Investors Financial Services Corp. Announces Third Quarter Earnings Up 54%.Business Editors BOSTON--(BUSINESS WIRE)--Oct. 15, 2003 Investors Financial Services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. Corp. (Nasdaq: IFIN IFIN Integrated Farming Information Network ) reported third quarter diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of $0.40, an increase of 54% from $0.26 in the third quarter of 2002. Net income for the third quarter was $26.4 million, up 53% from $17.3 million in the third quarter of 2002. For the nine months ended September September: see month. 30, 2003, the Company reported diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before per share of $1.01, an increase of 33% from $0.76 for the same period in 2002. Net operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the nine months ended September 30, 2003 was $67.0 million, an increase of 32% from $50.6 million for the same period of 2002. Prior year diluted earnings per share reflect the two-for-one stock split which occurred on June June: see month. 14, 2002. Diluted operating earnings per share and net operating income for the first nine months of 2003 exclude a $7.2 million charge, net of federal income tax benefit, that resulted from a retroactive Having reference to things that happened in the past, prior to the occurrence of the act in question. A retroactive or retrospective law is one that takes away or impairs vested rights acquired under existing laws, creates new obligations, imposes new duties, or attaches a change in Massachusetts Massachusetts (măsəch  `sĭts), most populous of the New England states of the NE United States. tax law enacted in the first quarter of 2003 and the
Company's subsequent settlement of the resulting tax assessment
with the Massachusetts Department of Revenue. The change in tax law
disallowed a dividends received deduction deduction, in logic, form of inference such that the conclusion must be true if the premises are true. For example, if we know that all men have two legs and that John is a man, it is then logical to deduce that John has two legs. taken by Investors Bank &
Trust Company on dividends it had received since 1999 from a
wholly-owned real estate investment trust. In the second quarter of
2003, the Company settled this disputed tax issue, agreeing to pay 50%
of the liability, resulting in the $7.2 million charge, net of federal
income tax benefit.
This press release includes both an income statement based on GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). and a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma operating income statement that excludes the $7.2 million charge described above. Management believes that operating earnings per share and net operating income, which exclude the charge, present a more useful depiction of the Company's actual results of operations because they exclude the effect of a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. change in tax law that is unrelated to the Company's ongoing operations. Including the $7.2 million charge, the Company recorded GAAP net income for the nine months ended September 30, 2003 of $59.8 million and GAAP diluted earnings per share of $0.90. Kevin KEVIN Keepers of the Eternal Vigilance of the Islamic Nation (fictional, from White Teeth by Zadie Smith) J. Sheehan People whose surname is or was Sheehan include:
Net operating revenue operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. for the third quarter grew 9% to $119.3 million from $109.7 million for the same period in 2002. Revenue from core services The introduction to this article provides insufficient context for those unfamiliar with the subject matter. Please help [ improve the introduction] to meet Wikipedia's layout standards. You can discuss the issue on the talk page. such as global custody The care, possession, and control of a thing or person. The retention, inspection, guarding, maintenance, or security of a thing within the immediate care and control of the person to whom it is committed. The detention of a person by lawful authority or process. , multicurrency accounting and mutual fund administration rose to $65.3 million for the third quarter, up 13% from $57.7 million from the same period in the prior year. Revenue from value-added services A value-added service (VAS) is a telecommunications industry term for non-core services or, in short, all services beyond standard voice calls and fax transmissions. including securities lending Securities Lending When a brokerage lends securities owned by its clients to short sellers. Notes: This allows brokers to create additional revenue (commissions) on the short sale transaction. , foreign exchange, cash management, and investment advisory services advisory services advisory services provided to the public, in their capacity as owners and managers of animals, are an important part of veterinary science. They may be provided by government bureaux, by commercial companies who deal in pharmaceuticals or animals or animal increased to $18.3 million for the quarter, up 12% from $16.3 million in the third quarter of 2002. Net interest income was flat at $35.2 million for the third quarter of 2003 compared to the $35.2 million recorded for the same period in 2002. