CHICAGO, Jan. 21 /PRNewswire-FirstCall/ -- Northern Trust Corporation
(Nasdaq: NTRS) today reported fourth quarter net income per common share of
$1.47 compared with net income per common share of $.55 reported in the fourth
quarter of 2007. Net income was $342.3 million compared with net income of
$125.0 million in the fourth quarter of last year. Operating earnings were
$323.3 million, or $1.39 per common share, compared with operating earnings of
$219.2 million, or $.97 per common share, in the fourth quarter of last year.
Northern Trust is providing operating earnings in order to provide a
clearer indication of the results and trends in Northern Trust's core
businesses, absent adjustments related to Visa, Inc. The following table
provides a reconciliation of operating earnings to reported earnings prepared
in accordance with generally accepted accounting principles.
($ In Millions Except Fourth Quarter 2008 Fourth Quarter 2007
Per Share Data) Amount Per Share Amount Per Share
Reported Earnings $342.3 $1.47 $125.0 $.55
Visa Indemnification
Accruals
(net of tax effects of
$11.0 in 2008 and $55.8
in 2007) (19.0) (.08) 94.2 .42
Operating Earnings $323.3 $1.39 $219.2 $.97
For the full year, Northern Trust reported record net income per common
share of $3.47 for 2008, an increase of 7% from $3.24 per common share a year
ago. Reported net income increased 9% to $794.8 million, up from $726.9
million last year. Excluding Visa, net operating earnings per common share
was $2.79 for 2008, a decrease of 24% from $3.66 per common share a year ago.
Net operating earnings decreased 22% to $641.3 million, compared with $821.1
million last year, resulting in large part from the $536.3 million of client
support related pre-tax charges recorded primarily in the third quarter of
2008.
Frederick H. Waddell, President and Chief Executive Officer, commented,
"Despite the extremely difficult economic conditions, our sound balance sheet
and prudent business model enabled us to achieve record fourth quarter
performance, and our 2008 full year results were strong in the context of the
environment. Our client franchise grew throughout the year and our capital
position at year end was solid. We remain focused on exceeding the
expectations of our clients.
As we look forward into 2009, we remain confident in our strategic and
competitive positioning, notwithstanding a cautious outlook consistent with
the very difficult economic conditions."
FOURTH QUARTER PERFORMANCE HIGHLIGHTS
Northern Trust's fourth quarter consolidated revenues reached $1.15
billion, up 18% from last year's fourth quarter, driven by record foreign
exchange trading income and record net interest income. Trust, investment and
other servicing fees decreased 11% from last year to $488.1 million and
represented 42% of fourth quarter revenues. Total fee-related income
increased 11% to $801.4 million and represented 70% of revenues. The current
quarter included a $44.4 million charge to reflect the other-than-temporary
impairment of four asset-backed securities held within Northern Trust's
balance sheet investment portfolio.
Trust, investment and other servicing fees from Corporate & Institutional
Services (C&IS) decreased 13% from the year-ago quarter to $273.8 million,
primarily reflecting lower market valuations, partially offset by new
business. The largest component of C&IS fees is custody and fund
administration fees, which decreased 10% to $150.1 million. Securities
lending fees totaled $44.2 million compared with $55.1 million in the fourth
quarter last year, primarily reflecting lower volumes. Asset valuation losses
in one mark-to-market investment fund used in our securities lending
activities reduced fees by approximately $44 million in the current quarter
compared to approximately $50 million in the prior year quarter. Fees from
asset management in the quarter totaled $62.5 million, down 17%, reflecting
lower market valuations. Trust, investment and other servicing fees from
Personal Financial Services (PFS) in the quarter decreased 8% and totaled
$214.3 million compared with $232.6 million a year ago. The decrease in PFS
fees resulted primarily from lower market valuations, offset in part by strong
new business.
Northern Trust's total assets under custody were $3.0 trillion and total
managed assets were $575.5 billion. C&IS assets under custody totaled $2.7
trillion, down 28% from a year ago, and included $1.4 trillion of global
custody assets, 32% lower than a year ago. C&IS assets under management
totaled $443.1 billion, a 27% decrease from the prior year. PFS assets under
custody totaled $288.3 billion, a 13% decrease from $332.4 billion in the
prior year quarter. PFS assets under management totaled $132.4 billion, an
11% decrease from $148.3 billion last year. The above are in comparison to
the twelve month decline in the S&P 500 index of approximately 38% and in the
EAFE index (USD) of approximately 45%.
Foreign exchange trading income reached a record $234.6 million, up 111%
or $123.4 million from the performance in last year's fourth quarter,
reflecting exceptionally high levels of currency volatility. Revenues from
security commissions and trading income totaled $19.6 million.
Other operating income equaled $84.1 million compared with $24.8 million
in the same period last year. The current quarter increase primarily reflects
a $33.3 million increase in non-trading foreign exchange gains, $20.6 million
of valuation gains recorded on credit default swap contracts, and a $5.4
million increase in commercial loan-related commitment fees.
Included in investment security gains (losses) is a $44.4 million charge
recorded to adjust the book values of four asset-backed securities to their
estimated fair values at December 31, 2008, as management determined the
securities to be other-than-temporarily impaired given their significantly
depressed market values and the uncertainty as to their future performance
under expected economic conditions.
