State Street Corporation | 47
STATE STREET CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
(Dollars in millions, except per share amounts)
|
2021
|
|
2020
|
|
|
|
|
|
|
Fee revenue:
|
|
|
|
|
|
|
|
|
|
Servicing fees
|
$
|
1,371
|
|
|
$
|
1,287
|
|
|
|
|
|
|
|
Management fees
|
493
|
|
|
464
|
|
|
|
|
|
|
|
Foreign exchange trading services
|
346
|
|
|
444
|
|
|
|
|
|
|
|
Securities finance
|
99
|
|
|
92
|
|
|
|
|
|
|
|
Software and processing fees
|
174
|
|
|
112
|
|
|
|
|
|
|
|
Total fee revenue
|
2,483
|
|
|
2,399
|
|
|
|
|
|
|
|
Net interest income:
|
|
|
|
|
|
|
|
|
|
Interest income
|
471
|
|
|
868
|
|
|
|
|
|
|
|
Interest expense
|
4
|
|
|
204
|
|
|
|
|
|
|
|
Net interest income
|
467
|
|
|
664
|
|
|
|
|
|
|
|
Other income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) related to investment securities, net
|
—
|
|
|
2
|
|
|
|
|
|
|
|
Other income
|
—
|
|
|
—
|
|
|
|
|
|
|
|
Total other income
|
—
|
|
|
2
|
|
|
|
|
|
|
Total revenue
|
2,950
|
|
|
3,065
|
|
|
|
|
|
|
|
Provision for credit losses
|
(9)
|
|
|
36
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Compensation and employee benefits
|
1,242
|
|
|
1,208
|
|
|
|
|
|
|
|
Information systems and communications
|
421
|
|
|
385
|
|
|
|
|
|
|
|
Transaction processing services
|
270
|
|
|
254
|
|
|
|
|
|
|
|
Occupancy
|
109
|
|
|
109
|
|
|
|
|
|
|
|
Acquisition and restructuring costs
|
10
|
|
|
11
|
|
|
|
|
|
|
|
Amortization of other intangible assets
|
58
|
|
|
58
|
|
|
|
|
|
|
|
Other
|
222
|
|
|
230
|
|
|
|
|
|
|
|
Total expenses
|
2,332
|
|
|
2,255
|
|
|
|
|
|
|
|
Income before income tax expense
|
627
|
|
|
774
|
|
|
|
|
|
|
|
Income tax expense
|
108
|
|
|
140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
519
|
|
|
$
|
634
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
$
|
489
|
|
|
$
|
580
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
1.39
|
|
|
$
|
1.64
|
|
|
|
|
|
|
|
Diluted
|
1.37
|
|
|
1.62
|
|
|
|
|
|
|
|
Average common shares outstanding (in thousands):
|
|
|
|
|
|
|
|
|
|
Basic
|
350,743
|
|
|
353,746
|
|
|
|
|
|
|
|
Diluted
|
355,690
|
|
|
357,993
|
|
|
|
|
|
|
|
Cash dividends declared per common share
|
$
|
.52
|
|
|
$
|
.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying condensed notes are an integral part of these consolidated financial statements.
State Street Corporation | 48
STATE STREET CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME(LOSS)
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(In millions)
|
2021
|
|
2020
|
|
|
Net income
|
$
|
519
|
|
|
$
|
634
|
|
|
|
Other comprehensive income (loss), net of related taxes:
|
|
|
|
|
|
Foreign currency translation, net of related taxes of $53 and ($10), respectively
|
(200)
|
|
|
(300)
|
|
|
|
Net unrealized gains (losses) on available-for-sale securities, net of reclassification adjustment and net of related taxes of ($161) and $35, respectively
|
(425)
|
|
|
134
|
|
|
|
Net unrealized gains (losses) on available-for-sale securities designated in fair value hedges, net of related taxes of $4 and ($3), respectively
|
12
|
|
|
(7)
|
|
|
|
|
|
|
|
|
|
Net unrealized gains (losses) on cash flow hedges, net of related taxes of $0 and $44, respectively
|
—
|
|
|
117
|
|
|
|
Net unrealized gains (losses) on retirement plans, net of related taxes of $3 and $4, respectively
|
8
|
|
|
12
|
|
|
|
Other comprehensive income (loss)
|
(605)
|
|
|
(44)
|
|
|
|
Total comprehensive income (loss)
|
$
|
(86)
|
|
|
$
|
590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying condensed notes are an integral part of these consolidated financial statements.
State Street Corporation | 49
STATE STREET CORPORATION
CONSOLIDATED STATEMENT OF CONDITION
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
|
(Dollars in millions, except per share amounts)
|
(UNAUDITED)
|
|
|
Assets:
|
|
|
|
Cash and due from banks
|
$
|
4,552
|
|
|
$
|
3,467
|
|
Interest-bearing deposits with banks
|
107,554
|
|
|
116,960
|
|
Securities purchased under resale agreements
|
5,238
|
|
|
3,106
|
|
Trading account assets
|
786
|
|
|
815
|
|
Investment securities available-for-sale
|
60,512
|
|
|
59,048
|
|
Investment securities held-to-maturity purchased under money market liquidity facility (less allowance for credit losses of $0 and $1) (fair value of $201 and $3,304)
|
201
|
|
|
3,299
|
|
Investment securities held-to-maturity (less allowance for credit losses of $2 and $2) (fair value of $46,752 and $50,003)
|
46,261
|
|
|
48,929
|
|
Loans (less allowance for credit losses on loans of $118 and $122)
|
31,467
|
|
|
27,803
|
|
Premises and equipment (net of accumulated depreciation of $4,960 and $4,825)
|
2,143
|
|
|
2,154
|
|
Accrued interest and fees receivable
|
3,302
|
|
|
3,105
|
|
|
|
|
|
Goodwill
|
7,629
|
|
|
7,683
|
|
Other intangible assets
|
2,007
|
|
|
1,827
|
|
Other assets
|
45,233
|
|
|
36,510
|
|
Total assets
|
$
|
316,885
|
|
|
$
|
314,706
|
|
Liabilities:
|
|
|
|
Deposits:
|
|
|
|
Non-interest-bearing
|
$
|
57,079
|
|
|
$
|
49,439
|
|
Interest-bearing - U.S.
|
108,372
|
|
|
102,331
|
|
Interest-bearing - non-U.S.
|
79,442
|
|
|
88,028
|
|
Total deposits
|
244,893
|
|
|
239,798
|
|
Securities sold under repurchase agreements
|
587
|
|
|
3,413
|
|
Short term borrowings under money market liquidity facility
|
200
|
|
|
3,302
|
|
Other short-term borrowings
|
642
|
|
|
685
|
|
Accrued expenses and other liabilities
|
31,722
|
|
|
27,503
|
|
Long-term debt
|
13,836
|
|
|
13,805
|
|
Total liabilities
|
291,880
|
|
|
288,506
|
|
Commitments, guarantees and contingencies (Notes 9 and 10)
|
|
|
|
Shareholders’ equity:
|
|
|
|
Preferred stock, no par, 3,500,000 shares authorized:
|
|
|
|
|
|
|
|
Series D, 7,500 shares issued and outstanding
|
742
|
|
|
742
|
|
|
|
|
|
Series F, 2,500 shares issued and outstanding
|
247
|
|
|
742
|
|
Series G, 5,000 shares issued and outstanding
|
493
|
|
|
493
|
|
Series H, 5,000 shares issued and outstanding
|
494
|
|
|
494
|
|
Common stock, $1 par, 750,000,000 shares authorized:
|
|
|
|
503,879,642 and 503,879,642 shares issued, and 348,032,982 and 353,156,279 shares outstanding
|
504
|
|
|
504
|
|
Surplus
|
10,227
|
|
|
10,205
|
|
Retained earnings
|
23,751
|
|
|
23,442
|
|
Accumulated other comprehensive income (loss)
|
(418)
|
|
|
187
|
|
Treasury stock, at cost (155,846,660 and 150,723,363 shares)
|
(11,035)
|
|
|
(10,609)
|
|
Total shareholders’ equity
|
25,005
|
|
|
26,200
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity
|
$
|
316,885
|
|
|
$
|
314,706
|
|
The accompanying condensed notes are an integral part of these consolidated financial statements.
State Street Corporation | 50
STATE STREET CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions, except per share amounts, shares in thousands)
|
Preferred
Stock
|
|
Common Stock
|
|
Surplus
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Treasury Stock
|
|
Total
|
Shares
|
|
Amount
|
|
|
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
$
|
2,962
|
|
|
503,880
|
|
|
$
|
504
|
|
|
$
|
10,132
|
|
|
$
|
21,918
|
|
|
$
|
(876)
|
|
|
146,490
|
|
|
$
|
(10,209)
|
|
|
$
|
24,431
|
|
Net income
|
|
|
|
|
|
|
|
|
634
|
|
|
|
|
|
|
|
|
634
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
(44)
|
|
|
|
|
|
|
(44)
|
|
Preferred stock redeemed
|
(491)
|
|
|
|
|
|
|
|
|
(9)
|
|
|
|
|
|
|
|
|
(500)
|
|
Cash dividends declared:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock - $0.52 per share
|
|
|
|
|
|
|
|
|
(183)
|
|
|
|
|
|
|
|
|
(183)
|
|
Preferred stock
|
|
|
|
|
|
|
|
|
(44)
|
|
|
|
|
|
|
|
|
(44)
|
|
Common stock acquired
|
|
|
|
|
|
|
|
|
|
|
|
|
6,464
|
|
|
(500)
|
|
|
(500)
|
|
Common stock awards exercised
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
(1,017)
|
|
|
45
|
|
|
68
|
|
Other (1)
|
|
|
|
|
|
|
—
|
|
|
(1)
|
|
|
|
|
(1)
|
|
|
—
|
|
|
(1)
|
|
Balance at March 31, 2020
|
$
|
2,471
|
|
|
503,880
|
|
|
$
|
504
|
|
|
$
|
10,155
|
|
|
$
|
22,315
|
|
|
$
|
(920)
|
|
|
151,936
|
|
|
$
|
(10,664)
|
|
|
$
|
23,861
|
|
Balance at December 31, 2020
|
$
|
2,471
|
|
|
503,880
|
|
|
$
|
504
|
|
|
$
|
10,205
|
|
|
$
|
23,442
|
|
|
$
|
187
|
|
|
150,723
|
|
|
$
|
(10,609)
|
|
|
$
|
26,200
|
|
Net income
|
|
|
|
|
|
|
|
|
519
|
|
|
|
|
|
|
|
|
519
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
(605)
|
|
|
|
|
|
|
(605)
|
|
Preferred stock redeemed
|
(495)
|
|
|
|
|
|
|
|
|
(5)
|
|
|
|
|
|
|
|
|
(500)
|
|
Cash dividends declared:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock - $0.52 per share
|
|
|
|
|
|
|
|
|
(182)
|
|
|
|
|
|
|
|
|
(182)
|
|
Preferred stock
|
|
|
|
|
|
|
|
|
(25)
|
|
|
|
|
|
|
|
|
(25)
|
|
Common stock acquired
|
|
|
|
|
|
|
|
|
|
|
|
|
6,233
|
|
|
(475)
|
|
|
(475)
|
|
Common stock awards exercised
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
(1,111)
|
|
|
49
|
|
|
71
|
|
Other
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
2
|
|
|
|
|
2
|
|
Balance at March 31, 2021
|
$
|
1,976
|
|
|
503,880
|
|
|
$
|
504
|
|
|
$
|
10,227
|
|
|
$
|
23,751
|
|
|
$
|
(418)
|
|
|
155,847
|
|
|
$
|
(11,035)
|
|
|
$
|
25,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes the impact of transitioning to ASC 326: Measurement of Credit Losses on Financial Instruments, consisting of a decrease in retained earnings of $3 million in the first quarter of 2020.
The accompanying condensed notes are an integral part of these consolidated financial statements.
State Street Corporation | 51
STATE STREET CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(In millions)
|
2021
|
|
2020
|
|
|
Operating Activities:
|
|
|
|
|
|
Net income
|
$
|
519
|
|
|
$
|
634
|
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
Deferred income tax (benefit)
|
(26)
|
|
|
8
|
|
|
|
Amortization of other intangible assets
|
58
|
|
|
58
|
|
|
|
Other non-cash adjustments for depreciation, amortization and accretion, net
|
359
|
|
|
274
|
|
|
|
Losses (gains) related to investment securities, net
|
—
|
|
|
(2)
|
|
|
|
Provision for credit losses
|
(9)
|
|
|
36
|
|
|
|
Change in trading account assets, net
|
29
|
|
|
42
|
|
|
|
Change in accrued interest and fees receivable, net
|
(197)
|
|
|
(43)
|
|
|
|
Change in collateral deposits, net
|
35
|
|
|
2,685
|
|
|
|
Change in unrealized losses (gains) on foreign exchange derivatives, net
|
(6,250)
|
|
|
(3,090)
|
|
|
|
Change in other assets, net
|
(377)
|
|
|
(891)
|
|
|
|
|
|
|
|
|
|
Change in accrued expenses and other liabilities, net
|
2,000
|
|
|
4,179
|
|
|
|
|
|
|
|
|
|
Other, net
|
127
|
|
|
149
|
|
|
|
Net cash (used in) provided by operating activities
|
(3,732)
|
|
|
4,039
|
|
|
|
Investing Activities:
|
|
|
|
|
|
Net (increase) decrease in interest-bearing deposits with banks
|
9,406
|
|
|
(78,770)
|
|
|
|
Net (increase) decrease in securities purchased under resale agreements
|
(2,132)
|
|
|
450
|
|
|
|
Proceeds from sales of available-for-sale securities
|
5,168
|
|
|
1,657
|
|
|
|
Proceeds from maturities of available-for-sale securities
|
5,004
|
|
|
4,219
|
|
|
|
Purchases of available-for-sale securities
|
(12,324)
|
|
|
(8,935)
|
|
|
|
|
|
|
|
|
|
Purchases of held-to-maturity securities under the MMLF program
|
—
|
|
|
(26,061)
|
|
|
|
|
|
|
|
|
|
Proceeds from maturities of held-to-maturity securities under the MMLF program
|
3,099
|
|
|
451
|
|
|
|
Proceeds from maturities of held-to-maturity securities
|
3,840
|
|
|
2,695
|
|
|
|
Purchases of held-to-maturity securities
|
(1,268)
|
|
|
(2,141)
|
|
|
|
Sale of loans
|
35
|
|
|
93
|
|
|
|
Net (increase) in loans
|
(3,695)
|
|
|
(6,164)
|
|
|
|
Business acquisitions, net of cash acquired
|
(214)
|
|
|
—
|
|
|
|
Purchases of equity investments and other long-term assets
|
(34)
|
|
|
(794)
|
|
|
|
Purchases of premises and equipment, net
|
(162)
|
|
|
(114)
|
|
|
|
|
|
|
|
|
|
Other, net
|
81
|
|
|
641
|
|
|
|
Net cash provided by (used in) investing activities
|
6,804
|
|
|
(112,773)
|
|
|
|
Financing Activities:
|
|
|
|
|
|
Net (decrease) increase in time deposits
|
(1,580)
|
|
|
18,635
|
|
|
|
Net increase (decrease) in all other deposits
|
6,674
|
|
|
56,596
|
|
|
|
Net (decrease) increase in securities sold under repurchase agreements
|
(2,826)
|
|
|
4,271
|
|
|
|
Net (decrease) increase in short-term borrowings under money market liquidity facility
|
(3,102)
|
|
|
25,665
|
|
|
|
Net (decrease) increase in other short-term borrowings
|
(43)
|
|
|
3,996
|
|
|
|
Proceeds from issuance of long-term debt, net of issuance costs
|
844
|
|
|
2,497
|
|
|
|
Payments for long-term debt and obligations under finance leases
|
(764)
|
|
|
(8)
|
|
|
|
Payments for redemption of preferred stock
|
(500)
|
|
|
(500)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchases of common stock
|
(475)
|
|
|
(515)
|
|
|
|
|
|
|
|
|
|
Repurchases of common stock for employee tax withholding
|
(6)
|
|
|
(43)
|
|
|
|
Payments for cash dividends
|
(209)
|
|
|
(230)
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
(1,987)
|
|
|
110,364
|
|
|
|
Net increase
|
1,085
|
|
|
1,630
|
|
|
|
Cash and due from banks at beginning of period
|
3,467
|
|
|
3,302
|
|
|
|
Cash and due from banks at end of period
|
$
|
4,552
|
|
|
$
|
4,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying condensed notes are an integral part of these consolidated financial statements.
State Street Corporation | 52
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Summary of Significant Accounting Policies
Basis of Presentation
The accounting and financial reporting policies of State Street Corporation conform to U.S. GAAP. State Street Corporation, the Parent Company, is a financial holding company headquartered in Boston, Massachusetts. Unless otherwise indicated or unless the context requires otherwise, all references in these notes to consolidated financial statements to “State Street,” “we,” “us,” “our” or similar references mean State Street Corporation and its subsidiaries on a consolidated basis, including our principal banking subsidiary, State Street Bank.
The accompanying consolidated financial statements should be read in conjunction with the financial and risk factor information included in our 2020 Form 10-K, which we previously filed with the SEC.
The consolidated financial statements accompanying these condensed notes are unaudited. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the consolidated results of operations in these financial statements, have been made. Certain previously reported amounts presented in this Form 10-Q have been reclassified to conform to current-period presentation. Events occurring subsequent to the date of our consolidated statement of condition were evaluated for potential recognition or disclosure in our consolidated financial statements through the date we filed this Form 10-Q with the SEC.
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions in the application of certain of our significant accounting policies that may materially affect the reported amounts of assets, liabilities, equity, revenue and expenses. As a result of unanticipated events or circumstances, actual results could differ from those estimates. These accounting estimates reflect the best judgment of management, but actual results could differ.
Our consolidated statement of condition as of December 31, 2020 included in the accompanying consolidated financial statements was derived from the audited financial statements as of that date, but does not include all notes required by U.S. GAAP for a complete set of consolidated financial statements.
Recent Accounting Developments
We did not adopt any new accounting standards in the first quarter of 2021 that had a material impact to our financial statements. Additionally, we continue to evaluate accounting standards that were recently issued but not yet adopted as of March 31, 2021; none are expected to have a material impact to our financial statements.
Note 2. Fair Value
Fair Value Measurements
We carry trading account assets and liabilities, AFS debt securities, certain equity securities and various types of derivative financial instruments, at fair value in our consolidated statement of condition on a recurring basis. Changes in the fair values of these financial assets and liabilities are recorded either as components of our consolidated statement of income or as components of AOCI within shareholders' equity in our consolidated statement of condition.
We measure fair value for the above-described financial assets and liabilities in conformity with U.S. GAAP that governs the measurement of the fair value of financial instruments. Management believes that its valuation techniques and underlying assumptions used to measure fair value conform to the provisions of U.S. GAAP. We categorize the financial assets and liabilities that we carry at fair value based on a prescribed three-level valuation hierarchy. For information about our valuation techniques for financial assets and financial liabilities measured at fair value and the fair value hierarchy, refer to pages 135 to 142 in Note 2 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2020 Form 10-K.
