01—Abstract
Summary
Summary of the 10-K filed March 14, 1997. Cited figures are marked; the original filing is the authoritative source.
Northern Trust Corporation, a Delaware bank holding company headquartered in Chicago, reported record 1996 results in this 10-K.
Net income reached $258.8 milliona, up from $220.0 million in 1995 (the filing states an increase of 17.6%). Fully diluted net income per common share rose 19% to $2.20, reflecting the two-for-one stock split effected in December 1996. Total assets were $21.6 billion at December 31, 1996, and stockholders' equity was $1.54 billion.
Trust assets under administration reached $778.9 billionb, up from $613.9 billion a year earlier. The company's revenue base is weighted toward fee income. Noninterest income was $777.9 million in 1996, versus net interest income of $388.3 million, and trust fees rose 17% to $592.3 million.
Net interest margin narrowed to 2.25% from 2.30%, and nonperforming assets declined to $21.4 millionc, the lowest level in over fifteen years according to the filing. Noninterest expenses increased 8% to $766.8 million. Capital and balance sheet positions remained strong, with tier 1 capital at 8.2% and total risk-based capital at 11.9% of risk-adjusted assets, both above stated minimums.
In January 1997 the company issued $150 milliond of floating rate capital securities, which qualify as Tier 1 capital. The filing also reports a dividend increase of 16.1% to $.18 per quarter in November 1996 and an expanded share buyback authorization.
02—Key points
Key Highlights
- Record 1996 net income of $258.8 million, up 17.6% from $220.0 million in 1995
- Fully diluted EPS of $2.20 in 1996, up 19% from $1.85, after the December 1996 two-for-one stock split
- Trust assets under administration of $778.9 billion at December 31, 1996, up from $613.9 billion
- Noninterest income of $777.9 million exceeded net interest income of $388.3 million, reflecting a fee-oriented business model
- Net interest margin declined to 2.25% from 2.30%, while nonperforming assets fell to $21.4 million
- Tier 1 capital ratio of 8.2% and total risk-based capital ratio of 11.9%, both above minimum requirements
- Quarterly dividend raised 16.1% to $.18 per share in November 1996, the tenth consecutive annual increase
03—Questions
Frequently Asked Questions
How did Northern Trust perform financially in 1996?
The filing reports record net income of $258.8 million, up 17.6% from $220.0 million in 1995. Return on average common stockholders' equity was 18.6%, and return on average assets was 1.23%.
What drives Northern Trust's revenue?
Noninterest income totaled $777.9 million in 1996, compared with net interest income of $388.3 million. Trust fees of $592.3 million were the largest component, and the filing notes the company is one of only five major U.S. bank holding companies earning more from fee-based services than from net interest income.
How strong is the company's capital position?
At December 31, 1996, tier 1 capital was 8.2% and total capital was 11.9% of risk-adjusted assets. The leverage ratio was 6.4%. The filing states that these ratios are well above the minimum requirements of 4.0% for tier 1 and 8.0% for total risk-based capital.
What happened to the stock and dividend?
The company completed a two-for-one stock split through a 100% stock distribution on December 9, 1996. The quarterly dividend was increased 16.1% to $.18 per share in November 1996, for an annual rate of $.72 on a post-split basis.
What are the main risks or pressures mentioned?
The filing cites intense competition in the master trust and master custody business, which affects pricing, and a declining net interest margin. It also notes that operational and fiduciary losses have occurred from time to time and may occur in the future.
04—Continue