-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, j1wyGEFiYR2NkNIE+snZ1jaFp0VF4OB9v+U5w9oGVOzRws1+VHmOIroYKvpD2Hq1 nDkDQuqjB2R2GSHyLq0dqA== 0000950131-95-002182.txt : 19950814 0000950131-95-002182.hdr.sgml : 19950814 ACCESSION NUMBER: 0000950131-95-002182 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950811 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHERN TRUST CORP CENTRAL INDEX KEY: 0000073124 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 362723087 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-05965 FILM NUMBER: 95561357 BUSINESS ADDRESS: STREET 1: 50 S LA SALLE ST CITY: CHICAGO STATE: IL ZIP: 60675 BUSINESS PHONE: 3126306000 FORMER COMPANY: FORMER CONFORMED NAME: NORTRUST CORP DATE OF NAME CHANGE: 19780525 10-Q 1 FORM 10-Q ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________________ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 1995 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------- ------------- Commission file number 0-5965 NORTHERN TRUST CORPORATION (Exact name of registrant as specified in its charter) 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) Registrant's telephone number, including area code: (312) 630-6000 _____________________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [_] 55,870,628 Shares - $1.66 2/3 Par Value (Shares of Common Stock Outstanding on June 30, 1995) ================================================================================ 1 PART I - FINANCIAL INFORMATION Item 1. Financial Statements CONSOLIDATED BALANCE SHEET Northern Trust Corporation
June 30 December 31 June 30 --------- ----------- --------- ($ In Millions) 1995 1994 1994 - ---------------------------------------- --------- ----------- --------- ASSETS Cash and Due from Banks $ 1,092.8 $ 1,192.5 $ 1,119.4 Money Market Assets Federal Funds Sold and Securities Purchased under Agreements to Resell 404.0 777.0 325.6 Time Deposits with Banks 1,654.5 1,864.7 2,214.5 Other 12.6 9.5 168.3 - ---------------------------------------- --------- --------- --------- Total 2,071.1 2,651.2 2,708.4 - ---------------------------------------- --------- --------- --------- Securities (Fair value $5,656.0 at June 1995, $5,069.7 at December 1994 and $4,755.8 at June 1994) 5,624.6 5,053.1 4,725.8 Loans and Leases (Net of unearned income of $75.6 at June 1995, $70.4 at December 1994 and $61.9 at June 1994) 9,421.8 8,590.6 8,572.4 Reserve for Credit Losses (145.9) (144.8) (144.9) Buildings and Equipment 278.2 274.7 273.0 Customers' Acceptance Liability 47.1 56.3 70.0 Trust Security Settlement Receivables 287.0 305.7 407.4 Other Assets 624.4 582.3 707.9 - ---------------------------------------- --------- --------- --------- Total Assets $19,301.1 $18,561.6 $18,439.4 - ---------------------------------------- --------- --------- --------- LIABILITIES Deposits Demand and Other Noninterest-Bearing $ 2,543.5 $ 2,604.7 $ 2,663.6 Savings and Money Market Deposits 3,008.2 3,176.3 3,218.0 Savings Certificates 2,028.5 1,524.5 1,198.3 Other Time 367.0 342.2 312.9 Foreign Offices--Demand 327.8 225.4 457.9 --Time 2,972.3 3,861.3 3,441.6 - ---------------------------------------- --------- --------- --------- Total Deposits 11,247.3 11,734.4 11,292.3 Federal Funds Purchased 1,063.9 972.0 921.4 Securities Sold under Agreements to Repurchase 1,066.3 2,216.9 1,012.1 Commercial Paper 147.3 123.8 122.2 Other Borrowings 3,415.9 1,077.9 2,261.5 Senior Medium-Term Notes 317.0 547.0 807.0 Notes Payable 241.1 244.8 323.4 Liability on Acceptances 47.1 56.3 70.0 Other Liabilities 364.9 307.8 404.7 - ---------------------------------------- --------- --------- --------- Total Liabilities 17,910.8 17,280.9 17,214.6 - ---------------------------------------- --------- --------- ---------
STOCKHOLDERS' EQUITY Preferred Stock 170.0 170.0 170.0 Common Stock -- $1.66 2/3 Par Value 93.4 90.6 90.6
JUNE 1995 December 1994 June 1994 ----------------------------------------------------------------- Shares authorized 140,000,000 140,000,000 140,000,000 Shares issued 56,035,628 54,360,374 54,360,374 Shares outstanding 55,870,628 54,089,259 54,060,987
Capital Surplus 307.2 302.2 302.7 Retained Earnings 847.0 762.7 704.7 Net Unrealized Loss on Securities (2.1) (15.8) (12.2) Translation Adjustments -- -- -- Common Stock Issuable -- Performance Plan 16.7 17.9 20.2 Deferred Compensation -- ESOP and Other (35.3) (38.8) (44.0) Treasury Stock -- at cost, 165,000 shares at June 1995, 271,115 shares at December 1994 and 299,387 shares at June 1994 (6.6) (8.1) (7.2) - -------------------------------------------- --------- --------- --------- Total Stockholders' Equity 1,390.3 1,280.7 1,224.8 - -------------------------------------------- --------- --------- --------- Total Liabilities and Stockholders' Equity $19,301.1 $18,561.6 $18,439.4 - -------------------------------------------- --------- --------- ---------
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CONSOLIDATED STATEMENT OF INCOME Northern Trust Corporation SECOND QUARTER ENDED JUNE 30 SIX MONTHS --------------------------- --------------------------- ($ In Millions Except Per Share Information) 1995 1994 1995 1994 - ----------------------------------------------------------- ----------- ----------- ----------- ----------- Interest Income Money Market Assets Federal Funds Sold and Securities Purchased under Agreements to Resell $ 3.9 $ 1.8 $ 7.4 $ 4.0 Time Deposits with Banks 20.8 26.1 47.5 48.6 Other .3 1.7 .5 2.7 - ----------------------------------------------------------- ----------- ----------- ----------- ----------- Total 25.0 29.6 55.4 55.3 - ----------------------------------------------------------- ----------- ----------- ----------- ----------- Securities 89.1 51.3 174.2 99.0 Loans and Leases 157.0 119.1 302.7 229.9 - ----------------------------------------------------------- ----------- ----------- ----------- ----------- Total Interest Income 271.1 200.0 532.3 384.2 - ----------------------------------------------------------- ----------- ----------- ----------- ----------- Interest Expense Deposits - Savings and Money Market Deposits 27.4 20.5 54.0 39.7 - Savings Certificates 30.6 12.5 55.1 23.8 - Other Time 8.0 4.3 14.4 7.4 - Foreign Offices 47.2 30.9 97.8 54.2 Federal Funds Purchased 16.1 13.5 32.2 26.8 Securities Sold under Agreements to Repurchase 25.0 10.4 49.1 19.7 Commercial Paper 2.2 1.3 4.3 2.3 Other Borrowings 15.9 11.4 26.4 20.9 Senior Medium-Term Notes 5.8 7.5 12.7 14.0 Notes Payable 4.9 6.4 9.8 12.6 - ----------------------------------------------------------- ----------- ----------- ----------- ----------- Total Interest Expense 183.1 118.7 355.8 221.4 - ----------------------------------------------------------- ----------- ----------- ----------- ----------- Net Interest Income 88.0 81.3 176.5 162.8 Provision for Credit Losses 1.5 1.0 3.0 4.0 - ----------------------------------------------------------- ----------- ----------- ----------- ----------- Net Interest Income after Provision for Credit Losses 86.5 80.3 173.5 158.8 - ----------------------------------------------------------- ----------- ----------- ----------- ----------- Noninterest Income Trust Fees 123.3 113.5 244.1 223.0 Security Commissions and Trading Income 5.2 6.0 11.1 12.8 Other Operating Income 39.9 59.4 74.7 92.5 Investment Security Gains (Losses) .1 (.1) .2 .1 - ----------------------------------------------------------- ----------- ----------- ----------- ----------- Total Noninterest Income 168.5 178.8 330.1 328.4 - ----------------------------------------------------------- ----------- ----------- ----------- ----------- Income before Noninterest Expenses 255.0 259.1 503.6 487.2 - ----------------------------------------------------------- ----------- ----------- ----------- ----------- Noninterest Expenses Salaries 84.4 80.6 166.9 155.0 Pension and Other Employee Benefits 20.8 19.0 42.3 38.1 Occupancy Expense 15.3 14.6 29.5 28.3 Equipment Expense 12.0 22.7 24.6 34.0 Other Operating Expenses 45.4 50.6 91.9 94.0 - ----------------------------------------------------------- ----------- ----------- ----------- ----------- Total Noninterest Expenses 177.9 187.5 355.2 349.4 - ----------------------------------------------------------- ----------- ----------- ----------- ----------- Income before Income Taxes 77.1 71.6 148.4 137.8 Provision for Income Taxes 24.0 22.9 46.0 43.7 - ----------------------------------------------------------- ----------- ----------- ----------- ----------- NET INCOME $ 53.1 $ 48.7 $ 102.4 $ 94.1 - ----------------------------------------------------------- ----------- ----------- ----------- ----------- Net Income Applicable to Common Stock $ 50.9 $ 46.9 $ 98.1 $ 90.7 - ----------------------------------------------------------- ----------- ----------- ----------- ----------- NET INCOME PER COMMON SHARE - PRIMARY $ .90 $ .85 $ 1.75 $ 1.65 - FULLY DILUTED .89 .85 1.74 1.64 - ----------------------------------------------------------- ----------- ----------- ----------- ----------- Average Number of Common Shares Outstanding - Primary 56,878,030 55,261,057 56,027,938 54,972,886 - Fully Diluted 58,178,442 56,466,708 57,340,009 56,201,234 - ----------------------------------------------------------- ----------- ----------- ----------- -----------
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CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY Northern Trust Corporation SIX MONTHS ENDED JUNE 30 ---------------------------- (In Millions) 1995 1994 - ---------------------------------------------------- -------- -------- PREFERRED STOCK Balance at January 1 and June 30 $ 170.0 $ 170.0 - ---------------------------------------------------- -------- -------- COMMON STOCK Balance at January 1 90.6 89.7 Stock Issued - Incentive Plan & Awards .1 -- Pooled Affiliate - Stock Issued 2.7 .9 - ---------------------------------------------------- -------- -------- Balance at June 30 93.4 90.6 - ---------------------------------------------------- -------- -------- CAPITAL SURPLUS Balance at January 1 302.2 303.0 Stock Issued - Incentive Plan and Awards (1.9) .1 Pooled Affiliate - Stock Issued 6.9 (.4) - ---------------------------------------------------- -------- -------- Balance at June 30 307.2 302.7 - ---------------------------------------------------- -------- -------- RETAINED EARNINGS Balance at January 1 762.7 631.9 Net Income 102.4 94.1 Dividends Declared on Common Stock (28.7) (23.6) Dividends Declared on Preferred Stock (4.5) (3.1) Pooled Affiliate 15.1 5.4 - ---------------------------------------------------- -------- -------- Balance at June 30 847.0 704.7 - ---------------------------------------------------- -------- -------- NET UNREALIZED LOSS ON SECURITIES AVAILABLE FOR SALE Balance at January 1 (15.8) (.4) Unrealized Gain (Loss), net 13.7 (11.8) - ---------------------------------------------------- -------- -------- Balance at June 30 (2.1) (12.2) - ---------------------------------------------------- -------- -------- TRANSLATION ADJUSTMENTS Balance at January 1 -- .6 Sale of Foreign Investment -- (.6) - ---------------------------------------------------- -------- -------- Balance at June 30 -- -- - ---------------------------------------------------- -------- -------- COMMON STOCK ISSUABLE - PERFORMANCE PLAN Balance at January 1 17.9 11.8 Stock Issuable, net of Stock Issued (1.2) 8.4 - ---------------------------------------------------- -------- -------- Balance at June 30 16.7 20.2 - ---------------------------------------------------- -------- -------- DEFERRED COMPENSATION - ESOP AND OTHER Balance at January 1 (38.8) (43.5) Compensation Deferred (1.4) (5.3) Compensation Amortized 4.9 4.8 - ---------------------------------------------------- -------- -------- Balance at June 30 (35.3) (44.0) - ---------------------------------------------------- -------- -------- TREASURY STOCK Balance at January 1 (8.1) (11.4) Stock Options and Awards 11.0 6.4 Stock Purchased (9.5) (2.2) - ---------------------------------------------------- -------- -------- Balance at June 30 (6.6) (7.2) - ---------------------------------------------------- -------- -------- TOTAL STOCKHOLDERS' EQUITY AT JUNE 30 $1,390.3 $1,224.8 - ---------------------------------------------------- -------- --------
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CONSOLIDATED STATEMENT OF CASH FLOWS Northern Trust Corporation Six Months Ended June 30 ----------------------------- (In Millions) 1995 1994 - ------------------------------------------------------------------- ------------- ------------ Cash Flows from Operating Activities: Net Income $ 102.4 $ 94.1 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Provision for Credit Losses 3.0 4.0 Depreciation on Buildings and Equipment 21.3 22.0 Increase in Interest Receivable (7.9) (9.8) Increase in Interest Payable 9.7 1.5 Amortization and Accretion of Securities and Unearned Income (88.6) 23.5 Gain on Sale of Foreign Investment - (34.5) Net (Increase) Decrease in Trading Account Securities (51.9) 20.4 Other Noncash, net 20.7 46.1 - ------------------------------------------------------------------- ------------- ------------ Net Cash Flows from Operating Activities 8.7 167.3 - ------------------------------------------------------------------- ------------- ------------ Cash Flows from Investing Activities: Net Decrease in Federal Funds Sold and Securities Purchased under Agreements to Resell 386.1 252.2 Net (Increase) Decrease in Time Deposits with Banks 210.2 (124.1) Net Increase in Other Money Market Assets (3.1) (92.1) Purchases of Securities-Held to Maturity (501.0) (221.4) Proceeds from Maturity and Redemption of Securities-Held to Maturity 594.3 503.4 Purchases of Securities-Available for Sale (15,315.8) (3,769.3) Proceeds from Maturity and Redemption of Securities-Available for Sale 14,889.6 2,729.8 Net Increase in Loans and Leases (737.3) (949.2) Purchases of Buildings and Equipment (20.2) (12.8) Sale of Foreign Investment - 58.1 Net (Increase) Decrease in Trust Security Settlement Receivables 18.7 (114.3) Other, net 2.4 11.1 - ------------------------------------------------------------------- ------------- ------------ Net Cash Flows from Investing Activities (476.1) (1,728.6) - ------------------------------------------------------------------- ------------- ------------ Cash Flows from Financing Activities: Net Increase (Decrease) in Deposits (666.5) 958.9 Net Increase (Decrease) in Federal Funds Purchased 91.9 (294.4) Net Increase (Decrease) in Securities Sold under Agreement to Repurchase (1,150.6) 409.9 Net Increase (Decrease) in Commercial Paper 23.5 (1.9) Net Increase in Short-Term Other Borrowings 2,346.0 63.4 Proceeds from Term Federal Funds Purchased 1,341.3 2,647.7 Repayments of Term Federal Funds Purchased (1,349.3) (2,588.2) Proceeds from Senior Medium-Term Notes - 230.0 Repayments of Senior Medium-Term Notes (230.0) (240.0) Repayment of Notes Payable (3.7) (3.4) Treasury Stock Purchased-Incentive Plans (1.9) (.6) Treasury Stock Purchased-Buy Back Program (6.6) - Net Proceeds from Stock Options 1.7 2.4 Cash Dividends Paid on Common and Preferred Stock (32.7) (26.4) Other, net 4.6 3.6 - ------------------------------------------------------------------- ------------- ------------ Net Cash Flows from Financing Activities 367.7 1,161.0 - ------------------------------------------------------------------- ------------- ------------ Decrease in Cash and Due from Banks (99.7) (400.3) Cash and Due from Banks at Beginning of Year 1,192.5 1,519.7 - ------------------------------------------------------------------- -------------- ------------- Cash and Due from Banks at June 30 $ 1,092.8 $ 1,119.4 - ------------------------------------------------------------------- -------------- ------------- Schedule of Noncash Investing and Financing Activities: Acquisition of Affiliate for Stock $ 24.7 $ 6.4 Supplemental Disclosures of Cash Flow Information: Interest Paid on Deposits and Short- and Long-Term Borrowings $ 345.7 $ 218.9 Income Taxes Received 31.3 23.5 - ------------------------------------------------------------------- --------------- --------------
5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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, 1995 and 1994 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 principles, refer to the Notes to Consolidated Financial Statements in the 1994 Annual Report to Stockholders. 2. SECURITIES - The following table summarizes the book and fair values of securities.
