x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended June 30, 2000 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to |
DELAWARE | 36-2723087 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
50 SOUTH LA SALLE STREET | ||
CHICAGO, ILLINOIS | 60675 | |
(Address of principal executive offices) | (Zip Code) |
June 30 | December 31 | June 30 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2000 | 1999 | 1999 | |||||||||||||||||
($ In Millions) | |||||||||||||||||||
Assets | |||||||||||||||||||
Cash and Due from Banks | $ 1,932.6 | $ 1,977.9 | $ 1,274.3 | ||||||||||||||||
Federal Funds Sold and Securities Purchased under Agreements to Resell | 504.5 | 1,083.8 | 704.0 | ||||||||||||||||
Time Deposits with Banks | 3,748.5 | 2,292.2 | 2,734.9 | ||||||||||||||||
Other Interest-Bearing Assets | 28.9 | 63.2 | 22.9 | ||||||||||||||||
Securities | |||||||||||||||||||
Available for Sale | 10,397.8 | 5,480.0 | 8,300.2 | ||||||||||||||||
Held to Maturity (Fair value — $775.3 at June 2000, $740.4 at December 1999, $506.0 at June 1999) | 789.0 | 752.7 | 501.2 | ||||||||||||||||
Trading Account | 12.2 | 11.0 | 9.1 | ||||||||||||||||
Total Securities | 11,199.0 | 6,243.7 | 8,810.5 | ||||||||||||||||
Loans and Leases | |||||||||||||||||||
Commercial and Other | 10,761.2 | 9,116.8 | 8,897.4 | ||||||||||||||||
Residential Mortgages | 6,519.5 | 6,257.7 | 6,108.6 | ||||||||||||||||
Total Loans and Leases (Net of unearned income — $352.8 at June 2000, $321.3 at December 1999, $149.6 at June 1999) | 17,280.7 | 15,374.5 | 15,006.0 | ||||||||||||||||
Reserve for Credit Losses | (159.3 | ) | (150.9 | ) | (151.9 | ) | |||||||||||||
Buildings and Equipment | 394.5 | 380.4 | 350.0 | ||||||||||||||||
Customers’ Acceptance Liability | 33.1 | 34.7 | 30.4 | ||||||||||||||||
Trust Security Settlement Receivables | 617.6 | 323.1 | 392.6 | ||||||||||||||||
Other Assets | 1,268.0 | 1,085.6 | 1,017.1 | ||||||||||||||||
Total Assets | $36,848.1 | $28,708.2 | $30,190.8 | ||||||||||||||||
Liabilities | |||||||||||||||||||
Deposits | |||||||||||||||||||
Demand and Other Noninterest-Bearing | $ 4,249.2 | $ 4,476.0 | $ 4,433.2 | ||||||||||||||||
Savings and Money Market | 5,274.2 | 5,299.7 | 4,626.3 | ||||||||||||||||
Savings Certificates | 2,238.6 | 2,338.6 | 2,140.6 | ||||||||||||||||
Other Time | 1,040.2 | 913.0 | 731.0 | ||||||||||||||||
Foreign Offices — Demand | 1,050.7 | 468.8 | 478.1 | ||||||||||||||||
— Time | 8,459.3 | 7,874.9 | 5,871.1 | ||||||||||||||||
Total Deposits | 22,312.2 | 21,371.0 | 18,280.3 | ||||||||||||||||
Federal Funds Purchased | 1,054.4 | 370.2 | 712.6 | ||||||||||||||||
Securities Sold Under Agreements to Repurchase | 3,050.1 | 997.8 | 1,311.3 | ||||||||||||||||
Commercial Paper | 145.1 | 145.1 | 129.0 | ||||||||||||||||
Other Borrowings | 5,494.6 | 1,155.3 | 5,497.8 | ||||||||||||||||
Senior Notes | 500.0 | 500.0 | 600.0 | ||||||||||||||||
Long-Term Debt | 638.3 | 659.4 | 458.8 | ||||||||||||||||
Debt — Floating Rate Capital Securities | 267.6 | 267.5 | 267.5 | ||||||||||||||||
Liability on Acceptances | 33.1 | 34.7 | 30.4 | ||||||||||||||||
Other Liabilities | 1,047.8 | 1,032.5 | 826.7 | ||||||||||||||||
Total Liabilities | 34,543.2 | 26,533.5 | 28,114.4 | ||||||||||||||||
Stockholders’ Equity | |||||||||||||||||||
Preferred Stock | 120.0 | 120.0 | 120.0 | ||||||||||||||||
Common Stock, $1.66 2/3 Par Value; Authorized 560,000,000 shares at June 2000 and 280,000,000 shares at December 1999 and June 1999; Outstanding 221,849,731 at June 2000, 222,161,934 at December 1999 and 111,473,056 at June 1999 | 379.8 | 379.8 | 189.9 | ||||||||||||||||
Capital Surplus | — | — | 197.2 | ||||||||||||||||
Retained Earnings | 2,034.8 | 1,870.7 | 1,721.8 | ||||||||||||||||
Net Unrealized Gain (Loss) on Securities Available for Sale | (2.3 | ) | (2.4 | ) | 1.5 | ||||||||||||||
Common Stock Issuable — Performance Plan | 113.3 | 55.0 | 56.7 | ||||||||||||||||
Deferred Compensation — ESOP and Other | (85.0 | ) | (44.2 | ) | (52.7 | ) | |||||||||||||
Treasury Stock — (at cost — 6,071,793 shares at June 2000, 5,759,590 shares at December 1999, and 2,487,706 shares at June 1999) | (255.7 | ) | (204.2 | ) | (158.0 | ) | |||||||||||||
Total Stockholders’ Equity | 2,304.9 | 2,174.7 | 2,076.4 | ||||||||||||||||
Total Liabilities and Stockholders’ Equity | $36,848.1 | $28,708.2 | $30,190.8 | ||||||||||||||||
Second Quarter Ended June 30 | Six Months Ended June 30 | |||||||
