NTRS » Topics » 2007 PFS ASSETS UNDER MANAGEMENT

These excerpts taken from the NTRS 10-K filed Feb 27, 2009.

2008 PFS ASSETS UNDER MANAGEMENT

 

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NORTHERN TRUST CORPORATION 2008 ANNUAL REPORT TO SHAREHOLDERS

34


Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Fees in the majority of locations in which PFS operates, and all mutual fund-related revenue, are accrued based on market values. PFS trust, investment and other servicing fees totaled a record $909.0 million for the year, up 1% from $897.8 million in 2007, which in turn was up 15% from $779.2 million in 2006. The current year performance was positively impacted by strong new business, offset in part by lower equity markets. The 2007 performance was positively impacted by new business and higher equity markets when compared with 2006.

At December 31, 2008, assets under custody in PFS totaled $288.3 billion, compared with $332.3 billion at December 31, 2007. Included in assets under custody are those for which Northern Trust has management responsibility. Managed assets totaled $132.4 billion at December 31, 2008, 11% lower than the previous year end, and were invested 31% in equity securities, 28% in fixed income securities and 41% in cash and other assets.

 

PFS Other Income

Other noninterest income for 2008 totaled $132.6 million compared with $99.4 million last year. The increase in noninterest income for 2008 was primarily driven by higher security commissions and trading income, commercial loan-related commitment fees, and treasury management fees. Noninterest income for 2007 was 3% higher than 2006.

 

PFS Net Interest Income

Net interest income of $542.7 million was 5% higher than the previous year. Average loan volume grew $3.6 billion or 20%, while the net interest margin decreased to 2.43% from 2.84% in 2007. The net interest margin reflects asset yields that have declined at a more accelerated pace than the related total funding sources, and the impact of changes to management accounting system methodologies relating to the application of funds transfer pricing and the allocation of capital. Net interest income for 2007 of $518.9 million was 4% higher than for 2006 resulting primarily from higher average loan volume, partially offset by a decrease in the net interest margin from 2.96% in 2006 to 2.84% in 2007.

 

PFS Provision for Credit Losses

The provision for credit losses was $89.8 million for 2008, compared with $13.5 million in 2007, and $5.9 million in 2006. The increase in the provision for credit losses from 2007 reflects growth in the commercial loan portfolio and weakness in the broader economic environment. The provision for credit losses in 2007 and 2006 primarily reflects growth in the loan portfolio and the migration of certain loans to higher risk credit ratings.

 

2008 PFS ASSETS UNDER MANAGEMENT

 



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NORTHERN TRUST
CORPORATION 2008 ANNUAL REPORT TO SHAREHOLDERS

FACE="arial" SIZE="1">34







Table of Contents


MANAGEMENT’S DISCUSSION AND ANALYSIS OF

ALIGN="center">FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 


Fees in the majority of locations in which PFS operates, and all mutual fund-related revenue, are accrued based on market values. PFS trust, investment and
other servicing fees totaled a record $909.0 million for the year, up 1% from $897.8 million in 2007, which in turn was up 15% from $779.2 million in 2006. The current year performance was positively impacted by strong new business, offset in
part by lower equity markets. The 2007 performance was positively impacted by new business and higher equity markets when compared with 2006.

SIZE="2">At December 31, 2008, assets under custody in PFS totaled $288.3 billion, compared with $332.3 billion at December 31, 2007. Included in assets under custody are those for which Northern Trust has management responsibility.
Managed assets totaled $132.4 billion at December 31, 2008, 11% lower than the previous year end, and were invested 31% in equity securities, 28% in fixed income securities and 41% in cash and other assets.

STYLE="margin-top:0px;margin-bottom:0px"> 

PFS Other Income

STYLE="margin-top:0px;margin-bottom:0px">Other noninterest income for 2008 totaled $132.6 million compared with $99.4 million last year. The increase in noninterest income for 2008 was primarily driven by higher
security commissions and trading income, commercial loan-related commitment fees, and treasury management fees. Noninterest income for 2007 was 3% higher than 2006.

SIZE="1"> 

PFS Net Interest Income

SIZE="2">Net interest income of $542.7 million was 5% higher than the previous year. Average loan volume grew $3.6 billion or 20%, while the net interest margin decreased to 2.43% from 2.84% in 2007. The net interest margin reflects asset yields
that have declined at a more accelerated pace than the related total funding sources, and the impact of changes to management accounting system methodologies relating to the application of funds transfer pricing and the allocation of capital. Net
interest income for 2007 of $518.9 million was 4% higher than for 2006 resulting primarily from higher average loan volume, partially offset by a decrease in the net interest margin from 2.96% in 2006 to 2.84% in 2007.

