<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) October 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 October 15, 1996 press
release, reporting on the registrant's earnings for the third quarter and first
nine months 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 October 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: October 16, 1996 By: Perry R. Pero
-------------
Perry R. Pero
Senior Executive Vice President
and Chief Financial Officer
(3)
<PAGE>
EXHIBIT INDEX
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Number Description Page Number
- ------ ----------- -----------
99 October 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
Dianne Kotsogiannis, Public Relations
Release #01448 (312) 444-4281
FOR IMMEDIATE RELEASE
- ---------------------
NORTHERN TRUST CORPORATION REPORTS RECORD 1996 THIRD QUARTER EARNINGS
OF $1.14 PER SHARE, UP 16%
(Chicago, October 15, 1996) Northern Trust Corporation reported record net
income of $66.5 million for the third quarter, an increase of 14% from $58.1
million earned in the third quarter of last year. Net income per common share
increased 16% to $1.14 from $.98 a year ago. This earnings performance resulted
in a return on average common equity of 18.9%. For the first nine months of
1996, net income also reached a record level of $191.4 million, an increase of
19% from the $160.5 million earned in the comparable period of 1995.
William A. Osborn, Chairman and Chief Executive Officer, said, "Northern's
record earnings for the quarter reflect strong revenues and continued success in
managing expenses. Year-to-year revenue growth of 11% continued its double digit
pace, driven by strong growth in trust fees, net interest income and treasury
management revenues. Northern achieved a record 158% productivity ratio in the
quarter and produced an outstanding 18.9% return on equity. Trust assets under
administration reached $723 billion, with $124 billion under management.
Northern continues to invest aggressively in technology enhancements and in
expanding our national network of offices providing personal trust and private
banking services."
THIRD QUARTER PERFORMANCE HIGHLIGHTS
Trust fees totaled $147.7 million in the quarter compared to $127.3 million
last year, representing an increase of 16%. Trust fees now represent 49% of
total taxable equivalent revenue and 76% of
-more-
<PAGE>
-2-
THIRD QUARTER PERFORMANCE HIGHLIGHTS (Continued)
noninterest income. Total trust assets under administration at September 30,
1996 were $722.7 billion compared to $585.4 billion a year ago, an increase of
23%. Trust assets under management increased 28% to $124.3 billion, from $97.2
billion at September 30, 1995.
Trust fees from Corporate & Institutional Services (C&IS) in the quarter
increased 21% and totaled $74.1 million compared to $61.4 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 corporate and
institutional clients worldwide. Fees generated by RCB International, Inc., an
October 31, 1995 acquisition, accounted for $6.9 million of the trust fee
growth. Excluding these revenues trust fees increased 9%. Compared to the prior
year quarter, securities lending fees increased 45% to $12.2 million, driven by
higher volumes of securities loaned as well as improved spreads earned on the
investment of cash collateral. Since September 30, 1995, total C&IS trust assets
under administration increased $122.9 billion to $641.9 billion at September 30,
1996, of which $77.1 billion is managed by Northern Trust. Included in the total
for trust assets under administration is approximately $98 billion of global
custody assets.
During the quarter, Northern Trust was named preferred provider of master
trust and domestic institutional custody services for current clients of First
Chicago NBD Corporation as it exits that business, positioning Northern Trust
well to pursue these relationships. To more effectively serve existing and new
Michigan-based master trust and institutional custody clients, Northern Trust
announced plans to open an office in Detroit, Michigan. The transition of those
First Chicago NBD clients who select Northern Trust is expected to begin in the
fourth quarter and be completed during the second quarter of 1997.
C&IS trust fees in the third quarter were 21% higher than a year ago, but
$2.3 million or 3% below this year's second quarter. The sequential quarter
comparison was affected by the fact that a much higher proportion of new 1996
C&IS trust business was transitioned and began earning fees in the second
quarter than in the third quarter. The second quarter also benefited from a
number of other factors, including securities lending fees that were $2.0
million higher. Unusually strong demand for certain government and international
equity securities, and a higher spread on securities lending cash collateral,
contributed to second quarter securities lending revenues. Higher consulting
revenues in the second quarter and non-recurring items also affected the
sequential quarter comparison.
-more-
<PAGE>
-3-
THIRD QUARTER PERFORMANCE HIGHLIGHTS (Continued)
Trust fees from Personal Financial Services (PFS) in the quarter increased
12% and totaled $73.6 million compared to $65.9 million in the year-ago quarter,
reflecting strong growth throughout Northern Trust's five-state office network.