---|---|---|---|---|---|---|---|---|
2000 | 1999 | 2000 | 1999 | |||||
($ In Millions Except Per Share Information) | ||||||||
Noninterest Income | ||||||||
Trust Fees | $ 305.6 | $ 236.2 | $ 591.6 | $ 460.7 | ||||
Foreign Exchange Trading Profits | 42.1 | 28.9 | 76.1 | 54.5 | ||||
Treasury Management Fees | 18.2 | 17.3 | 35.3 | 35.4 | ||||
Security Commissions and Trading Income | 8.3 | 7.7 | 17.9 | 15.2 | ||||
Other Operating Income | 18.7 | 12.1 | 34.4 | 22.5 | ||||
Investment Security Gains | — | .1 | — | .1 | ||||
Total Noninterest Income | 392.9 | 302.3 | 755.3 | 588.4 | ||||
Net Interest Income | ||||||||
Interest Income | 499.9 | 370.0 | 935.7 | 740.2 | ||||
Interest Expense | 359.1 | 243.4 | 655.5 | 488.0 | ||||
Net Interest Income | 140.8 | 126.6 | 280.2 | 252.2 | ||||
Provision for Credit Losses | 10.0 | 5.0 | 14.0 | 5.5 | ||||
Net Interest Income after Provision for Credit Losses | 130.8 | 121.6 | 266.2 | 246.7 | ||||
Noninterest Expenses | ||||||||
Compensation | 170.0 | 139.9 | 334.8 | 275.6 | ||||
Employee Benefits | 27.3 | 24.6 | 56.5 | 50.6 | ||||
Occupancy Expense | 22.2 | 18.1 | 43.0 | 35.8 | ||||
Equipment Expense | 18.5 | 15.6 | 36.4 | 31.2 | ||||
Other Operating Expenses | 100.2 | 73.5 | 193.6 | 144.9 | ||||
Total Noninterest Expenses | 338.2 | 271.7 | 664.3 | 538.1 | ||||
Income before Income Taxes | 185.5 | 152.2 | 357.2 | 297.0 | ||||
Provision for Income Taxes | 62.5 | 52.5 | 120.9 | 102.2 | ||||
Net Income | $ 123.0 | $ 99.7 | $ 236.3 | $ 194.8 | ||||
Net Income Applicable to Common Stock | $ 121.6 | $ 98.6 | $ 233.6 | $ 192.6 | ||||
Net Income Per Common Share — Basic | $ .55 | $ .44 | $ 1.06 | $ .87 | ||||
— Diluted | .53 | .43 | 1.01 | .84 | ||||
Average Number of Common Shares Outstanding — Basic | 221,010,593 | 221,949,172 | 221,104,966 | 221,796,976 | ||||
— Diluted | 230,503,264 | 230,294,202 | 230,311,960 | 230,218,330 | ||||
NORTHERN TRUST CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Second Quarter Ended June 30 | Six Months Ended June 30 | ||||||||
---|---|---|---|---|---|---|---|---|---|
2000 | 1999 | 2000 | 1999 | ||||||
(In Millions) | |||||||||
Net Income | $123.0 | $99.7 | $236.3 | $194.8 | |||||
Other Comprehensive Income (net of tax) | |||||||||
Unrealized Gains (Losses) on Securities Available for Sale | |||||||||
Unrealized Holding Gains (Losses) Arising during the Period | |||||||||
(Net of tax (provision) benefit of $(.5) and $1.4 million for the second quarters ended June 30, 2000 and 1999 respectively. | |||||||||
Net of tax provision of $.5 million and $1.3 million for six months ended June 30, 2000 and 1999, respectively). | .1 | (2.4 | ) | .1 | 2.1 | ||||
Less: Reclassification Adjustments for Gains Included in Net Income | — | — | — | — | |||||
Other Comprehensive Income | .1 | (2.4 | ) | .1 | 2.1 | ||||
Comprehensive Income | $123.1 | $97.3 | $236.4 | $196.9 | |||||
Six Months Ended June 30 | ||||||
---|---|---|---|---|---|---|
2000 | 1999 | |||||
(In Millions) | ||||||
Preferred Stock | ||||||
Balance at January 1 and June 30 | $ 120.0 | $ 120.0 | ||||
Common Stock | ||||||
Balance at January 1 and June 30 | 379.8 | 189.9 | ||||
Capital Surplus | ||||||
Balance at January 1 | — | 212.9 | ||||
Stock Issued — Incentive Plan and Awards | — | (15.7 | ) | |||
Balance at June 30 | — | 197.2 | ||||
Retained Earnings | ||||||
Balance at January 1 | 1,870.7 | 1,582.9 | ||||
Net Income | 236.3 | 194.8 | ||||
Dividends Declared — Common Stock | (59.9 | ) | (53.5 | ) | ||
Dividends Declared — Preferred Stock | (3.0 | ) | (2.4 | ) | ||
Incentive Plan and Awards | (9.3 | ) | — | |||
Balance at June 30 | 2,034.8 | 1,721.8 | ||||
Net Unrealized Gain (Loss) on Securities Available for Sale | ||||||
Balance at January 1 | (2.4 | ) | (.6 | ) | ||
Unrealized Gain, net | 0.1 | 2.1 | ||||
Balance at June 30 | (2.3 | ) | 1.5 | |||
Common Stock Issuable — Performance Plan | ||||||
Balance at January 1 | 55.0 | 30.4 | ||||
Stock Issuable, net of Stock Issued | 58.3 | 26.3 | ||||
Balance at June 30 | 113.3 | 56.7 | ||||
Deferred Compensation — ESOP and Other | ||||||
Balance at January 1 | (44.2 | ) | (44.3 | ) | ||
Compensation Deferred | (51.5 | ) | (15.3 | ) | ||
Compensation Amortized | 10.7 | 6.9 | ||||
Balance at June 30 | (85.0 | ) | (52.7 | ) | ||
Treasury Stock | ||||||
Balance at January 1 | (204.2 | ) | (150.9 | ) | ||
Stock Options and Awards | 50.1 | 55.5 | ||||
