<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) January 16, 1996
------------------------
NORTHERN TRUST CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
0-5965 36-2723087
- --------------------------------- -----------------------------------
(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
----------------------
Exhibit Index is located on page 4.
<PAGE>
Item 5. Other Events
The information contained in the registrant's January 16, 1996 press
release, reporting on the registrant's earnings for the fourth quarter of 1995
and for its 1995 fiscal year, 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 January 16, 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: January 16, 1996 By: /s/ Perry R. Pero
------------------
Perry R. Pero
Senior Executive Vice President
and Chief Financial Officer
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<PAGE>
EXHIBIT INDEX
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Number Description Page Number
- ------ ----------- -----------
99 January 16, 1996 Press Release 5
-4-
<PAGE>
- --------------------------------------------------------------------------------
NEWS RELEASE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NORTHERN TRUST CORPORATION
50 South LaSalle Street
Chicago, Illinois 60675
Contact: Laurie McMahon, Investor Relations
(312) 444-7811 or
Sue Rageas, Public Relations
Release #01439 (312) 444-4279
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
- ---------------------
NORTHERN TRUST CORPORATION REPORTS RECORD 1995 FOURTH QUARTER EARNINGS OF $1.00
PER SHARE, UP 46%
(Chicago, January 16, 1996) Northern Trust Corporation reported record net
income of $59.5 million for the fourth quarter, an increase of 48% from the
$40.1 million earned in the fourth quarter of last year. Net income per common
share increased to $1.00 from $.69 a year ago. This earnings performance
resulted in returns on average common equity and average assets of 18.19% and
1.16%, respectively. The fourth quarter of 1994 included a $5.9 million after-
tax pension settlement charge.
Full year 1995 earnings of $220.0 million were also at a record level
and increased 21% from the $182.2 million earned last year. Net income per
common share increased to $3.70 from $3.16 in 1994, a 17% increase. This record
performance resulted in returns on average common equity and average assets of
17.58% and 1.13%, respectively.
William A. Osborn, Chairman and Chief Executive Officer, commented,
"Strong earnings momentum continued in the fourth quarter capping a very
successful year for the Corporation. Northern's record earnings resulted from
excellent growth in all of the Corporation's diversified revenue sources
combined with strong expense control. Total revenues increased 11% in the
fourth quarter from 1994 levels. Trust fees, the largest single component of
revenues, grew 17% to a record $133.6 million, while foreign exchange trading
profits increased 23% from the previous year to $12.3 million. Total trust
assets increased 23% from year-end 1994 to $613.9 billion at the end of 1995.
Particularly noteworthy is that the managed portion of trust assets increased
26% to $103.8 billion at December 31, 1995."
Osborn continued, "Total operating expenses in the fourth quarter were
lower than in each of the previous three quarters of 1995 after adjusting for
incremental expenses associated with acquisitions and lower FDIC expenses,
demonstrating the continuing effectiveness of Northern Trust's expense
management program. In early 1995, we committed to control the expense growth
rate by taking approximately $50 million out of our base expenses over the next
three years. We now expect that goal to be reached with our
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1996 expense plan. Northern Trust remains committed to achieving strong revenue
growth while controlling expenses, improving productivity and maximizing both
revenue and expense benefits from its investments in technology.
"1995 marks the eighth consecutive year of record earnings," Osborn
also noted. "In recognition of this performance, the common stock dividend was
raised in November 19.2% to a new quarterly rate of $.31 per share, marking the
ninth consecutive year of dividend increases."
