<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 16, 1996
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NORTHERN TRUST CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
0-5965 36-2723087
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(Commission File Number) (IRS Employer Identification No.)
Fifty South LaSalle Street, Chicago, Illinois 60675
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312)630-6000
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<PAGE>
Item 5. Other Events
The information contained in the registrant's July 15, 1996 press
release, reporting on the registrant's earnings for the second quarter
and first six months of 1996, a copy of which is filed as Exhibit 99
hereto, is incorporated herein by reference.
Item 7. Financial Statements and Exhibits
(c)Exhibits:
Exhibit 99 July 15, 1996 Press Release
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTHERN TRUST CORPORATION
--------------------------
(Registrant)
Dated: July 16, 1996
By: Perry R. Pero
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Perry R. Pero
Senior Executive Vice President
and Chief Financial Officer
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<PAGE>
EXHIBIT INDEX
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<TABLE>
<CAPTION>
Number Description Page Number
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<C> <S> <C>
99 July 15, 1996 Press Release 5
</TABLE>
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<PAGE>
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NEWS RELEASE
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NORTHERN TRUST CORPORATION
50 South LaSalle Street
Chicago, Illinois 60675
Contact: Laurie McMahon, Investor Relations
(312) 444-7811 or
Sue Rageas, Public Relations
(312) 444-4279
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FOR IMMEDIATE RELEASE
- ---------------------
NORTHERN TRUST CORPORATION REPORTS RECORD 1996 SECOND QUARTER
EARNINGS OF $1.08 PER SHARE, UP 21%
(Chicago, July 15, 1996) Northern Trust Corporation reported record net income
of $63.4 million for the second quarter, an increase of 19% from the $53.1
million earned in the second quarter of last year. Net income per common share
increased 21% to $1.08 from $.89 a year ago. This earnings performance resulted
in a return on average common equity of 18.47%. For the first six months of
1996, net income also reached a record level of $124.9 million, an increase of
22% from the $102.4 million earned in the first half of 1995.
William A. Osborn, Chairman and Chief Executive Officer, said, "Northern's
record earnings for the quarter reflect continued growth momentum. We had strong
new business performance in both our corporate and personal businesses. Trust
assets grew a record $52 billion in the quarter. At $693 billion trust assets
are at a historic high and include $120 billion under management. Northern's
performance continues to benefit from the strong acceptance of our technology
based corporate
1
<PAGE>
trust services and the expansion of offices nationally to provide personal trust
and banking services."
SECOND QUARTER PERFORMANCE HIGHLIGHTS
Total revenues increased 13% as both the Personal Financial Services and
Corporate & Institutional Services business units achieved double digit revenue
growth rates.
Trust fees totaled $148.7 million in the quarter compared to $123.3 million
last year, representing an increase of 21%. Trust fees now represent 50% of
total taxable equivalent revenue and 76% of noninterest income. Total trust
assets under administration at June 30, 1996 were $692.9 billion compared to
$549.3 billion a year ago, an increase of 26%. Trust assets under management
increased 31% to $119.9 billion, from $91.1 billion at June 30, 1995.
Trust fees from Corporate & Institutional Services (C&IS) in the quarter
increased 29% and totaled $76.4 million compared to $59.2 million in the year-
ago quarter. These revenues are derived from a full range of custody, investment
and advisory services for the retirement and other asset pools of corporate
and institutional clients worldwide. Fees generated by RCB International, an
October 31, 1995 acquisition, accounted for $6.5 million of the trust fee
growth. Both domestic and international security lending fees increased
significantly from the second quarter of 1995, driven by record volumes of
securities loaned and higher spreads earned on the investment of cash
collateral. The increase in C&IS trust fees also resulted from substantial new
business and strong revenue growth in global custody, investment management and
retirement services. Northern Trust's commitment to the business, innovative
technology, relationship focus, financial strength, and product expertise
2
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SECOND QUARTER PERFORMANCE HIGHLIGHTS (Continued)
were important factors for clients who chose Northern as their service provider.
Since March 31, 1996, total C&IS trust assets under administration increased
$49.1 billion to $616.2 billion at June 30, 1996, of which $74.8 billion is
managed by Northern Trust. Included in the total for assets under administration
is approximately $94 billion of global custody assets.