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. were $80.8 million for the third quarter of 2003, down 5% from $85.1 million for the same period in 2002. Assets processed for clients totaled approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $956 billion at September 30, 2003, up 7% compared to $897 billion at June 30, 2003 and up 29% compared to $742 billion at September 30, 2002. Today the Company also announced that its Board of Directors declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. a cash dividend of $0.015 per share on its common stock. The dividend is payable November November: see month. 14, 2003 to stockholders of record as of October October: see month. 31, 2003. Investors Financial will broadcast a conference call, via the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the , today, October 15, 2003 at 9:00 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York 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) 457-2600, confirmation code 531873. Recorded replays of the conference call will be available at www.ibtco.com or by dialing (719) 457-0820, confirmation code 531873. Investors Financial Services Corp. provides services for a variety of financial asset managers including mutual fund complexes, investment advisors Investment Advisor 1. A person making investment recommendations in return for a flat fee or percentage of assets managed, known as a commission. 2. For mutual fund companies, it is the individual who has the day-to-day responsibility of investing and monitoring the cash and , 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, as well as value-added services including securities lending, foreign exchange, and cash management. Offices are located in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , Canada, Cayman Islands Cayman Islands (kā`mən), British dependency (2005 est. pop. 44,300), 100 sq mi (259 sq km), comprising three islands in the West Indies. , and Ireland Ireland, Irish Eire (âr`ə) [to it are related the poetic Erin and perhaps the Latin Hibernia], island, 32,598 sq mi (84,429 sq km), second largest of the British Isles. . Visit Investors Financial on the web at http://www.ibtco.com. This news release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. (statements that are not historical facts). These statements, such as Mr. Sheehan's statements regarding the Company's conversion of the Barclays Global Investors Canada Limited ("BGICL BGICL Barclays Global Investors Canada Limited (Toronto) ") assets to our systems, are based upon certain assumptions and estimates that might not be realized. Important factors that could cause the conversion to be delayed include the completion of systems development initiatives by both the Company and BGICL. 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 Form 10-Q Form 10-Q See 10-Q. for the quarter ended June 30, 2003 and the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December December: see month. 31, 2002.
Investors Financial Services Corp.
Condensed Consolidated Statements of Income (unaudited)
(Dollars in thousands, except share data)
For the Nine Months For the Three Months
Ended September 30, Ended September 30,
-------------------- -------------------
2003 2002 2003 2002
---------- --------- --------- ---------
Net Interest Income
Interest income $179,904 $184,965 $58,350 $63,781
Interest expense 68,277 80,834 23,088 28,546
---------- --------- --------- ---------
Net interest income 111,627 104,131 35,262 35,235
---------- --------- --------- ---------
Noninterest Income
Asset servicing fees 239,012 218,103 83,645 73,982
Other operating income 1,864 1,645 436 515
---------- --------- --------- ---------
Total noninterest income 240,876 219,748 84,081 74,497
---------- --------- --------- ---------
Net operating revenue 352,503 323,879 119,343 109,732
---------- --------- --------- ---------
Operating Expenses
Compensation and benefits 143,309 146,819 42,574 47,951
Technology and
telecommunications 29,020 30,070 10,170 10,004
Transaction processing
services 23,624 26,078 7,285 8,764
Occupancy 21,820 18,247 7,290 6,841
Depreciation and amortization 20,233 11,179 7,548 4,540
Professional fees 5,234 4,968 1,493 1,752
Travel and sales promotion 3,315 4,217 1,247 1,463
Other operating expenses 8,401 9,956 3,191 3,747
---------- --------- --------- ---------
Total operating expenses 254,956 251,534 80,798 85,062
---------- --------- --------- ---------
Income before income taxes 97,547 72,345 38,545 24,670
Provision for income taxes 37,711 21,704 12,141 7,401
---------- --------- --------- ---------
Net Income $59,836 $50,641 $26,404 $17,269
========== ========= ========= =========
Earnings per share (basic) $0.92 $0.79 $0.41 $0.27
========== ========= ========= =========
Earnings per share (diluted) $0.90 $0.76 $0.40 $0.26
========== ========= ========= =========
Share Information (unaudited)
For the Nine For the Three
Months Ended Months Ended
September 30, September 30,
----------------------- -----------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Common Stock
Outstanding 65,204,690 64,583,399 65,204,690 64,583,399
Weighted Average Basic
Shares 65,029,004 64,356,467 65,169,758 64,547,952
Weighted Average
Diluted Shares 66,398,123 66,422,099 66,556,106 66,276,997
Investors Financial Services Corp.
