<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 20, 1998
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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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Item 5. Other Events
The information contained in the registrant's April 20, 1998 press release,
reporting on the registrant's earnings for the first quarter of 1998, 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 20, 1998 Press Release
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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: April 21, 1998 By: Perry R. Pero
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Perry R. Pero
Senior Executive Vice President
and Chief Financial Officer
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EXHIBIT INDEX
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Number
Description Page Number
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99 April 20, 1998 Press Release 5
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Exhibit 99
Release Time: April 20, 1998 (7:30 a.m.)
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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 A. Rageas, Public Relations
Release #01473 (312) 444-4279 http://www.northerntrust.com
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FOR IMMEDIATE RELEASE
- ---------------------
NORTHERN TRUST CORPORATION REPORTS RECORD 1998 FIRST
QUARTER EARNINGS OF $.73 PER SHARE, UP 18%.
(Chicago, April 20, 1998) Northern Trust Corporation reported record net income
per share of $.73 for the first quarter, an increase of 18% from the $.62 earned
a year ago. Net income also increased 18% to a record $84.9 million from the
$71.7 million earned in the first quarter of last year. This performance
resulted in an outstanding return on average common equity of 20.7%.
William A. Osborn, Chairman and Chief Executive Officer, commented, "Strong
earnings momentum continued into the first quarter of 1998. Total revenues
increased 17% from 1997 levels, representing top tier performance in our
industry. Record corporate trust fees, personal trust fees, and net interest
income, along with continued strong results from foreign exchange, were the
primary drivers of this performance. Our 18% earnings per share growth for the
quarter, a 20.7% return on common equity and a productivity ratio of 160% met or
exceeded each of our strategic financial targets. The quarter also highlighted
our continued success in generating positive operating leverage as the 17%
growth in revenues was well above the 14% increase in noninterest expenses.
Since March 31, 1997, trust assets under administration have grown 41% to $1.2
trillion, with assets under management increasing 51% to $216 billion."
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Mr. Osborn continued, "During the quarter we also announced an agreement to
acquire Trust Bank of Colorado for approximately $15 million, marking our entry
into Colorado. We are also moving forward with plans for a PFS office in the
suburban Detroit area. These are important steps in our national Personal
Financial Services expansion program. Our outlook for continued growth of the
business remains positive."
FIRST QUARTER PERFORMANCE HIGHLIGHTS
Trust fees grew 22% to a record $193.7 million in the quarter compared to
$158.3 million in the first quarter of last year and represent 51% of total
revenues and 75% of noninterest income.
Trust fees from Personal Financial Services (PFS) in the quarter increased
22% and totaled $91.8 million compared to $75.5 million in the year-ago quarter.
The increase in PFS trust fees resulted primarily from strong new business
throughout Northern Trust's five-state office network and favorable equity
markets. Trust fees in each state increased 15% or more with growth especially
strong in Florida, Arizona and Texas. The Wealth Management Group, which now
administers $31.1 billion for significant family asset pools nationwide, also
had excellent performance, with trust fees increasing 22%. Total personal trust
assets under administration increased $9.6 billion since December 31, 1997 and
totaled $105.5 billion at March 31, 1998. Of this, $64.9 billion is managed by
Northern Trust.
Northern Trust expects to close the acquisition of Trust Bank of Colorado
in the second quarter of the year. After completing this acquisition, Northern
Trust's network of Personal Financial Services offices will include 63 locations
in six states.
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FIRST QUARTER PERFORMANCE HIGHLIGHTS (Continued)
Trust fees from Corporate & Institutional Services (C&IS) in the quarter
increased 23% and totaled $101.9 million compared to $82.8 million in the year-
ago quarter, reflecting strong new business. Excluding $3.5 million in fees
generated by Northern Trust Quantitative Advisors, Inc. (NTQA), a December 31,
1997 acquisition, C&IS trust fees increased 19% from the prior year. 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. Securities lending continued to achieve outstanding results, with
fees increasing 24%, or $3.5 million, from the prior year quarter to $17.9
million. Investment management revenues were outstanding and contributed
approximately 40% of the growth in C&IS trust fees, excluding the fees generated
by NTQA. Since December 31, 1997, total C&IS trust assets under administration
increased $73.1 billion to $1.06 trillion at March 31, 1998, of which $151.6
billion is managed by Northern Trust. Trust assets under administration included
approximately $173 billion of global custody assets, which increased 16% due to
new business and market appreciation.