FOURTH QUARTER PERFORMANCE HIGHLIGHTS
Trust fees from Corporate and Institutional Services (C&IS) in the
quarter grew 17% over last year and totaled $68.6 million. These revenues are
derived from a full range of custody, investment and advisory services for
corporate, retirement and institutional clients worldwide. C&IS trust assets
under administration grew $103.3 billion over year-end 1994 and totaled $550.5
billion at December 31, 1995, of which $65.5 billion is managed by Northern
Trust. Included in the total is $80.6 billion of global custody assets. The
increase in C&IS trust fees reflects new business and strong growth in custody,
retirement services, securities lending and investment management. Also
included are $3.8 million in fees contributed by RCB International, Inc. (RCB),
acquired on October 31, 1995. RCB acts as a manager of managers, filling a
variety of special investment needs, particularly in the international area, and
enhancing Northern Trust's consultative expertise.
Trust fees from Personal Financial Services (PFS) grew 17% from a year
ago to $65.0 million. Total personal trust assets under administration
increased $12.0 billion over year-end 1994 and totaled $63.4 billion at December
31, 1995, with $38.3 billion under management. During the fourth quarter,
Northern Trust expanded its Florida presence by opening a new office in
Bradenton, bringing to 19 the total number of offices in this high-growth
market. Northern Trust's national network of Personal Financial Service offices
now includes 50 locations in Illinois, Florida, California, Arizona, and Texas.
All states and the Wealth Management Group contributed to fourth quarter 1995
PFS trust fee growth.
Other noninterest income increased 9% and totaled $41.0 million
compared to $37.8 million in the fourth quarter of 1994. The principal items
included in noninterest income are foreign exchange trading profits and treasury
management fees. Foreign exchange trading profits were $12.3 million in the
fourth quarter, lower than the previous two quarters but up a significant 23%
from the year ago quarter. Foreign exchange revenues, which are generated in
both Chicago and London, continue to benefit from the increase in cross-border
investment activities of Master Trust/Master Custody clients. Fees from
treasury management services increased 13%. Total treasury management revenues
from
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FOURTH QUARTER PERFORMANCE HIGHLIGHTS (CONTINUED)
both fees and earnings on compensating deposit balances increased from the
fourth quarter of 1994 and reflect growth in all treasury management products,
particularly electronic services.
Net interest income for the quarter, stated on a fully taxable
equivalent basis, totaled a record $100.7 million, up 5% from the $95.9 million
reported last year. The increase in net interest income is due to acquisitions
and higher levels of earning assets concentrated primarily in residential
mortgages, commercial and industrial loans, and short-term federal agency and
U.S. Treasury securities. The net interest margin was 2.22% compared to 2.33%
in the fourth quarter of 1994. The decline in net interest margin is primarily
due to the narrowing of spreads between the yield on short-term assets and the
rates paid on retail deposits and various short-term funding sources.
The credit loss provision of $1.0 million was unchanged from the
fourth quarter of 1994 as credit quality continued to be strong. Fourth quarter
net charge-offs were $1.1 million or .05% of average loans on an annualized
basis, also unchanged from last year's fourth quarter.
Noninterest expenses totaled $178.5 million for the quarter and
included $3.6 million of incremental expenses from the RCB acquisition.
Excluding the impact of 1995 acquisitions and adjusting for lower FDIC premiums,
fourth quarter expenses were the lowest of any 1995 quarter. Noninterest
expenses in the fourth quarter of 1994 totaled $184.9 million and included a
$9.6 million (pre-tax) pension settlement charge. Adjusting for this 1994
charge, 1995 acquisitions, and the reduction in FDIC insurance premiums in 1995,
noninterest expenses were essentially unchanged from one year ago.
Salaries and benefits, which represent 59% of total noninterest
expenses, increased to $105.5 million from $99.6 million last year. The
principal items contributing to the change were merit increases, incentive
compensation and staff additions at Hazlehurst & Associates and from the Beach
Bank, Tanglewood Bank and RCB acquisitions. These increases were partially
offset by a decline in staff levels in other areas of the Corporation. Also
contributing to the increase was $1.1 million in staff-related severance costs.
Staff on a full-time equivalent basis totaled 6,531 at December 31, 1995
compared to 6,608 a year earlier. Adjusting for the positions added by the
acquisitions, staff levels declined by 256 positions or 4% from the end of 1994.