June 30, 1995 December 31, 1994 June 30, 1994 -------------------------------------------------------------------- Book Fair Book Fair Book Fair (In Millions) Value Value Value Value Value Value - ------------------------------------------------------------------------------------------------- Held to Maturity U.S. Government $ 88.1 $ 88.2 $ 137.2 $ 137.0 $ 98.8 $ 98.6 Obligations of States and Political Subdivisions 434.7 466.2 474.5 491.3 461.3 491.6 Federal Agency 22.7 22.6 -- -- -- -- Other 29.2 29.1 29.6 29.6 29.8 29.7 - ------------------------------------------------------------------------------------------------- Subtotal 574.7 606.1 641.3 657.9 589.9 619.9 - ------------------------------------------------------------------------------------------------- Available for Sale U.S. Government 729.3 729.3 801.3 801.3 1,401.1 1,401.1 Federal Agency 3,936.4 3,936.4 3,251.5 3,251.5 2,302.7 2,302.7 Preferred Stock 188.0 188.0 196.6 196.6 198.0 198.0 Other 140.3 140.3 158.4 158.4 177.3 177.3 - ------------------------------------------------------------------------------------------------- Subtotal 4,994.0 4,994.0 4,407.8 4,407.8 4,079.1 4,079.1 - ------------------------------------------------------------------------------------------------- Trading Account 55.9 55.9 4.0 4.0 56.8 56.8 - ------------------------------------------------------------------------------------------------- Total Securities $5,624.6 $5,656.0 $5,053.1 $5,069.7 $4,725.8 $4,755.8 - -------------------------------------------------------------------------------------------------
Reconciliation of Book Values to Fair Values of Securities Held to Maturity June 30, 1995 - --------------------------------------------------------------------------------------------------- Gross Unrealized Book ---------------- Fair (In Millions) Value Gains Losses Value - --------------------------------------------------------------------------------------------------- Held to Maturity U.S. Government $ 88.1 $ .2 $ .1 $ 88.2 Obligations of States and Political Subdivisions 434.7 31.6 .1 466.2 Federal Agency 22.7 .2 .3 22.6 Other 29.2 -- .1 29.1 - --------------------------------------------------------------------------------------------------- Total $574.7 $32.0 $ .6 $606.1 - ---------------------------------------------------------------------------------------------------
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Reconciliation of Amortized Cost to Fair Values of Securities Available for Sale June 30, 1995 - ------------------------------------------------------------------------------------------------------- Gross Unrealized Amortized ---------------- Fair (In Millions) Cost Gains Losses Value - ------------------------------------------------------------------------------------------------------- Available for Sale U.S. Government $ 731.4 $1.8 $ 3.9 $ 729.3 Federal Agency 3,937.9 3.0 4.5 3,936.4 Preferred Stock 188.2 -- .2 188.0 Other 142.7 .5 2.9 140.3 - ------------------------------------------------------------------------------------------------------- Total $5,000.2 $5.3 $11.5 $4,994.0 - -------------------------------------------------------------------------------------------------------
Unrealized gains and losses on off-balance sheet financial instruments used to hedge available for sale securities totaled $8.3 million and $5.4 million, respectively, as of June 30, 1995. Unrealized gains on these hedges are reported as other assets in the consolidated balance sheet; unrealized losses are reported as other liabilities. As of June 30, 1995, stockholders' equity included a charge of $2.1 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 $5.2 billion on June 30, 1995, $3.7 billion on December 31, 1994 and $4.1 billion on June 30, 1994. 4. CONTINGENT LIABILITIES - Standby letters of credit outstanding were $848.0 million on June 30, 1995, $819.9 million on December 31, 1994 and $830.8 million on June 30, 1994. 5. LOANS AND LEASES - Amounts outstanding in selected loan categories are shown below.
June 30 December 31 June 30 ------------------------------------------------ (In Millions) 1995 ` 1994 1994 - --------------------------------------------------------------------------------------------------------- Domestic Commercial $3,185.6 $2,672.0 $2,674.1 Residential Real Estate 3,550.2 3,299.1 3,161.7 Commercial Real Estate 471.1 494.1 480.2 Broker 241.8 274.6 349.5 Consumer 734.2 662.1 568.8 Other 673.3 642.1 647.7 Lease Financing 163.4 159.9 133.9 - --------------------------------------------------------------------------------------------------------- Total Domestic 9,019.6 8,203.9 8,015.9 International 402.2 386.7 556.5 - --------------------------------------------------------------------------------------------------------- Total Loans and Leases $9,421.8 $8,590.6 $8,572.4 - ---------------------------------------------------------------------------------------------------------
7 At June 30, 1995, other domestic and international loans include $842.1 million of overnight trust-related advances in connection with next day security settlements, compared with $716.5 million at December 31, 1994 and $799.0 million at June 30, 1994. Northern Trust adopted Statements of Financial Accounting Standards Nos. 114 and 118, "Accounting by Creditors for Impairment of a Loan", effective January 1, 1995. These statements provide guidance as to when loans should be classified and reported as impaired and address how the reserve for credit losses related to these loans should be determined. Any shortfall in the estimated value of an impaired loan compared with the recorded investment of the loan is identified as an allocated portion of the reserve for credit losses and is one of the factors considered by management in their overall assessment of reserve adequacy. No changes were required to Northern Trust's accounting policies for loans, charge-offs and interest income as a result of adopting these statements. These policies are described in Notes to Consolidated Financial Statements (Notes 1E and 1F) in the 1994 Annual Report. At June 30, 1995, nonperforming assets totaled $34.5 million. Included in this amount were loans with a recorded investment of $30.0 million which were also classified as impaired. Impaired loans totaling $26.0 million had no portion of the reserve for credit losses allocated to them, while $4.0 million had an allocated reserve of $.7 million. For the second quarter of 1995, the total recorded investment in impaired loans averaged $26.4 million. Total interest income recognized on impaired loans for the quarter ended June 30, 1995 was $230 thousand, most of which was recognized using the cash-basis method of accounting. 6. RESERVE FOR CREDIT LOSSES - Changes in the reserve for credit losses were as follows.