Stock Purchased | (101.6 | ) | (62.6 | ) | ||
Balance at June 30 | (255.7 | ) | (158.0 | ) | ||
Total Stockholders’ Equity at June 30 | $2,304.9 | $2,076.4 | ||||
Six Months Ended June 30 | ||||||
---|---|---|---|---|---|---|
2000 | 1999 | |||||
(In Millions) | ||||||
Cash Flows from Operating Activities: | ||||||
Net Income | $ 236.3 | $ 194.8 | ||||
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: | ||||||
Provision for Credit Losses | 14.0 | 5.5 | ||||
Depreciation on Buildings and Equipment | 34.1 | 28.8 | ||||
(Increase) Decrease in Interest Receivable | (13.1 | ) | 2.3 | |||
Increase (Decrease) in Interest Payable | 11.1 | (11.7 | ) | |||
Amortization and Accretion of Securities and Unearned Income | (89.9 | ) | (173.2 | ) | ||
Amortization of Software, Goodwill and Other Intangibles | 38.9 | 31.0 | ||||
Net Increase in Trading Account Securities | (1.2 | ) | — | |||
Other Noncash, net | (87.7 | ) | (1.5 | ) | ||
Net Cash Provided by Operating Activities | 142.5 | 76.0 | ||||
Cash Flows from Investing Activities: | ||||||
Net Decrease in Federal Funds Sold and Securities Purchased under Agreements to Resell | 579.3 | 460.4 | ||||
Net (Increase) Decrease in Time Deposits with Banks | (1,456.3 | ) | 529.8 | |||
Net (Increase) Decrease in Other Interest-Bearing Assets | 34.3 | (1.1 | ) | |||
Purchases of Securities-Held to Maturity | (95.3 | ) | (108.5 | ) | ||
Proceeds from Maturity and Redemption of Securities-Held to Maturity | 64.8 | 80.5 | ||||
Purchases of Securities-Available for Sale | (23,856.2 | ) | (20,284.5 | ) | ||
Proceeds from Sale, Maturity and Redemption of Securities-Available for Sale | 19,061.2 | 17,443.4 | ||||
Net Increase in Loans and Leases | (1,943.9 | ) | (1,285.7 | ) | ||
Purchases of Buildings and Equipment | (48.2 | ) | (38.5 | ) | ||
Purchases and Development of Computer Software | (52.3 | ) | (54.9 | ) | ||
Net Increase in Trust Security Settlement Receivables | (294.5 | ) | (55.9 | ) | ||
Other, net | 2.1 | 2.0 | ||||
Net Cash Used in Investing Activities | (8,005.0 | ) | (3,313.0 | ) | ||
Cash Flows from Financing Activities: | ||||||
Net Increase in Deposits | 941.2 | 77.6 | ||||
Net Increase (Decrease) in Federal Funds Purchased | 684.2 | (1,312.5 | ) | |||
Net Increase (Decrease) in Securities Sold under Agreements to Repurchase | 2,052.3 | (803.6 | ) | |||
Net Decrease in Commercial Paper | — | (19.1 | ) | |||
Net Increase in Short-Term Other Borrowings | 4,812.8 | 4,419.9 | ||||
Proceeds from Term Federal Funds Purchased | 1,474.5 | 3,958.3 | ||||
Repayments of Term Federal Funds Purchased | (1,948.0 | ) | (3,979.6 | ) | ||
Proceeds from Senior Notes & Long-Term Debt | 102.6 | 100.7 | ||||
Repayments of Senior Notes & Long-Term Debt | (123.7 | ) | (200.1 | ) | ||
Treasury Stock Purchased | (100.8 | ) | (62.4 | ) | ||
Net Proceeds from Stock Options | 9.4 | 14.1 | ||||
Cash Dividends Paid on Common and Preferred Stock | (93.1 | ) | (55.9 | ) | ||
Other, net | 5.8 | 7.9 | ||||
Net Cash Provided by Financing Activities | 7,817.2 | 2,145.3 | ||||
Decrease in Cash and Due from Banks | (45.3 | ) | (1,091.7 | ) | ||
Cash and Due from Banks at Beginning of Year | 1,977.9 | 2,366.0 | ||||
Cash and Due from Banks at June 30 | $ 1,932.6 | $ 1,274.3 | ||||
Supplemental Disclosures of Cash Flow Information: | ||||||
Interest Paid | $ 644.3 | $ 499.7 | ||||
Income Taxes (Received) Paid | 33.4 | (.2 | ) | |||
1. Basis of Presentation— The consolidated financial statements include the accounts of Northern Trust Corporation and its subsidiaries (Northern Trust), all of which are wholly-owned. Significant intercompany balances and transactions have been eliminated. The consolidated financial statements as of June 30, 2000 and 1999 have not been audited by independent public accountants. In the opinion of management, all adjustments necessary for a fair presentation of the financial position and the results of operations for the interim periods have been made. All such adjustments are of a normal recurring nature. Certain reclassifications have been made to prior periods’ consolidated financial statements to place them on a basis comparable with the current period’s consolidated financial statements. For a description of Northern Trust’s significant accounting policies, refer to Note 1 of the Notes to Consolidated Financial Statements in the 1999 Annual Report to Shareholders.