The decline in non-staff related expenses was due primarily to the $3.3 million
reduction in FDIC deposit insurance premiums.
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BALANCE SHEET
Balance sheet assets averaged $20.3 billion for the quarter, up 10%
from last year's average of $18.4 billion, reflecting growth in loans and
securities. Residential mortgages increased from $3.3 billion in 1994 to
average $3.8 billion and now represent 40% of the total loan portfolio.
Commercial and industrial loans also increased and averaged $3.1 billion during
the quarter compared to $2.8 billion in the fourth quarter of 1994.
Nonperforming assets at December 31, 1995 of $33.7 million represented .34% of
total loans outstanding and were covered 4.4 times by the reserve for credit
losses.
Common stockholders' equity averaged $1.25 billion, an increase of 13%
from the fourth quarter of 1994. The increase primarily reflects the growth in
retained earnings, offset by the repurchase during 1995 of 1,486,000 shares of
common stock pursuant to the Corporation's 4,000,000 share buy-back program.
The Corporation has announced the call for redemption of its $50 million Series
E convertible preferred stock on January 26, 1996. As long as the common stock
market price is above $43.83, the holders would receive more value by converting
rather than redeeming their preferred stock. Shares issuable upon conversion
have been reflected in the Corporation's fully diluted shares, so that
conversion would have no impact on fully diluted net income per common share.
PERFORMANCE HIGHLIGHTS - 1995
Net income totaled $220.0 million for 1995 compared with $182.2
million last year, an increase of 21%. Net income per common share increased to
$3.70 from $3.16 in 1994.
Total trust fees increased 11% to $505.0 million from $453.4 million
in the prior year. Trust fees remain the largest single revenue component
accounting for nearly 75% of total noninterest income and 47% of total taxable
equivalent revenue. Fees from C&IS grew 12% over last year and totaled $257.5
million while PFS fees grew 11% from 1994 levels and totaled $247.5 million.
Other noninterest income decreased 4% and totaled $173.1 million
compared to $180.0 million in 1994. The prior year results include a $28.5
million pre-tax gain on the sale of the Corporation's interest in Banque
Scandinave en Suisse. Exclusive of this non-recurring item, noninterest income
increased 14%. Foreign exchange trading profits were at record levels and
totaled $55.3 million, up 54% from $35.9 million last year. Fees from treasury
management services increased 7% to $49.6 million. Total treasury management
revenues from both fees and earnings on compensating deposit balances also
increased in 1995.
Net interest income, stated on a fully taxable equivalent basis,
totaled a record $395.2 million, up 7% from the $368.0 million reported last
year. The increase in net interest
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PERFORMANCE HIGHLIGHTS - 1995 (CONTINUED)
income is due to a 9% increase in average earning assets concentrated primarily
in loans and short-term federal agency securities. The net interest margin was
2.30% compared to 2.34% in 1994.
The credit loss provision of $6.0 million was unchanged from the prior
year. Net charge-offs of $5.9 million represented .06% of average loans
compared to $6.7 million or .08% of average loans in 1994. The reserve for
credit losses totaled $147.1 million representing 1.49% of outstanding loans at
December 31, 1995.
Noninterest expenses totaled $709.2 million in 1995, including $10.3
million of incremental expenses from 1995 acquisitions. As a result of the
reduction in premium rates, FDIC insurance expense in 1995 declined by $7.7
million compared to last year. Noninterest expenses of $700.5 million in 1994
included $30.9 million in non-recurring charges. Exclusive of all of these
items for both years, 1995 noninterest expenses increased 5.5% over last year.
Salaries and benefits increased to $419.1 million from $391.4 million
last year. The principal items contributing to the change were merit increases,
incentive compensation, and higher medical and retirement benefit expenses.
Severance costs associated with staff reductions totaled $3.3 million in 1995.
