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Investors Financial Services Reports 38% Growth in Second Quarter Earnings.

Business Editors

BOSTON--(BUSINESS WIRE)--July 10, 2001

Investors Financial Services Corp. (Nasdaq:IFIN) reported second quarter diluted earnings per share of $0.36, an increase of 38% from $0.26 in the second quarter of 2000. Net income for the second quarter was $11.9 million, up 47% from $8.1 million in the second quarter of 2000. For the six months ended June 30, 2001, the Company reported diluted earnings per share of $0.68, an increase of 36% from $0.50 for the same period in 2000.

"We are extremely pleased with our second quarter financial results. We exceeded our quarterly earnings target and are well positioned to exceed our original expectation for the remainder of the year," stated Kevin J. Sheehan, Chairman, Chief Executive Officer and President. "We've achieved these impressive results while completing complex strategic initiatives. On May 1, we assumed the operations of the U.S. asset administration unit of Barclays Global Investors (BGI), adding approximately $515 billion in assets processed. Also, on June 30, we successfully completed the technology conversion of the Advisor Custody Unit acquired from Chase in February."

Net operating revenue for the second quarter grew 66% to $87.8 million from $52.9 million for the same period in 2000. Revenue from core services such as global custody, multicurrency accounting and mutual fund administration grew to $48.0 million for the second quarter, up 54% from $31.2 million from the same period in the prior year. Revenue from core services includes approximately $8.4 million relating to the asset administration operations assumed from BGI. Revenue from value-added services including securities lending, foreign exchange and cash management sweep services increased to $12.1 million for the quarter, up 46% from $8.3 million in the second quarter of 2000. Net interest income, which arises from deposits generated by clients, increased 107% to $26.9 million from $13.0 million for the second quarter of 2000. Assets processed for clients totaled approximately $840 billion at June 30, 2001 compared to $303 billion at December 31, 2000.

Operating expenses were $70.2 million for the second quarter of 2001, up 74% from $40.3 million for the same period in 2000. Operating expenses include approximately $8.4 million relating to the asset administration operations assumed from BGI. Compensation and benefits increased 74% to $41.6 million in the second quarter from $23.9 million for the same period in the prior year due mainly to increased headcount relating to the increased volume of business.

Today the Company also announced that its Board of Directors declared a cash dividend of $0.02 per share on its common stock. The dividend is payable August 15, 2001 to stockholders of record as of July 31, 2001.

Investors Financial will broadcast a conference call, via the Internet, on Wednesday, July 11, 2001 at 11:00 a.m. EDT. The call will be accessible on Investors Financial's home page at The conference call will also be available via telephone at (719) 457-2679 confirmation code 480337. Recorded replays of the conference call will be available on the website and by dialing (719) 457-0820, confirmation code 480337.

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, global custody and multicurrency accounting, and value added services, including mutual fund administration, securities lending, foreign exchange, cash management, performance measurement and institutional transfer agency services. Offices are located in the United States, Canada, Cayman Islands, and Ireland. Visit Investors Financial on the web at

This news release contains forward-looking statements (statements which are not historical facts). These statements, such as Mr. Sheehan's statements regarding earnings for 2001, are based upon certain assumptions and estimates which might not be realized. Important factors that could cause actual results to differ materially from those indicated by any such forward-looking statements are set forth under the heading "Certain Factors That May Affect Future Results" in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001. Factors that may impact the Company's earnings performance and future growth include the performance of global financial markets, changes in interest rates, the level of client deposits, the ability of the Company to attract new clients and retain existing clients, the ability of the Company to convert new client assets successfully and the ability of the Company to integrate acquisitions successfully.

 (in thousands)

 June 30, December 31,
ASSETS 2001 2000

Federal funds sold and short-term investments $ - $ 450,000
Securities held to maturity 3,076,440 2,299,294
Securities available for sale 1,287,537 772,333
Loans, net of reserve 130,294 129,269
Non-marketable equity securities 50,000 15,000
Goodwill 81,900 34,094
Other non-earning assets 170,151 111,125

 TOTAL ASSETS $4,796,322 $3,811,115


Interest-bearing deposits $2,097,721 $1,878,247
Non-interest bearing deposits 217,523 453,637

 Total deposits 2,315,244 2,331,884
Short-term and other borrowings 2,083,881 1,251,971
Other liabilities 53,954 24,206

 TOTAL LIABILITIES 4,453,079 3,608,061
Minority interest/Trust preferred securities 24,260 24,246
Stockholders' equity 318,983 178,808

 STOCKHOLDERS' EQUITY $4,796,322 $3,811,115

 (in thousands, except per share amounts)

 Quarter Ended Six Months Ended
 June 30, June 30,
Statement of Income Data: 2001 2000 2001 2000

Net interest income $26,945 $13,030 $48,414 $25,987
Asset servicing
 and other fees 60,826 39,846 110,039 79,958

Net operating revenue 87,771 52,876 158,453 105,945
Operating expenses 70,172 40,322 125,025 82,096

Income before income taxes
 and minority interest 17,599 12,554 33,428 23,849
Provision for
 income taxes 5,310 4,036 10,394 7,668
Minority interest
 expense, net of
 income taxes 397 397 794 794

Net Income $11,892 $8,121 $22,240 $15,387

Diluted earnings
 per share $0.36 $0.26 $0.68 $0.50

Cash earnings
 per share $0.38 $0.27 $0.71 $0.52

Average Balance
 Sheet Data:
 Interest earning
 assets $4,337,780 $2,590,289 $3,959,591 $2,502,027
 Total assets 4,604,750 2,733,866 4,182,618 2,644,434
 Total deposits 2,086,918 1,371,279 1,991,229 1,380,813
 Common stockholders'
 equity 310,209 151,722 279,461 146,986
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Publication:Business Wire
Date:Jul 10, 2001
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