Net interest income for the quarter, stated on a fully taxable equivalent
basis, totaled $348.3 million, up 38% from $252.5 million reported in the
prior year quarter, primarily reflecting higher levels of average earning
assets and an increase in the net interest margin. Average earning assets of
$69.4 billion were 23% higher than a year ago, driven by growth in loans,
securities and money market assets. The net interest margin was 2.00%, up
from 1.79% in the prior year quarter, reflecting a widening of the spread
between interest rates on short term investments and on overnight funding
sources, including the impact of the Federal Reserve Bank rate reductions.
The reserve for credit losses at December 31, 2008 of $251.1 million
increased $43.6 million from the September 30, 2008 balance. The provision
for credit losses was $60.0 million in the current quarter and net charge-offs
totaled $15.8 million. The current quarter provision primarily reflects loan
growth and the continued weakening in the broader economic environment. An
$8.0 million provision was recorded in the prior year fourth quarter and net
charge-offs totaled $2.3 million. Nonperforming loans totaled $96.7 million
at December 31, 2008, compared with $58.8 million at September 30, 2008 and
$23.2 million at December 31, 2007. The increase from the prior quarter
primarily reflects the addition of two loans to nonperforming status. The
reserve for credit losses of $251.1 million included $22.0 million allocated
to loan commitments and other off-balance sheet exposures compared with $12.1
million in the prior year. The remaining $229.1 million reserve assigned to
loans and leases at December 31, 2008 represented a reserve to loan and lease
ratio of .75%, compared with .65% at September 30, 2008 and .58% a year ago.
Nonperforming loans of $96.7 million at quarter-end represented .31% of total
loans and leases and were covered 2.4 times by the assigned reserve.
Noninterest expenses totaled $555.2 million for the quarter, down 29% from
$782.4 million in the year-ago quarter. The current quarter includes a $30.0
million benefit from the reversal of a Visa related indemnification accrual
established in the third quarter of 2008, as the settlement of the Visa
litigation involving Discover Financial Services, which led to the accrual,
was funded by Visa through an escrow account. The prior year quarter included
a $150.0 million charge for other Visa indemnification accruals. Absent the
current and prior year quarter Visa related adjustments, expenses would have
totaled $585.2 million, down 7% from the prior year quarter.
Compensation and employee benefit expenses totaled $361.6 million, up
$16.5 million or 5% compared with the prior year quarter. The current quarter
includes a $17.0 million charge in connection with the previously announced
plan to reduce staff expense levels. Staff on a full-time equivalent basis at
December 31, 2008 totaled 12,200, up 12% from a year ago. The impact on the
current quarter of higher staff levels and annual salary increases was
partially offset by lower performance-based compensation and lower defined
contribution plan expense.
The expenses associated with outside services totaled $107.2 million, down
$1.9 million or 2% from $109.1 million last year. The current quarter
decrease primarily reflects lower expenses for consulting services, global
subcustody, and investment manager sub-advisory, offset by higher expenses for
technical and legal services.
Excluding Visa, the remaining expense categories totaled $116.4 million,
down from $178.2 million in the prior year quarter. The current quarter
decrease primarily reflects a $25.4 million reduction of previously
established accruals for the purchase of certain illiquid auction rate
securities from Northern Trust clients, a $20.1 million currency translation
related benefit associated with Lehman Brothers bankruptcy matters, and a $9.7
million expense decrease associated with a valuation adjustment of the
liability established in connection with the previously disclosed capital
support agreements with certain Northern Trust investment vehicles. As of
December 31, 2008, no capital contributions have been made under the
agreements.
Income tax expense of $180.0 million was recorded in the current quarter
and resulted in an effective tax rate of 34.5%. The prior year quarter
provision for income taxes was $42.7 million, representing an effective tax
rate of 25.5%. The lower effective rate for the prior year quarter resulted
from a lower level of taxable earnings, lower U.S. federal and state income
tax due to a higher proportion of income generated in jurisdictions with more
favorable tax rates than the U.S. and a net reduction in state income tax
reserves.
FOURTH QUARTER PERFORMANCE VS. THIRD QUARTER
Net income per common share of $1.47 was reported in the fourth quarter
compared with a net loss per common share of $.67 in the third quarter of
2008. The current quarter's net income of $342.3 million compares to a net
loss of $148.3 million in the third quarter. The third quarter's results were
negatively impacted by client support related charges totaling $561.5 million
($353.2 million after tax or $1.59 per common share) and a $30.0 million Visa
related indemnification accrual. The current quarter includes the $30.0
million benefit from the reversal of the third quarter Visa settlement accrual
due to the funding of the settlement by Visa through an escrow account.
($ In Millions Except Fourth Quarter 2008 Third Quarter 2008
Per Share Data) Amount Per Share Amount Per Share
Reported Earnings
(Loss) $342.3 $1.47 ($148.3) ($.67)
Visa Indemnification
Accruals
(net of tax effects of
$11.0 in the current
quarter and $11.1 in the
prior quarter) (19.0) (.08) 18.9 .09
Operating Earnings (Loss) $323.3 $1.39 ($129.4) ($.58)
Northern Trust is providing operating earnings in addition to its reported
results prepared in accordance with generally accepted accounting
principles in order to provide investors and others with a clearer
indication of the results and trends in Northern Trust's core businesses,
absent Visa adjustments.
