S.
 
$
13,967

 
$
13,750

 
$
12,273

   Non-U.S.
 
4,914

 
4,838

 
4,114

Total Assets Under Custody
 
$
18,881

 
$
18,588

 
$
16,387

Assets Under Management
 
 
 
 
 
 
Passive:
 
 
 
 
 
 
   Equities
 
$
816

 
$
814

 
$
690

   Fixed-Income
 
273

 
289

 
223

   Exchange-Traded Funds(2)
 
337

 
354

 
305

   Other(3)
 
227

 
225

 
194

     Total Passive
 
1,653

 
1,682

 
1,412

Active:
 
 
 
 
 
 
   Equities
 
44

 
46

 
45

   Fixed-Income
 
17

 
17

 
18

   Other
 
47

 
48

 
51

     Total Active
 
108

 
111

 
114

   Cash
 
385

 
383

 
382

Total Assets Under Management
 
$
2,146

 
$
2,176

 
$
1,908

 
 
 
 
 
 
 
(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)
 
June 30, 2013
 
March 31, 2013
 
June 30, 2012
 
Q2 2013 vs. Q1 2013
 
Q2 2013 vs. Q2 2012
 
Total Revenue:
 
 
 
 
 
 
 
 
 
 
 
Total revenue, GAAP basis
 
$
2,560

 
$
2,435

 
$
2,423

 
5.1
 %
 
5.7
 %
 
 
Adjustment to net interest revenue (see below)
 
33

 
32

 
31

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

 
34

 
33

 
 
 
 
 
 
Loss on sale of Greek investment securities (see below)
 
—

 
—

 
46

 
 
 
 
 
 
Adjustment to net interest revenue (see below)
 
(47
)
 
(31
)
 
(74
)
 
 
 
 
 
Total revenue, operating basis(1) (2) (3) (4) (5)
 
$
2,580

 
$
2,470

 
$
2,459

 
4.45

 
4.92

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Processing Fees and Other Revenue:
 
 
 
 
 
 
 
 
 
 
 
Total processing fees and other revenue, GAAP basis
 
$
66

 
$
60

 
$
48

 
10

 
38

 
 
Tax-equivalent adjustment associated with tax-advantaged investments
 
34

 
34

 
33

 
 
 
 
 
Total processing fees and other revenue, operating basis
 
$
100

 
$
94

 
$
81

 
6

 
23

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Interest Revenue:
 
 
 
 
 
 
 
 
 
 
 
Net interest revenue, GAAP basis
 
$
596

 
$
576

 
$
672

 
3

 
(11
)
 
 
Tax-equivalent adjustment associated with tax-exempt investment securities
 
33

 
32

 
31

 
 
 
 
 
 
Discount accretion related to former conduit securities
 
(47
)
 
(31
)
 
(74
)
 
 
 
 
 
Net interest revenue, operating basis
 
$
582

 
$
577

 
$
629

 
1

 
(7
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gains (Losses) Related to Investment Securities, net:
 
 
 
 
 
 
 
 
 
 
 
Gains (losses) related to investment securities, net, GAAP basis
 
$
(7
)
 
$
2

 
$
(27
)
 


 


 
 
Loss on sale of Greek investment securities
 
—

 
—

 
46

 
 
 
 
 
Gains (losses) related to investment securities, net, operating basis
 
$
(7
)
 
$
2

 
$
19

 


 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
Total expenses, GAAP basis
 
$
1,798

 
$
1,826

 
$
1,772

 
(1.5
)
 
1.5

 
 
Provisions for litigation exposure(6)
 
(15
)
 
—

 
(7
)
 
 
 
 
 
 
Acquisition costs
 
(19
)
 
(15
)
 
(15
)
 
 
 
 
 
 
Restructuring charges, net
 
(11
)
 
1

 
(22
)
 
 
 
 
 
Total expenses, operating basis(1) (2)
 
$
1,753

 
$
1,812

 
$
1,728

 
(3.26
)
 
1.45

 

(1) For the quarters ended June 30, 2013 and March 31, 2013, positive operating leverage in the quarter-over-quarter comparison was approximately 771 basis points, based on an increase in total operating-basis revenue of 4.45% and a decrease in total operating-basis expenses of 3.26%. 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 $1.81 billion for the quarter ended March 31, 2013, positive operating leverage in the quarter-over-quarter comparison would have been approximately 97 basis points, based on an increase in total operating-basis revenue of 4.45% and an increase in total operating-basis expenses of 3.48%, using adjusted total operating-basis expenses of $1.69 billion.
(2) For the quarters ended June 30, 2013 and June 30, 2012, positive operating leverage in the year-over-year comparison was approximately 347 basis points, based on an increase in total operating-basis revenue of 4.92% and an increase in total operating-basis expenses of 1.45%.






