<PAGE>
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 0-5965
NORTHERN TRUST CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 36-2723087
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
50 SOUTH LA SALLE STREET
CHICAGO, ILLINOIS 60675
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312)630-6000
------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
56,648,044 Shares - $1.66 2/3 Par Value
(Shares of Common Stock Outstanding on March 31, 1996)
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEET NORTHERN TRUST CORPORATION
March 31 December 31 March 31
------------ ------------ ------------
($ In Millions) 1996 1995 1995
- ---------------------------------------------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Assets
Cash and Due from Banks $ 1,125.7 $ 1,308.9 $ 1,180.8
Money Market Assets
Federal Funds Sold and Securities Purchased under Agreements to Resell 118.8 162.1 176.3
Time Deposits with Banks 1,828.9 1,567.6 1,767.7
Other 54.4 54.5 14.3
--------------------------------------------------------------------------- ------------- ------------- -------------
Total 2,002.1 1,784.2 1,958.3
--------------------------------------------------------------------------- ------------ ------------- -------------
Securities (Fair value $6,110.5 at March 1996, $5,787.8 at December 1995 and
$5,523.3 at March 1995) 6,087.3 5,760.3 5,495.1
Loans and Leases (Net of unearned income of $89.6 at March 1996, $89.6 at
December 1995, and $71.2 at March 1995) 10,025.6 9,906.0 8,875.7
Reserve for Credit Losses (147.2) (147.1) (145.8)
Buildings and Equipment 287.9 281.5 280.8
Customers' Acceptance Liability 28.9 35.8 52.6
Trust Security Settlement Receivables 215.8 327.1 232.2
Other Assets 675.6 676.8 806.4
--------------------------------------------------------------------------- ------------- ------------- -------------
Total Assets $ 20,301.7 $ 19,933.5 $ 18,736.1
--------------------------------------------------------------------------- ------------- ------------- ------------
Liabilities
Deposits
Demand and Other Noninterest-Bearing $ 2,609.8 $ 2,853.1 $ 2,475.1
Savings and Money Market Deposits 3,598.4 3,385.3 3,050.1
Savings Certificates 2,077.9 2,158.8 1,974.6
Other Time 451.2 384.3 334.9
Foreign Offices - Demand 309.2 459.8 264.5
- Time 3,053.9 3,246.9 3,510.7
--------------------------------------------------------------------------- ------------- ------------- -------------
Total Deposits 12,100.4 12,488.2 11,609.9
Federal Funds Purchased 2,715.2 2,300.1 1,471.1
Securities Sold Under Agreements to Repurchase 1,911.5 1,858.7 2,283.0
Commercial Paper 144.3 146.7 134.4
Other Borrowings 914.8 875.9 623.9
Senior Notes 305.0 17.0 392.0
Notes Payable 336.1 334.6 244.8
Liability on Acceptances 28.9 35.8 52.6
Other Liabilities 376.9 423.9 576.3
--------------------------------------------------------------------------- ------------- ------------- -------------
Total Liabilities 18,833.1 18,480.9 17,388.0
--------------------------------------------------------------------------- ------------ ------------- ------------
Stockholders' Equity
Preferred Stock 120.0 170.0 170.0
Common Stock - $1.66 2/3 Par Value 95.0 93.6 93.3
March 1996 December 1995 March 1995
---------------------------------------------------------------------------
Shares authorized 140,000,000 140,000,000 140,000,000
Shares issued 56,979,579 56,158,064 55,994,352
Shares outstanding 56,648,044 55,664,412 55,980,309
Capital Surplus 332.7 306.1 306.7
Retained Earnings 971.7 928.8 810.7
Net Unrealized Gain (Loss) on Securities (3.0) 2.6 (9.2)
Common Stock Issuable - Performance Plan 10.4 14.7 16.7
Deferred Compensation - ESOP and Other (40.3) (39.4) (39.6)
Treasury Stock - (at cost, 331,535 shares at March 1996, 493,652 shares at
December 1995, and 14,043 shares at March 1995) (17.9) (23.8) (.5)
--------------------------------------------------------------------------- ------------ ------------- ------------
Total Stockholders' Equity 1,468.6 1,452.6 1,348.1
--------------------------------------------------------------------------- ------------ ------------ -------------
Total Liabilities and Stockholders' Equity $ 20,301.7 $ 19,933.5 $ 18,736.1
--------------------------------------------------------------------------- ------------ ------------ ------------
</TABLE>
2
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME NORTHERN TRUST CORPORATION
First Quarter
Ended March 31
------------------------
($ In Millions Except Per Share Information) 1996 1995
- -------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Interest Income
Money Market Assets
Federal Funds Sold and Securities Purchased under Agreements to Resell $ 3.8 $ 3.5
Time Deposits with Banks 22.8 26.7
Other .8 .2
- -------------------------------------------------------------------------- ----------- -----------
Total 27.4 30.4
- -------------------------------------------------------------------------- ----------- -----------
Securities 93.6 85.1
Loans and Leases 163.9 145.7
- -------------------------------------------------------------------------- ----------- -----------
Total Interest Income 284.9 261.2
- -------------------------------------------------------------------------- ----------- -----------
Interest Expense
Deposits - Savings and Money Market Deposits 28.1 26.6
- Savings Certificates 30.9 24.5
- Other Time 8.4 6.4
- Foreign Offices 44.1 50.6
Federal Funds Purchased 28.7 16.1
Securities Sold under Agreements to Repurchase 26.1 24.1
Commercial Paper 1.9 2.1
Other Borrowings 12.8 10.5
Senior Notes 4.1 6.9
Notes Payable 6.4 4.9
- -------------------------------------------------------------------------- ----------- -----------
Total Interest Expense 191.5 172.7
- -------------------------------------------------------------------------- ----------- -----------
Net Interest Income 93.4 88.5
Provision for Credit Losses 5.0 1.5
- -------------------------------------------------------------------------- ----------- -----------
Net Interest Income after Provision for Credit Losses 88.4 87.0
- -------------------------------------------------------------------------- ----------- -----------
Noninterest Income
Trust Fees 143.9 120.8
Security Commissions and Trading Income 6.3 5.9
Other Operating Income 37.2 34.8
Investment Security Gains .3 .1
- -------------------------------------------------------------------------- ----------- -----------
Total Noninterest Income 187.7 161.6
- -------------------------------------------------------------------------- ----------- -----------
Income before Noninterest Expenses 276.1 248.6
- -------------------------------------------------------------------------- ----------- -----------
Noninterest Expenses
Salaries 87.7 82.5
Pension and Other Employee Benefits 20.4 21.5
Occupancy Expense 15.8 14.2
Equipment Expense 13.6 12.6
Other Operating Expenses 46.5 46.5
- -------------------------------------------------------------------------- ----------- -----------
Total Noninterest Expenses 184.0 177.3
- -------------------------------------------------------------------------- ----------- -----------
Income before Income Taxes 92.1 71.3
Provision for Income Taxes 30.6 22.0
- -------------------------------------------------------------------------- ----------- -----------
Net Income $ 61.5 $ 49.3
- -------------------------------------------------------------------------- ----------- -----------
Net Income Applicable to Common Stock $ 60.2 $ 47.2
- -------------------------------------------------------------------------- ----------- -----------
Net Income Per Common Share - Primary $ 1.05 $ .86
- Fully Diluted 1.04 .85
- -------------------------------------------------------------------------- ----------- -----------
Average Number of Common Shares Outstanding - Primary 57,490,937 55,168,319
- Fully Diluted 57,922,410 56,394,815
- -------------------------------------------------------------------------- ----------- -----------
</TABLE>
3
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY NORTHERN TRUST CORPORATION
First Quarter
Ended March 31
--------------------
(In Millions) 1996 1995
- -------------------------------------------------------- --------- ---------
<S> <C> <C>
Preferred Stock
Balance at January 1 $ 170.0 $ 170.0
Conversion of Preferred Stock, Series E (50.0) -
- -------------------------------------------------------- --------- ---------
Balance at March 31 120.0 170.0
- -------------------------------------------------------- --------- ---------
Common Stock
Balance at January 1 93.6 90.6
Stock Issued in Acquisitions - 2.7
Conversion of Preferred Stock, Series E 1.4 -
- -------------------------------------------------------- --------- ---------
Balance at March 31 95.0 93.3
- -------------------------------------------------------- --------- ---------
Capital Surplus
Balance at January 1 306.1 302.2
Stock Issued - Incentive Plan and Awards (2.6) (2.4)
Stock Issued in Acquisitions - 6.9
Conversion of Preferred Stock, Series E 29.2 -
- -------------------------------------------------------- --------- ---------
Balance at March 31 332.7 306.7
- -------------------------------------------------------- --------- ---------
Retained Earnings
Balance at January 1 928.8 762.7
Net Income 61.5 49.3
Dividend Declared on Common Stock (17.6) (14.1)
Dividends Declared on Preferred Stock (1.0) (2.3)
Pooled Affiliates - 15.1
- -------------------------------------------------------- --------- ---------
Balance at March 31 971.7 810.7
- -------------------------------------------------------- --------- ---------
Net Unrealized Gain (Loss) on Securities
Balance at January 1 2.6 (15.8)
Unrealized Gain (Loss), net (5.6) 6.6
- -------------------------------------------------------- --------- ---------
Balance at March 31 (3.0) (9.2)
- -------------------------------------------------------- --------- ---------
Common Stock Issuable - Performance Plan
Balance at January 1 14.7 17.9
Stock Issuable, net of Stock Issued (4.3) (1.2)
- -------------------------------------------------------- --------- ---------
Balance at March 31 10.4 16.7
- -------------------------------------------------------- --------- ---------
Deferred Compensation - ESOP and Other
Balance at January 1 (39.4) (38.8)
Compensation Deferred (1.8) (1.5)
Compensation Amortized .9 .7
- -------------------------------------------------------- --------- ---------
Balance at March 31 (40.3) (39.6)
- -------------------------------------------------------- --------- ---------
Treasury Stock
Balance at January 1 (23.8) (8.1)
Stock Options and Awards 17.2 10.4
Stock Purchased (30.5) (2.8)
Conversion of Preferred Stock, Series E 19.2 -
- -------------------------------------------------------- --------- ---------
Balance at March 31 (17.9) (.5)
- -------------------------------------------------------- --------- ---------
Total Stockholders' Equity at March 31 $1,468.6 $1,348.1
- -------------------------------------------------------- --------- ---------
</TABLE>
4
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS Northern Trust Corporation
<TABLE>
<CAPTION>
First Quarter
Ended March 31
--------------------------
(In Millions) 1996 1995
- --------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 61.5 $ 49.3
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Provision for Credit Losses 5.0 1.5
Depreciation on Buildings and Equipment 11.8 10.8
Increase in Interest Receivable (2.7) (18.5)
Increase (Decrease) in Interest Payable (.7) 5.6
Amortization and Accretion of Securities and Unearned Income (29.7) (45.6)
Amortization of Software, Goodwill and Other Intangibles 11.0 9.1
Net (Increase) Decrease in Trading Account Securities 82.0 (53.9)
Other Noncash, net (22.9) 57.6
- --------------------------------------------------------------------------------- ---------- -----------
Net Cash Flows from Operating Activities 115.3 15.9
- --------------------------------------------------------------------------------- ---------- -----------
Cash Flows from Investing Activities:
Net Decrease in Federal Funds Sold and Securities Purchased under
Agreements to Resell 43.3 613.8
Net (Increase) Decrease in Time Deposits with Banks (261.3) 97.0
Net (Increase) Decrease in Other Money Market Assets .1 (4.8)
Purchases of Securities--Held to Maturity (62.7) (179.4)
Proceeds from Maturity and Redemption of Securities--Held to Maturity 108.5 238.9
Purchases of Securities--Available for Sale (7,198.0) (3,724.4)
Proceeds from Sale, Maturity and Redemption of Securities--Available for Sale 6,754.9 3,404.4
Net Increase in Loans and Leases (125.4) (183.9)
Purchases of Buildings and Equipment (16.7) (12.3)
Net Decrease in Trust Security Settlement Receivables 111.3 73.5
Other, net (13.2) .4
- --------------------------------------------------------------------------------- ---------- -----------
Net Cash Flows from Investing Activities (659.2) 323.2
- --------------------------------------------------------------------------------- ---------- -----------
Cash Flows from Financing Activities:
Net Decrease in Deposits (387.7) (303.9)
Net Increase in Federal Funds Purchased 415.1 499.1
Net Increase in Securities Sold under Agreement to Repurchase 52.8 66.1
Net Increase (Decrease) in Commercial Paper (2.4) 10.6
Net Increase (Decrease) in Short-Term Other Borrowings 135.3 (262.0)
Proceeds from Term Federal Funds Purchased 902.4 437.9
Repayments of Term Federal Funds Purchased (998.8) (629.9)
Proceeds from Senior Notes 700.0 --
Repayments of Senior Notes (412.0) (155.0)
Treasury Stock Purchased (29.2) (1.9)
Net Proceeds from Stock Options 2.1 1.1
Cash Dividends Paid on Common and Preferred Stock (18.4) (16.3)
Other, net 1.5 3.4
- --------------------------------------------------------------------------------- ---------- -----------
Net Cash Flows from Financing Activities 360.7 (350.8)
- --------------------------------------------------------------------------------- ---------- -----------
Decrease in Cash and Due from Banks (183.2) (11.7)
Cash and Due from Banks at Beginning of Year 1,308.9 1,192.5
- --------------------------------------------------------------------------------- ---------- -----------
Cash and Due from Banks at March 31 $ 1,125.7 $ 1,180.8
- --------------------------------------------------------------------------------- ---------- -----------
Schedule of Noncash Investing and Financing Activities:
Conversion of Preferred Stock, Series E to Common Stock $ 49.7 $ --
Acquisition of Affiliate for Stock -- 24.7
Supplemental Disclosures of Cash Flow Information:
Interest Paid on Deposits and Short- and Long-Term Borrowings $ 192.2 $ 166.7
Income Taxes Received (1.9) (5.3)
- --------------------------------------------------------------------------------- ---------- -----------
</TABLE>
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION - The consolidated financial statements include
the accounts of Northern Trust Corporation and its subsidiaries ("Northern
Trust"), all of which are wholly owned. Significant intercompany balances and
transactions have been eliminated. The consolidated financial statements as of
March 31, 1996 and 1995 have not been audited by independent public accountants.
In the opinion of management, all adjustments necessary for a fair presentation
of the financial position and the results of operations for the interim periods
have been made. All such adjustments are of a normal recurring nature. For a
description of Northern Trust's significant accounting principles, refer to the
Notes to Consolidated Financial Statements in the 1995 Annual Report to
Stockholders.
2. SECURITIES - The following table summarizes the book and fair values of
securities.
