<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) April 14, 1997
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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 April 14, 1997 press release,
reporting on the registrant's earnings for the first quarter 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 April 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
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(Registrant)
Dated: April 15, 1997 By: /s/ 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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Number Description Page Number
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99 April 14, 1997 Press Release 5
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C O N F I D E N T I A L
Scheduled Release Time: 7:30 a.m. on April 14, 1997
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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
Diane Kotsogiannis, Public Relations
(312) 444-4281
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FOR IMMEDIATE RELEASE
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NORTHERN TRUST CORPORATION REPORTS RECORD 1997 FIRST
QUARTER EARNINGS OF $.62 PER SHARE, UP 19%
(Chicago, April 14, 1997) Northern Trust Corporation reported record net income
per common share of $.62 for the first quarter, an increase of 19% from $.52
earned a year ago. Net income increased 17% to a record $71.7 million from the
$61.5 million earned in the first 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,
"Strong earnings momentum continued into 1997 as total revenues increased 11%
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. Our 19% earnings per share growth for the
quarter, a productivity ratio of 157% and a 20% return on common equity
significantly exceeded each of our strategic financial targets. Since March 31,
1996, trust assets under administration grew 27% to $816 billion, with assets
under management increasing 19% to $136 billion."
<PAGE>
Mr. Osborn continued, "These outstanding results again confirm the
significant profit potential from Northern Trust's consistent focus on two
businesses: a unique national personal financial services franchise, and our
business of administering and managing domestic and global assets for corporate
and institutional clients worldwide. We will pursue this highly disciplined
strategy throughout 1997 by investing in the continued expansion of these two
sharply defined businesses."
FIRST QUARTER PERFORMANCE HIGHLIGHTS
Trust fees grew 10% to a record $157.7 million in the quarter compared to
$143.9 million last year and represent 49% of total revenues and 76% of
noninterest income. Total trust assets under administration at March 31, 1997
were $815.9 billion compared to $778.9 billion at year-end 1996, an increase of
5%. Trust assets under management increased 5% to $136.3 billion, from $130.3
billion at year-end.
Trust fees from Personal Financial Services (PFS) in the quarter increased
12% and totaled $79.3 million compared to $71.1 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 30% and now administers $24.0 billion of trust assets. Total
personal trust assets under administration increased $2.0 billion since December
31, 1996 and totaled $87.2 billion at March 31, 1997, $51.6 billion of which was
under management.
During the first quarter, Northern Trust expanded its California presence
by opening new offices at Montecito, in Santa Barbara County, and La Jolla, in
San Diego County, bringing to eight the total number of offices in this
attractive market. Also during the first quarter, Northern Trust Bank of Florida
opened a Tampa location, its twenty-third office in that state. With the
addition of these new offices,
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<PAGE>
FIRST QUARTER PERFORMANCE HIGHLIGHTS (Continued)
Northern Trust's national network of Personal Financial Service offices includes
sixty locations in Illinois, Florida, California, Arizona, and Texas.
Trust fees from Corporate & Institutional Services (C&IS) in the quarter
increased 8% and totaled $78.4 million compared to $72.8 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
first quarter fee growth. The increase in C&IS trust fees reflects net new
business, moderated by the effect of changing pricing structures for client
relationships which focus on total client revenues. These client relationships
increasingly involve services such as foreign exchange which generate revenue
not reflected in trust fees. Securities lending activities continued to achieve
outstanding results, with fees increasing 18% from the prior year quarter to
$14.3 million. Since December 31, 1996, total C&IS trust assets under
administration increased $35.0 billion to $728.7 billion at March 31, 1997, of
which $84.7 billion is managed by Northern Trust. Included in the total for
trust assets under administration is approximately $116 billion of global
custody assets.
Foreign exchange trading profits set a record, increasing 64% to $20.4
million from $12.5 million in the year-ago quarter. Foreign exchange trading
profits were positively impacted by the higher level of market volatility in the
quarter, and continued to benefit from the cross-border investment activity of
Master Trust/Custody clients. Fees from treasury management services were $14.6
million, also a new high, up 12% from the comparable quarter last year. Total
treasury management revenues from both fees and the computed value of
compensating deposit balances increased 9% from the first quarter of 1996 to
$22.4 million, reflecting the continued growth in new business.