Condensed Consolidated Balance Sheets (unaudited)
September 30, 2003 and December 31, 2002
(Dollars in thousands, except share data)
Sept. 30, Dec. 31,
2003 2002
----------- -----------
Assets
Cash and due from banks $41,494 $14,568
Securities held to maturity (approximate fair
value of $4,000,873 and $3,460,754
at September 30, 2003 and December 31, 2002,
respectively) 3,995,519 3,438,689
Securities available for sale 3,964,129 3,272,465
Nonmarketable equity securities 50,000 50,000
Loans, less allowance for loan losses of $100
at September 30, 2003 and December 31, 2002 166,788 143,737
Accrued interest and fees receivable 68,567 67,261
Equipment and leasehold improvements, less
accumulated depreciation of $40,931 and
$25,402 at September 30, 2003 and December
31, 2002, respectively 78,125 74,869
Goodwill, net 79,969 79,969
Other assets 110,990 73,916
----------- -----------
Total Assets $8,555,581 $7,215,474
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Demand $352,702 $384,461
Savings 3,507,061 2,858,457
Time 100,000 90,000
----------- -----------
Total deposits 3,959,763 3,332,918
Securities sold under repurchase agreements 3,348,458 2,301,974
Short-term and other borrowings 615,732 741,107
Due to brokers for open trades payable - 286,843
Company-obligated, mandatorily redeemable,
preferred securities of subsidiary trust
holding solely junior subordinated deferrable
interest debentures of the Company 24,000 -
Other liabilities 99,447 85,676
----------- -----------
Total liabilities 8,047,400 6,748,518
----------- -----------
Commitments and contingencies - -
Company-obligated, mandatorily redeemable,
preferred securities of subsidiary trust
holding solely junior subordinated deferrable
interest debentures of the Company - 24,000
----------- -----------
Stockholders' Equity:
Preferred stock, par value $0.01 (shares
authorized: 1,000,000; issued and
outstanding: none at September 30, 2003 and
December 31, 2002) - -
Common stock, par value $0.01 (shares
authorized: 100,000,000 at September 30, 2003
and December 31, 2002; issued and
outstanding: 65,204,690 at September 30,
2003 and 64,775,042 at December 31, 2002) 652 648
Surplus 238,099 233,337
Deferred compensation (1,211) (1,599)
Retained earnings 255,193 198,282
Accumulated other comprehensive income, net 15,448 12,288
Treasury stock, par value $0.01 (10,814 shares
at September 30, 2003 and December 31, 2002) - -
----------- -----------
Total stockholders' equity 508,181 442,956
----------- -----------
Total Liabilities and Stockholders' Equity $8,555,581 $7,215,474
=========== ===========
Investors Financial Services Corp.
Average Balance Sheet (unaudited)
For the Quarters Ended September 30, 2003 and 2002
(Dollars in thousands)
Three Months Ended Three Months Ended
September 30, 2003 September 30, 2002
---------------------------- ----------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
----------- -------- ------- ----------- -------- -------
Interest-earning assets:
Federal funds sold and
securities purchased
under resale
agreements $32,337 $77 0.95% $112,166 $473 1.69%
Investment
securities(1) 7,640,626 57,401 3.01% 5,770,590 62,378 4.32%
Loans 125,244 872 2.78% 116,912 930 3.18%
----------- -------- ----------- --------
Total
interest-
earning
assets 7,798,207 58,350 2.99% 5,999,668 63,781 4.25%
----------- -------- ----------- --------
Allowance
for loan
losses (100) (100)
Noninterest-
earning
assets 596,595 378,366
----------- -----------
Total
assets $8,394,702 $6,377,934
=========== ===========
Interest-bearing liabilities:
Deposits:
Savings $2,607,714 $10,466 1.61% $1,976,658 $10,750 2.18%
Time 685 1 0.58% - - -
Securities sold under
repurchase
agreements 3,321,693 6,969 0.84% 2,508,038 8,631 1.38%
Trust
preferred
stock (2) 24,000 586 9.77% 24,667 631 10.23%
Other
borrowings 1,288,492 5,066 1.57% 930,789 8,534 3.67%
----------- -------- ----------- --------
Total
interest-
bearing
liabilities 7,242,584 23,088 1.28% 5,440,152 28,546 2.10%
----------- -------- ----------- --------
Noninterest-bearing liabilities:
Demand
deposits 197,793 145,169
Savings 139,353 194,706
Non-interest-
bearing time
deposits 134,728 90,000
Other
liabi-
lities 192,116 97,374
----------- -----------
Total
liabilities 7,906,574 5,967,401
Equity 488,128 410,533
----------- -----------
Total
liabilities
and equity $8,394,702 $6,377,934
=========== ===========
Net interest
income $35,262 $35,235
======== ========
Net interest
margin (3) 1.81% 2.35%
======= =======
Average interest
rate spread (4) 1.71% 2.15%
======= =======
Ratio of interest-
earning assets
to interest
-bearing
liabilities 107.67% 110.28%
======= =======
(1) Average yield/cost on available for sale securities is based on
amortized cost.
