<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 19, 1999
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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 19, 1999 press
release, reporting on the registrant's earnings for the first quarter of 1999, 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 19, 1999 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
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(Registrant)
Dated: April 19, 1999 By: /s/ 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 19, 1999 Press Release 5
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Exhibit 99
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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
Release #01486 http://www.northerntrust.com
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FOR IMMEDIATE RELEASE
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NORTHERN TRUST CORPORATION REPORTS RECORD 1999 FIRST QUARTER
EARNINGS OF $.82 PER SHARE, UP 12%.
(Chicago, April 19, 1999) Northern Trust Corporation reported record net income
per share of $.82 for the first quarter, an increase of 12% from the $.73 earned
a year ago. Net income also increased 12% to a record $95.1 million from the
$84.9 million earned in the first quarter of last year. This performance
resulted in a return on average common equity of 20.6%.
William A. Osborn, Chairman and Chief Executive Officer, commented, "Strong
earnings momentum continued into the first quarter of 1999. Trust fee growth of
16%, driven by strong new business and a favorable U.S. stock market, led to an
11% increase in total revenues. Earnings per share increased 12%, above our
minimum goal of 10%, and the return on average common equity of 20.6% exceeded
our 18-20% target range for the eighth consecutive quarter. Trust assets under
administration have grown to $1.3 trillion over the past 12 months, up 12%, with
assets under management also increasing 12% to $243 billion. These results
reflect our consistent and sharply focused business strategy, which positions us
well for continued growth for the balance of 1999."
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FIRST QUARTER PERFORMANCE HIGHLIGHTS
Revenues increased 11% to $420.6 million. Trust fees grew 16% to a record
$224.5 million in the quarter compared to $193.7 million in the first quarter of
last year, representing 53% of total revenues and 78% of noninterest income.
Trust fees from Personal Financial Services (PFS) in the quarter increased
20% and totaled $110.6 million compared to $91.8 million in the year-ago
quarter. The increase resulted primarily from continued strong new business
throughout Northern Trust's national PFS network and favorable equity markets.
All states recorded double-digit increases in trust fees, with Florida, Arizona
and Texas each up over 20%. The Wealth Management Group also had excellent
performance, with trust fees increasing 25%. Wealth Management now administers
$39.2 billion in assets nationwide, up 26% from last year.
With expansion in Indian Wells, California and entry into Grand Rapids,
Michigan in 1999, Northern Trust's network of Personal Financial Services
offices now includes 69 locations in seven states. Total personal trust assets
under administration increased to $125.6 billion at March 31, 1999, up 19% from
March 31, 1998 and 4% from December 31, 1998. Of these assets under
administration, $75.8 billion is managed by Northern Trust, up 17% from March
31, 1998.
Trust fees from Corporate & Institutional Services (C&IS) in the quarter
increased 12% and totaled $113.9 million compared to $101.9 million in the year-
ago quarter, reflecting strong new business. C&IS trust 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. Although
all of these services contributed to the first quarter fee growth, nearly 60% of
the increase was a result of very strong securities lending fees, which
increased 39% or $7.1 million to $25.0 million primarily as a result of new
business, increased spreads for both domestic and international securities and
favorable equity markets. Excellent new business results drove fees generated by
Northern Trust Retirement Consulting, LLC up 31% or
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FIRST QUARTER PERFORMANCE HIGHLIGHTS (continued)
$2.4 million compared to last year's first quarter. Fees from investment
products increased $2.2 million to $33.6 million and custody fees increased
modestly.
Total C&IS trust assets under administration increased to $1.17 trillion at
March 31, 1999, up 11% from March 31, 1998 and 3% from December 31, 1998. Of the
C&IS trust assets under administration, $166.9 billion is managed by Northern
Trust, up 10% from March 31, 1998. Trust assets under administration included
approximately $207 billion of global custody assets.
Foreign exchange trading profits were $25.6 million compared to $28.1
million in the first quarter of the prior year. First quarter foreign exchange
activity was impacted by a lower level of custody-related foreign exchange
transactions, reflecting in particular the end of trading among the 11 European
currencies that became convertible at fixed rates into the euro effective
January 1, 1999.
Total treasury management revenues from both fees and the computed value of
compensating deposit balances increased 6% from the first quarter of 1998 to
$24.8 million, reflecting the continued growth in business from both new and
existing clients. The fee portion of these revenues accrued in the quarter was
$18.1 million, up 14% from $15.9 million in the comparable quarter last year.
Security commissions and trading income of $7.5 million were up 5% from a year
ago. This reflects a 21% increase in brokerage commissions at Northern Trust
Securities, Inc. offset in part by the absence of futures commissions resulting
from Northern Trust's exit from the futures business in the middle of last year.