Six Months Ended June 30 ----------------------- (In Millions) 1995 1994 - ---------------------------------------------------------- Balance at Beginning of Period $144.8 $145.5 Losses Charged to Reserve (5.6) (7.3) Recoveries Credited to Reserve 2.6 2.7 - ---------------------------------------------------------- Net Losses Charged to Reserve (3.0) (4.6) Provision for Credit Losses 3.0 4.0 Addition due to Acquisition 1.1 -- - ---------------------------------------------------------- Balance at End of Period $145.9 $144.9 - ----------------------------------------------------------
7. ACQUISITIONS - The acquisition of Beach One Financial Services, Inc., parent company of The Beach Bank of Vero Beach, Florida, was completed on March 31, 1995. The acquisition was effected through a merger in which Northern Trust Corporation issued 1,622,568 shares of its Common Stock. The Corporation has accounted for the transaction as a pooling-of-interests. Prior period consolidated financial statements were not restated due to the immateriality of the transaction. In February, 1995, the Corporation entered into a definitive agreement to acquire Tanglewood Bancshares, Inc., parent company of Tanglewood Bank N.A. Houston for $33.0 million in cash. 8 Tanglewood's assets totaled $229.9 million at December 31, 1994 and net income totaled $2.6 million in 1994. Following approval by Tanglewood shareholders in May and regulatory approval in June, the acquisition was completed July 31, 1995. In March, 1995, the Corporation entered into a definitive agreement to acquire RCB International Inc. an international provider of institutional investment management services, for approximately $14.2 million in cash and 608,571 shares of Northern Trust Corporation Common Stock, with a portion payable at closing and the balance payable through deferred compensation plans. RCB, headquartered in Stamford, Connecticut and with offices in Canada and the United Kingdom, had net revenues of $11.1 million in the fiscal year ending June 30, 1995. The agreement, which was approved by RCB shareholders in July 1995, is subject to regulatory approvals and is expected to close in the second half of 1995. 8. OFF BALANCE SHEET FINANCIAL INSTRUMENTS - In accordance with the terms of the 1994 agreement with The Benchmark Funds (see the 1994 Annual Report, Note 17c. to Consolidated Financial Statements) the Corporation exercised its option in June 1995 to purchase from the Funds certain floating rate federal agency securities at an aggregate price of $110.6 million, equal to the Funds' amortized cost basis in the securities. The securities, which mature in February 1997, were recorded by the Corporation at their fair value of $107.7 million. The charge recorded by the Corporation when it entered into the 1994 agreement more than covered the difference between the purchase price and fair value. 9 Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SECOND QUARTER EARNINGS HIGHLIGHTS Net income for the second quarter totaled a record $53.1 million, an increase of 9% from the $48.7 million reported in the second quarter of 1994. Net income per common share on a fully diluted basis increased 5% to $.89 in the 1995 quarter from $.85 in the second quarter of 1994, which included a nonrecurring gain and certain nonrecurring charges that resulted in a net addition to income of $5.2 million. This earnings performance produced an annualized return on average common equity (ROE) of 17.09% versus 18.06% reported last year and a return on average assets (ROA) of 1.13% versus 1.10% in 1994. Record levels of trust fees, net interest income, and foreign exchange trading profits contributed to the quarter's performance. Total noninterest expenses increased 6% after adjusting for several nonrecurring items in the year ago quarter's results, and were essentially unchanged from the first quarter of 1995. NONINTEREST INCOME Noninterest income totaled $168.5 million for the quarter, accounting for 63% of total taxable equivalent revenue. Excluding the effects of the $28.5 million pretax gain on the sale of the Corporation's interest in Banque Scandinave en Suisse (BSS) recorded in the second quarter of 1994, total noninterest income improved 12%. Trust fees, which represent 73% of noninterest income and 46% of total taxable equivalent revenue, grew 9% or $9.8 million over last year reaching $123.3 million. The increase reflects 9% growth levels in both the Corporate and Institutional Services (C&IS) and Personal Financial Services (PFS) business units. Total trust assets under administration at quarter-end were $549.3 billion, up $68.2 billion from one year ago. Trust fees from C&IS increased $5.0 million to $62.7 million. The increases in fees from Hazlehurst & Associates, Inc., acquired in the second quarter of 1994, securities lending activities and investment management services were the principal factors contributing to the growth over the year ago quarter. Domestic securities lending fees, up 33% versus last year, reflect a 10% increase in the volume of securities loaned as well as higher spreads earned from the investment of the cash collateral. Investment management fees increased 24% as a result of new business, particularly in actively managed equity funds and fixed income investments. Custody fees were essentially unchanged from the second quarter of 1994, due in part to a greater portion of global custody assets being reinvested into the U.S. market where both custody fees and the expense structure of custody providers are lower. In addition, new business growth has been partially offset by pricing adjustments to retain custody clients who also tend to use foreign exchange, 10 securities lending and deposit and other related services. C&IS trust assets under administration grew 14% or $59.5 billion over last year and now total $491.4 billion. C&IS Assets under the management of Northern Trust total $55.8 billion, up 16% from a year ago. PFS trust fees amounted to $60.6 million, up 9% or $4.8 million from one year ago. The main contributors to this fee growth were the Wealth Management Group and the Florida and Texas subsidiaries. Personal Financial Services fees benefited from higher investment management revenues and increased advisory and servicing revenues from The Northern Funds, established in April of 1994. The increase in trust fees also reflects the contribution of The Beach Bank of Vero Beach, Florida (Beach Bank), a March 31, 1995 acquisition. Total personal trust assets under administration increased $8.7 billion over last year and totaled $57.9 billion, with $35.3 billion under management. Security commissions and trading income totaled $5.2 million, compared with $6.0 million reported in the second quarter of last year. Other operating income in the quarter totaled $39.9 million, compared to $59.4 million in the second quarter of 1994 which included a $28.5 million pretax gain on the sale of the Corporation's interest in BSS. Foreign exchange trading profits were at record levels and totaled $15.6 million, an increase of $9.4 million. Foreign exchange revenues are related primarily to the cross-border investment activities of Master Trust/Master Custody clients. The fee portion of treasury management revenues rose 3% to $12.1 million. Total treasury management revenues, which, in addition to fees, include the value of compensating deposit balances, increased 5% to $19.2 million. These compensating deposit balances also contributed to the improvement in net interest income. NET INTEREST INCOME Net interest income for the second quarter totaled $88.0 million, 8% higher than the $81.3 million reported in the second quarter of 1994. Net interest income is defined as the total of interest income and amortized fees on earning assets less interest expense on deposits and borrowed funds adjusted for the impact of off-balance sheet hedging activity. When net interest income is adjusted to a fully taxable equivalent (FTE) basis, yields on taxable, nontaxable and partially taxable assets are comparable, although the adjustment to a FTE basis has no impact on net income. Net interest income on an FTE basis for the second quarter was $97.5 million, up 9% from the $89.5 million reported in 1994. This increase is due to higher levels of average earning assets, reflecting in part the acquisition of Beach Bank, in addition to a modest improvement in the net interest margin to 2.35% from 2.32% last year. 11 Earning assets for the second quarter averaged $16.7 billion, up 8% from the $15.5 billion in the second quarter of 1994. The $1.2 billion growth in earning assets reflects an 8% or $702 million increase in average loans, a $1.3 billion or 29% growth in average securities and a $854 million or 33% decrease in average money market assets. Overall loan volume reflected an $850 million or 11% growth in domestic lending. Approximately one-half of the increase in domestic lending is attributable to residential mortgage loans now accounting for 39% of the total average loan portfolio. Commercial and industrial loans grew 14% or $386 million to average $3.1 billion for the quarter. In addition, domestic and international overnight advances related to processing certain trust client investments averaged $623 million, up $66 million from a year ago. Securities for the quarter averaged $5.9 billion, up 29% from the $4.6 billion reported last year, due primarily to a $2.5 billion increase in short-term federal agency securities, offset in part by a $1.1 billion reduction in U.S. Government securities. The decline in money market assets of $854 million was due to short term interest rates providing fewer opportunities to add marginal net interest income. The growth in average earning assets was funded primarily by increased levels of interest-bearing time deposits and noninterest-related funds. Interest-bearing deposits averaged $9.4 billion, up $1.3 billion from the second quarter of 1994. This growth came principally from savings certificates (up $847 million), global custody deposit activity in London (up $298 million), and an increase of $216 million in other foreign time deposits which also are global custody related. The 73% increase in the average volume of savings certificates is due in large part to successful certificate of deposit campaigns conducted periodically during last year's fourth quarter and the first quarter of 1995. This inflow of funds has helped to reduce the reliance on wholesale funding sources, as average borrowed funds declined by $382 million from last year. Average noninterest-related funds increased $226 million, due primarily to growth in stockholders' equity. Total average stockholders' equity increased $153 million or 13% from the second quarter of 1994. This increase reflects the retention of earnings and the March 31, 1995 issuance of approximately 1.6 million shares of Northern Trust Corporation Common Stock to complete the acquisition of Beach Bank. The net interest margin increased to 2.35% compared with 2.32% last year due primarily to an increased volume of loans on which a higher margin is earned versus money market assets. Also contributing to the improvement in net interest margin was the increase in average noninterest-related funds. PROVISION FOR CREDIT LOSSES The provision for credit losses of $1.5 million compares to $1.0 million in the second quarter of 1994. For a discussion of the reserve for credit losses, refer to the Asset Quality section on pages 15 and 16. 12 NONINTEREST EXPENSES Noninterest expenses totaled $177.9 million for the quarter, down 5% from $187.5 million in the second quarter of 1994. Included in the year ago quarter's results were approximately $20.1 million in special charges. Adjusting for these nonrecurring items results in an increase in total noninterest expenses of 6% compared to last year. Included in the current quarter is a $.7 million expense for compensation payments pursuant to a consent decree resolving the investigation by the Department of Justice into the fair lending practices of Northern Trust's Illinois banking subsidiaries. The majority of the remaining increase was concentrated primarily in salaries and benefits, technology, personal trust business expansion, and Northern's growing global custody business. Salaries and benefits, which represent 59% of total noninterest expenses, increased 6% to $105.2 million. The prior year results include a $3.0 million addition to salary expense covering back pay obligations as a result of a review of the Corporation's overtime pay policy. Exclusive of this special charge, salary and benefit costs increased 9% from the second quarter of 1994. The principal items contributing to the increase were merit increases, additions to staff at Hazlehurst & Associates, Inc., personnel added in the Beach Bank acquisition, and higher costs related to incentive plans, health care, retirement benefits and payroll taxes. Staff on a full-time equivalent basis, including 106 positions at Hazlehurst and 86 positions at Beach Bank, averaged 6,560 compared with 6,356 in the second quarter of 1994. Excluding the positions added by the Beach Bank acquisition, staff levels declined by approximately 120 positions since the end of 1994. Net occupancy expenses totaled $15.3 million, up 4% or $.7 million from $14.6 million in 1994. The principal components of the increase were higher lease operating costs, amortization and depreciation of leasehold improvements and buildings, as well as expansion costs related to the opening of new offices in Florida and Illinois. Equipment expense, which includes depreciation, rental, and maintenance costs, totaled $12.0 million, down $10.7 million from the second quarter of 1994. Included in the prior year results is a charge of $11.2 million covering the trade-in and the sale and leaseback of mainframe computer equipment. Exclusive of this nonrecurring item, total equipment expense increased $.5 million or 4% primarily reflecting higher computer rental and maintenance costs, offset in part by reduced depreciation expense as a result of last year's sale and leaseback transaction. Other operating expenses totaled $45.4 million, down 10% from $50.6 million in the second quarter of 1994. The prior period results include a $3.5 million charge relating to an agreement with The Benchmark Funds and a $2.4 million write-down of older trust-related software. Included in other operating expenses is a one-time charge of $.7 million related to the consent decree resolving the Department of Justice investigation. Increases in computer software amortization, up $1.7 million to $8.7 million, along with increases in professional services, transaction-based 13 depository fees, business promotion and advertising, were partially offset by lower levels of costs incurred from processing errors and other real estate owned operating costs. PROVISION FOR INCOME TAXES The provision for income taxes was $24.0 million for the second quarter compared with $22.9 million in 1994. The higher tax provision in 1995 resulted from the growth in taxable earnings for federal income tax purposes while tax-exempt income declined slightly. Partially offsetting this was a lower state income tax provision due to increased levels of tax- exempt income for state purposes. The effective tax rate was 31% for the quarter versus 32% in 1994. SIX MONTHS EARNINGS HIGHLIGHTS Net income totaled $102.4 million for the six months ended June 30, 1995 compared to $94.1 million last year, an increase of 9%. On a fully diluted basis, net income per common share was $1.74, up 6% from the $1.64 earned last year. The ROE for the six month period was 16.97% versus 17.96% one year ago, while the ROA was 1.11% versus 1.08% in 1994. Noninterest income increased 1% to $330.1 million from $328.4 million in the like period of 1994. Excluding the BSS gain of $28.5 million recorded last year, the year to year increase was $30.2 million or 10%. Noninterest income comprised 63% of total taxable equivalent revenue in 1995. Trust fees totaled $244.1 million, up 9.5% from $223.0 million last year. Security commissions and trading income totaled $11.1 million, down $1.7 million from the $12.8 million earned last year. Other operating income, excluding the BSS gain from the prior year, increased 17% to $74.7 million. Foreign exchange trading profits were at record levels and totaled $26.8 million, an increase of $10.6 million compared with the first six months of 1994. The fee portion of treasury management revenues totaled $24.4 million, a 3% improvement from the $23.7 million reported in 1994. Total treasury management revenues, which in addition to fees include the value of compensating deposit balances, increased 8% and totaled $39.1 million. These compensating deposit balances also contributed to the improvement in net interest income. Net interest income stated on a fully taxable equivalent basis totaled a record $195.6 million, up 9% from the $178.9 million reported in the like period of 1994. The provision for credit losses decreased to $3.0 million from $4.0 million last year. Net loan charge-offs likewise declined to $3.0 million from $4.6 million in 1994. Noninterest expenses totaled $355.2 million, up 2% from $349.4 million in 1994. Exclusive of nonrecurring charges in 1994, total noninterest expenses increased 8% from prior year levels. 