Trust fees from Personal Financial Services (PFS) in the quarter increased
13% and totaled $72.3 million compared to $64.1 million in the year-ago quarter
reflecting strong growth throughout Northern Trust's five-state office network.
The increase in PFS trust fees resulted primarily from new business and higher
market values. During the second quarter, Northern Trust expanded its
distribution capabilities for personal trust and private banking services with
the opening of new offices in Sun City West, Arizona, Stuart, Florida and
Barrington, Illinois. Northern Trust's network of PFS offices at quarter-end
included 55 locations in Illinois, Florida, California, Arizona, and Texas.
Total personal trust assets under administration increased $2.6 billion since
March 31, 1996 and totaled $76.7 billion at June 30, 1996, $45.1 billion of
which was under management.
Other noninterest income totaled $46.5 million, up 3% from $45.2 million in
the second quarter of 1995. The principal items included in other noninterest
income are foreign exchange trading profits and treasury management fees.
Foreign exchange trading profits were $15.1 million in the second quarter, an
increase of 20% from the first quarter of 1996, but down 3% from the strong
performance in the 1995 second quarter. Foreign exchange trading profits are
impacted by the level of cross-border investment activities of Master
Trust/Master Custody clients and market volatility. Fees from treasury
management services were $14.5 million, up 20% from last year. Total
3
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SECOND QUARTER PERFORMANCE HIGHLIGHTS (Continued)
treasury management revenues from both fees and earnings on compensating deposit
balances increased 13% from the second quarter of 1995 to $22.0 million,
reflecting growth in both paper and electronic based products. The second
quarter also benefited from higher brokerage commission revenue at Northern
Trust Securities resulting from a greater level of activity in the financial
markets by individual investors. Other operating income in the second quarter of
1995 included $1.3 million in gains from the sale of lease residuals.
Net interest income for the quarter, stated on a fully taxable equivalent
basis, totaled a record $104.3 million, up 7% from the $97.5 million reported in
the second quarter last year. The increase in net interest income reflects
growth in noninterest related funds and higher levels of earning assets
concentrated primarily in residential mortgages, commercial and industrial
loans, and short-term government securities. The net interest margin was 2.22%,
essentially unchanged from the 2.21% reported for the first quarter of 1996, but
down from the 2.35% reported in the year-ago quarter.
Credit quality remains strong. Nonperforming loans totaled $38.9 million
compared to $31.9 million at December 31, 1995 and $33.3 million at June 30,
1995. These loans at quarter-end represent .37% of total loans and were covered
3.8 times by the $147.4 million reserve for credit losses. Second quarter net
charge-offs, at .15% of average loans, totaled $3.8 million, a $2.4 million
increase from the low levels reported one year ago. The $4.0 million provision
for credit losses, up from $1.5 million a year ago, was made in light of charge-
offs in the commercial loan portfolio and essentially maintained the reserve for
credit losses at its 1995 year-end and March 31, 1996 levels.
4
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SECOND QUARTER PERFORMANCE HIGHLIGHTS (Continued)
Noninterest expenses of $191.6 million were up $13.7 million or 8% from the
second quarter of 1995. Operating expenses of the two businesses acquired in the
second half of 1995 accounted for approximately $7.5 million of the increase
over last year, while the reduction in FDIC insurance premiums that commenced in
mid-1995 lowered quarterly expenses for 1996 by $4.2 million. Expenses for the
quarter were adversely affected by $4.1 million in costs attributable to errors
in the processing of three transactions by the capital reorganizations unit of
Global Custody operations. Without these processing costs, expense growth, net
of increases attributable to acquisitions and the decline due to lower FDIC
premiums, would have been 4%. The increase in noninterest expenses also reflects
the support necessary for higher levels of trust new business and treasury
management and global custody volumes, as well as the costs associated with PFS
office expansion.
Salaries and benefits, which represent 57% of total noninterest expenses,
increased to $108.4 million from $105.2 million in the year ago quarter. The
principal items contributing to the change were merit increases, incentive
compensation, and staff additions resulting from 1995 acquisitions and to
support Northern Trust's growing trust activities. These increases were
partially offset by a decline in staff levels in other areas of the Corporation
and cost savings from changes in several benefit plans effective January 1,
1996. Staff on a full-time equivalent basis at June 30, 1996 totaled 6,698, up
3% from 6,531 at the end of 1995.