June 30, 2000 | December 31, 1999 | June 30, 1999 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Book Value | Fair Value | Book Value | Fair Value | Book Value | Fair Value | |||||||
(In Millions) | ||||||||||||
Held to Maturity | ||||||||||||
US Government | $ 54.9 | $ 54.9 | $ 55.1 | $ 55.0 | $ 55.4 | $ 55.3 | ||||||
Obligations of States and Political Subdivisions | 459.8 | 450.1 | 476.0 | 466.6 | 238.9 | 246.4 | ||||||
Federal Agency | 5.9 | 5.6 | .9 | .7 | 2.5 | 2.4 | ||||||
Other | 268.4 | 264.7 | 220.7 | 218.1 | 204.4 | 201.9 | ||||||
Subtotal | 789.0 | 775.3 | 752.7 | 740.4 | 501.2 | 506.0 | ||||||
Available for Sale | ||||||||||||
US Government | 172.5 | 172.5 | 192.0 | 192.0 | 228.0 | 228.0 | ||||||
Obligations of States and Political Subdivisions | 15.2 | 15.2 | 15.3 | 15.3 | 254.6 | 254.6 | ||||||
Federal Agency | 10,034.5 | 10,034.5 | 5,105.6 | 5,105.6 | 7,697.4 | 7,697.4 | ||||||
Preferred Stock | 111.2 | 111.2 | 101.3 | 101.3 | 103.3 | 103.3 | ||||||
Other | 64.4 | 64.4 | 65.8 | 65.8 | 16.9 | 16.9 | ||||||
Subtotal | 10,397.8 | 10,397.8 | 5,480.0 | 5,480.0 | 8,300.2 | 8,300.2 | ||||||
Trading Account | 12.2 | 12.2 | 11.0 | 11.0 | 9.1 | 9.1 | ||||||
Total Securities | $11,199.0 | $11,185.3 | $6,243.7 | $6,231.4 | $8,810.5 | $8,815.3 | ||||||
June 30, 2000 | ||||||||
---|---|---|---|---|---|---|---|---|
Book Value | Gross Unrealized | Fair Value | ||||||
Gains | Losses | |||||||
(In Millions) | ||||||||
U.S. Government | $ 54.9 | $— | $ — | $ 54.9 | ||||
Obligations of States and Political Subdivisions | 459.8 | 2.3 | 12.0 | 450.1 | ||||
Federal Agency | 5.9 | — | .3 | 5.6 | ||||
Other | 268.4 | — | 3.7 | 264.7 | ||||
Total | $789.0 | $2.3 | $16.0 | $775.3 | ||||
Reconciliation of Amortized Cost to Fair Values of Securities Available for Sale
June 30, 2000 | ||||||||
---|---|---|---|---|---|---|---|---|
Amortized Cost | Gross Unrealized | Fair Value | ||||||
Gains | Losses | |||||||
(In Millions) | ||||||||
U.S. Government | $ 172.7 | $— | $ .2 | $ 172.5 | ||||
Obligations of States and Political Subdivisions | 16.8 | — | 1.6 | 15.2 | ||||
Federal Agency | 10,037.0 | 1.3 | 3.8 | 10,034.5 | ||||
Preferred Stock | 111.6 | — | .4 | 111.2 | ||||
Other | 64.5 | — | .1 | 64.4 | ||||
Total | $10,402.6 | $1.3 | $6.1 | $10,397.8 | ||||
Unrealized gains and losses on off-balance sheet financial instruments used to hedge securities available for sale totaled $2.2 million and none respectively, as of June 30, 2000. At June 30, 2000, stockholders’ equity included a charge of $2.3 million, net of tax, to recognize the depreciation on securities available for sale and the related hedges.
3. Pledged Assets — Securities and loans pledged to secure public and trust deposits, repurchase agreements and for other purposes as required or permitted by law were $14.2 billion on June 30, 2000, $4.9 billion on December 31, 1999 and $11.6 billion on June 30, 1999.
5. Loans and Leases— Amounts outstanding in selected loan categories are shown below.
June 30, 2000 | December 31, 1999 | June 30, 1999 | ||||
---|---|---|---|---|---|---|
(In Millions) | ||||||
Domestic | ||||||
Residential Real Estate | $ 6,519.5 | $ 6,257.7 | $ 6,108.6 | |||
Commercial | 5,073.0 | 4,704.1 | 4,348.5 | |||
Broker | 275.0 | 88.8 | 85.9 | |||
Commercial Real Estate | 844.3 | 780.4 | 742.0 | |||
Personal | 1,981.4 | 1,659.9 | 1,364.0 | |||
Other | 1,038.6 | 566.5 | 847.2 | |||
Lease Financing | 737.6 | 691.5 | 570.9 | |||
Total Domestic | 16,469.4 | 14,748.9 | 14,067.1 | |||
International | 811.3 | 625.6 | 938.9 | |||
Total Loans and Leases | $17,280.7 | $15,374.5 | $15,006.0 | |||
6. Reserve for Credit Losses— Changes in the reserve for credit losses were as follows:
Six Months Ended June 30 | ||||||
---|---|---|---|---|---|---|
2000 | 1999 | |||||
(In Millions) | ||||||
Balance at Beginning of Period | $150.9 | $146.8 | ||||
Charge-Offs | ||||||
Commercial Real Estate | — | (.1 | ) | |||
Other | (6.1 | ) | (1.2 | ) | ||
International | — | — | ||||
Total Charge-Offs | (6.1 | ) | (1.3 | ) | ||
Recoveries | .5 | .9 | ||||
Net Charge-Offs | (5.6 | ) | (.4 | ) | ||
Provision for Credit Losses | 14.0 | 5.5 | ||||
Balance at End of Period | $159.3 | $151.9 | ||||
7. Net Income Per Common Share Computations — The computation of net income per common share is presented in the following table.