Consolidated revenues increased 23% or $211.2 million to $1.15 billion.
Trust, investment and other servicing fees increased $13.2 million or 3% in
the fourth quarter, with C&IS fees increasing $29.3 million or 12% and PFS
fees decreasing $16.1 million or 7%. C&IS fees increased due to higher
securities lending fees, offset by lower custody and fund administration fees.
Securities lending fees totaled $44.2 million in the current quarter compared
with a negative $4.6 million in the third quarter. Mark-to-market adjustments
in one investment fund used in our securities lending activities reduced fees
by approximately $44 million in the fourth quarter and approximately $96
million in the third quarter. The decrease in PFS fees primarily reflects
lower market valuations, partially offset by new business.
Net interest income increased $82.6 million or 31% in the fourth quarter
compared with the third quarter results. The prior quarter net interest income
included a $9.5 million reduction related to revised estimates regarding the
Corporation's tax dispute with respect to certain structured lease
transactions. Absent this adjustment, net interest income would have
increased $73.1 million or 27%, primarily reflecting a widening of the spread
between interest rates on short term investments and on overnight funding
sources, including the impact of the Federal Reserve Bank rate reductions.
Foreign exchange trading income increased $92.8 million or 65%, reflecting
exceptionally high levels of currency volatility. The current quarter included
investment security impairment charges of $44.4 million compared with
impairment charges of $16.9 million in the third quarter.
The provision for credit losses totaled $60.0 million in the current
quarter, compared with $25.0 million in the third quarter of 2008 reflecting
the continued weakening in the broader economic environment.
On an operating basis, noninterest expense totaled $585.2 million in the
fourth quarter and $1.12 billion in the third quarter. Excluding the impact
of the $561.5 million of third quarter client support related charges,
expenses increased $22.7 million or 4% in the current quarter.
Compensation and employee benefits increased $78.9 million from the third
quarter. The third quarter included reductions of performance-based
compensation and defined contribution plan expense necessary to reflect
reduced projected full year performance. The current quarter includes the
$17.0 million charge in connection with the previously announced plan to
reduce staff expense levels. Outside services totaled $107.2 million compared
with $106.5 million in the third quarter.
Excluding Visa, other noninterest expense categories totaled $116.4
million, a decrease of $618.4 million from $734.8 million in the third
quarter. The third quarter included $561.5 million of client support related
charges. The remaining decrease in the current quarter is attributable to the
reduction of previously established accruals for losses on the purchase of
certain illiquid auction rate securities, the currency translation related
benefit associated with Lehman Brothers bankruptcy matters, and the valuation
adjustment of the liability for capital support agreements.
Total income tax expense was $180.0 million for the current quarter,
representing an effective rate of 34.5%. An income tax benefit of $104.5
million was recorded in the third quarter due to the pre-tax loss reported for
that quarter. The pre-tax loss resulted in an effective tax rate of 41.3% as
the operating loss resulted primarily from U.S. activities while foreign
operations, with lower tax rates, remained profitable. The third quarter
effective tax rate excluding the impact of client support, Visa
indemnification, and leasing related charges was 32.0%.
FULL YEAR PERFORMANCE HIGHLIGHTS
Net income per common share of $3.47 for the year was 7% higher than the
$3.24 reported in 2007. Net income was $794.8 million compared with $726.9
million earned in the prior year and resulted in a return on average common
equity of 15.98% and a return on average assets of 1.09%. The first quarter
of 2008 included an after tax benefit totaling $153.5 million ($.68 per share)
realized in connection with the March 2008 initial public offering of Visa
common stock. The benefit reflects a pre-tax gain of $167.9 million on the
partial redemption of Northern Trust's Visa shares in the initial public
offering and a $76.1 million offset to previously established Visa
indemnification accruals and related charges. The fourth quarter of 2007
included an after tax charge of $94.2 million ($.42 per common share)
reflecting the initial $150.0 million pre-tax charge for accruals related to
indemnifications of Visa.
($ In Millions Except 2008 2007
Per Share Data) Amount Per Share Amount Per Share
Reported Earnings $794.8 $3.47 $726.9 $3.24
Visa Indemnification
Accrual
(net of tax effects
of $28.2 in 2008 and
$55.8 in 2007) (47.9) (.21) 94.2 .42
Visa Initial Public
Offering
(net of $62.3 tax
effect) (105.6) (.47) - -
Operating Earnings $641.3 $2.79 $821.1 $3.66
Northern Trust is providing operating earnings in addition to its reported
results prepared in accordance with generally accepted accounting
principles in order to provide investors and others with a clearer
indication of the results and trends in Northern Trust's core businesses,
absent Visa adjustments.
Absent the Visa adjustments, operating earnings per share for the full
year totaled $2.79, a decrease of 24% from $3.66 reported last year.
Operating earnings were down 22% to $641.3 million compared with $821.1
million last year. The current period's results were negatively impacted by
client support related charges totaling $536.3 million ($1.50 per common
share) and by other significant charges totaling $119.4 million ($.67 per
common share).
Northern Trust's 2008 results were negatively impacted by the following
client support related and other significant charges recorded during the year.
Client Support Related Charges
-- A pre-tax charge of $314.1 million ($198.8 million after tax, or
$.88 per common share) in connection with support provided to cash
investment funds under capital support agreements.