Foreign exchange trading profits continued to be outstanding, increasing
37% to $28.1 million from $20.4 million in the same quarter last year. The
strong performance compared to last year reflects both increased trade volumes
as global custody assets continue to grow and volatility in the currency
markets, especially early in the quarter. Foreign exchange trading profits for
the first quarter were second only to the record $33.5 million in 1997's third
quarter, when volatility in the southeastern Asia currency markets and
transaction levels involving those currencies were particularly high.
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FIRST QUARTER PERFORMANCE HIGHLIGHTS (Continued)
Total treasury management revenues from both fees and the computed value of
compensating deposit balances increased 5% from the first quarter of 1997 to
$23.5 million, reflecting the continued growth in business from both new and
existing clients. The fee portion of these revenues accrued in the quarter was
$15.9 million, up from $14.6 million in the comparable quarter last year. Other
operating income was $11.0 million for the first quarter compared with $9.5
million in the same period of last year. The increase over last year is
primarily due to higher fees from trust deposits and banking services.
Net interest income for the quarter, stated on a fully taxable equivalent
basis, totaled $122.0 million, up 7% from the $114.1 million reported in last
year's first quarter. The increase in net interest income reflects higher levels
of noninterest-related funds, driven by increases in demand and noninterest-
bearing deposits and common equity, and 18% growth in average earning assets.
The asset growth included a 15% or $1.6 billion increase in loans and leases.
The net interest margin decreased to 2.11% from 2.33% reported in the year-ago
quarter. The decline in the margin is attributable to the flattening yield curve
which has compressed interest rate spreads and a higher proportion of assets
held in lower spread short-term securities and money market assets.
Nonperforming assets of $39.2 million at quarter-end decreased from $43.3
million at December 31, 1997. The overall quality of the loan portfolio remains
strong. Nonaccrual and restructured loans of $36.2 million at quarter-end
represent .28% of total loans and were covered 4.1 times by the $147.7 million
reserve for credit losses. First quarter net charge-offs, at .12% of average
loans, totaled $3.9 million. The provision for credit losses of $4.0 million in
the first quarter was $3.5 million higher than the comparable quarter in 1997
and essentially maintained the reserve for credit losses at the year-end level.
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FIRST QUARTER PERFORMANCE HIGHLIGHTS (Continued)
Noninterest expenses totaled $236.2 million for the quarter, an increase of
14% or $29.7 million from the $206.5 million in the year-ago quarter.
Approximately 75% of this increase is related to salaries and employee benefits.
The increase in salaries and benefits was primarily attributable to staff
growth, merit increases and higher performance-based compensation. Performance-
based compensation expenses were higher because of excellent new business
results, higher foreign exchange profits, strong corporate earnings and the
price increase in Northern Trust Corporation stock.
Staff levels increased from one year ago to support growth initiatives and
strong new business in both PFS and C&IS. Staff on a full-time equivalent basis
at March 31, 1998 totaled 7,672, up 8% from 7,081 at March 31, 1997, and up 2%
from 7,553 at December 31, 1997. In addition, the noninterest expense increase
in the first quarter reflects $3.1 million of incremental expenses resulting
from the NTQA acquisition, new private banking and trust offices, and continuing
investments in technology.
During the quarter Northern Trust made a strategic decision to exit the
futures brokerage business by June 30, 1998 with the transfer of the business of
Northern Futures Corporation (NFC) to Spear, Leeds & Kellogg. This decision will
allow Northern Trust to focus on its core businesses of trust, investments and
banking for individuals, corporations and institutions. It is expected that most
NFC employees will join Spear, Leeds and Kellogg or find other positions within
Northern Trust. The severance costs of approximately $200,000 associated with
this decision were recorded in the quarter.