5
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BALANCE SHEET
Balance sheet assets averaged $21.0 billion for the quarter, up 12% from
last year's average of $18.8 billion, reflecting growth in loans, securities and
money market assets. Loans and leases averaged $10.2 billion for the quarter, an
increase of $1.2 billion or 13%. Residential mortgages increased 20% to average
$4.2 billion and now represent 41% of the total loan portfolio. Commercial and
industrial loans averaged $3.3 billion during the quarter compared to $3.1
billion in the second quarter of 1995. The securities portfolio increased $.8
billion to average $6.7 billion primarily due to a 21% increase in short-term
U.S. Government and federal agency securities. Money market assets increased 13%
and averaged $2.0 billion during the second quarter.
Common stockholders' equity averaged $1.35 billion, an increase of 13% from
the second quarter of 1995. The increase primarily reflects the growth in
retained earnings, offset by the repurchase of common stock pursuant to the
Corporation's 4 million share buyback program. During the quarter the
Corporation acquired 590,211 shares at a total cost of $32.6 million. An
additional 1.1 million shares remain to be purchased under this program.
SIX MONTH PERFORMANCE HIGHLIGHTS
Net income increased 22% and totaled $124.9 million for the six months
ended June 30, 1996 compared with $102.4 million last year. Net income per
common share also increased 22%, to $2.12. Trust fees totaled $292.6 million, up
20% from $244.1 million last year. Treasury management revenues from both fees
and earnings on compensating deposit balances increased 10% to $42.5 million for
the six month
6
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SIX MONTH PERFORMANCE HIGHLIGHTS (Continued)
period, while foreign exchange trading profits were at record levels and totaled
$27.6 million. Net interest income, stated on a fully taxable equivalent basis,
totaled $206.3 million, up 5% from the $195.6 million reported last year. The
provision for credit losses increased $6.0 million to $9.0 million in 1996.
Noninterest expenses were up 6% and totaled $375.6 million for the six month
period ended June 30, 1996 compared to $355.2 million a year ago.
7
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Page 1
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
<TABLE>
<CAPTION>
STATEMENT OF INCOME STATISTICS ($ IN MILLIONS)
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SECOND QUARTER
===========================================
1996 1995 % Change *
===========================================
<S> <C> <C> <C>
Net Interest Income (Taxable Equivalent) $104.3 $97.5 6.9%
Less: Taxable Equivalent Adjustment 8.8 9.5 (8.0)
-------- --------- --------
Net Interest Income 95.5 88.0 8.6
Provision for Credit Losses 4.0 1.5 166.7
Noninterest Income
Trust Fees 148.7 123.3 20.6
Treasury Management Fees 14.5 12.1 19.5
Foreign Exchange Trading Profits 15.1 15.6 (3.2)
Security Commissions & Trading Income 6.4 5.2 23.4
Other Operating Income 10.4 12.2 (15.2)
Investment Security Transactions 0.1 0.1 N/M
-------- --------- --------
Total Noninterest Income 195.2 168.5 15.8
Noninterest Expenses
Salaries 90.0 84.4 6.6
Pension and Other Employee Benefits 18.4 20.8 (11.9)
Occupancy Expense 15.6 15.3 2.2
Equipment Expense 13.8 12.0 14.9
Other Operating Expenses 53.8 45.4 18.4
-------- --------- --------
Total Noninterest Expenses 191.6 177.9 7.7
-------- --------- --------
Income Before Income Taxes 95.1 77.1 23.4
Provision for Income Taxes 31.7 24.0 32.3
-------- --------- --------
NET INCOME $63.4 $53.1 19.4%
======== ========= ========
Net Income Per Common Share
Primary $1.08 $0.90 20.9%
Fully Diluted 1.08 0.89 21.5
Return on Average Common Equity 18.47% 17.09%
Average Common Equity $1,354.5 $1,195.8 13.3%
Return on Average Assets 1.21% 1.13%
Common Dividend Declared per Share $0.31 $0.26 19.2%
Preferred Dividends (millions) 1.2 2.2 (44.3)
Average Common Shares Outstanding (000s)
Primary 57,445 56,878
Fully Diluted 57,586 58,178
</TABLE>
(N/M) Not Meaningful
(*) Percentage change calculations are based on actual balances rather than
rounded amounts presented in Supplemental Consolidated Financial
Information.
