Exhibit 99.1
Investors Financial Services Corp. Announces Fourth Quarter Earnings and Extension of Servicing
Relationship with BGI
Contact: | John N. Spinney, Jr. |
| (617) 937-3500 |
| john.spinney@ibtco.com |
BOSTON, MA, January 25, 2006 - Investors Financial Services Corp. (Nasdaq: IFIN) reported diluted earnings per share of $0.60 for the fourth quarter of 2005, an increase of 15% from $0.52 in the fourth quarter of 2004. Net income for the fourth quarter of 2005 was $39.5 million, up 12% from $35.3 million in net income for the fourth quarter of 2004. For the year ended December 31, 2005, the Company reported diluted earnings per share of $2.37, an increase of 13% from $2.09 in diluted earnings per share in 2004. Net income for the year ended December 31, 2005 was $159.8 million, an increase of 13% from $142.0 million in 2004.
Kevin J. Sheehan, Chairman and Chief Executive Officer, commented, “Investors Financial Services Corp. completed 2005 with impressive fourth quarter results. Continued strong growth in our core and ancillary service fees again drove the Company’s performance. We remain confident in our ability to meet our diluted earnings per share goals for 2006. In addition, we have renewed our U.S. asset administration outsourcing agreement with Barclays Global Investors, N.A. (“BGI”).This renewal extends an important piece of our decade-long relationship with BGI and highlights our ability to service one of the largest and most sophisticated investment management firms in the world. Including BGI and Eaton Vance Corp., we have renewed long-term contracts with seven of our top ten clients over the past eighteen months, representing a significant percentage of our revenue and assets processed.”
Net operating revenue for the fourth quarter of 2005 grew 20% to $188.2 million from $157.3 million for the same period in 2004. Revenue from core services such as middle office outsourcing, global custody, multicurrency accounting and mutual fund administration rose to $101.4 million for the fourth quarter of 2005, up 22% from $82.8 million for the same period in the prior year. Revenue from ancillary services including foreign exchange, securities lending, cash management, and investment advisory services increased to $41.1 million for the quarter, up 64% from $25.1 million in the fourth quarter of 2004. Net interest income of $42.7 million for the fourth quarter of 2005 declined 13% from $48.9 million for the same period in 2004. Operating expenses were $126.0 million for the fourth quarter of 2005, up 22% from $103.1 million for the same period in 2004.
Results for the fourth quarter include securities gains of $1.3 million, or $0.01 per share, as a result of the Company continuing its strategy of replacing lower after-tax yielding municipal securities with higher after-tax yielding municipal securities.
Net operating revenue for the year ended December 31, 2005 grew 14% to $696.0 million from $613.2 million for 2004. Revenue from core services such as middle office outsourcing, global custody, multicurrency accounting and
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mutual fund administration rose to $375.6 million for the year ended December 31, 2005, up 20% from $314.3 million in the prior year. Revenue from ancillary services including foreign exchange, securities lending, cash management, and investment advisory services increased 23% to $133.5 million for the year ended December 31, 2005 from $108.9 million in 2004. Net interest income declined 9% to $170.4 million in 2005 from $187.7 million in 2004. Operating expenses were $460.1 million for the year ended December 31, 2005, up 15% from $398.4 million in 2004.
Assets processed for clients totaled $1.8 trillion at December 31, 2005, up 29% from $1.4 trillion at December 31, 2004.
Today, the Company also announced that its Board of Directors declared an increase in the quarterly cash dividend on its common stock from $0.02 per share to $0.0225 per share. The dividend is payable February 15, 2006 to stockholders of record as of January 31, 2006.
Investors Financial Services Corp. will broadcast a conference call, via the Internet, today, January 25, 2006 at 5:00 p.m. ET. The call will be accessible on the Company’s home page at www.ibtco.com. The conference call will also be available via telephone at (719) 457-2679, confirmation code 8744659. Recorded replays of the conference call will be available on the website and by dialing (719) 457-0820, confirmation code 8744659.
