<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 14, 1997
---------------------
NORTHERN TRUST CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation)
0-5965 36-2723087
- ------------------------ ----------------------------------
(Commission File Number) (IRS Employer Identification No.)
Fifty South LaSalle Street, Chicago, Illinois 60675
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 630-6000
--------------------------
<PAGE>
Item 5. Other Events
The information contained in the registrant's July 14, 1997 press release,
reporting on the registrant's earnings for the second quarter and first six
months of 1997, 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 14, 1997 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 15, 1997 By: Perry R. Pero
-------------
Perry R. Pero
Senior Executive Vice President
and Chief Financial Officer
(3)
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EXHIBIT INDEX
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Number Description Page Number
- ------ ----------- -----------
99 July 14, 1997 Press Release 5
-4-
<PAGE>
NEWS RELEASE
Northern Trust Corporation
50 South LaSalle Street
Chicago, Illinois 60675
Contact: Laurie McMahon, Investor Relations
(312) 444-7811 or
Dianne Kotsogiannis, Public Relations
Release #01462 (312) 444-4281 http://www.northerntrust.com
FOR IMMEDIATE RELEASE
- ---------------------
NORTHERN TRUST CORPORATION REPORTS RECORD 1997 SECOND
QUARTER EARNINGS OF $.65 PER SHARE, UP 20%
(Chicago, July 14, 1997) Northern Trust Corporation reported record net income
per common share of $.65 for the second quarter, an increase of 20% from $.54
earned a year ago. Net income increased 19% to a record $75.4 million from the
$63.4 million earned in the second quarter of last year. This performance
resulted in a return on average common equity of 20%.
William A. Osborn, Chairman and Chief Executive Officer, commented,
"Northern Trust is pleased to report the results of another outstanding quarter.
The Corporation's two business units performed at record levels. Total revenues
increased 14% from 1996 levels, maintaining their double digit pace. This
performance was driven by record levels of trust fees, net interest income, and
foreign exchange and treasury management revenues which produced positive
operating leverage between revenue and expense growth. Our 20% earnings per
share growth for the quarter significantly exceeded our strategic financial
target for this measure and return on common equity was at the upper end of its
18-20% strategic target. Since June 30, 1996, trust assets under administration
grew 28% to $889 billion, with assets under management increasing 25% to $149
billion."
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SECOND QUARTER PERFORMANCE HIGHLIGHTS
Trust fees grew 13% to a record $168.3 million in the quarter compared to
$149.2 million last year and represent 49% of total revenues and 75% of
noninterest income.
Trust fees from Personal Financial Services (PFS) in the quarter increased
12% and totaled $81.1 million compared to $72.3 million in the year-ago quarter.
The increase in PFS trust fees resulted primarily from exceptionally strong new
business throughout Northern Trust's five-state office network and favorable
equity markets. The Wealth Management Group, which administers significant
family asset pools nationwide, also had excellent performance, with trust fees
increasing 31%, and now administers $25.6 billion of trust assets. Total
administered personal trust assets increased $7.8 billion since March 31, 1997
and totaled $95.0 billion at June 30, 1997, $55.7 billion of which was under
management.
During the second quarter, Northern Trust expanded its Florida presence by
opening the Doral office in Dade County, the twenty-fourth office in that state.
With the addition of this new office, Northern Trust's national network of
Personal Financial Services offices includes sixty-one locations in Illinois,
Florida, California, Arizona and Texas.
Trust fees from Corporate & Institutional Services (C&IS) in the quarter
increased 13% and totaled $87.2 million compared to $76.9 million in the year-
ago quarter. These fees are derived from a full range of custody, investment and
advisory services rendered to retirement and other asset pools of corporate and
institutional clients worldwide, and all of these services contributed to the
second quarter fee growth. Securities lending continued to achieve outstanding
results, with fees increasing 35% from the prior year quarter to $19.2 million.
Fees from investment management services, including the activities of Northern
Trust Global Advisors, Inc., were also strong. The overall increase in C&IS
trust fees reflects net new business, moderated by the effect of changing
pricing structures for client relationships
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SECOND QUARTER PERFORMANCE HIGHLIGHTS (Continued)
which focus on total client revenues. These revenues increasingly include
earnings from custody-related deposits and foreign exchange profits which are
not reflected in trust fees. Since March 31, 1997, total C&IS trust assets under
administration increased $65.6 billion to $794.3 billion at June 30, 1997, of
which $93.7 billion is managed by Northern Trust. Trust assets under
administration included approximately $123 billion of global custody assets.