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995 March 31, 1995
-------------------------------------------------------------------------
Book Fair Book Fair Book Fair
(In Millions) Value Value Value Value Value Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Held to Maturity
U.S. Government $ 93.4 $ 93.3 $ 116.1 $ 116.3 $ 117.8 $ 117.6
Obligations of States and
Political Subdivisions 348.9 372.2 366.9 394.0 445.8 474.8
Federal Agency 18.2 18.2 22.2 22.4 22.4 21.8
Other 29.4 29.4 29.9 29.9 29.3 29.3
- ---------------------------------------------------------------------------------------------------------
Subtotal 489.9 513.1 535.1 562.6 615.3 643.5
- ---------------------------------------------------------------------------------------------------------
Available for Sale
U.S. Government 2,160.5 2,160.5 1,667.7 1,667.7 854.0 854.0
Obligations of States and
Political Subdivisions 73.2 73.2 70.2 70.2 - -
Federal Agency 3,167.6 3,167.6 3,152.8 3,152.8 3,619.1 3,619.1
Preferred Stock 112.4 112.4 147.8 147.8 196.4 196.4
Other 76.8 76.8 97.8 97.8 152.4 152.4
- ---------------------------------------------------------------------------------------------------------
Subtotal 5,590.5 5,590.5 5,136.3 5,136.3 4,821.9 4,821.9
- ---------------------------------------------------------------------------------------------------------
Trading Account 6.9 6.9 88.9 88.9 57.9 57.9
- ---------------------------------------------------------------------------------------------------------
Total Securities $6,087.3 $6,110.5 $5,760.3 $5,787.8 $5,495.1 $5,523.3
- ---------------------------------------------------------------------------------------------------------
Reconciliation of Book Values to Fair Values of
Securities Held to Maturity March 31, 1996
- ---------------------------------------------------------------------------------------------------------
Gross Unrealized
Book ---------------- Fair
(In Millions) Value Gains Losses Value
- ---------------------------------------------------------------------------------------------------------
Held to Maturity
U.S. Government $ 93.4 $ - $.1 $ 93.3
Obligations of States and
Political Subdivisions 348.9 23.5 .2 372.2
Federal Agency 18.2 .2 .2 18.2
Other 29.4 - - 29.4
- ---------------------------------------------------------------------------------------------------------
Total $489.9 $23.7 $.5 $513.1
- ---------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Reconciliation of Amortized Cost to Fair Values of
Securities Available for Sale March 31, 1996
- ----------------------------------------------------------------------------------
Gross Unrealized
Amortized ----------------- Fair
(In Millions) Cost Gains Losses Value
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for Sale
U.S. Government $2,162.4 $ 2.3 $ 4.2 $2,160.5
Obligations of States and
Political Subdivisions 72.3 1.9 1.0 73.2
Federal Agency 3,167.1 4.4 3.9 3,167.6
Preferred Stock 112.7 - .3 112.4
Other 77.8 .8 1.8 76.8
- ----------------------------------------------------------------------------------
Total $5,592.3 $ 9.4 $ 11.2 $5,590.5
- ----------------------------------------------------------------------------------
</TABLE>
Unrealized gains and losses on off-balance sheet financial instruments used to
hedge available for sale securities totaled $3.3 million and $6.3 million,
respectively, as of March 31, 1996. Unrealized gains on these hedges are
reported as other assets in the consolidated balance sheet; unrealized losses
are reported as other liabilities. As of March 31, 1996, stockholders' equity
included a charge of $3.0 million, net of tax, to recognize the depreciation on
securities available for sale and the related hedges.
3. PLEDGED ASSETS - Securities and loans pledged to secure public and trust
deposits, repurchase agreements and for other purposes as required or permitted
by law were $4.4 billion on March 31, 1996, $3.9 billion on December 31, 1995
and $3.7 billion on March 31, 1995.
4. CONTINGENT LIABILITIES - Standby letters of credit outstanding were $1.1
billion on March 31, 1996, $1.0 billion on December 31, 1995 and $833.7 million
on March 31, 1995.
5. LOANS AND LEASES - Amounts outstanding in selected loan categories are
shown below:
<TABLE>
<CAPTION>
March 31 December 31 March 31
---------------------------------
(In Millions) 1996 1995 1995
- --------------------------------------------------------------
<S> <C> <C> <C>
Domestic
Commercial $ 3,052.1 $3,202.1 $2,990.3
Residential Real Estate 4,048.1 3,896.4 3,429.5
Commercial Real Estate 537.0 512.6 505.6
Broker 383.3 304.0 169.9
Consumer 748.1 758.9 633.5
Other 560.7 625.5 614.8
Lease Financing 198.9 202.3 154.6
- --------------------------------------------------------------
Total Domestic 9,528.2 9,501.8 8,498.2
International 497.4 404.2 377.5
- --------------------------------------------------------------
Total Loans and Leases $10,025.6 $9,906.0 $8,875.7
- --------------------------------------------------------------
</TABLE>
7
<PAGE>
At March 31, 1996, other domestic and international loans include $612.3 million
of overnight trust-related advances in connection with next day security
settlements, compared with $810.4 million at December 31, 1995 and $732.9
million at March 31, 1995.
At March 31, 1996, nonperforming assets totaled $32.1 million. Included in this
amount were loans with a recorded investment of $27.6 million which were also
classified as impaired. A loan is impaired when, based on current information
and events, it is probable that a creditor will be unable to collect all amounts
due according to the contractual terms of the loan agreement. Impaired loans
totaling $16.0 million had no portion of the reserve for credit losses allocated
to them, while $11.6 million had an allocated reserve of $3.8 million. For the
first quarter of 1996, the total recorded investment in impaired loans averaged
$24.4 million. Total interest income recognized on impaired loans for the
quarter ended March 31, 1996 was $53 thousand, most of which was recognized
using the cash-basis method of accounting.
At March 31, 1995, nonperforming assets totaled $25.4 million and included $21.0
million of impaired loans. $16.6 million of these impaired loans had no reserve
allocation while $4.4 million had an allocated reserve of $1.1 million. Impaired
loans for the first quarter of 1995 averaged $26.5 million with $148 thousand of
interest income recognized, principally on the cash-basis method.
6. RESERVE FOR CREDIT LOSSES - Changes in the reserve for credit losses were
as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31
------------------------------
(In Millions) 1996 1995
- ----------------------------------------------------------------
<S> <C> <C>
Balance at Beginning of Period $147.1 $144.8
Charge-Offs (5.7) (2.7)
Recoveries 0.8 1.1
- ----------------------------------------------------------------
Net Charge-Offs (4.9) (1.6)
- ----------------------------------------------------------------
Provision for Credit Losses 5.0 1.5
Reserve Related to Acquisition - 1.1
- ----------------------------------------------------------------
Balance at End of Period $147.2 $145.8
- ----------------------------------------------------------------
</TABLE>
8
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FIRST QUARTER EARNINGS HIGHLIGHTS
Net income for the first quarter totaled a record $61.5 million, an
increase of 25% from the $49.3 million reported in the first quarter of
1995. Net income per common share on a fully diluted basis increased 22%
to $1.04 from $.85 in 1995. This earnings performance produced an
annualized return on average common equity (ROE) of 18.35% versus 16.84%
reported last year, and an annualized return on average assets (ROA) of
1.19% versus 1.09% in 1995. The quarter's performance reflects the
leverage of a 12% increase in total revenues, driven by record levels of
trust fees, coupled with a modest 4% increase in operating expenses.
NONINTEREST INCOME
Noninterest income increased 16% and totaled $187.7 million for the
quarter, accounting for 65% of total taxable equivalent revenue. Trust
fees, which represented 77% of noninterest income and 50% of total taxable
equivalent revenue, grew 19% or $23.1 million over the like period of 1995
reaching $143.9 million. Fees generated by businesses acquired after the
first quarter of 1995 accounted for $6.9 million of the trust fee growth.
Exclusive of these fees, trust fees increased 13% compared to the first
quarter of last year. Trust assets under administration at March 31, 1996
totaled $641.2 billion compared to $519.9 billion a year ago.
Trust fees from Corporate and Institutional Services (C&IS) increased $14.6
million to $72.8 million. Fees generated by RCB International, Inc. (RCB),
an October 31, 1995 acquisition, accounted for $6.0 million of the trust
fee growth. Exclusive of the RCB contribution, C&IS trust fees increased
$8.6 million or 15% from the year ago quarter. The increase in fees
reflects substantial new business and strong growth across all product
lines, particularly custody, securities lending, retirement services and
investment management. Custody fees increased $2.7 million or 10% and
totaled $30.2 million for the quarter. The growth, in both domestic and
global custody, was driven by increased transaction-based fees and new
business. Domestic securities lending fees, up 30% versus last year,
reflect a 25% increase in the volume of securities loaned as well as a
modest increase in the spread earned from the investment of the cash
collateral. International securities lending fees increased 48% during the
quarter, driven by a 79% increase in the volume of securities loaned,
partially offset by narrowing spreads on the investment of the cash
collateral. Fees from retirement services generated by Hazlehurst &
Associates, Inc. increased 22%, principally from new business. Investment
management fees, primarily related to institutional funds and enhanced cash
products, increased 61% driven by new business and growth in customized
products tailored to client needs. C&IS trust assets under administration
grew 24% or $108.1 billion over last year and now total $567.1 billion.
C&IS assets under the management of Northern Trust total $70.3 billion, up
39% from a year ago.
Trust fees from Personal Financial Services (PFS) grew 14% from the prior
year level of $62.6 million and totaled $71.1 million for the first
quarter. PFS trust fee growth resulted primarily
9
<PAGE>
from new business and higher market values of the assets administered. The
principal contributors to this fee growth were the Wealth Management Group and
PFS offices in Chicago, Florida, Arizona and Texas. The increase in fees also
reflects the contribution of $.9 million in fees from Beach Bank, a March 31,
1995 acquisition. During the first quarter of 1996, new offices were opened in
Bonita Springs and Delray Beach, bringing to 21 the total number of offices in
the high-growth Florida market. At March 31, 1996, Northern Trust's network of
PFS offices totaled 52 locations throughout Illinois, Florida, California,
Arizona and Texas. Total personal trust assets under administration increased
$13.2 billion from the prior year and totaled $74.1 billion at March 31, 1996,
with $44.2 billion under management.
Security commissions and trading income totaled $6.3 million compared with
$5.9 million reported in the first quarter of 1995. The increase resulted
primarily from a higher volume of trading activity by individual investors.
Other operating income totaled $37.2 million in the quarter, compared to
$34.8 million in the like quarter of 1995. The principal items included in
other operating income are foreign exchange trading profits and treasury
management fees. Foreign exchange trading profits of $12.5 million
increased 12% from the year ago quarter. Foreign exchange trading profits,
generated in both Chicago and London, continue to benefit from the increase
in cross-border investment activities of Master Trust/Master Custody
clients, although they are also impacted by market volatility. The fee
component of treasury management revenues rose 5% to $13.0 million compared
to the prior year. Total treasury management revenues, including both fees
and earnings on compensating deposit balances, were $20.5 million,
representing a 6% increase from the first quarter of 1995. This improvement
resulted from new business growth in all treasury management products,
particularly electronic services. The year to year comparison of treasury
management revenues was also impacted by a $.7 million decrease in the amount of
FDIC insurance premiums that were previously passed through to clients in 1995.
Other operating income in the first quarter also benefited from higher levels of
the trust-related overnight advances on which fees are charged.
NET INTEREST INCOME
Net interest income for the first quarter totaled a record $93.4 million, 5%
higher than the $88.5 million reported in the first quarter of 1995. Net
interest income is defined as the total of interest income and amortized fees on
earning assets, less interest expense on deposits and borrowed funds, adjusted
for the impact of off-balance sheet hedging activity. When net interest income
is adjusted to a fully taxable equivalent (FTE) basis, yields on taxable,
nontaxable and partially taxable assets are comparable, although the adjustment
to a FTE basis has no impact on net income. Net interest income on a FTE basis
for the first quarter was $102.0 million, up 4% from the $98.1 million reported
in 1995. The increase reflects the positive impact of 1995 acquisitions and
higher levels of earning assets, offset in part by a decline in the net interest
margin to 2.21% from 2.43% reported in the first quarter of 1995.
Earning assets for the first quarter averaged $18.6 billion, up 13% from
the $16.4 billion average for the first quarter of 1995. The $2.2 billion
growth in average earning assets reflects a 15% or
10
<PAGE>
$1.2 billion increase in average loans, and a $1.0 billion or 17% growth in
average security holdings. Money market assets totaled $2.1 billion on
average for the quarter, down 2% from the like period of 1995.
The overall loan growth was concentrated in the domestic portfolio as
international loans were essentially unchanged from the prior year level.
Approximately one-half of the domestic growth was centered in residential
mortgage loans, which increased to $3.9 billion on average and comprised
40% of the total average loan portfolio. Commercial and industrial loans
grew $220 million to average $3.1 billion during the first quarter of 1996.
Securities for the quarter averaged $6.7 billion, up 17% from the $5.7
billion reported last year, due primarily to a $1.1 billion increase in
short-term U.S. Government securities.
The growth in average earning assets was funded primarily by increased
levels of interest-bearing deposits, federal funds purchased, repurchase
agreements, and noninterest-related funds. Total interest-bearing deposits
averaged $9.9 billion, up $528 million from the first quarter of 1995.
This growth came principally from savings certificates (up $393 million),
savings and money market deposits (up $314 million), and other time
deposits (up $155 million), offset by a decline in foreign office time
deposits of $334 million, concentrated primarily in the London Branch.
Noninterest-related funds increased $272 million and averaged $2.8 billion
due in large part to growth in stockholders' equity. Stockholders' equity
increased $150 million or 11% and averaged $1.46 billion due primarily to
growth in retained earnings. The remaining increase in average
noninterest-related funds came from higher levels of demand deposit
accounts resulting from acquisitions and growth from new and existing
relationships.
The net interest margin decreased to 2.21% compared with 2.43% last year.
The flat yield curve experienced throughout much of the first quarter of
1996 narrowed spreads between returns on short-term assets and rates paid
on retail deposits and various short-term funding sources.
PROVISION FOR CREDIT LOSSES
The provision for credit losses of $5.0 million compares to $1.5 million in
the first quarter of 1995. For a discussion of the provision and reserve
for credit losses, refer to the Asset Quality section on pages 13 through 15.
NONINTEREST EXPENSES
Noninterest expenses totaled $184.0 million for the quarter, up $6.7
million or 4% from $177.3 million in the first quarter of 1995. Operating
expenses of the three businesses acquired in 1995 accounted for
approximately $8.6 million of total expenses in the quarter, while the
reduction in FDIC insurance premiums that began in the second half of 1995
lowered expenses in the first quarter of 1996 by $4.0 million. Northern
Trust continues to invest in technology and in the 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 Trust's stringent expense control initiatives.
11
<PAGE>
Salaries and benefits, which represent 59% of total noninterest expenses,
increased a modest 4% compared to the year ago quarter to $108.1 million. 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 retirement services activities. These
increases were partially offset by a decline in staff levels in other areas of
Northern Trust 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 unchanged from year-end 1995, but down 197
staff from March 31, 1995 (exclusive of 179 employees added through
acquisitions).
