Exhibit 99.1
Investors Financial Services Corp. Achieves 20% Core Services Revenue Growth in the First Quarter of 2007; Integration Planning with State Street Underway
Contact: | John N. Spinney, Jr. |
| (617) 937-3500 |
| john.spinney@ibtco.com |
BOSTON, MA, April 17, 2007 - Investors Financial Services Corp. (NASDAQ: IFIN) reported diluted earnings per share of $0.60 for the first quarter of 2007, compared to $0.56 in the first quarter of 2006. Net income for the first quarter of 2007 was $40.5 million, compared to $37.4 million in the first quarter of 2006. In addition, during the first quarter Investors Financial signed a definitive agreement to be acquired by State Street Corporation (NYSE: STT) in a stock transaction valued at approximately $4.5 billion at the time of signing. In the transaction, Investors Financial Services Corporation shareholders will receive 0.906 shares of State Street common stock for each share of Investors Financial Services Corporation common stock.
Kevin J. Sheehan, Chairman and Chief Executive Officer, commented, “The transaction with State Street, which is subject to customary closing conditions including regulatory and stockholder approvals, is expected to be completed in the third quarter of 2007. We believe that merging our servicing capabilities with State Street’s resources and global reach will provide our clients with an investment servicing partner that is unmatched in the industry.”
Net operating revenue for the first quarter of 2007 grew 14% to $220.3 million from $192.8 million for the same period in 2006. Revenue from core services such as global custody, multicurrency accounting, fund administration and middle office outsourcing rose to $129.0 million for the first quarter of 2007, up 20% from $107.8 million for the same period in the prior year. Revenue from value-added services including foreign exchange, cash management, securities lending and investment advisory services was $40.6 million for the quarter, compared to $40.5 million in the first quarter of 2006. Net interest income of $49.2 million for the first quarter of 2007 represented a 14% increase from $43.3 million for the same period in 2006. Operating expenses were $159.4 million for the first quarter of 2007, up 17% from $135.7 million for the same period in 2006.
Assets processed for clients totaled approximately $2.28 trillion at March 31, 2007, an increase of 3% compared to $2.21 trillion at December 31, 2006 and an increase of 18% compared to $1.93 trillion at March 31, 2006.
Today, the Company also announced that its Board of Directors declared a quarterly cash dividend on its common stock of $0.025 per share. The dividend is payable May 15, 2007 to stockholders of record as of April 30, 2007.
Investors Financial Services Corp. provides services for a variety of financial asset managers including fund complexes, investment advisors, hedge funds, banks and insurance companies. The Company’s wholly-owned subsidiary, Investors Bank & Trust Company, provides core services including global custody, multicurrency accounting, fund administration and middle office outsourcing, as well as value-added services including foreign exchange, cash management, securities lending and investment advisory services. Offices are located in the United States, Canada,
Cayman Islands, Ireland, the United Kingdom and Luxembourg. Visit Investors Financial Services Corp. on the web at www.ibtco.com.
Forward-Looking Statements
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 statements regarding the closing of the transaction with State Street, 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 failure to receive regulatory approval or stockholder approval for the transaction with State Street. Additional factors that could also affect actual results are set forth under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.
Investors Financial Services Corp.
