<PAGE>
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 16, 1996
----------------------------
NORTHERN TRUST CORPORATION
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
- ------------------------------------------------------------------------------
(State or other jurisdiction of incorporation)
0-5965 36-2723087
- ------------------------------ --------------------------------------
(Commission File Number) (IRS Employer Identification No.)
Fifty South LaSalle Street, Chicago, Illinois 60675
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 630-6000
---------------------------
<PAGE>
Item 5. Other Events
The information contained in the registrant's April 15, 1996 press release,
reporting on the registrant's earnings for the first quarter of 1996, a copy of
which is filed as Exhibit 99 hereto, is incorporated herein by reference.
Item 7. Financial Statements and Exhibits
(c) Exhibits:
Exhibit 99 April 15, 1996 Press Release
-2-
<PAGE>
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.
NORTHERN TRUST CORPORATION
--------------------------
(Registrant)
Dated: April 16, 1996 By: Perry R. Pero
-------------
Perry R. Pero
Senior Executive Vice President
and Chief Financial Officer
-3-
<PAGE>
EXHIBIT INDEX
-------------
Number Description Page Number
- ------ ----------- -----------
99 April 15, 1996 Press Release 5
-4-
<PAGE>
- -------------------------------------------------------------------------------
NEWS RELEASE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NORTHERN TRUST CORPORATION
50 South LaSalle Street
Chicago, Illinois 60675
Contact: Laurie McMahon, Investor Relations
(312) 444-7811 or
Sue Rageas, Public Relations
Release #01442 (312) 444-4279
- -------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
- ---------------------
NORTHERN TRUST CORPORATION REPORTS RECORD 1996 FIRST QUARTER EARNINGS OF $1.04
PER SHARE, UP 22%
(Chicago, April 15, 1996) Northern Trust Corporation reported record net income
of $61.5 million for the first quarter, an increase of 25% from the $49.3
million earned in the first quarter of last year. Net income per common share
increased 22% to $1.04 from $.85 a year ago. This earnings performance resulted
in a return on average common equity of 18.35%.
William A. Osborn, Chairman and Chief Executive Officer, said, "We are very
pleased that the momentum in our core businesses continues to be strong.
Financial results for the first quarter exceeded all of our key corporate
targets, with strong revenue growth across each of our products and services.
The increase in net income reflects the leverage of a 12% increase in total
revenues combined with a 4% increase in operating expenses. The modest growth
in expenses, which includes incremental expenses from three 1995 acquisitions,
demonstrates the effect of Northern's cost control initiatives. Trust fees, the
largest single component of revenues, grew 19% to a record $143.9 million and
accounted for 50% of total revenues. Total trust assets increased 6% from year-
end 1995 to $649 billion at March 31, 1996."
-more-
<PAGE>
-2-
FIRST QUARTER PERFORMANCE HIGHLIGHTS
Trust fees from Corporate & Institutional Services (C&IS) in the quarter
grew 25% and totaled $72.8 million compared to $58.2 million in the year ago
quarter. These revenues are derived from a full range of custody, investment
and advisory services for the retirement and other asset pools of our corporate
and institutional clients worldwide. Fees generated by RCB International, Inc.
(RCB), an October 31, 1995 acquisition, accounted for $6.0 million of the trust
fee growth. The remainder of the increase in C&IS trust fees resulted from
substantial new business, strong growth in custody service revenues, a higher
volume of security lending activity and growth in investment management fees.
Northern's innovative technology, relationship focus, financial strength, and
product expertise were important factors for clients who chose Northern as their
service provider or expanded existing relationships. Total C&IS trust assets
under administration increased $30.4 billion during the quarter to $574.7
billion at March 31, 1996, of which $70.3 billion is managed by Northern Trust.
Included in the total is approximately $87 billion of global custody assets.
Trust fees from Personal Financial Services (PFS) grew 14% to $71.1 million
compared to $62.6 million in the year ago quarter. PFS trust fee growth
resulted primarily from new business and higher market values. During the first
quarter, Northern expanded its Florida presence by opening new offices in Bonita
Springs and Delray Beach, bringing to 21 the total number of offices in this
high-growth market. Northern's network of Personal Financial Service offices at
quarter end included 52 locations in Illinois, Florida, California, Arizona, and
Texas. Total personal trust assets under administration increased $4.5 billion
over year-end 1995 and totaled $74.1 billion at March 31, 1996, with $44.2
billion under management.