-- Pre-tax charges totaling $167.6 million ($106.1 million after tax,
or $.47 per common share) in connection with actions taken to
provide support for Northern Trust's securities lending clients.
-- A $54.6 million pre-tax charge ($34.5 million after tax, or $.15 per
common share) related to the establishment of a program to purchase
certain illiquid auction rate securities that were purchased by a
limited number of Northern Trust clients.
Other Significant Charges
-- A $38.9 million pre-tax charge ($100.2 million after tax, or $.44
per common share) reducing net interest income and increasing income
taxes to revised estimates regarding the outcome of the
Corporation's tax position with respect to certain structured
leasing transactions.
-- A $61.3 million pre-tax charge ($38.8 million after tax, or $.17 per
common share) to reflect the other-than-temporary impairment of six
asset-backed securities held within Northern Trust's balance sheet
investment portfolio.
-- A $19.2 million pre-tax charge ($13.0 million after tax, or $.06 per
common share) associated with severance and benefits and other
operating costs in connection with the previously announced plan to
reduce staff expense levels and better position the company for
improved profitability and continued global growth.
Partially offsetting these charges were reductions in performance-based
compensation and defined contribution plan expense, primarily reflecting the
impact of the above charges on full year performance.
Revenues exclusive of the $167.9 million first quarter gain in connection
with Visa's initial public offering totaled $4.16 billion, up 16% from $3.57
billion last year, driven by record foreign exchange trading income and record
net interest income. Trust, investment and other servicing fees were $2.13
billion for the year, up 3% compared with $2.08 billion last year. After
adjusting to exclude the Visa gain, trust, investment and other servicing fees
represented 51% of revenues and total fee-related income represented 73% of
total revenues.
Trust, investment and other servicing fees from C&IS increased 4% to $1.23
billion from $1.18 billion a year ago, primarily reflecting new business,
partially offset by lower market valuations. Custody and fund administration
fees increased 8% to $661.6 million, primarily reflecting growth in global
fees. Securities lending fees totaled $221.4 million compared with $207.1
million last year. The increase was primarily due to improved spreads on the
investment of cash collateral, partially offset by net unrealized asset
valuation losses in one mark-to-market investment fund used in our securities
lending activities which reduced fees by approximately $212.7 million in 2008
and approximately $93.8 million in 2007. Fees from asset management decreased
5% to $277.4 million, primarily reflecting lower market valuations.
Trust, investment and other servicing fees from PFS increased 1% and
totaled $909.0 million compared with $897.8 million a year ago. The increase
resulted primarily from strong new business, offset in part by lower equity
markets. Revenue growth continued to be broad-based.
Foreign exchange trading income increased 75% and totaled a record $616.2
million in 2008 compared with $351.3 million last year. The increase reflects
strong client volumes as well as exceptionally high currency volatility.
Revenues from security commissions and trading income were $77.0 million
compared with $67.6 million in the prior year, primarily resulting from core
brokerage services.
Other operating income was $186.9 million for the year, compared with
$95.3 million last year. The current year increase primarily reflects $35.4
million of valuation gains recorded on certain credit default swap contracts,
a $34.0 million increase in non-trading foreign exchange gains, and a $13.5
million increase in commercial loan-related commitment fees. Also
contributing were higher custody-related deposit revenue, and a gain on the
redemption of an equity investment. A net loss of $56.3 million was
recognized in the current year on investment securities, which includes the
other-than-temporary impairment of six asset-backed securities, compared with
gains of $6.5 million recognized last year on the sale of investment
securities.
Net interest income, stated on a fully taxable equivalent basis, totaled
$1.13 billion, an increase of 24% from $907.9 million reported in the prior
year period. The full year results include leasing related adjustments that
reduced net interest income by $38.9 million. The current year increase
primarily reflects higher levels of average earning assets and an increase in
the net interest margin. Total average earning assets of $64.2 billion were
20% higher than a year ago. The net interest margin of 1.76% was up from 1.70%
in the prior year. Excluding the impact of the 2008 leasing adjustments, the
net interest margin would have been 1.82%, reflecting a widening of the spread
between interest rates on short term investments and on overnight funding
sources, including the impact of Federal Reserve Bank rate reductions.
The provision for credit losses was $115.0 million for the year compared
with $18.0 million in 2007. The current year provision primarily reflects
loan growth and weakness in the broader economic environment. Net charge-offs
totaled $23.2 million in the current year and $8.8 million in the prior year.
On an operating basis, noninterest expenses totaled $2.96 billion for the
year, up 30% from $2.28 billion a year-ago. Excluding the $536.3 million of
client support related charges, noninterest expenses totaled $2.43 billion, up
6% from the prior year. Compensation and employee benefit expenses of $1.36
billion increased $83.4 million or 7% from the prior year and represented 56%
of total adjusted operating expenses. The current year increase reflects the
impact of higher staff levels, annual salary increases, the $17.0 million
charge in connection with the plan to reduce staff expense levels, and higher
employment taxes and health care costs, partially offset by a $36.4 million
decrease in performance-based compensation and a $23.2 million decrease in
defined benefit and defined contribution plan expenses.
Expenses associated with outside services totaled $413.8 million, up $27.6
million or 7% from last year, reflecting higher expenses for legal fees,
outsourcing, technical, consulting and market data services.