The increase in PFS trust fees resulted primarily from new business and
favorable equity markets and represented a $1.3 million increase from the second
quarter. During the quarter, newly constructed Illinois facilities in Winnetka
and Chicago opened for business, enhancing Northern's service delivery to these
existing markets. Total personal trust assets under administration increased
$14.4 billion since September 30, 1995 and were $80.8 billion at September 30,
1996, $47.2 billion of which was under management.
In August, Northern Trust Corporation entered into a definitive agreement
to acquire Metroplex Bancshares, Inc., parent company of the $80 million asset
Bent Tree National Bank in Dallas, Texas for approximately $14.6 million in
cash. The agreement is subject to shareholder and various regulatory approvals
and is expected to close in the fourth quarter of 1996. The acquisition will add
a North Dallas location to Northern Trust's six existing Texas facilities.
Other noninterest income totaled $46.6 million, up from $46.1 million in
the third quarter of 1995. The principal items included in other noninterest
income are foreign exchange trading profits and treasury management fees.
Foreign exchange trading profits of $15.1 million were strong but fell short of
the record $16.2 million realized in last year's third quarter. Foreign exchange
trading profits are impacted by the level of cross-border investment activity of
Master Trust/Custody clients and market volatility. Northern Trust's success in
capturing custody-related foreign exchange, even in periods of lower volatility,
has enabled it to meet competitive pressures on base custody fees. Fees from
treasury management services were $13.9 million, up 12% from the comparable
quarter last year. Total treasury management revenues from both fees and the
computed value of compensating deposit balances increased 14% from the third
quarter of 1995 to $21.8 million, reflecting new business resulting in growth in
both paper and electronic-based products.
Net interest income for the quarter, stated on a fully taxable equivalent
basis, totaled a record $107.2 million, up 8% from the $98.9 million reported in
the third quarter of last year. The increase in net interest income reflects
higher levels of earning assets concentrated primarily in residential mortgages
and
-more-
<PAGE>
-4-
THIRD QUARTER PERFORMANCE HIGHLIGHTS (Continued)
commercial and industrial loans and growth in noninterest-related funds. The net
interest margin improved to 2.26% from 2.21% reported in the year-ago quarter.
Credit quality remains strong. Nonperforming assets totaled $37.7 million
at September 30, 1996 compared to $40.5 million at June 30, 1996 and $35.4
million at September 30, 1995. Nonperforming loans of $33.3 million at quarter-
end represent .31% of total loans and were covered 4.4 times by the $147.4
million reserve for credit losses. Third quarter net charge-offs, at .09% of
average loans, totaled $2.5 million. The $2.5 million provision for credit
losses, up from $2.0 million a year ago, was made in light of charge-offs in the
commercial portfolio and maintained the reserve for credit losses at its prior
year and June 30, 1996 levels.
Noninterest expenses of $191.3 million were up $15.8 million or 9% from the
third quarter of 1995. Operating expenses of the two businesses acquired in the
second half of 1995 accounted for approximately $6.9 million of the increase
over last year. Without these incremental costs, expense growth would have been
5%. The increase in noninterest expenses also reflects the support necessary for
higher levels of trust new business, increased treasury management and global
custody volumes, investments in technology and continuing PFS office expansion.
These increases were partially offset by lower expenses related to pension
settlement charges for retiring officers.
Salaries and benefits, which represent 58% of total noninterest expenses,
increased to $110.9 million from $104.4 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 Trust's growing trust activities. The incentive compensation
expense increase reflects the impact of Northern's higher common stock price as
well as new business development results. These increases were partially offset
by cost savings from changes in several benefit plans effective January 1, 1996.
Staff on a full-time equivalent basis at September 30, 1996 totaled 6,754, up 3%
from 6,531 at the end of 1995.
BALANCE SHEET
Balance sheet assets averaged $21.0 billion for the quarter, up 4% from
last year's average of $20.1 billion, reflecting growth in loans and money
market assets, partially offset by a decline in securities. Loans
-more-
<PAGE>
-5-
BALANCE SHEET (Continued)
and leases averaged $10.5 billion for the quarter, an increase of $1.2 billion
or 13%. Residential mortgages increased $.7 billion or 19% to average $4.4
billion for the quarter and now represent 41% of the total loan portfolio.