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<PAGE>
FIRST QUARTER PERFORMANCE HIGHLIGHTS (Continued)
Net interest income for the quarter, stated on a fully taxable equivalent
basis, totaled a record $114.1 million, up an impressive 12% from the $102.0
million reported in last year's first quarter. The increase in net interest
income reflects higher levels of average earning assets primarily driven by a
14% increase in loan volume. Residential mortgage loans accounted for 50% of the
increase. The net interest margin improved to 2.33% from 2.21% reported in the
year-ago quarter primarily due to lower funding costs and a 15% increase in
noninterest-related funds.
Credit quality remains exceptional. Nonperforming assets of $23.9 million
at quarter-end remained at historically low levels and compare with $21.4
million at December 31, 1996 and $32.1 million at March 31, 1996. Nonaccrual and
restructured loans of $21.7 million at quarter-end represent .19% of total loans
and were covered 6.9 times by the $148.3 million reserve for credit losses.
First quarter net charge-offs, at .02% of average loans, totaled $.5 million.
The $.5 million provision for credit losses, down from $5.0 million a year ago,
essentially maintained the reserve for credit losses at its year-end level.
Noninterest expenses of $205.9 million were up $21.9 million or 12% from
the year ago-quarter, which was favorably affected by a number of baseline cost
reductions implemented throughout 1995. Two-thirds of the increase in
noninterest expenses related to salaries and benefits, and was driven by the 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
1996. Staff on a full-time equivalent basis at March 31, 1997 totaled 7,081, up
from 6,933 at December 31, 1996 and 6,536 at March 31, 1996. The noninterest
expense increase in the first quarter also reflects a number of new initiatives
over the past twelve months, including the opening of eight additional private
banking and trust offices, a new Singapore office and expansion of the global
custody network.
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<PAGE>
BALANCE SHEET
Balance sheet assets averaged $22.4 billion for the quarter, up 7% from
last year's average of $20.9 billion, reflecting growth in loans and money
market assets, which was partially offset by a decline in securities. Loans and
leases averaged $11.1 billion for the quarter, an increase of $1.3 billion or
14%. Residential mortgages increased $.7 billion or 17% to average $4.6 billion
for the quarter and represented 41% of the total loan portfolio at March 31,
1997. Commercial and industrial loans averaged $3.3 billion during the quarter
compared to $3.1 billion in the first quarter of 1996. The securities portfolio
declined 13% to average $5.9 billion primarily due to a reduction in short-term
U.S. Government securities. Money market assets increased from $2.1 billion in
last year's first quarter to average $2.9 billion in the current quarter.
Common stockholders' equity averaged $1.4 billion, up 9% from last year's
first quarter. The increase primarily reflects growth in retained 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
445,374 shares at a cost of $17.9 million. An additional 4.2 million shares may
be purchased after March 31, 1997 pursuant to the share buyback program.
During the quarter the Corporation issued $150 million of Floating Rate
Capital Securities through a wholly owned statutory business trust. The
securities, which qualify as Tier 1 capital for regulatory purposes, were issued
at a discount to yield 60.5 basis points above the three-month London Interbank
Offered Rate.