Second Quarter Ended June 30 | Six Months Ended June 30 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
2000 | 1999 | 2000 | 1999 | |||||||||
($ In Millions Except Per Share Information) | ||||||||||||
Basic Net Income Per Common Share | ||||||||||||
Net Income | $ 123.0 | $ 99.7 | $ 236.3 | $ 194.8 | ||||||||
Less: Dividends on Preferred Stock | (1.4 | ) | (1.1 | ) | (2.7 | ) | (2.2 | ) | ||||
Net Income Applicable to Common Stock | $ 121.6 | $ 98.6 | $ 233.6 | $ 192.6 | ||||||||
Average Number of Common Shares Outstanding | 221,010,593 | 221,949,172 | 221,104,966 | 221,796,976 | ||||||||
Basic Net Income Per Common Share | $ .55 | $ .44 | $ 1.06 | $ .87 | ||||||||
Diluted Net Income Per Common Share | ||||||||||||
Net Income Applicable to Common Stock | $ 121.6 | $ 98.6 | $ 233.6 | $ 192.6 | ||||||||
Average Number of Common Shares Outstanding | 221,010,593 | 221,949,172 | 221,104,966 | 221,796,976 | ||||||||
Plus Dilutive Potential Common Shares: | ||||||||||||
Stock Options | 7,029,003 | 6,192,632 | 6,826,057 | 6,325,256 | ||||||||
Performance Shares | 1,655,813 | 1,420,440 | 1,592,880 | 1,390,672 | ||||||||
Other Stock Awards | 807,855 | 731,958 | 788,057 | 705,426 | ||||||||
Average Common and Potential Common Shares | 230,503,264 | 230,294,202 | 230,311,960 | 230,218,330 | ||||||||
Diluted Net Income Per Common Share | $ .53 | $ .43 | $ 1.01 | $ .84 | ||||||||
Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS |
Second Quarter Ended June 30 | ||||
---|---|---|---|---|
2000 | 1999 | |||
(In Millions) | ||||
Business Development | $ 15.0 | $10.7 | ||
Purchased Professional Services | 34.8 | 26.7 | ||
Telecommunications | 4.6 | 4.3 | ||
Postage and Supplies | 6.6 | 6.4 | ||
Software Amortization | 16.1 | 11.9 | ||
Goodwill and Other Intangibles Amortization | 3.8 | 3.5 | ||
Other Expenses | 19.3 | 10.0 | ||
Total Other Operating Expenses | $100.2 | $73.5 | ||
Corporate and Institutional Services | Personal Financial Services | Treasury and Other | Total Consolidated | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2000 | 1999 | 2000 | 1999 | 2000 | 1999 | 2000 | 1999 | |||||||||||||||||||
($ In Millions) | ||||||||||||||||||||||||||
Noninterest Income | ||||||||||||||||||||||||||
Trust Fees | $ 153.0 | $ 118.6 | $ 152.6 | $ 117.6 | $ — | $ — | $ 305.6 | $ 236.2 | ||||||||||||||||||
Other | 69.3 | 51.0 | 16.0 | 14.6 | 2.0 | .5 | 87.3 | 66.1 | ||||||||||||||||||
Net Interest Income after Provision for Credit Losses* | 45.7 | 36.4 | 94.2 | 93.4 | 4.2 | 1.0 | 144.1 | 130.8 | ||||||||||||||||||
Noninterest Expenses | 160.7 | 131.0 | 158.7 | 132.1 | 18.8 | 8.6 | 338.2 | 271.7 | ||||||||||||||||||
Income before Income Taxes* | 107.3 | 75.0 | 104.1 | 93.5 | (12.6 | ) | (7.1 | ) | 198.8 | 161.4 | ||||||||||||||||
Provision for Income Taxes* | 41.5 | 29.4 | 40.4 | 37.2 | (6.1 | ) | (4.9 | ) | 75.8 | 61.7 | ||||||||||||||||
Net Income | $ 65.8 | $ 45.6 | $ 63.7 | $ 56.3 | $ (6.5 | ) | $ (2.2 | ) | $ 123.0 | $ 99.7 | ||||||||||||||||
Percentage Net Income Contribution | 53 | % | 46 | % | 52 | % | 56 | % | (5 | )% | (2 | )% | 100 | % | 100 | % | ||||||||||
Average Assets | $16,696.4 | $12,156.0 | $13,302.4 | $11,745.4 | $4,329.4 | $5,222.9 | $34,328.2 | $29,124.3 | ||||||||||||||||||
Corporate and Institutional Services | Personal Financial Services | Treasury and Other | Total Consolidated | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2000 | 1999 | 2000 | 1999 | 2000 | 1999 | 2000 | 1999 | |||||||||||||||||
($ In Millions) | ||||||||||||||||||||||||
Noninterest Income | ||||||||||||||||||||||||
Trust Fees | $ 293.5 | $ 231.7 | $ 298.1 | $ 229.0 | $ — | $ — | $ 591.6 | $ 460.7 | ||||||||||||||||
Other | 129.3 | 99.2 | 33.3 | 27.6 | 1.1 | .9 | 163.7 | 127.7 | ||||||||||||||||
Net Interest Income after Provision for Credit Losses* | 88.2 | 77.7 | 196.6 | 181.9 | 6.1 | 5.2 | 290.9 | 264.8 | ||||||||||||||||
Noninterest Expenses | 309.6 | 256.6 | 313.1 | 261.1 | 41.6 | 20.4 | 664.3 | 538.1 | ||||||||||||||||
Income before Income Taxes* | 201.4 | 152.0 | 214.9 | 177.4 | (34.4 | ) | (14.3 | ) | 381.9 | 315.1 | ||||||||||||||
Provision for Income Taxes* | 78.1 | 59.5 | 83.5 | 70.5 | (16.0 | ) | (9.7 | ) | 145.6 | 120.3 | ||||||||||||||
Net Income | $ 123.3 | $ 92.5 | $ 131.4 | $ 106.9 | $ (18.4 | ) | $ (4.6 | ) | $ 236.3 | $ 194.8 | ||||||||||||||
Percentage Net Income Contribution | 52 | % | 47 | % | 56 | % | 55 | % | (8 | )% | (2 | )% | 100 | % | 100 | % | ||||||||
Average Assets | $16,200.5 | $12,252.9 | $12,953.8 | $11,502.4 | $3,639.8 | $5,496.3 | $32,794.1 | $29,251.6 | ||||||||||||||||
June 30, 2000 | March 31, 2000 | December 31, 1999 | June 30, 1999 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
(In Millions) | ||||||||||
