Northern Trust - History

History

Northern Trust was founded in 1889 by Byron Laflin Smith in a one-room office in the Rookery Building in Chicago's Loop, with a focus on providing trust and banking services for the city's prosperous citizens. Smith provided 40% of the bank's original capitalization of $1 million, and counted such businessmen and civic leaders as Marshall Field, Martin A. Ryerson, and Philip D. Armour among the original 27 shareholders. Intimately acquainted with the operations of the bank, these men would personally examine Northern's assets and records at each year's end.

In October 1929, however, the flamboyant decade of the 1920s came to a sudden halt—the stock market crash led to a spectacular drop in prices, employment and production. As these troubles swept across the country, one bank after another closed. Two days after his inauguration on March 6, 1933, Franklin D. Roosevelt closed all the banks in the United States. When they reopened a short time later, there was a great deal of uncertainty as to what might occur. Fortunately, the people in line outside the Northern bank offices were there to deposit money instead of withdraw it. Northern's conservative policies had served it well during the 1920s.

By 1941 nearly half of all the bank's commercial accounts were drawn from outside the Chicago metropolitan area. During World War II, Northern once again took part in the government's war bond drives, and also provided loans for manufacturing war materials under special government programs. The war created more opportunities for the bank; all sectors of its business expanded, and by 1945 the Northern Trust had doubled in size.

The years after World War II brought even greater prosperity to the bank as it continued to expand its services. Still under the direction of Solomon Smith, management at the bank became more aware of electronic data processing and how this new technology could revolutionize the banking industry. During the 1950s, Northern was at the forefront of developing numerous automated banking services, including the first fully automated financial statements for trust clients.

When Solomon Smith died in 1963 and his son, Edward Byron Smith, assumed leadership of the bank, assets totaled more than $1 billion. Near the end of the decade, Northern became the first state-chartered bank from Illinois to open an office outside the United States.

Throughout the 1970s and 80s, Northern Trust acquired companies and expanded into Florida, Arizona, California and Texas. When oil prices dropped suddenly in the early 1980s, many South American nations realized they could not pay off their enormous bank loans. Northern suffered uncharacteristically high losses. Aggressive management, loan reserves, and write-off enabled the bank to restore its asset quality.

When Edward Byron Smith retired in 1979, he was succeeded by E. Norman Staub, followed a few years later by Philip W. K. Sweet, and then by Weston Christopherson. When company veteran David W. Fox took over, he was only the seventh chief executive in the bank's existence. William A. Osborn was named president and chief operating officer in 1993 and became chairman and chief executive officer, in addition to president, in 1995. He stepped down as president in 2006 and as CEO on January 1, 2008. Frederick H. "Rick" Waddell then became president and CEO.

Northern Trust counts over 20% of the U.S.'s wealthiest families as its clients. It is also one of the largest global custodians in the world, serving the asset servicing needs of corporate and public retirement, foundations, endowment, fund managers, insurance companies and government funds.