Excluding Visa, the remaining expense categories totaled $1.19 billion, an
increase of $572.7 million from $620.9 million in the prior year. The current
year includes the $536.3 million of client support related charges. The
remaining increase reflects higher charges related to account servicing
activities and legal matters, increases in computer software expense, and
higher business promotion and advertising expenses.
Total income tax expense was $480.9 million for the year, representing an
effective rate of 37.7%. This compares with $333.9 million in income tax
expense and an effective rate of 31.5% for 2007. The current year effective
tax rate excluding the impact of client support, Visa indemnification, and
leasing related charges was 32.8%.
BALANCE SHEET
Assets averaged $79.4 billion for the quarter, up 22% from last year's
fourth quarter average of $64.8 billion. Loans and leases averaged $30.2
billion, up 26%. Money market assets averaged $24.9 billion for the quarter,
an increase of 13% from the prior year. The securities portfolio averaged
$14.3 billion, up 41% from last year, primarily reflecting an increase in the
average balance of government sponsored agency securities. The increase in
earning assets was primarily funded by growth in non-U.S. office deposits,
short-term borrowings, noninterest-bearing deposits in domestic offices,
long-term debt, and proceeds received from participation in the U.S.
Department of the Treasury's voluntary Capital Purchase Program.
Residential mortgages averaged $10.2 billion in the quarter, up 13% from
the prior year's fourth quarter, and represented 34% of the total average loan
and lease portfolio. Commercial loans averaged $8.2 billion, up 53% from $5.4
billion last year, while personal loans averaged $4.7 billion, up 32% from
last year's fourth quarter. Loans outside the U.S. decreased $61.2 million on
average from the prior year quarter to $1.8 billion.
Total stockholders' equity averaged $5.8 billion, up 34% from last year's
fourth quarter. The increase reflects the issuance of senior preferred stock
and related warrants to the U.S. Department of the Treasury pursuant to the
terms of the Capital Purchase Program and the retention of earnings, offset in
part by the repurchase of common stock pursuant to the Corporation's share
buyback program. During the fourth quarter of 2008, the Corporation
repurchased 93,352 shares at a cost of $4.3 million ($46.39 average price per
share) in connection with equity based compensation plans. An additional 7.6
million shares are authorized for repurchase after December 31, 2008 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 Northern Trust's financial goals, dividend
policy, expansion and business development plans, anticipated expense levels
and projected profit improvements, business prospects and positioning with
respect to market, demographic and pricing trends, strategic initiatives,
re-engineering and outsourcing activities, new business results and outlook,
changes in securities market prices and valuations, credit quality including
reserve levels, planned capital expenditures and technology spending,
anticipated tax benefits and expenses, and the effects of any extraordinary
events and various other matters (including developments with respect to
litigation, other contingent liabilities and obligations, and regulation
involving Northern Trust and changes in accounting policies, standards and
interpretations) on Northern Trust's business and results. Forward-looking
statements are typically identified by words or phrases, such as "believe,"
"expect," "anticipate," "intend," "estimate," "may increase," "may fluctuate,"
"plan," "goal," "target," "strategy," and similar expressions or future or
conditional verbs such as "may," "will," "should," "would," and "could."
Forward-looking statements are Northern Trust's current estimates or
expectations of future events or future results. Actual results could differ
materially from those indicated by these statements because the realization of
those results is subject to many risks and uncertainties. Northern Trust
Corporation's 2007 Financial Annual Report to Shareholders, including the
section of Management's Discussion and Analysis captioned "Factors Affecting
Future Results," and periodic reports to the Securities and Exchange
Commission, including the section captioned "Risk Factors," contain additional
information about factors that could affect actual results, including:
economic, market, and monetary policy risks; operational risks; investment
performance, fiduciary, and asset servicing risks; credit risks; liquidity
risks; holding company risks; regulation risks; litigation risks; tax and
accounting risks; strategic and competitive risks; and reputation risks. All
forward-looking statements included in this news release are based on
information available at the time of the release, and Northern Trust
Corporation assumes no obligation to update any forward-looking statement.
WEBCAST OF FOURTH QUARTER EARNINGS CONFERENCE CALL
Northern Trust's fourth quarter earnings conference call will be webcast
live on January 21, 2009. The Internet webcast opens the call to all
investors, allowing them to listen to the Chief Financial Officer's comments.
The live call will be conducted at 11:00 a.m. CT and is accessible on Northern
Trust's web site at:
http://www.northerntrust.com/financialreleases
The only authorized rebroadcasts of the live call will be available on
Northern Trust's web site from 2:00 p.m. CT on January 21, 2009 through 5:00
p.m. CT on January 28, 2009. Participants will need Windows Media(tm)
software, which can be downloaded free through Northern's web site. This
earnings release can also be accessed at the above web address.
