* Northern Trust pays $87 million for warrants

* Payment equals a 14 pct annualized return on investment

NEW YORK, Aug 26 (Reuters) - Northern Trust Corp (NTRS.O: Quote, Profile, Research) said on Wednesday it repurchased warrants issued to the U.S. Treasury for $87 million, becoming the latest bank to free itself from the government bailout program.

The company joined Goldman Sachs Group Inc (GS.N: Quote, Profile, Research), Morgan Stanley (MS.N: Quote, Profile, Research), U.S. Bancorp (USB.N: Quote, Profile, Research) and American Express Co (AXP.N: Quote, Profile, Research), among other large financial companies, to buy back preferred shares and warrants issued under the $700 billion Troubled Asset Relief Program (TARP).

The Chicago-based bank borrowed $1.6 billion under TARP. In June, Northern Trust repurchased 1.576 million shares of its preferred stock that had been issued to the U.S. Treasury.

The bank said with the repurchase of the warrant, Northern Trust will have paid to the U.S. Treasury more than $1.71 billion. The payments represent a 14 percent annualized return on investment to the U.S. Treasury, Northern Trust said.

The warrants would have let the government buy 3.8 million shares. (Reporting by Juan Lagorio. Editing by Robert MacMillan)