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)
 
June 30, 2013
 
March 31, 2013
 
June 30, 2012
 
Q2 2013 vs. Q1 2013
 
Q2 2013 vs. Q2 2012
 
Income Tax Expense:
 
 
 
 
 
 
 
Income tax expense, GAAP basis
 
$
183

 
$
145

 
$
162

 
 
 
 
 
 
Tax-equivalent adjustments
 
67

 
66

 
64

 
 
 
 
 
 
Net tax effect of non-operating adjustments
 
(2
)
 
(5
)
 
2

 
 
 
 
 
Income tax expense, operating basis
 
$
248

 
$
206

 
$
228

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income Available to Common Shareholders:
 
 
 
 
 
 
 
 
 
 
 
Net income available to common shareholders, GAAP basis
 
$
571

 
$
455

 
$
480

 
25
%
 
19
%
 
Net after-tax effect of non-operating adjustments to net interest revenue, net gains (losses) related to investment securities, net, expenses and income tax expense
 
—

 
(12
)
 
14

 
 
 
 
 
Net income available to common shareholders, operating basis
 
$
571

 
$
443

 
$
494

 
29

 
16

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted Earnings per Common Share:
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per common share, GAAP basis
 
$
1.24

 
$
.98

 
$
.98

 
27

 
27

 
 
Loss on sale of Greek investment securities
 
—

 
—

 
.06

 
 
 
 
 
 
Provisions for litigation exposure
 
.02

 
—

 
.01

 
 
 
 
 
 
Acquisition costs
 
.03

 
.02

 
.02

 
 
 
 
 
 
Restructuring charges, net
 
.01

 
—

 
.03

 
 
 
 
 
 
Discount accretion related to former conduit securities
 
(.06
)
 
(.04
)
 
(.09
)
 
 
 
 
 
Diluted earnings per common share, operating basis
 
$
1.24

 
$
.96

 
$
1.01

 
29

 
23

 
 
 
 
 
 
 
 
 
 
 
 
 
Return on Average Common Equity:
 
 
 
 
 
 
 
 
 
 
 
Return on average common equity, GAAP basis
 
11.3
 %
 
9.1
 %
 
10.0
 %
 
220

bps
130

bps
 
Loss on sale of Greek investment securities
 
—

 
—

 
0.6

 
 
 
 
 
 
Provisions for litigation exposure
 
0.2

 
—

 
0.1

 
 
 
 
 
 
Acquisition costs
 
0.2

 
0.2

 
0.2

 
 
 
 
 
 
Restructuring charges, net
 
0.1

 
—

 
0.3

 
 
 
 
 
 
Discount accretion related to former conduit securities
 
(0.5
)
 
(0.4
)
 
(0.9
)
 
 
 
 
 
Return on average common equity, operating basis
 
11.3
 %
 
8.9
 %
 
10.3
 %
 
240

 
100

 

(3) For the quarter ended June 30, 2013, compensation and employee benefits expense of $917 million, as a percentage of total operating-basis revenue of $2.58 billion, was 35.5%. For the quarter ended June 30, 2013, pre-tax operating margin, defined as the percentage of operating-basis pre-tax income before income tax expense of $827 million to total operating-basis revenue of $2.58 billion, was 32.1%.
(4) 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, composed of operating-basis pre-tax income before income tax expense of $658 million as a percentage of total operating-basis revenue of $2.47 billion, was 26.6%.
(5) For the quarter ended June 30, 2012, compensation and employee benefits expense of $942 million, as a percentage of total operating-basis revenue of $2.46 billion, was 38.3%. For the quarter ended June 30, 2012, pre-tax operating margin, composed of operating-basis pre-tax income before income tax expense of $732 million as a percentage of total operating-basis revenue of $2.46 billion, was 29.8%.
(6) For the quarters ended June 30, 2013 and June 30, 2012, other expenses, GAAP basis, were $316 million and $298 million, respectively, and other expenses, operating basis, were $301 million and $291 million, respectively.




