Northern Trust Corporation Reports Third Quarter Net Income of $234.6 Million, Earnings Per Common Share of $0.96 Increased 14%

Total Revenue Increased 7% over the Prior-Year Quarter
Returned $225.5 Million in Capital to Common Stockholders

CHICAGO--()--Northern Trust Corporation today reported third quarter net income per diluted common share of $0.96, compared to $0.84 in the third quarter of 2014 and $1.10 in the second quarter of 2015. Net income was $234.6 million, compared to $204.5 million in the prior-year quarter and $269.2 million in the prior quarter. Return on average common equity was 10.9%, compared to 10.1% in the prior-year quarter and 12.8% in the prior quarter.

The prior quarter included a pre-tax gain on the sale of 1.0 million Visa Inc. Class B common shares totaling $99.9 million, voluntary cash contributions to certain constant dollar net-asset-value (NAV) funds of $45.8 million and the impairment of the residual value of certain aircraft under leveraged lease agreements of $17.8 million. Excluding these items, net income per diluted common share, net income and return on average common equity for the prior quarter were $1.01, $246.7 million and 11.8%, respectively.

“We continue to perform well in a challenging environment, with net income and earnings per share exhibiting strong growth of 15% and 14%, respectively. Noninterest income and net interest income grew 7% and 8%, respectively. Expense growth of 5% reflects continued investments in our business as well as ongoing support of regulatory requirements and technology initiatives.

In the third quarter, we returned $225.5 million to common stockholders through dividends and stock repurchases, demonstrating our continuing commitment to returning capital to our common stockholders,” said Frederick H. Waddell, Chairman and Chief Executive Officer.

THIRD QUARTER 2015 PERFORMANCE VS. THIRD QUARTER 2014

Net income per diluted common share was $0.96 in the third quarter of 2015, up from $0.84 in the third quarter of 2014. Net income was $234.6 million, compared to $204.5 million in the prior-year quarter.

Revenue of $1.16 billion was up $76.6 million, or 7%, from $1.08 billion in the prior-year quarter, primarily reflecting higher trust, investment and other servicing fees, foreign exchange trading income and security commissions and trading income.

Trust, investment and other servicing fees were $749.1 million, up $30.9 million, or 4%, from $718.2 million in the prior-year quarter, primarily reflecting new business.

Assets under custody and assets under management are the primary drivers of the Corporation’s trust, investment and other servicing fees. The following table presents the Corporation’s assets under custody and assets under management by reporting segment.

($ In Billions)

  September 30,
2015
  June 30,
2015
  September 30,
2014
 

% Change
Q3-15/Q2-15

 

% Change
Q3-15/Q3-14

Assets Under Custody
Corporate & Institutional Services $ 5,460.6 $ 5,652.6 $ 5,403.1 (3 )% 1 %
Wealth Management 495.8   524.4   507.2   (5 )% (2 )%
Total Assets Under Custody $ 5,956.4   $ 6,177.0   $ 5,910.3   (4 )% 1 %
Assets Under Management
Corporate & Institutional Services $ 661.5 $ 713.6 $ 702.9 (7 )% (6 )%
Wealth Management 225.3   232.0   220.4   (3 )% 2 %
Total Assets Under Management $ 886.8   $ 945.6   $ 923.3   (6 )% (4 )%

Corporate & Institutional Services (C&IS) trust, investment and other servicing fees increased $29.8 million, or 7%, to $429.7 million from the prior-year quarter’s $399.9 million.

($ In Millions)

  Q3 2015   Q3 2014   Change Q3 2015 from Q3 2014
C&IS Trust, Investment and Other Servicing Fees  
Custody and Fund Administration $ 293.9 $ 275.0 $ 18.9 7 %
Investment Management 82.6 75.4 7.2 10
Securities Lending 19.8 22.0 (2.2 ) (10 )
Other   33.4     27.5     5.9   21  
Total $ 429.7   $ 399.9   $ 29.8   7 %

Custody and fund administration fees, the largest component of C&IS fees, increased 7%, driven by new business and higher equity markets, partially offset by the unfavorable impact of movements in foreign exchange rates. Investment management fees increased 10% due to new business and lower money market mutual fund fee waivers. Money market mutual fund fee waivers in C&IS totaled $12.2 million in the current quarter compared to $16.7 million in the prior-year quarter. Securities lending decreased 10% due to changes in fee arrangements.

Wealth Management trust, investment and other servicing fees totaled $319.4 million, increasing $1.1 million, from $318.3 million in the prior-year quarter.

($ In Millions)

  Q3 2015   Q3 2014   Change Q3 2015 from Q3 2014
Wealth Management Trust, Investment and Other Servicing Fees  
Central $ 126.8 $ 129.5 (2.7 ) (2 )%
East 82.1 83.2 (1.1 ) (1 )
West 66.8 67.5 (0.7 ) (1 )
Global Family Office   43.7     38.1     5.6   15  
Total $ 319.4   $ 318.3   $ 1.1   %

Global Family Office fees increased 15%, primarily attributable to new business, while fees across the regions decreased 1% to 2%. Money market mutual fund fee waivers in Wealth Management totaled $15.3 million in the current quarter compared to $16.9 million in the prior-year quarter.

Foreign exchange trading income totaled $62.9 million, up $16.5 million, or 36%, compared with $46.4 million in the prior-year quarter. The increase was primarily due to higher currency volatility as compared to the prior-year quarter.

Security commissions and trading income totaled $20.4 million, up $6.2 million, or 44%, compared with $14.2 million in the prior-year quarter. The increase was primarily attributable to higher income from interest rate protection products sold to clients.

Other operating income totaled $38.1 million, up 12%, compared to $34.1 million in the prior-year quarter, reflecting increases in various categories.