State Street Corporation | 53
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following tables present information with respect to our financial assets and liabilities carried at fair value in our consolidated statement of condition on a recurring basis as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements on a Recurring Basis
|
|
As of March 31, 2021
|
(In millions)
|
Quoted Market
Prices in Active
Markets
(Level 1)
|
|
Pricing Methods
with Significant
Observable
Market Inputs
(Level 2)
|
|
Pricing Methods
with Significant
Unobservable
Market Inputs
(Level 3)
|
|
Impact of Netting(1)
|
|
Total Net
Carrying Value
in Consolidated
Statement of
Condition
|
Assets:
|
|
|
|
|
|
|
|
|
|
Trading account assets:
|
|
|
|
|
|
|
|
|
|
U.S. government securities
|
$
|
40
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
40
|
|
Non-U.S. government securities
|
—
|
|
|
222
|
|
|
—
|
|
|
|
|
222
|
|
Other
|
—
|
|
|
524
|
|
|
—
|
|
|
|
|
524
|
|
|
|
|
|
|
|
|
|
|
|
Total trading account assets
|
40
|
|
|
746
|
|
|
—
|
|
|
|
|
786
|
|
Available-for-sale investment securities:
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal agencies:
|
|
|
|
|
|
|
|
|
|
Direct obligations
|
8,937
|
|
|
—
|
|
|
—
|
|
|
|
|
8,937
|
|
Mortgage-backed securities
|
—
|
|
|
14,425
|
|
|
—
|
|
|
|
|
14,425
|
|
Total U.S. Treasury and federal agencies
|
8,937
|
|
|
14,425
|
|
|
—
|
|
|
|
|
23,362
|
|
Asset-backed securities:
|
|
|
|
|
|
|
|
|
|
Student loans
|
—
|
|
|
288
|
|
|
—
|
|
|
|
|
288
|
|
Credit cards
|
—
|
|
|
91
|
|
|
—
|
|
|
|
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized loan obligations
|
—
|
|
|
3,669
|
|
|
106
|
|
|
|
|
3,775
|
|
Non-agency CMBS and RMBS(2)
|
—
|
|
|
71
|
|
|
—
|
|
|
|
|
71
|
|
Total asset-backed securities
|
—
|
|
|
4,119
|
|
|
106
|
|
|
|
|
4,225
|
|
Non-U.S. debt securities:
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
—
|
|
|
2,032
|
|
|
—
|
|
|
|
|
2,032
|
|
Asset-backed securities
|
—
|
|
|
2,297
|
|
|
—
|
|
|
|
|
2,297
|
|
Government securities
|
—
|
|
|
9,910
|
|
|
—
|
|
|
|
|
9,910
|
|
Other(3)
|
—
|
|
|
13,709
|
|
|
—
|
|
|
|
|
13,709
|
|
Total non-U.S. debt securities
|
—
|
|
|
27,948
|
|
|
—
|
|
|
|
|
27,948
|
|
State and political subdivisions
|
—
|
|
|
1,498
|
|
|
—
|
|
|
|
|
1,498
|
|
|
|
|
|
|
|
|
|
|
|
Other U.S. debt securities
|
—
|
|
|
3,464
|
|
|
15
|
|
|
|
|
3,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale investment securities
|
8,937
|
|
|
51,454
|
|
|
121
|
|
|
|
|
60,512
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
Derivative instruments:
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
—
|
|
|
21,892
|
|
|
6
|
|
|
$
|
(13,728)
|
|
|
8,170
|
|
Interest rate contracts
|
1
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative instruments
|
1
|
|
|
21,892
|
|
|
6
|
|
|
(13,729)
|
|
|
8,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
—
|
|
|
549
|
|
|
—
|
|
|
—
|
|
|
549
|
|
Total assets carried at fair value
|
$
|
8,978
|
|
|
$
|
74,641
|
|
|
$
|
127
|
|
|
$
|
(13,729)
|
|
|
$
|
70,017
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Accrued expenses and other liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments:
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
$
|
9
|
|
|
$
|
22,036
|
|
|
$
|
—
|
|
|
$
|
(15,533)
|
|
|
$
|
6,512
|
|
Interest rate contracts
|
—
|
|
|
35
|
|
|
—
|
|
|
(1)
|
|
|
34
|
|
Other derivative contracts
|
—
|
|
|
181
|
|
|
—
|
|
|
—
|
|
|
181
|
|
Total derivative instruments
|
9
|
|
|
22,252
|
|
|
—
|
|
|
(15,534)
|
|
|
6,727
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities carried at fair value
|
$
|
9
|
|
|
$
|
22,252
|
|
|
$
|
—
|
|
|
$
|
(15,534)
|
|
|
$
|
6,727
|
|
(1) Represents counterparty netting against level 2 financial assets and liabilities where a legally enforceable master netting agreement exists between us and the counterparty. Netting also reflects asset and liability reductions of $1.81 billion and $3.61 billion, respectively, for cash collateral received from and provided to derivative counterparties.
(2) Consists entirely of non-agency CMBS.
(3) As of March 31, 2021, the fair value of other non-U.S. debt securities included $10.13 billion of supranational and non-U.S. agency bonds, $1.90 billion of corporate bonds and $0.43 billion of covered bonds.
State Street Corporation | 54
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements on a Recurring Basis
|
|
As of December 31, 2020
|
(In millions)
|
Quoted Market
Prices in Active
Markets
(Level 1)
|
|
Pricing Methods
with Significant
Observable
Market Inputs
(Level 2)
|
|
Pricing Methods
with Significant
Unobservable
Market Inputs
(Level 3)
|
|
Impact of Netting(1)
|
|
Total Net
Carrying Value
in Consolidated
Statement of
Condition
|
Assets:
|
|
|
|
|
|
|
|
|
|
Trading account assets:
|
|
|
|
|
|
|
|
|
|
U.S. government securities
|
$
|
40
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
40
|
|
Non-U.S. government securities
|
—
|
|
|
239
|
|
|
—
|
|
|
|
|
239
|
|
Other
|
17
|
|
|
519
|
|
|
—
|
|
|
|
|
536
|
|
Total trading account assets
|
57
|
|
|
758
|
|
|
—
|
|
|
|
|
815
|
|
Available-for-sale investment securities:
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal agencies:
|
|
|
|
|
|
|
|
|
|
Direct obligations
|
6,575
|
|
|
—
|
|
|
—
|
|
|
|
|
6,575
|
|
Mortgage-backed securities
|
—
|
|
|
14,305
|
|
|
—
|
|
|
|
|
14,305
|
|
Total U.S. Treasury and federal agencies
|
6,575
|
|
|
14,305
|
|
|
—
|
|
|
|
|
20,880
|
|
Asset-backed securities:
|
|
|
|
|
|
|
|
|
|
Student loans
|
—
|
|
|
314
|
|
|
—
|
|
|
|
|
314
|
|
Credit cards
|
—
|
|
|
90
|
|
|
—
|
|
|
|
|
90
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized loan obligations
|
—
|
|
|
2,952
|
|
|
14
|
|
|
|
|
2,966
|
|
Non-agency CMBS and RMBS(2)
|
—
|
|
|
78
|
|
|
—
|
|
|
|
|
78
|
|
Total asset-backed securities
|
—
|
|
|
3,434
|
|
|
14
|
|
|
|
|
3,448
|
|
Non-U.S. debt securities:
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
—
|
|
|
1,996
|
|
|
—
|
|
|
|
|
1,996
|
|
Asset-backed securities
|
—
|
|
|
2,291
|
|
|
—
|
|
|
|
|
2,291
|
|
Government securities
|
—
|
|
|
12,539
|
|
|
—
|
|
|
|
|
12,539
|
|
Other(3)
|
—
|
|
|
12,903
|
|
|
—
|
|
|
|
|
12,903
|
|
Total non-U.S. debt securities
|
—
|
|
|
29,729
|
|
|
—
|
|
|
|
|
29,729
|
|
State and political subdivisions
|
—
|
|
|
1,548
|
|
|
—
|
|
|
|
|
1,548
|
|
|
|
|
|
|
|
|
|
|
|
Other U.S. debt securities
|
—
|
|
|
3,443
|
|
|
—
|
|
|
|
|
3,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale investment securities
|
6,575
|
|
|
52,459
|
|
|
14
|
|
|
|
|
59,048
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
Derivative instruments:
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
—
|
|
|
25,941
|
|
|
2
|
|
|
$
|
(20,140)
|
|
|
5,803
|
|
Interest rate contracts
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative instruments
|
1
|
|
|
25,941
|
|
|
2
|
|
|
(20,140)
|
|
|
5,804
|
|
Other
|
—
|
|
|
525
|
|
|
—
|
|
|
—
|
|
|
525
|
|
Total assets carried at fair value
|
$
|
6,633
|
|
|
$
|
79,683
|
|
|
$
|
16
|
|
|
$
|
(20,140)
|
|
|
$
|
66,192
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Accrued expenses and other liabilities:
|
|
|
|
|
|
|
|
|
|
Trading account liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4
|
|
Derivative instruments:
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
1
|
|
|
25,925
|
|
|
1
|
|
|
(15,558)
|
|
|
10,369
|
|
Interest rate contracts
|
—
|
|
|
42
|
|
|
—
|
|
|
—
|
|
|
42
|
|
Other derivative contracts
|
—
|
|
|
157
|
|
|
—
|
|
|
—
|
|
|
157
|
|
Total derivative instruments
|
1
|
|
|
26,124
|
|
|
1
|
|
|
(15,558)
|
|
|
10,568
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities carried at fair value
|
$
|
5
|
|
|
$
|
26,124
|
|
|
$
|
1
|
|
|
$
|
(15,558)
|
|
|
$
|
10,572
|
|
(1) Represents counterparty netting against level 2 financial assets and liabilities where a legally enforceable master netting agreement exists between us and the counterparty. Netting also reflects asset and liability reductions of $5.87 billion and $1.29 billion, respectively, for cash collateral received from and provided to derivative counterparties.
(2) Consists entirely of non-agency CMBS.
(3) As of December 31, 2020, the fair value of other non-U.S. debt securities included $9.55 billion of supranational and non-U.S. agency bonds, $1.88 billion of corporate bonds and $0.47 billion of covered bonds.
State Street Corporation | 55
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following tables present activity related to our level 3 financial assets during the three months ended March 31, 2021 and 2020, respectively. Transfers into and out of level 3 are reported as of the beginning of the period presented. During the three months ended March 31, 2021, transfers into level 3 were primarily related to a U.S. corporate bond, for which fair value was measured using information obtained from third party sources, including non-binding broker/dealer quotes. During the three months ended March 31, 2021, transfers out of level 3 were mainly related to collateralized loan obligations, for which fair value was measured using prices based on observable market information. During the three months ended March 31, 2020, there were no transfers into or out of level 3.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using Significant Unobservable Inputs
|
|
Three Months Ended March 31, 2021
|
|
Fair Value as of
December 31,
2020
|
|
Total Realized and
Unrealized Gains (Losses)
|
|
Purchases
|
|
|
|
Sales
|
|
Settlements
|
|
Transfers into
Level 3
|
|
Transfers
out of Level 3
|
|
Fair Value
as of March 31, 2021(1)
|
|
Change in Unrealized Gains (Losses) Related to Financial Instruments
Held as of
March 31, 2021
|
(In millions)
|
|
Recorded in Revenue(1)
|
|
Recorded in Other Comprehensive Income(1)
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale Investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized loan obligations
|
$
|
14
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
106
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(14)
|
|
|
$
|
106
|
|
|
|
Total asset-backed securities
|
14
|
|
|
—
|
|
|
—
|
|
|
106
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14)
|
|
|
106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other U.S. debt securities
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|
—
|
|
|
15
|
|
|
|
Total Available-for-sale investment securities
|
14
|
|
|
—
|
|
|
—
|
|
|
106
|
|
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|
(14)
|
|
|
121
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
2
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative instruments
|
2
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
1
|
|
Total assets carried at fair value
|
$
|
16
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
110
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15
|
|
|
$
|
(14)
|
|
|
$
|
127
|
|
|
$
|
1
|
|
(1) Total realized and unrealized gains (losses) on AFS investment securities are included within gains (losses) related to investment securities, net. Total realized and unrealized gains (losses) on derivative instruments are included within foreign exchange trading services.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using Significant Unobservable Inputs
|
|
Three Months Ended March 31, 2020
|
|
Fair Value
as of
December 31,
2019
|
|
Total Realized and
Unrealized Gains (Losses)
|
|
Purchases
|
|
|
|
Sales
|
|
Settlements
|
|
Transfers
into
Level 3
|
|
Transfers
out of
Level 3
|
|
Fair Value
as of March 31, 2020(1)
|
|
Change in Unrealized Gains (Losses) Related to Financial Instruments
Held as of
March 31, 2020
|
(In millions)
|
|
Recorded
in
Revenue(1)
|
|
Recorded
in Other
Comprehensive
Income(1)
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale Investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized loan obligations
|
1,820
|
|
|
—
|
|
|
(83)
|
|
|
178
|
|
|
|
|
(42)
|
|
|
(32)
|
|
|
—
|
|
|
—
|
|
|
1,841
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total asset-backed securities
|
1,820
|
|
|
—
|
|
|
(83)
|
|
|
178
|
|
|
|
|
(42)
|
|
|
(32)
|
|
|
—
|
|
|
—
|
|
|
1,841
|
|
|
—
|
|
Non-U.S. debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-backed securities
|
887
|
|
|
—
|
|
|
(65)
|
|
|
—
|
|
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
|
—
|
|
|
820
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
45
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
44
|
|
|
—
|
|
Total non-U.S. debt securities
|
932
|
|
|
—
|
|
|
(66)
|
|
|
—
|
|
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
|
—
|
|
|
864
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Available-for-sale investment securities
|
2,752
|
|
|
—
|
|
|
(149)
|
|
|
178
|
|
|
|
|
(42)
|
|
|
(34)
|
|
|
—
|
|
|
—
|
|
|
2,705
|
|
|
—
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
4
|
|
|
11
|
|
|
—
|
|
|
3
|
|
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
17
|
|
|
$
|
12
|
|
Total derivative instruments
|
4
|
|
|
11
|
|
|
—
|
|
|
3
|
|
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
17
|
|
|
12
|
|
Total assets carried at fair value
|
$
|
2,756
|
|
|
$
|
11
|
|
|
$
|
(149)
|
|
|
$
|
181
|
|
|
|
|
$
|
(42)
|
|
|
$
|
(35)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,722
|
|
|
$
|
12
|
|
(1) Total realized and unrealized gains (losses) on AFS investment securities are included within gains (losses) related to investment securities, net. Total realized and unrealized gains (losses) on derivative instruments are included within foreign exchange trading services.
State Street Corporation | 56
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table presents quantitative information, as of the dates indicated, about the valuation techniques and significant unobservable inputs used in the valuation of our level 3 financial assets and liabilities measured at fair value on a recurring basis for which we use internally-developed pricing models. The significant unobservable inputs for our level 3 financial assets and liabilities whose fair value is measured using pricing information from non-binding broker/dealer quotes are not included in the table, as the specific inputs applied are not provided by the broker/dealer.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quantitative Information about Level 3 Fair Value Measurements
|
|
Fair Value
|
|
|
|
|
|
Range
|
|
Weighted-Average
|
(Dollars in millions)
|
As of March 31, 2021
|
|
As of December 31, 2020
|
|
Valuation Technique
|
|
Significant Unobservable Input(1)
|
|
As of March 31, 2021
|
|
As of March 31, 2021
|
|
As of December 31, 2020
|
Significant unobservable inputs readily available to State Street:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Instruments, foreign exchange contracts
|
$
|
6
|
|
|
$
|
2
|
|
|
Option model
|
|
Volatility
|
|
4.2%
|
-
|
17.8%
|
|
7.3
|
%
|
|
7.9
|
%
|
Total
|
$
|
6
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments, foreign exchange contracts
|
$
|
—
|
|
|
$
|
1
|
|
|
Option model
|
|
Volatility
|
|
4.7%
|
-
|
7.4%
|
|
4.7
|
%
|
|
7.7
|
%
|
Total
|
$
|
—
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Significant changes in these unobservable inputs may result in significant changes in fair value measurement of the derivative instrument.
Fair Value Estimates
Estimates of fair value for financial instruments not carried at fair value in our consolidated statement of condition are generally subjective in nature, and are determined as of a specific point in time based on the characteristics of the financial instruments and relevant market information.
The following tables present the reported amounts and estimated fair values of the financial assets and liabilities not carried at fair value, as they would be categorized within the fair value hierarchy, as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Hierarchy
|
(In millions)
|
Reported Amount
|
|
Estimated Fair Value
|
|
Quoted Market Prices in Active Markets (Level 1)
|
|
Pricing Methods with Significant Observable Market Inputs (Level 2)
|
|
Pricing Methods with Significant Unobservable Market Inputs (Level 3)
|
March 31, 2021
|
|
|
|
|
|
|
|
|
|
Financial Assets:
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
$
|
4,552
|
|
|
4,552
|
|
|
$
|
4,552
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest-bearing deposits with banks
|
107,554
|
|
|
107,554
|
|
|
—
|
|
|
107,554
|
|
|
—
|
|
Securities purchased under resale agreements
|
5,238
|
|
|
5,238
|
|
|
—
|
|
|
5,238
|
|
|
—
|
|
HTM securities purchased under the MMLF
program
|
201
|
|
|
201
|
|
|
—
|
|
|
201
|
|
|
—
|
|
Investment securities held-to-maturity
|
46,261
|
|
|
46,953
|
|
|
5,566
|
|
|
41,337
|
|
|
50
|
|
Net loans (1)
|
31,467
|
|
|
31,512
|
|
|
—
|
|
|
29,340
|
|
|
2,171
|
|
Other(2)
|
6,757
|
|
|
6,757
|
|
|
—
|
|
|
6,757
|
|
|
—
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
Non-interest-bearing
|
$
|
57,079
|
|
|
$
|
57,079
|
|
|
$
|
—
|
|
|
$
|
57,079
|
|
|
$
|
—
|
|
Interest-bearing - U.S.
|
108,372
|
|
|
108,372
|
|
|
—
|
|
|
108,372
|
|
|
—
|
|
Interest-bearing - non-U.S.
|
79,442
|
|
|
79,442
|
|
|
—
|
|
|
79,442
|
|
|
—
|
|
Securities sold under repurchase agreements
|
587
|
|
|
587
|
|
|
—
|
|
|
587
|
|
|
—
|
|
Short-term borrowings under the MMLF
program
|
200
|
|
|
200
|
|
|
—
|
|
|
200
|
|
|
—
|
|
Other short-term borrowings
|
642
|
|
|
642
|
|
|
—
|
|
|
642
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
13,836
|
|
|
13,904
|
|
|
—
|
|
|
13,801
|
|
|
103
|
|
Other(1)
|
6,757
|
|
|
6,757
|
|
|
—
|
|
|
6,757
|
|
|
—
|
|
(1) Includes $7 million of loans classified as held-for-sale that were measured at fair value in level 2 as of March 31, 2021.
(2) Represents a portion of underlying client assets related to our enhanced custody business, which clients have allowed us to transfer and re-pledge.
State Street Corporation | 57
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Hierarchy
|
(In millions)
|
Reported Amount
|
|
Estimated Fair Value
|
|
Quoted Market Prices in Active Markets (Level 1)
|
|
Pricing Methods with Significant Observable Market Inputs (Level 2)
|
|
Pricing Methods with Significant Unobservable Market Inputs (Level 3)
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
Financial Assets:
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
$
|
3,467
|
|
|
$
|
3,467
|
|
|
$
|
3,467
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest-bearing deposits with banks
|
116,960
|
|
|
116,960
|
|
|
—
|
|
|
116,960
|
|
|
—
|
|
Securities purchased under resale agreements
|
3,106
|
|
|
3,106
|
|
|
—
|
|
|
3,106
|
|
|
—
|
|
HTM securities purchased under the MMLF
program
|
3,299
|
|
|
3,304
|
|
|
—
|
|
|
3,304
|
|
|
—
|
|
Investment securities held-to-maturity
|
48,929
|
|
|
50,003
|
|
|
6,115
|
|
|
43,888
|
|
|
—
|
|
Net loans
|
27,803
|
|
|
27,884
|
|
|
—
|
|
|
25,668
|
|
|
2,216
|
|
Other(1)
|
4,753
|
|
|
4,753
|
|
|
—
|
|
|
4,753
|
|
|
—
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
Non-interest-bearing
|
$
|
49,439
|
|
|
$
|
49,439
|
|
|
$
|
—
|
|
|
$
|
49,439
|
|
|
$
|
—
|
|
Interest-bearing - U.S.
|
102,331
|
|
|
102,331
|
|
|
—
|
|
|
102,331
|
|
|
—
|
|
Interest-bearing - non-U.S.
|
88,028
|
|
|
88,028
|
|
|
—
|
|
|
88,028
|
|
|
—
|
|
Securities sold under repurchase agreements
|
3,413
|
|
|
3,413
|
|
|
—
|
|
|
3,413
|
|
|
—
|
|
Short-term borrowings under the MMLF
program
|
3,302
|
|
|
3,302
|
|
|
—
|
|
|
3,302
|
|
|
—
|
|
Other short-term borrowings
|
685
|
|
|
685
|
|
|
—
|
|
|
685
|
|
|
—
|
|
Long-term debt
|
13,805
|
|
|
14,162
|
|
|
—
|
|
|
14,049
|
|
|
113
|
|
Other(1)
|
4,753
|
|
|
4,753
|
|
|
—
|
|
|
4,753
|
|
|
—
|
|
(1) Represents a portion of underlying client assets related to our enhanced custody business, which clients have allowed us to transfer and re-pledge.
Note 3. Investment Securities
Investment securities held by us are classified as either trading account assets, AFS, HTM or equity securities held at fair value at the time of purchase and reassessed periodically, based on management’s intent. For additional information on our accounting for investment securities, refer to page 143 in Note 3 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2020 Form 10-K.
Trading assets are carried at fair value. Both realized and unrealized gains and losses on trading assets are recorded in foreign exchange trading services revenue in our consolidated statement of income. AFS securities are carried at fair value, with any allowance for credit losses recorded through the consolidated statement of income and after-tax net unrealized gains and losses are recorded in AOCI. Gains or losses realized on sales of AFS investment securities are computed using the specific identification method and are recorded in gains (losses) related to investment securities, net, in our consolidated statement of income.
Starting in the first quarter of 2020, we supported our clients' liquidity needs through the MMLF program, purchasing a total of $29 billion of investment securities under that program, $0.2 billion of which remain outstanding as of March 31, 2021.
HTM investment securities are carried at cost, adjusted for amortization of premiums and accretion of discounts, with any allowance for credit losses recorded through the consolidated statement of income. As of March 31, 2021, we recognized an allowance for credit losses on HTM investment securities of $2 million.