STATE STREET CORPORATION
Earnings Release Addendum
RECONCILIATIONS OF OPERATING-BASIS (NON-GAAP) FINANCIAL INFORMATION
 
 
 
 
Six Months Ended
 
% Change
(Dollars in millions, except per share amounts)
 
June 30, 2013
 
June 30, 2012
 
2013 vs. 2012
Total Revenue:
 
 
 
 
 
 
Total revenue, GAAP basis
 
$
4,995

 
$
4,844

 
3.1
 %
 
Adjustment to net interest revenue (see below)
 
65

 
62

 
 
 
Adjustment to processing fees and other revenue (see below)
 
68

 
51

 
 
 
Loss on sale of Greek investment securities (see below)
 
—

 
46

 
 
 
Adjustment to net interest revenue (see below)
 
(78
)
 
(123
)
 
 
Total revenue, operating basis(1)
 
$
5,050

 
$
4,880

 
3.48

 
 
 
 
 
 
 
 
Processing Fees and Other Revenue:
 
 
 
 
 
 
Total processing fees and other revenue, GAAP basis
 
$
126

 
$
142

 
(11
)
 
Tax-equivalent adjustment associated with tax-advantaged investments
 
68

 
51

 
 
Total processing fees and other revenue, operating basis
 
$
194

 
$
193

 
1

 
 
 
 
 
 
 
 
Net Interest Revenue:
 
 
 
 
 
 
Net interest revenue, GAAP basis
 
$
1,172

 
$
1,297

 
(10
)
 
Tax-equivalent adjustment associated with tax-exempt investment securities
 
65

 
62

 
 
 
Discount accretion related to former conduit securities
 
(78
)
 
(123
)
 
 
Net interest revenue, operating basis
 
$
1,159

 
$
1,236

 
(6
)
 
 
 
 
 
 
 
 
Gains (Losses) Related to Investment Securities, net:
 
 
 
 
 
 
Gains (losses) related to investment securities, net, GAAP basis
 
$
(5
)
 
$
(16
)
 

 
Loss on sale of Greek investment securities
 
—

 
46

 
 
Gains (losses) related to investment securities, net, operating basis
 
$
(5
)
 
$
30

 

 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
Total expenses, GAAP basis
 
$
3,624

 
$
3,607

 
0.5

 
Provisions for litigation exposure(2)
 
(15
)
 
(22
)
 
 
 
Acquisition costs
 
(34
)
 
(28
)
 
 
 
Restructuring charges, net
 
(10
)
 
(30
)
 
 
Total expenses, operating basis(1)
 
$
3,565

 
$
3,527

 
1.08

 
 
 
 
 
 
 
 
(1) For the six months ended June 30, 2013 and June 30, 2012, positive operating leverage in the year-over-year comparison was approximately 240 basis points, based on an increase in total operating-basis revenue of 3.48% and an increase in total operating-basis expenses of 1.08%.
(2) For the six months ended June 30, 2013 and June 30, 2012, other expenses, GAAP basis, were $560 million and $557 million, respectively, and other expenses, operating basis, were $545 million and $535 million, respectively.











STATE STREET CORPORATION
Earnings Release Addendum
RECONCILIATIONS OF OPERATING-BASIS (NON-GAAP) FINANCIAL INFORMATION (Continued)
 
 
 
 
Six Months Ended
 
% Change
(Dollars in millions, except per share amounts)
 
June 30, 2013
 
June 30, 2012
 
2013 vs. 2012
Income Tax Expense:
 
 
 
 
 
 
 
Income tax expense, GAAP basis
 
$
328

 
$
321

 

 
 
Tax-equivalent adjustment not included in reported results
 
133

 
113

 
 
 
 
Net tax effect of non-operating adjustments
 
(7
)
 
(4
)
 
 
 
Income tax expense, operating basis
 
$
454

 
$
430

 
 
 
 
 
 
 
 
 
 
 
 
Net Income Available to Common Shareholders:
 
 
 
 
 
 
 
Net income available to common shareholders, GAAP basis
 
$
1,026

 
$
897

 
14
%
 
Net after-tax effect of non-operating adjustments to net interest revenue, net gains (losses) related to investment securities, net, expenses and income tax expense
 
(12
)
 
7

 
 
 
Net income available to common shareholders, operating basis
 
$
1,014

 
$
904

 
12

 
 
 
 
 
 
 
 
 
 
Diluted Earnings per Common Share:
 
 
 
 
 
 
 
Diluted earnings per common share, GAAP basis
 
$
2.22

 
$
1.83

 
21

 
 
Loss on sale of Greek investment securities
 
—

 
0.06

 
 
 
 
Provisions for litigation exposure
 
0.02

 
0.03

 
 
 
 
Acquisition costs
 
0.05

 
0.04

 
 