Foreign exchange trading profits set a record, increasing 58% to $23.9
million from $15.1 million in the year-ago quarter. The record profits resulted
from a combination of strong volumes and significant rate volatility. Factors
impacting foreign exchange rates during the quarter included the continued
uncertainty about the viability of the proposed European monetary union, the
strengthening of the Japanese yen in relation to the U.S. dollar, and increased
volatility in several of the secondary Asian currencies. Fees from treasury
management services were $15.0 million, also a new high, up from $14.5 million
in the comparable quarter last year. Total treasury management revenues from
both fees and the computed value of compensating deposit balances increased 5%
from the second quarter of 1996 to $23.0 million, reflecting the continued
growth in business from both new and existing clients. Other operating income
declined due to lower balances held at global custodians resulting in a
reduction in compensation received.
Net interest income for the quarter, stated on a fully taxable equivalent
basis, totaled a record $117.7 million, up 13% from the $104.3 million reported
in last year's second quarter. The increase in net interest income reflects
higher levels of noninterest related funds, driven by increases in common equity
and demand deposits, and growth in average earning assets primarily driven by a
14% increase in loan volume. Residential mortgage loans accounted for 40% of the
volume increase. The net interest margin fell slightly to 2.20% from 2.22%
reported in the year-ago quarter.
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SECOND QUARTER PERFORMANCE HIGHLIGHTS (Continued)
Nonperforming assets of $58.5 million at quarter-end increased from $21.4
million at December 31, 1996 and $40.5 million at June 30, 1996, principally as
a result of one borrower's Chapter 11 reorganization filing. Northern Trust's
portion of the affected syndicated bank loan is $35.0 million. The overall
quality of the loan portfolio remains strong. Nonaccrual and restructured loans
of $55.3 million at quarter-end represent .46% of total loans and were covered
2.7 times by the $148.4 million reserve for credit losses. Second quarter net
charge-offs, at .02% of average loans, totaled $.5 million. The $.5 million
provision for credit losses, down from $4.0 million a year ago, maintained the
reserve for credit losses at the prior quarter level.
Noninterest expenses of $217.0 million were up $24.9 million, or 13%, from
the year-ago quarter. The increase was largely attributable to staff-related
compensation and higher costs for performance-based compensation. The increase
in salaries and benefits resulted from salary adjustments and an 8% increase in
staff levels from one year ago required to support growth initiatives and record
volumes of new business generated by both PFS and C&IS. In addition, excellent
new business development results, record foreign exchange profits, strong
corporate earnings, and the price increase in Northern Trust Corporation stock
increased performance-based compensation expenses. The noninterest expense
increase in the second quarter also reflects a number of new initiatives over
the past twelve months, including six additional private banking and trust
offices, a new Singapore office and expansion of the global custody network.
Staff on a full-time equivalent basis at June 30, 1997 totaled 7,254, up 5% from
6,933 at December 31, 1996 and 8% from 6,698 at June 30, 1996.
BALANCE SHEET
Balance sheet assets averaged $23.9 billion for the quarter, up 13% from
last year's average of $21.0 billion, reflecting growth in loans and money
market assets, partially
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- 5 -
BALANCE SHEET (Continued)
offset by a decline in securities. Loans and leases averaged $11.6 billion for
the quarter, an increase of $1.4 billion or 14%. Residential mortgages increased
$.6 billion or 14% to average $4.8 billion for the quarter and represented 41%
of the total loan portfolio at June 30, 1997. Commercial and industrial loans
averaged $3.6 billion during the quarter compared to $3.3 billion in the second
quarter of 1996. The securities portfolio declined 4% to average $6.5 billion
primarily due to a reduction in short-term U.S. Government securities. Money
market assets increased from $2.0 billion in last year's second quarter to
average $3.4 billion in the current quarter.
Common stockholders' equity averaged $1.5 billion, up 10% from last year's
second quarter. The increase primarily reflects the retention of earnings offset
in part by the repurchase of common stock pursuant to the Corporation's share
buyback program. During the quarter, the Corporation acquired a total of 305,083
shares at a cost of $14.0 million. An additional 3.9 million shares may be
purchased after June 30, 1997 pursuant to the share buyback program.
In April 1997, Northern Trust issued $120 million of Floating Rate Capital
Securities through a wholly owned statutory business trust. The securities,
which qualify as Tier 1 capital for regulatory purposes, were issued at a
discount to yield 67.9 basis points above the three-month London Interbank
Offered Rate.