The increase in non staff-related expenses was primarily the result of continued
investment in technology and expansion of the personal trust and banking office
network.
/ / /
<PAGE>
Page 1
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
STATEMENT OF INCOME STATISTICS ($ IN MILLIONS)
<TABLE>
<CAPTION>
FOURTH QUARTER
-------------------------------------------
1995 1994 % Change*
-------------------------------------------
<S> <C> <C> <C>
Net Interest Income (Taxable Equivalent) $ 100.7 $ 95.9 5.0%
Less: Taxable Equivalent Adjustment 9.0 9.1 (1.1)
-------- -------- --------
Net Interest Income 91.7 86.8 5.5
Provision for Credit Losses 1.0 1.0 UNCH
Noninterest Income
Trust Fees 133.6 114.6 16.6
Treasury Management Fees 12.7 11.2 13.3
Foreign Exchange Trading Profits 12.3 10.1 22.9
Security Commissions & Trading Income 4.8 4.8 (0.4)
Other Operating Income 10.7 11.7 (8.3)
Investment Security Transactions 0.5 0.0 N/M
-------- -------- --------
Total Noninterest Income 174.6 152.4 14.6
Noninterest Expenses
Salaries 86.7 81.0 7.0
Pension and Other Employee Benefits 18.8 18.6 1.0
Occupancy Expense 15.1 14.7 3.2
Equipment Expense 12.0 11.6 3.8
Other Operating Expenses 45.9 59.0 (22.1)
-------- -------- --------
Total Noninterest Expenses 178.5 184.9 (3.4)
-------- -------- --------
Income Before Income Taxes 86.8 53.3 62.7
Provision for Income Taxes 27.3 13.2 105.5
-------- -------- --------
NET INCOME $ 59.5 $ 40.1 48.5%
======== ======== ========
Net Income Per Common Share
Primary $ 1.01 $ 0.69 47.4%
Fully Diluted 1.00 0.69 45.6
Return on Average Common Equity 18.19% 13.62%
Average Common Equity $1,252.1 $1,108.2 13.0%
Return on Average Assets 1.16% 0.87%
Common Dividend Declared per Share $ 0.31 $ 0.26 19.2%
Preferred Dividends (millions) 2.1 2.0 3.6
Average Common Shares Outstanding (000s)
Primary 56,601 55,288
Fully Diluted 58,138 56,493
</TABLE>
(N/M) Not Meaningful
(*) Percentage change calculations are based on actual balances rather than
the rounded amounts presented in Supplemental Consolidated Financial
Information.
<PAGE>
Page 2
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
STATEMENT OF INCOME STATISTICS ($ IN MILLIONS)
<TABLE>
<CAPTION>
TWELVE MONTHS
---------------------------------------------
1995 1994 % Change*
---------------------------------------------
<S> <C> <C> <C>
Net Interest Income (Taxable Equivalent) $ 395.2 $ 368.0 7.4%
Less: Taxable Equivalent Adjustment 37.6 33.4 12.9
-------- -------- --------
Net Interest Income 357.6 334.6 6.8
Provision for Credit Losses 6.0 6.0 UNCH
Noninterest Income
Trust Fees 505.0 453.4 11.4
Treasury Management Fees 49.6 46.3 7.1
Foreign Exchange Trading Profits 55.3 35.9 54.2
Security Commissions & Trading Income 21.7 22.0 (1.4)
Other Operating Income 45.5 47.4 (3.9)
Gain on Sale of BSS Investment 0.0 28.5 N/M
Investment Security Transactions 1.0 (0.1) N/M
-------- -------- --------
Total Noninterest Income 678.1 633.4 7.1