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BALANCE SHEET
Balance sheet assets averaged $26.0 billion for the quarter, up 16% from
last year's average of $22.4 billion, reflecting growth in loans, securities and
money market assets. Loans and leases averaged $12.7 billion for the quarter, an
increase of $1.6 billion or 15%. Residential mortgages increased $655 million or
14% to average $5.3 billion for the quarter and represented 41% of the total
loan portfolio. Commercial and industrial loans averaged $3.9 billion during the
quarter compared to $3.3 billion in the first quarter of 1997. The securities
portfolio increased $1.3 billion or 22% to $7.2 billion reflecting a higher
level of investments in short-term U.S. agency securities. Money market assets
increased from $2.9 billion in last year's first quarter to average $3.5 billion
in the current quarter, primarily as a result of growth in global custody
activities and the more active short-term investment of noninterest-bearing
balances previously held with global subcustodians.
Common stockholders' equity averaged $1.6 billion, up 14% from last year's
first 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 397,888
shares at a cost of $28.3 million. An additional 2.8 million shares may be
purchased after March 31, 1998 under the current share buyback program.
FORWARD-LOOKING STATEMENTS
This news release may be deemed to include forward-looking statements, such
as statements that relate to financial goals, business outlook, expansion plans,
and credit quality. Actual results could differ materially from those indicated
by these statements. Northern Trust's 1997 Annual Report to Stockholders,
including the section captioned "Forward-Looking Information", and periodic
reports to the SEC contain additional information about factors that could
affect actual results.
/ / /
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<TABLE>
<CAPTION>
Page 1
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
STATEMENT OF INCOME STATISTICS ($ IN MILLIONS)
FIRST QUARTER
------------------------------------
1998 1997 % Change *
------------------------------------
<S> <C> <C> <C>
Interest Income (Taxable Equivalent) $365.7 $308.0 19 %
Interest Expense 243.7 193.9 26
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Net Interest Income (Taxable Equivalent) 122.0 114.1 7
Noninterest Income
Trust Fees 193.7 158.3 22
Treasury Management Fees 15.9 14.6 9
Foreign Exchange Trading Profits 28.1 20.4 37
Security Commissions & Trading Income 7.2 5.9 21
Other Operating Income 11.0 9.5 17
Investment Security Transactions 0.7 0.6 19
---------- ---------- --------
Total Noninterest Income 256.6 209.3 23
Total Revenue (Taxable Equivalent) 378.6 323.4 17
Noninterest Expenses
Salaries 121.7 101.4 20
Pension and Other Employee Benefits 23.5 21.1 11
Occupancy Expense 16.9 16.1 4
Equipment Expense 16.5 14.9 11
Other Operating Expenses 57.6 53.0 9
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Total Noninterest Expenses 236.2 206.5 14
Provision for Credit Losses 4.0 0.5 N/M
Taxable Equivalent Adjustment 8.4 8.0 5
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Income Before Income Taxes 130.0 108.4 20
Provision for Income Taxes 45.1 36.7 23
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NET INCOME $84.9 $71.7 18 %
========= ========= =======
Net Income Per Common Share
Basic $0.75 $0.64 17 %
Diluted 0.73 0.62 18
Return on Average Common Equity 20.73 % 19.91 %
Average Common Equity $1,636.0 $1,437.3 14 %
Return on Average Assets 1.32 % 1.30 %
Common Dividend Declared per Share $0.21 $0.18 17 %
Preferred Dividends (millions) 1.3 1.2 5
Average Common Shares Outstanding (000s)
Basic 110,902 110,930
Diluted 115,056 114,649
(N/M) Not Meaningful
(*) Percentage change calculations are based on actual balances rather than
the rounded amounts presented in Supplemental Consolidated Financial
Information.