Other operating income was $10.4 million for the first quarter compared with
$11.0 million in the same period of last year, reflecting primarily a reduction
in trust deposit-related fee income.
Net interest income for the quarter, stated on a fully taxable equivalent
basis, totaled $134.5 million, up 10% from the $122.0 million reported in the
prior year quarter. The increase
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FIRST QUARTER PERFORMANCE HIGHLIGHTS (continued)
in net interest income reflects 12% growth in average earning assets and higher
levels of noninterest-related funds. The asset growth included an 11% or $1.3
billion increase in loans and leases and a 35% or $1.2 billion increase in money
market assets. The net interest margin was 2.07% versus 2.11% for the year-ago
quarter. The slight decline in the margin is largely attributable to the growth
in short-term, low margin assets.
Nonperforming assets of $32.3 million at quarter-end decreased from $39.2
million at March 31, 1998 and $35.2 million at December 31, 1998. The overall
quality of the loan portfolio remains strong. Nonaccrual and restructured loans
of $30.2 million at quarter-end represent .22% of total loans and were covered
4.9 times by the $147.2 million reserve for credit losses. First quarter net
charge-offs totaled $.1 million. The provision for credit losses of $.5 million
in the first quarter was $3.5 million below the comparable quarter in 1998.
Noninterest expenses totaled $266.4 million for the quarter, an increase of
13% or $30.2 million from the $236.2 million in the year-ago quarter.
Approximately 55% of the increase in expenses related to salaries, incentives
and employee benefits. In addition, the expense growth reflects costs associated
with technology investments, business promotion, and expansion of the PFS office
network.
The increase in compensation and benefits was primarily attributable to
staff growth, merit increases and higher performance-based incentives. 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, 1999 totaled 8,043, up 5% from 7,672 at March 31, 1998. Staff levels would
have been approximately 9% higher than a year ago had the Corporation not
outsourced the Illinois check processing at year-end. Higher performance-based
compensation is principally attributable to increased accruals for incentive
plans, as a result of strong performance, and for stock-based compensation
plans.
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BALANCE SHEET
Balance sheet assets averaged $29.4 billion for the quarter, up 13% from
last year's average of $26.0 billion, reflecting growth in loans and money
market assets. Loans and leases averaged $14.1 billion for the quarter, an
increase of $1.3 billion or 11%. Residential mortgages increased $678 million or
13% to average $5.9 billion for the quarter and represented 43% of the total
loan portfolio. Commercial and industrial loans averaged $4.4 billion during the
quarter compared to $3.9 billion in the first quarter of 1998. The securities
portfolio increased 4% to $7.5 billion on average during the period. Money
market assets averaged $4.7 billion in the quarter, up 35% or $1.2 billion from
last year.
Common stockholders' equity averaged $1.8 billion, up 13% 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 289,294
shares at a cost of $25.5 million. An additional 1.3 million shares may be
purchased after March 31, 1999 under the current share buyback program.
FORWARD-LOOKING STATEMENTS
This news release may be deemed to include forward-looking statements, such
as statements that relate to financial goals, business outlook, expansion plans,
new business and credit quality. Actual results could differ materially from
those indicated by these statements. Northern Trust's 1998 Annual Report to
Stockholders, including the section of Management's Discussion and Analysis
captioned "Forward-Looking Information," and periodic reports to the SEC contain
additional information about factors that could affect actual results.