State Street Corporation | 58
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table presents the amortized cost, fair value and associated unrealized gains and losses of AFS and HTM investment securities as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Amortized
Cost
|
|
Gross
Unrealized
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Gross
Unrealized
|
|
Fair
Value
|
(In millions)
|
Gains
|
|
Losses
|
|
Gains
|
|
Losses
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal agencies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct obligations
|
$
|
8,948
|
|
|
$
|
28
|
|
|
$
|
39
|
|
|
$
|
8,937
|
|
|
$
|
6,453
|
|
|
$
|
123
|
|
|
$
|
1
|
|
|
$
|
6,575
|
|
Mortgage-backed securities
|
14,181
|
|
|
326
|
|
|
82
|
|
|
14,425
|
|
|
13,891
|
|
|
421
|
|
|
7
|
|
|
14,305
|
|
Total U.S. Treasury and federal agencies
|
23,129
|
|
|
354
|
|
|
121
|
|
|
23,362
|
|
|
20,344
|
|
|
544
|
|
|
8
|
|
|
20,880
|
|
Asset-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Student loans(1)
|
283
|
|
|
5
|
|
|
—
|
|
|
288
|
|
|
313
|
|
|
2
|
|
|
1
|
|
|
314
|
|
Credit cards
|
90
|
|
|
1
|
|
|
—
|
|
|
91
|
|
|
90
|
|
|
—
|
|
|
—
|
|
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized loan obligations
|
3,770
|
|
|
6
|
|
|
1
|
|
|
3,775
|
|
|
2,969
|
|
|
3
|
|
|
6
|
|
|
2,966
|
|
Non-agency CMBS and RMBS(2)
|
70
|
|
|
1
|
|
|
—
|
|
|
71
|
|
|
76
|
|
|
2
|
|
|
—
|
|
|
78
|
|
Total asset-backed securities
|
4,213
|
|
|
13
|
|
|
1
|
|
|
4,225
|
|
|
3,448
|
|
|
7
|
|
|
7
|
|
|
3,448
|
|
Non-U.S. debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
2,021
|
|
|
11
|
|
|
—
|
|
|
2,032
|
|
|
1,994
|
|
|
4
|
|
|
2
|
|
|
1,996
|
|
Asset-backed securities
|
2,296
|
|
|
2
|
|
|
1
|
|
|
2,297
|
|
|
2,294
|
|
|
1
|
|
|
4
|
|
|
2,291
|
|
Government securities
|
9,773
|
|
|
138
|
|
|
1
|
|
|
9,910
|
|
|
12,337
|
|
|
202
|
|
|
—
|
|
|
12,539
|
|
Other(3)
|
13,679
|
|
|
111
|
|
|
81
|
|
|
13,709
|
|
|
12,729
|
|
|
177
|
|
|
3
|
|
|
12,903
|
|
Total non-U.S. debt securities
|
27,769
|
|
|
262
|
|
|
83
|
|
|
27,948
|
|
|
29,354
|
|
|
384
|
|
|
9
|
|
|
29,729
|
|
State and political subdivisions(4)
|
1,431
|
|
|
69
|
|
|
2
|
|
|
1,498
|
|
|
1,470
|
|
|
80
|
|
|
2
|
|
|
1,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other U.S. debt securities
|
3,437
|
|
|
51
|
|
|
9
|
|
|
3,479
|
|
|
3,371
|
|
|
72
|
|
|
—
|
|
|
3,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale securities(5)
|
$
|
59,979
|
|
|
$
|
749
|
|
|
$
|
216
|
|
|
$
|
60,512
|
|
|
$
|
57,987
|
|
|
$
|
1,087
|
|
|
$
|
26
|
|
|
$
|
59,048
|
|
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal agencies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct obligations
|
$
|
5,530
|
|
|
$
|
61
|
|
|
$
|
—
|
|
|
$
|
5,591
|
|
|
$
|
6,057
|
|
|
$
|
83
|
|
|
$
|
—
|
|
|
$
|
6,140
|
|
Mortgage-backed securities
|
34,930
|
|
|
629
|
|
|
322
|
|
|
35,237
|
|
|
36,901
|
|
|
955
|
|
|
67
|
|
|
37,789
|
|
Total U.S. Treasury and federal agencies
|
40,460
|
|
|
690
|
|
|
322
|
|
|
40,828
|
|
|
42,958
|
|
|
1,038
|
|
|
67
|
|
|
43,929
|
|
Asset-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Student loans(1)
|
4,745
|
|
|
43
|
|
|
20
|
|
|
4,768
|
|
|
4,774
|
|
|
33
|
|
|
25
|
|
|
4,782
|
|
Non-agency CMBS and RMBS(6)
|
526
|
|
|
32
|
|
|
1
|
|
|
557
|
|
|
554
|
|
|
30
|
|
|
1
|
|
|
583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total asset-backed securities
|
5,271
|
|
|
75
|
|
|
21
|
|
|
5,325
|
|
|
5,328
|
|
|
63
|
|
|
26
|
|
|
5,365
|
|
Non-U.S. debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
286
|
|
|
70
|
|
|
3
|
|
|
353
|
|
|
303
|
|
|
68
|
|
|
4
|
|
|
367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government securities
|
246
|
|
|
—
|
|
|
—
|
|
|
246
|
|
|
342
|
|
|
—
|
|
|
—
|
|
|
342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-U.S. debt securities
|
532
|
|
|
70
|
|
|
3
|
|
|
599
|
|
|
645
|
|
|
68
|
|
|
4
|
|
|
709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(5)(7)
|
46,263
|
|
|
835
|
|
|
346
|
|
|
46,752
|
|
|
48,931
|
|
|
1,169
|
|
|
97
|
|
|
50,003
|
|
HTM securities purchased under the MMLF program
|
201
|
|
|
—
|
|
|
—
|
|
|
201
|
|
|
3,300
|
|
|
4
|
|
|
—
|
|
|
3,304
|
|
Total held-to-maturity securities(5)
|
$
|
46,464
|
|
|
$
|
835
|
|
|
$
|
346
|
|
|
$
|
46,953
|
|
|
$
|
52,231
|
|
|
$
|
1,173
|
|
|
$
|
97
|
|
|
$
|
53,307
|
|
(1) Primarily comprised of securities guaranteed by the federal government with respect to at least 97% of defaulted principal and accrued interest on the underlying loans.
(2) Consists entirely of non-agency CMBS as of both March 31, 2021 and December 31, 2020.
(3) As of March 31, 2021 and December 31, 2020, the fair value of other non-U.S. debt securities included $10.13 billion and $9.55 billion, respectively, primarily of supranational and non-U.S. agency bonds, $1.90 billion and $1.88 billion, respectively, of corporate bonds and $0.43 billion and $0.47 billion, respectively, of covered bonds.
(4) As of both March 31, 2021 and December 31, 2020, the fair value of state and political subdivisions includes securities in trusts of $0.70 billion. Additional information about these trusts is provided in Note 11.
(5) An immaterial amount of accrued interest related to HTM and AFS investment securities was excluded from the amortized cost basis for the period ended March 31, 2021.
(6) As of March 31, 2021 and December 31, 2020, the total amortized cost included $446 million and $464 million, respectively, of non-agency CMBS and $80 million and $90 million of non-agency RMBS, respectively.
(7) As of March 31, 2021, we recognized an allowance for credit losses of $2 million on HTM investment securities.
State Street Corporation | 59
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Aggregate investment securities with carrying values of approximately $71.70 billion and $70.57 billion as of March 31, 2021 and December 31, 2020, respectively, were designated as pledged for public and trust deposits, short-term borrowings and for other purposes as provided by law.
The following tables present the aggregate fair values of AFS investment securities that have been in a continuous unrealized loss position for less than 12 months, and those that have been in a continuous unrealized loss position for 12 months or longer, as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2021
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
(In millions)
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal agencies:
|
|
|
|
|
|
|
|
|
|
|
|
Direct obligations
|
$
|
5,438
|
|
|
$
|
39
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,438
|
|
|
$
|
39
|
|
Mortgage-backed securities
|
3,753
|
|
|
82
|
|
|
11
|
|
|
—
|
|
|
3,764
|
|
|
82
|
|
Total U.S. Treasury and federal agencies
|
9,191
|
|
|
121
|
|
|
11
|
|
|
—
|
|
|
9,202
|
|
|
121
|
|
Asset-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized loan obligations
|
985
|
|
|
—
|
|
|
234
|
|
|
1
|
|
|
1,219
|
|
|
1
|
|
Total asset-backed securities
|
985
|
|
|
—
|
|
|
234
|
|
|
1
|
|
|
1,219
|
|
|
1
|
|
Non-U.S. debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-backed securities
|
231
|
|
|
—
|
|
|
895
|
|
|
1
|
|
|
1,126
|
|
|
1
|
|
Government securities
|
1,570
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1,570
|
|
|
1
|
|
Other
|
4,618
|
|
|
81
|
|
|
71
|
|
|
—
|
|
|
4,689
|
|
|
81
|
|
Total non-U.S. debt securities
|
6,419
|
|
|
82
|
|
|
966
|
|
|
1
|
|
|
7,385
|
|
|
83
|
|
State and political subdivisions
|
60
|
|
|
—
|
|
|
46
|
|
|
2
|
|
|
106
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other U.S. debt securities
|
922
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
922
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
17,577
|
|
|
$
|
212
|
|
|
$
|
1,257
|
|
|
$
|
4
|
|
|
$
|
18,834
|
|
|
$
|
216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
(In millions)
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal agencies:
|
|
|
|
|
|
|
|
|
|
|
|
Direct obligations
|
$
|
1,636
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,636
|
|
|
$
|
1
|
|
Mortgage-backed securities
|
1,394
|
|
|
7
|
|
|
63
|
|
|
—
|
|
|
1,457
|
|
|
7
|
|
Total U.S. Treasury and federal agencies
|
3,030
|
|
|
8
|
|
|
63
|
|
|
—
|
|
|
3,093
|
|
|
8
|
|
Asset-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
Student loans
|
31
|
|
|
—
|
|
|
197
|
|
|
1
|
|
|
228
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized loan obligations
|
1,498
|
|
|
4
|
|
|
369
|
|
|
2
|
|
|
1,867
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total asset-backed securities
|
1,529
|
|
|
4
|
|
|
566
|
|
|
3
|
|
|
2,095
|
|
|
7
|
|
Non-U.S. debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
600
|
|
|
1
|
|
|
120
|
|
|
1
|
|
|
720
|
|
|
2
|
|
Asset-backed securities
|
1,015
|
|
|
3
|
|
|
446
|
|
|
1
|
|
|
1,461
|
|
|
4
|
|
Government securities
|
489
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
489
|
|
|
—
|
|
Other
|
715
|
|
|
3
|
|
|
80
|
|
|
—
|
|
|
795
|
|
|
3
|
|
Total non-U.S. debt securities
|
2,819
|
|
|
7
|
|
|
646
|
|
|
2
|
|
|
3,465
|
|
|
9
|
|
State and political subdivisions
|
95
|
|
|
—
|
|
|
76
|
|
|
2
|
|
|
171
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other U.S. debt securities
|
17
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
7,490
|
|
|
$
|
19
|
|
|
$
|
1,351
|
|
|
$
|
7
|
|
|
$
|
8,841
|
|
|
$
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State Street Corporation | 60
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table presents the amortized cost and the fair value of contractual maturities of debt investment securities as of March 31, 2021. The maturities of certain ABS, MBS and collateralized mortgage obligations are based on expected principal payments. Actual maturities may differ from these expected maturities since certain borrowers have the right to prepay obligations with or without prepayment penalties.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2021
|
(In millions)
|
Under 1 Year
|
|
1 to 5 Years
|
|
6 to 10 Years
|
|
Over 10 Years
|
|
Total
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal agencies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct obligations
|
$
|
3,211
|
|
|
$
|
3,219
|
|
|
$
|
3,524
|
|
|
$
|
3,513
|
|
|
$
|
2,213
|
|
|
$
|
2,205
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,948
|
|
|
$
|
8,937
|
|
Mortgage-backed securities
|
109
|
|
|
114
|
|
|
795
|
|
|
808
|
|
|
3,808
|
|
|
3,830
|
|
|
9,469
|
|
|
9,673
|
|
|
14,181
|
|
|
14,425
|
|
Total U.S. Treasury and federal agencies
|
3,320
|
|
|
3,333
|
|
|
4,319
|
|
|
4,321
|
|
|
6,021
|
|
|
6,035
|
|
|
9,469
|
|
|
9,673
|
|
|
23,129
|
|
|
23,362
|
|
Asset-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Student loans
|
123
|
|
|
127
|
|
|
54
|
|
|
53
|
|
|
—
|
|
|
—
|
|
|
106
|
|
|
108
|
|
|
283
|
|
|
288
|
|
Credit cards
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
90
|
|
|
91
|
|
|
—
|
|
|
—
|
|
|
90
|
|
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized loan obligations
|
71
|
|
|
71
|
|
|
961
|
|
|
963
|
|
|
1,398
|
|
|
1,399
|
|
|
1,340
|
|
|
1,342
|
|
|
3,770
|
|
|
3,775
|
|
Non-agency CMBS and RMBS
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
70
|
|
|
71
|
|
|
70
|
|
|
71
|
|
Total asset-backed securities
|
194
|
|
|
198
|
|
|
1,015
|
|
|
1,016
|
|
|
1,488
|
|
|
1,490
|
|
|
1,516
|
|
|
1,521
|
|
|
4,213
|
|
|
4,225
|
|
Non-U.S. debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
276
|
|
|
277
|
|
|
576
|
|
|
578
|
|
|
49
|
|
|
50
|
|
|
1,120
|
|
|
1,127
|
|
|
2,021
|
|
|
2,032
|
|
Asset-backed securities
|
299
|
|
|
299
|
|
|
1,101
|
|
|
1,101
|
|
|
525
|
|
|
526
|
|
|
371
|
|
|
371
|
|
|
2,296
|
|
|
2,297
|
|
Government securities
|
2,526
|
|
|
2,527
|
|
|
6,736
|
|
|
6,866
|
|
|
453
|
|
|
458
|
|
|
58
|
|
|
59
|
|
|
9,773
|
|
|
9,910
|
|
Other
|
1,823
|
|
|
1,830
|
|
|
9,370
|
|
|
9,407
|
|
|
2,375
|
|
|
2,367
|
|
|
111
|
|
|
105
|
|
|
13,679
|
|
|
13,709
|
|
Total non-U.S. debt securities
|
4,924
|
|
|
4,933
|
|
|
17,783
|
|
|
17,952
|
|
|
3,402
|
|
|
3,401
|
|
|
1,660
|
|
|
1,662
|
|
|
27,769
|
|
|
27,948
|
|
State and political subdivisions
|
144
|
|
|
144
|
|
|
609
|
|
|
631
|
|
|
506
|
|
|
544
|
|
|
172
|
|
|
179
|
|
|
1,431
|
|
|
1,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other U.S. debt securities
|
590
|
|
|
594
|
|
|
2,786
|
|
|
2,820
|
|
|
61
|
|
|
65
|
|
|
—
|
|
|
—
|
|
|
3,437
|
|
|
3,479
|
|
Total
|
$
|
9,172
|
|
|
$
|
9,202
|
|
|
$
|
26,512
|
|
|
$
|
26,740
|
|
|
$
|
11,478
|
|
|
$
|
11,535
|
|
|
$
|
12,817
|
|
|
$
|
13,035
|
|
|
$
|
59,979
|
|
|
$
|
60,512
|
|
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal agencies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct obligations
|
$
|
4,405
|
|
|
$
|
4,444
|
|
|
$
|
1,104
|
|
|
$
|
1,126
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
20
|
|
|
$
|
20
|
|
|
$
|
5,530
|
|
|
$
|
5,591
|
|
Mortgage-backed securities
|
220
|
|
|
228
|
|
|
350
|
|
|
357
|
|
|
5,104
|
|
|
5,031
|
|
|
29,256
|
|
|
29,621
|
|
|
34,930
|
|
|
35,237
|
|
Total U.S. Treasury and federal agencies
|
4,625
|
|
|
4,672
|
|
|
1,454
|
|
|
1,483
|
|
|
5,105
|
|
|
5,032
|
|
|
29,276
|
|
|
29,641
|
|
|
40,460
|
|
|
40,828
|
|
Asset-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Student loans
|
364
|
|
|
357
|
|
|
125
|
|
|
123
|
|
|
901
|
|
|
908
|
|
|
3,355
|
|
|
3,380
|
|
|
4,745
|
|
|
4,768
|
|
Non-agency CMBS and RMBS
|
135
|
|
|
147
|
|
|
253
|
|
|
255
|
|
|
2
|
|
|
2
|
|
|
136
|
|
|
153
|
|
|
526
|
|
|
557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total asset-backed securities
|
499
|
|
|
504
|
|
|
378
|
|
|
378
|
|
|
903
|
|
|
910
|
|
|
3,491
|
|
|
3,533
|
|
|
5,271
|
|
|
5,325
|
|
Non-U.S. debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
84
|
|
|
81
|
|
|
22
|
|
|
22
|
|
|
—
|
|
|
—
|
|
|
180
|
|
|
250
|
|
|
286
|
|
|
353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government securities
|
246
|
|
|
246
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
246
|
|
|
246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-U.S. debt securities
|
330
|
|
|
327
|
|
|
22
|
|
|
22
|
|
|
—
|
|
|
—
|
|
|
180
|
|
|
250
|
|
|
532
|
|
|
599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
5,454
|
|
|
5,503
|
|
|
1,854
|
|
|
1,883
|
|
|
6,008
|
|
|
5,942
|
|
|
32,947
|
|
|
33,424
|
|
|
46,263
|
|
|
46,752
|
|
Held-to-maturity under money market mutual fund liquidity facility
|
201
|
|
|
201
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
201
|
|
|
201
|
|
Total held-to-maturity securities
|
$
|
5,655
|
|
|
$
|
5,704
|
|
|
$
|
1,854
|
|
|
$
|
1,883
|
|
|
$
|
6,008
|
|
|
$
|
5,942
|
|
|
$
|
32,947
|
|
|
$
|
33,424
|
|
|
$
|
46,464
|
|
|
$
|
46,953
|
|
State Street Corporation | 61
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Interest income related to debt securities is recognized in our consolidated statement of income using the effective interest method, or on a basis approximating a level rate of return over the contractual or estimated life of the security. The level rate of return considers any non-refundable fees or costs, as well as purchase premiums or discounts, adjusted as prepayments occur, resulting in amortization or accretion, accordingly.
Allowance for Credit Losses on Debt Securities and Impairment of AFS Securities
We conduct quarterly reviews of HTM and AFS securities on a collective (pool) basis when similar risk characteristics exist to determine whether an allowance for credit losses should be recognized. We review individual AFS securities periodically to assess if additional impairment is required. For additional information about the review of investment securities for expected credit losses or impairment, refer to pages 148 to 149 in Note 3 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2020 Form 10-K.
We monitor the credit quality of the HTM and AFS investment securities using a variety of methods, including both external and internal credit ratings. As of March 31, 2021, 99% of our HTM and AFS investment portfolio is publicly rated investment grade.
Our allowance for credit losses on our HTM securities is approximately $2 million as of March 31, 2021. In the first quarter of 2021, we recorded a $1 million reserve release and no charge-offs on HTM securities.
After a review of the investment portfolio, taking into consideration then-current economic conditions, adverse situations that might affect our ability to fully collect principal and interest, the timing of future payments, the credit quality and performance of the collateral underlying MBS and ABS and other relevant factors, management considers the aggregate decline in fair value of the investment securities portfolio and the resulting gross pre-tax unrealized losses of $562 million related to 664 securities as of March 31, 2021 to not be the result of any material changes in the credit characteristics of the securities.
Note 4. Loans and Allowance for Credit Losses
We segregate our loans into two segments: commercial and financial loans and commercial real estate loans. We further classify commercial and financial loans as fund finance loans, leveraged loans, overdrafts and other. These classifications reflect their risk characteristics, their initial measurement attributes and the methods we use to monitor and assess credit risk. For additional information on our loans, including our internal risk-rating system used to assess our risk of credit loss for each loan, refer to pages 149 to 154 in Note 4 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2020 Form 10-K.