Other noninterest income increased 7% and totaled $43.8 million compared to
$40.8 million in the first quarter of 1995. The principal items included in
other
-more-
<PAGE>
-3-
FIRST QUARTER PERFORMANCE HIGHLIGHTS (CONTINUED)
noninterest income are foreign exchange trading profits and treasury management
fees. Foreign exchange trading profits were $12.5 million in the first quarter,
an increase of 12% from the year ago quarter. Foreign exchange trading profits
continue to benefit from the increase in cross-border investment activities of
Master Trust/Master Custody clients, although they are also affected by market
volatility. Fees from treasury management services were $13.0 million, up 5%
from last year. Total treasury management revenues from both fees and earnings
on compensating deposit balances were $20.5 million, an increase of 6% from the
first quarter of 1995, and reflect growth in all treasury management products,
particularly electronic services. Other operating income in the first quarter
also benefited from higher fees on certain trust-related overnight advances.
Net interest income for the quarter, stated on a fully taxable equivalent
basis, totaled a record $102.0 million, up 4% from the $98.1 million reported in
the first quarter last year. The increase in net interest income reflects
acquisitions and higher levels of earning assets concentrated primarily in
residential mortgages, commercial and industrial loans, and short-term
government securities. The net interest margin was 2.21%, essentially unchanged
from the 2.22% reported for the fourth quarter of 1995 but down from the 2.43%
reported in the year ago quarter. The flat yield curve experienced in the first
two months of the quarter narrowed spreads between yields on short-term assets
and rates paid on retail deposits and various short-term funding sources.
Credit quality remains strong. Nonperforming loans of $30.6 million were
down slightly from year-end. They represent .31% of total loans and were
covered 4.8 times by the $147.2 million reserve for credit losses. First
quarter net charge-offs totaled $4.9 million compared to $1.6 million reported
one year ago. The $5.0 million provision
-more-
<PAGE>
-4-
FIRST QUARTER PERFORMANCE HIGHLIGHTS (CONTINUED)
for credit losses, up from $1.5 million a year ago, was made in light of charge-
offs in the commercial loan portfolio and maintained the reserve for credit
losses at its 1995 year-end level.
Noninterest expenses of $184.0 million were up $6.7 million or 4% from the
first quarter of 1995. Operating expenses of the three businesses acquired in
1995 accounted for approximately $8.6 million of these expenses in 1996, while
the 1995 second half reduction in FDIC insurance premiums lowered quarterly
expenses for 1996 by $4.0 million. Relative to the fourth quarter of 1995,
expenses increased $5.5 million due largely to salary merit increases,
additional depreciation and amortization expense for the new year, and the fact
that the fourth quarter included only two months of RCB expenses. Northern
continues to invest in technology and expansion of its network of personal trust
and banking offices. The incremental costs of these strategic programs in the
first quarter have been largely offset by savings obtained through Northern's
expense control initiatives.
Salaries and benefits, which represent 59% of total noninterest expenses,
increased to $108.1 million from $104.0 million in the year ago quarter. The
principal items contributing to the change were merit increases, incentive
compensation, and staff additions resulting from 1995 acquisitions and to
support Northern's growing retirement services activities. These increases were
partially offset by a decline in staff levels in other areas of the Corporation
and cost savings from changes in several benefit plans effective January 1,
1996. Staff on a full-time equivalent basis at March 31, 1996 totaled 6,536
which is essentially the same as year-end.
-more-
<PAGE>
-5-
BALANCE SHEET
Balance sheet assets averaged $20.9 billion for the quarter, up 14% from
last year's average of $18.4 billion, reflecting growth in loans and securities.
Loans and leases averaged $9.8 billion for the quarter, an increase of $1.2
billion or 15%. Residential mortgages increased from $3.3 billion in 1995 to
average $3.9 billion and now represent 40% of the total loan portfolio.
Commercial and industrial loans also increased and averaged $3.1 billion during
the quarter compared to $2.9 billion in the first quarter of 1995. The
securities portfolio increased $1.0 billion to average $6.7 billion. This
increase reflects investments in short-term government securities.
Common stockholders' equity averaged $1.32 billion, an increase of 16% from
the first quarter of 1995. The increase primarily reflects the growth in
retained earnings, offset by the repurchase of common stock pursuant to the
Corporation's 4 million share buyback program. During the quarter the
Corporation acquired 566,306 shares at a total cost of $30.5 million. An
additional 1.7 million shares remain to be purchased under this program. In
January 1996, the Corporation issued approximately 1.2 million shares of common
stock on conversion of its $50 million Series E convertible preferred stock,
which had been called for redemption. The conversion has no impact on fully
diluted net income per common share since the shares issued upon conversion were
reflected previously in the Corporation's fully diluted shares.
