SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): APRIL 10, 2003
INVESTORS FINANCIAL SERVICES CORP.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-26996 04-3279817
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(State or other jurisdiction (Commission file number) (I.R.S. Employer
of incorporation or organization) Identification No.)
200 CLARENDON STREET, BOSTON, MA 02116
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (617) 937-6700
NO CHANGE SINCE LAST REPORT
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(Former name or address, if changed since last report)
ITEM 9. REGULATION FD DISCLOSURE.
The undersigned Registrant furnishes the following information under Items 9 and
12.
A. PRESS RELEASE DATED APRIL 10, 2003
INVESTORS FINANCIAL SERVICES CORP. ANNOUNCES FIRST QUARTER EARNINGS
CONTACT: JOHN N. SPINNEY, JR.
(617) 937-3500
JOHN.SPINNEY@IBTCO.COM
BOSTON, MA, APRIL 10, 2003 - Investors Financial Services Corp.
(Nasdaq: IFIN) reported first quarter diluted operating earnings per share of
$0.29, an increase of 21% from $0.24 in the first quarter of 2002. Net operating
income for the first quarter was $19.3 million, up 20% from $16.1 million in the
first quarter of 2002. Prior year diluted earnings per share reflects the
two-for-one stock split which occurred on June 14, 2002.
Both diluted operating earnings per share and net operating income for
the first quarter of 2003 exclude the previously disclosed $13.9 million, or
$0.21 per share, one-time tax accrual that the Company recorded in accordance
with Accounting Principles Generally Accepted in the United States of America
("GAAP"). The one-time accrual resulted from a retroactive tax law change during
the first quarter by the Commonwealth of Massachusetts disallowing a dividends
received deduction taken by Investors Bank & Trust Company on dividends it
received since 1999 from a wholly-owned real estate investment trust. This press
release includes both an income statement based on GAAP and a pro forma income
statement excluding the one-time tax accrual, which management considers a more
useful depiction of the Company's results of operations. Including the tax
accrual, GAAP net income for the first quarter was $5.4 million and GAAP diluted
earnings per share was $0.08.
Kevin J. Sheehan, Chairman and Chief Executive Officer, commented,
"Investors Financial Services again delivered impressive operating results in a
challenging economic environment. Our diverse revenue stream and prudent cost
controls continued to drive our strong performance. We are confident that we
will be able to meet our diluted operating earnings per share target of $1.30
and our GAAP diluted earnings per share target of $1.09 for 2003."
Net operating revenue for the first quarter grew 7% to $113.0 million
from $105.7 million for the same period in 2002. Revenue from core services such
as global custody, multicurrency accounting and mutual fund administration rose
to $56.8 million for the first quarter, up 2% from $55.9 million from the same
period in the prior year. Revenue from value-added services including securities
lending, foreign exchange and cash management sweep services increased to $15.9
million for the quarter, up 19% from
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$13.4 million in the first quarter of 2002. Net interest income grew 10% to
$39.4 million for the first quarter of 2003 from $35.7 million for the same
period in 2002. Operating expenses were $84.4 million for the first quarter of
2003, up 3% from $82.1 million for the same period in 2002. Assets processed for
clients totaled approximately $784 billion at March 31, 2003 compared to $785
billion at December 31, 2002.
Today the Company also announced that its Board of Directors declared a
cash dividend of $0.015 per share on its common stock. The dividend is payable
May 14, 2003 to stockholders of record as of April 30, 2003. Investors Financial
will broadcast a conference call, via the Internet, today, April 10, 2003 at
9:00 a.m. EDT. The call will be accessible on Investors Financial's home page at
http://www.ibtco.com. The conference call will also be available via telephone
at (719) 457-2692, confirmation code 534670. Recorded replays of the conference
call will be available at www.ibtco.com or by dialing (719) 457-0820,
confirmation code 534670.
Investors Financial Services Corp. provides services for a variety of
financial asset managers such as mutual fund complexes, investment advisors,
banks, and insurance companies. Through our wholly-owned subsidiary, Investors
Bank & Trust Company, we provide core services including global custody,
multicurrency accounting, and mutual fund administration, and value added
services including securities lending, foreign exchange, and cash management.