SIX MONTH PERFORMANCE HIGHLIGHTS
Net income per common share increased 19% to $1.26 for the six month period
ended June 30, 1997. Net income increased 18% to $147.1 million compared with
$124.9 million last year and resulted in a return on average common equity of
20%.
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SIX MONTH PERFORMANCE HIGHLIGHTS (Continued)
Total revenues increased 13% from 1996 levels. Trust fees totaled $326.6
million, up 11% from $293.6 million reported last year. Foreign exchange trading
profits totaled $44.3 million, up 61% from last year's performance. Treasury
management revenues from both fees and the computed value of compensating
deposit balances increased 7% to $45.4 million. Net interest income, stated on a
fully taxable equivalent basis, totaled $231.8 million, up 12% from the $206.3
million reported last year.
The provision for credit losses decreased $8.0 million to $1.0 million in
1997. Noninterest expenses were up 12% and totaled $423.5 million compared to
$376.6 million a year ago.
FORWARD-LOOKING STATEMENTS
This news release may be deemed to include forward-looking statements, such
as statements that relate to financial goals, business outlook and credit
quality. Actual results could differ materially from those indicated by these
statements. Northern Trust's 1996 Annual Report to Stockholders and 1997
periodic reports to the SEC, including the section of the Quarterly Report on
Form 10-Q for March 31, 1997 captioned "Forward-Looking Information", contains
additional information about factors that could affect actual results.
/ / /
<PAGE>
<TABLE>
<CAPTION>
NORTHERN TRUST CORPORATION Page 1
(Supplemental Consolidated Financial Information)
STATEMENT OF INCOME STATISTICS ($ IN MILLIONS)
- ----------------------------------------------
SECOND QUARTER
---------------------------------------
1997 1996 % Change *
---------------------------------------
<S> <C> <C> <C>
Net Interest Income (Taxable Equivalent) $117.7 $104.3 13 %
Less: Taxable Equivalent Adjustment 8.5 8.8 (3)
--------- --------- ----
Net Interest Income 109.2 95.5 14
Provision for Credit Losses 0.5 4.0 N/M
Noninterest Income
Trust Fees 168.3 149.2 13
Treasury Management Fees 15.0 14.5 4
Foreign Exchange Trading Profits 23.9 15.1 58
Security Commissions & Trading Income 6.6 6.4 1
Other Operating Income 9.4 10.4 (9)
Investment Security Transactions 0.0 0.1 N/M
--------- --------- ----
Total Noninterest Income 223.2 195.7 14
Noninterest Expenses
Salaries 107.6 90.0 20
Pension and Other Employee Benefits 20.5 18.4 11
Occupancy Expense 16.4 14.9 10
Equipment Expense 14.9 14.1 6
Other Operating Expenses 57.6 54.7 5
--------- --------- ----
Total Noninterest Expenses 217.0 192.1 13
--------- --------- ----
Income Before Income Taxes 114.9 95.1 21
Provision for Income Taxes 39.5 31.7 25
--------- --------- ----
NET INCOME $75.4 $63.4 19 %
========= ========= ====
Net Income Per Common Share
Primary $0.65 $0.54 20 %
Fully Diluted 0.65 0.54 20
Return on Average Common Equity 20.01 % 18.47 %
Average Common Equity $1,485.7 $1,354.5 10 %
Return on Average Assets 1.27 % 1.21 %
Common Dividend Declared per Share $0.18 $0.16 16 %
Preferred Dividends (millions) 1.2 1.2 N/M
Average Common Shares Outstanding (000s)
Primary 114,484 114,889
Fully Diluted 114,790 115,171
(N/M) Not Meaningful
(*) Percentage change calculations are based on actual balances rather than the
rounded amounts presented in Supplemental Consolidated Financial Information.
Note: Per common share data reflect the two-for-one stock split effected by a 100% common stock
distribution on December 9, 1996 to holders of record on December 2, 1996.