The following table presents our recorded investment in loans, by segment, as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
March 31, 2021
|
|
December 31, 2020
|
|
|
Domestic(1):
|
|
|
|
|
|
Commercial and financial:
|
|
|
|
|
|
Fund Finance(2)
|
$
|
11,054
|
|
|
11,531
|
|
|
|
Leveraged loans
|
3,103
|
|
|
2,923
|
|
|
|
Overdrafts
|
4,507
|
|
|
1,894
|
|
|
|
Other(3)
|
1,963
|
|
|
2,688
|
|
|
|
Commercial real estate
|
2,096
|
|
|
2,096
|
|
|
|
|
|
|
|
|
|
Total domestic
|
22,723
|
|
|
21,132
|
|
|
|
Foreign(1):
|
|
|
|
|
|
Commercial and financial:
|
|
|
|
|
|
Fund Finance(2)
|
4,768
|
|
|
4,432
|
|
|
|
Leveraged loans
|
1,109
|
|
|
1,242
|
|
|
|
Overdrafts
|
2,956
|
|
|
1,088
|
|
|
|
Other(3)
|
29
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total foreign
|
8,862
|
|
|
6,793
|
|
|
|
Total loans(2)
|
31,585
|
|
|
27,925
|
|
|
|
Allowance for credit losses
|
(118)
|
|
|
(122)
|
|
|
|
Loans, net of allowance
|
$
|
31,467
|
|
|
$
|
27,803
|
|
|
|
(1) Domestic and foreign categorization is based on the borrower’s country of domicile.
(2) Fund finance loans include primarily $6,288 million loans to real money funds, $8,450 million private equity capital call finance loans and $832 million loans to business development companies as of March 31, 2021, compared to $6,391 million loans to real money funds, $8,380 million private equity capital call finance loans and $821 million loans to business development companies as of December 31, 2020.
(3) Includes $1,110 million securities finance loans, $831 million loans to municipalities and $51 million other loans as of March 31, 2021 and $1,911 million securities finance loans, $754 million loans to municipalities and $54 million other loans as of December 31, 2020.
The commercial and financial segment is composed of primarily fund finance loans, purchased leveraged loans, overdrafts and other loans. Fund finance loans are composed of revolving credit lines providing liquidity and leverage to mutual fund and private equity fund clients.
Certain loans are pledged as collateral for access to the Federal Reserve's discount window. As of March 31, 2021 and December 31, 2020, the loans
State Street Corporation | 62
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
pledged as collateral totaled $8.63 billion and $8.07 billion, respectively.
As of March 31, 2021 and December 31, 2020, we had no loans on non-accrual status.
We sold $42 million of leveraged loans in the first quarter of 2021 of which $7 million remained unsettled and was held for sale as of March 31, 2021.
In certain circumstances, we restructure troubled loans by granting concessions to borrowers experiencing financial difficulty. Once restructured, the loans are generally considered impaired until their maturity, regardless of whether the borrowers perform under the modified terms of the loans. There were no loans modified in troubled debt restructurings during the first quarter of 2021.
Allowance for Credit Losses
We recognize an allowance for credit losses in accordance with ASC 326 for financial assets held at amortized cost and off-balance sheet commitments. The allowance for credit losses is reviewed on a regular basis, and any provision for credit losses is recorded to reflect the amount necessary to maintain the allowance for expected credit losses at a level which represents what management does not expect to recover due to expected credit losses. For additional discussion on the allowance for credit losses for investment securities, please refer to Note 3, to the consolidated financial statements in this Form 10-Q.
When the allowance is recorded, a provision for credit loss expense is recognized in net income. The allowance for credit losses for financial assets (excluding investment securities, as discussed in Note 3) represents the portion of the amortized cost basis, including accrued interest for financial assets held at amortized cost, which management does not expect to recover due to expected credit losses and is presented on the statement of condition as an offset to the amortized cost basis. The accrued interest balance is presented separately on the statement of condition within accrued interest and fees receivable. The allowance for off-balance sheet commitments is presented within other liabilities.
The allowance for credit losses may be determined using various methods, including discounted cash flow methods, loss-rate methods, probability-of-default methods, and other quantitative or qualitative methods as determined by us. The method used to estimate expected credit losses may vary depending on the type of financial asset, our ability to predict the timing of cash flows, and the information available to us.
We measure expected credit losses of financial assets on a collective (pool) basis when similar risk characteristic exist. Each reporting period, we assess whether the assets in the pool continue to display similar risk characteristics.
For a financial asset that does not share risk characteristics with other assets, expected credit losses are measured as the difference between the discounted value of the expected future cash flows, utilizing the effective interest rate and the amortized cost basis of the asset. As of March 31, 2021, we had nine loans for $212 million in the commercial and financial segment that no longer met the similar risk characteristics of their collective pool. We recorded an allowance for credit losses of $20 million as of March 31, 2021 on these loans.
Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. In future periods, factors and forecasts then prevailing may result in significant changes in the allowance for credit losses in those future periods.
We estimate credit losses over the contractual life of the financial asset, while factoring in prepayment activity, where supported by data, over a three year reasonable and supportable forecast period. We utilize a baseline, upside and downside scenario which are applied based on a probability weighting, in order to better reflect management’s expectation of expected credit losses given existing market conditions and the changes in the economic environment. The multiple scenarios are based on a three year horizon (or less depending on contractual maturity) and then revert linearly over a two year period to a ten-year historical average thereafter. The contractual term excludes expected extensions, renewals and modifications, but includes prepayment assumptions where applicable.
As part of our allowance methodology, we establish qualitative reserves to address any risks inherent in our portfolio that are not addressed through our quantitative reserve assessment. These factors may relate to, among other things, legislation changes or new regulation, credit concentration, loan markets, scenario weighting and overall model limitations. The qualitative adjustments are applied to our portfolio of financial instruments under the existing governance structure and are inherently judgmental.
For additional information on the allowance for credit losses, refer to pages 150 to 151 in Note 4 to the consolidated financial statements included under item 8, Financial Statements and Supplementary Data, in our 2020 Form 10-K.
State Street Corporation | 63
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Credit Quality
Credit quality for financial assets held at amortized cost are continuously monitored by management and is reflected within the allowance for credit losses.
We use an internal risk-rating system to assess our risk of credit loss for each loan. This risk-rating process incorporates the use of risk-rating tools in conjunction with management judgment. Qualitative and quantitative inputs are captured in a systematic manner, and following a formal review and approval process, an internal credit rating based on our credit scale is assigned.
When computing allowance levels, credit loss assumptions are estimated using a model that categorizes asset pools based on loss history, delinquency status and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. In future periods evaluations of the overall asset portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and credit loss expense in those future periods.
Credit quality is assessed and monitored by evaluating various attributes in order to enable the earliest possible detection of any concerns with the customer’s credit rating. The results of those evaluations are utilized in underwriting new loans and transactions with counterparties and in our process for estimation of expected credit losses.
In assessing the risk rating assigned to each individual loan, among the factors considered are the borrower's debt capacity, collateral coverage, payment history and delinquency experience, financial flexibility and earnings strength, the expected amounts and source of repayment, the level and nature of contingencies, if any, and the industry
and geography in which the borrower operates. These factors are based on an evaluation of historical and current information, and involve subjective assessment and interpretation. Credit counterparties are evaluated and risk-rated on an individual basis at least annually. Management considers the ratings to be current as of March 31, 2021.
Our internal risk rating methodology assigns risk ratings to counterparties ranging from Investment Grade, Speculative, Special Mention, Substandard, Doubtful and Loss.
•Investment Grade. Counterparties with strong credit quality and low expected credit risk and probability of default. Approximately 82% of our loans were rated as investment grade as of March 31, 2021 with external credit ratings, or equivalent, of "BBB-" or better.
•Speculative. Counterparties that have the ability to repay but face significant uncertainties, such as adverse business, financial circumstances that could affect credit risk or economic downturns. Loans to counterparties rated as speculative account for approximately 17% of our loans as of March 31, 2021, and are concentrated in leveraged loans. Approximately 86% of those leveraged loans have an external credit rating, or equivalent, of "BB" or "B" as of March 31, 2021.
•Special Mention. Counterparties with potential weaknesses that, if uncorrected, may result in deterioration of repayment prospects.
•Substandard. Counterparties with well-defined weakness that jeopardizes repayment with the possibility we will sustain some loss.
•Doubtful. Counterparties with well-defined weakness which make collection or liquidation in full highly questionable and improbable.
•Loss. Counterparties which are uncollectible or have little value.
State Street Corporation | 64
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following tables present our recorded loans to counterparties by risk rating, as noted above, as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
Commercial and Financial
|
|
Commercial Real Estate
|
|
Total Loans
|
(In millions)
|
Investment grade
|
$
|
24,147
|
|
|
$
|
1,675
|
|
|
$
|
25,822
|
|
Speculative
|
5,088
|
|
|
421
|
|
|
5,509
|
|
Special mention
|
111
|
|
|
—
|
|
|
111
|
|
Substandard
|
127
|
|
|
—
|
|
|
127
|
|
Doubtful
|
16
|
|
|
—
|
|
|
16
|
|
|
|
|
|
|
|
Total(1)
|
$
|
29,489
|
|
|
$
|
2,096
|
|
|
$
|
31,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
Commercial and Financial
|
|
Commercial Real Estate
|
|
Total Loans
|
(In millions)
|
Investment grade
|
$
|
20,859
|
|
|
$
|
1,724
|
|
|
$
|
22,583
|
|
Speculative
|
4,852
|
|
|
372
|
|
|
5,224
|
|
Special mention
|
67
|
|
|
—
|
|
|
67
|
|
Substandard
|
34
|
|
|
—
|
|
|
34
|
|
Doubtful
|
17
|
|
|
—
|
|
|
17
|
|
Total(1)
|
$
|
25,829
|
|
|
$
|
2,096
|
|
|
$
|
27,925
|
|
(1) Loans Include $7,463 million and $2,982 million of overdrafts as of March 31, 2021 and December 31, 2020 respectively. Overdrafts are short-term in nature and do not present a significant credit risk to us.
For additional information about credit quality, refer to pages 151 to 154 in Note 4 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2020 Form 10-K.
The following table presents the amortized cost basis, by year of origination and credit quality indicator as of March 31, 2021. For origination years before the fifth annual period, we present the aggregate amortized cost basis of loans. For purchased loans, the date of issuance is used to determine the year of origination, not the date of acquisition. For modified, extended or renewed lending arrangements, we evaluate whether a credit event has occurred which would consider the loan to be a new arrangement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
2021
|
|
2020
|
|
2019
|
|
2018
|
|
2017
|
|
|
|
Prior
|
|
Revolving Loans
|
|
Total(1)
|
Domestic loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and financial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Rating:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment grade
|
$
|
4,563
|
|
|
$
|
58
|
|
|
$
|
385
|
|
|
$
|
4
|
|
|
$
|
162
|
|
|
|
|
$
|
200
|
|
|
$
|
11,767
|
|
|
$
|
17,139
|
|
Speculative
|
346
|
|
|
438
|
|
|
822
|
|
|
721
|
|
|
556
|
|
|
|
|
42
|
|
|
349
|
|
|
3,274
|
|
Special mention
|
—
|
|
|
—
|
|
|
48
|
|
|
29
|
|
|
34
|
|
|
|
|
—
|
|
|
—
|
|
|
111
|
|
Substandard
|
—
|
|
|
—
|
|
|
48
|
|
|
26
|
|
|
—
|
|
|
|
|
29
|
|
|
—
|
|
|
103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial and financing
|
$
|
4,909
|
|
|
$
|
496
|
|
|
$
|
1,303
|
|
|
$
|
780
|
|
|
$
|
752
|
|
|
|
|
$
|
271
|
|
|
$
|
12,116
|
|
|
$
|
20,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Rating:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment grade
|
$
|
—
|
|
|
$
|
129
|
|
|
$
|
383
|
|
|
$
|
689
|
|
|
$
|
277
|
|
|
|
|
$
|
197
|
|
|
$
|
—
|
|
|
$
|
1,675
|
|
Speculative
|
120
|
|
|
49
|
|
|
166
|
|
|
57
|
|
|
—
|
|
|
|
|
29
|
|
|
—
|
|
|
$
|
421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate
|
$
|
120
|
|
|
$
|
178
|
|
|
$
|
549
|
|
|
$
|
746
|
|
|
$
|
277
|
|
|
|
|
$
|
226
|
|
|
$
|
—
|
|
|
$
|
2,096
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S. loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and financial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Rating:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment grade
|
$
|
2,275
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
$
|
4,733
|
|
|
$
|
7,008
|
|
Speculative
|
730
|
|
|
176
|
|
|
348
|
|
|
256
|
|
|
177
|
|
|
|
|
63
|
|
|
64
|
|
|
1,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Substandard
|
—
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
24
|
|
Doubtful
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
|
|
|
—
|
|
|
—
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial and financing
|
$
|
3,005
|
|
|
$
|
176
|
|
|
$
|
348
|
|
|
$
|
280
|
|
|
$
|
193
|
|
|
|
|
$
|
63
|
|
|
$
|
4,797
|
|
|
$
|
8,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
$
|
8,034
|
|
|
$
|
850
|
|
|
$
|
2,200
|
|
|
$
|
1,806
|
|
|
$
|
1,222
|
|
|
|
|
$
|
560
|
|
|
$
|
16,913
|
|
|
$
|
31,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Any reserve associated with accrued interest is not material. As of March 31, 2021, accrued interest receivable of $105 million included in the amortized cost basis of loans has been excluded from the amortized cost basis within this table.
State Street Corporation | 65
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table presents the amortized cost basis, by year of origination and credit quality indicator as of December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
2020
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
|
|
Prior
|
|
Revolving Loans
|
|
Total(1)
|
Domestic loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and financial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Rating:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment grade
|
$
|
1,894
|
|
|
$
|
388
|
|
|
$
|
4
|
|
|
$
|
167
|
|
|
$
|
200
|
|
|
|
|
$
|
—
|
|
|
$
|
12,836
|
|
|
$
|
15,489
|
|
Speculative
|
432
|
|
|
942
|
|
|
822
|
|
|
610
|
|
|
43
|
|
|
|
|
—
|
|
|
597
|
|
|
3,446
|
|
Special mention
|
—
|
|
|
28
|
|
|
—
|
|
|
39
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
67
|
|
Substandard
|
—
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
29
|
|
|
|
|
—
|
|
|
—
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial and financing
|
$
|
2,326
|
|
|
$
|
1,363
|
|
|
$
|
826
|
|
|
$
|
816
|
|
|
$
|
272
|
|
|
|
|
$
|
—
|
|
|
$
|
13,433
|
|
|
$
|
19,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Rating:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment grade
|
$
|
178
|
|
|
$
|
383
|
|
|
$
|
688
|
|
|
$
|
277
|
|
|
$
|
197
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,723
|
|
Speculative
|
120
|
|
|
166
|
|
|
58
|
|
|
—
|
|
|
—
|
|
|
|
|
29
|
|
|
—
|
|
|
$
|
373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate
|
$
|
298
|
|
|
$
|
549
|
|
|
$
|
746
|
|
|
$
|
277
|
|
|
$
|
197
|
|
|
|
|
$
|
29
|
|
|
$
|
—
|
|
|
$
|
2,096
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S. loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and financial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Rating:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment grade
|
$
|
1,028
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
$
|
4,343
|
|
|
$
|
5,371
|
|
Speculative
|
283
|
|
|
401
|
|
|
346
|
|
|
162
|
|
|
26
|
|
|
|
|
66
|
|
|
121
|
|
|
1,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Doubtful
|
—
|
|
|
—
|
|
|
—
|
|
|
17
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial and financing
|
$
|
1,311
|
|
|
$
|
401
|
|
|
$
|
346
|
|
|
$
|
179
|
|
|
$
|
26
|
|
|
|
|
$
|
66
|
|
|
$
|
4,464
|
|
|
$
|
6,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
$
|
3,935
|
|
|
$
|
2,313
|
|
|
$
|
1,918
|
|
|
$
|
1,272
|
|
|
$
|
495
|
|
|
|
|
$
|
95
|
|
|
$
|
17,897
|
|
|
$
|
27,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Any reserve associated with accrued interest is not material. As of December 31, 2020, accrued interest receivable of $72 million included in the amortized cost basis of loans has been excluded from the amortized cost basis within this table.
The following table presents the activity in the allowance for credit losses by portfolio and class for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2021
|
|
Commercial and Financial
|
|
|
|
|
|
|
|
|
|
(In millions)
|
Leveraged Loans
|
|
Other Loans(1)
|
|
Commercial Real Estate
|
|
Held-to-Maturity Securities
|
|
Off-Balance Sheet Commitments
|
|
All Other
|
|
Total
|
Allowance for credit losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
97
|
|
|
$
|
17
|
|
|
$
|
8
|
|
|
$
|
3
|
|
|
$
|
22
|
|
|
$
|
1
|
|
|
$
|
148
|
|
Charge-offs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Provision
|
(1)
|
|
|
(5)
|
|
|
6
|
|
|
(1)
|
|
|
(7)
|
|
|
(1)
|
|
|
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation
|
(4)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
$
|
92
|
|
|
$
|
12
|
|
|
$
|
14
|
|
|
$
|
2
|
|
|
$
|
15
|
|
|
$
|
—
|
|
|
$
|
135
|
|
(1) Includes $10 million allowance for credit losses on Fund Finance loans and $2 million on other loans.
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
|
Commercial and Financial
|
|
|
|
|
|
|
|
|
|
(In millions)
|
Leveraged Loans
|
|
Other Loans
|
|
Commercial Real Estate
|
|
Held-to-Maturity Securities
|
|
Off-Balance Sheet Commitments
|
|
All Other
|
|
Total
|
Allowance for credit losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
61
|
|
|
$
|
10
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
19
|
|
|
$
|
1
|
|
|
$
|
93
|
|
Charge-offs
|
(5)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5)
|
|
Provision
|
27
|
|
|
—
|
|
|
2
|
|
|
4
|
|
|
3
|
|
|
—
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
$
|
83
|
|
|
$
|
10
|
|
|
$
|
4
|
|
|
$
|
4
|
|
|
$
|
22
|
|
|
$
|
1
|
|
|
$
|
124
|
|
State Street Corporation | 66
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Loans are reviewed on a regular basis, and any provisions for credit losses that are recorded reflect management's estimate of the amount necessary to maintain the allowance for loan losses at a level considered appropriate to absorb estimated credit losses in the loan portfolio. We reduced the allowance for credit losses by $13 million, principally through a $9 million reserve release in the provision for credit losses in the first quarter of 2021, versus an increase in the allowance for credit losses of $31 million principally through a $36 million provision for credit losses, in the first quarter of 2020. The reduction in the allowance reflects a shift in management’s economic outlook toward economic expansion and limited negative credit migration within our loan portfolio. Allowance estimates remain subject to continued model and economic uncertainty and management may use qualitative adjustments in the allowance estimates. If future data and forecasts deviate relative to the forecasts utilized to determine our allowance for credit losses as of March 31, 2021, or if credit risk migration is higher or lower than forecasted for reasons independent of the economic forecast, our allowance for credit losses will also change.
Note 5. Goodwill and Other Intangible Assets
The following table presents changes in the carrying amount of goodwill during the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
Investment
Servicing(1)
|
|
Investment
Management
|
|
Total
|
Goodwill:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance December 31, 2019
|
$
|
7,289
|
|
|
$
|
267
|
|
|
$
|
7,556
|
|
|
|
|
|
|
|
Foreign currency translation
|
124
|
|
|
3
|
|
|
127
|
|
Ending balance December 31, 2020
|
7,413
|
|
|
270
|
|
|
7,683
|
|
Acquisitions(2)
|
3
|
|
|
—
|
|
|
3
|
|
Foreign currency translation
|
(56)
|
|
|
(1)
|
|
|
(57)
|
|
Ending balance March 31, 2021
|
$
|
7,360
|
|
|
$
|
269
|
|
|
$
|
7,629
|
|
(1) Investment Servicing includes our acquisition of CRD.
(2) On March 31, 2021, Investment Servicing includes our acquisition of the depositary bank and fund administrator activities of Fideuram Bank Luxembourg, a subsidiary of Intesa Sanpaolo, with a total purchase price of approximately EUR 220 million or approximately $258 million. We accounted for this acquisition of a going concern as a business combination and, in accordance with ASC Topic 805, Business Combinations, we have recorded assets acquired and liabilities assumed at their respective fair values as of the acquisition date. The purchase price accounting reflected is provisional and is based upon estimates and assumptions that are subject to change within the measurement period (up to one year from the acquisition date pursuant to ASC 805). The measurement period remains open pending the completion of valuation procedures related to the acquired assets and assumed liabilities, primarily the identifiable intangible assets.
The following table presents changes in the net carrying amount of other intangible assets during the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
Investment
Servicing(1)
|
|
Investment
Management
|
|
Total
|
Other intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance December 31, 2019
|
$
|
1,908
|
|
|
$
|
122
|
|
|
$
|
2,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
|
(206)
|
|
|
(28)
|
|
|
(234)
|
|
Foreign currency translation
|
31
|
|
|
—
|
|
|
31
|
|
Ending balance December 31, 2020
|
1,733
|
|
|
94
|
|
|
1,827
|
|
Acquisitions(2)
|
253
|
|
|
—
|
|
|
253
|
|
Amortization
|
(52)
|
|
|
(6)
|
|
|
(58)
|
|
Foreign currency translation
|
(15)
|
|
|
—
|
|
|
(15)
|
|
Ending balance March 31, 2021
|
$
|
1,919
|
|
|
$
|
88
|
|
|
$
|
2,007
|
|
(1) Investment Servicing includes our acquisition of CRD.