Nonaccrual Loans | ||||||||||
Domestic | ||||||||||
Residential Real Estate | $ 4.8 | $ 5.6 | $ 6.4 | $ 5.7 | ||||||
Commercial | 47.1 | 48.2 | 50.3 | 35.3 | ||||||
Commercial Real Estate | 2.0 | 2.0 | 1.9 | 2.2 | ||||||
Personal | .5 | .7 | .7 | .9 | ||||||
Total Domestic | 54.4 | 56.5 | 59.3 | 44.1 | ||||||
International | — | — | — | — | ||||||
Total Nonaccrual Loans | 54.4 | 56.5 | 59.3 | 44.1 | ||||||
Other Real Estate Owned | 1.0 | 2.1 | 1.3 | 1.1 | ||||||
Total Nonperforming Assets | $55.4 | $58.6 | $60.6 | $45.2 | ||||||
Total 90 Day Past Due Loans (still accruing) | $25.5 | $25.2 | $15.4 | $19.6 | ||||||
June 30, 2000 | March 31, 2000 | December 31, 1999 | June 30, 1999 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Reserve Amount | Percent of Loans to Total Loans | Reserve Amount | Percent of Loans to Total Loans | Reserve Amount | Percent of Loans to Total Loans | Reserve Amount | Percent of Loans to Total Loans | |||||||||||||
($ in millions) | ||||||||||||||||||||
Specific Reserves | $ 18.6 | — | % | $ 19.0 | — | % | $ 15.0 | — | % | $ 17.3 | — | % | ||||||||
Inherent Reserves | ||||||||||||||||||||
Residential Real Estate | 10.1 | 38 | 11.3 | 39 | 11.5 | 41 | 12.6 | 41 | ||||||||||||
Commercial | 79.8 | 31 | 73.0 | 29 | 73.2 | 31 | 65.8 | 30 | ||||||||||||
Commercial Real Estate | 12.8 | 5 | 12.6 | 5 | 12.2 | 5 | 13.4 | 5 | ||||||||||||
Personal | 3.4 | 11 | 3.3 | 12 | 3.3 | 11 | 3.2 | 9 | ||||||||||||
Other | — | 6 | — | 6 | — | 4 | — | 5 | ||||||||||||
Lease Financing | 2.9 | 4 | 2.9 | 4 | 2.9 | 4 | 2.9 | 4 | ||||||||||||
International | 4.2 | 5 | 4.2 | 5 | 3.5 | 4 | 3.7 | 6 | ||||||||||||
Unallocated | 27.5 | — | 28.4 | — | 29.3 | — | 33.0 | — | ||||||||||||
Total Inherent Reserve | $140.7 | 100 | % | $135.7 | 100 | % | $135.9 | 100 | % | $134.6 | 100 | % | ||||||||
Total Reserve | $159.3 | 100 | % | $154.7 | 100 | % | $150.9 | 100 | % | $151.9 | 100 | % | ||||||||
· | The future health of the U.S. and international economies and other economic factors that affect wealth creation, investment and savings patterns, and Northern Trust’s interest rate risk exposure and credit risk. |
· | Changes in U.S. and worldwide securities markets, with respect to the market values of financial assets, the stability of particular securities markets and the level of volatility in certain markets such as foreign exchange. |
· | Regulatory developments and changes in accounting requirements or interpretations in the U.S. and other countries where Northern Trust has significant business. |
· | Changes in the nature of Northern Trust’s competition resulting from industry consolidation, enactment of the G ramm-Leach-Bliley Act of 1999, and other regulatory developments or other factors, as well as actions taken by particular competitors. |
· | Northern Trust’s success in continuing to generate new business in its existing markets, as well as its success in identifying and penetrating targeted markets, through acquisition or otherwise, and generating a profit in those markets in a reasonable time. |
· | Northern Trust’s ability to continue to generate superior investment results for clients and continue to develop its array of investment products, internally or through acquisition, in a manner that meets clients’ needs. |
· | Northern Trust’s success in further developing and implementing initiatives that integrate the Internet into methods of product distribution, new business development and client service. |
· | Northern Trust’s ability to continue to fund and accomplish technological innovation, improve processes and controls and attract and retain capable staff in order to deal with technology challenges and increasing volume and complexity in many of its businesses. |
· | Northern Trust’s success in integrating recent and future acquisitions and using the acquired businesses to execute its business strategy. |
· | The ability of each of Northern Trust’s principal businesses to maintain a product mix that achieves satisfactory margins. |
· | Changes in tax laws or other legislation that could affect Northern Trust’s personal and institutional asset administration businesses such as the proposed repeal of the federal estate tax. |
The following schedule should be read in conjunction with the Net Interest Income section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Second Quarter | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2000 | 1999 | |||||||||||||||
Interest | Volume | Rate | Interest | Volume | Rate | |||||||||||
(Interest and rate on a taxable equivalent basis) | ||||||||||||||||
($ in Millions) | ||||||||||||||||
Average Earning Assets | ||||||||||||||||
Money Market Assets | ||||||||||||||||