/ / /
<PAGE>
Page 1
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
STATEMENT OF INCOME STATISTICS ($ IN MILLIONS)
<TABLE>
<CAPTION>
FIRST QUARTER
===================================
1996 1995 % Change *
===================================
<S> <C> <C> <C>
Net Interest Income (Taxable Equivalent) $102.0 $98.1 4.0%
Less: Taxable Equivalent Adjustment 8.6 9.6 (9.6)
-------- ------ ------
Net Interest Income 93.4 88.5 5.5
Provision for Credit Losses 5.0 1.5 233.3
Noninterest Income
Trust Fees 143.9 120.8 19.1
Treasury Management Fees 13.0 12.3 5.2
Foreign Exchange Trading Profits 12.5 11.2 11.5
Security Commissions & Trading Income 6.3 5.9 6.9
Other Operating Income 11.7 11.3 4.7
Investment Security Transactions 0.3 0.1 N/M
-------- ------ ------
Total Noninterest Income 187.7 161.6 16.2
Noninterest Expenses
Salaries 87.7 82.5 6.2
Pension and Other Employee Benefits 20.4 21.5 (4.8)
Occupancy Expense 15.8 14.2 11.2
Equipment Expense 13.6 12.6 8.3
Other Operating Expenses 46.5 46.5 N/M
-------- ------ ------
Total Noninterest Expenses 184.0 177.3 3.8
-------- ------ ------
Income Before Income Taxes 92.1 71.3 29.2
Provision for Income Taxes 30.6 22.0 39.0
-------- ------ ------
NET INCOME $61.5 $49.3 24.8%
======== ====== ======
Net Income Per Common Share
Primary $1.05 $0.86 22.5%
Fully Diluted 1.04 0.85 22.3
Return on Average Common Equity 18.35% 16.84%
Average Common Equity $1,320.4 $1,136.0 16.2%
Return on Average Assets 1.19% 1.09%
Common Dividend Declared per Share $0.31 $0.26 19.2%
Preferred Dividends (millions) 1.3 2.1 (39.4)
Average Common Shares Outstanding (000s)
Primary 57,491 55,168
Fully Diluted 57,922 56,395
</TABLE>
(N/M) Not Meaningful
(*) Percentage change calculations are based on actual balances rather than
the rounded amounts presented in Supplemental Consolidated Financial
Information.
<PAGE>
Page 2
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
<TABLE>
<CAPTION>
BALANCE SHEET ($ IN MILLIONS)
MARCH 31
-----------------------------------
1996 1995 % Change *
-----------------------------------
<S> <C> <C> <C>
Assets
Money Market Assets $ 2,002.1 $ 1,958.3 2.2 %
Securities 6,087.3 5,495.1 10.8
Loans and Leases 10,025.6 8,875.7 13.0
--------- --------- --------
Total Earning Assets 18,115.0 16,329.1 10.9
Reserve for Credit Losses (147.2) (145.8) 1.0
Other Nonearning Assets 2,333.9 2,552.8 (8.6)
--------- --------- --------
Total Assets $20,301.7 $18,736.1 8.4 %
========= ========= ========
Liabilities and Stockholders' Equity
Total Interest-Bearing Deposits $9,181.4 $ 8,870.3 3.5 %
Borrowed Funds 5,685.8 4,512.4 26.0
Notes Payable (incl. Senior Notes) 641.1 636.8 0.7
--------- --------- --------
Total Interest-Related Funds 15,508.3 14,019.5 10.6
Demand & Other Noninterest-Bearing
Deposits 2,919.0 2,739.6 6.6
Other Liabilities 405.8 628.9 (35.5)
--------- --------- --------
Total Liabilities 18,833.1 17,388.0 8.3
Common Equity 1,348.6 1,178.1 14.5
Preferred Equity 120.0 170.0 (29.4)
--------- --------- --------
Total Liabilities and Stockholders'
Equity $20,301.7 18,736.1 8.4 %
========= ========= ========
</TABLE>
<TABLE>
<CAPTION>
AVERAGE BALANCE SHEET ($ IN MILLIONS)
FIRST QUARTER
-----------------------------------
1996 1995 % Change *
-----------------------------------
<S> <C> <C> <C>
Assets
Money Market Assets $ 2,065.9 $ 2,104.1 (1.8)
Securities 6,734.9 5,732.3 17.5
Loans and Leases 9,777.3 8,535.9 14.5
--------- --------- ---------
Total Earning Assets 18,578.1 16,372.3 13.5
Reserve for Credit Losses (147.2) (145.3) 1.3