Note: Certain reclassifications have been made to prior periods' financial statements to place them
on a basis comparable with the current period's financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NORTHERN TRUST CORPORATION Page 2
(Supplemental Consolidated Financial Information)
STATEMENT OF INCOME STATISTICS ($ IN MILLIONS)
- ----------------------------------------------
SIX MONTHS
----------------------------------------
1997 1996 % Change *
----------------------------------------
<S> <C> <C> <C>
Net Interest Income (Taxable Equivalent) $231.8 $206.3 12 %
Less: Taxable Equivalent Adjustment 16.5 17.4 (5)
--------- --------- ----
Net Interest Income 215.3 188.9 14
Provision for Credit Losses 1.0 9.0 N/M
Noninterest Income
Trust Fees 326.6 293.6 11
Treasury Management Fees 29.6 27.5 8
Foreign Exchange Trading Profits 44.3 27.6 61
Security Commissions & Trading Income 12.5 12.7 (2)
Other Operating Income 18.9 22.1 (15)
Investment Security Transactions 0.6 0.4 N/M
--------- --------- ----
Total Noninterest Income 432.5 383.9 13
Noninterest Expenses
Salaries 209.0 177.7 18
Pension and Other Employee Benefits 41.6 38.8 7
Occupancy Expense 32.5 30.0 8
Equipment Expense 29.8 28.1 6
Other Operating Expenses 110.6 102.0 8
--------- --------- ----
Total Noninterest Expenses 423.5 376.6 12
--------- --------- ----
Income Before Income Taxes 223.3 187.2 19
Provision for Income Taxes 76.2 62.3 22
--------- --------- ----
NET INCOME $147.1 $124.9 18 %
========= ========= ====
Earnings Per Common Share
Primary $1.26 $1.07 18 %
Fully Diluted 1.26 1.06 19
Return on Average Common Equity 19.96 % 18.41 %
Average Common Equity $1,461.6 $1,337.5 9 %
Return on Average Assets 1.28 % 1.20 %
Common Dividends Declared per Share $0.36 $0.31 16 %
Preferred Dividends (millions) 2.4 2.5 (3)
Average Common Shares Outstanding (000s)
Primary 114,567 114,936
Fully Diluted 114,838 115,610
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NORTHERN TRUST CORPORATION Page 3
(Supplemental Consolidated Financial Information)
BALANCE SHEET ($ IN MILLIONS)
- ----------------------------- JUNE 30
========================================
1997 1996 % Change *
========================================
Assets
- ------
<S> <C> <C> <C>
Money Market Assets $3,941.3 $2,345.2 68 %
Securities 7,035.9 6,303.3 12
Loans and Leases 11,958.1 10,405.2 15
---------- ---------- ---------
Total Earning Assets 22,935.3 19,053.7 20
Reserve for Credit Losses (148.4) (147.4) 1
Other Nonearning Assets 3,264.1 2,844.9 15
---------- ---------- ---------
Total Assets $26,051.0 $21,751.2 20 %
========== ========== =========
Liabilities and Stockholders' Equity
- ------------------------------------
Total Interest-Bearing Deposits $11,538.2 $9,992.8 15 %
Borrowed Funds 6,484.1 6,016.4 8
Senior Notes and Long-Term Debt 1,365.8 537.1 154
---------- ---------- ---------
Total Interest-Related Funds 19,388.1 16,546.3 17
Demand & Other Noninterest-Bearing Deposits 4,352.9 3,275.0 33
Other Liabilities 661.1 436.2 52
---------- ---------- ---------
Total Liabilities 24,402.1 20,257.5 20
Common Equity 1,528.9 1,373.7 11
Preferred Equity 120.0 120.0 -
---------- ---------- ---------
Total Liabilities and Stockholders' Equity $26,051.0 $21,751.2 20 %
========== ========== =========
AVERAGE BALANCE SHEET ($ IN MILLIONS)
- ------------------------------------- SECOND QUARTER
========================================
1997 1996 % Change *
========================================
Assets
- ------
Money Market Assets $3,371.1 $1,987.2 70 %
Securities 6,514.5 6,755.7 (4)
Loans and Leases 11,610.4 10,176.7 14
---------- ---------- ---------
Total Earning Assets 21,496.0 18,919.6 14
Reserve for Credit Losses (148.4) (147.3) 1