Net occupancy expense totaled $15.8 million, up 11% or $1.6 million from
$14.2 million in the first quarter of 1995, due in part to acquisitions and
new offices. The principal components of the increase were higher rent,
real estate taxes and utility costs, and amortization and depreciation of
leasehold improvements and buildings, offset in part by lower levels of
lease operating costs.
Equipment expense, which includes depreciation, rental, and maintenance
costs, totaled $13.6 million, up $1.0 million or 8% from the first quarter
of 1995. The principal components of the increase were higher levels of
depreciation primarily related to personal computers and computer hardware,
and higher rental costs associated with computer equipment and data
communication lines.
Other operating expenses totaled $46.5 million, unchanged from the prior
year level. The reduction in FDIC insurance premiums which took effect in
the second half of 1995 was offset by the addition of professional service
fees paid to RCB's network of investment managers, and higher levels of
software amortization, contract data processing costs, transaction-based
depository fees, and amortization expense of goodwill and other
intangibles.
The components of other operating expenses were as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
(In Millions) 1996 1995
--------- ---------
<S> <C> <C>
Business Development $ 6.0 $ 5.9
Purchased Professional Services 16.8 14.0
Telecommunications 2.7 2.6
Postage and Supplies 5.8 5.5
FDIC Premium -- 4.0
Software Amortization 8.6 7.4
Goodwill and Other Intangibles Amortization 2.4 1.7
Other Expense 4.2 5.4
----------- ---------
Total Other Operating Expenses $ 46.5 $ 46.5
=========== =========
</TABLE>
12
<PAGE>
PROVISION FOR INCOME TAXES
The provision for income taxes was $30.6 million for the first quarter
compared with $22.0 million in the year ago quarter. The higher tax
provision in 1996 resulted from the growth in taxable earnings for both
federal and state income tax purposes and a decline in tax-exempt income
from the prior year. The effective tax rate was 33% for 1996 versus 31% in
1995.
BALANCE SHEET
In January, 1996, the Corporation issued 1,198,372 shares of common stock
upon conversion of its $50 million stated value Series E convertible
preferred stock, which on January 5, 1996 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 already reflected in the
Corporation's fully diluted shares.
Total assets as of March 31, 1996 were $20.3 billion and averaged $20.9
billion for the first quarter, up 14% from last year's average of $18.4
billion. Due to increased lending activity, in addition to the Beach Bank
and Tanglewood Bank acquisitions, loans and leases totaled $10.0 billion at
March 31, 1996, and averaged $9.8 billion for the first quarter. This
compares with $8.9 billion in total loans at March 31, 1995 and $8.5
billion on average for the first quarter of last year.
Driven primarily by continued strong earnings growth, the conversion of the
Series E convertible preferred stock and stock issued in connection with
the March 31, 1995 acquisition of Beach Bank, common stockholders' equity
increased 16% and averaged $1.32 billion for the first quarter, versus
$1.14 billion last year. Total stockholders' equity for the quarter also
increased and averaged $1.46 billion compared with $1.31 billion last year.
During the quarter, the Corporation purchased 566,306 of its own shares at
a total cost of $30.5 million pursuant to the 4 million share buyback
program authorized by the Board of Directors in 1994. At March 31, 1996,
an additional 1.7 million shares remain to be purchased under this program.
Northern Trust's risk-based capital ratios remained strong at 9.1% for tier
1 and 12.7% for total capital at March 31, 1996. These capital ratios are
well above the minimum regulatory requirements of 4% for tier 1 and 8% for
total risk-based capital ratios. The leverage ratio (tier 1 capital to
first quarter average assets) of 6.1% at March 31, 1996, also exceeded the
regulatory requirement of 3%.
ASSET QUALITY
Nonperforming assets consist of nonaccrual loans, restructured loans and
other real estate owned (OREO). Nonperforming assets at March 31, 1996
totaled $32.1 million, compared with $33.7 million at December 31, 1995 and
$25.4 million at March 31, 1995. Domestic nonaccrual loans and leases,
consisting primarily of commercial loans, totaled $27.9 million, or .29% of
total domestic loans and leases at March 31, 1996. Included in this total
are commercial real estate loans of $16.3 million. At December 31, 1995
and March 31, 1995, domestic nonaccrual loans totaled $29.0 million and
$19.7 million, respectively.
13
<PAGE>
The following Nonperforming Asset table presents the outstanding amounts of
nonaccrual loans and leases, restructured loans and OREO. Also shown are
loans that have interest or principal payments that are delinquent 90 days
or more and are still accruing interest. The balance in this category at
any quarter end can fluctuate widely based on the timing of cash
collections, renegotiations and renewals.
Nonperforming Assets and 90 Day Past Due Loans and Leases
<TABLE>
<CAPTION>
March 31 December 31 March 31
(In Millions) 1996 1995 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nonaccrual Loans and Leases
Domestic $27.9 $29.0 $19.7
International - .2 1.3
- ------------------------------------------------------------------------------------------------------------------
Total Nonaccrual Loans and Leases 27.9 29.2 21.0
Restructured Loans 2.7 2.7 2.8
OREO 1.5 1.8 1.6
- ------------------------------------------------------------------------------------------------------------------
Total Nonperforming Assets $32.1 $33.7 $25.4
- ------------------------------------------------------------------------------------------------------------------
Total 90 Day Past Due Loans
(still accruing) $36.9 $22.0 $11.6
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
PROVISION AND RESERVE FOR CREDIT LOSSES. The provision for credit losses
is the charge against current earnings that is determined by management
through a disciplined credit review process as the amount needed to
maintain a reserve that is sufficient to absorb credit losses inherent in
Northern Trust's loan and lease portfolios and other credit undertakings.
While the largest portion of this reserve is intended to cover loan and
lease losses, it is considered a general reserve that is available to cover
all credit-related exposures.
The 1996 first quarter provision for credit losses was $5.0 million,
compared with $1.5 million in the first quarter of 1995. Net charge-offs
totaled $4.9 million in the first quarter of 1996, versus net charge-offs
of $1.6 million last year. The reserve for credit losses was $147.2
million or 1.47% of outstanding loans at March 31, 1996. This compares
with $147.1 million or 1.49% of outstanding loans at December 31, 1995 and
$145.8 million or 1.64% of outstanding loans at March 31, 1995. The lower
reserve to outstanding loans ratio at March 31, 1996 is attributable to
loan growth, a significant portion of which is in low-risk residential
mortgage lending.
The overall credit quality of the domestic portfolio has remained good as
evidenced by the low level of nonperforming loans and relatively moderate
level of net charge-offs. Management's assessment of the current U.S. economy
and the financial condition of certain clients facing financial
difficulties together with the types of loans creating portfolio growth
were primary factors impacting management's decision to maintain the
reserve for credit losses at $147.2 million at March 31, 1996, essentially
unchanged from December 31, 1995 and slightly higher
14
<PAGE>
than March 31, 1995. Although difficult to predict, management presently
expects that the provision for credit losses for the balance of 1996 will
be somewhat above the very low level experienced in the comparable period
of 1995.
Northern Trust continues to monitor closely several credits, but the
overall quality of its loan portfolio remains sound and the reserve for
credit losses is adequate to cover credit-related uncertainties as they
exist today. Established credit review procedures ensure that close
attention is given to commercial real estate-related loans and other
commercial loans, as well as other credit exposures that might be adversely
affected by significant increases in interest rates or unexpected downturns
in segments of the economies of the United States or other countries.
15
<PAGE>
The following schedule should be read in conjunction with the Net Interest
Income section of Management's Discussion and Analysis of Financial Condition
and Results of Operations.
<TABLE>
<CAPTION>
CONSOLIDATED ANALYSIS OF NET INTEREST INCOME NORTHERN TRUST CORPORATION
First Quarter
----------------------------------------------------------------------------
(Interest and rate on a taxable equivalent basis) 1996 1995
------------------------------------ -------------------------------------
($ in Millions) Interest Volume Rate Interest Volume Rate
- -------------------------------------------------- -------- ----------- ------ --------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Average Earning Assets
Money Market Assets
Federal Funds Sold and Repurchase Agreements $ 3.8 $ 267.1 5.66 % $ 3.5 $ 233.6 5.99 %
Time Deposits with Banks 22.8 1,745.3 5.26 26.7 1,856.4 5.83
Other .8 53.5 6.06 .2 14.1 6.26
- -------------------------------------------------- -------- ----------- ------ --------- ----------- -----
Total Money Market Assets 27.4 2,065.9 5.33 30.4 2,104.1 5.85
- -------------------------------------------------- -------- ----------- ------ --------- ----------- -----
Securities
U.S. Government 29.6 2,084.5 5.71 13.0 992.4 5.32
Obligations of States and Political Subdivision 10.5 422.1 9.99 12.5 453.0 11.04
Federal Agency 57.2 3,956.5 5.81 61.7 3,878.3 6.45
Other 3.9 262.3 6.02 6.0 382.2 6.35
Trading Account .2 9.5 7.25 .5 26.4 8.23
- -------------------------------------------------- -------- ----------- ------ --------- ----------- -----
Total Securities 101.4 6,734.9 6.05 93.7 5,732.3 6.62
- -------------------------------------------------- -------- ----------- ------ --------- ----------- -----
Loans and Leases 164.7 9,777.3 6.78 146.7 8,535.9 6.97
- -------------------------------------------------- -------- ----------- ------ --------- ----------- -----
Total Earning Assets $ 293.5 $ 18,578.1 6.35 % $ 270.8 $ 16,372.3 6.71 %
- -------------------------------------------------- -------- ----------- ------ --------- ----------- -----
Average Source of Funds
Deposits
Savings and Money Market Deposits $ 28.1 $ 3,577.7 3.16 % $ 26.6 $ 3,263.1 3.31 %
Savings Certificates 30.9 2,110.1 5.89 24.5 1,717.5 5.79
Other Time 8.4 611.4 5.53 6.4 456.6 5.67
Foreign Offices Time 44.1 3,577.4 4.96 50.6 3,911.9 5.24
- -------------------------------------------------- -------- ----------- ------ --------- ----------- -----
Total Deposits 111.5 9,876.6 4.54 108.1 9,349.1 4.69
Federal Funds Purchased 28.7 2,143.3 5.39 16.1 1,122.6 5.81
Repurchase Agreements 26.1 1,977.1 5.31 24.1 1,697.0 5.77
Commercial Paper 1.9 143.8 5.45 2.1 143.8 5.84
Other Borrowings 12.8 978.2 5.25 10.5 807.8 5.25
Senior Notes 4.1 314.4 5.25 6.9 469.6 5.92
Notes Payable 6.4 334.8 7.68 4.9 244.8 8.13
- -------------------------------------------------- -------- ----------- ------ --------- ----------- -----
Total Interest-Related Funds 191.5 15,768.2 4.88 172.7 13,834.7 5.06
- -------------------------------------------------- -------- ----------- ------ --------- ----------- -----
Interest Rate Spread - - 1.47 % - - 1.65 %
- -------------------------------------------------- -------- ----------- ------ --------- ----------- -----
Noninterest-Related Funds - 2,809.9 - - 2,537.6 -
- -------------------------------------------------- -------- ----------- ------ --------- ----------- -----
Total Source of Funds $ 191.5 $ 18,578.1 4.14 % $ 172.7 $ 16,372.3 4.28 %
- -------------------------------------------------- -------- ----------- ------ --------- ----------- -----
Net Interest Income/Margin $ 102.0 - 2.21 % $ 98.1 - 2.43 %
- -------------------------------------------------- -------- ----------- ------ --------- ----------- -----
</TABLE>
<TABLE>
<CAPTION>
ANALYSIS OF NET INTEREST INCOME CHANGES
DUE TO VOLUME AND RATE First Quarter 1996/95
------------------------------
Change Due To
--------------------
(In Millions) Volume Rate Total
- --------------------------------------------------------------------------- ------ -------- --------
<S> <C> <C> <C>
Earning Assets $ 34.3 $ (11.6) $ 22.7
Interest-Related Funds 25.4 (6.6) 18.8
- --------------------------------------------------------------------------- -------- --------- ---------
Net Interest Income $ 8.9 $ (5.0) $ 3.9
- --------------------------------------------------------------------------- -------- --------- ---------
</TABLE>
16
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Securities Holders
The annual meeting of stockholders of Northern Trust Corporation was
held on April 16, 1996 for the purposes of electing fourteen Directors
to hold office until the next annual meeting of stockholders. Proxies
for the meeting were solicited pursuant to Section 14(a) of the
Securities Exchange Act of 1934 and there was no solicitation in
opposition to management's nominees. All of management's nominees for
Directors as listed in the proxy statement were elected by the
following votes set forth below. There were no broker non-votes for
any candidate.
<TABLE>
<CAPTION>
Candidates "FOR" "WITHHELD"
----------------------- ---------- ----------
<S> <C> <C>
Dolores E. Cross 51,209,909 162,420
Robert S. Hamada 51,236,472 162,420
Barry G. Hastings 51,325,451 162,420
Robert A. Helman 51,234,438 162,420
Arthur L. Kelly 51,229,042 162,420
Ardis Krainik 50,672,814 162,420
Robert D. Krebs 51,234,518 162,420
Frederick A. Krehbiel 50,753,093 162,420
William G. Mitchell 50,735,163 162,420
Edward J. Mooney 51,226,140 162,420
William A. Osborn 51,248,198 162,420
Harold B. Smith 51,235,715 162,420
William D. Smithburg 51,186,113 162,420
Bide L. Thomas 51,208,166 162,420
</TABLE>
17
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a.) Exhibits
--------
Exhibit (3) Amendment to By-laws of the Corporation
and By-laws as amended.
Exhibit (10) Material Contracts:
(i) Northern Trust Corporation (1996)
Annual Performance Plan.
(ii) Northern Trust Corporation (1996)
Management Performance Plan.
Exhibit (11) Computation of Per Share Earnings.
Exhibit (27) Financial Data Schedule.
Exhibit (99) Remarks delivered by William A. Osborn at the
Annual Meeting of Stockholders of Northern Trust
Corporation held on April 16, 1996.
(b.) Reports on Form 8-K
-------------------
In a report on Form 8-K dated January 5, 1996, Northern Trust
incorporated by reference in Item 5 its January 5, 1996 press
release, reporting on its announced call for redemption on January
26, 1996 all of its outstanding 6.25% Series E Preferred Stock
Depository Shares.
In a report on Form 8-K dated January 16, 1996, Northern Trust
incorporated by reference in Item 5 its January 16, 1996 press
release, reporting on its earnings for the fourth quarter of 1995
and for its 1995 fiscal year. The press release, with summary
financial information, was filed pursuant to Item 7.