(2) Effective July 1, 2003, the Company adopted the provisions of SFAS
150, which resulted in a reclassification of the trust preferred
stock from mezzanine financing to liabilities.
(3) Net interest income divided by total interest-earning assets.
(4) Yield on interest-earning assets less rate paid on
interest-bearing liabilities.
Investors Financial Services Corp.
(Dollars in thousands)
Asset servicing fees by service lines (unaudited):
For the Nine For the Three
Months Ended Months Ended
September 30, September 30,
------------------- -----------------
2003 2002 2003 2002
--------- --------- -------- --------
Core service fees:
Custody, accounting and
administration $184,151 $172,857 $65,314 $57,666
--------- --------- -------- --------
Ancillary service fees:
Foreign exchange 25,984 18,706 9,161 7,669
Cash management 15,787 12,362 5,120 4,416
Securities lending 6,918 8,605 2,076 2,362
Investment advisory 5,235 5,413 1,657 1,817
Other 937 160 317 52
--------- --------- -------- --------
Total ancillary service fees: 54,861 45,246 18,331 16,316
--------- --------- -------- --------
Total $239,012 $218,103 $83,645 $73,982
========= ========= ======== ========
Reconciliation of Financial Measures (unaudited):
The following table represents a reconciliation between earnings
presented on the face of our Condensed Consolidated Statements of
Income included with this earnings release and the non-GAAP measure of
net operating income referenced in this earnings release (dollars in
thousands):
GAAP Earnings
For the Nine For the Three
Months Ended Months Ended
September 30, September 30,
----------------- -----------------
2003 2002 2003 2002
-------- -------- -------- --------
Income before taxes $97,547 $72,345 $38,545 $24,670
Provision for income taxes 37,711 21,704 12,141 7,401
-------- -------- -------- --------
Net Income $59,836 $50,641 $26,404 $17,269
======== ======== ======== ========
Earnings per share:
Basic $0.92 $0.79 $0.41 $0.27
======== ======== ======== ========
Diluted $0.90 $0.76 $0.40 $0.26
======== ======== ======== ========
Operating Earnings
For the Nine For the Three
Months Ended Months Ended
September 30, September 30,
------------------- --------------------
2003 2002 2003 2002
--------- --------- --------- ----------
Income before taxes $97,547 $72,345 $38,545 $24,670
Provision for income taxes 30,511(1) 21,704 12,141 7,401
--------- --------- --------- ----------
Net Income $67,036 $50,641 $26,404 $17,269
========= ========= ========= ==========
Earnings per share:
Basic $1.03 $0.79 $0.41 $0.27
========= ========= ========= ==========
Diluted $1.01 $0.76 $0.40 $0.26
========= ========= ========= ==========
(1) Provision for the nine months ended September 30, 2003 excludes a
tax accrual of $13.9 million related to 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 and excludes the subsequent reversal of $6.7
million of the provision, net of federal taxes, due to the
settlement of the related tax dispute with the Commonwealth of
Massachusetts Department of Revenue. The effect of the exclusions
is an increase in net income of $0.11 per diluted and basic share.
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