Net interest income on an FTE basis totaled $275.0 million, up $18.8 million, or 7%, compared to $256.2 million in the prior-year quarter. The increase was primarily the result of growth in earning assets and a higher net interest margin. Earning assets for the quarter averaged $100.8 billion, up $3.8 billion, or 4%, from $97.0 billion in the prior-year quarter, resulting from higher levels of securities and loans. Earning asset growth was funded by a higher level of demand deposits. The net interest margin increased to 1.08% from 1.05% in the prior-year quarter, primarily reflecting a lower cost of interest-related funds, partially offset by lower yields on certain categories of earning assets.

The provision for credit losses was a credit of $10.0 million in the current quarter, reflecting improved credit quality. There was no provision for credit losses recorded in the prior-year quarter. Net charge-offs in the current quarter were $9.4 million, resulting from charge-offs of $11.9 million and recoveries of $2.5 million. The prior-year quarter included $5.2 million of net charge-offs, resulting from $8.6 million of charge-offs and $3.4 million of recoveries. Nonperforming assets of $207.5 million decreased 10% from $231.2 million in the prior-year quarter.

The table below provides information regarding nonperforming assets, the allowance for credit losses and associated ratios.

($ In Millions)

  September 30,
2015
  June 30,
2015
  September 30,
2014
Nonperforming Assets
Nonperforming Loans and Leases $ 198.6 $ 208.7 $ 220.5
Other Real Estate Owned 8.9   10.1   10.7  
Total Nonperforming Assets 207.5   218.8   231.2  
 
Allowance for Credit Losses
Allowance for Credit Losses Assigned to:
Loans and Leases 242.2 257.3 269.4
Undrawn Loan Commitments and Standby Letters of credit 12.5   16.9   28.9  
Total Allowance for Credit Losses $ 254.7   $ 274.2   $ 298.3  
 
Ratios
Nonperforming Loans and Leases to Total Loans and Leases 0.59 % 0.63 % 0.72 %
Allowance for Credit Losses Assigned to Loans and Leases to Total Loans and Leases 0.73 % 0.78 % 0.88 %
Allowance for Credit Losses Assigned to Loans and Leases to Nonperforming Loans and Leases 1.2x 1.2x 1.2x

Noninterest expense totaled $812.3 million in the current quarter, up $37.6 million, or 5%, from $774.7 million in the prior-year quarter, attributable to higher outside services, compensation and equipment and software expenses.

Compensation expense, the largest component of noninterest expense, equaled $361.6 million in the current quarter, up $13.6 million, or 4%, from $348.0 million in the prior-year quarter. The increase primarily reflects higher staff levels, base pay adjustments and performance-based compensation, partially offset by the favorable impact of movements in foreign exchange rates. Staff on a full-time equivalent basis at September 30, 2015, totaled approximately 16,000, up 5% from September 30, 2014.

Employee benefit expense totaled $69.8 million in the current quarter, down slightly from $70.6 million in the prior-year quarter, reflecting lower expense associated with employee medical benefits offset by higher pension expense.

Expense associated with outside services totaled $158.3 million in the current quarter, up $15.9 million, or 11%, from $142.4 million in the prior-year quarter, primarily reflecting higher consulting expense due to regulatory related spend and increased technical services expense, partially offset by lower third-party advisory and sub-custodian expenses.

Equipment and software expense totaled $113.6 million in the current quarter, up $13.1 million, or 13%, from $100.5 million in the prior-year quarter, reflecting higher software-related costs.

Occupancy expense equaled $43.7 million, relatively unchanged from $43.8 million in the prior-year quarter.

Other operating expense totaled $65.3 million in the current quarter, down 6% from $69.4 million in the prior-year quarter, reflecting decreases in various categories.

The provision for income taxes was $118.6 million in the current quarter, representing an effective tax rate of 33.6%. The provision for income taxes in the prior-year quarter was $99.7 million, representing an effective tax rate of 32.8%.

THIRD QUARTER 2015 PERFORMANCE VS. SECOND QUARTER 2015

Net income per diluted common share was $0.96 in the current quarter, compared to $1.10 in the second quarter of 2015. Net income totaled $234.6 million, compared to $269.2 million in the prior quarter.

Revenue was $1.16 billion in the current quarter compared to $1.26 billion in the prior quarter. Noninterest income totaled $886.6 million in the current quarter, down $118.1 million, or 12%, from $1.00 billion in the prior quarter. The prior quarter included a $99.9 million gain on the sale of a portion of the Visa Inc. Class B common shares held by the Corporation. The remainder of the decrease reflected lower foreign exchange trading income and trust, investment and other servicing fees. Net interest income on an FTE basis was $275.0 million, up $17.4 million, or 7%, from $257.6 million. The prior quarter net interest income included the $17.8 million impairment of the residual value of certain aircraft under leveraged lease agreements. Excluding the impairment, net interest income on an FTE basis was $275.0 million, relatively unchanged from $275.4 million in the prior quarter.

Trust, investment and other servicing fees totaled $749.1 million in the current quarter, down $7.7 million, from $756.8 million in the prior quarter, primarily attributable to lower securities lending fees and unfavorable equity markets.

C&IS trust, investment and other servicing fees totaled $429.7 million, down slightly from $432.0 million in the prior quarter.

($ In Millions)

  Q3 2015   Q2 2015   Change Q3 2015 from Q2 2015
C&IS Trust, Investment and Other Servicing Fees  
Custody and Fund Administration $ 293.9 $ 293.6 $ 0.3 %
Investment Management 82.6 80.6 2.0 2
Securities Lending 19.8 26.8 (7.0 ) (26 )
Other 33.4   31.0   2.4   8  
Total $ 429.7   $ 432.0   $ (2.3 ) (1 )%

C&IS custody and fund administration fees remained relatively unchanged from the prior quarter. Investment management fees increased 2% in the current quarter, primarily attributable to lower money market mutual fund fee waivers. Money market mutual fund fee waivers in C&IS totaled $12.2 million in the current quarter compared with $13.6 million in the prior quarter. Securities lending decreased 26%, primarily reflecting lower spreads due to the international dividend season that occurred in the prior quarter.