18
<PAGE>
SIGNATURES
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)
Date: May 14, 1996 By: PERRY R. PERO
-------------------------------
PERRY R. PERO
Senior Executive Vice President
and Chief Financial Officer
Date: May 14, 1996 By: HARRY W. SHORT
------------------------------------
HARRY W. SHORT
Senior Vice President and Controller
(Chief Accounting Officer)
19
<PAGE>
Exhibit Number (3)
Board of Directors To 3/31/96 Form 10-Q
Resolution 4/16/96
- ------------------------------------------------------------------------
Northern Trust Corporation
FURTHER RESOLVED, that Articles IV, V, VI, VII and VIII of the
By-Laws of the Corporation are hereby amended to read in their entirety as
follows:
ARTICLE IV
THE AUDIT COMMITTEE
SECTION 4.1. Functions. An Audit Committee shall be appointed each year
by the Board of Directors. The Committee shall perform the following functions
for the Corporation and its subsidiaries on a consolidated basis and for such
individual banking subsidiaries as the Board shall direct:
(a) Reviewing with management and the independent public accountant the
reports issued with respect to the annual financial statements, the internal
control structure and procedures for financial reporting and compliance with
laws and regulations and the basis for such reports.
(b) Reviewing with management and the independent public accountant the
scope of services required by the annual audit, significant accounting policies,
and audit conclusions regarding significant accounting estimates.
(c) Reviewing with management and the independent public accountant their
assessments of the adequacy of internal controls, and the resolution of
identified material weaknesses and reportable conditions in internal controls
over financial reporting, including the prevention or detection of management
override or compromise of the internal control system.
(d) Reviewing with management and the independent public account
compliance with those laws and regulations with respect to which management and
the independent public accountant are required to report.
(e) Discussing with management the selection and termination of the
independent public accountant and any significant disagreements between the
independent public accountant and management.
(f) Reviewing the internal audit program and results of examinations.
(g) Reviewing the program of the Chief Compliance Officer and the
compliance function generally.
(h) Reviewing the results of regulatory examinations.
<PAGE>
Board of Directors
Resolution -2- 4/16/96
- --------------------------------------------------------------------------------
Northern Trust Corporation
(i) Reviewing such other matters as the Committee deems appropriate.
SECTION 4.2. Composition. The Committee shall consist of no less than
four Directors. All of the members of the Committee shall, in the judgment of
the Board of Directors, be independent of management of the Corporation and its
subsidiaries and shall meet other applicable regulatory requirements.
SECTION 4.3. Procedures. The Committee shall be appointed annually at the
organization meeting of the Board of Directors and at the same time a Chairman
shall be appointed. The Committee shall meet upon the call of the Chairman or
any member of the Committee, and a majority of the Committee's members shall
constitute a quorum. In the absence or disqualification of a member of the
Committee, the members thereof present at any meeting and not disqualified from
voting, whether or not they constitute a quorum, may unanimously appoint another
qualified member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
SECTION 4.4. Counsel. The Committee may, in order to assist it in the
performance of its functions, engage counsel of its choosing without the
approval of the engagement by the Board of Directors or management and may
direct the proper officers of the Corporation to pay the reasonable fees and
expenses of any such counsel.
ARTICLE V
THE CORPORATE GOVERNANCE COMMITTEE
SECTION 5.1. The Corporate Governance Committee. A Corporate Governance
Committee and its Chairman shall be appointed each year by the Board of
Directors to review and advise the Board of Directors with respect to the
structure and functioning of the Board and its interaction with the
Corporation's management and stockholders; review and advise the Board of
Directors with respect to the structure and membership of its Committees; and
to receive recommendations for, and to review, study and evaluate the
qualifications of all candidates for senior management succession and for
nomination to the Board of Directors. The Committee shall report to the Board
its conclusions with respect to such candidates and its recommendations for
nominees for election or reelection or appointment to fill vacancies in the
Board and as officers of the Corporation. The Committee shall consist of no less
than four Directors, a majority of whom shall constitute a quorum, and shall
meet upon the call of its Chairman or any member of the Committee. In the
absence or disqualification of a member of the Committee, the members thereof
present at any meeting and not disqualified from voting, whether or not they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
<PAGE>
Board of Directors
Resolution -3- 4/16/96
- --------------------------------------------------------------------------------
Northern Trust Corporation
ARTICLE VI
THE COMPENSATION AND BENEFITS COMMITTEE
SECTION 6.1. The Compensation and Benefits Committee. A Compensation and
Benefits Committee and its Chairman shall be appointed each year by the Board of
Directors to study, review and make recommendations to the Board with respect to
the salary policy for the Corporation, the compensation of senior officers and
the development of and amendment to incentive and benefit plans. The Committee
shall consist of no less than three Directors, none of whom shall be an active
officer of the Corporation. The Committee shall meet upon the call of the
Chairman or any member of the Committee, and a majority of the Committee's
members shall constitute a quorum. In the absence or disqualification of a
member of the Committee, the members thereof present at any meeting and not
disqualified from voting, whether or not they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
ARTICLE VII
THE BUSINESS RISK COMMITTEE
SECTION 7.1. The Business Risk Committee. A Business Risk Committee and its
Chairman shall be appointed to review with management risks inherent in the
businesses of the Corporation and its subsidiaries involving the extension of
credit, the management of assets and liabilities, the provision of fiduciary
investment services and the control processes with respect to these risks,
including matters related to credit risk, market risk, liquidity risk and
fiduciary investment and credit risk and such other related matters as may from
time to time be deemed appropriate by the Committee. The Committee shall consist
of no less than four Directors, a majority of whom shall not be active officers
of the Corporation. The Committee shall meet upon the call of the Chairman or
any member of the Committee, and a majority of the Committee's members shall
constitute a quorum. In the absence or disqualification of a member of the
Committee, the members thereof present at any meeting and not disqualified from
voting, whether or not they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member.
ARTICLE VIII
THE BUSINESS STRATEGY COMMITTEE
SECTION 8.1. The Business Strategy Committee. A Business Strategy Committee
and its Chairman shall be appointed each year by the Board of Directors to
review the policies, strategies and performance of the various business units of
the Corporation and such other related matters as may from time to time be
deemed appropriate by the Committee. The Committee shall consist of no less than
four Directors, a majority of whom shall not be active officers of the
Corporation.
<PAGE>
Board of Directors
Resolution -4- 4/16/96
- --------------------------------------------------------------------------------
Northern Trust Corporation
The Committee shall meet upon the call of the Chairman or any member of the
Committee, and a majority of the Committee's members shall constitute a quorum.
In the absence or disqualification of a member of the Committee, the members
thereof present at any meeting and not disqualified from voting, whether or not
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
<PAGE>
Exhibit Number (3)
To 3/31/96 Form 10-Q
By-laws
of
Northern Trust Corporation
Chicago, Illinois
As Effective April 16, 1996
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
<C> <S> <C>
Article I--The Stockholders
SECTION 1.1 --ANNUAL MEETING.............................................. 1
SECTION 1.2 --SPECIAL MEETINGS............................................ 1
SECTION 1.3 --NOTICE OF MEETINGS.......................................... 1
SECTION 1.4 --FIXING DATE OF RECORD....................................... 1
SECTION 1.5 --INSPECTORS OF ELECTION...................................... 2
SECTION 1.6 --QUORUM...................................................... 3
SECTION 1.7 --CUMULATIVE VOTING RIGHTS.................................... 3
SECTION 1.8 --PROXIES..................................................... 3
SECTION 1.9 --VOTING BY BALLOT............................................ 3
SECTION 1.10 --VOTING LISTS................................................ 3
SECTION 1.11 --PLACE OF MEETING............................................ 3
SECTION 1.12 --VOTING OF SHARES OF CERTAIN HOLDERS......................... 4
Article II--The Board of Directors
SECTION 2.1 --GENERAL POWERS.............................................. 4
SECTION 2.2 --NUMBER, TENURE AND QUALIFICATIONS........................... 4
SECTION 2.3 --REGULAR MEETINGS............................................ 4
SECTION 2.4 --SPECIAL MEETINGS; NOTICE.................................... 4
SECTION 2.5 --TIME OF NOTICE.............................................. 5
SECTION 2.6 --QUORUM...................................................... 5
SECTION 2.7 --MANNER OF ACTING............................................ 5
SECTION 2.8 --DIRECTORS' COMPENSATION..................................... 5
SECTION 2.9 --VACANCIES................................................... 5
SECTION 2.10 --CONSENT IN LIEU OF MEETING.................................. 6
Article III--The Executive Committee
SECTION 3.1 --NUMBER, TENURE, AND QUORUM.................................. 6
SECTION 3.2 --POWERS...................................................... 6
SECTION 3.3 --MEETINGS.................................................... 6
SECTION 3.4 --RECORDS AND REPORTS......................................... 6
Article IV--The Audit Committee
SECTION 4.1 --FUNCTIONS................................................... 7
SECTION 4.2 --COMPOSITION................................................. 7
SECTION 4.3 --PROCEDURES.................................................. 7
SECTION 4.4 --COUNSEL..................................................... 7
Article V--The Corporate Governance Committee
SECTION 5.1 --THE CORPORATE GOVERNANCE COMMITTEE.......................... 8
Article VI--The Compensation and Benefits Committee
SECTION 6.1 --THE COMPENSATION AND BENEFITS
COMMITTEE................................................... 8
Article VII--The Business Risk Committee
SECTION 7.1 --THE BUSINESS RISK COMMITTEE................................. 8
Article VIII--The Business Strategy Committee
SECTION 8.1 --THE BUSINESS STRATEGY COMMITTEE............................. 9
</TABLE>
i
<PAGE>
<TABLE>
<C> <S> <C>
Article IX--The Officers
SECTION 9.1 --NUMBER AND TERM OF OFFICE................................... 9
SECTION 9.2 --REMOVAL..................................................... 9
SECTION 9.3 --THE CHAIRMAN OF THE BOARD................................... 9
SECTION 9.4 --THE PRESIDENT............................................... 9
SECTION 9.5 --THE CHIEF EXECUTIVE OFFICER................................. 10
SECTION 9.6 --THE VICE CHAIRMEN........................................... 10
SECTION 9.7 --THE EXECUTIVE VICE PRESIDENTS............................... 10
SECTION 9.8 --THE VICE PRESIDENTS......................................... 10
SECTION 9.9 --THE TREASURER............................................... 10
SECTION 9.10 --THE SECRETARY............................................... 11
SECTION 9.11 --ASSISTANT TREASURERS AND ASSISTANT SECRETARIES.............. 11
SECTION 9.12 --SALARIES.................................................... 11
Article X--Contracts, Loans, Checks and Deposits
SECTION 10.1 --CONTRACTS................................................... 11
SECTION 10.2 --LOANS....................................................... 11
SECTION 10.3 --CHECKS, DRAFTS, ETC......................................... 11
SECTION 10.4 --DEPOSITS.................................................... 11
SECTION 10.5 --POWER TO EXECUTE PROXIES.................................... 12
Article XI--Certificates for Shares and Their Transfer
SECTION 11.1 --CERTIFICATES FOR SHARES..................................... 12
SECTION 11.2 --TRANSFERS OF SHARES......................................... 12
Article XII--Fiscal Year
SECTION 12.1 --FISCAL YEAR................................................. 12
Article XIII--SEAL
SECTION 13.1 --SEAL........................................................ 12
Article XIV--Waiver of Notice
SECTION 14.1 --WAIVER OF NOTICE............................................ 13
Article XV--Indemnification
SECTION 15.1 --INDEMNIFICATION REQUEST..................................... 13
SECTION 15.2 --DETERMINATION OF INDEMNIFICATION REQUEST.................... 13
SECTION 15.3 --PRESUMPTION OF ENTITLEMENT; CONCLUSIVE EFFECT OF FINDINGS OF
FACT AND LAW; OTHER PROCEDURES.............................. 13
SECTION 15.4 --COOPERATION AND EXPENSES.................................... 14
SECTION 15.5 --SELECTION OF INDEPENDENT COUNSEL............................ 14
SECTION 15.6 --TIME FOR DETERMINATION...................................... 14
SECTION 15.7 --FAILURE TO MAKE DETERMINATION; REMEDIES FOR ENFORCEMENT..... 15
SECTION 15.8 --APPEAL OF ADVERSE DETERMINATION............................. 15
SECTION 15.9 --BURDEN OF PROOF............................................. 15
SECTION 15.10 --DEFINITION OF "DISINTERESTED DIRECTOR"...................... 15
SECTION 15.11 --DEFINITION OF "CHANGE OF CONTROL"........................... 15
SECTION 15.12 --ADVANCEMENT OF EXPENSES..................................... 16
SECTION 15.13 --PERSONAL LIABILITY OF DIRECTORS............................. 16
Article XVI--Amendments
SECTION 16.1 --AMENDMENTS.................................................. 16
</TABLE>
ii
<PAGE>
By-laws
of
The Northern Trust Corporation
Chicago, Illinois
ARTICLE I
THE STOCKHOLDERS
SECTION 1.1 Annual Meeting. There shall be an annual meeting of the
stockholders on the third Tuesday in April of each year at ten-thirty o'clock
A.M., or at such other date or time as shall be designated from time to time by
the Board of Directors and stated in the notice of the meeting, for the election
of Directors and for the transaction of such other business as may come before
the meeting.
SECTION 1.2 Special Meetings. A special meeting of the stockholders may be
called at any time by the Board of Directors, the Chairman of the Board, the
President, or a Vice Chairman, and shall be called upon request in writing from
the holders of at least one-third of the issued and outstanding shares of
capital stock of the Corporation entitled to vote at such meeting specifying the
purpose or purposes for which such meeting shall be called.
SECTION 1.3 Notice of Meetings. Unless a different manner of giving notice
is prescribed by statute, written or printed notice stating the place, day, and
hour of the meeting, and in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered not more than 50 days nor
less than 10 days (or less than 20 days if a merger or consolidation of the
Corporation,or a sale, lease or exchange of all or substantially all of the
Corporation's property or assets, is to be acted upon at the meeting) before the
date of the meeting either personally or by mail, to each stockholder of record
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail with postage thereon prepaid
addressed to the stockholder at the stockholder's address as it appears on the
records of the Corporation.
<PAGE>
SECTION 1.4. Fixing Date of Record.
(a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix a record date, which record
date shall not precede the date on which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall not be more
than 60 nor less than 10 days (or less than 20 days if a merger or consolidation
of the Corporation, or a sale, lease or exchange of all or substantially all of
the Corporation's property or assets, is to be acted upon at the meeting) before
the date of such meeting. If no record date is fixed by the Board of Directors,
the record date for determining stockholders entitled to notice of or to vote at
a meeting of stockholders shall be at the close of business on the next day
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to an adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
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<PAGE>
ARTICLE (b) In order that the Corporation may determine the stockholders
I entitled to consent to corporate action in writing without a
meeting, the Board of Directors may fix a record date, which
record date shall not precede the date on which the resolution
fixing the record date is adopted by the Board of Directors, and
which date shall not be more than 10 days after the date upon
which the resolution fixing the record date is adopted by the
Board of Directors. If no record date has been fixed by the Board
of Directors, the record date for determining stockholders
entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is
required by the Restated Certificate of Incorporation of the
Corporation or by statute, shall be the first date on which a
signed written consent setting forth the action taken or proposed
to be taken is delivered in the manner required by law to the
Corporation at its registered office in the State of Delaware or
at its principal place of business or to an officer or agent of
the Corporation having custody of the book in which proceedings of
meetings of the Corporation's stockholders are recorded. Delivery
made to the Corporation's registered office shall be by hand
delivery or by certified or registered mail, return receipt
requested. If no record has been fixed by the Board of Directors
and prior action by the Board of Directors is required by the
Restated Certificate of Incorporation or by statute, the record
date for determining stockholders entitled to consent to corporate
action in writing without a meeting shall be at the close of
business on the day on which the Board of Directors adopts the
resolution taking such prior action.