Investors Financial Services Corp. provides services for a variety of financial asset managers including mutual fund complexes, investment advisors, banks, and insurance companies. Through our wholly-owned subsidiary, Investors Bank & Trust Company, we provide core services including middle office outsourcing, global custody, multicurrency accounting, and mutual fund administration, as well as ancillary services including foreign exchange, securities lending, cash management, and investment advisory services. Offices are located in the United States, Canada, Cayman Islands, Ireland, and the United Kingdom. Visit Investors Financial Services Corp. on the web at www.ibtco.com.
This news release contains forward-looking statements (statements that are not historical facts) made under the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. These statements, including the Company’s comments regarding expected diluted earnings per share for 2006, are subject to risks and uncertainties and are based upon certain assumptions and estimates that might not be realized. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include the timing and amount of interest rate movements by the Federal Reserve, the shape of the yield curve, reinvestment spreads, the performance of global financial markets, client fund flows, and the Company’s ability to execute its stock repurchase plan, manage its costs, sell its services to new and existing customers, and renew agreements with existing customers. Additional factors that could also affect actual results are set forth under the heading “Certain Factors That May Affect Future Results” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 and its Quarterly Report on Form 10-Q for the quarter ended September 30, 2005.
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Investors Financial Services Corp.
Condensed Consolidated Statements of Income (unaudited)
(Dollars in thousands, except share data)
|
| For the Year Ended |
| For the Three Months Ended |
| ||||||||
|
| 2005 |
| 2004 |
| 2005 |
| 2004 |
| ||||
Fees and Other Revenue: |
|
|
|
|
|
|
|
|
| ||||
Asset servicing fees: |
|
|
|
|
|
|
|
|
| ||||
Core service fees |
| $ | 375,596 |
| $ | 314,272 |
| $ | 101,446 |
| $ | 82,787 |
|
Ancillary service fees |
| 133,463 |
| 108,928 |
| 41,093 |
| 25,079 |
| ||||
Total asset servicing fees |
| 509,059 |
| 423,200 |
| 142,539 |
| 107,866 |
| ||||
Gain on sale of investments |
| 12,397 |
| 234 |
| 1,274 |
| — |
| ||||
Other operating income |
| 4,081 |
| 2,057 |
| 1,657 |
| 542 |
| ||||
Total fees and other revenue |
| 525,537 |
| 425,491 |
| 145,470 |
| 108,408 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Interest income |
| 447,705 |
| 313,149 |
| 127,035 |
| 89,899 |
| ||||
Interest expense |
| 277,280 |
| 125,469 |
| 84,310 |
| 40,982 |
| ||||
Net interest income |
| 170,425 |
| 187,680 |
| 42,725 |
| 48,917 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net operating revenue |
| 695,962 |
| 613,171 |
| 188,195 |
| 157,325 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Operating Expenses: |
|
|
|
|
|
|
|
|
| ||||
Compensation and benefits |
| 250,459 |
| 205,728 |
| 64,680 |
| 51,676 |
| ||||
Technology and telecommunications |