(2) On March 31, 2021, Investment Servicing includes our acquisition of the depositary bank and fund administrator activities, of Fideuram Bank Luxembourg, a subsidiary of Intesa Sanpaolo, for a total purchase price of approximately EUR 220 million or approximately $258 million. We accounted for this acquisition of a going concern as a business combination and, in accordance with ASC Topic 805, Business Combinations, we have recorded assets acquired and liabilities assumed at their respective fair values as of the acquisition date. The purchase price accounting reflected is provisional and is based upon estimates and assumptions that are subject to change within the measurement period (up to one year from the acquisition date pursuant to ASC 805). The measurement period remains open pending the completion of valuation procedures related to the acquired assets and assumed liabilities, primarily the identifiable intangible assets.
The following table presents the gross carrying amount, accumulated amortization and net carrying amount of other intangible assets by type as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
(In millions)
|
|
|
Other intangible assets:
|
|
|
|
|
|
Client relationships
|
$
|
2,827
|
|
|
$
|
(1,387)
|
|
|
$
|
1,440
|
|
Technology
|
386
|
|
|
(115)
|
|
|
271
|
|
Core deposits
|
699
|
|
|
(429)
|
|
|
270
|
|
Other
|
104
|
|
|
(78)
|
|
|
26
|
|
Total
|
$
|
4,016
|
|
|
$
|
(2,009)
|
|
|
$
|
2,007
|
|
|
|
|
|
|
|
December 31, 2020
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
(In millions)
|
|
|
Other intangible assets:
|
|
|
|
|
|
Client relationships
|
$
|
2,704
|
|
|
$
|
(1,450)
|
|
|
$
|
1,254
|
|
Technology
|
393
|
|
|
(113)
|
|
|
280
|
|
Core deposits
|
690
|
|
|
(425)
|
|
|
265
|
|
Other
|
107
|
|
|
(79)
|
|
|
28
|
|
Total
|
$
|
3,894
|
|
|
$
|
(2,067)
|
|
|
$
|
1,827
|
|
|
|
|
|
|
|
State Street Corporation | 67
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 6. Other Assets
The following table presents the components of other assets as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
March 31, 2021
|
|
December 31, 2020
|
Securities borrowed(1)
|
$
|
24,773
|
|
|
$
|
18,330
|
|
Derivative instruments, net
|
8,170
|
|
|
5,804
|
|
Bank-owned life insurance
|
3,502
|
|
|
3,479
|
|
Investments in joint ventures and other unconsolidated entities
|
3,027
|
|
|
3,095
|
|
Collateral, net
|
1,639
|
|
|
2,713
|
|
Receivable for securities settlement
|
1,110
|
|
|
117
|
|
Right-of-use assets
|
632
|
|
|
720
|
|
Accounts receivable
|
468
|
|
|
379
|
|
Prepaid expenses
|
461
|
|
|
383
|
|
Income tax receivable
|
300
|
|
|
367
|
|
Deferred tax assets, net of valuation allowance(2)
|
221
|
|
|
233
|
|
Deposits with clearing organizations
|
58
|
|
|
58
|
|
Other
|
872
|
|
|
832
|
|
Total
|
$
|
45,233
|
|
|
$
|
36,510
|
|
(1) Refer to Note 8, for further information on the impact of collateral on our financial statement presentation of securities borrowing and securities lending transactions.
(2) Deferred tax assets and liabilities recorded in our consolidated statement of condition are netted within the same tax jurisdiction.
Note 7. Derivative Financial Instruments
We use derivative financial instruments to support our clients' needs and to manage our interest rate and currency risks. These financial instruments consist of FX contracts such as forwards, futures and options contracts; interest rate contracts such as interest rate swaps (cross currency and single currency) and futures; and other derivative contracts. Derivative instruments used for risk management purposes that are highly effective in offsetting the risk being hedged are generally designated as hedging instruments in hedge accounting relationships, while others are economic hedges and not designated in hedge accounting relationships. For additional information on our derivative financial instruments, including derivatives not designated as hedging instruments, refer to pages 158 to 159 in Note 10 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2020 Form 10-K.
Derivatives Designated as Hedging Instruments
For additional information on our derivatives designated as hedging instruments, including our risk management objectives and hedging documentation methodologies, refer to page 159 in Note 10 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2020 Form 10-K.
Fair Value Hedges
Derivatives designated as fair value hedges are utilized to mitigate the risk of changes in the fair values of recognized assets and liabilities, including long-term debt and AFS securities. We use interest rate contracts in this manner to manage our exposure to changes in the fair value of hedged items caused by changes in interest rates.
Changes in the fair value of the derivative and changes in fair value of the hedged item due to changes in the hedged risk are recognized in earnings in the same line item. If a hedge is terminated, but the hedged item was not derecognized, all remaining adjustments to the carrying amount of the hedged item are amortized over a period that is consistent with the amortization of other discounts or premiums associated with the hedged item.
Cash Flow Hedges
Derivatives designated as cash flow hedges are utilized to offset the variability of cash flows of recognized assets or liabilities or forecasted transactions. We have entered into FX contracts to hedge the change in cash flows attributable to FX movements in foreign currency denominated investment securities. Additionally, we have entered into interest rate swap agreements to hedge the forecasted cash flows associated with LIBOR indexed floating-rate loans. The interest rate swaps synthetically convert the loan interest receipts from a variable-rate to a fixed-rate, thereby mitigating the risk attributable to changes in the LIBOR benchmark rate.
Changes in fair value of the derivatives designated as cash flow hedges are initially recorded in AOCI and then reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings and are presented in the same income statement line item as the earnings effect of the hedged item. If the hedge relationship is terminated, the change in fair value on the derivative recorded in AOCI is reclassified into earnings consistent with the timing of the hedged item. For hedge relationships that are discontinued because a forecasted transaction is not expected to occur according to the original hedge terms, any related derivative values recorded in AOCI are immediately recognized in earnings.
State Street Corporation | 68
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Net Investment Hedges
Derivatives categorized as net investment hedges are entered into to protect the net investment in our foreign operations against adverse changes in exchange rates. We use FX forward contracts to convert the foreign currency risk to U.S. dollars to mitigate our exposure to fluctuations in FX rates. The changes in fair value of the FX forward contracts are recorded, net of taxes, in the foreign currency translation component of OCI.
The following table presents the aggregate contractual, or notional, amounts of derivative financial instruments, including those entered into for trading and asset-and-liability management activities as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
March 31, 2021
|
|
December 31, 2020
|
Derivatives not designated as hedging instruments:
|
|
|
|
Interest rate contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures
|
$
|
3,238
|
|
|
$
|
2,842
|
|
Foreign exchange contracts:
|
|
|
|
Forward, swap and spot
|
2,735,180
|
|
|
2,640,989
|
|
Options purchased
|
1,333
|
|
|
946
|
|
Options written
|
380
|
|
|
661
|
|
Futures
|
2,639
|
|
|
1,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other:
|
|
|
|
Stable value contracts(1)
|
32,654
|
|
|
32,359
|
|
Deferred value awards(2)
|
443
|
|
|
332
|
|
Derivatives designated as hedging instruments:
|
|
|
|
Interest rate contracts:
|
|
|
|
Swap agreements
|
7,459
|
|
|
7,449
|
|
Foreign exchange contracts:
|
|
|
|
Forward and swap
|
6,055
|
|
|
5,221
|
|
(1) The notional value of the stable value contracts represents our maximum exposure. However, exposure to various stable value contracts is generally contractually limited to substantially lower amounts than the notional values.
(2) Represents grants of deferred value awards to employees; refer to pages 158 to 159 in Note 10 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2020 Form 10-K.
Notional amounts are provided here as an indication of the volume of our derivative activity and serve as a reference to calculate the fair values of the derivative.
The following tables present the fair value of derivative financial instruments, excluding the impact of master netting agreements, recorded in our consolidated statement of condition as of the dates indicated. The impact of master netting agreements is provided in Note 8.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Assets(1)
|
|
Derivative Liabilities(2)
|
(In millions)
|
March 31, 2021
|
|
December 31, 2020
|
|
March 31, 2021
|
|
December 31, 2020
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
$
|
21,776
|
|
|
$
|
25,939
|
|
|
$
|
22,044
|
|
|
$
|
25,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other derivative contracts
|
—
|
|
|
—
|
|
|
181
|
|
|
157
|
|
Total
|
$
|
21,776
|
|
|
$
|
25,939
|
|
|
$
|
22,225
|
|
|
$
|
25,968
|
|
|
|
|
|
|
|
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
$
|
122
|
|
|
$
|
4
|
|
|
$
|
1
|
|
|
$
|
116
|
|
Interest rate contracts
|
1
|
|
|
1
|
|
|
35
|
|
|
42
|
|
Total
|
$
|
123
|
|
|
$
|
5
|
|
|
$
|
36
|
|
|
$
|
158
|
|
(1) Derivative assets are included within other assets in our consolidated statement of condition.
(2) Derivative liabilities are included within other liabilities in our consolidated statement of condition.
State Street Corporation | 69
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following tables present the impact of our use of derivative financial instruments on our consolidated statement of income for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Gain (Loss) on
Derivative in Consolidated
Statement of Income
|
Amount of Gain (Loss) on Derivative Recognized in Consolidated Statement of Income
|
|
|
Three Months Ended March 31,
|
(In millions)
|
|
2021
|
|
2020
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
Foreign exchange contracts
|
Foreign exchange trading services revenue
|
$
|
242
|
|
|
$
|
333
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
Interest expense
|
21
|
|
|
2
|
|
|
|
Interest rate contracts
|
Foreign exchange trading services revenue
|
—
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other derivative contracts
|
Compensation and employee benefits
|
(79)
|
|
|
(67)
|
|
|
|
Total
|
|
$
|
184
|
|
|
$
|
271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the carrying amount and associated cumulative basis adjustments related to the application of hedge accounting that is included in the carrying amount of hedged assets and liabilities in fair value hedging relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
|
|
|
|
Cumulative Fair Value Hedging Adjustment Increasing (Decreasing) the carrying amount
|
|
|
(In millions)
|
Carrying Amount of Hedged Assets/Liabilities
|
|
Active
|
|
De-designated(1)
|
|
|
Long-term debt
|
$
|
9,771
|
|
|
$
|
—
|
|
|
$
|
636
|
|
|
|
Available-for-sale securities
|
2,814
|
|
|
(8)
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
|
|
Cumulative Fair Value Hedging Adjustment Increasing (Decreasing) the carrying amount
|
|
|
(In millions)
|
Carrying Amount of Hedged Assets/Liabilities
|
|
Active
|
|
De-designated(1)
|
|
|
Long-term debt
|
$
|
10,519
|
|
|
$
|
3
|
|
|
$
|
688
|
|
|
|
Available-for-sale securities
|
2,330
|
|
|
2
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Represents hedged items no longer designated in qualifying fair value hedging relationships for which an associated basis adjustment exists at the balance sheet date.
As of March 31, 2021 and December 31, 2020, the total notional amount of the interest rate swaps of fair value hedges was $2.61 billion and $2.60 billion, respectively.
The following tables present the impact of our use of derivative financial instruments on our consolidated statement of income for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
(In millions)
|
Location of Gain (Loss) on Derivative in Consolidated Statement of Income
|
|
Amount of Gain
(Loss) on Derivative
Recognized in
Consolidated
Statement of Income
|
|
Hedged Item in Fair Value Hedging Relationship
|
|
Location of Gain (Loss) on Hedged Item in Consolidated Statement of Income
|
|
Amount of Gain
(Loss) on Hedged
Item Recognized in
Consolidated
Statement of Income
|
Derivatives designated as fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
Net interest income
|
|
$
|
16
|
|
|
$
|
(11)
|
|
|
|
|
Available-for-sale securities(1)
|
|
Net interest income
|
|
$
|
(16)
|
|
|
$
|
10
|
|
|
|
Interest rate contracts
|
Net interest income
|
|
(12)
|
|
|
547
|
|
|
|
|
Long-term debt
|
|
Net interest income
|
|
11
|
|
|
(535)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
4
|
|
|
$
|
536
|
|
|
|
|
|
|
|
|
$
|
(5)
|
|
|
$
|
(525)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) In the first quarter of 2021, approximately $12 million of net unrealized gains on AFS investment securities designated in fair value hedges was recognized in OCI compared to $7 million of net unrealized losses in the same period in 2020.
State Street Corporation | 70
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
Three Months Ended March 31,
|
|
2021
|
|
2020
|
|
|
|
Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
|
|
2021
|
|
2020
|
|
|
(In millions)
|
Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivative
|
|
|
Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
|
Derivatives designated as cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts(1)
|
$
|
(16)
|
|
|
$
|
158
|
|
|
|
|
Net interest income
|
|
$
|
18
|
|
|
$
|
—
|
|
|
|
Foreign exchange contracts
|
36
|
|
|
10
|
|
|
|
|
Net interest income
|
|
3
|
|
|
7
|
|
|
|
Total derivatives designated as cash flow hedges
|
$
|
20
|
|
|
$
|
168
|
|
|
|
|
|
|
$
|
21
|
|
|
$
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as net investment hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
$
|
135
|
|
|
$
|
108
|
|
|
|
|
Gains (Losses) related to investment securities, net
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
Total derivatives designated as net investment hedges
|
135
|
|
|
108
|
|
|
|
|
|
|
—
|
|
|
—
|
|
|
|
Total
|
$
|
155
|
|
|
$
|
276
|
|
|
|
|
|
|
$
|
21
|
|
|
$
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) As of March 31, 2021, the maximum maturity date of the underlying hedged items is approximately 3.4 years.
Derivatives Netting and Credit Contingencies
Netting
Derivatives receivable and payable as well as cash collateral from the same counterparty are netted in the consolidated statement of condition for those counterparties with whom we have legally binding master netting agreements in place. In addition to cash collateral received and transferred presented on a net basis, we also receive and transfer collateral in the form of securities, which mitigate credit risk but are not eligible for netting. Additional information on netting is provided in Note 8.
Credit Contingencies
Certain of our derivatives are subject to master netting agreements with our derivative counterparties containing credit risk-related contingent features, which requires us to maintain an investment grade credit rating with the various credit rating agencies. If our rating falls below investment grade, we would be in violation of the provisions, and counterparties to the derivatives could request immediate payment or demand full overnight collateralization on derivatives instruments in net liability positions. The aggregate fair value of all derivatives with credit contingent features and in a liability position as of March 31, 2021 totaled approximately $5.15 billion, against which we provided $3.66 billion of collateral in the normal course of business. If our credit related contingent features underlying these agreements were triggered as of March 31, 2021, the maximum additional collateral we would be required to post to our counterparties is approximately $1.49 billion.
State Street Corporation | 71
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 8. Offsetting Arrangements
For additional information on our offsetting arrangements, refer to page 163 in Note 11 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2020 Form 10-K.
As of March 31, 2021 and December 31, 2020, the value of securities received as collateral from third parties where we are permitted to transfer or re-pledge the securities totaled $9.94 billion and $6.48 billion, respectively, and the fair value of the portion that had been transferred or re-pledged as of the same dates was $2.89 billion and $3.88 billion, respectively.
The following tables present information about the offsetting of assets related to derivative contracts and secured financing transactions, as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
March 31, 2021
|
|
|
Gross Amounts of Recognized
Assets(1)(2)
|
|
Gross Amounts Offset in Statement of Condition(3)
|
|
Net Amounts of Assets Presented in Statement of Condition
|
|
Gross Amounts Not Offset in Statement of Condition
|
|
|
|
|
|
(In millions)
|
|
|
|
Cash and Securities Received(4)
|
|
Net Amount(5)
|
|
|
|
|
|
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
$
|
21,898
|
|
|
$
|
(11,923)
|
|
|
$
|
9,975
|
|
|
$
|
—
|
|
|
$
|
9,975
|
|
|
|
|
|
|
Interest rate contracts(6)
|
1
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash collateral and securities netting
|
NA
|
|
(1,805)
|
|
|
(1,805)
|
|
|
(1,174)
|
|
|
(2,979)
|
|
|
|
|
|
|
Total derivatives
|
21,899
|
|
|
(13,729)
|
|
|
8,170
|
|
|
(1,174)
|
|
|
6,996
|
|
|
|
|
|
|
Other financial instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resale agreements and securities borrowing(7)(8)
|
144,230
|
|
|
(114,219)
|
|
|
30,011
|
|
|
(29,672)
|
|
|
339
|
|
|
|
|
|
|
Total derivatives and other financial instruments
|
$
|
166,129
|
|
|
$
|
(127,948)
|
|
|
$
|
38,181
|
|
|
$
|
(30,846)
|
|
|
$
|
7,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
December 31, 2020
|
|
Gross Amounts of Recognized
Assets(1)(2)
|
|
Gross Amounts Offset in Statement of Condition(3)
|
|
Net Amounts of Assets Presented in Statement of Condition
|
|
Gross Amounts Not Offset in Statement of Condition
|
(In millions)
|
|
|
|
Cash and Securities Received(4)
|
|
Net Amount(5)
|
Derivatives:
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
$
|
25,943
|
|
|
$
|
(14,271)
|
|
|
$
|
11,672
|
|
|
$
|
—
|
|
|
$
|
11,672
|
|
Interest rate contracts(6)
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash collateral and securities netting
|
NA
|
|
(5,869)
|
|
|
(5,869)
|
|
|
(1,105)
|
|
|
(6,974)
|
|
Total derivatives
|
25,944
|
|
|
(20,140)
|
|
|
5,804
|
|
|
(1,105)
|
|
|
4,699
|
|
Other financial instruments:
|
|
|
|
|
|
|
|
|
|
Resale agreements and securities borrowing(7)(8)
|
174,461
|
|
|
(153,025)
|
|
|
21,436
|
|
|
(20,568)
|
|
|
868
|
|
Total derivatives and other financial instruments
|
$
|
200,405
|
|
|
$
|
(173,165)
|
|
|
$
|
27,240
|
|
|
$
|
(21,673)
|
|
|
$
|
5,567
|
|
(1) Amounts include all transactions regardless of whether or not they are subject to an enforceable netting arrangement.
(2) Refer to Note 1 and Note 2 for additional information about the measurement basis of derivative instruments.
(3) Amounts subject to netting arrangements which have been determined to be legally enforceable and eligible for netting in the consolidated statement of condition.
(4) Includes securities in connection with our securities borrowing transactions.
(5) Includes amounts secured by collateral not determined to be subject to enforceable netting arrangements.
(6) Variation margin payments presented as settlements rather than collateral.
(7) Included in the $30.01 billion as of March 31, 2021 were $5.24 billion of resale agreements and $24.77 billion of collateral provided related to securities borrowing. Included in the $21.44 billion as of December 31, 2020 were $3.11 billion of resale agreements and $18.33 billion of collateral provided related to securities borrowing. Resale agreements and collateral provided related to securities borrowing were recorded in securities purchased under resale agreements and other assets, respectively, in our consolidated statement of condition. Refer to Note 9 for additional information with respect to principal securities finance transactions.
(8) Offsetting of resale agreements primarily relates to our involvement in FICC, where we settle transactions on a net basis for payment and delivery through the Fedwire system.
NA Not applicable
State Street Corporation | 72
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following tables present information about the offsetting of liabilities related to derivative contracts and secured financing transactions, as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
March 31, 2021
|
|
|
Gross Amounts of Recognized Liabilities(1)(2)
|
|
Gross Amounts Offset in Statement of Condition(3)
|
|
Net Amounts of Liabilities Presented in Statement of Condition
|
|
Gross Amounts Not Offset in Statement of Condition
|
|
|
|
|
|
(In millions)
|
|
|
|
Cash and Securities Received(4)
|
|
Net Amount(5)
|
|
|
|
|
|
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
$
|
22,045
|
|
|
$
|
(11,923)
|
|
|
$
|
10,122
|
|
|
$
|
—
|
|
|
$
|
10,122
|
|
|
|
|
|
|
Interest rate contracts(6)
|
35
|
|
|
(1)
|
|
|
34
|
|
|
—
|
|
|
34
|
|
|
|
|
|
|
Other derivative contracts
|
181
|
|
|
—
|
|
|
181
|
|
|
—
|
|
|
181
|
|
|
|
|
|
|
Cash collateral and securities netting
|
NA
|
|
(3,610)
|
|
|
(3,610)
|
|
|
(1,652)
|
|
|
(5,262)
|
|
|
|
|
|
|
Total derivatives
|
22,261
|
|
|
(15,534)
|
|
|
6,727
|
|
|
(1,652)
|
|
|
5,075
|
|
|
|
|
|
|
Other financial instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase agreements and securities lending(7)(8)
|
128,605
|
|
|
(114,220)
|
|
|
14,385
|
|
|
(13,815)
|
|
|
570
|
|
|
|
|
|
|
Total derivatives and other financial instruments
|
$
|
150,866
|
|
|
$
|
(129,754)
|
|
|
$
|
21,112
|
|
|
$
|
(15,467)
|
|
|
$
|
5,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
December 31, 2020
|
|
Gross Amounts of Recognized Liabilities(1)(2)
|
|
Gross Amounts Offset in Statement of Condition(3)
|
|
Net Amounts of Liabilities Presented in Statement of Condition
|
|
Gross Amounts Not Offset in Statement of Condition
|
(In millions)
|
|
|
|
Cash and Securities Received(4)
|
|
Net Amount(5)
|
Derivatives:
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
$
|
25,927
|
|
|
$
|
(14,271)
|
|
|
$
|
11,656
|
|
|
$
|
—
|
|
|
$
|
11,656
|
|
Interest rate contracts(6)
|
42
|
|
|
—
|
|
|
42
|
|
|
—
|
|
|
42
|
|
Other derivative contracts
|
157
|
|
|
—
|
|
|
157
|
|
|
—
|
|
|
157
|
|
Cash collateral and securities netting
|
NA
|
|
(1,287)
|
|
|
(1,287)
|
|
|
(1,732)
|
|
|
(3,019)
|
|
Total derivatives
|
26,126
|
|
|
(15,558)
|
|
|
10,568
|
|
|
(1,732)
|
|
|
8,836
|
|
Other financial instruments:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements and securities lending(7)(8)
|
165,793
|
|
|
(153,025)
|
|
|
12,768
|
|
|
(12,448)
|
|
|
320
|
|
Total derivatives and other financial instruments
|
$
|
191,919
|
|
|
$
|
(168,583)
|
|
|
$
|
23,336
|
|
|
$
|
(14,180)
|
|
|
$
|
9,156
|
|
(1) Amounts include all transactions regardless of whether or not they are subject to an enforceable netting arrangement.