Wealth Management trust, investment and other servicing fees were $319.4 million, down $5.4 million, or 2%, from $324.8 million in the prior quarter.

($ In Millions)

  Q3 2015   Q2 2015   Change Q3 2015 from Q2 2015
Wealth Management Trust, Investment and Other Servicing Fees  
Central $ 126.8 $ 128.2 $ (1.4 ) (1 )%
East 82.1 85.9 (3.8 ) (4 )
West 66.8 68.5 (1.7 ) (2 )
Global Family Office   43.7     42.2     1.5   4  
Total $ 319.4   $ 324.8   $ (5.4 ) (2 )%

The decreased Wealth Management fees were primarily due to unfavorable equity markets in the current quarter. Money market mutual fund fee waivers in Wealth Management totaled $15.3 million, compared to $14.6 million in the prior quarter.

Foreign exchange trading income in the current quarter decreased $11.9 million, or 16%, to $62.9 million compared to $74.8 million in the prior quarter, due to lower client volumes and lower currency volatility.

Other operating income totaled $38.1 million, down $99.3 million, or 72%, from $137.4 million in the prior quarter. The prior quarter included a $99.9 million gain on the sale of a portion of the Visa Inc. Class B common shares held by the Corporation. Excluding the gain, other operating income remained relatively consistent with the prior quarter.

Net interest income on an FTE basis totaled $275.0 million in the current quarter, up $17.4 million, or 7%, from $257.6 million in the prior quarter. The prior quarter included a $17.8 million impairment of the residual value of certain aircraft under leveraged lease agreements. Excluding the impairment, net interest income remained relatively unchanged compared to the prior quarter. Earning assets averaged $100.8 billion, down $3.0 billion, or 3%, from $103.8 billion in the prior quarter. The net interest margin increased to 1.08% from 1.00% in the prior quarter. Excluding the impairment, the net interest margin was 1.06% in the prior quarter. The increase excluding the impairment was primarily driven by a decrease in lower yielding money market assets.

The provision for credit losses was a credit of $10.0 million in both the current quarter and in the prior quarter. Net charge-offs in the current quarter totaled $9.4 million resulting from $11.9 million of charge-offs and $2.5 million of recoveries, compared to $2.6 million of net charge-offs in the prior quarter resulting from $6.1 million of charge-offs and $3.5 million of recoveries. Nonperforming assets of $207.5 million decreased 5% from $218.8 million in the prior quarter.

Noninterest expense totaled $812.3 million in the current quarter, down $42.2 million, or 5%, from $854.5 million in the prior quarter. The prior quarter included a $45.8 million charge related to voluntary cash contributions to certain constant dollar NAV funds. Excluding this charge, noninterest expense increased slightly from $808.7 million in the prior quarter.

Compensation expense in the current quarter totaled $361.6 million, down slightly from $361.9 million in the prior quarter.

Employee benefit expense totaled $69.8 million in the current quarter, down 5% from the prior quarter, primarily reflecting decreased payroll tax expense and lower expense associated with employee medical benefits.

Expense for outside services totaled $158.3 million in the current quarter, an increase of $11.1 million, or 8%, from $147.2 million in the prior quarter, primarily reflecting higher consulting expense due to regulatory related spend and increased technical services expense.

Equipment and software expense in the current quarter totaled $113.6 million, down slightly from $114.4 million in the prior quarter.

Other operating expense totaled $65.3 million for the current quarter, down $49.5 million, or 43%, from $114.8 million in the prior quarter. The prior quarter included a charge of $45.8 million related to voluntary cash contributions to certain constant dollar NAV funds. Excluding this charge, other operating expense decreased 5%, primarily due to lower charitable contributions.

The provision for income taxes in the current quarter totaled $118.6 million, representing an effective tax rate of 33.6%. The provision for income taxes in the prior quarter totaled $142.2 million, representing an effective tax rate of 34.6%.

STOCKHOLDERS' EQUITY

Total stockholders’ equity averaged $8.71 billion, up $425.0 million, or 5% from the prior-year quarter’s average of $8.29 billion. The increase was primarily attributable to earnings, partially offset by dividend declarations and the repurchase of common stock pursuant to the Corporation’s share repurchase program. During the current quarter, the Corporation declared cash dividends totaling $5.8 million to preferred stockholders and cash dividends totaling $85.0 million to common stockholders. During the three and nine months ended September 30, 2015, the Corporation repurchased 1,914,950 shares of common stock at a cost of $140.5 million ($73.37 average price per share) and 4,766,083 shares of common stock at a cost of $344.4 million ($72.27 average price per share), respectively.

CAPITAL RATIOS

The capital ratios of Northern Trust and its principal subsidiary bank, The Northern Trust Company, remained strong at September 30, 2015, with all ratios applicable to classification as “well capitalized” under U.S. regulatory requirements having been exceeded.

The table below provides capital ratios for Northern Trust Corporation and The Northern Trust Company determined by Basel III phased in requirements.