| 54,732 |
| 49,816 |
| 14,831 |
| 14,924 |
| ||||
Transaction processing services |
| 49,873 |
| 42,159 |
| 14,621 |
| 11,393 |
| ||||
Depreciation and amortization |
| 31,578 |
| 32,124 |
| 7,854 |
| 7,736 |
| ||||
Occupancy |
| 26,490 |
| 29,032 |
| 7,081 |
| 7,419 |
| ||||
Professional fees |
| 13,380 |
| 15,346 |
| 4,127 |
| 3,485 |
| ||||
Travel and sales promotion |
| 6,825 |
| 5,470 |
| 2,002 |
| 1,530 |
| ||||
Loss and loss adjustment expenses |
| 5,837 |
| 924 |
| 5,200 |
| 259 |
| ||||
Insurance |
| 4,219 |
| 4,625 |
| 935 |
| 1,126 |
| ||||
Other operating expenses |
| 16,716 |
| 13,159 |
| 4,619 |
| 3,510 |
| ||||
Total operating expenses |
| 460,109 |
| 398,383 |
| 125,950 |
| 103,058 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income Before Income Taxes |
| 235,853 |
| 214,788 |
| 62,245 |
| 54,267 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Provision for income taxes |
| 76,035 |
| 72,826 |
| 22,734 |
| 18,988 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net Income |
| $ | 159,818 |
| $ | 141,962 |
| $ | 39,511 |
| $ | 35,279 |
|
|
|
|
|
|
|
|
|
|
| ||||
Basic Earnings Per Share |
| $ | 2.42 |
| $ | 2.15 |
| $ | 0.61 |
| $ | 0.54 |
|
|
|
|
|
|
|
|
|
|
| ||||
Diluted Earnings Per Share |
| $ | 2.37 |
| $ | 2.09 |
| $ | 0.60 |
| $ | 0.52 |
|
Share Information (unaudited)
|
| For the Year Ended |
| For the Three Months Ended |
| ||||
|
| 2005 |
| 2004 |
| 2005 |
| 2004 |
|
|
|
|
|
|
|
|
|
|
|
Common stock outstanding |
| 65,052,637 |
| 66,595,349 |
| 65,052,637 |
| 66,595,349 |
|
Weighted-average basic shares |
| 66,139,323 |
| 66,179,286 |
| 64,978,937 |
| 66,461,316 |
|
Weighted-average diluted shares |
| 67,473,804 |
| 67,916,217 |
| 66,003,565 |
| 68,106,442 |
|
Investors Financial Services Corp.
Condensed Consolidated Balance Sheets (unaudited)
(Dollars in thousands, except share data)
|
| December 31, |
| December 31, |
| ||
|
|
|
|
|
| ||
Assets |
|
|
|
|
| ||
Cash and due from banks |
| $ | 79,637 |
| $ | 49,059 |
|
Securities held to maturity (including securities pledged of $4,529,421 and $4,021,625 at December 31, 2005 and 2004, respectively) (approximate fair value of $6,725,729 and $5,937,462 at December 31, 2005 and 2004, respectively) |
| 6,761,930 |
| 5,942,717 |
| ||
Securities available for sale (including securities pledged of $2,997,958 and $2,312,410 at December 31, 2005 and 2004, respectively) |
| 4,369,720 |
| 4,565,505 |
| ||
Nonmarketable equity securities |
| 50,000 |
| 50,000 |
| ||
Loans, less allowance for loan losses of $100 at December 31, 2005 and 2004 |
| 402,370 |
| 134,530 |
| ||
Accrued interest and fees receivable |
| 119,583 |
| 89,292 |
| ||
Equipment and leasehold improvements, less accumulated depreciation of $59,156 and $61,017 at December 31, 2005 and 2004, respectively |
| 69,401 |
| 67,883 |
| ||
Goodwill, net |
| 79,969 |
| 79,969 |
| ||
Other assets |
| 163,783 |
| 188,870 |
| ||
|
|
|
|
|
| ||
Total Assets |
| $ | 12,096,393 |
| $ | 11,167,825 |
|
|
|
|
|
|
| ||
Liabilities and Stockholders’ Equity |
|
|
|
|
| ||
Liabilities: |
|
|
|
|
| ||
Deposits: |
|
|
|
|
| ||
Demand |
| $ | 537,558 |
| $ | 690,308 |
|
Savings |
| 4,224,908 |
| 4,448,405 |
| ||
Time |
| 230,124 |