(2) Refer to Note 1 and Note 2 for additional information about the measurement basis of derivative instruments.
(3) Amounts subject to netting arrangements which have been determined to be legally enforceable and eligible for netting in the consolidated statement of condition.
(4) Includes securities provided in connection with our securities lending transactions.
(5) Includes amounts secured by collateral not determined to be subject to enforceable netting arrangements.
(6) Variation margin payments presented as settlements rather than collateral.
(7) Included in the $14.39 billion as of March 31, 2021 were $0.59 billion of repurchase agreements and $13.80 billion of collateral received related to securities lending transactions. Included in the $12.77 billion as of December 31, 2020 were $3.41 billion of repurchase agreements and $9.36 billion of collateral received related to securities lending transactions. Repurchase agreements and collateral received related to securities lending were recorded in securities sold under repurchase agreements and accrued expenses and other liabilities, respectively, in our consolidated statement of condition. Refer to Note 9 for additional information with respect to principal securities finance transactions.
(8) Offsetting of repurchase agreements primarily relates to our involvement in FICC, where we settle transactions on a net basis for payment and delivery through the Fedwire system.
NA Not applicable
The securities transferred under resale and repurchase agreements typically are U.S. Treasury, agency and agency MBS. In our principal securities borrowing and lending arrangements, the securities transferred are predominantly equity securities and some corporate debt securities. The fair value of the securities transferred may increase in value to an amount greater than the amount received under our repurchase and securities lending arrangements, which exposes us to counterparty risk. We require the review of the price of the underlying securities in relation to the carrying value of the repurchase agreements and securities lending arrangements on a daily basis and when appropriate, adjust the cash or security to be obtained or returned to counterparties that is reflective of the required collateral levels.
State Street Corporation | 73
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table summarizes our repurchase agreements and securities lending transactions by category of collateral pledged and remaining maturity of these agreements as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2021
|
|
As of December 31, 2020
|
(In millions)
|
Overnight and Continuous
|
|
Up to 30 Days
|
|
Greater than 90 Days
|
|
Total
|
|
Overnight and Continuous
|
|
Up to 30 Days
|
|
Greater than 90 Days
|
|
Total
|
Repurchase agreements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agency securities
|
$
|
110,960
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
110,960
|
|
|
$
|
152,140
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
152,140
|
|
Total
|
110,960
|
|
|
—
|
|
|
—
|
|
|
110,960
|
|
|
152,140
|
|
|
—
|
|
|
—
|
|
|
152,140
|
|
Securities lending transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US Treasury and agency securities
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Corporate debt securities
|
96
|
|
|
—
|
|
|
—
|
|
|
96
|
|
|
110
|
|
|
—
|
|
|
—
|
|
|
110
|
|
Equity securities
|
9,308
|
|
|
38
|
|
|
1,444
|
|
|
10,790
|
|
|
7,578
|
|
|
56
|
|
|
1,156
|
|
|
8,790
|
|
Other(1)
|
6,757
|
|
|
—
|
|
|
—
|
|
|
6,757
|
|
|
4,753
|
|
|
—
|
|
|
—
|
|
|
4,753
|
|
Total
|
16,163
|
|
|
38
|
|
|
1,444
|
|
|
17,645
|
|
|
12,441
|
|
|
56
|
|
|
1,156
|
|
|
13,653
|
|
Gross amount of recognized liabilities for repurchase agreements and securities lending
|
$
|
127,123
|
|
|
$
|
38
|
|
|
$
|
1,444
|
|
|
$
|
128,605
|
|
|
$
|
164,581
|
|
|
$
|
56
|
|
|
$
|
1,156
|
|
|
$
|
165,793
|
|
(1) Represents a security interest in underlying client assets related to our enhanced custody business, which assets clients have allowed us to transfer and re-pledge.
Note 9. Commitments and Guarantees
For additional information on our commitments and guarantees, refer to page 166 in Note 12 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2020 Form 10-K.
The following table presents the aggregate gross contractual amounts of our off-balance sheet commitments and off-balance sheet guarantees as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
March 31, 2021
|
|
December 31, 2020
|
Commitments:
|
|
|
|
Unfunded credit facilities
|
$
|
34,114
|
|
|
$
|
34,213
|
|
Guarantees(1):
|
|
|
|
Indemnified securities financing
|
$
|
436,039
|
|
|
$
|
440,875
|
|
Standby letters of credit
|
3,502
|
|
|
3,330
|
|
(1) The potential losses associated with these guarantees equal the gross contractual amounts and do not consider the value of any collateral or reflect any participations to independent third parties.
As of March 31, 2021, approximately 72% of our unfunded commitments to extend credit expire within one year, compared to approximately 73% as of December 31, 2020.
Indemnified Securities Financing
For additional information on our indemnified securities financing, refer to page 166 in Note 12 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2020 Form 10-K.
The following table summarizes the aggregate fair values of indemnified securities financing and related collateral, as well as collateral invested in indemnified repurchase agreements, as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
March 31, 2021
|
|
December 31, 2020
|
Fair value of indemnified securities financing
|
$
|
436,039
|
|
|
$
|
440,875
|
|
Fair value of cash and securities held by us, as agent, as collateral for indemnified securities financing
|
457,367
|
|
|
463,273
|
|
Fair value of collateral for indemnified securities financing invested in indemnified repurchase agreements
|
59,308
|
|
|
54,432
|
|
Fair value of cash and securities held by us or our agents as collateral for investments in indemnified repurchase agreements
|
64,146
|
|
|
58,092
|
|
In certain cases, we participate in securities finance transactions as a principal. As a principal, we borrow securities from the lending client and then lend such securities to the subsequent borrower, either our client or a broker/dealer. Our right to receive and obligation to return collateral in connection with our securities lending transactions are recorded in other assets and other liabilities, respectively, in our consolidated statement of condition. As of March 31, 2021 and December 31, 2020, we had approximately $24.77 billion and $18.33 billion, respectively, of collateral provided and approximately $13.80 billion and $9.36 billion, respectively, of collateral received from clients in connection with our participation in principal securities finance transactions.
State Street Corporation | 74
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FICC Guarantee
As a sponsoring member in the FICC member program, we provide a guarantee to FICC in the event a customer fails to perform its obligations under a transaction. In order to minimize the risk associated with this guarantee, sponsored members acting as buyers generally grant a security interest in the subject securities received under and held on their behalf by State Street. For additional information on our repurchase and reverse repurchase agreements, please refer to Note 8 to the consolidated financial statements in this Form 10-Q.
Note 10. Contingencies
Legal and Regulatory Matters
In the ordinary course of business, we and our subsidiaries are involved in disputes, litigation, and governmental or regulatory inquiries and investigations, both pending and threatened. These matters, if resolved adversely against us or settled, may result in monetary awards or payments, fines and penalties or require changes in our business practices. The resolution or settlement of these matters is inherently difficult to predict. Based on our assessment of these pending matters, we do not believe that the amount of any judgment, settlement or other action arising from any pending matter is likely to have a material adverse effect on our consolidated financial condition. However, an adverse outcome or development in certain of the matters described below could have a material adverse effect on our consolidated results of operations for the period in which such matter is resolved, or an accrual is determined to be required, on our consolidated financial condition, or on our reputation.
We evaluate our needs for accruals of loss contingencies related to legal and regulatory proceedings on a case-by-case basis. When we have a liability that we deem probable, and we deem the amount of such liability can be reasonably estimated as of the date of our consolidated financial statements, we accrue our estimate of the amount of loss. We also consider a loss probable and establish an accrual when we make, or intend to make, an offer of settlement. Once established, an accrual is subject to subsequent adjustment as a result of additional information. The resolution of legal and regulatory proceedings and the amount of reasonably estimable loss (or range thereof) are inherently difficult to predict, especially in the early stages of proceedings. Even if a loss is probable, an amount (or range) of loss might not be reasonably estimated until the later stages of the proceeding due to many factors such as the presence of complex or novel legal theories, the discretion of governmental authorities in seeking sanctions or negotiating resolutions in civil and criminal matters, the pace and timing of discovery
and other assessments of facts and the procedural posture of the matter (collectively, "factors influencing reasonable estimates").
As of March 31, 2021, our aggregate accruals for loss contingencies for legal, regulatory and related matters totaled approximately $146 million, including potential fines by government agencies and civil litigation with respect to the matters specifically discussed below. To the extent that we have established accruals in our consolidated statement of condition for probable loss contingencies, such accruals may not be sufficient to cover our ultimate financial exposure associated with any settlements or judgments. Any such ultimate financial exposure, or proceedings to which we may become subject in the future, could have a material adverse effect on our businesses, on our future consolidated financial statements or on our reputation.
As of March 31, 2021, for those matters for which we have accrued probable loss contingencies (including the Invoicing Matter described below) and for other matters for which loss is reasonably possible (but not probable) in future periods, and for which we are able to estimate a range of reasonably possible loss, our estimate of the aggregate reasonably possible loss (in excess of any accrued amounts) ranges up to approximately $40 million. Our estimate with respect to the aggregate reasonably possible loss is based upon currently available information and is subject to significant judgment and a variety of assumptions and known and unknown uncertainties, which may change quickly and significantly from time to time, particularly if and as we engage with applicable governmental agencies or plaintiffs in connection with a proceeding. Also, the matters underlying the reasonably possible loss will change from time to time. As a result, actual results may vary significantly from the current estimate.
In certain pending matters, it is not currently feasible to reasonably estimate the amount or a range of reasonably possible loss, and such losses, which may be significant, are not included in the estimate of reasonably possible loss discussed above. This is due to, among other factors, the factors influencing reasonable estimates described above. An adverse outcome in one or more of the matters for which we have not estimated the amount or a range of reasonably possible loss, individually or in the aggregate, could have a material adverse effect on our businesses, on our future consolidated financial statements or on our reputation. Given that our actual losses from any legal or regulatory proceeding for which we have provided an estimate of the reasonably possible loss could significantly exceed such estimate, and given that we cannot estimate reasonably possible loss for all legal and
State Street Corporation | 75
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
regulatory proceedings as to which we may be subject now or in the future, no conclusion as to our ultimate exposure from current pending or potential legal or regulatory proceedings should be drawn from the current estimate of reasonably possible loss.
The following discussion provides information with respect to significant legal, governmental and regulatory matters.
Invoicing Matter
In 2015, we determined that we had incorrectly invoiced clients for certain expenses. We have reimbursed most of our affected customers for those expenses, and we have implemented enhancements to our billing processes. In connection with our enhancements to our billing processes, we continue to review historical billing practices and may from time to time identify additional remediation. In 2017, we identified an additional area of incorrect expense billing associated with mailing services in our retirement services business. We currently expect the cumulative total of our payments to customers for these invoicing errors, including the error in the retirement services business, to be at least $370 million, all of which has been paid or is accrued. However, we may identify additional remediation costs.
In March 2017, a purported class action was commenced against us alleging that our invoicing practices violated duties owed to retirement plan customers under the Employee Retirement Income Security Act. In addition, we have received a purported class action demand letter alleging that our invoicing practices were unfair and deceptive under Massachusetts law. A class of customers, or particular customers, may assert that we have not paid to them all amounts incorrectly invoiced, and may seek double or treble damages under Massachusetts law.
We are also cooperating with investigations by governmental and regulatory authorities on these matters, including the civil and criminal divisions of the DOJ and the DOL, which reviews could result in significant fines or other sanctions, civil and criminal, against us. In June 2019, we reached an agreement with the SEC to settle its claims that we violated the recordkeeping provisions of Section 34(b) of the Investment Company Act of 1940 and caused violations of Section 31(a) of the Investment Company Act and Rules 31a-1(a) and 31a-1(b) thereunder in connection with our overcharges of customers which are registered investment companies. In reaching this settlement, we neither admitted nor denied the claims contained in the SEC’s order, and agreed to pay a civil monetary penalty of $40 million. Also in June 2019, we reached an agreement with the Massachusetts Attorney
General’s office to resolve its claims related to this matter. In reaching this settlement, we neither admitted nor denied the claims in the order, and agreed to pay a civil monetary penalty of $5.5 million. The costs associated with these settlements were within our related previously established accruals for loss contingencies. The SEC and Massachusetts Attorney General’s office settlements both recognize that the payment of $48.8 million in disgorgement and interest is satisfied by our direct reimbursements of our customers.
In January 2020, the DOJ outlined a framework for a possible resolution of their review. We are discussing the terms of a potential settlement of this matter with the DOJ. Separately, we have inquired of the DOL as to the status of their review but have not entered into settlement discussions with the DOL. There can be no assurance that any settlement with the DOJ or DOL will be reached on financial or other terms acceptable to us or at all. The aggregate amount of penalties that may potentially be imposed upon us in connection with the resolution of all outstanding investigations into our historical billing practices is not currently known. We have established a legal accrual with respect to the pending governmental investigations and civil litigation with respect to this matter, however, our ultimate liability with respect to this matter might be significantly in excess of our current accrual. Government authorities have significant discretion in criminal and civil matters as to the fines and other penalties they may seek to impose. Any resolution of the DOJ and DOL claims may involve penalties that could be a significant percentage, or a multiple of, all or a portion of the overcharge. The severity of such fines or penalties could take into account factors such as the amount or duration of our incorrect invoicing and the government’s or regulators’ assessment of the conduct of our employees, as well as prior conduct such as that which resulted in our January 2017 deferred prosecution agreement and settlement of civil claims regarding our indirect FX business.
The outcome of any of these proceedings and, in particular, any criminal sanction could materially adversely affect our results of operations and could have significant additional consequences for our business and reputation.
Shareholder Litigation
A shareholder of ours has filed a derivative complaint against the Company’s past and present officers and directors to recover alleged losses incurred by the Company relating to the invoicing matter and to the Ohio public retirement plans matter.
Income Taxes
In determining our provision for income taxes, we make certain judgments and interpretations with
State Street Corporation | 76
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
respect to tax laws in jurisdictions in which we have business operations. Because of the complex nature of these laws, in the normal course of our business, we are subject to challenges from U.S. and non-U.S. income tax authorities regarding the amount of income taxes due. These challenges may result in adjustments to the timing or amount of taxable income or deductions or the allocation of taxable income among tax jurisdictions. We recognize a tax benefit when it is more likely than not that our position will result in a tax deduction or credit. Unrecognized tax benefits of approximately $310 million as of March 31, 2021 increased from $308 million as of December 31, 2020.
We are presently under audit by a number of tax authorities, and the Internal Revenue Service is currently reviewing our U.S. income tax returns, including amended returns, for tax years 2014-2018. The earliest tax year open to examination in jurisdictions where we have material operations is 2013. Management believes that we have sufficiently accrued liabilities as of March 31, 2021 for potential tax exposures.
Note 11. Variable Interest Entities
For additional information on our variable interest entities (VIEs), refer to pages 169 to 170 in Note 14 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, "Variable Interest Entities", in our 2020 Form 10-K.
Tax-Exempt Investment Program
In the normal course of our business, we structure and sell certificated interests in pools of tax-exempt investment grade assets, principally to our mutual fund clients. We structure these pools as partnership trusts, and the assets and liabilities of the trusts are recorded in our consolidated statement of condition as AFS investment securities and other short-term borrowings. As of March 31, 2021 and December 31, 2020, we carried AFS investment
securities, composed of securities related to state and political subdivisions, with a fair value of $0.70 billion and $0.70 billion, respectively, and other short-term borrowings of $0.61 billion and $0.62 billion, respectively, in our consolidated statement of condition in connection with these trusts. The interest income and interest expense generated by the investments and certificated interests, respectively, are recorded as components of NII when earned or incurred.
The trusts had a weighted-average life of approximately 2.4 years as of March 31, 2021, compared to approximately 2.7 years as of December 31, 2020.
Interests in Investment Funds
As of March 31, 2021, the aggregate assets and liabilities of our consolidated sponsored investment funds totaled $13 million and $0 million, respectively. As of December 31, 2020, the aggregate assets and liabilities of our consolidated sponsored investment funds totaled $17 million and $4 million, respectively. As of both March 31, 2021 and December 31, 2020, our maximum total exposure associated with the consolidated sponsored investment funds totaled $13 million, and represented the value of our economic ownership interest in the funds.
As of March 31, 2021 and December 31, 2020, we managed certain funds, considered VIEs, in which we held a variable interest but for which we were not deemed to be the primary beneficiary. Our potential maximum loss exposure related to these unconsolidated funds totaled $22 million as of both March 31, 2021 and December 31, 2020, and represented the carrying value of our investments, which are recorded in other assets in our consolidated statement of condition. The amount of loss we may recognize during any period is limited to the carrying amount of our investments in the unconsolidated funds.
State Street Corporation | 77
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 12. Shareholders' Equity
Preferred Stock
The following table summarizes selected terms of each of the series of the preferred stock issued and outstanding as of March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock(2):
|
|
Issuance Date
|
|
Depositary Shares Issued
|
|
Amount outstanding (in millions)
|
Ownership Interest Per Depositary Share
|
|
Liquidation Preference Per Share
|
|
Liquidation Preference Per Depositary Share
|
|
Per Annum Dividend Rate
|
|
Dividend Payment Frequency
|
|
Carrying Value as of March 31, 2021
(In millions)
|
|
Redemption Date(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series D
|
|
February 2014
|
|
30,000,000
|
|
|
750
|
|
1/4,000th
|
|
100,000
|
|
|
25
|
|
|
5.90% to but excluding March 15, 2024, then a floating rate equal to the three-month LIBOR plus 3.108%
|
|
Quarterly
|
|
$
|
742
|
|
|
March 15, 2024
|
Series F(3)
|
|
May 2015
|
|
250,000
|
|
|
250
|
|
1/100th
|
|
100,000
|
|
|
1,000
|
|
|
5.25% to but excluding September 15, 2020, then a floating rate equal to the three-month LIBOR plus 3.597%, or 3.78088% effective March 15, 2021
|
|
Quarterly
|
|
247
|
|
|
September 15, 2020
|
Series G
|
|
April 2016
|
|
20,000,000
|
|
|
500
|
|
1/4,000th
|
|
100,000
|
|
|
25
|
|
|
5.35% to but excluding March 15, 2026, then a floating rate equal to the three-month LIBOR plus 3.709%
|
|
Quarterly
|
|
493
|
|
|
March 15, 2026
|
Series H
|
|
September 2018
|
|
500,000
|
|
|
500
|
|
1/100th
|
|
100,000
|
|
|
1,000
|
|
|
5.625% to but excluding December 15, 2023, then a floating rate equal to the three-month LIBOR plus 2.539%
|
|
Semi-annually
|
|
494
|
|
|
December 15, 2023
|
(1) On the redemption date, or any dividend payment date thereafter, the preferred stock and corresponding depositary shares may be redeemed by us, in whole or in part, at the liquidation price per share and liquidation price per depositary share plus any declared and unpaid dividends, without accumulation of any undeclared dividends.
(2) The preferred stock and corresponding depositary shares may be redeemed at our option in whole, but not in part, prior to the redemption date upon the occurrence of a regulatory capital treatment event, as defined in the certificate of designation, at a redemption price equal to the liquidation price per share and liquidation price per depositary share plus any declared and unpaid dividends, without accumulation of any undeclared dividends.
(3) Series F preferred stock is redeemable on September 15, 2020 and on each succeeding dividend payment date. We did not elect redemption on September 15, 2020 or December 15, 2020.