  September 30, 2015   June 30, 2015   September 30, 2014
Capital Ratios -

Northern Trust Corporation

 

Advanced
Approach

 

Standardized
Approach (a)

Advanced
Approach

 

Standardized
Approach (a)

Advanced
Approach

 

Standardized
Approach (a)

Common Equity Tier 1 12.4 % 10.4 % 12.0 % 10.7 % 12.7 % 12.8 %
Tier 1 13.0 % 11.0 % 12.6 % 11.2 % 13.4 % 13.6 %
Total 14.8 % 12.8 % 14.4 % 13.2 % 15.3 % 16.0 %
Tier 1 Leverage 7.8 % 7.8 % 7.6 % 7.6 % n/a 7.9 %
Supplementary Leverage (b) 6.4 % n/a 6.3 % n/a n/a n/a
 
September 30, 2015 June 30, 2015 September 30, 2014
Capital Ratios -

The Northern Trust Company

 

Advanced
Approach

Standardized
Approach (a)

Advanced
Approach

Standardized
Approach (a)

Advanced
Approach

Standardized
Approach (a)

Common Equity Tier 1 12.0 % 9.9 % 11.6 % 10.1 % 11.7 % 11.6 %
Tier 1 12.0 % 9.9 % 11.6 % 10.1 % 11.7 % 11.6 %
Total 13.6 % 11.6 % 13.2 % 11.9 % 13.7 % 14.0 %
Tier 1 Leverage 7.0 % 7.0 % 6.8 % 6.8 % n/a 6.8 %
Supplementary Leverage (b) 5.7 % n/a 5.6 % n/a n/a n/a
(a)   In 2014, Standardized Approach risk-weighted assets were determined by Basel I requirements. Effective with the first quarter of 2015, risk-weighted assets are calculated in accordance with the Basel III Standardized Approach final rules.
(b) Effective January 1, 2018, advanced approaches institutions, such as the Corporation, will be subject to a minimum supplementary leverage ratio of 3 percent.

RECONCILIATION OF REPORTED NET INTEREST INCOME TO FULLY TAXABLE EQUIVALENT

Net interest income stated on an FTE basis is a non-GAAP financial measure that facilitates the analysis of asset yields. Management believes an FTE presentation provides a clearer indication of net interest margins for comparative purposes. When adjusted to an FTE basis, yields on taxable, nontaxable and partially taxable assets are comparable; however, the adjustment to an FTE basis has no impact on net income. The table below presents a reconciliation of interest income and net interest income prepared in accordance with GAAP to interest income and net interest income on an FTE basis.

  Three Months Ended
September 30, 2015   June 30, 2015   September 30, 2014

($ In Millions)

Reported   FTE Adj.   FTE Reported   FTE Adj.   FTE Reported   FTE Adj.   FTE
Net Interest Income
Interest Income $ 305.7 $ 6.1 $ 311.8 $ 288.8 $ 6.4 $ 295.2 $ 293.8 $ 6.9 $ 300.7
Interest Expense 36.8     $ 36.8   37.6     37.6   44.5     44.5  
Net Interest Income $ 268.9   $ 6.1   $ 275.0   $ 251.2   $ 6.4   $ 257.6   $ 249.3   $ 6.9   $ 256.2  
Net Interest Margin 1.06 % 1.08 % 0.97 % 1.00 % 1.02 % 1.05 %

FORWARD-LOOKING STATEMENTS

This release may include forward-looking statements concerning Northern Trust’s financial results and outlook, capital adequacy, dividend policy, anticipated expense levels and technology spending, risk management policies, contingent liabilities, strategic initiatives, industry trends, and expectations regarding the impact of recent legislation. Forward-looking statements are typically identified by words or phrases such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “likely,” “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, and involve risks and uncertainties that are difficult to predict. These statements are based on assumptions about many important factors, including the factors discussed in Northern Trust’s most recent annual report on Form 10-K and other filings with the U.S. Securities and Exchange Commission, all of which are available on Northern Trust’s website. We caution you not to place undue reliance on any forward-looking statement as actual results may differ materially from those expressed or implied by forward-looking statements. Northern Trust assumes no obligation to update its forward-looking statements.

WEBCAST OF THIRD QUARTER EARNINGS CONFERENCE CALL

Northern Trust’s third quarter earnings conference call will be webcast on October 21, 2015. The live call will be conducted at 11:00 a.m. CT and is accessible on Northern Trust’s website at:

https://www.northerntrust.com/financialreleases

The rebroadcast of the live call will be available on Northern Trust’s website from 2:00 p.m. CT on October 21, 2015, for approximately four weeks. Participants will need Windows Media or Adobe Flash software. This earnings release can also be accessed at Northern Trust’s website.

To download our investor relations mobile app, which offers access to SEC filings, press releases, stock quotes and upcoming events, please visit Apple’s App Store for your iPad. You may find the app by searching Northern Trust Investor Relations or by clicking on https://appsto.re/us/MtHH3.i from your iPad.

NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)

STATEMENT OF INCOME DATA

 

($ In Millions Except Per Share Data)

THIRD QUARTER    
2015   2014   % Change (*)
Noninterest Income    
Trust, Investment and Other Servicing Fees $ 749.1 $ 718.2 4 %
Foreign Exchange Trading Income 62.9 46.4 36
Treasury Management Fees 16.1 16.4 (2 )
Security Commissions and Trading Income 20.4 14.2 44
Other Operating Income 38.1 34.1 12
Investment Security Gains, net       0.3   (100 )
Total Noninterest Income 886.6 829.6 7
 
Net Interest Income
Interest Income 305.7 293.8 4
Interest Expense   36.8     44.5   (17 )
Net Interest Income 268.9 249.3 8
Total Revenue 1,155.5 1,078.9 7
 
Provision for Credit Losses (10.0 ) N/M
 
Noninterest Expense
Compensation 361.6 348.0 4
Employee Benefits 69.8 70.6 (1 )
Outside Services 158.3 142.4 11
Equipment and Software 113.6 100.5 13
Occupancy 43.7 43.8
Other Operating Expense   65.3     69.4   (6 )
Total Noninterest Expense 812.3 774.7 5
 
Income before Income Taxes 353.2 304.2 16
Provision for Income Taxes   118.6     99.7   19  
NET INCOME $ 234.6   $ 204.5   15 %
 