14 BALANCE SHEET Total assets as of June 30, 1995 were $19.3 billion and averaged $18.6 billion for the first six months, up 6% from last year's average of $17.5 billion. With increased lending activity and the March 31,1995 acquisition of Beach Bank, loans and leases totaled $9.4 billion at June 30, 1995, and averaged $8.8 billion for the first six months. This compares with $8.6 billion in total loans on June 30, 1994 and $8.1 billion on average for the first six months of last year. Driven primarily by continued strong earnings growth and the acquisition of Beach Bank, common stockholders' equity increased 16% and totaled $1.220 billion at June 30, 1995, versus $1.055 billion at June 30, 1994. Total stockholders' equity increased commensurately and totaled $1.390 billion at June 30, 1995 compared with $1.225 billion at June 30, 1994. Northern Trust's risk-based capital ratios remained strong at 9.2% for tier 1 and 12.3% for total capital at June 30, 1995. These capital ratios are well above the minimum regulatory requirements of 4% for tier 1 and 8% for total risk-based capital ratios. The leverage ratio (tier 1 capital to second quarter average assets) of 6.6% at June 30, 1995, also exceeded the regulatory requirement of 3%. See Note 7 in Notes to Consolidated Financial Statements for a description of pending acquisitions. ASSET QUALITY Nonperforming assets consist of nonaccrual loans and leases, restructured loans, and other real estate owned (OREO). Nonperforming assets at June 30, 1995 totaled $34.5 million, compared with $30.0 million at December 31, 1994 and $39.6 million at June 30, 1994. Domestic nonaccrual loans and leases, consisting primarily of commercial loans, totaled $29.8 million, or .33% of total domestic loans and leases at June 30, 1995. Included in this total are commercial real estate loans of $7.3 million. The following Nonperforming Asset table presents the outstanding amounts of nonaccrual loans and leases, restructured loans and OREO. Also shown are loans that have interest or principal payments that are delinquent 90 days or more and are still accruing interest. The balance in this category at any quarter end can fluctuate widely based on the timing of cash collections, renegotiations and renewals. 15 Nonperforming Assets and 90 Day Past Due Loans and Leases
June 30 March 31 December 31 June 30 (In Millions) 1995 1995 1994 1994 - -------------------------------------------------------------------------------------------------- Nonaccrual Loans Domestic $29.8 $19.7 $26.5 $34.5 International .7 1.3 1.3 1.3 - -------------------------------------------------------------------------------------------------- Total Nonaccrual Loans 30.5 21.0 27.8 35.8 Restructured Loans 2.8 2.8 -- -- OREO 1.2 1.6 2.2 3.8 - -------------------------------------------------------------------------------------------------- Total Nonperforming Assets $34.5 $25.4 $30.0 $39.6 - -------------------------------------------------------------------------------------------------- Total 90 Day Past Due Loans (still accruing) $14.1 $11.6 $17.3 $31.1 - --------------------------------------------------------------------------------------------------
PROVISION AND RESERVE FOR CREDIT LOSSES. The provision for credit losses is the charge against current earnings that is determined by management through a disciplined credit review process as the amount needed to maintain a reserve that is sufficient to absorb credit losses inherent in Northern Trust's loan and lease portfolios and other credit undertakings. While the largest portion of this reserve is intended to cover loan and lease losses, it is considered a general reserve that is available to cover all credit-related exposures. The 1995 second quarter provision for credit losses was $1.5 million, compared with $1.0 million in 1994. Net charge-offs totaled $1.4 million in the second quarter of 1995 versus net charge-offs of $1.7 million last year. The reserve for credit losses was $145.9 million, equal to 1.55% of outstanding loans at June 30, 1995. This compares with $144.8 million or 1.69% of outstanding loans at December 31, 1994 and $144.9 million or 1.69% of outstanding loans at June 30, 1994. The lower reserve to outstanding loans ratio at June 30, 1995 is attributable to loan growth, a significant portion of which is in low-risk residential lending. The overall credit quality of the domestic portfolio has remained good as evidenced by the low level of nonperforming loans and net charge-offs. Management's assessment of the current U.S. economy and the financial condition of certain clients facing financial difficulties together with portfolio growth were primary factors impacting management's decision to maintain the reserve for credit losses at $145.9 million at June 30, 1995, essentially unchanged from December 31, 1994 and June 30, 1994. Northern Trust continues to monitor closely several credits, but the overall quality of its loan portfolio remains sound and the reserve for credit losses is adequate to cover credit-related uncertainties as they exist today. Established credit review procedures ensure that close attention is given to commercial real estate-related loans and other commercial loans, as well as other credit exposures that might be adversely affected by significant increases in interest rates or unexpected downturns in segments of the economies of the United States or other countries. 16 The following schedule should be read in conjunction with the Net Interest Income section of Management's Discussion and Analysis of Financial Condition and Results of Operations CONSOLIDATED ANALYSIS OF NET INTEREST INCOME
SECOND QUARTER -------------------------------------------------- (Interest and rate on a 1995 1994 taxable equivalent basis) ------------------------ ------------------------ ($ Amounts in Millions) INTEREST VOLUME RATE Interest Volume Rate - -------------------------- -------- --------- ----- -------- --------- ----- AVERAGE EARNING ASSETS Money Market Assets Federal Funds Sold and Repurchase Agreements $ 3.9 $ 258.2 6.21% $ 1.8 $ 167.3 4.16% Time Deposits with Banks 20.8 1,483.8 5.62 26.1 2,277.3 4.60 Other .3 13.9 6.68 1.7 165.5 4.12 - -------------------------- ------ --------- ----- ------ --------- ----- Total Money Market Assets 25.0 1,755.9 5.72 29.6 2,610.1 4.54 - -------------------------- ------ --------- ----- ------ --------- ----- Securities U.S. Government 12.8 915.4 5.59 20.8 2,026.4 4.11 Obligations of States and Political Subdivisions 12.0 440.4 10.95 13.4 469.4 11.44 Federal Agency 65.9 4,115.6 6.42 17.9 1,635.0 4.38 Other 5.9 376.8 6.25 5.2 401.2 5.18 Trading Account 1.0 57.5 6.77 1.2 59.4 8.05 - -------------------------- ------ --------- ----- ------ --------- ----- Total Securities 97.6 5,905.7 6.62 58.5 4,591.4 5.10 - -------------------------- ------ --------- ----- ------ --------- ----- Loans and Leases 158.0 8,973.7 7.06 120.1 8,271.6 5.83 - -------------------------- ------ --------- ----- ------ --------- ----- Total Earning Assets $280.6 $16,635.3 6.76% $208.2 $15,473.1 5.39% - -------------------------- ------ --------- ----- ------ --------- ----- AVERAGE SOURCE OF FUNDS Deposits Savings and Money Market Deposits $ 27.4 $ 3,289.0 3.34% $ 20.5 $ 3,454.0 2.38% Savings Certificates 30.6 2,000.9 6.12 12.5 1,154.1 4.33 Other Time 8.0 539.5 5.95 4.3 416.8 4.20 Foreign Offices Time 47.2 3,579.0 5.30 30.9 3,065.2 4.04 - -------------------------- ------ --------- ----- ------ --------- ----- Total Deposits 113.2 9,408.4 4.83 68.2 8,090.1 3.38 Federal Funds Purchased 16.1 1,068.6 6.04 13.5 1,395.3 3.89 Repurchase Agreements 25.0 1,666.5 6.02 10.4 1,089.2 3.83 Commercial Paper 2.2 146.3 5.96 1.3 130.5 3.96 Other Borrowings 15.9 1,162.1 5.51 11.4 1,305.3 3.49 Senior Medium-Term Notes 5.8 379.7 6.04 7.5 803.4 3.74 Notes Payable 4.9 244.7 8.04 6.4 326.7 7.72 - -------------------------- ------ --------- ----- ------ --------- ----- Total Interest-Related Funds 183.1 14,076.3 5.22 118.7 13,140.5 3.62 - -------------------------- ------ --------- ----- ------ --------- ----- Interest Rate Spread -- -- 1.54% -- -- 1.77% - -------------------------- ------ --------- ----- ------ --------- ----- Noninterest-Related Funds -- 2,559.0 -- -- 2,332.6 -- - -------------------------- ------ --------- ----- ------ --------- ----- Total Source of Funds $183.1 $16,635.3 4.41% $118.7 $15,473.1 3.07% - -------------------------- ------ --------- ----- ------ --------- ----- NET INTEREST INCOME/MARGIN $ 97.5 -- 2.35% $ 89.5 -- 2.32% - -------------------------- ------ --------- ----- ------ --------- -----
ANALYSIS OF NET INTEREST INCOME CHANGES DUE TO VOLUME AND RATE
SECOND QUARTER 1995/94 SIX MONTHS 1995/94 ---------------------- --------------------- CHANGE DUE TO CHANGE DUE TO --------------- ------------- (In Millions) VOLUME RATE TOTAL VOLUME RATE TOTAL - ---------------------- ------ ----- ----- ------ ------ ------ Earning Assets $22.0 $50.4 $72.4 $48.7 $102.4 $151.1 Interest-Related Funds 14.0 50.4 64.4 26.5 107.9 134.4 - ---------------------- ----- ----- ----- ----- ------ ------ Net Interest Income $ 8.0 $ -- $ 8.0 $22.2 $ (5.5) $ 16.7 - ---------------------- ----- ----- ----- ----- ------ ------
17 Northern Trust Corporation
SIX MONTHS ---------------------------------------------------- 1995 1994 -------------------------- ------------------------- Interest Volume Rate Interest Volume Rate ---------- --------- ----- --------- --------- ----- $ 7.4 $ 245.9 6.11% $ 4.0 $ 207.9 3.82% 47.5 1,669.1 5.74 48.6 2,178.1 4.50 .5 14.1 6.47 2.7 140.4 3.89 --------- --------- ----- ------ --------- ----- 55.4 1,929.1 5.79 55.3 2,526.4 4.41 --------- --------- ----- ------ --------- ----- 25.8 953.7 5.45 48.4 2,500.5 3.90 24.5 446.7 11.00 27.3 476.8 11.46 127.6 3,997.6 6.44 26.5 1,286.9 4.14 11.9 379.5 6.30 8.9 356.6 5.00 1.5 42.0 7.22 2.1 55.1 7.85 --------- --------- ----- ------ --------- ----- 191.3 5,819.5 6.62 113.2 4,675.9 4.87 --------- --------- ----- ------ --------- ----- 304.7 8,756.0 7.02 231.8 8,102.0 5.77 --------- --------- ----- ------ --------- ----- $551.4 $16,504.6 6.74% $400.3 $15,304.3 5.27% --------- --------- ----- ------ --------- ----- $ 54.0 $ 3,276.1 3.32% $ 39.7 $ 3,458.9 2.31% 55.1 1,860.0 5.97 23.8 1,127.1 4.25 14.4 498.3 5.82 7.4 364.3 4.11 97.8 3,744.5 5.27 54.2 2,865.6 3.81 --------- --------- ----- ------ --------- ----- 221.3 9,378.9 4.76 125.1 7,815.9 3.23 32.2 1,095.4 5.92 26.8 1,533.3 3.53 49.1 1,681.6 5.89 19.7 1,131.4 3.51 4.3 145.1 5.90 2.3 127.0 3.61 26.4 986.0 5.41 20.9 1,320.6 3.19 12.7 424.4 5.97 14.0 777.6 3.60 9.8 244.8 8.09 12.6 326.7 7.76 --------- --------- ----- ------ --------- ----- 355.8 13,956.2 5.14 221.4 13,032.5 3.42 --------- --------- ----- ------ --------- ----- -- -- 1.60% -- -- 1.85% --------- --------- ----- ------ --------- ----- -- 2,548.4 -- -- 2,271.8 -- --------- --------- ----- ------ --------- ----- $355.8 $16,504.6 4.35% $221.4 $15,304.3 2.91% --------- --------- ----- ------ --------- ----- $195.6 -- 2.39% $178.9 -- 2.36% --------- --------- ----- ------ --------- -----
18 PART II - OTHER INFORMATION Item 1. Legal Proceedings - In a consent decree filed and approved June 1, 1995, the Illinois banking subsidiaries of Northern Trust Corporation resolved claims brought by the U.S. Department of Justice after an 18- month fair lending investigation. The Department alleged the banks had in 1992 and 1993 not assisted African-Americans and Hispanic mortgage loan applicants as much as similarly situated non-minority applicants, in violation of Federal fair lending laws. The agreement reflected in the decree commits the banks to continue three initiatives: an intensive second-review process for all mortgage loan applicants proposed to be denied; The Northern Trust Company's Community Mortgage Team, which focuses on lending in low-to-moderate income neighborhoods; and the Fair Lending Policy Committee, which develops and coordinates corporate-wide fair lending initiatives. The banks also agreed to offer compensation to minority applicants who were denied loans in 1992 and 1993 but who, the Department and Northern agree, would have received loans or counteroffers under the banks' current standards. Payments will range from $1,500 to $40,000, with the average expected to be under $10,000. The banks agreed to set aside and Northern has expensed, a $700,000 fund for these payments. The banks will file reports with the Department of Justice for three years under the decree, which expires after five years. No penalties or payments in lieu of penalties are called for by the consent decree. The decree reflects the banks' denial that they engaged in any illegal discrimination and specifically notes that the Department of Justice found no evidence of racial animosity or hostility on the part of the banks' personnel. Item 6. Exhibits and Reports on Form 8-K (a.) Exhibits -------- Exhibit (3) Amendments to By-laws of the Corporation and By-laws as amended. Exhibit (10) Northern Trust Corporation (1995) Management Performance Plan Exhibit (11) Computation of Per Share Earnings Exhibit (27) Financial Data Schedule (b.) Reports on Form 8-K ------------------- No reports on Form 8-K were filed for the three months ended June 30, 1995. 19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NORTHERN TRUST CORPORATION -------------------------- (Registrant) Date: August 11, 1995 By: PERRY R. PERO ---------------------- PERRY R. PERO Senior Executive Vice President and Chief Financial Officer Date: August 11, 1995 By: HARRY W. SHORT ---------------------- HARRY W. SHORT Senior Vice President and Controller (Chief Accounting Officer) 20 EXHIBIT INDEX ------------- The following exhibits have been filed herewith.
Exhibit Number Description - ------ ----------- (3) Amendments to By-laws of the Corporation and By-laws as amended. (10) Northern Trust Corporation (1995) Management Performance Plan (11) Computation of Per Share Earnings. (27) Financial Data Schedule.