Offices are located in the United States, Canada, Cayman Islands, and Ireland.
Visit Investors Financial on the web at HTTP://WWW.IBTCO.COM.
This news release contains forward-looking statements (statements which
are not historical facts). These statements, such as Mr. Sheehan's statements
regarding the Company's 2003 operating and GAAP earnings estimates, 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 performance of global
financial markets, changes in interest rates, and the Company's ability to
continue to manage its costs and sell its services to new and 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, 2002.
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INVESTORS FINANCIAL SERVICES CORP.
CONDENSED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS)
March 31, December 31,
ASSETS 2003 2002
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Securities held to maturity $ 3,683,457 $ 3,438,689
Securities available for sale 3,512,795 3,272,465
Loans, net of reserve 107,182 143,737
Non-marketable equity securities 50,000 50,000
Goodwill 79,969 79,969
Other non-earning assets 266,974 229,917
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TOTAL ASSETS $ 7,700,377 $ 7,214,777
==================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Interest-bearing deposits $ 2,230,704 $ 2,702,822
Non-interest bearing deposits 628,457 630,096
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Total deposits 2,859,161 3,332,918
Securities sold under repurchase agreements 2,988,916 2,301,974
Short-term and other borrowings 1,178,477 741,107
Due to brokers for open trades payable 83,366 286,843
Other liabilities 109,924 85,676
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TOTAL LIABILITIES 7,219,844 6,748,518
Minority interest/Trust preferred securities 23,310 23,303
Stockholders' equity 457,223 442,956
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,700,377 $ 7,214,777
==================== ====================
AVERAGE BALANCE SHEET DATA:
Interest earning assets $ 6,731,791 $ 6,378,522
Total assets 7,177,001 6,928,189
Total deposits 2,663,447 2,797,843
Common stockholders' equity 447,788 427,866
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INVESTORS FINANCIAL SERVICES CORP.
SELECTED FINANCIAL DATA (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
GAAP EARNINGS
Quarter Ended
March 31,
STATEMENT OF INCOME DATA: 2003 2002
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Net interest income $ 39,369 $ 35,737
Asset servicing and other fees 73,644 69,917
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Net operating revenue 113,013 105,654
Operating expenses 84,447 82,108
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Income before income taxes and minority interest 28,566 23,546
Provision for income taxes 22,773 7,094
Minority interest expense, net of income taxes 381 397
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Net Income $ 5,412 $ 16,055
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Diluted earnings per share $ 0.08 $ 0.24
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PRO FORMA OPERATING EARNINGS
Quarter Ended
March 31,
STATEMENT OF INCOME DATA: 2003 2002
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Net interest income $ 39,369 $ 35,737
Asset servicing and other fees 73,644 69,917
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Net operating revenue 113,013 105,654
Operating expenses 84,447 82,108
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Income before income taxes and minority interest 28,566 23,546
Provision for income taxes (1) 8,873 7,094
Minority interest expense, net of income taxes 381 397
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Net Income $ 19,312 $ 16,055
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Diluted operating earnings per share $ 0.29 $ 0.24
==================== ====================
(1) Provision for first quarter 2003 income taxes excludes the $13,900 tax
accrual recognized by the Company as a result of a retroactive tax law
change by the Commonwealth of Massachusetts disallowing a 95% dividends
received deduction on dividends that Investors Bank & Trust Company
received from its wholly-owned real estate investment trust. The effect of
this exclusion is a difference of $0.21 per share in pro forma diluted
operating earnings versus GAAP diluted earnings per share.
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B. FINANCIAL HIGHLIGHTS
Investors Financial Services Corp.