(c) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to
exercise any rights in respect of any change, conversion or
exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall not be more
than 60 days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose
shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
(d) Only those who shall be stockholders of record on the record
date so fixed as aforesaid shall be entitled to such notice of,
and to vote at, such meeting and any adjournment thereof, or to
receive payment of such dividend or other distribution, or to
receive such allotment of rights, or to exercise such rights, as
the case may be, notwithstanding the transfer of any stock on the
books of the Corporation after the applicable record date.
SECTION 1.5. Inspectors of Election. The Board of Directors or
the Executive Committee of the Board of Directors of the
Corporation shall appoint, in advance, one or more inspectors to
act at each meeting of the stockholders of the Corporation. If no
inspector has been appointed or one or more have been appointed
but are unable or fail to act, the presiding officer of any
meeting of the stockholders shall appoint one or more persons as
inspectors for such meeting. Such inspectors shall ascertain the
number of shares of stock of the Corporation outstanding and
entitled to vote at the meeting and the voting power of each
share; determine and report the number of shares represented at
the meeting, based upon their determination of the validity and
effect of proxies and ballots; count all votes and ballots and
report the results; and do such other acts as are required by law
or are proper to conduct the election and voting with impartiality
and fairness to all the stockholders. Each report of an inspector
shall be in writing and signed by him or her or a majority of them
if there is more than one inspector acting at such meeting. If
there is more than one inspector, the report of a majority shall
be the report of the inspectors. The report of the inspector or
inspectors on the number of shares represented at the meeting and
the results of the voting shall be prima facie evidence thereof.
The inspector or inspectors may appoint or retain other persons or
entities to assist in performing their duties.
2
<PAGE>
ARTICLE SECTION 1.6. Quorum. A majority of the outstanding
I shares of capital stock entitled to vote at the
meeting, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders.
In the absence of a quorum, a meeting may be
adjourned from time to time without notice to the
stockholders except as otherwise required by law.
SECTION 1.7. Cumulative Voting Rights. At all
elections of Directors of the Corporation, each
stockholder entitled generally to vote for the
election of Directors shall be entitled to as many
votes as shall equal the number of votes which
(except for this provision as to cumulative voting)
the stockholder would be entitled to cast for the
election of Directors with respect to the
stockholder's shares of stock multiplied by the
number of Directors to be elected, and the
stockholder may cast all of such votes for a
single Director or may distribute them among the
number to be voted for, or for any two or more of
them as the stockholder may see fit.
SECTION 1.8. Proxies. At all meetings of
stockholders, a stockholder entitled to vote may
vote either in person or by proxy executed in
writing by the stockholder or by the stockholder's
duly authorized attorney-in-fact. Such proxy shall
be filed with the Secretary before or at the time of
the meeting. No proxy shall be valid after eleven
months from the date of its execution, unless
otherwise provided in the proxy.
SECTION 1.9. Voting by Ballot. Voting in any
election for Directors shall be by ballot.
SECTION 1.10. Voting Lists. The officer who has
charge of the stock ledger of the Corporation shall
prepare and make, at least ten days before every
meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting,
arranged in alphabetical order, and showing the
address of each stockholder and the number of
shares registered in the name of each stockholder.
Such list shall be open to the examination of any
stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting,
either at a place within the city where the meeting
is to be held, which place shall be specified in
the notice of the meeting, or, if not so specified,
at the place where the meeting is to be held. The
list shall also be produced and kept at the time
and place of the meeting during the whole time
thereof, and may be inspected by any stockholder
who is present.
SECTION 1.11. Place of Meeting. The Board of
Directors may designate any place, either within or
without the State of Delaware, as the place of
meeting for any annual meeting or any special
meeting called by the Board of Directors. If no
designation is made, or if a special meeting is
otherwise called, the place of meeting shall be the
principal office of the Corporation in the City of
Chicago.
3
<PAGE>
ARTICLE SECTION 1.12. Voting of Shares of Certain Holders.
I Shares of capital stock of the Corporation standing
in the name of another corporation, domestic or
foreign, may be voted by such officer, agent, or
proxy as the by-laws of such corporation may
prescribe, or, in the absence of such provision, as
the board of directors of such corporation may
determine.
Shares of capital stock of the Corporation standing
in the name of a deceased person, a minor ward or
an incompetent person, may be voted by his or her
administrator, executor, court appointed guardian
or conservator, either in person or by proxy
without a transfer of such shares into the name of
such administrator, executor, court appointed
guardian or conservator. Shares of capital stock of
the Corporation standing in the name of a trustee
may be voted by the trustees, either in person or by
proxy.
Shares of capital stock of the Corporation standing
in the name of a receiver may be voted by such
receiver, and shares held by or under the control
of a receiver may be voted by such receiver without
the transfer thereof into the receiver's name if
authority so to do be contained in an appropriate
order of the court by which such receiver was
appointed.
A stockholder whose shares are pledged shall be
entitled to vote such shares until the shares have been
transferred into the name of the pledgee, and thereafter the
pledgee shall be entitled to vote the shares so transferred.
Shares of its own capital stock belonging to this
Corporation shall not be voted, directly or
indirectly, at any meeting and shall not be counted
in determining the total number of outstanding
shares at any given time, but shares of its own
stock held by it in a fiduciary capacity may be
voted and shall be counted in determining the total
number of outstanding shares at any given time.
ARTICLE II
THE BOARD OF DIRECTORS
SECTION 2.1. General Powers. The business and
affairs of the Corporation shall be managed by or
under the direction of its Board of Directors.
SECTION 2.2. Number, Tenure and Qualifications. The
Board of Directors of the Corporation shall consist
of such number of Directors, not less than 5 nor
more than 25, as shall be fixed from time to time
by the Board of Directors. Each Director shall hold
office until the next annual meeting of
stockholders or until a successor is elected.
SECTION 2.3. Regular Meetings. A regular meeting of
the Board of Directors shall be held at least once
each quarter at such place, date and hour as the
Board may appoint. Notice of each regular meeting,
unless waived, shall be given in the same manner as
is provided for notice of a special meeting.
SECTION 2.4. Special Meetings; Notice. A special
meeting of the Board of Directors may be called by
or at the request of the Chairman of the Board, the
President, a Vice Chairman, or any two Directors.
The person or persons calling or requesting such
meeting may fix the place, date and hour thereof.
Notice of the place, date, and hour of each special
meeting, unless waived, shall be given to a
Director in person, by mail, by telegram or cable,
by telephone or wireless, or by any other means
that reasonably may be expected to provide similar
4
<PAGE>
ARTICLE notice. Except in emergency situations as described
II below, notice by any means shall be given at least
two days prior to the meeting. For purposes of
dealing with an emergency situation (as
conclusively determined by the officer or Directors
calling the meeting), notice may be given in
person, by telegram or cable, by telephone or
wireless, or by any other means that reasonably may
be expected to provide similar notice, not less
than two hours prior to the meeting. Such notice
may be given by the Secretary or by the officer or
Directors calling the meeting.
SECTION 2.5. Time of Notice. If notice to a
Director is given:
(a) in person, such notice shall be deemed to have
been given when delivered;
(b) by mail, such notice shall be deemed to have
been given when deposited in the United States
mail, postage prepaid, addressed to the Director at
such address as appears on the records of the
Corporation for such Director;
(c) by telegram, cable or other similar means (not
including mail) that provide written notice, such
notice shall be deemed to have been given when
delivered to any transmission company, with charges
prepaid, addressed to the Director at such address
as appears on the records of the Corporation for
such Director; or
(d) by telephone, wireless or other means of voice
transmission, such notice shall be deemed to have
been given when transmitted to such number or call
designation as appears on the records of the
Corporation for such Director.
Any meeting of the Board of Directors shall be a
legal meeting without any notice having been given
if all the Directors are present at the meeting,
and no notice of a meeting shall be required to be
given to any Director who attends such meetings.
SECTION 2.6. Quorum. A majority of the Board of
Directors shall constitute a quorum for the
transaction of business at any meeting of the Board
of Directors, provided that if less than a majority
of the Directors are present at said meeting, a
majority of the Directors present may adjourn the
meeting from time to time without further notice.
SECTION 2.7. Manner of Acting. The act of the
majority of the Directors present at a meeting at
which a quorum is present shall be the act of the
Board of Directors, except on additions,
amendments, repeal or any changes whatsoever in the
By-laws or the adoption of new By-laws, when the
affirmative votes of at least a majority of the
members of the Board shall be necessary for the
adoption of such changes.
A director may participate in a meeting of the
Board of Directors or any committee thereof by
means of conference telephone or similar
communications equipment by means of which all
persons participating in the meeting can hear each
other, and such participation shall constitute
presence in person at such meetings.
SECTION 2.8. Directors' Compensation. The Directors
shall receive such compensation as may be fixed by
the Board for services to the Corporation.
SECTION 2.9. Vacancies. If vacancies occur in the
Board of Directors caused by death, resignation,
retirement, disqualification or removal from office
of any Director or Directors, or otherwise, or if
any new Directorship is created by any increase in
the authorized number of Directors, a majority of
the surviving or remaining Directors then in
office, though less than a quorum, may choose a
successor or successors, or fill the newly created
Directorship, and the Directors so chosen shall
hold office until the next annual meeting of
stockholders or until their successors are elected.
5
<PAGE>
ARTICLE SECTION 2.10. Consent in Lieu of Meeting. Unless
II otherwise restricted by the Restated Certificate of
Incorporation or these By-laws, any action required
or permitted to be taken at any meeting of the
Board of Directors or any committee thereof may be
taken without a meeting if all members of the Board
or committee thereof, as the case may be, consent
thereto in writing, and the writing or writings are
filed with the minutes of the proceedings of the
Board or committee.
ARTICLE III
THE EXECUTIVE COMMITTEE
SECTION 3.1. Number, Tenure and Quorum. The
Directors shall each year appoint no less than five
Directors, one of whom shall be the Chairman of the
Board and one of whom shall be the President if the
President is designated the Chief Executive Officer,
who shall constitute and be called the Executive
Committee. Each Director so appointed shall act as a
member of the Committee until another is appointed and
acts in the Director's place. The Chairman of the Board
shall preside at meetings of the Committee. In the
absence or disqualification of a member of the
Committee, the members thereof present at any meeting
and not disqualified from voting, whether or not they
constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at
the meeting in the place of any such absent or
disqualified member. In the absence or inability to act
of the Chairman of the Board, or upon the request of
the Chairman, the President, if the President is a
member of the Committee, or a member elected by the
Committee shall preside at meetings of the Committee.
A majority of the members of the Executive
Committee shall constitute a quorum for the
transaction of business.
SECTION 3.2. Powers. The Executive Committee may,
while the Board of Directors is not in session,
exercise all or any of the powers of the Board of
Directors; except that the Executive Committee
shall not have the power or authority of the Board
of Directors in reference to amending the Restated
Certificate of Incorporation, adopting an agreement
of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and
assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a
dissolution, or amending the By-laws of the
Corporation, or declaring a dividend or authorizing
the issuance of stock.
SECTION 3.3. Meetings. Meetings of the Executive
Committee shall be held at the office of the
Corporation, or elsewhere, and at such time as they
may appoint, but the Committee shall at all times
be subject to the call of the Chairman of the Board
or any member of the Committee.
SECTION 3.4. Records and Reports. The Executive
Committee, through the Secretary or any Assistant
Secretary, shall keep books of separate minutes and
report all its action at every regular meeting of
the Board of Directors, or as often as may be
required by the Board.
6
<PAGE>
ARTICLE IV
THE AUDIT COMMITTEE
SECTION 4.1. Functions. An Audit Committee shall be
appointed each year by the Board of Directors. The
Committee shall perform the following functions for
the Corporation and its subsidiaries on a
consolidated basis and for such individual banking
subsidiaries as the Board shall direct:
(a) Reviewing with management and the independent
public accountant the reports issued with respect
to the annual financial statements, the internal
control structure and procedures for financial
reporting and compliance with laws and regulations
and the basis for such reports.
(b) Reviewing with management and the independent
public accountant the scope of services required by
the annual audit, significant accounting policies,
and audit conclusions regarding significant
accounting estimates.
(c) Reviewing with management and the independent
public accountant their assessments of the adequacy
of internal controls, and the resolution of
identified material weaknesses and reportable
conditions in internal controls over financial
reporting, including the prevention or detection of
management override or compromise of the internal
control system.
(d) Reviewing with management and the independent
public accountant compliance with those laws and
regulations with respect to which management and
the independent public accountant are required to
report.
(e) Discussing with management the selection and
termination of the independent public accountant
and any significant disagreements between the
independent public accountant and management.
(f) Reviewing the internal audit program and
results of examinations.
(g) Reviewing the program of the Chief Compliance
Officer and the compliance function generally.
(h) Reviewing the results of regulatory
examinations.
(i) Reviewing such other matters as the Committee
deems appropriate.
SECTION 4.2. Composition. The Committee shall
consist of no less than four Directors. All of the
members of the Committee shall, in the judgement of
the Board of Directors, be independent of management
of the Corporation and its subsidiaries and shall
meet other applicable regulatory requirements.
SECTION 4.3. Procedures. The Committee shall be appointed
annually at the organization meeting of the Board of Directors and
at the same time a Chairman shall be appointed. The Committee
shall meet upon the call of the Chairman or any member of the
Committee and a majority of the Committee's members shall
constitute a quorum. In the absence or disqualification of a
member of the Committee, the members thereof present at any
meeting and not disqualified from voting, whether or not they
constitute a quorum, may unanimously appoint another qualified
member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member.
SECTION 4.4. Counsel. The Committee may, in order
to assist it in the performance of its functions,
engage counsel of its choosing without the approval
of the engagement by the Board of Directors or
management and may direct the proper officers of
the Corporation to pay the reasonable fees and
expenses of any such counsel.
7
<PAGE>
ARTICLE V
THE CORPORATE GOVERNANCE COMMITTEE
SECTION 5.1. The Corporate Governance Committee. A
Corporate Governance Committee and its Chairman shall
be appointed each year by the Board of Directors to
review and advise the Board of Directors with respect
to the structure and functioning of the Board and its
interaction with the Corporation's management and
stockholders; review and advise the Board of Directors
with respect to the structure and membership of its
Committee; and to receive recommendations for, and to
review, study and evaluate the qualifications of all
candidates for senior management succession and for
nomination to the Board of Directors or its Committees.
