Balance Sheet

Assets averaged $75.0 billion in 4Q09, down 6% from 4Q08 average of $79.4 billion. Earning assets averaged $67.5 billion, down 3% from the prior-year quarter. The decrease in earning assets resulted primarily from a decrease in average money market assets and loans, partially offset by an increase in U.S. government sponsored agency securities and corporate debt.

Residential mortgages averaged $10.8 billion in 4Q09, up 5% from 4Q08 and represented 39% of the total average loan and lease portfolio. Commercial loans averaged $7.1 billion, down 13% from $8.2 billion last year, while personal loans averaged $4.8 billion, up 4% from last year's fourth quarter. Loans outside the U.S. decreased $1.0 billion on average from the prior-year quarter to $739.2 million.

Capital Structure

Non-performing assets increased 2.2% to $308 million or 1.11% of total loans plus OREO from $302 million or 1.07% in the prior quarter. Nominally, the results are not too much of a concern, but monitoring the trend of the shareholders, who hold NTRS stock assuming credit deterioration, is a non-factor. The Company actually recorded a $14 million sequential decline in non-performing loans, but this was negated by OREO that increased from $9 million at the end of the third quarter to approximately $30 million at year end. A significant portion of the net increase in other real estate owned was concentrated in two residential properties, one in Florida and one in California.

Net charge offs were $32 million or 0.47% of average loans compared with $46 million in the prior quarter or 0.65% of average loans and were up from $16 million or 0.22% of average loans in the year-earlier period. Loan loss reserves increased in the quarter to $341 million or 1.22% of total loans from $333 million or 1.18% of total loans in the prior quarter. The loan loss reserve coverage ratio (loan loss reserve divided by annualized net charge-offs) increased to 2.6x compared with 1.8x in the prior quarter, but decreased from 3.8x in the year-ago quarter due to the increase in net charge-offs.

Northern Trust’s risk-based capital ratios remained strong on December 31, 2009, with the Corporation’s tier 1 capital ratio of 13.6%, total risk-based capital ratio of 16.0%, and leverage ratio of 8.8%, each exceeding the regulatory requirements for classification as a “well capitalized” institution established by the U.S. banking regulators of 6%, 10%, and 5%, respectively. Each of Northern Trust’s U.S. subsidiary banks had capital ratios on December 31, 2009 that were above the levels required for classification as a “well capitalized” institution.

The ratio of tier 1 common equity to risk-weighted assets, a non-GAAP financial measure, was 13.0% on December 31, 2009, up from 12.7% on September 30, 2009 and up from 9.6% on December 31, 2008.
 

Share Repurchase Program

Total stockholders’ equity increased to $6.3 billion on December 31, 2009 and averaged $6.4 billion, up 9% from the prior year’s fourth quarter average of $5.8 billion. The increase in the average reflects the April 2009 issuance of 17,250,000 common shares in connection with a public offering and the retention of earnings. The Corporation repurchased on June 17, 2009 and August 26, 2009, respectively, all of the preferred stock and the related warrant that was issued under the CPP in November 2008.
 

Dividend

On January 4, 2010, NTRS paid a quarterly cash dividend of $0.28 per share on its common stock ($1.66-2/3 par value) to stockholders of record on December 10, 2009.

On February 16, 2010, NTRS declared a quarterly cash dividend of $0.28 per share on its common stock. The dividend is payable on April 1, 2010, to stockholders of record on March 10, 2010.