<PAGE>
Page 2
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
STATEMENT OF INCOME STATISTICS ($ IN MILLIONS)
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<TABLE>
<CAPTION>
SIX MONTHS
===========================
1996 1995 % Change*
===========================
<S> <C> <C>
Net Interest Income (Taxable Equivalent) $206.3 $195.6 5.5%
Less: Taxable Equivalent Adjustment 17.4 19.1 (8.8)
------ ------ -----
Net Interest Income 188.9 176.5 7.0
Provision for Credit Losses 9.0 3.0 200.0
Noninterest Income
Trust Fees 292.6 244.1 19.9
Treasury Management Fees 27.5 24.4 12.3
Foreign Exchange Trading Profits 27.6 26.8 3.0
Security Commissions & Trading Income 12.7 11.1 14.7
Other Operating Income 22.1 23.5 (5.7)
Investment Security Transactions 0.4 0.2 N/M
------ ------ -----
Total Noninterest Income 382.9 330.1 16.0
Noninterest Expenses
Salaries 177.7 166.9 6.4
Pension and Other Employee Benefits 38.8 42.3 (8.4)
Occupancy Expense 31.4 29.5 6.5
Equipment Expense 27.4 24.6 11.5
Other Operating Expenses 100.3 91.9 9.1
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Total Noninterest Expenses 375.6 355.2 5.7
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Income Before Income Taxes 187.2 148.4 26.2
Provision for Income Taxes 62.3 46.0 35.5
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NET INCOME $124.9 $102.4 22.0%
====== ====== =====
Earnings Per Common Share
Primary $2.13 $1.75 21.7%
Fully Diluted 2.12 1.74 21.9
Return on Average Common Equity 18.41% 16.97%
Average Common Equity $1,337.5 $1,166.1 14.7%
Return on Average Assets 1.20% 1.11%
Common Dividends Declared per Share $0.62 $0.52 19.2%
Preferred Dividends (millions) 2.5 4.3 (41.9)
Average Common Shares Outstanding (000s)
Primary 57,468 56,028
Fully Diluted 57,805 57,340
</TABLE>
<PAGE>
Page 3
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
BALANCE SHEET ($ IN MILLIONS)
<TABLE>
<CAPTION>
JUNE 30
======================================
1996 1995 % Change*
======================================
<S> <C> <C> <C>
Assets
Money Market Assets $2,345.2 $2,071.1 13.2%
Securities 6,303.3 5,624.6 12.1
Loans and Leases 10,405.2 9,421.8 10.4
---------- --------- -------
Total Earning Assets 19,053.7 17,117.5 11.3
Reserve for Credit Losses (147.4) (145.9) 1.0
Other Nonearning Assets 2,844.9 2,329.5 22.1
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Total Assets $21,751.2 $19,301.1 12.7%
========== ========= =======
Liabilities and Stockholders' Equity
Total Interest-Bearing Deposits $9,992.8 $8,376.0 19.3%
Borrowed Funds 6,016.4 5,693.4 5.7
Notes Payable (incl. Senior Notes) 537.1 558.1 (3.8)
---------- --------- -------
Total Interest-Related Funds 16,546.3 14,627.5 13.1
Demand & Other Noninterest-Bearing Deposits 3,275.0 2,871.3 14.1
Other Liabilities 436.2 412.0 5.9
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Total Liabilities 20,257.5 17,910.8 13.1
Common Equity 1,373.7 1,220.3 12.6
Preferred Equity 120.0 170.0 (29.4)
---------- --------- -------
Total Liabilities and Stockholders' Equity $21,751.2 $19,301.1 12.7%
========== ========= =======
AVERAGE BALANCE SHEET ($ IN MILLIONS)
SECOND QUARTER
======================================
1996 1995 % Change*
======================================
Assets
Money Market Assets $1,987.2 $1,755.9 13.2%
Securities 6,755.7 5,905.7 14.4
Loans and Leases 10,176.7 8,973.7 13.4
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Total Earning Assets 18,919.6 16,635.3 13.7