/ / /
<PAGE>
NORTHERN TRUST CORPORATION Page 1
(Supplemental Consolidated Financial Information)
STATEMENT OF INCOME STATISTICS ($ IN MILLIONS)
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<TABLE>
<CAPTION>
FIRST QUARTER
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1999 1998 % Change (*)
--------------------------------------------
<S> <C> <C> <C>
Noninterest Income
Trust Fees $ 224.5 $ 193.7 16 %
Foreign Exchange Trading Profits 25.6 28.1 (9)
Treasury Management Fees 18.1 15.9 14
Security Commissions & Trading Income 7.5 7.2 5
Other Operating Income 10.4 11.0 (7)
Investment Security Transactions - 0.7 -
-------- -------- -------
Total Noninterest Income 286.1 256.6 11
Interest Income (Taxable Equivalent) 379.1 365.7 4
Interest Expense 244.6 243.7 N/M
-------- -------- -------
Net Interest Income (Taxable Equivalent) 134.5 122.0 10
Total Revenue (Taxable Equivalent) 420.6 378.6 11
Noninterest Expenses
Compensation 135.7 121.7 11
Employee Benefits 26.0 23.5 11
Occupancy Expense 17.7 16.9 5
Equipment Expense 15.6 16.5 (5)
Other Operating Expenses 71.4 57.6 24
-------- -------- -------
Total Noninterest Expenses 266.4 236.2 13
Provision for Credit Losses 0.5 4.0 N/M
Taxable Equivalent Adjustment 8.9 8.4 5
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Income Before Income Taxes 144.8 130.0 11
Provision for Income Taxes 49.7 45.1 10
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NET INCOME $ 95.1 $ 84.9 12 %
======== ======== =======
Net Income Per Common Share
Basic $ 0.85 $ 0.75 13 %
Diluted 0.82 0.73 12
Return on Average Common Equity 20.62 % 20.73 %
Average Common Equity $1,848.8 $1,636.0 13 %
Return on Average Assets 1.31 % 1.32 %
Common Dividend Declared per Share $ 0.24 $ 0.21 14 %
Preferred Dividends (millions) 1.1 1.3 (9)
Average Common Shares Outstanding (000s)
Basic 110,822 110,902
Diluted 115,070 115,056
Common Shares Outstanding (EOP) 111,643 111,519
</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: Certain reclassifications have been made to prior periods' financial
statements to place them on a basis comparable with the current
period's financial statements.
<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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1999 1998 % Change (*)
---------------------------------------------
<S> <C> <C> <C>
Assets
Money Market Assets $ 3,423.3 $ 3,534.0 (3) %
Securities
U.S. Government 304.7 395.6 (23)
Federal Agency and Other 6,386.3 4,308.0 48
Municipal 517.7 433.7 19
Trading Account 14.5 14.2 2
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Total Securities 7,223.2 5,151.5 40
Loans and Leases 14,046.5 12,952.2 8
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Total Earning Assets 24,693.0 21,637.7 14
Reserve for Credit Losses (147.2) (147.7) N/M
Cash and Due from Banks 1,195.1 1,124.0 6
Trust Security Settlement Receivables 354.2 357.3 (1)
Buildings and Equipment 346.2 327.8 6
Other Nonearning Assets 1,113.3 952.7 17
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Total Assets $27,554.6 $24,251.8 14 %
========= ========= ======
Liabilities and Stockholders' Equity
Interest-Bearing Deposits
Savings $ 6,837.4 $ 6,431.1 6 %
Other Time 513.5 470.5 9
Foreign Office Time 4,817.5 5,192.6 (7)
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Total Interest-Bearing Deposits 12,168.4 12,094.2 1
Borrowed Funds 6,625.6 4,226.0 57
Senior Notes and Long-Term Debt 1,526.0 1,364.2 12
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Total Interest-Related Funds 20,320.0 17,684.4 15
Demand & Other Noninterest-Bearing Deposits 4,423.8 4,072.0 9
Other Liabilities 779.8 694.9 12
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Total Liabilities 25,523.6 22,451.3 14
Common Equity 1,911.0 1,680.5 14
Preferred Equity 120.0 120.0 -
--------- --------- ------
Total Liabilities and Stockholders' Equity $27,554.6 $24,251.8 14 %
--------- ========= ======
</TABLE>
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Page 3
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
AVERAGE BALANCE SHEET ($ IN MILLIONS)
<TABLE>
<CAPTION>
FIRST QUARTER
-----------------------------------------
1999 1998 % Change (*)
------------------------------------------
<S> <C> <C> <C>
Assets
Money Market Assets $ 4,737.8 $ 3,506.4 35%