Note: Certain reclassifications have been made to prior periods' financial
statements to place them on a basis comparable with the current period's
financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Page 2
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
BALANCE SHEET ($ IN MILLIONS)
March 31
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1998 1997 % Change *
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<S> <C> <C> <C>
Assets
Money Market Assets $3,534.0 $3,615.4 (2)%
Securities
U.S. Government 395.6 909.2 (56)
Federal Agency and Other 4,308.0 4,481.8 (4)
Municipal 433.7 419.5 3
Trading Account 14.2 13.7 4
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Total Securities 5,151.5 5,824.2 (12)
Loans and Leases 12,952.2 11,417.3 13
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Total Earning Assets 21,637.7 20,856.9 4
Reserve for Credit Losses (147.7) (148.3) N/M
Cash and Due from Banks 1,124.0 948.6 18
Trust Security Settlement Receivables 357.3 323.0 11
Buildings and Equipment 327.8 291.7 12
Other Nonearning Assets 952.7 959.9 (1)
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Total Assets $24,251.8 $23,231.8 4 %
============ ============ ========
Liabilities and Stockholders' Equity
Interest-Bearing Deposits
Savings Deposits $6,431.1 $5,601.7 15 %
Other Time Deposits 470.5 683.9 (31)
Foreign Office Time Deposits 5,192.6 4,560.9 14
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Total Interest-Bearing Deposits 12,094.2 10,846.5 12
Borrowed Funds 4,226.0 4,971.4 (15)
Senior Notes and Long-Term Debt 1,364.2 781.3 75
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Total Interest-Related Funds 17,684.4 16,599.2 7
Demand & Other Noninterest-Bearing Deposits 4,072.0 4,367.4 (7)
Other Liabilities 694.9 672.0 3
------------ ------------ --------
Total Liabilities 22,451.3 21,638.6 4
Common Equity 1,680.5 1,473.2 14
Preferred Equity 120.0 120.0 --
------------ ------------ --------
Total Liabilities and Stockholders' Equity $24,251.8 $23,231.8 4 %
============ ============ ========
</TABLE>
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NORTHERN TRUST CORPORATION Page 3
(Supplemental Consolidated Financial Information)
AVERAGE BALANCE SHEET ($ IN MILLIONS)
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<TABLE>
<CAPTION>
FIRST QUARTER
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1998 1997 % Change *
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<S> <C> <C> <C>
Assets
- ------
Money Market Assets $3,506.4 $2,895.1 21 %
Securities
U.S. Government 465.3 931.1 (50)
Federal Agency and Other 6,305.1 4,502.2 40
Municipal 398.2 420.7 (5)
Trading Account 8.9 7.1 25
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Total Securities 7,177.5 5,861.1 22
Loans and Leases 12,735.0 11,120.5 15
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Total Earning Assets 23,418.9 19,876.7 18
Reserve for Credit Losses (147.7) (148.3) N/M
Nonearning Assets 2,734.7 2,648.5 3
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Total Assets $26,005.9 $22,376.9 16 %
============ ============ ========
Liabilities and Stockholders' Equity
- ------------------------------------
Interest-Bearing Deposits
Savings Deposits $6,280.1 $5,973.2 5 %
Other Time Deposits 525.6 614.6 (14)
Foreign Office Time Deposits 5,553.1 4,081.9 36
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Total Interest-Bearing Deposits 12,358.8 10,669.7 16
Borrowed Funds 6,042.4 5,153.3 17
Senior Notes and Long-Term Debt 1,451.9 816.6 78
------------ ------------ --------
Total Interest-Related Funds 19,853.1 16,639.6 19
Demand & Other Noninterest-Bearing Deposits 3,740.7 3,491.4 7
Other Liabilities 656.1 688.6 (5)
