This excerpt taken from the NTRS 10-K filed Feb 27, 2009.
Commercial Real Estate
In managing its credit exposure, management has defined a commercial real estate loan as one where: (1) the borrowers principal business activity is the acquisition or the development of real estate for commercial purposes; (2) the principal collateral is real estate held for commercial purposes, and loan repayment is expected to flow from the operation of the property; or (3) the loan repayment is expected to flow from the sale or refinance of real estate as a normal and ongoing part of the business. Unsecured lines of credit to firms or individuals engaged in commercial real estate endeavors are included without regard to the use of loan proceeds. The commercial real estate portfolio consists of interim loans and commercial mortgages.
Short-term interim loans provide financing for the initial phases of the acquisition or development of commercial real estate, with the intent that the borrower will refinance the loan through another financial institution or sell the project upon its completion. The interim loans are primarily in those markets where Northern Trust has a strong presence and a thorough knowledge of the local economy. The interim loans, which totaled $606.5 million and $511.5 million as of December 31, 2008 and 2007, respectively, are composed primarily of loans to developers that are highly experienced and well known to Northern Trust.
Commercial mortgage financing, which totaled $2.4 billion and $1.9 billion as of December 31, 2008 and 2007, respectively, is provided for the acquisition or refinancing of income producing properties. Cash flows from the properties generally are sufficient to amortize the loan. These loans average approximately $1 million each and are primarily located in the Illinois and Florida markets.
At December 31, 2008, legally binding commitments to extend credit and standby letters of credit to commercial real
NORTHERN TRUST CORPORATION 2008 ANNUAL REPORT TO SHAREHOLDERS
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
estate developers totaled $613.3 million and $63.4 million, respectively. At December 31, 2007, legally binding commitments were $620.9 million and standby letters of credit were $57.6 million.