Consolidated Statements of Income (unaudited)
(Dollars in thousands, except share data)
| For the Three Months Ended |
| |||||
|
| March 31, |
| ||||
|
| 2007 |
| 2006 |
| ||
Fees and Other Revenue: |
|
|
|
|
| ||
Asset servicing fees: |
|
|
|
|
| ||
Core service fees |
| $ | 129,026 |
| $ | 107,759 |
|
Value-added service fees |
| 40,627 |
| 40,544 |
| ||
Total asset servicing fees |
| 169,653 |
| 148,303 |
| ||
Other operating income |
| 1,479 |
| 1,164 |
| ||
Total fees and other revenue |
| 171,132 |
| 149,467 |
| ||
|
|
|
|
|
| ||
Interest income |
| 157,985 |
| 134,437 |
| ||
Interest expense |
| 108,819 |
| 91,116 |
| ||
Net interest income |
| 49,166 |
| 43,321 |
| ||
|
|
|
|
|
| ||
Net operating revenue |
| 220,298 |
| 192,788 |
| ||
|
|
|
|
|
| ||
Operating Expenses: |
|
|
|
|
| ||
Compensation and benefits |
| 97,420 |
| 76,998 |
| ||
Technology and telecommunications |
| 18,535 |
| 17,338 |
| ||
Transaction processing services |
| 15,341 |
| 13,672 |
| ||
Occupancy |
| 10,018 |
| 7,551 |
| ||
Depreciation and amortization |
| 9,691 |
| 7,806 |
| ||
Professional fees |
| 2,273 |
| 3,461 |
| ||
Travel and sales promotion |
| 2,126 |
| 1,931 |
| ||
Insurance |
| 980 |
| 973 |
| ||
Other operating expenses |
| 3,010 |
| 5,954 |
| ||
Total operating expenses |
| 159,394 |
| 135,684 |
| ||
|
|
|
|
|
| ||
Income Before Income Taxes |
| 60,904 |
| 57,104 |
| ||
|
|
|
|
|
| ||
Provision for income taxes |
| 20,403 |
| 19,701 |
| ||
Net Income |
| $ | 40,501 |
| $ | 37,403 |
|
Basic Earnings Per Share |
| $ | 0.61 |
| $ | 0.57 |
|
Diluted Earnings Per Share |
| $ | 0.60 |
| $ | 0.56 |
|
Share Information (unaudited)
|
| For the Three Months Ended |
| ||
|
| March 31, |
| ||
|
| 2007 |
| 2006 |
|
|
|
|
|
|
|
Common stock outstanding |
| 66,765,087 |
| 65,531,272 |
|
Weighted-average basic shares |
| 66,068,993 |
| 65,313,068 |
|
Weighted-average diluted shares |
| 68,020,436 |
| 67,224,077 |
|
Investors Financial Services Corp.
Consolidated Balance Sheets (unaudited)
(Dollars in thousands, except share data)
|
| March 31, |
| December 31, |
| ||
|
| 2007 |
| 2006 |
| ||
|
|
|
|
|
| ||
Assets |
|
|
|
|
| ||
Cash and due from banks |
| $ | 467,332 |
| $ | 92,776 |
|
Interest-bearing deposits with other banks |
| 20,868 |
| 21,218 |
| ||
Other short-term investments |
| 1,134 |
| 1,971 |
| ||
Federal funds sold and securities purchased under resale agreements |
| 2,950,000 |
| 300,000 |
| ||
Securities held to maturity (including securities pledged of $4,169,418 and $4,096,013 at March 31, 2007 and December 31, 2006, respectively) (approximate fair value of $5,222,865 and $5,508,788 at March 31, 2007 and December 31, 2006, respectively) |
| 5,248,480 |
| 5,532,330 |
| ||
Securities available for sale (including securities pledged of $3,730,234 and $3,071,503 at March 31, 2007 and December 31, 2006, respectively) |
| 5,050,836 |
| 4,799,740 |
| ||
Nonmarketable equity securities |
| 38,962 |
| 40,054 |
| ||
Loans, less allowance for loan losses of $100 at March 31, 2007 and December 31, 2006 |
| 258,955 |
| 270,693 |
| ||
Accrued interest and fees receivable |
| 142,106 |
| 134,748 |
| ||