 
 
Restructuring charges, net
 
0.02

 
0.04

 
 
 
 
Effect on income tax rate of non-operating adjustments
 
(0.01
)
 
—

 
 
 
 
Discount accretion related to former conduit securities
 
(0.10
)
 
(0.15
)
 
 
 
Diluted earnings per common share, operating basis
 
$
2.20

 
$
1.85

 
19

 
 
 
 
 
 
 
 
 
 
Return on Average Common Equity:
 
 
 
 
 
 
 
Return on average common equity, GAAP basis
 
10.2
 %
 
9.4
 %
 
80

bps
 
Loss on sale of Greek investment securities
 
—

 
0.3

 
 
 
 
Provisions for litigation exposure
 
0.1

 
0.2

 
 
 
 
Acquisition costs
 
0.2

 
0.2

 
 
 
 
Restructuring charges, net
 
0.1

 
0.2

 
 
 
 
Discount accretion related to former conduit securities
 
(0.5
)
 
(0.8
)
 
 
 
Return on average common equity, operating basis
 
10.1
 %
 
9.5
 %
 
60

 




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 June 30, 2013, March 31, 2013 and June 30, 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 June 30, 2013, March 31, 2013 and June 30, 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)
 
June 30, 2013
 
March 31, 2013
 
June 30, 2012
RATIOS:
 
 
 
 
 
 
Tier 1 risk-based capital
 
16.6
%
 
18.0
%
 
19.9
%
Total risk-based capital
 
19.1
%
 
19.2

 
21.5

Tier 1 leverage
 
6.9

 
6.9

 
7.7

 
 
 
 
 
 
 
Supporting Calculations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Tier 1 risk-based capital
 
$
13,708

 
$
13,753

 
$
13,976

Total risk-weighted assets
 
82,444

 
76,265

 
70,105

Tier 1 risk-based capital ratio
 
16.6
%
 
18.0
%
 
19.9
%
 
 
 
 
 
 
 
Total risk-based capital
 
$
15,717

 
$
14,640

 
$
15,088

Total risk-weighted assets
 
82,444

 
76,265

 
70,105

Total risk-based capital ratio
 
19.1
%
 
19.2
%
 
21.5
%
 
 
 
 
 
 
 
Tier 1 risk-based capital
 
$
13,708

 
$
13,753

 
$
13,976

Adjusted quarterly average assets
 
198,758

 
199,240

 
181,516

Tier 1 leverage ratio
 
6.9
%
 
6.9
%
 
7.7
%





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)
 
 
June 30, 2013
 
March 31, 2013
 
June 30, 2012
Consolidated Total Assets
 
 
$
227,300

 
$
218,189

 
$
200,777

Less:
 
 
 
 
 
 
 
Goodwill
 
 
5,924

 
5,912

 
5,611

Other intangible assets
 
 
2,406

 
2,452

 
2,334

Cash balances held at central banks in excess of required reserves
 
 
36,458

 
31,516

 
24,546

Adjusted assets
 
 
182,512

 
178,309

 
168,286

Plus deferred tax liabilities
 
 
668

 
677

 
705

Total tangible assets
A
 
$
183,180

 
$
178,986

 
$
168,991

Consolidated Total Common Shareholders' Equity
 
 
$
19,591

 
$
20,380

 
$
19,397

Less:
 
 
 
 
 
 
 
Goodwill
 
 
5,924

 
5,912

 
5,611

Other intangible assets
 
 
2,406

 
2,452

 
2,334

Adjusted equity
 
 
11,261

 
12,016

 
11,452

Plus deferred tax liabilities
 
 
668

 
677

 
705

Total tangible common equity
B
 
$
11,929

 
$
12,693

 
$
12,157

Tangible common equity ratio
B/A
 
6.5
%
 
7.1
%
 
7.2
%
Tier 1 Risk-based Capital
 
 
$
13,708

 
$
13,753

 
$
13,976

Less:
 
 
 
 
 
 
 
Trust preferred securities
 
 
950

 
950

 
950

Preferred stock
 
 
490

 
489

 
500

Tier 1 common capital
C
 
$
12,268

 
$
12,314

 
$
12,526

Total risk-weighted assets
D
 
$
82,444

 
$
76,265

 
$
70,105

Ratio of tier 1 common capital to total risk-weighted assets
C/D
 
14.9
%
 
16.1
%
 
17.9
%




STATE STREET CORPORATION
Earnings Release Addendum
RECONCILIATION OF TIER 1 COMMON RATIO
 