Noninterest Expenses
Salaries 337.6 316.6 6.6
Pension and Other Employee Benefits 81.5 74.8 8.9
Occupancy Expense 60.2 57.4 5.0
Equipment Expense 48.6 56.4 (13.8)
Other Operating Expenses 181.3 195.3 (7.2)
-------- -------- --------
Total Noninterest Expenses 709.2 700.5 1.2
-------- -------- --------
Income Before Income Taxes 320.5 261.5 22.6
Provision for Income Taxes 100.5 79.3 26.7
-------- -------- --------
NET INCOME $ 220.0 $ 182.2 20.8%
======== ======== ========
Net Income Per Common Share
Primary $ 3.75 $ 3.17 18.3%
Fully Diluted 3.70 3.16 17.0
Return on Average Common Equity 17.58% 16.57%
Average Common Equity $1,202.7 $1,055.5 14.0%
Return on Average Assets 1.13% 1.02%
Common Dividends Declared per Share $ 1.09 $ 0.92 18.5%
Preferred Dividends (millions) 8.5 7.3 17.5
Average Common Shares Outstanding (000s)
Primary 56,338 55,144
Fully Diluted 58,069 56,352
</TABLE>
<PAGE>
Page 3
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
<TABLE>
<CAPTION>
BALANCE SHEET ($ IN MILLIONS)
DECEMBER 31
-------------------------------------------------
1995 1994 % Change*
-------------------------------------------------
<S> <C> <C> <C>
Assets
Money Market Assets $ 1,784.2 $ 2,651.2 (32.7)%
Securities 5,760.3 5,053.1 14.0
Loans and Leases 9,906.0 8,590.6 15.3
--------- --------- ---------
Total Earning Assets 17,450.5 16,294.9 7.1
Reserve for Credit Losses (147.1) (144.8) 1.6
Other Nonearning Assets 2,630.1 2,411.5 9.1
--------- --------- ---------
Total Assets $19,933.5 $18,561.6 7.4 %
========= ========= =========
Liabilities and Stockholders' Equity
Total Interest-Bearing Deposits $ 9,175.3 $ 8,904.3 3.0 %
Borrowed Funds 5,181.4 4,390.6 18.0
Notes Payable (incl. Medium-Term Notes) 351.6 791.8 (55.6)
--------- --------- ---------
Total Interest-Related Funds 14,708.3 14,086.7 4.4
Demand & Other Noninterest-Bearing Deposits 3,312.9 2,830.1 17.1
Other Liabilities 459.7 364.1 26.3
--------- --------- ---------
Total Liabilities 18,480.9 17,280.9 6.9
Common Equity 1,282.6 1,110.7 15.5
Preferred Equity 170.0 170.0 UNCH
--------- --------- ---------
Total Liabilities and Stockholders' Equity $19,933.5 $18,561.6 7.4 %
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
AVERAGE BALANCE SHEET ($ IN MILLIONS)
FOURTH QUARTER
-------------------------------------------------
1995 1994 % Change*
-------------------------------------------------
<S> <C> <C> <C>
Assets
Money Market Assets $ 1,863.0 $ 2,206.2 (15.6)%
Securities 6,443.5 5,500.4 17.1
Loans and Leases 9,662.9 8,618.7 12.1
--------- --------- ---------
Total Earning Assets 17,969.4 16,325.3 10.1
Reserve for Credit Losses (147.2) (144.9) 1.6
Other Nonearning Assets 2,465.0 2,196.4 12.2
--------- --------- ---------
Total Assets $20,287.2 $18,376.8 10.4 %
========= ========= =========
Liabilities and Stockholders' Equity
Total Interest-Bearing Deposits $ 9,263.6 $ 8,933.8 3.7 %
Borrowed Funds 4,903.5 3,777.9 29.8