STYLE="margin-top:0px;margin-bottom:0px"> 

PFS Provision for Credit Losses

STYLE="margin-top:0px;margin-bottom:0px">The provision for credit losses was $89.8 million for 2008, compared with $13.5 million in 2007, and $5.9 million in 2006. The increase in the provision for credit losses
from 2007 reflects growth in the commercial loan portfolio and weakness
in the broader economic environment. The provision for credit losses in 2007 and 2006 primarily reflects growth in the loan
portfolio and the migration of certain loans to higher risk credit ratings.

 

SIZE="2">PFS Direct Expenses

Direct expenses of PFS increased 21% in 2008 and 6% in 2007. Included in the current year results are the client
support related charges totaling $81.4 million, related to the auction rate securities purchase program and other client support related charges. Excluding the impact of these expenses, total direct expenses were $542.1 million, up $27.5 million or
5% from 2007. The remaining growth in noninterest expenses for 2008 reflects annual salary increases, higher charges related to account servicing activities and legal matters, and fees for legal services, partially offset by lower performance-based
compensation, occupancy costs, and lower business promotion and advertising. The growth in expenses for 2007 reflects annual salary increases, higher performance-based compensation, and higher occupancy costs, partially offset by lower costs
associated with business promotion and advertising.

 

These excerpts taken from the NTRS 10-K filed Feb 28, 2008.

2007 PFS ASSETS UNDER MANAGEMENT

 

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Fees in the majority of locations that PFS operates in and all mutual fund-related revenue are accrued based on market values. PFS trust, investment and other servicing fees totaled a record $897.8 million for the year, up 15% from $779.2 million in 2006, which in turn was up 10% from $707.1 million in 2005. The current year performance was positively impacted by strong new business and higher equity markets. The 2006 performance was positively impacted by new business and higher equity markets when compared with 2005.

At December 31, 2007, assets under custody in PFS totaled $332.3 billion, compared with $281.9 billion at December 31, 2006. Included in assets under custody are those for which Northern Trust has management responsibility. Managed assets totaled $148.3 billion at December 31, 2007 and were invested 46% in equity securities, 24% in fixed income securities and 30% in cash and other assets.

PFS Other Noninterest Income. Other noninterest income for 2007 totaled $99.4 million compared with $96.8 million last year. Noninterest income for 2006 was 2% lower than 2005 which included a $3.2 million nonrecurring gain from the sale of a building.

PFS Net Interest Income. Net interest income of $513.5 million was 3% higher than the previous year. Average loan volume grew $1.5 billion or 9%, while the net interest margin decreased to 2.81% from 2.96% in 2006, reflecting a higher cost of funding as the increase in interest rates on deposits and borrowed funds exceeded the increase in asset yields. Net interest income for 2006 of $497.7 million was 2% higher than 2005 resulting primarily from higher average loan volume, partially offset by a decrease in the net interest margin from 3.00% in 2005 to 2.96% in 2006.

PFS Provision for Credit Losses. The 2007 provision for credit losses of $13.5 million was $7.6 million higher than the previous year which was up $1.4 million from 2005. The provision in both 2007 and 2006 reflects overall growth in the loan portfolio and the migration of certain loans to higher risk credit ratings.

PFS Noninterest Expenses. PFS noninterest expenses, which include the direct expenses of the business unit, indirect expense allocations from NTGI and WWOT for product and operating support, and indirect expense allocations for certain corporate support services, increased 10% in 2007 and 7% in 2006. The growth in noninterest expenses for 2007 reflects annual salary increases, higher performance-based compensation, and higher occupancy costs, partially offset by lower costs associated with business promotion and advertising. In addition, indirect expense allocations for product and operating support increased $61.7 million or 17% from the prior year. The growth in expenses for 2006 reflects annual salary increases, higher performance-based compensation, employee benefit charges, higher occupancy costs, and expenses associated with consulting and other professional services. In addition, indirect expense allocations for product and operating support increased $33.2 million or 10% from 2005.