On March 15, 2021, we redeemed an aggregate of $500 million, or 5,000 of the 7,500 outstanding shares of our non-cumulative perpetual preferred stock, Series F, for cash at a redemption price of $100,000 per share (equivalent to $1,000 per depositary share) plus all declared and unpaid dividends.
The following table presents the dividends declared for each of the series of preferred stock issued and outstanding for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2021
|
|
2020
|
(Dollars in millions, except per share amounts)
|
Dividends Declared per Share
|
|
Dividends Declared per Depositary Share
|
|
Total
|
|
Dividends Declared per Share
|
|
Dividends Declared per Depositary Share
|
|
Total
|
Preferred Stock:
|
|
|
|
|
|
|
|
|
|
|
|
Series C
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,313
|
|
|
$
|
0.33
|
|
|
$
|
6
|
|
Series D
|
1,475
|
|
|
0.37
|
|
|
11
|
|
|
1,475
|
|
|
0.37
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series F
|
953
|
|
|
9.53
|
|
|
7
|
|
|
2,625
|
|
|
26.25
|
|
|
20
|
|
Series G
|
1,338
|
|
|
0.33
|
|
|
7
|
|
|
1,338
|
|
|
0.33
|
|
|
7
|
|
Series H
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
|
|
|
$
|
25
|
|
|
|
|
|
|
$
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In April 2021, we declared dividends on our series D, F, G and H preferred stock of approximately $1,475, $966, $1,338 and $2,813 respectively, per share, or approximately $0.37, $9.66, $0.33 and $28.13 respectively, per depositary share. These dividends total approximately $11 million, $2 million, $7 million and $14 million on our series D, F, G and H preferred stock, respectively, which will be paid in June 2021.
Common Stock
In June 2019, our Board approved a common stock purchase program authorizing the purchase of up to $2.0 billion of our common stock from July 1, 2019 through June 30, 2020 (the 2019 Program). We repurchased $500 million of our common stock in each of the third and fourth quarters of 2019 and the first quarter of 2020 under the 2019 Program.
State Street Corporation | 78
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On March 16, 2020, we, along with the other U.S. G-SIBs, suspended common share repurchases and maintained this suspension through the fourth quarter of 2020 in response to the COVID-19 pandemic. This suspension was consistent with limitations imposed by the Federal Reserve beginning in the second quarter of 2020. As a result, we had no repurchases of our common stock in the second, third or fourth quarters of 2020.
In December 2020, the Federal Reserve issued results of 2020 resubmission stress tests and authorized us to continue to pay common stock dividends at current levels and to resume repurchasing common shares in the first quarter of 2021. In January 2021, our Board authorized a share repurchase program for the purchase of up to $475 million of our common stock through March 31, 2021. In April 2021, our Board authorized a share repurchase program for the purchase of up to $425 million of our common stock through June 30, 2021, consistent with the limit set by the Federal Reserve.
The tables below present the activity under our common stock purchase program for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Acquired (In millions)
|
|
Average Cost per Share
|
|
Total Acquired (In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.2
|
|
|
$
|
76.21
|
|
|
$
|
475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Acquired (In millions)
|
|
Average Cost per Share
|
|
Total Acquired (In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.5
|
|
|
$
|
77.35
|
|
|
$
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below presents the dividends declared on common stock for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
Dividends Declared per Share
|
|
Total
(In millions)
|
|
Dividends Declared per Share
|
|
Total
(In millions)
|
|
|
|
|
|
|
|
|
Common Stock
|
$
|
0.52
|
|
|
$
|
182
|
|
|
$
|
0.52
|
|
|
$
|
183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Income (Loss)
The following table presents the after-tax components of AOCI for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
(In millions)
|
2021
|
|
2020
|
|
|
|
|
Net unrealized gains (losses) on cash flow hedges
|
$
|
57
|
|
|
$
|
47
|
|
|
|
|
|
Net unrealized gains (losses) on available-for-sale securities portfolio
|
502
|
|
|
556
|
|
|
|
|
|
Net unrealized gains (losses) related to reclassified available-for-sale securities
|
(46)
|
|
|
23
|
|
|
|
|
|
Net unrealized gains (losses) on available-for-sale securities
|
456
|
|
|
579
|
|
|
|
|
|
Net unrealized (losses) on available-for-sale securities designated in fair value hedges
|
(21)
|
|
|
(43)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains (losses) on hedges of net investments in non-U.S. subsidiaries
|
(69)
|
|
|
154
|
|
|
|
|
|
Other-than-temporary impairment on held-to-maturity securities related to factors other than credit
|
(2)
|
|
|
(2)
|
|
|
|
|
|
Net unrealized (losses) on retirement plans
|
(170)
|
|
|
(175)
|
|
|
|
|
|
Foreign currency translation
|
(669)
|
|
|
(1,480)
|
|
|
|
|
|
Total
|
$
|
(418)
|
|
|
$
|
(920)
|
|
|
|
|
|
The following table presents changes in AOCI by component, net of related taxes, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
Net Unrealized Gains (Losses) on Cash Flow Hedges
|
|
Net Unrealized Gains (Losses) on Available-for-Sale Securities
|
|
Net Unrealized Gains (Losses) on Hedges of Net Investments in Non-U.S. Subsidiaries
|
|
Other-Than-Temporary Impairment on Held-to-Maturity Securities
|
|
Net Unrealized Losses on Retirement Plans
|
|
Foreign Currency Translation
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2020
|
$
|
57
|
|
|
$
|
848
|
|
|
$
|
(204)
|
|
|
$
|
(2)
|
|
|
$
|
(178)
|
|
|
$
|
(334)
|
|
|
$
|
187
|
|
Other comprehensive income (loss) before reclassifications
|
(15)
|
|
|
(413)
|
|
|
135
|
|
|
—
|
|
|
—
|
|
|
(335)
|
|
|
(628)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified into earnings
|
15
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
23
|
|
Other comprehensive income (loss)
|
—
|
|
|
(413)
|
|
|
135
|
|
|
—
|
|
|
8
|
|
|
(335)
|
|
|
(605)
|
|
Balance as of March 31, 2021
|
$
|
57
|
|
|
$
|
435
|
|
|
$
|
(69)
|
|
|
$
|
(2)
|
|
|
$
|
(170)
|
|
|
$
|
(669)
|
|
|
$
|
(418)
|
|
State Street Corporation | 79
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
Net Unrealized Gains (Losses) on Cash Flow Hedges
|
|
Net Unrealized Gains (Losses) on Available-for-Sale Securities
|
|
Net Unrealized Gains (Losses) on Hedges of Net Investments in Non-U.S. Subsidiaries
|
|
Other-Than-Temporary Impairment on Held-to-Maturity Securities
|
|
Net Unrealized Losses on Retirement Plans
|
|
Foreign Currency Translation
|
|
Total
|
Balance as of December 31, 2019
|
$
|
(70)
|
|
|
$
|
409
|
|
|
$
|
46
|
|
|
$
|
(2)
|
|
|
$
|
(187)
|
|
|
$
|
(1,072)
|
|
|
$
|
(876)
|
|
Other comprehensive income (loss) before reclassifications
|
112
|
|
|
126
|
|
|
108
|
|
|
—
|
|
|
—
|
|
|
(408)
|
|
|
(62)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified into (out of) earnings
|
5
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
18
|
|
Other comprehensive income (loss)
|
117
|
|
|
127
|
|
|
108
|
|
|
—
|
|
|
12
|
|
|
(408)
|
|
|
(44)
|
|
Balance as of March 31, 2020
|
$
|
47
|
|
|
$
|
536
|
|
|
$
|
154
|
|
|
$
|
(2)
|
|
|
$
|
(175)
|
|
|
$
|
(1,480)
|
|
|
$
|
(920)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents after-tax reclassifications into earnings for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2021
|
|
2020
|
|
|
(In millions)
|
Amounts Reclassified into
(out of) Earnings
|
|
Affected Line Item in Consolidated Statement of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
Net realized gains (losses) from sales of available-for-sale securities, net of related taxes of $0 and $1, respectively
|
$
|
—
|
|
|
$
|
1
|
|
|
Net gains (losses) from sales of available-for-sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges:
|
|
|
|
|
|
Gain reclassified from accumulated other comprehensive income into Income, net of related taxes of $6 and $2
|
15
|
|
|
5
|
|
|
Net interest income reclassified from other comprehensive income
|
Retirement plans:
|
|
|
|
|
|
Amortization of actuarial losses, net of related taxes of $3 and $4, respectively
|
8
|
|
|
12
|
|
|
Compensation and employee benefits expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reclassifications (into) out of Accumulated other comprehensive loss
|
$
|
23
|
|
|
$
|
18
|
|
|
|
Note 13. Regulatory Capital
For additional information on our regulatory capital, including the regulatory capital requirements administered by federal banking agencies, and to which we are subject, refer to page 174 in Note 16 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2020 Form 10-K.
As of March 31, 2021, we and State Street Bank exceeded all regulatory capital adequacy requirements to which we were subject to. As of March 31, 2021, State Street Bank was categorized as “well capitalized” under the applicable regulatory capital adequacy framework, and exceeded all “well capitalized” ratio guidelines to which it was subject. Management believes that no conditions or events have occurred since March 31, 2021 that have changed the capital categorization of State Street Bank.
The following table presents the regulatory capital structure, total RWA, related regulatory capital ratios and the minimum required regulatory capital ratios for us and State Street Bank as of the dates indicated.
State Street Corporation | 80
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State Street Corporation
|
|
State Street Bank
|
(Dollars in millions)
|
Basel III Advanced Approaches March 31, 2021
|
|
Basel III Standardized Approach March 31, 2021
|
|
Basel III Advanced Approaches December 31, 2020
|
|
Basel III Standardized Approach December 31, 2020
|
|
Basel III Advanced Approaches March 31, 2021
|
|
Basel III Standardized Approach March 31, 2021
|
|
Basel III Advanced Approaches December 31, 2020
|
|
Basel III Standardized Approach December 31, 2020
|
Common shareholders' equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock and related surplus
|
$
|
10,731
|
|
|
$
|
10,731
|
|
|
$
|
10,709
|
|
|
$
|
10,709
|
|
|
$
|
12,893
|
|
|
$
|
12,893
|
|
|
$
|
12,893
|
|
|
$
|
12,893
|
|
Retained earnings
|
23,751
|
|
|
23,751
|
|
|
23,442
|
|
|
23,442
|
|
|
13,479
|
|
|
13,479
|
|
|
12,939
|
|
|
12,939
|
|
Accumulated other comprehensive income (loss)
|
(418)
|
|
|
(418)
|
|
|
187
|
|
|
187
|
|
|
(221)
|
|
|
(221)
|
|
|
371
|
|
|
371
|
|
Treasury stock, at cost
|
(11,035)
|
|
|
(11,035)
|
|
|
(10,609)
|
|
|
(10,609)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
23,029
|
|
|
23,029
|
|
|
23,729
|
|
|
23,729
|
|
|
26,151
|
|
|
26,151
|
|
|
26,203
|
|
|
26,203
|
|
Regulatory capital adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill and other intangible assets, net of associated deferred tax liabilities
|
(9,149)
|
|
|
(9,149)
|
|
|
(9,019)
|
|
|
(9,019)
|
|
|
(8,880)
|
|
|
(8,880)
|
|
|
(8,745)
|
|
|
(8,745)
|
|
Other adjustments(1)
|
(437)
|
|
|
(437)
|
|
|
(333)
|
|
|
(333)
|
|
|
(250)
|
|
|
(250)
|
|
|
(152)
|
|
|
(152)
|
|
Common equity tier 1 capital
|
13,443
|
|
|
13,443
|
|
|
14,377
|
|
|
14,377
|
|
|
17,021
|
|
|
17,021
|
|
|
17,306
|
|
|
17,306
|
|
Preferred stock
|
1,976
|
|
|
1,976
|
|
|
2,471
|
|
|
2,471
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital
|
15,419
|
|
|
15,419
|
|
|
16,848
|
|
|
16,848
|
|
|
17,021
|
|
|
17,021
|
|
|
17,306
|
|
|
17,306
|
|
Qualifying subordinated long-term debt
|
1,801
|
|
|
1,801
|
|
|
961
|
|
|
961
|
|
|
963
|
|
|
963
|
|
|
966
|
|
|
966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses
|
—
|
|
|
135
|
|
|
1
|
|
|
148
|
|
|
—
|
|
|
135
|
|
|
10
|
|
|
148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital
|
$
|
17,220
|
|
|
$
|
17,355
|
|
|
$
|
17,810
|
|
|
$
|
17,957
|
|
|
$
|
17,984
|
|
|
$
|
18,119
|
|
|
$
|
18,282
|
|
|
$
|
18,420
|
|
Risk-weighted assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit risk(2)
|
$
|
66,726
|
|
|
$
|
122,074
|
|
|
$
|
63,367
|
|
|
$
|
114,892
|
|
|
$
|
62,082
|
|
|
$
|
119,020
|
|
|
$
|
58,960
|
|
|
$
|
110,797
|
|
Operational risk(3)
|
44,075
|
|
|
NA
|
|
44,150
|
|
|
NA
|
|
43,600
|
|
|
NA
|
|
43,663
|
|
|
NA
|
Market risk
|
2,250
|
|
|
2,250
|
|
|
2,188
|
|
|
2,188
|
|
|
2,250
|
|
|
2,250
|
|
|
2,188
|
|
|
2,188
|
|
Total risk-weighted assets
|
$
|
113,051
|
|
|
$
|
124,324
|
|
|
$
|
109,705
|
|
|
$
|
117,080
|
|
|
$
|
107,932
|
|
|
$
|
121,270
|
|
|
$
|
104,811
|
|
|
$
|
112,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted quarterly average assets
|
$
|
285,480
|
|
|
$
|
285,480
|
|
|
$
|
263,490
|
|
|
$
|
263,490
|
|
|
$
|
282,319
|
|
|
$
|
282,319
|
|
|
$
|
260,489
|
|
|
$
|
260,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Ratios:
|
2021 Minimum Requirements(4)
|
2020 Minimum Requirements(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common equity tier 1 capital
|
8.0
|
%
|
8.0
|
%
|
11.9
|
%
|
|
10.8
|
%
|
|
13.1
|
%
|
|
12.3
|
%
|
|
15.8
|
%
|
|
14.0
|
%
|
|
16.5
|
%
|
|
15.3
|
%
|
Tier 1 capital
|
9.5
|
|
9.5
|
|
13.6
|
|
|
12.4
|
|
|
15.4
|
|
|
14.4
|
|
|
15.8
|
|
|
14.0
|
|
|
16.5
|
|
|
15.3
|
|
Total capital
|
11.5
|
|
11.5
|
|
15.2
|
|
|
14.0
|
|
|
16.2
|
|
|
15.3
|
|
|
16.7
|
|
|
14.9
|
|
|
17.4
|
|
|
16.3
|
|
Tier 1 leverage(5)
|
4.0
|
|
4.0
|
|
5.4
|
|
|
5.4
|
|
|
6.4
|
|
|
6.4
|
|
|
6.0
|
|
|
6.0
|
|
|
6.6
|
|
|
6.6
|
|
(1) Other adjustments within CET1 capital primarily include the overfunded portion of our defined benefit pension plan obligation net of associated deferred tax liabilities, disallowed deferred tax assets, and other required credit risk based deductions.
(2) Includes a CVA which reflects the risk of potential fair value adjustments for credit risk reflected in our valuation of OTC derivative contracts. We used a simple CVA approach in conformity with the Basel III advanced approaches.
(3) Under the current advanced approaches rules and regulatory guidance concerning operational risk models, RWA attributable to operational risk can vary substantially from period-to-period, without direct correlation to the effects of a particular loss event on our results of operations and financial condition and impacting dates and periods that may differ from the dates and periods as of and during which the loss event is reflected in our financial statements, with the timing and categorization dependent on the processes for model updates and, if applicable, model revalidation and regulatory review and related supervisory processes. An individual loss event can have a significant effect on the output of our operational RWA under the advanced approaches depending on the severity of the loss event and its categorization among the seven Basel-defined UOMs.
(4) Minimum requirements include a CCB of 2.5% and a SCB of 2.5% for the advanced approaches and the standardized approach, respectively, a G-SIB surcharge of 1.0% and a countercyclical buffer of 0%.
(5) State Street Bank is required to maintain a minimum Tier 1 leverage ratio of 5% as it is the insured depository institution subsidiary of one of the eight U.S. G-SIBs.
NA Not applicable
State Street Corporation | 81
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 14. Net Interest Income
The following table presents the components of interest income and interest expense, and related NII, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(In millions)
|
|
|
|
2021
|
|
2020
|
|
|
Interest income:
|
|
|
|
|
|
|
|
|
Interest-bearing deposits with banks
|
|
|
|
$
|
(9)
|
|
|
$
|
81
|
|
|
|
Investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities available-for-sale
|
|
|
|
140
|
|
|
213
|
|
|
|
Investment securities held-to-maturity
|
|
|
|
180
|
|
|
271
|
|
|
|
Investment securities purchased under money market liquidity facility
|
|
|
|
4
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities purchased under resale agreements
|
|
|
|
10
|
|
|
65
|
|
|
|
Loans
|
|
|
|
141
|
|
|
184
|
|
|
|
Other interest-earning assets
|
|
|
|
5
|
|
|
46
|
|
|
|
Total interest income
|
|
|
|
471
|
|
|
868
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
Interest-bearing deposits
|
|
|
|
(69)
|
|
|
68
|
|
|
|
Short term borrowings under money market liquidity facility
|
|
|
|
4
|
|
|
6
|
|
|
|
Securities sold under repurchase agreements
|
|
|
|
—
|
|
|
2
|
|
|
|
Other short-term borrowings
|
|
|
|
—
|
|
|
10
|
|
|
|
Long-term debt
|
|
|
|
60
|
|
|
88
|
|
|
|
Other interest-bearing liabilities
|
|
|
|
9
|
|
|
30
|
|
|
|
Total interest expense
|
|
|
|
4
|
|
|
204
|
|
|
|
Net interest income
|
|
|
|
$
|
467
|
|
|
$
|
664
|
|
|
|
Note 15. Expenses
The following table presents the components of other expenses for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(In millions)
|
|
|
|
2021
|
|
2020
|
|
|
Professional services
|
|
|
|
$
|
80
|
|
|
$
|
81
|
|
|
|
Regulatory fees and assessments
|
|
|
|
18
|
|
|
12
|
|
|
|
Sales advertising public relations
|
|
|
|
17
|
|
|
18
|
|
|
|
Securities processing
|
|
|
|
12
|
|
|
15
|
|
|
|
Insurance
|
|
|
|
3
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank operations
|
|
|
|
2
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
90
|
|
|
90
|
|
|
|
Total other expenses
|
|
|
|
$
|
222
|
|
|
$
|
230
|
|
|
|
Acquisition Costs
We recorded approximately $11 million of acquisition costs in the first quarter of 2021 compared to $11 million in the same period in 2020 related to our acquisition of CRD.
Restructuring and Repositioning Charges
The following table presents aggregate activity for repositioning charges for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
Employee
Related Costs
|
|
Real Estate
Actions
|
|
|
|
|
|
Asset and Other Write-offs
|
|
Total
|
Accrual Balance at December 31, 2019
|
$
|
190
|
|
|
$
|
7
|
|
|
|
|
|
|
$
|
1
|
|
|
$
|
198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments and Other Adjustments
|
(33)
|
|
|
(1)
|
|
|
|
|
|
|
—
|
|
|
(34)
|
|
Accrual Balance at March 31, 2020
|
$
|
157
|
|
|
$
|
6
|
|
|
|
|
|
|
$
|
1
|
|
|
$
|
164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual Balance at December 31, 2020
|
$
|
190
|
|
|
$
|
6
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
196
|
|
Accruals for Beacon
|
(1)
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
(1)
|
|
Accruals for Repositioning Charges
|
—
|
|
|
2
|
|
|
|
|
|
|
—
|
|
|
2
|
|
Payments and Other Adjustments
|
(9)
|
|
|
(2)
|
|
|
|
|
|
|
—
|
|
|
(11)
|
|
Accrual Balance at March 31, 2021
|
$
|
180
|
|
|
$
|
6
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 16. Earnings Per Common Share
For additional information on our earnings per share calculation methodologies, refer to pages 181 to 182 in Note 23 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2020 Form 10-K.