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
STATEMENT OF INCOME DATA
($ In Millions Except Per Share Data) FOURTH QUARTER
2008 2007 % Change(*)
Noninterest Income
Trust, Investment and Other
Servicing Fees $488.1 $547.2 (11)%
Foreign Exchange Trading Income 234.6 111.2 111
Treasury Management Fees 19.4 16.6 17
Security Commissions & Trading
Income 19.6 20.4 (4)
Other Operating Income 84.1 24.8 237
Investment Security Gains
(Losses), net (44.4) 0.1 N/M
Total Noninterest Income 801.4 720.3 11
Interest Income (Taxable Equivalent) 583.8 748.6 (22)
Interest Expense 235.5 496.1 (53)
Net Interest Income (Taxable Equivalent) 348.3 252.5 38
Total Revenue (Taxable Equivalent) 1,149.7 972.8 18
Noninterest Expenses
Compensation 310.6 282.6 10
Employee Benefits 51.0 62.5 (18)
Outside Services 107.2 109.1 (2)
Equipment and Software Expense 69.4 59.2 17
Occupancy Expense 43.2 37.2 16
Visa Indemnification Charges (30.0) 150.0 (120)
Other Operating Expenses 3.8 81.8 (95)
Total Noninterest Expenses 555.2 782.4 (29)
Provision for Credit Losses 60.0 8.0 650
Taxable Equivalent Adjustment 12.2 14.7 (17)
Income before Income Taxes 522.3 167.7 212
Provision for Income Taxes 180.0 42.7 322
NET INCOME $342.3 $125.0 174%
Net Income Applicable to Common Stock $330.3 $125.0 164
Per Common Share
Net Income
Basic $1.48 $0.57 160%
Diluted 1.47 0.55 167
Return on Average Common Equity 26.15% 11.34%
Average Common Equity $5,023.9 $4,371.3 15%
Return on Average Assets 1.72% 0.77%
Common Dividend Declared per Share $0.28 $0.28 -%
Preferred Dividends and Related
Adjustments (In Millions) $12.0 - 100
Average Common Shares Outstanding (000s)
Basic 222,941 220,355
Diluted 224,706 225,672
Common Shares Outstanding (EOP) 223,263 220,609
(*) Percentage calculations are based on actual balances rather than the
rounded amounts presented in the Supplemental Consolidated Financial
Information.
(N/M) Percentage change is either not meaningful or not applicable.
Certain custody related deposit and overdraft amounts, previously included
within other operating income, are now included within net interest income
in order to better align the classifications of these income and expense
amounts with the related balance sheet presentation. Prior period amounts
have been reclassified to place them on a comparable basis.
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
STATEMENT OF INCOME DATA
($ In Millions Except Per Share Data) TWELVE MONTHS
2008 2007 % Change (*)
Noninterest Income
Trust, Investment and Other
Servicing Fees $2,134.9 $2,077.6 3%
Foreign Exchange Trading Income 616.2 351.3 75
Treasury Management Fees 72.8 65.3 11
Security Commissions & Trading
Income 77.0 67.6 14
Gain on Visa Share Redemption 167.9 - N/M
Other Operating Income 186.9 95.3 96
Investment Security Gains
(Losses), net (56.3) 6.5 (972)
Total Noninterest Income 3,199.4 2,663.6 19
Interest Income (Taxable Equivalent) 2,528.3 2,846.7 (11)
Interest Expense 1,399.4 1,938.8 (28)
Net Interest Income (Taxable
Equivalent) 1,128.9 907.9 24
Total Revenue (Taxable Equivalent) 4,328.3 3,571.5 21
Noninterest Expenses
Compensation 1,133.1 1,038.2 9
Employee Benefits 223.4 234.9 (5)
Outside Services 413.8 386.2 7
Equipment and Software Expense 241.2 219.3 10
Occupancy Expense 166.1 156.5 6
Visa Indemnification Charges (76.1) 150.0 (151)
Other Operating Expenses 786.3 245.1 221
Total Noninterest Expenses 2,887.8 2,430.2 19
Provision for Credit Losses 115.0 18.0 539
Taxable Equivalent Adjustment 49.8 62.5 (20)
Income before Income Taxes 1,275.7 1,060.8 20
Provision for Income Taxes 480.9 333.9 44
NET INCOME $794.8 $726.9 9%
Net Income Applicable to Common Stock $782.8 $726.9 8
Per Common Share
Net Income
Basic $3.53 $3.31 7%
Diluted 3.47 3.24 7
Return on Average Common Equity 15.98% 17.46%
Average Common Equity $4,899.7 $4,164.2 18%
Return on Average Assets 1.09% 1.20%
Common Dividends Declared per Share $1.12 $1.03 9%
Preferred Dividends and Related
Adjustments (In Millions) $12.0 - 100
Average Common Shares Outstanding
(000s)
Basic 221,446 219,681
Diluted 225,380 224,316