 
 
 
 
 
 
In June 2012, U.S. banking regulators issued three Notices of Proposed Rulemaking, or NPRs. These NPRs proposed 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, and also proposed 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. On July 2, 2013, the Federal Reserve approved a rule intended to finalize its implementation of the Basel III framework in the U.S. The final rule consolidates, with revisions, the three NPRs originally issued by the Federal Reserve in June 2012. State Street's transition period with respect to the final rules has not yet commenced. Under the final rule, State Street expects to manage to the lower of its tier 1 common ratio calculated under the Basel III standardized approach, referred to as the standardized approach, and under the Basel III advanced approach, referred to as the advanced approach. These calculations differ from those in conformity with the June 2012 NPRs. The following table reconciles State Street's tier 1 common ratio, calculated in conformity with currently applicable regulatory guidelines, to State Street's estimated tier 1 common ratio calculated in conformity with the U.S. Basel III final rule approve by the Federal Reserve on July 2, 2013, or final rule, as State Street currently understands the impact of those requirements.(1)
As of June 30, 2013 (Dollars in millions)
 
Currently Applicable Regulatory Requirements (2)
 
Basel III Final Rules Standardized Approach (Estimated)(3)
 
Basel III Final Rules Advanced Approach (Estimated)(3)
Tier 1 risk-based capital
 
$
13,708

 
$
13,007

 
$
13,007

Less:
 
 
 
 
 
 
Trust preferred securities
 
950

 
475

 
475

Preferred stock
 
490

 
490

 
490

Plus:
 
 
 
 
 
 
Other
 
—

 
54

 
54

Tier 1 common capital
 
12,268

A
12,096

 
12,096

 
 
 
 
 
 
 
Total risk-weighted assets
 
82,444

B
120,495

 
111,035

 
 
 
 
 
 
 
Tier 1 common ratio
 
14.9
%
A/B
10.0
%
 
10.9
%
 
 
 
 
 
 
 



(1) Estimated pro forma Basel III tier 1 common ratios are preliminary, reflect tier 1 common equity calculated under the July 2013 final rule as applicable on its January 1, 2014 effective date, and are based on State Street's present interpretations, expectations and understanding of the final rule. Refer to the “Capital” section of the news release with which this Addendum is included for important information about the July 2013 final rule, State Street's calculation of its tier 1 common ratio thereunder and factors that could influence State Street's calculation of its tier 1 common ratio. Unless otherwise specified, all capital ratios refer to State Street Corporation and not State Street Bank and Trust Company.
 
 
 
 
 
 
 
(2) 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.
 
 
 
 
 
 
 
(3) As of June 30, 2013, for purposes of the calculations in conformity with the final rule, capital and total risk-weighted assets under both the standardized approach and the advanced approach were calculated using State Street’s estimates, based on the provisions of the final rule expected to affect capital in 2014. The tier 1 common ratio was calculated by dividing (a) tier 1 common capital (as described in footnote (2)), but with tier 1 risk-based capital calculated in conformity with the final rule, by (b) total risk-weighted assets, calculated in accordance with the final rule.
 
 
 
 
 
 
 
• Under both the standardized and advanced approaches, tier 1 risk-based capital decreased by $701 million, as a result of applying the estimated effect of the final rule to tier 1 risk-based capital of $13.708 billion as of June 30, 2013.
• Under both the standardized and advanced approaches, tier 1 common capital used in the calculation of the tier 1 common ratio was $12.096 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 $13.007 billion less non-common elements of capital, composed of trust preferred securities of $475 million, preferred stock of $490 million, and other adjustments of $54 million as of June 30, 2013, resulting in tier 1 common capital of $12.096 billion. As of June 30, 2013, there was no qualifying minority interest in subsidiaries.
• Under the standardized approach, total risk-weighted assets used in the calculation of the tier 1 common ratio increased by $38.051 billion as a result of applying the provisions of the final rule to total risk-weighted assets of $82.444 billion as of June 30, 2013. Under the advanced approach, total risk-weighted assets used in the calculation of the tier 1 common ratio increased by $28.591 billion as a result of applying the provisions of the final rule to total risk-weighted assets of $82.444 billion as of June 30, 2013.