Financial Highlights
Quarter Ended
March 31, 2003
Table of Contents
Consolidated Statement of Income/Share Information 7
Condensed Consolidated Balance Sheet 8
Average Balance Sheet 9
Asset Servicing Fees 10
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INVESTORS FINANCIAL SERVICES CORP.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
FOR THE QUARTER ENDED
MARCH 31, 2003
(Dollars in thousands, except per share data)
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NET INTEREST INCOME
Interest income $ 60,349
Interest expense 20,980
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Net interest income 39,369
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NON-INTEREST INCOME
Asset servicing fees 72,874
Other operating income 770
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Total non-interest income 73,644
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Net operating revenue 113,013
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OPERATING EXPENSES
Compensation and benefits 49,771
Technology and telecommunications 9,291
Occupancy 7,325
Transaction processing services 6,808
Depreciation and amortization 6,079
Professional fees 1,679
Travel and sales promotion 985
Other operating expenses 2,509
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Total operating expenses 84,447
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Income Before Income Taxes and Minority Interest 28,566
Provision for income taxes 22,773
Minority interest expense, net of income taxes 381
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NET INCOME
$ 5,412
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EARNINGS PER SHARE (DILUTED) $ 0.08
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SHARE INFORMATION
FOR THE QUARTER ENDED (UNAUDITED)
MARCH 31, 2003
Common Stock Outstanding at March 31, 2003 64,992,847
Weighted Average Diluted Shares at March 31, 2003 66,319,248
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INVESTORS FINANCIAL SERVICES CORP.
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
MARCH 31, 2003
(Dollars in thousands)
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ASSETS
Securities held to maturity $ 3,683,457
Securities available for sale 3,512,795
Loans, net of reserve 107,182
Non-marketable equity securities 50,000
Goodwill, net 79,969
Other assets 266,974
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TOTAL ASSETS $ 7,700,377
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LIABILITIES
Interest-bearing deposits $ 2,230,704
Non-interest bearing deposits 628,457
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Total deposits 2,859,161
Securities sold under repurchase agreements 2,988,916
Short-term and other borrowings 1,178,477
Due to brokers for open trades payable 83,366
Other liabilities 109,924
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TOTAL LIABILITIES 7,219,844
Minority interest/trust preferred securities 23,310
Stockholders' Equity 457,223
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,700,377
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INVESTORS FINANCIAL SERVICES CORP.
AVERAGE BALANCE SHEET (UNAUDITED)
FOR THE QUARTER ENDED MARCH 31, 2003
(Dollars in thousands)
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AVERAGE BALANCE AVERAGE
INTEREST YIELD/COST
INTEREST-EARNING ASSETS
Federal funds sold and securities purchased under resale
agreements $ 4,911 $ 16 1.30%
Investment securities 6,611,391 59,485 3.60%
Loans 115,489 848 2.94%
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Total interest-earning assets 6,731,791 60,349 3.59%
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Allowance for loan losses (100)
Non-interest earning assets 445,310
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TOTAL ASSETS $ 7,177,001
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INTEREST-BEARING LIABILITIES
Deposits
Savings $ 2,193,981 $ 9,117 1.66%
Securities sold under repurchase agreements 3,092,673 7,337 0.95%
Short-term and other borrowings 855,274 4,526 2.12%
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Total interest-bearing liabilities 6,141,928 20,980 1.37%
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Non-interest bearing liabilities
Demand deposits 212,569
Savings 166,897
Non-interest bearing time deposits 90,000
Other liabilities 94,514
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Total liabilities 6,705,908
Trust preferred stock 23,305
Equity 447,788
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,177,001
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Net interest income $ 39,369
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Net interest margin 2.34%
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Average interest rate spread 2.22%
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Ratio of interest-earning assets to interest-bearing liabilities 109.60%
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INVESTORS FINANCIAL SERVICES CORP.
ASSET SERVICING FEES (UNAUDITED)
FOR THE QUARTER ENDED MARCH 31, 2003
(Dollars in thousands)
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ASSET SERVICING FEES BY SERVICE LINES:
Custody, accounting, and administration $ 56,761
Foreign exchange 6,733
Cash management 5,035
Securities lending 2,188
Investment advisory 1,943
Other service fees 214
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TOTAL $ 72,874
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INVESTORS FINANCIAL SERVICES CORP.
By: /S/ KEVIN J. SHEEHAN
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Kevin J. Sheehan
Chief Executive Officer and
Chairman of the Board
Dated: April 10, 2003
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