Other Nonearning Assets 2,419.1 2,141.5 13.0
--------- --------- ---------
Total Assets $20,850.0 $18,368.5 13.5 %
========= ========= =========
Liabilities and Stockholders' Equity
Total Interest-Bearing Deposits $9,876.6 $ 9,349.1 5.6 %
Borrowed Funds 5,242.4 3,771.2 39.0
Notes Payable (incl. Senior Notes) 649.2 714.4 (9.1)
--------- --------- ---------
Total Interest-Related Funds 15,768.2 13,834.7 14.0
Demand & Other Noninterest-Bearing
Deposits 3,176.3 2,854.9 11.3
Other Liabilities 449.7 372.9 20.6
--------- --------- ---------
Total Liabilities 19,394.2 17,062.5 13.7
Common Equity 1,320.4 1,136.0 16.2
Preferred Equity 135.4 170.0 (20.4)
--------- --------- ---------
Total Liabilities and Stockholders'
Equity $20,850.0 18,368.5 13.5 %
========= ========= =========
</TABLE>
<PAGE>
NORTHERN TRUST CORPORATION Page 3
(Supplemental Consolidated Financial Information)
<TABLE>
<CAPTION>
Quarterly Trend Data ($ In Millions) 1996 1995
Quarter Quarters
------- ---------------------------------------
First Fourth Third Second First
------- ---------------------------------------
<S> <C> <C> <C> <C> <C>
Net Income Summary
- ------------------
Trust Fees $143.9 $133.6 $127.3 $123.3 $120.8
Other Noninterest Income 43.8 41.0 46.1 45.2 40.8
Net Interest Income (Taxable Equivalent) 102.0 100.7 98.9 97.5 98.1
------ ------ ------ ------ ------
Total Revenue (Taxable Equivalent) 289.7 275.3 272.3 266.0 259.7
Provision for Credit Losses 5.0 1.0 2.0 1.5 1.5
Noninterest Expenses 184.0 178.5 175.5 177.9 177.3
------ ------ ------ ------ ------
Pretax Income (Taxable Equivalent 100.7 95.8 94.8 86.6 80.9
Taxable Equivalent Adjustment 8.6 9.0 9.5 9.5 9.6
Provision for Income Taxes 30.6 27.3 27.2 24.0 22.0
------ ------ ------ ------ ------
Net Income $61.5 $59.5 $58.1 $53.1 $49.3
====== ====== ====== ====== ======
Per Common Share
- ----------------
Net Income: Primary $1.05 $1.01 $0.99 $0.90 $0.86
Fully Diluted 1.04 1.00 0.98 0.89 0.85
Dividend Declared 0.31 0.31 0.26 0.26 0.26
Book Value (EOP) 23.81 23.04 22.37 21.84 21.04
Market Value (EOP) 54.00 56.00 46.00 40.25 35.125
Ratios
- ------
Return on Average Common Equity 18.35% 18.19% 18.11% 17.09% 16.84%
Return on Average Assets 1.19 1.16 1.14 1.13 1.09
Net Interest Margin 2.21 2.22 2.21 2.35 2.43
Productivity Ratio* 157% 154% 155% 150% 146%
Risk-based Capital Ratios:
Tier 1 9.1 8.8 8.9 9.2 9.4
Total (Tier 1 + Tier 2) 12.7 12.5 12.7 12.3 12.8
Leverage 6.1 6.2 6.2 6.6 6.6
Trust Assets ($ Billions) - EOP
- -------------------------------
Corporate $574.7 $544.3 $519.0 $484.9 $459.0
Personal 74.1 69.6 66.4 64.4 60.9
------ ------ ------ ------ ------
Total Trust Assets $648.8 $613.9 $585.4 $549.3 $519.9
====== ====== ====== ====== ======
Memo: Managed Assets 114.5 105.5 97.2 91.1 87.5
Asset Quality ($ Millions) - EOP
- -------------------------------
Nonaccrual Loans $30.6 $31.9 $33.6 $33.3 $23.8
Other Real Estate Owned (OREO) 1.5 1.8 1.8 1.2 1.6
------ ------ ------ ------ ------
Total Nonperforming Assets $32.1 $33.7 $35.4 $34.5 $25.4
====== ====== ====== ====== ======
Nonperforming Assets/Loans & OREO 0.32% 0.34% 0.36% 0.37% 0.29%
Net Charge-offs $4.9 $1.1 $1.8 $1.4 $1.6
Net Charge-offs to Avg Loans (Annualized) 0.20% 0.05% 0.08% 0.06% 0.08%
Reserve for Credit Losses $147.2 $147.1 $147.3 $145.9 $145.8
Reserve to Nonaccrual Loans 481% 461% 437% 439% 611%
</TABLE>
(*) The productivity ratio is defined as total revenue on a taxable equivalent
basis before the provision for credit losses, divided by noninterest
expenses.