Commercial and industrial loans averaged $3.4 billion during the quarter
compared to $3.1 billion in the third quarter of 1995. The securities portfolio
declined 6% to average $6.3 billion primarily due to a reduction in short-term
federal agency securities. Money market assets increased 20% and averaged $2.1
billion during the third quarter. In late September, The Northern Trust Company
issued $100 million of 7.30% Subordinated Notes due 2006. The Subordinated Notes
qualify as Tier 2 capital for regulatory purposes and will thus support further
growth of The Northern Trust Company.
Common stockholders' equity averaged $1.37 billion, an increase of 12%
from the third quarter of 1995. The increase primarily reflects growth in
retained earnings and the conversion of Series E Preferred Stock in January,
1996, offset in part by the repurchase of common stock pursuant to the
Corporation's 4 million share buyback program. During the quarter, the
Corporation acquired 498,625 shares at a total cost of $31.8 million. An
additional 617,920 shares remain to be purchased under this program.
NINE MONTH PERFORMANCE HIGHLIGHTS
Net income increased 19% and totaled $191.4 million for the nine months
ended September 30, 1996 compared with $160.5 million last year. Net income per
common share increased 20%, to $3.25. Trust fees totaled $440.3 million, up 19%
from $371.4 million last year. Treasury management revenues from both fees and
the computed value of compensating deposit balances increased 11% to $64.3
million, while foreign exchange trading profits were essentially unchanged from
last year's record performance. Net interest income, stated on a fully taxable
equivalent basis, totaled $313.5 million, up 6% from the $294.5 million reported
last year. The provision for credit losses increased $6.5 million to $11.5
million in 1996. Noninterest expenses were up 7% and totaled $566.9 million
compared to $530.7 million a year ago. Excluding $23.1 million of operating
expenses of the businesses acquired in 1995 and the $7.8 million reduction in
FDIC insurance premiums, expense growth would have been 4%.
<PAGE>
Page 1
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
<TABLE>
<CAPTION>
STATEMENT OF INCOME STATISTICS ($ IN MILLION)
- ---------------------------------------------
THIRD QUARTER
----------------------------
1996 1995 % Change
----------------------------
<S> <C> <C> <C>
Net Interest Income (Taxable Equivalent) $107.2 $98.9 8.4%
Less: Taxable Equivalent Adjustment 8.4 9.5 (11.0)
------ ----- -----
Net Interest Income 98.8 89.4 10.5
Provision for Credit Losses 2.5 2.0 25.0
Noninterest Income
Trust Fees 147.7 127.3 16.1
Treasury Management Fees 13.9 12.5 12.3
Foreign Exchange Trading Profits 15.1 16.2 (6.9)
Security Commissions & Trading Income 5.0 5.8 (13.2)
Other Operating Income 12.7 11.3 10.3
Investment Security Transactions (0.1) 0.3 N/M
------ ----- -----
Total Noninterest Income 194.3 173.4 12.1
Noninterest Expenses
Salaries 92.4 84.0 10.1
Pension and Other Employee Benefits 18.5 20.4 (9.2)
Occupancy Expense 16.3 15.6 4.1
Equipment Expense 13.9 12.0 15.6
Other Operating Expenses 50.2 43.5 15.6
------ ----- -----
Total Noninterest Expenses 191.3 175.5 9.1
Income Before Income Taxes 99.3 85.3 16.3
Provision for Income Taxes 32.8 27.2 20.2
------ ----- -----
NET INCOME $66.5 $58.1 14.5%
====== ===== =====
Net Income Per Common Share
Primary $1.14 $0.99 15.4%
Fully Diluted 1.14 0.98 16.4
Return on Average Common Equity 18.93% 18.11%
Average Common Equity $1,370.5 $1,225.4 11.8%
Return on Average Assets 1.26% 1.14%
Common Dividend Declared per Share $0.31 $0.26 19.2%
Preferred Dividends (millions) 1.2 2.1 (42.1)
Average Common Shares Outstanding (000s)
Primary 57,269 56,686
Fully Diluted 57,421 58,119
</TABLE>
(N/M) Not Meaningful
(*) Percentage change calculations are based on actual balances rather than
the rounded amounts presented in Supplemental Consolidated Financial
Information.