 

Northern Trust Global Investments. The NTGI business unit provides a broad range of investment management and related services and other products to U.S. and non-U.S. clients of C&IS and PFS through various subsidiaries of the Corporation. Clients include institutional and individual separately managed accounts, bank common and collective funds, registered investment companies, non-U.S. collective investment funds, and unregistered private investment funds. NTGI offers both active and passive equity and fixed income portfolio management, as well as alternative asset classes (such as private equity and hedge funds of funds) and multi-manager products and services. NTGI’s activities also include brokerage, securities lending, transition management, and related services. NTGI’s business operates internationally and its revenues and expenses are fully allocated to C&IS and PFS.

 

16   NORTHERN TRUST CORPORATION 2007 FINANCIAL ANNUAL REPORT


MANAGEMENTS DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

At year-end, Northern Trust managed a record $757.2 billion in assets for personal and institutional clients, up 9% from $697.2 billion at year-end 2006. The increase in assets is attributable to higher equity markets and strong new business. Assets under management have grown at a five-year compound annual rate of 20%.

 

2007 PFS ASSETS UNDER MANAGEMENT

 



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Fees in the majority of locations that PFS operates
in and all mutual fund-related revenue are accrued based on market values. PFS trust, investment and other servicing fees totaled a record $897.8 million for the year, up 15% from $779.2 million in 2006, which in turn was up 10% from $707.1
million in 2005. The current year performance was positively impacted by strong new business and higher equity markets. The 2006 performance was positively impacted by new business and higher equity markets when compared with 2005.

STYLE="margin-top:0px;margin-bottom:0px; text-indent:3%">At December 31, 2007, assets under custody in PFS totaled $332.3 billion, compared with $281.9 billion at December 31, 2006. Included in assets
under custody are those for which Northern Trust has management responsibility. Managed assets totaled $148.3 billion at December 31, 2007 and were invested 46% in equity securities, 24% in fixed income securities and 30% in cash and other
assets.

PFS Other Noninterest Income. Other noninterest income for 2007 totaled $99.4 million compared with $96.8 million last year.
Noninterest income for 2006 was 2% lower than 2005 which included a $3.2 million nonrecurring gain from the sale of a building.

PFS Net
Interest Income.
Net interest income of $513.5 million was 3% higher than the previous year. Average loan volume grew $1.5 billion or 9%, while the net interest margin decreased to 2.81% from 2.96% in 2006, reflecting a higher cost of funding as
the increase in interest rates on deposits and borrowed funds exceeded the increase in asset yields. Net interest income for 2006 of $497.7 million was 2% higher than 2005 resulting primarily from higher average loan volume, partially offset by a
decrease in the net interest margin from 3.00% in 2005 to 2.96% in 2006.

PFS Provision for Credit Losses. The 2007 provision for
credit losses of $13.5 million was $7.6 million higher than the previous year which was up $1.4 million from 2005. The provision in both 2007 and 2006 reflects overall growth in the loan portfolio and the migration of certain loans to higher risk
credit ratings.

PFS Noninterest Expenses. PFS noninterest expenses, which include the direct expenses of the business unit, indirect
expense allocations from NTGI and WWOT for product and operating support, and indirect expense allocations for certain corporate support services, increased 10% in 2007 and 7% in 2006. The growth in noninterest expenses for 2007 reflects annual
salary increases, higher performance-based compensation, and higher occupancy costs, partially offset by lower costs associated with business promotion and advertising. In addition, indirect expense allocations for product and operating support
increased $61.7 million or 17% from the prior year. The growth in expenses for 2006 reflects annual salary increases, higher performance-based compensation, employee benefit charges, higher occupancy costs, and expenses associated with consulting
and other professional services. In addition, indirect expense allocations for product and operating support increased $33.2 million or 10% from 2005.

 

STYLE="margin-top:0px;margin-bottom:0px">Northern Trust Global Investments. The NTGI business unit provides a broad range of investment management and related services and other products to U.S. and
non-U.S. clients of C&IS and PFS through various subsidiaries of the Corporation. Clients include institutional and individual separately managed accounts, bank common and collective funds, registered investment companies, non-U.S. collective
investment funds, and unregistered private investment funds. NTGI offers both active and passive equity and fixed income portfolio management, as well as alternative asset classes (such as private equity and hedge funds of funds) and multi-manager
products and services. NTGI’s activities also include brokerage, securities lending, transition management, and related services. NTGI’s business operates internationally and its revenues and expenses are fully allocated to C&IS and
PFS.