The Committee shall report to the Board its conclusions
with respect to such candidates and its recommendations
for nominees for election or reelection or appointment
to fill vacancies in the Board and as officers of the
Corporation. The Committee shall consist of no less than
four Directors, a majority of whom shall constitute a
quorum, and shall meet upon the call of the Chairman
or any member of the Committee. In the absence or
disqualification of a member of the Committee,
the members thereof present at any meeting and not
disqualified from voting, whether or not they constitute
a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the
place of any such absent or disqualified member.
ARTICLE VI
THE COMPENSATION AND BENEFITS COMMITTEE
SECTION 6.1. The Compensation and Benefits
Committee. A Compensation and Benefits Committee
and its Chairman shall be appointed each year by
the Board of Directors to study, review and make
recommendations to the Board with respect to the
salary policy for the Corporation, the compensation
of senior officers, and the development of and
amendment to incentive and benefit plans. The
Committee shall consist of no less than three
Directors, none of whom shall be an active officer
of the Corporation. The Committee shall meet upon
the call of the Chairman or any member of the
Committee, and a majority of the Committee's members
shall constitute a quorum. In the absence or
disqualification of a member of the Committee, the
members thereof present at any meeting and not
disqualified from voting, whether or not they
constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the
meeting in the place of any such absent or
disqualified member.
ARTICLE VII
THE BUSINESS RISK COMMITTEE
SECTION 7.1. The Business Risk Committee. A
Business Risk Committee and its Chairman shall
be appointed to review with management risks
inherent in the businesses of the Corporation and
its subsidiaries involving the extension of credit,
the management of assets and liabilities, the
provision of fiduciary investment services and the
control processes with respect to these risks,
including matters related to credit risk, market risk,
liquidity risk and fiduciary investment and credit
risk and such other related matters as may from time
to time be deemed appropriate by the Committee. The
Committee shall consist of no less than four Directors,
a majority of whom shall not be active officers of the
Corporation. The Committee shall meet upon the call of
the Chairman or any member of the Committee, and a
majority of the Committee's members shall constitute
a quorum. In the absence or disqualification of a member
of the Committee, the members thereof present at any
meeting and not disqualified from voting, whether
or not they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified
member.
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<PAGE>
ARTICLE VIII
THE BUSINESS STRATEGY COMMITTEE
SECTION 8.1. The Business Strategy Committee.
A Business Strategy Committee and its Chairman
shall be appointed each year by the Board of
Directors to review the policies, strategies and
performance of the various business units of the
Corporation and such other related matters as may
from time to time be deemed appropriate by the
Committee. The Committee shall consist of no less
than four Directors, a majority of whom shall not
be active officers of the Corporation.
The Committee shall meet upon the call of the
Chairman or any member of the Committee, and a
majority of the Committee's members shall
constitute a quorum. In the absence or
disqualification of a member of the Committee,
the members thereof present at any meeting and
not disqualified from voting, whether or not
they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act
at the meeting in the place of any such
absent or disqualified member.
ARTICLE IX
THE OFFICERS
SECTION 9.1. Number and Term of Office. The
officers of the Corporation shall be a Chairman of
the Board and a President, one of whom shall be
designated Chief Executive Officer by the Board
of Directors, and may also include one or more
Vice Chairmen, one or more Executive Vice
Presidents (any of whom may be designated a
Senior Executive Vice President), such additional
Vice Presidents with such designations, if any,
as may be determined by the Board of Directors, a
Secretary, and a Treasurer and one or more
Assistant Secretaries and Assistant Treasurers as
may be determined by the Board of Directors, and
such other officers as may from time to time be
appointed by the Board of Directors. Any two or more
offices may be held by the same person. The Chairman
of the Board, the President and the Vice Chairmen
shall be elected from among the Directors; the
other officers may be appointed by the Board of
Directors.
The officers of the Corporation shall be elected or
appointed annually by the Board of Directors at the
first meeting of the Board of Directors held after
each annual meeting of stockholders. Vacancies or
new offices may be filled at any time. Each officer
shall hold office until a successor shall have
been duly elected or appointed or until his or her
death or until he or she shall resign or shall have
been removed by the Board of Directors.
SECTION 9.2. Removal. An officer may be removed by
the Board of Directors whenever in its judgment the
best interests of the Corporation would be served
thereby.
SECTION 9.3. The Chairman of the Board. The
Chairman of the Board shall have such powers as
are vested in him or her by the Board of Directors,
by law or by these By-laws. The Chairman shall
preside at the meetings of the stockholders, of the
Board of Directors, and of the Executive Committee.
SECTION 9.4. The President. The President shall
have the powers and duties vested in him or her by
the Board of Directors, by law or by these By-laws.
In the absence or inability to act of the Chairman of
the Board, or upon the request of the Chairman of
the Board, the President shall preside at meetings of
the stockholders and of the Board of Directors and
shall have and exercise all of the powers and
duties of the Chairman of the Board.
9
<PAGE>
ARTICLE SECTION 9.5. The Chief Executive Officer. The
IX Chief Executive Officer of the Corporation shall
have, subject to the supervision and direction
of the Board of Directors or of the Executive
Committee, general supervision of the business,
property and affairs of the Corporation and the
powers vested in him or her by the Board of Directors,
by law or by these By-laws or which usually attach or
pertain to such office. Except in those instances
in which the authority to execute is expressly
delegated to another officer or agent of the
Corporation or a different mode of execution is
expressly prescribed by the Board of Directors,
the Chief Executive Officer may execute for the
Corporation any contracts, deeds, mortgages, bonds,
or other instruments which the Board of Directors
has authorized, and the Chief Executive Officer may
(without previous authorization by the Board of
Directors) execute such contracts and other
instruments as the conduct of the Corporation's
business in its ordinary course requires.
SECTION 9.6. The Vice Chairmen. A Vice Chairman
shall have such powers as are vested in him or her by
the Board of Directors, by law or by these By-laws. In
the absence or inability to act of the Chairman of
the Board and the President, or upon request of the
Chairman of the Board, or in his or her absence upon
request of the President, a Vice Chairman (or in
the event there be more than one Vice Chairman, the
Vice Chairmen in the order designated, or in the
absence of any designation, then in the order of
their election) shall preside at meetings of
stockholders and of the Board of Directors and
shall have and exercise all their powers and
duties.
SECTION 9.7. The Executive Vice Presidents. In the
absence of the Chairman of the Board, the President
and the Vice Chairmen or in the event of their
inability or refusal to act, the Executive Vice
President (or in the event there be more than one
Executive Vice President, the Executive Vice
Presidents in the order designated, or in the
absence of any designation, then in the order of
their election) shall perform the duties of the
Chairman of the Board, of the President, and of the
Vice Chairmen and when so acting, shall have all
the powers of and be subject to all the
restrictions upon the Chairman of the Board, the
President and the Vice Chairmen. Any Executive Vice
President may sign, with the Secretary or any
Assistant Secretary, certificates for shares of the
corporation; and shall perform such other duties as
from time to time may be assigned to him or her by
the Chairman of the Board, the President, a Vice
Chairman, the Board of Directors, or these By-laws.
SECTION 9.8. The Vice Presidents. The Vice
Presidents shall perform such duties as may be
assigned to them from time to time by the Chairman
of the Board, the President, the Vice Chairmen, or
the Board of Directors, or these By-laws. Any Vice
President may sign, with the Secretary or an
Assistant Secretary, certificates for shares of the
Corporation.
SECTION 9.9. The Treasurer. If required by the
Board of Directors, the Treasurer shall give a bond
for the faithful discharge of his or her duties in
such sum and with such surety or sureties as the
Board of Directors shall determine. The Treasurer
shall (a) have charge and custody of and be
responsible for all funds and securities of the
Corporation; receive and give receipts for moneys
due and payable to the Corporation from any source
whatsoever, and deposit all such moneys in the name
of the Corporation in such banks, trust companies or
other depositaries as shall be selected in accordance
with the provisions of Article X of these By-laws;
(b) in general perform all the duties incident to the
office of Treasurer and such other duties as from
time to time may be assigned to him or her by the
Chairman of the Board, the President, a Vice Chairman,
the Board of Directors, or these By-laws.
10
<PAGE>
ARTICLE SECTION 9.10. The Secretary. The Secretary shall
IX have the custody of the corporate seal and the
Secretary or any Assistant Secretary shall affix
the same to all instruments or papers requiring the
seal of the Corporation. The Secretary, or in his or
her absence, any Assistant Secretary, shall see that
proper notices are sent of the meetings of the
stockholders, the Board of Directors and the
Executive Committee, and shall see that all proper
notices are given, as required by these By-laws.
The Secretary or any Assistant Secretary shall keep
the minutes of all meetings of stockholders and
Directors and all committees which may request
their services.
SECTION 9.11. Assistant Treasurers and Assistant
Secretaries. The Assistant Treasurers shall
respectively, if required by the Board of
Directors, give bonds for the faithful discharge of
their duties in such sums and with such sureties as
the Board of Directors shall determine. The
Assistant Secretaries as thereunto authorized by
the Board of Directors may sign with the Chairman
of the Board, the President, a Vice Chairman, or an
Executive Vice President certificates for shares of
the Corporation, the issue of which shall have been
authorized by a resolution of the Board of
Directors. The Assistant Treasurers and Assistant
Secretaries, in general, shall perform such duties
as shall be assigned to them by the Treasurer or
the Secretary, respectively, or by the Chairman of
the Board, the President, a Vice Chairman, the
Board of Directors, or these By-laws.
SECTION 9.12. Salaries. The salaries of the
officers shall be fixed from time to time by the
Board of Directors and no officer shall be
prevented from receiving such salary by reason of
the fact that the officer is also a director of the
Corporation.
ARTICLE X
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 10.1. Contracts. The Board of Directors may
authorize any officer or officers, agent or agents,
to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the
Corporation, and such authority may be general or
confined to specific instances.
SECTION 10.2. Loans. No loans shall be contracted on
behalf of the Corporation and no evidences of
indebtedness shall be issued in its name unless
authorized by a resolution of the Board of
Directors. Such authority may be general or
confined to specific instances.
SECTION 10.3. Checks, Drafts, etc. All checks,
drafts or other orders for the payment of money,
notes or other evidences of indebtedness issued in
the name of the Corporation, shall be signed by
such officer or officers, agent or agents of the
Corporation and in such manner as shall from
time to time be determined by resolution of the
Board of Directors.
SECTION 10.4. Deposits. All funds of the Corporation
not otherwise employed shall be deposited from time
to time to the credit of the Corporation in such
banks, trust companies or other depositaries as the
Board of Directors may select.
11
<PAGE>
ARTICLE SECTION 10.5. Power to Execute Proxies. The Chairman
X of the Board, the President, a Vice Chairman, or
any Executive Vice President may execute proxies on
behalf of the Corporation with respect to the
voting of any shares of stock owned by the
Corporation.
ARTICLE XI
CERTIFICATES FOR SHARES
AND THEIR TRANSFER
SECTION 11.1. Certificates for Shares. Certificates
representing shares of the Corporation shall be in
such form as may be determined by the Board of
Directors. Such certificates shall be signed by the
Chairman of the Board, the President, a Vice
Chairman, an Executive Vice President or a Vice
President and by the Secretary or an Assistant
Secretary and shall be sealed with the seal of the
Corporation. The seal may be a facsimile. If a
stock certificate is countersigned (i) by a
transfer agent other than the Corporation or its
employee, or (ii) by a registrar other than the
Corporation or its employee, any other signature on
the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer,
transfer agent, or registrar before such
certificate is issued, it may be issued by the
Corporation with the same effect as if he or she were
such officer, transfer agent or registrar at the date
of issue. All certificates for shares shall be
consecutively numbered or otherwise identified. The
name of the person to whom the shares represented
thereby are issued, with the number of shares and
date of issue, shall be entered on the books of the
Corporation.
All certificates surrendered to the Corporation for
transfer shall be cancelled and no new certificates
shall be issued until the former certificate for a
like number of shares shall have been surrendered
and cancelled, except that in case of a lost,
destroyed or mutilated certificate a new one may be
issued therefor upon such terms and indemnity to
the Corporation as the Board of Directors may
prescribe.
SECTION 11.2. Transfers of Shares. Transfers of
shares of the Corporation shall be made only on the
books of the Corporation by the holder of record
thereof or by the holder's legal representative, who
shall furnish proper evidence of authority to transfer,
or by the holder's attorney thereunto authorized by
power of attorney duly executed and filed with the
Secretary of the Corporation, and on surrender for
cancellation of the certificate for such shares.
The person in whose name shares stand on the books
of the Corporation shall be deemed the owner
thereof for all purposes as regards the
Corporation.
ARTICLE XII
FISCAL YEAR
SECTION 12.1. Fiscal Year. The fiscal year of the
Corporation shall begin on the first day of January
in each year and end on the last day of December in
each year.
ARTICLE XIII
SEAL
SECTION 13.1. Seal. The Board of Directors shall
provide a corporate seal which shall be in the form
of a circle and shall have inscribed thereon the
name of the Corporation.
12
<PAGE>
ARTICLE XIV
WAIVER OF NOTICE
SECTION 14.1. Waiver of Notice. Whenever any notice
whatever is required to be given under the
provisions of these By-laws or under the provisions
of the Restated Certificate of Incorporation or
under the provisions of the General Corporation Law
of Delaware, waiver thereof in writing, signed by
the person or persons entitled to such notice, whether
before or after the time stated therein, shall be
deemed equivalent to the giving of such notice.
Attendance of any person at a meeting for which any
notice whatever is required to be given under the
provisions of these By-laws, the Restated
Certificate of Incorporation or the General
Corporation Law of Delaware shall constitute a
waiver of notice of such meeting, except when the
person attends for the express purpose of
objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is
not lawfully called or convened.
ARTICLE XV
INDEMNIFICATION
SECTION 15.1. Indemnification Request. A director,
officer or other person (the "Indemnitee") who
seeks indemnification (other than advancement of
expenses pursuant to Section 15.12 hereof), in
respect of amounts paid or owing as expenses,
judgments, fines, or in settlement, shall submit a
written request for indemnification (the
"Indemnification Request") to the Board of
Directors of the Corporation by delivering or
mailing the same, registered or certified mail, to
the Board of Directors c/o the Secretary of the
Corporation at the Corporation's principal
executive offices. If mailed, the Indemnification
Request shall be deemed made 48 hours after
depositing the same in the United States mail
addressed as aforesaid.
SECTION 15.2. Determination of Indemnification
Request. The determination of the Indemnitee's
entitlement to indemnification as set forth in the
Indemnification Request shall be made in the
specific case, at the expense of the Corporation,
as set forth in paragraph 5 of Article Eighth of
the Restated Certificate of Incorporation. However,
in the event a Change of Control (as hereinafter
defined) shall have occurred, such determination
shall be made by Independent Counsel in a written
opinion to the Board of Directors, a copy of which
shall be delivered to the Indemnitee.
SECTION 15.3. Presumption of Entitlement;
Conclusive Effect of Findings of Fact and Law;
Other Procedures. The termination with respect to
the Indemnitee of any action, suit or proceeding or
of any claim, issue or matter therein, by judgment,
order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent, shall not of
itself adversely affect the right of the Indemnitee
to indemnification or create a presumption that the
Indemnitee did not meet the standard of conduct
required by Article Eighth of the Restated
Certificate of Incorporation for indemnification.