<PAGE>
Page 2
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
STATEMENT OF INCOME STATISTICS ($ IN MILLIONS)
- ---------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS
===========================
1996 1995 % Change*
===========================
<S> <C> <C> <C>
Net Interest Income (Taxable Equivalent) $313.5 $294.5 6.5%
Less: Taxable Equivalent Adjustment 25.8 28.6 (9.5)
------ ------ -----
Net Interest Income 287.7 265.9 8.2
Provision for Credit Losses 11.5 5.0 130.0
Noninterest Income
Trust Fees 440.3 371.4 18.6
Treasury Management Fees 41.4 36.9 12.3
Foreign Exchange Trading Profits 42.7 43.0 (0.8)
Security Commissions & Trading Income 17.7 16.9 5.1
Other Operating Income 34.8 34.8 N/M
Investment Security Transactions 0.3 0.5 N/M
------ ------ -----
Total Noninterest Income 577.2 503.5 14.6
Noninterest Expenses
Salaries 270.1 250.9 7.7
Pension and Other Employee Benefits 57.3 62.7 (8.7)
Occupancy Expense 47.7 45.1 5.7
Equipment Expense 41.3 36.6 12.9
Other Operating Expenses 150.5 135.4 11.2
------ ------ -----
Total Noninterest Expenses 566.9 530.7 6.8
------ ------ -----
Income Before Income Taxes 286.5 233.7 22.6
Provision for Income Taxes 95.1 73.2 29.8
------ ------ -----
NET INCOME $191.4 $160.5 19.3%
====== ====== ====
Earnings Per Common Share
Primary $3.27 $2.74 19.4%
Fully Diluted 3.25 2.71 19.9
Return on Average Common Equity 18.59% 17.37%
Average Common Equity $1,348.6 $1,186.1 13.7%
Return on Average Assets 1.22% 1.12%
Common Dividends Declared per Share $0.93 $0.78 19.2%
Preferred Dividends (millions) 3.7 6.4 (42.0)
Average Common Shares Outstanding (000s)
Primary 57,401 56,250
Fully Diluted 57,797 57,771
</TABLE>
<PAGE>
Page 3
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
BALANCE SHEET ($ IN MILLIONS)
<TABLE>
<CAPTION>
SEPTEMBER 30
------------------------------
1996 1995 % Change*
------------------------------
<S> <C> <C> <C>
Assets
Money Market Assets $ 2,378.4 $ 1,875.5 26.8%
Securities 5,827.8 5,855.4 (0.5)
Loans and Leases 10,909.2 9,808.3 11.2
--------- --------- -----
Total Earning Assets 19,115.4 17,539.2 9.0
Reserve for Credit Losses (147.4) (147.3) 0.1
Other Nonearning Assets 2,392.1 2,787.8 (14.2)
--------- --------- -----
Total Assets $21,360.1 $20,179.7 5.8%
========= ========= =====
Liabilities and Stockholders' Equity
Total Interest-Bearing Deposits $ 9,895.1 $ 8,404.6 17.7%
Borrowed Funds 5,297.9 6,428.1 (17.6)
Notes Payable (incl. Senior Notes) 637.0 458.1 39.1
--------- --------- -----
Total Interest-Related Funds 15,830.0 15,290.8 3.5
Demand & Other Noninterest-Bearing Deposits 3,543.5 2,952.4 20.0
Other Liabilities 469.8 525.9 (10.7)
--------- --------- -----
Total Liabilities 19,843.3 18,769.1 5.7
Common Equity 1,396.8 1,240.6 12.6
Preferred Equity 120.0 170.0 (29.4)
--------- --------- -----
Total Liabilities and Stockholders'
Equity $21,360.1 $20,179.7 5.8%
========= ========= =====
</TABLE>
AVERAGE BALANCE SHEET ($ IN MILLIONS)
<TABLE>
<CAPTION>
THIRD QUARTER
------------------------------
1996 1995 % Change*
------------------------------
<S> <C> <C> <C>
Assets
Money Market Assets $ 2,082.6 $ 1,739.8 19.7%
Securities 6,257.1 6,677.3 (6.3)
Loans and Leases 10,533.9 9,356.9 12.6
--------- --------- -----
Total Earning Assets 18,873.6 17,774.0 6.2
Reserve for Credit Losses (147.4) (146.6) 0.5
Other Nonearning Assets 2,264.1 2,503.7 (9.6)
--------- --------- -----
Total Assets $20,990.3 $20,131.1 4.3%