Common Shares Outstanding (EOP) 223,263 220,609
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
STATEMENT OF INCOME DATA FOURTH THIRD
($ In Millions Except Per Share Data) QUARTER QUARTER
2008 2008 % Change
Noninterest Income
Trust, Investment and Other
Servicing Fees $488.1 $474.9 3%
Foreign Exchange Trading Income 234.6 141.8 65
Treasury Management Fees 19.4 17.6 10
Security Commissions & Trading
Income 19.6 19.2 2
Other Operating Income 84.1 36.2 132
Investment Security Gains
(Losses), net (44.4) (16.9) (163)
Total Noninterest Income 801.4 672.8 19
Interest Income (Taxable Equivalent) 583.8 653.2 (11)
Interest Expense 235.5 387.5 (39)
Net Interest Income (Taxable Equivalent) 348.3 265.7 31
Total Revenue (Taxable Equivalent) 1,149.7 938.5 23
Noninterest Expenses
Compensation 310.6 230.3 35
Employee Benefits 51.0 52.4 (3)
Outside Services 107.2 106.5 1
Equipment and Software Expense 69.4 60.7 14
Occupancy Expense 43.2 41.8 3
Visa Indemnification Charges (30.0) 30.0 N/M
Other Operating Expenses 3.8 632.3 (99)
Total Noninterest Expenses 555.2 1,154.0 (52)
Provision for Credit Losses 60.0 25.0 140
Taxable Equivalent Adjustment 12.2 12.3 (1)
Income (Loss) before Income Taxes 522.3 (252.8) 307
Provision (Benefit) for Income Taxes 180.0 (104.5) 272
NET INCOME (LOSS) $342.3 ($148.3) 331%
Net Income Applicable to Common Stock $330.3 ($148.3) 323
Per Common Share
Net Income (Loss)
Basic $1.48 ($0.67) 321%
Diluted 1.47 (0.67) 319
Return on Average Common Equity 26.15% (11.62)%
Average Common Equity $5,023.9 $5,077.9 (1)%
Return on Average Assets 1.72% (0.80)%
Common Dividend Declared per Share $0.28 $0.28 -%
Preferred Dividends and Related
Adjustments (In Millions) $12.0 - 100
Average Common Shares Outstanding (000s)
Basic 222,941 221,899
Diluted 224,706 221,899
Common Shares Outstanding (EOP) 223,263 223,034
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
BALANCE SHEET ($ IN MILLIONS)
DECEMBER 31
2008 2007 % Change (*)
Assets
Money Market Assets $26,293.8 $25,072.2 5%
Securities
U.S. Government 19.9 5.1 289
Government Sponsored Agency
and Other 14,725.8 7,999.1 84
Municipal 822.8 880.9 (7)
Trading Account 2.3 3.1 (26)
Total Securities 15,570.8 8,888.2 75
Loans and Leases 30,755.4 25,340.1 21
Total Earning Assets 72,620.0 59,300.5 22
Reserve for Credit Losses Assigned
to Loans & Leases (229.1) (148.1) 55
Cash and Due from Banks 2,648.2 3,921.6 (32)
Client Security Settlement
Receivables 709.3 563.1 26
Buildings and Equipment, net 506.6 491.9 3
Other Nonearning Assets 5,798.6 3,482.2 67
Total Assets $82,053.6 $67,611.2 21%
Liabilities and Stockholders' Equity
Interest-Bearing Deposits
Savings $11,686.0 $9,561.9 22%
Other Time 801.6 557.5 44
Non-U.S. Offices - Interest-
Bearing 35,239.5 30,975.4 14
Total Interest-Bearing Deposits 47,727.1 41,094.8 16
Short-Term Borrowings 4,049.3 5,337.9 (24)
Senior Notes and Long-Term Debt 4,622.7 3,612.9 28
Total Interest-Related Funds 56,399.1 50,045.6 13
Demand & Other Noninterest-Bearing
Deposits 14,679.3 10,118.3 45
Other Liabilities 4,585.8 2,938.2 56
Total Liabilities 75,664.2 63,102.1 20
Total Equity 6,389.4 4,509.1 42
Total Liabilities and Stockholders'
Equity $82,053.6 $67,611.2 21%
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
BALANCE SHEET ($ IN MILLIONS) DECEMBER 31 SEPTEMBER 30
2008 2008 % Change
Assets
Money Market Assets $26,293.8 $26,079.0 1
Securities
U.S. Government 19.9 20.0 (1)
Government Sponsored Agency
and Other 14,725.8 12,501.1 18
Municipal 822.8 829.3 (1)
Trading Account 2.3 8.7 (74)
Total Securities 15,570.8 13,359.1 17
Loans and Leases 30,755.4 29,870.2 3
Total Earning Assets 72,620.0 69,308.3 5
Reserve for Credit Losses Assigned
to Loans & Leases (229.1) (194.7) 18
Cash and Due from Banks 2,648.2 3,775.7 (30)
Client Security Settlement
Receivables 709.3 857.0 (17)
Buildings and Equipment, net 506.6 492.9 3
Other Nonearning Assets 5,798.6 5,004.8 16
Total Assets $82,053.6 $79,244.0 4%
Liabilities and Stockholders' Equity
Interest-Bearing Deposits
Savings $11,686.0 $10,282.1 14%
Other Time 801.6 639.6 25
Non-U.S. Offices - Interest-
Bearing 35,239.5 41,060.4 (14)