If the Indemnitee is a person referred to in
paragraphs 1, 2 or 3 Article Eighth of the Restated
Certificate of Incorporation, the Indemnitee shall
be presumed to have met the required standard of
conduct but only to the extent not contrary to any
final findings of fact or law made in any action,
suit or proceeding to which the Indemnitee is or
was a party and for which indemnification is
requested. The person, persons or entity making the
determination of the Indemnitee's entitlement to
indemnification shall be entitled to rely upon all
such findings of fact and law made known to such
person, persons or entity. Such person, persons or
entity may consider such other matters as they or
it deem appropriate, shall not be required to
receive or hear evidence, oral presentations,
briefs or other submission, shall not be required
to hold hearings, and shall not otherwise be
subject to any rules of evidence or procedure
applicable to judicial or other proceedings.
13
<PAGE>
ARTICLE SECTION 15.4. Cooperation and Expenses. The
XV Indemnitee shall cooperate with the person, persons
or entity making the determination with respect to
the Indemnitee's entitlement to indemnification,
including providing to such person, persons or
entity upon reasonable advance request, any
documentation or information which is not
privileged or otherwise protected from disclosure
and which is reasonably available to the Indemnitee
and reasonably necessary to such determination. Any
costs or expenses (including attorneys' fees and
disbursements) reasonably incurred by the
Indemnitee in so cooperating with the person,
persons or entity making such determination shall
be borne by the Corporation irrespective of the
determination as to the Indemnitee's entitlement to
indemnification.
SECTION 15.5. Selection of Independent Counsel. If
a determination of the Indemnitee's entitlement to
indemnification is to be made by Independent Counsel,
the Independent Counsel shall be selected as provided
in this Section 15.5. If a Change of Control shall
not have occurred, Independent Counsel shall be
selected by a majority vote of a quorum of the
Board of Directors consisting of Disinterested
Directors. If a Change of Control shall have
occurred, or if a quorum shall decline or fail to
select Independent Counsel within five business days
after having directed, pursuant to paragraph 5(b)
of Article Eighth of the Restated Certificate of
Incorporation, the determination of the
Indemnitee's entitlement to indemnification to be
submitted to Independent Counsel, then Independent
Counsel shall be selected by the law firm regularly
or most frequently engaged by the Corporation
during the preceding three years for representation
or counseling in connection with general corporate
matters. In any event, Independent Counsel shall be
selected from among those Chicago, Illinois, or
Delaware law firms having a significant and
continuous practice in the field of corporate law
but excluding any firm that: (i) has, within the
preceding three years represented the Corporation,
the Indemnitee or affiliates of either in any
significant matter; (ii) has, within the preceding
three years, represented any other party in any
significant judicial or other proceeding against or
in opposition to the Corporation, the Indemnitee or
any affiliate of either; (iii) had any involvement
of any significant nature in or with respect to the
claim for which indemnification is requested; or
(iv) has any other material conflict of interest in
being engaged as Independent Counsel.
SECTION 15.6. Time for Determination. The
determination of the Indemnitee's entitlement to
indemnification shall be made within 60 days after
such Indemnitee shall have submitted all such
additional information, if any, as shall have been
reasonably requested during the 30-day period
following the initial submission of the
Indemnification Request to the Board of Directors
pursuant to Section 15.1 hereof. The foregoing
notwithstanding, in the event that the claim with
respect to which indemnification is requested is
the subject of a judicial, government or other
proceeding, the Board of Directors, stockholders or
Independent Counsel, as the case may be, may defer
their determination until 60 days after any such
proceeding shall have been finally adjudicated or
terminated (by settlement or otherwise) and all
periods for appeal, rehearing or reinstitution of
such proceeding (whether in a different forum or
otherwise) have expired.
14
<PAGE>
ARTICLE SECTION 15.7. Failure To Make Determination;
XV Remedies For Enforcement. If a determination of the
Indemnitee's entitlement to indemnification shall
not be made within the period specified in these
By-laws, unless due to a material failure of the
Indemnitee to comply with his or her obligations
under Section 15.4 hereof, then the Indemnitee
shall be entitled to indemnification to the extent
and in the manner set forth in the Indemnification
Request. The Indemnitee may only enforce his or her
rights to indemnification, whether pursuant to a
determination that the Indemnitee is entitled to
indemnification or pursuant to this Section 15.7,
in any judicial proceeding brought, at the election
of the Indemnitee, in any court having jurisdiction
within the State of Delaware, the State of
Illinois, or the state in which the Corporation
shall then have its principal executive offices.
The Indemnitee shall be entitled to all expenses
actually and reasonably incurred by him or her in
connection with the successful enforcement of the
Indemnitee's right to indemnification.
SECTION 15.8. Appeal of Adverse Determination. In
the event that a determination shall be made that
the Indemnitee is not entitled to indemnification,
in whole or in part, the Indemnitee may only
institute an action in any court having
jurisdiction within the State of Delaware, the
State of Illinois, or the state in which the
Corporation shall have its principal executive
offices to establish the Indemnitee's right to
indemnification. Any such proceeding shall be
conducted in all respects as a de novo
determination on the merits and any such prior
determination made pursuant to these By-laws that
the Indemnitee is not entitled to indemnification
shall not constitute a presumption that the
Indemnitee is not entitled to indemnification.
SECTION 15.9. Burden of Proof. In any judicial
proceeding regarding the Indemnitee's right or
entitlement to indemnification or advancement of
expenses, the Corporation shall have the burden of
proving that any Indemnitee who is a person
referred to in paragraphs 1, 2 or 3 of Article
Eighth of the Restated Certificate of Incorporation
is not entitled to indemnification or advancement
of expenses as the case may be, subject, however,
to principles of res judicata and collateral
estoppel relating to prior judicial proceedings to
which the Indemnitee is or was a party. In cases in
which the Indemnitee is not a person referred to in
paragraphs 1, 2 or 3 of Article Eighth of the
Restated Certificate of Incorporation, the
Indemnitee shall have the burden of proving he or
she is entitled to indemnification or the
advancement of expenses.
SECTION 15.10. Definition of "Disinterested
Director." A Disinterested Director shall mean any
director who (i) was not a party to the claim or
proceeding with respect to which indemnification is
requested; (ii) has not submitted an
Indemnification Request or a request for
advancement of expenses on his or her own behalf
that has not been finally resolved; or (iii) does
not have any direct and material financial or other
personal interest in the determination of the
Indemnification Request.
SECTION 15.11. Definition of "Change of Control."
A Change of Control shall be deemed to have
occurred on the earliest of:
(a) The receipt by the Corporation of a Schedule
13D or other statement filed under Section 13(d) of
the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), indicating that any entity,
person, or group has acquired beneficial ownership,
as that term is defined in Rule 13d-3 under the
Exchange Act, of more than 30% of the outstanding
capital stock of the Corporation entitled to vote
for the election of directors ("voting stock");
15
<PAGE>
Exhibit Number (10)(i)
To 3/31/96 Form 10-Q
NORTHERN TRUST CORPORATION
ANNUAL PERFORMANCE PLAN
1996
I. PURPOSE OF PLAN
---------------
The purpose of the Annual Performance Plan (the "Plan") is to promote the
achievement of superior financial and operating performance of the
Northern Trust Corporation and its subsidiaries (hereinafter referred to
as the "Corporation"), and further the objective of delivering unrivaled
service quality to its clients and partners through the awarding of cash
incentive payments to selected officers.
II. PLAN YEAR
---------
The Plan is effective from January 1, 1996 to December 31, 1996.
III. ELIGIBILITY AND PARTICIPATION
-----------------------------
Eligibility to participate in the Plan is restricted to officers with the
title of Vice President and above and who are not eligible for
participation in a Specialized Incentive Plan. Plan participation is
reviewed each year, and participation in one year does not automatically
indicate participation in subsequent Plan years. Participation in the
Plan is based upon recommendation from the respective Business Unit Head.
IV. AWARD FUNDING AND DETERMINATION
-------------------------------
At the beginning of the Plan year, the Compensation and Benefits
Committee of the Board of Directors of the Corporation will determine a
Corporate Earnings Target and profit plan funding for awards under the
Annual Performance Plan. The allocation of the plan award funding to each
respective Business Unit will be based on the salaries of the eligible
officers within the Business Unit. Within each Business Unit, one-half of
the available funding for awards under the Plan will be based on the
Corporation's financial achievement versus the Corporate Earnings Target.
The other half of the award funding is based on the financial achievement
of the Business Unit versus the Business Unit's earnings target. For
staff support personnel, the available funding for awards will be based
entirely on the financial achievement of the Corporation versus the
Corporate Earnings Target. The formula determining the pool level funding
based on Corporate and Business Unit performance is described in
Attachment I.
V. INDIVIDUAL AWARD DETERMINATION
------------------------------
Individual participant awards will be discretionary. They will be
determined by Business Unit Management based on an assessment of
individual performance, relative to performance expectations,
contribution, competitive level of total compensation, and available
award pool funding.
<PAGE>
VI. PAYMENT OF AWARDS
Awards will be paid in cash as soon as practicable following the
completion of the Plan year. Awards payable because of a Change in
Control of the Corporation pursuant to Paragraph VIII(h) shall be paid in
cash as soon as practicable following such Change in Control.
VII. ADMINISTRATION
The Plan shall be administered by the Management Committee of the
Corporation (the "Committee"). Subject to the provisions of the Plan, the
Committee shall be authorized to interpret the Plan, to establish, amend,
and rescind any rules and regulations relating to the Plan, and to make
all other determinations necessary or advisable for the administration of
the Plan. The determinations of the Committee in the effective
administration of the Plan, as described herein, shall be final and
conclusive.
The Board of Directors of the Corporation, by written resolution, may
amend, suspend, or terminate any or all provisions of the Plan at any
time.
VIII. OTHER PROVISIONS
The following miscellaneous provisions are applicable to the Plan:
(a) Awards paid under the provisions of the Plan are considered
pensionable earnings when paid.
(b) Termination of employment by a participant during the Plan year,
either voluntary or involuntary with case, and for reasons other
than death, disability, or retirement shall result in immediate
exclusion from the Plan.
(c) Except in the event of the death of a participant, the rights and
interests of a participant under the Plan shall not be assigned,
encumbered, or transferred.
(d) No employee or other person shall have any claim or right to be
granted an award under the Plan. Neither the Plan, nor any action
taken thereunder, shall be construed as giving any employee or other
person any right to be retained in the employ of the Corporation.
(e) The Corporation shall have the right to deduct from all payments
made under the Plan any taxes required by law to be withheld with
respect to such payment.
(f) All questions pertaining to the validity, construction and
administration of the Plan and any award hereunder shall be
determined in conformity with the laws of the State of Illinois.
2
<PAGE>
(g) Each participant shall designate a beneficiary (the "Designated
Beneficiary") to receive the award, if any, allocated to a
participant, in the event of such participant's death. If no
Designated Beneficiary survives the participant, it shall be the
surviving spouse of the participant or, if there is no surviving
spouse, it shall be the participant's estate.
(h) Notwithstanding any other terms contained herein, in the event of a
Change in Control of the Corporation, discretionary awards shall be
paid to participants in accordance with the last sentence of Section
VI of this Plan and as if the Corporation and Business Units had
achieved the respective earnings targets, as described in Section
IV. For purposes of this paragraph, a "Change in Control" of the
Corporation shall be deemed to occur on the earliest of:
(i) The receipt by the Corporation of a Schedule 13D or other
statement filed under Section 13(d) of the Securities
Exchange Act of 1934, as amended, (the "Exchange Act"),
indicating that any entity, person, or group has acquired
beneficial ownership, as that term is defined in Rule 13d-3
under the Exchange Act, or more than 30% of the outstanding
capital stock of the Corporation entitled to vote for the
election of directors ("voting stock");
(ii) The commencement by an entity, person or group (other than
the Corporation or a subsidiary of the Corporation) of a
tender offer or an exchange offer for more than 20% of the
outstanding voting stock of the Corporation.
(iii) The effective time of (A) a merger or consolidation of the
Corporation with one or more other corporations as a result
of which the holders of the outstanding voting stock of the
Corporation immediately prior to such merger or consolidation
hold less than 60% of the voting stock of the surviving or
resulting corporation, or (B) a transfer of substantially all
of the property of the Corporation other than to an entity of
which the Corporation owns at least 80% of the voting stock;
or
(iv) The election of the Board of Directors of the Corporation,
without the recommendation or approval of the incumbent Board
of Directors of the Corporation, or the lesser of (A) three
directors or (B) directors constituting a majority of the
number of directors of the Corporation then in office.
3
<PAGE>
Exhibit Number (10)(ii)
To 3/31/96 Form ID-Q
NORTHERN TRUST CORPORATION
MANAGEMENT PERFORMANCE PLAN
1996
I. Purpose of Plan
---------------
The purpose of the Annual Performance Plan (the "Plan") is to promote the
achievement of superior financial and operating performance of the
Northern Trust Corporation and its subsidiaries (hereinafter referred to
as the "Corporation"), and further the objective of delivering unrivaled
service quality to its clients and partners through the awarding of cash
incentive payments to selected officers.
II. Plan Year
---------
The Plan is effective from January 1, 1996 to December 31, 1996.
III. Eligibility and Participation
-----------------------------
Eligibility to participate in the Plan is restricted to selected
executive officers and subject to approval by the Compensation and
Benefits Committee of the Board of Directors (the "Committee").
IV. Participant Target Awards
-------------------------
At the beginning of the Plan year, the Committee shall determine
individual target awards. The target award will be described as a percent
of the annual base salary earned during the Plan year.
V. Award Determination
-------------------
The Committee establishes a Corporate Earnings Target for the Plan at the
beginning of the Plan year. The available funding for participant awards
will be based on (a) the aggregate of participants' target award amounts
and (b) the Corporation's financial achievement versus the Corporate
Earnings Target. The amount of the award funding will either increase or
decrease as calculated by the formula detailed in Attachment I.
VI. Payment of Awards
-----------------
Awards will be paid in cash as soon as practicable following the
completion of the Plan year. Any award amount that, with all other
compensation paid or to be paid for that year to the participant, exceeds
the level of tax deductible compensation to the Corporation, as
determined under Section 162(m) of the Internal Revenue Code, will be
deferred and paid in the year following the participant's retirement or
at which time the amount is no longer subject to such restrictions.
Deferred award balances will be adjusted with an interest factor as shall
be determined at the time of the deferral by the Committee.
<PAGE>
VII. Administration
--------------
The Plan shall be administered by the Committee. Subject to the
provisions of the Plan, the Committee shall be authorized to interpret
the Plan, to establish, amend and rescind any rules and regulations
relating to the Plan, and to make all other determinations necessary or
advisable for the administration of the Plan. The determinations of the
Committee in the effective administration of the Plan, as described
herein, shall be final and conclusive.