Equipment and leasehold improvements, less accumulated depreciation of $66,477 and $64,290 at March 31, 2007 and December 31, 2006, respectively |
| 131,768 |
| 113,287 |
| ||
Goodwill, net |
| 79,969 |
| 79,969 |
| ||
Other assets |
| 139,822 |
| 171,420 |
| ||
Total Assets |
| $ | 14,530,232 |
| $ | 11,558,206 |
|
|
|
|
|
|
| ||
Liabilities and Stockholders’ Equity |
|
|
|
|
| ||
Liabilities: |
|
|
|
|
| ||
Deposits: |
|
|
|
|
| ||
Demand |
| $ | 1,678,028 |
| $ | 695,821 |
|
Savings |
| 6,499,626 |
| 4,924,735 |
| ||
Time |
| 630,260 |
| 524,386 |
| ||
Total deposits |
| 8,807,914 |
| 6,144,942 |
| ||
|
|
|
|
|
| ||
Securities sold under repurchase agreements |
| 4,424,073 |
| 3,727,800 |
| ||
Short-term and other borrowings |
| 62,497 |
| 517,051 |
| ||
Due to brokers for open trades payable |
| — |
| 26,359 |
| ||
Junior subordinated deferrable interest debentures |
| 24,774 |
| 24,774 |
| ||
Accrued taxes and other expenses |
| 76,067 |
| 77,821 |
| ||
Other liabilities |
| 110,648 |
| 100,721 |
| ||
Total liabilities |
| 13,505,973 |
| 10,619,468 |
| ||
|
|
|
|
|
| ||
Commitments and contingencies |
| — |
| — |
| ||
|
|
|
|
|
| ||
Stockholders’ Equity: |
|
|
|
|
| ||
Preferred stock, par value $0.01 (shares authorized: 1,000,000; issued: none at March 31, 2007 and December 31, 2006) |
| — |
| — |
| ||
Common stock, par value $0.01 (shares authorized: 175,000,000; issued: 69,660,108 and 68,523,129 at March 31, 2007 and December 31, 2006, respectively) |
| 697 |
| 685 |
| ||
Surplus |
| 372,773 |
| 334,929 |
| ||
Deferred compensation |
| — |
| — |
| ||
Retained earnings |
| 759,284 |
| 720,433 |
| ||
Accumulated other comprehensive loss, net |
| (5,700 | ) | (14,514 | ) | ||
Treasury stock, at cost (2,895,021 shares at March 31, 2007 and December 31, 2006) |
| (102,795 | ) | (102,795 | ) | ||
Total stockholders’ equity |
| 1,024,259 |
| 938,738 |
| ||
Total Liabilities and Stockholders’ Equity |
| $ | 14,530,232 |
| $ | 11,558,206 |
|
Investors Financial Services Corp.
Average Balance Sheets (unaudited)
(Dollars in thousands)
|
| Three Months Ended March 31, 2007 |
| Three Months Ended March 31, 2006 |
| ||||||||||||
|
| Average |
|
|
| Average |
| Average |
|
|
| Average |
| ||||
|
| Balance |
| Interest |
| Yield/Cost |
| Balance |
| Interest |
| Yield/Cost |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Federal funds sold and securities purchased under resale agreements, interest-bearing deposits with other banks and other short-term investments |
| $ | 1,584,121 |
| $ | 20,762 |
| 5.24 | % | $ | 42,784 |
| $ | 478 |
| 4.47 | % |
Investment securities (1) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Mortgage-backed securities |
| 7,924,358 |
| 102,838 |
| 5.19 | % | 8,160,279 |
| 96,777 |
| 4.74 | % | ||||
Federal agency securities |
| 1,717,695 |
| 20,964 |
| 4.88 | % | 2,210,833 |
| 24,663 |
| 4.46 | % | ||||
State and political subdivisions |
| 438,942 |
| 4,600 |
| 4.19 | % | 505,096 |
| 5,503 |
| 4.36 | % | ||||
Other securities |
| 180,016 |
| 2,665 |
| 5.92 | % | 212,146 |
| 2,807 |
| 5.29 | % | ||||
Total investment securities |
| 10,261,011 |
| 131,067 |
| 5.11 | % | 11,088,354 |
| 129,750 |
| 4.68 | % | ||||
Loans |
| 324,997 |
| 6,156 |
| 7.58 | % | 316,996 |