21 EX-3 2 AMDT TO CORP BY-LAWS EXHIBIT NUMBER (3) TO 6/30/95 FORM 10-Q RESOLUTION 6/20/95 - -------------------------------------------------------------------------------- NORTHERN TRUST CORPORATION AMENDMENT TO CORPORATION BY-LAWS -------------------------------- RESOLVED, that Section 3.1 of Article III of the By-laws of the Corporation is hereby amended to read in its entirety as follows: SECTION 1. Number, Tenure and Quorum. The Directors shall each year appoint no less than five Directors, one of whom shall be the Chairman of the Board and one of whom shall be the President if the President is designated the Chief Executive Officer, who shall constitute and be called the Executive Committee. Each Director so appointed shall act as a member of the Committee until another is appointed and acts in his place. The Chairman of the Board shall preside at meetings of the Committee. In the absence or disqualification of a member of the Committee, the members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. In the absence or inability to act of the Chairman of the Board, or upon the request of the Chairman, the President, if he is a member of the Committee, or a member elected by the Committee shall preside at meetings of the Committee. A majority of the members of the Executive Committee shall constitute a quorum for the transaction of business. FURTHER RESOLVED, that Sections 9.1 and 9.3 of Article IX of the By-laws of the Corporation are hereby amended to read in their entirety as follows: SECTION 9.1 Number and Term of Office. The officers of the Corporation shall be a Chairman of the Board and a President, one of whom shall be designated Chief Executive Officer by the Board of Directors, and may also include one or more Vice Chairmen, one or more Executive Vice Presidents (any of whom may be designated a Senior Executive Vice President), such additional Vice Presidents with such designations, if any, as may be determined by the Board of Directors, a Secretary, and a Treasurer and one or more Assistant Secretaries and Assistant Treasurers as may be determined by the Board of Directors, and such other officers as may from time to time be appointed by the Board of Directors. Any two or more offices may be held by the same person. The Chairman of the Board, the President, and the Vice Chairmen shall be elected from among the Directors; the other officers may be appointed by the Board of Directors. The officers of the Corporation shall be elected or appointed annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of stockholders. Vacancies or new offices may be filled at any time. Each officer shall hold office until his successor shall have been duly elected or appointed or until his death or until he shall resign or shall have been removed by the Board of Directors. RESOLUTION -2- 6/20/95 - ----------------------------------------------------------------------------- NORTHERN TRUST CORPORATION SECTION 9.3 The Chairman of the Board. The Chairman of the Board shall have such powers as are vested in him by the Board of Directors, by law or by these By-laws. He shall preside at the meetings of the stockholders, of the Board of Directors, and of the Executive Committee. FURTHER RESOLVED, that a new Section 9.5 of Article IX of the By-laws of the Corporation shall be inserted immediately following Section 9.4 of Article IX of the By-laws of the Corporation to read as follows: SECTION 9.5 The Chief Executive Officer. The Chief Executive Officer of the Corporation shall have, subject to the supervision and direction of the Board of Directors or of the Executive Committee, general supervision of the business, property and affairs of the Corporation and the powers vested in him by the Board of Directors, by law or by these By-laws or which usually attach or pertain to such office. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the Corporation or a different mode of execution is expressly prescribed by the Board of Directors, the Chief Executive Officer may execute for the Corporation any contracts, deeds, mortgages, bonds, or other instruments which the Board of Directors has authorized, and he may (without previous authorization by the Board of Directors) execute such contracts and other instruments as the conduct of the Corporation's business in its ordinary course requires. FURTHER RESOLVED, that former Sections 9.5, 9.6, 9.7, 9.8, 9.9, 9.10, and 9.11 of Article IX of the By-laws of the Corporation shall be renumbered as Sections 9.6, 9.7, 9.8, 9.9, 9.10, 9.11, and 9.12 of Article IX of the By-laws, respectively. Exhibit Number (3) To 6/30/95 Form 10-Q RESOLUTION 4/18/95 - -------------------------------------------------------------------------------- NORTHERN TRUST CORPORATION AMENDMENT TO CORPORATION BY-LAWS -------------------------------- RESOLVED, that a new ARTICLE VII and a new ARTICLE VIII shall be inserted immediately following ARTICLE VI of the By-laws of the Corporation to read as follows: ARTICLE VII THE PERSONAL FINANCIAL SERVICES COMMITTEE Section 7.1. The Personal Financial Services Committee. A Personal Financial Services Committee and its Chairman shall be appointed each year by the Board of Directors to review the policies, strategies, and performance of the Personal Financial Services Business Unit of the Corporation and such other related matters as may from time to time be deemed appropriate by the Committee. The Committee shall consist of no less than four Directors, none of whom shall be an active officer of the Corporation. The Committee shall meet upon the call of the Chairman or any member of the Committee. In the absence or disqualification of a member of the Committee, the members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. ARTICLE VIII THE CORPORATE AND INSTITUTIONAL SERVICES COMMITTEE Section 8.1. The Corporate and Institutional Services Committee. A Corporate and Institutional Services Committee and its Chairman shall be appointed each year by the Board of Directors to review the policies, strategies, and performance of the Corporate and Institutional Services Business Unit of the Corporation and such other related matters as may from time to time be deemed appropriate by the Committee. The Committee shall consist of no less than four Directors, none of whom shall be an active officer of the Corporation. The Committee shall meet upon the call of the Chairman or any member of the Committee. In the absence or disqualification of a member of the Committee, the members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. FURTHER RESOLVED, that former ARTICLES VII, VIII, IX, X, XI, XII, XIII and XIV shall be renumbered as ARTICLES IX, X, XI, XII, XIII, XIV, XV and XVI, respectively. Exhibit Number (3) To 6/30/95 Form 10-Q By-laws of Northern Trust Corporation Chicago, Illinois As Effective June 20, 1995 Table of Contents Article I--The Stockholders SECTION 1.1 --ANNUAL MEETING.............................................. 1 SECTION 1.2 --SPECIAL MEETINGS............................................ 1 SECTION 1.3 --NOTICE OF MEETINGS.......................................... 1 SECTION 1.4 --FIXING DATE OF RECORD....................................... 2 SECTION 1.5 --INSPECTORS OF ELECTION...................................... 2 SECTION 1.6 --QUORUM...................................................... 3 SECTION 1.7 --CUMULATIVE VOTING RIGHTS.................................... 3 SECTION 1.8 --PROXIES..................................................... 3 SECTION 1.9 --VOTING BY BALLOT............................................ 3 SECTION 1.10 --VOTING LISTS................................................ 3 SECTION 1.11 --PLACE OF MEETING............................................ 4 SECTION 1.12 --VOTING OF SHARES OF CERTAIN HOLDERS......................... 4 Article II--The Board of Directors SECTION 2.1 --GENERAL POWERS.............................................. 5 SECTION 2.2 --NUMBER, TENURE AND QUALIFICATIONS........................... 5 SECTION 2.3 --REGULAR MEETINGS............................................ 5 SECTION 2.4 --SPECIAL MEETINGS; NOTICE.................................... 5 SECTION 2.5 --TIME OF NOTICE.............................................. 6 SECTION 2.6 --QUORUM...................................................... 6 SECTION 2.7 --MANNER OF ACTING............................................ 7 SECTION 2.8 --DIRECTORS' COMPENSATION..................................... 7 SECTION 2.9 --VACANCIES................................................... 7 SECTION 2.10 --CONSENT IN LIEU OF MEETING.................................. 7 Article III--The Executive Committee SECTION 3.1 --NUMBER, TENURE, AND QUORUM.................................. 7 SECTION 3.2 --POWERS...................................................... 8 SECTION 3.3 --MEETINGS.................................................... 8 SECTION 3.4 --RECORDS AND REPORTS......................................... 8 Article IV--The Audit Committee SECTION 4.1 --FUNCTIONS................................................... 9 SECTION 4.2 --COMPOSITION................................................. 9 SECTION 4.3 --PROCEDURES.................................................. 10 SECTION 4.4 --COUNSEL..................................................... 10 Article V--The Nominating Committee SECTION 5.1 --THE NOMINATING COMMITTEE.................................... 10 Article VI--The Compensation and Benefits Committee SECTION 6.1 --THE COMPENSATION AND BENEFITS COMMITTEE................................................... 11 Article VII--The Personal Financial Services Committee SECTION 7.1 --THE PERSONAL FINANCIAL SERVICES COMMITTEE................... 11 Article VIII--The Corporate and Institutional Services Committee SECTION 8.1 --THE CORPORATE AND INSTITUTIONAL SERVICES COMMITTEE.......... 11
i Article IX--The Officers SECTION 9.1 --NUMBER AND TERM OF OFFICE................................... 11 SECTION 9.2 --REMOVAL..................................................... 12 SECTION 9.3 --THE CHAIRMAN OF THE BOARD................................... 12 SECTION 9.4 --THE PRESIDENT............................................... 12 SECTION 9.5 --THE VICE CHAIRMEN........................................... 12 SECTION 9.6 --THE EXECUTIVE VICE PRESIDENTS............................... 12 SECTION 9.7 --THE VICE PRESIDENTS......................................... 13 SECTION 9.8 --THE TREASURER............................................... 13 SECTION 9.9 --THE SECRETARY............................................... 13 SECTION 9.10 --ASSISTANT TREASURERS AND ASSISTANT SECRETARIES.............. 14 SECTION 9.11 --SALARIES.................................................... 14 Article X--Contracts, Loans, Checks and Deposits SECTION 10.1 --CONTRACTS................................................... 14 SECTION 10.2 --LOANS....................................................... 14 SECTION 10.3 --CHECKS, DRAFTS, ETC......................................... 14 SECTION 10.4 --DEPOSITS.................................................... 15 SECTION 10.5 --POWER TO EXECUTE PROXIES.................................... 15 Article XI--Certificates for Shares and Their Transfer SECTION 11.1 --CERTIFICATES FOR SHARES..................................... 16 SECTION 11.2 --TRANSFERS OF SHARES......................................... 16 Article XII--Fiscal Year SECTION 12.1 --FISCAL YEAR................................................. 16 Article XIII--SEAL SECTION 13.1 --SEAL........................................................ 16 Article XIV--Waiver of Notice SECTION 14.1 --WAIVER OF NOTICE............................................ 16 Article XV--Indemnification SECTION 15.1 --INDEMNIFICATION REQUEST..................................... 17 SECTION 15.2 --DETERMINATION OF INDEMNIFICATION REQUEST.................... 17 SECTION 15.3 --PRESUMPTION OF ENTITLEMENT; CONCLUSIVE EFFECT OF FINDINGS OF FACT AND LAW; OTHER PROCEDURES.............................. 18 SECTION 15.4 --COOPERATION AND EXPENSES.................................... 18 SECTION 15.5 --SELECTION OF INDEPENDENT COUNSEL............................ 18 SECTION 15.6 --TIME FOR DETERMINATION...................................... 19 SECTION 15.7 --FAILURE TO MAKE DETERMINATION; REMEDIES FOR ENFORCEMENT..... 20 SECTION 15.8 --APPEAL OF ADVERSE DETERMINATION............................. 20 SECTION 15.9 --BURDEN OF PROOF............................................. 20 SECTION 15.10 --DEFINITION OF "DISINTERESTED DIRECTOR"...................... 21 SECTION 15.11 --DEFINITION OF "CHANGE OF CONTROL"........................... 21 SECTION 15.12 --ADVANCEMENT OF EXPENSES..................................... 22 SECTION 15.13 --PERSONAL LIABILITY OF DIRECTORS............................. 22 Article XVI--Amendments SECTION 16.1 --AMENDMENTS.................................................. 23
ii By-laws of The Northern Trust Corporation Chicago, Illinois ARTICLE I THE STOCKHOLDERS SECTION 1.1 Annual Meeting. There shall be an annual meeting of the stockholders on the third Tuesday in April of each year at ten-thirty o'clock A.M., or at such other date or time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, for the election of Directors and for the transaction of such other business as may come before the meeting. SECTION 1.2 Special Meetings. A special meeting of the stockholders may be called at any time by the Board of Directors, the Chairman of the Board, the President, or a Vice Chairman, and shall be called upon request in writing from the holders of at least one-third of the issued and outstanding shares of capital stock of the Corporation entitled to vote at such meeting specifying the purpose or purposes for which such meeting shall be called. SECTION 1.3 Notice of Meetings. Unless a different manner of giving notice is prescribed by statute, written or printed notice stating the place, day, and hour of the meeting, and in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than fifty days before the date of the meeting either personally or by mail, to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail with postage thereon prepaid addressed to the stockholder at his address as it appears on the records of the Corporation. 1 ARTICLE SECTION 1.4. Fixing Date of Record. I (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty or less than ten days before the date of such meeting, nor more than sixty days prior to any other action. (b) If no record date is fixed: (i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (ii) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed. (iii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. (c) A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 1.5. Inspectors of Election. Inspectors of Election shall be appointed by the Board of Directors or the Executive Committee to act at any meeting of stockholders at 2 which any election is held. The Inspectors of ARTICLE Election shall examine proxies, pass upon their I regularity, receive the votes and act as tellers, or perform any other duties which the Chairman may require of them at said meeting. SECTION 1.6. Quorum. A majority of the outstanding shares of capital stock entitled to vote at the meeting, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders. In the absence of a quorum, a meeting may be adjourned from time to time without notice to the stockholders. SECTION 1.7. Cumulative Voting Rights. At all elections of Directors of the Corporation, each stockholder entitled generally to vote for the election of Directors shall be entitled to as many votes as shall equal the number of votes which (except for this provision as to cumulative voting) he would be entitled to cast for the election of Directors with respect to his shares of stock multiplied by the number of Directors to be elected, and he may cast all of such votes for a single Director or may distribute them among the number to be voted for, or for any two or more of them as he may see fit. SECTION 1.8. Proxies. At all meetings of stockholders, a stockholder entitled to vote may vote either in person or by proxy executed in writing by the stockholder or by his duly authorized attorney-in-fact. Such proxy shall be filed with the Secretary before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. SECTION 1.9. Voting by Ballot. Voting in any election for Directors shall be by ballot. SECTION 1.10. Voting Lists. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the 3 ARTICLE meeting, during ordinary business hours, for a I period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 1.11. Place of Meeting. The Board of Directors may designate any place, either within or without the State of Delaware, as the place of meeting for any annual meeting or any special meeting called by the Board of Directors. If no designation is made, or if a special meeting is otherwise called, the place of meeting shall be the principal office of the Corporation in the City of Chicago. SECTION 1.12. Voting of Shares of Certain Holders. Shares of capital stock of the Corporation standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent, or proxy as the by-laws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine. Shares of capital stock of the Corporation standing in the name of a deceased person, a minor ward or an incompetent person, may be voted by his administrator, executor, court appointed guardian or conservator, either in person or by proxy without a transfer of such shares into the name of such administrator, executor, court appointed guardian or conservator. Shares of capital stock of the Corporation standing in the name of a trustee may be voted by him, either in person or by proxy. Shares of capital stock of the Corporation standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed. A stockholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into 4 the name of the pledgee, and thereafter the pledgee ARTICLE shall be entitled to vote the shares so transferred. I Shares of its own capital stock belonging to this Corporation shall not be voted, directly or indirectly, at any meeting and shall not be counted in determining the total number of outstanding shares at any given time, but shares of its own stock held by it in a fiduciary capacity may be voted and shall be counted in determining the total number of outstanding shares at any given time. ARTICLE II THE BOARD OF DIRECTORS SECTION 2.1. General Powers. The business and affairs of the Corporation shall be managed by its Board of Directors. SECTION 2.2. Number, Tenure and Qualifications. The Board of Directors of the Corporation shall consist of such number of Directors, not less than 5 nor more than 25, as shall be fixed from time to time by the Board of Directors. Each Director shall hold office until the next annual meeting of stockholders or until his successor is elected. SECTION 2.3. Regular Meetings. A regular meeting of the Board of Directors shall be held at least once each quarter at such place, date and hour as the Board may appoint. Notice of each regular meeting, unless waived, shall be given in the same manner as is provided for notice of a special meeting. SECTION 2.4. Special Meetings; Notice. A special meeting of the Board of Directors may be called by or at the request of the Chairman of the Board, the President, a Vice Chairman, or any two Directors. The person or persons calling or requesting such meeting may fix the place, date and hour thereof. Notice of the place, date, and hour of each special meeting, unless waived, shall be given to a Director in person, by mail, by telegram or cable, by telephone or wireless, or by any other means that reasonably may be expected to provide similar 5 ARTICLE notice. Except in emergency situations as described II below, notice by any means shall be given at least two days prior to the meeting. For purposes of dealing with an emergency situation (as conclusively determined by the officer or Directors calling the meeting), notice may be given in person, by telegram or cable, by telephone or wireless, or by any other means that reasonably may be expected to provide similar notice, not less than two hours prior to the meeting. Such notice may be given by the Secretary or by the officer or Directors calling the meeting. SECTION 2.5. Time of Notice. If notice to a Director is given: (a) in person, such notice shall be deemed to have been given when delivered; (b) by mail, such notice shall be deemed to have been given when deposited in the United States mail, postage prepaid, addressed to the Director at such address as appears on the records of the Corporation for such Director; (c) by telegram, cable or other similar means (not including mail) that provide written notice, such notice shall be deemed to have been given when delivered to any transmission company, with charges prepaid, addressed to the Director at such address as appears on the records of the Corporation for such Director; or (d) by telephone, wireless or other means of voice transmission, such notice shall be deemed to have been given when transmitted to such number or call designation as appears on the records of the Corporation for such Director. Any meeting of the Board of Directors shall be a legal meeting without any notice having been given if all the Directors are present at the meeting, and no notice of a meeting shall be required to be given to any Director who attends such meetings. SECTION 2.6. Quorum. A majority of the Board of Directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, provided that if less than a majority of the Directors are present at said meeting, a majority of the Directors present may adjourn the meeting from time to time without further notice. 6 SECTION 2.7. Manner of Acting. The act of the ARTICLE majority of the Directors present at a meeting at II which a quorum is present shall be the act of the Board of Directors, except on additions, amendments, repeal or any changes whatsoever in the By-laws or the adoption of new By-laws, when the affirmative votes of at least a majority of the members of the Board shall be necessary for the adoption of such changes. A director may participate in a meeting of the Board of Directors or any committee thereof by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at such meetings. SECTION 2.8. Directors' Compensation. The Directors shall receive such compensation as may be fixed by the Board for services to the Corporation. SECTION 2.9. Vacancies. If vacancies occur in the Board of Directors caused by death, resignation, retirement, disqualification or removal from office of any Director or Directors, or otherwise, or if any new Directorship is created by any increase in the authorized number of Directors, a majority of the surviving or remaining Directors then in office, though less than a quorum, may choose a successor or successors, or fill the newly created Directorship, and the Directors so chosen shall hold office until the next annual meeting of stockholders or until their successors are elected. SECTION 2.10. Consent in Lieu of Meeting. Unless otherwise restricted by the Certificate of Incorporation or these By-laws, any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board or committee thereof, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board or committee. ARTICLE III THE EXECUTIVE COMMITTEE SECTION 3.1. Number, Tenure and Quorum. The Directors 7 ARTICLE shall each year appoint no less than five III Directors, one of whom shall be the Chairman of the Board and one of whom shall be the President if the President is designated the Chief Executive Officer, who shall constitute and be called the Executive Committee. Each Director so appointed shall act as a member of the Committee until another is appointed and acts in his place. The Chairman of the Board shall preside at meetings of the Committee. In the absence or disqualification of a member of the Committee, the members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. In the absence or inability to act of the Chairman of the Board, or upon the request of the Chairman, the President, if he is a member of the Committee, or a member elected by the Committee shall preside at meetings of the Committee. A majority of the members of the Executive Committee shall constitute a quorum for the transaction of business. SECTION 3.2. Powers. The Executive Committee may, while the Board of Directors is not in session, exercise all or any of the powers of the Board of Directors; except that the Executive Committee shall not have the power or authority of the Board of Directors in reference to amending the Restated Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the By-laws of the Corporation, or declaring a dividend or authorizing the issuance of stock. SECTION 3.3. Meetings. Meetings of the Executive Committee shall be held at the office of the Corporation, or elsewhere, and at such time as they may appoint, but the Committee shall at all times be subject to the call of the Chairman of the Board or any member of the Committee. SECTION 3.4. Records and Reports. The Executive Committee, through the Secretary or any Assistant Secretary, shall keep books of separate minutes and report all its action at every regular meeting of the Board of Directors, or as often as may be required by the Board. 8 ARTICLE IV ARTICLE THE AUDIT COMMITTEE IV SECTION 4.1. Functions. An Audit Committee shall be appointed each year by the Board of Directors. The Committee shall perform the following functions for the Corporation and its subsidiaries on a consolidated basis and for such individual banking subsidiaries as the Board shall direct: (a) Reviewing with management and the independent public accountant the reports issued with respect to the annual financial statements, the internal control structure and procedures for financial reporting and compliance with laws and regulations and the basis for such reports. (b) Reviewing with management and the independent public accountant the scope of services required by the annual audit, significant accounting policies, and audit conclusions regarding significant accounting estimates. (c) Reviewing with management and the independent public accountant their assessments of the adequacy of internal controls, and the resolution of identified material weaknesses and reportable conditions in internal controls over financial reporting, including the prevention or detection of management override or compromise of the internal control system. (d) Reviewing with management and the independent public accountant compliance with those laws and regulations with respect to which management and the independent public accountant are required to report. (e) Discussing with management the selection and termination of the independent public accountant and any significant disagreements between the independent public accountant and management. (f) Reviewing the internal audit program and results of examinations. (g) Reviewing the program of the Chief Compliance Officer and the compliance function generally. (h) Reviewing the results of regulatory examinations. (i) Reviewing such other matters as the Committee deems appropriate. SECTION 4.2. Composition. The Committee shall consist of no less than four Directors. All of the members of the Committee shall, in the judgement of the Board of Directors, 9 ARTICLE be independent of management of the Corporation and its IV subsidiaries and shall meet other applicable regulatory requirements. SECTION 4.3. Procedures. The Committee shall be appointed annually at the organization meeting of the Board of Directors and at the same time a Chairman shall be appointed. The Committee shall meet upon the call of the Chairman or any member of the Committee. In the absence or disqualification of a member of the Committee, the members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another qualified member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. SECTION 4.4. Counsel. The Committee may, in order to assist it in the performance of its functions, engage counsel of its choosing without the approval of the engagement by the Board of Directors or management and may direct the proper officers of the Corporation to pay the reasonable fees and expenses of any such counsel. ARTICLE V THE NOMINATING COMMITTEE SECTION 5.1. The Nominating Committee. A Nominating Committee and its Chairman shall be appointed each year by the Board of Directors to receive recommendations for, and to review, study and evaluate the qualifications of all candidates for senior management succession and for nomination to the Board of Directors or its Committees. The Committee shall report to the Board its conclusions with respect to such candidates and its recommendations for nominees for election or reelection or appointment to fill vacancies in the Board and as officers of the Corporation. The Committee shall consist of no less than four Directors and shall meet upon the call of the Chairman or any member of the Committee. In the absence or disqualification of a member of the Committee, the members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. 10 ARTICLE VI ARTICLE THE COMPENSATION AND BENEFITS COMMITTEE VI SECTION 6.1. The Compensation and Benefits Committee. A Compensation and Benefits Committee and its Chairman shall be appointed each year by the Board of Directors to study, review and make recommendations to the Board with respect to the salary policy for the Corporation, the compensation of senior officers, and the development of and amendment to incentive and benefit plans. The Committee shall consist of no less than three Directors, none of whom shall be an active officer of the Corporation. The Committee shall meet upon the call of the Chairman or any member of the Committee. In the absence or disqualification of a member of the Committee, the members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. ARTICLE VII THE PERSONAL FINANCIAL SERVICES COMMITTEE SECTION 7.1. The Personal Financial Services Committee. A Personal Financial Services Committee and its Chairman shall be appointed each year by the Board of Directors to review the policies, strategies and performance of the Personal Financial Services Business Unit of the Corporation and such other related matters as may from time to time be deemed appropriate by the Committee. The Committee shall consist of no less than four Directors, none of whom shall be an active officer of the Corporation. The Committee shall meet upon the call of the Chairman or any member of the Committee. In the absence or disqualification of a member of the Committee, the members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. ARTICLE VIII THE CORPORATE AND INSTITUTIONAL SERVICES COMMITTEE SECTION 8.1. The Corporate and Institutional Services Committee. A Corporate and Institutional Services Committee and its Chairman shall be appointed each year by the Board of Directors to review the policies, strategies, and performance of the Corporate and Institutional Services Business Unit of the Corporation and such other related matters as may from time to time be deemed appropriate by the Committee. The Committee shall consist of no less than four Directors, none of whom shall be an active officer of the Corporation. The Committee shall meet upon the call of the Chairman or any member of the Committee. In the absence or disqualification of a member of the Committee, the members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. ARTICLE IX THE OFFICERS SECTION 9.1. Number and Term of Office. The officers of the Corporation shall be a Chairman of the Board and a President, one of whom shall be designated Chief Executive Officer by the Board of Directors, and may also include one or more Vice Chairmen, one or more Executive Vice Presidents (any of whom may be designated a Senior Executive Vice President), such additional Vice Presidents with such designations, if any, as may be determined by the Board of Directors, a Secretary, and a Treasurer and one or more Assistant Secretaries and Assistant Treasurers as may be determined by the Board of Directors, and such other officers as may from time to time be appointed by the Board of Directors. Any two or more offices may be held by the same person. The Chairman of the Board, the President and the Vice Chairmen shall be elected from among the Directors; the other officers may be appointed by the Board of Directors. The officers of the Corporation shall be elected or appointed annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of stockholders. Vacancies or new offices may be filled at any time. Each officer shall hold office until his successor shall have been duly elected or appointed or until his death or until he shall resign or shall have been removed by the Board of Directors. 