Reserve for Credit Losses (147.3) (145.9) 1.0
Other Nonearning Assets 2,255.8 2,332.7 (3.3)
---------- --------- -------
Total Assets $21,028.1 $18,822.1 11.7%
========== ========= =======
Liabilities and Stockholders' Equity
Total Interest-Bearing Deposits $9,983.0 $9,408.4 6.1%
Borrowed Funds 5,530.2 4,043.5 36.8
Notes Payable (incl. Senior Notes) 590.4 624.4 (5.4)
---------- --------- -------
Total Interest-Related Funds 16,103.6 14,076.3 14.4
Demand & Other Noninterest-Bearing Deposits 3,025.5 2,911.4 3.9
Other Liabilities 424.5 468.6 (9.4)
---------- --------- -------
Total Liabilities 19,553.6 17,456.3 12.0
Common Equity 1,354.5 1,195.8 13.3
Preferred Equity 120.0 170.0 (29.4)
---------- --------- -------
Total Liabilities and Stockholders' Equity $21,028.1 $18,822.1 11.7%
========== ========= =======
</TABLE>
<PAGE>
Page 4
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
<TABLE>
<CAPTION>
Quarterly Trend Data ($ In Millions) 1996 1995
Quarters Quarters
=================== ==============================
Second First Fourth Third Second
=================== ==============================
<S> <C> <C> <C> <C> <C>
Net Income Summary
Trust Fees $148.7 $143.9 $133.6 $127.3 $123.3
Other Noninterest Income 46.5 43.8 41.0 46.1 45.2
Net Interest Income (Taxable Equivalent) 104.3 102.0 100.7 98.9 97.5
------ ------ ------ ------ ------
Total Revenue (Taxable Equivalent) 299.5 289.7 275.3 272.3 266.0
Provision for Credit Losses 4.0 5.0 1.0 2.0 1.5
Noninterest Expenses 191.6 184.0 178.5 175.5 177.9
------ ------ ------ ------ ------
Pretax Income (Taxable Equivalent) 103.9 100.7 95.8 94.8 86.6
Taxable Equivalent Adjustment 8.8 8.6 9.0 9.5 9.5
Provision for Income Taxes 31.7 30.6 27.3 27.2 24.0
------ ------ ------ ------ ------
Net Income $63.4 $61.5 $59.5 $58.1 $53.1
====== ====== ====== ====== ======
Per Common Share
Net Income: Primary $1.08 $1.05 $1.01 $0.99 $0.90
Fully Diluted 1.08 1.04 1.00 0.98 0.89
Dividend Declared 0.31 0.31 0.31 0.26 0.26
Book Value (EOP) 24.41 23.81 23.04 22.37 21.84
Market Value (EOP) 57.75 54.00 56.00 46.00 40.25
Ratios
Return on Average Common Equity 18.47% 18.35% 18.19% 18.11% 17.09%
Return on Average Assets 1.21 1.19 1.16 1.14 1.13
Net Interest Margin 2.22 2.21 2.22 2.21 2.35
Productivity Ratio* 156% 157% 154% 155% 150%
Risk-based Capital Ratios:
Tier 1 8.4 9.1 8.8 8.9 9.2
Total (Tier 1 + Tier 2) 11.7 12.7 12.5 12.7 12.3
Leverage 6.2 6.1 6.2 6.2 6.6
Trust Assets ($ in Billions) - EOP
Corporate $616.2 $567.1 $544.3 $519.0 $484.9
Personal 76.7 74.1 69.6 66.4 64.4
------ ------ ------ ------ ------
Total Trust Assets $692.9 $641.2 $613.9 $585.4 $549.3
====== ====== ====== ====== ======
Memo: Managed Assets 119.9 114.5 105.5 97.2 91.1
Asset Quality ($ in Millions) - EOP
Nonaccrual Loans $38.9 $30.6 $31.9 $33.6 $33.3
Other Real Estate Owned (OREO) 1.6 1.5 1.8 1.8 1.2
------ ------ ------ ------ ------
Total Nonperforming Assets $40.5 $32.1 $33.7 $35.4 $34.5
====== ====== ====== ====== ======
Nonperforming Assets/Loans & OREO 0.39% 0.32% 0.34% 0.36% 0.37%
Net Charge-offs $3.8 $4.9 $1.1 $1.8 $1.4
Net Charge-offs (Annualized) to Avg Loans 0.15% 0.20% 0.05% 0.08% 0.06%
Reserve for Credit Losses $147.4 $147.2 $147.1 $147.3 $145.9
Reserve to Nonaccrual Loans 379% 481% 461% 437% 439%
</TABLE>
(*) The productivity ratio is defined as total revenue on a taxable
equivalent basis before the provision for credit losses, divided by
noninterest expenses.