------------ ------------ --------
Total Liabilities 24,249.9 20,819.6 16
Common Equity 1,636.0 1,437.3 14
Preferred Equity 120.0 120.0 -
------------ ------------ --------
Total Liabilities and Stockholders' Equity $26,005.9 $22,376.9 16 %
============ ============ ========
</TABLE>
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NORTHERN TRUST CORPORATION Page 4
(Supplemental Consolidated Financial Information)
<TABLE>
<CAPTION>
Quarterly Trend Data ($ In Millions) 1998 1997
- ------------------------------------ Quarter Quarters
------------ -------------------------------------------
First Fourth Third Second First
------------ ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Income Summary
- ------------------
Trust Fees $193.7 $185.2 $177.4 $168.3 $158.3
Other Noninterest Income 62.9 62.1 77.3 54.9 51.0
Net Interest Income (Taxable Equivalent) 122.0 121.5 117.6 117.7 114.1
------------ ----------- ----------- --------- ---------
Total Revenue (Taxable Equivalent) 378.6 368.8 372.3 340.9 323.4
Provision for Credit Losses 4.0 3.0 5.0 0.5 0.5
Noninterest Expenses 236.2 233.6 234.7 217.0 206.5
------------ ----------- ----------- --------- ---------
Pretax Income (Taxable Equivalent) 138.4 132.2 132.6 123.4 116.4
Taxable Equivalent Adjustment 8.4 8.2 8.0 8.5 8.0
Provision for Income Taxes 45.1 42.7 43.6 39.5 36.7
------------ ----------- ----------- --------- ---------
Net Income $84.9 $81.3 $81.0 $75.4 $71.7
============ =========== =========== ========= =========
Per Common Share
- ----------------
Net Income - Basic $0.75 $0.72 $0.72 $0.67 $0.64
- Diluted 0.73 0.70 0.70 0.65 0.62
Dividend Declared 0.21 0.21 0.18 0.18 0.18
Book Value (EOP) $15.07 $14.54 $14.14 $13.69 $13.21
Market Value (EOP) 74.75 69.75 59.13 48.38 37.50
Ratios
- ------
Return on Average Common Equity 20.73 % 20.04 % 20.68 % 20.01 % 19.91 %
Return on Average Assets 1.32 1.25 1.33 1.27 1.30
Net Interest Margin 2.11 2.07 2.14 2.20 2.33
Productivity Ratio * 160 % 158 % 159 % 157 % 157 %
Risk-based Capital Ratios:
Tier 1 9.8 % 9.6 % 9.9 % 9.6 % 9.1 %
Total (Tier 1 + Tier 2) 13.0 12.8 13.2 12.9 12.6
Leverage 7.0 6.9 7.3 7.2 6.9
Trust Assets ($ in Billions) - EOP **
- -------------------------------------
Corporate $1,056.5 $983.4 $920.4 $811.4 $743.6
Personal 105.5 95.9 91.7 87.0 79.4
------------ ----------- ----------- --------- ---------
Total Trust Assets $1,162.0 $1,079.3 $1,012.1 $898.4 $823.0
============ =========== =========== ========= =========
Memo: Managed Assets 216.5 196.6 164.5 158.4 143.5
Asset Quality ($ in Millions) - EOP
- -----------------------------------
Nonaccrual and Restructured Loans $36.2 $41.4 $46.3 $55.3 $21.7
Other Real Estate Owned (OREO) 3.0 1.9 4.1 3.2 2.2
------------ ----------- ----------- --------- ---------
Total Nonperforming Assets $39.2 $43.3 $50.4 $58.5 $23.9
============ =========== =========== ========= =========
Nonperforming Assets / Loans & OREO 0.30 % 0.34 % 0.41 % 0.49 % 0.21 %
Gross Charge-offs $4.7 $5.4 $6.0 $0.9 $2.1
Gross Recoveries 0.8 2.0 0.6 0.4 1.7
------------ ----------- ----------- --------- ---------
Net Charge-offs $3.9 $3.4 $5.4 $0.5 $0.4
============ =========== =========== ========= =========
Net Charge-offs (Annualized) to Average Loans 0.12 % 0.11 % 0.18 % 0.02 % 0.02 %
Reserve for Credit Losses $147.7 $147.6 $148.0 $148.4 $148.3
Reserve to Nonaccrual and Restructured Loans 408 % 356 % 319 % 268 % 686 %
</TABLE>
(*) The productivity ratio is defined as total revenue on a taxable equivalent
basis divided by noninterest expenses.
(**) Effective 1/1/98, the Middle Market segment was transferred to C&IS from
PFS. Trust assets and fees for all periods have been restated.