11 ARTICLE SECTION 9.2. Removal. An officer may be removed by IX the Board of Directors whenever in its judgment the best interests of the Corporation would be served thereby. SECTION 9.3. The Chairman of the Board. The Chairman of the Board shall have such powers as are vested in him by the Board of Directors, by law or by these By-laws. He shall preside at the meetings of the stockholders, of the Board of Directors, and of the Executive Committee. SECTION 9.4. The President. The President shall have the powers and duties vested in him by the Board of Directors, by law or by these By-laws. In the absence or inability to act of the Chairman of the Board, or upon the request of the Chairman of the Board, he shall preside at meetings of the stockholders and of the Board of Directors and shall have and exercise all of the powers and duties of the Chairman of the Board. SECTION 9.5. The Chief Executive Officer. The Chief Executive Officer of the Corporation shall have, subject to the supervision and direction of the Board of Directors or of the Executive Committee, general supervision of the business, property and affairs of the Corporation and the powers vested in him by the Board of Directors, by law or by these By-laws or which usually attach or pertain to such office. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the Corporation or a different mode of execution is expressly prescribed by the Board of Directors, the Chief Executive Officer may execute for the Corporation any contracts, deeds, mortgages, bonds, or other instruments which the Board of Directors has authorized, and he may (without previous authorization by the Board of Directors) execute such contracts and other instruments as the conduct of the Corporation's business in its ordinary course requires. SECTION 9.6. The Vice Chairmen. A Vice Chairman shall have such powers as are vested in him by the Board of Directors, by law or by these By-laws. In the absence or inability to act of the Chairman of the Board and the President, or upon request of the Chairman of the Board, or in his absence upon request of the President, a Vice Chairman (or in the event there be more than one Vice Chairman, the Vice Chairmen in the order designated, or in the absence of any designation, then in the order of their election) shall preside at meetings of stockholders and of the Board of Directors and shall have and exercise all their powers and duties. SECTION 9.7. The Executive Vice Presidents. In the absence of the Chairman of the Board, the President and the Vice Chairmen or in the event of their inability or refusal to act, the Executive Vice President (or in the event there be more than one Executive Vice President, the Executive Vice Presidents in the order designated, or in the absence of any designation, then in the order of their election) shall perform the duties 12 of the Chairman of the Board, of the President, and ARTICLE of the Vice Chairmen and when so acting, shall have IX all the powers of and be subject to all the restrictions upon the Chairman of the Board, the President and the Vice Chairmen. Any Executive Vice President may sign, with the Secretary or any Assistant Secretary, certificates for shares of the corporation; and shall perform such other duties as from time to time may be assigned to him by the Chairman of the Board, the President, a Vice Chairman, the Board of Directors, or these By-laws. SECTION 9.8. The Vice Presidents. The Vice Presidents shall perform such duties as may be assigned to them from time to time by the Chairman of the Board, the President, the Vice Chairmen, or the Board of Directors, or these By-laws. Any Vice President may sign, with the Secretary or an Assistant Secretary, certificates for shares of the Corporation. SECTION 9.9. The Treasurer. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors shall determine. He shall (a) have charge and custody of and be responsible for all funds and securities of the Corporation; receive and give receipts for moneys due and payable to the Corporation from any source whatsoever, and deposit all such moneys in the name of the Corporation in such banks, trust companies or other depositaries as shall be selected in accordance with the provisions of Article VIII of these By-laws; (b) in general perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Chairman of the Board, the President, a Vice Chairman, the Board of Directors, or these By-laws. SECTION 9.10. The Secretary. The Secretary shall have the custody of the corporate seal and the Secretary or any Assistant Secretary shall affix the same to all instruments or papers requiring the seal of the Corporation. The Secretary, or in his absence, any Assistant Secretary, shall see that proper notices are sent of the meetings of the stockholders, the Board of Directors and the Executive Committee, and shall see that all proper notices are given, as required by these By-laws. The Secretary or any Assistant Secretary shall keep the minutes of all meetings of stockholders and Directors and all committees which may request their services. 13 ARTICLE SECTION 9.11. Assistant Treasurers and Assistant IX Secretaries. The Assistant Treasurers shall respectively, if required by the Board of Directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors shall determine. The Assistant Secretaries as thereunto authorized by the Board of Directors may sign with the Chairman of the Board, the President, a Vice Chairman, or an Executive Vice President certificates for shares of the Corporation, the issue of which shall have been authorized by a resolution of the Board of Directors. The Assistant Treasurers and Assistant Secretaries, in general, shall perform such duties as shall be assigned to them by the Treasurer or the Secretary, respectively, or by the Chairman of the Board, the President, a Vice Chairman, the Board of Directors, or these By-laws. SECTION 9.12. Salaries. The salaries of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Corporation. ARTICLE X CONTRACTS, LOANS, CHECKS AND DEPOSITS SECTION 10.1. Contracts. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. SECTION 10.2. Loans. No loans shall be contracted on behalf of the Corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances. SECTION 10.3. Checks, Drafts, etc. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation, shall be signed by such officer or officers, agent or agents 14 of the Corporation and in such manner as shall from ARTICLE time to time be determined by resolution of the X Board of Directors. SECTION 10.4. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositaries as the Board of Directors may select. SECTION 10.5. Power to Execute Proxies. The Chairman of the Board, the President, a Vice Chairman, or any Executive Vice President may execute proxies on behalf of the Corporation with respect to the voting of any shares of stock owned by the Corporation. ARTICLE XI CERTIFICATES FOR SHARES AND THEIR TRANSFER SECTION 11.1. Certificates for Shares. Certificates representing shares of the Corporation shall be in such form as may be determined by the Board of Directors. Such certificates shall be signed by the Chairman of the Board, the President, a Vice Chairman, an Executive Vice President or a Vice President and by the Secretary or an Assistant Secretary and shall be sealed with the seal of the Corporation. The seal may be a facsimile. If a stock certificate is countersigned (i) by a transfer agent other than the Corporation or its employee, or (ii) by a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. All certificates for shares shall be consecutively numbered or otherwise identified. The name of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the books of the Corporation. 15 ARTICLE All certificates surrendered to the Corporation for XI transfer shall be cancelled and no new certificates shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in case of a lost, destroyed or mutilated certificate a new one may be issued therefor upon such terms and indemnity to the Corporation as the Board of Directors may prescribe. SECTION 11.2. Transfers of Shares. Transfers of shares of the Corporation shall be made only on the books of the Corporation by the holder of record thereof or by his legal representative, who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, and on surrender for cancellation of the certificate for such shares. The person in whose name shares stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. ARTICLE XII FISCAL YEAR SECTION 12.1. Fiscal Year. The fiscal year of the Corporation shall begin on the first day of January in each year and end on the last day of December in each year. ARTICLE XIII SEAL SECTION 13.1. Seal. The Board of Directors shall provide a corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the Corporation. ARTICLE XIV WAIVER OF NOTICE SECTION 14.1. Waiver of Notice. Whenever any notice whatever is required to be given under the provisions of these By-laws or under the provisions of the Restated Certificate of Incorporation or under the provisions of the General Corporation Law of Delaware, waiver thereof in writing, signed by the 16 person or persons entitled to such notice, whether ARTICLE before or after the time stated therein, shall be XIV deemed equivalent to the giving of such notice. Attendance of any person at a meeting for which any notice whatever is required to be given under the provisions of these By-laws, the Restated Certificate of Incorporation or the General Corporation Law of Delaware shall constitute a waiver of notice of such meeting, except when the person attends for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. ARTICLE XV INDEMNIFICATION SECTION 15.1. Indemnification Request. A director, officer or other person (the ``Indemnitee'') who seeks indemnification (other than advancement of expenses pursuant to Section 13.12 hereof), in respect of amounts paid or owing as expenses, judgments, fines, or in settlement, shall submit a written request for indemnification (the ``Indemnification Request'') to the Board of Directors of the Corporation by delivering or mailing the same, registered or certified mail, to the Board of Directors c/o the Secretary of the Corporation at the Corporation's principal executive offices. If mailed, the Indemnification Request shall be deemed made 48 hours after depositing the same in the United States mail addressed as aforesaid. SECTION 15.2. Determination of Indemnification Request. The determination of the Indemnitee's entitlement to indemnification as set forth in the Indemnification Request shall be made in the specific case, at the expense of the Corporation, as set forth in paragraph 5 of Article Eighth of the Restated Certificate of Incorporation. However, in the event a Change of Control (as hereinafter defined) shall have occurred, such determination shall be made by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to the Indemnitee. 17 ARTICLE SECTION 15.3. Presumption of Entitlement; XV Conclusive Effect of Findings of Fact and Law; Other Procedures. The termination with respect to the Indemnitee of any action, suit or proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not of itself adversely affect the right of the Indemnitee to indemnification or create a presumption that the Indemnitee did not meet the standard of conduct required by Article Eighth of the Restated Certificate of Incorporation for indemnification. If the Indemnitee is a person referred to in paragraphs 1, 2 or 3 Article Eighth of the Restated Certificate of Incorporation, the Indemnitee shall be presumed to have met the required standard of conduct but only to the extent not contrary to any final findings of fact or law made in any action, suit or proceeding to which the Indemnitee is or was a party and for which indemnification is requested. The person, persons or entity making the determination of the Indemnitee's entitlement to indemnification shall be entitled to rely upon all such findings of fact and law made known to such person, persons or entity. Such person, persons or entity may consider such other matters as they or it deem appropriate, shall not be required to receive or hear evidence, oral presentations, briefs or other submission, shall not be required to hold hearings, and shall not otherwise be subject to any rules of evidence or procedure applicable to judicial or other proceedings. SECTION 15.4. Cooperation and Expenses. The Indemnitee shall cooperate with the person, persons or entity making the determination with respect to the Indemnitee's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request, any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorneys' fees and disbursements) reasonably incurred by the Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Corporation irrespective of the determination as to the Indemnitee's entitlement to indemnification. SECTION 15.5. Selection of Independent Counsel. If a determination of the Indemnitee's entitlement to indemnification 18 is to be made by Independent Counsel, the ARTICLE Independent Counsel shall be selected as provided XV in this Section 13.5. If a Change of Control shall not have occurred, Independent Counsel shall be selected by a majority vote of a quorum of the Board of Directors consisting of Disinterested Directors. If a Change of Control shall have occurred, or if a quorum shall decline or fail to select Independent Counsel within 5 business days after having directed, pursuant to paragraph 5(b) of Article Eighth of the Restated Certificate of Incorporation, the determination of the Indemnitee's entitlement to indemnification to be submitted to Independent Counsel, then Independent Counsel shall be selected by the law firm regularly or most frequently engaged by the Corporation during the preceding three years for representation or counseling in connection with general corporate matters. In any event, Independent Counsel shall be selected from among those Chicago, Illinois, or Delaware law firms having a significant and continuous practice in the field of corporate law but excluding any firm that: (i) has, within the preceding three years represented the Corporation, the Indemnitee or affiliates of either in any significant matter; (ii) has, within the preceding three years, represented any other party in any significant judicial or other proceeding against or in opposition to the Corporation, the Indemnitee or any affiliate of either; (iii) had any involvement of any significant nature in or with respect to the claim for which indemnification is requested; or (iv) has any other material conflict of interest in being engaged as Independent Counsel. SECTION 15.6. Time for Determination. The determination of the Indemnitee's entitlement to indemnification shall be made within 60 days after such Indemnitee shall have submitted all such additional information, if any, as shall have been reasonably requested during the 30-day period following the initial submission of the Indemnification Request to the Board of Directors pursuant to Section 13.1 hereof. The foregoing notwithstanding, in the event that the claim with respect to which indemnification is requested is the subject of a judicial, government or other proceeding, the Board of Directors, stockholders or Independent Counsel, as the case may be, may defer their determination until 60 days after any 19 ARTICLE such proceeding shall have been finally adjudicated XV or terminated (by settlement or otherwise) and all periods for appeal, rehearing or reinstitution of such proceeding (whether in a different forum or otherwise) have expired. SECTION 15.7. Failure To Make Determination; Remedies For Enforcement. If a determination of the Indemnitee's entitlement to indemnification shall not be made within the period specified in these By-laws, unless due to a material failure of the Indemnitee to comply with his or her obligations under Section 13.4 hereof, then the Indemnitee shall be entitled to indemnification to the extent and in the manner set forth in the Indemnification Request. The Indemnitee may only enforce his or her rights to indemnification, whether pursuant to a determination that the Indemnitee is entitled to indemnification or pursuant to this Section 13.7, in any judicial proceeding brought, at the election of the Indemnitee, in any court having jurisdiction within the State of Delaware, the State of Illinois, or the state in which the Corporation shall then have its principal executive offices. The Indemnitee shall be entitled to all expenses actually and reasonably incurred by him or her in connection with the successful enforcement of the Indemnitee's right to indemnification. SECTION 15.8. Appeal of Adverse Determination. In the event that a determination shall be made that the Indemnitee is not entitled to indemnification, in whole or in part, the Indemnitee may only institute an action in any court having jurisdiction within the State of Delaware, the State of Illinois, or the state in which the Corporation shall have its principal executive offices to establish the Indemnitee's right to indemnification. Any such proceeding shall be conducted in all respects as a de novo determination on the merits and any such prior determination made pursuant to these