SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): APRIL 10, 2003 INVESTORS FINANCIAL SERVICES CORP. ---------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 0-26996 04-3279817 -------------- ------------- ------------- (State or other jurisdiction (Commission file number) (I.R.S. Employer of incorporation or organization) Identification No.) 200 CLARENDON STREET, BOSTON, MA 02116 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code: (617) 937-6700 NO CHANGE SINCE LAST REPORT ---------------------------------- (Former name or address, if changed since last report) ITEM 9. REGULATION FD DISCLOSURE. The undersigned Registrant furnishes the following information under Items 9 and 12. A. PRESS RELEASE DATED APRIL 10, 2003 INVESTORS FINANCIAL SERVICES CORP. ANNOUNCES FIRST QUARTER EARNINGS CONTACT: JOHN N. SPINNEY, JR. (617) 937-3500 JOHN.SPINNEY@IBTCO.COM BOSTON, MA, APRIL 10, 2003 - Investors Financial Services Corp. (Nasdaq: IFIN) reported first quarter diluted operating earnings per share of $0.29, an increase of 21% from $0.24 in the first quarter of 2002. Net operating income for the first quarter was $19.3 million, up 20% from $16.1 million in the first quarter of 2002. Prior year diluted earnings per share reflects the two-for-one stock split which occurred on June 14, 2002. Both diluted operating earnings per share and net operating income for the first quarter of 2003 exclude the previously disclosed $13.9 million, or $0.21 per share, one-time tax accrual that the Company recorded in accordance with Accounting Principles Generally Accepted in the United States of America ("GAAP"). The one-time accrual resulted from a retroactive tax law change during the first quarter by the Commonwealth of Massachusetts disallowing a dividends received deduction taken by Investors Bank & Trust Company on dividends it received since 1999 from a wholly-owned real estate investment trust. This press release includes both an income statement based on GAAP and a pro forma income statement excluding the one-time tax accrual, which management considers a more useful depiction of the Company's results of operations. Including the tax accrual, GAAP net income for the first quarter was $5.4 million and GAAP diluted earnings per share was $0.08. Kevin J. Sheehan, Chairman and Chief Executive Officer, commented, "Investors Financial Services again delivered impressive operating results in a challenging economic environment. Our diverse revenue stream and prudent cost controls continued to drive our strong performance. We are confident that we will be able to meet our diluted operating earnings per share target of $1.30 and our GAAP diluted earnings per share target of $1.09 for 2003." Net operating revenue for the first quarter grew 7% to $113.0 million from $105.7 million for the same period in 2002. Revenue from core services such as global custody, multicurrency accounting and mutual fund administration rose to $56.8 million for the first quarter, up 2% from $55.9 million from the same period in the prior year. Revenue from value-added services including securities lending, foreign exchange and cash management sweep services increased to $15.9 million for the quarter, up 19% from 2 $13.4 million in the first quarter of 2002. Net interest income grew 10% to $39.4 million for the first quarter of 2003 from $35.7 million for the same period in 2002. Operating expenses were $84.4 million for the first quarter of 2003, up 3% from $82.1 million for the same period in 2002. Assets processed for clients totaled approximately $784 billion at March 31, 2003 compared to $785 billion at December 31, 2002. Today the Company also announced that its Board of Directors declared a cash dividend of $0.015 per share on its common stock. The dividend is payable May 14, 2003 to stockholders of record as of April 30, 2003. Investors Financial will broadcast a conference call, via the Internet, today, April 10, 2003 at 9:00 a.m. EDT. The call will be accessible on Investors Financial's home page at http://www.ibtco.com. The conference call will also be available via telephone at (719) 457-2692, confirmation code 534670. Recorded replays of the conference call will be available at www.ibtco.com or by dialing (719) 457-0820, confirmation code 534670. Investors Financial Services Corp. provides services for a variety of financial asset managers such as mutual fund complexes, investment advisors, banks, and insurance companies. Through our wholly-owned subsidiary, Investors Bank & Trust Company, we provide core services including global custody, multicurrency accounting, and mutual fund administration, and value added services including securities lending, foreign exchange, and cash management. Offices are located in the United States, Canada, Cayman Islands, and Ireland. Visit Investors Financial on the web at HTTP://WWW.IBTCO.COM. This news release contains forward-looking statements (statements which are not historical facts). These statements, such as Mr. Sheehan's statements regarding the Company's 2003 operating and GAAP earnings estimates, are based upon certain assumptions and estimates that might not be realized. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include the performance of global financial markets, changes in interest rates, and the Company's ability to continue to manage its costs and sell its services to new and existing customers. Additional factors that could also affect actual results are set forth under the heading "Certain Factors That May Affect Future Results" in the Company's Annual Report on Form 10-K for the year ended December 31, 2002. 3 INVESTORS FINANCIAL SERVICES CORP. CONDENSED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS) March 31, December 31, ASSETS 2003 2002 -------------------- -------------------- Securities held to maturity $ 3,683,457 $ 3,438,689 Securities available for sale 3,512,795 3,272,465 Loans, net of reserve 107,182 143,737 Non-marketable equity securities 50,000 50,000 Goodwill 79,969 79,969 Other non-earning assets 266,974 229,917 -------------------- -------------------- TOTAL ASSETS $ 7,700,377 $ 7,214,777 ==================== ==================== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Interest-bearing deposits $ 2,230,704 $ 2,702,822 Non-interest bearing deposits 628,457 630,096 -------------------- -------------------- Total deposits 2,859,161 3,332,918 Securities sold under repurchase agreements 2,988,916 2,301,974 Short-term and other borrowings 1,178,477 741,107 Due to brokers for open trades payable 83,366 286,843 Other liabilities 109,924 85,676 -------------------- -------------------- TOTAL LIABILITIES 7,219,844 6,748,518 Minority interest/Trust preferred securities 23,310 23,303 Stockholders' equity 457,223 442,956 -------------------- -------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,700,377 $ 7,214,777 ==================== ==================== AVERAGE BALANCE SHEET DATA: Interest earning assets $ 6,731,791 $ 6,378,522 Total assets 7,177,001 6,928,189 Total deposits 2,663,447 2,797,843 Common stockholders' equity 447,788 427,866 4 INVESTORS FINANCIAL SERVICES CORP. SELECTED FINANCIAL DATA (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) GAAP EARNINGS Quarter Ended March 31, STATEMENT OF INCOME DATA: 2003 2002 -------------------- -------------------- Net interest income $ 39,369 $ 35,737 Asset servicing and other fees 73,644 69,917 -------------------- -------------------- Net operating revenue 113,013 105,654 Operating expenses 84,447 82,108 -------------------- -------------------- Income before income taxes and minority interest 28,566 23,546 Provision for income taxes 22,773 7,094 Minority interest expense, net of income taxes 381 397 -------------------- -------------------- Net Income $ 5,412 $ 16,055 ==================== ==================== Diluted earnings per share $ 0.08 $ 0.24 ==================== ==================== PRO FORMA OPERATING EARNINGS Quarter Ended March 31, STATEMENT OF INCOME DATA: 2003 2002 -------------------- -------------------- Net interest income $ 39,369 $ 35,737 Asset servicing and other fees 73,644 69,917 -------------------- -------------------- Net operating revenue 113,013 105,654 Operating expenses 84,447 82,108 -------------------- -------------------- Income before income taxes and minority interest 28,566 23,546 Provision for income taxes (1) 8,873 7,094 Minority interest expense, net of income taxes 381 397 -------------------- -------------------- Net Income $ 19,312 $ 16,055 ==================== ==================== Diluted operating earnings per share $ 0.29 $ 0.24 ==================== ==================== (1) Provision for first quarter 2003 income taxes excludes the $13,900 tax accrual recognized by the Company as a result of a retroactive tax law change by the Commonwealth of Massachusetts disallowing a 95% dividends received deduction on dividends that Investors Bank & Trust Company received from its wholly-owned real estate investment trust. The effect of this exclusion is a difference of $0.21 per share in pro forma diluted operating earnings versus GAAP diluted earnings per share. 