/ / /
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<PAGE>
NORTHERN TRUST CORPORATION Page 1
(Supplemental Consolidated Financial Information)
STATEMENT OF INCOME STATISTICS ($ IN MILLIONS)
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<TABLE>
<CAPTION>
FIRST QUARTER
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1997 1996 % Change *
-----------------------------------
<S> <C> <C> <C>
Net Interest Income (Taxable Equivalent) $114.1 $102.0 12%
Less: Taxable Equivalent Adjustment 8.0 8.6 (7)
-------- -------- ---
Net Interest Income 106.1 93.4 14
Provision for Credit Losses 0.5 5.0 N/M
Noninterest Income
Trust Fees 157.7 143.9 10
Treasury Management Fees 14.6 13.0 12
Foreign Exchange Trading Profits 20.4 12.5 64
Security Commissions & Trading Income 5.9 6.3 (6)
Other Operating Income 9.5 11.7 (20)
Investment Security Transactions 0.6 0.3 N/M
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Total Noninterest Income 208.7 187.7 11
Noninterest Expenses
Salaries 101.4 87.7 16
Pension and Other Employee Benefits 21.1 20.4 3
Occupancy Expense 16.1 15.1 7
Equipment Expense 14.9 14.0 6
Other Operating Expenses 52.4 46.8 12
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Total Noninterest Expenses 205.9 184.0 12
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Income Before Income Taxes 108.4 92.1 18
Provision for Income Taxes 36.7 30.6 20
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NET INCOME $71.7 $61.5 17%
======== ======== ===
Net Income Per Common Share
Primary $0.62 $0.52 19%
Fully Diluted 0.62 0.52 19
Return on Average Common Equity 19.91% 18.35%
Average Common Equity $1,437.3 $1,320.4 9%
Return on Average Assets 1.30% 1.19%
Common Dividend Declared per Share $0.18 $0.16 16%
Preferred Dividends (millions) 1.2 1.3 (9)
Average Common Shares Outstanding (000s)
Primary 114,649 114,982
Fully Diluted 114,651 115,845
</TABLE>
(N/M) Not Meaningful
(*) Percentage change calculations are based on actual balances rather than
the rounded amounts presented in Supplemental Consolidated Financial
Information.
Note: Per common share data reflect the two-for-one stock split effected by a
100% common stock distribution on December 9, 1996 to holders of record on
December 2, 1996.
<PAGE>
NORTHERN TRUST CORPORATION Page 2
(Supplemental Consolidated Financial Information)
<TABLE>
<CAPTION>
BALANCE SHEET ($ IN MILLIONS)
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MARCH 31
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1997 1996 % Change *
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<S> <C> <C> <C>
Assets
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Money Market Assets $3,615.4 $2,002.1 81%
Securities 5,824.2 6,087.3 (4)
Loans and Leases 11,417.3 10,025.6 14
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Total Earning Assets 20,856.9 18,115.0 15
Reserve for Credit Losses (148.3) (147.2) 1
Other Nonearning Assets 2,523.2 2,333.9 8
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Total Assets $23,231.8 $20,301.7 14%
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Liabilities and Stockholders' Equity
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Total Interest-Bearing Deposits $10,846.5 $9,181.4 18%
Borrowed Funds 4,971.4 5,685.8 (13)
Senior Notes and Long-Term Debt 781.3 641.1 22
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Total Interest-Related Funds 16,599.2 15,508.3 7
Demand & Other Noninterest-Bearing Deposits 4,367.4 2,919.0 50
Other Liabilities 672.0 405.8 66
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Total Liabilities 21,638.6 18,833.1 15
Common Equity 1,473.2 1,348.6 9
Preferred Equity 120.0 120.0 -
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Total Liabilities and Stockholders' Equity $23,231.8 $20,301.7 14%
========= ========= ===
AVERAGE BALANCE SHEET ($ IN MILLIONS)
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FIRST QUARTER
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1997 1996 % Change *
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Assets