========= ========= =====
Liabilities and Stockholders' Equity
Total Interest-Bearing Deposits $10,160.0 $ 9,374.9 8.4%
Borrowed Funds 5,317.0 5,317.2 N/M
Notes Payable (incl. Senior Notes) 544.7 428.7 27.0
--------- --------- -----
Total Interest-Related Funds 16,021.7 15,120.8 6.0
Demand & Other Noninterest-Bearing Deposits 2,954.8 3,094.4 (4.5)
Other Liabilities 523.3 520.5 0.5
--------- --------- -----
Total Liabilities 19,499.8 18,735.7 4.1
Common Equity 1,370.5 1,225.4 11.8
Preferred Equity 120.0 170.0 (29.4)
--------- --------- -----
Total Liabilities and Stockholders'
Equity $20,990.3 $20,131.1 4.3%
========= ========= =====
</TABLE>
<PAGE>
Page 4
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
<TABLE>
<CAPTION>
Quarterly Trend Data ($ In Millions) 1996 1995
- ------------------------------------ Quarters Quarters
------------------------------ -------------------
Third Second First Fourth Third
------------------------------ -------------------
Net Income Summary
- ------------------
<S> <C> <C> <C> <C> <C>
Trust Fees $147.7 $148.7 $143.9 $133.6 $127.3
Other Noninterest Income 46.6 46.5 43.8 41.0 46.1
Net Interest Income (Taxable Equivalent) 107.2 104.3 102.0 100.7 98.9
------ ------ ------ ------ ------
Total Revenue (Taxable Equivalent) 301.5 299.5 289.7 275.3 272.3
Provision for Credit Losses 2.5 4.0 5.0 1.0 2.0
Noninterest Expenses 191.3 191.6 184.0 178.5 175.5
------ ------ ------ ------ ------
Pretax Income (Taxable Equivalent) 107.7 103.9 100.7 95.8 94.8
Taxable Equivalent Adjustment 8.4 8.8 8.6 9.0 9.5
Provision for Income Taxes 32.8 31.7 30.6 27.3 27.2
------ ------ ------ ------ ------
Net Income $66.5 $63.4 $61.5 $59.5 $58.1
====== ====== ====== ====== ======
Per Common Share
- ----------------
Net Income: Primary $1.14 $1.08 $1.05 $1.01 $0.99
Fully Diluted 1.14 1.08 1.04 1.00 0.98
Dividend Declared 0.31 0.31 0.31 0.31 0.26
Book Value (EOP) 24.98 24.41 23.81 23.04 22.37
Market Value (EOP) 65.75 57.75 54.00 56.00 46.00
Ratios
- ------
Return on Average Common Equity 18.93% 18.47% 18.35% 18.19% 18.11%
Return on Average Assets 1.26 1.21 1.19 1.16 1.14
Net Interest Margin 2.26 2.22 2.21 2.22 2.21
Productivity Ratio * 158% 156% 157% 154% 155%
Risk--based Capital Ratios:
Tier 1 8.4 8.4 9.1 8.8 8.9
Total (Tier 1 + Tier 2) 12.3 11.7 12.7 12.5 12.7
Leverage 6.3 6.2 6.1 6.2 6.2
Trust Assets ($ in Billions) - EOP
- ----------------------------------
Corporate $641.9 $616.2 $567.1 $544.3 $519.0
Personal 80.8 76.7 74.1 69.6 66.4
------ ------ ------ ------ ------
Total Trust Assets $722.7 $692.9 $641.2 $613.9 $585.4
====== ====== ====== ====== ======
Memo: Managed Assets 124.3 119.9 114.5 105.5 97.2
Asset Quality ($ in Millions) - EOP
- -----------------------------------
Nonaccrual Loans $33.3 $38.9 $30.6 $31.9 $33.6
Other Real Estate Owned (OREO) 4.4 1.6 1.5 1.8 1.8
------ ------ ------ ------ ------
Total Nonperforming Assets $37.7 $40.5 $32.1 $33.7 $35.4
====== ====== ====== ====== ======
Nonperforming Assets/Loans & OREO 0.35% 0.39% 0.32% 0.34% 0.36%
Net Charge-offs $2.5 $3.8 $ 4.9 $1.1 $1.8
Net Charge-offs (Annualized) to Avg Loans 0.09% 0.15% 0.20% 0.05% 0.08%
Reserve for Credit Losses $147.4 $147.4 $147.2 $147.1 $147.3
Reserve to Nonaccrual Loans 442% 379% 481% 461% 437%
</TABLE>
(*) The productivity ratio is defined as total revenue on a taxable
equivalent basis before the provision for credit losses, divided by
noninterest expenses.