The following table presents the computation of basic and diluted earnings per common share for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(Dollars in millions, except per share amounts)
|
2021
|
|
2020
|
|
|
Net income
|
$
|
519
|
|
|
$
|
634
|
|
|
|
Less:
|
|
|
|
|
|
Preferred stock dividends
|
(30)
|
|
|
(53)
|
|
|
|
Dividends and undistributed earnings allocated to participating securities(1)
|
—
|
|
|
(1)
|
|
|
|
Net income available to common shareholders
|
$
|
489
|
|
|
$
|
580
|
|
|
|
Average common shares outstanding (In thousands):
|
|
|
|
|
|
Basic average common shares
|
350,743
|
|
|
353,746
|
|
|
|
Effect of dilutive securities: equity-based awards
|
4,947
|
|
|
4,247
|
|
|
|
Diluted average common shares
|
355,690
|
|
|
357,993
|
|
|
|
Anti-dilutive securities(2)
|
255
|
|
|
918
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
Basic
|
$
|
1.39
|
|
|
$
|
1.64
|
|
|
|
Diluted(3)
|
1.37
|
|
|
1.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Represents the portion of net income available to common equity allocated to participating securities, composed of unvested and fully vested SERP (Supplemental executive retirement plans) shares and fully vested deferred director stock awards, which are equity-based awards that contain non-forfeitable rights to dividends, and are considered to participate with the common stock in undistributed earnings.
(2) Represents equity-based awards outstanding but not included in the computation of diluted average common shares, because their effect was anti-dilutive. Additional information about equity-based awards is provided on pages 176 and 177 in Note 18 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2020 Form 10-K.
(3) Calculations reflect allocation of earnings to participating securities using the two-class method, as this computation is more dilutive than the treasury stock method.
State Street Corporation | 82
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 17. Line of Business Information
Our operations are organized into two lines of business: Investment Servicing and Investment Management, which are defined based on products and services provided. The results of operations for these lines of business are not necessarily comparable with those of other companies, including companies in the financial services industry. For information about our two lines of business, as well as revenues, expenses and capital allocation methodologies associated with them, refer to pages 182 to 183 in Note 24 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2020 Form 10-K.
The following is a summary of our line of business results for the periods indicated. The "Other" columns represent costs incurred that are not allocated to a specific line of business, certain employee costs, including certain severance and restructuring costs, acquisition costs and certain provisions for legal contingencies.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
Investment
Servicing
|
|
Investment
Management
|
|
Other
|
|
Total
|
(Dollars in millions)
|
2021
|
|
2020
|
|
|
|
2021
|
|
2020
|
|
|
|
2021
|
|
2020
|
|
|
|
2021
|
|
2020
|
|
|
Servicing fees
|
$
|
1,371
|
|
|
$
|
1,287
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
1,371
|
|
|
$
|
1,287
|
|
|
|
Management fees
|
—
|
|
|
—
|
|
|
|
|
493
|
|
|
464
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
493
|
|
|
464
|
|
|
|
Foreign exchange trading services
|
333
|
|
|
434
|
|
|
|
|
13
|
|
|
10
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
346
|
|
|
444
|
|
|
|
Securities finance
|
95
|
|
|
89
|
|
|
|
|
4
|
|
|
3
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
99
|
|
|
92
|
|
|
|
Software and processing fees(1)(2)
|
172
|
|
|
137
|
|
|
|
|
2
|
|
|
(25)
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
174
|
|
|
112
|
|
|
|
Total fee revenue(1)
|
1,971
|
|
|
1,947
|
|
|
|
|
512
|
|
|
452
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
2,483
|
|
|
2,399
|
|
|
|
Net interest income
|
473
|
|
|
663
|
|
|
|
|
(6)
|
|
|
1
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
467
|
|
|
664
|
|
|
|
Total other income
|
—
|
|
|
2
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
2
|
|
|
|
Total revenue(1)
|
2,444
|
|
|
2,612
|
|
|
|
|
506
|
|
|
453
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
2,950
|
|
|
3,065
|
|
|
|
Provision for credit losses
|
(9)
|
|
|
36
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
(9)
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses(1)
|
1,879
|
|
|
1,859
|
|
|
|
|
397
|
|
|
385
|
|
|
|
|
56
|
|
|
11
|
|
|
|
|
2,332
|
|
|
2,255
|
|
|
|
Income before income tax expense
|
$
|
574
|
|
|
$
|
717
|
|
|
|
|
$
|
109
|
|
|
$
|
68
|
|
|
|
|
$
|
(56)
|
|
|
$
|
(11)
|
|
|
|
|
$
|
627
|
|
|
$
|
774
|
|
|
|
Pre-tax margin
|
23
|
%
|
|
27
|
%
|
|
|
|
21
|
%
|
|
15
|
%
|
|
|
|
|
|
|
|
|
|
21
|
%
|
|
25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Investment Servicing includes results from our acquisition of CRD on October 1, 2018.
(2) Investment Management includes other revenue items that are primarily driven by equity market movements.
State Street Corporation | 83
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 18. Revenue from Contracts with Customers
For additional information on our revenue from contracts with customers, including revenues associated with both our Investment Servicing and Investment Management lines of business, refer to pages 184 to 186 in Note 25 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2020 Form 10-K.
Revenue by category
In the following table, revenue is disaggregated by our two lines of business and by revenue stream for which the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2021
|
|
Investment Servicing
|
|
Investment Management
|
|
|
|
Total
|
(Dollars in millions)
|
Topic 606 revenue
|
|
All other revenue
|
|
Total
|
|
Topic 606 revenue
|
|
All other revenue
|
|
Total
|
|
|
|
|
|
|
|
2021
|
Servicing fees
|
$
|
1,371
|
|
|
$
|
—
|
|
|
$
|
1,371
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
$
|
1,371
|
|
Management fees
|
—
|
|
|
—
|
|
|
—
|
|
|
493
|
|
|
—
|
|
|
493
|
|
|
|
|
|
|
|
|
493
|
|
Foreign exchange trading services
|
95
|
|
|
238
|
|
|
333
|
|
|
13
|
|
|
—
|
|
|
13
|
|
|
|
|
|
|
|
|
346
|
|
Securities finance
|
60
|
|
|
35
|
|
|
95
|
|
|
—
|
|
|
4
|
|
|
4
|
|
|
|
|
|
|
|
|
99
|
|
Software and processing fees
|
108
|
|
|
64
|
|
|
172
|
|
|
—
|
|
|
2
|
|
|
2
|
|
|
|
|
|
|
|
|
174
|
|
Total fee revenue
|
1,634
|
|
|
337
|
|
|
1,971
|
|
|
506
|
|
|
6
|
|
|
512
|
|
|
|
|
|
|
|
|
2,483
|
|
Net interest income
|
—
|
|
|
473
|
|
|
473
|
|
|
—
|
|
|
(6)
|
|
|
(6)
|
|
|
|
|
|
|
|
|
467
|
|
Total other income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
Total revenue
|
$
|
1,634
|
|
|
$
|
810
|
|
|
$
|
2,444
|
|
|
$
|
506
|
|
|
$
|
—
|
|
|
$
|
506
|
|
|
|
|
|
|
|
|
$
|
2,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
|
Investment Servicing
|
|
Investment Management
|
|
|
|
Total
|
(Dollars in millions)
|
Topic 606 revenue
|
|
All other revenue
|
|
Total
|
|
Topic 606 revenue
|
|
All other revenue
|
|
Total
|
|
|
|
|
|
|
|
2020
|
Servicing fees
|
$
|
1,287
|
|
|
$
|
—
|
|
|
$
|
1,287
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
$
|
1,287
|
|
Management fees
|
—
|
|
|
—
|
|
|
—
|
|
|
464
|
|
|
—
|
|
|
464
|
|
|
|
|
|
|
|
|
464
|
|
Foreign exchange trading services
|
100
|
|
|
334
|
|
|
434
|
|
|
10
|
|
|
—
|
|
|
10
|
|
|
|
|
|
|
|
|
444
|
|
Securities finance
|
57
|
|
|
32
|
|
|
89
|
|
|
—
|
|
|
3
|
|
|
3
|
|
|
|
|
|
|
|
|
92
|
|
Software and processing fees
|
107
|
|
|
30
|
|
|
137
|
|
|
—
|
|
|
(25)
|
|
|
(25)
|
|
|
|
|
|
|
|
|
112
|
|
Total fee revenue
|
1,551
|
|
|
396
|
|
|
1,947
|
|
|
474
|
|
|
(22)
|
|
|
452
|
|
|
|
|
|
|
|
|
2,399
|
|
Net interest income
|
—
|
|
|
663
|
|
|
663
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
|
|
|
|
|
|
664
|
|
Total other income
|
—
|
|
|
2
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
2
|
|
Total revenue
|
$
|
1,551
|
|
|
$
|
1,061
|
|
|
$
|
2,612
|
|
|
$
|
474
|
|
|
$
|
(21)
|
|
|
$
|
453
|
|
|
|
|
|
|
|
|
$
|
3,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract balances and contract costs
As of March 31, 2021 and December 31, 2020, net receivables of $4.24 billion and $2.68 billion, respectively, are included in accrued interest and fees receivable, representing amounts billed or currently billable related to revenue from contracts with customers. As performance obligations are satisfied, we have an unconditional right to payment and billing is generally performed monthly or quarterly; therefore, we do not have significant contract assets or liabilities.
No adjustments are made to the promised amount of consideration for the effects of a significant financing component as the period between when we transfer a promised service to a customer and when the customer pays for that service is expected to be one year or less.
State Street Corporation | 84
STATE STREET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 19. Non-U.S. Activities
We define our non-U.S. activities as those revenue-producing business activities that arise from clients which are generally serviced or managed outside the U.S. Due to the integrated nature of our business, precise segregation of our U.S. and non-U.S. activities is not possible.
Subjective estimates, assumptions and other judgments are applied to quantify the financial results and assets related to our non-U.S. activities, including our application of funds transfer pricing, our asset and liability management policies and our allocation of certain indirect corporate expenses. Management periodically reviews and updates its processes for quantifying the financial results and assets related to our non-U.S. activities.
The following table presents our U.S. and non-U.S. financial results for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
(In millions)
|
Non-U.S.(1)
|
|
U.S.
|
|
Total
|
|
Non-U.S.(1)
|
|
U.S.
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
$
|
1,337
|
|
|
$
|
1,613
|
|
|
$
|
2,950
|
|
|
$
|
1,357
|
|
|
$
|
1,708
|
|
|
$
|
3,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense
|
312
|
|
|
315
|
|
|
627
|
|
|
339
|
|
|
435
|
|
|
774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Geographic mix is generally based on the domicile of the entity servicing the funds and is not necessarily representative of the underlying asset mix.
Non-U.S. assets were $106.25 billion and $104.44 billion as of March 31, 2021 and 2020, respectively.
State Street Corporation | 85
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm
The Shareholders and Board of Directors of State Street Corporation
Results of Review of Interim Financial Statements
We have reviewed the accompanying consolidated statement of condition of State Street Corporation (the “Corporation”) as of March 31, 2021, and the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows for the three-month periods ended March 31, 2021 and 2020, and the related condensed notes (collectively referred to as the “condensed consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the consolidated statement of condition of the Corporation as of December 31, 2020, the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows for the year then ended, and the related notes (not presented herein); and in our report dated February 19, 2021, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated statement of condition as of December 31, 2020, is fairly stated, in all material respects, in relation to the consolidated statement of condition from which it has been derived.
Basis for Review Results
These financial statements are the responsibility of the Corporation’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
/s/ Ernst & Young LLP
Boston, Massachusetts
April 23, 2021
State Street Corporation | 86
|
|
|
|
|
|
|
|
|
|
|
|
ACRONYMS
|
|
|
|
|
|
|
|
|
ABS
|
Asset-backed securities
|
LCR(1)
|
Liquidity coverage ratio
|
AFS
|
Available-for-sale
|
LIHTC
|
Low income housing tax credits
|
AML
|
Anti-money laundering
|
LDA model
|
Loss distribution approach model
|
AOCI
|
Accumulated other comprehensive income (loss)
|
LIBOR
|
London Interbank Offered Rate
|
ASU
|
Accounting Standards Update
|
LTD
|
Long-term debt
|
AUC/A
|
Assets under custody and/or administration
|
MBS
|
Mortgage-backed securities
|
AUM
|
Assets under management
|
MRAC
|
Management Risk and Capital Committee
|
BCC
|
Business Conduct Committee
|
MRC
|
Model Risk Committee
|
bps
|
Basis points
|
MRM
|
Model Risk Management
|
CAP
|
Capital adequacy process
|
MVG
|
Model Validation Group
|
CCAR
|
Comprehensive Capital Analysis and Review
|
NII
|
Net interest income
|
CRD
|
Charles River Development
|
NIM
|
Net interest margin
|
CET1(1)
|
Common equity tier 1
|
NOL
|
Net Operating Loss
|
CFTC
|
Commodity Futures Trading Commission
|
NSFR(1)
|
Net stable funding ratio
|
CIS
|
Corporate Information Security
|
ORM
|
Operational risk management
|
COSO
|
Committee of Sponsoring Organizations of the Treadway Commission
|
OTC
|
Over-the-counter
|
CRO
|
Chief Risk Officer
|
OTTI
|
Other-than-temporary-impairment
|
CRPC
|
Credit Risk & Policy Committee
|
PCA
|
Prompt corrective action
|
CVA
|
Credit valuation adjustment
|
PCAOB
|
Public Company Accounting Oversight Board
|
DOJ
|
Department of Justice
|
PD(1)
|
Probability-of-default
|
DOL
|
Department of Labor
|
P&L
|
Profit-and-loss
|
E&A Committee
|
Examining and Audit Committee
|
RC
|
Risk Committee
|
ECB
|
European Central Bank
|
RWA(1)
|
Risk-weighted asset
|
EGRRCPA
|
Economic Growth, Regulatory Relief, and Consumer Protection Act
|
SCB
|
Stress Capital Buffer
|
EMEA
|
Europe, Middle East, and Africa
|
SEC
|
Securities and Exchange Commission
|
EPS
|
Earnings per share
|
SIFI
|
Systemically important financial institutions
|
ERM
|
Enterprise Risk Management
|
SLB
|
Stress Leverage Buffer
|
ETF
|
Exchange-Traded Fund
|
SLR(1)
|
Supplementary leverage ratio
|
EVE
|
Economic value of equity
|
SPDR
|
Spider; Standard and Poor's depository receipt
|
FDIC
|
Federal Deposit Insurance Corporation
|
SPOE Strategy
|
Single Point of Entry Strategy
|
FHLB
|
Federal Home Loan Bank of Boston
|
SSIF
|
State Street Intermediate Funding, LLC
|
FICC
|
Fixed Income Clearing Corporation
|
TCJA
|
Tax Cuts and Jobs Act
|
FTE
|
Fully taxable-equivalent
|
TLAC(1)
|
Total loss-absorbing capacity
|
FSOC
|
Financial Stability Oversight Council
|
TMRC
|
Trading and Markets Risk Committee
|
FX
|
Foreign exchange
|
TOPS
|
Technology and Operations Committee
|
GAAP
|
Generally accepted accounting principles
|
TORC
|
Technology and Operational Risk Committee
|
GCR
|
Global credit review
|
UCITS
|
Undertakings for Collective Investments in Transferable Securities
|
G-SIB
|
Global systemically important bank
|
UOM
|
Unit of measure
|
HQLA(1)
|
High-quality liquid assets
|
VaR
|
Value-at-Risk
|
HRC
|
Human Resources Committee
|
VIE
|
Variable interest entity
|
HTM
|
Held-to-maturity
|
WD
|
Withdrawn
|
IDI
|
Insured Depository Institution
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) As defined by the applicable U.S. regulations.
State Street Corporation | 87
|
|
|
|
|
|
|
|
|
GLOSSARY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-backed securities: A financial security backed by collateralized assets, other than real estate or mortgage backed securities.
Assets under custody and/or administration: Assets that we hold directly or indirectly on behalf of clients under a safekeeping or custody arrangement or for which we provide administrative services for clients. To the extent that we provide more than one AUC/A service (including back and middle office services) for a client’s assets, the value of the asset is only counted once in the total amount of AUC/A.
Assets under management: The total market value of client assets for which we provide investment management strategy services, advisory services and/or distribution services generating management fees based on a percentage of the assets’ market values. These client assets are not included on our balance sheet. Assets under management include managed assets lost but not liquidated. Lost business occurs from time to time and it is difficult to predict the timing of client behavior in transitioning these assets as the timing can vary significantly.
Beacon: A multi-year program, announced in October 2015, to create cost efficiencies through changes in our operational processes and to further digitize our processes and interfaces with our clients.
Certificates of deposit: A savings certificate with a fixed maturity date, specified fixed interest rate and can be issued in any denomination aside from minimum investment requirements. A CD restricts access to the funds until the maturity date of the investment.
Collateralized loan obligations: A security backed by a pool of debt, primarily senior secured leveraged loans. CLOs are similar to collateralized mortgage obligations, except for the different type of underlying loan. With a CLO, the investor receives scheduled debt payments from the underlying loans, assuming most of the risk in the event borrowers default, but is offered greater diversity and the potential for higher-than-average returns.
Commercial real estate: Property intended to generate profit from capital gains or rental income. CRE loans are term loans secured by commercial and multifamily properties. We seek CRE loans with strong competitive positions in major domestic markets, stable cash flows, modest leverage and experienced institutional ownership.
Deposit beta: A measure of how much of an interest rate increase is expected to be passed on to client interest-bearing accounts, on average.
Depot bank: A German term, specified by the country's law on investment companies, which essentially corresponds to 'custodian'.
Doubtful: Doubtful loans and leases meet the same definition of substandard loans and leases (i.e., well-defined weaknesses that jeopardize repayment with the possibility that we will sustain some loss) with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable.
Economic value of equity: A measure designed to estimate the fair value of assets, liabilities and off-balance sheet instruments based on a discounted cash flow model.
Exchange-Traded Fund: A type of exchange-traded investment product that offer investors a way to pool their money in a fund that makes investments in stocks, bonds, or other assets and, in return, to receive an interest in that investment pool. ETF shares are traded on a national stock exchange and at market prices that may or may not be the same as the net asset value.
Exposure-at-default: A measure used in the calculation of regulatory capital under Basel III final rule. It can be defined as the expected amount of loss a bank may be exposed to upon default of an obligor.
Global systemically important bank: A financial institution whose distress or disorderly failure, because of its size, complexity and systemic interconnectedness, would cause significant disruption to the wider financial system and economic activity, which will be subject to additional capital requirements.
Held-to-maturity investment securities: We classify investments in debt securities as held-to-maturity only if we have the positive intent and ability to hold those securities to maturity. Investments in debt securities classified as held-to-maturity are measured subsequently at amortized cost in the statement of financial position.
|
High-quality liquid assets: Cash or assets that can be converted into cash at little or no loss of value in private markets and are considered unencumbered.
Investment grade: A rating of loans and leases to counterparties with strong credit quality and low expected credit risk and probability of default. It applies to counterparties with a strong capacity to support the timely repayment of any financial commitment.
Liquidity coverage ratio: The ratio of encumbered high-quality liquid assets divided by expected total net cash outflows over a 30-day stress period. A Basel III framework requirement for banks and bank holding companies to measure liquidity, it is designed to ensure that certain banking institutions, including us, maintain a minimum amount of unencumbered HQLA sufficient to withstand the net cash outflow under a hypothetical standardized acute liquidity stress scenario for a 30-day stress period.
Net asset value: The amount of net assets attributable to each share/unit of the fund at a specific date or time.
Net stable funding ratio: The ratio of the amount of available stable funding relative to the amount of required stable funding. This ratio should be equal to at least 100% on an ongoing basis.
Other-than-temporary-impairment: Impairment charge taken on a security whose fair value has fallen below its carrying value on balance sheet and its value is not expected to recover through the holding period of the security.
Probability of default: A measure of the likelihood that a credit obligor will enter into default status.
Qualified financial contracts: Securities contracts, commodity contracts, forward contracts, repurchase agreements, swap agreements and any other contract determined by the FDIC to be a qualified financial contract.
Risk-weighted assets: A measurement used to quantify risk inherent in our on and off-balance sheet assets by adjusting the asset value for risk. RWA is used in the calculation of our risk-based capital ratios.
Special mention: Loans and leases that consist of counterparties with potential weaknesses that, if uncorrected, may result in deterioration of repayment prospects.
Speculative: Loans and leases that consist of counterparties that face ongoing uncertainties or exposure to business, financial, or economic downturns. However, these counterparties may have financial flexibility or access to financial alternatives, which allow for financial commitments to be met.
Substandard: Loans and leases that consist of counterparties with well-defined weakness that jeopardizes repayment with the possibility we will sustain some loss.
Supplementary leverage ratio: The ratio of our tier 1 capital to our total leverage exposure, which measures our capital adequacy relative to our on and off-balance sheet assets.
Total loss-absorbing capacity: The sum of our tier 1 regulatory capital plus eligible external long-term debt issued by us.
Value-at-Risk: Statistical model used to measure the potential loss in value of a portfolio that could occur in normal markets condition, over a defined holding period, within a certain confidence level.
Variable interest entity: An entity that: (1) lacks enough equity investment at risk to permit the entity to finance its activities without additional financial support from other parties; (2) has equity owners that lack the right to make significant decisions affecting the entity’s operations; and/or (3) has equity owners that do not have an obligation to absorb or the right to receive the entity’s losses or return.
|
|
|
|
State Street Corporation | 88