The Board of Directors of the Corporation, by written resolution, may
amend, suspend, or terminate any or all provisions of the Plan at any
time.
VIII. Miscellaneous Provisions
------------------------
The following miscellaneous provisions are applicable to the Plan:
(a) In the event of a participant's death, disability or retirement,
awards shall be prorated to the date of the event, and paid as
described in Section VI.
(b) Termination of employment by a participant during the Plan year, for
reasons other than death, disability, or retirement shall result in
immediate exclusion from the Plan unless the Compensation and
Benefits Committee decides otherwise in its sole discretion.
(c) Except in the event of the death of a participant, the rights and
interests of a participant under the Plan shall not be assigned,
encumbered, or transferred.
(d) No employee or other person shall have any claim or right to be
granted an award under the Plan. Neither the Plan, nor any action
taken thereunder, shall be construed as giving any employee or other
person any right to be retained in the employ of the Corporation.
(e) The Corporation shall have the right to deduct from all payments
made under the Plan any taxes required by law to be withheld with
respect to such payment.
(f) All questions pertaining to the validity, construction and
administration of the Plan and any award hereunder shall be
determined in conformity with the laws of the State of Illinois.
(g) Each participant shall designate a beneficiary (the "Designated
Beneficiary") to receive the award, if any, allocated to a
participant, in the event of such participant's death. If no
Designated Beneficiary survives the participant, it shall be the
surviving spouse of the participant or, if there is no surviving
spouse, it shall be the participant's estate.
2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER (11)
TO 3/31/96 FORM 10-Q
NORTHERN TRUST CORPORATION
COMPUTATION OF PER SHARE EARNINGS
First Quarter Ended March 31
------------------------------------------
1996 1995
------------ -------------
<S> <C> <C>
Computations Required by
- ------------------------
Regulation S-K
- --------------
Primary Earnings Per Share
- --------------------------
Net Income Applicable to
Common Shares $60,245,569 $47,181,699
============ ============
Weighted Average Number of Common
and Common Equivalent Shares Outstanding
Common Shares 56,258,183 54,250,684
Dilutive Effect of Common
Equivalent Shares (A)
Stock Options 924,273 586,299
Long Term Performance Stock Plan 263,698 323,123
Other 44,783 8,213
------------ ------------
57,490,937 55,168,319
============ ============
Net Income Per Common and
Common Equivalent Share $1.05 $0.86
============ ============
(A) Determined by application of the treasury stock method.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER (11)
TO 3/31/96 FORM 10-Q
NORTHERN TRUST CORPORATION
COMPUTATION OF PER SHARE EARNINGS
First Quarter Ended March 31
------------------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Computations Required by
- ------------------------
Regulation S-K
- --------------
Fully Diluted Earnings Per Share
- --------------------------------
Net Income Applicable to
Common Shares $60,245,569 $47,181,699
Add Back: Dividend on Series E Convertible
Preferred Stock 14,756 777,147
------------ ------------
$60,260,325 $47,958,846
============ ============
Weighted Average Number of Common
and Common Equivalent Shares Outstanding
Common Shares 56,258,183 54,250,684
Dilutive Effect of Common
Equivalent Shares (A)
Stock Options 962,193 604,437
Long Term Performance Stock Plan 270,220 326,028
Other 47,860 8,846
Other Potentially Dilutive Securities
Equivalent Shares Assuming Conversion of
Series E Convertible Preferred Stock 383,954 1,204,820
------------ ------------
57,922,410 56,394,815
============ ============
Net Income Per Common and
Common Equivalent Share $1.04 $0.85
============ ============
(A) Determined by application of the treasury stock method.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND> This schedule contains summary financial information extracted from the
Consolidated Balance Sheet and the Consolidated Statement of Income and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,125,674
<INT-BEARING-DEPOSITS> 1,828,937
<FED-FUNDS-SOLD> 118,779
<TRADING-ASSETS> 6,924
<INVESTMENTS-HELD-FOR-SALE> 5,590,435
<INVESTMENTS-CARRYING> 489,905
<INVESTMENTS-MARKET> 513,095
<LOANS> 10,025,613
<ALLOWANCE> 147,239
<TOTAL-ASSETS> 20,301,720
<DEPOSITS> 12,100,479
<SHORT-TERM> 5,985,835
<LIABILITIES-OTHER> 405,780
<LONG-TERM> 341,066
<COMMON> 94,966
0
120,000
<OTHER-SE> 1,253,594
<TOTAL-LIABILITIES-AND-EQUITY> 20,301,720
<INTEREST-LOAN> 163,896
<INTEREST-INVEST> 93,487
<INTEREST-OTHER> 27,552
<INTEREST-TOTAL> 284,935
<INTEREST-DEPOSIT> 111,486
<INTEREST-EXPENSE> 191,547
<INTEREST-INCOME-NET> 93,388
<LOAN-LOSSES> 5,000
<SECURITIES-GAINS> 272
<EXPENSE-OTHER> 184,044
<INCOME-PRETAX> 92,056
<INCOME-PRE-EXTRAORDINARY> 92,056
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 61,541
<EPS-PRIMARY> 1.05
<EPS-DILUTED> 1.04
<YIELD-ACTUAL> 2.21
<LOANS-NON> 27,877
<LOANS-PAST> 36,916
<LOANS-TROUBLED> 2,712
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 147,131
<CHARGE-OFFS> 5,691
<RECOVERIES> 799
<ALLOWANCE-CLOSE> 147,239
<ALLOWANCE-DOMESTIC> 110,180
<ALLOWANCE-FOREIGN> 2,729
<ALLOWANCE-UNALLOCATED> 34,330
</TABLE>
<PAGE>
Exhibit Number (99)
To 3/31/96 Form 10-Q
WILLIAM A. OSBORN
Chairman
Northern Trust Corporation
Annual Meeting Remarks
April 16, 1996
<PAGE>
While the votes are being counted, let me give you my perspective on the
state of the business at Northern Trust. Through 106 years of providing
outstanding services to clients worldwide, Northern Trust has built leading
market positions in two core businesses. We now enjoy a diverse and profitable
business mix that is unmatched in the industry. This morning I'll share with you
how we strengthened our market positioning over the past year and how we are
poised to seize growth opportunities. But first I'll take a few minutes to
review our 1995 and first quarter 1996 financial performance.
In 1995, solid revenue growth, combined with a successful effort to control
expenses, produced net income of $220 million - a 21% increase. Total revenues
increased 7%, led by trust fees which grew 11% during the year. Trust fee growth
was driven by new business and acquisitions as well as favorable equity and bond
market performance. Trust assets increased 23% to $614 billion at year end.
Our focus on controlling expenses resulted in a very modest 1% rate of
expense growth for the year. This allowed our revenue growth to have a direct
impact on bottom line profitability. Early in 1995, we made the commitment to
remove $50 million from our expense base over three years. We achieved the first
$15 million of reductions in 1995. As a result, we were able to absorb over $10
million of additional expenses from three acquisitions last year and still keep
total expenses essentially flat throughout the year. The remaining $35 million
of our $50 million expense reduction initiative is reflected in our 1996 profit
plan, which means that we expect to fulfill our commitment one year earlier than
originally anticipated. But we don't view 1996 as the end of our job of
controlling expenses. Expense management is an integral component of our
strategic business planning. Expenses will continue to grow, but only to support
profitable revenue growth opportunities.
<PAGE>
Measured against our financial benchmarks, our performance in 1995 was
strong. Earnings per share increased 17%, well above our minimum target of 10%.
Return on equity was 17.6%, only a bit short of our minimum 18% goal. And with
a 151% productivity ratio of revenue to noninterest expense, we met our 150%
goal in 1995 for the first time.
Momentum built throughout the year in 1995. Beginning with results in the
third quarter we were meeting all of our financial targets, including the 18%
ROE goal. This momentum has carried over into 1996. First quarter results
released just yesterday were very strong with net income up 25% to a record
$61.5 million. Trust fees grew 19% in the quarter, fueling total revenue growth
of 12%. Trust fees now account for one-half of total revenues, and fees in
total represent two-thirds of revenues. This fee-based revenue stream is a
characteristic of Northern that differentiates us from most other financial
institutions. Expense growth remained in check, increasing just 4% over last
year.
We handily exceeded all our financial targets in the first quarter.
Earnings per share were up a very strong 22%. The ROE increased for the fifth
consecutive quarter to 18.4%. And our 157% productivity ratio set an all-time
high. We view these goals as minimums, and we feel that exceeding them over the
long term would mean truly superior performance.
These last few slides speak for themselves. Your company is producing very
strong financial results.
Now a few comments on the condition of our businesses and opportunities for
continued growth.
2
<PAGE>
We compete as a top-tier provider in both our personal and our corporate &
institutional markets. As a result of our highly focused business strategy and
investment in these core businesses, Northern today is competitively positioned
to capture a significant share of the growth in our markets.
In our corporate & institutional business we offer a full array of custody,
investment, participant recordkeeping and consulting services for retirement and
other asset pools. Northern is one of the top providers in the highly
concentrated securities custody market. In the past year a number of players
have exited the business for reasons such as lack of scale and strategic focus.
This has presented increased opportunity for Northern to grow its business.
Northern is winning business with our scale, our commitment to this market, a
relationship focus that brings clients innovative solutions, and a technological
capability that we feel is second to none. Our record new business in the first
quarter demonstrates our success.
With the debut in 1995 of our Passport information delivery system,
Northern re-established itself as an industry leader in technological capability
and innovation. We incorporated many state-of-the-art design features into
Passport, and our systems overall have been built using the most current
technological thinking. Our technology is perceived as the newest and best, and
has set the standard in the industry. We now enjoy operational, service quality,
expense and product development advantages. In 1996 we will roll out products to
help clients measure and monitor the risk in their investment portfolios. Risk
management is a hot topic for our clients, and they are very enthusiastic about
this development. We will be the first to offer these products in the market.
3
<PAGE>
Our acquisition in 1994 of Hazlehurst & Associates, a benefits consulting
and recordkeeping firm, strengthened Northern's position as a leading provider
of retirement services. Demographic trends in the United States point to
continued strong growth of retirement assets. We have experienced significant
growth at Hazlehurst already as we pursue a fully integrated retirement services
strategy. And the increasing trend by clients to outsource the administration
of their retirement plans will also benefit Northern.
Internationally, we have an attractive and expanding client base in 20
countries across Asia, Europe, the Middle East and Canada. Northern's strong
credit ratings and our long-standing reputation for risk management position us
favorably for growth in several key markets, perhaps most of all
internationally. In 1995 we opened our office in Hong Kong to serve clients and
to expand our securities lending activities. We will open an office in
Singapore in mid-1996, pending regulatory approval, to build our market presence
and foreign exchange capabilities in the Far East. Our processing network in 67
countries services global custody assets that grew 30% in 1995 to $85 billion.
Our wide range of investment management expertise provides yet another
avenue for growth. In 1995 assets under management increased 28%, and today
Northern manages $114.5 billion of assets for corporate and personal clients.
We rank 14th nationally among all investment managers and in the top five for
institutional cash. Clients are attracted by our portfolio risk management
process for managing cash, which has consistently provided above market returns.
Our fixed income performance results have earned Northern a five star rating
from Morningstar, placing us in the top 10% of all fixed income funds. We
strengthened our investment consulting and equity management capabilities in
1995 with our
4
<PAGE>
funds. We strengthened our investment consulting and equity management
capabilities in 1995 with our acquisition of RCB International, a leading
manager of investment managers with particular expertise in international
equities.
Personal Financial Services is our other core business. We have a
one-of-a-kind strategy of marketing trust, investment management and private
banking services to individuals in high growth, affluent markets. The strategy
brings together the key elements of people, product range, delivery, marketing
and focus. Within each of these Northern enjoys a competitive advantage.
Our reputation is outstanding in this business, enabling us to attract and
retain professionals of the highest caliber. Our people are very experienced,
and they are actively involved and well-known in their communities. The quality
and range of product that we offer stands out in the industry. Northern has the
capability to manage non-traditional investments such as closely-held
businesses. These special skills, and a full range of more traditional banking,
investment and fiduciary products, enable us to service clients throughout their
lives. We are strategically located where the demographics are very favorable
and the demand is strong for our distinguishing "high touch" service style. Our
full range of expertise is available on site in each of our locations. Our trust
administrators, private bankers and portfolio managers work as a team to ensure
total client satisfaction. Service delivery is enhanced by our facilities which
are truly first class and consistent with our image as the bank of choice for
our target market.
5
<PAGE>
We are effective in building referral networks of estate planning
attorneys, accountants and financial planners, but our best source of referrals
for new business is our satisfied clients. We blend this more traditional avenue
of new business development with a unique style of marketing. For example, we
host events where we invite clients and prospects to meet and listen to well-
known authors, entertainers and political commentators. These forums have proven
to be very effective in building client loyalty and attracting new business. And
finally, because this core business generates almost half of total corporate
revenues, it gets a lot of senior management attention. I spend a significant
amount of my time with clients and prospects of both our personal and corporate
businesses.
Our franchise today spans five states with a total of 53 office locations.
We currently administer $74 billion of trust assets for individuals, with $44
billion under investment management. We rank first in Illinois and second in
Florida in market share for personal assets managed by banks. Nationwide we rank
in the top 10.
In 1995 we completed our acquisitions of Tanglewood Bancshares in Texas and
Beach One Financial Services in Florida, and we opened an office in Bradenton,
Florida. We intend to grow our business by further penetrating our existing
markets and by expanding our network of locations. In 1996 we have already
opened new offices in Bonita Springs, Delray Beach and Stuart, Florida. We have
scheduled office openings in Sun City West and Mesa, Arizona. And in Illinois,
we expect to open an office in Barrington, our new facility in Winnetka, and our
permanent facility on Chicago's south side. And our plans for expansion go well
beyond 1996.
6
<PAGE>
Northern manages a dynamic program of investing in the communities that we
serve. Several new initiatives were added to the program in 1995. We also
announced a five year, $300 million commitment for loans and investments for
affordable housing, small business and other initiatives targeted to low- and
moderate-income neighborhoods in Chicago and surrounding Cook County. To date we
have extended over $50 million of loans and investments under this program. Over
the years Northern has received several awards in recognition of our efforts to
help build stronger communities. We view all forms of community involvement by
the corporation and its employees to be an important part of our strategy.
Our core businesses are growing rapidly and require significant investment
of capital, but the strength of our earnings generates equity capital in excess
of projected needs. We are currently repurchasing common shares to manage our
capital position and to enhance shareholder return. In 1995 1.5 million shares
were repurchased, and in the first quarter we bought back another 566 thousand
shares. We are on pace to complete this year the 1.7 million shares remaining in
our current buy-back program. Shareholder returns in 1995 also benefited from a
19% increase in the dividend to $1.24 per share, the ninth consecutive year the
dividend has been increased to keep pace with earnings growth.
1995 marked the eighth consecutive year of record earnings for the
corporation and 1996 is off to a good start. Our confidence in Northern's
strategic opportunities has never been stronger. We are optimistic that we can
continue to deliver consistently strong operating performance.
7