| 257,669 |
| ||
Total deposits |
| 4,992,590 |
| 5,396,382 |
| ||
|
|
|
|
|
| ||
Securities sold under repurchase agreements |
| 4,797,868 |
| 4,255,497 |
| ||
Short-term and other borrowings |
| 1,356,649 |
| 594,681 |
| ||
Due to brokers for open trades payable |
| 21,293 |
| 5,475 |
| ||
Junior subordinated deferrable interest debentures |
| 24,774 |
| 24,774 |
| ||
Accrued taxes and other expenses |
| 45,077 |
| 54,967 |
| ||
Other liabilities |
| 85,284 |
| 123,787 |
| ||
Total liabilities |
| 11,323,535 |
| 10,455,563 |
| ||
|
|
|
|
|
| ||
Commitments and contingencies |
| — |
| — |
| ||
|
|
|
|
|
| ||
Stockholders’ Equity: |
|
|
|
|
| ||
Preferred stock, par value $0.01 (shares authorized: 1,000,000; issued: none in 2005 and 2004) |
| — |
| — |
| ||
Common stock, par value $0.01 (shares authorized: 175,000,000; issued 65,052,637 and 66,595,349 in 2005 and 2004, respectively) |
| 672 |
| 667 |
| ||
Surplus |
| 286,265 |
| 272,536 |
| ||
Deferred compensation |
| (311 | ) | (572 | ) | ||
Retained earnings |
| 572,549 |
| 418,034 |
| ||
Accumulated other comprehensive (loss) income, net |
| (13,369 | ) | 23,888 |
| ||
Treasury stock, at cost (2,124,669 and 73,235 shares in 2005 and 2004, respectively) |
| (72,948 | ) | (2,291 | ) | ||
Total stockholders’ equity |
| 772,858 |
| 712,262 |
| ||
|
|
|
|
|
| ||
Total Liabilities and Stockholders’ Equity |
| $ | 12,096,393 |
| $ | 11,167,825 |
|
Investors Financial Services Corp.
Average Balance Sheets (unaudited)
(Dollars in thousands)
|
| Three Months Ended December 31, 2005 |
| Three Months Ended December 31, 2004 |
| ||||||||||||
|
| Average |
| Interest |
| Average |
| Average |
| Interest |
| Average |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Federal funds sold and securities purchased under resale agreements |
| $ | 92,739 |
| $ | 932 |
| 4.02 | % | $ | 51,326 |
| $ | 247 |
| 1.92 | % |
Investment securities (1) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Mortgage-backed securities |
| 8,143,971 |
| 89,632 |
| 4.40 | % | 7,209,762 |
| 63,192 |
| 3.51 | % | ||||
Federal agency securities |
| 2,341,908 |
| 25,608 |
| 4.37 | % | 2,199,148 |
| 16,508 |
| 3.00 | % | ||||
State and political subdivisons |
| 455,081 |
| 5,111 |
| 4.49 | % | 508,999 |
| 5,820 |
| 4.57 | % | ||||
Other securities |
| 212,222 |
| 2,537 |
| 4.78 | % | 300,633 |
| 2,844 |
| 3.78 | % | ||||
Total investment securities |
| 11,153,182 |
| 122,888 |
| 4.41 | % | 10,218,542 |
| 88,364 |
| 3.46 | % | ||||
Loans |
| 305,279 |
| 3,215 |
| 4.21 | % | 158,160 |
| 1,288 |
| 3.26 | % | ||||
Total interest-earning assets |
| 11,551,200 |
| 127,035 |
| 4.40 | % | 10,428,028 |
| 89,899 |
| 3.45 | % | ||||
Allowance for loan losses |
| (100 | ) |
|
|
|
| (100 | ) |
|
|
|
| ||||
Noninterest-earning assets |
| 787,923 |
|
|
|
|
| 563,545 |
|
|
|
|
| ||||
Total assets |
| $ | 12,339,023 |
|
|
|
|
| $ | 10,991,473 |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Demand |
| $ | 84,472 |
| $ | 763 |
| 3.61 | % | $ | — |
| $ | — |
| — |
|
Savings |
| 3,875,862 |
| 27,224 |
| 2.81 | % | 3,921,057 |
| 14,622 |
| 1.49 | % | ||||
Time |
| 53,498 |
| 547 |
| 4.09 | % | 112,741 |
| 557 |
| 1.98 | % | ||||
Securities sold under repurchase agreements |