STATE STREET CORPORATION
Earnings Release Addendum
RECONCILIATION OF TIER 1 COMMON RATIO
In June 2012, U.S. banking regulators issued three NPRs. These NPRs proposed 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, and also proposed 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. On July 2, 2013, the Federal Reserve approved a rule intended to finalize its implementation of the Basel III framework in the U.S. The final rule consolidates, with revisions, the three NPRs originally issued by the Federal Reserve in June 2012. State Street's transition period with respect to the final rule has not yet commenced. State Street disclosed its estimated Basel III tier 1 common ratios as of March 31, 2013 and June 30, 2012 based on its understanding of the June 2012 NPRs, and those calculations differ from those in conformity with the July 2013 final rule. The following tables reconcile State Street's tier 1 common ratio, calculated in accordance with currently applicable regulatory guidelines, to State Street's estimated tier 1 common ratio calculated in conformity with the June 2012 U.S. Basel III NPRs, as State Street currently understands the impact of those proposed requirements.(1)
 
 
 
 
 
 
 
As of March 31, 2013 (Dollars in millions)
 
Currently Applicable Regulatory Requirements (2)
 
Basel III NPRs with Impact of SSFA (Estimated)(3)
 
Basel III NPRs with SSFA and Run-Off/Reinvestment (Estimated)(4)
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

C
12,168

 
12,168

 
 
 
 
 
 
 
Total risk-weighted assets
 
76,265

D
115,096

 
106,910

 
 
 
 
 
 
 
Tier 1 common ratio
 
16.1
%
C/D
10.6
%
 
11.4
%
 
 
 
 
 
 
 
As of June 30, 2012 (Dollars in millions)
 
Currently Applicable Regulatory Requirements(2)
 
Basel III NPRs with Impact of SSFA (Estimated)(5)
 
Basel III NPRs with SSFA and Run-Off/Reinvestment (Estimated)(6)
Tier 1 risk-based capital
 
$
13,976

 
$
13,435

 
$
12,885

Less:
 
 
 
 
 
 
Trust preferred securities
 
950

 
713

 
713

Preferred stock
 
500

 
500

 
500

Plus:
 
 
 
 
 
 
Other
 
—

 
58

 
58

Tier 1 common capital
 
12,526

E
12,280

 
11,730

 
 
 
 
 
 
 
Total risk-weighted assets
 
70,105

F
111,374

 
99,195

 
 
 
 
 
 
 
Tier 1 common ratio
 
17.9
%
E/F
11.0
%
 
11.8
%
 
 
 
 
 
 
 



(1) The estimated pro forma Basel III tier 1 common ratios presented in the table above as of March 31, 2013 and June 30, 2012 are estimates by State Street, calculated pursuant to the advanced approach in conformity with the June 2012 NPRs. Each of these calculations is based on State Street's present interpretations and understanding of the June 2012 NPRs. Refer to the “Capital” section of the news release with which this Addendum is included for important information about the June 2012 NPRs, State Street's calculation of its tier 1 common ratio thereunder and factors that could influence State Street's calculation of its tier 1 common ratio. Unless otherwise specified, all capital ratios refer to State Street Corporation and not State Street Bank and Trust Company.
 
 
 
 
 
 
 
(2) 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.
 
 
 
 
 
 
 
(3) As of March 31, 2013, for purposes of the calculations in conformity 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.
 
 
 
 
 
 
 
• 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.
 
 
 
 
 
 
 
(4) As of March 31, 2013, presents ratios calculated in conformity with the NPRs, as described in footnote (3), 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.
 
 
 
 
 
 
 
(5) As of June 30, 2012, for purposes of the calculations in conformity 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 (2)), 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.
 
 
 
 
 
 
 
• Tier 1 risk-based capital decreased by $541 million, as a result of applying the estimated effect of the NPRs to tier 1 risk-based capital of $13.976 billion as of June 30, 2012.
• Tier 1 common capital used in the calculation of the tier 1 common ratio was $12.280 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 $13.435 billion less non-common elements of capital, composed of trust preferred securities of $713 million, preferred stock of $500 million, and other adjustments of $58 million as of June 30, 2012, resulting in tier 1 common capital of $12.280 billion. As of June 30, 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 $41.269 billion as a result of applying the provisions of the NPRs, primarily the estimated impact of the SSFA, to total risk-weighted assets of $70.105 billion as of June 30, 2012.
 
 
 
 
 
 
 
(6) As of June 30, 2012, presents ratios calculated in conformity with the NPRs, as described in footnote (5), 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 July 2012 through December 2014, and the estimated effect, at that time, of the planned acquisition of GSAS, which was completed in the fourth quarter of 2012. The net impact of run-off and subsequent reinvestment and the GSAS acquisition is estimated to reduce total risk-weighted assets by $12.179 billion, from $111.374 billion to $99.195 billion.