By-laws that the Indemnitee is not entitled to indemnification shall not constitute a presumption that the Indemnitee is not entitled to indemnification. SECTION 15.9. Burden of Proof. In any judicial proceeding regarding the Indemnitee's right or entitlement to indemnification or advancement of expenses, the Corporation shall have the burden of proving that any Indemnitee who is a person 20 referred to in paragraphs 1, 2 or 3 of Article ARTICLE Eighth of the Restated Certificate of Incorporation XV is not entitled to indemnification or advancement of expenses as the case may be, subject, however, to principles of res judicata and collateral estoppel relating to prior judicial proceedings to which the Indemnitee is or was a party. In cases in which the Indemnitee is not a person referred to in paragraphs 1, 2 or 3 of Article Eighth of the Restated Certificate of Incorporation, the Indemnitee shall have the burden of proving he or she is entitled to indemnification or the advancement of expenses. SECTION 15.10. Definition of ``Disinterested Director.'' A Disinterested Director shall mean any director who (i) was not a party to the claim or proceeding with respect to which indemnification is requested, (ii) has not submitted an Indemnification Request or a request for advancement of expenses on his or her own behalf that has not been finally resolved; or (iii) does not have any direct and material financial or other personal interest in the determination of the Indemnification Request. SECTION 15.11. Definition of ``Change of Control.'' A Change of Control shall be deemed to have occurred on the earliest of: (a) The receipt by the Corporation of a Schedule 13D or other statement filed under Section 13(d) of the Securities Exchange Act of 1934, as amended (the ``Exchange Act''), indicating that any entity, person, or group has acquired beneficial ownership, as that term is defined in Rule 13d-3 under the Exchange Act, of more than 30% of the outstanding capital stock of the Corporation entitled to vote for the election of directors (``voting stock''); (b) The commencement by an entity, person, or group (other than the Corporation or a subsidiary of the Corporation) of a tender offer or an exchange offer for more than 20% of the outstanding voting stock of the Corporation; (c) The effective time of (i) a merger or consolidation of the Corporation with one or more other corporations as a result of which the holders of the outstanding voting stock of the 21 ARTICLE Corporation immediately prior to such merger or consolidation XV hold less than 80% of the voting stock of the surviving or resulting corporation, or (ii) a transfer of substantially all of the property of the Corporation other than to an entity of which the Corporation owns at least 80% of the voting stock; or (d) The election to the Board of Directors of the Corporation, without the recommendation or approval of the incumbent Board of Directors of the Corporation, of the lesser of (i) three directors or (ii) directors constituting a majority of the number of directors of the Corporation then in office. SECTION 15.12. Advancement of Expenses. Expenses as may be incurred by a person referred to in paragraphs 1, 2 or 3 of Article Eighth of the Restated Certificate of Incorporation in defending a civil or criminal action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation as authorized in such Article Eighth. Such expenses as may be incurred by other employees and agents may be so paid on such terms and conditions, if any, as the Board of Directors deems appropriate. For purposes of the foregoing, a determination that a person referred to in paragraphs 1, 2 or 3 of Article Eighth of the Restated Certificate of Incorporation is not entitled to be indemnified by the Corporation shall be made in the manner hereinbefore provided for the determination of an Indemnification Request; provided, however, that the Board of Directors may initiate such determination whenever it shall deem the same to be appropriate. In connection with such determination, such person shall be subject to all requirements of these By-laws imposed on an ``Indemnitee'' in respect of a determination made pursuant to Section 13.2 hereof. SECTION 15.13. Personal Liability of Directors. No director of the Corporation shall be personally liable to any person seeking indemnification or advancement of expenses for any determination, act or omission in connection therewith. 22 ARTICLE XVI ARTICLE AMENDMENTS XVI SECTION 16.1. Amendments. These By-laws may be altered, amended or repealed and new By-laws may be adopted at any meeting of the Board of Directors of the Corporation by the affirmative vote of a majority of the members of the Board. 23 EX-10 3 MGMT PERFORMANCE PLAN EXHIBIT NUMBER (10) TO 6/30/95 FORM 10-Q NORTHERN TRUST CORPORATION MANAGEMENT PERFORMANCE PLAN 1995 I. Purpose of Plan --------------- The purpose of the Annual Performance Plan (the "Plan") is to promote the achievement of superior financial and operating performance of the Northern Trust Corporation and its subsidiaries (hereinafter referred to as the "Corporation"), and further the objective of delivering unrivaled service quality to its clients and partners through the awarding of cash incentive payments to selected officers. II. Plan Year --------- The Plan is effective from January 1, 1995 to December 31, 1995. III. Eligibility and Participation ----------------------------- Eligibility to participate in the Plan is restricted to selected executive officers and subject to approval by the Compensation and Benefits Committee of the Board of Directors (the "Committee"). IV. Participant Target Awards ------------------------- At the beginning of the Plan year, the Committee shall determine individual target awards. The target award will be described as a percent of the annual base salary earned during the Plan year. V. Award Determination ------------------- The Committee establishes a Corporate Earnings Target for the Plan at the beginning of the Plan year. The available funding for participant awards will be based on (a) the aggregate of participants' target award amounts and (b) the Corporation's financial achievement versus the Corporate Earnings Target. The amount of the award funding will either increase or decrease as calculated by the formula detailed in Attachment I. VI. Payment of Awards ----------------- Awards will be paid in cash as soon as practicable following the completion of the Plan year. Any award amount that, with all other compensation paid or to be paid for that year to the participant, exceeds the level of tax deductible compensation to the Corporation, as determined by the Internal Revenue Service 162(m), will be deferred and paid in the year following the participant's retirement. Deferred award balances will be adjusted with an interest factor as shall be determined at the time of the deferral by the Committee. Notwithstanding the foregoing, awards payable because of a Change in Control of the Corporation pursuant to Paragraph VIII shall be paid in cash as soon as practicable following such Change in Control. VII. Administration -------------- The Plan shall be administered by the Management Committee of the Corporation (the "Committee"). Subject to the provisions of the Plan, the Committee shall be authorized to interpret the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, and to make all other determinations necessary or advisable for the administration of the Plan. The determinations of the Committee in the effective administration of the Plan, as described herein, shall be final and conclusive. The Board of Directors of the Corporation, by written resolution, may amend, suspend, or terminate any or all provisions of the Plan at any time. VIII. Miscellaneous Provisions ------------------------ The following miscellaneous provisions are applicable to the Plan: (a) In the event of a participant's death, disability or retirement, awards shall be prorated to the date of the event, and paid as described in Section VI. (b) Termination of employment by a participant during the Plan year, for reasons other than death, disability, or retirement shall result in immediate exclusion from the Plan unless the Compensation and Benefits Committee decides otherwise in its sole discretion. (c) Except in the event of the death of a participant, the rights and interests of a participant under the Plan shall not be assigned, encumbered, or transferred. (d) No employee or other person shall have any claim or right to be granted an award under the Plan. Neither the Plan, nor any action taken thereunder, shall be construed as giving any employee or other person any right to be retained in the employ of the Corporation. (e) The Corporation shall have the right to deduct from all payments made under the Plan any taxes required by law to be withheld with respect to such payment. (f) All questions pertaining to the validity, construction and administration of the Plan and any award hereunder shall be determined in conformity with the laws of the State of Illinois. 2 (g) Each participant shall designate a beneficiary (the "Designated Beneficiary") to receive the award, if any, allocated to a participant, in the event of such participant's death. If no Designated Beneficiary survives the participant, it shall be the surviving spouse of the participant or, if there is no surviving spouse, it shall be the participant's estate. (h) Notwithstanding any other terms contained herein, in the event of a Change in Control of the Corporation, discretionary awards shall be paid in accordance with the last sentence of Section VI of this Plan. For purposes of this paragraph, a "Change in Control" of the Corporation shall be deemed to occur on the earliest of: (i) The receipt by the Corporation of a Schedule 13D or other statement filed under Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), indicating that any entity, person, or group has acquired beneficial ownership, as that term is defined in Rule 13d-3 under the Exchange Act, or more than 30% of the outstanding capital stock of the Corporation entitled to vote for the election of directors ("voting stock"); (ii) The commencement by any entity, person, or group (other than the Corporation or a subsidiary of the Corporation) of a tender offer or an exchange offer for more than 20% of the outstanding voting stock of the Corporation; (iii) The effective time of (A) a merger or consolidation of the Corporation with one or more other corporations as a result of which the holders of the outstanding voting stock of the Corporation immediately prior to such merger or consolidation hold less than 80% of the voting stock of the surviving or resulting corporation, or (B) a transfer of substantially all of the property of the Corporation other than to an entity of which the Corporation owns at least 80% of the voting stock; or (iv) The election to the Board of Directors of the Corporation, without the recommendation or approval of the incumbent Board of Directors of the Corporation, or the lesser of (A) three directors or (B) directors constituting a majority of the number of directors of the Corporation then in office. 3 Attachment I MANAGEMENT PERFORMANCE PLAN CORPORATE EARNINGS TARGET AND AWARD SCHEDULE 1995 CORPORATE EARNINGS TARGET - ------------------------------ The 1995 Management Performance Plan Corporate Earnings Target is $213.8 million. Actual earnings after the accrual for payments made under the Plan and after any adjustments for unusual and/or extraordinary items will be compared against the Corporate Earnings Target. TARGET AWARD SCHEDULE - --------------------- The percentage of the aggregate target award funding will be determined in accordance with the following formula: For each percent change in net income above/below the respective earnings target, the pool amount shall change by: 1% for each percent between 0% - 5%, 2% for each percent between 5.1% - 10%, 3% for each percent between 10.1% - 15%, and 4% for each percent between 15.1% - 20%. ================================================================================ % of Net Income Target % of Pool Amount Funded - -------------------------------------------------------------------------------- 120% 150% - ------------------------------------------------------------------------------- 115% 130% - ------------------------------------------------------------------------------- 110% 115% - ------------------------------------------------------------------------------- 107% 109% - ------------------------------------------------------------------------------- 105% 105% - ------------------------------------------------------------------------------- 103% 103% - ------------------------------------------------------------------------------- 100% 100% - ------------------------------------------------------------------------------- 97% 97% - ------------------------------------------------------------------------------- 95% 95% - ------------------------------------------------------------------------------- 93% 91% - ------------------------------------------------------------------------------- 90% 85% - ------------------------------------------------------------------------------- 85% 70% - ------------------------------------------------------------------------------- 80% 50% ============================================================================== 4 EX-11 4 COMP PER SHARE EARNINGS EXHIBIT NUMBER (11) TO 6/30/95 FORM 10-Q NORTHERN TRUST CORPORATION COMPUTATION OF PER SHARE EARNINGS
Second Quarter Ended June 30 Six Months Ended June 30 -------------------------------- -------------------------------- 1995 1994 1995 1994 ----------- ----------- ----------- ----------- Computations Required by - ----------------------- Regulation S-K - -------------- Primary Earnings Per Share - --------------------------- Net Income Applicable to Common Shares $50,946,144 $46,968,577 $98,127,843 $90,732,442 =========== =========== =========== =========== Weighted Average Number of Common and Common Equivalent Shares Outstanding Common Shares 55,975,449 53,878,250 55,117,831 53,602,539 Dilutive Effect of Common Equivalent Shares (A) Stock Options 534,482 979,076 560,390 986,587 Long Term Performance Stock Plan 355,597 393,575 339,360 375,782 Other 12,502 10,157 10,357 7,978 ----------- ----------- ----------- ----------- 56,878,030 55,261,057 56,027,938 54,972,886 =========== =========== =========== =========== Net Income Per Common and Common Equivalent Share $0.90 $0.85 $1.75 $1.65 =========== =========== =========== ===========
(A) Determined by application of the treasury stock method. EXHIBIT NUMBER (11) TO 6/30/95 FORM 10-Q NORTHERN TRUST CORPORATION COMPUTATION OF PER SHARE EARNINGS
Second Quarter Ended June 30 Six Months Ended June 30 -------------------------------- -------------------------------- 1995 1994 1995 1994 ----------- ----------- ----------- ----------- Computations Required by - ----------------------- Regulation S-K - -------------- Fully Diluted Earnings Per Share - -------------------------------- Net Income Applicable to Common Shares $50,946,144 $46,968,577 $98,127,843 $90,732,442 Add Back: Dividend on Series E Convertible Preferred Stock 785,353 768,277 1,562,500 1,545,328 ----------- ----------- ----------- ----------- $51,731,497 $47,736,854 $99,690,343 $92,277,770 =========== =========== =========== =========== Weighted Average Number of Common and Common Equivalent Shares Outstanding Common Shares 55,975,449 53,878,250 55,117,831 53,602,539 Dilutive Effect of Common Equivalent Shares (A) Stock Options 610,847 979,907 656,258 1,009,134 Long Term Performance Stock Plan 372,812 393,575 349,420 376,574 Other 14,514 10,157 11,680 8,167 Other Potentially Dilutive Securities Equivalent Shares Assuming Conversion of Series E Convertible Preferred Stock 1,204,820 1,204,820 1,204,820 1,204,820 ----------- ----------- ----------- ----------- 58,178,442 56,466,708 57,340,009 56,201,234 =========== =========== =========== =========== Net Income Per Common and Common Equivalent Share $0.89 $0.85 $1.74 $1.64 =========== =========== =========== ===========
(A) Determined by application of the treasury stock method. EX-27 5 ARTICLE 9 FDS
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 1,092,760 8,376,023 403,978 55,856 4,994,101 574,642 606,037 9,421,795 145,945 19,301,158 11,247,276 5,893,428 412,026 358,116 93,393 0 170,000 1,126,919 19,301,158 302,735 172,736 56,809 532,280 221,302 355,761 176,519 3,000 243 355,263 148,384 148,384 0 0 102,438 1.75 1.74 2.16 30,474 14,113 2,800 0 144,838 5,626 2,683 145,945 107,775 2,737 35,433
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