 













16 NORTHERN TRUST CORPORATION 2007 FINANCIAL ANNUAL REPORT







MANAGEMENT
S DISCUSSION AND ANALYSIS OF

SIZE="1">FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

STYLE="margin-top:0px;margin-bottom:0px; text-indent:3%">At year-end, Northern Trust managed a record $757.2 billion in assets for personal and institutional clients, up 9% from $697.2 billion at year-end 2006.
The increase in assets is attributable to higher equity markets and strong new business. Assets under management have grown at a five-year compound annual rate of 20%.

 

This excerpt taken from the NTRS 10-K filed Feb 28, 2007.

2006 PFS ASSETS UNDER MANAGEMENT

 

 

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Fees in the majority of locations that PFS operates in and all mutual fund-related revenue are accrued based on market values throughout the current quarter. PFS trust, investment and other servicing fees totaled a record $781.3 million for the year, compared with $708.0 million in 2005 and $649.9 million in 2004. The current year performance was positively impacted by new business and higher equity markets. The 2005 performance was positively impacted by higher equity markets, new business, and the addition of $6.3 million of fees from FSG.

 

   

2006

NORTHERN TRUST CORPORATION FINANCIAL ANNUAL REPORT

  13


MANAGEMENTS DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

At December 31, 2006, assets under custody in PFS totaled $281.9 billion, compared with $225.6 billion at December 31, 2005. Included in assets under custody are those for which Northern Trust has management responsibility. Managed assets totaled $134.7 billion at December 31, 2006 and were invested 49% in equity securities, 34% in fixed income securities and 17% in cash and other assets.

PFS Other Noninterest Income. Other noninterest income for 2006 totaled $96.7 million compared with $98.4 million last year which included a $3.2 million nonrecurring gain from the sale of a building. Noninterest income for 2005 was 6% higher than the previous year primarily due to a 14% increase in security commissions and trading income and the nonrecurring gain previously mentioned.

PFS Net Interest Income. Net interest income of $497.7 million was 2% higher than the previous year. Average loan volume grew $1.2 billion or 8%, while the net interest margin decreased from 3.00% in 2005 to 2.88%, reflecting a higher cost of funding as the increase in interest rates on deposits and borrowed funds exceeded the increase in asset yields. Net interest income for 2005 of $487.1 million was 9% higher than 2004 resulting primarily from higher average loan volume and an improvement in the net interest margin from 2.89% in 2004 to 3.00%.

PFS Provision for Credit Losses. The 2006 provision for credit losses of $5.9 million was $1.4 million higher than the previous year which was down $2.8 million from 2004. The current year provision reflects overall growth in the loan portfolio and the migration of certain loans to higher risk credit ratings. The reduction in 2005 in the provision for credit losses resulted from an improvement in the credit quality of the portfolio.

PFS Noninterest Expenses. PFS noninterest expenses, which include the direct expenses of the business unit, indirect expense allocations from NTGI and WWOT for product and operating support, and indirect expense allocations for certain corporate support services, increased 7% in 2006 and 4% in 2005. The growth in expenses for 2006 reflects annual salary increases, higher performance-based compensation, employee benefit charges, higher occupancy costs, and expenses associated with consulting and other professional services. In addition, indirect expense allocations for product and operating support increased $32.9 million or 10% from the prior year. The increase in 2005 expenses primarily reflected annual salary increases, higher performance-based compensation, employee benefit charges, costs associated with business promotion, and indirect expense allocations for product and operating support.

 

Northern Trust Global Investments. The NTGI business unit, under the direction of Terence J. Toth, President – NTGI, provides a broad range of investment management and related services and other products to U.S. and non-U.S. clients of C&IS and PFS through various subsidiaries of the Corporation. Clients include institutional and individual separately managed accounts, bank common and collective funds, registered investment companies, non-U.S. collective investment funds, and unregistered private investment funds. NTGI offers both active and passive equity and fixed income portfolio management, as well as alternative asset classes (such as private equity and hedge funds of funds) and multi-manager products and services. NTGI’s activities also include brokerage, securities lending, transition management, and related services. NTGI’s business operates internationally and its revenues and expenses are fully allocated to C&IS and PFS.

At year-end, Northern Trust managed a record $697.2 billion in assets for personal and institutional clients, up 13% from $617.9 billion at year-end 2005. The increase in assets is attributable to higher equity markets and strong new business. Assets under management have grown at a five-year compound annual rate of 17%.

 

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