Federal Funds Sold and Resell Agreements | $ 13.7 | $ 859.4 | 6.38 | % | $ 11.4 | $ 934.6 | 4.88 | % | ||||||||
Time Deposits with Banks | 44.8 | 3,487.7 | 5.17 | 33.2 | 2,902.8 | 4.59 | ||||||||||
Other Interest-Bearing | .5 | 27.6 | 7.30 | .7 | 59.5 | 5.01 | ||||||||||
Total Money Market Assets | 59.0 | 4,374.7 | 5.42 | 45.3 | 3,896.9 | 4.67 | ||||||||||
Securities | ||||||||||||||||
U.S. Government | 3.4 | 235.0 | 5.85 | 4.0 | 306.7 | 5.23 | ||||||||||
Obligations of States and Political Subdivisions | 9.9 | 481.2 | 8.21 | 9.9 | 502.8 | 7.87 | ||||||||||
Federal Agency | 148.1 | 9,032.1 | 6.59 | 88.2 | 7,022.9 | 5.04 | ||||||||||
Other | 7.6 | 413.9 | 7.43 | 4.6 | 289.7 | 6.33 | ||||||||||
Trading Account | .2 | 12.4 | 7.48 | .2 | 14.3 | 6.85 | ||||||||||
Total Securities | 169.2 | 10,174.6 | 6.69 | 106.9 | 8,136.4 | 5.27 | ||||||||||
Loans and Leases | 285.0 | 16,375.4 | 7.00 | 227.0 | 14,271.2 | 6.38 | ||||||||||
Total Earning Assets | $513.2 | $30,924.7 | 6.67 | % | $379.2 | $26,304.5 | 5.78 | % | ||||||||
Reserve for Credit Losses | — | (157.0 | ) | — | — | (149.6 | ) | — | ||||||||
Cash and Due from Banks | — | 1,550.2 | — | — | 1,256.9 | — | ||||||||||
Other Assets | — | 2,010.3 | — | — | 1,712.5 | — | ||||||||||
Total Assets | — | $34,328.2 | — | — | $29,124.3 | — | ||||||||||
Average Source of Funds | ||||||||||||||||
Deposits | ||||||||||||||||
Savings and Money Market | $ 50.4 | $ 5,247.8 | 3.86 | % | $ 36.4 | $ 4,759.9 | 3.07 | % | ||||||||
Savings Certificates | 31.5 | 2,196.3 | 5.77 | 28.5 | 2,161.2 | 5.28 | ||||||||||
Other Time | 17.4 | 1,139.6 | 6.14 | 8.6 | 716.4 | 4.85 | ||||||||||
Foreign Offices Time | 105.0 | 7,944.3 | 5.32 | 61.2 | 5,869.7 | 4.18 | ||||||||||
Total Deposits | 204.3 | 16,528.0 | 4.97 | 134.7 | 13,507.2 | 4.00 | ||||||||||
Federal Funds Purchased | 26.5 | 1,681.5 | 6.35 | 38.5 | 3,237.0 | 4.77 | ||||||||||
Securities Sold Under Agreements to Repurchase | 22.7 | 1,475.8 | 6.19 | 21.5 | 1,832.9 | 4.71 | ||||||||||
Commercial Paper | 2.1 | 136.3 | 6.32 | 1.7 | 139.8 | 4.86 | ||||||||||
Other Borrowings | 78.8 | 5,087.7 | 6.22 | 27.4 | 2,167.0 | 5.07 | ||||||||||
Senior Notes | 8.6 | 500.0 | 6.86 | 7.8 | 640.6 | 4.88 | ||||||||||
Long-Term Debt | 11.3 | 638.4 | 7.03 | 8.0 | 458.6 | 6.93 | ||||||||||
Debt-Floating Rate Capital Securities | 4.8 | 267.6 | 7.11 | 3.8 | 267.5 | 5.64 | ||||||||||
Total Interest-Related Funds | 359.1 | 26,315.3 | 5.49 | 243.4 | 22,250.6 | 4.39 | ||||||||||
Interest Rate Spread | — | — | 1.18 | % | — | — | 1.39 | % | ||||||||
Noninterest-Related Funds | — | 4,622.5 | — | — | 4,006.2 | — | ||||||||||
Other Liabilities | — | 1,125.7 | — | — | 832.3 | — | ||||||||||
Stockholders’ Equity | — | 2,264.7 | — | — | 2,035.2 | — | ||||||||||
Total Liabilities and Stockholders’ Equity | — | $34,328.2 | — | — | $29,124.3 | — | ||||||||||
Net Interest Income/Margin | $154.1 | — | 2.00 | % | $135.8 | — | 2.07 | % | ||||||||
Second Quarter 2000/99 | Six Months 2000/99 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Change Due To | Change Due To | |||||||||||||
Volume | Rate | Total | Volume | Rate | Total | |||||||||
(In Millions) | ||||||||||||||
Earning Assets | $74.6 | $59.4 | $134.0 | $105.1 | $97.0 | $202.1 | ||||||||
Interest-Related Funds | 54.3 | 61.4 | 115.7 | 62.8 | 104.7 | 167.5 | ||||||||
Net Interest Income | $20.3 | $(2.0 | ) | $ 18.3 | $ 42.3 | $(7.7 | ) | $ 34.6 | ||||||
Six Months | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2000 | 1999 | |||||||||||||
Interest | Volume | Rate | Interest | Volume | Rate | |||||||||
$ 24.7 | $ 814.9 | 6.09 | % | $ 25.5 | $ 1,054.2 | 4.87 | % | |||||||
92.0 | 3,598.3 | 5.14 | 73.7 | 3,189.3 | 4.66 | |||||||||
1.5 | 42.9 | 7.03 | 1.7 | 71.5 | 4.92 | |||||||||
118.2 | 4,456.1 | 5.33 | 100.9 | 4,315.0 | 4.72 | |||||||||
7.0 | 242.6 | 5.79 | 8.5 | 309.4 | 5.51 | |||||||||
19.9 | 484.3 | 8.22 | 20.0 | 507.0 | 7.92 | |||||||||
252.0 | 7,954.7 | 6.37 | 168.5 | 6,697.0 | 5.07 | |||||||||
15.2 | 402.7 | 7.60 | 9.3 | 285.7 | 6.56 | |||||||||
.4 | 12.0 | 7.58 | .4 | 13.4 | 6.91 | |||||||||
294.5 | 9,096.3 | 6.51 | 206.7 | 7,812.5 | 5.33 | |||||||||
547.7 | 15,976.3 | 6.89 | 450.7 | 14,175.7 | 6.41 | |||||||||
$960.4 | $29,528.7 | 6.54 | % | $758.3 | $26,303.2 | 5.81 | % | |||||||
— | (155.0 | ) | — | — | (148.7 | ) | — | |||||||
— | 1,475.7 | — | — | 1,363.3 | — | |||||||||
— | 1,944.7 | — | — | 1,733.8 | — | |||||||||
— | $32,794.1 | — | — | $29,251.6 | — | |||||||||
$ 95.7 | $ 5,207.1 | 3.69 | % | $ 71.7 | $ 4,692.7 | 3.08 | % | |||||||
62.9 | 2,234.9 | 5.66 | 57.7 | 2,174.9 | 5.35 | |||||||||
28.5 | 964.4 | 5.94 | 15.4 | 638.8 | 4.87 | |||||||||
201.7 | 7,905.5 | 5.13 | 124.3 | 5,921.3 | 4.23 | |||||||||
388.8 | 16,311.9 | 4.79 | 269.1 | 13,427.7 | 4.04 | |||||||||