Notes Payable (incl. Medium-Term Notes) 894.4 1,018.8 (12.2)
--------- --------- ---------
Total Interest-Related Funds 15,061.5 13,730.5 9.7
Demand & Other Noninterest-Bearing Deposits 3,319.0 2,955.1 12.3
Other Liabilities 484.6 413.0 17.3
--------- --------- ---------
Total Liabilities 18,865.1 17,098.6 10.3
Common Equity 1,252.1 1,108.2 13.0
Preferred Equity 170.0 170.0 UNCH
--------- --------- ---------
Total Liabilities and Stockholders' Equity $20,287.2 $18,376.8 10.4 %
========= ========= =========
</TABLE>
<PAGE>
Page 4
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
<TABLE>
<CAPTION>
Quarterly Trend Data ($ In Millions) 1994
- ------------------------------------ 1995 Quarters Quarter
------------------------------------ ------
Fourth Third Second First Fourth
------------------------------------ ------
<S> <C> <C> <C> <C> <C>
Net Income Summary
Trust Fees $133.6 $127.3 $123.3 $120.8 $114.6
Other Noninterest Income 41.0 46.1 45.2 40.8 37.8
Net Interest Income
(Taxable Equivalent) 100.7 98.9 97.5 98.1 95.9
------ ------ ------ ------ ------
Total Revenue
(Taxable Equivalent) 275.3 272.3 266.0 259.7 248.3
Provision for Credit Losses 1.0 2.0 1.5 1.5 1.0
Noninterest Expenses 178.5 175.5 177.9 177.3 184.9
------ ------ ------ ------ ------
Pretax Income
(Taxable Equivalent) 95.8 94.8 86.6 80.9 62.4
Taxable Equivalent Adjustment 9.0 9.5 9.5 9.6 9.1
Provision for Income Taxes 27.3 27.2 24.0 22.0 13.2
------ ------ ------ ------ ------
Net Income $ 59.5 $ 58.1 $ 53.1 $ 49.3 $ 40.1
====== ====== ====== ====== ======
Per Common Share
Net Income: Primary $ 1.01 $ 0.99 $ 0.90 $ 0.86 $ 0.69
Fully Diluted 1.00 0.98 0.89 0.85 0.69
Dividend Declared 0.31 0.26 0.26 0.26 0.26
Book Value (EOP) 23.04 22.37 21.84 21.04 20.54
Market Value (EOP) 56.00 46.00 40.25 35.125 35.00
Ratios
Return on Common Equity 18.19% 18.11% 17.09% 16.84% 13.62%
Return on Average Assets 1.16 1.14 1.13 1.09 0.87
Net Interest Margin 2.22 2.21 2.35 2.43 2.33
Risk-based Capital Ratios:
Tier 1 8.8 8.9 9.2 9.4 9.0
Total (Tier 1 + Tier 2) 12.5 12.7 12.3 12.8 12.4
Leverage 6.2 6.2 6.6 6.6 6.2
Trust Assets ($ Billions) - EOP
Corporate $550.5 $525.0 $491.4 $464.9 $447.2
Personal 63.4 60.4 57.9 55.0 51.4
------ ------ ------ ------ ------
Total Trust Assets $613.9 $585.4 $549.3 $519.9 $498.6
====== ====== ====== ====== ======
Memo: Managed Assets 103.8 97.2 91.1 87.5 82.3
Asset Quality ($ Millions) - EOP
Nonaccrual Loans $ 31.9 $ 33.6 $ 33.3 $ 23.8 $ 27.8
Other Real Estate Owned (OREO) 1.8 1.8 1.2 1.6 2.2
------ ------ ------ ------ ------
Total Nonperforming Assets $ 33.7 $ 35.4 $ 34.5 $ 25.4 $ 30.0
====== ====== ====== ====== ======
Nonperforming Assets/Loans &
OREO 0.34% 0.36% 0.37% 0.29% 0.35%
Net Chargeoffs $ 1.1 $ 1.8 $ 1.4 $ 1.6 $ 1.1
Net Chargeoffs to Avg Loans
(Annualized) 0.05% 0.08% 0.06% 0.08% 0.05%
Reserve for Credit Losses $147.1 $147.3 $145.9 $145.8 $144.8
Reserve to Nonaccrual Loans 461% 437% 439% 611% 521%
</TABLE>