Securities
U.S. Government 312.2 465.3 (33)
Federal Agency and Other 6,649.0 6,305.1 5
Municipal 511.2 398.2 28
Trading Account 12.4 8.9 39
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Total Securities 7,484.8 7,177.5 4
Loans and Leases 14,079.2 12,735.0 11
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Total Earning Assets 26,301.8 23,418.9 12
Reserve for Credit Losses (147.1) (147.7) N/M
Nonearning Assets 3,225.6 2,734.7 18
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Total Assets $29,380.3 $26,005.9 13%
========= ========= ===
Liabilities and Stockholders' Equity
Interest-Bearing Deposits
Savings $ 6,813.5 $ 6,280.1 8%
Other Time 560.4 525.6 7
Foreign Office Time 5,973.6 5,553.1 8
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Total Interest-Bearing Deposits 13,347.5 12,358.8 8
Borrowed Funds 7,765.7 6,042.4 29
Senior Notes and Long-Term Debt 1,472.4 1,451.9 1
--------- --------- ---
Total Interest-Related Funds 22,585.6 19,853.1 14
Demand & Other Noninterest-Bearing
Deposits 3,979.8 3,740.7 6
Other Liabilities 846.1 656.1 29
--------- --------- ---
Total Liabilities 27,411.5 24,249.9 13
Common Equity 1,848.8 1,636.0 13
Preferred Equity 120.0 120.0 -
--------- --------- ---
Total Liabilities and
Stockholders' Equity $29,380.3 $26,005.9 13%
========= ========= ===
</TABLE>
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Page 4
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
Quarterly Trend Data ($ In Millions)
<TABLE>
<CAPTION>
1999 1998
Quarter Quarters
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First Fourth Third Second First
<S> <C> <C> <C> <C> <C>
Net Income Summary
Trust Fees $ 224.5 $ 216.7 $ 203.6 $ 202.3 $ 193.7
Other Noninterest Income 61.6 67.9 61.1 63.4 62.9
Net Interest Income (Taxable Equivalent) 134.5 135.2 127.7 128.2 122.0
-------- ------- -------- -------- -------
Total Revenue (Taxable Equivalent) 420.6 419.8 392.4 393.9 378.6
Provision for Credit Losses 0.5 1.0 1.0 3.0 4.0
Noninterest Expenses 266.4 269.4 243.8 247.7 236.2
-------- ------- ------- -------- --------
Pretax Income (Taxable Equivalent) 153.7 149.4 147.6 143.2 138.4
Taxable Equivalent Adjustment 8.9 8.8 9.7 9.0 8.4
Provision for Income Taxes 49.7 49.0 47.7 47.0 45.1
--------- ------- -------- -------- --------
Net Income $ 95.1 $ 91.6 $ 90.2 $ 87.2 $ 84.9
========= ======== ======== ======== =========
Per Common Share
Net Income - Basic $ 0.85 $ 0.82 $ 0.81 $ 0.78 $ 0.75
- Diluted 0.82 0.79 0.78 0.75 0.73
Dividend Declared 0.24 0.24 0.21 0.21 0.21
Book Value (EOP) $17.12 $16.37 $15.84 $15.46 $15.07
Market Value (EOP) 88.81 87.31 68.25 76.25 74.75
Ratios
Return on Average Common Equity 20.62 % 20.16 % 20.55 % 20.48 % 20.73 %
Return on Average Assets 1.31 1.27 1.30 1.32 1.32
Net Interest Margin 2.07 2.08 2.01 2.14 2.11
Productivity Ratio (*) 158 % 156 % 161 % 159 % 160 %
Risk-based Capital Ratios
Tier 1 9.9 % 9.8 % 9.4 % 9.3 % 9.8 %
Total (Tier 1 + Tier 2) 13.1 13.1 12.7 12.6 13.0
Leverage 7.0 6.9 6.9 7.0 7.0
Trust Assets ($ in Billions) - EOP
Corporate $1,170.4 $1,138.5 $1,024.5 $1,090.3 $1,056.5
Personal 125.6 121.2 104.8 110.2 105.5
-------- -------- -------- -------- --------
Total Trust Assets $1,296.0 $1,259.7 $1,129.3 $1,200.5 $1,162.0
======== ======== ======== ======== =======
Memo: Managed Assets $ 242.7 $ 236.0 $ 220.7 $ 228.7 $ 216.5
Asset Quality ($ in Millions) - EOP
Nonaccrual and Restructured Loans $ 30.2 $ 32.9 $ 29.6 $ 27.0 $ 36.2
Other Real Estate Owned (OREO) 2.1 2.3 1.6 2.0 3.0
-------- -------- -------- -------- -------
Total Nonperforming Assets $ 32.3 $ 35.2 $ 31.2 $ 29.0 $ 39.2
======== ======== ======== ======== =======
Nonperforming Assets / Loans & OREO 0.23 % 0.26 % 0.23 % 0.21 % 0.30 %
Gross Charge-offs $ 0.4 $ 1.0 $ 1.5 $ 4.6 $ 4.7
Gross Recoveries 0.3 0.2 0.4 0.4 0.8
-------- -------- -------- -------- -------
Net Charge-offs $ 0.1 $ 0.8 $ 1.1 $ 4.2 $ 3.9
======= ======== ======== ======== =======
Net Charge-offs (Annualized) to Average Loans 0.002 % 0.02 % 0.03 % 0.13 % 0.12 %
Reserve for Credit Losses $ 147.2 $ 146.8 $ 146.6 $ 146.7 $ 147.7
Reserve to Nonaccrual and Restructured Loans 487 % 446 % 496 % 543 % 408 %
</TABLE>
(*) The productivity ratio is defined as total revenue on a taxable equivalent
basis divided by noninterest expenses.