| 4,209 |
| 5.31 | % | ||||
Total interest-earning assets |
| 12,170,129 |
| 157,985 |
| 5.19 | % | 11,448,134 |
| 134,437 |
| 4.70 | % | ||||
Allowance for loan losses |
| (100 | ) |
|
|
|
| (100 | ) |
|
|
|
| ||||
Noninterest-earning assets |
| 639,557 |
|
|
|
|
| 641,002 |
|
|
|
|
| ||||
Total assets |
| $ | 12,809,586 |
|
|
|
|
| $ | 12,089,036 |
|
|
|
|
| ||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Demand |
| $ | 136,494 |
| $ | 1,565 |
| 4.65 | % | $ | 95,778 |
| $ | 919 |
| 3.84 | % |
Savings |
| 5,821,103 |
| 57,035 |
| 3.97 | % | 4,078,497 |
| 31,922 |
| 3.13 | % | ||||
Time |
| 294,892 |
| 3,844 |
| 5.21 | % | 75,974 |
| 846 |
| 4.45 | % | ||||
Securities sold under repurchase agreements |
| 4,491,610 |
| 43,993 |
| 3.92 | % | 4,826,124 |
| 40,954 |
| 3.39 | % | ||||
Junior subordinated debentures |
| 24,774 |
| 605 |
| 9.77 | % | 24,774 |
| 605 |
| 9.77 | % | ||||
Other borrowings |
| 104,651 |
| 1,777 |
| 6.79 | % | 1,401,077 |
| 15,870 |
| 4.53 | % | ||||
Total interest-bearing liabilities |
| 10,873,524 |
| 108,819 |
| 4.00 | % | 10,502,224 |
| 91,116 |
| 3.47 | % | ||||
Noninterest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Demand deposits |
| 412,091 |
|
|
|
|
| 342,368 |
|
|
|
|
| ||||
Savings |
| 95,162 |
|
|
|
|
| 56,212 |
|
|
|
|
| ||||
Time deposits |
| 306,111 |
|
|
|
|
| 215,000 |
|
|
|
|
| ||||
Other liabilities |
| 143,616 |
|
|
|
|
| 174,591 |
|
|
|
|
| ||||
Total liabilities |
| 11,830,504 |
|
|
|
|
| 11,290,395 |
|
|
|
|
| ||||
Equity |
| 979,082 |
|
|
|
|
| 798,641 |
|
|
|
|
| ||||
Total liabilities and equity |
| $ | 12,809,586 |
|
|
|
|
| $ | 12,089,036 |
|
|
|
|
| ||
Net interest income |
|
|
| $ | 49,166 |
|
|
|
|
| $ | 43,321 |
|
|
| ||
Net interest margin (2) |
|
|
|
|
| 1.62 | % |
|
|
|
| 1.51 | % | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Average interest rate spread (3) |
|
|
|
|
| 1.19 | % |
|
|
|
| 1.23 | % | ||||
Ratio of interest-earning assets to interest-bearing liabilities |
|
|
|
|
| 111.92 | % |
|
|
|
| 109.01 | % |
(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 Three Months Ended |
| |||||
|
| March 31, |
| ||||
|
| 2007 |
| 2006 |
| ||
|
|
|
|
|
| ||
Core service fees: |
|
|
|
|
| ||
Custody, accounting and administration |
| $ | 129,026 |
| $ | 107,759 |
|
|
|
|
|
|
| ||
Value-added service fees: |
|
|
|
|
| ||
Foreign exchange |
| 17,594 |
| 20,334 |
| ||
Cash management |
| 14,343 |
| 11,312 |
| ||
Securities lending |
| 6,060 |
| 6,162 |
| ||
Investment advisory |
| 1,839 |
| 1,936 |
| ||
Other service fees |
| 791 |
| 800 |
| ||
Total value-added service fees |
| 40,627 |
| 40,544 |
| ||
|
|
|
|
|
| ||
Total asset servicing fees |
| $ | 169,653 |
| $ | 148,303 |
|
Change in net assets processed (unaudited) (dollars in billions):
| For the Three Months Ended |
| ||
|
| March 31, 2007 |
| |
Net assets processed, beginning of period |
| $ | 2,212 |
|
Change in net assets processed: |
|
|
| |
Sales to new clients |
| 1 |
| |
Further penetration of existing clients |
| 12 |
| |
Lost clients |
| — |
| |
Fund flows and market gain |
| 51 |
| |
Total change in net assets processed |
| 64 |
| |
Net assets processed, end of period |
| $ | 2,276 |
|