Other Nonearning Assets 2,512.1 2,255.8 11
---------- ---------- ---------
Total Assets $23,859.7 $21,028.1 13 %
========== ========== =========
Liabilities and Stockholders' Equity
- ------------------------------------
Total Interest-Bearing Deposits $11,194.5 $9,983.0 12 %
Borrowed Funds 6,132.0 5,530.2 11
Senior Notes and Long-Term Debt 909.0 590.4 54
---------- ---------- ---------
Total Interest-Related Funds 18,235.5 16,103.6 13
Demand & Other Noninterest-Bearing Deposits 3,370.9 3,025.5 11
Other Liabilities 647.6 424.5 53
---------- ---------- ---------
Total Liabilities 22,254.0 19,553.6 14
Common Equity 1,485.7 1,354.5 10
Preferred Equity 120.0 120.0 -
---------- ---------- ---------
Total Liabilities and Stockholders' Equity $23,859.7 $21,028.1 13 %
========== ========== =========
</TABLE>
<PAGE>
NORTHERN TRUST CORPORATION Page 4
(Supplemental Consolidated Financial information)
<TABLE>
<CAPTION>
Quarterly Trend Data ($ In Millions) 1997 1996
- ------------------------------------ Quarters Quarters
========================= ==========================================
Second First Fourth Third Second
========================= ==========================================
<S> <C> <C> <C> <C> <C>
Net Income Summary
- ------------------
Trust Fees $168.3 $158.3 $152.6 $148.2 $149.2
Other Noninterest Income 54.9 51.0 48.7 46.6 46.5
Net Interest Income (Taxable Equivalent) 117.7 114.1 108.4 107.2 104.3
------ ------ ------ ------ ------
Total Revenue (Taxable Equivalent) 340.9 323.4 309.7 302.0 300.0
Provision for Credit Losses 0.5 0.5 0.5 2.5 4.0
Noninterest Expenses 217.0 206.5 200.5 191.8 192.1
------ ------ ------ ------ ------
Pretax Income (Taxable Equivalent) 123.4 116.4 108.7 107.7 103.9
Taxable Equivalent Adjustment 8.5 8.0 7.8 8.4 8.8
Provision for Income Taxes 39.5 36.7 33.5 32.8 31.7
------ ------ ------ ------ ------
Net Income $ 75.4 $ 71.7 $ 67.4 $ 66.5 $ 63.4
====== ====== ====== ====== ======
Per Common Share
- ----------------
Net Income-Primary $ 0.65 $ 0.62 $ 0.58 $ 0.57 $ 0.54
-Fully Diluted 0.65 0.62 0.58 0.57 0.54
Dividend Declared 0.18 0.18 0.18 0.16 0.16
Book Value (EOP) 13.69 13.21 12.80 12.49 12.21
Market Value (EOP) $48.38 $37.50 $36.25 $32.88 $28.88
Ratios
- ------
Return on Average Common Equity 20.01 % 19.91 % 18.79 % 18.93 % 18.47 %
Return on Average Assets 1.27 1.30 1.28 1.26 1.21
Net Interest Margin 2.20 2.33 2.30 2.26 2.22
Productivity Ratio* 157 % 157 % 154 % 157 % 156 %
Risk-based Capital Ratios:
Tier 1 9.6 9.1 8.2 8.4 8.4
Total (Tier 1 + Tier 2) 12.9 12.6 11.9 12.3 11.7
Leverage 7.2 6.9 6.4 6.3 6.2
Trust Assets ($ in Billions)-EOP
- --------------------------------
Corporate $794.3 $728.7 $693.7 $641.9 $616.2
Personal 95.0 87.2 85.2 80.8 76.7
------ ------ ------ ------ ------
Total Trust Assets $889.3 $815.9 $778.9 $722.7 $692.9
====== ====== ====== ====== ======
Memo: Managed Assets 149.4 136.3 $130.3 $124.3 119.9
Asset Quality ($ in Millions)-EOP
- ---------------------------------
Nonaccrual Loans $ 55.3 $ 21.7 $ 19.5 $ 33.3 $ 38.9
Other Real Estate Owned (OREO) 3.2 2.2 1.9 4.4 1.6
------ ----- ------ ------ ------
Total Nonperforming Assets $ 58.5 $ 23.9 $ 21.4 $ 37.7 $ 40.5
====== ======= ====== ====== ======
Nonperforming Assets/Loans & OREO 0.49 % 0.21 % 0.20 % 0.35 % 0.39 %
Net Charge-offs $ 0.5 $ 0.4 $ 0.6 $ 2.5 $ 3.8
Net Charge-offs (Annualized) to Avg Loans 0.02 % 0.02 % 0.02 % 0.09 % 0.15 %
Reserve for Credit Losses $148.4 $148.3 $148.3 $147.4 $147.4
Reserve to Nonaccrual Loans 268 % 686 % 761 % 442 % 379 %
</TABLE>
(*) The productivity ratio is defined as total revenue on a taxable equivalent
basis before the provision for credit losses, divided by noninterest
expenses.