| 5,043,733 |
| 39,585 |
| 3.14 | % | 4,776,215 |
| 20,990 |
| 1.76 | % | ||||
Junior subordinated debentures |
| 24,774 |
| 605 |
| 9.77 | % | 24,774 |
| 605 |
| 9.77 | % | ||||
Other borrowings |
| 1,523,913 |
| 15,586 |
| 4.09 | % | 796,934 |
| 4,208 |
| 2.11 | % | ||||
Total interest-bearing liabilities |
| 10,606,252 |
| 84,310 |
| 3.18 | % | 9,631,721 |
| 40,982 |
| 1.70 | % | ||||
Noninterest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Demand deposits |
| 357,210 |
|
|
|
|
| 247,971 |
|
|
|
|
| ||||
Savings |
| 67,249 |
|
|
|
|
| 93,825 |
|
|
|
|
| ||||
Time deposits |
| 185,924 |
|
|
|
|
| 143,370 |
|
|
|
|
| ||||
Other liabilities |
| 363,584 |
|
|
|
|
| 184,858 |
|
|
|
|
| ||||
Total liabilities |
| 11,580,219 |
|
|
|
|
| 10,301,745 |
|
|
|
|
| ||||
Equity |
| 758,804 |
|
|
|
|
| 689,728 |
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total liabilities and equity |
| $ | 12,339,023 |
|
|
|
|
| $ | 10,991,473 |
|
|
|
|
| ||
Net interest income |
|
|
| $ | 42,725 |
|
|
|
|
| $ | 48,917 |
|
|
| ||
Net interest margin (2) |
|
|
|
|
| 1.48 | % |
|
|
|
| 1.88 | % | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Average interest rate spread (3) |
|
|
|
|
| 1.22 | % |
|
|
|
| 1.75 | % | ||||
Ratio of interest-earning assets to interest-bearing liabilities |
|
|
|
|
| 108.91 | % |
|
|
|
| 108.27 | % |
(1) Average yield/cost on available for sale securities is based on amortized cost.
(2) Annualized net interest income divided by total interest-earning assets.
(3) Yield on interest-earning assets less rate paid on interest-bearing liabilities.
Investors Financial Services Corp.
Asset servicing fees by service lines (unaudited) (dollars in thousands)
|
| For the Year Ended |
| For the Three Months Ended |
| ||||||||
|
| 2005 |
| 2004 |
| 2005 |
| 2004 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Core service fees: |
|
|
|
|
|
|
|
|
| ||||
Custody, accounting and administration |
| $ | 375,596 |
| $ | 314,272 |
| $ | 101,446 |
| $ | 82,787 |
|
|
|
|
|
|
|
|
|
|
| ||||
Ancillary service fees: |
|
|
|
|
|
|
|
|
| ||||
Foreign exchange |
| 62,107 |
| 54,466 |
| 21,057 |
| 12,132 |
| ||||
Cash management |
| 37,592 |
| 26,396 |
| 11,636 |
| 6,809 |
| ||||
Securities lending |
| 22,536 |
| 10,385 |
| 5,374 |
| 2,667 |
| ||||
Investment advisory |
| 8,442 |
| 15,020 |
| 2,253 |
| 2,674 |
| ||||
Other service fees |
| 2,786 |
| 2,661 |
| 773 |
| 797 |
| ||||
Total ancillary service fees |
| 133,463 |
| 108,928 |
| 41,093 |
| 25,079 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Total asset servicing fees |
| $ | 509,059 |
| $ | 423,200 |
| $ | 142,539 |
| $ | 107,866 |
|
Change in net assets processed (unaudited) (dollars in billions):
|
| For the Year Ended |
| For the Three Months Ended |
| ||
|
|
|
|
|
| ||
Net assets processed, beginning of period |
| $ | 1,430 |
| $ | 1,734 |
|
Change in net assets processed: |
|
|
|
|
| ||
Sales to new clients |
| 159 |
| — |
| ||
Further penetration of existing clients |
| 42 |
| 4 |
| ||
Lost clients |
| (11 | ) | — |
| ||
Fund flows and market gain |
| 173 |
| 55 |
| ||
Total change in net assets processed |
| 363 |
| 59 |
| ||
Net assets processed, end of period |
| $ | 1,793 |
| $ | 1,793 |
|