5 B. FINANCIAL HIGHLIGHTS Investors Financial Services Corp. Financial Highlights Quarter Ended March 31, 2003 Table of Contents Consolidated Statement of Income/Share Information 7 Condensed Consolidated Balance Sheet 8 Average Balance Sheet 9 Asset Servicing Fees 10 6 INVESTORS FINANCIAL SERVICES CORP. CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) FOR THE QUARTER ENDED MARCH 31, 2003 (Dollars in thousands, except per share data) ----------------------------------------------------------------------------------------------- NET INTEREST INCOME Interest income $ 60,349 Interest expense 20,980 ------------------ Net interest income 39,369 ------------------ NON-INTEREST INCOME Asset servicing fees 72,874 Other operating income 770 ------------------ Total non-interest income 73,644 ------------------ Net operating revenue 113,013 ------------------ OPERATING EXPENSES Compensation and benefits 49,771 Technology and telecommunications 9,291 Occupancy 7,325 Transaction processing services 6,808 Depreciation and amortization 6,079 Professional fees 1,679 Travel and sales promotion 985 Other operating expenses 2,509 ------------------ Total operating expenses 84,447 ------------------ Income Before Income Taxes and Minority Interest 28,566 Provision for income taxes 22,773 Minority interest expense, net of income taxes 381 ------------------ NET INCOME $ 5,412 ================== EARNINGS PER SHARE (DILUTED) $ 0.08 ================== SHARE INFORMATION FOR THE QUARTER ENDED (UNAUDITED) MARCH 31, 2003 Common Stock Outstanding at March 31, 2003 64,992,847 Weighted Average Diluted Shares at March 31, 2003 66,319,248 7 INVESTORS FINANCIAL SERVICES CORP. CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) MARCH 31, 2003 (Dollars in thousands) ----------------------------------------------------------------------------------------------- ASSETS Securities held to maturity $ 3,683,457 Securities available for sale 3,512,795 Loans, net of reserve 107,182 Non-marketable equity securities 50,000 Goodwill, net 79,969 Other assets 266,974 ------------------ TOTAL ASSETS $ 7,700,377 ================== LIABILITIES Interest-bearing deposits $ 2,230,704 Non-interest bearing deposits 628,457 ------------------ Total deposits 2,859,161 Securities sold under repurchase agreements 2,988,916 Short-term and other borrowings 1,178,477 Due to brokers for open trades payable 83,366 Other liabilities 109,924 ------------------ TOTAL LIABILITIES 7,219,844 Minority interest/trust preferred securities 23,310 Stockholders' Equity 457,223 ------------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,700,377 ================== 8 INVESTORS FINANCIAL SERVICES CORP. AVERAGE BALANCE SHEET (UNAUDITED) FOR THE QUARTER ENDED MARCH 31, 2003 (Dollars in thousands) ------------------------------------------------------------------------------------------------------------------------ AVERAGE BALANCE AVERAGE INTEREST YIELD/COST INTEREST-EARNING ASSETS Federal funds sold and securities purchased under resale agreements $ 4,911 $ 16 1.30% Investment securities 6,611,391 59,485 3.60% Loans 115,489 848 2.94% -------------------------------------------------- Total interest-earning assets 6,731,791 60,349 3.59% ----------------- Allowance for loan losses (100) Non-interest earning assets 445,310 -------------------- TOTAL ASSETS $ 7,177,001 ==================== INTEREST-BEARING LIABILITIES Deposits Savings $ 2,193,981 $ 9,117 1.66% Securities sold under repurchase agreements 3,092,673 7,337 0.95% Short-term and other borrowings 855,274 4,526 2.12% -------------------------------------------------- Total interest-bearing liabilities 6,141,928 20,980 1.37% ----------------- Non-interest bearing liabilities Demand deposits 212,569 Savings 166,897 Non-interest bearing time deposits 90,000 Other liabilities 94,514 -------------------- Total liabilities 6,705,908 Trust preferred stock 23,305 Equity 447,788 -------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,177,001 ==================== Net interest income $ 39,369 ================= Net interest margin 2.34% =============== Average interest rate spread 2.22% =============== Ratio of interest-earning assets to interest-bearing liabilities 109.60% =============== 9 INVESTORS FINANCIAL SERVICES CORP. ASSET SERVICING FEES (UNAUDITED) FOR THE QUARTER ENDED MARCH 31, 2003 (Dollars in thousands) ------------------------------------------------------------------------------------- ASSET SERVICING FEES BY SERVICE LINES: Custody, accounting, and administration $ 56,761 Foreign exchange 6,733 Cash management 5,035 Securities lending 2,188 Investment advisory 1,943 Other service fees 214 --------------------- TOTAL $ 72,874 ===================== 10 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INVESTORS FINANCIAL SERVICES CORP. By: /S/ KEVIN J. SHEEHAN ------------------------------- Kevin J. Sheehan Chief Executive Officer and Chairman of the Board Dated: April 10, 2003 11