Money Market Assets $2,895.1 $2,065.9 40%
Securities 5,861.1 6,734.9 (13)
Loans and Leases 11,120.5 9,777.3 14
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Total Earning Assets 19,876.7 18,578.1 7
Reserve for Credit Losses (148.3) (147.2) 1
Other Nonearning Assets 2,648.5 2,419.1 9
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Total Assets $22,376.9 $20,850.0 7%
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Liabilities and Stockholders' Equity
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Total Interest-Bearing Deposits $10,669.7 $9,876.6 8%
Borrowed Funds 5,153.3 5,242.4 (2)
Senior Notes and Long-Term Debt 816.6 649.2 26
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Total Interest-Related Funds 16,639.6 15,768.2 6
Demand & Other Noninterest-Bearing Deposits 3,491.4 3,176.3 10
Other Liabilities 688.6 449.7 53
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Total Liabilities 20,819.6 19,394.2 7
Common Equity 1,437.3 1,320.4 9
Preferred Equity 120.0 135.4 (11)
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Total Liabilities and Stockholders' Equity $22,376.9 $20,850.0 7%
========= ========= ===
</TABLE>
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NORTHERN TRUST CORPORATION Page 3
(Supplemental Consolidated Financial Information)
<TABLE>
<CAPTION>
Quarterly Trend Data ($ In Millions) 1997 1996
Quarter Quarters
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First Fourth Third Second First
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<S> <C> <C> <C> <C> <C>
Net Income Summary
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Trust Fees $157.7 $152.0 $147.7 $148.7 $143.9
Other Noninterest Income 51.0 48.7 46.6 46.5 43.8
Net Interest Income (Taxable Equivalent) 114.1 108.4 107.2 104.3 102.0
------ ------ ------ ------ ------
Total Revenue (Taxable Equivalent) 322.8 309.1 301.5 299.5 289.7
Provision for Credit Losses 0.5 0.5 2.5 4.0 5.0
Noninterest Expenses 205.9 199.9 191.3 191.6 184.0
------ ------ ------ ------ ------
Pretax Income (Taxable Equivalent) 116.4 108.7 107.7 103.9 100.7
Taxable Equivalent Adjustment 8.0 7.8 8.4 8.8 8.6
Provision for Income Taxes 36.7 33.5 32.8 31.7 30.6
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Net Income $ 71.7 $ 67.4 $ 66.5 $ 63.4 $ 61.5
====== ====== ====== ====== ======
Per Common Share
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Net Income - Primary $ 0.62 $ 0.58 $ 0.57 $ 0.54 $ 0.52
- Fully Diluted 0.62 0.58 0.57 0.54 0.52
Dividend Declared 0.18 0.18 0.16 0.16 0.16
Book Value (EOP) 13.21 12.80 12.49 12.21 11.91
Market Value (EOP) $37.50 $36.25 $32.88 $28.88 $27.00
Ratios
- ------
Return on Average Common Equity 19.91% 18.79% 18.93% 18.47% 18.35%
Return on Average Assets 1.30 1.28 1.26 1.21 1.19
Net Interest Margin 2.33 2.30 2.26 2.22 2.21
Productivity Ratio * 157% 155% 158% 156% 157%
Risk-based Capital Ratios:
Tier 1 9.1 8.2 8.4 8.4 9.1
Total (Tier 1 + Tier 2) 12.6 11.9 12.3 11.7 12.7
Leverage 6.9 6.4 6.3 6.2 6.1
Trust Assets ($ in Billions) - EOP
- ----------------------------------
Corporate $728.7 $693.7 $641.9 $616.2 $567.1
Personal 87.2 85.2 80.8 76.7 74.1
------ ------ ------ ------ ------
Total Trust Assets $815.9 $778.9 $722.7 $692.9 $641.2
====== ====== ====== ====== ======
Memo: Managed Assets 136.3 130.3 124.3 119.9 114.5
Asset Quality ($ in Millions) - EOP
- -----------------------------------
Nonaccrual Loans $21.7 $19.5 $33.3 $38.9 $30.6
Other Real Estate Owned (OREO) 2.2 1.9 4.4 1.6 1.5
------ ------ ------ ------ ------
Total Nonperforming Assets $ 23.9 $ 21.4 $ 37.7 $ 40.5 $ 32.1
====== ====== ====== ====== ======
Nonperforming Assets/Loans & OREO 0.21% 0.20% 0.35% 0.39% 0.32%
Net Charge-offs $0.5 $0.6 $2.5 $3.8 $4.9
Net Charge-offs (Annualized) to Avg Loans 0.02% 0.02% 0.09% 0.15% 0.20%
Reserve for Credit Losses $148.3 $148.3 $147.4 $147.4 $147.2
Reserve to Nonaccrual Loans 686% 761% 442% 379% 481%
</TABLE>
(*) The productivity ratio is defined as total revenue on a taxable equivalent
basis before the provision for credit losses, divided by noninterest
expenses.