 
Dividends on Preferred Stock $ 5.8 $ N/M
Earnings Allocated to Participating Securities 3.8 3.5 9
Earnings Allocated to Common and Potential Common Shares 225.0 201.0 12
 
Per Common Share
Net Income
Basic $ 0.97 $ 0.85 14 %
Diluted 0.96 0.84 14
 
Average Common Equity $ 8,322.0 $ 8,044.7 3 %
Return on Average Common Equity 10.91 % 10.09 % 8
Return on Average Assets 0.85 % 0.77 % 10
 
Cash Dividends Declared per Common Share $ 0.36 $ 0.33 9 %
 
Average Common Shares Outstanding (000s)
Basic 232,232 235,701
Diluted 234,163 237,737
Common Shares Outstanding (EOP) (000s) 231,220

235,505

(*)   Percentage calculations are based on actual balances rather than the rounded amounts presented in the Supplemental Consolidated Financial Information.

NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)

STATEMENT OF INCOME DATA

  THIRD   SECOND  

($ In Millions Except Per Share Data)

QUARTER   QUARTER    
2015   2015   % Change (*)
Noninterest Income
Trust, Investment and Other Servicing Fees $ 749.1 $ 756.8 (1 )%
Foreign Exchange Trading Income 62.9 74.8 (16 )
Treasury Management Fees 16.1 16.1
Security Commissions and Trading Income 20.4 20.0 2
Other Operating Income 38.1 137.4 (72 )
Investment Security Losses, net       (0.4 ) (100 )
Total Noninterest Income 886.6 1,004.7 (12 )
 
Net Interest Income
Interest Income 305.7 288.8 6
Interest Expense   36.8     37.6   (2 )
Net Interest Income 268.9 251.2 7
 
Total Revenue 1,155.5 1,255.9 (8 )
 
Provision for Credit Losses (10.0 ) (10.0 )
 
Noninterest Expense
Compensation 361.6 361.9
Employee Benefits 69.8 73.2 (5 )
Outside Services 158.3 147.2 8
Equipment and Software 113.6 114.4 (1 )
Occupancy 43.7 43.0 2
Other Operating Expense   65.3     114.8   (43 )
Total Noninterest Expense   812.3     854.5   (5 )
     
Income before Income Taxes 353.2 411.4 (14 )
Provision for Income Taxes   118.6     142.2   (17 )
NET INCOME $ 234.6   $ 269.2   (13 )%
 
Dividends on Preferred Stock $ 5.8 $ 5.8 %
Earnings Allocated to Participating Securities 3.8 4.1 (7 )
Earnings Allocated to Common and Potential Common Shares 225.0 259.3 (13 )
 
Per Common Share
Net Income
Basic $ 0.97 $ 1.11 (13 )%
Diluted 0.96 1.10 (13 )
 
Average Common Equity $ 8,322.0 $ 8,219.4 1 %
Return on Average Common Equity 10.91 % 12.85 % (15 )
Return on Average Assets 0.85 % 0.97 % (12 )
 
Cash Dividends Declared per Common Share $ 0.36 $ 0.36 %
 
Average Common Shares Outstanding (000s)
Basic 232,232 233,149
Diluted 234,163 235,233
Common Shares Outstanding (EOP) (000s) 231,220 232,853
(*)   Percentage calculations are based on actual balances rather than the rounded amounts presented in the Supplemental Consolidated Financial Information.

NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)

STATEMENT OF INCOME DATA

 

($ In Millions Except Per Share Data)

NINE MONTHS    
2015   2014   % Change (*)
Noninterest Income    
Trust, Investment and Other Servicing Fees $ 2,233.4 $ 2,104.6 6 %
Foreign Exchange Trading Income 209.3 149.4 40
Treasury Management Fees 48.5 49.8 (3 )
Security Commissions and Trading Income 60.2 46.7 29
Other Operating Income 214.1 112.3 91
Investment Security Losses, net   (0.3 )   (3.3 ) (91 )
Total Noninterest Income 2,765.2 2,459.5 12
 
Net Interest Income
Interest Income 893.3 883.0 1
Interest Expense   112.6     141.4   (20 )
Net Interest Income 780.7 741.6 5
 
Total Revenue 3,545.9 3,201.1 11
 
Provision for Credit Losses (24.5 ) 3.0 N/M
 
Noninterest Expense
Compensation 1,077.8 1,062.2 1
Employee Benefits 215.9 206.0 5
Outside Services 440.6 431.4 2
Equipment and Software 338.3 317.9 6
Occupancy 129.7 135.2 (4 )
Other Operating Expense   253.5     201.0   26  
Total Noninterest Expense   2,455.8     2,353.7   4  
     
Income before Income Taxes 1,114.6 844.4 32
Provision for Income Taxes   380.1     276.6   37  
NET INCOME $ 734.5   $ 567.8   29 %
 
Dividends on Preferred Stock $ 17.5 $ N/M
Earnings Allocated to Participating Securities 11.6 9.5 22
Earnings Allocated to Common and Potential Common Shares 705.4 558.3 26
 
Per Common Share
Net Income
Basic $ 3.03 $ 2.36 28 %
Diluted 3.00 2.34 28
 
Average Common Equity $ 8,209.4 $ 7,973.1 3 %
Return on Average Common Equity 11.68 % 9.52 % 23
Return on Average Assets 0.90 % 0.74 % 22
 
Cash Dividends Declared per Common Share $ 1.05 $ 0.97 8 %
 
Average Common Shares Outstanding (000s)
Basic 232,916 236,302
Diluted 234,891 238,176
Common Shares Outstanding (EOP) (000s) 231,220 235,505
(*)   Percentage calculations are based on actual balances rather than the rounded amounts presented in the Supplemental Consolidated Financial Information.

NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)

BALANCE SHEET

 
($ In Millions) SEPTEMBER 30  
2015   2014 % Change (*)
Assets
Federal Funds Sold and Securities Purchased under Agreements to Resell $ 1,255.6 $ 1,010.0 24 %
Interest-Bearing Due from and Deposits with Banks (**) 16,311.1 15,334.5 6
Federal Reserve Deposits 22,252.0 21,328.0 4
Securities
U.S. Government 5,125.2 3,409.6 50
Obligations of States and Political Subdivisions 101.6 143.4 (29 )
Government Sponsored Agency 15,716.6 16,197.2 (3 )
Other (***)   16,425.0     12,991.2   26  
Total Securities 37,368.4 32,741.4 14
Loans and Leases   33,378.4     30,719.9   9  
Total Earning Assets 110,565.5 101,133.8 9
Allowance for Credit Losses Assigned to Loans and Leases (242.2 ) (269.4 ) (10 )
Cash and Due from Banks 2,109.8 2,918.9 (28 )
Buildings and Equipment 427.7 436.6 (2 )
Client Security Settlement Receivables 1,918.4 1,538.6 25
Goodwill 529.7 538.1 (2 )
Other Assets   4,686.3     4,857.1   (4 )
Total Assets $ 119,995.2   $ 111,153.7   8 %
 
Liabilities and Stockholders' Equity
Interest-Bearing Deposits
Savings and Money Market $ 15,153.5 $ 14,525.1 4 %
Savings Certificates and Other Time 1,457.1 1,869.0 (22 )
Non-U.S. Offices - Interest-Bearing   53,823.8     50,586.1   6  
Total Interest-Bearing Deposits 70,434.4 66,980.2 5
Short-Term Borrowings 4,908.6 3,411.5 44
Senior Notes 1,497.3 1,496.9
Long-Term Debt 1,394.3 1,598.7 (13 )
Floating Rate Capital Debt   277.3     277.2    
Total Interest-Related Funds 78,511.9 73,764.5 6
Demand and Other Noninterest-Bearing Deposits 29,501.5 24,742.3 19
Other Liabilities   3,197.3     4,104.3   (22 )
Total Liabilities 111,210.7 102,611.1 8
Common Equity 8,396.0 8,154.1 3
Preferred Equity   388.5     388.5    
Total Equity   8,784.5     8,542.6   3  
Total Liabilities and Stockholders' Equity $ 119,995.2   $ 111,153.7   8 %
(*)   Percentage calculations are based on actual balances rather than the rounded amounts presented in the Supplemental Consolidated Financial Information.
(**) Interest-Bearing Due from and Deposits with Banks includes the interest-bearing component of Cash and Due from Banks and Interest-Bearing Deposits with Banks as presented on the consolidated balance sheet in our periodic filings with the SEC.
(***) Other securities include Federal Reserve and Federal Home Loan Bank stock and certain community development investments for purposes of presenting earning assets; such securities are presented in other assets on consolidated balance sheet in our periodic filings with the SEC.

NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)

BALANCE SHEET

     
($ In Millions) SEPTEMBER 30 JUNE 30
2015 2015 % Change (*)
Assets
Federal Funds Sold and Securities Purchased under Agreements to Resell $ 1,255.6 $ 1,020.0 23 %
Interest-Bearing Due from and Deposits with Banks (**) 16,311.1 18,909.6 (14 )
Federal Reserve Deposits 22,252.0 17,488.7 27
Securities
U.S. Government 5,125.2 5,018.8 2
Obligations of States and Political Subdivisions 101.6 107.9 (6 )
Government Sponsored Agency 15,716.6 16,776.9 (6 )
Other (***)   16,425.0     17,289.6   (5 )
Total Securities 37,368.4 39,193.2 (5 )
Loans and Leases   33,378.4     32,953.8   1  
Total Earning Assets 110,565.5 109,565.3 1
Allowance for Credit Losses Assigned to Loans and Leases (242.2 ) (257.3 ) (6 )
Cash and Due from Banks 2,109.8 3,893.6 (46 )
Buildings and Equipment 427.7 436.5 (2 )
Client Security Settlement Receivables 1,918.4 2,034.2 (6 )
Goodwill 529.7 534.3 (1 )
Other Assets   4,686.3     3,736.3   25  
Total Assets $ 119,995.2   $ 119,942.9   %
 
Liabilities and Stockholders' Equity
Interest-Bearing Deposits
Savings and Money Market $ 15,153.5 $ 15,782.4 (4 )%
Savings Certificates and Other Time 1,457.1 1,540.5 (5 )
Non-U.S. Offices - Interest-Bearing   53,823.8     52,909.9   2  
Total Interest-Bearing Deposits 70,434.4 70,232.8
Short-Term Borrowings 4,908.6 3,704.0 33
Senior Notes 1,497.3 1,497.2
Long-Term Debt 1,394.3 1,362.3 2
Floating Rate Capital Debt   277.3     277.3    
Total Interest-Related Funds 78,511.9 77,073.6 2
Demand and Other Noninterest-Bearing Deposits 29,501.5 30,455.1 (3 )
Other Liabilities   3,197.3     3,664.9   (13 )
Total Liabilities 111,210.7 111,193.6
Common Equity 8,396.0 8,360.8
Preferred Equity   388.5     388.5    
Total Equity   8,784.5     8,749.3    
Total Liabilities and Stockholders' Equity $ 119,995.2   $ 119,942.9   %
(*)   Percentage calculations are based on actual balances rather than the rounded amounts presented in the Supplemental Consolidated Financial Information.
(**) Interest-Bearing Due from and Deposits with Banks includes the interest-bearing component of Cash and Due from Banks and Interest-Bearing Deposits with Banks as presented on the consolidated balance sheet in our periodic filings with the SEC.
(***)

Other securities include Federal Reserve and Federal Home Loan Bank stock and certain community development investments for purposes of presenting earning assets; such securities are presented in other assets on consolidated balance sheet in our periodic filings with the SEC.

NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)

AVERAGE BALANCE SHEET

     
($ In Millions) THIRD QUARTER    
2015   2014   % Change (*)
Assets
Federal Funds Sold and Securities Purchased under Agreements to Resell $ 1,080.4 $ 923.1 17 %
Interest-Bearing Due from and Deposits with Banks (**) 15,828.1 16,288.3 (3 )
Federal Reserve Deposits 12,721.3 15,914.3 (20 )
Securities
U.S. Government 5,034.6 3,031.9 66
Obligations of States and Political Subdivisions 103.3 148.5 (30 )
Government Sponsored Agency 16,198.2 17,385.6 (7 )
Other (***)   16,705.0     13,019.4   28  
Total Securities 38,041.1 33,585.4 13
Loans and Leases   33,138.3     30,256.4   10  
Total Earning Assets 100,809.2 96,967.5 4
Allowance for Credit Losses Assigned to Loans and Leases (256.0 ) (273.4 ) (6 )
Cash and Due from Banks 2,683.5 2,783.0 (4 )
Buildings and Equipment 435.6 445.6 (2 )
Client Security Settlement Receivables 1,031.8 820.8 26
Goodwill 532.4 541.9 (2 )
Other Assets   4,687.6     3,959.3   18  
Total Assets $ 109,924.1   $ 105,244.7   4 %
 
Liabilities and Stockholders' Equity
Interest-Bearing Deposits
Savings and Money Market $ 15,168.4 $ 15,019.0 1 %
Savings Certificates and Other Time 1,487.0 1,902.9 (22 )
Non-U.S. Offices - Interest-Bearing   50,107.9     48,725.5   3  
Total Interest-Bearing Deposits 66,763.3 65,647.4 2
Short-Term Borrowings 3,878.5 4,860.3 (20 )
Senior Notes 1,497.2 1,496.8
Long-Term Debt 1,374.3 1,636.5 (16 )
Floating Rate Capital Debt   277.3     277.2    
Total Interest-Related Funds 73,790.6 73,918.2
Demand and Other Noninterest-Bearing Deposits 24,263.7 20,069.8 21
Other Liabilities   3,159.3     2,971.2   6  
Total Liabilities 101,213.6 96,959.2 4
Common Equity 8,322.0 8,044.7 3
Preferred Equity   388.5     240.8   61  
Total Equity   8,710.5     8,285.5   5  
Total Liabilities and Stockholders' Equity $ 109,924.1   $ 105,244.7   4 %
(*)   Percentage calculations are based on actual balances rather than the rounded amounts presented in the Supplemental Consolidated Financial Information.
(**) Interest-Bearing Due from and Deposits with Banks includes the interest-bearing component of Cash and Due from Banks and Interest-Bearing Deposits with Banks as presented on the consolidated balance sheet in our periodic filings with the SEC.
(***) Other securities include Federal Reserve and Federal Home Loan Bank stock and certain community development investments for purposes of presenting earning assets; such securities are presented in other assets on consolidated balance sheet in our periodic filings with the SEC.

NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)

 

AVERAGE BALANCE SHEET

  THIRD   SECOND  
($ In Millions) QUARTER   QUARTER    
2015   2015   % Change (*)
Assets
Federal Funds Sold and Securities Purchased under Agreements to Resell $ 1,080.4 $ 1,041.9 4 %
Interest-Bearing Due from and Deposits with Banks (**) 15,828.1 16,920.6 (6 )
Federal Reserve Deposits 12,721.3 14,992.1 (15 )
Securities
U.S. Government 5,034.6 4,789.1 5
Obligations of States and Political Subdivisions 103.3 112.2 (8 )
Government Sponsored Agency 16,198.2 16,821.7 (4 )
Other (***)   16,705.0     16,207.0   3  
Total Securities 38,041.1 37,930.0
Loans and Leases   33,138.3     32,921.4   1  
Total Earning Assets 100,809.2 103,806.0 (3 )
Allowance for Credit Losses Assigned to Loans and Leases (256.0 ) (260.0 ) (2 )
Cash and Due from Banks 2,683.5 2,142.9 25
Buildings and Equipment 435.6 446.5 (2 )
Client Security Settlement Receivables 1,031.8 945.0 9
Goodwill 532.4 531.1
Other Assets   4,687.6     4,079.6   15  
Total Assets $ 109,924.1   $ 111,691.1   (2 )%
 
Liabilities and Stockholders' Equity
Interest-Bearing Deposits
Savings and Money Market $ 15,168.4 $ 15,705.4 (3 )%
Savings Certificates and Other Time 1,487.0 1,779.5 (16 )
Non-U.S. Offices - Interest-Bearing   50,107.9     49,291.8   2  
Total Interest-Bearing Deposits 66,763.3 66,776.7
Short-Term Borrowings 3,878.5 4,404.8 (12 )
Senior Notes 1,497.2 1,497.1
Long-Term Debt 1,374.3 1,380.2
Floating Rate Capital Debt   277.3     277.3    
Total Interest-Related Funds 73,790.6 74,336.1 (1 )
Demand and Other Noninterest-Bearing Deposits 24,263.7 25,558.4 (5 )
Other Liabilities   3,159.3     3,188.7   (1 )
Total Liabilities 101,213.6 103,083.2 (2 )
Common Equity 8,322.0 8,219.4 1
Preferred Equity   388.5     388.5    
Total Equity   8,710.5     8,607.9   1  
Total Liabilities and Stockholders' Equity $ 109,924.1   $ 111,691.1   (2 )%
(*)   Percentage calculations are based on actual balances rather than the rounded amounts presented in the Supplemental Consolidated Financial Information.
(**) Interest-Bearing Due from and Deposits with Banks includes the interest-bearing component of Cash and Due from Banks and Interest-Bearing Deposits with Banks as presented on the consolidated balance sheet in our periodic filings with the SEC.
(***) Other securities include Federal Reserve and Federal Home Loan Bank stock and certain community development investments for purposes of presenting earning assets; such securities are presented in other assets on consolidated balance sheet in our periodic filings with the SEC.

NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)

QUARTERLY TREND DATA

  2015   2014

($ In Millions Except Per Share Data)

QUARTERS   QUARTERS
THIRD   SECOND   FIRST   FOURTH   THIRD

Net Income Summary

   
Trust, Investment and Other Servicing Fees $ 749.1 $ 756.8 $ 727.5 $ 728.2 $ 718.2
Other Noninterest Income 137.5 247.9 146.4 138.0 111.4
Net Interest Income   268.9     251.2     260.6     263.9     249.3  
Total Revenue 1,155.5 1,255.9 1,134.5 1,130.1 1,078.9
Provision for Credit Losses (10.0 ) (10.0 ) (4.5 ) 3.0
Noninterest Expense   812.3     854.5     789.0     781.3     774.7  
Income before Income Taxes 353.2 411.4 350.0 345.8 304.2
Provision for Income Taxes   118.6     142.2     119.3     101.8     99.7  
Net Income $ 234.6   $ 269.2   $ 230.7   $ 244.0   $ 204.5  
 

Per Common Share

Net Income - Basic $ 0.97 $ 1.11 $ 0.95 $ 0.98 $ 0.85
- Diluted 0.96 1.10 0.94 0.98 0.84
Cash Dividends Declared per Common Share 0.36 0.36 0.33 0.33 0.33
Book Value (EOP) 36.31 35.91 35.22 34.54 34.62
Market Value (EOP) 68.16 76.46 69.65 67.40 68.03
 

Financial Ratios

Return on Average Common Equity 10.91 % 12.85 % 11.28 % 11.47 % 10.09 %
Return on Average Assets 0.85 0.97 0.87 0.90 0.77
Net Interest Margin (GAAP) 1.06 0.97 1.07 1.05 1.02
Net Interest Margin (FTE) 1.08 1.00 1.10 1.08 1.05
 

Capital Ratios

Standardized Approach
Common Equity Tier 1 10.4 % 10.7 % 10.5 % 12.5 % 12.8 %
Tier 1 11.0 11.2 11.1 13.3 13.6
Total 12.8 13.2 13.1 15.5 16.0
Tier 1 Leverage 7.8 7.6 7.8 7.8 7.9
 
Advanced Approach
Common Equity Tier 1 12.4 % 12.0 % 11.8 % 12.4 % 12.7 %
Tier 1 13.0 12.6 12.4 13.2 13.4
Total 14.8 14.4 14.2 15.0 15.3
Tier 1 Leverage 7.8 7.6 7.8 n/a n/a
Supplementary Leverage 6.4 6.3 6.4 n/a n/a
 

Assets Under Custody ($ In Billions) - EOP

Corporate & Institutional Services $ 5,460.6 $ 5,652.6 $ 5,566.2 $ 5,453.1 $ 5,403.1
Wealth Management   495.8     524.4     524.6     515.7     507.2  
Total Assets Under Custody $ 5,956.4   $ 6,177.0   $ 6,090.8   $ 5,968.8   $ 5,910.3  
 

Assets Under Management ($ In Billions) - EOP

Corporate & Institutional Services $ 661.5 $ 713.6 $ 727.0 $ 709.6 $ 702.9
Wealth Management   225.3     232.0     233.1     224.5     220.4  
Total Assets Under Management $ 886.8   $ 945.6   $ 960.1   $ 934.1   $ 923.3  
 

Asset Quality ($ In Millions) - EOP

Nonperforming Loans and Leases $ 198.6 $ 208.7 $ 219.6 $ 215.7 $ 220.5
Other Real Estate Owned (OREO)   8.9     10.1     8.5     16.6     10.7  
Total Nonperforming Assets $ 207.5   $ 218.8   $ 228.1   $ 232.3   $ 231.2  
Nonperforming Assets / Loans and Leases and OREO 0.62 % 0.66 % 0.70 % 0.73 % 0.75 %
Gross Charge-offs $ 11.9 $ 6.1 $ 7.5 $ 8.2 $ 8.6
Less: Gross Recoveries   2.5     3.5     2.9     2.8     3.4  
Net Charge-offs $ 9.4   $ 2.6   $ 4.6   $ 5.4   $ 5.2  
Net Charge-offs (Annualized) to Average Loans and Leases 0.11 % 0.03 % 0.06 % 0.07 % 0.07 %
Allowance for Credit Losses Assigned to Loans and Leases $ 242.2 $ 257.3 $ 259.0 $ 267.0 $ 269.4
Allowance to Nonperforming Loans and Leases 1.2x 1.2x 1.2x 1.2x 1.2x
Allowance for Other Credit-Related Exposures $ 12.5 $ 16.9 $ 27.7 $ 28.9 $ 28.9

Contacts

Northern Trust
Investor Contact:
Bev Fleming
(312) 444-7811
Beverly_Fleming@ntrs.com
or
Media Contact:
Doug Holt
(312) 557-1571
Doug_Holt@ntrs.com
https://www.northerntrust.com

Contacts

Northern Trust
Investor Contact:
Bev Fleming
(312) 444-7811
Beverly_Fleming@ntrs.com
or
Media Contact:
Doug Holt
(312) 557-1571
Doug_Holt@ntrs.com
https://www.northerntrust.com