Total Interest-Bearing Deposits 47,727.1 51,982.1 (8)
Short-Term Borrowings 4,049.3 2,784.0 45
Senior Notes and Long-Term Debt 4,622.7 4,582.4 1
Total Interest-Related Funds 56,399.1 59,348.5 (5)
Demand & Other Noninterest-Bearing
Deposits 14,679.3 10,457.0 40
Other Liabilities 4,585.8 4,602.5 N/M
Total Liabilities 75,664.2 74,408.0 2
Total Equity 6,389.4 4,836.0 32
Total Liabilities and Stockholders'
Equity $82,053.6 $79,244.0 4%
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
AVERAGE BALANCE SHEET ($ IN MILLIONS)
FOURTH QUARTER
2008 2007 % Change (*)
Assets
Money Market Assets $24,887.3 $22,048.9 13%
Securities
U.S. Government 19.9 5.1 289
Government Sponsored Agency
and Other 13,402.4 9,251.0 45
Municipal 825.7 881.8 (6)
Trading Account 9.9 3.9 154
Total Securities 14,257.9 10,141.8 41
Loans and Leases 30,227.8 23,997.6 26
Total Earning Assets 69,373.0 56,188.3 23
Reserve for Credit Losses Assigned
to Loans & Leases (192.8) (143.5) 34
Nonearning Assets 10,174.8 8,750.2 16
Total Assets $79,355.0 $64,795.0 22%
Liabilities and Stockholders' Equity
Interest-Bearing Deposits
Savings $10,481.9 $9,155.3 14%
Other Time 770.3 541.2 42
Non-U.S. Offices - Interest-
Bearing 35,173.0 31,449.2 12
Total Interest-Bearing Deposits 46,425.2 41,145.7 13
Short-Term Borrowings 6,659.4 3,387.9 97
Senior Notes and Long-Term Debt 4,578.9 3,445.6 33
Total Interest-Related Funds 57,663.5 47,979.2 20
Demand & Other Noninterest-Bearing
Deposits 9,737.1 8,397.8 16
Other Liabilities 6,109.1 4,046.7 51
Total Liabilities 73,509.7 60,423.7 22
Total Equity 5,845.3 4,371.3 34
Total Liabilities and Stockholders'
Equity $79,355.0 $64,795.0 22%
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
QUARTERLY TREND DATA
($ In Millions
Except Per 2008 2007
Share Data) Quarters Quarter
Fourth Third Second First Fourth
Net Income
Summary
Trust,
Investment
and Other
Servicing
Fees $488.1 $474.9 $645.1 $526.8 $547.2
Other
Noninterest
Income 313.3 197.9 200.2 353.1 173.1
Net Interest
Income (Taxable
Equivalent) 348.3 265.7 248.8 266.1 252.5
Total Revenue
(Taxable
Equivalent) 1,149.7 938.5 1,094.1 1,146.0 972.8
Provision for
Credit Losses 60.0 25.0 10.0 20.0 8.0
Noninterest
Expenses 555.2 1,154.0 643.3 535.3 782.4
Pretax Income
(Loss)
(Taxable
Equivalent) 534.5 (240.5) 440.8 590.7 182.4
Taxable
Equivalent
Adjustment 12.2 12.3 12.7 12.6 14.7
Provision
(Benefit) for
Income Taxes 180.0 (104.5) 212.5 192.9 42.7
Net Income
(Loss) $342.3 ($148.3) $215.6 $385.2 $125.0
Net Income
(Loss)
Applicable
to Common
Stock $330.3 ($148.3) $215.6 $385.2 $125.0
Per Common Share
Net Income
(Loss) - Basic $1.48 ($0.67) $0.98 $1.75 $0.57
- Diluted 1.47 (0.67) 0.96 1.71 0.55
Dividend
Declared 0.28 0.28 0.28 0.28 0.28
Book Value
(EOP) 21.89 21.68 22.46 21.62 20.44
Market Value
(EOP) 52.14 72.20 68.57 66.47 76.58
Ratios
Return on
Average
Common Equity 26.15% (11.62)% 17.75% 33.63% 11.34%
Return on
Average Assets 1.72 (0.80) 1.22 2.28 0.77
Net Interest
Margin 2.00 1.62 1.59 1.79 1.79
Risk-based Capital
Ratios
Tier 1 13.1% 9.2% 9.8% 9.6% 9.7%
Total (Tier 1
+ Tier 2) 15.4 11.4 11.7 11.5 11.9
Leverage 8.5 6.6 6.9 6.9 6.8
Assets Under
Custody ($ in
Billions) - EOP
Corporate $2,719.2 $3,217.0 $3,635.7 $3,659.9 $3,802.9
Personal 288.3 314.2 325.9 322.2 332.3
Total Assets
Under
Custody $3,007.5 $3,531.2 $3,961.6 $3,982.1 $4,135.2
Managed Assets $575.5 $652.4 $751.4 $778.6 $757.2
Asset Quality
($ in Millions) - EOP
Nonperforming
Loans $96.7 $58.8 $30.1 $27.7 $23.2
Other Real
Estate Owned
(OREO) 3.5 2.7 4.3 8.0 6.1
Total
Nonperforming
Assets $100.2 $61.5 $34.4 $35.7 $29.3
Nonperforming
Assets / Loans
& OREO 0.33% 0.21% 0.12% 0.13% 0.12%
Gross Charge-
offs $16.6 $1.5 $4.9 $2.7 $2.4
Less: Gross
Recoveries 0.8 1.2 0.2 0.3 0.1
Net Charge-
offs
(Recoveries) $15.8 $0.3 $4.7 $2.4 $2.3
Net Charge-
offs (Annualized)
to Average
Loans 0.21% 0.01% 0.07% 0.04% 0.04%
Reserve for
Credit Losses
Assigned to
Loans $229.1 $194.7 $172.5 $165.4 $148.1
Reserve to
Nonaccrual
Loans 237% 331% 573% 597% 638%
Reserve for
Other Credit-
Related
Exposures $22.0 $12.8 $10.6 $12.4 $12.1
SOURCE Northern Trust Corporation