65.4 | 2,185.5 | 6.02 | 80.1 | 3,385.3 | 4.77 | |||||||||
39.9 | 1,360.1 | 5.91 | 47.1 | 2,014.9 | 4.72 | |||||||||
4.2 | 137.6 | 6.17 | 3.4 | 139.1 | 4.91 | |||||||||
108.1 | 3,568.0 | 6.09 | 47.8 | 2,030.9 | 4.74 | |||||||||
17.2 | 506.0 | 6.79 | 17.0 | 693.4 | 4.91 | |||||||||
22.6 | 641.5 | 7.03 | 15.9 | 458.4 | 6.93 | |||||||||
9.3 | 267.6 | 6.91 | 7.6 | 267.5 | 5.68 | |||||||||
655.5 | 24,978.2 | 5.28 | 488.0 | 22,417.2 | 4.39 | |||||||||
— | — | 1.26 | % | — | — | 1.42 | % | |||||||
— | 4,517.1 | — | — | 3,993.1 | — | |||||||||
— | 1,068.7 | — | — | 839.1 | — | |||||||||
— | 2,230.1 | — | — | 2,002.2 | — | |||||||||
— | $32,794.1 | — | — | $29,251.6 | — | |||||||||
$304.9 | — | 2.08 | % | $270.3 | — | 2.07 | % | |||||||
Item 6. Exhibits and Reports on Form 8-K
(a) | Exhibits | ||||
(3) Articles of Incorporation and By-Laws: | |||||
(i) | Amendment to Restated Certificate of Incorporation of Northern Trust Corporation. | ||||
(ii) | Restated Certificate of Incorporation of Northern Trust Corporation as Amended to Date. | ||||
(10) Material Contracts: | |||||
(i) | Northern Trust Corporation (2000) Annual Performance Plan. | |||||
(ii) | Amendment dated as of May 16, 2000 to the Restated Northern Trust Corporation Supplemental Employee Stock Ownership Plan as amended and restated as of July 20, 1999. | |||||
(iii) | Amendment dated as of May 16, 2000 to the Restated Northern Trust Corporation Supplemental Thrift-Incentive Plan as amended and restated as of July 20, 1999. | |||||
(iv) | Amendment dated as of May 16, 2000 to the Restated Northern Trust Corporation Supplemental Pension Plan as amended and restated as of July 20, 1999. | |||||
(v) | Amendment dated as of May 16, 2000 to the Deferred Compensation Plans Trust Agreement dated as of May 11, 1998 between Northern Trust Corporation and Harris Trust and Savings Bank as Trustee (effective August 11, 1999, U.S. Trust Company, N.A. as successor trustee). | |||||
(vi) | Amendment dated as of May 16, 2000 to the Northern Trust Corporation Deferred Compensation Plan dated as of May 1, 1998. | |||||
(vii) | Amendment effective as of April 1, 2000 to the Northern Trust Employee Stock Ownership Plan as amended and restated effective January 1, 1989. | |||||
(99) Additional Exhibits: | ||||||
(i) | Corporate Governance Guidelines Adopted May 16, 2000 (supercedes Exhibit 99 (i) filed with the Quarterly Report on Form 10-Q for the quarter ended June 30, 1999). |
(b) | Reports on Form 8-K | |
In a report on Form 8-K filed April 17, 2000, Northern Trust Corporation incorporated in Item 5 its April 17, 2000 press release, reporting on its earnings for the first quarter of 2000. The press release, with summary financial information, was filed pursuant to Item 7. |
NORTHERN TRUST CORPORATION | |
(Registrant) |
By: | /s/ Perry R. Pero |
Perry R. Pero |
Vice Chairman |
and Chief Financial Officer |
By: | /s/ Harry W. Short |
Harry W. Short |
Executive Vice President and Controller |
(Chief Accounting Officer) |
Exhibit Number | Description | |||
---|---|---|---|---|
(3) | Articles of Incorporation and By-Laws: | |||
(i) | Amendment to Restated Certificate of Incorporation of Northern Trust Corporation. | |||
(ii) | Restated Certificate of Incorporation of Northern Trust Corporation as Amended to Date. | |||
(10) | Material Contracts: | |||
(i) | Northern Trust Corporation (2000) Annual Performance Plan. | |||
(ii) | Amendment dated as of May 16, 2000 to the Restated Northern Trust Corporation Supplemental Employee Stock Ownership Plan as amended and restated as of July 20, 1999. | |||
(iii) | Amendment dated as of May 16, 2000 to the Restated Northern Trust Corporation Supplemental Thrift-Incentive Plan as amended and restated as of July 20, 1999. | |||
(iv) | Amendment dated as of May 16, 2000 to the Restated Northern Trust Corporation Supplemental Pension Plan as amended and restated as of July 20, 1999. | |||
(v) | Amendment dated as of May 16, 2000 to the Deferred Compensation Plans Trust Agreement dated as of May 11, 1998 between Northern Trust Corporation and Harris Trust and Savings Bank as Trustee (effective August 11, 1999, U.S. Trust Company, N.A. as successor trustee). | |||
(vi) | Amendment dated as of May 16, 2000 to the Northern Trust Corporation Deferred Compensation Plan dated as of May 1, 1998. | |||
(vii) | Amendment effective as of April 1, 2000 to the Northern Trust Employee Stock Ownership Plan as amended and restated effective January 1, 1989. | |||
(99) | Additional Exhibits: | |||
(i) | Corporate Governance Guidelines Adopted May 16, 2000 (supercedes Exhibit 99 (i) filed with the Quarterly Report on Form 10-Q for the quarter ended June 30, 1999). |